Sales1

Rights & Obligations of the Vendee – Redemption1

[Follow the Outline]

Part ONE
Modified True or False. Consider the statement true only when it is absolutely true.
Explain ALL your answers.

1. If the place of payment should not have been stipulated, the payment must be made at the
place of the delivery of the thing sold. True. Art.1582
2. Where goods are delivered to the buyer, he is not deemed to have accepted them unless
and until he has had a reasonable opportunity of examining them for the purpose of
ascertaining whether they are in conformity with the contract. Art 1584
3. Acceptance of the goods by the buyer shall not discharge the seller from liability in
damages or other legal remedy for breach of any promise or warranty in the contract of
sale.
4. The Maceda Law can only be invoked if the buyer had paid at least two years of
installments before default.
5. Down payments, deposits or options in a sale covered by the Maceda Law, shall be
included in the computation of the total number of installment payments made.
6. No affirmation of the value of the thing, nor any statement purporting to be a statement of
the seller's opinion only, shall be construed as a warranty.
7. For the vendor to be held liable for breach of warranty against eviction, the final
judgment must be based on a right prior to the sale.
8. When adverse possession had been commenced before the sale but the prescriptive period
is completed after the transfer, the vendor shall not be liable for eviction.
9. If the property is sold for nonpayment of taxes due, the vendor is liable for eviction.
10. Any stipulation exempting the vendor from the obligation to answer for eviction shall be
void.
11. The seller of goods is deemed to be an unpaid seller when the whole of the price has not
been paid. True.
12. The seller of goods is deemed to be an unpaid seller when a bill of exchange or other
negotiable instrument has been received as conditional payment. False.
13. The unpaid seller may exercise his right of stoppage in transitu by obtaining actual
possession of the goods. True.
14. The remedies of the unpaid seller of goods can no longer be invoked if ownership in the
goods have passed already to the buyer. False.
15. 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. True.
16. Legal redemption shall take place when the vendor reserves the right to repurchase the
thing sold
17. Legal redemption is the right to be subrogated, upon the same terms and conditions
stipulated in the contract, in the place of one who acquires a thing by purchase only.
18. The contract shall be presumed to be a sale with a right to repurchase when the price in a
mortgage is unusually inadequate.
19. In case of doubt, a contract purporting to be a sale with right to repurchase shall be
construed as an equitable mortgage.
20. The creditors of the vendor cannot make use of the right of redemption against the
vendee, until after they have exhausted the property of the vendor.

Part TWO
Multiple Choice. Choose the best answer.

1. The buyer is deemed to have accepted the goods when:

a. he intimates to the seller that he has accepted them
b. 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 seller
c. when, after the lapse of a reasonable time, he retains the goods without intimating to the
seller that he has rejected them
d. all of the above
e. none of the above

2. The Realty Installment Buyer Act may apply to:

a. a sale of industrial lots
b. a sale of commercial buildings
c. sales to tenants
d. all of the above
d. none of the above

3. The cash surrender value is a minimum of:

a. 20% of the total payments made
b. 30% of the total payments made
c. 40% of the total payments made
d. 50% of the total payments made
e. 92% of the total payments made
4. The redhibitory action, based on the faults or defects of animals, must be brought within:
a. forty days from the date of their delivery to the vendee.
b. forty days from the date of the contract
c. six months from the date of their delivery to the vendee.
d. six months from the date of the contract
e. one year from the date of the contract

5. There is no implied warranty as to hidden defects/quality in the following, except:

a. “as is, where is” sales
b. sale of second hand articles
c. sale by virtue of authority in fact or law
d. animals sold at fairs or at public auctions
e. when validly suppressed by parties

6. The term "seller" [unpaid] includes the following, except:

a. an agent of the seller to whom the bill of lading has been indorsed
b. a consignor or agent who has himself paid or is directly responsible for the price
c. creditor of the buyer
 d. any other person who is in the position of a seller
e. none of the above

7. 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, except:
a. Where it was so stipulated
b. Where the goods have been sold without any stipulation as to credit
c. Where the goods have been sold on credit, but the term of credit has expired
d. Where the buyer becomes insolvent
e. all of the above
f. none of the above

8. That the buyer is insolvent is a requirement for the exercise of the:

a. A right to retain the goods
b. A right of stopping the goods in transitu
c. A right of resale
d. A right to rescind the sale
e. A right to demand for the payment of the unpaid price

9. In conventional redemption, the period for redemption, in the absence of an express agreement, shall
last:
a. one year from the date of the contract
b. four years from the date of the contract
c. one year from the registration of the contract
d. four years from the registration of the contract
e. none of the above

10. In a sale of a parcel of land with a right to repurchase, there being no stipulation to the contrary,
ownership passes to the vendee upon:
a. the perfection of the sale
b. upon delivery
c. upon payment of the price
d. upon the lapse of the period to repurchase
e. upon the order of the court

Part THREE
Give direct and concise but complete answers.
Cite authorities, if any.

1. By means of a public instrument, Mr. Nagbibili sold his mango plantation to Abenturero
effective immediately. They agreed that the delivery shall be effected six months from
the execution of the deed of sale. When the said period arrived, Abenturero demanded
delivery in writing but Nagbibili dilly-dallied. It was not until a month afterwards that
Nagbibili finally gave the land to Abenturero. In the three weeks before delivery,
 Nagbibili sold and delivered the entire produce of the mango plantation to Mr.
Commerciante for P200,000.00.
Commerciante knew nothing of the contract between Nagbibili and Abenturero.
Abenturero now seeks to recover from Commerciante either the full value of the mangoes
or a similar amount and quality of the mangoes sold.
Does Abenturero have this right against Commerciante? Explain.
Under the law particularly
Art. 1567, the buyer shall have
the right to the fruits of the thing from the time of the
perfection of the sale. In relation to
Art.
1
164, the creditor
shall be entitled to the fruits of the thing from the time the
obligation to deliver it arises.
In their agreement the obligation to deliver will arise only
after 6 mos. therefore the buyer will not be entitled to the
fruits during the 6 mo. period.
Though under the facts,
Abenturero already had the right to the fruits,
Abenturero
does not have the right to recover against Commerciante
because under
Art.
1
164, he will not have any real right

over the thing until the actual delivery of the thing to him.
The only remedy of
Abenturero is only against Nagbibili
since, Commerciante had no knowledge of such sale
between Nagbibili and
Abenturero.
What if during the 6 month period, Nagbibili harvested
the fruits and sold it to Commerciante, can
Abentuero
recover these fruits or the value thereof?
Abenturero does not have the right to the fruits because
Abenturero shall only have the right to the fruits of the thing
from the time the obligation to deliver it arises. Under the
facts, it was harvested before the 6 month period and
during such time Nagbibili is under no obligation to deliver
the fruits

what if the 6months expired, abenturero is now entitled all the fruits pertain to the buyer?
Commerciante knew nothing of this contract he is a buyer in gf
seller 1537 despite

2. Spouses Macario and Bonifacia Dakila entered into a contract to sell with Honorio Cruz
over a parcel of industrial land in Valenzuela, Bulacan for a price of Three Million Five
Hundred Thousand Pesos (P3,500,000.00). The spouses would give a downpayment of
Five Hundred Thousand Pesos (P500,000.00) upon the signing of the contract, while the
balance would be paid for the next three (3) consecutive months in the amount of One
Million Pesos (P1,000,000.00) per month. The spouses paid the first two (2) installments
but not the last installment. After one (1) year, the spouses offered to pay the unpaid
balance which Honorio refused to accept.
The spouses filed a complaint for specific performance against Honorio invoking the
application of the Maceda Law. If you are the judge, how will you decide the case?

I will dismiss the complaint. The invocation of the Maceda Law by the spouses is
misplaced. Section 3 of R.A. 6552 (Maceda Law) provides that it is applicable in all
transactions or contracts involving the sale or financing of real estate on instalment
payments, including residential condominium apartments but excluding industrial lots,
commercial buildings and sales to tenants. Since the subject of the case is an industrial
land, Maceda Law is not applicable.

3. Priscilla purchased a condominium unit in Makati City from the Citiland Corporation for a price
of P10 Million, payable P3 Million down and the balance with interest thereon at 14% per annum
payable in sixty (60) equal monthly installments of P198,333.33. They executed a Deed of
Conditional Sale in which it is stipulated that should the vendee fail to pay three (3) successive
installments, the sale shall be deemed automatically rescinded without the necessity of judicial
action and all payments made by the vendee shall be forfeited in favor of the vendor by way of
rental for the use and occupancy of the unit and as liquidated damages. For 46 months, Priscilla
paid the monthly installments religiously, but on the 47th and 48th months, she failed to pay. On
the 49th month, she tried to pay the installments due but the vendor refused to receive the
payments tendered by her. The following month, the vendor sent her a notice that it was
rescinding the Deed of Conditional Sale pursuant to the stipulation for automatic rescission, and
demanded that she vacate the premises. She replied that the contract cannot be rescinded without
judicial demand or notarial act pursuant to Article 1592 of the Civil Code.

a. Is Article 1592 applicable? (3%)

b. Can the vendor rescind the contract? (2%)

a)       Article 1592 of the Civil Code does not apply to a conditional sale.      
In Valarao v. CA, 304 SCRA 155, the Supreme Court held that Article 1592 applies
only to a contract  of  sale  and  not  to a Deed  of  Conditional  Sale where the seller has
reserved title to the property until full payment of the purchase price. The law applicable
is the Maceda Law.

SUGGESTED ANSWER:

b)     No, the vendor cannot rescind the contract under the circumstances. Under the
Maceda Law, which is the law applicable, the seller on installment may not rescind the
contract till after the lapse of the mandatory grace period
of 30 days for every one year of installment payments, and only after 30 days from
notice of cancellation or demand for rescission by a notarial act. In this case, the refusal
of the seller to accept payment from the buyer on the 49th month was not justified
because the buyer was entitled to 60 days grace period and the payment was tendered
within that period. Moreover, the notice of rescission served by the seller on the buyer
was not effective because the notice was not by a notarial act. Besides, the seller may still
pay within 30 days from such notarial notice before rescission may be effected. All these
requirements for a valid rescission were not complied with by the seller. Hence, the
rescission is invalid.

ANSWER: Sale of condominium unit and it would appear that it is a residential unit, in installment. This is covered by the Maceda
Law. The stipulation of automatic rescission is void.
When the buyer defaulted, it was already on the 47th month. She had already paid 46 months or 3 years and 10 months.
The grace period should have been 90 days. Since 1 month for every year after two years. On the 47 th month, she was 1 day in
default, 48th month, she was already 31 days in default, on the 49th month, 61 days. As such, the offer to pay was made within the
90 day period. The vendor does not have the right to rescind the contract.

What if 5th month defaulted: grace period is 60 days since the default happened only on the first year, unless otherwise stipulated.
If she was able to pay within the 60 days, and eventually failed to pay on the 3rd month of the 5th year. The payment is made
beyond the grace period. Under the law, the buyer is entitled only to a grace period once in every 5 years of the lifetime of the
contract.

Continuous default..default twice

4. X sold Y 100 sacks of rice that Y was to pick up from X’s rice mill on a particular date.
Y did not, however, appear on the agreed date to take delivery of the rice. After one
week, X automatically rescinded the sale without notarial notice to Y. Is the rescission
valid? Yes automatic rescission is allowed because rice is a consumable which can easily
deteriorate.

5. What are the so-called “Maceda” and “Recto” Laws in connection with sales on installments?
Give the most important features of each law. (5%)

A: The MACEDA LAW (RA 6552) is applicable to sales of immovable property on installments. The most
important features are (Rillo v. CA, G.R. No. 125347, June 19, 1997):

1. After having paid installments for at least two years, the buyer is entitled to a mandatory grace
period of one month for every year of installment payments made, to pay the unpaid installments
without interest.

If the contract is cancelled, the seller shall refund to the buyer the cash surrender value equivalent to
fifty percent (50%) of the total payments made, and after five years of installments, an additional five
percent (5%) every year but not to exceed ninety percent (90%) of the total payments made.

2. In case the installments paid were less than 2 years, the seller shall give the buyer a grace period of
not less than 60 days. If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract after 30 days from receipt by the buyer of the notice of
cancellation or demand for rescission by notarial act.

The RECTO LAW (Art. 1484) refers to sale of movables payable in installments and limiting the right of seller,
in case of default by the buyer, to one of three remedies:

1. a)  exact fulfillment;
2. b)  cancel the sale if two or more installments have not

been paid;

3. c)  foreclose the chattel mortgage on the things sold, also

in case of default of two or more installments, with no further action against the purchaser.
6. A bought a truck from B payable in installment secured by a chattel mortgage executed by A on
the truck. As additional security, A’s brother, C, executed a real estate mortgage in favor of B.

A defaulted in the payment of several installments. Consequently, B filed an action for replevin,
repossessed the truck, and foreclosed the chattel mortgage.

Can B proceed against the other properties of A and the real estate mortgage executed by C to
recover the deficiency, if any, after the chattel mortgage foreclosure sale? Explain.

ANSWER: No. The sale in this case is that of a personal property in installment. As such, the Recto Law applies. As such, the
remedies being alternative under such law, since B already foreclosed the chattel mortgage, he can no longer exact fulfillment of
the obligation by foreclosing the real estate mortgage or by proceeding against the other properties of A.

If A would’ve foreclosed the real estate mortgage, the Recto Law would not have applied since the mortgage foreclose is not on the
thing sold. Accordingly, such foreclosure would be in line with exacting fulfillment and he would’ve been entitled to a deficiency in
the proceeds of the foreclosure sale and the unpaid amount.

Not a special law cos under 1484 if not the thing sold like diamond ring not apply

2018 bar

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?

1. 1)  A can exercise his right of repurchase within four (4) years from the date of the contract (Art.
1606, Civil Code).
2. 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). ? 1607
ownership had already been consolidation.. recorded.. for record in his name!

Sale with right to repurchase.. resolutory condition could be repurchased by third person if assigned.. proper
exercise of right

What if not repurchased, ownership will be consolidated.. regardless if movable or immovable..

mere lapse of the time?

8. On July 14, 2004, Pedro executed in favor of Juan a Deed of Absolute Sale over a parcel of land
covered by TCT No. 6245. It appears in the Deed of Sale that Pedro received from Juan
P120,000.00 as purchase price. However, Pedro retained the owner’s duplicate of said title.
Thereafter, Juan, as lessor, and Pedro, as lessee, executed a contract of lease over the property for
 a period of one (1) year with a monthly rental of P1,000.00. Pedro, as lessee, was also obligated
to pay the realty taxes on the property during the period lease. Subsequently, Pedro filed a
complaint against Juan for the reformation of the Deed of Absolute Sale, alleging that the
transaction covered by the deed was an equitable mortgage. In his verified answer to the
complaint, Juan alleged that the property was sold to him under the Deed of Absolute Sale, and
interposed counterclaims to recover possession of the property and to compel Pedro to turn over
to him the owner’s duplicate of title.

Resolve the case with reasons.

The complaint of Pedro against Juan should be dismissed. The instances when a
contract — regardless of its nomenclature — may be presumed to be an equitable
mortgage are enumerated in Article 1602 of the Civil Code: “Art.  1602.  The  contract
shall  be  presumed  to  be  an equitable mortgage, in any of the following cases:

1.    When the price of a sale with right to repurchase is unusually inadequate:

2.    When the vendor remains in possession as lessee or otherwise;

3.   When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;

4.    When the purchaser retains for himself a part of the purchase price;

5.    When the vendor binds himself to pay the taxes on the thing sold;

6.    In any other case where it may be fairly inferred that the real intention of the parties

is that the transaction shall secure the payment of a debt or the performance of any
other obligation.

“In any of the foregoing cases, any money, fruits, or other benefit to be received by the
vendee as rent or otherwise shall be considered as interest which shall be subject to the
usury laws.”

Article 1604 states that “the provisions of article 1602 shall also apply to a contract
purporting to be an absolute sale.”

For Articles 1602 and 1604 to apply, two requisites must concur: 1) the parties entered
into a contract denominated as a contract of sale; and 2) their intention was to secure an
existing debt by way of mortgage (Heirs of Balite v. Lim, G.R. No. 152168,
December 10, 2004).

In the given case, although Pedro retained possession of the property as lessee after the
execution of the Deed of Sale, there is no showing that the intention of the parties was to
secure an existing debt by way of mortgage. Hence, the complaint of Pedro should be
dismissed.
9. Antonio, Bart, and Carlos are brothers. They purchased from their parents specific
portions of a parcel of land as evidenced by three separate deeds of sale, each deed
referring to a particular lot in metes and bounds. When the deeds were presented for
registration, the Register of Deeds could not issue separate certificates of title due to the
absence of a subdivision plan. The new title had to be issued, therefore, in the names of
the brothers as co-owners of the entire property. The situation has not changed up to
now, but each of the brothers has been receiving rentals exclusively from the lot actually
purchased by him.
Antonio sells his lot to a third person, with notice to his brothers. To enable the buyer to
secure a new title in his name, the deed of sale was made to refer to an undivided interest
in the property of the seller (Antonio), with the metes and bounds of the lot sold being
stated. Bart and Carlos reacted by signifying their exercise of their right of redemption
as co-owners. Antonio, in his behalf and in behalf of his buyer, contends that they are no
longer co-owners, although the title covering the property has remained in their names as
such.
May Bart and Carlos still redeem the lot sold by Antonio? Explain.

A: No, they may not redeem because there was no co- ownership among Antonio, Bart, and Carlos to start
with. Their parents already partitioned the land in selling separate portions to them (Si v. Court of Appeals,
G.R. No. 122047, October 12, 2000).

10. Betty and Lydia were co-owners of a parcel of land. Last January 31, 2001, when she paid her
real estate tax. Betty discovered that Lydia had sold her share to Emma on November 10, 2000.
The following day, Betty offered to redeem her share, but the latter replied that Betty’s right to
redeem has already prescribed. Is Emma correct or not? Why? (5%)

A: No, Emma, the buyer, is not correct. Betty can still enforce her right of legal redemption as a co-owner. Art.
1623 of the Civil Code gives a co-owner 30 days from written notice of the sale by the vendor to exercise his
right of legal redemption. In the present problem, the 30-day period for the exercise by Betty of her right of
redemption had not even begun to run because no notice in writing of the sale appears to have been given to
her by Lydia.