Sales & Lease: (Recitation Questions of Dean Jara)

S A LE S & L E A S E (recitation questions of Dean Jara) Coverage: Articles 1458 to 1688 (V.2.
7)
NOTE: The mark “(?)” means that the transcriptionist of this reviewer is uncertain
or was not able to find a specific provision/authority to support her answer. HELD: No. It may not. At most, it would authorize the grantee to sue for
recovery of damages under Article 19 of the Civil Code on abuse of right. If
1. What is a contract of sale? only a right of first refusal is constituted over a subject parcel of land,
By the contract of sale, one of the contracting parties obligates himself even if that right is supported by a separate consideration, its breach
to transfer the ownership of and to deliver a determinate thing, and the cannot justify correspondingly an issuance of a writ of execution under
other to pay therefore a price certain in money or its equivalent. (Art. judgment recognizing the mere existence of such right of first refusal, nor
1458, NCC) would it sanction an action for specific performance without thereby
negating the indispensable consensual element in the perfection of
2. What is the concept of first refusal in relation to sale? contracts.4
A right of first refusal is a promise on the part of the owner that if he
decides to sell the property in the future, he would first negotiate its sale Follow-up Questions on Asuncion v. CA:
to the promisee.1 - Was there a prior tenant landlord relationship?
- Did the court decide that the right of first refusal is different
3.
Can this right of 1st refusal exist even if there is no lease from an option?
contract? - Why is it different?
No, there can be no right of first refusal without a pre-existing - It can independently exist as a lease contract, and in that
contract of lease since the right of first refusal is only an accessory situation it will be the same as an option. (Decide)
contract. Also, it can only be exercised by a lessee. On the other hand, an - Does it have the essentials of a valid option?
option contract is a principal contract which can stand on its own. In an - What about in the option of stocks?
option contract, a consideration separate from the purchase price is - How did the SC justify the existence of first refusal in Ang Yu
required.2 Asuncion?
- What is its legal basis?
4. State the case of Ang Yu Asuncion v. CA.
FACTS: The petitioners were leasees of a residential and commercial space Helpful facts:
located at Binondo, Manila since 1935. Supported by a letter, the In giving judicial recognition to the “right of first refusal” pertaining to
petitioners were promised that, in case the owner decides to sell the transactions covering specific property, the Court distinguished it from
property, priority to purchase the property would be given to them. either a sale or an option contract. While the Court classified the “right of
In 1986, the spaces were offered for sale. The petitioners were willing first refusal” to be an “innovative juridical relation,” it pointed out that it
to pay P5M for the property, and they sent a letter to the owners asking cannot be deemed a perfected sale under Article 1458 of the Civil Code,
for the terms and conditions of the sale. Without responding to the nor an option contract under either Articles 1319 and 1479, because it
petioners, the owners sold the property to Unjieng (Bobby Cu & Rose) for merely pertains to a property without containing an agreement as to the
the sum of P6M. price or the terms of payment in case of exercise of the right of first
The petitioners filed a case to exercise their right of first refusal, and refusal.5
the trial court ruled that they should be given the right of first refusal if
the price were lower than P11M. The SC (in Asuncion) did not rescind the contract of sale because there
Unfortunately, while the case was pending with the trial court, the was no contract between the petitioner and private respondent that could
property was sold to Buen Realty for P15M. be considered an option contract. Instead, the SC granted an award for
The CA affirmed the ruling of the trial court, hence the case at bar.3 damages to the petitioners.6
ISSUE: Whether or not the petitioner has right of first refusal that may 5. The essential requisites of a contract.
effectively annul the sale made by its lessor to another. There are 3:

1 Cezar Lapuz Villanueva, Law on Sales (Manila: Rex Bookstore), 156. 4 Villanueva 158.
2 Answer contributed by Erika Gallego; see also: Villanueva,161. 5 Ibid.
3 Case digest by transcriptionist 6 Jara Notes of ejlvillena. 2008
S a n B e d a C o l l e g e o f L a w – M e n d io l a , M a n il a
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Transcribed By Valera, C.A.M. (2-J)
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“That in all things, God may be glorified.” 1 Semester, SY 2011-2012
S A LE S & L E A S E (recitation questions of Dean Jara) Coverage: Articles 1458 to 1688 (V.2.7)
(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract; Art. 1471. If the price is simulated, the sale is void, but the act may be
(3) Cause of the obligation which is established. (Art. 1318, NCC) shown to have been in reality a donation, or some other act or contract.
6. What is a forced sale, in contrast to a voluntary sale? Do we apply these provisions of the CC in forced sale?
In a voluntary sale, the owner willingly offers the transfer of his No, the provisions are not applicable when the price is shocking to the
property for a price. In a forced sale, however, the owner does not will the conscience and in the event of resale, better price can be obtained.
sale of his property. A forced sale may be a case where the property is
subject to sale even without the consent of the owner, or a case where 10. The rules governing installments of personal property.
there is vitiation of consent. In a contract of sale of personal property the price of which is payable in
Vitiation of consent, according to Article 1390 (2), makes the contract installments, the vendor may exercise any of the following remedies:
voidable or annullable, defined: “those where the consent is vitiated by (1) Exact fulfillment of the obligation, should the vendee fail to pay;
mistake, violence, intimidation, undue influence or fraud. These contracts (2) Cancel the sale, should the vendee’s failure to pay cover two or
are binding, unless they are annulled by a proper action in court. They are more installments;
susceptible to ratification.” (3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee’s failure to pay cover two or more
7.
In political law, the expropriation (eminent domain) still installments. In this case, he shall have no further action against
requires a consideration. Who decides the consideration? the purchaser to recover any unpaid balance of the price. Any
The expropriation of property for public use is governed by special agreement to the contrary shall be void. (Art. 1484, NCC)
laws. (Art. 1488, NCC)
11. Let’s assume that 1484 is not part of the Civil Code, what
8.
Aside from expropriation, what other ways may an owner’s remedy may apply?
consent be unnecessary? Art. 1191. The power to rescind obligations is implied in reciprocal ones,
In foreclosure of mortgage7 (e.g. in cases of nonpayment of in case one of the obligors should not comply or is not ready to comply
installments or debts), and executions to recover damages or serve with what is incumbent upon him.
liability. The injured party may choose between fulfillment and the rescission
(?) There may still be other answers. of the obligation with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should
The court awards to the creditor the right to compel the debtor to pay. become impossible.
This is an example of a forced sale. The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
9.
A car is taken and an auction is made. The car is worth P500K, This is understood to be without prejudice to the rights of third
but the highest bidder only bid P40K. The creditor is part of persons who have acquired the thing, in accordance with Articles 1385
the auction. Do you think the highest bidder will become the and 1388 and the Mortgage Law.
owner of the car?
Yes, but the sale will be voidable. (?) Follow-up questions for 1191 and 1484:
- If 1484 were useless, can we still make use of 1191?
Isn’t it that, according to the Civil Code, the gross inadequacy Yes, because a contract also involves an obligation to transfer and deliver.
of the price will not affect the validity of the sale.
CONTEXT: - 1191 speaks of what remedies?
Art. 1470. Gross inadequacy of price does not affect a contract of sale, Fulfillment and rescission of the obligation with payment of damages in
except as it may indicate a defect in the consent, or that the parties really either case.
intended a donation or some other act or contract.
- In terms of remedy is there a difference?
Yes, Article 1484 includes foreclosure of the chattel mortgage, and such
action will prohibit the seller from making further action against the
7 A remedy under Article 1484, (3), NCC. purchaser to recover any unpaid balance of the price.
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In the case given, the debtor violated an undertaking in consideration of

- In remedy #1 (of Art.1484), the vendor can recover the whole which the creditor agreed to the period, namely to pay the installments.
obligation, including the future and not just the unpaid. How is
that possible? 14. If the installments made were for a car. Can he get the car and
- A debt worth 300K is made. If there are 5 defulted the money? How is that possible?
installments, say 20K each, don’t you think that he may only Yes, by choosing the first remedy under Art. 1484 of the CC. Such election
collect 100K? Why are you saying that we may collect 300K? would require the fulfillment of the vendee’s obligation to pay. If, however,
Yes. The vendor may opt for remedy #1: Exact fulfillment of the obligation, the buyer is insolvent; or, if, he does not have enough to settle his
should the vendee fail to pay. obligation and only has the car as property to pay for the debt, the vendor
may apply for judicial foreclosure. In that case, he may have both the
An acceleration clause. money and the car. (?)
In most agreements, an acceleration clause is made to effect in the
following manner: 15. How is public auction possible under remedy #1?
In the event of default in the payment of any of the said
installments or said interest when due as herein provided, time JARA: The seller, now, can attach the car. Through a writ of attachment,
being of the essence hereof, the holder of this note may, without he may now open the car for auction, be the highest bidder, and get both.
notice or demand, declare the entire principal sum then unpaid
immediately due and payable. 16. How about remedy #2: what does he recover: the money, the
car, or both?
In the absence of an acceleration clause? Arts. 1191, 1198, and 1484. Cancellation of the sale would mean stoppage of payment. This would
mean that the vendee would lose his right to the ownership of the object
12. In an obligation with a period when does it become due? under consideration. The vendor will then get the car, but not get the
Art. 1193. Obligations for whose fulfillment a day certain has been fixed, money. (?)
shall be demandable only when that day comes.
Obligations with a resolutory period take effect at once, but terminate 17. Remember that the car is in the possession of the buyer. If the
upon arrival of the day certain. contract can be rescinded extrajudicially, do you need to go to
A day certain is understood to be that which must necessarily come, court for the car? Will this be possible under remedy #2?
although it may not be known when. Cancellation of the sale under #2 may be done judicially or extrajudicially.
If the uncertainty consists in whether the day will come or not, the However, if the vendor is not in the possession of the car, such car cannot
obligation is conditional, and it shall be regulated by the rules of the be auctioned. Consequently, the vendor would then need the court to
preceding Section. intervene or grant him possession. (?)
13. When is the period in the benefit of the other? JARA: There can be no foreclosure if he is not in the possession of the car.
According to Article 1198, “The debtor shall lose every right to make use In turn, it cannot be auctioned.
of the period:
(1) When after the obligation has been contracted, he becomes 18. We go to remedy #3. Can you explain how it is carried out?
insolvent, unless he gives a guaranty or security for the debt;
(2) When he does not furnish to the creditor the guarantees or 19. If the buyer hides the car, what can the vendor do?
securities which he has promised;
(3) When by his own acts he has impaired said guaranties or JARA: The action to get the car is called an ACTION FOR REPLEVIN –
securities after their establishment, and when through a
recovery of possession of personal property.
fortuitous event they disappear, unless he immediately gives new
ones equally satisfactory;
20. The debt was 800K, the buyer has payed 500K, may the seller
(4) When the debtor violates any undertaking in consideration of
recover the balance of 300K?
which the creditor agreed to the period;
(5) When the debtor attempts to abscond.” What does the seller recover?
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JARA: This is the favorite remedy of sellers. Why do you think so? (You No. A lease is a long-term rent agreement. The leasee merely has the
still have to go to court) rights of a usufructuary.
NOTE: Try to refer and complete the table below for questions #20 and 26. A sale of installment of a fund. The seller is aware of the
#21. remedies. Instead of having the buyer as the sole obligor, the
seller requires another as a solidary debtor. Given the same
21. Compare remedy #3 to #1. example, can he go against the other debtor?
Yes. In solidary obligations, the creditor may proceed against any one
JARA: In #2 he gets the car, not the money. of the solidary debtors or some or all of them simultaneously. The demand
made against one of them shall not be an obstacle to those which may
Remedies of a #1 Exact #2 Cancel #3 Foreclosure subsequently directed against the other, so long as the debt has not been
Seller (1484) fulfillment the c. mortgage fully collected. (Art. 1216, NCC)
Proceedings By court; Judicial Judicial (1191) or However, he who made the payment may claim from his co-debtors
Extrajudicial (by only the share which corresponds to each, with the interest for the
stipulation) payment already made. (par. 2, Art. 1217, NCC)
Unpaid balance To be collected May NOT be May not be
collected recovered (void)
Can the seller assign his rights to another?
Possession Seller (for public Seller Yes
auction) Yes, through an assignment of credit. Such would constitute a form of
Right to bid Yes (as long as N/A Yes Novation known as Subrogation. Such sobrogation of a third person in the
unconscionable) rights of the creditor is either legal or conventional. The former is not
Summary Everything can be presumed, except in cases expressly mentioned in the Civil Code; the
recovered latter must be clearly established in order that it may take effect. Also,
*Alternative, not cumulative. The exercise of one remedy would bar the exercise of conventional subrogation of a third person requires the consent of the
the others. original parties and of the third person. (Art. 1291, 1300, 1301 NCC)
NOTE: In Art. 1486, the courts may intervene if these damages or the May the 2nd seller also avail of 1484.
refusal on the part of the seller to return paid installments would be Yes. The rights of the seller include the exercise of the remedies in
unconscionable. Article 1484.
22. May the buyer bid in the auction of his car? 27. If it is an assignment of credit to a third person, how will the
No, he cannot but the seller can. The buyer already has ownership. assignee, X, expect to make money from the transaction? Is
the chattel mortgage is transferred to X?
23. In Art. 1485 there is another contract. What is this? The assignee, X, subrogates the rights of the assignor to claim from the
Art. 1485. The preceding article shall be applied to contracts purporting debtor. Such claim would include the right over the chattel mortgage.
to be leases of personal property with option to buy, when the lessor has
deprived the lessee of the possession or enjoyment of the thing. 28. The assignee invests 600K to the original seller, in the hope of
getting 800K. But, the buyer defaults after paying 500K. The
JARA: This is what marketers call as “rent-to-own” but in banks they call assignee now loses. Who can the assignee run to? Can he run to
it a “finance lease.” the original seller?
Generally, the assignee may not run against the original seller.
24. Why is it also covered by 1484?
It is covered because Article 1484 covers installments on a contract of
JARA: According to the SC, there can only be recovery from the original
sale of personal property. When the lessee exercises his option to buy, the
seller if the agreement with the assignee is “with recourse.”
lease paid for the personal property, in effect, becomes installments on the
sale of the property.
29. Why is 1484 usually referred to in our books as directory?
25. Is there a transfer of ownership in a lease?
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Article 1484 is referred to as directory because it provides for the (Max.: 90% of
payments made)
framework from which the vendor of personal property payable by
installments may exercise remedies. The special laws merely elaborate on
the provisions of such article. 32. If there is an amount distinct from the price, is there a valid
contract option?
30. Why did they pass the Recto Law if it just repeats 1484? Yes. In fact, the consideration distinct from the price is what makes
Recto law specifically refers to movables, private property, for the the unilateral promise binding upon the promisor, based on Art. 1479,
protection of the buyers. It excludes immovable properties. Article 1484 NCC.
refers to both movable and immovable private property.
33. Supposing that the ownership is already transferred to the
31. Compare the Recto to the Maceda Law. buyer. The cash surrender value comprises what payments?
The cash surrender value comprises of payments made for the completion
Art. 1484 Art. 1592 Recto Law Maceda Law of purchase price before the surrender of the actual delivery of the thing.
Contracts of Immovable Act No. 4122: RA 6552: Realty (?)
sale; remedies property Installment Installment
on Sales Law Buyer 34. Is 1480 not a duplication of Chapter 3?
installments Protection Act No. Article 1480 refers to any “injury or benefit” from the thing sold, after
Coverage Late Movables, Real Estate, the contract has been perfected, from the moment of perfection of the
payment, no Private excluding
demand for Property, industrial lots,
contract to the time of delivery. It applies to the sale of fungible things.
rescission For the commercial Chapter 3, on the other hand, involves the effects of the contract when the
protection of buildings, & sales thing sold has been “lost” may it be entirely or in part.
the buyers to tenants
Application: 35. Is there a conflict between 1480, Chapter 3, and 1504?
Contract to Yes No No Yes
What is the period contemplated? Who will bear the loss?
Sell
Does 1504 involve the loss after perfection but before
Contract of Yes Yes Yes, but only for
residential delivery?
Sale
purposes What are the 3 provisions of 1480?
Option to Art. 1485 N/A Is 1480 equivalent only to fungibles?
Buy 1480 tells us that? Who bears the loss?
Seller’s Yes Yes Yes N/A
right to bid Art. 1480 Chapter 3 Art. 1504
Provisions: Coverage Fungible goods made The effects of the The goods
1 – Exact Grace period of 60 independently for a contract when the
days (min.) single price thing sold has been
Fulfillment
lost. (1493-1494)
2– 30 days after
receipt of notice Period From the moment of After perfection Until ownership has
Cancellation Contemplated perfection to the time been transferred
(cancellation/
rescission) by the of the delivery (regardless of
buyer delivery)
Bearer of Loss Obligor, even when Vendor/Seller Seller
3–
due to fortuitous
Foreclosure events (1262)
of Chattel Important The risk shall not be 1493. Things. Also when:
Mortgage Provision(s) imputed to the -withdrawal 1) Seller retained
Benefit Buyer may claim vendee until they -demand remaining ownership to secure
50% of payments have been weighed, 1494. Specific goods performance by the
made, and, after 5 counted, or -avoided buyer
years of measured and -valid existing 2) Delayed delivery,
installments, an delivered, unless the risk of the party in
additional interest latter has incurred in fault
of 5% per annum delay.
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An obligation which consists in the delivery of a determinate thing

36. When these articles talk about a debtor-creditor relationship shall be extinguished if it should be lost or destroyed without the fault of
who are they in a sale (the seller & buyer)? How do we apply the debtor, and before he has incurred in delay.
the provision? When by law or stipulation, the obligor is liable even for fortuitous
events, the loss of the thing does not extinguish the obligation, and he
37. If the thing is lost by reason of fortuitous event, the obligation shall be responsible for damages. The same rule applies when the nature
is extinguished? of the obligation requires the assumption of risk. (1182a)
42. In law, we recognize the autonomy of contracts. How can they

The buyer has the obligation to deliver a payment, isn’t it?
follow the general rule in 1504 when some cases follow 1480?
Why is this conflict possible? What does the parenthesis ()
Will there be a common extinguishment?
signify?
CONTEXT:
Do you agree with him, if there is a loss through a fortuitous
1484. (1454-A-a)
event the obligation of the seller is extinguished? 1504. (n)
JARA: “(###a)” is an index to the amended provision of the old (Spanish)
What if the buyer losses his money through a fortuitous event, Civil Code while “(n)” is a new article inserted, due to American influence,
may his obligation be extinguished? Why? to the New Civil Code. The Uniform Sales Act of the United States was
patterned from the British, and gives reference to goods. The provision by
38. Does 1504 provide for a different principle? Who is the owner the Spanish refers to real property.
contemplated?
The buyer or the thing, if he bears the loss, then will he be 43. Why do you think that 1504 is an exception to “res perit
compelled to price? domino”?
The latin maxim res perit domino means that “the risk of loss is borne by
39. Why is there no conflict, again, between 1480 and 1540? the owner.” Article 1504 provides exemptions for such rule, viz:
In 1480, if the thing is lost, who pays the contract price? (1) Where delivery of the goods has been made to the buyer, in
There is a common ground in this article. The obligation to pay pursuance of the contract and the ownership in the goods has
is with the buyer? been retained by the seller merely to secure performance by the
Can we not come up with a solution to get rid of this conflict? buyer of his obligations under the contract, the goods are at the
buyer’s risk from the time of such delivery.
40. Can the parties agree that they will follow a different (2) Where actual delivery has been delayed through the fault of either
the buyer of seller the goods are at the risk of the party in fault.
principle/agreement?
Yes. Art. 1504 is a rule applicable only when the party did not make
an agreement, viz: 44. Who are those prohibited from buying property?
Art. 1504. Unless otherwise agreed, the goods remain at the seller’s There are 97
risk until the ownership therein is transferred to the buyer, but when the According to Art. 1490,
ownership therein is transferred to the buyer the goods are at the buyers 1. A husband and wife cannot sell property to each other, except:
risk whethere actual delivery has been made or not, except that… (1) When a separation of property was agreed upon in the marriage
settlements; or
41. Is there also an “unless” in 1480? (2) When there has been a judicial separation of property under
No, but because the article cites “from the perfection of the contract to Article 191 (1458a).
In addition, Art. 1491 mentions that: the following persons cannot acquire
the time of delivery, shall be governed by Articles 1163, 1165 and 1262”
by purchase, even at a public or judicial auction either in person or
it, in effect, recognizes stipulation by the parties. In Article 1262, it states
through the mediation of another:
that:
2. The guardian, the property of the person or persons who may be
under his guardianship;
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3. Agents, the property whose administration or sale may have been If the buyer is a minor, Art. 1489 applies, to wit:
intrusted to them, unless the consent of the principal have been given; All persons who are authorized in this Code to obligate
4. Executors and administrators, the property of the estate under the themselves, may enter into a contract of sale, saving the
administration; modifications contained in the following articles.
5. Public officers and employees, the property of the State or any Where necessaries are those sold and delivered to a minor
subdivision thereof, or of any government owned or controlled or other person without capacity to act, he must pay a
corporation, or institution, the administration of which has been reasonable price therefor. Necessaries are those referred to
intrusted to them; this provision shall apply to judges and government in Article 290. (1457a)
experts who, in any manner whatsoever take part in the sale;
6. Justices, judges, prosecuting attorneys, clerks of superior and inferior What if the minor is a buyer or a seller?
courts, and other officers and employees connected with the If the seller is a minor, the sale will be voidable. According to Art. 1390,
administration of justice, the property and rights in litigation or levied the following contracts are voidable or annullable, even though there may
upon an execution before the court within whose jurisdiction or have been no damage to the contracting parties:
territory they exercise their respective functions; this prohibition (1) Those where one of the parties is incapable of giving consent
includes the act of acquiring by assignment and shall apply to lawyers to a contract;
with respect tot the property and rights which may be the object of (2) Those where the consent is vitiated by mistake, violence,
any litigation in which they may take part by virtue of their intimidation, undue influence or fraud.
profession; These contracts are binding, unless they are annulled by a proper
7. Any others specially disqualified by law. (Art. 1491) action in court. They are susceptible of ratification. (n)
45. Husband and Wife. How would it prejudice 3rd persons? 47. Is it possible for both to be minors?
Medina8 gave the rationale for the relative incapacity of spouses to sell Yes.
properties to one another to be as follows: What will be the sale between them: void or voidable?
(a) To prevent spouses defrauding his creditors by transferring his Neither. The sale between them will be unenforceable.
properties to the other spouse;
(b) To avoid a situation where the dominant spouse would unduly You say unenforceable. Meaning what?
take advantage of the weaker spouse, thereby effectively In unenforceable contracts, there is excessive or lack of authority. In this
defrauding the latter; and case, the minors were both incapable of giving consent to a contract. (See
(c) To avoid an indirect violation of the prohibition against donations Art. 1403-1408)
between spouses under Article 133 of the Civil Code.
[NOTE: Article 133 is superseded by Article 87 of the Family 48. Aside from minority, are there other impediments to a sale?
Code] Yes. Included are those without capacity to act. (?)
Would it be affected by undue influence? 49. Why is there an “unless” in (2) when all of these (Art. 1491)
No, undue influence by the dominant spouse would be futile because of the involve a fiduciary position?
continued existence of the common fund on which both spouses can
continue claim. They cannot sell property to one another, otherwise it
50. In your study of Civil law, how do you consider the estate?
would circumvent Article 87 (FC) – the article does not exclude spouses
An estate is the net worth of a person at any point in time. It is the
governed by complete separation of property in its coverage.
sum of a person's assets - legal rights, interests and entitlements to
Consequently, donations and sales between spouses are void.
property of any kind - less all liabilities at that time. The issue is of special
legal significance on a question of bankruptcy and death of the person.
In what way will the heirs be prejudiced?
Depending on the context, the term is also used in reference to an estate in
46. How about in the case of minors? land or of a particular kind of property (such as real estate or personal

8 Medina v. Collector of Internal Revenue, 1 SCRA 302 (1961); as cited in Villanueva, page 49.
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estate). The term is also used to refer to the sum of a person's assets only.9 53. Do you think there is a difference between a “negotiable
instrument” and a “negotiable document of title”? Yes.
After ones death, the estate is a juridical person created by law, composed
Negotiable Instruments deals with an unconditional promise or order to
of a decedent’s property.
pay a sum certain in money. (Sec. 1, NIL)
Why can it not give its consent?
Because it is a juridical person, and not a natural person, it is While a Negotiable Document of Title refers to documents in the ordinary
incapable of decision-making. course of business used in the sale and transfer of goods. (Art. 1636, NCC)
The executor must have a consent?
Yes. The executor is merely a caretaker of the estate. According to 54. So, at most, the Document of Title (DoT) serves as proof of
Art. 2032, The court's approval is necessary in compromises entered into possession but not ownership? Why do you think so?
by guardians, parents, absentee's representatives, and administrators or The DoT serves serves as proof of possession, isn’t it?
executors of decedent's estates. (1810a) It is a proof of constructive possession or of title to the goods.10
51. Give the concept of a document of title. Art. 1513. A person to whom a negotiable document of title has been duly
According to Art. 1636, (1), the "Document of title to goods" includes negotiated acquires thereby:
any bill of lading, dock warrant, "quedan," or warehouse receipt or order (1) Such title to the goods as the person negotiating the document
for the delivery of goods, or any other document used in the ordinary to him had or had ability to convey to a purchaser in good faith for
course of business in the sale or transfer of goods, as proof of the value and also such title to the goods as the person to whose order
possession or control of the goods, or authorizing or purporting to the goods were to be delivered by the terms of the document had
authorize the possessor of the document to transfer or receive, either by or had ability to convey to a purchaser in good faith for value; and
endorsement or by delivery, goods represented by such document. (2) The direct obligation of the bailee issuing the document to hold
possession of the goods for him according to the terms of the
52. If a document of title, at the outset, was negotiable, may it document as fully as if such bailee had contracted directly with
become a non-negotiable document and vise-versa? him. (n)
Unless the document of title has been extinguished by service, a negotiable
document may not be made non-negotiable merely by insertion of words. Why are you telling us that a vendor has the burden to transfer
According to Art. 1510, “If a document of title which contains an ownership?
undertaking by a carrier, warehouseman or other bailee to deliver the Yes. The transfer of ownership is one of the main obligations in a
goods to bearer, to a specified person or order of a specified person or contract of sale. Under Art. 1458, “By the contract of sale one of the
which contains words of like import, has placed upon it the words "not contracting parties obligates himself to transfer the ownership and to
negotiable," "non-negotiable" or the like, such document may deliver a determinate thing, and the other to pay therefor a price certain
nevertheless be negotiated by the holder and is a negotiable document in money or its equivalent. A contract of sale may be absolute or
of title within the meaning of this Title. But nothing in this Title contained conditional.”
shall be construed as limiting or defining the effect upon the obligations of
the carrier, warehouseman, or other bailee issuing a document of title or The delivery, don’t you think, is a means to transfer
placing thereon the words "not negotiable," "non-negotiable," or the like.” ownership? Yes. (See Art. 1477)
On the other hand, a non-negotiable instrument may not be made 55. If a vendee has as evidence a warehouse receipt, his ownership
negotiable, since a document of title which is not in such form that it can may still be questioned. He, at most, only has constructive
be negotiated by delivery may be transferred by the holder by delivery to possession of the goods.
a purchaser or donee. A non-negotiable document cannot be negotiated If what he is holding is a warehouse receipt, why is it limited
and the endorsement of such a document gives the transferee no only to possession and not ownership of the goods?
additional right. (Art. 1511, NCC)

9 http://en.wikipedia.org/wiki/Estate_(law); see also Art. 1429, CC. 10 Villanueva, 231-232.
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The bailee is holding the goods for the holder of the receipt. He is only in (2) The direct obligation of the bailee issuing the document to hold
possession of such but the ownership, by constructive delivery, remains possession of the goods for him according to the terms of the
with the holder of the document of title. (?) document as fully as if such bailee had contracted directly with him.
56. If the buyer does not go to the bailee, can he also use the 61. Juan dela Cruz hijacked a plane for Del Monte products. He
document of title to sell the goods? deposits the products to a warehouseman. The latter issues a
Yes. The provisions on documents of title are geared towards assuring DoT to Juan dela Cruz. Juan dela Cruz sells the goods to Pedro
the public to take, accept, and deal with transactions over goods and Reyes by indorsing the DoT. May Pedro Reyes acquire title to
merchandise by means of documents of title issued in representation the goods?
thereof.11 Yes. The validity of the negotiation of a negotiable document of title is
not impaired by the fact that the negotiation was a breach of duty on the
57. May the possession and ownership of goods be defeated in the part of the person making the negotiation, or by the fact that the owner of
evidence of another title? the document was deprived of the possession of the same by loss, theft,
Yes (See Art. 1505 and 1506) fraud, accident, mistake, duress, or conversion, if the person to whom the
document was negotiated or a person to whom the document was
58. How do you call a contract between a bailor and a bailee? subsequently negotiated paid value therefor in good faith without notice of
JARA: It’s called “bailment.” It is usually the term used for a “contract of the breach of duty, or loss, theft, fraud, accident, mistake, duress or
deposit.” In Civil Law, the depositor is the possessor – he may even be a conversion. (Art. 1518, NCC)
thief.
Can Del Monte claim the goods from the warehouseman?
59. You’re familiar with the concept of “holder in due course” No. Del Monte cannot claim nor compel the warehouseman to
under the Negotiable Instruments Law (NIL). surrender the goods to him.
Is it possible for the “holder in due course” to acquire rights If goods are delivered to a bailee by the owner or by a person whose
which the indorser did not have at all? act in conveying the title to them to a purchaser in good faith for value
Yes. Based on Sec. 57 of the NIL, A holder in due course holds the would bind the owner and a negotiable document of title is issued for them
instrument free from any defect of title prior to parties, and free from they cannot thereafter, while in possession of such bailee, be attached by
defenses available to prior parities among themselves, and may enforce garnishment or otherwise or be levied under an execution unless the
payment of the instrument for the full amount thereof against all parties document be first surrendered to the bailee or its negotiation enjoined.
liable thereon. The bailee shall in no case be compelled to deliver up the actual possession
of the goods until the document is surrendered to him or impounded by
JARA: There is no such thing as holder in due course for the document of the court. (Art. 1519, NCC)
title.
62. If the DoT is not a negotiable document of title, may it be
60. Under the code, what does the endorsee of a document of title negotiated; or, may it still be subject to sale?
acquire? Yes. It may by assignment. (?)
Based on Art. 1513, A person to whom a negotiable document of
title has been duly negotiated acquires thereby: 63. In the case of NDT, what are the warranties?
(1) Such title to the goods as the person negotiating the document According to Art. 1516 of the NCC, A person who for value negotiates or
to him had or had ability to convey to a purchaser in good faith for transfers a document of title by endorsement or delivery, including one
value and also such title to the goods as the person to whose order who assigns for value a claim secured by a document of title unless a
the goods were to be delivered by the terms of the document had or contrary intention appears, warrants:
had ability to convey to a purchaser in good faith for value; and (1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair the
validity or worth of the document; and
11 Villanueva, 303.
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(4) That he has a right to transfer the title to the goods and that the No. One cannot give what one does not have. The snatcher is not the
goods are merchantable or fit for a particular purpose, whenever owner, and it does not fall under the exemptions.
such warranties would have been implied if the contract of the
parties had been to transfer without a document of title the goods 68. What if the snatcher sells it in the Bustillos Market? Isn’t that
represented thereby. an excemption in the code?
No, it is not an exemption. The stolen object may only be validly sold if a
64. Without involving a DoT, if the seller of a property is not the buyer purchases it for value from the market. The case, however,
owner of the property, is the contract valid? contemplates that the sale was made to the market.
No. The contract is void. (?)
What if he buys it from a store? The sale will then be valid.
That sale could also be valid, if… what?
If a document of title was issued and the purchaser bought the property in 69. What is the concept of “apparent owner”?
good faith for value, without knowledge of any impediments, the sale may Is it not applicable to movable property?
be valid. (?)
70. In the sale of the co-owner, can he sell the whole property?
65. What is the latin maxim that expresses that general rule [on Let’s say, 1 out of the 4 co-owners sell the property.
sale of property]? No. The rule is when prior to partition a co-owner sells the entire property
Nemo day quod non habet – one cannot give what one does not have owned in common, the sale of the property itself is void (i.e., the attempt
to transfer ownership of the entire property by virtue of the sale), but
66. State the general rule and exemptions. valid as to his spiritual share.13
IF THE SELLER IS A NON-OWNER: the buyer acquires no title even if in
good faith and for value under the maxim nemo dat quod non habet; the EXCEPTIONS14:
exceptions12 are: 1. When the subject matter is indivisible (the spiritual share will be
1. Owner is estopped or precluded by his conduct. (1505) void)
2. When sale is made by the registered owner or apparent owner in 2. When it is made with the consent of co-owners (there will no
accordance with recording or registration laws (Art. 1505, (1)) longer be a spiritual share when the boundaries have been
3. Contract of Sales sanctioned by judicial or statutory authority defined)
(Art. 1505, (2)) 3. Where the co-owner does not turn over the proceeds of the sale to
4. Purchases in merchant’s store, fairs or markets (Art. 1505, (3)) his co-owners (the spiritual share will be void)
5. When a person who is not the owner sells and delivers a thing, 4. Heirs’ subsequent acquisition (may validate any sale made by
subsequently acquires title thereto (Art. 1434) them, prior to their father’s death)
6. When the seller has a voidable title which has not been avoided at 5. Registration under the Torrens System (in good faith, valid)
the time of sale (Art. 1506)
7. Sale by co-owner of the whole property or a definite portion 71. Is it an obligation to transfer the ownership to the buyer after
thereof (see Villanueva, 328-331) the thing has been fully paid?
8. Special rights of an unpaid seller (Art. 1526–1533) Yes. It is an obligation under Art. 1458.
9. In case of movables, under Art. 559, acquisition of possession in
good faith under a claim of ownership, where the realowner has 72. Can delivery be done away with by stipulation?
not lost or been deprived of the movable, makes the possessor the No. Delivery is an obligation to be fulfilled by one party; delivery may
rightful owner of the movable. either be constructive or actual. Actual delivery may be done away with
by stipulation, but constructive deliver wherein the ownership passes on
67. A snatcher snatched a cellphone from San Beda and sold it to to the buyer may not be made under a contract of sale. Parties, however,
CEU. Is the sale valid?

13 Lopez v. Cuaycong, 74 Phil. 601 (1944); Panganiban v. Oamil, 542 SCRA 166 (2008)
12 From ejlvillena. 2008 Lecture and Recitation Notes on Sales and Lease (Dean Virgilio B. Jara) 14 Villanueva, 331-332.
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may stipulate a time for such delivery (See Article 1477 and 1478, CC).
(?)
77. May the seller make use of both 1484 and 1526?
73. Although the buyer has already received the thing is it valid,
as a stipulation, for him not to be the owner? 78. Does 1525/1526 only cover a lump sum?
Yes, it is valid. Based on Art. 1504, the ownership may be retained by the
seller to secure the performance of the buyer of his obligation under the 79. Is 1484 available if the carrier holds the goods?
contract.
80. What are the factual antecedents in 1525?
74. What are the kinds of delivery? The seller of goods is deemed to be an unpaid seller within the meaning of
1) Actual delivery this Title:
2) Constructive Delivery (1) When the whole of the price has not been paid or tendered;
a. Execution of Public Instrument (2) When a bill of exchange or other negotiable instrument has
b. Symbolic Delivery been received as conditional payment, and the condition on which
c. Constitutum Possessorium it was received has been broken by reason of the dishonor of the
d. Traditio Brevi Manu instrument, the insolvency of the buyer, or otherwise.
e. Traditio Longa Manu In Articles 1525 to 1535 the term "seller" includes an agent of the seller to
f. Delivery of Incorporeal Property whom the bill of lading has been indorsed, or a consignor or agent who has
g. Delivery by Negotiable Document of Title himself paid, or is directly responsible for the price, or any other person
h. Delivery Through Carrier who is in the position of a seller. (n)
75. What is an unpaid seller? 81. What is insolvency in 1525?

Art. 1525. The seller of goods is deemed to be an unpaid seller within the Insolvency in this article is when the buyer has ceased to pay his debts in
meaning of this Title: the ordinary course of business or cannot pay his debts as they become
(1) When the whole of the price has not been paid or tendered; due, whether insolvency proceedings have been commenced or not.15
(2) When a bill of exchange or other negotiable instrument has been
received as conditional payment, and the condition on which it was JARA: Unlike the usual definition of insolvency, in this context, one is
received has been broken by reason of the dishonor of the insolvent even when his assets are more than his liabilities.
instrument, the insolvency of the buyer, or otherwise.
In Articles 1525 to 1535 the term "seller" includes an agent of the seller to 82. If that is the concept of insolvency in 1525, can it also be
whom the bill of lading has been indorsed, or a consignor or agent who has applied in 1484?
himself paid, or is directly responsible for the price, or any other person Yes. Article 1484 would apply if the vendee, who was paying the vendor in
who is in the position of a seller. installments, later defaults in payment due to insolvency. (?)
76. The seller in 1484 is also an unpaid seller, isn’t it? Yes. 83. Why is 1525 emphatic for the insolvency when it is not at all
Would the general provisions of contract law be covered in this mentioned in 1484?
title? Yes. 1525 mentions insolvency in relation to a conditional instrument’s cause
Is there overlapping between these remedies? No. for dishonor. 1484, however, simply recognizes that there is non-payment
How many remedies are there in 1484? Three. of an installment without regard for the reason behind it. (?)
COMPARISON 1484 1525 / 1526 JARA: In the Insolvency Law, 1525 cannot seem to apply.
Coverage Installment of Personal Unpaid Seller
Property 84. How can he make use of the rights of the unpaid seller?
Remedy By Judicial Action Limited to those provided in
the article
Scope
15 Villanueva, 369.
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By exercising any of the remedies under Art. 1526, to wit: By exercising remedy #2 of Article 1526 (stoppage in transitu; also see
Subject to the provisions of this Title, notwithstanding that the ownership Article 1530, CC) first, he may thereafter exercise #3 and #4.
in the goods may have passed to the buyer, the unpaid seller of goods, as
such, has: 89. How does the unpaid seller retain possession of the goods, if it
(1) A lien on the goods or right to retain them for the price while he is already with the possession of the carrier?
is in possession of them; Art. 1532. The unpaid seller may exercise his right of stoppage in transitu
(2) In case of the insolvency of the buyer, a right of stopping the either by obtaining actual possession of the goods or by giving notice of his
goods in transitu after he has parted with the possession of them; claim to the carrier or other bailee in whose possession the goods are.
(3) A right of resale as limited by this Title; Such notice may be given either to the person in actual possession of the
(4) A right to rescind the sale as likewise limited by this Title. goods or to his principal. In the latter case the notice, to be effectual, must
Where the ownership in the goods has not passed to the buyer, the unpaid be given at such time and under such circumstances that the principal, by
seller has, in addition to his other remedies a right of withholding delivery the exercise of reasonable diligence, may prevent a delivery to the buyer.
similar to and coextensive with his rights of lien and stoppage in transitu When notice of stoppage in transitu is given by the seller to the
where the ownership has passed to the buyer. (n) carrier, or other bailee in possession of the goods, he must redeliver the
goods to, or according to the directions of, the seller. The expenses of such
85. May an unpaid seller carry out rescission extrajudicially? delivery must be borne by the seller. If, however, a negotiable document of
Yes. Under Art. 1534, an unpaid seller having the right of lien or title representing the goods has been issued by the carrier or other bailee,
having stopped the goods in transitu, may rescind the transfer of title and he shall not obliged to deliver or justified in delivering the goods to the
resume the ownership in the goods, where he expressly reserved the right seller unless such document is first surrendered for cancellation.
to do so in case the buyer should make default, or where the buyer has
been in default in the payment of the price for an unreasonable time. The 90. How is possessory lien of the unpaid seller lost?
seller shall not thereafter be liable to the buyer upon the contract of sale, Art. 1529. The unpaid seller of goods loses his lien thereon:
but may recover from the buyer damages for any loss occasioned by the (1) When he delivers the goods to a carrier or other bailee for the
breach of the contract. purpose of transmission to the buyer without reserving the
The transfer of title shall not be held to have been rescinded by an ownership in the goods or the right to the possession thereof;
unpaid seller until he has manifested by notice to the buyer or by some (2) When the buyer or his agent lawfully obtains possession of the
other overt act an intention to rescind. It is not necessary that such overt goods;
act should be communicated to the buyer, but the giving or failure to give (3) By waiver thereof.
notice to the buyer of the intention to rescind shall be relevant in any The unpaid seller of goods, having a lien thereon, does not lose his lien by
issue involving the question whether the buyer had been in default for an reason only that he has obtained judgment or decree for the price of the
unreasonable time before the right of rescission was asserted. goods.
86. May an unpaid seller chose whatever remedy that he wants to 91. While the goods were in transit, buyer#1 sold the goods to
do? buyer#2 is the sale valid? Why?
No. The remedies are hierarchical in application. A remedy can only It depends. If the sale was made with the assent of the seller or to a
be availed when the preceding remedy in the hierarchy is not available. purchaser for value in good faith, the sale would be valid. Otherwise, the
sale would generally be unenforceable since it was sold without
87. How can the unpaid seller rescind or resell if he does not have authority/capacity. (?) Article 1535 provides –
control over the goods? Subject to the provisions of this Title, the unpaid seller’s
To gain control over the goods, the unpaid seller must first exercise the right of lien or stoppage in transitu is not affected by any sale
first and second remedy under Article 1526, namely lien and stoppage in or other disposition of the goods which the buyer may have
transitu. If he is unable to do so extrajudicially, he may opt for judicial made, unless the seller has assented thereto.
action. If, however, a negotiable document of title has been issued
for goods, no seller’s lien or right of stoppage in transitu shall
88. If the seller no longer possesses the goods, how can he avail of defeat the right of any purchaser for value in good faith to
remedy #3 and #4? whom such document has been negotiated, whether such
negotiation be prior or subsequent to the notification to the
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carrier, or other bailee who issued such document, of the

seller’s claim to a lien or right of stoppage in transitu. ISSUE: Whether or not Sps. Lumo may be considered as buyers in good
faith and for value, thereby legitimate owners of the property.
Does buyer 2 acquire ownership of the goods?
Buyer 2 acquires ownership if the seller assented to the sale, or if he was a HELD: Yes. In dealing with subject registration, buyers are not required by
purchaser for value in good faith to whom a negotiable document of title law to go beyond the register to determine the legal condition of the
has been negotiated. (?) property.
Even assuming that the sheriff’s deed of final conveyance in favor
Can we say that it is valid at one point then later say that it is of petitioner bank was duly recorded in the day book of the Registry of
not valid? Deeds under Act 3344, ownership of the property would still be theirs as
Yes. In a case where the unpaid seller has not yet exercised the remedies purchasers in good faith who registered first under the Property
available to him and all elements of a contract of sale were present during Registration Decree (Act 496). Article 1544 (formerly Art. 1473, Old Civil
the perfection of the contract, such sale may be deemed valid. Its Code) only covers those registered under the Torrens Title System by Act
invalidity happened during the consummation stage which concerns itself 496. 16
with the actual transfer of ownership of the subject matter and the
payment of the price. The perfection stage merely concerns itself with the Follow-up Questions for Naawan v. CA:
creation of the obligation to transfer and pay. (?) - How many contracts of sale are involved here? Two.
- Who was the seller? Comayas.
What factors do you think will determine whether or not the - Do you think 1544 is applicable in the antecedent facts if the
sale is valid? vendors were different? No, 1544 will only apply for sales with
There are two: (1) sale or other disposition of the goods with the assent of the same immediate seller.
the seller; and (2) the issuance of a negotiable document of title for goods - The seller was the sheriff?
to a purchaser for value in good faith. (Article 1535, NCC). - Who is in the document of sale; it’s the sheriff, isn’t it?
- What is its business in selling the property sold?
Who is the owner, and what is the most important factor even - We should have a common seller, so who’s the common seller?
if we don’t take into account the remedies? - So why use 1544? They should have used a different provision.
The owner of the goods is the holder of the negotiable document of title, - When one element is not present (such as a different seller)
even if such holder is a thief. The Civil Law assumes everyone is in good we can’t use 1544, isn’t it?
faith. - It was the bank that initiated the sale, how can the sheriff act
----------- End of Midterm Coverage ------------ on behalf of the seller?
- The sale is not signed by the seller, how can it be voluntary?
92. What is the first case?
Naawan Community Rural Bank, Inc. v. CA & Sps. Lumo JARA: It was really the owner who sold the property, because he gave
FACTS: In May 17, 1988, the Sps. Lumo purchased a residential house and authority to the bank to sell the property if he fails to pay. [The sheriff’s
lot with 340m2 from Comayas for the sum of 125K. authority, therefore, was derived from the fact that Comayas mortgaged
Prior to their purchase, the spouses assured the legitimacy of his property.]
their acquisition by inquiring about the property’s status from the
Register of Deeds of Cagayan de Oro and the Bureau of lands. They settled 93. What is the next case?
a mortgage made by the vendor with a certain Mrs. Gallupo. Marciano Blanco v. Filemon Rivera (2006)
Unfortunately, in 1989, they were called for ejectment by a FACTS: The parties are half-brothers who both claim ownership over a
sheriff. The ejectment was due to the fact that Naawan, the bank with residential land.
whom Comayas mortgaged the property in 1983, foreclosed the land. Petitioner Blanco claims that their mother, Eugenia Reyes vda. de
The reason why the purchasers were not aware of such Rivera, sold him the property in 1977. He wanted to claim and register the
registration by Naawan was because the Register of Deeds of Cagayan de
Oro City was established in 1984. Prior to that date, the Register of Deeds
in Mizamis Oriental handled the titles.
16 Digest by transcriptionist.
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property but Respondent Rivera, who held the title as co-owner, refused to FACTS: Belen Lazaro was the absolute owner of a 5,333m2 lot at Arevalo,
furnish him the title. Iloilo City. The parcel was known as Lot 11-E. In 1979, she sold a 400m2
In 1980, the entire property was sold by Eugenia to Rivera portion of the property for a sum of 22K to Daisy Magallanes under a
through a quit claim deed with a consideration of P9,785. The land was “Contract To Sale” [sic] payable in 2 years. By 1980, Magallanes
thereby registered. completed payment, so she fenced the property and constructed a nipa
In 1982, Blanco instituted proceedings in the barangay to uphold hut, right after a “Deed of Definite Sale” was executed in her favor.
his claim over the property through a presentation of a deed of sale and an After Magallanes, Lazaro had 8 other buyers. Legal disputes,
affidavit by his mother. however, arose that Lazaro refused to turn over the mother title.
Respondent Rivera denies prior knowledge of petitioners claim Consequently, Magallanes and the other buyers filed an adverse claim
and, consequently, instituted ejectment proceedings against the petitioner with the Registry of Deeds and such was annotated on the title in 1981.
– who occupied ¼ of the property in contention. The ejectment case, While the case was pending, Lazaro sold Lot 11-E-8, the portion
however, was decided in favor of petitioner Blanco. claimed by Magallanes and a Mario Gonzales: 800m2, to her neice (Lynn
E converso, the RTC and CA decided in favor of the respondent, Lazaro) and the latter’s husband (Rogelio Natividad). Due to this second
hence the case at bar. claim, Magallanes caused another annotation on the TCT in 1983.
Notwithstanding the annotations, Sps. Natividad sold the property to Sps
ISSUE: Whether or not the registration of respondent Rivera may be Pudadera in July 3, 1986.
considered to be done with good faith and, hence, valid. In defense, the petitioner, Sps. Pudadera, now claims that Lot 11-
E-8-B was the portion owned by the respondents – as evidenced by a
DISPOSITIVE PORTION: Petition denied. CA affirmed. zoning permit and their payment of real estate tax – and not Lot 11-E-8-A
which they claim. In addition, they cite that the dismissal of the civil case
HELD: Yes, the affidavit (of the mother that the lot was sold to Blanco) involving the property was made in 1985; that the decision of the civil
taken ex-parte is generally considered inferior to testimonies in court. case was final and executory even if it was only annotated in July 7 (or 4
Even if the petitioners claims were true, he would still be estopped by days after the property was sold to them) of the following year.
laches.17 The CA ruled in favor of the Magallanes. The case at hand is an
appeal by husband Ireneo and heirs of deceased Daisy Magallanes.
Follow-up Questions for Blanco v. Rivera:
- Who commenced the first action, the first buyer? ISSUE: Who between the parties have a better right over Lot 11-E-8-A?
- The action filed was?
- Was there an eviction case? HELD: The Magallanes. Well-settled is the rule that every person dealing
- Who won the case? with registered land may safely rely on the correctness of the certificate of
- What was the action in the case about? title issued therefore and the law will, in no way, oblige him to go beyond
o Did it succeed? the certificate to determine the condition of the property. However, this
rule shall not apply when the party has actual knowledge of facts and
o Who filed, was it the registered owner?
circumstances that would impel a reasonably cautious man to make such
o What should have been done by the first buyer in order
inquiry.
to have claim over the property? The petitioners were aware or should have been aware of
o How do you propose an adverse claim if the buyer Magallanes’ prior physical possession and claim of ownership when they
refuses to surrender the title? visited the lot on several occassions. They cannot be considered buyers in
o What do you think is the form of an adverse claim? good faith.
JARA: Eviction only involves a case of possession and not title. DISPOSITIVE PORTION: Partially Granted. Affirmed with modifications:
Certificate of title must be for Magallanes while Attorney’s fees are deleted
94. Third case: Pudadera v. Magallanes. (rationale: petitioners’ bad faith in the institution of the subject action is
wanting).
Follow-up Questions for Pudadera v. Magallanes:

- What would equate to good faith?
17 Case digest by transcriptionist.
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- Should it always be at its face? breach of contract)

Breach of If the party has promised the
95. In a sale, what is the concept of warranty? Warranty condition to happen or to be
Warranty may be expressed or implied. Any affirmation of fact or any performed, the other party may
promise by the seller relating to the thing is an express warranty if the also treat the non-performance
natural tendency of such affirmation or promise is to induce the buyer to as a breach of warranty.
purchase the same, and if the buyer purchases the thing relying thereon. Obligation Generally goes into the root of Goes into performance of
No affirmation of the value of the thing, nor any statement purporting to the existence of the obligation. such obligation and in
be a statement of the seller’s opinion only, shall be construed as a fact may constitute an
warranty, unless the seller made such affirmation or statement as an obligation in itself.
expert and it was relied upon by the buyer (Art. 1546, NCC). Form Stipulated Expressed or Implied
(by law)
Expressed warranty makes the seller liable for damages when there is a Attaches to Either the buyer or the seller The subject matter or to
breach of obligation. Here there must be the obligations of the
(a) An affirmation of fact or any promise by the seller relating to seller as to the subject
the subject matter of the sale; matter
(b) The natural tendency of such affirmation or promise is to
induce the buyer to purchase the thing; and 97. The warranty would always refer to a seller?
(c) The buyer purchases the thing relying on such affirmation or No, it may also apply to his agent. Although only a seller is bound by the
promise thereon. implied warranties of law, nevertheless, by express contractual
On the other hand, implied warranties are those which by law consitute a stipulation, an agent of the seller may bind himself to such warranties.20
part of every contract of sale, whether or not the parties were aware of
them, and whether or not the parties intended them.18 98. If we would have a good and, on it, we see “warranties of a
seller” it’s okay. How about “warranties of a buyer”?
In a contract of sale, unless a contrary intention appears, there is: Warranties of a seller would be okay. It is the seller who gives the
(1) An implied warranty on the part of the seller that he has a right to warranty. The buyer’s obligation is limited to acceptance of the delivery
sell the thing and the time when the ownership is to pass, and that the and payment of such. He does not need to provide the seller for a warranty
buyer shall from the time have and enjoy the legal and peaceful for the seller’s own goods. (?)
possession of the thing;
(2) An implied warranty that the thing shall be free from any hidden
a. “Warranty of a buyer,” it can be done? Give an
faults or defects, or any charge or encumbrance not declared or known
example.
to the buyer.
b. If the buyer makes the warranty and the buyer breaks
This article shall not, however, be held to render liable a sheriff,
auctioneer, mortgagee, pledgee, or other person professing to sell by a warranty may he be liable for breach of such
virtue of authority in fact or law, for the sale of a thing in which a third warranty?
person has a legal or equitable interest (Art. 1547, NCC). c. Will it always relate to his obligation to pay?
d. Isn’t it obnoxious for the buyer to induce the seller to
96. Would it differ from a condition? sell; is it not that it’s the seller that induces the buyer
Yes, specifically as follows:19 to buy?
Condition Warranty e. Why cannot the buyer make a warranty?
Effect on Non-happening Non-fulfillment f. But can the buyer make a warranty that will induce
Contract of = Extinguishes the obligation = Breach of contract the seller to sell the property?
Sale (generally does not amount to a

18 Villanueva, p. 493-495.
19 Villanueva, p. 491-492. 20 Villanueva, p. 295.
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JARA: The law says that, when there is a warranty of a seller, it may be (1) Potestative – when the fulfillment of the condition depends upon
expressed or implied. The buyer has remedies so that the seller will be the will of a party to the obligation.
liable. (2) Casual – when the fulfillment of the condition depends upon
chance and/or upon the will of a third person.
99. Do you think it is legally feasible for the buyer to make (3) Mixed – when the fulfillment of the condition depends partly upon
warranties/remedies for the seller? the will of a party to the obligation and party upon chance and/or the
will of a third person.
JARA: There is a difference between a warranty and a condition. A
warranty is a fact. A condition is something which may or may not c. As to possibility.
happen; a suspensive and a resolutory condition are its kinds. (1) Possible – when the condition is capable of realization according to
nature, law, public policy, or good customs.
100. What is your concept of a suspensive and resolutory (2) Impossible – when the condition is not capable of realization
according to nature, law, public policy or good customs.
condition?
According to the first and second paragraphs of Art. 1193, a period may
d. As to mode.
be suspensive (ex die) or resolutory (in diem).
(1) Positive – when the condition involves performance of an act.
It is suspensive when the obligation becomes demandable only upon the
(2) Negative – when the condition involves non-performance of an act.
arrival of a day certain;
it is resolutory when the obligation is demandable at once, although it is e. As to divisibility.
terminated upon the arrival of a day certain.21 (1) Divisible – when the condition is susceptible of partial realization.
(2) Indivisible – when the condition is not susceptible of partial
101. Again, what is the definition of Sale? realization.
Based on Article 1458 of the NCC:
By a contract of sale, one of the contracting parties f. As to numbers.
obligates himself to transfer the ownership of and deliver a (1) Conjunctive – when there are several conditions, all of which must
determinate thing, and the other to pay therefore a price be realized.
certain in money or its equivalent. (2) Alternative – when there are several conditions, one of which
A contract of sale may be absolute or conditional. must be realized.
102. We are interested with the condition. A condition, should it g. As to form.

always be resolutory, or may it be suspensive? (1) Express – when the condition is stated expressly.
No, there are different kinds of conditions. Traditionally, there are seven (2) Implied – when the condition is tacit (8 Manresa, 5th Ed. Bk. 1, pp.
(7) classifications. Suspensive and resolutory conditions fall upon the 323-324).22
classification under effect.
103. Can you make that condition a warranty?
Give an example. Not in all cases. Generally, warranties are only classified as express or
a. As to effect. implied. As such, it can only apply to conditions as to form.
(1) Suspensive – when the fulfillment of the condition results in the
acquisition of rights arising out of the obligation. 104. What are the 5 warranties?
(2) Resolutory – when the fulfillment of the condition results in the Under Article 1555 of the Civil Code is the following:
extinguishment of rights arising out of the obligation. When the warranty has been agreed upon or nothing has been stipulated
on this point, in case eviction occurs, the vendee shall have the right to
b. As to cause or origin. demand of the vendor:

21 Desiderio P. Jurado, CIVIL LAW REVIEWER, 21st ed. (Manila: Rex Bookstore, 2009), p. 730-731. 22 Jurado, p. 720-721; and the classification based on De Leon’s textbook on Obligations and Contracts.
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(1) The return of the value which the thing sold had at the time of the (A) In case of rescission or damages:
eviction, be it greater or less than the price of the sale; a. The buyer may either bring an action for rescission or sue
(2) The income of fruits, if he has been ordered to deliver them to the for damages only if he does so within one (1) year
party who won the suit against him; computed from the execution of the deed.
(3) The costs of the suit which caused the eviction, and, in a proper b. If such one year period has lapsed, the buyer may only
case, those of the suit brought against the vendor for the warranty; bring an action for damages within an equal period, to be
(4) The expenses of the contract, if the vendee has paid them; counted from the date on which he discovered the burden
(5) The damages and interests, and ornamental expenses, if the sale or servitude (Art. 1560, NCC).24
was made in bad faith.
(B) In case of hidden defects:
105. Since you have used the words “unless otherwise,” may the Actions on warranties against hidden defects shall be barred after
exclusionary clause provided for in the warranties be six (6) months from the delivery of the thing sold (Art. 1572,
considered as express warranties? NCC).25
Yes, stipulations are considered as express warranties.
(C) In case of animals:
106. There is an express warranty against eviction, will it really a. The redhibitory action based on the faults or defects of
benefit the vendee? animals must be brought within fourty (40) days from
Ideally, the warranty should benefit the vendee since by definition a the date of their delivery to the buyer (Art. 1577, NCC).
warranty should induce the vendee to purchase the good/property. (?) b. If the animal should die within three (3) days after its
purchase the vendor shall be liable if the disease which
107. As long as there is a breach and there is a warranty, whether it cause[d] the death existed at the time of the contract
is an expressed or implied one, is it really meant for the (Art. 1578, NCC).
protection of the vendee? NOTE: When the buyer returns the objects bought and demands the
The warranty mainly protects the vendee, but it also limits or defines his payment of the purchase price, he is in effect “withdrawing from the
actions against the seller. (?) contract” as provided in Article 1567, where the prescriptive period is
six months from the delivery of the thing sold.26
108. What benefit will the vendee get out of it when the warranty is
expressed against when it is implied? (D) In case of consumer goods:
When the warranty is expressed, the vendee is certain as to what extent a. The seller and the consumer may stipulate the period
the vendor may be held liable in addition to what is provided by law. It will within which the express warranty shall be enforceable.
be easier to seek damages, as opposed to implied warranty where the b. But if the implied warranty on merchantability
buyer will be limited to what is provided by law. (?) accompanies an express warranty, both will be of equal
duration.
109. If these warranties remain to be implied, don’t you think that c. Any other implied warranty shall endure not less than
the vendee can still run after the vendor? sixty (60) days nor more than one (1) year following
Yes, the vendee may run after the vendor. Implied warranties are those the sale of new consumer products.
which by law constitute part of every contract of sale, whether or not the NOTE: All covenants, stipulations, or agreements contrary to
parties were aware of them, and whether or not the parties intended the provisions of Article 68 (of RA 7394: Consumer Act of the
them.23 Philippines) are specifically declared null and void and
without legal effect.27
110. What is the time of prescription?
There are different prescriptive periods for different cases, viz:

24
25
Villanueva, p. 502.
Villanueva, p. 506.
26 Dino v. CA, 359 SCRA 91 (2001) as cited in Villanueva, p. 507.
23 Villanueva, p. 495. 27 Villanueva, p. 512-514.
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a. 6 months, from delivery? So, in other words, if they stipulate such non- d.
The warranty against hidden defects shall be barred after 6 prescription of the warranty they don’t need to follow
months from the delivery of the thing sold (Art. 1572, CC). the provisions of prescription in the Civil Code.
JARA: There is a chapter on prescription – instinctive and acquisitive.
b. When it comes to animals, it is reduced to?
Within 40 days for faults and defects, and within 3 days e. Supposing that the Civil Code provides for 4 years, may
for death by disease existent at the time of contract. they go against this by stipulating otherwise? May
they put it for 6 years?
c. When it is an immovable?
1) After 1 year, what is the remedy? 112. What is the scope of warranty against hidden defects?
The buyer may only bring an action for damages Under Article 1561 of the Civil Code, the seller shall be responsible for
with an equal period to be counted from the date warranty against “hidden defect” which means:
on which he discovered the burder or servitude. (a) Only when the nature of the hidden defect is such that it should
2) Within that 1 year, what action can you file? render the subject matter unfit for the use for which it is
Based on Art. 1560, an action for rescission or intended; or
sue for damages. (b) Should diminish its fitness for such use to such an extent that had
the buyer been aware thereof, he would not have acquired it or
111. What is an express warranty against hidden defect? Express would have given a lower price for it.
warranty is a stipulated guarantee by the vendor to the vendee The seller is not answerable for patent defects or those which are
involving hidden defects of the thing sold. visible, or even for those which are not visible if the buyer is an expert
who, by reason of his trade or profession, should have known them.
Since the breach of an express warranty makes the seller liable for The seller is responsible to the buyer for any hidden faults or defects in
damages, it is important to note that the following requisites are the thing sold, even though he was not aware thereof (Art. 1566, NCC).
necessary in order that there be an express warranty in a contract of sale:
(a) It must be an affirmation of fact or promise by the seller relating 113. What is a sale on “as is” and “where is” basis?
to the subject matter of the sale; The phrase “as is and where is” (which has been adopted from dispositions
(b) The natural tendency of such affirmation or promise is to induce of army surplus property) means nothing more than that the vendor
the buyer to purchase the thing; and makes no warranty as to the quality or workable condition of the goods,
(c) The buyer purchases the thing relying on such affirmation or and that the vendee takes them in the conditions in which that they are
promise thereon.28 (?) found and from the place where they are found and from the place where
they are located. It does not extend liens or encumbrances unknown to the
Can we change the prescriptive period? vendee and could not be disclosed by a physical examination of the goods
No. Since the law, under Art. 1571 mandates that actions on warranties sold. (Monfort v. Willis, [CA] No.6964-R, October 15, 1951)
against hidden defects shall be barred after 6 months from the delivery of
the thing sold. (?) The term “as is” in public auction of (imported) goods refers to the
physical condition of the merchandise and not the legal situation in which
Is it a valid stipulation to make it 5 years? a. it was at the time of the sale. It has no bearing at all on the obligation of
Have you come across a provision in Sales for a b. the seller (Bureau of Customs) under Article 1495 “to ransfer the
prescriptive period for an express warranty? ownership and deliver, as well as warrant the thing which is the object of
c. So, can they stipulate that “an action for the breach of sale.” This warranty is as to the right and capacity to deliver. ( Auyong
the express warranty will not prescribe”? Hian v. Court of Tax Appeals, 109 SCRA 470 [1981]).29
JARA: What the Torrens Law says is that you cannot put a prescriptive
period for the title. a. Why is there no implied warranty?

28 Villanueva, p. 493-494; Art. 1546, CC; Also Carrascoso, Jr. v. CA, 477 SCRA 666 (2005) 29 Hector S. De Leon, “Comments and Cases on Sales and Lease,” 6th ed. (Manila: Rex Bookstore, 2005), p. 300.
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Because it must be understood from the terms, that the buyer 1) Can the vendor and vendee stipulate that there is
gets what he sees, and that the buyer is presumed to know no such warranty on the part of the vendor?
what he is buying. (?) Yes. The code provides in the first paragraph of Art.
1547 that “unless a contrary intention appears.”
b. What else? In second hand items?
There is no implied warranty as to the condition, adaptation, 114. You are the lawyer of the vendee. The vendor offers that the
fitness or suitability for the purpose for which made, or the warranty may be waived, what leverage can you get by putting
quality of an article sold as and for second-hand article. But away such warranty?
such articles might be sold under such circumstances as to Leverage may be stipulated by a meeting of minds. (?)
raise an implied warranty. A certification issued by the
vender that a second-hand machine was in A-1 condition is an JARA: The law says that an implied warranty could be suppressed
express warranty binding on the vendor. (Moles v.
because it results into the reduction of the purchase price.
Intermediate Appellate Court 169 SCRA 777 [1989]).30
115. Do you think that there should also be a prescriptive period for
c. If the thing sold is brand new, is there an implied
breach of warranty against eviction?
warranty against hidden defect?
Yes, such is provided for in the Code.
Yes, there is an implied warranty, however there is no
warranty of title for a sale which is by virtue of authority in
a. What is the period: how many days and from what point?
fact or law, as mentioned in the Civil Code –
In a contract of sale, unless a contrary intention appears, there is:
Generally, the period of prescription is 6 months (Art. 1571,
o An implied warranty on the part of the seller that he has a right NCC). Howerver, in redhibitory actions based on the faults or
to sell the thing at the time when the ownership is to pass, and defects of animals, the period is 40 days (Art. 1577, NCC).
that the buyer shall from that time have and enjoy the legal Whether 6 months or 40 days, the period must be counted
peaceful possession of the thing; and from the date of delivery to the vendee.31
o An implied warranty that the thing shall be free from any
hidden faults or defects, or any charge or encumbrance not How long after final judgment? b.
declared or known to the buyer.
These warranties, however, do not mean that a sheriff, auctioneer,
STUDENT: The 5 year period from the time the action
mortgagee, pledgee, or other person professing to sell by virtue of accrues.
authority in fact or in law, can be held liable for the sale of a thing in JARA: ?
which a third person has a legal or equitable interest (Art. 1547, c. What may the vendee seek within 1 year?
NCC). d. If he is not deprived of possession may he still avail of such
warranty?
In the sale of goods, there is an implied warranty as to the quality
JARA: If you read the chapter in prescription, in instances where the law
or fitness of the goods as follows:
(1) Where the buyer expressly or by implication makes known to does not prescribe, the prescription of 5 or 6 years, I think, shall apply.
the seller the particular purpose for which the goods are So, should we have one (prescription of 5 or 6 years)?
acquired, and it appears that the buyer relies on the seller’s skill Isn’t 10 years too long?
or judgment (whether he be the grower or manufacturer or What is the period for movables?
not), there is an implied warranty that the goods shall be
reasonably fit for such purpose; and
(2) Where the goods are bought by description from a seller who
116. What are the essential requisites of eviction?
deals in goods of that description (whether he be the grower or Warranty in case of eviction is an implied warranty in contracts of sale, by
manufacturer or not), there is an implied warranty that the virtue of which if the vendee is deprived of the who or a part of the thing
goods shall be of merchantable quality (Art. 1562, NCC). purchased by a final judgment based on a right prior to the sale or an act
imputable to the vendor, such vendor shall answer for the eviction even

30 De Leon, p. 301. 31 Jurado, p. 984.
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though nothing has been said in the contract of such subject. (Art. 1548, Because it is part of the obligation of the vendee to accept
NCC.) the delivery, his nonpayment will not extinguish such
obligation. However, if the vendee cannot pay the price,
In order that such warranty may be enforced it is essential that the unpaid seller shall have the right to exercise the
the following requisites must concur: remedies found under Article 1426 of the Civil Code.
(1) Deprivation of the vendee of the whole or part of the thing
purchased; b. If the parties do not agree in the time frame of
(2) The deprivation must be by virtue of a final judgment; acceptance, what happens?
(3) The deprivation must be based on a right prior to the sale or an Acceptance may be implied by their acts and obligation
act imputable to the vendor; still exists between the parties, and the court may set a
(4) The vendor must be summoned in the suit for eviction at the period for them. The relevant provisions for this scenario
instance of the vendee. (Arts. 1548, 1558, NCC.) are as follows:
a. Who are your plaintiff and defendant for you to have a Art. 1586. In the absence of express or implied agreement of the
final judgment? parties, acceptance of the goods by the buyer shall not discharge
Based on Art. 1588 (4) of the NCC, the vendor must be the seller from liability in damages or other legal remedy for
summoned in the suit for eviction at the instance of the breach of any promise or warranty in the contract of sale. But, if,
after acceptance of the goods, the buyer fails to give notice to the
vendee. Consequently, the vendee would be the plaintiff seller of the breach in any promise of warranty within a
while the vendor would be the defendant. reasonable time after the buyer knows, or ought to know of such
breach, the seller shall not be liable therefor.
b. You are contemplating a case of Juan Dela Cruz against
or filled by the vendee? Art. 1197. If the obligation does not fix a period, but from its
c. We are talking about a movable or immovable? nature and the circumstances it can be inferred that a period was
intended, the courts may fix the duration thereof.
An immovable. Eviction involves ejectment, therefore,
The courts shall also fix the duration of the period when it
the property or thing referred to must be immovable such depends upon the will of the debtor.
as a piece of land or a unit of property where one may In every case, the courts shall determine such period as
remain or reside. may under the circumstances have been probably contemplated
by the parties. Once fixed by the courts, the period cannot be
117. Even if the vendee is evicted, he cannot complain? The law changed by them.
prescribes that the vendor must be made a party to the case?
He may still complain. The provision wherein the vendor must be made a 119. If the vendee has not expressly manifested his acceptance of
party to the case is when the case involves an enforcement of warranty in the goods, what conduct of the vendee can be used to make the
an eviction case. (?) inference that he has accepted the goods?
JARA: It will be determined by the Rules of Court. A period to answer [for According to Art. 1585: The buyer is deemed to have accepted the goods
the vendor] is only 15 days, or depending on the circumstances. The when he intimates to the seller that he has accepted them, or when the
period where the vendor can be impleded will be a much shorter period. goods have been delivered to him, and he does any act in relation to them
which is inconsistent with the ownership of the seller, or when, after the
118. Obligations of the vendee? lapse of a reasonable time, he retains the goods without intimating to the
Based on Art. 1582 of the Civil Code, the vendee is bound to accept seller that he has rejected them. (n)
delivery and to pay the price of the thing sold at the time and place
stipulated in the contract. 120. After delivery of the goods, the vendor says “I am not
If the time and place should not have been stipulated, the accepting the goods.” Can he still be compelled to pay the
payment must be made at the time and place of the delivery of the thing purchase price?
sold. His obligation to pay depends on the quality of the delivery. If his refusal
a. What if he cannot pay the price, what happens to to pay is not valid, he may still be compelled by the seller to pay the
acceptance? purchase price, based on Art. 1588: “If there is no stipulation as specified
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in the first paragraph of article 1523, when the buyer's refusal to accept Generally, it is not his duty to return the goods. Art. 1587
the goods is without just cause, the title thereto passes to him from the provides that “unless otherwise agreed, where goods are
moment they are placed at his disposal.” delivered to the buyer, and he refuses to accept them,
having the right so to do, he is not bound to return them
However, if his refusal is justified due to a breach by the seller, the buyer to the seller, but it is sufficient if he notifies the seller that
may not be compelled to pay the price; and the buyer may avail of the he refuses to accept them. If he voluntarily constitutes
remedies under Article 1599 of the Civil Code – himself a depositary thereof, he shall be liable as such.”
Where there is a breach of warranty by the seller, the buyer may, at his election: c. Isn’t it that the law provides that if the vendee refuses
(1) Accept or keep the goods and set up against the seller, the breach of warranty to accept, a new relationship is created: a bailor-bailee
by way of recoupment in diminution or extinction of the price;
relationship?
(2) Accept or keep the goods and maintain an action against the seller for damages
for the breach of warranty; Such new relationship is not automatic. Under the same
(3) Refuse to accept the goods, and maintain an action against the seller for provision cited above the qualifying phrase is “if he
damages for the breach of warranty; voluntarily constitutes himself a depositary thereof, he
(4) Rescind the contract of sale and refuse to receive the goods or if the goods have shall be liable as such.”
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. d. Supposing he does not constitute himself as bailee, and
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
the goods are lost, should he deposit the goods with the
provisions of the second paragraph of Article 1191. court?
Where the goods have been delivered to the buyer, he cannot rescind the 1) Does the law require him to do so?
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 121. In a contract of sale, what is the meaning of an automatic
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
cancellation clause?
transferred to the buyer. But if deterioration or injury of the goods is due to the It is a stipulation in an agreement that automatic rescission of the
breach or warranty, such deterioration or injury shall not prevent the buyer contract of sale shall be made when there is nonpayment of the purchase
from returning or offering to return the goods to the seller and rescinding the price.
sale. As a general rule, the vendor may sue for rescission of the
Where the buyer is entitled to rescind the sale and elects to do so, he shall contract should the vendee fail to pay the price. The sale of real property,
cease to be liable for the price upon returning or offering to return the goods. If however, is subject to the stipulations agreed upon by the parties and to
the price or any part thereof has already been paid, the seller shall be liable to the provisions of Article 1592 (De Leon, 2005)32
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. Art. 1592. In the sale of immovable property, even though it may have
Where the buyer is entitled to rescind the sale and elects to do so, if the been stipulated that upon failure to pay the price at the time agreed upon
seller refuses to accept an offer of the buyer to return the goods, the buyer the rescission of the contract shall of right take place, the vendee may
shall thereafter be deemed to hold the goods as bailee for the seller, but subject pay, even after the expiration of the period, as long as no demand for
to a lien to secure payment of any portion of the price which has been paid, and rescission of the contract has been made upon him either judicially or by a
with the remedies for the enforcement of such lien allowed to an unpaid seller notarial act. After the demand, the court may not grant him a new term.
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 a. If the thing sold is real property, can we also have such
difference between the value of the goods at the time of delivery to the buyer clause?
and the value they would have had if they had answered to the warranty. Yes, but such will be void. According to Article1592 there
should be demand and a notarial act before rescission
a. The vendee has the prerogative to not set the rules? may occur. As such, there is no automatic cancellation.
b. If the vendee refuses to accept, is it his duty to return
the goods?
32 /ejlvillena. 2008 – Jara Notes
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Furthermore, special laws protect the buyer from such an

iniquitous provision. a. Do you think the provision of this code is still
applicable with the existence of the Maceda Law?
b. How do we carry out a cancellation clause, if there is Yes.
no need for intervention? b. So both Maceda Law and 1592 governs a “Contract of
Since it may be carried out judicially or by a notarial act, Sale”? Can the it stand together?
the notarial act is an extrajudicial act and there would be Yes, and the two can stand together.
no need for court intervention. c. Is there also rescission under the Maceda Law? Yes.
d. Is there no conflict? There is none.
c. Is it really automatic? No (See the answer in 121, (a)). e. What are those not govenerd by the Maceda Law?
Industrial lots, commercial buildings, & sales to tenants.
d. Do we apply an automatic cancellation clause in a f. What is included by the Maceda Law?
contract to sell? Real estate – as implied by those included (residential
Yes, but such automatic cancellation would not be based and condominum appartments) and excluded, the law
on Art. 1592, but on the provisions of the agreement by focuses on residential property.
the parties. In a contract to sell, the vendor has g. The period, how much shorter is it against 1592?
maintained ownership to ensure the buyer’s compliance. The period is not shorter, but longer. The Maceda Law
provides for at least 60 days, while Article 1592 only
The distinction between contract of sale and contracts to considers one instance of nonpayment.
sell with reserved title has been recognized by the
Supreme Court in repeated decision upholding the powers 1) So, automatic rescission does not really
of promissors under contracts to sell in case of failure of happen automatically?
the other party to complete payment, to extrajudicially Yes, it does not. A judicial or an extrajudicial act
terminate the operation of the contract, refuse of demand must first be made.
conveyance, and retain the sums or installments already 2) Don’t you think 1592 is more liberal with
received where such rights are expressly provided for.33
regard to the purchase price?
1592, does not affect the purchase price. It sets
122. Give us the Civil Code provision in the case of a piece of land
an action to rescind the contract.
(for automatic cancellation)? Art. 1592, NCC.
3) Is there a recovery in rescission?
Art. 1592 Maceda Law The vendor may recover the property, but no
Covers Immovable property RA 6552: Realty
(Contract of Sale ONLY; Installment Buyer
longer demand for the fulfillment of the purchase
Not applicable to a Contract Protection Act price.
to Sell) (Real Estate, excluding h. Does not the law give mutual restitution?
industrial lots, commercial 1) In 1592, does he get full restitution? Will
buildings, & sales to tenants)
Judicial or notarial act Extrajudicial act not the amount be much larger?
Rescission by
The vendee may pay even i. How long do you recover the possession of the property
Major provision
after the expiration of the when there is a notarial rescission?
period, as ong as no demand Under the Maceda Law, 30 days after the notarial act of
for rescission has been made
Once: “upon failure to pay the 60-day grace period if the
“notice of cancellation” or “demand for rescission of
Period of default
price agreed upon” installments paid is for less contract” there may be a cancellation of contract. Once
than 2 years; and the contract is cancelled, possession may be demanded by
the vendor, through the sheriff.
and additional 1 month grace
period for every additional
year of installment.

33 Jurado, p. 986; Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc, 43 SCRA 93.
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123. Under the code, when can the payment of a purchase price be goods or right to retain them for the price while he is in possession of
suspended? them.”
Based on Art. 1658 of the Civil Code, there are two instances for the
suspension of purchase price with respect to lease. “ The lessee may a. In addition to his rights under Article 1599, he may
suspend the payment of the rent in case the lessor fails exercise the rights of an unpaid seller. He can what?
[a] to make the necessary repairs or Yes. When the buyer has a right to rescind the sale but
[b] to maintain the lessee in peaceful and adequate enjoyment of the seller refuses to accept the return, the buyer would be
the property leased. deemed as bailee for the seller. The buyer will have a
(are there more?) right to retain the goods, just like an unpaid seller in
order to secure the price that he had paid.
124. Don’t you think Chapter 6 (Actions for breach of contract of sale
of goods) is already covered by other Articles, like 1191? 128. The causes that will extinguish a sale?
Yes, it is also covered by Article 1191; but chapter 6 specifically covers Sales are extinguished by the same causes as all other obligations, and
sale of goods while Article 1191 covers all obligations. The difference is also by conventional or legal redemption. (Art. 1600, NCC.)
elucidated by the first provision of Chapter 6, namely Article 1594: Accordingly, other obligations are extinguished:
“Actions for breach of the contract of sale of goods shall be governed (1) By payment or performance;
particularly by the provisions of this Chapter, and as to matters not (2) By the loss of the thing due;
specifically provided for herein, by other applicable provisions of this (3) By the condonation or remission of the debt;
Title.” (4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
125. Chapter 6 covers warranty against “hidden defects”? Yes. (6) By novation.
Other causes of extinguishment of obligations, such as annulment,
126. What is a “redhibitory effect”? rescission, fulfillment of a resolutory condition, and prescription, are
The redhibitory action is an action instituted to avoid a sale on account of governed elsewhere in this Code (Art. 1231, NCC).
some vice or defect in the things sold which renders the use impossible.34
The effect of such will release the vendee from his obligation against the 129. Give the distinctions between conventional and legal
vendor due to the vice or defect of the thing sold. redemption.
Conventional redemption shall take place when the vendor reserves
127. In that long Article in Chapter 6… It has something to do with the right to repurchase the thing sold, with the obligation to comply with
the rights of the unpaid seller. This time, it is exercised by the the provisions of Article 1616 and other stipulations which may have been
buyer. How does that work? agreed upon (Art. 1601, NCC).
Such long article in Chapter 6 is 1599. The last paragraph of the 4th item of Legal redemption is the right to be subrogated, upon the same terms
Article 1599 provides: and conditions stipulated in the contract, in the place of one who acquires
XXXX a thing by purchase or dation in payment, or by any other transaction
(4) …Where the buyer is entitled to rescind the sale and elects to whereby ownership is transmitted by onerous title (Art. 1619, NCC).
do so, if the seller refuses to accept an offer of the buyer to
return the goods, the buyer shall thereafter be deemed to hold 130. What are the periods?
the goods as bailee for the seller, but subject to a lien to secure The period varies. In case of conventional redemption, in the absence
payment of any portion of the price which has been paid, and of an express agreement, shall last four years from the date of the
with the remedies for the enforcement of such lien allowed to an contract. Should there be an agreement, the period cannot exceed ten
unpaid seller by Article 1526. years. However, the vendor may still exercise the right to repurchase
The right of an unpaid seller is then exercised with respect to the lien that within thirty days from the time final judgment was rendered in a civil
a buyer may have on the goods, to wit – Article 1526, (1) – “A lien on the action on the basis that the contract was a true sale with right to
repurchase (Art. 1606, NCC).
Generally, in legal redemption, “the right of legal pre-emption or
redemption shall not be exercised except within thirty days from the
34 De Leon, p. 318. notice in writing by the prospective vendor, or by the vendor, as the case
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may be. The deed of sale shall not be recorded in the Registry of Property, of another property, then YES – he can have both right of
unless accompanied by an affidavit of the vendor that he has given written legal redemption, as a co-owner; and a right of pre-emption as
notice thereof to all possible redemptioners. The right of redemption of co- an owner of an adjoining piece of urban land.
owners excludes that of adjoining owners (Art. 1623, NCC).” However,
aside from what is provided in the Civil Code, there are different periods of 132. In other words, pre-emption is a right of first refusal?
prescription for legal redemption, as such right to redeem is derived from Yes, it may be considered as a right of first refusal since the owner of the
law. Some other instances when right of legal redemption is granted are adjoining piece of urban land must first decline to purchase such property.
within as follows: (?)
a. Homesteads – 5 years from date of conveyance;
b. Tax Sales – 1 year from date of sale; 133. In one and the same sale of a parcel of land, can we have one
c. Judgment Debtor – 1 year from the date of registration;
d. Extrajudicial foreclosure – 1 year; and both conventional and legal redemption? Yes.
e. Judicial Foreclosure – 90 days;
f. Foreclosures by Banking Institutions – 1 year after sale of real estate; a. Suppose that the conventional redemption belongs to
g. Rural Bank Forecloses – 2 years from the registration of sheriff’s the vendor de retro while the legal redemption belongs
certificate of sale, or 5 years from expiration of period by heirs; and to the adjoining owner, how will the vendee decide
h. Agrarian Reform Code – 180 days from notice. 35
now?
The autonomy of contracts, as long as not contrary to law,
131. What is pre-emption?
must first be exercised. As such, the right of conventional
Pre-emption is the right of an owner to buy a piece of land over others. redemption by the vendor de retro must first be
This right of pre-emption may only be exercised by the owner of an
exercised, or prescribe before the right of legal
adjoining urban land, to wit: Whenever a piece of urban land which is so
redemption may be applicable. (?)
small and so situated that a major portion thereof cannot be used for any
practical purpose within a reasonable time, having been bought merely for
b. The one who is given the right of legal redemption
speculation, is about to be re-sold, the owner of any adjoining land has a
right of pre-emption at a reasonable price. cannot redeem the property?
If the re-sale has been perfected, the owner of the adjoining land shall The right to exercise the right of redemption falls on a
have a right of redemption, also at a reasonable price. case to case basis. The right of legal redemption cannot be
When two or more owners of adjoining lands wish to exercise the applied until conventional redemption is first settled. (?)
right of pre-emption or redemption, the owner whose intended use of the
land in question appears best justified shall be preferred (Art. 1622, NCC). c. If the vendor de retro gets back the property, may the
Moreover, the right of legal pre-emption or redemption shall not be one with a right of legal redemption get it away from
exercised except within thirty days from the notice in writing by the him? (because you said that the two can exists
prospective vendor, or by the vendor, as the case may be. The deed of sale together)
shall not be recorded in the Registry of Property, unless accompanied by No, the one with the right of legal redemption may not get
an affidavit of the vendor that he has given written notice thereof to all the property from him, since such right was only present
possible redemptioners. The right of redemption of co-owners excludes when he sold the property as vendor de retro. Having
that of adjoining owners (Art. 1623, NCC). exercised his right to redemption, the right of legal
redemption is no longer available. (?)
a. For example, a co-owner sold a property. His co-owner
has the right of legal redemption. Can he also have the d. There is conventional redemption and legal
right of pre-emption? How? redemption existing together. Possible?
If he is the owner of an adjoining urban land to that property STUDENT: Sir, if a co-owner sold his property as a vendor de
which was sold, and that such property sought to be retro, he has rights from both conventional and legal
redeemed is so small that it would be inutile if it were not part redemption.
e. What if his co-owner, who also has the right of legal
35 Villanueva, p. 561-567. redemption to the property that the co-owner vendor
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de retro sold, also exercises his right of legal (3) the sale must be to a third person.
redemption?
(JARA: Remember, legal redemption arises from law.) In our example (#135 and 137), don’t you think that a.
The co-owner may not exercise his right until the vendor de all the elements are present?
retro forfeits his right to redeem. (?) No. All the elements are not present because the sale is
not to a third person.
f. So the two cannot co-exist? JARA: It is a state policy to discourage co-ownership. Commentaries on
The two can co-exist, however, they may not be practiced the book were based on the Code Commission.
at the same time. One is prioritized over the other. (?)
139. Does the law distinguish between a “pacto de retro sale” and
g. Can one stem-out from the other? an “absolute sale” to a third party?
Yes. A vendor de retro, may also have a right of legal The law does not use the term “pacto de retro” however, from its
redemption after he loses his property. (?) provsions such may be implied from the definition of conventional
redemption. As such, the two are distinguished. The former in
134. What if there are 2 other co-owners of the land sold by a conventional redemption and the other in a usual contract of sale. (?)
vendor de retro? a. It just says to a third party, isn’t it? Yes.
(JARA: Legal redemption is a right, isn’t it? The vendee cannot do
anything to prevent such exercise of right.) 140. What is assignment?
Under Article 1624 of the Civil Code, “assignment” is in fact the sale of
According to the second paragraph of Article 1620, when there are two or credits and other incorporeal rights.
more co-owners who desire to exercise the right of redemption, they may
only do so in proportion to the share they may respectively have in the a. Is it different from a sale?
thing owned in common. Although credits and other intangible things within
human commerce are the proper object of a contract of
135. If co-owner #1 redeemed the property, but after #1 redeemed “sale” as defined in Article 1458 of the Civil Code,
the property, co-owner #3 now wants to exercise his right of “assignment” is the proper or rather technical, term that
legal redemption, may he still do so? should be used. Therefore, although “Deed of Sale of
No, co-owner#3 no longer has the right of legal redemption. Based on the Shares of Stock” is legally correct, it is technically
provision of Article 1620, for a co-owner of a thing to have a right of inaccurate, since the proper term is “Deed of Assignment
redemption, the sale must be to a third person. In the case given, the of Shares of Stock.” 36
property now belongs to a co-owner.
b. Is it governed by the provisions on the Chapter on
136. Is there anything in the Civil Code that one right (of Sales?
redemption: conventional or legal) is preferred over the No. If “sale” and “assignment” are legally the same
other? contracts, but with different names, the logical question
No. would then be: Why does our Civil Code provide for a
separate chapter under the Title on Sales to cover
137. If co-owner#1 sells his share to #2. Co-owner #3 cannot have assignments, Chapter 8 – Assignment of Credits and
the right to redeem, isn’t it? Other Incorporeal Rights? Although sale and assignment
Yes, since the sale is not to a third person (see Art .1620). are not technically the same, they are not however
different, because they come from the same root or genus,
138. What are the elements to create a legal redemption by co- which happens to be called “sale” also; consequently, the
owners? law must take up special matter peculiar to the sale of
Based on Art. 1620 of the Civil Code, there are three:
(1) There must be a co-owner of a thing;
(2) the shares of all the other co-owners or of any of them, are sold; and 36 Villanueva, p. 568.
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intangibles. Assignment therefore is a species of the of the following cases:

genus sale, defined in Article 1458 of the Civil Code. (1) When the price of a sale with right to repurchase is unusually
inadequate;
c. If it is governed by the Chapter on Sales, can we have (2) When the vendor remains in possession as lessee or
an assignment with the right to repurchase? otherwise;
(3) When upon or after the expiration of the right to repurchase
141. Is there anything that would prevent “right of repurchase” another instrument extending the period of redemption or
between the assignor and the assignee? No, there is none. granting a new period is executed;
a. Assuming they have come to that agreement, will that (4) When the purchaser retains for himself a part of the purchase
assignment be void? price;
(5) When the vendor binds himself to pay the taxes on the thing
No. There is nothing in the code that will make such an
sold;
assignment void. (?)
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
142. A “pacto de retro transaction” can be applied on assignment?
payment of a debt or the performance of any other obligation.
Yes.
In any of the foregoing cases, any money, fruits, or other
a. How about warranties on assignment?
benefit to be received by the vendee as rent or otherwise shall be
Since assignment concerns intangibles, a different kind of
considered as interest which shall be subject to the usury laws.
warranty applies, to wit:
(Art. 1602, NCC.)
The vendor in good faith shall be responsible for the
existence and legality of the credit at the time of the sale,
a. Will the role of the parties change?
unless it should have been sold as doubtful; but not for the
Yes, instead of vendor-vendee there will be a mortgagor-
solvency of the debtor, unless it has been so expressly
mortgagee.
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 b. Who will be the mortgagor and the mortgagee?
received and for the expenses specified in No. 1 of Article The vendor will be the mortgagor while the vendee will be
1616. The vendor in bad faith shall always be answerable the mortgagee. (?)
for the payment of all expenses, and for damages. (Art.
1628, NCC.) 144. The payee of the promissory note, can he sell the promissory
note?
In case the assignor in good faith should have made Yes, unless there is an agreement to the contrary. (?)
himself responsible for the solvency of the debtor, and the
contracting parties should not have agreed upon the 145. Is there a difference between a “sale” and an “assignment”?
duration of the liability, it shall last for one year only, Yes, although sale may cover assignment, assignment is the proper term
from the time of the assignment if the period had already used to cover the sale of credits and other incorporeal property.
expired. Consequently, assignment may not be used to describe the sale of
If the credit should be payable within a term or period tangibles.
which has not yet expired, the liability shall cease one
year after the maturity. (Art. 1629, NCC.) 146. If we have a promissory note, say for 1M. It is assigned to
Juan Dela Cruz. Is it valid? Yes.
b. Can we not allow an “equitable mortgage” in the
assignment of credit? 147. If there is a promissory note. Who runs after the debtor?
The holder of the promissory note may run after the debtor. (?)
143. In what cases may a sale be considered as an equitable
mortgage? 148. EXAMPLE: The assignor is in need of money so he sells the
The contract shall be presumed to be an equitable mortgage, in any promissory note (PN), worth P1M, for 800K to the assignee.
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a. Can the assignee compel the debtor to pay P1M, even if Section 2 of the Law defines the three types of
he paid only 800K? transactions which are treated as “bulk sales” covered by
Yes. The assignee is a third party in the relationship the Law, as any sale, transfer, mortgage or assignment of:
between his assignor and its debtor. There is no change in 1) A stock of goods, wares, merchandise,
the debt due from the debtor to its creditor – who is also provision or materials not in the ordinary
the assignor in this case. There is merely a subrogation of coursse of trade and the regular prosecution of
rights from the assignor to the assignee. (?) the business of the seller, mortgagor,
transferor, or assignor (“Extraordinary sale of
b. Under the code, what are the defenses that can be goods”);
exercised by the debtor against the assignee? 2) All, or substantially all, of the fixtures and
When a credit or other incorporeal right in litigation is equipment used in and about the business of
sold, the debtor shall have a right to extinguish it by the seller, mortgagor, transferor or assignor
reimbursing the assignee for the price the latter paid (“Extraordinary sale of fixtures and
therefor, the judicial costs incurred by him, and the equipment”); and
interest on the price from the day on which the same was 3) All, or substantially all, of the business or trade
paid. theretofore conducted by the seller, mortgagor,
A credit or other incorporeal right shall be considered transferor, or assignor; (“Sale of business
in litigation from the time the complaint concerning the enterprise”).37
same is answered.
The debtor may exercise his right within thirty days b. Why is this prohibited?
from the date the assignee demands payment from him It is primarily intended to prevent a situation where
(Art. 1634, NCC). merchants would defraud their creditors by hurriedly
selling their businesses and vanishing into thin air, with
149. EXAMPLE: The assignor filed a case against his debtor for a the creditors left holding the bag, while the transferee
PN worth P1M. In need of a financial fix, he sold his right in comes under the protection of the doctrine of “buyer in
litigation to Juan Dela Cruz for P700K. good faith and for value.” Often, it would be difficult for
the creditors to prove fraudulent connivance on the part
a. Is that a good stand?
of the buyer.38
Yes. The PN may be sold at a lower price so that the
assignee may earn from the transaction.
c. Why would it prejudice the other creditors; are they
not all in the same boat?
b. Can he compel the assignee to receive the P700K?
It is because a seller may sell his property to settle his
No. The debtor is still bound by his original obligation on
debts against one debtor and leave the other unpaid. (?)
the PN. The value of the PN is not affected by the
assignment made by the assignor to the assignee. The PN
must continue to be valued at P1M. 151. You said that the Bulk Sales Law is for the creditors. It is easy
to understand in a sale, because the debtor will no longer have
c. How is this different from the 1st example (#148)? property to settle his obligations to the creditor. But what
Disregarding the values and the circumstance that about in the case of mortgage?
caused the sale, the 1st example is not different from this It also includes mortgage because the law is wary of loopholes by
case. which a debtor may dispose of his property. In mortgage,
ownership may be transferred to another when the property is
150. What is the BULK SALES LAW? foreclosed.
Is also known as Act. No. 3952, as amended by R.A. 111.
a. What are the acts of the owner which are prohibited?
37 Villanueva, p. 584 : The enumeration has been re-arranged from the order given in the Bulk Sales Law to
show a hierarchical progression of the subject matter of “bulk sales.”
38 Villanueva, p. 583.
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Lease may be defined as a consensual, bilateral, onerous and commutative

a. In mortgage there is no transfer of ownership, isn’t it? contract by virtue of which one person binds himself to grant temporarily
Yes, initially there is no transfer of ownership. However, the use of a thing or to render some service to another who undertakes to
the mortgage may lead into a transfer of ownership. ay some rent, compensation or price. (Sanchez Roman 736) 40
In a mortgage, the property is given merely as a
guarantee, but when the debtor-mortgagor fails to 157. If the owner of a business rents out his entire property, shall it
perform his obligations to the mortgagee, the property be covered by the Bulk Sales Law?
may be attached and transfer of ownership may be made. No. The Bulk Sales Law only covers sales, mortgage, transfer and
assignment. Applying the statutory principle of casus omissus pro omisso
b. Do you agree that the mortgage is also covered by the habendus est: rent, as it was not included, must have been intentionally
Bulk Sales Law? omitted.
Yes, mortgage is mentioned as a transaction covered by
Sec. 2 of the Bulk Sales Law. a. Is it not a transfer?
No, it is not. There is only a grant for the temporary use
152. Suppose he sells anything that he has right to, will it be of the thing.
(cover) anything (all his properties)?
No. First, the items or property must be covered by the Bulk Sales Law; b. What if it is made for 20 or 30 years, is it not covered
and, second, it must not fall within those not covered by the law. Even if by the Bulk Sales Law?
the transaction falls within the definition of “bulk sale” the law would not Yes, it is still not covered by the law since there is no
be made to apply: transfer of ownership.
(a) If the seller transferor, mortgagor or assignor produces and
delivers a written waiver of the provisions of the Law from his c. Note hat a mortgage is included, so why can it not
creditors as shown by verified statements; and include a long-term lease?
(b) Transactions effected by executors, administrators, receivers, That is because in mortgage there can be possible
assignees in insolvency, or public officers acting under legal transfer of ownership in case the mortgagor defaults in
process.39 his obligation to pay the mortgagee. In the case of long-
term lease there is only a right to use the thing as a
153. From the very nature of the transactions it can prejudice the usufruct but the ownership will remain with the lessor.
creditor, but why does it apply to mortgage?
(JARA: You make your mind a little dirty, so that you can appreciate the d. What justification can you give for us to include a long-
law. ) term lease?
It applies to mortgage because the law is wary of loopholes by which a We may include long-term lease if such lease only
person may dispose of his property if it were to be foreclosed. purports to be a lease but is actually a rent-to-own
agreement. (?)
154. So why does it prohibit a mortgage?
JARA: Because they can end up in a mechanism that would lead to the 158. If the lease entered into by the owner is a financial lease, shall
sale of the property. it not also be covered by the Bulk Sales Law?
a. What is a FINANCIAL LEASE?
155. What are the obligations of the seller? According to Section 3(d) of RA 8556, a Financial Leasing
The seller has the obligation to transfer the ownership and to deliver a is “a mode of extending credit to a non-cancellable lease
determinate thing (see Art. 1548, NCC). contract under which the lessor purchases or acquires, at
the instance of a lessee, machinery, equipment, motor
156. Give the definition of a LEASE. The concept of lease. vehicles, appliances, business and office machines and

39 Villanueva, p. 585-586. 40 Jurado, p. 1003.
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other movable or immovable property in consideration of The entire article provides that “In the lease of work
the periodic payment by the lessee of a fixed amount of or service, one of the parties binds himself to execute a
money sufficient to amortize at least seventy (70%) of the piece of work or to render to the other some service for a
purchase price or acquisition cost, including any price certain, but the relation of principal and agent does
incidental expenses and a margin of profit over an not exist between them.”
obligatory period of not less than two (2) years during
which the lessee has the right to hold and use the leased c. With regard to a surgeon and a patient, do you think
property with the right to expense the lease rentals paid that is a “principal-agent” or a “lessor-lessee”
to the lessor and bears the cost of repairs, maintenance, relationship?
insurance and preservation thereof, but with no There is no “principal-agent” relationship, because the
obligation or option on his part to purchase the leased doctor does not represent the patient and he is not bound
property from the owner-lessor at the end of the lease by the acts of the patient. There is, however, a “lessor-
contract. lessee” relationship as a lease of service is availed of by
the patient (lessee) from the doctor (lessor).
b. Is it not considered a “sale on installment”?
It is not. In a financial lease, the ownership of the thing d. In short, in a lawyer-client relationship, the lawyers is
will not be transferred to the owner after the end of the the agent and the client is the principal. So, if the
lease. There is neither an obligation nor an option to buy. lawyer makes a mistake, that would also be a mistake
by the principal?
159. There can be a lease of a thing and of a service. What is the Yes, the mistake will also be of the principal. The only
difference? exemption is when the lawyer is a fraud, impostor or not
Respectively, based on Articles 1643 and 1644 of the Civil Code on Lease, a duly recognized member of the bar (? - see Sabio
the difference are as follows: Reviewer for Rules on Criminal Procedure).
In the lease of things, one of the parties binds himself to give to
another the enjoyment or use of a thing for a price certain, and for a 160. Let us say that a thief, with a stolen car, enters into a contract
period which may be definite or indefinite. However, no lease for more of lease with another. Will the contract of lease be valid? Why?
than ninety-nine years shall be valid.
No, the contract will be void. When all of the requisites prescribed by
In the lease of work or service, one of the parties binds himself to
law for contracts are present, but the cause, object or purpose is contrary
execute a piece of work or to render to the other some service for a price
to law, morals, good customs or public policy, or are prohibited by law, or
certain, but the relation of principal and agent does not exist between
they are delcared by law to be void, such contract will then be void. (See
them.
Art. 1409, NCC).
In this case, the stolen car which is the object of the contract, does
a. So, does this (lease of a service) apply to a lawyer? not belong to the lessor. It would be contrary to good customs and morals
It depends. For the lease of service to apply to a lawyer to allow such contract to be valid.
and his client, there must be no principal-agent
relationship. Therefore, it cannot apply to all lawyers. a. What do you call it now?
For, example, a lawyer who is paid with a retainer to A void contract of lease. (?)
handle a case for the client is an agent of the client;
however, if the lawyer is merely consulted by a client b. Does the code require that the lessor is the owner or a
regarding a situation, he may not automatically be held
valid possessor?
as a agent since he is not representing the client.
There is no requirement expressly requiring the lessor to
be the owner or valid possessor of the land. However,
b. In the code, there is a qualifying phrase. How do you
based on the provision on void or inexistent contracts,
define a lease of service? under Art. 1409, the contract may be void because the
Article 1644 makes an exception to the lease of car was stolen – contrary to law, morals, good customs,
service by the phrase “but principal and agent relation public policy and are prohibited by law.
does not exist between them.”
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It depends on stipulation. Generally, consent is necessary

161. In another case, if a squatter puts up a shanty and rents out a for assignment. On the other hand, subletting a property
space to a lessee, will there be a lease? may be done without consent of the lessor only if there is
No, there will not be a lease in the eyes of law. The lease is merely present no express prohibition to the contrary (see Arts. 1649-
in terms of agreement between the parties, but since the right to grant 1650).
usufrutuary to the lessee is inexistent, the lessee shall not have a
warranty against eviction from the property. (?) b. So, generally, can he sublet or assign?
Generally, the lessee can sublet but cannot assign.
a. How is this different from the first example when the
only difference is the object – a car and a land? 163. The lessee assigns his right to the bank, PNB, to secure a loan.
The car is a movable, but a land is immovable. Since lease Can he do such without the consent of the lessor?
is under the concept of sale, then the lease of movables is Generally, he may not make an assignment of the lease. Article 1649
also covered by the protection of the law for the buyer in provides that “the lessee cannot assign the lease without consent of the
good faith who has leased the goods under the provision lessor, unless there is stipulation to the contrary.”
of Art. 1505. (?)
164. There is a contract of lease. The code allows that the lessee
b. In the case of the stolen car, will the lessor be liable to may sublet the property, isn’t it? Yes.
the lessee in case the owner becomes the possessor of a. Say the 2-year period is still running. The principal
the car? lease is for 2 years, but the sublease is for 4 years. Is it
Yes, the lessor may still be liable to the lessee even if the valid?
contract is void. According to Art. 1412 (2), when only The contract is unenforceable since the lessee does not
one of the contracting parties is at fault, he cannot have the authority to allow the sublessee to lease the
recover what he has given by reason of the contract, or property beyond what is agreed between him (lessee) and
ask for the fulfillment of what has been promised him. the lessor.
The other, who is not at fault, may demand the return of After the 2-year period prescribes, according to the
what he has given without any obligation to comply with contract between the lessee and lessor, he may not
his promise. enforce the 4-year lease agreement. (?)
c. What is a BREACH? b. Is there a contractual relationship between the lessor

Breach of a contract is when one of the parties, by his and the sublessee?
acts, omissions, and other factors, is unable to comply There is none, but there is an obligation between them,
with what is incumbent upon him. (?) namely: Without prejudice to his obligation toward the
sublessor, the sublessee is bound to the lessor for all acts
d. How can there be breach when there is no transfer of which refer to the use and preservation of the thing
property? leased in the manner stipulated between the lessor and
In a lease, for example, a breach may happen if the the lessee (Art. 1651).
stipulated reason for the contract was so that a lessee
may reside in the leased area. If the area later turns out 1) If there is none, then why do you say that the
to be uninhabitable, the lessor then breaches his sublessee is bound to the lessor?
obligation to make the necessary repairs in order to keep Because just like the lessee, he is bound to
the place suitable for the use to which it has been devoted preserve the use of the thing leased.
(see Art. 1654, NCC).
2) If the lessee is evicted in the property, shall
162. There is a contract of lease for a commercial property. the sublessee also be evicted?
a. May the lessee assign or sublet? Yes, since the sublessee’s rights is only based
on the rights of the lessee.
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It depends on the property involved.

3) You’re telling us that the lessee is evicted In the lease of a piece of rural land, when its duration has not been
because of the sublessee? fixed, is understood to have been for all the time necessary for the
Yes, the lessee may be evicted because of the gathering of the fruits which the whole estate leased may yield in one
sublease since the sublessee is also bound to year, or which it may yield once, although two or more years have to
preserve the thing. If the sublessee fails to do elapse for the purpose (Art. 1682, NCC).
so, and the lessor evicts the sublessee, the In another case, if the period for the lease has not been fixed, it is
lessee may also be evicted because the understood to be from year to year, if the rent agreed upon is annual; from
sublessees breach would be credited as the month to month, if it is monthly; from week to week, if the rent is weekly;
lessee’s own. and from day to day, if the rent is to be paid daily. However, even though a
monthly rent is paid, and no period for the lease has been set, the courts
165. Does the law provide for the limit of the sublet? may fix a longer term for the lease after the lessee has occupied the
No, there is no provision limiting the lease. premises for over one year. If the rent is weekly, the courts may likewise
Can there be a sublease #3 and 4? Yes. determine a longer period after the lessee has been in possession for over
six months. In case of daily rent, the courts may also fix a longer period
166. Can the owner be a tenant of his own property? Is it legally after the lessee has stayed in the place for over one month (Art. 1687,
feasible? Yes. NCC).
a. Have you come across an article or an express
169. What is the latin term for “implied new lease”?
prohibition for an owner to become a tenant of his own
It is tacita redconduccion.
property? No. (?)
b. Give an example.
170. What are the grounds for eviction?
A building is leased by a lessee. The lessee turns the
building into a mall and divides it into units for rent. The a. Under the Code (Art. 1673, NCC)
lessor may rent such unit from the lessee for a boutique The lessor may judicially eject the lessee for any of the
or a restaurant. following causes:
(1) When the period agreed upon, or that which is
167. There is a lease on a piece of land for 2 years. Can the landlord, fixed for the duration of leases under Articles 1682
and 1687, has expired;
2 days before the expiration of the lease, go to the court?
(2) Lack of payment of the price stipulated;
It depends on his reason. If the landlord has legal grounds which may
(3) Violation of any of the conditions agreed upon in
be used to disregard the period, he may avail of the court’s help.
the contract;
However, with respect to the prescription, the lessee still has right to
(4) When the lessee devotes the thing leased to any
occupy such property before the period agreed upon expires.
use or service not stipulated which causes the
Consequently, the landlord does not yet have a cause of action. (?)
deterioration thereof; or if he does not observe the
requirement in No. 2 of Article 1657, as regards the
a. Can the landlord after the expiration of such period go
use thereof.
to court for an unlawful detainer? The ejectment of tenants of agricultural lands is governed
Yes. by special laws.
b. So if the lease expires today, may the landlord apply b. Under the Rental Law (Sec. 7, RA9341)
for an unlawful detainer? To summarize, judicial ejectment shall be allowed on the
Yes. following grounds:
1) Assignment of lease or subleasing of residential
c. What better proof of expression from the landlord is units in whole or in part, including the
there, to object to the occupancy, for the court? acceptance of boarders or bedspacers, without
written consent of the owned/lessor.
168. The implied new lease will be how long?
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2) Arrears in payment of rent for a total of three December 31, 1987, monthly rentals of all residential units not
months: Provided, That in the case of refusal by exceeding P480 shall not be increased by the lessor by more than
the lessor to accept payment of the rental agreed 10% in 1985, 20% in 1987, which increases shall be cumulative and
upon, the lessee may either deposit by way of compounded.
consignation, the amount in court, or with the (4) R.A. 6643 (Dec. 28, 1987) extends the effectivity of B.P. Blg 877
city or municipal treasurer, as the case may be, for another two (2) years, fixing the allowable maximum increase for
or in a bank in the name of and with, notice to the the two-year period to not more than 20% in 1988 and 20% in 1989,
lessor, within one (1) month after the refusal of which increases shall be cumulative and compounded.
the lessor to accept payment. (5) R.A. No. 7644 (Dec. 28, 1992) extends the effectivity of B.P. Blg.
3) Legitimate need of owner/lessor to repossess his of 877 for five (5) years, fixing the allowable maximum increase for the
her property for his or her own use or for the use of five –year period from 1993 to 1997 at 20% yearly which increases
any immediate member of his or her family as a shall be cumulative and compounded.
residential until. (6) R.A. No. 8437 (Dec. 22, 1997) extends the effectivity of B.P. Blg.
4) Need of the lessor to make necessary repairs of the 877 for four (4) years, fixing the allowable maximum increase for the
leased premises which is the subject of an existing four-year period from 1998 to 2001 at 15% yearly, which increases
order of condemnation by appropriate authorities shall cumulative and compounded.
concerned in order to make the said premises safe (7) R.A. No. 9161 (Dec. 22, 2001) provides that “beginning 01
and habitable. January 2002 and for a durationof three (3) years thereafter ending
5) Expiration of the period of the lease contract. on 31 December 2004, the monthly rentals of all residential units in
the National Capital Region and other highly urbanized cities not
171. Is the provision on assignment (for lease) the same in the CC exceeding P7,500.00 and the monthly rentals of all residential units
and in the Rental Law? in all other areas not exceeding P4,000.00 shall not be increased
Generally, yes, because both require consent. In the CC, it provides that annually by the lessor, without prejudice to existing contracts, by
the lessee cannot assign the lease without the consent of the lessor, unless more than 10%.41
there is a stipulation to the contrary (Art. 1649, NCC). In the Rental Law,
the assignment of lease of residential units in whole or in part, including b. At present, what properties are covered by the Rental
the acceptance of boarders or bedspacers, without the written consent of Law?
the owned/lessor, is what is prohibited. Covered by R.A. No. 9345 (Dec. 21, 2005) are
c. Give the duties of the lessor and the lessee.
172. Give a brief historical background of the Rental Law. d. Until when is the Rental Law?
A number of laws have been enacted freezing rentals for a certain period e. What happens after 2013?
of time at their current level for the benefit of the lower income group. The
common feature of these laws is the suspension of the application of 173. Are there no provisions on the New Rental Law that departs
paragraph (1) of Article 1673 of the Civil Code (except when the lease is from the old?
for a definite period) during the period of their effectivity, to lease of a Under the New Rental Law, as amended by R.A. 9653 which was effective
dwelling unit or of land on which another’s dwelling is located. in 2009, the allowable increase in rent was to be reduced to 7% per year
(1) Presidential Decree No. 20 (October 12, 1972) which amended from the 10% annual increase set by R.A. 9341. This percentage of
R.A. No. 659, prohibits the increase of the monthly rental agreed increase applies until 2013. Note that the law appears to be self-repealing
upon between the lessor and the lessee and the lessor and the lessee or repealed ever 4 years.
when said monthly rental does not exceed P300.00.
(2) B.P. Blg. 25 (April 10, 1979) prohibits for a duration of five (5) 174. Under the code, who can those who cannot validly enter into a
years from its effectivity, the increase of monthly rentals of all lease?
residential units not exceeding P300.00, for any one (1) year period, Same as those prohibited by Articles 1490 and 1491 of the Civil Code,
by more than 10% of the monthly rentals existing at the time of namely:
approval of the Act.
(3) B.P. Blg. 877 (June 6, 1985) provides that beginning July 1,
1985 and for a duration of two and half years thereafter ending 41 De Leon, p. 679-680.
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o Spouses, to each other;

o Guardians;
o Agents;
o Executors and administrators;
o Public officers and Employees;
o Justices, judges, prosecuting attorney, clerks…; and
o Others by law
175. Under the code, there is a ground for eviction when there is
necessary repairs. How is it under the Rental Law and the
Code?
Under the Rental Law, to warrant ejectment on the ground of need of the
lessor to make necessary repairs of the leased premises which is the
subject of an order of condemnation, the requisites are:
(1) after repair, the lessee ejected shall have the first preference to
lease the same promises;
(2) the new rent shall be reasonably commensurate with the
expenses incurred for the repair of said residential unit; and
(3) if the residential until is condemned or completely demolished,
the lease of the new building will no longer be subject to the
aforementioned first-preference rule in this subsection.
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Sales & Lease: (Recitation Questions of Dean Jara)

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Sales & Lease: (Recitation Questions of Dean Jara)

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S A LE S & L E A S E (recitation questions of Dean Jara) Coverage: Articles 1458 to 1688 (V.2.

(1) Consent of the contracting parties;

In the case given, the debtor violated an undertaking in consideration of

An obligation which consists in the delivery of a determinate thing

42. In law, we recognize the autonomy of contracts. How can they

75. What is an unpaid seller? 81. What is insolvency in 1525?

carrier, or other bailee who issued such document, of the

Follow-up Questions for Pudadera v. Magallanes:

- Should it always be at its face? breach of contract)

102. We are interested with the condition. A condition, should it g. As to form.

Furthermore, special laws protect the buyer from such an

intangibles. Assignment therefore is a species of the of the following cases:

Lease may be defined as a consensual, bilateral, onerous and commutative

It depends on stipulation. Generally, consent is necessary

c. What is a BREACH? b. Is there a contractual relationship between the lessor

It depends on the property involved.

o Spouses, to each other;

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