SY 2019-2020

LAW ON SALES 1
Atty. Dranyl Jared P. Amoroso

Grading System

1/3 -Recitation / Quizzes / Exercises / Others

1/3 -Midterms
1/3 - Finals

References: Law on Sales by Cesar L. Villanueva / Civil Code / Other references and cases to be announced, if
needed.

Classroom policies discussed and understood by students.

I. THE NATURE OF SALE

A. DEFINITION (ART. 1458)
1. Elements of Sale

2. Stages of Contract of Sale

3. Sale Creates Real Obligations “To Give” (Art. 1165)

4. Essential Characteristics of Sale

a. Nominate and Principal

b. Consensual (Art. 1475)
c. Bilateral and Reciprocal (Arts. 1169 and 1191)
d. Onerous
 Gaite v. Fonacier, 2 SCRA 830 (1961)
e. Commutative (but see: Arts. 1355 and 1470)
 Buenaventura v. CA, 416 SCRA 263 (2003)
f. Sale Is Title and Not Mode

B. S ALE DISTINGUISHED FROM S IMILAR CONTRACTS

1. Donation (Arts. 725 and 1471)

2. Barter (Arts. 1468, 1638 to 1641)

3. Contract for Piece-of-Work (Arts. 1467, 1713 to 1715)

 Celestino & Co. v. Collector, 99 Phil. 841 (1956)
 Commissioner of Internal Revenue v. Engineering Equipment & Supply Co., 64 SCRA 590 (1975)

4. Agency to Sell (Art. 1466)

 Quiroga v. Parsons, 38 Phil. 501 (1918)
 Puyat v. Arco Amusement Co., 72 Phil. 402 (1941)

5. Dacion En Pago (Arts. 1245 and 1934)

 Lo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182 (2003)

6. Lease (Arts. 1484 and 1485)

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The outline follows VILLANUEVA , LAW ON S ALES; and the Law on Sales Outline of Dean Cesar L. Villanueva, Atty. Alexander C. Dy, and Atty.
Ray Paolo J. Santiago, and Atty. Teresa S. Villanueva-Tiansay of the Ateneo Law School.

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II. PARTIES TO A CONTRACT OF SALES (Arts. 1489-1492)

1. General Rule (Art. 1489)

2. Minors, Insane and Demented Persons, Deaf-Mutes (Arts. 1327, 1397, 1399)
 Paragas v. Heirs of Dominador Balacano, 468 SCRA 717 (2005)

3. Sales By and Between Spouses

a. Contracts with Third Parties (Arts. 73, 96, and 124, Family Code)
b. Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code)
 Calimlim-Canullas v. Fortun, 129 SCRA 675 (1984)

4. Others Relatively Disqualified (Arts. 1491 and 1492)

 Rubias v. Batiller, 51 SCRA 120 (1973)
a. Guardians, Agents and Administrators
 Philippine Trust Co. v. Roldan, 99 Phil. 392 (1956)
b. Attorneys
 Rubias v. Batiller, 51 SCRA 120 (1973)
 Fabillo v. IAC, 195 SCRA 28 (1991)
c. Judges

III. SUBJECT MATTER OF SALE (Arts. 1459 to 1465)

 Polytechnic University v. CA, 368 SCRA 691 (2001)

1. Must Be Existing, Future or Contingent (Arts. 1347, 1348, and 1462)

a. Emptio Rei Speratae (Arts. 1461 and 1347)
b. Emptio Spei (Art. 1461)
c. Subject to Resolutory Condition (Art. 1465)

2. Must Be Licit (Arts. 1347, 1459 and 1575)

3. Must Be Determinate or At Least “Determinable” (Art. 1460)

 Atilano v. Atilano, 28 SCRA 231 (1969)
a. Generic things may be object of sale (Arts. 1246 and 1409[6])
 Melliza v. City of Iloilo, 23 SCRA 477 (1968)
 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)

4. Quantity of Subject Matter Not Essential for Perfection? (Art. 1349)

 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:
 Nool v. CA, 276 SCRA 149 (1997).
b. Subsequent Acquisition of Title by Non-Owner Seller (Art. 1434)
c. Acquisition by the Buyer May Even Depend on Contingency (Art. 1462)

6. Illegality of Subject Matter (Arts. 1409, 1458, 1461, 1462, and 1575)
a. Special Laws
b. Following Sales of Land Void

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IV. PRICE AND OTHER CONSIDERATION (Arts. 1469-1474)

1. Price Must Be Real (Art. 1471)

a. When Price“Simulated”
 Mapalo v. Mapalo, 17 SCRA 114 (1966) vis-à-vis Rongavilla v. Court of Appeals, 294 SCRA 289
(1998)
 Mate v. CA, 290 SCRA 463 (1998) vis-à-vis Yu Bun Guan v. Ong, 367 SCRA 559 (2001)
b. When Price is “False” (Arts. 1353 and 1354)
c. Non-Payment of Price

2. Must Be in Money or Its Equivalent (Arts. 1458 and 1468)

 Ong v. Ong, 139 SCRA 133 (1985)
 Bagnas v. CA, 176 SCRA 159 (1989)
 Republic v. Phil. Resources Dev., 102 Phil. 960 (1958)

3. Must Be Certain or Ascertainable at Perfection (Art. 1469)

a. How Price Determined to Be Ascertainable
(i) Set by third person appointed at perfection (Art. 1469)
(ii) Set by the courts (Art. 1469)
(iii) By reference to a definite day, particular exchange or market (Art. 1472)
(iv) By reference to another thing certain
b. Price Never Set By One or Both Parties (Arts. 1473, 1182)
c. Effects of Un-Ascertainability

4. Manner Of Payment Of Price Essential (Art. 1179)

 Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007)

5. Inadequacy of Price Does Not Affect Ordinary Sale (Arts. 1355 and 1470)
a. Gross Inadequacy of Price May Avoid Judicial Sale
b. Lesion of more than 1/4 of value of thing makes sale rescissible unless approved bycourt (Art. 1386)
c. Gross inadequacy of price may raise the presumption of equitable mortgage (Art. 1602)

V. FORMATION OF CONTRACT OF S ALE (Arts. 1475-1488)

A. POLICITACION S TAGE (Art. 1479)

 Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006)

 Muslim and Christian Urban Poor Association, Inc. v. BRYC-V Development Corp., 594 SCRA 724 (2009)

1. Option Contract
 Carceller v. Court of Appeals, 302 SCRA 718 (1999)
 Tayag v. Lacson, 426 SCRA 282 (2004)

a. meaning of “separate consideration” (arts. 1479 and 1324)

 Villamor v. Court of Appeals, 202 SCRA 607 (1991)
b. no separate consideration: void as option, valid as a certain offer
 Sanchez v. Rigos, 45 SCRA 368 (1972)
c. there must be acceptance of option offer.
 Vazquez v. CA, 199 SCRA 102 (1991).
d. proper exercise of option contract.
 Nietes v. CA, 46 SCRA 654 (1972).
 Carceller v. Court of Appeals, 302 SCRA 718 (1999)

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2. Right Of First Refusal
 Ang Yu Asuncion v. Court of Appeals, 238 SCRA 602 (1994)
 Equatorial Realty Dev., Inc. v. Mayfair Theater, Inc., 264 SCRA 483 (1996)
 Paranaque Kings Enterprises, Inc. v. CA, 268 SCRA 727, 741 (1997)
 Vasquez v. Ayala Corp., 443 SCRA 231 (2004)
 Riviera Filipina, Inv. v. Court of Appeals, 380 SCRA 245 (2002)

3. Mutual Promises To Buy And Sell (Art. 1479): “True Contract To Sell”
 Macion v. Guiani, 225 SCRA 102 (1993)

B. PERFECTION S TAGE (Arts. 1475, 1319, 1325 and1326)

1. Absolute Acceptance of a Certain Offer (Art. 1475)

 Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006)

2. When “Deviation” Allowed:

 Villonco v. Bormaheco, 65 SCRA 352 (1975)

3. Sale by Auction (Arts. 1476, 1403(2)(d), 1326)

4. Earnest Money (Art. 1482)

 Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006)

5. Difference Between Earnest Money and Option Money.

 Oesmer v. Paraiso Dev. Corp., 514 SCRA 228 (2007).

6. Sale Deemed Perfected Where Offer Was Made. (Art. 1319)

C. FORMAL REQ UIREMENTS OF S ALES (Arts. 1357, 1358, 1406 and 1483)

1. Form Not Important for Validity of Sale

a. Other Rulings on Deeds of Sale
b. Value of Business Forms to Prove Sale

2. When Form Important in Sale

a. To Bind Third Parties

 Fule v. CA, 286 SCRA 698 (1998)
 Dalion v. CA, 182 SCRA 872 (1990)

b. For Enforceability Between the Parties: STATUTE OF FRAUDS (Arts. 1403 and 1405)
 Secuya v. Vda. De Selma, 326 SCRA 244 (2000)

(1) Coverage:
(i) Sale of Real Property
(ii) Agency to Sell or to Buy
(iii) Rights of First Refusal
(iv) Equitable Mortgage
(v) Right to Repurchase

(2) Memorandum
 Yuviengco v. Dacuycuy, 104 SCRA 668 [1981
 Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995)
 Limketkai Sons Milling, Inc. v. CA, 255 SCRA 6 (1996)

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 Exception: Electronic Documents under the E-Commerce Act (R.A. 8792)

(3) Partial Execution (Art. 1405)

 Ortega v. Leonardo, 103 Phil. 870 (1958)
 Claudel v. Court of Appeals, 199 SCRA 113 (1991).
 Alfredo v. Borras, 404 SCRA 145 (2003)

(4) Waiver
 Limketkai Sons Milling, Inc. v. CA, 255 SCRA 6 (1996)

(5) Rulings on Receipts and Other Documentary Evidence of Sale

 Toyota Shaw, Inc. v. Court of Appeals, 244 SCRA 320 (1995)

c. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art. 1874)
d. Sale of Large Cattle (Art. 15851; Sec. 529, Revised Adm. Code)

D. S IMULATED S ALES

1. Badges and Non-badges of Simulation

2. When Motive Nullifies the Sale

3. Remedies Allowed When Sale Simulated

4. Effect When Sale Declared Void

(End of 1st Half of the Semester; End of Scope for Midterms )

VI. CONSUMMATION (Arts. 1493-1506) AND PERFORMANCE OF CONTRACT OF SALE (Arts.

1536- 1544, 1582-1590)

A. OBLIGATIONS OF SELLER

1. Preserve Subject Matter (Art. 1163)

2. Deliver with Fruits and Accessories (Arts. 1164, 1166, 1495, 1537)
3. Deliver the Subject Matter (Art. 1477)

a. Legal Premises for Doctrines on Tradition

b. General Doctrines on Tradition, Whether Actual or Constructive:
c. Physical Delivery (Art. 1497)
d. Constructive Delivery: Execution Of A Public Instrument (Art. 1498)
 Santos v. Santos, 366 SCRA 395 (2001)

(i) As to Movables (Arts. 1498-1499, 1513-1514)

 Dy, Jr. v. CA, 198 SCRA826

(ii) As to Immovables (Art. 1498)

 Addison v. Felix, 38 Phil. 404 (1918)
 Danguilan v. IAC, 168 SCRA 22 (1988)
 Pasagui v. Villablanca, 68 SCRA 18 (1975)
 Power Commercial and Industrial Corp. v. CA, 274 SCRA 597 (1997).

(1) Registration of Title Is Separate Mode from Execution of Public Instrument

 Chua v. Court of Appeals, 401 SCRA 54 (2003)
 Vive Eagle Land, Inc. v. Court of Appeals, 444 SCRA 445 (2004)
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 (2) Customary Steps in Selling Immovables
 Chua v. Court of Appeals, 401 SCRA 54 (2003).
(iii) As to Incorporeal Property (Arts. 1498 and 1501).

e. Constitutum Possessorium (Art. 1500)

f. Traditio Brevi Manu

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)

5. Taking-Out Insurance Coverage (Art. 1523)

6. Time and Place of Delivery (Art. 1521)
7. Expenses of Execution and Registration (Art. 1487), and of Putting Goods in Deliverable Estate (Art. 1521)

B. SPECIAL RULES ON COMPLETENESS OF DELIVERY

1. In Case of Movables (Art. 1522 and 1537, 1480)

a. Rules on Delivery to Carrier (Art. 1523)

(i) FAS Sales
(ii) FOB Sales
 Behn Meyer & Co. v. Yangco, 38 Phil. 602, 606 (1918)
(iii) CIF Sales
 Behn Meyer & Co. v. Yangco, 38 Phil. 602, 606 (1918).
b. Sale on Approval, Trial or Satisfaction (Art. 1502)
c. Sale by Description and/or Sample (Art. 1481)
d. Buyer's Right to Inspect Before Acceptance (Arts. 1481 and 1584) Except when carrier delivers COD.

2. In Case of Immovables

a. Where Sold Per Unit or Number (Arts. 1539 and 1540)

 Rudolf Lietz, Inc. v. Court of Appeals, 478 SCRA 451 (2005)
b. Where Sold for a Lump Sum (Art. 1542)
 Rudolf Lietz, Inc. v. Court of Appeals, 478 SCRA 451 (2005)
 Note the exception, and the exception to the exception.

C. DOUBLE SALES (Arts. 1544 and 1165)

1. Priority of Torrens System of Registration

 Naawan Community Rural Bank, Inc. v. Court of Appeals, 395 SCRA 43 (2003)
 Naval v. Court of Appeals, 483 SCRA 102 (2006)
2. Tests Applicable under Article 1544
 Carillo v. Court of Appeals, 503 SCRA 66 (2006).

a. Main Rule Under Art. 1544: Prior Tempore, Prior Jure.

 Carbonell v. CA, 69 SCRA 99 (1976)

3. Requisites for Double Sale

 Cheng v. Genato, 300 SCRA 722 (1998)

a. There Must Be Two Different Valid Sales

 San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99 (2005)

(1) Doctrine on Conditional Sales/Contracts to Sell and Adverse Claims:

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  Mendoza v. Kalaw, 42 Phil. 236 (1921)
 Adalin v. CA, 280 SCRA 536 (1997)
 Cheng v. Genato, 300 SCRA 722 (1998)

b. Exact Same Subject Matter

c. Exact Same Seller for Both Sales

 Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals, 448 SCRA 347 (2005)

4. Registration in Good Faith as First Priority

a. Meaning of “Registration”
 Carbonell v. Court of Appeals, 69 SCRA 99 (1976).
b. Registration Must Always Be in Good Faith

c. Knowledge of First Buyer of the Second Sale Does Not Amount to Registration in Favor of the Second
Buyer
 Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals, 448 SCRA 347 (2005).

d. Registration in Good Faith Always Pre-empts Possession in Good Faith

 San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99 (2005)

5. Possession Refers Both to Material and Symbolic Possession

6. Who is Purchaser in Good Faith?

 Estate of Lino Olaguer v. Ongjoco, 563 SCRA 373 (2008).

a. Must Have Paid Price in Full

b. Burden of Proof

c. Instances When No GoodFaith:

(1) Being In Business on Realty

(2) Close Relationship

(3) Gross Inadequacy of Price

(4) Obligation to Investigate or To Follow Leads

(5) Land in Adverse Possession

(6) Existence of Lis Pendens or Adverse Claim

(7) Annotation of Lien in Settlement of Estate

6. When Subject of Sale Is Unregistered Land

 Naawan Community Rural Bank v. CA, 395 SCRA 43 (2003)
 Abrigo v. De Vera, 432 SCRA 544 (2004)
 Dagupan Trading Co. v. Macam, 14 SCRA 179 (1965)
 Carumba v. CA, 31 SCRA 558 (1970)
 Acabal v. Acabal, 454 SCRA 555 (2005)

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D. OBLIGATIONS OF BUYER

1. Pay the Price (Art.1582)

2. Accept Delivery (Arts. 1582-1585)

(to be continued)