SALES – ATTY ZARAH VILLANUEVA CASTRO

San Beda College of Law, Mendiola

JOHN C. ICALIA
- If consideration consists partly in money and partly by thing, look at
SALES manifest intention.
- Depends on the intention of the parties if they consider their transaction
as barter or sale.
- If the value of thing is equal or less than amount of money, it is sale.
I. CONCEPTS; CONTRACT OF SALE (Art. 1458) - If the value of thing is more than amount of money, it is barter.
 By the contract of sale, one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to 2. Donation (Art 725)
pay therefore a price certain in money or its equivalent. - Donation is gratuitous while sale is onerous.
- Donation is formal contract; sale is consensual.
A. Characteristics: - Donation is governed by law on donation; sale is governed by law on
1. Consensual (Art. 1475) – perfected by mere consent. sales.
2. Bilateral (Art. 1458) – imposes obligation on both parties; obligation to
transfer ownership and deliver on the part of the seller and to pay the 3. Contract for a Piece of Work (Art. 1467)
price on the part of the buyer. - Also known as Massachusetts Rule.
3. Onerous (Art. 1350) – with valuable consideration. - If the contract for delivery of an article which the vendor in the ordinary
4. Commutative (Art. 2010) – each party gives and receives an equivalent. course of business manufactures or procures for general market,
5. Nominate (Art. 1458) – has given a special name or designation in the Civil whether on hand or not, it is a sale.
Code. - If goods are to be manufactured especially for a customer and upon
6. Principal – can stand on its own and does not depend on other contracts special order and not for the general market, it is a contract for piece of
for its existence and validity. work.

Essential Requisites/Elements: -------------------------------------------

1. Consent of the contracting parties Jurisprudence:
2. Subject matter (things and rights) G.R. No. L-8506 August 31, 1956
3. Cause (price) CO vs. CIR

------------------------------------------- The important thing to remember is that Celestino Co & Company habitually
Jurisprudence: makes sash, windows and doors, as it has represented in its stationery and
G.R. No. L-41847 December 12, 1986 advertisements to the public. That it "manufactures" the same is practically admitted by
LEABRES vs. COURT OF APPEALS appellant itself. The fact that windows and doors are made by it only when customers
place their orders, does not alter the nature of the establishment, for it is obvious that it
DOCTRINE: An examination of the receipt reveals that the same can neither be regarded only accepted such orders as called for the employment of such material-moulding,
as a contract of sale or a promise to sell.
1
Page
frames, panels-as it ordinarily manufactured or was in a position habitually to
manufacture.
The requisites of a valid contract of sale namely:
(1) consent or meeting of the minds of the parties; GR No. 71122, 25 March 1988
(2) determinate subject matter; CIR vs. Arnoldus Carpentry Shop
(3) price certain in money or its equivalent; - are lacking in said receipt and therefore the
"sale" is not valid nor enforceable. DOCTRINE: Based on Article 1467, what determines whether the contract is one of work
------------------------------------------- or of sale is whether the thing has been manufactured specially for the customer and
“upon his special order.” Thus, if the thing is specially done at the order of another, this is
B. Distinguished from other contracts: a contract for a piece of work. If, on the other hand, the thing is manufactured or
1. Barter (Art. 1468, 1638, 1954) procured for the general market in the ordinary course of one’s business, it is a contract
- In barter, the consideration is the giving of a thing; In sale, it is giving of of sale. The distinction between a contract of sale and one for work, labor and materials
money as payment. are tested by the inquiry whether the thing transferred is one not in existence and
- Both are governed by law on sales. which never would have existed but for the order of the party desiring to acquire it, or a

thing which would have existed and has been the subject of sale to some other persons
even if the order had not been given.
The one who has ready for the sale to the general public finished furniture is a
manufacturer, and the mere fact that he did not have on hand a particular piece or pieces
of furniture ordered does not make him a contractor only. A contract for the delivery at a
certain price of an article which the vendor in the ordinary course of his business
manufactures or procures for the – general market, whether the same is on hand at the
time or not, is a contract of sale, but if the goods are to be manufactured specially for the
customer and upon his special order, and not for the general market, it is a contract for a
piece of work.
-------------------------------------------
4. Agency to sell (Art. 1466)
- In agency to sell, agent is not obliged to pay for price but merely obliged
to deliver price received from buyer; in sale, the buyer pays for the price
of the object.
- In agency, the principal remains the owner even if object is delivered to
agent; in sale, buyer becomes owner of thing.
- In agency, agent assumes no risk/liability as long as within the authority
given; In sale, seller warrants.
- In agency, may be revoked unilaterally because fiduciary and even
revoked it without ground; in sale, not unilaterally revocable.
- In agency, agent is not allowed to profit; in sale, seller receives profit.
- Agency is a personal contract; sale is a real contract (to give),
rescission is not available in agency.
-------------------------------------------
Jurisprudence:
G.R. No. L-11491, 23 August 1918
Quiroga vs. Parsons
RULING: The Court ruled that the contract by and between the plaintiff and the
defendant was one of purchase and sale, and that the obligations the breach of which is
alleged as a cause of action are not imposed upon the defendant, either by agreement or
by law.
In order to classify a contract, due attention must be given to its essential clauses. In the
contract in question, what was essential, as constituting its cause and subject matter, is
that:
(1) The plaintiff was to furnish the defendant with the beds which the latter might
order, at the price stipulated, and that the defendant was to pay the price in the
manner stipulated.
(2) Payment was to be made at the end of sixty days, or before, at the plaintiff’s
request, or in cash, if the defendant so preferred, and in these last two cases an
additional discount was to be allowed for prompt payment.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
These are precisely the essential features of a contract of purchase and sale. There was
the obligation on the part of the plaintiff to supply the beds, and, on the part of the
defendant, to pay their price. These features exclude the legal conception of an agency or
order to sell whereby the mandatory or agent received the thing to sell it, and does not
pay its price, but delivers to the principal the price he obtains from the sale of the thing to
a third person, and if he does not succeed in selling it, he returns it.
By virtue of the contract between the plaintiff and the defendant, the latter, on receiving
the beds, was necessarily obliged to pay their price within the term fixed, without any
other consideration and regardless as to whether he had or had not sold the beds. In
respect to the defendant’s obligation to order by the dozen, the only one expressly
imposed by the contract, the effect of its breach would only entitle the plaintiff to
disregard the orders which the defendant might place under other conditions; but if the
plaintiff consents to fill them, he waives his right and cannot complain for having acted
thus at his own free will.
-------------------------------------------
5. Lease
- In sale, obligation is to absolutely transfer ownership of thing; in lease,
use of thing is for a specified period only with an obligation to return.
- In sale, consideration is price; in lease, consideration is rent.
- In sale, seller needs to be the owner of the thing to transfer ownership;
in lease, lessor need not be the
owner for ownership does not pass to the lessee.
Contract of Lease with Option to Buy (Art. 1485)
- Really a contract of sale but designated as lease in name only.
- It is a lease of personal property where rents are considered as payment
on installments.
C. Kinds of Sale
2 1. Absolute – seller does not reserve his title over the thing sold and thus,
upon delivery, ownership passes regardless of WON buyer has paid.
Page
2. Conditional – condition/s are imposed by the seller before ownership will
pass.
CONDITION – An event may may give rise or extinguish and obligation as agreed
by the contracting parties.
 May be a past event if the knowledge there of is unknown yet.
Contract to Sell – ownership is reserved by the seller despite delivery; considered as a
special kind of conditional sale; the buyer has the right to compel the seller to execute a
final deed of sale.
A preparatory stage before the perfection of Contract of sale.
-------------------------------------------
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Jurisprudence:
G.R. No. L-59266
Dignos vs. CA

Held: The Court ruled that there is an absolute contract of sale. That a deed of sale is
absolute in nature although denominated as a “Deed of Conditional Sale” where nowhere
in the contract in question is a proviso or stipulation to the effect that title to the
property sold is reserved in the vendor until full payment of the purchase price, nor is
there a stipulation giving the vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within a fixed period.

G.R. No. 135528, 14 July 2004

Rayos vs. CA

Held: The Court ruled that the parties executed a contract to sell and not a contract of
sale.

The petitioners retained ownership without further remedies by the respondents until
the payment of the purchase price of the property in full. Such payment is a positive
suspensive condition, failure of which is not really a breach, serious or otherwise, but an
event that prevents the obligation of the petitioners to convey title from arising, in
accordance with Article 1184 of the Civil Code.

The non-fulfillment by the respondent of his obligation to pay, which is a suspensive

condition to the obligation of the petitioners to sell and deliver the title to the property,
rendered the contract to sell ineffective and without force and effect. The parties stand as
if the conditional obligation had never existed

G.R. NO. 137845 : September 9, 2004

Clemeno, Jr. vs. Lobregat

Held: The Court ruled that the contract between the parties was a perfected verbal
3
Page
contract of sale and not a contract to sell over the subject property, with the petitioner as
vendor and the respondent as vendee.

Sale is a consensual contract and is perfected by mere consent, which is manifested by a

meeting of the minds as to the offer and acceptance thereof on three elements: subject
matter, price and terms of payment of the price.
-------------------------------------------
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
The owner of a thing may sell his interest in the land but with now specification
II. OBJECT OF SALE (Art. 1306) as to what specific part since the property is still not yet partitioned. Thus, the sale is valid
as regard 50% of the property and the rights therein.
A. Must be LICIT (Art. 1459) – within the commerce of man.
 Illicit per se – refers to its nature.
 Illicit per accidens – made illegal by provisions of law.
 Illicit contracts are null and void.

B. Must be DETERMINATE (Art. 1460) – not essential at the time of perfection;

particularly designated or physically segregated from all others of the same
class.
The requisite that a thing must be determinate is satisfied if at the time the contract is
entered into, the thing is capable of being made determinate without the necessity of a
new further agreement between the parties.

C. Must be having POTENTIAL EXISTENCE (Art. 1461) – animals not yet born, fruits
of trees, rice to be harvested.

D. Hope or expectancy (Art. 1461)

 Emptio rae speratae - sale of an expected thing; if does not materialize, the
sale is not effective (future thing).
o Depends on the existence.
 Emptio spei – sale of mere hope; does not matter whether it materializes
or not, as long as the hope itself validly existed (present thing).
o Example: Lotto ticket, Raffle ticket
o It is the “chance” which the buyer actually buys

 Mere hope or expectancy – VALID, as long as it will come into existence.

 Vain hope or expectancy - VOID.

E. Sale of Existing and future goods 4

 Art. 1462. The goods which form the subject of a contract of sale may be
Page
either existing goods, owned or possessed by the seller, or goods to be
manufactured, raised, or acquired by the seller after the perfection of the
contract of sale, in this Title called "future goods."
 There may be a contract of sale of goods, whose acquisition by the seller
depends upon a contingency which may or may not happen. (n)
 This is an EXECUTORY contract – already perfected but to be performed or
complied with by the seller.

F. Sale of Undivided Interest.

 Art 1463 A sole owner of a thing may sell an undivided interest.

Almendra VS IAC

III. PRICE (Art. 1350, 1352-53)
A. Certain in money (Art. 1469)
 Failure to pay the agreed price does not cancel a sale for lack of
consideration, for the consideration is still there, even if paid with
counterfeit money.
 With reference to another thing certain - tuition fee.
B. Who may determine the price (Art. 1469, 1473-74)
 Determination of price may be left to the judgment of a third person.
 If third person is unable or unwilling to fix it, the contract has no effect,
unless the parties later on agree as to the price.
 Cannot be left to the will of one of the parties.
C. Effect of Gross Inadequacy (Art. 1470)
 Must be proven as a fact.
 Does not affect a contract of sale EXCEPT if consent is vitiated.
 In execution of judicial sale, mere inadequacy will not affect the sale,
except if there is grossly inadequate as to shock the conscience of the
Court, it will be set aside.
D. Effect when price is simulated (Art. 1471)
 If price is simulated, contract is void, unless shown it was really a donation.
 Absolutely Simulated – parties do not intend to be bound at all.
- Purpose: to defraud creditors.
 Relatively Simulated – sale where they actually intended another contract
in which normally would be a donation.
- Purpose: (1) to minimize tax liabilities; (2) to circumvent the
provisions on legitimes and collation under succession.
Jurisprudence
Payongayong vs CA
Doctrine: Simulation occurs when an apparent contract is a declaration of fictitious will
deliberately made by agreement of the parties in order to produce, for the purpose of
deception, the appearance of juridical act which does not exist or is different from which
was really executed.
Requirements:
1. Outward declaration of will of the parties
2. False appearance intended by mutual agreement
3. Purpose: deceive third persons
E. Certainty of price of securities, grains, liquids, etc. (Art. 1472)
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
 The price is certain when:
- the price fixed is that which the thing sold would have on a definite
day, or a particular exchange or market; or
- an amount is fixed above or below the price on such day or in such
exchange or market.
F. Effect of failure to determine price (Art. 1474)
 The contract is inefficacious.
 However, if delivered to and appropriated by the buyer, he must pay a
reasonable price which depends on different circumstances of each case.
 Art. 1474. Where the price cannot be determined in accordance with the
preceding articles, or in any other manner, the contract is inefficacious.
However, if the thing or any part thereof has been delivered to and
appropriated by the buyer he must pay a reasonable price therefor. What
is a reasonable price is a question of fact dependent on the circumstances
of each particular case.
G. Meeting of the minds as to price
-------------------------------------------
Jurisprudence
G.R. Nos. L-21489 and L-21628, 19 May 1966, 17 SCRA 114
Mapalo vs. Mapalo
RULING: The Court ruled that a contract of purchase and sale is null and void and
produces no effect whatsoever where the same is without cause or consideration in
that the purchase price which appears in a contract as paid where in fact never been
paid by the purchaser to the vendor.
Starting with fundamentals, under the Civil Code, either the old or the new, for a contract
to exist at all, three essential requisites must concur: (1) consent, (2) object, and (3) cause
or consideration. The Court of Appeals is right in that the element of consent is present.
5 For consent was admittedly given, albeit obtained by fraud. Accordingly, said consent,
although defective, did exist. In such case, the defect in the consent would provide a
Page
ground for annulment of a voidable contract, not a reason for nullity ab initio.
The parties are agreed that the second element of object is likewise present namely, the
parcel of land subject matter of the same.Not so, however, as to the third element of
cause or consideration
G.R. No. 128120, 20 October 2004
Sweldish Match vs. CA
RULING: An offer would require, among other things, a clear certainty on both the object
and the cause or consideration of the envisioned contract. Consent in a contract of sale
should be manifested by the meeting of the offer and the acceptance upon the thing and
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer.

As a consensual contract, a contract of sale becomes a binding and valid contract upon
the meeting of the minds of the parties as to the price, despite the manner of payment,
or even the breach of that manner of payment. It is not the act of payment of price that
determines the validity of a contract of sale.
-------------------------------------------

6
Page

IV. FORMATION/PERFECTION OF A CONTRACT OF
SALE (Art. 1475)
 Perfected at the moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price.
 Upon that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing forms of contracts.
FORM:
General Rule: A COS may be in any form. Article 1483 provides that a COS may be in writing,
partly in writing xxx. This provision is exactly the same as Article 1356 in contracts which provides
that contracts may be obligatory in whatever form they may have been entered into provided all the
essential requisites are present. But then again even Article 1356 just like Article 1475 would
provide for exceptions.
Exceptions: The law may require a particular form for its validity. The Cattle Registration Decree is
an example - where the law itself provides for a particular form for the validity of the sale. But the
law may require particular form for its enforceability of the sale and that would be 1403 or the
statute of frauds. Concretely, the sale of a parcel of land if not in writing is valid but unenforceable.
It is not void. Note that the price of the land is irrelevant if immovable.
Example: Before, the sale of a land for P300 is valid and enforceable even if not in
writing. But presently, it has to be in writing to be enforceable. The price is still irrelevant.
 If the object of the sale is movable, you have to consider not the value of the thing
but the price agreed upon. The value may be different from the price. You can sell
a thing worth P1,000 for P400 but the law provides for the price. If the price is at
least P500 and the sale is not in writing, it will be unenforceable.
A. Option Contract (Art. 1479)
 A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
-------------------------------------------
Jurisprudence:
G.R. No. 111238, 25 January 1995
Adelfa Properties vs. CA
RULING: The Court ruled that the agreement between the parties is a contract to sell, and
not an option contract or a contract of sale.
The distinction between the two is important for:
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
1. In contract of sale, the title passes to the vendee upon the delivery of the
thing sold; whereas in a contract to sell, by agreement the ownership is
reserved in the vendor and is not to pass until the full payment of the price.
2. In a contract of sale, the vendor has lost and cannot recover ownership until
and unless the contract is resolved or rescinded; whereas in a contract to sell,
title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a
breach but an event that prevents the obligation of the vendor to convey title
from becoming effective. Thus, a deed of sale is considered absolute in nature
where there is neither a stipulation in the deed that title to the property sold
is reserved in the seller until the full payment of the price, nor one giving the
vendor the right to unilaterally resolve the contract the moment the buyer
fails to pay within a fixed period.
Article 1478 of the civil code does not require that such a stipulation be expressly made.
Consequently, an implied stipulation to that effect is considered valid and, therefore,
binding and enforceable between the parties. It should be noted that under the law and
jurisprudence, a contract which contains this kind of stipulation is considered a contract
to sell.
G.R. No. L-9871, 31 January 1958
Atkins, Kroll & Co. vs. Cua Hian Tek
Held: The argument, manifestly assumes that only a unilateral promise arose when the
offeree accepted. Such assumption is a mistake, because a bilateral contract to sell and to
buy was created upon acceptance.
So much so that Cua Hian Tek could be sued, he had backed out after accepting, by
7
Page refusing to get the sardines and/or to pay for their price. Indeed, the word "option" is
found neither in the offer nor in the acceptance. On the contrary, Cua Hian Tek accepted
"the firm offer for the sale" and adds, "the undersigned buyer has immediately filed an
application for import license . . ."
It can be taken for granted, as contended by the defendants, that the option contract
was not valid for lack of consideration. But it was, at least, an offer to sell, which was
accepted by letter, and of this acceptance, the offerer had knowledge before said offer
was withdrawn. The concurrence of both acts—the offer and the acceptance—could at
all events have generated a contract; it was therefore a contract of sale.
SANCHEZ V RIGOS: NOTE: The significance of this ruling is that it shows that the only
importance of a consideration for an option is that the option cannot be withdrawn by
the grantor during the stipulated period

Sanchez vs. Rigos
Facts: Mrs. Rigos offered to sell her land to Sanchez for a certain price. Rigos gave Sanchez 2
years within which to decide. (Note: The optionee or promisee or offeree is not bound to purchase
but he has the option to buy or purchase). In this case, Sanchez has the option. Before the lapse of
2 years, Sanchez told Rigos that he is buying and offered the price agreed upon but Rigos refused
claiming that she was not bound by the written option agreement because no option money
(consideration) was given by Sanchez. According to Rigos, the option contract is void.
Held: Since Sanchez accepted the offer and decided to buy within the period before the offer was
withdrawn, a perfected COS was created even without option money. In this case, there was no
option contract because it was merely an option agreement. Therefore, there was merely an offer
on the part of Rigos and once the offer was accepted before it was withdrawn, regardless of
whether option money was given and in this case no option money was given, a perfected COS
was created.
G.R. No. 109125, 2 December 1994
Ang Yu Ascuncion vs CA
RULING: An accepted unilateral promise which specifies the thing to be sold and the
price to be paid, when coupled with a valuable consideration distinct and separate from
the price, is what may properly be termed a perfected contract of option. This contract
is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of
the Civil Code, viz:
An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.
Observe, however, that the option is not the contract of sale itself. The optionee has the
right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is
accepted before a breach of the option, a bilateral promise to sell and to buy ensues and
both parties are then reciprocally bound to comply with their respective undertakings.
8
Page
A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is
merely an offer. Public advertisements or solicitations and the like are ordinarily
construed as mere invitations to make offers or only as proposals. These relations, until a
contract is perfected, are not considered binding commitments. Thus, at any time prior to
the perfection of the contract, either negotiating party may stop the negotiation. The
offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its
manifestation, such as by its mailing and not necessarily when the offeree learns of the
withdrawal.
Where a period is given to the offeree within which to accept the offer, the following
rules generally govern:
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
(1) If the period is not itself founded upon or supported by a consideration, the
offeror is still free and has the right to withdraw the offer before its acceptance,
or, if an acceptance has been made, before the offeror's coming to know of
such fact, by communicating that withdrawal to the offeree. The right to
withdraw, however, must not be exercised whimsically or arbitrarily; otherwise,
it could give rise to a damage claim under Article 19 of the Civil Code which
ordains that "every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is deemed
perfected, and it would be a breach of that contract to withdraw the offer
during the agreed period. The option, however, is an independent contract by
itself, and it is to be distinguished from the projected main agreement (subject
matter of the option) which is obviously yet to be concluded. If, in fact, the
optioner-offeror withdraws the offer before its acceptance (exercise of the
option) by the optionee-offeree, the latter may not sue for specific performance
on the proposed contract ("object" of the option) since it has failed to reach its
own stage of perfection. The optioner-offeror, however, renders himself liable
for damages for breach of the option. In these cases, care should be taken of
the real nature of the consideration given, for if, in fact, it has been intended to
be part of the consideration for the main contract with a right of withdrawal on
the part of the optionee, the main contract could be deemed perfected; a
similar instance would be an "earnest money" in a contract of sale that can
evidence its perfection (Art. 1482, Civil Code).
G.R. No. 126454, 26 November 2004
Bible Baptist Church vs. CA
An option contract, to be valid and binding, needs to be supported by a separate
consideration. The consideration need not be monetary but could consist of other
things or undertakings. However, if the consideration is not monetary, these must be
things or undertakings of value, in view of the onerous nature of the contract of option.
Furthermore, when a consideration for an option contract is not monetary, said
consideration must be clearly specified as such in the option contract or clause.
-------------------------------------------
B. Mutual Promise to Buy and Sell (Art. 1479)

An accepted unilateral promise to buy and sell a determinate thing for a price certain is
promising upon the promisor if the promise is supported by a consideration distinct from
the price. “Option Money”
C. Status of Advertisement (Art. 1325-26)
 Unless it appears otherwise, business advertisements of things for sale
are not definite offers, but mere invitations to make an offer.
 Advertisements for bidders are simply invitations to make proposals, and
the advertiser is not bound to accept the highest or lowest bidder, unless
the contrary appears.
D. Acceptance by Letter or Telegram (Art. 1319)
 Acceptance made by letter or telegram does not bind the offerer except
from the time it came to his knowledge. The contract, in such a case, is
presumed to have been entered into in the place where the offer was
made.
E. Perfection of Sale by Auction (Art. 1476)
 Where goods are put up for sale by auction in lots, each lot is the subject of
a separate contract of sale.
 A sale by auction is perfected when the auctioneer announces its
perfection by the fall of the hammer, or in other customary manner. Until
such announcement is made, any bidder may retract his bid; and the
auctioneer may withdraw the goods from the sale unless the auction has
been announced to be without reserve.
Q: Can the auctioneer withdraw the goods before the fall of the hammer?
A: As a rule, yes because the sale has not been perfected at the moment unless the
bidding or auction has been announced to be without reserve.
 A right to bid may be reserved expressly by or on behalf of the seller,
unless otherwise provided by law or by stipulation.
- If auction is announced to be “without reserve,” goods cannot be
withdrawn from the sale after the bid is made.
 Where notice has not been given that a sale by auction is subject to a right
to bid on behalf of the seller, it shall not be lawful for the seller to bid
himself or to employ or induce any person to bid at such sale on his behalf
or for the auctioneer, to employ or induce any person to bid at such sale
on behalf of the seller or knowingly to take any bid from the seller or any
person employed by him. Any sale contravening this rule may be treated as
fraudulent by the buyer.
- By taking part in the auction and offering bidding, the buyer voluntarily submitted to the
terms and conditions of the auction sale announced in the notice.
- Puffing/by-bidding – means employed by owner to increase the price of the bids; illegal.
F. Earnest Money (Art. 1482)
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
 When given in a contract of sale, it shall be considered as part of the price
and as proof of the perfection of the contract.
-------------------------------------------
Jurisprudence:
G.R. No. 135929, 20 April 2001
Limson vs. CA
Facts: Petitioner Lourdes Ong Limson alleged that in July 1978 respondent spouses
Lorenzo de Vera and Asuncion Santos-de Vera, through their agent Marcosa Sanchez,
offered to sell to petitioner a parcel of land situated in Barrio San Dionisio, Parañaque,
Metro Manila; that respondent spouses informed her that they were the owners of the
subject property; that on 31 July 1978 she agreed to buy the property at the price of
P34.00 per square meter and gave the sum of P20,000.00 to respondent spouses as
"earnest money;" that respondent spouses signed a receipt therefor and gave her a 10-
day option period to purchase the property; that respondent Lorenzo de Vera then
informed her that the subject property was mortgaged to Emilio Ramos and Isidro Ramos;
that respondent Lorenzo de Vera asked her to pay the balance of the purchase price to
enable him and his wife to settle their obligation with the Ramoses.
Petitioner also averred that she agreed to meet respondent spouses and the Ramoses on
5 August 1978 at the Office of the Registry of deeds of Makati, Metro Manila, to
consummate the transaction but due to the failure of respondent Asuncion Santos-de
Vera and the Ramoses to appear, no transaction was formalized. In a second meeting
scheduled on 11 August 1978 she claimed that she was willing and ready to pay the
balance of the purchase price but the transaction again did not materialize as respondent
spouses failed to pay the back taxes of subject property. Subsequently, on 23 August 1978
petitioner allegedly gave respondent Lorenzo de Vera three (3) checks in the total amount
of P36, 170.00 for the settlement of the back taxes of the property and for the payment
of the quitclaims of the three (3) tenants of subject land. The amount was purportedly
considered part of purchase price and respondent Lorenzo de Vera signed the receipts
therefore.
9
Petitioner alleged that on 5 September 1978 she was surprised to learn from the agent of
respondent spouses that the property was the subject of a negotiation for the sale to
Page
respondent Sunvar Realty Development Corporation (SUNVAR). Respondent spouses
prayed for actual damages for the unjustified filling of the Cross-Claim, moral damages for
the mental anguish and similar injuries they suffered by reason thereof, exemplary
damages "to prevent others from emulation the bad example" of respondents SUNVAR
and Cuenca, plus attorney’s fees. The Regional Trial Court rendered its decision in favor of
petitioner. On appeal, the Court of Appeals completely reversed the decision of the trial
court.
Issue: WON there was an earnest money given.
Held: The Court ruled that the consideration of P20,000.00 paid by petitioner to
respondent spouses was referred to as "earnest money" was not an earnest money but
option money.

A scrutiny of the facts as well as the evidence of the parties overwhelmingly leads to the
conclusion that the agreement between the parties was a contract of option and not a
contract to sell.
"Earnest money" and "option money" are not the same but distinguished thus:
(a) Earnest money is part of the purchase price, while option money is the money given
as a distinct consideration for an option contract;
(b) Earnest money given only where there is already a sale, while option money applies
to a sale not yet perfected; and,
(c) When earnest money is given, the buyer is bound to pay the balance, while when
the would-be buyer gives option money, he is not required to buy, but may even forfeit
it depending on the terms of the option.
There is nothing in the Receipt which indicates that the P20,000.00 was part of the
purchase price.
G.R. No. 137290, 31 July 2000
San Miguel Properties vs. Huang
Facts: Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged
in the purchase and sale of real properties. Part of its inventory are two parcels of land
were offered for sale for P52,140,000.00 in cash. The offer was made to Atty. Helena M.
Dauz who was acting for respondent spouses as undisclosed principals. In a letter dated
March 24, 1994, Atty. Dauz signified her clients’ interest in purchasing the properties for
the amount for which they were offered by petitioner, under the following terms: the
sum of P500,000.00 would be given as earnest money and the balance would be paid in
eight equal monthly installments from May to December, 1994. However, petitioner
refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter proposing the following terms for the
purchase of the properties.
Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In
a letter dated March 24, 1994, Atty. Dauz signified her clients’ interest in purchasing the
properties for the amount for which they were offered by petitioner, under the following
terms: the sum of P500,000.00 would be given as earnest money and the balance would
be paid in eight equal monthly installments from May to December, 1994. However,
petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter proposing the following terms for the
purchase of the properties.
Isidro A. Sobrecarey, petitioner’s vice-president and operations manager for corporate
real estate, indicated his conformity to the offer by affixing his signature to the letter and
accepted the "earnest-deposit" of P1 million. Upon request of respondent spouses,
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Sobrecarey ordered the removal of the "FOR SALE" sign from the properties. On April 25,
1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994
within which to exercise her option to purchase the property, adding that within that
period, "[we] hope to finalize [our] agreement on the matter." Her request was granted.
On July 7, 1994, petitioner, through its president and chief executive officer, Federico
Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the
terms and conditions of the sale despite the extension granted by petitioner, the latter
was returning the amount of P1 million given as "earnest-deposit."
On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the
execution within five days of a deed of sale covering the properties. Respondents
attempted to return the "earnest-deposit" but petitioner refused on the ground that
respondents’ option to purchase had already expired.
On August 16, 1994, respondent spouses filed a complaint for specific performance
against petitioner before the RTC of Pasig City.
Petitioner filed a motion to dismiss the complaint alleging that (1) the alleged "exclusive
option" of respondent spouses lacked a consideration separate and distinct from the
purchase price and was thus unenforceable and (2) the complaint did not allege a cause
of action because there was no "meeting of the minds" between the parties and,
therefore, no perfected contract of sale.
The trial court granted petitioner’s motion and dismissed the action. Respondents filed a
motion for reconsideration, but it was denied by the trial court. They then appealed to
the Court of Appeals which, on April 8, 1997, rendered a decision reversing the judgment
of the trial court.
Held: In the present case, the P1 million "earnest-deposit" could not have been given as
earnest money as contemplated in Art. 1482 because, at the time when petitioner
accepted the terms of respondents’ offer of March 29, 1994, their contract had not yet
been perfected. This is evident from the following conditions attached by respondents to
their letter, to wit:
10 (1) that they be given the exclusive option to purchase the property within 30
days from acceptance of the offer;
(2) that during the option period, the parties would negotiate the terms and
Page
conditions of the purchase; and
(3) petitioner would secure the necessary approvals while respondents would
handle the documentation.
The first condition for an option period of 30 days sufficiently shows that a sale was never
perfected. As petitioner correctly points out, acceptance of this condition did not give rise
to a perfected sale but merely to an option or an accepted unilateral promise on the part
of respondents to buy the subject properties within 30 days from the date of acceptance
of the offer. Such option giving respondents the exclusive right to buy the properties
within the period agreed upon is separate and distinct from the contract of sale which the
parties may enter. All that respondents had was just the option to buy the properties
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
which privilege was not, however, exercised by them because there was a failure to agree
on the terms of payment. No contract of sale may thus be enforced by respondents.
Furthermore, even the option secured by respondents from petitioner was fatally
defective.

Under the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a
determinate thing for a price certain is binding upon the promisor only if the promise is
supported by a distinct consideration. Consideration in an option contract may be
anything of value, unlike in sale where it must be the price certain in money or its
equivalent. There is no showing here of any consideration for the option. Lacking any
proof of such consideration, the option is unenforceable.

It is not the giving of earnest money, but the proof of the concurrence of all the
essential elements of the contract of sale which establishes the existence of a perfected
sale.
-------------------------------------------

G. Form of Sales (Art. 1403 [2, a,d,e], 1483, 1581, 1874)

 The following contracts are unenforceable, unless they are ratified:
(2) Those that do not comply with the Statute of Frauds as set forth in
this number. In the following cases an agreement hereafter made
shall be unenforceable by action, unless the same, or some note or
memorandum, thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement
cannot be received without the writing, or a secondary evidence of its
contents:
(a) An agreement that by its terms is not to be performed
within a year from the making thereof;
(d) An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos, unless the buyer
accept and receive part of such goods and chattels, or the evidences,
or some of them, of such things in action or pay at the time some part
of the purchase money; but when a sale is made by auction and entry 11
is made by the auctioneer in his sales book, at the time of the sale, of
the amount and kind of property sold, terms of sale, price, names of
Page

the purchasers and person on whose account the sale is made, it is a

sufficient memorandum;
e) An agreement of the leasing for a longer period than one
year, or for the sale of real property or of an interest therein.
 Subject to the provisions of the Statute of Frauds and of any other
applicable statute, a contract of sale may be made in writing, or by word
of mouth, or partly in writing and partly by word of mouth, or may be
inferred from the conduct of the parties.
 The form of sale of large cattle shall be governed by special laws.
 When a sale of a piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be
void.

V. PARTIES TO A CONTRACT OF SALE
The following cannot give consent to a contract:
(1) Unemancipated minors; (Exception: Necessaries)
(2) Insane or demented persons, and deaf-mutes who do not know
how to write.
1. All persons who are authorized to obligate themselves, may enter into a
contract of sale, saving modifications contained in the following articles.
Kind of Incapacity
1) Absolute Incapacity – the party cannot give consent to any and all contracts. (Ex. Civil
interdiction, (1) & (2) Above)
2) Relative Incapacity – the party is prohibited from entering sometimes with specific persons
and sometimes over specific things. (Ex. Married person, Special Incapacity (See Part V Sub
C)
Kind of Capacity
1. Juridical Capacity – it is the fitness to be the subject of legal relations. If a party to a sale has no
juridical capacity, the contract is void. Note that all natural living persons have juridical capacity.
Even if he is a 1 day old baby, he has juridical capacity. The baby can be the subject of donation.
Even if he is conceived, he has provisional personality.
Example: One example of a party to a sale without juridical capacity would be a corporation not
registered with the SEC. The contract entered by this corporation is a void contract because one of
the parties has no juridical capacity to enter into that contract.
2. Capacity to Act – it is the power to do acts with legal effects. If the incapacity only pertains to
capacity to act, the contract would normally be voidable. Without capacity to act or there are
restrictions with one’s capacity to act such as minority, insanity, deaf mute and does not know how
to write and civil interdiction.
Note: Under R.A. 6809 (December 1989) there is no more creature known as “unemancipated
minor”. Before 1989, the age of majority was 21.
A. Sale by a Minor (Art. 1489)
2. Where necessaries are those sold and delivered to a minor or other person
without capacity to act, he must pay a reasonable price therefore.
Necessaries - are those indispensable for sustenance, clothing, dwelling, education, and medical
treatment.
Q: What if one of the parties in a COS is a minor and the minor actively misrepresented as
to his age?
A: The SC said that the minor will be bound to such contract under the principle of estoppel.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
B. Sale between Spouses (Art. 1490)
3. General Rule: The husband and the wife cannot sell property to each other
4. Exception:
1) When a separation of property was agreed upon in the marriage
settlements; or
2) When there has been a judicial separation or property under Article
191.
 Every donation or grant of gratuitous advantage, direct or indirect,
between the spouses during the marriage shall be void, except moderate
gifts which the spouses may give each other on the occasion of any family
rejoicing. The prohibition shall also apply to persons living together as
husband and wife without a valid marriage.
CALIMLIM-CANULLAS V. FORTUN: …if transfers or conveyances between spouses were
allowed during marriage, that would destroy the system of conjugal partnership. It was also
designed to prevent the exercise of undue influence by one spouse over the other, as well as to
protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to
a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those
who incurred guilt would turn out to be better than those in legal union."
Contract of sale of married person to third parties
 The administration and enjoyment of the community property shall belong to
both spouses jointly.
 In case of disagreement, the husband's decision shall prevail, subject to recourse
to the court by the wife for proper remedy, which must be availed of within five
years from the date of the contract implementing such decision.
 In the event that one spouse is incapacitated or otherwise unable to participate in
the administration of the common properties, the other spouse may assume sole
powers of administration. These powers do not include disposition or
encumbrance without authority of the court or the written consent of the other
spouse. In the absence of such authority or consent, the disposition or
12 encumbrance shall be void. However, the transaction shall be construed as a
continuing offer on the part of the consenting spouse and the third person, and
may be perfected as a binding contract upon the acceptance by the other spouse
Page
or authorization by the court before the offer is withdrawn by either or both
offerors.
-------------------------------------------
Jurisprudence:
G.R. No. L-28771, 31 March 1971
Matabuena vs. Cervantes
Facts: Felix Matabuena cohabitated with respondent.  During this period,
Felix Matabuena donated to respondent a parcel of land. Later the two were
married. After the death of Felix Matabuena, his sister, Petitioner, sought the nullification
of the donation citing Art. 133 of the Civil Code “Every donation between the

spouses during the marriage shall be void.” The trial court ruled that this case was not
covered by the prohibition because the donation was made at the time the deceased and
Respondent were not yet married and were simply cohabitating.
Issue: WON the prohibition applies to donations between live-in partners.
Held: Yes. It is a fundamental principle in statutory construction that what is within the
spirit of the law is as much a part of the law as what is written. Since the reason for  the  administration, an executor may buy the hereditary rights of an heir to the estate under
ban  on  donations  between  spouses  during  the  marriage  is  to  prevent  the possibility
of undue influence and improper pressure being exerted by one spouse on the other,
there is no reason why this prohibition shall not apply also to common-law  relationships.
The  court,  however,  said  that  the  lack  of  the  donation  made  by  the deceased to
Respondent  does  not  necessarily mean that  the Petitioner  will  have exclusive rights to
the disputed property because the relationship between Felix and Respondent were
legitimated by marriage.
. of lien…(Art 133 par 5) (Baviera)
-------------------------------------------
C. Special Incapacity (Art. 1491)
5. The following persons cannot acquire by purchase, even at a public or
judicial auction, either in person or through the mediation of another:
1. A guardian cannot buy the property of the ward. The guardian is
not actually prohibited from entering into any and all contracts.
It is just that he cannot be the buyer of a property of his ward.
2. An agent cannot buy without the consent of the principal a
property which he was supposed to sell or administer.
3. The executors and administrators of the estate cannot buy a
property which is part of the estate.
4. Public officers, judges, their staff, clerk of court, stenographers
and lawyers are prohibited from buying those properties which
are the subject of litigation during the pendency of the case
Q: What is the status of the contracts under 1491?
A: Prof. Tolentino – voidable
13
Justice Vitug & Prof. Baviera – void
Prof. Pineda & Prof. de Leon – the first 3 are voidable and the last 3 are void.
Page
The better answer is void because these persons are prohibited from entering into these contracts.
Under Article 1409, if the contract is prohibited, it is void.
Generally: Aliens are prohibited from acquiring by purchase private lands – Take note “acquiring”
which means buying not selling. They can sell.
Exceptions / when aliens can buy:
a. Former natural born Filipino citizen. Under the Constitution they are allowed to buy small
land which they can use for residential purpose.
b. Another way of acquiring is by succession but this is not a sale
ADDITIONAL NOTES:
1) It is immaterial that no damage is suffered by the owner. The contract is void as the law
seeks to prevent said persons from being tempted to take advantage of their position.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
They occupy a position of trust and confidence in relation to the property under their
administration or jurisdiction.
2) Agents cannot buy the property of their principal without the consent of the latter.
BROKERS, however, do not come within the prohibition, as their authority consists
merely in looking for a buyer or seller, and to bring the latter and his principal together to
consummate the transaction. Of course, after the agency is terminated, the agent can
buy the property of the principal, which was formerly under his administration.
3) Although executors and administrators cannot buy the property under their
his administration, because the buyer, in such case, cannot get the share of the heir in
the estate until after the administration is ended.
4) With regard to the lawyers, the prohibition does not apply to other properties of the
client, nor to assignments of the property formerly in litigation when such assignment will
take effect only after final judgment (compensation of lawyers payable on a contingent
basis, unless unconscionable).
5) Examples of other persons especially disqualified by law are: (1) aliens purchasing
private agricultural lands (Art XII, Secs 3 & 7, Consti); (2) an unpaid seller having a right
-------------------------------------------
G.R. No. 158907, 12 February 2007
Olaguer vs. Purugganan
Facts: Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of
stock of Businessday Corporation (Businessday) with a total par value of P600,000.00. At
the time he was employed with the corporation as Executive Vice-President of
Businessday, and President of Businessday Information Systems and Services and of
Businessday Marketing Corporation, petitioner, together with respondent Raul Locsin
(Locsin) and Enrique Joaquin (Joaquin), was active in the political opposition against the
Marcos dictatorship. Anticipating the possibility that petitioner would be arrested and
detained by the Marcos military, Locsin, Joaquin, and Hector Holifeña had an unwritten
agreement that, in the event that petitioner was arrested, they would support the
petitioner’s family by the continued payment of his salary. Petitioner also executed a
Special Power of Attorney (SPA), on 26 May 1979, appointing as his attorneys-in-fact
Locsin, Joaquin and Hofileña for the purpose of selling or transferring petitioner’s shares
of stock with Businessday. During the trial, petitioner testified that he agreed to execute
the SPA in order to cancel his shares of stock, even before they are sold, for the purpose
of concealing that he was a stockholder of Businessday, in the event of a military
crackdown against the opposition. The parties acknowledged the SPA before respondent
Emilio Purugganan, Jr., who was then the Corporate Secretary of Businessday, and at the
same time, a notary public for Quezon City.
On 24 December 1979, petitioner was arrested by the Marcos military by virtue of an
Arrest, Search and Seizure Order and detained for allegedly committing arson. During the
petitioner’s detention, respondent Locsin ordered fellow respondent Purugganan to

cancel the petitioner’s shares in the books of the corporation and to transfer them to
respondent Locsin’s name.
Petitioner also agreed to stipulate that from 1980 to 1982, Businessday made regular
deposits, each amounting to P10,000.00, to the Metropolitan Bank and Trust Company
accounts of Manuel and Genaro Pantig, petitioner’s in-laws. The deposits were made on
every 15th and 30th of the month. Petitioner alleged that these funds consisted of his
monthly salary, which Businessday agreed to continue paying after his arrest for the
financial support of his family. After receiving a total of P600,000.00, the payments
stopped. Thereafter, respondent Locsin and Fernando went to ask petitioner to endorse
and deliver the rest of his stock certificates to respondent Locsin, but petitioner refused.
On 16 January 1986, petitioner was finally released from detention. He then discovered
that he was no longer registered as stockholder of Businessday in its corporate books. He
also learned that Purugganan, as the Corporate Secretary of Businessday, had already
recorded the transfer of shares in favor of respondent Locsin, while petitioner was
detained. When petitioner demanded that respondents restore to him full ownership of
his shares of stock, they refused to do so.
Petitioner filed a Complaint before the trial court against respondents Purugganan and
Locsin to declare as illegal the sale of the shares of stock, to restore to the petitioner full
ownership of the shares, and payment of damages. The trial court dismissed the
Complaint filed by the petitioner. It ruled that the sale of shares between petitioner and
respondent Locsin was valid. On appeal, the Court of Appeals affirmed the Decision of the
trial court that there was a perfected contract of sale.
Issue: WON there was a perfected sale.
Held: It is, indeed, a familiar and universally recognized doctrine that a person who
undertakes to act as agent for another cannot be permitted to deal in the agency matter
on his own account and for his own benefit without the consent of his principal, freely
given, with full knowledge of every detail known to the agent which might affect the
transaction.
The prohibition against agents purchasing property in their hands for sale or management
is, however, clearly, not absolute. It does not apply where the principal consents to the
sale of the property in the hands of the agent or administrator.
A.M. Nos. 1302, 1391 and 1543, 26 April 1991
Valencia vs. Cabinting
Facts: In 1933, petitioner Paulino Valencia and his wife Romana allegedly bought a parcel
of land, where they built their residential house from a certain Serapia Raymundo, an heir
of Pedro Raymundo, the original owner of the parcel of land. However, they failed to
register the sale or secure a transfer certificate of title in their names. Then, a conference
was held in the house of Atty. Jovellanos to settle the dispute between Serapia and the
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Sps. Valencia. As a result, Serapia was willing to relinquish her ownership if the Valencias
could show documents evidencing ownership. Paulino presented a deed of sale written in
Ilocano. Serapia claimed that the deed covered a different property. Thus, the parties
were not able to settle their differences. Assisted by Atty. Cabanting, Serapia filed a
complaint against Paulino for the recovery of possession with damages. The Valencias, on
the other hand, engaged the services of Atty. Antiniw, who advised them to present a
notarized deed of sale instead of the document in Ilocano. For the amount of P200 paid
by Paulino to Atty. Antiniw, the latter paid a person who would forge the signature of the
alleged vendor. The Pangasinan CFI favored Serapia. While the petition was of appeal,
Serapia sold 40 sq. m. to Atty. Jovellanos and the remaining was also sold to her counsel,
Atty. Cabanting.
Issue: WON Atty. Cabanting purchased the subject property in violation of Art. 1491 of
the Civil Code.
Held: The Court ruled in the affirmative. Art. 1491, NCC, prohibiting the sale to counsel
concerned, applies only while the litigation is pending. The thing is said to be in litigation
not only if it there is some contest or litigation over it in court, but also from the moment
that it becomes to the judicial action of the judge.
In the case at bar, while it is true that Atty. Cabanting purchased the lot after finality of
judgment, there was still a certiorari proceeding.
In certiorari proceedings, the appellate court may either grant or dismiss the petition.
Thus, it is not safe to conclude, for purposes under Art. 1491, NCC, that litigation has
terminated when the judgment of the trial court become final while certiorari connected
therewith is still in progress. Thus, the purchase of the property by Atty. Cabanting in this
case constitutes malpractice in violation of Art. 1491 of the Civil Code and the Canons of
Professional Ethics.
A.C. No. 6210, 9 December 2004
Ramos vs. Ngaseo
14 Facts: Sometime in 1998, complainant Federico Ramos went to respondent Atty. Patricio
Ngaseo's Makati office to engage his services as counsel in a case involving a piece of land
Page
in San Carlos, Pangasinan. On September 16, 1999, complainant went to the respondent's
office to inquire about the status of the case. Respondent informed him that the decision
was adverse to them because a congressman exerted pressure upon the trial judge.
Respondent however assured him that they could still appeal the adverse judgment and
asked for the additional amount of P3,850.00 and another P2,000.00 on September 26,
2000 as allowance for research made. Although an appeal was filed, complainant
however charges the respondent of purposely failing to submit a copy of the summons
and copy of the assailed decision. Subsequently, complainant learned that the respondent
filed the notice of appeal 3 days after the lapse of the reglementary period.
On January 29, 2003, complainant received a demand-letter from the respondent asking
for the delivery of the 1,000 sq. m. piece of land which he allegedly promised as payment
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
for respondent's appearance fee. In the same letter, respondent also threatened to file a
case in court if the complainant would not confer with him and settle the matter within VI. OBLIGATIONS OF THE VENDOR (Art. 1495)
30 days.
The vendor is bound to:
Complainant filed a complaint before the IBP charging his former counsel, respondent - Transfer ownership; and
Atty. Ngaseo, of violation of the Code of Professional Responsibility for demanding the - Deliver; as well as
delivery of 1,000 sq. m. parcel of land which was the subject of litigation. - Warrant the thing which is the object of the sale.
- Obligation to take care of the thing sold with the diligence of a good
father of a family prior to delivery.
In a report dated July 18, 2003, IBP Commissioner Rebecca Villanueva-Maala found the
- From the time of the perfection up to the time of delivery then there
respondent guilty of grave misconduct and conduct unbecoming of a lawyer in violation would be obligation to pay for the expenses for the execution and
of the Code of Professional Responsibility and recommended that he be suspended from registration of the sale and obligation to pay the capital gains tax would
the pr;actice of law for 1 year. be on the seller as a rule.
- Obligation to deliver the fruits which is related to the obligation to deliver
Respondent argues that he did not violate Article 1491 of the Civil Code because when he the thing
demanded the delivery of the 1,000 sq. m. of land which was offered and promised to
him in lieu of the appearance fees, the case has been terminated, when the appellate
court ordered the return of the 2-hectare parcel of land to the family of the complainant. 1) To preserve the object of sale (Art. 1163)
- Every person obliged to give something is also obliged to take care of
Issue: WON the respondent violated the prohibition under Article 1491 (5) of the Civil it with the proper diligence of a good father of a family, unless the law
Code. or the stipulation of the parties requires another standard of care.

Held: The Court ruled that even assuming arguendo that such demand for delivery is
unethical, respondent's act does not fall within the purview of Article 1491.
Under Article 1491(5) of the Civil Code, lawyers are prohibited from acquiring either by
purchase or assignment the property or rights involved which are the object of the
litigation in which they intervene by virtue of their profession. The prohibition on
purchase is all embracing to include not only sales to private individuals but also public or
judicial sales. The rationale advanced for the prohibition is that public policy disallows the
transactions in view of the fiduciary relationship involved, i.e., the relation of trust and
confidence and the peculiar control exercised by these persons. It is founded on public
policy because, by virtue of his office, an attorney may easily take advantage of the
credulity and ignorance of his client and unduly enrich himself at the expense of his client.
However, the said prohibition applies only if the sale or assignment of the property takes
15
place during the pendency of the litigation involving the client's property. Consequently,
Page
NOTE: The thing sold should be determinate because if generic (1460, 2 nd paragraph) then there is
nothing to be taken care of. It will become determinate only upon delivery.
Exceptions: There are sales transactions wherein the vendor would not have this obligation:
a. Constructive delivery - brevi manu – There would be no obligation on the part of
the seller to take care of the thing from the time of perfection because at the time
of perfection, the buyer was already in possession of the thing. Maybe he
borrowed the thing. Example: he borrowed the car and he decided to buy it – the
thing was already in his possession.
OBLIGATION TO PAY EXPENSES / TAXES
These obligations may be the subject of stipulation. By agreement, it would be the buyer
who will pay xxx Normally, dito hindi natutuloy ang sale dahil hindi magkasundo kung sino
magbabayad ng tax.
2) Transfer of Ownership and delivery of the object

where the property is acquired after the termination of the case, no violation of
paragraph 5, Article 1491 of the Civil Code attaches. To transfer ownership; who can transfer ownership?
- Only those who have the right to sell (lis dispodenti).
In the instant case, there was no actual acquisition of the property in litigation since the - Owner
respondent only made a written demand for its delivery which the complainant refused - Agent – because of the authority given.
to comply. Mere demand for delivery of the litigated property does not cause the transfer - Notary public
because of the authority of
of ownership, hence, not a prohibited transaction within the contemplation of Article in pledge
- Guardian the law to sell; statutory
1491.
- Liquidators power to sell.
-------------------------------------------
- Receivers
- Sheriff – because of the authority of the court.
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Q: May a person sell something which does not belong to him? Would the sale be valid? - Estoppel by deed (technical estoppel) – when the seller who was not the owner at
Would the buyer acquire ownership over the thing sold, if seller does not own the thing? the time of the sale and later acquires title thereto, ownership passes by operation
A: Yes. Ownership over the thing sold is not an essential requisite for the sale to be valid. But if the
of law (Art. 1434).
seller does not own the thing, he may have a problem on his obligation to transfer ownership. The
problem would be whether or not the buyer would acquire ownership over the thing sold if the
person who sold the thing is not the owner. Q: A and B co-owners of land sold (sale is verbal) to X their land. X subsequently
sold the land to Y. Would Y be considered to have acquired ownership over the
Q: Who would have the right to sell and therefore they can transfer ownership by way of land?
sale?
A: First, is the owner. Even if he is not the owner, he may have the right to sell because: A: Under 1434 which is considered as “Estoppel by Deed” (technical estoppel) – when
(1) He was given the authority by the owner. Example: Agent the seller who was not the owner at the time of the sale, acquires ownership, automatically,
(2) He may be the owner but he may have the authority of the law to sell, known as
ownership passes to the buyer by operation of law. However, Article 1434 requires delivery
“Statutory Power to Sell” (Article 1505). Examples: Notary public in pledge,
liquidators, guardians and receivers. to the buyer. And under the facts, 1434 would not apply because:
(3) Those who have the authority of the court. Example: Sheriff. Note: it is as if they a) There was no showing there was payment
have the authority of law because not even the judge can validly sell something if it b) No showing that there was delivery of the land to X.
is not consistent with the law. It cannot be said that by operation of law, Y likewise acquired ownership by way of
estoppel by deed.
Q: May a buyer acquire ownership over the thing sold if the seller has no right to sell?
A: The answer by way of exception is yes. But the general rule here is under 1505 – the buyer - Estoppel by record – in case of any testimony given in court.
acquires no better title than what the seller had. If the seller is neither the owner nor does he have
the authority to sell, the buyer acquires no better title than what the seller had. If his right is only as Jurisprudence: Sale by nephew of the owner of the land. Since the nephew could not
a lessee that is the most that can be transferred to the buyer. If he has no title then no title can be deliver the land, the buyer sued the nephew for estafa. For the accused to be acquitted,
transferred to the buyer. he asked his uncle to testify that he actually had the authority to sell. When the uncle
testified in court, the nephew is acquitted. After acquittal, the buyer demanded from the
Exceptions: (When the buyer can acquire a better title than what the seller had. Even if the seller uncle the delivery of the land. The uncle refused, claiming that “sa totoo land, I did not
does not have the right to sell, the buyer may acquire ownership over the thing sold because the authorized my nephew”.
law so provides and not because the seller was able to transfer ownership to the buyer.)
1. By Estoppel Q: Case was filed against the uncle, would that action prosper?
2. Estoppel by Deed
3. Estoppel by Record
A: SC said yes because he cannot be allowed now to claim that his nephew was not
4. Sale by an Apparent Owner
5. Negotiable Document of Title authorize to sell after he testified in court that he gave such authority.
6. Purchases from a Merchant’s Store xxx
6. This is estoppel by record which is considered a technical estoppel.
a. General rule (Art. 1505-1506, 1547)
- When the seller is neither the owner nor does he have the authority to sell, the
buyer acquires no better title than what the seller had. 16 - Sale by an apparent owner – a person who disposed the thing as if it was owned by
him.
b. Exceptions (where a third person may acquire ownership on the thing he bought  Factor’s act – an old name for agent; a third person may acquire ownership
Page

even though the seller is not the owner nor does he have the authority to sell) because he may rely on the power of attorney as written.
- The buyer buys them in good faith for value and without notice of the seller’s  Recording laws – may be a root of a valid title; Cattle Registration Decree, Land
defect of title (Art. 1505). Registration, Property Registration Decree (PD 529).
 By other provision of law enabling the apparent owner of the goods to dispose
- By Equitable Estoppel (estoppels in pais) – a person is precluded from denying of them as if he was really the owner.
that a third person has authority to sell because of the owner’s acts (Art. 1433).1

- Negotiable Document of Title If goods are covered by a negotiable document of title

1
SIY CONG BIEN V. HSBC: Since plaintiff had voluntarily clothed the person who negotiated the quedans with all the and it was thereafter negotiated. If the buyer bought it in good faith and for value,
attributes of ownership and upon which the bank relied, it is estopped to deny that the bank had a valid title to the quedans; he will rotected under the law. He will acquire ownership even if the seller did not
JALBUENZA V. LIZARRAGA: Bigelow on Estoppel says: ". . . it is now a well established principle that where the true
owner of property, for however short a time, holds out another, or, with knowledge of his own right, allows another to have the right to sell.
appear, as the owner of or as having full power of disposition over the property, the same being in the latter's actual
possession, and innocent third parties are thus led into dealing with some [such] apparent owner, they will be protected." (as
cited in Hernaez vs. Hernaez)

Example: The seller may have acquired title by violence. Binugbog nya yung owner ng
goods. Pero kung negotiable document of title yan and properly negotiated, lalo na
kung bearer document of title, then the buyer may acquire ownership even if the seller
has no right to sell.
- Purchases from a merchant’s store, markets, and fairs -There is no right to
recover as long as the buyer bought it in good faith from a merchant’s store (Art
1505)2
Purpose of the exception:
1) To protect innocent purchasers who buy at merchant stores,
market or fair
2) To facilitate commercial sales in movables
3) To give stability to business transactions
Q: F lost her diamond ring in a hold-up. Later on, this ring was an object of a
public sale of one pawnshop. Can F recover the ring from the buyer in that public
sale?
A: Yes, Article 559 provides that even if the buyer is in good faith so long as the true
owner is willing to reimburse the buyer of the price paid in that sale.
Note: Again in 1505, there is no right to recover as long as the buyer bought it in good
faith from a merchant’s store, there can be no recovery as a matter of right.
ANLABO NU? Sabi nga ni Atty Zarah, sinadaya na malabo mga provisions para may
trabaho ang mga lawyers. So Reconcile 559 and 1505. Sabi ng 1505, Valid sale kapag
nabili sa public market and in good faith si buyer. Pero may right din na binibigay si 559
sa true owner (naunlawfully nadprive sa kanyang movable property) which is to recover
yun. Pero since in nasa possession na yung ng buyer in good faith, marerecover lang
yun ni true owner by reimbursing si buyer. So parang bibilhin ulit yun ni true owner. 3
2 vendor have had such control over the thing sold that at the
SUN BROTHERS V. VELASCO: The policy of the law has always been that, where the rights
17
and interests of a vendor come into clash with that of an innocent buyer for value, the latter must
be protected. The rule appears to be a wise and necessary rule not only to facilitate commercial
sales on movables but to give stability to business transactions.
Page
MASICLAT V. CENTENO: The transaction between Ramon Masiclat and his unknown seller took
place on Miranda Street and not in the public market and this is . . . conclusive. Hence, Art. 1505
CC, invoked by the petitioners, has no application.
3
DE GARCIA V. CA: Respondent Angelina D. Guevara, having been unlawfully deprived of
the diamond ring in question, was entitled to recover it from petitioner Consuelo S. de Garcia
who was found in possession of the same. The only exception the law allows is when there is
acquisition in good faith of the possessor at a public sale, in which case the owner cannot
obtain its return without reimbursing the price. (Cruz v. Pahati; Aznar v. Yapdiangco);
REBULLIDA V. BUSTAMANTE: It appearing that the ring in question was lost or was stolen
from the place where the lawful owner deposited it, the case squarely falls under Art. 464 of
the Civil Code, which provides that the “one who has lost personal property or who has been
unlawfully deprived of it may recover it from whoever is possessing it.” The mere fact that the
possessor, even in good faith, ad purchased the ring from another person would not bar the
right of the owner to recover it once the identity and the owner’s deprivation are established.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
3) To deliver the object; how ownership is effected?
- Effected by delivery, whether actual of constructive (Art. 1477)
- There can be no transfer of ownership without delivery.
Notes:
(a) There may be a period agreed upon by the parties within which the buyer would have to
decide. Even if he failed to signify his acceptance by the mere lapse of the period, he is
deemed to have accepted (impliedly accepted) hence, ownership passes to him.
(b) Even before the lapse of the period, he may be considered to have accepted if he did an
act wherein he would be considered to have adopted the transaction then ownership
passed to him.
Example: Even if he has 10 days within which to decide but on the 2 nd day, he sold the car
to another. Obviously, he is deemed to have accepted the thing because he did an act
which is inconsistent with the ownership of the seller like he donated or destroyed the
thing.
(c) If there is no period agreed upon, the law says if he did not signify his acceptance he will
be considered to have accepted after the lapse of a reasonable time. Reasonable time will
depend on the circumstances of the sale, purpose of the sale, nature of the thing sold.
Example: Perishable goods.
“Delivered” – when placed in the control and possession of the vendee; conveyance of
ownership without prejudice to the right of vendor to claim payment of the price 4
a) Ways of effecting delivery (Arts. 1494-1501)
- Actual/real (Art. 1497) – the thing is placed in the control and possession of the
buyer.
- Constructive/legal
 Tradition instrumental (by public instrument) – execution thereof is equivalent
to delivery (Art. 1498 (1)).5
- operates as formal/symbolic delivery
- authorizes buyer to use such document as proof of ownership
- Symbolic delivery may produce the effect of tradition if
moment of the sale, its material delivery could have been
made
- GENERAL RULE: he who purchases through a public
instrument should be deemed a “possessor in fact” and this
presumption should give way before proof to the contrary
4
BEAN V. CADWALLER: Actual manual delivery of an article sold is not essential to the
passing of the title thereto (art 1450, Civil Code) unless made so by the terms of the contract
or by an understanding of the parties. The parties to the contract may agree when and on
what conditions the property in the subject of the contract was passed to the prospective
owner
5
MASALLO V. CESAR: As Matea Crispino admits, however, that she did not have
possession of the land when she executed and delivered her deed to plaintiff, the mere
execution and delivery of the deed did not constitute a delivery of possession

- A person must be in ACTUAL POSSESSION to be able to
transfer CONSTRUCTIVE POSSESSION through public
instrument
 Tradition symbolical (by delivery of the keys or certain symbols representing
the thing or where goods are kept) (Art. 1498 (2)).
 Tradition longa manu – there is delivery by mere consent or agreement of the
parties (Art. 1499).
If at the time of the sale, possession to the goods cannot be transferred to the
buyer. There must be a reason why it cannot be transferred at the time of the sale. This
is also known as tradition longa manu.
Example 1: The thing was the subject matter of a lease with a 3 rd person until the
expiration of the lease, the thing cannot be delivered.
Example 2: The thing was the subject matter of commodatum. As a rule, period of
commodatum has to be respected
 Tradition brevi manu – the BUYER was already in possession of the thing sold at
the time of the perfection of the sale so he will continue to be in possession
after the sale; eg. Property subject to lease was bought by the lessee (Art.
1499).
So dati lessee lang sya that is why he was in possession or maybe depositary lang
sya or maybe he was the agent at the time prior to the sale.
 Tradition constitutum possessorium – the SELLER will continue to be in the
possession of the thing after the sale but no longer as an owner but in another
capacity like lessee (Art. 1500).
Dito naman, kabaliktaran ng brevi manu, yung ownership malilipat sa buyer
pero possession magtutuloy pa din kay seller.Level down kung baga.Si A
may house na inioccupy niya, binenta kay B. Si B na may ari. Pero pinalease
ni B kay A, so magtutuloy pa din na doon titira si A, kaso nga lang hindi na as
owner kundi lessee na lang. Haaayyy ang sad. Hahaha.
 Quasi-tradition (Art. 1501) – delivery of rights, credits or incorporeal property,
made by:
o Placing titles of ownership in the hands of the buyer;
 Example: delivery of the certificate of shares of stocks.
o Allowing buyer to make use of the rights.
Example: Sale of shares of stocks → the vendee may not always
have the right to exercise his rights under the shares of stocks.
Concretely, if there is a stockholders’ meeting, the books of the
corporation will be closed for 30 days before the meeting. Thus, if
the sale occurred when the books are already closed, no one will
be recognized except those registered owners. So if you are the
buyer of those stocks, you can only use your right with the consent
of the vendor.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
-------------------------------------------
Jurisprudence:
G.R. No. L-19545, 18 April 1975
Phil. Suburban Development Corp. vs. Auditor General
Facts: On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines
approved in principle the acquisition by the People's Homesite and Housing Corporation
(PHHC) of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for
relocating the. The Board of Directors of the PHHC passed Resolution No. 700 authorizing
the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45/sqm. On
December 29,1960, after an exchange of communications, Petitioner Philippine Suburban
Development Corporation (PSDC), as owner of the unoccupied portion of the Sapang
Palay Estate and the PHHC, entered into a contract embodied in a public instrument
entitled "Deed of Absolute Sale”.
It appears that as early as the first week of June, 1960, prior to the signing of the deed by
the parties, the PHHC acquired possession of the property, with the consent of petitioner,
to enable the said PHHC to proceed immediately with the construction of roads. The
Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of
P30,099.79 from the purchase price to be paid by it to the Philippine Suburban
Development Corporation. Said amount represented the realty tax due on the property
involved for the calendar year 1961.
Petitioner claimed that it ceased to be the owner of the land in question upon the
execution of the Deed of Absolute Sale. It is now claimed in this appeal that the Auditor
General erred in disallowing the refund of the real estate tax because aside from the
presumptive delivery of the property by the execution of the deed of sale , the possession
of the property was actually delivered to the vendee prior to the sale, and, therefore, by
the transmission of ownership to the vendee, petitioner has ceased to be the owner of
the property involved, and, consequently, under no obligation to pay the real property tax
18 for the year 1961.
Page
Issue: WON the vendor (PSDC) placed the vendee (PHHC) in possession and control over
the thing sold even before the date of the sale.
Held: The Court ruled that the vendor (PSDC) placed the vendee (PHHC) in possession and
control over the thing sold even before the date of the sale. Under the civil law, delivery
(tradition) as a mode of transmission of ownership may be actual (real tradition) or
constructive (constructive tradition). When the sale of real property is made in a public
instrument, the execution thereof is equivalent to the delivery of the thing object of the
contract, if from the deed the contrary does not appear or cannot clearly be inferred.
In other words, there is symbolic delivery of the property subject of the sale by the
execution of the public instrument, unless from the express terms of the instrument, or
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
by clear inference therefrom, this was not the intention of the parties. Such would be the - Delivery to carrier; shipping terms -
case, for instance, when a certain date is fixed for the purchaser to take possession of the General rule: Delivery to carrier is delivery to the buyer.
property subject of the conveyance, or where, in case of sale by installments, it is Exception: Contrary intention appears; implied reservation of ownership
under Art. 1503 (1), (2), (3).
stipulated that until the last installment is made, the title to the property should remain
 COD (Collect On Delivery) – the carrier acts for the seller in
with the vendor, or when the vendor reserves the right to use and enjoy the properties collecting the purchase price, which the buyer must pay to obtain
until the gathering of the pending crops, 4 or where the vendor has no control over the possession of the goods.
thing sold at the moment of the sale, and, therefore, its material delivery could not have  FOB (Free On Board) – when goods are delivered at the point of
been made. shipment, delivery to carrier by placing the goods on vessel is
delivery to buyer.
In the case at bar, there is no question that the vendor had actually placed the vendee in  CIF (Cost, Insurance, Freight) –
possession and control over the thing sold, even before the date of the sale. The  When seller pays for services of the carrier, delivery to
condition that petitioner should first register the deed of sale and secure a new title in the carrier is delivery to the buyer.
name of the vendee before the latter shall pay the balance of the purchase price, did not  From the moment the vessel is at the port of to the
preclude the transmission of ownership. In the absence of an express stipulation to the goods, there is already delivery to the buyer.
contrary, the payment of the purchase price of the good is not a condition, precedent to
These terms may be used only in connection with fixing the price and will not be
the transfer of title to the buyer, but title passes by the delivery of the goods. construed as fixing the place of delivery to the buyer

-------------------------------------------
b) Special rules on:
- Sale or return (Art. 1502 (1)) – ownership passes to the buyer on delivery but,
he may revest the ownership in the seller by returning or tendering the goods
within the time fixed in the contract or within a reasonable time.
7. As opposed to a Conditional Sale (where title passes upon full payment or
satisfaction of condition passing of legal title), in sale on return, title passes on
delivery
Q: Ownership passes upon delivery?
A: Yes. However, the buyer is given the right to revest the title back to the seller
normally within a certain period.
Example: Clauses in subscription magazine which says that you can return within 30
days without payment.
- Sale on approval or trial (Art. 1502 (2)) – ownership passes to the buyer when:
Best indication of the intention of parties as to the place of delivery is the manner and
place of payment agreed upon by the parties
 Where price is payable upon proof of shipment, then the buyer agrees to accept
delivery at the point of shipment
 Where the price is payable only upon arrival of the goods at the point of
destination, then that is the place of delivery to the buyer
- Seller not the owner (Art. 1505) – the buyer acquires no better
title than the seller had.
- Seller’s title is voidable (Art. 1506) – 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.
-----------------------------------------
19
JURISPRUDENCE
Edu vs.Gomez, 129 SCRA 601;
Page

- he signifies his approval to the seller or does any other act adopting the
transaction; or Duran vs. IAC, 138 SCRA 489
- if he retains the goods without giving notice of rejection, if a time has
been fixed for such return, at the expiration of such time or of a -----------------------------------
reasonable time. c) When obligation to deliver arises
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
- Sale of specific goods with reserved title/conditional sales (Art. 1503 (1)) – the contract
seller may reserve the right of possession or ownership in the goods until
certain conditions have been fulfilled. Ownership is reserved by the seller -------------------------------------------
notwithstanding delivery. Jurisprudence:
38 Phil. 404, August 1918

Addison vs. Felix
Facts: The defendants-appellees spouses Maciana Felix and Balbino Tioco purchased from
plaintiff-appellant A.A. Addison four parcels of land to which Felix paid, at the time of the
execution of the deed, the sum of P3,000 on account of the purchase price. She likewise
bound herself to the remainder in installments, the first of P,2000 on July 15, 1914, the
second of P5,000 thirty days after the issuance to her of a certificate of title under the
Land Registration Act, and further, within ten years from the date of such title, P10 for
each cocoanut tree in bearing and P5 for each such tree not in bearing that might be
growing on said parcels of land on the date of the issuance of title to her, with the
condition that the total price should not exceed P85,000. It was further stipulated that
Felix was to deliver to the Addison 25% of the value of the products that she might obtain
from the four parcels "from the moment she takes possession of them until the Torrens
certificate of title be issued in her favor," and that within 1 year from the date of the
certificate of title in her favor, Marciana Felix may rescind the contract of purchase and
sale.
In January 1915, Addison , filed suit in the CFI of Manila to compel Felix to pay the first
installment of P2,000, demandable, in accordance with the terms of the contract of sale.
The defendants Felix and her husband Tioco contended that Addison had absolutely failed
to deliver the lands that were the subject matter of the sale, notwithstanding the
demands they made upon him for this purpose. The evidence adduced shows Addison
was able to designate only two of the four parcels, and more than 2/3 of these two were
found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the
parts he so occupied. The trial court held the contract of sale to be rescinded and ordered
Addison to return to Felix the P3,000 paid on account of the price, together with interest
thereon at the rate of 10% per annum.
Issue: WON there is delivery made and a transfer of ownership.
Held: The Court ruled that that the mere execution of the instrument was not a
fulfillment of the vendor's obligation to deliver the thing sold, and that from such non-
fulfillment arises the purchaser's right to demand, as she has demanded, the rescission of
the sale and the return of the price.
The thing is considered to be delivered when it is placed "in the hands and possession of
the vendee." It is true that the same article declares that the execution of a public
instrument is equivalent to the delivery of the thing which is the object of the contract,
but, in order that this symbolic delivery may produce the effect of tradition, it is necessary
that the vendor shall have had such control over the thing sold that, at the moment of the
sale, its material delivery could have been made. Symbolic delivery through the execution
of a public instrument is sufficient when there is no impediment whatever to prevent the
thing sold passing into the tenancy of the purchaser by the sole will of the vendor. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such are opposed by a third person’s will, then the delivery
has not been effected.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
G.R. No. L-21998, 10 November 1975
Pasagui vs. Villablanca
Facts: Petitioner-appellants Calixto Pasagui and Fausta Mosar filed a complaint with the
CFI at Tacloban City, alleging that for and in consideration of P2,800.00 they bought from
appellees Eustaquia Bocar and Catalina Bocar a parcel of agricultural land situated in
Hamindangon, Pastrana, Leyte; that the corresponding document of sale was executed,
notarized on the same date, and recorded in the Registry of Deeds; that during the first
week of February, 1963, defendant spouses Ester T. Villablanca and Zosimo Villablanca,
"illegally and without any right, whatsoever, took possession of the above property
harvesting coconuts from the coconut plantation thereon, thus depriving plaintiffs" of its
possession; that despite demands made by the plaintiffs upon the above-mentioned
defendants "to surrender to them the above-described property and its possession" the
latter failed or refused to return said parcel of land to the former, causing them damage;
and that Eustaquia and Catalina Bocar, vendors of the property, are included defendants
in the complaint by virtue of the warranty clause contained in the document of sale.
The trial court issued an order dismissing the complaint for lack of jurisdiction, it
appearing from the allegations in the complaint that the case is one for forcible entry
which belongs to the exclusive jurisdiction of the Justice of the Peace (now Municipal
Court) of Pastrana, Leyte.
Issue: WON petitioner was illegally deprived of his possession of the subject land.
Held: The Court ruled that the complaint does not allege that the plaintiffs were in
physical possession of the land and have been deprived of that possession through force,
intimidation, threat, strategy, or stealth.
It is true that the execution of the deed of absolute sale in a public instrument is
equivalent to delivery of the land subject of the sale. This presumptive delivery only holds
true when there is no impediment that may prevent the passing of the property from the
20 hands of the vendor into those of the vendee. It can be negated by the reality that the
vendees actually failed to obtain material possession of the land subject of the sale. It
appears from the records of the case at bar that plaintiffs-appellants had not acquired
Page
physical possession of the land since its purchase on November 12, 1962. As a matter of
fact, their purpose in filing the complaint in Civil Case No. 3285 is precisely to "get the
possession of the property."
In the case at bar, no such inference could be made as plaintiffs-appellants had not
claimed that they were in actual physical possession of the property prior to the entry of
the Villablancas. Moreover, it is evident that plaintiffs-appellants are not only seeking to
get the possession of the property, but as an alternative cause of action, they seek the
return of the price and payment of damages by the vendors "in case of eviction or loss of
ownership" of the said property. It is, therefore, not the summary action of forcible entry
within the context of the Rules.

G.R. No. L-31789, 29 June 1972
Banzon vs. Cruz
Facts: Sometime in 1952, Maximo Sta. Maria obtained crop loans from the Philippine
National Bank (hereinafter referred as the bank). Respondent Associated Insurance &
Surety Co., Inc. (hereinafter referred to as Associated) acted as surety of Sta. Maria, filing
surety bonds in favor of the bank to answer for prompt repayment of the loans. Petitioner
Antonio R. Banzon and Emilio Ma. Naval in turn acted as indemnitors of Associated and
were obligated to indemnify and hold harmless Associated from any liability thus acting as
surety of the loan. Sta. Maria failed to pay his obligations to the bank, which accordingly
demanded payment from Associated as surety. Instead of paying the bank, Associated
filed a complaint with the CFI of Manila against debtor Sta. Maria and indemnitors Banzon
and Naval. The CFI rendered judgment ordering Sta. Maria, Banzon and Naval "to pay
jointly and severally unto plaintiff for the benefit of the Philippine National Bank".
According to the Banzons' petition at bar, sometime in 1965, even before ownership over
the two parcels of land belonging to the Banzons could be consolidated in the name of
Associated "in clear collusion and confederation with (respondent) Pedro Cardenas,
allowed and permitted the latter to execute and levy one of the two parcels of land for a
judgment debt of P5,100.00 (of Associated in favor of Cardenas) 8 notwithstanding that
the property in question was worth P130,000.00 more or less, and further
notwithstanding the fact that said respondent (Associated) knew the property was merely
being held in trust by it for the benefit of the Philippine National Bank and therefore, not
being the legal owner thereof, it cannot validly dispose of it in any manner." The Cardenas
spouses thereafter filed with the CFI of Rizal a case to secure possession from the Banzons
of the lot. The CA rendered judgment dismissing the petition because it found the same
to be allegedly "merely a device to prevent the execution of a final judgment by the filing
of a new suit based upon the same grounds which have already been interposed and
passed upon in the case where the final judgment had already been rendered".
Issue: WON the petitioners are entitled to the possession of the property.
Held: The Court ruled that the petitioners are entitled to a writ restoring the status quo
ante. A mandatory writ shall therefore issue commanding respondent court to forthwith
restore petitioners to their possession of the lot from which they have been removed by
enforcement of said respondent court's enjoined order of demolition and writ of
possession.
When Associated nevertheless prematurely and contrary to the intent and condition of
the basic 1957 judgment levied in execution on the two Caloocan City lots of Banzon the
interest it acquired was clearly impressed with a trust character. Such acquisition of
Banzon's properties by Associated was effected, if not through fraud on Associated's part,
certainly through mistake and there Associated was "by force of law, considered a trustee
of implied trust for the benefit of the person from whom the property comes" by virtue of
Article 1456 of the Code — since Associated not having paid nor having been compelled
to pay the bank had no right in law or equity to so execute the judgment against Banzon
as indemnitor. Had there been no fraudulent concealment or suppression of the fact of
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
such non-payment by Associated or a mistaken notion just assumed without factual basis
that Associted had paid the bank and was thus entitled to enforce its judgement against
Banzon as indemnitor, the writ for execution of the judgment against Banzon's properties
would not been issued.
Furthermore, Associated's conduct, upon being sued by the Philippine National Bank
directly with the principal debtor Sta. Maria for collection of the debt 23e and sentenced
by the Pampanga court of first instance in 1963 (which it did not appeal) to pay the debt
in the much lesser amount of only P15,446.44, excluding interests, in not so discharging
its liability notwithstanding that it had already executed its 1957 judgment against
Banzon as indemnitor and taken in execution Banzon's two properties, was indeed rank
fraud. Associated therefore stands legally bound by force of law to now discharge its
implied trust and return Banzon's properties to him as their true and rightful owner.
G.R. No. 80298, 26 April 1990
EDCA Publishing & Distributing Corp. vs. Santos
Facts: On October 5, 1981, a person identifying himself as Professor Jose Cruz placed an
order by telephone with the petitioner company for 406 books, payable on delivery. EDCA
prepared the corresponding invoice and delivered the books as ordered, for which Cruz
issued a personal check covering the purchase price of P8,995.65. On October 7, 1981,
Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying the
seller's ownership from the invoice he showed her, paid him P1,700.00. Meanwhile, EDCA
having become suspicious over a second order placed by Cruz even before clearing of his
first check, made inquiries with the De la Salle College where he had claimed to be a dean
and was informed that there was no such person in its employ. Further verification
revealed that Cruz had no more account or deposit with the Philippine Amanah Bank,
against which he had drawn the payment check. EDCA then went to the police, which set
a trap and arrested Cruz. On the night of the same date, EDCA sought the assistance of
the police which forced their way into the store of the private respondents and
threatened Leonor Santos with prosecution for buying stolen property.
21
It is the contention of the petitioner that the private respondents have not established
their ownership of the disputed books because they have not even produced a receipt to
Page
prove they had bought the stock.
Issue: WON the petitioner was unlawfully deprived of its movable property.
Held: The Court ruled against the petitioner. The argument that the private respondents
did not acquire the books in good faith has been dismissed by the lower courts, and the
Court agrees. Leonor Santos first ascertained the ownership of the books from the EDCA
invoice showing that they had been sold to Cruz, who said he was selling them for a
discount because he was in financial need. Private respondents are in the business of
buying and selling books and often deal with hard-up sellers who urgently have to part
with their books at reduced prices. To Leonor Santos, Cruz must have been only one of
the many such sellers she was accustomed to dealing with. It is hardly bad faith for

anyone in the business of buying and selling books to buy them at a discount and resell
them for a profit.
The petitioner argues that it was, because the impostor acquired no title to the books
that he could have validly transferred to the private respondents. Its reason is that as the
payment check bounced for lack of funds, there was a failure of consideration that
nullified the contract of sale between it and Cruz.
The contract of sale is consensual and is perfected once agreement is reached between
the parties on the subject matter and the consideration. According to the Civil Code:
Art. 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.
xxx xxx xxx
Art. 1477. The ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in the thing shall not pass to
the purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that ownership in
the thing sold shall not pass to the buyer until full payment of the purchase only if there is
a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the
vendor to the vendee upon the actual or constructive delivery of the thing sold even if the
purchase price has not yet been paid.
Non-payment only creates a right to demand payment or to rescind the contract, or to
criminal prosecution in the case of bouncing checks. But absent the stipulation above
noted, delivery of the thing sold will effectively transfer ownership to the buyer who can
in turn transfer it to another.
Actual delivery of the books having been made, Cruz acquired ownership over the books
which he could then validly transfer to the private respondents. The fact that he had not
yet paid for them to EDCA was a matter between him and EDCA and did not impair the
title acquired by the private respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully deprived"
were to be interpreted in the manner suggested by the petitioner. A person relying on the
seller's title who buys a movable property from him would have to surrender it to another
person claiming to be the original owner who had not yet been paid the purchase price
therefore. The buyer in the second sale would be left holding the bag, so to speak, and
would be compelled to return the thing bought by him in good faith without even the
right to reimbursement of the amount he had paid for it. It would certainly be unfair now
to make the private respondents bear the prejudice sustained by EDCA as a result of its
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
own negligence. We cannot see the justice in transferring EDCA's loss to the Santoses
who had acted in good faith, and with proper care, when they bought the books from
Cruz. It is clear that its remedy is not against the private respondents but against Tomas
de la Peña, who has apparently caused all this trouble. The private respondents have
themselves been unduly inconvenienced, and for merely transacting a customary deal not
really unusual in their kind of business. It is they and not EDCA who have a right to
complain.
G.R. No. L-66944, 13 November 1989
Alliance Tobacco Corporation vs. Philippine Virginia Tobacco
Facts: In June 1963, PVTA entered into a merchandising loan agreement with the
petitioner in the amount of P25,500.00 for the purchase of flue-cured Virginia tobacco
from bona fide Virginia tobacco former-producers. The following month, petitioner
shipped to the Farmers’ Virginia Tobacco Redrying (FVTR) 96 bales of tobacco weighing
4,800 kilos covered by Guia No. 1 and 167 bales weighing 8,350 kilos covered by Guia No.
2. After several days, the grading of the plaintiffs tobacco took place but only 89 bales
from Guia No. 2 were graded, weighed and accepted. The remaining bales of tobacco in
Guia No. 2 and the whole of Guia No. 1 were not graded and weighed because after
grading and weighing 89 bales of Guia No. 2, some officers and employees in the premises
of defendant FVTR asked money for the separate grading and weighed of the un-graded
and un-weighed tobacco bales. Unfortunately, the remaining un-graded and un-weighed
174 bales with a total value of P28,382 were lost while they were in the possession of the
FVTR. Having learned of such loss in 1965, petitioner demanded for its value and the
application of the same to its merchandising loan with PVTA but both the latter and the
FVTR refused to heed said demands.
Consequently, petitioner filed in the then Court of First Instance of La Union a complaint
against PVTA and FVTR praying that the two defendants be ordered to pay it P4,443
representing the value of the 89 bales which were weighed, graded and accepted by the
defendants, P28,382.00 representing the value of the lost bales of tobacco and/or that
the said amount be applied to its loan with PVTA. The CFI ruled that the PVTA should not
22 be held responsible for the lost bales of tobacco because they were not yet properly
graded and weighed and the IAC affirmed.
Page
Issue: WON there is delivery of the goods to the vendee which will result in a perfected
contract of sale.
Held: The Court ruled that since PVTA had virtual control over the lost tobacco bales,
delivery thereof to the FVTR should also be considered effective delivery to the PVTA.
The Civil Code provides that ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof. 19 There is delivery when the
thing sold is placed in the control and possession of the vendee. 20 Indeed, in tobacco
trading, actual delivery plays a pivotal role.

The Court would have found merit in respondent PVTA's contention that the contract of
sale could not have been perfected pursuant to Article 1475 of the Civil Code because to
determine the price of the tobacco traded, the shipment should first be inspected, graded
and weighed, we find said contention misplaced herein. A strict interpretation of the
provision of Article 1475 may result in adverse effects to small planters who would not be
paid for the lost products of their toil. Such situation was what the ruling in PVTA vs. De
los Angeles sought to avoid.
-------------------------------------------
C) Other rules on delivery:
- Sale of real property by unit of measure or number (Art. 1539-
1541) – obligation to deliver the thing sold includes that of
placing in the control of the vendee all that is mentioned in the
contract.
1. 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 all that may have been stated
in the contract if the vendee should demand.
If not possible, the vendee may choose either to
reduce the price proportionally or to rescind the
contract provided that the lack in the area be not less
than 1/10 of that stated.
2. If there is a greater area of immovable than that stated
in the contract, the vendee may accept the area
included in the contract and reject the rest.
-------------------------------------------
Jurisprudence:
G.R. No. L-16394, 17 December 1966
Sta. Ana, Jr. vs. Hernandez
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Defendant Rosa Hernandez, on the other hand, claimed that the alleged excess was part
of the areas that she bought.
The CFI ordered Hernandez to vacate the excess portions. On appeal, the CA dismissed
petitioner’s complaint and ruled that Hernandez owned the excess portions. It based its
decision on the description of the land on the contract as well as to the lump sum price
indicated.
Issue: WON the defendant owns the excess portion when the description of the land in
the contract was not specific and definite.
Held: The Court ruled that the sale was made by unit of measure at a definite price for
each unit.
The ruling of the Supreme Court of Spain, in construing Article 1471 of the Spanish Civil
Code is highly persuasive that as between the absence of a recital of a given price per unit
of measurement, and the specification of the total area sold, the former must prevail and
determines the applicability of the norms concerning sales for a lump sum.
-------------------------------------------
- Sale of real estate made for a lump sum (Art. 1542) – there shall
be no increase or decrease of the price, although there be a
greater or lesser areas or number than that stated in the
contract.
1. Same rule shall be applied when 2 or more immovables
are sold for a single price
2. If besides the boundaries, its area or number is
designated in the contract, the vendor shall be bound
to deliver all that is included within said boundaries
23 even when it exceeds the area or number specified in
the contract.
Remedies of the vendee 3. Reduction of the price in proportion to what is lacking
Page

Facts: The petitioners herein, spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo, for the failure of the in the area or number
owned a parcel of land. On 28 May 1954, they sold two (2) separate portions of the land vendor to deliver what 4. Rescission of the contract.
for P11,000.00 to the herein respondent Rosa Hernandez. After the sale, the petitioners- was stipulated.
spouses caused the preparation of a subdivision plan which was approved by the Director -------------------------------------------
of Lands. Rosa Hernandez, however, unlike the previous vendees, did not conform to the .R. No. 108515, 16 October 1995
plan and refused to execute an agreement of subdivision and partition for registration Balantakbo vs. Court of Appeals
with the Register of Deeds of Bulacan and she, likewise, refused to vacate the areas that
she had occupied. Instead, she caused the preparation of a different subdivision plan, Facts: The land in question had been purchased by the Sumaya spouses (predecessor of
which was approved by the Director of Lands. Herein petitioners-spouses filed suit against private respondent Laguna Agro-Industrial Coconut Cooperative, Inc./LAGUNA) from
respondent Rosa Hernandez in the CFI of Bulacan claiming that said defendant was Consuelo Vda. de Balantakbo (mother of petitioner Luis Balantakbo and Sancho
occupying an excess of 17,000 square meters in area of what she had bought from them. Balantakbo), the sale being evidenced by a deed and that some 20 years later, or on
March 8, 1975, the seller's heirs, intruded into the land and harvested the coconuts found

therein. In their answer, the Balantakbos denied knowledge of the sale and alleged that
the land claimed sued for was different from that owned and held by them.
The RTC rendered judgment in favor of the Balantakbos. dismissing LAGUNA's complaint,
upholding the former's theory of the case and ruling that what was contemplated in the
descriptive words "more or less" immediately following the stated area of 2,000 square
meters in the description of the land was construable as referring only to a "slight
difference" in said area, 2 not to a difference as large as 4,870 square meters, or more
than double the 2,000 square meters actually stated and intended to be sold. The CA,
however, declared LAGUNA the owner of the entire land.
Issue: Whether the area described or the actual boundaries of the land prevail in case of
conflict.
Held: The Court ruled, citing the case of Dichoso, that in a contract of sale of land in mass,
it is well established that the specific boundaries stated in the contract must control over
any statement with respect to the area contained within its boundaries. It is not of vital
consequence that a deed or contract of sale of land should disclose the area with
mathematical accuracy. It is sufficient that its extent is objectively indicated with
sufficient precision to enable one to identify it. An error as to the superficial area is
immaterial.
-------------------------------------------
- Rules in case of double sale (Art. 1544) –
1. If the same thing be sold to different vendees,
ownership shall be transferred to the one who may
have first taken possession in good faith if it should be
a movable property.
2. If it is an immovable, to the one who first recorded the
sale in the Registry of Property in good faith.
3. Should there be no inscription, ownership shall pertain
to the person who in good faith was first in the
possession; and in the absence thereof, one who
presents the oldest title in good faith.
-------------------------------------------
Jurisprudence:
G.R. No. L-20046, 27 March 1968
Paylago vs. Jarabe
Facts: The entire lot involved in this suit was originally covered by Homestead Patent
issued on June 7, 1920 under Act No. 926 and later under OCT No. 251 of the Registry of
Deeds of Mindoro, issued on June 22, 1920 in the name of Anselmo Lacatan. After the
death of Anselmo Lacatan, TCT No. T-728 (which cancelled OCT No. 251) was issued in the
name his two sons and heirs, Vidal and Florentino Lacatan. Vidal Lacatan died on August
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
27, 1950. Vidal Lacatan's heirs, namely, Maximo, Tomas and Lucia Lacatan, executed a
deed of sale in favor of the spouses Romeo Paylago and Rosario Dimaandal, plaintiffs-
petitioners herein, over a portion of the entire lot under TCT No. T-728. When Florentino
Lacatan also died, leaving as his heirs his widow and three children, the said children of
Florentino Lacatan likewise executed a deed of sale in favor of the same vendees over
another portion of the same lot. By virtue of the registration of the two deeds of sale, a
new TCT No. T-4208 covering the total area of 6.7908 hectares was issued in favor of
plaintiffs-petitioners, the Paylago spouses. A subsequent subdivision survey for the
purpose of segregating the two aforementioned portions of land described in the deeds
as well as in the new TCT No. T-4208, however, disclosed that a portion of the total area
purchased by plaintiffs-petitioners and indicated in the sketch at a point marked was
being occupied by defendant-respondent. Hence, the action to recover possession and
ownership of the said portion.
The lower court held that plaintiffs-petitioners were not purchasers in good faith and,
accordingly, rendered judgment in favor of defendant-respondent, declaring the latter as
owner of the land in question with the right to retain possession of the same. The
decision was affirmed in toto by the Court of Appeals.
Issue: Whether the registered buyer or the prior but unregistered purchaser has the
better right over the real property.
Held: The Court ruled that as between two purchasers, the one who has registered the
sale in his favor, in good faith, has a preferred right over the other who has not registered
his title, even if the latter is in the actual possession of the immovable property. Indeed,
the foregoing principle finds concrete bases in the pertinent provisions of the New Civil
Code, Article 1544, providing that if the same immovable property should have been sold
to different vendees, "the ownership shall belong to the person acquiring it who in good
faith first recorded it in the registry of property."
There is no question that the sales made in favor of plaintiffs-petitioners were registered
while the alleged sale executed in favor of defendant-respondent was not. Applying the
24 foregoing principle of law to the instant case, it is now contended by plaintiffs-petitioners
that their certificate of title must prevail over defendant-respondent, and that the courts
below correspondingly committed error in deciding the case to the contrary.
Page
But there is more than meets the eye in the case at bar. While plaintiffs-petitioners have a
registered title, it cannot be denied that their acquisition and subsequent registration
were tainted with the vitiating element of bad faith. It was so found by both the Court of
First Instance and the Court of Appeals, and their finding is conclusive upon us.
G.R. No. L-19248, 28 February 1963
Hanopol vs. Pilapil
(Art. 1544 do not apply to unregistered lands)

Facts: Appellant Hanopol claims ownership of the unregistered land by virtue of a series
of purchases effected in 1938 by means of private instruments, executed by the former
owners Teodora, Lucia, Generosa, Sinforosa and Isabelo, all surnamed Siapo. Additionally,
he invokes in his favor a decision rendered by the CFI of Leyte on a complaint he filed on
June 16, 1948, against the same vendors, who, according to his own averments, took
possession of the said property in December, 1945 through fraud, threat and
intimidation, pretending falsely to be the owners thereof and ejecting the tenants of
Hanopol thereon, and since then had continued to possess the land. On the other hand,
appellee Pilapil asserts title to the property on the strength of a duly notarized deed of
sale executed in his favor by the same owners which deed of sale was registered in the
Registry of Deeds of Leyte under the provisions of Act No. 3344.
Issue: WON the right of the first buyer who did not register the sale cannot be prejudiced
by the registration of the second sale.
Held: The Court ruled that the proviso in Act No. 3344 does not seem to justify Hanopol’s
contention. If his theory is correct, then the second paragraph of Article 1544 of the New
Civil Code (formerly Article 1473 of the old Code) would have no application at all except
to lands or real estate registered under the Spanish Mortgage Law or the Land
Registration Act. Such a theory would thus limit the scope of that codal provision. But
even if the Court adopt this latter view, that is, that Article 1544 (formerly Article 1473)
only applies to registered land, the Court still do not agree with the appellant that by the
mere fact of his having a previous title or deed of sale, he has acquired thereby what is
referred to in Act No. 3344 as the "better right" that would be unaffected by the
registration of a second deed of sale under the same law. Under such theory, there would
never be a case of double sale of the same unregistered property.
G.R. No.109410, 28 August 1996
Balatbat vs. Court of Appeals
Facts: Aurelio A. Roque filed a complaint for partition against Corazon Roque, Alberto de
los Santos, Feliciano Roque, Severa Roque and Osmundo Roque before the then CFI of
Manila where the said court rendered a decision in favor of plaintiff Aurelio A. Roque.
Aurelio A. Roque sold his 6/10 share in T.C.T. No. 135671 to spouses Aurora Tuazon-
Repuyan and Jose Repuyan as evidenced by "Deed of Absolute Sale" where the latter
caused the annotation of her affidavit of adverse claim on the Transfer Certificate of Title
No. 135671. On August 20, 1980, Aurelio A. Roque filed a complaint for "Rescission of
Contract" against spouses Aurora Tuazon-Repuyan and Jose Repuyan before the CFI of
Manila. The complaint is grounded on spouses Repuyan's failure to pay the balance of
P45,000.00 of the purchase price.
Meanwhile, a deed of absolute sale was executed on February 4, 1982 between Aurelio S.
Roque, Corazon Roque, Feliciano Roque, Severa Roque and Osmundo Roque and Clara
Balatbat, married to Alejandro Balatbat. Clara Balatbat filed a motion for the issuance of a
writ of possession which was granted by the trial court on September 14, 1982 "subject,
however, to valid rights and interest of third persons over the same portion thereof,
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
other than vendor or any other person or persons privy to or claiming any rights or
interests under it".
Petitioner Clara Balatbat and her husband, Alejandro Balatbat filed the instant complaint
for delivery of the owners duplicate copy of T.C.T. No. 135671 against private
respondents Jose Repuyan and Aurora Repuyan. The RTC rendered a decision dismissing
the complaint and the CA affirmed the decision appealed from but with modifications.
Issue: WON there is a double sale.
Held: The Court ruled that this is a case of double sale contemplated under Article 1544
of the New Civil Code.
This is an instance of a double sale of an immovable property hence, the ownership shall
vests in the person acquiring it who in good faith first recorded it in the Registry of
Property. Evidently, private respondents Repuyan's caused the annotation of an adverse
claim on the title of the subject property denominated as Entry No. 5627/T-135671 on
July 21, 1980. The annotation of the adverse claim on TCT No. 135671 in the Registry of
Property is sufficient compliance as mandated by law and serves notice to the whole
world.
Petitioner filed a notice of lis pendens only on February 2, 1982. Accordingly, private
respondents who first caused the annotation of the adverse claim in good faith shall have
a better right over herein petitioner. Moreover, the physical possession of herein
petitioners by virtue of a writ of possession issued by the trial court on September 20,
1982 is "subject to the valid rights and interest of third persons over the same portion
thereof, other than vendor or any other person or persons privy to or claiming any rights
to interest under it." As between two purchasers, the one who has registered the sale in
his favor, has a preferred right over the other who has not registered his title even if the
latter is in actual possession of the immovable property. Further, even in default of the
first registrant or first in possession, private respondents have presented the oldest title.
Thus, private respondents who acquired the subject property in good faith and for
25 valuable consideration established a superior right as against the petitioner.
Caram vs. Lauret
Page
G.R. No. L-28740
FACTS: On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land
covered by OCT No. 3019 in favor of Claro Laureta, plaintiff, the respondent herein. The
deed of absolute sale in favor of the plaintiff was not registered because it was not
acknowledged before a notary public or any other authorized officer. Since June 10,1945,
the plaintiff Laureta had been and is in continuous, adverse and notorious
occupation of said land, without being molested, disturbed or stopped by any of the
defendants or their representatives. In fact, Laureta had been paying realty taxes due
thereon and had introduced improvements worth not less than P20,000.00 at the time of
the filing of the complaint. On May 5, 1947, the same land covered by OCT No. 3019was
sold by Marcos Mata to defendant Fermin Z. Caram, Jr., petitioner herein. The deed of

sale in favor of Caram was acknowledged before Atty. Abelardo Aportadera. On
December 9, 1947, the second sale between Marcos Mata and Fermin Caram, Jr. was
registered with the Register of Deeds. On the same date, Transfer Certificate of Title
No.140 was issued in favor of Fermin Caram Jr.The defendant Fermin Caram Jr. claimed
that he has no knowledge or information about the previous encumbrances, transactions,
and alienations in favor of plaintiff until the filing of the complaints.
ISSUE: Whether or not the knowledge petitioner of a prior unregistered sale of a titled
property attributable to petitioner and equivalent in law of registration of sale.
HELD: Yes. There is no doubt then that Irespe and Aportadera, acting as agents of Caram,
purchased the property of Mata in bad faith. Applying the principle of agency, Caram as
principal, should also be deemed to have acted in bad faith. Since Caram was a registrant
in bad faith, the situation is as if there was no registration at all. A possessor in good faith
is one who is not aware that there exists in his title or mode of acquisition any flaw which
invalidates it. Laureta was first in possession of the property. He is also a possessor in
good faith. It is true that Mata had alleged that the deed of sale in favor of Laureta was
procured by force. Such defect, however, was cured when, after the lapse of four years
from the time the intimidation ceased, Marcos Mata lost both his rights to file an action
for annulment or to set up nullity of the contract as a defense in an action to enforce
the same
Tañedo vs. CA,
January 22, 1996
FACTS: Lazaro Tañedo executed a deed of absolute sale in favor of Ricardo Tañedo and
Teresita Barrera in which he conveyed a parcel of land which he will inherit. Upon the
death of his father he executed an affidavit of conformity to reaffirm the said sale. He also
executed another deed of sale in favor of the spouses covering the parcel of land he
already inherited. Ricardo registered the last deed of sale in the registry of deeds in their
favor.
26
Page
Ricardo later learned that Lazaro sold the same property to his children through a deed of
sale.
ISSUE: WON the Tañedo spouses have a better right over the property against the
children of Lazaro Tañedo.
HELD: Since a future inheritance generally cannot be a subject of a contract, the deed of
sale and the affidavit of conformity made by Lazaro has no effect. The subject of dispute
therefore is the deed of sale made by him in favor of spouses Tañedo and another to his
children after he already legally acquired the property.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Thus, although the deed of sale in favor of private respondents was later than the one in
favor of petitioners, ownership would vest in the former because of the undisputed fact
of registration. On the other hand, petitioners have not registered the sale to them at all.
Petitioners contend that they were in possession of the property and that private
respondents never took possession thereof. As between two purchasers, the one who
registered the sale in his favor has a preferred right over the other who has not registered
his title, even if the latter is in actual possession of the immovable property.
Tanongon vs. Samson
382 SCRA 130
FACTS: Felicidad Samson, Casiano A. Osin, Alberto Belbes and Luisito Venus were
employees of CAYCO Marine Service, which is engaged in the business of hauling oil,
owned and operated by Iluminada Cayco OLIZEN. They filed a complaint against CAYCO
and OLIZON for illegal dismissal, underpayment of wages, non-payment of holiday
pay,rest day pay and leave pay. The labor arbiter dismissed the complaint for lack of
merit, but was reversed by the NLRC on appeal. CAYCO andOLIZON sought
reconsideration of the NLRC’s decision but it was denied. Likewise, on appeal to the
SupremeCourt through a petition for certiorari was likewise denied for failure to establish
grave abuse of discretion on thepart of NLRC. The decision of the NLRC became final and
executory on April 29, 1997. A writ of execution wasissued directing the NLRC sheriff to
collect from CAYCO and OLIZON the amount computed by the NLRC Research and
Investigation Unit to be awarded to the complainants. A notice of levy/sale on execution
of personal property was issued and thereafter, on August 8, 1997 the motor tanker of
CAYCO and OLIZEN was seized to be sold at public auction. However, Dorotea
TANONGON filed a third-party claim before the labor arbiter alleging that she was the
owner of the subject motor tanker for having acquired the same from OLIZEN on July 29,
1997 for a consideration of 1,100,000. The labor arbiter dismissed such claim for lack of
merit. It was found that the Deed of Absolute Sale was executed on July 29, after the
decision became final and executor on April 29. The sale had been entered into to
defraud them. But on appeal to NLRC, such decision was reversed because on two
grounds: (1) the power of the NLRC sheriff to execute judgments extended only to
properties unquestionably belonging to the judgment debtor. In this case, the ownership
of the property was in the name of TANONGAN. Hence, the vessel was questionably the
property of CAYCO; (2) Under Article 1387 of the Civil Code, alienations of property in the
fraud of creditors would give rise only to rescissible contracts. Thus, a judicial rescission
was required to disregard such third-party complaint. The decision of the NLRC was
reversed by the Court of Appeals ruling that judicial recission was not necessary. It is
evident that such sale was done to defraud, to overcome the enforcement of the Writ of
Execution, such sale was simulated or a fictitious transfer, in which no independent
judicial action was necessary to invalidate the sale. TANONGAN is not a buyer in good
faith for the sale was hastily concluded and the tanker and the necessary documents were
immediately delivered to the new owner. Such circumstances should put a reasonable
person on guard. Also, such power of the NLRC to enforce its final judgment, order or

award and to take such measures under extant laws as may be necessary to ensure
compliance with its decision was authorized under the provisions of Article 224 (a & b)
ISSUES:(1) Whether or not Dorotea M. TANONGAN is a buyer in good faith and for value
(2) Whether or not the CA acted with grave abuse of discretion amounting to lack or in
excess of jurisdictionin deciding against TANONGAN.
RULINGS:
(1) No. Tanongan is a buyer in bad faith. It is evident that the judgment favoring the
complainants as affirmed by the Supreme Court and the issuance of the Writ of Execution
was done before the sale of the motor tanker on July 29, 1997. The CA correctly ruled
that the act of OLIZON was an attempt to evade payment and that TANONGAN obviously
got word of the Writ. Despite such knowledge, she still bought the tanker ten days before
it was levied. It is also more that coincidental that the purchase price for the tanker was
P1.1M and the debt to be awarded amounted to P1,192,422.55. “A purchaser in good
faith or an innocent purchaser for value is one who buys property and pays a full and fair
price for it at the time of the purchase or before any notice of some other person's claim
on or interest in it.14 We emphasize that one cannot close one's eyes to facts that should
put a reasonable person on guard and still claim to have acted in good faith. Petitioner
should have inquired whether Olizon had other unsettled obligations and
encumbrances that could burden the subject property. Any person engaged in
business would be wary of buying from a company that is closing shop, because it may be
dissipating its assets to defraud its creditors.”
(2) No. The CA is correct. “The CA held, in overruling the NLRC, that the Commission
possessed, under Article224 (a and b),16 powers necessary to implement and enforce the
latter's final judgments, decisions, orders and awards. The appellate court ruled further
that the disputed contract was not merely rescissible; it was simulated or fictitious and,
thus, void ab initio. We agree with the Court of Appeals. A third-party claim on a levied
property does not automatically prevent execution. Under Rule 39 of the Revised Rules of
Court, execution is a remedy afforded by law for the enforcement of a judgment, its
object being to obtain satisfaction of the decision on which the writ is issued.17 In
executing a money judgment against the property of the obligor, the sheriff shall levy on
all properties belonging to the judgment debtor as is amply sufficient to satisfy the
decision and the costs; and shall sell the same, paying to the judgment creditor as much
of the proceeds as will satisfy the amount of the debt and costs. Sheriffs who levy upon
properties other than those of the judgment debtors are acting beyond the limits of their
authority. When a third-party claim is filed, the sheriff is not bound to proceed with the
levy of the property unless the judgment creditor or the latter's agent posts an indemnity
bond against the claim. Where the bond is filed, the remedy of the third-party claimant is
to file an independent reivindicatory action against the judgment creditor or the
purchaser of the property at public auction. The NLRC should not have automatically
lifted the levy and restrained execution, just because a third-party claim had been filed.
Further, judicial rescission is not necessary in the case at bar. The NLRC lifted the levy on
the subject property, ruling that its sheriff could execute its judgments only on
properties "unquestionably belonging to the judgment debtor." It observed that
the Certificate of Ownership over the disputed vessel was in the name of the third-party
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
claimant, herein petitioner. Petitioner's claim of ownership over the disputed tanker is
not supported by the evidence on record. The Maritime Industry Authority (Marina)
administrator wrote the parties in two separate letters, which said that the
registration of the disputed vessel under petitioner's name had not been effected,
and that the Certificates of Ownership and Vessel Registry covering the motor tanker M/T
Petron 7-C had not been released. The reasons were Marina's receipt of the Entry of
Judgment issued by the Supreme Court on April 29, 1997, and the Notice of Levy/Sale on
Execution of Personal Property covering the subject vessel.22 Under Article 573 of the
Code of Commerce, the acquisition of a vessel must appear on a written instrument,
which shall not produce any effect with respect to third persons if not inscribed in the
Registry of Vessels. Insofar as third persons like herein respondents were concerned, the
ownership of the disputed vessel remained with Olizon and CAYCO; thus, the CA correctly
held that the NLRC could proceed with the levy and the sale on execution.
Consolidated Rural Bank vs. CA
17 January 2005
FACTS: The Madrid brothers were the registered owners of Lot A situated in Isabela.
Said lot was subdivided into several lots. Rizal Madrid sold part of his share identified lot
A-7 to Gamiao and Dayag by virtue of a Deed of Sale, to which his brothers offered no
objection as evidenced by their Joint Affidavit .The deed of sale was not registered with
the ORD of Isabela. However, Gamiao and Dayag declared the property in their names on
a Tax Declaration. Gamiao and Dayag sold the subject southern half of lot to Teodoro dela
Cruz, and the northern half to Hernandez. Thereupon, Teodoro dela Cruz and Hernandez
took possession of and cultivated the portions of the property respectively sold to them
(Later Restituto Hernandez donated the northern half to his daughter. The children of
Teodoro dela Cruz continued possession of the southern half after their father’s death.) In
27 a Deed of Sale the Madrid brothers conveyed all their rights and interests over lot A-7 to
Marquez which the former confirmed. The deed of sale was registered with the ORD of
Isabela. Subsequently, Marquez subdivided lot A-7 into eight (8) lots. On the same date,
Page
Marquez and his spouse, Mercedita Mariana, mortgaged 4 lots to the Consolidated Rural
Bank, Inc. of Cagayan Valley (hereafter, CRB) to secure a loan. These deeds of real estate
mortgage were registered with the ORD. As Marquez defaulted in the payment of his
loan, CRB caused the foreclosure of the mortgages in its favor and the lots were sold to it
as the highest bidder. The Heirs-now respondents filed a case for reconveyance and
damages for the southern portion of Lot No. 7036-A (hereafter, the subject property)
against Marquez and CRB. The RTC handed down a decision in favor of Marquez. The
Heirs interposed an appeal with the CA, which upheld the claim of the Heirs. Hence, the
instant CRB petition.
ISSUE: WON Art. 1544 of the Civil Code (double sale) applicable in this case

HELD: NO.
The petition is denied, and the decision as modified is affirmed. Like the lower court, the
appellate court resolved the present controversy by applying the rule on double sale
provided in Article 1544 of the Civil Code. They, however, arrived at different conclusions.
The RTC made CRB and the other defendants win, while the Court of Appeals decided the
case in favor of the Heirs.
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 possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith. The provision is not applicable in the present
case. It contemplates a case of double or multiple sales by a single vendor. It cannot be
invoked where the two different contracts of sale are made by two different persons, one
of them not being the owner of the property sold. And even if the sale was made by the
same person, if the second sale was made when such person was no longer the owner of
the property, because it had been acquired by the first purchaser in full dominion, the
second purchaser cannot acquire any right. In the case at bar, the subject property was
not transferred to several purchasers by a single vendor. In the first deed of sale, the
vendors were Gamiao and Dayag whose right to the subject property originated from
their acquisition thereof from Rizal Madrid with the conformity of all the other Madrid
brothers. On the other hand, the vendors in the other or later deed were the Madrid
brothers but at that time they were no longer the owners since they had long before
disposed of the property in favor of Gamiao and Dayag.
In a situation where not all the requisites are present which would warrant the
application of Art. 1544, the principle of prior tempore, potior jure or simply “he who is
first in time is preferred in right, should apply.” The only essential requisite of this rule is
priority in time; in other words, the only one who can invoke this is the first vendee.
Undisputedly, he is a purchaser in good faith because at the time he bought the real
property, there was still no sale to a second vendee. In the instant case, the sale to the
Heirs by Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to the
sale by the Madrid brothers to Marquez. The Heirs also had possessed the subject
property first in time. Thus, applying the principle, the Heirs, without a scintilla of doubt,
have a superior right to the subject property. Moreover, it is an established principle that
no one can give what one does not have¾nemo dat quod non habet. Accordingly, one can
sell only what one owns or is authorized to sell, and the buyer can acquire no more than
what the seller can transfer legally.53 In this case, since the Madrid brothers were no
longer the owners of the subject property at the time of the sale to Marquez, the latter
did not acquire any right to it.
Dela Merced vs. GSIS
365 SCRA 1
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
FACTS: This case involves five registered parcels of land located within the Antonio
Subdivision, Pasig City Lots 6, 7, 8, and 10 of Block 2 and Lot 8 of Block 8 (subject
properties). These lots were originally owned by, and titled in the name of, Jose C. Zulueta
(Zulueta), as evidenced by Transfer Certificate of Title (TCT) No. 26105 which contains
several lots other than the subject properties within the Antonio Subdivision.
Later, the Zulueta spouses mortgaged several lots contained in TCT No. 26105 to the GSIS,
which eventually foreclosed on the mortgaged properties, including the subject
properties. Upon consolidation of GSISs ownership, TCT No. 26105 in Zuluetas name was
cancelled, and TCT No. 23554 was issued in GSISs name.
Upon learning of the foreclosure, petitioners predecessor, Francisco Dela Merced (Dela
Merced), later on substituted by his heirs, filed a complaint praying for the nullity of the
GSIS foreclosure on the subject properties (Lots 6, 7, 8, and 10 of Block 2 and Lot 8 of
Block 8) on the ground that he, not the Zuluetas, was the owner of these lots at the time
of the foreclosure. Dela Merced also impleaded Victor and Milagros Manlongat, who
were claiming Lot 6, Block 2 by virtue of a sale executed by the GSIS in their daughters
(Elizabeth Manlongat) favor. Dela Merced argued that, due to the nullity of GSISs
foreclosure over the subject properties, it had no ownership right that could be
transferred to Elizabeth Manlongat.
After a protracted litigation, the SC rendered a Decision in the petitioners favor and
nullified GSISs foreclosure of the subject properties because these lots were never part of
its mortgage agreement with the Zulueta spouses. Pursuant to the finality of the Decision,
petitioners filed a Motion for Execution which GSIS opposed on the basis of Section 39 of
the GSIS Act of 1997 (RA 8291 which allegedly exempts GSIS funds and properties from
attachment, garnishment, execution, levy and other court processes. A writ of execution
was finally issued, however, first by the RTC and then by the CA. The GSIS filed a petition
for review before the SC which was denied by the latter.
28 After the resolution of the issue of GSISs exemption, petitioners encountered more
problems with the execution of the Decision. According to the RD of Pasig City, Policarpio
Page
Espenesin, he could not cancel the titles of GSIS over Lots 7 and 8 because it no longer
had title over these two lots and had already conveyed the same to two other persons.
Hence, the RD claimed that the writ of execution must first be modified to include the
cancellation of derivative titles of the GSIS title.
ISSUES:
I. Whether the GSIS can still raise the issue of exemption
II. Whether a final and executory judgment against GSIS and Manlongat can be enforced
against their successors-in-interest or holders of derivative titles

III. Whether an order to cancel title to a particular property includes an order to provide
technical descriptions and segregate it from its mother title
HELD:
(1) The issue of GSISs alleged exemption under RA 8291 had been finally decided against
when this Court denied GSISs petition for review. GSISs attempt to resurrect the same
issue by interjecting the same in this proceeding is barred by the principle of "law of the
case," which states that "determinations of questions of law will generally be held to
govern a case throughout all its subsequent stages where such determination has already
been made on a prior appeal to a court of last resort."
(2) A notice of lis pendens is an announcement to the whole world that a particular real
property is in litigation, serving as a warning that one who acquires an interest over said
property does so at his own risk, or that he gambles on the result of the litigation over the
said property. It is not disputed that petitioners caused the annotation of lis pendens on
TCT No. 23554 of the lots in question. The current holders of the derivative titles to these
lots were aware of such annotation when the individual titles were issued to them.
Ineluctably, both were bound by the outcome of the litigation.
(3) The order contained in the Decision in G.R. No. 140398 is for the RD to cancel GSISs
titles over Lot 10, Block 2 and Lot 8, Block 8, inter alia. Whether these titles are individual
or contained in a mother title is of no consequence. The RD has to cause their
cancellation. If the cancellation can only be carried out by requiring GSIS or the Bureau of
Lands to provide the necessary information, then they can be compelled to do so.
Otherwise, the Courts decision would be rendered inefficacious, and GSIS would retain
ostensible ownership over the lots by the simple expedience that they are included in a
mother title, instead of individual titles. That result is manifestly contrary to the Courts
ruling and would subvert the very purpose of bringing this case for a complete resolution.
San Lorenzo Development Corp. vs. CA
449 SCRA 99
FACTS: Enrique Salvatierra died intestate and without any issue. He was survived by his
legitimate brothers: Tomas, Bartolome, Venancio and Macario, and sister Marcela. His
estate consisted of three parcels of land.
An Extrajudicial Partition with Confirmation of Sale was executed by and among the
surviving legal heirs and descendants of Enrique Salvatierra, which consisted of Lot No.
25, 26 and 27. By virtue of the sale executed by Marcela in favor of Venancio, the latter
now owns 2/5 shares of the estate. By virtue of the sale by Bartolome’s heirs Catalina and
Ignacia, of his undivided shares to Tomas, now deceased, represented by his widow,
Catalina Azarcon, the latter now owns 2/5 shares in the said estate. Anselmo Salvatierra
represented his father Macario, who had already died.
Thereafter, Venancio sold the whole of Lot No. 27 and a 149-sq. m. portion of Lot 26 to
herein respondent spouses Lino Longalong and Paciencia Mariano. The Longalongs took
possession of the said lots. It was discovered in 1982 (through a relocation survey) that
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
the 149 sq. m. portion of Lot No. 26 was outside their fence. It turned out that Anselmo
Salvatierra was able to obtain a title, Original Certificate of Title No. 0-4221 in his name,
the title covering the whole of Lot. No. 26 which has an area of 749 sq. m.
Private respondents Longalong then filed a case with the RTC for the reconveyance of the
said portion of Lot 26.
ISSUES:
1. Whether or not there was a double sale.
2. Which prescriptive period for actions for annulment should prevail, Art. 1391 of the
New Civil Code which limits the filing of actions to four (4) years or Art. 1144 of the same
Code which limits the period of the filing of actions on certain grounds to ten years?
RULING:
Petitioners rely on the theory that this is a case of double sale case of Lot No. 26 to both
petitioners and respondents Longalong, et. al. A perusal of the records and evidence,
reveals otherwise. Both parties did not dispute the existence and contents of the
Extrajudicial Partition with Confirmation of Sale, as both presented them as their
respective exhibits. The parties may not have realized it, but the deciding factor of this
dispute is this very document itself. It is very clear therein that Macario Salvatierra’s share
in the estate of the deceased Enrique Salvatierra is only 405 sq. m. out of the 749 sq. m.
comprising Lot No. 26. Since Venancio Salvatierra, under this document, is to get a
portion of Lot No. 26 in addition to Lot No. 27, then it follows that Venancio is entitled to
the remaining 344 sq. m. of Lot No. 26, after deducting the 405 sq. m. share of Macario.
The applicable provision in the case at bar is Art. 1144 of the New Civil. Art. 1391 of the
same code, referred to by petitioners is not in point. This article must be read in
conjunction with Art. 1390 which refers to voidable contracts. This case at hand involves
fraud committed by petitioner Anselmo Salvatierra in registering the whole of Lot No. 26
in his name, with evident bad faith. In effect, an implied trust was created by virtue of Art.
1456.
29
In this connection, we hold that an action for reconveyance of registered land based on
Page
an implied trust may be barred by laches. The prescriptive period for such actions is ten
(10) years from the date the right of action accrued. The complaint for reconveyance was
filed by the Longalong spouses on November 22, 1985, only five (5) years after the
issuance of the O.C.T. No. 0-4221 over Lot No. 26 in the name of Anselmo Salvatierra.
Hence prescription has not yet set in.
G.R. No. L-27587, 18 February 1970
Carumba vs. Court of Appeals
Facts: In 1955, the spouses Amado Canuto and Nemesia Ibasco, by virtue of a “Deed of
Sale of Unregistered Land with Covenants of Warranty” sold a parcel of land located in
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Camarines Sur, to the spouses Amado Carumba and Benita Canuto, The referred deed of therefore, the judgment debtor no longer had dominical interest nor any real right over
sale was never registered in the Office of the RD of Camarines Sur, and the Notary was the land that could pass to the purchaser at the execution sale. Hence, the latter must
not then an authorized notary public in the place. In 1957, a complaint for a sum or yield the land to petitioner Carumba.
money was filed by Balbuena against Amado Canuto and Nemesia Ibasco before the
Justice of the Peace Court. A decision was rendered in favor of Balbuena and against the Said rule is different in case of lands covered by Torrens titles, where the prior sale is
defendants. In 1968, the ex-officio Sheriff issued a “Definite Deed of Sale of the property neither recorded nor known to the execution purchaser prior to the levy; but the land
now in question in favor of Balbuena, which instrument of sale was registered before the here in question is admittedly not registered under Act No. 496.
Office of the RD.
------------------------------------------
The CFI, finding that after execution of the document Carumba had taken possession of
the land, and planted thereon:
3) To deliver the fruits and accessories (Art. 1537)
1. declared him to be the owner of the property under a consummated sale;
- In the condition in which they were upon the perfection of the
2. held void the execution levy made by the sheriff, pursuant to a judgment
contract.
against Carumba’s vendor, Amado Canuto;
- All fruits shall pertain to the vendee from the day on which the
3. and nullified the sale in favor of the judgment creditor, Balbuena.
contract was perfected.
The CA, without altering the findings of fact made by the court of origin, declared that
4) To pay for the expenses of the execution and registration (Art. 1487)
there having been a double sale of the land subject of the suit Balbuena’s title was
- Unless there is a stipulation to the contrary.
superior to that of his adversary under Article 1544 of the Civil Code of the Philippines
since the execution sale had been properly registered in good faith and the sale to
5) Conditions and Warranties
Carumba was not recorded.
a)Condition; concept (Art. 1545) – where the obligation of either party to a contract of
Issue: WON the petitioner has a superior title over the land and rule on double sale
sale is subject to any condition which is not performed, such party may:
applies.
i) refuse to proceed with the contract; or
Held: The Court ruled that while under the invoked Article 1544 registration in good faith
ii) waive performance of the condition.
prevails over possession in the event of a double sale by the vendor of the same piece of
land to different vendees, said article is of no application to the case at bar, even if
- If the other party has promised that the condition should happen or
Balbuena, the later vendee, was ignorant of the prior sale made by his judgment debtor in
be performed, such first mentioned party may also treat the non-
favor of petitioner Carumba. The reason is that the purchaser of unregistered land at a
performance of the condition as a breach of warranty.
sheriff’s execution sale only steps into the shoes of the judgment debtor, and merely
acquires the latter’s interest in the property sold as of the time the property was levied
- Where the ownership of the thing has not passed, the buyer may
upon. This is specifically provided by section 35 of Rule 39 of the Revised Rules of Court, 30 treat the fulfillment by the seller of his obligation to deliver the same
the second paragraph of said section specifically providing that:
as described and as warranted expressly or by implication in the
contract of sale as a condition of the obligation of the buyer to
Page

Upon the execution and delivery of said (final) deed the purchaser,
perform his promise to accept and pay for the thing.
redemptioner, or his assignee shall be substituted to and acquire all the right,
title, interest, and claim of the judgment debtor to the property as of the time of
the levy, except as against the judgment debtor in possession, in which case the Obligations which cannot be Waived:
substitution shall be effective as of the time of the deed … (Emphasis supplied) 1. Obligation to transfer
2. Obligation to deliver
While the time of the levy does not clearly appear, it could not have been made prior to
1957, when the decision against the former owners of the land was rendered in favor of Obligation which can be Waived:
Balbuena. But the deed of sale in favor of Canuto had been executed two years before, in 1. Obligation to warrant the thing
1955, and while only embodied in a private document, the same, coupled with the fact
that the buyer (petitioner Carumba) had taken possession of the unregistered land sold,
sufficed to vest ownership on the said buyer. When the levy was made by the Sheriff,

b) Warranty – where one party promised that the contingency or some act fixed by the
contract shall be performed, like a promise that the goods are of a certain kind and
character or that certain state of facts would exist, the promise constitutes a
warranty, and failure of which gives rise to an action for its breach. Breach: the buyer
may
(1) accept goods + maintain an action for damages
(2) accept goods + set up breach of warranty as a recoupment in
diminution/ extinction of price
(3) refuse to accept goods and maintain action for damages
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Test: whether the vendor assumes to assert a fact of which the buyer is ignorant, in which
case it is a warranty, or whether it is merely an expression of an opinion or judgment on
the part of the seller on a matter of which the seller has no special knowledge and on
which the buyer may be expected also to have an opinion or exercise his judgment.
 “In good condition” v. “Excellent quality” – the first relates to the quantity, kind or
condition of the goods sold, it is an affirmation of fact or promise, and not a mere
expression of an opinion; the second is not an express warranty and the purchaser
must rely on the implied warranty that the goods are merchantable; mere
expression of an opinion6

Distinguished from false representation

(4) rescind + refuse to accept goods; or return (or offer to return) goods +
recover price paid
Distinguished from condition
Condition
Generally goes into the root of the
existence of the obligation
Must be stipulated by the parties in order
to form part of an obligation
May attach itself either to obligation of
seller to deliver possession or transfer
ownership over subject matter of sale
Warranty
Goes into the performance of such
obligation, and in fact may constitute an
obligation in itself
May form part of obligation by contract or
provision of law, without parties having
agreed thereto
Whether express or implied, relates to
subject matter itself or to the obligations of
the seller as to the subject matter of the
sale
PHIL. MANUFACTURING v. Go JUCCO: An intention to deceive or mislead the other party
to his prejudice is an essential element of fraud. Concealment of facts does not
necessarily amount to false representation, unless there was an active misstatement of
fact or a partial statement of fact, such that withholding of that which is not stated makes
that which is stated absolutely false.
1) Express (Art. 1546) – any affirmation of fact or any promise by the seller relating to
the thing, the natural tendency is to induce to purchase the thing.
 There must be an affirmation of fact;
 The fact must pertain to the thing either to the quality, character or title of the
thing.
The use of the words / terminologies is not conclusive as to whether or not there is an express
warranty.
6
SONGCO v SELLNER: Opinion or dealer’s talk is not warranty. Opinion or dealer’s talk is
the usual or ordinary means used by sellers to get a high price and is understood as
31 affording to buyers no ground for omitting to make inquiries. Caveat emptor. A man who
relies on such an affirmation does so at his own peril and must take the consequences of his
imprudence.
Page

Distinguished from opinion, dealer’s talk What would make a misrepresentation void: (a) false representation is as to matters of
fact substantially affecting buyer’s interest, and not as to matters of opinion, judgment,
a) Warranty – an affirmation of fact or any promise by seller relating to the thing which probability or expectation; (b) the party to the contract who has special/expert knowledge
has a natural tendency to induce the buyer to purchase the same, relying on such promise takes advantage of the ignorance of another to impose upon him the false representation.

of affirmation

b) Opinion/dealer’s talk – an affirmation of the value of the thing or any statement of the MOLES v IAC: Ordinarily, what does not appear on the face of the written instrument should
seller’s opinion shall not be construed as a warranty, unless the seller made such an be regarded as dealer's or trader's talk; conversely, what is specifically represented as true in
affirmation as an expert and it was relied upon by the buyer said document, as in the instant case, cannot be considered as mere dealer's talk

Example: “I guaranty / warranty you that you will be happy if you buy this car at P100,000”→ this
does not result in an express warranty
Again, if the affirmation of fact pertains to the quality of the thing, it is an express warranty.
Example: These 10 sacks of fertilizer would result in 200 cavans of rice.
The statement of the seller’s opinion is not as a rule considered an express warranty.
Example: “This is the best piña cloth” → it may turn out that there are better piña cloth.
As long as the seller is not an expert on that field, that would be treated merely as an opinion and
there can be no liability for breach of an express warranty.
BE: “A” sold a land to B for P1M in Antipolo. As agreed upon P100,000 will be paid upon the
signing of the DOS. The balance will be paid within 30 days from the time the occupants
(squatters) of the land are evicted. It was so stipulated that if within 6 months, the squatters
have not yet been evicted, the seller should return the P100,000. Another stipulation states
– within the 6-month period, the value of the land doubled. Despite the filing of an eviction
suit by the seller and the lapse of the 6-month period, the squatters were still occupying the
land. The seller offers to return the P100,000 to the buyer. The buyer refused to accept the
P100,000 and told the seller “never mind even if the squatters are still there. I will still buy
the land”. So the buyer offered to pay the balance P900,000 and demanded that a DOS be
executed by the seller. The seller refused to accept the P900,000. What he did is to file an
action to rescind the contract. Would the action prosper?
SA: If the answer is based on rescission, the action will not prosper because rescission may only
be invoked by the aggrieved party. The seller is not an aggrieved party.
2. Implied (Art. 1547) – those which are not stipulated but provided by law.
Prof. De Leon: because of this implied warranty, it cannot be said that Philippine law does not
adopt caveat emptor “buyer beware
Even if there is no stipulation as to these warranties, the law itself would provide for these
warranties and hence if there are hidden defects he would have remedies under the law or even if
he was deprived of the thing he bought he would have a remedy against the seller. Hence, it is not
correct to say that Philippine law has adopted caveat emptor. But there are certain instances when
32
there would be no such implied warranty against hidden defects. There may be warranty as to title
or against eviction but there is no warranty against hidden defects under certain circumstances.
Page
A) Warranty against eviction/of seller’s title (Art. 1548-1559) – in order for the vendor
to be held liable, the following requisites must be complied with:
1. Existence of a final judgment depriving the vendee of the whole or part of the
thing purchased;
In other words, a case was filed by a 3rd person against the buyer which resulted
in a favorable decision as to the plaintiff resulting in the deprivation of the property
by the buyer.
2. Deprivation must be either
a) based on a third person’s prior right over the thing or
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
b) based on an act imputable to the vendor;
3. There should be no valid waiver;
4. The action to hold the vendor liable should be filed within the period
prescribed by law
Q: If the seller was able to transfer ownership to the buyer may the seller nonetheless be
held liable for breach of warranty against eviction?
A: Yes. These are 2 different obligations: the obligation to transfer ownership and the obligation to
warrant the thing.
Example: This warranty against eviction would include the warranty that the buyer from the
moment of the sale have and enjoy the legal and peaceful possession over the thing sold.
-------------------------------------------
Jurisprudence:
G.R. No. L-41233, 21 November 1979
J.M. Tuason & Co., Inc. vs. CA
Facts: Petitioner executed, in favor of Ricardo de Leon, a contract to sell a lot with the
agreed price of P24.60 per square meter. At the execution of the contract, Ricardo de
Leon paid the down-payment of P4,190.86 and agreed to pay the balance in the monthly
installment of P498.63 including the agreed annual interest of 10%. Meanwhile, on April
10, 1953, petitioner signed a compromise agreement with the Deudors. On July 19, 1965
with the consent of the petitioner, Ricardo de Leon transferred all his rights to the lot in
favor of his parents, herein private respondents Alfonso and Rosario de Leon. On the
same date, private respondents paid the outstanding balance of the purchase price. At
the time of the execution of the contract to sell, the contracting parties knew that a
portion of the lot in question was actually occupied by Ramon Rivera. However, it was
their understanding that the latter will be ejected by the petitioner from the premises.
Petitioner filed a complaint of ejectment against Ramon Rivera before the CFI and later
petitioner Ricardo de Leon and respondents Alfonso and Rosario de Leon as necessary
parties and they were evicted from the premises in the question which was affirmed by
the CA. Private respondents filed the proper action before the CFI of Manila action against
J.M. Tuason & Co., Inc. to enforce the vendor's warranty against eviction or to recover the
value of the land plus damages.
The CFI decided the case against herein petitioner J.M. & Co., Inc. which was affirmed by
the CA.
Issue: WON the respondents are entitled to the vendor’s warranty eviction.
Held: The Court ruled that without being shown to be vendees in good faith, herein
respondents are not entitled to the warranty against eviction nor are they entitled to
recover damages (Article 1555 of the Civil Code).

The prior right of Ramon Rivera to purchase the lot in litigation was based more on his
prior occupancy to the same since 1949, about which fact respondents De Leon were
informed by petitioner at the time of the execution of the contract to sell. The execution
of the compromise agreement merely recognized this prior right, under the condition as
stipulated in said agreement, that it was possible to do so.
The Court did not have the hesitation to give to petitioner the benefit of the doubt of its
having acted in good faith, which is always presumed, without any intention of taking
advantage of the other party dealing with it. "Good faith consists in an honest intention to
abstain from taking any unconscientious advantage of another. Good faith is an opposite
of fraud and of bad faith and its non-existence must be established by competent proof."
Moreover, at the time of the execution of the contract to sell it is an admitted fact that
Ricardo de Leon knew that a third party was occupying a part of the lot subject of the
sale. Ricardo de Leon ought to have known that he was buying a property with the
distinct possibility of not being able to possess and own the land due to the occupancy of
another person on the same. So there had to be an understanding between him and the
petitioner for the latter to eject the occupant, something which, by the facts then
obtaining and the law relevant thereto, would make the ejectment more speculative than
certain. Nonetheless, Ricardo de Leon knowingly assumed the risk when he bought the,
land, and was even called a vendee in bad faith by the Court of Appeals in doing so,
clearly not an innocent purchaser in good faith. If petitioner that it would eject Ramon
Rivera, he did so, not knowing that the compromise agreement would stand on the way,
as it had thought, in all good faith, that paragraph 7 of the compromise agreement
excluded the lot in question, having been already sold to Ricardo de Leon before the
agreement was executed in court.
One who purchases real estate with knowledge of a defect or lack of title in his vendor
cannot claim that he has acquired title thereto in good faith, as against the true owner of
the land or of an interest therein; and the same rule must be applied to one who has
knowledge of facts which should have put him upon such inquiry and investigation as
might be necessary to acquaint him with the defects in the title of his vendor. A purchaser
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.
G.R. No. L-42636, 1 August 1985
Escaler vs. CA
Facts: Spouses Africa V. Reynoso and Jose L, Reynoso sold to petitioners several others, a
parcel of land which Deed of Sale contained a covenant against eviction. On April 21,
1961, the Register of Deeds of Rizal and A. Doronilla Resources Development, Inc. filed a
case before the CFI of Rizal for the cancellation of the OCT issued in the name of Angelina
Reynoso (predecessor-in-interest of private respondents-vendors) on the ground that the
property covered by said title is already previously registered under a TCT issued in the
name of A. Doronilla Development, Inc. In that case, an order was issued declaring the
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
OCT null and void. Petitioners, spouses Maria de Leon Escaler and Ernesto Escaler and
spouses Cecilia J. Roxas and Pedro Roxas, filed a civil case before the CFI of Rizal against
their vendors, herein private respondents, spouses Jose L. Reynoso and Africa Reynoso
for the recovery of the value of the property sold to them plus damages on the ground
that the latter have violated the vendors' "warranty against eviction."
The CFI rendered a judgment ordering the return to the plaintiffs Maria Luisa de Leon
Escaler and Ernesto Escaler, Cecilia J. Roxas and Pedro Roxas, the value of the property
sold to them at the time of eviction. The CA reversed this decision and ruled that
petitioners as vendees had not given private respondents-vendors, formal notice of the
eviction case as mandated by Arts. 1558 and 1559 of the New Civil Code.
Issue: WON a vendor’s liability for eviction may be enforced in the case at bar.
Held: The Court ruled that the petition is devoid of merit. Consequently, it must be
dismissed.
Article 1548, in relation to Articles 1558. and 1559 of the New Civil Code reads as follows:
Art. 1548, Eviction shall take place whenever by a final judgment based on a
right prior to the sale or an act imputable to the vendor, the vendee is deprived
of the whole or of a part of the thing purchased.
The vendor shall answer for the eviction even though nothing has been said in
the contract on the subject.
The contracting parties, however, may increase, diminish, or suppress this legal
obligation of the vendor.
Xxxx
Art. 1558. The vendor shall not be obliged to make good the proper warranty,
unless he is summoned in the suit for eviction at the instance of the vendee.
33 (emphasis supplied)
Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of
Page
Court for answering the complaint that the vendor be made as co-defendant
In order that a vendor's liability for eviction may be enforced, the following requisites
must concur: — a) there must be a final judgment; b) the purchaser has been deprived of
the whole or part of the thing sold; c) said deprivation was by virtue of a right prior to the
sale made by the vendor; and d) the vendor has been summoned and made co-defendant
in the suit for eviction at the instance of the vendee.
In the case at bar, the fourth requisite—that of being summoned in the suit for eviction
(Case No. 4252) at the instance of the vendee—is not present. All that the petitioners did,
per their very admission, was to furnish respondents, by registered mail, with a copy of
the opposition they (petitioners filed in the eviction suit. Decidedly, this is not the kind of

notice prescribed by the aforequoted Articles 1558 and 1559 of the New Civil Code. The
term "unless he is summoned in the suit for eviction at the instance of the vendee"
means that the respondents as vendor/s should be made parties to the suit at the
instance of petitioners-vendees, either by way of asking that the former be made a co-
defendant or by the filing of a third-party complaint against said vendors. Nothing of that
sort appeared to have been done by the petitioners in the instant case.
-------------------------------------------
(a) Warranty against hidden defects (Arts. 1560-61, 1566-81) – refers to
such defects as would render the thing unfit for the use intended or would diminish
its fitness for such use to such an extent that, had the vendee been aware thereof,
he would not acquire it or have given a lower price for it.
The following requisites must be present in order for the vendor to be held liable:
i. Defect must exist at the time of the sale;
ii. Defect must be hidden;
iii. Defect must result in the thing being unfit for the purpose of
the buyer or at least diminish the fitness of the thing.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Q: If the thing which has a hidden defect was lost or destroyed, can the vendee hold the
vendor liable for this breach of warranty? Does it matter if the loss was due to a fortuitous
event or maybe the loss was due to the fault of the buyer himself, nonetheless, can he hold
the vendor liable?
A: Yes. The vendee can hold the vendor liable for breach of warranty against hidden defects even
if the thing was lost due to fortuitous event or due to the fault of the vendee himself because of the
hidden defects. But of course, if the cause of the loss was the defect itself, the liability is greater
than if the cause of the loss was a fortuitous event or fault of the buyer.
If there would be a problem here as to the extent of the liability of the vendor, he should first
consider the cause of the loss, maybe it was lost due to the defect itself or lost through fortuitous
event or lost through the fault of the vendee. After that, he should determine whether the vendor
was aware of the defects or he was not aware. Again, if he was aware, damages may be
recovered. If he was not aware, he may not be held liable for damages unless he can only be held
liable for interest.
If the defect was the cause of the loss, the vendor would be liable for the return of the price, not
only the price less value but also to refund the expenses and damages because the vendor was
aware of the defects.

 Instances where no warranty against hidden defects: If the vendor was not aware of the defects, he cannot be held liable for damages but he would only
be held liable for the price.
a. “As is, where is” sale – the seller disclaims liability and
If the cause of the loss of the thing was a fortuitous event, he can only be held liable for the price
it is the buyer’s responsibility to get the item where it is less value.
located at the time of the sale.
However, ANY CHARGE OR NON – APPARENT ENCUMBRANCE NOT DECLARED OR KNOWN TO THE
b. Sale of secondhand items BUYER
there is still
Q: Would there be an encumbrance over an immovable which is a form of easement or
warranty servitude?
c. Sale of animals in fairs
against A: An example of this is a road right of way.
eviction. d. Sale in public auction Q: If the buyer bought the land which turned out to have a road right of way in favor of a 3 rd
person, can he claim breach of warranty against any charge or non – apparent
encumbrance?
34 A: Of course there are requisites:
(1) The encumbrance or easement or burden or the road right of way has to be non –
DEFFECT MUST BE HIDDEN apparent.
Page

If the defect is patent and the buyer nonetheless bought the thing then he can no longer hold the
seller liable.
If the seller is not aware of the hidden defects, he can be held liable. If he was aware, his liability
will be greater because that makes him a bad faith seller.
Q: Even if there is such a hidden defect, is it possible that the vendee cannot hold the
vendor liable despite the fact that there was hidden defect even if he was not informed
because maybe the seller was not aware?
A: Yes, he may not be able to hold the seller liable if he is an expert on the thing. He is expected to
know the defect.
Q: If there is an encumbrance, what are the remedies of the buyer?
A: (a) He can seek for the reduction of the price.
(b) Rescission - the law requires that the action for rescission must be filed within 1 year from
the date of the contract. If after 1 year, no more rescission.
(c) If he became aware more than a year, he may file an action for damages, But the law
requires that the action for damages has to be filed within 1 year also but from the time of the
discovery of encumbrance. If he filed it for example, after 2 years from discovery – no recovery of
damages.

The defect must result in the thing being unfit for the purpose of the buyer or at least it diminish the
-------------------------------------------
fitness of the thing such that the buyer would not have bought it at the price had he known of such
Jurisprudence:
defect.

G.R. No. 73913, 31 January 1989
Moles vs. IAC
Facts: petitioner needed a linotype printing machine for his printing business, The LM
Press at Bacolod City, and applied for an industrial loan with the Development Bank of the
Philippines (DBP) for the purchase thereof. An agent of Smith, Bell and Co. who is a friend
of petitioner introduced the latter to private respondent, owner of the Diolosa Publishing
House in Iloilo City, who had two available machines. Thereafter, petitioner went to Iloilo
City to inspect the two machines offered for sale and was informed that the same were
secondhand but functional. On his second visit to the Diolosa Publishing House, petitioner
decided to buy the linotype machine. The transaction was basically verbal in nature but to
facilitate the loan application with the DBP, a pro forma invoice was signed by petitioner
with an addendum that payment had not yet been made but that he promised to pay the
full amount upon the release of his loan from the aforementioned bank on or before the
end of the month. The machine was delivered to petitioner's publishing house where it
was installed by an employee of respondent Diolosa. Prior to the release of the loan, a
representative from the DBP, Bacolod, supposedly inspected the machine but he merely
looked at it to see that it was there where later on received the DBP check for P50,000.00.
On November 29, 1977, petitioner wrote private respondent that the machine was not
functioning properly as it needed a new distributor bar. In the same letter, petitioner
unburdened himself of his grievances and sentiments in this wise. After their requests to
check the machine went unheeded, petitioner thus finally decided to indorse the matter
to his lawyer. An expert witness found several defects. Having found defects in said
machine, the witness informed Sy Brother about his findings, hence the purchase was
aborted. In his opinion, major repairs were needed to put the machine back in good
running condition.
On 17 May 1978, petitioner Jerry T. Moles commenced a suit against private respondent
Mariano M. Diolosa in the aforesaid trial court in Bacolod City, for rescission of contract
with damages. Private respondent moved to dismiss on the ground of improper venue.
This was opposed by petitioner who averred that there is no formal document evidencing
the sale which is substantially verbal in character. In an order dated June 23, 1978, the
trial court denied the motion to dismiss, holding that the question of venue could not be
resolved at said stage of the case. The subsequent motion for reconsideration was
likewise denied.
Issues:
1. WON there is an implied warranty of its quality or fitness on a secondhand item;
2. WON the hidden defects in the machine is sufficient to warrant a rescission of the
contract between the parties.
Held: As to the first issue, the Court ruled that there is no implied warranty as to the
condition, adaptation, fitness, or suitability for the purpose for which made, or the
quality, of an article sold as and for a secondhand article.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
The respondent court cited the ruling in Sison vs. Ago, et al. to the effect that unless
goods are sold as to raise an implied warranty, as a general rule there is no implied
warranty in the sale of secondhand articles.
Said general rule, however, is not without exceptions. Article 1562 of our Civil Code,
which was taken from the Uniform Sales Act, provides:
Art. 1562. In a sale of goods, there is an implied warranty or condition as to the
quality or fitness of the goods, as follows:
1) Where the buyer, expressly or by implication, makes known to the seller the
particular purpose for which the goods are acquired, and it appears that the
buyer relies on the seller's skill or judgment (whether he be the grower or
manufacturer or not), there is an implied warranty that the goods shall be
reasonably fit for such purpose;
In the present case, a certification to the effect that the linotype machine bought by
petitioner was in A-1 condition was issued by private respondent in favor of the former.
This cannot but be considered as an express warranty. However, it is private respondent's
submission that the same is not binding on him, not being a part of the contract of sale
between them. This contention is bereft of substance.
It must be remembered that the certification was a condition sine qua non for the release
of petitioner's loan which was to be used as payment for the purchase price of the
machine. Private respondent failed to refute this material fact. Neither does he explain
why he made that express warranty on the condition of the machine if he had not
intended to be bound by it. In fact, the respondent court, in declaring that petitioner
should have availed of the remedy of requiring repairs as provided for in said certification,
thereby considered the same as part and parcel of the verbal contract between the
parties.
On the basis of the foregoing circumstances, the inescapable conclusion is that private
respondent is indeed bound by the express warranty he executed in favor of herein
35 petitioner.
As to the second issue, the Court considered the rule on redhibitory defects
Page
contemplated in Article 1561 of the Civil Code. A redhibitory defect must be an
imperfection or defect of such nature as to engender a certain degree of importance. An
imperfection or defect of little consequence does not come within the category of being
redhibitory.
Nutrimix Feeds Corporation vs. CA
25 October 2004
FACTS: Evangelista spouses purchased feeds from Nutrimix. They refused to pay their
unsettled debt claiming that thousands of their livestock were poisoned by the Nutrimix
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
feeds. Nutrimix sued them for collection of money. The spouses countered with a suit for 2. The seller manifested that the thing would be fit for the purpose and the buyer relied on
such representation of the seller.
damages. Various expert witnesses were presented during the trial.
Note: If the thing is sold under the trade name there can be no warranty of fitness for a particular
ISSUE: W/N Nutrimix should be held liable for the death of the livestock purpose.

HELD: NO. In alleging that there was a violation of warranty against hidden defects, the WARRANTY OF MERCHANTABILITY
spouses assumed the burden of proof. However, this they failed to overcome. Under the It pertains to the fact that it is fit for the general purpose. If the thing was sold by description or by
law, the defect must exist at the time the sale was made and at the time the product left sample, it is considered that there is such a thing as warranty of merchantability.
the hands of the seller, which the spouses failed to prove. The feeds were belatedly
tested—3 months after the death of the broilers and hogs. This means that at that time,
Instances whether there would be no warranty against hidden defects and therefore caveat
they may have already been contaminated.
emptor may be invoked:
1. Sale which is an “as is where is” sale which means sale where it is found xxx bahala ka sa
They failed to prove that the feeds delivered to be tested were the same feeds that buhay mo if you want to buy the thing and you cannot later on claim that there were hidden defects.
allegedly poisoned the animals. It is also common practice for them to mix different kinds (Faye: pls. research the complete meaning of “as is where is” sale. Atty. Uribe will ask the
of feeds. The mere death of the animals does not raise a prima facie case of breach of meaning. )
warranty. In this case, the evidence presented by the spouses are only circumstantial. 2. Sale of 2nd hand items
The remedies of breach of warranty against hidden defects are either withdrawal from 3. Sale of animals in fairs
the contract or to demand a proportionate reduction of the price plus damages in either 4. Sale in public auction
case. In this case, though the spouses failed to make out their case, hence they should be
Note: There would still be warranty against eviction.
liable for their debt.
Note: Rules on warranty also apply to judicial sale.

Q: In sale by authority of law or in execution sale, can there be breach of warranty against
------------------------------------------- eviction?
A: Yes. The judgment debtor and not the sheriff shall be liable.
(b) Warranty of quality (Arts. 1562-65, 1586, 1599 (5))
The law would specifically exempt certain persons from liability for breach of warranty like sheriff,
a. Warranty of merchantability – it pertains to the fact that it is fit for the general auctioneer, mortgagee, pledge and other persons who sell by virtues of an authority of law like
notary public because they are not really selling for themselves, they are selling on behalf of
purpose especially if the thing was sold by description or by sample.
another person.

b. Warranty of fitness – the thing bought may not actually have any defect and for
one million buyers, it would be fit for their purpose. However, it may not be fit
for the purpose of one buyer and if all the requisites for this warranty are
present, then the buyer may hold the seller liable for breach although there is 36
no hidden defect, as long as not fit for the purpose of the buyer.
 Buyer has to inform the seller of the particular purpose for which
Page
5. Rule in case of sale under a patent or trade name (Art. 1563) – there is no
warranty as to its fitness for any particular purpose, unless there is stipulation to the
contrary.
6. Effect of usage of trade (Art. 1564) – it may annexed an implied warranty or
condition as to the quality or fitness for a particular purpose.

the thing is to be used;

 Seller manifested that the thing would be fit for the purpose and
7. Rule in case of goods sold by sample (Art. 1565) – if the seller is a dealer in
the buyer relied on such representation of the seller.
goods of that kind, there is an implied warranty that the goods shall be free from any
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE defect rendering them unmerchantable which would not be apparent on reasonable
examination of the sample.
The thing bought may not actually have any defect and for 1 million buyers it would be fit for their
purpose. However, it may not be fit for the purpose of 1 buyer and if all the requisites for this
warranty are present, then he may hold the seller liable for breach of warranty of fitness for a 3. Alternative remedies of buyer to enforce the warranties; prescriptive period
particular purpose although there is no hidden defect but it is not fit for the purpose of the buyer. (Arts. 1567, 1571) – the vendee may elect between:
In order for the seller may be held liable:
1. The buyer has to inform the seller of the particular purpose for which the thing is to be
i.) Withdrawing from the contract;
use and
ii.) Demanding a proportionate reduction of the price.

iii.) Plus damages in any case between i.) and ii.)
*actions barred after 6 months from the delivery of the property/thing
sold.
8. Loss of the thing sold due to hidden defects (Arts. 1567-69) – in cases provided
under Arts. 1561-62, 1564-66, the vendee may elect between withdrawing from
the contract and demanding a proportionate reduction of the price, with
damages in either case.
- If the vendor was aware of the hidden defects, he shall bear the loss,
and shall be obliged to return the price and refund the expenses of
the contract, with damages. If he was not aware of them, he shall only
return the price and the interest thereon, and reimburse the expenses
of the contract which the vendee might have paid.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Q: If one of the animals has redhibitory defect, can the buyer rescind the entire contract
pertaining to all the animals?
A: G.R.: No. He can only rescind the contract pertaining to the animal with redhibitory defect. He
cannot rescind the entire contract pertaining to all animals.
Exception: If he can prove that he would not have bought the others had he known the defect of
one then he can rescind the entire contract.
Q: Who has the burden of proof that he would not have bought the others had he known of
the defect of one?
A: Normally, it would be the buyer. But the law under certain circumstances would provide for this
presumption that it is presumed that he would have bought the others had he known of the defect
of one.
Examples: He bought the animals in teams or in pairs then the presumption arises.
- Love birds (Ang mga love birds, kapag namatay yung isa later on mamatay din yung isa.
Minsan nga mgsuicide pa sya pag mag isa na lang sya. Iuuntog nya ulo nya sa cage
nya. )

- If the thing sold had hidden defects and lost through a fortuitous
event or through vendee’s fault, the latter may demand of the vendor
the price which he paid, less the value which the thing had when it
was lost. If the vendor acted in bad faith, he shall pay damages.

 Applicability of warranty on judicial sales (Art. 1570) – except that the

judgment debtor shall not be liable for damages.

 Prescriptive period of action (Art. 1571) – shall be barred after 6 months from
the delivery of the thing sold.

 Rules on sale of animals (Arts. 1572-81) – if 2 or more animals are sold

together,

General rule: the redhibitory defect of one shall only give rise to its
redhibition and not of that of the others. He cannot rescind the entire 37
contract pertaining to all animals.
Page

*Redhibitory defect (Art. 1576) – kind of defect that even by

examination of expert, it cannot be discovered.

Exception: if he can prove that he would not have bought the others had
he known the defect of one, then he can rescind the entire contract.

Presumption that the buyer would not have bought the others had
he known of the defect of one – arises when the buyer bought the
animals in teams or in pairs.

Sale of animals suffering from contagious diseases – VOID.

 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
the bill of lading was endorsed in blank by the person whose
VII. DOCUMENTS OF TITLE order the goods were deliverable.

A. Concept and function/purpose: - Who may negotiate? (Art. 1512) –

- A document used in the ordinary course of business in the sale or transfer
of goods, as proof of the possession or control of the goods, or authorizing
or purporting to authorize the possessor of the document to transfer or
receive, either by endorsement or by delivery, goods represented by such
document (Art. 1636).7
- Evidence of possession or control of goods described therein;
- Medium of transferring title and possession over the goods described
therein without having to effect actual delivery (Villanueva, 2009 ed.)
- The custody of a negotiable warehouse receipts issued to the order of the
owner, or to bearer, is a representation of title upon which bona fide
purchasers for value are entitled to rely , despite breaches of t rust or
violations of agreement on the part of the apparent owner (Siy Cong Bieng
v. HSBC, 56 Phil 598).
The functions of documents of title are
(1) Evidence of the possession or control of the goods described therein
(2) Medium of transferring title and possession over the goods described
therein without having to effect actual delivery thereof (Villanueva)
(3) Evidence of existence of contract to hold the depositary liable
B. Common forms of documents of title:
1. Dock warrant –
2. Bill of lading – is a document issued by the common carrier acknowledging
receipt of goods described therein for transportation to a designated place
and delivery to a named consignee.
3. Warehouse receipt –
4. Quedan –
38
C. Classes of documents of title:
Page
- The owner of the document;
- The one to whom possession or custody of the document
has been entrusted by the owner.
- Rights of the a person to whom the document has been negotiated
(Art. 1513, 1519) –
- He acquires the rights of his vendor
- Whatever rights the original cosignee had over the goods.
- Also the direct obligation of the carrier as if he were the
shipper.
- Can sue the carrier directly in his own name.
- Transfer of order document without indorsement (Art. 1515)
- If transferred for value by delivery, the transferee acquires a
right against the transferor to compel him to indorse the
document unless a contrary intention appears.
- Negotiation shall take effect as of the time when the
indorsement is actually made.
- Indorser not a guarantor (Art. 1517)
- Indorsemnt of a document of title shall not make the
indorser liable for any failure on the part of the bailee who
issued the document or previous indorsers thereof to fulfill
their respective obligations.
- Negotiation not impaired by (Art. 1518):
- The fact that the negotiation was a breach of duty on the
part of the person making the negotiation;
- 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 other paid for value

without notice of the breach.

1. Negotiable documents of title –
2.
- How negotiated?
- Negotiated by delivery of the document to another if by the
terms thereof, the goods are deliverable to bearer, or when
7
PHIL. TRUST CO. V NATIONAL BANK: The purpose of documents of title is that the seller
is allowed by fiction of law to deal with the goods described therein as though he had
physically delivered them to the buyer; and the buyer may take the document of title as
though he had actually taken possession and control over the goods described therein
Non-negotiable documents of title (Art. 1510) –
- Rights of the a person to whom the document has been negotiated
(Art. 1514)
- He acquires the title to the goods, subject to the terms of
any agreement with the transferor as against the transferor
subject to the terms of any agreement;
- He also acquires the right to notify the bailee who issued
the document of the transfer;
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
- Also a direct obligation of such bailee to hold possession of
the goods for him according to the terms of the document.

D. Warranties of a person negotiating or transferring documents (Art. 1516)

- He warrants that:
1. The document is genuine;
2. He has a legal right to negotiate or transfer it;
3. He has knowledge of no fact which would impair the
validity or worth of the document; and
4. He has a right to transfer the title to the goods;
5. The goods are merchantable or fit for a particular
purpose.

E. Rules on levy/garnishment of documents of title

39
Page
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
B. Rights of Vendee
VIII. RIGHTS AND OBLIGATIONS OF THE VENDEE
1. Right of inspection/examination (Art. 1584)
- Where goods are delivered to the buyer, which he has not previously
A. Principal Obligation of Vendee (1582) examined, he is not deemed to have accepted them unless and until he
- The vendee is bound to accept delivery and to pay the price of the has had reasonable opportunity of examining them for the purpose of
thing sold at the time and place stipulated in the contract. ascertaining whether they are in conformity with the contract if there is
- If the time and place should not have been stipulated, the payment no stipulation to the contrary.
must be made at the time and place of the delivery of the thing sold
General rule: When the seller tenders delivery of goods to the buyer, he is
Q: If the buyer received the goods delivered, does it mean that he already accepted? bound, on request, to afford the buyer a reasonable opportunity of
examining the goods.
A: No because receiving is preliminary to accepting. In fact, this is consistent to the right provided
by law to the buyer which is the right of inspection or the right of examination. Thereafter, he may
XPN: Unless otherwise agreed.
reject the goods if defective.

Q: When Is there obligation to pay?

2. Acceptance not a bar to action for damages (Art. 1586)

A: (1) As stipulated XPN: In the absence of express or implied agreement of the parties.
(2) If there is no stipulation, it would be at the time and place of delivery.
XPN to the XPN: If after the acceptance of the goods, the buyer fails to give
notice to the seller of the breach in any promise of warranty within a
reasonable time after the buyer knows, or ought to know of such breach,
1. No obligation to accept delivery by installments
the seller shall not be liable therefor.
(Art. 1583)
- This is the general rule.
3. No obligation to return goods wrongfully delivered (Art. 1587)
- Exception: unless otherwise agreed.
General rule: Where goods are delivered to the buyer, and he refuses to
4. Modes of manifesting acceptance (Art. 1585)
accept them, having the right so to do, he is not bound to return them to
- When the buyer intimates to the seller that he has accepted them;
the seller.
- When the goods have been delivered to him and he does any act in
relation to them which is inconsistent with the ownership of the
XPN: Unless otherwise agreed.
seller;
- When after the lapse of a reasonable time, he retains the goods
Requirement: It is sufficient if he notifies the seller that he refuses to
without intimating to the seller that he has rejected them. 40 accept them.
5. Effect of a wrongful refusal to accept (Art. 1588)
Page

Note: If he voluntarily constitutes himself a depositary, he shall be liable as

- The title passes to the buyer from the moment they are placed at his
such.
disposal.
4. Right to suspend the payment of price (Art. 1590)
6. Liability for interest (Art. 1589)
- The vendee owes interest for the period between the delivery of the
General rule: In the following cases:
thing and the payment of the price in the following cases:
1. The vendee be disturbed in the possession or ownership of the
(1) If so stipulated;
thing acquired
(2) If the thing sold and delivered produce fruits or income;
2. The vendee has reasonable grounds to fear such disturbance by
(3) If he should be in default, from the time of judicial or
vindicatory action or a foreclosure of mortgage.
extrajudicial demand for the payment of the price.
XPN:

1. The vendor gives security for the return of the price in a proper
case; or
2. It has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment.
Note: Mere act of trespass shall not authorize the suspension of the
payment of the price.
5. When rescission of sale of real property may be made (Art. 1591-92)
- When the vendor have reasonable grounds to fear the loss of
immovable property sold and its price.
- If such ground did not exist, Art. 1191 shall be observed.
- The vendee may pay even after the expiration of the time agreed
upon the rescission of the contract shall take place, as long as no
demand for rescission of the contract has been made upon him either
judicially or by a notarial act.
6. Rescission in case of sale of movable thing (Art. 1593)
- Shall of right take place in the interest of the vendor if the vendee,
upon the expiration of the period fixed for the delivery of the thing,
should not have appeared to receive it, or having appeared, he should
not have tendered the price at the same time unless a longer period
has been stipulated for its payment.
-------------------------------------------
Jurisprudence:
G.R. No. 142310, 30 September 2004
Arra Realty Corp., et. al. vs. Guarantee Dev’t. Corp.
Facts: Arra Realty Corporation (ARC) was the owner of a parcel of land. Through its
president, the ARC decided to construct a five-story building on its property and engaged
the services of Engineer Erlinda Peñaloza as project and structural engineer. In the
process, Peñaloza and the ARC, agreed on November 18, 1982 that Peñaloza would share
the purchase price of one floor of the building, payable within sixty (60) days and the
balance payable in twenty (20) equal quarterly installments of P110,205. The parties
further agreed that the payments of Peñaloza would be credited to her account in partial
payment of her stock subscription in the ARC’s capital stock. Peñaloza took possession of
the one-half portion of the second floor, where she put up her office and operated the St.
Michael International Institute of Technology. Unknown to her, ARC had executed a real
estate mortgage over the lot and the entire building in favor of the China Banking
Corporation as security for a loan. Peñaloza paid for the portion of the second floor of the
building she had purchased from the ARC. She learned that the property had been
mortgaged to the China Banking Corporation sometime in July 1984. Thereafter, she
stopped paying the installments due on the purchase price of the property. When the
ARC failed to pay its loan to China Banking Corporation, the subject property was
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
foreclosed extrajudicially, and, thereafter, sold at public auction to China Banking
Corporation. The ARC and the Guarantee Development Corporation and Insurance Agency
(GDCIA) executed a deed of conditional sale covering the building and the lot. The
petitioner executed a deed of absolute sale over the lot and building in favor of the GDCIA
for P22,000,000. The ARC obliged itself under the deed to deliver possession of the
property without any occupants therein.
Peñaloza filed a complaint against the ARC, the GDCIA, and the Spouses Arguelles, with
the RTC of Makati. The trial court rendered judgment in favor of Peñaloza and the GDCIA,
and against the ARC and the Spouses Arguelles. On appeal, the CA rendered judgment
affirming with modification the appealed decision.
Issue: WON Peñaloza has the right to suspend payments.
Held: The Court ruled against the petitioners.
The parties had agreed on the three elements of subject matter, price, and terms of
payment. Hence, the contract of sale was perfected, it being consensual in nature,
perfected by mere consent, which, in turn, was manifested the moment there was a
meeting of the minds as to the offer and the acceptance thereof. The perfection of the
sale is not negated by the fact that the property subject of the sale was not yet in
existence. This is so because the ownership by the seller of the thing sold at the time of
the perfection of the contract of sale is not an element of its perfection. A perfected
contract of sale cannot be challenged on the ground of non-ownership on the part of the
seller at the time of its perfection. What the law requires is that the seller has the right to
transfer ownership at the time the thing is delivered. Perfection per se does not transfer
ownership which occurs upon the actual or constructive delivery of the thing sold.
In May 1983, respondent Peñaloza took possession of a portion of the second floor of the
building sold to her with an area of 552 square meters. She put up her office and
operated the St. Michael International Institute of Technology. Thenceforth, respondent
Peñaloza became the owner of the property, conformably to Article 1477 of the New Civil
Code which reads:
41 Art. 1477. The ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.
Page
In a contract of sale, until and unless the contract is resolved or rescinded in accordance
with law, the vendor cannot recover the thing sold even if the vendee failed to pay in full
the initial payment for the property. The failure of the buyer to pay the purchase price
within the stipulated period does not by itself bar the transfer of ownership or possession
of the property sold, nor ipso facto rescind the contract. 37 Such failure will merely give the
vendor the option to rescind the contract of sale judicially or by notarial demand as
provided for by Article 1592 of the New Civil Code:
Art. 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay, even

after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by a notarial act. After the
demand, the court may not grant him a new term.
Admittedly, respondent Peñaloza failed to pay the downpayment on time. But then, the
petitioner ARC accepted, without any objections, the delayed payments of the
respondent; hence, as provided in Article 1235 of the New Civil Code, the obligation of
the respondent is deemed complied with:
Art. 1235. When the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or objection,
the obligation is deemed fully complied with.
The respondent cannot be blamed for suspending further remittances of payment to the
petitioner ARC because when she pushed for the issuance of her title to the property
after taking possession thereof, the ARC failed to comply. She was aghast when she
discovered that in July 1984, even before she took possession of the property, the
petitioner ARC had already mortgaged the lot and the building to the China Banking
Corporation; when she offered to pay the balance of the purchase price of the property to
enable her to secure her title thereon, the petitioner ARC ignored her offer. Under Article
1590 of the New Civil Code, a vendee may suspend the payment of the price of the
property sold:
Art. 1590. Should the vendee be disturbed in the possession or ownership of
the thing acquired, or should he have reasonable grounds to fear such
disturbance, by a vindicatory action or a foreclosure of mortgage, he may
suspend the payment of the price until the vendor has caused the disturbance
or danger to cease, unless the latter gives security for the return of the price in
a proper case, or it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment. A mere act of
trespass shall not authorize the suspension of the payment of the price.
ROBERTO Z. LAFORTEZA vs. ALONZO MACHUCA
G.R. No. 137552. June 16, 2000 (333SCRA643)
Third Division
Facts: On August 2, 1988, defendants Lea Zulueta-Laforteza and Michael Z. Laforteza both
executed a Special Power of Attorney (SPA) in favor of defendants Roberto and Gonzalo Z.
Laforteza, Jr., appointing both as her Attorney-in-fact authorizing them jointly to sell the
subject property and sign any document for the settlement of the estate of the late
Francisco Q. Laforteza.
Both agency instruments contained a provision that in any document or paper to exercise
authority granted, the signature of both attorneys-in-fact must be affixed.
On October 27, 1988, defendant Dennis Z. Laforteza executed an SPA in favor of
defendant Roberto Z. Laforteza for the purpose of selling the subject property. A year
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
later, Dennis Z. Laforteza executed another SPA in favor of defendants Roberto and
Gonzalo Laforteza, Jr. naming both attorneys-in-fact for the purpose of selling the subject
property and signing any document for the settlement of the estate of the late Francisco
Q. Laforteza.
On January 20, 1989, the heirs of the late Francisco Q. Laforteza represented by Roberto
Z. Laforteza and Gonzalo Z. Laforteza, Jr. entered into a Memorandum of Agreement
(MOA[Contract to Sell]) with the plaintiff over the subject property for the sum of
P630,000.00.
On January 20, 1989, plaintiff paid the earnest money of P30,000.00, plus rentals for the
subject property.
On September 18, 1998 , defendant heirs, through their counsel wrote a letter to the
plaintiff furnishing the latter a copy of the reconstituted title to the subject property,
advising him that he had 30 days to produce the balance of P600,000.00 under the
Memorandum of Agreement which plaintiff received on the same date.
On October 18, 1989, plaintiff sent the defendant heirs a letter requesting for an
extension of the 30 DAYS.
On November 15, 1989, plaintiff informed the defendant heirs, through defendant
Roberto Z. Laforteza, that he already had the balance P600,000.00 covered by United
Coconut Planters Bank Managers Check. However, the defendants, refused to accept the
balance Defendant Roberto Z. Laforteza had told him that the subject property was no
longer for sale.
On November 20, 1998, defendants informed the plaintiff that they were canceling the
MOA in view of the plaintiffs failure to comply with his contractual obligations.
Thereafter, plaintiff reiterated his request to tender payment of the balance. Defendants,
however, insisted on the rescission of the MOA. Plaintiff filed the instant action for
specific performance. The lower court rendered judgment in favor of the plaintiff.
Petitioners appealed to the Court of Appeals, which affirmed with modification the
42 decision of the lower court.
Motion for Reconsideration was denied but the Decision was modified so as to absolve
Page
Gonzalo Z. Laforteza, Jr. from liability for the payment of moral damages. Hence this
petition.
Issues: W the Memorandum of Agreement is a mere contract to sell, as indicated in its
title.
Ruling: CA decision is AFFIRMED and the instant petition is hereby DENIED.
A perusal of the MOA shows that the transaction between the petitioners and the
respondent was one of sale and lease.

A contract of sale is a consensual contract and is perfected at the moment there is a
meeting of the 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. The elements of a valid
contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the
minds; (2) determinate subject matter and (3) price certain in money or its equivalent.
In the case at bench, there was a perfected agreement between the petitioners and the
respondent whereby the petitioners obligated themselves to transfer the ownership of
and deliver the house and lot and the respondent to pay the price amounting to
P600,000.00. All the elements of a contract of sale were thus present. However, the
balance of the purchase price was to be paid only upon the issuance of the new certificate
of title in lieu of the one in the name of the late Francisco Laforteza and upon the
execution of an extrajudicial settlement of his estate. Prior to the issuance of the
"reconstituted" title, the respondent was already placed in possession of the house and
lot as lessee thereof for six months at a monthly rate of P3,500.00.
The six-month period during which the respondent would be in possession of the
property as lessee, was clearly not a period within which to exercise an option. An option
is a contract granting a privilege to buy or sell within an agreed time and at a determined
price. An option contract is a separate and distinct contract from that which the parties
may enter into upon the consummation of the option. An option must be supported by
consideration. An option contract is governed by the second paragraph of Article 1479 of
the Civil Code.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Petitioner argues that period for performance of obligation cannot be extended to 10
years because to do so would convert the obligation to purely potestative
Held
Under Art. 1191 of Civil Code, the right to rescind an obligation is predicated on violation
between parties brought about by breach of faith by one of them. Rescission, however, is
allowed only when the breach is substantial and fundamental to the fulfillment of the
obligation
In this case, no substantial breach – in the Kasulatan, it was stipulated that payment could
be made even after 10 years from execution of contract, provided they will pay the 12%
interest
Civil Code prohibits purely potestative, suspensive, conditional obligation that depend on
the whims of the debtor. Nowhere in the deed that payment of purchase price is
dependent whether respondents want to pay it or not, the fact that they already made
partial payment shows that parties intended to be bound by the Kasulatan

“An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from
the price."

In the present case, the six-month period merely delayed the demandability of the
contract of sale and did not determine its perfection for after the expiration of the six-
month period, there was an absolute obligation on the part of the petitioners and the
respondent to comply with the terms of the sale.
43
Vda. De Mistica vs. Naguiat
Page

418 SCRA 73

Issue/Scope
Potestative Condition under Art. 1182 in relation to Art. 1191 of Civil Code

Facts
Predecessor-in-interest of Petitioner and herein Defendants entered into a contract to sell
in which the latter prayed the initial payment and undertake to pay the remaining by
installment within 10 years subject to 12% interest per annum

Petitioner filed a complaint for rescission alleging failure and refusal of Defendants to pay
the balance constitutes a violation of the contract which entitles her to rescind the same

IX. ACTIONS FOR BREACH OF CONTRACT OF
SALE OF GOODS
A. Available remedies on the part of the seller:
1. Action for payment of price (NCC 1595)
Art 1595. Where, under a contract of sale, the ownership of the goods has passed to
the buyer and he wrongfully neglects or refuses to pay for the goods according to the
terms of the contract of sale, the seller may maintain an action against him for the price
of the goods.
Where, under a contract of sale, the price is payable on a certain day, irrespective of
delivery or of transfer of title and the buyer wrongfully neglects or refuses to pay such
price, the seller may maintain an action for the price although the ownership in the
goods has not passed. But it shall be a defense to such an action that the seller at any
time before the judgment in such action has manifested an inability to perform the
contract of sale on his part or an intention not to perform it.
Although the ownership in the goods has not passed, if they cannot readily be resold
for a reasonable price, and if the provisions of article 1596, fourth paragraph, are not
applicable, the seller may offer to deliver the goods to the buyer, and, if the buyer
refuses to receive them, may notify the buyer that the goods are thereafter held by the
seller as bailee for the buyer. Thereafter the seller may treat the goods as the buyer's
and may maintain an action for the price. (n)
2. Action for damages in case of non-acceptance of goods (NCC 1596)
Art 1596. Where the buyer wrongfully neglects or refuses to accept and pay for the
goods, the seller may maintain an action against him for damages for nonacceptance.
The measure of damages is the estimated loss directly and naturally resulting in the
ordinary course of events from the buyer's breach of contract.
Where there is an available market for the goods in question, the measure of damages
is, in the absence of special circumstances showing proximate damage of a different
amount, the difference between the contract price and the market or current price at
the time or times when the goods ought to have been accepted, or, if no time was fixed
for acceptance, then at the time of the refusal to accept.
If, while labor or expense of material amount is necessary on the part of the seller to
enable him to fulfill his obligations under the contract of sale, the buyer repudiates the
contract or notifies the seller to proceed no further therewith, the buyer shall be liable
to the seller for labor performed or expenses made before receiving notice of the
buyer's repudiation or countermand. The profit the seller would have made if the
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
contract or the sale had been fully performed shall be considered in awarding the
damages. (n)
3. Action for rescission of contract (NCC 1597)
Art 1597. Where the goods have not been delivered to the buyer, and the buyer has
repudiated the contract of sale, or has manifested his inability to perform his
obligations thereunder, or has committed a breach thereof, the seller may totally
rescind the contract of sale by giving notice of his election so to do to the buyer. (n)
4. Unpaid Seller
a) Unpaid seller – if the whole price has not been paid or tendered, or when the
check received as conditional payment was dishonored by non-payment or
insolvency of the buyer
b) seller – includes the agent of the seller to whom the bill of lading was endorsed,
or the consignor or agent who had paid the price or is responsible for the price,
or any other person who is in the position of a seller.
a. Concept (NCC 1525)
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
44 directly responsible for the price, or any other person who is in the position of a
seller. (n)
Page
b. Remedies of an unpaid seller (NCC 1526-1535)
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)
a) If ownership over the goods had not yet passed to the buyer: the seller, as owner, could
retain the goods or resell them to another, without prejudice to his liability for damages
for any breach of contract committed by him.
b) If ownership had passed to the buyer but the goods are still in the possession of the
seller or are in transit to the buyer: the unpaid seller could withhold delivery or stop the
goods in transit should the buyer become insolvent. As a consequence of his lien over the
goods, the unpaid seller could resell the goods to another or resume ownership over
them, without court order, and may still used the buyer for damages
(1) Lien on the goods
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)
45
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
Page
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)
 The unpaid seller’s lien implies that he has a right to retain possession of the goods
until payment or tender of the whole price, unless he agreed to sell on credit.
 If the unpaid seller agrees to sell on credit, he may refuse to deliver them if the
buyer becomes insolvent, or if the term of the credit had expired and the price has
not been paid.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
 Loss of lien: the unpaid seller losses his lien when:
 He delivers the goods to the carrier or other bailee, consigning them to the
buyer under a straight or non-negotiable bill of lading, or
 When the goods were delivered to the buyer, or
 When he waived his lien.
 It is not lost on the remainder of the goods when only partial delivery was made,
unless such was intended to operate as symbolical delivery of the whole. The lien is
not lost by the mere fact that the seller had already obtained judgment for the price.
 Revival of lien: the unpaid seller’s lien is revived if the goods are returned by the
buyer in wrongful repudiation of the contract.
(2) Right of stoppage in transit
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.
46
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
Page
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.
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
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)
 Old common law remedy which is an extension of the lien for the price and entitles
the unpaid seller to resume possession of the goods while they are in transit before
the goods come in possession of the vendee if the later is or becomes insolvent.
 Goods are considered to be in transit from the time they are delivered to a carrier or
other bailee by the seller for the purpose of transmission to the buyer, until the
buyer or his agent takes delivery of them from the carrier. To terminate the transit
by delivery to a middleman, it must be delivery to keep, not to transport.
 Goods are still considered to be in transit even if they reached their ultimate
destination when the buyer rejects them and they remain in the possession of the
carrier.
 Goods are no longer in transit if the buyer or his agent obtained delivery of the
goods even before they reached their ultimate destination, or when the goods
arrived at the ultimate destination but the carrier or other bailee wrongfully refuses
to deliver the goods to the buyer or his agent, or when the carrier, upon arrival of
the goods at the ultimate destination, enters into a new contract with the buyer or
his agent.

 If there was partial delivery of the goods to the buyer, the remainder of the goods
may be stopped in transitu, unless such part delivery has been made under such
circumstances as to show an agreement with the buyer to give up possession of the
whole. Where the buyer has taken some portion of the whole mass which was then
susceptible of possession, there is constructive possession of the whole.
 Sale of goods in transit: 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.
1) Where a negotiable document of title has been issued for the goods, no seller’s lien or
right of stoppage in transitu cannot defeat the rights of any purchaser for value in good
faith to whom such document has been negotiated.
2.) Where the document of title is a straight bill of lading, the seller’s right of stoppage
will not be cut off as the transferee acquires no greater or added rights than his
transferor.
Right of Stoppage; How Exercised-The unpaid seller may exercise his right by
1. obtaining actual possession of the goods or
2. by giving notice of his claim to the carrier or other
bailee in whose possession the goods are.
When notice of stoppage in transit is given to the carrier, the latte must redeliver the
goods to, or according to the directions of, the seller. If however, a negotiable document
of title representing the goods has been issued by the carrier, the latter shall not be
obliged to deliver the goods unless such document is first surrendered for cancellation.
(3) Right of resale
Art 1533. Where the goods are of perishable nature, or where the seller expressly
47
reserves the right of resale in case the buyer should make default, or where the buyer has
Page
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
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
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)
 When the goods are of perishable nature, or where the seller expressly reserves the
right of resale in case the buyer should default in payment, or where the buyer has
been in default for an unreasonable length of time, the unpaid seller, having a right
of lien or having stopped the goods in transitu, may resell the goods and recover
from the buyer damages for breach of contract.
 The resale may be in a public or private sale, but the seller cannot buy them directly
or indirectly. The seller is entitled to any profit he may make out of the resale.
 In case he sells them at a loss, he is entitled to recover the difference from the
original buyer. It is not essential to the validity of a resale that previous notice of an
intention to resell or notice of the time and place or resale be given to the original
buyer.
 Damages recoverable: Whether the action is for damages or to recover loss from a
resale, the purpose is to compensate the seller for loss for breach of contract. Thus,
if the purchaser fails to take delivery and pay the price, the vendor, without need of
first rescinding the contract judicially, is entitled to resell, and if obliged to sell for
less than the contract price, the buyer is liable for the difference.
 Due diligence must be exercised to secure the highest price obtainable in the best
available market. The burden of showing it was exercised is on the
vendor.
(4) Right to rescind8
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
8
MERCHANTS REFRIGERATING CORP v TITMAN: A rescission of the contract would
accomplish the following results:
(1) termination of the original contract
(2) return of the title to the undelivered portion of the goods to the seller
(3) release of the buyer from his obligation to take and pay for the balance of the goods
(4) the unpaid seller would be free to pursue its remedies on quantum meruit to recover
what it had delivered to the buyer (Merchants Refrigerating Co. v Benjamin Titman
Corp)

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)
 An unpaid seller having the right of lien or having stopped the goods in transitu may
rescind the transfer of title and resume ownership in the goods where he expressly
reserved the right to do so in case the buyer defaults, or where the buyer has been
in default in payment of the price for an unreasonable time. The transfer of title
shall not be held to have been rescinded by the unpaid seller until he manifests by
notice to the buyer or by some overt act an intention to rescind. After rescinding the
transfer of title, the seller may still recover damages from the buyer for breach of
contract.
 As used in Art. 1534, the term “rescind” is equivalent to return of the title over the
undelivered goods to the seller and the right to recover damages for loss due to
breach of contract.
B. Available remedies on the part of the buyer:
5. Action by buyer for specific performance (NCC 1598)
Art 1598. Where the seller has broken a contract to deliver specific or ascertained goods,
a court may, on the application of the buyer, direct that the contract shall be performed
specifically, without giving the seller the option of retaining the goods on payment of
damages. The judgment or decree may be unconditional, or upon such terms and
conditions as to damages, payment of the price and otherwise, as the court may deem
just. (n)
6. Action by buyer for rescission or damages for breach of
warranty (NCC 1599)
Art. 1599. Where there is a breach of warranty by the seller, the buyer may, at his
election:
(1) Accept or keep the goods and set up against the seller, the breach of warranty
by way of recoupment in diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action against the seller for damages
for the breach of warranty;
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
(3) Refuse to accept the goods, and maintain an action against the seller for
damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the goods have
already been received, return them or offer to return them to the seller and
recover the price or any part thereof which has been paid.
When the buyer has claimed and been granted a remedy in anyone of these ways, no
other remedy can thereafter be granted, without prejudice to the provisions of the
second paragraph of Article 1191.
Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew
of the breach of warranty when he accepted the goods without protest, or if he fails to
notify the seller within a reasonable time of the election to rescind, or if he fails to return
or to offer to return the goods to the seller in substantially as good condition as they were
in at the time the ownership was transferred to the buyer. But if deterioration or injury of
the goods is due to the breach or warranty, such deterioration or injury shall not prevent
the buyer from returning or offering to return the goods to the seller and rescinding the
sale.
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be
liable for the price upon returning or offering to return the goods. If the price or any part
thereof has already been paid, the seller shall be liable to repay so much thereof as has
been paid, concurrently with the return of the goods, or immediately after an offer to
return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to
accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to
hold the goods as bailee for the seller, but subject to a lien to secure payment of any
portion of the price which has been paid, and with the remedies for the enforcement of
such lien allowed to an unpaid seller by Article 1526.
48 (5) In the case of breach of warranty of quality, such loss, in the absence of special
circumstances showing proximate damage of a greater amount, is the difference between
the value of the goods at the time of delivery to the buyer and the value they would have
Page
had if they had answered to the warranty. (n)
Art 1571. Actions arising from the provisions of the preceding ten articles shall be barred
after six months, from the delivery of the thing sold. (1490)
7. Rule in case of sale by description or by sample (NCC Article
1481)
Art 1481. In the contract of sale of goods by description or by sample, the contract may
be rescinded if the bulk of the goods delivered do not correspond with the description or
the sample, and if the contract be by sample as well as description, it is not sufficient that

the bulk of goods correspond with the sample if they do not also correspond with the
description.
The buyer shall have a reasonable opportunity of comparing the bulk with the description
or the sample. (n)
A. Recto Law (Sale of Movables on Installments) (NCC 1484-86; )9
Art 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted,
should the vendee's failure to pay cover two or more installments. In this case,
he shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary shall be void. (1454-A-a) 10
9
LEVY v GERVACIO: CC Art 1454 is aimed at sales where the price is payable in several
installments. A cash payment (in sales with two installments) cannot be considered as a
payment in installments, and even if it can be so considered, still the law does not apply, for it
requires nonpayment of two or more installments in order that its provisions may be invoked.
In this case, only one installment was unpaid.
10
TAJANLANGIT v SOUTHERN MOTORS: It is true that there was a chattel mortgage on
the goods sold, but Southern Motors elected to sue the note exclusively – to exact
fulfillment of the obligation to pay. It had the right to select among the three remedies
established in Art 1484. In choosing to sue on the note, it was not thereby limited to the
proceeds of the sale, on execution, of the mortgaged good.
FILINVEST v CA: The remedies IN 1484 are alternative and not cumulative. Hence, the
exercise of one bars the exercise of the others.
NONATO v IAC: The corporation is barred from exacting payment from Nonato of the
balance of the price of the vehicle when it had already repossessed it.
CRUZ v FILIPINAS INVESTMENTS: The vendor of personal property sold on installment
basis is precluded, after foreclosing the chattel mortgage on the thing sold, from having a
recourse against the additional security put up by a third party to guarantee the purchaser’s
performance of his obligation.
NORTHERN MOTORS v SAPINOSO: What Art 1484 (3) prohibits is “further action against
the purchaser to recover any unpaid balance of the price;” and although this Court has
construed the word “action” to mean “any judicial or extrajudicial proceeding by virtue of
which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied
balance of the purchase price from the purchaser or his privy,” there is no occasion at this
stage to apply the restrictive provision of the said article because there has not yet been a
foreclosure sale resulting in a deficiency. The payment of the sum of P1,250 of Sapinoso
was a voluntary act on his part and did not result from a “further action” instituted by Northern
Motors.
BORBON v SERVICE-WIDE SPECIALIST:
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Art 1485. The preceding article shall be applied to contracts purporting to be leases of
personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing. (1454-A-a)
Art 1486. In the case referred to in two preceding articles, a stipulation that the
installments or rents paid shall not be returned to the vendee or lessee shall be valid
insofar as the same may not be unconscionable under the circumstances. (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)
49
When the seller assigns his credit to another person, the latter may likewise avail of the
remedies under Art 1484 (assuming case is one of sale of movables on installment). If the
Page
remedy chosen is rescission, a stipulation in the contract that the installments paid shall
not be returned to the vendee is valid insofar as the same may not be unconscionable
under the circumstances (Villanueva citing Delta Motor v. Niu Kim Duan, 213 SCRA 259)
Jurisprudence
When the seller assigns his credit to another person, the latter is likewise bound by the same
law. Accordingly, when the assignee forecloses on the mortgage, there can be no further
recovery of the deficiency, and the seller-mortgagee is deemed to have renounced any right
thereto.
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
Levi Hermanos, Inc. vs. Gervacio
69 Phil 52

Zayas vs. Luneta Motor Company

117 SCRA 726

Borbon II vs. Servicewide Specialists, Inc.

July 11, 1996

Bachrach Motor Co. vs. Millan

61 Phil 409

Tajanlangit vs. Southern Motors, Inc.

101 Phil 606

Cruz vs. Filipinas Investment & Finance Corp.

23 SCRA 791

50
Page

X. RISK OF LOSS (NCC 1174, 1493-94; 1504, 1538, 1189)
A. General rule
Art. 1263. In an obligation to deliver a generic thing, the loss or destruction of anything of
the same kind does not extinguish the obligation. (n)
Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not be foreseen, or which,
though foreseen, were inevitable.
An obligation to deliver a generic thing is not extinguished by loss because genus never
perishes.
NOTE that the next 3 situations contemplate loss of specific things
1. When loss occurs before perfection
When loss occurred before perfection, it is borne by the seller. This is because
ownership is still with him11.
2. When loss occurs at the time of perfection
Art. 1493. If at the time the contract of sale is perfected, the thing which is the object of
the contract has been entirely lost, the contract shall be without any effect.
But if the thing should have been lost in part only, the vendee may choose between
withdrawing from the contract and demanding the remaining part, paying its price in
proportion to the total sum agreed upon. (1460a)
Art. 1494. Where the parties purport a sale of specific goods, and the goods without the
knowledge of the seller have perished in part or have wholly or in a material part so
deteriorated in quality as to be substantially changed in character, the buyer may at his
option treat the sale:
(1) As avoided; or
(2) Valid in all of the existing goods or in so much thereof as have not
deteriorated, and as binding the buyer to pay the agreed price for the
goods in which the ownership will pass, if the sale was divisible. (n)
 If at the time the sale is perfected, the thing had been lost entirely, the contract shall
be ineffective. This is because there can be no contract without an object.
 The loss must have occurred before the contract was entered into, without the
knowledge of both parties.
11
ROMAN V GRIMALT: The sale was not perfected as the buyer agreed to buy the vessel,
provided that the title was in proper form. As the vendor failed to perfect his title, the loss was
borne by him
SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
 Options of buyer when there is partial loss and a loss which results in substantial
change in character
O Withdraw from the contract
O Buy the remainder at a proportionate price
3. When loss occurs after perfection but before delivery
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)
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)
Art. 1406. When a contract is enforceable under the Statute of Frauds, and a public
document is necessary for its registration in the Registry of Deeds, the parties may avail
themselves of the right under Article 1357.
Art. 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:
51 (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
Page
damages; it is understood that the thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence is unknown or it
cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is
to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose
between the rescission of the obligation and its fulfillment, with indemnity for
damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to
the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than
that granted to the usufructuary. (1122)
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA

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)

When loss occurs after perfection but before delivery, the seller bears the risk of loss. The
buyer does not bear the risk of loss until the goods are delivered, actually or
constructively. This is because the rule is a combination of the common-law rule that the
owner bears the risk of loss (res perit domino), and the Roman law requiring delivery to
transfer ownership.

B. When ownership is transferred

GENERAL RULES:
1. The risk of loss shall be borne by the owner.
2. Ownership is transferred upon delivery.

EXCEPTIONS:
1. Contrary stipulation12
2. Security title13
3. Delay through the fault of the buyer or the seller 14 – at the risk of the party at fault

12
SUN BROS. APPLIANCES V PEREZ: The law allows an agreement which stipulates that
(1) where goods are sold and delivered to the buyer, the title is to remain in the seller until full
payment, [but] (2) the loss or destruction of the property while in the possession of the buyer
before payment, does not relieve him from the obligation to pay the price; in which case, the
buyer suffers the loss. The reasons for its validity are: First, the absolute and unconditional
nature of the vendee’s promise to pay for the goods. Second, the vendor has fully performed
his contract and the vendee received what he bargained for. Third, the policy of providing an 52
incentive to care properly for the goods, which is under the control and dominion of the
vendee.
Page

13
LAWYER’S COOP. V TABORA: Despite the loss of the books in a fire, the risk of loss
would be borne by the buyer although he was not the owner yet. This is because the
stipulation “ownership shall only be transferred upon full payment” was agreed merely to
secure the performance by the buyer of his obligation. Moreover, in the contract, it was
agreed that loss or damage to the books after delivery to the buyer shall be borne by the
buyer.
While under the rule, an obligor should be exempt from liability when the loss occurs in a
fortuitous event, this cannot be used by the buyer as a defense to exempt himself from
paying. His obligation does not pertain to the delivery of the subject matter, but to the
payment of the purchase price. The ability to pay in money or legal tender is never lost
through a fortuitous event.
14
NORTH NEGROS SUGAR CO. V CIA. GEN DE TABACOS: If there was delay in
accepting delivery but there was segregation of goods, such that place of delivery was at the
seller’s warehouse, the buyer bears the risk of loss. This is because the seller becomes
merely a depositary.
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA
XI. EXTINGUISHMENT OF SALE (NCC 1600)

A. Common Causes
B. Special Causes
C. Extra-special Causes
1. Conventional redemption (NCC 1601 to 1616; CASES:
Catangcatang vs. Legayada, 84 SCRA 51; Villarica vs. Court of
Appeals, 26 SCRA 189; Diamante vs. CA, 206 SCRA 52; Vda. De
Urbano vs. GSIS, 367 SCRA 672; Legaspi vs. CA, 142 SCRA 82)

a. Definition
b. Distinguished from option to purchase
c. Period of redemption (NCC 1606)
d. Effect when no redemption is made
e. Equitable mortgage (NCC, 1602-06; CASES: San Pedro vs.
Lee, et al. 28 May 2004; Ceballos vs. Intestate Estate of the
late Emigdio Mercado, 28 May 2004; Balatero vs. IAC, 154
SCRA 530; Lacorte vs. CA, 286 SCRA 24; Camus vs. CA, 222
SCRA 612; Dapiton vs. CA, 272 SCRA 95)

f. Right of the parties to the fruits of the land (NCC 1617)

g. Right of vendor a retro as to charges/encumbrances (NCC
1618)

2. Legal Redemption; concept and instances (NCC 1619-1623)

CASES: Alonzo vs. IAC,150 SCRA 259; Primary Structures

Corporation vs. Sps. Valencia, GR No. 150060, August 19, 2003; 53
Lee Chuy Realty Corporation vs. Court of Appeals, December 4,
Page

1995)
 SALES – ATTY ZARAH VILLANUEVA CASTRO
San Beda College of Law, Mendiola
JOHN C. ICALIA

54
Page