Fer Grace Cataylo Niaga JD II

Sales Final Exam

1. A. What is the definition of SALE?

Answer:

Sale is a nominate contract whereby one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing and the other to pay therefor a
price certain in money or its equivalent.

B. Is the Contract of Sale valid?

Answer:

Yes. The contract is valid because according to the rule of the civil code, notarization of
contracts is not required for its validity. The article of the civil code clearly states that contracts
are obligatory, in whatever form they might have been entered into, as long as all the essential
requisites for their validity is present. Moreover, another article in the civil code states that it
requires acts and contracts that create, transmit, modify or extinguish real rights over
immovable property should appear in public document, which Is achieved through notarization,
suggesting contracts involving land must be notarized. However, the said provision does not go
into validity of a contract, but rather ordered for the convenience of the contracting parties.

2. A. Will Bert’s action for specific performance prosper?

Answer:
Yes. Will Bert’s action for specific performance will prosper because there was a binding
agreement of sale, not just an option contract. The sale was perfected upon acceptance by
Simeon of 10% of the agreed price. This amount is in reality earnest money which, under Art.
1482, shall be considered a part of the price arid as proof of the perfection of the contract.

B. May Simeon justify his refusal to proceed with the sale by the fact that the deal is financially
disadvantageous to him?

Answer:
No. Simeon cannot justify his refusal to proceed with the sale by the fact that the deal is
financially disadvantageous to him. Having made a bad bargain is not a legal ground for pulling
out of a binding contract of sale, in the absence of some actionable wrong by the other party
and no such wrong has been committed by Will Bert.
3. A. Will the suit prosper?

Answer:
No. The suit will not prosper because the contract between the parties was already
perfected. Under the law, the contract of sale is perfected at the moment there is meeting of
the mind upon the thing which is the object of the contract and upon the price.

B. Does Ray have any cause of action against Biong and Linda? Can he also recover damages
from the spouses?

Answer:
Yes. The contract having been perfected, Ray can sue Biong and Linda for specific
performance. Ray can also recover damages from the spouses based on Article 19 of the Civil
Code: 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.

4. D sold a second-hand car to E for P150,000.00. The agreement between D and E was that half of
the purchase price, or P75,000.00 shall be paid in five equal monthly installments of P15,000.00
each. That car was delivered to E, and E paid the amount of P75,000.00 to D. Less than one
month thereafter, the car was stolen from E’s garage with no fault on E’s part and was never
recovered. Is E legally bound to pay the said unpaid balance of P75,000.00?

Answer:

Yes. E is legally bound to pay the balance of P75,000.00. The ownership of the car sold
was acquired by E from the moment it was delivered to him. Having acquired ownership, E
bears the risk of the loss of the thing under the doctrine of res perit domino (Articles 1496.
1497, Civil Code).

5. LT applied with BPI to purchase a house and lot in Quezon City, one of its acquired assets. The
amount offered was P1,000,000.00 payable, as follows: P200,000.00 down payment, the
balance of P800,000.00 payable within 90 days from June 1, 1985. BPI accepted the offer,
whereupon LT drew a check for P200,000.00 in favor of BPI which the latter thereafter
deposited in its account. On September 5, 1985, LT wrote BPI requesting extension until October
10, 1985, within which to pay the balance, to which BPI agreed. On October 5, 1985, due to the
expected delay in the remittance of the needed amount by his financier from the United States,
LT wrote BPI requesting a last extension until October 30, 1985, within which to pay the balance.
BPI denied LT’s request because another had offered to buy the same property for
P1,500,000.00, cancelled its agreement with LT and offered to return to him the amount of
P200,000.00 that LT had paid to it. On October 20, 1985, upon receipt of the amount of
P800,000.00 from his US financier, LT offered to pay the amount by tendering a cashier’s check
therefor, but which BPI refused to accept. LT then filed a complaint against BPI in the RTC for
 specific performance and deposited in court the amount of P800,000.00. Is BPI legally correct in
cancelling its contract with LT?

Answer:
No. BPI is not correct in canceling the contract with LT. In Lina Topacio v Court of
Appeals and BPI Investment (G.R. No. 102606, July 3, 1993, 211 SCRA 291) the Supreme Court
held that the earnest money is part of the purchase price and is proof of the perfection of the
contract. Secondly, notarial or judicial rescission under Art. 1592 and 1991 of the Civil Code is
necessary.

6. X sold a parcel of land to Y on 01 January 2002, payment and delivery to be made on 01

February 2002. It was stipulated that if payment were not to be made by Y on 01 February 2002,
the sale between the parties would automatically be rescinded. Y failed to pay on 01 February
2002, but offered to pay three days later, which payment X refused to accept, claiming that their
contract of sale had already been rescinded. Is X’s contention correct?

Answer:
No. This is a contract to sell and not a contract of absolute sale, since as there has been
no delivery of the land. Article 1592 of the New Civil code is not applicable. Instead, Article 1595
of the New Civil Code applies. The seller has two alternative remedies: (1) specific performance,
or (2) rescission or resolution under Article 1191 of the New Civil code. In both remedies,
damages are due because of default.

7. On January 2, 1980, A and B entered into a contract whereby A sold to B a parcel of land for and
in consideration of P10,000.00, A reserving to himself the right to repurchase the same. Because
they were friends, no period was agreed upon for the repurchase of the property. 1) Until when
must A exercise his right of repurchase? 2) If A fails to redeem the property within the allowable
period, what would you advise B to do for his better protection?

Answer:
1. A can exercise his right of repurchase within four (4) years from the date of the
contract (Art. 1606, Civil Code).
2. I would advise B to file an action for consolidation of title and obtain a judicial order
of consolidation which must be recorded in the Registry of Property (Art. 1607. Civil
Code).
8. Juliet offered to sell her house and lot, together with all the furniture and appliances therein to
Dehlma. Before agreeing to purchase the property, Dehlma went to the Register of Deeds to
verify Juliet's title. She discovered that while the property was registered in Juliet's name under
the Land Registration Act, as amended by the Property Registration Decree, it property, Dehlma
told Juliet to redeem the property from Elaine, and gave her an advance payment to be used for
purposes of releasing the mortgage on the property. When the mortgage was released, Juliet
executed a Deed of Absolute Sale over the property which was duly registered with the Registry
 of Deeds, and a new TCT was issued in Dehlma's name. Dehlma immediately took possession
over the house and lot and the movables therein. Thereafter, Dehlma went to the Assessor's
Office to get a new tax declaration under her name. She was surprised to find out that the
property was already declared for tax purposes in the name of XYZ Bank which had foreclosed
the mortgage on the property before it was sold to her. XYZ Bank was also the purchaser in the
foreclosure sale of the property. At that time, the property was still unregistered but XYZ Bank
registered the Sheriff's Deed of Conveyance in the day book of the Register of Deeds under Act.
3344 and obtained a tax declaration in its name. a) Was Dehlma a purchaser in good faith? b)
Who as between Dehlma and XYZ Bank has a better right to the house and lot?

Answer:
Yes. Dehlma is a purchaser in good faith. She learned about the XYZ tax declaration and
foreclosure sale only after the sale to her was registered. She relied on the certificate of title of
her predecessor-in-interest. Under the Torrens system, a buyer of registered lands is not
required by law to inquire further than what the Torrens certificated indicates on its face. If a
person proceeds to buy it relying on the title, that person is considered a buyer in good faith.

9. Pablo sold his car to Alfonso who issued a postdated check in full payment therefore. Before the
maturity of the check, Alfonso sold the car to Gregorio who later sold it to Gabriel. When
presented for payment, the check issued by Alfonso was dishonoured by the drawee bank for
the reason that he, Alfonso, had already closed his account even before he issued his check.
Pablo sued to recover the car from Gabriel alleging that he (Pablo) had been unlawfully deprived
of it by reason of Alfonso’s deception. Will the suit prosper?

Answer:
No. The suit will not prosper because Pablo was not unlawfully deprived of the car
although he was unlawfully deprived of the price. The perfection of the sale and the delivery of
the car was enough to allow Alfonso to have a right of ownership over the car, which can be
lawfully transferred to Gregorio. Art. 559 applies only to a person who is in possession in good
faith of the property, and not to the owner thereof. Alfonso, in the problem, was the owner,
and, hence, Gabriel acquired the title to the car.

10. Peter and Paul entered into a Contract to Sell whereby Peter, the lot owner, agreed to sell to
Paul his lot on November 6, 2016 for the price of P1,000,000.00 to be paid at the residence of
Peter in Makati City at 1 :00 p.m. If the full price is paid in cash at the specified time and place,
then Peter will execute a Deed of Absolute Sale and deliver the title to Paul. On November 6,
2016, Paul did not show up and was not heard of from that date on. In view of the
nonperformance by Paul of his obligation, Peter sent a letter to Paul that he is expressly and
extra-judicially declaring the Contract to Sell rescinded and of no legal and binding effect. Peter
further stated that failure on the part of Paul to contest the rescission within thirty (30) days
from receipt of said letter shall mean that the latter agreed to the rescission. Paul did not reply
to this letter for five (5) years. Thus, Peter decided to sell his lot to Henry in 2021. After hearing
that Henry bought the lot, Paul now questions the sale of the lot to Henry and files a complaint
 for nullification of the sale. 1. Is the exercise by Peter of his power to rescind extra-judicially the
Contract to Sell the proper and legal way of rescinding said contract? Explain. 2. In case Paul
made a down payment pursuant to a stipulation in the Contract to Sell, what is the legal remedy
of Peter?

Answer:
1. No. In a Contract to Sell, ownership is retained by the seller until the buyer pays the
purchase price in full. The full payment is a positive suspensive condition, the failure
of the which, is not a breach, casual or serious, but simply an event that prevented
the obligation of the vendor to convey title from acquiring binding force. The non-
fulfillment of the condition creates no contract from which rights and obligations
may arise. There can be no rescission from a non-existing obligation.
2. Peter may cancel the Contract to Sell and keep the down payment paid by Paul.
Since ownership of the property is retained by the seller, the contract remains to be
a Contract to Sell despite the down payment. The remedies available in Article 1191
of New Civil Code which are specific performance and rescission are not applicable
as no obligation existed due to the non-fulfillment of the positive suspensive
condition. The Contract to Sell may be terminated as Peter could no longer legally
compel Paul to pay the balance of the purchase price. Since Paul’s refusal to pay
was due to his own fault, the forfeiture of Paul’s down payment is warranted.

11. On June 15, 1995, Jesus sold a parcel of registered land to Jaime. On June 30, 1995, he sold the
same land to Jose. Who has a better right if: a) The first sale is registered ahead of the second
sale, with knowledge of the latter. Why? b) The second sale is registered ahead of the first sale,
with knowledge of the latter? Why?

Answer:
a. The first buyer has the better right if his sale was first to be registered, even though
the first buyer knew of the second sale. The fact that he knew of the second sale at
the time of his registration does not make him as acting in bad faith because the
sale to him was ahead in time, hence, has a priority in right. What creates bad faith
in the case of double sale of land is knowledge of a previous sale.
b. The first buyer is still to be preferred, where the second sale is registered ahead of
the first sale but with knowledge of the latter. This is because the second buyer,
who at the time he registered his sale knew that the property had already been sold
to someone else, acted in bad faith. (Article 1544)
12. JV, owner of a parcel of land, sold it to PP. But the deed of sale was not registered. One year
later, JV sold the parcel again to RR, who succeeded to register the deed and to obtain a transfer
certificate of title over the property in his own name. Who has a better right over the parcel of
land, RR or PP? Why? Explain the legal basis for your answer.

Answer:
It depends on whether or not RR is an innocent purchaser for value. Under the Torrens
System, a deed or instrument operated only as a contract between the parties and as evidence
of authority to the Register of Deeds to make the registration. It is the registration of the deed
or the instrument that is the operative act that conveys or affects the land. (Sec. 51, P.D. No.
1529). In cases of double sale of titled land, it is a well-settled rule that the buyer who first
registers the sale in good faith acquires a better right to the land. (Art. 1544, Civil Code).