Professional Documents
Culture Documents
1. Elements of Sale
Elements of sale: (a) consent or meeting of the minds; (b) determinate subject matter; and (c) price
certain in money or its equivalent. xNavarra v. Planters Dev. Bank, 527 SCRA 562 (2007).4
Sale being a consensual contract, its essential elements must be proven. xVillanueva v. CA, 267
SCRA 89 (1997).
Absence of any essential elements negates a sale xDizon v. CA, 302 SCRA 288 (1999),5 even
when earnest money has been paid. xManila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).
But once all elements are proven, a sale’s validity is not affected by a previously executed fictitious
deed of sale. xPeñalosa v. Santos, 363 SCRA 545 (2001); and the burden is on the other party to prove
otherwise. xHeirs of Ernesto Biona v. CA, 362 SCRA 29 (2001).
1
The Outline presents the manner by which the Law on Sales will be taken-up in class. The x's and those footnoted in
the Outline represent cases or topics which need no extended discussions, either because the essence of the rulings
are already summarized in the Outline or they contain similar rulings or doctrines as other cases to be discussed.
Unless otherwise indicated, the numbered articles refer to articles of the Civil Code.
2
Ownership is the independent and general power of a person over a thing for purposes recognized by law and within the limits
established thereby, which includes the right to enjoy and dispose of a thing, without other limitations than those established by law. . . .
Aside from the jus utendi and the jus abutendi inherent in the right to enjoy the thing, the right to dispose, or the jus disponendi, is the
power of the owner to alienate, encumber, transform and even destroy the thing owned. Flancia v. CA, 457 SCRA 224 (2005).
3
Alfredo v. Borras, 404 SCRA 145 (2003); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Roberts v. Papio, 515 SCRA
346 (2007); Hyatt Elevators and Escalators Corp. v. Cathedral Heights Building Complex Assn., 636 SCRA 401 (2010).
4
Jovan Land, Inc. v. CA, 268 SCRA 160 (1997); Quijada v. CA, 299 SCRA 695 (1998); Co v. CA, 312 SCRA 528 (1999); San Andres v.
Rodriguez, 332 SCRA 769 (2000); Roble v. Arbasa, 362 SCRA 69 (2001); Polytechnic University v. CA, 368 SCRA 691 (2001);
Katipunan v. Katipunan, 375 SCRA 199 (2002); Londres v. CA, 394 SCRA 133 (2002); Manongsong v. Estimo, 404 SCRA 683 (2003);
Jimenez, Jr. v. Jordana, 444 SCRA 250 (2004); San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458
(2005); Roberts v. Papio, 515 SCRA 346 (2007); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Republic v. Florendo, 549
SCRA 527 (2008); GSIS v. Lopez, 592 SCRA 456 (2009); Baladad v. Rublico, 595 SCRA 125 (2009); Del Prado v. Caballero, 614 SCRA
102 (2010); Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010); Hyatt Elevators and Escalators Corp. v. Cathedral
Heights Building Complex Assn., 636 SCRA 401 (2010).
5
Roberts v. Papio, 515 SCRA 346 (2007); XYST Corp. v. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009).
6
Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995); Jovan Land, Inc. v. CA, 268 SCRA 160 (1997); Bugatti v. CA, 343 SCRA
335 (2000); Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444
(2006); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008);
GSIS v. Lopez, 592 SCRA 456 (2009); XYST Corp. v. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009).
7
Bowe v. CA, 220 SCRA 158 (1993); Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Cavite Dev’t Bank v.
Lim, 324 SCRA 346 (2000).
8
Romero v. CA, 250 SCRA 223 (1995); Balatbat v. CA, 261 SCRA 128 (1996); Coronel v. CA, 263 SCRA 15 (1996); City of Cebu v.
Heirs of Candido Rubi, 306 SCRA 408 (1999); Agasen v. CA, 325 SCRA 504 (2000); Laforteza v. Machuca, 333 SCRA 643 (2000);
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Upon its perfection, the parties may reciprocally demand performance. xHeirs of Venancio Bejenting
9
v. Bañez, 502 SCRA 531 (2006); subject only to the provisions of the law governing the form of
contracts. xCruz v. Fernando, 477 SCRA 173 (2005).
It remains valid even if parties have not affixed their signatures to its written form, xGabelo v. CA,
316 SCRA 386 (1999), or the manner of payment is breached. xPilipinas Shell Petroleum Corp v.
Gobonseng, 496 SCRA 305 (2006).
In an Extrajudicial Settlement of Estate with Absolute Sale, it would be immaterial that the buyer’s
signature does not appear thereon since the contract of sale is consensual and perfected by mere
consent. xBaladad v. Rublico, 595 SCRA 125 (2009).
Failure of the subdivision developer to obtain a license to sell does not render the sales void
especially that the parties have impliedly admitted that there was already a meeting of the minds as
to the subject of the sale and price. Cantemprate v. CRS Realty Dev. Corp. 587 SCRA 492 (2009).
The binding effect of sale is based on the principle that the obligations arising therefrom have the
force of law between the parties. xVeterans Federation of the Philippines v. CA, 345 SCRA 348
(2000).
Perfection Distinguished from Demandability – Not all contracts of sale become automatically
and immediately effective. In sales with assumption of mortgage, there is a condition precedent to the
seller’s consent and without the approval of the mortgagee, the sale is not perfected. xBiñan Steel
Corp. v. CA, 391 SCRA 90 (2002).
“No Contract Situation” versus “Void Contract” – Absence of consent (i.e., complete meeting
of minds) negates the existence of a perfected sale. xFirme v. Bukal Enterprises and Dev. Corp., 414
SCRA 190 (2003). The contract then is null and void ab initio, absolutely wanting in civil effects;
hence, it does not create, modify, or extinguish the juridical relation to which it refers. xCabotaje v.
Pudunan, 436 SCRA 423 (2004).
When there is no meeting of the minds on price, the contract “is not perfected” and does not
serve as a binding juridical relation between the parties. xManila Metal Container Corp. v. PNB, 511
10
SCRA 444 (2006), and should be more accurately denominated as inexistent, as it did not pass the
stage of generation to the point of perfection. xNHA v. Grace Baptist Church, 424 SCRA 147 (2004).
d. Onerous and Commutative (√Gaite v. Fonacier, 2 SCRA 830 [1961]; BUT SEE: Arts. 1355 and
1470)
In a contract of sale, there is no requirement that the price be equal to the exact value of the
subject matter of sale; all that is required is that the parties believed that they will receive good value
in exchange for what they will give. √Buenaventura v. CA, 416 SCRA 263 (2003).
Londres v. CA, 394 SCRA 133 (2002); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Buenaventura v. CA, 416 SCRA 263 (2003);
San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Ainza v. Padua, 462 SCRA 614 (2005);
Roberts v. Papio, 515 SCRA 346 (2007); MCC Industrial Sales Corp. v. Ssangyong Corp., 536 SCRA 408 (2007); Castillo v. Reyes. 539
SCRA 193 (2007); XYST Corp. v. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009); Del Prado v. Caballero, 614 SCRA 102
(2010); Duarte v. Duran, 657 SCRA 607 (2011).
9
Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
10
Roberts v. Papio, 515 SCRA 346 (2007).
11
Ong v. CA, 310 SCRA 1 (1999); Mortel v. KASSCO, 348 SCRA 391 (2000); Agro Conglomerates, Inc. v. CA, 348 SCRA 450 (2000);
Velarde v. CA, 361 SCRA 56 (2001); Carrascoso, Jr. v. CA, 477 SCRA 666 (2005); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53
(2008); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008).
12
Vda. De Quirino v. Palarca, 29 SCRA 1 (1969)
13
Acap v. CA, 251 SCRA 30 (1995).
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Seller’s ownership of the thing sold is not an element of perfection; what the law requires is that
seller has the right to transfer ownership at the time of delivery. xQuijada v. CA, 299 SCRA 695
(1998).14
BUT SEE: xTitong v. CA, 287 SCRA 102 (1998), which defined a “sale” as “a contract transferring
dominion and other real rights in the thing sold.”
14
Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Heirs of
Jesus M. Mascuñana v. CA, 461 SCRA 186 (2005).
15
Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Orden v. Aurea, 562 SCRA 660 (2008); Ver Reyes v.
Salvador, Sr., 564 SCRA 456 (2008)..
16
Commissioner of Internal Revenue v. Arnoldus Carpentry Shop, 159 SCRA 199 (1988); Del Monte Philippines, Inc. v. Aragones, 461
SCRA 139 (2005).
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buyer to the contract effected he may voluntarily assume warranties of seller. xSchmid and Oberly, Inc.
v. RJL Martinez, 166 SCRA 493 (1988).
2. Minors, Insane and Demented Persons, Deaf-Mutes (Arts. 1327, 1397 and 1399)
A minor cannot be deemed to have given her consent to a contract of sale; consent is among the
essential requisites of a contract, including one of sale, absent of which there can be no valid contract.
[?] xLabagala v. Santiago, 371 SCRA 360 (2001).
b. Protection of the Senile and Elderly (Art. 24) and Illiterates (Art. 1332)
Under Art. 1332, when one of the parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that
the terms thereof have been fully explained to the former; otherwise, sale is void. [?] xVda. De Ape v.
CA, 456 SCRA 193 (2005).
17
Dao Heng Bank, Inc. (now BDO) v. Laigo, 571 SCRA 434 (2008); Technogas Philippines Mfg. Corp. v. PNB, 551 SCRA 183 (2008);
Ocampo v. Land Bank of the Philippines, 591 SCRA 562 (2009); D.B.T. Mar-Bay Construction, Inc. v. Panes, 594 SCRA 578 (2009).
18
Aquintey v. Tibong 511 SCRA 414 (2006); Rockville Excel International Exim Corp. v. Culla, 602 SCRA 124 (2009).
19
Filinvest Credit Corp. v. Philippine Acetylene Co., Inc. 111 SCRA 421 (1982); Vda. de Jayme v. CA, 390 SCRA 380 (2002); Ong v.
Roban Lending Corp., 557 SCRA 516 (2008).
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While a person is not incompetent to contract merely because of advanced years or by reason of
physical infirmities, when such age or infirmities have impaired the mental faculties so as to prevent
the person from properly, intelligently or firmly protecting his property rights, then he is undeniably
incapacitated, and the sale he entered into is void. [?]. √Paragas v. Heirs of Dominador Balacano,
468 SCRA 717 (2005).20
a. Contracts with Third Parties (Arts. 73, 96, and 124, Family Code)
Under Art. 124 of Family Code, sale by husband of a conjugal property without the wife’s consent
is void and not merely voidable, since the resulting contract lacks one of the essential elements of “full
consent”. xGuiang v. CA, 291 SCRA 372 (1998).21
A wife affixing her signature to a Deed of Sale as a witness is deemed to have given her consent.
xPelayo v. Perez, 459 SCRA 475 (2005).
As an exception, husband may dispose of conjugal property without wife’s consent if such sale is
necessary to answer for conjugal liabilities mentioned in Articles 161 and 162. xAbalos v. Macatangay,
Jr., 439 SCRA 64 (2004).
b. Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code)
Sales between spouses who are not governed by a complete separation of property regime are
void, not just voidable. xMedina v. Collector, 1 SCRA 302 (1960).
Since the spouses cannot validly sell property to one another under Art. 1490, then policy
consideration and the dictates of morality require that the prohibition should apply also to common-law
relationships. cf. Matabuena v. Cervantes, 38 SCRA 284 (1971).
Sale by husband of conjugal land to his concubine is null and void for being contrary to morals and
public policy and “subversive of the stability of the family, a basic social institution which public policy
cherishes and protects.” √Calimlim-Canullas v. Fortun, 129 SCRA 675 (1984).22
Nevertheless, when property resold to a third-party buyer in good faith and for value,
reconveyance is no longer available. xCruz v. CA, 281 SCRA 491 (1997).
The in pari delicto doctrine would not apply to the spouses-parties under Art. 1490, since only the
heirs and the creditors can question the sale’s nullity. xModina v. CA, 317 SCRA 696 (1999).
b. Attorneys
(1) Prohibition against attorneys purchasing the properties of their clients in litigation applies:
Only while litigation is pending. xDirector of Lands v. Ababa, 88 SCRA 513 (1979);
Even though litigation is not adversarial in nature Rubias v. Batiller, 51 SCRA 120 (1973); or when it is a
certiorari proceeding that may has no merit xValencia v. Cabanting, 196 SCRA 302 (1991).
Only to a lawyer of record, and does not cover assignment of the property given in judgment made by a
client to an attorney, who has not taken part in the case. Municipal Council of Iloilo v. Evangelista, 55 Phil.
24
290 (1930);
Not applicable to a lawyer who acquired property prior to the time he intervened as counsel in the suit
involving such property. Del Rosario v. Millado, 26 SCRA 700 (1969).
20
Domingo v. CA, 367 SCRA 368 (2001).
21
Cirelos v. Hernandez, 490 SCRA 625 (2006); Bautista v. Silva, 502 SCRA 334 (2006).
22
Ching v. Goynako, Jr., 506 SCRA 735 (2006).
23
Uy Sui Pin v. Cantollas, 70 Phil. 55 (1940); Medina v. Collector, 1 SCRA 302 (1961).
24
Gregorio Araneta, Inc. v. Tuason de Paterno, 49 O.G. 45 (1952).
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(b) Contingency fee arrangement granting the lawyer proprietary rights to the property in
litigation since the payment of said fee is not made during the pendency of litigation but only
after judgment has been rendered. [?] √Fabillo v. IAC, 195 SCRA 28 (1991).25
c. Judges
A judge should restrain himself from participating in the sale of properties—it is incumbent upon
him to advise the parties to discontinue the transaction if it is contrary to law. Britanico v. Espinosa,
486 SCRA 523 (2006).
A judge who buys property in litigation before his court after the judgment becomes final does not
violate Art. 1491, but he can be administratively disciplined for violation of the Code of Judicial Ethics.
xMacariola v. Asuncion, 114 SCRA 77 (1982).
Even when the main cause is a collection of a sum of money, the properties levied are still
subject to the prohibition. xGan Tingco v. Pabinguit, 35 Phil. 81 (1916).
1. Subject Must at Perfection Be Existing, Future or Contingent (Arts. 1347, 1348, and 1462)
a. Emptio Rei Speratae (Arts. 1461 and 1347)
Pending crops which have potential existence may be valid object of sale. xSibal v. Valdez, 50
Phil. 512 (1927); and such transaction cannot be considered to effectively be sale of the land or any
part thereof. xPichel v. Alonzo, 111 SCRA 341 (1981).
a. Non-Specific Things (Generic) May Be the Object of Sale (Arts. 1246 and 1409[6])
Subject matter is determinable when from the formula or description adopted at perfection
there is a way by which the courts can delineate it independent of the will of the parties. √Melliza
v. City of Iloilo, 23 SCRA 477 (1968).
Where the lot sold is said to adjoin the “previously paid lot” on three sides thereof, the subject
lot is capable of being determined without the need of any new contract, even when the exact area
of the adjoining residential lot is subject to the result of a survey. xSan Andres v. Rodriguez, 332
SCRA 769 (2000).
25
Recto v. Harden, 100 Phil. 427 (1956); Vda. de Laig v. CA, 86 SCRA 641 (1978).
26
Londres v. CA, 394 SCRA 133 (2002).
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As the above-quoted portion of the kasunduan shows [giving reference to the area, the
locality located, and vicinity with reference of old trees], there is no doubt that the object of the
sale is determinate. xCarabeo v. Dingco, 647 SCRA 200 (2011).
Determinable subject matter of sale are not subject to risk of loss until they are physically
segregated or particularly designated. √Yu Tek & Co. v. Gonzales, 29 Phil. 384 (1915).
b. Undivided Interest (Art. 1463) or Undivided Share in a Mass of Fungible Goods (Art. 1464) –
May result it co-ownership.
4. Quantity of Goods as Subject Matter Not Essential for Perfection [?] (Art. 1349)
Sale of grains is perfected even when the exact quantity or quality is not known, so long as the
source of the subject is certain. √NGA v. IAC, 171 SCRA 131 (1989).
Where seller quoted to buyer the items offered for sale, by item number, part number, description
and unit price, and the buyer had sent in reply a purchase order without indicating the quantity being
order, there was already a perfected contract of sale, even when required letter of credit had not
been opened by the buyer. √Johannes Schuback & Sons Phil. Trading Corp. v. CA, 227 SCRA
719 (1993).
5. Seller’s Obligation to Transfer Title to Buyer (Art. 1459, 1462, and 1505)
a. Seller’s Ownership Need Not Exist at Perfection:
Sale of copra for future delivery does not make seller liable for estafa for failing to deliver
because the contract is still valid and the obligation was civil and not criminal. xEsguerra v.
People, 108 Phil. 1078 (1960).
A perfected sale cannot be challenged on the ground of the seller’s non-ownership of the thing
sold at the time of the perfection; it is at delivery that the law requires the seller to have the
ownership of the thing sold. xAlcantara-Daus v. de Leon, 404 SCRA 74 (2003).27
It is essential that seller is owner of the property he is selling. The principal obligation of a
seller is “to transfer the ownership of” the property sold (Art. 1458). This law stems from the
principle that nobody can dispose of that which does not belong to him. NEMO DAT QUOD NON
HABET. Noel v. CA, 240 SCRA 78 (1995).
That the sellers are no longer owners of the goods at perfection does not appear to be one of
the void contracts enumerated in Art. 1409 of Civil Code; and Art. 1402 thereof recognizes a sale
where the goods are to be “acquired . . . by the seller after the perfection of the contract of sale,”
clearly implying that a sale is possible even if the seller was not the owner at the time of sale,
provided he acquires title to the property later on; nevertheless such contract may be deemed to
be inoperative and may thus fall, by analogy, under Art. 1409(5): “Those which contemplate an
impossible service.” Nool v. CA, 276 SCRA 149 (1997).
b. Subsequent Acquisition of Title by Non-Owner Seller (Art. 1434) – Title passes to the seller
by operation of law.
X6. Illegality of Subject Matter (Arts. 1409, 1458, 1461, 1462, and 1575)
a. Special Laws: narcotics (R.A. 6425); wild bird or mammal (Act 2590, Sec. 7); rare wild plants (Act
3983); poisonous plants or fruits (R.A. 1288); dynamited fish (R.A 428); gunpowder and explosives
(Act 2255); firearms and ammunitions (P.D. 9); sale of realty by non-Christians (Sec. 145, Revised
Adm. Code, R.A. 4252)
b. Following Sales of Land Void:
By Non-Christian if not approved by Provincial Governor per Sec. 145 of Revised Administrative Code.
xTac-an v. CA, 129 SCRA 319 (1984).
Friar land without consent of Secretary of Agriculture required under Act No. 1120. xAlonso v. Cebu
Country Club, Inc., 375 SCRA 390 (2002); Liao v. CA, 323 SCRA 430 (2000).
Made in violation of land reform laws declaring tenant-tillers as the full owners of the lands they tilled.
xSiacor v. Gigantana, 380 SCRA 306 (2002).
Reclaimed lands are of the public domain and cannot, without congressional fiat, be sold, public or private.
Fisheries Dev. Authority v. CA, 534 SCRA 490 (2007).
27
Heirs of Arturo Reyes v. Socco-Beltran, 572 SCRA 211 (2008).
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Seller cannot unilaterally increase the price previously agreed upon with the buyer, even when due to
increased construction costs. GSIS v. CA, 228 SCRA 183 (1993).
Buyer who opted to purchase the land on installment basis with imposed interest, cannot unilaterally
disavow the obligation created by the stipulation in the contract which sets the interest at 24% p.a. “The
rationale behind having to pay a higher sum on the installment is to compensate the vendor for waiting a
number of years before receiving the total amount due. The amount of the stated contract price paid in
full today is worth much more than a series of small payments totaling the same amount. x x x To assert
that mere prompt payment of the monthly installments should obviate imposition of the stipulated interest
is to ignore an economic fact and negate one of the most important principles on which commerce
operates.” Bortikey v. AFP RSBS, 477 SCRA 511 (2005).
(3) Effects When Price Simulated – The principle of in pari delicto nonoritur action, which denies all
recovery to the guilty parties inter se, where the price is simulated; the doctrine applies only
where the nullity arises from the illegality of the consideration or the purpose of the contract.
Modina v. CA, 317 SCRA 696 (1999).28
c. Non-Payment of Price
Sale being consensual, failure of buyer to pay the price does not make the contract void for lack
of consideration or simulation, but results in buyer’s default, for which the seller may exercise his
legal remedies. xBalatbat v. CA, 261 SCRA 128 (1996).29
“In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes
the transaction that, for a time, existed and discharges the obligations created thereunder. [?] The
remedy of an unpaid seller in a contract of sale is to seek either specific performance or rescission.”
xHeirs of Pedro Escanlar v. CA, 281 SCRA 176 (1997).30
Badge That Price Is Simulated, Not Just Unpaid: It is a badge of simulated price, which
render the sale void, when the price, which is stipulated thereon to have been paid, has in fact
never been paid by the purchaser to the seller. xVda. de Catindig. v. Heirs of Catalina Roque, 74
SCRA 83 (1976).31
b. Price Never Set By One or Both Parties (Arts. 1473, 1182), unless the price is separately
accepted by the other party.
BUT: If Buyer Appropriates the Object, He Must Pay Reasonable Price (Art. 1474)
There can be no concept of “appropriation” when it comes to land? – Where a church
organization has been allowed possession and introduce improvements on the land as part of its
application to purchase with the NHA, and thereafter it refused the formal resolution of the NHA
Board setting the price and insisted on paying the lower price allegedly given by the NHA Field
Office, there can be no binding contract of sale upon which an action for specific performance can
prosper, not even on fixing the price equal to the fair market value of the property. xNHA v. Grace
Baptist Church, 424 SCRA 147 (2004).
Even when there was no meeting on the minds of the price, this Court rules that to deny
petitioner’s claim would unjustly enrich respondent who had benefited from the repairs of their
four elevators. xHyatt Elevators and Escalators Corp. v. Cathedral Heights Building Complex
Assn., 636 SCRA 401 (2010).
5. Inadequacy of Price Does Not Affect Ordinary Sale (Arts. 1355 and 1470)
Mere inadequacy of the price does not affect the validity of the sale when both parties are in a
position to form an independent judgment concerning the transaction, unless fraud, mistake, or undue
influence indicative of a defect in consent is present. The contract may be annulled for vitiated consent
and not due to the inadequacy of price. xBautista v. CA, 436 SCRA 141 (2004).35
32
The deed of sale with assumption of mortgage is a registrable instrument and must be registered with the Register of Deeds in order
to bind third parties. Rodriguez v. CA, 495 SCRA 490 (2006).
33
Boston Bank of the Philippines v. Manalo, 482 SCRA 108 (2006).
34
Velasco v. CA, 51 SCRA 439 (1973); Co v. CA, 286 SCRA 76 (1998); San Miguel Properties Philippines v. Huang, 336 SCRA 737
(2000); Montecillo v. Reynes, 385 SCRA 244 (2002); Edrada v. Ramos, 468 SCRA 597 (2005); Cruz v. Fernando, 477 SCRA 173
(2005); Marnelego v. Banco Filipino Savings and Mortgage Bank, 480 SCRA 399 (2006); Boston Bank of the Phil. v. Manalo, 482 SCRA
108 (2006); Platinum Plans Phil., Inc. v. Cucueco, 488 SCRA 156 (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).
35
Ereñeta v. Bezore, 54 SCRA 13 (1973); Bacungan v. CA, 574 SCRA 642 (2008); Bacungan v. CA, 574 SCRA 642 (2008).
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Absent any evidence of the fair market value of a land as of the time of sale, it cannot be concluded
that the price was inadequate. xAcabal v. Acabal, 454 SCRA 897 (2005).36
b. Lesion of more than 1/4 of value of thing makes sale rescissible unless approved by court
(Art. 1386)
c. Gross inadequacy of price may raise the presumption of equitable mortgage (Art. 1602)
1. OPTION CONTRACT
An option is a preparatory contract in which one party grants to the other, for a fixed period and
under specified conditions, the power to decide, whether or not to enter into a principal contract. It
binds the party who has given the option, not to enter into the principal contract with any other person
36
Avila v. Barabat, 485 SCRA 8 (2006).
37
Tayengco v. CA, 15 SCRA 306 (1965); Republic v. NLRC, 244 SCRA 564 (1995).
38
Vda. de Gordon v. CA, 109 SCRA 388 (1981).
39
Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007).
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during the period designated, and, within that period, to enter into such contract with the one to whom
the option was granted, if the latter should decide to use the option. It is a separate agreement distinct
from the contract of sale which the parties may enter into upon the consummation of the option.
√Carceller v. CA, 302 SCRA 718 (1999).40
An option imposes no binding obligation on the person holding the option aside from the
consideration for the offer. Until accepted, it is not treated as a sale. √Tayag v. Lacson, 426 SCRA
282 (2004).41
Tenants, not being the registered owners, cannot grant an option on the land, much less any
“exclusive right” to buy the property under the Latin saying “nem dat quod non habet.” xTayag v.
Lacson, 426 SCRA 282 (2004).
c. There Must Be Acceptance of Option Offer. √Vazquez v. CA, 199 SCRA 102 (1991).
40
Laforteza v. Machuca, 333 SCRA 643 (2000); Buot v. CA, 357 SCRA 846 (2001); Abalos v. Macatangay, Jr., 439 SCRA 649
(2004); Vasquez v. Ayala Corp., 443 SCRA 231 (2004); Eulogio v. Apeles, 576 SCRA 561 (2009); Polytechnic University of the
Philippines v. Golden Horizon Realty Corp., 615 SCRA 478 (2010).
41
Adelfa Properties, Inc. v. CA, 240 SCRA 565 (1995); Kilosbayan, Inc. v. Morato, 246 SCRA 540 (1995); San Miguel Properties
Philippines, Inc. v. Huang, 336 SCRA 737 (2000); Limson v. CA, 357 SCRA 209 (2001).
42
JMA House, Inc. v. Sta. Monica Industrial and Dev. Corp., 500 SCRA 526 (2006).
43
De la Cavada v. Diaz, 37 Phil. 982 (1918); San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000)
44
Affirming Atkins, Kroll & Co., Inc. v. Cua, 102 Phil. 948 (1958); Overturning Southwestern Sugar Molasses Co. v. Atlantic Gulf &
Pacific Co., 97 Phil. 249 (1955).
45
Limson v. CA, 357 SCRA 209 (2001).
46
Rosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001); Conculada v. CA, 367 SCRA 164 (2001); Polytechnic University v. CA, 368
SCRA 691 (2001); Riviera Filipina, Inv. v. CA, 380 SCRA 245 (2002); Lucrative Realty and Dev. Corp. v. Bernabe, Jr., 392 SCRA 679
- 12 -
In a right of first refusal, while the object might be made determinate, the exercise of the right
would be dependent not only on the grantor’s eventual intention to enter into a binding juridical relation
with another but also on terms, including the price, that are yet to be firmed up. . . the “offer” may be
withdrawn anytime by communicating the withdrawal to the other party. √Vasquez v. Ayala Corp.,
443 SCRA 231 (2004).
A right of first refusal clause simply means that should the lessor decide to sell the leased property
during the term of the lease, such sale should first be offered to the lessee; and the series of
negotiations that transpire between the lessor and the lessee on the basis of such preference is
deemed a compliance of such clause even when no final purchase agreement is perfected between
the parties. The lessor was then at liberty to offer the sale to a third party who paid a higher price, and
there is no violation of the right of the lessee. √Riviera Filipina, Inv. v. CA, 380 SCRA 245 (2002).47
When a lease contract contains a right of first refusal, the lessor has the legal duty to the lessee
not to sell the leased property to anyone at any price until after the lessor made an offer to sell the
property to the lessee and the lessee has failed to accept it. Only after the lessee has failed to
exercise his right of first priority could the lessor sell the property to other buyers under the same terms
and conditions offered to the lessee, or under terms and conditions more favorable to the lessor.
Polytechnic University of the Philippines v. Golden Horizon Realty Corp., 615 SCRA 478 (2010).
A right of first refusal is a contractual grant, not of the sale of a property, but of the first priority to
buy the property in the event the owner sells the same. As distinguished from an option contract, in a
right of first refusal, whole the object might be made determinate, the exercise of the right of first
refusal would be dependent not only on the owner’s eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that are yet to be firmed up. Polytechnic
University of the Philippines v. Golden Horizon Realty Corp., 615 SCRA 478 (2010).
A right of first refusal in a lease in favor of the lessee cannot be availed of by the sublessee.
xSadhwani v. CA, 281 SCRA 75 (1997).
4. MUTUAL PROMISES TO BUY AND SELL (Art. 1479): “TRUE CONTRACT TO SELL”
Mutual promises to buy and sell a certain thing for a certain price gives each of the contracting
parties a right to demand from the other the fulfillment of the obligation. xBorromeo v. Franco, 5 Phil.
49 (1905).
Even in this case the certainty of the price must also exist, otherwise, there is no valid and
enforceable contract to sell. xTan Tiah v. Yu Jose, 67 Phil. 739 (1939).
An accepted bilateral promise to buy and sell is in a sense similar to, but not exactly the same, as
a perfected contract of sale because there is already a meeting of minds upon the thing which is the
object of the contract and upon the price. 48 But a contract of sale is consummated only upon delivery
and payment, whereas in a bilateral promise to buy and sell gives the contracting parties rights in
personam, such that each has the right to demand from the other the fulfillment of their respective
undertakings. √Macion v. Guiani, 225 SCRA 102 (1993).49
The cause of action under a mutual promise to buy and sell is 10 years. xVillamor v. CA, 202
SCRA 607 (1991).
(2002); Villegas v. CA, 499 SCRA 276 (2006); Polytechnic University of the Philippines v. Golden Horizon Realty Corp., 615 SCRA 478
(2010).
47
Polytechnic University v. CA, 368 SCRA 691 (2001); Villegas v. CA, 499 SCRA 276 (2006).
48
El Banco Nacional Filipino v. Ah Sing, 69 Phil. 611 (1940); Manuel v. Rodriguez, 109 Phil. 1 (1960).
49
Borromeo v. Franco, 5 Phil. 49 (1905); Villamor v. CA, 202 SCRA 607 (1991); Coronel v. CA, 263 SCRA 15 (1996).
50
Valdez v. CA, 439 SCRA 55 (2004); Blas v. Angeles-Hutalla, 439 SCRA 273 (2004); Ainza v. Padua, 462 SCRA 614 (2005); Cruz v.
Fernando, 477 SCRA 173 (2005).
51
Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).
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otherwise, the same constitutes a counter-offer and has the effect of rejecting the offer. XYST Corp. v.
DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009).
52
Beaumont v. Prieto, 41 Phil. 670 (1916); Zayco v. Serra, 44 Phil. 326 (1923); Tuazon v. Del Rosario-Suarez, 637 SCRA 728 (2010).
53
Reiterated in Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995), but reversed in 255 SCRA
54
Limjoco v. CA, 37 SCRA 663 (1971); Villonco v. Bormaheco, 65 SCRA 352 (1975); Spouses Doromal, Sr. v. CA, 66 SCRA 575
(1975); PNB v. CA, 262 SCRA 464 (1996); San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000); Platinum Plans Phil.
Inc. v. Cucueco, 488 SCRA 156 (2006).
55
San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000).
56
XYST Corp. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009).
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5. Difference Between Earnest Money and Option Money. √Oesmer v. Paraiso Dev. Corp., 514
SCRA 228 (2007).
57
F. Irureta Goyena v. Tambunting, 1 Phil. 490 (1902).
58
Heirs of Biona v. CA, 362 SCRA 29 (2001); The Estate of Pedro C. Gonzales v. The Heirs of Marcos Perez, 605 SCRA 47 (2009).
59
Yason v. Arciaga, 449 SCRA 458 (2005); Union Bank v. Ong, 491 SCRA 581 (2006); Tapuroc v. Loquellano Vda. De Mende, 512
SCRA 97 (2007); Alfaro v. CA, 519 SCRA 270 (2007); Santos v. Lumbao, 519 SCRA 408 (2007); Pedrano v. Heirs of Benedicto
Pedrano, 539 SCRA 401 (2007); Olivares v. Sarmiento, 554 SCRA 384 (2008).
60
Nazareno v. CA, 343 SCRA 637 (2000); Santos v. Heirs of Jose P. Mariano, 344 SCRA 284 (2000)
61
Domingo v. CA, 367 SCRA 368 (2001).
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2. WHEN FORM IMPORTANT IN SALE
b. For Enforceability Between the Parties: STATUTE OF FRAUDS (Arts. 1403 and 1405)
The term “Statute of Frauds” is descriptive of the statutes which require certain classes of
contracts, such as agreements for the sale of real property, to be in writing, the purpose being to
prevent fraud and perjury in the enforcement of obligations depending for their evidence on the
unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be
evidenced by a writing signed by the party to be charged. Shoemaker v. La Tondeña, 68 Phil. 24
(1939).
Presupposes Valid Contract of Sale – “The application of the Statute of Frauds presupposes
the existence of a perfected contract.” When the records show that there was no perfected contract
of sale, there is no basis for the application of the Statute of Frauds. xFirme v. Bukal Enterprises
and Dev. Corp., 414 SCRA 190 (2003).66
(1) Coverage:
(i) Sale of Real Property – A sale of realty cannot be proven by means of witnesses, but must necessarily
be evidenced by a written instrument, duly subscribed by the party charged, or by secondary evidence
of the contents of such document. No other evidence can be received except the documentary
67
evidence referred to. xGorospe v. Ilayat, 29 Phil. 21 (1914).
(ii) Agency to Sell or to Buy – As contrasted from sale, an agency to sell does not belong to any of the
three categories of contracts covered by Arts. 1357 and 1358 and not one enumerated under the
68
Statutes of Frauds in Art. 1403. xLim v. CA, 254 SCRA 170 (1996).
(iii) Rights of First Refusal – A “right of first refusal” is not covered by the statute of frauds. Furthermore,
Art. 1403(2)(e) of Civil Code presupposes the existence of a perfected, albeit unwritten, contract of
sale; a right of first refusal, such as the one involved in the instant case, is not by any means a
perfected contract of sale of real property. xRosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001).
(iv) Equitable Mortgage – Statute does not stand in the way of treating an absolute deed as a mortgage,
when such was the parties’ intention, although the agreement for redemption or defeasance is proved
69
by parol evidence. xCuyugan v. Santos, 34 Phil. 100 (1916).
(v) Right to Repurchase – The deed and the verbal agreement allowing the right of repurchase should be
considered as an integral whole; the deed of sale is itself the note or memorandum evidencing the
contract. xMactan Cebu Int’ll Airport Authority v. CA, 263 SCRA 736 (1996).
(2) Memorandum (√Yuviengco v. Dacuycuy, 104 SCRA 668 [1981];
Under Art. 1403, an exception to the unenforceability of contracts pursuant to the Statute of
Frauds is the existence of a written note or memorandum evidencing the contract. The
memorandum may be found in several writings, not necessarily in one document, and constitutes
the written evidence that such a contract was entered into. The existence of a written contract of
the sale is not necessary so long as the agreement to sell real property is evidenced by a written
note or memorandum, embodying the essentials of the contract and signed by the party charged
or his agent. √Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995).
BUT: The memoranda must be signed by the party sought to be charged, and must clearly
provide a deed of sale categorically conveying the subject property. √Limketkai Sons Milling,
Inc. v. CA, 255 SCRA 6 (1996); 261 SCRA 464 (1996).
62
Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002).
63
Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995); Agasen v. CA, 325 SCRA 504 (2000).
64
Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002).
65
Talusan v. Tayag, 356 SCRA 263 (2001); Santos v. Manalili, 476 SCRA 679 (2005).
66
Rosencor Dev’t Corp. v. Inquing, 354 SCRA 119 (2001).
67
Alba Vda. De Ray v. CA, 314 SCRA 36 (1999).
68
Torcuator v. Bernabe, 459 SCRA 439 (2005).
69
Rosales v. Suba, 408 SCRA 664 (2003); Ayson, Jr. v. Paragas, 557 SCRA 50 (2008).
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For the memorandum to take the sale out of the coverage of the Statute of Frauds, it must
contain “all the essential terms of the contract” of sale. xTorcuator v. Bernabe, 459 SCRA 439
(2005),70 even when scattered into various correspondences which can be brought together
xCity of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999).71
(3) Partial Execution (Art. 1405) √Ortega v. Leonardo, 103 Phil. 870 (1958); √Claudel v. CA, 199
SCRA 113 (1991).
Delivery of the deed to buyer’s agent, with no intention to part with the title until the purchase
price is paid, does not take the case out of the Statute of Frauds. xBaretto v. Manila Railroad
Co., 46 Phil. 964 (1924).
The Statute of Frauds does not apply to contracts either partially or totally performed. In
addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefits
under the contract, such as the acceptance of the purchase price and using the proceeds to pay
outstanding loans. √Alfredo v. Borras, 404 SCRA 145 (2003).72
(4) Waiver – (Art. 1405) Cross-examination on the contract is deemed a waiver of the defense of
the Statute. xAbrenica v. Gonda, 34 Phil. 739 (1916); Talosig v. Vda. De Nieba, 43 SCRA 472
(1972).73
When the purported buyer’s exhibits failed to establish the perfection of the contract of sale,
oral testimony cannot take their place without violating the parol evidence rule. It was therefore
irregular for the trial court to have admitted in evidence testimony to prove the existence of a
contract of sale of a real property between the parties, despite the persistent objection made by
the purported seller’s counsel as early as the first scheduled hearing, even when cross-
examination was made on the basis of the witnesses’ affidavit-form testimony. √Limketkai
Sons Milling, Inc. v. CA, 255 SCRA 6 (1996); 261 SCRA 464 (1996).
c. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art. 1874)
When sale of a piece of land or any interest therein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void,75 even when:
Agent is the son of the owner. xDelos Reyes v. CA, 313 SCRA 632 (1999)
There is partial payment of the price received by the supposed agent. xDizon v. CA, 396 SCRA 154
76
(2003).
In the case of a corporate owner of realty. xCity-Lite Realty Corp. v. CA, 325 SCRA 385 (2000).77
70
Paredes v. Espino, 22 SCRA 1000 (1968).
71
Berg v. Magdalena Estate, Inc., 92 Phil. 110 (1952); Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995); First Philippine Int’l
Bank v. CA, 252 SCRA 259 (1996).
72
Vda. de Jomoc v. CA, 200 SCRA 74 (1991); Soliva v. The Intestate Estate of Marcelo M. Villalba, 417 SCRA 277 (2003); Ainza v.
Padua, 462 SCRA 614 (2005); De la Cena v. Briones, 508 SCRA 62 (2006); Yaneza v. CA, 572 SCRA 413 (2008); Duarte v. Duran, 657
SCRA 607 (2011).
73
Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995); Lacanilao v. CA, 262 SCRA 486 (1996).
74
Limson v. CA, 357 SCRA 209 (2001).
75
Alcantara v. Nido, 618 SCRA 333 (2010); Camper Realty Corp. V. Pajo-Reyes, 632 SCRA 400 (2010).
76
Firme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).
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When Contract to Sell was signed by the co-owners themselves as witnesses, the written
authority for their agent mandated under Article 1874 of the Civil Code is no longer required. xOesmer
v. Paraiso Dev. Corp., 514 SCRA 228, 237 (2007).
d. Sale of Large Cattle (Art. 15851; Sec. 529, Revised Adm. Code)
the signature appearing on the Deeds of Sale is not that of her husband is not enough to allege simulation,
since forgery is not presumed; it must be proven by clear, positive and convincing evidence. xR.F. Navarro &
Co. v. Vailoces, 361 SCRA 139 (2001).
Simulation of contract and gross inadequacy of price are distinct legal concepts, with different effects – the
concept of a simulated sale is incompatible with inadequacy of price. When the parties to an alleged contract
do not really intend to be bound by it, the contract is simulated and void. Gross inadequacy of price by itself
will not result in a void contract, and it does not even affect the validity of a contract of sale, unless it signifies
a defect in the consent or that the parties actually intended a donation or some other contract. xBravo-
Guerrero v. Bravo, 465 SCRA 244 (2005).
77
Pineda v. CA, 376 SCRA 222 (2002).
78
Rosario v. CA, 310 SCRA 464 (1999); Loyola v. CA, 326 SCRA 285 (2000); Yu Bun Guan v. Ong, 367 SCRA 559 (2001);
Payongayong v. CA, 430 SCRA 210 (2004).
79
Solidstate Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197 (2008).
80
Rufloe v. Burgos, 577 SCRA 264, 272-273 (2009).
81
Uy v. CA, 314 SCRA 69, 81 (1999).
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4. Effect When Sale Declared Void:
The action for the declaration of the contract’s nullity is imprescriptible—an action for reconveyance of
property on a void contract of sale does not prescribe. Fil-Estate Golf and Dev., Inc. v. Navarro, 526 SCRA 51
(2007).
Possessor is entitled to keep the fruits during the period for which the buyer held the property in good faith.
xDBP v. CA, 316 SCRA 650 (1999).
Then restoration of what has been given is in order, since the relationship between parties in any contract
even if subsequently voided must always be characterized and punctuated by good faith and fair dealing.
xDe los Reyes v. CA, 313 SCRA 632 (1999); xHeirs of Ignacia Aguilar-Reyes v. Mijares, 410 SCRA 97
(2003).
Alien who purchases land in the name of his Filipina lover, has no standing to seek legal remedies
to either recover the property or the purchase price paid, since the transaction is void ab initio for being
in violation of the constitutional prohibition. xFrenzel v. Catito, 406 SCRA 55 (2003).
A. OBLIGATIONS OF SELLER
1. Preserve Subject Matter (Art. 1163)
2. Deliver with Fruits and Accessories (Arts. 1164, 1166, 1495, 1537)
(i) As to Movables (Arts. 1498-1499, 1513-1514; √Dy, Jr. v. CA, 198 SCRA 826)
Where it is stipulated that deliveries must be made to the buyer or his duly authorized
representative named in the contracts, the seller is under obligation to deliver in accordance with
such instructions.. xLagon v. Hooven Comalco Industries, Inc., 349 SCRA 363 (2001).
84
Ocampo v. CA, 233 SCRA 551 (1994).
85
Tating v. Marcella, 519 SCRA 79 (2007); De Leon v. Ong, 611 SCRA 381 (2010).
86
Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001); Engreso v. De La Cruz, 401 SCRA 217 (2003); Ten Forty
Realty and Dev. Corp. v. Cruz, 410 SCRA 484 (2003); Copuyoc v. De Solas, 504 SCRA 176 (2006).
87
Beatingo v. Gasis, 642 SCRA 539 (2011).
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Execution by supposed buyers of a chattel mortgage over subject vehicle in favor of the
financing company does not mean that ownership had been transferred to them, for delivery must
be on the part of the seller. xUnion Motor Corp. v. CA, 361 SCRA 506 (2001).
Neither issuance of an invoice, which is not a document of title xP.T. Cerna Corp. v. CA, 221
SCRA 19 (1993),88 nor of the registration certificate of vehicle xUnion Motor Corp. v. CA, 361
SCRA 506 (2001),89 would constitute constructive delivery.
(1) Registration of Title Is Separate Mode from Execution of Public Instrument – The
recording of the sale with the proper Registry of Deeds and the transfer of the certificate of
title in the name of the buyer are necessary only to bind third parties to the transfer of
ownership. As between the seller and the buyer, the transfer of ownership takes effect upon
the execution of a public instrument conveying the real estate. √Chua v. CA, 401 SCRA 54
(2003).
BUT SEE: Under Art. 1495, seller is obliged to transfer title over the property and deliver the
same to the vendee. √Vive Eagle Land, Inc. v. CA, 444 SCRA 445 (2004).
(2) Customary Steps in Selling Immovables – “Customarily, in the absence of a contrary
agreement, the submission by an individual seller to the buyer of the following papers would
complete a sale of real estate: (1) owner’s duplicate copy of the Torrens title; (2) signed deed
of absolute sale; (3) tax declaration; and (4) latest realty tax receipt. They buyer can retain
the amount for the capital gains tax and pay it upon authority of the seller, or the seller can
pay the tax, depending on the agreement of the parties.” √Chua v. CA, 401 SCRA 54 (2003).
The execution of the notarized deed of sale and the delivery of the owner’s duplicate
copy of the original certificate of title to the buyer is tantamount to constructive delivery of the
object of the sale. Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
e. Constitutum Possessorium (Art. 1500) – A provision in the deed of sale granting to seller a right to
lease the subject matter of the sale is valid: the possession is deemed to be constituted in the vendee
by virtue of this mode of tradition.” xAmigo v. Teves, 96 Phil. 252 (1954).
f. Traditio Brevi Manu – Prior to the sale, petitioners were in possession of the subject property as
lessees. Upon sale to them of the rights, interests and participation as to the ½ portion pro indiviso,
they remained in possession, not in the concept of lessees anymore but as owners now through
symbolic delivery known as traditio brevi manu. xHeirs of Pedro Escanlar v. CA, 281 SCRA 176
(1997).
88
Norkis Distributors v. CA, 193 SCRA 694 (1991).
89
Abuan v. Garcia, 14 SCRA 759 (1965); Santos v. Santos, 366 SCRA 395 (2001).
90
Florendo v. Foz, 20 Phil. 388 (1911); Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159 (1950); Phil. Suburban
Dev. v. Auditor, 63 SCRA 397 (1975).
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4. Transfer Ownership to Vendee Upon Delivery (Arts. 1477, 1478, and 1496)
a. When Buyer Refuses to Accept (Art. 1588)
b. In Case of Express or Implied Reservation (Arts. 1478 and 1503)
7. Expenses of Execution and Registration (Art. 1487), and of Putting Goods in Deliverable Estate
(Art. 1521)
Unless otherwise stipulated: (a) under Art. 1487 the expenses for the registration of the sale should
be shouldered by the vendor xVive Eagle Land, Inc. v. CA, 444 SCRA 445 (2004); and (b) duty to
withhold taxes due on the sale is imposed on seller. xEquitable Realty Dev’t Inc. v. Mayfair Theater,
Inc., 332 SCRA 139 (2000).
Buyer 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. Payment of the capital gains tax, however, is not a pre-requisite to the
transfer of ownership to the buyer. The transfer of ownership takes effect upon the signing and
notarization of the deed of absolute sale.” xChua v. CA, 401 SCRA 54 (2003).
A judgment on a contract of sale that decrees seller’s obligations to execute and deliver the deed
of absolute sale and the certificate of title, does not necessarily include within its terms the obligation to
pay for the expenses in notarizing a deed of sale and in obtaining new certificate of title. xJose
Clavano, Inc. v. HLRB, 378 SCRA 172 (2002).
(iii) CIF Sales √General Foods v. NACOCO, 100 Phil. 337 (1956).
“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. √Behn Meyer & Co. v. Yangco, 38 Phil. 602, 606 (1918).
Under an arrangement “c.i.f. Pacific Coast” (destination), “the vendor is to pay not only the
cost of the goods, but also the freight and insurance expenses, and, as it was judicially interpreted,
this is taken to indicate that the delivery is to be made at the port of destination.” √Pacific
Vegetable Oil Corp. v. Singzon, Supreme Court Advance Decisions, 29 April 1955.
91
Chua Ngo v. Universal Trading Co., Inc., 87 Phil. 331 (1950).
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For a sale to be a “sale or return” or a “sale on approval,” there must be a clear agreement to
either of such effect, otherwise, the provisions of Art. 1502 of Civil Code governing such sales
cannot be invoked by either party to the contract. xIndustrial Textile Manufacturing Co. v. LPJ
Enterprises, Inc., 217 SCRA 322 (1993).
d. Buyer's Right to Inspect Before Acceptance (Arts. 1481 and 1584) Except when carrier
delivers COD.
2. In Case of Immovables
b. Where Sold for a Lump Sum [“A cuerpo cierto or por precio alzado”] (Art. 1542)
In a contract of sale of land in a mass, the specific boundaries stated in the contract must control
over any statement with respect to the area contained within its boundaries. Salinas v. Faustino, 566
SCRA 18 (2008).
In a lump sum sale, when the land delivered to the buyer is exactly as that described in the deed
and covered within the boundaries designated, the difference in actual area (34 versus 10 hectares)
will not authorize the buyer to rescind the contract because the seller has complied with delivering the
subject matter agreed upon. xTeran v. Villanueva, 56 Phil. 677 (1932); this is the rule when evidence
shows that the parties never gave importance to the area of the land in fixing the price (97 versus 60
hectares). xAzarraga v. Gay, 52 Phil. 599 (1928).
Where the parties agreed on a sale at a rate of a certain price per unit of measure and not one
for a lump sum, it is Article 1539 and not Article 1542 which is the applicable law—the buyer is
entitled to the relief afforded to him under Article 1529, that is, either a proportional reduction of the
price or the rescission of the contract. xCebu Winland Dev. Corp. v. Ong Siao Hua, 588 SCRA 120
(2009).
EXCEPT: A buyer of land, when sold in gross or with the description “more or less” or similar words in
designating quantity covers only a reasonable excess of deficiency. In the case at bar an
area of “644 square meters more” is not reasonable excess or deficiency, to be deemed
included in the deed of sale. xRoble v. Arbasa, 362 SCRA 69 (2001);√Rudolf Lietz, Inc. v.
CA, 478 SCRA 451 (2005).93
EXCEPTION TO EXCEPTION: When buyer, who has been occupying the land for two years as lessee,
actually is deemed to take risk on the actual size of the property bought at lump sum.
xGarcia v. Velasco, 72 Phil. 248 (1941).
92
Goyena v. Tambunting, 1 Phil. 490 (1902); Santa Ana v. Hernandez, 18 SCRA 973 (1966).
93
Asiain v. Jalandoni, 45 Phil 296 (1923); Balantakbo v. CA, 249 SCRA 323 (1995); Esguerra v. Trinidad, 518 SCRA 186 (2007); Del
Prado v. Caballero, 614 SCRA 102 (2010).
94
Pudadera v. Magallanes, 633 SCRA 332 (2010).
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(a) When two different titles are issued over the same registered land, the buyer who claims under a
title that was first issued shall be preferred. xLiao v. CA, 323 SCRA 430 (2000);
(b) Invoking the rules on double sales and “priority in time” under Art. 1544 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 registered under the
Torrens system, because:
of the “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;” and
the Torrens system rule that formal registration proceedings undertaken on the property and the
subsequent issuance of a title over the land had under the Torrens system had the legal effect of
cleansing title on the property of all liens and claims which were not annotated therein .
√Naawan Community Rural Bank, Inc. v. CA, 395 SCRA 43 (2003).95
BUT SEE: √ Naval v. CA, 483 SCRA 102 (2006).
a. M AIN RULE UNDER ART. 1544: PRIOR TEMPORE, PRIOR JURE. √Carbonell v. CA, 69 SCRA 99
(1976).96
3. Requisites for Double Sale: √Cheng v. Genato, 300 SCRA 722 (1998).97
a. There Must Be Two Different Valid Sales: Article 1544 does not apply where:
There is only one valid sale, while the other sale over the same property is void. Fudot v.
Cattleya Land, Inc., 533 SCRA 350 (2007);98 or
Where one of the contract is a contract to sell. √San Lorenzo Dev. Corp. v. CA, 449 SCRA 99
(2005).99
When the seller sold the same properties to two buyers, first to the respondent and then to
Viloria on two separate occasions, the second sale was not void for the sole reason that petitioner
had previously sold the same properties to respondent. This case involves a double sale as the
disputed properties were sold validly on two separate occasions by the same seller to the two
different buyers in good faith. De Leon v. Ong, 611 SCRA 381, 388 (2010).
(1) Doctrine on Conditional Sales/Contracts to Sell and Adverse Claims: √Mendoza v. Kalaw,
42 Phil. 236 (1921); √Adalin v. CA, 280 SCRA 536 (1997).
The rules on double sales under Art. 1544 are not applicable to contract to sell, because of the
circumstances that must concur in order for the provisions to Art. 1544 on double sales to apply,
namely that there must be a valid sales transactions, and buyers must be at odds over the rightful
ownership of the subject matter who must have bought from the very same seller, are lacking in a
contract to sell for neither a transfer of ownership nor a sales transaction has been consummated,
and such contract is binding only upon the fulfillment or non-fulfillment of an event. Nevertheless,
the governing principle of Art. 1544 should apply, mainly the governing principle of primus
tempore,portior jure (first in time, stronger in right). √Cheng v. Genato, 300 SCRA 722 (1998).
b. Registration Must Always Be in Good Faith – In cases of double sales of immovables, what finds
relevance and materiality is not whether or not the second buyer was a buyer in good faith or that
he was first to register, 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. xMartinez v. CA, 358
SCRA 38 (2001);103 this is so because the defense of indefeasibility of a Torrens title does not
extend to a transferee who takes the certificate of title in bad faith. xOcceña v. Esponilla, 431 SCRA
116 (2004).
c. Knowledge of First Buyer of the Second Sale Does Not Amount to Registration in Favor of
the Second Buyer
Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights
except where the second buyer 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 priced exacted by Article
1544 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.” xUraca v. CA, 278 SCRA
702 (1997).104
100
Ong v. Olasiman, 485 SCRA 464 (2006).
101
Gallardo v. Gallardo, 46 O.G. No. 11 p. 5568; Sigaya v. Mayuga, 467 SCRA 341, 357 (2005).
102
Ulep v. CA, 472 SCRA 241 (2005).
103
Blanco v. Rivera, 488 SCRA 148 (2006); Gabriel v. Mabanta, 399 SCRA 573 (2003); De la Cena v. Briones, 508 SCRA 62 (2006);
Tanglao v. Parungao, 535 SCRA 123 (2007); Bernardez v. CA, 533 SCRA 451 (2007); Orduña v. Fuentebella, 622 SCRA 146 (2010);
Estate of Margarita D. Cabacungan v. Laigo, 655 SCRA 366 (2011).
104
Cruz v. Cabana, 129 SCRA 656 (1984); Gatmaitan v. CA, 200 SCRA 37 (1991); Vda. de Jomoc v. CA, 200 SCRA 74 (1991); Bucad
v. CA, 216 SCRA 423 (1992); Berico v. CA, 225 SCRA 469 (1993); Bautista v. CA, 322 SCRA 294 (2000); Bautista v. CA, 322 SCRA
294 (2000); Ulep v. CA, 472 SCRA 241 (2005); Escueta v. Lim, 512 SCRA 411 (2007); Lumbres v. Tablada, Jr., 516 SCRA 575 (2007);
Fudot v. Cattleya Land, Inc., 533 SCRA 350 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007).
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In a situation where a party has actual knowledge of the claimant’s actual, open and notorious
possession of a disputed property at the time of registration, the actual notice and knowledge are
equivalent to registration, because to hold otherwise would be to tolerate fraud and the Torrens
system cannot be used to shield fraud – while certificates of title are indefeasible, unassailable and
binding against the whole world, they merely confirm or record title already existing and vested.
√Consolidated Rural Bank (Cagayan Valley), Inc. v. CA, 448 SCRA 347 (2005).
In double sales, the first buyer always has priority rights over subsequent buyers of the same
property. The good faith of the first buyer remains all throughout despite his subsequent acquisition
of knowledge of the subsequent sale. Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
d. Registration in Good Faith Always Pre-empts Possession in Good Faith – 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.
xTañedo v. CA, 252 SCRA 80 (1996).105
The registration of a sale after the annotation of the notice of lis pendens does not obliterate the
effects of delivery and possession in good faith. The rules on constructive notice upon registration
provided for under Section 52 of the Property Registration Decree (P.D. No. 1529) operate only
from the time of the registration of the notice of lis pendens which in this case was effected only
after the time the sale in favor of the second buyer had long been consummated by delivery of the
subject matter. √San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005).
a. Must Have Paid Price in Full – A purchaser is good faith is one who buys property 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. Tanglao v. Parungao, 535 SCRA 123 (2007)107
Under Article 1544, mere registration is not enough to acquire a new title. Good faith must
concur. Clearly, when the buyer has not yet fully paid the purchase price, and as long as seller
remains unpaid, the buyer cannot feign good faith. xPortic v. Cristobal, 546 SCRA 577 (2005).
BUT SEE: In the determination of whether or not the buyer is in good faith, the point in time to be
considered is the moment when the parties actually entered into the contract of sale. Estate of Lino
Olaquer v. Ongjoco, 563 SCRA 373 (2008).
b. Burden of Proof – The burden of proving the status of a purchaser in good faith lies upon him
who asserts that status. It is not sufficient to invoke the ordinary presumption of good faith, that is,
that everyone is presumed to have acted in good faith, since the good faith that is here essential is
integral with the very status that must be established. xTanglao v. Parungao, 535 SCRA 123
(2007).108
As a general rule, the question of whether or not a person is a purchaser in good faith is a
factual matter that will not be delved into by this Court, since only questions of law may be raised
in petitions for review. Tio v. Abayata, 556 SCRA 175 (2008).
BUT SEE: It is anxiomatic that good faith is always presumed in the absence of any direct
evidence of bad faith. xSantiago v. CA, 247 SCRA 336 (1995).
105
Liao v. CA, 323 SCRA 430 (2000); Talusan v. Tayag, 356 SCRA 263 (2001); Dauz v. Exchavez, 533 SCRA 637 (2007).
106
Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159 (1950); Navera v. CA, 184 SCRA 584 (1990).
107
Agricultural and Home Extension Dev. v. CA., 213 SCRA 536 (1992); Veloso v. CA, 260 SCRA 593 (1996); Balatbat v. CA, 261
SCRA 128 (1996); Mathay v. CA, 295 SCRA 556 (1998); Diaz-Duarte v. Ong, 298 SCRA 388 (1998); Liao v. CA, 323 SCRA 430 (2000);
Tanongon v. Samson, 382 SCRA 130 (2002); Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002);
Aguirre v. CA, 421 SCRA 310 (2004); Galvez v. CA, 485 SCRA 346 (2006); Chua v. Soriano, 521 SCRA 68 (2007); Raymundo v.
Bandong, 526 SCRA 514 (2007); De Leon v. Ong, 611 SCRA 381 (2010); Kings Properties Corp. v. Galido, 606 SCRA 137 (2009); The
Heirs of Romana Saves v. The Heirs of Escolastico Saves, 632 SCRA 236 (2010).
108
Tsai v. CA, 366 SCRA 324 (2001); Aguirre v. CA, 421 SCRA 310 (2004); Raymundo v. Bandong, 526 SCRA 514 (2007); Eagle
Realty Corp. V. Republic, 557 SCRA 77 (2008); Pudadera v. Magallanes, 633 SCRA 332 (2010).
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c. Instances When No Good Faith:
(1) Being In Business on Realty – A mortgagee who eventually ended buying the property at
the public auction, cannot claim to be a buyer in good faith when his business in the
constructing and selling townhouses and extending credit to the public, including real estate
loans; for he 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.
xExpresscredit Financing Corp. v. Velasco, 473 SCRA 570 (2005).109
A banking institution is expected to exercise due diligence before entering into a
mortgage contract, and the ascertainment of the statute or condition of a proper offered to it
as security for a loan must be a standard and indispensable part of its operations; and it
cannot simply rely upon reviewing the title to the property offered for mortgage. Tio v.
Abayata, 556 SCRA 175 (2008).110
(2) Close Relationship – 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. The buyers “are deemed to have constructive knowledge by virtue
of their relationship” to their sellers. xPilapil v. CA, 250 SCRA 566 (1995).
(3) Gross Inadequacy of Price – Mere inadequacy of price is not ipso facto a badge of lack of
good faith—to be so, the price must be grossly inadequate or shocking to the conscience
such that the mind revolts against it and such that a reasonable man would neither directly or
indirectly be likely to consent to it. Tio v. Abayata, 556 SCRA 175 (2008).
(4) Obligation to Investigate or To Follow Leads – 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, such as —
A buyer of a registered land would be in bad faith when he purchases without asking to see the
owner’s copy of the title and/or without visiting the land where he would then have seen first buyer
111
occupying the same. xSantiago v. CA, 247 SCRA 336 (1995).
When there are occupants to the land being bought, since it is the common practice in the real
estate industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent
112
purchaser usually takes. xMartinez v. CA, 358 SCRA 38 (2001).
Any person engaged in business would be wary of buying from a company that is closing shop,
because it may be dissipating its assets to defraud creditors. Such buyer is bound to inquire whether
the owners had unsettled obligations encumbrance that could burden the property. xSamson v. CA,
113
238 SCRA 397 (1994).
The property was titled and transferred with undue haste within a short period of time, “plus the fact
that the subject property is a vast tract of land in a prime location, should have, at the very least,
triggered petitioner’s curiosity.” Eagle Realty Corp v. Republic, 557 SCRA 77, 94 (2008).
(5) Land in Adverse Possession – Buyer who could not have failed to know or discover that the
land sold to him was in the adverse possession of another is a buyer in bad faith. xHeirs of
Ramon Durano, Sr. v. Uy, 344 SCRA 238 (2000).114
(6) Existence of Lis Pendens or Adverse Claim – Registration of an adverse claim places any
subsequent buyer of the registered land in bad faith. Kings Properties Corp. v. Galido, 606
SCRA 137 (2009).
Settled is the rule that one who deals with property with a notice of lis pendens, even
when at the time of sale the annotation was cancelled but there was a pending appeal,
cannot invoke the right of a purchaser in good faith. A purchaser cannot close his eyes to
facts which should put a reasonable man on guard and claim that he acted in the belief that
there was no defect in the title of the seller. xPo Lam v. CA, 316 SCRA 721 (1999).
EXCEPT: When knowledge of lis pendens was acquired at the time there was order to have it
cancelled. xPo Lam v. CA, 347 SCRA 86 (2000).115
109
Adriano v. Pangilinan, 373 SCRA 544 (2002); Lloyd’s Enterprises and Credit Corp. v. Dolleton, 555 SCRA 142 (2008); Eagle Realty
Corp v. Republic, 557 SCRA 77 (2008); Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
110
Agag v. Alpha Financing Corp., 407 SCRA 602 (2003); Bank of Commerce v. San Pablo, Jr., 522 SCRA 713 (2007); Lloyd’s
Enterprises and Credit Corp. v. Dolleton, 555 SCRA 142 (2008);Ty v. Queen’s Row Subdivision, Inc., 607 SCRA 324 (2009).
111
R.R. Paredes v. Calilung, 517 SCRA 369 (2007); Chua v. Soriano, 521 SCRA 68 (2007).
112
Mathay v. CA, 295 SCRA 556 (1998); Republic v. De Guzman, 326 SCRA 267 (2000); Heirs of Ramon Durano, Sr. v. Uy, 344 SCRA
238 (2000); Heirs of Celestial v. Heirs of Celestial, 408 SCRA 291 (2003); Erasusta, Jr. v. CA, 495 SCRA 319 (2006); De la Cena v.
Briones, 508 SCRA 62 (2006); Tanglao v. Parungao, 535 SCRA 123, 132 (2007).
113
Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
114
Modina v. CA, 317 SCRA 696, 706 (1999); Republic v. De Guzman, 326 SCRA 267 (2000); Martinez v. CA, 358 SCRA 38 (2001);
Heirs of Trinidad de Leon Vda. De Roxas v. CA, 422 SCRA 101 (2004); Occeñna v. Esponilla, 431 SCRA 116 (2004); PNB v. Heirs of
Estanislao Militar, 494 SCRA 308 (2006); Raymundo v. Bandong, 526 SCRA 514 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007);
Tio v. Abayata, 556 SCRA 175 (2008); Orduña v. Fuentebella, 622 SCRA 146 (2010); Deanon v. Mag-abo, 622 SCRA 180 (2010); The
Heirs of Romana Saves v. The Heirs of Escolastico Saves, 632 SCRA 236 (2010).
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(7) Annotation of Lien in Settlement of Estate – An annotation placed on new certificates of
title issued pursuant to the distribution and partition of a decedent’s real properties is a
warning to third persons on the possible interest of excluded heirs or unpaid creditors in
these properties—where a buyer purchases the real property despite the annotation, he must
be ready for the possibility that the title be subject to the rights of excluded parties. Tan v.
Benolirao, 604 SCRA 36 (2009).
(8) Banks Are Vested with Public Interest and Obligation to Exercise Extraordinary
Diligence – One of the protections afforded by P.D. 957 to buyers is the right to have her
contract to sell registered with the Register of Deeds in order to make it binding on third
parties. Nonetheless, despite the non-registration of the contract to sell, the mortgagee bank
cannot be considered, under the circumstances, an innocent purchaser for value of the lot
when it accepted the latter (together with other assigned properties) as payment for the
mortgagor developer’s obligation—the bank was well aware that the assigned properties
were subdivision lots and therefore within the purview of P.D. 957. Luzon Dev. Bank v.
Enriquez, 639 SCRA 332 (2011).
6. When Subject of Sale Is Unregistered Land √Naawan Community Rural Bank v. CA, 395 SCRA
43 (2003).
The rules in double sale 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. Thus, if the sale is not
registered, it is binding only between the seller and the buyer but it does not affect innocent third
persons. √Abrigo v. De Vera, 432 SCRA 544 (2004).
When first sale is over unregistered land and the second sale is when it is registered, the rules on
double sale do not apply. √Dagupan Trading Co. v. Macam, 14 SCRA 179 (1965).
Article 1544 is 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 Sec. 35, Rule 39 of the Revised Rules of Court on execution sale [now Sec. 33, Rule 39,
1997 Rules of Civil Procedure)]. √Carumba v. CA, 31 SCRA 558 (1970).
Under Act 3344, registration of instruments affecting unregistered lands is “without prejudice to a
third party with a better right,” which means that mere registration does not give the buyer any right
over the land if the seller was not anymore the owner of the land having previously sold the same to
somebody else even if the earlier sale was unrecorded. The rules on double sale under Art. 1544 has
no application to land no registered under the Torrens system.√Acabal v. Acabal, 454 SCRA 555
(2005).116
D. OBLIGATIONS OF BUYER
1. Pay the Price (Art. 1582)
When seller cannot show title to the subject matter, then he cannot compel the buyer to pay the
price. xHeirs of Severina San Miguel v. CA, 364 SCRA 523 (2001).
Mere sending of a letter by the buyer expressing the intention to pay without the accompanying
payment is not considered a valid tender of payment and consignation of the amount due are
essential in order to extinguish the obligation to pay and oblige the seller to convey title. xTorcuator v.
Bernabe, 459 SCRA 439 (2005).
Unless the parties to a sale have agreed to the payment of the purchase price to any other party,
then its payment to be effective must be made to the seller in accordance with Article 1240 which
provides that “Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.” xMontecillo v.
Reynes, 385 SCRA 244 (2002).
115
Pudadera v. Magallanes, 633 SCRA 332 (2010).
116
Hanopol v. Pilapil, 7 SCRA 452 (1963); Radiowealth Finance Co. v. Palileo, 197 SCRA 245 (1991); Spouses Honorio Santiago v.
CA, 247 SCRA 336 (1995); Bayoca v. Nogales, 340 SCRA 154 (2000); Fidel v. CA, 559 SCRA 186 (2008); Daclag v. Macahilig, 560
SCRA 137 (2008); Amodia Vda. De Melencion v. CA, 534 SCRA 62, 82 (2007); Fidel v. CA, 559 SCRA 186 (2008).
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VII. DOCUMENTS OF TITLE (Arts. 1507-1520)
1. Definition (Art. 1636)
1. Effect of Sale Where Seller Not Owner at Time of Delivery (Art. 1505; √Paulmitan v. CA, 215
SCRA 866 [1992]).
In sale, it is essential that the seller is the owner of the property he is selling. The principal
obligation of a seller is “to transfer the ownership of” the property sold (Art. 1458). This law stems
from the principle that nobody can dispose of that which does not belong to him: NEMO DAT
QUOD NON HABET. Noel v. CA, 240 SCRA 78 (1995).117
Although a situation (where the sellers were no longer owners) does not appear to be one of the
void contracts enumerated in Art. 1409 of Civil Code, and under Art. 1402 Civil Code itself
recognizes a sale where the goods are to be “acquired x x x by the seller after the perfection of the
contract of sale” clearly implying that a sale is possible even if the seller was not the owner at the
time of sale, provided he acquires title to the property later on, but when delivery of ownership is no
longer possible, the sale should be considered void, and consequently, the right to repurchase
provided therein would also be void Nool v. CA, 276 SCRA 149 (1997).
If one buys the land of another, to which the seller is supposed to have a good title, and in
consequence of facts unknown alike to both parties, the seller has in fact no title at all, equity will
cancel the sale and cause the purchase money to be restored to the buyer, putting both parties in
status quo. DBP v. CA, 249 SCRA 331 (1995).
117
Azcona v. Reyes, 59 Phil. 446 (1934); Coronel v. Ona, 33 Phil. 456 (1916).
- 29 -
steps into the shoes of the vendor as co-owner. xPanganiban v. Oamil, 542 SCRA 166 (2008);118
except when the intention of the purchase was clearly the property itself and not just the spiritual
share. √Mindanao v. Yap, 13 SCRA 190 (1965).
An agreement that purports a specific portion of an un-partitioned co-owned property is not void;
it shall effectively transfer the seller’s ideal share in the co-ownership. Heirs of the Late Spouses
Aurelio and Esperanza Balite v. Lim, 446 SCRA 54 (2004).119
In which case, the proper action is not for nullification of sale, or for the recovery of possession
of the property owned in common from the other co-owners, but for division or partition of the entire
property. xTomas Claudio Memorial College, Inc. v. CA, 316 SCRA 502 (1999).120
A co-owner who sells one of the two lands owned in common with another co-owner, and does
not turn-over one-half of the proceeds of the sale to the other co-owner, the latter may by law and
equity lay exclusive claim to the remaining parcel of land. xImperial v. CA, 259 SCRA 65 (1996).
a. Estoppel on True Owner (Art. 1434) √Bucton v. Gabar, 55 SCRA 499 (1974).
The owner of the goods who has been unlawfully deprived of it may recover it even from a
purchaser in good faith. Thus, the purchaser of property which has been stolen from the owner has
been held to acquire no title to it even though he purchased for value and in good faith. Exception is
when the true owner is estopped. xFrancisco v. Chemical Bulk Carriers, Inc., 657 SCRA 355
(2011).
3. Sale by One Having Voidable Title (Art. 1506, as an exception to Art. 559)
Whenever there is an underlying sale which grants to the culprit-buyer a voidable title, even when
this is accompanied by the criminal act of estafa or swindling, Art. 1506 would grant to the buyer in
good faith a better title as against the original owner even though the latter may be classified to have
been “unlawfully deprived” of the subject matter under Art. 559. √Tagatac v. Jimenez, 53 O.G. 3792
(1957); √EDCA Publishing v. Santos, 184 SCRA 614 (1990).
118
Estoque v. Pajimula, 24 SCRA 59 (1968); Aguirre v. CA, 421 SCRA 310 (2004); Acabal v. Acabal, 454 SCRA 555 (2005); Barcenas
v. Tomas, 454 SCRA 593 (2005).
119
Almendra v. IAC, 204 SCRA 142 (1991); Fernandez v. Fernandez, 363 SCRA 811 (2001); Aguirre v. CA, 421 SCRA 310 (2004);
Santos v. Lumbao, 519 SCRA 408 (2007); Republic v. Heirs of Francisca Dignos-Sorono, 549 SCRA 58 (2008).
120
Heirs of Romana Ingjug-Tiro v. Casals, 363 SCRA 435 (2001); Aguirre v. CA, 421 SCRA 310 (2004).
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When owner did not voluntarily deliver possession of the car, and in effect it was stolen from him,
then one who buys the car even in good faith from the thief will lose the car to the owner who is
deemed to have been unlawfully deprived. √Aznar v. Yapdiangco, 13 SCRA 486 (1965).
In all other cases of unlawful deprivation done through estafa, the original owner recovers even
from the buyer in good faith. √Cruz v. Pahati, 98 Phil. 788 (1956). [CLV: Decision showed that
second buyer, or current possessor could not claim good faith because of erasures in the
covering documents presented by his seller]
Owner of diamond ring may recover possession of the same from pawnshop where the owner’s
agent had pledged it without authority to do so; Article 559 applies and the defense that the
pawnshop acquired possession without notice of any defect of the pledgor-agent is unavailing.
√Dizon v. Suntay, 47 SCRA 160 (1972).121 [In those cases possessor is a merchant and only
has a pledge in his favor].
A. ON PART OF SELLER
121
Valera v. Matute, 9 Phil. 479 (1908); Arenas v. Raymundo, 19 Phi. 47 (1911).
122
Song Fo & Co. v. Oria, 33 Phil. 3 (1915); Lawyer's Coop v. Narciso, 55 O.G. 3313).
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Seller in possession of the goods may sell them at buyer's risk. xKatigbak v. CA, 4 SCRA 243
(1962).
f. Remedy of Foreclosure
Barring effect would cover a third-party mortgage, when it was the chattel mortgage that was
first foreclosed. √Ridad v. Filipinas Investment, 120 SCRA 246 (1983).
When the seller assigns his credit to another person, the latter is likewise bound by the same
law. √Zayas v. Luneta Motors, 117 SCRA 726 (1982).125
(i) “Barring” Effects of Foreclosure – Filing of the action of replevin in order to foreclose on the
chattel mortgage does not produce the barring effect under the Recto Law; for it is the fact of
foreclosure and actual sale of the mortgaged chattel that bar further recovery by the seller of
any balance on the buyer’s outstanding obligation not satisfied by the sale. The voluntary
payment of the installment by the buyer-mortgagor is valid and not recoverable in spite the
restrictive provisions of Art. 1484(3). √Northern Motors v. Sapinoso, 33 SCRA 356 (1970).
126
Foreclosure on the chattel mortgage prevents further action on the supporting real estate
mortgage, whether the chattel mortgage is first foreclosed √Cruz v. Filipinas Investment &
Finance Corp., 23 SCRA 791 (1968);127 and vice versa when the real estate mortgage is first
foreclosed. √Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).
All amounts barred from recovery. √Macondray & Co. v. Eustaquio, 64 Phil. 446 (1937).
(ii) Rule on “Perverse Buyer”. √Filipinas Investment & Finance Corp. v. Ridad, 30 SCRA 564
(1969).
123
De la Cruz v. Asian Consumer, 214 SCRA 103 (1992); Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).
124
Southern Motors v. Moscoso, 2 SCRA 168 (1961); Industrial Finance Corp. v. Ramirez, 77 SCRA 152 (1977); Rosario v. PCI
Leasing and Finance, Inc., 474 SCRA 500 (2005).
125
Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).
126
Manila Motor Co. v. Fernandez, 99 Phil. 782 (1956); Magna Financial Services Group, Inc. v. Colarina, 477 SCRA 245 (2005).
127
Pascual v. Universal Motors Corp., 61 SCRA 121 (1974).
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from passing to the vendee until and unless the price is fully paid. xElisco Tool Manufacturing
Corp. v. CA, 307 SCRA 731 (1999).128
Where a lease agreement over equipment is without an express option to purchase, but
nevertheless when a final demand is given prior to suit, the demand letter indicates clearly it was
within the option of the lessee to fully pay the balance of the unpaid rentals and would be able to
keep the equipment, then the real contract between the parties was a sale of movable on
installment disguised as a lease agreement. √PCI Leasing and Finance, Inc. v. Giraffe-X
Creative Imaging, Inc., 527 SCRA 405 (2007).
4. IN CASE OF IMMOVABLES:
a . Anticipatory Breach (Art. 1591) √Legarda v. Saldaña, 55 SCRA 324 (1974).
b. Sales of Subdivision Lots and Condominium Units (Secs. 23 and 24, P.D. 957)
P.D.957 “was issued in the wake of numerous reports that many real estate subdivision
owners, developers, operators and/or sellers have reneged on their representations and
obligations to provide and maintain properly subdivision roads, drainage, sewerage, water
systems, lighting systems and other basic requirements or the health and safety of home and lot
buyers. It was designed to stem the tide of fraudulent manipulations perpetrated by unscrupulous
subdivision and condominium sellers free from liens and encumbrances.” xCasa Filipinas Realty
Corp. v. Office of the President, 241 SCRA 165 (1995).
Section 20 of P.D. 957 directs every owner and developer of real property to provide the
necessary facilities, improvements, infrastructure and other forms of development, failure to carry
out which is sufficient cause for the buyer to suspend payment, and any sums of money already
paid shall not be forfeited. xTamayo v. Huang, 480 SCRA 156 (2006).
In case the developer of a subdivision or condominium fails in its obligation under Section
20, Section 23 gives the buyer:
the option to demand reimbursement of the total amount paid, or to wait for further development of
the subdivision, and when the buyer opts for the latter alternative, he may suspend payment of the
installments until such time that the owner or developer has fulfilled its obligations. xTamayo v.
Huang, 480 SCRA 156 (2006);
buyer required only to give due notice to the owner or developer of the buyer’s intention to suspend
payment. xZamora Realty and Dev. Corp. v. Office of the President, 506 SCRA 591 (2006);
Sec. 23 does not require that a notice be given first by the buyer to the seller before a demand for
refund can be made as the notice and demand can be made in the same letter or communication.
xCasa Filipinas Realty Corp v. Office of the President, 241 SCRA 165 (1995);
Option granted by law is with buyer and not the developer/seller. xRelucio v. Brillante-Garfin, 187
SCRA 405 (1990).
“Buyer” under P.D. 957 would include one who acquires for a valuable consideration a
condominium unit by way of assignment by the condominium project owner in payment of its
indebtedness for contractor’s fee. xAMA Computer College, Inc. v. Factora, 378 SCRA 121
(2002).
Buyers of condominium units would be justified in suspending payments, when the
developer-seller fails to give them a copy of the Contract to Sell despite repeated demands.
xGold Loop Properties, Inc. v. CA, 350 SCRA 371 (2001); or when they failed to provide for the
amenities mandated under their development plan. Fedman Dev. Corp. v. Agcaoili, 656 SCRA
354 (2011). However, when the Reservation Agreement provides that the buyer shall be entitled
to a Contract to Sell only upon its payment of at least 30% of the total contract price, the non-
happening yet of that condition does not render the seller in default as to warrant the buyer the
right to rescind the sale and demand a refund. G.G. Sportwear Mfg. Corp. v. World Class
Properties, Inc., 614 SCRA 75 (2010).
Nothing in P.D. 957 provides for the nullification of a contract to sell in the event the seller, at
the time the contract was entered into, did not possess a certificate of registration or a license to
sell, sale being a consensual contract. Co Chien v. Sta. Lucia Realty, 513 SCRA 570 (2007).129
The dissatisfaction of the buyer under a Contract of Sale as to the completion date of the
project does not itself constitute substantial breach as to authorize the buyer to rescind the
contract and ask for refund of the amounts paid to the seller. G.G. Sportwear Mfg. Corp. v.
World Class Properties, Inc., 614 SCRA 75 (2010).
Under P.D. No. 957, a buyer cause of action against the developer for failure to develop
ripens only when the developer fails to complete the project on the lapse of the completion period
stated on the sale contract or the developer’s Licenses to Sell. Any premature demand prior to
128
Vda. de Jose v. Barrueco, 67 Phil. 191 (1939); U.S. Commercial v. Halili, 93 Phil. 271 (1953); H.E. Heacock v. Bantal
Manufacturing, 66 Phil. 245 (1938); Manila Gas Corp. v. Calupita, 66 Phil. 747 (1938); Filinvest Credit Corp. v. CA, 178 SCRA 188
(1989).
129
Cantemplate v. CRS Realty Dev. Corp., 587 SCRA 492 (2009).
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the indicated completion date would be premature. G.G. Sportwear Mfg. Corp. v. World Class
Properties, Inc., 614 SCRA 75 (2010).
The lack of Certificate of Registration or the License to Sell of the developer-seller merely
subjects the developer to administrative sanctions, but do not render the contracts to sell entered
into on the project null and void. G.G. Sportwear Mfg. Corp. v. World Class Properties, Inc., 614
SCRA 75 (2010).
Since the lots are involved in litigation and there is a notice of lis pendens at the back of the
titles involved, the subdivision developer have to be given a reasonable period of time to work on
the adverse claims and deliver clean titles to the buyer, and should the former fail to deliver clean
titles at the end of the period, it ought to reimburse the buyers not only for the purchase price of
the subdivision lots sold to them but also the incremental value arising from the appreciation of
the lots. Cantemprate v. CRS Realty Dev. Corp., 587 SCRA 492 (2009).
a. “Role” of Maceda Law – Maceda Law’s declared policy is to protect buyers of real estate on
installment basis against onerous and oppressive conditions, and seeks to address the acute
housing shortage problem in our country that has prompted thousands of middle and lower class
buyers of houses, lots and condominium units to enter into all sorts of contracts with private
housing developers involving installment schemes. Active Realty & Dev. Corp. Daroya, 382 SCRA
152 (2002).130
Maceda Law recognizes in conditional sales of all kinds of real estate seller’s right to cancel the
contract upon non-payment of an installment by the buyer, which is simply an event that prevents
the obligation of the vendor to convey title from acquiring binding force. Pagtulunan v. Dela Cruz
Vda. De Manzano, 533 SCRA 242 (2008).131
b. Transactions Covered
The formal requirements of rescission under the Maceda Law apply even to contracts entered
into prior to its effectivity. xSiska Dev. Corp. v. Office of the President, 231 SCRA 674 (1994).132
BUT SEE xPeople’s Industrial and Commercial Corp. v. CA, 281 SCRA 206 (1997).
Maceda Law finds no application to a contract to sell where the suspensive condition has not
been fulfilled, because said Law presuppose the existence of a valid and effective contract to sell a
condominium. [?] xMortel v. KASSCO, Inc., 348 SCRA 391, 398 (2000).133
Maceda Law makes no distinctions between “option” and “sale” which under P.D. 957 also
includes “an exchange or attempt to sell, an option of sale or purchase, a solicitation of a sale or an
offer to sell directly,” and the all-embracing definition virtually includes all transactions concerning
land and housing acquisition, including reservation agreements. xRealty Exchange Venture Corp.
v. Sendino, 233 SCRA 665 (1994).
Maceda Law has no application to protect the developer or one who succeeds the developer.
xLagandaon v. CA, 290 SCRA 463 (1998).
The sale of large tracts of land (69,028 square meters) do not constitute residential real estate
within the contemplation of the Maceda Law. xGarcia v. CA, 619 SCRA 280 (2010).
c. How to Determine Years of Installments: √Jestra Dev. and Management Corp. v. Pacifico, 513
SCRA 413 (2007).
d. How Cancellation of Contract Can Be Effected – The cancellation of the contract under the
Maceda Law must follow the following steps:
First, the seller should extend the buyer a grace period of at least sixty (60) days from the due
date of the installments.
Second, at the end of the grace period, the seller shall furnish the buyer with a notarial notice
of cancellation or demand for rescission, effective thirty (30) days from the buyer’s receipt
130
OIympia Housing Inc. v. Panasiatic Travel Corp., 395 SCRA 298 (2003); Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA
413 (2007).
131
Leaño v. CA, 369 SCRA 36 (2001); Cordero v. F.S. Management & Dev. Corp., 506 SCRA 451 (2006).
132
Eugenio v. Executive Secretary Franklin M. Drilon, 252 SCRA 106 (1996); PNB v. Office of the President, 252 SCRA 620 (1996).
133
Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006).
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thereof; a mere notice or letter, short of a notarial act, would not suffice. √McLaughlin v. CA,
144 SCRA 693 (1986).134
Third, for contracts covering more than two years of payments, there must be return to the
buyer of the cash surrender value. xVilldara, Jr. v. Zabala, 545 SCRA 325 (2008).135
The additional formality of a demand on [the seller’s] part for rescission by notarial act would
appear, in the premises, to be merely circuitous and consequently superfluous” since the seller
therein filed an action for annulment of contract, which is a kindred concept of rescission by
notarial act. xLayug v. IAC, 167 SCRA 627 (1988).
A decision rendered in an ejectment case operated as the required notice of cancellation under
the Maceda Law; but as the buyer was not given the cash surrender value of the payments she
made, there was still no actual cancellation of the contract. xLeaño v. CA, 369 SCRA 36 (2001).
A formal letter demand upon buyer to vacate the premises is not the same as the notice of
cancellation or demand for rescission by a notarial act required by R.A. No. 6552. Evidently, the
case of unlawful detainer filed by petitioner does not exempt him from complying with the said
requirement. xPagtulunan v. Dela Cruz Vda. De Manzano, 533 SCRA 242 (2008).
Where the buyers under a contract to sell offers to pay the last installment a year and a half
after the stipulated date, that was beyond the sixty-day grace period under Section 4 of the
Maceda Law. The buyers cannot use the second sentence of Section 4 of the Maceda Law
against the sellers’ alleged failure to give an effective notice of cancellation or demand for
rescission because the sellers merely sent the notice to the address supplied by the buyers in the
Contract to Sell. √Garcia v. CA, 619 SCRA 280 (2010).
B. ON PART OF BUYER
1. In case of Movables (Arts. 1598-1599)
134
Luzon Brokerage v. Maritime Bldg., 86 SCRA 305 (1978); Luzon Brokerage v. Maritime Bldg., 43 SCRA 93 (1972); Fabrigas v. San
Francisco del Monte, 475 SCRA 247 (2005).
135
Active Realty & Dev. Corp. v. Daroya, 382 SCRA 152 (2002); Olympia Housing v. Panasiatic Travel Corp., 395 SCRA 298 (2003);
Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA 413 (2007).
136
Caridad Estates, Inc. v. Santero, 71 Phil. 114 (1940); Albea v. Inquimboy, 86 Phil. 477 (1950); Manuel v. Rodriguez, 109 Phil. 1
(1960); Joseph & Sons Enterprises, Inc. v. CA, 143 SCRA 663 (1986) Gimenez v. CA, 195 SCRA 205 (1991); Jacinto v. Kaparaz, 209
SCRA 246 (1992); Odyssey Park, Inc. v. CA, 280 SCRA 253 (1997); Rillo v. CA, 274 SCRA 461 (1997); Platinum Plans Phil., Inc. v.
Cucueco, 488 SCRA 156 (2006); Tan v. Benolirao, 604 SCRA 36 (2009); Garcia v. CA, 619 SCRA 280 (2010).
137
Escueta v. Pando, 76 Phil. 256 (1946).
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XI. REMEDY OF RESCISSION IN SALES CONTRACTS COVERING
IMMOVABLES: CONTRACT OF SALE versus CONTRACT TO SELL
138
Reiterated in Congregation of the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008); Heirs of Antonio F. Bernabe v. CA,
559 SCRA 53 (2008); Congregation of the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008).
139
Iringan v. CA, 366 SCRA 41 (2001).
140
Almira v. CA, 399 SCRA 351 (2003).
141
Ocampo v. CA, 233 SCRA 551 (1994); Co v. CA, 312 SCRA 528 (1999).
142
Central Philippine University v. CA, 246 SCRA 511 (1995); Romeo v. CA, 250 SCRA 223 (1995); Cheng v. Genato, 300 SCRA 722
(1998); Uy v. CA, 314 SCRA 63 (1999).
143
Ocejo, Perez & Co. v. International Banking Corp. 37 Phil. 631 (1918); Republic v. Hospital de San Juan de Dios, 84 Phil. 820
(1949); De la Rama Steamship Co. v. Tan, G.R. No. 8784, May 21, 1956; 99 Phil. 1034 (unrep.) (1956); Heirs of Jesus M. Mascuñana v.
CA, 461 SCRA 186 (2005).
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Nonetheless, the law does not prohibit the parties from entering into agreement that violation of
the terms of the contract would cause cancellation thereof, even without court intervention. xFroilan
v. Pan Oriental Shipping Co., 12 SCRA 276 (1964).144
144
Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 95 (1972); Luzon Brokerage v. Maritime Bldg., 86 SCRA 305
(1978).
145
Velarde v. CA, 361 SCRA 56 (2001); Orden v. Aurea, 562 SCRA 660 (2008).
146
The Manila Racing Club v. The Manila Jockey Club, 69 Phil. 55 (1939).
147
Sta. Lucia Realty & Dev., Inc. V. Uyecio, 562 SCRA 226 (2008); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).
148
Lim v. CA, 182 SCRA 564 (1990); Buot v. CA, 357 SCRA 846 (2001); Abesamis v. CA, 361 SCRA 328 (2001); Tuazon v. Garilao,
362 SCRA 654 (2001); Leaño v. CA, 369 SCRA 36 (2001); Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316
(2002); Almira v. CA, 399 SCRA 351 (2003); Chua v. CA, 401 SCRA 54 (2002); Flancia v. CA, 457 SCRA 224 (2005); Vidad, Sr. v.
Tayamen, 531 SCRA 147 (2007); Hulst v. PR Builders, Inc., 532 SCRA 74 (2007); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53
(2008); Orden v. Aurea, 562 SCRA 660 (2008); Tan v. Benolirao, 604 SCRA36 (2009); Bank of P.I. v. SMP, Inc., 609 SCRA 134 (2009);
De Leon v. Ong, 611 SCRA 381 (2010); Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010).
149
Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010).
150
Platinum Plans Phil., Inc. v. Cucueco, 488 SCRA 156 (2006); Valenzuela v. Kalayaan Dev. and Industrial Corp., 590 SCRA 380
(2009);Tan v. Benolirao, 604 SCRA 36 (2009);
151
Demafelis v. CA, 538 SCRA 305 (2007).
152
De Leon v. De Leon, 593 SCRA 768 (2009).
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c. Importance of “Locating” the Condition to Pay Price in Full
In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes
the transaction that, for a time existed, and discharges the obligations created thereunder. xBlas v.
Angeles-Hutalla, 439 SCRA 273 (2004).153 Whereas, in a contract to sell, the payment of the
purchase price is a positive suspensive condition. The vendor’s obligation to convey the title does not
become effective in case of failure to pay. xBuot v. CA, 357 SCRA 846 (2001).154
When the obligation of buyer to pay the full amount of the purchase price was made subject to
the condition that the seller first delivery the clean title over the parcel bough within twenty (20)
months from the signing of the contract, such condition is imposed merely on the performance of the
obligation, as distinguished from a condition imposed on the perfection of the contract. The non-
happening of the condition merely granted the buyer the right to rescind the contract or even to waive
it and enforce performance on the part of the seller, all in consonance with Art. 1545 of Civil Code
which provides that “Where the obligation of either party to a contract of sale is subject to any
condition which is not performed, such party may refuse to proceed with the contract or he may waive
performance of the condition.” √Babasa v. CA, 290 SCRA 532 (1998).
The remedy of rescission under Article 1191 of the Civil Code cannot apply to mere contracts to
sell—in a contract to sell, the payment of the purchase price is a positive suspensive condition, and
failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring an obligatory force. Tan v.
Benolirao, 604 SCRA 36 (2009).155
153
Valenzuela v. Kalayaan Dev’t and Industrial Corp., 590 SCRA 380 (2009); Traders Royal Bank v. Cuison Lumber Co., Inc., 588
SCRA 690 (2009).
154
Heirs of Spouses Sandejas v. Lina, 351 SCRA 183 (2001); Zamora Realty and Dev. Corp v. Office of the President, 506 SCRA 591
(2006).
155
Traders Royal Bank v. Cuison Lumber Co., Inc., 588 SCRA 690 (2009); Nabus v. Pacson, 605 SCRA 334 (2009).
156
Topacio v. CA, 211 SCRA 219 (1992); Laforteza v. Machuca, 333 SCRA 643 (2000); Almira v. CA, 399 SCRA351 (2003).
157
Roque v. Lapuz, 96 SCRA 741 (1980); Angeles v. Calanz, 135 SCRA 323 (1985);Alfonso v. CA, 186 SCRA 400 (1990)
158
San Andres v. Rodriguez, 332 SCRA 769 (2000); Vda. De Mistica v. Naguiat, 418 SCRA 73 (2003); Blas v. Angeles-Hutalla, 439
SCRA 273 (2004); Villadar, Jr. V. Zabala, 545 SCRA 325 (2008); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Ver Reyes v.
Salvador, Sr., 564 SCRA 456 (2008).
159
Bowe v. CA, 220 SCRA 158 (1993); Rayos v. CA, 434 SCRA 365 (2004); Solidstate Multi-Products Corp. v. Catienza-Villaverde, 559
SCRA 197 (2008); Tan v. Benolirao, 604 SCRA 36 (2009); Nabus v. Pacson, 605 SCRA 334 (2009).
160
Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Bank of P.I. v. SMP, Inc., 609 SCRA 134 (2009).
161
Siska Dev. Corp. v. Office of the President, 231 SCRA 674 (1994); Sta. Lucia Realty & Dev., Inc. v. Uyecio, 562 SCRA 226 (2008).
162
Manuel v. Rodriguez, 109 Phil. 1 (1960); Laforteza v. Machuca, 333 SCRA 643 (2000); Villamaria, Jr. v. CA, 487 SCRA 571 (2006).
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2. Minimum Requirement for Cancellation of Contract to Sell
The act of a party in treating a contract as cancelled should be made known to the other party
because this act is subject to scrutiny and review of the courts in case the alleged defaulter bring the
matter for judicial determination. √University of the Philippines v. De los Angeles, 35 SCRA 103
(1970); √ Palay Inc. v. Clave, 124 SCRA 638 (1983).163
The act of the seller in notifying the buyer of his intention to sell the properties to other interested
persons if the latter failed to pay the balance of the purchase price is sufficient notice for the cancellation
or resolution of their contract to sell. Orden v. Aurea, 562 SCRA 660 (2008).
A contract to sell imposes reciprocal obligations and so cannot be terminated unilaterally by either
party. Judicial rescission is required under Article 1191. However, this rule is not absolute. We have held
that in proper cases, a party may take it upon itself to consider the contract rescinded and act accordingly
albeit subject to judicial confirmation, which may or may not be given. √Lim v. CA, 182 SCRA 564
(1990). BUT SEE: In a contract to sell, upon failure of buyer to comply with its obligation, there was no
need to judicially rescind the contract to sell. Failure by one of the parties to abide by the conditions in a
contract to sell resulted in the rescission of the contract. √AFP Mutual Benefit Assn., Inc. v. CA, 364
SCRA 768 (2001).164
A grace period is a right, not an obligation of the debtor, and when unconditionally conferred, the
grace period is effective without further need of demand either calling for the payment of the obligation or
for honoring the right. xBricktown Dev. Corp. v. Amor Tierra Dev.., 239 SCRA 126 (1995).
The act of the seller in notifying the buyer of his intention to sell the properties to other interest
persons if the latter failed to pay the balance of the purchase price is sufficient notice for the cancellation
or resolution of their contract to sell. Orden v. Aurea, 562 SCRA 660 (2008).
163
Jison v. CA, 164 SCRA 339 (1988); Lim v. CA, 182 SCRA 564 (1990); Cheng v. Genato, 300 SCRA 722 (1998).
164
Torralba v. De los Angeles, 96 SCRA 69 (1980).
165
Romero v. CA, 250 SCRA 223 (1995); Adalin v. CA, 280 SCRA 536 (1997); Republic v. Florendo, 549 SCRA 527 (2008).
166
Biñan Steel Corp. v. CA, 391 SCRA 90 (2002).
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2. Conditions versus Warranties. √Power Commercial and Industrial Corp. v. CA, 274 SCRA 597
(1997).
167
Oro Land Realty Dev. Corp. v. Claunan, 516 SCRA 681 (2007)
168
Canizares Tiana v. Torrejos, 21 Phil. 127 (1911); J.M. Tuazon v. CA, 94 SCRA 413 (1979).
- 40 -
considerably decreases fitness); (e) The action must be instituted within the statute of limitations.
169
√Nutrimix Feeds Corp. v. CA, 441 SCRA 357 (2004).
Seller’s agent can by agreement be liable for the warranty against hidden defects. xSchmid and
Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988).
g. Additional Warranties for Consumer Products (Arts. 68, Consumer Act, R.A. 7394).
6. Effects of Waivers
The phrase “as is, where is” basis pertains solely to the physical condition of the thing sold, not to its
legal situation. In the case at bar, the US tax liabilities constitute a potential lien which applies to the
subject’s matter’s legal situation, not to its physical aspect. Thus, the buyer has no obligation to
shoulder the same. xNDC v. Madrigal Wan Hui Lines Corp., 412 SCRA 375 (2003).
B. CONVENTIONAL REDEMPTION
169
Investments & Dev’t, Inc. v. CA, 162 SCRA 636 [1988]).
170
Claravall v. CA, 190 SCRA 439 (1990); Torres v. CA, 216 SCRA 287 (1992); Roberts v. Papio, 515 SCRA 346 (2007).
171
Ramos v. Icasiano, 51 Phil (1927).
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In sales denominated as pacto de retro, the price agreed upon should not generally be considered
as the just value of the thing sold, absent other corroborative evidence—there is no requirement in
sales that the price be equal to the exact value of the thing subject matter of the sale. xDorado Vda.
De Delfin v. Dellota, 542 SCRA 397 (2008).
Sales with rights of repurchase, as defined by the Civil Code, are not favored. We will not construe
instruments to be sales with a right to repurchase, with the stringent and onerous effects which follow,
unless the terms of the document and the surrounding circumstances require it. Whenever, under the
terms of the writing, any other construction can fairly and reasonably be made, such construction will
be adopted and the contract will be construed as a mere loan unless the court can see that, if enforced
according to its terms, it is not an unconscionable one. Bautista v. Unangst, 557 SCRA 256 (2008).
[citing Ramos v. CA 180 SCRA 635 (1989), which in turn cites Padilla v. Linsangan, 19 Phil. 65 (1911)
and Aquino v. Deala, 63 Phil. 582 (1936).
2. Redemption Period
The period to repurchase is not suspended merely because there is a divergence of opinion
between the parties as to the precise meaning of the phrase providing for the condition upon which the
right to repurchase is triggered. The existence of seller a retro’s right to repurchase the proper is not
dependent upon the prior final interpretation by the court of the said phrase. √Misterio v. Cebu State
College of Science and Technology, 461 SCRA 122 (2005).
172
Reyes v. Hamada, 14 SCRA 215 (1965); Solid Homes, Inc. v. CA, 275 SCRA 267 (1997); Misterio v. Cebu State College of Science
and Technology, 461 SCRA 122 (2005); Cadungog v. Yap, 469 SCRA 561 (2005); Ramos v. Dizon, 498 SCRA 17 (2006); Lumayag v.
Heirs of Jacinto Nemeño, 526 SCRA 51 (2007).
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vendor a retro may be duly heard. If the vendee succeeds in proving that the transaction was indeed a
pacto de retro, the vendor is still given a period of thirty days from the finality of the judgment within
which to repurchase the property. xSolid Homes v. CA, 275 SCRA 267 (1997).
Once the vendor fails to redeem the property within the stipulated period, irrevocable title shall be
vested in the vendee by operation of law. xVda. de Rigonan v. Derecho, 463 SCRA 627 (2005).
Under a sale a retro, the failure of the buyer to consolidate his title under Art. 1607 does not impair
such title and ownership because the method prescribed thereunder is merely for the purpose of
registering and consolidating titles to the property. In fact, the failure on the part of a seller a retro to
exercise the redemption right within the period agreed upon or provided for by law, vests upon the
buyer a retro absolute title and ownership over the property sold by operation of law. Consequently,
after the effect of consolidation, the mortgage or re-sale by the seller a retro of the same property
would not transfer title and ownership to the mortgagee or buyer, as the case may be, under the Latin
maxim NEMO DAT QUOD NON HABET. xCadungog v. Yap, 469 SCRA 561 (2005).
173
Lao v. CA, 275 SCRA 237 (1997).
174
Salonga v. Concepcion, 470 SCRA 291 (2005).
175
Ceballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004); Alvaro v. Ternida, 479 SCRA 288 (2006); Cirelos
v. Hernandez, 490 SCRA 624 (2006); Lumayag v. Heirs of Jacinto Nemeño, 526 SCRA 51 (2007); Olivares v. Sarmiento, 554 SCRA 384
(2008); Tio v. Abayata, 556 SCRA 175 (2008); Deheza-Inamarga v. Alano, 574 SCRA 651 (2008); Rockville Excel International Exim
Corp. v. Culla, 602 SCRA 124 (2009); Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
176
Matanguihan v. CA, 275 SCRA 380 (1997); Martinez v. CA, 358 SCRA 38 (2001); Hilado v. Heirs of Rafael Medlla, 37 SCRA 257
(2002); Ceballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004); San Pedro v. Lee, 430 SCRA 338 (2005); Go
v. Bacaron, 472 SCRA 229 (2005), citing VILLANUEVA, CESAR L. PHILIPPINE LAW ON SALES, (1998 ed.), p. 271; Romulo v. Layug, Jr., 501
SCRA262 (2006); Roberts v. Papio, 515 SCRA 346 (2007); Raymundo v. Bandong, 526 SCRA 514 (2007); Dorado Vda. De Delfin v.
Dellota, 542 SCRA 397 (2008); Muñoz, Jr. V. Ramirez, 629 SCRA 38 (2010).
177
Austria v. Gonzales, Jr., 420 SCRA 414 (2004); Raymundo v. Bandong, 526 SCRA 514 (2007).
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title with a right to repurchase under specified conditions reserved to the seller, was in truth and in fact
given merely as security for the repayment of a loan. xMariano v. CA, 220 SCRA 716 (1993).178
178
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Cuyugan v. Santos, 34 Phil. 100 (1916); Matanguihan v. CA, 275 SCRA 380 (1997);
Hilado v. Heirs of Rafael Medlla, 37 SCRA 257 (2002); Madrigal v. CA, 456 SCRA 659 (2005); Legaspi v. Ong, 459 SCRA 122 (2005);
Banga v. Bello, 471 SCRA 653 (2005); Diño v. Jardines, 481 SCRA 226 (2006); Ayson, Jr. V. Paragas, 557 SCRA 50 (2008).
179
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Balatero v. IAC, 154 SCRA 530 (1987); Mariano v. CA, 220 SCRA 716 (1993);
Lobres v. CA, 351 SCRA 716 (2001).
180
Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256 (2008).
181
Claravall v. CA, 190 SCRA 439, 448 (1990); Uy v. CA, 230 SCRA 664 (1994); Lobres v. CA, 351 SCRA 716 (2001); Alvaro v.
Ternida, 479 SCRA 288 (2006); Diño v. Jardines, 481 SCRA 226 (2006); Raymundo v. Bandong, 526 SCRA 514 (2007); Aleligay v.
Laserna, 537 SCRA 699 (2007); Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008); Bautista v. Unangst, 557 SCRA 256 (2008);
Rockville Excell International Exim Corp. V. Culla, 602 SCRA 124 (2009); Heirs of Jose Reyes, Jr. v. Reyes, 626 SCRA 758 (2010).
182
Zamora v.CA, 260 SCRA 10 (1996).
183
Romulo v. Layug, Jr., 501 SCRA262 (2006).
184
Romulo v. Layug, Jr., 501 SCRA262 (2006); Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256
(2008); Rockville Excell International Exim Corp. v. Culla, 602 SCRA 124 (2009).
185
Cruz v. CA, 412 SCRA 614 (2003).
186
Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
187
Lumayag v. Heirs of Jacinto Nemeño, 526 SCRA 51 (2007).
188
Austria v. Gonzales, Jr., 420 SCRA 414 (2004).
189
Oronce v. CA, 298 SCRA 133 (1998).
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the parties, give rise to a presumption of equitable mortgage. xCeballos v. Intestate Estate of the Late
Emigdio Mercado, 430 SCRA 323 (2004).
The fact that the price in a pacto de retro sale is not the true value of the property does not justify
the conclusion that the contract is one of equitable mortgage; in fact a pacto de retro sale, the practice
is to fix a relatively reduced price to afford the seller a retro every facility to redeem the property.
xIgnacio v. CA, 246 SCRA 242 (1995).190
Article 1602 being remedial in nature, may be applied retroactively in cases prior to the effectivity
of the Civil Code. xOlea v. CA, 247 SCRA 274 (1995).
190
De Ocampo v. Lim, 38 Phil. 579 (1918); Feliciano v. Limjuco, 41 Phil.147 (1920); Belonio v. Movella, 105 Phil. 756 (1959).
191
Guerrero v. Yñigo, 96 Phil. 37 (1954); Montevirgin v. CA, 112 SCRA 641 (1982); Vda. de Zulueta v. Octaviano, 121 SCRA 314
(1983); Ong v. Roban Lending Corp., 557 SCRA 516 (2008); Heirs of Jose Reyes, Jr. V. Reyes, 626 SCRA 758 (2010).
192
Legaspi v. Ong, 459 SCRA 122 (2005).
193
Tapas v. CA, 69 SCRA 393 (1976).
194
Vda. de Macoy v. CA, 206 SCRA 244 (1992).
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C. LEGAL REDEMPTION
e. Sale of Credit in Litigation (Art. 1634) – 30 days from notice of demand to pay.
195
Basa v. Aguilar, 117 SCRA 128 (1982).
196
De Guzman v. CA, 148 SCRA 75 (1987); Adille v. CA, 157 SCRA 455 (1988).
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2. When Period of Legal Redemption Begins (Art. 1623)
Both the letter and the spirit of the law argue against any attempt to widen the scope of the notice
specified in the Civil Code to include any other kind of notice, such as verbal or by registration. Marinao
v. CA, 222 SCRA 736 (1993).197
The 30-day period for the commencement of the right to exercise the legal redemption right, even
when such right has been recognized to exist in a final and executory court decision, does not begin
from the entry of judgment, but from the written notice served by the seller to the party entitled to
exercise such redemption right. Guillen v. CA, 589 SCRA 399 (2009).
The interpretation of Art. 1623 where there is a need for notice in writing, should always tilt in favor
of the redemptioner and against the buyer, since the purpose is to reduce the number of participants
until the community is terminated, being a hindrance to the development and better administration of the
property. “It is a one-way street,” in favor of the redemptioner since he can compel the buyer to sell to
him but he cannot be compelled by the vendee to buy. xHermoso v. CA, 300 SCRA 516 (1998).
The 30-day period does not begin to run in the absence of written notification coming from the
seller. xCua v. Vargas, 506 SCRA 374 (2006);198 and it must be a written notice of a perfected sale.
xSpouses Doromal v. CA, 66 SCRA 575 (1975).
The written notice of sale is mandatory, notwithstanding actual knowledge of a co-owner, in order to
remove all uncertainties about the sale, its terms and conditions, as well as its efficacy and status.
xVerdad v. CA, 256 SCRA 593 (1996)..
Notice to minors may validly be served upon parents even when the latter have not been judicially
appointed as guardians since the same is beneficial to the children. xBadillo v. Ferrer, 152 SCRA 407
(1987).
Neither the registration of the sale xCabrera v. Villanueva, 160 SCRA 627 (1988), nor the
annotation of an adverse claim xVda. De Ape v. CA, 456 SCRA 193 (2005), nor notice being given by
the city treasurer xVerdad v. CA, 256 SCRA 593 (1996), comply with the written notice required under
Art. 1623 to begin the tolling of the 30-day period of redemption.
The notice required under Article 1623 is deemed to have been complied with when the other co-
owner has signed the Deed of Extrajudicial Partition and Exchange of Shares which embodies the
disposition of part of the property owned in common. xFernandez v. Tarun, 391 SCRA 653 (2002).
The existence of a clause in the deed of sale to the effect that the vendor has complied with the
provisions of Article 1623, cannot be taken to “being the written affirmation under oath, as well as the
evidence, that the required written notice to petitioner under Article 1623 has been meet, for the person
entitled to the right is not a party to the deed of sale. xPrimary Structures Corp. v. Valencia, 409 SCRA
371 (2003).
√Francisco v. Boiser, 332 SCRA 305 (2000), summarized the case-law on Art. 1623, and with
definitiveness declared:
For the 30-day redemption period to begin to run, notice must be given by the seller; and that notice given
by the buyer or even by the Register of Deeds is not sufficient. This expressly affirms the original ruling in
Butte v. Manuel Uy and Sons, Inc., 4 SCRA 526 (1962), as affirmed in xSalatandol v. Retes, 162 SCRA 568
(1988). This expressly overruled the ruling in xEtcuban v. CA, 148 SCRA 507 (1987), which allowed the
giving of notice by the buyer to be effective under Article 1623;
When notice is given by the proper party (i.e., the seller), no particular form of written notice is prescribed
under Article 1623, so that the furnishing of the copies of the deeds of sale to the co-owner would be
sufficient, as held previously in xDistrito v. CA, 197 SCRA 606 (1991); Conejero v. CA, 16 SCRA 775
(1966); xBadillo v. Ferrer, 152 SCRA 407 (1987), but only on the form of giving notice but not on the ruling
of who is the proper party to give notice;
Affirmed ruling in xAlonzo v. IAC, 150 SCRA 259 (1987), that the filing of the suit for ejectment or collection
of rentals against a co-owner actually dispenses with the need for a written notice, and must be construed
as commencing the running of the period to exercise the right of redemption, since the filing of the suit
amounted to actual knowledge of the sale from which the 30-day period of redemption commences to run.
a. Rare Exceptions:
When the sale to the buyer was effected through the co-owner who acted as the broker, and
never indicated that he would exercise his right to redeem. xDistrito v. CA, 197 SCRA 606 (1991).
When the buyers took possession of the property immediately after the execution of the deed of
sale in their favor and lived in the midst of the other co-owners who never questioned the same.
xPilapil v. CA, 250 SCRA 560 (1995).
197
Citing Hernaez v. Hernaez, 32 Phil. 214 (1915); Castillo v. Samonte, 106 Phil. 1024 (1960).
198
Garcia v. Calaliman, 17 SCRA 201 (1989); Mariano v. CA, 222 SCRA 736 (1993).
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Under the free patent or homestead provisions of the Public Land Act a period of five (5) years
from the date of conveyance is provided, to be reckoned from the date of the sale and not from the
date of registration in the office of the Register of Deeds. xLee Chuy Realty Corp. v. CA, 250 SCRA
596 (1995).199
c. Redemption by Judgment Debtor (Secs. 27-28, Rule 39, Rules of Civil Procedure)
Written notice must be given to the judgment debtor before the sale of the property on execution,
to give him the opportunity to prevent the sale by paying the judgment debt sought to be enforced and
the costs which have been incurred. xTorres v. Cabling, 275 SCRA 329 (1997).
Where there is a third-party claim, sheriff should demand from the judgment creditor who becomes
the highest bidder, payment in cash of his bid instead of merely crediting the amount to the partial
satisfaction of the judgment debt. xTorres v. Cabling, 275 SCRA 329 (1997).
Under Sec. 28, Rule 39 of the 1997 Rules of Civil Procedure, the period of redemption shall be “at
any time within one (1) year from the date of registration of the certificate of sale,” so that the period is
now to be understood as composed of 365 days, unlike the 360 days under the old provisions of the
Rules of Court. xYsmael v. CA, 318 SCRA 215 (1999).
199
Mata v. CA, 318 SCRA 416 (1999).
200
Vaca v. CA, 234 SCRA 146 (1994).
201
Heirs of Felicidad Canque v. CA, 275 SCRA 741 (1997).
202
Springsun Management Systems Corp. v. Camerino, 449 SCRA 65 (2005).
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the latter case, the assignment has an effect similar to that of a sale. xLicaros v. Gatmaitan, 362 SCRA
548 (2001).203
In its most general and comprehensive sense, an assignment is “a transfer or making over to
another of the whole of any property, real or personal, in possession or in action, or of any estate or
right therein. It includes transfers of all kinds of property, and is peculiarly applicable to intangible
personal property and, accordingly, it is ordinarily employed to describe the transfer of non-negotiable
choses in action and of rights in or connected with property as distinguished from the particular item or
property.” xPNB v. CA, 272 SCRA 291 (1997).
4. Effects of Assignment
a. Assignment of Credit
An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the
consent of the debtor, transfers his credit and accessory rights to another, known as the assignee,
who acquires the power to enforce it to the same extent as the assignor could enforce it against the
debtor. xAquintey v. Tibong, 511 SCRA 414 (2006).204
As a consequence, the third party steps into the shoes of the original creditor as subrogee of the
latter. Although constituting a novation, such assignment does not extinguish the obligation under the
credit assigned, even when the assignment is effected without his consent. xSouth City Homes, Inc. V.
BA Finance Corp., 371 SCRA 603 (2001).
d. Tradition in Assignment
Notarization converts a private document Assignment of Credit into a public document, thus
complying with the mandate of Article 1625 of the Civil Code and making it enforceable even as
against third persons. xLedonio v. Capitol Dev. Corp., 526 SCRA 379 (2007).
203
Nyco Sales Corp. v. BA Finance Corp., 200 SCRA 637 (1991); Rodriguez v. CA, 207 SCRA 553 (1992); Project Builders, Inc. v. CA,
358 SCRA 626 (2001).
204
Lo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182 (2003).
205
Sison & Sison v. Yap Tico, 37 Phil. 587 (1918); C & C Commercial Corp. v. PNB, 175 SCRA 1 (1989); Project Builders, Inc. v. CA,
358 SCRA 626 (2001); .Aquintey v. Tibong, 511 SCRA 414 (2006); Ledonio v. Capitol Dev’t Corp., 526 SCRA 379 (2007).
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7. Subrogation versus Assignment of Credit (Art.1301)
Subrogation extinguishes the obligation and gives rise to a new one; assignment refers to the same
right which passes from one person to another. The nullity of an old obligation may be cured by
subrogation, such that a new obligation will be perfectly valid; but the nullity of an obligation is not
remedied by the assignment of the creditor’s right to another. In an assignment of credit, the consent of
the debtor is not necessary in order that the assignment may fully produce legal effects; whereas,
conventional subrogation requires an agreement among the three parties concerned – original creditor,
debtor, and new creditor. It is a new contractual relation based on the mutual agreement among all the
necessary parties. √Licaros v. Gatmaitan, 362 SCRA 548 (2001).206
4. Effects of Non-Compliance
a. If purchase money or mortgage proceeds are not applied pro-rata to payment of the bona fide
claims of the creditors, the sale is deemed fraudulent and void. (Sec. 4)
b. Non-giving of the list of creditors or intentional omission of the names of some of the creditors, and
placing of wrong data required by law, would subject the seller or mortgagor to penal sanctions.
(Sec. 4)
c. Bulk transfer without consideration or for nominal consideration punishable. (Sec. 7)
d. Failure to comply with other provisions of the law the non-application of the consideration
proportionately to the creditors, the preparation of the inventory, and the notification to creditors,
are also made punishable. (Sec. 11)
A bulk sale done without complying with the terms of the Law, makes the transaction fraudulent
and void, but does not change the basic relationship between the seller, assignor/encumbrancer and
206
Ledonio v. Capitol Dev. Corp., 526 SCRA 379 (2007).
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his creditor. The portion of a judgment providing for subsidiary liability is invalid, since the proper
remedy of the creditor is to collect on the credit against the defendant, and if they cannot pay, to attach
on the property fraudulently mortgage since the same still pertain to the debtors-defendants. xPeople
v. Mapoy, 73 Phil. 678 (1942).
d. Meaning of “Consumption” (DOJ Opinion No. 325, series of 1945; IRR of Law).
The Law limits its application to the sale of items sold for domestic or household, or properly
called consumer goods; whereas, when the same items are sold to commercial users, they would
constitute non-consumer goods and not covered by the Law. √Balmaceda v. Union Carbide
Philippines, Inc. 124 SCRA 893 (1983).207
207
Marsman & Co., Inc. v. First Coconut Central Co., Inc., 162 SCRA 206 (1988); B.F. Goodrich Philippines, Inc. v. Reyes, Sr., 121
SCRA 363 (1983).
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b. Grandfather Rule on 100% Filipino Ownership of Corporate Entity: SEC Opinions, dated 20
March 1972 and 22 April 1983; DTI Opinion to Tanada, Teehankee & Carreon Law Office, dated
3 August 1959.
a. Pre-qualification requirements
b. Rules on Branches/Stores
6. Penalty Provision
7. Applicability of the Anti-Dummy Act (Comm. Act. 108, as amended by P.D. 715)
a. Law penalizes Filipinos who permit aliens to use them as nominees/dummies to enjoy privileges
reserved for Filipinos. Criminal sanctions are imposed on the president, manager, board member
or persons in charge of the violating entity and causing the latter to forfeit its privileges, rights and
franchises.
b. Section 2-A of the Law prohibits aliens from intervening in the management, operation,
administration or control of nationalized business, whether as officers, employees or laborers, with
or without remuneration. Aliens may not take part in technical aspects, provided no Filipino can
do such technical work, and with express authority from the Philippine President.
c. Later, Pres. Decree 715 amended the Law by adding of a proviso expressly allowing the election
of aliens as members of the boards of directors of corporations or associations engaged in
partially nationalized activities in proportion to their allowable participation or share in the capital of
such entities.
The amendment was meant to settle the uncertainty created in the obiter opinion in Luzon
Stevedoring Corp. v. Anti-Dummy Board, 46 SCRA 474 (1972), which rejected the argument that
the Anti-Dummy Law covered only employment in wholly nationalized businesses and not in those
that are only partly nationalized.
The Filipino common-law wife of a Chinese national is not barred from engaging in the retail
business provided she uses capital exclusively derived from her paraphernal properties; allowing
her common-law Chinese husband to take part in management of the retail business would be a
violation of the law. xTalan v. People, 169 SCRA 586 (1989).
—oOo—