CIVIL LAW

REVIEW II LAW ON
SALES
Atty. Crisostomo Uribe - Course Outline (Dec.
2009)
Donnell R. Agaton | Recoletos de Manila - College
of Law

Art. 1458 (CC) By the contract of sale, one of

the contracting parties obligates himself to
transfer ownership of and to deliver a
determinate thing, and the other to pay
therefor a price in money or its equivalent.

Insurance contracts.

6. Nominate contract - has a particular

name to distinguish it from others.
As to nature:

When one of the parties delivers a thing and

the other pays a price it constitute a contract
of sale?
Not necessarily. Not all delivery of a thing and
the concomitant payment of a price constitute a
contract of sale. It could be a contract of lease.
What is necessary is the intent of the parties to
transfer ownership over the subject matter of the
contract of sale.

1. movable or immovable - This is important

because one must determine the object of the
sale.

Statute of Frauds:
a. movable
b. immovable
Maceda Law
Recto Law

Note: Sale is a contract and therefore, the

provision on obligations and contract under the
civil code may generally apply.

2. A thing or a right - important as to the mode of

delivery.

What are the characteristics of a contract of

sale?

3. Valid, Voidable, Void, unenforceable

Rescissible etc.

1. Consensual
2. Perfected by meeting of the minds as to the
price and the object.

What are the distinctions between absolute

sale and conditional sale?

except: in cattle registration decree to
be a perfected contract it requires to be in a
public instrument, registered and a certificate
of title be issued.
3. It is a principal contract such that it can stand
on its own for its perfection and validity.
4. It is onerous where both parties are obliged to
give something.

Absolute Sale

Conditional Sale

The seller does not

reserve his title over
the thing sold,
ownership passes
upon delivery
whether the buyer
has actually paid a
single centavo or
not.

Conditions are
imposed by the
seller in order that
ownership will
pass.

5. Commutative because there is equivalence of

value to be performed by both parties.

except: aleatory contracts or sale of
hope. The obligation of a party will only arise
upon the happening of a
certain event or
conditions. The
performance of one of the
parties or
both is contingent on the
occurrence of a particular event.

Ownership
automatically
passes from the
moment the
condition
happened.
Contract to sell

e.g. sale of lotto ticket is contingent
upon the numbers would appear in the draw.
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A receipt was issued by A to B for the sum of

75k as partial payment for a car, the balance to
be paid at the end of the month. Is this a
contract of sale?
This is a contract of sale. This is not a contract
to sell because in a contract to sell ownership is
reserved by the seller, such that despite delivery
to the buyer, the buyer did not acquire
ownership over the thing upon delivery.
In a contract to sell, upon the happening of the
condition or conditions imposed by the seller,
ownership does not automatically pass to the
buyer. Though a contract to sell is a special form
of a conditional sale, it is a peculiar kind of sale
because despite the happening of all the
conditions, and despite actual delivery to the
buyer, the buyer does not automatically acquire
ownership.
Upon the happening of the condition in a
contract to sell, the buyer is only given the right
to compel the seller to execute a final deed of
sale.
Dation in payment
Art. 1245 Dation in payment, whereby property
is alienated to the creditor in satisfaction of a
debt in money, shall be governed by the law on
sales.
For dation in payment to be governed by the law
on sales it is required that one of the pre existing
obligation must be in money, if the other
consideration is not in money covered by dation
in payment, it will not be governed by the law on
sales, such will be governed by the law on
novation.
Practically there is a change in the object of the
contract. Example: If A owes B 100k and A
would offer a car to V, and if B accepts, such
would be dation in payment. This would be
governed by the law on sales because the pre
exsiting obligation is in money.
However, if A is obliged to deliver a horse but
instead delivered a car and B accepts, this
would be dation in payment but not under Art.

1245 but by novation by changing the object of

the obligation.
As to nature, dation in payment is a special form
of payment, while sales is a contract.
In dation in payment there must be a pre
existing obligation. Since this is a special form of
payment, there has to be an obligation. There is
no pre exiting obligation in a contract of sale.
Massachusetts Rule
It is a rule where a contract was entered into for
a contract for a piece of work. For example, a
person who entered a store to buy shoes, but
since there is no size that would fit such person,
the store offered to make a pair of shoes
specially made for him. In a contract of sale, the
shoes ordinarily sold are for the general market,
while the shoes specially made, is a contract for
piece of work.
A obliged himself to deliver to B a car work
250k. B on the other hand, obliged himself to
deliver to B a watch plus cash in the amount
of 150k. What is the nature of the transaction
between A and B?
Depending on the intention of the parties, A and
B may consider as one of sale or barter. If the
intention of the parties are not clear base on the
agreement, the nature of the contract would
depend on the value of the watch. If the value of
the watch is greater than 150k, it will be barter,
but if the value of the watch is equal or less than
150k, then it would be sale. The value f the car
is irrelevant.
A gave B the exclusive right to sell his denim
jeans, promising B 20% discount on sales.
However, it was stipulated in their agreement
that B shall pay the price of this jeans 60
days from delivery. After the jeans was
deliver to B and before B could sell the
jeans, the store was burned without the fault
of anyone. Thus, can B still be compelled to
pay the price of this jeans?

Under Art. 1466, in construing a contract

containing provisions characteristic of both the
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contract of sale and of the contract of agency to

sell, the essential clauses of the whole
instrument shall be considered.
If assuming this is a contract of agency the
ownership does not pass to B, the owner-seller
shall bear the loss and noting that B is not
negligent under the facts. If however it is a
contract of sale, then ownership passes to B,
and since he is the owner, he bears the loss.
Since both are characteristic of a contract of
sale and agency, the provisions of Art. 1466
however shall be applied. Here, the essential
clauses of the whole instrument must be
inquired into. One of the clauses or condition
agreed upon by the parties is that B had to pay
the price within 60 days. As such, that would
make the contract as one of sale and not of
agency. This is because 60 days from delivery,
whether or not B has sold those jeans to other
persons, he is already obliged to pay the price.
Being a contract of sale therefor and there
having a delivery, ownership passes to the
buyer. Hence, the buyer bears the loss.
Therefore he cannot be compelled to pay the
price of the jeans.
Essential elements of a contract of sale?
1. Consent of the contracting parties
2. Object or subject matter which is a
determinate thing or determinate subject
matter (may either be a thing or right).

Service cannot be a subject matter of a

contract of sale.

3. Cause or consideration

As to the seller: the price in money or

its equivalent.

What is the effect of a contract of sale when

there is no consent given by one or both of
the parties?
If consent is not given by one or both of the
parties, the contract is void because one of the
essential elements is lacking. Under the law, it is
considered as a fictitious contract. A fictitious
contract would normally be that the signature of

the parties in the sale was forged. If the

signature of the seller was forged, that would be
a fictitious contract. The alleged seller will not
have participation in the execution of the
contract.

Simulated Contract
HEre the parties actually have participation.
They (the parties) voluntarily sign the deed of
sale, however they do not intend to be bound by
the terms of the contract, or they may intend to
be bound but not under a contract of sale but on
some other contract.
2 Kinds of simulated contracts
1. Absolutely simulated Contracts - Here, the
parties do not want to be bound by the
contract, the common reason is to defraud
creditors. For example, the debtor wold sell
his remaining properties in a simulated
contract to make it appear that he has no
property, that may be reached by his
creditors.
2. Relatively simulated contracts - Here it may
appear to be in a valid deed of sale but they
actually intend to enter into another contract
such that it is actually a donation or to
circumvent the provisions of the legitime.
If consent is given, would it mean that the
contract is valid?
Not necessarily, because when consent is given
by an incapacitated person, such is void or
voidable as the case may be. This is because
there are specific rules followed depending on
the basis of incapacity.
What are the kinds of incapacity
1. Absolute incapacity - A party cannot validly
give consent to any contract.
2. Relative incapacity - The party is prohibited in
entering into specific contracts or specific
persons or things.

a. Sale between spouses - The SC would

consistently consider this contract as void,
except:

a1. when the spouses in their marriage

settlement, and agreed they constitute
complete separation of property. They
can enter into a contract of sale with
each other.

object of
any litigation in which they may
take part by virtue of their profession.

c. Aliens are prohibited from acquiring private

lands by purchase, except:

a2. Even if they did not execute a
marriage settlement, if during their marriage
obtained a judicial declaration
of complete
separation of property.
a. sale by persons mentioned under Art. 1491,
namely:

b1. The guardian, the property of the

person or persons who may be under
his guardianship;

b 2 . A g e n t s , t h e p r o p e r t y w h o s e
administration or sale may have been
entrusted to them, unless the consent
of
the principal has been given;

b3, Executors and administrators, the

p r o p e r t y o f t h e e s t a t e u n d e r
administration;

b4. Public officers and employees, the

property of the State or of any
s u b d i v i s i o n t h e r e o f , o r o f a n y
government-owned or controlled corporation,
or institution, the
administration 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;

b6. Any others specially disqualified by

law.

c1. former natural born citizens

Note: Even if consent is given by one

capacitated but such consent is vitiated consent,
the contract is merely voidable either by fraud,
mistake, intimidation, undue influence and
violence.
If the party giving consent is in the name of
another person, but without the authority of such
person or authority of the law, such contract
shall be unenforceable.
Two kinds of capacity
1. Juridical capacity

It is the fitness to be the subject of legal

relations.

If the party has no juridical capacity, the

contract is definitely void.

All living natural persons have juridical

capacity.

An alleged corporation which has not

been registered with the SEC has no
juridical capacity.

2. Capacity to act

b5. Justices, judges, prosecuting
attorneys, clerks of superior and inferior
courts, and other officers and
employees
connected with the administration of justice,
the property and rights in litigation or levied
upon an
execution before the court within
whose jurisdiction or 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

It is the power to do acts with legal
effects.

Without capacity to act, normally the

contract shall be voidable.

Particular restriction with respect to
capacity to act is minority or insanity,
deaf
mutes who does not know how to read and
write or persons suffering from
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civil interdiction.

H o w e v e r, i f s u c h m i n o r a c t u a l l y
misrepresented as to his age, he will be
bound to such contract, under the principle of
estoppel.




items.

Note that when sale of items which are

necessary would bind that minor, but
not as to the actual contract price but
only the reasonable price of those

Object of Subject matter of a contract of sale

(determinate thing or right)

considered void? May the seller be held

liable for damages?
Things having the potential existence may be
the object of a valid sale. As long as the the 3
essential requisites of a contract of sale is
present, then there is a valid contract of sale.
The seller may not be liable for damages
because there are excuses for non performance
of obligation because it was due to fortuitous
event, as such it is excused. If however, the
failure to produce palay is through negligence,
he is liable.
Sale of a lotto ticket is it a valid sale?

1. Thing - Requisites of sales as to things:

a. The thing must be within the commerce of
men, such as sale of navigable rivers, sale of
cadavers, sale of internal organs.
2. Must be licit (not prohibited by law)
3. They must be determinate

Sale of a car and sale of a mitsubishi

lancer glx forest black 2007 model.

A thing is considered determinate only

when it is particularly designated or
physically segregated from all others
of the same class.

Sale of a car shall be void, but the sale

of a mitsubishi lancer glx forest black

2007 model is a valid sale because
under Art. 1460 (2) of the new civil code
provides that 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.
If A and B agreed that A would sell and
transfer ownership over a palay that would
be harvested in a specific rice field and in a
specific season. However, upon the arrival of
the period nothing has been harvested. What
is the status of the sale? Since nothing has
been harvested, would the contract be

If before the draw such is a valid sale of the

ticket whether the winning numbers appeared or
not.
If after the draw, would depend on whether it is a
winning or a losing ticket. Sale of a vain hope is
a void sale as in the latter case.
In an agreement between A and B where A
sold a parcel of land to B, with a right to
repurchase within 1 year. On the third
month,, B sold the same parcel of land to C.
On the 11th month, A offered to repurchase
the land. Who had the better right between A
and C? or, will the sale between B and C be a
valid sale noting that the sale is with a right
to repurchase?
Sale is a consensual contract. As long as there
is a meeting of the minds as to the object and as
to the price, then there is a valid and perfected
sale. This is a valid sale even if the object of the
sale is with a right to repurchase. Further, under
Art. 1465 Things subject to a resolutory
condition may be the object of the contract of
sale. Note: It is the ownership of a thing which
can be the subject of a resolutory condition and
not the thing.
Since, A had the right to repurchase, A had the
better right. However, when C is a innocent
purchaser for value as when there is no
annotation at the back of the title of the parcel of
land that it is subject to a right to repurchase,
and in such case C will have a better right.
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Sale of a right is otherwise known as?

Assignment of a right.

That would be a valid sale even if the currency

is not Philippine currency, as the law requires
only that it be in money or it may even be its
equivalent like promissory notes, or letters of
credit.

Is assignment of a right a sale?

Not necessarily. If the asssignment is with a
valuable consideration, it is a sale, if gratuitous
or by dation in payment it is not a sale as it is
not for consideration. Examples are sale of a
credit or sale of shares of stock are considered
considered as rights.
Furthermore, the right must not be
instransmissible. For a right to be the object of a
contract of sale, the same must not be
instransmissible. Under the law the only three
general reasons why a right may not be
transmissble are 1) by nature, 2)by stipulation,
3)law.
Rights which are purely personal cannot be a
subject of sale by nature are intransmissible,
rights where personal qualifications of a person
are considered. With respect to stipulations,
they may be transmissible by nature but by
stipulation they may be considered
instransmissible. Sublease of a property may be
transmistted to another but by stipulation, it
cannot be done and hence instransmissible. In
partnership, the rights in a specific property,
where the law requires that assignment cannot
be done without the consent of all the partners,
the assignment of one cannot be done without
the consent of all the partners.
Is the sale of rights perfected by mere
consent?
Yes. By mere meeting of the minds, and without
the execution of a specific instrument, the sale
shall be valid. However, to bind third persons
such sale must be recorded in the registry of
property.
In a deed of sale, where the price stated in
the deed was 100 lapad (10,000 yen) = 1
million yen, as such the sale not being in
Philippine peso, a valid sale? Can the seller
compel the buyer to pay in that currency?

If the contract would be entered into after RA

529 was repealed by RA 8183 in 1996, then the
seller can be compelled to pay in a currency
other than Philippine peso. Otherwise
the seller cannot compel the buyer to pa in
japanese currency.
Can there be a valid payment in 10,000 1
peso coins?
Yes, but the seller cannot be compelled to
accept because under Philippine law 1 peso
coins only have legal tender power up to 50
pesos.
Sale of shares of stocks valued at 5000 but
there was no date as to the value of the
shares
The price must be certain as one of the
requirement in order that the sale shall be valid.
The date is very material because the value of
the shares changes depending on the date.
Even if the date has been fixed but the time has
not been considered such as the opening and
closing with respect to such exchange would
affect the validity of the sale. Because if the
value upon the opening is 50 pesos but in the
closing it is only 39 pesos, then such is not
certain when the time is not considered.
Who can fix the price of the sale?
It is best that the parties shall agree as to the
price of the sale, but the parties may agree as to
who may fix the price.
May the sale be perfected if one of the
parties is designated to fix the price?
It is valid provided the person designated to fix
the price, the price fixed must be accepted by
the other party. As to the price, if one of the
parties designated fixed it at 1 million but the
other party did not accept, there is no perfected
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contract of sale, because the latter did not

accept, there being no meeting of the minds.
May a third person be tasked by the original
parties to fixed the price?
It is void when the third person does not want to
fix the price or unable to fix the price.
If such third person was able to fix the price but
it is too high or it is too low and there is fraud
employed, the contract is not void, the remedy
of such party is to go to court to fix the price.
May a sale be valid if the price of a car is
valued at 1 peso?
Yes, because under the law gross inadequacy
as to the price does not invalidate the contract,
except as otherwise provided by law.
An example of this exception is that of lesion
where such would invalidate the contract of sale
under Art. 1381 where the guardian sells the
property of the ward and there is lesion of more
than 25% of the value of such thing such
contract is rescissible. If the buyer should be the
guardian Art. 1481 should apply and the contract
shall be void.
If there is a gross inadequacy and the parties
intend another contract, then such would be a
simulated sale, and as such the contract shall
be void, as when the real purpose of the sale is
donation.
Is there a need for delivery in order that a
contract of sale be perfected?

As a consensual contract there is no need for

delivery in order that a contract of sale will be
perfected. The only question is here the time
when the contract is perfected.

With respect to the auctioneer, he may withdraw

as a rule, before the fall of the hammer. Unless
the bidding has been announced to be without
reserved as far as the auctioneer is concerned.
Option contracts
In the case of Sanchez vs. Rigos, Rigos offered
to sell a parcel of land to Sanchez for a certain
price, and Rigos gave Sanchez 2 years within
which to decide whether he will buy it or not. In
options the optionee or offeree he is not bound
to purchase, but he has the option. Therefore
Sanchez has the option on whether to buy the
land or not. Before the lapse of the 2 year
period, Sanchez told Rigos that he is buying the
land, but Rigos refused to sell it and said that he
was not bound by this agreement because there
was no option money given by Sanchez for lack
of consideration.
But the SC said that since Sanchez the offeree
accepted the offer and considered to buy within
the period before the offer was withdrawn a
perfected contract of sale was created even
without the option money given by the offeree.
In this case there was no option contract, and
this is merely an option agreement whereby
what was given is merely an offer on the part of
Rigos, therefore before the option was
withdrawn regardless whether an option money
is given, a perfected contract of sale was
created.
Assuming there was option money, before the
offeree decide to buy the offerror withdraw on
the 6th month, but on the 10th month the offeree
decided that the offeror now want to buy. Can
the offeree compel the seller to sell the offer
having been withdrawn before it was accepted?
No. The action for specific performance will not
prosper because the offeree who decided to
buy, when the offerror withdraw the same, there
is no more offer to be considered.

Option sale
An option sale is perfected upon the fall of the
hammer or any other customary manner by
which the same may be considered perfected.
Before the fall of the hammer, the buyer who
made his bid may actually withdraw his bid.

But the offeree can claim for damages because

the offerror is bound to give the offeree 2 years
within which to decide. He is liable not under a
perfected contract of sale but on a perfected
contract to offer.
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Option money distinguished from earnest

money
Option money is not considered part of the
price; earnest money is considered as part of
the price but also considered as proof of a
perfected contract of sale.
Note however, as decided by the SC, when the
option money will be treated by the parties as
part of the price, the same shall be binding
between the parties. Without stipulation, it is not
considered part of the price. Option money is a
consideration for the option.

As a rule, there is no actual form as provided in

Art. 1483 that a contract of sale may be 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 for as long as the
essential requisites are present. But however,
when the law itself provides for a particular form
then the same must be complied with in order
for it to be enforceable, such as the statute of
frauds and the cattle registration decree.
Statute of Frauds
In sale of a parcel of land which is not in writing,
is a valid contract but unenforceable.

Earnest money
Earnest money may be called by any other
name but if it is considered by the parties as part
of the price, such would be considered as
earnest money.
However, even if there is earnest money, it does
not mean that there is already a perfected
contract of sale. If it is merely a proof of a
perfected contract of sale. Even if there is
earnest money given, if the contracting parties
have not agreed as to the total amount of the
purchase price, then there will never be a
contract of sale.
Even though they have agreed as to the total
amount of the price and an earnest money is
given, and were able to agree as to the total
amount of the price, but not as to the object then
there will be no perfected contract of sale.
Earnest money is not the only requirement in a
perfected contract of sale.
There is a perfected sale by the mere
meeting of the minds, does it mean that it is
already enforceable?
Not that upon perfection the parties to such
contract, the parties already have the right to
compel the parties to perform their respective
obligations. But perfection is subject to
formalities required by law like the statute of
frauds.
There may be a meeting of the minds, but the
same shall be unenforceable.

If the object of the sale is a movable, the value

of the price agreed upon must be considered
and not the actual value of the price must be
considered. If the price is at least 500 pesos and
the same is not in writing, the same is
unenforceable. Even if the price is less than 500
pesos the same must be in writing when the
same is not to be performed within 1 year.
In the case of Paredes vs. Aquino, Paredes here
was a prospective buyer and Aquino was the
owner of a parcel of land. The negotiation was
made through letters and telegrams. Ultimately
the owner made a letter signed by him to
Paredes stating that he and his wife already
agreed to sell the land at the specific price.
However, the execution of the sale shall be
made upon arrival of Paredes in Palawan, as
the latter is from Northern Luzon. When Paredes
arrived in Palawan, the seller said that he was
no longer interested in selling the land. Hence,
Paredes filed an action to compel Aquino to sell
the land. Aquinos defense on the other hand
was he Statute of Frauds, since there was no
deed of sale, there was no perfected contract of
sale. The SC ruled that the contract was no
longer covered by the statute of frauds since
there was already a letter. Under the law,
specifically under Art. 1403 even if the contract
does not comply with the statute of frauds, the
same shall be enforceable and no longer
covered under the operation of the statute of
frauds when the same was made through some
note or memorandum, be in writing, and
subscribed by the party charged, or by his
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agent. Hence, Aquino can be compelled to

execute a final deed of sale.

on their agreement because until such time

there is no obligation to deliver which arise.

In a deed of sale there can be 100s ob

obligations of the vendors because of the
stipulation. There are only few obligations
imposed by law to the vendors, and these
are:

Secondly, the buyer cannot compel the buyer to

receive the fruits because he shall not acquire
real rights over such fruits until the delivery of
the thing. The buyers remedy is going after the
seller.

1. The obligation to transfer ownership

2. The obligation to deliver
3. The obligation to warrant the thing
4. The obligation to take care of the thing sold
with the diligence of a good father of the
family from the time of perfection upto the
time of delivery.
5. The obligations to pay the capital gains tax
6. The obligations to deliver the fruits

Obligation to take care of the thing

Obligations to deliver the fruits

A sale of a mango plantation between A and
B, A agreed to deliver to B the fruits only
after 6 months from the perfection of the
sale. Despite the arrival of the period, the
seller took him 1 month to deliver the fruits
to the buyer. A however, sold the fruits to a
third person X in good faith. Can B recover
the fruits from X? What are the remedies of
the buyer as against the seller?
Under the law under Art. 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.
Art. 1537 however should be considered in
relation to Art. 1164 which provides that 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.
From the foregoing therefore the vendor actually
has rights to the fruits but not from the time of
perfection. B is only entitled to the fruits of the
thing from the end of the 6 month period base

The premise in this kind of obligation of the

seller is a determinate thing. If the thing sold is a
generic thing, there is nothing to be taken care
of, it will become determinate only upon delivery.
One scenario where the seller does not have the
obligation to take care of the thing from the time
of perfection, when the buyer already was in
possession of the thing at the time of perfection.
Obligation to pay expenses or capital gains
tax
Through stipulation, the parties can agree as to
who is going to pay the tax.
May a person sell something which does not
belong to him? (Bar Question)
Yes. Ownership over a thing is not a requisite in
order for a sale to become valid. But if the seller
does not own the thing he may have a problem
in performing his obligation to transfer
ownership. The problem actually is whether or
not the buyer acquire ownership over the thing
sold by the person selling who does not own
the thing. Thus, only those persons who have
the right to sell can transfer ownership.
The owner or even if not the owner a person has
been given authority by the owner, therefore he
will have the right to sell, or the law authorizes a
person the power to sell (art. 1505 statutory
power to sell) (e.g. the notary public, the
pledgee under pledge, under the mortgage law
the liquidators have authority to sell, the
guardian, receivers etc), those who have the
authority of the court (sheriff in an execution
sale or foreclosure sale).

10

May the buyer actually acquire ownership

over the thing sold if the seller has no right
to sell?
Under Art. 1505 the buyer does not acquire
better title than what the seller had. If the seller
is neither the owner or does not have authority
to sell, the buyer acquires no better title than
what the seller had. As an exception, the buyer
can acquire better title than what the seller had,
even if the seller is not the owner or does not
have the right to sell, when:
a. by estoppel in pait - by the principle of
estoppel a person will be precluded from
denying that a person has authority to sell by
the owners acts or representations. This
estoppel is other wise known as estoppel in
pait (equitable kind of estoppel).
a. estoppel by deed (technical estoppel)-Art.
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 passes by operation of law
to the buyer or grantee.

that by operation of law, Y likewise acquired

ownership by estoppel by deed.
Sale by the nephew of the owner of a parcel
of land. Since the nephew could not deliver
the land to the buyer, the buyer filed a
complaint for estafa. In this criminal case, for
the accused to be acquitted, he asked his
uncle to testify that he actually had the
authority to sell. When the uncle testified in
court, the nephew was acquitted because
after all, he had the authority to sell. After the
acquittal of the nephew and the buyer
demanded from the uncle for the delivery,
the uncle refused for in reality he said that
he did not authorized his nephew. So when a
civil case was filed to compel the uncle to
deliver and transfer ownership over the
thing, will that action prosper?
Yes, because the owner cannot be allowed now
that his nephew was not authorized when he
testified in court that he gave such authority.
This is considered as estoppel by record and
also considered technical estoppel.
Discuss Sale by an apparent owner?

a. Estoppel by record (technical estoppel)a. A sale by an apparent owner a. Purchases from a merchant store
A and B are co-owners of a parcel of land. A
and B sold it to X verbally. X sold the land for
150,000 to Y. Would Y be considered to have
acquired ownership over the parcel of land?
Under Art. 1434 or otherwise known as estoppel
by deed or technical estoppel. When the seller
who was not the owner at the time of the sale
acquired ownership, automatically ownership
passes to the buyer by operation of law.
However, under Art. 1434 does not apply
because the law requires the delivery of the
parcel of land to X the buyer, and under the
facts art. 1434 would not apply because 1. there
was no showing that there was delivery/payment
already due to the verbal nature of the sale
hence unenforceable. Hence it could not be said

As provided by factors act, recording laws, and

other laws which enable the apparent owner of
goods to dispose of them as if he were the real
owner.
Under the Factors (an old name for agent)
Act, even if the agent has no right to sell a
specific thing a third person may actually
acquire ownership because he can only rely
on the power of attorney as written. If for
example an agent through a special power of
attorney was given the power to purchase a
car, however in the verbal instruction the
agent was authorized to sell that car only to
one of the members of a certain
organization. But the agent sold the car to a
person other than to a member of the
organization as directed by the principal.
Would that buyer acquire ownership even if
the agent has no right to sell to that buyer?
Yes. Under Art 1900 so far as third persons are
concerned, they only have to rely on the SPA as
written even if the seller agent was not
11

authorized as instructed, the buyer acquire

ownership over the thing subject of the sale.
The elder brother Miguel Mapalo donated
half of his land to his younger brother
because the latter was about to get married.
Instead of the younger brother asked his
elder brother to sign a deed of donation, he
asked the latter to sign a deed of sale not
only half of the land but the entire parcel of
land. He was therefore able to register the
property in his name. After 10 years,
however, he sold this entire parcel of land to
the Narcisos. Obviously, the younger brother
is not authorized to sell with respect to the
other half, because what was only given is
only half of the land. But the Narcisos
claimed that they bought the land on an
apparent owner because the entire property
was registered in the ame of the seller. Did
the Narcisos acquired ownership because
they bought the entire property from an
apparent owner?
Not necessarily, because the seller must not
only be an apparent owner but buyer must also
be a buyer in good faith. The buyers in this case
is not in good faith because before they bought
the land, they went first to the house of Miguel
Magpalo to inquire on whether he (younger
brother) would allow his younger brother to sell
that parcel of land. Therefore they are in bad
faith because they knew and because Miguel
also had the right to the half portion of the land
when they bought the entire parcel of land.
Therefore they did not acquire ownership over
the entire parcel of land (Mapalo vs. Mapalo)
The owner of a parcel of land covered by a
TCT or OCT, mortgaged a parcel of land to
the creditor and delivered the TCT or OCT.
This mortgagee forged the signature of the
owner in a deed of sale. Thus, he was able to
register the property in his name with that
forged deed. Thereafter, the mortgagee who
was a buyer in the forged deed, sold that
land to a third person who had no knowledge
of the transaction between the mortgagor A
and mortgagee B. Did the mortgagee
acquired ownership? Did the buyer acquired
the property over the parcel of land? When
can a buyer said to be in good faith?

The mortgagee did not acquire ownership by

virtue of a deed of sale. A forged deed is a void
instrument and cannot be the source of a valid
title to the buyer. This forged deed however, can
be the root of a valid title under the mirror
principle when the buyer bought it from the
mortgagee in whose name it was registered,
and relied on the TCT, then if he acquired the
property in good faith, then he had acquired
ownership over the parcel of land under Art.
1505 in relation to PD 1529, when the buyer
bought a parcel of land relying on the TCT alone
and buying it in good faith then he will have a
better right than the owner.
By the mere fact that the buyer did not know the
execution of the time of the deed necessarily
mean he is already a buyer in good faith? Not
necessarily because the law requires that he
had fully paid without knowledge of defect in the
title of the seller. He may have acquired
knowledge after the execution of the deed of
sale but before payment, he can no longer be
considered a buyer in good faith.
*The owner of a parcel of land entrusted the
secretary to take hold of the TCT only for
safekeeping. Thus the secretary forged the
signature of his boss in a deed of sale. Thus
he was able to register the property in his
name, and sold this parcel of land to a third
person, and such person is considered to be
in good faith, then he has acquired
ownership over the thing sold even if the
seller had nor right to sell. This is because
the buyer bought it from an apparent owner
who disposed of the thing as if it was really
owned by him.
*Under the New Civil Code on negotiable
documents of title, if goods are covered by a
negotiable document of title and there was a
negotiation of this document as a
consequence of a sale, if the buyer bought
the good in good faith and for value, he will
be protected under the law, and acquire
ownership over the goods even if the seller
do not have the right to sell. The seller may
have acquired over the document of title
through violence, but if it is negotiable
document of title especially if it is a bearer
12

instrument, then the buyer may acquire

ownership over the goods even if the seller
had no right to sell.
Sun brothers was the owner of the
refrigerator (they are engaged in the
business of selling refrigerators) and sold it
to Lopez in an installment basis. As
stipulated Sun brothers reserved ownership
over the refrigerator until full payment. The
buyer Lopez paid only 300 and the remaining
balance to be paid on a monthly basis.
However, Lopez sold the refrigerator to
Velasco the very next day in his store to Co
Cang Chiu. Sun brothers after learning of the
sale, filed an action to recover the
refrigerator. Would the action prosper? Did
Co Cang Chiu acquired ownership over the
refrigerator? Can Sun brothers recover the
refrigerator by reimbursing the price paid by
Co Cang Chiu?
As to Velasco, the rule under Art. 1505 is that
the buyer cannot acquire better title than what
the seller had.
As to Co Cang Chiu, he acquired ownership
over the refrigerator because he bought it in a
merchant store. Under 1505 last paragraph, if
the owner bought the thing in good faith from a
merchant store he acquires ownership over the
thing. Note, he must have no knowledge of the
defect in the title of the goods.
As to the issue on whether Sun Brothers recover
the refrigerator from Co Cang Chiu by
reimbursing the price paid. The SC held that
Sun brothers cannot. This is because under Art
1505, the ownership of the buyer who bought
that thing in the merchant store and in good faith
and for value, is absolute in character.
Art. 559 does not apply to this scrnario because
Sun Bros. was not unlawfully deprived nor is the
thing lost. If the thing was lost or the owner is
unlawfully deprived, such owner can recover the
same even if it was sol through a public sale or
in a merchant store but such owner must
reimburse the person who bought in in good
faith and for value. (Sun brothers and company
vs. Jose Velasco and Co Cang Chu)

Art. 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)

One painting owned by A was stolen from

her. Later on she noticed that the painting
was in the room of B, and asked how he
acquired the painting, he said that he
acquired the same in a gallery auction. Can
the owner of the painting from whom the
painting was stolen recover the same from
B?
A gallery auction is not a public sale. Since it is
not a public sale, the owner can recover the
property even without reimbursement.
If it is a public sale, the owner can recover the
painting provided the owner reimburses the
buyer of the price paid in that sale.
A diamond ring was robbed in a bus, and
this same diamond ring has become the
object of a public sale of a pawnshop. Can
the owner recover the ring from the buyer in
the public sale initiated by the pawnshop?
Yes, if the buyer is in good faith, and so long the
owner is willing to reimburse the buyer of the
price paid in that sale, he may recover the
same.
Can the owner recover a thing from the
buyer who bought in a merchant store?
No. The owner cannot recover the thing from the
buyer even if the same was lost or the owner
was unlawfully deprived thereof, and even if the
owner wishes to reimburse the buyer for the
price paid. As a matter of right, the buyer in
good faith acquires absolute title over the thing.
How is transfer of ownership over a thing
effected?
It is effected by delivery, actual or constructive.
13

Everytime there is delivery, the buyer

acquires ownership upon delivery?
Not necessarily. This is not an absolute that
upon delivery as a consequence of sale, there is
transfer of ownership. There are kinds of sale
that despite delivery, the buyer does not acquire
ownership. Examples of which are:
a. Conditional sale - Here ownership is reserved
by the seller, such that despite delivery
ownership does not pass to the buyer. The
buyer does not acquire ownership upon
delivery but rather upon the happening of the
condition (usually upon full payment of the
price).
a. A sale on Trial, sale on satisfaction or sale on
approval - Upon delivery, even if there is no
actual delivery, there is no transfer of
ownership at the time of delivery. The buyer
will acquire ownership over the thing sold
when the buyer signifies his acceptance or
approval over the thing sold. Even If he does
not signify his approval ownership may still
pass to him if: 1) there is a period agreed
upon by the parties with which to decide and
upon lapse of the period he had impliedly
accepted or 2) even before the lapse of a
period, he may be considered as to have
impliedly accepted if he did an act wherein he
would be considered to have adopted the
transaction then ownership would be
considered to have pass on the buyer (e.g.
even if he has 10 days within which to decide,
after two days however from delivery, he sold
the car to another) 3) there may be no period
the buyer is deemed to have accepted after
the lapse of a reasonable time. What is
reasonable time will depend on the
circumstances surrounding the sale, the
purpose of the sale, or the nature of the thing
sold.
In Sale or Return, ownership passes to the
buyer upon delivery?
In this kind of sale ownership passes to the
buyer upon delivery. However in this kind of
sale, the buyer is given the right to reimburse
the title back to the seller.

A car was sold at 150,000, 75,000 was paid at

the execution of the deed of sale, the balance
payable on a monthly basis. The car was
delivered to the buyer. However, before he could
pay the balance, the car was destroyed, can the
buyer still be compelled to pay the balance?
He can still be compelled to pay the balance.
This is because upon delivery of the car to the
buyer, there being no retention or reservation of
ownership by the seller, ownership passes to the
buyer. Under Art 1504, res perit domino rule, the
owner bears the loss.
In sale on approval, who bears the loss?
The seller and not the buyer even if there is no
delivery, because the owner is still the seller.
Under the res perit domino rule, the owner bears
the loss.
A set of AMJUR was sold to Tabora on
installment basis. On the day these books
were delivered to the office of Atty. Tabora,
the entire block where the office of the latter
is located was burned together with the
AMJUR. Atty Tabora refused to pay the
balance despite demand by lawyers co.
Lawyers co therefore filed a case. Two
defenses were raised 1) res perit domino rule
because there is a stipulation in the contract
that the seller shall retain ownership over the
books until full payment, and if lawyers co
was the owner then it should bear the loss.
Is the argument correct?
No. If there was a stipulation in the contract that
ownership shall be retained by lawyers co until
full payment was made, there was also a
stipulation that the risk of loss shall pertain to
the buyer at the time the books were delivered
whatever the cause of the loss. This is an
exception to the res perit domino rule.
Assuming there was no stipulation that the
risk of loss shall pertain to the buyer upon
delivery, may the buyer still be held to
answer for the loss?
Under Art. 1504, when the owner reserved the
title to the property only to secure the payment
14

of the price of the buyer, then by law, risk of loss

shall only pertain to the buyer. This is known as
a security title. Therefore, even if the buyer did
not acquire title upon delivery, he bears the loss.
Whenever there is delay in the delivery of the
thing sold, who bears the loss?
It depends who may be at fault for the delay in
the delivery. It may be the seller or the buyer.
If for example, there is a stipulation that the
buyer must retrieve the goods on the
warehouse of the seller on a specific date.
On that date agreed upon, the seller
demanded the buyer to get the goods at the
warehouse. Despite such, the buyer failed to
obtain the goods. The next day, the
warehouse was burned. Who then shall bear
the loss?
Here the seller was still the owner, however, the
buyer was already in delay in retrieving the
goods, hence, under Art. 1504, the buyer bears
the loss, as an exception to the res perit domino
rule.
If the seller is the one at fault, who bears the
loss?
The premise here, the ownership should have
been passed to the buyer but the goods are still
with the seller (this could happen by constructive
delivery but physical possession is still with the
seller), even so, the seller shall bear the loss
because he was the one at fault for the delay in
the delivery of the thing sold despite demand by
the buyer.
An owner of a registered land sold the land
to B. B did not register the sale. A few days
thereafter, A sold again the same parcel of
land to C, who this time registered the sale.
Who between B and C have a better right to
this parcel of land?

If the thing sold is a movable, the first person

who took possession over the thing shall have a
better right.
If the thing sold is an immovable, the buyer who
first register in good faith will have the better
right, if there was no registration, then the
person who first took possession, if no one is in
possession then it will be the buyer with the
oldest title in good faith. Good faith here does
not pertain to knowledge of a defect of title of
the second buyer since he is the first buyer,
good faith here means he has no knowledge of
the defect on the title of the seller.
If a thing is sold to two or more persons,
what will be the effect of: 1) the first buyer
was the first to register with knowledge of
the second sale; 2) the second buyer was the
first to register with knowledge of the first
sale. Who will have a better right in these to
scenarios?
1. In the first scenario, his knowledge of the
second sale does not make him a registrant in
bad faith. Knowledge should pertain to one
which is prior sale in order to make one a
registrant in bad faith. Hence, here he has a
better right.
2. As to the second scenario, he is considered a
registrant in bad faith because of his prior
knowledge of a former sale. Hence, he will
not have a better right.
If a person bought the thing without
knowledge of the prior sale and registered
the same, would that mean he is a registrant
in good faith?
Not necessarily. This is because he may have
acquired knowledge prior to the registration. but
after buying. What is required by law is not a
buyer in good faith, but a registrant in good faith.

It depends on whether or not C register the sale

in good faith.

Bautista vs. Sioson

Note: In Art. 1544 pertaining to double sales, as

to which rule to apply would depend on the
nature of the thing sold whether it is immovable
or a a movable. If it is a sale of a movable.

The owner sold a registered parcel of land to

B who did not register, neither did he took
physical possession. After the sale they
executed a lease agreement in which the
15

buyer is now the lessor and that the seller

became the lessee. Hence, the seller
continued to be in possession of the land
not as a concept of an owner but of a lessee.
After the sale and the contract of lease, A
sold this parcel of land to C, who also did
not register the same, and this time C took
physical possession. Who between B and C
had a better right?
B would have a better right because when B
executed a lease contract with A, B is in
contemplation of law in possession of the
property, which is legal possession, he obviously
is therefore a possessor in good faith, the first
who took possession in good faith. Though C
had physical possession over the property, he is
considered to be the one second in possession.
B therefore was considered to have a better
right.
Note: Legal possession is sufficient to determine
as to who have a better right between two
persons.
Carumba vs. CA
Sale of a parcel of land to B who took
possession of the land. However, this seller
a judgment debtor to one of his creditor.
Because of a judgment in favor of a creditor
C, the parcel of land had become the subject
of an execution sale. Then the buyer became
C who registered the sale. Who will have a
better right between B and C and C had no
knowledge of the first sale?
B would have a better right because this parcel
of land was registered under the Torrens
System. Art.1544 does not apply to unregistered
lands. Only those lands which are registered
under the Torrens System can be covered by
the provisions of Art. 1544.
It could be noticed that C had registered the
land, but the same is not covered under the
torrens system because, there is another
system of registration of unregistered lands.
There is a different book covered by this kind of
registration, hence, Art 1544 would not apply.

Therefore, if ARt. 1544 would not apply, B would

have a better right because there was actual
delivery to him. Therfore, under the general rule,
upon delivery, ownership passes to the buyer.
When ownership had passed to the buyer when
the property was sold in the execution sale, the
buyer would not get anything from the execution
sale because he merely steps into the shoes of
the judgment debtor. Since the judgment debtor
had no ownership over the land at the time of
sale, the he did not acquire ownership by virtue
of that sale.
Note: To determine that the land is under the
torrens system, the ownership is proven by
TCTs or OCTs, otherwise if proof of ownership
are mere tax declarations, it will not be
considered as registered land.
Obligation to deliver to object of the sale
In this obligation one must distinguish first the
subject matter of the sale whether it is a thing or
a right.
Ownership passes upon meeting of the
minds as a consequence of sale?
False, there must be delivery.
As to delivery of things as a consequence of
sale known as tradition, there are two modes
recognized by law, what are these?

1. Actual - Material delivery or real delivery

To have a valid actual delivery the thing

must be subject to possession and
control of the vendee.

If the thing sold was delivered to a third

person, there may still be actual
d e l i v e r y w h e n s u c h t h i r d p e r s o n h a s
authority to receive from the vendee.
As
such he becomes an agent of the vendee,
thus, there is actual delivery.
2. Constructive delivery
a. By the execution of a public instrument (if the
contrary intention does not appear on the
document) by the mere execution of the
16

public instrument, that is already equivalent to

delivery. Hence, ownership passes to the
buyer.
a. Delivery of Keys (Tradicion Symbolica)
a. By mere consent or agreement of the parties
provided at the time of the sale; possession of
the goods cannot be transferred to the buyer
(e.g. when the thing was the subject matter of
the lease, because before expiration of the
lease the thing cannot be transferred to the
buyer).
a. Tradicion Brevi Manu - Here, the buyer was
already in possession the property, but there
is a change as to the status of possession
such as that of a lessee, depositary or agent
to possession in the concept of an owner.
a. Tradicion Constitutum Possesorium - Here
the seller would still continue to be in
possession of the thing after the sale but no
longer in the concept of an owner but in
another capacity.
The original owner here, X & Y whose
properties are fixtures in a salon, while Z &
D was a judgment creditor of X & Y. Because
of judgment rendered by a court in favor of
Z, the sheriff levied upon the properties of X
and Y which was still in the latters physical
possession. This execution sale was
questioned by A & B on the premise that
these goods were already sold to them prior
to the levy. Hence, if these goods were sold
to them prior to the levy, ownership already
passed to A & B, and as such there is
nothing more to be levied upon. But the
debtor was very much in physical
possession. May A & B be considered as
owners of the land despite them not being in
actual physical possession of the good sold,
and make them to have a better right over
the judgment creditors over an execution
sale?
Even if there was no physical possession and
there was no actual delivery, there may be a
constructive delivery by the execution of a public
instrument. Unfortunately in this case, the deed
of sale was merely in a private instrument.

In order for the ownership to pass, it had to be in

a public instrument (constructive delivery).
If for example the seller and the buyer
pursuant to their agreement delivered the
goods to a common carrier, upon delivery of
the goods to a common carrier, would that
result in transfer of ownership immediately?
If delivery to the common carrier is delivery to
the buyer, then ownership passes to the buyer
upon delivery to the common carrier. Such is a
general rule, the exceptions are:
1. if there was stipulation that ownership will not
pass to the buyer until full payment.
2. Even if the deed of sale does not provide for
such stipulation, the seller may have obtained
a bill of lading which provides that the goods
are deliverable to the seller himself or his
agent. Thus despite delivery of the goods to
the ship, there is no transfer of ownership
because it would still be the seller who would
have the right to obtain the goods from the
common carrier.

Kinds of Delivery of Incorporeal properties

(Quasi Tradicion)
What are the three modes of deliveries as to
rights?
1. Execution of a public instrument; (from the
delivery of certificates, ownership passes)
2. Use by the vendee of his rights with the
vendors consent (e.g. in sales of shares of
stock, the vendee may not always necessarily
have the right to exercise the stockholders
rights over the share, the buyer can only
exercise such right with the consent of the
vendor).
In a sale of 1000 pairs of shoes, as agreed
upon by the parties. The seller delivered
1200 pairs of shoes instead of only 1000.
May the buyer refused to accept everything?

17

Under the law, he would only have the right to

reject the excess, but he can be compelled to
accept the 1000.
Assuming if what was agreed upon was
1000, and the seller delivered only 800, can
buyer be compelled to receive the 800?
No, because under the law, partial performance
is non performance. As a rule, a creditor cannot
accept partial performance of the obligation,
except when there is a stipulation that partial
deliveries is allowed, or when the obligation
pertains to one which is partly liquidated and
partly unliquidated, obligation to different term
and conditions.
The buyer accepted only 800 at 1000 per pair
of shoes, it so happened the seller can no
longer deliver the balance of 200, since what
was previously stipulated was 1000 pair of
shoes. How much can the buyer be
compelled to pay?
It depends on whether the buyer was aware that
the seller could no longer the balance or when
he accepted he was not aware that the seller
could no longer deliver the balance.
If he was aware that the seller can no longer
deliver the balance, then he can be compelled to
pay at the contract rate. In this case, 800,000.
If he had no knowledge or awareness that the
seller can no longer deliver the balance when he
accepted, then under the law the buyer can only
be compelled to pay the fair value of this thing.
An obligation to deliver 1000 cavans of a
specific rice (milagrosa). However, the seller
delivered 1200 cavans of both milagrosa and
combodian rice. May the buyer have the right
to reject everything?
Yes he would have the right to reject everything
if the goods are deemed indivisible. Meaning in
each sack of rice, cambodian rice and milagrosa
rice are mixed.
However, if in each sack it is clear from each
that it is milagrosa or combadian then, that
would not be considered as indivisible, and he

can only be compelled the part which is

milagrosa, and reject the combodian rice.
Sale of a parcel of land and the price agreed
upon is 1 million at 100 sq. m., the actual
area delivered was only 95 square meters,
what are the remedies of the buyer?
1. Specific performance if it is possible for the
seller to deliver the balance such when the
adjacent land is still owned by the seller; or
2. proportional reduction of the price is with a
specific amount given to a specific measure.
If the sale is a lump sum sale, then any
deficiency in the area, there is no right to
proportional reduction of the price. Further,
even if there is an increase in the area
delivered, there will also be no additional
increase in the price.
3. Rescission - As a rule it will not be a remedy
base on the facts. Because rescission will
only be a remedy if the area lacking is more
than 10% of the area agreed upon. But even
if the area lacking is not more than 10%,
rescission will be a remedy if the buyer can
prove that he would not have bought the land
had he known that it was less than 100 sq. m.
Note: Rescission and proportional reduction if
the property delivered is of inferior quality. If by
agreement the parties intend to sell a rice field,
but it turned out that 20% of the land is not
actually a rice field and cannot be planted by
palay. The remedy of the buyer is to make a
proportional reduction of the price if he still
would want the land or rescission would be a
remedy if the area which is inferior is more than
10% of the total area of the land.
Place of Delivery
Generally, ownership passes at the place of delivery.
Where should the thing or goods be delivered?
The seller delivered the goods to the place of business
of the buyer and the buyer refused to accept the
goods. From that moment does it mean that the buyer
is already in delay because he refused to accept the
goods?
It depends on whether there is a stipulation as to the place
of delivery or not. If there was such a stipulation, and the

18

place agreed upon was not the place of business of the

buyer, of course he would have the right to refused to
accept the delivery of the goods in his place of business.
In other words, with respect to the place of delivery the first
thing that should be considered is the:
1.
2.
3.
4.
5.

stipulation
place fixed by usage or trade
place of business of the seller
sellers place of residence
If the thing is not in the place of business seller nor
buyer, known both to the parties, but in some other
place. The place of delivery shall be where the thing is
located at the time of perfection of the contract.

Places fixed by usage or trade

If there is no stipulation as to the place of delivery, the law
provides that, it will be the place fixed by the usage or
trade.
Shipping Arrangements; place of delivery
1. F.O.B. (Free On Board) Arrangement (Point of
Destination)
If there is no place stipulated as to the place of delivery and
the goods are to be shipped on an FOB basis, the place of
delivery shall be the place ownership is deemed to pass. In
an FOB arrangement, the parties should have agreed to a
specific port whether it is the port of origin or it could be the
port of destination.
In an FOB port of origin, the place of delivery shall be
considered to be the port of origin. It would be the port of
origin because FOB mean Free On Board, and Free On
Board means that the moment the goods arrived at the port
of origin, the seller will be free from any expense on
transportation of the goods to the buyer. From the port of
origin, it will be the buyer who will shoulder the expenses
for the transportation. It would appear since the buyer who
shoulder the expenses, it is the buyer who is the owner of
the goods as it reached the port of origin. If he is already
the owner under this FOB arrangement therefore, the place
of delivery shall be the port of Manila.

Is it possible in a CIF arrangement or in an FOB

arrangement, the place of delivery shall be the port of
destination?
These delivery arrangements only make rules of
presumption. It must give way to the real intention of the
parties as to the place of delivery, without expressly
stipulating as to the place of delivery. The intention of the
parties as to the place of delivery shall be determined by
the place and manner of the payment of the price. Where
the price is paid, that is determinative of the place of
delivery.
Under Art. 1582, as to the place of payment, if there is no
place agreed upon where payment should be made, the
place of payment should be made to the place of delivery.
In one case, it was stipulated in the contract that the seller
can demand the payment of the price, upon the arrival of
the goods at the port of destination in a CIF arrangement.
The SC ruled that the place of delivery is the port of
destination because it is only at that port that the seller can
demand on the payment of the price. They have agreed on
a CIF arrangement (port of destination) for the purpose of
fixing of the price, because generally, CIF means port of
origin, however out of the price, it will be the port of
destination, and payment shall include the cost, the
insurance and the freight. The place of delivery being the
port of destination, ownership passes in the port of
destination. Effectively the freight shall be shouldered by
the buyer, but that amount will be taken to the price fixed
by the seller.
In another case, the parties agreed in an FOB
arrangement, but it was stipulated in the contract that the
seller can demand the payment of the price by presenting
the bill of lading to the buyer. The bill of lading can be
presented at the port of origin to the buyer because a bill of
lading can be taken from the common carrier at the port of
origin. Despite of an FOB arrange, the place of delivery is
the port of origin. FOB port of destination is arranged in this
case because the buyer would want to have the seller to
shoulder all the expenses for the transportation of the
goods up to the port of destination.
Obligations of the Seller; Warranty

In FOB port of destination arrangement, the seller would

have to shoulder the expenses for the transportation of the
goods, upto and until the arrival of the goods at the port of
destination. Hence, delivery passes at the port of
destination.
2. C.I.F. (costs, insurance,freight) Arrangement (Point of
Origin)
In a CIF arrangement, the place of delivery is considered to
be the port of origin because, the price paid by the buyer
would already include the costs, insurance, and freight.
The buyer pays for the freight, it appears therefore that
ownership passes at the port of origin, hence, delivery is
made at the port of origin.

Does Philippine law adopt the common law principle of

caveat emptor (buyer beware)?
As a rule, Philippine Law does not adopt the common law
principle of buyer beware because of the implied
warranties. Even in the absence of stipulation, this
warranties are deemed attached to the contract, and the
buyer may hold the seller liable for breach of warranty.
However, it is only a general rule. There are instances
where there can be no implied warranty. Examples, where
there is no implied warranties are:

19

1. In sale of animals in fair (no warranty against hidden

defects) (but with warranty against eviction or title)
2. public auctions (no warranty against hidden defects) (but
with warranty against eviction or title)
3. as is where is sales (no warranty as to the fitness of the
thing, but there is still warranty against eviction)
4. sale of second hand items
When would and affirmation of fact or promise of a
vendor be the basis in holding the seller liable for
breach of an express warranty?
The law requires that an affirmation of fact or promise of
the seller must relate to the thing itself. In other words, it
must relate to the character of the thing, or to the quality of
the thing, or its title.
Secondly, it is required that such affirmation of fact must
have the natural tendency to induce a person to purchase
the thing;
Thirdly, the buyer purchase the thing relying on the
affirmation of fact or promise made by the seller.
If the seller told the buyer that this is the best fertilizer
in this world, would that be the basis in holding the
seller liable if it would came out that there are other
brands of fertilizer that are much better than what was
sold to this buyer?
That cannot be the basis in holding the seller liable
because, that will be treated merely as an opinion.
Unless such opinion is made by an expert, such statement
cannot be the basis in holding the seller liable under this
express warranty.
In a sale of a car, the seller told the buyer that even
only with one liter of gasoline, you can drive this car
for 50 km. Is this an express warranty?
This is an example of an express warranty, and failure of
the car to consume gas at 1km/50km may hold the seller
liable for breach of his express warranty.
Does it mean that the word guarantee is used, means
there is an express warranty?
No. Such word if it does not go into the character of the
thing, the quality of the thing or its title, such would not
pertain to an express warranty.
In December 1985, Salvador and the Star Semi
Conductor Company, executed a deed of conditional
sale wherein the former agreed to sell his 2000 sq. m.
lot in Cainta, Rizal to the latter for the price of 1million,
payable 100,000 down. The balance 60 days after the
squatters in the property have been removed. If the
squatters have not been removed after 6 mos., the

100,000 down payment shall be returned by the vendor

to the vendee. Salvador filed ejectment suits against
the squatters but despite of the decision of the Court
in his favor, the squatters would still would not leave.
In August 1986, Salvador offered to return the 100,000
down to the vendee on the ground that he was unable
to remove the squatters to the property. SSC refused
to accept the money and demanded that Salvador
execute a deed of absolute sale of its property in its
favor, in which time it will pay the balance of its price.
The value of the land had doubled at that time,
Salvador consigned the 100k in court and filed an
action for rescission of the deed of conditional sale,
plus damages. Will the action prosper?
Under the facts, Salvador is not an aggrieved party, hence
he will not have any remedy under the law. In fact, he was
the one who failed to evict the squatters.
The payment of the balance as agreed upon is made to
depend upon the removal of the squatters within 6 mos.
Clearly, if not, impliedly from the facts, that is an obligation
of the seller, and such is the condition for the payment.
Since such condition did not happen, wherein the squatters
failed to flee, would such condition for the payment of the
balance would not arise.
Under Art. 1545, it is the buyer who is given options under
the law, due to the non happening of the conditions due to
the fault of the seller. The options of the seller are: 1) Not to
proceed with the sale because the condition did not
happen; 2) Waive the happening of the condition and
proceed with the sale. In this case the second option was
chosen by the buyer. 3) Treat the non happening of the
condition as a breach of warranty, which can be the basis
of holding the seller liable for damages.
Implied Warranties
1. Warranty against eviction
2. Warranty against hidden defects
3. Warranty of quality (Warranty of fitness for a particular
purpose)
Is warranty against hidden defects include warranty of
fitness for a particular purpose?
No because, in an implied warranty of fitness for a
particular purpose, the thing may not have any hidden
defect. As to 1 million buyers they will be fine, but, as to 1
person as to him, it may not be fit for his purpose.
1. Warranty against eviction
What is included in warranty against eviction?
1. That the seller has the right to sell at the time ownership
is to pass; and
2. that the buyer will have and enjoy the legal and peaceful
possession.

20

May the buyer hold the seller liable for breach of

warranty against eviction if the buyer was deprived of
enjoyment and peaceful possession, even if he was
not deprived of ownership?
Yes. Because there can be a judgment in favor of a third
person who would have the right to the possession of the
thing but he is not the owner. One such person is a lessee.
Once the court consider a lease contract as a valid and
binding lease, even as against the buyer, the buyer can be
deprived of the possession but he is not deprived of
ownership. Thus, this could be a breach of warranty
against eviction because then, he would warrant that the
buyer would have a legal and peaceful possession of the
thing.
What requisites provided by law in order to hold the
seller liable for breach of warranty against eviction by
the buyer?
1. There must be a final judgment depriving the buyer of
the thing in whole or in part;
2. The seller must be notified (or summoned or considered
as party defendant)
3. The reason why the buyer was deprived of the thing
must be based on a right of a third person existing even
prior to the sale or even if such right of the third person
after such sale that must be baed on act imputable to
the vendor.

In double sales where the first buyer was deprived of the

thing because of a right of a second buyer which is
imputable to the vendor, such when the buyer was
deprived if such thing because of an execution sale due to
failure of the seller to pay real property tax if the tax
accrued before the sale.
If the buyer was deprived of the thing based on the
judgment of the court that a third person acquired the
property by acquisitive prescription, can the seller be
held liable for breach of warranty against eviction?
It depends on whether the prescribe period had already
been completed at the time of the sale or not. For example,
if this is based on the 10 year acquisitive prescription with
color of title, if the occupant in whose favor the court
decided who acquired the property resulting in the
deprivation of the buyer of such property was already in
possession for 7 years at the time of the sale, but the buyer
never even bothered to examine the parcel of land. When
he arrived after 12 years there is a judgment in favor of the
occupant because the occupant was able to complete the
10 year period prescribe by law without interruption. Here,
the buyer cannot hold the seller liable. This is no longer the
fault of the seller when the occupant was able to complete
the period. If the buyer only wrote a letter demanding the
occupant to vacate the premises that would have
interrupted the running of the prescriptive period. It is the
fault of the buyer why he is deprived of this land.
If the seller would be liable under this warranty against
eviction, what are the possible liabilities of the seller?

Will a mere letter of a third person claiming a right over

a property, which letter was received by the buyer, can
the buyer hold the seller liable?

Under the law, value of the thing at the time of eviction not
the price, including the fruits, costs, income and expenses
and damages and interest.

Of course not. The law requires that there must be final

judgment depriving the buyer of the thing in whole or in
part.

A person can only be held liable for damages if he is in bad

faith. A seller may be held liable for damages in relation to
this warranty against eviction if he was in bad faith.

In case there is a judgment, and such judgment was in

favor of a third person against the buyer, is it required
for the buyer to appeal in order to hold the seller
liable?

When would the seller be considered to be in bad

faith? If the seller knew of the defect of his title at the
time of the sale, therefore he is a seller in bad faith?

No such appeal is required on the part of the buyer. But if

the seller does not want to be liable, then he should
appeal.
A scenario where the buyer was deprived of the thing
based on a right of a third person existing even prior to
the sale?
One example is in double sales where the second buyer
was deprived of a thing because of a right of a first buyer,
having the thing first registered in his name in good faith.
A scenario where a buyer was deprived of a thing after
the sale which is imputable to the vendor?

Not necessarily, he may have known of the defect in his

title, but he had informed the buyer. Even if he knew of the
defect in his title and he did not inform the buyer of such
defect, he need not be in bad faith because probably the
buyer was already aware of the defect of his title.
If the seller executed a waiver even in case of eviction,
where such buyer agree that he will not hold the seller
liable for the deprivation of such thing, can the seller
be held liable?
Yes, if the seller is in bad faith, because under the law,
such waiver is void, and therefore the seller can be held
liable.

21

If the buyer executed a waiver, and the seller acted in

good faith, may the seller be held liable?
Yes, the seller may be held liable when the waiver is known
as waiver consciente. It is a waiver consciente when the
buyer executed a waiver not knowing the defect of the title
of the seller, at the same time the seller does not likewise
knew of such defect. The seller is liable for only the value
of the thing at the time of eviction, excluding the other
liabilities.
If the waiver is an intencionada waiver, with full knowledge
of the possibility of eviction. In other words, he knows the
defect in the title of the seller when he bought and when he
executed the waiver. Of course the buyer can no longer
hold the seller liable for breach of warranty against eviction.
If there is no waiver, and the buyer was deprived, will
the seller be held liable?

Damages will only be granted if the seller is in bad

faith. He is in bad faith when the seller did not inform
the buyer of the defect.
2. If the thing was lost due to the defect itself
The liability will be greater if the cause of the loss was
due to the defect itself, than when the cause of the
loss was due to the fault of the buyer or to a fortuitous
event.
In case of defect the seller has to return the price in
good faith or in bad faith.
Damages will only be granted if the seller is in bad
faith. He is in bad faith when the seller did not inform
the buyer of the defect.

Of, course, the only difference is the extent of the liability of

the seller whether he is in good faith or bad faith. If seller is
in bad faith, he will be even liable for damages in case of
eviction.

Note: Damages and interest cannot concur in case of loss

due to the defect. When the seller is in bad faith (vendor
was aware of the defect) damages is granted, if in good
faith (vendor was not aware of the defect) interest shall be
granted.

Warranty against hidden faults or defects

In warranty against eviction, interest and damages concur.

What are the requirements in order for the seller to be

held liable for breach of warranty against hidden
defects?

If the thing was lost or destroyed due to a fortuitous

event, fault of the vendee, or due to the defect itself,
how can the buyer prove that the thing had hidden
defects, when the thing was lost?

1. The defect must be hidden and not patent.

2. The defect must have already existed at the time of the
sale.

It is a matter of proof. The buyer might have allowed an

expert to examine the thing before the loss of the thing. He
has a proof of the defect of the thing before its loss.

If the buyer discovered the defect on the thing bought

10 days after the sale, the seller will be liable for
breach of warranty against hidden defects?

Even if the thing with hidden defects was lost or

destroyed, is it possible that the seller will not be liable
for a single centavo, even without a waiver?

Not necessarily because the defect may be patent, hence

the seller cannot be held liable. Secondly, the defect may
exist at the time after the sale, therefore the seller cannot
be held liable for breach of warranty against hidden
defects.
In case the seller is held liable for breach of warranty
against hidden defects, what are the possible liability
of the seller?

When the loss was due to a fortuitous event or fault of the

vendee, and the vendor was not aware of the defect. In this
scenario the liability of the seller is only to return the price
less value. But when the value is greater than the price, the
seller would no longer return the price less value hence no
liability. The value may be greater than the price when the
seller sold the thing less than its value or the thing was sold
at its value but there was appreciation of the value. Lesion
does not affect the validity of the sale.

1. If the thing was lost or destroyed due to a fortuitous

event or it was lost or destroyed due to the fault of the
buyer, may the seller still be held liable?

Included in this warrant against hidden defects, would

pertain to any charge or non-apparent encumbrance not
declared or known to the buyer.

Yes the seller will still be held liable because the thing
had hidden defects.
If the cause of the loss was due to the fault of the
buyer or to a fortuitous event, the liability of the seller
is to return the price less value at the time of the loss
whether the seller is on good faith or bad faith.

1. In relation to a sale of a parcel of land, and such is

subject to a right of way, will the seller be liable in
relation to breach of warranty?
Not necessarily. Maybe it was known to the buyer or it
was declared to the buyer. Even if it is not declared
and not known to the buyer but the encumbrance is

22

apparent, hence the seller cannot be held liable for

breach of warranty. Even if not known or was declared
to the buyer or the encumbrance is non apparent, the
seller may be liable when the encumbrance is
registered.
The sale of a parcel of land was entered into January 2,
2009. The buyer filed an action for breach of warranty
against hidden defects pertaining to any charge or non
apparent encumbrance unknown to the buyer, because
of a right of way only last friday, will the action
prosper?
It depends on what kind of action. If the action is an action
for rescission, it will not prosper because the law requires
that the action for rescission should be filed within 1 year
from the date of the contract. It is more than 1 year.
If this is an action for damages, it MAY prosper depending
on when the buyer discovered the encumbrance. The law
requires that an action for damages may be filed within 1
year from discovery of the encumbrance. When it is within
such period, then the action will prosper.
Sale of Animals with defects or diseases (redhibitory
defects)
A redhibitory defect cannot be discovered despite an
examination by an expert.

Are there no implied warranties in judicial sales?

False. There can be implied warranties in judicial sales.
1. There seems to be a provision where certain persons
such as mortgagees, pledgees, auctioneers, and
sheriffs, cannot be held liable for breach of warranty.
Since a sheriff is the seller in a judicial sale, and under
the law he cannot be held liable, it is concluded that
there are no implied warranties in judicial sale. Such
view is incorrect, it does not follow that the sheriff cannot
be held liable. It does not mean that when the sheriff
cannot be held liable, it does not follow that no one can
be held liable. The judgment debtor can be held liable,
unless the contrary was decreed in the judgment.
2. In judicial sale, normally these are second hand items,
hence, there is no warranty as to hidden defects? False,
because the sheriff can levy brand new properties, such
when the seller was in the business of selling brand new
items. In this latter case, the judgment debtor may be
held liable for breach of warranty against hidden defects.
Under Art. 1570, the law provides as to the rules
involving warranty against hidden defects they were
made expressly applicable to judicial sales.
Rights and obligations of the vendee
What are the rights of the vendee?

If a buyer bought 7 dogs and one of them turned out to

have a redhibitory defect, will an action for redhibition
be a remedy not only as to the animal with the defect
but also as to the other animals?
As a rule, no. Redhibition would only pertain to defective
animals, unless the buyer can prove that he would not
have bought the others had he known of the defect of one.
The burden of proof in proving that the buyer would not
have bought the dogs had he known of the defect of one is
the buyer, but under certain circumstances the law would
presume that the buyer would not have bought the others
had he known of the defect of one. This would happen
when he bought the animals in pairs, as a team or as a
group.
If the animal bought died 5 days after the sale, can the
buyer still demand for the return of the price?
The seller can no longer be held liable for breach of
warranty because the law requires that the animal should
die within 3 days. The disease must be existing at the time
of sale.
The seller can however, be obliged to return if the death
although it happened more than 3 days after the sale, was
caused by a contagious disease. Under the law, this
contract is void, hence the seller can be compelled to
return the price paid by the buyer.

1. Right to the Fruits

By means of a public instrument, Mr. Nagbibili sold his
mango plantation to Abentorero effective immediately.
The parties agreed that the delivery will be effected 6
mos. from execution of the deed of sale. When the said
period arrived Abenturero demanded the thing, but
Nagbibili dili dallied. It was only a month afterwards
when Nagbibili finally delivered the land to Abenturero.
In the three weeks before delivery, Nagbibili sold and
deliver the entire produce of the Mango plantation to
Mr. Commerciante. Mr. Commerciante known nothing
of the contract between Nagbibili and Abenturero.
Abenturero now seeks to recover from Commerciante
either the full value of the mangoes or a similar amount
and quality of the mangoes sold. Does abenturero
have the right to the fruits against Commerciante?
Under the law particularly Art. 1567, the buyer shall have
the right to the fruits of the thing from the time of the
perfection of the sale. In relation to Art. 1164, the creditor
shall be entitled to the fruits of the thing from the time the
obligation to deliver it arises.
In their agreement the obligation to deliver will arise only
after 6 mos. therefore the buyer will not be entitled to the
fruits during the 6 mo. period. Though under the facts,
Abenturero already had the right to the fruits, Abenturero
does not have the right to recover against Commerciante
because under Art. 1164, he will not have any real right

23

over the thing until the actual delivery of the thing to him.
The only remedy of Abenturero is only against Nagbibili
since, Commerciante had no knowledge of such sale
between Nagbibili and Abenturero.
What if during the 6 month period, Nagbibili harvested
the fruits and sold it to Commerciante, can Abentuero
recover these fruits or the value thereof?
Abenturero does not have the right to the fruits because
Abenturero shall only have the right to the fruits of the thing
from the time the obligation to deliver it arises. Under the
facts, it was harvested before the 6 month period and
during such time Nagbibili is under no obligation to deliver
the fruits.

sometimes the employees of the seller will leave the

place immediately. After 1 hour the buyer called the
seller informing him that he is rejecting the goods,
and told the seller to obtain the goods in the place of
the buyer. But before the seller could obtain the goods
from the buyers place, all the goods were destroyed.
Can the buyer be held liable for the price of these
goods?
It depends on the reason for the refusal to accept. If there
is no just cause for the refusal, under the law ownership is
deemed to pass to the buyer, hence, the owner bears the
loss. As such, he can be compelled to pay the price.
If there is a good and valid reason, probably the goods
were defective, such that he had to reject the goods, the
law expressly provides that ownership will not pass to him
and he cannot be compelled to pay the price.

2. Right of examination
If the goods were delivered by the seller to the place of
business of the buyer, and the goods were received by
the buyer, does it mean that ownership already passed
upon receipt of the goods?
Not necessarily. Receiving is different from accepting. In
order that ownership is to pass, the law requires that the
buyer must have accepted the goods. Receiving is only
preliminary to accepting, in fact receiving is necessary for
him to exercise a right which is the right of examination or
inspection before he accepts. As to when he will be
deemed to have accepted, when he intimates his
acceptance to the seller or when he did an act inconsistent
with the ownership of the seller, after the lapse of a
reasonable time.
Is it possible that the vendee upon receiving, he
already accepted?
Yes, when the vendee had waived the right of examination
by express stipulation, or by certain arrangements that may
be agreed upon by the parties wherein there will be no right
of examination preliminary to acceptance.
E.g. In sale of coal from the location of the site of the
mining company, it will be delivered to Calaca plant in
Batangas, when the coal was received by Napocor, it is
deemed accepted. There will be no examination
preliminary to acceptance. However, there will be an
examination after receiving not for the purpose of
determining whether it will be accepted or not, but the
purpose will only be for the fixing of the price, and ascertain
the quality of the coal.
Are COD sales have right of examination?
None because upon delivery, the buyer pays, and the
buyer is deemed to have accepted.

Pursuant to a sale, the seller delivered the rice field 2

years ago, but the payment was only made today. Can
the seller demand to pay interest on the price?
Ordinarily, the buyer cannot be held liable for the interest
on the price. Unless there is an express stipulation to the
contrary, interest cannot be demanded. As an exception,
the seller can validly demand interest only if there was
such a stipulation to pay interest.
Even if there is no such stipulation to pay interest, the
buyer may be held liable to pay interest if the thing is fruit
bearing. Under the facts, the land sold is a rice field,
hence, it is fruit bearing. And as such, the buyer can be
compelled to pay interest on the price.
Even if there is no stipulation and even if the thing is not
fruit bearing, he may be held liable for interest in the price
because the buyer is already in delay after judicial or
extrajudicial demand is made by the seller.
It must be noted, under 1164, there is no need for demand,
when one of the parties had complied with his obligation,
delay by the other begins. Under this scenario this
presupposes that there is a period within which to pay and
the period had already prescribed, and in such case there
has to be a judicial or extrajudicial demand.

3. Maceda Law RA 6552 - Right of the vendee

The Realty Installment Buyer Act - This law is intended to
protect ordinary buyers.
This law can only be invoked when the object of the sale is
a realty. Clearly, this cannot be invoked if the object of the
sale is a personal property or a movable property.
If it is an immovable property, is it covered by the
Maceda Law?

If the goods were delivered to the place of business of

the buyer which goods were received by the buyer but

24

Not necessarily. What is covered by the Maceda Law are

realties. Not every immovable is covered by the Maceda
Law.
If it is a realty is it covered by the Maceda Law?
Not necessarily. It must be a residential realty, and not
commercial or industrial realty.
A sale on installment is a sale on credit? If a sale on
installment is a sale on credit, a sale on credit is
covered by the Maceda Law?
A sale on installment is a sale on credit, but a sale on credit
need not necessarily mean it is covered by the Maceda
Law, because a sale on credit need not be on installment
basis.
A sale of a condominium unit where 1/3 of the price will be
paid upon signing of the contract, but the balance will be
paid within a year. Such is not covered by the Maceda Law
because that is not a sale on installment basis. This is a
sale on credit on a straight term basis.

In a sale on installment payable in 20 years or 30 years,

a buyer was able to religiously pay his monthly
ammortization for 10 years, what if on the 11th year the
buyer for one reason or another, he was no longer able
to pay. What will be the effect?
Is the maceda law be invoked if the buyer was able to
pay installments for at least two years?
False. Even if the buyer was not able to pay installments
for a full two years, the buyer can have rights under the
law. If he already paid for two years, he would have better
rights.
What are the rights of the buyer if he only paid for less
than 2 years?
He is given a minimum of 60 day grace period which can
be increased at the option of the seller but no less than 60.
In this grace period, the rights of the buyer are: 1) He can
update his accounts 2) Pay the arrears without being held
liable for penalties, surcharges, interests, he can pay the
entire balance during this grace period. 3) Sell his interest
under this contract 4)Assign his interest or rights under this
contract.
If the buyer was able to pay installments for at least
two years, what are the rights of the buyer?
The buyer will be entitled to a portion of the amounts paid,
known as the Cash Surrender Value in a minimum of 50%
for 2 years of all payments made. After another 5 years or if
he paid for a total of 7 years, entitled to another 5% which
means 55%, and every year thereafter, additional 5%, but
not to exceed 90%.

Priscilla purchased a condominium unit in Makati City

from the Cityland Corporation for a price of 10 million
payable 3 million down and the balance thereon shall
be paid in 60 equal monthly installments. They
executed a deed of conditional sale in which it is
stipulated that should the vendee fail to pay 3
successive monthly installments, the sale shall be
deemed automatically rescinded without the necessity
of judicial action and the actual payments made by the
vendee shall be forfeited in favor of the vendor by way
of rental for the use and occupancy of the unit and
liquidated damages. For 46 months Priscilla paid
monthly installments religiously, but on the 47th and
48th month she failed to pay. On the 49th month she
tried to pay the installment due, but the vendor refused
to receive the payments tendered by her. The following
month the vendor sent her a notice that he was
rescinding the deed of conditional sale pursuant to the
stipulation of automatic rescission and demanded that
she vacate the premises. She replied that the contract
cannot be rescinded without judicial demand or
notarial act pursuant to Art. 1592 of the Civil Code.
Can the vendor rescind the contract?
No, because the object of sale is a residential unit and
under the Maceda Law, there are two stipulations that are
declared void by this law. One of the stipulation is the
stipulation providing for the automatic rescission of the
contract. Another void stipulation under the Maceda Law is
known as the forfeiture clause. In other words, the buyer is
entitled to the Cash Surrender Value even if there is a
forfeiture clause. Such clause is a void clause under the
Maceda Law.
The vendor cannot rescind because under this Maceda
Law, the buyer had already paid for at least two years. The
buyer is entitled to a grace period which is 1 month for
every year. Under the facts Priscilla had already paid for 46
months, and thus having completed paying 3 years she is
entitled to a 3 months grace period equivalent to 90 days.
On the 49th installment offered to pay, she dafaulted on the
47th and 48th month hence, there is 60 days within which
she did not pay which was well within the 90 day grace
period. Had she not offered to pay on the 49th month,
rescission may be a remedy on the part of the seller.
Hence, rescission cannot be a remedy on the part of the
seller.
If rescission is a remedy, the seller is obliged to return the
cash surrender value to the buyer. There can be no valid
rescission without the return of this cash surrender value.
If the price is to be paid in 15 years and buyer failed to
pay on the 5th month of the first year, how long is the
grace period? He has a grace period of 60 days.
Thereafter he was able to pay the 5th, 6th, 7th, and in
fact he was able to pay installments up to the 5th year.
On the 5th month of the 5th year, he defaulted again.
How long is the grace period?

25

None. Under this law, the buyer can only avail of the grace
period once in every 5 years of installments.

the seller must still have possessory lien or he must have

exercised the right of stoppage in transitu.

Remedies

Possessory Lien

What are the remedies of the unpaid seller?

This possessory Lien is the right to withhold delivery or the

right to retain. Nowhere in the Code will one find
possessory lien. But the popular name is possessory lien,
to distinguish this lien of the seller from another lien of the
seller in a scenario where the goods have already been
delivered to the buyer. Under the rules on preference on
the concurrence and preference of credits, as to a thing
which was the object of a sale, which was already
delivered to a buyer who thereafter became insolvent, the
seller has preference as to the unpaid price over the thing.

1.
2.
3.
4.
5.
6.
7.

Possessory Lien
Right of Stoppage in Transitu
Right to Rescind
Right of Resale
Damages
Specific Performance
Recto Law

If the buyer paid 90% of the price can the seller still
invoke these remedies?
Yes, as long as the price has not be fully paid, the seller is
still an unpaid seller.
Even if the buyer paid a check for the full amount, the seller
may still have the right to invoke these remedies if the
check was dishonored, not due to the fault of the seller.
May a person who is not a party to the sale be able to
invoke any of these remedies?
Yes because the law provides that the word seller would
include certain third persons, such as assignees or heirs of
the seller, or an agent to whom a bill of lading was
endorsed.
May these remedies be invoked if theses remedies
already passed to the buyer?
Yes, by express provision of the law.
How can the seller have the right to retain or
possessory lien if ownership already passed?
Possession by the seller may be retained because of
constructive delivery. With constructive delivery, ownership
may already be with the buyer, but possession may still
be with the seller, or the seller was merely constituted as a
depositary. Ownership already passed but the seller still
has the right to withhold the delivery of the goods.
Are these remedies alternative or can be invoke all at
the same time?
As to two remedies, they cannot exist at the same time,
and these are possessory lien and stoppage in transitu
because a requirement for the right of stoppage in transitu
to arise is that the seller must have already parted
possession, and possession is a requirement in
possessory lien. But if the seller properly exercised the
right of stoppage in transitu,the implication is that the seller
will be reverted back to its possessory lien.
However, as to the two other remedies of right of resale
and right of rescission, the law even expressly requires that

Is insolvency required in order for this right to

withhold can be exercised?
No. It is not necessary or required, but it is one of the
grounds for the seller to withhold the delivery of the goods.
Even if the buyer is not insolvent but there is no stipulation
as to credit, the buyer still did not pay, the seller has the
right to retain the goods.
Even if there was stipulation as to credit such that the
buyer was given a period, but despite the lapse of the
period the buyer still did not pay, the seller can still retain
the goods.
If the goods were delivered by the seller to a common
carrier, pursuant to their stipulation in the contract for
ultimate delivery to the buyer, does it mean that the
seller has lost its lien over the goods?
As a rule, delivery to a common carrier is delivery to the
buyer. But even if the goods were delivered to the common
carrier, the seller may not have lost his lien. Therefore his
remedy is possessory lien and not stoppage in transitu.
This would happen if he reserved ownership over the thing.
What is provided under the law will include reservation of
ownership. There is something wrong with the view that
possessory lien may be invoked when the seller reserved
ownership, because it does not matter whether the seller
reserved ownership or not in relation to possessory lien.
Even if ownership had already passed he may still have the
right to retain the goods.
If there is a reservation of possession, there will be no
problem since the seller would have the right to obtain the
goods from the common carrier, he did not lose his
possessory.
Stoppage in Transitu
As to stoppage in transitu, once the seller had already
parted possession and the goods are already in transit and
the as another requisite the buyer is already insolvent.
Take note that the insolvency of the buyer need not happen
at the time of the perfection of the contract. Even if the

26

insolvency occurred while the goods were already in

transit. that can be the basis of the exercise of this right.
There is no question as to taking actual possession over
the goods. But the other manner of exercising the right is
by giving notice to the common carrier as to the exercise of
the right. The problem here would be in the scenario where
even with notice given by the seller as to his exercise of the
right. However, the common carrier refused to deliver the
goods back to the seller or to the place of the place
specified by the seller, it does not necessarily mean that
the common carrier would be liable because another
requirement in order for the common carrier to be obliged
to return the goods back to the seller under a certain
situation is that the document of title which covers the
goods must be surrendered first to the common carrier.
This is a protection to common carriers because if goods
are covered by negotiable document of title a third person
who is not the seller may have a better right over the
goods. This is in relation to the alienation made by the
buyer to a third person.
In a scenario where the seller has possessory lien or
he just exercised his right to stoppage in transitu, what
if the buyer sold the goods to a third person, can that
third person compel the seller to deliver the goods to
the buyer? Will the alienation of the goods to a third
person, will the seller lose his lien?
As a rule, the seller will not lose his possessory lien. As an
exception, the seller will lose his lien when the seller
assented to this alienation. Secondly, when the goods are
covered by a negotiable document of title like a negotiable
bill of lading and the buyer sold this goods to a third person
in good faith and for value, which means he had no
knowledge of the defect on the title of his seller. Thirdly, this
negotiable document of title must have been negotiated to
this third person. With these, the seller would lose his lien.
The third person will have a better right over the goods. A
negotiable instrument being a bearer instrument , he can
easily negotiate by delivery. Even if it is an order
instrument, and it is deliverable to the order of the buyer,
he can endorse such document to another buyer. Again,
the unpaid seller will lose this lien when all these requisites
are present.
If an action for specific performance was filed instead
of invoking the other remedies or together with the
other remedies, in the judgment of the court, the
judgment was in favor of the seller, and if the judgment
becomes final and executory ordering the buyer to pay
the price, may the seller now lose his lien, and
therefore the buyer can demand for the delivery of the
goods to him so that he will thereafter pay the price?
No. Even if there is such a judgment in favor of the seller,
he will not lose his lien. Just because there is a judgment in
favor of the seller, there is no guarantee at all that the
buyer will be able to pay or the buyer will in fact pay.
Right of Resale

It is required that the seller must still have possessory lien

for the seller to exercise the right of resale.
Is insolvency required?
No, but it may be one of the scenarios where the seller will
have the right to resell. One of the grounds for the exercise
of the right is because the buyer has been in default for an
unreasonable length of time. Another ground, is that this
right is expressly reserved to the seller, and another ground
is that the goods are perishable.
In relation to this remedy, the law would mention two
notices coming from the vendor to the vendee. The first
notice is the intention of the vendor to resell. The second
notice is as to the date, the time and to the place of the
resale.
Are the notices necessary for the validity of the resale?
These notices are not necessary for the validity of the
resale. Its relevance, as to the first notice pertaining to the
intention to resell will only be relevant if the ground for the
resale is because the buyer had been in default for an
unreasonable length of time. If there is such notice
especially if the notice was sent by a lawyer, it will be seen
when the notice was sent, when it as received by the
buyer, therefore, it would tell that the buyer had been in
default for an unreasonable length of time. As to the two
other grounds of express reservation and goods are
perishable, as to the first notice will find not relevance.
As to the second notice of the date, time and place of
resale. This has something to do when the resale was
done in good faith or not. So what if the sale is in good faith
or in bad faith? When would it be considered on good faith
or in bad faith? The effect of this, has something to do
with the right to recover the deficiency after the resale. For
example, the unpaid amount or the total contact price of
100k, but the net proceeds of the resale is 60k, hence the
deficiency of 40k. Can the seller recover this deficiency
from the buyer? Yes, if the sale is a goods faith sale. Such
notice is important because if the buyer was given notice
at the date, time and place of resale, he would have been
present or he could have attended the resale, and he
would have known if indeed the highest bid was only 60k.
Whereas if there is no notice, there is a good possibility
that the seller may have even sold the same property to
himself. Under the law he could not sell the property to
himself directly or indirectly. Hence he could not connive to
a third person to buy the goods for a less value so he can
recover the deficiency from the buyer. Such would be a bad
faith sale, and the seller could no longer have the right to
recover the deficiency. But if indeed there was a good faith
sale, and there was actual bidding and there are person
who bid, but the highest bidder is 60, the buyer can be
compelled to pay the deficiency.
When the net proceeds is greater than the payable
amount, who is entitled to the excess amount?

27

Under the law it is the seller. The seller shall not be

responsible for the buyer for whatever profit he may obtain
out of the resale.
If the buyer partially paid, but the seller resold it at a
price higher than the amount payable, can the buyer
demand for the amount paid?
No. The law is clear that the seller shall not be responsible
for any profit he may obtain out of the resale.
If ownership had already passed to the buyer, in the
exercise of the right of resale, should the seller rescind
the first contract, or the title of the first buyer for him
to be able to resell?
No need for rescission because the effect of the resale
would terminate the ownership of the first buyer by
operation of law. Such ownership can be vested upon the
second buyer upon the delivery of the goods to the second
buyer.
Rescission
What are the grounds for rescission?
1. The buyer has been in default for an unreasonable
length of time
2. The right is expressly reserved to the seller;

The Recto law is considered as a protection to buyers

despite the fact that the law gives the seller remedies, and
not to buyers. In the sense that these remedies are
alternative in character, it is meant to protect buyers
because once the seller invoke any of these remedies, he
can no longer invoke the other remedies.
Sale of a specific car worth 5 million, payable in 10
equal annual payments. The buyer failed to pay the
third installment. Can the seller invoke any of the three
remedies?
No, because only one installment was unpaid. For the two
other remedies to be available to the seller, the buyer must
have failed to pay two or more installments. If there is only
one installment left unpaid, the only remedy by the seller is
exact fulfillment.
Despite demand, the buyer failed to pay the third
installment, within a month the seller filed an action to
recover a sum of money. In this action how much will
be recovered by the seller?
Since the buyer was able to pay only 2 installments
equivalent to 1 million, therefore there is yet a balance of 4
million, the seller cannot recover the whole 4 million. What
the seller can recover is only the due amount left unpaid,
which is the third installment in the amount of 500
thousand.
Is it possible for the seller to recover the entire
balance?

Recto Law
If the buyer fails to pay 2 or more installments remedies are
provided to the seller. In the first place, the Recto Law is
considered related to the Maceda Law, thats why the
examiner might require you to distinguish one from the
other, hence:
Maceda Law

Recto Law

Contract of Sale

Contract of Sale

Sale on Installment

Sale on Installment

Passed to protect buyers

Passed to protect buyers,

Object of sale is a Realty

for Residential purpose

Object of the sale is a

personal property or
movable property.
Remedies:
Exact fulfillment
Cancellation of the Sale
Foreclosure of Mortgage

Yes, if there is a clause in the contract of sale known as an

acceleration clause stating that even if the buyer only failed
to pay only one installment, the entire balance will become
due and demandable.
Assuming the buyer failed to pay the third installment and
the 7th installment, may the seller invoke any of the three
remedies?
No. If the seller defaulted on the third and on the 7th
installment, the premise here is that the seller was able to
pay the third, fourth, fifth and the sixth installment. Since he
defaulted on the 7th, there is only one unpaid installment.
The law requires that the buyer must have failed to pay two
or more installments (consecutive installments). The law
did not mention that the buyer failed to pay twice.
In a scenario, buyer failed to pay several installments,
such as the third and the 4th? May the seller invoke
any of the three remedies?
Yes.
If the seller in the above scenario chose cancellation of
the sale, with cancellation of the sale, what is the effect
as to the right and obligation of the parties?

28

Since this is a form of rescission, the effect would be

mutual restitution. The buyer will have to return the car to
the seller, and with mutual restitution the seller would
normally return all the amounts paid, but under this law, the
seller is not required to return all the amounts paid. The law
allows the seller to retain a reasonable amount which will
be considered as compensation for the use of the thing.

proceeds will be applied to the indebtedness which is

prohibited under the Recto Law.

May the seller retain all the amounts paid by the

buyer?

2. Return of goods by the buyer to the seller in Sale or

Return or Sale on Trial (Art. 1502).

Yes, if there is a forfeiture clause. This is one big difference

in the Maceda Law. In the Maceda Law, forfeiture clause is
void.

3. Seller stopping the goods in transit (Art. 1532).

Even if there is a forfeiture clause, is it possible that

the seller, may not have the right to retain all the
amounts paid?

5. Unpaid seller rescinding the contract of sale (Art. 1534)

Yes, if to do so would be considered as unconscionable. To

determine if it is unconscionable would depend on the
circumstances of the case or of the sale and the amount
involve and the parties.
To secure the fulfillment of the buyers obligation on
the car sold, the buyer mortgage his blue diamond.
Thereafter the buyer failed to pay the third and the
fourth installments. The seller can now invoke any of
these remedies, but when the seller invoke foreclosure
of the mortgage and the net proceeds of the
foreclosure sale is less than the balance, hence there
is deficiency, can the seller recover the deficiency from
the buyer?
Yes, because the Recto Law does not apply to this
scenario because the thing bought was not the same thing
which was mortgaged. For the Recto Law to apply, what is
bought, is the same thing which is mortgaged.
A bought a truck from B payable in installment secured
by a chattel mortgage executed by A on the truck. As
additional security As brother C, executed a real estate
mortgage in favor of B. A defaulted in the payment of
several installments. Consequently B filed an action
for replevin, repossessed the truck and foreclosed the
chattel mortgage. Can B proceed the other properties
of A and the real estate mortgage executed by C, to
recover the deficiency if any after the chattel mortgage
foreclosure sale?
No. B cannot procced against the other properties because
under the Recto Law, since under the facts the sale is
covered being a sale of a movable on installment, would
not allow the recovery of the deficiencies of foreclosure.
Going after the other properties is a form of recovery of
deficiency.
In the same manner, the foreclosure of the real estate
mortgage is also a form of recovery of the deficiency,
because the real estate property will be sold and the net

Modes of Extinguishment of Sale

1. Cancellation of Sale of personal property payable in
installment (Art. 1484).

4. Unpaid seller reselling the goods (Art. 1533).

6. Rescission of sale when the thing delivered was lacking

in area or of inferior quality.
7. Rescission of sale when there is a breach of warranty;
8. Rescission of the sale of animals with redhibitory defect;
9. Payment
10. Novation
11. Loss of the thing
12. Resale
What is the extra special mode of extinguishment of
sale?
Redemption either conventional or legal.
What are the kinds of redemption?
1. Conventional - There is right to repurchase expressly
reserved in the contract and this right may only arise in 1
kind of contract. This is a sale with a right to repurchase
or pacto de retro sale.
2. Legal - Those which may be exercised by co-owners or
by owners of adjacent lots.
Conventional
If there was no stipulation as to the right of redemption then
no right of redemption.
In the exercise of this right, how much would have to
be offered by the seller a retro in order to redeem the
property? Would the price paid by the buyer be
sufficient in order to repurchase the same?
Not necessarily. Under the law, the amount which has to be
offered by the seller a retro (vendor) in the exercise of the
right of redemption are: 1) price paid; 2) the expenses
incurred by the vendee (buyer a retro) for the execution of

29

the contract 3) necessary and useful expenses incurred by

the buyer (buyer a retro).
Fruits at the time of sale
In a mango plantation, there may be fruits at the time
of redemption.The value of the fruits is 100k. Can the
seller (buyer a retro) be compelled to pay for the value
of the fruits?

a. The period is 4 years. Under the law, if there is a right of

redemption but the parties failed to provide for such a
period, the law itself says that the right may be exercised
only within 4 years. However, if the parties stipulated as
to the period within which the right may be exercised, the
law provides that such cannot exceed 10 years, and if it
exceeds 10 years, the same will be reduced.
b. To file an action for the consolidation of title.

It will depend on whether there are fruits at the time of the

sale. If there were fruits at the time of the sale, the seller
(seller a retro) will only be obliged to pay the fruits at the
time of redemption if at the time of the sale, the buyer
(buyer a retro) paid for the price of the value of the fruits.
But if at the time of the sale, there were fruits but the buyer
(buyer a retro) did not pay for the value of the fruits, then
the seller should not likewise be compelled to pay for the
value of the fruits at the time of redemption.
No fruits at the time of sale, but there are fruits at the time
of redemption
If a COS was entered into in January 2001 and there
were no fruits at the time of the sale. However, at the
time of redemption in April 1, 2005 there were fruits.
The value of which is 100k. How much can the seller be
compelled to pay fro these fruits?
Under the law the seller (seller a retro) can be compelled to
pay for the value of the fruits giving the buyer (buyer a
retro) the part corresponding to the time he possessed the
land in the last year, counted from the anniversary of the
date of the sale.
Under the facts, the anniversary date is every January 1st.
The anniversary date (the last year) is January 1, 2005.
From January 1, 2005 to April 1, 2005, the buyer was
already in possession for 3 months out of 12 mos. of the
entire year, meaning it is 1/4 of the entire year. Therefore
the buyer a retro (seller) is compelled to pay 1/4 of the of
the 100k value of the fruits which is 25,000.

In a sale with right to repurchase, ownership passes

upon the expiration of the right to repurchase?
No, ownership passes to the buyer upon delivery. The
implication however of the expiration to the right to
repurchase, is that ownership by the buyer becomes
absolute.
What will be the effect of the expiration of the period to
repurchase without the seller exercising such right? Or
even if he did exercise, it was not a valid exercise of a
right? In the above scenarios, what is the effect on the
ownership of the buyer?
Buyers right of ownership over the thing becomes absolute.
During the period he has ownership, but this ownership is
subject to a resolutory condition which is the valid exercise
of the right to repurchase. And upon repurchase, ownership
by the buyer (buyer a retro) shall be terminated.
Upon the lapse of the period without the seller having
exercised his right to repurchase the ownership of the
buyer becomes absolute regardless of whether the
subject of the sale is an immovable or a movable
property?
Yes, ownership becomes absolute, and it does not matter
whether the object of sale is an immovable or a personal
property.
Is an action for consolidation of title required in order
that the buyer acquire ownership over the object of the
sale or at lease acquire absolute ownership?

Period of Conventional Redemption

A sold a land to B for 10k with a right to repurchase
expressly agreed upon between the parties. Because
they were friends, they did not provide for a period
within which the seller may exercise the right to
repurchase. But again, there was a reservation of the
right to repurchase, but the parties failed to fix the
period.
a. When should the seller a retro exercise the right to
repurchase?
b. If the seller failed to repurchase within the period
agreed upon or the period prescribed by law, what
will be your advice to the buyer in order to protect
the buyer more?

No. This action is only necessary if he would want the

property to be registered in his name. This action is in
order to protect the buyer so that the seller cannot sell the
property to another person.

Assuming you are a lawyer, a client asked you to

examine a document which is denominated as a
DOS with a right to repurchase and that client was
the buyer a retro (buyer). However, upon
examination of the terms and conditions of the
contract, it appears that the right has long expired.
Thus, the client asked, may I still be able to recover
this parcel of land which is the subject matter of
this contract?

30

Consider the possibility that the client may recover. Ask

the client of the circumstances surrounding the
execution of that document. Ask him Why did you
execute this DOS? If the answer is kasi po atty. nagka
utang ako sa kanya 150k tapos sabi nya instead of
executing a mortgage agreement, DOS with a right to
repurchase. Anyway, from the DOS with a right to
repurchase, he may appear to be protected. Kasi if he
owes that person 1M and if he is given in the debt a
period of 1 year within which to pay in the DOS with a
right to repurchase, he would also have 1 year within
which to repurchase. Diba parang pareho lang? But
instead of mortgage he was asked to sign a DOS. If that
is the case, clearly you can conclude that this is not an
honest to goodness sale with a right to repurchase. You
can treat this transaction merely as an equitable
mortgage. Hence, he may still be able to recover what
was the subject matter of that transaction.
Why would the creditor (buyer) ask his debtor
(seller) to sign a DOS with a right to repurchase
instead of a mortgage to secure the fulfillment of his
obligation?
To ensure that the property will be owned by him
automatically upon the expiration of the period within
which to repurchase and the seller a retro failed to
exercise the right to repurchase which will not happen in
a mortgage. There is a principle in mortgage known as
pactum commissorium. Upon the default of the debtor
the mortgagee, cannot validly appropriate the thing for
himself. Ownership will not automatically pass by mere
default of the principal debtor because pactum
commissorium is void because the remedy of the
creditor is to have the property sold in a foreclosure sale
not to appropriate the thing. So to avoid those
requirements sa mortgage, ang gagawin ng seller/
creditor is to have the debtor sign a DOS with a right to
repurchase because the moment the debtor failed to
repurchase within the period, absolute ownership goes
to the creditor who is in that sale the buyer (creditor) a
retro. Wala na syang kailangan gawin.

Are these presumptions conclusive?

No, this is merely a disputable presumption. In fact, the
SC would sustain the validity of a sale with a right to
repurchase despite the gross inadequacy of price
because somehow it would be advantageous to the
seller a retro. In the exercise of the right to repurchase,
it is more advantageous if the price is small because he
can easily come up with that amount and repurchase
the thing.
What if there was a stipulation in the COS that the
seller will shoulder the capital gains tax? Would the
presumption that this is an equitable mortgage will
arise?
No, the presumption will only arise if the seller bound
himself to pay the tax on the thing not the capital gains
tax. That would be the real property tax.
Note: Presumptions under 1602 would arise regardless
of whether the sale is denominated as a sale with a right
to repurchase or a DOS. It doesnt matter. Even if it is a
DOS if there is doubt as to whether or not it is an
equitable mortgage. It has to be resolved as an
equitable mortgage.
What is the remedy of the seller a retro?
Reformation because the contract as written did not
reflect the real intention of the parties. The real intention
is to secure the fulfillment of the obligation of the vendor
a retro (debtor).
B. Legal Redemption
Who has the right to redeem?
A: 2 groups
1. Co-owners

If the instrument is a DOS with a right to repurchase it

may actually be considered as an equitable mortgage
by just examining the terms and conditions of that
contract. There are certain instances when the law itself
provides for a presumption that this is an equitable
mortgage under 1602.

2. Owners of adjacent lots (object is lot)

- consider if rural or urban land

What are those instances where a DOS may actually

be disputably presumed to be as an equitable
mortgage?

It does not matter.

1.
2.

The price is grossly inadequate.

If the vendor a retro would continue to be in the
possession of the thing after the sale, which is
unusual because if indeed this is a sale then
the vendee should be in possession after the
sale.

Co-owners
Co-owners of what thing, movable or immovable?

A, B, C, D co-owners of land. D donated his interest

in the land to X. would A, B, C, have the right to
redeem?
No, in legal redemption, the alienation by a co-owner
must be by onerous title (sale, dacion en pago,
barter). This act (donation) is gratuitous act. Hence, no
right of redemption.

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What if B sold his interest in the land to D. would A

and C have the right to redeem?
No, because for A and C to have the right to reddem,
the alienation should be in favor of a 3rd person.
What if B sold his interest in the land to X. A, D, C,
wanted to redeem. May they be able to exercise the
right of redemption? All of them?
Yes. All of them.
Is this the same rule in adjacent lots?
No, in adjacent lots, there can be so many owners
depending on how it is big. The owner with the
smallest land area would have the right to redeem.
What if the owners of adjacent lots would have
equal area?
The first one who manifested his desire to redeem.
As to Co - owners

cannot agree on the portion of the share of B which

will be redeemed by both of them - what would be
the final sharing?
C will have 2/3, A will have 1/3 because they will have
the right to redeem in proportion to their share in that
property. Note: they may stipulate as to the sharing.
What if in the DOS executed between B and X, the
price stated in DOS was 3M. Hence, A and C can be
compelled to redeem by paying 3M?
Not necessarily, under the law, if the price stated in this
sale is unconscionable, the redemptioners can only be
compelled to pay the reasonable value. Ang posibleng
value could only be 1M pero ang nakalagay sa DOS
3M. Is it possible that X did not pay 3M? Yes. Why
would they do that? The reason for that is to pre-empt
A and C from exercising the right of redemption. To
discourage them from redeeming the property kasi kung
mura yan they can easily exercise the right of
redemption.
The law protects the redemptioners - if the price is
unconscionable - they may pay reasonable value.

Land owned by spouses was sold by them to their

three sons in 3 different deeds of sale. In each DOS
the specific area was already described. After the
execution of the DOS, these children would actually
harvest only their respective area. They wanted to
have their respective share registered in their own
name. They filed a petition for the cancellation of
the title of their parents for that property to be
divided, they submitted their individual DOS. But
the petition was denied by the register of Deeds
because they failed to submit a subdivision plan.
The RD cancelled the TCT in the name of the
parents issued another TCT in the name of the 3
children in one TCT. One of the children sold the
land to a 3rd person. Can the 2 other brothers
redeem as co-owners?

What if the value is 3M but DOS stated 1M but X

actually paid 3M (1M was stated to reduce tax
liability). How much can A and C be compelled to
pay?

No, because under the facts, they are no longer coowners because before hand their parents sold to them
the property in three separate deeds of sale. Although a
single TCT was issued to them, is not conclusive as to
the rights of the parties to a certain property such as in
the case as co-owners. At its face they are co-owners
but in reality there has already been a partition of the
property. In fact, a property may be registered in a
person who is not the owner because somebody forged
the signature of the real owner. Thus, the requirement of
the law that the co-owner would have the right to
redeem is not present therefore, there would be no right
of redemption.

Owners of Adjacent Lots

Make a distinction between a sale of an urban land and
sale of rural land.

A, B, C co-owners. As share . Bs share . Cs

share . B sold his interest in the land to X.
However, A and C both wanted to redeem. (As coowners they may have the right to redeem). If they

Doromal vs CA
Held: The co-owners can only be compelled to pay the
price stated in the deed of sale. The trial court sustained
the claim of the buyer that they be reimbursed the
actual amount paid because according to the trial court
that would be immoral to pay only the amount stated in
the contract. SC said it was more immoral when the
parties pay only a small amount where in fact the real
amount paid is a much higher amount. Because the
only purpose of this is to defraud the government.

Sale of Urban land

Requisites:
1.

The land is so small and purchased only for

speculation

If that is the case, then the adjacent lot owners

would have the right not only of the right of redemption
but also of right of pre-emption. (Article 1622)
In rural there is no right of pre-emption meaning
even before the perfection of the sale, the adjacent lot
owners would already have the right to redeem by way

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of pre-emption, 30 days from notice of such intention to

sell.

buyer. How would he know the terms and conditions of

the sale if he is not given a copy of the DOS. So he
must have a copy.

But in rural lands and alienation is by onerous title.

Another requisite: the land which was the object the
sale must not be greater than 1 hectare.

Double Sales

Also, for the owners to have the right of redemption,

the buyer from whom the property will be redeemed
must have another rural land.
Another requisite - the land sold and the land of
redemptioner must not be separated by brooks, rivers in
order that these lot owners would have the right to
redeem.
BE: Sisters A and B co-owners of land. B sold her
interest in the land to X a 3rd person. X sent a notice
to the sister of the seller, the other co-owner
informing her of such sale and giving her copy of
the DOS. Despite notice, A did nothing. After that, X
requested for the annotation of the sale in the title
of that property in the RD. RD sent another notice to
A. A did not do anything. After so many months, X
wanted the property to be partitioned. A then give
notice to X that she is exercising the right to
redeem. Does A have the right to redeem? Right of
redemption must be exercise within 30 days from
what?
A: The co-owner still has the right to redeem. Under
1623, the 30-day period would start to run only from the
time the co-owner received from the vendor. Sino
nagbigay ng notice from the facts? Una, yung
vendee pangalawa yung RD. so hindi yung vendor amd
nagbigay. So 30-day period has not started to run.
Hence, he still has the right to redeem.
Atty. Uribe: Under the facts, she received 2 notices, not
only written notices but also copies of the DOS. Under
the principle of estoppel, she cannot claim that she still
has 30 days. In fact, in a decision of SC involving a sale
of a co-owner share which sale was facilitated by the
other co-owner. But the latter claimed he can still
redeem because he did not receive notice. SC said sya
ang nag-facilitate ng sale so why he could not be given
notice, hence he had knowledge of the sale. This is still
consistent in the case of Doromal. If you consider the
provision literally it says 30 days from the time of notice
in writing is given by the vendor to the co-owner. Ang
nakalagay sa batas, notice in writing. Hence,
apparently even a letter written by the vendor would
suffice and hence the 30 day period would start to
run? SC said: No, the co-owner should be given a copy
of the DOS and it is only from that moment that the 30day period will start to run. This is a good ruling - not
any ordinary notice but a copy of the DOS because in
redemption, the redemptioner is supposed to be
subrogated under the same terms and conditions as the

If the same thing should have been sold to different

vendees, to whom shall ownership be transferred? Is it
possible that ownership have been transferred to both
buyers?
It is possible that both buyers may have acquired
ownership but only one of them would have a better right.
The real question in double sales is who has the better
right.
What is the rule when there is a sale of a movable
property to two or more persons, who has a better
right?
The first person who took possession in good faith. If no
one took possession of the movable, it is the buyer who
has the oldest title, and in good faith.
What is the rule when there is a sale of an immovable
to two or more persons, who has a better right?
1. The first who registered the deed of sale in good faith;
2. The first who took possession in good faith
3. The buyer who has the oldest title in good faith.
JV, owner of a parcel of land sold it to PP. But the land
was not registered, one year later, JV sold the same
parcel of land to RR, who succeeded to register the
deed and to obtain a TCT over the property in his own
name. Who has the better right over the parcel of land?
RR may have a better right, when RR registered the sale in
good faith. Under the facts, RR was able to register the
deed in his own name, there was no mention that he had
no knowledge of the prior sale at the time of registration.
How to determine good faith between first and second
buyer?
As to the first buyer, it is the fact that he has no knowledge
of the defect on the title of the seller.
As to the second buyer, it is the fact that he has no
knowledge of the title of the first buyer.
June 15, 1995, Jesus sold a parcel of land to Jaime. On
June 30 1995, he sold the same land to Jose. Who has
the better right if the first sale is registered ahead of
the second sale, with knowledge of the latter and the
second sale was registered ahead of the first sale with
knowledge of the latter?
As to the first sale, first sale was registered ahead of the
second even with knowledge of the second sale, the
registration is valid. Even though the first buyer acquired
knowledge of the second sale, he may register the deed of

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sale after the second sale. Since he was the first buyer
who registered the sale, knowing the second sale does not
make the first buyer a buyer in bad faith.
As to the second sale, though the deed of sale was
registered first, but with knowledge of the first sale, then
the registration was in bad faith.
If the second buyer had no knowledge of the prior sale
when he signed the deed of sale, but when he is about
to register the deed of sale, he acquired knowledge of
the first sale, would that make him a buyer in bad
faith?
What is required under Art. 1544 is registration in good
faith. At the time of perfection, signing or payment, he may
still have no knowledge of the prior sale but at the time of
registration he may already have knowledge, hence, he
cannot be considered a registrant in good faith. He may not
have a better right over the first buyer.
Bautista vs. Sioson
The owner sold a registered parcel of land to B who
did not register, neither did he took physical
possession. After the sale they executed a lease
agreement in which the buyer is now the lessor and
that the seller became the lessee. Hence, the seller
continued to be in possession of the land not as a
concept of an owner but of a lessee. After the sale and
the contract of lease, A sold this parcel of land to C,
who also did not register the same, and this time C
took physical possession. Who between B and C had a
better right?
B would have a better right because when B executed a
lease contract with A, B is in contemplation of law in
possession of the property, which is legal possession, he
obviously is therefore a possessor in good faith, the first
who took possession in good faith. Though C had physical
possession over the property, he is considered to be the
one second in possession. B therefore was considered to
have a better right.

registered under the Torrens System can be covered by the

provisions of Art. 1544.
It could be noticed that C had registered the land, but the
same is not covered under the torrens system because,
there is another system of registration of unregistered
lands. There is a different book covered by this kind of
registration, hence, Art 1544 would not apply.
Therefore, if ARt. 1544 would not apply, B would have a
better right because there was actual delivery to him.
Therfore, under the general rule, upon delivery, ownership
passes to the buyer. When ownership had passed to the
buyer when the property was sold in the execution sale, the
buyer would not get anything from the execution sale
because he merely steps into the shoes of the judgment
debtor. Since the judgment debtor had no ownership over
the land at the time of sale, the he did not acquire
ownership by virtue of that sale.
Note: To determine that the land is under the torrens
system, the ownership is proven by TCTs or OCTs,
otherwise if proof of ownership are mere tax declarations, it
will not be considered as registered land.

Loss of the thing which is the subject of a contract of Sale

If the thing sold or the object of the sale is lost or
destroyed, who will bear the loss, or who may be held
liable for the loss? Can the buyer still be compelled to
pay the price despite the loss of the thing which was
the object of the sale?
The first thing that must be considered is the cause of the
loss because even if the seller or the buyer is still the
owner, if the loss was due to the fault of one of the parties,
he would either be the one to bear the loss or he can be
held liable for the loss.

Note: Legal possession is sufficient to determine as to who

have a better right between two persons.

For example if the seller was at fault resulting in the loss of

the thing and he was still the owner, he will bear the loss.
But if at the time of the loss, the buyer was the owner, and
the seller was at fault, the seller will be liable for the loss of
the thing because he was at fault.

Carumba vs. CA

Loss due to fortuitous event

Sale of a parcel of land to B who took possession of

the land. However, this seller a judgment debtor to one
of his creditor. Because of a judgment in favor of a
creditor C, the parcel of land had become the subject
of an execution sale. Then the buyer became C who
registered the sale. Who will have a better right
between B and C and C had no knowledge of the first
sale?

The common scenario in the bar exams is that the

thing is lost due to a fortuitous event, without the fault
of the buyer or the seller, who bears the loss or who
can be held liable for the loss?

B would have a better right because this parcel of land was

registered under the Torrens System. Art.1544 does not
apply to unregistered lands. Only those lands which are

Another scenario which must be considered is when

did the loss happen? This question will be relevant if
the loss happen after the perfection. Because if the
loss of the thing happened before the perfection, if the
loss was due to a fortuitous event? It will be the seller
who shall bear the loss, if the seller is the owner. In
such case, there will be no perfected contract of sale at

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all because there was no object to talk about. After the

perfection of the sale, who bears the loss?

delivery of the car to X. The owner B therefore had to bear

the loss.

As a rule, the owner bears the loss. This is not applicable

in sale of fungible goods, because in such sale, under Art.
1480, if these goods are sold at the price fixed according to
weight, number or measure and these goods had already
been weighed, counted or measured, the risk of loss will
already be with the vendee even before there is transfer of
ownership. Such is not correct, because such law is relied
upon the old civil code. The New Civil Code under Art.
1480 last paragraph is an amended version of Art 1452 of
the Old Civil Code. In the amended version it was provided
that 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. With delivery, ownership passes to the
buyer and therefore, it is the vendee who shall bear the risk
of loss. Therefore, there is seem to be no exception, as far
as fungible goods are concerned.

Under what circumstance would a party to a contract

of sale who was not the owner at the time of the loss
be the one to bear the loss?

D sold a second hand car to E for 350k, the agreement

between D and E was that half of the purchase price
shall be paid upon delivery of the car to E and the
balance of 175k shall be paid in 5 equal monthly
installments of 15k each. The car was delivered to E
and D paid the amount of 175k to E. Less than one
month thereafter, the car was stolen from Es garage
with no fault on Es part and was never recovered. Is D
legally bound to pay the balance of 175k?
Whether or not E would be legally bound to pay will depend
on who will bear the loss. Since the car was stolen, would
the buyer bear the loss? Or would the seller be the one to
bear the loss? If E would have to bear the loss, he would
still be compelled to pay the balance.
From the facts, there was already delivery, there is nothing
under the facts that will show ownership was reserved.
Therefore upon delivery, ownership passes to E the buyer.
Under the facts, there was no fault on the part of the seller.
Hence, the buyer bears the loss. Therefore, E can be
compelled to pay such balance.
S, an American resident of Manila, about to leave on a
vacation, sold his car to B, for 2000 USD. The payment
to be made 10 days after delivery to X, a third party
depositary agreed upon who shall deliver the car to B
upon receipt by X of the purchase price. It was
stipulated that ownership be retained by S until
delivery of the car to X. 5 days after delivery of the car
to X, it was destroyed by fire which gutted the house of
X, without the fault of either X or B. Is buyer B legally
obligated to pay the purchase price?
From the agreement of the parties, ownership is retained
by S until the delivery of the car. However, under the facts
the loss happened after the delivery of the car, therefore it
is clear that ownership had already passed to B after

1. If there is a stipulation (take note of Tabora Case).

2. When ownership is retained by the seller in order to
secure payment of the price for the goods sold (Art.
1504).
3. When the seller is in possession but the buyer is at fault
because of the delay in retrieving the goods.
4. When the seller is in posession, but ownership had
already passed to the buyer by constructive delivery, but
the seller will bear the loss due to the sellers fault.
A set of AMJUR was sold to Tabora on installment
basis. On the day these books were delivered to the
office of Atty. Tabora, the entire block where the office
of the latter is located was burned together with the
AMJUR. Atty Tabora refused to pay the balance despite
demand by lawyers co. Lawyers co therefore filed a
case. Two defenses were raised 1) res perit domino
rule because there is a stipulation in the contract that
the seller shall retain ownership over the books until
full payment, and if lawyers co was the owner then it
should bear the loss. Is the argument correct?
No. If there was a stipulation in the contract that ownership
shall be retained by lawyers co until full payment was
made, there was also a stipulation that the risk of loss shall
pertain to the buyer at the time the books were delivered
whatever the cause of the loss. This is an exception to the
res perit domino rule.
Assuming there was no stipulation that the risk of loss
shall pertain to the buyer upon delivery, may the buyer
still be held to answer for the loss?
Under Art. 1504, when the owner reserved the title to the
property only to secure the payment of the price of the
buyer, then by law, risk of loss shall only pertain to the
buyer. This is known as a security title. Therefore, even if
the buyer did not acquire title upon delivery, he bears the
loss.
If the object of the sale is in possession of the seller,
and the same was lost due to fortuitous event, who will
bear the loss? The seller?
Not necessarily. It will be the party who was at fault
resulting in the delay in the delivery of the goods. It may be
the buyer or the seller.
As agreed upon by the parties, the buyer should have
obtained the goods from the seller yesterday. However,
due to the fault of the buyer, he failed to get the goods

35

from the sellers place. Today all these goods were lost
or destroyed due to a fortuitous event. Who will bear
the loss?
Ordinarily, the buyer who would obtain possession from the
seller.
At that time there is yet no delivery because the goods are
still with the seller. The owner is still the seller but the
owner will not bear the loss because the delay in the
delivery was due to the fault of the buyer.
In another scenario, the goods are still with the seller,
but it will be the seller who would bear the loss even if
the buyer was already the owner. How could the buyer
already be the owner if the seller is still in possession
of the goods. The answer would be by reason of
constructive delivery. Philippine law recognizes not
only physical or actual but also constructive delivery.
One example of constructive delivery, is the execution
of a public document or instrument, ownership passed
to the buyer but possession is still with the seller. If it
was the seller who was at fault resulting in the delay in
the delivery of the goods, of course the buyer will not
bear the loss even if he was the owner already at the
time of the loss.

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