OBLIGATIONS OF THE VENDOR

SECTION 1:

GENERAL PROVISIONS (OWNERSHIP) 1495-1496

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)
WHAT ARE THE PRINCIPAL OBLIGATIONS OF THE VENDOR?

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

2. (Art. 1537) to deliver the thing, with its accessions and accessories, if any, in
the condition in which they were upon the perfection of the contract;
3. (Arts. 1495, 1547) to warrant against eviction and against hidden defects;
4. (see Art. 1163) to take care of the thing, pending delivery, with proper
diligence ; and
5. (Art. 1487) to pay for the expenses of the deed of sale, unless there is a
stipulation to the contrary.

OBLIGATION TO TRANSFER AND DELIVER

1. Ownership by vendor at time of perfection of contract not essential.

The vendor need not be the owner of the thing at the time of perfection of the
contract; it is sufficient that he has “a righto transfer the ownership thereof at the time it
is delivered.”

(Heirs of Q. Seraspi vs.CA, 331 SCRA 293 [2000]; Waite vs. Peterson, 8 Phil.235

[1907]):
When a property belonging to a person is unlawfully taken by another,
the former has the right of action against the latter for the recovery of the
property. Such right may be transferred by the sale or assignment of the
property and the transferee can maintain such action against the wrongdoer.

2. Transfer not essential to perfection of contract.

Art. 1991. The depositor's heir who in good faith may have sold the thing which
he did not know was deposited, shall only be bound to return the price he may
have received or to assign his right of action against the buyer in case the price
has not been paid him.

Thus, if the seller does not deliver at the time stipulated, the buyer may
ask for the rescission of the contract or fulfilment with the right to damages in
either case.
 3. No obligation to make delivery during period of redemption.

4. Right of vendee to transfer of certificate of title.

(Gabila vs. Perez, 169 SCRA 517 [1989])

In a sale of registered land, the vendee has a right to receive and the
vendor the corresponding obligation to transfer to him, not only the possession
and employment of the land but also the certificate of title.

5. Right of buyer to recover the price paid. 

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. by actual or real delivery (Art. 1497.);

2. by constructive or legal delivery (Arts. 1498-1501.); or
3. by delivery in any other manner signifying an agreement that the
possession is transferred to the vendee. (Arts. 1496-1499.)

In all the different modes of delivery, the critical factor which

gives legal effect to the act is the actual intention of the vendor to
deliver, and its acceptance by the vendee. The act, without the
intention, is insufficient. 

SECTION 2: DELIVERY OF THE THING SOLD

Methods of Delivery (1497)

Art. 1497. The thing sold shall be understood as delivered, when it is

placed in the control and possession of the vendee.

KINDS OF DELIVERY
 1. Actual or real Delivery (Article 1497)

2. Legal or Constructive

a. legal formalities. (Art. 1498, Civil Code)

b. symbolical tradition or traditio simbolica (such as the delivery of the
key of the place where the movable sold is being kept). (Art. 1498, par.
2, Civil Code)
c. traditio longa manu (by mere consent or agreement) if the movable sold
cannot yet be transferred to the possession of the buyer at the time of
the sale. (Art. 1499, Civil Code)
d. traditio brevi manu (if the buyer had already the possession of the
object even before the purchase, as when the tenant of a car buys the
car, that is, his possession as an owner). (Art. 1499, Civil Code)
e. traditio constitutum possessorium (opposite of tradition brevi manu)
possession as owner changed, for example, to possession as a lessee.

3. Quasi-tradition - delivery of rights, credits, or incorporeal

property, made by:
1) placing titles of ownership in the hands of a
lawyer;
2) or allowing the buyer to make use of the rights.

Kinds of Constructive Delivery/ Quasi-Tradition (1498-1503)

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)
TWO KINDS OF CONSTRUCTIVE DELIVERY
1. Legal Formalities (1st Paragraph, Article 1498)
2. Traditio simbolica (2nd Paragraph, Article 1498)
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/ delivery with long hand

A species of delivery which takes place where the transferor places
the article in the hands of the transferee, or, on his order, delivers it at his
house
EXAMPLE: I give to you the umbrella that you bought from me

TRADITIO BREVI MANU = Delivery with short hand.

A species of constructive or implied delivery. When he who
already holds possession of a thing in another’s name agrees with that
other that thenceforth he shall possess it in his own name, in this case a
delivery and redelivery are not necessary.
EXAMPLE: you are renting a house & lot, thereafter you bought
that same house you are renting. There is no need to deliver it to you coz
you already hold the house and lot, although in the capacity of an "owner"
now and no longer a "lessee".

Traditio Longa Manu- by mere consent /agreement. If the

movable sold cannot yet be transferred to the possession of the buyer at
the time of the sale. (1499)
Traditio Brevi Manu- if the buyer had already the possession of the
object even before the purchase. (Lessee becomes owner)

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

TRADITIO CONSTITUTUM POSSESSORIUM
(Continuous possession)
Here the seller, after the sale, retains possession of the article
acting as agent on behalf of the buyer.
 EXAMPLE: you buy from me a night gown for you to use in your
Christmas party. you don't take the gown with you, you still leave it with
me and I continue to have possession of the gown so that I can alter or
change the measurement of the gown to fit your vital statistics.

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 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)
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)

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.
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 OR RETURN SALE ON TRIAL

sale subject to a resolutory
condition
depends entirely on the will of the
buyer
ownership of the goods passes to
the buyer on delivery and
subsequent return of the goods
reverts ownership in the seller
the risk of loss or injury rests
upon the buyer, while in sale on
trial
subject to a suspensive condition
depends on the character or quality of
the goods
ownership re-mains in the seller until
the buyer signifies his approval or
acceptance to the seller
the risk still remains with the seller
Virgilio S. David vs. Misamis Occidental II Electric Cooperative, Inc.,
GR 194785, July 11, 2012, 676 SCRA 367
FACTS:

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 down payment 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
down payment. 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 nothing was heard from MOELCI for some time after
the shipment, Emanuel Medina (Medina), David’s Marketing Manager, went to
Ozamiz City to check Contracts on the shipment. Medina was able to confer with
Engr. Rada who told him that the loan was not yet released and asked if it was
possible to withdraw the shipped items. Medina agreed.
When no payment was made after several months, Medina was
constrained to send a demand letter, dated September 15, 1993, which MOELCI
duly received. Engr. Rada replied in writing that the goods were still in the
warehouse of William Lines again reiterating that the loan had not been approved
by NEA. This prompted Medina to head back to Ozamiz City where he found out
that the goods had already been released to MOELCI evidenced by the shipping
company’s copy of the Bill of Lading which was stamped "Released," and with
the notation that the arrastre charges in the amount of P5, 095.60 had been paid.
This was supported by a receipt of payment with the corresponding cargo delivery
receipt issued by the Integrated Port Services of Ozamiz, Inc.
Subsequently, demand letters were sent to MOELCI demanding the
payment of the whole amount plus the balance of previous purchases of other
electrical hardware. Aside from the formal demand letters, David added that
several statements of accounts were regularly sent through the mails by the
company and these were never disputed by MOELCI.
On February 17, 1994, David filed a complaint for specific performance
with damages with the RTC

ISSUES:

1. WON there was a perfected contract of sale

2. WON there was a delivery that consummated the contract

HELD:

An examination of the alleged contract to sell, "Exhibit A," despite its

unconventional form, would show that said document, with all the stipulations
therein and with the attendant circumstances surrounding it, was actually a
Contract of Sale.
 The rule is that it is not the title of the contract, but its express terms or
stipulations that determine the kind of contract entered into by the parties.12 First,
there was meeting of minds as to the transfer of ownership of the subject matter.
The letter (Exhibit A), though appearing to be a mere price quotation/proposal,
was not what it seemed. It contained terms and conditions, so that, by the fact that
Jimenez, Chairman of the Committee on Contracts Management, and Engr. Rada,
General Manager of MOELCI, had signed their names under the word
"CONFORME," they, in effect, agreed with the terms and conditions with respect
to the purchase of the subject 10 MVA Power Transformer. As correctly argued
by David, if their purpose was merely to acknowledge the receipt of the proposal,
they would not have signed their name under the word "CONFORME."

Besides, the uncontroverted attending circumstances bolster the fact that

there was consent or meeting of minds in the transfer of ownership. To begin
with, a board resolution was issued authorizing the purchase of the subject power
transformer. Next, armed with the said resolution, top officials of MOELCI
visited David’s office in Quezon City three times to discuss the terms of the
purchase. Then, when the loan that MOELCI was relying upon to finance the
purchase was not forthcoming, MOELCI, through Engr. Rada, convinced David
to do away with the 50% down payment and deliver the unit so that it could
already address its acute power shortage predicament, to which David acceded
when it made the delivery, through the carrier William Lines, as evidenced by a
bill of lading.

Second, the document specified a determinate subject matter which was

one (1) Unit of 10 MVA Power Transformer with corresponding KV Line
Accessories. And third, the document stated categorically the price certain in
money which was P5,200,000.00 for one (1) unit of 10 MVA Power Transformer
and P2,169,500.00 for the KV Line Accessories.

In sum, since there was a meeting of the minds, there was consent on the
part of David to transfer ownership of the power transformer to MOELCI in
exchange for the price, thereby complying.

OBLIGATION TO DELIVERY THE FRUITS AND ACCESSORIES

OF THE THING SOLD (1537)

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.
All the fruits shall pertain to the vendee from the day on which the contract
was perfected. (1468a)

WHEN IS THE VENDEE ENTITLED TO THE FRUITS?

(Article 1164) The creditor has a right to the fruits of the thing
from the time the obligation to deliver it arises. However, he shall acquire
no real right over it until the same has been delivered to him.

(Article 1475) The contract of sale is perfected at the moment there

is a meeting of minds upon the thing which is the object of the contract
and upon the price.

From that moment, the parties may reciprocally demand

performance, subject to the provisions of the law governing the form of
contracts.

WHO BEARS THE RISK OF LOSS AFTER THE DELIVERY OF THE

DETERMINATE THING (1504)

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;
(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 (1538)

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)
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)

For reference of Article 1189:

Article 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation
to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the
pendency of the condition:

(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;

(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that
the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is
unknown or it cannot be recovered;

(2) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the
obligation and its fulfilment, with indemnity for damages in either case;

(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;

(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the
usufructuary. (1122)

Sale of Goods by a Non-Owner (1505)

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 (1506)

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)

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)

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)

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 vs. Noah’s Ark Sugar Refinery, et. Al. GR 107243, September 1,
1993, 226 SCRA 36
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.
 RNS and St Therese Merchandising negotiated and indorsed its
quedans to Luis T. Ramos and Cresencia Zoleta. Zoleta and Ramos then
used the quedans as security for loans obtained by them from PNB in the
amounts of P23.5 million and P15.6 million, respectively. These quedans
they indorsed to the bank. Both Zoleta and Ramos failed to pay their loans
upon maturity.

PNB wrote to Noah demanding delivery of the sugar covered by

the quedans. Noah's Ark refused to comply with the demand. PNB filed
with the RTC a verified complaint for "Specific Performance with
Damages and Application for Writ of Attachment" against Noah's Ark,
Alberto T. Looyuko, Jimmy T. Go, and Wilson T. Go, the last three being
identified as "the Sole Proprietor, Managing Partner and Executive Vice
President of Noah, respectively."

RTC denied the application for preliminary attachment. Noah and

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

o 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
o 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.
o 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.

Rosa Ng Sy and Teresita Ng claims that the transaction between them and
Noah was "bogus and simulated complex banking schemes and financial
maneuvers and that it was to avoid payment of taxes considering that
Noah is under sequestration by the PCGG.

PNB filed a "Motion for Summary Judgment and prayed for the
delivery of the sugar stocks covered by the Warehouse Receipts/Quedans
which are now in the PNB’s possession as holder for value and in due
course; or alternatively, for payment of actual damages of P39.1M to pay
plaintiff attorney's fees, litigation expenses and judicial costs estimated at
no less than P1M and such other reliefs just and equitable under the
premises.

RTC denied the motion for summary judgment on the ground that
there exists conflicting claims among the parties relative to the ownership
of the sugar quedans as to whether or not the quedans falls within the
coverage of the Warehouse Receipt Law and whether or not the
transaction between PNB and third party defendants (Sy ans Ng) is
governed by contract of pledge that would require PNB’s compliance
with Art. 2112, Civil Code as regards the disposition of the quedans.
PNB filed a petition for certiorari with the CA but the latter court
nullified RTC order and ordered that "summary judgment be rendered in
favor of the PNB. CA ruled that "questions of law should be resolved after
and not before, the questions of fact.
Noah moved for reconsideration, but their motion was denied by
the CA. RTC rendered judgment, but not in accordance with the decision
of the CA since it dismissed PNB’s complaint for lack of cause of action
ISSUES:
WON 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.

WON PNB as indorsee/ pledgee of quedans was entitled to

delivery of sugar stocks from the warehouseman, Noah's Ark."

RULING:
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).

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.
SC also held that the quedans were negotiable documents and had been
duly negotiated to the PNB which acquired the rights set out in Article 1513 of
the Civil Code:
1. Such title to the goods as the person negotiating the documents 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.

PLACE AND TIME OF DELIVERY (1521)

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)
RULES ON THE PLACE OF DELIVERY

The presumption is that buyer must take the goods from the

seller’s place of business or residence rather than the seller to deliver them
to the buyer.

(1)Where there is an agreement, express or implied, the place of

delivery is that agreed upon;

(2)Where there is no agreement, the place of delivery is that

determined by usage of trade;

(3)Where there is no agreement and there is also no prevalent

usage, the place of delivery is the seller’s place of business;

(4)In any other case, the place of delivery is the seller’s residence;

and

(5) (Article 1251) In case of specific goods, which to the

knowledge of the parties at the time the contract was made were
in some other place, that place is the place of delivery, in the
absence of any agreement or usage of trade to the contrary.

TIME OF DELIVERY
(a) Delivery (if to be made by seller) must be within a reasonable time, in
the absence of express agreement. (Art. 1521, par. 2).

(b) What is a reasonable time is a question of fact, depending upon

circumstances provable even by evidence aliunde (extrinsic evidence).

(c) Among the circumstances that may be considered are the following:

1) character of the goods;

2) purpose intended;
3) ability of seller to produce the goods;
 4) transportation facilities;
5) distance thru which the goods must be carried;
6) usual course of business in that particular trade.
(Smith, Bell and Co. v. Sotelo Matti, 44 Phil. 874).
(d) If a delivery is to be made “at once,” “promptly,” or “as soon as
possible,” a reasonable time must necessarily be given. (See De Moss v.
Conart Motor Sales, 71 N.E. 2d 158).

(e) Premature delivery generally is not allowed because a term is for the
benefit of both parties. (See Winter v. Kahn, 208 N.Y.S. 74).

Incomplete Delivery (1522)

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 vs Kodak Philippines, Ltd., GR 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, with the following terms:

“This confirms our verbal agreement for Kodak Phils., Ltd. To provide Colorkwik
Laboratories, Inc. with three (3) units Kodak Minilab System 22XL . . . for your proposed outlets in
Rizal Avenue (Manila), Tagum (Davao del Norte), and your existing Multicolor photo counter in
Cotabato City under the following terms and conditions:

1. Said Minilab Equipment packages will avail a total of 19% multiple order
discount based on prevailing equipment price provided said equipment packages will be
purchased not later than June 30, 1992.

2. 19% Multiple Order Discount shall be applied in the form of merchandise

and delivered in advance immediately after signing of the contract. * Also includes start-
up packages worth P61,000.00.

3. NO DOWNPAYMENT.

4. Minilab Equipment Package shall be payable in 48 monthly installments at

THIRTY FIVE THOUSAND PESOS (P35,000.00) inclusive of 24% interest rate for the
first 12 months; the balance shall be re-amortized for the remaining 36 months and the
prevailing interest shall be applied.

5. Prevailing price of Kodak Minilab System 22XL as of January 8, 1992 is at

ONE MILLION SEVEN HUNDRED NINETY SIX THOUSAND PESOS.

6. Price is subject to change without prior notice. *Secured with PDCs; 1st
monthly amortization due 45 days after installation.”

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 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.

The Lam Spouses then filed before the CA a Petition to Set Aside the
Orders issued by the trial court. These Orders were subsequently set aside by the
CA, and the case was remanded to the trial court for pre-trial.

In its Decision, the RTC dismissed the case and ordered the plaintiff to
pay Lam Spouses.

Lam Spouses filed their Notice of Partial Appeal. Kodak Philippines, Ltd. also
filed an appeal. However, the CA dismissed it for Kodak Philippines, Ltd.’s failure to
file its appellant’s brief, without prejudice to the continuation of the Lam Spouses’
appeal. The Resolution became final and executory.

CA modified the decision of the RTC.

ISSUES:

(1) WON the contract between petitioners Spouses Alexander and Julie Lam
and respondent Kodak Philippines, Ltd. pertained to obligations that are
severable, divisible, and susceptible of partial performance under Article
1225 of the New Civil Code.

(2) WON upon rescission of the contract, the parties are entitled to Article
1190 and Article 1522 of the New Civil Code.

HELD:

(1) The Letter Agreement contained an indivisible obligation.

The intention of the parties is for there to be a single transaction covering

all three (3) units of the Minilab Equipment. Respondent’s obligation was to
deliver all products purchased under a "package," and, in turn, petitioners’
obligation was to pay for the total purchase price, payable in instalments.

The intention of the parties to bind themselves to an indivisible obligation

can be further discerned through their direct acts in relation to the package deal.
There was only one agreement covering all three (3) units of the Minilab
Equipment and their accessories. The Letter Agreement specified only one
purpose for the buyer, which was to obtain these units for three different outlets.
If the intention of the parties were to have a divisible contract, then separate
agreements could have been made for each Minilab Equipment unit instead of
covering all three in one package deal. Furthermore, the 19% multiple order
discount as contained in the Letter Agreement was applied to all three acquired
units. The "no downpayment" term contained in the Letter Agreement was also
applicable to all the Minilab Equipment units. Lastly, the fourth clause of the
Letter Agreement clearly referred to the object of the contract as "Minilab
Equipment Package."

In ruling that the contract between the parties intended to cover divisible
obligations, the Court of Appeals highlighted: (a) the separate purchase price of
each item; (b) petitioners’ acceptance of separate deliveries of the units; and (c)
the separate payment arrangements for each unit. However, through the specified
terms and conditions, the tenor of the Letter Agreement indicated an intention for
a single transaction. This intent must prevail even though the articles involved are
physically separable and capable of being paid for and delivered individually,
consistent with the New Civil Code: Article 1225. For the purposes of the
preceding articles, obligations to give definite things and those which are not
susceptible of partial performance shall be deemed to be indivisible. When the
obligation has for its object the execution of a certain number of days of work, the
accomplishment of work by metrical units, or analogous things which by their
nature are susceptible of partial performance, it shall be divisible. However, even
though the object or service may be physically divisible, an obligation is
indivisible if so provided by law or intended by the parties. 

In Nazareno v. Court of Appeals, the indivisibility of an obligation is

tested against whether it can be the subject of partial performance: An obligation
is indivisible when it cannot be validly performed in parts, whatever may be the
nature of the thing which is the object thereof. The indivisibility refers to the
prestation and not to the object thereof.  In the present case, the Deed of Sale of
January 29, 1970 supposedly conveyed the six lots to Natividad. The obligation is
clearly indivisible because the performance of the contract cannot be done in
parts, otherwise the value of what is transferred is diminished. Petitioners are
therefore mistaken in basing the indivisibility of a contract on the number of
obligors.

There is no indication in the Letter Agreement that the units petitioners

ordered were covered by three (3) separate transactions. The factors considered by
the Court of Appeals are mere incidents of the execution of the obligation, which
is to deliver three units of the Minilab Equipment on the part of respondent and
payment for all three on the part of petitioners. The intention to create an
indivisible contract is apparent from the benefits that the Letter Agreement
afforded to both parties. Petitioners were given the 19% discount on account of a
multiple order, with the discount being equally applicable to all units that they
sought to acquire. The provision on "no down payment" was also applicable to all
units. Respondent, in turn, was entitled to payment of all three Minilab Equipment
units, payable by instalments.

(2) 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 instalments 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.

WHEREFORE, the Petition is DENIED.

Delivery of the Goods to a Carrier or a Courier (1523)

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)

General Rule: This article deals with “delivery to a carrier on behalf of the
buyer.” Delivery to carrier is delivery to buyer, if it is the duty of the seller to
send the goods to the buyer.
Exception: (Paragraphs 1, 2 and 3 of Article 1503)

KINDS OF DELIVERY

1. C.I.F (cost, insurance, delivery)

  The selling price includes insurance and freight. The same is thus
shouldered by the seller.

2. F.O.B (free on board) a.k.a F.A.S (free alongside)

 General Rule: the property passes as soon as the goods are

delivered aboard the carrier or alongside the vessel, and that the
buyer as the owner of the goods is to bear all expenses after they
are so delivered.

a) f.o.b. at the place of shipment

(the buyer must pay the freight)

b) f.o.b. alongside (the vessel)

(from the moment the goods are brought
alongside the vessel, the buyer must pay for the
freight or expenses)

c) f.o.b. at the place of destination

(the seller must pay the freight, since the
contract states “free on board till destination).

WHEN THE VENDOR IS NOT BOUND TO DELIVERY (1524 AND

1536)

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 (1525-1535)

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)

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)
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, 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)

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 IMMOVABLE AT A RATE PER UNIT (1539-1541)

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 (1542)

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.
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 1544

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 vs. Keyser Mercantile, Inc., GR 208462, December 10, 2014, 744 SCRA
645

FACTS:

On October 20, 1989, Eugenia Gocolay, chairperson and president

of respondent Keyser Mercantile, Inc. (Keyser), entered into a contract to
sell with Bayfront Development Corporation (Baxfront) for the purchase
on installment basis of a condominium unit in Bayfront Tower
Condominium located at A. Mabini Street, Malate, Manila. The subject of
the sale was Unit G of the said condominium project consisting of 163.59
square meters with the privilege to use two (2) parking slots covered by
Condominium Certificate of Title (CCT)No. 15802. This Contract to
Sell was not registered with the Register of Deeds of Manila. Thus, the
subject unit remained in the name of Bayfront with a clean title.

On July 7, 1990, petitioner spouses Carlos and Rosario Suntay

(Spouses Suntay) also purchased several condominium units on the 4th
floor of Bayfront Tower Condominium through another contract to sell.
Despite payment of the full purchase price, however, Bayfront failed to
deliver the condominium units. When Bayfront failed to reimburse the full
purchase price, Spouses Suntay filed an action against it before the
Housing and Land Use Regulatory Board (HLURB) for violation of P.D.
No. 957 and P.D. No. 1344, rescission of contract, sum of money, and
damages.

In its decision, dated April 23 1994, the HLURB rescinded the

Contract to Sell between Bayfront and Spouses Suntay and ordered
Bayfront to pay Spouses Suntay the total amount of 2,752,068.60 as
purchase price with interest. Consequently, on November 16, 1994, the
HLURB issued a writ of execution.

Upon the application of Spouses Suntay, the Sheriffs of the RTC of

Manila levied Bayfront’s titled properties, including the subject
 condominium Unit G and the two parking slots. Considering that CCT No.
15802 was still registered under Bayfront with a clean title, the sheriffs
deemed it proper to be levied. The levy on execution in favor of Spouses
Suntay was duly recorded in the Register of Deeds of Manila on January
18, 1995.

The auction sale was conducted on February 23, 1995, and

Spouses Suntay were the highest bidder. Consequently, on March 1, 1995,
the Certificate of Sale in favor of Spouses Suntay was issued. This was
duly annotated at the back of CCT No. 15802 on April 7, 1995.
Meanwhile, the Deed of Absolute Sale between Bayfront and Keyser
involving the subject property was finally executed on November 9, 1995.
The latter allegedly paid the full purchase price sometime in 1991. When
Keyser was about to register the said deed of absolute sale in February
1996, it discovered the Notice of Levy and the Certificate of Sale
annotated at the back of CCT No. 15802 in favor of Spouses Suntay.
Nevertheless, on March 12, 1996, the Register of Deeds cancelled the title
of Bayfront and issued CCT No. 26474 in the name of Keyser but carried
over the annotation of the Suntays.

ISSUE:

 WON the case has prescribed?

 WON the sale was valid?

HELD:

The defense of prescription is unavailing. In Fulton Insurance

Company v. Manila Railroad Company, this Court ruled that the filing of
the first action interrupted the running of the period, and then declared
that, at any rate, the second action was filed within the balance of the
remaining period. Applying Article 1155 of the New Civil Code in that
case, the interruption took place when the first action was filed in the
Court of First Instance of Manila. The interruption lasted during the
pendency of the action until the order of dismissal for alleged lack of
jurisdiction became final.

In the present case, the prescriptive period was interrupted when

HLURB Case No. REM-032196-9152 was filed on March 21, 1996. The
interruption lasted during the pendency of the action and until the
judgment of dismissal due to lack of jurisdiction was rendered on the
September 23, 2005. Thus, the filing of Civil Case No. 06-114716 on
March 24, 2006 was squarely within the prescriptive period of four (4)
years.
 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.

In the case of Uy v. Spouses Medina which dealt with essentially

the same issues, the Court wrote:
Considering that the sale was not registered earlier, the right of petitioner over
the land became subordinate and subject to the preference created over the earlier
annotated levy in favor of Swift. The levy of execution registered and annotated on
September 1, 1998 takes precedence over the sale of the land to petitioner on February
16, 1997, despite the subsequent registration on September 14, 1998 of the prior sale.
Such preference in favor of the levy on execution retracts to the date of levy for to hold
otherwise will render the preference nugatory and meaningless.

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.

Peralta vs. heirs of Bernardina Abalon. Et. Al . GR184338 and GR

183464, June 30, 2014 727 SCRA477

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.

ISSUE:

WON 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:

The Court affirmed the decision of the Court of Appeals that the
Transfer Certificate of Title in the name of the Andals are legal and valid
while those in the name of the Spouses Peralta is cancelled for being null
and void.

The Torrens system was intended to guarantee the integrity and

conclusiveness of the certificate of registration and merely confirms
ownership and does not create it. It cannot be used for perpetration of
fraud against the real owner of the registered land. The established rule is
that a forged deed is generally null and cannot convey title. The exception
is Section 55 of the Land Registration Act which provides protection to an
innocent purchaser for value, allowing him to retain the parcel of land
bought and his title is considered valid. The qualifying point here is that
there must be a complete chain of registered titles (If person relied on
this with owner’s original Duplicate Copy of Title). NOTES:  completely
processed title. Original – Abalon forged transferred to Rellama (original
title was transferred).

When Rellama sold the properties to the Andals, on the face of the
title it was in his name and there was no annotation. To the Andals, there
was no doubt that Rellama was the owner of the property and he had
transmissible rights of ownership over the said property. They had every
right to rely on the face of his title alone. There they were considered as
innocent purchaser for value. There was no evidence that the chain of
registered title was broken. Therefore, their titles were legal and valid.
 As for the Spouses Peralta, they were considered as buyers in bad
faith for they merely relied on the photocopy of the title provided by
Rellama. This should have made the Spouses suspicious that there was
some flaw in the title of Rellama.

Peblia Alfaro and the Heirs of Prosperous Alfara, et.al. vs. Sps.
Dumalagan et. Al. GR 186622, January 22, 2014 714 SCRA 476

FACTS:
The lot in controversy consists of an estimated area
of 2,287 sq m, more or less, located in Talisay-Minglanilla
Estate, Brgy. San Roque, Talisay City, registered in the
name of Olegario Bagano. On 14 June 1995, Bagano sold
the subject property to petitioner Spouses Prosperous and
Peblia Alfaro (Spouses Alfaro) through a Deed of Absolute
Sale.
Petitioners caused the immediate transfer of the title
in their names on 20 June 1995 and at the same time, paid
the real property tax, and constructed a perimeter fence
around the subject property.
In preservation of their right as occupants of the
subject property, respondents filed the instant case.
According to respondent, the Spouses Dumalagan are the
real owners of Lot No. 1710-H, a portion of the subject
property, based on a notarized Deed of Absolute Sale dated
6 December 1993. To prove ownership and possession,
respondents offered in evidence a Certificate of Completion
and a Certificate of Occupancy both dated 10 August 1993
and Visayan Electric Company Inc. electric bills. Right
after their purchase from Bagano, respondent Spouses
Dumalagan immediately took possession of the subject
property and constructed a nipa hut therein, which they
later on leased to Ramil Quiñineza, who then occupied the
subject property until the end of 1997. Since then, several
tenants have occupied the subject property, paying monthly
rentals to respondent Spouses Dumalagan: Spouses Crispin
and Editha Dalogdog, Spouses Alberto and Lucy Boncales,
and Spouses Mariano and Constancia Castañares.
Meanwhile, Spouses Bagano filed a complaint for
Declaration of Nullity of Sale with Damages and
Preliminary Injunction against petitioners on 15 April 1996
entitled, "Spouses Olegario P. Bagano and Cecilia C.
Bagano v. Spouses Peblia and Prosperous Alfaro ("Bagano
case" for brevity). In the Bagano case, this Court sustained
the validity of the Deed of Absolute Sale executed on 14
June 1995 between petitioners and Spouses Bagano.
In the case at bar, the trial court dismissed the
complaint for lack of cause of action on 7 August 2006.
According to the trial court, the plaintiffs failed to establish
that defendants were in bad faith when they bought Lot No.
1710 in 1995.
Aggrieved, respondents elevated the case to the Court
of Appeals. On 20 May 2008, the appellate court reversed
and set aside the trial court decision. According to the
appellate court, petitioners cannot claim good faith. It
referred to annotations written at the back of Bagano's title.
It noted that the annotated adverse claims, even if not in the
names of respondents, have the effect of charging
petitioners as subsequent buyers with constructive notice of
the defect of the seller's title. Moreover, as shown by the
records, petitioners had prior knowledge that portions of
the subject property have been sold to third persons.
On 9 February 2009, the Court of Appeals denied the
motion for reconsideration affirming its decision. Hence
this Petition.
ISSUE:
WON the court of appeals committed a reversible
error in partially reversing a decision of the Supreme Court
involving the issues of ownership over the same lot.

HELD:
As just noted, this Court sustained the validity of the
Deed of Absolute Sale between Spouses Bagano and
petitioners in the Bagano case. On this basis, petitioners
contend that the Supreme Court's decision in the Bagano
case constitutes res judicata apropos the case at bar.
According to petitioners, respondents, even if they were not
made parties, are bound by the Court's ruling on the
ownership in favor of petitioner. Petitioners contend that
the appellate court violated the doctrine of res judicata
when it sustained the validity of the Deed of Absolute Sale
as it unduly awarded ownership of the subject property to
respondents, obliquely reversing the Supreme Court's
decision in the Bagano case.
Res judicata refers to the rule that a final judgment or
decree on the merits by a court of competent jurisdiction is
conclusive of the rights of the parties or their privies in all
later suits on all points and matters determined in the
former suit. The elements of res judicata are as follows: (1)
the former judgment or order must be final; (2) the
judgment or order must be on the merits; (3) it must have
been rendered by a court having jurisdiction over the
subject matter and the parties; and (4) there must be,
between the first and the second action, identity of parties,
of subject matter and cause of action.
 Our decision in the Bagano case on the merits has
long been final. Also, the court a quo has jurisdiction over
the subject matter and the parties. However, on the issue on
identity of parties and cause of action, we rule in the
negative.
In the Bagano case, the parties are herein petitioner
Spouses Alfaro and the Spouses Bagano, as privies to the
Deed of Absolute Sale dated 14 June 1995. In the case at
bar, the parties are petitioner Spouses Alfaro and
respondent Spouses Dumalagan basing their rights on the
Deed of Absolute Sale dated 3 December 1993. There is,
thus, no identity of parties.
In the Bagano case, the cause of action is the alleged
forgery of the Deed of Absolute Sale by petitioners; the
crux of the case being the validity of the sale between
Bagano and petitioners. In the case at bar, the cause of
action is the violation of right of ownership of respondent
Spouses Dumalagan. Clearly, there is no identity of cause
of action. Therefore, the doctrine of res judicata is
inapplicable in the case at bar. The appellate court did not
reverse a Supreme Court decision.
Petitioners also contend that respondents should have
intervened in the Bagano case; for failure to intervene, the
latter are bound by the judgment for bad faith and/or
Laches. Petitioners' claim must fail. In Mactan-Cebu
International Airport Authority v. Heirs of Estanislao
Miñoza, et. al., this Court clarified that:
xxx an independent controversy cannot be injected into a suit by
intervention, hence, such intervention will not be allowed where it would
enlarge the issues in the action and expand the scope of the remedies. It is not
proper where there are certain facts giving the intervenor's case an aspect
peculiar to himself and differentiating it clearly from that of the original
parties; the proper course is for the would-be intervenor to litigate his claim in
a separate suit. Intervention is not intended to change the nature and character
of the action itself, or to stop or delay the placid operation of the machinery of
the trial. The remedy of intervention is not proper where it will have the effect
of retarding the principal suit or delaying the trial of the action.
 In line with this ruling, the issue on double sale,
which concerns the present case cannot be injected into the
Bagano case, which is based on facts peculiar to the
transaction between Bagano and petitioners. For one,
herein respondents claim ownership of only a portion of the
property litigated in the Bagano case, and the basis of
respondents' claim is a prior sale to them by Bagano, whose
authority as a seller was an unquestioned fact. Neither of
the parties in the second Bagano sale made any mention of
the first sale of a part of the property to respondents.
Article 1544 of the Civil Code 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.
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 had prior knowledge of the previous sales
by instalment of portions of the property to several
purchasers. Moreover, petitioners had prior knowledge of
respondents' possession over the subject property. Hence,
the rule on double sale is inapplicable in the case at bar. As
correctly held by the appellate court, petitioners' prior
registration of the subject property, with prior knowledge
of respondents' claim of ownership and possession, cannot
confer ownership or better right over the subject property.
The ruling in Crisostomo v. Court of Appeals, citing
repeated pronouncements, is apropos:
It is a well-settled rule that a purchaser or mortgagee cannot close
his eyes to facts which should put a reasonable man upon his guard, and then
claim that he acted in good faith under the belief that there was no defect in the
title of the vendor or mortgagor. His mere refusal to believe that such defect
exists, or his wilful closing of his eyes to the possibility of the existence of a
defect in the vendor's or mortgagor's title, will not make him an innocent
purchaser or mortgagee for value, if it afterwards develops that the title was in
fact defective, and it appears that he had such notice of the defects as would
have led to its discovery had he acted with the measure of precaution which
may be required of a prudent man in a like situation. [Emphasis supplied]