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Module 6. Obligations of the Vendor

CANTA-ARAGON, Anna Katharina C. | JD 2A

MODULE 6
CHAPTER 4. OBLIGATIONS OF THE VENDOR
INSTRUCTOR: Atty. Jinky Fianza

CONTENT
1. SECTION 1. - General Provisions (Ownership)
2. SECTION 2. - Delivery of the Thing Sold
a. Methods of Delivery
b. Kinds of Constructive Delivery / Quasi-Tradition
i. Virgilio S. David v. Misamis Occidental II Electric Cooperative, GR No.
194785, July 11, 2012
c. Obligation to Deliver the Fruits and Accessories of the Thing Sold
d. Who Bears the Risk of Loss after the Delivery of the Determinate Thing
e. Loss, Deterioration or Improvement of the Thing after Perfection but before its
Delivery
i. Art. 1480
ii. Art. 1538
f. Sale of Goods by a Non-Owner
g. Sale of Goods by a Person Having a Voidable Title
h. Remedy of an Owner who is Unlawfully Deprived of his Movable Property
i. Documents of Title
i. Arts. 1507-1520
ii. PNB v. Noah’s Ark Sugar Refinery, et. al., GR No. 107243, September 1,
1993
j. Place and Time of Delivery
k. Incomplete Delivery
i. Lam, et. al. v. Kodak Philippines, Ltd., GR No. 167615, January 11, 2016
l. Delivery of the Goods to a Carrier or a Courier
m. When the Vendor is Not Bound to Delivery
n. Unpaid Seller
o. Sale of an Immovable at a Rate per Unit
p. Sale of an Immovable Made for a Lump Sum
q. Double Sales
i. Suntay v. Keyser Mercantile, Inc., GR No. 208462, December 10, 2014
ii. Peralta v. Heirs of Bernardina Abalon, et. al., GR. No. 183464, June 30,
2014
iii. Peblia Alfaro and the Heirs of Prosperous Alfaro, et. al. v. Sps. Dumalagan,
et. al., GR No. 186622, January 22, 2014

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Module 6. Obligations of the Vendor
CANTA-ARAGON, Anna Katharina C. | JD 2A

SECTION 1. - General Provisions

Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant
the thing which is the object of the sale. (1461a)

Principal obligations of the vendor

1. To transfer the ownership of the the determinate thing sold;

2. To deliver the thing;
3. To warrant against eviction and hidden defects (Arts. 1495, 1547);
4. To take care of the thing, pending delivery, with proper diligence (Art. 1163);
5. To pay for the expenses for the execution and registration of the deed of sale, unless
there is a stipulation to the contrary (Art. 1487)

❖ Vendor need not be the owner of the thing at the time of perfection of the contract; it is
sufficient that he has “a right to transfer the ownership thereof at the time it is delivered.”
❖ Obligation to transfer ownership and deliver is implied in every contract of sale
❖ One who sells something he does not own yet is bound by the sale when he acquires the
thing later (Bucton vs. Gabar)

Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is transferred from the vendor to the
vendee. (n)

Ways of effecting delivery:

1. Actual or real delivery (Art. 1497)

2. Constructive or legal delivery (Arts. 1498-1501)
a. Equivalent to actual delivery
i. By the execution of a public instrument
ii. By symbolical tradition or traditio symbolica
iii. By traditio longa manu
iv. By traditio brevi manu
v. By traditio constitutum possessorium
vi. By quasi-delivery or quasi-traditio
b. Contrary may be stipulated
3. By delivery in any other manner signifying an agreement that the possession is
transferred to the vendee (Arts. 1496-1499)

SECTION 2. - Delivery of the Thing Sold

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Module 6. Obligations of the Vendor
CANTA-ARAGON, Anna Katharina C. | JD 2A

Methods of Delivery
Art. 1497. The thing sold shall be understood as delivered, when it is placed in the control
and possession of the vendee. (1462a)

Tradition - derivative mode of acquiring ownership by virtue of which one who has the right
and intention to alienate a corporeal thing, transmits it by virtue of a just title to one who
accepts the same

Kinds of Constructive Delivery / Quasi-Tradition

Art. 1498. When the sale is made through a public instrument, the execution thereof shall
be equivalent to the delivery of the thing which is the object of the contract, if from the
deed the contrary does not appear or cannot clearly be inferred.

With regard to movable property, its delivery may also be made by the delivery of the keys
of the place or depository where it is stored or kept. (1463a)

❖ Execution of a public instrument as a manner of delivery applies to movable as well as

immovable property since the law does not make any distinction. The manner of delivery
is also symbolic.
➢ If it appears from the document or it can be inferred therefrom that it was not the
intention of the parties to make delivery, no tradition can be deemed to have
taken place.
❖ Symbolic delivery by the execution of a public instrument is equivalent to actual delivery
only when the thing is subject to the control of the vendor. A seller cannot deliver
constructively if he cannot deliver actually.
❖ Constructive delivery is symbolic when, to effect the delivery, the parties make use of a
token symbol to represent the thing delivered.

Art. 1499. The delivery of movable property may likewise be made by the mere consent or
agreement of the contracting parties, if the thing sold cannot be transferred to the
possession of the vendee at the time of the sale, or if the latter already had it in his
possession for any other reason. (1463a)

❖ Traditio longa manu - takes place by the mere consent or agreement of the contracting
parties as when the vendor merely points to the thing sold which shall thereafter be at
the control and disposal of the vendee.
❖ Traditio brevi manu - when the vendee has already the possession of the thing sold by
virtue of another title as when the lessor sells the thing leased to the lessee.

Art. 1500. There may also be tradition constitutum possessorium. (n)

❖ Traditio constitutum possessorium - opposite of traditio brevi manu. It takes place when
the vendor continues in possession of the property sold not as owner but in some other
capacity, as for example, when the vendor stays as a tenant on the vendee.

Art. 1501. With respect to incorporeal property, the provisions of the first paragraph of
article 1498 shall govern. In any other case wherein said provisions are not applicable, the

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placing of the titles of ownership in the possession of the vendee or the use by the vendee
of his rights, with the vendor's consent, shall be understood as a delivery. (1464)

❖ Quasi-traiditio - delivery of incorporeal things or rights

➢ By the execution of a public instrument
➢ By the placing of the titles of ownership in the possession of vendee
➢ By allowing the vendee to use his rights as new owner with the consent of the
vendor

Art. 1502. When goods are delivered to the buyer "on sale or return" to give the buyer an
option to return the goods instead of paying the price, the ownership passes to the buyer of
delivery, but he may revest the ownership in the seller by returning or tendering the goods
within the time fixed in the contract, or, if no time has been fixed, within a reasonable time.
(n)

When goods are delivered to the buyer on approval or on trial or on satisfaction, or other
similar terms, the ownership therein passes to the buyer:

(1) When he signifies his approval or acceptance to the seller or does any other act adopting
the transaction;

(2) If he does not signify his approval or acceptance to the seller, but retains the goods
without giving notice of rejection, then if a time has been fixed for the return of the goods,
on the expiration of such time, and, if no time has been fixed, on the expiration of a
reasonable time. What is a reasonable time is a question of fact. (n)

❖ Contracts of sale or return - property is sold but the buyer, who becomes the owner of
the property on delivery, has the option to return the same to the seller instead of paying
the price.
❖ Sale on trial or approval - a contract in the nature of an option to purchase if the goods
prove satisfactory, the approval of the buyer being a condition precedent.

SALE OR RETURN SALE ON TRIAL

Subject to a resolutory condition Subject to a suspensive condition

Depends entirely on the will of the buyer Depends on the character of the goods

Ownership passes to the buyer on Ownership remains in the seller until

delivery, reverts upon subsequent return buyer signifies acceptance

Risk of loss or injury rests with the buyer Risk remains with seller

Art. 1503. When there is a contract of sale of specific goods, the seller may, by the terms of
the contract, reserve the right of possession or ownership in the goods until certain
conditions have been fulfilled. The right of possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the
purpose of transmission to the buyer.

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Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or
his agent, or to the order of the seller or of his agent, the seller thereby reserves the
ownership in the goods. But, if except for the form of the bill of lading, the ownership would
have passed to the buyer on shipment of the goods, the seller's property in the goods shall
be deemed to be only for the purpose of securing performance by the buyer of his
obligations under the contract.

Where goods are shipped, and by the bill of lading the goods are deliverable to order of the
buyer or of his agent, but possession of the bill of lading is retained by the seller or his
agent, the seller thereby reserves a right to the possession of the goods as against the
buyer.

Where the seller of goods draws on the buyer for the price and transmits the bill of
exchange and bill of lading together to the buyer to secure acceptance or payment of the
bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill
of exchange, and if he wrongfully retains the bill of lading he acquires no added right
thereby. If, however, the bill of lading provides that the goods are deliverable to the buyer
or to the order of the buyer, or is indorsed in blank, or to the buyer by the consignee named
therein, one who purchases in good faith, for value, the bill of lading, or goods from the
buyer will obtain the ownership in the goods, although the bill of exchange has not been
honored, provided that such purchaser has received delivery of the bill of lading indorsed by
the consignee named therein, or of the goods, without notice of the facts making the
transfer wrongful. (n)

❖ Sale of specific goods

➢ GR: Delivery, be it only constructive, passes title in the thing sold; and delivery to
the carrier is deemed to be a delivery to the buyer.
■ If a seller consigns goods to another specified person it indicates an
intention on the part of the seller to deliver to the carrier as bailee for the
person named, and if such shipment was authorized by that person as a
buyer, the ownership vests in him.
■ If the seller directs the carrier to redeliver the goods at their destination to
the seller himself, or to his order, it indicates an intention that the carrier
shall be the bailee for the seller and the ownership will remain in the latter.
➢ Exceptions:
■ If a contrary intention appears by the terms of the contract
■ In the cases provided in par. 2, 3, 4

Virgilio S. David vs. Misamis Occidental II Electric Cooperative, Inc.

GR No. 194785
July 11, 2012

Facts:

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CANTA-ARAGON, Anna Katharina C. | JD 2A

Petitioner Virgilio S. David (David) was the owner or proprietor of VSD Electric Sales, a
company engaged in the business of supplying electrical hardware including transformers for
rural electric cooperatives like respondent Misamis Occidental II Electric Cooperative, Inc.
(MOELCI), with principal office located in Ozamis City.

To solve its problem of power shortage affecting some areas within its coverage,
MOELCI expressed its intention to purchase a 10 MVA power transformer from David. For
this reason, its General Manager, Engr. Reynaldo Rada (Engr. Rada), went to meet David in
the latter's office in Quezon City. David agreed to supply the power transformer provided
that MOELCI would secure a board resolution because the item would still have to be
imported.

On June 8, 1992, Engr. Rada and Director Jose Jimenez (Jimenez), who was in-charge of
procurement, returned to Manila and presented to David the requested board resolution
which authorized the purchase of one 10 MVA power transformer. In turn, David presented
his proposal... for the acquisition of said transformer. This proposal was the same proposal
that he would usually give to his clients.

After the reading of the proposal and the discussion of terms, David instructed his then
secretary and bookkeeper, Ellen M. Wong, to type the names of Engr. Rada and Jimenez at
the end of the proposal. Both signed the document under the word "conforme." The board
resolution was thereafter attached to the proposal.

As stated in the proposal, the subject transformer, together with the basic accessories,
was valued at P5,200,000.00. It was also stipulated therein that 50% of the purchase price
should be paid as downpayment and the remaining balance to be paid upon delivery. Freight
handling, insurance, customs duties, and incidental expenses were for the account of the
buyer.

The Board Resolution, on the other hand, stated that the purchase of the said
transformer was to be financed through a loan from the National Electrification
Administration (NEA). As there was no immediate action on the loan application, Engr. Rada
returned to Manila in early December 1992 and requested David to deliver the transformer
to them even without the required downpayment. David granted the request provided that
MOELCI would pay interest at 24% per annum.

Engr. Rada acquiesced to the condition. On December 17, 1992, the goods were shipped
to Ozamiz City via William Lines. In the Bill of Lading, a sales invoice was included which
stated the agreed interest rate of 24% per annum. When no payment was made after several
months, Medina was constrained to send a demand letter, dated September 15, 1993, which
MOELCI duly received.

Subsequently, demand letters were sent to MOELCI demanding the payment of the
whole amount plus the balance of previous purchases of other electrical hardware. On
February 17, 1994, David filed a complaint for specific performance with damages with the
RTC.

Issue:

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CANTA-ARAGON, Anna Katharina C. | JD 2A

Whether or not there was a delivery that consummated the contract

Held:

YES, there was delivery that consummated the contract. Article 1523 of the Civil Code
becomes applicable. It provides:

Where, in pursuance of a contract of sale, the seller is authorized or required to send

the goods to the buyer delivery of the goods to a carrier, whether named by the
buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery
of the goods to the buyer, except in the cases provided for in Article 1503, first,
second and third paragraphs, or unless a contrary intent appears.

MOELCI, in denying that the power transformer was delivered to it, argued that the Bill of Lading
which David was relying upon was not conclusive. It argued that although the bill of lading
was stamped "Released," there was nothing in it that indicated that said power transformer
was indeed released to it or delivered to its possession. For this reason, it is its position that
it is not liable to pay the purchase price of the 10 MVA power transformer.

It is clear that MOELCI agreed that the power transformer would be delivered and that the
freight, handling, insurance, custom duties, and incidental expenses shall be shouldered by it.
The payment of freight can be taken to indicate the intention of the parties with regard to
the place of delivery. If the buyer is to pay the freight, as in this case, it is reasonable to
suppose that the subject of the sale is transferred to the buyer at the point of shipment. In
other words, the title to the goods transfers to the buyer upon shipment or delivery to the
carrier.

Obligation to Deliver the Fruits and Accessories of the Thing Sold

Art. 1537. The vendor is bound to deliver the thing sold and its accessions and accessories in
the condition in which they were upon the perfection of the contract.

Who Bears the Risk of Loss after the Delivery of the Determinate Thing
Art. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership
therein is transferred to the buyer, but when the ownership therein is transferred to the
buyer the goods are at the buyer's risk whether actual delivery has been made or not, except
that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations under the contract, the goods
are at the buyer's risk from the time of such delivery;

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(2) Where actual delivery has been delayed through the fault of either the buyer or seller the
goods are at the risk of the party in fault. (n)

Loss, Deterioration or Improvement of the Thing after Perfection but before its
Delivery
Art. 1480. Any injury to or benefit from the thing sold, after the contract has been perfected,
from the moment of the perfection of the contract to the time of delivery, shall be governed
by Articles 1163 to 1165, and 1262.

This rule shall apply to the sale of fungible things, made independently and for a single price,
or without consideration of their weight, number, or measure.

Should fungible things be sold for a price fixed according to weight, number, or measure, the
risk shall not be imputed to the vendee until they have been weighed, counted, or measured
and delivered, unless the latter has incurred in delay. (1452a)

Art. 1538. In case of loss, deterioration or improvement of the thing before its delivery, the
rules in Article 1189 shall be observed, the vendor being considered the debtor. (n)

Sale of Goods by a Non-Owner

Art. 1505. Subject to the provisions of this Title, where goods are sold by a person who is not
the owner thereof, and who does not sell them under authority or with the consent of
the owner, the buyer acquires no better title to the goods than the seller had, unless the
owner of the goods is by his conduct precluded from denying the seller's authority to sell.

Nothing in this Title, however, shall affect:

(1) The provisions of any factors' act, recording laws, or any other provision of law enabling
the apparent owner of goods to dispose of them as if he were the true owner thereof;

(2) The validity of any contract of sale under statutory power of sale or under the order of a
court of competent jurisdiction;

(3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code
of Commerce and special laws. (n)

Sale of Goods by a Person Having a Voidable Title

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CANTA-ARAGON, Anna Katharina C. | JD 2A

Art. 1506. Where the seller of goods has a voidable title thereto, but his title has not been
avoided at the time of the sale, the buyer acquires a good title to the goods, provided he
buys them in good faith, for value, and without notice of the seller's defect of title. (n)

Remedy of an Owner who is Unlawfully Deprived of his Movable Property

Documents of Title
Art. 1507. A document of title in which it is stated that the goods referred to therein will be
delivered to the bearer, or to the order of any person named in such document is a
negotiable document of title. (n)

Art. 1508. A negotiable document of title may be negotiated by delivery:

(1) Where by the terms of the document the carrier, warehouseman or other bailee issuing
the same undertakes to deliver the goods to the bearer; or

(2) Where by the terms of the document the carrier, warehouseman or other bailee issuing
the same undertakes to deliver the goods to the order of a specified person, and such person
or a subsequent endorsee of the document has indorsed it in blank or to the bearer.

Where by the terms of a negotiable document of title the goods are deliverable to bearer or
where a negotiable document of title has been indorsed in blank or to bearer, any holder may
indorse the same to himself or to any specified person, and in such case the document shall
thereafter be negotiated only by the endorsement of such endorsee. (n)

Art. 1509. A negotiable document of title may be negotiated by the endorsement of the
person to whose order the goods are by the terms of the document deliverable. Such
endorsement may be in blank, to bearer or to a specified person. If indorsed to a specified
person, it may be again negotiated by the endorsement of such person in blank, to bearer or
to another specified person. Subsequent negotiations may be made in like manner. (n)

Art. 1510. If a document of title which contains an undertaking by a carrier, warehouseman

or other bailee to deliver the goods to bearer, to a specified person or order of a specified
person or which contains words of like import, has placed upon it the words "not negotiable,"
"non-negotiable" or the like, such document may nevertheless be negotiated by the holder
and is a negotiable document of title within the meaning of this Title. But nothing in this Title
contained 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 placing thereon the
words "not negotiable," "non-negotiable," or the like. (n)

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Art. 1511. A document of title which is not in such form that it can be negotiated by delivery
may be transferred by the holder by delivery to a purchaser or donee. A non-negotiable
document cannot be negotiated and the endorsement of such a document gives the
transferee no additional right. (n)

Art. 1512. A negotiable document of title may be negotiated:

(1) By the owner therefor; or

(2) By any person to whom the possession or custody of the document has been entrusted
by the owner, if, by the terms of the document the bailee issuing the document undertakes
to deliver the goods to the order of the person to whom the possession or custody of the
document has been entrusted, or if at the time of such entrusting the document is in such
form that it may be negotiated by delivery. (n)

Art. 1513. A person to whom a negotiable document of title has been duly negotiated
acquires thereby:

(1) Such title to the goods as the person negotiating the document to him had or had ability
to convey to a purchaser in good faith for value and also such title to the goods as the person
to whose order the goods were to be delivered by the terms of the document had or had
ability to convey to a purchaser in good faith for value; and

(2) The direct obligation of the bailee issuing the document to hold possession of the goods
for him according to the terms of the document as fully as if such bailee had contracted
directly with him. (n)

Art. 1514. A person to whom a document of title has been transferred, but not negotiated,
acquires thereby, as against the transferor, the title to the goods, subject to the terms of any
agreement with the transferor.

If the document is non-negotiable, such person also acquires the right to notify the bailee
who issued the document of the transfer thereof, and thereby to acquire the direct
obligation of such bailee to hold possession of the goods for him according to the terms of
the document.

Prior to the notification to such bailee by the transferor or transferee of a non-negotiable

document of title, the title of the transferee to the goods and the right to acquire the
obligation of such bailee may be defeated by the levy of an attachment of execution upon
the goods by a creditor of the transferor, or by a notification to such bailee by the transferor
or a subsequent purchaser from the transfer of a subsequent sale of the goods by the
transferor. (n)

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Art. 1515. Where a negotiable document of title is transferred for value by delivery, and the
endorsement of the transferor is essential for negotiation, the transferee acquires a right
against the transferor to compel him to endorse the document unless a contrary intention
appears. The negotiation shall take effect as of the time when the endorsement is actually
made. (n)

Art. 1516. A person who for value negotiates or transfers a document of title by
endorsement or delivery, including one who assigns for value a claim secured by a document
of title unless a contrary intention appears, warrants:

(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

(4) That he has a right to transfer the title to the goods and that the goods are merchantable
or fit for a particular purpose, whenever such warranties would have been implied if the
contract of the parties had been to transfer without a document of title the goods
represented thereby. (n)

Art. 1517. The endorsement of a document of title shall not make the endorser liable for any
failure on the part of the bailee who issued the document or previous endorsers thereof to
fulfill their respective obligations. (n)

Art. 1518. 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 part of the person making the
negotiation, or by the fact that the owner of the document was deprived of the possession of
the same by loss, theft, fraud, accident, mistake, duress, or conversion, if the person to whom
the document was negotiated or a person to whom the document was subsequently
negotiated paid value therefor in good faith without notice of the breach of duty, or loss,
theft, fraud, accident, mistake, duress or conversion. (n)

Art. 1519. If goods are delivered to a bailee by the owner or by a person whose act in
conveying the title to them to a purchaser in good faith for value would bind the owner and a
negotiable document of title is issued for them they cannot thereafter, while in possession of
such bailee, be attached by garnishment or otherwise or be levied under an execution unless
the document be first surrendered to the bailee or its negotiation enjoined. 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 the court. (n)

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Art. 1520. A creditor whose debtor is the owner of a negotiable document of title shall be
entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in
attaching such document or in satisfying the claim by means thereof as is allowed at law or in
equity in regard to property which cannot readily be attached or levied upon by ordinary
legal process. (n)

PNB v. Noah’s Ark Sugar Refinery, et. al.

GR No. 107243
September 1, 1993

Facts:

In accordance with the Warehouse Receipts Law, Noah's Ark Sugar

Refinery (Noah) issued on several dates warehouse receipts (quedans) to Rosa Sy, RNS
Merchandising (Rosa Ng Sy) and St. Therese Merchandising.

Noah issued quedans to its vendees who in turn negotiated it to PNB.

When PNB tried to demand the sugar covered by the quedans, Noah refused because
the check its vendees issued for the quedans were dishonoured.

Noah and its co-defendants claimed that they are still the legal owners of
the quedans and the sugar represented thereon because:

● the P63M check issued by Rosa Ng Sy of RNS and Teresita Ng of St.

Therese Merchandising for the quedans were dishonoured by reason of
"payment stopped" and "drawn against insufficient funds
● Since the vendees and first indorsers of quedans did not acquire
ownership, the subsequent indorsers and PNB did not acquire a better
right of ownership than the original vendees/first indorsers.
● That quedans are not negotiable instruments within the purview of the
Warehouse Receipts Law but simply an internal guarantee of defendants
in the sale of their stocks of sugar.

Noah also asked that the quedans be delivered or returned to them

Issues:

1. Whether the non-payment of the purchase price for the quedans by the original
vendees rendered invalid the negotiation by vendees/first indorsers to indorsers
and the subsequent negotiation of Ramos and Zoleta to PNB.
2. Whether or not PNB as indorsee/ pledgee of quedans was entitled to delivery of
sugar stocks from the warehouseman, Noah's Ark."

Held:

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1. The non-payment of the purchase price does not render the subsequent
negotiation invalid. The validity of the negotiation in favour of PNB cannot be
impaired even if the negotiation between Noah and its first vendees was in
breach of faith on the part of the vendees or by the fact that Noah was deprived
of the possession of the same by fraud, mistake or conversion if PNB paid value in
good faith without notice of such breach of duty, fraud, mistake or conversion.
(Article 1518, New Civil Code).
2. PNB is entitled to the delivery of the sugar covered by the quedans. PNB whose
debtor was the owner of the quedan shall be entitled to such aid from the court
of appropriate jurisdiction attaching such document or in satisfying the claim by
means as is allowed by law or in equity in regard to property which cannot be
readily attached or levied upon by ordinary process. (See Art. 1520, New Civil
Code). If the quedans were negotiable in form and duly indorsed to PNB (the
creditor), the delivery of the quedans to PNB makes the PNB the owner of the
property covered by said quedans and on deposit with Noah, the warehouseman.
PNB's right to enforce the obligation of Noah as a warehouseman, to deliver the
sugar stock to PNB as holder of the quedans, does not depend on the outcome of
the third-party complaint because the validity of the negotiation transferring title
to the goods to PNB as holder of the quedans is not affected by an act of RNS
Merchandising and St. Therese Merchandising, in breach of trust, fraud or
conversion against Noah's Ark.

Place and Time of Delivery

Art. 1521. Whether it is for the buyer to take possession of the goods or of the seller to send
them to the buyer is a question depending in each case on the contract, express or implied,
between the parties. Apart from any such contract, express or implied, or usage of trade to
the contrary, the place of delivery is the seller's place of business if he has one, and if not his
residence; but in case of a contract of sale of specific goods, which to the knowledge of the
parties when the contract or the sale was made were in some other place, then that place is
the place of delivery.

Where by a contract of sale the seller is bound to send the goods to the buyer, but no time
for sending them is fixed, the seller is bound to send them within a reasonable time.

Where the goods at the time of sale are in the possession of a third person, the seller has not
fulfilled his obligation to deliver to the buyer unless and until such third person acknowledges
to the buyer that he holds the goods on the buyer's behalf.

Demand or tender of delivery may be treated as ineffectual unless made at a reasonable

hour. What is a reasonable hour is a question of fact.

Unless otherwise agreed, the expenses of and incidental to putting the goods into a
deliverable state must be borne by the seller. (n)

Incomplete Delivery

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Art. 1522. Where the seller delivers to the buyer a quantity of goods less than he contracted
to sell, the buyer may reject them, but if the buyer accepts or retains the goods so delivered,
knowing that the seller is not going to perform the contract in full, he must pay for them at
the contract rate. If, however, the buyer has used or disposed of the goods delivered before
he knows that the seller is not going to perform his contract in full, the buyer shall not be
liable for more than the fair value to him of the goods so received.

Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell,
the buyer may accept the goods included in the contract and reject the rest. If the buyer
accepts the whole of the goods so delivered he must pay for them at the contract rate.

Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a
different description not included in the contract, the buyer may accept the goods which are
in accordance with the contract and reject the rest.

In the preceding two paragraphs, if the subject matter is indivisible, the buyer may reject the
whole of the goods.

The provisions of this article are subject to any usage of trade, special agreement, or course
of dealing between the parties. (n)

Lam, et. al. v. Kodak Philippines, Ltd.

GR No. 167615
January 11, 2016

Facts:
On January 8, 1992, the Lam Spouses and Kodak
Philippines, Ltd. entered into an agreement (Letter Agreement)
for the sale of three (3) units of the Kodak Minilab System 22XL6
(Minilab Equipment) in the amount of ₱1,796,000.00 per unit.
Kodak Philippines, Ltd. delivered one (1) unit of the Minilab
Equipment in Tagum, Davao Province. The delivered unit was
installed by Noritsu representatives. The Lam Spouses issued
postdated checks amounting to ₱35,000.00 each for 12 months as
payment for the first delivered unit, with the first check due on
March 31, 1992.

The Lam Spouses requested that Kodak Philippines, Ltd. not negotiate the
check dated March 31, 1992 allegedly due to insufficiency of funds. The same request
was made for the check due on April 30, 1992. However, both checks were negotiated
by Kodak Philippines, Ltd. and were honored by the depository bank. The 10 other
checks were subsequently dishonored after the Lam Spouses ordered the depository
bank to stop payment.

Kodak Philippines, Ltd. canceled the sale and demanded that the Lam
Spouses return the unit. The Lam Spouses ignored the demand but also rescinded the

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contract through the letter dated November 18, 1992 on account of Kodak Philippines,
Ltd.’s failure to deliver the two (2) remaining Minilab Equipment units.

Kodak Philippines, Ltd. filed a Complaint for replevin and/or recovery of

sum of money. The Lam Spouses failed to appear during the pre-trial conference. Thus,
they were declared in default. Kodak Philippines, Ltd. presented evidence ex-parte. The
trial court issued the Decision in favor of Kodak Philippines, Ltd. ordering the seizure of
the Minilab Equipment. Based on this Decision, Kodak Philippines, Ltd. was able to obtain
a writ of seizure for the Minilab Equipment installed at the Lam Spouses’ outlet in Tagum,
Davao Province. The writ was enforced and Kodak Philippines, Ltd. gained possession of
the Minilab Equipment unit, accessories, and the generator set.

Issues:

Upon rescission of the contract, what are the parties entitled to under
Article 1190 and Article 1522 of the New Civil Code?

Held:

The power to rescind obligations is implied in reciprocal ones, in case one of

the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfilment and the rescission of
the obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfilment, if the latter should become impossible. The court
shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period.

Rescission under Article 1191 has the effect of mutual restitution. In

Velarde v. Court of Appeals: Rescission abrogates the contract from its inception and
requires a mutual restitution of benefits received. The Court of Appeals correctly ruled
that both parties must be restored to their original situation as far as practicable, as if the
contract was never entered into. Petitioners must relinquish possession of the delivered
Minilab Equipment unit and accessories, while respondent must return the amount
tendered by petitioners as partial payment for the unit received. Further, respondent
cannot claim that the two (2) monthly installments should be offset against the amount
awarded by the Court of Appeals to petitioners because the effect of rescission under
Article 1191 is to bring the parties back to their original positions before the contract was
entered into.

When rescission is sought under Article 1191 of the Civil Code, it need
not be judicially invoked because the power to resolve is implied in reciprocal obligations.
The right to resolve allows an injured party to minimize the damages he or she may suffer
on account of the other party’s failure to perform what is incumbent upon him or her.
When a party fails to comply with his or her obligation, the other party’s right to resolve
the contract is triggered. The resolution immediately produces legal effects if the non-
performing party does not question the resolution. Court intervention only becomes
necessary when the party who allegedly failed to comply with his or her obligation
disputes the resolution of the contract. Since both parties in this case have exercised
their right to resolve under Article 1191, there is no need for a judicial decree before the
resolution produces effects.

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Delivery of the Goods to a Carrier or a Courier

Art. 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to
send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer
or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods
to the buyer, except in the case provided for in Article 1503, first, second and third
paragraphs, or unless a contrary intent appears.

Unless otherwise authorized by the buyer, the seller must make such contract with the
carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods
and the other circumstances of the case. If the seller omit so to do, and the goods are lost or
damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a
delivery to himself, or may hold the seller responsible in damages.

Unless otherwise agreed, where goods are sent by the seller to the buyer under
circumstances in which the seller knows or ought to know that it is usual to insure, the seller
must give such notice to the buyer as may enable him to insure them during their transit, and,
if the seller fails to do so, the goods shall be deemed to be at his risk during such transit. (n)

When the Vendor is Not Bound to Delivery

Art. 1524. The vendor shall not be bound to deliver the thing sold, if the vendee has not paid
him the price, or if no period for the payment has been fixed in the contract. (1466)

Art. 1536. The vendor is not bound to deliver the thing sold in case the vendee should lose
the right to make use of the terms as provided in Article 1198. (1467a)

Unpaid Seller
Art. 1525. The seller of goods is deemed to be an unpaid seller within the meaning of this
Title:

(1) When the whole of the price has not been paid or tendered;

(2) When a bill of exchange or other negotiable instrument has been received as conditional
payment, and the condition on which it was received has been broken by reason of the
dishonor of the instrument, the insolvency of the buyer, or otherwise.

In Articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of
lading has been indorsed, or a consignor or agent who has himself paid, or is directly
responsible for the price, or any other person who is in the position of a seller. (n)

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Art. 1526. Subject to the provisions of this Title, notwithstanding that the ownership in the
goods may have passed to the buyer, the unpaid seller of goods, as such, has:

(1) A lien on the goods or right to retain them for the price while he is in possession of them;

(2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he
has parted with the possession of them;

(3) A right of resale as limited by this Title;

(4) A right to rescind the sale as likewise limited by this Title.

Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in
addition to his other remedies a right of withholding delivery similar to and coextensive with
his rights of lien and stoppage in transitu where the ownership has passed to the buyer. (n)

Art. 1527. Subject to the provisions of this Title, the unpaid seller of goods who is in
possession of them is entitled to retain possession of them until payment or tender of the
price in the following cases, namely:

(1) Where the goods have been sold without any stipulation as to credit;

(2) Where the goods have been sold on credit, but the term of credit has expired;

(3) Where the buyer becomes insolvent.

The seller may exercise his right of lien notwithstanding that he is in possession of the goods
as agent or bailee for the buyer. (n)

Art. 1528. Where an unpaid seller has made part delivery of the goods, he may exercise his
right of lien on the remainder, unless such part delivery has been made under such
circumstances as to show an intent to waive the lien or right of retention. (n)

Art. 1529. The unpaid seller of goods loses his lien thereon:

(1) When he delivers the goods to a carrier or other bailee for the purpose of transmission to
the buyer without reserving the ownership in the goods or the right to the possession
thereof;

(2) When the buyer or his agent lawfully obtains possession of the goods;

(3) By waiver thereof.

The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he
has obtained judgment or decree for the price of the goods. (n)

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Art. 1530. Subject to the provisions of this Title, when the buyer of goods is or becomes
insolvent, the unpaid seller who has parted with the possession of the goods has the right of
stopping them in transitu, that is to say, he may resume possession of the goods at any time
while they are in transit, and he will then become entitled to the same rights in regard to the
goods as he would have had if he had never parted with the possession. (n)

Art. 1531. Goods are in transit within the meaning of the preceding article:

(1) From the time when they are delivered to a carrier by land, water, or air, or other bailee
for the purpose of transmission to the buyer, until the buyer, or his agent in that behalf, takes
delivery of them from such carrier or other bailee;

(2) If the goods are rejected by the buyer, and the carrier or other bailee continues in
possession of them, even if the seller has refused to receive them back.

Goods are no longer in transit within the meaning of the preceding article:

(1) If the buyer, or his agent in that behalf, obtains delivery of the goods before their arrival
at the appointed destination;

(2) If, after the arrival of the goods at the appointed destination, the carrier or other bailee
acknowledges to the buyer or his agent that he holds the goods on his behalf and continues
in possession of them as bailee for the buyer or his agent; and it is immaterial that further
destination for the goods may have been indicated by the buyer;

(3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his
agent in that behalf.

If the goods are delivered to a ship, freight train, truck, or airplane chartered by the buyer, it
is a question depending on the circumstances of the particular case, whether they are in the
possession of the carrier as such or as agent of the buyer.

If part delivery of the goods has been made to the buyer, or his agent in that behalf, the
remainder of the goods may be stopped in transitu, unless such part delivery has been under
such circumstances as to show an agreement with the buyer to give up possession of the
whole of the goods. (n)

Art. 1532. The unpaid seller may exercise his right of stoppage in transitu either by obtaining
actual possession of the goods or by giving notice of his claim to the carrier or other bailee in
whose possession the goods are. Such notice may be given either to the person in actual
possession of the goods or to his principal. In the latter case the notice, to be effectual, must
be given at such time and under such circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the buyer.

When notice of stoppage in transitu is given by the seller to the carrier, or other bailee in
possession of the goods, he must redeliver the goods to, or according to the directions of,

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the seller. The expenses of such delivery must be borne by the seller. If, however, a
negotiable document of title representing the goods has been issued by the carrier or other
bailee, he shall not obliged to deliver or justified in delivering the goods to the seller unless
such document is first surrendered for cancellation. (n)

Art. 1533. Where the goods are of perishable nature, or where the seller expressly reserves
the right of resale 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, an unpaid seller having a right
of lien or having stopped the goods in transitu may resell the goods. He shall not thereafter
be liable to the original buyer upon the contract of sale or for any profit made by such resale,
but may recover from the buyer damages for any loss occasioned by the breach of the
contract of sale.

Where a resale is made, as authorized in this article, the buyer acquires a good title as against
the original buyer.

It is not essential to the validity of resale that notice of an intention to resell the goods be
given by the seller to the original buyer. But where the right to resell is not based on the
perishable nature of the goods or upon an express provision of the contract of sale, the
giving or failure to give such notice shall be relevant in any issue involving the question
whether the buyer had been in default for an unreasonable time before the resale was made.

It is not essential to the validity of a resale that notice of the time and place of such resale
should be given by the seller to the original buyer.

The seller is bound to exercise reasonable care and judgment in making a resale, and subject
to this requirement may make a resale either by public or private sale. He cannot, however,
directly or indirectly buy the goods. (n)

Art. 1534. An unpaid seller having the right of lien or having stopped the goods in transitu,
may rescind the transfer of title and resume the ownership in the goods, where he expressly
reserved the right 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 seller shall not
thereafter be liable to the buyer upon the contract of sale, but may recover from the buyer
damages for any loss occasioned by the breach of the contract.

The transfer of title shall not be held to have been rescinded by an unpaid seller until he has
manifested by notice to the buyer or by some other overt act an intention to rescind. It is not
necessary that such overt act should be communicated to the buyer, but the giving or failure
to give notice to the buyer of the intention to rescind shall be relevant in any issue involving
the question whether the buyer had been in default for an unreasonable time before the
right of rescission was asserted. (n)

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Art. 1535. Subject to the provisions of this Title, the unpaid seller's right of lien or stoppage
in transitu is not affected by any sale, or other disposition of the goods which the buyer may
have made, unless the seller has assented thereto.

If, however, a negotiable document of title has been issued for goods, no seller's lien or right
of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom
such document has been negotiated, whether such negotiation be prior or subsequent to the
notification to the carrier, or other bailee who issued such document, of the seller's claim to a
lien or right of stoppage in transitu. (n)

Sale of an Immovable at a Rate per Unit

Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of
the vendee all that is mentioned in the contract, in conformity with the following rules:

If the sale of real estate should be made with a statement of its area, at the rate of a certain
price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if
the latter should demand it, all that may have been stated in the contract; but, should this be
not possible, the vendee may choose between a proportional reduction of the price and the
rescission of the contract, provided that, in the latter case, the lack in the area be not less
than one-tenth of that stated.

The same shall be done, even when the area is the same, if any part of the immovable is not
of the quality specified in the contract.

The rescission, in this case, shall only take place at the will of the vendee, when the inferior
value of the thing sold exceeds one-tenth of the price agreed upon.

Nevertheless, if the vendee would not have bought the immovable had he known of its
smaller area of inferior quality, he may rescind the sale. (1469a)

Art. 1540. If, in the case of the preceding article, there is a greater area or number in the
immovable than that stated in the contract, the vendee may accept the area included in the
contract and reject the rest. If he accepts the whole area, he must pay for the same at the
contract rate. (1470a)

Art. 1541. The provisions of the two preceding articles shall apply to judicial sales. (n)

Sale of an Immovable Made for a Lump Sum

Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum
for a unit of measure or number, there shall be no increase or decrease of the price, although
there be a greater or less area or number than that stated in the contract.

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The same rule shall be applied when two or more immovables as sold for a single price; but if,
besides mentioning the boundaries, which is indispensable in every conveyance of real
estate, its area or number should be designated in the contract, the vendor shall be bound to
deliver all that is included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer a reduction in
the price, in proportion to what is lacking in the area or number, unless the contract is
rescinded because the vendee does not accede to the failure to deliver what has been
stipulated. (1471)

Double Sales
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith. (1473)

Suntay v. Keyser Mercantile, Inc.

GR No. 208462
December 10, 2014

Facts:

Keyser bought a condo unit from Bayfront and the contract to sell wasn’t registered in
the register of deeds so the title remained with Bayfront. Bayfront lost a case against the
Suntays so its properties were levied, and this included the Keyser’s unit, which they protested
against. The Supreme Court held that the Spouses Suntay had a better right since they relied on
Bayfront’s clean title, plus the levy on execution fully registered is given preference over a prior
unregistered sale.

Issues:

Whether or not the CA, in sustaining the decision of the court a quo committed a serious
reversible error in not applying Sec. 52 of PD 1529 and Art. 1544 of the Civil Code by finding
that herein petitioners have better rights of ownership over the subject condominium property
in litigation.

Held:

Yes. The CA had completely overlooked the significance of a levy on execution. The
doctrine is well settled that a levy on execution duly registered takes preference over a prior
unregistered sale. Even if the prior salewas subsequently registered before the sale in execution
but after the levy was duly made, the validity of the execution sale should be maintained because

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it retroacts to the date of the levy. Otherwise, the preference created by the levy would be
meaningless and illusory.

In this case, the contract to sell between Keyser and Bayfront was executed on October
20, 1989, but the deed of absolute sale was only made on November 9, 1995 and registered on
March 12, 1996. The Notice of Levy in favor of Spouses Suntay was registered on January 18,
1995, while the Certificate of Sale on April 7, 1995, both dates clearly ahead of Keyser’s
registration of its Deed of Absolute Sale. Evidently, applying the doctrine of primus tempore,
potior jure(first in time, stronger in right), Spouses Suntay have a better right than Keyser.

The settled rule is that levy on attachment, duly registered, takes preference over a prior
unregistered sale. This result is a necessary consequence of the fact that the property involved
was duly covered by the Torrens system which works under the fundamental principle that
registration is the operative act which gives validity to the transfer or creates a lien upon the
land. The preference created by the levy on attachment is not diminished even by the
subsequent registration of the prior sale. This is so because an attachment is a proceeding in rem.
It is against the particular property, enforceable against the whole world. The attaching creditor
acquires a specific lien on the attached property which nothing can subsequently destroy except
the very dissolution of the attachment or levy itself. Such a proceeding, in effect, means that the
property attached is an indebted thing and a virtual condemnation of it to pay the owner’s debt.
The lien continues until the debt is paid, or sale is had under execution issued on the judgment,
or until the judgment is satisfied, or the attachment discharged or vacated in some manner
provided by law. (Uy v. Spouses Medina)

Peralta v. Heirs of Bernardina Abalon, et. al.

GR. No. 183448
June 30, 2014

Facts:

A parcel of land registered under the name of Bernardina Abalon and fraudulently
transferred through a forged Deed of Absolute Sale to one, Restituto Rellama who in turn
subdivided the subject property and sold it separately to the other parties to this case – Spouses
Peralta and the Andals. Thereafter, Spouses Peralta and the Andals individually registered the
respective portions of the land they have brought under their names. The heirs of Bernardina
were claiming back the land, alleging that since it was sold under fraudulent circumstances, no
valid title passed to the buyers. On the other hand, the buyers, who were now title holders of
the subject parcel of land, averred that they were buyers in good faith and sought the protection
accorded to them under the law.

Issues:

Whether or not a forged instrument may become the root of a valid title in the hands of
an innocent purchaser for value, even if the true owner thereof has been in possession of the
genuine title which is valid has not been cancelled.

Held:

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YES, the established rule is that a forged deed is generally null and cannot convey title,
the exception thereto, pursuant to Section 55 of the Land Registration Act, denotes the
registration of titles from the forger to the innocent purchaser for value. Thus, the qualifying
point here is that there must be a complete chain of registered titles. This means that all the
transfers starting from the original rightful owner to the innocent holder for value – and that
includes the transfer to the forger – must be duly registered, and the title must be properly
issued to the transferee. Contrary to what the Abalons would like to impress on us, Fule and
Torres do not present clashing views. In Fule, the original owner relinquished physical
possession of her title and thus enabled the perpetrator to commit the fraud, which resulted in
the cancellation of her title and the issuance of a new one. The forged instrument eventually
became the root of a valid title in the hands of an innocent purchaser for value. The new title
under the name of the forger was registered and relied upon by the innocent purchaser for
value. Hence, it was clear that there was a complete chain of registered titles.

In the instant case, there is no evidence that the chain of registered titles was broken in
the case of the Andals. Neither were they proven to have knowledge of anything that would
make them suspicious of the nature of Rellama’s ownership over the subject parcel of land.
Hence, we sustain the CA’s ruling that the Andals were buyers in good faith. Consequently, the
validity of their title to the parcel of the land bought from Rellama must be upheld.

Peblia Alfaro and the Heirs of Prosperous Alfaro, et. al. v. Sps. Dumalagan, et. al.
GR No. 186622
January 22, 2014

Facts:

Sps. Prosperous and Peblia Alfaro bought a lot from Sps. Bagano through a Deed of
absolute Sale on June 1995. The subject property was presently occupied by Sps. Dumalagan.
Due to such circumstance and to allegedly protect their right, the Sps. Alfaro filed a petition.
Spouses Dumalagan presented the notarized Deed of Absolute Sale dated December 6, 1993
and certificate, they are the real owner of a portion of the subject property, based on a notarized
Deed of Absolute Sale dated December 6, 1993 and certificate of completion and a certificate of
occupancy, both dated August 10,1993.

Sps. Bagano filed a complaint for Declaration of nullity of Sale with Damages and
Preliminary injunction against petitioners. In said case, the trial court sustained the validity of the
Deed of Absolute Sale between petitioners and Sps. Bagano, which the appellate court reversed
and set aside.

According to the Appellate court, petitioners cannot claim good faith by referring to the
annotations written at the back of Bagano’s title. It stated that regardless if the petitioners name
was not stated in the annotated adverse claims it still have the effect of constructive notice of
the defect in the seller’s title that made them as subsequent buyers. Such fact can be considered
as an evidence that Sps. Alfaro had prior notice that the property they bought had prior owners.

Issues:

Whether or not the petitioners are considered as buyers in good faith.

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Held:

No, a purchaser in good faith is one who buys the property of another without notice
that some other person has a right to, or an interest in such property, and pays a full and fair
price for the same at the time of such purchase, or before he has notice of some other person’s
claim or interest in the property.

The petitioners are not such purchaser. Petitioners , based on evidence presented, had
admitted that they have prior knowledge of the previous sales by installment of portions of the
property to several purchasers based on the annotation in the title. Moreover, petitioners had
prior knowledge of respondents’ possession over the subject property.

Article 1544 clearly states that the rule on double or multiple sales applies only when all
the purchasers are in good faith. In detail Art. 1544 requires that before the second buyer can
obtain priority over the first, he must show that he acted in good faith throughout, i.e., in
ignorance of the first sale and of the first buyer’s rights, from the time of acquisition until the
title is transferred to him by registration or failing registration, by delivery of possession. Hence,
the rule on double sale is inapplicable in the case at bar. As correctly held by the appellate court.
Petitioner’s prior registration with prior knowledge of respondents’ claim of ownership and
possession, cannot confer ownership or better right over the subject property.

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