Copy-of-law-on-sales-reviewer.pdf 1x1hl

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LAW ON SALES Finals Reviewer BECAUSE SHARING IS LOVING “A new command I give you: Love one another. As I have loved you, so you must love one another By this everyone will know that you are my disciples, if you love one another.” John 13: 34-35

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Chapter(1:(The(Nature(of(Sale(

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( Article(1458.( By(the(contract(of(sale(one(of(the(contracting(parties(obligates(himself(

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to(transfer(the(ownership(and(to(deliver(a(determinate(thing,(and(the( other(to(pay(therefor(a(price(certain(in(money(or(its(equivalent.( ( A(contract(of(sale(may(be(absolute(or(conditional.((1445a)( ! I.(Definition(of(Sale( •

Contract! whereby! one! of! the! contracting! parties! (seller)! obligates!himself!to...! o Transfer!the!ownership! o Deliver!the!possession! o Of!a!determinate!thing!

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Perfection!bring!about…! o Obligations!of!the!Seller! ! Transfer!ownership!! ! Deliver!the!Possession!of!the!Subject!Matter! o

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Obligation!of!the!Buyer! ! Pay!the!Price!

These!are!real!obligations!(obligations!to!give)!

This! means! that! they! can! be! subject! for! actions! of! specific!performance.!Article(1165(1).1! Thus,! one! who! defaults! can’t! insist! on! just! paying! damages!

The(requisite(that(a(thing(be(determinate(is(satisfied(if(at(the(time(the( contract( is( entered( into,( the( thing( is( capable( of( being( made( determinate( without( the( necessity( of( a( new( or( further( agreement( between(the(parties.((n)( ( •

To!pay!a!price!certain! In!money!or!its!equivalent!

( A.(Nature(of(Obligation(Created(in(a(Sale(


( B.(Subject(Matter(of(Sale( ( Article(1460.(( A( thing( is( determinate( when( it( is( particularly( designated( or( physical( segregated(from(all(other(of(the(same(class.( (

To!the!other!party,!the!Buyer,!who!obligates!himself! o o

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“Determinable”! is! included! in! “determinate”! when! describing! the!subject!matter!of!a!sale.!

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!Article.(1165.!! When!what!is!to!be!delivered!is!a!determinate!thing,!the!creditor,!in!addition!to! the! right! granted! him! by! Article! 1170,! may! compel! the! debtor! to! make! the! delivery.! ! If! the! thing! is! indeterminate! or! generic,! he! may! ask! that! the! obligation! be! complied!with!at!the!expense!of!the!debtor.! ! If!the!obligor!delays,!or!has!promised!to!deliver!the!same!thing!to!two!or!more! persons! who! do! not! have! the! same! interest,! he! shall! be! responsible! for! any! fortuitous!event!until!he!has!effected!the!delivery.!(1096)!


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Article( 1460:! the! “determinate”! requirement! is! satisfied! when,! at!the!time!the!contract!is!entered!into…! o The!thing!is!capable!of!being!made!determinate!! o Without!necessity!of!new!or!further!agreement!

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Strictly!speaking,!only!two:!perfection!and!consummation!

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But!SC!has!considered!three:! o

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! C.(Elements(of(Contract(of(Sale(

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When!all!three!are!present,!a!perfected!contract!of!sale!arises! o o

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Such! validity! not! affected! by! fictitious! deed! of! sale! previously!executed.! Neither!is!it!affected!by!non\performance!thereafter!

Absence!of!requirements!negates!the!existence!of!a!contract!of! sale.!Dizon'v.'CA'(302'SCRA'288)! o CLV:!The!more!proper!term!is!to!declare!a!“no!contract”! situation.!

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Defect!in!any!of!the!elements!makes!the!contract!either:! o

Voidable,!when!defect!is!a!vitiation!of!consent!!

Void!as!mandated!under!Article(1409.1!

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obligation!of!the!seller! o Necessarily! would! require! a! segregation/designation! at! some! point,! making! the! subject! matter! determinate! at! that!point!! o “Determinate”! emphasizes! that! the! delivery! and! transfer! can! only! be! made! when! the! subject! matter! becomes!specific/determinate.!

exchange!for!the!price! 2. Subject!matter! 3. Price!certain!in!money!or!its!equivalent!


! D.(Stages(in(the(Life(of(Sale(

CLV:! “Determinate”! is! also! accurate! because! it! refers! to! the!

• Coronel'v.'CA'(263'SCRA'15)' 1. Consent! or! meeting! of! the! minds! to! transfer! ownership! in!

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Policitation! ! This! is! a! period! of! time! from! when! the! parties! indicate!interest!in!entering!into!an!agreement! ! To!the!time!when!the!contract!is!perfected! Perfection! ! The! concurrence! of! the! essential! elements! of! the!sale! Consummation! ! From!when!the!parties!perform!their!respective! obligations!

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(Article(1409.( The!following!contracts!are!inexistent!and!void!from!the!beginning:! 1.

Those!whose!cause,!object!or!purpose!is!contrary!to!law,!morals,!good! customs,!public!order!or!public!policy;! 2. Those!which!are!absolutely!simulated!or!fictitious;! 3. Those! whose! cause! or! object! did! not! exist! at! the! time! of! the! transaction;! 4. Those!whose!object!is!outside!the!commerce!of!men;! 5. Those!which!contemplate!an!impossible!service;! 6. Those! where! the! intention! of! the! parties! relative! to! the! principal! object!of!the!contract!cannot!be!ascertained;! 7. Those!expressly!prohibited!or!declared!void!by!law.! These!contracts!cannot!be!ratified.!Neither!can!the!right!to!set!up!the!defense! of!illegality!be!waived.! (


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Culminates!in!extinguishment!of!the!contract!

! II.(Essential(Characteristics(of(Sale( ! A.(Nominate(and(Principal( •

Nominate!"!since!it!has!been!given!a!name!by!law!

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Principal!"!in!contrast!to!accessories!like!mortgage!contracts! o o o

It!can!stand!on!its!own! Independent! of! other! contracts! for! validity! and! existence!! Parties!enter!into!a!sale!to!achieve!a!sale! ! Not!in!preparation!for!another!contract!

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Supreme(Court(Doctrine:!Real!character!of!contract!is!indicated! by!the!substance,!not!by!the!name!given!to!it!by!the!parties!

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Lao'v.'CA'(275'SCRA'237)' o o o

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minds(upon(the(thing(which(is(the(object(of(the(contract(and(upon(the( price.!( ( From(that(moment,(the(parties(may(reciprocally(demand(performance,( subject( to( the( provisions( of( the( law( governing( the( form( of( contracts.( (1450a)( ( •

Sale!is!perfected!by!mere!consent! o At! the! moment! there! is! a! meeting! of! the! minds! upon! the!object!and!consideration,!the!contract!is!perfected!! o The!actual!delivery!of!the!subject!matter!or!payment!of!

Courts!must!look!at!the!intent!of!the!parties!in!order!to! determine!the!nature!of!a!contract! Not!at!the!nomenclature!used!to!describe!it! True!aim!and!purpose!can!be!shown!by!conduct,!words,! actions!

Thus,!all!other!contracts!which!have!for!their!objective...!

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B.(Consensual( ( Article(1475.(( The(contract(of(sale(is(perfected(at(the(moment(there(is(a(meeting(of(

Cavite'Dev'Bank'v.'Lim'(324'SCRA'246)' o Contracts!not!defined!by!parties! o But!by!the!principles!of!law! o

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Transfer!of!ownership!and!possession!of!a!determinate! subject! For!a!valuable!consideration! Will!be!governed!by!the!law!on!Sales!

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the!price!agreed!upon!are!not!necessary!components!to! establish!the!existence!of!a!valid!sale.! ! Thus,! nondelivery! or! nonpayment! does! not! invalidate!or!void!a!perfected!sale.! ! These!merely!become!legal!basis!for!remedies.! The!binding!effect!of!sale!is!based!on!the!principle!that! the! obligations! arising! therefrom! have! the! force! of! law! between! the! parties.! Veterans' Federation' of' the' Philippines'v.'Court'of'Appeals'(345'SCRA'348)! ! Noncompliance! with! formal! requirements! does! not!affect!validity!of!contract.! ! Article( 1358! requiring! the! embodiment! of! certain! contracts! in! a! public! instrument! is! only! for! convenience,! and! registration! of! the! instrument! only! adversely! affects! third! parties.!


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Formal!requirements!are!for!the!benefit!of!third! parties.'Fule'v.'Court'of'Appeals'(286'SCRA'91)! •

Buenaventura'v.'Court'of'Appeals'(416'SCRA'263)' o o

Sale!over!subject!matter!is!not!real,!but!consensual! It!becomes!valid!and!binding!upon!meeting!of!the!minds! as!to!the!price.!! ' Cantemprate'v.'CRS'Realty'Dev.'Corp.'

( Facts:( Petitioners! bought! on! an! installment! basis! subdivision! lots! from! respondent!CRS!Realty!and!had!paid!in!full!the!agreed!purchase!prices;! but! notwithstanding! the! full! payment! and! despite! demands,! respondents!failed!and!refused!to!deliver!the!corresponding!certificates! of!title!to!petitioners.!They!alleged!that!respondent!Casal!was!the!owner! of!a!parcel!of!land!situated!in!General!Mariano!Alvarez,!Cavite!known!as! the! CRS! Farm! Estate! while! respondent! Salvador! was! the! president! of! respondent! CRS! Realty,! the! developer! of! CRS! Farm! Estate.! Petitioners! averred! that! respondents! failed! to! deliver! the! titles! to! their! respective! properties.! Casal! averred! that! despite! his! willingness! to! deliver! them,! petitioners! refused! to! accept! the! certificates! of! title! with! notice! of! lis! pendens!covering!the!subdivision!lots.!Respondent!Salvador!alleged!that! the!failure!by!respondent!Casal!to!comply!with!his!obligation!under!the! first! agreement! to! deliver! to! CRS! or! the! buyers! the! certificates! of! title! was! caused! by! the! annotation! of! the! notice! of! lis! pendens! on! the! certificate!of!title!covering!the!subdivision!property.! ! HLURB!Arbiter!Ma.!Perpetua!Y.!Aquino!declared!that!the!regular!courts! and! not! the! HLURB! had! jurisdiction! over! petitioners’! complaint,! thus,! the! complaint! for! quieting! of! title! could! not! be! given! due! course.! The! Heirs! of! Laudiza! and! Ligon! were! dropped! as! parties! on! the! ground! of!

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lack! of! cause! of! action.! However,! she! found! respondents! CRS! Realty,! Casal!and!Salvador!liable!on!their!obligation!to!deliver!the!certificates!of! title! of! the! subdivision! lots! to! petitioners! who! had! paid! in! full! the! purchase! price! of! the! properties.! She! also! found! as! fraudulent! and! consequently! nullified! the! subsequent! transfer! of! a! portion! of! the! subdivision!to!respondents!Ang!and!Cuason.1! ( Issue:(Whether!or!not!the!absence!of!a!license!to!sell!has!rendered!the! sales!void! ( Held:(Failure!of!the!subdivision!developer!to!obtain!a!license!to!sell!the! subdivision! lots! does! not! render! the! sales! void! on! that! ground! alone! especially! that! the! parties! have! impliedly! itted! that! there! was! already!a!meeting!of!the!minds!as!to!the!subject!of!the!sale!and!price!of! the!contract.( ( Article(1332.( When( one( of( the( parties( is( unable( to( read,( or( if( the( contract( is( in( a( language(not(understood(by(him,(and(mistake(or(fraud(is(alleged,(the( person(enforcing(the(contract(must(show(that(the((thereof(have( been(fully(explained(to(the(former.( ( •

General( Rule:( He! who! alleges! existence! of! a! sale! must! show! it! by!competent!proof.! o Exception:!Article(1332!of!the!Civil!Code!

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!(2012,!August!12).!Jaja's&blog+a+dog.!Retrieved!from! http://jcajote.blogspot.com/2012/08/vicenta\cantemprate\et\al\vs\crs\ realty.html!



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B.1.(Modalities(that(Affect(Characteristic(of(Consensuality( •

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Consensual!characteristic!may!be!affected!by!certain!modalities! added!by!stipulation! o Example:!Suspensive!term!or!condition!

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Not! all! contracts! of! sale! become! automatically! and! immediately!effective.!! In! sales! with! assumption! of! mortgage,! there! is! a! condition!precedent!to!the!seller’s!consent!and!without! the! approval! of! the! mortgagee,! the! sale! is! not! perfected.! Biñan& Steel& Corp.& v.& Court& of& Appeals& (391' SCRA'90)! Even! delivery! and! taking! possession! of! subject! matter,! with! consent! of! the! seller,! does! not! perfect! sale! when! meeting!of!minds!is!incomplete.!In!this!case,!there!was! no!agreement!yet!on!final!price.!NHA'vs.'Grace'Baptist' Church'(391'SCRA'90)!

! C.(Bilateral(and(Reciprocal( Bilateral!"!it!imposes!obligations!on!both!parties! o Obligation/promise! of! each! party! is! the! cause! for! the! obligation!of!the!other.! o It!is!a!requisite!for!a!valid!and!enforceable!sale!that!it!is! mutually! obligatory.' Polytechnic' University' of' the' Philippines'v.'Court'of'Appeals'(368'SCRA'691)! •

Reciprocal!Obligations!"!each!party!is!simultaneously!a!debtor! and!creditor!of!the!other! o

Those!which!arise!from!the!same!cause!


The! performance! of! one! is! conditioned! upon! the! simultaneous!fulfillment!of!the!other.!Cortes'v.'Court'of' Appeals'(494'SCRA'570)' A!perfected!contract!of!sale!carries!the!correlative!duty! of! the! seller! to! deliver! the! property! and! the! obligation! of! the! buyer! to! pay! the! agreed! price.' Congregation' of' the' Religious' of' the' Virgin' Mary' v.' Orola' (553' SCRA' 578)'

Perfection!must!be!distinguished!from!Demandability! o

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' Cortes'v.'Court'of'Appeals' ( Facts:( For! the! purchase! price! of! 3.7M,! Villa! Esperanza! Development! Corporation! (vendee)! and! Antonio! Cortes! (vendor)! entered! into! a! contract! of! sale! over! the! lots! located! at! Baclaran,! Parañaque,! Metro! Manila.! The! Corporation! advanced! to! Cortes! the! total! sum! of! P1,213,000.00.! In! September! 1983,! the! parties! executed! a! deed! of! absolute!sale!on!the!following!:! •

The! Corporation! shall! advance! 2.2! M! as! downpayment,! and! Cortes!shall!likewise!deliver!the!TCT!for!the!3!lots.!

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The! balance! of! 1.5M! shall! be! payable! within! a! year! from! the!

date!of!the!execution.! The!Corporation!filed!the!instant!case!for!specific!performance!seeking! to!compel!Cortes!to!deliver!the!TCTs!and!the!original!copy!of!the!Deed! of!Absolute!Sale.!According!to!the!Corporation,!despite!its!readiness!and! ability!to!pay!the!purchase!price,!Cortes!refused!delivery!of!the!sought! documents.! It! prayed! for! damages,! attorney’s! fees! and! litigation! expenses.! Cortes! claimed! that! the! owner’s! duplicate! copy! of! the! three! TCTs! were! surrendered! to! the! Corporation! and! it! is! the! latter! which! refused!to!pay!in!full!the!agreed!down!payment.!



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Issue:( Whether!or!not!there!is!delay!in!the!performance!of!the!parties’! obligation!that!would!justify!the!rescission!of!the!contract!of!sale! ( Held:! BOTH! ARE! IN! DELAY.! Cortes! avers! that! he! delivered! the! TCT’s!

Corporation!to!pay!in!full!the!down!payment!never!acquired!obligatory! force.1! ' Congregation'of'the'Religious'of'the'Virgin'Mary'v.'Orola'

through! the! broker’s! son.! He! further! avers! that! the! broker’s! son! delivered! it! to! the! broker,! who! in! turn! delivered! them! to! the! Corporation.! Marcosa! Sanchez’s! unrebutted! testimony! is! that,! she! did! not!receive!the!TCTs.!She!also!denied!knowledge!of!delivery!thereof!to! her!son,!Manny.! ! What! further! strengthened! the! findings! that! Cortes! did! not! surrender!

' Facts:( On! April! 1999,! petitioner,! acting! through! Sr.! Fe! Enhenco,! and! respondents!mets!to!talk!about!the!sale!of!the!property!of!respondents! adjacent! to! St.! Mary’s! Academy.! Said! property! is! Lot! 159B\2! which! is! ed! in! the! name! of! Manuel! Laserna.! Josepehine! Orola! went! to! Manila!on!May,!1999!for!the!subject!property!and!was!enetertained!by! Ma.!Clarita!Balleque.!A!contract!to!sale!was!made!between!the!parties!

the!subject!documents!was!the!offer!of!Cortes’!counsel!at!the!pre\trial! to!deliver!the!TCTs!and!the!Deed!of!Absolute!Sale!if!the!Corporation!will! pay! the! balance! of! the! down! payment.! Indeed,! if! the! said! documents! were! already! in! the! hands! of! the! Corporation,! there! was! no! need! for! Cortes’!counsel!to!make!such!offer.! ! Considering! that! their! obligation! was! reciprocal,! performance! thereof!

where! petitioners! are! bounde! to! pay! the! property! for! P5,555,000.00! with!10%!of!the!total!consideration!payable!upon!the!execution!of!the! contract.! This! was! signed! by! Sr.! Enhenco! as! witness.! On! June! 7,! 1999,! Josephine!and!Antonio!received!the!RCBC!check!bearing!the!amount!of! P555,550.00!as!down!payment!by!petitioner.!An!extrajudicial!settlement! was!executed!for!the!estate!of!Trinidad!Andrada!Laserna!adjudicating!to! themselves!the!subject!property.!Transfer!Certificates!were!now!under!

must! be! simultaneous.! The! mutual! inaction! of! Cortes! and! the! Corporation!therefore!gave!rise!to!a!compensation!morae!or!default!on! the! part! of! both! parties! because! neither! has! completed! their! part! in! their! reciprocal! obligation.! Cortes! is! yet! to! deliver! the! original! copy! of! the!notarized!Deed!and!the!TCTs,!while!the!Corporation!is!yet!to!pay!in! full! the! agreed! down! payment! of! P2,200,000.00.! This! mutual! delay! of! the!parties!cancels!out!the!effects!of!default,!such!that!it!is!as!if!no!one! is!guilty!of!delay.!

their! names.! With! an! undated! Absolute! Deed! of! Sale,! respondents! scheduled!to!meet!with!petitioner!for!the!remaining!balance.!Petitioner! did! not! arrive.! They! instead! refused! to! pay! respondents! due! to! unreasonable! grounds.! This! made! respondents! file! a! complaint! before! the! RTC! with! alternative! causes! of! action! or! rescission.! RTC! granted! respondents.!On!appeal,!the!matter!was!resolved!by!the!appellate!court! through!Article!1378!of!the!New!Civil!Code.! (

! Under! Article! 1169! of! the! Civil! Code,! from! the! moment! one! of! the! parties!fulfills!his!obligation,!delay!by!the!other!begins.!Since!Cortes!did! not! perform! his! part,! the! provision! of! the! contract! requiring! the!

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!(June!2010).!The!Stray!Decision!Notes.!Retrieved!from! http://thestraydecision.wordpress.com/2010/06/21/cortes\vs\court\of\ appeals/!



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Issue:( Whether!or!not!Article!1191!should!be!applied!instead!of!Article! 1378!of!the!New!Civil!Code.! ( Held:!YES.!Such!case!falls!under!Article!1191!because!it!applies!to!breach! of!reciprocal!obligations.!Article1191!speaks!of!the!remedy!of!rescission! in!reciprocal!obligations.!In!the!present!case,!when!RVM!refused!to!pay! the! balance! which! breached! the! contract,! respondents! have! availed! of! the! remedies! granted! by! Article! 1191.! They! are! entitled! to! damages! regardless!of!the!relief!that!would!be!granted!by!the!Court.!Hence,!the! court!should!apply!Article!1191!of!the!New!Civil!Code,1! ! •

Legal!Effects!of!Sale!being!bilateral/reciprocal! 1. Power!to!rescind!is!implied!–!it!need!not!be!stipulated!in! the!contract!for!innocent!party!to!invoke!the!remedy.2!

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2. Neither!party!incurs!in!delay!if!the!other!party!does!not! comply/is!not!ready!to!comply.3! 3. From!the!moment!one!of!the!parties!fulfills,!default!by! the!other!begins,!without!need!of!prior!demand.4! •

Remedies!available:! 1. Remedy!of!Specific!Performance! 2. Rescission!or!Resolution!

! D.(Onerous( •

Onerous!"!it!imposes!a!valuable!consideration.! o Ideally,!a!price!certain!in!money!or!its!equivalent.!

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Rules! of! interpretation:! we! interpret! in! favor! of! the! greater! reciprocity!of!interests.'Gaite'v.'Fonacier'(2'SCRA'830)&

! Gaite'v.'Fonacier! (

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!Drex!Mendez.!(2012!July!16).!Obli&Cases&2.!Retrieved!from! http://www.idoub.com/doc/100162558/Obli\Cases\2! 2 (Article(1191.( The! power! to! rescind! obligations! is! implied! in! reciprocal! ones,! in! case! one! of! the!obligors!should!not!comply!with!what!is!incumbent!upon!him.! ! The!injured!party!may!choose!between!the!fulfillment!and!the!rescission!of!the! obligation,! with! the! payment! of! damages! in! either! case.! He! may! also! seek! rescission,! even! after! he! has! chosen! fulfillment,! if! the! latter! should! become! impossible.! ! The! court! shall! decree! the! rescission! claimed,! unless! there! be! just! cause! authorizing!the!fixing!of!a!period.! !

Facts:( Fonacier! owned! iron! lode! mineral! claims.! Through! a! deed! of! assignment,! he! made! Gaite! as! his! attorney\in\fact! to! explore! and! develop! the! mining! claims.! Gaite! then! developed! them.! Later! Fonacier! decided! to! revoke! the! deed! of! assignment.! Gaite!agreed!provided!that!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! This! is! understood! to! be! without! prejudice! to! the! rights! of! third! persons! who! have! acquired! the! thing,! in! accordance! with! Articles! 1385! and! 1388! and! the! Mortgage!Law.!(1124)! ! 3 (Article(1168( When!the!obligation!consists!in!not!doing,!and!the!obligor!does!what!has!been! forbidden!him,!it!shall!also!be!undone!at!his!expense.!(1099a)! ( 4 (Article(1168(and(1191,(New(Civil(Code(



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he!be!paid!Php75,000.!Fonacier!agreed,!but!only!on!the!condition!that! Php!10,000!will!be!paid!after!the!g!of!the!“revocation!of!power!of! attorney!and!contract”!agreement!and!the!php65,000!will!be!paid!from! and! out! of! the! first! letter! of! credit! covering! the! first! shipment! of! iron!

the!interpretation!which!favour!the!greatest!reciprocity!of!interests!shall! be!applied.!There!can!be!no!question!that!greater!reciprocity!obtains!if! the!buyer'!obligation!is!deemed!to!be!actually!existing,!with!only!its!due! date!postponed!or!deferred.!In!accordance!with!the!civil!code,!since!the!

ores!and!of!the!first!amount!derived!from!the!local!sale!of!iron!ore!made! by!the!Larap!Mines!&!Smelting!Co.!Gaite!agreed!to!such!condition!after! a! surety! bond,! underwritten! by! Far! Eastern! Surety! and! Insurance! Co.! (FESIC),! was! executed! in! favour! of! Gaite! to! secure! the! payment! of! the! balance.! The! liability! of! FESIC! would! however,! attach! only! when! there! had!been!an!actual!sale!of!iron!ore!amounting!to!at!least!php65,000.!1! year! later! the! bond! expired! without! any! sale! being! made.! When! Gaite!

security! was! impaired! and! Fonacier! did! not! replace! it! with! a! new! one,! Plaintiff!lost!the!right!to!use!the!period!thus!the!65,000!is!due!already.! ! E.(Commutative(

demanded! payment,! fonacier! wasn’t! able! to! pay.! In! his! defense,! he! claimed!that!it!was!a!condition!that!the!balance!will!be!paid!out!of!the! first! letter! of! credit.! Since! they! still! haven’t! sold! any! iron! ore,! the! condition!has!not!yet!been!fulfilled.!! ! Issue:( Whether! the! obligation! of! appellant! Fonacier! to! pay! appellee! Gaite!the!P65,000.00!(balance!of!the!price!of!the!iron!ore!in!question)is! one!with!a!period!or!term!or!one!with!a!suspensive!condition! ! Held:(It!is!a!period.!The!Supreme!Court!said!that!it!was!not!the!case!as! the! wording! of! the! contract! implies! that! what! was! uncertain! was! the! date/maturity!of!the!payment!and!not!the!payment!itself.!Being!so!it!is!a! period! and! not! a! condition.! Also,! Sale! is! normally! commutative! and! onerous!that!each!party!anticipate!performance!by!the!other!from!the! very!start.!Although!a!person!can!assume!risk!of!recovering!nothing!(i.e! through!a!suspensive!condition)!for!what!he!gives,!it!is!not!usually!in!the! course! of! business! to! do! so.! Furthermore,! the! civil! code! states! if! the! contract! is! onerous,! the! doubt! shall! be! settled! in! favor! of! the! greatest! reciprocity!of!interests.!A!sales!contract!is!an!onerous!contract,!being!so,!

•

Commutative!"!a!thing!of!value!is!exchanged!for!equal!value! o

•

Ideally,!the!value!of!the!subject!matter!is!equivalent!to! the!price!paid.!

No!strict!requirement!though! o

o

All!that!is!required!is!that!the!parties!believed!that!they! will! receive! good! value! in! exchange! for! what! they! will! give.!Buenaventura'v.'Court'or'Appeals'(416'SCRA'263)! Ex.! Seller! selling! old! car! for! P200,000.! Even! if! a! more! objective! review! would! say! that! the! car! is! worth! P500,000,! the! contract! would! still! be! a! sale,! as! seller! really!believes!that!he’s!receiving!appropriate!value!

•

Gaite&v.&Fonacier:!obligations!in!a!sale!can!be!subordinated!to!a! suspensive! condition.! Thus,! commutativeness! is! not! objective,! but!subjective.!!

•

However,!subjective!nature!cannot!be!pushed!to!absurdity! o

•


Seller,! knowing! full! well! that! his! car! is! worth! P200,000! still! opts! to! sells! it! for! P100.! Such! could! be! considered! more! of! a! donation,! and! therefore! reformation! of! the! instrument!may!be!had!to!express!parties’!true!intent.!

Subjective! nature! ed! by! principle! that! inadequacy! of! price!does!not!affect!ordinary!sale!

SALES%REVIEWER%(2013/2014)% % o

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Not! a! sufficient! ground! for! cancelling! a! voluntary! contract!of!sale.! ' Buenaventura'v.'Court'or'Appeals!

( Facts:! Spouses! Leonardo! and! Feliciano! Joaquin! executed! deeds! of! sale! to! some! of! their! children.! The! remaining! children! filed! a! case! because! they! believe! that! such! sale! (1)! would! impair! their! legitime! and! (2)! was! void!for!lack!of!consideration.!! ! Issue:! Whether! or! not! the! deeds! of! sale! are! void! for! lack! of! consideration!and!gross!inadequacy!of!prince.! ! Held:! NO.! The! Court! held! that! their! rights! to! their! parents’! properties! would!vest!only!upon!their!parents’!death,!and!while!they!are!still!alive,! they! may! dispose! of! it! even! without! the! consent! of! the! heirs.! On! the! issue!of!consideration,!the!Supreme!Court!held!that!a!contract!of!sale!is! a!consensual!contract.!As!long!as!the!price!of!the!property!was!agreed! upon,! the! contract! is! valid.! Failure! of! payment! would! not! result! in! an! invalid! contract,! but! merely! gives! a! right! to! demand! payment.! Also,! inadequate!consideration!does!not!invalidate!a!contract.! ( F.(Sales(is(Title(and(Not(Mode( •

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Sale!is!merely!a!title!that!creates!obligation!to!deliver!or! transfer! ownership.! On! its! own,! sale! does! not! transfer! the!ownership!as!a!mode.!

Sale! perfected! by! consent! but! ownership! es! only! upon! delivery.! o [Sale]!Real!right!over!a!thing!arising!from!a!juridical!act! is!not!sufficient!to!give!rise!to!ownership…! o [Delivery]! …Such! right! must! be! completed! by! fulfilling! certain! conditions! imposed! by! law.! Acap' v.' Court' of' Appeals'(251'SCRA'30)!

! Sale(

Delivery(

Title!

Mode!

Constitutes!the!legal!basis!by! which!to!affect!ownership!

Legal!means!by!which!ownership!is! created,!transferred,!or!destroyed! (e.g.!Succession,!Donation,! Discovery)!

! III.(Sales(Distinguished(from(Other(Similar(Contracts( •

Underlying! principle:! intent! of! parties! and! elements! of! relationship!are!more!important!than!the!nomenclature!used!to! describe!a!certain!contract.!

•

A! mode! is! the! legal! means! by! which! dominion! or! ownership! is! created,!transferred!or!destroyed,!but!title!is!only!the!legal!basis! by!which!to!affect!dominion!or!ownership.! o Delivery! or! tradition! is! the! mode! that! transfers! ownership!and!possession.!

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A! contract! is! what! the! law! defines! it! to! be,! taking! into! consideration!its!essential!elements,!and!the!title!given!to!it!by! the! parties! is! not! as! much! significant! as! its! substance. 1 !The! transfer!of!ownership!in!exchange!for!a!price!paid!or!promised!

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Romero' v.' CA,' 250' SCRA' 223' (1995);' Lao' v.' Court' of' Appeals,' 275' SCRA' 237' (1997);'Orden'v.'Aurea,'562'SCRA'660'(2008);'Ver'Reyes'v.'Salvador,'Sr.,'564' SCRA'456'(2008).!!



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is! the! very! essence! of! a! contract! of! sale.! Santos' v.' Court' of' Appeals'(337'SCRA'67)!

•

A!valid!sale!cannot!have!the!legal! effect!of!depriving!the!compulsory! heirs!of!their!legitimes.! Manongsong'v.'Estimo' (404'SCRA'683)! •

When! is! it! important! to! know! the! distinction?! When! the! consideration!for!the!transfer!is!not!clear.(

•

Donation:! act! of! liberality! whereby! a! person! disposes! gratuitously!of!a!thing!or!right!in!favor!of!another!person,!who! accepts!it.1!

When!price!of!sale!is!simulated,!the!sale!is!void,!but!the!act!may! be!shown!to!be!a!donation!or!some!other!act.2! o Contract!may!be!in!the!form!of!a!“sale”!but!will!end!up! being!governed!by!some!other!provisions!of!law.!

! Sale(

Donation(

Essentially!onerous!

Generally!gratuitous!

Consensual!Contract!i.e.!perfected! by!consent!

Solemn!Contract!i.e.!requiring! formalities!(requires!consent!and! other!formalities!required!by!law! in!order!to!be!valid)!"!Article(745(

Does!NOT!cause!diminution!of!the! seller’s!estate,!but!merely! substitution!of!values,!with!the!

•

Causes!diminution!of!the!seller’s! estate!and!may!prejudice!the! legitimes!of!his!heirs.!As!such,!it!

(Article(725.( Donation! is! an! act! of! liberality! whereby! a! person! disposes! gratuitously! of! a! thing!or!right!in!favor!of!another,!who!accepts!it.!(618a)! !

On! the! other! hand,! a! supposed! donation! may! actually! have! different!considerations!rather!than!liberality! o Burdens!placed!upon!the!donee! o In! that! case,! it! becomes! important! to! determine! what! o

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can!be!subject!to!rescission.!

!

( ( A.(From(Donation( •


property!sold!replaced!by!the! equivalent!monetary! consideration!

In! determining! the! real! character! of! sale,! courts! look! at! the! intent!of!the!parties,!their!true!aim!and!purpose!in!entering!into! the! contract,! as! well! as! “by! their! conduct,! words,! actions! and! deeds! prior! to,! during! and! immediately! after! executing! the! agreement,”! and! not! at! the! nomenclature! used! to! describe! it.! Lao'v.'Court'of'Appeals'(275'SCRA'237)!

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the!applicable!rule!is!(Law!on!Sales!vs.!Law!on!Donation)! Article( 726( of( the( Civil( Code:( Even! if! a! burden! is! imposed! on! donee,! it! is! still! a! donation! when! such! burden!is!less!than!the!value!of!the!thing!given.! Legal! implication! –! when! the! burden! is! more! valuable! than! the! thing! given,! it! is! an! “onerous! donation”,! and! may!be!a!barter!or!a!sale.!

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(Article(1471.( 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.!(n)!



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B.(From(Barter( •

Barter! "! One! of! the! parties! binds! himself! to! give! one! thing! in! consideration!for!the!other’s!promise!to!give!another!thing!

•

Sale! "! One! of! the! parties! binds! himself! to! deliver! a! thing! in! consideration! of! the! other’s! undertaking! to! pay! the! price! in! money!or!its!equivalent.!

! B.1.(Rules(to(Differentiate(Sale(from(Barter((Article(1468)( •

Manifest!Intention!of!the!Parties! o o

•

Even! if! acquisition! of! a! thing! is! paid! for! by! another! object!that’s!worth!more!than!the!money!component! It! may! still! be! a! sale! if! such! was! the! intention! of! the! parties.!

When! Intention! Does! Not! Appear! and! Consideration! Consists! Partly!in!Money!and!Partly!in!Another!Thing! o It!is!barter!when!value!of!the!thing!given!as!part!of!the! consideration!exceeds!the!amount!of!money!given! o It! is! sale! when! the! value! of! the! thing! given! as! part! of! consideration! equals! or! is! less! than! the! amount! of! money!given.!

•

Actually,!these!distinctions!are!merely!academic!

•

Aside!from!two!separate!rules!applicable!to!barter,!Article(1641!

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exchange,(but(he(shall(be(entitled(to(damages.((1539a)( ( Article(1640( One( who( loses( by( eviction( the( thing( received( in( barter( may( recover( that(which(he(gave(in(exchange(with(a(right(to(damages.(However,(he( can( only( make( use( of( the( right( to( recover( the( thing( which( he( has( delivered(while(the(same(remains(in(the(possession(of(the(other(party,( and( without( prejudice( to( the( rights( acquired( in( good( faith( in( the( meantime(by(a(third(person.((1540a)( ( •

Two!instances!where!difference!is!critical! o o

Statute!of!Frauds!does!not!apply!to!barter.! Right!of!legal!redemption!granted!by!law!to!an!ading! owner! of! an! urban! land! does! not! cover! exchanges! of! properties.!

( C.(From(Contract(for(a(Piece\of\Work( •

Piece!of!Work!Contract!Defined:( o

What!are!the!two!separate!rules?!See!Article(1639(and!1640!

( ( ( ( (


Article(1639( If( one( of( the( contracting( parties,( having( received( the( thing( promised( him( in( barter,( should( prove( that( if( did( not( belong( to( the( person( who( gave( it,( he( cannot( be( compelled( to( deliver( that( which( he( offered( in(

say!that!barter!is!governed!by!the!Law!on!Sales!! •

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Contractor!binds!himself!to!execute!a!piece!of!work!for! the! employer,! in! consideration! of! a! certain! price! or! compensation! Contractor!may!either!employ!only!his!labor!or!skill,!or! also!furnish!the!material!

! !



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C.1.(Statutory(Rules(to(Distinguish(Sale(from(a(Piece(of(Work(contract( •

Inchausti'v.'Cromwell'(20'Phil'345)' o

o

Distinction!between!sale!and!contract!for!piece!of!work! is!tested!by!the!inquiry!of!whether!the!thing!transferred! is! one! not! in! existence! and! which! never! would! have! existed!but!for!the!order!of!the!party! Or,! a! thing! which! would! have! existed! and! been! the! object!of!a!sale!to!some!other!person,!even!if!the!order! was!not!made!

• Later,!the!Civil!Code!gave!statutory!rules!in!Article(14671! 1. “Habituality!Test”! o Manufacturing! in! the! ordinary! course! of! business! "! o

sales!contracts! Manufacturing! upon! special! order! for! customers! "! piece!of!work! ! “Upon!special!order”!"!based!on!the!ability!of! producer! to! manufacture! the! goods! without! waiting!for!specific!orders!! ' ' ' '

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!Article(1467.!! A!contract!for!the!delivery!at!a!certain!price!of!an!article!which!the!vendor!in! the! ordinary! course! of! his! business! manufactures! or! procures! for! the! general! market,!whether!the!same!is!on!hand!at!the!time!or!not,!is!a!contract!of!sale,! but! if! the! goods! are! to! be! manufactured! specially! for! the! customer! and! upon! his!special!order,!and!not!for!the!general!market,!it!is!a!contract!for!a!piece!of! work.!(n)!

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Celestino'Co'v.'Collector'of'Internal'Revenue' ! Facts:(Company!used!to!pay!sales!tax!on!its!products!as!a!manufacturer\ seller.! They! began! claiming! that! they! should! only! be! assessed! a! contractor’s! tax,! because! they! manufactured! their! products! only! upon! special! customers’! special! orders,! in! accordance! with! specifications.! Thus,!their!services!constitute!a!piece\of\work!contract.! ! Issue:(Whether!or!not!the!Company’s!work!constitute!piece\of\work! ! Held:( NO.! Court! held! that! company! can’t! claim! the! contractor’s! tax! –! they!were!sellers.!(1)!They!habitually!made!the!products.!(2)!That!they! made! products! only! upon! order! did! not! alter! than! nature! of! the! establishment! –! they! would! manufacture! the! products! as! they! always! had.! Any! builder! could! order! such! products.! Thus! they! did! not! serve! special!customers!only.!The!essence!of!contract!of!piece!of!work!is!“sale! of!service.”!Thus,!the!company!must!accept!a!job!which!requires!use!of! services!not!generally!performed!by!it.! ! 2. The!test!of!“special!orders”,!in!this!case,!is!not!one!of!timing! o Rather,!it!is!done!by!determining!the!nature!of!the!work! to!be!performed!and!the!products!to!be!made.! o The! products! must! not! be! ordinary! products! of! the! manufacturer.! o They!should!require!special!skills!or!equipment.! •


To! Tolentino,! the! distinction! depends! on! the! intention! of! parties:! if! parties! intended! that! at! some! future! date! an! object! has! to! be! delivered,! without! considering! the! work! or! labor! of! the!party!bound!to!deliver,!the!contract!is!one!of!sale;!but!if!one! of! the! parties! accepts! the! undertaking! on! the! basis! of! some!


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plan,!taking!into!!the!work!he!will!employ!personally!or! through! another,! the! contract! is! for! a! piece! of! work.! Engineering'&'Machinery'Corp.'v.'CA'(252'SCRA'156)!

• •

Commission'of'Internal'Revenue'v.'Engineering'Equipment'&Supply'Co.' ! Facts:( EEI! was! engaged! in! design! and! installation! of! air\conditioning! systems.! An! anonymous! letter! was! sent! to! the! Collector,! now! the! Commission! of! Internal! Revenue! (CIR)! denouncing! Engineering! for! tax! evasion! by! misdeclaring! its! imported! articles! and! for! conniving! with! foreign! suppliers.! The! assessed! tax! deficiency! is! P480,! 912.01! from!

labor!rather!than!on!the!sale!of!articles.!! ! Issue:(Whether!or!not!EEI!is!a!contractor!of!air\conditioning!units( ! Held:( YES.! The! Court! held! that! EEI! was! a! contractor.! “If! the! article! ordered! by! the! purchaser! is! exactly! such! as! [vendor]! makes! and! keeps! on! hand! for! sale! to! anyone,! and! no! change! is! made! at! defendant’s! request,!it!is!a!contract!of!sale.”!In!this!case,!EEI!undertook!negotiations! and!execution!of!individual!contracts!–!each!contract!job!was!different,! no!two!were!identical.! !


Test:! whether! the! manufacturer! could! produce! the! product! ahead!of!any!special!order!

!

misdeclared! importation! of! air\condition! units! and! parts! and! its! accessories!subject!to!Section!185(m)!of!the!Tax!Code!(as!manufacturer! and!seller!of!aircon!units,!company!is!subject!to!30%!advance!sales!tax).! The! company! claimed! that! it! is! not! a! manufacturer! but! a! seller! of! air\ conditioning! units! and! spare! parts! and! accessories! thereof,! but! a! contractor!which!designs,!supplies!and!installs!air\conditioning!systems,! and!thus!the!tax!applicable!to!their!business!is!on!the!sale!of!service!or!

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What! is! the! test! to! follow?! CLV! mentions! the! “main! theme”! in! SC!decisions! o Main! distinguishing! factor! "! essence! of! why! parties! enter!into!the!contract! ! SALE!"!If!essence!is!the!object! ! PIECE!OF!WORK!"!if!the!essence!is!the!Service,! Knowledge,!or!Reputation!of!the!manufacturer,! it!is!for!a!piece!of!work;!essentially!the!contract! is!a!sale!of!services/labor.!

! C.2.(Practical(needs(for(being(able(to(distinguish(( •

Tax!Provisions!

•

Sale!"!real!obligation! o o

•

Piece!of!work!"!subject!matter!is!service!rendered! o o

•

Obligation!to!give! Remedy:!Action!for!Specific!Performance!! Obligation!to!do! Remedy:!Cannot!be!subject!to!specific!performance!!

Piece!of!work!is!not!governed!by!Statute!of!Frauds.!

! D.(From(Agency(to(Sell(or(Agency(to(Buy( •

Agency!"!a!person!binds!himself!to!render!some!service!or!to! do! something! in! representation! or! on! behalf! of! the! principal,! with!the!consent!or!authority!of!the!latter.!

•


Agency!establishes!a!representative!capacity!in!the!agent! o Highly!fiduciary! o Involves!obligations!to!do!!


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D.1.(Distinguishing(Sale(from(Agency( ! Sale(

Agency(

Not!unilaterally!revocable!

Essentially!revocable!by!principal!

Buyer!himself!pays!for!the!subject,! Agent!not!obliged!to!pay!the!price,! which!is!his!main!obligation! merely!obliged!to!deliver!price! which!he!may!receive!from!buyer! Buyer!becomes!owner!of!subject! matter!after!delivery!

Agent!never!becomes!owner!

Seller!warrants!

Agent!assumes!no!personal! liability!as!long!as!he!acts!within! authority!and!in!name!of!principal!

The!seller!receives!personal!profit! from!the!sale!

Agency!is!a!fiduciary!relationship! and!thus!the!agent!disqualified! from!receiving!personal!profit!

( D.2.(Statutory(Rule( ! Article(1466.(( In( construing( a( contract( containing( provisions( characteristic( of( both( the(contract(of(sale(and(of(the(contract(of(agency(to(sell,(the(essential( clauses(of(the(whole(instrument(shall(be(considered.((n)( ! Quiroga'v.'Parsons'' ! Facts:(Plaintiff!Quiroga!granted!to!Parsons!the!right!to!sell!as!an!“agent”! the!“Quiroga!beds”!in!Visayas.!Under!the!contract,!Parsons!was!obliged! to!pay!for!the!beds!within!a!specified!period!after!delivery!even!when!it! has! not! been! sold.! Later,! Quiroga! sought! the! rescission! of! the!

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agreement!claiming!Parsons!violated!his!obligation!not!to!sell!the!beds! at! higher! prices! than! those! of! the! invoices,! and! others.! Quiroga! claims! that!Parsons!is!his!agent.! ! Issue:(Whether!or!not!Parson!is!Quiroga’s!agent.! ! Held:(NO.!The!Court!found!the!arrangement!to!be!one!of!sale!since!the! essential!clause!provides!that!“payment!was!to!be!made!at!the!end! of! 60! days”! Such! feature! exclude! the! legal! conception! of! an! agency! or! order!to!sell!whereby!the!mandatory!or!agency!received!the!thing!to!sell! it,!and!does!not!pay!its!price,!but!delivers!to!the!principal!the!price!he! obtains!from!the!sale!of!the!thing!to!a!third!person,!and!if!he!does!not! succeed!in!selling!the!thing,!he!returns!it.!The!essential!clause!provided! for! a! transfer! of! ownership! upon! payment! –! precisely! the! essential! features!of!a!sale.!! ! Puyat'v.'Arco'Amusement'Co.' ( Facts:( Gonzalo! Puyat! &! Sons! is! the! exclusive! agent! of! Starr! Piano! Company.! Wanting! to! purchase! sound! equipment! from! Starr,! Arco! approached! Gonzalo.! They! agreed! that! upon! purchase,! Gonzalo! would! receive! 10%! commission.! Two! transactions! happened! \! $1,700! and! $! 1,600! each.! 3! years! after! the! transactions,! Arco! discovered! that! they! paid! Gonzalo! the! list! price! and! not! the! net! price! of! the! equipment.! Wanting!to!get!reimbursement,!they!filed!a!case!in!court!claiming!that! Gonzalo! was! their! agent.! Trial! court! absolved! Gonzalo! stating! that! the! agreement!was!one!of!sale!and!not!agency.!CA!on!the!other!hand!ruled! that!it!was!one!of!agent!and!principal.!! ! Issue:(Whether!or!not!the!contract!was!one!of!agency.!



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Held:( NO.! The! Supreme! Court! held! that! the! relationship! that! the! contract!was!one!of!sale.!Gonzalo!could!not!have!been!the!agent!of!Arco! for! he! was! already! Starr’s! agent.! One! could! not! be! both! the! agent! of! buyer!and!seller.!SC!also!said!that!since!Gonzalo!would!be!liable!for!any!

o

unforeseen! events,! he! is! indeed! not! an! agent! for! this! goes! against! the! principle!of!agency!that!an!agent!is!exempt!from!liability!as!mentioned! by!Section!254,!Code!of!Commerce.! ( •

Dacion!exists!in!the!stage!of!consummation! o It!is!a!special!mode!of!payment!!

•

Requisites!for!Dacion!en!Pago.!Lo' v.' KJS' Eco_Formwork' System' Phil.,'Inc.'(413'SCRA'182)! 1. Performance!of!the!prestation!in!lieu!of!payment! 2. Difference! between! prestation! due! and! that! given! in! substitution!! 3. Agreement!that!the!obligation!is!extinguished.!

One! factor! that! most! clearly! distinguishes! agency! from! other!

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legal!concepts,!including!sale,!is!control;!one!person!–!the!agent! –!agrees!to!act!under!the!control!or!direction!of!another! –!the! principal.!Victorias'Milling'Co.,'Inc.'v.'CA'(333'SCRA'663)!

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General(Rule:(Contract!of!Agency!is!valid!and!enforceable!in!any! form!–!not!under!the!Statute!of!Frauds.! o Exception:!Authority!to!sell!land!must!be!in!writing.!! !

E.(From(Dacion(en(Pago( •

Dacion!"!property!is!alienated!to!creditor!in!full!satisfaction!of! a! debt! in! money.! It! involves! the! delivery! and! transmission! of! ownership! of! a! thing! as! an! accepted! equivalent! of! the! performance!of!the!obligation.!Yuson'v.'Vitan'(496'SCRA'540)! o Governed!by!law!on!sales!(express!provision!of!law)!

Objective!novation!takes!place! ! Thing! offered! as! accepted! equivalent! of! performance! ! Considered! as! object! of! sale! –! debt! is! the!

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Assumption!by!“agent”!of!the!risk!pertaining!to!the!cost!or!price!

! D.3.(Value(for(being(able(to(distinguish(


purchase!price!!

of! the! subject! matter! makes! the! relationship! that! of! buyer\ seller,! for! the! agent! does! not! assume! risk! with! respect! to! the! price!or!the!property!subject!of!the!relationship.!Ker'&'Co.,'Ltd.' v.'Lingad'(38'SCRA'524)! •

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Similar!to!sale!in!that!the!creditor!“buys”!the!thing,!payment!of! which!is!charged!to!the!debtor’s!debt.! o In! a! true! dacion! en! pago,! the! assignment! of! the! property!extinguishes!the!monetary!debt.!Ong'v.'Roban' Lending'Corp.'(557'SCRA'516)!

! Yuson'v.'Vitan' ' Facts:(Atty.!Vitan!helped!Yuson!and!his!wife!buy!a!taxi,!but!he!borrowed! P100,000! from! them.! He! executed! several! postdated! checks! to! guarantee!payment!but!all!were!dishonored.!Vitan!executed!a!Deed!of! Absolute! Sale! over! his! property! in! Bulacan! so! Yuson! can! either! sell! or! mortgage!it,!while!Vitan!claimed!they!were!to!return!to!him!the!excess! of! the! proceeds! after! obtaining! the! money! represented! by! the! dishonored! checks.! They! executed! a! Second! Deed! of! Sale! which! Vitan!



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claimed! was! Counter! Deed! of! Sale! as! a! collateral! for! the! ! of! a! certain!Evelyn!Estur.!! ! Issue:(Whether!or!not!there!was!a!dacion!en!pago!

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! Issue:!Whether!or!not!the!Deed!of!Assignment!extinguished!petitioner’s! obligation.! ( Held:(NO.!The!Supreme!Court!ruled!that!though!a!Deed!of!Assignment,! as! in! this! case,! may! extinguish! an! obligation,! it! is! incumbent! on! the! Assignor! to! ensure! the! existence! and! legality! of! the! credit.! Lo! failed! to! do!this!as!he!assigned!non\existent!credit.!


Other!Highlights! •

For! dacion! to! arise,! there! must! be! actual! delivery! of! the! property! to! the! creditor! by! way! of! extinguishment! of! the! pre\ existing!debt.!Philippine'Lawin'Bus'Co.'v.'CA'(374'SCRA'332)!

( Held:(NO.!The!Court!agreed,!saying!he!failed!to!honor!his!debts!and!his! obligation! was! not! extinguished! because! he! did! not! mean! to! sell! or! transfer! ownership! of! his! property! to! the! Yusons.! He! also! defrauded! complainant!by!issuing!postdated!checks.! ! Lo'v.'KJS'Eco_Formwork'System'Phil.,'Inc.! ( Facts:(Lo!purchased!steel!scaffolding!from!KJS!on!a!monthly!installment! basis.! When! he! failed! to! make! payments,! he! executed! a! Deed! of! Assignment!with!KJS!so!that!the!latter!can!collect!the!receivables!that!Lo! had! from! Jomero.! When! KJS! tried! to! collect,! Jomero! said! that! Lo’s! previous! debt! with! them! compensated! his! receivables.! KJS! then! filed! a! money!claim!against!Jomero.!!

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A!creditor,!especially!a!bank,!which!enters!into!dacion!en!pago,! should! know! and! must! accept! the! legal! consequence! thereof,! that! the! pre\existing! obligation! is! totally! extinguished.! Estanislao'v.'East'West'Banking'Corp.'(544'SCRA'369)!

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A! property! subject! to! a! real! estate! mortgage,! which! has! not! been!foreclosed,!may!validly!be!the!subject!of!dacion!en!pago,! for! a! mortgage! does! not! take! away! the! property! rights! of! the! mortgagor;! however,! the! creditor! who! becomes! the! buyer! of! the! property! is! subject! to! the! real! estate! mortgage! lien.! Typingco'v.'Lim'(604'SCRA'396)!

! F.(From(Lease( •

Lease!"!lessor!binds!himself!to!give!to!another!the!enjoyment! or!use!of!a!thing!for!a!price!certain,!for!a!period!which!may!be! definite!or!indefinite.!

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“Lease!with!option!to!buy”!is!a!conditional!sale.! o

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Such!is!a!lease!only!in!name!

When!rentals!in!a!lease!are!meant!to!be!installment!payments,! it! is! actually! a! sale! by! installments.! ! Filinvest' Credit' Corp.' v.' Court'of'Appeals'(178'SCRA'188)!

!

! ! ! !



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Chapter(2:(Parties(of(Sale( ! I.(General(Rule(on(Capacity(of(Parties( ! Article(1489.(( All( persons( who( are( authorized( in( this( Code( to( obligate( themselves,( may( enter( into( a( contract( of( sale,( saving( the( modifications( contained( in(the(following(articles.( ( Where( necessaries( are( those( sold( and( delivered( to( a( minor( or( other( person( without( capacity( to( act,( he( must( pay( a( reasonable( price( therefor.(Necessaries(are(those(referred(to(in(Article(290.((1457a)( ( •

General(Rule:!any!person!who!has!capacity!to!act,!or!the!power! to! do! acts! with! legal! effects,! or! with! the! power! to! obligate! himself!may!enter!into!a!contract!of!sale.!

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Natural!Persons!!!age!of!majority!begins!at!18!years;!they!have! capacity!to!act!from!this!point!

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Juridical! Persons! !! a! juridical! personality! distinct! from! the! !or!partners! o Expressly!recognized!by!law! o They!have!full!juridical!capacity!

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Exception:!(1)!Necessaries!

Contracts! entered! into! by! these! people! are! not! void,! but!

Person! who! is! capacitated! cannot! institute! the! action! for! annulment!based!on!incapacity.!

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When!entered!into!during!a!lucid!interval!!!valid!

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When!entered!during!a!state!of!drunkenness!or!under!hypnotic! spell!!!voidable.!!

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General( Rule:( Incapacitated! person! is! not! obliged! to! make! restitution! o Exception:! Insofar! as! he! has! been! benefitted! by! the! thing/price!

( A.(Necessaries( •

This!is!an!exception!to!a!general!rule!regarding!minors! o

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Since! they! cannot! give! consent,! there! can! be! no! valid! sale.!Thus,!the!sale!is!voidable!

However,! where! necessaries! are! sold! and! delivered! to! a! minor! or! incapacitated! person,! he! must! pay! a! reasonable! price! therefore.!Article(1489(2).(The!sale!here!is!valid.!

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Necessaries!are!defined!in!Article(194(of(the(Family(Code! o o o o o o

1397(and(1399)( General(Rule:!Minors,!insane!or!demented!persons,!deafEmutes! who! cannot! write! have! no! legal! capacity! to! contract! and! thus! cannot!be!parties!to!a!sale.!This!results!in!voidable!contracts.!


voidable! o Subject!to!annulment! o Subject!to!ratification!

! II.( Minors,( Insane,( or( Demented( Person,( DeafPMutes( (Article( 1327,( •

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Everything!indispensable!for!sustenance!! Dwelling! Clothing! Medical!Attendance! Education!and!transportation! In!keeping!with!the!financial!capacity!of!the!family!!

Requisites!for!sale!of!necessaries!to!minors!to!be!valid!


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1. Perfection!of!sale!! 2. Delivery!of!subject!necessaries! ! B.(Emancipation(( •

R.A.(No.(6809!has!lowered!age!of!majority!to!18!years!old!

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Thus,! issue! on! validity! of! sales! entered! into! by! emancipated! minors!no!longer!exists.!

( C.(Senility(and(Serious(Illness! •

General( Rule:( A! person! is! not! incompetent! to! contract! merely! because!of!advanced!years!or!by!reason!of!physical!infirmities.( o Exception:( When! such! age! or! infirmities! have! impaired! the! mental! faculties! so! as! to! prevent! the! person! from! properly,! intelligently,! and! firmly! protecting! his! rights,! then!he!is!undeniably!incapacitated.(

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CLV:! the! essence! of! the! ruling! declaring! the! sale! void! was! that! there! was! never! any! meeting! of! the! minds,! and! no! real! consideration!!!This!was!caused!by!the!incapacity!

! Paragas!v.!Heirs!of!Dominador!Balacano! ! Facts:(Gregorio!Balacano!is!the!father!of!Domingo!Balacano!who!in!turn! is! the! father! of! defendants! (and! original! plaintiffs)! Dominic,! Rodolfo,! Nanette! and! Cyric.! In! their! original! complaint,! herein! defendants! claim! that! the! sale! which! their! grandfather! Gregorio! executed! in! favor! Spouses! Paragas! of! lands! for! the! amount! of! P500,000! is! null! and! void.! They!allege!that!the!contract!was!executed!when!Gregorio!was!seriously!

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understand!what!he!was!g!when!Rudy!Paragas!made!him!sign!the! deed! of! sale.! On! the! other! hand,! Spouses! Paragas! presented! the! one! who! notarized! the! deed,! Atty.! De! Guzman,! as! a! witness! who! in! turn! testified! that! Gregorio! Balacano! had! approached! him! prior! to! his! hospitalization! asking! him! to! draft! a! deed! of! sale! to! be! execute! by! Gregorio!and!Rudy!Paragas.!Such!deed!was!personally!brought!be!Atty.! De!Guzman!and!Rudy!to!Gregorio!in!the!hospital,!and!witnessed!by!Julia! and! Antonio.! Atty.! De! Guzman! also! claimed! that! although! the! deed! of! sale!states!that!it!was!executed!on!July!22!at!Santiago!City,!it!was!in!fact! executed!on!July!18!in!Bayombong,!Nueva!Vizcaya.! ! Issue:(Whether!or!not!there!was!a!valid!contract!of!sale.! ( Held:( NO.!Petitioners!have!failed!to!prove!that!there!was!a!meeting!of! minds! between! them! and! Gregorio,! and! the! latter’s! health! at! the! time! he! supposedly! signed! the! deed! of! sale! casts! serious! doubt! on! whether! he!fully!understood!the!contents!of!the!documents!we!was!g.!The! Supreme! Court! ruled! that! (1)! Atty! De! Guzman! is! an! unreliable! witness! because! he! had! not! faithfully! executed! his! functions! as! notary! public! and!because!his!testimony!does!not!prove!that!there!was!a!meeting!of! minds! between! Gregorio! and! Rudy! especially! concerning! the! consideration!of!the!sale,!and!(2)!Gregorio!was!literally!on!his!death!bed! and! therefore! an! octogenarian! making! it! highly! doubtful! that! he! had! been!of!sound!mind!when!he!signed!the!deed!of!sale.! ! •

ill! as! evidenced! by! his! hospital! confinement,! weakness! and! inability! to! talk.! Because! of! this,! they! claim! that! Gregorio! did! not! completely!


Paragas!Doctrine! o o

Sale! executed! by! senile! person! declared! void,! and! not! voidable!! SC!used!Article(24,(New(Civil(Code! " Protection!of!one!with!mental!weakness!!


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CLV:!this!seems!illogical! o

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CLV! prefers! the! annulment! of! contract! by! reason! of! vitiated!consent!

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of!the!minds!(Domingo)! ! III.(Sales(by(and(Between(Spouses( ! Article(1490.(( The(husband(and(the(wife(cannot(sell(property(to(each(other,(except:( (

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(1)( When( a( separation( of( property( was( agreed( upon( in( the( marriage( settlements;(or( ( (2)( When( there( has( been( a( judicial( separation( or( property( under( Article(191.((1458a)( ! A.(Sale(with(Third(Parties( • •

Either! spouse! may! exercise...business! without! the! consent! of! the! other,! and! latter! may! only! object! on! valid,!serious!and!moral!grounds.! Courts!shall!decide!whether!the!objection!is!proper! If! benefits! accrued! before! objection,! obligation! enforced!against!separate!property! Otherwise,!chargeable!against!the!community!property!

Under!Law!on!Sales! o Spouse!may!enter!into!sales!in!regular!or!normal!pursuit! of!his!or!her!profession,!without!consent!! o However!–!Article(96(and(124,(Family(Code! " "

"

istration! of! conjugal! property! will! belong! to!both!tly! In! case! of! disagreement! –! husband’s! decision! will! prevail,! subject! to! wife! seeking! remedy! within!5!years!! Disposition/encumbrance! of! property! shall! be! void! without! authority! of! court! or! written! consent!of!other!spouse!

Before!Family!Code!!!there!were!limitations!on!when!husband! or!wife!could!deal!with!conjugal!property.!

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In! such! case:! transaction! considered! as! a! continuing! offer! on! the! part! of! the! consenting!spouse!and!the!third!person!

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May!be!perfected!as!a!binding!contract! (before!withdrawal!by!either!party)! o Upon! acceptance! of! other! spouse!!

Present! Family! Code! !! Common! provisions! apply! equally! to! both!spouses.! o Spouses! have! t! istration! of! the! conjugal! properties!in!Conjugal!Partnership!of!Gains! o In!Absolute!Community!Property,!everything!coEowned!

! ! !


Article(73,(Family(Code( o

In!other!words,!CLV!seems!to!prefer!having!such!sales!declared! voidable!(Paragas)!or!declaring!sale!void!because!of!no!meeting!

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Or!upon!authorization!by!court!


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Abalos!v.!Macatangay!Jr.,!439!SCRA!64!(2004)! " General( Rule:( Sale! of! husband! of! conjugal! property! without! consent! of! capacitated! wife! was!void!ab!initio! " Exception:! husband! may! dispose! of! conjugal! property! without! consent! of! wife! when! sale! is! necessary! to! answer! for! conjugal! liabilities! in!

Before! his! death,! Fernando! sold! the! land! he! exclusively! owned! along! with!his!and!Mercedes’!conjugal!house!built!thereon!to!Daguines.!Upon! failure! to! take! possession! of! the! lot! and! house! still! occupied! by! Mercedes,! Daguines! filed! for! quieting! of! title.! The! trial! court! earlier! ruled!in!favor!of!Daguines,!but!reversed!upon!an!MR!by!Mercedes.!! ! Issue:( Whether! or! not! the! sale! of! the! lot! together! with! the! house! and!

Article( 1490,( New( Civil( Code:! Spouses! cannot! sell! property! to! each!other,!except:! o Separation! of! property! was! agreed! upon! in! marriage! settlement!! o Judicial!Decree!for!separation!of!property! Article( 1492:! Prohibition! relating! to! spouses! selling! to! one! another!applicable!to!sales!in! o Redemption!! o Compromise!! o Renunciation!

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! Facts:( During! their! marriage,! Fernando! Canullas! abandoned! his! wife,! Mercedes! Calimlim! Canullas,! and! cohabited! with! Corazon! Daguines.!

! B.(Sales(Between(Spouses(

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Guiang!v.!Court!of!Appeals,!291!SCRA!372!(1998)! " Sale! by! husband! of! conjugal! property! without! consent! of! wife! –! void! (there! was! no! full! consent)!!

Article(161P162(of(NCC.!

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CalimlimMCanullas!v.!Fortun!

improvements!thereon!was!valid.! ! Held:(NO.!The!Supreme!Court!resolved!the!issue!by!saying!that!the!sale! was! void! for! being! contrary! to! morals! and! public! policy,! and! because! conveyances! by! one! spouse! to! another! is! prohibited! by! law;! and! such! prohibition!also!applies!to!a!couple!living!as!husband!and!wife!without! the!benefit!of!marriage.! ! B.1.(Status(of(Prohibited(Sales(between(Spouses( •

Contracts!entered!into!in!violation!of!the!above!two!provisions! are!void!

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Not!everyone!may!assail!validity,!though! o Spouses!themselves!cannot!–!they!are!in!pari!delicto.! o Creditors! who! became! such! after! transaction! cannot! –! they!have!not!been!prejudiced!!

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Who!can!assail?! o Heirs!of!either!spouse,!who!have!been!prejudiced! o Prior!creditors!

Sales! between! spouses! who! are! not! governed! by! a! complete! separation! of! property! regime! are! void,! not! just! voidable.! Medina!v.!Collector!(1!SCRA!302)! ! !


SALES%REVIEWER%(2013/2014)% % o •

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State!–!payment!of!taxes!due!on!transactions.!!

Nevertheless,! when! property! resold! to! a! thirdEparty! buyer! in!

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prohibition!against!donations!between!spouses.! •

between!spouses!(Article(133)! " Article( 133! now! replaced! by! Article( 87,( Family( Code(–!prohibition!also!applies!to!persons!living! together! as! husband! and! wife! without! a! valid! marriage.! •

Article( 86! does! not! make! the! same! exceptions! for! donations! that!Article(1490!does!for!sales! o Thus,! even! if! there! is! judicial! separation! of! property,! they!still!can’t!donate!to!each!other.! o Explanation:! donation! necessarily! reduces! estate! of! donor! –! sale! would! result! in! both! estates! being! of! the! Sale! between! spouses! governed! by! Absolute! Community! of! Property! is! not! possible! because! there! is! simply! cannot! be! a! purchase!of!what!a!partyEbuyer!already!owns.!

CLV:! key! element! to! exceptions! lies! in! the! psychology! of! the! situation! o Hardness!of!heart!on!the!part!of!the!spouses! o o o

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Businesslike!approach!to!the!relationship! Thus,! it! would! be! unlikely! for! one! spouse! to! influence! the!other.!! This! still! doesn’t! cover! situations! where! dominant! spouses!could!influence!the!other,!weaker!spouses!

CLV’s!final!word!–!absolute!prohibition!under!Article(87,(Family(

Code!should!apply!to!sales!between!spouses.! ! C.(Applicability(of(Incapacity(to(Common(Law(Spouses( •

Since! under! Article( 1490,! the! spouses! cannot! validly! sell! property! to! one! another,! then! policy! consideration! and! the! dictates! of! morality! require! that! the! prohibition! should! apply! also!to!commonElaw!relationships.!Matabuena!v.!Cervantes!(38! SCRA!284)!

same!value! •

It! would! seem! that! the! situations! in! the! exceptions! are! also! susceptible!to!the!evils!sought!to!be!avoided.! o Greater! danger! of! undue! influence! in! separation! of! property! o One! spouse! can! still! exercise! undue! influence! or! pressure!on!the!other!one.! o Also,! exceptions! allow! the! circumvention! of! the!

Medina!v.!Collector!of!Internal!Revenue,!1!SCRA!302!(1961)! 1. Prevent! a! spouse! defrauding! his! creditors! by! transferring!his!properties!to!the!other!spouse! 2. Avoid! situation! where! dominant! spouse! unduly! takes! advantage!of!the!weaker!spouse,!defrauding!the!latter! 3. Avoid!indirect!violation!of!prohibitions!against!donation!


B.3.(Rationale(for(Exceptions(to(Prohibition(under(Article(1490(

good! faith! and! for! value,! reconveyance! is! no! longer! available.! Cruz!v.!CA!(281!SCRA!491)! ! B.2.(Rationale(for(Prohibition( •

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CalimlimMCanullas!v.!Fortun!(129!SCRA!675)! o

Court! applied! the! same! ruling! in! Matabuena( v.( Cervantes!(concerning!donations)!to!sales!!


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Sales!between!common!law!spouses!are!void! " Article( 1409:! such! are! contrary! to! morals! and! public!policy! " Article(1352:!void!for!having!unlawful!cause!

(5)( Justices,( judges,( prosecuting( attorneys,( clerks( of( superior( and( inferior( courts,( and( other( officers( and( employees( connected( with( the( istration(of(justice,(the(property(and(rights(in(litigation(or(levied( upon( an( execution( before( the( court( within( whose( jurisdiction( or(

" Article(1490:!prohibits!sales!between!spouses! SC:! otherwise,! those! who! “incurred! guilt”! (thus! living! without! the! benefit! of! marriage)! would! be! in! a! better! position!that!those!who!were!legally!married.!

territory( they( exercise( their( respective( functions;( this( prohibition( includes(the(act(of(acquiring(by(assignment(and(shall(apply(to(lawyers,( with(respect(to(the(property(and(rights(which(may(be(the(object(of(any( litigation(in(which(they(may(take(part(by(virtue(of(their(profession.( ( (6)(Any(others(specially(disqualified(by(law.((1459a)( (

! IV.(Specific(Incapacity(Mandated(by(Law( ( Article(1491.(( The(following(persons(cannot(acquire(by(purchase,(even(at(a(public(or( judicial(auction,(either(in(person(or(through(the(mediation(of(another:( ( (1)( The( guardian,( the( property( of( the( person( or( persons( who( may( be( under(his(guardianship;( (

Article(1492.(( The(prohibitions(in(the(two(preceding(articles(are(applicable(to(sales(in( legal(redemption,(compromises(and(renunciations.((n)( ! •

(2)(Agents,(the(property(whose(istration(or(sale(may(have(been( entrusted(to(them,(unless(the(consent(of(the(principal(has(been(given;( ( (3)( Executors( and( s,( the( property( of( the( estate( under( istration;( ( (4)(Public(officers(and(employees,(the(property(of(the(State(or(of(any( subdivision( thereof,( or( of( any( governmentPowned( or( controlled( corporation,( or( institution,( the( istration( of( which( has( been( intrusted(to(them;(this(provision(shall(apply(to(judges(and(government( experts(who,(in(any(manner(whatsoever,(take(part(in(the(sale;( (


Article( 1491,( Civil( Code! prohibits! the! following! persons! from! entering!into!contracts!of!sale:!(AGEPEJL)! o Agents,! with! respect! to! property! whose! istration! or!sale!may!have!been!entrusted!to!him,!unless!consent! of!principal!has!been!given.! o Guardians,!with!respect!to!property!of!person!under!his! guardianship! o o

Executor( or( ,! with! respect! to! property! of! estate!under!his!istration! Public(officers(and(employees,!with!respect!to!property! of!the!State!or!any!subdivision!thereof! " Or!of!any!GOCC!or!institution! " istration! of! which! has! been! entrusted! to! them!


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Provision! includes! judges! and! government! experts!who!take!part!in!the!sale.! Justices,( judges,( prosecuting( attorneys,( clerks( of( courts,( and( other( officers( and( employees( connected( "

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These! incapacities! are! applied! also! to! sales! in! redemption,! compromise!and!renunciation.!

which!Rubias!was!the!lawyer!of!Militante.! ! Issue:(Whether!or!not!the!contract!of!sale!between!Militante!and!Rubias! was! VOID! because! Rubias! acquired! it! from! Militante! while! he! was! still! the!lawyer!of!the!latter!in!a!land!registration!case.! ( Held:(YES.!The!Supreme!Court!affirmed!the!decision!of!the!lower!courts,!

and(1942( Apart!from!case!of!agents,!all!cases!in!the!enumeration!cannot! be! validated! by! the! consent! of! the! persons! sought! to! be! protected! o •

Only!in!the!“agents”!part!is!“consent!of!principals”!given! as!an!exception.!

It! is! not! expressly! stated! that! such! contracts! are! void.! Wolfson! v.! Estate! of! Martinez! (20! Phil! 340)! classified! them! as! merely! voidable.!

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Violation! of! such! provision! cannot! be! cured! by! ratification! ! Rubias!v.!Batiller!

! Facts:( Rubias! filed! an! ejectment! case! against! Batiller,! claiming! that! he! was!the!rightful!owner!of!a!lot!in!Iloilo!since!he!purchased!said!property! from! his! client/fatherEinElaw,! Francisco! Militante.! Batiller! claimed! that! he! and! his! predecessors! had! actual! and! public! possession! of! the! property!since!time!immemorial,!and!that!Militante!was!not!the!rightful! owner! because! his! application! for! land! registration! was! denied,! during!

! A.( Legal( Status( of( Contracts( Entered( Into( in( Violation( of( Articles( 1491( •


with( the( istration( of( justice,! with! respect! to! property! and! rights! in! litigation! or! levied! upon! an! execution!before!the!court!within!whose!jurisdiction!or! territory!they!exercise!their!respective!functions! Lawyers,!with!respect!to!property!and!rights!which!may! be! the! object! of! any! litigation! in! which! they! may! take! part!by!virtue!of!their!profession.!

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invoking! Articles! 1409! and! 1421! of! the! Civil! Code! which! expressly! prohibit! lawyers! from! purchasing! properties! belonging! to! their! clients! that!were!subject!to!a!litigation!case.! ! A.1.(Different(form(of(“ratification”( •

In! Rubias! v.! Batiller! (51! SCRA! 120),! the! Court! said! that! they! must!be!void,!not!merely!voidable.! o Civil! Code! recognizes! the! nullity! of! contracts! which! are! expressly! prohibited! or! declared! void! by! law! and! declares!such!inexistent!and!void!from!the!beginning.!


Rubias! tries! to! declare! a! difference! in! the! “voidness”! of! guardians,!agents,!s,!as!opposed!to!judges,!judicial! officers!and!lawyers.! o Permanent!disqualification!of!public!and!judicial!officers! and!lawyers!is!grounded!on!public!policy.! o First! three! may! be! “ratified”! by! means! of! and! in! “the! form!of!a!new!contract.”!

SALES%REVIEWER%(2013/2014)% % " "

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In!which!case!the!validity!will!be!determined!as! of!the!time!of!the!execution!of!the!new!contract! Thus,! the! contract! may! be! lawful! when! at! the! time! of! the! second! contract,! the! legal!

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In!the!first!group!(agents,!guardians,!s)! o After! the! inhibition! has! ceased,! only! real! wrong! is! a! private!one!! o

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A! wrong! that! such! private! parties! may! choose! to! condone!

Second!group!(judges,!judicial!officers!and!lawyers)! o There!also!exists!a!public!wrong! o o

Damage!to!the!public!service! Damage! to! esteem! with! which! we! regard! our! justice! system!

! A.2.(Proper(Party(to(Raise(Issue(of(Nullity( •

The!nullity!of!contracts!entered!into!in!violation!of!Article(1491,! may! be! raised! by! any! person! whenever! juridical! effects! found! thereon!are!asserted!against!him.!

! A.3.(Fraud(or(Lesion(Not(Relevant(for(Nullity( •

Point!made.!

! B.(Agents( •

Brokers!do!not!come!within!this!prohibition! o o

Their!authority!is!merely!looking!for!a!buyer/seller! To! bring! them! together! for! them! to! consummate! transaction.!


He!is!prohibited!from!buying!for!himself.!

Schmid!&!Oberly!v.!RJL!Martinez!Fishing!Corp!(166!SCRA!493)! o

impediments!no!longer!exist! •

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Broker! !! one! who! is! engaged,! for! others,! on! a! commission,! negotiating! contracts! relative! to! property! with!the!custody!of!which!he!has!no!concern.! Strictly!a!middleman.! His!occupation!is!to!bring!parties!together!to!bargain.!

( C.(Guardians,(s(and(Executors( •

These! are! necessarily! officers! of! the! courts! !! as! they! are! appointed!to!such!positions!in!judicial!proceedings!

! Philippine!Trust!Co.!v.!Roldan! ! Facts:( Guardian! filed! a! motion! for! authority! to! sell! parcels! of! land! belonging!to!the!ward!(to!invest!in!a!house!for!the!ward).!Guardian!sold! parcels! of! land! in! favor! of! her! brother! in! law,! who! immediately! resold! the!parcels!to!the!guardian.! ! Issue:(Whether!or!not!the!3!sales!should!be!annulled!pursuant!to!Article! 1459! ( Held:(YES.!The!first!2!sales!violated!Article!1459.!The!third!was!annulled! because!Socorro!Roldan!could!!no!title!to!Emilio!Cruz!(since!the!first! 2! were! annulled).! The! Supreme! Court! here! overturned! an! earlier! doctrine! which! required! proof! that! the! third! party! was! a! mere! intermediary.! Even! without! such! proof,! the! sale! may! be! rescinded.! Guardianship! is! a! trust! of! the! highest! order! –! the! sales! were! declared! void.!



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CLV:! Any! matter! relating! to! advantage! or! benefit! is! irrelevant! under!Article(1491.! o The!article!imposes!absolute!disqualification.! o To!allow!exceptions!based!on!“benefit”!is!to!court!abuse! of!such!doctrine.!

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Prohibition! against! agents! does! not! apply! if! the! principal!

! C.1.(Hereditary(Rights(Not(Included(in(Coverage( •

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CLV:! This! is! hard! to! accept! –! hereditary! rights! gain! their! value! only!from!the!estate! o The! estate! is! what! is! within! fiduciary! control! of! the! ! o If! they! were! not! included,! ! could! validly! acquire! hereditary! rights! –! putting! him! in! a! conflict! of! o

interest!situation.! Thus,! the! prohibition! must! apply! based! on! the! spirit! of! the!law.!

! D.(Judges,(Justices(and(Those(Involved(in(istration(of(Justice( •

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Doctrine!of!“prohibition!applicable!only!during!period!of! litigation”!also!applies!to!judges.! In! that! case,! judge! acquired! pieces! of! land! which! had! been!part!of!a!partition!case!decided!by!him! SC!held!that!prohibition!was!only!applicable!to!property!

A! judge! who! buys! property! in! litigation! before! his! court! after! the! judgment! becomes! final! does! not! violate! Article! 1491,! but!

he! can! be! istratively! disciplined! for!violation! of! the! Code! of!Judicial!Ethics.!Macariola!v.!Asuncion!(114!SCRA!77)! ! E.(Attorneys( •

Valencia!v.!Cabanting!(35!Phil.!81)!–!reason!for!the!prohibition! is!the!fiduciary!relationship.! o Intended! to! curtail! any! undue! influence! of! the! lawyer! upon!his!o!client.!

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Rubias! v.! Batiller! (51! SCRA! 120)! –! nullity! of! such! contracts! is! definite!and!permanent!! o Cannot!be!cured!by!ratification!or!compromise.!

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Gan!Tingo!v.!Pabinguit!(35!Phil!81)! o

The! property! is! in! litigation! from! the! moment! it! becomes!subject!to!the!judicial!action!of!the!judge!!

actually! under! litigation! –! and! such! acquisition! must! take!place!“during!the!pendency”!of!the!litigation!

Earlier! ruling:! Naval! v.! Enriquez,! 3! Phil.! 669! (1904)! held! that! hereditary!rights!aren’t!included!in!the!prohibition!insofar!as!the! !or!executor!of!the!estate!of!the!deceased.!!


Macariola!v.!Asuncion!(114!SCRA!77)! o

consents!to!the!sale!of!the!property!in!the!hands!of!the!agent.! Distajo!v.!CA!(339!SCRA!52)!

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As! to! judges,! it! is! not! required! that! some! contest! or! litigation!over!the!property!itself!should!have!been!tried! by!the!judge.!


Araneta! Inc! v.! Tuason! de! Paterno! (49! OG! 45)! –! prohibition! applies! only! when! property! they! are! buying! is! actually! the! subject!of!litigation! o It!does!not!apply!to!a!sale!who!were!not!the!counsel!of! the!owners!in!the!case.!


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Del! Rosario! v.! Millado! (26! SCRA! 700)! –! prohibition! does! not!

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apply!when!lawyer!acquired!property!prior!to!his!involvement!in! a!case!concerning!such.! •

Municipal! Council! of! Iloilo! v.! Evangelista! (55! Phil.! 290)! –! prohibition! applies! only! to! lawyer! who! actually! represented! a!

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Prohibition! only! apples! when! litigation! is! pending.! Including! if! case!is!on!appeal,!after!final!judgment.! !

E.1.(Contingent(Fee(Agreements( •

Recto!v.!Harden!(100!Phil.!427)!–!prohibition!does!not!apply!to! a!contingent!fee!agreement! o Fee!based!on!value!of!property!involved! o

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Lawyer!can!acquire!a!certain!percentage!of!the!value!of! the!properties,!if!his!client!wins.!

Vda.! De! Laig! v.! Court! of! Appeals! (86! SCRA! 641)! –! such! agreement!not!prohibited!because!payment!is!not!made!during! pendency!of!litigation!

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Director! of! Lands! v.! Ababa! (88! SCRA! 513)! –! contingent! fee! always!subject!to!supervision!of!courts! o Court! may! protect!the! client!from!any!undue!influence! or!fraud.!

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Fabillo!v.!IAC!(195!SCRA!28)!–!lawyer!still!must!not!exert!undue! influence.!

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CLV:!Ababa!and!Fabillo!sort!of!miss!the!point! o

They! exclude! contingent! fee! agreements! from! prohibition!because!of!the!timing! " Fees!are!paid!after!pendency!of!litigation!


However,! the! agreement! is! negotiated! during! the! pendency! of! litigation! –! at! a! point! where! the! lawyer! may!still!exert!undue!influence!

Also! –! contingency! fee! agreement! is! essentially! a! contract! for! service!–!why!is!it!in!the!Law!on!Sales?! o Law! on! Sales:! “catchEall”! provision! for! all! onerous! contracts!for!transfer!of!ownership.!!

client!in!a!suit!involving!that!property.! •

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! Fabillo!v.!Intermediate!Appellate!Court! ! Facts:( Petitioners! seek! the! reversal! of! the! CA’s! decision! interpreting! in! favor!of!lawyer!Alfredo!M.!Murillo!the!contract!of!services!entered!into! between!him!and!his!clients,!spouses!Florencio!Fabillo!and!Josefa!Taña.!! In! her! last! will! and! testament,! Justina! Fabillo! left! to! (a)! her! brother,! Florencio,!a!house!and!lot!located!in!San!Salvador!St,!Leyte,!and!(b)!to! her! husband,! Gregorio! Brioso,! a! piece! of! land! in! Pugahanay,! Leyte.!! Florencio! filed! for! a! probate! of! the! will,! which! was! approved! by! the! court.!!He!then!sought!the!assistance!of!Atty.!Murillo!to!recover!the!San! Salvador! property! with! the! consideration! that! he! will! give! Murillo! 40%! of! the! value! of! the! house! and! lot! in! case! they! win! the! case.! ! The! CONTRACT!OF!SERVICES!basically!stipulated!that!in!case!the!house!and! lot! shall! be! awarded! to! Florencio,! mortgaged,! leased,! or! just! occupied! by! him! or! his! heirs,! Murillo! will! receive! 40%! of! the! of! proceeds! of! whichever!transaction!as!his!attorney’s!fees.!!Murillo!won!the!case,!and! Florencio! was! declared! the! lawful! owner! of! both! the! San! Salvador! and! Pugahanay! properties.! Murillo! then! proceeded! to! assert! his! rights! stipulated!in!the!contract,!but!Fabillo!and!his!heirs!began!to!contest!the! same,! saying! that! the! spouses’! consent! was! vitiated,! and! that! the! fees! stipulated! were! unconscionable,! among! others.! The! lower! court! eventually! ruled! in! favour! of! Murillo,! saying! that! he! was! the! true! and!



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lawful!owner!of!40%!of!the!parcels!of!land!stipulated!in!their!contract,! and! that! Fabillo! and! his! heirs! were! to! compensate! him! for! damages,! attorney’s!fees,!and!litigation!costs.! ! Issue:! Whether! or! not! the! contract! of! services! violated! Article! 1491! of! the!Civil!Code.!!! ! Held:( NO.! ! A! contract! between! a! lawyer! and! his! client! stipulating! a! contingent! fee! is! not! covered! under! Article! 1491! (5)! of! the! Civil! Code! because!the!payment!of!said!fee!is!not!made!during!the!pendency!of!the! litigation! but! only! after! judgment! has! been! rendered! in! the! case! handled! by! the! lawyer.! As! long! as! the! lawyer! does! not! exert! undue! influence!on!his!client,!that!no!fraud!is!committed!or!imposition!applied,! or! that! the! compensation! is! clearly! not! excessive! as! to! amount! to! extortion,! a! contract! for! contingent! fee! is! valid! and! enforceable.!! Moreover,! the! SC! held! that! the! contingent! fee! stipulated! between! the! Fabillo! spouses! and! Murillo! (40%! OF! THE! PROPERTIES)! was! a! wrong! interpretation! of! the! contract,! for! if! scrutinized,! what! the! parties! intended! was! 40%! OF! THE! VALUE(of! the! properties! as! Murillo's! contingent! fee.! In! consonance! with! the! rules! of! interpretation,! the! ambiguity! of! said! provision! was! resolved! against! Murillo! as! it! was! he! himself! who! drafted! the! contract.! ! The! SC! then! ordered! Fabillo! to! pay! Murillo!P3000!for!attorney’s!fees!with!interest.!


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Chapter(3:(Subject(Matter( ! I.(Requisites(of(Valid(Subject(Matter! ! Article(1459( The( thing( must( be( licit( and( the( vendor( must( have( a( right( to( transfer( the(ownership(thereof(at(the(time(it(is(delivered.((n)( ( Article(1460( A(thing(is(determinate(when(it(is(particularly(designated(or(physically( segregated(from(all(others(of(the(same(class.( ( The(requisite(that(a(thing(be(determinate(is(satisfied(if(at(the(time(the( contract( is( entered( into,( the( thing( is( capable( of( being( made( determinate( without( the( necessity( of( a( new( or( further( agreement( between(the(parties.((n)( ( Article(1461( Things(having(a(potential(existence(may(be(the(object(of(the(contract(

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manufactured,(raised,(or(acquired(by(the(seller(after(the(perfection(of( the(contract(of(sale,(in(this(Title(called(“future(goods.”( ( There( may( be( a( contract( of( sale( of( goods,( whose( acquisition( by( the( seller(depends(upon(a(contingency(which(may(or(may(not(happen.((n)( ( A.(Requisites(of(a(valid(subject(matter:((PLD)( 1. It!must!be!a!possible!thing! 2. It!must!be!licit! 3. It!must!be!determinate!or!at!least!determinable! ! B.(General(Points( Effect!of!absence!of!any!requisite! •

Absence! of! any! requisite! results! in! either! a! “no! contract”! situation,!or!a!void!contract!under!Article(1409.!

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Effect! of! “no! contract”! situation! !! buyer! can! recover! what! he! has!paid,!based!on!the!principle!of!unjust!enrichment!

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Effects!of!void!contracts:!

of(sale.( ( The( efficacy( of( the( sale( of( a( mere( hope( or( expectancy( is( deemed( subject(to(the(condition(that(the(thing(will(come(into(existence( ( The(sale(of(a(vain(hope(or(expectancy(is(void.((n)( ( Article(1462( The(goods(which(form(the(subject(of(a(contract(of(sale(may(be(either( existing( goods,( owned( or( possessed( by( the( seller,( or( goods( to( be(


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If! void! because! the! illegality! constitutes! a! criminal! offense! (Article( 1411)! !! pari! delicto! will! apply;! courts! leave! the! parties! where! they! are,! without! prejudice! to! criminal!prosecution! If! void! but! the! act! is! merely! prohibited! and! not! illegal! per! se! (Article( 1416)( !! If! public! policy! is! enhanced,! plaintiff!may!recover.! If! no! crime,! but! both! are! at! fault! (Article( 1412)( !! neither!may!recover! If!no!crime,!and!only!one!party!is!at!fault!(Article(1412)(! !!innocent!party!may!recover!


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The!requisites!of!the!subject!matter!are!meant!to!safeguard!the!

realizability!and!enforceability!of!the!obligations!of!the!seller!to! transfer!ownership!and!deliver!possession.! ! C.(Subject(Matter(Must(be(a(“Possible(Thing”( A!thing!is!possible!when!it!is:!(PEFR)! •

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A!future!thing!(Article(1462)!

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Contingent!or!subject!to!a!resolutory!condition!(Article( 1462( &( Article(1465)( !

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Literally!mean!“the!purchase!of!what!we!hope”!

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A! contract! of! sale! covering! future! things,! and! subject! to! a! suspensive! condition! that! the! subject! matter! will! come! into! existence.!

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If! the! thing! does! not! come! into! existence,! contract! is! deemed! extinguished.!

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Covers! only! determinate! or! specific! things.! Generic! or! determinable!things!are!not!covered!since!they!do!not!come!out! of!existence.!

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A! literal! application! of! Article( 1409(3)! which! holds! that! contracts!“whose!cause!or!object!did!not!exist!at!the!time!of!the! transaction”!are!deemed!inexistent!and!void!ab!initio!does!not! apply!in!contracts!of!sale!involving!possible!things.!

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But! if! the! subject! matter! cannot! come! to! existence! (i.e.! an! impossible! thing),! the! contract! is! void! because! of! Article( 1409(3).(

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The!sale!of!goods!yet!to!be!manufactured,!raised,!or!acquired!by! the!seller!is!valid,!provided!that!they!can!come!into!existence.!

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For!things!whose!existence!depends!on!a!condition,!capacity!to! exist!is!sufficient.!Certainty!to!exist!is!not!necessary.!

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The! seller! does! not! have! to! be! owner! of! the! thing! at! the! time! the! sale! is! perfected,! but! only! that! he/she! is! the! owner! of! the! thing!come!the!date!of!delivery.!

Crops! which! are! yet! to! be! harvested! and! have! a! potential! existence! may! be! the! valid! subject! matter! of! sale.! They! are! considered! distinct! from! the! land! on! which! they! grow.! Sibal! v.! Valdez!(50!Phil.!512);!Pichel!v.!Alonzo!(111!SCRA!34)!

Implications!of!the!definition!of!“possible!thing”! •


C.1.(Emptio(Rei(Speratae(

Existing! or! has! a! potential! to! exist,! considering! the! state! of! science!and!technology!at!the!time!of!perfection!of!the!contract! (Article(1461)!

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! C.2.(Emptio(Spei( •

Literally!means!“the!purchase!of!hope”!

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Still!a!valid!sale.!What!is!prohibited!by!the!Civil!Code!is!the!sale! of!a!vain!hope!or!expectancy!(Article(1461)! o Example:! sale! of! sweepstakes! ticket.! The! object! of! the! sale!is!the!chance!to!win.!

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A! sale! emptio! spei! is! a! possible! situation! where! the!

commutative!nature!of!sale!is!not!complied!with.!The!buyer!can! actually!get!more!than!what!he!paid!for.! ! C.3.(Sale(of(Things(Subject(to(a(Resolutory(Condition( •

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If! the! thing! is! extinguished! by! the! resolutory! condition,! the! contract!of!sale!is!itself!extinguished.!


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Held:!YES,!there!was!a!contract!of!sale!in!violation!of!Firestone’s!right!of! first! refusal.! The! provisions! on! sale! are! “catchUall”! provisions! which! covers! transfers! whereby! ownership! of! a! thing! is! ceded! for! a! consideration.!The!cancellation!of!NDC’s!debt!was!the!consideration!for!

be! returned! since! they! are! deemed! to! have! been! mutually!compensated((Article(1187).!

the!sale.!Since!the!NDC,!PUP,!and!the!national!government!are!distinct! from!each!other,!the!transfer!was!not!a!transfer!within!the!same!entity,! and!was!thus!a!conveyance!of!title.! !! D.(Subject(Matter(Must(Be(Licit(

The! suspensive! or! resolutory! condition! does! not! affect! the! commutative! nature! of! sale.! It! is! presumed! that! the! parties!

The! essence! of! a! contract! of! sale! is! the! meeting! of! the! minds! with!respect!to!the!subject!matter.!

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The!parties!should!return!to!each!other!what!they!have! received! (Article( 1190),! in! order! to! preserve! the! commutative!nature!of!sale.! The!fruits!and!interests!of!the!things!received!need!not!

considered! these! in! the! determination! of! the! price! or! consideration!for!the!sale.! ! C.4.(Subject(Matter(is(Nexus(of(Sale( •

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The! provisions! on! sale! are! “catchUall”! provisions! which! covers! transfers! whereby! ownership! of! a! thing! is! ceded! for! a!

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outside! the! commerce! of! men,! and! all! rights! which! are! not! intransmissible.( ( D.1.(Sales(Declared(Illegal(by(Law( •

Things!outside!the!commerce!of!man!

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Animals!suffering!from!contagious!disease,!rendering!them!unfit!

consideration.!Polytechnic!University!v.!CA!(368!SCRA!691)! !

for!use!or!service!they!are!intended!for! •

Under! Article( 1347,! a! sale! involving! future! inheritance! is! void! and!cannot!be!the!source!of!any!right!nor!create!any!obligation.! Tañedo'v.'Court'of'Appeals'(252'SCRA'80)!

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Those!declared!void!by!special!laws:! o Narcotics,! gunpowder,! explosives,! firearms! and! ammunictions.!! o Wild!animals!and!rare,!wild!or!poisonous!plants!or!fruits!

Polytechnic!University!v.!CA! ! Facts:!NDC!owned!a!10Uhectare!property!which!was!leased!by!Firestone! Ceramics! with! a! right! of! first! refusal.! Near! the! end! of! the! lease! term,! NDC! looked! to! sell! the! property! to! Polytechnic! University! of! the! Philippines! (PUP).! Memorandum! Order! No.! 214,! issued! by! Pres.! Cory! Aquino,! ordered! the! conveyance! of! the! property! to! PUP.! It! also! cancelled!the!debt!of!NDC!to!the!National!Government.! ! Issue:!Was!there!a!contract!of!sale!between!NDC!and!PUP?! !

A!thing!is!licit!and!may!be!the!objet!of!a!contract!when!it!is!not!

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Sale! of! friar! land! without! consent! of! Secretary! of! Agriculture!

Sale! of! land! to! a! foreigner! is! void! because! it! is! contrary! to! the! Constitution.!Frenzel!v.!Catito!(406!SCRA!55)!


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is! merely! encumbrance! and! effect! a! loss! of! his! principal! attribute! as! owner! to! dispose! of! the! property.! Law! even! considers! void! a! stipulation! forbidding! the! owner! from! alienating!mortgaged!immovable.!Pineda!v.!CA!(409!SCRA!438)!

E.1.(Determinate(Subject(Matter( •

(Article(1460)(A!thing!is!determinate!or!specific!when!it!is!! o Particularly!designated,!or! o Physically!segregated!from!others!of!the!same!class.!

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Defense!of!force!majeure!is!applicable!to!release!the!seller!from! the!consequences!of!failure!to!deliver!!

! E.2.(Determinable(Subject(Matter( •

2!Requisites/Tests:! o “Capacity! to! segregate”! test! !! at! perfection,! subject! matter!is!capable!of!being!made!determinate! o “No! further! agreement”! test! !! without! necessity! of! a! new!or!further!agreement!between!the!parties!

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A!determinable!subject!matter!is!a!generic!object!because!it!has! not! been! physically! segregated! nor! particularly! designated! at! the!point!of!perfection!from!the!rest!of!its!kind.! o

Where!the!lot!sold!is!said!to!ad!the!“previously!paid! lot”!on!three!sides!thereof,!the!subject!lot!is!capable!of! being! determined! without! the! need! of! any! new! contract,! even! when! the! exact! area! of! the! ading!


residential! lot! is! subject! to! the! result! of! a! survey.! San! Andres!v.!Rodriguez!(332!SCRA!769)!

A!mortgagor!is!not!prevented!from!selling!the!property,!since!it!

! E.(Subject(Matter(Must(Be(Determinate(or(at(Least(Determinable( !

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•

If!the!court!still!has!to!go!back!to!the!parties!to!determine!their! intended! subject! matter,! the! sale! is! void! because! of! Article( 1409(6).( ! Melliza!v.!City!of!Iloilo!

! Facts:! Juliana! Melliza! sold! parts! of! Lot! No.! 1214! to! Iloilo! City.! The! lots! mentioned! were! 1214UC,! 1214UD,! and! the! area! “needed! for! the! construction! of! the! city! hall! site,! avenues! and! parks! according! to! the! Arellano!Plan.”!The!rights!to!the!property!were!eventually!transferred!to! Pio! Sian! Melliza.! The! TCT! issued! to! him! contained! the! annotation! that! lots!1214UBU2!and!1214UBU3!also!belonged!to!City!of!Iloilo.! ! Issue:!Whether!or!not!lot!1214UB!did!belong!to!the!City!of!Iloilo.! ! Held:! YES,! it! did.! It! was! part! of! the! subject! matter! of! the! deed! of! sale! between!Juliana!Melliza!and!the!city.!The!requirement!that!a!sale!must! have! a! determinate! object! is! fulfilled! as! long! as,! at! the! time! of! perfection! of! the! contract,! the! object! is! capable! of! being! determined! without! further! agreement.! In! this! case,! the! Arellano! Plan! already! specified!the!lands!which!were!neede!for!the!city!hall!site.! ! E.3.(Test(of(Determinability(Is(the(Meeting(of(Minds(of(Parties(and(Not( the(Covering(Deed( •


The!true!contract!of!sale!is!intangible!and!is!a!legal!concept.!It!is! perfected!by!the!meeting!of!the!minds.!


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The!Deed!of!Sale!is!merely!an!evidence!of!the!contract.!If!it!does!

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not!reflect!the!true!meeting!of!the!minds,!it!may!be!subject!to! reformation.!It!does!not!invalidate!the!contract.! !

• Atilano!v.!Atilano!

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With! a! specific! quantity,! the! obligation! to! deliver! an! object! becomes! realizable,! enforceable! and! demandable.!

Exception:!When!a!maximum!quota/quantity!is!agreed!upon.!It!

! Facts:! Eulogio! Atilano! executed! a! deed! of! sale! in! favor! of! his! brother! which! supposedly! covered! lot! 535UE.! It! was! later! on! discovered! that!

is!still!possible!to!determine!the!quantity!without!the!need!of!a! new!contract.!National!Grains!Authority!v.!IAC!(171!SCRA!131)! ! National!Grains!Authority!v.!IAC!

what!was!actually!occupied!was!lot!535UA,!while!Eulogio!was!occupying! lot!535UE.!Eulogio’s!heirs!filed!an!action!seeking!possession!of!lot!535UA.! ! Issue:!What!was!the!real!subject!matter!of!the!deed!of!sale?! ! Held:!The!SC!held!that!the!brothers!intended!to!convey!lot!535UA.!The! error! in! the! deed! of! sale! did! not! invalidate! the! transfer.! It! was! just! a!

( Facts:! Leon! Soriano! (respondent)! offered! to! sell! palay! grains! to! the! National!Grains!Authority.!Soriano's!documents!were!processed!and!he! was! given! a! quota! of! 2,640! cavans! of! palay.! He! then! delivered! 630! cavans! of! palay! to! the! NGA! warehouse.! When! he! demanded! payment! for!the!cavans!of!palay,!he!was!informed!that!his!payment!will!be!held!in! abeyance!because!he!was!not!a!bona!fide!farmer,!accusing!him!of!taking!

mistake! which! did! not! vitiate! consent.! Thus,! the! contract! of! sale,! as! evidenced! by! the! deed! of! sale,! is! valid.! Cited! here! is! the! doctrine! that! “one!sells!or!buys!real!property!as!he!sees!it,!in!its!actual!setting!and!by! its!physical!metes!and!bonds,!and!not!by!the!mere!lot!number!assigned! to!it!in!the!certificate!of!title.”! ! E.4.(Quantity(is(Essential(in(the(Validity(of(the(Contract(of(Sale(

the! palay! from! the! warehouse! of! Ben! de! Guzman,! a! rice! trader.! Leon! Soriano! was! then! asked! by! William! Cabal! to! withdraw! his! cavans! of! palay! from! the! warehouse! because! they! cannot! be! legally! accepted.! Soriano! insisted! that! the! palay! grains! delivered! be! paid,! so! he! filed! a! complaint! for! specific! performance! and/or! collection! of! money! against! NGA.!The!trial!court!and!Appellate!courts!granted!the!case!in!Soriano’s! favor!and!asked!NGA!to!pay!him!for!the!cavans!of!palay!delivered.!NGA!

General(Rule:!Quantity!is!essential! o It!goes!into!the!determinability!of!the!subject!matter.! o It! also! goes! into! the! price! or! consideration! in! the! contract.!(i.e.!the!total!amount!to!be!paid!is!determined!

is! now! appealing! with! the! Supreme! court! for! the! decision! on! the! grounds! that! 1)! There! was! no! meeting! of! the! minds! between! him! and! Soriano!since!delivery!had!not!been!made!2)!An!essential!element!of!a! contract:!Consent,!was!missing.!!! ! Issue:(Whether!or!not!there!was!a!contract!of!sale.!! !

•

by!the!quantity!to!be!bought)!



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Held:( YES.! (1)! When! the! NFA! accepted! Soriano’s! offer! by! noting! in! Soriano's!Farmer's!Information!Sheet!a!quota!of!2,640!cavans,!there!was! already! a! meeting! of! the! minds! between! the! parties.! According! to! Article! 1349! of! the! New! Civil! Code,! the! fact! that! the! quantity! is! not!

serve! as! our! initial! purchase! order.! PO! will! include! 3%! discount.”! In! order! to! avail! of! the! old! prices,! Schuback! immediately! ordered! the! products! from! .! Partial! deliveries! were! made.! Then,! for! his! failure! to! secure! letters! of! credit,! SJ! failed! to! purchase! the! same! and!

determinate! shall! not! be! an! obstacle! to! the! existence! of! the! contract,! provided! it! is! possible! to! determine! the! same,! without! the! need! of! a! new!contract!between!the!parties.!(2)!According!to!Article!1475!of!the! Civil! Code,! Sale! is! a! consensual! contract! and! “there! is! perfection! when! there! is! consent! upon! the! subject! matter! and! price,! even! if! neither! is! delivered."!! !

alleged!that!there!was!no!perfected!contract!of!sale.!Hence!the!claim!of! Schuback!for!damages.! ! Issue:(Whether!or!not!there!was!a!perfected!contract!of!sale.! ! Held:( YES.! The! offer! was! manifested! on! December! 17,! 1981! upon! submission! of! the! proposal! containing! the! item! number,! quantity,! part!

Where!seller!quoted!to!buyer!the!items!offered!for!sale,!by!item! number,!part!number,!description!and!unit!price,!and!the!buyer! had! sent! in! reply! a! purchase! order! without! indicating! the! quantity!being!order,!there!was!already!a!perfected!contract!of!

number,!description,!the!unit!price!and!total!to!private!respondent.!On! December! 24,! 1981,! private! respondent! informed! petitioner! of! his! desire!to!avail!of!the!prices!of!the!parts!at!that!time!and!simultaneously! enclosed!its!Purchase!Order!dated!December!14,!1981.!At!this!stage,!a! meeting! of! the! minds! between! vendor! and! vendee! has! occurred.! Although!said!purchase!order!did!not!contain!the!quantity!he!wanted!to! order,! SJ! made! good! his! promise! to! communicate! the! same! on!

•

sale,!even!when!required!letter!of!credit!had!not!been!opened! by!the!buyer.!Johannes!Schuback!&!Sons!Phil.!Trading!Corp.!v.! CA!(227!SCRA!719)( ! Johannes!Schuback!&!Sons!Phil.!Trading!Corp.!v.!CA! ( Facts:( Philippine! SJ! Industrial! Trading! (SJ),! through! Ramon! San! Jose,! approached! Schuback! &! Sons! to! purchase! MAN! bus! spare! parts.! After! he! submitted! the! list! of! parts! he! wanted,! Schuback! coordinated! w/! its! !Office!to!quote!the!prices.!Upon!receiving!the!quoted!prices,! he! forwarded! a! formal! offer! to! SJ,! which! contained! the! prices,! item! numbers,! descriptions,! etc.! SJ! informed! Schuback! of! his! desire! to! purchase! such! items! and! promised! to! submit! the! quantity! per! unit.! SJ! then!submitted!such!quantities!needed!to!Schuback’s!GM,!Mr.!Reichert.! SJ!indicated!the!same!in!the!Purchase!Order!w/!the!inscription!“this!will!

December! 29,! 1981.! At! this! point! SJ! was! already! in! the! process! of! executing!the!agreement!previously!reached!between!the!parties.! ! •

Atty.! Santiago:! This! case! proves! that! “quantity”! is! important! in! sale.!

! E.5.(Generic(Non^Determinable(Objects( •

Refers!to!fungible!things!(e.g.!sugar,!rice,!oil,!etc.)!

•

Sale!of!fungible!things!is!valid!if!it!can!be!made!determinate!at! the!time!of!delivery.!



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Although!the!sale!of!determinable!generic!thing!is!valid,! the!obligation!to!deliver!the!subject!matter!can!only!be! complied!with!when!the!subject!matter!has!been!made! determinate,!either!by!physical!segregation!or!particular!

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Fungible/generic!things!are!never!lost.!Therefore,!the!obligation! to!deliver!is!not!extinguished!by!loss.!

! Yu!Tek!&!Co.!v.!Gonzales! ! Facts:! The! two! parties! entered! into! a! contract! where! Gonzales! bound! himself! to! deliver! 600! piculs! of! first! class! sugar! to! YTC,! without! designating!a!particular!source.!Gonzales!failed!to!deliver!claiming!that! the! sugar! was! supposed! to! come! for! his! harvest,! but! because! of! fore! majeure,!he!was!not!able!to!harvest!anything.!YTC!brought!suit.! ! Issue:!Whether!or!not!force!majeure!is!a!valid!defense!for!Gonzales.! ! Held:!NO.!Sugar!is!a!fungible!and!generic!object!which!is!never!lost.!As! long!as!the!object!is!not!made!determinate,!the!thing!is!not!lost,!and!the! seller!is!still!bound!to!deliver.! ! Article(1246.(( When( the( obligation( consists( in( the( delivery( of( an( indeterminate( or( generic(thing,(whose(quality(and(circumstances(have(not(been(stated,( the( creditor( cannot( demand( a( thing( of( superior( quality.( Neither( can( the( debtor( deliver( a( thing( of( inferior( quality.( The( purpose( of( the( obligation( and( other( circumstances( shall( be( taken( into( consideration.( (1167a)( !


The!Courts!have!the!power!to!set!the!appropriate!quality!of!the! subject!matter!of!a!sale!when!the!same!is!determinable!generic.! o Article( 1246! covers! only! quality! of! a! generic! subject! matter,! so! that! when! it! is! the! kind! and! quantity! that! cannot! be! determined! without! need! of! a! new! agreement!of!the!parties,!the!contract!is!void.!

designation.! •

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! E.6.(If(the(subject(matter(is(neither(determinate(or(determinable,(the( contract(is(VOID( •

Void! by! virtue! of! Article( 1409(6)( of( the( Civil( Code! which! declares!inexistent!“those![contracts]!where!the!intention!of!the! parties!relative!to!the!principal!object!of!the!contract!cannot!be! ascertained.”!

! Article(1463( The(sole(owner(of(a(thing(may(sell(an(undivided(interest(therein.( ( Article(1464( In( the( case( of( fungible( goods,( there( may( be( a( sale( of( an( undivided( share( of( a( specific( mass,( though( the( seller( purports( to( sell( and( the( buyer(to(buy(a(definite(number,(weight(or(measure(of(the(goods(in(the( mass,(and(though(the(number,(weight(or(measure(of(the(goods(in(the( mass( is( undetermined.( By( such( a( sale( the( buyer( becomes( owner( in( common( of( such( a( share( of( the( mass( as( the( number,( weight( or( measure(bought(bears(to(the(number,(weight(or(measure(of(the(mass.( If(the(mass(contains(less(than(the(number,(weight(or(measure(bought,( the( buyer( becomes( the( owner( of( the( whole( mass( and( the( seller( is( bound(to(make(good(the(deficiency(from(the(goods(of(the(same(kind( and(quality,(unless(a(contrary(intent(appears.(



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E.7.(Instances(where(a(sale(will(give(rise(to(a(co^ownership:( 1. Sale!of!an!undivided!interest!(Article(1463)! •

•

CoUownership! will! be! proportional! to! the! percentage! of! the!

The! buyer! will! be! a! coUowner! to! the! extent! of! the! definite! number,!weight,!or!measure!actually!bought.!

•


General(Rule:!Ownership!is!required!only!upon!delivery.!It!is!not! required! at! the! perfection! of! the! contract,! provided,! that! the! seller! will! be! able! to! transmit! ownership! at! the! time! of! consummation!of!the!contract.! o Exception:! In! judicial! sale,! the! forced! seller! who! is! actually!the!mortgagor!in!default,!is!the!owner!because! only!the!absolute!owner!of!the!thing!can!mortgage!it.!

undivided!interest!with!respect!to!the!whole.! 2. Sale!of!an!undivided!share!in!a!mass!of!fungible!things!(Article( 1464)( •

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A!perfected!contract!of!sale!cannot!be!challenged!on!the!ground! of!the!seller’s!nonUownership!of!the!thing!sold!at!the!time!of!the! perfection!of!the!contract;!it!is!at!delivery!that!the!law!requires! the! seller! to! have! the! right! to! transfer! ownership! of! the! thing! sold.!AlcantaraUDaus!v.!de!Leon!(404!SCRA!74)!

If! what! was! actually! bought! is! greater! than! the! amount! available,! the! buyer! will! become! owner! of! the! whole! and! the! seller!is!bound!to!supply!the!deficiency.! If! the! sale! covers! a! specific! mass! as! a! subject! matter,! without! any! provisions! as! to! the! measuring! or! weighing! of! the! subject!

•

sold,! and! the! price! was! not! based! on! such! measurement,! the! subject! matter! of! the! sale! is! the! whole! mass! itself,! as! a! determinate!object.!The!sale!is!valid.!Gaite!v.!Fonacier!(2!SCRA! 831)!

Sale!of!copra!for!future!delivery!does!not!make!seller!liable!for! estafa!for!failing!to!deliver!because!the!contract!is!still!valid!and! the! obligation! was! civil! and! not! criminal.! Esguerra! v.! People,! 108!Phil.!1078!!

•

! F.( Seller’s( Obligation( to( Transfer( Ownership( Required( at( Time( of( Delivery(

If! the! owner! does! not! reveal! that! he! is! not! the! owner! of! the! thing! at! the! time! of! perfection,! the! contract! of! sale! cannot! be! declared!null!and!void.!Hilltop!v.!Villacorta!(13!CAR!113)!

•

Sale!of!a!lot!by!a!seller!who!is!yet!to!acquire!full!ownership!from!

•

! F.1.( Ownership( is( only( required( at( time( of( delivery( (consummation( stage);(Seller's(Ownership(Need(Not(Exist(at(Perfection:( •

a!government!agency!was!still!valid!since!it!involved!the!sale!of! a!future!thing.!Mananzala!v.!CA!(286!SCRA!722)! !

It! is! essential! that! seller! is! owner! of! the! property! he! is! selling.!

Nool!v.!CA!

The!principal!obligation!of!a!seller!is!“to!transfer!the!ownership! of”! the! property! sold! (Article( 1458).! This! law! stems! from! the! principle!that!nobody!can!dispose!of!that!which!does!not!belong! to! him.! NEMO! DAT! QUOD! NON! HABET.! Noel! v.! CA! (240! SCRA! 78)!

( Facts:(Victorino!and!Francisco!Nool!are!owners!of!two!parcels!of!land!in! Isabela.! Conchita! Nool! and! her! spouse! Gaudencio! claims! that! these! belong! to! them! because! they! bought.! They! said! that! they! had! mortgaged! it! with! DBP,! but! it! was! foreclosed! because! they! were! not!



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able! to! pay.! DBP! Officer,! Manuel! Mallorca,! confirmed! that! DBP! gained! absolute!ownership!of!the!2!lands!because!the!right!to!redemption!was! not! exercised.! Later,! both! were! sold! to! Anecleto! Nool.! Conchita! and! Gaudencio! claims! that! they! had! asked! Anecleto! to! purchase! the! land!

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from!DBP!for!them,!but!they!had!an!agreement!that!Anecleto!would!buy! the!property!for!P100,000.!Anacleto!was!able!to!pay!P30,000.!However,! he! and! his! spouse,! Emilia! Nebre,! were! unable! to! pay! the! balance! of! P14,000.! IN! ADDITION,! Conchita! claims! that! another! agreement! was! made! whereby! Anecleto! would! return! the! properties! to! plaintiffs! anytime! that! the! plaintiffs! had! the! money! to! redeem! the! same.! Defendants! on! the! other! hand,! claims! that! they! bought! the! property! directly! from! DBP! and! were! merely! misled! into! executing! a! document! stating! that! he! would! return! the! lands! to! plaintiffs,! because! they! were! under!the!belief!that!Conchita!still!had!the!right!to!redeem!the!same.! ! Issue:(Whether!or!not!the!contract!of!sale!was!valid.! ! Held:( NO.! Sellers! no! longer! had! any! title! to! the! parcels! of! land! at! the! time! of! sale,! and! evidence! showed! that! defendants! bought! the! lands! directly! from! DBP! after! discovering! that! petitioners! did! not! own! them.! In!this!case,!delivery!was!is!no!longer!possible!because!Conchita!was!no! longer!the!owner.!! ! F.2.(Subsequent(Acquisition(of(Title(by(Non^Owner(Seller((Article(1434)( –(validates(the(sale(and(title(es(to(the(seller(by(operation(of(law.( •

If! a! buyer! sells! something! and! delivers! it! to! the! buyer! without! owning! it,! the! contract! of! sale! remains! valid! but! the! buyer! has! no!better!title!to!the!goods!than!the!seller.!(Article(1505)!


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However,! if! the! seller! thereafter! acquires! title! to! the! thing!sold!and!delivered,!such!title!es!to!the!buyer! by!operation!of!law.!(Article(1434)!


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Chapter(4:(Price(and(Other( Consideration( ! I.(Meaning(of(“Price”( •

Price&!&sum&stipulated&as&the&equivalent&of&the&thing&sold&and& also&every&incident&taken&into&consideration&for&the&fixing&of&the& price&put&to&the&debit&of&the&buyer&and&agreed&to&by&him.&

•

The& ideal& consideration& for& a& contract& of& sale& would& be& “price”& as&a&“sum&certain&in&money&or&its&equivalent.”& o But& a& sale& can& have& other& valuable& considerations,& not& necessarily&money.&The&essence&of&sale&is&the&transfer&of& ownership&for&some&valuable&consideration.&Polytechnic( University(of(the(Philippines(v.(Court(of(Appeals(

•

Once& agreed& upon,& the& seller& cannot& unilaterally& increase& the& price.&Neither&can&the&buyer&unilaterally&withdraw&from&the&sale& because&of&the&price.&

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( A.1.(When(Price(is(Real( •

At&the&time&of&perfection,&there&is&legal&intention&to&pay&on&the& part&of&the&buyer,&and&legal&expectation&on&the&part&of&the&seller&


to& receive& the& price& as& the& value& of& the& subject& matter& he& obligates&himself&to&deliver.& & A.2.(When(Price(is(Simulated((Absolutely(Simulated(! (Void)( •

It& is& simulated& when& neither& party& had& any& intention& that& the& amount&will&be&paid&!&the&sale&is&void.&

•

However,& such& a& contract& can& in& reality& be& a& donation& or& some& other&contract.&In&this&way,&the&contract’s&validity&can&be&saved.&

•

The& issue& thus& boils& down& to& contractual& intent& at& the& time& of& perfection&of&the&contract.&& o If&there&was&no&intent&to&pay&and&receive&the&stipulated& price,&the&agreement&is&wholly&simulated&and&thus&void.&& o The&parties&may&recover&from&each&other&what&they&may& have&given&under&the&“contract.”&

•

Intent&can&be&determined&by&the&overt&acts&of&the&parties.&

•

The&pari%delicto&rule&–&which&denies&all&recovery&of&either&party&–& will&apply&in&the&following&instances&of&simulated&sales:& o o o

& II.(Requisites(of(a(Valid(Price( The&price&must&be:& 1. Real& 2. In&Money&or&its&Equivalent& 3. It&must&be&Certain&or&Ascertainable& & A.(Price(Must(be(Real(

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Both&parties&are&in&bad&faith& There&is&illegal&consideration& The&purpose&of&the&simulation&is&illegal&

( A.3.(When(Price(is(False((Relatively(Simulated(! (Valid;(Reformation)( •

“False& price”& !& there& is& a& real& price& agreed& upon& but& not& declared,& and& what& is& stated& in& the& deed& of& sale& is& not& the& one& intended&to&be&paid&

•

The& sale& itself& is& valid,& but& the& instrument& embodying& it& is& subject&to&reformation.&Macapgal!v.!Remorin!(458!SCRA!652)!

•


A&false&price&is&a&form&of&relative&simulation&of&contract.&


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However,& the& parties& may& be& bound& by& estoppel& to& follow& the& price& in& the& instrument& when& interests& of& third& parties& will& be& adversely&affected&by&the&reformation&of&the&instrument.&

•

When& price& indicated& in& deed& of& absolute& sale& is& undervalued& consideration&pursuant&to&intention&to&avoid&payment&of&higher& capital& gains& taxes,& the& price& stated& is& false,& but& the& sale& is& still& valid& and& binding& on& the& real& .& Heirs& of& Spouses! Balite! v.! Lim!(446!SCRA!54)&

( A.4.(Meeting(of(Minds(as(to(the(Price( ( Mapalo!v.!Mapalo! ! Facts:&Miguel&and&Candida&Mapalo&were&illiterate&farmers.&They&owned& a&residential&land&in&Pangasinan.&Maximo&Mapalo&–&brother&of&Miguel&U& was& about& to& be& married.& Miguel& and& candida& donated& to& Maximo& the& eastern&half&of&the&land.&Maximo&deceived&them&by&making&them&sign&a& deed&of&absolute&sale&over&the&entire&lot.&Consideration&in&the&amount&of& five& hundred& pesos& was& stated& in& the& deed& but& the& spouses& never&

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Held:& NO.& With& respect& to& the& eastern& portion,& the& consideration& was& the&pure&liberality&of&the&Mapalo&spouses.&The&western&portion,&on&the& other& hand,& had& no& consideration& pertaining& to& it.& The& P500& was& an& absolutely& simulated& price.& Thus,& the& western& portion& was& reconveyed& to&plaintiff&spouses&Mapalo.& ! Rongavilla!v.!Court!of!Appeals! ! Facts:&In&dispute&is&the&validity&of&a&Deed&of&Sale&over&a&land&in&Las&Pinas& owned&by&two&aunt&respondents&Mercedes&(Age&60)&and&Florencia&(Age& 71),& employed& as& spinsters,& who& both& could& not& read& English& but& can& read&and&write&in&Tagalog.&The&Aunts&borrowed&P2000&from&Dolores&for& the& repair& of& their& dilapidated& roof.& 1& month& later& Dolores& returned& bringing& a& document& in& English& and& to& be& signed& by& her& aunts.& When& asked,& she& said& it& was& a& document& saying& that& they& owed& her& P2000.& After& 4& years,& the& aunts& were& asked& to& vacate& the& premises& and& when& the&aunt’s&went&to&the&registry&of&deeds&they&found&that&their&title&had& been& cancelled& and& that& Dolores& had& it& titled& to& her& name.& The& aunt’s&

received&anything.&Miguel&built&a&fence&to÷&the&lot&and&continued& to& occupy& the& western& part.& Maximo& ed& the& entire& lot.& After& thirteen& years,& Maximo& sold& the& land& to& the& Narcisos& who& took& possession&only&of&the&eastern&half.&The&Narcisos&sought&to&be&declared& owners& of& the& entire& land.& The& spouses& claimed& that& the& sale& to& the& Narcisos&was&void&for&lack&of&consideration.& &

filed& with& the& RTC& to& have& the& deed& of& sale& declared& null& and& void& for& lack&of&consideration&and&for&having&been&obtained&fraudulently.&& ( Issue:( Whether& or& not& the& deed& of& sale& is& null& and& void& for& lack& of& consideration( ( Held:(YES.&The&P2000&given&which&was&exchanged&was¬&for&the&sale&of& the& property,& but& for& the& purposes& of& repairs& to& the& house.& The& aunt’s&

Issue:( Whether& there& was& a& cause& or& consideration& to& & the& existence&of&a&contract&of&sale& (

never& clearly& intended& to& sell& the& property& as& it& was& their& home& and& if& they&wanted&to&sell&it&they&should&never&had&fixed&the&roof.&Public&policy& is& well& served& in& defending& the& rights& of& the& aged& to& legal& protection&



%

including&their&right&to&property.&The&property&was&ordered&reconveyed& to&the&aunts.!& & A.5.(Effect(of(NonRpayment(of(Price( •

Failure& to& pay& is& not& automatically& equal& to& the& lack& of& consideration.&There&is&still&consideration,&thus,&the&sale&remains& valid.& o It&is¬&the&fact&of&payment&that&determines&the&validity& of&a&contract&of&sale,&since&sale&is¬&a&real&contract.&

•

Failure&to&pay&goes&into&the&consummation&of&the&contract,¬& its&perfection.&

•

Such& failure& to& pay& gives& the& right& to& the& seller& to& demand& specific&performance&or&rescission&of&the&contract.&

•

BUT&if&the&deed&of&sale&says&that&the&price&has&been&paid&when&in& fact&it&hasn’t&been,&this&is&a&“badge&of&simulation”&which&would& render&the&contract&void.&Montecillo!v.!Reynes!(385!SCRA!233)&

•

“In& a& contract& of& sale,& the& nonUpayment& of& the& price& is& a& resolutory&condition&which&extinguishes&the&transaction&that,&for& a& time,& existed& and& discharges& the& obligations& created& thereunder.&[?]&The&remedy&of&an&unpaid&seller&in&a&contract&of& sale& is& to& seek& either& specific& performance& or& rescission.”& Heirs! of!Pedro!Escanlar!v.!Court!of!Appeals(281!SCRA!176)! o CLV&disagrees!

& & & & & &

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A.6.(Accommodation(Does(Not(Make(Sale(Void(for(Lack(of(Price( ( Yu!Bun!Gan!v.!Ong! ! Facts:( Yu& Bun& Guan& and& Elvira& Ong& were& husband& and& wife& who& had& 3& children.& During& the& marriage,& Elvira& Ong& purchased& a& property& in& JP& Rizal& with& her& own& personal& funds.& Yu& Bun& left& Elvira& and& her& children& but&before&their&separation,&Yu&Bun&induced&Elvira&to&execute&a&Deed&of& Absolute&sale&of&the&JP&Rizal&property&in&his&name&alone&so&that&he&could& obtain&a&loan&to&be&used&to&build&a&commercial&building&in&favor&of&the& children.&The&consideration&for&the&said&simulated&sale&was&that&after&the& execution&of&the&Deed&of&Sale,&Yu&Bun&will&execute&a&Deed&of&Sale&for&his& property& called& the& Juno& lot.& In& the& Deed& of& Sale& there& was& also& a& P200,000& peso& payment& which& was& said& to& be& the& actual& valuable& consideration.& The& title& was& transferred& to& him& but& Elvira& kept& the& owner’s& copy.& Yu& Bun& did& not& pay& the& 200,000& and& even& tried& to& claim& ownership&of&the&property&for&himself.&Elvira&then&filed&to&have&the&Deed& of&Sale&declared&Null&and&Void.( ( Issue:(Whether&or¬&the&Sale&was&void&for&lack&of&consideration& & Held:( YES.& The& Deed& of& Sale& was& absolutely& simulated& and& so& void& and& without&effect.&No&portion&of&the&P200,000&consideration&was&ever&paid.& And&from&the&facts,&neither&party&had&any&intention&to&pay&the&amount.& The& Deed& of& Sale& was& executed& merely& to& facilitate& the& transfer& of& the& property& pursuant& to& an& agreement& between& the& parties& that& a& commercial&building&will&be&built&in&the&JP&Rizal&land&for&the&children&and& a&property&transferred&to&them.& ! !



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Mate!v.!ca! ! Facts:(Josefina&Rey&approached&Fernando&Mate&asking&for&help&because& her& family& was& to& be& sued& by& Innocencio&Tan& for& issuing& rubber& checks&

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blame& but& himself& for& his& loss.& He& acted& negligently& out& of& desire& for& profit.!& & B.(Price(Must(Be(in(Money(or(Its(Equivalent:(Valuable(Consideration(

amounting&to&4,432,067.00.&She&asked&him&to&cede&his&3&lots&in&Tacloban& Leyte& to& Tan& with& a& stipulation& for& a& right& to& repurchase& within& 6& months,& and& it& will& be& Josefina& who& will& repurchase& them& for& him.& He& initially& rejected& her& as&he& was& under& no& obligation& to& convey& his& properties;&but&after&a&long&discussion&and&convinced&that&he&was&going& to&execute&a&simulated&transfer&of&ownership,&Mate&agreed&to&the&& and& as& such,& Josefina& issued& him& 2& checks,& one& for& P& 1.4& million,&

•

Price& must& be& “valuable& consideration”& as& mandated& by& Civil& Law,&instead&of&“any&price”&mandated&in&common&law.&

•

Article(1458:&Obligation&of&Buyer&–&he&must&pay&the&price&certain&

pertaining& to& the& value& of& the& lot,& and& a& check& for& P& 420,000.00& corresponding& to& interest& for& 6& months.& He& then& drafted& the& deed& of& sale& himself,& and& ceded& his& properties& to& Tan.& Eventually,& both& checks& bounced& and& he& sued& Tan& for& annulment& of& the& sale& for& lack& of& consideration& since& he& never& received& anything.& He& also& sued& Josefina& criminally,&but&she&was&nowhere&to&be&found.& &

•

Issue:(Whether&or¬&the&sale&was&valid.& & Held:( The& sale& was& valid;& there& was& a& consideration& in& the& form& of& the& check&for&P&420,000.00.&It&was&his&fee&for&executing&the&sale.&It&was¬& only& kindness& that& impelled& him& to& cede& his& properties,& it& was& also& his& interest&for&profit.&Even&if&the&price&stipulated&in&the&covering&instrument& is& simulated,& the& sale& is& still& valid& and& enforceable& provided& there& is& another& consideration& (apart& from& the& false& price).& It& is& of& no& moment& that& he& never& received& the& money;& a& sale& is& a& consensual& contract.& Moreover,& he& also& tacitly& itted& to& the& sale& when& he& filed& criminal& charges& against& Josefina.& Fernando,& being& a& lawyer,& has& no& one& else& to&

in&“money&or&its&equivalent.”& •

(“Something&equivalent”&is&something&representative&of&money.& For& this& case,& services& are& not& included.& Bagnas! v.! Court! of! Appeals!(176!SCRA!159)& Article( 1468:& the& sale& is& valid& when& the& consideration& is& part& money&and&partly&in&another&thing.& o

The& consideration& for& a& valid& sale& can& be& the& price& and& other&additional&considerations.&

& Ong!v.!Ong! ( Facts:(Imelda&Ong&claimed&that&the&P1.00&consideration&contained&in&the& Deed& of& Quitclaim& was& clearly& inadequate& and& that& Sandra& Maruzo,& being&a&minor,&could¬&accept&the&donation.&The&Court&ruled&in&favor& of&respondent&stating&that&the&Deed&said&that&it&was&executed&for&other& valuable&consideration.&Although&the&cause&is¬&stated&in&the&contract& it&is&presumed&that&it&is&existing&unless&the&debtor&proves&the&contrary.& Furthermore,&the&donation&to&an&incapacitated&donee&does¬&need&the& acceptance& by& the& lawful& representative& if& said& donation& does& not& contain&any&condition.&The&Quitclaim&does¬&contain&any&condition.& & Issue:&Whether&or¬&the&Deed&if&Quitclaim&is&valid.&



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Held:( YES.& (1)& Although& the& cause& is& not& stated& in& the& contract& it& is& presumed&that&it&is&existing&unless&the&debtor&proves&the&contrary.&It&is&a& legal& presumption& of& sufficient& cause& or& consideration& ing& a& contract& even& if& such& cause& is& not& stated.& This& presumption& cannot& be&

lack&of&legal&solemnities.&Since&the&contracts&are&void,&the&properties&are& deemed&as&part&of&the&estate,&and&all&intestate&heirs&have&the&capacity&to& contest&any&conveyance&of&estate&property.& &

overcome&by&a&simple&assertion&of&lack&of&consideration&especially&when& the&contract&itself&states&that&consideration&was&given,&and&the&same&has& been& reduced& into& a& public& instrument& with& all& due& formalities& and& solemnities.&(2)&The&donation&to&an&incapacitated&donee&does¬&need& the& acceptance& by& the& lawful& representative& if& said& donation& does& not& contain&any&condition.& !

Republic!v.!Phil.!Resources!Dev.& & Facts:( Macario& Apostol,& president& of& the& Philippine& Resources& Development&Corporation,&owed&the&Bureau&of&Prisons&a&sum&of&money& (P34,015.06& in& total).& Philippine& Resources& filed& a& motion& to& intervene,& alleging& that& Apostol& delivered& some& goods& to& the& Bureau& to& settle& his& personal& debt,& without& the& knowledge& or& consent& of& the& stockholders.&

Bagnas!v.!ca! ! Facts:(Hilario&Mateum,&a&man&with&no&ascendants&or&descendants,&died& without& leaving& a& will.& Petitioners& are& his& nearest& relatives,& while& respondents&are&more&distantly&related.&2&Deeds&of&Sale&were&purportly& entered& between& Mateum& and& respondents,& transferring& 10& parcels& of& land& in& consideration& of& P1.00& and& for& various& unnamed& and& unvalued&

The& Corporation& demanded& to& recover& the& goods& from& the& Bureau& but& the& Bureau& refused.& The& Court& of& Appeals& set& aside& the& lower& court’s& order&denying&the&motion&to&intervene.&The&Republic&of&the&Philippines& filed& a& petition& in& the& SC& contending& that& the& Corporation& has& no& legal& interest& since& the& action& only& concerns& a& collection& of& a& sum& of& money& Apostol&owed&and¬&the&goods&turned&over&by&Apostol&to&the&Bureau.&& &

services.& Petitioners& wish& to& have& the& Deeds& of& Sale& annulled& on& the& ground& that& it& was& fictitious,& fraudulent,& or& falsified,& or,& if& it& were& a& donation,&void&for&lack&of&acceptance&in&a&public&instrument.&& ( Issue:( Whether& or& not& the& deeds& of& sale& were& void& ab& initio& or& merely& voidable,& since& the& price& of& P1.00& and& unspecified& and& unvalued& past,& present&and&future&services&are&a&far&cry&from&the&assessed&valuation&of& P10,500.&

Issue:( Whether& or& not& the& subject& matter& of& the& original& litigation& is& a& sum& of& money& not& the& goods& reportedly& turned& over& by& Apostol& as& payment&of&his&private&debts.& ( Held:( NO.&The&SC&held&that&the&Corporation&had&standing&since&subject& of& the& action& may& be& a& price& certain& in& money& or& its& equivalent,& thus& encoming& the& goods& Apostol& delivered.& If& the& trial& court& credits& Apostol& with& the& value& of& the& goods,& the& Corporation& would& be&

( Held:(Both&were&Void&Ab&Initio.&The&SC&ruled&that&the&Deeds&of&Sale&were& void&due&to&the&manifest&disproportion&between&the&consideration&and& the&actual&price&of&the&property.&It&cannot&be&a&donation&because&of&the&

negatively&affected.& & •


Republic! v.! Phil.! Resources! Dev.! (102! Phil.! 960).& The& Supreme& Court& said& that& payment& need& not& be& in& money.& However,& this&


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case& covers& the& consummation& stage& not& perfection& –& they& didn’t& agree& that& such& goods& could& be& used& as& payment.& Essentially& what& happened& here& was& a& dacion& en& pago.& (substitution&of&the&goods&for&the&price),&which&is&valid.& •

Polytechnic! University! v.! Court! of! Appeals(368! SCRA! 691).& cancellation&of&liabilities&of&seller&was&a&valid&consideration.&

•

CLV:& requisite& of& “money& or& its& equivalent”& has& not& been& held&

o

•

o

o

adequate& consideration,& even& stating& a& false/nominal& consideration.& " This&assumes&that&the&valuable&consideration&in& addition& to& the& nominal& amount& was& actually& agreed&upon.& There&must&be&a&valuable&consideration.&

Bagnas! v.! Court! of! Appeals! (176! SCRA! 159)! ! & a& sale& where& consideration& in& the& contract& was& “one& peso& and& services& rendered.”& o SC:&disproportion&between&consideration&stipulated&and& the&value&of&the&property.&They&concluded&–&price&stated&

The& significance& of& the& requirement& –& demonstrate& the& ideal!example!of!the!onerous!nature!of!sale&–&that&it&is& ed&by&“valuable&consideration.”&

( B.1.( Adequacy( of( Price( to( Make( it( “Real”;( Concept( of( “Valuable( Consideration.”( •

o

Ong! v.! Ong! (139! SCRA! 133)& ! & a& sale& was& held& valid& when& consideration& for& real& property& was& one& peso& “and& other& valuable&considerations.”& o Since&there&was&no&evidence&that&the&consideration&was& not&paid,&it&is&presumed&to&exist.1&

o

o

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

(Article(1354.( Although&the&Court&of&Appealsuse&is¬&stated&in&the&contract,&it&is&presumed& that&it&exists&and&is&lawful,&unless&the&debtor&proves&the&contrary.&(1277)& (


SC:& Inadequacy& is& unimportant.& The& usual& practice& is& to& place& a& nominal& amount,& but& there& are& more& valuable& considerations&to&be&given& Essence& of& this& ruling& !& it& is& possible& to& agree& on& an&

o

steadfast&by&the&SC.& o This&shows&that&the&essence&of&a&sale&is&the&obligations&–& for&the&seller&to&deliver,&and&for&the&buyer&to&pay& o Price& may& be& subject& to& variations& –& it’s& essentially& a& generic&obligation&

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( ( ( (


was&false&and&fictitious,&thus&the&sale&was&void!ab!initio.& SC:& even& though& there& was& a& consideration& agreed& upon,&and&the&parties&intended&to&pay&it,&the&sale&is&void& if&price&was&merely&nominal& CLV:&this&does¬&mean&that&the&sale&was&void&because& the&services&were¬&actually&performed& " NonUperformance& has& nothing& to& do& with& validity&& Sale&here&was&void&because&it&was&found&that&there&was& no& intention& to& pay& any& valuable& consideration& –& thus,& void&for&lack&of&consideration.&


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C.(Price(Must(Be(Certain(or(Ascertainable(at(Perfection( ( Article(1469.(( In(order(that(the(price(may(be(considered(certain,(it(shall(be(sufficient(

% •

•

Reiterate:& Money& is& the& best& model& of& valuable& consideration&&

•

Designation&of&3rd&party&to&fix&the&price&is&valid.& o This&designation&already&makes&the&price&ascertainable& o

•

Article(1469&–&when&is&price&considered&ascertainable?& o When&it&is&with&reference&to&another&thing&certain.& o

certain.&Moreno,!Jr.!v.!Private!Management!Office!(507! SCRA!63)! Consideration&is&generally&agreed&upon&as&whole&even&if& it&consists&of&several&parts,&and&even&if&it&is&contained&in& one&or&more&instruments;&otherwise&there&would&be&no& price& certain,& and& the& contract& of& sale& not& perfected.! Arimas!v.!Arimas!(55!O.G.!8682).!

( C.1.(Price(Fixed(by(3rd(Party(

Certainty& !& when& it& has& been& expressed& and& agreed& upon& in& specific&&of&specific&pesos&and&centavos.& o

Price&is&ascertainable&if&the&&of&the&contract&furnishes&the&

o

seller(or(the(buyer,(as(the(case(may(be.((1447a)( ( •


courts& a& basis& or& measure& for& determining& the& amount& agreed& upon,& without& having& to& refer& back& to& either& or& both& parties.& Villanueva!v.!Court!of!Appeals(267!SCRA!89)! o Where& the& sale& involves& an& asset& under& a& privatization& scheme& which& attaches& a& peculiar& meaning& or& signification& to& the& term& “indicative& price”& as& merely& constituting& a& ballUpark& figure,& then& the& price& is& not&

that( it( be( so( with( reference( to( another( thing( certain,( or( that( the( determination( thereof( be( left( to( the( judgment( of( a( special( person( or( persons.( ( Should( such( person( or( persons( be( unable( or( unwilling( to( fix( it,( the( contract( shall( be( inefficacious,( unless( the( parties( subsequently( agree( upon(the(price.( ( If( the( third( person( or( persons( acted( in( bad( faith( or( by( mistake,( the( courts(may(fix(the(price.( ( Where( such( third( person( or( persons( are( prevented( from( fixing( the( price(or((by(fault(of(the(seller(or(the(buyer,(the(party(not(in(fault( may(have(such(remedies(against(the(party(in(fault(as(are(allowed(the(

%

Determination& is& left& to& judgment& of& specified& person/persons.&


However&–&fixing&of&price&cannot&be&left&to&discretion&of& one& of& the& parties& –& the& contract& of& sale& does& not& yet& exist&when&the&price&has&yet&to&be&fixed.& " No&mutuality&or&obligatory&force&

Before&price&is&fixed&by&third&person&!&the&sale&is&perfected&and& existing,&although&conditional.& o Thus,& a& party& cannot& unilaterally& withdraw& from& the& contract.& o The& condition& is& a& suspensive& condition& of& the& third& party&fixing&the&price.&


Parties&can&seek&court&remedy&to&fix&the&price& These&are&the&only&two&instances&where&this&is&possible.&&

o

When&party&is&unable&or&unwilling&to&fix&the&price& o Parties&cannot&seek&aid&from&the&court&to&fix&the&price&o&& o o o

•

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If&third&party&fixes&the&price&in&bad&faith&or&by&mistake:& o o

•

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the&parties& o Innocent&party&has&remedies&against&the&guilty&party.& o Party&may&demand&from&the&courts&to&fix&the&price.& o Based& on& Article( 1186,& when& a& party& prevents& a& condition&from&happening,&it’s&considered&as&fulfilled.&

The& subject& matter& may& not& be& left& up& to& the& will& of& a& third& party.& o Situation& contemplated:& price& agreed& upon,& but& there& are&similar&subjects&and&the&parties&can’t&choose.&

It&is¬&a&generic&obligation& Designation& cannot& be& left& to& a& 3rd& person& who& may& choose& a& subject& that& party& might& be& unwilling&to&give.&

( C.3.(Price(Ascertainable(in(Reference(to(Other(Things(Certain( •

Price& of& securities,& grains,& etc.& will& be& considered& certain& when& price&is...&& o That&which&the&thing&would&have&on&a&definite&day& o Or&in&a&particular&exchange&or&market&

& C.2.(Fixing(of(Subject(Matter(by(Third(Party( •


" Any&money&may&be&used& " cannot&be&extinguished&by&fortuitous&event& Obligation& to& deliver& subject& matter& can& only& be& complied&when&it&is&already&determinate/determinable& " "

The&condition&imposed&has¬&yet&happened& NonUhappening&extinguished&the&contract& The&sale&here&is&“inefficacious.”&

When& third& party& is& prevented& from& fixing& the& price& by& one& of&

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•

Price&of&thing&is&certain&at&the&point&of&perfection&when&it&refers& to&another&thing&certain& o Certain&invoices&existing&and&identified&& o Known&factors,&or&stipulated&formula.&

( C.4.(Effect(of(Unascertainability(

•

Such& designation& would& in& fact& authorize& withdrawal& of& the& parties&&

•

When&price&can’t&be&determined&in&accordance&with&any&of&the& preceding&rules&!&sale&is&inefficacious&

•

Subject&Matter&must&be&determinate/determinable&

•

Law&does¬&use&the&term&“void”&

o o •

Test&is&one&of&fact&!&physical&segregation&and&particular& designation.& It&must&be&so&without&further&agreement.&

o o •

Why&are&the&rules&different?& o

Obligation& to& pay& the& price& is& essentially& a& fungible& obligation&


There&is&actually&a&contract,&but&a&conditional&one& It&can’t&be&voided&by&what&happens&after&perfection&

CLV:& BUT& If& Buyer& Appropriates& the& Object,& He& Must& Pay& Reasonable&Price&(Article(1474)& o There& can& be& no& concept& of& “appropriation”& when& it& comes&to&land?&–&Where&a&church&organization&has&been&


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allowed&possession&and&introduce&improvements&on&the& land&as&part&of&its&application&to&purchase&with&the&NHA,& and& thereafter& it& refused& the& formal& resolution& of& the& NHA&Board&setting&the&price&and&insisted&on&paying&the&

•

•

•

Main& cause& of& action& is& a& receipt& issued& for& an& alleged& sale.&

No& valid& sale& since& they& were& unable& to& arrive& at& acceptable& & of& payment& scheme.& San! Miguel! Properties! Philippines! Inc.!v.!Huang!(336!SCRA!737)!

•

Absence& of& stipulation& on& manner& of& payment& s& the& position&that&such&contract&was&a&contract&to&sell,¬&a&contract& of& sale& which& essential& constitutes& obligations& to& do& and& not& subject&to&an&action&for&specific&performance.&Cruz!v.!Fernando,! Sr.!(477!SCRA!173)!

It&is&part&of&the&prestation&of&the&contract.& Specific&performance&can’t&be&availed&of.& •

Time&value&of&money& Seller&may&be&willing&to&accept&lower&price&if&it&is&to&be& paid&within&a&short&period&of&time&

CLV:&“&of&payment”&has&same&requisites&of&“price”&in&order& to& & a& valid& contract& of& sale& i.e.& it& must& be& certain& or& ascertainable.& o If& & of& payment& are& provided& in& a& formula/process& that&doesn’t&require&agreement&of&parties,&it&is&valid&but& with&a&condition.&

When& manner& of& payment& is& discussed& after& acceptance,& such& acceptance& did& not& produce& a& binding& contract& of& sale.& There& was&no&complete&meeting&of&the&minds&and&there&is&no&basis&to& sue& on& a& contract& that& does& not& exist.& This& is& why& Specific& Performance& cannot& be& availed& of.& Navarra! v.! Planters! Dev.! Bank!(527!SCRA!562)!

Even& if& downpayment& had& been& made& and& received,& no& valid&

Receipt& was& only& an& acknowledgement& for& P1000.& There& is& no& indication& of& the& total& purchase& price,& or& of& what& the& installments&were.&SC&held&that&receipt&cannot&be&basis&of&valid& sale.&Leabres!v.!Court!of!Appeals(146!SCRA!158)&

Manner&of&payment&goes&into&the&essence&of&what&makes&price& certain,&because…& o o

•

•

A&meeting&of&the&minds&must&include&the&&and&manner&of& payment&of&the&price.& o Such& is& an& essential& ingredient& before& a& valid& sale& can& exist.& o o


sale&where&manner&of&payment&was¬&agreed&upon.&A&definite& agreement& on& manner& of& payment& is& an& essential& element& in& formation&of&binding&sale.!Velasco!v.!Court!of!Appeals(51!SCRA! 439)&

lower& price& allegedly& given& by& the& NHA& Field& Office,& there&can&be&no&binding&contract&of&sale&upon&which&an& action& for& specific& performance& can& prosper,& not& even& on&fixing&the&price&equal&to&the&fair&market&value&of&the& property.&NHA!v.!Grace!Baptist!Church!(424!SCRA!147)! ( D.(Manner(of(Payment(of(Price(Must(be(Agreed(Upon( •

%

o ( ( ( (


Similar&to&when&price&is&left&up&to&3rd&person.&


%

D.1.(Proper(Understanding(of(Manner(of(Payment( •

While&it&is&imperative&that&meeting&of&the&minds&be&made&when& it& comes& to& & of& payment,& they& do& not& always& have& to& be& expressly&agreed&upon&–&when&the&law&supplies&these&by&default.&

•

In&the&earlier&cases&(Navarro,!Velasco,!Leabres),&parties&were&to& have&a&mode&of&payment&other&that&immediate&payment& o There& could& not& have& been& a& meeting& of& the& minds& because&both&parties&expected&more&negotiations&as&to& manner&of&payment.&

•

In& all& other& cases,& General( Rule:( Price& is& deemed& to& be& demandable&at&once.& o Art( 1179:& all& obligations& without& conditions& or& periods& are&demandable&at&once.& o In& absence& of& stipulation& indicating& a& different& form& of& payment,& price& is& deemed& by& operation& of& law& to& be& immediately&demandable&

•

Where& there& is& no& other& basis& of& payment,& the& reasonable& conclusion&is&that&subsequent&payments&shall&be&made&in&same& amounts& as& first& payment.& DBP! v.! Court! of! Appeals! (344! SCRA! 492)!

& Navarra!v.!Planters!Dev.!Bank! ! Facts:(Both&the&Spouses&Navarra&and&RRRC&got&loans&from&Planters&Bank& and&secured&them&with&their&properties.&Both&defaulted&and&&their&lands& were& foreclosed& and& bought& by& Planters.& The& Navarras& were& unable& to& exercise& their& right& of& redemption& but& RRRC& managed& to& come& into& an& agreement& with& Planters& which,& in& the& end,& gave& them& a& receivable& of& P300,000& from& Planters.& Jorge& Navarra& sent& a& letter& to& Planters&

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requesting& that& he& be& given& a& chance& to& repurchase& their& properties,& while&promising&to&pay&a&downpayment&of&P300,000&for&it.&The&Planters& Bank& agreed& to& his& request& subject& to& certain& conditions.& Navarra& sent& them&another&letter&asking&them&to&apply&the&P300,000&excess&of&RRRC& to&their&transaction&to&serve&as&his&downpayment.&Planters&told&him&to& secure&a&board&resolution&from&RRRC&authorizing&him&to&do&so.&Navarra& failed&to&submit&this&resolution&to&Planters,&so&they&denied&his&request.&A& case& was& filed& by& Navarra& for& specific& performance.& He& claimed& that& there& was& already& a& perfected& contract& of& sale& between& him& and& Planters& Bank& because& of& their& letters& so& they& should& be& compelled& to& sell& him& back& his& properties.& The& trial& court& ruled& in& his& favor& but& the& Court&of&Appeals&reversed&this.&& & Issue:(Whether&or¬&there&was&a&perfected&contract&of&sale.& ( Held:(NO.&There&was&no&perfected&contract&of&sale&because&there&was&no& definite&offer&made&and&there&was&no&absolute&acceptance.&Also,&before& a&valid&and&binding&contract&of&sale&can&exist,&the&manner&of&payment&of& the& purchase& price& must& first& be& established.& The& manner& of& payment& goes& into& the& price,& such& that& a& disagreement& on& the& manner& of& payment& is& tantamount& to& a& failure& to& agree& on& the& price.& That& is& the& case&here&as&the&letters&only&&for&an&initial&downpayment&but&are& completely& silent& as& to& how& the& succeeding& installment& payments& shall& be&made.&Navarra’s&letter&also&failed&to&specify&a&definite&amount&of&the& purchase& price& for& the& repurchase& of& the& subject& properties.& It& merely& stated&that&the&"purchase&price&will&be& based&on&the&redemption&value& plus& accrued& interest& at& the& prevailing& rate& up& to& the& date& of& the& sales& contract."& There& is& too& much& ambiguity& here.& In& fine,& there& was& no& acceptance& of& their& offer& in& the& first& place.& The& very& circumstance& that& the& Navarras& had& to& make& a& new& request& in& their& 2nd& letter,& to& use& the&



%

P300,000& excess& of& RCCC,& is& a& clear& indication& that& no& definite& agreement&has&yet&been&reached&at&that&point.&As&we&see&it,&this&request& constitutes& a& new& offer& on& the& part& of& the& Navarras,& which& offer& was& again&conditionally&accepted&by&the&Bank&as&in&fact&it&even&required&the& Navarras&to&submit&a&board&resolution&of&RRRC&before&it&could&proceed& with&the&proposed&sale/repurchase.&The&eventual&failure&of&the&spouses& to& submit& the& required& board& resolution& precludes& the& perfection& of& a& contract&of&sale/repurchase&between&the&parties& ( E.(Where(There(is(Sale(Even(When(No(Price(Has(Been(Agreed(Upon( & Article(1474.( Where( the( price( cannot( be( determined( in( accordance( with( the( preceding( articles,( or( in( any( other( manner,( the( contract( is( inefficacious.( However,( if( the( thing( or( any( part( thereof( has( been( delivered(to(and(appropriated(by(the(buyer(he(must(pay(a(reasonable( price( therefor.( What( is( a( reasonable( price( is( a( question( of( fact( dependent(on(the(circumstances(of(each(particular(case.((n)(

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•

“Inability&to&produce&the&effect&wanted”&

•

Does¬&exclude&void&sales&

•

Rather,& it& includes& valid& sales& which& have& become& inefficacious& in&the&same&group&as&void&sales&(when&it&comes&to&price)&

& E.3.(Concept(of(Appropriation( •

Basis&of&Article( 1474&is&Robles! v.! Lizarraga! Hermanos! (50! Phil.! 387)! o

•

An&unjust&enrichment&would&occur&in&allowing&someone& to&appropriate&the&movables&without&compensating&the& other&person.&&

2&Important&Points& o

o

Doctrine& is& based& on& unjust& enrichment& against& the& buyer& !& he& can’t& be& allowed& to& retain& the& subject& matter&without&being&liable&to&pay&the&price& Applies&even&in&a&“no&contract”&situation&where&there&is& no&meeting&of&the&minds&as&to&price.& " May& also& apply& to& void& sale& contract,& where& defect&is&in&the&price.&

•

In&such&a&case,&courts&have&authority&to&fix&the&reasonable&price& for&the&subject&matter.&

•

This& article& is& the& only& exception& where& there& would& still& be& a&

o

valid& sale& even& when& there& is& no& meeting& of& the& minds& as& to& price.&

o

•


E.2.(What(Does(“Inefficacious”(Mean?(

&

& E.1.(What(Does(“Preceding(Articles”(Mean?((

%

•

•

CLV:&1469U1473&

& &


Article(1474&meant&to&cover&all&sale&contract&situations& Agreement& as& to& the& subject& matter,& along& with& tradition.& Article(1474(is&a&remedy&in&favour&of&the&seller&

What&if&he&does¬&want&to&take&advantage&of&the&remedy,&and& instead&recover&the&subject&matter?& o Seems¬&possible&if&appropriation&had&taken&place& o Article( 1474& seems& to& contemplate& a& situation& where& there&is&delivery&but¬&appropriation&


%

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Thus&we&must&look&at&what&appropriation&means&

" " •

enrichment.&

El! Oro! Engravers! v.! Court! of! Appeals! (546! SCRA! 42)( ! & sales&

•

invoices&are¬&evidence&of&payment,&but&only&of&receipt.& o Best& evidence& to& prove& paymen& :& official& receipt& issued& by&seller& •

•

facts&was&that&there&was&partial&payment&and&delivery&of& possession.& These& things& would& remove& contract& from& Statute&of&Frauds.& •

Coronel!v.!Court!of!Appeals!(263!SCRA!15)&! &seller&executed&a&

Cheng! v.! Genato! (300! SCRA! 722)& ! & seller& acknowledged& receipt& of& sum& as& partial& payment.& Did& not& provide& further& stipulations&as&to&balance&or&manner&of&payment.& o SC:& no& sale,& since& requisites& were& not& expressed& in& the& o

Toyota! Shaw! v.! Court! of! Appeals! (244! SCRA! 320)! ! written& agreement& was& entered& between& a& prospective& buyer& and& the&

Limson! v.! Court! of! Appeals! (357! SCRA! 209)& ! & nothing& in& the&

receipt& of& downpayment,& indicating& balance& of& purchase& price,& with&obligation&to&transfer&title&upon&payment& o SC:& There& was& a& perfected& contract& of& sale.& No& reservation&of&title&until&payment.& o CLV:& This& is& consistent& with& requirement& that& memoranda&of&sale&must&include&all&essential&requisites& in&order&to&remove&it&from&the&Statute&of&Frauds.&&

Leabres!v.!Court!of!Appeals!(146!SCRA!158)(! &buyer&sought&to& enforce&purchase&on&land&based&on&receipt& o SC:&Receipt&cannot&be&regarded&as&contract&of&sale&& " There&was&only&recognition&of&the&sum&of&P1000,& and& the& requisites& for& valid& contract& were& lacking.&Thus,&sale&is¬&valid¬&enforceable.& o CLV:& Leabres& seems& to& deal& with& the& Statute& of& Frauds& (i.e.& sale& was& not& enforceable).& However,& reading& of&

Agreement&only&provided&for&the&downpayment& No& purchase& price& or& manner& of& payment& of& balance&

receipt& indicated& that& the& earnest& money& was& part& of& the& purchase&price,&much&less&any&showing&of&a&perfected&sale&–&only& conclusion&is&no&sale.&

( III.(Rulings(on(Receipts(and(Other(Documents(Embodying(Price( •


sales& representative.& There& was& an& acknowledged& downpayment&of&P100,000.& o SC:& There& was& never& a& perfected& contract& between& the& parties.&

“Appropriation”& !& covers& situation& of& acceptance,& and& buyer& treats&subject&matter&as&his&own.& o Not& applicable& to& real& estate& !& would& fall& under& builders&in&good&faith.& o Applied& to& movables& !& entails& a& transformation& such& that& it& cannot& be& returned& in& its& original& state& as& to& warrant&the&fixing&of&reasonable&price&to&prevent&unjust&

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•

receipt.&& CLV:& isn’t& sale& a& consensual& contract?& Defect& in& memorandum&would&affect&enforceability,&but&should&it& affect&validity?&

Xentrex! v.! Court! of! Appeals! (291! SCRA! 66)&! &contract&of&sale& perfected&upon&meeting&of&the&minds.&



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SC:& Seller& obliged& itself& when& it& accepted& deposit& and& pulled&out&a&unit.&

•

David! v.! Tiongson! (313! SCRA! 63)& ! & sale& of& real& property& on&

•

Tigno! v.! Aquino! (444! SCRA! 61)& ! & absence& of& receipts& or& any& proof&of&consideration&is¬&conclusive&as&to&the&inexistence&of& a&sale&since&consideration&always&presumed.& o CLV:& no& constant& doctrine& when& it& comes& to& legal& consequences&of&receipts.& &

In& a& sale,& there& is& no& requirement& that& the& price& is& exactly& the&

& A.(Distinguished(from(Simulated(Price(

Article(1355:&Lesion&or&inadequacy&of&cause&does¬&invalidate& a&contract,&unless&there&is&fraud,&mistake&or&undue&influence.&

Bravo_Guerrero!v.!Bravo!(465!SCRA!244).&Simulation&of&contract& and&gross&inadequacy&of&price&are&distinct&legal&concepts.& o When&parties&to&an&alleged&contract&do¬&really&intend& to&be&bound&–&simulated&

Mere& inadequacy& of& the& price& does& not& affect& the& validity&of&the&sale&when&both&parties&are&in&a&position&to& form& an& independent& judgment& concerning& the& transaction,& unless& fraud,& mistake,& or& undue& influence& indicative&of&a&defect&in&consent&is&present.&The&contract& may&be&annulled&for&vitiated&consent&and¬&due&to&the& inadequacy& of& price.& Bautista! v.! Court! of! Appeals(436!

" Void& " No&legal&effect& " No&real&agreement& Gross&inadequacy&–¬&a&void&contract& " Validity&of&sale¬&affected& " Unless& there& is& a& defect& in& consent& or& parties& intended&donation&or&other&contract&

o

SCRA!141)! •

“Gross& inadequacy”& !& present& when& a& reasonable& man& would&

value&of&the&subject&matter.& o Recall:& Test& for& commutativeness& is& the& belief& of& the& parties&that&they&received&good&value.&

% IV.(Inadequacy(of(Price( •


not&agree&to&dispose&of&his&property&at&that&amount.& o Absent& any& evidence& of& the& fair& market& value& of& a& land& as&of&the&time&of&its&sale,&it&cannot&be&concluded&that&the& price& at& which& it& was& sold& was& inadequate.& Acabal! v.! Acabal!(454!SCRA!897)!

installments& o SC:& Even& when& receipts& do& not& provide& for& the& installments,& when& there& is& partial& payment,& Statute& of& Frauds&no&longer&applies.& •

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Article( 1470:& Gross& inadequacy& of& price& does& not& affect& a& contract&of&sale& o Except&as&it&may&indicate&a&defect&in&consent& o

Or&that&parties&really&intended&a&donation&or&some&other& act.&

•

o

& B.(Rescissible(Contracts(of(Sale( •

Inadequacy& of& Price& –& ground& for& rescission& in& cases& covered& under&Article(1381&of&the&Civil&Code.2&

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 2

(Article(1381(–(The(following(contracts(are(rescissible:(



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& C.( Judicial( Sale( (Exception( to( the( General( Rule( that( Courts( cannot( interfere(and(set(a(price(for(Sale)( •

o

•

State&must&protect&seller&from&a&bad&deal&that’s¬&his& fault.&

Requisites:& o Such& inadequacy& however& must& be& “shocking& to& the& o

•

o

General(Rule:(Inadequacy&of&price&may&render&void&judicial&sale& of&real&property& o Why& the& difference?& Here,& the& sale& is& not& a& result& of& negotiations.& In& fact,& property& of& the& “Seller”& is& to& be& sold&at&public&auction.&

•

o

conscience&of&man.”&Pascua!v.!Simeon!(161!SCRA!1)( It& must& be& shown& that& a& resale& would& fetch& a& better& price.&Cu!Bie!v.!Court!of!Appeals(15!SCRA!307)!

Exception:( However,& even& if& these& are& shown,& judicial& sale& will& not&be&set&aside&when&there&is&a&right&to&redemption.&

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (1) Those&which&are&entered&into&by&guardians&whenever&the&wards&whom& they& represent& suffer& lesion& by& more& than& oneUfourth& of& the& value& of& the&things&which&are&the&object&thereof;& (2) Those&agreed&upon&in&representation&of&absentees,&if&the&latter&suffer& the&lesion&stated&in&the&preceding&number;& (3) Those&undertaken&in&fraud&of&creditors&when&the&latter&cannot&in&any& other&manner&collect&the&claims&due&them;& (4) Those&which&refer&to&things&under&litigation&if&they&have&been&entered& into& by& the& defendant& without& the& knowledge& and& approval& of& the& litigants&or&of&competent&judicial&authority;& (5) All&other&contracts&specially&declared&by&law&to&be&subject&to&rescission.& (1291a)&

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Lower& sale& price& !& easier& time& for& the& owner& to& redeem.& Proper&remedy&is&simply&for&the&“Seller”&to&exercise&such& right.&

BUT:&By&way&of&extraordinary&circumstances&perceived,&when&in& a&judicial&sale&the&right&of&redemption&has&been&lost,&where&the& inadequacy& of& the& price& is& purely& shocking& to& the& conscience,& such&that&the&mind&revolts&at&it&and&such&that&a&reasonable&man& would&neither&directly&or&indirectly&be&likely&to&consent&to&it,&the& same& will& be& se& aside.& Cometa! v.! Court! of! Appeals(351! SCRA! 294)!

•

When& judicial& sale& is& voided& without& fault& of& purchaser,& the&

latter& is& entitled& return& of& price& with& simple& interest,& together& with& all& sums& paid& out& by& him& in& improvements& introduced& on& the& property,& taxes,& and& other& expenses.! Seven! Brothers! Shipping!Corp.!v.!ca,!246!SCRA!33! ( D.(Sales(with(Right(to(Repurchase( •

In& sales& like& this,& the& gross& inadequacy& gives& rise& to& a& presumption&of&equitable&mortgage.(

•

Remedy& of& the& seller& !& have& the& sale& reformed& or& declared& a& mortgage&contract,&then&pay&off&the&debt&which&is&secured.&

•

Remedy&of&the&buyer&!&foreclose&on&the&mortgage.& o cannot& appropriate& the& subject& matter& –& pactum% commissorium&which&is¬&allowed.&

( V.(When(Motive(Nullifies(Sale( •

Consideration&is¬&equal&to&motive&&

•

When&motive&is&illegal,&sale&is&void.&


&


Sale& executed& in& order& to& frustrate& another& person’s& right&to&inheritance&and&to&avoid&tax&

Cause&v.&Motive& o

o o

•

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cause&!&Essential&reason&which&moves&parties&to&enter& into& the& contract& and& is& the& “immediate,& direct& and& proximate&reason”&to&create&the&obligation.& Motive&!&Particular&reason&of&a&contracting&party&which& does¬&affect&the&other&party& Uy!v.!Court!of!Appeals!(314!SCRA!69,!81).&In&this&case…& " cause&of&vendor&to&sell&the&land&is&to&obtain&the& price,&and&for&the&vendee,&the&acquisition&of&the& land.&& " Motive& of& the& vendor& is& to& use& the& lands& for& housing.&

BUT( (Supreme& Court& said& that)& When& motive& predetermines& cause,&it&may&be&regarded&as&the&cause.& o When& there& was& a& mistake& in& the& quality& of& land,& the& motive/cause& was& negated.& And& thus& the& contract& was& inexistent.&

•

Heirs!of!Spouses!Balite!v.!Lim!(446!SCRA!54)&–&amount&reflected& in&Deed&of&Sale&was&lower&than&what&they&agreed&on& o Motive& was& to& pay& lower& taxes.& The& Supreme& Court& ruled& that& the& contract& of& sale& was& valid& as& the& motive& o

here&was¬&equivalent&to&the&consideration.& Although& illegal,& motives& do& not& take& the& place& of& the& consideration.&


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Chapter(5:(Formation(of(Sale( ( I.(Stages(in(the(Life(of(Sale( a) Policitacion*–*negotiation*and*bargaining* b) Perfection*–*moment*when*there*is*meeting*of*the*minds*on*the* subject*matter*and*price* c) Consummation*–*parties*perform*their*respective*obligations* * II.(Policitation(Stage( ( A.(General(Points( •

Scope:* Negotiation* covers* the* period* from* the* time* the* prospective*contracting*parties*indicate*interest*in*the*contract* to*the*time*the*contract*is*concluded/perfected.*

•

Negotiation*is*initiated*by*an*offer,*which*must*be*certain.*

•

In* order* to* give* rise* to* a* contract* of* sale,* the* offer* must* be* accepted.* Acceptance* must* be* absolute,* clear,* unequivocal,* plain* and* unequivocal.! Manila& Metal& Containers& Corp.& v.& PNB& (511&SCRA&444)(

•

General( Rule:( Before* the* negotiation* is* concluded* by* acceptance,* there* is* “freedom* to* contract.”* An* owner* of* property* is* free* to* offer* the* subject* property* for* sale* to* any* interested* person.* There* is* still* no* obligation* between* the* potential*buyer*and*potential*seller.** o Exception:*option*contract,*infra*

•

A* Letter* of* Intent* to* Buy* and* Sell* is* just* that,* a* declaration* of* intent.* It* is* not* a* conditional* contract* of* sale* or* a* contract* to* sell.* It* is* also* not* an* offer.* Muslim& and& Christian& Urban& Poor& Association,&Inc.&v.&BRYEC&Dev’t.&Corp.&(594&SCRA&724)&

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Manila&Metal&Container&Corp.&v.&Philippine&National&Bank& * Facts:*PNB*foreclosed*the*mortgage*MMCC*constituted*in*its*favor.*PNB* won*the*public*auction.*MMCC*requested*for*an*extension*of*the*1Myear* redemption*period,*which*PNB*rejected.*A*special*assets*department*of* PNB*issued*to*petitioner*a*statement*of**indicating*bid*price*and* interest* (about* Php* 1.5* million);* MMCC* then* remitted* Php* 725,000* as* “deposit* for* repurchase”.* PNB* offered* to* MMCC* to* buy* back* the* property*for*Php*2.66*million.*MMCC*insists*that*it*had*already*accepted* the*offer*of*the*PNB*department*of*Php*1.5*million,*and*it*had*deposited* the*money*as*earnest*money*(down*payment).*The*amount*of*Php*2.6* million*is*a*unilateral*increase*by*PNB*of*the*purchase*price.* * Issue:* Whether* or* not* there* was* already* a* perfected* contract* of* sale* when* MMCC* gave* deposit* after* the* department* issued* statement* of* .* * Held:*NO.*The*exchanges*were*counter*offers*and*so*the*contract*never* moved* beyond* the* negotiation* stage.* It* was* stipulated* by* the* parties* that* PNB* will* accept* the* deposit* “on* the* condition* that* the* purchase* price*is*still*subject*to*the*approval*of*the*PNB*board.”*Thus,*there*was* no*definite*price.* * Muslim&and&Christian&Urban&Poor&Association,&Inc.&v.&BRYCEV& Development&Corp.& * Facts:*MCUPAI*entered*into*negotiation*with*Seafood*Corporation*(SFC)* for*the*purchase*of*latter’s*land.*MCUPAI*executed*a*Letter*of*Intent*to* Buy* and* SFC* a* Letter* of* Intent* to* Sell* to* facilitate* the* former’s* loan* application.*The*sale*didn’t*happen*because*herein*buyer*wasn’t*able*to*



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obtain* a* loan,* even* when* it* was* given* an* extension* of* 3* months* to* procure*it.*Eventually,*SFC*sold*the*lot*to*BRYCMV.*MCUPAI*alleged*that* the* sale* violated* its* subsisting* agreement* with* SFC* which* gave* it* a* preferred*right*to*purchase*the*lot.* * Issue:* Whether* or* not* the* letters* of* intent* created* a* bilateral* contract* within*the*meaning*of*Article*1479* * Held:*NO.*A*mere*intention*or*plan*to*do*something*does*not*give*rise* to*an*obligation,*nor*bind*a*party*to*do*or*give.*It*was*not*an*offer,*but* merely*an*expression*of*the*intention*to*enter*in*to*the*contract.*It*does*

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•

General( Rule:* They* are* less* than* offers* and* are* merely* invitations* to* make* an* offer.* Thus,* direct* acceptance* of* such* ments*do*not*give*rise*to*a*valid*and*binding*sale.* o Exception:* It* appears* otherwise.* That* is,* there* is* a* determinate* subject* matter* and* a* determinate* price* and**of*payment.**

•

Better* rule* according* to* CLV* and* Atty.* Santiago:* Even* if* the* ment* contains* definite* ,* it* remains* an* invitation*


so* long* as* it* is* addressed* to* the* general* public.* The* exception* comes* in* when* the* invitation* is* addressed* to* a* particular* offeree.* * C.(Offers( •

General(Rule:(An*offer,*prior*to*its*acceptance,*is*subject*to*the* complete* will* of* the* offeror* i.e.* he* may* withdraw* or* destroy* it* and*it*is*not*necessaty*that*the*offeree*leans*of*the*withdrawal.* o

not* contain* a* commitment* to* enter* into* the* contract.* In* fact,* SFC’s* entering*into*a*contract*was*conditioned*upon*MCUPAI’s*ability*to*raise* the*funds.* * B.(ments(and(Invitations( ( Article(1325( Unless(it(appears(otherwise,(business(ments(of(things(for(sale( are(not(definite(offers,(but(mere(invitations(to(make(an(offer.((n)( *

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Exception:*Option*Contracts*

•

The* offeror* can* attach* any* term* or* condition* he* desires,* and* may* fix* the* time,* place* and* manner* of* acceptance.* He* has* full* control*of*the*offer*before*it*is*accepted.*

•

Acceptance* by* the* offeree* must* be* absolute.* Any* conditional* acceptance*will*be*a*counterMoffer*which*rejects*and*terminates* the*original*offer.*

•

An*offer*becomes*ineffective*upon*the*death,*civil*interdiction,* insanity* or* insolvency* of* either* offeror* or* offeree,* before* acceptance* is* conveyed* and* received* by* the* offeror.* Article( 1323*

( D.(Option(Contracts* ( Article(1479(( A( promise( to( buy( and( sell( a( determinate( thing( for( a( price( certain( is( reciprocally(demandable.( ( An( accepted( unilateral( promise( to( buy( or( to( sell( a( determinate( thing( for( a( price( certain( is( binding( upon( the( promissor( if( the( promise( is( ed(by(a(consideration(distinct(from(the(price.((1451a)(



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Article(1324( When( the( offeror( has( allowed( the( offeree( a( certain( period( to( accept,( the( offer( may( be( withdrawn( at( any( time( before( acceptance( by( communicating( such( withdrawal,( except( when( the( option( is( founded(

Carcellar&v.&Court&of&Appeals& * Facts:* SIHI* (landowner)* entered* into* lease* contract* with* Carcellar* with* option*to*purchase*within*a*certain*period,*exercised*by*a*written*notice*

upon(a(consideration,(as(something(paid(or(promised.((n)( * D.1.Definition(and(Essence(of(Option(Contract(

to* SIHI.* Nearing* termination,* Carceller* wrote* expressing* his* intent* to* exercise* the* option,* but* requested* for* an* extension* to* raise* funds,* which* SIHI* rejected.* Carceller* still* later* expressed* intention* to* exercise* option*to*purchase*after*the*period*expired,*which*SIHI*denied*because* period*had*lapsed.*Carceller*files*action*for*specific*performance.* * Issue:* Whether* or* not* Carceller* should* be* allowed* to* exercise* option*

•

An*option*is*a*preparatory*contract*in*which*one*party*grants*to* the*other,*for*a*fixed*period*and*under*specified*conditions,*the* power* to* decide* whether* or* not* to* enter* into* a* principal* contract*(i.e.*contract*of*sale).*It*binds*the*party*who*has*given* the* option,* not* to* enter* into* the* principal* contract* with* any* other* person* during* the* period* designated,* and,* within* that* period,* to* enter* into* such* contract* with* the* one* to* whom* the* option* was* granted,* if* the* latter* should* decide* to* use* the* option.* It* is* a* separate* agreement* distinct* from* the* contract* which*the*parties*may*enter*into*upon*the*consummation*of*the* option.*Carceller&v.&Court&of&Appeals&(302&SCRA&718)*

•

An* option* is* a* continuing* offer* or* an* unaccepted* offer* which* must* be* certain.* It* is* distinct* from* the* contract* of* sale,* but* as* soon*as*the*offer*is*accepted,*the*contract*of*sale*is*perfected.* Adelfa&Properties,&Inc.&v.&Court&of&Appeals&(240&SCRA&565)! o The* individual* giving* the* option* does* not* sell* his* land,* but*rather*the*right*to*privilege*to*buy*at*the*election*or* option*of*the*other*party.*

* * * *

given*the*delay*in*giving*the*required*notice* * Held:*YES.*Carceller’s*letter*to*SIHI*showed*intent*to*exercise*option*to* purchase* despite* the* request* for* the* extension.* Granting* the* option* is* consistent* with* the* intention* of* the* parties.* The* delay* was* not* substantial*or*fundamental*as*to*amount*to*a*breach*that*would*defeat* the* intention* of* the* parties* when* they* entered* into* the* contract.* His* first*letter*and*his*formal*exercise*were*within*reasonable*time*frame.* * Tayag&v.&Court&of&Appeals& * Facts:*Lacsons*are*owners*of*a*land,*tenanted*by*farmer*tillers*who*had* landholdings* thereon.* The* farmers* executed* a* deed* of* assignment* in* favor* of* Tayag* stating* that* they* would* assign* their* landholdings* for* Php50/sq.* meter* payable* when* legal* impediments* to* the* sale* of* the* property* no* longer* existed* and* if* the* Lacsons* decide* to* sell* the* property.*When*Tayag*called*for*a*meeting*to*discuss*their*agreement,* the*farmers*expressed*they*would*not*attend*and*that*they*were*going* to*sell*their*landholdings*to*the*Lacsons.*Tayag*claims*that*they*had*no*



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right* to* deal* directly* with* the* Lacsons,* while* their* contracts* with* him* were*valid*and*existing.* * Issue:*Whether*or*not*the*deeds*of*assignment*were*option*contracts.* * Held:* NO.* The* payment* of* the* purchase* price* was* conditioned* on* the* disappearance*of*any*legal*impediments*in*sale*of*the*property*and*on* the* Lacsons* actually* selling* it—there* was* no* showing* that* they* ever* agreed* to* sell* their* property.* There* was* no* option* contract* here* because*in*an*option*contract,*the*one*giving*is*only*bound*to*hold*the* land*in*case*the*optionee*decides*the*receive*the*lands*at*his*election.* Here,* the* farmers* did* not* just* give* Tayag* an* option;* they* gave* him* an* exclusive*right*to*buy*the*property.*They*cannot*legally*do*this*because* they* are* not* the* ed* owners* of* the* land.* They* had* no* right* to* enter* into* those* contracts* with* Tayag* without* the* knowledge* of* the* Lacsons.* * D.2.( Characteristics( and( Obligations( in( an( Option( Contract;( Compared(

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choose*to*purchase*or*not*

Prestation:*To*Give*

Prestation:*To*Do*or*Not*Do*

Covered*by*Statute*of*Frauds*

Not*Covered*by*Statute*of*Frauds*

* •

Consideration*must*be*money*or*

Consideration*may*be*anything*of*

its*equivalent,*or*essentially*a* valuable*consideration.*

value,*even*if*it’s*not*money.*

•

An*option*contract*is*a*consensual*contract.*

•

It*is*a*unilateral*promise*to*sell*a*determinate*thing.*It*only*binds* the*optioner*–*even*when*the*optionee*has*not*paid*a*separate* consideration*–*with*the*following*obligations:* 1. Not*to*offer*to*any*third*party*the*sale*of*the*object* 2. Not*to*withdraw*the*offer*during*the*agreed*period* 3. To*enter*into*a*contract*of*sale*when*the*option*holder,* if* he* uses* the* option* (i.e.* accepts* the* offer)* within* the* specified*period.*

•

Consensual*Contract* Bilateral*Contract*

Unilateral*Contract*

Subject*matter*is*a*thing*to*be*

Subject*matter*is*the*right*to*

General(Rule:(An*option*without*separate*consideration*is*void* as* a* contract.* Consideration* in* an* option* contract* may* be* anything*of*value,*not*necessarily*money*or*its*equivalent.* o Exception:* An* option* may* be* included* within* another* valid* contract,* such* as* a* lease* or* mortgage.* It* will* be* binding* even* if* it* does* not* have* a* separate* consideration.* It* is* a* stipulation* within* the* contract* which*acts*like*an*option*contract.*

OPTION(CONTRACT(

Onerous;*requires*a*separate*consideration.*Lack*of*consideration* makes*the*contract*void.*


given*

with(Sale( * CONTRACT(OF(SALE(

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The*three*obligations*are*obligations*to*do.*Therefore,*a*breach* of*the*option*contract*will*only*be*actionable*for*damages,*not* specific*performance.* o When* the* offer* is* accepted,* the* obligations* become* obligations*to*give,*since*the*contract*of*sale*is*already* perfected.*


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The* subject* matter* of* an* option* contract* is* the* option* to*

o

purchase* a* determinate* thing.* In* other* words,* it* is* the* subject* matter*is*the*right*to*choose*to*buy*or*not.* •

An* option* contract* is* not* covered* by* the* Statute* of* Frauds.* Therefore,*it*can*be*proved*by*parol*evidence*and*is*enforceable* even*if*not*written.*

* D.3.(Elements(of(a(Valid(Option(Contract( 1. Consent* 2. Subject* Matter* –* the* right* to* choose* whether* or* not* to* buy* a* determinate/determinable* object* for* a* price* certain* (including* manner*of*payment).*

o

o

*

•

•

•

Some* examples* where* the* Court* held* that* there* was* separate* consideration:*

option*to*buy*the*other*half*was*the*difference*between* the*market*value*and*the*P70*price*paid.* In* reciprocal* contracts* like* lease,* the* obligation* or* promise* of* each* party* is* the* consideration* for* that* of* the*other.1*Vda.&De&Quirino&v.&Palarca&(29&SCRA&1)* The* monthly* interest* paid* by* the* spouses* on* the* foreclosed*property*during*the*one*year*period*granted*

The* option* to* buy* included* in* a* mortgage* was* deemed* a* valid*

The*Court*had*ruled*in*1947*that*the*consideration*is*presumed* to*exist.*Once*proven,*it*is*binding.*Montinola&v.&Cojunagco&(78& Phil.& 481)* This* is* in* contrast* with* the* 1972* case* of* Sanchez& v.& Rigos&(45&SCRA&368)&which*refused*to*apply*that*presumption.*

An*option*contract*is*an*offer*and*a*preparatory*contract*to*that* of*sale.*This*presupposes*that*there*is*already*a*purchase*price* on*the*subject*matter*of*the*sale*which*was*agreed*upon*by*the* parties.* As* long* as* the* consideration* for* the* option* contract* is* distinct*and*not*included*in*the*purchase*price,*it*is*considered* “separate*consideration”.*

In( Villamor& v.& Court& of& Appeals& (202& SCRA& 607),* the* buyers*bought*1⁄2*of*the*land*for*P70*which*was*much* higher*than*the*prevailing*market*rate*at*that*time.*The* Court* ruled* that* the* separate* consideration* for* the*

stipulation* since* it* is* ed* by* the* same* consideration* of* the* mortgage,* which* is* itself* distinct* from* that* of* the* sale.* Soriano&v.&Bautista&(6&SCRA&946)*

Just* like* in* a* sale,* the* option* contract* will* only* be* perfected* if*

the*parties*agree*on*the*specific*object*(i.e.*the*right*itself,*and* the* conditions)* and* the* price* and* manner* of* payment* of* the* consideration.* * D.4.(Meaning(of(“Separate(Consideration”( •


to* them* by* the* bank* was* considered* as* the* separate* consideration*to*hold*the*option*contract*valid.&Dijamco& v.&Court&of&Appeals&(440&SCRA&190)*

3. Consideration* which* is* anything* of* value* and* is* separate* and* distinct*from*the*purchase*price* •

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* * *

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

*Article( 1350.* In* onerous* contracts* the* cause* is* understood* to* be,* for* each* contracting*party,*the*prestation*or*promise*of*a*thing*or*service*by*the*other;* in* remuneratory* ones,* the* service* or* benefit* which* is* remunerated;* and* in* contracts*of*pure*beneficence,*the*mere*liberality*of*the*benefactor.*(1274)*



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Villamor&v.&Court&of&Appeals&

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* Facts:* Villamor* purchased* from* Reyes* one* half* of* a* piece* of* land* for* more* than* the* market* value.* They* then* executed* a* Deed* of* Option*

but*would*still*be*a*valid*offer.*If*the*option*is*exercised*before* it*is*withdrawn,*it*is*equivalent*to*an*offer*being*accepted.*Thus,* a*valid*and*binding*sale*would*be*perfected.** o The* burden* of* proof* to* show* that* the* option* contract*

stating* that* the* reason* only* why* Villamor* bought* the* half* in* the* first* place*is*because*Reyes*granted*him*exclusive*right*to*buy*the*other*half* whenever* the* need* would* arise* for* either* party.* Reyes* sought* to* repurchase*the*half*already*bought*by*Villamor*but*the*latter*refused.* * Issue:*Whether*or*not*the*Deed*of*Option*was*valid* *

has*a*separate*consideration*is*with*the*party*seeking*to* show* it.* Article* 1354,* which* presumes* that* consideration* exists,* cannot* apply* since* Article( 1479,* the* more* specific* provision,* requires* such* separate* consideration*for*an*option*to*be*valid.* Lately,*there*have*been*rulings*by*the*SC*which*tend*to* diverge*from*the*Sanchez*doctrine.*However,*Sanchez*is*

Held:( YES.* The* consideration* for* the* Option* was* the* difference* in* the* higher*purchase*price*of*the*land*compared*to*its*actual*market*value.* Consideration* maybe* anything* of* value.* The* option* here* was* the* consideration* for* the* Villamors* buying* the* first* half* of* the* land.* Since* they*expressed*their*intention*to*exercise*the*option*(which*is*an*offer),* a*valid*contract*was*perfected.* * D.5.(When(Option(Is(Without(Separate(Consideration( * Article(1479.!( A( promise( to( buy( and( sell( a( determinate( thing( for( a( price( certain( is( reciprocally(demandable.( ( An( accepted( unilateral( promise( to( buy( or( to( sell( a( determinate( thing( for( a( price( certain( is( binding( upon( the( promissor( if( the( promise( is(

o

still* the* controlling* doctrine* since* it* has* yet* to* be* expressly*abandoned*by*the*Court.&Montilla&v.&Court&of& Appeals& (161& SRA& 167);& Natino& v.& IAC& (197& SCRA& 323);& Yai&Ka&Sin&Trading&v.&Court&of&Appeals&(209&SCRA&763);& Diamante&v.&Court&of&Appeals&(206&SCRA&52)* •

for*the*Sanchez*doctrine*to*apply*the*option*must*be*accepted* and*the*acceptance*must*be*communicated*to*the*offeror.*This* emphasizes* the* point* that* an* option* contract* is* a* distinct* contract.* •

ed(by(a(consideration(distinct(from(the(price.((1451a)( * •

It*was*held*in*Vazquez&v.&Court&of&Appeals&(199&SCRA&102)*that*

Controlling(Doctrine:(Sanchez&v.&Rigos&(45&SCRA&368).&Without* separate*consideration,*an*option*contract*is*void*as*a*contract*


Classroom*example:* o

S*is*selling*B*a*condominium*unit.*He*tells*B*that*he*can* pay*P50,000*as*reservation*fee*which*will*entitle*him*to* a* period* of* 1* month* to* think* about* the* purchase.* If* he* accepts,* the* P50,000* will* be* deducted* from* the* purchase* price.* This* is* not* an* option* contract* because* the*50,000*is*not*a*separate*consideration*but*is*actually* part* of* the* purchase* price.* What* we* have* is* an*


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innominate* contract* (do* ut* facias).* Breach* of* the* contract*will*entitle*B*to*damages*only.*The*innominate* contract* involves* a* prestation* to* do,* thus,* specific* performance*is*not*available.* *

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Vasquez&v.&Court&of&Appeals& * Facts:* Vallejera* sold* land* to* Vasquez* who* then* secured* Transfer* Certificate* of* Title.* A* separate* instrument* together* with* the* deed* of*

* Facts:* An* Option* to* Purchase* was* executed* where* Rigos* would* sell* a* piece*of*land*to*Sanchez*upon*the*exercise*of*the*option*within*2*years.* Sanchez* made* several* tenders* of* payment* to* Rigos,* which* latter* rejected.* Sanchez* then* deposited* the* amount* with* the* CFI* and*

sale,*a*Right*to*Repurchase*was*executed*by*them*in*favor*of*Vallejera.* Later,* Vasquez* resisted* this* action* for* redemption* on* the* premise* that* Right*to*Repurchase*is*just*an*option*to*buy*since*it*is*not*embodied*in* the*same*document*of*sale*but*in*a*separate*document,*and*such*option* is*not*ed*by*a*consideration*distinct*from*the*price,*the*deed*for* right*to*repurchase*is*not*binding*upon*them.* *

commenced* suit* for* specific* performance* against* Rigos.* Latter* asserts* that*it*was*not*a*valid*contract*for*absence*of*consideration.* * Issue:*Whether*or*not*there*is*a*valid*option*contract* * Held:* NO.* Seller* cannot* revoke* an* offer* if* the* option* to* buy* had* a* separate*consideration.*If*the*option*is*given*without*a*consideration,*it*

Issue:* Whether* or* not* the* right* of* repurchase* gave* rise* to* a* valid* contract*of*sale.* * Held:* NO.* The* right* to* repurchase* was* not* ed* by* a* separate* consideration.*Thus,*for*it*to*be*binding*on*Vasquez,*it*must*have*been* shown*that*Vallejera*accepted*the*offer*therein*before*it*was*withdrawn* by*Vasquez.*None*was*made;*the*vendor*a*retro*must*make*actual*and*

is*a*mere*offer*of*a*contract*of*sale,*which*is*not*binding*until*accepted.* If,* however,* acceptance* is* made* before* a* withdrawal,* it* constitutes* a* binding*contract*of*sale,*even*though*the*option*was*not*ed*by*a* sufficient* consideration.* Accordingly,* the* promisee* cannot* compel* the* promisor*to*comply*with*the*promise,*unless*the*former*establishes*the* existence* of* said* distinct* consideration.* In* other* words,* the* promisee* has* the* burden* of* proving* such* consideration.* Plaintiff* herein* has* not* even*alleged*the*existence*thereof*in*his*complaint.*

simultaneous*tender*of*payment*and*consignation.*Mere*expressions*of* readiness* or* willingness* to* repurchase* are* insufficient.* The* right* of* repurchase* is* not* a* right* granted* the* vendor* by* the* vendee* in* a* subsequent* instrument,* but* is* a* right* reserved* by* the* vendor* in* the* same*instrument*of*sale*as*one*of*the*stipulations*of*the*contract.* * D.6.(Option(Not(Deemed(Part(of(Renewal(of(Lease(

Sanchez&v.&Rigos&

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* * * *


Under* the* principle* of* tacita! reconduccion,* a* lease* is* impliedly* renewed* if* the* term* of* the* original* contract* of* lease* has*


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expired,*the*lessor*has*not*ordered*the*lessee*to*vacate,*and*15* days*has*ed*without*the*acquiescence*of*the*lessor.*1* •

o

Only* the* essential* stipulations* in* the* lease* are* deemed*

renewed.* o An* option* to* purchase* which* is* stipulated* in* a* lease* is* not*essential*to*the*lease.*Thus,*they*it*is*not*renewed.** * D.7.(Period(of(Exercise(of(Option( •

•

If* the* option* contract* does* not* specify* the* period* in* which* the* option* can* be* exercised,* it* cannot* be* presumed* that* it* can* be* exercised*indefinitely.*

* D.8.(Proper(Exercise(of(Option( The* optionee* may* exercise* his* right* by* merely* advising* the* offeror* of* the* decision* to* buy* and* expressing* his* readiness* to* pay,*provided*that*he*is*actually*able*to*pay.*Actual*payment*is* not*necessary*to*exercise*the*option.*Nietes&v.&Court&of&Appeals& (46&SCRA&654)* •

The*acceptance*or*exercise*of*the*option*must*still*be*within*the* option*period*stipulated.& o Notice* within* the* option* period* of* clear* intention* to* purchase* the* property,* even* with* a* request* for* leeway* or* extension* of* the* period* in* order* to* raise* money* to* buy* the* property,* is* a* valid* and* substantial* exercise* of* the*option.*Carceller&v.&Court&of&Appeals&(302&SCRA&718)&

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*Samelo*v.*Manotok*Services,*Inc.,*G.R.*No.*170509*(not*in*the*book)*


In*Sanchez& v.& Rigos& (45& SCRA& 368),*the*Court*held*that* repeated* tenders* of* payment,* which* were* refused* by* the* optioner* for* no* reason,* constitute* evidence* of* a* valid*exercise*of*the*option.*

The* refusal* by* the* offeror* to* comply* with* the* demand* by* the* offeree* with* the* exercise* of* his* option* may* be* enforced* by* specific*performance.** o Exercise* of* the* option* is* acceptance* of* the* offer* which* perfects*the*contract*of*sale.*Thus,*the*obligations*to*do* become*obligations*to*give.*

* Nietes&v.&Court&of&Appeals&

Actions* upon* written* contracts* must* be* brought* within* 10* years.*Afterwards,*it*prescribes.*

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•

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* Facts:* Garcia* (owner* and* lessor)* entered* into* a* Contract* of* Lease* with* Option*to*Buy*a*school*with*Nietes*(lessee).*Lessee*is*granted*an*option* to*buy*the*land*within*the*period*of*the*contract*of*lease.*Later,*Garcia* expressed*his*intention*to*rescind*the*contract*due*to*poor*maintenance* of* the* building.* In* his* reply,* Nietes* expressed* inention* to* exercise* the* option*to*buy.*In*the*specific*performance*case*filed*against*Garcia,*he* asserts*that*the*full*purchase*price*must*first*be*paid*before*the*option* could*be*exercised.* * Issue:*Whether*or*not*Garcia’s*assertion*is*correct.* * Held:*NO.*In*the*case*of*an*option*to*buy,*the*creditor*may*validly*and* effectively* exercise* his* right* by* merely* advising* the* debtor* of* the* former’s*(1)*decision*to*buy*and*(2)*his*readiness*to*pay*the*stipulated* price,*provided*that*the*same*is*available*and*actually*delivered*to*the* debtor* upon* execution* and* delivery* by* him* of* the* corresponding* deed* of*sale.*In*other*words,*notice*of*the*creditor’s*decision*to*exercise*his*



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option*to*buy*need*not*be*coupled*with*actual*payment*of*the*price,*so* long*as*this*is*delivered*to*the*owner*of*the*property*upon*performance* of*his*part*of*the*agreement.!* * Ang& Yu& Asuncion& v.& Court& of& Appeals& (238& SCRA& 602)* summarized*the*applicable*rules:* a. If* the* period* is* not* ed* by* a* separate* consideration,* the* offeror* can* still* withdraw* the* offer* before* it* is* accepted,* or* before* he* learns* of* an* acceptance*made*by*the*offeree.* b. The*right*to*withdraw*must*not*be*done*whimsically*or* arbitrarily,* otherwise,* the* other* party* may* sue* for* damages* under* Article( 19.( If* there* is* a* separate* consideration,* an* option* contract* is* perfected,* and* withdrawal* of* the* option* within* the* period* is* a* breach* of*the*contract.* c. The*option*contract*is*an*independent*contract*by*itself.* If* it* is* withdrawn,* there* is* a* breach* which* can* be* the* basis*of*an*action*for*damages.*Specific*performance*is* not*available.* d. The* nature* of* the* consideration* must* be* taken* into* .* If* the* consideration* was* in* fact* part* of* the* purchase* price,* then* there* is* no* option* contract,* but* a* perfected*contract*of*sale.* * •

Ang! Yu! Asuncion! v.! Court! of! Appeals* ruled* that* the* separate* consideration*merely*guarantees*that*within*the*option*period,* before*the*optioner*withdraws*the*offer,*an*acceptance*by*the*


optionee*would*give*rise*to*a*valid*sale.*This,*in*effect,*is*similar* to*the*doctrine*in*Sanchez!v.!Rigos*which*considered*an*option* which*did*not*have*separate*consideration.* o The* effect* is* that* as* far* as* the* optionee* is* concerned,*

D.9.(Summary(Rules(When(Period(is(Granted(to(Promisee( •

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o

o

whether* or* not* he* gives* a* separate* consideration,* his* right* can* be* defeated* simply* by* the* optioner’s* withdrawal.*He*is*therefore*not*assured*that*a*sale*will* be*perfected.* According* to* RP,* the* more* logical* action* in* case* of* a* breach* of* an* option* contract* is* specific* performance.* But,* the* reasoning* in* Ang! Yu* (i.e* you* can’t* compel* specific* performance* for* prestations* to* do)* is* also* logical.* CLV*says*this*does*not*provide*for*a*commercially*sound* doctrine*because*it*emasculates*the*effectiveness*of*an* option* ed* by* a* separate* consideration.* There* is* no*incentive*or*motivation*for*the*optionee*to*give,*and* the*optioner*to*demand*a*separate*consideration.* * Ang&Yu&Asuncion&v.&Court&of&Appeals&

* Facts:*Ang*Yu*and*others*were*tenants*and*lessees*of*commercial*spaces* owned* by* Ongpin.* On* several* occasions,* Ongpin* informed* Ang* Yu* that* he*is*offering*to*sell*the*premises*and*is*giving*them*priority*to*acquire* the*same.*Negotiations*were*had*and*counter*offers*were*given*by*both* parties.* Ang* Yu* filed* for* specific* performance* to* compel* Ongpin* to* sell* the* property* when* he* found* out* that* the* latter* was* about* to* sell* the* property.* Pending* resolution* of* the* case,* Ongpin* sold* the* property* to* another.* *



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Issue:*Whether*or*not*there*was*a*perfected*sale.* * Held:* NO.* In* a* right* of* first* refusal,* while* the* object* might* be* made* determinate,* the* exercise* of* the* right,* would* depend* not* only* on* the* vendor’s*intention*to*sell*but*also*on*,*including*the*price,*that*are* yet* to* be* firmed* up.* Its* breach* cannot* justify* an* issuance* of* a* writ* of* execution* under* a* judgment* or* sanction* an* action* for* specific* performance* without* negating* consensuality* in* the* perfection* of* contracts.*The*proper*remedy*is*an*action*for*damages.* * E.(Rights(of(First(Refusal( •

Definition:( A* promise* on* the* part* of* the* owner* that* if* he* decides* to* sell* the* property* in* the* future,* he* would* first* negotiate*its*sale*to*the*promisee.*

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& & E.2.(Action(if(the(Right(to(First(Refusal(is(Breached( •

•

o

While* it* has* a* definite* subject* matter,* there* is* no* agreement*as*to*the*price*or*the*manner*of*payment.* Furthermore,* the* exercise* of* the* right* would* be* dependent*upon*the*grantor’s*eventual*intention*to*sell* the*land.*

In* Guerrero,* the* Court* ruled* that* rescission* is* also* not* allowed* for*breach*of*right*of*first*refusal.*This*was*reversed*in*1992*in* the* case* of& Guzman,& Bocaling& && Co.& v.& Bonnevie& (206& SCRA& 668).* It* held* that* when* a* right* of* first* refusal* included* in* a* contract*of*lease*is*breached*by*selling*the*property*to*another,* the* contract* of* sale* is* rescissible* because* of* injury* to* third* persons*(the*lessees).*!*Prevailing(Doctrine*

A* right* of* first* refusal* is* not* a* contract.* It* is* not* a* sale* nor* an* option*contract.*Vasquez&v.&Ayala&Corp.&(443&SCRA&231)& o

If*the*promise*is*breached,*an*action*for*specific*performance*is* not* allowed,* but* action* for* damages* is* allowed.* Guerrero& v.& Yñigo&(96&Phil.&37)&

certain,* they* are* not* subject* to* contractual* enforcement.* Ang& Yu&Asuncion&v.&Court&of&Appeals&(238&SCRA&602)& •

A*right*of*first*refusal*clause*simply*means*that*should*the*lessor*

violation*of*the*right*of*the*lessee.&Riviera&Filipina,&Inv.&v.&Court& of&Appeals&(380&SCRA&245)&

E.1.(Basic(Concepts(in(the(Right(of(First(Refusal( Rights* of* first* refusal* only* constitute* “innovative* juridical* relations”,* but* do* not* rise* to* the* level* of* contractual* commitment* since* with* the* absence* of* agreement* on* price*


decide*to*sell*the*leased*property*during*the*term*of*the*lease,* such*sale*should*first*be*offered*to*the*lessee;*and*the*series*of* negotiations* that* transpire* between* the* lessor* and* the* lessee* on*the*basis*of*such*preference*is*deemed*a*compliance*of*such* clause* even* when* no* final* purchase* agreement* is* perfected* between*the*parties.*The*lessor*was*then*at*liberty*to*offer*the* sale* to* a* third* party* who* paid* a* higher* price,* and* there* is* no*

* •

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The*buyer*of*a*real*property*who*knew*that*such*property*was* subject*to*the*right*of*first*refusal*cannot*claim*good*faith.* o Where* the* right* of* first* refusal* clause* found* in* a* valid* lease* contract* was* violated* and* the* property* was* sold* to*a*buyer*who*was*aware*of*the*existence*of*such*right,*


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the* resulting* contract* is* rescissible* by* the* person* in* whose*favor*the*right*of*first*refusal*was*given.*

If*the*right*of*first*refusal*is*included*in*a*lease,*there*need*not* be*a*separate*consideration*for*the*right*since*it*is*already*part* and*parcel*of*the*entire*contract*of*lease.*The*consideration*for* the* lease* is* the* consideration* for* the* right* of* first* refusal.* Equatorial&Realty&Dev.,&Inc.&v.&Mayfair&Theater,&Inc.&(264&SCRA& 483)& o The*enforceability*of*the*right*of*first*refusal*is*based*on* the*obligatory*force*of*the*lease*contract.* o If* the* right* is* violated* by* the* grantor* who* sold* the* property*to*another,*the*resulting*contract*is*rescissible* by*the*grantee*of*the*right.*

•

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•

A*right*of*first*refusal*in*a*lease*in*favor*of*the*lessee*cannot*be* availed*of*by*the*sublessee.&Sadhwani&v.&Court&of&Appeals&(281& SCRA&75*

•

Similar*to*an*option*contract,*the*right*of*first*refusal*included*in* a* lease* is* not* renewed* even* in* tacita* reconduccion.* Dizon& v.& Court&of&Appeals&(396&SCRA&152)*

* E.4.(Right(of(First(Refusal(v.(Option(Contract( •

The* Equatorial! Realty* ruling* would* only* apply* to* rights* of* first* refusal* attached* to* a* valid* principal* contract.* If* they* are* constituted*as*separate*contracts,*the*ruling*in*Ang!Yu!Asuncion* would*apply.* o

Verbal* grants* of* the* right* of* first* refusal* are* unenforceable* since* such* right* must* be* embodied* in* a* written* contract.* Sen& Po& Ek& Marketing& Corp.& v.& Martinez&(325&SCRA&210)&


the* same* * and* conditions* offered* to* the* lessee,* or* under* *and*conditions*more*favorable*to*the*lessor.& Polytechnic& University& of& the& Philippines& v.& Golden& Horizon& Realty& Corp.& (615&SCRA&478)&

* E.3.(Right(of(First(Refusal(Embodied(in(a(Lease(Agreement( •

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A*right*of*first*refusal*is*a*contractual*grant,*not*of*the*sale*of*a* property,* but* of* the* first* priority* to* buy* the* property* in* the* event*the*owner*sells*the*same.*As*distinguished*from*an*option* contract,* in* a* right* of* first* refusal,* whole* the* object* might* be* made* determinate,* the* exercise* of* the* right* of* first* refusal* would*be*dependent*not*only*on*the*owner’s*eventual*intention* to*enter*into*a*binding*juridical*relation*with*another*but*also*on* ,* including* the* price,* that* are* yet* to* be* firmed* up.* Polytechnic& University& of& the& Philippines& v.& Golden& Horizon& Realty&Corp.,&615&SCRA&478&

&

When*a*lease*contract*contains*a*right*of*first*refusal,*the*lessor*

Equatorial&Realty&Dev.&Inc.&v.&Mayfair&Theater&Inc.&

has*the*legal*duty*to*the*lessee*not*to*sell*the*leased*property*to* anyone* at* any* price* until* after* the* lessor* made* an* offer* to* sell* the*property*to*the*lessee*and*the*lessee*has*failed*to*accept*it.* Only* after* the* lessee* has* failed* to* exercise* his* right* of* first* priority*could*the*lessor*sell*the*property*to*other*buyers*under*

* Facts:* Two* contracts* of* lease* between* Carmelo* and* Mayfair* provided* “that*if*the*LESSOR*should*desire*to*sell*the*leased*premises,*the*LESSEE* shall*be*given*30*days*exclusive*option*to*purchase*the*same.”*Carmelo* initially* offered* to* sell* the* leased* property* to* Mayfair* for* six* to* seven*



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million* pesos.* Mayfair* indicated* interest* in* purchasing* the* property* though*it*invoked*the*30Mday*period.*Nothing*was*heard*thereafter*from* Carmelo.* Four* years* later,* the* latter* sold* its* entire* Recto* Avenue* property,* including* the* leased* premises,* to* Equatorial* for* P11,300,000*

the$lot$to$Parañaque$King$for$fifteen$million;$the#latter#refused#claiming# that$ the$ offer$ was$ “ridiculous.”$ Catalina$ thereafter$ sold$ it$ again$ to$ Raymundo)for)nine)million.)The)lower)courts)dismissed)the)Complaint)of) Parañaque( King( claiming( that( Catalina( had( substantially( complied( with(

without* informing* Mayfair.* Mayfair* filed* an* action* for* specific* performance* to* have* the* property* sold* to* it* and* to* annul* the* sale* to* Equatorial.* ( Issues:** 1. Whether*or*not*there*was*a*right*of*first*refusal.*!*YES** 2. Whether* or* not* the* sale* to* Equatorial* was* valid.* !* YES,* but*

her*obligation*to*offer*the*said*lot*to*the*former.* * Issues:** 1. Whether*the*complaint*alleging*breach*of*the*contractual*right* of*“first*option*or*priority*to*buy”*states*a*valid*cause*of*action.* !*YES.* 2. Whether* or* not* the* grantee* of* such* right* is* entitled* to* be*

such*contract*of*sale*is*rescissible.* * Held:*Carmelo*violated*the*right*of*first*refusal*when*without*affording* its*negotiations*with*Mayfair*the*full*process*to*ripen*to*a*definite*offer* and* a* possible* acceptance* within* the* "30Mday* exclusive* option"* time.* Equatorial* is* a* buyer* in* bad* faith* because* it* had* notice* and* full* knowledge* of* Mayfair’s* rights.* Hence,* the* sale* to* Equatorial* is* rescissible.* * Paranaque&Kings&v.&Court&of&Appeals& * Facts:*Catalina*owned*eight*parcels*of*land*which*were*leased*to*Chua,* who* then* assigned* his* rights* to* Lee* Ching! Bing.& Lee& Ching& Bing& then& assigned( the( rights( to( Parañaque( King,( which( introduced( significant( improvements*on*the*premises.*It*was*stipulated*in*the*lease*agreement*

offered*the*same**and*conditions*as*those*given*to*a*third* party*who*eventually*bought*such*properties*!*YES.* * Held:* * The* Supreme* Court* held* that* in* order* to* have* full* compliance* with* the* contractual* right* granting* petitioner* the* first* option* to* purchase,* the* sale* of* the* properties* for* the* amount* of* P9* million,* the* price*for*which*they*were*finally*sold*to*respondent*Raymundo,*should* have* likewise* been* first* offered* to* petitioner.* Only* if* the* petitioner* failed* to* exercise* their* right* of* first* priority* could* Santos* thereafter* lawfully* sell* the* subject* property* to* others,* and* only* under* the* same* * and* conditions* previously* offered* to* the* petitioner.* The* basis* of* the*right*of*the*first*refusal*must*be*the*current*offer*to*sell*of*the*seller* or*offer*to*purchase*of*any*prospective*buyer.* * •

that,*“in*case*of*sale,*the*lessor*shall*have*the*option*or*priority*to*buy* the* said* properties.”( Catalina,( in( violation( of( the( said( stipulation,( sold( the$lot$to$Raymundo$for$five$million.$Parañaque$King$then$notified$her$of$ the$breach.$She$immediately$had$the$lots$reconveyed.$She$then$offered$


How* to* comply* with* the* right* of* first* refusal* when* the* seller* decides*to*sell:** o The* seller* must* first* offer* to* sell* the* property* to* the* grantee*of*the*option.*


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o

The*negotiations*about*the*sale*between*the*seller*and* the* grantee* would* be* deemed* compliance* with* the* right,*even*if*there*is*no*final*price*agreed*upon.*Riviera& Filipina,&Inc.&v.&Court&of&Appeals&(380&SCRA&245)*

also*on*,*including*price,*that*are*yet*to*be*firmed*up.*It*was*not*an* option*contract*because*there*was*no*separate*consideration.** * Applied*to*the*instant*case,*paragraph*5.15*is*obviously*a*mere*right*of*

o

If* no* price* is* agreed* upon,* the* seller* can* then* offer* to* sell* to* other* parties* with* the* same* * as* those* offered*to*the*grantee.* If* the* seller* and* the* third* party* negotiate* and* agree* upon* different* ,* the* seller* must* first* offer* these* new**again*to*the*grantee.*Riviera&Filipina,&Inc.&v.& Court&of&Appeals&(380&SCRA&245)*

first* refusal* and* not* an* option* contract.* Although* the* paragraph* has* a* definite*object,*i.e.,*the*sale*of*subject*lots,*the*period*within*which*they* will* be* offered* for* sale* to* petitioners* and,* necessarily,* the* price* for* which*the*subject*lots*will*be*sold*are*not*specified.* * Riviera&Filipina&v.&Court&of&Appeals& *

If*the*grantee*again*rejects*the*new*,*the*seller*can* proceed*with*the*sale*of*the*property*to*the*third*party.*

* Facts:*Vasquez*spouses*own*shares*of*stocks*with*Conduit*Corporation.* Conduit's* main* asset* was* a* 49.9* hectare* land* in* Ayala* Alabang,*

Facts:* Juan* L.* Reyes* leased* his* land* along* EDSA,* QC* to* Riviera* Filipina* Inc.* The* contract* of* lease* was* for* 10* years* renewable.* Par.* 11* in* the* lease*contained*that*the*lessee*shall*have*the*right*of*first*refusal*should* the*lessee*decided*to*sell*the*property*during*the*term*of*the*lease.*The* said*lot*was*also*subject*to*a*REAL*ESTATE*MORTGAGE*with*Prudential* Bank.*Reyes*was*not*able*to*pay*for*the*installment*and*Prudential*Bank* foreclosed*the*property*with*a*1*year*redemption*period.*Reyes*decided*

Muntinlupa.* Spouses* enter* into* a* MOA* with* Ayala* where* the* latter* committed* to* develop* said* lands* including* the* 4* parcels* of* land* to* be* sold*to*petitioner*spouses.*Par.*5.15*of*MOA*states*that*Ayala*agrees*to* grant*the*spouses*"a*first*option*to*purchase*four*developed*lots*next*to* the* “Retained* Area”* at* the* prevailing* market* price* at* the* time* of* the* purchase.”* * Issue:* Whether* or* not* the* stipulation* is* a* right* of* first* refusal* or* an*

to* sell* the* property.* Reyes* offered* to* sell* for* P5,000* per* square* meter* but* Riviera* through* its* president* only* offered* P3,500.* 7* months* later* Riviera*offered*P4000* and* Reyes* now* wants*P6000.*Riviera*then* offers* P5000* pesos* saying* it* would* be* paid* fully* in* 60* days,* that* the* “offer* is* what* we* feel* should* be* the* market* price* of* your* property”* and* they* Reyes* should* decide* in* 15* days.* Reyes* replied* that* “you* have* unfortunately* failed* to* take* advantage* of* your* right* of* first* refusal.* Reyes* then* offered* to* sell* the* property* to* Cypress* Construction*

option*contract.*!*It*was*a*right*of*first*refusal.* * Held:* While* the* object* may* be* determinate,* the* exercise* of* the* right* would* depend* not* only* on* the* grantor's* eventual* intention* to* sell* but*

Company* who* paid* P5300.* Reyes* did* not* inform* Riviera* of* the* P5,300* offer.*Riviera*filed*a*suit*to*have*the*title*transferred*in*his*name*after*it* has*paid*the*P5300*paid*by*Cypress.*RTC*and*Court*of*Appeals*ruled*that* Riviera*lost*its*right*of*first*refusal.*

o

o &

Vasquez&v.&Ayala&Corp.&



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Issue:* Whether* or* not* Riviera’s* right* of* first* refusal* was* violated* by* Reyes’*sale*of*the*property*to*Cypress.* * Held:*NO.*Riviera*strongly*exhibited*a*"takeMit*or*leaveMit"*attitude*in*its* negotiations* with* Reyes.* It* quoted* its* "fixed* and* final"* price* as* P5,000* and* not* any* peso* more.* Riviera* cannot* now* be* heard* that* had* it* been* informed*of*the*offer*of*P5,300*of*Cypress,*it*would*have*matched*said* price.* Its* stubborn* approach* in* its* negotiations* with* Reyes* showed* crystalMclear*that*there*was*never*any*need*to*disclose*such*information* and* doing* so* would* be* just* a* futile* effort* on* the* part* of* Reyes.* Reyes* was*under*no*obligation*to*disclose*the*same.*

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In*light*of*the*rulings*in*Equatorial!Realty*and*Parañaque!Kings,* it* seems* that* rights* of* first* refusal* attached* to* principal* contracts*have*greater*legal*enforceability*than*option*contracts* which*are*ed*by*separate*consideration.*

•

CLV’s*proposed*better*rule:* o

o

o

Justice* Vitug,* in* his* decision* in* Ang! Yu! Asuncion* and* in* his* dissent*in*Equatorial!Realty*said*that*a*right*of*first*refusal*is*not* a*contract.* o In*his*view,*breach*would*result*in*damages*pursuant*to* Article*19.** CLV*posits*that*a*right*of*first*refusal*over*a*determinate*subject* matter* and* ed* by* a* separate* consideration* would* give* rise*to*an*innominate*contract*(do!ut!facias).* o This* would* allow* the* remedy* of* recission* which* would* then*give*rise*to*damages*if*it*is*breached.*(Note:*Article*


Enforceability*of*Option*Rights*Should*be*at*Par*with,*if*not*at*a*Higher* Level*Than,*Rights*of*First*Refusal*

* F.( Proposed( Doctrine( on( Option( Contracts( vis_à_vis( Right( of( First( Refusal( * Alternative*Doctrine*of*Enforceability*of*Rights*of*First*Refusal* •

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If* the* option* is* ed* by* a* separate* consideration,* the*optionee*shall*have*the*right*to*exercise*the*option* anytime*during*the*period,*and*that*would*give*rise*to*a* valid*sale.* The* optioner,* on* the* other* hand,* cannot* withdraw* the* offer* during* the* option* period,* and* any* attempt* to* withdraw*will*be*void.* If*a*third*party*bought*the*property*in*bad*faith*(i.e.*he* knew* the* existence* of* the* option* in* favor* of* the* optionee),* the* optionee* can* go* after* the* optioner* and* the* thirdMparty* buyer* in* an* action* for* specific* performance.*

If*a*third*party*bought*the*property*in*good*faith*and*for* value,* the* optionee* may* sue* the* optioner* for* recovery* of*damages*for*breach*of*contract*of*sale.* * G.(Mutual(Promises(to(Buy(and(Sell( o

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19*would*not*be*the*basis*for*damages.)* *


This*gives*rise*to*a*mutual*obligation*which*allows*each*party*to* demand* fulfillment* of* the* obligation.* It* is* an* executory* agreement.&Borromeo&v.&Franco&(5&Phil.&49)*


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Even* in* this* case* the* certainty* of* the* price* must* also* exist,* otherwise,*there*is*no*valid*and*enforceable*contract*to*sell.*Tan& Tiah&v.&Yu&Jose&(67&Phil.&739)&

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An*unconditional*mutual*promise*to*buy*and*sell*is*enforceable* by*an*action*for*specific*performance.* Contract* of* sale* v.* Mutual* Promise* to* Buy* and* Sell.* Macion& v.& Guiani&(225&SCRA&102)* *

Contract(of(Sale(

Mutual(Promise(to(Buy(and(Sell(

An*accepted*bilateral*promise*to*buy*and*sell*is*in*a*sense*similar*to,*but* not*exactly*the*same,*as*a*perfected*contract*of*sale*because*there*is* already*a*meeting*of*minds*upon*the*thing*which*is*the*object*of*the* contract*and*upon*the*price.* Consummated*only*

Gives*the*contracting*parties*rights*in*personam,*

upon*delivery*and* payment*

such*that*each*has*the*right*to*demand*from*the* other*the*fulfillment*of*their*respective* undertakings.*

* Macion&v.&Judge&Guiani& * Facts:(Petitioners*and*private*respondent*entered*into*a*contract*to*sell* where* petitioners* was* to* sell* two* lots* to* private* respondents* for* P1,750,000.* Petitioners* surrendered* the* physical* possession* of* the* 2* lots* to* private* respondent* who* promptly* built* an* edifice* worth* P800,000.* However,* the* sale* failed* to* materialize.* Petitioners* filed* a* complaint* for* unlawful* detainer* against* private* respondent* while* private*respondent*filed*a*complaint*for*reformation*of*the*contract*to* sell.* *

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The* parties* entered* into* a* compromise* agreement* where* private* respondents* were* given* 5* months* to* raise* P2,060,000* and* upon* securing*the*amount,*petitioners*were*to*execute*a*deed*of*sale*for*the* 2* lots.* The* trial* court* approved* this* compromise.* After* private* respondent*secured*a*loan*from*BPI,*it*wrote*letters*to*petitioner*for*the* latter*to*execute*a*contract*to*sell.*On*the*other*hand,*petitioners*filed*a* motion* for* execution* of* judgment* alleging* that* after* a* lapse* of* 5* months,* private* respondent* have* failed* to* settle* their* obligations* with* petitioners.*Respondent*judge*ruled*in*favor*of*respondents.*Hence,*the* present*petition.* * Issue:*Whether*or*not*respondent*Judge*may*compel*Macion*to*execute* a*contract*to*sell*in*favor*of*Dela*Vida*Institute.* * Held:*YES.*The*court*looked*into*the*contemporaneous*and*subsequent* acts*of*the*parties*and*determined*their*real*intentions.*A*review*of*the* facts*reveal*that*even*prior*to*the*g*of*the*compromise*agreement* and*the*filing*of*Civil*Case*No.*592*before*the*trial*court,*the*parties*had* already*entered*into*a*contract*to*sell.*In*contracts*to*sell,*payment*is*a* positive* suspensive* condition,* failure* of* which* does* not* constitute* a* breach* but* an* event* that* prevents* the* obligation* of* the* vendor* to* convey* title* from* materializing,* in* accordance* with* Article* 1184* of* the* Civil*Code.* * III.(Perfection(Stage:(Offer(and(Acceptance( ( Article(1475.!( The(contract(of(sale(is(perfected(at(the(moment(there(is(a(meeting(of( minds(upon(the(thing(which(is(the(object(of(the(contract(and(upon(the( price.(



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( From(that(moment,(the(parties(may(reciprocally(demand(performance,( subject( to( the( provisions( of( the( law( governing( the( form( of( contracts.( (1450a)(

Sale,*being*a*consensual*contract*is*perfected*by*the*meeting*of* the*minds*upon*the*object*of*the*contract*and*the*price.*

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Meeting*of*the*minds*happens*when*the*following*meet:* o Certain*offer* o Absolute* acceptance* !* The* acceptance* must* be* plain,* unequivocal,*unconditional*and*without*variance*of*any*

o

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An*offer*is*certain*when*it*contains:* o A*description*of*the*subject*matter*which*is*a*“possible* thing,”*licit*and*determinate*or*at*least*determinable.* o

And* a* price* which* is* real,* in* money* or* its* equivalent,* certain*or*at*least*ascertainable.*The**of*payment* must*also*be*included.*

Under* Article( 1319,* the* acceptance* of* an* offer* must* therefore*

The* moment* a* party* accepts* the* offer* unconditionally,* the*

( C.1.(No(Absolute(Acceptance(in(the(Following:& •

Placing*the*word*“Noted”*and*g*such*note*at*the*bottom* of* the* written* offer* cannot* be* considered* an* acceptance* that* would*give*rise*to*a*valid*contract*of*sale.&DBP&v.&Ong&(460&SCRA& 170)&

* C.(Acceptance(Must(Be(“Absolute”( •

A* qualified* acceptance* or* one* that* involves* a* new* proposal*

contract*of*sale*is*perfected.*If*the*seller*subsequently*requests* for*a*higher*price,*but*no*agreement*is*reached,*the*first*sale*is* stil* valid* and* is* not* novated.* Uraca& v.& Court& of& Appeals& (278& SCRA&702)&

An* offer* which* is* not* certain,* no* matter* how* absolutely* it* is* accepted,*can*never*give*rise*to*a*valid*sale.*

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will*not*be*so*if*it*involves*any*new*proposition.*Zayco&v.& Serra&(44&Phil&326)& Acceptance* must* be* in* the* exact* * in* which* they* are* made.* Any* modification* annuls* the* offer.* Beumont& v.&Prieto&(41&Phil.&670)&

constitutes*a*counterMoffer*and*a*rejection*of*the*original*offer.* The*acceptance*must*be*identical*in*all*respects*with*that*of*the* offer* so* as* to* produce* consent* or* meeting* of* minds.* Manila& Metal&Container&Corp.&v.&PNB&(511&SCRA&444)&

sort*from*the*proposal.* * B.(Offer(Must(Be(“Certain”(


that* petitioner’s* acceptance* of* the* offer* was* qualified,* which* amounts* to* a* rejection* of* the* original* offer.& Limketkai& Sons& Milling,&Inc.&v.&Court&of&Appeals&(255&SCRA&626)& o The*acceptance*must*be*plain*and*unconditional,*and*it*

* A.(Consent(that(Perfects(a(Sale( •

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•

be*unqualified*and*absolute.*In*other*words,*it*must*be*identical* in*all*respects*with*that*of*the*offer*so*as*to*produce*consent*or* meeting*of*the*minds.*This*was*not*the*case*herein*considering*


If*sale*subject*to*suspensive*condition:*No*perfected*sale*of*a*lot* where* the* award* thereof* was* expressly* made* subject* to* approval*by*the*higher*authorities*and*there*eventually*was*no*


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acceptance* manifested* by* the* supposed* awardee.* * People's& Homesite&&&Housing&Corp.&v.&Court&of&Appeals&(133&SCRA&777)&& •

If* the* term* “to* negotiate”* is* included* in* the* acceptance* letter,* there*is*still*no*absolute*acceptance.*Yuvienco&v.&Dacuycuy&(104& SCRA&668)&

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If* a* party* accepts* but* with* a* request* that* payment* * be* modified,* there* is* no* absolute* acceptance.* Limketkai& Sons& Milling,&Inc.&v.&Court&of&Appeals&(255&SCRA&626)&

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A*document*cannot*constitute*a*sale*even*when*it*provides*for*a* downpayment* since* the* provision* on* the* downpayment* made* no*specific*reference*to*a*sale*of*a*vehicle.*Definiteness*as*to*the* price* is* an* essential* element* of* a* binding* agreement* to* sell* personal*property.*Toyota& Shaw,& Inc.& v.& Court& of& Appeals& (244& SCRA&320)&

( C.2.(When(“Deviation”(Is(Allowed( •

The*change*in*the*phrases*which*do*not*essentially*change*the* * of* the* offer* does* not* amount* to* a* rejection* and* a* counterMoffer.* Clarificatory* changes* are* allowed.& Villonco& v.& Bormaheco&(65&SCRA&352)&

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sent* a* counterMoffer* that* the* 100k* will* have* an* interest* of* 10%* per* annum.*The*check*was*delivered*by*de*Tagle*to*Bromaheco,*which*was* received*by*Cervantes.*The*voucherMreceipt*evidencing*delivery*had*the* phrase*“subject*to*the**and*conditions*embodied*in*Bormaheco’s* letter”.*Later,*Cervantes*returned*the*earnest*money*and*reasoned*that* he*acquired*the*property*beyond*the*45*days*period.* * Issue:*Whether*or*not*there*was*a*perfected*sale.* * Held:* YES.* "Whenever* earnest* money* is* given* in* a* contract* of* sale,* it* shall*be*considered*as*part*of*the*price*and*as*proof*of*the*perfection*of* the* contract"* (Article* 1482,* Civil* Code).* The* contract* was* already* consummated* at* the* time* respondent* accepted* the* check.* In* fact,* he* accepted* the* earnest* money,* and* furthermore* returned* the* 100k* with* 10%* interest* which* serves* as* proof* of* the* acceptance.* The* alleged* changes*or*qualifications*in*the*revised*counterMoffer*are*not*material*or* are*mere*clarifications*of*what*the*parties*had*previously*agreed*upon.* * C.3.(Acceptance(may(be(Express(or(Implied( •

& Villonco&v.&Bormaheco& * Facts:* Cervantes* (Bormaheco)* owns* a* lot* in* Buendia.* It* offered* to* sell* the*lot*to*Villaconco*who*owns*a*lot*adjacent*to*the*lot*of*the*latter*with* the*following*conditions;*(a)*100k*as*earnest*money*which*will*become* part*of*the*payment*if*lot*in*Sta.*Ana*is*purchased*(b)*If*the*said*property*

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Acceptance* may* be* evidenced* by* some* act* or* conduct,* communicated*to*the*offeror,*either*in*a*formal*or*an*informal* manner,*that*clearly*manifest*the*intention*or*determination*to* accept*the*offer*to*buy*or*sell.&

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is* not* purchased,* the* money* will* be* returned* and* the* sale* will* not* be* consummated,*which*will*be*known*45*days*after*negotiation.*Villonco*


Acceptance* on* the* part* of* the* buyer* was* manifested* through* acts* such* as* payment* of* the* purchase* price,* declaration* of* the* property* for* tax* purposes,* and* payment* of* real* estate* taxes.* Gomez&v.&Court&of&Appeals&(340&SCRA&720)&


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By* affixing* their* signatures* as* witnesses,* the* coMowners* accepted* the* * of* the* contract.* Oesmer& v.& Paraiso& Development&Corp.&(514&SCRA&228)&

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Held:* YES.* The* other* five* petitioners* (excluding* Ernesto)* personally* affixed* their* signatures* thereon.* Therefore,* a* written* authority* is* no* longer* necessary* in* order* to* sell* their* shares* because,* by* affixing* their* signatures* on* the* Contract* to* Sell,* they* were* not* selling* their* shares* through*an*agent*but,*rather,*they*were*selling*directly*and*in*their*own* right.*6/8*of*the*property*is*sold.* *

Does* not* bind* the* offeror* except* from* the* time* it* came* to* his* knowledge.*Therefore,*mere*mailing*or*sending*the*acceptance* is* not* enough.* The* offeror* may* still* withdraw* before* he* learns* of*the*acceptance.**

Oesmer&v.&Paraiso&Development&Co.&

A* P100,000* check,* payable* to* Ernesto,* was* given* as* option* money.* Sometime* thereafter,* 4* other* also* signed* the* Contract* to* Sell.* Petitioners*then*wrote*a*letter*to*PDC*to*rescind*the*contract.* * Issue:*Whether*or*not*the*sale*is*valid*on*the*petitioners*who*signed*the* contract* *


C.4.(Acceptance(by(Letter(or(Telegram(

& & Facts:* Petitioners* are* siblings* and* coMowners* of* two* parcels* of* land* in* Cavite.*Ernesto,*met*with*Respondent*PDC*and*signed*a*Contract*to*Sell.*

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* C.5.(Acceptance(Subject(to(a(Suspensive(Condition( •

Even* if* there* is* a* meeting* of* the* minds,* there* will* be* no* perfected* contract* of* sale* if* it* is* subject* to* a* suspensive* condition.*Gan,&Sr.&v.&Reforma&(11&Court&of&AppealsR&57)&

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CLV:*Disagrees.*He*proposes*that*the*better*rule*should*be*that* there* is* already* a* perfected* contract* but* it* is* not* yet* demandable*because*of*the*suspensive*condition.&

* C.6.(Acceptance(in(Auction(Sales( •

The* owner* of* the* property* sold* at* auction* may* provide* the* * under* which* the* auction* will* proceed* and* the* same* are* binding*upon*all*bidders,*whether*they*knew*of*such*conditions* or*not.*Leoquinco&v.&Postal&Savings&Bank&(47&Phil.&772)&

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The* court* also* had* the* occasion* of* distinguishing* earnest* money* and* option* money;* (a)* earnest* money* is* part* of* the* purchase* price,* while* option* money* is* the* money* given* as* a* distinct* consideration* for* an* option*contract;*(b)*earnest*money*is*given*only*where*there*is*already*a* sale,* while* option* money* applies* to* a* sale* not* yet* perfected;* and* (c)* when* earnest* money* is* given,* the* buyer* is* bound* to* pay* the* balance,* while*when*the*wouldMbe*buyer*gives*option*money,*he*is*not*required* to*buy,*but*may*even*forfeit*it*depending*on*the**of*the*option.*


An* auction* sale* is* perfected* by* the* fall* of* the* hammer* and* it* does* not* matter* if* another* bidder* matched* the* price* of* the* highest* bidder.* Province& of& Cebu& v.& Heirs& of& Rufina& Morales& (546&SCRA&315)& o Until* such* announcement* is* made,* any* bidder* may* retract* his* bid,* and* the* auctioneer* may* withdraw* the* goods* from* the* sale,* unless* the* auction* has* been* announced*to*be*without*reserve.&


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( D.(Earnest(Money( * Article(1482.( Whenever( earnest( money( is( given( in( a( contract( of( sale( it( shall( be(

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earnest*money*forms*part*of*the*consideration*only*if*the*sale*is* consummated*upon*full*payment*of*the*purchase*price.*Hence,* there* must* first* be* a* perfected* contract* of* sale* before* we* can* speak*of*earnest*money.&GSIS&v.&Lopez&(592&SCRA&456)&

absence* of* contrary* or* rebuttal* evidence.* PNB& v.& Court& of& Appeals&(262&SCRA&464,484)*

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The*presumption*is*based*on*the*fact*that*there*is*a*valid*sale.*

& D.2.(Varying(Treatments(of(Earnest(Money( •

The*treatment*of*earnest*money*in*Article(1482*is*the*preferred* concept*under*the*law.*

The* presumption* does* not* apply* when* earnest* money* is* given*

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in*a*contract*to*sell.*Serrano&v.&Caguiat&(517&SCRA&57).** o The* money* given* in* a* contract* to* sell* is* not* earnest* money* but* as* part* of* the* consideration* to* the* seller’s* promise* to* reserve* the* subject* property* for* the* buyer.* PNB&v.&Court&of&Appeals&(262&SCRA&464)* o Especially* where* by* stipulation* the* buyer* has* the* right* to*walk*away*from*the*transaction,*with*no*obligation*to*

Whenever* earnest* money* is* given* in* a* contract* of* sale,* it* shall* be*considered*as*part*of*the*price*and*as*proof*of*the*perfection* of* the* contract.* But* when* there* is* no* contract* of* sale* because* the* parties* never* went* * the* negotiation* stage,* or* more* accurately,* have* not* reached* the* perfection* stage* with* the* present*of*the*three*essential*elements*of*the*contract*of*sale,* the* concept* of* earnest* money* is* certainly* inapplicable.* The*

Article* 1482* gives* a* presumption.* This* prevails* only* in* the*

The*giving*of*earnest*money*does*not*establish*the*existence*of* a* perfected* sale.* It* is* still* the* concurrence* of* the* esential* elements* of* sale* which* perfects* the* contract.* Manila& Metal& Containers&Corp.&v.&PNB&(511&SCRA&444)&

In* a* conditional* contract* of* sale,* the* acceptance* of* earnest* money*would*prove*that*the*sale*is*conditionally*consummated* or*party*executed.*Villonco&v.&Bormaheco&(65&SCRA&352)&

considered(as(part(of(the(prices(and(as(proof(of(the(perfection(of(the( contract.((1454a)( * D.1.(Function(of(Earnest(Money(

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pay* the* balance,* although* he* will* forfeit* the* earnest* money.*Chua&v.&Court&of&Appeals&(401&SCRA&54)&

Generally,* the* seller* and* the* auctioneer* cannot* bid* either* by* themselves*or*by*an*agent.*Exception*is*when*the*seller*reserves* such*right.*In*such*case,*there*must*be*notice.&

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However,* there* is* nothing* which* prevents* the* parties* from* treating*the*earnest*money*differently.* o For* example,* in* Spouses& Doromal& v.& Court& of& Appeals& (66&SCRA&575),*the*parties*treated*the*earnest*money*as* a*guarantee*that*the*buyer*would*not*back*out*from*the* sale.*This*was*the*concept*of*earnest*money*in*the*old* Civil*Code.*

* *



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D.3.(Distinguishing(Earnest(Money(and(Option(Money( •

Adelfa&Properties,&Inc.&v.&Court&of&Appeals&(240&SCRA&565,&580)* provides*the*distinctions:* * Earnest(Money(

Part*of*the*purchase*price*

•

Option(Money( Distinct*consideration*for*an* option*contract*

They*buyer*is*bound*to*pay*the* balance*

They*buyer*is*not*required*to*buy.*

* There* is* no* option* contract* at* all* if* there* is* no* distinct* consideration* for* the* contract.* Rather,* a* situation* where* the* money*given*is*supposed*to*be*credited*to*the*purchase*price*if* the* sale* pushes* through* OR* forfeited* if* the* sale* does* not* push*

through,* is* a* hybrid* of* Article( 1842.* As* such,* the* article* is* not* strictly*applicable.** * D.4.(Effect(of(Rescission(on(Earnest(Money(Received(

The*sale’s*place*of*perfection*is*where*the*meeting*of*the*minds*

* F.(Expenses(of(Execution(and(Registration( * The*seller*has*to*answer*for*the*following*expenses:* 1. Execution*and*registration*of*the*sale* 2. Putting*the*goods*into*a*deliverable*state* 3. Withholding*taxes*due*on*the*sale* * G.(Performance(Should(Not(Affect(Perfection( •

The* ability* of* the* parties* to* perform* the* contract* (after* perfection)*does*not*affect*the*perfection*of*the*contract.*

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Example:* o In* Schuback& v.& Court& of& Appeals& (227& SCRA& 719),* the* Court*ruled*that*there*was*already*a*perfected*sale*even* when*the*required*letter*of*credit*(which*was*the*means* of*payment*agreed*upon)*had*not*been*opened*by*the* buyer.*

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NonMpayment*of*the*price*does*not*render*void*nor*reverse*the* effects*of*the*perfection*of*the*contract*of*sale.*It*only*creates*a* right* to* demand* fulfillment* of* the* obligation* or* to* rescind* the* contract.*Balatbat&v.&Court&of&Appeals&(261&SCRA&128)&

If* the* sale* is* rescinded,* the* seller* must* return* the* earnest* money.* Rescission* creates* the* obligation* to* return* the* things* which*were*the*object*of*the*contract,*together*with*their*fruits* and*interest.*

In*case*of*acceptance*by*telegram*or*letter,*the*presumption*is* that* the* contract* was* perfected* in* the* place* where* the* offer* was*made.*

Except*if*expressly*stipulated,*the*seller*cannot*keep*the*earnest* money* to* answer* for* damages* sustained* in* the* event* that* the* sale*fails*due*to*the*fault*of*the*buyer.*Goldenrod,& Inc& v.& Court& of&Appeals&(299&SCRA&141)&

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E.(Place(of(Perfection(

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Applies*to*a*sale*not*yet*perfected*

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as*to*the*determinate*subject*matter*and*price*occurs.*

Given*only*where*there*is*already* a*sale*

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*


When*the*seller*is*not*the*owner*both*at*the*time*of*perfection* and*delivery,*it*is*similar*to*an*“impossible*service”*under*Article*


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1409(5).* Thus,* the* contract* is* void.* Nool& v.& Court& of& Appeals& (276&SCRA&149)& o BUT,* CLV* says* that* the* comparison* to* an* impossible* service* is* erroneous* because* the* obligations* are* “to*

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•

Sale,*being*a*consensual*contract,*no*particular*form*is*required* for*its*validity.*

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The* sale* of* land* under* a* private* instrument* is* valid.* Gallar& v.& Hussain&(20&SCRA&186)** o The* requirement* in* the* Statute* of* Frauds* that* sale* of* real*estate*should*be*embodied*in*a*public*document*is* only*for*the*purpose*of*binding*third*parties.* o The*fact*that*the*sale*over*land*was*not*ed*does* not* affect* the* validity* of* the* sale.* Again,* registration* is* only* for* the* purpose* of* greater* efficacy* and* binding* third*persons.*Universal&Sugar&Milling&Corp.&v.&Heirs&of& Angel&Teves&(389&SCRA&216)*

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:*Unenforceable*contracts*are*still*valid.**

Article( 13581*enumerates* the* contracts* which* require* a* public* document.* However,* it* expressly* provides* that* sales* of* real* property*or*an*interest*therein,*are*governed*by*Article(1403(2)( (i.e.(Statute(of(Frauds)(and(Article(1405.(

* IV.(Form(of(Sales( ( A.(Form(Not(Generally(Important(for(Validity(of(Sale( ( Article(1483(

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A.1.( Requirement( for( Public( Instrument( for( Immovable( under( Article( 1358(

give,”*not*“to*do.”*

Subject( to( the( provisions( of( the( Statute( of( Frauds( and( of( any( other( applicable( statue,( a( contract( of( sale( may( be( made( in( writing,( or( by( word( of( mouth,( or( partly( in( writing( and( partly( by( word( of( mouth,( or( may(be(inferred(from(the(conduct(of(the(parties.((n)( *

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Provisions*of*Article(1358*are*only*for*purposes*of*convenience.* NonMcompliance* would* not* render* the* contract* void* or* unenforceable.* It* merely* provides* a* cause* of* action* for* the* parties* to* compel* the* other* to* have* the* document* notarized.* Dalion&v.&Court&of&Appeals&(182&SCRA&872)* o Articles( 1357( and( 1358,* in* relation* to* Article( 1403(2),* require*that*the*sale*of*real*property*must*be*in*writing* for* it* to* be* enforceable,* it* need* not* be* notarized* for* there*is*nothing*in*those*provisions*which*require*that*it*

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

*Article(1358.*The*following*must*appear*in*a*public*document:* (1) Acts* and* contracts* which* have* for* their* object* the* creation,*

transmission,* modification* or* extinguishment* of* real* rights* over* immovable*property;*sales*of*real*property*or*of*an*interest*therein*a* governed*by*Articles*1403,*No.*2,*and*1405;* (2) The* cession,* repudiation* or* renunciation* of* hereditary* rights* or* of* those*of*the*conjugal*partnership*of*gains;* (3) The*power*to*ister*property,*or*any*other*power*which*has*for* its* object* an* act* appearing* or* which* should* appear* in* a* public* document,*or*should*prejudice*a*third*person;* (4) The*cession*of*actions*or*rights*proceeding*from*an*act*appearing*in*a* public*document.* All* other* contracts* where* the* amount* involved* exceeds* five* hundred* pesos* must* appear* in* writing,* even* a* private* one.* But* sales* of* goods,* chattels* or* things*in*action*are*governed*by*Articles,*1403,*No.*2*and*1405.*(1280a)*



o

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Issue:*Whether*or*not*the*sale*was*valid*despite*the*failure*to*embody*it* in*a*public*document* * Held:* YES.* Article* 1358* states* that* “acts* and* contracts* which* have* for*

Court.(Tigno&v.&Aquino&(444&SCRA&61).&

their*object*the*creation,*transmission,*modification*or*extinction*of*real* rights*over*immovable*property*must*appear*in*a*public*instrument”*is* only* for* convenience,* not* for* validity* or* enforceability.* It* is* not* a* requirement*for*the*validity*of*a*contract*of*sale*of*a*parcel*of*land*that* this*be*embodied*in*a*public*instrument.* * A*contract*of*sale*is*a*consensual*contract,*which*means*that*the*sale*is*

Although*the*conveyance*of*land*is*not*made*in*a*public* document,* it* does* not* affect* the* validity* of* such* conveyance.* Article( 1358* of* the* Civil* Code* does* not* require*the*accomplishment*of*the*acts*or*contracts*in*a* public* instrument* in* order* to* validate* the* act* or* contract* but* only* to* insure* its* efficacy.* The& Estate& of& Pedro& C.& Gonzales& v.& Their& Hiers& of& Marcos& Perez& (605& SCRA&47)&

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must* be* executed* in* a* public* document* to* be* valid.* Martinez&v.&Court&of&Appeals&(358&SCRA&38).**& But*both*its*due*execution*and*its*authenticity*must*be* proven,* pursuant* to* Sec.( 20,( Rule( 132( of( the( Rules( of(

Even*if*the*deed*of*sale*has*not*yet*been*signed*and*notarized,* the* contract* is* still* perfected.* Limketkai& Sons& Milling,& Inc.& v.& Court&of&Appeals&(250&SCRA&523)* o

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However,*if*a*deed*of*sale*over*a*condominium*unit*or*a*piece* of*land*is*not*ed*in*the*Registry*of*Deeds,*it*cannot*bind* third* persons.* Talusan& v.& Tayag& (356& SCRA& 263),& Santos& v.& Manalili&(476&SCRA&679)*

perfected* by* mere* consent.* No* particular* form* is* required* for* its* validity.* The* Supreme* Court* ruled* that* the* authenticity* of* the* sale* has* been* proved* accordingly* since* witnesses* positively* testified* to* the* authenticity* of* the* sale,* and* the* signature* thereon* was* proved* to* be* authentic.* The* Court* also* ruled* that* execution* of* the* sale* in* a* public* document*is*not*a*fatal*defect*as*a*contract*of*sale*is*consensual.* * A.2.(Function(of(a(Deed(of(Sale( •

A*formal*and*symbolic*delivery*of*the*property*sold,*and*can*be* used*by*the*buyer*as*proof*of*ownership.*

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The*execution*of*a*public*document*is*one*of*the*highest*forms*

* Dalion&v.&Court&of&Appeals& * Facts:*Sabesaje*sued*to*recover*ownership*of*land*that*was*sold*to*him* by* Dalion.* Dalion* denies* the* sale,* and* claims* that* Sabesaje* is* only* preempting* Dalion’s* threat* to* sue* for* unpaid* commission* on* sales* of*

of*constructive*delivery*in*the*Law*on*Sales.* •

copra* and* abaca* that* petitioner* spouses* earned* when* they* were* istering*5*parcels*of*land*for*Leonardo*Sabesaje.* *


Public*Document:* o o o o

Subscribed*and*acknowledged*before*a*notary*public* Enjoys*presumption*of*regularity*and*due*execution* High*probative*value* Clear* and* convincing,* not* merely* preponderant,* evidence*is*required*to*contradict*such*


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If*this*alone*is*present,*the*deed*of*sale*is*not*notarized* and*remains*a*private*document.*

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In* Dalumpines& v.& Court& of& Appeals& (336& SCRA& 538),* the* signatures*of*the*sellers*were*found*on*the*acknowledgment*of* the*notarized*Deed*of*Absolute*Sale,*not*the*Deed*of*Absolute* Sale*itself.*The*Court*ruled*that*the*deed*cannot*be*considered* notarized* because* the* notary* public* did* not* observe* utmost* care*in*the*performance*of*his*duty.*

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That* marital* consent* was* executed* prior* to* the* Deed* of*

A* Deed* of* Sale* when* acknowledged* before* a* notary* public,* enjoys* the* presumption* of* regularity* and* due* execution.* To* overthrow* that* presumption,* sufficient,* clear* and* convincing* evidence* is* required,* otherwise* the* document* should* be* upheld.*BravoEGuerrero&v.&Bravo&(465&SCRA&244)*

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Even*if*deeds*of*sale*were*notarized*by*someone*who*was*not*a* notary*public,*the*sale*still*remained*valid.*But*the*Deed*of*Sale* becomes* a* mere* private* document.* R.F.& Navarro& && Co.& v.& Vailoces&(361&SCRA&139)&

* A.3.(Other(Rulings(on(Deeds(of(Sale:( •

Assuming* that* the* buyers* failed* to* pay* the* full* price* stated* in*

Absolute*Sale*does*not*indicate*that*it*is*a*phoney.*Pan& Pacific& Industrial&Sales&Co.,&Inc.&v.&Court&of&Appeals&(482&SCRA&164)&

Jurat* –* clause* at* the* foot* of* an* affidavit* showing* when,* where* and*before*whom*the*actual*oath*was*sworn* o

Seller*may*agree*to*a*deed*of*absolute*sale*before*full*payment*

the*Deed*of*Sale,*such*partial*failure*would*not*render*the*sale* void.*BravoEGuerrero&v.&Bravo&(465&SCRA&244)*

the* sale* was* simulated.* Santos& v.& Santos& (366& SCRA& 395)* •


of* the* purchase* price.* Pan& Pacific& Industrial& Sales& Co.,& Inc.& v.& Court&of&Appeals&(482&SCRA&164)&

Execution* and* notarization* of* a* deed* of* sale* is* not* conclusive* presumption* of* delivery* of* possession.* Santos& v.& Santos& (366& SCRA&395)* o The* buyer’s* immediate* taking* of* possession* and* occupation* of* the* property* corroborates* the* authenticity*of*the*deed*of*sale.*Alcos&v.&IAC&(162&SCRA& 823)* o But* the* seller’s* continued* possession* of* the* property* casts*doubt*on*the*validity*of*the*sale.*It*can*show*that*

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as* long* as* there* is* a* meeting* of* the* minds.* Gomez& v.& Court& of& Appeals&(340&SCRA&720)&

However,*notarization*does*not*guarantee*validity.*Neither*is*it* conclusive*of*the*nature*of*the*transaction*conferred*by*the*said* document.*Salonga&v.&Concepcion&(470&SCRA&291)&

•

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•

Notarization*of*a*deed*of*sale*does*not*guarantee*its*validity*nor* is* it* conclusive* of* the* true* agreement* of* the* parties* thereto,* because*it*is*not*the*function*of*the*notary*public*to*validate*an* instrument*that*was*never*intended*by*the*parties*to*have*any* binding*legal*effect.*Salonga&v.&Concepcion&(470&SCRA&291)*

•

Even* if* unsigned,* Contracts* to* Sell* constitute* the* law* between* the* contracting* parties.* They* are* consensual* and* thus,* binding*


Any*substantial*difference*between*the**of*the*Contract*to* Sell* and* the* concomitant* Deed* of* Absolute* Sale* (such* as* difference*in*subject*matter,*and*difference*in*price*and/or*the* * thereof),* does* not* make* the* transaction* between* the*


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seller* and* the* buyer* void,* for* it* is* truism* that* the* execution* of* the* Deed* of* Absolute* Sale* effectively* rendered* the* previous* Contract* to* Sell* ineffective* and* cancelled* [through* the* process* of*novation].*Lumbres&v.&Talbrad,&Jr.&(516&SCRA&575)*

Business*forms,*e.g.,*order*slip,*delivery*charge*invoice*and*the* like,*which*are*issued*by*the*seller*in*the*ordinary*course*of*the* business* are* not* always* fully* accomplished* to* contain* all* the* necessary* information* describing* in* detail* the* whole* business* transaction—more* often* than* not* they* are* accomplished* perfunctorily* without* proper* regard* to* any* legal* repercussion* for*such*neglect*such*that*despite*their*being*often*incomplete,* said* business* forms* are* commonly* recognized* in* ordinary* commercial*transactions*as*valid*between*the*parties*and*at*the* very* least* they* serve* as* an* acknowledgment* that* a* business* transaction*has*in*fact*transpired.**Donato&C.&Cruz&Trading&Corp.& v.&Court&of&Appeals&(347&SCRA&13)&

•

all* throughout* the* Philippines”* is* void* if* not* approved* by* the* National* Commission* on* Indigenous* Peoples* (NCIP).* * B.1.(Sale(by(and(Authority(of(an(Agent(Must(Be(in(Writing( •

•

General(Rule:*Form*does*not*affect*validity*of*sale.**

•

Exceptions:*(ACM)*

An*oral*sale*entered*into*by*the*son*for*the*real*property*of*his* father*is*void.*Delos&Reyes&v.&Court&of&Appeals&(313&SCRA&632)&

•

Likewise,* the* agent* of* a* corporation* must* have* a* written* authority* to* sell* a* piece* of* land,* otherwise,* it* will* be* void.* Receipt* of* part* of* the* purchase* price* by* the* agent* will* not* validate*the*sale.*CityELite&Realty&Corp.&v.&Court&of&Appeals&

•

(325&SCRA&385)&

•

However,* the* agent’s* written* authority* alone* will* not* exempt* the*sale*from*the*Statute*of*Frauds.*The*Deed*of*Sale*itself*must* be* in* writing* and* ed* in* order* to* be* enforceable* and*

( B.(When(Form(of(Sale(Affects(its(Validity( •

The*authority*of*an*agent*to*sell*real*estate*must*be*embodied* in*a*written*special*power*of*attorney.*Therefore,*the*authority* must* be* expressly* given* and* specific.* Cosmic& Lumber& Corp.& v.& Court&of&Appeals&(265&SCRA&168);&Raet&v.&Court&of&Appeals&(295& SCRA&677)&

These* documents* are* not* mere* scraps* of* paper* bereft* of* probative* value* but* vital* pieces* of* evidence* of* commercial* transactions.* They* are* written* memorials* of* the* details* of* the* consummation* of* contracts.* Lagon& v.& Hooven& Comalco& Industries,&Inc.&(349&SCRA&363)&


2. Sale* of* large* cattle* must* be* in* writing,* otherwise* the* sale* would* be* void.* It* must* also* be* ed* with* the* municipal*treasurer*in*order*to*be*valid.* 3. Sale*of*land*by*“nonMMuslim*hill*tribe*cultural*minorities*

* A.4.(Value(of(Business(Forms(to(Prove(Sale( •

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binding*to*3rd*persons.*Torcuator&v.&Bernabe&(459&SCRA&439)* •

1. Power* to* sell* a* piece* of* land* by* an* agent* must* be* in* writing,*otherwise,*the*sale*will*be*void.*


When* the* Contract* to* Sell* is* signed* by* the* coMowners* themselves,* written* authority* by* the* agent* is* no* longer* required.*The*coMowners*are*acting*directly.*Oesmer& v.& Paraiso& Dev.&Corp.&(514&SCRA&228)&


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B.2.(To(Bind(Third(Parties( •

Article( 1358( which* requires* the* embodiment* of* certain* contracts* in* a* public* instrument* is* only* for* convenience,* and* registration* of* the* instrument* only* adversely* affects* third* parties.* Formal* requirements* are,* therefore,* for* the* benefit* of* third*parties;*and*nonMcompliance*therewith*does*not*adversely* affect*the*validity*of*the*contract*nor*the*contractual*rights*and* obligations*of*the*parties*thereunder.*Fule& v.& Court& of& Appeals& (286&SCRA&698);&Dalion&v.&Court&of&Appeals&(182&SCRA&872)**

•

Article(1358*of*the*Civil*Code*which*requires*the*embodiment*of* certain*contracts*in*a*public*instrument,*in*only*for*convenience;* and* registration* of* the* instrument* only* adversely* affects* third* parties,* and* nonMcompliance* therewith* does* not* adversely* affect* the* validity* of* the* contract* or* the* contractual* rights* and* obligations* of* the* parties* thereunder.* Estreller& v.& Ysmael& (581& SCRA&247)&&

•

While* sale* of* land* appearing* in* a* private* deed* is* binding* between* the* parties,* it* cannot* be* considered* binding* on* third* persons,* if* it* is* not* embodied* in* a* public* instrument* and* recorded*in*the*Registry*of*Deeds.*Secuya&v.&Vda.&De&Selma&(326& SCRA&244)& & Fule&v.&Court&of&Appeals&

( Facts:*A*land*owned*by*Fr.*Jacobe*was*foreclosed*and*put*up*for*public* auction* by* Rural* Bank.* Fule,* the* bank’s* corporate* secretary,* sought* a* buyer* for* the* land.* His* 2* agents* recommended* Dra.* Cruz.* At* that* time* Fule*was*interested*in*a*pair*of*diamond*earrings*that*Cruz*had*but*the* latter*rejected*all*his*monetary*offers*for*it.*When*he*offered*the*land*to*

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Dra.*Cruz,*she*showed*interest*in*trading*so*he*redeemed*the*property* in* Fr.* Jacobe’s* name* and* executed* a* deed* of* sale* to* get* it* in* his* own* name.*Fule*represented*the*land*to*be*actually*worth*P200,000*so*they* agreed*that*it*would*be*traded*for*the*earrings,*being*worth*P160,000,* plus*P40,000;*this*notwithstanding*that*the*consideration*in*their*deed* of* sale* says* the* land* is* only* worth* P80,000.* When* Fule* had* signed* the* deed* “delivering”* the* land* to* Dra.* Cruz,* they* went* to* the* bank* to* retrieve* the* earrings.* Upon* a* quick* glance,* Cruz* showed* satisfaction* at* the* earrings* and* left* with* them.* 2* hours* later* however,* he* went* back* and*claimed*that*the*earrings*were*fake.*A*suit*was*brought*to*void*their* contract* of* sale.* Bought* the* RTC* and* Court* of* Appeals* upheld* the* sale* and*awarded*damages*in*favor*of*respondents,*hence*this*appeal.* Issue:(Whether*or*not*there*was*a*valid*contract*of*sale*or*barter.* ( Held:( YES.* The* Supreme* Court* also* ruled* that* their* contract* of* barter,* which* took* the* form* of* a* sale,* was* complete* by* mere* meeting* of* the* minds*and*so*legally*binding*on*them,*especially*since*there*was*already* delivery* to* both* parties* of* their* respective* objects* and* both* had* accepted*them*–*Fule*especially,*by*his*act*in*leaving*the*bank*with*the* jewelry.* Damages* were* also* proper* since* Fule* brought* suit* knowing* himself*to*be*guilty*and*negligent*in*not*bothering*to*inspect*the*jewelry* before*leaving*with*it;*he*should*have*known*better*since*he*himself*is*a* banker*and*a*jeweler.* & Secuya&v.&Vda.&De&Selma( ( Facts:( The$parcel$of$land$subject$of$this$case$is$a$portion$of$original$Lot$ 5679.& The& property& was& originally& ed& under& a& patent& issued& to& Maxima&Caballero&Vda.&de&Cariño.&During&her&lifetime,&she&entered&into& an* agreement* of* partition* in* 1938* with* Paciencia* Sabellona,* whereby*



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she* bound* herself* to* transfer* oneMthird* (1/3)* of* Lot* 5679* in* favor* of* Paciencia.*An*action*for*quieting*of*title*was*filed*by*petitioners*against* private* respondent.* Secuya* alleged* that* Paciencia* took* possession* and* occupation* of* that* oneMthird* portion* of* Lot* 5679* adjudicated* to* her.*

private* respondent's* title* is* amply* ed* by* clear* evidence,* while* petitioners'*claim*is*barren*of*proof.* & C.(Statute(of(Frauds:(When(Form(Is(Important(for(Enforceability(

Later,* she* sold* the* three* thousand* square* meter* portion* thereof* to* Dalmacio* Secuya* (predecessorMinMinterest* of* petitioners)* in* 1953.* Respondent*claimed*that*she*is*the*ed*owner*of*Lot*5679,*having* bought*the*land*sometime*in*February*1975*from*Cesaria*Caballero*and* has*been*in*possession*of*the*same*since*then.* ( Issue:(Whether*or*not*the*sale*to*Dalmacio*Secuya*was*valid.*(

( C.1.(Nature(and(Purpose(of(Statute(of(Frauds(

( Held:( NO.* There* was* no* evidence* of* the* sale.* Petitioners* insist* that* Paciencia*sold*the*disputed*property*to*Dalmacio*Secuya*on*October*20,* 1953,*and*that*the*sale*was*embodied*in*a*private*document.*However,* such* document,* which* would* have* been* the* best* evidence* of* the* transaction,*was*never*presented*in*court,*allegedly*because*it*had*been* lost.* While* a* sale* of* a* piece* of* land* appearing* in* a* private* deed* is*

•

To*prevent*fraud*and*perjury*in*the*enforcement*of*obligations.* The*written*note*must*emobody*the*essentials*of*the*contract.* Torcuator&v.&Bernabe&(459&SCRA&439)*

•

Presupposes* Valid* Contract* of* Sale* !* “The* application* of* the* Statute* of* Frauds* presupposes* the* existence* of* a* perfected* contract.”*When*the*records*show*that*there*was*no*perfected* contract* of* sale,* there* is* no* basis* for* the* application* of* the* Statute* of* Frauds.* Firme& v.& Bukal& Enterprises& and& Dev.& Corp.& (414&SCRA&190)&

•

Atty.*Santiago*!*The*parties*cannot*and*should*not*merely*rely* on*their*memory*for*certain*transactions.&

•

binding* between* the* parties,* it* cannot* be* considered* binding* on* third* persons,*if*it*is*not*embodied*in*a*public*instrument*and*recorded*in*the* Registry*of*Property.* * While* petitioners* alleged* that* respondent* was* aware* of* petitioners’* possession* of* the* disputed* properties,* thus,* regarding* her* as* not* a* purchaser*in*good*faith*who*is*entitled*to*the*protection*of*the*Torrens* system,* Cesaria* Caballero,* assured* respondent* that* petitioners* were* just* tenants* on* the* said* lot.* Private* respondent* cannot* be* faulted* for* believing*this*representation,*considering*that*petitioners'*claim*was*not* noted* in* the* certificate* of* the* title* covering* Lot* No.* 5679.* Moreover,*


The*term*“Statute*of*Frauds”*is*descriptive*of*the*statutes*which* require*certain*classes*of*contracts,*such*as*agreements*for*the* sale* of* real* property,* to* be* in* writing,* the* purpose* being* to* prevent* fraud* and* perjury* in* the* enforcement* of* obligations* depending* for* their* evidence* on* the* unassisted* memory* of* witnesses* by* requiring* certain* enumerated* contracts* and* transactions*to*be*evidenced*by*a*writing*signed*by*the*party*to* be*charged.*Shoemaker&v.&La&Tondeña&(68&Phil.&24)& & & & &


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C.2.(Coverage(of(the(Statute(of(Frauds(and(Exceptions( ( Sales*Coverage*in*Statute*of*Frauds* •

The*following*kinds*of*sale*are*unenforceable*if*not*embodied*in*

long* as* the* agreement* to* sell* real* property* is* evidenced* by* a* written*note*or*memorandum,*embodying*the*essentials*of*the* contract*and*signed*by*the*party*charged*or*his*agent.** •

3. Sale*of*real*property.* Evidence*of*the*agreement*must*be*in*writing.** * Exceptions*to*Coverage*of*Statue*of*Frauds*in*Sales*Contracts* The*following*are*exempted*from*the*Statute*of*Frauds*and*are* thus*enforceable:*(MMPOE)* 1. There* is* a* note* or* memorandum* in* writing* and* subscribed*by*the*party*charged*or*his*agent*

•

For* the* memorandum* to* take* the* sale* out* of* the* coverage* of* the*Statute*of*Frauds,*it*must*contain*“all*the*essential**of* the*contract”*of*sale.*Torcuator&v.&Bernabe&(459&SCRA&439).!! o Even* when* scattered* into* various* correspondences* which*can*be*brought*together.**City&of&Cebu&v.&Heirs&of& Candido&Rubi&(306&SCRA&408)& o The* manner* of* payment* must* also* be* included* in* the*

2. When* there* has* been* partial* consummation/partial* performance* 3. Failure*to*object*to*the*presentation*of*evidence*aliunde* (meaning:* from* another* place)* as* to* the* existence* of* a* contract* 4. Sales*effected*through*electronic*commerce.*

memorandum.*Yuvienco&v.&Dacuycuy&(104&SCRA&668)& •

* C.3.(Memorandum( ( Nature*of*Memorandum*

But*the*Court*has*held*that*in*sales*of*real*property,*the*statute* of* frauds* will* not* apply* if* there* has* already* been* partial* payment* even* if* the* memorandum* evidencing* the* sale* did* not* mention*payment*by*installment.*David& v.& Tiongson& (313& SCRA& 63)&

•

General(Rule:(An*exception*to*the*unenforceability*of*contracts* pursuant* to* the* Statute* of* Frauds* is* the* existence* of* a* written* note* or* memorandum* evidencing* the* contract.* The*

BUT:*The*memoranda*must*be*signed*by*the*party*sought*to*be* charged,* and* must* clearly* provide* a* deed* of* sale* categorically* conveying*the*subject*property.*Oral*evidence*will*not*suffice*to* prove*the*sale.*Limketkai&Sons&Milling,&Inc.&v.&Court&of&Appeals& (255&SCRA&626)&

•

•


memorandum*may*be*found*in*several*writings,*not*necessarily* in* one* document.* The* memorandum* or* memoranda* is/are* written* evidence* that* such* a* contract* was* entered* into.* The* existence* of* a* written* contract* of* the* sale* is* not* necessary* so*

a*written*document:*(1M500MR)* 1. A*sale*which*is*not*to*be*performed*within*one*year.* 2. Agreement* for* the* sale* of* goods,* chattel* or* things* in* action*not*less*than*P500.*

•

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& &


Exception:(Electronic(Documents(under(the(E_COMMERCE(ACT( (R.A.(8792)&


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Yuviengco&v.&Dacuycuy&

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* Facts:*Petitioners*own*a*property*in*Tacloban*City*which*they*intend*to* sell* for* 6.5M.* They* gave* the* respondents* the* right* to* purchase* the*

In*any*sale*of*real*property*on*installments,*the*Statute*of*Frauds*read* together* with* the* perfection* requirements* of* Article* 1475* of* the* Civil* Code* must* be* understood* and* applied* in* the* sense* that* the* idea* of* payment* on* installments* must* be* in* the* requisite* of* a* note* or*

property* within* July* 31,* 1978.* Respondents* replied* that* they* agree* to* buy* the* property* and* they* will* negotiate* for* details,* as* soon* as* petitioners* send* their* representative* in* Tacloban.* * Petitioner* sent* another*telegram*informing*respondents*that*their*proposal*is*accepted* and*a*contract*will*be*prepared.* * Petitioners’* lawyer,* Mr.* Gamboa,* arrived* bringing* a* * changing*

memorandum* therein* contemplated.* Under* the* Statute* of* Frauds,* the* contents* of* the* note* or* memorandum,* whether* in* one* writing* or* in* separate* ones* merely* indicative* for* an* adequate* understanding* of* all* the* essential* elements* of* the* entire* agreement,* may* be* said* to* be* the* contract*itself,*except*as*to*the*form* * Limketkai&v.&Court&of&Appeals&

the* mode* of* payment.* It* now* stated* that* the* balance* payment* should* be* paid* within* 30* days* instead* of* the* former* 90* days* originally* agreed* upon.*(The*original**was*2M*payment*upon*execution*of*contract,* and*then*4.5M*after*90*days)* ( Issue:*Whether*or*not*there*was*a*perfected*contract*of*sale.* *

* Facts:* BPI* as* trustee* of* PRC,* authorized* Pedro* Revilla* to* sell* a* lot* in* Barrio*Bagong*Hog,*Pasig.*BPI*VP*Albano,*Asst.*VP*Aromin*and*Limketkai* had* negotiations* and* eventually* settled* on* Php* 1000/sq* meter.* Lim* asked*if*they*could*pay*on**and*so*VP*Albano*dictated*the**of* payment.*About*3*days*later,*Limketkai*learned*that*its*offer*to*pay*on* * has* been* frozen.* Lim* went* to* BPI* to* tender* full* payment* of* Php*

Held:* NO.* The* Supreme* Court* considered* the* correct* juridical* significance*of*the*telegram*of*respondents*instructing*Atty.*Gamboa*to* "proceed* to* Tacloban* tonegotiate* details."* It* emphasizes* the* word* "negotiate"* advisedly* because* to* Court’s* mind* it* is* the* keyword* that* negates* and* makes* it* legally* impossible* to* hold* that* respondents'* acceptance* of* petitioners'* offer,* assuming* that* it* was* a* "certain"* offer* indeed,* was* the* "absolute"* one* that* Article* 1319.* Payment* on* installments* is* entirely* different* from* cash* payment.* The* manner* of*

33,* 056,* 000.00* to* VP* Albano* but* the* latter* refused* payment* and* said* his*authority*to*sell*the*land*had*been*withdrawn.*Limketkai*filed*a*case* to*against*BPI*for*specific*performance.* * Issues( 1. Whether*or*not*there*was*a*perfected*contract*of*sale*between* Limketkai*and*BPI*!*YES* 2. Whether* or* not* the* evidence* itted* by* the* trial* court* in*

payment*is*an*essential*requisite*in*a*contract*of*sale.*The*alteration*in* the* * of* payment* clearly* showed* there* was* no* meeting* of* the* minds*yet*to*perfect*a*contract*of*sale.* *

ruling*for*the*perfection*of*the*sale*is*issible,*given*that*in*a* sale*of*real*property,*the*Statute*of*Frauds*is*applicable?*!YES* 3. Whether*or*not*the*sale*to*NBS*during*the*pendency*of*the*trial* in*the*RTC*was*effected*in*good*faith*!*NO*



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Held( 1. Contract( of( sale( perfected.* VP* and* Asst.* VP* have* authority* to* sell* since* their* primary* responsibilities* were* to* manage* and* ister* real* estate* property.* Asst.* VP* Aromin* testified* that* there*was*already*a*perfected*contract*of*sale.*When*they*met,* talked*and*agreed*that*the*lot*would*be*sold*to*Limketkai*at*Php* 1000/sq.* meter* and* on* * dictated* by* Albano,* the* sale* was* perfected.* 2. Statute(of(Frauds.*Transaction*was*outside*the*ambit*of*the*SoF,* there* is* the* existence* of* a* written* note* or* memorandum,* the* Authorization* Letters* and* letter* from* Limketkai* confirming* the* sale.* Respondents* crossMexamined* the* witnesses* at* length* regarding*the*contract,*price,*tender*of*payment,*etc.* 3. NBS(not(a(purchaser(in(good(faith.*They*ignored*the*lis!pendens* annotated*on*the*title.* & Limketkai&v.&Court&of&Appeals&(MR)&

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However,*delivery*of*the*deed*to*the*buyer*without*intention*on* the*part*of*the*seller*to*part*with*the*title*until*purchase*price*is* paid*does*not*constitute*partial*performance.*Baretto&v.&Manila& Railroad&Co.&(46&Phil.&964)&

•

Partial*performance*of*a*sale*of*real*property*will*take*it*out*of* the* Statute* of* Frauds* even* if* the* formal* requirements* (i.e.* it* must* be* in* writing)* are* not* complied* with,* as* long* as* the* essential*requisites*of*sale*are*present.*Vda.&De&Jomoc&v.&Court& of&Appeals&(200&SCRA&74)&

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The* Statute* of* Frauds* only* applies* to* executory* contracts.* The* Statute*of*Frauds*does*not*apply*to*contracts*either*partially*or* totally* performed.* In* addition,* a* contract* that* violates* the* Statute*of*Frauds*is*ratified*by*the*acceptance*of*benefits*under* the*contract,*such*as*the*acceptance*of*the*purchase*price*and* using* the* proceeds* to* pay* outstanding* loans.* Where* one* party* has*performed*his*obligation,*oral*evidence*will*be*itted*to* prove* the* agreement.* Alfredo& v.& Borras& (404& SCRA& 145)* (Note* the* difference* with* the* issibility* of* parol* evidence* in* the* Limketkai*case,*supra.)* & Spouses&Alfredo&v.&Spouses&Borras&

*

* ( (

Definition:( Partial* performance* is* not* limited* to* the* giving* of* money.*Contracts*covered*by*the*Statute*of*Frauds*are* ratified* by*acceptance*of*benefits*under*them.*(Article(1405)*

1. No( contract( of( sale( perfected.* Petitioners* fail* to* establish* any* definite*agreement*or*meeting*of*the*mind*as*regards*the*price* or* term* of* payment.* Petitioner’s* acceptance* of* the* offer* was* qualified,*which*amounts*to*a*rejection*of*the*original*offer.*

the*memoranda*or*notes*that*the*law*speaks*of.*


C.4.(Partial(Performance(

*

2. Statute( of( Frauds.* Petitioner* claims* as* proof* of* perfected* contract* of* sale* between* it* and* respondent* BPI* were* not* subscribed*by*the*party*charged,*i.e.*BPI,*thus*did*not*constitute*

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* Facts:* Godofredo* &* Carmen* mortgaged* their* land* to* the* DBP* for* P* 7,000.00.*To*pay*their*debt,*they*sold*the*land*to*Armando*&*Adelia*for* P* 15,000.00,* the* latter* also* assumed* to* pay* the* loan.* Carmen* issued*



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Armando*&*Adelia*a*receipt*for*the*sale.*They*also*delivered*to*Armando* &* Adelia* the* Original* Cert.* of* Title,* tax* declarations,* and* tax* receipts.* They*also*introduced*Armando*&*Adelia*to*the*Natanawans,*the*tenants* of*the*said*property*as*the*new*lessors.*They*thereafter*took*possession*

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•

Sale* of* real* property* which* are* not* in* writing* but* are* partially* executed*still*do*not*bind*third*parties.*

If* a* third* party* disputes* the* ownership* of* the* property,* the* person*against*whom*that*claim*is*brought*cannot*present*any*

o

* Held:* The* Statute* of* Frauds* in* applicable* only* to* executory* contracts,* not*those*that*have*already*been*partially*or*completely*consummated.* In*this*case*the*sale*of*the*land*to*Armando*&*Adelia*had*already*been*

•

Formal* requirements* are* for* the* benefit* of* third* parties.* NonM

proof* of* such* sale* and* hence,* has* no* means* to* enforce* the* contract.* Thus,* the* Statute* of* Frauds* is* for* the* benefit* of* the* parties*in*the*sale.*Claudel&v.&Court&of&Appeals&(199&SCRA&113)* o The* Claudel! ruling* confirms* the* variance* in* principles* involving*movables*and*immovables.*Article(1403(treats* partial* execution* as* applicable* only* to* “goods* and* chattel.”*

1. Whether* or* not* sale* of* land* in* favor* of* Borras* is* valid* even* if* orally*entered.*!*YES* 2. Whether*or*not*Statute*of*Frauds*is*applicable*!*NO*

* Effect*of*Partial*Execution*on*Third*Parties*


compliance* does* not* affect* the* validity* of* the* contract.* Fule& v.& Court&of&Appeals&(286&SCRA&698)&

of*the*said*land.*Later*they*found*out*that*Godofredo*&*Carmen*sold*the* land* again* to* other* buyers* by* securing* duplicate* copies* of* the* OCTs* upon* petition* w/* the* court.* Thus,* they* filed* a* case* entitled* Specific* Performance.* Godofredo* &* Carmen* claim* that* the* sale,* not* being* in* writing,*is*unenforceable*under*the*Statute*of*Frauds.* * Issue:**

consummated.* The* ownership* over* the* land* was* also* transferred* to* Armando*&*Adelia*when*they*were*introduced*to*the*Natanawans*and* took*possession*thereof.*Therefore,*when*Godofredo*&*Carmen*sold*the* land*to*the*other*buyers,*it*was*no*longer*theirs*to*sell.*The*Statute*of* Frauds* likewise* does* not* apply* considering* that* Godofredo* &* Carmen* had*already*derived*the*benefits*from*the*sale*–*such*as*the*money*to* pay* for* the* loan.* The* receipt* also* suffices* to* constitute* the* “memorandum”*required*by*the*Statute*of*Frauds.*

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o

For* movables,* mere* possession* is* enough* to* give* a* presumption* of* ownership* (Article( 559). 1 *For* immovables,*a*Torrens*title*is*needed.* Note*the*difference*in*the*ruling*of*Claudel*and*Vda.!De! Jomoc.* The* controlling( doctrine* is* that* of* Vda.! De! Jomoc:! partial* performance* in* sales* of* real* property* takes*it*out*of*the*Statute*of*Frauds.*However,*it*is*still* the*registration*in*the*Registry*of*Deeds*which*will*bind* third*parties.*

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

*Article( 559.* The* possession* of* movable* property* acquired* in* good* faith* is* equivalent*to*a*title.*Nevertheless,*one*who*has*lost*any*movable*or*has*been* unlawfully* deprived* thereof,* may* recover* it* from* the* person* in* possession* of* the*same.** * If* the* possessor* of* a* movable* lost* or* which* the* owner* has* been* unlawfully* deprived,*has*acquired*it*in*good*faith*at*a*public*sale,*the*owner*cannot*obtain* its*return*without*reimbursing*the*price*paid*therefor.*(464a)*



•

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according*to*the*Statute*of*Frauds.)*

Issue:(Whether*or*not*there*was*a*valid*sale.* * Held:( NO.* The* general* rule* is* that* a* sale* once* consummated* is* valid* regardless* of* its* form;* however,* proving* that* the* sale* is* valid* and* existing* is* a* different* matter.* However,* in* the* event* that* a* 3rd* party* disputes* the* ownership,* there* is* no* such* proof* in* * of* the* ownership.*As*such,*it*cannot*prejudice*third*persons,*such*as*the*heirs*

Londres& v.& Court& of& Appeals& (394& SCRA& 133)* summarized* the* rulings*on*the*matter:* o Article(1358*is*only*for*convenience*

o •


The* siblings* filed* a* case* for* cancellation* of* titles* and* reconveyance* arguing* that* there* was* a* verbal* sale* between* Cecilio* and* their* parents* over*the*lot.*As*evidence,*they*presented*a*subdivision*plan.* (

Reliance* on* testimony* of* witnesses* as* secondary* evidence* to* prove* a* sale* of* real* property* will* not* prosper* because* such* a* sale*must*be*evidenced*by*a*written*instrument*when*it*involves*

o

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Claudel* shows* the* effect* of* having* a* sale* of* real* property* which* isn’t* reduced* to* writing.* Thus,* it* emphasizes* the* importance* of* the* Statute* of* Frauds.* (Claudel* was* decided* based* on* prescription,* not*

3rd*parties.*Alba&Vda.&De&Rax&v.&Court&of&Appeals&(314&SCRA&36)* •

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Registration* of* the* instrument* is* needed* only* to* adversely*affect*third*parties* NonMcompliance* with* formal* requirements* does* not* affect*validity*

in*this*case.*Also,*the*heirs*had*a*right*to*rely*upon*their*Torrens*titles,* which,*as*opposed*to*the*subdivision*plans,*are*definitely*more*credible.* * Nature*and*Coverage*of*Partial*Performance* •

Partial*payment*of*the*purchase*price*is*not*the*only*manner*of* partial*performance.*

In* the* Torrens* system,* execution* of* a* public* document* is* not* enough*to*bind*third*persons.* Registration* with* the* Registry* of* Deeds*is*the*operative*act.*Secuya&v.&Vda.&De&Selma&(326&SCRA& 144)& & Claudel&v.&Court&of&Appeals&

•

Facts:( Cecilio( Claudel* acquired* a* lot* from* the* Bureau* of* Lands.* He* occupied*the*same,*declared*it*in*his*name*and*dutifully*paid*his*taxes.* After* his* death,* his* heirs* and* siblings* contested* each* other* claiming* ownership* thereof.* It* was* his* heirs* who* were* in* possession* of* the* property.* They* partitioned* it* amongst* themselves,* ed* each* portion*under*the*Torrens*System,*and*each*paid*their*respective*taxes.*

•

Other* modes* of* partial* performance:* Ortega& v.& Leonardo& (103& Phil.&870)& o o o o

&


Possession* Making*of*improvements*o*Rendition*of*services* Payment*of*taxes* Relinquishment*of*rights*

Requisites*of*partial*performance:* 1. Must* pertain* to* the* subject* matter* or* the* price* of* the* sale* 2. Must*involve*an*act*or*“complicity”*on*the*party*sought* to*be*charged*


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Partial*performance*must*amount*to*estoppel*against*the*party*

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C.5.(Waiver(of(Provisions(of(the(Statute(of(Frauds(

sought*to*be*charged.*

•

*

This*is*the*third*ground*which*takes*a*contract*out*of*the*Statute* of*Frauds.*

Ortega&v.&Leonardo&

•

* Facts:( Ortega* occupied* a* parcel* of* land.* After* the* liberation,* the* government*assigned*the*lot*to*the*Rural*Progress*.*She*asserted* her*right*thereto;*but*was*disputed*by*Leonardo.*Ortega*and*Leonardo*

waived* the* defects* of* the* contract.* Thus,* the* contract* will* be* enforceable.*Article(14051* •

agreed*to*a*compromise.*The*agreement*was*for*Ortega*to*desist*from* pressing*her*claim,*and*Leonardo,*upon*getting*the*lot,*would*sell*to*her* a* portion* thereof* provided* she* paid* for* the* surveying* of* the* lot.* If* he* acquired* title,* she* could* stay* as* tenant.* Ortega* thus* desisted* from* her* claim,*paid*for*the*surveying*of*the*lot*and*the*preparation*of*the*plan,* and*regularly*paid*him*a*monthly*rental.*When*she*remodeled*her*son’s* house*beside*the*lot,*it*extended*over*the*subject*lot.*When*Leonardo*

CrossMexamination* on* the* contract* is* deemed* a* waiver* of* the* defense* of* the* Statute* of* Frauds.* Abrenica& v.& Gonda& (34& Phil.& 739)&

•

When* the* purported* buyer’s* exhibits* failed* to* establish* the* perfection* of* the* contract* of* sale,* oral* testimony* cannot* take* their* place* without* violating* the* parol* evidence* rule.* * It* was* therefore* irregular* for* the* trial* court* to* have* itted* in* evidence*testimony*to*prove*the*existence*of*a*contract*of*sale* of* a* real* property* between* the* parties,* despite* the* persistent* objection*made*by*the*purported*seller’s*counsel*as*early*as*the* first* scheduled* hearing,* even* when* crossMexamination* was* made* on* the* basis* of* the* witnesses’* affidavitMform* testimony.& Limketkai&Sons&Milling,&Inc.&v.&CA,&255&SCRA&6&(1996);&261&SCRA&

acquired*title,*he*refused*to*sell*the*portion*agreed*upon.*He*claims*that* the*contract*is*unenforceable*based*on*the*Statute*of*Frauds.* * Issue:(Whether*or*not*the*contract*is*unenforceable.* * Held:( NO.* The* contract* is* enforceable* because* there* was* partial* performance.* Ortega* made* substantial* improvements* on* the* lot,* desisted* from* her* claim,* continued* possession,* and* paid* for* the* surveying,* and* also* paid* the* rentals.* All* these* put* together* amount* to* partial* performance,* which* takes* the* verbal* agreement* out* of* the* operation*of*the*Statute*of*Frauds.( * ( ( (

When* a* party* fails* to* object* during* trial* to* the* presentation* of* oral* evidence* to* prove* the* contract,* he* is* deemed* to* have*

464&(1996).& & & & &

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

*Article(1405.* Contracts*infringing*the*Statute*of*Frauds,*referred*to*in*No.*2*of*Article*1403,* are* ratified* by* the* failure* to* object* to* the* presentation* of* oral* evidence* to* prove*the*same,*or*by*the*acceptance*of*benefit*under*them.*



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C.6.(Value(of(Business(Forms(to(Prove(Sale( •

% •

Business* forms* (e.g.* receipts,* order* slips,* etc.)* issued* by* the*

They*serve*as*an*acknowledgement*that*a*business*transaction*

•

did*take*place.* •

By*themselves,*they*are*inadequate*to*establish*the*case*for*the* vendor.*Their*probative*value*must*be*evaluated*in*conjunction* with*other*evidence.*

Since* a* contract* of* sale* is* perfected* by* mere* consent,* then* when* the* dealer* of* motor* vehicles* accepts* a* deposit* of* P50,0000* and* pulls* out* a* unit* from* the* assembler* for* that* purpose,* it* was* in* breach* of* contract* when* it* sold* the* car* subsequently* to* another* buyer.* Xentrex& Automotive,& Inc.& v.& Court&of&Appeals&(291&SCRA&66)&

•

A* sales* invoice* is* a* commercial* documentMcommercial* documents* or* papers* are* those* used* by* merchants* or* businessmen* to* promote* or* facilitate* trade* or* credit* transactions—they* are* not* mere* scraps* of* paper* bereft* of* probative* value,* but* vital* pieces* of* evidence* of* commercial* transactions,* written* memorials* of* the* details* of* the* consummation* of* contracts.* SeaEoil& Petroleum& Corp.& v.& Autocorp&Group&(569&SCRA&387)&&

•

Sales* invoices* are* not* evidence* of* payment* of* the* price,* but* evidence*of*the*receipt*of*the*goods;*since*the*best*evidence*to* prove*payment*is*the*official*receipt.*El& Oro& Engravers& Corp.& v.& Court&of&Appeals&(546&SCRA&42)&

A* receipt* which* is* merely* an* acknowledgment* of* the* sum*

In*itself,*the*absence*of*receipts,*or*any*proof*of*consideration,* would* not* be* conclusive* of* the* inexistence* of* a* sale* since* consideration* is* always* presumed.* Tigno& v.& Aquino& (444& SCRA& 61)&

•

* C.7.(Rulings(on(Receipts(and(Other(Documentary(Evidence(of(Sale(( •


received,* without* any* indication* therein* of* the* total* purchase* price* of* the* land* or* of* the* monthly* installments* to* be* paid,* cannot*be*the*basis*of*valid*sale.*Leabres&v.&CA&(146&SCRA&158&)&

seller* are* not* always* fully* accomplished* to* contain* all* the* necessary*information*describing*the*business*transaction.* •

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Receipts*proves*payment*which*takes*the*sale*out*of*the*Statute* of*Frauds.*Toyota&Shaw,&Inc.&v.&Court&of&Appeals&(244&SCRA&320)* & Toyota&Shaw&v.&Court&of&Appeals&

* Facts:* Luna* Sosa* wanted* to* buy* a* Toyota* Lite* Ace.* He* went* to* Toyota* Shaw*where*he*met*Popong*Bernardo,*a*sales*rep.*Sosa*explained*that* he* needed* the* Lite* Ace* by* June* 17,* otherwise,* he* would* become* a* laughing* stock.* Bernardo* guaranteed* that* the* vehicle* would* be* delivered.* They* executed* a* document* entitled* Agreements* between* Sosa*&*Popong*Bernardo*of*Toyota*Shaw”*where*a*P100K*downpayment* was*stipulated*and*that*the*Lite*Ace*would*be*available*at*a*given*date.* When*the*day*of*reckoning*arrived,*the*Lite*Ace*was*unavailable*—*the* explanation* of* Bernardo* being* “nasulot* ng* ibang* malakas.”* However,* according* to* Toyota,* the* true* reason* was* that* BA* Finance,* which* was* supposed* to* answer* for* the* balance* of* the* purchase* price,* did* not* approve* Sosa’s* application.* Toyota* also* returned* the* downpayment.* Thus,* Sosa* sued* for* damages* amounting* to* P1.2M* due* to* his* humiliation,*hurt*feelings,*sleepless*nights,*and*so*on.* * Issue:*Whether*or*not*there*was*a*perfected*contract*of*sale.*



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%

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Held:* NO.* There* was* no* agreement* as* to* the* price* and* the* manner* of* payment,*which*are*both*essential*to*the*perfection*of*the*sale.* * D.(Sales(Effected(as(Electronic(Commerce((R.A.(8792)(

F.(Form(in(“Sales(on(Return(or(Approval”( ( Article(1502.( When(goods(are(delivered(to(the(buyer(“on(sale(or(return”(to(give(the(

•

The* main* point* of* this* entire* section* in* the* book* is* this:* electronic* documents* are* given* the* same* legal* recognition* as* paper* documents.* Thus,* they* are* issible* as* evidence* in* court.*

•

In*assessing*the*evidential*weight*of*an*electronic*data*message* or*electronic*document,*the*reliability*of*the*manner*in*which*it* was* generated,* stored* or* communicated,* the* reliability* of* the* manner*in*which*its*originator*was*identified*is*given*regard.*

buyer( an( option( to( return( the( goods( instead( of( paying( the( price,( the( ownership( es( to( the( buyer( on( delivery,( but( he( may( revest( the( ownership(in(the(seller(by(returning(or(tendering(the(goods(within(the( time( fixed( in( the( contract,( or,( if( no( time( has( been( fixed,( within( a( reasonable(time.((n)*( ( When( goods( are( delivered( to( the( buyer( on( approval( or( on( trial( or( on(

( E.(Form(in(Equitable(Mortgage(Claims( •

The*Statute*of*Frauds*does*not*stand*in*the*way*of*treating*an* absolute* deed* of* sale* as* a* mortgage,* when* such* was* the* intention*of*the*parties.*Cuyugan&v.&Santos&(34&Phil.&100)(

•

A*contract*should*be*construed*as*a*mortgage*or*a*loan*instead* of* a* pacto! de! retro* sale* when* its* * are* ambiguous* or* the* circumstances*surrounding*its*execution*or*its*performance*are* incompatible*with*a*sale.*Parol*evidence*becomes*issible*to* prove* that* the* instrument* was* intended* to* be* a* security* for* a* loan.*Lapat&v.&Rosario&(312&SCRA&539)(

•

An* equitable* mortgage* is* not* different* from* a* real* estate*

satisfaction,( or( other( similar( ,( the( ownership( therein( es( to( the(buyer:( ( (1)(When(he(signifies(his(approval(or(acceptance(to(the(seller(or(does( any(other(act(adopting(the(transaction;( ( (2)(If(he(does(not(signify(his(approval(or(acceptance(to(the(seller,(but( retains(the(goods(without(giving(notice(of(rejection,(then(if(a(time(has( been(fixed(for(the(return(of(the(goods,(on(the(expiration(of(such(time,( and,(if(no(time(has(been(fixed,(on(the*expiration(of(a(reasonable(time.( What(is(a(reasonable(time(is(a(question(of(fact.((n)( * •

mortgage,* and* the* lien* created* thereby* ought* not* to* be* defeated*by*requiring*compliance*with*the*formalities*necessary* to* the* validity* of* a* voluntary* real* estate* mortgage.* Rosales& v.& Suba&(408&SCRA&664)( (


The*Court*has*held*that*the*conditions*in*Article( 1502( will*only* apply* if* there* is* an* express* stipulation* that* the* sale* is* either* a* “sale* on* return”* or* a* “sale* on* approval.”* Industrial& Textile& Manufacturing& Company& of& the& Phil.,& Inc.& v.& Enterprises,& Inc.& (217&SCRA&322)&


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Parol* evidence* will* not* be* itted* to* prove* that* a* sale* was* a*

% •

“sale*on*return”*or*“sale*on*approval.”* The*buyer*cannot*accept*part*of*the*goods*and*reject*the*rest.** * G.(Right(of(First(Refusal(Must(Be(Contained(in(Written(Contract( Verbal*grants*of*such*right*are*not*enforceable.*In*effect,*this*is* an*addition*to*the*Statute*of*Frauds.*Sen&Po&Ek&Marketing&Corp.& v.&Martinez&(325&SCRA&210)( (

IV.(When(Sale(Completely(Simulated( •

“Simulation”* !* declaration* of* a* fictitious* will,* made* by* agreement*of*the*parties,*in*order*to*produce,*for*the*purposes* of* deception,* the* appearance* of* a* juridical* act* which* does* not* exist* or* is* different* from* what* was* really* executed.! Loyola& v.& Court&of&Appeals&(326&SCRA&285)& o When* a* sale* is* absolutely* simulated,* it* is* always* completely*void*and*nonMexistent.* o When* a* sale* is* relatively* simulated,* there* is* another* intent.*As*such,*it*is*valid*and*subject*to*reformation.*

•

A.(Badges(and(Non_badges(of(Simulation:!! •

NonMpayment* of* the* stipulated* consideration,* absence* of* any* attempt* by* the* buyers* to* assert* their* alleged* rights* over* the* subject*property.*Villaflor&v.&CA&(280&SCRA&297)(

•

Failure* of* alleged* buyers* to* collect* rentals* from* alleged* seller.* Santiago& v.& CA& (278& SCRA& 98),* but* not* when* there* appears* a* legitimate* lessorMlessee* relationship* between* the* vendee* and* the*vendor.*Union&Bank&v.&Ong&(491&SCRA&581)*

•

Although* the* agreement* did* not* provide* for* the* absolute* transfer*ownership*of*the*land*to*buyer,*that*did*not*amount*to* simulation,* since* delivery* of* certificate* of* ownership* and* execution*of*deed*of*absolute*sale*were*expressly*stipulated*as* suspensive* conditions,* which* gave* rise* to* the* corresponding* obligation*on*part*of*buyer*to*pay*the*last*installments.**Villaflor& v.&CA&(280&SCRA&297)**

•

really*desired*or*intended*to*produce*legal*effect.* •

Requisites*of*Simulated*Sale:**

(

If*the*parties*enter*into*a*sale*to*which*they*did*not*intend*to*be* legally* bound,* the* contract* is* void* and* not* susceptible* to* ratification.*Rosario&v.&Court&of&Appeals&(310&SCRA&464)* o In* simulated* contracts,* the* parties* do* not* intend* to* be* bound*by*the*contract*and*the*apparent*contract*is*not*


1. An*outward*declaration*of*will*different*from*the*will*of* the*parties;** 2. False* appearance* must* have* been* intended* by* mutual* agreement;*and** 3. Purpose* is* to* deceive* third* persons.* Manila& Banking& Corp.&v.&Silverio((466(SCRA(438)*

•

•

%

Characteristic*of*simulation*is*that*the*apparent*contract*is*not* really*desired*or*intended*to*produce*legal*effect*or*in*any*way* alter*the*parties’*juridical*situation,*or*that*the*parties*have*no* intention*to*be*bound*by*the*contract.**


When*signature*on*a*deed*of*sale*is*a*forgery.*Fidel&v.&Court&of& Appeals&(559&SCRA&186).*But*bare*assertions*that*the*signature* appearing*on*the*Deeds*of*Sale*is*not*that*of*her*husband*is*not* enough* to* allege* simulation,* since* forgery* is* not* presumed;* it* must*be*proven*by*clear,*positive*and*convincing*evidence.*R.F.& Navarro&&&Co.&&v.&Vailoces&(361&SCRA&139)*


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( C.(Remedies(Allowed(When(Sale(Simulated( •

If*the*contract*is*void*!*nullified&

•

Voidable*!*annulment&

•

Rescissible*!*rescission&

•

When*a*contract*of*sale*is*void,*the*right*to*set*up*its*nullity*or*

actually* intended* a* donation* or* some* other* contract.* BravoE Guerrero&v.&Bravo&(465&SCRA&244)*

nonMexistence* is* available* to* third* persons* whose* interests* are* directly* affected* thereby.* Likewise,* the* remedy* of* accion* pauliana* is* available* when* the* subject* matter* is* a* conveyance,* otherwise* valid,* undertaken* in* fraud* of* creditors.* Manila& Banking&Corp.&v.&Silverio&(466&SCRA&438)&

* B.(When(Motive(Nullifies(the(Sale( •

In*sale,*consideration*is,*as*a*rule,*different*from*the*motive*of* parties,* and* when* the* primary* motive* is* illegal,* such* as* when* the*sale*was*executed*over*a*land*to*illegally*frustrate*a*person's* right*to*inheritance*and*to*avoid*payment*of*estate*tax,*the*sale* is* void* because* illegal* motive* predetermined* purpose* of* the* contract.*Olegario&v.&CA&(238&SCRA&96)**

•

•

motives* neither* determine* nor* take* the* place* of* the* consideration.*Heirs&of&Spouses&Balite&v.&Lim&(446&SCRA&54&)& An*action*or*defense*for*the*declaration*of*the*inexistence*of*a* contract* is* imprescriptible.* On* the* other* hand,* an* action* to* rescind* is* founded* upon* and* presupposes* the* existence* of* a* contract.* A* contract* which* is* null* and* void* is* no* contract* at* all*

The*rescissory*action*to*set*aside*contracts*in*fraud*of*creditors* is* accion* pauliana,* essentially* a* subsidiary* remedy* accorded* under* Article( 1383( which* the* party* suffering* damage* can* avail* of*only*when*he*has*no*other*legal*means*to*obtain*reparation* for* the* same.* In* such* action,* it* must* be* shown* that* both* contracting*parties*have*acted*maliciously*so*as*to*prejudice*the* creditors* who* were* prevented* from* collecting* their* claims.* Rescission*if*generally*unavailing*should*a*third*person,*acting*in* good* faith,* is* in* lawful* possession* of* the* property* since* he* is* protect*by*law*against*a*suit*for*rescission*by*the*registration*of* the*transfer*to*him*in*the*registry.*Union&Bank&v.&Ong&(491&SCRA&

Where* the* parties* to* a* contract* of* sale* agreed* to* a* consideration,*but*the*amount*reflected*in*the*final*Deed*of*Sale* was* lower,* their* motivation* being* to* pay* lower* taxes* on* the* transaction,* the* contract* of* sale* remains* valid* and* enforceable* upon* the* * of* the* real* consideration.* Although* illegal,* the*

•


and* hence* could* not* be* the* subject* of* rescission.* Campos& v.& Pastrana&(608&SCRA&55)&

Simulation*of*contract*and*gross*inadequacy*of*price*are*distinct* legal* concepts,* with* different* effects* –* the* concept* of* a* simulated* sale* is* incompatible* with* inadequacy* of* price.* When* the* parties* to* an* alleged* contract* do* not* really* intend* to* be* bound* by* it,* the* contract* is* simulated* and* void.* Gross* inadequacy* of* price* by* itself* will* not* result* in* a* void* contract,* and* it* does* not* even* affect* the* validity* of* a* contract* of* sale,* unless* it* signifies* a* defect* in* the* consent* or* that* the* parties*

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581)& * D.(Effect(When(Sale(Declared(Void:( •


The* action* for* the* declaration* of* the* contract’s* nullity* is* imprescriptible—an* action* for* reconveyance* of* property* on* a*


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void* contract* of* sale* does* not* prescribe.* FilEEstate& Golf& and& Dev.,&Inc.&v.&Navarro&(526&SCRA&51)& •

Possessor* is* entitled* to* keep* the* fruits* during* the* period* for* which*the*buyer*held*the*property*in*good*faith.*DBP&v.&CA&(316& SCRA&650)&

•

Then* restoration* of* what* has* been* given* is* in* order,* since* the* relationship* between* parties* in* any* contract* even* if* subsequently* voided* must* always* be* characterized* and* punctuated* by* good* faith* and* fair* dealing.* De& los& Reyes& v.& CA& (313&SCRA&632);&Heirs&of&Ignacia&AguilarEReyes&v.&Mijares&(410& SCRA&97).&

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Alien* who* purchases* land* in* the* name* of* his* Filipina* lover,* has* no* standing* to* seek* legal* remedies* to* either* recover* the* property*or*the*purchase*price*paid,*since*the*transaction*is*void* ab*initio*for*being*in*violation*of*the*constitutional*prohibition.* Frenzel&v.&Catito&(406&SCRA&55)*


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Chapter(6:(Performance(or( Consummation(of(Sale( ! I.(Obligations(of(Seller( ( A.(To(Preserve(the(Subject(Matter( ( Article(1163.( Every(person(obliged(to(give(something(is(also(obliged(to(take(care(of(it( with(the(proper(diligence(of(a(good(father(of(a(family,(unless(the(law( or( the( stipulation( of( the( parties( requires( another( standard( of( care.( (1094a)(

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In#the#sale#of#a#determinate#object,#the#obligation#of#taking#care# of# the# subject# matter# arises# upon# perfection,# even# before# delivery.#Otherwise,#the#seller#is#liable#for#breach.#

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When#the#sale#is#void#or#fictitious,#no#valid#title#over#the#subject#

A#forged#deed#of#sale#is#null#and#void#and#conveys#no#title.#It#is#a# wellIsettled# principle# that# no# one# can# give# what# one# does# not# have,# nemo# dat# quod# non# habet.# One# can# sell# only# what# one# owns#or#is#authorized#to#sell,#and#the#buyer#can#acquire#no#more# right#than#what#the#seller#can#transfer#legally.#Rufloe! v.! Burgos! (577!SCRA!264,!272E273)!

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Article# 1459( of# the# Civil# Code# on# contracts# of# sale# “specifically# requires# that# the# vendor# must# have# ownership# of# the# property# at# the# time# it# is# delivered.”# Heirs! of! Arturo! Reyes! v.! SoccoE Beltran!(572!SCRA!211,!220E221)!

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A# contract# to# sell,# or# a# condition# contract# of# sale# where# the# suspensive# condition# has# not# happened,# even# when# found# in# a# public#document,#cannot#be#treated#as#constituting#constructive# delivery,# especially# when# from# the# face# of# the# instrument# it# is#

( B.(To(Deliver(the(Subject(Matter( (

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When# seller# had# no# ownership# over# the# subject# matter# at# the# time# of# delivery,# no# valid# title# can# # in# favor# of# the# buyer.# Nemo# dat# quod# non# habet# –# No# man# can# give# that# which# he# does#not#have.#Tsai!v.!Court!of!Appeals!(366!SCRA!324)!!

It#is#an#obligation#“to#do.”##

Article(1495.!( The(vendor(is(bound(to(transfer(the(ownership(of(and(deliver,(as(well( as(warrant(the(thing(which(is(object(of(the(sale.((1461a)( ( Legal#Premises#for#Doctrines#on#Tradition#


except#what#he#can#do#lawfully.#Traders!Royal!Bank!v.!Court!of! Appeals!(269!SCRA!15).!

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shown# that# the# seller# “was# not# yet# the# owner# of# the# property# and#was#only#expecting#to#inherit#it.”#(at#p.#221)#Heirs!of!Arturo! Reyes!v.!SoccoEBeltran!(572!SCRA!211)! •

One#can#sell#only#what#one#owns#or#is#authorized#to#sell,#and#the# buyer# can# acquire# no# more# than# what# the# seller# can# transfer# legally.#Daclag!v.!Macahilig!(560!SCRA!137).!

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matter#can#be#conveyed#to#the#buyer#even#with#delivery.#Nemo# potest# nisi# quod# de# jure# potest# –# No# man# can# do# anything#


A# tax# declaration,# by# itself,# is# not# considered# conclusive# evidence# of# ownership# –# it# is# merely# an# indicium# of# a# claim# of# ownership.#Daclag!v.!Macahilig!(560!SCRA!137)!


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constructive# If# there# is# no# express# stipulation# that# title# shall# not# # until# payment# of# price,# and# the# thing# sold# has# been# delivered,# ownership# es# from# the# moment# the# thing# sold# is# placed# in# the#possession#and#control#of#the#buyer.#Payment#of#price#does# not# determine# the# effect# of# delivery.! Kuenzle! &! Streiff! v.! Watson!&!Co.!(13!Phil!26)! o It# may# be# stipulated# that# ownership# in# the# thing# shall#

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in# Article# 1543( of# the# Civil# Code.! Cebu! Winland! Dev.! Corp.! v.! Ong!Siao!Hua!(588!SCRA!120).! •

not# # to# buyer# until# he# has# fully# paid# price.# Article( 1478.1# In#the#absence#of#an#express#stipulation#to#the#contrary,# payment# of# purchase# price# of# the# goods# is# not# a# condition#precedent#to#the#transfer#of#title#to#the#buyer,# but# title# es# by# the# delivery# of# the# goods.# Phil.! Suburban!Dev.!Corp.!v.!Auditor!General!(63!SCRA!397)! Failure#of#the#buyer#to#make#good#the#price#does#not,#in# law,# cause# the# ownership# to# revest# to# the# seller# unless# the# bilateral# contract# of# sale# is# first# rescinded# or#

#Article# 1478.# The# parties# may# stipulate# that# ownership# in# the# thing# shall# not# #to#the#purchaser#until#he#has#fully#paid#the#price.#(n)#

“Delivery”#as#used#in#the#Law#on#Sales#refers#to#the#concurrent# transfer# of# two# things:# (1)# possession# and# (2)# ownership.# If# the# vendee# is# placed# in# actual# possession# of# the# property,# but# by# agreement#of#the#parties#ownership#of#the#same#is#retained#by# the# vendor# until# the# vendee# has# fully# paid# the# price,# the# mere# transfer#of#the#possession#of#the#property#subject#of#the#sale#is# not#the#“delivery”#contemplated#in#the#Law#on#Sales#or#as#used#

Transfer# of# ownership# is# effected# by# delivery,# actual# or#

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Delivery#transfers#ownership#ipso#jure,#without#prejudice#to#the# right#of#the#seller#to#claim#payment#of#the#price.#Ocejo,!Perez!&! Co.!v.!International!Banking!Corp.!(37!Phil.!631)!

( General#Doctrines#on#Tradition,#Whether#Actual#or#Constructive#

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resolved#pursuant#to#Article#1191.! Balatbat! v.! Court! of! Appeals!(261!SCRA!128)!

Nevertheless#when#at#the#time#of#delivery#there#is#no#proof#that# the#seller#had#ownership#and#as#in#fact#the#tax#declaration#to#the# subject#property#was#in#the#name#of#another#person,#then#there# was#no#transfer#of#ownership#by#delivery.##Heirs!of!Severina!San! Miguel!v.!Court!of!Appeals!(364!SCRA!523)!

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Since# delivery# of# subject# matter# of# sale# is# an# obligation# on# the# part#of#the#seller,#the#acceptance#thereof#by#the#buyer#is#not#a# condition#for#the#completeness#of#delivery.! ! La! Fuerza! v.! Court! of!Appeals!(23!SCRA!1217).!

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A# contract# to# sell,# or# a# condition# contract# of# sale# where# the# suspensive# condition# has# not# happened,# even# when# found# in# a# public#document,#cannot#be#treated#as#constituting#constructive# delivery,# especially# when# from# the# face# of# the# instrument# it# is# shown# that# the# seller# “was# not# yet# the# owner# of# the# property# and# was# only# expecting# to# inherit# it.”! Heirs! of! Arturo! Reyes! v.! SoccoEBeltran!(572!SCRA!211,!221)!

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C.(To(Deliver(the(Fruits(and(Accessories( ( Article(1164.( The( creditor( has( a( right( to( the( fruits( of( the( thing( from( the( time( the(

II.(Tradition(as(a(Consequence(of(a(Valid(Sale( ( A.(Essence(of(Tradition( #

obligation( to( deliver( it( arises.( However,( he( shall( acquire( no( real( right( over(it(until(the(same(has(been(delivered(to(him.((1095)( ( Article(1537.( The( vendor( is( bound( to( deliver( the( thing( sold( and( its( accessions( and( accessories(in(the(condition(in(which(they(were(upon(the(perfection(of( the(contract.(

Article(1496.!( The( ownership( of( the( thing( sold( is( acquired( by( the( vendee( from( the( moment(it(is(delivered(to(him(in(any(of(the(ways(specified(in(Articles( 1497(to(1501,(or(in(any(other(manner(signifying(an(agreement(that(the( possession(is(transferred(from(the(vendor(to(the(vendee( #

( All( the( fruits( shall( pertain( to( the( vendee( from( the( day( on( which( the( contract(was(perfected.((1468a)( (

control# and# possession# of# the# vendee.# Delivery# is# a# composite# act,# in# which# both# parties# must# # and# the# minds# of# both# parties#concur.#Equatorial!Realty!Dev.,!Inc.!v.!Mayfair!Theater,! Inc.!(370!SCRA!56).!

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In# a# sale# involving# a# determinate# subject# matter,# even# prior# to#

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delivery# of# ownership# thereof# to# the# buyer,# the# buyer# already# has#certain#rights#enforceable#against#the#seller.# •

Since# the# subject# matter# is# intended# for# delivery# to# the# buyer# from# the# point# of# perfection# of# the# sale,# then# necessarily# the# accessories# and# fruits# must# from# then# on# be# held# for# the# #of#the#buyer.#

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Please#see#discussions#in#Chapter#12.#

Tradition#produces#its#legal#consequences#from#the#fact# that#delivery#is#effected#pursuant#to#a#valid#sale.#There#is# no#transfer#of#ownership#by#the#execution#of#a#deed#of# sale# merely# intended# to# accommodate# the# buyer# to# enable#him#to#generate#funds#for#his#business.#

The#critical#factor#in#the#different#modes#of#delivery,#which#gives# legal# effect# to# the# act,# is# the# actual# intention# of# the# vendor# to# deliver,# and# its# acceptance# by# the# vendee.# Without# that# intention,#there#is#no#tradition.#Santos!v.!Santos!(370!SCRA!56)#

# D.(To(Warrant(the(Subject(Matter( •

There# is# delivery# if# and# when# the# thing# sold# is# placed# in# the#

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# ( ( (


The#legal#effects#of#the#parties’#intention#must#be#gauged#at#the# point# of# perfection# by# which# the# obligation# to# deliver# the# subject#matter#is#created.# o Was# there# mutual# intention# and# agreement# to# transfer# the#ownership#of#the#subject#matter#

SALES%REVIEWER%(2013/2014)% % ! ! •

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If#yes,#there#is#a#valid#sale.# If#no,#the#sale#is#simulated,#and#therefore#void.#

2(Factors(of(the(Principle(of(Tradition# o o

Acceptance#(although#an#obligation#of#the#buyer)#is#not# essential#for#delivery#(seller)#to#achieve#its#legal#effects.# An# express# intention# on# the# matter# by# the# parties# to# a# sale,#at#the#point#of#delivery#is#not#essential#for#tradition# to#produce#its#legal#consequences.#

# B.(Types(of(Delivery:(Actual(Delivery( ( Article(1497.!( The( thing( sold( shall( be( understood( as( delivered,( when( it( is( placed( in( the(control(and(possession(of(the(vendee.((1462a)( ( •

Although# possession# is# the# best# gauge# when# there# is# control,# nonetheless# control# can# take# other# forms# other# than# actual# physical#possession.# o In# a# case,# the# lot# was# considered# to# be# in# the# buyer’s# control#when#the#buyer#subsequently#filed#an#ejectment# suit#against#someone.#Power!Commercial!and!Industrial! Corp.!v.!Court!of!Appeals!(274!SCRA!597)!

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It#is#not#necessary#that#seller#himself#delivers#title#to#the#buyer# because# the# thing# sold# is# understood# as# delivered# when# it# is# placed# in# control# and# possession# of# buyer.# Thus,# when# sellers# themselves# introduced# the# tenant# to# the# buyer# as# the# new# owners# of# the# land,# and# from# that# time# on# the# buyer# acted# as# landlord#thereof,#there#was#delivery#that#transferred#title#to#the# buyer.!!Alfredo!v.!Borras!(404!SCRA!145)!

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C.(Types(of(Delivery:(Constructive(Delivery( ( Article(1496.(( The( ownership( of( the( thing( sold( is( acquired( by( the( vendee( from( the( moment(it(is(delivered(to(him(in(any(of(the(ways(specified(in(Articles( 1497(to(1501,(or(in(any(other(manner(signifying(an(agreement(that(the( possession(is(transferred(from(the(vendor(to(the(vendee.((n)( # •

The# essence# of# most# forms# of# constructive# delivery# is# the# existence# of# an# agreement# between# the# seller# and# the# buyer,# and#that#the#latter#is#understood#to#have#control#of#the#subject# matter#of#the#sale.#

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Where# deed# of# sale# or# any# agreement# analogous# to# a# deed# of# sale,# is# made# through# a# public# instrument,# its# execution# is# equivalent# to# the# delivery# of# the# property.# Caoibes,! Jr.! v.! CaoibesEPantoja!(496!SCRA!273)!

# C.1.(Execution(of(Public(Instrument:(As(to(immovable(property( # Constructive# delivery# has# the# same# legal# effect# as# actual# or# physical# delivery# # Article(1498.( When( the( sale( is( made( through( a( public( instrument,( the( execution( thereof( shall( be( equivalent( to( the( delivery( of( the( thing( which( is( the( object(of(the(contract,(if(from(the(deed(the(contrary(does(not(appear( or(cannot(clearly(be(inferred.( (



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With(regard(to(movable(property,(its(delivery(may(also(be(made(by(the( delivery( of( the( keys( of( the( place( or( depository( where( it( is( stored( or( kept.((1463a)( ( •

Constructive# delivery# has# the# same# legal# effect# as# actual# or# physical#delivery.#Municipality! of! Victorias! v.! Court! of! Appeals! (149!SCRA!31)!

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Jurisprudence# has# held# that# a# notarized# deed# of# sale# has# two#

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not# legally# required,# since# ownership# and# possession# are# two# entirely#different#legal#concepts.#Notwithstanding#the#presence# of# illegal# occupants# on# the# subject# property,# transfer# of# ownership# by# symbolic# delivery# under# Article# 1498( can# still# be# effected# through# the# execution# of# the# deed# of# conveyance.! Sabio!v.!International!Corporate!Bank!(364!SCRA!385)( •

There#is#nothing#in#Article#1498(that#provides#that#execution#of# a# deed# of# sale# is# a# conclusive# presumption# of# delivery# of# possession;#presumptive#delivery#can#be#negated#by#the#failure# of# the# vendee# to# take# actual# possession# of# the# land# or# the# continued# enjoyment# of# possession# by# the# vendor.# Santos! v.! Santos!(366!SCRA!395)! o The# presumptive# delivery# by# the# execution# of# a# public# instrument#can#be#negated#by#the#failure#of#the#vendee# to# take# actual# possession# of# the# land# sold.! Cebu! Winland!Dev.!Corp.!v.!Ong!Siao!Hua!(588!SCRA!120)!

ownership.# Under# Article# 1498,# the# mere# execution# of# the# deed# of# conveyance#in#a#public#instrument#is#equivalent#to#the#delivery# of#the#property,#and#that#prior#physical#delivery#or#possession#is#


sold# cannot# transfer# constructive# possession# by# the# execution# and#delivery#of#a#public#instrument.(Asset!Privatization!Trust!v.! T.J.!Enterprises!(587!SCRA!481)!

functions:# 1. It# operates# as# a# formal# or# symbolic# delivery# of# the# property#sold.# 2. It#authorizes#the#buyer#to#use#the#document#as#proof#of# •

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Control#is#still#necessary.#If#a#public#document#was#executed,#but# the#buyer#is#not#placed#in#control#of#the#property,#there#is#only#a# rebuttable# presumption# of# delivery# which# can# be# rebutted# by# clear#and#convincing#evidence.#Santos!v.!Santos!(366!SCRA!395)!

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As# a# general# rule,# when# the# sale# is# made# through# a# public# instrument,# the# execution# thereof# shall# be# equivalent# to# the# delivery#of#the#thing#which#is#the#object#of#the#contract,#if#from# the# deed# the# contrary# does# not# appear# or# cannot# clearly# be# inferred.#In#order#the#execution#of#a#public#instrument#to#effect# tradition,# the# purchaser# must# be# placed# in# control# of# the# thing# sold.#A#person#who#does#not#have#actual#possession#of#the#thing#


Registration(of(Title(Is(Separate(Mode(from(Execution(of(Public( Instrument# "# The# recording# of# the# sale# with# the# proper# Registry# of# Deeds# and# the# transfer# of# the# certificate# of# title# in# the#name#of#the#buyer#are#necessary#only#to#bind#third#parties# to# the# transfer# of# ownership.# As# between# the# seller# and# the# buyer,# the# transfer# of# ownership# takes# effect# upon# the# execution#of#a#public#instrument#conveying#the#real#estate.#Chua! v.!Court!of!Appeals!(401!SCRA!54)! BUT( SEE:# Under# Article# 1495,# seller# is# obliged# to# transfer# title# over# the# property# and# deliver# the# same# to# the# vendee.# Vive! Eagle!Land,!Inc.!v.!Court!of!Appeals!(444!SCRA!445)!


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Customary(Steps(in(Selling(Immovables#"#“Customarily,#in#the# absence# of# a# contrary# agreement,# the# submission# by# an# individual# seller# to# the# buyer# of# the# following# papers# would# complete#a#sale#of#real#estate:#(1)#owner’s#duplicate#copy#of#the# Torrens# title;# (2)# signed# deed# of# absolute# sale;# (3)# tax# declaration;# and# (4)# latest# realty# tax# receipt.# The# buyer# can# retain# the# amount# for# the# capital# gains# tax# and# pay# it# upon# authority#of#the#seller,#or#the#seller#can#pay#the#tax,#depending# on#the#agreement#of#the#parties.”#Chua!v.!Court!of!Appeals!(401! SCRA!54)!

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The#execution#of#the#notarized#deed#of#sale#and#the#delivery#of# the# owner’s# duplicate# copy# of# the# original# certificate# of# title# to# the#buyer#is#tantamount#to#constructive#delivery#of#the#object#of# the#sale.!Kings!Properties!Corp.!v.!Galido!(606!SCRA!137)!

! Santos!v.!Santos! # Facts:#Jesus#and#Rosalia#owned#a#lot#with#a#4Idoor#apartment.#They#sold# through#a#public#instrument#the#said#property#to#their#children,#Salvador#

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#Antonio,#Hipolito,#Imperial#&#Zaragosa.#(2012).#Sales&CLV&Case&Digests.# Retrieved#from#http://www.idoub.com/doc/104486360/SalesICLVICaseI Digests#


Issue:#Whether#or#not#a#sale#through#a#public#instrument#tantamount#to# delivery#of#the#thing#sold.# # Held:#NO.#There#is#nothing#in#Article#1498#that#provides#that#execution# of#a#deed#of#sale#is#a#conclusive#presumption#of#delivery#of#possession;# presumptive# delivery# can# be# negated# by# the# failure# of# the# vendee# to# take# actual# possession# of# the# land# or# the# continued# enjoyment# of# possession# by# the# vendor.# For# the# execution# of# a# public# instrument# to# effect# tradition,# the# purchaser# must# be# placed# in# control# of# the# thing# sold.#To#effect#delivery,#there#must#be#the#actual#intention#of#the#vendor# to#deliver,#and#its#acceptance#by#the#vendee.# ! Cases#where#execution#of#public#instrument#covering#valid#sales#do#not# produce#the#effects#of#tradition:# 1. When# there# is# a# contrary# stipulation.# Phil.! Suburban! Dev.! v.! Auditor!(63!SCRA!397)# 2. At# the# time# of# the# execution# of# the# public# instrument,# the# subject# matter# was# not# subject# to# the# control# of# the# seller.# Addison!v.!Felix!(38!Phil.!404)# a. However,# if# there# was# an# express# agreement# that# the# buyer# had# to# take# necessary# steps# to# obtain# material# possession,#and#it#was#proven#that#the#buyer#knew#the# subject#matter#to#be#in#possession#of#a#third#party,#such# agreement# is# valid.# The# seller# is# deemed# to# have# complied#with#his#obligation#to#deliver#by#the#execution# of#the#public#instrument.#

and#Rosa—who#sold#her#share#to#Salvador#as#well.#Nonetheless,#in#spite# of# the# sale,# Rosalia# remained# in# possession# and# control# over# the# property.# Jesus,# Rosalia# and# Salvador# died.# Zenaida,# claiming# to# be# Salvador’s#heir,#demanded#rent#from#the#tenants.#The#other#children#of# Jesus#and#Rosalia#filed#a#case#for#reconveyance#averring#that#the#sale#to# Salvador#was#fictitious#and#done#merely#to#accommodate#him.1# #

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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3. General( Rule:# Not# only# must# the# seller# have# control# at# the# execution# of# the# instrument,# such# control# or# ability# to# transfer# physical#possession#must#subsist#for#a#reasonable#length#of#time.#



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Pasagui!v.!Villablanca!(68!SCRA!18);!Danguilan!v.!Intermediate! Appellate!Court!(168!SCRA!22).# a. This#is#an#important#ingredient#for#constructive#delivery;# otherwise,# the# execution# of# a# public# instrument,# as# a#

Held:#NO.#The#thing#is#considered#to#be#delivered#when#it#is#placed#"in# the#hands#and#possession#of#the#vendee."#(Article#1462).#It#is#true#that# the# same# article# declares# that# the# execution# of# a# public# instruments# is# equivalent# to# the# delivery# of# the# thing# which# is# the# object# of# the#

mode# of# delivery,# would# create# undue# burden# on# the# buyer,#who#would#be#compelled#to#literally#“jump”#into# the#possession#of#the#subject#matter#soon#after#g# the# instrument,# for# he# would# then# obtain# no# remedy# from#the#seller.# 4. Exception:# When# buyer# assumes# the# risks# of# ownership# and# possession.!Power!Commercial!and!Industrial!Corp.!v.!Court!of!

contract,# but,# in# order# that# this# symbolic# delivery# may# produce# the# effect# of# tradition,# it# is# necessary# that# the# vendor# shall# have# had# such# control#over#the#thing#sold#that,#at#the#moment#of#the#sale,#its#material# delivery# could# have# been# made.# It# is# not# enough# to# confer# upon# the# purchaser# the# ownership# and# the# right# of# possession.# The# thing# sold# must#be#placed#in#his#control.# !

Appeals!(274!SCRA!597)# a. Example:# Execution# of# Deed# of# Conditional# Sale# with# provision# that# final# deed# of# sale# to# be# executed# upon# full#payment#does#not#transfer#ownership#of#the#subject# matter.#Fortune!Tobacco!Corp.!v.!NLRC!!(200!SCRA!766).#

Danguilan!v.!IAC!

Addison!v.!Felix!

# Facts:#Apolonia#filed#a#complaint#against#Danguilan#for#recovery#of#two# lots.#She#claimed#to#have#purchased#these#lots#from#Domingo#Melad#and# moved# out# because# Danguilan# asked# if# he# could# cultivate# the# lands.# Domingo# claims# Domingo# signed# private# instruments# conveying# said# properties#on#the#understanding#that#the#latter#would#take#care#of#the#

# Facts:# Spouses# Marciana# Felix# and# Balbino# Tioco# bought# 4# parcels# of# land#from#A.#A.#Addison.#Felix#paid#at#the#time#of#execution#P3000#and# the#manner#of#payment#for#subsequent#installments#were#stipulated#by# the# parties.# The# contract# also# provided# for# a# stipulation# for# rescission# within#1#year#from#the#issuance#of#title#to#the#property,#and#shall#effect# restitution# among# the# parties.# Addison# filed# a# suit# in# the# CFI# of# Manila# claiming# the# first# installment# of# P2000.# Defendants# contested# that# the#

grantor#and#arrange#for#his#burial.# # Issue:#Who#has#a#better#claim#to#the#property?# # Held:#DAGUILAN.#At#the#onset,#the#donation#in#favor#of#Danguilan#was# valid#even#though#embodied#in#a#private#instrument,#because#it#was#an# onerous# donation.# The# deed# of# sale# presented# by# Apolonia# was# also# suspicious.#It#was#only#3#years#old#and#the#consideration#was#paid#for#by#

property#was#not#delivered,#hence#they#asked#for#a#refund.# # Issue:# Whether# or# not# there# was# delivery# and,# therefore,# a# transfer# of# ownership#of#the#thing#sold.#

her#mother.#Assuming#that#it#was#valid,#still#the#presumptive#delivery#is# overcome#by#the#fact#that#she#failed#to#take#possession#of#the#property.# Ownership,#after#all,#is#not#transferred#by#mere#stipulation#butby#actual# and# adverse# possession.# She# even# transferred# the# same# to# Danguilan#

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possession#of#the#same.#She#cannot#have#a#better#right#in#this#case#than# Danguilan.!# # Pasagui!v.!Villablanca!

The#seller#must#have#actual#control#of#the#object#of#sale#at#the#time#of# the# execution# of# the# instrument,# and# such# control/ability# to# transfer# physical#possession#must#subsist#for#a#reasonable#amount#of#time#after# the#execution#of#the#instrument.#Pasagui#had#not#yet#acquired#physical#

# Facts:# Pasagui# purchased# a# parcel# of# land# form# the# Bocar# Spouses# for# P2,800,#which#was#embodied#in#a#public#instrument.#They#failed#to#take# possession# of# the# property# because# the# Villablancas# illegally# took# possession# of# the# property# and# harvested# the# coconuts# therein.# Thus,# Pasagui# filed# a# case# for# ejectment# before# the# CFI.# The# Bocar# spouses# were# likewise# impleaded.# The# latter# contested# that# the# case# should# be#

possession#of#the#land#because#no#delivery#was#ever#made#by#the#seller,# even#by#constructive#delivery#that#proves#actual#possession#and#control.# #

dismissed# because# the# CFI# did# not# have# jurisdiction# over# forcible# entry# cases.# # Issue:#Whether#or#not#this#is#a#case#of#forcible#entry.# # Held:# NO.# The# case# was# not# for# forcible# entry# because# there# was# no# allegation#that#Pasagui#was#in#prior#physical#possession#of#the#land#and# that# the# Villablancas,# through# force,# stealth,# or# threat,# deprived# them# thereof.# While# the# sale# was# made# through# a# public# document# is# equivalent# to# delivery,# this# presumption# only# holds# true# if# there# is# no# impediment# to# the# possession# of# the# purchaser.# Such# is# not# the# case# here.#Since#Pasagui#had#not#yet#acquired#physical#possession#of#the#land,# the# case# was# not# one# for# forcible# entry# and# the# CFI# (not# municipal# courts)#has#jurisdiction.1# #

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The# registration# of# a# Deed# of# Sale# involving# land# with# the#

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Registry# of# Deeds# is# necessary# only# to# bind# 3rd# parties.# As# between# the# buyer# and# seller,# ownership# is# transferred# by# the# execution# of# the# public# document.! Chua! v.! Court! of! Appeals! (401!SCRA!54)! # Power!Commercial!and!Industrial!Corp.!v.!Court!of!Appeals! # Facts:# PCIC# bought# a# property# from# spouses# Quiambao.# PCIC# also# assumed# mortgage# on# the# land# in# favor# of# PNB.# Spouses# again# mortgaged# the# land# to# PNB# to# guarantee# a# loan.# PCIC# assumed# this# mortgage# also,# so# parties# executed# a# Deed# of# Absolute# Sale# with# Assumption# of# Mortgage,# along# with# the# application# for# assumption# of# mortgage,# to# PNB.# PCIC# filed# for# rescission# of# the# contract# for# Quiambaos’#failure#to#eject#the#lessees#and#transfer#physical#possession# to#them.#During#the#pendency#of#the#case,#the#mortgage#was#foreclosed# and#PNB#was#the#highest#bidder#at#the#public#auction.# # Issues:# Whether# or# not# the# contract# may# be# rescinded# due# to# a# substantial#breach#of#the#contract—failure#to#eject#tenants#and#violation# of#warranty#against#eviction.# #



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Held:#NO.#Delivery#can#be#actual#or#constructive.#Symbolic#delivery,#as#a# species# of# constructive# delivery,# may# be# prevented# if# the# vendor# does# not# possess# control# over# the# thing# sold,# in# which# case# this# legal# fiction# must# yield# to# reality.# Here,# the# lot# had# been# placed# in# PCIC’s# control.#

the(sale,(or(if(the(latter(already(had(it(in(his(possession(for(any(other( reason.((1463a)( ! •

Where#it#is#stipulated#that#deliveries#must#be#made#to#the#buyer# or# his# duly# authorized# representative# named# in# the# contracts,# the#seller#is#under#obligation#to#deliver#in#accordance#with#such# instructions.# Lagon! v.! Hooven! Comalco! Industries,! Inc.! (349! SCRA!363).!!

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Execution# by# supposed# buyers# of# a# chattel# mortgage# over# subject#vehicle#in#favor#of#the#financing#company#does#not#mean# that#ownership#had#been#transferred#to#them,#for#delivery#must#


be# on# the# part# of# the# seller.# Union! Motor! Corp.! v.! Court! of! Appeals!(361!SCRA!506)! •

Neither#issuance#of#an#invoice,#which#is#not#a#document#of#title# P.T.!Cerna!Corp.!v.!Court!of!Appeals!(221!SCRA!19),#nor#of#the# registration#certificate#of#vehicle#Union!Motor!Corp.!v.!Court!of! Appeals!(361!SCRA!506),#would#constitute#constructive#delivery.#

That’s# why# they# were# able# to# file# the# ejectment# cases# subsequently.# Since# ejectment# of# lessees# was# not# stipulated# as# a# condition,# it# cannot# be#invoked#as#a#cause#to#allow#PCIC#to#rescind#its#contract.#In#fact,#PCIC# was# aware# of# the# presence# of# the# tenants# when# it# entered# into# the# contract#of#sale#hence#it#assumed#the#risks#of#ownership#and#possession.# Power# Commercial# was# deprived# of# ownership# only# after# it# failed# to# remit#the#amortizations,#but#not#due#to#failure#of#delivery.# ( C.2.(Execution(of(Public(Instrument:(As(to(movable(property( ( Article(1499.( The(delivery(of(movable(property(may(likewise(be(made(by(the(mere( consent( or( agreement( of( the( contracting( parties,( if( the( thing( sold( cannot(be(transferred(to(the(possession(of(the(vendee(at(the(time(of(

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When#it#comes#to#a#thirdIparty#and#the#issue#centers#on#the#title# or#ownership#of#the#subject#matter,#constructive#delivery#by#the# execution# of# a# public# instrument# would# produce# the# effect# of# tradition,#but#only#insofar#as#title#is#concerned,#provided#that#at# the#time#of#the#execution#there#was#no#legal#impediment#on#the# part# of# the# seller# to# transfer# title# to# the# buyer,# even# if# at# the# time#of#sale,#control#of#possession#of#the#subject#matter#was#not# in#the#hands#of#the#seller.!Dy,!Jr.!v.!Court!of!Appeals!(198!SCRA! 826)!

! Dy,!Jr.!v.!Court!of!Appeals! # Facts:#Wilfredo#Dy#obtained#a#loan#from#Libra#to#buy#a#truck#and#tractor,# which# were# mortgaged# to# Libra# as# security.# Perfecto# Dy# purchased# the# tractor#from#Wilfredo#and#assumed#the#mortgage#debt.#The#tractor#was# in# Libra’s# possession# because# Wilfredo# failed# to# pay# the# amortization.# Perfecto#offered#to#pay#the#full#amount#but#Libra#refused#since#the#loan# was#obtained#not#only#for#the#tractor#but#the#truck#as#well.#There#was#a# collection# case# pending# filed# by# Gelac# Trading# against# Wilfredo.# The# tractor#was#seized#and#sold#at#a#public#auction#where#Gelac#Trading#was# the#lone#bidder.#Gelac#Trading#sold#the#tractor#to#Antonio#Gonzales.# # #



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Issue:( 1. Whether# or# not# there# was# constructive# delivery# at# the# time# of# the#execution#of#the#deed#of#sale#in#favor#Perfecto.#"#YES# 2. Whether#or#not#Wilfredo#must#first#have#control#and#possession# of#the#thing#before#he#could#transfer#ownership#by#constructive# delivery.#"#NO#

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agreement# of# the# parties# when# the# thing# sold# cannot# be# immediately# transferred#to#the#possession#of#the#vendee.#

! C.3.(Execution(of(Public(Instrument:(As(to(Incorporeal(Property( # Article(1501.(( With( respect( to( incorporeal( property,( the( provisions( of( the( first(

incorporeal#property,#with#the#seller’s#consent# •

( D.(Expenses(of(Execution(and(Registration( ( Article(1487.( The( expenses( for( the( execution( and( registration( of( the( sale( shall( be( borne( by( the( vendor,( unless( there( is( a( stipulation( to( the( contrary.( (1455a)( # •

Unless#otherwise#stipulated:## o

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3# types# of# constructive# delivery# specifically# applicable# to# incorporeal#property:#

In# the# sale# of# shares# of# stock,# physical# delivery# of# a# stock# certificate# is# one# of# the# essential# requisites# for# the# transfer# of# ownership#of#the#stocks#purchased.#Filinvest’s#failure#to#delivery# the#stock#certificates#representing#the#shares#of#stock#purchased# by# TEMI# and# Garcia# amounted# to# a# substantial# breach# of# their# contract# which# gave# rise# to# a# right# to# rescind# the# sale.# RaquelE Santos!v.!Court!of!Appeals!(592!SCRA!169)!

paragraph(of(Article(1498(shall(govern.(In(any(other(case(wherein(said( provisions(are(not(applicable,(the(placing(of(the(titles(of(ownership(in( the( possession( of( the( vendee( or( the( use( by( the( vendee( of( his( rights,( with(the(vendor's(consent,(shall(be(understood(as(a(delivery.((1464)( ! •


1. Execution# of# a# public# instrument,# if# the# contrary# does# not# appear# 2. Placing#of#the#titles#of#ownership#in#the#possession#of#the#buyer# 3. Use#and#enjoyment#by#the#buyer#of#the#rights#pertaining#to#the#

# Held:#Article#1496#states#that#the#ownership#of#the#thing#sold#is#acquired# by#the#vendee#from#the#moment#it#is#delivered#to#him#in#any#of#the#ways# specified# in# Article# 1497I# 1501# or# in# any# other# manner# signifying# an# agreement# that# the# possession# is# transferred# from# the# vendor# to# the# vendee.# Although# actual# delivery# of# the# tractor# could# not# be# made,# there#was#constructive#delivery#already#upon#the#execution#of#the#public# instrument# pursuant# to# Article# 1498# and# upon# the# consent# or#

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Under#Article#1487,#the#expenses#for#the#registration#of# the#sale#should#be#shouldered#by#the#vendor.!Vive!Eagle! Land,!Inc.!v.!Court!of!Appeals!(444!SCRA!445).! Duty# to# withhold# taxes# due# on# the# sale# is# imposed# on# seller.# Equitable! Realty! Development! Inc.! v.! Mayfair! Theater,!Inc.!(332!SCRA!139).!

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Buyer# has# more# interest# in# having# the# capital# gains# tax# paid# immediately#since#this#is#a#preIrequisite#to#the#issuance#of#a#new#


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Torrens# title# in# his# name.# Nevertheless,# as# far# as# the# government# is# concerned,# the# capital# gains# tax# remains# a# liability#of#the#seller#since#it#is#a#tax#on#the#seller’s#gain#from#the# sale# of# the# real# estate.# Payment# of# the# capital# gains# tax,#

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# E.(Expenses(of(Delivery(and(Registration(on(Real(Estate( •

In#the#2002#case#of#Jose!Clavano!v.!HLURB!(378!SCRA!172),#the# SC#held#that#a#judgment#on#a#sale#that#decrees#the#obligations#of# the#seller#to#execute#and#deliver#the#deed#of#absolute#sale#and# the# certificate# of# title,# does# not# necessarily# include# the# obligation# on# the# part# of# the# seller# to# pay# for# expenses# in# notarizing#the#deed#of#sale#and#in#obtaining#a#new#certificate#of# title.#

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In#the#2003#case#of#Chua!v.!Court!of!Appeals!(401!SCRA!54),#the# Court# held# that# the# obligation# of# the# seller# is# to# transfer# ownership# which# is# done# by# the# execution# of# a# public# instrument.# Thus,# expenses# for# registration# in# the# Registry# of# Deeds,# which# merely# binds# third# persons# but# does# not# transfer#

In# the# 2004# case# of# Vive! Eagle! Land,! Inc.! v.! Court! of! Appeals! (444!SCRA!445),#the#SC#held#that#registration#of#the#sale#should# be# shouldered# by# the# seller# unless# there# is# a# contrary# stipulation.#

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CLV# doesn’t# say# which# case# is# correct,# but# he# seems# to# favor# Chua&v.&Court&of&Appeals&since#he#keeps#saying#that#the#other#2# cases#are#in#stark#contrast#to#Chua.# ! Chua!v.!Court!of!Appeals!

A# judgment# on# a# contract# of# sale# that# decrees# seller’s# obligations#to#execute#and#deliver#the#deed#of#absolute#sale#and# the# certificate# of# title,# does# not# necessarily# include# within# its# # the# obligation# to# pay# for# the# expenses# in# notarizing# a# deed# of# sale# and# in# obtaining# new# certificate# of# title.# Jose! Clavano,!Inc.!v.!HLRB!(378!SCRA!172)#


ownership,# is# to# be# borne# by# the# buyer.# Capital# gains# tax# remains#liability#of#the#seller.#

however,# is# not# a# preIrequisite# to# the# transfer# of# ownership# to# the# buyer.# The# transfer# of# ownership# takes# effect# upon# the# g#and#notarization#of#the#deed#of#absolute#sale.”# Chua! v.!! Court!of!Appeals!(401!SCRA!54)! •

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# Facts:# ValdesIChoy# is# the# owner# of# the# subject# matter,# when# she# d#the#property#for#sale.#Chua#responded#to#the#ment,# and# met# up# with# ValdesIChoy.# They# agreed# for# the# purchase# price# of# P10,800,000,# to# be# paid# on# July# 15,# 1989.# This# was# evidenced# by# an# earnest# money# for# P100,000,# which# was# put# on# a# receipt,# stating# that# the# money# will# be# forfeited# upon# failure# to# pay# on# the# day# stipulated.# On# July# 13,# ValdesIChoy# executed# two# deeds# of# absolute# sale,# first,# pertaining# to# the# house# and# lot,# valued# at# P8,000,000,# and# second,# pertaining#to#the#movable#properties#therein.#The#next#day,#Chua#issued# a# check# worth# P485,000# for# the# purpose# paying# the# capital# gains# tax.# The#value#was#deducted#from#the#balance,#with#an#outstanding#value#of# P10,295,000#(additional#P80,000#for#the#documentary#stamp#tax).#Chua# also# showed# a# check# worth# P10,215,00# to# ValdesIChoy,# however,# he# demanded# that# the# TCT# should# first# be# transferred# to# his# name# before# paying#the#check.#Out#of#anger,#ValdesI#Choy#tore#the#deed#of#absolute# sale.# On# the# reckoning# date,# ValdesIChoy# tried# to# make# a# compromise# with#Chua,#but#she#did#not#get#any#response.#Two#days#later,#Chua#filed#



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an# action# for# specific# performance,# which# the# trial# court# dismissed.# A# week#later,#he#filed#another#action#for#specific#performance,#where#the# court#ruled#in#favor#of#him.#On#appeal,#CA#reversed.1# (

payment# of# the# purchase# price.# Second,# absent# of# a# formal# deed# of# conveyance#of#the#property#in#favor#of#the#buyer#shows#that#there#was# no# intention# to# transfer# ownership# immediately.# The# nonIfulfillment# of# the# suspensive# condition,# which# is# payment# of# the# full# purchase# price#

Issue:( Whether# or# not# Chua# can# compel# ValdesIChoy# to# cause# the# issuance#of#a#new#TCT#in#Chua's#name#even#before#payment#of#the#full# purchase#price.## # Held:( NO.# The# obligation# of# the# seller# is# to# transfer# to# the# buyer# ownership# of# the# thing# sold.# There# is# a# difference# between# transfer# of# the# certificate# of# title# in# the# name# of# the# buyer,# and# transfer# of#

prevents#the#obligation#to#sell#from#arising,#where#the#owner#retains#the# ownership# over# the# property.# Article# 1482# speaks# of# earnest# money# as# an# evidence# of# a# perfected# contract# of# sale.# However,# in# this# case,# the# earnest#money#was#paid#in#part#consideration#of#a#contract#to#sell,#and# therefore,#Article#1482#does#not#apply.# # Vive!Eagle!Land,!Inc!v.!Court!of!Appeals!

ownership# to# the# buyer.# Registration# of# title# is# separate# mode# from# execution# of# public# instrument.# The# recording# of# the# sale# with# the# proper#Registry#of#Deeds#and#the#transfer#of#the#certificate#of#title#in#the# name# of# the# buyer# are# necessary# only# to# bind# third# parties# to# the# transfer#of#ownership.#As#between#the#seller#and#the#buyer,#the#transfer# of# ownership# takes# effect# upon# the# execution# of# a# public# instrument# conveying#the#real#estate.#The#submission#by#a#seller#to#the#buyer#of#the#

! Facts:# In# 1987,# Spouses# Flores,# as# owners,# sold# 2# parcels# of# land# in# Cubao#to#Tatic#Square#International#Corp#for#P5.7M.#Tatic#applied#for#a# loan#with#Capital#Rual#Bank#of#Makati#to#finance#its#purchase#of#the#said# lots,#which#the#bank#granted#provided#that#the#torrens#title#over#the#lots# would#be#ed#under#its#name#as#collateral#for#the#payment#of#the# loan.# In# 1988,# Tatic# sold# these# parcels# of# land# to# Vive# Eagle# Land# Inc#

following# papers# would# complete# a# sale# of# real# estate:# (1)# owner’s# duplicate#copy#of#the#Torrens#title;#(2)#signed#deed#of#absolute#sale;#(3)# tax#declaration;#and#(4)#latest#realty#tax#receipt.# # Furthermore,# their# agreement# is# a# contract# to# sell.# First,# when# the# agreement#was#made,#the#earnest#money#is#forfeited#in#favor#of#ValdesI Choy#who#may#then#sell#the#land#to#other#interested#parties.#This#is#the# nature# of# reserving# the# ownership# of# the# property,# subject# to# the# full#

(VELI)# for# P6.3M,# although# the# torrens# titles# over# the# lots# were# still# in# the# custody# of# the# bank.# During# the# same# year,# VELI# sold# one# of# these# parcels# of# land# to# Genuino# Ice# Co.# Inc.# for# P4M.# Also,# a# deed# of# assignment# of# rights# in# which# VELI# assigned# in# favor# of# Genuino# Ice# all# rights#and#interests#under#the#Deed#of#Sale#executed#by#spouses#Flores# and#the#other#Deed#of#Sale#executed#by#Tatic#in#VELI's#favor,#in#so#far#as# that#lot#is#concerned.# #

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Flores#"#Tatic#(2#lots)#"#VELI#(2#lots)#"#Genuino#Ice#(1#lot)# # Genuino#Ice#demanded#that#VELI#pay#its#capital#gains#tax#amounting#to# P285,000.# However,# VELI# refused# saying# that# the# Spouses# Flores# and#



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Tobias# (broker# of# the# sale)# are# responsible# to# pay# the# tax.# Genuino# Ice# filed# an# action# for# specific# performance# against# VELI,# contending# that# VELI#failed#to#transfer#title#to#and#in#the#name#of#Genuino#Ice,#to#cause# the# eviction# of# the# occupants,# and# to# pay# the# tax# and# other# dues# to#

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Under#Article#1495,#VELI,#as#vendor,#is#obliged#to#transfer#title#over#the# property# and# deliver# the# same# to# the# vendee# (Genuino# Ice).# While# Article#1498#provides#that#the#execution#of#a#notarized#deed#of#absolute# sale# shall# be# equivalent# to# the# delivery# of# the# property,# the# same# shall# not# apply# if# from# the# deed# the# contrary# does# not# appear# or# cannot# clearly# be# inferred.# In# this# case,# Genuino# Ice# and# VELI# agreed# that# the# latter#would#cause#the#eviction#of#the#tenants#and#deliver#possession#of# the# property.# It# is# clear# that# at# the# time# the# petitioner# executed# the# deed#of#sale#in#favor#of#Genuino#Ice,#there#were#tenants#in#the#property.#


It# cannot# be# concluded# that# the# property# was# thereby# delivered# to# Genuino#Ice.1#

! F.(Symbolic(Delivery(

effectuate#the#transfer#of#the#title#of#the#property.#RTC#ruled#in#favor#of# Genuino#Ice,#CA#affirmed.# # Issue:#Whether#or#not#petitioner#VELI#is#obliged#to#pay#for#the#expenses# for#transfer#of#the#property#and#the#issuance#of#the#titles#to#and#under# the#name#of#the#Genuino.# # Held:# YES.# Under# Article# 1487,# the# expenses# for# the# registration# of# the# sale# should# be# shouldered# by# the# vendor# (VELI)# unless# there# is# a# stipulation# to# the# contrary.# In# the# absence# of# the# stipulation# of# the# parties#relating#to#the#expenses#for#the#registration#of#the#sale#and#the# transfer# of# the# title# to# the# vendee# (Genuino# Ice),# Article# 1487# shall# be# applied#in#a#supplementary#manner.## #

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Must# involve# or# cover# the# subject# matter,# and# cannot# take# a# form#relating#to#the#payment#of#the#purchase#price.# o

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The#issuance#of#a#receipt#for#partial#payment#cannot#be# taken# to# mean# a# transfer# of# ownership.# Lorenzo! Dev.! Corp.!v.!Court!of!Appeals!(449!SCRA!99)! As#to#movables,#constructive#delivery#may#also#be#made# by# the# delivery# of# the# keys# of# the# place# or# depositary# where#the#movable#is#stored#or#kept.!

! G.(Constitutum(Possessorium( •

The# seller# held# possession# in# the# concept# of# owner,# and# pursuant#to#the#contract,#the#seller#continues#possession,#but#as# lesee,#or#any#other#form#of#possession#other#than#in#the#concept# of#an#owner.&

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A#provision#in#the#deed#of#sale#granting#to#seller#a#right#to#lease# the#subject#matter#of#the#sale#is#valid:#the#possession#is#deemed# to# be# constituted# in# the# vendee# by# virtue# of# this# mode# of# tradition.”#Amigo!v.!Teves!(96!Phil.!252)!

& H.(Traditio(Brevi(Manu( •

Opposite#of#constitutum#possessorium#

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The# buyer# is# already# in# the# possession# of# the# property# before# the#sale,#but#not#in#the#concept#of#the#owner.#After#the#sale,#the# buyer#becomes#possesor#in#the#concept#of#owner.#

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# I.(Traditio(Longa(Manu( Delivery#by#mere#agreement,#such#as#when#the#seller#points#the# property# subject# matter# of# the# sale# by# way# of# delivery# without# need#of#actually#delivering#physical#possession.#

! J.(Delivery(by(Negotiable(Document(of(Title( •

A#negotiable#document#of#title#represents#the#actual#goods.#If#it# is# transferred# in# good# faith# and# for# value,# and# if# the# transferor# had#the#ability#to#convey,#it#is#equivalent#to#the#transfer#of#the# thing#itself#(Example:#Negotiable#warehouse#receipt).#

•

# ( ( ( (

If# the# document# of# title# has# merely# been# assigned,# and# not# negotiated,# the# transferee/assignee# only# acquires# the# transferor’s#title.#

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K.(Delivery(through(Carrier( •

This#mode#only#applies#to#the#sale#of#goods.##

•

General(Rule:#In#the#absence#of#contrary#stipulation,#delivery#to# the#carrier#is#deemed#delivery#to#the#buyer.#The#carrier#acts#as# an#agent#of#the#buyer.#

Prior# to# the# sale,# petitioners# were# in# possession# of# the# subject# property# as# lessees.# Upon# sale# to# them# of# the# rights,# interests# and# participation# as# to# the# ½# portion# pro# indiviso,# they# remained#in#possession,#not#in#the#concept#of#lessees#anymore# but#as#owners#now#through#symbolic#delivery#known#as#traditio# brevi#manu.##Heirs! of! Pedro! Escanlar! v.! Court! of! Appeals! (281! SCRA!176)!

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# Article(1523.( Where,( in( pursuance( of( a( contract( of( sale,( the( seller( is( authorized( or( required(to(send(the(goods(to(the(buyer,(delivery(of(the(goods(to(the( buyer,( whether( named( by( the( buyer( or( not,( for( the( purpose( of( transmission(to(the(buyer(is(deemed(to(be(a(delivery(of(the(goods(to( the(buyer,(except(in(the(cases(provided(for(in(Article(1503,(first,(second( and(third(paragraphs,(or(unless(a(contrary(intent(appears.( ( Unless(otherwise(authorized(by(the(buyer,(the(seller(must(make(such( contract(with(the(carrier(on(behalf(of(the(buyer(as(may(be(reasonable,( having(regard(to(the(nature(of(the(goods(and(the(other(circumstances( of( the( case.( If( the( seller( omit( so( to( do,( and( the( goods( are( lost( or( damaged( in( course( of( transit,( the( buyer( may( decline( to( treat( the( delivery(to(the(carrier(as(a(delivery(to(himself,(or(may(hold(the(seller( responsible(in(damage.( ( Unless( otherwise( agreed,( where( goods( are( sent( by( the( seller( to( the( buyer(under(circumstances(in(which(the(seller(knows(or(ought(to(know( that(it(is(usual(to(insure,(the(seller(must(give(such(notice(to(the(buyer( as(may(enable(him(to(insure(them(during(their(transit,(and,(if(the(seller( fails(to(do(so,(the(goods(shall(be(deemed(to(be(at(his(risk(during(such( transit.((n)( (



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a. F.#A.#S.#Sales:#“Freight#Along#Side”# •

•

The#seller#pays#all#charges#and#is#subject#to#risk#until#the#goods#

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“f.#o.#b.#shipping#point”#"#delivery#of#the#goods#to#the#carrier#is# #

“f.#o.#b.#destination”#"#delivery#to#the#buyer#takes#place#upon#

# Facts:#Yangco#ordered#80#drums#of#caustic#soda#“Carabao#Brand”#from# Bhen#&#Meyer.#The#instrument#evidencing#the#agreement#made#use#of# the# # “FOB”# and# “CIF.”# The# goods# were# detained# by# the# British# authorities# in# Penang.# Bhen# &# Meyer# alleges# that# Yangco# had# already# acquired# ownership# of# the# said# goods# and# should# thus# pay# for# the# purchase# price.# However,# Yangco# refused# to# accept# the# same# alleging#

The#price#fixed#covers#not#only#the#costs#of#the#goods,#but#also# the#expense#of#freight,#and#insurance#

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Two#schools#of#though#on#effect#of#delivery#under#c.i.f#sales:# o The#carrier#acts#as#an#agent#of#the#buyer,#and#therefore,# delivery#to#the#carrier#is#delivery#to#the#buyer.#The#buyer#

o

•

These#shipping#arrangements#create#presumptive#effects#which#

equivalent#to#delivery#to#the#buyer.#Risk#of#loss#pertains#to#the# buyer.# arrival#of#the#vessel#at#the#point#of#destination.#Prior#to#arrival,# risk#of#loss#pertains#to#the#seller.# c. C.#I.#F.#Sales:#“Costs,#insurance,#and#freight”# •


can# guide# the# courts# in# construing# when# constructive# delivery# occurs.#However,#such#presumptions#must#necessarily#give#way# to# any# stipulation# or# intimation# to# the# contrary,# as# these# show# the# intent# of# the# parties.# It# is# still# the# intention# of# the# parties# which#control#the#agreement.#

are#placed#alongside#the#vessel.#Delivery#of#the#goods#alongside# the#vessel#completes#the#effect#of#delivery.# b. F.#O.#B.#Sales:#“Free#on#board”# •

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thus# obtained# ownership.# General! Foods! v.! NACOCO! (100!Phil!637).# Both# parties# agree# that# the# seller# takes# on# the# responsibility# of# insuring# the# goods.# Delivery# to# the# carrier#is#not#equivalent#to#delivery#to#the#buyer.#Behn,! Meyer!&!Co.!v.!Yangco!(38!Phil!602).#

Under# an# arrangement# “c.i.f.# Pacific# Coast”# (destination),# “the# vendor# is# to# pay# not# only# the# cost# of# the# goods,# but# also# the# freight# and# insurance# expenses,# and,# as# it# was# judicially# interpreted,# this# is# taken# to# indicate# that# the# delivery# is# to# be# made#at#the#port#of#destination.”#Pacific!Vegetable!Oil!Corp.!v.! Singzon,!Supreme!Court!Advance!Decisions,!29!April!1955#

Behn,!Meyer!&!Co.!v.!Yangco!

that# the# goods# were# not# “Carabao# Brand”# and# that# the# same# were# adulterated.1# # Issue:#Whether#or#not#the#seller#is#liable.# # Held:# YES.# Contract# provided# for# “c.i.f.# Manila...”# The# term# c.i.f.# presumes# that# property# es# (considered# delivered)# to# the# buyer# upon#delivery#to#the#common#carrier.#“f.o.b.”#presumes#that#the#seller#is# responsible# until# delivery# is# made# to# destination.# But# these# are# just# presumptions.# Intent# is# still# controlling.# Although# “c.i.f.”# was# used,# it# is# clear#from#the#contract#that#the#parties#intended#the#seller#to#be#liable#

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until# delivery# was# made# to# destination# (Manila).# Not# having# been# fulfilled,#buyer#has#a#right#to#rescind#for#substantial#breach.# # General!Foods!v.!NACOCO!

Singzon# again# failed# to# ship# the# copra,# and# he# did# not# pay# the# fine# or# ship#the#500#tons#as#originally#agreed.#Pacific#filed#an#action#to#recover# damages.# Singzon# claims# that# Pacific# had# no# legal# personality# to# sue# because#it#is#a#foreign#corporation.1#

( Facts:#NACOCO#(based#in#Manila)#sold#1000#tons#of#copra#to#GFC.#It#was# shipped#to#GFC#(New#York)#aboard#the#SS#Mindoro.#NACOCO#withdrew# from#GFC’s#letter#of#credit#the#amount#corresponding#to#the#copra.#But# GFC# only# received# 800# tons# so# it# demanded# a# refund# corresponding# to# the#price#of#the#deficiency.#NACOCO’s#defense#is#that#since#the#contract# was#c.i.f.,#delivery#to#the#carrier#(SS#Mindoro)#was#equivalent#to#delivery#

# Issue:#Whether#or#not#Singzon#liable# # Held:#YES.#Under#their#arrangement,#the#vendor#was#not#only#to#pay#for# cost,# but# also# freight# and# insurance# expenses.# So# before# arrival# at# the# destination,#the#risk#of#loss#should#be#for#the##of#the#seller.## #

to#the#buyer#(GFC).# # Issue:#Whether#or#not#NACOCO#is#liable#to#refund.# # Held:#YES.#While#in#ordinary#c.i.f.#delivery#to#the#carrier#is#delivery#to#the# buyer,# the# parties# can# insert# stipulations.# Here,# the# parties# stipulated# that#the#price#to#be#paid#would#be#based#on#the#exact#net#weight#upon#

III.(Effects(and(Completeness(of(Delivery( # 2#Things#Must#Be#Present#to#make#delivery#produce#its#legal#effect:## 1.#Delivery#must#be#made#pursuant#to#a#valid#sale#

arrival# at# port# of# destination.# NACOCO# had# burden# to# prove# that# the# deficiency# in# weight# was# owing# to# risks# of# the# voyage# or# allowable# weighing#errors#and#not#the#drying#up#of#the#copra.#It#did#not#prove.# # Pacific!Vegetable!Oil!Corp.!v.!Singzon! # Facts:# Petitioner# and# respondent# entered# into# a# contract# in# the# US# whereby#Singzon#agreed#to#ship#500#tons#of#copra,#with#the#agreement# CIF,#Pacific#Coast.#Singzon#failed#to#deliver,#but#the#parties#entered#into# a# settlement,# whereby# Singzon# would# deliver# 300# tons# at# the# same# #the#contract#provided#that#should#Singzon#again#default,#he#would# pay# $10,000# for# damages# and# the# original# contract# would# be# revived.#

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Tradition# pertains# to# the# consummation# stage# of# sale,# thus,# it# presupposes#a#valid#sale.#

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When#a#sale#is#fictitious,#no#title#over#the#subject#matter#of#the# sale#can#be#conveyed.#

2.# Delivery# must# be# made# when# seller# has# ownership# over# the# subject# matter#of#sale#so#delivered# •

No#man#can#dispose#of#that#which#does#not#belong#to#him.##

# # # #

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To#Whom#Delivery#Must#Be#Made# •

General( Rule:# Delivery# must# be# made# to# the# buyer# or# his# duly# authorized# representatives# named# in# the# contract.# Lagoon! v.! Hooven!Comalco!Industries,!Inc.!(349!SCRA!363)!

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Exception:(However,#parties#can#validly#stipulate#how#delivery#is# to#be#made#and#to#whom.#

# When#Buyer#Refuses#to#Accept# •

Even#if#the#buyer#refuses#to#accept,#the#delivery#by#the#seller#will# produce# its# legal# effects.# However,# the# seller# is# still# legally# obliged# to# take# certain# steps# as# not# to# be# held# liable# for# consequent#loss#or#damage#to#the#goods.#

# Article(1588.( If( there( is( no( stipulation( as( specified( in( the( first( paragraph( of( Article( 1523,( when( the( buyer’s( refusal( to( accept( the( goods( is( without( just( cause,( the( title( thereto( es( to( him( from( the( moment( they( are( placed(at(his(disposal.((n)( ( A.(Rules(on(Effects(of(Delivery(for(Movables( ( Article(1522.( Where(the(seller(delivers(to(the(buyer(a(quantity(of(goods(less(than(he( contracted(to(sell,(the(buyer(may(reject(them,(but(if(the(buyer(accepts( or(retains(the(goods(so(delivered,(knowing(that(the(seller(is(not(going( to( perform( the( contract( in( full,( he( must( pay( for( them( at( the( contract( rate.( If,( however,( the( buyer( has( used( or( disposed( of( the( goods( delivered( before( he( knows( that( the( seller( is( not( going( to( perform( his(

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contract( in( full,( the( buyer( shall( not( be( liable( for( more( than( the( fair( value(to(him(of(the(goods(so(received.( ( Where(the(seller(delivers(to(the(buyer(a(quantity(of(goods(larger(than( he(contracted(to(sell,(the(buyer(may(accept(the(goods(included(in(the( contract( and( reject( the( rest.( If( the( buyer( accepts( the( whole( of( the( goods(so(delivered,(he(must(pay(for(them(at(the(contract(rate.( ( Where(the(seller(delivers(to(the(buyer(the(goods(he(contracted(to(sell( mixed( with( goods( of( a( different( description( not( included( in( the( contract,( the( buyer( may( accept( the( goods( which( are( in( accordance( with(the(contract(and(reject(the(rest.( In( the( preceding( two( paragraphs,( if( the( subject( matter( is( indivisible,( the(buyer(may(reject(the(whole(of(the(goods.( ( The(provisions(of(this(article(are(subject(to(any(usage(of(trade,(special( agreement,(or(course(of(dealing(between(the(parties.((n)( # A.1.(When(Goods(Held(by(Third(Party( •

When#goods#are#in#the#possession#of#a#third#party#at#the#time#of# the# sale,# the# seller# has# not# fulfilled# his# obligation# to# deliver# unless# and# until# the# third# person# acknowledges# to# the# buyer# that#he#holds#the#goods#on#the#buyer’s#behalf.#Article(15211#

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#Article(1521.#Whether#it#is#for#the#buyer#to#take#possession#of#the#goods#or#of# the# seller# to# send# them# to# the# buyer# is# a# question# depending# in# each# case# on# the# contract,# express# or# implied,# between# the# parties.# Apart# from# any# such# contract,# express# or# implied,# or# usage# of# trade# to# the# contrary,# the# place# of# delivery#is#the#seller's#place#of#business#if#he#has#one,#and#if#not#his#residence;# but# in# case# of# a# contract# of# sale# of# specific# goods,# which# to# the# knowledge# of#



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contract.”#Gaite!v.!Fonacier!(2!SCRA!831)! ( A.2.(Reservation(of(Ownership( Ownership# will# not# transfer# to# the# buyer# in# case# of# express# reservation# in# the# contract,# such# as# when# the# parties# stipulate# that# ownership# will# not# transfer# until# the# purchase# price# is# full#

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! the#parties#when#the#contract#or#the#sale#was#made#were#in#some#other#place,# then#that#place#is#the#place#of#delivery.# # Where#by#a#contract#of#sale#the#seller#is#bound#to#send#the#goods#to#the#buyer,# but#no#time#for#sending#them#is#fixed,#the#seller#is#bound#to#send#them#within#a# reasonable#time.# # Where#the#goods#at#the#time#of#sale#are#in#the#possession#of#a#third#person,#the# seller# has# not# fulfilled# his# obligation# to# deliver# to# the# buyer# unless# and# until# such# third# person# acknowledges# to# the# buyer# that# he# holds# the# goods# on# the# buyer's#behalf.# # Demand# or# tender# of# delivery# may# be# treated# as# ineffectual# unless# made# at# a# reasonable#hour.#What#is#a#reasonable#hour#is#a#question#of#fact.# Unless#otherwise#agreed,#the#expenses#of#and#incidental#to#putting#the#goods# into#a#deliverable#state#must#be#borne#by#the#seller.#(n)#

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paid,# or# until# certain# conditions# are# fulfilled.# (Article( 1478;( Article(1503)( o Technically# speaking,# this# does# not# refer# to# conditional# contracts# of# sale# or# contracts# to# sell# where# the#

When# the# contract# does# not# provide# for# the# measuring# or# weighing#of#a#sold#specific#mass,#and#the#price#agreed#upon#was# not#based#on#such#measurement,#then#“[t]he#subject#matter#of# the# sale# is,# therefore,# a# determinate# object,# the# mass,# and# not# the#actual#number#of#units#or#tons#contained#therein,#so#that#all# that#is#required#of#seller#was#to#deliver#in#good#faith#to#his#buyer# all# of# those# found# in# the# mass,# notwithstanding# that# the# quantity# delivered# is# less# than# the# amount# estimated# in# the#

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o •

conditions#refer#to#the#perfection#of#the#contract.# The# conditions# mentioned# here# refer# to# the# consummation#stage#of#the#contract.#

Article(1503#of#the#Civil#Code#gives#instances#where#reservation#

of#ownership#is#implied:# 1. Goods# are# shipped,# and# by# the# bill# of# lading# the# goods# are# deliverable# to# the# seller# or# his# agent,# the# seller# reserves# ownership#of#the#goods.#But,#if#except#from#the#form#of#the#bill# of# lading,# ownership# would# have# ed# to# the# buyer,# the# seller’s# property# in# the# goods# shall# be# deemed# to# be# only# for# purpose# of# securing# performance# of# the# buyer’s# obligation,# in# which#case#the#buyer#bears#the#risk#of#loss.# 2. Goods# are# shipped,# and# by# the# bill# of# lading# the# goods# are# deliverable# to# the# buyer,# but# possession# of# the# bill# of# lading# is# retained# by# the# seller,# the# seller# reserves# a# right# to# the# possession#of#the#goods,#and#ownership#is#still#transferred#to#the# buyer# 3. Seller#draws#on#the#buyer#for#the#price,#and#transmits#the#bill#of#


exchange#and#the#bill#of#lading#together#to#the#buyer,#the#buyer# is#bound#to#return#the#bill#of#lading#if#he#does#not#honor#the#bill# of#exchange.#If#he#retains#the#bill#of#lading,#he#does#not#acquire# any#added#right.# a. If# the# bill# of# lading# provides# that# the# goods# are# deliverable# to# the# buyer,# one# who# purchases# in# good# faith# and# for# value# the# bill# of# lading# or# the# goods# from#


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the#buyer,#will#obtain#ownership,#provided#that#the#bill# of#lading#is#indorsed#to#such#purchaser.# # A.3.(Obligation(as(to(Accessories(and(Accessions( o

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•

The# seller# must# deliver# to# the# buyer# a# quantity# of# goods# that# should# not# be# less# than# what# he# contracted# to# sell,# otherwise# the#buyer#may#reject#them.#

General(Rule:(Article(1481(1)! o

Sale#of#movables#in#Article#1522#must#be#distinguished#from#the# sale#of#specific#mass#under#Article#1480#which#refers#to#sale#of# fungible#things.#

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If# there# is# no# provision# in# the# contract# for# the# measuring# or# weighing#of#the#fungible#thing,#nor#is#the#price#agreed#upon#by# the# parties# to# be# based# on# such# measurement,# the# subject# matter# of# the# sale# is# the# mass# itself,# as# a# determinate# object.# The# obligation# therefore,# of# the# seller# is# to# deliver# the# whole# mass,#regardless#of#the#quantity.#Gaite!v.!Fonacier!(2!SCRA!830)#

o

goods(correspond(with(the(sample(if(they(do(not(also(correspond(with( the(description.( (

There# is# a# sale# by# sample# when# a# small# quantity# is# exhibited# by# the# seller# as# a# fair# specimen# of# the# bulk,# which# is# not# present# and# there# is# no# opportunity# to# inspect# or# examine# the# same;# and# the# parties# treated# the# sample# as# the# standard# of# quality# and# that# they# contracted# with# reference# to# the# sample# with# the# understanding# that# the# product# to# be# delivered# would# correspondent#with#the#sample.#Mendoza!v.!David!(441! SCRA!172)! Atty.# Santiago# "# If# the# delivered# products# does# not# conform#to#the#sample,#the#buyer#may#choose#to#return# the#products#or#ask#for#a#reduction#of#price.!

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Exception:( If# the# buyer# had# agreed# to# deviations# between# the# sample# and# what# has# been# delivered,# rescission# will# not# be# available.#Engel!v.!Mariano!Velasco!&!Co.,!47!Phil.!115!

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If# a# certain# piece# of# machinery# delivered# is# in# accordance# with# the# description,# and# yet,# it# cannot# be# used# for# the# purposes# intended#by#the#buyer,#he#cannot#refuse#to#pay#if#the#seller#was# not# made# aware# of# the# intended# purpose.# Pacific! Commercial!

# A.5.(Sale(by(Description(and/or(Sample( # Article(1481.( In( the( contract( of( sale( of( goods( by( description( or( by( sample,( the( contract( may( be( rescinded( if( the( bulk( of( the( goods( delivered( do( not( correspond(with(the(description(or(the(sample,(and(if(the(contract(be( by(sample(as(well(as(by(description,(it(is(not(sufficient(that(the(bulk(of(


The(buyer(shall(have(a(reasonable(opportunity(of(comparing(the(bulk( with(the(description(or(the(sample.((n)( #

# A.4.(Sale(in(Mass(of(Movables( •

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Co.!v.!Ermita!Market!&!Cold!Stores,!56!Phil.!617! A.6.(“On(Sale(or(Return”(and(“Sale(on(Approval,(Trial,(Satisfaction,(or( Acceptance”,(and(“Form(of(Such(Special(Sales”((Article(1502)( •


In# a# “sale# or# return,”# the# ownership# es# to# the# buyer# on# delivery# pursuant# to# a# perfected# contract# of# sale;# and# the# subsequent# return# of# the# goods# reverts# ownership# back# to# the#


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seller.#In#such#case,#tradition#as#a#mode#of#acquiring#ownership# must# be# in# consequence# of# a# contract.! Vallarta! v.! Court! of! Appeals!(150!SCRA!336)! •

When#goods#are#delivered#to#the#buyer#on#“sale#on#approval#or# on#trial#or#on#satisfaction,”#the#ownership#therein#es#to#the# buyer#only:! o When#buyer#signifies#his#approval#or#acceptance#to#the# seller#or#does#any#other#act#adopting#the#transaction;#or! o

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When# the# sale# of# a# movable# is# “sale# on# acceptance,”# no# ownership# could# have# been# transferred# to# the# buyer# despite# delivery# and# possession# because# there# was# still# no# perfected# contract#when#delivery#was#done.#The#acceptance#by#the#buyer# is# a# suspensive# condition# which# will# give# rise# to# the# perfected# contract#of#sale.#Vallarta!v.!Court!of!Appeals!(150!SCRA!336)!

•

•

In#order#for#Article#1502#to#apply,#it#must#be#clearly#expressed#in# writing# that# the# sale# is# that# of# “sale# or# return”# or# “sale# on#


Delivery# of# goods# is# generally# evidenced# by# a# written# acknowledgment#of#receipt.!Lao!v.!Court!of!Appeals!(325!SCRA! 694)# o A#bill#of#lading#cannot#substitute#for#a#delivery#receipt.#It#

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In#a#“sale#on#approval”#(also#called#“sale#on#acceptance,#“sale#on#

336)!

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approval.”# It# cannot# be# proved# by# parol# evidence.# Industrial! Textile!Manufacturing!Co.!v.!LPJ!Enterprises!(217!SCRA!322)# # A.7.(Written(Proof(of(Delivery(

If#the#buyer#does#not#signify#his#approval#or#acceptance,# but#retains#the#goods#without#giving#notice#of#rejection,# then#if#a#time#has#been#fixed#for#the#return#of#the#goods,# on#the#expiration#of#such#time,#and,#if#not#time#has#been# fixed,#on#the#expiration#of##a#reasonable#time.!

trial”# or# “sale# on# satisfaction”),# the# delivery# of# the# object# does# not#transfer#ownership#to#the#buyer#since#the#delivery#was#not# for# purposes# of# transferring# ownership,# since# the# prestation# to# effect#a#meeting#of#the#minds#to#give#rise#to#a#valid#contract#is# incumbent#on#the#buyer.#Vallarta!v.!Court!of!Appeals!(150!SCRA! •

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is#a#written#acknowledgment#of#receipt#of#the#goods#by# the#carrier.#It#is#not#evidence#of#receipt#of#goods#by#the# consignee#or#the#person#named#in#the#bill#of#lading# A#factory#consignment#invoice#is#not#evidence#of#actual# delivery.# It# is# just# a# detailed# statement# of# the# nature,# quantity# and# cost# of# the# thing# sold.# It# does# not# prove# that# the# goods# were# actually# delivered# to# the# buyer# or# consignee.#

# A.8.(Time(and(Place(of(Delivery( # Article(1521.( Whether(it(is(for(the(buyer(to(take(possession(of(the(goods(or(for(the( seller(to(send(them(to(the(buyer(is(a(question(depending(in(each(case( on( the( contract,( express( or( implied,( between( the( parties.( Apart( from( any(such(contract,(express(or(implied(or(usage(of(trade(to(the(contrary,( the(place(of(delivery(is(the(seller’s(place(of(business(if(he(has(one,(and( if(not(his(residence;(but(in(case(of(a(contract(of(sale(of(specific(goods,( which( to( the( knowledge( of( the( parties( when( the( contract( or( the( sale( was( made( were( in( some( other( place,( then( that( place( is( the( place( of( delivery.( (



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Where(by(contract(of(sale(the(seller(is(bound(to(send(the(goods(to(the( buyer,( but( no( time( for( sending( them( is( fixed,( the( seller( is( bound( to( send(them(within(a(reasonable(time.( (

If(the(sale(of(real(estate(should(be(made(with(a(statement(of(its(area,( at( the( rate( of( a( certain( price( for( a( unit( of( measure( or( number,( the( vendor( shall( be( obliged( to( deliver( to( the( vendee,( If( the( latter( should( demand(it,(all(that(may(have(been(stated(in(the(contract;(but,(should(

Where( the( goods( at( the( time( of( sale( are( in( the( possession( of( a( third( person,(the(seller(has(not(fulfilled(his(obligation(to(deliver(to(the(buyer( unless(and(until(such(third(person(acknowledges(to(the(buyer(that(he( holds(the(goods(on(the(buyer’s(behalf.( ( Demand( or( tender( of( delivery( may( be( treated( as( ineffectual( unless( made(at(a(reasonable(hour.(What(is(a(reasonable(hour(is(a(question(of(

this( be( not( possible,( the( vendee( may( choose( between( a( proportional( reduction(of(the(price(and(the(rescission(of(the(contract,(provided(that,( in( the( latter( case,( the( lack( in( the( area( be( not( less( than( onehtenth( of( that(stated.( ( The(same(shall(be(done,(even(when(the(area(is(the(same,(if(any(part(of( the(immovable(is(not(of(the(quality(specified(in(the(contract.(

fact.( ( Unless(otherwise(agreed,(the(expenses(of(and(incidental(to(putting(the( goods(into(a(deliverable(state(must(be(borne(by(the(seller.((n)( ( A.9.(Seller(Shall(Pay(Expenses(of(Delivery(

( The( rescission,( in( this( case,( shall( only( take( place( at( the( will( of( the( vendee,(when(the(inferior(value(of(the(thing(sold(exceeds(onehtenth(of( the(price(agreed(upon.( ( Nevertheless,( if( the( vendee( would( not( have( bought( the( immovable( had(he(known(of(its(smaller(area(or(inferior(quality,(he(may(rescind(the(

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The# expenses# for# delivery# are# to# be# borne# by# the# seller# since# they# are# expenses# pertaining# to# “putting# the# goods# into# a# deliverable#state.”#

# B.(Rules(on(Effects(of(Delivery(for(Immovables( ( B.1.(Where(Immovables(Sold(per(Unit(or(Number( # Article(1539.( The(obligation(to(deliver(the(thing(sold(includes(that(of(placing(in(the( control( of( the( vendee( all( that( is( mentioned( in( the( contract,( in( conformity(with(the(following(rules:( (

sale.((1469a)( ( Article(1540.( If,( in( the( case( of( the( preceding( article,( there( is( a( greater( area( or( number(in(the(immovable(than(that(stated(in(the(contract,(the(vendee( may(accept(the(area(included(in(the(contract(and(reject(the(rest.(If(he( accepts(the(whole(area,(he(must(pay(for(the(same(at(the(contract(rate.( (1470a)( ( Article(1541.( The( provisions( of( the( two( preceding( articles( shall( apply( to( judicial( sales.((n)(



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In# a# unit# price# sale,# the# statement# of# the# area# of# immovable# is# not# conclusive# and# the# price# may# be# reduced# or# increased# depending# on# the# area# actually# delivered.# Rudolf! Lietz,! Inc.! v.! Court!of!Appeals!(478!SCRA!451)! o If# the# vendor# delivers# less# than# the# area# agreed# upon,# the# vendee# may# oblige# the# vendor# to# deliver# all# that# is# stated#in#the#contract#or#demand#for#the#proportionate# reduction# of# the# purchase# price# if# delivery# is# not# o

possible.# If#the#vendor#delivers#more#than#the#area#stated#in#the# contract,# the# vendee# has# the# option# to# accept# only# the# amount# agreed# upon# or# to# accept# the# whole# area,# provided#he#pays#for#the#additional#area#at#the#contract# rate.#

( Rudolf!Leitz,!Inc.!v.!Court!of!Appeals! # Facts:# Respondent# Buriol# owned# a# parcel# of# uned# land# in# Capsalay#Island,#Port#Barton,#San#Vicente,#Palawan.#He#leased#1#hectare# of#this#property#to#Italian#citizens#Turatello#and#Sani.#Buriol#sold#the#lot# along# with# 4# more# hectares# (total# of# 5# hectares)# to# petitioner# Rudolf# Lietz,#Inc.#The#deed#of#sale#described#the#property#in##of#area#and# boundaries,# not# price# per# unit.# Later# on,# Rudolf# Lietz,# Inc.# discovered# that#Buriol#only#owned#4#hectares,#not#5,#and#1#of#which#was#leased#to# herein# private# respondents.# Hence,# Buriol# was# only# able# to# deliver# 3# hectares.# Rudolf# Lietz,# Inc.# filed# a# complaint# contending# that# he# is# entitled# to# reduction# of# the# purchase# price# in# accordance# with# Article# 1539#(sale#with#statement#of#area#and#price#per#unit).# #

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Issue:(Whether#or#not#Rudolf#Lietz,#Inc.#is#entitled#to#the#delivery#of#the# entire#five#hectares#or#its#equivalent.# ( Held:(NO.#Article#1542#(lump#sum#sale#of#land)#applies.#There#shall#be#no# reduction# in# price# even# if# the# area# delivered# is# less# than# that# stated# in# the# contract.# The# area# within# the# boundaries# as# stated# in# the# contract# shall# control# over# shall# control# over# the# area# agreed# upon# in# the# contract.# # B.2.(Where(Immovables(Sold(for(a(Lump(Sum( # Article(1542.!( In(the(sale(of(real(estate,(made(for(a(lump(sum(and(not(at(the(rate(of(a( certain( sum( for( a( unit( of( measure( or( number,( there( shall( be( no( increase(or(decrease(of(the(price,(although(there(be(a(greater(or(lesser( areas(or(number(than(that(stated(in(the(contract.( ( The(same(rule(shall(be(applied(when(two(or(more(immovables(are(sold( for(a(single(price;(but(if,(besides(mentioning(the(boundaries,(which(is( indispensable( in( every( conveyance( of( real( estate,( its( area( or( number( should( be( designated( in( the( contract,( the( vendor( shall( be( bound( to( deliver( all( that( is( included( within( said( boundaries,( even( when( it( exceeds(the(area(or(number(specified(in(the(contract;(and,(should(he( not( be( able( to( do( so,( he( shall( suffer( a( reduction( in( the( price,( in( proportion( to( what( is( lacking( in( the( area( or( number,( unless( the( contract( is( rescinded( because( the( vendee( does( not( accede( to( the( failure(to(deliver(what(has(been(stipulated.((1471)( ( ( (



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Article(1543.( The( actions( arising( from( Articles( 1539( and( 1542( shall( prescribe( in( six( months,(counted(from(the(day(of(delivery.((1472a)( ( •

case# at# bar# an# area# of# “644# square# meters# more”# is# not# reasonable# excess# or# deficiency,# to# be# deemed# included# in# the# deed#of#sale.##Roble!v.!Arbasa!(362!SCRA!69);!Rudolf!Lietz,!Inc.! v.!Court!of!Appeals!(478!SCRA!451)! •

Exception( to( exception:#When#buyer,#who#has#been#occupying# the#land#for#two#years#as#lessee,#actually#is#deemed#to#take#risk# on#the#actual#size#of#the#property#bought#at#lump#sum.##Garcia! v.!Velasco!(72!Phil.!248)!

In# a# lump# sum# sale,# when# the# land# delivered# to# the# buyer# is# exactly# as# that# described# in# the# deed# and# covered# within# the# boundaries# designated,# the# difference#in#actual#area#(34#versus#10#hectares)#will#not# authorize#the#buyer#to#rescind#the#contract#because#the# seller# has# complied# with# delivering# the# subject# matter# agreed#upon.#Teran!v.!Villanueva!(56!Phil.!677)!

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Exception( to( Article( 1542:# The# sale# of# land# under# the# description# “more# or# less”# or# similar# words# covers# “only# a# reasonable#excess#or#deficiency.”#Lietz!v.!Court!of!Appeals!(478! SCRA!431)#

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This# is# the# rule# when# evidence# shows# that# the# parties# never#gave#importance#to#the#area#of#the#land#in#fixing# the# price# (97# versus# 60# hectares).# Azarraga! v.! Gay! (52! Phil.!599)!

# B.3.(Lump(Sum(Sale(v.(Sale(by(Unit(of(Measure(or(Number( •

Exception:# A# buyer# of# land,# when# sold# in# gross# or# with# the# description# “more# or# less”# or# similar# words# in# designating# quantity# covers# only# a# reasonable# excess# of# deficiency.# In# the#

General(Rule:#If#the#price#per#unit#of#measure#or#number#is#not# expressly# provided# for# in# the# contract,# the# rules# of# lump# sum# sale#shall#prevail#in#the#sale#of#real#property.#

# B.4.(Where(Immovables(Sold(in(Mass(

Where# the# parties# agreed# on# a# sale# at# a# rate# of# a# certain# price# per# unit# of# measure# and# not# one# for# a# lump# sum,# it# is# Article# 1539# and# not# Article# 1542# which# is# the# applicable# law—the# buyer# is# entitled# to# the# relief# afforded# to# him# under# Article# 1529,#that#is,#either#a#proportional#reduction#of#the#price#or#the# rescission#of#the#contract.#Cebu!Winland!Dev.!Corp.!v.!Ong!Siao! Hua!(588!SCRA!120)!

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General(Rule:(In#a#contract#of#sale#of#land#in#a#mass,#the#specific# boundaries# stated# in# the# contract# must# control# over# any# statement# with# respect# to# the# area# contained# within# its# boundaries.#Salinas!v.!Faustino!(566!SCRA!18)! o

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A#judicial#sale#in#mass#of#separate#known#lots#or#parcels#will#not# be#set#aside,#unless#it#is#made#to#appear#that#a#larger#sum#could# have# been# realized# form# a# sale# in# parcels# or# that# a# sale# of# less# than#the#whole#would#have#been#sufficient#to#satisfy#the#debt.#

# # # # # #



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IV.(Double(Sales! # Article(1544.!( If( the( same( thing( should( have( been( sold( to( different( vendees,( the( ownership(shall(be(transferred(to(the(person(who(may(have(first(taken( possession(thereof(in(good(faith,(if(it(should(be(movable(property.( ( Should( it( be( immovable( property,( the( ownership( shall( belong( to( the( person(acquiring(it(who(in(good(faith(first(recorded(it(in(the(Registry(of( Property.( ( Should( there( be( no( inscription,( the( ownership( shall( pertain( to( the( person( who( in( good( faith( was( first( in( the( possession;( and,( in( the( absence(thereof,(to(the(person(who(presents(the(oldest(title,(provided( there(is(good(faith.((1473)( ( A.(Rule(on(Double(Sales(Must(Be(Considered(as(Rules(on(Tradition( •

pursuant#to#which#tradition#was#or#could#be#effected.# 2. The#seller#who#effected#multiple#sales#to#various#buyers#over#the# same#subject#matter#actually#had#ownership.#

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The#best#way#to#appreciate#Article( 1544#is#perhaps#to#consider# that# it# is# more# reflective# of# the# doctrinal# values# on# what# Philippine#society#considers#to#be#the#best#gauge#of#determining# who#between#disputing#claimants#would#be#preferred.#

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Possession#and#enjoyment#of#movable#property#are#considered# to#be#the#public’s#best#gauge#of#who#owns#a#movable.#

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When# it# comes# to# immovable# properties,# their# importance# in# civil# society# requires# that# they# be# governed# by# a# system# of# registration#(i.e.#the#Torrens#System).#

( C.(Two(Divergent(Systems(When(It(Comes(to(Land( ( C.1.(Priority(of(Torrens(System(of(Registration#(P.D.(1529)( •

Section(51(of(P.D.(1529#embodies#the#“registration#in#good#faith# as#the#operative#act”#doctrine.#

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Article# 1544# does# not# overcome# the# priority# rules# under# P.D.( 1529.(

( P.D.(1529(

Article(1544(

“Registration”#in#P.D.(1529#is#the# judicial#or#istrative#process# by#which#a#parcel#of#land#is#placed#

“Registration”#in#Article#1544# refers#to#the#annotation#of# contracts,#transactions#and#legal#

for#the#first#time#within#the# coverage#of#the#Torrens#System.#

processes#in#the#Registry#of#Deeds.# (

Problem:# The# rules# on# double# sales,# although# essentially# applicable# within# the# stage# of# consummation,# have# a# way# of# dictating#or#preIempting#the#principles#of#perfection.#

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B.(Article(1544(as(the(Platform(for(Discussion(

The# rules# on# Double# Sales# cover# the# effects# and# consequences#

of# tradition# in# a# particular# situation# where# the# same# seller# has# sold#the#same#subject#property#to#two#or#more#buyers#who#do# not#represent#the#same#interests.( 1. The# conflicting# sales# are# all# valid# and# demandable# sales,#

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# •

When#Article(1544#does#not#apply:#

1. When# two# certificates# of# title# are# issued# to# different# persons# covering#the#same#land,#Article#1544#cannot#apply.#Instead,#the#



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principle# of# the# Torrens# system# will# apply.# "# The# earlier# title# will#prevail.#Liao!v.!Court!of!Appeals!(323!SCRA!430).# 2. Article# 1544# will# also# not# apply# in# a# case# where# a# first# buyer# bought# the# land# not# under# the# Torrens# system,# but# under# Act(

! Facts:( Comayas#offered#to#sell#to#the#Lumo#Spouses#a#house#and#lot#in# CDO# City.# The# property# was# already# ed# under# the# Torrens#

No.( 3344,# and# a# subsequent# buyer# bought# the# same# property# when#it#was#already#ed#under#the#Torrens#system#of#PD( 1529.( "# The# Torrens# title# will# prevail.# Naawan! Community! Rural!Bank,!Inc.!v.!Court!of!Appeals!(395!SCRA!43);!Abrigo!v.!De! Vera!(432!SCRA!544);!Dagupan!Trading!Co.!v.!Macam!(14!SCRA! 179)# This#is#because:#

System#that#time#and#they#made#appropriate#inquiries#with#the## of# Deeds# of# CDO# as# well# as# the# Bureau# of# Lands# regarding# the# legal# status#of#the#property.#They#found#out#that#it#was#mortgaged#for#P8,000,# paid# Comayas# to# settle# the# mortgage,# and# the# release# of# the# adverse# claim#was#annotated#in#the#title.#Thereafter,#they#executed#an#Absolute# Deed# of# Sale# over# the# subject# property# and# ed# the# same.# However,# it# turns# out# that# it# was# already# previously# sold# to# Naawan#

a. Of#the#“wellIknown#rule#in#this#jurisdiction#that#persons# dealing#with#ed#land#have#the#legal#right#to#rely# on# the# fact# of# the# Torrens# Certificate# of# Title# and# to# dispense#with#the#need#to#inquire#further,#except#when# the#party#concerned#has#actual#knowledge#of#facts#and# circumstances# that# would# impel# a# reasonably# cautious# man#to#make#such#inquiry;”#and#

Community# Rural# Bank# when# it# was# still# uned.# The# Bank# foreclosed#on#the#property,#purchased#the#same,#and#ed#it#under# Act# 3344.# Thus,# the# Bank# sought# to# eject# the# spouses.# However,# the# latter#countered#with#an#action#for#quieting#of#title.#NCRB#contends#that# the# earlier# registration# of# the# Deed# of# Conveyance# under# Act# 3344# should# prevail# over# the# later# registration# of# the# Lumos# spouses,# under# P.D.#1529,#as#this#is#a#case#of#double#sale#under#Article#1544.#

b. The# Torrens# system# rule# that# formal# registration# proceedings# undertaken# on# the# property# and# the# subsequent# issuance# of# a# title# over# the# land# had# under# the#Torrens#system#had#the#legal#effect#of#cleansing#title# on# the# property# of# all# liens# and# claims# which# were# not# annotated#therein.#

# Issue:(Whether#or#not#Lumos#has#better#right#over#NCRB.# ( Held:( YES.# Private# respondents# were# not# required# to# go# beyond# the# # to# determine# legal# condition# of# the# property.# They# were# only# charged#with#notice#of#such#burdens#on#the#property#as#were#noted#on# the# OCT# or# on# the# .# Lumo# spouses# were# in# good# faith# as# they# inquired#in#the#RoD#and#the#Bureau#of#Property#regarding#vendor’s#title.#

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Article(1544(is#not#a#contest#between#two#protagonists#running# the#same#race.#(See(section(on(registration)# # # # #

Naawan!Community!Rural!Bank!v.!Court!of!Appeals!

Neither#were#they#aware#of#any#adverse#claim,#other#than#Mrs.#Galupo,# who# they# settled# with.# Considering,# thus,# that# Lumo# spouses# exercised# the# required# diligence# in# ascertaining# the# legal# status# of# title,# they# should# be# considered# as# innocent# purchasers# for# value# and# in# good#



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faith.“Priority#in#time”#principle#invoked#by#NCRB#refers#to#Act#3344,#not# the#Torrens#system.# ( Dagupan!Trading!Co.!v.!Macam!

( Facts:#Uned#parcel#of#land#was#sold#by#Idelfonso#to#Gregorio#in# 1969.# Gregorio# sold# it# to# other# people,# who# then# took# possession.# In#

( Facts:( Sammy#Maron#and#his#7#brothers#were#coIowners#of#a#parcel#of# land# for# which# they# applied# for# registration.# Pending# the# proceedings,# they# sold# the# same# to# Macam,# who# thereafter# introduced# substantial# improvements#thereon.#Later#on,#the#property#was#levied#upon#and#sold# in# favor# of# Dagupan# Trading,# which# thereafter# ed# the# Sheriff’s# Final#Certificate#of#Sale#

comes#Juanita#who#was#able#to#obtain#an#OCT#in#her#name,#saying#the# same# land# was# sold# to# her# by# Idelfonso# in# 1972.# # that# both# initial#conveyances#were#made#while#land#was#uned.# # Issue:#Whether#or#not#Gregorio#has#better#right#over#Juanita.# # Held:# YES.# The# land# was# uned# under# the# Torrens# system# at# the#

# Issue:(Who#has#a#better#right,#Macam#or#Dagupan?( # Held:( MACAM.# In# this# case,# the# sale# in# favor# of# Macam# was# executed# before#the#land#was#ed,#while#the#sale#in#favor#of#Dagupan#was# made#after#the#registration.#In#such#a#case,#the#Rules#of#Court#will#apply# such#that#the#delivery#of#the#Sheriff’s#Final#Certificate#of#Sale#in#favor#of#

time# of# the# first# sale.# The# applicable# law# is# Act# 3344,# under# which# registration# by# first# buyer# under# the# # of# Deeds# is# constructive# notice# to# the# second# buyer.# So# the# latter# cannot# be# deemed# in# good# faith.#Juanita#having#been#able#to#obtain#an#OCT#in#her#name#does#not# cleanse#her#title#of#the#defect#carried#under#the#provisions#of#Act#3344.# # D.(Tests(Applicable(under(Article(1544:(

Dagupan#merely#substitutes#the#latter#into#the#shoes#of#the#seller#Maron# and# acquires# all# rights,# interests,# and# claims# of# the# latter.# Considering# that#at#the#time#of#the#levy,#Maron#was#no#longer#the#owner#of#the#land,# then# no# title# can# thereafter# # in# favor# of# Dagupan.# Macam’s# title# is# thus#sustained.1# ( Doctrine:#When#first#sale#is#over#uned#land#and#the#second#sale# is#when#it#is#ed,#the#rules#on#double#sale#do#not#apply.#

Naval!v.!Court!of!Appeals!

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Caveat&emptor#requires#the#buyer#to#be#aware#of#the#supposed# title#of#the#seller#and#he#who#buys#without#checking#the#seller's# title# takes# all# the# risks# and# losses# consequent# to# such# failure.# Caram,!Jr.!v.!Laureta!(103!SCRA!7)!

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The# provision# on# double# sale# presumes# title# or# ownership# to# #to#first#buyer,#exception#being:#(a)#when#the#second#buyer,# in#good#faith,#s#the#sale#ahead#of#the#first#buyer,#and#(b)# should#there#be#no#inscription#by#either#of#the#two#buyers,#when#

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

#Antonio,#Hipolito,#Imperial#&#Zaragosa.#(2012).#Salse#CLV#Case#Digests.# Retrieved#from#http://www.idoub.com/doc/104486360/SalesICLVICaseI Digests#


the# second# buyer,# in# good# faith,# acquires# possession# of# the# property# ahead# of# the# first# buyer.# Unless,# the# second# buyer# satisfies#these#requirements,#title#or#ownership#will#not#transfer#


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to#him#to#the#prejudice#of#the#first#buyer.”##Coronel! v.! Court! of! Appeals!(263!SCRA!15)! •

In#spite#of#the#three#levels#of#tests#provided#under#Article#1544,# the#Court#seems#to#recognize#only#registration#in#good#faith#by# the#second#buyer#and#does#not#characterize#the#meaning#of#the# last# two# test# of# possession# and# oldest# title.# Carillo! v.! Court! of! Appeals!(503!SCRA!66)!

# Carillo!v.!Court!of!Appeals! # Facts:#Both#Gonazales#and#Dabons#claim#to#have#bought#the#land#from# Aristotle# Manio.# In# litgitating# against# Manio’s# alleged# attorneysIinIfact# for# the# issuance# of# the# deed# of# sale,# Gonzales# never# impleaded# Manio# himself,# or# the# Dabons.# Court# orders# were# issued# in# favor# of# Gonzales# for#execution#of#deed#of#sale#as#well#as#issuance#of#TCT#in#her#name.# # Issue:#Whether#or#not#the#Dabons#have#a#right#to#seek#annulment#of#the# court#order.# # Held:#YES.#There#was#extrinsic#fraud#as#the#necessary#parties#in#interest# were# not# given# their# day# in# court.# Dabons# may# seek# annulment# of# the# court#orders.#On#the#issue#of#double#sale,#court#outlined#the#provisions# of#Article#1544#and#stressed#that#in#order#for#this#provision#to#be#availed# of,#there#must#have#been#both#acquisition#in#good#faith#and#registration# in#good#faith.#Case#was#remanded.# ( •

MAIN( RULE( UNDER( ARTICLE( 1544:( PRIOR( TEMPORE,( PRIOR(

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Carbonell!v.!Court!of!Appeals! ! Facts:#Poncio#was#owner#of#land#mortgaged#to#bank.#He#offered#to#sell# to# Carbonell,# who# accepted# and# applied# for# assumption# of# mortgage.# Later# on,# Poncio# informed# Carbonell# that# he# could# no# longer# continue# with#their#sale#because#he’d#already#sold#the#same#land#to#one#Infante.# Upon#learning#this,#Carbonell#ed#an#adverse#claim.#Subsequently,# Infante# ed# her# deed# of# sale.# TCT# was# issued# in# Infante’s# name# but#with#annotation#of#the#adverse#claim#of#Carbonell.# # Issue:#Who#has#a#better#claim?# # Held:# CARBONELL.# When# Carbonell’s# sale# was# perfected,# she# was# in# good#faith#because#Poncio#was#the#owner.#Her#good#faith#did#not#cease# even# when# she# ed# the# adverse# claim,# notwithstanding# knowledge# of# the# second# sale# to# Infante.# Infante,# on# the# other# hand,# was# in# bad# faith# because# she# actually# knew# of# the# first# sale.# Furthermore,#she#was#aware#of#an#adverse#claim#on#the#land#when#she# ed#it.#Carbonell#was#also#in#possession#of#the#land#when#Infante# bought#it,#so#the#latter#should#have#inquired.# ( E.(Essential(Elements(for(Applicability(of(Article(154!! ( E.1.(There(Must(Be(Two(Valid(Sales( •

If# one# sale# is# valid,# and# the# other# is# void,# Article# 1544# will# not# apply.#Fudot!v.!Cattleya!Land,!Inc.!(533!SCRA!350)!

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JURE.(Carbonell!v.!Court!of!Appeals!(69!SCRA!99)! (


Article#1544#will#not#apply#when#one#contract#is#that#of#sale,#and# the#other#is#a#contract#to#sell.#Strictly#speaking,#in#a#contract#to# sell,#there#is#still#no#transfer#of#ownership#involved.#San!Lorenzo!


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Dev.! Corp.! v.! Court! of! Appeals! (449! SCRA! 99);! Mendoza! v.! Kalaw,! (42! Phil.! 236);! Adalin! v.! Court! of! Appeals! (280! SCRA! 536);!Cheng!v.!Genato!(300!SCRA!722)! o The# rules# on# double# sales# under# Article# 1544# are# not#

met# at# the# RD,# where# he# again# agreed# to# continue# the# contract# with# them.# He# advised# Cheng# of# his# decision;# the# latter# countered# that# the# sale# had# already# been# perfected.# Cheng# executed# an# Affidavit# of# Adverse# Claim# and# had# it# annotated# to# the# TCTs# and# sued# for# specific#

applicable# to# contract# to# sell,# because# of# the# circumstances# that# must# concur# in# order# for# the# provisions# to# Article# 1544# on# double# sales# to# apply,# namely# that# there# must# be# a# valid# sales# transactions,# and#buyers#must#be#at#odds#over#the#rightful#ownership# of# the# subject# matter# who# must# have# bought# from# the# very# same# seller,# are# lacking# in# a# contract# to# sell# for#

performance.# # Issue:(Who#has#better#title?# # Held:( DA# JOSE# SPOUSES.# Both# agreements# involve# a# contract# to# sell,# which# makes# Article# 1544# inapplicable# since# neither# a# transfer# of# ownership# nor# a# sales# transaction# took# place.# A# contract# to# sell# is#

neither# a# transfer# of# ownership# nor# a# sales# transaction# has# been# consummated,# and# such# contract# is# binding# only#upon#the#fulfillment#or#nonIfulfillment#of#an#event.# Nevertheless,# the# governing# principle# of# Article# 1544# should# apply,# mainly# the# governing# principle# of# primus# tempore& portior& jure# (first# in# time,# stronger# in# right).! Cheng!v.!Genato,!300!SCRA!722!

premised# upon# a# suspensive# condition—the# full# payment# of# the# purchase#price.#That#being#the#case,#the#elementary#principle#of#first#in# time,#priority#in#right#should#apply.#As#such,#the#contract#in#favor#of#the# Da# Jose# spouses# must# prevail# considering# that# the# same# had# not# been# validly#rescinded.#Besides,#Cheng#cannot#be#considered#to#have#acted#in# good#faith#as#he#had#knowledge#of#the#prior#transaction#in#favor#of#the# spouses.1#

! Cheng!v.!Genato! # Facts:( Genato# owned# 2# parcels# of# land# in# Paradise# Farms.# He# agreed# with# the# Da# Jose# spouses# to# enter# into# a# contract# to# sell# over# the# said# parcels;# it# was# embodied# in# a# public# instrument# annotated# to# the# certificates# of# title.# They# asked# for# and# were# granted# an# extension# for# the# payment# of# the# purchase# price.# Unknown# to# them,# Genato# dealt# with# Cheng# regarding# the# lot,# executed# an# Affidavit# to# annul# the# Contract#to#Sell,#appraised#the#latter#of#his#decision#to#rescind#the#sale,# and#received#a#down#payment#from#Cheng#upon#the#guarantee#that#the# said#contract#to#sell#will#be#annulled.#By#chance,#Genato#and#the#spouses#

( Doctrine:#Requisites#for#Double#Sale:# (a)#The#two#(or#more)#sales#transactions#in#issue#must#pertain#to#exactly# the#same#subject#matter,#and#must#be#valid#sales#transactions.# (b)#The#two#(or#more)#buyers#at#odds#over#the#rightful#ownership#of#the# subject#matter#must#each#represent#conflicting#interests;#and# (c)#The#two#(or#more)#buyers#at#odds#over#the#rightful#ownership#of#the# subject#matter#must#each#have#bought#from#the#very#same#seller.#

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San!Lorenzo!Dev.!Corp.!v.!Court!of!Appeals! # Facts:(Spouses#Lu#owned#2#parcels#of#land,#which#they#purportedly#sold# to#Babasanta.#He#demanded#the#execution#of#a#Final#Deed#of#Sale#in#his# favor#so#he#may#effect#full#payment#of#the#purchase#price;#however,#the# spouses#declined#to#push#through#with#the#sale.#They#claimed#that#when# he# requested# for# a# discount# and# they# refused,# he# rescinded# the# agreement.# Thus,# Babasanta# filed# a# case# for# Specific# Performance.# San# Lorenzo# Development# Corp.# (SLDC)# intervened# claiming# that# the# lots# have#been#sold#to#it#by#virtue#of#a#Deed#of#Absolute#Sale#with#Mortgage# and# that# it# was# a# purchaser# in# good# faith.# Both# sales# were# not# ed.# # Issue:(Who#has#better#title?# ( Held:(SLDC.#There#was#no#double#sale#in#this#case#because#the#contract# in#favor#of#Babasanta#was#a#mere#contract#to#sell;#hence,#Art.#1544#is#not# applicable.#The#ownership#of#the#property#was#not#to#be#transmitted#in# his#favor#until#the#full#payment#of#the#purchase#price.#There#was#neither# actual# nor# constructive# delivery# as# his# title# is# based# on# a# mere# receipt.# Based#on#this#alone,#the#right#of#SLDC#must#be#preferred.# ( Doctrine:# SLDC# has# a# better# right.# Article# 1544# does# NOT# apply# where# one#of#the#contract#is#a#contract#to#sell.# # Contract(of(Sale(

Contract(to(Sell(

Title#es#to#the#vendee# upon#the#delivery#of#the#thing# sold#

By#agreement#the#ownership#is# reserved#in#the#vendor#and#is#not#to# #until#the#full#payment#of#the#price#

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The#vendor#has#lost#and# cannot#recover#ownership# until#and#unless#the#contract#

Title#is#retained#by#the#vendor#until#the# full#payment#of#the#price,#such# payment#being#a#positive#suspensive#

is#resolved#or#rescinded#

condition#and#failure#of#which#is#not#a# breach#but#an#event#that#prevents#the# obligation#of#the#vendor#to#convey#title# from#becoming#effective#

# Mendoza!v.!Kalaw! # Facts:(Mendoza#filed#a#petition#for#the#registration#of#a#parcel#of#land#he# purchased# from# Canet# by# way# of# an# absolute# sale.# Kalaw# opposed# stating#that#he#bought#the#same#subject#matter#from#Canet#(by#way#of#a# conditional#sale).# ( Issue:#Who#has#better#title?# ( Held:( MENDOZA.# Two# sales# were# executed,# a# conditional# sale# and# an# absolute# sale.# Actual# possession# was# obtained# by# Mendoza# first.# Mendoza# also# fully# paid# the# purchase# price,# while# Kalaw’s# payment# depended#upon#the#performance#of#certain#conditions#mentioned#in#the# contract# of# sale.# A# conditional# sale,# before# the# performance# of# the# condition,#can#hardly#be#said#to#be#a#sale#of#property.#Article#1473#(now# Article#1544)#will#not#be#applicable.# #


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Adalin!v.!Court!of!Appeals!

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! Facts:(Elena#Kado#and#her#siblings#owned#a#lot#with#a#5Idoor#commercial# building#fronting#Imperial#Hotel.#The#units#were#leased.#Elena#contracted#

condition.#Sale#made#by#Elena#to#Yu#and#Lim#(considered#by#the#Court)#is# absolute.# # Court# ruled# that# no# amount# of# legal# rationalizing# can# sanction# the#

the#services#of#Bautista,#who#brought#Yu#and#Lim#to#her#for#the#purpose# of# buying# the# premises.# During# the# meeting,# it# was# agreed# that# the# Yu# and# Lim# would# buy# the# said# units# except# for# the# 5th# which# is# to# be# bought#by#Adalin.#They#entered#into#a#Conditional#Sale#where#Elena#was# obligated# to# evict# the# tenants# before# the# full# payment# of# the# purchase# price.# Elena# offered# the# same# for# sale# to# the# lessees# but# they# refused# claiming#that#they#could#not#afford;#thus,#she#filed#a#case#for#ejectment#

breach# of# contract.# Elena# committed# in# accepting# offer# after# having# earlier#sold#property#to#Yu#and#Lim.# # Subsequent# sale# smacks# of# bad# faith# considering# the# tenants# knew# of# negotiations#between#Elena#and#Yu#Lim.# # Deed#of#Conditional#Sale#(Yu,#Lim#and#Kado)#was#given#preference#over#

against# them.# Thereafter,# the# lessees# decided# to# exercise# their# right# to# buy# the# units—Kalaw# ruled# that# since# the# sale# to# Yu# and# Lim# was# conditional,#the#subsequent#sale#to#the#lessees#must#be#preferred.1# # Issue:(Who#has#better#title?# ( Held:#YU#AND#LIM.#Elena,#in#behalf#of#Kado#siblings,#already#committed#

the#Deed#of#Sale#of#ed#Land#(Carlos,#Co#and#Kado).# # E.2.(Exact(Same(Subject(Matter(

to# sell# the# property# to# Yu# and# Lim# and# Loreto# Adalin.# She# understood# her#obligation#to#eject#the#tenants#on#the#subject#property.#Payment#of# balance#was#subject#to#the#condition#that#she#would#secure#eviction#of# tenants.#Sale#transaction#not#yet#complete#and#both#sellers#and#buyers# have# respective# obligations# to# be# fulfilled—buyers,# pay# price,# sellers,# ejectment.#Deed#of#Conditional#Sale#may#be#an#accurate#denomination# of# the# transaction,# and# the# choice# of# who# to# sell# the# property# to# had# already# been# made# by# the# sellers# and# no# longer# subject# to# any#

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Article# 1544# applies# where# the# same# thing# is# sold# to# different#

buyers#by#the#same#seller.#Ong!v.!Oalsiman!(485!SCRA!464)!and# therefore#does#not#apply#where#there#was#a#sale#to#one#party#of# the# land# itself# while# the# other# contract# was# a# mere# promise# to# sell# the# land# or# at# most# an# actual# assignment# of# the# rights# to# repurchase#the#same#land.#Dischoso!v.!Roxas!(5!SCRA!781)# # E.3.(Exact(Same(Seller(For(Both(Sales( •

Article# 1544# applies# where# the# same# thing# is# sold# to# different# vendees# by# the# same# immediate# vendor.# It# does# not# apply# where# the# same# thing# is# sold# to# different# vendees# by# different# vendors# or# even# to# the# same# buyer# but# by# different# sellers.# Salera!v.!Rodaje!(530!SCRA!432,!438)!

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Article#1544#on#double#sales#has#no#application#in#cases#where# the#sales#involved#were#initiated#not#by#just#one#vendor#but#by#


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several#successive#vendors.#MactanECebu! International! Airport! Authority!v.!Tirol!(588!SCRA!635)! •

For# Article# 1544# to# apply,# it# is# necessary# that# the# conveyance# must#have#been#made#by#a#party#who#has#an#existing#right#in#the# thing#and#the#power#to#dispose#of#it.#It#cannot#be#invoked#where# the# two# different# contracts# of# sale# are# made# by# two# different# persons,#one#of#them#not#being#the#owner#of#the#property#sold.# And# even# if# the# sale# was# made# by# the# same# person,# if# the# second# sale# was# made# when# such# person# was# no# longer# the# owner#of#the#property,#because#it#had#been#acquired#by#the#first# purchaser#in#full#dominion,#the#second#purchaser#cannot#acquire# any# right.! Consolidated! Rural! Bank! (Cagayan! Valley),! Inc.! v.! Court!of!Appeals!(448!SCRA!347)!

( Consolidated!Rural!Bank!(Cagayan!Valley),!Inc.!v.!Court!of!Appeals! ! Facts:( The# Madrid# Brothers# owned# a# parcel# of# land,# which# was# later# subdivided.#Rizal#Madrid#sold#his#share#to#Gamaio#and#Dayag;#the#other# brothers# offered# no# objection.# The# sale# was# not# ed# under# the# Torrens# System.# Gamaio# and# Dayag# sold# the# southern# half# to# Teodoro,# and#the#northern#half#to#Hernandez,#who#thereafter#donated#the#same# to#his#daughter.#They#all#maintained#possession#of#the#properties.#Later# on,# the# brothers# all# sold# their# shared# to# Marquez# who# further# subdivided# the# same,# ed# the# lands,# and# mortgaged# portions# thereof#to#Consolidated#Bank#and#Bank#of#Cauayan.#For#failure#to#settle# his# debt,# CB# foreclosed# the# property.# The# successorsIinIinterest# of# Gamiao# and# Dayag# sought# reconveyance.# CB# interposed# that# the# mortgage#must#be#respected.# #

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Issue:( Who# has# a# better# title,# Marquez# or# the# successorsIinIinterest# of# Gamiao#and#Dayag?# ( Held:# THE# SUCCESSORSIINIINTEREST# OF# GAMIAO# AND# DAYAG.# Article# 1544#does#not#apply#as#the#doubleImultiple#sales#were#not#done#by#the# single#vendor#—#in#this#case#by#the#brothers#on#the#one#side#and#Gamiao# and#Dayag#on#the#other.#That#being#the#case,#the#simple#rule#on#priority# in#time,#priority#in#right#would#apply.#As#such,#the#successorsIinIinterest# of#Gamiao#and#Dayag#would#have#a#better#right#as#the#sale#in#their#favor# came#ahead#of#time.#Further,#Marquez#was#not#in#good#faith.#He#knew# that# the# property# was# being# claimed# by# other# parties# who# were# in# possession#thereof#instead,#he#willfully#closed#his#eyes#to#the#possibility# of#the#flaws.1# # E.4.(The(Two(Or(More(Buyers(At(Odds(Over(The(Rightful(Ownership(Of( The(Subject(Matter(Must(Each(Represent(Conflicting(Interests( •

No# application# when# the# covered# valid# contracts# are# not# yet# demandable# sales,# such# as# when# one# or# both# the# contracts# in# dispute#are#contracts#to#sell.#Mendoza!v.!Kalaw,!(42!Phil.!236)(

( F.(Registration(in(Good(Faith(as(First(Priority( # F.1.(Meaning(of(“Registration”( •

Annotation# of# adverse# claim# is# considered# as# registration.# Carbonnel!v.!Court!of!Appeals!(69!SCRA!99)!

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o

Registration#of#the#extraIjudicial#partition#which#merely# mentions#the#sale#is#not#the#registration#covered#under# Article#1544#and#cannot#prevail#over#the#registration#of# the# pacto& de& retro& sale.# Vda.! de! Alcantara! v.! Court! of! Appeals!(252!SCRA!457)!

“There# can# be# no# constructive# notice# to# the# second# buyer# through#registration#under#Act(3344#if#the#property#is#ed# under#the#Torrens#system.”#Amodia!Vda.!De!Melencion!v.!Court! of!Appeals!(534!SCRA!62,!82)!

! F.2.(Registration(must(always(be(in(good(faith( •

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What#matters#is#if#the#buyer#s#in#good#faith.#If#he#buys#in# good# faith,# but# subsequently# s# in# bad# faith,# he# will# not# have#a#better#title,#even#if#he#s#first.#

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In# cases# of# double# sales# of# immovables,# what# finds# relevance# and# materiality# is# not# whether# or# not# the# second# buyer# was# a# buyer#in#good#faith#or#that#he#was#first#to#,#but#whether# or# not# said# second# buyer# s# such# second# sale# in# good# faith,#that#is,#without#knowledge#of#any#defect#in#the#title#of#the# property#sold.!Martinez!v.!CA!(358!SCRA!38),!this#is#so#because# the#defense#of#indefeasibility#of#a#Torrens#title#does#not#extend# to# a# transferee# who# takes# the# certificate# of# title# in# bad# faith.! Occeña!v.!Esponilla!(431!SCRA!116)!

# F.3.(Knowledge(of(the(first(buyer(of(the(second(sale(does(not(amount( to(registration(in(favor(of(the(second(buyer( •

If# the# first# buyer# s# the# sale# despite# knowing# about# the# second# sale,# he# will# still# have# better# right,# provided,# that# the# second#buyer#had#not#ed#it#in#good#faith#before#the#first# buyer’s#registration.#

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The# first# buyer’s# good# faith# remains# all# throughout# despite# his# subsequent# knowledge# of# the# second# sale.# Kings! Properties# Corp.!v.!Galido!(606!SCRA!137)#

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Good# faith# means# no# notice# of# defect# in# title# of# the# property# sold.# For# the# second# buyer# to# be# in# good# faith,# he# must# not# know#of#the#prior#sale#to#the#first#buyer.#

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last#two#tests#of#possession#and#oldest#title.# Carillo! v.! Court! of! Appeals!(503!SCRA!66)!

“Registration”# means# any# entry# made# in# the# books# of# the# registry,# including# both# registration# in# its# ordinary# and# strict# sense,# and# cancellation,# annotation,# and# even# marginal# notes.! Cheng!v.!Genato!(300!SCRA!722)! o Declaration#of#purchase#for#taxation#purposes#does#not# comply# with# the# required# registration,# and# the# fact# alone# does# not# even# itself# constitute# evidence# of# ownership.#Bayoca!v.!Nogales!(340!SCRA!154)!

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For#the#second#buyer#to#displace#the#first,#he#must#prove#that#he# acted# in# good# faith# throughout# the# process,# from# acquisition# until#registration.#Uraca!v.!Court!of!Appeals!(278!SCRA!702)#

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In#spite#of#the#three#levels#of#tests#provided#under#Article#1544,# the#Court#seems#to#recognize#only#registration#in#good#faith#by# the#second#buyer#and#does#not#characterize#the#meaning#of#the#


In# a# situation# where# a# party# has# actual# knowledge# of# the# claimant’s#actual,#open#and#notorious#possession#of#a#disputed# property# at# the# time# of# registration,# the# actual# notice# and# knowledge# are# equivalent# to# registration,# because# to# hold# otherwise# would# be# to# tolerate# fraud# and# the# Torrens# system#


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2. Possessors# in# good# faith# are# those# who# are# not# aware# of# any# flaw#in#their#title#or#mode#of#acquisition;# 3. Buyers# of# real# property# that# is# in# the# possession# of# persons# other#than#the#seller#must#be#wary#–#they#must#investigate#the#

Appeals!(448!SCRA!347)!

rights#of#the#possessors;#and# 4. Good#faith#is#always#presumed,#upon#those#who#allege#bad#faith# on# the# part# of# the# possessors# rests# the# burden# of# proof.# Ten! Forty!Realty!and!Dev.!Corp.!v.!Cruz!(410!SCRA!484).!

Between# two# buyers,# the# one# who# s# the# land# is# preferred# over# the# one# who# merely# possesses# it.# Tañedo' v.' Court!of!Appeals!(252!SCRA!80)!!

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cannot# be# used# to# shield# fraud# –# while# certificates# of# title# are# indefeasible,#unassailable#and#binding#against#the#whole#world,# they#merely#confirm#or#record#title#already#existing#and#vested.# Consolidated! Rural! Bank! (Cagayan! Valley),! Inc.! v.! Court! of! # F.4.( Registration( in( Good( Faith( always( prehempts( Possession( in( Good( Faith( •

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# H.(Who(is(a(Purchaser(in(Good(Faith?( •

point#must#be#at#the#time#of#perfection#of#the#contract.#Estate! of!Lino!Olaguer!v.!Ongjoco!(563!SCRA!373)!

The#registration#of#a#sale#after#the#annotation#of#the#notice#of#lis& pendens& does# not# obliterate# the# effects# of# delivery# and# possession#in#good#faith.#The#rules#on#constructive#notice#upon# registration# provided# for# under# Section# 52# of# the# Property# Registration#Decree#(P.D.#No.#1529)#operate#only#from#the#time# of#the#registration#of#the#notice#of#lis&pendens&which#in#this#case# was#effected#only#after#the#time#the#sale#in#favor#of#the#second# buyer# had# long# been# consummated# by# delivery# of# the# subject#

To# determine# whether# a# buyer# is# in# good# faith,# the# reckoning#

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Requisites#of#good#faith:#

1. No# notice# that# another# person# as# a# right# to# or# interest# in# the# property# 2. Must#have#paid#in#full#price# o A# purchaser# is# good# faith# is# one# who# buys# property# of# another,# without# notice# that# some# other# person# has# a#

matter.#San! Lorenzo! Dev.! Corp.! v.! Court! of! Appeals! (449! SCRA! 99)! ( G.(Possession(refers(to(Both(Material(and(Symbolic(Possession( # Absent# any# registration,# possession# will# determine# which# has# better# right,#based#on#these#guidelines:# 1. Possession#mentioned#in#Article#1544#includes#not#only#material# but#also#symbolic#possession;#


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right#to,#or#interest#in,#such#property#and#pays#a#full#and# fair#price#for#the#same#at#the#time#of#such#purchase,#or# before# he# has# notice# of# the# claim# or# interest# of# some# other#person#in#the#property.#Tanglao!v.!Parungao!(535! SCRA!123)! Under# Article# 1544,# mere# registration# is# not# enough# to# acquire# a# new# title.# Good# faith# must# concur.# Clearly,# when# the# buyer# has# not# yet# fully# paid# the# purchase# price,# and# as# long# as# seller# remains# unpaid,# the# buyer#


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cannot# feign# good# faith.# Portic! v.! Cristobal! (546! SCRA! 577)! # Estate!of!Lino!Olaguer!v.!Ongjoco! # Facts:( s# of# the# Lino# Olaguer’s# (deceased)# estate# sold# parcels#of#lands#(including#Lot#76)#to#Bacani.#The#latter#sold#back#Lot#76# to#the#s.#Later#on,#a#TCT#for#the#land#was#issued#to#Eduardo# and#Olivia#(the#s).#Jose,#husband#of#Olivia,#sold#portions#of# the# same# land# to# Ongjoco.# There# were# 2# deeds# of# sale# for# each# transaction.#Olaguer’s#estate#filed#annulment#case#against#Ongjoco#et#al.# # Issue:(Whether#or#not#Ongjoco#was#a#buyer#in#good#faith# ( Held:(NO.#With#respect#to#Lots#1#and#2,#he#cannot#be#considered#a#buyer# in# good# faith# since# there# was# no# proof# that# the# sale# on# both# lots# was# evidenced#by#a#written#power#of#attorney.#According#to#Agency#Law,#a# sale#of#a#piece#of#land#must#be#coupled#with#a#written#authority#of#such# agent,#else#the#sale#is#void.#Since#the#respondent#was#not#able#to#show# proof# that# there# really# was# an# existing# written# authority,# the# sale# over# such# lots# cannot# be# considered# valid,# and# must# be# returned# to# the# Estate#of#Lino#Olaguer.# # With#respect#to#Lots#76ID#to#76IG,#there#was#a#notarized#general#power# of#attorney#to#show#evidence#that#authority#had#been#given#by#Virgilio# to#his#father#to#dispose#the#subject#lots.#Since#petitioners#was#not#able#

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Doctrine:( In# the# determination# of# whether# or# not# a# buyer# is# in# good# faith,# the# point# in# time# to# be# considered# is# the# moment# the# parties# actually#entered#into#the#contract#of#sale.# # H.1.(Burden(of(Proof( •

Good#faith#is#a#question#of#fact#which#must#be#proven#in#court.# The#burden#of#proof#is#on#the#one#who#asserts#it.#Good#faith#as#a# presumption# is# not# enough.# Tio! v.! Abayata! (556! SCRA! 175);! Tanglao!v.!Parungao!(535!SCRA!123)!

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As#a#general#rule,#the#question#of#whether#or#not#a#person#is#a# purchaser# in# good# faith# is# a# factual# matter# that# will# not# be# delved# into# by# this# Court,# since# only# questions# of# law# may# be# raised#in#petitions#for#review.#Tio!v.!Abayata!(556!SCRA!175)!

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BUT# it# is# axiomatic# that# good# faith# is# always# presumed# in# the# absence#of#any#direct#evidence#of#bad#faith.!Santiago!v.!CA!(247! SCRA!336)!

# H.2.(Instances(where(there(is(no(good(faith( 1.#Being#in#the#realty#business# •

A#person#in#the#realty#business#(just#like#banks)#is#charged#with#

extraordinary# diligence# in# ascertaining# that# there# are# no# other# persons#with#rights#over#the#land.#Expresscredit!Financing!Corp.! v.!Velasco!(473!SCRA!570)! 2.#Close#relationship# •

to# show# any# proof# that# the# lots# being# sold# twice# to# respondent# show# bad#faith,#good#faith#must#be#presumed.#Being#notarized,#the#regularity# of#such#general#power#of#attorney#must#also#be#presumed.# (


If#the#buyer#is#a#child#of#the#seller,#or#a#close#family#friend#who# lived#in#the#same#area,#they#are#deemed#to#have#known#of#the# circumstances#of#the#land#and#are#thus,#not#really#third#parties.# Pilapil!v.!Court!of!Appeals!(250!SCRA!566);!Aguirre!v.! Court!of! Appeals!(421!SCRA!310)!


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3.#Gross#inadequacy#of#price# •

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When#there#are#certain#facts#which#would#put#a#reasonable#man#

Examples# of# facts# necessitating# further# investigation# on# the# property:# o There# are# occupants# on# the# land,# whether# or# not# they# possess#it#in#the#concept#of#owner.#Martinez!v.!Court!of! o

o

o

Appeals!(358!SCRA!38)! When#the#seller#is#a#company#which#is#closing#shop#and# liquidating#assets.#They#might#be#dissipating#their#assets# to# defraud# creditors.# Samson! v.! Court! of! Appeals! (238! SCRA!397)# The# property# was# titled# and# transferred# with# undue# haste# within# a# short# period# of# time# and# that# the# land# was#a#vast#tract#of#land#in#a#prime#location.#Eagle!Realty# Corp!v.!Republic!(557!SCRA!77)# When# the# buyer# deals# with# someone# who# is# not# a# ed# owner,# he# is# expected# to# examine# the# certificate# of# title# as# well# as# the# authority# and# capacity#

A#buyer#of#ed#land#is#required#to#at#least#ask#the#seller#to#

show#the#title#to#the#land.#If#he#does#not#ask#for#it,#he#will#be#in# bad#faith.#Santiago!v.!Court!of!Appeals!(247!SCRA!336)! 5.#When#there#are#stipulations#in#the#deed#showing#bad#faith# In# a# case,# the# Court# held# that# a# stipulation# in# the# deed# of# sale# providing#that#any#losses#which#the#buyer#may#incur#in#the#event# the# title# turns# out# to# be# vested# in# another# person# are# to# bo# borne# by# the# buyer# alone,# showed# that# the# buyer# did# not# purchase#the#subject#matter#in#good#faith#without#notice#of#any# defect# in# the# title# of# the# seller.# Limketkai! Sons! Milling,! Inc.! v.!

on# guard# and# prompt# him# to# investigate# the# property,# he# is# expected#to#do#so.#Actual#lack#of#knowledge#of#flaw#in#title#is#not# enough# if# these# facts# exist.! Mathay! v.! Court! of! Appeals! (295! SCRA!556)# •


of# the# seller# to# sell# the# land.# R.R.! Paredes! v.! Caliling! (517!SCRA!369);!Chua!v.!Soriano!(521!SCRA!68)#

To#be#a#badge#of#bad#faith,#the#price#must#be#grossly#inadequate#

or#shocking#to#the#conscience#such#that#the#mind#revolts#against# it# and# such# that# a# reasonable# man# would# neither# directly# or# indirectly# be# likely# to# consent# to# it.! Tio! v.! Abayata! (556! SCRA! 175)! 4.#Obligation#to#investigate#or#to#follow#leads#

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Court!of!Appeals!(250!SCRA!523)! 6.#Land#in#adverse#possession# •

When# the# land# is# in# possession# of# a# third# person,# the# buyer# should# investigate# the# rights# of# those# in# possession.# Without# such# inquiry,# the# buyer# can# hardly# be# regarded# as# a# buyer# in# good#faith.#Republic!v.!De!Guzman!(326!SCRA!267)#

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A#buyer#who#could#not#have#failed#to#know#or#discover#that#the# land# sold# to# him# was# in# the# adverse# possession# of# another# is# a#

buyer#in#bad#faith.#Heirs!of!Ramon!Durano,!Sr.!v.!Uy!(344!SCRA! 238)! 7.#Existence#of#Lis&Pendens#or#Adverse#Claim# •

An# annotation# of# lis& pendens# is# a# notice# to# the# world# that# any# right#that#anyone#will#acquire#over#the#property#is#subject#to#the# result#of#the#suit.#Republic!v.!De!Guzman!(326!SCRA!267)!

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Any#subsequent#buyer#of#the#ed#land#annotated#with#lis# pendens# or# adverse# claim# is# thus# in# bad# faith.! Kings! Properties! Corp.!v.!Galido!(606!SCRA!137)!



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Even# if# the# annotation# of# lis# pendens# was# subsequently#

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Such# annotation# is# a# warning# to# third# persons# on# the# possible#

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Situations#where#Article#1544#will#not#apply:# o Not#all#the#requisites#are#present# o The# requisites# are# present,# but# either# the# first# to# # rule# or# first# to# possess# rule# were# not# complied# with#

o o •

This#is#actually#the#main#rule#for#double#sales.!Carbonell! v.!Court!of!Appeals!(69!SCRA!99)! The# rules# in# Article# 1544# only# provide# for# special# rules# for#certain#circumstances.#

The# priority# contemplated# in# this# instance# is# that# of# who# acquired#title#first.#The#question#to#ask,#therefore,#is#who#among# the#buyers#had#the#first#perfected#and#valid#contract#of#sale.#

Under# Act# 3344,# registration# of# instruments# affecting# uned#lands#is#“without#prejudice#to#a#third#party#with#a# better#right,”#which#means#that#mere#registration#does#not#give# the#buyer#any#right#over#the#land#if#the#seller#was#not#anymore# the# owner# of# the# land# having# previously# sold# the# same# to# somebody# else# even# if# the# earlier# sale# was# unrecorded.# The#

I.(When(Article(1544(Does(Not(Apply,(Priority(in(Time(Rule(Applies(

In# these# cases,# the# general# rule# of# Prius& tempore,& potior& jure# (Priority#in#time,#priority#in#right)#will#apply.#

If#a#piece#of#land#is#sold#through#a#private#deed#of#sale#but#was# never# ed.# The# land# was# then# sold# in# public# auction# and# the#sale#to#the#second#buyer#was#ed#under#Act#No.#3344.# The#applicable#provision#is#that#of#Sec.#33,#Rule#39#of#the#Rules# of#Court,#not#Article#1544.#Carumba!v.!CA!(31!SCRA!558)!

#

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Rules# on# double# sales# for# immovables# under# Article( 1544# are# applicable#to#uned#land,#but#only#insofar#as#they#do#not# undermine# specific# rules,# such# as# the# “without# prejudice# to# better#right”#provision#in#Act(No.(3344,(now(Sec.(113,(P.D.(1529.#

interest# of# excluded# heirs# or# unpaid# creditors# in# these# properties.#The#buyers#of#these#properties#must#be#ready#for#the# possibility# that# their# title# be# subject# to# rights# of# excluded# parties.#Tan!v.!Benolirao!(604!SCRA!36)#

•


J.(Uned(Land(

cancelled# but# there# was# a# pending# appeal,# the# buyer# cannot# invoke#good#faith.#Po!Lam!v.!Court!of!Appeals!(316!SCRA!86)# o Exception:#When#knowledge#of#lis&pendens#was#acquired# at#the#time#there#was#order#to#have#it#cancelled.# 8.#Annotation#of#Lien#in#Settlement#of#Estate# •

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rules# on# double# sale# under# Article# 1544# has# no# application# to# land#not#ed#under#the#Torrens#system.#Acabal!v.!Acabal,! (454!SCRA!555)! ! Abrigo!v.!De!Vera! # Facts:( By# virtue# of# a# compromise# agreement# judicially# approved,# Villafania# sold# to# Rosenda# and# Rosita# a# house# and# lot.# Unknown# to# them,#Villafania#obtained#a#free#patent#over#the#said#land#and#sold#it#to# De# Vera.# On# the# other# hand,# Rosenda# and# Rosita# sold# the# property# to#

# #



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the# spouses# Abrigo.# Now# De# Vera# and# Abrigo# dispute# ownership# over# the#property—the#former#filing#an#ejectment#suit#against#the#latter.1# # Issue:(Who#has#a#better#title,#Abrigo#or#De#Vera?#

# Facts:# Amado# sold# an# uned# land# to# Carumba# through# a# private# document.# Amado# owed# a# sum# of# money# from# Balbuena.# Balbuena#

( Held:# DE# VERA.# He# bought# and# ed# the# property# in# good# faith.# Spouses# Abrigo# ed# the# property# under# Act# No.# 3344# because# it# was# unknown# to# them# that# it# was# covered# under# the# Torrens# System,# while# De# Vera# ed# the# same# under# the# Torrens# System# because# Villafania# procured# the# TCT# upon# purchase.# De# Vera’s# right# prevails,# spouses#Abrigo#cannot#validly#argue#that#they#were#fraudulently#misled#

successfully# obtained# a# judgment# on# his# credit# against# Amado.# Sheriff# issued#a#Definite#Deed#of#Sale#(on#the#same#property#sold#to#Carumba)# in#favor#of#Balbuena#and#ed#it#before#RoD.#CFI#said#levy#was#void# and#declared#Carumba#as#owner#because#he#already#had#possession#of# the# land.# CA# said# there# was# a# double# sale# and# Balbuena# should# be# declared#owner#because#his#sale#was#ed#in#good#faith.# #

into#believing#that#the#property#was#uned.#A#Torrens#title,#once# ed,#serves#as#a#notice#to#the#whole#world.#All#persons#must#take# notice,#and#no#one#can#plead#ignorance#of#the#registration.# The#rules#in#double#sale#under#Article#1544,#whereby#the#buyer#who#is# able# to# first# # the# purchase# in# good# faith# “is# in# full# accord# with# Section#51#of#PD#1529#which#provides#that#no#deed,#mortgage,#lease,#or# other# voluntary# instrument# –# except# a# will# purporting# to# convey# or#

Issue:#Whether#or#not#there#is#a#double#sale.# # Held:# NO.# Article# 1544# does# not# apply# to# uned# land.# The# purchaser#of#an#uned#land#at#a#sheriff’s#execution#sale#only#steps# into#the#shoes#of#the#judgment#debtor#and#merely#acquires#the#latter’s# interest#in#the#property#sold#as#of#the#time#that#the#property#was#levied# upon.#The#first#Deed#of#Sale#while#only#embodied#in#a#private#document#

affect#ed#land#shall#take#effect#as#a#conveyance#or#bind#the#land# until#its#registration.#Thus,#if#the#sale#is#not#ed,#it#is#binding#only# between# the# seller# and# the# buyer# but# it# does# not# affect# innocent# third# persons.# ( ! ! !

but# coupled# with# the# fact# that# Carumba# had# taken# possession# of# the# land#sold,#sufficed#to#vest#ownership#on#the#buyer.#So#when#the#levy#was# made# by# the# Sheriff,# the# judgment# debtor# no# longer# had# dominical# interest#nor#any#real#right#over#the#land.#No#double#sale.# # Acabal!v.!Acabal! # Facts:#Spouses#Acabal#sold#their#lot#to#their#son#Villaner#Acabal#who#in#

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

turn# transferred# it# to# his# godsonInephew# Leonardo# Acabal.# This# was# later# on# sold# to# Leonardo# and# Ramon# Nicolas# hence# a# complaint# was# filed# by# Villaner# against# them# and# his# nephew# arguing# that# what# he#

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Carumba!v.!CA!



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signed#was#a#Lease#contract#and#not#a#sales#contract.#The#RTC#ruled#in# favor#of#Nicolas#which#was#reversed#by#the#CA#thus#the#case#at#bar.# # Issue:#Whether#or#not#there#was#a#valid#sale#

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What# if# land# is# sold# BEFORE# it# was# ed# and# then# sold# a# second# time# by# the# same# person# AFTER# it# was# ed,# will# Article# 1544# apply?# No.# Article# 1544# will# not# apply# because# registration# was# different# for# both# transactions;# albeit,# no# registration#at#all#in#the#first#one.#

# Held:#YES.#It#is#valid#only#insofar#as#5/9#of#the#land#is#concerned.#This#is# so#because#the#property#in#question#was#bought#during#the#pendency#of# the# marriage# of# Villaner# therefore# it# is# presumed# to# belong# to# the# conjugal#partnership.#Leonarda#failed#to#prove#otherwise.#Nevertheless,# when#Justiniana#(wife)#died,#her#share#vested#on#her#8#children,#and#her# husband#vesting#him#with#5/9#share#on#the#property.#Since#it#is#not#yet#

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Ownership#of#the#land#will#then#depend#on:#

1. If# 2nd# buyer,# in# good# faith,# ed# the# land# under# the# Torrens# System,# he# prevails# because# of# the# indefeasibility# of# a# Torrens#Title.# 2. But#if#registration#was#made#under#Act#No.#3344,#ownership#by# the#buyer#of#the#land#is#still#dependent#on#other#better#rights#of# a#third#party.#Mere#registration#does#not#give#a#buyer#any#right#

partitioned,# he# cannot# yet# claim# title# to# any# definite# portion# of# the# property# but# only# to# his# ideal,# abstract# or# spiritual# share.# He# may# still# dispose#of#the#same#for#every#coIowner#has#absolute#ownership#over#his# undivided# interest# in# the# coIowned# property.# However,# he# cannot# dispose# of# the# shares# of# his# coIowners# based# on# nemo# dat# qui# non# habet.#Since#he#sold#it#without#the#consent#of#the#other#coIowners,#the# sale#is#still#valid#only#insofar#as#his#shares#are#concerned.#And#the#finding#

!

that# both# Leonardo# and# Villaner# were# in# pari# delicto,# the# same# is# irrelevant#because#the#property#concerned#is#uned.1# # Doctrine:( If# uned# land,# once# it# is# ed# under# the# Torrens# System,#registration#gives#indefeasibility#to#the#title.#It#cleanses#the#title# if#registration#was#made#in#good#faith.# #

( Article(1582.( The( vendee( is( bound( to( accept( delivery( and( to( pay( the( price( of( the( thing(sold(at(the(time(and(place(stipulated(in(the(contract.( ( If( the( time( and( place( should( not( have( been( stipulated,( the( payment( must(be(made(at(the(time(and(place(of(the(delivery(of(the(thing(sold.(

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

over# the# land# if# the# seller# was# not# anymore# the# owner# of# the# land#having#previously#sold#the#same#to#somebody#else.# V.(Obligations(of(Buyer( ( A.(Pay(the(Price(

(1500a)( (

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When# seller# cannot# show# title# to# the# subject# matter,# then# he# cannot#compel#the#buyer#to#pay#the#price.!Heirs!of!Severina!San! Miguel!v.!Court!of!Appeals!(364!SCRA!523).!

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Mere# sending# of# a# letter# by# the# buyer# expressing# the# intention# to# pay# without# the# accompanying# payment# is# not# considered# a# valid# tender# of# payment# and# consignation# of# the# amount# due# are# essential# in# order# to# extinguish# the# obligation# to# pay# and# oblige#the#seller#to#convey#title.#Torcuator!v.!Bernabe!(459!SCRA! 439).!

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Unless# there# is# a# contrary# stipulation,# payment# to# be# effective# must# be# made# to# the# seller# in# accordance# with# Article# 1240# which# provides# that# “Payment# shall# be# made# to# the# person# in# whose# favor# the# obligation# has# been# constituted,# or# his# successor# in# interest,# or# any# person# authorized# to# receive# it.”# Montecillo!v.!Reynes!(385!SCRA!244).!

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NonIpayment# of# the# consideration# in# the# sale# does# not# prove# simulation,# at# most,# it# gives# the# seller# the# right# to# sue# for# collection.#! o Generally#in#a#sale,#payment#of#the#price#is#a#“resolutory# condition”# and# the# remedy# of# the# seller# is# to# exact# fulfillment#or,#in#case#of#a#substantial#breach,#to#rescind# the#contract#under#Article(1191.!

! B.(Accept(Delivery(of(Thing(Bought( •

The#buyer#is#bound#to#accept#delivery#of#the#thing#bought#at#the# time#and#place#stipulated#in#the#contract.#( o If#the#time#and#place#were#not#stipulated,#the#payment# must# be# made# at# the# time# and# place# of# the# delivery# of# the#thing#sold.(

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The# buyer# is# deemed# to# have# accepted# the# goods# when# he# intimates#to#the#seller#that#he#has#accepted#them.#Article(1585(

( Goods#Sold#Deliverable#by#Installments# # Article(1583.( Unless( otherwise( agreed,( the( buyer( of( goods( is( not( bound( to( accept( delivery(thereof(by(installments.( ( Where( there( is( a( contract( of( sale( of( goods( to( be( delivered( by( stated( installments,(which(are(to(be(separately(paid(for,(and(the(seller(makes( defective( deliveries( in( respect( of( one( or( more( installments,( or( the( buyer(neglects(or(refuses(without(just(cause(to(take(delivery(of(or(pay( for(one(more(installments,(it(depends(in(each(case(on(the((of(the( contract( and( the( circumstances( of( the( case,( whether( the( breach( of( contract( is( so( material( as( to( justify( the( injured( party( in( refusing( to( proceed( further( and( suing( for( damages( for( breach( of( the( entire( contract,(or(whether(the(breach(is(severable,(giving(rise(to(a(claim(for( compensation(but(not(to(a(right(to(treat(the(whole(contract(as(broken.( (n)( ( B.1.(Opportunity(to(Inspect(Goods( ( Article(1584.( Where(goods(are(delivered(to(the(buyer,(which(he(has(not(previously( examined,( he( is( not( deemed( to( have( accepted( them( unless( and( until( he( has( had( a( reasonable( opportunity( of( examining( them( for( the( purpose( of( ascertaining( whether( they( are( in( conformity( with( the( contract(if(there(is(no(stipulation(to(the(contrary.( (



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Unless(otherwise(agreed,(when(the(seller(tenders(delivery(of(goods(to( the( buyer,( he( is( bound,( on( request,( to( afford( the( buyer( a( reasonable( opportunity( of( examining( the( goods( for( the( purpose( of( ascertaining( whether(they(are(in(conformity(with(the(contract.(

B.2.(Effect(of(Acceptance(of(Goods(on(Seller’s(Warranty( ( Article(1586.(( In( the( absence( of( express( or( implied( agreement( of( the( parties,(

( Where( goods( are( delivered( to( a( carrier( by( the( seller,( in( accordance( with(an(order(from(or(agreement(with(the(buyer,(upon(the((that( the( goods( shall( not( be( delivered( by( the( carrier( to( the( buyer( until( he( has( paid( the( price,( whether( such( ( are( indicated( by( marking( the( goods(with(the(words("collect(on(delivery,"(or(otherwise,(the(buyer(is( not(entitled(to(examine(the(goods(before(the(payment(of(the(price,(in(

acceptance( of( the( goods( by( the( buyer( shall( not( discharge( the( seller( from( liability( in( damages( or( other( legal( remedy( for( breach( of( any( promise(or(warranty(in(the(contract(of(sale.(But,(if,(after(acceptance(of( the(goods,(the(buyer(fails(to(give(notice(to(the(seller(of(the(breach(in( any( promise( of( warranty( within( a( reasonable( time( after( the( buyer( knows,(or(ought(to(know(of(such(breach,(the(seller(shall(not(be(liable( therefor.((n)(

the( absence( of( agreement( or( usage( of( trade( permitting( such( examination.((n)( (

( B.3.(Refusal(to(Accept(Goods( ( Article(1587.(( Unless(otherwise(agreed,(where(goods(are(delivered(to(the(buyer,(and( he(refuses(to(accept(them,(having(the(right(so(to(do,(he(is(not(bound(to( return(them(to(the(seller,(but(it(is(sufficient(if(he(notifies(the(seller(that(

•

General(Rule:(Article(1584(1)#

•

Exception:(Article(1584(3);(C.O.D.#Sales#

( Article(1585.( The(buyer(is(deemed(to(have(accepted(the(goods(when(he(intimates(to( the( seller( that( he( has( accepted( them,( or( when( the( goods( have( been( delivered( to( him,( and( he( does( any( act( in( relation( to( them( which( is( inconsistent(with(the(ownership(of(the(seller,(or(when,(after(the(lapse( of( a( reasonable( time,( he( retains( the( goods( without( intimating( to( the( seller(that(he(has(rejected(them.((n)( ( ( ( ( (

he( refuses( to( accept( them.( If( he( voluntarily( constitutes( himself( a( depositary(thereof,(he(shall(be(liable(as(such.((n)( ( Article(1588.(( If( there( is( no( stipulation( as( specified( in( the( first( paragraph( of( Article( 1523,( when( the( buyer's( refusal( to( accept( the( goods( is( without( just( cause,( the( title( thereto( es( to( him( from( the( moment( they( are( placed(at(his(disposal.((n)!( #



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Chapter(7:(Documents(of(Title(

o

! I.(Definition(and(Function( •

•

or$order$for$the$delivery$of$goods,$or$any$other$document$used$ in$ the$ ordinary$ course$ of$ business$ in$ the$ sale$ or$ transfer$ of$ goods,$ as$ proof$ of$ the$ possession$ or$ control$ of$ the$ goods,$ or$ authorizing$ or$ purporting$ to$ authorize$ the$ possessor$ of$ the$

o

•

document$ to$ transfer$ or$ receive,$ either$ by$ endorsement$ or$ by$ delivery,$goods$represented$by$such$document.$Article(16361$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1


Example:$ Warehouse$ Receipts,$ Bonded$ Warehouse$ Receipts$$

2$Functions:$ o

Any$bill$of$lading,$dock$warrant,$"quedan,"$or$warehouse$receipt$

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As$ evidence$ of$ the$ possession$ or$ control$ of$ the$ goods$ described$therein.$ As$the$medium$of$transferring$title$and$possession$over$ the$ goods$ described$ therein,$ without$ having$ to$ effect$ actual$delivery$thereof.$

Delivery$and$possession$of$the$document$of$title$is$tantamount$ to$delivery$and$possession$of$the$goods$which$the$document$of$ title$ represents.$ It$ represents$ that$ one$ who$ has$ possession$ of$ the$ receipt$ has$ been$ entrusted$ has$ the$ title$ to$ the$ goods.$

$Article(1636.$In$the$preceding$articles$in$this$Title$governing$the$sale$of$goods,$ unless$the$context$or$subject$matter$otherwise$requires:$ $ (1)$ "Document$ of$ title$ to$ goods"$ includes$ any$ bill$ of$ lading,$ dock$ warrant,$ "quedan,"$or$warehouse$receipt$or$order$for$the$delivery$of$goods,$or$any$other$ document$ used$ in$ the$ ordinary$ course$ of$ business$ in$ the$ sale$ or$ transfer$ of$ goods,$ as$ proof$ of$ the$ possession$ or$ control$ of$ the$ goods,$ or$ authorizing$ or$

$ $

purporting$to$authorize$the$possessor$of$the$document$to$transfer$or$receive,$ either$by$endorsement$or$by$delivery,$goods$represented$by$such$document.$ $ "Goods"$includes$all$chattels$personal$but$not$things$in$action$or$money$of$legal$ tender$in$the$Philippines.$The$term$includes$growing$fruits$or$crops.$ $ "Order"$relating$to$documents$of$title$means$an$order$by$endorsement$on$the$ documents.$ $ "Quality$of$goods"$includes$their$state$or$condition.$ $ "Specific$ goods"$ means$ goods$ identified$ and$ agreed$ upon$ at$ the$ time$ a$ contract$of$sale$is$made.$

An$ antecedent$ or$ preRexisting$ claim,$ whether$ for$ money$ or$ not,$ constitutes$ "value"$ where$ goods$ or$ documents$ of$ title$ are$ taken$ either$ in$ satisfaction$ thereof$or$as$security$therefor.$ $ (2)$A$person$is$insolvent$within$the$meaning$of$this$Title$who$either$has$ceased$ to$pay$his$debts$in$the$ordinary$course$of$business$or$cannot$pay$his$debts$as$ they$ become$ due,$ whether$ insolvency$ proceedings$ have$ been$ commenced$ or$ not.$ $ (3)$Goods$are$in$a$"deliverable$state"$within$the$meaning$of$this$Title$when$they$ are$in$such$a$state$that$the$buyer$would,$under$the$contract,$be$bound$to$take$ delivery$of$them.$(n)$ $

Philippine! Trust! co.! v.! National! Bank! (42! Phil.! 413);! Siy! Cong! Bieng!v.!HSBC!(56!Phil.!598)!

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Rationale$for$Documents$of$Title$ •

Through$a$document$of$title,$seller$is$allowed$by$fiction$of$law$to$ deal$ with$ the$ goods$ described$ therein$ as$ though$ he$ had$ physically$delivered$them$to$the$buyer;$and$buyer$may$take$the$ document$ as$ though$ he$ had$ actually$ taken$ possession$ and$ control$over$the$goods$described$therein.$Philippine!Trust!Co.!v.! National!Bank!(42!Phil.!413)!

•

The$ provisions$ on$ documents$ of$ title$ are$ geared$ towards$ assuring$ the$ public$ to$ take,$ accept,$ and$ deal$ with$ transactions$ over$goods$and$merchandise$by$means$of$the$documents$of$title$ issued$in$representation$thereof.!

•

Warehouse$receipt$represents$the$goods,$but$the$entrusting$of$ the$receipt$is$more$than$the$mere$delivery$of$the$goods;$it$is$a$ representation$ that$ the$ one$ to$ whom$ the$ possession$ of$ the$ receipt$ has$ been$ so$ entrusted$ has$ the$ title$ to$ the$ goods.$ Siy! Cong!Bieng!v.!Hongkong!&!Shanghai!Bank!(56!Phil.!598)!

( II.(Types(of(Documents(of(Title:(Negotiable(Document(of(Title( ( A.(Negotiable(Document(of(Title( ( Article(1507.( A( document( of( title( in( which( it( is( stated( that( the( goods( referred( to( therein(will(be(delivered(to(the(bearer,(or(to(the(order(of(any(person( named(in(such(document(is(a(negotiable(document(of(title.((n)( ( B.(NonJNegotiable(Document(of(Title( •

Documents$of$title$which$are$not$deliverable$“to$bearer”$or$“to$ order.”$(

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C.(Effects(of(Errors(on(Documents(of(Title( •

Clerical$errors$do$not$affect$the$negotiability$of$the$instrument.$

$ Article(1510.( If( a( document( of( title( which( contains( an( undertaking( by( a( carrier,( warehouseman( or( other( bailee( to( deliver( the( goods( to( bearer,( to( a( specified( person( or( order( of( a( specified( person( or( which( contains( words( of( like( import,( has( placed( upon( it( the( words( "not( negotiable,"( "nonJnegotiable"( or( the( like,( such( document( may( nevertheless( be( negotiated(by(the(holder(and(is(a(negotiable(document(of(title(within( the( meaning( of( this( Title.( But( nothing( in( this( Title( contained( shall( be( construed(as(limiting(or(defining(the(effect(upon(the(obligations(of(the( carrier,(warehouseman,(or(other(bailee(issuing(a(document(of(title(or( placing(thereon(the(words("not(negotiable,"("nonJnegotiable,"(or(the( like.((n)( $ III.( Effects( of( Use( of( “NonJNegotiable”( ( on( Negotiable( Documents(of(Title( •

Such$ document$ may$ nevertheless$ be$ negotiated$ by$ the$ holder$ and$is$a$negotiable$document$of$title.$

( A.(How(Negotiation(Properly(Effected( $ Article(1508.( A(negotiable(document(of(title(may(be(negotiated(by(delivery:( ( (1)(Where(by(the((of(the(document(the(carrier,(warehouseman(or( other( bailee( issuing( the( same( undertakes( to( deliver( the( goods( to( the( bearer;(or(



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(2)(Where(by(the((of(the(document(the(carrier,(warehouseman(or( other( bailee( issuing( the( same( undertakes( to( deliver( the( goods( to( the( order(of(a(specified(person,(and(such(person(or(a(subsequent(endorsee( of(the(document(has(indorsed(it(in(blank(or(to(the(bearer.(

possession(or(custody(of(the(document(has(been(entrusted,(or( if(at(the(time(of(such(entrusting(the(document(is(in(such(form( that(it(may(be(negotiated(by(delivery.((n)( (

( Where( by( the( ( of( a( negotiable( document( of( title( the( goods( are( deliverable( to( bearer( or( where( a( negotiable( document( of( title( has( been(indorsed(in(blank(or(to(bearer,(any(holder(may(indorse(the(same( to(himself(or(to(any(specified(person,(and(in(such(case(the(document( shall( thereafter( be( negotiated( only( by( the( endorsement( of( such( endorsee.((n)(

C.(Effects(of(Proper(Negotiation( ( Article(1513.!( A( person( to( whom( a( negotiable( document( of( title( has( been( duly( negotiated(acquires(thereby:( ( (1)(Such(title(to(the(goods(as(the(person(negotiating(the(document(to(

( Article(1509.( A(negotiable(document(of(title(may(be(negotiated(by(the(endorsement( of( the( person( to( whose( order( the( goods( are( by( the( ( of( the( document( deliverable.( Such( endorsement( may( be( in( blank,( to( bearer( or( to( a( specified( person.( If( indorsed( to( a( specified( person,( it( may( be( again( negotiated( by( the( endorsement( of( such( person( in( blank,( to(

him(had(or(had(ability(to(convey(to(a(purchaser(in(good(faith(for(value( and( also( such( title( to( the( goods( as( the( person( to( whose( order( the( goods(were(to(be(delivered(by(the((of(the(document(had(or(had( ability(to(convey(to(a(purchaser(in(good(faith(for(value;(and( ( (2)( The( direct( obligation( of( the( bailee( issuing( the( document( to( hold( possession( of( the( goods( for( him( according( to( the( ( of( the(

bearer( or( to( another( specified( person.( Subsequent( negotiations( may( be(made(in(like(manner.((n)( ( B.(Who(Can(Negotiate( ( Article(1512.!( A(negotiable(document(of(title(may(be(negotiated:( 1) By(the(owner(therefor;(or(

document( as( fully( as( if( such( bailee( had( contracted( directly( with( him.( (n)( ( •

2) By( any( person( to( whom( the( possession( or( custody( of( the( document(has(been(entrusted(by(the(owner,(if,(by(the((of( the( document( the( bailee( issuing( the( document( undertakes( to( deliver( the( goods( to( the( order( of( the( person( to( whom( the(


The$endorsement$and$delivery$of$a$negotiable$quedan$operates$ as$ the$ transfer$ of$ possession$ and$ ownership$ of$ the$ property$ referred$to$therein,$and$had$the$effect$of$divorcing$the$property$ covered$ therein$ from$ the$ estate$ of$ the$ insolvent$ prior$ to$ the$ filing$ of$ the$ petition$ for$ insolvency.( Philippine! Trust! Co.! v.! National!Bank!(42!Phil.!413)! ( (


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D.( Effects( of( Merely( Transferring/Delivering( of( “Order”( Negotiable( Documents(of(Title( ( Article(1514.((

E.(Effects(and(Consequences(of(Unauthorized(Negotiation( ( Article(1518.( The(validity(of(the(negotiation(of(a(negotiable(document(of(title(is(not(

A( person( to( whom( a( document( of( title( has( been( transferred,( but( not( negotiated,(acquires(thereby,(as(against(the(transferor,(the(title(to(the( goods,(subject(to(the((of(any(agreement(with(the(transferor.( ( If(the(document(is(nonJnegotiable,(such(person(also(acquires(the(right( to(notify(the(bailee(who(issued(the(document(of(the(transfer(thereof,( and( thereby( to( acquire( the( direct( obligation( of( such( bailee( to( hold(

impaired(by(the(fact(that(the(negotiation(was(a(breach(of(duty(on(the( part( of( the( person( making( the( negotiation,( or( by( the( fact( that( the( owner(of(the(document(was(deprived(of(the(possession(of(the(same(by( loss,( theft,( fraud,( accident,( mistake,( duress,( or( conversion,( if( the( person( to( whom( the( document( was( negotiated( or( a( person( to( whom( the( document( was( subsequently( negotiated( paid( value( therefor( in( good( faith( without( notice( of( the( breach( of( duty,( or( loss,( theft,( fraud,(

possession( of( the( goods( for( him( according( to( the( ( of( the( document.( ( Prior(to(the(notification(to(such(bailee(by(the(transferor(or(transferee( of(a(nonJnegotiable(document(of(title,(the(title(of(the(transferee(to(the( goods( and( the( right( to( acquire( the( obligation( of( such( bailee( may( be( defeated(by(the(levy(of(an(attachment(of(execution(upon(the(goods(by(

accident,(mistake,(duress(or(conversion.((n)( (

a(creditor(of(the(transferor,(or(by(a(notification(to(such(bailee(by(the( transferor( or( a( subsequent( purchaser( from( the( transfer( of( a( subsequent(sale(of(the(goods(by(the(transferor.((n)( ( Article(1515.( Where( a( negotiable( document( of( title( is( transferred( for( value( by( delivery,( and( the( endorsement( of( the( transferor( is( essential( for( negotiation,( the( transferee( acquires( a( right( against( the( transferor( to(

•

Even$when$the$owner$loses$the$negotiable$document$of$title$to$ a$ thief,$ and$ it$ is$ deliverable$ to$ bearer,$ the$ latter$ may$ validly$ impart$title$thereto$to$a$holder$in$due$course,$who$is$essentially$ a$buyer$in$good$faith$and$for$value.(

•

The$ only$ real$ defense$ that$ can$ validly$ be$ raised$ against$ the$ holder$in$due$course$of$a$negotiable$document$of$title$would$be$ forgery$ of$ the$ endorsement$ of$ the$ owner$ when$ such$ endorsement$is$necessary$to$effect$proper$negotiation.(

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compel( him( to( endorse( the( document( unless( a( contrary( intention( appears.( The( negotiation( shall( take( effect( as( of( the( time( when( the( endorsement(is(actually(made.((n)( (


As$ between$ the$ owner$ of$ a$ negotiable$ document$ of$ title$ who$ endorsed$it$in$blank$and$entrusted$it$to$a$friend,$and$the$holder$ of$such$negotiable$document$of$title$to$whom$it$was$negotiated$ and$ who$ received$ it$ in$ good$ faith$ and$ for$ value,$ the$ latter$ is$ preferred,$ under$ the$ principle$ that$ as$ between$ two$ innocent$ persons,$ he$ who$ made$ the$ loss$ possible$ should$ bear$ the$ loss.(( Siy! Long! Bieng! v.! Hongkong! and! Shanghai! Banking! Corp.! (56! Phil.!598)!


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IV.( Types( of( Documents( of( Title:( Assignment! NonJNegotiable( Document(of(Title( ( A.(How(Assignment(Made(

(1) That(the(document(is(genuine;( ( (2) That(he(has(a(legal(right(to(negotiate(or(transfer(it;( (

( Article(1511.( A(document(of(title(which(is(not(in(such(form(that(it(can(be(negotiated( by( delivery( may( be( transferred( by( the( holder( by( delivery( to( a( purchaser(or(donee.(A(nonJnegotiable(document(cannot(be(negotiated( and( the( endorsement( of( such( a( document( gives( the( transferee( no( additional(right.((n)(

(3) That(he(has(knowledge(of(no(fact(which(would(impair(the(validity( or(worth(of(the(document;(and( ( (4) That(he(has(a(right(to(transfer(the(title(to(the(goods(and(that(the( goods(are(merchantable(or(fit(for(a(particular(purpose,(whenever( such( warranties( would( have( been( implied( if( the( contract( of( the( parties(had(been(to(transfer(without(a(document(of(title(the(goods(

( •

Since$ a$ nonRnegotiable$ document$ of$ title$ constitutes$ an$ incorporeal$ right,$ its$ sale$ constitutes$ actually$ an$ assignment$ which$ under$ Article( 1624$ is$ perfected$ by$ mere$ consent,$ but$

represented(thereby.((n)( ( •

which$ under$ Article( 1625$ would$ require$ its$ appearance$ in$ a$ public$ instrument,$ otherwise$ it$ “shall$ produce$ no$ effect$ as$ against$third$persons”( ( B.(Effects(of(Transfer(by(Assignment(( •

See(Article(1514(2)(

( V.(Warranties(on(Negotiation(and(Assignment(of(Documents(of(Title( ! Article(1516.( A(person(who(for(value(negotiates(or(transfers(a(document(of(title(by( endorsement(or(delivery,(including(one(who(assigns(for(value(a(claim( secured( by( a( document( of( title( unless( a( contrary( intention( appears,( warrants:(

The$ seller/assignor$ of$ the$ document$ of$ title$ also$ warrants$ the$ existence$ and$ legality$ of$ the$ documents$ of$ title$ at$ the$ time$ of$ sale,$ unless$ it$ has$ been$ sold$ as$ doubtful;$ but$ that$ he$ does$ not$ warrant$the$solvency$of$the$debtor$(i.e.$the$bailee),$unless$it$has$ been$so$expressly$stipulated$or$unless$the$insolvency$was$prior$ to$the$sale$and$of$common$knowledge.(

( Article(1517.(( The(endorsement(of(a( document( of( title( shall( not( make( the( endorser( liable( for( any( failure( on( the( part( of( the( bailee( who( issued( the( document( or( previous( endorsers( thereof( to( fulfill( their( respective( obligations.((n)( ( ( ( (



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VI.(Effects(When(Owner(of(the(Document(of(Title(Has(No(Legal(Title(to( the(Goods( ( A.(When(Goods(Covered(by(NonJNegotiable(Document( $ Where(the(owner(had(neither(lost( nor(been(unlawfully(deprived(of( the(goods(

Where(the(owner(had(lost(the( goods(or(been(unlawfully( deprived(thereof.(

The$assigneeRbuyer’s$title$to$the$ goods$is$preferred$against$the$

The$owner$may$recover$against$ the$assigneeRbuyer,$even$when$the$

owner$who$can$no$longer$recover$ the$goods.$In$such$cases,$the$ assigneeRbuyer’s$ownership$to$the$ goods$is$not$derived$from$the$ assignorRseller,$but$is$granted$by$ Article(559(

latter$is$in$good$faith$and$bought$ for$value,$because$Article(559$ expressly$does$not$give$to$the$ assigneeRbuyer$any$original$title;$ and$in$such$cases,$the$title$of$the$ assigneeRbuyer$is$derived$from$ that$of$the$assignorRseller’s.$

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Where(the(owner(had(lost(the( goods(or(been(unlawfully( deprived(thereof.(

The$holderRbuyer$acquires$valid$ The$owner$may$recover$against$ ownership$of$such$goods$because$ the$bailee$and$therefore$ his$possession$in$good$faith$and$for$ against$the$holderRbuyer,$even$ value,$which$by$itself$would$ when$the$latter$is$a$holder$in$ constitute$as$an$original$source$or$ due$course$with$respect$to$the$ ownership$under$Article(559,(is$ negotiable$document$of$title,$


clearly$evidenced$by$his$being$a$ holder$in$due$course$of$the$ negotiable$document$of$title$

and$a$possessor$in$good$faith$ and$for$value$with$respect$to$ the$goods.$

( VII.( Rules( on( Levy/Garnishment( of( Goods( Covered( by( Documents( of( Title( A.(When(NonJNegotiable(Document(of(Title( •

See(Article(1514(3)( o

•

Prior$ to$ notification,$ garnishment$ and$ levy$ may$ defeat$ the$nonRnegotiable$document$of$title.(

In$ effect,$ the$ assignment$ or$ sale$ by$ the$ original$ owner$ of$ the$ nonRnegotiable$ document$ of$ title,$ even$ when$ executed$ in$ a$ public,$instrument$does$not$transfer$possession$or$title$over$the$ goods$covered$by$the$document$of$title,$until$actual$notification$ is$made$to$the$bailee$of$the$transfer$or$assignment$of$goods.(

•

In$ the$ case$ of$ a$ nonRnegotiable$ document$ of$ title,$ possession$ and$ ownership$ of$ the$ document$ of$ title$ (by$ assignment)$ does$ not$ necessarily$ bring$ with$ it$ possession$ or$ title$ over$ the$ goods$ covered.$ Rather,$ it$ is$ the$ notification$ of$ the$ bailee$ of$ the$ assignment$ that$ is$ the$ operative$ act$ that$ will$ transfer$ title$ and/or$ possession$ of$ the$ goods$ in$ favor$ of$ the$ transfereeR assignee.$(

$ B.(When(Goods(Covered(by(Negotiable(Document( ( Where(the(owner(had(neither(lost( nor(been(unlawfully(deprived(of( the(goods(

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( B.(When(Negotiable(Document(of(Title( ( Article(1519.( If(goods(are(delivered(to(a(bailee(by(the(owner(or(by(a(person(whose( act(in(conveying(the(title(to(them(to(a(purchaser(in(good(faith(for(value( would(bind(the(owner(and(a(negotiable(document(of(title(is(issued(for(



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them( they( cannot( thereafter,( while( in( possession( of( such( bailee,( be( attached(by(garnishment(or(otherwise(or(be(levied(under(an(execution( unless( the( document( be( first( surrendered( to( the( bailee( or( its( negotiation(ened.( ( The( bailee( shall( in( no( case( be( compelled( to( deliver( up( the( actual( possession( of( the( goods( until( the( document( is( surrendered( to( him( or( impounded(by(the(court.((n)( ( •

The$special$rules$on$goods$covered$by$the$negotiable$document$ of$title$show$that$in$such$case$ownership$and$possession$of$the$ document$ itself$ is$ equivalent$ to$ the$ holder$ having$ actual$ ownership$and$possession$of$the$goods$covered$thereby.$

•

The$ goods$ are$ treated$ to$ be$ inseparable$ from$ the$ negotiable$ document$of$title$covering$them$and$vice$versa.$

( Article(1520.( A(creditor(whose(debtor(is(the(owner(of(a(negotiable(document(of(title( shall(be(entitled(to(such(aid(from(courts(of(appropriate(jurisdiction(by( injunction( and( otherwise( in( attaching( such( document( or( in( satisfying( the(claim(by(means(thereof(as(is(allowed(at(law(or(in(equity(in(regard( to( property( which( cannot( readily( be( attached( or( levied( upon( by( ordinary(legal(process.((n)( (


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Chapter)8:)Sale)By)a)Non3Owner)or)By) One)Having)Voidable)Title) ) I.)When)Seller)is)Not)Owner)of)Subject)Matter) ) A.)At)Perfection) •

Seller% need% not% be% the% owner% at% perfection,% provided% he% acquires% title% later% on,% but% when% delivery% of% ownership% is% no% longer%possible,%the%sale%should%be%considered%void.%Nool$ v.$ CA$ (276$SCRA$149)$

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)(1)) The) provisions) of) any) factors') act,) recording) laws,) or) any) other) provision) of) law) enabling) the) apparent) owner) of) goods) to) dispose) of) them)as)if)he)were)the)true)owner)thereof;) ) (2))The)validity)of)any)contract)of)sale)under)statutory)power)of)sale)or) under)the)order)of)a)court)of)competent)jurisdiction;) ) (3)) Purchases) made) in) a) merchant's) store,) or) in) fairs,) or) markets,) in) accordance)with)the)Code)of)Commerce)and)special)laws.)(n)) % •

Note%that%the%provision%does%not%say%that%the%contract%is%void.% o

Perfection%merely%creates%the%obligation%to%transfer%ownership,% but%it%does%not%by%itself%transfer%ownership.%% o Therefore,%it%is%not%critical%for%a%valid%perfection%of%a%sale% to%come%about,%that%the%seller%at%that%time%is%the%owner.%

Although% a% situation% (where% the% sellers% were% no% longer% owners)%does%not%appear%to%be%one%of%the%void%contracts% enumerated% in% Article) 1409% of% Civil% Code,% and% under% Article)1402%Civil%Code%itself%recognizes%a%sale%where%the% goods% are% to% be% “acquired% x% x% x% by% the% seller% after% the% perfection%of%the%contract%of%sale”%clearly%implying%that% a%sale%is%possible%even%if%the%seller%was%not%the%owner%at% the% time% of% sale,% provided% he% acquires% title% to% the% property%later%on,%but%when%delivery%of%ownership%is%no% longer%possible,%the%sale%should%be%considered%void,%and% consequently,% the% right% to% repurchase% provided% therein%

) B.)At)Consummation) % Effect%of%Sale%Where%Seller%Not%Owner%at%Time%of%Delivery% ) Article)1505.) Subject) to) the) provisions) of) this) Title,) where) goods) are) sold) by) a) person) who) is) not) the) owner) thereof,) and) who) does) not) sell) them) under)authority)or)with)the)consent)of)the)owner,)the)buyer)acquires) no) better) title) to) the) goods) than) the) seller) had,) unless) the) owner) of) the) goods) is) by) his) conduct) precluded) from) denying) the) seller's) authority)to)sell.) )

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would%also%be%void.%Nool$v.$CA$(276$SCRA$149)% •

Nothing)in)this)Title,)however,)shall)affect:)


A% seller% may% validly% “sell”% (enter% into% a% valid% and% binding% sale)% properties% which% he% entirely% does% not% own% at% the% time% of% perfection.% Such% contract% is% valid,% and% an% action% to% annul% such% contract% is% improper;% and% it% is% his% failure% to% comply% with% his% obligation% to% transfer% ownership% over% the% subject% matter% that% would%give%rise%to%an%action%for%rescission%with%damages.%%


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It%is%at%the%consummation%stage%where%the%principle%of%nemo%dat% quod% non% habet% (one% cannot% give% what% one% does% not% have)% applies.%Cavite$Dev’t.$Bank$v.$Spouses$Syrus$Lim$(324$SCRA$346)% o In%sale,%it%is%essential%that%the%seller%is%the%owner%of%the% property%he%is%selling.%The%principal%obligation%of%a%seller% is%“to%transfer%the%ownership%of”%the%property%sold%(Art.% 1458).% This% law% stems% from% the% principle% that% nobody% can% dispose% of% that% which% does% not% belong% to% him:% NEMO% DAT% QUOD% NON% HABET.% Noel$ v.$ CA$ (240$ SCRA$ 78)$

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If%one%buys%the%land%of%another,%to%which%the%seller%is%supposed% to%have%a%good%title,%and%in%consequence%of%facts%unknown%alike%

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the%property.%The%Heirs%of%Pascual%then%surfaced%and%sought%to%partition% the%property.1% % Issue:) Whether%or%not%Juliana%became%the%owner%of%the%entire%lot%after% she%redeemed%it%herself.% % Held:) NO.%When%Donato%Paulmitan%sold%on%May%28,%1974%Lot%No.%1091% to% his% daughter% Juliana% P.% Fanesa,% he% was% only% a% coaowner% with% respondents%and%as%such,%he%could%only%sell%that%portion%which%may%be% allotted%to%him%upon%termination%of%the%coaownership.%A%coaowner%could% only%sell%that%portion%which%may%be%allotted%to%him%upon%termination%of%

Paulmitan$v.$CA$

the% coaownership.% A% sale% of% the% entire% property% by% one% coaowner% without% the% consent% of% the% other% coaowners% is% not% null% and% void.% However,% only% the% rights% of% the% coaownerasell% are% transferred,% thereby% making% the% buyer% a% coaowner% of% the% property.% The% sale% by% petitioner% Donato% Paulmitan% of% the% land% to% his% daughter,% petitioner% Juliana% P.% Fanesa,% did% not% give% to% the% latter% ownership% over% the% entire% land% but% merely% transferred% to% her% the% one% half% (1/2)% undivided% share% of% her%

Facts:) 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.% Donato,% thereafter,% executed% an% affidavit% of% Declaration% of% Heirship— unilaterally% adjudicating% one% of% the% lots% to% himself.% He% thereafter% sold% the%entire%lot%to%his%daughter%Juliana.%For%the%failure%to%pay%taxes,%the%lot% was% forfeited% and% sold% at% a% public% auction,% but% Juliana% later% redeemed%

father,%thus%making%her%the%coa%owner%of%the%land%in%question%with%the% respondents,%her%first%cousins.%However,%Julia%did%acquire%the%right%to%be% reimbursed% for% half% of% the% redemption% price% she% paid% to% the% Provincial% Government% of% Negros% Occidental% on% behalf% of% her% coaowners.% Until% reimbursed,%she%holds%a%lien%upon%the%subject%property%for%the%amount% due%her.% % )

to% both% parties,% the% seller% has% in% fact% no% title% at% all,% equity% will% cancel%the%sale%and%cause%the%purchase%money%to%be%restored%to% the% buyer,% putting% both% parties% in% status% quo.$ DBP$ v.$ CA$ (249$ SCRA$331)$ % %

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%Antonio,%Hipolito,%Imperial%&%Zaragosa.%(2012).%Salse%CLV%Case%Digests.% Retrieved%from%http://www.idoub.com/doc/104486360/SalesaCLVaCasea Digests%



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C.)Sales)by)Co3owner)of)Whole)Property)or)Definite)Portion)Thereof) •

% •

None%of%the%coaowners%may%claim%any%right,%title%or%interest%to%a% particular%portion%of%the%thing%owned%in%common.% o In% a% contract% of% sale% of% coaowned% property,% what% the% vendee% obtains% by% virtue% of% such% a% sale% are% the% same% rights% as% the% vendor% had% as% coaowner% (i.e.,% his% spiritual% share),% and% the% vendee% merely% steps% into% the% shoes% of% the% vendor% as% coaowner.) Panganiban$ v.$ Oamil$ (542$ o

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entire% property.% He% will% have% this% right% since% he% became% a% coa owner% himself.% Nullification% of% the% sale% is% not% proper.% Tomas$ Claudio$ Memorial$ College,$ Inc.$ v.$ Court$ of$ Appeals$ (316$ SCRA$ 502)$ o CLV’s% comment:% The% rulings% seem% to% disregard% the% commercial% fact% that% sellers% and% buyers% agree% on% the% price%based%on%the%size%of%the%property%(i.e.%buyers%will%

SCRA$166).$ Except% when% the% intention% of% the% purchase% was% clearly% the% property% itself% and% not% just% the% spiritual% share.% Mindanao$v.$Yap$(13$SCRA$190)$

pay%more%if%they%expect%to%acquire%the%entire%property;% buyers%will%pay%less%if%they%expect%to%acquire%just%a%part).% The% proper% remedy,% according% to% CLV,% is% to% uphold% the% validity% of% the% sale,% but% allow% the% buyer% to% either% (1)% seek% rescission% for% breach% of% the% seller’s% obligation% to% deliver% the% object% agreed% upon,% or% (2)% accept% partial% delivery%with%appropriate%reduction%in%price.%

A% coaowner% can% demand% partition,% but% before% such,% he% has% no%

A% coaowner,% however,% has% the% power% to% alienate% his% undivided% share% over% the% property.% Thus,% if% before% partition,% he% sells% the% entire%property%or%a%definite%portion%thereof%without%consent%of% other% coaowners,% the% sale% will% only% be% valid% with% regard% to% his% undivided%share%in%the%property.%The%sale%cannot%be%considered% as% null% and% void.% BailonQCasilao$ v.$ CA$ (160$ SCRA$ 738);$ Paulmitan$v.$CA$(215$SCRA$866)$ o The%buyer%thus%becomes%a%coaowner%of%the%property.% o

An%agreement%that%purports%a%specific%portion%of%an%una partitioned% coaowned% property% is% not% void;% it% shall% effectively% transfer% the% seller’s% ideal% share% in% the% coa ownership.$ Heirs$ of$ the$ Late$ Spouses$ Aurelio$ and$ Esperanza$Balite$v.$Lim$(446$SCRA$54)$



The%remedy%of%the%buyer%therefore%is%to%demand%partition%of%the%

right% to% divide% the% lot% into% two% parts,% and% convey% the% whole% of% one%part%by%metes%and%bounds.%Lopez$v.$Ilustre$(5$Phil$567)% •

%

o

Atty.%Santiago:%Find%the%best%remedy%that%suits%the%facts% of%the%case.% ! If% the% intent% was% to% buy% a% definite% portion% (without% the% consent% of% the% coaowners% being% obtained)% but% such% area% cannot% be% sold,% then% there% would% be% no% meeting% of% the% minds.% As% such,%there%would%be%a%void%sale%because%one%of% !

!

the%essential%requisites%of%a%sale%is%missing.% Determine%whether%the%buyer%wants%to%be%a%coa owner% of% the% property,% or% whether% the% buyer% wants%to%be%an%owner%of%a%particular%portion%of% the%coaowned%property.% If% it% is% unclear% what% the% intent% of% the% buyer% is% and% the% coaowneraseller% did% not% disclose% his% incapacity%to%sell%that%particular%portion%(fraud),%


%

then% annulment% of% the% sale% is% the% proper% remedy.%

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Mindanao$Academy,$Inc.$v.$Yap$

with%regard%to%the%performance%of%an%obligation,%it%does%not%affect%the% perfection%of%the%sale.% % Atty.%Santiago:%In%this%case,%you%have%to%look%at%the%intent%of%the%parties.%

% Facts:%Rosenda%and%Sotero%were%among%coaowners%of%4%parcels%of%land,% which%they%sold%to%Ildefonso%Yap%for%some%P100K%without%the%consent%of% the% other% coaowners.% They% included% in% the% sale% certain% buildings% and% laboratory%and%other%educational%equipment%within%the%said%properties,% which%were%actually%owned%by%Mindanao%Academy.%Mindanao%Academy% and%the%other%coaowners%assailed%the%validity%of%the%sale.%The%trial%court%

Yap%was%not%interested%in%the%lands%as%much%as%he%was%interested%in%the% whole%property%INCLUDING%the%school%and%its%contents.% ) D.)Exceptions)to)Rule)on)Effect)of)Sale)of)Definite)Portion)of)Co3owner) 1. The% subject% matter% is% indivisible% by% nature% or% by% intent.% It% renders% the% contract% void% since% the% buyer% would% not% have% entered% into% the% transaction% except% to% acquire% all% of% the%

declared%the%sale%null%and%void.%Yap%contends%that%Erlinda,%one%of%the%coa owners% owning% 5/12% share% of% the% coaownership,% does% not% have% the% standing%to%challenge%the%sale%for%being%in%bad%faith.1% % Issue:)Whether%or%not%the%sale%is%null%and%void.% % Held:% YES.% The% prestation% was% indivisible% and% incapable% of% partial%

properties% purchased% by% him.% Mindanao$ Academy,$ Inc.$ v.$ Yap$ (13$SCRA$190)$ 2. If% the% sale% of% a% particular% portion% is% with% consent% of% other% coa owners,%the%sale%as%to%that%portion%is%valid.%Lack%of%objection%by% the%coaowners%is%in%effect%already%a%partial%partition.%Pamplona$ v.$Moreto$(96$SCRA$775)$ 3. A% coaowner% who% sells% one% of% the% two% lands% owned% in% common%

annulment%in%as%much%as%Yap%itted%that%he%would%not%have%entered% into%the%transaction%except%to%acquire%all%of%the%properties.%The%contract% of%sale%was%void%because%the%problem%with%the%sale%went%into%one%of%the% essential%requisites%of%a%sale.%There%was%no%meeting%of%the%minds%as%to% the%subject%matter.%If%the%problem%is%one%of%the%essential%requisites%and% was% only% found% during% the% consummation% stage,% the% contract% can% be% voided%even%if%already%at%the%consummation%stage.%If%the%problem%is%only%

with%another%coaowner,%and%does%not%turn%over%oneahalf%of%the% proceeds% of% the% sale% to% the% other% coaowner,% the% latter% may% by% law% and% equity% lay% exclusive% claim% to% the% remaining% parcel% of% land.%Imperial$v.$Court$of$Appeals$(259$SCRA$65)$ 4. Ipso% jure% transfer% of% ownership% under% Article) 1434.% When% the% coaowneraseller% subsequently% acquires% title% to% the% definite% portion% or% the% entire% property% subject% matter% of% the% sale,% the% title%automatically%es%to%the%buyer.%Pisueña(v.(Heirs(of(Petra(

)

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Unating$(313$SCRA$384)$ 5. Registration%under%the%Torrens%system.%If%the%Torrens%title%shows% that%the%property%is%owned%solely%by%the%seller%(i.e.%no%indication%



%

that% property% is% coa% owned),% the% buyer% can% rely% on% the% Torrens% title.%Cruz$v.$Leis$(327$SCRA$570)$ % II.)Exceptions)to)Rules)on)Legal)Effects)of)Sale)by)a)Non3)Owner) ) •

This%should%not%be%confused%with%double%sales.)

•

In% this% case,% the% original% owner% is% a% stranger% to% the% sale%

transaction%between%the%seller%and%buyer.) ) A.)When)Real)Owner)Estopped) ) Article)1434.) When)a)person)who)is)not)the)owner)of)a)thing)sells)or)alienates)and) delivers) it,) and) later) the) seller) or) grantor) acquires) title) thereto,) such) title)es)by)operation)of)law)to)the)buyer)or)grantee.) ) Bucton$v.$Gabar$ % Facts:) Josefina% bought% a% parcel% of% land% from% Villarin.% By% verbal%

%


Held:% YES.% When% a% person% who% is% not% the% owner% of% a% thing% sells% and% delivers%it,%and%later%the%seller%acquires%title%thereto,%such%title%es%by% operation%of%law%to%the%buyer.%Seller%is%subsequently%barred%by%estoppel% from%claiming%otherwise.%Assuming%that%at%the%time%when%Josefina%sold% the% lot% to% Nicanora,% she% was% not% yet% the% owner% thereof.% When% Villarin% executed% the% Deed% of% Sale% in% her% favor,% title% ed% to% Nicanora% by% operation%of%law.%Although%the%sale%between%Josefina%and%Nicanora%was% verbal,%it%was%as%between%them.%Considering%that%Nicanora%has%paid%the% purchase%price,%she%became%owner%of%1⁄2%of%the%lot.%Likewise,%although% the%complaint%was%titled%“specific%performance”%it%was%actually%one%for% quieting% of% title,% which% is% imprescriptible% so% long% as% the% plaintiff% is% in% possession%of%the%lot.1% ) B.)Recording)Laws)(P.D.)1529)) •

The% defense% of% indefeasibility% of% Torrens% title% where% the% disputed% buildings% and% equipment% are% located% is% unavailing,% since%such%defense%is%available%to%sale%of%lands%and%not%to%sale%of% properties%situated%therein.$Tsai$v.$CA$(366$SCRA$324)$

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agreement,% Josefina% sold% a% 1⁄2% portion% thereof% to% Nicanora% for% P3,000.% Nicanora% paid% P1,000% then% P400—all% evidence% by% receipts—then% she% loaned% Josefina% P1,000% and% thereafter% along% with% her% spouse,% took% possession% of% the% lot% and% built% their% house% as% well% as% apartments% thereon.% Villarin% then% issued% a% Deed% of% Sale% to% Josefina,% but% the% latter% refused%to%execute%the%corresponding%Deed%of%Sale%to%Nicanora.%Josefina% claimed% that% the% amounts% paid% by% Nicanora% were% in% the% concept% of% loans.%Thus,%Nicanora%filed%a%case%for%specific%performance.% ) Issue:)Whether%or%not%there%was%a%sale%between%Josefina%and%Nicanora.%

%

The%buyer%of%ed%land%has%the%right%to%rely%on%the%Torrens% title% of% the% said% land,% absent% any% factual% circumstances% which% would% lead% a% prudent% man% to% inquire% further% if% the% vendor% has% the%capacity%to%transfer%interest%to%the%land.%Sy$v.$Capistrano,$Jr.$ (560$SCRA$103)$ o Where% innocent% third% persons,% relying% on% the% correctness%of%the%certificate%of%title%thus%issued,%acquire% rights% over% the% property,% the% court% cannot% disregard%

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such%rights%and%order%the%cancellation%of%the%certificate,% since% the% effect% of% such% outright% cancellation% will% be% to% impair%public%confidence%in%the%certificate%of%title.%Every% person%dealing%with%the%ed%land%may%safely%rely%

%

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) ) )

•

Sale% by% a% sheriff% of% land% levied% upon% at% public% auction% would% validly%transfer%ownership%to%the%highest%bidder.%

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When%a%defeated%party%refuses%to%execute%the%absolute%deed%of% sale%in%accordance%with%the%judgment,%the%court%may%direct%the% act% to% be% done% at% the% cost% of% the% disobedient% party% by% some% other%person%appointed%by%the%court%and%the%act%when%so%done% shall% have% the% like% effect% as% is% done% by% the% party.% Manila$ Remnant$Co.,$Inc.$v.$CA$(231$SCRA$281)$

) D.)Sale)at)a)Merchant)Stores,)Fairs)or)Markets) •

Atty.% Santiago:% The% indefeasibility% of% the% Torrens% system% protects% an% IPV,% even% when% the% real% owner% was% unlawfully% deprived%thereof.%This%is%in%contrast%to%the%rule%on%movables.$

This% is% an% example% of% an% imperfect% or% void% title% ripening% into% a% valid% one.% The% rights% and% interest% of% an% innocent% purchaser% for% value% is% protected% in% order% to% facilitate% commercial% sales% on% movables% and% to% give% stability% to% business% transaction.% Sun$ Brothers$&$Co.$v.$Velasco$(54$O.G.$5143)$

person%has%a%right%to%or%interest%in%it,%and%who%pays%a%full% and% fair% price% at% the% time% of% the% purchase% or% before% receiving% any% notice% of% another% person’s% claim.% The% burden% of% proving% the% status% of% a% purchaser% in% good% faith% and% for% value% lies% upon% one% who% asserts% that% status.% This% onus% probandi% cannot% be% discharged% by% mere% invocation% of% the% ordinary% presumption% of% good% faith.%Rufloe$v.$Burgos,$577$SCRA$264,$272Q273$

Judgments%of%courts%divesting%the%ed%owner%of%title%and% vesting%them%in%the%other%party%are%valid.%

An% innocent% purchaser% for% value% is% one% who% purchases% a% titled% land% by% virtue% of% a% deed% executed% by% the% ed% owner% himself% not% by% a% forged% deed.$ Insurance$ Services$ and$ Commercial$Traders,$Inc.$v.$CA$(341$SCRA$572)$ o An% innocent% purchaser% for% value% is% one% who% buys% the% property% of% another% without% notice% that% some% other%


C.)Statutory)Power;)Judicial)Sale)

on% the% correctness% of% the% certificate% of% title% issued% therefor% and% the% law% will% in% no% way% oblige% him% to% go% behind%the%certificate%to%determine%the%condition%of%the% property.$ Heirs$ of$ Spouses$ Benito$ Gavino.$ v.$ Court$ of$ Appeals$(291$SCRA$495)$ •

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“Store”% "% any% place% where% goods% are% kept% for% sale% or% where% goods% are% deposited% and% sold% by% one% engaged% in% buying% and% selling% them.% City$ of$ Manila$ v.$ Bugsuk$ Lumber$ Co.$ (101$ Phil.$ 859)$

% City$of$Manila$v.$Bugsuk$ % Facts:) Bugsuk% Lumber% had% an% office% in% Manila.% It% was% organised% to% buy% and% sell% lumber,% and% in% 1951% made% sales% of% lumber% to% several% firms.% In% 1952,% the% City% Treasurer% assessed% it% for% license% fees% and% mayor’s% permit—alleging% that% Bugsuk% sold% at% wholesale% and% retail% to% different%



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%

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lumber% dealers% in% Manila.% Bugsuk% refused% to% pay% alleging% that% the% lumber% it% produced% were% delivered% directly% from% the% shipper% to% the% buyer,%that%they%paid%the%appropriate%Timber%License%Fees%and%that%their% Manila% Office% only% received% orders% and% accepted% payments.% Bugsuk%

Sun$Brothers$&$Co.$v.$Velasco$ % Facts:) Sun% Brothers% sold% an% iral% Refrigerator% to% Lopez% upon% the% agreement%that%ownership%will%only%%to%the%latter%upon%payment%of%

alleges%that%it%is%not%a%dealer%and%its%office%is%not%a%store%to%warrant%the% imposition% of% the% additional% taxes.% In% other% words,% they% produced% the% logs% themselves% and% sent% them% directly% to% the% consumers% –% they% were% not%a%middleman%between%a%producer%and%a%consumer,%rather%they%were% a%producer.% % Issue:) Whether% or% not% appellant,% maintaining% a% principal% office% in%

the%full%purchase%price.%Lopez%paid%only%the%downpayment%and%sold%the% same%to%JV%Trading%(owned%by%Velasco)%and%was%displayed%in%the%latter’s% store.% It% was% thereafter% bought% by% Co% Kang% Chiu% from% JV% Trading.% Sun% Brothers%sought%to%recover%the%refrigerator.) ) Issue:)Whether%or%not%Sun%Brothers%may%recover%the%refrigerator.% )

Manila,% receiving% orders% for% its% products% and% accepting% in% said% office% payments%thereto,%can%be%considered%a%dealer%in%the%city%and%therefore% liable%for%additional%taxes.) % Held:) NO.% A% dealer% is% a% middleman% between% the% producer% and% the% consumer.%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%

Held:%NO.%The%general%rule%is%that%when%a%person%who%is%not%the%owner% of% a% thing% sells% the% same,% the% buyer% acquires% no% better% title% than% the% seller%has.%Applying%the%general%rule,%Lopez%by%reason%of%the%agreement% had% no% title% to% the% goods% for% having% failed% to% pay% the% full% price.% It% therefore% follows% that% JV% Trading% had% no% title% thereto% as% Velasco% was% obliged%to%inquire%to%inquire%if%Lopez%had%good%title%to%the%refrigerator.% %

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.% % Doctrine:) The% necessary% element% of% “store”% is% that% there% are% goods% or% wares% displayed% or% stored% therein.% Also,% the% firm% must% be% actually%

However,% a% purchase% in% good% faith% in% a% merchant% store,% or% fair,% or% market%is%protected%by%law.%When%the%refrigerator%was%sold%to%Co%Kang% Chiu,% the% latter% acquired% a% valid% title% to% the% thing.% Co% Kang% Chiu% purchased% the% refrigerator% in% a% merchant% store,% for% value% and% in% good% faith.%Thus,%he%is%protected%by%the%law%as%an%innocent%purchaser.% % It%is%an%exception%to%the%general%rule%that%no%transfer%of%ownership%may% be% had% through% an% act% of% a% nonaowner.% The% rights% and% interest% of% an%

engaged% in% the% business% of% buying% and% selling.% If% a% firm% produces,% manufactures,% and% delivers% its% own% produce% from% its% warehouses% and% they%have%no%stores%open%for%sale,%firm%is%not%a%merchant%store% %

innocent% buyer% for% value% who% bought% a% thing% from% a% merchant% store% should% be% protected% when% it% comes% into% clash% with% the% right% and% interests%of%a%vendor.%The%buyer%cannot%be%reasonably%expected%to%look% behind%the%title%of%articles%he%buys%in%a%store.%



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E.)Sale)by)a)Seller)Who)has)Voidable)Title)on)the)Subject)Matter)Sold) ) Article)1506.) Where)the)seller)of)goods)has)a)voidable)title)thereto,)but)his)title)has)

when% it% will% contravene% the% Torrens% system,% where% it% states% that% innocent% third% persons,% relying% on% the% correctness%of%the%certificate%of%title%thus%issued,%acquire% rights% over% the% property,% the% court% cannot% disregard%

not) been) avoided) at) the) time) of) the) sale,) the) buyer) acquires) a) good) title)to)the)goods,)provided)he)buys)them)in)good)faith,)for)value,)and) without)notice)of)the)seller's)defect)of)title.)(n)) %

such%rights%and%order%the%cancellation%of%the%certificate.$ Exception:) However,% the% defense% of% indefeasibility% of% Torrens% title% is% unavailing% to% properties% and% other% improvements% situated% or% built% on% the% land.% Tsai$ v.$ CA$ (366$SCRA$324)$

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Since%the%provision%talks%of%payment%by%the%buyer%and%transfer% of%title%to%the%buyer,%the%provision%applies%to%the%consummation% stage%of%the%contract.% o If%after%perfection%but%before%consummation,%the%seller’s% voidable%title%becomes%void,%the%buyer%does%not%obtain% good%title.%

•

The%language%of%the%deed%of%sale%may%show%bad%faith%on% the%part%of%the%buyer,%and%such%bad%faith%would%give%the% buyer%no%right%greater%than%that%of%the%seller.%Limketkai$ Sons$Milling$Inc.$v.$Court$of$Appeals$(250$SCRA$523)%

% F.)Applicable)Rules)to)Immovables) Articles) 1505%and%1506%do%not%apply%to%immovables.%When%the% seller% of% a% parcel% of% land% has% only% voidable% or% void% title% to% the% property,% the% buyer,% even% though% in% good% faith% and% for% value,% takes%only%the%same%title%as%the%seller%had.% •

•

For% land,% the% Torrens% system% still% prevails.% Heirs$ of$ Spouses$ Benito$Gavino.$v.$Court$of$Appeals$(291$SCRA$495)$ o

General) Rule:) The% rule% that% the% direct% result% of% a% previously% void% contract% cannot% be% valid% is% unavailing%

A%person%who%deals%with%ed%land%through%someone%who% is% not% the% ed% owner% is% expected% to% look% beyond% the% certificate% of% title% and% examine% all% the% factual% circumstances% thereof%in%order%to%determine%if%the%vendor%has%the%capacity%to% transfer%any%interest%in%the%land.%Sy$v.$Capistrano,$Jr.$(560$SCRA$ 103)$

Good%faith%is%required.% o

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o

% G.)“Title”)as)to)Movable)Properties) ) Article)559.) The) possession) of) movable) property) acquired) in) good) faith) is) equivalent) to) a) title.) Nevertheless,) one) who) has) lost) any) movable) or) has)been)unlawfully)deprived)thereof)may)recover)it)from)the)person) in)possession)of)the)same.) ) If) the) possessor) of) a) movable) lost) or) which) the) owner) has) been) unlawfully)deprived,)has)acquired)it)in)good)faith)at)a)public)sale,)the) owner) cannot) obtain) its) return) without) reimbursing) the) price) paid) therefor.)(464a)) % %



%

Exceptions%to%Article)559% •

By% crossareference% to% Article) 1505,% the% owner% cannot% recover% the%movable%if%it%was%already%bought%from%a%merchant%store.%

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By%crossareference%to%Article)1506,%if%the%possessor%in%good%faith% acquired% title% from% a% seller% who% at% the% time% of% delivery% had% a% voidable% title% thereto,% the% original% owner% cannot% recover% the% movable.%

% Tagatac$v.$Jimenez$ % Facts:% Tagatac% bought% a% car% abroad% and% brought% it% to% the% Philippines.% Warner% Feist% deceived% her% into% believing% that% he% was% very% rich% and% purchased% her% car.% She% delivered% possession% thereof.% Levy% (another% name% of% Feist)% issued% her% a% postdated% check,% which% was% dishonored.% Feist%then%disappeared%with%the%car.%Feist%was%able%to%%the%car%in% his% name% and% eventually% sold% the% car% to% Sanchez,% who% then% sold% the% same%to%Jimenez.%Jimenez%even%labored%to%%the%car’s%records%with% Motor% Vehicle% Office.% Jimenez% then% delivered% the% car% to% California% Car% Exchange% for% display.% Tagatac,% upon% finding% out,% sought% to% recover% the% 1

car,%but%Jimenez%refused. % % Issue:%Whether%or%not%Tagatac%may%recover.% % Held:% NO.% Whenever% there% is% a% contract% of% sale% which% grants% to% the% culpritabuyer%(Feist)%a%voidable%title,%even%if%accomplished%through%estafa% or%swindling,%the%buyer%in%good%faith%(Jimenez)%is%granted%a%better%title%as%

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against% the% original% owner% (Tagatac)% even% though% the% latter% (Tagatac)% may% be% classified% to% have% been% “unlawfully% deprived”% of% the% subject% matter%(Article%1506).%% % Jimenez%was%a%buyer%in%good%faith%of%the%car%–%he%had%no%knowledge%of% any%defect%in%the%title%of%the%seller.%It%is%true%that%one%who%has%lost%any% movable%or%has%been%unlawfully%deprived%thereof%may%recover%the%same% from% the% possessor.% However,% Tagatac% was% NOT% unlawfully% deprived% within%the%context%of%the%Civil%Code.%The%sale%between%Feist%and%Tagatac% was% merely% voidable% (valid% until% annulled).% There% was% a% valid% transmission%of%ownership.%The%fact%that%Feist%did%not%pay%only%gives%rise% to% an% action% to% resolve% the% contract% or% demand% payment.% When% Feist% sold% the% car% to% Sanchez,% the% sale% between% him% and% Tagatac% was% still% valid;% therefore,% good% title% ed% to% Sanchez.% As% between% 2% innocent% parties,%the%one%who%made%possible%the%injury%must%bear%the%loss.% % Att.%Santiago:%It%was%the%delivery%of%the%car%that%lawfully%transferred%the% property% from% Tagatac% to% Feist.% The% bouncing% the% check% goes% into% the% consummation% of% the% payment.% However,% since% there% has% been% proper% delivery,%the%buyer%may%then%validly%sell%it%another.%This%is%reinforced%in% EDCA$Publishing$v.$Santos.% % EDCA$Publishing$v.$Santos$ % Facts:% EDCA% sold% 406% books% to% Jose% Cruz% wherein% the% latter% issued% a% check% as% payment.% Cruz% in% turn% sold% 120% of% those% books% to% Leonor% Santos.%Meanwhile,%EDCA%became%suspicious%of%Cruz%when%he%placed%his% second% order.% They% investigated% and% found% out% that% Jose% Cruz% was% an% impostor%and%the%check%he%issued%was%drawn%against%a%closed%.% EDCA%then%forcibly%took%the%120%books%from%Santos.%



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Issue:)Whether%or%not%EDCA%may%retrieve%the%books%from%Santos% ) Held:% NO.% Santos% was% a% purchaser% in% good% faith% and% exercised% due% diligence%when%he%asked%for%the%invoice%from%EDCA%before%purchasing%it%

Ireneo%wait%and%thereafter%escaped%with%the%car%and%the%deed.%Marella% was%then%able%to%sell%the%car%to%Aznar.%The%police%thereafter%seized%the% car% in% Aznar’s% possession.% Aznar% countered% with% a% complaint% for% Replevin.1%

from%Cruz.%Nonapayment%only%creates%a%right%to%demand%payment%or%to% rescind%the%contract,%or%to%criminal%prosecution%in%the%case%of%bouncing% checks.%But%absent%the%stipulation%that%ownership%shall%not%%until%full% payment,%delivery%of%the%thing%sold%will%effectively%transfer%ownership%to% the% buyer% who% can% in% turn% transfer% it% to% another.% Ownership% of% the% books% ed% to% Tomas% upon% the% delivery% thereof.% He% had% the% right% to% transfer%the%same%to%Santos.%The%fact%that%he%did%not%pay%for%the%books%

% Issue:)Whether%or%not%Santos%may%recover%from%Aznar.% ) Held:%YES.%It%should%be%recalled%that%while%there%was%indeed%a%contract% of% sale% between% Marella% and% Santos,% the% former,% as% vendee,% took% possession% of% the% subject% matter% thereof% by% stealing% the% same% while% it% was% in% the% custody% of% the% latter's% son.% Teodoro% was% clearly% unlawfully%

only% warrants% rescission% or% an% action% for% payment.% EDCA% cannot% be% considered%to%have%been%unlawfully%deprived%under%the%CC%as%to%warrant% recovery% of% the% books% from% Santos.% Possession% of% movable% property% acquired%in%good%faith%is%equivalent%to%title.%% % Aznar$v.$Yapdiangco$ %

deprived% of% the% car.% There% was% no% valid% delivery% to% Marella,% hence% the% latter%acquired%no%title%to%the%car.%He%neither%had%a%voidable%title%under% Article% 1506% nor% was% it% delivered% to% him.% Santos% has% a% better% right.% Moreover% Article% 559% (Irrevindicability)% does% not% apply.% The% common% law%principle%that%where%1%of%2%innocent%persons%must%suffer%by%a%fraud% perpetrated%by%another,%the%law%imposes%the%loss%upon%the%party%who,% by% his% misplaced% confidence,% has% enabled% the% fraud% to% be% committed,%

Facts:%Teodoro%Santos%d%for%sale%his%Ford%Fairlane%car.%De%Dios% approached% them% purporting% to% be% a% nephew% of% Marella.% Teodoro,% transacted%with%Marella%who%agreed%to%buy%the%car,%agreeing%to%pay%the% same% only% after% the% car% has% been% ed% in% his% name.% Teodoro% instructed%his%son,%Irineo%not%to%part%with%De%Dios%until%he%has%received% the% full% payment% of% the% car.% The% Deed% was% ed% in% his% name,% but% Marella% has% yet% to% pay% so% the% documents% were% not% delivered% to% him.% Marella% pleaded% with% Ireneo% that% he% and% De% Dios% proceed% to% Marella’s%

cannot%be%applied%in%a%case%which%is%covered%by%an%express%provision%of% law.% % Doctrine:) Thus,% when% owner% did% not% voluntarily% deliver% possession% of% the%car,%and%in%effect%it%was%stolen%from%him,%then%one%who%buys%the%car% even%in%good%faith%from%the%thief%will%lose%the%car%to%the%owner%who%is% deemed%to%have%been%unlawfully%deprived.%

sister%to%secure%the%shortage%of%cash.%Marella%also%induced%Ireneo%to%give% him% the% documents% under% the% pretext% that% he% will% show% them% to% his% lawyer.% Ireneo% agreed.% They% proceeded% thereto,% Ireneo% was% accompanied% by% De% Dios% and% an% anonymous% person.% De% Dios% made%

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Atty.% Santiago:% there% was% not% proper% delivery% as% contemplated% by%law.$

% Cruz$v.$Pahati$ % Facts:%Jose%Cruz%delivered%his%car%to%Belizo%for%the%latter%to%sell%the%same.% Belizo% forged% the% letter% of% Cruz% to% the% Motor% Section% of% the% Bureau% of% Public% Works% and% converted% the% same% into% a% Deed% of% Sale.% Using% the% forged% deed,% he% had% the% car% ed% in% his% name.% Thereafter,% Belizo% sold%the%car%to%Bulahan,%who%in%turn%sold%the%same%to%Pahati.%However,% the% car% was% impounded% by% the% police,% and% the% sale% to% Pahati% was% cancelled.% Bulahan% now% contends% that% between% 2% innocent% parties% (Bulahan%and%Cruz),%the%person%who%made%possible%the%injury%must%bear% the%loss—in%this%case,%supposedly%Cruz.1% ) Issue:)Whether%or%not%Cruz%may%recover%the%car.% ) Held:%YES.%Both%Cruz%and%Bulahan%are%in%good%faith.%Cruz%as%a%better%right% to%the%car%in%question%than%defendant%Bulahan%for%it%cannot%be%disputed% that% Cruz% had% been% illegally% deprived% thereof% because% of% the% ingenious% scheme%utilized%by%Belizo%to%enable%him%to%dispose%of%it%as%if%he%were%the% owner% thereof.% Undisputed% is% the% fact% that% the% letter% was% falsified% and% this%fact%can%be%clearly%seen%by%a%cursory%examination%of%the%document.% If%Bulahan%had%been%more%diligent%he%could%have%seen%that%the%pertinent% portion%of%the%letter%had%been%erased%which%would%have%placed%him%on%

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guard% to% make% an% inquiry% as% regards% the% authority% of% Belizo% to% sell% the% car.%This%he%failed%to%do.%% % Article% 559,% “one% who% has% lost% any% movable% or% has% been% lawfully% deprived% thereof,% may% recover% it% from% the% person% in% possession% of% the% same%and%the%only%defense%is%if%the%other%party%has%acquired%it%in%good% faith%and%at%a%public%sale”%and%Article%1505,%“sellers%who%are%not%owners% xxx%buyer%acquires%no%better%right%than%the%seller”%are%applicable%in%this% situation.% % Doctrine:)In%all%other%cases%of%unlawful%deprivation%done%through%estafa,% the%original%owner%recovers%even%from%the%buyer%in%good%faith.%) Cruz$ v.$ Pahati$(98$Phil.$788)$ •

CLV:% Decision% showed% that% second% buyer,% or% current% possessor% could% not% claim% good% faith% because% of% erasures% in% the% covering% documents%presented%by%his%seller%

% Dizon$v.$Suntay$ % Facts:%Lourdes%Suntay%is%the%owner%of%a%3acarat%diamond%ring%valued%at% P5,500.% She% and% Clarita% Sison% entered% into% a% transaction% wherein% the% ring%would%be%sold%on%commission.%Clarita%received%the%ring%and%issued%a% receipt.%After%some%time,%Lourdes%made%demands%for%the%return%of%the% ring% but% the% latter% refused% to% comply.% When% Lourdes% insisted% on% the% return,%Clarita%gave%her%the%pawnshop%ticket%which%is%the%receipt%of%the% pledge% and% she% found% out% that% 3% days% after% the% ring% was% received% by% Clarita,%it%was%pledged%by%Melia%Sison,%the%niece%of%Clarita’s%husband%in% connivance% with% Clarita% with% the% pawnshop% of% Dominador% Dizon% for% P2,600.% Lourdes% then% filed% an% estafa% case.% She% then% asked% Dominador% Dizon% for% the% return% of% the% ring% pledged% but% refused% to% return% the% ring%



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thus% the% case% filed% by% Lourdes.% The% CFI% issued% a% writ% of% replevin% so% Lourdes%was%able%to%have%possession%of%the%ring%during%the%pendency%of% the%case.%The%CFI%also%ruled%in%her%favor%which%was%affirmed%by%the%CA% on%appeal.%Thus%the%case%at%bar.1% ) Issue:)Whether%or%not%Suntay%may%recover%the%ring%from%the%pawnshop.% ) Held:%YES.%Article) 559) applies%here.%Lourdes,%being%unlawfully%deprived% of%her%ring%thus%she%has%a%right%to%recover%it%from%the%current%possessor.% Dizon% is% engaged% in% a% business% where% presumably% ordinary% prudence% would% require% him% to% inquire% whether% or% not% an% individual% who% is% offering% the% jewelry% by% pledge% is% entitled% to% do% so.% The% principle% of% estoppel% cannot% help% him% at% all.% Since% there% was% no% precaution% availed% of,% perhaps% because% of% the% difficulty% of% resisting% opportunity% for% profit,% he%only%has%himself%to%blame%and%should%be%the%last%to%complain%if%the% right%of%the%true%owner%of%the%jewelry%should%be%recognized.% % Doctrine:) Owner% of% diamond% ring% may% recover% possession% of% the% same% from% pawnshop% where% the% owner’s% agent% had% pledged% it% without% authority% to% do% so;% Article% 559% applies% and% the% defense% that% the% pawnshop% acquired% possession% without% notice% of% any% defect% of% the% pledgoraagent%is%unavailing.)) •

CLV:% In% those% cases% possessor% is% a% merchant% and% only% has% a% pledge%in%his%favor.%

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Chapter(9:(Loss(and(Deterioration,( Fruits(and(Other(Benefits( ! •

The! prevailing! doctrines! in! our! jurisdiction! on! risk! of! loss! and! deterioration!and!the!benefits!of!the!fruits!and!improvement!is! a!combination!of!civil!law!and!common!law!concepts.! o The! hybrid! rule! on! the! risk! of! loss! under! the! present! Civil!Code!happens!not!at!the!point!of!perfection!but!at! the!point!of!delivery.!

•

The!basic!concept!is!res!perit!domino!(the!owner!shall!bear!the! risk!of!loss).!(This!is!derived!from!common!law.)!

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Ownership!can!only!be!transferred!by!delivery.!(This!is!from!civil! law.)!!

! No(Application(When(Subject(Matter(is(Determinable( ( Article(1263.( In( an( obligation( to( deliver( a( generic( thing,( the( loss( or( destruction( of( anything(of(the(same(kind(does(not(extinguish(the(obligation.((n)( ! I.(Before(Perfection( •

The! purported! seller! owns! the! thing.! Loss,! deterioration,! fruits! and!improvements!pertain!to!him.!

• ! ! ! !

The!purported!buyer!still!has!no!legal!relationship!to!the!thing.!

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%%%%%%%ATTY.%RAY%PAOLO%SANTIAGO% Roman&v.&Grimalt&

! Facts:!Roman!and!Grimalt!entered!into!a!contract!of!sale!for!a!schooner! payable!by!3!installments!provided!the!title!papers!to!the!vessel!were!in! proper! form.! It! must! be! noted! that! the! title! of! the! vessel! was! in! the! name! of! Paulina! Giron! and! not! Roman.! The! vessel! sank! before! Roman! could!present!his!title!and!as!a!result,!Grimalt!refused!to!pay!the!price!in! the!contract.! ! Issue:( Whether! or! not! the! sale! was! perfected! making! Grimalt! liable! to! pay!the!purchase!price.! ( Held:!NO.!The!defendant!was!under!no!obligation!to!pay!the!price!of!the! vessel,! the! purchase! of! which! had! not! been! concluded.! The! conversations! had! between! the! parties! and! the! letter! written! by! defendant! to! plaintiff! did! not! establish! a! contract! sufficient! in! itself! to! create! reciprocal! rights! between! the! parties.! There! was! yet! to! be! a! perfected!contract!between!them!for!the!failure!of!Roman!to!perfect!his! title.! That! being! the! case,! the! loss! is! for! the! ! of! Roman! as! the! owner!thereof.! ! Doctrine:(If!no!contract!of!sale!was!actually!executed!by!the!parties!the! loss! of! the! vessel! must! be! borne! by! its! owner! and! not! by! a! party! who! only!intended!to!purchase!it!and!who!was!unable!to!do!so!on!!of! failure!on!the!part!of!the!owner!to!show!proper!title!to!the!vessel!and! thus!enable!them!to!draw!up!the!contract!of!sale.! ! ! ! !



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II.(At(the(Time(of(Perfection( ( Article(1493.( If(at(the(time(the(contract(of(sale(is(perfected,(the(thing(which(is(the( object( of( the( contract( has( been( entirely( lost,( the( contract( shall( be( without(any(effect.( ( But( if( the( thing( should( have( been( lost( in( part( only,( the( vendee( may( choose( between( withdrawing( from( the( contract( and( demanding( the( remaining(part,(paying(its(price(in(proportion(to(the(total(sum(agreed( upon.((1460a)!( ( Article(1494.( Where( the( parties( purport( a( sale( of( specific( goods,( and( the( goods( without( the( knowledge( of( the( seller( have( perished( in( part( or( have( wholly( or( in( a( material( part( so( deteriorated( in( quality( as( to( be( substantially( changed( in( character,( the( buyer( may( at( his( option( treat( the(sale:( ( (1)(As(avoided;(or( ( (2)(As(valid(in(all(of(the(existing(goods(or(in(so(much(thereof(as(have( not(deteriorated,(and(as(binding(the(buyer(to(pay(the(agreed(price(for( the( goods( in( which( the( ownership( will( ,( if( the( sale( was( divisible.( (n)( ( •

Note! that! Article( 1493! says! that! the! contract! is! “without! any! effect.”! It! does! not! use! the! term! void! because! it! highlights! the! fact! that! the! perfection! of! the! contract! is! not! affected! by! the! loss!of!the!subject!matter.!

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However,!the!effect!of!the!loss!is!that!as!if!the!sale!was! void.!

If! the! subject! matter! is! lost! at! the! point! of! perfection,! and! the! seller!bears!the!loss!and!the!buyer!is!relieved!of!his!obligations! under!the!contract,!then!the!implication!is!that!after!perfection! the! buyer! then! bears! the! risk! of! loss! and! deterioration! even! without!prior!delivery!to!him.!

! III.(After(Perfection(But(Before(Delivery( ( Article(1538.( In( case( of( loss,( deterioration( or( improvement( of( the( thing( before( its( delivery,(the(rules(in(Article(1189(shall(be(observed,(the(vendor(being( considered(the(debtor.((n)( ( Article(1189.1( When( the( conditions( have( been( imposed( with( the( intention( of( suspending( the( efficacy( of( an( obligation( to( give,( the( following( rules( shall(be(observed(in(case(of(the(improvement,(loss(or(deterioration(of( the(thing(during(the(pendency(of(the(condition:( ( (1)( If( the( thing( is( lost( without( the( fault( of( the( debtor,( the( obligation( shall(be(extinguished;( ( (2)( If( the( thing( is( lost( through( the( fault( of( the( debtor,( he( shall( be( obliged(to(pay(damages;(it(is(understood(that(the(thing(is(lost(when(it(

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!This!article!is!consistent!with!Article(1262.!

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perishes,(or(goes(out(of(commerce,(or(disappears(in(such(a(way(that(its( existence(is(unknown(or(it(cannot(be(recovered;( ( (3)( When( the( thing( deteriorates( without( the( fault( of( the( debtor,( the(

performance( by( the( buyer( of( his( obligations( under( the( contract,( the( goods(are(at(the(buyer's(risk(from(the(time(of(such(delivery;( ( (2)(Where(actual(delivery(has(been(delayed(through(the(fault(of(either(

impairment(is(to(be(borne(by(the(creditor;( ( (4)(If(it(deteriorates(through(the(fault(of(the(debtor,(the(creditor(may( choose( between( the( rescission( of( the( obligation( and( its( fulfillment,( with(indemnity(for(damages(in(either(case;( ( (5)(If(the(thing(is(improved(by(its(nature,(or(by(time,(the(improvement(

the(buyer(or(seller(the(goods(are(at(the(risk(of(the(party(in(fault.((n)( (

shall(inure(to(the(benefit(of(the(creditor;( ( (6)( If( it( is( improved( at( the( expense( of( the( debtor,( he( shall( have( no( other(right(than(that(granted(to(the(usufructuary.((1122)( ( •

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v.&CA&(361&SCRA&506)& o CLV:!What!dilutes!full!reliance!on(Article(1504(is!that!as! worded,!it!clearly!contradicts!the!rules!of!deterioration,! fruits!and!improvement,!to!which!rules!all!authors!are!in! accord.& ( IV.(After(Delivery( •

General( Rule:( After! delivery! to! the! buyer,! ownership! is! transferred!to!the!buyer.!The!goods!shall!then!be!at!the!buyer’s! risk.!(Article(1504)!

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Exceptions:!

In!case!of!deterioration!or!improvement!of!the!thing!before!its!

delivery,!the!rules!of!Article(1189!shall!be!observed.( ( A.(General(Rule( ( Article(1504.( Unless(otherwise(agreed,(the(goods(remain(at(the(seller's(risk(until(the( ownership(therein(is(transferred(to(the(buyer,(but(when(the(ownership( therein( is( transferred( to( the( buyer( the( goods( are( at( the( buyer's( risk( whether(actual(delivery(has(been(made(or(not,(except(that:( ( (1)( Where( delivery( of( the( goods( has( been( made( to( the( buyer( or( to( a( bailee(for(the(buyer,(in(pursuance(of(the(contract(and(the(ownership(in( the( goods( has( been( retained( by( the( seller( merely( to( secure(

After!perfection,!but!before!delivery,!the!risk!of!loss!is!borne!by! the!seller!under!the!rule!of!res!perit!domino.!Union&Motor&Corp.&

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If! delivery! to! the! buyer! was! made,! but! ownership! was! retained! by! the! seller! only! for! the! purpose! of! securing! the! buyer’s! obligation! to! pay,! the! buyer! shall! still! bear! the!risk.!

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If!actual!delivery!had!been!delayed!through!the!fault!of! either! the! buyer! or! seller,! the! goods! are! at! the! risk! of! the!party!at!fault.!

If!the!thing!is!lost!when!the!buyer!bears!the!risk,!the!buyer!shall! still!pay!the!balance!of!the!purchase!price.!Song&Fo&&&Co.&v.&Oria& (33&Phil.&3)&


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Lawyer's&Cooperative&v.&Tabora& ! Facts:! Tabora! purchased! volumes! of! AmJur! from! Lawyers! Coop.! The! agreement! was! for! ownership! to! remain! with! Lawyers! Coop! until! payment!of!the!full!price.!“Loss!or!damage!to!the!goods!after!delivery!to! the!buyer!is!for!the!!of!the!latter.”!The!books!were!delivered!to! his!office;!that!same!night,!his!office!was!razed!by!fire.!Tabora!failed!to! pay!the!full!purchase!price.!Now!Lawyers!Coop!sues!him!for!the!balance.! Tabora!invokes!force!majeure.1! ( Issue:(Whether!or!not!Tabora!must!bear!the!loss.! ( Held:! YES.! The! contract! specifically! stated! that! after! delivery,! Buyer! would! bear! the! loss.! Moreover! under! Article( 1504,! “when! title/ownership! remains! in! seller! merely! to! secure! performance! by! buyer!of!his!obligations,!the!goods!are!at!the!buyer’s!risk!from!time!of! delivery.”!The!rule!that!the!obligor!should!be!exempt!when!loss!occurs! through!force!majeure!only!applied!when!the!obligation!consists!in!the! delivery!of!a!determinate!thing.!The!obligation!of!Tabora!consists!of!the! delivery!not!a!determinate!thing,!but!a!generic!thing!–!money.!Thus,!he! is!not!absolved!from!liability.! ! ( V.(Loss,(Deterioration,(Fruits(and(Improvements( ( A.(Loss(by(Fault(of(a(Party(

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!Antonio,!Hipolito,!Imperial!&!Zaragosa.!(2012).!Salse!CLV!Case!Digests.! Retrieved!from!http://www.idoub.com/doc/104486360/SalesdCLVdCased Digests!

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If!the!loss!is!thru!the!fault!of!the!seller,!the!buyer!shall!have!the! right!to!recover!damages.!(Article(1189)!

( B.(Loss(by(Fortuitous(Event( ( Article(1480.( Any( injury( to( or( benefit( from( the( thing( sold,( after( the( contract( has( been(perfected,(from(the(moment(of(the(perfection(of(the(contract(to( the( time( of( delivery,( shall( be( governed( by( Articles( 1163( to( 1165,( and( 1262.( ( This(rule(shall(apply(to(the(sale(of(fungible(things,(made(independently( and( for( a( single( price,( or( without( consideration( of( their( weight,( number,(or(measure.( ( Should( fungible( things( be( sold( for( a( price( fixed( according( to( weight,( number,(or(measure,(the(risk(shall(not(be(imputed(to(the(vendee(until( they(have(been(weighed,(counted,(or(measured(and(delivered,(unless( the(latter(has(incurred(in(delay.((1452a)( ( Article(1262.( An( obligation( which( consists( in( the( delivery( of( a( determinate( thing( shall(be(extinguished(if(it(should(be(lost(or(destroyed(without(the(fault( of(the(debtor,(and(before(he(has(incurred(in(delay.( ( When( by( law( or( stipulation,( the( obligor( is( liable( even( for( fortuitous( events,(the(loss(of(the(thing(does(not(extinguish(the(obligation,(and(he( shall( be( responsible( for( damages.( The( same( rule( applies( when( the( nature(of(the(obligation(requires(the(assumption(of(risk.((1182a)( (



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Paras! and! Padilla! say! that! even! if! the! subject! matter! is! lost! by!

•

fortuitous!event,!the!buyer!is!still!obliged!to!pay.!They!don’t!cite! any!authority!for!this!position.! •

When!the!title!and!beneficial!interest!over!the!subject!matter!of!

Tolentino! says! that! the! obligation! of! the! buyer! to! pay! is! also! extinguished!since!sale!creates!a!reciprocal!obligation.!The!seller!

CLV!agrees!with!Tolentino’s!view.!He!says!that!this!view!better! harmonizes!Article!1480,!1538!and!1504.!

this!issue!would!be!and!should!be!that!the!person!who! should!bear!the!risk!of!loss!should!be!the!party!who!had! greater!stake!on!the!subject!matter!at!the!point!of!loss,! deterioration!or!improvement.!

! C.(Deterioration( •

Article(1189!shall!apply.!

!

!

D.(Fruits(and(Improvements( ( Article(1537.( The( vendor( is( bound( to( deliver( the( thing( sold( and( its( accessions( and( accessories(in(the(condition(in(which(they(were(upon(the(perfection(of( the(contract.( (

(

All( the( fruits( shall( pertain( to( the( vendee( from( the( day( on( which( the( contract(was(perfected.((1468a)( ( Article(1164.( The( creditor( has( a( right( to( the( fruits( of( the( thing( from( the( time( the( obligation( to( deliver( it( arises.( However,( he( shall( acquire( no( real( right( over(it(until(the(same(has(been(delivered(to(him.((1095)(


the! sale! do! not! pertain! to! the! same! person,! who! should! suffer! the! loss! and! deterioration! thereof,! and! benefit! from! the! fruits! and!improvements?! o CLV:! The! proper! resolution! therefore! should! be! obtained! from! the! same! legal! authorities! from! whence! the! Code! Commission! copied! the! res! perit! domino! doctrine! –! the! common! law! system.! The! resolution! to!

should!thus!return!whatever!was!paid!by!the!buyer,!if!there!had! been!payment!already.! •

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Seller(

Buyer(

x!

!

x!! (Loss!and!deterioration! !!owner)!

x!! (Fruits!!!beneficial! owner)!

!

x!

Perfection( After(perfection,( Before(delivery( Delivery( Confusion( !!If!the!thing!has! been!delivered!but! the!ownership! remains!with!the! seller(

x! !!Still!the!owner!if!the! price!has!not!been!fully! paid.!

x! !!Owner!once!fully! paid;!condition!is! satisfied!

*Before! perfection! and! after! delivery! !! the! owner! is! always! liable,! which!is!merged!in!one!person.!

(



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Chapter)10:)Remedies)of)Parties) ) I.)Introduction) •

In#the#realm#of#performance,#the#main#rule#in#Sales#was#caveat& emptor#(let#the#buyer#beware),#which#required#the#buyer#to#be# aware#of#the#supposed#title#of#the#seller#to#the#subject#matter;# and# that# a# buyer# who# buys# without# checking# the# seller’s# title# takes#all#the#risks#and#losses#consequent#to#such#failure.#

•

General) Rule:) Today,# the# doctrine# of# caveat# emptor# is# used# to# determine# whether# the# buyer,# in# taking# delivery# of# the# subject# matter#of#the#sale,#can#be#considered#a#buyer#in#good#faith;#or# to# determine# whether# the# buyer# assumed# the# risks# and# contingencies#attached#to#the#subject#matter#of#the#sale.#

•

Exception:# The# principal# embodied# in# our# Torrens# system# present# an# exception# to# the# caveat# emptor# rule,# since# under# such#system#a#buyer#need#only#rely#upon#the#title#of#a#ed# land#and#has#no#obligation#to#look#beyond#such#title.#

) II.)Remedies)in)cases)of)movables) ) A.)Ordinary)Remedies)of)Seller) ) A.1.)Movables)in)General) ) Article)1593.) With) respect) to) movable) property,) the) rescission) of) the) sale) shall) of) right)take)place)in)the)interest)of)the)vendor,)if)the)vendee,)upon)the) expiration)of)the)period)fixed)for)the)delivery)of)the)thing,)should)not) have)appeared)to)receive)it,)or,)having)appeared,)he)should)not)have)

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tendered)the)price)at)the)same)time,)unless)a)longer)period)has)been) stipulated)for)its)payment.)(1505)) ) A.2.)Sale)of)Goods) # NonEPayment#Of#Price#By#The#Buyer# ) Article)1595.) Where,) under) a) contract) of) sale,) the) ownership) of) the) goods) has) ed) to) the) buyer) and) he) wrongfully) neglects) or) refuses) to) pay) for) the)goods)according)to)the))of)the)contract)of)sale,)the)seller)may) maintain)an)action)against)him)for)the)price)of)the)goods.) ) Where,)under)a)contract)of)sale,)the)price)is)payable)on)a)certain)day,) irrespective)of)delivery)or)of)transfer)of)title)and)the)buyer)wrongfully) neglects)or)refuses)to)pay)such)price,)the)seller)may)maintain)an)action) for)the)price)although)the)ownership)in)the)goods)has)not)ed.)But) it)shall)be)a)defense)to)such)an)action)that)the)seller)at)any)time)before) the)judgment)in)such)action)has)manifested)an)inability)to)perform)the) contract)of)sale)on)his)part)or)an)intention)not)to)perform)it.) ) Although) the) ownership) in) the) goods) has) not) ed,) if) they) cannot) readily)be)resold)for)a)reasonable)price,)and)if)the)provisions)of)article) 1596,) fourth) paragraph,) are) not) applicable,) the) seller) may) offer) to) deliver) the) goods) to) the) buyer,) and,) if) the) buyer) refuses) to) receive) them,)may)notify)the)buyer)that)the)goods)are)thereafter)held)by)the) seller)as)bailee)for)the)buyer.)Thereafter)the)seller)may)treat)the)goods) as)the)buyer's)and)may)maintain)an)action)for)the)price.)(n)) ) •


Article)1595(1))! )Ownership#transferred#to#buyer)


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•

Article)1595(2))! )No#transfer#of#ownership#to#buyer)

•

Article)1595(3))! )When#price#payable#on#certain#day)

# When#Buyer#Wrongfully#Neglects#Or#Refuses#To#Accept#Goods# ) Article)1596.) Where)the)buyer)wrongfully)neglects)or)refuses)to)accept)and)pay)for) the)goods,)the)seller)may)maintain)an)action)against)him)for)damages) for)nonacceptance.) ) The) measure) of) damages) is) the) estimated) loss) directly) and) naturally) resulting) in) the) ordinary) course) of) events) from) the) buyer's) breach) of) contract.) ) Where) there) is) an) available) market) for) the) goods) in) question,) the) measure) of) damages) is,) in) the) absence) of) special) circumstances) showing) proximate) damage) of) a) different) amount,) the) difference) between)the)contract)price)and)the)market)or)current)price)at)the)time) or)times)when)the)goods)ought)to)have)been)accepted,)or,)if)no)time) was)fixed)for)acceptance,)then)at)the)time)of)the)refusal)to)accept.) ) If,)while)labor)or)expense)of)material)amount)is)necessary)on)the)part) of)the)seller)to)enable)him)to)fulfill)his)obligations)under)the)contract) of) sale,) the) buyer) repudiates) the) contract) or) notifies) the) seller) to) proceed)no)further)therewith,)the)buyer)shall)be)liable)to)the)seller)for) labor) performed) or) expenses) made) before) receiving) notice) of) the) buyer's)repudiation)or)countermand.)The)profit)the)seller)would)have) made) if) the) contract) or) the) sale) had) been) fully) performed) shall) be) considered)in)awarding)the)damages.)(n))

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Article)1597.) Where)the)goods)have)not)been)delivered)to)the)buyer,)and)the)buyer) has)repudiated)the)contract)of)sale,)or)has)manifested)his)inability)to) perform) his) obligations) thereunder,) or) has) committed) a) breach) thereof,) the) seller) may) totally) rescind) the) contract) of) sale) by) giving) notice)of)his)election)so)to)do)to)the)buyer.)(n)) ) •

Under#Article)1597,#when#the#buyer#of#scrap#iron#fails#to#put#up# the#letter#of#credit#in#favor#of#the#seller#as#the#condition#of#the# sale,# the# seller# had# a# right# to# terminate# the# contract,# and# nonE compliance#with#the#condition#meant#that#the#seller’s#obligation# to#sell#never#did#arise.)Visayan'Sawmill'Co.'v.'Court'of'Appeals' (219'SCRA'378)'

) B.)Special)Remedies)of)“Unpaid)Seller”)of)Goods) •

The# remedies# of# an# unpaid# seller# are# similar# to# the# doctrine# of# selfEhelp#in#Article)4291)

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For# an# unpaid# seller,# the# minimum# requirement# is# that# the# goods# are# in# the# possession# of# the# seller# so# as# to# prevent# an# actual# physical# tussle# with# the# buyer# in# the# exercise# of# such# remedies.)

) ) ) )

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

#Article)429.#The#owner#or#lawful#possessor#of#a#thing#has#the#right#to#exclude# any#person#from#the#enjoyment#and#disposal#thereof.#For#this#purpose,#he#may# use#such#force#as#may#be#reasonably#necessary#to#repel#or#prevent#an#actual#or# threatened#unlawful#physical#invasion#or#usurpation#of#his#property.#(n)#



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B.1.)Definition)of)“Unpaid)Seller”) ) Article)1525.) The) seller) of) goods) is) deemed) to) be) an) unpaid) seller) within) the)

)(3))A)right)of)resale)as)limited)by)this)Title;) ) (4))A)right)to)rescind)the)sale)as)likewise)limited)by)this)Title.) )

meaning)of)this)Title:) ) (1))When)the)whole)of)the)price)has)not)been)paid)or)tendered;) ) (2)) When) a) bill) of) exchange) or) other) negotiable) instrument) has) been) received) as) conditional) payment,) and) the) condition) on) which) it) was) received)has)been)broken)by)reason)of)the)dishonor)of)the)instrument,)

Where) the) ownership) in) the) goods) has) not) ed) to) the) buyer,) the) unpaid) seller) has,) in) addition) to) his) other) remedies) a) right) of) withholding)delivery)similar)to)and)coextensive)with)his)rights)of)lien) and) stoppage) in) transitu) where) the) ownership) has) ed) to) the) buyer.)(n)) # 4#Special#Remedies#Available#To#The#Unpaid#Seller#

the)insolvency)of)the)buyer,)or)otherwise.) ) In) Articles) 1525) to) 1535) the) term) "seller") includes) an) agent) of) the) seller)to)whom)the)bill)of)lading)has)been)indorsed,)or)a)consignor)or) agent)who)has)himself)paid,)or)is)directly)responsible)for)the)price,)or) any)other)person)who)is)in)the)position)of)a)seller.)(n)) ) B.2.)Rights)of)Unpaid)Seller) # Article)1526.!) Subject) to) the) provisions) of) this) Title,) notwithstanding) that) the) ownership) in) the) goods) may) have) ed) to) the) buyer,) the) unpaid) seller)of)goods,)as)such,)has:) ) (1))A)lien)on)the)goods)or)right)to)retain)them)for)the)price)while)he)is) in)possession)of)them;) ) (2))In)case)of)the)insolvency)of)the)buyer,)a)right)of)stopping)the)goods) in)transitu)after)he)has)parted)with)the)possession)of)them;)

1. 2. 3. 4.

Possessory#lien# Stoppage#in#transitu# Special#right#to#resell#goods# Special#right#to#rescind#

•

These#remedies#have#a#hierarchichal#application.#

•

The# last# two# are# called# “special”# because# they# are# rights# accorded#only#to#the#unpaid#seller,#and#are#of#a#different#nature# from#the#right#of#rescission#in#Article)1191.)

) B.3.)Possesory)Lien) •

If# the# ownership# of# the# goods# has# ed# to# the# buyer,# the# unpaid#seller#still#has#a#lien#on#the#goods#or#right#to#retain#them# for#the#price#while#he#is#in#possession.#

•

If#ownership#has#not#ed#to#the#buyer,#the#unpaid#seller#has#a# right#of#withholding#delivery.#

# When#Possessory#Lien#May#Be#Exercised#(Memory#Aid:#STI)# #



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Article)1527.) Subject)to)the)provisions)of)this)Title,)the)unpaid)seller)of)goods)who)is) in) possession) of) them) is) entitled) to) retain) possession) of) them) until) payment)or)tender)of)the)price)in)the)following)cases,)namely:)

Instances#When#Possessory#Lien#Is#Lost#(Memory#Aid:#DOW)# # Article)1529.) The)unpaid)seller)of)goods)loses)his)lien)thereon:)

) (1)) Where) the) goods) have) been) sold) without) any) stipulation) as) to) credit;) ) (2))Where)the)goods)have)been)sold)on)credit,)but)the)term)of)credit) has)expired;) )

) (1)) When) he) delivers) the) goods) to) a) carrier) or) other) bailee) for) the) purpose)of)transmission)to)the)buyer)without)reserving)the)ownership) in)the)goods)or)the)right)to)the)possession)thereof;) ) (2)) When) the) buyer) or) his) agent) lawfully) obtains) possession) of) the) goods;)

(3))Where)the)buyer)becomes)insolvent.) ) The) seller) may) exercise) his) right) of) lien) notwithstanding) that) he) is) in) possession)of)the)goods)as)agent)or)bailee)for)the)buyer.)(n)) # When#Negotiable#Document#Of#Title#Has#Been#Issued#

) (3))By)waiver)thereof.) ) The)unpaid)seller)of)goods,)having)a)lien)thereon,)does)not)lose)his)lien) by)reason)only)that)he)has)obtained)judgment)or)decree)for)the)price) of)the)goods.)(n)) #

•

No#seller’s#lien#shall#defeat#the#rights#of#an#innocent#purchaser# for#value#to#whom#such#document#has#been#negotiated.#

•

# When#Partial#Delivery#Is#Made# ) Article)1528.!) Where) an) unpaid) seller) has) made) part) delivery) of) the) goods,) he) may) exercise) his) right) of) lien) on) the) remainder,) unless) such) part) delivery) has) been) made) under) such) circumstances) as) to) show) an) intent) to) waive)the)lien)or)right)of)retention.)(n)) # # #

The#unpaid#seller#losses#his#possessory#lien#when#he#parts#with# physical# possession# of# the# goods.# In# this# case,# he# still# has# the# remedy# of# stoppage# in# transitu,# but# only# when# the# buyer# is# insolvent.#

# B.4.)Stoppage)in)Transitu) ) Article)1530.) Subject) to) the) provisions) of) this) Title,) when) the) buyer) of) goods) is) or) becomes) insolvent,) the) unpaid) seller) who) has) parted) with) the) possession)of)the)goods)has)the)right)of)stopping)them)in)transitu,)that) is) to) say,) he) may) resume) possession) of) the) goods) at) any) time) while)



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they)are)in)transit,)and)he)will)then)become)entitled)to)the)same)rights) in) regard) to) the) goods) as) he) would) have) had) if) he) had) never) parted) with)the)possession.)(n)) )

When#Goods#Are#Deemed#“In#Transit”#Or#Not;#And## When#Part#Delivery#Already#Made# # Article)1531.)

When#A#Negotiable#Document#Of#Title#Is#Issued# ) Article)1535.) Subject)to)the)provisions)of)this)Title,)the)unpaid)seller's)right)of)lien)or) stoppage)in)transitu)is)not)affected)by)any)sale,)or)other)disposition)of) the) goods) which) the) buyer) may) have) made,) unless) the) seller) has) assented)thereto.)

Goods)are)in)transit)within)the)meaning)of)the)preceding)article:) ) (1))From)the)time)when)they)are)delivered)to)a)carrier)by)land,)water,) or) air,) or) other) bailee) for) the) purpose) of) transmission) to) the) buyer,) until)the)buyer,)or)his)agent)in)that)behalf,)takes)delivery)of)them)from) such)carrier)or)other)bailee;) )

) If,)however,)a)negotiable)document)of)title)has)been)issued)for)goods,) no)seller's)lien)or)right)of)stoppage)in)transitu)shall)defeat)the)right)of) any) purchaser) for) value) in) good) faith) to) whom) such) document) has) been)negotiated,)whether)such)negotiation)be)prior)or)subsequent)to) the) notification) to) the) carrier,) or) other) bailee) who) issued) such) document,) of) the) seller's) claim) to) a) lien) or) right) of) stoppage) in)

(2)) If) the) goods) are) rejected) by) the) buyer,) and) the) carrier) or) other) bailee)continues)in)possession)of)them,)even)if)the)seller)has)refused) to)receive)them)back.) ) Goods) are) no) longer) in) transit) within) the) meaning) of) the) preceding) article:) )

transitu.)(n)) ) When#Buyer#Is#Deemed#“Insolvent”#

(1)) If) the) buyer,) or) his) agent) in) that) behalf,) obtains) delivery) of) the) goods)before)their)arrival)at)the)appointed)destination;) ) (2)) If,) after) the) arrival) of) the) goods) at) the) appointed) destination,) the) carrier)or)other)bailee)acknowledges)to)the)buyer)or)his)agent)that)he) holds)the)goods)on)his)behalf)and)continues)in)possession)of)them)as) bailee) for) the) buyer) or) his) agent;) and) it) is) immaterial) that) further) destination)for)the)goods)may)have)been)indicated)by)the)buyer;)

•

“A#buyer#is#deemed#insolvent#when#he#either#has#ceased#to#pay# his# debts# in# the# ordinary# course# of# business# or# cannot# pay# his# debts#as#they#become#due.”#Article)1636(2)#

# # #

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Insolvency#proceedings#need#not#be#commenced.#

•

Buyer#must#be#insolvent#for#stoppage#in#transitu#to#apply.#

) (3))If)the)carrier)or)other)bailee)wrongfully)refuses)to)deliver)the)goods) to)the)buyer)or)his)agent)in)that)behalf.) )



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If) the) goods) are) delivered) to) a) ship,) freight) train,) truck,) or) airplane) chartered) by) the) buyer,) it) is) a) question) depending) on) the) circumstances) of) the) particular) case,) whether) they) are) in) the) possession)of)the)carrier)as)such)or)as)agent)of)the)buyer.)

the)goods)to,)or)according)to)the)directions)of,)the)seller.)The)expenses) of)such)delivery)must)be)borne)by)the)seller.)If,)however,)a)negotiable) document) of) title) representing) the) goods) has) been) issued) by) the) carrier) or) other) bailee,) he) shall) not) obliged) to) deliver) or) justified) in)

) If)part)delivery)of)the)goods)has)been)made)to)the)buyer,)or)his)agent) in)that)behalf,)the)remainder)of)the)goods)may)be)stopped)in)transitu,) unless) such) part) delivery) has) been) under) such) circumstances) as) to) show)an)agreement)with)the)buyer)to)give)up)possession)of)the)whole) of)the)goods.)(n)) )

delivering) the) goods) to) the) seller) unless) such) document) is) first) surrendered)for)cancellation.)(n)) ) B.5.)Special)Right)to)Resell)Goods) # Article)1533.) Where) the) goods) are) of) perishable) nature,) or) where) the) seller)

Article) 1531#presupposes#that#the#carrier#through#him#delivery# is#made#is#NOT#an#agent#of#the#buyer.#Delivery#to#such#carrier#is# not#delivery#to#the#buyer.#

expressly) reserves) the) right) of) resale) in) case) the) buyer) should) make) default,)or)where)the)buyer)has)been)in)default)in)the)payment)of)the) price)for)an)unreasonable)time,)an)unpaid)seller)having)a)right)of)lien) or)having)stopped)the)goods)in)transitu)may)resell)the)goods.)He)shall) not)thereafter)be)liable)to)the)original)buyer)upon)the)contract)of)sale) or)for)any)profit)made)by)such)resale,)but)may)recover)from)the)buyer) damages)for)any)loss)occasioned)by)the)breach)of)the)contract)of)sale.)

•

# How#Stoppage#In#Transitu#May#Be#Exercised;#And#When#Goods#Covered# By#A#Negotiable#Document#Of#Title# # Article)1532.) The)unpaid)seller)may)exercise)his)right)of)stoppage)in)transitu)either) by)obtaining)actual)possession)of)the)goods)or)by)giving)notice)of)his) claim)to)the)carrier)or)other)bailee)in)whose)possession)the)goods)are.) Such)notice)may)be)given)either)to)the)person)in)actual)possession)of) the) goods) or) to) his) principal.) In) the) latter) case) the) notice,) to) be) effectual,) must) be) given) at) such) time) and) under) such) circumstances) that)the)principal,)by)the)exercise)of)reasonable)diligence,)may)prevent) a)delivery)to)the)buyer.) ) When) notice) of) stoppage) in) transitu) is) given) by) the) seller) to) the) carrier,) or) other) bailee) in) possession) of) the) goods,) he) must) redeliver)

) Where) a) resale) is) made,) as) authorized) in) this) article,) the) buyer) acquires)a)good)title)as)against)the)original)buyer.) ) It)is)not)essential)to)the)validity)of)resale)that)notice)of)an)intention)to) resell)the)goods)be)given)by)the)seller)to)the)original)buyer.)But)where) the)right)to)resell)is)not)based)on)the)perishable)nature)of)the)goods)or) upon)an)express)provision)of)the)contract)of)sale,)the)giving)or)failure) to)give)such)notice)shall)be)relevant)in)any)issue)involving)the)question) whether) the) buyer) had) been) in) default) for) an) unreasonable) time) before)the)resale)was)made.) )



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It)is)not)essential)to)the)validity)of)a)resale)that)notice)of)the)time)and) place)of)such)resale)should)be)given)by)the)seller)to)the)original)buyer.) ) The) seller) is) bound) to) exercise) reasonable) care) and) judgment) in) making) a) resale,) and) subject) to) this) requirement) may) make) a) resale) either) by) public) or) private) sale.) He) cannot,) however,) directly) or) indirectly)buy)the)goods.)(n)) ) •

•

The# seller# “shall# not# thereafter# be# liable# to# the# original# buyer#

# Transfer#Of#Ownership# •

Special# right# to# resell# can# be# exercised# even# if# the# seller# had# already#transferred#ownership#to#the#original#buyer.#

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unpaid# seller,# the# Supreme# Court# had# already# recognized# the# right# of# a# seller,# when# the# contract# of# sale# is# still# executory# in# stage,# to# resell# the# movables# subject# matter# of# the# sale,# when# the#buyer#fails#to#pay#the#purchase#price.#Hanlon'v.'Hausserman' (40'Phil.'796)'

However,#because#of#Article)1533,#the#second#buyer#will#still#be# able#to#get#a#good#title#against#the#original#buyer.#

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This#is#a#special#feature#of#this#right#to#resell.#The#seller#can#still# vest# ownership# in# the# second# buyer# even# if# at# the# time# of# the# second#sale,#he#did#not#have#ownership#anymore.# o

)

Note:# The# buyer# need# not# rescind# the# first# contract# judicially# before# reselling# the# thing.# If# he# is# obliged# to# sell# it# for# less# than# the# contract# price,# the# nonEpaying# buyer# is# liable# for# the# difference.# Katigbak' v.' Court' of' Appeals' (4' SCRA' 243).' The# seller# is# not# obliged# to# give# the# original# owner# the# profits# (i.e.# difference# of# contract# price# and# sale# price),#if#any.#(Article)1533)# # Effect#Of#Having#Exercised#Right#Of#Resale#


upon#the#contract#of#sale#or#for#any#profit#made#by#such#resale,# but# may# recover# from# the# buyer# damages# for# any# loss# occasioned#by#the#breach#of#the#contract#of#sale.”#

Even#before#the#formal#statutory#adoption#of#the#remedies#of#an#

When#The#Right#Is#Exercisable#(PERU)# 1. The# unpaid# seller# has# previously# excercised# possessory# lien# or# stoppage#in#transitu# 2. The#goods#are#of#perishable#nature# 3. Seller#has#expressly#reserved#such#right# 4. Buyer#has#been#in#default#for#an#unreasonable#length#of#time# #

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o

Ordinarily,#the#destruction#or#taking#away#of#ownership# in# one# person# and# placing# it# in# another# person# in# such# manner#can#only#be#done#through#court#action.## But# in# this# case# of# an# unpaid# seller,# he# can# effect# transfer#of#ownership#even#without#judicial#action.#

# Notice#To#Defaulting#Buyer# •

Article)1533(3))and)(4)#

# Standard#Of#Care#And#Disqualification#In#Resale# • # # # # #


Article)1533(5)#


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B.6.)Special)Right)to)Rescind) ) Article)1534.) An)unpaid)seller)having)the)right)of)lien)or)having)stopped)the)goods)in) transitu,)may)rescind)the)transfer)of)title)and)resume)the)ownership)in) the)goods,)where)he)expressly)reserved)the)right)to)do)so)in)case)the) buyer)should)make)default,)or)where)the)buyer)has)been)in)default)in) the)payment)of)the)price)for)an)unreasonable)time.)The)seller)shall)not) thereafter) be) liable) to) the) buyer) upon) the) contract) of) sale,) but) may) recover)from)the)buyer)damages)for)any)loss)occasioned)by)the)breach) of)the)contract.) ) The) transfer) of) title) shall) not) be) held) to) have) been) rescinded) by) an) unpaid) seller) until) he) has) manifested) by) notice) to) the) buyer) or) by) some) other) overt) act) an) intention) to) rescind.) It) is) not) necessary) that) such)overt)act)should)be)communicated)to)the)buyer,)but)the)giving)or) failure)to)give)notice)to)the)buyer)of)the)intention)to)rescind)shall)be) relevant) in) any) issue) involving) the) question) whether) the) buyer) had) been)in)default)for)an)unreasonable)time)before)the)right)of)rescission) was)asserted.)(n)) ) When#The#Right#May#Be#Exercised#(RED)# 1. Unpaid# seller# has# exercised# his# possessory# lien# or# stoppage# in# transitu# 2. Seller#expressly#reserved#the#right#to#rescind#in#case#of#default# 3. Buyer#has#been#in#default#for#an#unreasonable#length#of#time# # Effect#Of#Exercise#Of#Such#Right# • #

Last#sentence#of#Article)1534(1)#

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Transfer#Of#Title# •

Article)1534(2)#

) C.)Remedies)of)Buyer) ) C.1.)Failure)of)Seller)to)Deliver) ) Article)1598.) Where) the) seller) has) broken) a) contract) to) deliver) specific) or) ascertained)goods,)a)court)may,)on)the)application)of)the)buyer,)direct) that) the) contract) shall) be) performed) specifically,) without) giving) the) seller)the)option)of)retaining)the)goods)on)payment)of)damages.)The) judgment) or) decree) may) be) unconditional,) or) upon) such) ) and) conditions)as)to)damages,)payment)of)the)price)and)otherwise,)as)the) court)may)deem)just.)(n)) ) C.2.)Breach)of)Seller’s)Warranty) ) Article) 1599# provides# the# following# remedies# to# the# buyer# in# case# the# seller#breaches#his#warranty:# 1. Accept# or# keep# the# goods# and# set# up# against# the# seller# the# breach# of# warranty# by# way# of# recoupment# in# diminution# or# extinction#of#the#price# 2. Accept# or# keep# the# goods# and# maintain# an# action# for# damages# against#the#seller# 3. Refuse#to#accept#the#goods#and#maintain#an#action#for#damages# 4. Rescind#the#sale#and#refuse#to#receive#the#goods#or#if#the#goods# have#already#been#received,#return#them#or#offer#to#return#them# to#the#seller#and#recover#the#price#paid.# #



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These# remedies# are# alternative.# However,# the# buyer# still# has# a# right#to#rescind#if#he#has#chosen#specific#performance#but#it#has# become#impossible.#This#is#based#on#Article)1191(2).)

) C.3.)Suspension)of)Payments)in)Anticipation)of)Breach) ) Article)1590.) Should)the)vendee)be)disturbed)in)the)possession)or)ownership)of)the) thing) acquired,) or) should) he) have) reasonable) grounds) to) fear) such) disturbance,) by) a) vindicatory) action) or) a) foreclosure) of) mortgage,) he) may)suspend)the)payment)of)the)price)until)the)vendor)has)caused)the) disturbance)or)danger)to)cease,)unless)the)latter)gives)security)for)the) return) of) the) price) in) a) proper) case,) or) it) has) been) stipulated) that,) notwithstanding) any) such) contingency,) the) vendee) shall) be) bound) to) make) the) payment.) A) mere) act) of) tres) shall) not) authorize) the)

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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.)Any)agreement) to)the)contrary)shall)be)void.)(1454dAda)) ) D.1.)Rationale)of)Recto)Law) •

It#was#originally#ed#in#1939#and#was#eventually#incorporated# in#the#Civil#Code#as#Article)1484.#

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The# purpose# is# to# prevent# the# abuses# of# mortgagees# who# foreclose# on# the# chattel# mortgage,# buy# the# property# at# a# low# price,#and#then#suing#the#mortgagor#for#deficiency.#

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The#Recto#Law#prevents#mortgagee#from#seizing#the#mortgaged# property,#buying#it#at#foreclosure#sale#for#a#low#price#and#then# bringing# the# suit# against# the# mortgagor# for# a# deficiency# judgment.#The#almost#invariable#result#was#that#the#mortgagor# found#himself#minus#the#property#and#still#owing#practically#the# full# amount# of# his# original# indebtedness.# Magna' Financial' Services'Group,'Inc.'v.'Colarina'(477'SCRA'245)'

The#pendency#of#suit#over#the#subject#matter#of#the#sale#justifies# the#buyer#in#suspending#payment#of#the#balance#of#the#purchase# price#by#reason#of#aforesaid#vindicatory#action#filed#against#it.)

) D.)RECTO)LAW:)Sales)of)Movables)on)Installments) ) Article)1484.!) In)a)contract)of)sale)of)personal)property)the)price)of)which)is)payable) in) installments,) the) vendor) may) exercise) any) of) the) following)


(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)

suspension)of)the)payment)of)the)price.)(1502a)) ) •

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# D.2.)Coverage)of)the)Law) •

remedies:) ) (1))Exact)fulfillment)of)the)obligation,)should)the)vendee)fail)to)pay;)


Installment#sales#are#covered.# o It#is#an#“installment#sale”#if#the#price#is#payable#in#two#or# more# future# payments,# whether# or# not# there# is# a# downpayment.#Levy'v.'Gervacio'(69'Phil.'52)'


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Financing#transactions#derived#or#arising#from#sales#of#movables# on#installments#are#covered.#

unpaid.# Although# it# is# a# sale# of# personal# property,# it# is# not# payable# in# installments.#It#is#payable#in#a#straight#term#in#which#the#balance#should# be# paid# in# its# totality# at# maturity# date# of# the# PN,# therefore# the# prohibition#does#not#apply.#

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In# this# case,# the# seller# assigned# his# credit# to# the# financing#

#

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Contracts#to#Sell#are#not#covered.#Visayan'Sawmill'Co.'v.'Court' of'Appeals'(219'SCRA'378)'

company.#The#financing#company#is#thus#bound#by#Article)1484.# Zayas'v.'Luneta'Motor'Company'(117'SCRA'726)' o Where#the#financing#transaction#is#not#born#from#a#sale# but# a# mortgage,# it# is# not# covered# by# the# Recto# Law# PAMECourt' of' Appeals' Wood' Treatment' Plant,' Inc.' v.' Court'of'Appeals'(310'SCRA'281,'289)' # Levy'Hermanos'v.'Gervacio' # Facts:# Levy# Hermanos,# Inc.,# sold# to# Lazaro# Blas# Gervacio,# who# after# downpayment,# executed# a# promissory# note# for# the# balance# of# P2,400,# payable#on#or#before#June#15,#1937,#and#mortgaged#the#car#as#security# for# balance.# Gervacio# failed# to# pay.# The# mortgage# was# foreclosed# and# sold#at#P800.#Hermanos#instituted#a#civil#action#for#the#balance.# # Issue:#Whether#or#not#Levy#Hermanos#can#recover#the#balance.# # Held:# YES.# Article# 1484# applies.# The# suggestion# that# the# cash# payment# made# in# this# case# should# be# considered# as# an# installment# in# order# to# bring# the# contract# sued# upon# under# the# operation# of# the# law,# is# untenable.# A# cash# payment# cannot# be# considered# as# a# payment# by# installment,# and# even# if# it# can# be# so# considered,# still# the# law# does# not# apply,#for#it#requires#nonEpayment#of#two#or#more#installments#in#order# that# its# provisions# may# be# invoked.# Here,# only# one# installment# was#

Zayas'v.'Luneta'Motor'Company' # Facts:# Petitioner# Eutropio# Zayas,# Jr.# purchased# on# installment# basis# a# motor#vehicle#from%Escaño#Enterprises#in#Cagayan#de#Oro#City,#dealer#of# Respondent# Luneta# Motor# Company.# Car# was# delivered# to# Zayas# who# executed# a# promissory# note# on# the# balance# and# in# addition# a# chattel# mortgage#on#the#car#in#favor#of#Luneta.#Zayas#was#unable#to#pay#further# prompting#Luneta#to#extraEjudicially#foreclose#chattel#mortgage;#car#sold# at#public#auction#with#Luneta#as#highest#bidder.#Luneta#filed#civil#case#for# recovery#of#balance#of#P1,551.74#plus#interest.#He#denied#applicability#of# Article# 1484# because# contract# was# only# a# mere# loan# and# not# sale# on# installment# # Issue:# Whether# or# not# Article# 1484# would# apply# to# a# person# or# entity# which#financed#purchase#on#installments#of#a#motor#vehicle#where#the# seller# subsequently# assigns# loan# documents# to# the# financing# person# or# entity.# # Held:)YES.!Escaño'was'an'agent'of'Luneta'Motor'Company'and'that'the' certification# from# the$ cashier$ of$ Escaño$ Enterprises$ (submitted$ in$ evidence)#on#monthly#installments#aid$by$Zayas$mentioned$that$the$note$ was$ in$ favor$ of$ Luneta.$ Escaño# assigned# its# rights' visEàEvis# the# sale# to# Luneta#Motor#Company,#the#nature#of#the#transaction#didn't#change#and# as#an#assignee,#Luneta#had#no#better#rights#than#assignor#Escano#under# the# same# transaction.# Transaction# would# still# be# a# sale# of# personal#



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property# in# installments# covered# by# Article# 1484;# to# rule# otherwise# would#pave#the#way#for#subverting#the#policy#underlying#Art#1484#on#the# foreclosure#of#chattel#mortgages# # D.3.)Remedies)Provided)Under)Article)1484) # Nature#Of#The#Remedies#In#Article#1484# •

The#article#provides#for#three#remedies.#

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These# are# alternative# and# exclusive,# and# the# exercise# of# one# would#bar#the#exercise#of#the#others.#Delta'Motor'Sales'Corp.'v.' Niu'Kim'Duan'(213'SCRA'259)' o This#is#the#“vertical”#barring#effect.## o

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However,# seeking# a# writ# of# replevin# is# consistent# with# any#of#the#three#remedies.#Universal'Motors'Corp.'v.'Dy' Hian'Tat'(28'SCRA'161)'

Recovery#of#unpaid#balance#is#also#barred#when#the#remedy#of# either#rescission#or#foreclosure#is#chosen.' o This#is#the#“horizontal”#barring#effect.#' o In#installment#sales,#if#the#action#instituted#is#for#specific# performance# and# the# mortgaged# property# is# subsequently# attached# and# sold,# the# sale# does# not# amount# to# a# foreclosure# of# the# mortgage,# has# been# upheld# in# subsequent# decisions# and# seems# now# wellE established.' Industrial' Finance' Corp.' v.' Ramirez' (77' SCRA'152)'

# # # #

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Delta'Motor'Sales'Corp.'v.'Niu'Kim'Duan' # Facts:# Niu# Kim# Duan# purchased# from# Delta# Motors# 3# air# conditioning# units.# Niu# paid# the# downpayment,# the# balance# payable# in# 24# installments.# Title# to# the# property# remained# with# Delta# until# the# payment#of#the#full#purchase#price.#Under#the#agreement,#failure#to#pay# 2# monthly# installments# makes# the# obligation# entirely# due# and# demandable.# The# units# were# delivered,# Niu# failed# to# pay.# Thus,# Delta# filed#a#complaint#for#Replevin#and#applied#the#installments#paid#by#Niu# as# rentals;# Niu# contends# that# the# contractual# stipulations# are# unconscionable.# # Issue:#Whether#or#not#the#remedy#Delta#availed#of#was#unconscionable# # Held:#NO.#A#stipulation#in#the#contract#treating#installments#as#rentals#in# case#of#failure#to#pay#is#VALID—so#long#as#they#are#not#unconscionable.# The# provision# in# this# case# is# reasonable.# An# unpaid# seller# has# 3# alternative# (not# cumulative)# remedies:# (1)# exact# fulfillment# of# the# obligation,# (2)# cancel# the# sale# for# default# in# 2# installments,# and# (3)# foreclose# the# chattel# mortgage# (if# any)# but# the# seller# cannot# anymore# claim# the# unpaid# balance# of# the# price.# Delta# chose# the# 2nd# remedy.# Having# done# so,# it# is# now# barred# from# claiming# the# balance# of# the# purchase#price.1# # ) )

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

#Antonio,#Hipolito,#Imperial#&#Zaragosa.#(2012).#Salse#CLV#Case#Digests.# Retrieved#from#http://www.idoub.com/doc/104486360/SalesECLVECaseE Digests#



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D.4.)Remedy)of)Specific)Performance) •

This#remedy#is#alternative.#However,#it#can#be#argued#that#if#the# obligation# to# pay# becomes# impossible,# the# seller# may# still# seek# rescission#based#on#Article)1191.## o CLV# however# says# that# the# generic# obligation# to# pay# can’t#become#impossible.#

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The#seller#is#deemed#to#have#chosen#specific#performance#when# he# files# an# action# in# court# for# recovery.# Sending# of# demand# letter#to#the#buyer#is#not#enough#and#should#not#be#considered# has#having#barred#the#resort#to#either#the#remedies#of#rescission# or#foreclosure.#

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When# judgment# is# rendered# in# favor# of# the# seller,# the# buyer# becomes#a#judgment#debtor.#His#obligation#can#be#executed#on# all# personal# and# real# properties# of# the# buyer# which# are# not# exempt#from#execution.#

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The#fact#that#the#seller#obtained#a#writ#of#execution#against#the# property# mortgaged,# but# pursuant# to# an# action# for# specific# performance#with#a#plea#for#a#writ#of#replevin,#does#not#amount# to# a# foreclosure# of# the# chattel# mortgage# covered# by# the# Recto# Law.#Tajanglangit'v.'Southern'Motors'(101'Phil.'606)'

#

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bidder,#which#was#also#Southern#Motors.#Since#the#judgment#called#for# so#much#more,#Southern#Motors#obtained#an#alias#writ#of#execution#so# that# the# sheriff# could# levy# attachment# on# the# other# real# properties# of# the#Tajanlangits.# # Issue:# Whether# or# not# Southern# Motors# had# already# foreclosed# on# the# chattel#mortgage#and#thus#have#no#more#further#action#against#them.# # Held:#NO.#There#was#no#foreclosure#sale#since#Southern#Motors#elected# 1484(1)# and# sued# on# the# Note# exclusively.# Southern# Motors# had# the# choice# what# remedy# in# Article# 1484# to# use.# Neither# was# there# cancellation# of# the# sale# which# was# also# affirmed# by# the# sheriff.# There# was# an# execution# against# on# the# property# mortgaged# not# a# cancellation/foreclosure#on#the#sale.#The#fact#that#the#seller#obtained#a# writ# of# execution# against# the# property# mortgaged,# but# pursuant# to# an# action# for# specific# performance# with# a# plea# for# a# writ# of# replevin,# does# not# amount# to# a# foreclosure# of# the# chattel# mortgage# covered# by# the# Recto#Law# # D.5.)Remedy)of)Recission) •

Tajanglangit'v.'Southern'Motors' # Facts:# Spouses# Tajanlangit# bought# 2# tractors# and# 1# Thresher# from# Southern# Motors# on# installment# basis# by# issuing# a# Promissory# Note# to# that#effect.#They#then#defaulted#on#the#installment#payments.#The#court# entered# judgment# for# the# total# sum# of# the# purchased# machineries#

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Rescission# obliges# both# parties# to# make# restitution.# However,# under# Article) 1486,# a# stipulation# that# the# installments# or# rents# paid# shall# not# be# returned# is# valid,# as# long# as# they# are# not# unconscionable.#Delta'Motor'Sales'Corp.'v.'Niu'Kim'Duan'(213' SCRA'259)'

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(P25,575)# plus# interest# and# collection# costs.# The# sheriff# then# levied# on# the# machineries# and# sold# them# on# auction# for# P10K# to# the# highest#


A# stipulation# which# provides# for# the# forfeiture# of# the# amounts# paid#by#the#buyer#when#the#contract#is#rescinded#is#not#contrary# to#law.#Such#forfeited#amounts#are#like#the#damages#which#can# also#be#recovered#in#rescission.#


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purchase#price.#Nonato'v.'IAC'(140'SCRA'255)'

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General) Rule:) Rescission# is# chosen# when# there# is# a# clear# indication#by#the#seller#that#he#wants#to#end#the#contract.# o Sends#a#notice#of#rescission#to#the#buyer# o Takes#possession#of#the#subject#matter#of#the#sale# o Files#an#action#for#rescission#

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When#the#seller’s#assignee,#a#financing#company,#is#able#to#take# back#possession#of#the#motor#vehicle#with#a#condition#that#the# car# can# be# redeemed# by# the# buyers# within# 15# days,# such# possession# is# clearly# with# the# intent# to# cancel# the# contract.# Nonato'v.'IAC'(140'SCRA'255)'

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The# retaking# of# possession# of# the# property# must# be# coupled# with#an#unequivocal#desire#on#the#part#of#the#seller#to#rescind.# As# such,# surrender# of# mortgaged# property# is# not# necessarily# equivalent# to# rescission.# Vda.' De' Quiambao' v.' Manila' Motor' Co.'(3'SCRA'445)'

# Barring#Effect#Of#Rescission# •

Even# if# not# explicitly# stated# in# the# law,# rescission# still# bars# the# seller#from#recovering#deficiency#or#unpaid#balance,#in#the#same# way#that#foreclosure#on#chattel#mortgage#does.# o

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However,#the#seller#may#recover#damages.#

It# is# because# of# the# nature# of# rescission# which# requires# mutual# restitution.#When#the#subject#matter#is#returned,#and#damages# are#paid,#or#payments#are#forfeited,#the#two#parties#are#deemed#


to#have#been#mutually#compensated.#The#seller#cannot#have#its# cake#and#eat#it#too.#Nonato'v.'IAC'(140'SCRA'255)'

Mutual# restitution# prevents# recovering# on# the# balance# of# the#

# When#Rescission#Deemed#Chosen#

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# Nonato'v.'IAC' # Facts:) Restituto# and# Ester# Nonato# purchased# a# Volkswagen# Sakbayan# from# the# People's# Car,# Inc.,# on# installment# basis.# The# defendants# executed#a#promissory#note#and#a#chattel#mortgage#in#favor#of#People's# Car,# Inc.# It# then# assigned# its# rights# and# interests# over# the# note# and# mortgage#in#favor#of#Investor's#Finance#Corporation#(IFC).#For#failure#of# defendants#to#pay#two#or#more#installments,#despite#demands,#the#car# was# repossessed# by# IFC.# Despite# repossession,# IFC# demanded# that# Nonatos#pay#the#balance#of#the#price#of#the#car.!# # Issue:#Whether#a#vendor#who#had#cancelled#the#sale#of#a#motor#vehicle# for# failure# of# the# buyer# to# pay# two# or# more# of# the# stipulated# installments,#may#also#demand#payment#of#the#balance#of#the#purchase# price.# # Held:) NO.# The# applicable# law# in# the# case# at# bar# is# Article# 1484.# These# remedies#have#been#recognized#as#alternative,#not#cumulative,#that#the# exercise# of# one# would# bar# the# exercise# of# the# others.# The# acts# performed#by#the#corporation#are#wholly#consistent#with#the#conclusion# that#it#had#opted#to#cancel#the#contract#of#sale#of#the#vehicle.#It#is#thus# barred#from#exacting#payment#of#the#balance#of#the#price#of#the#vehicle.# It#cannot#have#its#cake#and#eat#it#too.# # ) ) )



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D.6.)Foreclosure)of)Chattel)Mortgage)Constituted)on)Subject)Property) # When#Remedy#Of#Foreclosure#Is#Deemed#Chosen# •

The# seller# is# deemed# to# have# chosen# to# foreclose# only# at# the# time# of# actual# sale# of# the# subject# property# at# public# auction.# Manila' Trading' &' Supply' Co.' v.' Reyes' (62' Phil.' 461);' Manila' Motor'Co.,'Inc.'v.'Fernandez'(99'Phil.'782)'

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The# filing# for# and# issuance# of# a# writ# of# replevin# (and# the# subsequent# recovery# of# possession)# does# not# mean# that# the# seller#will#foreclose#on#the#mortgage.#Universal'Motors'Corp.'v.' Sy'Hian'Tat'(28'SCRA'161)' o Filing#of#a#writ#of#replevin#is#usually#a#preliminary#step#to# foreclose# so# that# the# seller# will# be# able# to# regain# possession.#

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If# the# seller# files# an# action# denominated# as# “replevin# with# damages”# which# seeks# to# recover# possession# and# in# the# alternative,#to#recover#the#unpaid#balance#of#the#price,#he#is#still# not# considered# as# having# chosen# foreclosure# as# a# remedy.# Industrial'Finance'Corp.'v.'Ramirez'(77'SCRA'152)'

# Barring#Effect#of#Foreclosure# •

It#is#the#foreclosure#and#actual#sale#at#public#auction#which#bars# further#recovery#by#the#seller.#

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Filing# of# the# action# of# replevin# in# order# to# foreclose# on# the# chattel#mortgage#does#not#produce#the#barring#effect#under#the# Recto#Law;#for#it#is#the#fact#of#foreclosure#and#actual#sale#of#the# mortgaged#chattel#that#bar#further#recovery#by#the#seller#of#any# balance# on# the# buyer’s# outstanding# obligation# not# satisfied# by# the# sale.# The# voluntary# payment# of# the# installment# by# the#

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buyerEmortgagor# is# valid# and# not# recoverable# in# spite# the# restrictive# provisions# of# Article) 1484(3).# Northern' Motors,' Inc.' v.'Sapinoso'(33'SCRA'356)' # Northern'Motors,'Inc.'v.'Sapinoso' # Facts:# Respondent# Casiano# Sapinoso# purchased# from# petitioner# Northern# Motors# an# Opel# Kadett# car# for# P12,171# making# a# downpayment# and# executing# a# promissory# note# for# the# balance# of# P10,540# payable# in# installments.# To# secure# the# payment# of# the# note,# Sapinoso# executed# in# favor# of# Northern# Motors# a# chattel# mortgage# on# the# car;# the# mortgage# provided# among# others# that# upon# Sapinoso’s# default# in# payment# of# any# part# of# the# principal# or# interest,# Northern# Motors#may#elect#any#of#the#ff.#remedies#(a)#sale#of#the#car#by#Northern# (b)# cancellation# of# the# sale# to# Sapinoso# (c)# extrajudicial# foreclosure# (d)# ordinary# civil# action# for# fulfillment# of# the# mortgage# contract;# additionally,# whichever# remedy# is# chosen,# Sapinoso# waives# his# right# to# reimbursement# of# any# and# all# amounts# on# the# principal# and# interest# already# paid.# Sapinoso# failed# to# pay# the# first# 5# installments# due# from# AugustENovember# 1965;# he# made# payments# though# on# November# and# December# and# on# April# the# next# year# but# failed# to# make# subsequent# payments.#Northern#Motors#filed#a#complaint#stating#that#it#was#availing# of#the#option#of#extrajudically#foreclosing#the#mortgage#and#prayed#that# (a)#a#writ#of#replevin#be#issued#upon#its#filing#of#a#bond#(b)#it#be#declared# to# have# the# rightful# possession# of# the# car# (c)# in# default# of# delivery,# Sapinoso# be# ordered# to# pay# the# balance# with# interest.# Subsequent# to# the# commencement# of# the# action# but# before# filing# of# his# answer,# Sapinoso# made# 2# payments# amounting# to# P1,250# on# the# promissory# note;# in# the# meantime,# a# writ# of# replevin# was# issued# and# the# car# was# turned# over# to# Northern# Motors.# Sapinoso# claimed# that# he# withheld#



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payments#because#the#car#was#defective#and#Northern#Motors#failed#to# fix#it#despite#his#repeated#demands.## # Issue:# Whether# or# not# as# under# Article# 1484# of# the# Civil# Code,# plaintiff#

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a# foreclosure# sale# payments# voluntarily# tendered# by# the# debtorE mortgagor#who#its#indebtedness.1!# # Barring#Effect#On#Other#Securities#Given#For#Payment#Of#Price#

Northern#Motors#is#barred#from#recovering#unpaid#balance#of#the#debt# having#elected#to#foreclose#on#the#chattel#mortgage.# # Held:) NO.# In# issuing# the# writ# of# replevin# and# upholding# after# trial# the# right# to# possession# of# the# car# by# Northern# Motors,# the# court# below# correctly#considered#the#action#as#one#of#replevin#to#secure#possession# of# the# car# as# preliminary# step# to# a# foreclosure# sale.# The# court# below# however# erred# in# concluding# that# the# legal# effect# of# the# action# was# to# bar# Northern# Motors# from# accepting# further# payments# on# the# promissory# note.# It# is# the# fact# of# foreclosure# and# actual# sale# of# the# mortgaged# chattel# that# bars# further# recovery# by# the# vendor# of# any# balance#on#the#vendee’s#outstanding#obligation#not#satisfied#by#the#sale.# In# the# present# case,# there# is# no# occasion# to# apply# the# restrictive# provision# of# Article# 1484# as# there# has# not# yet# been# a# foreclosure# sale# resulting# in# a# deficiency.# A# mortgage# creditor# before# the# actual# foreclosure# sale# is# not# precluded# from# recovering# the# unpaid# balance# although# he# has# filed# for# replevin# for# the# purpose# of# extrajudicial# foreclosure.#Also,#a#mortgage#creditor#who#has#elected#to#foreclose#but# subsequently# desists# from# proceeding# with# the# auction# sale# without# gaining# any# advantage# and# without# causing# any# disadvantage# to# the# mortgagor# is# not# barred# from# suing# on# the# unpaid# .# And# as# applicable#here,#a#mortgage#creditor#is#not#barred#from#accepting#before#

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Foreclosure#on#the#chattel#mortgage#prevents#further#action#on# the# ing# real# estate# mortgage,# whether# the# chattel# mortgage# is# first# foreclosed.# Cruz' v.' Filipinas' Investment' &' Finance'Corp.'(23'SCRA'791)'

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And#vice#versa#when#the#real#estate#mortgage#is#first#foreclosed.# Borbon'II'v.'Servicewide'Specialists,'Inc.'(258'SCRA'634)' o The# Court# held# that# if# the# thirdEparty# mortgagor# is# forced#to#pay,#then#he#as#the#guarantor#will#be#allowed#

o •

to# recover# from# the# principal# debtor.# This# would# be# an# indirect#subversion#of#Article)1484.) The# action# being# barred# also# includes# extrajudicial# proceedings,#not#just#judicial#proceedings.#

The# seller# is# likewise# precluded# from# further# extrajudicially# foreclosing# on# any# additional# security# which# the# buyer# himself# has# constituted.# Ridad' v.' Filipinas' Investment' and' Finance' Corp.'(120'SCRA'246)'

# Cruz'v.'Filipinas'Investment'&'Finance'Corp.' # Facts:) Ruperto#Cruz#bought#a#bus#from#Far#East#Motor#Corp#which#was# payable# on# installments# of# P1,487.20/month# for# 30# months# with# 12%# interest.# Cruz# executed# a# promissory# note# in# the# sum# of# the# purchase#

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price.# To# secure# the# paypent# of# the# promissory# note,# Cruz# executed# a# chattel# mortgage# on# the# bus.# Since# no# downpayment# was# made,# Far# East# required# Cruz# to# execute# another# security# and# for# the# a# REM# was# executed#on#the#land#and#building#of#Mrs.#Reyes#which#at#that#time#was#

result#in#a#circumvention#of#the#law.#Should#the#guarantor#be#compelled# to#pay#the#balance#then#the#guarantor#would#be#entitled#to#recover#from# the#debtorEvendee.#In#the#end,#it#would#still#be#the#debtorEvendee#who# would#bear#the#payment#of#the#purchase#price.#Also,#the#word#“action”#

mortgaged#to#DBP.#Far#East#then#assigned#all#its#rights#and#indorsed#the# promissory# note# to# Filipinas# Investment# and# Financing# Corp.# Cruz# defaulted#in#payment#of#the#promissory#note#with#only#P500#being#ever# paid.# Filipinas# had# the# chattel# mortgage# foreclosed# and# it# was# the# highest#bidder#at#the#foreclosure#sale.#However,#the#proceeds#were#not# sufficient#to#cover#the#balance#so#it#paid#the#indebtedness#of#Mrs.#Reyes# and#requested#that#it#be#sold#at#foreclosure#sale#as#well.#Thus#Cruz#and#

in#Article#1484#covers#all#types#of#legal#demand#of#one’s#right#whether# judicial#or#extrajudicial#thus#the#barring#effect#applies#to#an#extrajudicial# foreclosure.# # Borbon'II'v.'Servicewide'Specialists,'Inc.' # Facts:# (B&B)# tly# and# severally# signed# a# promissory# note# in# favor#

Mrs.#Reyes#filed#an#action#with#the#CFI#to#have#the#REM#constituted#on# her#land#cancelled.#The#CFI#ruled#in#favor#of#Cruz#and#Reyes#finding#that# the#extrajudicial#foreclosure#barred#further#action#for#recovery#thus#the# case#at#bar.1# # Issue:#Whether#or#not#recovery#from#an#additional#security#is#included#in# the#prohibition#thus#allowing#Filipinas#to#recover#the#balance.#

Pangasinan# Auto# Mart,# Inc.# for# P122,856.00# to# be# payable# in# installments#without#need#of#notice#or#demand#with#a#Chattel#Mortgage# on#1#Brand#new#1984#Isuzu#KCD#20#Crew#Cab.#The#rights#of#Pangasinan# Auto#Mart,#Inc.#was#later#assigned#to#Filinvest#Credit#Corporation,#with# notice# to# the# defendants.# Because# the# defendants# did# not# pay# their# monthly# installments,# Filinvest# demanded# from# the# defendants# the# payment# of# their# installments# due# on# January# 29,# 1985# by# telegram.#

# Held:#YES.#Article#1484#applies.#It#has#thus#the#exercise#of#one#bars#the# exercise# of# the# others.# This# is# so# to# prevent# he# abuses# committed# in# connection#with#foreclosure#mortgages#wherein#the#mortgagees#would# seize#the#mortgaged#property#and#buying#them#at#a#very#low#price#at#the# sale#and#then#bringing#suit#for#collection#of#the#unpaid#balance#resulting# in# the# mortgagor# still# liable# to# pay# his# original# debt# plus# losing# the# property.#To#allow#Filipinas#to#recover#thru#the#additional#security#would#

Filinvest# Credit# Corporation# thereafter# assigned# all# its# rights,# interest# and# title# over# the# Promissory# Note# and# the# chattel# mortgage# to# Servicewide# Specialists,# inc.# (SSI).# The# plaintiff# attempted# to# collect# by# sending#a#demand#letter#to#the#defendants#for#them#to#pay#their#entire# obligation.# The# defendants# claim# that# what# they# intended# to# buy# from# Pangasinan# Auto# Mart# was# a# jeepney# type# Isuzu# K.# C.# Cab.# Defendants#further#claim#that#they#are#not#in#default#of#their#obligation# because# the# Pangasinan# Auto# Mart# was# first# guilty# of# not# fulfilling# its#

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obligation# in# the# contract.# The# defendants# claim# that# neither# party# incurs#delay#if#the#other#does#not#comply#with#his#obligation# #

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Issue:#Whether#or#not#the#awards#made#by#the#court#a#quo#of#liquidated# damages#and#attorney's#fees#to#private#respondent#appropriate.## # Held:# Attorney’s# fees# !# YES.# Liquidated# Damages# !# NO.# When# the#

Held:# NO.# Article# 1484# of# the# Civil# Code# applies.# These# remedies# are# alternative,# not# cumulative.# In# this# case,# the# mortgagee# chose# to# foreclose#on#the#chattel#mortgage#on#the#2#new#Ford#vehicles.#Because# they# chose# this# option,# they# may# not# anymore# have# any# further# action#

seller# assigns# his# credit# to# another# person,# the# latter# is# likewise# bound# by# the# same# law.# Accordingly,# when# the# assignee# forecloses# on# the# mortgage,# there# can# be# no# further# recovery# of# the# deficiency,# and# the# sellerEmortgagee#is#deemed#to#have#renounced#any#right#to#the#unpaid# balance.# Thus# there# must# be# no# payment# of# liquidated# damages,# however#grant#of#attorney's#fees#were#allowed.# #

to#recover#the#unpaid#balance#pursuant#to#Article#1484(3).#They#are#thus# precluded#from#having#a#recourse#against#the#additional#security#put#up# by#a#guarantor.!# # Extent#Of#The#Barring#Effect)

Ridad'v.'Filipinas'Investment'&'Finance'Corp.'

•

Eustaquio'(64'Phil.'446)' •

# Facts:# Plaintiffs# Ridad# bought# 2# brand# new# Ford# Consul# sedans.# They# executed# a# promissory# note# and# a# chattel# mortgage# on# the# two# cars# AND#another#car#AND#plaintiff’s#taxi#operation#franchise#or#certificate#of# public#convenience.#The#vendor#assigned#its#rights,#title#and#interest#to# the# promissory# note# and# chattel# mortgage# to# Filipinas# Investment# and# Finance# Corp.# The# buyers# defaulted# on# their# payment.# FIFC# foreclosed# extraEjudicially# on# the# chattel# mortgage# and# they# were# the# highest# bidder.#Another#auction#sale#was#held#at#a#later#date#for#the#remaining# properties,# including# the# taxi# franchise.# FIFC# was# again# the# highest# bidder.# It# subsequently# sold# and# conveyed# the# taxi# franchise# to# Jose# Sebastian#who#filed#with#the#PSC#for#approval#of#the#sale.#Plaintiff#then# filed#an#action#for#annulment#of#contract#and#the#subsequent#sales#with# the#CFI#of#Rizal.# ) Issue:# Whether# or# not# the# foreclosure# on# the# chattel# mortgage# was# valid.# )

All# amounts# barred# from# recovery.' Macondray' &' Co.' v.' The# original# wording# of# the# Recto# Law# contained# “any# unpaid# balance”#instead#of#“any#unpaid#balance#of#the#price.”#The#Court# has# interpreted# “any# unpaid# balance”# to# include# even# interest# on# the# principal,# attorney’s# fees,# expenses# of# collection,# and# other#costs.#Maconday'&'Co.,'Inc.'v.'Eustaqio.''(64'Phil.'446)' o Even# if# this# case# is# a# 1937# case,# it# remains# good# law,# despite# the# change# in# wording# in# what# is# now# Article# 1484# of# the# Civil# Code.# This# doctrine# was# reiterated# in# the#1969#case#of#Filipinas#Investment#&#Finance#Corp.#v.# Ridad,#infra.# # Macondray'&'Co.,'Inc.'v.'Eustaquio'

# Facts:# Macondray# sold# a# De# Soto# car# Sedan# from# Eustaquio# for# P595,# and# for# which# he# executed# a# promissory# note# where# he# undertook# to# pay# the# car# in# 12# monthly# installments,# 12%# interest# per# annum.# He# mortgaged#same#car#to#guarantee#his#note;#he#paid#the#first#installment# but#failed#to#pay#any#of#the#remaining.#So#plaintiff#brought#an#action#to#



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obtain# possession# of# the# car# AND# recover# the# balance# owing# him# (interest,#attorney's#fees,#expenses#and#costs).# # Issue:) Whether# or# not# Macondray# may# still# claim# the# interests# and#

# Facts:#The#Ridad#Spouses#purchased#a#Ford#Consul#Sedan#from#Supreme# Sales# and# Dev’t.# Corp.# Supreme# Sales# was# the# assignorEinEinterest# of#

attorney’s#fees#stipulated) # Held:) NO.# The# Recto# law# prevents# the# mortgagee# from# seizing# the# mortgaged# property,# buying# it# at# foreclosure# sale# and# then# bringing# a# suit#against#the#mortgagor#for#a#deficiency#judgment.#This#is#to#close#the# door#to#abuses#already#committed#in#connection#with#the#foreclosure#of# the#chattel#mortgages#when#sales#were#payable#in#installments.##

FILIPINAS# Investment# and# Finance.# The# car# was# worth# 13,371# of# which# 1,160#was#paid#upon#delivery,#and#the#remaining#balance#to#be#paid#in# 24#monthly#installments.#A#promissory#note#and#chattel#mortgage#were# executed# by# the# Ridad’s# to# ensure# fulfillment# of# their# obligation.# The# Ridad# Spouses# failed# to# pay# the# last# 5# installments,# which# prompted# Filipinas# to# file# a# replevin# suit# in# the# city# court# of# Manila,# or# in# the# alternative,# to# recover# the# unpaid# balance# if# delivery# could# not# be#

"All#amounts#barred#from#recovery."# "Any# unpaid# balance"# refers# to# the# deficiency# judgment# including# interest# on# principal,# attorney's# fees,# expenses# of# collection,# and# the# costs.# # Rules#On#Perverse#BuyerEMortgagor#

effected.# The# complaint# of# Filipinas# stated# that# there# was# an# unjustifiable# failure# and# refusal# of# the# Ridad# Spouses# to# surrender# the# car#for#foreclosure.#The#sheriff#was#able#to#seize#the#car#and#sell#it#in#a# public#auction.#The#Ridad#Spouses#were#declared#in#default#during#these# proceedings#due#to#their#alleged#nonEreceipt#of#summons;#and#the#order# of#default#included#an#order#to#pay#Filipinas#500#for#attorney’s#fees#and# 163# for# expenses# incurred# in# seizing# the# car.# Their# motion# to# set# aside#

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General) Rule:# The# Eustaquio# doctrine# bars# all# amounts# from# recovery#in#case#the#sellerEmortgagee#forecloses#on#the#chattel# mortgage.#

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Exception:#When#the#buyerEmortgagor#refuses#to#surrender#the# chattel# to# allow# the# seller# to# be# able# to# proceed# with# foreclosure,# the# seller# is# allowed# to# recover# expenses# and# attorney’s# fees# incurred# in# trying# to# obtain# possession# of# the# chattel.#Filipinas'Investment'&'Finance'Corp.'v.'Ridad'(30'SCRA' 564)'

# # #

Filipinas'Investment'&'Finance'Corp.'v.'Ridad'

the# order# of# default# was# denied# by# the# city# court# of# Manila,# thus# the# Ridad’s#appealed#to#the#CFI#Manila.#The#CFI#said#that#the#only#issue#to#be# resolved# was# with# regard# to# the# atty’s# fees# and# the# expenses# incurred# due# to# the# seizure# of# the# car.# It# ruled# that# Filipinas# was# entitled# to# recover# both# amounts;# for# the# seizure# of# the# car,# and# the# lowered# the# attys#fees#of#300.# # Issue:) Whether# or# not# under# Article# 1484# (the# Recto# Law)# Fiipinas# is# entitled# to# the# award# for# attorneys# fees# and# expenses# incurred# due# to# the#seizure#of#the#car.## )



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Held:) YES,#but#with#certain#qualifications.##Although#the#purpose#of#the# Recto# law# is# to# protect# the# buyers# on# installment# who# were# victimized# by# sellers# who# succeeded# in# unjustly# enriching# themselves# at# the# expense#of#the#buyers,#the#mortgagee#(seller)#is#also#entitled#protection#

with#the#rent#payments#as#the#installments#paid.#Vda.'De'Jose'v.' Barrueco'(67'Phil.'191)' o The#Court#took#judicial#notice#of#the#practice#of#vendors# of#personal#property#of#denominating#a#contract#of#sale#

against#PERVERSE#MORTGAGORS.#Perverse#mortgagors#are#those#where# after# failing# to# pay# 2# or# more# installments,# refuse# to# deliver# chattel# to# the# mortgagee# or# conceals# it# in# a# place# outside# the# reach# of# the# mortgagor.# Since# the# mortgagee# would# enforce# his# rights# through# the# means#and#within#the#limits#delineated#by#law,#the#next#step#is#to#file#an# action# for# replevin# to# recover# immediate# possession# of# the# chattel.# In# this#case,#the#necessary#expenses#should#be#borne#by#the#mortgagor.#

on#installment#as#one#of#lease#to#prevent#the#ownership# of# the# object# of# the# sale# from# ing# to# the# vendee# until# and# unless# the# price# is# fully# paid.' Elisco' Tool' Manufacturing' Corp.' v.' Court' of' Appeals' (307' SCRA' 731)'

# E.)Lease)with)Option)to)Purchase) ) Article)1485.!) The) preceding) article) shall) be) applied) to) contracts) purporting) to) be) leases) of) personal) property) with) option) to) buy,) when) the) lessor) has) deprived) the) lessee) of) the) possession) or) enjoyment) of) the) thing.) (1454dAda)) ) Article)1486.) In)the)case)referred)to)in)two)preceding)articles,)a)stipulation)that)the) installments) or) rents) paid) shall) not) be) returned) to) the) vendee) or) lessee) shall) be) valid) insofar) as) the) same) may) not) be) unconscionable) under)the)circumstances.)(n)) # •

Some#sellers#opt#to#making#contracts#in#the#form#of#leases#with# an# option# to# buy# for# a# small# consideration# at# the# end# of# the# term.# These# contracts# must# be# regarded# as# installment# sales,#

Where#a#lease#agreement#over#equipment#is#without#an#express#

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option# to# purchase,# but# nevertheless# when# a# final# demand# is# given# prior# to# suit,# the# demand# letter# indicates# clearly# it# was# within# the# option# of# the# lessee# to# fully# pay# the# balance# of# the# unpaid#rentals#and#would#be#able#to#keep#the#equipment,#then# the#real#contract#between#the#parties#was#a#sale#of#movable#on# installment# disguised# as# a# lease# agreement.# PCI' Leasing' &' Finance,'Inc.'v.'GiraffebX'Creative'Imaging,'Inc.'(527'SCRA'405)' # PCI'Leasing'&'Finance,'Inc.'v.'GiraffebX'Creative'Imaging,'Inc.' # Facts:#PCI#Leasing#and#Giraffe#entered#into#a#Lease#Agreement#whereby# PCI# Leasing# leased# several# machineries# for# a# rent# of# P116,# 878.# 21/month#for#36#months#and#P181,#362/month#for#36#months#for#a#total# of#P10,#736,#647.56.#Giraffe#paid#the#amount#of#P3,#120,#000#as#guaranty# deposit.#However#,#after#1#year#,#Giraffe#defaulted#in#its#monthlyErental# payment# obligations.# After# a# 3Emonth# default,# PCI# demanded# a# formal# payEorE#surrenderEequipment#type#but#the#demand#went#unheeded#thus# PCI#instituted#the#instant#case#and#prayed#for#the#issuance#for#the#writ# of# replevin.# The# trial# court# issued# a# writ# of# replevin.# Giraffe# filed# a# motion#to#dismiss#arguing#that#PCI#was#barred#from#pursuing#any#other#



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claim#since#the#seizure#of#the#2#leased#equipments#because#the#contract# was#in#reality#a#lease#with#option#to#buy.#The#RTC#granted#the#motion#to# dismiss#ruling#that#it#was#akin#to#a#contract#covered#by#art.#1485#hence# can#no#longer#pursue#its#claim.#Hence#the#case#at#bar.1# # Issue:) Whether# or# not# the# contract# was# covered# by# Article# 1485# and# 1484#hence#barred#PCI#from#recovering) ) Held:)YES.#The#Recto#Law#applies#because#the#contract#is#actually#a#lease# with# option# to# buy.# It# was# not# a# straight# lease# because# the# petitioner# stands#to#make#P13M++#in#a#year's#time#out#of#an#investment#of#P8.1M.# The# intention# of# the# parties# must# be# looked# into.# Also,# the# demand# letter# was# fashioned# in# the# alternative:# payment# of# the# unpaid# full# balance#OR#the#surrender#of#the#financed#asset,#suggesting#that#Giraffe# can# keep# the# equipment# if# it# exercises# its# option# to# acquire# the# same.# This#reflects#a#situation#where#a#financing#company#conceals#up#to#the# last# moment# its# intention# to# sell# the# property# in# an# attempt# to# circumvent# the# Recto# law.# Sellers# in# this# case# have# resorted# to# the# device#of#making#contracts#in#the#form#of#leases#either#with#options#to# the# buyer# to# purchase# for# a# small# consideration# at# the# end# of# term,# provided#the#soE#called#rent#has#been#duly#paid,#or#with#stipulations#that# if#the#rent#throughout#the#term#is#paid,#title#shall#thereupon#vest#in#the# lessee.# It# is# obvious# that# such# transactions# are# leases# only# in# name.# In# choosing#replevin,#PCI#now#waived#its#right#to#bring#an#action#to#recover# unpaid# rentals# on# the# leased# items.# Remedies# under# Article# 1484# are# alternative,#not#cumulative.#

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What#is#the#Barring#Effect#on#Such#Contracts?# •

Key#question:#When#the#lessor#retakes#possession#of#the#object# upon# nonEpayment,# is# this# considered# as# a# foreclosure# or# a# rescission?# o CLV#cites#a#lot#of#cases#which#show#that#the#Court#hasn’t# really#made#a#definitive#answer#to#this#question.#

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However,# CLV# says# that# the# Court# seems# to# treat# installment# sales#of#movables#which#are#structured#as#lease#with#option#to# purchase# as# equivalent# to# a# chattel# mortgage# executed# on# the# thing#itself.#

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Therefore,# when# the# purported# lessor# takes# possession# of# the# subject# matter,# it# is# treated# legally# as# a# foreclosure.# Thus,# the# barring#effect#of#foreclosure#applies.#

# III.)Remedies)in)cases)of)Immovables) ) A.)Remedies)of)Seller) ) A.1)Anticipatory)Breach) ) Article)1591.) Should) the) vendor) have) reasonable) grounds) to) fear) the) loss) of) immovable)property)sold)and)its)price,)he)may)immediately)sue)for)the) rescission)of)the)sale.) ) Should) such) ground) not) exist,) the) provisions) of) Article) 1191) shall) be) observed.)(1503)) ) )



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A.2.)Failure)of)Buyer)to)Pay)Price) ) Article)1592.) In) the) sale) of) immovable) property,) even) though) it) may) have) been)

because#the#lots#were#under#water/#no#improvements#he#so#it#could#not# be#delivered#to#him.# # Issue:)Whether#or#not#the#claim#of#Hermanos#Legarda#be#upheld,#as#he#

stipulated)that)upon)failure)to)pay)the)price)at)the)time)agreed)upon) the)rescission)of)the)contract)shall)of)right)take)place,)the)vendee)may) pay,)even)after)the)expiration)of)the)period,)as)long)as)no)demand)for) rescission)of)the)contract)has)been)made)upon)him)either)judicially)or) by) a) notarial) act.) After) the) demand,) the) court) may) not) grant) him) a) new)term.)(1504a)) )

claims#that#the#payment#should#be#considered#as#rent#and#that#the#sale# should#be#cancelled.) ) Held:) NO.# The# total# amount# paid# as# principal# amounted# to# P1,682.23# more# than# the# amount# of# one# lot.# Therefore,# it# is# just# and# fair# in# accordance#with#law#and#equity#to#consider#one#lot#as#fully#paid.#There# was# already# substantial# performance.# Under# Article# 1234,# if# the#

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The#Court#has#tended#to#interpret#Article)1592#liberally#in#favor# of# the# buyer# to# give# him# every# opportunity# to# comply# with# his# obligation#and#proceed#to#take#the#subject#immovable.#

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Article) 1592#only#covers#contracts#of#sale.#Contracts#to#sell#are#

obligation# has# been# substantially# performed# in# good# faith,# the# obligor# may#recover#as#though#there#had#been#a#strict#and#complete#fulfillment,# less#damages#suffered#by#the#obligee.# # B.)Remedies)of)Buyer) ) B.1.)Suspension)of)Payment)

not#covered.# •

The# Court# has# also# resorted# to# equitable# resolutions# in# the# application# of# Article) 1592.# Such# was# the# case# in# Legarda' Hermanos&v.&Saldaña'(55'SCRA'324).'

# Legarda'Hermanos'v.'Saldaña' # Facts:#Saldana#bought#two#lots#from#Legarda#for#P1,500#each,#payable#in#

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See#Article)1590)

) B.2.)In)Case)of)Subdivision)or)Condominium)Projects) •

10#years,#divided#into#120#equal#monthly#installments#with#10%#interest# per# annum.# Saldana# paid# for# 8# continuous# years# about# 95# monthly# installments# total# P3,# 582# (P1.8K# interest,# 1.6K# applied# to# principal),# then#he#stopped#payment.#Trial#Court#upheld#cancellation#of#contract#to# sell,#Court#of#Appeals#reversed#saying#that#Saldana#suspended#payment#


Presidential) Decree) No.) 957# is# known# as# The# Subdivision# and# Condominium#Buyers’#Protective#Decree.# o This#decree#was#issued#in#the#wake#of#numerous#reports# that# subdivision# and# condominium# developers# had# reneged# on# their# representations# and# obligation# to# provide# subdivision# roads,# drainage,# sewerage,# water# systems,# lighting# system,# etc.# Casa' Filipinas' Realty' Corp.'v.'Office'of'the'President'(241'SCRA'165)'


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Section)20.)Time)of)Completion.) Every) owner) or) developer) shall) construct) and) provide) the) facilities,) improvements,) infrastructures) and) other) forms) of) development,) including) water) supply) and) lighting) facilities,) which) are) offered) and) indicated) in) the) approved) subdivision) or) condominium) plans,) brochures,) prospectus,) printed) matters,) letters) or) in) any) form) of) ment,) within) one) year) from) the) date) of) the) issuance) of) the) license) for) the) subdivision) or) condominium) project) or) such) other) period)of)time)as)may)be)fixed)by)the)Authority.) ) Section)23.)NondForfeiture)of)Payments.) No) installment) payment) made) by) a) buyer) in) a) subdivision) or) condominium)project)for)the)lot)or)unit)he)contracted)to)buy)shall)be) forfeited)in)favor)of)the)owner)or)developer)when)the)buyer,)after)due) notice)to)the)owner)or)developer,)desists)from)further)payment)due)to) the) failure) of) the) owner) or) developer) to) develop) the) subdivision) or) condominium)project)according)to)the)approved)plans)and)within)the) time)limit)for)complying)with)the)same.)Such)buyer)may,)at)his)option,)

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“Buyer”) under) P.D.) 957# would# include# one# who# acquires# for# a#

In#case#the#seller#fails#to#comply#with#his#obligations#in#Section) 20)of)P.D.)957,#the#buyer#has#two#options:#Relucio'v.'Brillanteb Griffin'(187'SCRA'405)' 1. Demand#reimbursement#of#the#amount#paid.# 2. Wait# for# further# development# of# the# subdivision# or# condominium.# In# this# case,# the# buyer# may# suspend# payment# until# the# seller# fulfills# his# obligations.# He# may# not# be# ousted# from# the# subdivision.# Tamayo' v.' Huang' (480'SCRA'156).#

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Section# 23# does# not# require# that# a# notice# be# given# first# by# the# buyer#to#the#seller#before#a#demand#for#refund#can#be#made#as# the# notice# and# demand# can# be# made# in# the# same# letter# or# communication.# Casa' Filipinas' Realty' Corp' v.' Office' of' the' President'(241'SCRA'165)' o Buyer#required#only#to#give#due#notice#to#the#owner#or# developer#of#the#buyer’s#intention#to#suspend#payment.' Zamora'Realty'and'Dev.'Corp.'v.'Office'of'the'President' (506'SCRA'591)'

Section) 20) of) P.D.) 957# directs# every# owner# and# developer# of# real#property#to#provide#the#necessary#facilities,#improvements,# infrastructure#and#other#forms#of#development,#failure#to#carry# out#which#is#sufficient#cause#for#the#buyer#to#suspend#payment,# and# any# sums# of# money# already# paid# shall# not# be# forfeited.# Tamayo'v.'Huang'(480'SCRA'156)'


valuable# consideration# a# condominium# unit# by# way# of# assignment# by# the# condominium# project# owner# in# payment# of# its# indebtedness# for# contractor’s# fee.' AMA' Computer' College,' Inc.'v.'Factora'(378'SCRA'121)'

be)reimbursed)the)total)amount)paid)including)amortization)interests) but)excluding)delinquency)interests,)with)interest)thereon)at)the)legal) rate.) ) •

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The# buyer# has# the# right# to# compel# the# seller# to# complete# the# roads# and# other# facilities# on# the# subdivisioin,# even# if# it# wasn’t# stipulated# in# the# sale.# The# seller# cannot# shift# to# the# buyer# the# burden#of#providing#for#access#to#and#from#the#subdivision.#Lim' v.'Delos'Santos'(8'SCRA'798);'Consing'v.'Court'of'Appeals'(177' SCRA'14)'

SALES%REVIEWER%(2013/2014)% % o o

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If# the# seller# defaults,# the# buyer# should# be# entitled# to# a# proportionate#reduction#in#the#purchase#price.# Under#P.D.#No.#957,#a#buyer#cause#of#action#against#the# developer# for# failure# to# develop# ripens# only# when# the# developer# fails# to# complete# the# project# on# the# lapse# of# the#completion#period#stated#on#the#sale#contract#or#the# developer’s# Licenses# to# Sell.# Any# demand# prior# to# the# indicated# completion# date# would# be# premature.# G.G.' Sportwear' Mfg.' Corp.' v.' World' Class' Properties,' Inc.' (614'SCRA'75)'

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Buyers# of# condominium# units# would# be# justified# in# suspending#

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The#dissatisfaction#of#the#buyer#under#a#Contract#of#Sale# as#to#the#completion#date#of#the#project#does#not#itself# constitute# substantial# breach# as# to# authorize# the# buyer# to# rescind# the# contract# and# ask# for# refund# of# the# amounts#paid#to#the#seller.' G.G.' Sportwear' Mfg.' Corp.' v.'World'Class'Properties,'Inc.'(614'SCRA'75)'


Since#the#lots#are#involved#in#litigation#and#there#is#a#notice#of#lis# pendens# at# the# back# of# the# titles# involved,# the# subdivision# developer#have#to#be#given#a#reasonable#period#of#time#to#work# on#the#adverse#claims#and#deliver#clean#titles#to#the#buyer,#and# should# the# former# fail# to# deliver# clean# titles# at# the# end# of# the# period,# it# ought# to# reimburse# the# buyers# not# only# for# the# purchase#price#of#the#subdivision#lots#sold#to#them#but#also#the# incremental# value# arising# from# the# appreciation# of# the# lots.# Cantemprate'v.'CRS'Realty'Dev.'Corp.'(587'SCRA'492)'

' Notice#Required#Under#Section#23#Of#P.D.#957#

payments,# when# the# developerEseller# fails# to# give# them# a# copy# of# the# Contract# to# Sell# despite# repeated# demands.# Gold' Loop' Properties,'Inc.'v.'Court'of'Appeals'(350'SCRA'371)' o However,# when# the# Reservation# Agreement# provides# that#the#buyer#shall#be#entitled#to#a#Contract#to#Sell#only# upon# its# payment# of# at# least# 30%# of# the# total# contract# price,#the#nonEhappening#yet#of#that#condition#does#not# render#the#seller#in#default#as#to#warrant#the#buyer#the# right# to# rescind# the# sale# and# demand# a# refund.# G.G.' Sportwear' Mfg.' Corp.' v.' World' Class' Properties,' Inc.' (614'SCRA'75)'

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Nothing#in#P.D.)957#provides#for#the#nullification#of#a#contract#to# sell#in#the#event#the#seller,#at#the#time#the#contract#was#entered# into,#did#not#possess#a#certificate#of#registration#or#a#license#to# sell,# sale# being# a# consensual# contract.' Co' Chien' v.' Sta.' Lucia' Realty'(513'SCRA'570)'

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The# lack# of# Certificate# of# Registration# or# the# License# to# Sell# of# the# developerEseller# merely# subjects# the# developer# to# istrative#sanctions,#but#do#not#render#the#contracts#to#sell# entered#into#on#the#project#null#and#void.'G.G.'Sportwear'Mfg.' Corp.'v.'World'Class'Properties,'Inc.'(614'SCRA'75)'

' Retroactive#Application#Of#P.D.#957# •

# # #


P.D.)957#may#be#applied#retroactively#since#it#is#the#intent#of#the# law# as# shown# from# its# preamble.# It# is# an# instrument# of# social# justice.#Eugenio'v.'Drilon'(252'SCRA'106)'


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B.3.)Right)to)Grace)Period)Stipulated) •

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When# a# grace# period# is# provided# for# in# the# contract# of# sale,# it#

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C.)MACEDA)LAW:)Sales)of)Real)Estate)on)Installments)

real# estate# on# installment# basis# against# onerous# and# oppressive# conditions,# and# seeks# to# address# the# acute# housing# shortage# problem# in# our# country# that# has# prompted# thousands# of# middle# and# lower# class# buyers# of#houses,#lots#and#condominium#units#to#enter#into#all# sorts# of# contracts# with# private# housing# developers# involving# installment# schemes.# Active' Realty' &' Dev.'

Republic) Act) No.) 6552# is# known# as# the# “Realty# Installment# Buyer#Protection#Act.”# o So#long#as#the#parties’#stipulation#do#not#contradict#the# Maceda#Law,#then#their#stipulations#would#be#valid.# " Example:#Acceleration#Clause# “The# contract# for# the# purchase# of# a# piece# of# land# on# installment# basis# is# not# only# lawful;# it# is# also# of# widespread#usage#or#custom#in#our#economic#system…If# [buyer]# eventually# found# the# interest# stipulation# in# the# contract# financially# disadvantageous# to# him,# he# cannot#

Corp.'Daroya'(382'SCRA'152)' •

now#turn#to#this#Court#for#succor#without#impairing#the# constitutional# right# to# the# obligation# of# contracts.# This# Court# will# not# relieve# petitioner# of# the# necessary# consequences# of# his# free# and# voluntary,# and# otherwise# lawful,#act.”#Bortikey'v.'AFP'Retirement'and'Separation' Benefits'System'(477'SCRA'511)'

Maceda# Law# recognizes# in# conditional# sales# of# all# kinds# of# real# estate#seller’s#right#to#cancel#the#contract#upon#nonEpayment#of# an# installment# by# the# buyer,# which# is# simply# an# event# that# prevents# the# obligation# of# the# vendor# to# convey# title# from# acquiring# binding# force.# Pagtulunan' v.' Dela' Cruz' Vda.' De' Manzano'(533'SCRA'242)'

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At# times,# the# Court# has# also# applied# the# Maceda# Law# retroactively.# Siska' Dev.' Corp.' v.' Office' of' the' President' (231' SCRA'674)' o However,# the# law# itself# does# not# expressly# provide# for# retroactive#application.'

# # # #

It# declared# a# public# policy# to# protect# buyers# of# real# estate# on# installment# payments# against# onerous# and# oppressive# conditions.#(Section)2,)R.A.)6552)# o The# courts# have# used# the# Maceda# Law# as# a# policy# statement# of# the# State# in# protecting# the# interests# of# buyers#of#residential#real#estate#on#installments.## o Maceda# Law’s# declared# policy# is# to# protect# buyers# of#

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C.1.)Role)Of)Maceda)Law)

should#be#construed#as#a#right,#not#an#obligation#of#the#debtor,# and# when# unconditionally# conferred,# the# grace# period# is# effective#without#further#need#of#demand#either#calling#for#the# payment# of# the# obligation# or# for# honoring# the# right.#Bricktown' Dev.'Corp.'v.'Amor'Tierra'Dev.'Corp.'(239'SCRA'126)'

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C.2.)Transactions)Covered) •

The# sale# of# large# tracts# of# land# (69,028# square# meters)# do# not# constitute# residential# real# estate# within# the# contemplation# of# the# Maceda# Law.# Garcia' v.' Court' of' Appeals'(619'SCRA'280)'

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It#also#covers#the#financing#of#real#estate#on#installment.#

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The#Maceda#Law#also#covers#contracts#to#sell.#This#is#evidenced# by#the#use#of#the#word#“cancellation”#in#the#law#itself.# o

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Maceda# Law# finds# no# application# to# a# contract# to# sell# where# the# suspensive# condition# has# not# been# fulfilled,# because# said# Law# presuppose# the# existence# of# a# valid# and#effective#contract#to#sell#a#condominium.#Mortel'v.' KASSCO,'Inc.'(348'SCRA'391,'398)'

Venture'Corp.'v.'Sendino'(233'SCRA'665)' •

The# Maceda# Law# uses# the# same# definition# of# “sale# on# installment”#as#the#Recto#Law.#

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Includes#subdivisions,#condominiums#and#those#under#P.D.)957#

# C.3.)Transactions)Excluded)From)Coverage) •

list#–#are#to#be#considered#as#excluded#because#they#are#not# within#the#clearly#expressed#coverage.# •

The# following# transactions# are# excluded# from# coverage# of# the# Maceda#Law:#(Court#of#Appeals)# 1. Sales#covering#industrial#lots#

The# Maceda# Law# Cannot# be# invoked# by# the# Highest# Bidder# in# Foreclosure#Proceedings# o o

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Such# person# is# not# the# real# party# to# the# original# installment#sales.# He# does# not# have# any# rights# promoted# under# the# Maceda#Law.#

Maceda#Law#has#no#application#to#protect#the#developer#or#one# who# succeeds# the# developer.# Lagandaon' v.' Court' of' Appeals' (290'SCRA'463)'

Maceda#Law#makes#no#distinctions#between#“option”#and#“sale”# which#under#P.D.#957#also#includes#“an#exchange#or#attempt#to# sell,#an#option#of#sale#or#purchase,#a#solicitation#of#a#sale#or#an# offer# to# sell# directly,”# and# the# allEembracing# definition# virtually# includes# all# transactions# concerning# land# and# housing# acquisition,#including#reservation#agreements.#Realty' Exchange'


2. Sales#covering#commercial#buildings#and#lots# 3. Sales#to#tenants#under#agrarian#reform#laws# Note:# This# enumeration# is# not# exclusive# since# other# transactions#involving#immovable#–#although#not#within#the#

It#covers#primarily#residential#real#estate#bought#on#installment.# o

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# C.4.)Rights)Granted) •

When# the# buyer# has# paid# at# least# 2# years# of# installment# (See# formula#to#compute#installment#mode)#

# Section)3.) In) all) transactions) or) contracts) involving) the) sale) or) financing) of) real) estate) on) installment) payments,) including) residential) condominium) apartments) but) excluding) industrial) lots,) commercial) buildings) and) sales) to) tenants) under) RA) 3844,) as) amended) by) RA) 6389,) where) the) buyer)has)paid)at)least)two)years)of)installments,)the)buyer)is)entitled) to) the) following) rights) in) case) he) defaults) in) the) payment) of) succeeding)installments:) )



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(a)) To) pay,) without) additional) interest,) the) unpaid) installments) due) within) the) total) grace) period) earned) by) him) which) is) hereby) fixed) at) the) rate) of) one) (1)) month) grace) period) for) every) one) (1)) year) of) installment) payments) made:) Provided,) That) this) right) shall) be) exercised) by) the) buyer) only) once) in) every) five) (5)) years) of) the) life) of) the)contract)and)its)extensions,)if)any.) ) (b))If)the)contract)is)cancelled,)the)seller)shall)refund)to)the)buyer)the) cash) surrender) value) of) the) payments) on) the) property) equivalent) to) fifty) per) cent) (50%)) of) the) total) payments) made,) and,) after) five) (5)) years) of) installments,) an) additional) five) per) cent) (5%)) every) year) but)

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The# cancellation# of# the# contract# under# the# Maceda# Law# must# follow#the#following#steps:#(GNR)#

short#of#a#notarial#act,#would#not#suffice.#McLaughlin'v.' Court'of'Appeals'(144'SCRA'693).# 3. Third,#for#contracts#covering#more#than#two#(2)#years#of# payments,# there# must# be# return# to# the# buyer# of# the# cash#surrender#value.#Villdara,' Jr.' v.' Zabala' (545' SCRA' 325).# •

The#right#to#make#sure#of#the#grace#period#can#be#exercised#by#

The# additional# formality# of# a# demand# on# [the# seller’s]# part# for# rescission#by#notarial#act#would#be#unnecessary#since#the#seller# therein# filed# an# action# for# annulment# of# contract,# which# is# a# kindred#concept#of#rescission#by#notarial#act.#Layug'v.'IAC'(167' SCRA'627)'

It#is#only#this#grace#period#that#cannot#be#used#when#the#buyer# defaulted# prior# to# the# 5# years.# However,# the# seller# must# still# comply#with#all#the#requirements#for#rescission.#

Example:# Debtor# defaulted# in# the# second# year,# then# made#good#with#all#his#payments.#On#the#fifth#year,#he# defaulted# again.# Debtor# is# not# entitled# to# the# grace# period,#but#is#still#entitled#to#notice#by#notarial#act.#

1. First,#the#seller#should#extend#the#buyer#a#grace#period# of# at# least# sixty# (60)# days# from# the# due# date# of# the# installments.# 2. Second,# at# the# end# of# the# grace# period,# the# seller# shall# furnish# the# buyer# with# a# notarial# notice# of# cancellation# or#demand#for#rescission,#effective#thirty#(30)#days#from# the# buyer’s# receipt# thereof;# a# mere# notice# or# letter,#

the# buyer# only# once# every# five# (5)# years# of# the# life# of# the# contract#and#its#extensions,#if#any.# •


# How#Cancellation#Of#Contract#Can#Be#Effected#

not) to) exceed) ninety) per) cent) (90%)) of) the) total) payments) made:) Provided,)That)the)actual)cancellation)of)the)contract)shall)take)place) after) thirty) (30)) days) from) receipt) by) the) buyer) of) the) notice) of) cancellation)or)the)demand)for)rescission)of)the)contract)by)a)notarial) act)and)upon)full)payment)of)the)cash)surrender)value)to)the)buyer.) ) Down)payments,)deposits)or)options)on)the)contract)shall)be)included) in) the) computation) of) the) total) number) of) installment) payments) made.) ) Exercise#Of#Grace#Period#

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A# decision# rendered# in# an# ejectment# case# operated# as# the# required#notice#of#cancellation#under#the#Maceda#Law.#Leaño&v.& Court'of'Appeals'(369'SCRA'36)'


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A# formal# letter# demand# upon# buyer# to# vacate# the# premises# is# not# the# same# as# the# notice# of# cancellation# or# demand# for# rescission#by#a#notarial#act#required#by#R.A.)No.)6552.#Evidently,# the# case# of# unlawful# detainer# filed# by# petitioner# does# not# exempt# him# from# complying# with# the# said# requirement.# Pagtulungan'v.'Dela'Cruz'Vda.'De'Manzano'(533'SCRA'242)'

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Where#the#buyers#under#a#contract#to#sell#offers#to#pay#the#last# installment#a#year#and#a#half#after#the#stipulated#date,#that#was# beyond# the# sixtyEday# grace# period# under# Section) 4) of# the# Maceda# Law.# The# buyers# cannot# use# the# second# sentence# of# Section)4)of#the#Maceda#Law#against#the#sellers’#alleged#failure# to# give# an# effective# notice# of# cancellation# or# demand# for# rescission# because# the# sellers# merely# sent# the# notice# to# the# address#supplied#by#the#buyers#in#the#Contract#to#Sell.#Garcia'v.' Court'of'Appeals'(619'SCRA'280)'

# Garcia'v.'Court'of'Appeals' # Facts:#A#contract#to#sell#was#entered#into#between#seller#Dela#Cruz#and#

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Held:# NO.# Maceda# law# inapplicable# since# the# said# law# applies# to# contracts# of# real# estate# on# installment# payments,# example:# condominium.# Subject# lands# are# not# residential# real# estate# within# the# contemplation#of#the#Maceda#Law.#Even#if#it#did#apply,#offer#of#payment# was#made#beyond#the#60Eday#grace#period.# # When#The#Buyer#Has#Paid#Less#Than#2#Years#Of#Installments# ) Section)4.) In) case) where) less) than) two) (2)) years) of) installments) were) paid,) the) seller)shall)give)the)buyer)a)grace)period)of)not)less)than)sixty)(60))days) from)the)date)the)installment)became)due.) ) If) the) buyer) fails) to) pay) the) installments) due) at) the) expiration) of) the) grace) period,) the) seller) may) cancel) the) contract) after) thirty) (30)) days) from)receipt)by)the)buyer)of)the)notice)of)cancellation)or)the)demand) for)rescission)of)the)contract)by)a)notarial)act.) ) Formula#to#Compute#the#Installment#Mode#

the#Spouses#Garcia#and#Spouses#Galvez,#downpayment#was#made,#and# the#rest#was#payable#in#3#installments.#The#last#installment#was#not#paid.# In#the#contract#it#said#that#failure#to#comply#with#the##of#payment# would#cause#rescission,#and#possession#shall#be#retained#until#a#deed#of# absolute#sale#is#executed#by#the#buyers.#Deed#of#Absolute#Sale#shall#be# executed#upon#full#payment.# #

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The# proper# formula# to# apply# in# determining# how# many# installments#have#been#made#is#to#include#any#payment#made#as# downpayment# or# reservation# fee# as# part# of# the# installments# made,# and# then# divide# them# by# the# stipulated# mode# of# payment,# i.e.,# whether# it# is# monthly,# quarterly,# semiEannual# or# annual.#Jestra'Dev.'&'Mgt.'Corp'v.'Pacifico'(513'SCRA'413)' o Atty.#Santiago#!#it’s#the#overEall#amount#you#have#paid# visEàEvis#the#amount#due.#This#is#not#necessarily#2Eyears# of#monthly#installments.'

Issue:)Whether#or#not#the#Maceda#Law#applies.# ) # #



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# Facts:# Daniel# Pacifico# signed# a# Reservation# application# with# FilEEstate# Marketing# Assn# for# the# purchase# of# a# house# nad# lot# and# paid# the#

annually,# semiEannually). 1 #Since# after# applying# this# formula,# Pacifico# failed# to# pay# at# least# 2# years# of# installments,# he# is# not# entitled# to# a# refund# of# the# cash# surrender# value# of# his# payments.# Section# 4# is# applicable.# The# cancellation# is# a# 2Estep# process:# (1)# The# seller# should#

reservation# fee.# The# Reservation# application# contained# the# amounts# to# be# paid# in# installments# with# interests.# Unable# to# comply# with# the# schedule# of# payments,# Pacifico# requested# Jestra# to# allow# him# to# make# periodic# payments# which# the# latter# granted.# They# later# on# executed# a# contract# to# sell# when# the# remaining# balance# was# only# P260K.# Pacifico# requested# twice# for# a# restructuring# of# his# unsettled# obligation# which# Jestra#granted#subject#to#certain#conditions#of#additional#penalties#et#al.#

extend#the#buyer#a#grace#period#of#at#least#60#days#from#the#due#date#of# the# installment;# (2)# At# the# end# of# the# grace# period,# the# seller# shall# furnish#the#buyer#with#a#notice#of#cancellation#or#demand#for#rescission# through# a# notarial# act,# effective# 30# days# from# the# buyer's# receipt# thereof.#Despite#the#notice#of#dishonor,#Pacifico#took#no#action#and#60# days#had#lapsed.# #

As# compliance# to# the# condition,# Pacifico# issued# 12# postE# dated# checks# however# he# is# unable# to# pay# so# he# requested# that# he# be# allowed# to# dispose#the#property#to#recover#his#interest#and#he#could#recover#the#12# post#dated#checks,#which#was#this#time#was#denied#by#Jestra.#Jestra#then# sent# a# notarial# notice# of# cancellation# that# they# are# giving# him# until# a# certain#date#to#pay#or#else#the#contract#will#be#automatically#cancelled.# Pacifico# then# filed# a# complaint# before# the# HLURB# claiming# that# despite#

D.)Interpretation)of)Grace)Period)and)Mode)of)Cancellation)

Jestra'Dev.'Mgt.'Corp'v.'Pacifico'

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The# ruling# in# McLaughlin' v.' Court' of' Appeals' (144' SCRA' 693)# provides#for#2#doctrines#applicable#to#the#Maceda#Law:# 1. Although# the# law# seem# to# require# rescission# and# cancellation# to# be# both# by# notarial# act,# McLaughlin& would# hold# that# notarial# act# as# merely# applicable# to# rescission#where#as#“notice#of#cancellation”#need#not#be# by#notarial#act.# 2. McLaughlin#would#hold#that#even#after#the#expiration#of# the#grace#period#provided#by#the#Law,#the#buyer#still#can# prevent#rescission#or#cancellation#of#the#contract,#within#

his#full#payment#of#the#downpayment,#Jestra#failed#to#deliver#to#him#the# property#and#instead#sold#it#to#another#buyer.#HRLURB#Arbiter#decided# in#Pacifico’s#favor#finding#Jestra#liable.# # Issue:)Whether#or#not#Pacifico#has#paid#at#least#2#years#of#installments.# # Held:# NO.# The# proper# formula# to# apply# in# determining# how# many# installments#have#been#made#is#to#include#any#payment#made#as#down#

the#30Eday#period#when#rescission#and#cancellation#is#to# take#effect.# " This# is# the# 30Eday# grace# period# between# the# expiration#of#the#statutory#grace#period#and#the# actual# cancellation# of# the# contract.# Under# this#

payment#OR#reservation#fee#as#part#of#the#installments#made,#and#then# to# divide# the# stipulated# mode# of# payment# (i.e.# monthly,# quarterly,#

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#p.419.#Sales#Book.#



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period,# interest# must# already# be# paid.# Any# cancellation#within#this#30Eday#period#is#invalid.# •

The# ruling# in# McLaughlin' v.' Court' of' Appeals' (144' SCRA' 693)# provides#for#2#grace#periods:# 1. The# 60Eday# period# provided# by# law# before# a# notice# of# cancellation#is#served#to#the#buyer# a. Statutory#Grace#Period#!#availment#of#the#right# to# update# installment# payments# is# without# interest# and# penalties,# even# when# such# are# stipulated#in#the#parties’#contract.# 2. The# before# rescission# or# cancellation# actually# takes# place.# a. Period# prior# to# the# effectivity# of# rescission# or# cancellation;#Jurisprudential#grace#period#!#the# buyer# would# be# liable# for# and# would# have# to# include#in#his#payments#the#stipulated#interests# and#penalties#incurred.#

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Actual# cancellation# occurs# 30# days# after# the# notice# of# cancellation#or#demand#for#rescission#is#received#by#the#buyer.# o

However,# if# the# seller# does# not# refund# the# buyer# pursuant#to#Section)3(b))of#the)Maceda)Law,#rescission# or#cancellation#will#not#take#place#despite#the#effectivity# of#the#notice#of#cancellation.#Leaño&v.&Court'of'Appeals' (369'SCRA'36)'

' McLaughlin'v.'Court'of'Appeals' # Facts:#A#contract#of#conditional#sale#payable#in#installments#was#entered# into# by# McLaughlin# and# Flores.# Due# to# the# latter's# failure# to# pay# the#

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balance,#a#complaint#for#rescission#was#filed#in#court.#Parties#submitted# a#Compromise#Agreement#which#had#a#stipulation#that#in#case#of#failure# to# comply,# McLaughlin# is# entitled# to# a# writ# of# execution# rescinding# the# Deed#of#Conditional#Sale#of#Real#Property#and#Flores#waives#his#right#to# appeal.# Also,# in# case# of# rescission# all# payments# made# by# Flores# will# be# forfeited# in# favor# of# Flores.# On# October# 15,# 1980,# petitioner# wrote# to# Flores#demanding#payment#of#the#balance#on#or#before#October#31.#

! On#November#7,#petitioner#filed#a#motion#for#writ#of#execution#alleging# that# Flores# failed# to# pay# the# installment# due# on# June# 1980# and# also# failed# to# pay# the# monthly# rentals# from# that# date.# She# prayed# that# the# deed# of# conditional# sale# be# rescinded# with# forfeiture# of# all# payments# and# payment# of# the# monthly# rentals# and# eviction# of# Flores.# The# trial# court#granted#the#motion.# # On#November#17,#Flores#filed#a#motion#for#reconsideration#tendering#at# the# same# time# a# certified# manager’s# check# payable# to# petitioner# and# covering#the#entire#obligation#including#the#December#1980#installment.# The#trial#court#denied#the#motion.# # On# appeal,# the# CA# ruled# in# favor# of# Flores# holding# that# the# delay# in# payment# was# not# a# violation# of# an# essential# condition# which# would# warrant# a# rescission# since# On# November# 17# or# just# 17# days# from# the# October# 31# deadline# set# by# petitioner,# Flores# tendered# the# certified# manager’s#check#and#that#it#was#inequitable#for#Flores#to#forfeit#all#the# payments#made#(P101,550).# # Issue:) Whether# or# not# it# is# inequitable# to# cancel# the# contract# and# to# have# the# amount# paid# by# Flores# be# forfeited# to# petitioner# particularly#



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after#Flores#had#tendered#the#certified#manager’s#check#in#full#payment# of#the#obligation.## ) Held:) YES.# There# is# already# substantial# compliance# by# Flores# with# the#

the# payment# of# his# obligation# because# of# his# failure# to# deposit# the# amount.# # Requirements#For#A#Valid#And#Effective#Cancellation#Under#The#Maceda#

compromise#agreement.#More#importantly,#the#Maceda#law#recognizes# the# vendor’s# right# to# cancel# the# contract# to# sell# upon# the# breach# and# nonpayment# of# the# stipulated# installments# but# requires# a# grace# period# after#at#least#2#years#of#regular#installment#payments.# # But#in#cases#where#less#than#2#years#of#installments#were#paid,#the#seller# shall# give# the# buyer# a# grace# period# of# not# less# than# 60# days# from# the#

Law# 1. Notarial#act#of#rescission#(notice).# 2. The#seller#must#refund#to#the#buyer#the#cash#surrender#value#of# the#payments#on#the#property.# ) E.)Other)Rights)Granted)to)Buyer) )

date# the# installment# became# due.# If# the# buyer# fails# to# pay# the# installments# due# at# the# expiration# of# the# grace# period,# the# seller# may# cancel# the# contract# after# 30# days# from# the# receipt# by# the# buyer# of# the# notice# of# the# cancellation# or# the# demand# for# rescission# of# the# contract# by# a# notarial# act.# Assuming# that# under# the# # of# agreement# the# December# 31# installment# was# due# when# on# October# 15# petitioner# demanded#payment#of#the#balance#on#or#before#October#31,#petitioner#

Section)5.) Under)Section)3)and)4,)the)buyer)shall)have)the)right)to)sell)his)rights) or) assign) the) same) to) another) person) or) to) reinstate) the) contract) by) updating) the) ) during) the) grace) period) and) before) actual) cancellation) of) the) contract.) The) deed) of) sale) or) assignment) shall) be) done)by)notarial)act.) )

could#cancel#the#contract#after#30#days#from#the#receipt#by#Flores#of#the# notice# of# cancellation.# Considering# petitioner’s# motion# for# execution# filed#on#November#7#as#a#notice#of#cancellation,#petitioner#could#cancel# the#contract#after#30#days#from#the#receipt#by#Flores#of#said#motion.# # Flores’#tender#of#payment#together#with#his#motion#for#reconsideration# on#November#17#was#well#within#the#30#day#period#granted#by#law.#The# tender#made#by#Flores#of#a#certified#bank#manager’s#check#was#a#valid# tender# of# payment.# It# covered# the# full# amount# of# the# obligation.# However,# although# he# had# made# a# valid# tender# of# payment# which# preserved#his#rights#as#a#vendee,#he#did#not#follow#it#with#consignation# or# deposit# of# the# sum# due# with# the# court.# Hence# he# remains# liable# for#

•

When#the#debtor#has#made#current#his#payment#!#the#contract# cannot#be#rescinded.)

•

Assignment# or# Selling# !# so# long# as# the# contract# has# not# been# cancelled,# the# debtor# may# sell# or# assign# his# rights.# The# subsequent# buyer# or# assignee# may# then# take# over# the# payments.)

) Section)6.) The)buyer)shall)have)the)right)to)pay)in)advance)any)installment)or)the) full) unpaid) balance) of) the) purchase) price) any) time) without) interest)



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and)to)have)such)full)payment)of)the)purchase)price)annotated)in)the) certificate)of)title)covering)the)property.) ) •

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of# the# balance# of# the# purchase# price# before# the# trial# court# operates# as# full# payment.# Province' of' Cebu' v.' Heirs' of' Rufina' Morales'(546'SCRA'315)'

Section) 6# render# nugatory# all# provisions# in# loan# agreements#

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Automatic#rescission#clauses#are#not#valid#nor#can#be#given#legal#

covering# the# financing# of# residential# real# estate# and# condominium# units# whereby# any# payment# ahead# of# the# schedule#amortization#was#met#with#a#penalty#clause.)

effect#under#Articles#1191)and)1592.#Iringan'v.'Court'of'Appeals' (366'SCRA'41)' o Indeed,#rescission#requires#under#the#law#a#positive#act# of# choice# on# the# party# of# the# nonEdefaulting# party.#

F.)Effect)of)Contrary)Stipulation) ) Section)7.) Any)stipulation)in)any)contract)hereafter)entered)into)contrary)to)the) provisions)of)Sections)3,)4,)5)and)6,)shall)be)null)and)void.) ) G.)Maceda)Law)Cannot)Be)Availed)of)by)Developer)

Olympia# Housing' v.' Panasiatic' Travel' Corp.' (395' SCRA' 298)'

)

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The#Maceda#Law#is#aimed#at#protecting#the#buyers#of#real#estate# on#installment#payments.#One#who#buys#the#development#from# the#developer#and#then#becomes#his#successorEinEinterest#is#not# covered#by#the#law.#Lagandoan' v.' Court' of' Appeals' (290' SCRA'

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fails# to# invoke# judicially# or# by# notarial# act# the# resolution# of# a# contract# of# sale# would# be# prevented# from# blocking# the# consummation# of# the# same# in# light# of# the# precept# that# mere# failure# to# fulfill# the# contract# does# not# operate# ipso# facto# as# rescission.#Platinum'Plans'Phil.,'Inc.'v.'Cucueco'(488'SCRA'156)' # V.)Cancellation)of)Judicial)Sale)

330)'

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# IV.)Rescission)on)Sales)of)NondResidential)Immovables)on)Installments) •

Pertinent#provisions:#Article)1191#and#Article)1592.#

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Articles)1191#and#1592#on#rescission#cannot#apply#to#a#contract# to#sell#since#“there#can#be#no#rescission#of#an#obligation#that#is# still# nonEexistent,# the# suspensive# condition# not# having# happened.”#Valarao'v.'Court'of'Appeals'(304'SCRA'155)#

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Vendor# cannot# recover# ownership# of# the# thing# sold# until# and# unless#the#contract#itself#is#resolved#and#set#aside;#a#party#who#

Where# a# judicial# sale# is# voided# without# fault# of# the# purchaser,# the# latter# is# entitled# to# reimbursement# of# the# purchase# money# paid#by#him.#A#judicial#sale#can#only#be#set#aside#upon#the#return# to#the#buyer#of#the#purchase#price#with#simple#interest,#together# with# all# sums# paid# out# by# him# in# improvements# introduced# on# the#property,#taxes,#and#other#expenses#by#him.#Seven'Brothers' Shipping'Corp.'v.'Court'of'Appeals'(246'SCRA'33)'

#

Article)1592#allows#the#buyer#of#an#immovable#to#pay#as#long#as# no#demand#for#rescission#has#been#made;#and#the#consignation#



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Chapter(11:(Remedies(For(Rescission( And(Cancellation(For(Immovables( •

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1191! !! rescission! grounded! on! Substantial! Breach! which! is! actually!resolution.!

! A.(Forfeiture(of(Amortization( • If! there! were! amortizations! paid,! can! the! payments! be! forfeited?! YES.! To! the! extent! that! it! is! reasonable! (and! only! if! there!is!a!forfeiture!clause).! o But!the!SC!did!not!discuss!what!is!“reasonable”! o Basic!requirement:!a!forfeiture!clause.! • CASE:! No! forfeiture! clause! but! the! SC! allowed! it! as! reasonable! compensation.! o To!be!sure:!put!in!a!forfeiture!clause.! o If!there!isn’t!any:!paglaban!mo!nalang!! ! B.(Automatic(Rescission(or(Extra@Judicial(Rescission( • UP! case! !! if! you! proceed! on! extraPjudicial! rescission,! it! is! subject! to! the! decision! of! the! Court.! Your! contract’s! rescission! clause!would!be!subject!to!the!decision!to!the!Court.! o This! is! because! Article! 1191! talks! about! substantial! breach,!and!such!can!only!be!determined!by!the!Courts! and!not!the!parties!themselves.! • If! you! do! not! have! a! rescission! clause,! you! can! NEVER! proceed! with!an!automatic!rescission!or!extraPjudicial!rescission.! ! C.(Contracts(to(Sell( • The!classic!contract!to!sell!is!the!mutual!promise!to!buy!and!sell.! o In!a!classic!sense,!it!is!an!obligation!to!do,!and!as!such,! specific!performance!does!not!lie.!

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CONFUSION:!There!are!contracts!to!sell!worded!as!such!but!the! idea!of!the!parties!is!not!the!classic!mutual!promise!to!buy!and! to!sell.!The!idea!is!just!to!withhold!ownership.! o The! real! obligation! of! the! parties! is! not! to! make! good! your!promise!to!sell!and!buy,!but!to!transfer!ownership.! The! concept! here! is! to! protect! the! seller! from! giving! ownership!and!prevent!a!situation!where!the!seller!will! have! a! hard! time! recovering! the! property! in! case! the! buyer!defaults.! o Furthermore,! in! this! case,! possession! has! been! transferred!to!the!buyer.! o In!this!case,!specific!performance!lies.! Differentiate!with!Conditional!Sale:!

Classic(Contract(to(Sell( Mutual!promise!to!buy!and!sell! Clear!reservation!of!ownership! There!is!no!transfer!of!ownership.!

Conditional(Sale( ! No!reservation!of!ownership! Transfer!of!ownership!is! conditioned!on!the!payment,! but!even!if!the!buyer!defaults,! the!ownership!has!already! vested!in!the!buyer.! Intent!to!transfer!ownership!is! clear.!

Condition!is!usually!full!payment,! before!intent!to!transfer!ownership! would!arise.! There!must!be!a!reservation!of!the! ! right!to!rescind!(automatic!rescission)! Does!not!require!rescission!(in!theory)! Requires!rescission!(in!theory)! !!Thus!the!action!should!be!for! reconveyance!for!property.! ! • In! theory! !! the! second! requirement! is! ridiculous! since! a! contract! to! sell! is! simply! subject! to! the! suspensive/resolutory! condition,! such! that! if! the! condition! does! not! come! about,! the!



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contract! is! simply! extinguished.! Thus,! it! does! not! need! to! be! rescinded.! o Why! was! it! ruled?! Because! the! determination! of! the! legal!rights!of!the!parties!requires!them!to!go!to!Court.! ! XI.( REMEDY( OF( RESCISSION( IN( SALES( CONTRACTS( COVERING( IMMOVABLES:( CONTRACT' OF' SALE' versus'CONTRACT'TO'SELL! ( A.( NATURE( OF( REMEDY( OF( RESCISSION( (RESOLUTION)!!!(Arts.( 1191,( 1479,(1592)! ( 1.! Distinguishing( from( Other( Remedy( of( Rescission! (Universal! Food!Corp.!v.!CA,!33!SCRA!22![1970]1.!But' see' contra' Suria!v.! IAC,!151!SCRA!661![1987]).! ! While! Art.! 1191! uses! the! term! “rescission,”! the! original! term! which! was! used! in! the! old! Civil! Code! was! “resolution.”! Resolution! is! a! principal! action! which! is! based! on! breach! of! a! party,! while! rescission! under! Art.! 1383! is! a! subsidiary! action! limited!to!cases!of!rescission!for!lesion!under!Art.!1381.!!xOng! v.!Court!of!Appeals,!310!SCRA!1!(1999).2! ( 2.(Basis(of(Remedy(of(Rescission((Resolution)( ! Rescission! under! Art.! 1191! is! predicated! on! a! breach! of! faith! by! the! other! party! who! violates! the! reciprocity! between! them,! and! the! breach! contemplated! is! the! obligor’s! failure! to! comply!with!an!existing!obligation.!When!the!obligee!may!seek! rescission!and,!in!the!absence!of!any!just!cause!for!the!court!to! 1Reiterated(in(Congregation(of(the(Religious(of(the(Virgin(Mary(v.(Orola,!553!SCRA!578!(2008);!Heirs(

of( Antonio( F.( Bernabe( v.( Court( of( Appeals,! 559! SCRA! 53! (2008);! Congregation( of( the( Religious( of( the( Virgin(Mary(v.(Orola,!553!SCRA!578!(2008).!! 2Iringan(v.(Court(of(Appeals,!366!SCRA!41!(2001).!!


determine!the!period!of!compliance,!the!court!shall!decree!the! rescission.!xVelarde!v.!Court!of!Appeals,!361!SCRA!56!(2001).3! ! To!rescind!is!to!declare!a!contract!void!at!its!inception!and! to!put!an!end!to!it!as!though!it!never!was.!It!is!not!merely!to! terminate!it!and!release!the!parties!from!further!obligations!to! each!other,!but!to!abrogate!it!from!the!beginning!and!restore! the!parties!to!their!relative!positions!as!if!no!contract!has!been! made.!xVelarde!v.!Court!of!Appeals,!361!SCRA!56!(2001).4! ! When! a! party! asks! for! the! resolution! or! cancellation! of! a! contract! it! is! implied! that! he! recognizes! it! existence! –! a! nonP existent! contract! cannot! be! cancelled.! xPan! Pacific! Industrial! Sales!Co.,!Inc.!v.!Court!of!Appeals,!482!SCRA!164!(2006).! ! NonPpayment! of! the! purchase! price! is! a! resolutory! condition!for!which!the!remedy!is!either!rescission!or!specific! performance! under! Article! 1191.! This! is! true! for! reciprocal! obligations! where! the! obligation! is! a! resolutory! condition! of! the! other.! On! the! other! hand,! the! buyer! is! entitled! to! retain! the! purchase! price! or! a! part! thereof! if! the! seller! fails! to! perform! any! essential! obligation! of! the! contract.! Such! right! is! premised! on! the! general! principles! of! reciprocal! obligation.! xGil!v.!Court!of!Appeals,!411!SCRA!18!(2003).5( ! Consignation! by! the! buyer! of! the! purchase! price! of! the! property,! there! having! been! no! previous! receipt! of! a! notarial! demand! for! rescission,! is! sufficient! to! defeat! the! right! of! the! seller!to!demand!for!a!rescission!of!the!deed!of!absolute!sale.!! xGil!v.!Court!of!Appeals,!411!SCRA!18!(2003).( !

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3Almira(v.(Court(of(Appeals,!399!SCRA!351!(2003).!! 4Ocampo(v.(CA,(233!SCRA!551!(1994);!Co(v.(CA,(312!SCRA!528!(1999).!

5Central( Philippine( University( v.( CA,( 246! SCRA! 511! (1995);! Romeo( v.( CA,! 250! SCRA! 223! (1995);! Cheng(v.(Genato,(300!SCRA!722!(1998);!Uy(v.(CA,(314!SCRA!63!(1999).!



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Creditors! do! not! have! such! material! interest! as! to! allow! them!to!sue!for!rescission!of!a!sale!–!theirs!is!only!a!personal! right!to!receive!payment!for!the!loan,!not!a!real!right!over!the! property! subject! of! the! deed! of! sale.! xAdorable! v.! CA,! 319! SCRA!200!(1999).! ' Action' for' Rescission' Not' Similar' to' An' Action' for' Reconveyance' –! In! the! sale! of! real! property,! the! seller! is! not! precluded! from! going! to! the! court! to! demand! judicial! rescission!in!lieu!of!a!notarial!act!of!rescission.!But!such!action! is!different!from!an!action!for!reconveyance!of!possession!on! the! thesis! of! a! prior! rescission! of! the! contract! covering! the! property.! The! effects! that! flow! from! an! affirmative! judgment! in! either! case! would! be! materially! dissimilar! in! various! respects:! judicial! resolution! of! a! contract! gives! rise! to! mutual! restitution! which! is! not! necessarily! the! situation! that! arise! in! an! action! for! reconveyance.! In! an! action! for! rescission,! unlike! in! an! action! for! reconveyance! predicated! on! an! extrajudicial! rescission! (rescission! by! notarial! act),! the! court,! instead! of! decreeing!rescission,!may!authorize!for!a!just!cause!the!fixing! of! a! period.! xOlympia! Housing! v.! Panasiatic! Travel! Corp.,! 395! SCRA!298!(2003).! ! 3.!Power(to(Rescind(Generally(Judicial(in(Nature! ! A! seller! cannot! unilaterally! and! extrajudicially! rescind! a! contract! of! sale! where! there! is! no! express! stipulation! authorizing! it.! Unilateral! rescission! will! not! be! judicially! favored! or! allowed! if! the! breach! is! not! substantial! and! fundamental! to! the! fulfillment! of! the! obligation.! xBenito! v.! SaquitanFRuiz,!394!SCRA!250!(2002).1! !

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1Ocejo,( Perez( &( Co.( v.( International( Banking( Corp.( 37! Phil.! 631! (1918);! Republic( v.( Hospital( de( San(

Juan(de(Dios,(84!Phil.!820!(1949);!De(la(Rama(Steamship(Co.(v.(Tan,!G.R.!No.!8784,!May!21,!1956;!99! Phil.!1034!(unrep.)!(1956);!Heirs(of(Jesus(M.(Mascuñana(v.(Court(of(Appeals,!461!SCRA!186!(2005).!!

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Nonetheless,! the! law! does! not! prohibit! the! parties! from! entering! into! agreement! that! violation! of! the! ! of! the! contract!would!cause!cancellation!thereof,!even!without!court! intervention.! xFroilan! v.! Pan! Oriental! Shipping! Co.,! 12! SCRA! 276!(1964).2! 4.(!Mutual(Restitution(and(Forfeiture!(Art.(1385)! ! When! sale! is! annulled,! parties! are! governed! by! Art.! 1398! whereunder!they!shall!restore!to!each!other!the!things!which! have!been!the!subject!matter!of!the!contract,!with!their!fruits,! and! price! with! interest.! ! xInes! v.! Court! of! Appeals,! 247! SCRA! 312!(1995).3! ! The!seller’s!right!in!a!contract!to!sell!with!reserved!title!to! extrajudicially!cancel!the!sale!upon!failure!of!the!buyer!to!pay! the! stipulated! installments! and! retain! the! sums! and! installments!already!received!has!long!been!recognized!by!the! wellPestablished! doctrine! of! 39! years! standing.! xPangilinan! v.! CA,!279!SCRA!590!(1997).4! ! Pursuant! to! Art.! 1188,! in! a! contract! to! sell,! even! if! the! buyers!did!not!mistakenly!make!partial!payments,!inasmuch!as! the! suspensive! condition! was! not! fulfilled,! it! is! only! fair! and! just!that!the!buyers!be!allowed!to!recover!what!they!had!paid! in! expectancy! that! the! condition! would! happen;! otherwise,! there! would! be! unjust! enrichment! on! the! part! of! the! seller.! xBuot!v.!Court!of!Appeals,!357!SCRA!846!(2001).! ( B.(DISTINCTIONS(BETWEEN(CONTRACT(OF(SALE(AND(CONTRACT(TO( SELL' ( 1.!CONTRACT(OF(SALE(versus(CONTRACT(TO(SELL!!(Art.(1458)!!

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2Luzon( Brokerage( Co.,( Inc.( v.( Maritime( Building( Co.,( Inc.,! 43! SCRA! 95! (1972);! Luzon( Brokerage( v.( Maritime(Bldg.,!86!SCRA!305!(1978).! 3Velarde(v.(Court(of(Appeals,!361!SCRA!56!(2001);!Orden(v.(Aurea,!562!SCRA!660!(2008).!! 4The(Manila(Racing(Club(v.(The(Manila(Jockey(Club,!69!Phil.!55!(1939).!!



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√Adelfa'Properties,'Inc.'v.'CA,(240(SCRA(575((1995).1! ! In!a!contract!of!sale,!title!to!the!property!es!to!buyer!upon! the!delivery!of!the!thing!sold;!in!a!contract!to!sell,!ownership!is,!by! agreement,!reserved!in!the!seller!and!is!not!to!!to!buyer!until! full!payment!of!purchase!price.!Otherwise!stated,!in!a!contract!of! sale,!seller!loses!ownership!over!the!property!and!cannot!recover! it!until!and!unless!the!contract!is!resolved!or!rescinded,!whereas!in! a!contract!to!sell,!title!is!retained!by!the!seller!until!full!payment!of! the!price.!In!the!latter!contract,!payment!of!the!price!is!a!positive! suspensive!condition,!failure!of!which!is!not!a!breach!but!an!event! that! prevents! the! obligation! of! the! vendor! to! convey! title! from! becoming!effective.!!xCastillo!v.!Reyes,!539!SCRA!193!(2007).2! ( a.(Rationale(of(Contracts(to(Sell( ! A!contract!to!sell!is!commonly!entered!into!so!as!to!protect! the! seller! against! a! buyer! who! intends! to! buy! the! property! in! installments! by! withholding! ownership! over! the! property! until! the!buyer!effects!full!payment!therefor.!It!cannot!be!inferred!in! a!situation!where!both!parties!understood!the!price!to!be!paid! in! cash.! ! xCity! of! Cebu! v.! Heirs! of! Candido! Rubi,! 306! SCRA! 408! (1999).3! ( b.(Is(a(Contract(to(Sell(a(“Sale”(under(Article(1458?( !

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1Sta.(Lucia(Realty(&(Dev.,(Inc.(V.(Uyecio,!562!SCRA!226!(2008);! Ver(Reyes(v.(Salvador,(Sr.,!564!SCRA! 456!(2008).! 2Lim(v.(CA,!182!SCRA!564!(1990);!Buot(v.(CA,!357!SCRA!846!(2001);!Abesamis(v.(CA,!361!SCRA!328! (2001);!Tuazon(v.(Garilao,!362!SCRA!654!(2001);!Leaño(v.(CA,!369!SCRA!36!(2001);!Universal(Robina( Sugar(Milling(Corp.(v.(Heirs(of(Angel(Teves,!389!SCRA!316!(2002);!Almira(v.(Court(of(Appeals,!399!SCRA! 351!(2003);!Chua(v.(Court(of(Appeals,!401!SCRA!54!(2002);!Flancia(v.(Court(of(Appeals,!457!SCRA!224! (2005);!Vidad,(Sr.(v.(Tayamen,!531!SCRA!!147!(2007);!Hulst(v.(PR(Builders,(Inc.,!532!SCRA!74!(2007);! Heirs(of(Antonio(F.(Bernabe(v.(Court(of(Appeals,! 559! SCRA! 53! (2008);! Orden(v.(Aurea,! 562! SCRA! 660! (2008);!Tan(v.(Benolirao,!604!SCRA36!(2009);!Bank(of(P.I.(v.(SMP,(Inc.,!609!SCRA!134!(2009);!De(Leon( v.(Ong,!611!SCRA!381!(2010);!Montecalvo(v.(Heirs(of(Eugenia(T.(Primero,!624!SCRA!575!(2010).! 3Montecalvo(v.(Heirs(of(Eugenia(T.(Primero,!624!SCRA!575!(2010).!

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A! “contract! to! sell”! as! “a! bilateral! contract! whereby! the! prospective! seller,! while! expressly! reserving! the! ownership! of! the!subject!property!despite!delivery!thereof!to!the!prospective! buyer,!binds!himself!to!sell!the!said!property!exclusively!to!the! prospective! buyer! upon! fulfillment! of! the! condition! agreed! upon,! that! is,! full! payment! of! the! purchase! price.”! √Coronel' v.' CA,( 263( SCRA( 15,( 27( (1996).4!BUT' SEE:! √PNB' v.' CA,' 262( SCRA(( 464((1996).! ! To! be! sure,! a! contract! of! sale! may! either! be! absolute! or! conditional.! One! form! of! conditional! sales! is! what! is! now! popularly! termed! as! a! “Contract! to! Sell,”! where! ownership! or! title! is! retained! until! the! fulfillment! of! a! positive! suspensive! condition! normally! the! payment! of! the! purchase! price! in! the! manner! agreed! upon.! For! a! contract,! like! a! contract! to! sell,! involves!a!meeting!of!minds!between!two!persons!whereby!one! binds!himself,!with!respect!to!the!other,!to!give!something!or!to! render!some!service.!xGomez!v.!Court!of!Appeals,!340!SCRA!720,! 728!(2000).5! ! A!contract!to!sell!is!akin!to!a!conditional!sale,!in!which!the! efficacy!or!obligatory!force!of!the!vendor’s!obligation!to!transfer! title!is!subordinated!to!the!happening!of!a!future!and!uncertain! event,! so! that! if! the! suspensive! condition! does! not! take! place,! the! parties! would! stand! as! if! the! conditional! obligation! never! existed.!Orden!v.!Aurea,!562!SCRA!660!(2008).6! ( c.(Importance(of(“Locating”(the(Condition(to(Pay(Price!in(Full! ! In! a! contract! of! sale,! the! nonPpayment! of! the! price! is! a! resolutory!condition!which!extinguishes!the!transaction!that,!for! a! time! existed,! and! discharges! the! obligations! created!

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4 Platinum( Plans( Phil.,( Inc.( v.( Cucueco,! 488! SCRA! 156! (2006);! Valenzuela( v.( Kalayaan( Dev.( and( Industrial(Corp.,!590!SCRA!380!(2009);Tan(v.(Benolirao,!604!SCRA!36!(2009);!( 5Demafelis(v.(Court(of(Appeals,!538!SCRA!305!(2007).(( 6De(Leon(v.(De(Leon,!593!SCRA!768!(2009).!



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thereunder.! xBlas! v.! AngelesFHutalla,! 439! SCRA! 273! (2004). 1! Whereas,! in! a! contract! to! sell,! the! payment! of! the! purchase! price!is!a!positive!suspensive!condition.!The!vendor’s!obligation! to!convey!the!title!does!not!become!effective!in!case!of!failure! to!pay.!xBuot!v.!Court!of!Appeals,!357!SCRA!846!(2001).2! ! When!the!obligation!of!buyer!to!pay!the!full!amount!of!the! purchase!price!was!made!subject!to!the!condition!that!the!seller! first!delivery!the!clean!title!over!the!parcel!bough!within!twenty! (20)!months!from!the!g!of!the!contract,!such!condition!is! imposed! merely! on! the! performance! of! the! obligation,! as! distinguished!from!a!condition!imposed!on!the!perfection!of!the! contract.! The! nonPhappening! of! the! condition! merely! granted! the! buyer! the! right! to! rescind! the! contract! or! even! to! waive! it! and! enforce! performance! on! the! part! of! the! seller,! all! in! consonance! with! Art.! 1545! of! Civil! Code! which! provides! that! “Where! the! obligation! of! either! party! to! a! contract! of! sale! is! subject!to!any!condition!which!is!not!performed,!such!party!may! refuse! to! proceed! with! the! contract! or! he! may! waive! performance! of! the! condition.”! ! √Babasa' v.' Court' of' Appeals,' 290(SCRA(532((1998).! ! The! remedy! of! rescission! under! Article! 1191! of! the! Civil! Code! cannot! apply! to! mere! contracts! to! sell—in! a! contract! to! sell,!the!payment!of!the!purchase!price!is!a!positive!suspensive! condition,!and!failure!to!pay!the!price!agreed!upon!is!not!a!mere! breach,! casual! or! serious,! but! a! situation! that! prevents! the! obligation! of! the! vendor! to! convey! title! from! acquiring! an! obligatory!force.!Tan!v.!Benolirao,!604!SCRA!36!(2009).3!

(

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1Valenzuela( v.( Kalayann( Development( and( Industrial( Corp.,! 590! SCRA! 380! (2009);! Traders( Royal( Bank(v.(Cuison(Lumber(Co.,(Inc.,!588!SCRA!690!(2009).! 2Heirs(of(Spouses(Sandejas(v.(Lina,(351!SCRA!183!(2001);!Zamora(Realty(and(Dev.(Corp(v.(Office(of(the( President,!506!SCRA!591!(2006).! 3Traders(Royal(Bank(v.(Cuison(Lumber(Co.,(Inc.,( 588! SCRA! 690! (2009);! Nabus(v.(Pacson,! 605! SCRA! 334!(2009).!

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d.(Necessary(Stipulations(in(a(Contract(to(Sell:( ! A!contract!is!one!of!sale,!absent!any!stipulation!therein!(a)! reserving! title! over! the! property! to! the! vendee! until! full! payment! of! the! purchase! price,4!and! (b)! giving! the! vendor! the! right! to! unilaterally! rescind! the! contract! in! case! of! nonP payment.5!√Valdez'v.'Court'of'Appeals,(439(SCRA(55((2004);!De' Leon'v.'Ong,(611(SCRA(381((2010);6!BUT'SEE:!!√Dignos'v.'Court'of' Appeals,(158(SCRA(375((1988).! ! It! was! enough! for! the! Court! to! characterize! the! Deed! of! Condition!Sale!as!a!“contract!to!sell”!alone!by!the!reservation!of! ownership.!Heirs!of!Antonio!F.!Bernabe!v.!Court!of!Appeals,!559! SCRA!53!(2008).! ! The! reservation! of! title! may! not! be! found! in! express! provision! of! the! contract,! but! may! also! be! determined! from! proven!acts!of!the!parties.!xSalazar!v.!CA,!258!SCRA!325!(1996).! ! The! absence! of! a! formal! deed! of! conveyance! [or! a! stipulation!to!execute!the!deed!of!sale!only!full!payment!of!the! purchase! price]! is! a! strong! indication! that! the! parties! did! not! intend! immediate! transfer! of! ownership,! but! only! a! transfer! after!full!payment!of!the!purchase!price,7!and!the!seller!retained! possession! of! the! certificate! of! tile! and! all! other! documents! relative!to!the!sale!until!there!was!full!payment!of!the!purchase! price.!xChua!v.!Court!of!Appeals,!401!SCRA!54!(2003).!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 4Topacio(v.(CA,!211!SCRA!219!(1992);!Laforteza(v.(Machuca,!333!SCRA!643!(2000);!Almira(v.(Court( of(Appeals,!399!SCRA351!(2003).!! 5Roque(v.(Lapuz,(96! SCRA! 741! (1980);! Angeles(v.(Calanz,! 135! SCRA! 323! (1985);Alfonso(v.(CA,! 186! SCRA!400!(1990)!! 6San(Andres(v.(Rodriguez,(332! SCRA! 769! (2000);! Vda.(De(Mistica(v.(Naguiat,! 418! SCRA! 73! (2003);! Blas(v.(AngelesTHutalla,! 439! SCRA! 273! (2004);! Villadar,(Jr.(V.(Zabala,! 545! SCRA! 325! (2008);! Heirs(of( Antonio(F.(Bernabe(v.(Court(of(Appeals,!559!SCRA!53!(2008);!Ver(Reyes(v.(Salvador,(Sr.,!564!SCRA!456! (2008).! 7Bowe(v.(Court(of(Appeals,!220!SCRA!158!(1993);! Rayos(v.(Court(of(Appeals,!434!SCRA!365!(2004);! Solidstate( MultiTProducts( Corp.( v.( CatienzaTVillaverde,! 559! SCRA! 197! (2008);! Tan( v.( Benolirao,! 604! SCRA!36!(2009);!Nabus(v.(Pacson,!605!SCRA!334!(2009).!



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! An!agreement!in!which!ownership!is!reserved!in!the!vendor! and! is! not! to! ! to! the! vendee! until! full! payment! of! the! purchase!price!is!known!as!a!contract!to!sell.!The!absence!of!full! payment!suspends!the!vendors’!obligation!to!convey!title,!even! if! the! sale! has! already! been! ed.! Registration! does! not! vest,! but! merely! serves! as! evidence! of,! title! to! a! particular! property.!Our!land!registration!laws!do!not!give!title!holders!any! better! ownership! than! what! they! actually! had! prior! to! registration.!xPortic!v.!Cristobal,!456!SCRA!577!(2005).1! ( e.(Issue(of(Substantial(Breach!(Arts.(1191(and(1234)! ! The!concept!of!substantial!breach!is!irrelevant!to!a!contract! of!sale.!!xLuzon!Brokerage!Co.,!Inc.!v.!Maritime!Building!Co.,!Inc.,! 43!SCRA!93!(1972).2!! ! In! a! contract! to! sell! real! property! on! installments,! the! full! payment!of!the!purchase!price!is!a!positive!condition,!the!failure! of! which! is! not! considered! a! breach,! casual! or! serious,! but! simply!an!event!that!prevented!the!obligation!of!the!vendor!to! convey!title!from!acquiring!any!obligatory!force.!The!transfer!of! ownership!and!title!would!occur!after!full!payment!of!the!price.! xLeaño!v.!CA,!369!SCRA!36!(2001).3! ( 2.(Minimum(Requirement(for(Cancellation(of(Contract(to(Sell!! ! The!act!of!a!party!in!treating!a!contract!as!cancelled!should!be! made! known! to! the! other! party! because! this! act! is! subject! to! scrutiny!and!review!of!the!courts!in!case!the!alleged!defaulter!bring!

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1Antonio(F.(Bernabe(v.(Court(of(Appeals,!559!SCRA!53!(2008);!Bank(of(P.I.(v.(SMP,(Inc.,!609!SCRA!134! (2009).! 2Siska( Dev.( Corp.( v.( Office( of( the( President,! 231! SCRA! 674! (1994);! Sta.( Lucia( Realty( &( Dev.,( Inc.( v.( Uyecio,!562!SCRA!226!(2008).!! 3Manuel(v.(Rodriguez,!109!Phil.!1!(1960);!Laforteza(v.(Machuca,!333!SCRA!643!(2000);!Villamaria,(Jr.( v.(Court(of(Appeals,!487!SCRA!571!(2006).!

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the!matter!for!judicial!determination.!√University'of'the'Philippines' v.' De' los' Angeles,' 35( SCRA( 103( (1970);( √Palay' Inc.' v.' Clave,( 124( SCRA(638((1983).4(( ! The!act!of!the!seller!in!notifying!the!buyer!of!his!intention!to!sell! the!properties!to!other!interested!persons!if!the!latter!failed!to!pay! the! balance! of! the! purchase! price! is! sufficient! notice! for! the! cancellation! or! resolution! of! their! contract! to! sell.! Orden! v.! Aurea,! 562!SCRA!660!(2008).( ! A! contract! to! sell! imposes! reciprocal! obligations! and! so! cannot! be! terminated! unilaterally! by! either! party.! Judicial! rescission! is! required!under!Article!1191.!!However,!this!rule!is!not!absolute.!We! have! held! that! in! proper! cases,! a! party! may! take! it! upon! itself! to! consider!the!contract!rescinded!and!act!accordingly!albeit!subject!to! judicial!confirmation,!which!may!or!may!not!be!given.!!√Lim'v.'Court' of' Appeals,( 182( SCRA( 564( (1990).! ! BUT' SEE:( In! a! contract! to! sell,! upon! failure! of! buyer! to! comply! with! its! obligation,! there! was! no! need!to!judicially!rescind!the!contract!to!sell.!Failure!by!one!of!the! parties!to!abide!by!the!conditions!in!a!contract!to!sell!resulted!in!the! rescission! of! the! contract.! √AFP' Mutual' Benefit' Assn.,' Inc.' v.' CA,( 364(SCRA(768((2001).5! ! A! grace! period! is! a! right,! not! an! obligation! of! the! debtor,! and! when! unconditionally! conferred,! the! grace! period! is! effective! without! further! need! of! demand! either! calling! for! the! payment! of! the! obligation! or! for! honoring! the! right.! xBricktown! Dev.! Corp.! v.! Amor!Tierra!Dev..,!239!SCRA!126!(1995).! ! The!act!of!the!seller!in!notifying!the!buyer!of!his!intention!to!sell! the!properties!to!other!interest!persons!if!the!latter!failed!to!pay!the! balance!of!the!purchase!price!is!sufficient!notice!for!the!cancellation!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 4Jison(v.(CA,!164!SCRA!339!(1988);(Lim(v.(CA,!182!SCRA!564!(1990);!Cheng(v.(Genato,!300!SCRA!722! (1998).! 5Torralba(v.(De(los(Angeles,!96!SCRA!69!(1980).!!



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or!resolution!of!their!contract!to!sell.!Orden!v.!Aurea,!562!SCRA!660! (2008).! ( 3.((Equity(Resolutions(on(Contracts(to(Sell( ! Although!buyer!clearly!defaulted!in!his!installment!payments!in! a! contract! to! sell! covering! two! parcels! of! land,! the! Supreme! Court! nevertheless!awarded!ownership!over!one!of!the!two!(2)!lots!tly! purchased! by! the! buyer,! on! the! basis! that! the! total! amount! of! installments!paid,!although!not!enough!to!cover!the!purchase!price! of!the!two!lots!were!enough!to!cover!fully!the!purchase!price!of!one! lot,!ruling!!there!was!substantial!performance!insofar!as!one!of!the! lots!concerned!as!to!prevent!rescission!thereto.!xLegarda!Hermanos! v.!Saldaña,!55!SCRA!3246!(1974).! ! Where! buyer! had! religiously! been! paying! monthly! installments! for!8!years,!but!even!after!default!he!was!willing!and!had!offered!to! pay! all! the! arrears,! the! Court! granted! additional! period! of! 60! days! from! receipt! of! judgment! for! buyer! to! make! all! installments! payments! in! arrears! plus! interests,! although! demand! for! rescission! had!already!been!made.!xJ.M.!Tuazon!Co.,!Inc.!v.!Javier,!31!SCRA!829! (1970).! (


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Chapter(12:(Conditions(and(Warranties(

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Where(the(ownership(in(the(thing(has(not(ed,(the(buyer(may(treat( the( fulfillment( by( the( seller( of( his( obligation( to( deliver( the( same( as( described(and(as(warranted(expressly(or(by(implication(in(the(contract( of( sale( as( a( condition( of( the( obligation( of( the( buyer( to( perform( his( promise(to(accept(and(pay(for(the(thing.((n)( ! •

•

! ! !

Condition(imposed(on(perfection(

Condition(imposed(on( performance(

Failure!to!comply!results!in!failure! of!contract!

Failure!to!comply!results!in!the! two!remedies!being!available!to! the!other!party.!

! Laforteza!v.!Machuca! ( Facts:(In!the!exercise!of!the!authority!of!Special!Power!Of!Attorney,!on! January! 20,! 1989,! the! heirs! of! the! late! Francisco! Q.! Laforteza! represented! by! Roberto! Z.! Laforteza! and! Gonzalo! Z.! Laforteza,! Jr.! entered! into! a! Memorandum! of! Agreement! (Contract! to! Sell)! with! the! plaintiff! over! the! subject! property! for! the! sum! of! 630,000! payable! as! follows:! •

Distinction! between! condition! imposed! on! perfection! and! imposed! on! performance.! Romero! v.! Court! of! Appeals! (250! SCRA!223)!

30,000!–earnest!money,!to!be!forfeited!in!favor!of!Lafortezas!if! the!sale!is!not!effected!due!to!the!fault!of!Machuca!

•

600,000! –! upon! issuance! of! the! new! certificate! of! title! in! the! name!of!late!Francisco!Laforteza!and!upon!execution!of!an!extra! judicial!settlement!of!the!decedent’s!estate!with!sale!in!favor!of! Machuca!

Two!alternative!remedies!where!obligation!of!the!other!party!to! a! contract! of! sale! is! subject! to! a! condition,! and! such! is! not! performed.! 1. Refusal!to!proceed!with!contract.! 2. Waive!performance!of!the!condition.!


*Laforteza!v.!Machuca!(333!SCRA!643)!

! I.(Conditions( ! Article(1545.(( Where(the(obligation(of(either(party(to(a(contract(of(sale(is(subject(to( any( condition( which( is( not( performed,( such( party( may( refuse( to( proceed( with( the( contract( or( he( may( waive( performance( of( the( condition.( If( the( other( party( has( promised( that( the( condition( should( happen(or(be(performed,(such(first(mentioned(party(may(also(treat(the( nonperformance(of(the(condition(as(a(breach(of(warranty.( (

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! Paragraph! 4! of! the! Memorandum! contained! a! provision! that:! upon! issuance!of!the!new!title,!the!Machuca!shall!be!notified!in!writing!and!he! shall!have!30!days!to!produce!the!balance!of!600k!which!shall!be!paid!to! Laforteza!upon!execution!of!the!extrajudicial!settlement.!Machuca!paid! earnest!money!of!30k!plus!rentals!for!subject!property.!Upon!failure!of! Machuca! to! comply! with! the! payment! of! the! balance,! Lafortezas! informed! the! formed! that! they! were! canceling! the! contract.! Machuca!



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requested!that!he!intends!to!tender!payment!of!the!balance!which!was! refused! by! the! Lafortezas! who! insisted! for! the! rescission! of! the! memorandum.!Machuca!filed!an!action!for!specific!performance! !

date! of! the! execution! of! the! agreement! up! to! the! executon! of! the! extrajudicial!settlement.! ! In! this! case,! the! 6cmonth! period! merely! delayed! the! demandability! of!

Issue:!Whether!the!contract!executed!by!the!parties!is!a!contract!of!sale! or!a!contract!to!sell! ! Held:!CONTRACT!OF!SALE!AND!LEASE.!The!Memorandum!of!Agreement! shows!that!the!transaction!between!the!petitioners!and!respondent!was! one!of!sale!and!lease.!A!contract!of!sale!is!a!consensual!contract!and!is! perfected!at!the!moment!there!is!a!meeting!of!the!minds!upon!the!thing!

the! contract! of! sale! and! did! not! determine! perfection! for! after! the! expiration!of!the!6!month!period,!there!was!a!absolute!obligation!on!the! part!of!Lafortezas!and!Machuca!to!comply!with!the!!of!the!sale.! The! fact! that! after! the! expiration! of! the! 6cmonth! period,! Machuca! would! retain! possession! of! the! house! and! lot! without! need! of! paying! rentals! for! the! use! therefore,! clearly! indicated! that! the! parties! contemplated! that! ownership! over! the! property! would! already! be!

which! is! the! object! of! the! contract! and! upon! the! price.! From! that! moment! the! parties! may! reciprocally! demand! performance! subject! to! the!provisions!of!the!law!governing!the!form!of!contracts.!In!this!case,! there! was! a! perfected! agreement! between! the! petitioners! and! respondent! whereby! Lafortezas! obligated! themselves! to! transfer! the! ownership! of! and! deliver! the! house! and! lot! and! Machuca! to! pay! the! price! amounting! to! 630k.! All! the! elements! of! a! contract! of! sale! were!

transferred!by!that!time.! ! What!further!indicated!that!this!was!a!contract!of!sale!was!the!payment! of! earnest! money.! Earnest! money! is! something! of! value! to! show! that! buyer!was!really!in!earnest,!and!given!to!the!seller!to!bind!the!bargain.! Whenever!earnest!money!is!given!in!a!contract!of!sale,!it!is!considered! as!part!of!the!purchase!price!and!proof!of!the!perfection!of!the!contract.!

thus!present.!However,!the!balance!of!the!purchase!price!was!to!be!paid! only!upon!the!issuance!of!the!new!certificate!of!title!in!lieu!of!the!one!in! the!name!of!the!late!Francisco!Laforteza!and!upon!the!execution!of!an! extrajudicial!settlement!of!his!estate.!! ! Prior!to!the!issuance!of!the!“reconstituted”!title,!Machuca!was!already! placed!in!possession!of!the!house!and!lot!as!lessee!thereof!for!6!months! at!a!monthly!rate!of!3,500k.!It!was!stipulated!that!should!the!issuance!of!

!

the! new! title! and! execution! of! the! extrajudicial! settlement! be! completed! prior! to! expiration! of! 6month! period,! Machuca! would! be! liable!only!for!the!rentals!pertaining!to!the!period!commencing!from!the!

•

In! a! “Sale! with! Assumption! of! Mortgage,”! the! assumption! of! mortgage! is! a! condition! to! the! seller’s! consent! so! that! without! approval! by! the! mortgagee,! no! sale! is! perfected.! In! such! case,! the!seller!remains!the!owner!and!mortgagor!of!the!property!and! retains! the! right! to! redeem! the! foreclosed! property.! Ramos! v.! Court!of!Appeals!(279!SCRA!118).!But!such!condition!is!deemed! fulfilled! when! the! seller! takes! any! action! to! prevent! its! happening.!De!Leon!v.!Ong!(611!SCRA!381)!

•


Contract! of! sale! to! become! effective! upon! happening! of! the! condition.!Heirs!of!Escanlar!v.!Court!of!Appeals!(281!SCRA!176)!


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Nonchappening! did! not! affect! validity! of! the! contract! only!the!effectivity.!

There!has!arisen!here!a!confusion!in!the!concepts!of!validity!and! the!efficacy!of!a!contract.!Under!Article( 1318!of!Civil!Code,!the! essential!requisites!of!a!contract!are:!consent!of!the!contracting! parties;! object! certain! which! is! the! subject! matter! of! the! contract! and! cause! of! the! obligation! which! is! established.! Absent! one! of! the! above,! no! contract! can! arise.! Conversely,! where! all! are! present,! the! result! is! a! valid! contract.! However,! some! parties! introduce! various! kinds! of! restrictions! or! modalities,! the! lack! of! which! will! not,! however,! affect! the! validity!of!the!contract.!Thus,!a!provision!“this!Contract!of!Sale! of! rights,! interests! and! participations! shall! become! effective! only!upon!the!approval!by!the!Honorable!Court,”!in!the!event!of! noncapproval! by! the! courts,! affect! only! the! effectivity! and! not! the! validity! of! the! contract! of! sale.! Heirs! of! Pedro! Escanlar! v.! Court!of!Appeals!(281!SCRA!176)!

•

The! phrase! “as! is,! where! is”! in! sale! pertains! solely! to! the! physical! condition! of! the! thing! sold,! not! to! its! legal! situation.! The!vendor!is!bound!to!transfer!the!ownership!of!and!deliver,!as! well!as!warrant!the!thing!which!is!the!object!of!the!sale.!Assets! Privatization!Trust!v.!T.J.!Enterprises!(587!SCRA!481)!

•

Stipulation! that! deed! of! sale! would! issue! after! the! condition! does! not! prevent! perfection! of! the! contract! David! v.! Tiongson! (313!SCRA!63)! ! ! ! !

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Heirs!of!Pedro!Escanlar!v.!Court!of!Appeals! ( Facts:(The!Heirs!of!Carican!executed!a!Deed!of!Sale!of!Rights,!Interests,! and!Participation!over!a!parcel!of!undivided!land!in!favor!of!the!Heirs!of! Escanlar.!It!was!stipulated!that!“the!contract!shall!become!effective!only! upon! approval! of! the! CFI! of! Negros! Occidental.”! The! Heirs! of! Escanlar! failed!to!pay!the!balance!of!the!purchase!price,!but!the!Heirs!of!Carican! never! demanded! payment! and! continued! to! accept! belated! payments.! They!later!on!sold!their!interests!over!the!same!land!to!the!Chuas!and! assailed!the!validity!of!the!Deed!of!Sale!they!executed!with!the!Heirs!of! Escanlar.! The! lower! courts! annulled! the! contract! for! not! having! the! approval!of!the!court!as!stipulated.! ( Issue:(Whether!or!not!the!Deed!of!Sale!to!the!Heirs!of!Escanlar!is!valid( ( Held:( YES.! There! is! a! distinction! between! the! validity! and! effectivity.! Only!the!effectivity!was!made!subject!to!the!condition.!So!long!as!all!the! requisites! (consent,! subject! matter,! and! price)! are! present,! as! in! this! case,! the! contract! is! already! perfected.! Nonetheless,! the! intent! of! the! parties!clearly!manifests!their!intention!to!give!efficacy!to!the!contract.! In!fact,!the!vendors!continued!to!accept!payments.!That!being!the!case,! the!sale!in!favor!of!the!Heirs!of!Escanlar!must!be!preferred!as!it!is!a!valid! and!subsisting!one.1! ( ( (

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!Antonio,!Hipolito,!Imperial!&!Zaragosa.!(2012).!Salse!CLV!Case!Digests.! Retrieved!from!http://www.idoub.com/doc/104486360/SalescCLVcCasec Digests!



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II.(Distinctions(between(Conditions(and(Warranties( •

When! ownership! has! not! ed,! buyer! may! treat! the! fulfillment!of!the!seller!of!his!obligation!under!the!contract!as!a! condition!for!his!obligation!to!accept!and!pay.!

•

If! the! party! promised! that! a! condition! would! be! performed! or! would!happen,!other!party!may!treat!nonerformance!of!such! as!a!breach!of!warranty.! o Such!stipulation!elevates!the!condition!to!a!warranty!! o And!entitle!the!other!party!to!damages!

! Condition(

Warranty(

Nonchappening!of!condition! does!not!amount!to!a!breach!

Noncfulfillment!of!warranty! constitutes!a!breach!

Goes!into!root!of!existence!of! the!obligation!

Goes!into!performance! May!constitute!an!obligation!in!itself!

Must!be!stipulated!by!the! parties!

May!form!part!of!the!obligation!by! provision!of!law,!even!without! stipulation.!

May!attach!to!the!seller!or!to! the!buyer!

Relates!to!subject!matter!itself,!or! obligations!of!the!seller!as!to!the! subject!matter.!

! Power!Commercial!and!Industrial!Corp.!v.!Court!of!Appeals! ! Facts:( Power!Commercial!Corp!entered!into!a!contract!of!sale!with!the! Quiambao!spouses.!It!agreed!to!assume!the!mortgages!thereon.!A!Deed! of! Absolute! Sale! with! Assumption! of! Mortgage! was! executed.! Power! Commercial! Corp! failed! to! settle! the! mortgage! debt! contracted! by! the! spouses,! thus! it! could! not! undertake! the! proper! action! to! evict! the!

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lessees!on!the!lot.!Power!Commercial!Corp!thereafter!sought!to!rescind! the! contract! of! sale! alleging! that! it! failed! to! take! actual! and! physical! possession!of!the!lot.! ( Issue:(Whether!or!not!there!was!a!breach!of!warranty!on!the!part!of!the! spouses!that!it!would!evict!the!lessees! ( Held:( NO.!First,!such!condition!that!the!Quiambao!spouses!would!have! to!evict!the!lessees!was!not!stipulated!in!the!contract.!Thus,!it!cannot!be! considered! a! condition! imposed! upon! its! perfection.! In! fact,! Power! Commercial! Corp.! was! well! aware! of! the! presence! of! the! tenants! therein.!It!was!also!given!control!over!the!said!lot!and!it!endeavored!to! terminate!the!occupation!of!its!actual!tenants.!Also,!since!it!was!Power! Commercial!that!knowingly!undertook!the!risk!of!evicting!the!lessees,!it! cannot!now!claim!that!there!was!a!breach!of!warranty!on!the!part!of!the! vendor.1! ! III.(Express(Warranties( ( Article(1546.(( Any( affirmation( of( fact( or( any( promise( by( the( seller( relating( to( the( thing( is( an( express( warranty( if( the( natural( tendency( of( such( affirmation( or( promise( is( to( induce( the( buyer( to( purchase( the( same,( and(if(the(buyer(purchase(the(thing(relying(thereon.(No(affirmation(of( the(value(of(the(thing,(nor(any(statement(purporting(to(be(a(statement( of( the( seller's( opinion( only,( shall( be( construed( as( a( warranty,( unless(

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the(seller(made(such(affirmation(or(statement(as(an(expert(and(it(was( relied(upon(by(the(buyer.((n)( ! •

o

A! warranty! is! a! statement! or! representation! made! by! the! seller! of! goods,! contemporaneously! and! as! part! of! the! contract! of! sale,! having! reference! to! the! character,! quality!or!title!of!the!goods,!and!by!which!he!promises! or!undertakes!to!insure!that!certain!facts!are!or!shall!be! as! he! then! represents! them.! Ang! v.! Court! of! Appeals! (567!SCRA!53)! A! warranty! is! an! affirmation! of! fact! or! any! promise! made! by! a! vendor! in! relation! to! the! thing! sold.! The! decisive!test!is!whether!the!vendor!assumes!to!assert!a! fact! of! which! the! vendee! is! ignorant.! Goodyear! Philippines,!Inc.!v.!Sy!(474!SCRA!427)!

•

Breach! of! an! express! warranty! makes! the! seller! liable! for! damages.!Carrascoso,!Jr.!v.!Court!of!Appeals!(477!SCRA!666)!

•

Requisites!for!the!existence!of!an!express!warranty! 1. It!must!be!an!affirmation!of!fact,!or!any!promise!by!the! seller!relating!to!the!subject!matter!of!the!sale.! 2. Natural!tendency!of!such!affirmation!is!to!induce!buyer! to!purchase!the!thing;!and! 3. Buyer! purchases! relying! on! such! affirmation/promise! thereon.!

•

The! principle! of! caveat! emptor! only! requires! the! purchaser! to! exercise!care!and!attention!ordinarily!exercised!by!prudent!men! in! like! business! affairs,! and! only! applies! to! defects! which! are! open! and! patent! to! the! service! of! one! exercising! such! care.! It!


can! only! be! applied! where! it! is! shown! or! conceded! that! the! parties! to! the! contract! stand! on! equal! footing! and! have! equal! knowledge! or! equal! means! of! knowledge! and! there! is! no! relation!of!trust!or!confidence!between!them.!It!does!not!apply!

Definition! o

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to! a! representation! that! amounts! to! a! warranty! by! the! seller! and!the!situation!requires!the!buyer!to!rely!upon!such!promise! or!affirmation.!Guinhawa!v.!People!(468!SCRA!278)!! ! Guinhawa!v.!People! ( Facts:( Jaime!Guinhawa!is!engaged!in!the!business!of!selling!brand!new! vehicles,! and! had! a! showroom! displaying! his! products.! Guinhawa! purchased! a! brand! new! Mitsubishi! Lc300! from! Manila.! Guinhawa’s! driver,!Leopoldo!Olayan,!drove!the!van!from!Manila!to!Naga.!However,! Olayan!suffered!a!heart!attack!during!the!trip!causing!the!damage!to!the! under! chassis! since! the! left! front! tire! had! to! be! replaced.! This! was! repaired!and!the!van!was!put!on!display!in!Guinhawa’s!showroom.!This! same!van!was!later!sold!to!Spouses!Silo!who!are!engaged!in!the!business! of! buying! garments! in! Manila! and! selling! them! in! Naga.! They! saw! the! van! in! Guinhawa’s! showroom! and! inspected! its! interior! but! not! the! under!chassis.!They!also!did!not!conduct!a!test!drive,!and!so!bought!the! van! without! any! knowledge! of! the! damage! it! had! previously! incurred.! Azotea,! the! sales! manager,! was! the! one! who! transacted! with! the! Spouses!Silo!and!furnished!the!couple!with!a!Service!Manual!containing! the!warranty!!and!conditions.!The!day!after!the!van!was!bought!by! the! spouses,! Josephine! Silo! (wife)! went! to! Manila! with! Glenda! Pingol! and! the! latter’s! husband! (driver).! On! the! way! back,! they! heard! a! squeaking! sound! and! later! discovered! that! it! was! caused! by! parts! underneath! the! vehicle! that! were! welded! together.! Guinhawa! insisted! that!the!defects!were!mere!factory!defects.!As!the!defects!persisted,!the!



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spouses! requested! that! Guinhawa! replace! the! van! with! 2! Charadec Daihatsu!vehicles!within!a!week!or!two,!with!the!additional!costs!to!be! taken! from! their! downpayment.! However,! the! spouses! later! asked! for! the! rescission! of! the! contract! upon! discovering! that! the! van! was! really!

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“The! law! allows! considerable! latitude! to! seller’s! statements,! or! dealer’s! talk;! and! experience! teaches! that!it!is!exceedingly!risky!to!accept!it!at!its!face!value.! Assertions!concerning!the!property!which!is!the!subject!

not!brand!new.! ( Issue:( Whether! or! not! there! were! fraudulent! representations! by! Guinhawa.! ! Held:( YES.! The! Supreme! Court! ruled! that! Jaime! Guinhawa! is! guilty! of! other!deceits.!The!Court!pointed!out!that!the!crime!could!be!committed!

of! a! contract! of! sale,! or! in! regard! to! its! qualities! and! characteristics,! are! the! usual! and! ordinary! means! used! by! sellers! to! obtain! a! high! price! and! are! always! understood! as! affording! to! buyers! no! ground! for! omitting!to!make!inquiries.!A!man!who!relies!upon!such! an! affirmation! made! by! a! person! whose! interest! might! so! readily! prompt! him! to! exaggerate! the! value! of! his!

by!omission.!If,!in!a!contract!of!sale,!the!vendor!knowingly!allowed!the! vendee!to!be!deceived!as!to!the!thing!sold!in!a!material!matter!by!failing! to! disclose! an! intrinsic! circumstance! that! is! vital! to! the! contract,! knowing! that! the! vendee! is! acting! upon! the! presumption! that! no! such! fact! exists,! deceit! is! accomplished! by! the! suppression! of! the! truth.! Azotea!knew!that!the!van!had!figured!in!an!accident,!was!damaged!and! had!to!be!repaired.!Nevertheless,!the!van!was!placed!in!the!showroom,!

property! does! so! as! his! peril,! and! must! take! the! consequences! of! his! own! imprudence.”! Songco! v.! Sellner!(37!Phil.!254)!

thus! making! it! appear! to! the! public! that! it! was! a! brand! new! unit.! The! petitioner! was! mandated! to! reveal! the! foregoing! facts! to! the! private! complainant.!! ! •

•

usual! and! ordinary! means! of! sellers! to! get! a! high! price.! A! man! who! relies! upon! such! affirmation...does! so! at! his! own! peril.! Azarraga!v.!Gay!(52!Phil.!599)! ! Prescription!of!Warranties! •

A! breach! in! the! warranties! of! the! seller! entitles! the! buyer! to! a! proportionate! reduction! of! the! purchase! price.! PNB! v.! Mega! Prime!Realty!and!Holding!Corp.!(567!SCRA!633)!

Affirmation! of! value! or! statement! of! seller’s! opinion! is! not! a! warranty!(Article( 13411).( Unless!seller!made!such!statement!as! an!expert,!and!was!relied!upon!by!the!buyer.!

Assertions! concerning! the! property’s! characteristics! are! the!

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!Article(1341.!! A! mere! expression! of! an! opinion! does! not! signify! fraud,! unless! made! by! an! expert!and!the!other!party!has!relied!on!the!former's!special!knowledge.!(n)!


The!prescriptive!period!for!instituting!actions!based!on!a!breach! of!express!warranty!is!that!specified!in!the!contract,!and!in!the! absence! of! such! period,! the! general! rule! on! rescission! of! contract,!which!is!four!years,!while!for!actions!based!on!breach! of!implied!warranty,!the!prescriptive!period!is!six!months!from!


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the! date! of! the! delivery! of! the! thing! sold.! Ang! v.! Court! of! Appeals!(567!SCRA!53)! ! IV.(Implied(Warranties( ( Article(1547.( In(a(contract(of(sale,(unless(a(contrary(intention(appears,(there(is:( ( (1)(An(implied(warranty(on(the(part(of(the(seller(that(he(has(a(right(to( sell(the(thing(at(the(time(when(the(ownership(is(to(,(and(that(the( buyer( shall( from( that( time( have( and( enjoy( the( legal( and( peaceful( possession(of(the(thing;( ( (2)( An( implied( warranty( that( the( thing( shall( be( free( from( any( hidden( faults(or(defects,(or(any(charge(or(encumbrance(not(declared(or(known( to(the(buyer.( ( This( Article( shall( not,( however,( be( held( to( render( liable( a( sheriff,( auctioneer,(mortgagee,(pledgee,(or(other(person(professing(to(sell(by( virtue(of(authority(in(fact(or(law,(for(the(sale(of(a(thing(in(which(a(third( person(has(a(legal(or(equitable(interest.((n)( ! •

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Exception:(Express!stipulation!in!contract!may!make!the! agent!of!the!seller!bound!by!these.!

! A.(Warranty(That(Seller(Has(Right(To(Sell( •

The!implied!warranty!that!seller!has!the!right!to!sell!the!thing!at! the!time!the!ownership!is!to!!refers!only!to!the!transfer!of! ownership! at! the! point! of! consummation,! NOT! any! representation!as!to!ownership!at!the!point!of!perfection.!

•

It! shall! not! be! applicable! to! render! liable! a! sheriff,! auctioneer,! mortgagee,! pledgee! or! any! other! person! professing! to! sell! by! virtue!of!authority!in!fact!or!law.! o For! the! sale! of! a! thing! in! which! a! third! person! has! a! legal/equitable!interest!

•

There!can!be!no!legal!waiver!of!this!warranty!without!changing! basic!nature!of!the!relationship! o Unless! it! amounts! to! clear! assumption! of! risk! on! the! part!of!the!buyer!

( B.(Warranty(Against(Eviction( •

Warranty! against! eviction! is! an! implied! warranty! that! when! ownership! will! ,! buyer! shall! have! legal! and! peaceful! possession.!

Implied!Warranties!(definition)!!!those!which!by!law!constitute!

•

part!of!every!contract!of!sale,!whether!or!not!the!parties!were! aware!of!or!intended!them.!

Vendor! shall! answer! for! the! eviction! even! if! there! is! no! stipulation!regarding!eviction!

•

The!seller,!in!declaring!that!he!owned!and!had!clean!title!to!the! vehicle,! gave! an! implied! warranty! of! title,! and! in! pledging! that! he! “will! defend! the! same! from! all! claims! or! any! claim! whatsoever! [and]! will! save! the! vendee! from! any! suit! by! the!

Who!is!liable?! o

General( Rule:( Only! a! seller! is! bound! by! the! implied! warranties.!

government! of! the! Republic! of! the! Philippines,”! he! gave! a!



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warranty! against! eviction,! and! the! prescriptive! period! to! file! a! breach! thereof! is! six! months! after! the! delivery! of! the! vehicle.! Ang!v.!Court!of!Appeals!(567!SCRA!53)! ! Ang!v.!Court!of!Appeals!

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the! ground! that! the! filing! of! said! complaint! seeking! the! awarding! of! damages!for!breach!of!warranty!has!already!prescribed.!! ! Issue:( Whether! or! not! Ang‘s! cause! of! action! had! not! yet! prescribed!

( Facts:( Under! a! "carcswapping"! scheme,! Bruno! Soledad! sold! his! Mitsubishi! GSR! sedan! 1982! model! to! Jaime! Ang.! For! his! part,! Ang! conveyed! to! Soledad! his! Mitsubishi! Lancer! model! 1988.! Ang,! a! buyer! and! seller! of! used! vehicles,! later! offered! the! Mitsubishi! GSR! for! sale! through! Far! Eastern! Motors,! a! secondchand! auto! display! center.! The!

when!he!filed!the!complaint! ! Held:(YES.!In!declaring!that!he!owned!and!had!clean!title!to!the!vehicle! at! the! time! the! Deed! of! Absolute! Sale! was! forged,! Soledad! gave! an! implied!warranty!of!title.!In!pledging!that!he!"will!defend!the!same!from! all! claims! or! any! claim! whatsoever! and! will! save! the! vendee! from! any! suit!by!the!government!of!the!Republic!of!the!Philippines,"!Soledad!gave!

vehicle! was! eventually! sold! to! Paul! Bugash.! Before! the! deed! could! be! ed!in!Bugash‘s!name,!however,!the!vehicle!was!seized!by!virtue! of!a!writ!of!replevin!on!!of!the!alleged!failure!of!Ronaldo!Panes,! the! owner! of! the! vehicle! prior! to! Soledad,! to! pay! the! mortgage! debt! constituted!thereon.! ! To! secure! the! release! of! the! vehicle,! Ang! paid! BA! Finance.! Soledad!

a!warranty!against!eviction.!! ! Given! Ang‘s! business! of! buying! and! selling! used! vehicles,! he! could! not! have!merely!relied!on!Soledad‘s!affirmation!that!the!car!was!free!from! liens! and! encumbrances.! He! was! expected! to! have! thoroughly! verified! the!car‘s!registration!and!related!documents.!! !

refused! to! reimburse,! despite! repeated! demands,! drawing! Ang! to! charge!him!for!Estafa!with!abuse!of!confidence.!By!Resolution,!the!City! Prosecutor‘s! Office! dismissed! the! complaint! for! insufficiency! of! evidence,! drawing! Ang! to! file! for! consecutive! complaints! for! damages! against! Soledad! before! the! Regional! Trial! Court! (RTC)! of! Cebu! City.! Subsequently,!the!RTC!rendered!judgment!in!favor!of!Ang!"for!the!sake! of! justice! and! equity,! and! in! consonance! with! the! salutary! principle! of! noncenrichment!at!another‘s!expense.!The!RTC!then!ordered!Soledad!to!

Since! what! Soledad,! as! seller,! gave! was! an! implied! warranty,! the! prescriptive! period! to! file! a! breach! thereof! is! six! months! after! the! delivery! of! the! vehicle,! following! Article! 1571.! But! even! if! the! date! of! filing! of! the! action! is! reckoned! from! the! date! petitioner! instituted! his! first! complaint! for! damages! on! November! 9,! 1993,! and! not! on! July! 15,! 1996! when! he! filed! the! complaint! subject! of! the! present! petition,! the! action! just! the! same! had! prescribed,! it! having! been! filed! 16! months! after!July!28,!1992,!the!date!of!delivery!of!the!vehicle.1!

pay!Ang!the!amount!the!latter!paid!to!BA!Finance.!! ! Soledad! then! appealed! to! the! Appellate! Court,! which! reverses! the! decision! of! the! RTC.! The! Court! of! Appeals! dismissed! Ang‘s! petition! on!

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B.1.(When(There(Is(Breach(Of(This(Warranty( 1. Purchaser!has!been!deprived!of/evicted!from!the!whole!or!part! of!the!thing!sold;! o The!buyer!need!not!resist!the!eviction.! 2. Eviction!is!by!final!judgment;! o The!warranty!cannot!be!enforced!until!a!final!judgment! has! been! rendered! whereby! the! buyer! loses! the! thing! acquired!or!a!part!thereof.!! o The! buyer! need! not! appeal! from! the! decision! in! order! that!the!seller!may!become!liable!for!eviction.! 3. Basis!thereof!is!a!right!prior!to!the!sale!made!by!the!seller;!and! 4. Seller! has! been! summoned! and! made! cocdefendant! in! the! suit! for!eviction!at!the!instance!of!the!buyer.! o In!order!to!constitute!notice!of!eviction!to!the!seller,!the! seller!must!have!been!made!a!party!to!the!case.!! " Warranty! cannot! be! enforced! against! seller! when! buyer! merely! mailed! seller! a! copy! of! the! opposition! of! buyer! to! the! eviction! suit.! Seller!

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must! be! summoned! in! the! suit! for! eviction! at! the!instance!of!the!buyer!(Article!1558),!and!be! made!a!cocdefendant!(Article!1559);!or!made!a! thirdarty! defendant.! Escaler! v.! Court! of! Appeals!(138!SCRA!1)! This!is!the!only!condition!that!is!required!to!be!complied! with! by! the! vendee.! Once! this! is! proven,! the! buyer’s! right! to! the! warranty! is! perfect,! and! the! seller! cannot! set!up!anything!against!it.!Jovellano!v.!Lualhati!(47!Phil.! 371)!

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No! action! for! breach! of! this! warranty! when! buyer! was! well! aware! of! the! presence! of! tenants,! and! even! undertook! the! job! of!ejecting!these!squatters.!Power!Commercial!v.!CA!(274!SCRA! 597)!

! B.2.(Eviction(In(Part( ! Article(1556.(( Should(the(vendee(lose,(by(reason(of(the(eviction,(a(part(of(the(thing( sold( of( such( importance,( in( relation( to( the( whole,( that( he( would( not( have(bought(it(without(said(part,(he(may(demand(the(rescission(of(the( contract;( but( with( the( obligation( to( return( the( thing( without( other( encumbrances(that(those(which(it(had(when(he(acquired(it.( ( He(may(exercise(this(right(of(action,(instead(of(enforcing(the(vendor's( liability(for(eviction.( ( The(same(rule(shall(be(observed(when(two(or(more(things(have(been( tly(sold(for(a(lump(sum,(or(for(a(separate(price(for(each(of(them,(if( it( should( clearly( appear( that( the( vendee( would( not( have( purchased( one(without(the(other.((1479a)( ! B.3.(Particular(Causes(Given(By(Law( ! Article(1550.(( When( adverse( possession( had( been( commenced( before( the( sale( but( the( prescriptive( period( is( completed( after( the( transfer,( the( vendor( shall(not(be(liable(for(eviction.((n)( ( (



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Article(1551.(( If( the( property( is( sold( for( nonpayment( of( taxes( due( and( not( made( known(to(the(vendee(before(the(sale,(the(vendor(is(liable(for(eviction.( (n)( ! B.4.(Applicability(to(Judicial(Sales( ! Article(1552.(( The( judgment( debtor( is( also( responsible( for( eviction( in( judicial( sales,( unless(it(is(otherwise(decreed(in(the(judgment.((n)( ! •

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Atty.!Santiago:!In!judicial!sales,!sometimes!what!is!being!sold!is! not! the! property! of! the! judicial! debtor,! but! that! of! the! guarantor.! The! owner! in! this! case! cannot! be! held! liable! for! warranty! of! eviction,! but! rather! it! is! judgmentcdebtor! who! should!be!held!liable!for!eviction.!

! B.5.(Amounts(For(Which(Seller(Is(Liable(In(Case(Of(Eviction( !

BUT!in!the!following!cases:! o Santiago!Land!Dev.!Corp.!v.!Court!of!Appeals!(276!SCRA! 674),! the! Court! ruled! that! a! buyer! at! execution! sales! takes!property!subject!to!superior!right!of!other!parties.!

Article(1555.( When( the( warranty( has( been( agreed( upon( or( nothing( has( been( stipulated(on(this(point,(in(case(eviction(occurs,(the(vendee(shall(have( the(right(to(demand(of(the(vendor:( ( (1)(The(return(of(the(value(which(the(thing(sold(had(at(the(time(of(the( eviction,(be(it(greater(or(less(than(the(price(of(the(sale;(

Therefore,! the! judgment! debtorcseller! is! not! liable! for! eviction.! Caveat! emptor! applies! in! execution! sales,! and! the! sheriff!does!not!warrant!the!title!to!the!property!sold!by! him.!It!is!not!incumbent!upon!him!to!place!purchaser!in! possession.! Allure! Manufacturing,! Inc.! v.! Court! of! Appeals!(199!SCRA!285)!

( (2)(The(income(or(fruits,(if(he(has(been(ordered(to(deliver(them(to(the( party(who(won(the(suit(against(him;( ( (3)( The( costs( of( the( suit( which( caused( the( eviction,( and,( in( a( proper( case,(those(of(the(suit(brought(against(the(vendor(for(the(warranty;( (

No! Warranty! Against! Eviction! When! Execution! Sale! !! In! voluntary! sales,! vendor! can! be! expected! to! defend! his! title! because!of!his!warranty!to!the!vendees!but!no!such!obligation!is! owed! by! the! owner! whose! land! is! sold! at! execution! sale.!

(4)(The(expenses(of(the(contract,(if(the(vendee(has(paid(them;( ( (5)( The( damages( and( interests,( and( ornamental( expenses,( if( the( sale( was(made(in(bad(faith.((1478)( ( ( ( (

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Santiago!Land!Dev.!Corp.!v.!Court!of!Appeals!(276!SCRA!674)!! o BUT!SEE:!Article(1552!



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B.6.(Waiver(Of(Warranty(And(Effects( ! Article(1553.(( Any( stipulation( exempting( the( vendor( from( the( obligation( to( answer(

the( contract,( unless( he( should( prefer( the( appropriate( indemnity.( Neither(right(can(be(exercised(if(the(non_apparent(burden(or(servitude( is( recorded( in( the( Registry( of( Property,( unless( there( is( an( express( warranty(that(the(thing(is(free(from(all(burdens(and(encumbrances.(

for(eviction(shall(be(void,(if(he(acted(in(bad(faith.((1476)( !

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If!seller!acted!in!bad!faith,!then!any!stipulation!exempting!seller! from!answering!eviction!shall!be!void.!Article(1553.!

( Within(one(year,(to(be(computed(from(the(execution(of(the(deed,(the( vendee(may(bring(the(action(for(rescission,(or(sue(for(damages.( ( One( year( having( elapsed,( he( may( only( bring( an( action( for( damages( within( an( equal( period,( to( be( counted( from( the( date( on( which( he( discovered(the(burden(or(servitude.((1483a)(

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If! buyer! merely! renounces! the! warranty! in! general! ,! and!

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Effect!of!waiver!depends!on!nature!of!such!waiver.!Whether:! o It!is!a!general!or!specific!waiver;!and! o

Done!in!good!faith!or!bad!faith!on!seller’s!part!

without!knowledge!of!a!particular!risk,!and!eviction!takes!place,! the!seller!shall!only!pay!the!value!of!thing!at!time!of!eviction.! o General!waiver!limits!liability!of!seller.! •

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2. Nature! of! such! makes! it! so! that! the! buyer! would! not! have!acquired!the!immovable!had!be!been!aware!of!it.!!

If! buyer! waived! with! knowledge! of! risks! (specific! waiver)! seller! shall!not!be!liable.! o Even! when! there! is! no! specific! waiver,! buyer! cannot! hold!seller!liable!when!he!is!aware!of!a!third!party!claim! (BUYER!MUST!BE!IN!GOOD!FAITH).!JM!Tuazon!v.!CA!(94! SCRA!413)!

! C.(Warranty(Against(Non_apparent(Servitudes( ( Article(1560.(( If( the( immovable( sold( should( be( encumbered( with( any( non_apparent( burden( or( servitude,( not( mentioned( in( the( agreement,( of( such( a( nature( that( it( must( be( presumed( that( the( vendee( would( not( have( acquired(it(had(he(been(aware(thereof,(he(may(ask(for(the(rescission(of(

Requisites!for!Warranty!Against!NoncApparent!Servitude! 1. Immovable! sold! is! encumbered! by! noncapparent! burden/servitude,!not!mentioned!in!the!agreement!

! C.1.(This(warranty(does(not(apply( 1. When!servitude!is!mentioned!in!the!agreement!!! 2. If!the!noncapparent!burden!is!recorded!in!the!Registry!of!Deeds! o Unless!there!is!an!express!warranty!that!the!thing!is!free! from!all!burdens!and!encumbrances.! ! C.2.(Remedies(and(Prescriptive(Period( •

Buyer!may!bring!action!for!rescission!or!sue!for!damages!within! one!(1)!year!from!execution!of!the!deed.!

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If! this! has! elapsed,! he! may! only! bring! an! action! for! damages! within!one!year!from!when!he!discovered!the!servitude.!!


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D.(Warranty(Against(Hidden(Defects( ( Article(1561.(( The( vendor( shall( be( responsible( for( warranty( against( the( hidden( defects(which(the(thing(sold(may(have,(should(they(render(it(unfit(for( the(use(for(which(it(is(intended,(or(should(they(diminish(its(fitness(for( such(use(to(such(an(extent(that,(had(the(vendee(been(aware(thereof,( he(would(not(have(acquired(it(or(would(have(given(a(lower(price(for(it;( but( said( vendor( shall( not( be( answerable( for( patent( defects( or( those( which(may(be(visible,(or(for(those(which(are(not(visible(if(the(vendee(is( an( expert( who,( by( reason( of( his( trade( or( profession,( should( have( known(them.((1484a)( ( •

Seller!shall!be!responsible!when...! 1. Nature!of!hidden!defect!is!such!that!it!would!render!the!

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Seller’s! agent! can! by! agreement! be! liable! for! the! warranty! against!hidden!defects.!Schmid!and!Oberly,!Inc.!v.!RJL!Martinez! (166!SCRA!493)!

! D.1.(Requisites(for(Breach(( Nutrimix!Feeds!Corp.!v.!Court!of!Appeals!(441!SCRA!357)! 1. Defect!must!be!hidden! 2. Must!exist!at!time!of!the!sale! 3. Must!ordinarily!have!been!excluded!from!the!contract! 4. Must! be! important! (render! thing! unfit! or! decrease! fitness! considerably)! 5. Action!must!be!instituted!within!Statute!of!Limitations! ! Nutrimix!Feeds!Corp.!v.!Court!of!Appeals! (

subject! manner! unfit! for! the! use! for! which! it! was! intended.! 2. Diminish!its!fitness!to!such!an!extent!that!buyer!would! not!have!bought!it!or!he!would!have!paid!a!lower!price! for!it.! Note:! Seller! responsible! even! if! he! was! not! aware! of! these! hidden!defects.!Article(1566(1)(

Facts:(Evangelista!spouses!purchased!feeds!from!Nutrimix.!They!refused! to! pay! their! unsettled! debt! claiming! that! thousands! of! their! livestock! were!poisoned!by!the!Nutrimix!feeds.!Nutrimix!sued!them!for!collection! of! money.! The! spouses! countered! with! a! suit! for! that! time,! they! may! have!already!been!contaminated.!! ! Issue:( Whether! or! not! Nutrimix! is! guilty! of! breach! of! warranty! due! to!

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Seller! not! answerable! for! patent! defects,! or! those! which! are! visible.! o Even! for! those! which! are! invisible,! if! the! buyer! should! know!about!them!by!reason!of!his!trade/profession!

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The!warranty!applies!to!both!movable!and!immovable!

hidden!defects( ( Held:(NO.!In!the!sale!of!animal!feeds,!there!is!an!implied!warranty!that!it! is! reasonably! fit! and! suitable! to! be! used! for! the! purpose! which! both! parties!contemplated.!To!be!able!to!prove!liability!on!the!basis!of!breach! of! implied! warranty,! three! things! must! be! established! by! the! respondents.!!



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First!is!that!they!sustained!injury!because!of!the!product;!the!!

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Second! is! that! the! injury! occurred! because! the! product! was! defective!or!unreasonably!unsafe;!and!!

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Finally,! the! defect! existed! when! the! product! left! the! hands! of!

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proportionate( reduction( of( the( price,( with( damages( in( either( case.( (1486a)( ! •

the!petitioner.!! ! A! manufacturer! or! seller! of! a! product! cannot! be! held! liable! for! any! damage! allegedly! caused! by! the! product! in! the! absence! of! any! proof! that!the!product!in!question!was!defective.!The!defect!must!be!present!

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The!buyer!may!either:! o o

Withdraw!(accion!redhibitoria);!or! Demand!a!reduction!of!the!price!(action!quanti!minoris)!

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Damages!in!either!case.!

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The!choice!of!remedies!is!available!only!when!the!thing!has!not! been!lost.!

upon!the!delivery!or!manufacture!of!the!product;!or!when!the!product! left!the!seller’s!or!manufacturer’s!control;!or!when!the!product!was!sold! to! the! purchaser;! or! the! product! must! have! reached! the! ! or! consumer!without!substantial!change!in!the!condition!it!was!sold.! ! In!alleging!that!there!was!a!violation!of!warranty!against!hidden!defects,! the!spouses!assumed!the!burden!of!proof.!However,!this!they!failed!to!

! Article(1568.(( If( the( thing( sold( should( be( lost( in( consequence( of( the( hidden( faults,( and(the(vendor(was(aware(of(them,(he(shall(bear(the(loss,(and(shall(be( obliged( to( return( the( price( and( refund( the( expenses( of( the( contract,( with( damages.( If( he( was( not( aware( of( them,( he( shall( only( return( the( price(and(interest(thereon,(and(reimburse(the(expenses(of(the(contract(

overcome.!Under!the!law,!the!defect!must!exist!at!the!time!the!sale!was! made!and!at!the!time!the!product!left!the!hands!of!the!seller,!which!the! spouses! failed! to! prove.! The! feeds! were! belatedly! tested—3! months! after!the!death!of!the!broilers!and!hogs.!This!means!that!that!time,!they! may! have! already! been! contaminated.! They! failed! to! prove! that! the! feeds! delivered! to! be! tested! were! the! same! feeds! that! allegedly! poisoned!the!animals.!

which(the(vendee(might(have(paid.((1487a)( ! •

! D.2.(Remedies(of(Buyer/Obligation(of(Seller( ! Article(1567.(( In( the( cases( of( Articles( 1561,( 1562,( 1564,( 1565( and( 1566,( the( vendee( may( elect( between( withdrawing( from( the( contract( and( demanding( a(


If!it!has!been!lost,!obligations!of!seller!depend!on!cause!of!loss,! knowledge!of!hidden!defect!by!seller,!and!whether!there!was!a! waiver!of!the!warranty.! o Lost!through!hidden!faults! " If!seller!was!aware!!!he!shall!bear!the!loss,!and! return! the! price! and! expenses! of! the! contract,! with!damages.! " If! seller! was! not! aware! !! only! obliged! only! to! return! the! price! and! interest! thereon,! and! reimburse! the! expenses! of! contract,! but! no! damages.!


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If!lost!through!fortuitous!event!or!through!fault!of!buyer!! " If! seller! was! not! aware! i.e.! in! good! faith! !! buyer!may!demand!the!price!he!paid,!less!value! of!the!thing!when!it!was!lost.!

D.4.(Applicability(To(Judicial(Sales( ! Article(1570.(( The(preceding(articles(of(this(Subsection(shall(be(applicable(to(judicial(

If!seller!in!bad!faith!!!he!shall!pay!damages!to! the!buyer,!

sales,(except(that(the(judgment(debtor(shall(not(be(liable(for(damages.( (1489a)( !

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! D.3.(When(There(Is(A(Waiver(Of(Warranty( ! Article(1566.(( The( vendor( is( responsible( to( the( vendee( for( any( hidden( faults( or( defects(in(the(thing(sold,(even(though(he(was(not(aware(thereof.( ( This(provision(shall(not(apply(if(the(contrary(has(been(stipulated,(and( the(vendor(was(not(aware(of(the(hidden(faults(or(defects(in(the(thing( sold.((1485)( ! •

If!seller!not!aware!!!loss!will!not!make!seller!liable!

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If!seller!was!in!bad!faith!!!seller!still!liable!on!the!warranty!

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The!stipulation!in!a!lease!with!option!to!purchase!(treated!as!a! sale! of! movable! on! installments)! that! the! buyerclessee! “absolutely!releases!the!lessor!from!any!liability!whatsoever!as! to!any!and!all!matters!in!relation!to!warranty!in!accordance!with! the! provisions! hereinafter! stipulated,”! was! held! as! an! express! waiver!of!warranty!against!hidden!defect!in!favor!of!the!sellerc lessor! which! “absolved! the! [sellerclessor]! from! any! liability! arising! from! any! defect! or! deficiency! of! the! machinery! they! bought.”! Filinvest! Credit! Corp.! v.! Court! of! Appeals! (178! SCRA! 188)!

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Although!there!may!be!hidden!defects,!the!debtor!may!not!have! been!in!bad!faith!especially!if!the!property!was!not!his!own!but! the! guarantor’s.! As! such,! the! judgmentcdebtor! cannot! be! held! liable!for!damages!for!the!hidden!defects.!

! D.6.(Prescriptive(Period( ! Article(1571.(( Actions( arising( from( the( provisions( of( the( preceding( ten( articles( shall( be(barred(after(six(months,(from(the(delivery(of(the(thing(sold.((1490)( ! E.(Redhibitory(Defects(of(Animals( ( Article(1576.(( If(the(hidden(defect(of(animals,(even(in(case(a(professional(inspection( has( been( made,( should( be( of( such( a( nature( that( expert( knowledge( is( not( sufficient( to( discover( it,( the( defect( shall( be( considered( as( redhibitory.( ( But( if( the( veterinarian,( through( ignorance( or( bad( faith( should( fail( to( discover(or(disclose(it,(he(shall(be(liable(for(damages.((1495)( ( (



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E.1.(Sale(Of(Team( ( Article(1572.(( If(two(or(more(animals(are(sold(together,(whether(for(a(lump(sum(or(

E.3.(Prescriptive(Period( ( Article(1577.(( The(redhibitory(action,(based(on(the(faults(or(defects(of(animals,(must(

for( a( separate( price( for( each( of( them,( the( redhibitory( defect( of( one( shall(only(give(rise(to(its(redhibition,(and(not(that(of(the(others;(unless( it(should(appear(that(the(vendee(would(not(have(purchased(the(sound( animal(or(animals(without(the(defective(one.( ( The( latter( case( shall( be( presumed( when( a( team,( yoke( pair,( or( set( is( bought,( even( if( a( separate( price( has( been( fixed( for( each( one( of( the(

be( brought( within( forty( days( from( the( date( of( their( delivery( to( the( vendee.( ( This( action( can( only( be( exercised( with( respect( to( faults( and( defects( which(are(determined(by(law(or(by(local(customs.((1496a)( ( Article(1578.((

animals(composing(the(same.((1491)( ( Article(1573.(( The( provisions( of( the( preceding( article( with( respect( to( the( sale( of( animals(shall(in(like(manner(be(applicable(to(the(sale(of(other(things.( (1492)( !

If( the( animal( should( die( within( three( days( after( its( purchase,( the( vendor(shall(be(liable(if(the(disease(which(cause(the(death(existed(at( the(time(of(the(contract.((1497a)( ! E.4.(Obligation(Of(Buyer(To(Return(( ! Article(1579.((

E.2.(Other(Rules(On(Sale(Of(Animals( ! Article(1574.(( There(is(no(warranty(against(hidden(defects(of(animals(sold(at(fairs(or( at(public(auctions,(or(of(live(stock(sold(as(condemned.((1493a)( ( Article(1575.(( The(sale(of(animals(suffering(from(contagious(diseases(shall(be(void.(

If(the(sale(be(rescinded,(the(animal(shall(be(returned(in(the(condition( in( which( it( was( sold( and( delivered,( the( vendee( being( answerable( for( any(injury(due(to(his(negligence,(and(not(arising(from(the(redhibitory( fault(or(defect.((1498)( ( E.5.(Remedies(of(Buyer( ! Article(1580.((

( A(contract(of(sale(of(animals(shall(also(be(void(if(the(use(or(service(for( which(they(are(acquired(has(been(stated(in(the(contract,(and(they(are( found(to(be(unfit(therefor.((1494a)(

In( the( sale( of( animals( with( redhibitory( defects,( the( vendee( shall( also( enjoy( the( right( mentioned( in( article( 1567;( but( he( must( make( use( thereof(within(the(same(period(which(has(been(fixed(for(the(exercise( of(the(redhibitory(action.((1499)(



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V.(Implied(Warranties(in(Sale(of(Goods( ! A.(Warranty(as(to(Fitness(or(Quality( ( Article(1562.( In(a(sale(of(goods,(there(is(an(implied(warranty(or(condition(as(to(the( quality(or(fitness(of(the(goods,(as(follows:( ( (1)(Where(the(buyer,(expressly(or(by(implication,(makes(known(to(the( seller(the(particular(purpose(for(which(the(goods(are(acquired,(and(it( appears(that(the(buyer(relies(on(the(seller's(skill(or(judgment((whether( he(be(the(grower(or(manufacturer(or(not),(there(is(an(implied(warranty( that(the(goods(shall(be(reasonably(fit(for(such(purpose;( ( (2)( Where( the( goods( are( brought( by( description( from( a( seller( who( deals( in( goods( of( that( description( (whether( he( be( the( grower( or( manufacturer(or(not),(there(is(an(implied(warranty(that(the(goods(shall( be(of(merchantable(quality.((n)( ! A.1.(Requisites(For(Breach(Of(Warranty(To(Apply( 1. Buyer!sustained!injury!because!of!the!product.! 2. Injury!occurred!because!product!was!defective!or!unreasonably! unsafe.! 3. Defect!existed!when!product!left!the!hands!of!the!seller.! •

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A.2.(Measure(Of(Damage(In(Case(Of(Breach(Of(Warranty(On(Quality( •

Difference! between! value! of! goods! at! the! time! of! delivery! and! the! value! they! would! have! had! if! the! warranty! was! complied! with.!(Article(1599)! o Applies! in! absence! of! special! circumstances! showing! damage!of!a!greater!amount!!

! B.(Sale(of(Goods(by(Sample/Description( ! Article(1565.( In( the( case( of( a( contract( of( sale( by( sample,( if( the( seller( is( a( dealer( in( goods(of(that(kind,(there(is(an(implied(warranty(that(the(goods(shall(be( free(from(any(defect(rendering(them(unmerchantable(which(would(not( be(apparent(on(reasonable(examination(of(the(sample.((n)( ! •

A! seller’s! description! of! the! goods! which! is! made! part! of! the! basis! of! the! transaction! creates! a! warranty! that! the! goods! will! conform!to!that!description.!Mendoza!v.!David!(441!SCRA!172)!

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There!is!a!sale!by!sample!when!a!small!quantity!is!exhibited!by!

A! manufacturer! or! seller! cannot! be! held! liable! if! there! is! no! proof! that! the! product! was! defective.! Product! must! have! reached!!without!substantial!change!in!condition.!Nutrimix! Feeds!v.!Court!of!Appeals!(441!SCRA!357)!

! !


the! seller! as! a! fair! specimen! of! the! bulk,! which! is! not! present! and!there!is!no!opportunity!to!inspect!or!examine!the!same.!To! constitute! a! sale! by! sample,! it! must! appear! that! the! parties! treated! the! sample! as! the! standard! of! quality! and! that! they! contracted!with!reference!to!the!sample!with!the!understanding! that!the!product!to!be!delivered!would!correspondent!with!the! sample.! In! a! contract! of! sale! by! sample,! there! is! an! implied! warranty!that!the!goods!shall!be!free!from!any!defect!which!is! not! apparent! on! reasonable! examination! of! the! sample! and!


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which! would! render! the! goods! unmerchantable.! Mendoza! v.! David!(441!SCRA!172)!

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( C.( Buyer’s( Option( In( Case( Of( Breach( Of( Warranty( ! ( Article( 1599(1)(

Where(the(goods(have(been(delivered(to(the(buyer,(he(cannot(rescind( the( sale( if( he( knew( of( the( breach( of( warranty( when( he( accepted( the( goods( without( protest,( or( if( he( fails( to( notify( the( seller( within( a( reasonable(time(of(the(election(to(rescind,(or(if(he(fails(to(return(or(to(

and((2)! ( Article(1599.(( Where( there( is( a( breach( of( warranty( by( the( seller,( the( buyer( may,( at( his(election:( ( (1)(Accept(or(keep(the(goods(and(set(up(against(the(seller,(the(breach(

offer( to( return( the( goods( to( the( seller( in( substantially( as( good( condition(as(they(were(in(at(the(time(the(ownership(was(transferred(to( the( buyer.( But( if( deterioration( or( injury( of( the( goods( is( due( to( the( breach(or(warranty,(such(deterioration(or(injury(shall(not(prevent(the( buyer(from(returning(or(offering(to(return(the(goods(to(the(seller(and( rescinding(the(sale.( (

of(warranty(by(way(of(recoupment(in(diminution(or(extinction(of(the( price;( ( (2)(Accept(or(keep(the(goods(and(maintain(an(action(against(the(seller( for(damages(for(the(breach(of(warranty;( ( (3)( Refuse( to( accept( the( goods,( and( maintain( an( action( against( the(

Where(the(buyer(is(entitled(to(rescind(the(sale(and(elects(to(do(so,(he( shall( cease( to( be( liable( for( the( price( upon( returning( or( offering( to( return( the( goods.( If( the( price( or( any( part( thereof( has( already( been( paid,( the( seller( shall( be( liable( to( repay( so( much( thereof( as( has( been( paid,(concurrently(with(the(return(of(the(goods,(or(immediately(after( an(offer(to(return(the(goods(in(exchange(for(repayment(of(the(price.( (

seller(for(damages(for(the(breach(of(warranty;( ( (4)( Rescind( the( contract( of( sale( and( refuse( to( receive( the( goods( or( if( the(goods(have(already(been(received,(return(them(or(offer(to(return( them(to(the(seller(and(recover(the(price(or(any(part(thereof(which(has( been(paid.( ( When(the(buyer(has(claimed(and(been(granted(a(remedy(in(anyone(of(

Where(the(buyer(is(entitled(to(rescind(the(sale(and(elects(to(do(so,(if( the(seller(refuses(to(accept(an(offer(of(the(buyer(to(return(the(goods,( the( buyer( shall( thereafter( be( deemed( to( hold( the( goods(as(bailee(for( the(seller,(but(subject(to(a(lien(to(secure(payment(of(any(portion(of(the( price(which(has(been(paid,(and(with(the(remedies(for(the(enforcement( of(such(lien(allowed(to(an(unpaid(seller(by(Article(1526.(5)( ( In(the(case(of(breach(of(warranty(of(quality,(such(loss,(in(the(absence(

these( ways,( no( other( remedy( can( thereafter( be( granted,( without( prejudice(to(the(provisions(of(the(second(paragraph(of(Article(1191.( (

of( special( circumstances( showing( proximate( damage( of( a( greater( amount,(is(the(difference(between(the(value(of(the(goods(at(the(time( of(delivery(to(the(buyer(and(the(value(they(would(have(had(if(they(had( answered(to(the(warranty.((n)(



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6. Stipulate! the! period! within! which,! after! notice! of! defect,! malfunction! or! failure! to! conform! to! the! warranty,! the! warrantor!will!perform!any!obligation!under!the!warranty.!

The!buyer!may!elect!either!of!the!remedies!in!Article(1599(1)!

These!remedies!are!alternative.!Article(1599(2)! ! D.(Waiver(of(Remedies(! (Article(1599(3)!!

!

!

A.(Subsidiary(Liability(Of(Retailer(! (Article(68(b)(3)(

o

E.(Obligation(of(Buyer(on(the(Price(! (Article(1599(4)( ! F.(Refusal(of(seller(to(accept(Return(of(Goods(! (Article(1599(5)( ! VI.(Additional((of(Warranties(for(Consumer(Goods( ( •

Republic(Act(No.(7394(! (Consumer!Act!of!the!Philippines!

•

Consumer!Products,(Article(4(q)!!!cover!goods!which!are!! o Primarily!for!personal,!family,!household,!or!agricultural! purposes! o

•

•

o •

1. Set! forth! the! ! of! warranty! in! clear! and! readily! understandable! language! and! clearly! identify! himself! as! warrantor;!! 2. Identify!the!party!to!whom!the!warranty!is!extended;!! 3. State!the!products!or!parts!covered;!! 4. State! what! the! warrantor! will! do! in! the! event! of! a! defect,! malfunction!of!failure!to!conform!to!the!written!warranty!and!at! whose!expense;! 5. State! what! the! consumer! must! do! to! avail! of! the! rights! which! accrue!to!the!warranty;!and!!

In! such! case,! the! retailer! shall! shoulder! the! expenses! and!costs!necessary!to!honor!the!warranty.!!

Nothing! therein! shall! prevent! the! retailer! from! proceeding! against!the!distributor!or!manufacturer.!

! B.(Enforcement(Of(Warranty(! (Article(68(b)(4)( •

Which! shall! include! but! not! limited! to! food,! drugs,! cosmetics,!and!devices.!

(Article( 68)( ! of! express! warranty! c! Any! seller! or! manufacturer!who!gives!an!express!warranty!shall:!

The! retailer! shall! be! subsidiarily! liable! under! the! warranty! in! case! of! failure! of! both! the! manufacturer! and! distributor! to! honor!the!warranty.!!

Warranty! rights! may! be! enforced! by! presentment! to! the! immediate!seller!either!the!warranty!card!or!the!official!receipt! along! with! the! product! to! be! serviced! or! returned! to! the! immediate!seller.!

•

No! other! documentary! requirement! shall! be! demanded! from! the!purchaser.!

( C.(Duration(Of(Warranty(! (Article(68(e)(and((f)( •

A! period! may! be! stipulated! for! when! the! warranty! may! be! enforced.(

•

But!if!the!implied!warranty!on!merchantability!accompanies!an! express!warranty,!both!will!be!of!equal!duration.(

•

Any! other! implied! warranty! shall! endure! not! less! than! 60! days!


nor! more! than! 1! year! following! the! sale! of! new! consumer! products.(


%

D.(Breach(Of(Warranties(! (Article(68(g)( ! In!Case!Of!Breach!Of!Express!Warranty! •

The! consumer! may! elect! to! have! the! goods! repaired! or! its! purchase!price!refunded.(

•

In! case! of! repair! !! the! warranty! work! must! be! made! to! conform!to!the!express!warranty!within!30!days.( o The! 30cday! period! may! be! extended! by! conditions! which!are!beyond!the!control!of!the!warrantor.(

•

In!case!of!refund!!!the!amount!directly!attributable!to!the!use! of! the! consumer! prior! to! the! discovery! of! the! noncconformity! shall!be!deducted.(

! In!Case!Of!Breach!Of!Implied!Warranty( •

The!consumer!may:! o o

Retain!the!goods!and!recover!damages!OR!! Reject!the!goods,!cancel!the!contract!and!recover!from! the! seller! so! much! of! the! purchase! prices! as! has! been! paid,!included!damages.!

( E.(Contrary(Stipulations( •

All!contrary!stipulations!are!void.!


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Chapter(13:(Extinguishment(of(Sale( ! I.(In(General( ( Article(1600.(( Sales(are(extinguished(by(the(same(causes(as(all(other(obligations,(by( those(stated(in(the(preceding(articles(of(this(Title,(and(by(conventional( or(legal(redemption.((1506)( ( •

Same%grounds%by%which%obligations%in%general%are%extinguished%

%

Article(1601.(Conventional(Redemption(Defined( Conventional( Redemption( shall( take( place( when( the( vendor( reserves( the( right( to( repurchase( the( thing( sold,( with( the( obligation( to( comply( with( the( provisions( of( Article( 1616( and( other( stipulations( which( may( have(been(agreed(upon.( ( Conventional%Redemption%takes%place:% •

Only% extinguishes% obligations% to% which% they%pertain%in%a%contract%of%sale%

!

% % %

• Loss%

o o o o o

Prescription% Conventional%or%Legal%Redemption%(Article(1600)%

When%the%seller%reserved%for%himself%the%right%to%repurchase%the% thing%sold,%with%obligation%to:% 1. Return%price%of%the%sale% 2. Return%expenses%of%the%contract% 3. Any% other% legitimate% payments% made% by% reason% of% the% sale%% 4. Necessary%and%useful%expenses%of%the%thing%sold.%

Not%necessarily%the%contract%itself%

! Remission% ! Compensation%% ! Confusion% ! Novation% Annulment% Rescission% Resolutory%Condition%


II.(Conventional(Redemption( ( A.(Definition( (

also%apply%to%extinguishment%of%obligations%arising%from%sale% o PA:LO:RE:CO:CO:NO% ! Payment% •

%

•

Even% when% sale% is% one% with% right% to% repurchase,% buyer% is% subrogated% to% the% seller’s% rights% and% actions1%even% during% the% period%where%redemption%can%be%made%by%the%seller.% o In% other% words,% right% to% redemption% does% not% prevent% full%consummation.%

•

Who%may%exercise?% 1. Seller%in%whom%right%is%recognized%by%contract% 2. Any% person% to% whom% such% right% may% have% been% transferred%

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

%Article(1609.(( The%vendee%is%subrogated%to%the%vendor's%rights%and%actions.(



%

3. In% the% case% of% legal% redemption,% the% person% so% entitled% by%law.%

%

Distinguishing%right%to%redeem%from%option%to%purchase.% o Article( 1601:% Right% of% repurchase% must% be% reserved% by% the% vendor% through% stipulation% to% that% effect% in% the% contract%of%sale% Not%a%right%granted%to%the%vendor%by%the%vendee% It%is%one%of%the%stipulations%in%the%contract% Once% instrument% executed,% vendor% may% no% longer%reserve% Any% right% thereafter% granted% to% the% vendor,% by% the% vendee%cannot%be%considered%a%right%to%repurchase,%but% some%other%right,%like%an%option%to%buy.%

•

•

Essence%of%pacto%de%retro%"%title%and%ownership%is%immediately% vested%in%the%vendee%a%retro,%subject%to%a%restrictive%condition%of% repurchase%by%the%vendor%within%the%redemption%period.%

•

Sales%with%rights%of%repurchase,%as%defined%by%the%Civil%Code,%are% not%favored.%We%will%not%construe%instruments%to%be%sales%with%a% right% to% repurchase,% with% the% stringent% and% onerous% effects% which% follow,% unless% the% % of% the% document% and% the% surrounding% circumstances% require% it.% Whenever,% under% the% % of% the% writing,% any% other% construction% can% fairly% and% reasonably%be%made,%such%construction%will%be%adopted%and%the% contract% will% be% construed% as% a% mere% loan% unless% the% court% can% see% that,% if% enforced% according% to% its% ,% it% is% not% an% unconscionable%one.%Bautista!v.!Unangst!(557!SCRA!256).!!

%

Valid% existence% of% a% right% to% repurchase% hinges% upon% fact% that% the%underlying%contract%of%sale%is%valid,%and%that%there%has%been% performance.% o Right% to% repurchase% must% be% constituted% as% part% of% a% valid%sale%at%perfection.%Villarica!v.!CA!(26!SCRA!189)!

•

An% agreement% to% repurchase% becomes% a% promise% to% sell% when% made% after% the% sale% because% when% the% sale% is% made% without% such% agreement% the% purchaser% acquires% the% things% sold% absolutely;%and,%if%he%afterwards%grants%the%vendor%the%right%to% repurchase,%it%is%a%new%contract%entered%into%by%the%purchaser%as% absolute%owner.!Roberts!v.!Papio!(515!SCRA!346)!

! ! !

o


Valid%Sale%Required%For%There%To%Be%A%Valid%Right%To%Repurchase%

% B.(Proper(Reservation(of(Right(to(Repurchase( •

%

! Roberts!v.!Papio% Facts:(Spouses%Martin%and%Lucina%Papio%were%owners%of%a%residential%lot% located% in% Makati.% They% executed% a% real% estate% mortgage% on% said% property% to% obtain% a% long% from% Amparo% Investments.% Upon% Papio’s% failure%to%pay%the%loan,%the%corporation%filed%a%petition%for%extrajudicial% foreclosure%of%mortgage.%Since%the%couple%needed%money%to%prevent%the% foreclosure,%they%executed%a%Deed%of%Absolute%Sale%over%the%property%in% favor% of% Amelia% Roberts.% Of% the% P85,000% purchase% price,% P59,000% was% paid%to%Amparo%Investments%while%the%P26,000%difference%was%retained% by% the% spouses.% The% title% to% the% property% was% delivered% to% Amelia% Roberts.% % Thereafter,% the% parties% executed% a% 2:year% contract% of% lease% over% the% property,%with%Roberts%as%lessor%and%Papio%as%lessee.%At%first,%Papio%paid% his%monthly%rentals,%but%stopped%paying%after%1985.%However,%he%and%his% family% remained% in% possession% of% the% property% for% almost% 13% years.%



%

%

Despite% repeated% demand,% Papio% refused% to% pay% and% refused% to% leave% the%premises.%Hence,%Roberts%filed%a%complaint%for%unlawful%detainer.% % Paprio% raised% the% defense% that% in% the% original% contract% of% sale,% Roberts%

o

gave%him%the%right%to%redeem%the%property%at%any%time%for%a%reasonable% amount.% In% fact,% on% 1985% he% remitted% to% Roberts’% authorized% representative,%Perlita%Ventura,%the%amount%of%P250,000%as%repurchase% price.%Allegedly,%Roberts%only%refused%to%execute%a%deed%of%absolute%sale% because% Ventura% misappropriated% the% amount% of% P39,000% from% the% supposed%repurchase%price% ( Issue:( Whether% or% not% the% contract% of% sale% entered% into% by% Papio% and% Roberts%is%actually%an%equitable%mortgage.% % Held:(NO.%It%is%the%contract%of%sale.! One%repurchases%only%what%one%has% previously%sold.%The%right%to%repurchase%presupposes%a%valid%contract%of% sale% between% same% parties.% By% insisting% that% he% had% repurchased% the% property,% Papio% thereby% itted% that% the% deed% of% absolute% sale% executed%by%him%and%Roberts%was%in%fact%and%in%law%a%deed%of%absolute% sale% and% not% an% equitable% mortgage;% he% had% acquired% ownership% over% the% property% based% on% said% deed.% Respondent,% is% thus% estopped% from% asserting% that% the% contract% under% the% deed% of% absolute% sale% is% an% equitable% mortgage% unless% there% is% an% allegation% and% evidence% of% palpable% mistake% on% the% part% of% respondent,% or% a% fraud% on% the% part% of% Roberts.% % C.(Right(of(Repurchase(Provable(by(Parol(Evidence( •

Right%to%repurchase:%merely%a%feature%in%the%contract%of%sale% o Thus,%it%is%governed%by%the%Statute%of%Frauds%

o •

%


However,% SC% has% held:% when% the% contract% of% sale% is% in% writing,% parol% evidence% may% be% adduced% to% prove% the% right%to%repurchase% ! This%is%because%the%Deed%of%Sale%and%the%verbal% agreement%allowing%the%right%to%repurchase%are% an%integral%whole.% ! The% deed% of% sale% itself% is% the% “note% or% memorandum”%required%to%remove%the%contract% from%the%Statute%of%Frauds.% Also,% if% there% is% no% objection% to% such% parol% evidence,% it% will%be%issible%in%trial.%

SC:%“Best%Evidence”%Rule%not%an%obstacle%to%the%adducement%of% such%parol%evidence.% o When% parol% agreement% was% the% moving% cause% of% the% written%contract.% o o

When% written% contract% was% executed% on% the% faith/representation%of%the%parol%contract.% Right% to% repurchase% proved% orally% is% consistent% with% %of%written%contract..%

% D.(Distinguished(from(Option(to(Purchase( ( Right(to(Redeem(

Option(to(Purchase(

Not%a%separate%contract%–%merely% part%of%a%main%contract%of%sale%–% cannot%exist%unless%reserved%at% time%of%perfection%

Generally%a%principal%contract,% created%independent%of%another% contract%

Must%be%imbedded%into%the%

May%exist%before%or%after%the%

contract%of%sale%upon%its%perfection%

perfection%of%the%sale,%or%be%



%

%

imbedded%in%another%contract% upon%its%perfection% Does%not%need%a%separate%

Must%have%consideration%separate%

consideration%to%be%valid%and% effective%

and%distinct%from%the%purchase% price%

Redemption%period%cannot%exceed% 10%years%

Period%for%an%option%may%exceed% 10%years%

Exercise%requires%that%notice%be% accompanied%by%tender%of%

Requires%only%a%notice%of%exercise% to%be%given%to%the%optioner%

•

•

•

The% 30% day% period% under% Article( 1606% does% not% apply% if% the% courts%should%find%the%sale%to%be%absolute.%Pangilinan!v.!Ramos! (181!SCRA!359)!

An% equitable% mortgage% is% a% voidable% contract.% It% may% be% annulled%within%four%(4)%years%from%the%time%the%cause%of%action% accrues.%Ayson,!Jr.!v.!Paragas!(557!SCRA!50)%

% E.(Period(of(Redemption(

However,(the(vendor(may(still(exercise(the(right(to(repurchase(within( thirty(days(from(the(time(final(judgment(was(rendered(in(a(civil(action( on(the(basis(that(the(contract(was(a(true(sale(with(right(to(repurchase.( %

Sellers% in% a% sale% judicially% declared% as% pacto% de% retro% may% not%

equitable% mortgage,% as% a% sign% of% good% faith,% they% should% have% consigned% with% the% trial% court% the% amount% representing% their% alleged% loan,% on% or% before% the% expiration% of% the% right% to% repurchase.%Abilla!v.!Gobonseng!(374!SCRA!51)!

Results%in%perfection%of%a%contract% of%sale%

( Article(1606.( The( right( referred( to( in( Article( 1601,( in( the( absence( of( an( express( agreement,(shall(last(four(years(from(the(date(of(the(contract.( ( Should(there(be(an(agreement,(the(period(cannot(exceed(ten(years.( (


exercise% the% right% to% repurchase% within% the% 30:day% period% provided% under% Article( 1606,% although% they% have% taken% the% position%that%the%same%was%an%equitable%mortgage,%if%it%is%shown% that% there% was% no% honest% belief% thereof% since:% (a)% none% of% the% circumstances% under% Article( 1602% were% shown% to% exist% to% warrant% a% conclusion% that% the% transaction% was% an% equitable% mortgage;% and% (b)% that% if% they% truly% believed% the% sale% to% be% an%

payment%–%consignment%when% tender%cannot%be%made% Exercise%extinguishes%contract%of% sale%

%

% Abilla!v.!Gobonseng% % Facts:%Spouses%Abilla%instituted%against%Spouses%Gobonseng%an%action%for% specific%performance,%recovery%of%sum%of%money%and%damages,%seeking% the% reimbursement% of% the% expenses% they% incurred% in% the% preparation% and% registration% of% 2% public% instruments::% Deed% of% Sale% and% Option% to% Buy.%As%a%defense,%Spouses%Gobonseng%contended%that%the%transaction% covered% by% these% instruments% was% a% mortgage.% RTC% ruled% in% favor% of% Spouses%Abilla,%stating%that%it%was%a%sale%giving%Spouses%Gobonseng%until% August%31,%1983%within%which%to%buy%back%the%17%lots%subject%of%the%sale.% CA%affirmed%and%held%that%the%transaction%was%a%pacto%de%retro%sale,%and% not%an%equitable%mortgage.%



%

%

In% 1999,% Spouses% Gobonseng% filed% with% the% RTC% an% urgent% motion% to% repuchase% the% lots% with% tender% of% payment,% which% was% denied.% However,% after% the% judge% inhibited% himself% from% the% case,% it% was% reraffled%to%a%different%branch,%which%granted%the%motion%to%repurchase.% % Issue:% Whether% or% not% Spouses% Gobonseng% may% exercise% the% right% to% repurchase,%as%stipulated%in%Article%1606(3).% % Held:%NO.%Sellers%in%a%sale%judicially:declared%as%pacto%de%retro%may%NOT% exercise% the% right% to% repurchase% within% the% 30:day% period% provided% under%Article%1606,%although%they%have%taken%the%position%that%the%same% was%an%equitable%mortgage,%if%it%shown%that%there%was%no%honest%belief% thereof% since:% (a)% none% of% the% circumstances% under% Article% 1602% were% shown% to% exist% to% warrant% a% conclusion% that% the% transaction% was% an% equitable%mortgage;%and%(b)%that%if%they%truly%believed%the%sale%to%be%an% equitable%mortgage,%as%a%sign%of%good%faith,%they%should%have%consigned% with% the% trial% court% the% amount% representing% their% alleged% loan,% on% or% before%the%expiration%of%the%right%to%repurchase.1%

o

o

To%be%discussed%later.%%

% E.2.(When(Period(Agreed(Upon( •

General( Rule:( If% there% is% an% agreement% as% to% period,% it% cannot% exceed% 10% years% if% it% exceeds% 10% years,% the% agreement% is% only% valid%for%the%first%10%years.%%

•

Anchuel!v.!IAC!(147!SCRA!434)! o Stipulation:%Vendor%cannot%redeem%within%19%years%from% o

•

o o

General( Rule:( If%it%is%stipulated%that%there%is%a%right%to%redeem,% and%in%the%absence%of%agreement%as%to%period%of%exercise,%it%shall% Misterio!v.!Cebu!State!College!(461!SCRA!122)! o

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

%Antonio,%Hipolito,%Imperial%&%Zaragosa.%(2012).%Salse%CLV%Case%Digests.% Retrieved%from%http://www.idoub.com/doc/104486360/Sales:CLV:Case: Digests%


execution.% SC:%Such%is%void%for%being%violative%of%Article( 1601,( and% fixed%the%period%of%redemption%at%ten%years.(

Tayao!v.!Dulay!(13!SCRA!758)!

last%4%years%from%date%of%the%contract.% •


It% was% held% that% the% four:year% period% began% from% happening%of%condition%contained%in%deed%of%sale%(rather% than%date%of%contract).% CLV:%This%is%inexplicable!% !

% E.1.(When(No(Period(Agreed(Upon( •

%

Stipulation:% right% of% redemption% cannot% be% exercised% within%10%years% SC:%Stipulation%was%void.%However,%such%nullity%does%not% convert% contract% into% a% mere% indebtedness% nor% an% equitable%mortgage.% ! Article%1606%would%apply%"%seller%may%exercise% right%to%redemption%within%a%period%of%10%years% form%date%of%contract% Although%stipulation%as%to%the%period%may%be%unclear%or% void,%there%is%still%a%stipulation.% ! Thus,% we% follow% the% 10:year% period% for% redemption.%

SALES%REVIEWER%(2013/2014)% % ! •

We% do% not% consider% the% right% of% redemption% as% being%one%without%a%stipulated%period.%%

Stipulation:%sellers%could%exercise%in%March%of%any%year.% Such% could% be% exercised% for% a% period% of% 10% years% from% date%thereafter,%but%not%after%10%years%%

Ong! Chua! v.! Carr! (53! Phil.! 957)% "% pendency% of% an% action% brought%in%good%faith%and%relating%to%the%validity%of%a%sale%a%retro% tolls%the%running%of%the%period%of%redemption.% o Note:%The%seller%a%retro%had%given%notice%of%the%exercise% of%the%redemption%right%within%the%redemption%period.% BUT% Misterio!v.!Cebu!State!College!(461!SCRA!122)!" %Pendency%of%a% litigation%does%not%toll%the%period.! o Such%period%is%not%suspended%merely%because%there%is%a%

o o

divergence% of% opinion% between% the% parties% as% to% when% the% condition% upon% which% the% right% to% repurchase% is% triggered.% Existence%of%right%to%repurchase%is%not%dependent%upon% the%interpretation%by%the%court%of%said%condition% Note:% The% successors:in:interest% of% the% seller% a% retro% sought% to% exercise% the% redemption% right% after% the% expiration%of%the%four:year%redemption%period.%

•

o

CLV:%No%contradiction%between%these%two%cases%

%


Important% consideration:% “vesting”% of% the% exercise% of% the% right% by% its% proper% exercise% (requiring% notice% and% tender)% Thus,% in% essence,% completion% of% redemption% process% (payment%of%amounts%required%in%Article(1616)%is%tolled% by%the%filing%of%a%civil%action%relating%to%the%issue%of%such% redemption% ! Provided%that%both%exercise%and%filing%would%be% done%within%redemption%period.%

Right%to%redeem%had%prescribes%when%exercised%after%10% years.%

% E.3.(Pendency(of(Action(Tolls(Redemption(Period(

•

o

Ochagabia!v.!Court!of!Appeals!(304!SCRA!867)! o

•

%

Bandong!v.!Austria!(31!Phil.!479)! o o

•

%

% Misterio!v.!Cebu!State!College( ( Facts:( Asuncion%sold%to%Sudlon%Agricultural%High%School%(SAHS)%a%parcel% of%land,%reserving%the%right%to%repurchase%the%same%in%case%(1)%the%school% ceases% to% exist,% or% (2)% the% school% transfers% location.% She% had% her% right% annotated.% She% died.% By% virtue% of% BP% 412,% SAHS% was% merged% with% the% Cebu%State%College,%effective%June%1983.%In%1990,%the%heirs%of%Asuncion% sought%to%exercise%their%right%to%redeem,%claiming%that%school%has%ceased% to%exist.% ( Issue:(Whether%or%not%the%heirs%of%Asuncion%may%still%exercise%their%right% to%redeem%the%property% ( Held:(NO.%Their%right%has%already%prescribed.%Considering%that%no%period% for% redemption% was% agreed% upon,% the% law% imposes% a% 4:year% limitation.% This% means% that% from% the% time% the% school% was% merged% to% Cebu% State% College,% they% had% 4% years,% or% until% June% 1987% to% redeem% the% property.% However,% they% failed% to% do% so% within% the% period.% Failure% to% redeem% automatically% consolidates% ownership% in% favor% of% the% vendee.% The% fact%



%

%

%


that% the% right% to% redeem% was% annotated% does% not% make% it% imprescriptible,%it%only%serves%to%notify%third%persons.1% ( E.4.( NonXpayment( of( Price( Does( Not( Affect( Running( of( Redemption(

G.(How(Redemption(Effected( ( Article(1616.( The( vendor( cannot( avail( himself( of( the( right( of( repurchase( without(

Period(

returning(to(the(vendee(the(price(of(the(sale,(and(in(addition:( ( (1)( The( expenses( of( the( contract,( and( any( other( legitimate( payments( made(by(reason(of(the(sale;( ( (2)(The(necessary(and(useful(expenses(made(on(the(thing(sold.( %

•

Catangcatang! v.! Legayada! (82! SCRA! 51)% " % nonpayment% of% purchase% price% does% not% serve% to% suspend% the% period% of% redemption.% o o

Sale% was% consummated% upon% execution% of% document,% and%delivery%of%land%to%the%vendee.% Nonpayment% of% the% balance% of% the% price% does% not% suspend% the% efficacy% of% the% provisions% of% the% valid% contract.%

•

% F.(Possession(of(Subject(Matter(During(Period(of(Redemption( • •

In%a%sale%a%retro,%buyer%has%the%right%to%immediate%possession%of% property%sold,%unless%otherwise%agreed%upon.%

3. Necessary%and%useful%expenses%made%on%the%thing%sold.% •

Title% and% ownership% of% property% are% immediately% vested% in% the% buyer% a% retro,% subject% only% to% the% resolutory% condition% of% the% repurchase%by%the%seller%within%the%period.%

•

Pending% repurchase,% the% buyer% may% alienate,% mortgage,% or% encumber%the%property.% o But% such% alienation,% mortgage% or% encumbrance% is% as% revocable%as%his%right.% o When% right% exercised,% the% buyer% has% to% return% the% property%free%from%all%encumbrances%imposed%by%him.%

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Three%things%need%to%be%returned%(Article(1616)% 1. Price%of%the%sale.% 2. Expenses% of% contract,% and% any% other% legitimate% payments%made%by%reason%of%the%sale.% Seller%may%bring%his%action%against%every%possessor%who%derives% right%from%the%buyer.% o Even%if%there%is%no%mention%of%the%right%to%repurchase%in% o

•

the%contract%between%buyer%and%subsequent%buyer.% Without%prejudice%to%provisions%of%Property%Registration% Decree% and% the% Mortgage% Law,% with% respect% to% mortgagees/purchasers%in%good%faith%and%for%value.%

Failure% to% pay% useful% improvements% entitles% buyer% a% retro% to% retain% possession% of% the% land% until% actual% reimbursement% is% done.%

•

1



Article(1616%is%not%exclusive%


%

%

It% should% be% construed% with% Article( 1601% which% states% that%in%order%to%redeem,%Article%1616%must%be%complied% with%as%well%as%“other%stipulations%agreed%upon.”%

G.1.(How(Redemption(Exercised(

!

Well:settled% is% the% rule% that% a% formal% offer% to% redeem% must% be% accompanied%by%a%valid%tender%of%the%redemption%price%and%the% filing% of% a% judicial% action,% plus% the% consignation% of% the%

o

•

The%fact%that%the%seller%a%retro%deposited%the%amount%of% the% repurchase% money% with% the% Clerk% of% Court% was% simply%an%additional%security.% Mere%sending%of%letters%expressing%desire%to%repurchase,% without%tender,%does%not%comply%with%the%requirement% of%law.%

Where% tender% of% payment% cannot% be% validly% made% (because% buyer%cannot%be%located)%seller%must%file%a%suit%for%consignation% of% the% redemption% price% within% the% redemption% period.% Catangcatang!v.!Legayada!(84!SCRA!51)!

•

Formal% offer% to% redeem% accompanied% by% tender% of% redemption% price%is%not%essential%when%right%to%redeem%is%exercised%through% a% judicial% action% within% the% redemption% period,% simultaneous%

Formal% offer% to% pay% accompanied% by% bona% fide% tender%of%payment.% •

redemption%price%within%the%period%of%redemption,%is%equivalent% to% a% formal%offer%to%redeem.%Villegas! v.! Court! of! Appeals! (499! SCRA!276)! o In%order%to%exercise%the%right%to%redeem,%only%tender%of% payment%is%sufficient.%Legaspi!v.!CA!(142!SCRA!82)%% o Consignation% is% not% required% after% tender% is% refused% Mariano!v.!CA!(222!SCRA!736)! o


with% consignation% of% the% redemption% price.% Lee! Chuy! Realty! v.! Court!of!Appeals!(250!SCRA!596)! o No%prescribed%form%for%an%offer%to%redeem%% o Thus,%we%have%two%ways%of%redeeming%

% •

%

!

(as%opposed%to%exercised).%% Exercise% through% judicial% action% accompanied% with% simultaneous% deposit% of% the% redemption% price.% •

o

Only% necessary% to% preserve% right% of% redemption% for% further% enforcement.%

Filing% of% action% is% equivalent% to% formal%

offer.% When%is%right%of%redemption%deemed%“vested”% ! Formal% offer% to% redeem,% accompanied% by% bona% fide% tender% of% payment,% within% redemption% period.% ! Thus,%the%right%is%“vested”%–%it%may%be%enforced% even%beyond%redemption%period.%

% G.2.(In(MultiXParty(Cases( ( Article(1611.(( In( a( sale( with( a( right( to( repurchase,( the( vendee( of( a( part( of( an( undivided( immovable( who( acquires( the( whole( thereof( in( the( case( of( Article(498,(may(compel(the(vendor(to(redeem(the(whole(property,(if( the(latter(wishes(to(make(use(of(the(right(of(redemption.((1513)( (



%

%

In% a% sale% a% retro,% the% buyer% of% part% of% an% undivided% immovable% 1

who%acquires%the%whole%thereof%under%Article(498 %may%compel% the% seller% to% redeem% the% whole% property,% if% the% seller% wants% to% make%use%of%the%right%to%redemption.% o Seller% wants% to% repurchase% only% his% part:% Buyer% may% compel%him%to%repurchase%the%whole%thing.% ( Article(1612.((

( •

Several% persons,% tly% and% in% the% same% contract,% sell% an% undivided%immovable%with%right%to%repurchase.% o None%of%them%may%exercise%this%right%for%more%than%his% respective%share.%%

•

Same% rule% applies% if% the% seller% who% sold% the% immovable% alone% has%several%heirs.% o Heirs% may% only% redeem% part% which% he% may% have% acquired.%

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


Article(1613.(( In(the(case(of(the(preceding(article,(the(vendee(may(demand(of(all(the( vendors( or( coXheirs( that( they( come( to( an( agreement( upon( the( purchase( of( the( whole( thing( sold;( and( should( they( fail( to( do( so,( the( vendee( cannot( be( compelled( to( consent( to( a( partial( redemption.( (1515)( ( •

If( several( persons,( tly( and( in( the( same( contract,( should( sell( an( undivided( immovable( with( a( right( of( repurchase,( none( of( them( may( exercise(this(right(for(more(than(his(respective(share.( ( The(same(rule(shall(apply(if(the(person(who(sold(an(immovable(alone( has(left(several(heirs,(in(which(case(each(of(the(latter(may(only(redeem( the(part(which(he(may(have(acquired.((1514)(

%

In%these%cases,%the%buyer%may%demand%that%the%vendors/co:heirs% come%to%an%agreement%upon%the%repurchase%of%the%whole%thing% sold.% o If%they%cannot,%buyer%cannot%be%compelled%to%consent%to% a%partial%redemption.%

( Article(1610.(( The( creditors( of( the( vendor( cannot( make( use( of( the( right( of( redemption( against( the( vendee,( until( after( they( have( exhausted( the( property(of(the(vendor.((1512)( ( Article(1614.(( Each(one(of(the(coXowners(of(an(undivided(immovable(who(may(have( sold( his( share( separately,( may( independently( exercise( the( right( of( repurchase( as( regards( his( own( share,( and( the( vendee( cannot( compel( him(to(redeem(the(whole(property.((1516)( ( •

1

%Article(498.%% Whenever% the% thing% is% essentially% indivisible% and% the% co:owners% cannot% agree% that% it% be% allotted% to% one% of% them% who% shall% indemnify% the% others,% it% shall% be% sold%and%its%proceeds%distributed.%(404).%% "%Thus,%the%above%discussion%refers%to%the%guy%who%buys%this%property.%


Co:owner% of% undivided% immovable% who% sells% his% share% separately% may% independently% exercise% the% right% of% repurchase% upon% his% own% share,% and% buyer% cannot% compel% him% to% redeem% the%whole.%


%

%

Creditors% of% the% seller% cannot% make% use% of% the% right% of%

o

redemption% against% the% buyer,% until% after% they% have% exhausted% the%property%of%the%seller.% •

De!Guzman!v.!Court!of!Appeals!(148!SCRA!74)! o If% one% of% the% co:owners/co:heirs% alone% redeem% the%

o

whole%property,%he%will%be%a%mere%trustee%with%respect% to%the%shares%of%the%co:owners/co:%heirs.% Thus,%no%prescription%lies%against%the%rights%of%these%co: owners/co:heirs% to% demand% from% the% redemptioner% their%share%in%the%property.%

o

•

If% such% is% denied% because% contract% was% actually% an% equitable%mortgage,%then%another%action%may%be%filed%to% collect/foreclose.%

•

Notwithstanding% Article( 1607,( recording% in% the% Registry% of% Deeds% of% the% consolidation% of% ownership% to% the% buyer% is% not% a% condition%sine%qua%non%to%transfer%of%ownership% o Buyer%would%still%be%the%owner.% o

o o

Essence% of% pacto% de% retro% "% title% and% ownership% are% immediately% vested% in% buyer,% subject% to% resolutory% condition%of%repurchase.% Failure% of% seller% to% perform% the% said% condition% vests% absolute%title%and%ownership%over%the%property%sold.% Failure%to%consolidate%title%under%Article( 1607( does%not% impair% buyer’s% ownership.% The% method% prescribed% is% merely%for%purposes%of%registration.%

% I.( Grant( of( 30Xday( Redemption( Right( in( Case( of( Litigation( and( Article( 1606( •

Last%paragraph%of%Article(1606%"%“vendor%may%still%exercise%the% right% to% repurchase% within% thirty% days% from% the% time% final% judgment% was% rendered% in% a% civil% action% on% the% basis% that% the% contract%was%a%true%sale%with%right%to%repurchase.”%

Article( 1607% abolished% automatic% consolidation% of% ownership% upon%expiration%of%period%by%requiring%the%above%action%(where% the%vendor%may%be%heard).%

If% buyer% proves% that% the% transaction% was% a% pacto% de% retro,%the%vendor%is%then%given%a%grace%period%of%30:days% within% which% to% repurchase.% Solid! Homes! v.! Court! of! Appeals!(275!SCRA!267)!

Once% the% vendor% fails% to% redeem% the% property% within% the% stipulated%period,%irrevocable%title%shall%be%vested%in%the%vendee% by% operation% of% law.% Vda.! de! Rigonan! v.! Derecho! (463! SCRA! 627)!

( Article(1607.( In(case(of(real(property,(the(consolidation(of(ownership(in(the(vendee( by(virtue(of(the(failure(of(the(vendor(to(comply(with(the(provisions(of( Article(1616(shall(not(be(recorded(in(the(Registry(of(Property(without(a( judicial(order,(after(the(vendor(has(been(duly(heard.((n)( % Before% the% New% Civil% Code:% when% no% redemption% made,% buyer% automatically%acquired%full%ownership.%Today,%Article(1607.% o This% proceeding% for% consolidation% is% an% ordinary% civil% action,%not%a%motion%incident%to%another%action.%


•

% H.(When(Redemption(Not(Made(

•

%

•


Expiration%of%period%ipso%jure%extinguishes%right%to%redeem%


•

%

However:% when% there% was% a% previous% suit% concerning% the% nature% of% the% contract,% the% seller% may% still% exercise% right% to% repurchase% within% 30:days% from% the% time% final% judgment%was%rendered.%

Tapas!v.!Court!of!Appeals!(69!SCRA!393)! o 30:day% period% contemplates% a% case% involving% a% controversy%as%to%the%nature%of%the%contract.% o Court% decides% whether% it% is% a% pacto% de% retro% or% an% equitable%mortgage.%

•

Pangilinan!v.!Ramos!(181!SCRA!359)! o 30:day%period%does%not%apply%to%a%contract%found%to%be% an%absolute%sale.%% o

•

The% 30:day% period% is% a% requisite% to% the% exercise% of% the% right%to%redemption.%It%is%the%policy%of%law%is%not%to%leave% title%in%uncertainty%beyond%such%30:day%period.%%

% •

o

o

Seller%may%have%considered%the%sale%to%be%an%equitable% mortgage.% Being% such,% the% seller% has% every% right% to% extinguish% the% equitable% mortgage% by% paying:up% the% loan%at%any%time%before%the%buyer%has%foreclosed%on%the% mortgage.% Allowing% the% expiration% of% the% redemption% period% is% consistent%with%his%claim%that%the%sale%was%an%equitable%


However:% if% issue% was% whether% the% contract% was% an% absolute% sale%or%sale%a%retro% o Judgment%of%sale%a%retro%does%not%give%the%seller%the%30: day%period.%% o In% such% a% case,% seller% is% negligent% for% not% exercising% the% right%to%redeem.%

% I.1.(Feigning(Equitable(Mortgage(Situation(to(Avail(of(Article(1606( •

What%if%seller%feigns%defense%of%equitable%mortgage%in%order%to% get%the%30:day%period?%

•

Adorable!v.!Inacala!(103!SCRA!481)! o

•

Rationale%for%30:day%period% o

%

Where% evidence% established% no% honest% doubt% as% to% parties’% intentions% to% make% it% a% sale% pacto% de% retro,% seller%would%not%be%entitled%to%Article(1606’s%benefits.%

Vda.!De!Macoy!v.!Court!of!Appeals!(206!SCRA!244)!and!Felicen! v.!Orias!(156!SCRA!586)! o There%must%be%honest%belief%on%part%of%vendor%that%the% agreement% was% in% reality% a% mortgage,% merely% to% give% security%for%an%obligation.%

•

mortgage.% Thus,% upon% finding% of% the% court% that% it% was% indeed% a% pacto% de% retro,% then% the% seller% must% be% granted% a% final% 30:day% period% within% which% to% decide% and% if% ever,% exercise%his%right%to%redeem.%


Abilla!v.!Gobonseng!(374!SCRA!429)! o

When%sale%is%judicially%declared%pacto%de%retro,%and%after% vendors% take% the% position% that% it% was% an% equitable% mortgage,% having% no% honest% belief% to% that% effect% –% vendors%may%not%avail%of%the%additional%30:day%period.% !

If% they% truly% believed% that% the% sale% was% an% equitable% mortgage,% they% should% have% consigned% with% the% trial% court% the% amount% representing%the%alleged%loan.%


%

However,%this%was%reversed.%Article(1606%only%applies%when%the%

% •

%


Article( 448% of% the% Civil% Code% on% the% rights% of% a% builder% in% good%

nature%of%the%transaction%was%put%in%issue%before%the%court.% o It% applies% in% a% situation% where% one% party% claims% that% it% was%a%pacto%de%retro,%and%the%other%claimed%that%it%was% an% equitable% mortgage,% and% the% courts% decided% that% it% was%a%pactto%de%retro%sale.% o However,%applicability%still%rests%on%the%bona%fire%intent% of% the% seller% a% retro,% if% he% truly% believed% that% the%

faith%is%inapplicable%in%cases%involving%contracts%of%sale%with%right% of%repurchase—it%is%inapplicable%when%the%owner%of%the%land%is% the%builder,%sower,%or%planter.%Where%the%true%owner%himself%is% the%builder%of%the%works%on%his%own%land,%the%issue%of%good%faith% or% bad% faith% is% entirely% irrelevant.% The% right% to% repurchase% may% be%exercised%only%by%the%vendor%in%whom%the%right%is%recognized% by%contract%or%by%any%person%to%whom%the%right%may%have%been%

transaction%was%an%equitable%mortgage.% It% doesn’t% matter% what% the% buyer% intended% the% transaction%to%be.%

transferred.% In% a% sale% with% right% of% repurchase,% the% applicable% provisions%are%Articles(1606(and(1616%of%the%Civil%Code,%and%not% Article(448.(Narvaez!v.!Alciso!(594!SCRA!60)%

o % J.(Fruits( ( Article(1617.(

% K.(Equitable(Mortgage( ( Article(1602(

If(at(the(time(of(the(execution(of(the(sale(there(should(be(on(the(land,( visible( or( growing( fruits,( there( shall( be( no( reimbursement( for( or( proX rating(of(those(existing(at(the(time(of(redemption,(if(no(indemnity(was( paid(by(the(purchaser(when(the(sale(was(executed.( ( Should(there(have(been(no(fruits(at(the(time(of(the(sale(and(some(exist( at( the( time( of( redemption,( they( shall( be( prorated( between( the(

The(contract(shall(be(presumed(to(be(an(equitable(mortgage,(in(any(of( the(following(cases:( ( (1)( When( the( price( of( a( sale( with( right( to( repurchase( is( unusually( inadequate;( ( (2)(When(the(vendor(remains(in(possession(as(lessee(or(otherwise;(

redemptioner(and(the(vendee,(giving(the(latter(the(part(corresponding( to( the( time( he( possessed( the( land( in( the( last( year,( counted( from( the( anniversary(of(the(date(of(the(sale.( %

( (3)( When( upon( or( after( the( expiration( of( the( right( to( repurchase( another(instrument(extending(the(period(of(redemption(or(granting(a( new(period(is(executed;( ( (4)( When( the( purchaser( retains( for( himself( a( part( of( the( purchase( price;( (

•

Almeda! v.! Daluro! (79! SCRA! 327)% "% Article( 1617% applies% only% when% parties% have% not% provided% for% their% sharing% arrangement% with%respect%to%the%fruits%existing%at%the%time%of%redemption.%



%

(5)(When(the(vendor(binds(himself(to(pay(the(taxes(on(the(thing(sold;( ( (6)( In( any( other( case( where( it( may( be( fairly( inferred( that( the( real( intention( of( the( parties( is( that( the( transaction( shall( secure( the(

% •

An% equitable% mortgage% is% “one% which% although% lacking% in% some% formality,%or%form%or%words,%or%other%requisites%demanded%by%a% statute,% nevertheless% reveals% the% intention% of% the% parties% to% charge%real%property%as%security%for%a%debt,%and%contains%nothing%

Also%enumerated%essential%requisites% 1. Parties% entered% into% a% contract% denominated% as% a% contract%of%sale;%and%% 2. The%intention%was%to%secure%an%existing%debt%by%way%of%a% mortgage.%

•

San! Pedro! v.! Lee! (430! SCRA! 338)% " % when% the% two% above%

•

This% kind% of% arrangement,% where% the% ownership% of% the% land% is% supposedly%transferred%to%the%buyer%who%provides%for%the%funds% to% redeem% the% property% from% the% bank% but% nonetheless% allows% the%seller%to%later%on%buy%back%the%properties,%is%in%the%nature%of% an% equitable% mortgage% governed% by% Articles( 1602( and( 1604% of% the%Civil%Code.%Bacungan!v.!Court!of!Appeals!(574!SCRA!642)!

% Article(1603.(( In( case( of( doubt,( a( contract( purporting( to( be( a( sale( with( right( to( repurchase(shall(be(construed(as(an(equitable(mortgage.((n)( % •

conditions% are% not% proven,% the% existence% of% any% circumstance% enumerated% in% Article( 1602% cannot% be% the% basis% to% treat% the% transaction%as%an%equitable%mortgage.% •

The% decisive% factor% in% evaluating% whether% an% agreement% is% an%

understanding.%Necessitous%men%are%not%always%free,%in%that%to% answer%a%pressing%emergency,%they%will%submit%to%any%term%that% the%crafty%may%impose%on%them.%Banga!v.!Bello!(471!SCRA!653)!

impossible% or% contrary% to% law.”% Raymundo! v.! Bandong! (526! SCRA!514)% •


equitable%mortgage%is%the%intention%of%the%parties,%as%shown%not% necessarily% by% the% terminology% used% in% the% contract% but% by% all% the%surrounding%circumstances,%such%as%the%relative%situation%of% the%parties%at%that%time,%the%attitude,%acts,%conduct,%declarations% of% the% parties,% the% negotiations% between% them% leading% to% the% deed,%and%generally,%all%pertinent%facts%having%a%tendency%to%fix% and% determine% the% real% nature% of% their% design% and%

payment(of(a(debt(or(the(performance(of(any(other(obligation.( ( In(any(of(the(foregoing(cases,(any(money,(fruits,(or(other(benefit(to(be( received( by( the( vendee( as( rent( or( otherwise( shall( be( considered( as( interest(which(shall(be(subject(to(the(usury(laws.( ( K.1.(Definition(of(Equitable(Mortgage( •

%

General(Rule:(In%other%words,%we%look%at%the%two%requisites%first% before%going%to%Article(1602.%


When% in% doubt,% courts% construe% transactions% as% equitable% mortgages%since%it%provides%for%lesser%transmission%of%rights.% o The% law% on% equitable% mortgage% favors% the% least% transmission% of% rights% and% interest% over% a% property% in% controversy,% since% the% law% seeks% to% prevent% circumvention% of% the% law% on% usury% and% the% prohibition% against% pactum% commissorium% provisions.% Additionally,%


•

%

%

K.2.(Pactum(Commissorium( ( Article(2088.!( The(creditor(cannot(appropriate(the(things(given(by(way(of(pledge(or(

those% with% average% intelligence% invariably% finding% themselves% in% no% position% whatsoever% to% bargain% fairly% with%their%creditors.%Spouses'Miseña'v.'Rongavilla,'(303' SCRA!749)!

mortgage,( or( dispose( of( them.( Any( stipulation( to( the( contrary( is( null( and(void.((1859a)( %

Lapat! v.! Rosario! (312! SCRA! 539)% "% contract% should% be%

pactum%commissorium,%which%enable%the%mortgagee%to%acquire% ownership%of%the%mortgaged%property%without%the%need%of%any% foreclosure%proceedings,%are:%! 1. There% should% be% a% property% mortgaged% by% way% of% security%for%the%payment%of%the%principal%obligation.% 2. There% should% be% a% stipulation% for% automatic% appropriation%by%the%creditor%of%the%thing%mortgaged%in%

•

Molina! v.! Court! of! Appeals! (398! SCRA! 97)( " % intention% of% parties% is% showed% by% all% surrounding% circumstances,% not% by% the% terminology%used%in%the%contract.%

•


it% is% aimed% to% end% unjust% or% oppressive% transactions% or% violations% in% connection% with% a% sale% or% property.% The% wisdom% of% these% provisions% cannot% be% doubted,% considering% many% cases% of% unlettered% persons% or% even%

considered%as%a%mortgage%or%as%a%loan%instead%of%pacto%de%retro% when% its% % are% ambiguous% or% the% circumstances% are% inconsistent%with%a%sale.% •

%

Ong!v.!Roban!Lending!Corp.!(557!SCRA!516)(" (The%elements%of%

case%of%non:%payment%of%the%principal%obligation%within% the%stipulated%period.!

Equitable% mortgage% seeks% to% prevent% situation% where% necessitous% men,% who% are% not% always% free% in% that% to% answer% a% pressing%emergency,%will%submit%to%any%term%that%the%crafty%may% impose%on%them.%Banga!v.!Bello!(471!SCRA!653)% o Besides,%it%is%a%fact%that%in%time%of%grave%financial%distress% which% render% persons% hard:pressed% to% meet% even% their% basic% needs% or% answer% an% emergency,% such% persons% would% have% no% choice% but% to% sign% a% deed% of% absolute%

•

It%does%not%apply%when%the%security%for%a%debt%is%also%money%in% the%form%of%time%deposit.!Consing!v.!CA!(177!SCRA!14)!

•

Vda.!de!Zulueta!v.!Octaviano!(121!SCRA!314)! o Stipulation:%upon%redemption%by%buyer%from%third%party,% that%instrument%would%be%considered%a%deed%of%absolute% sale% from% seller% to% buyer.% Another% instrument% was%

sale%of%property%or%a%sale%thereof%with%pacto%de%retro%if% only% to% obtain% a% much:needed% loan% from% unscrupulous% money%lenders.%Matanguihan!v.!Court!of!Appeals!(275! SCRA!380)% % %


o o o

executed%entitled%“option%to%repurchase.”% This%was%not%a%sale%a%retro%as%the%option%to%repurchase% was%in%a%separate%document.% Neither% was% it% an% equitable% mortgage% as% it% was% not% meant%to%secure%a%loan%–%no%application%of%Article(1602.( SC:%It%was%not%a%pactum%commissorium%either%


o

%

%

! Seller%was%not%a%debtor% ! Nothing%was%offered%as%security.% Public% Policy% on% pactum% commissorium% applies% only% when% the% transaction% is% a% mortgage% or% other% security%

•

•

Guerrero! v.! Ynigo! (96! Phil.! 37)% " % “mortgage% with% conditional% sale”% o

o

Stipulation:%Mortgagor%reserved%for%himself%the%right%to% redeem%property%by%paying%back%the%amount%loaned.%On% failure% of% mortgagor% to% exercise% such% right,% title% would% %and%be%vested%in%the%mortgagee.% SC:% Such% stipulation% cannot% be% construed% as% giving% mortgagee%right%to%own%the%property%upon%failure%of%the% mortgagor% to% pay.% This% is% void% for% being% pactum%

•

Montevirgin!v.!Court!of!Appeals!(112!SCRA!641)! o Equitable% mortgage% guised% as% a% sale% a% retro% cannot% be% enforced%as%a%sale%% o

Parties% entered% into% a% Dacion% en% Pago% with% Right% to% Repurchase.% If% borrower% failed% to% comply% with% new% % of% payment,% agreement% would% cause% the% obligation% for% the% borrower% to% transfer% and% assign% the% real% property% to% the% lender% in% full% payment.% Such% was% not%pactum%commissorium% BUT(

A.!Francisco!Realty!v.!Court!of!Appeals!(298!SCRA!349)!! o The% stipulation% in% the% promissory% note% providing% that% upon% failure% of% the% makers% to% pay% interests,% ownership% of% the% property% would% automatically% be% transferred% to% the% payee,% and% the% covering% deed% of% sale% would% be% ed% is% in% substance% a% pactum% commissorium% in% violation% of% Article( 2088,% and% consequently,% the% resultant%sale%is%void%and%the%registration%and%obtaining% of% new% title% in% the% name% of% the% buyer% would% have% be% declared%void%also.%

commissorium.% •


Solid!Homes!v.!Court!of!Appeals!(275!SCRA!267)! o

contract% –% no% application% to% a% true% sale% or% transfer% transaction.%

%

%

When% a% purported% sale% a% retro% is% found% to% be% an% equitable% mortgage,% the% proper% remedy% in% case% the% borrower%does%not%pay%the%“price”%is%to%foreclose%on%the% mortgage.% ! There% can% be% no% loss% of% the% “seller’s”% right% to% redeem% for% that% would% be% pactum% commissorium.%

( Facts:( Solid% Homes% executed% in% favor% of% State% Financing% Center% a% Real% Estate% Mortgage% on% its% properties% embraced% in% the% TCT,% in% order% to% secure%the%payment%of%a%loan%of%10M%which%the%former%obtained%from% the%latter.% %

Return% of% redemption% price% would% be% equaL% to% paying%the%principal%loan,%thus%extinguishing%the% equitable%mortgage.%

A%year%later,%Solid%Homes%applied%for%and%was%granted%an%additional%loan% of% 1,% 511,270.03% by% State% Financing,% and% to% secure% its% payment,% Solid% executed% an% amendment% to% real% estate% mortgage% whereby% the% credits%

!

Solid!Homes!v.!Court!of!Appeals!



%

%

%


secured%by%the%first%mortgage%on%the%abovementioned%properties%were% increased%from%10M%to%11,511,270.03.% Solid% homes% obtained% additional% credits% and% financing% facilities% from% State% Financing% in% the% sum% of% 1,499,811.97% and% to% secure% its% payment,%

Issue:(% 1. Whether% or% not% the% memorandum% of% agreement/dacion% en% pago%executed%by%the%parties%is%valid%and%binding%"%YES% 2. Whether%or%not%solid%homes%can%claim%damages%arising%from%the%

the%former%executed%the%amendment%to%real%estate%mortgage%whereby% the%mortgage%executed%on%its%properties%was%again%amended%so%that%the% loans% or% credits% secured% thereby% were% further% increased% from% 11,511,% 270.03%to%13,011,082.00.% % When% the% obligations% became% due% and% payable,% State% Financing% made% repeated%demands%upon%Solid%homes%for%the%payment%thereof,%but%the%

non:annotation% of% its% right% of% repurchase% in% the% consolidated% titles%"%NO% % Held:( The% Memorandum% of% Agreement/Dacion% En% Pago% was% valid% and% binding,% and% that% the% registration% of% said% instrument% in% the% % of% Deeds%was%in%accordance%with%law%and%the%agreement%of%the%parties.% %

latter%failed%to%do%so.% % State% Financing% filed% a% petition% for% extrajudicial% foreclosure% of% the% mortgages%who%in%pursuance%of%the%petition,%issued%a%notice%of%sheriff’s% sale% whereby% the% mortgaged% properties% of% Solid% homes% and% the% improvements% existing% thereon,% including% the% V.V.% Soliven% Towers% II% Building% were% set% for% public% auction% sale% in% order% to% satisfy% the% full%

Solid% homes% utterly% failed% to% prove% that% respondent% corporation% had% maliciously% and% in% bad% faith% caused% the% non:annotation% of% petitioner’s% right%of%repurchase%so%as%to%prevent%the%latter%from%exercising%such%right.% On% the% contrary,% it% is% itted% by% both% parties% that% State% Financing% informed% Solid% homes% of% the% registration% with% the% % of% deeds% of% their% memorandum% of% agreement/dacion% en% pago% and% the% issuance% of% the%new%certificates%of%title%in%the%name%of%State%Financing.%

amount% of% Solid% homes’% mortgage% indebtedness,% the% interest% thereon,% and%the%fees%and%expenses%incidental%to%the%foreclosure%proceedings.% % Before% the% scheduled% public% auction% sale,% the% mortgagor% Solid% homes% made% representations% and% induced% State% Financing% to% forego% with% the% foreclosure% of% the% real% estate% mortgage.% By% reason% thereof,% State% Financing% agreed% to% suspend% the% foreclosure% of% mortgaged% properties,% subject%to%the%%and%conditions%they%agreed%upon,%and%in%pursuance%

% Clearly,% petitioner% was% not% prejudiced% by% the% non:% annotation% of% such% right% in% the% certificates% of% title% issued% in% the% name% of% State% Financing.% Also,% it% was% not% the% function% of% the% corporation% to% cause% said% annotation.%It%was%equally%the%responsibility%of%petitioner%to%protect%its% own% rights% by% making% sure% that% its% right% of% repurchase% was% indeed% annotated%in%the%consolidated%titles%of%State%Financing.% %

of% the% said% agreement,% they% executed% a% document% entitled% MEMORANDUM%OF%AGREEMENT/DACION%EN%P%AGO.% % %

The% only% legal% transgression% of% State% was% its% failure% to% observe% the% proper%procedure%in%effecting%the%consolidation%of%the%titles%in%its%name.% But%this%does%not%automatically%entitle%the%petitioner%to%damages%absent%



%

convincing% proof% of% malice% and% bad% faith% on% the% part% of% private% respondent:corporation.1!% % A.!Francisco!Realty!v.!Court!of!Appeals%

%

% Issue:(Whether%or%not%the%sale%was%considered%as%an%equitable%mortgage% % Held:( YES.% The% transfer% was% in% the% nature% of% pactum% commissorium,% since% the% sale% was% really% considered% as% an% equitable% mortgage.% It% was% really% intended% by% the% spouses% to% make% such% undated% deed% of% sale% a% security.% Also,% when% petitioners% transferred% the% title% in% its% name,% the%

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1



spouses%was%never%informed%of%such%action.%Such%transfer%was%therefore% void,%making%the%TCT%held%by%petitioners%null%and%void%as%well.2( ( K.3.(Rationale(Behind(Provisions(on(Equitable(Mortgages(

% Facts:(A.%Francisco%Realty%and%Development%Corp.%granted%a%loan%worth% P7.5M%in%favor%of%spouses%Javillonar,%to%which%the%latter%executed%three% documents:% a)% a% promissory% note% containing% the% interest% charge% of% 4%% monthly,% b)% a% deed% of% mortgage% over% the% subject% property,% c)% an% undated% deed% of% sale% of% the% mortgaged% property.% Since% the% spouses% allegedly%failed%to%comply%with%the%payments,%petitioner%ed%the% sale%in%its%favor,%getting%a%TCT%issued%in%its%name%without%knowledge%by% the% spouses.% Subsequently,% the% spouses% obtained% another% loan% worth% P2.5M,%g%another%promissory%note%in%favor%of%petitioner.%Petitioner% demanded% the% possession% of% the% property,% as% well% as% the% interest% payments,% to% which% the% spouses% refused% to% comply.% Petitioner% filed% an% action%for%possession%in%the%RTC.%RTC%ruled%in%favor%of%petitioner,%but%CA% reversed.%

%

•

The% provisions% of% the% Civil% Code% governing% equitable% mortgage% disguised%as%sale%contracts%are%primarily%designed%to%curtail%the% evils% brought% about% by% contracts% of% sale% with% right% to% repurchase,%particularly%the%circumvention%of%the%usury%law%and% pactum% commissorium.% Heirs! of! Jose! Reyes,! Jr.! v.! Reyes! (626! SCRA!758).!

•

They%envision%contracts%of%sale%w/%right%to%repurchase%where%the% real% intention% of% the% parties% is% that% the% repurchase% price% is% money% loaned,% and% the% “pacto% de% retro% sale”% is% a% means% of% securing%the%loan.%

•

Since% Article( 1602% is% remedial% in% nature,% it% was% applied% retroactively% in% cases% prior% to% the% effectivity% of% the% New% Civil% Code.%

% K.4.(When(Presumed(Equitable(Mortgage( •

See%Article(1602%above.%

•

General( Rule:( Existence%of%any%one%of%these%conditions%suffices% to%give%rise%to%the%non:conclusive%presumption%that%the%contract% is%an%equitable%mortgage.%

•

Exception:% Article( 1602( is% not% conclusive% and% may% be% rebutted% by%competent%and%satisfactory%proof%to%the%contrary.%

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 2




•

%

%

Lim! v.! Calaguas! (45! O.G.! No.! 8,! p.3394)% " % in% order% for%

o

presumption% to% apply,% the% parties% must% have% intended% the% contract%to%be%a%mortgage%and%not%a%pacto%de%retro.%

o

Lim% enumerates% the% following% circumstances% to% treat% the% contract%as%an%equitable%mortgage.% o

o

% used% in% power:of:attorney% indicate% that% conveyance% was% intended% to% be% a% loan% secured% by% a% mortgage% Price% paid% in% relation% to% value% of% property% is% grossly% inadequate% ! However,% mere% allegation% of% insufficiency% of% selling%price%does%not%create%the%presumption%if% there%is%no%proof%regarding%the%market%values%of% the%area%and%property%in%question% •

Inadequacy% of% price:% Consideration% so% far% short% of% the% real% value% as% to% startle%

o o

o

Even%with%the%assertion%that%the%price%in% a% pacto% de% retro% is% not% the% assessed% price,% does% not% justify% the% conclusion%

that% the% contract% is% one% of% equitable% mortgage.% o Practice%in%pacto%de%retro%sale%is% to% fix% a% relatively% reduced% price% to%afford%the%seller%a%retro%every% facility%to%redeem%the%property.% Seller% at% time% of% alleged% sale% was% in% urgent% need% of% money.%


o o


Supposed%seller%invested%money%he%obtained%in%making% improvements%on%the%property%sold.% Seller%remained%in%possession.% ! Although%the%seller%only%remained%in%possession%

! !

the%mind.% •

%

for%a%year,%such%stipulation%did%not%detract%from% the% fact% that% possession% (an% indicium% of% ownership)% was% retained% by% the% vendor,% and% that% the% vendor% retained% part% of% the% purchase% price.% This%pointed%to%an%equitable%mortgage.% Continued%possession%where%sellers%promised%to%

vacate,%but%did%not.%Tolerated%possession%is%not% enough%to%prove%equitable%mortgage.% Seller%paid%land%tax% Buyer% accepted% partial% payments,% such% acceptance% being%incompatible%with%idea%of%irrevocability%of%the%title% of% ownership% of% the% purchaser% at% the% expiration% of% the% term%stipulated%in%the%original%contract%for%the%exercise% of%the%right%to%redemption% Seller%remained%bound%for%the%repayment%of%the%money%% Transaction%had%origin%in%a%borrowing%of%money.% ! When% true% intention% was% not% to% convey% ownership,% but% to% secure% housing% loan% of% “buyer”% in% which% “seller”% had% a% direct% interest% since% proceeds% were% to% be% applied% to% their% outstanding% mortgage% obligations.% –% Equitable% !

Mortgage% Alleged% loan% disbursed% on% installments% –% no% proof% as% to% inadequacy% of% price% –% continued% receipt% of% rentals% by% seller% was% found% to% be% a%


o •

%

gesture% of% generosity% :% considered% sale% on% installments% There%was%a%previous%debt%between%the%parties%that%was% not%extinguished%by%the%sale%but%remained%subsisting.%

•

Article(1604.( The(provisions(of(Article(1602(shall(also(apply(to(a(contract(purporting( to(be(an(absolute(sale.((n)!( % Two% requisites% for% Article( 1604( (in% relation% to% Article( 1602)( to% apply:% 1. Parties%entered%into%contract%denominated%as%a%contract% of%sale.% 2. Intention% was% to% secure% an% existing% debt% by% way% of% mortgage.%

Austria! v.! Gonzales%" ( non:application%of%“best%evidence%rule”%

( Article(1605.( In(the(cases(referred(to(in(Articles(1602(and(1604,(the(apparent(vendor( may(ask(for(the(reformation(of(the(instrument.((n)( % •

When%a%contract%is%construed%to%be%an%equitable%mortgage,%the% following%may%result:% o Any%money,%fruit%or%benefit%to%be%received%by%the%buyer% as% rent% shall% be% considered% as% interest% subject% to% usury% laws;% o The% apparent% “Seller”% may% ask% for% reformation% of% the%

K.6.(Proof(by(Parole(Evidence;(Best(Evidence(Rule(

•


% K.7.(Effects(When(Sale(Adjudged(to(Be(an(Equitable(Mortgage(

% •

%

to%equitable%mortgage%situations.% o Decisive% factor% in% evaluating% intent% in% such% agreements% is%not%always%the%document%itself.% o But% all% the% surrounding% circumstances.% Thus,% parole% evidence%is%acceptable.%

Delay%in%transferring%title%does%not%give%rise%to%presumption.%

% K.5.(Applicability(to(Deeds(of(Absolute(Sale( (

•

%

Parole% evidence% is% issible% to% % claims% that% the% documents%were%really%given%as%security%for%payment%of%a%loan.% Provided%that%nature%of%agreement%is%placed%in%issue.% Matanguihan!v.!Court!of!Appeals!(275!SCRA!280)! o Parol% evidence% is% competent% to% prove% that% the% instrument%in%question%was%given%merely%as%a%security.% o Upon% proof% of% the% truth% of% such% allegations,% court% will% enforce%the%agreement%as%they%truly%intended.%


o o

instrument;% Court% may% decree% that% “buyer”:debtor% must% pay% his% outstanding%loan%to%“seller”:creditor% Where% trial% court% did% not% % upon% the% mortgagor’s% claim%that%he%paid%the%mortgage%obligation,%a%remand%of% the%case%to%trial%court%is%in%order%% ! To% determine% whether% the% mortgage% had% been% !

settled.% And%if%not,%how%much%mortgagor%should%pay%to% settle%the%same.%%


Tolentino!v.!Court!of!Appeals!(386!SCRA!36)! o

•

%

Although% Article( 1605% allows% for% reformation,% nothing% precludes% pursuit% of% other% remedies% to% protect% his% interest,%such%as:% ! Declaration%of%nullity%for%the%deed%of%sale% ! Specific%performance%

CLV:% However,% nullification% proposed% by% Tolentino% would% be% unfair% –% it% would% leave% buyer% without% the% necessary% security% contract,% which% remains% valid.% Reformation% should% be% the% proper% remedy% to% enforce% true% intention.% But,% in% the% event% property%had%been%sold%to%a%third%party,%nullification%of%that%sale% and% reconveyance% should% be% allowed% provided% security%

•

%

Article(1619.( Legal(redemption(is(the(right(to(be(subrogated,(upon(the(same(( and( conditions( stipulated( in( the( contract,( in( the( place( of( one( who( acquires( a( thing( by( purchase( or( dation( in( payment,( or( by( any( other( transaction( whereby( ownership( is( transmitted( by( onerous( title.( (1521a)( ( A.1.(Rationale(for(Legal(Redemption(

arrangement%over%the%property%is%preserved.%

•

Reasons%of%public%policy%

Balatero!v.!IAC!(154!SCRA!530)! o If% a% sale% a% retro% is% construed% to% be% an% equitable% mortgage,%execution%of%an%affidavit%of%consolidation%is%of%

•

Benefit%and%convenience%of%redemptioner,%to%afford%him%a%way%

BrionesZVasquez!v.!Court!of!Appeals!(450!SCRA!644)! o

•

out%of%what%might%be%an%inconvenient%association% •

Expiration% of% “period% of% redemption”% in% an% equitable% mortgage% does% not% prevent% the% purported% seller% from% extinguishing% the%

Intended%to%minimize%co:ownership% o

•

Consolidation%of%ownership%in%person%of%the%mortgagee% would%amount%to%pactum%commissorium.%

main% contract% of% loan,% and% thus% also% the% equitable% mortgage% contract.% o As%long%as%foreclosure%has%not%been%done.% ( (


III.(Legal(Redemption( ( A.(Definition( (

no% consequence,% and% “constructive% possession”% would% not%ripen%to%ownership%since%such%was%not%in%concept%of% an%owner.% •

%

Law% grants% a% co:owner% the% exercise% of% said% right% of% redemption%when%shares%of%other%owners%are%sold%to%a% third%person%

Avila!v.!Barabat!(485!SCRA!8)! o

Once%property%is%subdivided%and%distributed%among%the% co:owners,%no%more%reason%to%sustain%any%right%of%legal% redemption.%

% B.( Salient( Distinctions( between( Conventional( and( Legal( Right( of( Redemption( % Conventional((“right(a(retro”)(

Legal((“subrogation”)(

Can%only%be%constituted%by%express%

Does%not%have%to%be%expressly%



%

reservation%in%a%contract%of%sale%at% time%of%perfection%

reserved,%covers%other%onerous% transfers%of%title%

In%favor%of%the%seller%

Given%to%a%third:party%to%the%sale.%

Exercise%extinguishes%the% underlying%contract%of%sale,%as% though%there%was%never%any% contract%at%all%

Constitutes%a%new%sale%in% substitution%of%the%original%sale%

% C.(Legal(Redemption(Under(Civil(Code(( ( C.1.(Among(CoXHeirs( ( Article(1088.( Should( any( of( the( heirs( sell( his( hereditary( rights( to( a( stranger( before( the(partition,(any(or(all(of(the(coXheirs(may(be(subrogated(to(the(rights( of(the(purchaser(by(reimbursing(him(for(the(price(of(the(sale,(provided(

%

( C.2.(Among(CoXOwners( ( Article(1620.( A(coXowner(of(a(thing(may(exercise(the(right(of(redemption(in(case(the( shares(of(all(the(other(coXowners(or(of(any(of(them,(are(sold(to(a(third( person.( If( the( price( of( the( alienation( is( grossly( excessive,( the( redemptioner(shall(pay(only(a(reasonable(one.( ( •

Right%of%redemption%may%be%exercised%by%a%co:owner%only%when% part%of%the%community%property%is%sold%to%a%stranger.% o When% sold% to% another% co:owner,% there% is% no% new% participant.!Fernandez!v.!Tarun!(391!SCRA!653)%

•

Should% two% or% more% co:owners% desire% to% exercise% the% right% of% redemption,% they% may% do% so% only% in% proportion% to% the% share% they%have%in%the%co:owned%thing.%

•

Right% of% redemption% of% co:owners% excludes% ading% owners.% Article(1623(2)1%

No% right% of% legal% redemption% available% to% co:heirs% when% sale% covers%a%particular%property%of%the%estate.%

•

Redemption% right% pertain% to% disposition% of% right% to% inherit,% and% not% when% there% is% a% sale% of% a% particular% property% of% the% estate.% Plan!v.!IAC!(135!SCRA!270)%

•

The% heirs% who% actually% participated% in% the% execution% of% the% extrajudicial% settlement,% which% included% the% sale% to% a% third% person%of%their%pro%indiviso%shares%in%the%property,%are%bound%by% the% same;% while% the% co:heirs% who% did% not% participate% are% given%


the%right%to%redeem%their%shares%pursuant%to%Article(1088.%Cua!v.! Vargas!(506!SCRA!374)!

they( do( so( within( the( period( of( one( month( from( the( time( they( were( notified(in(writing(of(the(sale(by(the(vendor.((1067a)( % •

%

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%Article(1623.%% The% right% of% legal% pre:emption% or% redemption% shall% not% be% exercised% except% within% thirty% days% from% the% notice% in% writing% by% the% prospective% vendor,% or% by% the%vendor,%as%the%case%may%be.%The%deed%of%sale%shall%not%be%recorded%in%the% Registry%of%Property,%unless%accompanied%by%an%affidavit%of%the%vendor%that%he% has%given%written%notice%thereof%to%all%possible%redemptioners.% % The% right% of% redemption% of% co:owners% excludes% that% of% ading% owners.% (1524a)%



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The% requisites% for% the% exercise% of% legal% redemption% are% as% follows:% (1)% there% must% be% co:ownership;% (2)% one% of% the% co: owners%sold%his%right%to%a%stranger;%(3)%the%sale%was%made%before%

CoXOwners( •

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Article( 1088,% the% heir% may% redeem% for% himself% the% heredity% rights%sold%by%a%co:heir.%%

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Mariano! v.! Court! of! Appeals! (220! SCRA! 716)% " % co:heir% exercised% legal% redemption% over% parcel% of% land% belonging% to% estate%of%decedent.%Thus,%which%redemption%clause%to%apply?% o Distinction%between%1088%and%1620% o When% sake% of% particular% property% or% interest% in% o

property,%Article(1620.( When%sale%of%hereditary%right%itself,(Article(1088.(

When% the% heirs% have% partitioned% the% estate% among% themselves% and%each%have%occupied%and%treated%definite%portions%thereof%as% their%own,%co:ownership%has%ceased%even%though%the%property%is%

% C.5.(Among(Ading(Owners(of(Rural(Lands( ( Article(1621.!( The(owners(of(ading(lands(shall(also(have(the(right(of(redemption(

still% under% one% title,% and% the% sale% by% one% of% the% heirs% of% his% definite%portion%cannot%trigger%the%right%of%redemption%in%favor%

when( a( piece( of( rural( land,( the( area( of( which( does( not( exceed( one( hectare,(is(alienated,(unless(the(grantee(does(not(own(any(rural(land.(

C.3.(Effect(of(de(Facto(Partition(Among(CoXHeirs(and(CoXOwners( •

Article(1620%includes%doctrine%that%a%redemption%by%a%co:owner% of%the%property%owned%in%common,%even%when%his%own%fund%is% used,% within% period,% inures% to% benefit% of% all% other% co:owners.% Annie!Tan!v.!Court!of!Appeals!(172!SCRA!660)!

the% partition% of% the% co:owned% property;% (4)% the% right% of% redemption%must%be%exercised%by%one%or%more%co:owners%within% a%period%of%thirty%days%to%be%counted%from%the%time%he%or%they% were% notified% in% writing% by% the% co:owner% vendor;% and% (5)% the% vendee% must% be% reimbursed% the% price% of% the% sale.% Calma! v.! Santos!(590!SCRA!359)! %

For%the%right%of%redemption%to%be%exercised,%co:ownership%must%

% C.4.(Distinguishing(Between(the(Rights(of(Redemption(of(CoXHeirs(and(

SCRA!399)! •


exist%at%the%time%of%the%conveyance%is%made%by%a%co:owner%and% the% redemption% is% demanded% by% the% other% co:owner% or% co: owners.%Avila!v.!Barabat!(485!SCRA!8)!

Redemption% by% co:owner% redounds% to% the% benefit% of% all% other% co:owners.% Mariano! v.! Court! of! Appeals! (222! SCRA! 736)% and% the% 30:day% period% for% the% commencement% of% the% right% to% exercise% the% legal% redemption% right,% even% when% such% right% has% been%recognized%to%exist%in%a%final%and%executory%court%decision,% does% not% begin% from% the% entry% of% judgment,% but% from% the% written% notice% served% by% the% seller% to% the% party% entitled% to% exercise%such%redemption%right.%Guillen!v.!Court!of!Appeals!(589!

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of%the%other%heirs.%Vda.!De!Ape!v.!Court!of!Appeals!(456!SCRA! 193)!

When% the% seller% a% retro% dies,% the% right% to% redeem% cannot% be% exercised%by%a%co:heir%alone,%since%the%right%to%redeem%belonged% in%common%to%all%the%heirs.%De!Guzman!v.!Court!of!Appeals!(148! SCRA!75)!

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This( right( is( not( applicable( to( adjacent( lands( which( are( separated( by( brooks,( drains,( ravines,( roads( and( other( apparent( servitudes( for( the( benefit(of(other(estates.( (

is( about( to( be( reXsold,( the( owner( of( any( ading( land( has( a( right( of( preXemption(at(a(reasonable(price.( ( If(the(reXsale(has(been(perfected,(the(owner(of(the(ading(land(shall(

If( two( or( more( ading( owners( desire( to( exercise( the( right( of( redemption( at( the( same( time,( the( owner( of( the( ading( land( of( smaller(area(shall(be(preferred;(and(should(both(lands(have(the(same( area,(the(one(who(first(requested(the(redemption.((1523a)( (

have(a(right(of(redemption,(also(at(a(reasonable(price.( ( When(two(or(more(owners(of(ading(lands(wish(to(exercise(the(right( of(preXemption(or(redemption,(the(owner(whose(intended(use(of(the( land(in(question(appears(best(justified(shall(be(preferred.((n)( %

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Right% of% redemption% covers% only% “resale”% and% does% not% cover% exchanges%or%barter%of%properties.%De! Santos! v.! City! of! Manila! (45!SCRA!409)!

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is%to%discourage%speculation%in%real%estate%and%the%aggravation%of% the%housing%problems.% o “Urban”%"%refers%to%the%character%of%the%community%or% vicinity%in%which%the%land%is%found.%

Both% the% land% sought% to% be% redeemed% and% the% property% belonging% to% the% redemptioner% must% be% rural% lands.% Primary! Structures!Corp.!v.!Valencia!(409!SCRA!371)%

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Ortega!v.!Orcine!(38!SCRA!276)%"%the%purpose%of%this%provision%

When% there% is% no% issue% that% when% the% ading% lands% involved%

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are% both% rural% lands,% then% the% right% of% redemption% can% be% exercised% and% the% only% exemption% provided% is% when% the% buyer% can% show% that% he% did% not% own% any% other% rural% land.% But% the% burden%of%proof%to%provide%for%the%exception%lies%with%the%buyer.% Primary!Structures!Corp.!v.!Valencia!(409!SCRA!371)%

Redemption%of%Urban%land%only%applies%when%there%is%resale% o No% right% of% redemption% when% urban% land% is%transferred% under%“exchange”%of%properties.%

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Legaspi! v.! Court! of! Appeals! (69! SCRA! 360)% " ( practically% did% away%with%requirement%of%having%purchased%land%previously%for% speculation.%

% C.6.(Among(Ading(Owners(of(Urban(Land( % Article(1622.!( Whenever(a(piece(of(urban(land(which(is(so(small(and(so(situated(that( a( major( portion( thereof( cannot( be( used( for( any( practical( purpose( within(a(reasonable(time,(having(been(bought(merely(for(speculation,(

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Sen! Po! Ek! Marketing! v.! Martinez! (325! SCRA! 210)! held% that% Article( 1622% only% deals% with% small% urban% lands% bought% for% speculation.! o Right% does% not% apply% to% a% lessee% trying% to% buy% the% land% he%is%leasing.%

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C.7.(Sale(of(Credit(in(Litigation( ( Article(1634.( When(a(credit(or(other(incorporeal(right(in(litigation(is(sold,(the(debtor( shall(have(a(right(to(extinguish(it(by(reimbursing(the(assignee(for(the( price( the( latter( paid( therefor,( the( judicial( costs( incurred( by( him,( and( the(interest(on(the(price(from(the(day(on(which(the(same(was(paid.( ( A(credit(or(other(incorporeal(right(shall(be(considered(in(litigation(from( the(time(the(complaint(concerning(the(same(is(answered.( ( The(debtor(may(exercise(his(right(within(thirty(days(from(the(date(the( assignee(demands(payment(from(him.( ( C.8.(When(Legal(Redemption(Period(Begins(to(Run( ( Article(1623.( The( right( of( legal( preXemption( or( redemption( shall( not( be( exercised( except(within(thirty(days(from(the(notice(in(writing(by(the(prospective( vendor,( or( by( the( vendor,( as( the( case( may( be.( The( deed( of( sale( shall( not(be(recorded(in(the(Registry(of(Property,(unless(accompanied(by(an( affidavit(of(the(vendor(that(he(has(given(written(notice(thereof(to(all( possible(redemptioners.( ( The( right( of( redemption( of( coXowners( excludes( that( of( ading( owners.(

% •

Cabrera! v.! Villanueva! (160! SCRA! 627)( " ( Court% accepted% affidavit%saying%that%seller%gave%written%notice%to%co:%owners%as% proof%of%compliance%with%1623.%!


Primary! Structures! Corp! v.! Valencia! (409! SCRA! 371)! " ( Affirmed%need%for%strict%compliance%with%Article(1623.! o Existence% of% a% clause% in% deed% of% sale% saying% that% seller% had%complied%is%not%the%written%affirmation%under%oath% that%the%required%notice%has%been%met%–%thus%it%was%not% deemed%to%be%in%compliance%with%1623.%% o CLV:%This%case%provides%the%better%rule%when%compared% to%Cabrera&v.&Villanueva.%

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Butte!v.!Manuel!Uy!and!Sons!Inc.!(4!SCRA!527)(" (Notice%must% be%given%by%the%seller! o Notice% given% by% the% buyer,% even% if% written,% does% not% start%the%30:day%period.%

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Castillo!v.!Samonte!(106!SCRA!1023)(" (Letter%and%spirit%of%law% argue% against% a% wider% scope% of% the% notice% specified% in% Article( 1088.! o Written%notice%is%essential%to%start%the%running%of%the%30: day%period.%%

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Conejero!v.!Court!of!Appeals!(16!SCRA!775)! o The%law%did%not%provide%for%a%particular%mode%of%written% notice,% and% therefore% any% compliance% with% “written% notice”% should% suffice,% including% giving% a% copy% of% the% deed%of%sale.%%

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Garcia!v.!Calaliman!(17!SCRA!201)! o Written% notice% is% indispensable% in% order% to% remove% all% o

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uncertainty%as%to%the%sale.% Method%of%notification%is%exclusive%–%must%be%in%writing% –%but%no%specific%form.%

Vda!de!Ape!v.!Court!of!Appeals!(456!SCRA!193)!


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Annotation% of% adverse% claim% on% title% does% not% comply% with%Article(1623.(

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Spouses!Doromal!v.!Court!of!Appeals!(300!SCRA!516)! o 30:day%period%does%not%run%when%transaction%covered%in% notice%was%not%a%perfected%contract%of%sale.% o Notice%must%be%with%execution%and%delivery%of%the%deed% o

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This%doctrine%cannot%be%applied%to%legal%pre:emption.%

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Notice%to%minors%may%validly%be%served%upon%parents%even%when% the%latter%have%not%been%judicially%appointed%as%guardians%since% the% same% is% beneficial% to% the% children.% Badillo! v.! Ferrer! (152!

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Hermoso!v.!Court!of!Appeals!(300!SCRA!516)! Notice% in% writing% is% needed% in% 3% other% species% of% legal% redemption% 1. Case% where% share% of% co:owners% are% sold% to% a% third% person%% 2. Redemption%of%ading%rural%land% 3. Redemption%of%ading%urban%land.% o Interpretation% in% these% cases% tilts% in% favor% of% the% o

redemptioner.%

Francisco! v.! Boiser! (332! SCRA! 305)! –! Requirements% under%

dispenses% with% need% for% written% notice% –% filing% of% the% suit%amounts%to%actual%knowledge%of%the%sale.% •

SCRA!407)! % 2)%Summation%on%Strict%Rules%on%Notice%

The%written%notice%of%sale%is%mandatory,%notwithstanding%actual%

Article(1623! 1. Notice% must% be% given% by% seller% in% order% for% 30:day% redemption%period%to%run.% 2. No%particular%form%is%prescribed.% 3. Filing% of% suit% for% ejectment% or% collection% of% rentals%

of%sale.% Period% should% not% be% deemed% to% have% commenced% unless%notice%is%made%after%execution%of%formal%deed%of% disposal.%

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knowledge% of% a% co:owner,% in% order% to% remove% all% uncertainties% about% the% sale,% its% % and% conditions,% as% well% as% its% efficacy% and%status.%Verdad!v.!Court!of!Appeals!(256!SCRA!593)! o Written% notice% required% was% enacted% to% remove% all% doubts%about%the%alienation.%

% 1)%Notice%Must%Cover%Perfected%Sale% •

%

Fernandez!v.!Tarun!(391!SCRA!653)! o Other% co:owner% signs% deed% of% partition% embodying% disposition%of%property%–%proper%notice.%

% Francisco!v.!Boiser% % Facts:( Petitioner% Adalia% Francisco% and% three% of% her% sisters,% Ester,% Elizabeth,% and% Adeluisa,% were% co:owners% of% four% parcels% of% ed% land%in%Caloocan%City.%On%August%1979,%they%sold%1/5%of%their%undivided% share%to%their%mother,%Adela%Blas,%for%PhP10,000,%making%her%a%co:owner% of%the%real%property%to%that%extent.%% % 7%years%later,%in%1986,%however,%Adela%sold%her%1/5%share%for%PhP10,000% to%respondent%Zenaida%Boiser,%another%sister%of%petitioner.%



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In%1992%or%6%years%after%the%sale,%Adalia%received%summons%with%a%copy% of% a% complaint% by% Zenaida% demanding% her% share% in% the% rentals% being% collected% from% the% tenants% of% the% Ten% Commandments% Building,% which% stands%on%the%co:owned%property.%Adalia%then%informs%Zenaida%that%she%

Held:( The% petitioner% points% out% that% the% case% does% not% concern% the% particular% form% in% which% such% notice% must% be% given,% but% rather% the% sufficiency%of%notice%given%by%a%vendee%in%lieu%of%the%required%notice%to% be%given%by%the%vendor%or%prospective%vendor.%

was% exercising% her% right% of% redemption% as% co:owner% of% the% subject% property,%depositing%for%that%purpose%PhP10,000%with%the%Clerk%of%Court% The%case%was%however%dismissed%after%Zenaida%was%declared%non:suited,% and%Adalia’s%counterclaim%was%thus%dismissed%as%well.% % 3% years% after,% Adalia% institutes% a% complaint% demanding% the% redemption% of% the% property,% contending% that% the% 30:% day% period% for% redemption%

% The%text%of%Article%1623%clearly%and%expressly%prescribes%that%the%30%days% for% making% the% redemption% shall% be% counted% from% notice% in% writing% by% the%vendor%it%makes%sense%to%require%that%notice%be%given%by%the%vendor% and%nobody%else,%since%the%vendor%of%an%undivided%interest%is%in%the%best% position% to% know% who% are% his% co:owners,% who% under% the% law% must% be% notified%of%the%sale.%

under%Art.%1623%had%not%begun%to%run%against%her%or%any%of%the%other%co: owners,% since% the% vendor% Adela% did% not% inform% them% about% the% sale,% which% fact% they% only% came% to% know% of% when% Adalia% received% the% summons% in% 1992.% Zenaida% on% the% other% hand% contends% that% Adalia% already% knew% of% the% sale% even% before% she% received% the% summons% since% Zenaida%had%informed%Adalia%by%letter%of%the%sale%with%a%demand%for%her% share% of% the% rentals% three% months% before% filing% suit,% attaching% to% it% a%

% Notice%by%the%co:owner%likewise%removes%all%doubt%as%to%the%fact%of%the% sale,%its%perfection,%and%its%validity%by%not%immediately%notifying,%or%not% notifying% at% all,% a% co:% owner,% the% vendor% can% delay% or% even% effectively% prevent%the%meaningful%exercise%of%the%right%of%redemption.% % However,% it% would% be% unjust% in% the% case% at% bar% to% require% the% vendor%

copy%of%the%deed%of%sale.%Adalia’s%receipt%of%the%said%letter%is%proven%by% the% fact% that% within% a% week,% she% advised% the% tenants% of% the% building% to% disregard% Zenaida’s% letter:demand.% The% trial% court% dismissed% the% complaint% for% legal% redemption,% holding% that% Art.% 1623% does% not% prescribe%any%particular%form%of%notifying%co:owners%on%appeal,%the%CA% affirmed.% % Issue:(Whether%or%not%the%letter:demand%by%Zenaida%to%Adalia,%to%which%

Adela% to% serve% notice% of% the% sale,% when% the% fact% has% already% been% established% in% both% lower% courts% Adalia% has% effectively% exercised% her% right% when% she% deposited% the% P10,000% redemption% price% 7% days% after% receiving%the%summons.1% % 3)%Exceptions%to%Written%Notice%Requirement%

the% deed% of% sale% was% attached,% can% be% considered% as% sufficient% compliance%with%the%notice%requirement%of%Article%1623%for%the%purpose% of%legal%redemption.% %

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Alonzo!v.!IAC!(150!SCRA!259)!" !Exception%to%Article(1088!

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o

Situation% where% co:heirs% lived% with% purchaser% in% the% same%lot,%but%the%action%was%brought%only%after%13%years% of%knowing%about%the%same.% The%co:heirs%are%deemed%to%have%received%actual%notice%

o

of%the%same%(even%if%no%written%notice).% Laches%seems%to%be%the%main%principal.%%

o

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Pilapil!v.!Court!of!Appeals!(250!SCRA!560)! o Requirement% of% written% notice% was% rendered% inutile%

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( Section(119( Every( conveyance( of( land( acquired( under( the( free( patent( or( homestead(provisions,(when(proper,(shall(be(subject(to(repurchase(by( the( applicant,( his( widow,( or( legal( heirs,( within( a( period( of( five( years( from(the(date(of(the(conveyance.( % •

Distrito!v.!Court!of!Appeals!(197!SCRA!606)!" !Exception(to(the( [Alonzo](Exception!

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When% co:owner% himself% is% middleman% to% effect% sale% to% third%party,%notice%is%no%longer%necessary% He%already%has%actual%knowledge%of%the%sale% 30:day%period%begins%from%such%knowledge%

%

Public(Land(Act(

when% no% co:owners% questioned% the% sale,% even% when% buyers%immediately%took%possession.%

o

Sale% within% 5% years% void% even% when% in% favor% of% homesteader’s% own%child.% Right%to%repurchase%under%homestead%patent%granted%by%law% o Need%not%be%provided%for%in%deed%of%sale.% o

Cannot%be%waived.%

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Where% homestead% was% sold% at% extrajudicial% foreclosure,% 5% year% period% begins% to% run% after% expiration% of% one% year% period% of% repurchase%allowed%in%extrajudicial%foreclosure.%

Verdad! v.! Court! of! Appeals! (256! SCRA! 593)! –! Alonzo% and%

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All%other%cases%–%from%date%of%sale,%not%from%date%of%registration.%

Distrito%are%special%exceptions% o Co:owner%learned%of%the%sale%through%city%treasurer% o Her% exercise% of% right% of% redemption% was% timely:% no% written%notice%of%sale%was%ever%given%to%her,%thus%the%30: day%period%had%not%yet%run.%

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Section%119%of%Public%Land%act%should%be%read%with%Article%1616%

o o •

%

% D.(Other(Instances(where(Right(of(Legal(Redemption(is(Granted( ( D.1.(Redemption(of(Homesteads( ( ( (

of% NCC% –% there% should% be% a% return% of% the% price/tender% of% payment.% o Mere%notice%of%intent%to%redeem%is%insufficient.% % D.2.(Redemption(in(Tax(Sales( ( National(Internal(Revenue(Code( ( Section(214.(Redemption(of(Property(Sold.( Within(one((1)(year(from(the(date(of(sale,(the(delinquent(taxpayer,(or( any(one(for(him,(shall(have(the(right(of(paying(to(the(Revenue(District(



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Officer(the(amount(of(the(public(taxes,(penalties,(and(interest(thereon( from( the( date( of( delinquency( to( the( date( of( sale,( together( with( interest( on( said( purchase( price...The( owner( shall( not,( however,( be( deprived(of(the(possession(of(the(said(property(and(shall(be(entitled(to(

thereon(in(addition,(up(to(the(time(of(redemption,(together(with(the( amount( of( any( assessments( or( taxes( which( the( purchaser( may( have( paid(thereon(after(purchase,(and(interest(on(such(last(named(amount( at(the(same(rate;(and(if(the(purchaser(be(also(a(creditor(having(a(prior(

the( rents( and( other( income( thereof( until( the( expiration( of( the( time( allowed(for(its(redemption.( ( D.3.(Redemption(by(Judgment(Debtor( ( Rules(Of(Court( (

lien(to(that(of(the(redemptioner,(other(than(the(judgment(under(which( such(purchase(was(made,(the(amount(of(such(other(lien,(with(interest.( x(x(x( ( •

the% period% of% redemption% shall% be% “at% any% time% within% one% (1)% year%from%the%date%of%registration%of%the%certificate%of%sale,”%so% that% the% period% is% now% to% be% understood% as% composed% of% 365% days,%unlike%the%360%days%under%the%old%provisions%of%the%Rules% of%Court.%Ysmael!v.!CA!(318!SCRA!215)%%

Section(27.Who(may(redeem(real(property(so(sold.(( Real( property( sold( as( provided( in( the( last( preceding( section,( or( any( part( thereof( sold( separately,( may( be( redeemed( in( the( manner( hereinafter(provided,(by(the(following(persons:( ( (a)( The( judgment( obligor;( or( his( successor( in( interest( in( the( whole( or( any(part(of(the(property;(

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In%execution%sales,%the%sheriff%does%not%warrant%the%title%to%the% property%sold%by%him%and%it%is%not%incumbent%on%him%to%place%the% purchaser%in%possession%of%the%property.%% o The%rule%of%caveat%emptor%applies%to%execution%sales.%

( (b)( A( creditor( having( a( lien( by( virtue( of( an( attachment,( judgment( or( mortgage( on( the( property( sold,( or( on( some( part( thereof,( subsequent( to( the( lien( under( which( the( property( was( sold.( Such( redeeming( creditor(is(termed(a(redemptioner.((29a)( ( Section(28.(Time(and(manner(of,(and(amounts(payable(on,(successive( redemptions;(notice(to(be(given(and(filed.(( The( judgment( obligor,( or( redemptioner,( may( redeem( the( property( from(the(purchaser,(at(any(time(within(one((1)(year(from(the(date(of( the(registration(of(the(certificate(of(sale,(by(paying(the(purchaser(the( amount( of( his( purchase,( with( the( per( centum( per( month( interest(

Under%Section(28,(Rule(39(of(the(1997(Rules(of(Civil(Procedure,%

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Written% notice% is% required% to% be% given% to% the% judgment:debtor% before% the% sale% of% the% property% on% execution% to% give% him% the% opportunity%to%prevent%the%sale%by%paying%the%judgment%sought% to%be%enforced%and%the%costs%which%have%been%incurred.%Torres! v.!Cabling!(275!SCRA!329)!

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Where%there%is%a%third:party%claim,%sheriff%should%demand%from% the% judgment% creditor% who% becomes% the% highest% bidder,% payment% in% cash% of% his% bid% instead% of% merely% crediting% the% amount%to%the%partial%satisfaction%of%the%judgment%debt.%Torres! v.!Cabling!(275!SCRA!329)!

(



%

D.4.(Redemption(in(Extrajudicial(Foreclosure( ( Act(No.(3135( "An(Act(To(Regulate(The(Sale(Of(Property(Under(Special(Powers( Inserted(In(Or(Annexed(To(RealXEstate(Mortgages"( ( Section(6.(( In( all( cases( in( which( an( extrajudicial( sale( is( made( under( the( special( power(hereinbefore(referred(to,(the(debtor,(his(successors(in(interest( or( any( judicial( creditor( or( judgment( creditor( of( said( debtor,( or( any( person( having( a( lien( on( the( property( subsequent( to( the( mortgage( or( deed(of(trust(under(which(the(property(is(sold,(may(redeem(the(same( at(any(time(within(the(term(of(one(year(from(and(after(the(date(of(the( sale;( and( such( redemption( shall( be( governed( by( the( provisions( of( sections(four(hundred(and(sixtyXfour((464)(to(four(hundred(and(sixtyX six((466),(inclusive,(of(the(Code(of(Civil(Procedure,(in(so(far(as(these(are( not(inconsistent(with(the(provisions(of(this(Act.( ( •

This%is%the%General(Rule(

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Before% the% expiration% of% the% 1:year% redemption% period% within% which% the% judgment:debtor% or% mortgagor% may% redeem% the% property,% the% purchaser% thereof% is% not% entitled,% as% a% matter% of% right,%to%the%possession%of%the%subject%matter.(

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The%Court%may%allow%the%purchaser%to%receive%the%rentals%of%the% purchased% property,% but% the% purchaser% is% able% to% the% judgment:debtor%for%that%amount,%and%may%be%credited%against% the% redemption% price% when% the% said% judgment% debtor% or% mortgagor%effects%the%redemption.(

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The% redemption% of% extra:judicially% foreclosed% properties% is% exercised%within%one%(1)%year%from%the%date%of%the%auction%sale% as% provided% for% in% Act% 3135.( Lee! Chuy! Realty! Corp.! v.! CA! (250! SCRA!596)!

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The%execution%of%a%dacion%en%pago%by%sellers%effectively%waives% the%redemption%period%normally%given%a%mortgagor.!First!Global! Realty!and!Dev.!Corp.!v.!San!Agustin!(377!SCRA!341)!

( D.5.(Foreclosures(by(Banking(Institutions( ( Republic(Act(No.(8791(( ((General(Banking(Law(Of(2000)( ( Section(47.(Foreclosure(of(Real(Estate(Mortgage.( In( the( event( of( foreclosure,( whether( judicially( or( extraXjudicially,( of( any( mortgage( on( real( estate( which( is( security( for( any( loan( or( other( credit( accommodation( granted,( the( mortgagor( or( debtor( whose( real( property(has(been(sold(for(the(full(or(partial(payment(of(his(obligation( shall(have(the(right(within(one(year(after(the(sale(of(the(real(estate,(to( redeem( the( property( by( paying( the( amount( due( under( the( mortgage( deed,(with(interest(thereon(at(rate(specified(in(the(mortgage,(and(all( the( costs( and( expenses( incurred( by( the( bank( or( institution( from( the( sale(and(custody(of(said(property(less(the(income(derived(therefrom.( However,( the( purchaser( at( the( auction( sale( concerned( whether( in( a( judicial(or(extraXjudicial(foreclosure(shall(have(the(right(to(enter(upon( and( take( possession( of( such( property( immediately( after( the( date( of( the( confirmation( of( the( auction( sale( and( ister( the( same( in( accordance( with( law.( ( Any( petition( in( court( to( en( or( restrain( the( conduct( of( foreclosure( proceedings( instituted( pursuant( to( this(



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provision( shall( be( given( due( course( only( upon( the( filing( by( the( petitioner(of(a(bond(in(an(amount(fixed(by(the(court(conditioned(that( he(will(pay(all(the(damages(which(the(bank(may(suffer(by(the(ening( or(the(restraint(of(the(foreclosure(proceeding.!( ( (Notwithstanding( Act( 3135,( juridical( persons( whose( property( is( being( sold( pursuant( to( an( extrajudicial( foreclosure,( shall( have( the( right( to( redeem( the( property( in( accordance( with( this( provision( until,( but( not( after,( the( registration( of( the( certificate( of( foreclosure( sale( with( the( applicable((of(Deeds(which(in(no(case(shall(be(more(than(three( (3)(months(after(foreclosure,(whichever(is(earlier.(Owners(of(property(

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After%bank%has%foreclosed%the%property%as%highest%bidder%in%the% auction% sale,% the% accepted% offer% of% spouses:borrowers% to% “repurchase”% the% property% was% actually% a% new% option% contract,% and%the%condition%that%the%spouses:borrowers%will%pay%monthly% interest% during% the% one:year% option% period% is% considered% to% be% the% separate% consideration% to% hold% the% option% contract% valid.! Dijamco!v.!Court!of!Appeals!(440!SCRA!190)!

! D.6.(Redemption(in(Judicial(Foreclosure(

that(has(been(sold(in(a(foreclosure(sale(prior(to(the(effectivity(of(this( Act(shall(retain(their(redemption(rights(until(their(expiration.( (

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No% right% to% redeem% is% granted% to% the% debtor:mortgagor% when% there%has%been%a%judicial%foreclosure%of%a%real%estate%mortgage,% except%when%the%mortgagee%is%a%bank%or%a%banking%institution.(

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Section(47(1)(refers%to%foreclosures%by%banking%institutions.(%

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Section(47(2)%is%the%Exception(to%Act%3135.%

“Equity% of% Redemption”% "% the% right% of% the% defendant: mortgagor%to%extinguish%the%mortgage%and%retain%ownership%of% the% property% by% paying% the% secured% debt% within% 90% days% after% the%judgment%becomes%final,%or%even%after%the%foreclosure%sale%

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A% stipulation% to% render% the% right% to% redeem% defeasible% by% an%

but%before%the%confirmation%of%it%by%the%Court.(

option%to%buy%on%the%part%of%the%creditor.!Soriano!v.!Bautista!(6! SCRA!946)! •

( D.7.(Period(Of(Redemption(When(Rural(Bank(Forecloses((R.A.(No.(720)(

No%right%to%redeem%from%a%judicial%foreclosure%sale,%except%those%

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granted%by%banks%or%banking%institutions.!GSIS!v.!CFI!(175!SCRA! 19)! •

may% redeem% the% property% within% 2% years% from% the% date% of% foreclosure.(

The% one:year% redemption% period% in% the% case% of% foreclosure% is% not%interrupted%by%the%filing%of%an%action%assailing%the%validity%of% the%mortgage,%so%that%at%the%expiration%thereof,%the%mortgagee% who% acquires% the% property% at% the% foreclosure% sale% can% proceed% to%have%title%consolidated%in%his%name%and%a%writ%of%possession% issued%in%his%favor.!Union!Bank!v.!CA!(359!SCRA!480)!

Where%the%property%is%mortgaged%with%a%rural%bank,%the%debtor%

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If% the% debtor% fails% to% exercise% the% redemption% in% the% 2:year% period,%his%heirs%may%still%repurchase%the%property%within%5%years% from%expiration%of%the%2:year%redemption%period.(

( ( ( (



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D.8.(Legal(right(to(redeem(under(Agrarian(Reform(Code( % Republic(Act(No.(3844( (Agricultural(Land(Reform(Code)( ( Section(12.(Lessee's(Right(of(Redemption(( In( case( the( landholding( is( sold( to( a( third( person( without( the( knowledge(of(the(agricultural(lessee,(the(latter(shall(have(the(right(to( redeem( the( same( at( a( reasonable( price( and( consideration:( Provided,( That(the(entire(landholding(sold(must(be(redeemed:(Provided,(further,( That( where( these( are( two( or( more( agricultural( lessees,( each( shall( be( entitled( to( said( right( of( redemption( only( to( the( extent( of( the( area( actually(cultivated(by(him.(The(right(of(redemption(under(this(Section( may( be( exercised( within( two( years( from( the( registration( of( the( sale,( and(shall(have(priority(over(any(other(right(of(legal(redemption.( ( •

In% the% event% that% the% landholding% is% sold% to% a% third% person% without% the% knowledge% of% the% agricultural% lessee,% the% latter% is% granted% by% law% the% right% to% redeem% it% within% 180% days% from% notice% in% writing% and% at% a% reasonable% price% and% consideration.% Quiño&v.&CA!(291!SCRA!249)(


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Chapter(14:(Assignment( ( I.(Nature(of(Assignment(in(the(Scheme(of(Things( ( Article(1624.( An( assignment( of( creditors( and( other( incorporeal( rights( shall( be( perfected(in(accordance(with(the(provisions(of(Article(1475.((n)( ! •

Assignment! is! the! process! of! transferring! the! right! of! assignor! to! assignee! who! would! then! have! the! right! to! proceed! against! the! debtor.! The! assignment! may! be! done! gratuitously! or! onerously,! in! the! latter! case,! the! assignment! has! an! effect! similar! to! that! of! a! sale.! Licaros(v.(Gatmaitan((362(SCRA(548)(

Though!intangible!things!may!be!the!object!of!sale!as!defined!in! Article(1458,!the!more!proper!term!is!“assignment.”!

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Assignment,!more!or!less,!is!the!same!as!sale!–!why!then!do!we!

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Commutative!

Some!definitions!of!Assignment! o Prior! to! New! Civil! Code,! assignment! was! not! limited! to! the!genus!of!sale!!!it!could!be!dation,!or!donation,!etc.! However,! with! the! provisions! of! the! NCC,! there! should! be!little!doubt!!!assignment!should!only!cover!“sales”! of!credits.! Except! in! case! of! donation,! the! transaction! of! assignment!is!still!covered!by!the!law!on!sales.! " Assignment!by!dation,!assignment!by!barter!and! assignment! of! credit! as! guaranty! (mortgage!

! II.(What(Makes(Assignment(Different?( •

An!assignment!of!credit!is!an!agreement!by!virtue!of!which!the! owner!of!a!credit,!known!as!the!assignor,!by!a!legal!cause,!such! as!sale,!dacion!en!pago,!exchange!or!donation,!and!without!the! consent! of! the! debtor,! transfers! his! credit! and! accessory! rights! to!another,!known!as!the!assignee,!who!acquires!the!power!to! enforce! it! to! the! same! extent! as! the! assignor! could! enforce! it! against!the!debtor.!Aquintey(v.(Tibong((511(SCRA(414)(

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Assignment!shares!characteristics!of!sale! o o o

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contract)!are!covered!by!the!Law!on!Sales!

What’s! the! point?! –! Characteristics! of! the! genus! “sale”! must! necessarily!pertain!to!assignment! o All!jurisprudential!doctrines!pertaining!to!sale!pertain!to! assignment,!with!some!modifications.!

Onerous! " However,! assignments! may! be! done! gratuitously! or! onerously.! Nyco( v.( BA( Finance( (200(SCRA(637)!

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have!a!separate!chapter!in!our!Civil!Code?! o Even! though! they’re! not! technically! the! same,! they! come!from!the!same!genus!!!“sale”! •


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Assignment!!!the!sale!of!credits!and!other!incorporeal!rights.! o

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Nominate!! Consensual! Reciprocal!


As! a! consequence,! the! third! party! steps! into! the! shoes! of! the! original!creditor!as!subrogee!of!the!latter.!Although!constituting! a!novation,!such!assignment!does!not!extinguish!the!obligation! under!the!credit!assigned,!even!when!the!assignment!is!effected!


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without!his!consent.!South(City(Homes,(Inc.(v.(BA(Finance(Corp.( (371(SCRA(603)( •

Philippine( National( Bank( v.( Court( of( Appeals( (272( SCRA( 291)! characterized! assignment! as! a! transfer! or! making! over! to! another! of! the! whole! of! any! property,! real! or! personal,! in! possession!or!in!action,!or!of!any!estate!or!right!therein.! o Includes! transfers! of! all! kinds! of! property,! and! is! peculiarly!applicable!to!intangible!personal!property.! o

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Ordinarily! employed! to! describe! the! transfer! of! nonR negotiable! choses! in! action! and! rights! connected! with! property!distinguished!from!the!actual!item.!

! A.(Validity(and(Binding(Effect( !

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Binding!effect!as!to!third!persons!not!present!unless!it!appears! in!a!public!document,!or!in!the!Registry!of!Property!if!real!rights! are!assigned.! o Because!assignment!deals!with!intangible!property,!the! only!evidence!as!to!the!transfer!is!the!public!instrument.!

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Without!the!public!instrument,!assignment!is!still!valid.! o

But!in!such!case,!it!is!enforceable!only!between!assignor! and!assignee,!and!their!successors!in!interest.!

When! assignment! is! still! at! the! executory! stage! (and! not! evidenced!in!writing)!it!is!covered!by!the!Statute!of!Frauds.!

• Assignment(

Subject!matter!is!tangible!property!

Subject!matter!is!intangible! property!

Consensual! !

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against( third( person,( unless( it( appears( in( a( public( instrument,( or( the( instrument( is( recorded( in( the( Registry( of( Property( in( case( the( assignment(involves(real(property.((1526)( (

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Sale(

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B.(Binding(Effect(as(to(Third(Parties( ( Article(1625.(( An( assignment( of( a( credit,( right( or( action( shall( produce( no( effect( as(

PNB$v.$Court$of$Appeals!implies!that!assignment!may!also!refer! to!tangible!property.! o CLV:! Properly! speaking,! transfer! of! ownership! and! possession! of! tangible! property! is! a! sale,! not! an! assignment.!

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Assignment!does!not!cover!donation!involving!intangibles! o Donations!are!formal!contracts!

Exception:!When!assignment!involves!document!of!title! o Assignment! does! not! bind! the! bailee! unless! specific! notice!of!the!transfer!of!the!covering!document!of!title! is!given!by!transferor/transferee!to!the!bailee!

! C.(Effect(of(Assignment(of(Credit(on(Debtor( •

Any! ambiguity! in! the! meaning! of! an! assignment! shall! be! resolved! against! the! party! who! prepared! the! deed! of! assignment.!


C(&C(Commercial(Corp.(v.(Philippine(National(Bank((175(SCRA( 1)$ held! that! the! meeting! of! minds! in! assignment! contemplates! that!between!the!assignor!and!assignee.!The!debtor’s!consent!is! not! necessary,! and! it! is! sufficient! that! the! assignment! be! brought!to!the!debtor’s!knowledge!in!order!to!be!binding.(


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In!an!assignment!of!credit,!the!consent!of!the!debtor!is! not!essential!for!its!perfection,!his!knowledge!thereof!or! lack! of! it! affecting! only! the! efficaciousness! or! inefficaciousness! of! any! payment! he! might! make.(

Article(1285.(( The(debtor(who(has(consented(to(the(assignment(of(rights(made(by(a( creditor(in(favor(of(a(third(person,(cannot(set(up(against(the(assignee( the( compensation( which( would( pertain( to( him( against( the( assignor,(

Project( Builders,( Inc.( v.( Court( of( Appeals( (358( SCRA( 626)(

unless(the(assignor(was(notified(by(the(debtor(at(the(time(he(gave(his( consent,(that(he(reserved(his(right(to(the(compensation.( ( If(the(creditor(communicated(the(cession(to(him(but(the(debtor(did(not( consent( thereto,( the( latter( may( set( up( the( compensation( of( debts( previous(to(the(cession,(but(not(of(subsequent(ones.( (

Debtor’s! consent! not! needed! for! assignment! to! produce! legal! effects.!NIDC(v.(De(los(Angeles((40(SCRA(489)( o

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Duty! to! pay! assignee! does! not! depend! on! debtor’s! consent.! Otherwise,! creditors! would! have! a! hard! time! asg!credit.! Purpose!of!notice:!only!to!inform!debtor!that!he!should! pay!someone!else,!not!the!original!creditor.! This! change! is! a! novation.! However,! liability! is! not! extinguished.!

Even! though! knowledge/consent! of! debtor! is! not! required! for! validity!of!the!assignment,!lack!of!such!has!legal!effects.!

! Article(1626.((

If( the( assignment( is( made( without( the( knowledge( of( the( debtor,( he( may(set(up(the(compensation(of(all(credits(prior(to(the(same(and(also( later(ones(until(he(had(knowledge(of(the(assignment.((1198a)( ( o Article(1285.!Assignment!of!rights!made!by!creditor!to!a! third!person!without!knowledge!of!debtor.! " Debtor! may! set! up! against! the! assignee! the!

The(debtor(who,(before(having(knowledge(of(the(assignment,(pays(his( creditor(shall(be(released(from(the(obligation.((1527)( ! o When!a!credit!is!assigned,!if!the!debtor!pays!his!creditor! because!he!didn’t!know!of!the!assignment,!his!payment! shall!release!him!from!further!obligations.! ! ! ! !


compensation! pertaining! to! him! against! the! assignor.!

"

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All!credits!prior!to!the!assignment!

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All!later!ones!until!he!had!knowledge!of!

the!assignment.! If! debtor! consented! to! such! assignment:! he! cannot!set!up!such!compensation!unless!debtor! reserved!the!right! If! he! had! knowledge,! but! no! consent:! he! may! set!up!compensation!of!previous!debts,!but!not! subsequent!ones!


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D.(Transfer(of(Ownership( •

Assignment! of! credit! is! an! act! of! transferring! the! right! of! an! assignor! to! an! assignee! who! could! proceed! against! principal! debtor.!Project(Builders(v.(Court(of(Appeals((358(SCRA(626)! o Transfer!takes!place!on!perfection!of!contract!

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CLV!(disagrees):!Assignment!is!also!not!a!mode,!but!only!a!title.! o

Thus!the!transfer!does!not!take!place!on!perfection.! " It! should! be! effected! the! same! way! as! sale! i.e.! via!constructive!delivery,!like!executing!a!public! instrument.! " Effects!of!tradition!of!sale!in!general!should!also! apply! Except! that! doctrines! on! actual/physical! delivery!have!no!application.! Article( 1508! of! Civil! Code! s! this! !! placing! of! titles! of! incorporeal! rights! in! possession! of! vendee! is! equal!to!delivery.! However,! without! registration/execution! in! a! public! instrument,!such!delivery!would!not!bind!third!parties.! "

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Notarization!of!the!assignment!of!credit!converted!into!a!public! document.!Leonido(v.(Capitol(Dev.(Corp.((526(SCRA(379)!!!

! D.1.(Accessories(and(Accessions( ! Article(1627.(( The(assignment(of(a(credit(includes(all(the(accessory(rights,(such(as(a( guaranty,(mortgage,(pledge(or(preference.((1528)( (

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Assignment!of!a!credit!includes!all!the!accessory!rights,!such!as!

guaranty,! mortgage,! pledge! or! preference.! United( Planters( Sugar( Milling( Co.,( Inc.( (UPSUMCO)( v.( Court( of( Appeals( (527( SCRA(336)( ! D.2.(Warranties( ( Article(1628.( The( vendor( in( good( faith( shall( be( responsible( for( the( existence( and( legality(of(the(credit(at(the(time(of(the(sale,(unless(it(should(have(been( sold(as(doubtful;(but(not(for(the(solvency(of(the(debtor,(unless(it(has( been(so(expressly(stipulated(or(unless(the(insolvency(was(prior(to(the( sale(and(of(common(knowledge.( ( Even(in(these(cases(he(shall(only(be(liable(for(the(price(received(and(for( the(expenses(specified(in(No.(1(of(Article(1616.( ( The(vendor(in(bad(faith(shall(always(be(answerable(for(the(payment(of( all(expenses,(and(for(damages.((1529)( ( Article(1629.( In( case( the( assignor( in( good( faith( should( have( made( himself( responsible(for(the(solvency(of(the(debtor,(and(the(contracting(parties( should(not(have(agreed(upon(the(duration(of(the(liability,(it(shall(last( for( one( year( only,( from( the( time( of( the( assignment( if( the( period( had( already(expired.( ( If(the(credit(should(be(payable(within(a(term(or(period(which(has(not( yet( expired,( the( liability( shall( cease( one( year( after( the( maturity.( (1530a)(



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Warranty!against!hidden!defects!does!not!apply!to!an!intangible! since!it!has!no!physical!existence.!

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Assignor! responsible! for! existence! and! legality! of! credit,! at! the! time!of!sale.! o Unless!it!was!really!sold!as!a!doubtful!!

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Even! when! there! is! a! warranty! as! to! the! debtor’s! solvency,! it! doesn’t!last!forever.! o 1!year!from!the!assignment,!if!credit!was!already!due! o Otherwise,!1!year!from!the!maturity!of!the!credit!

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If!assignor!in!good!faith!is!liable!for!a!warranty! o Only!expenses!of!the!contract! o Other! legitimate! payments! made! by! reason! of! assignment.!

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If!assignor!was!in!bad!faith,!and!he!breached!warranties! o Additional!liability!for!necessary!and!useful!expenses!

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When!dacion!takes!the!form!of!an!assignment!of!credit!(which!is!

Nyco(Sales(Corp.(v.(BA(Finance((200(SCRA(637)( ( Nyco(Sales(Corp.(v.(BA(Finance( ( Facts:! NYCO! Sales! Corp! extended! a! credit! accommodation! to! the! Fernandez! Brothers.! The! brothers,! acting! in! behalf! of! Sanshell! Corp,! discounted!a!BPI!check!for!P60,000!with!NYCO,!which!then!indorsed!the!

warranties! ( Held:(YES.!The!assignor!(NYCO)!warrants!both!the!existence!and!legality! of!the!credit,!as!well!as!the!solvency!of!the!debtor.!If!there!is!a!breach!of! any!of!the!2!warranties,!the!assignor!is!liable!to!the!assignee.!That!being! the! case,! NYCO! cannot! evade! liability.! So! long! as! the! credit! remains!


unpaid,! the! assignor! remains! liable! notwithstanding! failure! to! give! notice!of!dishonor!that!is!because!the!liability!of!NYCO!stems!form!the! assignment,!not!on!the!checks!alone.1( (

Assignor!does!not!warrant!the!solvency!of!the!debtor,!unless:! 1. There!is!a!stipulation!to!that!effect;!or! 2. Insolvency!of!the!debtor!was!prior!to!the!assignment!! 3. Insolvency!of!the!debtor!was!of!common!knowledge.!

said! check! to! BA! Finance! accompanied! by! a! Deed! of! Assignment.! BA! Finance,!in!turn,!released!the!funds,!which!were!used!by!the!brothers.! The!BPI!check!was!dishonored.!The!brothers!issued!a!substitute!check,! which! was! also! dishonored.! Now! BA! Finance! goes! after! NYCO,! which! disclaims!liability.( ( Issue:( Whether! or! not! NYCO,! as! the! assignor,! is! liable! for! breach! of!

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in!the!nature!of!a!sale)!it!extinguishes!the!obligation.!However,! assignor/seller! still! warrants! the! existence! and! legality! of! the! credit.! Lo( v.( KJS( Eco\Framework( System( Phil.,( Inc.( (413( SCRA( 182)( ! Other!Specific!Warranties! ! Article(1630.(( One(who(sells(an(inheritance(without(enumerating(the(things(of(which( it( is( composed,( shall( only( be( answerable( for( his( character( as( an( heir.( (1531)(

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

!Antonio,!Hipolito,!Imperial!&!Zaragosa.!(2012).!Salse!CLV!Case!Digests.! Retrieved!from!http://www.idoub.com/doc/104486360/SalesRCLVRCaseR Digests!



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Article(1631.(( One( who( sells( for( a( lump( sum( the( whole( of( certain( rights,( rents,( or( products,(shall(comply(by(answering(for(the(legitimacy(of(the(whole(in( general;( but( he( shall( not( be( obliged( to( warrant( each( of( the( various( parts(of(which(it(may(be(composed,(except(in(the(case(of(eviction(from( the(whole(or(the(part(of(greater(value.((1532a)( ( Article(1632.( Should( the( vendor( have( profited( by( some( of( the( fruits( or( received( anything(from(the(inheritance(sold,(he(shall(pay(the(vendee(thereof,(if( the(contrary(has(not(been(stipulated.((1533)(

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A(credit(or(other(incorporeal(right(shall(be(considered(in(litigation(from( the(time(the(complaint(concerning(the(same(is(answered.( (


The(debtor(may(exercise(his(right(within(thirty(days(from(the(date(the( assignee(demands(payment(from(him.((1535)( ! •

Reason!for!the!rule!on!assignments!in!litis!pendencia! o o o

Such!assignements!are!deemed!speculative.! Law!would!rather!benefit!the!debtor,!than!the!one!who! merely!speculates!for!profit.! If! assignor! is! willing! to! dispose! of! the! credit! at! a! low! price,!debtor!should!benefit.!

•

( Article(1633.(( The( vendee( shall,( on( his( part,( reimburse( the( vendor( for( all( that( the( latter( may( have( paid( for( the( debts( of( and( charges( on( the( estate( and( satisfy( the( credits( he( may( have( against( the( same,( unless( there( is( an( agreement(to(the(contrary.((1534)( ! III.(Assignment(of(Credit(in(Litigation( ( Article(1634.( When(a(credit(or(other(incorporeal(right(in(litigation(is(sold,(the(debtor( shall(have(a(right(to(extinguish(it(by(reimbursing(the(assignee(for(the( price( the( latter( paid( therefor,( the( judicial( costs( incurred( by( him,( and( the(interest(on(the(price(from(the(day(on(which(the(same(was(paid.( (

%

Right! to! redeem! on! debtor’s! part! shall! not! exist! when! the! law! considers!the!assignment!as!not!for!speculation.! Example:! o o o

•

Assignment!of!credit!to!the!coRheir!or!coRowner!of!such! credit/right! Assignment!to!a!creditor!in!payment!for!his!own!credit;!! Assignment! to! the! possessor! of! a! tenement/piece! of! land! which! is! subject! to! the! right! in! litigation! that! was! assigned!

In! the! foregoing! cases,! assignee! has! a! legitimate! purpose! for! taking!the!assignment!–!not!merely!speculation.!

! A.(Differentiating(from(Subrogation( •

Differences! between! assignment! and! subrogation:! Licaros( v.( Gatmaitan((362(SCRA(548)! ! Subrogation(

Assignment(

Extinguishes!original!obligation,! gives!rise!to!a!new!one!

Same!right!ed!from!one! person!to!another!

Nullity!of!an!old!obligation!may!be!

Nullity!of!obligation!not!remedied!



%

cured!by!subrogation!(new!one!is! valid)!

through!assignment!

Agreement!required!between!

Consent!of!debtor!not!required!to!

original!parties!and!new!creditor!

produce!legal!effects!

! •

Extinguishment! of! old! obligation! is! an! effect! of! conventional! subrogation,!not!a!requirement.! ( Licaros(v.(Gatmaitan!

( Facts:(Abelardo!Licaros!invested!his!money!worth!$150,000!with!AngloR Asean!Bank,!a!money!market!placement!by!way!of!deposit,!based!in!the! Republic!of!Venatu.!Unexpectedly,!he!had!a!hard!time!getting!back!his! investments!as!well!as!the!interest!earned.!He!then!sought!the!counsel! of! Antonio! Gatmaitan,! a! reputable! banker! and! investor.! They! entered! into!an!agreement,!where!a!nonRnegotiable!promissory!note!was!to!be! executed!in!favor!of!Licaros!worth!$150,000,!and!that!Gatmaitan!would! take!over!the!value!of!the!investment!made!by!Licaros!with!the!AngloR Asean! Bank! at! the! former's! expense.! When! Gatmaitan! ed! the! foreign! bank,! it! said! they! will! look! into! it,! but! it! didn't! prospered.! Because! of! the! inability! to! collect,! Gatmaitan! did! not! bother! to! pay! Licaros! the! value! of! the! promissory! note.! Licaros,! however,! believing! that!he!had!a!right!to!collect!from!Gatmaitan!regardless!of!the!outcome,! demanded! payment,! but! was! ignore.! Licaros! filed! a! complaint! against! Gatmaitan!for!the!collection!of!the!note.!The!trial!court!ruled!in!favor!of! Licaros,!but!Court!of!Appeals!reversed.( (

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Issue:(Whether!the!memorandum!of!agreement!between!petitioner!and! respondent! is! one! of! assignment! of! credit! or! one! of! conventional! subrogation! ( Held:(CONVENTIONAL!SUBROGATION.!An!assignment!of!credit!has!been! defined! as! the! process! of! transferring! the! right! of! the! assignor! to! the! assignee! who! would! then! have! a! right! to! proceed! against! the! debtor.! Consent! of! the! debtor! is! not! required! is! not! necessary! to! product! its! legal! effects,! since! notice! of! the! assignment! would! be! enough.! On! the! other!hand,!subrogation!of!credit!has!been!defined!as!the!transfer!of!all! the!rights!of!the!creditor!to!a!third!person,!who!substitutes!him!in!all!his! rights.! It! requires! that! all! the! related! parties! thereto,! the! original! creditor,!the!new!creditor!and!the!debtor,!enter!into!a!new!agreement,! requiring!the!consent!of!the!debtor!of!such!transfer!of!rights.!In!the!case! at!hand,!it!was!clearly!stipulated!by!the!parties!in!the!memorandum!of! agreement! that! the! express! conformity! of! the! third! party! (debtor)! is! needed.! The! memorandum! contains! a! space! for! the! signature! of! the! AngloRAsean! Bank! written! therein! "with! our! conforme".! Without! such! signature,! there! was! no! transfer! of! rights.! The! usage! of! the! word! "Assignment"! was! used! as! a! general! term,! since! Gatmaitan! was! not! a! lawyer,! and! therefore! was! not! wellRversed! with! the! language! of! the! law.1! ( IV.(Assignment(of(Copyright((Intellectual(Property(Code)( •

Owner!of!copyright!may!assign!it!in!whole!or!in!part!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1!Antonio,!Hipolito,!Imperial!&!Zaragosa.!(2012).!Salse!CLV!Case!Digests.!

Retrieved!from!http://www.idoub.com/doc/104486360/SalesRCLVRCaseR Digests!



%

Assignee! entitled! to! all! rights! and! remedies! which! assignor!had!with!respect!to!copyright!

Not! deemed! assigned! inter! vivos! unless! there! is! written! indication!of!such!intention!

•

Submission! of! a! work! to! a! newspaper! or! magazine! for! publication!shall!constitute!an!assignment! o But!only!for!one!publication! o Unless!a!greater!right!is!granted!

•

Two!or!more!persons!tly!own!a!copyright! o

•

Consent! of! other! owners! is! needed! for! an! owner! to! grant!licenses!

Copyright!is!distinct!from!property!subject!to!it! o Transfer!of!copy!right!is!not!transfer!of!material!object! o

In! the! same! way,! transfer! of! the! work! does! not! imply! assignment!of!the!copyright.!

( V.(Assignment(as(Equitable(Mortgage( •

Assignment!of!intangibles!may!be!used!to!secure!loans!!

•

Principles! pertaining! to! Equitable! Mortgage! will! apply.! Development(Bank(of(the(Philippines(v.(Court(of(Appeals( (284( SCRA(14)! o o o

Assignment!to!secure!payment!of!promissory!notes! Such!is!equivalent!to!an!equitable!mortgage! Thus,!nonpayment!of!loan!cannot!authorize!assignee!to! ! the! assigned! rights! in! his! name! (it! would! be! tantamount!to!Pactum!Commissorium)!

!


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Chapter(15:(Bulk(Sales(Law( ( •

Intended& as& a& species& of& bankruptcy& law& to& protect& supply& creditors/businessmen&against&preferential/fraudulent&transfers& done&by&merchants&

•

Intended& to& prevent& a& situation& where& merchants& would& sell& their& businesses& then& vanish,& leaving& their& creditors& without& recourse&against&the&“buyers&in&good&faith&and&for&value.”&

•

Law& covers& all& transactions,& good& faith& or& not,& that& are& within& the&description&of&a&“bulk&sale”&

•

Primary&Objective&is&to&compel&seller&in&bulk&to:& o Execute& and& deliver& a& verified& list& of& creditors& to& the& buyer&& o o

•

Give&notice&of&the&intended&sale&to&the&creditors& Use&the&proceeds&to&pay&outstanding&liabilities&

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or( assignment( of( all,( or( substantially( all,( of( the( business( or( trade( theretofore( conducted( by( the( vendor,( mortgagor,( transferor,( or( assignor,( or( of( all,( or( substantially( all,( of( the( fixtures( and( equipment( used( in( and( about( the( business( of( the( vendor,( mortgagor,( transferor,( or( assignor,( shall( be( deemed( to( be( a( sale( and( transfer( in( bulk,( in( contemplation( of( this( Act:( Provided,( however,( That( if( such( vendor,( mortgagor,( transferor( or( assignor,( produces( and( delivers( a( written( waiver( of( the( provisions( of( this( Act( from( his( creditors( as( shown( by( verified( statements,( then,( and( in( that( case,( the( provisions( of( this( section(shall(not(apply.( & •

I.&Transactions&covered&by&the&law& ( Section(2.(Sale(and(transfer(in(bulk.((

Three&Types&of&Transaction& o o o

& ( Doctrine:(A&sale&made&of&all&the&effects&in&the&vendor's&store&without&the& buyer& being& furnished& a& sworn& list& of& creditors& as& required& by& Sec& 3,& is& null& and& void& irrespective& of& the& good& or& bad& faith& of& the& buyer,& and& judgment&creditors&may&treat&such&sale&as&never&having&been&made&and& proceed&to&have&execution&levied&on&the&properties&thus&sold.&


Any(sale,(transfer,(mortgage(or(assignment(of(a(stock(of(goods,(wares,( merchandise,( provisions,( or( materials( otherwise( than( in( the( ordinary( course( of( trade( and( the( regular( prosecution( of( the( business( of( the( vendor,(mortgagor,(transferor,(or(assignor,(or(sale,(transfer,(mortgage(

This&is&considered&as&being&a&valid&exercise&of&the&State’s&police& power.&Liwanag'v.'Menghraj'(72'Phil.'410)& Chin'v.'Uy'

%

•

Motive/intention/consequence&of&sale&is¬&an&element& o

•

Extraordinary&sale&of&goods&(Yellow)& Extraordinary&sale&of&fixtures&and&equipment&(Pink)& Sale&of&Business&Enterprise&(Green)& As& long& as& the& transaction& is& within& the& description,& no& matter&what&it’s&being&done&for,&it&is&covered&by&the&Bulk& Sales&Law.&

Qualification&of&“in&the&normal&course&of&business”&applies&only& to&the&first&type&& o Second& two& types& are& by& nature& not& in& the& normal& course&of&business.&

•


Bulk&sales&are&of&a&nature&that&they&do¬&fall&within&the&normal& course,&which&thus&should&warn&parties&to&such&transactions&


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A.(“Bulk(Sales”(not(Covered(by(Law( •

% •

Some& exceptions:& even& if& transaction& comes& within& Section& 2,& Bulk&Sales&Law&does¬&apply&to&these&cases:& 1. Seller& produces& and& delivers& a& written& waiver& of& the& provisions& of& the& Law& from& his& creditors& as& shown& by& verified&statements;&and& 2. Transactions& effected& by& executors,& s,& receivers,& assignees& in& insolvency,& or& public& officers,&

•

•

•

Bulk& sales& law& should& be& construed& strictly& against& the& State&and&in&favor&of&the&accused.& In& this& case,& accused& was& held& liable& for& selling& his& foundry&shop,&along&with&all&other&assets.&The&Supreme& Court&held&that&the&Bulk&Sales&Law&contemplates&sale&of& merchandise,& stock,& and& goods& –& not& the& sale& of& the& whole&shop&with&the&equipment,&credits,&etc.&&As&such,&a&

( Facts:! In& 1978,& Pioneer& Glass& Manufacturing& Corp.purchased& from& Yu& (under& Ancar& Equipment& Parts& and& Tonicar)& equipment& parts& worth& P7,000.& However,& Pioneer& failed& or& refused& to& pay& upon& demand.& Without&informing&Yu,&Pioneer&Glass&transferred&all&its&assets&to&DBP&in&a& "deed& of& cession& of& property& in& payment& of& obligation"& or& dacion& en& pago.&In&turn,&DBP&sold&these&assets&to&Union&Glass&that&same&year.&

foundry& shop& which& does& not& sell& merchandise& is& not& included.&

In& 1983,& Yu& instituted& an& action& against& Pioneer& Glass,& DBP,& and& Union& Glass,& asserting& that& the& transfer& of& the& assets& to& DBP& was& void& by& reason&of&fraud.& ( Issue:( Whether& or& not& the& Bulk& Sales& Law& covers& the& conveyance& in& question&(its&violation&would&make&DBP,&Union&Glass,&and&Pioneer&Glass& liable&to&Yu)&

Meaning&of&merchandise&and&Stock& o Merchandise&!&something&sold&everyday,&going&in&and&

o

However,&Wong&and&DPB&rulings&seem&only&to&interpret&the&first& When& it& comes& to& the& other& two& types,& law& does& not& limit&the&coverage&to&a&particular&type&of&business.& o We&do¬&consider&the&Wong&and&DBP&rulings&when&it& comes&to&the&other&two&types&of&Bulk&sales& ' Development'Bank'of'the'Philippines'v.'RTC'of'Manila&

People'v.'Wong'(50'O.G.'4876)'

o

Thus& –& enumeration& in& the& first& type& of& bulk& sales:& only& covers&

type& o

& B.(“Business”(Covered(by(the(Law( o


those&sold&in&the&normal&course&of&business.& o Wong:& “sale& of& fixtures& and& equipment”& excludes& materials&used&in&the&process&of&production.&

acting&under&legal&process.&

•

%

out& of& the& store,& replaced& by& other& goods& –& things& usually&bought&and&sold&in&trade&by&merchants& Stock&!&those&goods&kept&for&sale.&

Development'Bank'of'the'Philippines'v.'RTC'of'Manila'(86'O.G.,' No.' 6,' 1137)& reiterated& the& Wong& ruling& regarding& applicability& to&bulk&sales¬&involving&merchandise&and&stock.&

( Held:( NO.& Under& the& Bulk& Sales& Law,& the& & "goods"& and& "merchandise,"& having& acquired& a& fixed& meaning,& refer& to& things& and&



%

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articles,& which& are& kept& for& sale& by& a& merchant.& Likewise,& the& term& "fixtures"& has& been& interpreted& to& mean& the& chattels,& which& the& merchants&usually&possess&and&annex&to&the&premises&occupied&by&them& in& order& to& store,& handle& and& display& their& goods& and& wares.& The&

the&vendee,&mortgagee,&or&agent&be&a&corporation,&then&to&the& president,& vicebpresident,& treasurer,& secretary& or& manager& of& said& corporation,& or,& if& such& vendee& or& mortgagee& be& a& partnership& firm,& then& to& a& member& thereof,& a& written&

technicality&of&these&&conveys&the&intention&of&the&law&to&apply&it& to& merchants& who& are& in& the& business& of& selling& goods& and& wares& and& similar&merchandise.& & In& this& case,& Pioneer& Glass& manufactured& glass& only& on& specific& orders& and&it&did¬&sell&directly&to&consumers&but&manufactured&its&products& only&for&particular&clients.&Thus,&Pioneer&Glass&was&NOT&a&merchandiser.&

statement,&sworn&to&substantially&as&hereinafter&provided,&of:( a. The&names&and&addresses&of&all&creditors&to&whom&said& vendor&or&mortgagor&may&be&indebted,&together&with&& b. The& amount& of& indebtedness& due& or& owing,& or& to& become& due& or& owing& by& said& vendor& or& mortgagor& to& each&of&said&creditors& 2. ProURata( Application( of( Proceeds( (Section( 4)( –& Applying& the&

Moreover,& the& dacion& en& pago& between& Pioneer& and& DBP& transferred& and& conveyed& the& bulk& of& its& corporate& assets& to& extinguish& its& outstanding& debts& to& DBP.& Thus,& the& subject& matter& of& the& deed& of& cession&was&the&assets,¬&stockbinbtrade.&Such&conveyance&was&clearly& outside&the&ambit&of&the&Bulk&Sales&Law.&SC&ordered&Pioneer&Glass,¬& DBP& and& Union& Glass,& to& pay& Yu& the& price& of& the& equipment& purchased& plus&interest.1&

purchase& or& mortgage& money& of& the& said& property& to& the& pro& rata&payment&of&the&bona&fide&claim&or&claims&of&the&creditors&of& the&vendor&or&mortgagor,&as&shown&upon&such&sworn&statement.& 3. Written(Advance(Disclosure(to(Creditors((Section((5)(—&It&shall& be&the&duty&of&every&vendor,&transferor,&mortgagor,&or&assignor:& a. At& least& ten& days& before& the& sale,& transfer& or& execution& of& a& mortgage& upon& any& stock& of& goods,& wares,&

( II.(Obligations(of(Seller/Encumbrancer(When(Transaction(is(a(Bulk(Sale( ( 1. To(Deliver(a(Sworn(Statement(of(Listing(of(Creditors&(Section(3)( –( Before& receiving& from& the& vendee,& mortgagee,& or& his,& or& its& agent&or&representative&any&part&of&the&purchase&price&thereof,& or& any& promissory& note,& memorandum,& or& other& evidence& therefor,& to& deliver& to& such& vendee,& mortgagee,& or& agent,& or& if&

merchandise,&provisions&or&materials,&in&bulk,&to&make&a& full&detailed&inventory&thereof&and&to&preserve&the&same& showing&the&quantity&and,&so&far&as&is&possible&with&the& exercise& of& reasonable& diligence,& the& cost& price& to& the& vendor,&transferor,&mortgagor&or&assignor&of&each&article& to&be&included&in&the&sale,&transfer&or&mortgage,&and&& b. Notify& every& creditor& whose& name& and& address& is& set& forth&in&the&verified&statement&of&the&vendor,&transferor,&

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1

&Antonio,&Hipolito,&Imperial&&&Zaragosa.&(2012).&Salse&CLV&Case&Digests.& Retrieved&from&http://www.idoub.com/doc/104486360/SalesbCLVbCaseb Digests&


mortgagor,& or& assignor,& at& least& ten& days& before& transferring& possession& thereof,& personally& or& by& ed& mail,& of& the& price,& & conditions& of& the& sale,&transfer,&mortgage,&or&assignment.&


%

4. Bulk( Transfers( for( Nominal( Value( (Section( 7)( –& It& shall& be& unlawful& for& any& person,& firm& or& corporation,& as& owner& of& any& stock& of& goods,& wares,& merchandise,& provisions& or& materials,& in& bulk,&to&transfer&title&to&the&same&without&consideration&or&for&a&

% o

•

nominal&consideration&only.& ( III.(Consequences(of(Violation(of(the(Law( •

•

o o

On&the&seller& On&the&buyer&

If& sworn& listing& of& creditors& is& not& prepared,& or& if& the& proceeds& are¬&applied&to&them,&the&sale&shall&be&fraudulent&and&void.& o This&is¬&merely&a&presumption:&it&is&in&fact&treated&as& void.&& " No&legal&effects&arise&from&the&transaction& " No&right&of&action&accrues&

•

Thus,&the&subject&matter&is&still&owned&by&the&assignor,&and&still& subject&to&the&satisfaction&of&his&liabilities&&

•

Law&declares&it&unlawful,&but¬&fraudulent&and&void& However,&if&there&was&no&other&valuable&consideration,& we& have& to& declare& it& void& for& lack& of& cause& or& consideration.&

Criminal&Liability& •

Violation& of& his& obligations& to& prepare& a& list& of& creditors& and& apply&the&proceeds&of&the&sale&to&these&creditors&subjects&him&to& criminal&liability.&&

•

If&the&list&does¬&include&all&names&of&creditors,&or&with&wrong& amounts,&it&subjects&him&to&criminal&liability.&

•

To& sell& the& stocks/goods/merchandise& for& no& consideration,& or& for& nominal& consideration& only,& subject& seller& to& criminal& liability.&&

& No&Criminal&Liability& •

People'v.'Mapoy'(73'Phil.'678)' o

Legal&consequences&of&a&sale&in&Bulk&for&Nominal&Value&

& B.(On(Seller/Mortgagor/Assignor(

& A.(On(the(Transaction(itself( •

Proper& remedy& of& creditor& is& to& collect& on& the& credit& against& the& defendant,& and& if& he& cannot& pay,& to& attach& on&the&property&fraudulently&sold/mortgaged.&

Failure& to& make& an& advanced& written& disclosure& to& creditors&

o o

Section( 11:& Imprisonment& of& not& less& that& 6& months,& not& more& We& evaluate& the& effects& of& breaking& the& law& from& 3& different& standpoints:&& o On&the&transaction&itself&


does¬&render&the&sale&fraudulent&and&void.&

than&5&years,&w/&fine¬&exceeding&P5,000.& •

%

Sworn& statement& should& be& ed& with& Department& of& Trade&and&Industry.& o Noncompliance& with& this& does& not& affect& validity& nor& does&it&subject&him&to&criminal&penalty.&

Sale& is& void,& but& the& relationship& between& seller& and& creditor&is&unchanged.& •

Failure& to& deliver& advance& notice& does& not& subject& him& to& criminal&liability.&&



%

& C.(On(Buyer/Mortgagee/Transferee( •

No&direct&obligation.&

•

It&can&be&said&that&no&criminal&liability&attaches&to&the&buyers& o Some& argue& that& they& are& principals& by& indispensable& cooperation,&if&they&were&aware&of&the&intent/conspired& with&the&seller.&

•

There& are& still& effects& though& since& sale& may& be& rendered& fraudulent&and&void.&Thus,&he&would&find&himself¬&entitled&to& the&things&he&paid&for.& o He& may& also& be& sued& for& recovery& of& what& he& has& obtained.& o He& may& also& be& liable& for& damages& for& having& helped& defraud&creditors.&


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