CRC-ACE _ The Professional CPA Review School LECTURE AID - SALES REMEDIES OF AN UNPAID SELLER: a. General Remedies: 1. Action for specific performance with damages 2. Action for rescission with damages b. Special Remedies: 1. Sale of personal property in instalment basis [RECTO LAW] a. Specific performance in case the buyer fails to pay. b. Rescission of the sale in case of default of 2 or more installments. c. Foreclose the chattel mortgage on the thing sold in case of default of 2 or more installments. In this case, the seller shall have no further action for deficiency judgment. NOTE: : Aside from the above remedies, the seller can also retain the installments paid provided that the forfeiture was part of the stipulations of the parties and the same is not unconscionable. : The remedies are alternative and not cumulative. : Art. 1484 does not apply in: 1. Sale of real property 2. Mortgage of real property 3. Sale of a personal property on straight terms 2. Sale of goods Unpaid seller of goods — 1. one who has not been paid or tendered the whole price 2. one who has received a bill of exchange or other negotiable instrument as conditional payment and the condition on which it was received has been broken by reason of the dishonor of the instrument. a. Lien on goods while in his possession Requisites: 1. the seller is unpaid 2. the buyer is insolvent 3. the goods are in the possession of the seller 4. the goods have been sold a. without stipulation as to credit b. with a stipulation as to credit but the term has expired NOTE: Possessory lien will be lost: 1, CRC-ACE The Professional CPA Review School 1. when the goods are delivered to the common carrier or other bailee without reservation of ownership; 2. when the buyer or his agent lawfully obtains possession of the goods 3. when there is waiver on the part of the seller b. Stoppage in transitu (Goods are in transit from the time they are delivered to the carrier for the purpose of delivery to the buyer or his agent) Requisites: 1. the seller is unpaid 2. buyer is insolvent 3. the goods are in transit 4. seller will bear the expenses of delivery of the goods after the exercise of the right c. Resale of thing Requisites: 1. the seller is unpaid 2. the buyer is in default in the payment of the price 3. the goods are perishable in nature 4. the right is expressly reserved 5. the seller can either exercise possessory lien or stoppage in transitu d._Rescission of the contract Requisites 1. the seller is unpaid 2. the right is expressly reserved 3. the buyer has been in default in the payment of the price for an unreasonable time 4. the seller can exercise right of lien or stoppage in transit 3. Sale of real estate in installment (R.A. 6552) [MACEDA LAW] a. Right of specific performance - the seller must observe the grace period granted to the buyer to pay, without additional interest, the unpaid installment. b. Right of rescission - cancellation can only take place after 30 days from receipt of the notice of cancellation or demand for rescission by a notarial act. c. Right on installments - seller can retain not more than 50% of the installments paid. But if the installments paid were less than 2 years, the seller can have absolute forfeiture over the installments paid. RULES IN CASE OF DOUBLE SALE: 1. Personal Property - to the first possessor in good faith: 2CRC-ACE The Professional CPA Review School 2. Real Property - the person who first recorded the sale in the Registry of Property (Register of Deeds) in good faith. + if not recorded, to the first possessor in good faith; + if none of the above, to the person with the oldest title, in good faith. Rules in case area/number is greater/lesser than that stated in the contract 1. Ifarea was stated at the rate of a certain price for a unit or number a. Incase of excess the buyer may choose to: 1. pay for the agreed area and refuse the rest 2. accept everything but will pay for the excess. b. Incase of deficiency the buyer may choose: 1. proportional reduction of the price 2. cancellation of the contract if deficiency is at least 10% of that stated 2. If the sale was made for a lump sum: no decrease or increase in the price WARRANTY - A statement or representation made by the seller of goods, contemporaneously and as a part of the contract of sale, having reference to the character, 1 quality or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents. Kinds of warranty: 1. Express 2. Implied Kinds of Implied Warranties: 1. Warranty against eviction Elements: a. Vendee is deprived of the thing purchased; b. The deprivation is by virtue of a final judgment; c. The judgment is base on a prior right to the sale or an act imputable to the vendor; d. The vendor was summoned in the suit for eviction at the instance of the vendee; e. No waiver of warranty by the vendee. Remedies of the Vendee: 1. Total eviction - the vendee can demand the following: a. Value of the thing at the time of eviction; b. Income or fruits if he has been ordered to deliver them to the party who won the suit; c. Costs of the suit; d. Expenses of the contract; 3, CRC-ACE The Professional CPA Review School e. Damages and interest if the sale was in bad faith. 2. Partial eviction a. The vendee can rescind the contract; b. The vendee can demand the following; 1. Value of the thing at the time of eviction; 2. Income or fruits if he has been ordered to deliver them to the party who won the suit; 3. Costs of the suit; 4. Expenses of the contract; 5. Damages and interest if the sale was in bad faith Waiver of evictior 1.Consciente — - waiver without knowledge of the risk of eviction 2. Intencionada - waiver with knowledge of the risks of eviction coupled with an assumption of its consequences 2. Warranty against hidden defects Elements: a. defect must be serious or important; b. __ it must be hidden; c. _ itmust exist at the time of the sale; d. vendee must give notice of the defect to the vendor within a reasonable time; e. _ nopresctiption yet (6 months from delivery of thing or 40 days in case of animals) f. no waiver of warranty Remedies of the Vendee: ‘a. Accion redhibitoria (rescission) b. — Accion quanti minoris (reduction of the price) Redhibition: _ the avoidance of a sale on account of some vice or defect in the thing sold 3. Warranty as to Fitness or Merchantability - goods are reasonably fit for the purpose for which they are sold EXTINGUISHMENT OF SALE 1. Same causes as all other obligations 2. Conventional Redemption - The vendor reserved the right to reacquire the property sold. When to exercise the right of redemption: 4CRC-ACE The Professional CPA Review School 1. if there is no agreement to redeem -- there is no right to redeem (sale is absolute) 2. if there is an agreement to redeem --- a. but no express stipulation as to time --- 4 years form date of contract b. period was fixed or intended -- not to exceed 10 years NOTE: period of redemption may be extended ONLY before its expiration but the extension plus the original term should not exceed 10 years HOWEVER, the vendor may still exercise the right to repurchase within 30 days from the time the final judgment was rendered in a civil action on the basis that the contract was a true sale with right of repurchase. 3. Legal Redemption - the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or donation in payment, or by any other transaction whereby ownership is transferred by onerous title. nal redemption is considered to be an equitable mortgage in any of 1. Price of sale is unusually inadequate; 2. Vendor remains in possession; 3. Period of redemption is extended after expiration; 4. Purchaser retains part of the purchase price; 5. Vendor binds himself to pay the taxes of the thing sold; 6. Other cases where the parties really intended that the transaction shall secure the payment of a debt or the performance of any obligation. Vendor should pay the following in case of redemption: 1. Price of the sale 2. Expenses of the contract 3. necessary and useful expenses made upon the thing sold INSTANCES OF REDEMPTION: 1. Under the Civil Code (legal redemption) a. Sale of co-owner by his share to a stranger b. When a credit or other incorporeal right in litigation is sold c. Sale of an heir of his hereditary rights to a stranger d. Sale of adjacent rural lands not exceeding 1 hectare 5, CRC-ACE The Professional CPA Review School e. Sale of small urban lands bought merely for speculation. 2. Under special laws a. An equity of redemption in case of judicial foreclosures; b. A right of redemption in cases of extra-judicial foreclosures.