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SALES REVIEW When I teach prebar review, mas short pa jud ani.

At least
ATTY. ZACHAEL JESS ESPEJO dire, mas naa pay substance kumpara sa prebar review.

November 24, 2015 So let’s start of course with the…


1st hour
Now take note that the 2015 coverage of the Bar Examthis CONCEPT OF SALE
is the coverage of the subject Sales. Mind you, the
coverage of sales does not change eversince I began Article 1458. By the contract of sale one of the
teaching sales review. That is: contracting parties obligates himself to transfer the
1. Definition ownership and to deliver a determinate thing, and the
2. Essential requisites other to pay therefor a price certain in money or its
3. Parties to the contract of sales equivalent.
4. Subject matter
5. Obligations of the seller A contract of sale may be absolute or conditional.
6. Transfer of ownership
7. Price
Characteristics of a Contract of Sale:
8. Formation of contract of sales
1. Nominate
9. Risk of loss -which means that it has been given a particular
10. Documents of title name by law. A certain set of provisions will be
11. Remedies of the unpaid seller
applicable n trying to construe issues related to the
12. Performance of contract
contract.
13. Warranties
14. Breach of contract
2. Principal
15. Extinguishment of the sale -we know that as distinguished from a mere
16. Subdivision and condominium buyers [PD 957 and
accessory contracts. It can stand on its own and
Condominium Act]
does not depend upon existence and validity of
another contracts. It is on itself valid.
Now why am I pointing this out to you? I poited this out
because the coverage as given by the Supreme Court is -and also as distinguished from preparatory
almost identical to the titles of the book of Villanueva. And contracts, a contract of sale is entered into for its
so the best book perhaps in this case is the book of
own sake and not for the purpose of entering into
Villanueva. It will pay to read that book once again.
further juridical relations.
Let’s look upon the bar trending. Take note that for the last
3. Consensual
25 years, there have been 52 essay questions relating to -meaning it is perfected by mere consent. It is not a
Sales. So therefore, you expect that at least in your bar real contract which requires delivery in order for the
examinations, there would be 2 sales questions to be asked
contract to be perfected. It is not also a formal
and there were more than 2 sales questions asked in 1991,
contract because a contract of sale we will learn
1993, 2001, 2002, 2013 and 2014. Tag tulo.
later on is one that is valid in whatever form it may
have been entered into. It can be in writing or by
Ang pinakasurprising karon, despite the fact that the way of word of mouth or partly in writing or partly in
examiner for civil law bar is someone that is known in
word of mouth. Or even just inferred from the
Persons and Family Relations, naay four sales questions
conduct of the parties.
asked in the 2015 Bar Examinations. It’s quite peculiar.
4. Bilateral
So the conclusion is, sale is a rich bar examination source -a contract of sale is a “sinelagmatic” contract
based on the questions asked. Sales are also benchmark which means contracts interest in a reciprocal
questions. Meaning, if you answer the question correctly,
prestations—bilateral contracts where both parties
the examiner will be more inclined to give you a passing
are principally obliged.
mark because that’s very very basic. If you fail to answer
that, however, the examiner will be conversely inclined.
5. Onerous
Meaning, isipon niya na wala kay nahibal-an. Therefore, -as distinguished from gratuitous contracts. The
mabagsak ka. The benefit of the doubt will not be in your consideration here is something of value.
favor then.
6. Commutative
I always tell this to my fourth year review classes in civil law
-parties contemplate a real performance of the
2, because practically your grade in civil law review
contract. in other words equivalent value or object
depends upon my family. Succession, obligations and and monetary consideration that are presumed to
contracts, sales and credit transactions, so be good to my be equal in value.
family.
7. Sale is a title not a mode.
Ok, so review lang ni. In other words, I do not expect you to
-which means, in the contract of sale, delivery is
be reading the topics for the first time. You’re not learning
simply that transfers ownership. It is not the
these topics for the first time. If you are hearing them for the contract itself that transfers ownership.
first time, then perhaps you need to go back to the
textbooks. These should be very very familiar with you
Now what’s the consequence of the characterization of the
already. Being a mere review, not all topics will be taken up.
contract of sale as consensual and reciprocal?
Only those topics of substantial importance and high
probability to be asked in the bar examinations will be MACASAET VS. R. TRANSPORT CORPORATION
discussed. Kana lang jung posible na naay mugawas sa October 10, 2007
bar examinations. G.R. No. 172446
TINGA, J.
Sale is perfected at the moment there is a meeting of minds Sales is onerous because it imposes valuable consideration
upon the thing which is the object of the contract and upon as a prestation which is the payment of a price certain in
the price. From that moment, the parties may reciprocally money or its equivalent.
demand performance, subject to the provisions of the law
governing the form of contracts.[24] A perfected contract of But the more important thing to remember would be, what
sale imposes reciprocal obligations on the parties whereby is the consequence of the characterization of a contract
the vendor obligates himself to transfer the ownership of of sale as an onerous contract? Naa bay difference sa
and to deliver a determinate thing to the buyer who, in turn, treatment sa usa ka onerous contract compared with
is obligated to pay a price certain in money or its equivalent. gratuitous contracts? Like a contract of donation or in credit
Failure of either party to comply with his obligation entitles transactions, a contract of commodatum which is also
the other to rescission as the power to rescind is implied in essentially gratuitous. What is the consequence of this
reciprocal obligations. characterization?

Now when a contract is possessed of reciprocal Article 1378. When it is absolutely impossible to settle
prestations, remember that the power to rescind is implied doubts by the rules established in the preceding
in reciprocals. So it calls the application of Aricle 1191 of articles, and the doubts refer to incidental
the Civil Code. circumstances of a gratuitous contract, the least
transmission of rights and interests shall prevail.xxx
Article 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the obligors
So all things being equal therefore, if there is doubt as to
should not comply with what is incumbent upon him.
whether or not a contract is one of donation or a contract of
commodatum, which has a least of transmission of rights
The injured party may choose between the fulfillment
and interest? It would be the contract of commodatum.
and the rescission of the obligation, with the payment
Therefore, you resolve the doubt accordingly. But what
of damages in either case. He may also seek
about for onerous contracts?
rescission, even after he has chosen fulfillment, if the
latter should become impossible.
xxxIf the contract is onerous, the doubt shall be settled
The court shall decree the rescission claimed, unless in favor of the greatest reciprocity of interests.
there be just cause authorizing the fixing of a period.
But remember when we determine the greatest reciprocity
This is understood to be without prejudice to the rights of interests, because this is an onerous contract, you look
of third persons who have acquired the thing, in at the value of the matters that are exchanged—the objects
accordance with articles 1385 and 1388 and the that are exchanged. So for a particular thing, you pay a
Mortgage Law. certain amount, what would be more in keeping with the
greatest reciprocity in interest given the amount that was
The power need not be stipulated in the contract in order for paid? So if it is more in keeping with a sale, then you
the innocent party to invoke the remedy and also under actually construe the doubt in favor of a contract being a
Article 1169 sale.

Article 1169. Those obliged to deliver or to do Sale or lease, the amount being is considerably high, unsa
something incur in delay from the time the obligee man ang kontrata? It will be considered a sale rather than a
judicially or extrajudicially demands from them the lease because it involves the greatest reciprocity of interest.
fulfillment of their obligation.
However, the demand by the creditor shall not be Commutative
necessary in order that delay may exist: The second weirdest charcateristic in a contract of sale.
This is a characterization based on ***. So they can either
(1) When the obligation or the law expressly so be commutative for the parties, meaning mubayad ko ug 1
declare; or million, expected na makadawat ko ug value na woth 1
million. Equivalent values or atleast relatively, I believe that
(2) When from the nature and the circumstances I am getting my money’s worth.
of the obligation it appears that the designation
of the time when the thing is to be delivered or In aleatory contracts on the other hand, usually the
the service is to be rendered was a controlling fulfillment of the contract is dependent on chance. So the
motive for the establishment of the contract; or time use given varies. For example, contract of insurance.
The insurance contract says that if it is cause covered by
(3) When demand would be useless, as when the policy, you stand to get 5Million Pesos. Do you pay
the obligor has rendered it beyond his power to 5Million pesos? No, you don’t. You pay a minimal amount
perform. by way of premium. so the values are not the same.
In reciprocal obligations, neither party incurs in delay if Similar in buying a lotto ticket where fulfillment depends on
the other does not comply or is not ready to comply in chance. You pay ten pesos, how much do you win? You get
a proper manner with what is incumbent upon him. millions, but if you lose, that’s nothing.
From the moment one of the parties fulfills his
obligation, delay by the other begins. Title not a Mode
Ownership is only acquired by a legal mode or process.
So this provision in Article 1169 tells you that in a contract While the title is only the justication, mode is the actual
of sale dapat kaliwaan. “I gave, then you give me.” process of acquisition or transfer of ownership of a thing in
question.
Onerous contracts, the cause is understood to be for each
contracting party the prestation or promise of a thing or Article 712. Ownership is acquired by occupation and
service by the other and remuneratory ones, the service or by intellectual creation. [original mode]
benefit which is remunerated and in contracts of pure
benifecence , the mere liberality of the benefactor.
Ownership and other real rights over property are Article 1318. There is no contract unless the following
acquired and transmitted by law, by donation, by requisites concur:
testate and intestate succession, and in consequence (1) Consent of the contracting parties;
of certain contracts, by tradition. [derivative mode] (2) Object certain which is the subject matter of
the contract;
They may also be acquired by means of prescription. (3) Cause of the obligation which is established.

This is the basis of Villanueva. Kung walay consent, object


“by tradition” or cause, no contract arises. Unfortunately for Dean
Otherwise known as delivery as a result of a certain Villanueva., to my mind man gud, you only classify a
contracts such as sale, barter, assignment or mutum. Take contract based on the classification of contract in the Civil
note that sale is merely a title that creates the obligation on Code itself—valid, void, unenforceable, voidable contracts.
the part of the seller to transfer ownership and to deliver it, Walay “no contract” contract.
but by its own, it does not transfer ownership.
DISTINCTION OF SALE WITH OTHER CONTRACTS
It is delivery as a consequence of certan contracts that
transfers ownership not the contract itself. So in the 1. Sale vs. Barter
contract of sale, the mere fact that you enter into a contract
does not necessarily transfer ownership. The contract itself, Article 1468. If the consideration of the contract
no. when there is delivery however, whether it is actual or consists partly in money, and partly in another
symbolic, delivery, that is the time when you can say that thing, the transaction shall be characterized by
there is transfer of ownership. So if you are asked in the bar the manifest intention of the parties. If such
examinations regarding this weird characteristic of sale, intention does not clearly appear, it shall be
being a title not a mode, the only case that you can refer to considered a barter if the value of the thing
is… given as a part of the consideration exceeds the
amount of the money or its equivalent;
ACAP VS. CA otherwise, it is a sale.
G.R. No. 118114
December 7, 1995 Barter is one of the contracts where the
PADILLA, J. consideration and the subject matter of the contract
Sale by itself does not transfer or affect ownership. It only are practically the same class. They are both
creates the obligation—the juridical justification to transfer objects.
ownership is tradition or delivery as consequence of sale
that actually transfers ownership. When you exchange foreign currency with
[dili nako ni makita sa case pero ambot mao man ni ang Philippine currency, dili na barter.
gisulti ni sir]
The disctinctions between the two are practically
Review ta a little bit about the elements of contract in academic. Since aside from Articles 1639 and 1640
general. All contracts at the very minimum would have 3 of the Civil Code, barter shall be governed by the
elements: provisions of the title of sale.

1. Consent So naa lang juy provisions na specific kaayo that


-by the contracting parties which is manifested by apply to barter. The rest of the incidents of the
the meeting of the offer and the acceptance upon contract of barter would therefore be goverened by
the thing and the cause which constitute the the provisions of the law on sale. Except for these 2
contract. rules:

2. Object Certain
-which is the subject matter of the contract Article 1639. If one of the contracting parties,
having received the thing promised him in
3. Cause or consideration barter, should prove that it did not belong to the
person who gave it, he cannot be compelled to
deliver that which he offered in exchange, but
If we translate these into sales term, this would be the set of he shall be entitled to damages. (1539a)
elements of a Contract of Sale:
Does this provision seem familiar to you? YES,
1. Consent or meeting of the minds to transfer
because when we were dealing with sales, naa tay
ownership in exchange for the price.
ginatawag na warranty against eviction or warranty
that the owner has a right to sell or the seller has a
2. Determinate subject matter right to sell and its practically the same rule with
Article 1639 together with the entitlement for
3. Price certain in money or its equivalent
damages in case there is an eviction.
This is based on the case of Coronel vs. CA 263 SCRA 141
Article 1640. One who loses by eviction the
thing received in barter may recover that which
Q: What is the effect if one of the elements of a contract he gave in exchange with a right to damages, or
of sale is missing? he may only demand an indemnity for damages.
A: The contract is void. (Mapalo vs. Mapalo 17 SCRA 114) However, he can only make use of the right to
recover the thing which he has delivered while
BUT my favorite author Villanueva opines that the the the same remains in the possession of the
proper thing to do is to declare it as “no contract” situation. other party, and without prejudice to the rights
Where can we find that in the Civil Code? acquired in good faith in the meantime by a
third person.
Remember that under the law, somebody who is in whose intended use of
good faith whether you are a buyer in good faith or the land in question
a possessor in good faith, you will always be appears best justified
preferred. We’ll go to that in Land Titles. shall be preferred.

SALE BARTER
Article 1458. By the One of the parties binds
contract of sale one of himself to give one thing Rules in determining if a contract of sale is a
the contracting parties in consideration of the barter:
obligates himself to other’s promise to give
transfer the ownership another. Pila ang gihatag na kwarta ug tagpila ang gihatag
and to deliver a na thing? Kung mas dako ang value sa thing, then
determinate thing, and it’s barter. Kung mas dako ang monetary
the other to pay therefor component or consideration, then it’s called a sale.
a price certain in money NO, IT’S NOT AUTOMATIC!!! Determine first the
or its equivalent. intention of the parties and then apply the rules

There is an exchange of There is an exchange of


a thing or a price. the a thing for a thing. 2. Sale vs. Contract of a Piece of Work
subject matter for 3.
consideration. SALE CONTRACT OF PIECE
OF WORK
Statute of frauds applies Statute of frauds does -consensual-
on certain sales not apply. -object: determined thing-
-consideration: price-
Magbaylo ta kuntahay
ug cellphone. That’s a Article 1713. By the
barter. The moment I contract for a piece of
deliver to you work the contractor binds
something, what himself to execute a
happens to the piece of work for the
contract? It becomes employer, in
executed. consideration of a certain
price or compensation.
Remember the principle The contractor may
that statute of frauds either employ only his
does not apply to an labor or skill, or also
executed or partially furnish the material.
executed contracts.
Ang ako jung mahinumduman aning contract for a
There is a right of There is no right of piece of work noh, kana ganing muadto ka ug
redemption redemption Abreeza, kanang groccery area dira. You go there
and naay mag-atang dira, kana ganing nagabuhat
ug painting. So you can actually have a painting
ARTICLE 1622. made by commission. Commission the artist to
Whenever a piece of make a painting of you.
urban land which is so
small and so situated Now, what would set aside a contract for a piece of
that a major portion work from an ordinary contract of sale? If I want a
thereof cannot be picture, I go to the mall and I buy it.
used for any practical
purpose within a If I want my portrait to be made, that is a special
reasonable time, piece of work. It is peculiar.
having been bought
merely for speculation, Take note of:
is about to be re-sold,
the owner of any Article 1714. If the contractor agrees to produce
adjoining land has a the work from material furnished by him, he
right of pre-emption at shall deliver the thing produced to the employer
a reasonable price. and transfer dominion over the thing. This
contract shall be governed by the following
If the re-sale has been articles as well as by the pertinent provisions
perfected, the owner on warranty of title and against hidden defects
of the adjoining land and the payment of price in a contract of sale.
shall have a right of
redemption, also at a Duha na ni ka kontrata that is governed by contract
reasonable price. of sale.

When two or more Now what makes the act of distinguishing a


owners of adjoining contract of sale from a contract of a piece of work is
lands wish to exercise in the ruling of the SC in…
the right of pre-
emption or
redemption, the owner CIR vs. AdMU
G.R. No. 115349 The study therefore is one that is intellectual creation
April 18, 1997 everybody can use. The freedom from tax of
PANGANIBAN, J.: educational institution applies.

In a piece of work, a transfer of ownership is Hooray for us! Dili kita, ang Ateneo lang.
involved and a party necessarily walks away with
an object. The distinction lies in Art 1713.

What happens here was that AdMU has a research Art. 1713. By the contract for a piece of work the
department where the research department can be contractor binds himself to execute a piece of work
commissioned to conduct studies for a fee. This is for the employer, in consideration of a certain price
the Institute of Popular Culture. or compensation. The contractor may either employ
only his labor or skill, or also furnish the material.
Now, tagaan sila ug kwarta--a grant. Mao pud to
ang gamiton nila to undertake the research and of You pay for the work that is actually performed by the
course after research they will give everything and contractor.
then you come out with a report.
In a contract of sale, the obligation of the seller is to
Who owns the results? deliver the object of the sale. Thus you can compel by
specific performance. A real obligation.
If it is a contract of piece of work, there is this
obligation to transfer the work to whoever In a contract for a piece of work the obligation is to
commissioned the study. execute, to do. A personal obligation. Theoretically
therefore it is not susceptible of specific performance.
The contention of the CIR was if this is a contract of
sale, then you are liable for sales tax and VAT. If it Is that simple? As jurisprudence would reveal to you.
is a contract for piece of work, then it is something No.
that should also be compensated and therefore
there is still tax consequence. Mubayad ka ug Art 1467 is used to determine whether or not a contract
contractor’s tax. of sale or for a piece of work.

SC says, it does not matter. Either way, the party Art. 1467. A contract for the delivery at a certain
necessarily walks away with the object. price of an article which the vendor in the ordinary
course of his business manufactures or procures
------audio cut---- for the general market, whether the same is on
hand at the time or not, is a contract of sale.
WHY? The contracts entered into by the seller is
CIR vs. AdMU something that is habitually made. Naga baligya kog
G.R. No. 115349 ingani whether on hand or not, but since it is habitually
April 18, 1997 made, it is considered as a contract of sale.
PANGANIBAN, J.:
But if the goods are to be manufactured specially
In a piece of work, a transfer of ownership is involved for the customer and upon his special order, and
and a party necessarily walks away with an object. not for the general market, it is a contract for a
piece of work.
What happens here was that AdMU has a research Simple lang diba? For bar exams, just memorize art
department where the research department can be 1467. Problem is jurisprudence would tell you a
commissioned to conduct studies for a fee. This is the different thing.
Institute of Popular Culture.
In Inchausti v. Cromwell an old case 20 Phil 345 (1911)
Now, tagaan sila ug kwarta--a grant. Mao pud to ang Kinsa ni si Cromwell? The tax collector.
gamiton nila to undertake the research and of course It’s talking about hemp. Not the one you smoke.
after research they will give everything and then you The hemp can be sold in bailed or unbailed form.
come out with a report. Accdg to the company that sells the hemp, singko
pesos ang presyo sa hemp in its ordinary form, the act
Who owns the results? of bailing is an addition to the price. Plus 1 peso.
Inchausti said 5 pesos must be taxed based on a
If it is a contract of piece of work, there is this obligation contract of sale and 1 peso to another tax for a piece of
to transfer the work to whoever commissioned the work. The tax collector is claiming that the bailing is a
study. contract for a piece of work.

The contention of the CIR was if this is a contract of


sale, then you are liable for sales tax and VAT. If it is a SC: No. It is customary to sell hemp in bailed form.
contract for piece of work, then it is something that So tanan na siya subject to sales tax.
should also be compensated and therefore there is still
tax consequence. Mubayad ka ug contractor’s tax. The distinction between a contract of sale and one for
work, labor, and materials is tested by the inquiry
SC says, it does not matter. Either way, the party whether the thing transferred is one no in existence and
necessarily walks away with the object. which never would have existed but for the order of the
party desiring to acquire it, or a thing which would have
Kadto bang nag commission to make the research they existed and been the subject of sale to some other
walk away with an object by way of payment. person, even if the order had not been given

This is the test of existence making the contract here a


contract of sale.
The BIR assessed 3% contractor’s tax on its
The bail would have been in bailed form whether or not gross receipts. Arnolius contends that it is a
the party buying the hemp requested it. Whatever you manufacturer not a contractor. It’s just there! We
say it is a contract of sale. habitually make this wood works!

Celestino v. Collector 99 Phil 841 (1956) SC: The true test is the mere existence of the product at
The case where Celestino was in a habit of selling sash the time of the perfection of the contract such that the
as in building material na sash. thing already exists, the contract is a contract of sale. If
Gi pangulektahan ug sales tax by the collector of not, it is a contract for a piece of work.
internal revenue. Celestino said this is a contract for
piece of work which entailes lesser taxes. Every time a This is not a test followed in this jurisdiction.
customer comes to his shop, they have to manufacture
specially for that customer. As can be clearly seen from the wordings of Art 1467
SC: You have to apply the test of habituality. Ang work what determines is whether the thing is manufactured
ba requires special skill, special materials, from the specially for the customer and upon special order.
manufacturer? No. It must be in the nature of the Thus, if the thing is specially done upon the order of
contracts that they are not ordinarily made by the another, it is a contract for a piece of work. If, on the
manufacturer. The contract is one of sale. Apply the other hand, it is made for the general public and made
sales tax rather than the percentage tax of in the ordinary course of one’s business, it is a contract
manufacturers. of sale.

CIR v Engineering Equipment The SC did not even apply the case of Engineering
Mao ni ang special orders list. Equipment--airconditioning systems fabricated at the
You can buy an aircondition off the shelf right making it order diba. In this case no. It does not entail special
a contract of sale and so Engineering Equipment said skills or special equipment .
that kaning aircon gani it can be in a form of a sale, and
it should not be assessed contractor’s tax. But, the DMPI v Aragones June 23, 2005
airconditioning here is centralized type. Every building
is different, not the same. So it is in the nature of the Del Monte Phil Inc. entered into a contract of supply
airconditioning units here the central type system would agreement with MEGA-WAFF, the contractor, and
not exist if not for the order of the party deciding to Dynablock a subcontractor, whereby the latter undertook
acquire it. So it is a contract for a piece of work. Kung the supply and installation of modular pavement at
ingana lang na aircon (aircon in the classroom), DMPI’s warehouse in Cagayan de Oro City. Its main
contract of sale. office is in Mandaluyong.

In Engineering v CA (1996) the SC quoted Tolentino. Dynablock sent machines for the fabrication casting of
the concrete blocks that Megawaf specified. Hexagonal.
The distinction depends on the intention of parties.
Megawaf through Marcia later directed to instead
Thus, if parties intended that at some future date an fabricate machines for S-shaped blocks.
object has to be delivered, without considering the work
or labor of the party bound to deliver, the contract is one Kanang sa flooring.
of sale; but if one of the parties accepts the undertaking
on the basis of some plan, taking into account the work DMPI released a check to Megawaf P157,000
he will employ personally or through another, the representing the balance of its obligation.
contract is for a piece of work
Dynablock, the subcontractor, was unpaid.
It is not petitioner’s line of business to sell aircondition to They sued Megawaf and DMPI under Art 1729 of the
be sold off the shelf. The field of expertise is the Civil Code which provides:
fabrication and the installation of such systems as
ordered by the customers and in accordance with that Art. 1729. Those who put their labor upon or furnish
particular plans and specifications provided by the materials for a piece of work undertaken by the
customers themselves. contractor have an action against the owner up to
the amount owing from the latter to the contractor at
Very clearly central type airconditioning system— the time the claim is made.
contract for a piece of work.
So this is what you call the material man’s lien. Kana
bang nagpabuhat ug usa ka balay sa contractor. Naay
subcontractor. So ang subcontractor who furnished
CIR v Arnolius Carpentry material or labor, naa na siyay lien na pwede niya
idrekta sa owner sa building nga gina tukod in order for
What does Arnolius Carpentry do? him to be insured.

Repairs, processes, buys, sells, cabinet shelf products, However, the following shall not prejudice the
wood and metal office furnitures, cabinets, windows, laborers, employees and furnishers of materials:
doors, etc. including their parts. (1) Payments made by the owner to the contractor
before they are due;
So when you go to their shop, they have samples but (2) Renunciation by the contractor of any amount
you cannot buy the samples. You point out to a due him from the owner.
particular sample and Arnolius will make it for you.

Cannot be bought off the shelf, but you can point to the So if the supply given here was a sale, Dynablock has
shelves na basehan para sa himuon ni Arnolius sa no cause of action. But if it is a contract for a piece of
imuha. work, it has.
If it is a contract of sale, it can be bought off the shelf or Art. 1245. Dation in payment, whereby property is
something habitually sold by Dynablock then wala siyay alienated to the creditor in satisfaction of a debt in
material man’s lien. They only have a cause of action for money, shall be governed by the law of sales.
the price.
That’s the 3rd transaction governed by the law on sales.
But if it is a contract for a piece of work, pwede niya
obligahon ang Del Monte. Because practically speaking, a dacion en pago is a sale
baliktad lang. What happens in a sale? You freely
SC: negotiate. There is greater freedom in fixing price pwede
The distinction between a contract of sale and one for ba 500k nalang? And then when you agreed already,
work, labor and materials is tested by inquiry whether you pay and you get the object.
the thing transferred is one not in existence and which
never would have existed but for the order of the party In dation in payment, which is in actuality an objective
desiring to acquire it, or a thing which would have novation of a contract, na fix na daan kung pila ang
existed but has been the subject of sale to some other kwarta nga component sa transaction. What is not fixed
persons even if the order had not been given. If the is the thing to be given for that amount of money.
article ordered by the purchaser is exactly such as the
seller makes and keeps on hand for sale to anyone, and Tan Shuy v Maulawin
no change or modification of it is made at purchaser’s Feb 8, 2012 GR 19375
request, it is a contract of sale even though it may be Article 1245 of the Civil Code provides for a special
entirely made after, and in consequence of the mode of payment called dation in payment (dación en
purchaser’s order for it. pago). There is dation in payment when property is
In the case at bench, the modular paving blocks are not alienated to the creditor in satisfaction of a debt in
exactly what the plaintiff-appellee makes and keeps on money. Here, the debtor delivers and transmits to the
hand for sale to anyone, but with a modification that the creditor the former’s ownership over a thing as an
same be "S" in shape. Hence, the agreement falls within accepted equivalent of the payment or performance of
the ambit of Article 1467 making Article 1729 likewise an outstanding debt. In such cases, Article 1245
applicable in the instant case. provides that the law on sales shall apply, since the
undertaking really partakes – in one sense – of the
That’s another important consequence the application of nature of sale; that is, the creditor is really buying the
art 1729. thing or property of the debtor, the payment for which is
to be charged against the debtor’s obligation. Dation in
Going back to Villanueva. The intention of the parties. payment extinguishes the obligation to the extent of the
Why did the parties enter into the contract in the first value of the thing delivered, either as agreed upon by
place? the parties or as may be proved, unless the parties by
If it is to get an object regardless of which party gets it, agreement – express or implied, or by their silence –
then it’s a sale. But if the essence is the service, consider the thing as equivalent to the obligation, in
knowledge, regulation or expertise of the contractor who which case the obligation is totally extinguished.
manufactures the object, then the contract is for a piece
of work which is essentially a sale of service.
SSS v. AGLP
In case it is asked in the bar exams. How do you April 30, 2008
distinguish.
Kani ang case na gatuyok sa bar exam last year. If there
Sales consists purely of obligations to deliver, to pay. is a question on obligations and contracts, dacion en
Contract for a piece of work (CPW) real and personal pago it’s this.
obligations. To pay and execute.
In its modern concept, what actually takes place in
Sale susceptible for specific performance whether you dacion en pago is an objective novation of the obligation
are the seller or the buyer. where the thing offered as an accepted equivalent of the
CPW not susceptible for specific performance otherwise performance of an obligation is considered as the object
there would be involuntary servitude. of the contract of sale, while the debt is considered as
the purchase price. In any case, common consent is an
The buyer may have a 3rd party deliver a subject matter essential prerequisite, be it sale or novation, to have the
and have the same charged to the seller if the subject effect of totally extinguishing the debt or obligation.
matter is generic under art 1165.
CPW on the other hand, the remedy is art 1715. Just take note of distinguishment as well as pledge.

If the contract fails or refuses to comply with this What is pledge? Nangutang ka.
obligation, the employer may have the defect What is your security for the payment? A determinate
removed or another work executed, at the movable object similar to when you go to a pawnshop.
contractor's cost.
Dation in payment transfers ownership.
Allowing the principal to simply get another contractor to Pledge transfers possession.
perform the work pero pabayran atong original
contractor. That’s the remedy. You cannot do it directly Dation extinguishes the obligation.
eh but you can do it indirectly. Pledge creates an obligation.

Sale vs. Dation In Payment In Dation the delivery here is to perform an obligation.
In Pledge the delivery is to secure an obligation.

I know that you know dacion en pago. In dation, the creditor is allowed to appropriate the
property belonging to the debtor with the consent of the
latter.
In pledge, the creditor is not allowed to appropriate the
thing given without following strict performance. Why What if the contract was entered into during lucid interval
not? Kana bitawng di ka kabayad. by an insane or demented person?
Sige akua nalang ni imong gi prenda. It is valid.
No that is not allowed because that will now amount to a
violation of the rule against pactum commissorium—an Art. 1328. Contracts entered into during a lucid
agreement of forfeiture. interval are valid. Contracts agreed to in a state of
drunkenness or during a hypnotic spell are voidable.
In dation, there is a valid and pre-existing principal
obligation that will be satisfied by delivery of the When do you institute the action?
property.
In pledge, there is a valid and CO-existing obligation that Art. 1391. The action for annulment shall be brought
can be satisfied by the foreclosure of the property. within four years.

Remember the exception in pledge relating to pactum This period shall begin:
commissorium. Kuntahay pawnshop ka. You do auction
sales. First auction sale walay nag bid. You call for
another auction sale. Sa second auction sale gani wala In cases of intimidation, violencor undue
gihapoy mag bid, you can foreclose already provided the influence, from the time the defect of the
creditor gives an acquittance. You can do that without consent ceases.
violating the rule on pactum commissorium.
In case of mistake or fraud, from the time of
Going back to the essential elements of a sale: the discovery of the same.
Consent meeting of the minds
Determined subject matter And when the action refers to contracts entered into
Price certain in money or its equivalent. by minors or other incapacitated persons, from the
time the guardianship ceases.
Consent
Who may be parties to a contract of sale? What does “And when the action refers to contracts
Only capacitated parties can give their consent to buy or entered into by minors or other incapacitated persons,
to sell and under Art. 1489, all persons who are from the time the guardianship ceases” mean? Dapat ba
authorized in this Code to obligate themselves, may gyud naay court-appointed guardian?
enter into a contract of sale.
No. Example you are 17 years old. When does
You have to go back to your persons and family relations guardianship cease? Upon attaining the age of majority.
here. Kanus-a ba ka naay capacity to act. When do you A minor is incapacitated to enter into a contract of sale.
have juridical capacity. These are things you have to go
back to. In the case of Mercado v espiritu, karaan nga kaso, the
SC did not allow the minor to seek the annulment of the
There are two types of incapacity—absolute and relative. sale.

Absolute incapacity refers to persons who are by Here there was a contract of sale of real property by
themselves incapacitated to act under all circumstances minors who pretended that they were of age of majority.
as a general rule. Di gyud pwede. Miskan unsa pa nga
sitwasyon, di gyud ka pwede mubaligya, di gyud ka When the case was filed, they were already of age. Wala
pwede mupalit. na, nag cease na ang ilahang minority.

Relative incapacity, on the other hand, refers to the Here comes 2015 bar question for which there is still no
incapacity of persons to by themselves, BUT only with suggested answer except mine.
reference to certain persons, circumstances, and
property. As to what they are we will go to that later. Jackie inherited a townhouse. She wanted to study in an
exclusive school so she sold the townhouse. When the
Let’s go first to persons under absolute incapacity to sell. buyer found out that Jackie was still a minor, Jackie
1327 promised to execute another contract of sale upon
reaching the age of majority. When Jackie turned 25,
Art. 1327. The following cannot give consent to a she wanted to annul the contract of sale.
contract:
What is the status of the contract—valid, void, or
(1) Unemancipated minors; voidable?
Can Jackie annul the contract?
(2) Insane or demented persons, and deaf-
This is actually very basic. I discuss this every time
mutes who do not know how to write.
during Sales review.

Contracts entered into by such legally incapacitated My suggested answer—the sale is voidable. Under Art
persons are not void but merely voidable subject to 1390 of the Civil Code, a sale where one of the parties is
annulment or ratification. incapable of giving consent to a contract including
minors, is voidable but subject to annulment or
Remember that the action for annulment cannot be ratification.
instituted by the person who is capacitated since he is In this case, since Jackie was still a minor when she sold
disqualified in alleging the incapacity of the person with the property the sale is voidable.
whom he contracts.
However, Jackie could no longer recover the property.
So what would be the effect of the sale here? Under Art. 1391, the action for annulment shall be
Voidable subject to annulment and ratification brought within four years counted from the time the
minor attained the age of majority or when the What happens when you are placed under civil
guardianship ceases. Since Jackie is already 25 years interdiction?
old which is 7 years after reaching the age of majority,
the action to annul has clearly prescribed. Article 34. Civil interdiction. - Civil interdiction shall
deprive the offender during the time of his sentence of
Basic! So if you were the ones taking the bar exams, the rights of parental authority, or guardianship, either as
kaya kaayo. to the person or property of any ward, of marital
authority, of the right to manage his property and of the
Rule when both parties are incapacitated. right to dispose of such property by any act or any
Here the contract is unenforceable not void subject to conveyance inter vivos.
ratification when both parties are incapable of giving
consent to a contract.
Inter vivos lang ha.
What about sale of the necessaries?
A minor is normally not capable to give consent and So let’s list these persons who are absolutely
since consent is necessary to a contract, the absence
incapacitated.
thereof cannot comprise a valid sale.
1. Minors, insane, and demented persons
But article 1489 specifically provides that even though a
2. Deaf-mutes who do not know how to write
minor cannot validly enter into a contract of sale, where 3. Persons under the state of drunkenness or
necessaries are sold and delivered to a minor or other under hypnotic spell, unless of course if it is
person without capacity to act, he must pay a
done under lucid interval
reasonable price therefor, and the resulting sale is valid
4. Persons suffering from civil interdiction—You
and not merely voidable.
cannot sell, or you cannot buy.
First question to ask, what are necessaries? Let’s go to persons laboring under relative incapacity to
Memorize this definition as you will also memorize the
sell.
meaning of support. Pareha ran a siya ug definition.
Relative incapacity to bind themselves with reference to
Eveything indispensable for sustenance, clothing,
certain persons, circumstances, or property.
dwelling, medical attendance, transportation, education,
in keeping with the financial capacity of the family. Meaning in any other case, you can but for this particular
case, for this particular person, you cannot.
Family Code Art. 290. Support is everything that is
indispensable for sustenance, dwelling, clothing and
1st, spouses. GR: Husband and wife, either one of them
medical attendance, according to the social position of
can become parties to a contract with third persons.
the family. However, they cannot be parties to a sale or donation as
between themselves as a general rule, subject to a
Support also includes the education of the person few/limited exceptions.
entitled to be supported until he completes his education So if it is me selling to my wife or my wife selling to me,
or training for some profession, trade or vocation, even cannot be. That is prohibited.
beyond the age of majority. But with third persons, no problem. The law is very clear.
Spouses can enter into contracts with third persons.

You just have to remember this: Art 73 Family Code


Naa kay manghod and he is 12 years old.
Your younger brother goes to the sari-sari store to buy Either spouse may exercise any legitimate profession,
bread.
occupation, business or activity without the consent of
Remember that if consent is really required, unsaon niya
the other. The latter may object only on valid, serious,
pag palit ug pagkaon? Maghulat siya?
and moral grounds.
This is what art 1489 is envisioning.
In case of disagreement, the court shall decide whether
In order to be valid, two elements must be present: or not:
1. Perfection of the contract of the sale meaning
there must be meeting of the minds (1) The objection is proper, and
2. Delivery of the subject of necessaries
(2) Benefit has occurred to the family prior to the
Ikaw ang tag-iya sa tandihan. Naay nipalit nga minor. objection or thereafter. If the benefit accrued
Gikuha niya ang pan unya nidagan. prior to the objection, the resulting obligation
Pag singil nimo sa minor, “dili pwede, I’m incapable of shall be enforced against the separate property
giving consent to a contract.” of the spouse who has not obtained consent.

No. this is necessaries. There is delivery already you The foregoing provisions shall not prejudice the rights of
must pay a reasonable price. creditors who acted in good faith.
Necessaries being indispensable for sustenance are
deemed to redound to the benefit of the incapacitated
persons. In these cases, therefore, the rationale is unjust
What are the contracts that may be entered into by the
enrichment. There is no such thing as free pandesal.
spouses? It will depend on the kind of contract.
1st, contracts that the spouses may enter into individually
There’s a special disqualification under Art 34 of the
and are covered by the general rule and the exceptions
Revised Penal Code—civil interdiction.
under art 73. Basic contracts with food clothing and
other necessities do not require that the contract be years from the date of the contract implementing such
entered into by the spouses jointly. decision.
Unsaon nalang akuang asawa kung wala ko, dili siya
kakaon? In the event that one spouse is incapacitated or
otherwise unable to participate in the administration of
So basic necessities that can be allowed because the the common properties, the other spouse may assume
law presumes that it will redound to the benefit of the sole powers of administration. These powers do not
family. The law presumes that the contract is entered include disposition or encumbrance without authority of
into jointly by the parties, no need for the consent. the court or the written consent of the other spouse. In
Of course, it does not cover those which are extravagant the absence of such authority or consent, the disposition
or irresponsible such as buying a luxury car or a Prada or encumbrance shall be void. However, the transaction
bag worth P60,000! shall be construed as a continuing offer on the part of
the consenting spouse and the third person, and may be
2nd are contracts that the law prefers the spouses to perfected as a binding contract upon the acceptance by
enter into jointly. These are contracts with direct the other spouse or authorization by the court before the
consequences to the family and in relation to the offer is withdrawn by either or both offerors.
property regime. Hence, the law provides that both the
husband and the wife give formal consent.
Baligyag yuta that pertains to the community property.
Such as when the other one is abroad
Even if from the very beginning it was mine. But I Or they are separated in fact and they pretend
brought it into the marriage so my wife has to give not to know anything about the other
consent.
Power of court or written consent
Now, what’s the status of the contract entered into
without the spouse’s consent? In absence, void.
Let’s make a qualification.
It depends on when the sale was contracted?
Now there is a big difference. Because under the Civil
During the effectivity of the Family Code? Or the Civil
Code and based on the case of Aiza v Padua, it is
Code?
simply voidable. But now under the Family Code and
In the Family Code, Ainza v Padua, June 30, 2005:
under art 96, it is void.
When the subject of the sale is conjugal property
(because that was the default regime under the Civil However, the transaction shall be construed as a
Code), but for me this ruling is weird because it was
continuing offer on the part of the consenting spouse
made using the process of elimination. The SC said that
and the third person, and may be perfected as a binding
neither is the contract unenforceable because it is not
contract upon the acceptance by the other spouse or
one of those listed in Art 1403 of the Civil Code, nor is it
authorization by the court before the offer is withdrawn
void because it is not one of those mentioned in Art by either or both offerors.
1409. Therefore, by process of elimination, it must be a
voidable contract.
Void as a contract but valid as an offer.
How does the offer ripen into a contract?
Don’t you find that weird?
Two situations:
a. If the other spouse gives a written consent
This only applies to a sale of conjugal property governed b. Court authorization to proceed with the sale
by the Civil Code. This is the prevailing provision.
2. Conjugal Partnership of Gains
Article 173. The wife may, during the marriage, and
within ten years from the transaction questioned, ask the
Same provision. Art 96. Follow the same rule, identical
courts for the annulment of any contract of the husband rules. No need to distinguish.
entered into without her consent, when such consent is
required, or any act or contract of the husband which Summary:
tends to defraud her or impair her interest in the conjugal
CC:
partnership property. Should the wife fail to exercise this
Voidable. Ainza v Padua.
right, she or her heirs, after the dissolution of the
10 years to question from date of transaction—deemed
marriage, may demand the value of property fraudulently to cover only written contracts.
alienated by the husband. Oral contracts still apply 1145 of the CC. 6 years.
Family Code Aug 3, 1988. Any thing after that, Family
FC:
Code na ang mag govern.
Void.
Although in some cases, gi-apply gihapon ang Family
But Articles 96 and 124 are silent as to when the non-
Code by ruling that the retroactive effect of the Family consenting spouse can question.
Code must not impair vested rights in the property
regimes under the Civil Code. For that we go to the case of Fuentes v Roca April 21,
2010.
1. Absolute Community of Property Regime which
is the default regime in the absence of marriage In 1989, Fuentes allegedly presented an affidavit of
settlements. consent to sell from his wife Rosario.
Art 96 Family Code.
In 1997, after the death of both Paciano and Rosario, the
heirs of Roca, filed an action for an annulment of the
Art. 96. The administration and enjoyment of the sale claiming that the signature in the affidavit was
community property shall belong to both spouses jointly. forged.
In case of disagreement, the husband's decision shall
prevail, subject to recourse to the court by the wife for SC agrees that the signature of Rosario was forged.
proper remedy, which must be availed of within five Walay consent ang spouse so the property clearly was
sold without the consent of the wife Rosario. Effect: The
sale is void without an authentic consent. Family Code Wala pa gihapon ni suggested answer except MY
applies. Although Paciano and Rosario married in 1950, suggested answer:
Paciano sold the conjugal property to the Fuentes
spouses on Jan 8, 1989 a few month after the FC took At the onset, it shall be noted that Marco and Gina were
effect. married during the effectivity of the Family Code. Thus,
in the absence of a marriage settlement, the appropriate
For as long as the provisions of the FC does not impair matrimonial regime is absolute community property.
vested rights, the FC should be given retroactive effect. Under art 96 of the FC which applies to the aforesaid
matrimonial regime, a sale of property without the other
spouse’s written consent is void.
Kanus-a nimo i-file? 1 In this case, the separation in fact between Marco and
410 it does not prescribe. Gina did not affect their regime of absolute community
Art. 1410. The action or defense for the declaration of property. Hence, the consent of both spouses must still
the inexistence of a contract does not prescribe. be obtained in every transaction involving their absolute
Although laches can be applied but very limited. community property. In the absence of judicial
GR: Kung dili mag prescribe there can be no laches we authorization, Marco could not validly sell the property
know that from Civ Pro. without Gina’s consent.

Even if we apply the Civil Code provision under Art 173, Husband and wife are deemed to be one person in the
10 yrs, covered gihapon. 1989-1997 7 years. It did not eyes of the law. Therefore I cannot self to myself. My
yet prescribe. wife cannot sell to me, or I cannot sell to my wife. In
certain situations, both spouses consent are needed.
Beautiful case penned by Justice Teresita Leonardo De Our estates are merged resulting to an increase in total
Castro who is the chairman of this year’s bar patrimony. And the man cannot give anything to his wife
examination. because as far as the law is concerned, she is himself.
Makes sense? I know medyo weird.
The trend is kung kinsa ang chair, ang iyahang penned
cases ang mugawas sa bar. It happened 2 years ago The basic rule there is from the rule on donation. There
and I was very happy. cannot be a donation of property between spouses
under art 87. Except moderate gifts.
What can the spouse do to proceed with the Art. 87. Every donation or grant of gratuitous advantage,
transaction? Ask for court or judicial authorization to direct or indirect, between the spouses during the
proceed with the action by filing a verified petition before marriage shall be void, except moderate gifts which the
the court attaching thereto the proposed sale or the spouses may give each other on the occasion of any
transaction if there is any and if none shall describe in family rejoicing. The prohibition shall also apply to
detail the said transaction and state the reason why the persons living together as husband and wife without a
consent thereto cannot be obtained. And in the case the valid marriage.
final deed be duly executed by the parties, it may be
submitted to and may be approved by court under art
239 of the Family Code of the Philippines. The last sentence first. If the rule were otherwise, the
position of those in sin would be better than that of those
in patrimony. That’s not my own words ha. That’s the
Art. 239. When a husband and wife are separated in word of the SC.
fact, or one has abandoned the other and one of them
seeks judicial authorization for a transaction where the Agapay v Palang
consent of the other spouse is required by law but such The condition of those who incurred guilt would turn out
consent is withheld or cannot be obtained, a verified to be better than those in legal union.
petition may be filed in court alleging the foregoing facts.
How about sale? Kung donation dili pwede, labaw na
ang sale unless there is a separation of property agreed
The petition shall attach the proposed deed, if any,
upon by the spouses in their marriage settlement or
embodying the transaction, and, if none, shall describe
there has been a judicial separation of property art 191
in detail the said transaction and state the reason why
the spouse has been sentenced with the penalty which
the required consent thereto cannot be secured. In any
case, the final deed duly executed by the parties shall be carries with it civil interdiction or in the case of legal
submitted to and approved by the court. separation.

Separaion in fact—NO. It’s not part of what is stated in


the law.
Maskin walay consent, ask for judicial authorization. But this one is more important. When the husband sells
to the wife, or the wife sells to the husband, neither of
Now the 2015 bar question. them can question the sale because they are in pari
Marco and Gina were married in 1989. delicto.
10 years later, Gina left Marco and lived with another
man, leaving their 2 children with Marco. Kinsa maka pangutana? For that, remember the case of
When Marco needed money for the children’s education, Modina v CA.
he sold their conjugal property which Marco acquired It applies to cases where the nullity arises from the
before their marriage without Gina’s consent. illegality of the consideration or the purpose of the
contract. When two persons are equally at fault, the law
Is the sale valid, void or voidable? does not relieve them.
Furthermore, if this line of argument be followed, the
So if you have read the case of Fuentes v Roca, Trial Court could not have declared subject contract as
matubag nimo. null and void because only the heirs and the creditors
can question its nullity and not the spouses themselves
who executed the contract with full knowledge of the
prohibition. Valid until annulled

If a question is asked in the bar exams, remember the Period. Art 1391
case of MODINA!

Ngano ta mo gina pa timan-an ani nga kaso? Because Art. 1391. The action for annulment shall be brought
the next case is MEDINA v CIR. Same issue but added within four years.
one. What happened in this case?
In 1944 Antonio Medina married Antonia Mobiles.
This period shall begin:
Before 1946 acquired properties and business of their
own.
Later on, however, Antonio acquired forest concessions In cases of intimidation, violence or undue
in the Province of Isabela. influence, from the time the defect of the
From 1946-1948, logs were sold by petitioner Antonio to consent ceases.
different buyers in Manila through his agent Mariano
Osorio. So ang lumber niya gibaligya niya kang Osorio. In case of mistake or fraud, from the time of the
Osorio therefore is the middleman. discovery of the same.
Sometime in 1949, Antonia started to engage in
business as an agent dealer. And when the action refers to contracts entered into by
In 1952, Antonio sold almost all his logs to Antonia. minors or other incapacitated persons, from the time the
Antonia sold these logs to Manila through the same guardianship ceases.
agent Osorio.
The proceeds were upon instruction from petitioner 2015 Bar Q
either received from Osorio or deposited by Osorio in
Antonio’s bank account with PNB. I’m so happy! 3 questions came out from the first 2 hours
So the logs cut by Antonio were sold to his wife’s dealers of my lecture.
Antonia.
On the theses that petitioner sold his logs to his wife and
null and void pursuant to art 1490, the collector taxed the
sales as one made by petitioner. Deficiency sales tax
and surcharges were assessed.
Petitioner protested the assessment.
Petitioner presented an alleged complete separation of
property agreement between him and his wife.
According to him, the collector cannot assess him with
the said taxes him being a stranger to the said Is there a mere defect on consent? Voidable?
transactions. Valid? Unenforceable? Or void? Do we apply 1390?
Those whose consent is vitiated by mistake, violence or
Issue: W/N the sales made are valid. If valid, there will fraud?
be no deficiency taxes for the petitioner kay dili mudako
iyang tax base. It’s not a purely sales question. Bear with me but this is
my suggested answer.
Held: The government, as correctly pointed out by the The deed of sale is void for the ff. reasons.
Tax Court, is always an interested party to all matters Under Art 1409 of the Civil Code, a contract whose
involving taxable transactions and, needless to say, cause, subject or purpose is contrary to law, morals,
qualified to question their validity or legitimacy whenever public customs, order, or public policy is void.
necessary to block tax evasion. Further more, contracts declared by law as void are
So from MOdina case it’s heirs and creditors. likewise void. In Yu v PAGCOR (2009) contracts
Sa Medina case, naay ikatulo—the government. The expressly declared by law as void such as gambling
BIR. contracts cannot be ratified.
In this case, the contract was executed in connection to
Being void transactions, the sales made by the petitioner a gambling debt making it void. Z can therefore file an
to his wife were correctly disregarded by the Collector in action from the deed of sale and recover his loss. Art
his tax assessments that considered as the taxable 2014 CC Any loser in a game of chance may recover his
sales those made by the wife through the spouses' loss from the winner, with legal interest from the time he
common agent, Mariano Osorio. paid the amount lost, and subsidiarily from the operator
or manager of the gambling house.
What other sales where consent is defective making Short problem, difficult solution. There are only 7 cases
them VOIDABLE contracts? by the SC using Art 2014.

Art. 1390. The following contracts are voidable or There’s a title of the CC related to gambling. Do you
annullable, even though there may have been no even know that? Is that discussed in law school? Murag
damage to the contracting parties: wala. To my mind it is not a fair question but sige lang.
(1) Those where one of the parties is incapable You can answer it using sales without referring to the
of giving consent to a contract; gambling provisions. You can argue that it is voidable
because there is vitiated consent. It’s all about how you
(2) Those where the consent is vitiated by argue. When you argue, you have to argue persuasively.
mistake, violence, intimidation, undue influence
or fraud.
DECEMBER 1, 2015
These contracts are binding, unless they are annulled by
a proper action in court. They are susceptible of Ok, so last meeting we were already discussing the
ratification. incapacity of buyer and seller and this time we will now be
talking about persons under relative incapacity. You have to The prohibition cannot be made to apply unless there was a
remember that what we are about to discuss is still under proof that a third party buyer is a mere intermediary of the
the heading of consent as an element of contract of sale guardian or that the latter had previously agreed with the
and the law here that we need to be really really familiar third party buyer to buy the property for the disqualified
with will be Article 1491. person.

Article 1491. The following persons cannot acquire by However, later on, came the case of…
purchase, even at a public or judicial auction, either in
person or through the mediation of another: PHILIPPINE TRUST COMPANY vs. ROLDAN
G.R. No. L-8477
(1) The guardian, the property of the person or May 31, 1956
persons who may be under his guardianship; BENGZON, J.:
This totally reverses Rodriguez vs. Mactal. Even arguendo
(2) Agents, the property whose administration the guardian without malice besets a guardian so
or sale may have been intrusted to them, unless circumstanced, necessitates the annulment of the
the consent of the principal has been given; transaction, even if no actual collusion is proved (so hard to
prove) between such guardian and the intermediate
(3) Executors and administrators, the property purchaser. This would uphold a sound principle of equity
of the estate under administration; and justice.

(4) Public officers and employees, the property And so, what the SC really looked at on the previous case
of the State or of any subdivision thereof, or of (Mactal Case) was the fact na pwede diay nimo buhaton
any government-owned or controlled indirectly the doing that you cannot do directly and the law
corporation, or institution, the administration of frowns that type of situation. and so here (Roldan case)
which has been intrusted to them; this even if there is no actual collusion is proved, then void na
provision shall apply to judges and government jud siya because of that incapacity.
experts who, in any manner whatsoever, take
part in the sale;
(4) Public officers and employees, the property of the
 I want you to take very particular attention to State or of any subdivision thereof, or of any
that phrase there [underlined] because that will government-owned or controlled corporation, or
play into consideration when we will be institution, the administration of which has been
discussing a bit later on about the case intrusted to them; this provision shall apply to judges
regarding this matter. and government experts who, in any manner
whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys,
clerks of superior and inferior courts, and other
officers and employees connected with the Dili judges na judiciary ang ginapasabot dire ha. Now, here
administration of justice, the property and is what I was talking about…
rights in litigation or levied upon an execution
before the court within whose jurisdiction or
territory they exercise their respective MAHARLIKA vs. SPOUSES TAGLE
functions; this prohibition includes the act of G.R. No. L-65594
acquiring by assignment and shall apply to July 9, 1986
lawyers, with respect to the property and rights GUTIERREZ, JR., J.:
which may be the object of any litigation in What happened here was that land was foreclosed by GSIS
which they may take part by virtue of their and was sold in public auction. It was bought by the wife of
profession; the chief of the Retirement Division of GSIS.

(6) Any others specially disqualified by law. Now remember the law, the administration of the
property has been intrusted to them. So there has to be
that element—that he is of course administering a certain
Now, what is the reason why are these prohibited? Public property to a certain extent for the government. Why?
policy. Because that would now prevent some sort of insider
trading or insider information. So, he knows the value of the
property so, I’ll buy it for this much. That’s the reason why
the law under 1491 is phrased that way, but here in this
(1) The guardian, the property of the person or persons case, ang asawa ang nakapalit. Asawa sa chief of the
who may be under his guardianship; Retirement Division which does not even administer the
property.
Now take note of this one INDIRECT PURCHASE. If X is
the administrator of the estate. Y later on buys the property SC ruled, a Division Chief of the GSIS is not an ordinary
employee without influence or authority. The mere fact that
and a bit later on, further, X becomes the owner. So dili
he exercises ample authority with respect to a particular
direct purchase. It is indirect. So in that situation would the activity, i.e., retirement, shows that his influence cannot be
sale be valid? lightly regarded.

RODRIGUEZ vs.MACTAL The point is that he is a public officer and his wife acts for
G.R. No. L-39720 and in his name in any transaction with the GSIS. If he is
April 4, 1934 allowed to participate in the public bidding of properties
GODDARD, J.: foreclosed or confiscated by the GSIS, there will always be
the suspicion among other bidders and the general public
that the insider official had access to information and It is not yet pending. Wala pa may gifile. So it is not
connections with his fellow GSIS officials as to allow him to yet in litigation.
eventually acquire the property. It is precisely the need to
forestall such suspicions and to restore confidence in the 3. Purchase after the finality of the litigation
public service that the Civil Code now declares such Of course it is valid. (Vda. de Laig, et al. vs. Court
transactions to be void from the beginning and not merely of Appeals; 86 SCRA 641)
voidable.
4. Property to serve as contingent fee
So, the SC extended the prohibition. Not only to in terms of You know a contingent fee, the payment paid to a
offce being held but in terms of relations. Pati asawa dili lawyer or professional servicce would depend upon
pwede. To my mind, this is a very good piece of judicial the outcome of the case. in essence, what the
legislation because it actually reflects the fact that you lawyer would be doing, would be to gamble a little
cannot compartmentalize in a particualr branch or agency bit of the outcome of the litigation. Of course it
of the government. There will always be influence. Due or would depend in part in the case. kung madaog
undue, there will always be influence. siya because of his efforts, he gets part of the
property as contingent fee. If they do not win, then
(5) Justices, judges, prosecuting attorneys, clerks of nothing. That’s valid because transfer of
superior and inferior courts, and other officers and assignment takes effect only after finality of the
employees connected with the administration of judgment. This is a very common practice. The
justice, the property and rights in litigation or levied lawyer is a little bit gambling.
upon an execution before the court within whose
jurisdiction or territory they exercise their respective Now, is it also acceptable if the lawyer himself
functions; this prohibition includes the act of acquiring undertakes to underwrite the expenses of the
by assignment and shall apply to lawyers, with respect case? kanang siya ang mubayad sa tanan, pati
to the property and rights which may be the object of filing fee siya ang mubayad. You heard situations
any litigation in which they may take part by virtue of like that in your Legal Ethics.
their profession;
TAKE NOTE:
Now, this one is the most common where lawyers would
have, by way of a fee, property of their clients. I never had FORNILDA vs. RTC
this situation however. wa jud ni nahitabo sa akoa. G.R.No. L-72306
January 24, 1989
Some lawyers would accept property. “Kapag mudaog ta, MELENCIO-HERRERA, J.:
akoa na ang katunga.” Ing-ana ang ginabuhat sa ubang Here the property was mortgaged to the lawyer while the
abogado and you can only imagine how many cases have case is pending. It was foreclosed after the termination of
been decided by the SC based on this policy. the case and the lawyer sold it in public auction.

Because of the sheer number of cases, we have no time to SC said VOID.


read all of these cases. What we need to do would be to
examine some of the cases: Mao ra ni ang dili nako ma-fit sa formula. Diba the shortcut
formula is determine whether or not the purchase was
1. The property sold to the lawyer pending appeal. made while the case was still pending. If it is no longer
So the question here simply is, “Is it still pending pending, then pwede ang pagpalit. Pending ba, regardless
litigation?” in the case where no longer pending, of the stage—pretrial, execution stage, appeal or certiorari
there is no longer prohibition, but if the property is proceedings, then purchase is void. So, here, if you really
still in litigation, then that is void. look at this case, was there purchase while the case is still
pending? NO. but, he bought it later on when the case is
So here, it is still covered under prohibition because already terminated. So, mao ni ang dili magfit sa formula.
it is still pending appeal. It is not yet final. There is
still something to be done. So it is still in litigation. So, how should we take care of this? General rule you
remember: once the case is still pending, you do not
Property was purchased by counsel pending consider the sale valid. But when naay special
certiorari proceeding. What differentiates a considerations, if ang facts of the case is similar to Fornilda
certiorari proceeding with any other proceeding vs. RTC, that’s the time when you consider it as an
involving the property and therefore in Valencia vs. exception to that general rule.
Cabanting, still void. Case is till pending. Property
is still in litigation. DO NOT COMPLICATE THINGS. Do not read too much
into the ruling of the SC because you might mistakenly
Lawyer acquired the property as payment of interpret it. That’s very dangerous for the Bar Examinations.
professional services in another case. they have 2
cases, for example, and then the lawyer Now, here is this case of
represented the party in both of these cases and in
one of those cases, iyaha ng nakuha ang property, THE CONJUGAL PARTNERSHIP OF THE SPOUSES
but in the other case where it is still in litigation, is it CADAVEDO vs. LACAYA
still covered? VALID. (Municipal Council of Iloilo vs. G.R. No. 173188
Evangelista). It is not the pending case. it is a January 15, 2014
different case. therefore, walay problema. BRION, J.:

The lawyer acquired the property long before he Lawyer represents the clients. And their fee stipulation,
intervened in the case of the party. Did he buy the where they were also able to present the contract for
property while the case is still pending? SC said no. attorney’s fees with the lawyer—contingent fee basis and if
therefore, the purchase is valid. they would become the prevailing parties they would pay
the sum of P2,000 for attorney’s fees.
2. Purchase of property before action in courts
What the lawyer was trying to do here was to represent the own recovery rather than that of his client or to accept a
clients not only in one case, but several interrelated cases settlement which might take care of his interest in the
involving conjugal property. verdict to the sacrifice of that of his client in violation of his
duty of undivided fidelity to his client’s cause.
September 1981, Atty. Lacaya entered his appearance in
Civil Case No. 1721 by filing a motion for the issuance of You know what the Legal Ethics examination in the recently
the execution. So naa na kay idea na execution stage na ni. concluded Bar Examinations is a tough one. Nobody
expected I to be that tough.
September 23, 1981, Spouses Ames filed Civil Case No.
3352 against Sps. Cadavedo represented by Atty. Lacaya. Now take note that the prohibition under Article 1041
applies to lawyers who are members in the firm. Remember
So, sanga-sanga ni na kaso between the parties and that when you enter appearance, naturally you enter
related properties. appearance in the name of the firm. When a client contracts
a particular lawyer within a firm, it contracts with the entire
Then, in October 16, 1981, the RTC granted the motion for firm. Take note:
the issuance of the writ of execution and the spouses took
possession of the subject lot on October 24, 1981. So, MEDINA vs. CIR
girestore na sila karon sa property. G.R. No. L-15113
January 28, 1961
Soon after the subject matter was subdivided, the lawyer REYES, J.B.L. J.:
took one of the subdivided portions alleging that the Contracts violative of the provisions of Article 1490 of the
contingent fees was orally amended. Karon ginaingon niya Civil Code are null and void. REASON: fiduciary
na despite the fact na naa sa among kontrata na bayran ko relationship involved and the peculiar control exercised by
ug dos mil pesos, ginaingon karon sa lawyer na taking these persons over their supposed transferees. It is
advantage of the exception of the Parol Evidence Rule, “we founded on public policy.
orally agreed to novate our contract and instead of
receiving money, half of the property na lang” Here’s a 2013 Bar Examination Question that I want to use
for illustration purposes. I remember when I was teaching
On May 13, 1982, Ames and Atty. Lacaya executed the Sales Review 2 years ago, I asked everybody to answer the
Compromise Agreement whereby Atty. Lacaya ultimately question in class in 8 minutes. I called the top of the class.
obtained 10 hectares of the property. siya na karon ang There were two: Atty. Padlan and Atty. Garcia. When I
nagcompromise agreement. “Wala koy pakialam! With called Atty. Garcia, I was so surprised about his answer and
respect to my portion, I’ll get my half!” and so that’s why I told him “you will top the bar!” nagdilang anghel ni-top jud
nagcompromise agreement. sa bar. Now put yourself in the shoes. How would you
answer this 2013 Bar Question…
Another fact to consider here is that Atty. Lacaya undertook
to advance all expenses of the litigation. Meaning siya Rica petitioned the annulment of their 10-year old
tanan nagfinance. marriage with Richard. Richard hired Atty Cruz to
represent him in the proceedings. In payment of Atty.
So, SC ruled A thing is in litigation if there is a contest or Cruz’s acceptance and attorney’s fees, Richard
litigation over it in court or when it is subject of the judicial conveyed to Atty. Cruz a parcel of land in Taguig that
action.34 Following this definition, we find that the subject he recently purchased with his lotto winnings. The
lot was still in litigation when Atty. Lacaya acquired the transfer of documents were duly signed and Atty. Cruz
disputed one-half portion. immediately took possession by fencing of the
properties in the perimeter. Despite the transfer to Atty.
From these timelines, whether by virtue of the alleged oral Cruz, Richard offered the same parcel of land to the
contingent fee agreement or an agreement subsequently Spouses Garcia. After inspection of the land and
entered into, Atty. Lacaya acquired the disputed one-half considering it as a good investment, they purchased it
portion (which was after October 24, 1981) while Civil Case from Richard. So there was double sale! Immediately
No. 3352 and the motion for the issuance of a writ of after the sale, the spouses Garcia commenced the
execution in Civil Case No. 1721were already pending construction of a three-storey building over the land
before the lower courts. Similarly, the compromise but they were prevented from doing so by Atty. Cruz
agreement, including the subsequent judicial approval, was who claimed that he has a better right in ling to the
effected during the pendency of Civil Case No. 3352. In all prior conveyance of the property. Is Atty. Cruz’s claim
of these, the relationship of a lawyer and a client still correct?
existed between Atty. Lacaya and the spouses Cadavedo.
MY SUGGESTED ANSWER: Atty. Cruz’s claim is not
Likewise, this agreement is champertous and is contrary to correct for the following reasons:
public policy. In Bautista v. Atty. Gonzales,28 the Court
struck down the contingent fee agreement between therein 1. Under the law on double
respondent Atty. Ramon A. Gonzales and his client for sales of property, a mere prior conveyance is not
being contrary to public policy. There, the Court held that an the basis of priority. It is the act of registration that
reimbursement of litigation expenses paid by the former is best prioritize upon any one of the buyers. Whoever
against public policy, especially if the lawyer has agreed to first registers the sale in good faith is preferred
carry on the action at his expense in consideration of some under the law. Atty. Cruz did not register the same
bargain to have a part of the thing in dispute. It violates the thing.
fiduciary relationship between the lawyer and his client.
2. Neither Atty. Cruz nor the
The rule of the profession that forbids a lawyer from spouses were vendees in a perfectly valid sale. In
contracting with his client for part of the thing in litigation in both instances, the property sold to them, were in
exchange for conducting the case at the lawyer’s expense turn purchased by the vendor Richar using his
is designed to prevent the lawyer from acquiring an interest lottery winnings, as his marriage to Rica was not
between him and his client. To permit these arrangements yet dissolved, such lotto winnings were still part of
is to enable the lawyer to "acquire additional stake in the the absolute community of property and so was the
outcome of the action which might lead him to consider his parcel of land bought out of the proceeds thereof.
Rica’s consent was not obtained in either of the We enter into a contract of sale for the future good
sales making both void. that will make man immortal. WRONG!!! THAT
CANNOT EXIST! In a strict science and
3. Finally it must be noted that technology, you cannot do that.
when the lot was purchased by Atty. Cruz, there
was a pending annulment case filed by Rita against Example: to sell bread. Even if the bread is not yet
the vendor Richard. As previously noted, the made at that time, bread is such in nature that it
property was bought by Richard to his lottery could be made.
winnings obtained during the subsistence of the
marriage. Hence, the lot is still technically part of If the contract was to sell a drug that would make a
the community property. Annulment proceedings man immortal, dili jud ni siya pwede. You cannot do
involved determination of the properties and may that.
be resolved to the separation of properties between
the spouses. For this reason, when the lot was sold A expects or hopes to acquire a hous and lot on
to Atty Cruz, the sale was technically property in January 14, 2016. Can A sell the lot? YES. Under
litigation which under Article 1491, a lawyer cannot Article 1461, the efficacy of the sale of a mere hope
buy while the case is still pending. Thus, from this or expectancy is deemed subject to the condition
POV, the sale of a parcel of land is void. that the thing will come into existence.

Now remember, that when you talk about buying


So one answer kuha kaayo nimo tanan. What surprised me future property, the contract is perfectly ok because
about Atty. Garcia was the fact that his anwer was almost the subject matter is only required at the time of
99% similar to my answer and I had a benefit of research. delivery of the subject matter. You do not have to
He was able to nswer that from the top of his head in 8 own the property right now. You do not have the
minutes making him of course better than me. so I said, property right now. Just make sure that when the
“you will top the bar!” and he topped the bar. Number 4, just time to deliver arrives, you already own it. you
imagine. Naa juy mga ing-ana mga gifted children. already have the right to transfer ownership.

Just a bit of obligations and contracts review,


Let’s go to the second element: remember the difference between a suspensive
SUBJECT MATTER condition and a resolutory condition.

Kani daghan kaayong mga ginagmay na crazy thoughts, When you talk about suspensive condition, it is one
but of course what you need to remember here is still the that suspends the efficacy of an obligation. So, it is
same as in any other subject matter of any other other subordinated to the happening to a future and
contract. uncertain event. If the condition does not take
place, the parties would stand as if the obligation
So subject matter must be: had never existed.
1. existing, but it may be future and it
may even have contingent existence. Now going back to Article 1461, the efficacy of the
Article 1461. Things having a potential sale of a mere hope or expectancy is deemed
existence may be the object of the contract of subject to the [suspensive] condition that the thing
sale. will come into existence. This is also known as
EMPTIO REI SPERATAE.
The efficacy of the sale of a mere hope or
expectancy is deemed subject to the condition Naa pud na siyay partner later on. Si emptio spei.
that the thing will come into existence.
Now, what is this EMPTIO REI SPERATAE? It is a
The sale of a vain hope or expectancy is void. contract covering future things subject toa
suspensive condition that the subject matter will
Subject matter may be future or based on come into existence.
contingency. Future, for example, goods to be
manufactured, acquired by the seller after the Example: sale of piglets which are yet to be born.
perfection of the contract of sale So, subject to the condition that the piglets will be
born alive. If it does not come into existence, then
So A entered into a contract of sale with B where A the contract is extinguished.
agrees to buy all crops to be harvested from the
property of B. Are you sure that the crops would Sale of a future thing subject to a suspensive
grow? What if there is a crop failure? Does it make condition. What’s the future thing? Piglets. If they
the contract of sale void on the simple possibility are born alive, then they own the piglets. That’s the
that the subject may not arise from. Of course dili suspensive condition.
because contract of sale can be made over future
goods. What about this EMPTIO SPEI? This is the SALE
OF A HOPE. It is subject to the following elements:
Now take note when you determine the existence a. thing itself is not certain to exist
of goods as subject matter of contract of sale, do b. object of the contract is the hope itself
not think in terms of physical existence or non c. the hope or expectancy must not be
existence. You do not see it and therefore, it is made
avoid subject matter? NO!
review ta a bit about emptio rei speratae. What are
You have to determine whether in a strict science you selling here? A FUTURE THING subject to a
and technology will allow the subject matter to suspensive condition that the thing will come into
come into existence. existence.
On the other hand, in emptio spei, what are you Not outside the commerce of man includes all
selling? Past? Present? Future thing? PRESENT rights that are transmissible. which means to you
THING!!! You are selling HOPE! that if the right is instransmissible, it cannot be
subject of sale.
Example sale of lotto tickets for 10 pesos. The
buyer purchases the hope that upon the draw the What’s an example of an instransmissible right?
ticket would win 20M pesos. The object of the sale Kanang di jud nimo mabaligya sa uban ang kana
is the ticket which represents the hope or na katungod because it is purely or strictly personal
expectancy not the price itself. Therefore if the to you. The right to give or the right to obtain
ticket will not win, the sale would still be valid. You support. It is an absolute right. Purely personal.
are not buying the 20M. you are only buying the
hope of getting 20M. What about illicit?

Now, if it is a vain hope, for example, the ticket is 1. Future inheritance cannot be a subject
already expired, or it has been falsified, the sale is of sale.
void because it is a vain hope or expectancy. 2. Sale of animals suffering from
contagious diseases
QUESTION: Between emptio rei speratae and  We will discuss this sometime when we
emptio spei which among the two of them is valid? will talk about redhibitory defects
BOTH OF THEM ARE VALID!!! The only time it
beomes void is when the expectancy or hope is a Example of illegal subject matter?
vain one! 1. Narcotics
2. Rare wild plants
EMPTIO REI EMPTIO SPEI 3. Poisonous plants
SPERATAE 4. Dynamite fish
The subject matter is a Present thing—THE 5. Gunpowder and explosives, firearms and
future thing or HOPE ammunitions
something that has  Dili nimo na pwede ibaligya without of
potential or future course the requisite permit because you
existence. can sell firearms and ammunitions if you
are licensed. If you are not, then you are
The thing must exist Whether the hope or not allowed to sell it. that is an illegal
for it to be valid. expectancy is not subject matter.
fulfilled and therefore
do not exist, the sale is Now, can you recall when I was your Evidence
still valid provided it is professor, here is this case, People vs. Alejandro
not vain. William. Where he sought the exclusion of the
evidence of marijuana taken after a bybust
Although to my mind it is apples and oranges. operation on the ground that it is outside the
commerce of man. Inadmissible daw because it is
Now remember the contract as onerous and outside the commerce of man. SC said that is
commutative. Equivalence of values. You pay for absurd! Human body is outside the commerce of
something hoping to get the exact same thing or man, yet human body is evidence. An autopsy
the exact value. That is not in emptio spei. report that would of course express therein the
findings over the cause of death of a victim is also
Ok what about existing goods? outside the commerce of man and therefore dili
Article 1465. Things subject to a resolutory diay na siya pwede himuong ebidensya? But that’s
condition may be the object of the contract of a different story. We are talking here abiut Sale, but
sale. as evidence, pwede.

This is actually very common. Sale of land subject


to the right of repurchase. That;s the most common 3. Determinate or at least determinable.
example here. The resolutory condition is the This is where the case law is quite abundant.
repurchase of the land. If repurchase, the sale is
extinguished. What is determinate? Particularly designated or
physically segregated from all others of the same
Must ownership of the thing sold be vested to the
class. “That red car” “This blue jeep” mao ng
owner at the time of the perfection of the contract?
NO. segregated from all others of the same class or
particular ly designated.
Article 1459. xxx the vendor must have a right
to transfer the ownership thereof at the time it is Determinable means that the subject matter is
delivered. capable of being determinate without the necessity
of a new or further agreement between the parties.
Again, you go back to that weird characteristic of
the contract of sale, that is DELIVERY IS THE
MODE OF TRANSFERING OWNERSHIP. Remember that generic objects, undivided interest
Ownership is actually not required at the time of of a sole owner, undivided share of a specific bus
perfection. Only at the time of delivery. that is still allowed even if technically speaking they
are generic. This is the most common sale. You go
2. It must be licit, lawful, within the to the market and you buy meat or vegetables. Dili
commerce of man. man na determinate, “that vegetable!” NO! you buy
according to weight. You buy according to the
quality not necessarily designating it physically from Now here determinable ba gyapon siya kung walay specific
the class. That is still valid. quantity stated in the contract? Di ba usually when you buy
car, you buy 1 car. If you have a lot of money, you buy 5
cars. Naay specific quantity. We are not talking about the
Determinable ta kay dire jud dapit ang case law. if
quality here ha. We are talking about the QUANTITY.
you remember in your second year, especially in Kadaghanon sa imong gipalit.
the book of Villanueva, baga kaayo ang iyang
discussion dire. A buys sacks of sugar from B. mao lang na. that’s the
contract without designating how many sacks of sugar he is
going to buy. Will that be void or curable? Is there a need
ATILANO vs. ATILANO for the parties to enter into a new agreement to determine
G.R. No. L-22487 quantity which of course is important as a factor to
May 21, 1969 determine the subject matter.
MAKALINTAL, J.:
Wrong designation of the lot does not vitiate the sale since NATIONAL GRAINS AUTHORITY vs. IAC
the parties before entering into the contract saw the actual G.R. No. 74470
setting and the meets and bounds of the subject matter. March 8, 1989
MEDIALDEA, J.:
What happened here? si A, nibaligya ug property kang B
which they inspected which they saw. They huggled for the The subject matter was rice to be harvested from the
price. that is Lot B, but he meant to buy Lot A. when the seller’s farm. According to their contract, the seller has a
Deeds of Sale was eventually drafted, ang nakabutang sa quota of 2,640 cavans of palay. So mao na iyang quota.
technical description is not Lot A, but Lot B. Will that vitiate
the sale? The buyer now claims that he did not consent to pay only
620 cavans.
SC said no!!! you merely erred in designating the lot, but it
does not mean that parties do not know the identity. Even if Is this valid or void?
mali ang technical description, it is still possible to
determine which lot is subject to the sale without entering SC ruled VALID because it states a quota. The seller
into a new agreement between the parties. therefore can deliver as much of his produce for as long as
it does not exceed the agreed quota. Kung kuntahay diay
Therefore, the sale in the case of Atilano vs. Atilano was mudeliver siya ug isa ra ka sako na bugas, or 1 cavan of
valid. palay lang ang iyang i-deliver, no problem. It’s within a
quota which is 0-2640 cavans. Nideliver siya ug 620
BAR Q:Ciriaco Realty sold to the spouses Dela Cruz a 500 cavans. That’s within the quota.
sqm lot in Paranaque. The land now has a fair market value
of 1.2M. Garcia sold to the spouses a 700 sqm land which Now, what happens if kulang? 2,640 is of course
is adjacent to lot A and Lot B has a present market value of determinate subject matter. So the sale is valid with respect
500M. Sps Dela Cruz constructed a house in lot B because to that. For the remaining, then, they may execute a
according to them that’s what they bought relying on the different contract. It does not make the sale void. The fact
representation of the sales agent that it is the property that that the quantity is not determinate shall not be an obstacle
they purchased. Only upon the completion of their house to the existence of the contract provided that it is possible to
did the spouses Dela Cruz discover that they have built on determine the sale without the need for a further
lot B owned by spouses Rodriguez not on lot A that they agreement.
purchased. They spent 1M for the house. As their lawyer,
advise Sps. Dela Cruz on their rights and obligations under Let’s go to the third element:
the circumstances and recourses and options open to them PRICE
to protect their interests. How do you define price? it is a sum stipulated as the
equivalent of the thing sold, and also every incident taken
So you start with Atilano case. wrong designation of the lot into consideration for the fixing of the same put to the debit
does not vitiate the contract. And then you go to Property of the vendee and agreed to by him.
Law. what would be the rights of builder, planter, sower in
good faith and bad faith. Ana ra man na. simple lang. The price must be real it must not be merely simulated or
fictitious. It must be in money or its equivalent or express in
I do not place here a suggested answer because I am not a terms of money or equivalent money.
Property professor. I will not arrogate upon myself
knowledge that I do not know. It must be certain or ascertainable at the time of the
perfection of the contract. Remember that consent is
Can property be considered determinable even without manifested by the meeting of the offer and the acceptance
technical descriptions? According to SC in Laranja vs. upon the thing and the cost which are constitute in contract
CA, the subject matter is still determinable. The deed of and so at the time of perfection dapat fix na ang price.
sale merely identifies the subject properties by indicating lot That’s the general rule. So it can be fixed by the third
numbers, lot areas and the certificate number covering person. it can be fixed by the courts. It can be fixed with
them. Resort can always be made to the technical reference to a definite day or particular exchange in the
description as stated in the certificates of title of the two market like gold. When you buy gold, nagachange ang
properties. presyo niana. The price of gold today would be different to
the price of gold tomorrow. So you always refer to the
In actual practice, I have a client before who found a Deed market. Reference to another thing certain. Paliton nimo ng
of Sale over a 10 sqm property. kana bitawng right of way bugas sa presyo na isa ka kilo na asukal. Pwede ngano dili
lang. maayo untag straight to siya, where boundaries are gud. Wala lang ko kabalo kung kinsa ang lugi sa inyong
simple. We do not have to write down the technical duha. It’s a reference to another thing certain but it can
description. You can just attach a photocopy of the never be made by only one.
certificate of title while making a Deed of Sale.
What is the effect if the contract states the price but it was
never paid? It’s null and void as a Sales question because
there was never any real consideration. (Montecillo vs. like? Remember the three stages in the light of a contract of
Reynes, Mapalo vs. Mapalo) sale.
1. Preparation/ Conception/ Generation
Illeterate farmers signed the contract for 500 pesos -this is the policitation stage. We huggle. Offer,
consideration while the amount was never paid. Since there counter-offer and then finally we’re ready to enter
was no real consideration, the contract is void. That is the into contract. This will also cover:
effect if it is simulated. a. preparatory juridical relations
b. option contracts
Kuntahay gibayran pero actually wala gibayran. If the price c. right of first refusal
is simulated, the sale is void, but the contract may be
shown in reality a donation or some other contract. -here, it starts with negotiation and bargaining and
ends with at the moment of the agreement of price
Why do parties do that? Tax consequences. It might and the contracts here in the first phase would be
sometimes cheaper to execute a deed of sale than deed of policitation—offers or counteroffers, technically
donation especially if it is a donation to strangers. speaking dili na sila contract. There is no meeting
of the minds yet, but the important thing here is
Sale, you pay as much as 8.3% of the total consideration option contract, rights of first refusal and contract to
for your taxes. 6% ang capital gains tax. Then you pay sell.
1.5% for docstamps and then you have .8 for realproperty
taxes. 2. Perfection/ Birth of the contract
3. Consummation/ Death of the contract
In Ong vs. Ong, the consideration is 1 peso and other
valuable considerations. That’s a void sale. However, Now among the three stages which one is the longest and
because of the fact that the consideration was so small, it which one is the shortest? It depends. You can huggle for a
may be proven to be instead a donation. long time. You can enter into contract to sell while the
condition is full payment of the purchase price and the
Bagnas vs. CA. There’s a gross disproportion here contract to sell lasts for 25 years. Technically speaking, you
between the consideration stipulated and the value of the are still in the preparation stage because no contract of sale
thing and therefore it shows that the price is false and can be entered into until after full payment of the purchase
fictitious and therefore the contract is void. price.

What is the effect if the price is uncertain? Contract is Consummation or death of the contract can also take a lot
inefficacious, but if the buyer nevertheless appropriates the of time. You buy property to be amortized within a certain
object, he must pay a reasonable price. period because there is perfection of the contract from the
moment of the meeting of the minds between the parties.
The manner of payment must be agreed upon. What happens after perfection? Already consummation.
Perfection is the shortest one in the life of a contract of sale.
What is the effect of inadequacy of price in voluntary sales?
It must not affect the validity of the sale. But if it is a judicial
sale, the general rule is the court may avoid the judicial sale POLICITATION
when it is shocking to the conscience of man. Judicial sale An unaccepted unilateral promise to buy or sell even if
meaning auction. EXCEPTION is when there is a right of accepted by the other party it is not binding upon the
redemption because the smaller the price, the easier t promisor and may be withdrawn at anytime.
would be for the judgment debtor to recover the property.
That’s the reason for exception. It is to benefit the judgment Violation of the promise does not give rise of any relief of
debtor. the other party because there is no yet any valid contract.

EQUITABLE MORTGAGE. What if, deed of sale siya sa This is a BAR Q 1999 in a form of a multiple choice
property and there is a right to repurchase and it is a very question. Unsay status of public advertisements or
very small amount. Why does it raise a presumption of solicitations? They are mere invitations to make offers or
equitable mortgage? Because the transaction is in effect in only proposals.
actuality a contract of loan with mortgage. Kung nabayran
nimo tibuok, then pwede nimo makuha imong property. A promise to sell the house to B if B passes the bar exams.
ngano gamay ang repurchase price? because it represents A sold the house to C before B passed the bar exams. So
the last installment of the payment. wala na siyay matransfer later on kung inkaso man na
mupasar si B sa bar exams. So there is no more possibility
Article 1381. The following contracts are rescissible: for the contract to arise because the proposed subject
(1) Those which are entered into by guardians matter is no longer there.
whenever the wards whom they represent
suffer lesion by more than one-fourth of the Is the sale valid? Is B entitled to rentals since he was
value of the things which are the object thereof; promised to sell?
xxx
The sale is valid. A merely made an unaccepted unilateral
Article 1386. Rescission referred to in Nos. 1 xxx of promise to B in the nature of policitation. This contract does
article 1381 shall not take place with respect to not give rise to any obligation. It does not preclude the
contracts approved by the courts. owner from selling the thing to another.

Actually Obligations and Contracts na ni. Di ba lesion or Dili pud siya entitled to rentals. A promised to sell is
inadequacy of cost? unilateral, unaccepted, hence there was no contract of sale
that would transfer ownership over the thing to B. B is not
entitled to rentals because he is not the owner of the thing.
FORMATION OF THE CONTRACT OF SALE
How does a sale come about? and when it does come
about, what is its form? How should a contract of sale look OPTION CONTRACTS
An option contract is an accepted unilateral promise to buy RIGHT OF FIRST REFUSAL
or sell a determinate thing which is supported by a Sayon ra ang option contract. All you need to know is to
consideration distinct from the price. remember the definition of option contract and what
happens if there is such.
Sa laktod pagkasulti, “paliton ko na. sige paliton ko na sa
imoha. Pero dili pa nako mabayran karon dayon. I-reserve Now, let’s go to right of first refusal. This is something else
lang. for the act of reserving, tagaan na taka ug entirely. It grants a person the right to buy a property before
P10,000.00” it is offered to sell to another.

That’s an option contract. There is a consideration distinct To my mind the best way to understand what right of first
from the price. the P10k is not part of the purchase price. refusal is is to transalate it to Cebuano. “Katungod na
it’s like a fee to reserve the property in the meantime. unang mubalibad” ok? Kung muingon ka ug katungod nga
That;s how we understand an option contract. unang mubalibad, ikaw pud ang naay katungod na una nga
muoyun. You are also the person who has the right to buy it
Take note that if there is a consideration paid for the option exclusively to the exclusion of other persons. Now this does
of buying or selling something, it only gives rise to a case not mean a separate consideration because the
for damages, but not for specific performance. The right not stipulation—the right of first refusal is usually part and
to enter into contractual relations is absolute. You cannot parcel of a contract where the right is granted. It usually
compel a person to be in contract with you kung dili siya happens in a contract of lease. Ikaw ang tenant sa property.
ganahan makigkontrata sa imoha. When the seller has sold girentahan nimo na siya sa landowner and now the
the property to another person, all you have is a cause of landowner in a contract of lease says that should I decide to
action for damages. Unsay basis? sell the property in the future you are the given the right to
first refuse.
An option contract must have a consideration separate and
distinct from the purchase price. otherwise, the option ANG YU ASUNCION VS. CA
contract is void but it is valid as an offer. Offer ra gyapon 238 SCRA 602
siya. Kung accepted, then it might give rise to a perfected In the law on sales, the so-called "right of first refusal" is an
contract of sale. If there is no consideration, the contract is innovative juridical relation. Needless to point out, it cannot
void, but the offer can still be accepted until it is withdrawn. be deemed a perfected contract of sale under Article 1458
There can still be meeting of the minds. of the Civil Code. Neither can the right of first refusal,
understood in its normal concept, per se be brought within
Option contract is a continuing offer or contract by which the purview of an option under the second paragraph of
the owner stipulates with another that the latter shall have Article 1479, aforequoted, or possibly of an offer under
the right to buy the property at a fixed price when there is a Article 1319 9 of the same Code. An option or an offer
certain time or under the compliance with certain terms and would require, among other things, 10 a clear certainty on
conditions or which gives to the owner the property the right both the object and the cause or consideration of the
to sell or demand of sale. An option is not to sell or envisioned contract. In a right of first refusal, while the
purchase, but merely secures the privilege to buy. It is not a object might be made determinate, the exercise of the right,
sale of property but a sale of right to repurchase. So na kay however, would be dependent not only on the grantor's
gipalit—ang katungod na mupalit. That’s the reason why eventual intention to enter into a binding juridical relation
there is a separate consideration distinct from the price. with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it can
BAR 2002: If the parties enter into an option contract at best be so described as merely belonging to a class of
supported by separate consideration and the option preparatory juridical relations governed not by contracts
contract is not respected would the buyer ask for (since the essential elements to establish the vinculum juris
specific performance? Can the seller escape liability by would still be indefinite and inconclusive) but by, among
saying that honoring the option contract would be other laws of general application, the pertinent scattered
financially disadvantageous to him? provisions of the Civil Code on human conduct.
It will only give rise for a case for damages and not for
specific performance. The seller cannot escape liability by What the SC is saying here is you apply not the law on
claiming economic lesion since the seller renders an option obligations and contracts, you apply human relations.
contract as the obligation to sustain the offer until the end of That’s why you actually discuss this human relations in torts
the agreement. But it doesn’t mean that you cannot and damages.
withdraw the offer. You can sell it to somebody else. What is the status of contract of sale that was made in
violation of another parties’ right of first refusal?
So this is the basis for damages:
Article 19. Every person must, in the exercise of his If there is uniformity in terms and conditions of the owner
rights and in the performance of his duties, act with and the lessee, but the owner sells to another, the contract
justice, give everyone his due, and observe honesty of sale is rescissible.
and good faith.
BAR Q: A 20-year lease contract over a building, the
That’s the case of Ang Yu vs. Asuncion. We will discuss lessee is expressly granted the right of first refusal
that later. should the lessor decide to sell the land and the
building. However the lessor sold the property to a
Now, if there is no consideration and the option contract is third person who knew about the lease and in fact
violated or the agreement was violated, then there is no agreed to it. lessee brought an action against the lessor
cause of action. it is just a mere offer—a mere promise. seller and the buyer to rescind the sale and to compel
speific performance to his right of first refusal in the
If there is consideration and it was violated, damages only. sense that the lessor should execute a deed of
You cannot ask for specific performance. absolute sale in the name of the lessee of the same
price.
If there is no consideration, but the offer is not withdrawn,
the property is not sold to anybody in the meantime, then SUGGESTED ANSWER UP: The action filed for the lessee
the buyer can still buy. for both rescission of the sale ans specific performance
which was violated should prosper. The ruling in Equitorial
Realty vs. Mayfair, a case with similar facts, sustains both right of first refusal.
rights of actions because the buyer in the subsequent sale
knew the existence of the right of first refusal. Hence, in bad The elements of sale The elements of sale
faith. are already definite except the subject
when the option matter are yet to be
On one hand we have Equitorial. On the other hand, we contract is created firmed up.
have Ang Yu Asuncion. Practically the same principles but
different rulings. Why? Presence of bad faith on the part of Dependent on the It’s not dependent only
the transferee. That’s why Ang yu is also an alternative exercise of the option upon grantor’s
answer. The action will not prosper. The court ruled ina itself. If the person eventual intention to
unanimous en banc decision that the right of first refusal holding the option enter into a sale with
founded upon contract, must be in a quasi delictual decides to buy, he can the other but also on
relationship covered by the principles of human relations buy based on the terms that are yet to
and unjust enrichment. Hence, the action that would terms already be firmed up.
prosper is an action for damages in a proper forum for the established in the
purpose. option contract.

Violation would give depending on whether


Secondly, the right of first refusal implies that the offer of a rise to a case for or not there is good
person in whose favor that right was given must conform damages and not for faith or bad faith, and
with the same terms and conditions as those given in the specific performance, uniformity of the terms,
offeree. This case however, Eugenio, the lessee, was violation here would
offeringonly 4.5M instead of 5M which was consideration of give rise for an action
the sale. So there has to be uniformity in the terms. for rescission or
damages.
Kung unform ang terms ang imohang offer sa holder of right
of first refusal and the buyer, ikaw dapat ang i-prefer. If Rescission can be a
there is bad faith, of course, rescission and specific remedy because
performance of the right of first refusal. unless the contract of
sale is not rescinded,
2014 BAR Q: Tess leased her 1,500 sqm lot in Antipolo the prty cannot
City to Ruth for a period of 3 years, from January 2010 exercise his right of
to February 2013. On March 19, 2011, Tess sent a letter first refusal. That’s the
to Ruth, part of which reads as follows: premise there. That;s
the rational ngano
“I am offering you to buy the property you are presently kailangan nimo i-
leasing at P5,000.00 per sqm or for a total of rescind. Kung dili nimo
P7,500,000.00 You can pay the contrat price by i-rescind ang
installment for 2 years without interest. I will give you a pagbaligya sa third
period of 1 year from receipt of this letter to decide person, the latter who
whether you will buy the property.” is not holder of right of
first refusal, dili pwede
After the expiration of the lease contract, Tess sold the mabaligya sa imoha
property to her niece for a total consideration of P4M. kung wala niya gi-
exercise ang iyang
Ruth filed a complaint for the annulment of the sale, right of first refusal. I-
reconveyance and damages against Tess and her cancel sa to nimo.
niece. Ruth alleged that the sale of the leased property Otherwise, there would
violated her right to buy under the principle of right of be double sale.
first refusal.
Specific performance
Is the allegation of Ruth tenable? is not a remedy! There
is no contract between
OPTION CONTRACT RIGHT OF FIRST the two of you except
REFUSAL a contract of lease with
Right granted under a Usually something the right of first refusal.
contract distinct from granted in the same
the sale. contract which is Damages is a remedy
usually a lease at the if the right is
inception of the unjustifiably
contract disregarded under the
circumstances
Supported by a Does not need a described in the law.
consideration distinct separate
from the price consideration. It is SUGGESTED ANSWER: the contention is tenable. What is
presumed that the involved in the case is not a right of first refusal but a mere
consideration is the offer. Offer to buy lang. A right of first refusal is a right
same as the right of granted to a party offered to buy those property before he
the original contract offers to sell to anyine else. An option on the other hand is
and that is the lease. a contract on which the owner of the property agrees to the
Kung unsa tong person that he shall have the right to buy the propetty at a
consideration sa lease, fixed price within a certain time this must be supported by a
that’s the consideration same by the price.
consideration of the
In the instant case, this is just an option contract. As it rescinded. Specifically ownership can perforce the
grants Ruth a fixed period of 2 years to buy the property at because there is consolidated deed of the
a price certain of 7.5M.Furthermore, because the option of fundamentally breach of person as buyer.
this case is without consideration, it may be withdrawn at
obligation to pay the
anytime and the property can be sold to another person.
DECEMBER 2, 2015 purchase price.

FORMATION OF SALE

Part of formation of contract of sale: The vendor has lost control Precisely because there is a
over the property and can reservation of ownership,
1. Option contract recover it only if the contract title remains in the vendor.
2. Right of first refusal is rescinded. He cannot just therefore, no rescission is
3. Contract to sell take back ownership. You required.
-take note here, just like contract of sale, is a have to file an action for
bilateral contract. In other words, both parties to the rescission of the contract.
agreement would have their respective obligations.
The prospective seller while reserving the
ownership of the subject property despite the ____
of the prospective buyer, binds himself to sell the
property exclusively to the prospective buyer upon CONTRACT TO SELL CONDITIONAL SALE
the fulfilment of the condition that is full payment of
the purchase price. First element is absent. The first element of consent
is present although it is
-take note that this is not a contract of sale. Why? condition upon the happening
Precisely because the first element which is of the event. So there is no
consent is absent. Take note, that in the contract to delay in the perfection of the
sell, there is already consideration. There is already contract. Contract is
determinate subject matter, but consent is the one prefected. It is perfectly valid,
that is not present. The seller does not consent to but its performance is subject
transfer ownership to the buyer until the happening to certain conditions.
of event which may be full payment of the price
which is a suspensive condition. The non-fullfilment
of which prevents the obligation.
Now, how do we illustrate this?

Now important to all of us in trying to prepare for the bar Coronel vs. CA
examinations would be the distinctions between contract to
Here, naay document denominated as receipt of
sell and contract of sale. Why? Because practically every
downpayment which provides the following details: Juan
year in the bar examinations, except this year, naa juy
has given Maria 50K as downpayment for a lot owned by
pangutana relating to contract of sale vs. contract to sell.
Maria. Since the lot was named under Maria’s father, who is
dead, Maria will have the lot transferred under her name.
after Maria already had a transfer certificate of title in her
CONTRACT OF SALE CONTRACT TO SELL name, that’s the time that she will execute Absolute Deed of
Sale. Maria sold the lot to Pedro. Can Juan sue Maria for
Title passes to the buyer There is a reservation of the specific performance? Or is it simply a contract to sell
upon delivery of the subject ownership on the part of the situation? or was is ripen to a conditional sale because the
matter. vendor which means that treatment is very very different.
while property has been
delivered, it does not According to SC, it is a conditional sale. The receipt shows
presume a transfer of that Maria intended to transfer title to Juan if not for the fact
ownership. It is precisely that the lot is still in the name of her father but Maria did not
the payment of the reserve title of the lot and agreed to make absolute sale in
purchase price that would the name of Juan. Juan can sue for specific performance
give rise to the obligation of with damages.
the seller to sell and
therefore transfer the
ownership to the subject Now, in the bar examinations in 1997, how do you compare
matter of the contract. a conditional sale from an absolute sale?

CONDITIONAL SALE ABSOLUTE SALE


Nonpayment is a negative Full payment is a positive
Contract of sale where the Is a contract where the
resolutory condition. Kung resolutory condition which
seller transfers ownership to seller has transferred
wala ka kabayad, it will give means that when you pay
the buyer subject to the ownership over the property
the other party the cause of the full purchase price of a
happening of the suspensive to the buyer when the latter
action to have the contract contract of sale, then
condition. has paid to the seller a full That is the principle that you have to remember.
consideration of sale.

What is that suspensive SECOND PHASE: PERFECTION


condition more often than
not? It is still full payment of There’s the meeting of the minds. Consent, which
the purchase price. according to the Civil Code, the offer must be certain and
the acceptance, absolute. Remember that a qualified
acceptance constitues a counter-offer. therefore a
counteroffer would not result to the meeting of the minds. It
Here’s a 2014 bar question: Nante, a registered owner of a is only when the counter offer is accepted that meeting of
parcel of land in Quezon City sold the property to Monica the minds would result.
under a Deed of Sale which states as follows:
Take note that in consent, there is a meeting of the offer
“Wherefore, in consideration of a sum of 500K value to be and acceptance of the thing and the cost which constitute a
paid and delivered today in receipt of which shall be contract. Sa ato pa, nagkasinabot na ta. Buyer and seller
acknowledge by me of the full satisfaction of Monica, have already agreed that I am going to sell something in
referred to as Vendee, I hereby sell, transfer, cede, convey exchange for how much? That’s what happened in the
and sign as by this presents I hereby sold, transferred, meeting of the minds.
ceded and conveyed and assigned a parcel of land covered
by TCT 2468 in favor of the Vendee.” After delivery of the
initial payment of 100k, Monica immediately took
possession of the subject lot. 5 months after, Monica failed Article 1319 is still your provision of choice here.
to pay the remaining balance of the purchase price. Nante
filed an action for recovery of the possession of the Article 1319. Consent is manifested by the meeting of
the offer and the acceptance upon the thing and the
property. Nante alleged that the agreement was one to
cause which are to constitute the contract. The offer
sell—a contract to sell which was not consummated as the must be certain and the acceptance absolute. A
full contract price was not paid. Is the contention of Nante qualified acceptance constitutes a counter-offer.
tenable?
Acceptance made by letter or telegram does not bind
Now the answer to this question would depend upon the the offerer except from the time it came to his
classification of the transaction between the parties Nante knowledge. The contract, in such a case, is presumed
and Monica. If you classify it as a contract to sell, therefore to have been entered into in the place where the offer
Nante is correct. He can simply recover the possession of was made.
the property because he owns it, but if it is a contract of
sale, albeit a conditional sale, was there proper restoration Now, if you’re going to remember this provision, in all
and is there a need to rescind the contract to recover probability what you are going to remember is Article 1319
first paragraph. Second paragraph is not so much fun to
ownership/ possession of the property.
memorize.
So my answer here is: Nante is not correct. Under contract
When we are talking about perfection already, we cannot
to sell, the separate takes the title of the thing to be sold
avoid talking about earnest money. This is sometimes alled
until the purchaser fully pays the agreed purchase price. the earnest payment or earnest or argentum dei or “god’s
full payment is a positive suspensive condition. The silver” because according to Roman law tradition, once you
nonfullfilment of which is not a breach of contract but have “god’s silver”, you actually have power over a land.
merely an event that prevents the seller from conveying title But actually, it is for the purchase of slaves. Kung mubayad
to the purchaser. ka anang argentum dei, you literally have the power of god
over a slave. So what is it? it is a deposit towards a
In this case did Nante contract the name ownership purchase made by a buyer to demonstrate that the buyer is
property only until full payment of the purchase price to serious or earnest about granting to complete the purchase.
Earnest money is a deposit made by the buyer towards a
transfer property? NO, there is no reservation. In fact, when
downpayment in evidence of good faith when the purchase
the terms of the contract, it appears to be conveyed has been decided. The earnest money becomes part of the
ownership of the property. thus, full payment of the price downpayment of the offer is accepted. If the offer is
was not a condition precedent to the transfer of ownership, rejected, the earnest money is given back and so earnest
but a condition subsequent thereto. It is not a contract to money is forfeited conversely if the buyer holds out of it.
sell. The remedy of recovery of possession therefore must that’s the short summary of what we need to know relating
to earnest money.
be improper remedy. What Nante should have filed could
be an action for rescission under Article 1191 of the Civil
Article 1482. Whenever earnest money is given in a
Code.
contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract.
So there is a big difference specifically because the remedy
is different.
How can you be sure that it is earnest money? Because at
most what Article 1482 provides would be a rule. A rule that
If it is a contract to sell, no need to rescind. If it is a
you can apply to determine whether or not earnest money
conditional or absolute sale, you have to file an action for was paid. Not every payment of money during the stage of
rescission to recover the ownership. The ownership had not the life of the contract of sale would be considered as
been reserved. earnest money. So it actually depends on the
circumstances beyond the payment of the supposed (d) Earnest money merely creates disputable presumption
“earnest money” of the contract of sale. In option, payment is evidence of a
contract of privilege to buy at a certain property at a certain
So if the earnest money was paid during the preparation or price and for a certain period,
negotiation stage in the contract of sale, is it earnest
money? Naganegotiate pa lang ko. NO!!! it is not earnest (e) Earnest Money can be recovered if there is stipulation.
money. It can be considered at least a guaranty that the Option Money, cannot be recovered unless stipulated.
buyer would not backout.
(f)The payment of Earnest Money would mean that it is
If it is paid during the perfection stage, it presupposes the partially executed hence, Statute of frauds will not apply
meeting of the offer, acceptance of the thing and the cause while Option Money as a consideration is not governed by
which constitutes the contract of sale, then it is earnest Statute of frauds.
money and then you apply Article 1482. It is already proof
of perfection.
BAR 2006
What if earnest money was paid during the consummation
stage as part of the downpayment of the purchase price? it Biong and Linda are spouses who own real property. Ray
is also considered as earnest money. Proof of perfection prepared a deed of sale and a manager’s check for P2 M.
and the buyer would already be obliged to pay the balance After receiving the P2M, Biong signed the deed of sale but
of the purchase price. Linda was abroad. When Linda returned, she refused to
sign since she changed her mind. Linda filed a case to
If it is a means for the preservation of the property, for the nullify the sale and for damages against Ray. Will the
prospect of the future transaction, it is not considered as case prosper?
earnest money. The rules on option would instead be
applied. UP SUGGESTED ANSWER: Linda’s case to annul the sale
will not prosper since all the elements of a perfected
Take note na kung option, it is more of a reservation of the contract of sale are present. When the couple’s offer was
thing. Mao na siya ang reservation for the prospect of the accepted by Ray and the acceptance was made known to
future tranaction. “You give me time and I’ll pay the the couple, there was already a perfected contract of sale.
purchase price.” That’s option. That’s not earnest. Absent any ground to annul, Linda’s action will not prosper

Now, take note that the payment of earnest money merely


relates to a disputable presumption that contract of sale
was already perfected. To be conclusive, payment of FORM OF SALE
earnest money must be simultaneous with or later than the
concurrence of the requisites of a contract of sale.
Should sale be in writing to be effective? Valid? Or
enforceable?
Sa ato pa, klaro ang cause or consideration of the contract.
Klaron na ang suject matter and then there is payment of Article 1483. Subject to the provisions of the Statute of
earnest money,. That is when it is perfected.
Frauds and of any other applicable statute, a contract
of sale may be made in writing, or by word of mouth, or
Now, kung dili pa klaro ang cause nibayad na ka ug kwarta, partly in writing and partly by word of mouth, or may be
it cannot be considered earnest money because the inferred from the conduct of the parties.
lements of the contract are not yet firmed up.
So it is valid in whatever form it may enter into. Pwede
How would you distinguish earnest money and option sulat. Pwede oral. Sabot2 lang. pwede partyly in writing and
money? pwede partly by word of mouth or worse, it can be inferred
from the conduct of the parties.
Adelfa vs. CA
G.R. No. 111238 However, there are exceptions:
January 25, 1995
REGALADO, J.:
1. Statute of frauds
There are clear distinctions between earnest money and
option money, viz.: Article 1403. The following contracts are
(a) earnest money is part of the purchase price, unenforceable, unless they are ratified:
while option money ids the money given as a
distinct consideration for an option contract; (2) Those that do not comply with the Statute of
Frauds as set forth in this number. In the following
(b) earnest money is given only where there is cases an agreement hereafter made shall be
already a sale, while option money applies to a sale unenforceable by action, unless the same, or some
not yet perfected; and note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent;
(c) when earnest money is given, the buyer is evidence, therefore, of the agreement cannot be
bound to pay the balance, while when the would-be received without the writing, or a secondary
buyer gives option money, he is not required to evidence of its contents:
buy.

To my mind, that case is only good if the question is only (a) An agreement that by its terms is not to be
3%, but if it is for a 5% you better add these: performed within a year from the making thereof;

(b) xxx
Why is it that your obligation is to deliver? Because
(c) xxx ownership is transferred to the buyer upon actual or
constructive delivery.
(d) An agreement for the sale of goods, chattels or
things in action, at a price not less than five Is there a possibility that there is delivery but it will not
hundred pesos, unless the buyer accept and produce transfer of ownership? Pwede ba nimo i-stipulate
receive part of such goods and chattels, or the that there is no transfer of ownership by delivery? Of
evidences, or some of them, of such things in course.
action or pay at the time some part of the purchase
money; but when a sale is made by auction and
Article 1478. The parties may stipulate that ownership
entry is made by the auctioneer in his sales book,
in the thing shall not pass to the purchaser until he has
at the time of the sale, of the amount and kind of
fully paid the price.
property sold, terms of sale, price, names of the
purchasers and person on whose account the sale
is made, it is a sufficient memorandum; Example would be purchase of appliances payable in 6
months. Adto ka karon ug LYR Marketing Corp or Imperial
(e) xxx Appliance Plaza. Madala na nimo ang refrigerator
immediately after you contracted. Unya karon wala nimo na
( f ) xxx nabayran, does it mean na imoha na na? dili. Kwaon na
balik sa tag-iya bahalag baho na kaayo na imong
In relation to: refrigerator.

Article 1405. Contracts infringing the Statute of Let us go to the different types of delivery under Article
Frauds, referred to in No. 2 of article 1403, are 1497, etc. of course the most preferable would be physical
ratified by the failure to object to the or actual delivery.
presentation of oral evidence to prove the
same, or by the acceptance of benefit under Article 1497. The thing sold shall be understood as
them. delivered, when it is placed in the control and
possession of the vendee.
Remember that statute of frauds is an evidentiary
rule. Remember our Evidence class? I always Physical delivery would also be applicable for those
discuss this after parol evidence rule. The main subjects that are capable of being transferred from one
distinction is parol evidence rule what you are trying hand to another. A book, sack of rice, movable proeprties
to prove is other terms and conditions that are not would be capable of manual delivery. On the other hand, if
stated in the contract itself. Under statute of frauds, it is not capable of physical delivery such as in the case of
what you are trying to prove is the contract itself. land or other immovables, constructive delivery.
2. Sale of realty through an agent
-remember agent without authority to sell,
Article 1498. When the sale is made through a public
remember it is VOID sale.
instrument, the execution thereof shall be equivalent to
the delivery of the thing which is the object of the
Article 1878. Special powers of attorney are
contract, if from the deed the contrary does not appear
necessary in the following cases:
or cannot clearly be inferred.
xxx
(5) To enter into any contract by which the
ownership of an immovable is transmitted or With regard to movable property, its delivery may also
acquired either gratuitously or for a valuable be made by the delivery of the keys of the place or
consideration; depository where it is stored or kept. [traditio
xxx symbolica]

let us supposed that you have sold the property Article 1501. With respect to incorporeal property, the
without the authoirty of the owner, signed it in his provisions of the first paragraph of article 1498 shall
behalf, the resulting sale will be null and void govern. In any other case wherein said provisions are
because your authority was not in the form of not applicable, the placing of the titles of ownership in
special power. Balik2 jud ni sa bar. the possession of the vendee or the use by the vendee
of his rights, with the vendor's consent, shall be
understood as a delivery.
Let’s go to the third phase:
CONSUMMATION OR PERFORMANCE STAGE We also have longga mano. You point out.

In wiritng or in paper there is also what we call traditio brevi


Let’s go first with the obligations of the seller. Of course mano which seems to be an opposite of longga mano, but
under Article 1458. By the contract of sale one of the actually they are not opposites. Ang traditio brevi mano kay
contracting parties [seller] obligates himself to transfer delivery to the buyer who already had the possession
the ownership and to deliver a determinate thing, and before the sale such as when the landlord sells to his
the other to pay therefor a price certain in money or its
tenants the property. is there a need to deliver the land? No
equivalent. Those are the main obligations of the seller,
but it does not mean that he does not have incidental more kay naa naman ang tenant dira.
obligations. So we will be discussing all these obligations.
So what would be the opposite of traditio brevi mano?
It includes preservation of the thing. Remember that when Traditio constitutum possesorium. What does the law say
you are obliged to give something, you are also obliged to about it? NOTHING. Although it is in the Civil Code. Article
take care of it with proper diligence of a good father of the 1500. There may also be tradition constitutum
family. That’s oblicon. possessorium. It does not say what it means.
Deganos said that the transaction between him and
So what is it? it is when you are the owner, you sold it Bordador was a sale on credit. Thus, he cannot be sued for
already but you still retain the property in some other estafa as delivery transferred ownership to him. That’s right.
capacity. Ex: house owner who sells the house who sells If there is transfer of ownership , he cannot convert or
the house as a tenant of the same. misappropriate something that he already owns. It is
therefore convereted toa mere civil obligation to pay the
Delivery can also be by means of negotiable instruments, value.
negotiable documents or title. So there is delivery of
movables by negotitation of a negotiable document of title Assuming that there was no sale, the contract was novated
and the person to whom the negotiation is made acquires into a loan when Bordador accepted the partial payment.
the right of the person to whom delivery shall be made, by How did the SC rule in this case?
the terms of the document.

Now, is it important for lawyers or for us law students to Based on the express terms and tenor of the Kasunduan at
determine whether or not delivery has the intended effect? Katibayan , Degaños received and accepted the items
What would be the legal treatment if delivery was made under the obligation to sell them in behalf of the
with the effect of transferring ownership or without the effect complainants ("ang mga hiyas (jewelries) na natatala sa
ibaba nito upang ipagbili ko sa kapakanan ng nasabing
of transferring the ownership? There is specifically in
Ginang"), and he would be compensated with the overprice
criminal law. as his commission ("Ang bilang kabayaran o pabuya sa
You are an agent. You sell, for example, a jewelry akin ay ano mang halaga na aking mapalabis na mga
collection. So a jewelry was delivered to you and then you halagang nakatala sa ibaba nito."). Plainly, the transaction
converted the jewelry by your own use. What would be the was a consignment under the obligation to account for the
effect? What type of possession do you have over the proceeds of sale, or to return the unsold items. As such, he
was the agent of the complainants in the sale to others of
jewelry? Is it possession as an agent? Would it open you up
the items listed in the Kasunduan at Katibayan.
to a criminal liability? Depending upon the type of delivery.
In contrast, according the first paragraph of Article 1458 of
For example, contract of commodatum, no transfer of the Civil Code, one of the contracting parties in a contract of
ownership na di ba? When you convert the property for sale obligates himself to transfer the ownership of and to
your own use, you are liable for estafa. But if it is a contract deliver a determinate thing, while the other party obligates
of simple loan/ mutuum, walay estafa because there is himself to pay therefor a price certain in money or its
transfer of ownership. equivalent. Contrary to the contention of Degaños, there
was no sale on credit to him because the ownership of the
items did not pass to him.
DEGAÑOS vs. PEOPLE
G.R. No. 162826
October 14, 2013 Although the novation of a contract of agency to make it
BERSAMIN, J.: one of sale may relieve an offender from an incipient
criminal liability, that did not happen here, for the partial
payments and the proposal to pay the balance the accused
The text and tenor of the relevant Kasunduan at Katibayan made during the barangay proceedings were not at all
follow: incompatible with Degafios liability under the agency that
had already attached. Rather than converting the agency to
KASUNDUAN AT KATIBAYAN sale, therefore, he even thereby confirmed his liability as
the sales agent of the complainants.
xxxx
There is a big difference because there is no transfer of
Akong nakalagda sa ibaba nito ay nagpapatunay na
ownership, there can be criminal liability.
tinanggap ko kay Ginang LYDIA BORDADOR ng Calvario,
Meycauayan, Bulacan ang mga hiyas (jewelries) [sic] na
natatala sa ibaba nito upang ipagbili ko sa kapakanan ng Ok, kaning documents of title, when was this ever asked in
nasabing Ginang. Ang pagbibilhan ko sa nasabing mga the bar? For the last 30 years, wala jud ni napangutana, sa
hiyas ay aking ibibigay sa nasabing Ginang, sa loob ng commercial law pa, pero civil law, wala.
__________ araw at ang hindi mabili ay aking isasauli sa
kanya sa loob din ng nasabing taning na panahon sa ARTICLE 1636. In the preceding articles in this Title
mabuting kalagayan katulad ng aking tanggapin. Ang bilang
governing the sale of goods, unless the context or
kabayaran o pabuya sa akin ay ano mang halaga na aking
mapalabis na mga halagang nakatala sa ibaba nito. Ako ay subject matter otherwise requires:
walang karapatang magpautang o kaya ay magpalako sa
ibang tao ng nasabing mga hiyas.9 (1) "Document of title to goods" includes any bill of
lading, dock warrant, "quedan," or warehouse
xxxx receipt or order for the delivery of goods, or any
other document used in the ordinary course of
The jewelry will be sold on commission by the seller si business in the sale or transfer of goods, as
Deganos on behalf of Lydia Bordador whom was the real proof of the possession or control of the goods,
owner of the jewelry. If he sells, he will be compensated by or authorizing or purporting to authorize the
means of a commission. Deganos did not remit the possessor of the document to transfer or
proceeds or return the jewelries prompting Bordador to file receive, either by endorsement or by delivery,
a case of estafa. goods represented by such document.
Xxx
Article 1164. The creditor has a right to the
Perfect example here is warehouse receipt. Whoever holds fruits of the thing from the time the obligation to
deliver it arises. However, he shall acquire no
a warehouse receipt can claim whatever is inside the
real right over it until the same has been
warehouse or the goods inside the warehouse. Therefore, delivered to him.
when you negotiate a warehouse receipt, assuming it is -remember that a right can either be: personal or
negotiable, then di ba ang nakabutang dira “pay to the real. When you talk about personal, it is
bearer” or “deliver to the bearer” so that is equivalent to demandable by one person against another person.
delivery. To compel you to give, to do or not do. That’s
personal right.
Now, take note the doccuments of title, serves the following
So, by ex: A entered into a contract of sale over a
purposes: piece of land on August 15. 1976, that is the date of
1. It is evidence of control, perfection. The land was contucted at A’s
possession or control of goods described. possession on January 14, 1977 and by execution
2. It is a medium of of the Deed of Sale. So before August 15, 1976, B
transferring possession and control of goods has no right whatsoever over the fruits. He has no
described without having to undertake actual right over the land even. Wala pa may contract. But
after August 15. 1976, there is already perfection
delivery.
and following Art. 1537, the moment of perfection is
What are the types of documents of title? the reckoning point from when to reckon, kanus-a
1. Negotiable ka naay right over the fruits. According to 1164, it is
– states that goods will be delivered to bearer or to a personal right only over the fruits. When does he
the order of one person have a real right? Only when he is placed into the
possession of the thing. That is on January 14,
1977.
2. Non-negotiable
-does not state that the goods referred to therein Now, what would be the consequences? If A sells
will be delivered to the bearer or the order of any the land with its fruits to another person, before the
person perfection of the contract, in August 15, 1976, he
cannot question the sale without prejudice to any
Kani pud wala pud ni gina-ask sa bar exam pero at least rights granted to him under the rules on option
man lang maagian nato. Delivery of goods to the carrier is contract. Meaning, if there is an option, he can file
deemed delivery of goods to the buyer an action for damages. That’s all he can do.

Article 1523. Where, in pursuance of a contract of sale, If A sells the land with its fruits to another on or
the seller is authorized or required to send the goods to after August 15, 1976, A can go after B only
the buyer, delivery of the goods to a carrier, whether because he has a personal right that entitles him to
named by the buyer or not, for the purpose of a remedy. So if the property is in the hands of a
transmission to the buyer is deemed to be a delivery of third person, dili na niya ma-enforce ang iyang right
the goods to the buyer, except in the cases provided ngadto. If A sold the property after on or after
for in article 1503, first, second and third paragraphs, January 14, 1977, the date of delivery, B already
or unless a contrary intent appears. has a right of recourse against the second vendee
as A has already the real right enforceable.
Unless otherwise authorized by the buyer, the seller
must make such contract with the carrier on behalf of 2. To bear for the expenses of the execution and
the buyer as may be reasonable, having regard to the registration in the absence of agreement
nature of the goods and the other circumstances of the
case. If the seller omit so to do, and the goods are lost 3. To warrant the thing sold
or damaged in course of transit, the buyer may decline
to treat the delivery to the carrier as a delivery to
himself, or may hold the seller responsible in damages. LET’S GO TO WARRANTIES…
Two types:
Unless otherwise agreed, where goods are sent by the 1. Express
seller to the buyer under circumstances in which the 2. Implied
seller knows or ought to know that it is usual to insure,
the seller must give such notice to the buyer as may
enable him to insure them during their transit, and, if Ang express warranty is naa gyud positive affirmation of the
the seller fails to do so, the goods shall be deemed to fact made by the seller. It relates to the quality of the
be at his risk during such transit. subject matter. The nature is it induces the buyer to buy the
thing relying thereon.
Let’s go to other obligations of the seller: Ex. A seller sells a car. Buy this car because it has a very
1. To deliver the fruits and accessions under Article efficient fuel consumption. 25km/liter. That is the reason
1164, 1537 why the buyer was induced to buy the car in the 1 st place.
So he purchases the thing relying thereon. If it later on turns
Article 1537. The vendor is bound to deliver the out na dili diay na iyang fuel ratio, can you hold the seller
thing sold and its accessions and accessories
in the condition in which they were upon the liable?
perfection of the contract. SC says that is simply sales talk. Kung naliba ka that is
your problem. Caveat emptor. Buyer beware. However you
All the fruits shall pertain to the vendee from can hold the seller liable if it was made by the seller who
the day on which the contract was perfected. was actually an expert. You bought the car from an expert
or a mechanic. Under express warranty, you can hold him such an extent that, had the vendee been aware thereof, he
liable. would not have acquired it or would have given a lower
Let’s go to implied warranties. price for it; but said vendor shall not be answerable for
Just remember what they are. patent defects or those which may be visible, or for those
Warranty that the seller has the right to sell. which are not visible if the vendee is an expert who, by
Warranty against eviction reason of his trade or profession, should have known them.
Warranty against non-apparent servitudes
Warrant against hidden defects Visible pa ang supposedly na defect o dili?
Warrant as to fitness and quality If it’s visible, it’s caveat emptor. Sala nimo wala nimo na
discover.
Warranty that the seller has the right to sell at the time of But if it can only be discovered by closest scrutiny and with
consummation not at the time of perfection. Requirement of the aid of experts then that’s a hidden defect.
ownership is at delivery stage lang.
You buy a car.
Article 1547. In a contract of sale, unless a contrary Shiny. New. Gamay lang na mileage. Look’s well-
intention appears, there is: maintained. What you do not know, sa engine.
If there’s a defect in the engine that you don’t know about,
(1) An implied warranty on the part of the seller that that can be considered as a hidden defect. Perfect
he has a right to sell the thing at the time when the example. Pero I realized na naay mga tao nga madungog
ownership is to pass, and that the buyer shall from
pa lang nila ang makina, kabalo na sila kung naay defect.
that time have and enjoy the legal and peaceful
possession of the thing;
Story about Ma’am and Sir selling their Honda Fit (with TV).
(2) An implied warranty that the thing shall be free
from any hidden faults or defects, or any charge or Pagkadungog niya (mekaniko) sa makina, he knows
encumbrance not declared or known to the buyer. already na defective so I was not able to sell the car. But
eventually I sold it at a very low price. Nalugi kog 100K just
This article shall not, however, be held to render because it looked good.
liable a sheriff, auctioneer, mortgagee, pledgee, or
other person professing to sell by virtue of authority
in fact or law, for the sale of a thing in which a third
person has a legal or equitable interest. Art 1566

Art. 1566. The vendor is responsible to the vendee for


Next is the warrant of eviction. What do you need to any hidden faults or defects in the thing sold, even
remember to exercise the warranty? though he was not aware thereof.

What are the requisites: This provision shall not apply if the contrary has been
stipulated, and the vendor was not aware of the hidden
Whenever by a final judgment based on a right prior to the
faults or defects in the thing sold.
sale or an act imputable to the vendor, the vendee is
deprived of the whole or of a part of the thing purchased.

In order that a vendor's liability for eviction may be What’s your remedy if there’s a violation?
enforced, the following requisites must concur—a) there
must be a final judgment; b) the purchaser has been 2 remedies:
deprived of the whole or part of the thing sold; c) said
The vendee may elect between
deprivation was by virtue of a right prior to the sale made by
the vendor; and d) the vendor has been summoned and 1. Withdrawing from the contract and
made co-defendant in the suit for eviction at the instance of 2. Demanding a proportionate reduction of the price
the vendee. with damages in either case
The term "unless he is summoned in the suit for eviction at
the instance of the vendee" means that the respondents as So rescission or an action quanti minoris—pagamyan ang
vendor/s should be made parties to the suit at the instance presyo. Proportionate reduction of the price. If you want to
of petitioners-vendees, either by way of asking that the pursue with the sale otherwise you can rescind.
former be made a co-defendant or by the filing of a third-
party complaint against said vendors.
(Escaler v CA 138 SCRA 1)
Now related to hidden defects would be redhibitory defects.
Question revolves around whether or not there is final Art 1576
judgment already.
Art. 1576. If the hidden defect of animals, even in case a
Now we go to warranty against hidden defects: professional inspection has been made, should be of
such a nature that expert knowledge is not sufficient to
Article 1561. The vendor shall be responsible for warranty discover it, the defect shall be considered as
against the hidden defects which the thing sold may have, redhibitory.
should they render it unfit for the use for which it is
intended, or should they diminish its fitness for such use to
But if the veterinarian, through ignorance or bad faith The effect therefore is 2 or more persons would be claiming
should fail to discover or disclose it, he shall be liable ownership and possession over the same subject matter of
for damages. the contract.

We are talking here of animals. Like if you buy a dog diba Same property sold to two different persons.
naa nay papeles if pure bred ba. You won’t normally look at
that because you buy puppies because they are cute. Later Art. 1544. If the same thing should have been sold to
on na na nimo ma determine. Will you be able to notice the different vendees, the ownership shall be transferred to
defect dayon? I’m assuming na dili. If you say na “sir, I the person who may have first taken possession
can.” What are you a dog expert or something? So the thereof in good faith, if it should be movable property.
defect shall be redhibitory.
SO IF MOVABLE ANG PROPERTY – 1st in possession is
preferred no problem there

A redhibitory defect. What does that mean? Kana bang


hidden defect is that considered redhibitory? This is a Civil
Code made for lawyers, not for laymen. Redhibitory does Should it be immovable property, the ownership shall
not refer to the nature of the defect but to the nature of the belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
remedy given by law.

It will be first to register, okay?

The remedy of redhibition. To redhibit. The presence of a


defect which renders the thing unfit for the use it is intended
allows the seller to file redhibitory actions namely to have Should there be no inscription, the ownership shall
the sale avoided or rescinded. So redhibitory is another pertain to the person who in good faith was first in the
word for cause of rescission. Ana lang na. Rescission or possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good
quanti minoris. faith.

And finally with respect to obligations of the buyer.


How do we ensure that when you take the bar
We already talked about the obligations of the seller. examinations, a double sale question would be really
Transferring ownership, preserving the thing. addressed by you?

Unsa ang sa buyer? Of course to pay for the price of the Memorize 1544.
thing sold not only under art 1582 but also in 1458 to pay
Is it simply a case of prior possession? No. It depends. For
thereof to pay a price certain in money or its equivalent and
movable property of course it is prius in temporae _
accept its delivery. If everything is up to specification as to
meaning whoever took possession first in good faith, it’s
quantity and quality have been satisfied by the seller you
yours if it is movable property.
have to accept delivery you cannot refuse. And because
delivery is for your benefit such that you will obtain But remember na dili lang time imohang factor diha. You
ownership by the thing, you have to pay for expenses of have to determine also the good faith or the bad faith of the
delivery. buyer. Even if you are first in possession but you are in bad
faith then you can’t be preferred under the law.

What else?
Problematic Sales.
Immovable property what do you have to remember?
It is not a smooth transaction.
Registration is paramount.
3 situations here:
Whoever first registers in the Registry of Property, the sale
1. Double Sale is preferred. But again there’s that requisite of good faith.
2. Sale by Non-Owner
If both did not register, ownership pertains to the one first in
3. Sale by One with Voidable Title
possession. In the absence of possession, the person who
presents oldest title. Pinakauna nga transaction.

Let’s go first to double sale which is the easiest to


understand. We are talking here of what provision of law
Ayha pa dayon ta mag first in possession. So it’s actually
1544 if I am not mistaken.
the last rather than the first.

A double sale covers a situation whereby particular property


Bar Qs 2001
movable or immovable is sold by one vendor to two or more
vendees who do not represent the same class.
On June 15, 1995, Jesus sold a parcel of land to Michael. Pagbaligya nakog usab kang B, mahibal-an ba ni B na
On June 30, 1995, he sold the same land to Jose. gibaligya na nako ning yuta na ni just by looking? No.

Who has a better right if: Ex. On Jan 14 A sold to B his car a retro or with right of
repurchase. They stipulated that the right of repurchase can
the 1st sale is registered ahead of the 2nd sale with be had at any time within 1 year from the date of the sale.
knowledge of the 2nd vendee meaning pag baligya kay 2nd
vendee, kabalo siya nga naay first sale nga nahitabo sa On Aug 15 A sold the same car to C with a stipulation that
property. delivery of the car can be made within 1 month.

In the 2nd situation, the 2nd sale is registered ahead of the Is there double sale?
1st sale which the 2nd buyer knew of.
Both contracts must be valid sales. There is no double sale
Pareha ra ba o dili? if at least one of the contracts conveying the property is not
valid.
So in the 1st situation, the 1st buyer has a better right if the
sale is the first to be registered even if the 1st buyer knew of What if one contract is made with the consent of one
the 2nd sale. The fact that he knew of the 2nd sale at the spouse? And the other sale is made by one spouse without
time of the registration does not make him as acting in bad the consent of the other? One is void, and one is valid.
faith because the sale to him was done in a prior time. What There cannot be a double sale. Both contracts must purport
creates bad faith is knowledge of a previous sale not to be valid sales.
necessarily a later sale. Gi palit nimo ang property. And
then later on you have knowledge na gi baligya na pud Bar Q in 2010 Read that.
usab. It does not matter because at the time it was sold to
you, it was okay. X was the owner of an unregistered parcel of land in
Cabanatuan City. As she was abroad, she advised her
What about the 2nd one. sister Y via overseas call to sell the land and sign a contract
of sale on her behalf.
The 1st buyer is still preferred. The 2nd buyer knew that the
property had been sold to somebody else and acted in bad Y thus sold the land to B1 on March 31, 2001 and executed
faith. a deed of absolute sale on behalf of X. B1 fully paid the
purchase price.
What else do we need to remember under art 1544?
B2, unaware of the sale of the land to B1, signified to Y his
Both conveyances must be sales. If one is a sale and the interest to buy it but asked Y for her authority from X.
other is mortgage there is no double sale. It does not matter Without informing X that she had sold the land to B1, Y
sought X for a written authority to sell.
if they are registered are not. The objects of the contract
are different. One is for sale and the other is for security,
X e-mailed Y an authority to sell the land. Y thereafter sold
okay?
the land on May 1, 2001 to B2 on monthly installment basis
for two years, the first installment to be paid at the end of
A sold a parcel of land to B. After a week A mortgaged the
May 2001.
property to C. C with the knowledge of the latter registered
the mortgage. Who is preferred? Of course ang sale. Kay si Who between B1 and B2 has a better right over the land?
C, mortgage lang ng iyaha.C will not be given any Explain.
preference. 2nd, when A mortgaged the property, he was no
longer the owner. C’s knowledge of the previous sale
makes him a mortgagee in bad faith.
Email
Remember the requirement with respect to pledge,
mortgage, and antichresis. The pledgor or mortgagor must What’s the authority to sell here? E-mail. What’s the
be the absolute owner of the thing pledged or mortgaged. requirement under 1878 ? it has to be in a special power of
attorney. So who between B1 and B2 has the better right?
So technically speaking, pag baligya, it cannot be
mortgaged anymore by the creditor. Okay? Another thing that you have to remember, it’s an
unregistered parcel of land.
Both contracts must purport to convey the same subject
matter to different vendees in a way that delivery to one of Remember that if it is registered, you have the convenience
them is impossible. of the Torrens Title going in your favor.

So pag baligya nako kang A, it is with the intention of If unregistered land, there is a different procedure.
parting with the property already.
Answer is neither b1 or b2 has the right over the property.
Pag baligya nako kang B ug usab, alangan ideliver pud Neither sale is valid.
nimo.
Since it is unregistered, the seller does not have the
So in the case of land let’s suppose. Baligya nako kang A. authority to sell. Simple. Gi violate ang 1878 and it is
Di baya capable of physical delivery ang yuta. unregistered land.
Unsa man diay ang kinahanglan kung unregistered? PD Next voidable title.
1529 Property Registration Decree. No deed, conveyance,
mortgage, lease or other instrument affecting land not Katong Aznar v Yapjanco we are talking about void title.
registered under the Torrens System shall be valid except Kinawat e.
as between the parties thereto. It does not affect third
So let’s talk about seller having voidable title.
persons.
Art 1506 the situation is the seller has a voidable title but
So you have to register the instrument in a manner
such title has not been avoided at the time of the sale.
prescribed under art 113 of pd 1529.
Remember that a voidable contract is valid until it is
Now we’re done with double sales. annulled. The buyer acquires good title to the goods if he is
in good faith as a purchaser for value and he has no notice
of the defect of the seller’s right.

Sale by non-owner The time here is the time of delivery because it is the time
there is transfer of ownership. So very important gyud na.
The main law here is art 1505. The difference between perfection and consummation.
When is ownership required? At the time of delivery not at
The goods here are sold by a person who is not the
owner thereof, and who does not sell them under the time of creation. Ex A and B already agreed to the sale.
authority or with the consent of the owner. A has a voidable title. B does not know about it. A’s title is
What’s the effect? annulled after perfection but before delivery. What is the
The buyer acquires no better title to the goods than the effect?
seller had, unless the owner of the goods is by his
conduct precluded from denying the seller's authority NO valid delivery can be made. No right to transfer
to sell. ownership anymore. B does not obtain good title over the
The status of the sale is VOID in the case of DBP v CA goods.
1995.
Let’s change the facts a little bit.
Let’s apply the case to Aznar v Yapchanco.
A and B already agreed to the sale. A has voidable title. B
Atty. Batacan made it a point to distinguish this from the does not know about it. Annulment happens after perfection
case of EDCA Publishing v Santos. and after delivery. Let’s assume that B is an innocent
purchaser for value. B obtains good title to the goods
A takes B’s car without his consent. Sells it to C who does
because the title was annulled after delivery na. As long as
not know about it. What Is the effect of kana bitawng walay
he is an innocent purchaser for value and he is in good
knowledge ang usa ka 3rd party? Pwede siya mahimong
faith.
purchaser for value. If the person selling to him is the owner
of the property. Kinsa man ning innocent purchaser for value?
Ruling: C does not acquire the title to the car. B was In Property, Sales, Land Titles, this innocent purchaser for
unlawfully deprived of his car under 559 … value and in good faith is a privileged animal.

Article 559. The possession of movable property acquired Even if the root of your title is a forged deed, you can
in good faith is equivalent to a title. Nevertheless, one who become the owner of the property. The recourse of the real
has lost any movable or has been unlawfully deprived owner would be after the compensation fund under PD
thereof, may recover it from the person in possession of the
1529 for damages.
same.
One who buys the property of another without notice that
If the possessor of a movable lost or which the owner has some other person has a right to or an interest in such
been unlawfully deprived, has acquired it in good faith at a
property pays a full and fair price for the sale at the time of
public sale, the owner cannot obtain its return without
reimbursing the price paid therefor. such purchase or before he has notice of the claim or
interest of some other person in the property.

Jurisprudence
Exceptions to the rule:
Tagatac v Jimenez
When the owner by his conduct is precluded from denying
A sold his car to B. B issued check as payment. The check
seller’s authority and when the contrary is provided for in
bounced. C bought the car from B in good faith and for
the court of laws. Statutory power of sale or under order of
value despite the fact that there is failure of consideration.
a court of competent jurisdiction or when the sale is made
in a merchant’s store. Ruling: C acquires good title to the car. A can only rescind
the sale but the sale must be set aside in the court 1st
Pay particular attention to Art 1434. The situation here is a
before A can recover title but A has to reimburse C for the
non-owner sells a thing and delivers it to the buyer. Later on
price paid.
the seller becomes the owner. In effect, title is validated.
Invalid before because he has no title. But when he Take note of the difference of Tagatac v Jimenez and Aznar
acquired it, whatever the defect in his title was actually v Yapjanco.
cured by the subsequent purchase.
Using a falsified manager’s check, Justine as the buyer was Sa kadaghan sa alternative answer diba, if you are not sure
able to take hold of a 2nd hand car bought from United Car of your answer, do not frown. Nobody can get it perfect all
Sales, Inc. The sale was registered in the LTO. A week the time.
later, the seller knew that the check has been dishonored.
At that time, Justine was nowhere to be seen. It turned out But what matters is how well you argue your answer even if
that the car was sold to Jericho who knew nothing of the you feel that it’s not correct.
falsified check. In a suit filed by United Car vs Jericho for
Whether you like it or not, the bar exam is an essay writing
recovery of the property, plaintiff alleged that it had been
competition.
unlawfully deprived of its property through fraud and should
consequently be allowed to recover it without having to
reimburse the defendant for the price the latter had paid.
Should the suit prosper? DECEMBER 8, 2015

By citing the phrase unlawfully discharged, he is actually Recall:


talking about Aznar v Yapjanco. Aznar doctrine. If you have
been unlawfully deprived, of course you have every right Art 1506. The situation envisioned here is the seller has a
under the law to recover the property. voidable title but the title has not been avoided at the time
of the sale.
But the facts of the case more or less Tagatac v Jimenez.
Once title is voidable, it is valid until declared void.
So during our time, nag libog gyud mi.
That title has not been avoided at the time of the sale.
Suggested answer of UP:
What happens is there is a buyer who acquires the property
The suit should prosper as to the recovery of the car. in good faith and for value without notice of the defect of the
However, since Jericho was not guilty of any fraud, and seller’s title.
appears to be an innocent purchaser for value, he should
be reimbursed for the price he paid. Now first thing that we need to determine would be what is
the meaning of the phrase “at the time of the sale”
This is without prejudice to United Car Sales Inc right of
action against Justine. The phrase means at “the time of delivery” of the subject
matter since it is the fact of delivery which transfers
As between two innocent parties, the party causing the ownership.
injury should suffer the loss. Therefore United Car Sales
should suffer the loss. So A&B for example agreed on a sale. A has a voidable
title. B does not know about it. A’s title is annulled after
Is it a lawyer’s answer? Yes! It covers every base. But for perfection but before delivery. Effect: B does not obtain
those who read the cases: good title over the thing.

The Suit will prosper because the criminal act of estafa What happens if annulment happens after perfection and
should be deemed to come within the meaning of unlawful after delivery?
deprivation under Art 559. As without it, the plaintiff would
not have parted with the possession of his car. That is of Effect: B obtains good title over the thing as long as he is
course, Aznar. an innocent purchaser for value and in good faith.

Another answer. Remember who is an innocent purchaser for value. He is


one who buys property of another without notice that some
No, the suit will not prosper. The sale is valid, and Jericho is other person has a right to or an interest in such property
a buyer in good faith. and pays a full and fair price for the same at the time of
such purchase or before he has notice that some other
Kana lang short answer. That’s UP type of answer. person has a claim or interest in the property.
You know what there’s yet another answer given by UP We also discussed the cases previously. We have the case
also. of Aznar v Yapjanco. Then we have Tagatac v Jimenez.
Ning bounce ang cheke nga dapat unta pambayad sa kotse
Under the law on sales, when a thing sold is delivered to
na iyahang gipalit. And the ruling of the SC: C obtains good
the buyer without reservation of ownership, the ownership
title to the car. A can only rescind the sale but the sale must
is transferred to the buyer. Therefore, the plaintiff should
be set aside by the court before he can recover. A must
not be allowed to recover the car without reimbursing the
reimburse C for the price he paid.
price that the latter had paid. EDCA Publishing v Santos.
We also discussed the 1998 bar question which is more or
What am I trying to drive at? There are many ways to skin a
less the same with Tagatac v Jimenez.
cat. But in the law, there are only two answers—not
alternative, not suggested. It’s either the right answer or the Using a falsified manager’s check, Justine as the buyer was
wrong answer. But even if the bar examiner is not sure of able to take hold of a 2nd hand car bought from United Car
the answer, you have to be adamant and argue Sales, Inc. The sale was registered in the LTO. A week
persuasively. later, the seller knew that the check has been dishonored.
At that time, Justine was nowhere to be seen. It turned out
that the car was sold to Jericho who knew nothing of the If the co-owner sold the entire property, including the
falsified check. In a suit filed by United Car vs Jericho for shares of the co-owners, the sale is valid only up to the
recovery of the property, plaintiff alleged that it had been share of the co-owner-seller.
unlawfully deprived of its property through fraud and should
consequently be allowed to recover it without having to EDC v Samson Oct 2014
reimburse the defendant for the price the latter had paid.
A & B during their marriage owned a parcel of land. This
Should the suit prosper?
land was inherited by their children C & D. When C and D
Take note that these 1998 bar questions were subjected to died, their children became co-owners of the property. The
many suggested answers. heirs of C sold the entire property to EDC without the
consent of the heirs of D for 3M pesos. The heirs of D filed
The first suggested answer is: an action to annul the sale to EDC.

The suit should prosper as to the recovery of the car. Naa bay right to annul ang heirs ni D?
However, since Jericho was not guilty of any fraud, and
appears to be an innocent purchaser for value, he should The SC used Art 493 of the Civil Code.
be reimbursed for the price he paid.
Article 493. Each co-owner shall have the full ownership of
This is without prejudice to United Car Sales Inc right of his part and of the fruits and benefits pertaining thereto, and
action against Justine. he may therefore alienate, assign or mortgage it, and even
substitute another person in its enjoyment, except when
As between two innocent parties, the party causing the personal rights are involved. But the effect of the alienation
injury should suffer the loss. Therefore United Car Sales or the mortgage, with respect to the co-owners, shall be
should suffer the loss. limited to the portion which may be allotted to him in the
division upon the termination of the co-ownership.
Second answer would be:
493 tells you that “okay, you can sell.” Because you are co-
The Suit will prosper because the criminal act of estafa owner. You have dominical rights over the property owned
should be deemed to come within the meaning of unlawful in common. But, the effect of any alienation or any
deprivation under Art 559. mortgage with respect to the co-owners, will be limited to
the portion which may be allotted to him after partition--
And then another answer:
upon the division of the property that terminates the
Jericho is a buyer in good faith. As a buyer in good faith, he ownership.
is protected.
A co-owner cannot rightfully dispose of a particular portion
And yet another answer: of the co-owner property prior to partition among the co-
owners. That’s the general rule.
Under the law on sales, when a thing sold is delivered to
the buyer without reservation of ownership, the ownership However, this should not signify that the vendee does not
is transferred to the buyer. Therefore, in the case of acquire anything at all in case of physically segregated area
recovery of United Car v Jericho, the plaintiff should not be of a co-owned lot is in fact sold to him since the co-owner’s
allowed to recover the car without reimbursing the price interest could properly be the subject of a contract. What
Jericho had paid. EDCA Publishing v Santos. Another case the vendee obtains by the virtue of such sale is the same
discussed by Atty. Batacan. right that the vendor had as co-owner. In an ideal share, the
number that I was talking about, equivalent to the
Okay next. consideration given under their transaction.

Human na ta sa sale of a seller having voidable title. In other words, the vendee steps into the shoes of the
vendor as co-owner and acquires a proportionate abstract
Sale by a co-owner share in the property held in common.

Remember your rules regarding co-ownership So sa ato pa, sa pag baligya sa tibuok nga property, what is
validly sold in that situation?
If you are a co-owner, and there has yet been a partition of
the property, what you have is merely an aliquot share. Ang Accdg. to the SC applying 493, only the portion that
imuha lang, numero. All you have is a number. If there are properly pertains to you as co-owner and not the entire
3 co-owners, you have 1/3. You do not own any specific property.
property yet.
What is the effect if the deed purports to sell a specific
A co-owner sells a property owned in common in the co- property instead of a mere aliquot portion or spiritual share?
ownership.
The fact that the agreement purports to sell a concrete
What is the status of the sale? portion of the property does not render the sale void.

It depends on what the co-owner had sold. The binding force of a contract must be recognized as far
as it is legally possible to do so. However, if the property is
If the co-owner only sold his pro-indiviso share, the sale is
later partitioned and the specific area sold was not awarded
perfectly valid. You’re just selling the number. No problem.
to the seller, the buyer cannot insist to get the portion sold.
The sale over the share is valid but not as to specific There is already a meeting of the minds. At the time the
property. buyer and seller entered into the contract of sale, neither
the buyer or the seller knows that the object is already lost.
In this case, the buyer already paid the full price for the I sell to you my car not knowing that it is already lost. If
entire property. So the SC said, the heirs should return ½ of specific or determinate and the loss is total, the contract is
the purchase price to the buyer. There is unjust enrichment without effect because there’s no subject matter already.
when a person unjustly obtains benefit to the loss of The seller therefore, cannot demand any payment and shall
another or when a person retains money or property of shoulder the loss. He cannot insist to receive the purchase
another against the fundamental principles of justice, price. That would lead to unjust results. If it is generic, its
equity, and good conscience. Therefore, it was correct that loss will not extinguish the sale. Class never perishes. Nag
the heirs of C return the amount of 1.4+ million which baligya kag sako sa bugas and it’s lost or spoiled. Genus
represents half of the purchase price to prevent unjust never perishes.
enrichment to the heirs of C at the expense of the heirs of
D. But if the thing should have been lost in part only, the
vendee may choose between withdrawing from the contract
So that’s a very fair ruling of the SC. But it does not take and demanding the remaining part paying its price in
consideration of the fact that certain buyers would not buy proportion to the total sum agreed upon. So it is akin to an
property if it will not get the entire property. action quanti minoris.
The situation is A is an owner of land—lots a and b. And Kung katunga nalang sa property, the price should be
then lot a is near the highway. Lot b naa sa likod. In other reduced in accordance to what is left to the property.
words, to access lot b from the highway, it needs a right of
way or at least contiguous ba siya sa lot a. So let us say the What if daghan ka gina baligya, under art 1494.
same ruling apply to these set of facts. Would you continue
with the sale knowing that you will be getting diay not the Art. 1494. Where the parties purport a sale of specific
one that abuts the highway but katong sa likod. Equitable goods, and the goods without the knowledge of the
considerations would dictate that the seller should be given seller have perished in part or have wholly or in a
the right to withdraw from the contract if he feels na dili material part so deteriorated in quality as to be
substantially changed in character, the buyer may at
bitaw ni mao ang reason ngano ni enter ko sa contract.
his option treat the sale:
EPC v Samson remember this case.
(1) As avoided; or
O kani pabalik-balik ni sa obligations and contracts and sa
sales: (2) As valid in all of the existing goods or in so
much thereof as have not deteriorated, and as
Loss, deterioration, fruits and other benefits binding the buyer to pay the agreed price for
the goods in which the ownership will pass, if
Define loss. the sale was divisible. (n)

In evidence I ask you this. Under the best evidence rule if


you recall. That the evidence is lost or destroyed then you
have to lay the basis for secondary evidence. Naa siya’y choice. The buyer is the one given the choice.
Mupadayon ba ko o dili. If mag pa dayon siya all he can buy
The law only defines loss one way and that’s under oblicon. of course is what remains of the goods.
The thing is lost when it perishes, or goes out of commerce
or disappears in such a way that its existence is unknown So human nata. Before perfection, it’s res perit domino. At
and it cannot be recovered Art 1189. the time of perfection, naa nay meeting of the minds and
neither the buyer nor the seller knew that the subject is lost,
Wala nay laing definition. Remedial or civil law apply the okay we know that already.
same definition.
What happens if there is an obligation suspended, there’s
What’s the principle that you might remember? The some period given for the delivery of the thing and the loss
principle of res perit domino. The thing is lost to the owner occurs before the thing is delivered. What happens if loss
and therefore it is important to remember that the owner occurs after perfection, before delivery?
always bears the risk of loss as a GR. Corollarily, he will
also enjoy the fruits and benefits and bear the risk of So remember that in a contract of sale, it’s actually delivery
deterioration subject to certain exceptions. that transfers the ownership. Hence, prior to delivery, the
seller still owns the subject matter of the sale. Therefore,
Before perfection what happens? even after perfection of the contract but prior deliver, the
seller shall bear the loss. Again, following the general rule
Any loss or deterioration as well as the fruits and other on res perit domino. However, this time, there are
benefits shall be for the account of the owner who in the exceptions. Ownership remains with the seller but the buyer
contract of sale is the seller. There’s nothing to talk about or bears the loss.
any modification of ownership. Negotiation stage. For all
intents and purposes, the owner is the one who bears the 1st, if it is through the fault of the buyer. Loss is caused by
loss and benefits accordingly as well. the buyer of course because that would lead to unequitable
situation. Iyahang sala tapos the seller bears the loss? No,
At the time of perfection that cannot be.
Where the goods are delivered to the buyer or to a bailee (3) When the thing deteriorates without the fault of
for the buyer but under the contract, ownership of the goods the debtor, the impairment is to be borne by the
has been retained by the seller merely to secure creditor;
performance by the buyer of his obligations under the
contract, the goods are at the buyer’s risk from the time of (4) If it deteriorates through the fault of the debtor,
the creditor may choose between the rescission of
such delivery.
the obligation and its fulfillment, with indemnity for
damages in either case;
In short, it is delivery with retention of ownership. It will still
be at the risk of the buyer.
(5) If the thing is improved by its nature, or by time,
the improvement shall inure to the benefit of the
creditor;

(6) If it is improved at the expense of the debtor, he


shall have no other right than that granted to the
usufructuary.
Here’s the tricky part. Loss after perfection but before
delivery but what if the loss is without the fault of the buyer
or the seller—meaning loss through fortuitous event?
No matter how you look at it, it will be borne by the buyer.
Remember that at the time of the perfection, both the buyer
and the seller did not know of the loss. The loss happened
sometime thereafter. IN between perfection and delivery. Fruits! Pertain to the buyer after perfection regardless of
whether there is delivery yet or not.
No definite answer but let’s look at the different views.
Article 1164. The creditor has a right to the fruits of the
thing from the time the obligation to deliver it arises.
Paras – the buyer still has to pay. Only the seller’s
However, he shall acquire no real right over it until the
obligation is extinguished. Art 1189 as well. Buyer is paying
same has been delivered to him.
for nothing.
Article 1537. The vendor is bound to deliver the thing sold
and its accessions and accessories in the condition in
Tolentino – more scholarly. The buyer’s obligation to pay is which they were upon the perfection of the contract.
extinguished because the contract involves reciprocal
obligations. He who gives nothing gets nothing. Both their
obligations are extinguished. Package deal when it comes to fruits. You get the fruits
from the meeting of the minds.

If you want to top the bar exams, present both views then
choose the side you like and state why. After delivery? Delivery transfers ownership so the buyer
bears the loss and gets the benefit pursuant to res perit
domino. Iyaha naman. You don’t even have to analyze.
What about deterioration after perfection before delivery.
What if there is transfer of ownership but no delivery, wala
The buyer shall bear it because in the end what you will be
pa gi delivery but clear sa deed na there is transfer already.
getting is the deteriorated thing. Basis art 1538 …
Not yet in possession. Who bears the loss? Again GR res
Article 1538. In case of loss, deterioration or improvement perit domino. Buyer as the new owner bears the loss. Basis
of the thing before its delivery, the rules in article 1189 shall art 1504 .
be observed, the vendor being considered the debtor.
Article 1504. Unless otherwise agreed, the goods remain
Governs loss and deterioration in oblicon. Apply 1189. at the seller's risk until the ownership therein is transferred
to the buyer, but when the ownership therein is transferred
to the buyer the goods are at the buyer's risk whether actual
Article 1189. When the conditions have been imposed with
delivery has been made or not, except that:
the intention of suspending the efficacy of an obligation to
give, the following rules shall be observed in case of the
improvement, loss or deterioration of the thing during the (1) Where delivery of the goods has been made to
pendency of the condition: the buyer or to a bailee for the buyer, in pursuance
of the contract and the ownership in the goods has
been retained by the seller merely to secure
(1) If the thing is lost without the fault of the debtor,
performance by the buyer of his obligations under
the obligation shall be extinguished;
the contract, the goods are at the buyer's risk from
the time of such delivery;
(2) If the thing is lost through the fault of the debtor,
he shall be obliged to pay damages; it is
(2) Where actual delivery has been delayed
understood that the thing is lost when it perishes, or
through the fault of either the buyer or seller the
goes out of commerce, or disappears in such a way
goods are at the risk of the party in fault.
that its existence is unknown or it cannot be
recovered;
The law is harsh. 1504 is actually an incentive to the buyer P2 Million. Ray sent Linda .a letter confirming his intention
to take delivery immediately. Mupalit ka “sige diha sa na sa to buy the property. Later, another couple, Bernie and
imuha!” why would you bother the seller to be a de facto Elena, offered a similar house at a lower price of Pl.5
Million. But Ray insisted on buying the house of Biong and
depositary for you? Incentive not a punishment.
Linda for sentimental reason. Ray prepared a deed of sale
to be signed by the couple and a manager's check for P2
Million. After receiving the P2 Million, Biong signed the
deed of sale. However, Linda was not able to sign it
What are the rules here?
because she was abroad. On her return, she refused to
sign the document saying she changed her mind. Linda
Preparatory stage – seller seller seller
filed suit for nullification of the deed of sale and for moral
and exemplary damages against Ray.
After delivery – buyer buyer buyer

Before delivery after perfection – Paras v Tolentino. 1. Will the suit prosper? Explain. 2.5%
2. Does Ray have any cause of action against Biong
Deterioration – Buyer based on law 1189 and Linda? Can he also recover damages from the
spouses? Explain. 2.5%
Fruits – Buyer again

Does Ray have a cause of action?


Remedies in case contract of sale is finished
Sub question lang ni.
Just remember the important ones—katong naay probability
to be asked in the bar. Ray can file a case for specific performance or rescission
with claim to damages in each case as Linda breached the
Breach of contract by the seller contract. She previously consented to the sale.

If he does not deliver, the relief will be to sue for


specific performance with damages because there is
already a breach of contract. Regardless if it is conditional However, when it comes to breach by the buyer it is not as
or absolute sale. simple.

The seller in order to recover in a perfected contract of If the movable is sold and the delivery is unaccepted by the
sale, there is a need to rescind. Breach by the buyer like buyer, the seller can file for an action for rescission. If
none payment of the purchase price. delivery is accepted but no price is paid, seller can rescind
or sue for the price. If title is passed but price is not paid, he
In a contract to sell, no need. You can take immediate can sure for the price plus damages. If the sale is
possession of the property without filing for rescission. repudiated before the delivery of the object, then he can file
rescission with damages.
And warranties.
Inability to pay before delivery rescission with damages.
What would be the remedies of the buyer if the seller
breaches his warranties? Does not pay the price for whatever reason then you have
all of these remedies--possessory lien, stoppage in transit,
He can accept the good plus recoupment of the price. Or he special right of resale and special right to rescind.
can accept but he can claim damages like warranty against
hidden defects. Or he can choose not to accept the goods. Among these 4 there are tiers where you have to apply of
Totally. But he can claim for damages. He is not at fault. the remedies in the 1st tier first before you can apply the
And he may rescind or refuse to accept or to return it when other remedies.
he already accepted.
1st tier – possessory lien and stoppage in transitu
These remedies are mutually exclusive. Not cumulative in
nature. 2nd tier – special right of resale and special right to rescind

Disturbed in possession – to suspend payment of the price Unless you have previously exercised either your
until the end of the disturbance. Mere trespassing is not possessory lien or your stoppage in transit, you cannot avail
considered as a disturbance. Nobody can control the mind of your special right to resell the goods and special right to
of a trespasser. But if there is disturbance in possession rescind.
that has some juridical basis coming from the seller himself.
Who is an unpaid seller?
Ex. Seller leased it to another person while he already sold
it to you An unpaid seller is where the whole of the price has not
been paid or tendered or the negotiable document of title
was received as conditional payment and the condition was
Bar 2006 ___. Basic idea which you have to remember is that you
are an unpaid seller if you have not been paid the whole
Spouses Biong and Linda wanted to sell' their house. They price.
found a prospective buyer, Ray. Linda negotiated with Ray
for the sale of the property. They agreed on a fair price of
Possessory Lien buyer claims them. Even if it already arrived. Wala pa gi
claim.
Ownership has been transferred to the buyer by delivery
either actually or constructive but seller has not yet been Or goods are rejected by the buyer and the carrier remains
paid. to be in possession even if the seller refuses to take the
goods back. There’s still no complete delivery.
The seller can retain the goods or the price while still in
possession of the goods. Does it already produce the effect of delivery? If wala pa,
it’s in transit. Kung wala na sa possession sa seller but
technically wala pa sa buyer, it’s in transit.

We have agreed that there is transfer of ownership already What if the buyer sold it already to a 3rd person. Wala pa sa
pending the delivery but the goods are with me in the mean iyahang possession. That is done a lot.
time unless you pay me the purchase price I will not deliver.
So I will impose my lien over the thing. Like an Atty’s Lien Friend who owns a luxury car. He is using a luxury car
on the document if di ka mabayran di nimo iturn over. Same without paying for it actually kay naa na siyay buyer.
with civil law. You are in possession of the thing you can
refuse turning over if you have not yet been paid. Simple as If the buyer sells the thing without the seller’s knowledge,
that. the seller’s right of stoppage in transit is not affected. It can
be enforced against the buyer of the buyer. And the right of
stoppage does not defeat the title of the title of an innocent
purchaser for value who issued a negotiable document.
Can only be exercised when goods are sold without any Like a bill of lading.
stipulation as to credit or goods were sold on credit but the
term of credit has expired or the buyer becomes insolvent.

2nd tier of special remedies.

It means that the price is demandable at once. The situation envisioned by the law is you previously either
exercised you r possessory lien or alternatively if the goods
Or, human na ang panahon sa pagbayad ug wa pa niya gi were no longer in his possession, made a stoppage in
bayran. There is delay. transitu. But neither of them worked.

Lastly, why would I deliver the goods if he cannot pay me 1st the special right to resell the goods.
because he is insolvent.
Available when:

Goods are perishable or the seller expressly reserves the


Stoppage while the goods are in transit or on the way to be rights in case of buyer’s default, or buyer has been in
delivered to the buyer default for an unreasonable length of time.

Special right to rescind:


So the seller no longer has possession. Unfortunately for Again you have to exercise first possessory lien or
him, while the goods are in transit, the buyer becomes stoppage in transitu.
insolvent and the buyer cannot anymore pay. The seller can
stop the goods in transit and resume possession at any In addition you may hold the buyer liable for damages.
time.

What about for immovables? In art 1592


How do you do that? Mulanguy ka? You simply have to
make known that you are stopping it in transit. Article 1592. In the sale of immovable property, even
though it may have been stipulated that upon failure to pay
We have cases where: the price at the time agreed upon the rescission of the
contract shall of right take place, the vendee may pay, even
Delivery to the carrier is delivery to the buyer. No problem. after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either
Delivery to the bailee of the buyer is enough already.
judicially or by a notarial act. After the demand, the court
What you can do is to call the bailee or the transportation may not grant him a new term.
company who delivered that you are exercising your right of
Daghan ing ana nga provisions that if you fail to pay no
stoppage in transit.
need to rescind. The vendee may pay even after the
Effect: Seller enjoys same rights as if he never parted with expiration of the period for as long as no demand for
the possession of the goods. rescission has been made…

When goods deemed to be in transit? Period between 1592 remember this. This has been asked in the bar.
delivery to the carrier for transmission to the buyer until the
X & Y agreed to a sale of land payment and delivery will be back. Find another buyer. But the foreclosure of mortgage
on Feb 1 2002. They stipulate that if no payment is done on that’s actually quite problematic. Lisod mag foreclose ug
feb 1 the sale is automatically rescinded. X did not pay on chattel mortgage
Feb 1 but offered to pay 3 days later. Is the contract
rescinded.

So 1592 even if the contract stipulates automatic


rescission, the buyer may still pay at any time before any
The second law RA6542.
notarial or judicial demand has been made upon. The
contract is not rescinded. Maceda Law for immovables. Residential real estate. Sales
on installments. Naa kay amortizations na bayaran. Or
financing of real estate on installments including
Sale on installment condominium units.

This has always been part of the bar exam coverage but When the buyer defaults, the Maceda law introduces a lot
ever since I taught sales review wala pa ni nigawas. But of important principles.
since it is part of the coverage let’s discuss it.
Remember:

Cash surrender value


1st we have Recto Law Art 1484
Grace Period
What would be the options available when the buyer
The questions in the bar exam will either be a question of
discontinues payment on installment?
coverage or a question of rights. What sales are covered,
Seller can exact fulfillment, what grace period, and how much will be the cash
surrender value.
cancel the sale if the buyer fails to pay 2 or more
installments, It depends on the number of installments.

or foreclose the chattel mortgage if any if the buyer fails to Installments will be in terms of years not monthly. It does
pay 2 or more installments but the seller has to give an not matter if you made 6 monthly installments. The law will
acquittance of the entire claim. consider it as less than 2 years. If the buyer has paid less
than 2 years of installments, the buyer is entitled to a
Available lang ni siya for sale of MOVABLES in minimum grace period of 60 days. From the time he
installments. defaults, he has 60 days to pay whatever is outstanding.
Without payment, the sale will be cancelled within 30 days
The remedies are mutually exclusive. Alternative not from receipt of notice of cancellation. In effect, you have 90
cumulative. days.

Some residential developers would still accept payment


even after notice of cancellation. Mas advanatageous man
The options given to the seller is actually a protected
na sa ilaha. You pay. So who’s to say that later on you will
national policy of the state. If in the Philippines it is
not default in payment again? So I (seler) have the option
prohibited to successively avail of the remedies even if in a
to get paid and selling it to somebody else. The buyer for
foreign nation you are allowed, Philippine law would still
example paid 2 or more years of installments. This time,
govern if the contract was executed here. Lex loci
you have the right to pay without interest within the grace
contractus.
period. And take not that you have extra period within which
Asa ang situs sa contract. to pay whatever is outstanding for every year that you have
made an installment.
When the seller already enforced the contract for collecting
the sum due he can no longer rescind the sale. He cannot 2 years or less 60 days.
also foreclose the mortgage.
But let’s say you paid more than 2 years, you are entitled to
If the seller forecloses the chattel mortgage, it can no longer an extra month, another 30 days for every year that you
sue for the deficiency or balance. He is deemed to have paid installments.
made an acquittance of the claim. Wala na gyud siya’y
But remember that you can only use that grace period once
pwede irecover.
every 5 years.
If the seller chooses specific performance in the replevin
Installments include:
suit for damages, seller is still entitled to an alias writ of
execution for the unsatisfied balance. Any option money that is paid or any downpayment made
by the buyer to the seller
Specific performance, but in the mean time you claim for
possession of the property. Gibaligya nimo ang property ug Now kung dili niya iavail within the grace period, the seller
dili enough. You are still entitled to the balance. This is the cannot simply get all the money that has been paid.
best one. For me the second is cancel the sale. Why? You
can always sue for damages plus you get your property
There is a cash surrender value equivalent to 50% of He thus wrote a letter to DEVLAND informing it that he was
payments made. stopping payment. Consequently, DEVLAND cancelled the
sale and wrote Bernie, informing him that his payments are
You get an extra 5% for every year in excess of 5 years but forfeited in its favor.
it cannot extend to more than 90% of the installments
a) Was the action of DEVLAND proper? Explain. (2%)
made.
b) Discuss the rights of Bernie (“A” in Atty. Espejo’s lecture)
Period is very important. Increments are very important.
under the circumstances. (2%)
We have no problem with counting the days of grace
c) Supposing DEVLAND had fully developed the
period. Below 2 years, 60 days. Any year above that, plus subdivision but Bernie failed to pay further installments after
30 days. 4 years due to business reverses. Discuss the rights and
obligations of the parties. (2%)
Cash surrender value, 50% of payments made. That would
be your base of computation plus 5 years for every year in
excess of 5 years.

So for the first 5 years, you have a cash surrender value of So again the bar exam question would just be a question
50%. So din a gyud ka malugi. Makuha nimo balik ang 50% about coverage. Would a certain transaction be under the
sa imong gibayad. Every succeeding year after you earn an Maceda Law?
additional 5% not exceeding 90%. You get to 90% after 8
years. IF it is then apply the grace period and cash surrender.

5 years you earn 50%.

So the remaining 40% divided by 5. Tama? I don’t know. The action of the developer is wrong. Under PD 957, a
Mao gani ko nag abogado. buyer may desist payment when the owner or developer
fails to develop the subdivision or condominium according
Ex. to the approved plans and within the time limit agreed upon.
The buyer may get all the installments he made and these
4 years of installments at P100,000 per year are not considered forfeited.

50% of 400K or 200K

Assuming the developer develops the subdivision, but A


refuses to pay, after 48 monthly installments under the
6 years at 100K per year
Maceda Law, A should be entitled to pay w/o interest his
50% is 300K plus 5 years the extra year above 5 years installments in arrears within a grace period of 4 months or
1 month for every year of installment. For the first two
years, you get 60 days . Plus an additional of one month for
every year you made complete installments.
Timan-an lang gyud ninyo ang formula. That’s all there is to
it. What if he fails to pay within the grace period?

He is entitled to reimbursement 50% of his payments since


he has made at least 2 years of annual installments.
What if sa bar kay months. You have to compute.
Wa nay madugang nga 5% pero it can be below 5 years.
Installments can be once a year. One time payment. What if 50% CSV.
ang pangutana sa bar he paid on this year. Did not pay the
next year. What are his rights.

What about if it is the seller who commits the breach. PD Now, a case to my mind is interesting.
597 the owner or developer fails to develop the subdivision
or condominium according to the approved plans and within Cantemprate v CRS Realty May 8, 2009
the time limit, the buyer is entitled to reimbursement of all
Petitioners here bought on installments subdivision lots
the installments made.
from respondent CRS Realty and had paid in full the agreed
You can desist from paying. Kung din a gyud ka purchase price. Respondents failed to deliver the
mupadayon, you can get your money back. certificates of title. The complaint prayed that respondents
be ordered to deliver the certificates and to pay petitioner
damages. HLURB dismissed the complaint. The Office of
the President affirmed the HLURB. The CA found out that
Bar 2005 CRS did not have the required license to sell and therefore
the sales are void so neither party can compel the other to
Bernie bought on installment a residential subdivision lot
perform his obligation in the contract.
from DEVLAND. After having faithfully paid the installments
for 48 months, Bernie discovered that DEVLAND had failed
Is license to sell a ground to invalidate the sale?
to develop the subdivision in accordance with the approved
plans and specifications within the time frame in the plan.
SC: It’s not one of the grounds to make a sale void. The Bar 2001 and 2002
only requisite for a contract of sale or a contract to sell to
exist in law is meeting of the minds. The failure to obtain the When can a co owner legally redeem the property
license does not render the sale void on that ground alone
specially the parties have impliedly admitted that there was
already meeting of the minds as to the subject of the sale If a co owner sells his share to a 3rd person, his co owner
and price of the contract. The absence of the license here may redeem.
only subjects CSR Realty civilly and criminally liable for the
said violation. The absence of the license does not affect In case of redemption by 2 or more owners, redemption
the contract of sale between petitioner and CRS Realty. shall be in proportion to the share they have in the thing
they own in common.

Dimaguila v Monteiro Jan 27, 2014


Grounds for Extinguishment of Sale
Property was partitioned between two heirs. A and X. A got
Same thing as ground for extinguishment of any other the southern, X got the northern. A has heirs—B, C and D.
obligation X has heirs – Y and Z. X & X died. The halves of the
property were inherited by their respective heirs. B sold the
Article 1231. Obligations are extinguished: entire southern. Y and Z questioned the sale.

(1) By payment or performance; Naa bay right of redemption?

(2) By the loss of the thing due; SC:Petitioners as heirs of X who inherited the northern
potion do not possess the necessary personality to assail
(3) By the condonation or remission of the debt; the sale of the southern half. Between the buyer and the
heirs of a they are not real parties in interest who stand to
(4) By the confusion or merger of the rights of be benefited or injured by the sale of the southern half of
creditor and debtor; which they absolutely have no right. Only co owners have
the personality to assail the sale. No right of redemption.
(5) By compensation;
Among co owners or adjoining owners.
(6) By novation.
Just remember that rural land pwede if the area does not
Other causes of extinguishment of obligations, such as exceed one hectare unless the grantee does not own the
annulment, rescission, fulfillment of a resolutory condition, rural land. If it’s urban land, specifically small urban land
and prescription, are governed elsewhere in this Code. that is so situated that a major portion cannot be used for
any practical reason within a reasonable period. Will that be
We don’t have a problem with the first ones. But what you questioned in the bar exams? Never, never.
may not know is kining redemption.
Can credit in litigation be sold? Yes.
Redemption has the effect of reselling back to the original
order. The creditor assigns his right to credit to a 3rd person. The
debtor may extinguish, ang 3rd person gi palit niya ang
Redemption can be conventional exercised by the seller utang sa creditor na iyaha pang gina litigate sa debtor, the
and reserved in the contract of sale, the statue of fraud debtor may reimburse the assignee for the payment of price
applies, the period should not exceed years, if silent, default he paid for the credit. That would extinguish the obligation.
period will be 4 years. The debtor may reimburse within 30 days from the time the
assignee demands payment.
There can be legal redemption. The law allows adjoining co
owners or co heirs. Period of redemption. 30 days.

The right of redemption among co heirs and adjoining co The right to redeem shall not be exercised except within 30
owners. days from notice in writing by the prospective seller(s) . The
deed of sale shall not be recorded in the Registry of
An heir sells his hereditary rights to a stranger before
Property unless with the affidavit of the seller that he has
partition.
sent notices to all possible redemptioners.
Any or all of the co heirs may be subrogated to the buyers
rights by reimbursing him of the price. Co heirs may redeem
within one month from the time they were notified in writing Quiz on the 2015 Bar Question
of the sale.
(Atty. Espejo did not dictate the question)
That’s all you have to remember for now we will discuss
that more in credit transaction. I don’t have the answer here but I have an idea.

Karon you just have to know who are given the right of You can answer this with the difference between a contract
redemption. to sell and a contract of sale. Because there is a perfected
contract of sale here then it has to be rescinded before
there is restitution.

Wala kabayad. There is consent. Partially performed


contract kinahanglan nimo irescind.

Answer is no.

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