SALES (JUDGE EDGARDO BELLOSILLO)
FINALS 3. Even if period for such payment is
Arts. 1526-1534 – Special rights of unpaid
seller
1. Possessory lien
2. Right of stoppage in transitu
3. Right to resale
4. Right to rescind contract of sale
When does the unpaid seller have the
right to retain the goods?
When the unpaid seller has not yet
transported the goods, he is still in the control
and possession of the goods under the
following situations:
1. Where the goods have been sold
without any stipulation as to the
credit.
2. Where the goods have been sold on
credit but the term of the credit has
expired.
3. When the buyer becomes insolvent.
When does the unpaid seller lose the right
of lien over the goods?
1. If there was already a delivery to the
agent or bailee of the buyer.
2. There was already a delivery to the
buyer or his agent. (under Art. 1529,
par. 2: When the buyer or his agent
lawfully obtains possession of the
goods)
3. There was a waiver.
When is the vendor not obliged to deliver
the goods after the perfection of the
contract?
1. When the vendee has not paid the
price.
2. If no period for the payment has been
fixed in the contract.
fixed in the contract but vendee has
lost the right to make use of the
period.
Art. 1536. When the vendee loses the right
to make use of the period
1. After the perfection of the obligation,
the vendee becomes insolvent,
unless he puts up a security or
guaranties for the satisfaction of the
debt.
2. If the vendee fails to deliver the
guaranty or security he promised to
the creditor.
3. The vendee, by his actions, impairs
the guaranties and securities.
4. If the vendee, by his actions, he
violates his undertaking.
5. Vendee attempts to abscond.
Right of stoppage in transitu
The unpaid seller can stop the delivery of the
goods to the buyer.
1. If the seller is unpaid
2. The buyer must be insolvent
3. The goods must be in transit
4. The seller must actually either take
possession of the goods sold or give
notice of his claim to the carrier or the
person in possession
5. The seller must surrender the
negotiable document of title by the
carrier or bailee
6. The seller must bear the expenses of
delivery of the goods after the
exercise of the right
What is the rationale for giving the unpaid
seller the right to stop the goods in
transit?
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 SALES (JUDGE EDGARDO BELLOSILLO)
If you will allow the buyer to take possession
and ownership of the goods, that will be an
injustice on the part of the seller owing to the
insolvency of the debtor.
When are goods in transit—meaning,
they are on the way to the buyer?
1. From the time they are delivered to
the carrier.
↳ Carrier may either be land,
water, or air or other mode of
transmission to the buyer.
↳ The buyer of his agent will
take the deliveries from the
carrier or other bailee.
2. If the goods are rejected by the buyer
and carrier or other bailee continues
to be in possession of them even if
the seller has refused to receive them
back.
When are the goods no longer in transit?
1. If the buyer or his agent obtains the
delivery of the goods before their
arrival at the appointed destination.
2. If after the arrival of the goods at the
appointed estimation, the carrier or
other bailee acknowledges to the
buyer or his agent that he holds the
goods on his behalf. It is immaterial
that the appointed estimation of the
goods was indicated by the buyer.
3. If the carrier or other bailee
wrongfully refuses to deliver the
goods to the buyer or his agent.
How is stoppage in transitu exercised?
1. By obtaining the actual possession of
the goods on the part of the unpaid
seller; or
2. Giving notice or the claim to the
persons in actual possession of the
goods.
What are the following effects after the
unpaid will obtain actual possession and
give notice of the claim to the person in
possession?
1. The goods will cease to be in transit.
2. The contract of carriage is
terminated.
3. The carrier shall not deliver the goods
anymore to the buyer, otherwise he
will be held liable for damages.
4. The carrier must redeliver the goods
according to the direction of the
seller.
5. If negotiable document of title has
been issued, then such document
must be surrendered for cancellation
to the bailee.
Is the delivery of the goods to the carrier
or hired by the buyer, do you consider
that delivery to the buyer?
NO.
How about delivery of the goods to the
ship or the truck owned by the buyer?
That is considered delivery to the buyer.
What is the effect of partial delivery of the
goods?
The mere fact that part of the goods has
been delivered, it will not deprive the seller of
the right to stop with respect to the remainder
of the goods to be delivered. The seller may
still exercise the right of stoppage in transitu
with respect to the remainder.
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 SALES (JUDGE EDGARDO BELLOSILLO)
Under Art. 1533, when is the right of
resale available to the unpaid seller?
The unpaid seller may exercise the right of
resale:
1. Where the goods are perishable
2. The seller expressly reserves the
right of resale in case of the buyer’s
default
3. In case of an unreasonable default on
the part of the buyer
4. It is essential that before the unpaid
seller can exercise the right of resale,
the unpaid seller should have the
right of lien or the right to stop the
goods in transitu
↳ Technically, the seller is
unpaid
↳ Note that before the seller can
exercise the right of resale or
rescind the contract, he must
have either the right of
possessory lien or right of
stoppage in transitu.
↳ If the unpaid seller has no
such rights, he cannot
exercise the right of resale or
rescission of the contract.
↳ There is a hierarchy of
application of the rights of the
unpaid seller.
Possessory
lien
Stoppage in
transitu
Resale
Rescission
What is the effect of resale?
Katigbak v. Evangelista
Facts: Evangelista sold his tractor and
Katigbak signified his intention to buy the
tractor. They agreed upon the price of
P12,000. P5,000 will be paid upon the
signing of the contract and the balance will
be payable within 60 days. But before the
delivery of the tractor, Katigbak was informed
that there is a defect in the tractor and asked
for repairs. They agreed that Katigbak will
advance the expenses for the repairs which
cost P2,029.
Katigbak did not pursue the transaction. He
withdrew from the contract. He did not take
delivery or paid the balance of the price. He
then demanded for the reimbursement for his
expenses for the repairs of the tractor. But,
Evangelista refused and Lundberg refused to
reimburse Katigbak.
Katigbak filed an action and the lower court
granted his complaint, ordering Evangelista
and Lundberg to pay him. But the CA
reversed the lower court.
Under the provisions of Art. 1533, in the
event that the buyer refused to take the
delivery and pay the price, the unpaid seller
has the right to resell the goods. In case the
unpaid seller will exercise the right to resell
the goods, is there a need for the unpaid
seller to rescind the contract?
The SC said no. There is no need on the part
of the unpaid seller because in the first place
he is still in possession of the goods and
there is no need for the unpaid seller to
rescind the contract, and the unpaid seller
can sell the tractor and in the event that the
tractor will be sold less than to what was
agreed upon with the original buyer, the
original buyer will be held liable.
What happened in this case, it was sold for
P10,000. In the original transaction, it was
P2,000. So nalugi ‘yong seller dito, si Mr.
Evangelista. He lost P2,000. And because of
that, he is entitled to offset from the claim of
Katigbak. There was a P2,000 to be
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reimbursed and because of that, it can be
offset to P2,000 difference from the original
sale.
Note: In the event that the seller will decide
to resell the goods, if there is notice, if there
is no notice to be given to the original buyer,
there is no need to send a notice and there
is no need to rescind the contract. He can
resell the goods to another buyer.
When is notice required?
1. In case the unpaid seller will resell the
goods, not because of the perishable
nature of the goods or because of the
express provision or stipulation in the
contract.
2. Notice is significant in determining
whether or not the original buyer was
in bad faith or there was a default but
not on the part of the original buyer.
Right to rescind the contract of sale
The seller has this right only if he has
possessory lien or the right of stoppage in
transitu
1. If the right to rescind is expressly
preserved in case the buyer should
make a default
2. Where the buyer delays in the
payment
What is the effect of the rescission?
The seller will now resume his ownership
over the goods but the seller has no liability
to the buyer upon the contract of sale.
The buyer may be made liable for the
damages in case of loss or breach of
contract.
What should be done in order to rescind
the transfer of title?
1. Notice to the buyer or
2. It must be through an overt action
showing an intention on the part of
the unpaid seller to rescind the
contract.
Is there a need of notice to the buyer in
the event that the unpaid seller will
exercise the right of rescission?
NO. No notice is required. It is only in resale
that notice is significant where the original
buyer is in default.
Obligations of vendor
Is the vendor bound to deliver the
accessories and accessions after the
perfection of the contract?
The moment that the contract of sale is
perfected, the vendor is bound to deliver the
accessions and accessories.
What are accessions?
Fruits of the thing.
What are accessories?
They are the anything attached to the
principal (e.g., picture frame). What
produced fruits: natural, civil, and industrial
fruits.
Industrial fruits are those produced by lands
of any kind through cultivation or labor.
Civil fruits are the rents of the buildings and
other properties.
Natural fruits are those harvested from fruit-
bearing trees.
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 SALES (JUDGE EDGARDO BELLOSILLO)
When the obligations of the vendor to
deliver the fruits?
They arise when the obligation to deliver
arises. The moment that the contract of sale
is perfected, the vendor is bound to deliver
the fruits to the buyer.
Rules in case of loss, deterioration, or
improvement of the thing before delivery
1. In case the object is lost without the
fault of the debtor, the obligation is
extinguished.
2. If the object is lost through the fault of
the debtor, the debtor shall be held
liable for damages.
3. If the object deteriorated before the
delivery without the fault of the
debtor/seller, it shall be borne by the
creditor.
4. If the object deteriorated due to the
fault of the debtor/buyer, the creditor
has two options: (1) rescind the
contract; or (2) fulfillment with
indemnity for damages.
5. In case the object improves due to
nature or time, it will inure to the
benefit of the creditor.
6. If the object was improved due to the
efforts of the debtor, the debtor has
no other right than that granted to the
usufructuary.
In case of sale of real property by unit of
measure/number, what is the right of the
vendee in case the real property
delivered, there is a lack in area of at least
1/10 stipulated in the contract?
The vendee has two options:
1. Ask for a proportionate reduction of
the price; and
2. Rescission of the contract.
If the vendee will exercise the right of
rescission, the lack in area must at least be
1/10. It should not be less than 1/10,
otherwise, he cannot rescind the contract.
In case of deficiency in the quality of the real
property, the deficiency should exceed the
1/10 of the price agreed by the parties.
In case of sale of real property for a lump
sum (a cuerpo cierto or por precio
alzado): A and B agreed that A will buy the
property of B for P1 million and the total
area of the property is 1,000 square-
meters. After the delivery and based on
the boundaries described in the title, it
turned out that the total area is 1,500
square-meters. Does the buyer have the
right to demand for the delivery of the 500
square-meters?
YES, the buyer can demand from the seller
to deliver the 500 square-meters which is in
the boundary of the property.
Which one will prevail: the one described
in the title or the one described in the
boundaries?
In case of conflict between the boundary and
the one stated in the contract/descriptions of
the property, the boundaries must prevail.
What if the seller will refuse to deliver the
500 square-meters?
The buyer has the option to ask for
1. Proportionate reduction of the price
and
2. Rescission
What if the area after the delivery, it was
found out that it is less than what they
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agreed upon? Supposing they agreed
that the total area is 1,000 square-meters
and after the perfection and delivery and
buyer took possession, it was found out
that it was only 800 square-meters. Can
the buyer demand the proportionate
reduction of the price or can he demand
for rescission?
NO. It is presumed that the buyer should
exercise due diligence, he should check or
conduct an ocular inspection before buying
the property.
When should the actions be filed?
Within 6 months from the delivery of the real
property.
Conditions and warranties
Art. 1545
What is the difference between the
condition imposed for the perfection of a
contract and the condition imposed for
the performance of the obligation?
If contract of sale is subject to any condition
not performed, party may refuse to proceed
with the contract or waive performance of
condition.
If other party promised the happening or
performance of such condition party may
treat non-performance as a breach of
warranty.
Condition for the perfection is not
complied?
There is no contract.
What is a warranty?
A statement or representation made by the
seller of goods, as part of the contract of sale,
having reference to the character, quality, or
title, of the goods, and by which he promises
or undertakes to insure that certain facts are
or shall be as he then represents.
What is a condition?
An uncertain event or contingency, the
fulfillment or happening of which gives rise to
rights and obligations.
What are the essential elements of
warranties against eviction?
1. There is final judgment
2. Purchaser has been deprived in
whole or in part of the thing sold
3. Deprivation was virtue of a right prior
to the sale or one imputable to the
seller effected by the seller
4. Vendor has been previously notified
of the complaint for eviction at the
instance of the purchaser
5. There must be no waiver on the part
of the buyer
Example: buying real property and the buyer
was ejected. There is a problem with the
property. The buyer can file an action for
damages against the seller, but the above
requisites must be present.
First requisite: The vendor must be
deprived in full or in part of the property
which is the subject of the contract of
sale.
The vendee cannot ask for rescission if
you cannot return what you have
received. Can the vendee ask for
rescission if he was deprived of the whole
property?
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 SALES (JUDGE EDGARDO BELLOSILLO)
NO, because he lost the whole property. He
cannot return the property to the vendor.
Second requisite: Final judgment
Supposing the vendee, after buying the
property, the third person filed an action
for ejectment. He was ejected from the
property. There was a decision by the
lower court that granted the ejectment
and the buyer did not appeal the decision.
Can he still file an action against the
vendor because he did not exercise his
right to appeal?
Is the vendee obliged to elevate that
decision to the appellate court? To
exhaust all the remedies?
There is no need for the buyer to exhaust all
remedies. The mere fact that there was a
decision which became final and executory,
then the vendee can run after the vendor
because he was evicted or ejected from the
property.
Third requisite: The vendor must be
summoned.
What do you mean by “summoned”?
He must be notified of the eviction at the
instance of the purchaser.
Is it enough that the vendor was just
notified? For example, after the complaint
for ejectment was filed against the
vendee by the third person, the vendee
texted/called the vendor from whom he
bought the property. Is it enough that he
texted/called to constitute as
notification?
The seller must be impleaded as a co-
defendant in the case at the instance of the
vendee.
Why is there a need to implead the vendor
as co-defendant?
Due process to prove that the ejectment suit
filed against the vendee was adjust.
Last requisite: No waiver
If there is a waiver, he cannot run after the
vendor. He took the risk in buying the
property.
In what situations would implied warranty
not apply?
1. If the qualities and working conditions
of the goods and the vendee takes
them in the condition that they are
found. (“as is” and “were is” sale, e.g.,
sale of secondhand cars)
What is “caveat emptor”?
Let the buyer beware. The seller may place
the goods in an open market and the buyer
must make proper selection of the goods
displayed. Upon choosing the goods
displayed, the buyer can’t hold the seller
liable if the goods that he has chosen turns
out to be defective.
What if the buyer did not inform the seller
of his intention or purpose of buying the
goods? Can the buyer still hold the seller
liable for that?
NO, he must first inform the seller of his
intention or purpose of buying the goods
before he could go after the seller.
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Is the rule regarding caveat emptor
applicable to execution sales?
YES, if you are buying a property subject of
an execution sale, you have to check first the
property before engaging in that execution
sale.
In execution sale, the sheriff is not obliged to
put the purchaser in possession (or
position?). It does not warrant upon the title.
In tax sale?
YES, caveat emptor will also apply in tax
sales. The government has the right to
subject a property to tax sale for non-
payment of taxes.
Two kinds of waiver of eviction:
1. Without knowledge of risk of eviction
(waiver consciente) – presumed
2. With knowledge of risk of eviction
(waiver intencionada) – must be
proved; vendor is exempted from
liability.
Rights of the vendee in case of eviction
(VICED):
1. Value of the thing at the time of
eviction
2. Income
3. Costs
4. Expenses
5. Damages and interests or
ornamental expenses if seller was in
bad faith
Can the vendee ask for rescission if he is
totally evicted from the premises?
NO. The remedy of rescission is no longer
available to a person totally evicted?
What if he was partially evicted from the
premises? Can he still exercise the right
of rescission?
YES.
What are the two options of the vendee if
he is partially evicted from the premises?
Rescission in respect to the portion he is still
holding and sue the vendor for damages for
breach of warranty.
Can the warranty be enforced before the
finality of the judgment?
There is a need for final judgment. If the case
is pending, he cannot file for an action for
breach of warranty, so there must be a
finality of the decision before he could file for
damages.
❖ Spouses Babasa v. Court of Appeals
↳ The obligation of Tabangao will arise
only once the title is delivered but the
spouses Babasa cannot deliver the
title. In fact, they are asking for
indefinite extension and demanding
payment of interest. That is unfair
and ill-motivated.
↳ When may a conditional contract of
sale be treated as an absolute sale?
There are two conditions that must be
seen in the contract of sale:
1. Right to unilaterally rescind the
contract in case of non-payment;
and
2. Delivery of title upon full payment
of price.
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↳ Absence of the two conditions, the
contract may be treated as a
conditional contract of sale.
❖ Jaime Ang v. Court of Appeals
↳ After Ang sold the car, he filed
several actions which were
dismissed for wrong cause of action.
↳ When it was filed with the MeTC, it
had already prescribed (PP: 60 days
upon delivery).
↳ If the action is based on a written
contract, the prescriptive period
under Art. 1144 of the CC is 10 years.
But that provision does not apply in
this case.
↳ The PP here is 6 months from the
delivery.
↳ How many days to file the action if the
object is an animal? 40 days from the
delivery.
❖ Power Commercial v. PNB
↳ They did not submit all the
documents required for the approval
of the deed of sale with assumption
of mortgage because it is subject to
the approval of the bank because
they assumed the mortgage, the
obligation of spouses Quiambao
using the property as collateral for
that obligation.
↳ Who prepared the contract between
petitioner and the spouses? It was
the lawyer of the petitioner. The
lawyer did not include in the terms
and conditions where the spouses
should eject the squatters. If they
really intended that condition be
included, then the lawyer should
have included that.
↳ StatCon: In case of obscurity in the
contract, it must be construed against
the party who caused it.
↳ Solutio indebiti. Does it apply in this
case? No. (see requisites)
Retail Trade Liberalization Act of 2000
It is the policy of the State to promote
consumer welfare in attracting promoting
and welcoming productive investment that
will bring down price for the Filipino
consumer, create more jobs, promote
tourism, assist small manufacturers,
stimulate economic growth and enable
Philippine goods and services to become
globally competitive through the liberalization
of the retail trade sector.
Pursuant to this policy, the Philippine
retail industry is hereby liberalized to
encourage Filipino and competitive retail
trade sector in the interest of empower the
Filipino consumer through lower prices,
higher quality goods, better services and
wider choices.
Definition of “retail trade”
Retail trade is any act, occupation or calling
of habitually selling direct to the general
public merchandise, commodities or good for
consumption.
Elements of “retail trade.”
1. Habitual act or business of selling
2. Direct to the general public
3. Merchandise, commodities or good
for consumption
SEC ruled that selling of merchandise or
goods which are incidental to the primary
purpose of the corporation will not be
considered retail trade. For example, a
hospital will operate a pharmacy within the
hospital. That is not retail trade.
Telecommunications company will sell
cellphones. That is not retail trade. Hotel
corporations will operate a restaurant within
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the hotel. That is not retail trade. They are
considered as isolated transactions or
isolated acts of selling which are incidental to
the primary purpose of the corporation.
Retail trade is a valid exercise of the police
power of the State.
❖ Ichong v. Hernandez
↳ Issue: constitutionality of the Retail
Trade Liberalization Act.
↳ The best evidence to determine the
alien dominance in retail business
are the statistics on the retail trade,
which put down the figures in black
and white. Between the constitutional
convention year (1935), when the
fear of alien domination and control of
the retail trade already filled the
minds of our leaders with fears and
misgivings, and the year of the
enactment of the nationalization of
the retail trade act (1954), official
statistics unmistakably point out to
the ever-increasing dominance and
control by the alien of the retail trade.
↳ Statistical figures reveal that in
percentage distribution of assets and
gross sales, alien participation has
steadily increased during the years. It
is true, of course, that Filipinos have
the edge in the number of retailers,
but aliens more than make up for the
numerical gap through their assets
and gross sales which average
between six and seven times those of
the very many Filipino retailers.
If the thing sold is lost due to hidden
defects, is the vendor liable to the
vendee?
Vendor is liable to the vendee.
If the vendor is aware that there is a defect
in the thing sold to the vendee, what are
the liabilities of the vendor?
He shall bear the loss and shall be obliged
to return the price and refund the expenses
of the contract with damages.
What if the vendor is not aware of the
defect?
If he was not aware of them, he shall only
return the price and interest thereon, and
reimburse the expenses of the contract
which the vendee might have paid.
Vendor is not liable for damages.
Ramos v. Court of Appeals
- After it was foreclosed by the GSIS,
the spouses wanted to redeem the
property. Are they allowed to redeem
the property?
- The spouses were not able to
redeem the property.
- After the property was redeemed, a
new title was issued. At that time,
petitioners filed for the annulment of
the foreclosure.
- Assumption of mortgage was not
approved by GSIS for failure to pay
the amortization.
- Deed of sale with assumption of
mortgage was not perfected.
If the thing sold had any hidden fault at
the time of the sale, and should thereafter
be lost by a fortuitous event or through
the fault of the vendee, can the vendee
demand the price?
YES. If the thing sold had any hidden fault at
the time of the sale, and should thereafter be
lost by a fortuitous event or through the fault
of the vendee, the vendee may demand the
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vendor the price paid less the value which
the thing had when it was lost.
How much will the vendor pay the
vendee?
The price of the thing bought from the value
of the thing it was lost.
Example: Supposing, it was a speedboat
worth 5 million. A bought from B a
speedboat worth 5 million. B did not
declare that the speedboat has a hidden
defect or fault at the time of sale. Then the
thing was lost due to a fortuitous event at
the fault of the vendee. Despite thereof,
the vendee can still demand from the
vendor the refund of the price of the thing
minus the value of the thing at the time it
was lost.
Supposing the thing sold had no hidden
defects and it was lost due to fortuitous
event or through the fault of the vendee,
how much is the liability of the vendor to
the vendee?
Loss should be borne by the vendee.
Are the provisions of Arts. 1568 and 1569
applicable to judicial sales?
YES.
Why is the judgment debtor exempted
from damages?
Due to the compulsory nature of the sale.
So if the thing bought by the vendee
at a judicial sale has a hidden defect, then
the buyer can hold the vendor/judgment
debtor liable as well. But judgment debtor is
not liable for damages because he was only
forced to sell his property to answer for his
obligation.
Cebu Winland
- Art. 1543: action already prescribed.
- SC held that the concept of delivery
contemplated in the article refers to
the concurrent transfer of both
possession and ownership of the
property.
- In this case, what was only
transferred was possession and not
ownership.
- Ownership will be transferred after
full payment.
- Failure to deliver the total area
agreed upon, then the vendee has
two options: (1) reduction of the price
or (2) rescission.
- Action has not yet prescribed
because there was no delivery.
- Period of 6 months will be counted
from the delivery and receipt of
ownership.
In case of conflict between the area
(specified in the contract of sale, e.g.,
100km2) and boundaries, which will
prevail?
The boundary will prevail.
What if the vendee bought two or more
animals and one of them has a redhibitory
defect? Can he ask for rescission of the
contract?
NO. The redhibitory defect in one animal will
not affect the sale.
What is the exception?
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 SALES (JUDGE EDGARDO BELLOSILLO)
When it appears that the vendee would not
have bought the animal without the defective
one.
The vendor can be held liable for that.
Supposing the animals were bought at a
fair or during a public auction, is there a
warranty?
NO. There is no warranty against hidden
defects of animals sold at fairs or at public
auctions, or of livestock sold as condemned.
What about the sale of an animal suffering
from a contagious disease?
The sale shall be void.
What is redhibitory defect?
It is a defect in the article sold against which
defect the seller is bound to warrant. The vice
must constitute an imperfection, a defect in
its nature, of certain importance; and a minor
defect does not give rise to redhibition.
It is a vice or defect where the vendor is
bound to warrant.
What if the animal sold dies within 3 days,
is the vendor liable to the vendee?
The vendor shall be liable if the disease
which caused the death existed at the time of
the contract. Within 3 days after the
purchase, not the delivery.
What are the alternative remedies of the
vendee in sale of animals?
1. Redhibitory action
2. Proportionate reduction in price
(accion quanti minoris or accion
estimatoria)
3. In both cases, the vendee can ask for
damages
In case of sale of large cattle, what laws
will govern its sale?
Special laws shall govern. The contract must
appear in a public document.
Spouses Nonato v. IAC
- They cannot avail both remedies
because they are alternative and not
successive.
What are the statutory obligations of the
vendee?
The vendee is bound to:
a. Accept delivery
b. Pay the price of the thing sold at the
time and place stipulated in the
contract
What are the obligations of the vendor?
1. Deliver the goods
2. Take care of the goods as a good
father of a family
3. To warrant against hidden defects
and eviction
4. To pay the expenses of the delivery if
required
After the perfection of the contract of
sale, is the vendor obliged to deliver to
the vendee?
NO. The seller is not obliged to deliver until
the buyer has paid the price and the buyer is
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 SALES (JUDGE EDGARDO BELLOSILLO)
not obliged to pay the price until there has
been delivery. If one of them fulfills their
respective obligation, then the other party
would have to fulfill their obligation as well.
What if there is a stipulation agreed by the
parties with respect to the acceptance
and payment of the thing? Is the vendee
obliged to pay and the vendor obliged to
deliver?
The seller is bound to deliver even if the
buyer has not yet paid.
What if there is no time and place
stipulated for the delivery?
The vendee is bound to pay at the time and
place of delivery.
In the absence of stipulation as to the
place of delivery, what is the rule to be
observed?
Payment will be made in the place wherever
the object is when the contract was
perfected.
If only the time is stipulated in the contract,
then the vendee is required to pay even
before the thing is delivered.
With respect to payment on installments,
is the vendee obliged to accept the
delivery of the thing on installment?
NO. The vendee is not obliged to accept the
thing unless there is an agreement. The
vendee is also not obliged to pay the price of
installment.
With respect to the examination of the
goods to be delivered, does the vendee
have the right to examine the goods
before delivery?
YES, if the thing delivered to the buyer, he is
given a reasonable opportunity to examine
the goods.
When is the vendee not allowed or has no
right to examine the goods?
1. If there is a stipulation
2. If the thing delivered is on COD (cash
on delivery)
Filinvest Company
- Whether or not the return of the
mortgaged vehicle, by virtue of the
surrender, cancelled the obligation.
- When the appellants opted to return
the vehicle, it extinguished the
obligation for the unpaid price.
- Can the mortgagee still ask for the
payment of the balance? YES.
- When has the mortgagee no right to
ask payment for the balance?
- The subject property must be
foreclosed and there must be actual
auction sale of the subject property.
- These will extinguish the right of the
mortgagee to ask payment for the
balance.
- Did the assignee assume payment
for the taxes?
Spouses De la Cruz v. Asian Consumer
Finance Industrial Corporation
- Remedies are alternative not
cumulative; if one was chosen then
the others cannot be availed.
- Should the value of the vehicle be
deducted from the balance of the
obligation of the petitioners? How
much should be paid?
- Possession of the vehicle is already
with the respondent, but despite
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 SALES (JUDGE EDGARDO BELLOSILLO)
thereof it is demanding the payment
of the entire balance.
- Value of the truck should be
deducted.
- No auction sale.
- Mortgagee is still entitled to the
payment of the balance but not the
entire balance because they are
already in possession of the truck.
Cerna v. Leviste
- Third person cannot be solidarily
liable for another’s obligation.
- Liability of the third party extends only
to the property mortgage. Should
there be insufficiency in the amount
collected, the creditors should have
recourse on the principal debtor.
Mortgage must be forfeited.
- What happened to the principal
mortgagor? He died.
- There was a procedural defect in the
action. Cause of action should be
against the estate.
- Was the remedy by Cerna proper?
NO.
- Res judicata.
The Grandfather Rule
It is a process of characterizing the
citizenship of shares in one corporation held
by another corporation by attributing the
controlling interest of individual stockholders
in the second layer of corporate ownership.
Tests to determine the citizenship of a
corporation (aside from the Grandfather
Rule):
1. Incorporation test – nationality is
determined by the place of
incorporation.
2. Domiciliary test – nationality is
determined by the principal place of
business.
3. Control test – nationality of the
controlling stockholders.
When should the Grandfather Rule be
applied?
1. If the corporation’s Filipino equity
(ownership of Filipinos) fall below the
constitutional requirement of 60%, it
requires that the ownership of the
Filipino in the corporation must be
appeased at 60%; or
2. If there is a doubt as to the Filipino to
foreign equity.
Illustration of the Grandfather Rule:
Narra Nickel Mining and Development Corp.,
et al.
If the 60% Filipino ownership threshold under
the Control Test is not met, the Grandfather
Rule will be applied such that the prorated
indirect shareholding of non-Filipinos will be
determined and added to any direct non-
Filipino shareholding, to determine the total
non-Filipino shareholding in the nationalized
entity. For this purpose, each entity at which
the 60% Filipino ownership threshold under
the Control Test is not met will be pierced, to
determine the proportional Filipino and non-
Filipino ownership, and such proportion shall
be applied for the purpose of determining the
nationality of shares owned by such entity. It
must be emphasized that under the 1967
SEC Rules, the Grandfather Rule will be
applied only when the threshold for the
Control Test is not met, that is, only when the
Filipino shareholding in the corporation is
below 60% of the capital.
Acceptance
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 SALES (JUDGE EDGARDO BELLOSILLO)
- One of the obligations of the vendee
What are the two modes of accepting the
goods?
Express and implied acceptance.
Summarize into three ways of accepting
the goods:
1. He intimates to the seller that he
has accepted them; or
2. 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; or
3. When, after the lapse of
reasonable time, he retains the
goods without intimating to the
seller that he has rejected them.
Is acceptance a condition to complete the
delivery?
NO. Delivery is the obligation of the seller;
acceptance is the obligation of the vendee.
Is it possible that there is an acceptance
of the goods but no actual receipt of the
goods?
YES.
Is it possible that there is acceptance but
no delivery yet?
YES. Acceptance can precede delivery.
Will the acceptance by the vendee bar or
prohibit the vendee to file an action for
damages against the vendor?
NO. The acceptance of the buyer does not
free the seller from liability for the warranty of
the goods delivered.
What possible action can the vendee file
against the vendor?
The vendee may file for rescission of sale.
Can the vendee also file an action for
damages against the vendor?
YES.
A bought a car for installment and used it
as collateral for his obligations and he
used his motorcycle as second collateral
for that obligation. After the buyer failed
for pay his obligations, can the creditor
foreclose the second collateral put up by
A?
NO. Creditor can only foreclose the original
collateral and not the second because it was
the former which was included in the original
mortgage.
Right of the mortgagee to foreclose the
property will apply only to the subject of the
loan.
When will a conditional contract of sale
be considered as an absolute deed of
sale?
PCI v. Giraffe-X
- Replevin is the recovery of
possession
- Alternative remedies not cumulative
- Absence of clause of right to
repurchase
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 SALES (JUDGE EDGARDO BELLOSILLO)
- Practice of vendors of selling
properties on installment which is
treated as lease with option to buy
- Rental is installment payment of the
price
What are the effects if buyer refuses to
accept delivery?
1. No obligation or duty on the part of
the vendee to return the goods
2. Mere notice of refusal to the seller will
suffice
Who is now in possession of the goods?
The buyer will be the depository of the goods;
he will take care of the goods in the
meantime.
Can the buyer resell the goods?
YES. After giving notification to the seller,
buyer may resell the goods.
Under that situation, there is a justifiable
reason on the part of the vendee to refuse to
accept.
What if there is no justifiable reason to
accept the goods on the part of the
buyer?
Then the title is already passed to buyer from
the moment the buyer refused to accept.
Who will shoulder the loss in case the
object delivered is damaged?
The buyer since the title already passed to
him.
Supposing that the object was delivered
to the carrier (not yet reached the place of
the buyer), is that delivery to the carrier
also a delivery to the buyer?
GR: Delivery to the carrier is not delivery to
the buyer.
XPN: If the buyer is the owner of the vessel
used by the carrier for delivery.
When can the vendee be held liable for
payment of interest?
1. It has been stipulated
2. The thing sold and delivered
produces fruits or income
3. Buyer is in default from the time of
judicial or extrajudicial demand for
the payment of the price
Note: No. 2 is always asked.
A sold to B a secondhand car which
amounts to P300,000. It was agreed today
and the car is delivered today and to be
paid also today. The buyer was not able
to pay today and was able to pay only in
January 15, 2022. There was no
agreement on the payment of interest. Is
the buyer liable to pay for the interest?
YES, only when a judicial or extrajudicial
demand for the payment of the price.
A used to operate a taxi. B is also a taxi
operator. A sold his taxi to B. It was sold
today and delivered today but B paid on
January 15, 2022. After delivery by A to B,
he used the taxi in his operations. Can the
seller demand for the payment of
interest?
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 SALES (JUDGE EDGARDO BELLOSILLO)
YES, but only from the time in which the
delivery of the taxi to the time of the payment.
Art. 1956
- No interest shall be due unless it has
been expressly stipulated in writing.
In the absence of that stipulation, the
other party cannot demand for the
payment of interest.
- Only applies to contract of loan
With respect to other contracts, the
stipulations of the parties to pay the interest
may be oral.
If the object of the contract does not produce
income or interest, then the vendee cannot
be held liable for the interest unless there is
a stipulation between the parties and then
there is a judicial or extrajudicial demand for
the payment of the price.
From the moment there is a demand, that is
the time that the vendee can be held liable to
pay for the interest.
When the buyer cannot suspend the
payment of the price:
1. if the vendor gives security for the
return of the price in a proper case;
2. if it has been stipulated that
notwithstanding any such
contingency, the vendee must make
payment
3. if the vendor has caused the
disturbance or danger to cease;
4. if the disturbance is a mere act of
trespass; and
5. if the vendee has fully paid the price.
What is you understanding of the
disturbance which is a mere act of
trespass?
No basis on the part of the buyer if the
disturbance is a mere act of trespass,
meaning the third person has no right
whatsoever over the property.
Supposing there is a case filed between
the buyer and the third person. Can the
buyer now suspend or rescind the
contract?
YES.
Is that case a cause of action for
rescission of the contract on the part of
the buyer?
NO. There must be a final judgment.
When can vendee move for rescission?
After final judgment. If the judgment is not yet
final, there might be a collusion between the
vendee and the third person.
When can the buyer move for the
rescission and not for the suspension of
payment?
Where the disturbance is caused by the
existence of a non-apparent servitude. (see
Art. 1560.).
When can vendee suspend the payment
of the price?
1. Well-grounded fear (fundado temor)
2. Fear is because of:
a. Vindicatory action or action to
recover
b. Foreclosure of mortgage
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 SALES (JUDGE EDGARDO BELLOSILLO)
What is a vindicatory action?
1. Ejectment
2. Unlawful detainer
3. Forcible entry
4. Accion publiciana
5. Accion reivindicatoria
Laforteza v. Machuca
- Was there a valid rescission on part
of petitioner? Was it rescinded before
the buyer offered to pay the balance?
NO.
- There was offer to pay but was
refused.
- Rescission must precede offer to
pay.
- Art. 1892
Supposing on Nov. 23, A sold to B a piece
of land and payment under the delivery to
be made on Nov. 30. It was stipulated that
if payment would not be made on Nov. 30,
the contract would automatically be
rescinded. Can B still pay A on Dec. 5?
YES, the buyer can still pay the seller as long
as there is no demand yet. That stipulation is
a pactum commissorium and is null and void.
Art. 1592.
If there is a demand for rescission on Dec. 1,
then the buyer cannot pay anymore.
Under what situations these provisions
shall not apply?
1. Sale on installment of real estate
2. Contract to sell/conditional sale of real
estate
3. Cases covered by R.A. No. 6552
When seller may immediately sue for the
rescission of the sale
a. Loss of the immovable property sold
and
b. Loss of the price
Before he can rescind the contract, there
must be notice by the seller. There must be
a reason for the rescission.
When can the seller sue for the rescission
of contract of sale?
In the sale of real property, the vendor must
make a demand for rescission before he can
have the right to rescind the contract.
What if the property is movable?
In the case of personal property the vendor
can rescind the contract, as a matter of right,
if the vendee, without any valid cause, does
not:
1. accept delivery or
2. pay the price unless a credit period for
its payment has been stipulated.
There must be a demand for rescission on
the part of the vendor before he can exercise
his right to rescission.
BULK SALES LAW
Purpose
The Bulk Sales Law is designed to prevent
the defrauding of creditors by the secret sale
or disposal or mortgage in bulk of all or
substantially all of a merchant’s stock of
goods.
When is a sale considered in bulk?
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 SALES (JUDGE EDGARDO BELLOSILLO)
Any sale, transfer, mortgage or assignment
of a stock of goods, wares, merchandise,
provisions, or materials otherwise than in the
ordinary course of trade and the regular
prosecution of the business or substantially
all r of all, or substantially all, of the fixtures
and equipment used in and about the
business shall be deemed to be a sale and
transfer in bulk.
When is sale in bulk not covered by the
bulk sales law?
1. If the sale or transfer is in the ordinary
course of trade and the regular
prosecution of the business of the
vendor;
2. If it is made by one who produces and
delivers a written waiver of the
provisions of the Bulk Sales Act from
his creditors;
3. If it is made by an executor,
administrator, receiver, as-signee in
insolvency, or public officer, acting
under judicial process (Sec. 8.);
4. If it refers to properties exempt from
attachment or execution.
What are the certain formalities that must
be complied with by the debtors?
The sworn statement containing the names
and addresses of all creditors of the vendor
or mortgagor provided for in Section three of
this Act, shall be registered in the Bureau of
Commerce. For the registration of each such
sworn statement a fee of five pesos shall be
charged to the vendor or mortgagor of the
stock of goods, wares, merchandise,
provisions or materials in bulk.
Creditors must be notified of the intended
sale.
How will the proceeds of the sale be used
by the debtor?
Pro rate among the claimants. Pro-rated
application of proceeds.
Can the creditor go after the subsequent
purchasers?
NO.
What is the right given to the creditors
under this provision? Is it a personal right
or a real right?
Personal right. He acquires no right in the
property purchased as against the creditors
of the seller.
Innocent purchasers for value are protected
under this provision. They cannot run after
subsequent purchasers unless it is proven
that there is bad faith on the part of the buyer
and subsequent purchasers.
Actions and remedies available to the
parties in a contract of sale in case of
breach:
Available to the seller:
1. action by the seller for payment of the
price
2. action by the seller for damages for
non-acceptance of the goods
3. action by the seller for rescission of
the contract for breach thereof
Available to the buyer:
1. action by the buyer for specific
performance
2. action by the buyer for rescission or
damages for breach of warranty
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 SALES (JUDGE EDGARDO BELLOSILLO)
When an action for the price of the goods
under a contract of sale can be
maintained by the seller:
1. when the ownership of the goods has
passed to the buyer and he
wrongfully neglects or refuses to pay
for the price
2. when the price is payable on a certain
day and the buyer wrongfully
neglects or refuses to pay such price,
irrespective of delivery or of transfer
of the title
3. when the goods cannot readily be
resold for a reasonable price and the
buyer wrongfully refuses to accept
them even be-fore the ownership in
the goods has passed, if the
provisions of Article 1596, 4th
paragraph (infra.) are not applicable.
What actions are available to the seller of
the goods in case the buyer wrongfully
refuses to accept the goods?
1. Damages
2. Hold the goods as bailee
3. Ask for resolution of the contract for
failure of the buyer to fulfill his
obligations
What is the measure of damages for non-
acceptance of the goods?
1. Difference between contract price
and market price.
2. Add full amount of damage.
3. Proximate damage.
What is the measure of damages for
repudiation or countermand?
It is the labor performed and expenses
incurred for materials plus profit he would
realize had the sale been fully performed.
When the seller may rescind the contract
of sale before the delivery?
1. When the buyer repudiated contract
of sale
2. The buyer manifested his inability to
perform his obligations
3. When buyer committed a breach of
contract of sale
What are the remedies on the part of the
buyer in case of breach of warranties by
the seller?
1. accept the goods and set up the
seller’s breach to reduce or
extinguish the price;
2. accept the goods and maintain an
action for damages for the breach of
the warranty;
3. refuse to accept the goods and
maintain an action for dam-ages for
the breach of the warranty
4. rescind the contract of sale by
returning or offering the return of the
goods, and recover the price or any
part thereof which has been paid
The remedies open to the buyer under the
article may be grouped into three, to wit:
a) recoupment (No. 1.);
b) action (No. 3.) or counterclaim for
damages (No. 2.); and
c) rescission. (No. 4.)
The above remedies are alternative. Once a
remedy has been granted to the buyer, no
other remedy can thereafter be exercised or
granted.
The only exception is when after the buyer
has chosen fulfillment, it should become
impossible, in which case he may also sue
for rescission.
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 SALES (JUDGE EDGARDO BELLOSILLO)

2. In case of purchase of real

Obligations of buyer in case of
rescission:
1. In case of rescission, the buyer shall
cease to be liable for the price, his
only obligation being to return the
goods;
2. If he has paid the price or any part
thereof, he may recover it from the
seller
3. He has the right to hold the goods as
bailee for the seller should the latter
refuse the return of the goods;
He has the right to have a lien on the goods
for any portion of the price already paid which
lien he may enforce as if he were an unpaid
seller.
property where property
delivered is less than in area
which is more than 1/10 of the
area (move for rescission or
extinguishment of sale)
Extra-special modes of extinguishment
1. Conventional redemption
2. Legal redemption
What is conventional redemption?
Conventional redemption takes place when
the vendor reserves the right to repurchase
the thing sold with the obligation to comply
with the provisions of Art. 1616 of the CC. It
is stipulated in the contract that he will
repurchase the property.

Modes of extinguishment of contract of

sale: Is it required that the right of the vendor
to repurchase the property must be
Same as those modes of extinguishment of
incorporated in a contract of sale?
obligation.
YES, it is required that the agreement or the
1. Novation
right of the vendor to repurchase the property
2. Payment or performance
must be stipulated in the same contract or
3. Loss of the thing
document.
4. Condonation
5. Remission If it is not stipulated or mentioned in the same
6. Confusion or merger of right of creditor document, there is no such right to
and debtor repurchase. There is no contract of the right
7. Compensation to repurchase on the part of the vendor, but
8. Annulment a mere promise to sell.
9. Rescission
10. Fulfillment of resolutory conditions
11. Prescription Claraval
12. Death of the debtor (sometimes)
13. Mutual desistance - The agreement to repurchase on the
14. Unilateral desistance part of the vendor was executed or
made in a separate document.
- But it was executed on the same day
Special modes of extinguishment: when the contract of sale was
executed.
1. Art. 1484 (Recto Law) - The SC said that there was really an
intention on the part of the parties that

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 SALES (JUDGE EDGARDO BELLOSILLO)
the vendor will exercise the right to
repurchase. Thus, that agreement
was recognized.
Villarica
- Where the agreement on the part of
the vendor to repurchase was made
in a separate document but the
problem was that the document was
executed 6 months after the
execution of the contract of sale.
- SC: the intention of the vendor to
repurchase was not recognized as a
right to repurchase.
Is that stipulation as to the right to
repurchase considered as an accidental
or a natural element of the contract?
Accidental element because the parties must
agree that the vendor has the right to
repurchase unlike the natural elements
(warranty against hidden defects, etc., are
presumed). Both parties must agree that it is
a part of the contract.
When is a contract deemed to be an
equitable mortgage?
Art. 1602 enumerates similar circumstances
which will qualify the contract as an equitable
mortgage. The presence of any one or even
one of the circumstances under 1602 will
render the contract as an equitable
mortgage.
(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;
• Lumayag case
(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 aa 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.
For example: there was a contract entered by
the parties and was denominated as a
contract of sale, but if you will try to see the
transactions or the circumstances beyond,
you will find out that the contract that the
parties executed is an equitable mortgage.
The above 5 items mentioned are the
transactions that will qualify as an equitable
mortgage. But no. 6 where it can be inferred
that the transaction of the parties is to secure
payment of debt or obligation is also
considered as equitable mortgage.
Lumayag
- Lumayag is the son-in-law. His father-in-
law sold the property to Lumayag.
Although he sold the property to his son-
in-law, the property is still in the
possession of the other siblings.
- When Lumayag applied for reconstitution
of title, it was opposed by the other heirs.
According to them, they are in
possession of owner’s copy so there is
no basis for the reconstitution of title.
According to Lumayag, the transaction
was a contract of sale.
- It was proven that the transaction was an
equitable mortgage.
- Attendant circumstances that made the
transaction an equitable mortgage:
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 SALES (JUDGE EDGARDO BELLOSILLO)

1. The respondents are still in Dellota to allow Dionisia to redeem the

possession of the property 40,000 square meters while the 50,000
under Art. 1602. square meters consolidated by operation
2. Respondents are the one of law in favor of intervenor Gumersindo
paying for the realty taxes. Delena.
3. Provision of pactum - SC: Dionisia is no longer entitled to the
commissorium. property because the right to repurchase
- Property was only used as security for the property already expired and there
payment of obligations. are two essential requisites of equitable
mortgage:
1. The parties entered into a
Is pactum commissorium a valid contract with what appears to
transaction? be a contract of sale; and
2. The intention is to secure an
NO. There is no such provision recognizing existing debt by way of
that pactum commissorium is valid. mortgage.
It is an agreement wherein non-compliance - The Courts are not the guardians of the
by the party, the property will be transferred parties incompetent to enter a contract of
under the name of the other party. That is sale. The contract in this case is that of
prohibited under the law; void agreement. sale because if it was an equitable
mortgage, then the vendor has the right
to repurchase. The contract of sale was
already perfected.
Vda de Delfin v. Dellota
- Dionisia sold 50,000 square meters of lot
to spouses Ildefonso Delfin with the right Conventional redemption v. option to
to repurchase, but she failed to exercise buy1
her right to repurchase.
- Another 50,000 square meters was sold Conventional
to Gumersindo Delena with the right to redemption/right Option to buy
repurchase, and she also failed to to repurchase
exercise the right as agreed upon. Generally a
It is not a separate
- Dionisia filed an action at the CFI contract but merely
principal, albeit
because she wanted to exercise the right preparatory,
part of the main
to repurchase because prior to the filing contract and may
contract of sale.
of the action, sometime in 1956, a deed be created
XPN: Claraval
independent of
of mortgage and promise to sell was case
another contract.
executed by Dionisia in favor of Salvador
It may exist prior to
Dellota. It must be
or after the
- Salvador Dellota leased that lot to embedded in a
perfection of the
Gumersindo Delena and Dionisia sold to contract of sale
sale or be
Salvador 90,000 square meters. upon the latter’s
embedded in
- Dionisia wanted to exercise the right to perfection.
another contract.
repurchase from Idelfonso Delfin and It does not need a It must have a
Patricia Delfin but the CFI ordered separate consideration

1 Villanueva, p. 518.

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 SALES (JUDGE EDGARDO BELLOSILLO)

consideration in separate and mortgage. Property will be presumed to be

order to be valid distinct from the used as security for payment of obligation.
and effective. purchase price.
The redemption
It may exceed 10
period cannot Speaking of tender of payment, is it
years.
exceed 10 years.
possible that vendor will issue the check
It requires notice to
as a tender of payment to repurchase the
be accompanied by
a tender of It requires only property? Is that allowed?
payment, including notice of such YES, because the right to repurchase is a
consignment when exercise be given right not an obligation on the part of the
tender of payment to the optioner.
vendor. He must exercise that right because
cannot be
effectively made. if he doesn’t, he loses ownership of the
The valid exercise property.
The exercise of this
of an option right But if whether or not the check will be
right extinguishes
results into the honored is another story. If he issued a
the existing
perfection of the
contract of sale. bounced check although there was a valid
contract of sale.
exercise of the right to repurchase, he can
still be held liable for that.
What if the period exceeded 10 years?
Will the contract still be valid?
Remedies of the parties if the contract is
YES, the contract will remain valid. Only the
not clear:
period will be considered void and the vendor
can no longer exercise the right to 1. If there was a meeting of minds between
repurchase. the parties and their agreement was
reduced into writing but apparently the
If the vendor will not exercise the right to
contract does not contain the terms and
repurchase within the period agreed upon or
conditions agreed by the parties by
within 10 years, then ownership and title will
reason of mistake or fraud, then the
be vested in the vendee.
remedy of the party is REFORMATION.
2. If there is no meeting of minds, the
remedy is ANNULMENT OF THE
Is there a need of a judicial order? CONTRACT.
NO, there is no need for a filing of a petition
on the part of the vendee. The ownership is
transferred to the vendee by operation of What is the period given to the vendor a
law. retro to exercise the right to repurchase?

The judicial order is required only for the
registration of consolidation of title.
Art. 1603
In case of doubt, under Art. 1603, the
contract will be construed as an equitable
1. If there is no agreement between the
parties that the vendor has no right to
repurchase, then the vendor has no right
to repurchase because there is no such
agreement.
2. If there is an agreement between the
parties that the vendor a retro has the
right to repurchase but it was not

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 SALES (JUDGE EDGARDO BELLOSILLO)
stipulated in the contract when the
vendor should exercise the right to
repurchase – vendor has 4 YEARS
FROM THE DATE OF THE CONTRACT.
3. If there is an agreement between the
parties – vendor should exercise his right
to repurchase WITHIN THE PERIOD
AGREED UPON.
Supposing the parties agreed that the
vendor has the right to repurchase in 11
years?
The vendor can only exercise his right up to
10 years because the period agreed upon is
not valid. He can exercise the maximum
period of 10 years.
Supposing there is a conflict between the
parties whether the vendor has the right
to repurchase or not and there was a
litigation/case filed.
If there is a final decision of the court that
decided that the vendor has the right to
repurchase, the vendor has still 30 days from
the finality of the decision to exercise his right
to repurchase the property.
Sometimes that decision will take 20 to 30
years.
Rights of the vendee
The vendee is subrogated to the vendor’s
rights and actions.
Example: Insurance. In case of
motor/vehicular accident. The insurance
company can prosecute the case against the
offender by filing an action for criminal case
and damages. The insurance company will
step into the shoes of the insured.
Can the creditors of the vendor a retro
exercise the right of repurchase?
NO, they cannot without exhausting the
properties of the vendor a retro. They must
exhaust the properties before exercising the
right to redeem the property.
Is there an exception to that?
YES, there are exceptions. There is no need
for exhaustion in the case of prior
mortgagees and creditors in an antichresis of
the property.
In the case of prior mortgagees and creditors
in antichresis, there is no need for them to
exhaust the property of the vendor a retro.
What is the rationale for the need to
exhaust first the properties of the vendor
a retro before the creditors can exercise
the right of redemption?
It is detrimental to the stability of the property
if we were to countenance an extensive
(excessive) use of the resolutory action.
How is the property owned in common by
several owners be divided?
First, a co-owner may demand a partition of
the thing owned in common insofar as his
share is concerned.
But supposing now the property cannot be
divided, the remedy is one of the co-owners
will indemnify the others. He will buy the
share of the other co-owners. If they cannot
agree, then the other remedy is to dispose
the whole property and they will just divide
what or distribute the proceeds.
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 SALES (JUDGE EDGARDO BELLOSILLO)
Example:
X, Y, and Z are co-owners of a parcel of land.
If they sold the said property to B without the
right to repurchase in a contract, each of
them—X, Y, and Z—they can only
repurchase 1/3 portion of the property.
Example:
W is the sole owner of the land and he sold it
with right to repurchase to B. Unfortunately,
W died but he left behind X, Y, and Z are his
heirs. X, Y, and Z want to redeem the
property. They are each only entitled to
redeem 1/3 portion.
Example:
Each one of the co-owners of an undivided
immovable property was able to dispose
their share in a separate contract on different
dates. Supposing that the one of the co-
owners wanted to exercise the right to
repurchase with respect to his share. He
cannot redeem the whole property, but only
what he disposed.
Example:
If the vendee should have several heirs and
the action for redemption cannot be brought
against them except for his own share only.
A sold a parcel of land to B with pacto de
retro. B died, leaving C, D, and E as his heirs.
A wanted to exercise his right to redeem the
property. He cannot compel any one of the
heirs to sell the whole property.
If one of the heirs became the owner of the
whole property, then he can be compelled to
sell the whole property.
2 Paras, p. 289.
What are the obligations of the vendor a
retro if the redemption of the property is
made?
1. He has to pay the price of the property.
2. He has to pay the expenses of the
contract.
3. He has to pay the other legitimate
payments by reason of the same.
4. Necessary expenses
5. Useful expenses
Is it possible that the parties may agree
that aside from the items enumerated, to
include other expenses to be paid by the
vendor a retro?
The parties are allowed to enter stipulations
provided that they are not contrary to law,
morals, customs, public policy, or public
order. The items are not exclusive. They are
the common or usual obligations of the
vendor a retro in case he wants to exercise
the right to repurchase.
Exercise of right of redemption
The moment the vendor a retro signified his
intention to redeem, it stops the running of
the period of redemption on the date the offer
is made.
The offer must be coupled with the tender of
payment.
With respect to the payment of taxes, vendee
a retro has to pay the taxes for that property.
The payment of taxes by the vendee a retro
is not reimbursable.
BAR Q:2
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 SALES (JUDGE EDGARDO BELLOSILLO)
The wife during the marriage sold under
pacto de retro her paraphernal property
consisting of a house and lot. A few weeks
later, she died. The husband thereupon
repurchased the property with his exclusive
capital. To whom will the property belong: to
the husband or to the heirs of the wife?
Ans:
To the heirs of the wife, one of whom is the
husband himself. Being paraphernal
property at the time of its sale under pacto de
retro, its redemption or repurchase by the
husband must be deemed as having
revested its ownership in the heirs of the
wife, subject to a lien in favor of the husband
for the amount paid out with his exclusive
capital. The nature of the property
repurchased is not determined by the
character of the money used for its
repurchase, but by the ownership of the right
of redemption.
If there are fruit-bearing trees/fruits at the
time the property was sold, is the vendor
required to pay for the growing fruits?
NO, as long as there is no indemnity paid by
the vendee when he put that in the property,
then he is not entitled to reimbursement for
that.
May a buyer a retro mortgage the
property?
YES, he can mortgage the property but he
has to make sure that when the vendor a
retro will exercise his right to redeem the
property, the vendee a retro has to clear the
property from any mortgage.
Legal redemption
This is an extra-special mode of
extinguishment a contract of sale.
It is the right to be subrogated upon the same
terms and conditions stipulated in the
contract in the place of one who acquires the
thing by purchase or dation in payment or by
any other transaction whereby ownership is
transmitted by onerous title.
Under this concept, there is no need on the
part of the parties to put terms and conditions
into writing. The right is provided by law
unlike in conventional redemption where
there must be an agreement by the parties
for the vendor a retro to exercise his right to
repurchase the property.
What are the requisites before a co-owner
may exercise the right of legal
redemption?
1. There must be a co-ownership
2. Alienation of all or any of the shares of
the other co-owners
3. Sale must be to a stranger/third person
and not to any one of the co-owners
(there is no right of redemption against a
co-owner)
4. Sale must be before partition
Example:
X, Y, and Z are co-owners of a parcel of land.
X sold his share to B. Later, Y sold his share
to B, but X wanted to exercise the right of
redemption. X wants to redeem what was
sold by Y. Can X exercise the right of
redemption?
NO. One of the requisites is missing. When
Y sold his share to B, X is no longer a co-
owner. He cannot repurchase the property
sold by his co-owner, Y. When X disposed of
his share, he is no longer a co-owner of the
property.
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 SALES (JUDGE EDGARDO BELLOSILLO)

Conventional redemption v. legal In case two or more adjacent owners

redemption wanted or decided to exercise the right of
the redemption, who has the preferential
Conventional right to exercise legal redemption?
Legal redemption
redemption
It is provided by The law gives preference to the owner of the
operation of law. adjoining land of smaller area.
Co-owners can
Must be stipulated exercise legal
in the contract. redemption even What if both adjacent owners have the
though there is no same area?
express provision
in the contract. The preferential right must be given to the
one who first requested the redemption.
The right a retro is The right a retro is
in favor of the given to third
seller. parties of the sale.
What is the purpose of allowing
Exercise of right of Although it redemption of rural lands by adjacent
conventional extinguishes the owners?
redemption original contract of
extinguishes the sale, actually To encourage the maximum development
underlying contract constitutes a new and utilization of agricultural lands.
of sale as though sale in substitution
there was never of the original
any contract at all. contract of sale.
Urban land in the city
What are the two rights?
Right of legal redemption of adjacent
owners of rural lands3 Right of pre-emption and right of redemption.
Requisites:
1. Both lands of the one exercising the right Right of pre-emption v. right of
of redemption and the land sought to be redemption
redeemed must be rural lands;
2. The lands must be adjacent; Pre-emption Redemption
3. There must be an alienation; Exercised before Exercised after
4. The piece of rural land alienated must not sale. sale.
exceed 1 hectare; There is no There can be
5. The grantee or vendee must already own rescission because rescission of the
any other rural land; and no sale existed yet. original sale.
6. The rural land sold must not be The action is The action is
separated by brooks, drains, ravines, directed against the directed against the
roads, and other apparent servitudes prospective seller. buyer.
from the adjoining lands.

3 De Leon, p. 447.

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 SALES (JUDGE EDGARDO BELLOSILLO)
What are the conditions before the right
of pre-emption or redemption can be
exercised?
1. The one exercising the right must
be an adjacent owner;
2. The second piece of urban land
sold must be so small and
situated that a major portion
thereof cannot be used for any
practical purpose within
reasonable time; and
3. That such urban land was bought
by its owner merely for
speculation.
If two or more adjoining owners of the
urban land wanted to exercise the right of
redemption or pre-emption, who has
preferential right?
The law prefers him whose intended use of
the land appears best justified.
What is the purpose of allowing the
adjoining owners of urban land to
exercise the right of redemption or pre-
emption?
1. To discourage speculation in real
estate; and
2. The consequent aggravation of
the housing problems in centers
of population.
When shall the right of legal redemption
or pre-emption be exercised?
It should be exercised within 30 days from
notice from the prospective vendor or by the
vendor as the case may be.
Adalia Francisco v. Zenaida
- Adalia is one of the co-owners of the
property together with the other siblings
and then they sold a share of their
mother.
- Unknown to them, the mother sold the
share to their other sibling. After knowing
that, the petitioner wanted to redeem the
property but Zenaida said that the right to
redeem already expired.
- According to petitioner, the period has
not yet expired because there was no
formal notice given to her. But according
to respondent, when she informed
petitioner about her intention to claim the
rentals being the new owner of the
property, that already constituted as a
notice that she bought the property.
- The SC said no.
- Under Art. 1623, there must be a formal
notice from the vendor; otherwise, there
is no valid registration.
- In this case, there was no valid notice
given to the petitioner. Formal notice is
required.
- 30 days from receipt of the notice (unlike
in conventional redemption, from the
date of the contract). In the case of legal
redemption, 30 days from the receipt of
the notice.
Example:
There are several co-owners/co-heirs. If one
of the heirs sold his share, he has to inform
the other heirs about the sale. He has to
execute an affidavit attaching the deed of
sale that he informed the other heirs about
the sale of his share. If there is no such
notice or affidavit, it will not be registered in
the register of deeds.
Olympia Basa
- Puyat sold a portion of his property to his
son-in-law and the other co-owners, the
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 SALES (JUDGE EDGARDO BELLOSILLO)
petitioners, wanted to redeem the
property.
- The lower court resolved the issue in
favor of the respondent not applying the
law. Children had inchoate right to
succeed to the same property.
- But the law requires that there must be a
formal notice.
- In this case, the property was sold to the
son-in-law.
- Art. 1623 requires a formal notice
informing the other co-owners of the
disposition of the property. Without that
notice, by stating in the affidavit that he
notified the other redemptioners to
exercise that right of redemption, the
property will not be registered and the
other co-owners can exercise the right of
redemption. They can still redeem the
property.
Spouses Serafin & Anita Si
- They bought the property from one of the
sons of Mr. Armada.
- The Spouses Armada had already sold
the property to the 3 children.
- One of the 3 children, Spouses Jose
Armada and Remedios Almanzor wanted
to repurchase the property. When they
exercised the right to repurchase, there
is no more co-ownership of the property
because it was already subdivided a long
time ago.
- When Spouses Jose Armada and
Remedios Almanzor wanted to annul the
contract of sale, they brought an action
for reconveyance because they wanted
to exercise the right of redemption.
- But the SC said no. The property was
already sold a long time ago.
- The other co-owners cannot exercise the
right of legal redemption because of the
requisites is not present anymore: there
is no co-ownership of the property.
- Spouses Jose had no more right to
redeem the property.
Olympia Housing v. Panasiatic Corp.
- The subject matter is a condominium
sold by Olympia Housing to respondent.
- But the respondent failed to pay and
Olympia Housing filed an action for
reconveyance to recover the possession.
- RTC dismissed the case because it was
premature. There was no compliance
with RA 6522 (Maceda Law).
- But RTC ruled on the obligation of the
respondent that they have to pay in full
the remaining balance. For failure to pay,
they have to vacate and whatever
payments made by them shall be
charged as rentals for using the property.
- CA affirmed the RTC decision.
- Issue before SC by petitioner: action for
recovery of possession would be
considered as a case of judicial
rescission. Whether or not there was
rescission by notarial act.
- The SC said there was no compliance
with the Maceda Law. There was no valid
rescission.
- There was no cancellation. There must
be a 60-day notice to vendee if the
payment is less than 2 years. Failure to
pay, then another 30 days given to the
vendee to pay, otherwise vendor will
move for the cancellation of the contract
by notarial act and it requires the
payment.
- If vendee has been paying for 5 years,
then an additional payment of 5% for
every year of payment. But it should not
be more than 90% of the total payments.
- If you cannot return what you receive,
you cannot ask for rescission.
What is an assignment of credit?
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 SALES (JUDGE EDGARDO BELLOSILLO)

Under Art. 1624, it is a contract by which one He warrants only about the existence and
person who is the creditor or assignor legality of the credit. But he does not warrant
transfers to another his rights and actions the solvency of the debtor.
against a third persons.
Consent of the debtor is not required. Notice
There are three parties (sometimes 4 if there will suffice. The assignor must inform the
is a guarantor): debtor that he already assigned his credit to
another person. So in case there would be
1. Assignor – transfers his rights and
payment later on, the debtor will pay to the
actions against the debtor to the assignee.
assignee in consideration of a price
certain in money or its equivalent.
2. Assignee
3. Debtor What if there was no notice and payment
was made by the debtor to the creditor?
That is a valid payment because there is no
Characteristics of assignment of credit: notice.
1. Consensual
2. Bilateral
What is the binding effect of the
3. Onerous
assignment?
4. Commutative
5. Aleatory To be binding to third persons, it must appear
In principle, it is also a contract of sale. in a public document. It must be notarized to
be binding to third persons.
If it involves real property, it should be
What is the subject matter in assignment recorded in the Registry of Property. But as
of credit? to between the parties, even though it is in a
private document, it is binding between
The subject matter is the credit. The credit or them.
right assigned.

What is the purpose of giving notice to

What is the consideration?
the debtor?
The consideration is the price paid for the
To inform the debtor that from the date of
credit or right.
assignment, he should make payment to the
assignee and not to the original creditor. The
purpose is for the protection of the assignee.
What is the agreement?
Consent is the agreement of the parties to
the assignment of credit or right at the agreed What does assignment of credit include?
price.
The assignment of credit includes all
accessory rights such as guaranty,
mortgage, pledge, or preference.
What does the assignor warrant?

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 SALES (JUDGE EDGARDO BELLOSILLO)
What is the liability of the vendor or the
creditor who is in bad faith?
He will be liable for the payment of the price
and all the expenses and for damages.
What is the liability of the vendor-creditor
who is in good faith?
He is only liable for the price received and to
the expenses of the contract and any other
legitimate payments by reason of the
assignment.
What is the period covered by the
warranty?
If there is a guaranty on the part of the
creditor-vendor about the solvency of the
debtor and if there is a stipulation, that is for
the term or period fixed or agreed upon. He
has to be answerable for that because he
guaranteed that the debtor will pay the
obligations within the specific period.
If there is no stipulation, then for 1 year from
the assignment of credit when the period of
payment of the credit has expired.
One year also after its maturity when the
period for payment has not yet expired.
Example:
B owes C (creditor) P100,000 payable on
Oct. 01, 2004. C assigns his credit to D,
making himself responsible for the solvency
of the debtor. There is a warranty of the
solvency of the debtor on the part of C. If
there is a stipulation, there is no problem with
that.
If the assignment is made on Nov. 01, 2004
which is one month after the due date of the
payment. The liability agreed is limited to 1
4 De Leon, p. 480.
year from the assignment. That is when the
assignor will be bound or answerable for that
warranty of solvency.
Supposing the assignment was made before
Oct. 01, 2004 and was made on Sept. 01,
2004. The counting of 1 year is from Oct. 01,
2004. The guaranty of the solvency of the
debtor will be counted from Oct. 01, 2004.
Sale of inheritance
Example:
X and Y are heirs of Z. X sold his expected
inheritance/successional rights to B worth
P50 million. After the property was inherited,
there was only P40 million. Can B hold X
liable for the difference of P10 million?
NO, he cannot hold X liable for the difference
because X does not warrant the objects
which make up his inheritance.
In the sale of successional rights, he only
warrants that he is an heir of Z and he does
not warrant the object which make up his
inheritance.
Sale of whole of certain rights, rents, or
products4
Example:
S is a partner and he sells to B. B bought all
the interests of S in the partnership for a lump
sum price of P1.5 million. After the
dissolution of the partnership, it turned out
that S has a share of P500,000 cash and
office equipment of P300,000 and a car of
P700,000. A claim was filed against the
partnership over the car. The car was the
subject of replevin. The car was taken from
B who was the buyer. Can the buyer hold S
liable for the value of the car?
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 SALES (JUDGE EDGARDO BELLOSILLO)

Under Art. 1631, the vendor warrants only be cured by remedied by the
the legitimacy of the whole of his share in the subrogation, such assignment of the
partnership and he does not warrant the that a new creditor’s right to
various parts of which it may be composed. obligation will be another.
He does not warrant whatever the perfectly valid.
composition of the share.
There was no basis for B to file an action • There is no need of notice if it is
against S because he was evicted only from public knowledge that debtor is
the part of lower value. But if the value insolvent.
exceeds, the S will be liable because he was
evicted from the thing which is of valuable
value. -- Final meeting --
Refer to notes above for answers.
What are the requisites before the right of • What are the rights of the unpaid seller?
legal redemption can be exercised by the • Case: Katigbak v. CA
debtor? • In case the goods were sold by the
1. There must be a sale or assignment of vendor was forced to resell the goods at
credit. a low price, can the vendor run after the
2. There must be a pending litigation at the original buyer for the difference? YES.
time of the assignment. • What if the vendor was able to sell that
3. The debtor must pay the assignee the for more than 100,000 is the vendor
price, pay the judicial costs incurred by obliged to keep that supposing the
him, and the interest on the price from the vendor (choppy)
date of payment. • Damnum absque injuria – damage
4. The right must be exercised by the debtor without injury
within 30 days from the date the assignee • When can the unpaid seller exercise the
demands (judicially or extrajudicially) right to rescission?
payment from him. • When is noticed required? If the object of
resale is not appreciable goods or there
is no stipulation to that effect.
Conventional subrogation v. assignment • Why is notice relevant? To determine if
of credit5 vendee was in default or not. Object must
not be perishable and there is no
Conventional Assignment of stipulation.
subrogation credit • GR: Notice is not required.
Consent of the Consent of debtors • Art. 1539: Right to resell in case there is
debtors is required. is not required. a lack in area.
It extinguishes the It refers to the • Can the vendee ask for the rescission
obligation and same right which when there is a lack of area? YES, if it is
gives rise to a new passes from one more than 1/10.
one. person to another. • Deficiency in quality must exceed 1/10 of
The nullity of the The nullity of an the price agreed upon.
old obligation may obligation is not

5 Villanueva, p. 580.

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 SALES (JUDGE EDGARDO BELLOSILLO)
• Action of rescission should be filed 6
months from date of delivery.
• Conditions in the perfection of the
contract v. conditions in the performance
of the obligation.
• Options of offended party: (1) refuse to
proceed with the contract; or (2) waive
the conditions.
• Case: Ong Siao Hua
• What are the elements to make the seller
in case of eviction?
• Failure to implead vendor as defendant –
buyer cannot run after vendor/make him
liable.
• Vendee must initiate action.
• What are the two kinds of waiver?
• What are the requisites for warranty
against hidden defects?
• In case of animals, how many days?
• Doctrine of caveat emptor?
• Doctrine of caveat venditor (let the seller
beware): the vendor is liable to the
vendee for any hidden faults or defects in
the thing sold, even though he was not
aware thereof.6
• What are the two alternative remedies of
the buyer to enforce the warranty?
• What are the effects of loss of defective
thing sold? Art. 1569.
• How much is the liability of the vendor for
loss of defective thing sold?
• What if the vendor is in bad faith?
• No hidden defect – vendor cannot be
liable for the loss due to fault of vendee.
• Conventional redemption – not exceed
10 years.
• Conventional redemption v. option.
• What is required on the part of the vendor
a retro? Is there a need of notice to
vendee a retro? YES, formal notice with
tender of payment.
• Tender of payment: check, legal tender,
promissory note on the part of vendor.
6 De Leon, p. 329.
• Right to repurchase is a right, not an
obligation. No need for consignation.
• Is there a specific form for the vendor a
retro to give notice? What form of notice
should be given? No form required.
• Is the right to repurchase on the part of
the vendor a retro part of the contract of
sale? YES, it should be incorporated;
otherwise, it will just be a mere promise
to sell.
• What is legal redemption?
• Notice must be given to the co-owners
and they have 30 days to repurchase the
property from receipt of notice. It is
required; otherwise contract of sale will
not be registered.
• Right of the adjoining owners of urban
property to redeem the property.
• Who has the preferential right to
purchase the property in case or urban
land? In rural land?
• What is the measure of damages for non-
acceptance of goods? Difference
between the contract price and the
market price plus full amount of damages
and proximate damages.
• In case of measure of damages for
repudiation or countermand, what is the
measure of damages? Labor performed
and expenses for materials used before
the receipt of the notice plus the profit
that would be realized.
• When can the vendee be held liable to
pay interest? Date of delivery to date of
payment.
1. There must be a stipulation that
vendee will be held liable to pay
for the interest.
2. In the absence of stipulation, if
the object delivered produced
income or fruits.
3. In case there is default from
judicial or extrajudicial demand.
• Contract can be construed as a contract
of loan. In a contract of loan, there must
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 SALES (JUDGE EDGARDO BELLOSILLO)
be a stipulation to the payment of
interest. In absence of stipulation,
borrower cannot be held liable for the
interest.
• In a contract of sale, even if there is no
stipulation for the payment of interest, the
buyer can be held liable in case there is
delay in the payment of the price as long
as the 3 aforementioned conditions are
present.
• What are the remedies of the buyer in
case of breach of warranty? (Art. 1599)
• When intention is not reflected in contract
– reformation.
• When is annulment exercised?
• When is a contract deemed as an
equitable mortgage? (Art. 1602)
• When can the vendor exercise the right
to redeem the property in case of
equitable mortgage?
• When can there be a presumption that
the contract of sale be an equitable
mortgage?
1. Contract was denominated as a
contract of sale; and
2. Intention of the parties was to
secure the payment of the
obligations and the property was
only used as security.
• Bar Q
• What are the requisites for the co-owner
to exercise the right of redemption?
• Pre-emption v. redemption?
• Exercise of legal redemption for rural
lands and urban lands.
• Right of redemption of co-owners
excludes adjoining owners.
• What is the effect if the price in a pacto
de retro sale is not the true value of the
property? Does it make the contract an
equitable mortgage? NO. The value is
not important.
• Consent of debtor is not required in
assignment of credit.
• Purpose of notice to debtor: make
payment to assignee.
• What if the debtor paid the original
creditor before notice? Payment is valid
because he was not notified.
• If debtor was notified but he paid the
creditor and the creditor was insolvent,
can the assignee run after the
creditor/debtor? YES, he can run after
the creditor and debtor.
• What does the assignor of credit
warrants? Existence and legality of the
assignment but not the solvency of the
debtor, unless the insolvency of the
debtor is public knowledge.
• In case of sale of inheritance or
successional rights. Vendor warrants
only the fact that he is an heir. There is
no partition yet.
• In case of sale of whole of certain
products. Vendor warrants only the
legitimacy of the whole and he does not
warrant the various part of which it may
be composed.
• But if the value where the buyer exceeds,
then the seller can be held liable because
the buyer is evicted from the part of
greater value.
• If vendor does not exercise the right to
repurchase within the period, he cannot
file an action later on just to resurrect his
right to repurchase.
Cases:
• Project Builders v. CA
- Receivables were used as
collateral and the credit was
increased to 5 million.
- Petitioner failed to pay and the
property used as collateral was
foreclosed and was redeemed
within 1 year but there was still a
difference of 1,300,000.
- Respondent demanded payment
from petitioner.
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 SALES (JUDGE EDGARDO BELLOSILLO)

- Petitioner argues that lack of of NDIC is already final and

notice transformed the contract executory. There was a valid
into a loan. assignment on PCIB to NDIC
- SC said no. There was a valid which is already final and
assignment of credit. In execution.
assignment of credit, there is no - Remedy of respondent is to file
need of notice to the debtor. It is separate action not in the same
enough that there was an action
assignment.
• Lo v. KJS Eco. Formwork System
- Lo bought steel scaffoldings from -- END --
respondent. There was down
payment of 150,000 and a
balance of 135,000 where
petitioner assigned his receivable
from Jomero Realty.
- Jomero Realty demanded
payment. It argued that there was
no valid assignment.
- Assignor warrants the existence,
but in this case, the receivable
was not existing at the time.
There was bad faith on part of Lo.
• National Investment v. Delos Angeles
- Vda. Del Rosario bought the
property from the respondents.
Respondents own several
properties.
- After the title was transferred
under her name, she used that as
collateral. She borrowed from
PCI Bank.
- Failure on the part of the Vda. del
Rosario to pay, respondents filed
an action for reconveyance and
rescission and cancellation of the
mortgage.
- Lower court: granted the
reconveyance and cancellation
but recognized without prejudice
to the rights of PCI Bank.
- PCI Bank foreclosed the property
and assigned to NDIC Corp. and
private respondents wanted to
cancel the encumbrance.
- SC: Decision of lower court with
respect to recognition of the right

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