Professional Documents
Culture Documents
3. Sale Creates Real Obligations “T G ” (Art. “No Contract Situation” versus “Void
1165) Contract”: Absence of complete meeting of
minds negates existence of a perfected sale,
4. Essential Characteristics of Sale: xFirme v. Bukal Enterprises, 414 SCRA 190 (2003);
the contract is void and absolutely wanting in
a. Nominate and Principal – Sale is what the law civil effects, and does not create or modify the
defines it to be, taking into consideration its juridical relation to which it refers, xCabotaje v.
essential elements, and not what the Pudunan, 436 SCRA 423 (2004).
contracting parties call it. xSantos v. Court of
When the contract of sale is not perfected, as
Appeals, 337 SCRA 67 (2000).8
when there is no meeting of minds on the price,
b. Consensual (Art. 1475) – Sale being a it cannot, as an independent source of
consensual contract, is perfected, valid and obligation, serve as a binding juridical relation
binding upon meeting of the minds on the between the parties, xHeirs of Fausto C. Ignacio
subject matter and the consideration;9 being a v. Home Bankers Savings, 689 SCRA 173 (2013);12
consensual, and not real, in character, sale’s and should be accurately denominated as
essential elements must be proven, xVillanueva “inexistent”, as it did not pass the stage of
v. CA, 267 SCRA 89 (1997); but once all elements generation to the point of perfection. xNHA v.
are proven, its validity is not affected by a Grace Baptist Church, 424 SCRA 147 (2004).
previously executed fictitious deed of sale,
xPeñalosa v. Santos, 363 SCRA 545 (2001); and c. Bilateral and Reciprocal (Arts. 1169 and 1191) –
the burden is on the other party to prove A contract of sale gives rise to “reciprocal
otherwise, xHeirs of Ernesto Biona v. CA, 362 obligations”, which arise from the same cause
SCRA 29 (2001). with each party being a debtor and creditor of
the other, such that the obligation of one is
C :U S P —
dependent upon the obligation of the other; and
● Its binding effect is based on the principle that they are to be performed simultaneously, so that
the obligations arising therefrom have the the performance of one is conditioned upon the
force of law between the parties. xVeterans simultaneous fulfillment of the other. xCortes v.
Federation of the Phils. v. CA, 345 SCRA 348 CA, 494 SCRA 570 (2006).13
(2000).
A perfected contract of sale is bilateral
● The parties may reciprocally demand because it carries the correlative duty of the
performance, xHeirs of Venancio Bejenting v. seller to deliver the property and the obligation
Bañez, 502 SCRA 531 (2006);10 subject only to
of the buyer to pay the agreed price.
the provisions of law governing the form of
contracts. xCruz v. Fernando, 477 SCRA 173 xCongregation of the Religious of the Virgin
(2005). Mary v. Orola, 553 SCRA 578 (2008).
● It remains valid even though the parties have The power to rescind without need of prior
not affixed their signatures to its written form, demand is implied in reciprocal ones when one
xGabelo v. CA, 316 SCRA 386 (1999);11 nor of the obligors does not comply with his
translated into written form, Duarte v. Duran, obligation. xAlmocera v. Ong, 546 SCRA 164
657 SCRA 607 (2011); or the manner of (2008).14
payment is breached, xPilipinas Shell
When rescission of a contract of sale is
Petroleum Corp v. Gobonseng, 496 SCRA 305
(2006). sought under Article 1191 of the Civil Code, it
need not be judicially invoked because the
● Failure of developer to obtain a license to sell owner to resolve is implied in reciprocal
does not render its sales void especially that obligations. The resolution immediately
the parties have admitted that there was produces legal effects if the nonperforming
already a meeting of the minds as to the
party does not question the resolution. Court
subject of the sale and price. xCantemprate v.
CRS Realty Dev. Corp., 587 SCRA 492 (2009). intervention only becomes necessary when the
party who allegedly failed to comply with his or
Perfection Distinguished from her obligation disputes the resolution of the
Demandability: Not all contracts of sale become contract. √Lam v. Kodak Philippines, 778 SCRA
automatically and immediately effective. In sale 96 (2016).
with assumption of mortgage, there is a
condition precedent to the seller’s consent and d. Onerous and Commutative (Arts. 1355 and
without the approval of the mortgagee, the sale 1470) – The resolution of issues pertaining to
is not perfected. xBiñan Steel Corp. v. CA, 391 periods and conditions in a contract of sale must
SCRA 90 (2002). be based on its onerous and commutative
nature. √Gaite v. Fonacier, 2 SCRA 830 (1961).
In a contract of sale, there is no requirement
8
that the price be equal to the exact value of the
Bowe v. CA, 220 SCRA 158 (1993); Romero v. CA, 250 SCRA 223 (1995); subject matter of sale; all that is required is that
Lao v. CA, 275 SCRA 237 (1997); Cavite Dev’t Bank v. Lim, 324 SCRA 346
(2000). the parties believed that they will receive good
9
Romero v. CA, 250 SCRA 223 (1995); Balatbat v. CA, 261 SCRA 128 value in exchange for what they will give.
(1996); Coronel v. CA, 263 SCRA 15 (1996); City of Cebu v. Heirs of Candido √Buenaventura v. CA, 416 SCRA 263 (2003).
Rubi, 306 SCRA 408 (1999); Agasen v. CA, 325 SCRA 504 (2000); Laforteza
v. Machuca, 333 SCRA 643 (2000); Londres v. CA, 394 SCRA 133 (2002);
Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Buenaventura v. CA, 416
SCRA 263 (2003); San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005);
12
Yason v. Arciaga, 449 SCRA 458 (2005); Ainza v. Padua, 462 SCRA 614 Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Roberts v.
(2005); Roberts v. Papio, 515 SCRA 346 (2007); MCC Industrial Sales Corp. v. Papio, 515 SCRA 346 (2007).
13
Ssangyong Corp., 536 SCRA 408 (2007); Castillo v. Reyes. 539 SCRA 193 Ong v. CA, 310 SCRA 1 (1999); Mortel v. KASSCO, 348 SCRA 391 (2000);
(2007); XYST Corp. v. DMC Urban Properties Dev., 594 SCRA 598 (2009); Agro Conglomerates v. CA, 348 SCRA 450 (2000); Velarde v. CA, 361 SCRA
Del Prado v. Caballero, 614 SCRA 102 (2010); Heirs of Fausto C. Ignacio v. 56 (2001); Carrascoso, Jr. v. CA, 477 SCRA 666 (2005); Heirs of Antonio F.
Home Bankers Savings, 689 SCRA 173 (2013); Dantis v. Maghinang, Jr., 695 Bernabe v. CA, 559 SCRA 53 (2008); Antonino v. Register of Deeds of Makati,
SCRA 599 (2013); Lam v. Kodak Phil., 778 SCRA 96 (2016). 674 SCRA 227 (2012).
10 14
Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008). Vda. De Quirino v. Palarca, 29 SCRA 1 (1969); Cabrera v. Ysaac, 740
11
Baladad v. Rublico, 595 SCRA 125 (2009). SCRA 612 (2014).
3 of 41
of the estate of the deceased. xNaval v. Enriquez, of a thing is ceded for a consideration. √Polytechnic
3 Phil. 669 (1904). University v. Court of Appeals, 368 SCRA 691 (2001).
No more need to comply with the An agreement whereby a party renounces and
requirement in xRodriquez v. Mactal, 60 Phil. 13 transfers whatever rights, interests, or claims she has
(1934) to show that a third party bought as over a parcel of land in favor of another party in
conduit/nominee of the buyer disqualified under consideration of the latter’s payment of therein loan, is
Art. 1491; rather, the presumption now is that essentially a sale, and the rule on delivery effected
such disqualified party obtained the property in through a public instrument applies. xCaoibes, Jr. v.
violation of said article. √Philippine Trust Co. v. Caoibes-Pantoja, 496 SCRA 273 (2006).
Roldan, 99 Phil. 392 (1956).
1. Subject Matter Must Be “Existing, Future or
Prohibition against agents does not apply if
the principal consents to the sale of the property Contingent” (Arts. 1347, 1348, and 1462)
in the hands of the agent. xDistajo v. CA, 339 a. Emptio Rei Speratae (Arts. 1347 and 1461) –
SCRA 52 (2000). Pending crops which have potential existence
may be valid object of sale, xSibal v. Valdez, 50
b. Attorneys Phil. 512 (1927); and transaction cannot be
(1) Prohibition Against Attorneys Applies: considered to be sale of the land or any part
thereof, xPichel v. Alonzo, 111 SCRA 341 (1981).
● Even though litigation is not adversarial in
nature, Rubias v. Batiller, 51 SCRA 120 (1973); Sale of copra for future delivery does not make
or a certiorari proceeding that has no merit, non-delivering seller liable for estafa since sale is
xValencia v. Cabanting, 196 SCRA 302 (1991). valid and obligation was civil and not criminal.
● Sale pursued while litigation is pending. xEsguerra v. People, 108 Phil. 1078 (1960).
xDirector of Lands v. Ababa, 88 SCRA 513 b. Emptio Spei (Art. 1461)
(1979).
● Only to a lawyer of record, and does not c. Subject to a Resolutory Condition (Art. 1465)
cover assignment of the property given in
judgment made by a client to an attorney, 2. Must Be “Licit” (Arts. 1347, 1459 and 1575)
who has not taken part in the case. Although under Art. 1347, a sale involving future
xMunicipal Council of Iloilo v. Evangelista, inheritance is void and does not create an
55 Phil. 290 (1930).28 obligation, xTañedo v. CA, 252 SCRA 80 (1996); such
(2) Prohibition Does Not Apply To: does not cover a waiver of hereditary rights which
is not equivalent to sale, since waiver is a mode of
● A lawyer who acquired property prior to the extinction of ownership in favor of the other
time he intervened as counsel in the suit persons who are co-heirs. xAcap v. Court of
involving such property. xDel Rosario v. Appeals, 251 SCRA 30 (1995).
Millado, 26 SCRA 700 (1969).
Mortgagor can legally sell the mortgaged
● Sale of the land acquired by a client to
property—mortgage is merely an encumbrance
satisfy a judgment to his attorney as long
as the property was not the subject of the that does not affect his principal attribute as owner
litigation. xDaroy v. Abecia, 298 SCRA 172 thereof. Law even considers void a stipulation
(1998). forbidding owner from alienating mortgaged
immovable. xPineda v. CA, 409 SCRA 438 (2003).31
● Contingency fee arrangement granting
the lawyer proprietary rights to the 3. Must Be “Determinate” or At Least
property in litigation since the payment of “Determinable” (Art. 1460)
said fee is not made during the pendency
of litigation but only after judgment has When deed of sale erroneously describes the lot
been rendered. √Fabillo v. IAC, 195 SCRA adjacent to the land seen and eventually delivered
28 (1991).29 to the buyer, such vetted land is the one upon
which the minds have met, and not that
c. Judges erroneously described in the deed. Prudent people
Even when the main cause is a collection of a buy land on the basis of what they see, not on what
sum of money, the properties levied are still is technically described in Deed or Torrens title.
subject to the prohibition. xGan Tingco v. √Atilano v. Atilano, 28 SCRA 231 (1969).32
Pabinguit, 35 Phil. 81 (1916).30
a. Non-Specific Things (Generic) May Be the
A judge who buys property in litigation Object of Sale (Arts. 1246 and 1409[6])
before his court after the judgment becomes
final does not violate Art. 1491, but he can be Determinable subject matter of sale are not
administratively disciplined for violation of the subject to risk of loss until they are physically
Code of Judicial Ethics. xMacariola v. Asuncion, segregated or particularly designated. √Yu Tek
114 SCRA 77 (1982). & Co. v. Gonzales, 29 Phil. 384 (1915).
Subject matter is “determinable” when from
the formula or description adopted at perfection
III SUBJECT MATTER OF SALE there is a way by which the courts can delineate
it independent of the will of the parties.
The transfer of title or an agreement to transfer
√Melliza v. City of Iloilo, 23 SCRA 477 (1968).
title for a price paid or promised to be paid is the
essence of sale. xCommissioner of Internal Revenue v. Where lot sold is described to adjoin
CA and AdeMU, 271 SCRA 605 (1997). “previously paid lot on three sides thereof”, it can
be determined without need of a new contract,
Civil Code provisions defining sales is a “catch-all
even when the exact area of adjoining lot is
provision” which effectively brings within the Law on
subject to the result of a survey. xSan Andres v.
Sales a whole gamut of transfers whereby ownership
Rodriguez, 332 SCRA 769 (2000).
28
Gregorio Araneta, Inc. v. Tuason de Paterno, 49 O.G. 45 (1952).
29
Recto v. Harden, 100 Phil. 427 (1956); Vda. de Laig v. CA, 86 SCRA 641
31
(1978). Typingco v. Lim, 604 SCRA 396 (2009).
30 32
Britanico v. Espinosa, 486 SCRA 523 (2006). Londres v. CA, 394 SCRA 133 (2002).
6 of 41
b. “Quantity of Goods” Not Essential for 6 Illegality of Subject Matter (Arts. 1409, 1458,
Perfection? (Art. 1349) 1461, 1462, and 1575)
Sale of grains is perfected even when the
a. Special Laws: narcotics (R.A. 6425); wild bird or
exact quantity or quality is not known, so long as
mammal (Act 2590); rare wild plants (Act 3983);
the source of the subject is certain. √NGA v. IAC,
poisonous plants/fruits (R.A. 1288); dynamited
171 SCRA 131 (1989).
fish (R.A 428); gunpowder and explosives (Act
Where seller quoted items offered for sale, by 2255); firearms and ammunitions (P.D. 9); sale of
item number, part number, description and unit realty by non-Christians (Sec. 145, Revised Adm.
price, and buyer had sent in reply a purchase Code, R.A. 4252)
order without indicating the quantity being
order, there was already a perfected contract of b. Following Sales of Land Void:
sale, even when required letter of credit had not ● By Non-Christian if not approved by Provincial
been opened by the buyer. √Johannes Governor per Sec. 145 of Revised
Schuback & Sons v. CA, 227 SCRA 719 (1993). Administrative Code. xTac-an v. Court of
Appeals, 129 SCRA 319 (1984).
c. Undivided Interest (Art. 1463), Undivided Share ● Friar land without consent of Secretary of
in a Mass of Fungible Goods (Art. 1464) – May Agriculture required under Act No. 1120.
Result In Co-ownership xAlonso v. Cebu Country Club, 375 SCRA 390
(2002); xLiao v. CA, 323 SCRA 430 (2000).
● Made in violation of land reform laws declaring
tenant-tillers as the full owners of the lands
5. Seller’s Obligation to Transfer Title to Buyer they tilled. xSiacor v. Gigantana, 380 SCRA 306
(Art. 1459, 1462, and 1505) (2002).
a. Seller Need Not Be the Owner at the Time of ● Reclaimed lands are of the public domain and
Perfection cannot, without congressional fiat, be sold,
public or private. xFisheries Dev. Authority v.
A perfected sale cannot be challenged on the
CA, 534 SCRA 490 (2007).
ground of the seller’s non-ownership of the
thing sold at the time of the perfection; it is at ● Alien who purchases land in the name of his
delivery that the law requires the seller to have Filipina lover, has no standing to recover the
property or the purchase price paid, since the
the ownership of the thing sold.
transaction is void ab initio for being in
xAlcantara-Daus v. de Leon, 404 SCRA 74 (2003). violation of the constitutional prohibition.
33
xFrenzel v. Catito, 406 SCRA 55 (2003).
B S : It is essential that seller is owner of
the property he is selling. The principal
obligation of a seller is “to transfer the ownership IV PRICE AND OTHER
of” the property sold (Art. 1458). This law stems
from the principle that nobody can dispose of
CONSIDERATION (A 1469-1474)
that which does not belong to him. NEMO DAT “Price” signifies the sum stipulated as the
QUOD NON HABET. xNoel v. Court of Appeals, equivalent of the thing sold and also every incident
240 SCRA 78 (1995).34 taken into consideration for the fixing of the price put
T S : Although it appears that seller is to the debit of the buyer and agreed to by him.
not owner of the goods at perfection is one of xInchausti & Co. v. Cromwell, 20 Phil. 345 (1911).
the void contracts enumerated in Art. 1409, and Under the doctrine of “obligatory force”, seller
Art. 1402 recognizes a sale where the goods are cannot unilaterally increase the price previously
to be “acquired by the seller after the perfection agreed upon with the buyer, even when due to
of the contract of sale,” clearly implying that a increased construction costs. xGSIS v. Court of
sale is possible even if seller was not the owner Appeals, 228 SCRA 183 (1993).
at time of sale, nevertheless such contract may
Buyer who opted to purchase the land on
be deemed to be inoperative and falls, by
installment basis with imposed interest at 24% p.a.,
analogy, under Art. 1409(5): “Those which
cannot unilaterally disavow the obligation created by
contemplate an impossible service.” xNool v.
the stipulation in the contract: “The rationale behind
Court of Appeals, 276 SCRA 149 (1997).
having to pay a higher sum on the installment is to
N S : Seller and buyer must agree as to compensate the vendor for waiting a number of years
the certain thing that will be subject of the sale, before receiving the total amount due. The amount of
as well as the price in which the thing will be the stated contract price paid in full today is worth
sold. The thing to be sold is the object of the much more than a series of small payments totaling
contract, while the price is the cause or the same amount. … To assert that mere prompt
consideration. The object of a valid sale must be payment of the monthly installments should obviate
owned by the seller, or seller must be authorized imposition of the stipulated interest is to ignore an
by the owner to sell the object; otherwise, sale is economic fact and negate one of the most important
null and void. xCabrera v. Ysaac, 740 SCRA 612 principles on which commerce operates.” Bortikey v.
(2014). AFP-RSBS, 477 SCRA 511 (2005).
(1) √Mapalo v. Mapalo, 17 SCRA 114 (1966), buyer to the seller. xVda. de Catindig. v. Heirs of
versus: When two old ladies, not versed in Catalina Roque, 74 SCRA 83 (1976).38
English, sign a Deed of Sale on
representation by buyer that it was merely 2. Price Must Be in “Money or Its Equivalent”
to evidence their lending of money, the (Arts. 1458 and 1468)
situation constitutes more than just fraud Price must be “valuable consideration” under by
and vitiation of consent to give rise to a Civil Law, instead of “any price” mandated in
voidable contract, since there was in fact no Common Law. √Ong v. Ong, 139 SCRA 133 (1985);
intention to enter into a sale, there was no √Bagnas v. CA, 176 SCRA 159 (1989).
consent at all, and more importantly, there
Consideration for a valid contract of sale need
was no consideration or price agreed upon,
not be “money or its equivalent,”√Republic v. Phil.
which makes the contract void ab initio.
Resources Dev., 102 Phil. 960 (1958); and can take
√Rongavilla v. CA, 294 SCRA 289 (1998).
different forms, such as the prestation or promise of
(2) √Mate v. Court of Appeals, 290 SCRA 463 a thing or service by another, such as when the
(1998), versus: When Deed of Sale was consideration is:
executed to facilitate transfer of property to ● Expected profits from the subdivision project.
buyer to enable him to construct a xTorres v. CA, 320 SCRA 428 (1999).
commercial building and to sell the
● Cancellation of liabilities on the property in favor
property to the children, such arrangement
of the seller. xPolytechnic University v. Court of
being merely a subterfuge on the part of Appeals, 368 SCRA 691 (2001)
buyer, the agreement cannot also be taken
as a consideration and sale is void. √Yu Bun ● Assumption of mortgage on property sold.
Guan v. Ong, 367 SCRA 559 (2001). xDoles v. Angeles, 492 SCRA 607 (2006).39
(3) Effects When Price Simulated – The 3. Price Must Be “Certain” or “Ascertainable” at
principle of in pari delicto nonoritur action Perfection (Art. 1469)
denies all recovery to the guilty parties inter
se, where the price is simulated; the a. Price Is “Ascertainable” When:
doctrine applies only where the nullity arises (1) Set by Third Person Appointed at
from the illegality of the consideration or Perfection (Art. 1469)
the purpose of the contract. Modina v. Court
(2) Set by the Courts (Art. 1469)
of Appeals, 317 SCRA 696 (1999).35
(3) By Reference to a Definite Day, Particular
b. When Price Is “False” (Arts. 1353 and 1354) Exchange or Market (Art. 1472)
When the parties intended to be bound by (4) By Reference to Another Thing Certain,
the sale, but the deed did not reflect the actual such as to invoices then in existence and
price agreed upon, there is only a relative clearly identified by the agreement
simulation of the contract which remains valid xMcCullough v. Aenlle, 3 Phil. 285 (1904); or
and enforceable, but subject to reformation. based on known factors or stipulated
xMacapgal v. Remorin, 458 SCRA 652 (2005). formula. xMitsui v. Manila, 39 Phil. 624 (1919).
When price indicated in deed of absolute sale Price is “ascertainable” if the terms of the
is undervalued pursuant to intention to avoid contract furnishes the courts a basis or measure
payment of higher capital gains taxes, the price for determining the amount agreed upon,
stated is false, but the sale is still valid and without having to refer back to either or both
binding on the real terms agreed upon. xHeirs of parties. Villanueva v. Court of Appeals, 267 SCRA
Spouses Balite v. Lim, 446 SCRA 54 (2004). 89 (1997).40
c. Effect of Non-Payment of Price However, where the sale involves an asset under
a privatization scheme which attaches a peculiar
Sale being consensual, failure of buyer to pay meaning or signification to the term “indicative
the price does not make the contract void for price” as merely constituting a ball-park figure,
lack of consideration or simulation, but results in then the price is not certain. xMoreno, Jr. v. PMO,
buyer’s default, for which seller may exercise his 507 SCRA 63 (2006).
legal remedies. xBalatbat v. Court of Appeals,
261 SCRA 128 (1996).36 Price or consideration is generally agreed
upon as whole even if it consists of several parts,
“In a contract of sale, the non-payment of the and even if it is contained in one or more
price is a resolutory condition which instruments; otherwise there would be no price
extinguishes the transaction that, for a time, certain, and the contract of sale not perfected.
existed and discharges the obligations created xArimas v. Arimas, 55 O.G. 8682.
thereunder. [?] The remedy of an unpaid seller in
a contract of sale is to seek either specific b. Price Can Never Set By One or Both Parties
performance or rescission.” xHeirs of Pedro After Alleged Perfection, Unless Such Price Is
Escanlar v. CA, 281 SCRA 176 (1997).37 Separately Accepted by the Other Party. (Arts.
Price Simulated, Not Just Unpaid: It is a 1473, 1182)
badge of simulated price, which render the sale
void, when price is expressly stipulated to have
been paid, but in fact never been paid by the 38
Ocejo v. Flores, 40 Phil. 921 (1920); Ladanga v. CA, 131 SCRA 361
(1984); Rongavilla v. CA, 294 SCRA 289 (1998); Labagala v. Santiago, 371
SCRA 360 (2001); Cruz v. Bancom Finance Corp., 379 SCRA 490 (2002);
Montecillo v. Reynes, 385 SCRA 244 (2002); Republic v. Southside
Homeowners Asso., 502 SCRA 587 (2006); Quimpo, Sr. v Abad Vda de
Beltran, 545 SCRA 174 (2008); Solidstate Multi-Products Corp. v.
35
Yu Bun Guan v. Ong, , 367 SCRA 559 (2001); Gonzales v. Trinidad, 67 Catienza-Villaverde, 559 SCRA 197 (2008); Clemente v. CA, 772 SCRA 339
Phil. 682 (1939) (2015).
36 39
Peñalosa v. Santos, 363 SCRA 545 (2001); Soliva v. Intestate Estate of The deed of sale with assumption of mortgage is a registrable instrument
Marcelo M. Villalba, 417 SCRA 277 (2003); Province of Cebu v. Heirs of and must be registered with the Register of Deeds in order to bind third
Rufina Morales, 546 SCRA 315 (2008). parties. Rodriguez v. CA, 495 SCRA 490 (2006).
37 40
Villaflor v. CA, 280 SCRA 297 (1997). Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006).
8 of 41
Letter of Intent to Buy and Sell is just that—a at any time before acceptance. If it is founded
manifestation of offeror’s intention to sell the property upon a consideration, the offeror cannot
and offeree’s intention to acquire the same—which is withdraw his offer before the lapse of the period
neither a contract to sell nor a conditional contract of agreed upon. √Tuazon v. Del Rosario-Suarez,
sale. xMuslim and Christian Urban Poor Assn. v. 637 SCRA 728 (2010).
BRYC-V Dev’t Corp., 594 SCRA 724 (2009).
c. The “Double Acceptance Rule” – An option to
When the offeree negotiates for a much lower rise to the level of a contract, there must be
price, it constitutes a counter-offer and is therefor not formal acceptance of the option offer. √Vazquez
an acceptance of the offer of offeror. xTuazon v. Del v. CA, 199 SCRA 102 (1991).
Rosario-Suarez, 637 SCRA 728 (2010).
d. Exercise of Option Contract – In an option to
1. O C buy, oitonee-offeree may validly and effectively
An option is a preparatory contract in which one exercise his right by merely advising the
party grants to the other, for a fixed period and optioner-offeror of his decision to buy and
under specified conditions, the power to decide, expressing his readiness to pay the stipulated
whether or not to enter into a principal contract. It price as soon as the seller is able to execute the
binds the party who has given the option, not to proper deed of sale; thus, notice of the
enter into the principal contract with any other optionee-offeree’s decision to exercise his option
person during the period designated, and, within to buy need not be couple with actual payment
that period, to enter into such contract with the one of the price. √Nietes v. CA, 46 SCRA 654 (1972).
to whom the option was granted, if the latter An option attached to a lease when not
should decide to use the option. It is a separate exercised within the option period is
agreement distinct from the contract of sale which extinguished and cannot be deemed to have
the parties may enter into upon the consummation been included in the implied renewal of the
of the option. Carceller v. Court of Appeals, 302 lease (tacita reconduccion). xDizon v. CA, 302
SCRA 718 (1999).47 SCRA 288 (1999). B S : There may be “virtual”
An option imposes no binding obligation on the exercise of option with the option period.
person holding the option aside from the √Carceller v. Court of Appeals, 302 SCRA 718
consideration for the offer. Until accepted (1999).
(exercised), it is not treated as a sale. √Tayag v. Proper exercise of an option gives rise to the
Lacson, 426 SCRA 282 (2004).48 reciprocal obligations of sale xHeirs of Luis
Bacus v. CA, 371 SCRA 295 (2001),53 which must
a. Meaning of “Separate Consideration” (Arts. be enforced with ten (10) years as provided
1479 and 1324) – A unilateral promise to sell, in under Art. 1144. xDizon v. CA, 302 SCRA 288
order to be binding upon the promissor, must (1999).
be for a price certain and supported by a
consideration separate from such price. 2. R F R
xSalame v. CA, 239 SCRA 356 (1995).49
A right of first refusal cannot be the subject of
“Separate consideration” in an option may be specific performance, but breach on the part of the
anything of value, unlike in sale where it must be promissor would allow a recovery of damages.
the price certain in money or its equivalent. xGuerrero v. Yñigo, 96 Phil. 37 (1954).
√Villamor v. CA, 202 SCRA 607 (1991),50 such
Rights of first refusal only constitute “innovative
when the option is attached to real estate
juridical relations”, but do not rise to the level of
mortgage xSoriano v. Bautista, 6 SCRA 946
contractual commitment since with the absence of
(1962).
agreement on price certain, they are not subject to
Although no consideration is expressly contractual enforcement. √Ang Yu Asuncion v. CA,
mentioned in an option, it may be proved, and 238 SCRA 602 (1994).
once proven, option is binding. xMontinola v.
Right of first refusal contained in a Contract of
Cojuangco, 78 Phil. 481 (1947).
Lease, when breached by promissor allows
enforcement by the promisee by way of rescission
b. Option With No Separate Consideration: Void
of the sale entered into with the third party,
as Option, Valid as a Certain Offer – “He who
pursuant to Arts. 1381(3) and 1385 of Civil Code.
draws first wins.” √Sanchez v. Rigos, 45 SCRA
xGuzman, Bocaling & Co. v. Bonnevie, 206 SCRA
368 (1972).51
668 (1992), √Equatorial Realty Dev. v. Mayfair
B S : Nothing Arises From an Option Theater, 264 SCRA 483 (1996);54 √Parañaque
Without Separate Consideration. Kings Enterprises v. Court of Appeals, 268 SCRA
xYao Ka Sin Trading v. Court of 727 (1997).
Appeals, 209 SCRA 763 (1991).52
B : Not against a purchaser for value and in
If the option is without any consideration, the good faith. √Rosencor Dev. Corp. v. Inquing, 354
offeror may withdraw his offer by SCRA 119 (2001).
communicating such withdrawal to the offeree
A right of first refusal in a lease in favor of the
47
Laforteza v. Machuca, 333 SCRA 643 (2000); Buot v. CA, 357 SCRA 846
lessee cannot be availed of by the sublessee.
(2001); Abalos v. Macatangay, Jr., 439 SCRA 649 (2004); Vasquez v. Ayala xSadhwani v. Court of Appeals, 281 SCRA 75 (1997).
Corp., 443 SCRA 231 (2004); Eulogio v. Apeles, 576 SCRA 561 (2009);
Polytechnic University of the Phil. v. Golden Horizon Realty Corp., 615 SCRA
In a right of first refusal, while the object might
478 (2010). be made determinate, the exercise of the right
48
Adelfa Properties v. CA, 240 SCRA 565 (1995); Kilosbayan v. Morato, 246 would be dependent not only on the grantor’s
SCRA 540 (1995); San Miguel Properties Phil. v. Huang, 336 SCRA 737
(2000); Limson v. CA, 357 SCRA 209 (2001).
49 53
JMA House v. Sta. Monica Industrial and Dev. Corp., 500 SCRA 526 Limson v. CA, 357 SCRA 209 (2001).
54
(2006). Rosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001); Conculada v. CA,
50
De la Cavada v. Diaz, 37 Phil. 982 (1918); San Miguel Properties Phil. v. 367 SCRA 164 (2001); Polytechnic University v. CA, 368 SCRA 691 (2001);
Huang, 336 SCRA 737 (2000) Riviera Filipina, Inv. v. CA, 380 SCRA 245 (2002); Lucrative Realty and Dev.
51
Affirmed in Vasquez v. CA, 199 SCRA 102 (1991). Corp. v. Bernabe, Jr., 392 SCRA 679 (2002); Villegas v. CA, 499 SCRA 276
52
Montilla v. CA, 161 SCRA 855 (1988); Natino v. IAC, 197 SCRA 323 (2006); Polytechnic University of the Phil. v. Golden Horizon Realty Corp., 615
(1991); Diamante v. CA, 206 SCRA 52 (1992). SCRA 478 (2010).
10 of 41
eventual intention to enter into a binding juridical refers to the exact object and consideration embodied
relation with another but also on terms, including in said offer. xVillanueva v. PNB, 510 SCRA 275 (2006).59
the price, that are yet to be firmed up. . . the “offer” If a material element of a contemplated contract
may be withdrawn anytime by communicating the is left for future negotiations, the same is too indefinite
withdrawal to the other party. √Vasquez v. Ayala to be enforceable. For a contract to be enforceable, its
Corp., 443 SCRA 231 (2004). terms must be certain and explicit, not vague or
A right of first refusal simply means that should indefinite. xBoston Bank of the Phil. v. Manalo, 482
lessor decide to sell the leased property during the SCRA 108 (2006).60
term of the lease, such sale should first be offered
to the lessee; and the series of negotiations that 1. Absolute Acceptance of a Certain Offer (Art. 1475)
transpire between lessor and lessee on the basis of Under Article 1319, the acceptance of an offer
such preference is a compliance even when no must therefore be unqualified and absolute. In
final purchase agreement is perfected between other words, it must be identical in all respects with
the parties. The lessor was then at liberty to offer that of the offer so as to produce consent or
the sale to a third party who paid a higher price, meeting of the minds. Here, petitioner’s
and there is no violation of the right of the lessee. acceptance of the offer was qualified, which
√Riviera Filipina, Inc. v. CA, 380 SCRA 245 (2002). amounts to a rejection of the original offer.
55
√Manila Metal Container Corp. v. PNB, 511 SCRA
Right of first refusal clause does not apply to this 444 (2006).61
situation where the owner to eject the tenant on
Placing the word “Noted” and signing below
the ground that the former needs the premises for
such word at the bottom of the written offer is not
residential purposes. xEstanislao v. Gudito, 693
an absolute acceptance that would give rise to a
SCRA 330 (2013).
valid sale. xDBP v. Ong, 460 SCRA 170 (2005).
3. M P B S (Art. 1479): Subject to Suspensive Condition: There is no
“T C S ” perfected sale of a lot where award thereof was
made subject to approval by the higher authorities
Mutual promises to buy and sell a certain thing
and there eventually was no acceptance
for a certain price gives parties a right to demand
manifested by the supposed awardee. xPeople's
from the other the fulfillment of the obligation,
Homesite. v. CA, 133 SCRA 777 (1984).
xBorromeo v. Franco, 5 Phil. 49 (1905); even in this
case the certainty of the price must also exist, 2. When “Deviation” Allowed
otherwise, there is no valid and enforceable
contract to sell. xTan Tiah v. Yu Jose, 67 Phil. 739 It is true that an acceptance may contain a
(1939). request for certain changes in the terms of the offer
and yet be a binding acceptance, so long as it is
An accepted bilateral promise to buy and sell is clear that the meaning of the acceptance is
in a sense similar to, but not exactly the same, as a positively and unequivocally to accept the offer,
perfected contract of sale because there is already a whether such request is granted or not, a contract
meeting of minds upon the thing which is the is formed. Vendor’s change in a phrase of the offer
object of the contract and upon the price.56 But a to purchase which do not essentially change the
contract of sale is consummated only upon delivery terms of the offer, does not amount to a rejection of
and payment, whereas in a bilateral promise to buy the offer and the tender or a counter-offer.
and sell gives the contracting parties rights in √Villonco v. Bormaheco, 65 SCRA 352 (1975).62
personam, such that each has the right to demand
from the other the fulfillment of their respective 3. Sale by Auction (Arts. 1476, 1403(2)(d), 1326)
undertakings. √Macion v. Guiani, 225 SCRA 102
Owner’s terms and conditions for the sale of
(1993).57
property under auction are binding on all bidders,
Cause of action under a mutual promise to buy whether or not they knew of them. xLeoquinco v.
and sell is 10 years. xVillamor v. Court of Appeals, Postal Savings Bank, 47 Phil. 772 (1925).
202 SCRA 607 (1991).
An auction sale is perfected by the fall of the
hammer or in other customary manner and it does
B P S S (Arts. 1475, 1319, not matter that another was allowed to match the
1325 and 1326) bid of the highest bidder. xProvince of Cebu v. Heirs
Sale is perfected at the moment there is a of Rufina Morales, 546 SCRA 315 (2008).
meeting of minds upon the thing which is the object
of the contract and upon the price. From that 4. Earnest Money (Art. 1482)
moment, the parties may reciprocally demand Earnest money given by the buyer shall be
performance subject to the law governing the form of considered as part of the price and as proof of the
contracts. xMarnelego v. Banco Filipino Savings and perfection of the contract. It constitutes an advance
Mortgage Bank, 480 SCRA 399 (2006).58 payment to be deducted from the total price.
Mutual consent being a state of mind, its xEscueta v. Lim, 512 SCRA 411 (2007).
existence may only be inferred from the confluence of In a potential sale transaction, prior payment of
two acts of the parties: an offer certain as to the object earnest money even before the owner can agree to
of the contract and its consideration, and an sell his property is irregular, and cannot be used to
acceptance of the offer which is absolute in that it bind the owner to the obligations of a seller under
an otherwise perfected contract of sale. Property
owner/prospective seller may not be legally obliged
55
Polytechnic University v. CA, 368 SCRA 691 (2001); Villegas v. CA, 499
SCRA 276 (2006); Polytechnic University of the Phil. v. Golden Horizon Realty
59
Corp., 615 SCRA 478 (2010). Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).
56 60
El Banco Nacional Filipino v. Ah Sing, 69 Phil. 611 (1940); Manuel v. Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).
61
Rodriguez, 109 Phil. 1 (1960). Beaumont v. Prieto, 41 Phil. 670 (1916); Zayco v. Serra, 44 Phil. 326
57
Borromeo v. Franco, 5 Phil. 49 (1905); Villamor v. CA, 202 SCRA 607 (1923); Limketkai Sons Milling, v. CA, 255 SCRA 626 (1996); XYST Corp. v.
(1991); Coronel v. CA, 263 SCRA 15 (1996). DMC Urban Properties Dev., 594 SCRA 598 (2009); Tuazon v. Del
58
Valdez v. CA, 439 SCRA 55 (2004); Blas v. Angeles-Hutalla, 439 SCRA Rosario-Suarez, 637 SCRA 728 (2010).
62
273 (2004); Ainza v. Padua, 462 SCRA 614 (2005); Cruz v. Fernando, 477 Limketkai Sons Milling v. CA, 250 SCRA 523 (1995), but reversed in 255
SCRA 173 (2005). SCRA 626,
11 of 41
to enter into a sale with a prospective buyer ● That marital consent executed prior to the Deed
through the latter's employment of questionable of Absolute Sale does not indicate that it is a
practices which prevent the owner from freely phoney. xPan Pacific Industrial Sales Co. v.
giving his consent to the transaction. √First Court of Appeals, 482 SCRA 164 (2006).
Optima Realty Corp. v. Securitron Security ● A notarized Deed of Sale enjoys the
Services, 748 SCRA 534 (2015).63 presumption of regularity and due execution; to
Article 1482 does not apply when earnest money overthrow that presumption, sufficient, clear
and convincing evidence is required, otherwise
given in a contract to sell xSerrano v. Caguiat, 517
the document should be upheld.
SCRA 57 (2007), especially where by stipulation the xBravo-Guerrero v. Bravo, 465 SCRA 244 (2005).
buyer has the right to walk away from the 67
72
Rosencor Dev’t Corp. v. Inquing, 354 SCRA 119 (2001).
73
Alba Vda. De Ray v. CA, 314 SCRA 36 (1999).
74
Torcuator v. Bernabe, 459 SCRA 439 (2005).
75 79
Rosales v. Suba, 408 SCRA 664 (2003); Ayson, Jr. v. Paragas, 557 SCRA Vda. de Jomoc v. CA, 200 SCRA 74 (1991); Soliva v. Estate of Marcelo M.
50 (2008). Villalba, 417 SCRA 277 (2003); Ainza v. Padua, 462 SCRA 614 (2005); De la
76
Paredes v. Espino, 22 SCRA 1000 (1968); Torcuator v. Bernabe, 459 Cena v. Briones, 508 SCRA 62 (2006); Yaneza v. CA, 572 SCRA 413 (2008);
SCRA 439 (2005). Duarte v. Duran, 657 SCRA 607 (2011).
77 80
Berg v. Magdalena Estate, 92 Phil. 110 (1952); Limketkai Sons Milling v. Lagon v. Hooven Comalco Industries, 349 SCRA 363 (2001).
81
CA, 250 SCRA 523 (1995); First Philippine Int’l Bank v. CA, 252 SCRA 259 Xentrex Automotive v. CA, 291 SCRA 66 (1998).
82
(1996). Limson v. CA, 357 SCRA 209 (2001).
78 83
Talosig v. Vda. De Nieba, 43 SCRA 472 (1972); Limketkai Sons Milling v. Alcantara v. Nido, 618 SCRA 333 (2010); Camper Realty Corp. v.
CA, 250 SCRA 523 (1995); Lacanilao v. CA, 262 SCRA 486 (1996). Pajo-Reyes, 632 SCRA 400 (2010).
13 of 41
matter can be conveyed to the buyer. xTraders of title to the buyer, but title passes by the
Royal Bank v. CA, 269 SCRA 15 (1997).90 delivery of the goods. xPhil. Suburban Dev.
Corp. v. Auditor General, 63 SCRA 397
(ii) Nemo Dat Quod Non Habet – “No man can (1975).92
give that which he does not have.” Even when
● Failure of buyer to make good the price
the sale is valid, if the seller had no ownership
does not cause the ownership to revest to
over the subject matter at the time of delivery,
the seller unless the bilateral contract of
no valid title can pass in favor of the buyer. xTsai
sale is first rescinded or resolved pursuant
v. CA, 366 SCRA 324 (2001).91
to Art. 1191. xBalatbat v. Court of Appeals,
A tax declaration by itself is not considered 261 SCRA 128 (1996).
conclusive evidence of ownership; it is merely an
indicium of a claim of ownership. Daclag v. (3) Tradition Per Se Transfers Ownership to
Macahilig, 560 SCRA 137 (2008); nevertheless, the Buyer (Arts. 1477, 1478, and 1496) – In
when at delivery there is no proof that seller had the absence of a stipulation to the contrary,
ownership and property’s tax declaration was in tradition produces its natural legal effects,
the name of another person, then there was no most important of which being conveyance
transfer of ownership by delivery. xHeirs of of ownership, without prejudice to right of
Severina San Miguel v. CA, 364 SCRA 523 (2001). seller to claim payment of price. xFroilan v.
Pan Oriental Shipping, 12 SCRA 276 (1964).93
Article 1459 on contracts of sale “specifically
requires that the vendor must have ownership of In a contract of sale, title to the property
the property at the time it is delivered;” sold passes to buyer upon delivery of thing
ownership need not be with the seller at the sold; seller loses ownership by delivery and
time of perfection. xHeirs of Arturo Reyes v. cannot recover it until and unless contract is
Socco-Beltran, 572 SCRA 211 (2008). resolved or rescinded by court process. David
v. Misamis Occidental II Electric Cooperative,
One can sell only what one owns or is
676 SCRA 367 (2012).
authorized to sell, and the buyer can acquire no
more than what the seller can transfer legally. c. A P D (Art. 1497) –
xDaclag v. Macahilig, 560 SCRA 137 (2008). Article 1477 recognizes that the “ownership of
A contract to sell, or a conditional contract of the thing sold shall be transferred to the vendee
sale where the suspensive condition has not upon the actual or constructive delivery thereof;”
happened, even when found in a public related to this is Article 1497 which provides that
document, cannot be treated as constituting “[t]he thing sold shall be understood as delivered
constructive delivery, especially when from the when it is placed in the control and possession
face of the instrument it is shown that the seller of the vendee.” Santiago v. Villamor, 686 SCRA
“was not yet the owner of the property and was 313 (2012).
only expecting to inherit it.” xHeirs of Arturo It is not necessary that seller himself
Reyes v. Socco-Beltran, 572 SCRA 211 (2008). physically delivers title to the buyer because the
thing sold is understood as delivered when it is
b. G D T , W placed in control and possession of buyer. Thus,
A C when sellers themselves introduced the tenant
(1) Meaning of “Delivery” (Art. 1477) – Delivery to the buyer as the new owners of the land, and
contemplates “the absolute giving up of the from that time on the buyer acted as landlord
control and custody of the property on the part thereof, there was delivery that transferred title
of the vendor, and the assumption of the same to the buyer. xAlfredo v. Borras, 404 SCRA 145
by the vendee. Non nudis pactis sed traditione (2003).
dominia rerum transferantur. There is delivery
if and when the thing sold “is placed in the d. C D : E
control and possession of the vendee.” P I (Art. 1498) – Where deed of
xEquatorial Realty Dev. v. Mayfair Theater, 370 sale or any agreement analogous to a deed of
SCRA 56 (2001). sale, is made through a public instrument, its
execution is equivalent to the delivery of the
“Delivery” in sales refers to the concurrent property. xCaoibes, Jr. v. Caoibes-Pantoja, 496
transfer of two things: (1) possession and (2) SCRA 273 (2006).94
ownership. If the vendee is placed in actual
possession of the property, but by agreement Under Art. 1498, the mere execution of the
of the parties ownership of the same is deed of conveyance in a public instrument is
retained by the vendor until the vendee has equivalent to the delivery of the property, and
fully paid the price, the mere transfer of the that prior physical delivery or possession is not
possession of the property subject of the sale is legally required, since ownership and possession
not the “delivery” contemplated in the Law on are two entirely different legal concepts.
Sales or as used in Art. 1543 of the Civil Code. Notwithstanding the presence of illegal
xCebu Winland Dev. Corp. v. Ong Siao Hua, 588 occupants on the subject property, transfer of
SCRA 120 (2009). ownership by symbolic delivery under Art. 1498
can still be effected through the execution of the
(2) Relationship to the Price – It may be deed of conveyance. xSabio v. Int’l Corporate
stipulated that ownership in the thing shall not Bank, 364 SCRA 385 (2001).
pass to buyer until he has fully paid price (Art. B S : There is nothing in Article 1498 that
1478). C : provides that execution of a deed of sale is a
● Absence of an express stipulation to the conclusive presumption of delivery of
contrary, payment of price of the goods is possession; presumptive delivery can be
not a condition precedent to the transfer 92
Ocampo v. CA, 233 SCRA 551 (1994).
93
Kuenzle & Streiff v. Watson & Co., 13 Phil. 26 (1909); Ocejo, Perez & Co.
90
Rufloe v. Burgos, 577 SCRA 264, 272-273 (2009). v. Int'l Banking Corp., 37 Phil. 631 (1918).
91 94
Tangalin v. CA, 371 SCRA 49 (2001); Heirs of Arturo Reyes v. Tating v. Marcella, 519 SCRA 79 (2007); De Leon v. Ong, 611 SCRA 381
Socco-Beltran, 572 SCRA 211 (2008); Francisco v. Chemical Bulk Carriers, (2010); Villamar v. Mangaoil, 669 SCRA 2012 (2012); Santiago v. Villamor,
657 SCRA 355 (20 686 SCRA 313 (2012).
15 of 41
negated by the failure of buyer to take actual 404 (1918); for a person who does not
possession of the land or the continued have actual possession or control of
enjoyment of possession by the vendor. √Santos the thing sold cannot transfer
v. Santos, 366 SCRA 395 (2001).95 constructive possession by the
As a general rule, when sale is made through execution and delivery of a public
a public instrument, the execution thereof shall instrument. xVillamar v. Mangaoil,
be equivalent to the delivery of the thing which 669 SCRA 426 (2012).100
is the object of sale, if from the deed the – and –
contrary does not appear or cannot clearly be
inferred. In order the execution of a public (b) Such Control Should Remain within
instrument to effect tradition, the purchaser a Reasonable Period after
must be placed in control of the thing sold. A Execution of the instrument,
person who does not have actual possession of √Danguilan v. IAC, 168 SCRA 22
the thing sold cannot transfer constructive (1988).
possession by the execution and delivery of a E : When Buyer Assumes Risks of
public instrument. xAsset Privatization Trust v. Ownership and Possession.
T.J. Enterprises, 587 SCRA 481 (2009). √Power Commercial and
A contract to sell, or a condition contract of Industrial Corp. v. CA, 274 SCRA
sale where the suspensive condition has not 597 (1997).101
happened, even when found in a public
document, cannot be treated as constituting Registration of Title Is Separate Mode from
constructive delivery, especially when from the Execution of Public Instrument – Recording of
face of the instrument it is shown that the seller the sale with the proper Registry of Deeds and
“was not yet the owner of the property and was transfer of the TCT in the name of the buyer are
only expecting to inherit it.” Heirs of Arturo necessary only to bind third parties. As
Reyes v. Socco-Beltran, 572 SCRA 211 (2008).96 between the seller and the buyer, transfer of
Issuance of an acknowledgment receipt of ownership takes effect upon the execution of a
partial payment, when it is not a public public instrument conveying the real estate.
instrument does not convey title. xSan Lorenzo √Chua v. CA, 401 SCRA 54 (2003).
Dev. Corp. v. CA, 449 SCRA 99 (2005). B S : Under Art. 1495, seller is obliged to
transfer title over the property and deliver the
(i) As to Movables (Arts. 1498-1499, 1513-1514) –
same to the vendee. √Vive Eagle Land, v. CA,
The effects of delivery on ownership can be
444 SCRA 445 (2004).
segregated from the delivery of possession.
√Dy, Jr. v. CA, 198 SCRA 826 (1991). Customary Steps in Selling Immovables –
Where it is stipulated that deliveries must be “Customarily, in the absence of a contrary
made to the buyer or his duly authorized agreement, the submission by an individual
representative named in the contracts, seller is seller to the buyer of the following papers
under obligation to deliver in accordance with would complete a sale of real estate: (1) owner’s
such instructions. xLagon v. Hooven Comalco duplicate copy of the Torrens title; (2) signed
Industries, 349 SCRA 363 (2001). deed of absolute sale; (3) tax declaration; and
(4) latest realty tax receipt. They buyer can
Neither issuance of an invoice, which is not a
retain the amount for the capital gains tax and
document of title xP.T. Cerna Corp. v. CA, 221
pay it upon authority of the seller, or the seller
SCRA 19 (1993),97 nor of the registration certificate
can pay the tax, depending on the agreement
of vehicle xUnion Motor Corp. v. CA, 361 SCRA 506
of the parties.” √Chua v. Court of Appeals, 401
(2001),98 would constitute constructive delivery of
SCRA 54 (2003).
the vehicle.
Execution of notarized deed of sale and the
(ii) As to Immovables (Art. 1498) – In case of delivery of the owner’s duplicate copy of the
immovables, when sale is made through a original certificate of title to the buyer is
public instrument, execution thereof shall be tantamount to constructive delivery of the
equivalent to delivery of the thing object of object of the sale. Kings Properties Corp. v.
the sale, if from the deed the contrary does Galido, 606 SCRA 137 (2009).
not appear or cannot clearly be inferred.
xMunicipality of Victorias v. Court of Appeals, (iii) As to Incorporeal Property (Arts. 1498
149 SCRA 31 (1987);99 and that prior physical and 1501) – In the sale of shares of stock,
delivery or possession is not legally required delivery of a stock certificate is one of the
since execution of the deed is deemed essential requisites for the transfer of
equivalent to delivery. xManuel R. Dulay ownership of the stocks purchased. Seller’s
Enterprises v. CA, 225 SCRA 678 (1993); failure to delivery the stock certificates
P T : representing the shares of stock
amounted to a substantial breach which
(a) Thing Sold Subject to Control of gave rise to a right to rescind the sale.
Seller, √Addison v. Felix, 38 Phil. Raquel-Santos v. CA, 592 SCRA 169 (2009).
2. In Case of Immovables
102
Chua Ngo v. Universal Trading Co., 87 Phil. 331 (1950).
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it would be shown that a buyer was in bad faith, lacking in a contract to sell for neither a transfer
the alleged registration they have made of ownership nor a sales transaction has been
amounted to no registration at all. The principle consummated, and such contract is binding
of primus tempore, potior jure (first in time, only upon the fulfillment or non-fulfillment of an
stronger in right) gains greater significance in event. Nevertheless, the governing principle of
case of a double sale of immovable property. Art. 1544 should apply, mainly the governing
When the thing sold twice is an immovable, the principle of primus tempore, portior jure (first in
one who acquires it and first records in the time, stronger in right). √Cheng v. Genato, 300
Registry of Property, both made in good faith, SCRA 722 (1998).
shall be deemed the owner. Verily, the act of
registration must be coupled with good faith – b. Exact Same Subject Matter – Art. 1544 applies
that is, the registrant must have no knowledge where the same thing is sold to different buyers
of the defect or lack of title of his vendor or must by the same seller. xOng v. Oalsiman, 485 SCRA
not have been aware of facts which would have 464 (2006); and does not apply where there was
put him upon such inquiry and investigation as a sale to one party of the land itself while the
might be necessary to acquaint him with the other contract was a mere promise to sell the
defects in the title of his vendor. xRosaroso v. land or at most an actual assignment of the
Soria, 699 SCRA 232 (2013).108 rights to repurchase the same land. xDischoso v.
Roxas, 5 SCRA 781 (1962).
3. Requisites for Double Sale Rule to Apply :
√Cheng v. Genato, 300 SCRA 722 (1998).109 c. Exact Same Seller for Both Sales – Art. 1544
applies where the same thing is sold to different
a. There Must Be Two Different Valid Sales: vendees by the same vendor. It does not apply
Article 1544 does not apply where: where the same thing is sold to different
● There is only one valid sale, while the other vendees by different vendors, or even to the
sale over the same property is void. xFudot v. same buyer but by different sellers. xSalera v.
Cattleya Land, 533 SCRA 350 (2007);110 or Rodaje, 530 SCRA 432, 438 (2007);113 or by several
successive vendors. xMactan-Cebu International
● Where one or both of the contracts is a
Airport Authority v. Tirol, 588 SCRA 635 (2009).114
contract to sell. √San Lorenzo Dev. Corp. v.
CA, 449 SCRA 99 (2005).111 B S : √Badilla v. Bragat, 757 SCRA 131
(2015).
When the seller sold the same properties to
two buyers, first to the respondent and then to For Article 1544 to apply, it is necessary that
Viloria on two separate occasions, the second the conveyance must have been made by a
sale was not void for the sole reason that party who has an existing right in the thing and
petitioner had previously sold the same the power to dispose of it. It cannot be invoked
properties to respondent. This case involves a where the two different contracts of sale are
double sale as the disputed properties were sold made by two different persons, one of them not
validly on two separate occasions by the same being the owner of the property sold. And even if
seller to the two different buyers in good faith. the sale was made by the same person, if the
xDe Leon v. Ong, 611 SCRA 381, 388 (2010). second sale was made when such person was
no longer the owner of the property, because it
When the seller sold the same properties to
had been acquired by the first purchaser in full
two buyers, first to the respondent and then to
dominion, the second purchaser cannot acquire
Viloria on two separate occasions, the second
any right. √Consolidated Rural Bank v. CA, 448
sale was not void for the sole reason that
SCRA 347 (2005),115 citing V , P
petitioner had previously sold the same
L S 100 (1995).
properties to respondent. This case involves a
double sale as the disputed properties were sold
validly on two separate occasions by the same
seller to the two different buyers in good faith. 4. “Registration in Good Faith” as First Priority
De Leon v. Ong, 611 SCRA 381, 388 (2010).
a. Meaning of “Registration”
Rules on double sales applies even if one of
the sales is an auction sale. Gopiao v. The annotation of adverse claim can qualify
Metrobank, 731 SCRA 131 (2014). as the registration mandated under the rules on
double sale. √Carbonnel v. CA, 69 SCRA 99
(1) Doctrine on Conditional Sales/Contracts to (1976).
Sell and Adverse Claims: √Adalin v. CA, 280 Registration means any entry made in the
SCRA 536 (1997).112 books of the registry, including both registration
Rules on double sales under Art. 1544 are not in its ordinary and strict sense, and cancellation,
applicable to contract to sell, because of the annotation, and even marginal notes. It is the
circumstances that must concur in order for the entry made in the registry which records
provisions to Art. 1544 on double sales to apply, solemnly and permanently the right of
namely that there must be a valid sales ownership and other real rights. xCheng v.
transactions, and buyers must be at odds over Genato, 300 SCRA 722 (1998).116
the rightful ownership of the subject matter who Declaration of purchase for taxation purposes
must have bought from the very same seller, are does not comply with the required registration.
108 xBayoca v. Nogales, 340 SCRA 154 (2000).
Pudadera v. Magllanes, 633 SCRA 332 (2010); Calma v. Santos, 590
SCRA 359 (2009). Registration of the Extra-judicial Partition
109
Mactan-Cebu International Airport Authority v. Tirol, 588 SCRA 635 which merely mentions the sale is not the
(2009); Cano Vda. De Viray v. Usi, 686 SCRA 211 (2012); Roque v. Aguado, registration covered under Art. 1544 and cannot
720 SCRA 780 (2014); Skunac Corp. v. Sylianteng, 723 SCRA 625 (2014).
110
Espiritu v. Valerio, 9 SCRA 761 (1963); Remalante v. Tibe, 158 SCRA 138
113
(1988); Delfin v. Valdez, 502 SCRA 24 (2006). Ong v. Olasiman, 485 SCRA 464 (2006).
111 114
Torrecampo v. Alindogan, Sr., 517 SCRA 84 (2007). Roque v. Aguado, 720 SCRA 780 (2014); Skunac Corp. v. Sylianteng, 723
112
Mendoza v. Kalaw, 42 Phil. 236 (1921); Ruiz v. CA, 362 SCRA 40 (2001) SCRA 625 (2014); Badilla v. Bragat, 757 SCRA 131 (2015).
115
and Valdevieso v. Damalerio, 451 SCRA 664 (2005); Rural Bank of Sta. Gallardo v. Gallardo, 46 O.G. No. 11 p. 5568; Sigaya v. Mayuga, 467
Barbara [Pangasinan] v. Manila Mission of the Church of Jesus Christ of Latter SCRA 341, 357 (2005).
116
Day Saints, 596 SCRA 415 (2009). Ulep v. CA, 472 SCRA 241 (2005).
19 of 41
prevail over the registration of the pacto de retro title already existing and vested. √Consolidated
sale. xVda. de Alcantara v. CA, 252 SCRA 457 Rural Bank) v. CA, 448 SCRA 347 (2005).
(1996).
d. Registration in Good Faith Always Pre-empts
“There can be no constructive notice to the
Possession in Good Faith – Between two
second buyer through registration under Act
purchasers, the one who registered the sale in
3344 if the property is registered under the
his favor has a preferred right over the other who
Torrens system.” xAmodia Vda. De Melencion v.
has not registered his title, even if the latter is in
CA, 534 SCRA 62, 82 (2007), thereby overturning
actual possession of the immovable property.
obiter in Santiago v. CA, 247 SCRA 336 (1995).
xTañedo v. CA, 252 SCRA 80 (1996).119
b. Registration Must Always Be in Good Faith – In The registration of a sale after the annotation
cases of double sales of immovables, what finds of lis pendens does not obliterate the effects of
relevance and materiality is not whether or not delivery and possession in good faith. The rules
the second buyer was a buyer in good faith or on constructive notice upon registration
that he was first to register, but whether or not provided for under Section 52 of the Property
said second buyer registers such second sale in Registration Decree (P.D. No. 1529) operate only
good faith, that is, without knowledge of any from the time of the registration of the notice of
defect in the title of the property sold. xMartinez lis pendens which in this case was effected only
v. CA, 358 SCRA 38 (2001);117 this is so because the after the time the sale in favor of the second
defense of indefeasibility of a Torrens title does buyer had long been consummated by delivery
not extend to a transferee who takes the of the subject matter. √San Lorenzo Dev. Corp.
certificate of title in bad faith. xOcceña v. v. CA, 449 SCRA 99 (2005).
Esponilla, 431 SCRA 116 (2004).
5. “First to Possess in Good Faith” as Second
c. Knowledge of First Buyer of the Second Sale Priority
Does Not Amount to Registration in Favor of Absence inscription, the law gives preference to
the Second Buyer – In double sales, first buyer buyer who in good faith is first in possession, under
always has priority rights over subsequent the following jurisprudential parameters: (a)
buyers of the same property. Good faith of the possession mentioned in Art. 1544 includes not only
first buyer remains all throughout despite his material but also symbolic possession;120 (b)
subsequent acquisition of knowledge of the possessors in good faith are those who are not
subsequent sale. xKings Properties Corp. v. aware of any flaw in their title or mode of
Galido, 606 SCRA 137 (2009). acquisition; (c) buyers of real property that is in the
Knowledge gained by the first buyer of the possession of persons other than the seller must be
second sale cannot defeat the first buyer's rights wary – they must investigate the rights of the
except where the second buyer registers in good possessors; and (d) good faith is always presumed,
faith the second sale ahead of the first. Such upon those who allege bad faith on the part of
knowledge of the first buyer does not bar her possessors rests the burden of proof. xTen Forty
from availing of her rights under the law, among Realty v. Cruz, 410 SCRA 484 (2003).121
them, to register first her purchase as against After the sale of a realty by means of a public
the second buyer. But in converso, knowledge instrument, the vendor, who resells it to another,
gained by the second buyer of the first sale does not transmit anything to the second vendee,
defeats his rights even if he is first to register the and if the latter, by virtue of this second sale takes
second sale, since such knowledge taints his material possession of the thing, he does it as mere
prior registration with bad faith. This is the detainer, and it would be unjust to protect this
priced exacted by Article 1544 for the second detention against the rights of the thing lawfully
buyer being able to displace the first buyer; that acquired by the first vendee. √The Roman
before the second buyer can obtain priority over Catholic Church v. Pante, 669 SCRA 234 (2012).
the first, he must show that he acted in good
faith throughout (i.e., in ignorance of the first 6. Who is Purchaser in Good Faith?
sale and of the first buyer's right) –from the time
of acquisition until the title is transferred to him a. Must Have Paid Price in Full – A purchaser in
by registration or failing registration, by delivery good faith is one who buys property without
of possession.” xUraca v. CA, 278 SCRA 702 notice that some other person has a right to,
(1997).118 or interest in, such property, and pays a full
and fair price for the same at the time of
In a situation where a party has actual
such purchase, or before he has notice of
knowledge of the claimant’s actual, open and
claim or interest of some other person in the
notorious possession of a disputed property at
property. xLocsin v. Hizon, 735 SCRA 547 (2014).
the time of registration, the actual notice and 122
knowledge are equivalent to registration,
because to hold otherwise would be to tolerate
fraud and the Torrens system cannot be used to 119
Liao v. CA, 323 SCRA 430 (2000); Talusan v. Tayag, 356 SCRA 263
shield fraud – while certificates of title are (2001); Dauz v. Exchavez, 533 SCRA 637 (2007).
indefeasible, unassailable and binding against 120
Roman Catholic Church v. Pante, 669 SCRA 234 (2012).
the whole world, they merely confirm or record 121
Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159
(1950); Navera v. CA, 184 SCRA 584 (1990); The Roman Catholic Church v.
Pante, 669 SCRA 234 (2012).
117 122
Blanco v. Rivera, 488 SCRA 148 (2006); Gabriel v. Mabanta, 399 SCRA Agricultural and Home Extension Dev. v. CA., 213 SCRA 536 (1992);
573 (2003); De la Cena v. Briones, 508 SCRA 62 (2006); Tanglao v. Veloso v. CA, 260 SCRA 593 (1996); Balatbat v. CA, 261 SCRA 128 (1996);
Parungao, 535 SCRA 123 (2007); Bernardez v. CA, 533 SCRA 451 (2007); Mathay v. CA, 295 SCRA 556 (1998); Diaz-Duarte v. Ong, 298 SCRA 388
Orduña v. Fuentebella, 622 SCRA 146 (2010); Estate of Margarita D. (1998); Liao v. CA, 323 SCRA 430 (2000); Tanongon v. Samson, 382 SCRA
Cabacungan v. Laigo, 655 SCRA 366 (2011). 130 (2002); Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389
118
Cruz v. Cabana, 129 SCRA 656 (1984); Gatmaitan v. CA, 200 SCRA 37 SCRA 316 (2002); Aguirre v. CA, 421 SCRA 310 (2004); Galvez v. CA, 485
(1991); Vda. de Jomoc v. CA, 200 SCRA 74 (1991); Bucad v. CA, 216 SCRA SCRA 346 (2006); Chua v. Soriano, 521 SCRA 68 (2007); Raymundo v.
423 (1992); Berico v. CA, 225 SCRA 469 (1993); Bautista v. CA, 322 SCRA Bandong, 526 SCRA 514 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007);
294 (2000); Bautista v. CA, 322 SCRA 294 (2000); Ulep v. CA, 472 SCRA 241 Kings Properties Corp. v. Galido, 606 SCRA 137 (2009); De Leon v. Ong, 611
(2005); Escueta v. Lim, 512 SCRA 411 (2007); Lumbres v. Tablada, Jr., 516 SCRA 381 (2010); The Heirs of Romana Saves v. The Heirs of Escolastico
SCRA 575 (2007); Fudot v. Cattleya Land, 533 SCRA 350 (2007); Tanglao v. Saves, 632 SCRA 236 (2010); De Leon v. Ong, 611 SCRA 381 (2010); Yared
Parungao, 535 SCRA 123 (2007). v. Tiongco, 660 SCRA545 (2011); PCSO v. New Dagupan Metro Gas Corp.,
20 of 41
A purchaser in good faith is one who buys charged with greater diligence that ordinary
with the well-founded belief that the person buyers or encumbrances for value, because it
from he receives the property had title to it would be standard in his business, as a matter of
and had the capacity to convey it. In this case, due diligence required of banks and financing
the buyers bought. xHeirs of Soliva v. Soliva, companies, to ascertain whether the property
757 SCRA 26 (2015); xBliss Dev. Corp. /HGC v. being offered as security for the debt has already
Diaz, 765 SCRA 453 (2015). been sold to another to prevent injury to prior
Under Art. 1544, mere registration is not innocent buyers. xExpresscredit Financing Corp.
enough to acquire a new title; good faith must v. Velasco, 473 SCRA 570 (2005).125
concur. Clearly, when buyer has not yet fully paid A bank is expected to exercise due diligence
purchase price, and as long as seller remains before entering into a mortgage contract, and
unpaid, buyer cannot feign good faith. xPortic v. the ascertainment of the statute or condition of
Cristobal, 546 SCRA 577 (2005).123 a proper offered to it as security for a loan must
B S : In the determination of whether or be a standard and indispensable part of
not the buyer is in good faith, the point in time operations; and it cannot simply rely upon
to be considered is the moment when the reviewing the title to the property offered for
parties actually entered into the contract of sale. mortgage. xTio v. Abayata, 556 SCRA 175 (2008).
126
xEstate of Lino Olaquer v. Ongjoco, 563 SCRA
373 (2008). (2) Close Relationship – The sale to one’s daughter
Not being purchasers in good faith, buyers and sons will give rise to the conclusion that the
having registered the sale, will not, as against buyers, not being really third parties, knew of the
the petitioners, carry the day for any of them previous sales and cannot be considered in good
under Article 1544 of the Civil Code prescribing faith. The buyers “are deemed to have
rules on preference in case of double sales of constructive knowledge by virtue of their
immovable properties. xOrduña v. Fuentebella, relationship” to their sellers. xPilapil v. Court of
622 SCRA 146 (2010). Appeals, 250 SCRA 566 (1995).
b. Burden of Proof – The burden of proving the (3) Gross Inadequacy of Price – Mere inadequacy of
status of a purchaser in good faith lies upon him price is not ipso facto a badge of lack of good
who asserts that status. It is not sufficient to faith—to be so, the price must be grossly
invoke the ordinary presumption of good faith, inadequate or shocking to the conscience such
that is, that everyone is presumed to have acted that the mind revolts against it and such that a
in good faith, since the good faith that is here reasonable man would neither directly or
essential is integral with the very status that indirectly be likely to consent to it. xTio v.
must be established. xTanglao v. Parungao, 535 Abayata, 556 SCRA 175 (2008).
SCRA 123 (2007).124
(4) Obligation to Investigate or To Follow Leads – A
As a general rule, the question of whether or purchaser who is aware of facts which should
not a person is a purchaser in good faith is a put a reasonable man upon his guard cannot
factual matter that will not be delved into by this turn a blind eye and later claim that he acted in
Court, since only questions of law may be raised good faith,127 such as —
in petitions for review. xTio v. Abayata, 556 SCRA
175 (2008). ● Buyer of a registered land would be in bad faith
when he purchases without asking to see the
B S : It is anxiomatic that good faith is owner’s copy of the title and/or without visiting
always presumed in the absence of any direct the land where he would then have seen first
evidence of bad faith. xSantiago v. CA, 247 SCRA buyer occupying the same. xSantiago v. CA, 247
336 (1995). SCRA 336 (1995).128
● When there are occupants to the land being
c. Instances When No Good Faith – One who buys bought, since it is the common practice in the
from one who is not the registered owner is real estate industry, an ocular inspection of the
expected to examine not only the certificate of premises involved is a safeguard a cautious and
title but all factual circumstances necessary for prudent purchaser usually takes. xMartinez v.
one to determine if there are any flaws in the title CA, 358 SCRA 38 (2001).129
of the transferor, or in the capacity to transfer the ● Any person engaged in business would be wary
land. It is a well-settled rule that a purchaser of buying from a company that is closing shop,
cannot close his eyes to facts which should put a because it may be dissipating its assets to
reasonable man upon his guard, and then claim defraud creditors. Such buyer is bound to
that he acted in good faith under the belief that inquire whether the owners had unsettled
there was no defect in the title of the vendor. obligations encumbrance that could burden the
xHeirs of Nicolas S. Cabigas v. Limbaco, 654 property. xSamson v. CA, 238 SCRA 397 (1994).130
SCRA 643 (2011). ● Property was titled and transferred with undue
haste, “plus the fact that the subject property is
(1) Being In Business on Realty – A mortgagee who
eventually ended buying the property at the 125
Adriano v. Pangilinan, 373 SCRA 544 (2002); Lloyd’s Enterprises and
public auction, cannot claim to be a buyer in Credit Corp. v. Dolleton, 555 SCRA 142 (2008); Eagle Realty Corp v. Republic,
557 SCRA 77 (2008); Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
good faith when his business in the constructing 126
Agag v. Alpha Financing Corp., 407 SCRA 602 (2003); Bank of
and selling townhouses and extending credit to Commerce v. San Pablo, Jr., 522 SCRA 713 (2007); Lloyd’s Enterprises and
the public, including real estate loans; for he is Credit Corp. v. Dolleton, 555 SCRA 142 (2008);Ty v. Queen’s Row
Subdivision, 607 SCRA 324 (2009).
127
Filinvest Dev. Corp. v. Golden Haven Memorial Part, 634 SCRA 372
676 SCRA 156 (2012); Santiago v. Villamor, 686 SCRA 313 (2012); Angeles v. (2010); Yared v. Tiongco, 660 SCRA545 (2011).
128
Domingo, 692 SCRA 277 (2013); Nobleza v. Nuega, 752 SCRA 602 (2015). R.R. Paredes v. Calilung, 517 SCRA 369 (2007); Chua v. Soriano, 521
123
Uy v. Fule, 727 SCRA 456 (2014); Peralta v. Heirs of Bernardina Abalon, SCRA 68 (2007).
129
727 SCRA 477 (2014); Locsin v. Hizon, 735 SCRA 547 (2014). Mathay v. CA, 295 SCRA 556 (1998); Republic v. De Guzman, 326 SCRA
124
Tsai v. CA, 366 SCRA 324 (2001); Aguirre v. CA, 421 SCRA 310 (2004); 267 (2000); Heirs of Ramon Durano, Sr. v. Uy, 344 SCRA 238 (2000); Heirs of
Raymundo v. Bandong, 526 SCRA 514 (2007); Eagle Realty Corp. v. Celestial v. Heirs of Celestial, 408 SCRA 291 (2003); Erasusta, Jr. v. CA, 495
Republic, 557 SCRA 77 (2008); Rufloe v. Burgos, 577 SCRA 264 SCRA 319 (2006); De la Cena v. Briones, 508 SCRA 62 (2006); Tanglao v.
(2009)Pudadera v. Magallanes, 633 SCRA 332 (2010), Nobleza v. Nuega, 752 Parungao, 535 SCRA 123, 132 (2007).
130
SCRA 602 (2015). Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
21 of 41
a vast tract of land in a prime location, should assigned properties) as payment for the
have, at the very least, triggered petitioner’s mortgagor developer’s obligation—the bank
curiosity.” xEagle Realty Corp v. Republic, 557 was well aware that the assigned properties
SCRA 77, 94 (2008). were subdivision lots and therefore within the
(5) Land in Adverse Possession – Where land sold purview of P.D. 957. xLuzon Dev. Bank v.
is in the possession of a person other than Enriquez, 639 SCRA 332 (2011).
vendor, purchaser must go beyond the When financial institutions exercise
certificate of title and make inquiries extraordinary diligence in determining the
concerning the actual possessor. Without such validity of the certificates of title to property
inquiry, the buyer cannot be said to be in good being sold or mortgaged to them and still fail
faith and cannot have any right over the to find any defect or encumbrance upon the
property. xTio v. Abayata, 556 SCRA 175 (2008).131 subject properties after said inquiry, such
Buyer who could not have failed to know or financial institutions should be protected like
discover that the land sold to him was in the any other innocent purchaser for value if they
adverse possession of another is a buyer in bad paid a full and fair price at the time of the
faith. xHeirs of Ramon Durano, Sr. v. Uy, 344 purchase or before having notice of some other
SCRA 238 (2000).132 person’s claim on or interest in the property.
xTy v. Queen’s Row Subdivision, 607 SCRA 324
(6) Existence of Lis Pendens or Adverse Claim – (2009)
Registration of an adverse claim places any
subsequent buyer of the registered land in bad 7. When Subject of Sale Is Unregistered Land:
faith. xKings Properties Corp. v. Galido, 606
When first sale is over unregistered land and the
SCRA 137 (2009).133
second sale is when it is registered, the rules on
Settled is the rule that one who deals with double sale do not apply. √Dagupan Trading Co. v.
property with a notice of lis pendens, even Macam, 14 SCRA 179 (1965).
when at the time of sale the annotation was
Article 1544 is inapplicable to unregistered land
cancelled but there was a pending appeal,
because “the purchaser of unregistered land at a
cannot invoke the right of a purchaser in good
sheriff’s execution sale only steps into the shoes of
faith. A purchaser cannot close his eyes to facts
the judgment debtor, and merely acquires the
which should put a reasonable man on guard
latter’s interest in the property sold as of the time
and claim that he acted in the belief that there
the property was levied upon,” as expressly
was no defect in the title of the seller, xPo Lam
provided for in then Sec. 35, Rule 39 of the Revised
v. CA, 316 SCRA 721 (1999).
Rules of Court on execution sale [now Sec. 33, Rule
C : When knowledge of lis pendens 39, 1997 Rules of Civil Procedure)]. √Carumba v.
was acquired at the time there was order to CA, 31 SCRA 558 (1970).
have it cancelled, xPo Lam v. CA, 347 SCRA 86 Article 1544 rules in double sale, whereby the
(2000).134 A buyer cannot be in bad faith when it buyer who is able to first register the purchase in
was shown that at the time of purchase the good faith, is in full accord with Sec. 51 of P.D. 1529
notice of lis pendens was already being which provides that no deed, mortgage, lease, or
ordered cancelled and the cancellation of the other voluntary instrument shall take effect as a
notice terminated the effects of such notice. conveyance or bind the land until its registration.
xPudadera v. Magallanes, 633 SCRA 332 (2010). Thus, if the sale is not registered, it is binding only
between seller and buyer, but it does not affect
(7) Annotation of Lien in Settlement of Estate – An
innocent third persons. √Abrigo v. De Vera, 432
annotation on CTC issued pursuant to the
SCRA 544 (2004).135
distribution and partition of a decedent’s real
properties is a warning to third persons on the Under Act 3344, registration of instruments
possible interest of excluded heirs or unpaid affecting unregistered lands is “without prejudice
creditors in these properties—where a buyer to a third party with a better right,” which means
purchases the real property despite the that mere registration does not give buyer any right
annotation, he must be ready for the possibility over the land if seller was not anymore owner
that the title be subject to the rights of thereof, having previously sold it to somebody else
excluded parties. xTan v. Benolirao, 604 SCRA even if the earlier sale was unrecorded. The rules on
36 (2009). double sale have no application to land no
registered under the Torrens system.√Acabal v.
(8) Banks Are Vested with Public Interest and Acabal, 454 SCRA 555 (2005).136
Obligation to Exercise Extraordinary Diligence
– One of the protections afforded by P.D. 957 to C. Obligations of Buyer
buyers is the right to have her contract to sell
registered with the Register of Deeds to bind 1. Buyer Must Pay the Price (Art. 1582)
on third parties. Nonetheless, despite such
non-registration, the mortgagee bank cannot When seller cannot show title to the subject
be considered, under the circumstances, an matter, then he cannot compel the buyer to pay
innocent purchaser for value of the lot when it the price. xHeirs of Severina San Miguel v. CA, 364
accepted the latter (together with other SCRA 523 (2001).
Mere sending of a letter by the buyer expressing
131
Games and Garments Developers v. Allied Banking Corp., 762 SCRA 447 the intention to pay without the accompanying
(2015).
132
payment is not considered a valid tender of
Modina v. CA, 317 SCRA 696, 706 (1999); Republic v. De Guzman, 326
SCRA 267 (2000); Martinez v. CA, 358 SCRA 38 (2001); Heirs of Trinidad de
payment and consignation of the amount due are
Leon Vda. De Roxas v. CA, 422 SCRA 101 (2004); Occeñna v. Esponilla, 431
SCRA 116 (2004); PNB v. Heirs of Estanislao Militar, 494 SCRA 308 (2006);
135
Raymundo v. Bandong, 526 SCRA 514 (2007); Tanglao v. Parungao, 535 Sabitsana, Jr. v. Muertegui, 703 SCRA 145 (2013)
136
SCRA 123 (2007); Tio v. Abayata, 556 SCRA 175 (2008); Orduña v. Hanopol v. Pilapil, 7 SCRA 452 (1963); Radiowealth Finance Co. v.
Fuentebella, 622 SCRA 146 (2010); Deanon v. Mag-abo, 622 SCRA 180 Palileo, 197 SCRA 245 (1991); Spouses Honorio Santiago v. CA, 247 SCRA
(2010); The Heirs of Romana Saves v. The Heirs of Escolastico Saves, 632 336 (1995); Bayoca v. Nogales, 340 SCRA 154 (2000); Fidel v. CA, 559 SCRA
SCRA 236 (2010); Rosaroso v. Soria, 699 SCRA 232 (2013). 186 (2008); Daclag v. Macahilig, 560 SCRA 137 (2008); Amodia Vda. De
133
Tan v. Benolirao, 604 SCRA 36 (2009). Melencion v. CA, 534 SCRA 62, 82 (2007); Fidel v. CA, 559 SCRA 186 (2008).
134
Pudadera v. Magallanes, 633 SCRA 332 (2010).
22 of 41
of sale, or for the recovery of possession of the d. Sales in Merchants Stores, Fairs or Markets
property owned in common, but for division or (Arts. 85 and 86, Code of Commerce)
partition of the entire property. xTomas Claudio
Memorial College v. CA, 316 SCRA 502 (1999).139 A merchant store requires a fixed
establishment where the merchant not only
C : Sale of a portion of the property is stores his merchandise, but where he conducts
considered an alteration of the thing owned in the ordinary court of business. √City of Manila
common. Under the Civil Code, such disposition v. Bugsuk, 101 Phil. 859 (1957).140
requires the unanimous consent of the other The owner of the goods who has been
co-owners. Prior to partition, a sale of a definite unlawfully deprived of it may recover it even
portion of common property requires the from a purchaser in good faith. Thus, the
consent of all co-owners because it operates to purchaser of property which has been stolen
partition the land with respect to the co-owner from the owner has been held to acquire no title
selling his or her share. At best, the agreement to it even though he purchased for value and in
between the parties is a contract to sell, not a good faith. xFrancisco v. Chemical Bulk Carriers,
contract of sale. xCabrera v. Ysaac, 740 SCRA 612 657 SCRA 355 (2011).
(2014).
140
Sun Bros. & Co. v. Velasco, 54 O.G. 5143 (1958).
139 141
Heirs of Romana Ingjug-Tiro v. Casals, 363 SCRA 435 (2001); Aguirre v. Valera v. Matute, 9 Phil. 479 (1908); Arenas v. Raymundo, 19 Phi. 47
CA, 421 SCRA 310 (2004). (1911).
24 of 41
(1) General Rule: Before delivery, risk of loss is almost invariable result was that the mortgagor
borne by seller under the rule of res perit found himself minus the property and still owing
domino. xChrysler Phil. v. CA, 133 SCRA 567 practically the full amount of his original
(1984). indebtedness. xMagna Financial Services Group v.
Colarina, 477 SCRA 245 (2005).
In sale of motor vehicle, where there was
neither physical nor constructive delivery, the a. When Is There “Installment Sale”?: At least two
thing sold remained at the seller’s risk. (2) stipulated payments in the future, whether or
xUnion Motor Corp v. CA, 361 SCRA 506 (2001). not there is a downpayment. xLevy v. Gervacio,
69 Phil. 52 (1939).
(2) Loss by Fault of a Party (Arts. 1480, 1504,
1538) b. Contracts to Sell Movables Not Covered.
xVisayan Sawmill v. CA, 219 SCRA 378 (1993).
(3) Loss by Fortuitous Event (Arts. 1480, 1163,
1164, 1165, 1504, 1538, and 1189; READ c. Unpaid Seller’s Remedies Not Cumulative, But
Comments of P , T , P , Alternative and Exclusive. √Delta Motor Sales
and B ) Corp. v. Niu Kim Duan, 213 SCRA 259 (1992).143
(4) Deterioration (Arts. 1480, 1163-65, and 1262; Seeking a writ of replevin consistent with any
Arts. 1189 and 1538) of the three remedies. xUniversal Motors Corp. v.
Dy Hian Tat, 28 SCRA 161 (1969).
(5) Fruits or Improvements from time of
perfection pertain to buyer (Arts. 1480, d. Remedy of Specific Performance – That seller
1537-1538) obtained a writ of execution against the
mortgaged property pursuant to an action for
d. After Delivery (Art. 1504). √Lawyer's Coop v. specific performance, does not amount to a
Tabora, 13 SCRA 762 (1965).142 foreclosure of the chattel mortgage covered by
the Recto Law. √Tajanglangit v. Southern
Motors, 101 Phil. 606 (1957).144
X REMEDIES FOR BREACH OF
e. Remedy of Rescission – Surrender of mortgaged
CONTRACT OR SALE (A property is not necessarily equivalent to
1594-1599) rescission. xVda. de Quiambao v. Manila Motors
Co., 3 SCRA 444 (1961).
A. R S Mutual restitution prevents recovering on the
balance of the purchase price. √Nonato v. IAC,
1. In Case of Movables (Arts. 1593, 1595 to 1597) 140 SCRA 255 (1985); but stipulation on
Under Art. 1597, where buyer of scrap iron fails to non-return of payments is valid provided not
put up the LC in favor of the seller as the condition unconscionable. xDelta Motor Sales Corp. v. Niu
of the sale, seller may terminate the Kim Duan, 213 SCRA 259 (1992).
contract—non-compliance with condition meant
that seller’s obligation to sell never arose. xVisayan f. Remedy of Foreclosure – When the seller
Sawmill Co. v. CA, 219 SCRA 378 (1993). assigns his credit to another person, assignee is
likewise bound by the same law. √Zayas v.
2. Unpaid Seller of Goods (Arts. 1524-1535) Luneta Motors, 117 SCRA 726 (1982).145
Barring effect would cover a third-party
a. Who Is an “Unpaid Seller”? (Art. 1525) mortgage, when it was the chattel mortgage
b. Rights of the Unpaid Seller: that was first foreclosed. √Ridad v. Filipinas
● Possessory Lien (Arts. 1526-1529, 1503(1), Investment, 120 SCRA 246 (1983).
1535) B S : A judicious perusal of the records
would reveal that mortgagor-buyer never
● Right of Stoppage in Transitu (Arts.
bought the subject vehicle from financing
1530-1532, 1535, 1636[2])
company but from a third party, and merely
● Special Right of Resale (Art. 1533) sought financing from mortgagee for its full
purchase price. Consequently Art. 184 does not
● Special Right to Rescind (Art. 1534)
apply against financing company. √Equitable
Even before the formal statutory adoption of Savings Bank v. Palces, 787 SCRA 260 (2016).
the remedies of an unpaid seller, the Supreme
Court had already recognized the right of a (1) “Barring” Effects of Foreclosure: All amounts
seller, when the contract of sale is still executory due from the sale, including damages and
in stage, to resell the movables subject matter of attorneys fees, barred from recovery.
the sale, when the buyer fails to pay the √Macondray & Co. v. Eustaquio, 64 Phil.
purchase price. xHanlon v. Hausserman, 40 Phil. 446 (1937).
796 (1920). Action of replevin in order to foreclose on the
The unpaid seller in possession of goods may chattel mortgage does not produce the barring
sell them at buyer’s risk. xKatigbak v. Court of effect under the Recto Law; for it is the fact of
Appeals, 4 SCRA 243 (1962). foreclosure and actual sale of the mortgaged
chattel that bar further recovery by the seller of
3. RECTO LAW: S M any balance on the buyer’s outstanding
I (Arts. 1484, 1485, 1486) obligation not satisfied by the sale. The
voluntary payment of the installment by the
Recto Law prevents mortgagee from seizing buyer-mortgagor is valid and not recoverable in
mortgaged property, buying it at foreclosure sale
for a low price and then bringing the suit against 143
De la Cruz v. Asian Consumer, 214 SCRA 103 (1992); Borbon II v.
the mortgagor for a deficiency judgment. The Servicewide Specialists, 258 SCRA 634 (1996).
144
Southern Motors v. Moscoso, 2 SCRA 168 (1961); Industrial Finance
Corp. v. Ramirez, 77 SCRA 152 (1977); Rosario v. PCI Leasing and Finance,
142
Song Fo & Co. v. Oria, 33 Phil. 3 (1915); Lawyer's Cooperative v. Narciso, 474 SCRA 500 (2005).
145
55 O.G. 3313. Borbon II v. Servicewide Specialists, 258 SCRA 634 (1996).
25 of 41
spite the restrictive provisions of Art. 1484(3). (1) “Buyer” under P.D. 957 includes one who
√Northern Motors v. Sapinoso, 33 SCRA 356 acquires for a valuable consideration a
(1970). 146 condominium unit by way of assignment by
Foreclosure on chattel mortgage prevents project owner in payment of its
further action on the supporting real estate indebtedness for contractor’s fee. xAMA
mortgage, whether the chattel mortgage is first Computer College v. Factora, 378 SCRA 121
foreclosed √Cruz v. Filipinas Investment & (2002).
Finance Corp., 23 SCRA 791 (1968);147 and vice (2) Section 20 of P.D. 957 directs every
versa when the real estate mortgage is first developer of real property to provide the
foreclosed. √Borbon II v. Servicewide necessary facilities, improvements,
Specialists, 258 SCRA 634 (1996). infrastructure and other forms of
(2) Rule on “Perverse Buyer”: √Filipinas development, failure to carry out which is
Investment. v. sufficient cause for the buyer to suspend
Ridad, 30 SCRA payment, and any sums of money already
564 (1969). paid shall not be forfeited. xTamayo v.
Huang, 480 SCRA 156 (2006).
g. Purported Lease with Option to Buy In case the developer fails in its obligation
Judicial notice has been taken of the practice under Section 20, the Sec. 23 provides:
of vendors of personal property of denominating ● Buyer has the option to demand
a contract of sale on installment as one of lease reimbursement of the total amount paid,
to prevent the ownership of the object of the or to wait for further development of the
sale from passing to the vendee until and unless subdivision; if buyer opts for the latter, he
the price is fully paid. xElisco Tool may suspend payment of the
Manufacturing Corp. v. Court of Appeals, 307 installments until such time that the
SCRA 731 (1999).148 owner or developer has fulfilled its
Where a lease agreement over equipment is obligations. xTamayo v. Huang, 480
without an express option to purchase, but SCRA 156 (2006).
nevertheless when a final demand is given prior ● Option granted by law is with buyer and
to suit, the demand letter indicates clearly it was not the developer/seller. xRelucio v.
within the option of the lessee to fully pay the Brillante-Garfin, 187 SCRA 405 (1990).
balance of the unpaid rentals and would be able
to keep the equipment, then the real contract ● In exercising the option, buyer required
between the parties was a sale of movable on only to give due notice to
installment disguised as a lease agreement. owner/developer of buyer’s intention to
√PCI Leasing and Finance v. Giraffe-X suspend payment. xZamora Realty v. OP,
Creative Imaging, 527 SCRA 405 (2007). 506 SCRA 591 (2006);
● It is not required that a notice be given
4 I C I : first by buyer to seller before a demand
for refund can be made as the notice and
a. Anticipatory Breach (Art. 1591). √Legarda v. demand can be made in the same letter
Saldaña, 55 SCRA 324 (1974). or communication. xCasa Filipinas
b.Sales of Subdivision Lots and Condominium Realty Corp v. OP, 241 SCRA 165 (1995);
Units (P.D. 957) – P.D.957 was issued in the wake ● Even with a mortgage over the lot, seller
of numerous reports that many real estate still bound to redeem said mortgage
subdivision owners, developers, operators and/or without any cost to buyer apart from the
sellers have reneged on their representations balance of the purchase price and
and obligations to provide and maintain registration fees—subdivision developers
properly subdivision roads, drainage, sewerage, have are obliged to deliver the
water systems, lighting systems and other basic corresponding clean certificates of title
requirements or the health and safety of home of the subdivision lots where the
and lot buyers. xCasa Filipinas Realty Corp. v. purchase price of which have been paid
Office of the President, 241 SCRA 165 (1995). in full by the buyers. xCantemprate v.
It is the intent of P.D. 957 to protect the buyer CRS Realty Dev. Corp., 587 SCRA 492
against unscrupulous developers, operators (2009).
and/or sellers who reneged on their obligations. ● Buyers would be justified in suspending
Thus, in order to achieve this purpose, equity payments, when developer-seller fails to
and justice dictate that the injured party should give a copy of the Contract to Sell despite
be afforded full recompensed and as such, be repeated demands, xGold Loop
allowed to recover the prevailing market value of Properties v. CA, 350 SCRA 371 (2001); or
the undelivered lot which had ben fully paid for. when they failed to provide for the
xGotesco Properties v. Fajardo, 692 SCRA 319 amenities mandated under their
(2013). development plan, xFedman Dev. Corp. v.
Retroactive application of P.D. No. 957 to Agcaoili, 656 SCRA 354 (2011).
transactions entered into prior to its enactment ● When Reservation Agreement provides
in 1976 is already settled. xEugenio v. Exec. Sec. that buyer is entitled to a Contract to Sell
Drilon, 252 SCRA 106 (1996); xRotario v. Alcantara, only upon payment of at least 30% of
736 SCRA 584 (2014). price, non-happening yet of that
condition does not render seller in
default as to warrant buyer the right to
146
Manila Motor Co. v. Fernandez, 99 Phil. 782 (1956); Magna Financial rescind sale and demand refund. xG.G.
Services Group, v. Colarina, 477 SCRA 245 (2005). Sportwear Mfg. Corp. v. World Class
147
148
Pascual v. Universal Motors Corp., 61 SCRA 121 (1974). Properties, 614 SCRA 75 (2010).
Vda. de Jose v. Barrueco, 67 Phil. 191 (1939); U.S. Commercial v. Halili,
93 Phil. 271 (1953); H.E. Heacock v. Bantal Manufacturing, 66 Phil. 245 ● Buyer’s cause of action against the
(1938); Manila Gas Corp. v. Calupita, 66 Phil. 747 (1938); Filinvest Credit developer for failure to develop ripens
Corp. v. CA, 178 SCRA 188 (1989).
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only when the developer fails to system. . . . If [buyer] eventually found the interest
complete the project on the lapse of the stipulation in the contract financially
completion period stated on the sale disadvantageous to him, he cannot now turn to this
contract or the developer’s Licenses to Court for succor without impairing the
Sell. Any premature demand prior to the constitutional right to the obligation of contracts.
indicated completion date would be This Court will not relieve petitioner of the
premature. xG.G. Sportwear Mfg. Corp. v. necessary consequences of his free and voluntary,
World Class Properties, 614 SCRA 75 and otherwise lawful, act.” xBortikey v. AFP - RSBS,
(2010). 477 SCRA 511 (2005).
(3) One of the protections afforded by P.D. 957 a. “Role” of Maceda Law – Maceda Law’s declared
to buyers is the right to have the Contract to policy is to protect buyers of real estate on
Sell registered with the Register of Deeds to installment basis against onerous and
bind third parties, T : oppressive conditions, and seeks to address the
● Nothing in P.D. 957 provides for the acute housing shortage problem in our country
nullification of a contract to sell if seller, that has prompted thousands of middle and
at the time perfection, did not possess a lower class buyers of houses, lots and
certificate of registration or a license to condominium units to enter into all sorts of
sell, sale being a consensual contract. contracts with private housing developers
xCo Chien v. Sta. Lucia Realty, 513 SCRA involving installment schemes. xActive Realty &
570 (2007).149 Dev. Corp. Daroya, 382 SCRA 152 (2002).150
● Buyer’s dissatisfaction under a Contract Maceda Law recognizes in conditional sales of
of Sale as to the completion date of the all kinds of real estate seller’s right to cancel the
project does not constitute substantial contract upon non-payment of an installment
breach to allow rescission and ask for by the buyer, which is simply an event that
refund. xG.G. Sportwear Mfg. Corp. v. prevents the obligation of the vendor to convey
World Class Properties, 614 SCRA 75 title from acquiring binding force. xPagtulunan
(2010). v. Dela Cruz Vda. De Manzano, 533 SCRA 242
● Despite non-registration of Contracts to (2008).151
Sell, foreclosing mortgagee-bank cannot
be considered an innocent purchaser for b. Transactions Covered – The formal requirements
value of the subdivision lots which it of rescission under the Maceda Law apply even
accepted as payment for mortgagor’s to contracts entered into prior to its effectivity.
obligation—bank was well aware that the xSiska Dev. Corp. v. Office of the President, 231
assigned properties were subdivision lots SCRA 674 (1994).152 B S : xPeople’s Industrial
and therefore within the purview of P.D. and Commercial Corp. v. Court of Appeals, 281
957. xLuzon Dev. Bank v. Enriquez, 639 SCRA 206 (1997).
SCRA 332 (2011). Maceda Law makes no distinctions between
“option” and “sale” which under P.D. 957 also
(4) Sec. 25 of P.D. 957 imposes on the includes “an exchange or attempt to sell, an
subdivision owner or developer the option of sale or purchase, a solicitation of a sale
obligation to cause the transfer of the or an offer to sell directly,” and the all-embracing
corresponding certificate of title to the definition virtually includes all transactions
buyer upon full payment. xGotesco concerning land and housing acquisition,
Properties v. Fajardo, 692 SCRA 319 (2013). including reservation agreements. xRealty
Since the lots are involved in litigation Exchange Venture Corp. v. Sendino, 233 SCRA
and there is a notice of lis pendens at the 665 (1994).
back of the titles involved, the subdivision Maceda Law has no application to protect the
developer have to be given a reasonable developer or one who succeeds the developer.
period of time to work on the adverse claims xLagandaon v. Court of Appeals, 290 SCRA 463
and deliver clean titles to the buyer, and (1998).
should the former fail to deliver clean titles
at the end of the period, it ought to Maceda Law finds no application to a
reimburse the buyers not only for the contract to sell where the suspensive condition
purchase price of the subdivision lots sold to has not been fulfilled, because said Law
them but also the incremental value arising presuppose the existence of a valid and effective
from the appreciation of the lots. contract to sell a condominium. [?] xMortel v.
xCantemprate v. CRS Realty Dev. Corp., 587 KASSCO Inc., 348 SCRA 391, 398 (2000).153
SCRA 492 (2009). Since Maceda Law governs sales of real estate
on installments, Communities Cagayan, Inc. v.
(5) Developer’s lack of Certificate of Nanol, 685 SCRA 453 (2012), it has no application
Registration or License to Sell merely to the sale of large tracts of land (69,028 square
subjects it to administrative sanctions, but meters) which do not constitute residential real
do not render the sales entered into on the estate within the contemplation of the Maceda
project null and void. xG.G. Sportswear Mfg. Law. xGarcia v. Court of Appeals, 619 SCRA 280
Corp. v. World Class Properties, 614 SCRA 75 (2010).
(2010).
Maceda Law does not cover a loan extended
by the employer to enable its employee to
5. MACEDA LAW: S R R finance the purchase of a house and lot. The law
I (R.A. 6552).
150
“The contract for the purchase of a piece of land OIympia Housing v. Panasiatic Travel, 395 SCRA 298 (2003); Jestra Dev.
on installment basis is not only lawful; it is also of and Management Corp. v. Pacifico, 513 SCRA 413 (2007).
151
Leaño v. CA, 369 SCRA 36 (2001); Cordero v. F.S. Management & Dev.
widespread usage or custom in our economic Corp., 506 SCRA 451 (2006); Manuel Uy & Sons v. Valbueco, 705 SCRA 537
(2013).
152
Eugenio v. E.S. Franklin M. Drilon, 252 SCRA 106 (1996); PNB v. Office of
149
Cantemplate v. CRS Realty Dev. Corp., 587 SCRA 492 (2009); Moldex the President, 252 SCRA 620 (1996).
153
Realty v. Saberon, 695 SCRA 34331 (2013). Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006).
27 of 41
protects only a buyer acquiring the property by two years of installments. xManuel Uy & Sons v.
installment, not a borrower whose rights are Valbueco, Inc., 705 SCRA 537 (2013).
governed by the terms of the loan from the
employer xSpouses Sebastian v. BPI Family 6 R S N -R
Bank, 739 SCRA 9 (2014). I I (Arts. 1191 and
1592)
c. How to Determine Years of Installments:
√Jestra Dev. and Management Corp. v. Articles 1191 and 1592 on rescission cannot apply
Pacifico, 513 SCRA 413 (2007). to a contract to sell since “there can be no
rescission of an obligation that is still non-existent,
d. How Cancellation of Contract Can Be Effected: the suspensive condition not having happened.”
The cancellation of the contract under the xValarao v. CA, 304 SCRA 155 (1999).156
Maceda Law must follow the following steps: Article 1191 providing for rescission cannot be
● First, seller should extend the buyer a applied to sales of real property on installments
grace period of at least 60 days from the since they are governed by the Maceda Law.
due date of the installments. Bonrostro v. Luna, 702 SCRA 1 (2013).
● Second, at end of grace period, seller shall Automatic rescission clauses are not valid nor
furnish buyer with a notarial notice of can they be given legal effect under Articles 1191
cancellation or demand for rescission, and 1592. xIringan v. Court of Appeals, 366 SCRA 41
effective 30 days from buyer’s receipt (2001).157
thereof; a mere notice or letter, would not Indeed, rescission requires under the law a
suffice. √McLaughlin v. CA, 144 SCRA 693 positive act of choice on the party of the
(1986).154 non-defaulting party. xOlympia Housing v.
● Third, for contracts covering more than Panasiatic Travel Corp., 395 SCRA 298 (2003).
two years of payments, there must be Art. 1592 allows the buyer of an immovable to
return to the buyer of the cash surrender pay as long as no demand for rescission has been
value. xVilldara, Jr. v. Zabala, 545 SCRA 325 made; consignation of the balance of the purchase
(2008).155 price before the trial court operates as full payment.
xProvince of Cebu v. Heirs of Rufina Morales, 546
● Until and unless seller complies with these
SCRA 315 (2008).
mandatory requirements, contract to sell
remains valid and subsisting. Seller cannot recover ownership until and unless
xCommunities Cagayan v. Nanol, 685 the contract itself is resolved and set aside; a party
SCRA 453 (2012). who fails to invoke judicially or by notarial act the
resolution of a sale would be prevented from
Additional formality of a demand on [the
blockingits consummation in light of the precept
seller’s] part for rescission by notarial act would
that mere failure to fulfill the contract does not
appear, in the premises, to be merely circuitous
operate ipso facto as rescission. xPlatinum Plans
and consequently superfluous” since the seller
Phil. v. Cucueco, 488 SCRA 156 (2006).
therein filed an action for annulment of
contract, which is a kindred concept of For Art. 1592 to apply, the following requisites
rescission by notarial act. xLayug v. IAC, 167 must be present: (1) a contract of sale of an
SCRA 627 (1988). immovable property and (2) a stipulation in the
contract that failure to pay the price at the time
Decision rendered in an ejectment case
agreed upon will cause the rescission of the
operates as the required notice of cancellation
contract. Buyer can still pay even after the time
under the Maceda Law; but as buyer was not
agreed upon, if the agreement between the parties
given the cash surrender value, there was still no
has these requisites. This right of buyer to pay
actual cancellation of the contract. xLeaño v. CA,
ceases when seller demands rescission judicially or
369 SCRA 36 (2001).
extrajudicially (which must be notarized). xCabrera
Formal letter demand upon buyer to vacate v. Ysaac, 740 SCRA 612 (2014).
the premises is not the same as the notice of
cancellation or demand for rescission by a
notarial act required by R.A. No. 6552. Evidently,
B. R B
the case of unlawful detainer filed by petitioner 1. In the Case of Movables (Arts. 1598-1599)
does not exempt him from complying with the
said requirement. xPagtulunan v. Dela Cruz Vda. 2. In the Case of Immovables (Arts. 1191; Secs. 23
De Manzano, 533 SCRA 242 (2008). and 24, P.D. 957)
Where buyers under a contract to sell offers
to pay the last installment a year and a half after 3. Suspension of Payment (Art. 1590) – Pendency
the stipulated date, that was beyond the of suit over the subject matter of sale justifies buyer
sixty-day grace period under Section 4 of the in suspending payment of the balance of the
Maceda Law. The buyers cannot use the second purchase price by reason of aforesaid vindicatory
sentence of Section 4 of the Maceda Law against action filed against it. The assurance made by the
the sellers’ alleged failure to give an effective seller that the buyer did not have to worry about
notice of cancellation or demand for rescission the case because it was pure and simple
because the sellers merely sent the notice to the harassment is not the kind of guaranty
address supplied by the buyers in the Contract contemplated under Article 1590 wherein the buyer
to Sell. √Garcia v. CA, 619 SCRA 280 (2010). is bound to make payment if the seller should give
Under the Maceda Law, the right of the buyer
to refund accrues only when he has paid at least
156
Caridad Estates v. Santero, 71 Phil. 114 (1940); Albea v. Inquimboy, 86
Phil. 477 (1950); Manuel v. Rodriguez, 109 Phil. 1 (1960); Joseph & Sons
Enterprises v. CA, 143 SCRA 663 (1986) Gimenez v. CA, 195 SCRA 205
154
Luzon Brokerage v. Maritime Bldg., 43 SCRA 93 (1972) & 86 SCRA 305 (1991); Jacinto v. Kaparaz, 209 SCRA 246 (1992); Odyssey Park v. CA, 280
(1978); Fabrigas v. San Francisco del Monte, 475 SCRA 247 (2005). SCRA 253 (1997); Rillo v. CA, 274 SCRA 461 (1997); Platinum Plans Phil. v.
155
Active Realty & Dev. Corp. v. Daroya, 382 SCRA 152 (2002); Olympia Cucueco, 488 SCRA 156 (2006); Tan v. Benolirao, 604 SCRA 36 (2009);
Housing v. Panasiatic Travel Corp., 395 SCRA 298 (2003); Jestra Dev. and Garcia v. CA, 619 SCRA 280 (2010).
157
Management Corp. v. Pacifico, 513 SCRA 413 (2007). Escueta v. Pando, 76 Phil. 256 (1946).
28 of 41
a security for the return of the price. xAdelfa for a rescission of the deed of absolute sale. xGil v.
Properties v. CA, 240 SCRA 565 (1995). CA, 411 SCRA 18 (2003).
When a party asks for the resolution or
cancellation of a contract it is implied that he
XI REMEDY OF RESCISSION IN SALES recognizes it existence – a non-existent contract
cannot be cancelled. xPan Pacific Industrial Sales
OF IMMOVABLES: CONTRACT OF Co. v. Court of Appeals, 482 SCRA 164 (2006).
SALE VERSUS CONTRACT TO SELL Action for Rescission Not Similar to Action for
Reconveyance: In sale of real property, seller is not
A N R R (Arts. precluded from going to the court to demand
1191, 1479, 1592) judicial rescission in lieu of a notarial act of
rescission. But such action is different from an
1. Distinguishing from Other Remedy of action for reconveyance of possession on the thesis
Rescission. xUniversal Food Corp. v. Court of of a prior rescission of the contract covering the
Appeals, 33 SCRA 22 (1970).158 B S C : property. The effects that flow from an affirmative
xSuria v. IAC, 151 SCRA 661 [1987]). judgment in either case would be materially
While Art. 1191 uses the term “rescission,” the dissimilar in that: (a) judicial resolution gives rise to
original term which was used in the old Civil Code mutual restitution which is not necessarily the
was “resolution.” Resolution is a principal action situation in an action for reconveyance; (b) unlike in
which is based on breach of a party, while rescission an action for reconveyance predicated on an
under Art. 1383 is a subsidiary action limited to extrajudicial rescission (rescission by notarial act), in
cases of rescission for lesion under Art. 1381. xOng v. an action for rescission, the court may authorize for
Court of Appeals, 310 SCRA 1 (1999).159 a just cause the fixing of a period. xOlympia
Housing v. Panasiatic Travel Corp., 395 SCRA 298
Outside of sales that have been entered into in (2003).
fraud of creditors, the general rule for ordinary
contracts of sale is that the seller’s creditors do not 3. Power to Rescind Generally Judicial in Nature –
have such material interest as to allow them to sue A seller cannot extrajudicially rescind a contract of
for rescission of a sale – theirs is only a personal sale where there is no express stipulation
right to receive payment for the loan, not a real authorizing it. Unilateral rescission will not be
right over the property subject of the deed of sale. judicially favored or allowed if the breach is not
xAdorable v. CA, 319 SCRA 200 (1999). substantial and fundamental to the fulfillment of
To rescind is to declare a contract void at its the obligation. xBenito v. Saquitan-Ruiz, 394 SCRA
inception and to put an end to it as though it never 250 (2002);163 nonetheless, the law does not prohibit
was. It is not merely to terminate it and release the the parties from entering into agreement that
parties from further obligations to each other, but violation of the terms of the contract would cause
to abrogate it from the beginning and restore the cancellation thereof, even without court
parties to their relative positions as if no contract intervention. xFroilan v. Pan Oriental Shipping Co.,
has been made. xVelarde v. Court of Appeals, 361 12 SCRA 276 (1964).164
SCRA 56 (2001).160
4. Mutual Restitution and Forfeiture (Art. 1385) –
2. Remedy of Rescission (Resolution) Is Inherent When sale is rescinded, the general rule under Art.
in the Reciprocity of Sale – Rescission under Art. 1398 is for parties to restore to each other the things
1191 is predicated on a breach of faith by the other which have been the subject matter of the contract,
party who violates the reciprocity between their fruits, and price with interest. xInes v. CA, 247
them—breach contemplated is obligor’s failure to SCRA 312 (1995).165
comply with an existing obligation. When obligee H : Seller’s right in a contract to sell with
seeks rescission, in the absence of any just cause for reserved title to extrajudicially cancel the sale upon
courts to determine the period of compliance, they failure of the buyer to pay the stipulated
shall decree the rescission. xVelarde v. CA, 361 SCRA installments and retain the sums and installments
56 (2001).161 already received has long been recognized by the
Non-payment of price is a resolutory condition well-established doctrine of 39 years standing.
for which the remedy is either rescission or specific xPangilinan v. Court of Appeals, 279 SCRA 590
performance under Art. 1191. This is true for (1997).166
reciprocal obligations where the obligation is a Pursuant to Art. 1188, in a contract to sell, even if
resolutory condition of the other. On the other buyers did not mistakenly make partial payments,
hand, buyer is entitled to retain the purchase price inasmuch as the suspensive condition was not
if the seller fails to perform any essential obligation fulfilled, it is only fair and just that buyers be
of the contract. Such right is premised on the allowed to recover what they had paid in
general principles of reciprocal obligation. xGil v. CA, expectancy that the condition would happen;
411 SCRA 18 (2003).162 otherwise, there would be unjust enrichment on
Consignation by the buyer of the purchase price part of seller. xBuot v. CA, 357 SCRA 846 (2001).
of the property, there having been no previous
receipt of a notarial demand for rescission, is
sufficient to defeat the right of the seller to demand
158 163
Congregation of the Religious of the Virgin Mary v. Orola, 553 SCRA 578 Ocejo, Perez & Co. v. International Banking Corp. 37 Phil. 631 (1918);
(2008); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Congregation Republic v. Hospital de San Juan de Dios, 84 Phil. 820 (1949); De la Rama
of the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008). Steamship Co. v. Tan, G.R. No. 8784, May 21, 1956; 99 Phil. 1034 (unrep.)
159
Iringan v. CA, 366 SCRA 41 (2001). (1956); Heirs of Jesus M. Mascuñana v. CA, 461 SCRA 186 (2005).
160 164
Ocampo v. CA, 233 SCRA 551 (1994); Co v. CA, 312 SCRA 528 (1999); Luzon Brokerage Co., v. Maritime Building Co., 43 SCRA 95 (1972); 86
Orden v. Aurea, 562 SCRA 660 (2008). SCRA 305 (1978); Pangilinan v. CA, 279 SCRA 590 (1997); Calilap-Asmeron
161
Almira v. CA, 399 SCRA 351 (2003). v. DBP, 661 SCRA 54 (2011).
162 165
Central Philippine University v. CA, 246 SCRA 511 (1995); Romeo v. CA, Velarde v. CA, 361 SCRA 56 (2001); Orden v. Aurea, 562 SCRA 660
250 SCRA 223 (1995); Cheng v. Genato, 300 SCRA 722 (1998); Uy v. CA, (2008).
166
314 SCRA 63 (1999). Manila Racing Club v. Manila Jockey Club, 69 Phil. 55 (1939).
29 of 41
In a contract to sell, payment of the price is a e. Substantial Breach (Arts. 1191 and 1234) –
positive suspensive condition, failure of which is Concept of substantial breach is irrelevant in
not a breach of contract warranting rescission
under Article 1191 of the Civil Code but rather just
an event that prevents the supposes seller from
being bound to convey title to the supposed 176
buyer. xBonrostro v. Luna, 702 SCRA 1 (2013). Topacio v. CA, 211 SCRA 219 (1992); Laforteza v. Machuca, 333 SCRA
643 (2000); Almira v. CA, 399 SCRA351 (2003); Manuel Uy & Sons v.
In a contract to sell, the seller’s obligation to Valbueco, Inc., 705 SCRA 537 (2013); Reyes v. Tuparan, 650 SCRA 238
deliver the corresponding certificates of title is (2011).
177
Roque v. Lapuz, 96 SCRA 741 (1980); Angeles v. Calanz, 135 SCRA 323
simultaneous and reciprocal to the buyer’s full (1985); Alfonso v. CA, 186 SCRA 400 (1990)
payment of the purchase price. xGotesco 178
San Andres v. Rodriguez, 332 SCRA 769 (2000); Vda. De Mistica v.
Properties v. Fajardo, 692 SCRA 319 (2013). Naguiat, 418 SCRA 73 (2003); Blas v. Angeles-Hutalla, 439 SCRA 273 (2004);
Villadar, Jr. V. Zabala, 545 SCRA 325 (2008); Heirs of Antonio F. Bernabe v.
CA, 559 SCRA 53 (2008); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).
179
Bowe v. CA, 220 SCRA 158 (1993); Rayos v. CA, 434 SCRA 365 (2004);
172
Valenzuela v. Kalayaan Dev’t and Industrial Corp., 590 SCRA 380 (2009); Solidstate Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197 (2008);
Traders Royal Bank v. Cuison Lumber Co., 588 SCRA 690 (2009). Tan v. Benolirao, 604 SCRA 36 (2009); Nabus v. Pacson, 605 SCRA 334
173
Heirs of Spouses Sandejas v. Lina, 351 SCRA 183 (2001); Zamora Realty (2009).
180
and Dev. Corp v. Office of the President, 506 SCRA 591 (2006); Nabus v. Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Bank of P.I. v. SMP, Inc.,
Pacson, 605 SCRA 334 (2009); Union Bank v. Maunlad Homes, 678 SCRA 609 SCRA 134 (2009).
181
539 (2012). Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Solidstate
174
Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010); Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197 (2008)Tan v.
Tumibay v. Lopez, 697 SCRA 21 (2013). Benolirao, 604 SCRA 36 (2009); Nabus v. Pacson, 605 SCRA 334 (2009);
175
Traders Royal Bank v. Cuison Lumber Co., 588 SCRA 690 (2009); Nabus Union Bank v. Maunlad Homes, 678 SCRA 539 (2012); Diego v. Diego, 691
v. Pacson, 605 SCRA 334 (2009); Diego v. Diego, 691 SCRA 361 (2013). SCRA 361 (2013).
31 of 41
contracts to sell. xLuzon Brokerage Co. v. rescission had already been made. xJ.M. Tuazon Co.
Maritime Building Co., 43 SCRA 93 (1972).182 v. Javier, 31 SCRA 829 (1970).
In a contract to sell real property on
installments, the full payment of the purchase XII CONDITIONS AND
price is a positive condition, the failure of which WARRANTIES
is not considered a breach, casual or serious, but
simply an event that prevented the obligation of 1. Conditions (Art. 1545)
the vendor to convey title from acquiring any
obligatory force. The transfer of ownership and Failure to comply with condition imposed upon
title would occur after full payment of the price. perfection of the contract results in failure of a
xLeaño v. Court of Appeals, 369 SCRA 36 (2001).183 contract, while the failure to comply with a
condition imposed on the performance of an
2. Minimum Requirement for Cancellation of obligation only gives the other party the option
Contracts to Sell either to refuse to proceed with sale or waive the
condition. √Laforteza v. Machuca, 333 SCRA 643
The act of a party in treating a contract as (2000).186
cancelled should be made known to the other
party because this act is subject to scrutiny and In a “Sale with Assumption of Mortgage,”
review of the courts in case the alleged defaulter assumption of mortgage is a condition to the
bring the matter for judicial determination. seller’s consent so that without approval by the
√University of the Philippines v. De los Angeles, mortgagee, no sale is perfected. In such case, the
35 SCRA 103 (1970); √Palay Inc. v. Clave, 124 SCRA seller remains the owner and mortgagor of the
638 (1983).184 property and retains the right to redeem the
foreclosed property. xRamos v. CA, 279 SCRA 118
√ B S : In a contract to sell, upon failure of (1997).187 But such condition is deemed fulfilled
buyer to comply with its obligation, there was no when the seller takes any action to prevent its
need to judicially rescind the contract to sell. Failure happening. xDe Leon v. Ong, 611 SCRA 381 (2010).
by one of the parties to abide by the conditions in a
contract to sell resulted in the rescission of the There has arisen a confusion in the concepts of
contract. √AFP Mutual Benefit Assn. v. CA, 364 “validity” and “efficacy” of a contract. Under Art.
SCRA 768 (2001).185 1318, absence any of the essential requisites of a
contract (i.e., consent of the parties, object certain
The notice of termination of a Contract to Sell which is the subject matter, and cause of the
may take any of the following forms: obligation), then no contract arises. Conversely,
● Act of the seller in notifying the buyer of his where all are present, the result is a valid contract.
intention to sell the properties to other interested However, some parties introduce various kinds of
persons if the latter failed to pay the balance of the restrictions or modalities, the lack of which will not,
purchase price is sufficient notice for the however, affect the validity of the contract. A
cancellation or resolution of their contract to sell. provision “this Contract of Sale of rights, interests
xOrden v. Aurea, 562 SCRA 660 (2008). and participations shall become effective only upon
● If mere nonpayment is enough to cancel a contract the approval by the Honorable Court,” in the event
to sell, the letter given to petitioner’s lawyer is also of non-approval by the courts, affect only the
an acceptable form of rescinding the contract. The effectivity and not the validity of the contract of
law does not require notarization for a letter to sale. √Heirs of Pedro Escanlar v. Court of
rescind a contract to sell immovable. Notarization Appeals, 281 SCRA 176 (1997).
is only required if a contract of sale is being
“As Is, Where Is” in sale pertains solely to the
rescinded. Cabrera v. xYsaac, 740 SCRA 612 (2014).
physical condition of the thing sold, not to its legal
3. Equity Resolutions on Contracts to Sell – situation. xAssets Privatization Trust v. T.J.
Although buyer clearly defaulted in his installment Enterprises, 587 SCRA 481 (2009).
payments in a contract to sell covering two parcels The condition in the contract of sale of buyer’s
of land, he should nevertheless be awarded assumption of the mortgage constituted on the
ownership over one of the two (2) lots jointly subject matter is deemed fulfilled when the seller
purchased by the buyer, on the basis that the total prevented its fulfillment by paying his outstanding
amount of installments paid, although not enough obligation to the bank and taking back the
to cover the purchase price of the two lots were certificates of title without even notifying the buyer.
enough to cover fully the purchase price of one lot, xDe Leon v. Ong, 611 SCRA 381 (2010).
ruling there was substantial performance insofar as
one of the lots concerned as to prevent rescission 2. Conditions versus Warranties. √Power
thereto. xLegarda Hermanos v. Saldaña, 55 SCRA Commercial and
3246 (1974). Industrial Corp.
Where buyer had religiously been paying v. Court of
monthly installments for 8 years, but even after Appeals, 274
default he was willing and had offered to pay all the SCRA 597 (1997).
arrears, on the basis of equity he shall be granted
3. Express Warranties (Art. 1546) – A warranty is a
additional period of 60 days from receipt of
statement or representation made by the seller of
judgment to make all installments payments in
goods, contemporaneously and as part of the
arrears plus interests, although demand for
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
182
are or shall be as he then represents them. xAng v.
Siska Dev. Corp. v. Office of the President, 231 SCRA 674 (1994); Sta. CA, 567 SCRA 53 (2008).
Lucia Realty & Dev. v. Uyecio, 562 SCRA 226 (2008).
183
Manuel v. Rodriguez, 109 Phil. 1 (1960); Laforteza v. Machuca, 333 SCRA A warranty is an affirmation of fact or any
643 (2000); Villamaria, Jr. v. CA, 487 SCRA 571 (2006); Valenzuela v. promise made by a vendor in relation to the thing
Kalayaan Dev. and Industrial Corp. 590 SCRA 380 (2009).
184
Jison v. CA, 164 SCRA 339 (1988); Lim v. CA, 182 SCRA 564 (1990); Lim
186
v. CA, 182 SCRA 564 (1990); Cheng v. Genato, 300 SCRA 722 (1998); Toledo Romero v. CA, 250 SCRA 223 (1995); Adalin v. CA, 280 SCRA 536
v. CA, 765 SCRA 104 (2015). (1997); Republic v. Florendo, 549 SCRA 527 (2008).
185 187
Torralba v. Delos Angeles, 96 SCRA 69 (1980). Biñan Steel Corp. v. CA, 391 SCRA 90 (2002).
32 of 41
sold. The decisive test is whether the vendor Corp. v. CA, 276 SCRA 674 (1997). B : Art.
assumes to assert a fact of which the vendee is 1552.
ignorant. xGoodyear Philippines v. Sy, 474 SCRA 427 The seller, in declaring that he owned and
(2005). had clean title to the vehicle, gave an implied
Seller’s Talk: “The law allows considerable warranty of title, and in pledging that he “will
latitude to seller’s statements, or dealer’s talk; and defend the same from all claims or any claim
experience teaches that it is exceedingly risky to whatsoever [and] will save the vendee from any
accept it at its face value. Assertions concerning the suit by the government of the Republic of the
property which is the subject of a contract of sale, Philippines,” he gave a warranty against eviction,
or in regard to its qualities and characteristics, are and the prescriptive period to file a breach
the usual and ordinary means used by sellers to thereof is six months after the delivery of the
obtain a high price and are always understood as vehicle. √Ang v. CA, 567 SCRA 53 (2008).
affording to buyers no ground for omitting to make
inquiries. A man who relies upon such an c. Warranty Against Non-Apparent Servitudes
affirmation made by a person whose interest might (Arts. 1560)
so readily prompt him to exaggerate the value of
his property does so as his peril, and must take the d. Warranty Against Hidden Defects (Arts. 1561,
consequences of his own imprudence.” xSongco v. 1566-1580) – Stipulation in a lease with option to
Sellner, 37 Phil. 254 (1917). purchase (treated as a sale of movable on
installments) that buyer-lessee “absolutely
Caveat emptor only requires the purchaser to releases the lessor from any liability whatsoever
exercise care and attention ordinarily exercised by as to any and all matters in relation to warranty
prudent men in like business affairs, and only in accordance with the provisions hereinafter
applies to defects which are open and patent to the stipulated,” is an express waiver of warranty
service of one exercising such care. It can only be against hidden defect in favor of seller-lessor
applied where it is shown or conceded that the who is absolved from any liability arising from
parties to the contract stand on equal footing and any defect or deficiency of the machinery sold.
have equal knowledge or equal means of xFilinvest Credit Corp. v. CA, 178 SCRA 188 (1989).
knowledge and there is no relation of trust or
confidence between them. It does not apply to a A hidden defect is unknown or could not have
representation that amounts to a warranty by the been known to the buyer. Requisites to recover
seller and the situation requires the buyer to rely on account of hidden defects are: 1. Defect must:
upon such promise or affirmation. √Guinhawa v. (a) be hidden; (b) exist at perfection of contract;
People, 468 SCRA 278 (2005).188 (c) ordinarily have been excluded from the
contract; and (d) be important to render the
Breach of an express warranty makes seller liable thing unfit or considerably decreases fitness;
for damages. The following requisites essential to and 2. Action must be instituted within the
establish an express warranty: (1) it must be an statute of limitations. √Nutrimix Feeds Corp. v.
affirmation of fact or any promise by the seller Court of Appeals, 441 SCRA 357 (2004).190
relating to the subject matter of the sale; (2) natural
tendency of such affirmation or promise is to Seller’s agent can by agreement be liable for
induce the buyer to purchase the thing; and (3) the warranty against hidden defects. xSchmid
buyer purchases the thing relying on such and Oberly, Inc. v. RJL Martinez, 166 SCRA 493
affirmation or promise thereon. xCarrascoso, Jr. v. (1988).
CA, 477 SCRA 666 (2005). e. Warranty as to Fitness or Quality of Goods
(Arts. 1562, 1565, 1599)
4. Implied Warranties (Art. 1547)
In order to enforce the implied warranty that
a. Seller Has Right to Sell the goods are reasonably fit and suitable to be
used for the purpose which both parties
b. Warranty Against Eviction (Arts. 1548-1560) – contemplated, the following must be
Seller must be summoned in the suit for eviction established: (a) that the buyer sustained injury
at the instance of the buyer (Art. 1558), and be because of the product; (b) that the injury
made a co-defendant (or made a third-party occurred because the product was defective or
defendant (Art. 1559). xEscaler v. Court of unreasonably unsafe; and finally (c) the defect
Appeals, 138 SCRA 1 (1985).189 existed when the product left the hands of the
A dacion en pago is governed by the law of petitioner. √Nutrimix Feeds Corp. v. CA, 441
sales, and contracts of sale come with SCRA 357 (2004).
warranties, either express (if explicitly stipulated A manufacturer or seller of a product cannot
by the parties) or implied (under Article 1547 et be held liable for any damage allegedly caused
seq. of the Civil Code). The implied warranty in by the product in the absence of any proof that
case of eviction is waivable and cannot be the product in question is defective, which was
invoked if the buyer knew of the risks or danger present upon the delivery or manufacture of the
of eviction and assumed its consequences. product; or when the product left the seller’s or
xLuzon Dev. Bank v. Enriquez, 639 SCRA 332 manufacturer’s control; or when the product
(2011). was sold to the purchaser; or the product must
No Warranty Against Eviction When have reached the user or consumer without
Execution Sale: In voluntary sales, vendor can substantial change in the condition it was sold.
√Nutrimix Feeds Corp. v. Court of Appeals, 441
be expected to defend his title because of his
SCRA 357 (2004).
warranty to the vendees but no such
obligation is owed by the owner whose land is f. Sale of Goods by Sample (Art. 1565)
sold at execution sale. xSantiago Land Dev. There is a sale by sample when a small
quantity is exhibited by the seller as a fair
specimen of the bulk, which is not present and
188
there is no opportunity to inspect or examine
Oro Land Realty Dev. Corp. v. Claunan, 516 SCRA 681 (2007)
189
Canizares Tiana v. Torrejos, 21 Phil. 127 (1911); J.M. Tuazon v. CA, 94
190
SCRA 413 (1979). Investments & Dev’t, Inc. v. CA, 162 SCRA 636 [1988]).
33 of 41
the same. To constitute a sale by sample, it must of the thing sold, absent other corroborative
appear that the parties treated the sample as evidence—there is no requirement in sales that the
the standard of quality and that they contracted price be equal to the exact value of the thing
with reference to the sample with the subject matter of the sale. xDorado Vda. De Delfin
understanding that the product to be delivered v. Dellota, 542 SCRA 397 (2008).
would correspondent with the sample. In a
contract of sale by sample, there is an implied 2. Redemption Period
warranty that the goods shall be free from any The period to repurchase is not suspended
defect which is not apparent on reasonable merely because there is a divergence of opinion
examination of the sample and which would between the parties as to the precise meaning of
render the goods unmerchantable. xMendoza v. the phrase providing for the condition upon which
David, 441 SCRA 172 (2004). the right to repurchase is triggered. The existence
g. Additional Warranties for Consumer Products of seller a retro’s right to repurchase the proper is
(Arts. 68, Consumer Act, R.A. 7394). not dependent upon the prior final interpretation
by the court of the said phrase. √Misterio v. Cebu
5. Effects and Prescription of Warranties (Art. State College of Science and Technology, 461
1599) – A breach in the warranties of the seller SCRA 122 (2005).
entitles the buyer to a proportionate reduction of
the purchase price. xPNB v. Mega Prime Realty and 3. Situation Prior to Redemption (Art. 1606)
Holding Corp., 567 SCRA 633 (2008). In a sale a retro, buyer has a right to the
The prescriptive period for instituting actions immediate possession of the property sold, unless
based on a breach of express warranty is that otherwise agreed upon, since title and ownership of
specified in the contract, and in the absence of the property sold are immediately vested in the
such period, the general rule on rescission of buyer a retro, subject only to the resolutory
contract, which is 4 years, while for actions based condition of repurchase by the seller a retro within
on breach of implied warranty, the prescriptive the stipulated period. xVda. de Rigonan v. Derecho,
period is 6 months from the date of the delivery of 463 SCRA 627 (2005).193
the thing sold. xAng v. Court of Appeals, 567 SCRA
53 (2008). 4. Who Can Exercise Right of Redemption?
(Arts. 1611 to 1614)
6. Effects of Waivers –The phrase “as is, where is”
basis pertains solely to the physical condition of the 5. How Is Redemption Effected? (Art. 1616)
thing sold, not to its legal situation. In the case at In order to exercise the right to redeem, only
bar, the US tax liabilities constitute a potential lien tender of payment is sufficient xLegaspi v. CA, 142
which applies to the subject’s matter’s legal SCRA 82 1986); consignation is not required after
situation, not to its physical aspect. Thus, the buyer tender is refused xMariano v. CA, 222 SCRA 736
has no obligation to shoulder the same. xNDC v. (1993). B : When tender not possible, consignation
Madrigal Wan Hui Lines Corp., 412 SCRA 375 (2003). should be made xCatangcatang v. Legayada, 84
SCRA 51 (1978).
7. Buyer’s Options in Case of Breach of Warranty A formal offer to redeem accompanied by a
(Art. 1599) – The remedy against violation of tender of redemption price is not essential where
warranty against hidden defects is either to the right is exercised through a judicial action
withdraw from the contract (accion redhibitoria) or within the redemption period and simultaneously
to demand a proportionate reduction of the price depositing the redemption price. xLee Chuy Realty
(accion quanti minoris), with damages in either Corp. v. CA, 250 SCRA 596 (1995).194
case. √Nutrimix Feeds Corp. v. CA, 441 SCRA 357
(2004). 6. Redemption Price (Art. 1616)
XIII EXTINGUISHMENT OF THE A stipulation in a sale a retro requiring as part of
the redemption price interest for the cost of money,
CONTRACT OF SALE is not in contravention with Art. 1616, since the
provision is not restrictive nor exclusive, and does
A. I G (Arts. 1231 and 1600) not bar additional amounts that the parties may
agree upon, since the article itself provides “and
B. C R (S other stipulations which may have been agreed
R ) upon.” xSolid Homes v. CA, 275 SCRA 267 (1997).
Article 448 on the rights of a builder in good
1. Definition (Art. 1601) faith is inapplicable in contracts of sale with right of
Right to repurchase must be constituted as part repurchase—where true owner himself is the
of a valid sale at perfection. xVillarica v. CA, 26 builder of the works on his own land, the issue of
SCRA 189 (1968).191 good faith or bad faith is entirely irrelevant. The
right to repurchase may be exercised only by the
An agreement to repurchase becomes a
vendor in whom the right is recognized by contract
promise to sell when made after the sale because
or by any person to whom the right may have been
when the sale is made without such agreement the
transferred. In a sale with right of repurchase, the
purchases acquires the things sold absolutely; and,
applicable provisions are Articles 1606 and 1616 of
if he afterwards grants the vendor the right to
the Civil Code, and not Article 448. xNarvaez v.
repurchase, it is a new contract entered into by the
Alciso, 594 SCRA 60 (2009).
purchases as absolute owner. √Roberts v. Papio,
515 SCRA 346 (2007).192
In sales s pacto de retro, the price agreed upon
should not generally be considered as the just value 193
Reyes v. Hamada, 14 SCRA 215 (1965); Solid Homes v. CA, 275 SCRA
267 (1997); Misterio v. Cebu State College of Science and Technology, 461
SCRA 122 (2005); Cadungog v. Yap, 469 SCRA 561 (2005); Ramos v. Dizon,
191
Claravall v. CA, 190 SCRA 439 (1990); Torres v. CA, 216 SCRA 287 498 SCRA 17 (2006); Lumayag v. Heirs of Jacinto Nemeño, 526 SCRA 51
(1992); Roberts v. Papio, 515 SCRA 346 (2007). (2007).
192 194
Ramos v. Icasiano, 51 Phil (1927). Villegas v. CA, 499 SCRA 276 (2006).
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7. Fruits (Art. 1617) – Article 1617 on the disposition of with average intelligence invariably finding
fruits of property redeemed applies only when the themselves in no position whatsoever to bargain
parties failed to provide a sharing arrangement fairly with their creditors. xSpouses Miseña v.
thereof; otherwise, the parties contractual Rongavilla, 303 SCRA 749 (1999).198
stipulations prevail. xAlmeda v. Daluro, 79 SCRA 327 An equitable mortgage is defined as one
(1977). although lacking in some formality, or form or
words, or other requisites demanded by a statute,
8. Effect When No Redemption Made (Art. 1607): nevertheless reveals the parties’ intention to charge
C real property as security for a debt, and contains
Art. 1607 abolished automatic consolidation of nothing impossible or contrary to law. For equitable
ownership in the vendee a retro upon expiration of mortgage to arise, two requisites must concur: (1)
the redemption period by requiring the vendee to that the parties entered into a contract
institute an action for consolidation where the denominated as a sale; and (2) the intention was to
vendor a retro may be duly heard. If the vendee secure an existing debt by way of mortgage.
succeeds in proving that the transaction was xRaymundo v. Bandong, 526 SCRA 514 (2007).199
indeed a pacto de retro, the vendor is still given a This kind of arrangement, where the ownership
period of thirty days from the finality of the of the land is supposedly transferred to the buyer
judgment within which to repurchase the property. who provides for the funds to redeem the property
xSolid Homes v. CA, 275 SCRA 267 (1997). from the bank but nonetheless allows the seller to
Once vendor fails to redeem the property within later on buy back the properties, is in the nature of
the stipulated period, irrevocable title shall be an equitable mortgage governed by Arts. 1602 and
vested in the vendee by operation of law. xVda. de 1604 of the Civil Code. xBacungan v. CA, 574 SCRA
Rigonan v. Derecho, 463 SCRA 627 (2005). 642 (2008).
Under a sale a retro, failure of buyer to Sales with rights of repurchase are not favored.
consolidate his title under Art. 1607 does not impair Courts will not construe instruments to be sales
such title and ownership because the method with a right to repurchase, with the stringent and
prescribed thereunder is merely for purpose of onerous effects which follow, unless the terms of
registering and consolidating titles to the property. the document and the surrounding circumstances
In fact, failure of a seller a retro to exercise the require it. Whenever, any other construction can
redemption right within the period agreed upon or fairly and reasonably be made, such construction
provided for by law, vests upon the buyer a retro will be adopted and the contract will be construed
absolute title and ownership over the property sold as a mere loan unless the court can see that, if
by operation of law. Consequently, after the effect of enforced according to its terms, it is not an
consolidation, the mortgage or re-sale by the seller unconscionable one. xBautista v. Unangst, 557
a retro of the same property would not transfer title SCRA 256 (2008).200
and ownership to the mortgagee or buyer, as the The decisive factor in evaluating whether an
case may be, under the Latin maxim NEMO DAT agreement is an equitable mortgage is the
QUOD NON HABET. xCadungog v. Yap, 469 SCRA intention of the parties, as shown not necessarily by
561 (2005). the terminology used in the contract but by all the
surrounding circumstances, such as the relative
9. E M (Arts. 1602-1604) situation of the parties at that time, the attitude,
It is a fact that in time of grave financial distress acts, conduct, declarations of the parties, the
which render persons hard-pressed to meet even negotiations between them leading to the deed,
their basic needs or answer an emergency, such and generally, all pertinent facts having a tendency
persons would have no choice but to sign a deed of to fix and determine the real nature of their design
absolute sale of property or a sale thereof with and understanding. xBanga v. Bello, 471 SCRA 653
pacto de retro if only to obtain a much-needed loan (2005).201
from unscrupulous money lenders. xMatanguihan Consequently, the non-payment of the debt
v. CA, 275 SCRA 380 (1997).195 when due gives the mortgagee the right to
Parol evidence is competent and admissible in foreclose the mortgage, sell the property and apply
support of the allegations that an instrument the proceeds of the sale for the satisfaction of the
purporting on its face to transfer the absolute title loan obligation. While there is no single test to
to property, or to transfer the title with a right to determine whether the deed of absolute sale on its
repurchase under specified conditions reserved to face is really a simple loan accommodation secured
the seller, was in truth and in fact given merely as by a mortgage, Art. 1602 of the Civil Code, however,
security for the repayment of a loan. xMariano v. CA, enumerates several instances when a contract is
220 SCRA 716 (1993).196 presumed to be an equitable mortgage. xHeirs of
Dela Rosa v. Batongbacal, 731 SCRA 263 (2014).202
Equitable mortgage favors the least
transmission of rights and interest over a property
in controversy, since the law seeks to prevent 198
Lao v. CA, 275 SCRA 237 (1997).
199
circumvention of the law on usury and the Ceballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323
(2004); Alvaro v. Ternida, 479 SCRA 288 (2006); Cirelos v. Hernandez, 490
prohibition against pactum commissorium SCRA 624 (2006); Lumayag v. Heirs of Jacinto Nemeño, 526 SCRA 51
provisions.197 Additionally, it is aimed to end unjust (2007); Olivares v. Sarmiento, 554 SCRA 384 (2008); Tio v. Abayata, 556
or oppressive transactions or violations in SCRA 175 (2008); Deheza-Inamarga v. Alano, 574 SCRA 651 (2008);
connection with a sale or property. The wisdom of Rockville Excel Int’l Exim Corp. v. Culla, 602 SCRA 124 (2009); Kings
Properties Corp. v. Galido, 606 SCRA 137 (2009); Muñoz, Jr. v. Ramirez, 629
these provisions cannot be doubted, considering SCRA 38 (2010); Martires v. Chua, 694 SCRA 38 (2013); Heirs of Soliva v.
many cases of unlettered persons or even those Soliva, 757 SCRA 26 (2015).
200
Padilla v. Linsangan, 19 Phil. 65 (1911); Aquino v. Deala, 63 Phil. 582
195
Salonga v. Concepcion, 470 SCRA 291 (2005). (1936); Ramos v. CA 180 SCRA 635 (1989).
196 201
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Cuyugan v. Santos, 34 Austria v. Gonzales, Jr., 420 SCRA 414 (2004); Raymundo v. Bandong,
Phil. 100 (1916); Matanguihan v. CA, 275 SCRA 380 (1997); Hilado v. Heirs of 526 SCRA 514 (2007).
202
Rafael Medlla, 37 SCRA 257 (2002); Madrigal v. CA, 456 SCRA 659 (2005); Matanguihan v. CA, 275 SCRA 380 (1997); Martinez v. CA, 358 SCRA 38
Legaspi v. Ong, 459 SCRA 122 (2005); Banga v. Bello, 471 SCRA 653 (2005); (2001); Hilado v. Heirs of Rafael Medlla, 37 SCRA 257 (2002); Ceballos v.
Diño v. Jardines, 481 SCRA 226 (2006); Ayson, Jr. v. Paragas, 557 SCRA 50 Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004); San
(2008). Pedro v. Lee, 430 SCRA 338 (2005); Go v. Bacaron, 472 SCRA 229 (2005),
197
Heirs of Jose Reyes, Jr. v. Reyes, 626 SCRA 758 (2010). citing V , C L. P L S , (1998 ed.), p. 271;
35 of 41
an equitable mortgage, although Art. 1605 which foreclosure proceedings, judicial or otherwise,
allows for the remedy of reformation, nothing cover a pactum commissorium situation. Thus,
therein precludes an aggrieved party from whatever conveyance was made by Planters
pursuing other remedies to effectively protect Development Bank to Home Guaranty Corp. in
his interest and recover his property, such as an view of this illicit stipulation is ineffectual; it did
action for declaration of nullity of the deed of not vest ownership in Home Guaranty Corp. All
sale and specific performance. xTolentino v. CA, that this transfer engendered is a constructive
386 SCRA 36 (2002). trust in which the properties comprising the
In equitable mortgage, consolidation of Asset Pool are held in trust by Home Guaranty
ownership in the mortgagee in equity upon Corp., as trustee, for the trustor, La Savoie
failure of the mortgagor in equity to pay the ✓Home Guaranty Corp. v. La Savoie Dev.
obligation, would amount to a pactum Corp., 748 SCRA 312 (2015).
commissorium. The only proper remedy is to
cause the foreclosure of the mortgage in equity. d. Final Chance to Redeem in “Mistaken
xBriones-Vasquez v. CA, 450 SCRA 644 (2005); or Equitable Mortgage” (Art. 1606): 30-day period
to determine if the principal obligation secured under Art. 1606 does not apply if courts find the
by the equitable mortgage has been paid or sale to be absolute. xPangilinan v. Ramos, 181
settled. xBanga v. Bello, 471 SCRA 653 (2005). SCRA 359 (1990).219
Sellers in a sale judicially declared as pacto de
c. Pactum Commissorium (Art. 2088) – A retro may not exercise right to repurchase within
stipulation which is a pactum commisorium 30-day period under Art. 1606, although they
enables the mortgagee to acquire ownership of have taken the position that the same was an
the mortgaged properties without need of any equitable mortgage, if it is shown that there was
foreclosure proceedings—it is a nullity being no honest belief thereof since none of the
contrary to the provisions of Art. 2088 of the Civil circumstances under Art. 1602 were shown to
Code, xLumayag v. Heirs of Jacinto Nemeño, 526 exist. If they truly believed the sale to be an
SCRA 315 (2007);216 and has been repeatedly equitable mortgage, as a sign of good faith, they
declared as contrary to morals and public policy, should have consigned with the amount
xSolitarios v. Jaque, 740 SCRA 226 (2014). representing their alleged loan, on or before the
In a pactum commissorium there should bee: expiration of the right to repurchase. √Abilla v.
(1) a property mortgaged by way of security for Gobonseng, 374 SCRA 51 (2002).220
the payment of the principal obligation, and (2) a
stipulation for automatic appropriation by the C. L R
creditor of the thing mortgaged in case of
non-payment of the principal obligation within 1 Definition (Art. 1619) – Legal redemption is in the
the stipulated period. That the questioned nature of a privilege created by law partly for reasons
contracts were freely and voluntarily executed of public policy and partly for the benefit and
by petitioners and respondent is of no moment, convenience of the redemptioner, to afford him a way
pactum commissorium being void for being out of what might be a disagreeable or an
prohibited by law. xOng v. Roban Lending Corp., inconvenient association into which he has been
557 SCRA 516 (2008).217 thrust. It is intended to minimize co-ownership.
It does not apply when the security for a debt xFernandez v. Tarun, 391 SCRA 653 (2002).221
is also money in the form of time deposit.
xConsing v. Court of Appeals, 177 SCRA 14 (1989). 2. Legal Redemption Rights under the Civil Code
Provision in MOA/Dacion en Pago with a a. Among Co-Heirs (Art. 1088)
Right to Repurchase that if borrower fails to
comply with the new terms of restructuring the Redemption right pertain to disposition of
loan, the agreement shall automatically operate right to inherit, and not when there is a sale of a
as a dacion en pago without need of executing particular property of the estate. xPlan v. IAC,
any new document does not constitute pactum 135 SCRA 270 (1985).
commissorium. √Solid Homes v. Court of When heirs have partitioned the estate
Appeals, 275 SCRA 267 (1997). among themselves and each have occupied and
treated definite portions thereof as their own,
B S : Stipulation in promissory note that
co-ownership has ceased even though the
upon failure of makers to pay interests,
property is still under one title, and sale by one
owner-ship of property would automatically be
of the heirs of his definite portion cannot trigger
transferred to payee, and the covering deed of
the right of redemption in favor of the other
sale would be registered, is in substance a
heirs. xVda. De Ape v. CA, 456 SCRA 193 (2005).
pactum commissorium in violation of Art. 2088,
and the resultant sale is void and the registration Heirs who actually participated in the
and obtaining of new title in the name of the execution of the extrajudicial settlement, which
buyer would have be declared void also. √A. included the sale to a third person of their pro
Francisco Realty v. CA, 298 SCRA 349 (1998).218 indiviso shares in the property, are bound by the
same; while the co-heirs who did not participate
Stipulation in the Contract of Guaranty for the are given the right to redeem their shares
“prompt assignment and conveyance to [Home pursuant to Art. 1088. xCua v. Vargas, 506 SCRA
Guaranty Corp.] of all the corresponding 374 (2006).
properties in the Asset Pool” that are held as
security in favor of the guarantor, and b. Among Co-Owners (Art. 1620)
dispensing with the need of conducting When seller a retro dies, right to redeem
216
cannot be exercised by a co-heir alone, since the
Guerrero v. Yñigo, 96 Phil. 37 (1954); Montevirgin v. CA, 112 SCRA 641
(1982); Vda. de Zulueta v. Octaviano, 121 SCRA 314 (1983); Ong v. Roban
Lending Corp., 557 SCRA 516 (2008); Heirs of Jose Reyes, Jr. V. Reyes, 626
SCRA 758 (2010); Martires v. Chua, 694 SCRA 38 (2013).
217 219
Philnico Industrial Corp. v. PMO, 733 SCRA 703 (2014). Tapas v. CA, 69 SCRA 393 (1976).
218 220
Legaspi v. Ong, 459 SCRA 122 (2005); Home Guaranty Corp. v. La Vda. de Macoy v. CA, 206 SCRA 244 (1992).
221
Savoie Dev. Corp., 748 SCRA 312 (2015). Basa v. Aguilar, 117 SCRA 128 (1982).
37 of 41
right belonged in common to all the heirs. xDe on which the same was paid; and (f)
Guzman v. CA, 148 SCRA 75 (1987). reimburse-ment must be done within 30 days
The right of redemption may be exercised by from the date of the assignee’s demand. xSitus
a co-owner only when part of the community Dev. Corp. v. Asiatrust Bank, 677 SCRA 495 (2012).
property is sold to a stranger, now when sold to
another co-owner because a new participant is 3 When Period of Legal Redemption Begins (Art.
not added to the co-ownership. xFernandez v. 1623)
Tarun, 391 SCRA 653 (2002). Both the letter and the spirit of the law argue
For the right of redemption to be exercised, against any attempt to widen the scope of the
co-ownership must exist at the time of the notice specified in the Civil Code to include any
conveyance is made by a co-owner and the other kind of notice, such as verbal or by
redemption is demanded by the other co-owner registration. xMarinao v. Court of Appeals, 222 SCRA
or co-owners. xAvila v. Barabat, 485 SCRA 8 736 (1993).223
(2006). The 30-day period for the commencement of
Redemption by co-owner redounds to the the right to exercise the legal redemption right,
benefit of all co-owners, xMariano v. CA, 222 even when such right has been recognized to exist
SCRA 736 (1993); and 30-day redemption period, in a final and executory court decision, does not
even when such right has been recognized to begin from the entry of judgment, but from the
exist in a final and executory court decision, does written notice served by the seller to the party
not begin from the entry of judgment, but from entitled to exercise such redemption right. xGuillen
written notice served by seller to the party v. CA, 589 SCRA 399 (2009).
entitled to exercise such redemption right,
Interpretation of Art. 1623 where there is a need
xGuillen v. Court of Appeals, 589 SCRA 399
for notice in writing, should always tilt in favor of
(2009).
redemptioner and against buyer, since the purpose
The requisites for the exercise of legal is to reduce the number of participants until the
redemption are as follows: (1) there must be community is terminated, being a hindrance to the
co-ownership; (2) one of the co-owners sold his development and better administration of the
right to a stranger; (3) the sale was made before property. “It is a one-way street,” in favor of
the partition of the co-owned property; (4) the redemptioner who can compel buyer to sell to him
right of redemption must be exercised by one or but he cannot be compelled to buy. xHermoso v.
more co-owners within a period of thirty days to Court of Appeals, 300 SCRA 516 (1998).
be counted from the time he or they were
notified in writing by the co-owner vendor; and The 30-day period does not begin to run in the
(5) the vendee must be reimbursed the price of absence of written notification coming from the
the sale. xCalma v. Santos, 590 SCRA 359 (2009). seller. xCua v. Vargas, 506 SCRA 374 (2006);224 and it
must be a written notice of a perfected sale.
c. Distinguishing Between Right of Redemption xSpouses Doromal v. Court of Appeals, 66 SCRA 575
of Co-Heirs and Co-Owners – (1975).
Art. 1620 includes the doctrine that Written notice of sale is mandatory,
redemption by a co-owner of the property notwithstanding actual knowledge of a co-owner,
owned in common, even when he uses his own in order to remove all uncertainties about the sale,
fund, within the period prescribed by law inures its terms and conditions, as well as its efficacy and
to the benefit of all the other co-owners. xAnnie status. xVerdad v. Court of Appeals, 256 SCRA 593
Tan v. CA, 172 SCRA 660 (1989).222 (1996).
Notice may validly be served upon parents even
d. Among Adjoining Owners (Arts. 1621 and 1622) when they have not been judicially appointed as
Right of redemption covers only “resale” and guardians since same is beneficial to the children.
does not cover exchanges or barter of properties xBadillo v. Ferrer, 152 SCRA 407 (1987).
xDe Santos v. City of Manila, 45 SCRA 409 (1972). Neither the registration of the sale, xCabrera v.
Requisite to show property previously bought Villanueva, 160 SCRA 627 (1988); nor the annotation
on “speculation” dropped. xLegaspi v. Court of of an adverse claim, xVda. De Ape v. CA, 456 SCRA
Appeals, 69 SCRA 360 (1976). 193 (2005); nor notice being given by the city
When there is no issue that adjoining lands treasurer, xVerdad v. CA, 256 SCRA 593 (1996);
involved are both rural lands, right to redeem comply with the written notice required under Art.
can be exercised and the only exemption 1623 to begin the tolling of the 30-day period of
provided is when the buyer cannot show that he redemption.
did not own any other rural land. xPrimary Notice required under Art. 1623 is deemed to
Structures Corp. v. Valencia, 409 SCRA 371 (2003). have been complied with when other co-owner has
signed Deed of Extrajudicial Partition which
e. Sale of Credit in Litigation (Art. 1634) – 30 Days embodies the disposition of part of the property
from Notice of Demand to Pay. owned in common. xFernandez v. Tarun, 391 SCRA
For debtor to be entitled to extinguish his 653 (2002).
credit by reimbursing the assignee under Art.
The clause in the deed of sale that seller has
1634, the following requisites must concur: (a)
complied with the provisions of Art. 1623, cannot be
there must be a credit or other incorporeal right;
taken to “being the written affirmation under oath,
(b) the credit or other incorporeal right must be
as well as the evidence, that the required written
in litigation; (c) credit or other incorporeal right
notice to petitioner under Art. 1623 has been meet,
must be sold to an assignee pending litigation;
for the person entitled to the right is not a party to
(d) assignee must have demanded payment
from the debtor; (e) debtor must reimburse the
assignee for the price paid, judicial costs
incurred and interest on the price form the day 223
Hernaez v. Hernaez, 32 Phil. 214 (1915); Castillo v. Samonte, 106 Phil.
1024 (1960).
222 224
De Guzman v. CA, 148 SCRA 75 (1987); Adille v. CA, 157 SCRA 455 Garcia v. Calaliman, 17 SCRA 201 (1989); Mariano v. CA, 222 SCRA 736
(1988). (1993).
38 of 41
the deed of sale. xPrimary Structures Corp. v. be “at any time within one (1) year from the date
Valencia, 409 SCRA 371 (2003). of registration of the certificate of sale,” so that
√Francisco v. Boiser, 332 SCRA 305 (2000), the period is now to be understood as composed
summarized the case-law on Art. 1623, and with of 365 days, unlike the 360 days under the old
definitiveness declared: provisions of the Rules of Court. xYsmael v.
Court of Appeals, 318 SCRA 215 (1999).
● For 30-day redemption period to begin to run,
notice must be given by seller; notice given by the d. Redemption in Extrajudicial Foreclosure (Sec.
buyer or even by the Register of Deeds is not 6, Act 3135)
sufficient. This expressly affirms the original
rulings in xButte v. Manuel Uy and Sons, 4 SCRA Redemption of extra-judicially foreclosed
526 (1962), and xSalatandol v. Retes, 162 SCRA 568 properties is exercised within 1-year from date of
(1988); and expressly overruled the ruling in auction sale as provided r in Act 3135. xLee Chuy
xEtcuban v. CA, 148 SCRA 507 (1987), which Realty Corp. v. CA, 250 SCRA 596 (1995).
allowed the giving of notice by the buyer to be Execution of a dacion en pago by sellers
effective under Art. 1623. effectively waives the redemption period
● When notice is given by the proper party (seller), normally given a mortgagor. xFirst Global Realty
no particular form of written notice is prescribed and Dev. Corp. v. San Agustin, 377 SCRA 341
under Art. 1623, so that the furnishing of the (2002).
copies of the deeds of sale to the co-owner would
be sufficient, as held previously in xDistrito v. CA, e. Redemption in Judicial Foreclosure of
197 SCRA 606 (1991); xConejero v. CA, 16 SCRA 775 Mortgage (Sec. 47, R.A. 8791)
(1966); xBadillo v. Ferrer, 152 SCRA 407 (1987.
A stipulation to render the right to redeem
● Affirmed ruling in xAlonzo v. IAC, 150 SCRA 259
defeasible by an option to buy on the part of the
(1987), that filing of suit for ejectment or
collection of rentals against a co-owner actually creditor. √Soriano v. Bautista, 6 SCRA 946
dispenses with the written notice, and (1962).
commences running of period to exercise the No right to redeem from a judicial foreclosure
right of redemption, since filing of the suit sale, except those granted by banks or banking
amounted to actual knowledge of the sale. institutions. xGSIS v. CFI, 175 SCRA 19 (1989).
a. Rare Exceptions – When sale to the buyer was One-year redemption period in foreclosure is
effected through the co-owner acting as broker, not interrupted by filing an action assailing the
and never indicated that he would exercise his validity of the mortgage, so that at the expiration
right to redeem. xDistrito v. CA, 197 SCRA 606 thereof, the mortgagee who acquires the
(1991). property at the foreclosure sale can proceed to
have title consolidated in his name and a writ of
When buyers took possession of the property
possession issued in his favor. xUnion Bank v. CA,
immediately after the execution of the deed of
359 SCRA 480 (2001).226
sale in their favor and lived in the midst of the
other co-owners who never questioned the After bank has foreclosed the property as
same. xPilapil v. CA, 250 SCRA 560 (1995). highest bidder in the auction sale, the accepted
offer of spouses-borrowers to “repurchase” the
4. O L R R property was actually a new option contract, and
the condition that the spouses-borrowers will
a. Redemption in Patents (Sec. 119, C.A. 141) pay monthly interest during the one-year option
Right to repurchase is granted by law and period is considered to be the separate
need not be provided for in the deed of sale. consideration to hold the option contract valid.
xBerin v. Court of Appeals, 194 SCRA 508 (1991). xDijamco v. Court of Appeals, 440 SCRA 190
(2004).
Under free/homestead patent provisions of
the Public Land Act a period of 5 years from the f. Redemption in Foreclosure by Rural Banks (R.A.
date of conveyance is provided, to be reckoned No. 720)
from the date of the sale and not from the date
If the land is mortgaged to a rural bank,
of registration in the Register of Deeds. xLee
mortgagor may redeem within two (2) years
Chuy Realty v. CA, 250 SCRA 596 (1995).225
from the date of foreclosure or from the
b. Redemption in Tax Sales (Sec. 215, NIRC of registration of the sheriff's certificate of sale at
1997) such foreclosure if the property is not covered or
is covered, respectively, by Torrens title. If the
c. Redemption by Judgment Debtor (Secs. 27-28, mortgagor fails to exercise such right, he or his
Rule 39, Rules of Civil Procedure) heirs may still repurchase within five (5) years
from expiration of the two (2) year redemption
Written notice must be given to judgment period pursuant to Sec. 119 of the Public Land
debtor before sale of the property on execution, Act (C.A. 141). xRural Bank of Davao City v. Court
to give him the opportunity to prevent the sale of Appeals, 217 SCRA 554 (1993).227
by paying the judgment debt sought to be
enforced and the costs which have been g. Legal Right to Redeem under Agrarian
incurred. xTorres v. Cabling, 275 SCRA 329 (1997). Reform Code
Where there is a third-party claim, sheriff Under Section 12 of R.A. 3844, as amended, in
should demand from the judgment creditor the event that the landholding is sold to a third
who becomes the highest bidder, payment in person without the knowledge of the
cash of his bid instead of merely crediting the agricultural lessee, the latter is granted by law
amount to the partial satisfaction of the the right to redeem it within 180 days from
judgment debt. xTorres v. Cabling, 275 SCRA 329 notice in writing and at a reasonable price and
(1997).
Under Sec. 28, Rule 39 of the 1997 Rules of
Civil Procedure, the period of redemption shall
226
Vaca v. CA, 234 SCRA 146 (1994).
225 227
Mata v. CA, 318 SCRA 416 (1999). Heirs of Felicidad Canque v. CA, 275 SCRA 741 (1997).
39 of 41
consideration. xQuiño v. Court of Appeals, 291 debtor. Otherwise, all creditors would be prevented
SCRA 249 (1998).228 from assigning their credits because of the
possibility of the debtors’ refusal to given consent.
What the law requires in an assignment of credit is
mere notice to debtor, the purpose of which is only
XIV ASSIGNMENT (A 1624-1635) to inform the debtor that from the date of the
“Assignment” is the process of transferring the assignment, payment should be made to the
right of assignor to assignee who would then have the assignee and not to the original creditor. xNIDC v.
right to proceed against the debtor. Assignment may Delos Angeles, 40 SCRA 489 (1971).231
be done gratuitously or onerously, in latter case,
assignment has effect similar to that of a sale. xLicaros c. Accessories and Accessions (Art. 1627)
v. Gatmaitan, 362 SCRA 548 (2001).229 Assignment of a credit includes all the accessory
In its most general and comprehensive sense, an rights, such as guaranty, mortgage, pledge or
assignment is “a transfer or making over to another of preference. xUnited Planters Sugar Milling Co.
the whole of any property, real or personal, in (UPSUMCO) v. CA, 527 SCRA 336 (2007).
possession or in action, or of any estate or right d. Tradition in Assignment - Notarization converts
therein. It includes transfers of all kinds of property, a private document Assignment of Credit into a
and is peculiarly applicable to intangible personal public document, thus complying with the
property and, accordingly, it is ordinarily employed to mandate of Art. 1625 and making it enforceable
describe the transfer of non-negotiable choses in even as against third persons. xLedonio v. Capitol
action and of rights in or connected with property as Dev. Corp., 526 SCRA 379 (2007).
distinguished from the particular item or property.”
xPNB v. Court of Appeals, 272 SCRA 291 (1997). 4. Warranties of Assignor (Art. 1628)
Assignor warrants only the existence or legality of
1. Perfection by Mere Consent (Art. 1624)
the credit but not the solvency of the debtor. √Nyco
Sales Corp. v. BA Finance, 200 SCRA 637 (1991).
2. But Must Be in Public Instrument to Affect
Third Parties (Art. 1625) E : (a) If this is expressly warranted;
(b) If insolvency is known by the
3. Effects of Assignment assignor prior to assignment;
a. Assignment of Credit (c) If insolvency is prior to assignment
An assignment of credit is an agreement by is common knowledge.
virtue of which the owner of a credit, known as the When dacion en pago takes the form of an
assignor, by a legal cause, such as sale, dacion en assignment of credit, it may extinguishe the
pago, exchange or donation, and without the obligation; however, by virtue of the warranty in Art.
consent of the debtor, transfers his credit and 1628, which makes the vendor liable for the existence
accessory rights to another, known as the assignee, and legality of the credit at the time of sale, when it is
who acquires the power to enforce it to the same shown that the assigned credit no longer existed at
extent as the assignor could enforce it against the the time of dation, then it behooves the assignor to
debtor. xAquintey v. Tibong, 511 SCRA 414 (2006).230 make good its warranty and pay the obligation. xLo v.
As a consequence, the third party steps into the KJS Eco-Formwork System Phil., 413 SCRA 182 (2003).
shoes of the original creditor as subrogee of the
latter. Although constituting a novation, such 5. Right of Repurchase on Assignment of Credit
assignment does not extinguish the obligation under Litigation (Arts. 1634 and1635)
under the credit assigned, even when the
assignment is effected without his consent. xSouth 6. Subrogation versus Assignment of Credit
City Homes V. BA Finance Corp., 371 SCRA 603 (Art.1301)
(2001). Subrogation extinguishes the obligation and gives
By virtue of the Deed of Assignment, assignee is rise to a new one; assignment refers to the same right
deemed subrogated to the rights and obligations of which passes from one person to another. Nullity of an
assignor and is bound by exactly the same old obligation may be cured by subrogation, such that
conditions as those which bound the assignor. a new obligation will be perfectly valid; but such nullity
Accordingly, assignee of a nonnegotiable chose in is not remedied by the assignment of the creditor’s
action acquires no greater right than what was right to another. In an assignment of credit, the
possessed by his assignor and simply stands into consent of the debtor is not necessary in order that
the shoes of the latter. xFort Bonifacio Dev. Corp. v. the assignment may fully produce legal effects;
Fong, 754 SCRA 544 (2015). whereas, conventional subrogation requires an
agreement among the three parties concerned –
b. Issues Relating to Debtor (Art. 1626) original creditor, debtor, and new creditor. It is a new
In an assignment of credit, the debtor’s consent contractual relation based on the mutual agreement
is not essential for its perfection, his knowledge among all the necessary parties. √Licaros v.
thereof or lack of it affecting only the Gatmaitan, 362 SCRA 548 (2001).232
efficaciousness or inefficaciousness of any payment
he might make. xProject Builders v. Court of 7. Assignment of Copyright (Sec. 180, Intellectual
Appeals, 358 SCRA 626 (2001). Property Code)
Consent of debtor is not necessary in order that
8. Assignment as an Equitable Mortgage
assignment may fully produce legal effects, and the
duty to pay does not depend on the consent of the When assignor executes a Deed of Assignment
covering her leasehold rights in order to secure
228
Springsun Management Systems Corp. v. Camerino, 449 SCRA 65
231
(2005). Sison & Sison v. Yap Tico, 37 Phil. 587 (1918); C&C Commercial Corp. v.
229
Nyco Sales Corp. v. BA Finance Corp., 200 SCRA 637 (1991); Rodriguez PNB, 175 SCRA 1 (1989); Project Builders v. CA, 358 SCRA 626 (2001);
v. CA, 207 SCRA 553 (1992); Project Builders v. CA, 358 SCRA 626 (2001). Aquintey v. Tibong, 511 SCRA 414 (2006); Ledonio v. Capitol Dev’t Corp., 526
230
Lo v. KJS Eco-Formwork System Phil., 413 SCRA 182 (2003); Spouses SCRA 379 (2007).
232
Chin Kong Wong Choi v. UCPB, 753 SCRA 153 (2015). Ledonio v. Capitol Dev. Corp., 526 SCRA 379 (2007).
40 of 41
payment of promissory notes covering the loan she d. Failure to comply with other provisions of the
obtained from the bank, such assignment is law the non-application of the consideration
equivalent to an equitable mortgage, and proportionately to the creditors, the preparation
non-payment of the loan cannot authorize bank to of the inventory, and the notification to creditors,
register the leasehold rights in its name as it would be are also made punishable. (Sec. 11)
a violation of Art. 2088 against pactum commissorium. A bulk sale done without complying with the
The proper remedy of the assignee is to proceed to Law, makes the transaction fraudulent and void,
foreclose on the leasehold right assigned as security but does not change th relationship between
for the loan. xDBP v. Court of Appeals, 284 SCRA 14 seller/assignor/encumbrancer and his creditor.
(1998). Hence, a judgment providing for subsidiary liability
is invalid—proper remedy is to collect on the credit
against the defendants, and if they cannot pay, to
XV BULK SALES LAW (A N attach on the property fraudulently mortgage since
3952) it still pertain to the debtors-defendants. xPeople v.
Mapoy, 73 Phil. 678 (1942).
1. Scope. √Chin v. Uy, 40 O.G. 4 Supp. 52
d. Meaning of “General Public” (DOJ Opinion No. nationalized activities in proportion to their
253, series of 1954). allowable participation or share in the capital of
such entities.
Even when consumer goods is limited only to
the company officers, same would still be retail The amendment was meant to settle the uncertainty
trade covered by the Law. √Goodyear Tire v. created in the obiter opinion in Luzon
Reyes, Sr., 123 SCRA 273 (1983). Stevedoring Corp. v. Anti-Dummy Board, 46
SCRA 474 (1972), which rejected the argument
Where company manufactures glass
that the Anti-Dummy Law covered only
products only on specific orders, it does not sell
employment in wholly nationalized businesses
directly to consumers but manufacturers, it
and not in those that are only partly nationalized.
cannot be said that it is a merchandiser. √DBP
v. Judge of RTC of Manila, 86 O.G. No. 6 1137, 05 The Filipino common-law wife of a Chinese
Feb. 1990. national is not barred from engaging in the retail
business provided she uses capital exclusively
3. Categories of Retail Trade Enterprises derived from her paraphernal properties;
allowing her common-law Chinese husband to
a. C A – Exclusive to Filipino citizens and take part in management of the retail business
100% Filipino entities would be a violation of the law. xTalan v. People,
b. C B C 169 SCRA 586 (1989).
c. C D – Luxury Items
d. Exempted Areas —oOo—
e. Rights Granted to Former Natural-Born
Filipinos
6 Penalty Provision