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B. AVAILABLE REMEDIES ON THE PART OF THE BUYER
A. ACTION BY BUYER FOR SPECIFIC PERFORMANCE
1598 Where the seller has broken a contract to deliver specific or
ascertained goods, a court may, on the application of the
buyer, direct that the contract shall be performed
specifically, without giving the seller the option of retaining
the goods on payment of damages. The judgment or
decree may be unconditional, or upon such terms and
conditions as to damages, payment of the price and
otherwise, as the court may deem just.
The article applies only where the goods to be delivered are specific or
ascertained
In reciprocal obligations, it is the injured party who has a right to choose
between fulfillment (see Art. 1165, par. 1.) and rescission, with the payment of
damages in either case. (Art. 1191.)
the right of the injured party to demand specific performance cannot be
defeated by the guilty party’s choice torescind the contract.
Article 1598 which grants to the buyer, as a matter of right, the remedy of
specific performance in case the seller should violate his obligation to make
delivery.
The seller cannot retain the goods on payment of damages because damages
are imposed by law to insure fulfillment of contract and not to substitute for it.
In granting specific performance, the court may impose such terms and
conditions as to damages, payment of the price and otherwise, as it may deem
just.
B. ACTION BY BUYER FOR RECISSION OR DAMAGES FOR BREACH OF WARRANTY
1599 Where there is a breach of warranty by the seller, the
buyer may, at his election:
(1) Accept or keep the goods and set up against the seller,
the breach of warranty by way of recoupment in
diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action
against the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action
against the seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the
goods or if the goods have already been received, return
them or offer to return them to the seller and recover the
price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in
anyone of these ways, no other remedy can thereafter be
granted, without prejudice to the provisions of the second
paragraph of Article 1191.
Where the goods have been delivered to the buyer, he
cannot rescind the sale if he knew of the breach of
warranty when he accepted the goods without protest, or
if he fails to notify the seller within a reasonable time of the
election to rescind, or if he fails to return or to offer to
return the goods to the seller in substantially as good
condition as they were in at the time the ownership was
transferred to the buyer. But if deterioration or injury of
the goods is due to the breach or warranty, such
deterioration or injury shall not prevent the buyer from
returning or offering to return the goods to the seller and
rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to
do so, he shall cease to be liable for the price upon
returning or offering to return the goods. If the price or any
part thereof has already been paid, the seller shall be liable
to repay so much thereof as has been paid, concurrently
with the return of the goods, or immediately after an offer
to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to
do so, if the seller refuses to accept an offer of the buyer to
return the goods, the buyer shall thereafter be deemed to
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hold the goods as bailee for the seller, but subject to a lien
to secure payment of any portion of the price which has
been paid, and with the remedies for the enforcement of
such lien allowed to an unpaid seller by Article 1526.
(5) In the case of breach of warranty of quality, such loss, in
the absence of special circumstances showing proximate
damage of a greater amount, is the difference between the
value of the goods at the time of delivery to the buyer and
the value they would have had if they had answered to the
warranty.
Remedies of buyer for breach of warranty by seller
1. accept the goods and set up the seller’s breach to reduce or extinguish the
price;
2. accept the goods and maintain an action for damages for the breach of the
warranty;
3. refuse to accept the goods and maintain an action for damages for the
breach of the warranty; and
4. rescind the contract of sale by returning or offering the return of the goods,
and recover the price or any part thereof which has been paid. (Nos. 1-4.)
The remedies open to the buyer under the article may be grouped into three, to
wit: (a) recoupment (No. 1.); (b) action (No.3.) or counterclaim for damages (No.
2.); and (c) rescission. (No.4.)
Nos. (1) and (2) should be read in connection with Article 1586.
The general measure of damage in case of breach of warranty of quality is
provided in No. (5) of Article 1599. It is similar to the measure of damages under
Article 1596, par. 2.
The above remedies are alternative. Once a remedy has been granted to the
buyer, no other remedy can thereafter be exercised or granted
exception is when after the buyer has chosen fulfillment, it should become
impossible, in which case he may also sue for rescission
theory of recoupment is that the seller’s damages are cut down to an amount
which will compensate him for the value of what he has given
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It is fundamental that the breach of an obligation gives rise to an action for
damages. It is, therefore, unnecessary to discuss so plain a point.
Acceptance with knowledge of the breach of warranty does preclude rescission
but it does not necessarily preclude a right to recoupment or damages.
By means of counterclaim, both sides of the contract are enforced in the same
litigation.
When rescission by the buyer is not allowed
1. if the buyer accepted the goods knowing of the breach of warranty without
protest;
2. if he fails to notify the seller within a reasonable time of his election to
rescind; and
3. if he fails to return or offer to return the goods is substantially as good
condition as they were in at the time of the transfer of ownership to him.
But where the injury to the goods was caused by the very defect against
which the seller warranted, the buyer may still rescind the sale.
Rights and Obligation of buyer in case of rescission
1. the buyer shall cease to be liable for the price, his only obligation being to
return the goods;
2. If he has paid the price or any part thereof, he may recover it from the seller
3. He has the right to hold the goods as bailee for the seller should the latter
refuse the return of the goods; and
4. He has the right to have a lien on the goods for any portion of the price
already paid which lien he may enforce as if he were an unpaid seller
C. RULES IN CASE OF SALE BY DESCRIPTION OR BY SAMPLE
1481 In the contract of sale of goods by description or by sample,
the contract may be rescinded if the bulk of the goods
delivered do not correspond with the description or the
sample, and if the contract be by sample as well as
description, it is not sufficient that the bulk of goods
correspond with the sample if they do not also correspond
with the description.
The buyer Shall have a reasonable opportunity of
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comparing the bulk with the description or the sample.
Sale by description. — Sale by description occurs where a seller sells things as
being of a particular kind, the buyer not knowing whether the seller’s
representations are true or false, but relying on them as true; or, as otherwise
stated, where the purchaser has not seen the article sold and relies on the
description given him by the vendor, or has seen the goods but the want of
identity is not apparent on inspection.
Reason for the rule is that a dealer who sells an article describing it as the kind
of an article of commerce the identity of which is not known to the purchaser,
must understand that such purchaser relies upon the description as a
representation by the seller that it is the thing described.
If the bulk of the goods delivered do not correspond with the description, the
contract may be rescinded
But if the thing delivered is as described, the fact that the buyer cannot use the
thing sold for the purpose for which it was intended without the seller’s fault
does not exempt the buyer from paying the purchase price agreed upon.
Sale by sample. — To constitute a sale by sample, it must appear that the
parties contracted solely with reference to the sample, with the understanding
that the bulk was like it
But a mere exhibition of a sample by the seller in the absence of any showing
that it was an inducement of the sale or formed the sole basis thereof, does not
amount to a sale by sample as where the quality of the articles to be furnished is
expressly described in the contract without reference to the sample or the
parties agree that the goods ordered shall differ from the sample in some
particular matter
a sale is by sample is determined by the intent of the parties as shown by the
terms of the contract and the circumstances surrounding the transaction. In a
sale by sample, the vendor warrants that the thing sold and to be delivered by
him shall conform with the sample in kind, character, and quality
Sale by description and sample. — When a sale is made both by sample and by
description, the goods must satisfy all the warranties (see Art. 1565.)
appropriate to either kind of sale, and it is not sufficient that the bulk of the
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goods correspond with the sample if they do not also correspond with the
description, and vice versa.
“bulk of goods” is not used to designate the greater portion of the goods.
Rather, it is used to denote the goods as distinguished from the sample with
which they must correspond. The word “goods” in the phrase is an
oppositionalgenitive defining “bulk.” In other words “bulk of goods” mean the
same as “goods” which, as a whole body, must correspond substantially with
the sample and description.
I. RISK OF LOSS
1174 Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation, or when the nature of
the obligation requires the assumption of risk, no person
shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable
Fortuitous event is any extraordinary event which cannot be foreseen, or which,
though foreseen, is inevitable. In other words, it is an event which is either
impossible to foresee or impossible to avoid
Acts of man. — Strictly speaking, fortuitous event is an event independent of
the will of the obligor but not of other human wills, e.g., war, fi re, robbery,
murder, insurrection, etc.
Acts of God. — They are those events which are totally independent of the will
of every human being, e.g., earthquake, fl ood, rain, shipwreck, lightning,
eruption of volcano, etc. They are also called force majeure. The term generally
applies to a natural accident.
In our law, fortuitous events and force majeure are identical in so far as they
exempt an obligor from liability. Both are independent of the will of the obligor
Ordinary fortuitous events or those events which are common and which the
contracting parties could reasonably foresee (e.g., rain);and
Extraordinary fortuitous events or those events which are uncommon and which
the contracting parties could not have reasonably foreseen
Requisite of Fortuitous event
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1. The event must be independent of the human will or at least of the obligor’s
will;
2. The event could not be foreseen (unforeseeable), or if it could be foreseen,
must have been impossible to avoid (unavoidable);
3. The event must be of such a character as to render is impossible for the
obligor to comply with his obligation in a normal manner; and
4. The obligor must be free from any participation in, or the aggravation of the
injury to the obligee.
A person is not, as a rule, responsible for loss or damage resulting from
fortuitous events. In other words, his obligation is extinguished.
Exceptions:
1. When expressly specifi ed by law.21 — In exceptions (a), (b), and (c) below,
the special strictness of the law is justifi ed.
a. The debtor is guilty of fraud, negligence, or delay, or contravention of
the tenor of the obligation. (Arts. 1170, 1165, par.3.)
b. The debtor has promised to deliver the same (specific) thing to two or
more persons who do not have the same interest for it would be
impossible for the debtor to comply with his obligation to two or more
creditors even without any fortuitous event taking place. (Ibid.)
c. The debt of a thing certain and determinate proceeds from a criminal
offense, unless the thing having been offered by the debtor to the
person who should receive it, the latter refused without justification to
accept it. (Art. 1268.)
d. The thing to be delivered is generic (Art. 1263.) for the debtor can still
comply with his obligation by delivering another thing of the same kind
in accordance with the principle that “genus never perishes” (genus
nunquam perit).
2. When declared by stipulation. — The basis for this exception rests upon the
freedom of contract.
1493 If at the time the contract of sale is perfected, the thing
which is the object of the contract has been entirely lost,
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the contract shall be without any effect.
But if the thing should have been lost in part only, the
vendee may choose between withdrawing from the
contract and demanding the remaining part, paying its
price in proportion to the total sum agreed upon.
Effect of loss of thing at the time of sale
1. Thing entirely lost - the contract is inexistent and void (Art 1409[3].) because
there is no object. (Art. 1318, par. 2.) There being no contract, there is no
necessity to bring an action for annulment.
2. Thing partially lost - the vendee may elect between withdrawing from the
contract and demanding the remaining part, paying its proportionate price.
(Art. 1493, par. 2.)\
When a thing considered lost - thing is lost when it perishes or goes out of
commerce or disappears in such a way that its existence is unknown or it cannot
be recovered.
1494 Where the parties purport a sale of specific goods, and the
goods without the knowledge of the seller have perished in
part or have wholly or in a material part so deteriorated in
quality as to be substantially changed in character, the
buyer may at his option treat the sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof
as have not deteriorated, and as binding the buyer to pay
the agreed price for the goods in which the ownership will
pass, if the sale was divisible.
Article 1493 applies to a sale of specific thing. Article 1494, on the other hand,
applies to sales of goods sale consists of a mass of “specific goods” which means
“goods identified and agreed upon at the time a contract of sale is made.”
Effect of loss in case of specific of goods
1. Sale divisible. — The second option is available only if the sale is divisible.
(Art. 1494, par. 2.) A contract is divisible when its consideration is made up
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of several parts. (see Art. 1420.) When the consideration is entire and single,
the contract is indivisible.
2. Sale indivisible. — Suppose the sale is not divisible, what price is the buyer
to pay for the remaining goods if he elects to continue with the sale? It is
believed that the buyer should be made to pay only the proportionate price
of the remaining goods as provided for in paragraph 2 of the preceding
article. If the sale is indivisible, the object thereof may be considered as a
specific thing
1504 Unless otherwise agreed, the goods remain at the seller's
risk until the ownership therein is transferred to the buyer,
but when the ownership therein is transferred to the buyer
the goods are at the buyer's risk whether actual delivery
has been made or not, except that:
(1) Where delivery of the goods has been made to the
buyer or to a bailee for the buyer, in pursuance of the
contract and the ownership in the goods has been retained
by the seller merely to secure performance by the buyer of
his obligations under the contract, the goods are at the
buyer's risk from the time of such delivery;
(2) Where actual delivery has been delayed through the
fault of either the buyer or seller the goods are at the risk
of the party in fault.
general rule, if the thing is lost by fortuitous event, the risk is borne by the
owner of the thing at the time of the loss under the principle of res perit domino
exceptions:
1. Where the seller reserves the ownership of the goods merely to secure the
performance by the buyer of his obligations under the contract, the
ownership is considered transferred to the buyer who, therefore, assumes
the risk from the time of delivery.
2. Where actual delivery had been delayed through the fault of either the
buyer or seller, the goods are at the risk of the party at fault with respect to
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any loss which might not have occurred but for such fault. In this case, the
law punishes the party at fault.
Conflict between Article 1480 and Article 1504. — Under Article 1480, if the
thing sold is lost after perfection of the contract but before its delivery, that is,
even before the ownership is transferred to the buyer, the risk of loss by
fortuitous event without the seller’s fault is borne by the buyer as an exception
to the rule of res perit domino.
1538 In case of loss, deterioration or improvement of the thing
before its delivery, the rules in Article 1189 shall be
observed, the vendor being considered the debtor
Rules in case of loss, deterioration, or improvement of thing before delivery.
(1189)
1. If the thing is lost without the fault of the debtor, the obligation shall be
extinguished;
2. If the thing is lost through the fault of the debtor, he shall be obliged to pay
damages; it is understood that the thing is lost when it perishes, or goes out
of commerce, or disappears in such a way that its existence is unknown or it
cannot be recovered;
3. When the thing deteriorates without the fault of the debtor, the
impairment is to be borne by the creditor;
4. If it deteriorates through the fault of the debtor, the creditor may choose
between the rescission of the obligation and its fulfillment, with indemnity
for damages in either case;
5. If the thing is improved by its nature, or by time, the improvement shall
inure to the benefit of the creditor;
6. If it is improved at the expense of the debtor, he shall have no other right
than that granted to the usufructuary
II. EXTINGUISHMENT OF SALE
1600 Sales are extinguished by the same causes as all other
obligations, by those stated in the preceding articles of this
Title, and by conventional or legal redemption
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CAUSES FOR EXTINGUISHMENT OF SALE
A. COMMON CAUSE
- or those causes which are also the means of extinguishing all other
contracts like payment, loss of the thing, condonation, etc. (see Art. 1231.);
B. SPECIAL CAUSE
- Special or those causes which are recognized by the law on sales (such as
those covered by Articles 1484, 1532, 1539, 1540, 1542, 1556, 1560, 1567,
and 1591.);
C. EXTRA SPECIAL
- Extra-special or those causes which are given special discussion by the Civil
Code and these are conventional redemption and legal redemption
1. CONVENTIONAL REDEMPTION
a. Definition
1601 Conventional redemption shall take place when the vendor
reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Article 1616 and
other stipulations which may have been agreed upon.
Conventional redemption is the right which the vendor reserves to himself, to
reacquire the property sold provided he returns to the vendee the price of the
sale, the expenses of the contract, any other legitimate payments made
therefor and the necessary and useful expenses made on the thing sold (Art.
1616.), and fulfills other stipulations which may have been agreed upon.
Subject: Both real and personal property may be the subject matter of pacto de
retro sales or sales with right to repurchase although there are certain articles
(Arts. 1607, 1611, 1612, 1613, 1614, 1617, 1618.) which are applicable only to
immovables.
Nature of conventional redemption.
1. It is purely contractual because it is a right created, not by mandate of the
law, but by virtue of an express contract
2. It is an accidental stipulation and, therefore, its nullity cannot affect the sale
itself since the latter might be entered into without said stipulation.
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3. It is a real right when registered, because it binds third persons.
4. It is potestative because it depends upon the will of the vendor.
5. It is a resolutory condition because when exercised, the right of ownership
acquired by the vendee is extinguished
6. It is not an obligation but a power or privilege that the vendor has reserved
for himself
7. It is reserved at the moment of the perfection of the contract for if the right
to repurchase is agreed upon afterwards, there is only a promise to sell
which produces different rights and effects and is governed by Article 1479.
8. The person entitled to exercise the right of redemption necessarily is the
owner of the property sold and not any third party.
9. It gives rise to reciprocal obligation that of returning the price of sale and
other expenses, on the part of the vendor
b. Option to buy vs. right of repurchase
1. The right of repurchase is not a right granted the vendor by the vendee in a
subsequent instrument, but a right reserved by the vendor in the same
instrument of sale as one of the stipulations of the contract.
2. Once the instrument of absolute sale is executed, the vendor no longer
reserves the right to repurchase, and any right thereafter granted the
vendor by the vendee in a separate instrument cannot be a right of
repurchase, but some other right like the option to buy.
Right to redeem vs right of repurchase
1. The right to redeem becomes functus officio on the date of its expiry, and its
exercise after the period is not really one of redemption but a repurchase
2. redemption is by force of law; the purchaser at public auction is bound to
accept redemption. Repurchase, however, of foreclosed property, after
redemption period, imposes no such obligation
c. Period of redemption
1606 The right referred to in Article 1601, in the absence of an
express agreement, shall last four years from the date of
the contract.
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Should there be an agreement, the period cannot exceed
ten years.
However, the vendor may still exercise the right to
repurchase within thirty days from the time final judgment
was rendered in a civil action on the basis that the contract
was a true sale with right to repurchase.
Article 1606 refers to conventional redemption. It does not apply where the
contract is not one of sale with right of repurchase.
For conventional redemption to take place, the vendor should reserve, in no
uncertain terms, the right to repurchase the thing sold.
Period of Redemption
1. No agreement granting right. — If there is no agreement in a contract of
sale (see Umale vs. Fernandez, 28 Phil. 89 [1914].) granting the vendor the
right to redeem, there is no right of redemption since the sale should be
considered an absolute sale.
2. Agreement merely grants right. — If the parties agreed only on the right to
redeem on the part of the vendor but there is a total absence of express
stipulation as to the time within which the repurchase should be made, then
the period of redemption shall be four (4) years from the date of the
contract. (par. 1.)
3. Definite period of redemption agreed upon. — If the parties agreed on a
definite period of redemption, then the right to redeem must be exercised
within the period fixed provided it does not exceed 10 years. (par. 2.) It has
been held that the non-payment by the vendee a retro of the balance of the
purchase price does not suspend the running of the period of redemption
agreed upon (5 years) in the absence of a stipulation to that effect. A sale is
consummated upon the execution of the document and the delivery of the
subject matter thereof to the vendee. Failure to pay part of the price does
not in any way affect the cause or consideration of the contract
4. Period agreed upon exceeds ten years. — Where the agreed period exceeds
10 years, the vendor a retro has 10 years from the execution of the contract
to exercise his right of redemption.
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5. Period of redemption not specified. — If the parties agreed that the vendor
shall have a right to redeem and they intend a period which, however, is not
specified, then the redemption period is 10 years
6. Final judgment that contract is pacto de retro. — “From the time final
judgment was rendered in a civil action on the basis that the contract was a
true sale with right to repurchase,” the vendor a retro has 30 days within
which to exercise the right torepurchase.
When Article 1606, par. 3, not applicable.
1. Contract found to be an absolute sale. — Article 1606, paragraph 3 is not
applicable where the contract is found to be an absolute deed of sale, pure
and simple. There could not even be a period of redemption. It refers to
cases involving a transaction where the seller contests or denies that the
true agreement is one of sale with right to repurchase and claims that the
real intention was a loan with equitable mortgage, but the court decides
otherwise.
2. Sale known and admitted by vendor as pacto de retro. — Neither is said
provision applicable where the sale is admittedly one with pacto de retro. If
the rule were otherwise, it would be within the power of every vendor a
retro to set at naught a pacto de retro or resurrect an expired right of
repurchase, by simply instituting an action to reform the contract — known
to him to be in truth, a sale with pacto de retro — into an equitable
mortgage.
d. Effect when no redemption is made
Felicen v. Orias
FACTS: Under a "Deed of Sale With Right to Repurchase," the spouses Severino
Orias and Milagros O. Lim sold to Pedro A. Felicen, Sr. a parcel of land in Salcedo,
Samar with an area of 7.8 hectares at the price of P 3,000.00. The deed expressly
reserved to the vendors the right to redeem within two (2) years. That period
expired without any offer having been made by the vendors a retro to repurchase
the land. Some eight (8) years afterwards" the vendors a retro filed suit in the Court
of First Instance against the vendees to compel the latter to resell and reconvey the
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property to them. After due proceedings, the Trial Court rendered judgment, finding
that the contract between the parties was in truth one of sale with pacto de retro,
and that the period stipulated for the repurchase had already expired; but this
notwithstanding, the vendors a retro still had the right to repurchase the property
within thirty (30) days from the time the judgment becomes final, in accordance
with the third paragraph of Article 1606 of the Civil Code, by complying with the
requirements of Article 1616. The Court of Appeals affirmed the decision of the Trial
Court.
ISSUE Whether or not the vendors a retro can still repurchase the property pursuant
to the third paragraph of Art.1606 of the Civil Code.
HELD: The thesis of the RTC and CA cannot upon the undisputed facts be sustained.
The application of the third paragraph of Article 1606 is predicated upon the bona
fides of the vendor a retro. It must appear that there was a belief on his part,
founded on facts attendant upon the execution of the sale with pacto de retro,
honestly and sincerely entertained, that the agreement was in reality a mortgage,
one not intended to affect the title to the property ostensibly sold, but merely to
give it as security for a loan or other obligation. In that event, if the matter of the
real nature of the contract is submitted for judicial resolution, the application of the
rule is meet and proper: that the vendor a retro be allowed to repurchase the
property sold within 30 days from rendition of final judgment declaring the contract
to be a true sale with right to repurchase. Conversely, if it should appear that the
parties' agreement was really one of sale— transferring ownership to the vendee,
but accompanied by a reservation to the vendor of the right to repurchase the
property — and there are no circumstances that may reasonably be accepted as
generating some honest doubt as to the parties' intention, the proviso is
inapplicable. The reason is quite obvious. If the rule were otherwise, it would be
within the power of every vendor a retro to set at naught a pacto de retro, or
resurrect an expired right of repurchase, by simply instituting an action to reform
the contract — known to him to be in truth a sale with pacto de retro — into an
equitable mortgage. As postulated by the petitioner, "to allow herein private
respondents to repurchase the property by applying said paragraph .. to the case at
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bar despite the fact that the stipulated redemption period had already long expired
when they instituted the present action, would in effect alter or modify the
stipulation in the contract as to the definite and specific limitation of the period for
repurchase (2 years from date of sale or only until June 25, 1958) thereby not simply
increasing but in reality resuscitating the expired right to repurchase .. and likewise
the already terminated and extinguished obligation to resell by herein petitioner."
The rule would thus be a made a tool to spawn protect and even reward fraud and
bad faith, a situation surely never contemplated or intended by the law.
Vda De Macoy v. CA
FACTS: Dominga Tabora Vda. de Macoy was the owner of a rice land located at
Bagasbas, Daet, Camarines Norte. She acquired the land from spouses Patrocinio
and Pablo Serrano on January 27, 1964, for a consideration of P11,000.00. On
December 28, 1970, she executed a document which is dominated "Pabilihang
Mabibili-Muli" or sale with a right to repurchase in favor of private respondents
spouses Jesus F. Redillas and Anatalia Elon, for the sum of P6,000.00 over the land.
Among other things, it was provided therein that the period of repurchase is
between December 29, 1973 and December 29, 1975. Dominga Tabora Vda. de
Macoy died in February, 1972, leaving as heirs petitioners Julieta Macoy Pongco,
Rufina, Francisco, Miriam and Herson Macoy and Teopista Macoy de Zantua.
Alleging failure of petitioners to repurchase the land, private respondent Jesus F.
Redillas executed an Affidavit of Consolidation of Ownership on May 31, 197. On
July 21, 1977, he and his wife filed a petition for Recording of Consolidation of
Ownership before the Regional Trial Court of Daet, Camarines Norte. judgment was
rendered by the trial court ordering consolidation of ownership and registration of
title over the land in the name of private respondents. TCT was issued in the name
of private respondent Jesus F. Redillas, married to private respondent Anatalia Elon.
On June 16, 1978, private respondents mortgaged the land to the Rural Bank of Jose
Panganiban, Inc. to secure a loan of P15,000.00. On July 17, 1980, they borrowed an
additional amount of P10,00.00 from the bank. On October 4, 1978, petitioners filed
a petition for relief from the trial court's decision, finding the petition meritorious,
the trial court set aside its previous order and decision and granted new trial
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Consequently, petitioners, through their representative Teopista Macoy de Zantua,
filed their answer to the petition of private respondents. They alleged that the
document executed by the late Dominga Tabora Vda. de Macoy was not a sale with
a right to repurchase but an equitable mortgage or a contract of antichresis. They
alleged further that even assuming it to be a sale with a right to repurchase they
nevertheless had thirty (30) days from final judgment under Article 1606 of the Civil
Code within which to redeem the land. During the trial, the trial court, upon motion
of petitioners, ordered the Register of Deeds to immediately restore TCT in the
Registry office.
ISSUE: Whether or not the document executed by the late Dominga Tabora Vda. de
Macoy was not a sale with a right to repurchase but an equitable mortgage
HELD: Based on the evidence on record, none of the aforementioned instances is
present in this case. Rather, evident manifestations of a genuine sale with right to
repurchase exist. The price of the sale is not unusually inadequate. The price fixed in
a pacto de retro sale is not necessarily the true value of the land sold (De Ocampo,
et al., v. Lim, 38 Phil. 579). The reason is that the vendor has the right to repurchase
the land. The practice is to fix a relatively reduced price (but not a grossly
inadequate one) in order to afford the vendor a retro every facility to redeem the
land, unlike in an absolute sale where the vendor, in permanently giving away his
property, tries to get, as compensation, its real value. There is not even any proof
that she paid the real estate taxes thereon since the time of the sale. In the contrary
evidence showed that the private respondent Anatalia Elon paid the real estate
taxes thereon for the calendar years 1974-1977. Inasmuch as the document is
plainly a pacto de retro sale, it cannot be considered a loan with mortgage. We
reiterate that the contract is the law between the parties. When the words of a
contract are clear and readily understandable, there is no room for construction
Paez v. Magno
FACTS: On October 1943, plaintiffs and appellants borrowed from defendant
andappellee P4,000 in Japanese Military notes, with the promise to pay within a
period of five years. As a security, a parcel of land was mortgaged infavor of the
SALES9BTO14 | LDCS
creditor. OnSeptember 1944, payment of this debt was offered and tendered, but
was rejected bythe creditor. For that reason, an action was filed on November 18,
1945 asking that theobligation be declared as already paid and the deed of
mortgage be cancelled.Defendant filed a motion to dismiss upon the ground that
plaintiffs have no cause of action, therebeing no cause of action, there being no
allegation that the thing due wasconsigned in court, as provided by law. The motion
was granted, hence, this appeal.
ISSUE: Whether or not the debtor is relieved of his liability.
HELD: There is no allegation that the amount of debt was consigned in court after
tender of payment had been made and rejected. Therefore, the debtor is not
relieved of his liability. A mere tender of payment is enough, if made on time, as a
basis for actionagainst the vendee to compel him to resell. But that tender does not
in itself relieve thevendor from his obligation to pay the price whenredemption is
allowed by the court. Inother word, tender of payment issufficient to compel
redemption but is not in itself apayment that relieves the vendor from his liability to
pay the redemption price
e. Equitable mortgage
1602 The contract shall be presumed to be an equitable
mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is
unusually inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period of
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the
purchase price;
(5) When the vendor binds himself to pay the taxes on the
thing sold;
(6) In any other case where it may be fairly inferred that
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 SALES9BTO14 | LDCS

the real intention of the parties is that the transaction shall A vendor who decides to redeem or repurchase a property sold with pacto de
secure the payment of a debt or the performance of any retro in a sense stands as the debtor and the vendee as the creditor of the
other obligation. repurchase price.
In any of the foregoing cases, any money, fruits, or other The sole right of the vendor under a pacto de retro agreement is that of
benefit to be received by the vendee as rent or otherwise redemption. He has no other interest left in the property which he can transfer.
shall be considered as interest which shall be subject to the But a sale subsequently made by the vendor to an innocent purchaser for value
usury laws.
could defeat the vendee’s title and right to possession if the latter’s right is not
An equitable mortgage is one which lacks the proper formalities form or words,
properly registered or annotated.
or other requisites prescribed by law for a mortgage, but shows the intention of
Requisite For a presumption of an equitable mortgage to arise
the parties to make the property subject of the contract as security for a debt
1. that the parties entered into a contract denominated as a contract of sale
and contains nothing impossible or contrary to law.
with a right of repurchase or purporting to be an absolute sale
Article 1602 is a new provision and is one of the suitable remedies (see Arts.
2. and that their intention was to secure an existing debt by way of mortgage
1603-1607.1) sponsored by the Code Commission to provide safeguards and
six distinct and separate circumstance the presence of any (not a concurrence)
restrictions against the evils of sales with a right of repurchase, commonly called
of which is sufficient to give rise to the presumption that a contract, regardless
pacto de retro sales.
of its nomenclature, is an equitable mortgage
The policy of the law is to discourage pacto de retro sales and thereby prevent
1. Price of the sale usually inadequate
the circumvention of the prohibition against usury
2. Vendor remains in possession
Pacto de retro vs. mortgage
3. Period of redemption is extended after expiration
1. In pacto de retro, ownership is transferred but the ownership is subject to
4. Purchaser retains part of the price
the condition that the seller might recover the ownership within a certain
5. Vendor binds himself to pay taxes on the thing sold
period of time,3 while in mortgage, ownership is not transferred but the
6. The parties really intended an equitable mortgage
property is merely subject to a charge or lien as security for the compliance
A contract should be construed as a mortgage or a loan instead of a pacto de
of a principal obligation, usually a loan;
retro sale when its terms are ambiguous
2. If the seller does not repurchase the property upon the very day named in
Intention to execute mortgage may be fairly inferred
the contract, he loses all interest thereon, while the mortgagor does not
1. Vendor in urgent need of money
lose his interest in the property if he fails to pay the debt at its maturity
2. Automatic appropriation by vendee of property sold stipulated.
3. In the case of a pacto de retro, there is no obligation resting upon the
3. Vendee given possession of certificate of title.
purchaser to foreclose. Neither does the vendor have any right to redeem
4. Escalation of purchase price every month stipulated
the property after the maturity of the debt. On the other hand, it is the duty
5. Vendor borrowed from vendee money used in buying property sold
of the mortgagee to foreclose the mortgage if he wishes to secure a perfect
6. Vendor of low intelligence and illiterate
title thereto, and after the maturity of the debt secured by the mortgage
7. Vendor continued to pay monthly interest; property not transferred to
and before foreclosure, the mortgagor has a right to redeem.
vendee; etc

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8. Vendor continued to be indebted
9. Vendor mortgaged property sold to a bank; paid taxes thereon; etc.
1603 In case of doubt, a contract purporting to be a sale with
right to repurchase shall be construed as an equitable
mortgage.
1604 The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale
Presumption in case of doubt
1. Doubt resolved in favor of equitable mortgage. — Whether the sale is
absolute or pacto de retro, it shall be presumed to be an equitable
mortgage even if only one of the circumstances mentioned in Article 1602
is present. This is so because pacto de retro sales, with the stringent and
onerous effects that accompany them, are not favored.
2. Presumption, an exception to general rule. — Article 1603 is an exception
to the rule that doubts affecting an onerous contract shall be settled in
favor of the greatest reciprocity of interests. (Art.1378, par. 1.) An
equitable mortgage effects a lesser transmission of rights and interests
than a contract of sale, since the debtor does not surrender all rights to his
property but simply confers upon the creditor the right to collect what is
owing from the value of the thing given as security.
3. Parol evidence admissible. — Parol evidence is admissible to show that a
transaction purporting to be an absolute or a pacto de retro sale is really
one of loan with a security and, therefore, a mortgage.
4. Where contract appears to be a genuine sale. — If from all indications, the
contract appears to be a genuine sale with right of repurchase (or an
absolute sale) and none of the suspicious circumstances mentioned in
Article 1602 is present, the true agreement will be upheld.
Effect where contract held is an equitable mortgage
1. Formal requirements of mortgage deemed complied with
2. Contract subordinate to a subsequent registered mortgage
3. Title of property remains in supposed vendor
4. Remedy of creditor is to foreclose
SALES9BTO14 | LDCS
5. Conveyance of land not to affect mortgagor’s right of redemption.
1605 In the cases referred to in Articles 1602 and 1604, the
apparent vendor may ask for the reformation of the
instrument.
When vendor may ask for reformation - Reformation is that remedy granted by
law by means of which a written instrument is made or construed so as to
express or conform to the real intention of the parties when such intention is
not expressed in the instrument be reformed (Art. 1365.) so that the contract
should appear to be a mortgage and not an absolute sale or a pacto de retro
sale.
1606 The right referred to in Article 1601, in the absence of an
express agreement, shall last four years from the date of
the contract.
Should there be an agreement, the period cannot exceed
ten years.
However, the vendor may still exercise the right to
repurchase within thirty days from the time final judgment
was rendered in a civil action on the basis that the contract
was a true sale with right to repurchase.
Period for exercise of right of redemption.
1. No agreement granting right.
2. Agreement merely grants right
3. Definite period of redemption agreed upon.
4. Period agreed upon exceeds ten years.
5. Period of redemption not specified.
6. Final judgment that contract is pacto de retro
When Article 1606, par. 3, not applicable.
1. Contract found to be an absolute sale.
2. Sale known and admitted by vendor as pacto de retro
3. Party abandoned position that transaction an equitable mortgage after
judicial declaration of transaction as a pacto de retro sale.
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Date from which period reckoned
1. Date of contract
2. Date of finality of judgment
Effect of stipulation extending period of repurchase
1. After expiration of period of redemption. — It is legally impossible to speak of
extension because that which is extinguished cannot be extended and because
the ownership in the vendee is already consolidated, and becomes absolute.
2. Before the expiration of the period of redemption. — The original term may be
extended provided that the extension, including the original term, shall not
extend beyond 10 years; otherwise, the extension is void as to the excess.
The question of the period within which the repurchase may be made is
unanimously considered as a question of public interest.
Cachola v. CA
FACTS: On July 30, 1973, the respondent spouses Federico Briones and Trinidad
Encinas, as the registered owners of the above-named property under Transfer
Certificate of Title (TCT) No. 72398 mortgaged the same to Benjamin Ocampo as a
security for a loan of P15,000.00. For failure of the spouses to pay the loan, Ocampo
caused the foreclosure of the real estate mortgage and the subsequent sale of the
property at public auction. Ocampo being the highest bidder, purchased the
property at the auction. A certificate of sale was executed in his favor. The
respondents were able to exercise their right of redemption within the one-year
period from the auction sale by paying P19,876.80 plus accrued interests and taxes.
This was made possible through a loan of P40,000.00 obtained from petitioner, the
late Mauricio Cachola and his co-defendant in Civil Case No for annulment of deed
of sale, Angelina Alfaras. This second loan was evidenced by a promissory note
executed by the spouses Briones duly signed by them dated March 11, 1975, but
subscribed before a notary public on March 13, 1975. The loan was also evidenced
by a "Kasunduan between the petitioners, and the respondent spouses, on the
other signed on March 13, 1975 containing the same stipulation for payment. The
Kasunduan recognized the full ownership by the respondents. There was also a
stipulation that after the properties shall have been redeemed from Ocampo, the
SALES9BTO14 | LDCS
title should be placed in the hands of Cachola for the purpose of securing the loan.
Hence, another real estate mortgage was entered into by virtue of the Kasunduan
over the same house and lot in favor of petitioner Cachola. TCT No. 72398 was
placed under the custody of Angelina Alfaras on behalf of the petitioner. The
respondent spouses failed to pay any amount within the stipulated six month period
and even afterwards. On January 30, 1976, petitioner executed a Release of
Mortgage. Sometime in 1977, the petitioner filed an unlawful detainer suit against
the respondents-spouses. In June 1979, the respondents filed a suit for annulment
of the deed of absolute sale and annulment of the unlawful detainer judgment. On
November 9, 1981, the subject property was conveyed by Cachola to his son
Ebenezer Cachola by way of donation inter vivos. On June 10, 1985, the respondents
filed the instant case against the petitioner and Angelina Alfaras before the Regional
Trial Court, Quezon City again for: annulment of the deed of absolute sale,
cancellation of TCT of the petitioner and annulment of the unlawful detainer
judgment. The trial court ruled that the action for annulment of the deed of sale on
the ground of fraud had already prescribed, and that the contract entered into was
not one of absolute sale but an equitable mortgage because of the gross inadequacy
of the price of the sale. Thus, it ordered the cancellation of TCT issued in the name
of Mauricio Cachola and the subsequent deed of donation, and the revival of TCT of
Briones. On appeal, the decision of the trial court was affirmed with modifications.
Hence, this petition for review on certiorari.
ISSUE: whether or not the contract is one of sale or equitable mortgage
HELD: The Court is convinced that the evidence is wanting to substantiate the
conclusion that a contract which in form and substance is a deed of sale is actually
an equitable mortgage. The questioned decision is based on the following: 1) the
gross inadequacy of the price; 2) the fact that the respondents-vendors remained in
possession of the property after the execution of the questioned deed of absolute
sale; and 3) the respondents, being old and knowing no English, could not have
intelligently understood the document they signed. An equitable mortgage is "one
which although it lacks some formality, form of words or other requisites prescribed
by a statute, show(s) the intention of the parties to charge a real property as
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security for a debt and contains nothing impossible or contrary to law." The words
of the contract are clear and leave no doubt as to the desire of the spouses to
transfer the property by way of sale to the petitioner. No other meaning could be
given to the terms and stipulations of the contract but their literal meaning. (Article
1370, New Civil Code). The contract was proper in form. It was properly executed
and signed by each of the spouses and by Cachola on its second page as well as on
the left hand margin of every page. It was acknowledged by a notary public.
Considering that the price of the deed was not extraordinarily inadequate, that it
was the vendee who paid the realty taxes due on the property, and that the vendors
were not the lawful possessors thereof prior to their eviction, the Court is
constrained to uphold the validity of the contract of sale in favor of petitioner
Mauricio Cachola and the subsequent donation inter vivos to Ebenezer Cachola
1617 The vendor cannot avail himself of the right of repurchase
without returning to the vendee the price of the sale, and
in addition:
(1) The expenses of the contract, and any other legitimate
payments made by reason of the sale;
(2) The necessary and useful expenses made on the thing
sold.
Rights of parties as to fruits of land
1. If there were fruits at the time of the sale and the vendee paid for them, he
must be reimbursed at the time of redemption as the payment forms part of
the purchase price.
2. If no indemnity was paid by the vendee for the fruits, there shall be no
reimbursement for those existing at the time of redemption.
3. If the property had no fruits at the time of the sale and some exist at the
time of redemption, they shall be apportioned proportionately between the
redemptioner and the vendee, giving the latter a share in proportion to the
time he possessed the property during the last year counted from the
anniversary of the date of the sale (par. 2.) to compensate the vendee for
his expense.
f. Right of the vendor a retro as to charges/encumbrance
SALES9BTO14 | LDCS
1618 The vendor who recovers the thing sold shall receive it free
from all charges or mortgages constituted by the vendee,
but he shall respect the leases which the latter may have
executed in good faith, and in accordance with the custom
of the place where the land is situated.
Right of vendor a retro to recover thing sold free from charges. - The vendee a
retro may alienate, encumber, or perform other acts of ownership over the
thing sold. But his ownership being revocable upon redemption, all acts done by
him are also revocable.
The vendor has the right to receive the property in the same condition in which
it was at the time of the sale.
The law, however, establishes an exception with respect to leases which the
vendee may have entered into in good faith according to the custom of the
place where the land is located.
3. LEGAL REDEMPTION
1619 Legal redemption is the right to be subrogated, upon the
same terms and conditions stipulated in the contract, in the
place of one who acquires a thing by purchase or dation in
payment, or by any other transaction whereby ownership is
transmitted by onerous title
Article 1619 gives the definition of legal redemption. As the word “thing” is
employed without qualification, the right applies to both movable and
immovable property.
Subrogation transfers to the person subrogated the rights pertaining to another.
(Art. 1303.)
Note that legal redemption may take place not only in purchase or dation in
payment but in any other transfer of ownership by onerous title. It has been
held, however, that it cannot take place in barter and in the transmission of
property by hereditary title
Dation in payment or dacion en pago is the transmission of the ownership of a
thing by the debtor to the creditor as the accepted equivalent of the
performance of an obligation.
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Nature of dation in payment
1. Sale of thing
2. Novation of an obligation
Basis and nature of right of legal redemption.
1. The nature of conventional and legal rights of redemption is identical,
except for the source of the right. While conventional redemption arises
from the voluntary agreement of the parties, legal redemption proceeds
from law.
 The concept of legal redemption may be converted into one of
conventional redemption. Thus, where there was voluntary agreement
of the parties, consisting of extensions of the redemption period
granted at the request of the vendors followed by commitment by them
to pay the redemption price at a fixed date, it was held that the concept
of legal redemption is converted by the parties into one of conventional
redemption such that it generated binding contracts when approved by
the vendee.
2. The right of legal redemption is not predicated on proprietary right but on a
bare statutory privilege to be exercised only by the person named in the
statute. In other words, the statute does not make actual ownership at the
time of sale or redemption a condition precedent, the right following the
person and not the property
3. Legal redemption is in the nature of a mere privilege created partly for
reason of public policy and partly for the benefit and convenience of the
redemptioner to afford him a way out of what might be a disagreeable or
inconvenient association into which he has been thrust. It is intended to
minimize co-ownership.
Instances of Legal Redemption
1. Under the Civil Code, the instances of legal redemption are found in Articles
1620, 1621, 1622, 1634
2. Under special laws, the following are instances of legal redemption
a. Redemption by owner of real property sold for delinquent taxes. The
period is within one year from the date of sale
SALES9BTO14 | LDCS
b. Repurchase by homesteader of homestead sold under the Public Land
Act. The period is five years
c. Redemption by judgment debtor or redemptioner of real property sold
on execution. The period is twelve months (Rules of Court, Rule 39, Sec.
30.)
d. Redemption by mortgagor after mortgaged property has been judicially
foreclosed and sold. The period is ninety days but before confirmation
of sale by the court
e. Redemption by an agricultural lessee of landholding sold by the
landowner. The period is 180 days from notice in writing which shall be
served by the vendee on all lessees affected and the Department of
Agrarian Reform upon the registration of the sale.
Rights of Legal Redemption of co owner (1620)
1. There must be co-ownership of a thing;
2. There must be alienation of all or of any of the shares of the other co-
owners;
3. The sale must be to a third person or stranger (Art. 1620.), i.e., a non-co-
owner; and
4. The sale must be before partition
By whom and against whom right may be exercised
1. A co-owner has the legal right to sell, assign, or mortgage his ideal share in
the property held in common
2. Co-owners have no right of legal redemption against each other to whom
the law grants the same privilege, but only against a third person
3. Should any of the heirs sell his hereditary right to a stranger before
partition, any or all of the co-heirs may be subrogated to the rights of the
purchaser by reimbursing him for the purchase price, provided it be done
within the period of one (1) month to be counted from the time they were
notified in writing of the sale by the vendor.
4. The right of legal redemption is not granted solely and exclusively to the
original co-owners but applies to those who subsequently acquire their
respective shares while the community subsists.
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When right cannot be invoked.
1. Thing owned in common partitioned
2. Shares of all co-owners sold.
3. Thing owned in common had been offered for sale by all co-owners
Price of redemption
1. Reasonable price
2. Price stated in the deed of sale
3. Amount actually paid by the buyer.
Right of legal redemption of adjacent owners of rural lands (1621)
1. Both the land of the one exercising the right of redemption and the land
sought to be redeemed must be rural;
2. The lands must be adjacent;
3. There must be an alienation;
4. The piece of rural land alienated must not exceed one (1) hectare;
5. The grantee or vendee must already own any other rural land; and
6. The rural land sold must not be separated by brooks, drains, ravines, roads
and other apparent servitudes from the adjoining lands
rural” has been defined as relating to or constituting tenement in gland adopted
and used for agricultural or pastoral purposes.
Purpose of the grant of right to owners of adjoining rural lands
1. To benefit adjacent owners and public weal as well.
2. To avoid difficulties in cultivation
3. To protect agriculture
Rights of pre-emption and legal redemption of adjacent owners of urban lands
(1622)
1. Meaning. — Article 1622 recognizes two rights; namely:
a. Pre-emption, which has been defined as the act or right of purchasing
before others. (72 C.J.S. 478.) It is exercised before the sale or resale
against the would-be vendor; and
b. Redemption, which is exercised after the sale has been perfected
against the vendee. The recognition of the right of redemption will
result in the rescission of the sale.
SALES9BTO14 | LDCS
2. Requisites:
a. The one exercising the right must be an adjacent owner;
b. The piece of land sold must be so small and so situated that a major
portion thereof cannot be used for any practical purpose within a
reasonable time.
c. Such urban land was bought by its owner merely for speculation.
3. Price. — The price to be paid is a reasonable price. In a case, an adjoining
owner was held not entitled to redeem a lot (612 sq. meters) which was
much bigger area-wise, than the lot (140 sq. meters) owned by him.
4. Preference as between two or more adjacent owners. — In case two or
more adjoining owners desire to exercise the right of legal redemption, the
law prefers him whose intended use of the land appears best justified.
“urban,” as used in Article 1622, does not necessarily refer to the nature of the
land itself sought to be redeemed nor to the purpose to which it is somehow
devoted, but to the character of the community or vicinity in which it is found.
Period for exercise of right (1623)
1. Absolute and non-extendible — The period provided in the above article is
absolute. It is peremptory and non-extendible
2. A condition precedent. — The thirty-day period4 is not a prescriptive period
but is more a requisite or condition precedent to the exercise of the right of
legal redemption
3. Reason for rule. — The fundamental policy of the law is to discourage the
keeping for a long time of property in a state of uncertainty, beyond the
thirty-day period, a situation which obviously is unjust to the purchaser and
prejudicial to public interest.
Notice by vendor or prospective vendor.
1. Reasons for rule. — The reasons for requiring the vendor to give the notice
are easy to see. The seller of an undivided interest is in the best position to
know who are his co-owners that under the law must be notified of the
sale.
2. Notice must be in writing. — The written notice required under Article
1088 (supra.) and Article 1623 is indispensable.
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3. Form of written notice. — Jurisprudence affirms the need for notice but its
form has been the subject of varying interpretations.
4. Contents of written notice of sale. — The notice in writing which Article
1623 requires to be made is a notice not only of a perfected sale but of the
actual execution and delivery of the deed of sale.
5. Notice by any other insufficient. — The notice required by Article 1623
must be given by the vendor (or prospective vendor) and by nobody else.
How right exercised
1. Consignation in court.
2. Tender of price
PSC v. Sps Valencia
FACTS: Herein petitioner and respondents are the children of the spouses Rufo and
Sebastiana Balus. On January 3, 1979, Rufo mortgaged a parcel of land, which he
owns, as a security for a loan he obtained from the Rural Bank of Maigo, Lanao del
Norte. Rufo failed to pay his loan. As a result, the mortgaged property was
foreclosed and was sold to the bank as the sole bidder at a public auction held for
that purpose. The property was not redeemed within the period allowed by law.
More than two years after the auction, or on January 25, 1984, the sheriff executed
a Definite Deed of Sale in favor of the Bank. Thereafter, a new title was issued in the
name of the Bank. On October 10, 1989, herein petitioner and respondents
executed an Extrajudicial Settlement of Estate adjudicating to each of them a
specific one-third portion of the subject property consisting of 10,246 square
meters. The Extrajudicial Settlement also contained provisions wherein the parties
admitted knowledge of the fact that their father mortgaged the subject property to
the Bank and that they intended to redeem the same at the soonest possible time.
Three years after the execution of the Extrajudicial Settlement, herein respondents
bought the subject property from the Bank. On October 12, 1992, a Deed of Sale of
Registered Land was executed by the Bank in favor of respondents. Subsequently, a
TCT was issued in the name of respondents. Meanwhile, petitioner continued
possession of the subject lot. On June 27, 1995, respondents filed a Complaint for
Recovery of Possession and Damages against petitioner, contending that they had
SALES9BTO14 | LDCS
already informed petitioner of the fact that they were the new owners of the
disputed property, but the petitioner still refused to surrender possession of the
same to them. The RTC held that the right of petitioner to purchase from the
respondents his share in the disputed property was recognized by the provisions of
the Extrajudicial Settlement of Estate, which the parties had executed before the
respondents bought the subject lot from the Bank. Aggrieved by the Decision of the
RTC, herein respondents filed an appeal with the CA. The CA ruled that when
petitioner and respondents did not redeem the subject property within the
redemption period and allowed the consolidation of ownership and the issuance of
a new title in the name of the Bank, their co-ownership was extinguished. Hence,
the instant petition for review on certiorari under Rule 45.
ISSUE: Whether or not co-ownership by him and respondents over the subject
property persisted even after the lot was purchased by the Bank and title thereto
transferred to its name, and even after it was eventually bought back by the
respondents from the Bank.
RULING: The court is not persuaded. At the outset, it bears to emphasize that there
is no dispute with respect to the fact that the subject property was exclusively
owned by petitioner and respondents' father, Rufo, at the time that it was
mortgaged in 1979. This was stipulated by the parties during the hearing conducted
by the trial court on October 28, 1996. Evidence shows that a Definite Deed of Sale
was issued in favor of the Bank on January 25, 1984, after the period of redemption
expired. There is neither any dispute that a new title was issued in the Bank's name
before Rufo died on July 6, 1984. Hence, there is no question that the Bank acquired
exclusive ownership of the contested lot during the lifetime of Rufo. The rights to a
person's succession are transmitted from the moment of his death. In addition, the
inheritance of a person consists of the property and transmissible rights and
obligations existing at the time of his death, as well as those which have accrued
thereto since the opening of the succession. In the present case, since Rufo lost
ownership of the subject property during his lifetime, it only follows that at the time
of his death, the disputed parcel of land no longer formed part of his estate to which
his heirs may lay claim. Stated differently, petitioner and respondents never
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inherited the subject lot from their father. Furthermore, petitioner's contention that
he and his siblings intended to continue their supposed co-ownership of the subject
property contradicts the provisions of the subject Extrajudicial Settlement where
they clearly manifested their intention of having the subject property divided or
partitioned by assigning to each of the petitioner and respondents a specific 1/3
portion of the same. Partition calls for the segregation and conveyance of a
determinate portion of the property owned in common. It seeks a severance of the
individual interests of each co-owner, vesting in each of them a sole estate in a
specific property and giving each one a right to enjoy his estate without supervision
or interference from the other. In other words, the purpose of partition is to put an
end to co-ownership, an objective which negates petitioner's claims in the present
case.
Etcuban v. CA
FACTS: Petitioner Dominico Etcuban (petitioner) inherited a piece of land together
with his co-heirs (the spouse of the deceased, Demetria Initan, and Pedro, Vicente,
Felicitas, Anastacio, Froilan, Alfonso. Advincula, Anunciacion, Jesus, Aguinaldo, all
surnamed Etcuban) from their deceased father. Said piece of land was declared in
their names as the heirs of Eleuterio Etcuban under Tax Declaration No. 06837.
Thereafter the eleven co-heirs executed in favor of Jesus C. Songalia and Guadalupe
S. Songalia (private respondents Songalia) eleven deeds of sale of their respective
shares in the co-ownership for the total sum of P26,340.00. The earliest of the
eleven deeds of sale was made on December 9, 1963 and the last one in December
1967. In his complaint before the trial court, petitioner alleged that his coowners
leased and / or sold their respective shares without giving due notice to him as a co-
owner notwithstanding his intimations to them that he was willing to buy all their
respective shares. Private respondents Songalia, in denying the material allegations
of the complaint, argued that petitioner came to know of the sale of the subject
property to them in August 1968 or sometime earlier; that acting on this knowledge,
petitioner thru his lawyers wrote private respondents Songalia on August 15, 1968
about the matter; that Jesus Songalia personally went to the office of Atty. Vicente
Faelner or counsel for petitioner to inform him of the sale of the subject property;
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that petitioner took no action despite the information he received from private
respondents Songalia thru his counsel; and that, consequently, petitioner lost his
right to redeem under Art. 1623 of the new Civil Code because the right of
redemption may be exercised only within 30 days from notice of sale and petitioner
was definitely notified of the sale years ago as shown by the records. The trial court
allowed petitioner his right of redemption over the subject property and ordered
the private respondents Songalia to accept the redemption price of P26,340.00. The
Court of Appeals, on the other hand, ruled that petitioner is barred from redeeming
the subject property for his failure to make a valid tender of the sale price of the
land paid by the defendants within the period fixed by Art. 1623 of the Civil Code.
ISSUE: Who has the right of redemption over the subject property?
HELD: The Supreme Court dismissed herein petition and affirmed the decision of
the appellate court. Petitioner contends that vendors (his co-heirs) should be the
ones to give him written notice and not the vendees (defendants or private
respondent herein). However, while it is true that written notice is required by the
law (Art. 1623), it is equally true that the same Art. 1623 does not prescribe any
particular form of notice, nor any distinctive method for notifying the redemptioner.
So long therefore, as the latter is informed in writing of the sale and the particulars
thereof, the 30 days for redemption start running, and the redemptioner has no real
cause to complain. In the case at bar, where the vendors or co-owners of petitioner
stated under oath in the deeds of sale that notice of sale had been given to
prospective redemptioners in accordance with Article 1623 of the Civil Code. "A
sworn statement or clause in a deed of sale to the effect that a written notice of sale
was given to possible redemptioners or co-owners might be used to determine
whether an offer to redeem was made on or out of time, or whether there was
substantial compliance with the requirement of said Art. 1623."
III. ASSIGNMENT OF CREDIT AND OTHER INCORPOREAL RIGHTS
A. CONCEPTS
1624 An assignment of creditors and other incorporeal rights
shall be perfected in accordance with the provisions of
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Article 1475.
Assignment of credit is a contract by which the owner (assignor/ creditor) of a
credit and other incorporeal rights transfers, either onerously or gratuitously,
to another (assignee) his rights and actions against a third person (debtor).
Nature of assignment of credit
1. Assignment of credit and other incorporeal rights is a consensual, bilateral,
onerous, and commutative or aleatory contract
2. The assignment involves no transfer of ownership but merely effects the
transfer of rights which the assignor has at the time to the assignee
3. It may be done gratuitously (i.e., by donation) or onerously. If done
onerously (i.e., exchange, dacion en pago), whatever may be the legal
cause, it is really a sale
Assignment distinguished from of the terms.
1. Renunciation is the abandonment of a right without a transferto another.
(see Art. 1270.)
2. Agency involves representation, not transmission wherein the agent acts for
the principal.
3. Substitution is the change of a new debtor for the previous debtor with the
credit remaining in the same creditor. (see 10 Manresa 377.)
4. Subrogation is the change in the person of the creditor with the credit being
extinguished.
B. EXCLUDED CASES OF ASSIGNMENT
1635 From the provisions of the preceding article shall be
excepted the assignments or sales made:
(1) To a co-heir or co-owner of the right assigned;
(2) To a creditor in payment of his credit;
(3) To the possessor of a tenement or piece of land which is
subject to the right in litigation assigned
Exceptions to debtor’s right to legal redemption
1. Sale to a co-heir or co-owner. — This exception is based on the desire to do
away with co-ownership or pro-indivision. Moreover, if the right of
redemption is granted to the debtor, it would not terminate litigation which
SALES9BTO14 | LDCS
is the purpose of this article because the co-owner or co-heir may still sue
the debtor for the share that corresponds to the former in the credit
2. Sale to a creditor. — There is a lawful basis for the assignment as the
assignee cannot be considered as a vendee of a right in litigation and as a
speculator. It really refers to a dation in payment.
3. Sale to the possessor of property in question. — The reason for this
exception is that the assignee is moved by a desire to preserve the property
and not to speculate at the expense of the debtor.
C. PERFECTION
1625 An assignment of a credit, right or action shall produce no
effect as against third person, unless it appears in a public
instrument, or the instrument is recorded in the Registry of
Property in case the assignment involves real property.
Binding effect of assignment
1. As between the parties, the assignment is valid although it appears only in a
private document so long as the law does not require a specific form for its
validity
2. To affect third persons, the assignment must appear in a public instrument,
and in case it involves real property, it is indispensable that it be recorded in
the Registry of Property.
3. The assignee merely steps into the shoes of the assignor, the former
acquiring the credit subject to defenses (e.g., fraud, prescription, etc.)
available to the debtor against the assignor.
D. EFFECTS OF ASSIGNMENT
1626 The debtor who, before having knowledge of the
assignment, pays his creditor shall be released from the
obligation
In an assignment of credit, the consent of the debtor is not essential in order
that it may produce legal effects.
Effect of payment by debtor after assignment of credit
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1. Before notice. — The notice is thus for the protection of the assignee
because before the said notice, payment to the original creditor is valid.
2. After notice, or before notice but debtor had knowledge of assignment. —
Payment by the debtor to the original creditor after the former had received
notice of the assignment, whether or not he consented, is not valid as
against the assignee
1627 The assignment of a credit includes all the accessory rights,
such as a guaranty, mortgage, pledge or preference.
Extent of assignment of credit. - The assignment of credit includes not only the
credit itself but also all rights accessory thereto. (see Art. 1537.) This follows the
familiar rule that the accessory follows the principal. But the parties may
stipulate that the accessory rights shall not be included in the assignment.
E. WARRANTIESOF ASSIGNOR
1628 The vendor in good faith shall be responsible for the
existence and legality of the credit at the time of the sale,
unless it should have been sold as doubtful; but not for the
solvency of the debtor, unless it has been so expressly
stipulated or unless the insolvency was prior to the sale and
of common knowledge.
Even in these cases he shall only be liable for the price
received and for the expenses specified in No. 1 of Article
1616.
The vendor in bad faith shall always be answerable for the
payment of all expenses, and for damages
Warranties of the assignor of credit
1. When a creditor assigns his credit, he warrants only the
(a) existence and (b) legality of the credit at the perfection of the contract.
He is not even liable for the warranty if the credit had been sold as doubtful.
2. There is no warranty as to the solvency of the debtor unless it is expressly
stipulated or unless the insolvency was already existing and of public
knowledge at the time of the assignment.
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If there be any breach of the above warranties, the assign or vendor shall be
held answerable therefor.
Liabilities of the assignor of credit
1. For violation of the above warranties, the liability of the vendor (assignor) in
good faith is limited only to the price received and to the expenses of the
contract, and any other legitimate payments by reason of the assignment.
2. The assignor in bad faith is liable not only for the payment of the price and
all expenses, but also for damages. An assignor in bad faith is one who has
knowledge of any of the circumstances
1629 In case the assignor in good faith should have made himself
responsible for the solvency of the debtor, and the
contracting parties should not have agreed upon the
duration of the liability, it shall last for one year only, from
the time of the assignment if the period had already
expired.
If the credit should be payable within a term or period
which has not yet expired, the liability shall cease one year
after the maturity
Duration of assignor’s liability where debtor’s solvency guaranteed
1. If there is a stipulation, then for the term or period fixed;
2. If there is no stipulation:
a. for one year from the assignment of the credit when the period for
payment of the credit has expired; or
b. for one year after its maturity, when such period for payment has not
yet expired.
Reason for rule
1. to prevent fraud which may be committed by feigning the solvency of the
debtor at the time of the assignment when in fact he is insolvent
2. to oblige the assignee to exert efforts in the recovery of the credit and
thereby avoid that by his oversight, the assignor may suffer
F. SPECIAL RULES
1. ASSIGNMENT FOR SALE OF INHERITANCE
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1630 One who sells an inheritance without enumerating the
things of which it is composed, shall only be answerable for
his character as an heir.
sale of successional right or the right to an inheritance before partition
a. Subject of sale is hereditary right, not objects which make up inheritance. —
An inheritance may be sold either with specification of the properties to be
alienated or without enumerating the things comprising it, that is to say, the
hereditary rights only
b. Warranties of seller. — The seller of an inheritance warrants only the fact of
his heirship but he does not warrant the objects which make up his
inheritance
1631 One who sells for a lump sum the whole of certain rights,
rents, or products, shall comply by answering for the
legitimacy of the whole in general; but he shall not be
obliged to warrant each of the various parts of which it may
be composed, except in the case of eviction from the whole
or the part of greater value
In the sale of the whole of certain rights, rents, or products for a lump sum, the
subject matter is the totality of such rights, rents, or products. As a
consequence, the vendor warrants only the legitimacy of the whole and not the
various parts of which it may be composed. The vendor is not liable for eviction
of each of the various parts unless the eviction involves the whole or the part of
greater value
1632 Should the vendor have profited by some of the fruits or
received anything from the inheritance sold, he shall pay
the vendee thereof, if the contrary has not been stipulated.
Unless otherwise stipulated, the fruits of an inheritance are included in the sale
thereof. (see Art. 1537.) If the vendor merely received the fruits, he must deliver
them to the vendee; if they have been consumed, he must reimburse the
vendee; if they have been sold, he must deliver the price of the sale
SALES9BTO14 | LDCS
The liability of the vendor for anything received from the inheritance sold is
subject to any agreement to the contrary
1633 The vendee shall, on his part, reimburse the vendor for all
that the latter may have paid for the debts of and charges
on the estate and satisfy the credits he may have against
the same, unless there is an agreement to the contrary
Liability of vendee for debts of and charges on estate - the vendor is obliged to
pay the vendee the fruits or anything received from the inheritance, it is also
just that the vendee be required to reimburse the vendor for whatever the
latter has paid for the debts of and charges on the estate.
2. ASSIGNMENT OF INCORPOREAL RIGHT UNDER LITIGATION
1634 When a credit or other incorporeal right in litigation is sold,
the debtor shall have a right to extinguish it by reimbursing
the assignee for the price the latter paid therefor, the
judicial costs incurred by him, and the interest on the price
from the day on which the same was paid.
A credit or other incorporeal right shall be considered in
litigation from the time the complaint concerning the same
is answered.
The debtor may exercise his right within thirty days from
the date the assignee demands payment from him.
requisites before the right of legal redemption can be exercised:
1. There must be a sale or assignment of a credit. The concept of sale must be
understood in its restricted sense. The right cannot be exercised if the
transaction is exchange or donation
2. There must be a pending litigation at the time of the assignment. The
complaint by the assignor must have been filed and answered by the
creditor before the sale of the credit.
3. The debtor must pay the assignee
a. the price paid by him;
b. the judicial costs incurred by him; and
c. the interest on the price from the date of payment; and
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d. The right must be exercised by the debtor within thirty (30) days from
the date the assignee demands (judicially or extra-judicially) payment
from him.
1635 From the provisions of the preceding article shall be
excepted the assignments or sales made:
(1) To a co-heir or co-owner of the right assigned;
(2) To a creditor in payment of his credit;
(3) To the possessor of a tenement or piece of land which is
subject to the right in litigation assigned.
Exceptions to debtor’s right to legal redemption
4. Sale to a co-heir or co-owner. — This exception is based on the desire to do
away with co-ownership or pro-indivision. Moreover, if the right of
redemption is granted to the debtor, it would not terminate litigation which
is the purpose of this article because the co-owner or co-heir may still sue
the debtor for the share that corresponds to the former in the credit
5. Sale to a creditor. — There is a lawful basis for the assignment as the
assignee cannot be considered as a vendee of a right in litigation and as a
speculator. It really refers to a dation in payment.
6. Sale to the possessor of property in question. — The reason for this
exception is that the assignee is moved by a desire to preserve the property
and not to speculate at the expense of the debtor.
IV. BARTER
1638 By the contract of barter or exchange one of the parties
binds himself to give one thing in consideration of the
other's promise to give another thing.
barter is defined by Article 1638. It is similar to sale with the only difference that
instead of paying a price in money, another thing is given in lieu thereof. (see
Art. 1468.)
A contract whereby one person transfers the ownership of non-fungible things
to another with the obligation on the part of the latter to give things of the
same kind, quantity, and quality is considered a barter. (Art. 1954.)
SALES9BTO14 | LDCS
The use of the term “barter” in describing a contract is not controlling
Perfection and consummation of the contract
1. The contract of barter is perfected from the moment there is a meeting of
minds upon the things promised by each party in consideration of the other.
2. It is consummated from the time of mutual delivery by the contracting
parties of things they promised.
1639 If one of the contracting parties, having received the thing
promised him in barter, should prove that it did not belong
to the person who gave it, he cannot be compelled to
deliver that which he offered in exchange, but he shall be
entitled to damages
Under this provision, the aggrieved party cannot be compelled to deliver the
thing he has promised Moreover, he is entitled to claim damages. The rule is
analogous to Articles 1590 and 1591
1640 One who loses by eviction the thing received in barter may
recover that which he gave in exchange with a right to
damages, or he may only demand an indemnity for
damages. However, he can only make use of the right to
recover the thing which he has delivered while the same
remains in the possession of the other party, and without
prejudice to the rights acquired in good faith in the
meantime by a third person
In case of eviction, the injured party is given the option either to recover the
property he has given in exchange with damages or only claim an indemnity for
damages. The right to recover is however, subject to the rights of innocent third
persons
1641 As to all matters not specifically provided for in this Title,
barter shall be governed by the provisions of the preceding
Title relating to sales.
Barter is a mutual sale. Each party really is both a vendor and a vendee. For this
reason, the provisions on sales are also applicable to barter
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V. BULK SALES LAW
Sec1 This Act shall be known as “The Bulk Sales Law.”
Purpose: The Bulk Sales Law is designed to prevent the defrauding of creditors
by the secret sale or disposal or mortgage in bulk of all or substantially all of a
merchant’s stock of goods
The general scheme of the law is to declare such bulk sales fraudulent and void
as to creditors of the vendor, or presumptively so, unless specified formalities
are observed, such as the demanding and the giving of a list of creditors, the
giving of actual or constructive notice to such creditors, by record or otherwise,
and the making of an inventory.
The effect of the law is to create a new type or kind of fraudulent conveyance
The Bulk Sales Law is constitutional. It does not deprive persons of their
property without due process of law nor do they deny to such persons the equal
protection of the law.
The statute should be read as a whole for purposes of construction
Sec2 Any sale, transfer, mortgage or assignment of a stock of
goods, wares, merchandise, provisions, or materials
otherwise than in the ordinary course of trade and the
regular prosecution of the business of the vendor,
mortgagor, transferor, or assignor, or sale, transfer,
mortgage or assignment of all, or substantially all, of the
business or trade theretofore conducted by the vendor,
mortgagor, transferor, or assignor, or of all, or substantially
all, of the fixtures and equipment used in and about the
business of the vendor, mortgagor, transferor, or assignor,
shall be deemed to be a sale and transfer in bulk, in
contemplation of this Act: Provided, however, That if such
vendor, mortgagor, transferor or assignor, produces and
delivers a written waiver of the provisions of this Act from
his creditors as shown by verified statements, then, and in
that case, the provisions of this section shall not apply.
SALES9BTO14 | LDCS
sale and transfer in bulk under the Bulk Sales Law is any sale, transfer,
mortgage, or assignment -
1. of a stock of goods, wares, merchandise, provisions, or materials otherwise
than in the ordinary course of trade and the regular prosecution of the
business; or
2. of all or substantially all, of the business or trade; or
3. of all or substantially all, of the fixtures and equipment used in the business
of the vendor, mortgagor transferor, or assignor.
When sale or transfer in bulk not covered by the Bulk Sales Law.
1. If the sale or transfer is in the ordinary course of trade and the regular
prosecution of the business of the vendor;
2. If it is made by one who produces and delivers a written waiver of the
provisions of the Bulk Sales Act from his creditors
3. If it is made by an executor, administrator, receiver, assignee in insolvency,
or public officer, acting under judicial process
4. If it refers to properties exempt from attachment or execution. (Rules of
Court, Rule 39, Sec. 12.)
common use of the term stock when applied to goods in a mercantile house
refers to that which are kept for sale
Merchandise must be construed to mean such things as are usually bought and
sold in trade by merchants
fixtures refers to such articles of merchandise usually possessed and annexed to
the premises occupied by merchants to enable them better to store, handle,
and display their wares and which are commonly known as trade fixtures,
although removable without material injury to the premises at or before the
end of tenancy.
Sec3 It shall be the duty of every person who shall sell,
mortgage, transfer, or assign any stock of goods, wares,
merchandise, provisions or materials in bulk, for cash or on
credit, before receiving from the vendee, mortgagee, or
his, or its agent or representative any part of the purchase
price thereof, or any promissory note, memorandum, or
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other evidence therefor, to deliver to such vendee,
mortgagee, or agent, or if the vendee, mortgagee, or agent
be a corporation, then to the president, vice-president,
treasurer, secretary or manager of said corporation, or, if
such vendee or mortgagee be a partnership firm, then to a
member thereof, a written statement, sworn to
substantially as hereinafter provided, of the names and
addresses of all creditors to whom said vendor or
mortgagor may be indebted, together with the amount of
indebtedness due or owing, or to become due or owing by
said vendor or mortgagor to each of said creditors, which
statement shall be verified by an oath to the following
effect:
PHILIPPINE ISLANDS
PROVINCE OR CITY OF _________________}
Before me, the undersigned authority, personally appeared
__________________ (vendor, mortgagor, agent or
representative, as the case may be), bearing cedula No.
____________ issued at ___________ on the day of
_____________ who, by me being first duly sworn, upon
his oath, deposes and states that the foregoing statement
contains the names of all of the creditors of
________________ (vendor, or mortgagor) together with
their addresses, and that the amount set opposite each of
said respective names, is the amount now due and owing,
and which shall become due and owing by _____________
(vendor or mortgagor) to such creditors, and that there are
no creditors holding claims due or which shall become due,
for or on account of goods, wares, merchandise, provisions
or materials purchased upon credit or on account of money
borrowed, to carry on the business of which said goods,
wares, merchandise, provisions or materials are a part,
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other than as set forth in said statement.
______________________
Subscribed and sworn to before me this _______ day of
______, 19___, at ________
Sec4 Whenever any person shall sell, mortgage, transfer, or
assign any stock of goods, wares, merchandise, provisions
or materials, in bulk, for cash or on credit, and shall receive
any part of the purchase price, or any promissory note, or
other evidence of indebtedness for said purchase price or
advance upon mortgage, without having first delivered to
the vendee or mortgagee or to his or its agent or
representative, the sworn statement provided for in
section three hereof, and without applying the purchase or
mortgage money of the said property to the pro rata
payment of the bona fide claim or claims of the creditors of
the vendor or mortgagor, as shown upon such sworn
statement, he shall be deemed to have violated this Act,
and any such sale, transfer or mortgage shall be fraudulent
and void.
Sec4 It shall be the duty of every vendor, transferor, mortgagor,
or assignor, at least ten days before the sale, transfer or
execution of a mortgage upon any stock of goods, wares,
merchandise, provisions or materials, in bulk, to make a full
detailed inventory thereof and to preserve the same
showing the quantity and, so far as is possible with the
exercise of reasonable diligence, the cost price to the
vendor, transferor, mortgagor or assignor of each article to
be included in the sale, transfer or mortgage, and notify
every creditor whose name and address is set forth in the
verified statement of the vendor, transferor, mortgagor, or
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assignor, at least ten days before transferring possession
thereof, personally or by registered mail, of the price,
terms conditions of the sale, transfer, mortgage, or
assignment.
The law protects or benefits the creditors as follows:
1. It requires the vendor, etc. to deliver to the vendee, etc. a sworn written
statement of the names and addresses of all creditors to whom said
vendor, etc. may be indebted together with the amount of indebtedness
due or to become due
2. It requires the vendor, etc. at least ten (10) days before the sale, etc., to
make a full detailed inventory showing the quantity and the cost price of
the goods and to notify every creditor of the price, terms, and conditions of
the sale, etc
Creditors may waive the right to the benefit of the statute or estop themselves
to claim that the sale was invalid because the requirements of statute were not
complied with.
Effects of false statements in the schedule of creditors.
1. Without knowledge of buyer. — If the statement is fair upon its face and
the buyer has no knowledge of its incorrectness (as when the seller
misrepresents the amount of his indebtedness), and nothing to put him on
inquiry about it, he will be protected in its purchase.
2. With knowledge or imputed knowledge of buyer. — If the vendee has
knowledge of the false statement or the statement is defective on its face
(as when it fails to give the addresses of the creditors), the vendee accepts
it at his peril
3. With names of certain creditors without notice omitted. — If the list omits
to name certain creditors who are not notified, the sale is void as to such
creditors, whether that omission was fraudulent or not.
4. With respect to an innocent purchaser for value from the original
purchaser. — But the creditor of the vendor who fails to comply with the
requirements of the statutes does not have the right to pursue the
property in whosoever hands it may fall.
SALES9BTO14 | LDCS
Effect of violation of law on transfer.
1. As between the parties. — The bulk sales law does not in any way affect
the validity of the transfer as between the intermediate parties thereto.
2. As against creditors. — A purchaser in violation of the law acquires no
right in the property purchased as against the creditors of the seller
Sec6 Any vendor, transferor, mortgagor or assignor of any stock
of goods, wares, merchandise, provisions or materials, in
bulk, or any person acting for, or on behalf of any such
vendor, transferor, mortgagor, or assignor, who shall
knowingly or willfully make, or deliver or cause to be made
or delivered, a statement, as provided for in section three
hereof, which shall not include the names of all such
creditors, with the correct amount due and to become due
to each of them, or shall contain any false or untrue
statement, shall be deemed to have violated the provisions
of this Act
Sec7 It shall be unlawful for any person, firm or corporation, as
owner of any stock of goods, wares, merchandise,
provisions or materials, in bulk, to transfer title to the same
without consideration or for a nominal consideration only.
Acts punished by law
1. Knowingly or willfully making or delivering a statement as required by the
Act (Sec. 3.) which does not include the names of all the creditors of the
vendor, etc. with the correct amount due and to become due or which
contains any false or untrue statement
2. Transferring title to any stock of goods, wares, merchandise, provisions or
materials sold in bulk without consideration or for a nominal consideration
only.
Sec8 Nothing in this Act contained shall apply to executors,
administrators, receivers, assignees in insolvency, or public
officers, acting under judicial process
Sec9 The sworn statement containing the names and addresses
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 SALES9BTO14 | LDCS

of all creditors of the vendor or mortgagor provided for in

section three of this Act, shall be registered in the Bureau
of Commerce. For the registration of each such sworn
statement a fee of five pesos shall be charged to the
vendor or mortgagor of the stock of goods, wares,
merchandise, provisions or materials, in bulk.
Sec10 The provisions of this Act shall be administered by the
Director of the Bureau of Commerce and Industry, who is
hereby empowered, with the approval of the Department
Head, to prescribe and adopt from time to time such rules
and regulations as may be deemed necessary for the
proper and efficient enforcement of the provisions of this
Act.
Sec11 Any person violating any provision of this Act shall, upon
conviction thereof, be punished by imprisonment not less
than six months, nor more than five years, or fined in sum
not exceeding five thousand pesos, or both such
imprisonment and fine, in the discretion of the court.
Sec12 This act shall take effect on its approval

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