214 LAW ON SALES
CHAPTER 6 “to transfer the ownership of and to deliver a determinate thing.”
PERFORMANCE OR
CONSUMMATION OF SALE
OBLIGATIONS OF SELLER
1. To Preserve the Subject Matter
Article 1163 of the Civil Code lays down a rule applicable
to obligations and contracts in general, that “[E]very person
obliged to give a determinate thing is also obliged to take
care of it with the proper diligence of a good father of a family,
unless the law or the stipulation of the parties requires another
standard of care.”
When a sale covers a specific or determinate object, upon
perfection and even prior to delivery, and although the seller still
owns the subject matter, he is already obliged to take care of
the subject matter with the diligence of a good father of a family;
otherwise, he becomes liable to the buyer for breach of such
obligation, as when the thing deteriorates or is lost through
seller’s fault.
The ancillary obligation to preserve the subject matter of
the sale involves a personal obligation “to do,” rather than a real
obligation “to give,” and arises as a necessary legal assurance
to the buyer that the seller would be able to comply fully with the
main obligation to deliver the object of sale.
2. To Deliver the Subject Matter
Under Article 1495 of the Civil Code, the seller is bound: (a)
to transfer the ownership of, and (b) to deliver the thing, which
is the object of the sale to the buyer. Even in the definition of
sale under Article 1458, it covers the twin-obligations of the seller
214
PERFORMANCE OR CONSUMMATION OF SALE 215
Although the wordings of both Articles 1458 and 1495 seem to
separate “delivery” of the subject matter from the “transfer of
ownership,” nonetheless, the means by which the seller can
transfer the ownership of the subject matter is by the mode of
tradition or delivery, whether actual or constructive.
As early as in Kuenzle & Streiff v. Watson & Co.,1 the Supreme
Court held that where there is no express provision that the title
shall not pass until payment of the price, and the thing sold has
been delivered, title passes from the moment the thing sold is
placed in the possession and control of the buyer. In spite of the
reciprocal nature of a sale, it is not the prior payment of price that
determines the effects of delivery of the subject matter.
Ocejo, Perez & Co. v. International Banking Corp.,2 also
held that delivery produces its natural effects in law, the principal
and most important of which being the conveyance of ownership,
without prejudice to the right of the seller to claim payment of the
price. Normally therefore, as a consequence of a valid sale, the
delivery of the subject matter ipso jure transfers its ownership to
the buyer.
3. To Deliver the Fruits and Accessories
Under Article 1164 of the Civil Code, which applies only to
an obligation to deliver a determinate thing, the transferee has a
right to the fruits of the thing from the time the obligation to deliver
it arises; however, he shall acquire no real right over them until
the same has been delivered to him.
Every obligation to deliver a determinate thing is coupled with
a specific provision under Article 1537, that the seller is bound to
deliver the thing sold and its accessions and accessories in the
condition in which they were upon the perfection of the contract,
and all the fruits shall pertain to the buyer from the day on which
the contract was perfected.
1
13 Phil. 26 (1909).
2
37 Phil. 631 (1918).
216 LAW ON SALES
Unlike in the principle of res perit domino where it is the
owner of the thing who bears the risk of loss and benefits from the
fruits of the thing owned, in a sale involving a determinate subject
matter, even prior to delivery and transfer of ownership thereof
to the buyer, the buyer already has certain rights enforceable
against the seller, pertaining to the subject matter. This is in
accordance with the principle that the accessories always
follow the principal; and since the subject matter is intended for
delivery to the buyer from the point of perfection of the sale, then
necessarily the accessories and fruits must from then on be held
for the account of the buyer.
4. To Warrant the Subject Matter
Under Article 1495 of the Civil Code, with the fulfillment of
the primary obligation to deliver the subject matter, the seller is
then obliged to “warrant the thing which is the object of the sale.”
The warranties of the seller are discussed in details in Chapter
12.
TRADITION AS A CONSEQUENCE OF A VALID SALE
1. Essence of Tradition
Equatorial Realty Dev., Inc. v. Mayfair Theater, Inc.,3 had
explained quite vividly the mode of tradition when it held that
“ownership of the thing sold is a real right, which the buyer acquires
only upon delivery of the thing to him in any of the ways specified
in Articles 1497 to 1501 of the Civil Code, or in any other manner
signifying an agreement that the possession is transferred from
the vendor to the vendee. This right is transferred, not merely by
contract, but also by tradition or delivery. Non nudis pactis sed
traditione dominia rerum transferantur. And there is said to be
delivery if and when the thing sold ‘is placed in the control and
possession of the vendee.’”4 The Court held further that delivery
is a composite act, in which both parties must join and the minds
of both parties concur; it is an act by which one party parts with
3
370 SCRA 56 (2001).
4
Ibid, at p. 70.
PERFORMANCE OR CONSUMMATION OF SALE 217
the title to and the possession of the property, and the other
acquires the right to and the possession of the same.5
Santos v. Santos,6 held that “the critical factor in the different
modes of effecting delivery, which gives legal effect to the act is
the actual intention of the vendor to deliver, and its acceptance
by the vendee. Without that intention, there is no tradition.”7 This
is quite an inelegant way to put forth the principle on tradition
based on two factors:
(a) Acceptance, although an obligation on the
part of the buyer, is not essential for delivery
by the seller to achieve its legal effects;
and
(b) An express intention on the matter by the
parties to a sale, at the point of delivery is
not essential for tradition to produce its legal
consequences.
The legal effects of the parties’ intention must be gauged at
the point of perfection by which the obligation to deliver the subject
matter is created: was there mutual intention and agreement to
transfer the ownership of the subject matter; if in the affirmative,
there is a valid sale; if in the negative, we have a simulated sale
which is void ab initio. Besides, the rule has always been that
tradition that is effected by reason of a valid sale would produce
its legal consequences, without the parties having to say so, or
particularly intend it at the point of delivery.8
The essence of the Equatorial Realty and Santos rulings is
that tradition produces its legal consequences from the fact that
delivery is effected pursuant to a valid sale. Consequently, in one
case,9 it was held that there is no transfer of ownership by the
5
370 SCRA 56 (2001).
6
366 SCRA 395 (2001).
7
Ibid, at p. 405, citing Norkis Distributors, Inc. v. Court of Appeals, 193 SCRA 694,
698-699 (1991), and Abuan v. Garcia, 14 SCRA 759 (1965).
8
Kuenzle & Streiff v. Watson & Co., 13 Phil. 26 (1909); Ocejo, Perez & Co. v.
International Banking Corp., 37 Phil. 631 (1918); Froilan v. Pan Oriental Shipping Co., 12
SCRA 276 (1964); Balatbat v. Court of Appeals, 261 SCRA 128 (1996).
9
Union Motor Corp. v. Court of Appeals, 361 SCRA 506 (2001).
218 LAW ON SALES
execution of a deed of sale merely intended to accommodate the
buyer to enable him to generate funds for his business venture,
simply because there was no valid sale behind the purported act
of constructive delivery.
In another case,10 it was held that when the auction sale of
the subject properties to the bank was void, no valid title passed
in its favor; consequently, the subsequent sale and delivery of
the properties thereof by the bank was also nullity (i.e., title held
by the bank’s buyer was void) under the elementary principle of
nemo dat quod non habet, one cannot give what one does not
have.
a. Types of Delivery
The Law on Sales under the Civil Code recognizes two
general types of delivery that will effectively transfer ownership of
the subject matter to the buyer and would constitute compliance
by the seller of his obligations under a valid contract of sale: (a)
actual or physical delivery; and (b) constructive delivery.
Froilan v. Pan Oriental Shipping Co.,11 held that in the
absence of stipulation to the contrary, the ownership of the thing
sold passes to the buyer upon the actual or constructive delivery
thereof.
Alfredo v. Borras,12 held that it is not necessary that the
seller himself delivers title of the property to the buyer because
the thing sold is understood as delivered when it is placed in the
control and possession of the buyer. In that decision, the seller
himself introduced the tenant to the buyers as the new owners of
the land, and from that time on the buyers acted as landlord, and
thereby there was deem to have been delivery.
1. Actual Delivery
Under Article 1497 of the Civil Code, there is actual or
physical delivery when the thing sold is placed in the control and
10
Tsai v. Court of Appeals, 366 SCRA 324 (2001).
11
12 SCRA 276 (1964).
12
404 SCRA 145 (2003).
PERFORMANCE OR CONSUMMATION OF SALE 219
possession of the buyer.13 Although possession is the best gauge
when there is control, nonetheless control can take other forms
other than actual physical possession.
Thus, Power Commercial and Industrial Corp. v. Court of
Appeals,14 held that for both actual or constructive delivery “[t]he
key word is control, not possession,”15 in determining the legal
effect of tradition. Power Commercial considered that the lot sold
had been placed under the control of the buyer, as evidenced
by the subsequent filing by the buyer of an ejectment suit, which
signified that the buyer was the new owner which intended
to obtain for itself, and to terminate said occupants’ actual
possession thereof.
2. Constructive Delivery
Under Article 1496 of the Civil Code, constructive delivery
can take several forms, and may be any “manner signifying an
agreement that the possession is transferred from the vendor
to the vendee.” The essence of most forms of constructive
delivery is the existence of an agreement between the seller
and the buyer, and that the latter is understood to have control
of the subject matter of sale.
The discussions on the execution of a public instrument as
a form of constructive delivery should be considered as setting
the same basic premise or principles as to all other forms of
constructive delivery. The importance of using the “execution of a
public instrument pursuant to a valid sale,” as the prime example
to highlight the doctrines to cover all types of constructive delivery
comes from its applicability to all types of subject matter, whether
movable or immovable, tangible or intangible.
a. Execution of Public Instrument
Under Article 1498 of the Civil Code, in the case of both
movables and immovables, when the sale is made through a
public instrument, the execution thereof shall be equivalent to
13
People v. Tan, 338 SCRA 330 (2000).
14
274 SCRA 597 (1997).
15
Ibid, at p. 610.
220 LAW ON SALES
the delivery of the subject matter of sale, if from the deed the
contrary does not appear or cannot clearly be inferred.16 In
several cases,17 the Court held that the notarized deed of sale
has two functions:
(a) It operates as a formal or symbolic delivery
of the property sold; and
(b) It authorizes the buyer to use the document
as proof of ownership.
Therefore, the general rule is that the execution of a public
instrument has the same legal effects as actual or physical
delivery, i.e., it transfers the ownership of the subject matter to
the buyer, and constitutes valid compliance by the seller of his
primary obligations under the sale.18
Of course, the foregoing rules apply only to a public instrument
that evidences a valid sale. Thus, Torcuator v. Bernabe,19 held
that a special power of attorney authorizing the agents to execute
a deed of sale over the property can by no means be interpreted
as delivery or conveyance of ownership over said property, thus:
“Taken by itself, in fact, the special power of attorney can be
interpreted as tied up with any number of property arrangements,
such as a contract of lease or a joint venture.”20
(1) Constructive Delivery Has the Same Legal Effect
as Actual or Physical Delivery
Municipality of Victorias v. Court of Appeals,21 held that the
legal effects and consequences of actual or physical delivery,
also apply equally to constructive delivery: “Similarly, when the
sale is made through a public instrument, the execution thereof
16
Florendo v. Foz, 20 Phil. 388 (1911). Also Roman v. Grimalt, 6 Phil. 96 (1906),
citing Art. 1462 of the old Civil Code, which held that “When the sale is made by means
of a public instrument the execution thereof shall be equivalent to the delivery of the thing
which is the object of the contract.” (at p. 99).
17
Manuel R. Dulay Enterprises, Inc. v. Court of Appeals, 225 SCRA 678 (1993);
Power Commercial and Industrial Corp. v. Court of Appeals, 274 SCRA 597 (1997);
Garcia v. Court of Appeals, 312 SCRA 180 (1999).
18
Velarde v. Court of Appeals, 361 SCRA 56 (2001).
19
459 SCRA 439 (2005).
20
Ibid, at p. 451.
21
149 SCRA 31 (1987).
PERFORMANCE OR CONSUMMATION OF SALE 221
shall be equivalent to the delivery of the thing which is the object
of the contract, if from the deed, the contrary does not appear or
cannot be clearly inferred.”22
The concept has been aptly summed-up in Sabio v.
International Corporate Bank,23 where the Court held —
Under Article 1498 ... the mere execution of the deed
of conveyance in a public instrument is equivalent to
the delivery of the property. ... prior physical delivery or
possession is not legally required. It is well-established
that ownership and possession are two entirely
different legal concepts. Just as possession is not a
definite proof of ownership, neither is non-possession
inconsistent with ownership. Thus, it is of no legal
consequence that respondents were never in actual
possession or occupation of the subject property. They,
nevertheless, perfected and completed ownership
and title to the subject property. Notwithstanding the
presence of illegal occupants on the subject property,
transfer of ownership by symbolic delivery under Article
1498 can still be effected through the execution of the
deed of conveyance.24
The author therefore takes exception to the ruling in Ten
Forty Realty and Dev. Corp. v. Cruz,25 where the Supreme
Court held that “[N]owhere in the Civil Code is it provided that
the execution of a Deed of Sale is a conclusive presumption of
delivery of possession of a piece of real estate. This Court has
held that the execution of a public instrument gives rise only
to a prima facie presumption of delivery. Such presumption is
destroyed when the delivery is not effected because of legal
impediment ... negated by the failure of the vendee to take
actual possession of the land sold.” The Ten Forty Realty ruling
confuses between the twin functions of a public instrument,
22
Ibid, at p. 43. Reiterated in Caoibes, Jr. v. Caoibes-Pantoja, 496 SCRA 273
(2006).
23
364 SCRA 385 (2001).
24
See also Manuel R. Dulay Enterprises, Inc. v. Court of Appeals, 225 SCRA 678
(1993).
25
410 SCRA 484 (2003).
222 LAW ON SALES
first being merely an evidence of a sale, and second, a public
instrument being the main, but not the only ingredient, in what
constitutes constructive delivery. By itself a deed of sale is
merely a species of evidence, and it becomes an integral part
of tradition when coupled with other requirements mandated by
jurisprudence, namely, control over the subject matter at the time
of execution and the passage of reasonable time for the control
to remain.
(2) When Execution of Public Instrument
Does Not Produce Effects of Delivery
There are cases when the execution of public instruments
covering valid sales do not produce the effects of tradition.
First, when in the execution of a public instrument, there is
a stipulation to the contrary.26 Phil. Suburban Dev. v. Auditor,27
held that such express reservation or contrary inference would
be present when:
(a) A certain date is fixed for the purchaser to
take possession of the property subject of
the conveyance;
(b) In case of sale by installments, it is stipulated
that until the last installment is made, the
title to the property should remain with the
seller;
(c) When the seller reserves the right to use
and enjoy the property until the gathering of
the pending crops; or
(d) Where the seller has no control over the
thing sold at the moment of the sale, and,
therefore, its material delivery could not
have been made.
Phil. Suburban held that since the execution of the public
instrument was preceded by actual delivery of the subject real
26
Art. 1498, Civil Code.
27
63 SCRA 397 (1975).
PERFORMANCE OR CONSUMMATION OF SALE 223
estate, then tradition was effected in spite of the condition stated
in the instrument that the seller should first register the deed of
sale and secure a new title in the name of the buyer before the
latter shall pay the balance of the purchase price, which did not
preclude the transmission of ownership, thus: “In the absence
of an express stipulation to the contrary, the payment of the
purchase price of the goods is not a condition precedent to the
transfer of title to the buyer, but title passes by the delivery.”28
This well-established rule is contrary to what was said in
Heirs of Severina San Miguel v. Court of Appeals,29 that “[i]n a
contract of sale, title only passes to the vendee upon full payment
of the stipulated consideration, or upon delivery of the thing
sold.” In fact, Balatbat v. Court of Appeals,30 held that “[D]evoid
of stipulation that ‘ownership in the thing shall not pass to the
purchaser until he has fully paid the price’ [Art. 1478], ownership
in the thing shall pass from the seller to the buyer upon actual or
constructive delivery of the thing sold even if the purchase price
has not yet been fully paid. Failure of the buyer to make good the
price does not, in law, cause the ownership to revest to the seller
unless the bilateral contract of sale is first rescinded or resolved
pursuant to Art. 1191.”31
In Fortune Tobacco Corp. v. NLRC,32 where the resolution of
the issues boiled down to whether there was an actual sale of the
employer’s plant and facilities, the Court held that the execution
of the deed of conditional sale with provision that the final deed of
sale was to be executed only upon full payment, did not transfer
ownership of the subject matter by the delivery thereof. It also
held that “even accepting that the plant and its facilities have been
sold on a conditional basis, there can be no actual sale thereof
[i.e., transfer of ownership] unless the plant and its facilities are
unconditionally conveyed ... by virtue of a ‘final or absolute deed
of sale’ in accordance with the terms and conditions stated in the
agreement between the parties.”33
28
Ibid, at p. 406.
29
364 SCRA 523 (2001).
30
261 SCRA 128 (1996).
31
Ibid, at pp. 138-139.
32
200 SCRA 766 (1991).
33
Ibid, at p. 772.
224 LAW ON SALES
Secondly, when at the time of the execution of the public
instrument, the subject matter was not subject to the control of
the seller, then the legal effects of delivery would not happen.
Addison v. Felix,34 held earlier that it is the duty of the
seller to deliver the thing sold, and that symbolic delivery by the
execution of a public instrument is equivalent to actual delivery
only when the thing sold is subject to the control of the seller, so
that “at the moment of sale, its material delivery could have been
made,”35 which talks of capacity rather than an actual physical
delivery. The “moment of sale” referred to was of course the
consummation stage, thus —
The Code imposes upon the vendor the obligation
to deliver the thing sold. The thing is considered to be
delivered when it is placed “in the hands and possession
of the vendee.” ... It is true that the same article declares
that the execution of a public instrument is equivalent
to the delivery of the thing which is the object of the
contract, but, in order that this symbolic delivery may
produce the effect of tradition, it is necessary that the
vendor shall have such control over the thing sold that,
at the moment of the sale, its material delivery could
have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession.
The thing sold must be placed in his control. When
there is no impediment whatsoever to prevent the thing
sold from passing into the tenancy of the purchaser by
the sole will of the vendor, symbolic delivery through
the execution of a public instrument is sufficient. But
if, notwithstanding the execution of the instrument, the
purchaser cannot have the enjoyment and material
tenancy of the thing and make use of it himself or
through another in his name, because such tenancy
and enjoyment are opposed by the interposition of
another will, then fiction yields to reality — the delivery
has not been effected.36
34
38 Phil. 404 (1918).
35
Ibid, at p. 408.
36
Ibid, at p. 408; emphasis supplied.
PERFORMANCE OR CONSUMMATION OF SALE 225
Addison however recognized that “if the sale had been made
under the express agreement of imposing upon the purchaser
the obligation to take the necessary steps to obtain the material
possession of the thing sold, and it were proven that she knew
that the thing was in the possession of a third person claiming to
have property rights therein, such agreement would perfectly be
valid,”37 and there would have been full compliance by the seller
of his obligations under the sale, by the mere execution of the
public instrument.
In effect, Addison does not intend to place constructive
delivery at a lower category than that of actual delivery, and
there is no implication in the ruling that for constructive delivery
to produce the effects of tradition, it has to be coupled by
subsequent actual delivery or by the actual taking of physical
possession by the buyer. Otherwise, if constructive delivery
cannot do the job without actual delivery being made later on,
then constructive delivery would not in reality be a separate
form of tradition.
The Addison doctrine was reiterated in Power Commercial
and Industrial Corp. v. Court of Appeals,38 where the Court
emphasized that the operative word in the doctrine is not
“possession” but “control.” In Power Commercial, the buyer was
fully aware of the existence of squatters on the property at the
time of the transactions and even undertook the job of evicting
them. The Court held that the buyer cannot contend later on
that the execution of the deed of sale in a public document did
not operate as a symbolic delivery to transfer possession to the
buyer due to the presence of occupants on the lot sold, thus:
Although most authorities consider transfer of
ownership as the primary purpose of sale, delivery
remains an indispensable requisite as our law does
not admit the doctrine of transfer of property by mere
consent.39 The Civil Code provides that delivery can either
37
Ibid, at p. 409.
38
274 SCRA 597 (1997).
39
Articles 1477 and 1495, Civil Code; Fidelity & Deposit Co. v. Wilson, 8 Phil. 51,
56-57 (1907); Tan Leonco v. Go Inqui, 8 Phil. 531 (1907); Kuenzle & Streiff v. Macke &
Chandler, 14 Phil. 610, 611-612 (1909).
226 LAW ON SALES
be (1) ACTUAL (Article 1497) or (2) CONSTRUCTIVE
(Articles 1498-1501). Symbolic delivery (Article 1498),
as a species of constructive delivery, effects the
transfer of ownership through the execution of a public
document. Its efficacy can, however, be prevented if
the vendor does not possess control over the thing
sold,40 in which case this legal fiction must yield to
reality. The key word is control, not possession, of the
land ... Considering that the deed of sale between the
parties did not stipulate or infer otherwise, delivery was
effected through the execution of said deed.41
Nevertheless, the statement in Power Commercial that
“our law does not admit the doctrine of transfer of property by
mere consent,” is not accurate, since under Article 1496 of the
Civil Code, the ownership of the thing sold is acquired by the
buyer from the moment it is delivered to him in any of the ways
specified by law, “or in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee.”
As discussed hereunder, traditio longa manu and other forms of
symbolic delivery involve a mere agreement that buyer is now
the owner and possessor of the subject matter.
Thirdly, from the decision in Pasagui v. Villablanca,42 we
can infer an additional element into the Addison doctrine, that
in order that the execution of public instrument to produce the
effect of tradition, not only must the seller have actual control
of the object of the sale at the execution of the instrument, but
that such control or ability to transfer physical possession and
enjoyment must subsist for a reasonable length of time after the
instrument’s execution.
We can only “infer” the ruling from the decision because
Pasagui actually covered the main issue of whether the proper
action that should have been filed was one of forcible entry, which
required plaintiff’s prior possession; it was therefore a decision,
40
Addison v. Felix, 38 Phil. 404, 408 (1918); Vda. De Sarmiento v. Lesaca, 108
Phil. 900, 902-03 (1960); and Danguilan v. Intermediate Appellate Court, 168 SCRA 22,
32 (1988).
41
Reiterated in Solid Homes, Inc. v. Court of Appeals, 275 SCRA 267 (1997).
42
68 SCRA 18 (1975).
PERFORMANCE OR CONSUMMATION OF SALE 227
not on sale, but on jurisdiction and proper remedy. It held that
although a public instrument had been executed to cover the sale,
and despite the facts showing that the third-party claimants of the
subject parcel of land came into possession after the instrument
was executed, there was no delivery ever made by the seller
even by constructive delivery as to conclude that the buyer ever
had title, possession or control of the subject real estate.
The implied Pasagui ruling of control for a reasonable
period after execution of the instrument is an important ingredient
for constructive delivery; otherwise, the execution of a public
instrument, as a mode of delivery, would create undue burden on
the part of the buyer, who would be compelled to literally “jump”
into the possession of the subject matter soon after signing the
instrument, for he would then obtain no remedy from the seller.
The rationale for such inferred ruling should apply equally to all
forms of constructive delivery, since tradition being an obligation
on the part of the seller, the burden must continue to be with the
seller to grant the buyer reasonable period to take possession of
the subject matter. The ruling has since obtained doctrinal status
when it was reiterated in Danguilan v. Intermediate Appellate
Court,43 and Vda. de Sarmiento v. Lesaca.44
It is clear therefore, that without the other requisites mandated
by jurisprudence (i.e., control at time of delivery and passage
of reasonable time), the mere execution of a public instrument
does not create a conclusive presumption of delivery, which
presumption can be rebutted by clear and convincing evidence,
such as when the buyer failed to take actual possession or there
was continued enjoyment by the seller of possession.45
(3) Special Variation to Addison Doctrine
The Addison doctrine seemed to have been strained in the
case of Dy, Jr. v. Court of Appeals,46 where a brother bought
through a deed of absolute sale a tractor from his brother-
43
168 SCRA 22 (1988).
44
108 Phil. 900 (1960).
45
Santos v. Santos, 366 SCRA 395 (2001). Reiterated in Engreso v. De la Cruz,
401 SCRA 217 (2003); Ten Forty Realty and Dev. Corp. v. Cruz, 410 SCRA 484 (2003).
46
198 SCRA 826 (1991).
228 LAW ON SALES
seller, which at the time of the execution of the instrument, was
mortgaged to and in the possession of the mortgagee. The
purchase was with the knowledge of the mortgagee who insisted
that delivery to the buyer shall be made only upon the clearing of
the check payment on the mortgage debt. In the meantime, the
tractor was executed upon by a judgment creditor of the brother-
seller while still in the possession of the mortgagee.
The issue before the Court was whether the execution
effected upon the tractor to enforce the brother-seller’s judgment
debt was still valid, since the tractor was already sold to the
brother-buyer. The judgment creditor insisted that at the time of
the execution of the deed of sale, no constructive delivery was
effected since the consummation of the sale was dependent upon
the clearance and encashment of the check which was issued in
payment of the tractor.
In ruling for the brother-buyer, Justice Gutierrez held in
Dy, Jr., that “[T]he mortgagor who gave the property as security
under a chattel mortgage did not part with the ownership over the
same. He had a right to sell it although he was under obligation
to secure the written consent of the mortgagor.”47 He held that
in addition to Article 1498 of the Civil Code which recognized
the execution of public instrument as constructive delivery, under
Article 1499, it is provided that the delivery of movable property
may likewise be made by the mere consent or agreement of
the contracting parties, if the thing sold cannot be transferred to
the possession of the vendee at the time of sale, or if the latter
already had it in his possession for any other reason.
Nevertheless, Justice Gutierrez recognized that “[I]n the
instant case, actual delivery of the subject tractor could not be
made. However, there was constructive delivery already upon
the execution of the public instrument pursuant to Art. 1498 and
upon the consent or agreement of the parties when the thing
sold cannot be immediately transferred to the possession of the
vendee. (Art. 1499).”48 With the acknowledgment that actual
47
Ibid, at p. 830.
48
Ibid, at p. 831.
PERFORMANCE OR CONSUMMATION OF SALE 229
delivery could not be effected, because possession of the tractor
was with the mortgagee, under the Addison doctrine, constructive
delivery through the execution of the public instrument could not
produce the effects of tradition, as to have made the brother-
buyer the owner of the subject matter.
In addressing this particular point raised by the respondent
Court of Appeals in its appealed decision, Justice Gutierrez held
that “[W]hile it is true that [the seller] was not in actual possession
and control of the subject tractor, his right of ownership was not
divested from him upon his default. Neither could it be said that
[the mortgagee] was the owner of the subject tractor because the
mortgagee can not become the owner of or convert and appro-
priate to himself the property mortgaged. (Art. 2088, Civil Code)
Said property continues to belong to the mortgagor.”49 The only
proper way to treat the Dy, Jr. ruling is to consider that when it
comes to a third-party and the issue centers on the title or owner-
ship of the subject matter of a sale, then constructive delivery by
the execution of the public instrument would produce the effect
of tradition, but only insofar as title is concerned, provided that at
the time of the execution there was no legal impediment on the
part of the seller to transfer title to the buyer, even if at the time
of sale, control or possession of the subject matter was not in the
hands of the seller.
In any event, the variation in Dy, Jr. is not really that crucial,
since Addison itself recognized that “if the sale had been made
under the express agreement of imposing upon the purchaser
the obligation to take the necessary steps to obtain the material
possession of the thing sold, and it were proven that she knew
that the thing was in the possession of a third person claiming
to have property rights therein, such agreement would perfectly
be valid,”50 and therefore execution of the public document by
itself would produce the legal effects of tradition and effectively
transfer ownership to the buyer, even when the subject matter is
in the hands of a third party.
49
Ibid, at pp. 831-832.
50
Ibid, at p. 409.
230 LAW ON SALES
b. Symbolic Delivery
As to movables, constructive delivery may also be made
by the delivery of the keys of the place or depository where the
movable is stored or kept.51
Symbolic delivery must involve or cover the subject matter,
and cannot take a form relating to the payment of the purchase
price. Thus, Lorenzo Dev. Corp. v. Court of Appeals,52 held that
the issuance of an acknowledgment receipt of the partial payment
for the property bought cannot be taken to mean a transfer of
ownership thereof to the buyer because “no constructive delivery
of the real property could have been effected by virtue thereof.”
c. Constitutum Possessorium
This mode of constructive delivery takes effect when at the
time of the perfection of the sale, the seller held possession of
the subject matter in the concept of owner, and pursuant to the
contract, the seller continues to hold physical possession thereof
no longer in the concept of an owner, but as a lessee or any other
form of possession other than in the concept of owner.53
d. Traditio Brevi Manu
This mode of delivery is opposite that of constitutum
possessorium, where before the sale, the would-be buyer was
already in possession of the would-be subject matter of the
sale, say as a lessee, and pursuant to sale, he would now hold
possession in the concept of an owner.
Heirs of Pedro Escanlar v. Court of Appeals,54 illustrates
the application of traditio brevi manu. In that case, prior to
the sale, would-be buyers were in possession of the subject
property as lessees. Upon sale to them of the rights, interests
and participation as to the one-half (½) portion pro indiviso, they
remained in possession, not in the concept of lessees anymore
51
Art. 1498, Civil Code.
52
449 SCRA 99 (2005).
53
Art. 1500; Amigo v. Teves, 96 Phil. 252 (1954).
54
281 SCRA 176 (1997).
PERFORMANCE OR CONSUMMATION OF SALE 231
but as owners now through symbolic delivery known as traditio
brevi manu.
e. Traditio Longa Manu
This is delivery of a thing merely by agreement, such as when
the seller points the property subject matter of the sale by way of
delivery without need of actually delivering physical possession
thereof. Thus, under Article 1499 of the Civil Code, the delivery of
movable property may be made by the mere consent or agreement
of the contracting parties, if the thing sold cannot be transferred to
the possession of the buyer at the time of the sale.
f. Delivery of Incorporeal Property
An incorporeal property having no physical existence, its
delivery can only be effected by constructive delivery. Article
1501 of the Civil Code recognizes three (3) types of constructive
delivery specifically applicable to incorporeal property, thus:
(a) When the sale is made through a public
instrument, the execution thereof shall be
equivalent to the delivery of the thing which
is the object of the contract, if from the deed
the contrary does not appear or cannot
clearly be inferred;
(b) By the placing of the titles of ownership in
the possession of the buyer; or
(c) The use and enjoyment by the buyer of the
rights pertaining to the incorporeal property,
with the seller’s consent.
g. Delivery by Negotiable Document of Title
A person to whom a negotiable document of title has been
duly negotiated acquires thereby such title to the goods as
transferor had or had ability to convey to a purchaser in good
faith for value, and also the title of the persons to whom the
documents was originally.55 Therefore, the buyer of the goods
55
Art. 1513, Civil Code.
232 LAW ON SALES
can by the process of negotiation of the covering document have
a title better than that of his immediate seller.
On other hand, the buyer to whom a document of title has
been transferred by assignment, acquires only his transferor’s title
to the goods, and always subject to the terms of any agreement
with the transferor.56
Since an invoice is not a negotiable document of title, the
issuance thereof would not constitute constructive delivery.57
h. Delivery Through Carrier
Delivery through a carrier as a form of constructive delivery
necessarily pertains only to a sale of goods. The general rule,
and in the absence of stipulation or circumstances to the contrary,
delivery to carrier is deemed delivery to the buyer, the premise
being that the carrier acts as an agent of the buyer.
This default rule is best illustrated by Article 1523 of the Civil
Code, where, if in pursuance of a sale, the seller is authorized or
required to send the goods to the buyer, delivery of the goods to
a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of the goods
to the buyer, unless a contrary intent appears.
Unless otherwise authorized by the buyer, the seller must
make such contract with the carrier on behalf of the buyer as may
be reasonable, having regard to the nature of the goods and the
other circumstances of the case. If the seller omits to do so, and
the goods are lost or damaged in the course of the transit, the
buyer may decline to treat the delivery to the carrier as delivery to
himself, or may hold the seller responsible for damages.58
Unless otherwise agreed, where goods are sent by the seller
to the buyer under circumstances in which the seller knows or
ought to know that it is usual to insure, the seller must give such
notice to the buyer as may enable him to insure them during their
56
Art. 1514, Civil Code.
57
Norkis Distributors v. Court of Appeals, 193 SCRA 694 (1991); P.T. Cerna Corp.
v. Court of Appeals, 221 SCRA 19 (1993).
58
Art. 1523, Civil Code.
PERFORMANCE OR CONSUMMATION OF SALE 233
transit, and if the seller fails to do so, the goods shall be deemed
to be at his risk during such transit.59
(1) F.A.S. Sales
Under such arrangement, “the seller pays all charges and is
subject to risk until the goods are placed alongside the vessel.”60
In other words, delivery of the goods alongside the vessel
completes the effect of tradition.
(2) F.O.B. Sales
In mercantile contracts of American origin, “f.o.b.” stands
for the words “free on board,” and under such arrangement
the seller shall bear all expenses until the goods are delivered,
depending on whether the goods are to be delivered “f.o.b.” at
the point of shipment or at the point of destination.61 Under an
“f.o.b., shipping point” arrangement, delivery of the goods to the
carrier is equivalent to delivery to the buyer, and at that point the
risk of loss pertains to the buyer.
Under an “f.o.b., destination” arrangement, only when the
vessel has arrived at the point of destination would there be
delivery to the buyer and prior to that point in time, the risk of loss
over the subject matter of the sale will be borne by the seller.
(3) C.I.F. Sales
The letters “c.i.f.” found in British contracts stand for costs,
insurance, and freight; they signify that the price fixed covers
not only the costs of the goods, but the expense of freight and
insurance to be paid by the seller.62 Under that arrangement, the
amount quoted by the seller and agreed to by the buyer, covers
not only the cost of the merchandise (i.e., the price), but also the
cost of insurance and freight. There are two schools of thought
on the effect of delivery under c.i.f. sales.
59
Art. 1523, Civil Code.
60
A. Soriano Y Cia. v. Collector, 97 Phil. 505 (1955).
61
Behn Meyer & Co. v. Yangco, 38 Phil. 602, 606 (1918).
62
Behn Meyer & Co. v. Yangco, 38 Phil. 602, 606 (1918).
234 LAW ON SALES
Under the first school of thought, since in a c.i.f. arrangement,
the costs of insurance and freight are ultimately to be borne by the
buyer, as part of the price he has obligated himself to pay, then
it would mean that the carrier acts as an agent of the buyer who
pays the freight, and therefore delivery to the carrier is delivery
to the buyer. In addition, since the insurance over the goods
shipped is for the account of the buyer, then clearly the buyer has
obtained ownership over the goods during the shipment period
since this is required under the insurance law for the buyer to
have insurable interest.
The other school of thought provides that in quoting a c.i.f.
price, that means that both parties agree that the seller takes on
the responsibility of insuring the goods and providing for their
shipment to the buyer, and for which responsibility he gets a
package price. Under such circumstances, delivery by the seller
of the goods to the carrier is not equivalent to delivery to the
buyer, and the seller must continue to bear the risk of loss during
the shipment period since this is an integral part of his obligation
under the agreed terms of the sale.
In the early case of Behn, Meyer & Co. v. Yangco,63 where
the shipping terms were “c.i.f., Manila” on goods coming from
New York, the Court held that “[I]f the contract be silent as to
the person or mode by which the goods are to be sent, delivery
by the vendor to a common carrier, in the usual and ordinary
course of business, transfers the property to the vendee.”64 The
implication is clear therefore in Behn Meyer & Co. that a “c.i.f.”
arrangement “signifies that the price fixed covers not only the
costs of the goods, but the expense of freight and insurance
to be paid by the seller,” and therefore seller bears the risk of
loss during shipment. It held that “[A] specification in a contract
relative to the payment of freight can be taken to indicate the
intention of the parties in regard to the place of delivery. If the
buyer is to pay the freight, it is reasonable to suppose that he
does so because the goods become his at the point of shipment.
On the other hand, if the seller is to pay the freight, the inference
63
38 Phil. 602 (1918).
64
Ibid, at p. 605.
PERFORMANCE OR CONSUMMATION OF SALE 235
is equally strong that the duty of the seller is to have the goods
transported to their ultimate destination and that title to property
does not pass until the goods have reached their destination.”65
Nevertheless, Behn, Meyer & Co. upheld the principle
that “both of the terms ‘c.i.f.’ and ‘f.o.b.’ merely make rules of
presumption which yield to proof of contrary intention.”66 The Court
then held that since in the instant case the “c.i.f.” arrangement
was accompanied with the word “Manila” which was the point of
destination, then this must be taken to mean “that the contract
price, covering costs, insurance, and freight, signifies that the
delivery was to be made at Manila.”67
In Pacific Vegetable Oil Corp. v. Singzon,68 the Court held
that under an arrangement “c.i.f. Pacific Coast” (the point of
destination), “the vendor is to pay not only the cost of the goods,
but also the freight and insurance expenses, and, as it was
judicially interpreted, this is taken to indicate that the delivery is
to be made at the port of destination.”
Behn, Meyer & Co. and Pacific Vegetable agree with the
second school of thought that since c.i.f. includes both insurance
and freight expenses to be paid by the seller, ordinarily therefore,
in a c.i.f. arrangement, the risk of loss for the account of the buyer
arises only when the vessel arrives at the point of destination.
On the other hand General Foods v. NACOCO,69 upholds
the first school of thought that “[t]here is no question that under
an ordinary C.I.F. agreement, delivery to the buyer is complete
upon delivery of the goods to the carrier and tender of the
shipping and other documents required by the contract and the
insurance policy taken in the buyer’s behalf.”70 General Foods
therefore holds that although it is the seller who may make the
arrangement for the insurance coverage and freightage of the
goods, he does this for the account and benefit of the buyer, who
has agreed to pay for such amounts.
65
Ibid, at pp. 605-606.
66
Ibid, at p. 606.
67
Ibid, at pp. 606-607.
68
G.R. No. L-7917, Supreme Court Advance Decisions, 29 April 1955.
69
100 Phil. 637 (1956).
70
Ibid, at p. 341.
236 LAW ON SALES
In General Foods, the price was quoted “CIF New York”
(the point of destination), and although the Court did not place
significance on the indication of “New York” it held that “[t]here is
equally no question that the parties may, by express stipulation
or impliedly (by making the buyer’s obligation depend on arrival
and inspection of the goods), modify a CIF contract and throw
the risk upon the seller until arrival in the port of destination.”71
The Court took into consideration that the price agreed upon was
to be based on “net landed weights” and it held that delivery by
the seller to the carrier in Manila of the goods covered was not
delivery to the buyer, and the risk of loss of the goods during the
voyage was to be borne by the seller.
The lesson learned from all of these is that the shipping
arrangements in a sale create, by commercial usage, certain
presumptive effects; however, such presumptive effects must
give away, rather easily, to any stipulation or even intimation
to the contrary. The courts have therefore tended to look at
other stipulations or indications in the agreement to find the
true intentions of the parties as to the transfer of the risk of
loss before they would apply the presumptive effects of such
acronyms.
EFFECTS AND COMPLETENESS OF DELIVERY
For tradition to produce the twin legal consequences of
transferring ownership to the buyer and effecting the fulfillment
of the primary obligations of the seller, two principles must apply,
namely:
(a) Delivery must be made pursuant to a valid
sale; and
(b) Delivery must be effected when seller has
ownership over the subject matter of sale
so delivered.
71
Ibid, at p. 341.
PERFORMANCE OR CONSUMMATION OF SALE 237
a. Delivery Must Be Made Pursuant to a Valid Sale
Since tradition takes effect in the consummation stage of
sale, it presupposes that there has been a valid passage through
perfection stage that has given rise to a valid and binding sale
that is capable of performance. Consequently, delivery would
produce the effect of transferring ownership to the buyer only
when it is made pursuant to a valid sale.
When a sale is fictitious, and therefore void and inexistent,
as there was no consideration for the same, no title over the
subject matter of the sale can be conveyed. Nemo potest nisi
quod de jure potest — No man can do anything except what he
can do lawfully.72
b. Delivery Must Be Made By Seller Who Has
Ownership over the Subject Matter
Likewise, delivery would produce the effect of transferring
ownership only if at the time of delivery the seller still had
ownership over the subject matter. This stems from the principle
that no man can dispose of that which does not belong to him.
(Nemo dat quod non habet.)73
c. To Whom Delivery Must Be Made
Lagoon v. Hooven Comalco Industries, Inc.,74 held that
where it is stipulated that deliveries must be made to the buyer
or his duly authorized representative named in the contracts, the
seller is bound to deliver in such manner only, unless the buyer
specifically designated someone to receive delivery.
72
Traders Royal Bank v. Court of Appeals, 269 SCRA 15 (1997); Cadungog v. Yap,
469 SCRA 561 (2005); Naval v. Court of Appeals, 483 SCRA 102 (2006).
73
Noel v. Court of Appeals, 240 SCRA 789 (1995); Nool v. Court of Appeals, 276
SCRA 149 (1997); Tangalin v. Court of Appeals, 371 SCRA 49 (2001); Naval v. Court of
Appeals, 483 SCRA 102 (2006).
Although tax declaration is not evidence of title, nevertheless when at the time of
delivery there is no proof that the seller had ownership and as in fact the tax declaration
to the subject property was in the name of another person, though tax declaration do
not prove ownership of the property of the declarant, tax declarations and receipts can
be strong evidence of ownership of land when accompanied by possession for a period
sufficient for prescription. Heirs of Severina San Miguel v. Court of Appeals, 364 SCRA
523 (2001).
74
349 SCRA 363 (2001).
238 LAW ON SALES
d. When Buyer Refuses to Accept
Since delivery of the subject matter of the sale is an
obligation on the part of the seller, the acceptance thereof by
the buyer is not a condition for the completeness of delivery.75
Even with such refusal of acceptance, delivery, whether actual
or constructive, will produce its legal effects, as, for example,
transferring the risk of loss of the subject matter to the buyer who
has become the owner thereof.
Under Article 1588 of the Civil Code, when the buyer’s
refusal to accept the goods is without just cause, the title thereto
passes to him from the moment they are placed at his disposal.
However, even under such circumstances, the seller is still
legally obliged to take certain steps as not to be held liable for
consequent loss or damage to the goods.
1. Rules on Effects of Delivery for Movables
Article 1522 of the Civil Code provides the rules on the
delivery of goods —
(a) Where the seller delivers to the buyer
a quantity of goods less than what he
contracted to sell, the buyer may reject
them; but if the buyer accepts or retains the
goods so delivered, knowing that the seller
is not going to perform the contract in full,
he must pay for them at the contract rate;
(b) If, however, the buyer has used or disposed
of the goods delivered before he knows that
the seller is not going to perform his contract
in full, the buyer shall not be liable for more
than the fair value to him of the goods so
received;
(c) Where the seller delivers to the buyer
a quantity of goods larger than what he
contracted to sell, the buyer may accept the
75
La Fuerza v. Court of Appeals, 23 SCRA 1217 (1968).
PERFORMANCE OR CONSUMMATION OF SALE 239
goods covered in the contract and reject the
rest; if the buyer accepts the whole of the
goods so delivered he must pay for them
at the contract rate; if the subject matter is
indivisible, the buyer may reject the whole
of the goods; or
(d) Where the seller delivers to the buyer the
goods contracted but mixed with goods of a
different description, the buyer may accept
the contracted goods and reject the rest; if
the subject matter is indivisible, the buyer
may reject the goods entirely.
a. When Goods Held by Third Party
Where the goods at the time of sale are in the possession of
a third person, the seller has not fulfilled his obligation to deliver
to the buyer unless and until such third person acknowledges to
the buyer that he holds the goods on the buyer’s behalf.76
b. Reservation of Ownership
Despite delivery, ownership will not transfer to the buyer in
case of express reservation, such as when the parties stipulate
that ownership will not transfer until the purchase price is fully
paid,77 or until certain conditions are fulfilled.78
Article 1503 of the Civil Code gives the following instances
when there is an implied reservation of ownership:
(a) Where goods are shipped, and by the bill of
lading the goods are deliverable to the seller
or his agent, the seller thereby reserves the
ownership in the goods.
But, if except from the form of the bill of
lading, ownership would have passed to the
buyer on shipment of the goods, the seller’s
76
Art. 1521, Civil Code.
77
Art. 1478, Civil Code.
78
Art. 1503, Civil Code.
240 LAW ON SALES
property in the goods shall be deemed to be
only for purpose of securing performance of
the buyer’s obligations, in which case the
buyer bears the risk of loss;
(b) Where goods are shipped, and by the bill of
lading the goods are deliverable to the order
of the buyer or of his agent, but possession
of the bill of lading is retained by the seller or
his agent, the seller thereby reserves a right
to the possession of the goods as against
the buyer, and ownership is still transferred
to the buyer;
(c) Where the seller of goods draws on the
buyer for the price and transmits the bill of
exchange and bill of lading together to the
buyer to secure acceptance or payment of
the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor
the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no
added right thereby.
In the last case, however, if the bill of lading provides
that the goods are deliverable to the buyer or to the order of
the person named therein, one who purchases in good faith
for value the bill of lading, or goods from the buyer will obtain
the ownership in the goods, although the bill of exchange has
not been honored, provided that such purchaser has received
delivery of the bill of lading endorsed by the consignee named
therein, or of the goods, without notice of the facts making the
transfer wrongful.79
c. Obligation as to Accessories and Accessions
In the sale of movables, in addition to the obligation of the
seller to deliver the accessories and accessions in the condition
in which they were upon the perfection of the contract,80 the seller
79
Art. 1503, Civil Code.
80
Art. 1537, Civil Code.
PERFORMANCE OR CONSUMMATION OF SALE 241
must deliver to the buyer a quantity of goods that should not be
less than what he contracted to sell, otherwise the buyer may
reject them.81
d. Sale in Mass of Movables
The sale of movables under Article 1522 of the NCC,
should be distinguished from the sale of specific mass under
Article 1480 which provides for the “sale of fungible things, made
independently and for a single price, or without consideration of
their weight, number, or measure.”
In Gaite v. Fonacier,82 which involved the sale of iron ore,
it was held that if there is no provision in the contract for the
measuring or weighing of the fungible movables sold in order to
complete or perfect the sale, nor is the price agreed upon by the
parties to be based upon such measurement, then the “subject
matter of the sale is, therefore, a determinate object, the mass,
and not the actual number of units or tons contained therein, so
that all that was required of the seller Gaite was to deliver in good
faith to his buyer all of the ore found in the mass, notwithstanding
that the quantity delivered is less than the amount estimated by
them.”83
e. Sale by Description and/or Sample
In a sale of goods by description or sample, the sale may
be rescinded if the bulk of the goods delivered do not correspond
with the description or the sample, and if the contract be by
sample as well as by description, it is not sufficient that the bulk of
goods correspond with the sample if they do not also correspond
with the description.84 By their very nature, sales of goods by
sample and/or description, should allow the buyer a reasonable
opportunity of inspection or of comparing the bulk with the sample
or the description before accepting their delivery.85
81
Art. 1522, Civil Code.
82
2 SCRA 830 (1961).
83
Ibid, at p. 840; emphasis supplied.
84
Art. 1481, Civil Code.
85
Last paragraph of Art. 1481, Civil Code.
242 LAW ON SALES
Mendoza v. David,86 held that there is “sale by sample” when
a small quantity is exhibited by the seller as a fair specimen of the
bulk, which is not present and there is no opportunity to inspect
or examine the same, thus: “To constitute a sale by sample, it
must appear that the parties treated the sample as the standard
of quality and that they contracted with reference to the sample
with the understanding that the product to be delivered would
correspond with the sample.”87
Mendoza described a “sale of goods by description” as one
where “a seller sells things as being of a particular kind, the buyer
not knowing whether the seller’s representations are true or false,
but relying on them as true; or as otherwise stated, where the
buyer has not seen the article sold and relies on the description
given to him by the seller, or has seen the goods, but the want of
identity is not apparent on inspection.”88
The Court in Mendoza also held that the term “sale by
sample” does not include an agreement to manufacture goods
to correspond with the pattern, especially where in that case
the three sets of furniture were manufactured according to the
specifications provided by the buyer, and not in accordance with
the replicas displayed in the seller’s shop.
Engel v. Mariano Velasco & Co.,89 held that even in sales
by description and/or sample, the purchaser will not be released
from his obligation to accept and pay for the goods by deviations
on the part of the seller from the exact terms of the contract, if
the purchaser had acquiesced to such deviations after due notice
thereof.
Pacific Commercial Co. v. Ermita Market & Cold Stores,90
held that when the machine delivered by the seller is in accordance
with the description stated in the sales contract, the buyer cannot
refuse to pay the balance of the purchase price and the cost of
installation even if it proves that the machine cannot be used
86
441 SCRA 172 (2004).
87
Ibid, at p. 184.
88
Ibid, at pp. 184-185.
89
47 Phil. 115 (1924).
90
56 Phil. 617 (1932).
PERFORMANCE OR CONSUMMATION OF SALE 243
satisfactorily for the purposes for which he bought it when such
purpose was not made known to the seller.
f. “On Sale or Return”
Under Article 1502 of the NCC, when goods are delivered to
the buyer “on sale or return” to give the buyer an option to return
the goods instead of paying the price, the ownership passes to
the buyer on delivery, but he may revest the ownership in the
seller by returning or tendering the goods within the time fixed
in the contract, or, if no time has been fixed, within a reasonable
time.
g. “Sale on Approval, Trial, Satisfaction, or Acceptance”
On the other hand, Article 1502 provides that when goods
are delivered to the buyer on approval or on trial or on satisfac-
tion, or other similar terms, the ownership therein passes to the
buyer only: (a) when he signifies his approval or acceptance to
the seller or does any other act adopting the transaction; or (b)
if the buyer does not signify his approval or acceptance, but re-
tains the goods without giving notice of rejection, then if a time
has been fixed for the return of the goods, on the expiration of
such time, and, if no time has been fixed, on the expiration of a
reasonable time.
Vallarta v. Court of Appeals,91 held that when the sale of a
movable is “sale on acceptance,” no ownership could have been
transferred to the buyer although he took possession thereof,
because “[d]elivery, or tradition, as a mode of acquiring ownership
must be in consequence of a contract ..., e.g., sale,”92 and in that
case there was as yet no contract when delivery was effected.
h. Form of Such Special Sales
Industrial Textile Manufacturing Co. v. LPJ Enterprises,
Inc.,93 held that for a sale to be considered and construed as a
“sale or return” or a “sale on approval,” there must be a clear
91
150 SCRA 336 (1987).
92
Ibid, at p. 342.
93
217 SCRA 322 (1993).
244 LAW ON SALES
agreement to either of such effect, otherwise, the provisions of
Article 1502 of the Civil Code governing such sales cannot be
invoked by either party to the contract, and therefore must be in
writing, and cannot be proved by parol evidence:
... The provision in the Uniform Sales Act and the
Uniform Commercial Code from which Article 1502 was
taken, clearly requires an express written agreement
to make a sales contract either a “sale or return” or a
“sale on approval.” Parol or extrinsic testimony could
not be admitted for the purpose of showing that an
invoice or bill of sale that was complete in every aspect
and purporting to embody a sale without condition or
restriction constituted a contract of sale or return. If the
purchaser desired to incorporate a stipulation securing
to him the right to return, he should have done so at
the time the contract was made. On the other hand,
the buyer cannot accept part and reject the rest of the
goods since this falls outside the normal intent of the
parties in the “on approval” situation.94
i. Written Proof of Delivery
Lao v. Court of Appeals,95 confirmed that in case of goods,
delivery is generally evidenced by a written acknowledgment of a
person that he has actually received the thing or the goods, as in
delivery receipts, under the following rules:
(a) A bill of lading cannot substitute for a
delivery receipt, because it is a written
acknowledgment of receipt of the goods by
the carrier and an agreement to transport
and deliver them at a specific place to a
person named or upon his order; it does
not evidence receipt of the goods by the
consignee or the person named in the bill of
lading; and
94
Ibid, at p. 327, citing 67 AM JUR 2D, pp. 733-748.
95
325 SCRA 694 (2000).
PERFORMANCE OR CONSUMMATION OF SALE 245
(b) A factory consignment invoice is not
evidence of actual delivery of the goods
since in the invoice nothing more than a
detailed statement of the nature, quantity
and cost of the thing sold, and it not proof
that the thing or goods were actually
delivered to the buyer or the consignee.
j. Time and Place of Delivery
Whether it is for the buyer to take possession of the goods
or for the seller to send them to the buyer is a question depending
in each case on the contract, express or implied, between the
parties. Apart from such contract, express or implied, or usage
of trade to the contrary, the place of delivery is seller’s place of
business, if he has one, and if not, his residence.96 In case of a
sale of specific goods, which to the knowledge of the parties when
the contract or the sale was made were in some other place, then
that place is the place of delivery.97
Where by a sale the seller is bound to send the goods to the
buyer, but no time for sending them is fixed, the seller is bound to
send them within a reasonable time.98
Demand or tender of delivery may be treated as ineffectual
unless made at a reasonable hour; and what may be a reasonable
hour is a question of fact.99
k. Seller Shall Pay Expenses of Delivery
Unless otherwise agreed, the expenses in putting the goods
into a deliverable state must be borne by the seller.100
2. Rules on Effects of Delivery for Immovables
The following rules to determine completeness of delivery
shall apply when the subject matter of the sale is an immovable:
96
Art. 1521, Civil Code.
97
Art. 1521, Civil Code.
98
Art. 1521, Civil Code.
99
Art. 1521, Civil Code.
100
Art. 1521, Civil Code.
246 LAW ON SALES
a. Where Immovables Sold Per Unit or Number
If the sale of real estate should be made with a statement
of its area, at the rate of a certain price for a unit of measure or
number, the seller is obliged to deliver to the buyer, if the latter
should demand it, all that may have been stated in the contract.
If this should not be possible, the buyer may choose between
a proportional reduction of the price, or the rescission of the
contract when in the latter case, the lack of area be not less than
one-tenth (1/10) of that stated.101
In Rudolf Lietz, Inc. v. Court of Appeals,102 it was held that
the statement of the area of the immovable is not conclusive and
the price may be reduced or increased depending on the area
actually delivered.
The rule applies, even when the area is the same, if any part
of the immovable is not of the quality specified in the contract;
provided that rescission may take place when the inferior value
of the thing sold exceeds one-tenth (1/10) of the price agreed
upon.103
Even when the smaller area or inferiority of quality does
not conform to the minimum amount or value provided by law
to allow rescission on the part of the buyer, nevertheless, if the
buyer would not have bought the immovable had he known of its
smaller area or inferior quality, he may rescind the sale.104
On the other hand, if there is a greater area or number in
the immovable than that stated in the contract, the buyer may
accept the area included in the contract and reject the rest. If
he accepts the whole area, he must pay for the same at the
contract rate.105
The foregoing rules also apply to judicial sales.106
101
Art. 1539, Civil Code.
102
478 SCRA 451 (2005).
103
Art. 1539, Civil Code.
104
Art. 1539, Civil Code.
105
Art. 1540, Civil Code.
106
Art. 1541, Civil Code.
PERFORMANCE OR CONSUMMATION OF SALE 247
b. Where Immovables Sold for a Lump Sum
In the sale of real estate made for a lump sum and not at
the rate of a certain sum for a unit of measure or number, there
shall be no increase or decrease of the price, although there
be a greater or lesser area or number than that stated in the
contract,107 especially with the use of qualifying words of “more
or less” in describing the area.108
The same rule applies when two or more immovables are
sold for a single price; but if, besides mentioning the boundaries
which is indispensable in every conveyance of real estate,
its area or number should be designated in the contract, the
vendor shall be bound to deliver all that is included within said
boundaries, even when it exceeds the area or number specified
in the contract; and, should he not be able to do so, he shall
suffer a reduction in the price, in proportion to what is lacking in
the area or number, unless the contract is rescinded because
the buyer does not accede to the failure to deliver what has been
stipulated.109
Nevertheless, in both Asiain v. Jalandoni,110 and Roble v.
Arbasa,111 the Court held that although under Article 1542, in
the sale of real estate by lump sum, there shall be no increase
or decrease of the price although there be a greater or lesser
area or number than that stated in the contract, the rule admits
of exception because the sale of land under description “more
or less” or similar words in designating quantity covers “only a
reasonable excess or deficiency.”112 In Roble, the Court held that
a deficiency or excess of “644 square meters” is not reasonable.
The exception to this rule is when expressly the buyer assumes
the risk on the actual area of the land bought.113
107
Art. 1542, Civil Code.
108
Esguerra v. Trinidad, 518 SCRA 186 (2007).
109
Art. 1542, Civil Code. See also Azarraga v. Gay, 52 Phil. 599 (1928), and Teran
v. Villanueva, 56 Phil. 677 (1932).
110
45 Phil 296 (1923).
111
362 SCRA 69 (2001).
112
Reiterated in Rudolf Lietz, Inc. v. Court of Appeals, 478 SCRA 451 (2005).
113
Garcia v. Velasco, 72 Phil. 248 (1941).
248 LAW ON SALES
c. Lump Sum Sale versus Sale by Unit
of Measure or Number
Santa Ana v. Hernandez,114 clarified the governing rule in
the sale of real property, whether to treat it as a lump-sum sale
or a sale per unit of measure or number. In that case, the sellers-
spouses sold to the buyer two separate portions of a much
bigger land indicating in the instrument the total purchase price
and the areas of each of the sold portions totaling 17,000 square
meters, plus an indication of the boundaries. Subsequently, the
buyer refused to vacate the areas occupied by her which were
in excess of 17,000 square meters but which she alleged where
within the boundaries described in the instrument.
In affirming that the contract between the parties was a
lump-sum sale, and therefore the buyer was entitled to occupy
all portions within the boundaries stated in the instrument,
even if they exceed 17,000 square meters, the Court held that
“the sale made was of a definite and identified tract, a corpus
certum, that obligated the vendors to deliver to the buyer all the
land within the boundaries, irrespective of whether its real area
should be greater or smaller than what is recited in the deed. ...
To hold the buyer to no more than the area recited on the deed,
it must be made clear therein that the sale was made by unit of
measure at a definite price for each unit.”115
The Court also held that “[i]f the defendant intended to
buy by the meters he should have so stated in the contract.”
Also, based on the ruling of the Supreme Court of Spain, in
construing Article 1471 of the Spanish Civil Code, which was
copied verbatim in Article 1542 of our Civil Code, the Court
held that it “is highly persuasive that as between the absence
of a recital of a given price per unit of measurement, and the
specification of the total area sold, the former must prevail and
determines the applicability of the norms concerning sales for
a lump sum.116 In short, Santa Ana provides that if the price per
unit of measure or number is not expressly provided for in the
114
18 SCRA 973 (1966).
115
Ibid, at p. 979.
116
Ibid, at p. 980, citing Goyena v. Tambunting, 1 Phil. 490 (1902).
PERFORMANCE OR CONSUMMATION OF SALE 249
contract, the rules of lump sum sale shall prevail in the sale of
real property.
Balantakbo v. Court of Appeals,117 reiterated that the rule is
quite well-settled that what really defines a piece of land is not
the area calculated with more or less certainty mentioned in the
description but the boundaries therein laid down as enclosing the
land and indicating its limits: where the land is sold for a lump sum
and not so much per unit of measure or number, the boundaries
of the land stated in the contract determine the effects and scope
of the sale not the area thereof.118
In Esguerra v. Trinidad,119 the Court held —
Under Article 1542, what is controlling is the entire
land included within the boundaries, regardless of
whether the real area should be greater or smaller than
that recited in the deed. This is particularly true since
the are of the land ... was described in the deed as
“humigit kumulang,” that is, more or less. A caveat is
in order, however, the use of “more or less” or similar
words in designating quantify covers only a reasonable
excess or deficiency. A vendee of land sold in gross
or with the description “more or less” with reference
to its area does not thereby ipso facto take all risks of
quantity in the land. Numerical data are not of course
the sole gauge of unreasonableness of the excess
of deficiency in area. Courts must consider a host of
other factors, in one case (Roble v. Arbas, 362 SCRA
69 [2001]), the Court found substantial discrepancy in
area due to contemporaneous circumstance. Citing
change in the physical nature of the property, it was
therein established that the excess area at the southern
portion was a product of reclamation, which explained
why the land’s technical description in the deed of
sale indicated the seashore as its southern boundary,
hence the inclusion of the reclaimed area was declared
unreasonable.” The increase by a fourth of a fraction
117
249 SCRA 323 (1995).
118
Reiterated in Rudolf Lietz, Inc. v. Court of Appeals, 478 SCRA 451 (2005).
119
518 SCRA 186 (2007).
250 LAW ON SALES
of the area indicated in the deed of sale cannot be
considered an unreasonable excess.120
d. Where Immovables Sold in Mass
A judicial sale in mass of separate known lots or parcels will
not be set aside, unless it is made to appear that a larger sum
could have been realized from a sale in parcels or that a sale
of less than the whole would have been sufficient to satisfy the
debt.121
e. Expenses of Delivery and Registration
on Real Estate
As discussed in greater details in the appropriate chapters,
the rules pertaining to, and the effects of, tradition, whether actual
or constructive, vary greatly when the subject matter of a valid
sale is real property, especially so when it is registered land. This
is because of the rather peremptory effect of “registration in good
faith as the operative act” principle under the Torrens system
embodied in the Property Registration Decree,122 and the priority
of registration in good faith to determine ownership preference in
double sales rules in Article 1544 of the Civil Code.
The Supreme Court held in 2003 in Chua v. Court of
Appeals,123 that registration of the title of the buyer over the
purchased real estate is not an ingredient necessary for tradition
to have full effect, thus —
The obligation of the seller is to transfer to the buyer
ownership of the thing sold. In the sale of real property,
the seller is not obligated to transfer in the name of the
buyer a new certificate of title, but rather to transfer
ownership of the real property. There is a difference
between transfer of the certificate of title in the name of
the buyer, and the transfer of ownership to the buyer. The
buyer may become the owner of the real property even
if the certificate of title is still registered in the name of
120
Ibid, at pp. 198-199.
121
Republic v. NLRC, 244 SCRA 564 (1995).
122
Pres. Decree 1529.
123
401 SCRA 54 (2003).
PERFORMANCE OR CONSUMMATION OF SALE 251
the seller. As between the seller and buyer, ownership
is transferred not by issuance of a new certificate of
title in the name of the buyer but by the execution of the
instrument of sale in a public document.124 x x x. The
recording of the sale with the proper Registry of Deeds
and the transfer of the certificate of title in the name of
the buyer are necessary only to bind third parties to
the transfer of ownership. As between the seller and
the buyer, the transfer of ownership takes effect upon
the execution of a public instrument conveying the real
estate. Registration of the sale with the Registry of
Deeds, or the issuance of a new certificate of title, does
not confer ownership on the buyer. Such registration
or issuance of a new certificate of title is not one of the
modes of acquiring ownership.
Chua also held that although the buyer of a parcel of land
has more interest in having the capital gains tax paid immediately
since this is a pre-requisite to the issuance of a new Torrens title
in his name, nevertheless, as far as the government is concerned,
the capital gains tax remains a liability of the seller since it is a
tax on the seller’s gain from the sale of the real estate. The Court
also emphasized that the payment of the capital gains tax is not
a pre-requisite to the transfer of ownership to the buyer, and
that the transfer of ownership took effect upon the signing and
notarization of the deed of absolute sale.
Earlier, Jose Clavano, Inc. v. HLURB,125 held that a judgment
on a sale that decrees the obligations of the seller to execute and
deliver the deed of absolute sale and the certificate of title, does
not necessarily include within its terms the obligation on the part
of the seller to pay for the expenses in notarizing the deed of sale
and in obtaining new certificate of title.
The ruling in Jose Clavano, Inc. is contrary to the Court’s
subsequent ruling in Chua where the Court decreed the
obligations of the seller to deliver the documents necessary to
allow the buyer to be able to effect registration of his purchase.
124
Ibid, at p. 70.
125
378 SCRA 172 (2002).
252 LAW ON SALES PERFORMANCE OR CONSUMMATION OF SALE 253

In fact, Vive Eagle Land, Inc. v. Court of Appeals,126
subsequently held that under Article 1487 of the Civil Code, the
expenses for the registration of the sale should be shouldered
by the seller unless there is a stipulation to the contrary; and that
under Article 1495, the seller is obliged to transfer title over the
property and deliver the same to the vendee. The ruling in Vive
Eagle Land is again in stark contrast to the Court’s earlier ruling in
Chua that registration of the title of the buyer over the purchased
real estate is not an ingredient necessary for tradition to have full
effect, and therefore “the seller is not obligated to transfer in the
name of the buyer a new certificate of title, but rather to transfer
ownership of the real property. There is a difference between
transfer of the certificate of title in the name of the buyer, and the
transfer of ownership to the buyer.”
Nevertheless, the rules on double sales, although
essentially applicable within the stage of consummation, have a
way of dictating or pre-empting the principles of perfection. This
will be discussed at the appropriate points below.
The substantive discussions are better introduced with
the following proposition that may be obvious to many readers
already, thus: although Article 1544 may provide for the rules
on double sales for all types of movables and immovables,
nonetheless, the rules therein are not the only existing and
prevailing rules on double sales; that in fact, Article 1544 is
merely reflective and implementative of civil law principles in
Property Law, as well as special laws on registration of land and
other real estates.

DOUBLE SALES 2. Article 1544 as the Platform for Discussion

1. Rules on Double Sales Must Be Considered Article 1544 of the Civil Code provides that if the same thing
as Rules on Tradition 127 should have been sold to different buyers, the ownership shall
The various rules on double sales, including those provided be given:
under Article 1544 of the Civil Code, are rules that pertain to the (a) When subject matter is movable, to the
consummation stage in the life of a sale; they cover the effects buyer:
and consequences of tradition in a particular situation where the
same seller has sold the same subject property to two or more • Who may have first taken possession
buyers who do not represent the same interests. Consequently, thereof in good faith;
the various rules on double sales usually can only operate under (b) When subject matter is immovable, to the
the same premise that tradition, whether actual or constructive, buyer:
can be made operative, that is:
• “Who in good faith first recorded [the
(a) The conflicting sales are all valid and de- sale] in the Registry of Property;”
mandable sales, pursuant to which tradition
was or could be effected; and • “Should there be no inscription, ... to the
person who in good faith was first in the
(b) The seller who effected multiple sales possession” of the subject matter;
to various buyers over the same subject
matter actually had ownership to convey.128 • “[I]n the absence thereof, to the person
who presents the oldest title, provided
126
444 SCRA 445 (2004). there is good faith.”
127
The rules on double sales under Article 1544 of the Civil Code find no relevance
in an ordinary donation. Hemedes v. Court of Appeals, 316 SCRA 347 (1999). The best way to appreciate Article 1544 is perhaps to
128
Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals, 448 SCRA consider that it is more reflective of the doctrinal values on what
347 (2005).
254 LAW ON SALES
Philippine society considers to be the best gauge of determining
who between disputing claimants would be preferred.
When it comes to movable properties, our society has
determined that one who possesses in good faith should be
preferred against another who merely interposes a claim even
though he be also in good faith. In other words, possession and
enjoyment of movable property are considered to be the public’s
best gauge of who owns a movable. This principle is expressed in
Article 559 of the Civil Code, which provides that the “possession
of movable property acquired in good faith is equivalent to title,”
which may be good even against the real owner of such movable.
When it comes to immovable properties, their importance
in civil society would require that they be governed by a system
of registration upon which the public may be able to clearly
determine who owns a particular property and what claims
and liens pertain thereto. This is the reason why in many of
it decisions, the Supreme Court holds that the execution of a
private document or the transfer of physical possession over real
property binds only the parties thereto, but that there must be
compliance with “[f]ormal requirements ... for the benefit of third
parties;”129 that although the “rule of thumb is that a sale of land,
once consummated, is valid regardless of the form it may have
been entered into,” this only applies to the contracting parties and
“in the event that a third party ... disputes the ownership of the
property, the person against whom that claim is brought can not
present any proof of such sale and hence has no means to enforce
the contract;”130 and that other than a proper memorandum of the
sale, but more importantly, the registration of that sale with the
Registry of Deeds is what binds registered land.131
Thus, under Article 1544, the buyer in good faith who is able
to effect registration of his purchase is preferred.
If we continue through the hierarchy of values when it comes
to double sales over immovables reflected in Article 1544, we find
129
Fule v. Court of Appeals, 286 SCRA 698 (1998).
130
Claudel v. Court of Appeals, 199 SCRA 113 (1991); also Alba Vda. De Rax v.
Court of Appeals, 314 SCRA 36 (1999).
131
Secuya v. Vda. De Selma, 326 SCRA 244 (2000).
PERFORMANCE OR CONSUMMATION OF SALE 255
that the second rule that grants preference to a buyer who first
takes possession of the immovable in good faith, is consistent
with the essence of the principle that the sale, even when it is
valid and enforceable, is merely a “title” or the legal justification
to acquire ownership, but it is tradition that is the “mode” by which
ownership is transferred to a buyer. Consequently, outside the
applicability of the primary rule on registration, the buyer who first
obtains possession of the subject matter in good faith is preferred
against another claiming buyer, under the inversely phrased
principle of Nemo dat quod non habet, that “No man can receive
from his seller what the latter no longer has.”
Finally, in the absence of first inscription or first possession,
both in good faith, Article 1544 reflects in the third rule applicable
to double sales of immovable the principle of prius tempore,
potior jure, which means that the first buyer, having the oldest
title in good faith, should be preferred.
3. Two Divergent Systems When It Comes to Land
Although registration of a sale occupies the highest prefer-
ence for determining who owns land and other real estate, it has
assumed two divergent paths in Philippine jurisdiction, between
“registered land” (which is covered by the Torrens system) and
“unregistered land” (not covered by the Torrens system).
Registration under the Torrens system was previously gov-
erned by Act No. 496 (The Public Land Act), but now governed
by Pres. Decree No. 1529 (The Property Registration Decree).
Annotation or registration of transactions over unregistered land
was governed by Act No. 3344, but is now also provided for in
Pres. Decree No. 1529. The doctrinal difference between the two
sets of registration systems for real estate is quite stark.
a. The Case for Registered Land
Section 51 of Pres. Decree No. 1529 embodies the
“registration in good faith as the operative act” doctrine, thus —
Sec. 51. Conveyance and other dealings by
registered owners. — An owner of registered land may
256 LAW ON SALES
convey, mortgage, lease, charge or otherwise deal with
the same in accordance with existing laws ... But no
deed, mortgage, lease, or other voluntary instrument,
except a will, purporting to convey or affect registered
land shall take effect as a conveyance or bind the land,
but shall operate only as a contract between the parties
and as evidence of authority to the Register of Deeds
to make registration.
The act of registration shall be the operative act to
convey or affect the land insofar as third persons are
concerned, and in all cases under this Decree, the
registration shall be made in the office of the Register
of Deeds for the province or city where the land lies.
Abrigo v. De Vera,132 affirms that the rule in double sales
under Article 1544, whereby the buyer who is able to first register
the purchase in good faith “is in full accord with Section 51 of
PD 1529 which provides that no deed, mortgage, lease, or other
voluntary instrument — except a will purporting to convey or
affect registered land, shall take effect as a conveyance or bind
the land until its registration.”133
(1) Article 1544 Does Not Overcome the Priority
Rules Under P.D. No. 1529.
It should be emphasized that a clear distinction should be
drawn between the term “registration” which is the judicial or
administrative process by which a parcel of land is placed for
the first time within the coverage of the Torrens system, from
the term “registration” which is intended to cover the annotation
or inscription of a contract, transaction or legal process in the
Register of Deeds covering a property, which may or may not
be registered land. Only the second meaning of “registration” is
meant to be covered by the rules on double sales under Article
1544. More importantly, since the legal effect of registration
under Article 1544 pertains only to double sales, the coverage
432 SCRA 544 (2004).
132
Ibid, at p. 551. Also Carumba v. Court of Appeals, 31 SCRA 558 (1970);
133
Radiowealth Finance Co. v. Palileo, 197 SCRA 245 (1991).
PERFORMANCE OR CONSUMMATION OF SALE 257
and the effects of registration under Section 51 of Pres. Decree
No. 1459 cover not only sales contracts, but all other forms of
annotated voluntary contracts and transactions, like lease,
mortgage, options, agency designation, contracts to sell, etc. In
other words, the registration principle under Pres. Decree No.
1459 has a wider scope, and thereby a more pre-emptive effect,
than the narrow double sales application of Article 1544 of the
Civil Code.
A reading of the various decisions of the Supreme Court on
the matter clearly indicates that the rules of double sales under
Article 1544 do not overcome nor pre-empt the specific rules
under the Torrens system for registered land, which provide that
registration is the “operative act” by which dealings on registered
land, whether they be voluntary or involuntary, shall be recognized
as existing and binding upon third parties.
For example, Liao v. Court of Appeals,134 held that when two
certificates of title are issued to different persons covering the
same land in whole or in part, the rules on double sales under
Article 1544 cannot formally be applied, and instead the particular
doctrine under the Torrens System would apply, i.e., the person
holding title which was issued of an earlier date must prevail;
and, in case of successive registrations, where more than one
certificate is issued over the same land, the person holding a prior
certificate is entitled to the land as against a person who relies
on a subsequent certificate. Liao applied the principle under the
Torrens system that a certificate is not conclusive evidence of title
if the same land had been registered and an earlier certificate for
the same is in existence.
Another example is the decision in Naawan Community
Rural Bank, Inc. v. Court of Appeals,135 where the Court held
that invoking the rules on double sales and “priority in time”
would be misplaced by a first buyer who bought the land not
within the Torrens system but under Act No. 3344, as against the
second buyer who bought the same property when it was already
134
323 SCRA 430 (2000).
135
395 SCRA 43 (2003).
258 LAW ON SALES
registered under the Torrens System, thus: “It is a well-known
rule in this jurisdiction that persons dealing with registered land
have the legal right to rely on the fact of the Torrens Certificate
of Title and to dispense with the need to inquire further, except
when the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to
make such inquiry.”136 In addition, Naawan Community Rural
Bank held that the formal registration proceedings undertaken on
the property and the subsequent issuance of a title over the land
under the Torrens system had the legal effect of cleansing title
on the property of all liens and claims which were not annotated
therein.
The ruling in Naawan Community Rural Bank was reiterated
in Abrigo v. De Vera,137 where the Court emphasized that the
legal priority of registration of sale under Pres. Decree No. 1529
cannot be overcome by an earlier registration under Act No. 3344
which is not effective form of registration under Article 1544 of the
Civil Code.
b. The Case for Unregistered Land
If we consider that Act No. 3344 embodied the principle
that “registration is without prejudice to a third party with a better
right,” and that Sec. 113 of Pres. Decree No. 1529, now provides
that —
Sec. 113. Recording of instruments relating to
unregistered lands — No deed, conveyance, mortgage,
lease, or other voluntary instruments affecting land not
registered under the Torrens system shall be valid,
except as between the parties thereto, unless such
instrument shall have been recorded in the manner
prescribed in the office of the Register of Deeds x x
x. ... It shall be understood that any recording made
under this section shall be without prejudice to a third
party with a better right. x x x.
136
Ibid, at p. 50.
137
432 SCRA 544 (2004).
PERFORMANCE OR CONSUMMATION OF SALE 259
then we would must come to the conclusion that the “first to
register in good faith” rule under Article 1544 would be wholly
inapplicable to unregistered land. This is the main reason why in
many leading decisions, the Supreme Court has declared that the
rules on double sales under Article 1544 of the Civil Code have
no application to unregistered land.138 This sweeping statement
has led to much confusion on the applicable rule when it comes
to double sales of unregistered land.
The author posits that the better way to construe the principle
“without prejudice to a third party with a better right” under Act
No. 3344, and now Section. 113 of Pres. Decree No. 1459, is
to say that it implements the primary doctrine of Prius tempore,
potior jure, and thereby always favors the first buyer.
Firstly, if we accept that the two other rules found in Article
1544, namely, “first to possess in good faith” and the “person
with the oldest title in good faith,” are consistent with the principle
under Act No. 3344 of protecting the “third party with a better
right,” then such rules on double sales as found in Article 1544
would be applicable to unregistered land. Secondly, how would
you consider the other line of decisions of the Supreme Court
which have applied Article 1544 in situations where there has
been double sales of unregistered land? 139
A reading (and re-reading) of the leading and relevant
decisions of the Supreme Court covering double sales situations
over unregistered land would lead to one clear conclusion: That
the rules on double sales for immovables under Article 1544
are applicable to unregistered land, but only insofar as they do
not undermine specific rules and legislations that have a higher
hierarchical enforcement value, such as the “without prejudice
to a better right” provision under Act No. 3344, now Section 113
of the Property Registration Decree. Who therefore is the “third
138
Dagupan Trading Co. v. Macam, 14 SCRA 179 (1965); Carumba v. Court of
Appeals, 31 SCRA 558 (1970); Radiowealth Finance Co. v. Palileo, 197 SCRA 245
(1991); Naawan Community Rural Bank, Inc. v. Court of Appeals, 395 SCRA 43 (2003);
Abrigo v. De Vera, 432 SCRA 544 (2004); Naval v. Court of Appeals, 483 SCRA 102
(2006).
139
Lichauco v. Berenguer, 39 Phil. 643 (1919); Hanopol v. Pilapil, 7 SCRA 452
(1963); Dischoso v. Roxas, 5 SCRA 781 (1962); Espiritu v. Valerio, 9 SCRA 761 (1963).
260 LAW ON SALES
party with a better right” for unregistered land? Is it always the
first buyer under the concept of “oldest title in good faith” under
Article 1544?
In both Lichauco v. Berenguer,140 and Hanopol v. Pilapil,141
the Court defined the buyer with a “better right” as more than just
having in his favor an earlier deed of sale, but rather a mode by
which ownership is directly affected, like acquisitive prescription
or when one who has taken possession of the property bought
either by actual or constructive delivery (i.e., first to take
possession in good faith). The Court thus held in Hanopol —
It thus appears that the “better right” referred to in
Act No. 3344 is much more than the mere prior deed of
sale in favor of the first vendee. In the Lichauco case
just mentioned, it was the prescriptive right that had
supervened. Or, as also suggested in that case, other
facts and circumstances exist which, in addition to his
deed of sale, the first vendee can be said to have better
right than the second purchaser.
In the case at bar, there appears to be no clear
evidence of Hanopol’s possession of the land in
controversy. In fact, in his complaint against the
vendors, Hanopol alleged that the Siapos took
possession of the same land under claim of ownership
in 1945 and continued and were in such possession at
the time of the filing of the complaint against them in
1948. Consequently, since the Siapos were in actual
occupancy of the property under claim of ownership,
when they sold the said land to ... appellee Pilapil ...,
such possession was transmitted to the latter, at least
constructively, with the execution of the notarial deed
of sale, if not actually and physically. ... Thus, even
on this score, Hanopol cannot have a better right than
appellee Pilapil who, according to the trial court, “was
not shown to be a purchaser in bad faith.”142
140
39 Phil. 643 (1919).
141
7 SCRA 452 (1963).
142
Ibid, at pp. 456-457.
PERFORMANCE OR CONSUMMATION OF SALE 261
The consistent ruling of the Court that although registration
under Act No. 3344 of his sale by the second buyer cannot of
itself overcome the sale to the first buyer, and yet registration
by the first buyer under Act No. 3344 can have the effect of
constructive notice to the second buyer that can defeat his right
as a buyer in good faith.143 In other words, registration under
Act No. 3344, now under Section 113 of Pres. Decree No.
1459, would have legal effect only when it is consistent with the
principle of protecting “a third party with a better right,” which
essentially refers to the first buyer in a double sales situation
involving unregistered land.
Another situation covers the sale of unregistered land under
a public auction sale, where rules under Article 1544 cannot
overcome the particular provisions of the Rules of Court. For
example, Carumba v. Court of Appeals,144 had distinguished the
applicability of Article 1544 depending on whether the land is
registered under the Torrens system or is unregistered land. In
Carumba, the first buyer had a private deed of sale which was
never registered, but he took possession of the land; whereas,
the second buyer was the highest bidder in the public auction of
the same land, and the sale to him was registered under Act No.
3344.
Carumba ruled that the provisions of Article 1544 granting
priority to the buyer who registers in good faith over the other
buyer who takes possession in good faith are inapplicable to
unregistered land because “the purchaser of unregistered land
at a sheriff’s execution sale only steps into the shoes of the
judgment debtor, and merely acquires the latter’s interest in the
property sold as of the time the property was levied upon,” as
expressly provided for in then Section 35, Rule 39 of the Revised
Rules of Court on execution sale (now Section 33, Rule 39, 1997
Rules of Civil Procedure). In other words, the essence of the
Carumba ruling is not that Article 1544 is wholly inapplicable to
unregistered land, but that the specific provision of now Section
143
Bautista v. Fule, 85 Phil. 391 (1950); Bayoca v. Nogales, 340 SCRA 154 (2000);
Naval v. Court of Appeals, 483 SCRA 102 (2006).
144
31 SCRA 558 (1970).
262 LAW ON SALES
33, Rule 39 of the 1997 Rules of Civil Procedure providing that the
purchaser at public auction “shall be substituted to and acquire
all the rights, title, interest and claim of the judgment obligor to
the property as of the time of the levy,” overrides the provision of
Article 1544 when it involves unregistered land since under Act
No. 3344 registration of instruments affecting unregistered lands
is “without prejudice to a third party with a better right.”
In contrast, in Radiowealth Finance Co. v. Palileo,145 citing
Carumba, the Court noted that under the Torrens system, it is the
act of registration that operates to convey and affect registered
land, and that therefore a bona fide purchaser of a registered
land at an execution sale (in spite of the merely “stepping into
the shoes of the judgment debtor” rule for public auctions done
pursuant to the Rules of Court) acquires a good title as against a
prior transferee, if such transfer was unrecorded, thus:
... There is no ambiguity regarding the application
of the law with respect to lands registered under the
Torrens System. Section 51 of Presidential Decree
No. 1529 (amending Section 50 of Act No. 496) clearly
provides that the act of registration is the operative
act to convey or affect registered lands insofar as
third person are concerned. Thus, a person dealing
with registered land is not required to go behind the
register to determine the condition of the property.
He is only charged with notice of the burdens on the
property which are noted on the face of the register or
certificate of title. Following this principle, this Court
has time and again held that a purchaser in good
faith of registered land (covered by a Torrens Title)
acquires a good title as against all the transferees
thereof whose right is not recorded in the registry of
deed at the time of sale.146
Radiowealth Finance confirms the proposition that even
in the purchase of registered land under levy on execution,
the provisions of Section 33, Rule 39 of the 1997 Rules of Civil
145
197 SCRA 245 (1991).
146
Ibid, at pp. 246-247.
PERFORMANCE OR CONSUMMATION OF SALE 263
Procedure cannot overturn the specific provisions of Pres.
Decree No. 1529, which provide that it is registration that is the
operative act to convey or affect registered lands; and therefore,
the earlier unregistered sale, although coupled with possession,
cannot overturn the effect of the registration in good faith of the
second judicial sale.
But since Radiowealth Finance involved the issue of whether
the rules in Article 1544 are applicable to an unregistered land
purchased at a judicial sale recorded under Act No. 3344, which
was earlier sold by the judgment debtor in a conventional sale,
but unrecorded, the Court again upheld the principle in Carumba.
Although Radiowealth Finance declared that “Article 1544 of the
Civil Code has no application to land not registered under Act No.
496,” nevertheless the subsequent discussions in the decision
meant to cover only the situation where the subject unregistered
land was first sold by conventional sale, and subsequently sold by
public auction, in which case again the provision of now Section
33, Rule 39 of the 1997 Rules of Civil Procedure would be made
to apply, since “the purchaser of unregistered land at a sheriff’s
execution sale only steps into the shoes of the judgment debtor,
and merely acquires the latter’s interest in the property sold as of
the time the property was levied upon.”
Although an obiter, Espiritu v. Valerio,147 held that where
the owner sold his a parcel of unregistered land to two different
parties — assuming that both sales are valid — the buyer whose
deed of sale was first registered under the provisions of Act No.
3344 would have a better right. Thus —
... If both are valid, appellants’ contention that they
have a better right than that claimed by appellee would
seem to be meritorious in the light of the facts of the
case and the provisions of Article 1544 of the New Civil
Code, it not being disputed that the Deed of Sale in favor
of the appellee was registered under the provisions of
Act 3344 on June 16, 1955, while Exhibits 1 and 2 were
similarly registered eleven days before.148
147
9 SCRA 761 (1963).
148
Ibid, at p. 763; emphasis supplied.
264 LAW ON SALES
In Dischoso v. Roxas,149 the substantive discussions in the
decision presumed that Article 1544 would have been applicable
to the double sales of an unregistered coconut land, except for
the fact that the first sale involved the land itself, while the second
sale involved the right to repurchase the said land.
4. Global Rules on Double Sales
In a global set of rules on double sales, where Article 1544
is only a component, registration in good faith under the Torrens
system (i.e., Pres. Decree No. 1529), is considered to be of the
highest order, providing for absolute first priority to the buyer who
has it in his favor. This particular rule, for obvious reasons, cannot
apply to unregistered land.
Under that same global set of rules on double sales, the
principle embodied in the Rules of Court as to the risk being taken
by the highest bidder, occupy the second highest priority rule,
which would overcome the rules provided for in Article 1544. But
because registration for registered land has the highest priority,
this second rule can pertain only to cases involving unregistered
land.
Oddly enough, this rule was demonstrated in Dagupan
Trading Co. v. Macam,150 which held that where one of the two
conflicting sales of a piece of land was executed before the land
was registered, while the other was an execution sale in favor of
the judgment creditor of the owner made after the same property
had been registered and issued a title “free from all liens and
encumbrances,” Article 1544 should not apply, and what should
determine the rights of the second buyer would be the then
Section 35, Rule 39 of the Revised Rules of Court on execution
sale. Such a position of the Court meant that since the land
was previously sold to the first buyer, the second buyer at the
execution sale actually bought nothing since the judgment debtor
no longer had rights to the property previously sold.
Dagupan Trading admitted that “[i]f the property covered
by the conflicting sales were unregistered land [then the first
149
5 SCRA 781 (1962).
150
14 SCRA 179 (1965).
PERFORMANCE OR CONSUMMATION OF SALE 265
buyer] would undoubtedly have the better right in view of the
fact that his claim is based on a prior sale;” whereas, were the
land involved in the conflicting transaction was a duly registered
land, the second buyer at public auction would prevail since
“the registration of the deed of sale is the operative act that
gives validity to the transfer.” Nevertheless, the Court held that
the case did not fall in either cases, and therefore the provisions
of then Section 35, Rule 39 of the Rules of Court were applied
in direct conflict with the provisions of the Torrens system that
guaranteed the title to the land. The Court considered the
subsequent registration of the land as a technicality that could
not cancel and render ineffective the previous unregistered
sale and conveyance of title and ownership in favor of the first
buyer, especially when the first buyer “took possession of the
land conveyed as owner thereof, and introduced considerable
improvements thereon.”
The Dagupan Trading ruling found application in Naval v.
Court of Appeals,151 where both buyers bought the same parcel
of land from the same seller when it was still unregistered land,
with the first buyer having registered his purchase under Act
No. 3344, and the second buyer subsequently being able to
obtain a title by having the land registered under the Torrens
system. The Court held in Naval, that Article 1544 had no
application to double sales which both covered the same
unregistered land at the time of both sales, and held that the
registration contemplated under this provision has been held to
refer to registration under the Torrens system, which considers
the act of registration as the operative act that binds the land.
What the Court held applicable was the rules on double sales
of unregistered land under Act No. 3344, which provides for
the registration of all instruments on land neither covered by
the Spanish Mortgage Law or the Torrens system. Under that
law, registration by the first buyer is constructive notice to
the second buyer that can defeat his right as such buyer in
good faith, and that the registration of an instrument involving
unregistered land in the Registry of Deeds creates constructive
151
483 SCRA 102 (2006).
266 LAW ON SALES
notice and binds third person who may subsequently deal with
the same property.152
In Naval, although the second buyer was able to register
the land under the Torrens system, the Court held that it cannot
detract from the fact that she acquired the land as unregistered
land, and her act of registration under the Torrens system cannot
cleanse her title of defect that it carried under the provisions of
Act No. 3344. The Court clarified that the issue of good faith
or bad faith of the buyer under Article 1544 or that under the
Property Registration Decree is relevant only where the subject
of the sale is registered land and the purchaser is buying the
same from the registered owner of whose title to the land is
clean. In Naval, the second buyer did not buy the land from a
registered owner thereof, but in fact she was the one who had
the land subsequently registered, with constructive knowledge
of the previous sale which was deemed to have placed her in
bad faith.
The rulings in Dagupan Trading and Naval cover unusual
cases, constituting equitable exception to the basic tenets laid
down in Carumba and Radiowealth Finance. More importantly,
the rulings in Dagupan Trading and Naval are diametrically
opposed to the rulings in Naawan Community Rural Bank and
Abrigo discussed above.
Under a global set of rules pertaining to double sales, the
particular rules provided under Article 1544 take only third rung,
with registration under the Torrens system and the rule on public
auction sales under the Rules of Court, coming in first and second,
respectively. If this were the case, what does the first rule under
Article 1544 on “first to register in good faith” still cover? This
is where things become truly confusing based on the conflicting
decisions of the Court.
There is a line of decisions that says that the “first to register
in good faith” rule in Article 1544 covers precisely the “absolutely
first” rule of registration being the operative fact under the Torrens
See also Bautista v. Fule, 85 Phil. 391 (1950), cited in Naawayan Community
152
Rural Bank, Inc. v. Court of Appeals, 395 SCRA 43 (2003).
PERFORMANCE OR CONSUMMATION OF SALE 267
system, and has no application to unregistered land; and yet
the Court has applied the “first to register in good faith” rule for
double sales involving unregistered land,153 albeit in favor of first
buyer. The other position holds that the rules embodied in Article
1544 of the Civil Code presume that the issues to be resolved do
not fall within the priority rules of the Torrens system under Pres.
Decree No. 1546, nor of the specific rules on auction sale under
the Rules of Court.
The author offers no clear solution to these issues. For
whatever it is worth, it must be observed that the principle of
“registration in good faith as the operative act,” under Pres.
Decree No. 1459, although of utmost priority application, goes
beyond contracts of sale, but includes priority rules covering
other forms of transactions, like liens, encumbrances, involuntary
dealings with registered land, like attachment and executions. In
addition, the priority rule under Pres. Decree No. 1459 covers
even contracts to sell and other processes within the policitacion
stage and will even protect the title of a purchaser in good faith
and for value who derives his title from one who had void title (i.e.,
“chain of title” theory). Whereas, the rules on double sales under
Article 1544 of the Civil Code are strictly applicable to double
sales only when they are valid and demandable and the issues
arise only at the consummation stage.
In his concurring opinion in Carbonell v. Court of Appeals,154
then Justice Teehankee had explained that Article 1544 is not
the only rule pertaining to double sales, as in fact the main rule
is essentially a principle not embodied directly in a statutory
provision, which is “First in time, priority in right.” The peculiarity
of it all, however, is that the main rule is not the primary rule,
since the provisions of Article 1544, although not the main rule,
constitute nevertheless the primary rule, i.e., one has to go
through the tests provided in Article 1544 before one may apply
the main rule of prius tempore, potior jure. As pointed out earlier,
the “first in time, priority in right,” is embodied within the “oldest
153
Bautista v. Fule, 85 Phil. 391 (1950); Bayoca v. Nogales, 340 SCRA 154 (2000);
Naval v. Court of Appeals, 483 SCRA 102 (2006).
154
69 SCRA 99 (1976).
268 LAW ON SALES
title in good faith” provided in Article 1544, which is a concept
developed hereunder. Nonetheless, in a global rule of double
sales, the rule “first in time, priority in right,” would occupy the
bottom rung.
5. Essential Elements for Applicability of Article 1544
Whether the subject matter of double sales be movable or
immovable, jurisprudence has confirmed that for the provisions
of Article 1544 to apply, the following requisites must concur:
(a) The two (or more) sales transactions must
constitute valid sales;
(b) The two (or more) sales transactions
must pertain to exactly the same subject
matter;
(c) The two (or more) buyers at odds over the
rightful ownership of the subject matter
must each represent conflicting interests;
and
(d) The two (or more) buyers at odds over the
rightful ownership of the subject matter
must each have bought from the very same
seller.
The foregoing requisites of “double sales” were quoted
directly by the Court in Cheng v. Genato,155 without giving due
acknowledgment to the author.
a. Nature of Two Sales Involved
For Article 1544 test to even apply, both sales involved in
the dispute must be valid, or at least be voidable, sales. This
is a critical requirement because the rules under Article 1544
being applications of rules of delivery at consummation stage,
can operate only from the premise that tradition was effected “as
a consequence of a valid sale.” Thus, in a case where one of the
155
300 SCRA 722 (1998).
PERFORMANCE OR CONSUMMATION OF SALE 269
sales was void for having forged the signature of the seller, the
provisions of Article 1544 were held to be inapplicable.156
We therefore look with rabid curiosity at the pronouncement
in Caram, Jr. v. Laureta,157 where in a double sales situation it held
that that “the second contract of sale, having been registered in
bad faith, is null and void. Article 1410 of the Civil Code of the
Philippines provides that any action or defense for the declaration
of the inexistence of a contract does not prescribe.” In effect,
Caram, Jr. considered the failure of the second buyer to comply
with the registration requirement under Article 1544 in good faith
to make his sale void, thus —
The fact that the second contract is not considered
void under Article 1409 and that Article 1544 does not
declare void a deed of sale registered in bad faith does
not mean that said contract is not void. Article 1544
specifically provides who shall be the owner in case
of a double sale (sic) of an immovable property. To
give full effect to this provision, the status of the two
contracts must be declared valid so that one vendee
may contract must be declared void to cut off all rights
which may arise from said contract. Otherwise, Article
1544 will be meaningless.158
Since Article 1544 provides for rules on tradition, it must
operate under the premise that the contracts upon which the
rules are to operate would have to be valid contracts; otherwise,
tradition pursuant to a void contract would not create any legal
effect. Registration, much less delivery of the subject matter, are
matters that go into consummation and cannot legally affect the
status of a sale valid at perfection.
The proper doctrine in Caram, Jr. is that the attempt to
deliver the subject matter pursuant to a second valid sale would
not produce the legal effects of delivery (i.e., the attempt to
transfer ownership in the person of the second buyer would
156
Espiritu v. Valerio, 9 SCRA 761 (1963). Also San Lorenzo Dev. Corp. v. Court of
Appeals, 449 SCRA 99 (2005); Fudot v. Cattleya Land, Inc., 533 SCRA 350 (2007).
157
103 SCRA 7 (1981).
158
Ibid, at p. 19.
270 LAW ON SALES
produce no legal consequences); but the second contract itself
would remain a valid contract, and can be rescinded for breach
of the obligation to deliver. The lack of ownership on the part of
the seller does not affect the validity of an otherwise valid sale;
and the failure of the seller to effect proper delivery does not
render the contract void, but merely constitutes a breach as the
basis for rescission.
b. Applicability of Rules on Double Sales to
Contracts to Sell and Adverse Claims
Since the rules on double sales are rules pertaining to
tradition at consummation stage, they have no application when
the covered valid contracts are not yet demandable sales, such
as when one or both the contracts in dispute are contracts to
sell.159
In the early case of Mendoza v. Kalaw,160 what were involved
were the sales by the owner of the same parcel of land to two
buyers: the first buyer under a conditional sale, and the second
buyer, under a deed of absolute sale. The second buyer paid the
purchase price and obtained possession of the property. In any
event, the first buyer obtained an “anotacion preventiva” (now
equivalent to an adverse claim).
Mendoza held that the rules on double sales under the
then Article 1473 of the old Civil Code were not applicable on
the ground that there was no double sales situation since the
first sale was a conditional sale: “[A] conditional sale, before the
performance of the condition, can hardly be said to be a sale of
property, especially where the condition has not been performed
or complied with.”161 The Court also held that the registration
of the adverse claim, which was good only for 30-days, did not
grant to the first buyer any advantage because “[a] preventive
precautionary notice only protects the interests and rights of the
person who secures it against those who acquire an interest in
the property subsequent thereto, and then, only for a period of
159
Torrecampo v. Alindogon, Sr., 517 SCRA 84 (2007).
160
42 Phil. 236 (1921).
161
Ibid, at p. 238.
PERFORMANCE OR CONSUMMATION OF SALE 271
thirty days. It cannot affect the rights or interest of persons who
acquired an interest in property theretofore.”162
The pronouncements in Mendoza on the non-effect of an
adverse claim have of course been clarified by the ruling in
Carbonell v. Court of Appeals,163 where the annotation of the
adverse claim by the first buyer was deemed to be equivalent
to the registration required under Article 1544. Likewise, the
ruling that a conditional sale does not constitute a sale for the
application of the rules on double sales under Article 1544 has
likewise been abrogated in Andalin v. Court of Appeals,164 where
the first sale was under a “Deed of Conditional Sale,” while the
second sale was under “Deeds of Sale of Registered Land.”
In Adalin, the Court had to resolve the issue of whether the
first unconsummated conditional sale, which required the seller
to eject the existing lessees on the property sold, could prevail
over the subsequent consummated absolute contracts of sale
effected in favor of the lessees who have refused to vacate the
premises. The Court held that the non-compliance by the seller
of the undertaking to eject the lessees cannot be considered a
legal justification for him to renege on the first sale, otherwise it
would be equivalent to sanctioning the performance by the seller
of his obligations under the deed subject to his own will and
caprices; and that seller cannot employ his own failure to comply
with his undertaking to justify his obligation under the conditional
sale. More importantly, the Court applied the provisions of Article
1544 on double sales and held that the subsequent buyers were
already aware of the first conditional sale and therefore they were
in bad faith, and their knowledge of the first sale gave preference
to the first sale.
In contrast, Coronel v. Court of Appeals,165 earlier held that
Article 1544 on double sales does not apply where the earlier
sale is a contract to sell. The Court ruled that it is essential to
distinguish a contract to sell and a conditional contract of sale,
162
Ibid, at p. 239.
163
69 SCRA 99 (1976).
164
280 SCRA 536 (1997).
165
263 SCRA 15 (1996).
272 LAW ON SALES
especially in cases where the subject property is sold by the
owner not to the party the seller contracted with, but to a third
person, thus:
In a contract to sell, there being no previous sale of
the property, a third person buying such property despite
the fulfillment of the suspensive condition such as the
full payment of the purchase price, for instance, cannot
be deemed a buyer in bad faith and the prospective
[first] buyer cannot seek the relief of reconveyance of
the property. There is no double sale in such case. Title
to the property will transfer to the buyer after registration
because there is no defect in the owner-seller’s title per
se, but the latter, of course, may be sued for damages
by the intending [first] buyer.166
It seems therefore, that when one of the sales is a contract
to sell, as distinguished from a conditional contract of sale, the
rules of Article 1544 on double sales do not apply, and the buyer
under the contract of sale albeit conditional is always preferred,167
as being effectively “the first in time.”
It is interesting to note, however, that the distinction has
further been blurred by the Court in Cheng v. Genato.168 In
that case, the Court held that the rules on double sales under
Article 1544 are not applicable to a contract to sell because of
the circumstances that must concur in order for the provisions
to Article 1544 on double sales to apply, namely that there must
be valid sales transactions, and buyers must be at odds over
the rightful ownership of the subject matter who must have
bought from the very same seller, are lacking in a contract to
sell —
... for neither a transfer of ownership nor a sales
transaction has been consummated. The contract to
be binding upon the obligee or the vendor depends
upon the fulfillment or non-fulfillment of an event.
166
Ibid, at p. 28.
167
San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99 (2005).
168
300 SCRA 722 (1998).
PERFORMANCE OR CONSUMMATION OF SALE 273
Notwithstanding this contrary finding [that it is a
contract to sell] we are of the view that the governing
principle of Article 1544, Civil Code, should apply
in this situation. Jurisprudence teaches us that the
governing principle of PRIMUS TEMPORE, PORTIOR
JURE (first in time, stronger in right). For not only
was the contract between herein respondents first in
time; it was also registered long before petitioner’s
intrusion as second buyer. This principle only applies
when the special rules provided in the aforecited
article of the Civil Code do not apply or fit the specific
circumstances mandated under said law or by
jurisprudence interpreting the article.169
The Cheng ruling can only be interpreted to mean that
the contract to sell whereby the suspensive conditions are first
fulfilled, would be considered as “first in time.”
c. There Must Be “Sameness” of Subject Matter
In a case where one buyer bought the parcel of land, and
the other buyer bought the right to redeem the same parcel of
land, Article 1544 was deemed to be inapplicable, because the
subject of the second sale is not the land itself, but the right to
redeem.170
d. There Must Involve the Same Seller
In a case where Buyer 1 bought the thing from Mr. X, who in
turn bought it from Mr. Seller, and the contending Buyer 2 bought
the same subject matter from Mr. Seller, the issue between Buyer
1 and Buyer 2 cannot be resolved by using the provisions of
Article 1544 since they do not have the same immediate seller.171
As will be noted, successors and predecessors-in-interest theo-
ries are not applicable to be able to obtain application of the pro-
visions of Article 1544.
169
Ibid, at p. 740.
170
Dischoso v. Roxas, 5 SCRA 781, 789-790 (1962).
171
Cruzado v. Bustos, 34 Phil. 17 (1916). Reiterated in Ong v. Olasiman, 485 SCRA
464 (2006); Solera v. Rodaje, 530 SCRA 432 (2007).
274 LAW ON SALES
Although a number of decisions have been rendered by the
Court applying Article 1544 principles even in case of successive
sales from the same original seller, this requisite has been
reiterated lately in Consolidated Rural Bank (Cagayan Valley),
Inc. v. Court of Appeals,172 where the Court held —
[The provisions of Article 1544 of the Civil Code]
contemplate a case of double or multiple sales by a
single vendor. More specifically, it covers a situation
where a single vendor sold one and the same
immovable property to two or more buyers. ... it is
necessary that the conveyance must have been made
by a party who has an existing right in the thing and
the power to dispose of it. It cannot be invoked where
the two different contracts of sale are made by two
different persons, one of them not being the owner of
the property sold. And even if the sale was made by
the same person, if the second sale was made when
such person was no longer the owner of the property,
because it had been acquired by the first purchaser
in full dominion, the second purchaser cannot acquire
any right.173
e. Article 1544 Is Not a Contest Between
Two Protagonists Running the Same Race
When one reads the language of Article 1544 one may be
led to believe that the rules govern, in a manner of speaking,
a contest between two buyers, who race against each other to
comply with the hierarchical modes provided for in said article
to have preferential right over the subject matter. This is not so,
as explained in Carbonell v. Court of Appeals.174
In Carbonell, the Seller sold under a private instrument a
registered parcel of land to Buyer 1, who in addition to paying
cash to the Seller also updated the mortgage lien on said land
with the mortgagee bank. A week later, the Seller sold the same
172
448 SCRA 347 (2005). Reiterated in Sigaya v. Mayuga, 467 SCRA 341 (2005);
Ong v. Olasiman, 485 SCRA 464 (2006).
173
Ibid, at p. 360. Reiterated in Solera v. Rodaje, 530 SCRA 432 (2007).
174
69 SCRA 99 (1976), citing C. VILLANUEVA, PHILIPPINE LAW ON SALES, 100 (1995).
PERFORMANCE OR CONSUMMATION OF SALE 275
parcel of land to Buyer 2, who took possession thereof. When
the Buyer 1 learned of the sale to Buyer 2, he registered an
adverse claim on the title of the land with the Registry of Deeds.
Subsequently, Buyer 2 registered his sale.
In ruling for Buyer 1, the Court in the main decision held that
when Buyer 1 bought the lot from the Seller, she was the only
buyer thereof and the title of Seller was still in his name solely
encumbered by a bank mortgage duly annotated thereon. Buyer
1 was not aware — and she could not have been aware — of
any sale to Buyer 2 as there was no such sale to Buyer 2 then.
Hence, Buyer 1’s prior purchase of the land was made in good
faith. Buyer 1’s good faith subsisted and continued to exist when
she recorded her adverse claim prior to the registration of Buyer
2’s deed of sale. Nor did Buyer 1’s good faith cease when she
found out earlier of the subsequent sale to Buyer 2. Buyer 1’s
recording of the adverse claim should be deemed to have been
done in good faith and should emphasize Buyer 2’s bad faith
when she registered her deed of sale thereafter.
As culled from the reasoning in the main decision of
Carbonell, the Buyer 1 under Article 1544 does not start from
the same level as the subsequent buyers of the same subject
matter. Being the first buyer, Buyer 1 necessarily is in good
faith compared to the second or subsequent buyer. But the
good faith of Buyer 1 remains and subsists throughout, despite
his subsequent acquisition of knowledge of the second or
subsequent sale. Whereas, Buyer 2 who may have entered
into the sale in good faith, would become a buyer in bad faith
by his subsequent acquisition of knowledge of the first sale. In
other words, Buyer 1 always has priority rights over subsequent
buyers of the same property.
Such a state of affairs does not clearly come across from a
reading of the Carbonell main decision, especially when the main
decision imputed bad faith on the part of Buyer 2 even at the time
she entered into the second sale over the property. The principle
comes out more clearly by reading the separate opinion of then
Justice Teehankee, who starts his reasoning from the premise
that both Buyer 1 and Buyer 2 were purchasers in good faith at
276 LAW ON SALES
the respective dates of their purchases, but posits the main rule
prius tempore, potior jure, thus:
The governing principle here is prius tempore, potior
jure (first in time, stronger in right). Knowledge gained
by the first buyer of the second sale cannot defeat the
first buyer’s rights except only as provided by the Civil
Code and that is where the second buyer first registers
in good faith the second sale ahead of the first. Such
knowledge of the first buyer does not bar her from
availing of her rights under the law, among them, to
register first her purchase as against the second buyer.
But in converso knowledge gained by the second buyer
of the first sale defeats his rights even if he is first to
register the second sale, since such knowledge taints
his prior registration with bad faith.
This is the price exacted by Article 1544 of the Civil
Code for the second buyer being able to displace the first
buyer: that before the second buyer can obtain priority
over the first, he must show that he acted in good faith
throughout (i.e., in ignorance of the first sale and of the
first buyer’s rights) — from the time of acquisition until
the title is transferred to him by registration or failing
registration, by delivery of possession. The second
buyer must show continuing good faith and innocence
or lack of knowledge of the first sale until his contract
ripens into full ownership through prior registration as
provided by law.175
In essence, then Justice Teehankee indicated that the
positive steps provided under Article 1544 are directed to Buyer
2, if he wishes to obtain preference of title to the subject matter,
but not to Buyer 1 because he is already by the rule of “first in
time priority in rights” the preferred buyer.
The Carbonell principle in applying Article 1544 can be
likened to a race where it is only Buyer 2 who must run the track
and achieve certain goals in order to dislodge Buyer 1 who already
175
Ibid, at pp. 122-123. Reiterated in Ulep v. Court of Appeals, 472 SCRA 241
(2005); Tanglao v. Parungao, 535 SCRA 123 (2007).
PERFORMANCE OR CONSUMMATION OF SALE 277
stands at the winner’s box. Somehow, Buyer 2, without knowing
that there is already a winner, Buyer 1, must run the race in a
prescribed manner to win, i.e., he must register his sale without
knowing of the first sale and before the first sale is registered; or
take possession of the property without knowing of the first sale
and before Buyer 1 takes possession thereof. And yet, even as
Buyer 2 runs the race (without actually knowing that he is in a
race with the first buyer), Buyer 1 can knowingly or unknowingly
finish the race in his favor by simply registering his sale. That is
why the specification of “good faith” in Article 1544 is addressed
only to the second or subsequent buyer.
If Buyer 1 registers his sale now aware of Buyer 2, that
practically ends the race, for there is no way that legally Buyer
2 can topple Buyer 1 from the winner’s box. On the other
hand, even if Buyer 1 learns of the second buyer, so long
as Buyer 2 has not registered his sale, Buyer 1 can end the
race by registering his sale, because his good faith remains
throughout. Buyer 1 is basically the winner of the race without
doing anything, by the fact that he is the first buyer. The only
manner by which Buyer 1 by doing nothing could possibly lose
is for Buyer 2 to register his sale before the second buyer learns
of the first buyer. Practically, the only way by which Buyer 2 can
win the race at the prescribed manner under Article 1544 is not
to know during the race that he is in a race against Buyer 1 who
merely sits or stands on the winner’s box without registering his
own sale.
In further refinement of the Carbonell doctrine on the main
rule of priority in time, the decision in Caram, Jr. v. Laureta,176
and subsequent rulings,177 seem to point out that Buyer 1 never
even has to leave the winner’s box in order to end the race by
having to register his sale; Buyer 1 just need to draw the attention
of the second buyer as to his (Buyer 1’s) existence. In those
cases it was ruled that the knowledge of the first unregistered
sale by Buyer 2 ends the race altogether either because (a) the
103 SCRA 7 (1981).
176
Cruz v. Cabana, 129 SCRA 656 (1984); Gatmaitan v. Court of Appeals, 200
177
SCRA 37 (1991); Vda. de Jomoc v. Court of Appeals, 200 SCRA 74 (1991).
278 LAW ON SALES
knowledge by Buyer 2 of the first sale is equivalent to registration
in favor of Buyer 1; or (b) knowledge of the first sale makes Buyer
2 one in bad faith, and only a good faith second buyer is qualified
to run the race.
On the other hand, knowledge of the second unregistered
sale by Buyer 1 is not equivalent to registration in favor of Buyer
2 because the act required of the second buyer under Article
1544 seems to be a positive act of registration or taking of
possession, as the case may be, before he learns of the first
sale.178 As summarized by Justice Melo in Coronel v. Court of
Appeals:179
The ... provision on double sale (sic) presumes
title or ownership to pass to the first buyer, the
exception being: (a) when the second buyer, in good
faith, registers the sale ahead of the first buyer, and
(b) should there be no inscription by either of the two
buyers, when the second buyer, in good faith, acquires
possession of the property ahead of the first buyer.
Unless, the second buyer satisfies these requirements,
title or ownership will not transfer to him to the prejudice
of the first buyer.180
Uraca v. Court of Appeals,181 summarized it succinctly,
when it held that “before the second buyer can obtain priority
over the first, he must show that he acted in good faith throughout
(i.e., ignorance of the first sale and of the first buyer’s rights) —
from the time of acquisition until the title is transferred to him by
registration or failing registration, by delivery of possession.”182
Bayoca v. Nogales,183 held that “to merit protection under
Article 1544 ... the second buyer must act in good faith in regis-
178
Carbonell v. Court of Appeals, 69 SCRA 99 (1976); but see dissenting opinion
of Justice Muñoz-Palma.
179
263 SCRA 15 (1996).
180
Ibid, at p. 37.
181
278 SCRA 702 (1997). See also Martinez v. Court of Appeals, 358 SCRA 38
(2001); Gabriel v. Spouses Mabanta, 399 SCRA 573 (2003).
182
Ibid, at p. 712, quoting from Cruz v. Caban, 129 SCRA 656, 663 (1984).
183
340 SCRA 154 (2000).
PERFORMANCE OR CONSUMMATION OF SALE 279
tering the deed. Thus, it has been held that in cases of double
sale[s] of immovables, what finds relevance and materiality is not
whether or not the second buyer was a buyer in good faith but
whether or not said second buyer registers such second sale in
good faith, that is, without knowledge of any defect, in the title of
the property sold.”184
In Escueta v. Lim,185 it was held that by applying Article
1544, a second buyer of the property who may have had actual or
constructive knowledge of such defect in the seller’s title cannot
be a registrant in good faith; such second buyer cannot defeat
the first buyer’s title, and if title has been issued to the second
buyer, the first buyer may seek reconveyance of the property
subject of the sale.
f. Peculiar Developments
The rather well-established Carbonell doctrine seems to be
undergoing indirect erosions by the obiter ruling in San Lorenzo
Dev. Corp. v. Court of Appeals,186 where the Court held that the
provisions of Article 1544 presented an actual race between the
two buyers in equal level, thus: “When the thing sold twice is an
immovable, the one who acquires it and first records it in the
Registry of Property, both made in good faith, shall be deemed
the owner. Verily, the act of registration must be coupled with
good faith — that is, the registrant must have no knowledge of
the defect or lack of title of his vendor or must not have been
aware of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the
defects in the title of his vendor.”187 The Court thereby decreed
the annotation of lis pendens by the first buyer as ineffective to
overcome the previous possession acquired in good faith by the
second buyer, because the annotation was done at the time when
first buyer already knew of the second sale. Impliedly included in
the ruling is that the annotation of lis pendens by the first buyer
184
Ibid, at p. 166.
185
512 SCRA 411 (2007).
186
449 SCRA 99 (2005).
187
Ibid, at pp. 115-116.
280 LAW ON SALES
cannot qualify to be equivalent to the requisite of registration
under Article 1544.
This particular obiter ruling in San Lorenzo Dev. Corp. is
contrary to the established principle that by the annotation of the
lis pendens the second buyer is deemed to have learned of the
first sale, which is equivalent to registration in favor of the first
buyer.
g. Who Is Purchaser in Good Faith?
Since the tests provided for in Article 1544 are really
addressed to the second or subsequent buyers, it would be
important to note that each of the tests that have to be hurdled by
the second or subsequent buyer must be done in “good faith.”188
As the Court said in Occeña v. Esponilla,189 “[i]n all cases [of
double sales], good faith is essential. It is the basic premise of
the preferential rights granted to the one claiming ownership over
an immovable. What is material is whether the second buyer first
registers the second sale in good faith, i.e., without knowledge
of any defect in the title of the property sold. The defense of
indefeasibility of a Torrens title does not extend to a transferee
who takes the certificate of title in bad faith, with notice of a
flaw.”190
This seems to be in conformity with the principle in the Law
on Property that the law will protect an innocent purchaser, i.e.,
a buyer in good faith and for value, often even against the owner
of the property who had acted with negligence.
(1) Burden of Proof
Mathay v. Court of Appeals,191 held that as a rule, he who
asserts the status of a purchaser in good faith and for value, has
the burden of proving such assertion. This onus probandi cannot
188
Gabriel v. Mabanta, 399 SCRA 573 (2003); Alfredo v. Borras, 404 SCRA 145
(2003).
189
431 SCRA 116 (2004).
190
Ibid, at pp. 123-124. Reiterated in Consolidated Rural Bank (Cagayan Valley),
Inc. v. Court of Appeals, 448 SCRA 347 (2005); San Lorenzo Dev. Corp. v. Court of
Appeals, 449 SCRA 99 (2005); Portic v. Cristobal, 546 SCRA 577 (2005).
191
295 SCRA 556 (1998).
PERFORMANCE OR CONSUMMATION OF SALE 281
be discharged by mere invocation of the legal presumption
of good faith, i.e., that everyone is presumed to act in good
faith.192
Reference must be made however to the isolated rulings
in Santiago v. Court of Appeals,193 and Ten Forty Realty and
Dev. Corp. v. Cruz,194 where the Court held that it is anxiomatic
that good faith is always presumed in the absence of any direct
evidence of bad faith.
(2) Requisite of Full Payment
Agricultural and Home Extension Dev. Group v. Court of
Appeals,195 defines a “purchaser in good faith” as “one who buys
the property of another without notice that some other person has
a right to or interest in such property and pays a full and fair price
for the same at the time of such purchase or before he has notice
of the claim or interest of some other person in the property.”196 If
we take a close look at the definition given, it actually includes as
an element of good faith that there must be full payment on the
part of the buyer.
The element of having paid in full as part of good faith de-
termination has since been consistently reiterated in subsequent
Supreme Court rulings.197
192
Reiterated in Tsai v. Court Appeals, 366 SCRA 324 (2001); Aguirre v. Court of
Appeals, 421 SCRA 310 (2004); Raymundo v. Bondong, 526 SCRA 514 (2007); Tanglao
v. Parungao, 535 SCRA 123 (2007).
193
247 SCRA 336 (1995).
194
410 SCRA 484 (2003).
195
213 SCRA 563 (1992).
196
Ibid, at pp. 565-565, quoting from Co v. Court of Appeals, 196 SCRA 705 (1996).
Reiterated in Diaz-Duarte v. Ong, 298 SCRA 388 (1998); Millena v. Court of Appeals, 324
SCRA 126 (2000); Tanongon v. Samson, 382 SCRA 130 (2002); Universal Robina Sugar
Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002); Heirs of Aguilar-Reyes v.
Spouses Mijares, 410 SCRA 97 (2003); San Roque Realty and Dev. Corp. v. Republic,
532 SCRA 493 (2007).
197
Veloso v. Court of Appeals, 260 SCRA 593 (1996); Balatbat v. Court of Appeals,
261 SCRA 128 (1996); Mathay v. Court of Appeals, 295 SCRA 556 (1998); Diaz-Duarte
v. Ong, 298 SCRA 388 (1998); Tanongon v. Samson, 382 SCRA 130 (2002); Heirs of
Aguilar-Reyes v. Spouses Mijares, 410 SCRA 97 (2003); Portic v. Cristobal, 546 SCRA
577 (2005); Galvez v. Court of Appeals, 485 SCRA 346 (2006).
282 LAW ON SALES
This concept of good faith including the requisite of the buyer
having paid in full the purchase price may seem contrary to well-
established principle that the effects of tradition over the subject
matter are unhindered by the fact that the buyer has not paid
the purchase price. Nevertheless, since the operative doctrine
under Article 1544 is that the second or subsequent buyer is
being granted an opportunity to take the subject matter from the
clutches of the first buyer by positive act, he may do so only when
he acts with equity, which is that he is an innocent purchaser for
value and in good faith.
The doctrine is also consistent with the bilateral-reciprocal
nature of contracts of sale: that a party to a sale cannot demand
fulfillment from the other when he himself is in default or not ready
to comply with his own obligation.
(3) Obligation to Investigate Known Facts
Mathay v. Court of Appeals,198 also discussed the principle
that actual lack of knowledge of the flaw in title by one’s transferor
is not enough to constitute a buyer to be in good faith, thus:
... Although it is a recognized principle that a person
dealing on a registered land need not go beyond its
certificate of title, it is also a firmly settled rule that
where there are circumstances which would put a party
on guard and prompt him to investigate or inspect the
property being sold to him, such as the presence of
occupants/tenants thereon, it is, of course, expected
from the purchaser of a valued piece of land to inquire
first into the status or nature of possession of the
occupants, i.e., whether or not the occupants possess
the land en concepto dueño, in the concept of owner.
As is the common practice in the real estate industry,
an ocular inspection of the premises involved is a
safeguard a cautious and prudent purchaser usually
takes. Should he find out that the land he intends to buy
is occupied by anybody else other than the seller who,
as in this case, is not in actual possession, it would
198
295 SCRA 556 (1998). Also Modina v. Court of Appeals, 317 SCRA 696
(1999).
PERFORMANCE OR CONSUMMATION OF SALE 283
then be incumbent upon the purchaser to verify the
extent of the occupant’s possessory rights. The failure
of a prospective buyer to take such precautionary steps
would mean negligence on his part and would thereby
preclude him from claiming or invoking the rights of a
“purchaser in good faith.”199
As held in Aguirre v. Court of Appeals,200 a purchaser cannot
close his eyes to facts which should put a reasonable man upon
his guard, and then claim that he acted in good faith under the
belief that there was no defect in the title of the vendor.201
(4) Special Rule on Real Estate Market Players
Expresscredit Financing Corp. v. Velasco,202 expressed
the special rule that applies to persons or entities who regularly
engage in dealing with real estate. They cannot simply rely upon
the title, but are obliged to enter upon an investigation of the
actual condition and occupants of the subject property.
In Expresscredit Financing a mortgage was constituted on
a parcel of land which had previously been sold to the first buyer
who took possession and enjoyment thereof without having
registered his purchase. The mortgagee who eventually ended
buying the property at the public auction held for the foreclosure
of the mortgage, was deemed not eligible to claim to be a buyer
in good faith when his business was in the constructing and
selling townhouses and extending credit to the public, including
real estate loans. The Court held that in such an instance, the
mortgagee is charged with greater diligence that ordinary buyers
or encumbrances for value, because it would be standard in his
business, as a matter of due diligence required of banks and
financing companies, to ascertain whether the property being
offered as security for the debt has already been sold to another
to prevent injury to prior innocent buyers.
199
Ibid, at pp. 575-576. Reiterated in Tanglao v. Parungao, 535 SCRA 123 (2007);
Bermudez v. Court of Appeals, 533 SCRA 451 (2007).
200
421 SCRA 310 (2004).
201
Reiterated in Tanongon v. Samson, 382 SCRA 130 (2002); Heirs of Aguilar-
Reyes v. Spouses Mijares, 410 SCRA 97 (2003); Escueta v. Lim, 512 SCRA 411 (2007).
202
473 SCRA 570 (2005).
284 LAW ON SALES
(5) Land in Adverse Possession
In Martinez v. Court of Appeals,203 it was held that a purchaser
who is aware of facts which should put a reasonable man upon
his guard cannot turn a blind eye and later claim that he acted
in good faith; and the fact that there were already occupants on
the property should put a buyer on inquiry as to the nature of the
occupant’s right over the property.204
Heirs of Trinidad de Leon Vda. De Roxas v. Court of
Appeals,205 held that where the land sold is in the possession of
a person other than the vendor, the purchaser must go beyond
the certificate of title and make inquiries concerning the rights of
the actual possessor.206
The rule is settled that a buyer of real property which is in
the possession of persons other than the seller must be wary and
should investigate the rights of those in possession, otherwise
without such inquiry, the buyer can hardly be regarded as a buyer
in good faith.207
(6) Existence of Lis Pendens
Agricultural and Home Extension Dev. Group also pointed
out that even the annotation of lis pendens on the title to the
property by third parties does not place the buyer thereof in bad
faith since “these did not have the effect of establishing a lien
or encumbrance on the property affected. Their only purpose
was to give notice to third persons and to the whole world that
any interest they might acquire in the property pending litigation
would be subject to the result of the suit.”208 The ruling seems
reasonable when it is a third party who annotates a lis pendens;
203
358 SCRA 38 (2001).
204
Reiterated in Heirs of Severa P. Gregorio v. Court of Appeals, 30 SCRA 565
(1998); Heirs of Celestial v. Heirs of Celestial, 408 SCRA 291 (2003); Consolidated Rural
Bank (Cagayan Valley), Inc. v. Court of Appeals, 448 SCRA 347 (2005); Raymundo v.
Bondong, 526 SCRA 514 (2007).
205
422 SCRA 101 (2004).
206
Reiterated in Occeña v. Esponilla, 431 SCRA 116 (2004).
207
Republic v. De Guzman, 326 SCRA 267 (2000); Heirs of Ramos Durano, Sr. v.
Uy, 344 SCRA 238 (2000); Tanglao v. Parungao, 535 SCRA 123 (2007).
208
Ibid, at p. 566.
PERFORMANCE OR CONSUMMATION OF SALE 285
but would not be good law if it is one of the disputing buyers
who annotates the lien, because such annotation is equivalent
to registration or at least affects the good faith situation of the
second buyer.
A contrary ruling was issued in Limketkai Sons Milling, Inc.
v. Court of Appeals,209 where the Court held that a buyer could
not be considered an innocent purchaser where it ignored the
notice of lis pendens on the title when it bought the lot. The rule
has been reiterated in Po Lam v. Court of Appeals.210
In any event, the ruling in Agricultural and Home Extension
Dev. Group should be considered absurd (see discussions
below) in that in the case of adverse claim (which has a lower
binding category than lis pendens) its annotation is equivalent to
registration and would place a subsequent buyer in bad faith.211
(7) Annotation of Adverse Claim
In Balatbat v. Court of Appeals,212 it was held that in the
realm of double sales, the registration of an adverse claim places
any subsequent buyer of the registered parcel of land in bad faith,
for —
[S]he should have known that there was a pending
case and an annotation of adverse claim was made in
the title of the property before the Register of Deeds and
she could have discovered that the subject property was
already sold. ... It is incumbent upon the vendee of the
property to ask for the delivery of the owner’s duplicate
copy of the title from the vendor. A purchaser of a value
piece of property cannot just close his eyes to facts
which should put a reasonable man upon his guard
and then claim that he acted in good faith and under
the belief that there was no defect or lack of title of the
vendor. One who purchases real estate with knowledge
of a defect or lack of title in his vendor cannot claim that
209
250 SCRA 523 (1995).
210
316 SCRA 721 (1999).
211
Carbonell v. Court of Appeals, 69 SCRA 99 (1976).
212
261 SCRA 128 (1996).
286 LAW ON SALES
he has acquired title thereto in good faith as against the
true owner of the land or of an interest therein; and the
same rule must be applied to one who has knowledge
of facts which should have put him upon such inquiry
and investigation as might be necessary to acquaint him
with the defects in the title of his vendor. Good faith, or
the want of it is not a visible, tangible fact that can be
seen or touched, but rather a state or condition of mind
which can only be judged of by actual or fancied tokens
or signs.213
The principle providing that the prior annotation of adverse
claim places subsequent buyers in bad faith has been reiterated
in Alfredo v. Borras.214
If the annotation of an adverse claim, which was good for
30-days only is sufficient to place a subsequent buyer in bad
faith, then logically, the annotation of a lis pendens should have
the same legal effect, as was the ruling in Limketkai Sons Milling,
Inc. v. Court of Appeals.215
(8) Existence of Relationship
In Pilapil v. Court of Appeals,216 the Court held that the sale
to one’s daughter and sons will give rise to the conclusion that
the buyers, not being really third parties, knew of the previous
sales and cannot be considered in good faith, since the buyers
“are deemed to have constructive knowledge by virtue of their
relationship” to their sellers.
In Aguirre v. Court of Appeals,217 the Court refused
to recognize good faith in the person of a buyer who lived in
the same area and was familiar to the members of the family
of the seller, since “he deliberately chose to close his eyes to
said facts and despite his personal knowledge to the contrary,
he purchased the disputed property from [seller] on the basis of
213
Ibid, at pp. 142-143.
214
404 SCRA 145 (2003).
215
250 SCRA 523 (1995).
216
250 SCRA 560, 566 (1995).
217
421 SCRA 310 (2004).
PERFORMANCE OR CONSUMMATION OF SALE 287
the misrepresentation of the latter in his Affidavit of Transfer that
he is the sole surviving heir of [the decedent]”218 who was the
registered owner of the land.
(9) Stipulations in Deed Showing Bad Faith
In Limketkai Sons Milling, Inc. v. Court of Appeals,219 the
Court held that a stipulation in the deed of sale providing that
any losses which the buyer may incur in the event the title turns
out to be vested in another person are to be borne by the buyer
alone, showed that the buyer did not purchase the subject
matter in good faith without notice of any defect in the title of
the seller.
(10) When Dealing With Non-Registered Owner
In R.R. Paredes v. Caliling,220 the Court held that while
one who buys from the registered owner does not need to look
behind the certificate of title, one who buys from one who is
not the registered owner is expected to examine not only the
certificate of title but all factual circumstances necessary for him
to determine if there are any flaws in the title of the transferor, or
in his capacity to transfer the land. 221
h. Requisites of Prior Registration
“Registration” means any entry made in the books of the
registry, including both registration in its ordinary and strict
sense, and cancellation, annotation, and even marginal notes.
It is the entry made in the registry which records solemnly and
permanently the right of ownership and other real rights.222
Annotation of an adverse claim or lis pendens have been
held to produce the same effect as formal registration.223 Curiously
218
Ibid, at p. 321.
219
250 SCRA 523, 543 (1995).
220
517 SCRA 369 (2007).
221
Reiterated in Chua v. Soriano, 521 SCRA 68 (2007).
222
Cheng v. Genato, 300 SCRA 722 (1998). Also Ulep v. Court of Appeals, 472
SCRA 241 (2005).
223
Carbonell v. Court of Appeals, 69 SCRA 99 (1976); Balatbat v. Court of Appeals,
261 SCRA 128 (1996).
288 LAW ON SALES
though, in San Lorenzo Dev. Corp. v. Court of Appeals,224 the
Court did not consider the subsequent registration of lis pendens
to be equivalent to the registration required under Article 1544 as
to have greater effect on the prior possession in good faith by the
second buyer.
In several other cases,225 the Court held that in the case of
unregistered land, not sold under public auction sale, registration
by the first buyer under Act No. 3344 can have the effect of
constructive notice to the second buyer that can defeat his right
as such buyer, but not vice versa.
On the other hand, the Court held that the registration of
the Extrajudicial Partition which merely mentions the sale is not
the registration covered under Article 1544 on double sales and
cannot prevail over the registration of the pacto de retro sale.226
In another case,227 it was held that the declaration of purchase for
taxation purpose does not comply with the required registration,
and the fact alone does not even itself constitute evidence of
ownership.
(1) Prior Registration By the Second Buyer
Must Always Be in Good Faith
Uraca v. Court of Appeals,228 held that the prior registration
of the disputed property by the second buyer does not by itself
confer ownership or a better right over the property, and that
Article 1544 requires that such registration must be coupled with
good faith, thus —
Jurisprudence teaches us that “(t)he governing
principle is primus tempore, potior jure (first in time,
stronger in rights). Knowledge gained by the first buyer
of the second sale cannot defeat the first buyer’s rights
224
449 SCRA 99 (2005).
225
Bautista v. Fule, 85 Phil. 391 (1950); Bayoca v. Nogales, 340 SCRA 154 (2000);
Naval v. Court of Appeals, 483 SCRA 102 (2006).
226
Vda. de Alcantara v. Court of Appeals, 252 SCRA 457 (1996).
227
Santiago v. Court of Appeals, 247 SCRA 336 (1995); Bayoca v. Nogales, 340
SCRA 154 (2000).
228
278 SCRA 702 (1997).
PERFORMANCE OR CONSUMMATION OF SALE 289
except where the second buyer registers in good faith
the second sale ahead of the first, as provided by the
Civil Code. Such knowledge of the first buyer does
not bar her from availing of her rights under the law,
among them, to register first her purchase as against
the second buyer. But in converso, knowledge gained
by the second buyer of the first sale defeats his rights
even if he is first to register the second sale, since such
knowledge taints his prior registration with bad faith.
This is the priced exacted by Article 1544 of the Civil
Code for the second buyer being able to displace the first
buyer; that before the second buyer can obtain priority
over the first, he must show that he acted in good faith
throughout (i.e., in ignorance of the first sale and of the
first buyer’s right) — from the time of acquisition until
the title is transferred to him by registration or failing
registration, by delivery of possession.”229
Esquivias v. Court of Appeals,230 held that while the deed of
sale of a second buyer was registered ahead of the deed of sale
of the first buyer, the prior registration cannot prevail over the
deed of sale in favor of the first buyer because the second buyer
at that time already knew of the prior sale to the first buyer, and
such knowledge tainted his registration with bad faith. To merit
protection under Article 1544, the second buyer must act in good
faith in registering his deed.
(2) The Need for Second Buyer to Do Positive Act
under Article 1544
The Carbonell doctrine that Article 1544 is addressed
particularly to the second buyer to do a positive act, was reiterated
in Fudot v. Cattleya Land Inc.,231 where the Court held —
Knowledge gained by the first buyer of the second
sale cannot defeat the first buyer’s rights, except where
229
Ibid, at p. 712, quoting from Cruz v. Cabana, 129 SCRA 656, 663 (1984).
Reiterated in Bautista v. Court of Appeals, 322 SCRA 294 (2000); Limson v. Court of
Appeals, 357 SCRA 209 (2001).
230
272 SCRA 803 (1997).
231
533 SCRA 350 (2007).
290 LAW ON SALES
the second buyer registers in good faith the second
sale ahead of the first as provided by the aforequoted
provision of the Civil Code. Such knowledge of the first
buyer does not bar him from availing of his rights under
the law, among them to register first his purchase as
against the second buyer. However, knowledge gained
by the second buyer of the first sake defeats his rights
even if he is first to registered the second sale, since
such knowledge taints his prior registration with bad
faith it is thus essential, to merit the protection of Art.
1544, second paragraph, that the second realty buyer
must act in good faith in registering his deed of sale.232
i. First to Possess in Good Faith
Ten Forty Realty and Dev. Corp. v. Cruz,233 held that in the
absence of inscription in double sales, the law gives preferential
right to the buyer who in good faith is first in possession, under
the following jurisprudential parameters:
(a) Possession mentioned in Article 1544
includes not only material but also symbolic
possession;
(b) Possessors in good faith are those who are
not aware of any flaw in their title or mode
of acquisition;
(c) Buyers of real property that is in the
possession of persons other than the seller
must be wary — they must investigate the
rights of the possessors; and
(d) Good faith is always presumed, upon those
who allege bad faith on the part of the
possessors rests the burden of proof.
The “juridical parameters” summarized by Ten Forty Realty,
do not all conform to the previous rulings rendered by the Court
under Article 1544. In particular, the Court had ruled consistently
232
Ibid, at p. 362. Also Tanglao v. Parungao, 535 SCRA 123, 131-132 (2007).
233
410 SCRA 484 (2003).
PERFORMANCE OR CONSUMMATION OF SALE 291
in the past, that under double sales, presumption of good faith
cannot apply, and the buyer has the burden of showing that he
was the first to register or possess in good faith.234
The rule of “first to possess in good faith,” is consistent
with the provision under then Act No. 3344, now Sec. 113 of
Pres. Decree No. 1459, that registration of a transaction over
unregistered land shall be without prejudice to a “third party with
a better right.” Hanopol v. Pilapil,235 held that the “better right”
that cannot be prejudiced by the registration of a second sale of
a parcel of unregistered land, referred to in Act No. 3344, was
considered to mean “more than a mere prior deed of sale in favor
of the first buyer. It involves facts and circumstances — in addition
to a deed of sale — which, combined, would make it clear that
the first buyer has a better right than the second purchaser,” such
as acquisition of possession by the second buyer either by actual
delivery or through the execution of a public instrument.236
(1) Registration in Good Faith Always
Pre-empts Possession in Good Faith
Santiago v. Court of Appeals,237 held that in double sales of
real property, the buyer who has in possession the Torrens title
and had the deed of sale registered must prevail.
Tañedo v. Court of Appeals,238 emphasized the rule that
buyer-registrant in good faith always has preference to the
buyer-possessor in good faith, even when in point in time, the
possession in good faith happened ahead of the registration in
good faith. In that case the Court held that under Article 1544, in
case of double sales of an immovable —
... Ownership shall belong to the buyer who in good
faith registers it first in the registry of property. Although
the deed of sale in favor of private respondents was
234
Mathay v. Court of Appeals, 295 SCRA 556 (1998); Tsai v. Court Appeals, 366
SCRA 324 (2001); Aguirre v. Court of Appeals, 421 SCRA 310 (2004).
235
7 SCRA 452 (1963).
236
Ibid, at p. 456, citing Lichauco v. Berenguer, 39 Phil. 643 (1918).
237
247 SCRA 336 (1995). Also Liao v. Court of Appeals, 323 SCRA 430 (2000).
238
252 SCRA 80 (1996).
292 LAW ON SALES
later than the one in favor of petitioner, ownership
would vest in the former because of the undisputed fact
of registration. On the other hand, petitioners have not
registered the sale to them at all. Petitioners contend
that they were in possession of the property and that
private respondents never took possession thereof. As
between two purchasers, the one who registered the
sale in his favor has a preferred right over the other
who has not registered his title, even if the latter is in
actual possession of the immovable property.239
In Balatbat v. Court of Appeals,240 the seller sold his pro-
indiviso share in a registered land co-owned with his children.
Subsequently, the same entire lot was sold again by the same
seller and his children, represented by the Clerk of Court under
the Rules of Court, pursuant to a final judgment. The Court held
that undoubtedly this was a case of double sales of immovable
property covered by Article 1544, and hence ownership shall
vests in the person acquiring it who in good faith first recorded
it in the Registry of Property. The first buyer had caused the
annotation of an adverse claim on the title of the subject property,
which is deemed sufficient compliance as mandated by law and
serves notice to the whole world, and is preferred to the notice of
lis pendens annotated by the second buyer subsequently.
In addition, Balatbat held that although the second buyer
was in possession of the subject property by virtue of the writ
of possession issued by the court, the writ was conditioned as
follows “subject to the valid rights and interest of third persons
over the same portion thereof, other than vendor or any other
person or persons privy to or claiming any right to interest under
it.”241 The Court held that “[a]s between two purchasers, the one
who has registered the sale in his favor, has a preferred right
over the other who has not registered his title even if the latter is
in actual possession of the immovable property.”242
239
Ibid, at p. 88.
240
261 SCRA 128 (1996).
241
Ibid, at p. 134.
242
Ibid, at p. 142.
PERFORMANCE OR CONSUMMATION OF SALE 293
And yet, in its obiter ruling on the particular issue raised in
San Lorenzo Dev. Corp., to wit, “Did the registration of the sale
after the annotation of the notice of lis pendens obliterate the
effects of delivery and possession in good faith which admittedly
had occurred prior to [Second Buyer] SLDC’s knowledge of the
transaction in favor of [First Buyer] Babasanta?” the Court ruled
—
We do not hold so.243
x x x.
A purchaser in good faith is one who buys property
of another without notice that some other person has a
right to, or interest in, such property and pays a full and
fair price for the same at the time of such purchase, or
before he has notice of the claim or interest of some
other person in the property. Following the foregoing
definition, we rule that SLDC qualifies as a buyer in
good faith ... At the time of the sale of the property to
SLDC, the vendors were still the registered owners
of the property and were in fact in possession of the
lands. Time and again, this Court has ruled that a
person dealing with the owner of registered land is
not bound to go beyond the certificate of title as he is
charged with notice of burdens on the property which
are noted on the face of the register or on the certificate
of title. ... Babasanta apparently relies on the principle
of constructive notice incorporated in Section 52 of
the Property Registration Decree (P.D. No. 1529)244 ...
However, the constructive notice operates as such by
the express wording of Section 52 from the time of the
registration of the notice of lis pendens which in this
case was effected only on 2 June 1989, at which time
the sale in favor of SLDC had long been consummated
[with the] . ... transfer ownership over the property to
SLDC is concerned.
More fundamentally, given the superiority of the
right of SLDC to the claim of Babasanta the annotation
243
449 SCRA 99, 116.
244
Ibid, at p. 117.
294 LAW ON SALES
of the notice of lis pendens cannot help Babasanta’s
position a bit and it is irrelevant to the good or bad faith
characterization of SLDC as a purchaser. 245
The San Lorenzo obiter ruling above-quoted is disturbing
on two points: (a) it equates the annotation of a lis pendens only
to qualifying the state of minds of the buyers (whether they be in
good faith or bad faith) and does not equate it to be a species of
registration under the Torrens system; and (b) it holds that prior
possession by the second buyer in good faith has “superiority” to
a subsequent registration by the first buyer who has knowledge
of the second sale.
San Lorenzo cites Abarquez v. Court of Appeals,246 to say
that “this Court had the occasion to rule that if a vendee in a
double sale registers the sale after he has acquired knowledge of
a previous sale, the registration constitutes a registration in bad
faith and does not confer upon him any right. If the registration
is done in bad faith, it is as if there is no registration at all, and
the buyer who has taken possession first of the property in good
faith shall be preferred.”247 Yet a reading of Abarquez would show
that the ruling was addressed to the second buyer, that his prior
registration cannot overcome the earlier possession by the first
buyer, which was registered in bad faith.
(2) Possession Under Article 1544 Refers to
Material and Symbolic Possession
In Navera v. Court of Appeals,248 where both deeds of sale
over the same registered parcel of land were not registered
with the Registry of Deeds, the buyer of the first deed of sale
executed in a public instrument had a better right, although the
subsequent buyer took material possession thereof. It was ruled
that since the sale to the first buyer was in a public instrument
it was clearly tantamount to a delivery of the land, resulting in
the material and symbolic possession thereof being transferred
245
Ibid, at p. 118.
246
213 SCRA 415 (1992).
247
Ibid, at p. 119.
248
184 SCRA 584 (1990).
PERFORMANCE OR CONSUMMATION OF SALE 295
to the latter. So that when subsequently the second buyer took
material possession of the same land, he did so merely as a
detainer. Navera held that the possession mentioned in Article
1544 for determining who has better right when the same piece
of land has been sold several times by the same seller includes
not only the material but also the symbolic possession thereof.
Navera reiterated the doctrine laid down earlier under the
old Civil Code provision on double sales (then Article 1473) in the
cases of Quimson v. Rosete,249 and Sanchez v. Ramos.250
(3) Possession Acquired in Good Faith Is Stable Status
When the second buyer who takes possession of the subject
matter in good faith, must he remain in good faith subsequently
thereafter in order to claim priority based on possession under
Article 1544 of the Civil Code? San Lorenzo Dev. Corp. v. Court of
Appeals,251 answered this particular issue in favor of the second
buyer when it held:
Did the registration of the sale after the annotation of
the notice of lis pendens obliterate the effects of deliv-
ery and possession in good faith which admittedly had
occurred prior to SLDC’s knowledge of the transaction
in favor of Babasanta?
We do not hold so.252
... At the time both deeds were executed, SLDC
had no knowledge of the prior transaction of the
Spouses Lu with Babasanta. Simply stated, from the
time of execution of the first deed up to the moment
of transfer and delivery of possession of the lands to
SLDC, it had acted in good faith and the subsequent
annotation of lis pendens has no effect at all on the
consummated sale between SLDC and the Spouses
Lu.253
249
87 Phil. 159 (1950).
250
40 Phil. 614 (1919).
251
449 SCRA 99 (2005).
252
Ibid, at p. 116.
253
Ibid, at pp. 116-117.
296 LAW ON SALES
j. When Article 1544 Does Not Apply, Priority
in Time Rule Applies
In either of the following situations, thus:
(a) Where not all the requisites necessary to
make Article 1544 applicable are present;
or
(b) Where the requisites to make Article 1544
applicable were present, but that either the
first to register or first to possess rules were
not complied with;
which legal rule should apply to the case? In the first situation,
it would be the general rule of Prius tempore, potior jure, which
is actually the main rule in double sales.254 Article 1544 rules on
double sales provide for special rules and when the transactions
do not fit the specific circumstances mandated under the article
or by jurisprudence interpreting the article, then there is no basis
to apply such rules, and the proper doctrine applicable should be
the main rule of “Priority in time, priority in right.”
In the second situation, Article 1544 provides that ownership
should go “to the person who presents the oldest title, provided
there is good faith.” Is the buyer who has the oldest title in good
faith not necessarily the chronological first buyer under a valid
and demandable sale? If the answer is in the affirmative, then the
“oldest title” rule merely reflects the general rule of “First in time,
priority in right.” That means there is no race to run at all because
the first buyer should always win over subsequent buyers. This
observation is consistent then with the statement in Cheng v.
Genato,255 that the “governing principle” under Article 1544 is
“first in time, priority in rights.”256
Notice that the rule of “first in time, priority in right,” is a
rule that falls back to perfection stage: Who between contending
buyers is “first in time” would be that buyer who chronologically
254
Essentially lifted by Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of
Appeals, 448 SCRA 347 (2005).
255
300 SCRA 722 (1998).
256
Ibid, at p. 740.
PERFORMANCE OR CONSUMMATION OF SALE 297
had the first perfected and valid sale over the same subject
matter with the same seller. The rationale of the rule is that if
none of the contending buyers have validly effected a transfer of
ownership in his favor through any of the modes of tradition, then
the first buyer in point of time should be preferred because his
title (i.e., the legal basis upon which he can claim ownership over
the subject matter), was first in time.
Under a global set of rules pertaining to double sales, the
principle of “First in time, priority in right,” occupies the cellar
position only when special rules do not apply, perhaps because it
is the least representative of the mode of tradition.
OBLIGATIONS OF BUYER
1. Pay the Price
Buyer is obliged to pay for the price at the time and place
stipulated in the contract.257 Mere sending of a letter by the
buyer expressing his intention to pay without the accompanying
payment is not considered a valid tender of payment.258 Unless
the parties have agreed to the payment of the price to any other
party, then its payment to be effective must be made to the seller
in accordance with Art. 1240 of the Civil Code which provides
that “[P]ayment shall be made to the person in whose favor the
obligation has been constituted or his successor in interest, or
any person authorized to receive.”259
Buyer is also obliged to pay interest for the period
between delivery of the subject matter and the payment
of the price when: (a) the same has been stipulated; (b)
should object delivered produce fruits or income; or (c)
in case the buyer is in default, from the time of judicial
or extrajudicial demand.260
Non-payment of the consideration in the sale does not
prove simulation; at most, it gives the seller the right to sue for
257
Art. 1582, Civil Code.
258
Torcuator v. Bernabe, 459 SCRA 439 (2005).
259
Montecillo v. Reynes, 385 SCRA 244 (2002).
260
Art. 1589, Civil Code.
298 LAW ON SALES
collection. Generally in a sale, payment of the price is a “resolutory
condition” and the remedy of the seller is to exact fulfillment or, in
case of a substantial breach, to rescind the contract under Article
1191 of the Civil Code.261
2. Accept Delivery of Thing Bought
The buyer is bound to accept delivery of the thing bought
at the time and place stipulated in the contract. If the time and
place should not have been stipulated, the payment must be
made at the time and place of the delivery of the thing sold.262
In case of goods, the buyer is deemed to have accepted
the goods when he intimates to the seller that he has accepted
them, or when the goods have been delivered to him, and he
does any act in relation to them which is inconsistent with the
ownership of the seller, or when, after the lapse of a reasonable
time, he retains the goods without intimating to the seller that he
has rejected them.263
a. Opportunity to Inspect Goods
Where goods are delivered to the buyer, which he has
not previously examined, he is not deemed to have accepted
them unless and until he has had a reasonable opportunity of
examining them for the purpose of ascertaining whether they are
in conformity with the contract, if there is no stipulation to the
contrary.264
(1) Exception: C.O.D. Sales
Where goods are delivered to a carrier in accordance with
an order from or agreement with the buyer, upon the terms that
the goods shall not be delivered by the carrier to the buyer until he
has paid the price, whether such terms are indicated by marking
the goods with words “collect on delivery,” or otherwise, the buyer
is not entitled to examine the goods before the payment of the
261
Villaflor v. Court of Appeals, 280 SCRA 297 (1997).
262
Art. 1582, Civil Code.
263
Art. 1585, Civil Code.
264
Art. 1584, Civil Code.
PERFORMANCE OR CONSUMMATION OF SALE 299
price, in the absence of agreement or usage of trade permitting
such examination.265
b. Goods Sold Deliverable by Installments
Unless otherwise agreed, the buyer of goods is not bound to
accept delivery thereof by installments.266
Where the sale covers goods to be delivered by stated
installments, which are to be separately paid for, and the
seller makes defective deliveries in respect of one or more
installments, or the buyer neglects or refuses without just
cause to take delivery of or pay for one or more installments,
it depends in each case on the terms of the contract and the
circumstances of the case, whether the breach of contract is
so material as to justify the injured party in refusing to proceed
further and suing for damages for breach of the entire contract,
or whether the breach is severable, giving rise to a claim for
compensation but not to a right to treat the whole contract as
broken.267
c. Effect of Acceptance of Goods on Seller’s Warranty
In the absence of an agreement to the contrary, acceptance
of the goods by the buyer shall not discharge the seller from
liability in damages or other legal remedy for breach of promise
or warranty in the sale.268
However, if after acceptance of the goods, the buyer fails
to give notice to the seller of breach in any promise or warranty
within a reasonable time after the buyer knows, or ought to know,
of such breach, the seller is excused.269
d. Refusal to Accept Goods
Unless otherwise agreed, where goods are delivered to the
buyer, and he refuses to accept them, having the right to do so,
265
Art. 1584, Civil Code.
266
Art. 1583, Civil Code.
267
Art. 1583, Civil Code.
268
Art. 1586, Civil Code.
269
Art. 1586, Civil Code.
300 LAW ON SALES

he is not bound to return them to the seller, and it is sufficient that

he notifies the seller of his refusal.270 If he voluntarily constitutes
himself as a depository, he shall be liable as such.271
On the other hand, in the absence of stipulation, when the
buyer’s refusal to accept the goods is without just cause, the title
thereto passes to him from the moment they are placed at his
disposal.272

—oOo—

270
Art. 1587, Civil Code.
271
Art. 1587, Civil Code.
272
Art. 1588, Civil Code.