SALES REVIEWER | 2nd EXAM COVERAGE

In interpreting Art. 1544, the Court declared that the

governing principle is Primus Tempore, Potior Jure
DOUBLE SALES
which means First in Time, Stronger in Right

NOTE: Knowledge by the first buyer of the second

Article 1544. If the same thing should have been
sold to different vendees, the ownership shall be sale cannot defeat the first buyer's rights. (Coronel v
transferred to the person who may have first taken CA)
possession thereof in good faith, if it should be
movable property. NOTE: This principle will be defeated if the second
buyer registers the land IN GOOD FAITH.
Should it be immovable property, the ownership
shall belong to the person acquiring it who in good APPLICATION
faith first recorded it (sale) in the Registry of Property.
1. The vendor has an existing right over the
Should there be no inscription, the ownership shall property and power of disposal;
pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person 2. There are at least 2 sales executed by the
who presents the oldest title, provided there is good
same vendor;
faith. (1473)
3. The sales involve the same property; and
Double sale involves a situation whereby a seller sells
the property to 2 or more persons. 4. There are 2 or more vendees of the same
property sold by the vendor.
TEST: Is there a double sale? (check first if 1544 can be
applied) RULES IN KNOWLEDGE OR NOTICE

In Spouses Roque v. Aguado — the following are the 1. knowledge gained by the first buyer of the
circumstances which must concur before 1544 applies. second sale cannot defeat the first buyer’s rights

REQUISITES OF A DOUBLE SALE: XPN: where the second buyer registers

in good faith the second sale ahead of
1. The 2 or more sales transaction must constitute the first as provided by the afore-quoted
valid sales; provision of the Civil Code

2. knowledge gained by the second buyer of the

2. there are 2 or more sales transactions in issue
first sale defeats his rights even if he is first to
which pertains to the same subject matter.
register the second sale, since such
knowledge taints his prior registration with
3. The 2 or more buyers at odds over the rightful
bad faith.
ownership of the subject matter must each
represent conflicting interests; and GOOD FAITH

4. The 2 or more buyers at odds over the rightful Status, state or condition of honesty which presupposes
ownership of the subject matter must have that the buyer of a property belonging to another, is
bought from the same seller. without notice or awareness that some other person has
a right to, or interest in, such property.
NOTE: absence of one, there is NO double sale
GR: Good faith is presumed
Supposed there is a double sale:
Article 527. Good faith is always presumed,
MOVABLE PROPERTY IMMOVABLE PROPERTY and upon him who alleges bad faith on the
part of a possessor rests the burden of proof.
The ownership shall be 1. The first to register the (434)
transferred to the sale of the property in
person who may have good faith The presumption is rebuttable by the opposite
first taken possession party by presenting clear, strong, and convincing
thereof in good faith 2. The first to possess the
evidence to overcome the presumption.
property in good faith
-1st possessor in GF XPN: In Art 1544, the buyer does NOT enjoy the
3. The one who presents
presumption of good faith, because it is he who has the
the oldest title in good
burden of proof to establish that he was in good faith.
faith
BUYER IN GOOD FAITH
NOTE: Good faith must be
present in the 3 instances A buyer in good faith is not only one who buys the
property of another without notice that some other
NOTE: Contract to sell is not covered by double sale. person has a right to, or interest in, such property but
also pays a full and fair price for the same at the time
PRIMUS TEMPORE POTIOR JURE of such purchase or before he has notice of the claim
or interest of some other person in the property.

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Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
 SALES REVIEWER | 2nd EXAM COVERAGE
DOUBLE SALE CANNOT BE INVOKED
1. Where there are 2 different contracts of sale
made by 2 different persons, one of whom not
being the owner of the property sold;
2. When the earlier transaction is a pacto de retro
sale of an unregistered land and the subsequent
conveyance is a donation of the land in favor of
another by the vendor a retro;
3. Where one of the deeds of sale is a forgery or if
one sale is simulated and the other is genuine
(Fudot v. Cattleya);
4. Where one sale is absolute and the other is a
pacto de retro transaction where the period to
redeem has not yet expired;
5. Where one of the sales is subject to a
suspensive condition which condition was not
complied with and the other is an absolute sale
being that a conditional sale is not a full-fledged
sale before the condition had been performed;
6. Where one contract is a sale of the land itself
and the other contract was either a mere
promise to assign or at most, an actual
assignment of the right to repurchase the same
property;
7. Where one transaction is a sale and the other is
a mortgage;
8. Where one claim is based on prescription and
the other is on sale; and
9. In a contract to sell, there was no previous sale
of the property.
ROQUE v. AGUADO
FACTS:
An unregistered lot with an area of 20,862 sq.m was
originally owned by RIVERO, AGUILAR,
GONZALES, ANTONIO, VICTA, TOPACIO and
AGUSTO. The RIVEROS entered into a Deed of
Conditional Sale with the Spouses ROQUE over a
1,231 sqm portion of lot 18089 for P30,775.
It was agreed that SPS ROQUE shall pay initially
P15,387 upon signing and the remaining balance is
payable upon the registration of the lot, as well as
the segregation and the concomitant issuance of a
separate title over the portion in the SPS names.
After the execution of the deed they took possession
and utilized the same as a balut factory.
SABUG JR applied for a free patent over the lot
18089 and was issued an OCT under his name on
October 21, 1991. In June 1993, SABUG and
RIVERO in her personal capacity in representation of
RIVERO ET AL executed a Joint Affidavit
acknowledging that there is a portion belongs to SPS
ROQUE and expressed their willingness to segregate
the same from the entire area of lot 18089.
HOWEVER, SABUG sold the lot to AGUADO for
P2.5M. AGUADO obtained a loan from the Land
Bank for P8M. The bank foreclosed on the
property as AGUADO failed to pay her loan
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
obligation.
CASE: SPS ROQUE filed a complaint for
reconveyance, annulment of sale, deed of REM and
certificate of sale and damages against AGUADO
and SABUG seeking to be declared as the true
owners of the portion that has been included in the
sale between AGUADO AND SABUG.
SABUG denied any knowledge of the 1977 Deed of
Conditional Sale through which the subject portion
had been purportedly conveyed to SPS ROQUE.
LANDBANK averred that it had no knowledge of SPS
ROQUE’s claim as to the portion as the title was
registered under AGUADO’s name and there was no
lien annotated on the TCT.
RTC - It dismissed the complaint of SPS ROQUE. It
held that ROQUE failed to establish their ownership
over the portion. Taking into account the fact that at
the time of the conditional sale, RIVERO et al had no
proof of title over the lot. And that the deed was not
registered with the ROD.
CA - affirmed. It held that while the bank was not
regarded as mortgagee/purchaser in good faith with
respect to the portion considering the possession of
SPS ROQUE, the order not to reconvey title or
segregation thereof was for failure to pay the
remaining balance. It only ordered to respect SPS
ROQUE's possession with the option to appropriate
the improvements.
ISSUE: W/N there was a double sale. W/N ROQUE
can validly claim the portion.
RULING: NO . There was no double sale.
THIS IS A CONTRACT TO SELL. There being no
previous sale of the property, a 3rd person buying
such property despite the fulfillment of the
suspensive condition such as the full payment of the
purchase price, cannot be deemed a buyer in bad
faith and the prospective buyer cannot seek the relief
of reconveyance of the property.
IN THIS CASE: there was no double sale. The title to
the property will transfer to the buyer after
registration because there is no defect in the
owner-seller’s title per se, but the latter, of course,
may be sued for damages by the intended buyer.
In Cheng v. Genato, the following circumstances
must concur to determine the applicability of Article
1544:
1. The 2 (or more) sales transactions in issue
must pertain to exactly the same subject
matter, and must be valid sales
transactions;
2. The 2 (or more) buyers at odds over the
rightful ownership of the subject matter must
each represent conflicting interests; and
3. The 2 (or more) buyers at odds over the
rightful ownership of the subject matter must
each have bought from the same seller.
HERE: none of the circumstances are present in this
case.
THEREFORE, there is no double sale as there was
no valid sale to speak of. The first transaction was
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sold via contract to sell and the 2nd transaction was
sold via contract of sale. It is noteworthy that neither
of the 2 transactions was declared void.
REMEDY of SPS ROQUE: case for damages.
Reconveyance of the title cannot be had by ROQUE
because they do not have right over the title. Even if
the positive suspensive condition took place, there
only arises an obligation to transfer but not the right
itself.
CORONEL v. CA
FACTS:
In the Receipt Agreement, it was stipulated that:
1. RAMONA will make the DP of 50K upon
execution of the document
2. CORONELS will cause the transfer in their
names the title of the property registered in the
name of their father upon receipt of 50K
3. Upon the transfer in their names of the
property, CORONELS will execute the DOAS
in favor of RAMONA and she will pay the
whole balance of 1.190M
4. In Jan 1985, CONCEPCION ALCARAZ,
mother of RAMONA paid the 50K
Feb 6, 1985, the property under the father was
transferred into the CORONEL'S names.
Feb 18, 1985, CORONELS sold the property to
MABANAG for P1.5M after payment of P300K. Hence
the cancellation and rescission of the contract with
RAMONA by depositing the DP paid by CONCEPCION
in the bank.
CONCEPCION filed a complaint for specific
performance against CORONEL and caused the
annotation of a notice of lis pendens at the back of the
TCT.
April 25, 1985, CORONELS executed a DOAS in favor
of CATALINA, consequently a new title was issued in
favor of CATALINA.
RTC - ordered the execution of the DOAS in favor of
CONCEPCION and ordered them to pay the balance
of P1.1M to CORONEL. It ordered the cancellation and
declared without force and effect the TCT issued in
CATALINA’s name.
ISSUE: W/N there was a double sale.
RULING:
Yes. THERE WAS DOUBLE SALE
The condition contemplated by the parties was the
issuance of a certificate of title in CORONEL’s name. It
was fulfilled on February 6, 1985 were the respective
obligations of CORONEL and ALCARAZ became
mutually demandable.
HERE: CORONEL were obliged to present the TCT in
their names to ALCARAZ, the buyer, and to
immediately execute the DOAS, while ALCARAZ was
obliged to pay the balance of the purchase price
amounting to P1.1M
“ The petitioners-sellers Coronel bound themselves "to effect
the transfer in our names from our deceased father
Constancio P. Coronel, the transfer certificate of title
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
immediately upon receipt of the downpayment above-stated".
The sale was still subject to this suspensive condition.”
HOWEVER, CORONEL recognized that they entered
into a contract of sale subject to a suspensive
condition.
Article 1186 was applied. It provides that condition
shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.
IN THIS CASE: The suspensive condition of
transferring the title in the name of CORONEL was
fulfilled when a title was issued in the names of
CORONEL on February 6, 1985.
Under Article 1187, the effects of conditional obligation
to give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the obligation.
HERE:
The rights and obligations of the parties with respect to
the perfected contract of sale became mutually due
and demandable as of the time of fulfillment or
occurrence of the suspensive condition on February 6,
1985. As of that point in time, reciprocal obligations of
both seller and buyer arose.
DOUBLE SALE
Article 1544. Xxx Should be immovable property, the
ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
In this case: the DOAS April 25, 1985 as proof of the
second contract was registered with the ROD giving
rise to the issuance of new TCT in the name of
MABANAG on Jun 5, 1985.
Article 1544 presumes title or ownership to pass to the
first buyer, the exceptions are:
1. When the second buyer, in good faith,
registered the sale ahead of the first buyer
2. Should there be no inscription by either of the
2 buyers, when the second buyer, in good
faith, acquires possession of the property
ahead of the first buyer.
Unless the 2nd buyer satisfies these requirements, title
or ownership will not transfer to him to the prejudice
of the first buyer.
GOVERNING PRINCIPLE
prius tempore, potior jure (first in time, stronger in right)
As a rule, the first buyer is presumed the owner.
EXC: (the 2nd buyer can defeat the 1st buyer)
1. If the 2nd buyer is the 1st registrant in good faith;
2. If there is no registration, the 2nd buyer is the first
possessor in good faith.
1. Knowledge by the first buyer of the second
sale cannot defeat the first buyer's rights
except when the second buyer first
registers in good faith the second sale;
2. Knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to
register, since knowledge taints his
registration with bad faith
IT IS MATERIAL THAT THE 2ND BUYER
REGISTERED SUCH SALE IN GOOD FAITH (without
knowledge of any defect in the title of the property
sold.)
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MABANAG could not have in good faith, registered the
sale entered into on February 18, 1985 because as
early as February 22, 1985, a notice of lis pendens
had been annotated on the TCT in the names of
CORONEL, whereas MABANAG registered the said
sale sometime in April, 1985.
Thus, at the time of registration, MABANAG knew that
the property had been previously sold to ALCARAZ or
at least she was charged with knowledge that a
previous buyer is claiming title to the property.
HELD: if a vendee in a double sale registers that sale
after he has acquired knowledge that there was a
previous sale of the same property to a 3rd party in a
previous sale, the registration will constitute a
registration in bad faith and will not confer upon him
any right.
Therefore, the sale between ALCARAZ and
CORONEL was perfected on Feb 6, 1985 prior to the
sale between CATALINA and CORONEL on Feb 18,
1985.
REVIEW
If the 2nd buyer knows that there is already a sale, it
will affect good faith.
Q: What is the effect if the 1st buyer knows that
there is a 2nd sale?
A: Knowledge of the 1st buyer of the 2nd sale cannot
defeat the 1st buyer’s rights. Even if the 1st buyer learns
eventually that the subject matter is being sold to others,
it will not affect his first in time, stronger in right.
Q: Is lis pendens the only way for a second buyer to
know that there has been a first sale of the property?
A: No. In Carbonell v. CA — the existence of prior sale
to Carbonell was duly established. When Carbonell
bought the lot from Poncio on Jan. 27, 1955, she was
the only buyer thereof and the title was still in the name
of Poncio and she could not have been aware of any
sale of Infante as there was no such sale since then.
Carbonell’s prior purchase of the land was made in good
faith and such subsisted and continued to exist when
she recorded her adverse claim 4 days prior to the
registration of Infante’s DOS.
CARBONELL v. CA
FACTS:
JOSE PONCIO, a native of Batanes Islands, was the
owner of the parcel of land with improvements in
Rizal, with an area of some 195 sqm. This property
was subject to a mortgage in favor of REPUBLIC
SAVINGS BANK for the sum of P1,500.
ROSARIO CARBONELL, a cousin and adjacent
neighbor of PONCIO. Both came from the Batanes
Islands. ROSARIO lived in the adjoining lot at V. Agan
Street.
EMMA INFANTE and ROSARIO offered to buy the lot
from PONCIO.
PONCIO unable to keep up with the installments due
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
on the mortgage, he approached CARBONELL and
offered to sell the lot, excluding the house where
PONCIO lived. CARBONELL accepted the offer and
proposed the price of P9.50/sqm. PONCIO accepted
the offer after securing the consent of his wife and
parents on the condition that from the purchase
price would come the money to be paid to the
bank.
PONCIO and CARBONELL went to REPUBLIC
SAVINGS BANK and secured the consent of the
president for CARBONELL to pay the arrears on the
mortgage and to continue the payment of the
installments as they fall due.
On Jan 27, 1955, CARBONELL and PONCIO made
and executed a document in the Batanes dialect. It
was stipulated that beginning January 27, 1955,
PONCIO could start living on the lot sold by him to
CARBONELL, until after 1 year during which time
PONCIO would not pay anything. If after 1 year, he
could not find any place where to move his house, he
could still continue occupying the site but he should
pay a rent that may be agreed.
CARBONELL asked Atty. Reyes to prepare the formal
deed of sale which she brought to PONCIO together
with the amount of some P400.00, the balance she
still had to pay in addition to her assuming the
mortgage obligation to Republic Savings Bank.
PONCIO told CARBONELL that he could no longer
proceed with the sale because he had already given
the lot to INFANTE. CARBONELL contacted
INFANTE but refused to see her.
Feb 5, 1955, CARBONELL saw INFANTE erecting a
wall around the lot with a gate.
It was admitted by PONCIO that INFANTE improved
her offer and agreed to sell the land and its
improvements to her for P3,535.
In a memorandum dated Jan 31, 1955, PONCIO
bound himself to sell to INFANTE the lot for
P2,375.52, with INFANTE assuming the mortgage
debt in favor of REPUBLIC SAVINGS BANK in the
amount of P1, 177.48. INFANTE was living behind the
houses of PONCIO and CARBONELL.
Feb 2, 1955, PONCIO executed the DOS in favor of
INFANTE in the sum of P3, 554 and on the same
date, INFANTE paid the bank the mortgage
indebtedness of P1,500.
CARBONELL registered the adverse claim on Feb
8, 1955. While DOS in favor of INFANTE was
registered only on Feb 12, 1955. Thus, a new TCT
was issued with annotation of the adverse claim of
CARBONELL.
CARBONELL filed the complaint against INFANTE
praying that she be declared the lawful owner of the
lot and that PONCIO be ordered to execute the
corresponding deed of conveyance of the land in her
favor.
RTC - dismissed the claim of CARBONELL that the
memorandum presented by her to prove the sale does
not satisfy the requirements of the law.
CA - declared CARBONELL to have a superior right
to the lot and condemned INFANTE to reconvey the
lot to CARBONELL, after her reimbursement to them
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of the sum P3K+legal interest.
ISSUE: Who has a better right over the lot between,
CARBONELL and INFANTES?
RULING: CARBONELL has a better right over the lot.
For Article 1544(2) to apply, it is essential that the
buyer of realty must act in good faith in registering his
DOS to merit the protection.
IN THIS CASE:
If there is an inscription, prior registration in good faith
is a precondition to superior title. If here is no
inscription, the decisive factor is prior possession in
good faith.
HERE:
When CARBONELL bought the lot from PONCIO on
Jan 27, 1955, she was the only buyer and the title of
PONCIO was still in his name encumbered by bank
mortgage that was annotated.
CARBONELL was not aware and she could not have
been aware of any sale to INFANTE as there was no
such sale then. Thus, the prior purchase of
CARBONELL was made in good faith. It subsisted to
exist when she recorded her adverse claim 4 days
prior to the registration of INFANTE’s deed.
IT did not cease after PONCIO told her on Jan 31,
1955 of the 2nd sale to INFANTE. With that,
CARBONELL wanted to speak with INFANTE which
shows good faith on her part. But, INFANTE refused
to see her despite being neighbors. Therefore, under
the circumstances, the recording of the adverse claim
is deemed to have been done in good faith.
BAD FAITH
1. Refused to see CARBONELL. Ordinarily, one
will not refuse to see her neighbor. INFANTE
herein live just behind the house of
CARBONELL.
2. CARBONELL was already in possession of
the mortgage passbook and the copy of the
mortgage contract when the lot was sold to
INFANTE.
3. INFANTE could have inquired from PONCIO
as to why he was no longer in possession of
the mortgage passbook and from
CARBONELL as to why she is in the
possession of the lot.
4. CARBONELL registered on Feb 8, 1955 the
adverse claim which was annotated on the
back of the title 4 days before INFANTE’s
registration of the DOS on Feb 12, 1995 that
was executed on Feb 2, 1955
IT WAS ESTABLISHED THAT THERE WAS A PRIOR
SALE TO CARBONELL
INFANTE was in bad faith when she enticed PONCIO
to dishonor the contract with CARBONELLm and
instead to sell the lot to INFANTE by offering PONCIO
a higher price than the price for which he sold the
same to CARBONELL.
Thus, INFANTE cannot recover the value of
improvements introduced in the lot. However, she can
get P1,500 for the payment to redeem the mortgage.
ROSAROSO v. SORIA
FACTS:
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
ROSAROSO and DUAZO acquired lands in Cebu
City. They had 9 children. (HOSPICIO, ARTURO,
FLORITA, LUCILA, EDUARDO, MANUEL, CLEOFE,
ANTONIO, ANGELICA. On Apr 25, 1952, DUAZO
died. Later on ROSAROSO married LOURDES.
On Jan 16, 1995, a complaint for declaration of nullity
of documents with Damages was filed by LUIS
ROSAROSO against LUCILA, LAILA(daughter of
LUCILA) and MERIDIAN. On Jan 6, 1996, with HAM
SOLUTAN, and LOURDES included as defendants.
ALLEGATIONS OF HOSPICIO, ANTONIO,
ANGELICA and CLEOFE:
1. On Nov 4, 1991, LUIS with the full knowledge
and consent of LOURDES executed a DOAS
(1st sale) of Lot 8, 19, 22, 23, and Lot 5665
and 7967 in their favor.
2. That LAILA conspired with her mother
LUCILA in obtaining SPA (Apr 3, 1993) from
LUIS
3. LUIS was sick, infirm, blind and of unsound
mind
4. LUCILa nad LAILA accomplished by fixing the
thumb mark of LUIS on the SPA that
authorized LAILA to sell and convey Lot 8, 22,
23 which had been sold to them
5. On the strength of SPA, LUIS(Jul 21, 1993)
LAILA and HAM mortgaged Lot 19 to Vital
Lending for and in consideration of P150K.
6. A 2nd sale took place on Aug 23, 1994 when
LUCILA made LUIS to sign the DOAS
conveying to meridian 3 parcels of land for
P960K (2nd sale)
7. MERIDIAN was in bad faith when it did not
make any inquiry as to who were the
occupants and owners of the lot
8. If MERIDIAN had investigated, it would have
been informed as to the status of the lot.
HOSPICIO prayed that the 2 SPAs and the DOS in
favor of MERIDIAN be declared null and void.
ALLEGATIONS of LUCILA and LAILA:
1. That ROSAROSO are estopped from
questioning the 2nd sale in favor of
MERIDIAN because they failed not only in
effecting the necessary transfer of the title, but
also in annotating their interests on the
titles of the questioned properties;
2. That the SPA was valid as the same was
made when LUIS was conscious and of sound
mind and body
MERIDIAN’s allegations:
1. That LUIS was fully aware of the conveyances
he made.
2. That the affixing of thumb mark was witnessed
by SANCHEZ, VP of the corporation
3. That they are in good faith in checking the
titles of the lots with ROD CEBU and
discovered that the 1st sale was not
registered.
4. That the signature was obtained through
fraud, deceit and trickery.
RTC - held that when LUIS executed the 2nd DOS in
favor of MERIDIAN, he was no longer the owner of Lot
19, 22 and 23 as he had already sold them to his
children on the 1st marriage.
CA - ruled that the 1st DOS in favor of ROSAROSA
was void because they failed to prove that there was a
consideration for the 4 parcels of land. As to the 2nd
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sale, it was valid because the documents were
notarized and as such, it enjoys presumption of
regularity.
ISSUE: Who has a better right over the lot?
RULING: HOSPICIO ROSAROSO has a better right
over the lot.
The 1st DOS was valid because LUCILA never
contested the conveyance of the lot in favor of
ROSAROSO. It was insisted by LUCILA that the sale
was simulated because there was no valid
consideration. However, they failed to substantiate the
allegations as they never presented clear and
convincing evidence to back up such claims.
ASSUMING ARGUENDO that there was no
consideration, LUIS still had no right to sell what he no
longer owned. In default thereof, to the person who
presents the oldest title, provided there is good
faith.ence for rescission of the sale on the part of the
buyer to perform his part of the obligation.
NOTE: Failure of the buyer to make good of the price
does not cause the ownership to revert to the seller,
unless the bilateral contract of sale is rescinded.
Non-payment only created the right to demand the
fulfillment of the obligation or to rescind the contract.
MERIDIAN IS A BUYER IN BAD FAITH
- Otherwise stated, ownership of an immovable
property which is the subject of a double sale
shall be transferred:
1. to the person acquiring it who in good faith
first recorded it in the Registry of Property;
2. in default thereof, to the person who in good
faith was first in possession; and
3. in default thereof, to the person who presents
the oldest title, provided there is good faith.
2 fold requirement:
1. acquisition in good faith
2. registration in good faith
Good faith must concur with the registration. If it would
be shown that a buyer was in bad faith, the alleged
registration they have made amounted to no
registration at all.
PRIMUS TEMPORE, POTIOR JURE
First in time, stronger in right
- The one who acquires the immovable and first
records it with the Registry of Property, both
made in good faith, shall be deemed the
owner.
When a land is in the actual possession of persons
other than the seller, the buyer should investigate the
rights of those in possession of the land. If there is no
inquiry, he is not deemed to be a buyer in good faith.
GR: a purchaser may be considered a purchaser in
good faith when he has examined the latest
certificate of title.
XPN: when there exist facts that would create
suspicion in an otherwise reasonable man to go
beyond the present title and to investigate those
that preceded it.
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
IN THIS CASE:
It is clear that MERIDIAN, through its agent, knew
that the subject properties were in possession of
persons other than the seller.
Instead of investigating the rights and interests of
the persons occupying the said lots, however, it
chose to just believe that LUIS still owned them.
Simply, MERIDIAN REALTY failed to exercise the
due diligence required by law of purchasers in
acquiring a piece of land in the possession of a
person or persons other than the seller.
INNOCENT PURCHASER FOR VALUE
One who buys the property of another, without notice
that some other person has a right or interest in the
property, for which a full and fair price is paid by the
buyer at the time of the purchase or before receipt of any
notice of claims or interest of some other person in the
property. To successfully invoke and be considered as a
buyer in good faith, the presumption is that first and
foremost, the "buyer in good faith" must have shown
prudence and due diligence in the exercise of his/her
rights
CALMA v. LACHICA
FACTS:
ATTY. LACHICA filed a complaint for annulment of
void deeds of sale, annulment of titles, reconveyance
and damages originally against RICARDO and
CALMA and later on PABLO TUMALE was impleaded
as additional defendant in a 2nd Amended Complaint.
LACHICA’s allegations:
1. That he was the absolute owner and actual
possessor of the property
2. That he acquired the lot in 1974 for P15K
through sale from TOLENTINO married to
VICTORIA CALDERON, who are RICARDO’s
parents
3. The property’s title was delivered to LACHICA
in 1974 and that they have been in
possession of the same
In 1974 the DOS was lost. Hence in 1979, LACHICA
and CEFERINO agreed to execute another DOS.
TOLENTINO demanded an additional P15K from
LACHICa to which he complied. Thus, in the new
DOS executed on Apr 29, 1979, the consideration was
increased to P30K.
After the notarization of the new DOS on Apr 29,
1986, LACHICA requested SPS TOLENTINO to
execute an affidavit of non-tenancy and other
documents required by the DAR for the transfer of title
in LACHICA’s name.
Taking advantage of the situation, CEFERINO and
RICARDO requested LACHICA to allow them to
cultivate the 5K sqm portion of the land. CEFERINO
and RICARDO allegedly offered to process the
transfer of the title to LACHICA’s name to persuade
him to grant their request.
According toLACHICA, because of trust and
confidence, he entrusted the notarized DOS to
CEFERINO for the transfer of title to his name and
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waited for TOLENTINO to make good on the promise.
LACHICA caused the annotation of a notice of
adverse claim on May 25, 1981.
In 2001, LACHICA learned that CEFERINO had
passed away and RICARDO was nowhere to be
located. LACHICA found out that PABLO was in the
possession of the 5K sqm portion of the property by
TOLENTINO in 1986.
LACHICA discovered that the title was registered
under the name of RICARDO which had been
transferred to CALMA upon RICARDO’s sale to
CALMA.
The TCT was under the name of CEFERINO,
transferred to RICARDO and then to CALMA.
LACHICA argued that not only was RICARDO in full
knowledge of the sale of the lot to him by CEFERINO,
but his adverse claim was evidently annotated in
CEFERINO’s title and carried over to RICARDO’s title.
Further, he alleged that CALMA is an alien, thus not
qualified to own lands in the Philippines.
Hence, the case for annulment of DOS between
CEFERINO and RICARDO. Including the DOS
between RICARDO and CALMA.
RTC - ruled that CALMA was an innocent purchaser
for value and that he already acquired his indefeasible
rights over the title. It may be true that the adverse
claim was annotated in RICARDO’s title, the same title
shows that the adverse claim was canceled more than
4 years before he bought the property.
CA - ruled that both RICARDO and CALMA were in
bad faith in the acquisition of the property. Finding that
the registration of title in RICARDO’s name was null
and void as he had prior knowledge of the sale
between CEFERINO and LACHICA. With that,
RICARDO’s title must be annulled as he had no valid
title to the property. He had nothing to convey to
CALMA.
ISSUE: Who between CALMA and LACHICA has
better rights over the property?
RULING: CALMA has a better right over the
property.
IN THIS CASE:
1. CALMA acquire the lot through sale from
RICARDO by virtue of DOAS dated Jul 10,
1998
2. It was registered in the ROD on Dec 22, 1998.
3. CALMA inquired with ROD and the bank
where the lot was mortgaged by RICARDO as
to the authenticity and status of RICARDO’s
title
4. CALMA was able to ascertain that
RICARDO’s title was clean where it shows
that the annotation was canceled.
The court allowed CALMA to rely on the face of the
title there being no indicia that could have aroused
questions in CALMA’s mind regarding the title of the
property.
Applying the rule on double sale under Article 1544,
CALMA’s right as an innocent purchaser for value who
was able to register his acquisition of the subject
property should prevail over the unregistered sale of
the same to LACHICA
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
REMEMBER: Every person dealing with registered land
may safely rely on the correctness of the certificate of
title issued therefor and is in no way obliged to go
beyond the certificate to determine the condition of the
property.
GR: Under the mirror principle, what is stated in the title
shall be the basis in determining the nature of the
property. Thus, what is stated in the title is sufficient
enough for the normal person to be able to get the
property as a clean title.
XPNS:
1. when the party has actual knowledge of facts
and circumstances that would impel a
reasonably cautious man to make further
inquiry;
2. when the buyer has knowledge of a defect or
the lack of title in his vendor; or
3. when the buyer/mortgagee is a bank or an
institution of similar nature as they are enjoined
to exert a. higher degree of diligence, care, and
prudence than individuals in handling real estate
transactions.
Q: What if there is forgery in the 1st sale?
A: In the case of Fudot v. Cattleya, there was no double
sale. The first requisite that there must be 2 valid sales is
lacking. If one of the sales is void by reason of forgery,
then there is no double sale to speak of.
AGUSTIN v. DE VERA
FACTS:
GREGORIO DE VERA owned a residential land with
an area of 180 sqm in Dagupan City.
On Jan 6, 1986, GREGORIO and AGUSTIN executed
a document entitled Contract to Purchase and Sale
whereby GREGORIO agreed to sell to AGUSTIN the
disputed property under the following terms and
conditions:
1. Contract price of the land is P30K
2. 15K will be paid to GREGORIO upon
execution of the contract and the balance to
be paid upon the release of the land from the
Pangasinan Savings and Loan Association to
which parcel of land is currently mortgaged;
3. GREGORIO obligates himself to have the title
of the land released from mortgage from the
bank within 1 month from the day of the
execution of the contract;
4. Immediately upon payment of 15K, AGUSTIN
can take possession of the land and may
introduce improvements;
5. Upon release of the title from the bank and
upon payments of the balance of P15K by
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AGUSTIN to GREGORIO, DEED of Sale will
be executed
6. Costs of documentation and other expenses
in the transfer will be borne by AGUSTIN.
In May 2001, AGUSTIN sold ½ portion of the land to
IMELDA AGUSTIN who introduced improvements
and constructed a sari-sari store. AGUSTIN caused
the annotation of an adverse claim on TCT 36987 on
Aug 22, 1987.
Sep 3 2007 GREGORIO sold the property to
ROMANA DE VERA for P500K.
Said document was registered on
Sep 6, 2010.
Nov 15 AGUSTIN filed a case for specific
2017 performance and
Acknowledgement of the Contract
of Purchase and Sale and Judicial
Declaration of Ownership against
the heirs of GREGORIO
It was alleged in the complaint filed by AGUSTIN that
despite receipt of the full payment, GREGORIO failed
to deliver the title as promised.
ROMANA was declared a buyer in bad faith, having
bought the land from GREGORIO despite being
charged with the knowledge of AGUSTIN’s ownership
claim through the adverse claim and notice of lis
pendens annotated on TCT No. 36897, and having
found AGUSTIN in actual possession of the property.
CA reversed. It ruled that the contract is a contract to
sell.
ISSUE: Who has a better right between AGUSTIN
and DE VERA?
RULING: AGUSTIN has a better right of ownership
over the property.
Art. 1544. If the same thing should have been sold
to different vendees, the ownership shall be
transferred to the person who may have first taken
possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership
shall belong to the person acquiring it who in
good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in
the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there
is good faith.
Applying 1544, ROMANA was a buyer in bad faith.
Indubitable, AGUSTIN caused the annotation on TCT
36987 of an adverse claim indicating the fact that they
entered into a sale contract with GREGORIO.
The annotation was made prior to the execution of the
DOAS between GREGORIO and ROMANA on Sep 3,
2007.
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TAKE NOTE:
In Duenas v. Metrobank — purchasers of registered
land may seek sanctuary under the protection afforded
to innocent purchasers in good faith and for value;
PROVIDED, they remain in good faith until registration.
NOTE: It is only upon registration in good faith can the
purchaser acquire such rights and interests as they
appear in the title.
HERE: SC held that buyers of registered land must
be continuing purchasers for value and in good faith
from the time of sale until the registration of the
sale.
In the event that the buyer of a registered who has yet to
register the sale becomes aware of any claim or interest
of some other person in the property or of any defect or
restriction in the title of the seller or his capacity to
convey title, the buyer shall no longer be considered
considered to be in good faith even if he subsequently
registers the conveyance.
It is only upon registration in good faith will the
buyer acquire such rights and interests as they
appear in a certificate of title unaffected by any prior lien
or encumbrance noted therein.
REQS TO BE A PURCHASER FOR VALUE
1. Property must be bought for consideration; and
2. Purchaser should have no knowledge or notice
of adverse claim or interest until registration.
Q: When do we say that a buyer has registered the
sale?
A:
1. The buyer files a duly notarized Deed of Sale;
2. Such is entered into the daybook;
3. The buyer surrenders or presents the Owner’s
Duplicate Certificate of Title covering the land;
and
4. He pays the registration fees.
WHEN SELLER IS NOT THE OWNER OR
VOIDABLE TITLE
SALE BY NON OWNER
AT PERFECTION
At the time of perfection, the sale is valid because
ownership by the seller is not yet required at the time of
perfection. It is upon the delivery of the thing that the
ownership is required and if not possible, the sale will
be deemed inoperative. (Nool v. CA)
AT CONSUMMATION
Article 1505. Subject to the provisions of this Title,
where goods are sold by a person who is not the
owner thereof, and who does not sell them under
authority or with the consent of the owner, the buyer
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acquires no better title to the goods than the seller
had, unless the owner of the goods is by his conduct
precluded from denying the seller's authority to sell.
Nothing in this Title, however, shall affect:
1. The provisions of any factors' act, recording
laws, or any other provision of law enabling
the apparent owner of goods to dispose of
them as if he were the true owner thereof;
2. The validity of any contract of sale under
statutory power of sale or under the order of a
court of competent jurisdiction;
3. Purchases made in a merchant's store, or in
fairs, or markets, in accordance with the Code
of Commerce and special laws. (n)
Q: Can you sell what you do not own?
A: YES. One can sell what he does not own;
PROVIDED that during the consummation stage, one
already owns the thing being sold.
A valid sale exists to bind both parties even if at the
time of perfection, the seller was not the owner
thereof. It is the consummation stage that concerns
itself with the actual transfer of ownership of the
subject matter and the payment of the price;
perfection merely concerns itself with the creation of
the obligations to transfer and to pay.
SALE BY A CO-OWNER
RULES
1. Every co-owner has the right to sell his
pro-indiviso share in the co-owned property
even without the consent of the other co-owners;
2. But that none of the co-owners may claim any
right, title or interest to a particular portion of the
thing owned in common; and
3. Therefore, a co-owner has no right to sell an
undivided part of the real estate. Selling of a
specific portion of a common property is not
allowed since a common property is yet to be
partitioned.
GR: A co-owner cannot sell the whole property
because he only owns an ideal share in the rights over
the common property.
XPN: if the sale of the thing is with the consent of ALL
his co-owners.
Q: What is the Status of the sale of a whole
common property by one co-owner to a third
person or stranger?
A: Void as to the property but valid as to the share of
the co-owners. He can only sell his share but he
cannot sell the share of his co-owners.
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
TAKE NOTE: It is not the portion that’s to be sold but
only the co-ownership right.
XPN TO THE NON-OWNER RULE
Where the seller of goods has a voidable title thereto,
but his title has not been avoided at the time of the
sale, the buyer acquires a good title to the goods,
provided he buys them in good faith, for value, and
without notice of the seller’s defect of title.
GR: Nemo dat quod non habet.
Article 1505 of CC provides that where goods are sold
by a person who is not the owner thereof, and who
does not sell them under authority or with the consent of
the owner, the buyer acquires no better title to the
goods than the seller had.
XPNS:
1. WHEN THE REAL OWNER IS ESTOPPED
Under Article 1505 of the Civil Code, when the
owner is, by his conduct, precluded from
denying the seller’s authority to sell;
👉 the owner must, by word or conduct,
have caused or allowed it to appear that
the title or authority to sell is with the
seller and the buyer must have been
misled to his damage.
EX: Person acting as an agent w/o
authority but later on ratified the
authority of the agent, then the real
owner is estopped
2. RECORDING LAWS
Registration does not confer ownership but
registration is a prima facie evidence that a
person owns the land.
3. STATUTORY POWERS AND JUDICIAL SALES
Under Article 1505 of the Civil Code, sales
made under statutory power of sale or under
the order of a court of competent
jurisdiction;
👉 Judgments of courts divesting the
registered owner of title and vesting
them in the other party are valid
although the courts may not be the
owner of the land.
NOTE: In case of foreclosure sales,
execution sales, the seller in an auction
sale is not the owner, it is the sheriff or
the one conducting the auction. That
sale of a non-owner is valid because
sale in a foreclosure is sanctioned by
laws.
4. SALE AT A MERCHANT STORE
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Under Article 1505 of the Civil Code, sales
made in a merchant’s store in accordance with
the Code of Commerce and special laws;
👉 acquires a valid title to the thing
although his predecessors-in-interest
did not have any right of ownership over
it.
👉 Protecting innocent third parties who
have made purchases at merchant’s
stores in good faith and for value
appears to be a wise and necessary rule
not only to facilitate commercial sales on
movables but to give stability to
business transactions.
NOTE: this is contemplated under the
code of Commerce or Special Laws. If a
thing is displayed in a merchant’s store
and a buyer buys it, the latter acquires a
valid tile.
SPECIAL RIGHTS OF AN UNPAID
SELLER OF GOODS (Arts. 1526 &
1533, CC)
Article 1526. Subject to the
provisions of this Title,
notwithstanding that the ownership in
the goods may have passed to the
buyer, the unpaid seller of goods, as
such, has:
1. A lien on the goods or right
to retain them for the price
while he is in possession of
them;
2. In case of the insolvency of
the buyer, a right of stopping
the goods in transitu after he
has parted with the
possession of them;
3. A right of resale as limited by
this Title;
4. A right to rescind the sale as
likewise limited by this Title.
Where the ownership in the goods
has not passed to the buyer, the
unpaid seller has, in addition to his
other remedies a right of withholding
delivery similar to and coextensive
with his rights of lien and stoppage in
transitu where the ownership has
passed to the buyer. (n)
Article 1533. Where the goods are of
perishable nature, or where the seller
expressly reserves the right of resale
in case the buyer should make
default, or where the buyer has been
in default in the payment of the price
for an unreasonable time, an unpaid
seller having a right of lien or having
stopped the goods in transitu may
resell the goods. He shall not
thereafter be liable to the original
buyer upon the contract of sale or for
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
any profit made by such resale, but
may recover from the buyer damages
for any loss occasioned by the
breach of the contract of sale.
Where a resale is made, as
authorized in this article, the buyer
acquires a good title as against the
original buyer.
It is not essential to the validity of
resale that notice of an intention to
resell the goods be given by the
seller to the original buyer. But where
the right to resell is not based on the
perishable nature of the goods or
upon an express provision of the
contract of sale, the giving or failure
to give such notice shall be relevant
in any issue involving the question
whether the buyer had been in
default for an unreasonable time
before the resale was made.
It is not essential to the validity of a
resale that notice of the time and
place of such resale should be given
by the seller to the original buyer.
The seller is bound to exercise
reasonable care and judgment in
making a resale, and subject to this
requirement may make a resale
either by public or private sale. He
cannot, however, directly or indirectly
buy the goods. (n)
5. SALE OF GOODS WITH A VOIDABLE TITLE
Under Article 1506 of the Civil Code, the sale
by a seller who at the time of delivery had
voidable title to the thing delivered
NOTE: still valid until annulled; If the
seller has a voidable title over the
property and sells it to a buyer who is in
good faith and purchaser for value and
without notice of a voidable title, then
upon transfer to the buyer, from
voidable of the seller to the buyer, it
becomes a good title.
IN CASE OF MOVABLES: under Article 559 of the Civil
Code, acquisition of possession in good faith under a
claim of ownership where the real owner has NOT lost
or has NOT been unlawfully deprived of the movable
makes the possessor the rightful owner of the movable.
SALE BY ONE HAVING A VOIDABLE TITLE
Article 559. The possession of movable property
acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has
been unlawfully deprived thereof, may recover it from
the person in possession of the same.
If the possessor of a movable lost or which the owner
has been unlawfully deprived, has acquired it in good
faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.
(464a)
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DOCTRINE OF IRREVINDICABILITY PERIOD CONSEQUENCES & LIABILITIES

Before No obligations yet. Therefore, res

GR: possession of movable property acquired in good Perfection perit domino. The owner bears the
faith is equivalent to title.
loss. The parties remain status quo
XPN: one who has either lost any movable or has been before anything else. Therefore, as to
unlawfully deprived thereof may recover it from the loss, deterioration and benefits, they
person in possession of the same. all are in the account of the owner.

XPN TO XPN: if acquired in a public sale or merchant At the Time TAKE NOTE: It was stated without
of Perfection any effect.
store, the one unlawfully deprived cannot recover if
the buyer acquired it in good faith at a public sale (Arts 1493 - If at the time of the perfection, there
unless he reimburses the buyer for the price paid. 1494) was:

Article 1506. Where the seller of goods has a

voidable title thereto, but his title has not been avoided TOTAL the contract shall be
at the time of the sale, the buyer acquires a good title LOSS without any effect
to the goods, provided he buys them in good faith, for
value, and without notice of the seller's defect of title. PARTIAL the buyer may
(n) LOSS choose between

👉 withdrawing from
the contract; and
SELLER WITH VOIDABLE TITLE

If the seller of the goods has a voidable title thereto, the

👉 demanding
remaining part,
the

buyer can still acquire a good title thereof. paying its price in
proportion to the
The Article applies only if the seller has a title to the total sum agreed
property although it may be voidable. It cannot apply to upon.
a situation where the seller has no title at all to the
property which he is selling. GOODS: refer to movable properties
sold in mass, e.g., merchandise,
REQS FOR BUYER TO ACQUIRE GOOD TITLE grains, fruits in bulk.

1. He is in good faith; (GOOD FAITH) NOTE: If there’s partial loss or

deterioration that could substantially
2. He paid something of value for the property; and change the character of the goods,
(FOR VALUE) then the buyer has 2 options, treat the

👉
sale as:
3. He is not aware of the seller’s defect or flaw on
👉
Voided; or
the title. (NO KNOWLEDGE) Valid as only to those that did
not deteriorate.
RATIONALE
After ART. 1504 —
1. A voidable contract is valid until it is duly Perfection
annulled; and But Before GR: Ownership if not yet transferred,
Delivery the risk is upon the seller. But if
2. Where one of 2 innocent parties must suffer, he ownership has been transferred, then
who places the offender in a position to do (Arts. 1504, the ownership is transferred res perit
wrong must be the one to suffer the 1480, 1262, domino. Owner bears the loss, in that
consequences of his actions. 1163, 1165, case, upon delivery of the thing, there
1538, & 1189) is already a transfer of ownership that
LOSS, DETERIORATION, FRUITS and OTHER carries the transfer of risk. So at the
BENEFITS time of delivery, the buyer bears the
loss.
In selling and delivering the property as a consequence
XPNs:
of a sale, it includes not only the accessions but also the
accessories. 1. Reservation of ownership by
the seller despite delivery to
Q: What happens to loss, deterioration, fruits and
the buyer but only for
other benefits in case of a sale? In case there is a
purposes of securing
property that will bear natural, civil or industrial
performance.
fruits; or if the thing will be lost or will be damaged
in the course of the contract, what are the In Lawyer’s Coop v.
consequences and liabilities of the parties? Tabora — Where
delivery of the goods has
A:

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been made to the buyer genus never perishes, applying the

or to a bailee for the case of Gaisano Cagayan.
buyer, in pursuance of
the contract and the In sale, if the obligation of the seller is
ownership in the goods to deliver a determinate thing,
has been retained by therefore, if the determinate thing is
the seller merely to lost without the fault of anyone then
secure performance by the obligation is extinguished. But this
the buyer of his is not the case if the obligations
obligations under the involve a generic thing, such as the
contract, the goods are at payment of money.
the buyer's risk from the
time of such delivery. SPECIFIC RULES GOVERNING
DETERIORATION AND
Retention of ownership IMPROVEMENT
by the seller but only for
purposes of securing
AS TO LOSS
performance in a contract
of sale. 1. If the loss was without the
fault of the seller, the
2. Actual delivery is delayed, obligation is extinguished.
even if there was an
agreement as to the delivery 2. But if the loss is because of
the fault of the seller, he
point…
shall be obliged to pay
👉 if the seller is the one damages.
who gave a reason for Q: When do we consider
the delay, anything that that the thing is lost?
happens to the good is
at the seller’s risk. A: when it perishes or
goes out of commerce or
👉 If the buyer is the cause disappears in such a way
that its existence is
of delay, then it is at the
unknown or it cannot be
buyer’s risk. recovered.
ART. 1262 — AS TO DETERIORATION
If Art. 1262 will apply in a Contract of 3. If the deterioration was
sale, it provides that the buyer, in without the fault of the
addition to recovery of damages may seller, the impairment is
compel the seller to make delivery borne by the buyer.
under 1165, but if the determinate
4. But if the deterioration is
thing is loss, then the obligation shall
through the fault of the
be extinguished if the loss was without seller, the buyer has 2

👉
the fault of the seller. options:

XPNs:
1. When the seller is in delay;
👉 Rescission
Fulfillment

2. By reason of law; NOTE: In both cases, with

3. There’s a stipulation; or damages.
4. When the nature of law
AS TO IMPROVEMENTS
requires the obligation of risk.
5. If the thing is improved by
Q: How about if the subject matter its nature, or by time, the
is an indeterminate thing? improvement shall inure to
the benefit of the buyer.
NOTE: This does not apply to
a sale because sale requires HERE: SM before delivery
but after perfection has
that the subject matter be beared fruits, it shall be for
determinate or at least the benefit of the buyer.
determinable.
6. But if the thing improves at
A: In obligations involving generic the expense of the seller, he
shall have no other rights
things, loss is not a ground to
than that granted to the
extinguish the obligation because the usufructuary.

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HERE: This is a situation
whereby the subject matter
of the sale has been subject
to a perfected contract of
sale.
ILLUSTRATION: X and Y
agreed already that X will
sell his piece of land but the
land will be delivered only 3
months from now. But if
within the 3 month period,
the seller introduced
improvements thereon, the
seller cannot remove the
improvements at the time of
the delivery as provided in
Article 1189(6). It says that
the removal cannot be had
if the same will result in an
injury to the subject matter.
NOTE: In Art. 1189 (6), upon
delivery there is already transfer of
ownership, thus, if there is already
transmission of ownership, it
involves the transmission of risk.
Res Perit domino.
After ART. 1504 —
Delivery
GR: there’s transmission of ownership
and that includes the transmission of
risks. Res Perit Domino
XPNS [1504]:
1. 1504 (1) - na deliver na but
pursuant to the contract, yung
pagmamayari is under the seller’s
name pa rin. If reserved ownership
by the seller is by the reason of
securing the performance of the
buyer in its obligation, but
delivered the thing, the risk is still
upon the buyer.
EX: You bought a photocopier
but OR wasn’t issued yet
because the seller wanted to
make sure you secure your
obligations. Still, the machine
was delivered and due to the
flood, the machine was
destroyed. The one who will
bear the loss is you and not
the seller.
In Lawyer's Coop v. Tabora
— Tabora bought a set of
books from Lawyers coop and
wasn't able to pay it in full.
Unfortunately, a fire happened
on May 15, 1955. As a
measure of goodwill, he was
given another set of volumes
but despite what happened,
the lawyer's coop still asked
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
for the payment of the books
he bought (balance of the
books that were burned).
Tabora’s contention: there is
force majeure, so his
obligation is extinguished. It
was agreed upon the contract
that the title and ownership
shall remain at the ownership
of Lawyer’s Coop. Since the
ownership is still at Lawyer’s
coop, then they must bear the
loss.
SC: No. Res Perit Domino
does not mean in this case
that Lawyer’s Coop was
actually the owner. This is a
situation that involves the
exception in 1504 (1).
Lawyer’s coop still owned the
books for purposes of
securing the performance of
Atty. Tabora because it is not
yet fully paid. 1504 (1) the risk
is at the buyer because the
products are already in his
possession. Therefore, the
liability of Tabora was not
extinguished.
Another Contention of
Tabora: Obligation is
extinguished because the loss
of the subject matter was
because of fire.
SC: The obligation of the
Lawyer’s coop is to deliver a
determinate thing which they
already did. The obligation of
atty. Tabora is a personal
obligation, which is to pay the
balance. Payment involves
money which is an
indeterminate thing or generic
thing. Therefore, even if there
was a fire, genus does not
perish, so the obligation of
Atty. Tabora is not
extinguished because it is a
personal obligation that
involves a generic thing.
2. 1504 (2) - where actual delivery
has been delayed through the fault
of either the buyer or seller the
goods are at the risk of the party in
fault.
NOTE: Only contracts of sale where the subject matter
is determinate or specific pursuant to the maxim
Genus Nunquam Perit (generic thing never perishes)
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AT THE TIME OF PERFECTION
Article 1493. If at the time the contract of sale is
perfected, the thing which is the object of the contract
has been entirely lost, the contract shall be without
any effect.
But if the thing should have been lost in part only, the
vendee may choose between withdrawing from the
contract and demanding the remaining part, paying its
price in proportion to the total sum agreed upon.
(1460a)
Article 1494. Where the parties purport a sale of
specific goods, and the goods without the knowledge
of the seller have perished in part or have wholly or
in a material part so deteriorated in quality as to be
substantially changed in character, the buyer may at
his option treat the sale:
1. As avoided; or
2. As valid in all of the existing goods or in so
much thereof as have not deteriorated, and as
binding the buyer to pay the agreed price for
the goods in which the ownership will pass, if
the sale was divisible. (n)
AFTER PERFECTION BUT BEFORE DELIVERY
Article 1504. Unless otherwise agreed, the goods
remain at the seller's risk until the ownership
therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the
goods are at the buyer's risk whether actual delivery
has been made or not, except that:
1. Where delivery of the goods has been made
to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership
in the goods has been retained by the seller
merely to secure performance by the buyer
of his obligations under the contract, the
goods are at the buyer's risk from the time of
such delivery;
2. Where actual delivery has been delayed
through the fault of either the buyer or
seller the goods are at the risk of the party in
fault. (n)
NOTE: This provision talks about prior to delivery. This
involves, goods, books, bulk of books, grain, fruits but
not immovable.
Article 1480. Any injury to or benefit from the thing
sold, after the contract has been perfected, from the
moment of the perfection of the contract to the time of
delivery, shall be governed by articles 1163 to 1165,
and 1262.
This rule shall apply to the sale of fungible things,
made independently and for a single price, or without
consideration of their weight, number, or measure.
Should fungible things be sold for a price fixed
according to weight, number, or measure, the risk
shall not be imputed to the vendee until they have
been weighed, counted, or measured and delivered,
unless the latter has incurred in delay.
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
Article 1262. An obligation which consists in the
delivery of a determinate thing shall be extinguished if
it should be lost or destroyed without the fault of the
debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even
for fortuitous events, the loss of the thing does not
extinguish the obligation, and he shall be responsible
for damages. The same rule applies when the nature
of the obligation requires the assumption of risk
Article 1163. Every person obliged to give something
is also obliged to take care of it with the proper
diligence of a good father of a family, unless the law or
the stipulation of the parties requires another standard
of care. (1094a)
Article 1164. The creditor has a right to the fruits of
the thing from the time the obligation to deliver it
arises. However, he shall acquire no real right over it
until the same has been delivered to him. (1095)
Article 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the right
granted him by article 1170, may compel the debtor to
make the delivery.
If the thing is indeterminate or generic, he may ask
that the obligation be complied with at the expense of
the debtor.
If the obligor delays, or has promised to deliver the
same thing to two or more persons who do not have
the same interest, he shall be responsible for any
fortuitous event until he has effected the delivery.
(1096)
Article 1537. The vendor is bound to deliver the thing
sold and its accessions and accessories in the
condition in which they were upon the perfection of the
contract.
All the fruits shall pertain to the vendee from the day
on which the contract was perfected. (1468a)
Article 1538. In case of loss, deterioration or
improvement of the thing before its delivery, the rules
in article 1189 shall be observed, the vendor being
considered the debtor. (n)
Article 1189. When the conditions have been
imposed with the intention of suspending the efficacy
of an obligation to give, the following rules shall be
observed in case of the improvement, loss or
deterioration of the thing during the pendency of the
condition:
(1) If the thing is lost without the fault of the
debtor (seller), the obligation shall be
extinguished;
(2) If the thing is lost through the fault of the
debtor (seller), he shall be obliged to pay
damages; it is understood that the thing is lost
when it perishes, or goes out of commerce, or
disappears in such a way that its existence is
unknown or it cannot be recovered;
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(3) When the thing deteriorates without the fault
of the debtor (seller), the impairment is to be
borne by the creditor (buyer);
(4) If it deteriorates through the fault of the debtor
(seller) , the creditor may choose between the
rescission of the obligation and its
fulfillment, with indemnity for damages in
either case; (both cases with damages)
(5) If the thing is improved by its nature, or by
time, the improvement shall inure to the
benefit of the creditor (buyer);
(6) If it is improved at the expense of the debtor
(seller), he shall have no other right than that
granted to the usufructuary. (1122)
HERE: SM is already from the perfected
contract of sale.
READ like this: If the improvement is caused by the
seller, then the seller can only remove it without
injury to the subject matter.
The only logical and reasonable conclusion one can
derive from the foregoing discussion is that the rule of
Res Perit Domino provided in Article 1504 on goods,
applies only to “loss” and provides no application to
issues pertaining to “deterioration”, “fruits” and
“improvements over the subject matter of the sale.
AFTER CONSUMMATION OR AFTER DELIVERY
Article 1504. Unless otherwise agreed, the goods
remain at the seller's risk until the ownership therein is
transferred to the buyer, but when the ownership
therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or
not xxx
1. Where delivery of the goods has been made to the
buyer or to a bailee for the buyer, in pursuance of the
contract and the ownership in the goods has been
retained by the seller merely to secure performance
by the buyer of his obligations under the contract, the
goods are at the buyer’s risk from the time of such
delivery;
2. Where actual delivery has been delayed through
the fault of either the buyer or seller the goods are at
the risk of the party in fault. (n)
LAWYER’s COOP v. TABORA
Generic things do not perish. Thus, the obligation is
not extinguished. Money is an indeterminate thing.
FACTS:
TABORA bought from LAWYERS COOPERATIVE:
1. 1 complete set of American Jurisprudence
consisting of 48 volumes with 1954 pocket
parts
2. plus 1 set of American Jurisprudence,
General Index of 4 volumes for P1,675.50
3. Freight cost of P6.90 amounting to P1, 682.40
TABORA made partial payment of P300 leaving a
balance of P1, 382.40 and the books were delivered
and received for TABORA on MAy 15, 1955 in his law
office.
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
CONTROVERSY: There was a fire that destroyed and
burned the law office and library of TABORA, thus, the
books bought were burned.
TABORA failed to pay the monthly installments agreed
upon on the balance of the purchase price. The
company demanded payment of the installments due.
Hence the case for recovery of the balance of the
obligation. The company likewise demanded TABORA
to pay 25% of the amount due as liquidated damages.
TABORA’s ALLEGATIONS:
1. Invoked force majeure as a defense
2. That the loss of the books was due to force
majeure, hence, he cannot be held
responsible for the loss.
RTC - ordered TABORA to pay the company the sum
of P1,382.40 with the legal interest from the filing of
the complaint + sum equivalent to 25% of the total
amount due as liquidated damages
ISSUE: W/N TABORA is liable for the balance of
P1,382.40 despite the fact that the books were
burned.
RULING:
YES. TABORA is liable for the balance despite the
fire.
While as a rule the loss of the object of the contract
of sale is borne by the owner or in case of force
majeure the one under obligation to deliver the object
is exempt from liability, the application of that rule
does not here obtain because the law on the contract
entered into on the matter argues against it.
HERE:
There was an express stipulation that the loss or
damage to the books after delivery to the buyer shall
be borne by the buyer.
Article 1504 provides that where delivery of the goods
has been made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the ownership
in the goods has been retained by the seller merely to
secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk
from the time of such delivery.
The obligation does not refer to a determinate thing,
but is pecuniary in nature, and the obligor bound
himself to assume the loss after the delivery of the
goods to him. The obligor(buyer) agreed to assume
any risk concerning the goods from the time of their
delivery, which is an exception to the rule provided for
in Article 1262 of our Civil Code.
REMEDIES IN CASE OF BREACH
1. the remedies of the buyer;
2. the ordinary remedies of the seller;
3. the special remedies of an unpaid seller of
goods; and
4. the sale of movable on installments.
REVIEW
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REMEDY: Specific performance for the delivery of the

In case of breach of a contract, which gives rise to a
reciprocal obligations, there are 2 consequence:
1. RESCISSION if the breach is substantial; or
2. Specific performance if the breach is not
substantial.
thing.
Q: X and Y agreed that the former will buy from the
latter a laptop and that Y will personally deliver it or
make it available to pick up. What if hindi i-deliver ni
X?

But in both cases it is with damages.
NOTE: both parties in a contract of sale are debtors and
creditors of each other. The seller has an obligation to
deliver but is entitled to receive payment. On the other
hand, the buyer is entitled to receive the subject matter
and to pay the price in certain in money or its equivalent.
A: 1598 is the remedy. Remedy of Specific performance.
If there is no delivery and there’s already a payment, the
buyer may choose to demand the delivery. File in court a
specific performance.
BREACH OF SELLER’S WARRANTY

THEREFORE: BOTH parties have remedies against
each other. The buyer has remedies against the seller
and the seller has remedies against the buyer.
REMEDIES OF THE
BUYER
1. NON DELIVERY
Specific performance for
the delivery of the thing
2. BREACH OF
WARRANTY
A. Accept + Recoupment
through diminution of
price or extinction.
B. Accept + Damages
C. Refuse to Accept +
Damages
D. Rescission + Refusal;
- Rescind + Refuse if not
yet delivered;
- Rescind + Return if
already received.
E. Ask for damages
- Deduction from the
value of the goods to the
warranty agreed upon
Article 1599. Where there is a breach of warranty
by the seller, the buyer may, at his election:
1. Accept or keep the goods and set up
against the seller, the breach of warranty by
way of recoupment in diminution or
REMEDIES OF THE extinction of the price;
SELLER 2. Accept or keep the goods and maintain an
action against the seller for damages for
the breach of warranty;
3. Refuse to accept the goods, and maintain
an action against the seller for damages for
the breach of warranty;
4. Rescind the contract of sale and refuse to
receive the goods or if the goods have
already been received, return them or offer
to return them to the seller and recover the
price or any part thereof which has been
paid.
When the buyer has claimed and been granted a
remedy in anyone of these ways, no other remedy
can thereafter be granted, without prejudice to the
provisions of the second paragraph of article 1191.
Where the goods have been delivered to the buyer, he
cannot rescind the sale if he knew of the breach of
warranty when he accepted the goods without
protest, or if he fails to notify the seller within a
reasonable time of the election to rescind, or if he
fails to return or to offer to return the goods to the
seller in substantially as good condition as they
were in at the time the ownership was transferred to
the buyer. But if deterioration or injury of the
goods is due to the breach of warranty, such
deterioration or injury shall not prevent the buyer
from returning or offering to return the goods to
the seller and rescinding the sale.

Where the buyer is entitled to rescind the sale and

REMEDIES OF THE BUYER
NON-DELIVERY
Article 1598. Where the seller has broken a contract
to deliver specific or ascertained goods, a court
may, on the application of the buyer, direct that the
contract shall be performed specifically, without
giving the seller the option of retaining the goods
on payment of damages. The judgment or decree
may be unconditional, or upon such terms and
conditions as to damages, payment of the price and
otherwise, as the court may deem just. (n)
elects to do so, he shall cease to be liable for the
price upon returning or offering to return the
goods. If the price or any part thereof has already
been paid, the seller shall be liable to repay so much
thereof as has been paid, concurrently with the return
of the goods, or immediately after an offer to return
the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and
elects to do so, if the seller refuses to accept an offer
of the buyer to return the goods, the buyer shall
thereafter be deemed to hold the goods as bailee
for the seller, but subject to a lien to secure the
payment of any portion of the price which has
been paid, and with the remedies for the
enforcement of such lien allowed to an unpaid
seller by article 1526.

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5. In the case of breach of warranty of quality, such
loss, in the absence of special circumstances
showing proximate damage of a greater amount, is
the difference between the value of the goods at
the time of delivery to the buyer and the value they
would have had if they had answered to the
warranty. (n)
In case the seller breaches his warranty, the buyer may
avail of the following remedies:
1ST REMEDY: Accept + Recoupment through
diminution of price or extinction.
Accept or keep the goods and set up against the
seller, the breach of warranty by way of recoupment in
diminution or extinction of the price;
Recoupment (reconvencion): the act of
rebating or recouping a part of a claim upon
which one is sued by means of a legal or
equitable right resulting from a counterclaim
arising out of the same transaction. It is the
setting up of a demand arising from the same
transaction as the plaintiff’s claim, to abate or
reduce that claim.
In First United v. Bayanihan — the 2nd
transaction’s warranty expired. 1st transaction-
nabayaran; 2nd transaction- may sira. Dahil may
sira sa 2nd transaction, ayaw na bayaran ng first
united yung balance ng first transaction.
Bayanihan Argument: the defect was in the
first transaction, so the first transaction must still
be paid.
SC: Recoupment is the act of rebating or
recouping a part of a claim upon which one is
sued by means of a legal or equitable right
resulting from a counterclaim arising out of
the same transaction. It is the setting up of a
demand arising from the same transaction as
the plaintiff’s claim, to abate or reduce that
claim.
HERE: it was not proper for first United to not
pay the first transaction just because there were
defects in the second transaction.
If there’s a breach of warranty, you may reduce
or extinguish payment by recoupment but ONLY
if it arises from the same contract/transaction.
2ND REMEDY: Accept + Damages
Accept or keep the goods and maintain an action
against the seller for damages for the breach of
warranty;
3RD REMEDY: Refuse to Accept + Damages
Refuse to accept the goods, and maintain an action
against the seller for damages for the breach of
warranty;
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
4TH REMEDY:
A. Rescission + Refusal;
B. Rescind + Refuse if not yet delivered;
C. Rescind + Return if already received.
HOWEVER: Buyer cannot rescind if upon receiving the
subject matter, he already knew that there was a breach
of warranty.
1. Upon acceptance of the thing, the buyer already
knew that there was defect and did not protest to
it
2. Did not notify the seller of the defect
3. Failed to return or offer to return the thing at the
same condition at the time it was transferred
4. If there is rescission, the buyer can receive the
price subject to the return of the thing to the
seller.
5. But if the seller will not return the price received
to the buyer, as buyer he transforms into a
bailee, a depositary for the purpose of keeping
the goods.
If you rescind based on 1599 (4), then you can recover
the price upon the return of the thing to the seller. If the
seller does not return the money or does not accept
what you’re returning, then the buyer can transform to a
baillee. (Baillee- purpose of safe keeping of goods).
5TH REMEDY:
A. Ask for damages
B. Deduction from the value of the goods to the
warranty agreed upon.
Art. 1599 (5), breach of quality. If in agreement, there’s a
certain standard of quality covered as a warranty in the
contract and upon the arrival of the goods it did not meet
the standard of quality, then the buyer can demand for
the difference of the value if it was the warranty both
parties agreed upon.
EX: You bought Class A bananas but you received Class
B. As a buyer, you can recover the value of the goods by
deducting the warranty agreed upon. If the price of Class
B is P10k, and the warranty agreed for Class A is P20k,
you can recover the P10k.
FIRST UNITED v. BAYANIHAN
FACTS:
FIRST UNITED and BLUE STAR were associate
construction firms sharing financial resources,
equipment and technical personnel on a case-to-case
basis.
From May 27, 1992 to July 8, 1992, they ordered 6
units of dump trucks from BAYANIHAN, engaged in
importing and reconditioning used Japan-made trucks
and selling trucks to interested buyers who were
engaged in the construction business.
In Sep 1992, FUCC ordered from BAYANIHAN 1 unit
of Hino Mover that BAYANIHAN delivered on the same
date. FUCC ordered a unit of Isuzu Transit Mixer that
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was delivered to FUCC. For the 2 purchases, FUCC
partially paid in cash and the balance through
post-dated checks.
CONTROVERSY: Upon presentment of the checks for
payment, FUCC ordered the payment stopped.
BAYANIHAN demanded the full settlement of the
obligation from FUCC. Instead, FUCC informed
BAYANIHAN that they were withholding the payments
due to the breakdown of the 2nd dump truck delivered
on May 27, 1992.
BAYANIHAN filed an action for collection on April 29,
1993 seeking payment of the unpaid balance in the
amount of P735K.
FUCC’S ALLEGATIONS:
1. They stopped the payment of P735K because
BAYANIHAN refused to repair the 2nd dump
truck
2. They informed BAYANIHAN of the defects in
the unit but refused to comply with the
warranty compelling them to incur expenses
for the repair and spare parts.
3. That BAYANIHAN should return the price of
the defective unit worth P830K minus P735K
with 12% pa interest on the difference of P90K
on May 1993 until it is fully paid
4. That BAYANIHAN should reimburse them the
P247,950 as the expenses for the repair of the
unit with 12% pa from Dec 16, 1992
5. That BAYANIHAN should pay exemplary
damages
BAYANIHAN allegations:
1. That FUCC were not legally justified in
withholding payment of the unpaid balance of
the purchase price of the Hino Mover and
Isuzu Transit Mixer due to the alleged defects
in 2nd unit because the purchase of 2 units
was an entirely different transaction from the
sale of dump trucks, for which the warranties
had expired.
RTC - FUCC is liable for the payment of the unpaid
balance of the purchase price of the Hino and Isuzu
unit for P735K. It was ruled that FUCC cannot claim
legal compensation because the claims they had set
up in the counterclaim were not liquidated and
demandable.
CA - affirmed. It was held that recoupment could not
be properly invoked by FUCC because the
transactions were different. The expenses incurred for
the repair and spare parts of the second dump truck
were not a proper subject of recoupment because they
did not arise out of the purchase of the Hino Prime
Mover and the Isuzu Transit Mixer.
ISSUE:
1. W/N there FUCC validly exercised the right
of recoupment through withholding of
payment of the unpaid balance of the
purchase price ;
2. W/N cost of repairs for the 2nd unit
delivered on May 27, 1992 could be offset
for FUCC’s obligation to BAYANIHAN
RULING:
NO. FUCC could not validly resort to recoupment
against BAYANIHAN.
Article 1599(1) provides for the remedy of recoupment
in diminution or extinction of price in case of breach of
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
warranty by the seller. (reduction or extinction of the
price of the same unit sold.)
IN THIS CASE:
It was improper for FUCC to set up their claim for
repair expenses and other spare parts of the dump
truck against their remaining balance on the price of
the prime mover and the transit mixer they owed to
BAYANIHAN.
To be entitled for recoupment:
1. The claim must arise from the same
transaction
HERE: The purchase of the prime mover and the
transit mixer and not to a previous contract involving
the purchase of the dump truck.
Consequently, the breakdown of one of the dump
trucks did not grant the right to stop and withhold the
payment of the remaining balance on the last 2
purchases.
2.YES. COMPENSATION was permissible.
ARTICLE 1279 provides that in order that
compensation may be proper, it is necessary:
1. That each of the obligors be bound principally,
and that he be at the same time a principal
creditor of the other;
2. That both debts consists in a sum of money, or
if the things due are consumable, they be of
the same kind, and also of the same quality if
the latter has been stated;
3. That the two debts be due;
4. That they be liquidated and demandable;
5. That over neither of them there be any
retention or controversy, commenced by third
persons and communicated in due time to the
debtor.
Compensation takes effect by operation of law when all
of the requisites are present. It extinguishes both debts
to the concurrent amount.
HERE:
With FUCC’s expenses for the repair of the dump truck
already established and determined with certainty, it
follows that legal compensation could take place
because all the requirements were present.
IN THIS CASE: The amount P71,350K should be set
off against FUCC’s unpaid obligation of P735,000.00,
leaving a balance of P663,650.00, the amount FUCC
still owed to BAYANIHAN.
SUSPENSION OF PAYMENTS IN ANTICIPATION OF
BREACH
Article 1590. Should the vendee be disturbed in the
possession or ownership of the thing acquired, or
should he have reasonable grounds to fear such
disturbance, by a vindicatory action or a foreclosure of
mortgage, he may suspend the payment of the price
until the vendor has caused the disturbance or danger
to cease, unless the latter gives security for the return
of the price in a proper case, or it has been stipulated
that, notwithstanding any such contingency, the
vendee shall be bound to make the payment. A mere
act of trespass shall not authorize the suspension
of the payment of the price. (1502a)
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NOTE: This talks about the ownership or possible
ownership of the thing is going to be challenged.
SITUATION: if you know that the thing is subject to an
action to recover title, then you learned after the
payment of ½ of the price. You do not want to pay
because there is another who wants to buy the same.
Article 1590 allows the suspension of payment.
GR: As a rule, you have to pay.
XPN: Article 1590 allows the suspension of payments.
Q: What are the grounds for suspension of
payments by the buyer?
A:
1. Vendee is disturbed in the possession or
ownership (actual disturbance or in law)
EX: Vindicatory Action (someone is filing
a case) or Foreclosure of mortgage
NOTE: A mere act of trespass shall
not authorize the suspension of the
payment of the price. It should be a
disturbance in law.
2. Vendee has reasonable grounds to fear such
disturbance by a vindicatory action or
foreclosure of a mortgage (danger of
disturbance)
EX: Even if there is no Foreclosure of
mortgage yet but you received a notice
that the property is going to be sold at a
public auction, that is a ground fear of
the disturbance.
TAKE NOTE: MERE TRESPASS is not a disturbance
that will authorize the suspension of the payment of the
price.
Q: When can the suspension of payments by the
buyer be lifted?
A: When the vendor has caused the disturbance or
danger to cease.
XPNS:
1. Seller gives security for the return of the price
in a proper case
2. It has been stipulated that, notwithstanding any
such contingency, the vendee shall be bound
to make the payment.
REMEDIES OF THE BUYER
ORDINARY REMEDIES SPECIAL REMEDIES
a. Movables (Art. 1593) In hierarchical
application:
b. Immovables (Arts.
1591 and 1592) a. Right of retention /
possessory lien
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
Note: Rescission of b. Stoppage in transitu
sale involving
immovables must be c. Special right of
a simple sale. If it is resale
paid on installment,
d. Special right to
the Maceda Law shall
rescind
apply.
c. Goods (Arts. 1595,
1596, 1597)
ORDINARY REMEDIES OF A SELLER
MOVABLES
Article 1593. With respect to movable property, the
rescission of the sale shall of right take place in the
interest of the vendor, if the vendee, upon the
expiration of the period fixed for the delivery of the
thing, should not have appeared to receive it, or,
having appeared, he should not have tendered the
price at the same time, unless a longer period has
been stipulated for its payment. (1505)
If the buyer does not pay the price at the time of delivery,
or if there is a period for delivery, or for a period to pay
the price, but did not pay the same, the remedy of the
seller is rescission.
The seller may have the sale rescinded if upon the
expiration of the period fixed for the delivery of the thing,
the buyer refuses to receive, or if there was delivery
refuses to make a payment, if the payment was not
made simultaneously.
REMEDY: Rescission if you are not paid; or refuses to
receive the subject of the sale
RECKONING POINT: Delivery
IMMOVABLES
Article 1591. Should the vendor have reasonable
grounds to fear the loss of immovable property sold
and its price, he may immediately sue for the
rescission of the sale.
Should such ground not exist, the provisions of article
1191 shall be observed. (1503)
Article 1592. In the sale of immovable property, even
though it may have been stipulated that upon failure to
pay the price at the time agreed upon the rescission of
the contract shall of right take place, the vendee may
pay, even after the expiration of the period, as long as
no demand for rescission of the contract has been
made upon him either judicially or by a notarial act.
After the demand, the court may not grant him a new
term. (1504a)
TAKE NOTE: Articles 1591 & 1592 as remedies
involving an immovable involves a simple sale.
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If the sale is by installments, the MACEDA LAW will ILLUSTRATION: there was a special order for pancit but
apply, subject to a situation where it is covered by the it was canceled by the one who ordered. This cannot be
MACEDA LAW. rescinded, thus Article 1595 shall be applied.

IMMOVABLE SCENARIO REMEDY

When may a seller rescind— Ownership is Action for Specific Performance
transferred to as an action against him for the
1. Reasonable grounds to fear the loss of immovable
property buyer price of the goods

2. There may be a stipulation in the contract HERE: Demand

allowing the seller to rescind as of right for failure performance of the price
to pay the price.
HOWEVER: If the thing is not
Effect if there is Effect if there is delivered and the seller
stipulation but there stipulation and there manifested an intention not to
was no judicial or was judicial or notarial perform the obligation, there is
notarial demand for demand for rescission no action for the price.
rescission yet
No ownership is 1. If the goods are not readily
The buyer can still pay The buyer can no longer transferred over saleable goods
pay goods
Seller - offer to deliver the
Effect if there is payment and the rescission goods to the buyer
clause was not invoked

The seller cannot anymore rescind 2. If buyer refuses to receive

them

MOVABLE IMMOVABLE Seller - may notify the buyer

that the goods are held by
As to reckoning act the seller as Bailee and
thereafter may treat the
Delivery Demand because an goods as the buyer’s
immovable cannot be
delivered to the hands of Maintain an Action for the
another person Price.

When Price is Irrespective of delivery, the seller

GOODS
Article 1595. Where, under a contract of sale, the
ownership of the goods has passed to the buyer and
he wrongfully neglects or refuses to pay for the goods
according to the terms of the contract of sale, the
seller may maintain an action against him for the price
of the goods.
Where, under a contract of sale, the price is payable
on a certain day, irrespective of delivery or of transfer
of title and the buyer wrongfully neglects or refuses to
pay such price, the seller may maintain an action
for the price although the ownership in the goods
has not passed. But it shall be a defense to such an
action that the seller at any time before the
judgment in such action has manifested an
inability to perform the contract of sale on his part
or an intention not to perform it.
Although the ownership in the goods has not passed,
if they cannot readily be resold for a reasonable price,
and if the provisions of article 1596, fourth paragraph,
are not applicable, the seller may offer to deliver the
goods to the buyer, and, if the buyer refuses to
receive them, may notify the buyer that the goods
are thereafter held by the seller as bailee for the
buyer. Thereafter the seller may treat the goods as
the buyer's and may maintain an action for the price.
(n)
Payable on may maintain an Action for the
Certain Day Price
Article 1596. Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, the seller
may maintain an action against him for damages for
nonacceptance.
The measure of damages is the estimated loss
directly and naturally resulting in the ordinary course
of events from the buyer's breach of contract.
Where there is an available market for the goods in
question, the measure of damages is, in the absence
of special circumstances showing proximate damage
of a different amount, the difference between the
contract price and the market or current price at the
time or times when the goods ought to have been
accepted, or, if no time was fixed for acceptance, then
at the time of the refusal to accept.
If, while labor or expense of material amount is
necessary on the part of the seller to enable him to
fulfill his obligations under the contract of sale, the
buyer repudiates the contract or notifies the seller to
proceed no further therewith, the buyer shall be liable
to the seller for labor performed or expenses made
before receiving notice of the buyer's repudiation or
countermand. The profit the seller would have made if
the contract or the sale had been fully performed shall
be considered in awarding the damages. (n)

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NOTE: This Article talks about when the goods were 2. The buyer manifested his inability to perform his
wrongfully neglected or if there was a refusal to accept. obligation
If there’s non-acceptance, the remedy is damages.
3. That the buyer committed a breach of
RULES obligations in a contract of sale

UNSAERN PAG RESCIND? Just give a Notice of

The seller may maintain an action against him for
Rescission
Damages for the non-acceptance, in accordance with
these rules: COMPARE:

1. The damages shall cover the estimated loss

MOVABLE IMMOVABLE GOODS
directly and naturally resulting in the ordinary
course of event from the breach; As to rescission

2. If there is an available market for the goods, Judicial or a Give a notice of

absent circumstances showing proximate notarial demand rescission
for rescission
damage of a different amount, the measure of
damages is the difference between the As to ordinary remedies of the seller
contract price and the market or current
price at the time when the goods ought to have If the buyer will RESCISSION if: 1. ACTION FOR
been accepted, or refused. not pay or not PRICE
accept the 1. There is
thing, you may reasonable If there is no
Q: What is the value of damages? grounds to payment
have the sale
RESCINDED fear the loss
A: difference between the contract price of immovable 2. ACTION FOR
and the current market price at the time property THE PRICE
when the goods should have been 2. There may be If there is a
accepted. a stipulation in period but the
the contract same was not
3. If buyer repudiates the contract or notifies the allowing the paid
seller to
seller to proceed no further, buyer shall be liable
rescind as of 3. If the goods is
for the Labor performed or Expenses of material right for failure not readily
amount is necessary on the part of the seller to to pay the resaleable
enable him to fulfill his obligations under the sale price. (perishable):
of the made before receiving notice of the a. Offer to
buyer’s repudiation and countermand; and deliver

4. The profits the seller would have made if the b. Notify the
contract of sale was fully performed shall be buyer
considered in awarding such damages (Article c. The seller
1596) become the
bailee for
VALUE of DAMAGES: contract price; the current market the buyer
price at the time when the goods should have been d. ACTION
accepted. FOR THE
PRICE
BUT: if the goods are of such nature that the seller has
spent labor and expense and materials, the value of 4. DAMAGES if:
GROUND is
DAMAGES for non-acceptance shall be the value of wrongful neglect
labor performed, expenses made and market price. or refusal to
accept not
involving a
RESCISSION IN CASE THE BUYER HAS readily
REPUDIATED THE SALE OR MANIFESTED perishable good
INABILITY TO PERFORM HIS OBLIGATIONS but the good is
readily
resaleable
Article 1597. Where the goods have not been 5. RESCISSION if:
delivered to the buyer, and the buyer has repudiated
the contract of sale, or has manifested his inability to a. The buyer
perform his obligations thereunder, or has committed repudiates
a breach thereof, the seller may totally rescind the the contract
contract of sale by giving notice of his election so to
do to the buyer. (n) b. buyer
manifested
his inability
Extreme remedy of the seller. If it involves goods under to perform
the 3 situation: his
obligations
1. Repudiation of the contract of sale by the buyer

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c. The buyer fixed in the contract. (1466)

breaches
obligation
TAKE NOTE: Art. 1524 is subject to stipulations
As to the value of damages
XPN: You qualify as an unpaid seller; Art. 1526 applies.
1. Difference
between the
contract price
Article 1526. Subject to the provisions of this Title,
and the market notwithstanding that the ownership in the goods may
value have passed to the buyer, the unpaid seller of
goods, as such, has:
2. If made with
labor, expenses 1. A lien on the goods or right to retain them
and materials: for the price while he is in possession of them;
value of labor, 2. In case of the insolvency of the buyer, a right
expenses and
of stopping the goods in transitu after he
material + the
loss of profits
has parted with the possession of them;

3. A right of resale as limited by this Title;

SPECIAL REMEDIES OF AN UNPAID SELLER 4. A right to rescind the sale as likewise limited
by this Title.
The provisions of the Civil Code on the remedies of an
unpaid seller demonstrate the intention of the Code Where the ownership in the goods has not passed
to the buyer, the unpaid seller has, in addition to his
Commission to empower individuals with remedies to
other remedies a right of withholding delivery
take matters into their own hands when the similar to and coextensive with his rights of lien and
circumstances warrant the same, provided it does not stoppage in transitu where the ownership has
involve physical intrusion into the person or privacy passed to the buyer. (n)
of the buyer in default, by being able to achieve the
legal effects without need of seeking the intervention RIGHTS OR REMEDIES OF AN UNPAID SELLER
of the courts.
Whether or not ownership over the goods has been
In the case of the remedies of the unpaid seller, the transferred to the buyer, the unpaid seller is entitled to
minimum requirement is that the goods are in the the following rights or remedies:
possession of the seller so as to prevent an actual
physical tussle with the buyer in the exercise of such 1. Possessory Lien
remedies. 2. Stoppage in transitu
3. Special right of resale; and
4. Special right to rescind
Article 1525. The seller of goods is deemed to be an
unpaid seller within the meaning of this Title: TAKE NOTE: They have a hierarchical application:

1. When the whole of the price has not been 👉 (3) and (4) can be availed of only when either of
paid or tendered; (1) and (2) has been exercised.

2. When a bill of exchange or other negotiable

instrument has been received as conditional
👉 The remedies (3) and (4) have the word special
because they are rights only to the unpaid seller
payment, and the condition on which it was
as defined by law and are not of same nature
received has been broken by reason of the
dishonor of the instrument, the insolvency of under Article 1191 in reciprocal contracts
the buyer, or otherwise.
If the thing is in the possession of the unpaid seller -
In articles 1525 to 1535 the term "seller" includes an thepossessory lien
agent of the seller to whom the bill of lading has been
indorsed, or a consignor or agent who has himself If the thing is not in the possession of the seller, and he
paid, or is directly responsible for the price, or any
is an unpaid seller, the buyer becomes insolvent, unpaid
other person who is in the position of a seller. (n)
seller may exercise stoppage in transitu.
Q: Who is an unpaid seller?(Art. 1525)
THEN: by exercising either retention or stoppage, the
A: Unpaid seller if: seller may exercise the special right of resale or the
1. Total or partial price has not been paid. special right to rescind.
2. If the checks were dishonored
POSSESSORY LIEN
GENERAL RULE:

ARTICLE 1524. The vendor shall not be bound to

👉 Right of Retention
deliver the thing sold, if the vendee has not paid him
the price, or if no period for the payment has been

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👉 The unpaid seller will keep the physical
possession thing but will not release it to the
buyer until he is paid by the buyer.
👉 Unpaid seller has the possession of the thing
and over the thing, there is a lien putting a
possessory lien over it so in case the buyer will
demand the delivery of the thing, the unpaid
seller will not give it back until the unpaid seller
will be paid.
REQUISITES
Article 1527. Subject to the provisions of this Title, the
unpaid seller of goods who is in possession of them is
entitled to retain possession of them until payment or
tender of the price in the following cases, namely:
1. Where the goods have been sold without any
stipulation as to credit;
2. Where the goods have been sold on credit,
but the term of credit has expired;
3. Where the buyer becomes insolvent.
The seller may exercise his right of lien
notwithstanding that he is in possession of the goods
as agent or bailee for the buyer. (n)
NOTE: The possessory lien of the unpaid seller is
exercisable only in the following instances:
1. Where the goods have been sold without any
stipulation as to credit;
2. Where the goods have been sold on credit, but
the term of credit has expired;
3. Where the buyer becomes insolvent.
PART DELIVERY
Article 1528. Where an unpaid seller has made part
delivery of the goods, he may exercise his right of lien
on the remainder, unless such part delivery has been
made under such circumstances as to show an intent
to waive the lien or right of retention. (n)
Q: What if out of 50 bags, 25 were delivered to the
carrier?
A: As a GR: the unpaid seller may exercise the
possessory lien on the remainder.
XPN: when there is waiver.
NOTE: Possessory lien can only be exercised to the
goods that are left with the unpaid seller.
RIGHT OF RETENTION IS LOST
Article 1529. The unpaid seller of goods loses his
lien thereon:
1. When he delivers the goods to a carrier or
other bailee for the purpose of transmission to
the buyer without reserving the ownership
in the goods or the right to the possession
thereof;
2. When the buyer or his agent lawfully
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obtains possession of the goods;
3. By waiver thereof.
The unpaid seller of goods, having a lien thereon,
does not lose his lien by reason only that he has
obtained judgment or decree for the price of the
goods. (n)
Q: When do you lose the possessory lien?
A:
1. When he delivers the goods to a carrier or
other bailee for the purpose of transmission to
the buyer without reserving the ownership in
the goods or the right to the possession thereof;
2. When the buyer or his agent lawfully obtains
possession of the goods;
3. By waiver thereof.
PREREQUISITE: The unpaid seller must be still in
possession of the thing to exercise the possessory lien.
TAKE NOTE: But he shall not lose his lien by reason
only that he has obtained a judgment or decree for the
price of goods (Article 1529)
MEANING: the unpaid seller loses his possessory lien,
when he parts with physical possession of the goods, as
when he delivers the goods to the carrier.
IN THAT CASE: he still has the remedy of stoppage in
transitu, but only if the buyer has in the meantime
become insolvent.
STOPPAGE IN TRANSITU
👉 Right of Retention (*Right of Stoppage ata?)
👉 Usually exercised by the seller when the thing is
already in transit and the buyer is incapable of
paying for the thing.
👉 The right of the unpaid seller which he has to
repossess the thing before they come into the
possession of the insolvent buyer.
Article 1530. Subject to the provisions of this Title,
when the buyer of goods is or becomes insolvent, the
unpaid seller who has parted with the possession
of the goods has the right of stopping them in
transitu, that is to say, he may resume possession
of the goods at any time while they are in transit,
and he will then become entitled to the same rights in
regard to the goods as he would have had if he had
never parted with the possession. (n)
ILLUSTRATION: There is an order to be paid via COD,
but the insolvent buyer canceled the order. The remedy
of the seller is to stop the same in transit.
REQUISITES:
1. You are the unpaid seller
2. Seller is no longer in possession of the goods
3. The buyer is insolvent
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DEFINITION OF INSOLVENT
ARTICLE 1636. In the preceding articles in this Title
governing the sale of goods, unless the context or
subject matter otherwise requires:
xxxx
(2) A person is insolvent within the meaning of this
Title who either has ceased to pay his debts in the
ordinary course of business or cannot pay his debts
as they become due, whether insolvency proceedings
have been commenced or not.
Under the Law on Sales, a buyer is deemed insolvent
who either has, whether there was insolvency
proceedings or not:
1. ceased to pay his debts in the ordinary course of
business;
2. cannot pay debts when due.
NOTE: Insolvency Proceedings is not a requisite to
exercise the right of stoppage in transit.
WHEN DEEMED IN TRANSIT / NOT IN TRANSIT
Article 1531. Goods are in transit within the meaning
of the preceding article:
1. From the time when they are delivered to a
carrier by land, water, or air, or other bailee for
the purpose of transmission to the buyer, until
the buyer, or his agent in that behalf, takes
delivery of them from such carrier or other
bailee;
2. If the goods are rejected by the buyer, and the
carrier or other bailee continues in possession
of them, even if the seller has refused to
receive them back.
Goods are no longer in transit within the meaning of
the preceding article:
1. If the buyer, or his agent in that behalf,
obtains delivery of the goods before their
arrival at the appointed destination;
2. If, after the arrival of the goods at the
appointed destination, the carrier or other
bailee acknowledges to the buyer or his
agent that he holds the goods on his
behalf and continues in possession of
them as bailee for the buyer or his agent; and
it is immaterial that further destination for
the goods may have been indicated by the
buyer;
3. If the carrier or other bailee wrongfully
refuses to deliver the goods to the buyer or
his agent on that behalf.
If the goods are delivered to a ship, freight train, truck,
or airplane chartered by the buyer (buyer rented), it is
a question depending on the circumstances of the
particular case, whether they are in the possession of
the carrier as such or as agent of the buyer.
If part delivery of the goods has been made to the
buyer, or his agent on that behalf, the remainder of the
goods may be stopped in transitu, unless such part
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delivery has been under such circumstances as to
show an agreement with the buyer to give up
possession of the whole of the goods. (n)
HOW EXERCISED
Article 1532. The unpaid seller may exercise his
right of stoppage in transitu either by obtaining
actual possession of the goods or by giving notice of
his claim to the carrier or other bailee in whose
possession the goods are. Such notice may be given
either to the person in actual possession of the goods
or to his principal. In the latter case the notice, to be
effectual, must be given at such time and under such
circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the
buyer.
When notice of stoppage in transitu is given by the
seller to the carrier, or other bailee in possession of
the goods, he must redeliver the goods to, or
according to the directions of, the seller. The
expenses of such delivery must be borne by the seller.
If, however, a negotiable document of title
representing the goods has been issued by the carrier
or other bailee, he shall not be obliged to deliver or
justified in delivering the goods to the seller unless
such document is first surrendered for cancellation. (n)
2 WAYS TO EXERCISE STOPPAGE IN TRANSITU
1. Obtaining actual possession of the goods
2. By giving notice of his claim to the carrier or
other bailee in whose possession the goods are
HERE: to be effectual, the notice should be
given to—
→ The person who will deliver the goods
i.e., rider.
→ The head office of the carrier i.e., head
ng LBC.
NOTE: Notice given to the head office must be given
within a reasonable time within which the rider may be
informed of the stoppage of the delivery.
Once notice of the stoppage has been given, the rider
must redeliver the goods to the seller or he must
redeliver the goods in accordance to the instructions of
the seller.
SPECIAL RIGHT OF RESALE
Article 1533. Where the goods are of perishable
nature, or where the seller expressly reserves the
right of resale in case the buyer should make
default, or where the buyer has been in default in
the payment of the price for an unreasonable time,
an unpaid seller having a right of lien or having
stopped the goods in transitu may resell the
goods. He shall not thereafter be liable to the
original buyer upon the contract of sale or for any
profit made by such resale, but may recover from the
buyer damages for any loss occasioned by the
breach of the contract of sale.
Where a resale is made, as authorized in this article,
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the buyer acquires a good title as against the
original buyer.
It is not essential to the validity of resale that
notice of an intention to resell the goods be given
by the seller to the original buyer. But where the
right to resell is not based on the perishable nature of
the goods or upon an express provision of the contract
of sale, the giving or failure to give such notice shall
be relevant in any issue involving the question
whether the buyer had been in default for an
unreasonable time before the resale was made.
It is not essential to the validity of a resale that notice
of the time and place of such resale should be given
by the seller to the original buyer.
The seller is bound to exercise reasonable care
and judgment in making a resale, and subject to this
requirement may make a resale either by public or
private sale. He cannot, however, directly or
indirectly buy the goods. (n)
The special right of resale can be made only when the
unpaid seller has previously exercised either his
1. right of possessory lien; or
2. stoppage in transit
Q: When can you do a resale?
A: The following requisite must be followed:
1. That the seller is an unpaid seller
2. The unpaid seller has exercised either the right
of retention or has exercised the right of
stoppage in transit
3. Any of the following EVENTS would exist:
a. The goods are of Perishable nature;
b. The seller expressly Reserves the right
of resale in case the buyer should make
default; or
c. Where the buyer has been in Default in
the payment of the price for an
unreasonable time.
Q: If there is a resale, do you have a remedy against
the original insolvent buyer?
A: Yes. The unpaid seller can still recover from the
original buyer damages for any loss by reason of breach.
Thus, the subsequent buyer will have a good title even
against the original buyer.
NOTE: Notice of resale to the original buyer is not
required that there is an intention to resell it even the
notice of the time and place of resale and this will not
affect the validity of the resale.
NOTE: Resale can be done through:
1. Public Sale / Auction
2. Private Sale
SPECIAL RIGHT TO RESCIND
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Article 1534. An unpaid seller having the right of
lien or having stopped the goods in transitu, may
rescind the transfer of title and resume the
ownership in the goods, where he expressly
reserved the right to do so in case the buyer
should make default, or where the buyer has been in
default in the payment of the price for an
unreasonable time. The seller shall not thereafter be
liable to the buyer upon the contract of sale, but may
recover from the buyer damages for any loss
occasioned by the breach of the contract.
The transfer of title shall not be held to have been
rescinded by an unpaid seller until he has
manifested by notice to the buyer or by some
other overt act an intention to rescind. It is not
necessary that such overt act should be
communicated to the buyer, but the giving or failure to
give notice to the buyer of the intention to rescind shall
be relevant in any issue involving the question
whether the buyer had been in default for an
unreasonable time before the right of rescission
was asserted. (n)
An unpaid seller can exercise the right to rescind
when:
1. The unpaid seller has either exercised the right
of retention or has exercised right of stoppage in
transitu;
2. Any of the SITUATIONS are present:
a. The right to rescind is expressly
reserved or
b. The buyer has been in delay for an
unreasonable time.
3. The seller must be an unpaid seller.
EFFECT IF THE SELLER RESCIND THE SALE
The seller shall not be liable to the original buyer but the
buyer may be made liable for damages for any loss by
reason of the breach of contract.
RECTO LAW
NOTE: This involves a sale of personal property by
installments. (i.e cars)
It is called RECTO LAW because prior to the Civil Code,
sale by installments of personal property was previously
governed by Article 1454 of the 1899 Civil Code. It was
amended by Act No. 4122 or Installment Sales Law
authored by Senator Recto. The amended portion of
Article 1454 is carried over to the New Civil Code as
Article 1484-1486. Hence, it is called Recto Law.
APPLICABILITY
1. Sale of personal property payable in installments
2. Contracts which purport to be a lease of
personal property with option to buy when the
owner will be deprived the renter of possession
or enjoyment of the thing.
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PURPOSE
In Levy v. Gervacio — SC explained that the law is
aimed zat those sales where the price is payable in
several installments, for, generally, it is in these cases
that partial payments consist in relatively small amounts,
constituting thus a great temptation for improvident
purchasers to buy beyond their means. There is no such
temptation where the price is to be paid in cash, or, as in
the instant case, partly in cash and partly in one term,
for, in the latter case, the partial payments are not so
small as to place purchasers off their guard and delude
them to a miscalculation of their ability to pay.
CONCEPT OF SALE BY INSTALLMENTS
In Levy v. Gervacio — SC held that for there to be a
sale of installments, there should be at least two (2)
installments.
HERE: there was no installment; it was just a one-time
payment of the balance.
SO: RECTO Law cannot apply.
LEVY HERMANOS v. GERVACIO
FACTS:
LEVY sold to GERVACIO a packard car. After making
the initial payment, GERVACIO executed a PN for the
balance of P2,400 payable on or before June 15, 1937
with interest at 12% pa to secure the payment of the
PN, GERVACIO mortgaged the car to LEVY.
Eventually, GERVACIO failed to pay hence the
foreclosure sale of the car which was sold at a public
auction, at which, LEVY was the highest bidder for
P1,800.
CASE: the action is for the collection of the balance of
P1,600 + interest.
This was an issue, because under 1484(3), if
foreclosure of chattel mortgager is exercised, there
shall have no other further action against the
purchaser to recover any unpaid balance of the price
HERE: After the foreclosure of the vehicle, there was
still a deficiency. But LEVY filed another action for the
recovery of the deficiency.
ISSUE: W/N RECTO LAW can be applied in this
case
RULING:
NO. RECTO LAW cannot be applied.
This is a case of straight term payment. In which the
balance shall be paid on June 15, 1937.
The SC said that for there to be sale on installments
there should be at least 2 installments.
IN THIS CASE: There were no installments. It was
just a payment of the balance one time. It was not a
sale by installments, thus, the protection of the
RECTO LAW cannot be applied.
“Undoubtedly, the law is aimed at those sales
where the price is payable in several installments,
for, generally, it is in these cases that partial
payments consist in relatively small amounts,
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
constituting thus a great temptation for improvident
purchasers to buy beyond their means. There is no
such temptation where the price is to be paid in
cash, or, as in the instant case, partly in cash and
partly in one term, for, in the latter case, the partial
payments are not so small as to place purchasers
off their guard and delude them to a miscalculation
of their ability to pay.”
THEREFORE: GERVACIO can still be made liable for
the recovery of the deficiency even after the
foreclosure of the chattel.
RECTO LAW is there to protect the improvident
buyers.
REMEDIES
Article 1484. In a contract of sale of personal property
the price of which is payable in installments, the
vendor may exercise any of the following remedies:
1. Exact fulfillment of the obligation, should
the vendee fail to pay;
2. Cancel the sale, should the vendee's failure
to pay cover two or more installments;
3. Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the
vendee's failure to pay cover two or more
installments. In this case, he shall have no
further action against the purchaser to recover
any unpaid balance of the price. Any
agreement to the contrary shall be void.
(1454- A-a)
REMEDIES (exclusive ni ah)
1. Exact fulfillment of the obligation, should the
vendee fail to pay; (1 installment)
Sending a demand letter is not the
exacting of fullfilment under RECTO
LAW.
NEED: Action For Specific Performance
2. Cancel or Rescind the sale, should the
vendee's failure to pay cover 2 or more
installments.
There shall be return of the price but if
there is stipulation that there is forfeiture
and that it is not unconscionable (1486)
3. Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the
vendee's failure to pay cover 2 or more
installments. (c/f Personal Property Security
Act)
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CREDTRANS REVIEW balance of P2,400 payable on or before June 15, 1937

with interest at 12% pa to secure the payment of the
PN, GERVACIO mortgaged the car to LEVY.
MORTGAGOR MORTGAGEE CHATTEL
MORTGAGE
Eventually, GERVACIO failed to pay hence the
The one who The one whom The subject foreclosure sale of the car which was sold at a public
gives the the mortgage matter auction, at which, LEVY was the highest bidder for
security (the was instituted P1,800.
borrower) (the lender)
CASE: the action is for the collection of the balance of
P1,600 + interest.
NOTE: Chattel Mortgage has already been repealed
by the Personal Property Security Act. This was an issue, because under 1484(3), if
foreclosure of chattel mortgage is exercised, there
HERE: what is made is a security interest
shall have no other further action against the
purchaser to recover any unpaid balance of the price
GRANTOR SECURED COLLATERAL
CREDITOR HERE: After the foreclosure of the vehicle, there was
still a deficiency. But LEVY filed another action for the
The one who The one for The subject recovery of the deficiency.
constitutes the whom the matter
security security ISSUE: W/N RECTO LAW can be applied in this
interest interest was case
constituted
RULING:
NO. RECTO LAW cannot be applied.
AS OF NOW: There is yet no statement by the SC that This is a case of straight term payment. In which the
the word chattel mortgage will be replaced by security balance shall be paid on June 15, 1937.
interest.
The SC said that for there to be sale on installments
IN THIS CASE: he shall have no further action against there should be at least 2 installments.
the purchaser to recover any unpaid balance of the
price. Any agreement to the contrary shall be void. IN THIS CASE: There was no installments. It was just
a payment of the balance one time. It was not a sale
NOTE: Actual foreclosure is necessary to bar by installments, thus, the protection of the RECTO
the vendor from recovering the unpaid balance. LAW cannot be applied.

“Undoubtedly, the law is aimed at those sales

1. The 1st remedy (exact fulfillment of the obligation) where the price is payable in several installments,
is available even after the first default. for, generally, it is in these cases that partial
HOWEVER: the 2nd and 3rd remedies (cancel payments consist in relatively small amounts,
constituting thus a great temptation for improvident
and foreclose) are only available after failure to
purchasers to buy beyond their means. There is no
pay 2 or more installments. such temptation where the price is to be paid in
cash, or, as in the instant case, partly in cash and
2. When the 3rd remedy is chosen, there is an partly in one term, for, in the latter case, the partial
explicit provision that the seller can have no payments are not so small as to place purchasers
further action against the buyer to recover any off their guard and delude them to a miscalculation
unpaid balance of the price. Any agreement to of their ability to pay.”
the contrary shall be void.
THEREFORE: GERVACIO can still be made liable for
the recovery of the deficiency even after the
GR: The remedies under Article 1484 have been foreclosure of the chattel.
recognized as alternative, not cumulative, in that the
exercise of one would bar the exercise of the others. RECTO LAW is there to protect the improvident
buyers.
XPN: when you chose the first option (i.e., exact
fulfillment) and the vendee refuses to comply or the
same has become impossible, resort to rescission of the FORECLOSURE
contract will still be allowed. Also, the seller may still
recover from the buyer the unpaid balance of the ACT 1405 Rule 39 of Rules of Court
purchase price if after choosing the first remedy there
If there is foreclosure 1. An action for specific
exists a deficiency. and there is deficiency, performance is filed
the latter cannot be
After the foreclosure under the RECTO LAW, if there is recovered. 2. There will be levy if
deficiency, this cannot be demanded because it is there is no performance
already barred.
3. There will be execution
sale
LEVY HERMANOS v. GERVACIO
4. Auction sale
FACTS:
LEVY sold to GERVACIO a packard car. After making 5. Even if there is
the initial payment, GERVACIO executed a PN for the deficiency, deficiency

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 SALES REVIEWER | 2nd EXAM COVERAGE
can be recovered.
Deficiency can be
recovered because the
remedy was through the
execution of the action for
specific performance
In Tajanlangit v. Southern Motors — the choice that
was been made was to sue for a specific performance.
Therefore, if there is deficiency in the execution sale for
the action for specific performance, there can still be
recovery of the deficiency.
But if remedy exercised is foreclosure, there can be no
recovery of the deficiency.
Article 1485. The preceding article shall be applied to
contracts purporting to be leases of personal property
with option to buy, when the lessor has deprived the
lessee of the possession or enjoyment of the thing.
(1454-A-a)
Article 1486. In the case referred to in the two
preceding articles, a stipulation that the installments or
rents paid shall not be returned to the vendee or
lessee shall be valid insofar as the same may not be
unconscionable under the circumstances. (n)
A stipulation for the forfeiture of the amounts paid by
the buyer even when the contract is rescinded is not
really contrary to the remedy of rescission since to a
great extent, it offers a means of restitution to the
obligee for the loss in value or deterioration of the thing
subject of the sale, or recompense for the lost
opportunity suffered by the seller due to the default of
the buyer.
MACEDA LAW
RA 6552 – An Act to Provide Protection to Buyers of
Real Estate on Installment Payments
RATIONALE
This law aims to protect buyers from Real Estate
Developers.
Section 1. This Act shall be known as the "Realty
Installment Buyer Act."
Section 2. It is hereby declared a public policy to
protect buyers of real estate on installment payments
against onerous and oppressive conditions.
This came into effect in September 1972, it has a policy
to protect real estate buyers on installment basis from
onerous and oppressive conditions. The law seeks to
address the acute housing shortage problem in our
country that has prompted thousands of middle and
lower class buyers of houses, lots, and condominium
units to enter into all sorts of contracts with private
housing developments involving installment schemes.
In Active Realty & Development Corporation v.
Daroya — The law seeks to address the acute housing
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
shortage problem in our country that has prompted
thousands of middle and lower class buyers of houses,
lots and condominium units to enter into all sorts of
contracts with private housing developers involving
installment schemes.
Lot buyers, mostly low-income earners eager to acquire
a lot upon which to build their homes, readily affix their
signatures on these contracts, without an opportunity to
question the onerous provisions therein as the contract
is offered to them on a "take it or leave it" basis.
Most of these contracts of adhesion, drawn exclusively
by the developers, entrap innocent buyers by requiring
cash deposits for reservation agreements which
oftentimes include, in fine print, onerous default clauses
where all the installment payments made will be forfeited
upon failure to pay any installment due even if the
buyers had made payments for several years. Real
estate developers thus enjoy an unnecessary advantage
over lot buyers who they often exploit with iniquitous
results. They get to forfeit all the installment payments of
defaulting buyers and resell the same lot to another
buyer with the same exigent conditions.
COVERAGE
Section 3. In all transactions or contracts involving the
sale or financing of real estate on installment
payments, including residential condominium
apartments but excluding industrial lots,
commercial buildings and sales to tenants under
Republic Act Numbered Thirty-eight hundred forty-
four, as amended by Republic Act Numbered Sixty-
three hundred eighty-nine, where the buyer has paid
at least two years of installments, the buyer is
entitled to the following rights in case he defaults in
the payment of succeeding installments:
xxxx
COVERAGE: sale or financing of real estate on
installment payments + including residential
condominium apartments
EXCLUDING:
1. industrial lots;
2. commercial buildings;
3. sales to tenants under RA 3844(Agrarian
Reform) as amended.
NOTE: this enumeration is not exclusive, an example
would be the sale on installment of commercial or office
condo units.
In Garcia v. CA — MACEDA Law was not applicable as
the sale involved 5 parcels of land (6.9 ha) were not
residential lots. It was beyond contemplation of such
consideration as residential property.
In Sps. Dela Cruz v. CA — the contract must involve a
subdivision developer, a condominium corporation, a
real estate developer. The contract between the parties
was a contract to sell real property. But as reflected in
the records, here, the respondents as buyers paid to the
petitioners, as sellers an installment of P50K after the
initial payment of 1M. But, it is not a contract involving a
subdivision owner or developer. This only involves 2
owners and the subsequent spouses. Thus, not covered
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by MACEDA Law.
NOTE: if it is not covered by MACEDA Law, apply Article
1592.
In Vive Eagle Land v. National Home Mortgage — the
contract must involve a developer.
ILLUSTRATION: The sale of commercial lots involving a
vast area. Does it necessarily mean that the seller
involving a commercial or industrial lot can no
longer cancel the sale?
A: They can still cancel the sale. It is just that if they are
not covered by the MACEDA law, they are not covered
by protections of rights and remedies of this law.
ROYAL PLAINS VIEW v. MEJIA
FACTS:
Dominador executed a Contract of Sale in favor of
Bias Mejia involving the subject property. Bias died
and was survived by his son, Nestor.
Sometime in 2005, Nestor met Renato. At that time,
Nestor was in actual physical occupation of a parcel of
land with an entire area of 12.3 hectares. Renato and
Nestor agreed to split the entire lot but both titles were
still under the name of spouses Ramones.
Nestor and Royal Plains entered into a Deed of
Conditional Sale. Where Royal Plains was to pay a
sum of P8M of which P500k was for down payment.
The balance was to be paid in 36 equal monthly
installments of P208,333.30 from June 30, 2005 -May
30, 2008.18
The March 23, 2005 DOCS was revoked and a new
deed was executed on April 11, 2007 between Nestor
and Royal Plains represented by Renato. The new
DOCS stated that Royal Plains had paid Nestor the
amount of P1,972,000.00 and the remaining balance
was to be paid in 40 equal monthly installments of
P150,000.00 from July 1, 2007 - June 2010.
Royal Plains and Nestor entered into a verbal
gentlemen's agreement that they would divide the
6-hectare lot into two and Royal Plains handled the
OCT and partition. Nestor sold the whole property to
the Spouses Egina for the P 12M.
Renato received a document entitled "Rescission of
Deed of Conditional Sale" dated February 5, 2010
rescinding the April 11, 2007 DOCS alleging that
Renato & Royal had defaulted in the payment of the
monthly installments agreed upon.
Royal and Renato filed a Complaint for Declaration of
Nullity of the Instrument.
RTC- Nestor could not have been the owner of the
subject property because his father's (Bias') contract
with Dominador was a conditional sale and there was
yet no conveyance of the same in Bias' favor.
CA- Contract to Sell. Since Royal had already paid at
least two years of installments then the Maceda Law
should be applied. When Nestor canceled the
contract, he failed to comply with the requirement
under the Maceda Law, that is, the refund of the cash
surrender value.
Royal argues: Maceda law should not be applied.
Issue: Is Maceda Law applicable? No.
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
RULING: It is clear that the buyer's protection under
R.A. No. 6552 only applies to contracts of sale of real
estate on installment payments, including residential
condominium apartments, but excluding industrial lots,
commercial buildings and sales to tenants. A
purchase by a company involved in the real estate
business, as in this case, of a six-hectare lot can
hardly be considered as residential.
This is not to say that sellers in a contract to sell
industrial and commercial lots are precluded from
canceling the contract when buyers defaulted in one
installment.
In other words, whether the property is residential,
commercial or industrial, Maceda Law does not make
any distinction insofar as the availability of the remedy
of cancellation by the seller in case of nonpayment of
installments is concerned.
The only distinction lies on the added protection given
by the law to residential buyers, which is not enjoyed
by commercial and industrial lot buyers. Indeed, the
Maceda Law addressed the predicament of thousands
upon thousands of residential property buyers who, in
the words of this Court, are hounded to suffer the loss
of their life earnings only because of an oversight or
difficulty in paying one or two installments.
HERE: Without looking at the facts, you would know that
the MACEDA Law will not apply because the area of the
subject property is 12.3 hectares. Again, it is obvious
that it is not for residential but for industrial or
commercial purposes.
Since the contract between Royal Plains and Mejia is a
contract to sell, there can be no rescission.
Section 4. In case where less than two years of
installments were paid, the seller shall give the
buyer a grace period of not less than sixty (60)
days from the date the installment became due. If
the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel
the contract after thirty (30) days from receipt by
the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act.
Section 5. Under Section 3 and 4, the buyer shall
have the right to sell his rights or assign the same to
another person or to reinstate the contract by updating
the account during the grace period and before actual
cancellation of the contract. The deed of sale or
assignment shall be done by notarial act.
Section 6. The buyer shall have the right to pay in
advance any installment or the full unpaid balance of
the purchase price any time without interest and to
have such full payment of the purchase price
annotated in the certificate of title covering the
property.
Section 7. Any stipulation in any contract hereafter
entered into contrary to the provisions of Sections 3,
4, 5 and 6, shall be null and void.
Section 8. If any provision of this Act is held invalid or
unconstitutional, no other provision shall be affected
thereby.
Section 9. This Act shall take effect upon its approval.
Approved: August 26, 1972.
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MACEDA LAW COVERS CONTRACTS TO SELL
The employment of the term “cancellation” under the
Maceda Law clearly indicates that it covers contracts to
sell residential real estate on installments.
NOTE: Not applicable to all sales on installments in real
properties.
CONSEQUENCE IF NOT COVERED BY MACEDA
LAW
There can still be cancellation but MACEDA LAW cannot
be raised as a defense for protection. (Royal Plains
View v. Mejia)
NOTE: Contract to Sell is also applicable in
Maceda Law.
Contract to Sell Contract of Sale
Notarial Cancellation Notarial Demand
Rescission
RIGHTS & REMEDIES
AT LEAST 2 YEARS OF INSTALLMENT PAID
Section 3.
Xxxxxx
A. To pay, without additional interest, the
unpaid installments due within the total
grace period earned by him which is
hereby fixed at the rate of one month grace
period for every one year of installment
payments made: PROVIDED, That this right
shall be exercised by the buyer only once
in every five years of the life of the contract
and its extensions, if any.
B. If the contract is canceled, the seller shall
refund to the buyer the cash surrender value
of the payments on the property equivalent
to fifty per cent (50%) of the total payments
made, and, after five years of installments,
an additional five per cent (5%) every year
but not to exceed ninety per cent (90%) of
the total payments made: Provided, That the
actual cancellation of the contract shall
take place after thirty (30) days from receipt
by the buyer of the notice of cancellation
or the demand for rescission of the
contract by a notarial act and upon full
payment of the cash surrender value to the
buyer.
Down payments, deposits or options on the contract
shall be included in the computation of the total
number of installment payments made.
THE BUYER IS CONSEQUENCES
ENTITLED TO:
Longer Grace If not canceled - Entitled to 1
Period month grace period for every 1
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year of installment payments
made: PROVIDED, That this right
shall be exercised by the buyer
only once in every five (5) years
of the life of the contract and its
extensions, if any.
EX. Already paid 3 years, then the
grace period would be 3 months.
Cancellation a. refund to the buyer the cash
surrender value of the
payments on the property
equivalent to fifty per cent
(50%) of the total
payments made,
b. after five (5) years of
installments, an additional
five per cent (5%) every
year but not to exceed
ninety per cent (90%) of
for the total payments made
EX. Paid 7 years, so
there’s 60%.
c. Actual cancellation must
be
→ thirty (30) days from
receipt by the buyer of
a notice of cancellation
or the demand for
rescission by a notarial
act
→ upon full payment of
the cash surrender
value to the buyer.
TWIN REQUIREMENTS
1. Receipt of the buyer of the notarial
cancellation/rescission or notarial demand; and
2. Full Payment of the full cash surrender value
EFFECT/s OF ABSENCE
1. Cancellation is void
2. Rescission is invalid
Before getting someone’s house or property, make sure
to serve notarial rescission and fully pay the cash
surrender value.
Q: Will it immediately be canceled?
A: No. Takes effect after 30 days after complying the two
requisites
SUMMARY
1. Give a minimum of 2 years grace period.
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TAKE NOTE: If despite the grant of the grace period the

2. If not paid within 2 years, extend to a longer
grace period, usually a 60-days grace period.
3. If the seller wants to cancel, give a notarial notice
of cancellation. Effective 30 days after receipt.
vendee still fails to pay the installments due, the vendor
may cancel the contract after 30 days from receipt by
the vendee of the notice of cancellation or the demand
for rescission of the contract by a notarial act.

4. And pay the full return of the cash surrender DIFF IF LESS THAN 2 YRS: No cash surrender value
value. but still entitled to a notarial demand for cancellation or
notarial demand for rescission.
SUMMARY

1. If not able to pay, give the buyer a grace period, In Pagtalunan v. Vda. de Manzano, clearly a demand
the grace period depends on the years paid. letter is not the same as a notice of cancellation or
Minimum of 2 months because of the 2 years. demand for rescission. Thus, mere notice or letter that is
not notarial would not suffice.
2. If not able to pay within the grace period, you
cannot cancel because you need to serve first a
notice. (Notarial notice of cancellation or a Section 3 Section 4
notarial demand for rescission)
AS TO REQ OF NOTARIAL DEMAND
3. Pay the full amount of the cash surrender value
Entitled to a notarial demand of cancellation or notarial
computed as discussed (50% on the total
demand for rescission.
payments received but if more than 5 years,
additional 5% every year but not more than 90%) AS TO INSTALLMENTS

4. The cancellation will take place on the 30th day There should be at least Less than 2 years of
after the compliance of the 2 requirements. 2 years of installment installment payments.
payments.

LESS THAN 2 YEARS OF INSTALLMENT PAID AS TO GRACE PERIODS

Grace period is longer, 1 Fixed grace period is 60

Section 4. In case where less than two years of
installments were paid, the seller shall give the
buyer a grace period of not less than sixty (60)
days from the date the installment became due. If
the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel
the contract after thirty (30) days from receipt by
the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act.
THE BUYER IS CONSEQUENCES
ENTITLED TO:
Fixed Grace The vendor shall give the vendee
Period a grace period of not less than 60
days from the date the installment
became due, without additional
interest.
Cancellation THE 2-STEP PROCESS FOR
CANCELLATION
1. The seller should extend the
buyer a grace period of at
least 60 days from the due
date of the installments.
2. At the end of the grace
period, the seller shall
furnish the buyer with a
notice of cancellation or a
demand for rescission
through a notarial act.
Effective 30 days from the
receipt thereof.
month for every year days.
paid.
NOTE: Can only be
exercised once in every 5
years
AS TO RETURN OF CASH SURRENDER VALUE
There is return of cash No return of cash
surrender value surrender value.
ACTIVE REALTY v. DAROYA
- Involves an OFW who has entered in a COS
with the owner and developer of Town Town &
Country Hills Executive Village in Rizal
- Active Realty sent Daroya a notice of
cancellation which is not notarized.
● The Supreme Court found that Daroya has
been paying for 4 years of installments.
Therefore, she has a grace period and she
must be paid for the cash surrender value.
● Active realty failed to send a notarized notice
of cancellation and refund the cash
surrender value.
HERE: It is iniquitous that Active Realty did not
comply with the mandatory twin requirements in
cancellation of the contract.
● Contract remained valid because the
cancellation was wrong.
● The Contract to sell between the parties
remained subsisting.

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 SALES REVIEWER | 2nd EXAM COVERAGE
SInce the cancellation is void; the sale is valid. But
property cannot be given back to the buyer as the
same was sold to an innocent purchaser for value
Discussion: Daroya paid a price but if you multiply the
monthly installments, it is greater than the contract price.
The sad thing in this case is Active Realty sold the
property to another which is an innocent purchaser for
value. Therefore, Daroya cannot redeem the property
anymore.
HERE: Daroya can get the refund of everything she has
paid with interest. (Compensatory and Legal Interest)
REVIEW
Consequence of failure to comply with the twin
requirement:
1. Cancellation is void
2. Sale is valid
But if sold to an innocent purchaser for value, the
property can no longer be redeemed. Thus, the
remedy is return of everything given + interest.
PRYCE PROPERTIES v. NOLASCO
HERE: There is an automatic cancellation provision in
the contract to sell and sending by registered mail is
deemed service regardless of whether it is
received or not.
- The stipulation is void as the same is in
violation of Section 7.
- In this case, they started counting on the date
of sending. .
● Receipt is not the same as sending.
● The notarial cancellation / notarial rescission
was formally defective yet it was notarized via
a jurat. The requirement on the notarial
should be in an acknowledgment.
- There must be a competent ID. What was
presented here was a Cedula.
Section 4 of RA 6552 requires four (4) conditions
before the seller may actually cancel the contract:
(1) the defaulting buyer has paid less than 2
years of installments;
(2) the seller must give such defaulting buyer a
60-day grace period, reckoned from the date
the installment became due;
(3) if the buyer fails to pay the installments due at
the expiration of the said grace period, the
seller must give the buyer a notice of
cancellation and/or a demand for rescission
by notarial act; and
(4) the seller may actually cancel the contract
only after the lapse of 30 days from the
buyer’s receipt of the said notice of
cancellation and/or demand for rescission by
notarial act.
No proper cancellation so the sale remained valid.
Legal remedy of the defaulting buyer:
1. Pay in advance any installment at any time,
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
necessarily without interest;
2. Pay the full unpaid balance of the purchase
price at any time without interest, and to have
such full payment of the purchase price
annotated in the certificate of title covering
the real property subject of the transaction
under RA 9552; or
3. Claim an equitable refund of prior
payments and/or deposits made by the
defaulting buyer to the seller pertinent to their
transaction under RA 9552, if any.
In Planters v. Chandumal — If the seller will not accept
the payment of cash surrender value, payment must be
consigned to extinguish the payment of the cash
surrender value.
In Optimum Development v. Jovellanos — if the
cancellation was proper, the 2 requirements have been
complied and after the lapse of the 30 day-period. Then,
action for unlawful detainer may be filed to eject the
person in possession of the property.
OTHER RIGHTS GRANTED TO THE BUYER
1. The right to sell his rights or assign the same
to another person or to reinstate the contract
by updating the account during the grace
period and before actual cancellation of the
contract. (Section 5 of the Maceda Law)
2. the right to pay in advance any installment or
the full unpaid balance of the purchase price any
time without interest and to have such full
payment of the purchase price annotated in the
certificate of title covering the property. (Section
6 of the Maceda Law)
REIMBURSEMENT OF THE TOTAL AMOUNT PAID
IN CASE OF SUBDIVISION OR CONDOMINIUM
PROJECT
THE SUBDIVISION AND CONDOMINIUM BUYERS’
PROTECTIVE DECREE PRESIDENTIAL DECREE
NO. 957
Section 1. Title. This Decree shall be known as THE
SUBDIVISION AND CONDOMINIUM BUYERS'
PROTECTIVE DECREE. xxxx
Section 23. Non-Forfeiture of Payments. No
installment payment made by a buyer in a
subdivision or condominium project for the lot or unit
he contracted to buy shall be forfeited in favor of
the owner or developer when the buyer, after due
notice to the owner or developer, desists from
further payment due to the failure of the owner or
developer to develop the subdivision or
condominium project according to the approved
plans and within the time limit for complying with the
same. Such buyer may, at his option, be
reimbursed the total amount paid including
amortization interests but excluding delinquency
interests, with interest thereon at the legal rate.
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Section 24. Failure to pay installments. The rights
of the buyer in the event of this failure to pay the
installments due for reasons other than the failure of
the owner or developer to develop the project shall be
governed by Republic Act No. 6552.
Where the transaction or contract was entered into
prior to the effectivity of Republic Act No. 6552 on
August 26, 1972, the defaulting buyer shall be entitled
to the corresponding refund based on the
installments paid after the effectivity of the law in
the absence of any provision in the contract to the
contrary.
SEC 23 ILLUSTRATION: when it comes to
condominium units, there is a pre-selling. That the unit
will be available in 2025. But if the same is not yet
available, the intending buyer may stop the payment and
this will not be taken against him. The reason for the
suspension of payment is because of the fault of the
developer as the pre-approved plan was not followed.
Thereafter, reimbursement can be availed of if the
developer still does not comply with the plan.
The buyer’s cause of action ripens only when the
developer fails to complete the project on the lapse
of the completion period stated on the sale contract
or the developer’s Licenses to Sell.
However, the mere dissatisfaction of the buyer as to
the completion date of the project does not itself
constitute substantial breach as to authorize the buyer
to rescind the contract and ask for refund of the amounts
paid to the seller.
CONDITIONS AND WARRANTIES
CONDITIONS
Article 1545. Where the obligation of either party to a
contract of sale is subject to any condition which is not
performed, such party may refuse to proceed with
the contract or he may waive performance of the
condition. If the other party has promised that the
condition should happen or be performed, such
first mentioned party may also treat the
nonperformance of the condition as a breach of
warranty.
Where the ownership in the thing has not passed,
the buyer may treat the fulfillment by the seller of his
obligation to deliver the same as described and as
warranted expressly or by implication in the
contract of sale as a condition of the obligation of
the buyer to perform his promise to accept and
pay for the thing. (n)
KINDS OF CONDITIONS IMPOSED IN A CONTRACT
OF SALE
CONDITIONS IMPOSED CONDITIONS IMPOSED
IN THE PERFECTION ON THE
OF THE CONTRACT PERFORMANCE OF AN
OBLIGATION
Condition is required for There is already a
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
the contract to be perfected contract and a
perfected condition is imposed
upon the consummation
portion.
If not performed, Failure Merely gives the other
to comply results in the party the option to either
failure to contract refuse to proceed with
the sale or to waive the
condition
NOTE: Choice of the
injured party
The alleged "failure" of respondent spouses to eject
the lessees from the lot in question and to deliver
actual and physical possession thereof cannot be
considered a substantial breach of a condition for two
reasons: first, such "failure" was not stipulated as a
condition — whether resolutory or suspensive —
in the contract; and second, its effects and
consequences were not specified either. (Power
Commercial v. CA)
EFFECT OF NON-FULFILLMENT OF CONDITION:
1. If the obligation of either party is subject to any
condition and such condition is not fulfilled, such
party may either:
→ Refuse to proceed with the contract
→ Proceed with the contract, waiving the
performance of the condition
2. If the condition is in the nature of a promise
that it should happen, the non- performance
of such a condition may be treated by the
other party as a breach of warranty.
ROMERO v. CA
A perfected contract of sale may either be absolute or
conditional depending on whether the agreement is
devoid of, or subject to, any condition imposed on the
passing of title of the thing to be conveyed or on the
obligation of a party thereto. When ownership is
retained until the fulfillment of a positive condition the
breach of the condition will simply prevent the duty to
convey title from acquiring an obligatory force. If the
condition is imposed on an obligation of a party which
is not complied with, the other party may either refuse
to proceed or waive said condition (Art. 1545, Civil
Code). Where, of course, the condition is imposed
upon the perfection of the contract itself, the failure of
such a condition would prevent the juridical relation
itself from coming into existence.
From the moment the contract is perfected, the parties
are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping
with good faith, usage and law. Under the agreement,
private respondent is obligated to evict the squatters
on the property. The ejectment of the squatters is a
condition the operative act of which sets into
motion the period of compliance by petitioner of
his own obligation, i.e., to pay the balance of the
purchase price.
Private respondent's failure "to remove the
squatters from the property" within the stipulated
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void or claim damages for breach of warranty. Thus, a

period gives petitioner the right to either refuse to
proceed with the agreement or waive that warranty may either be expressed or implied. (Pilipinas
condition in consonance with Article 1545 of the Makro v. Coco Charcoal)
Civil Code.
KINDS OF WARRANTIES
In contracts of sale particularly, Article 1545 of the
Civil Code, aforementioned, allows the obligee to EXPRESS IMPLIED
choose between proceeding with the agreement or
waiving the performance of the condition. It is this Stipulated by the parties Even if there is
provision which is the pertinent rule in the case at
stipulation, the law itself
bench. Here, evidently, petitioner has waived the
performance of the condition imposed on private which provides for such
respondent to free the property from squatters.
i.e warranty against
hidden defect
DISCUSSION: Only a condition on the performance
because there’s already an agreement to sell. In such Affirmation of facts which Exists by operation of
that, to perform the obligation to deliver, the squatters will induce the buyer to law
must be removed from the property within 60 days. buy the thing relying on
the affirmation of promise
IN THIS CASE: the squatters were not able to vacate
the property. The option not to proceed with the sale Exist because of the
should be decided by the injured party and not Ong intention and express
Siong. intention of the parties

Q: Did the buyer refuse to proceed with the contract

or waived the condition? REMEDIES IN CASE OF BREACH

A: The buyer waived the condition because he still paid.

CONDITION v. WARRANTY
CONDITION
Accidental element. It is
always stipulated.
Refer to performance of
the obligation
Art. 1599. Where there is a breach of warranty by the
seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against
WARRANTY the seller, the breach of warranty by way of
recoupment in diminution or extinction of the
It may either be price;
natural/accidental
(2) Accept or keep the goods and maintain an
Involves an obligation or action against the seller for damages for the
the subject matter breach of warranty;

Non-fulfillment will result The non-fulfillment of a (3) Refuse to accept the goods, and maintain an
to a choice either: warranty would action against the seller for damages for the
1. To refuse to proceed; constitute a breach of breach of warranty;
2. To waive a condition the warranty
(4) Rescind the contract of sale and refuse to
Upon the performance of Not only limited to an receive the goods or if the goods have already
either party obligation but may also been received, return them or offer to return
come with the SM itself. them to the seller and recover the price or any
part thereof which has been paid.
The non-happening of The non-fulfillment of a
the condition, although it warranty would When the buyer has claimed and been
may extinguish the constitute a breach of granted a remedy in any of these ways, no
obligation upon which it the warranty other remedy can thereafter be granted,
is based, generally does without prejudice to the provisions of the
not amount to a breach second paragraph of Article 1191.
of the contract of sale.
Where the goods have been delivered to the
(XPN: Art 1545, par 2) buyer, he cannot rescind the sale if he knew
of the breach of warranty when he accepted
the goods without protest, or if he fails to
WARRANTIES notify the seller within a reasonable time of
the election to rescind, or if he fails to return
or to offer to return the goods to the seller in
Any representation made by the seller of the thing with substantially as good condition as they were
respect to its character, quality, or ownership by which in at the time the ownership was transferred to
he induces the buyer to purchase the same relying on the buyer. But if deterioration or injury of the
said representation. goods is due to the breach or warranty, such
deterioration or injury shall not prevent the
A warranty is a collateral undertaking in a sale of either buyer from returning or offering to return the
goods to the seller and rescinding the sale.
real or personal property, express or implied; that if the
property sold does not possess certain incidents or Where the buyer is entitled to rescind the sale
qualities, the purchaser may either consider the sale

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and elects to do so, he shall cease to be liable
for the price upon returning or offering to
return the goods. If the price or any part
thereof has already been paid, the seller shall
be liable to repay so much thereof as has
been paid, concurrently with the return of the
goods, or immediately after an offer to return
the goods in exchange for repayment of the
price.
Where the buyer is entitled to rescind the sale
and elects to do so, if the seller refuses to
accept an offer of the buyer to return the
goods, the buyer shall thereafter be deemed
to hold the goods as bailee for the seller, but
subject to a lien to secure payment of any
portion of the price which has been paid, and
with the remedies for the enforcement of such
lien allowed to an unpaid seller by Article
1526.
(5) In the case of breach of warranty of quality,
such loss, in the absence of special
circumstances showing proximate damage of
a greater amount, is the difference between
the value of the goods at the time of delivery
to the buyer and the value they would have
had if they had answered to the warranty. (n)
In case the seller breaches his warranty, the buyer
may avail of the following remedies:
1. Accept or keep the goods and set up against the
seller, the breach of warranty by way of
recoupment in diminution or extinction of the
price;
➔ reduction or extinction of the price of the
same item or unit sold and not to a
different transaction or contract of sale.
(First United Constructors
Corporation v. Bayanihan Automotive
Corporation)
2. Accept or keep the goods and maintain an
action against the seller for damages for the
breach of warranty;
3. Refuse to accept the goods, and maintain an
action against the seller for damages for the
breach of warranty;
4. Rescind the contract of sale and refuse to
receive the goods or if the goods have already
been received, return them or offer to return
them to the seller and recover the price or any
part thereof which has been paid.
EXPRESS WARRANTIES
Article 1546. Any affirmation of fact or any promise
by the seller relating to the thing is an express
warranty if the natural tendency of such affirmation or
promise is to induce the buyer to purchase the
same, and if the buyer purchases the thing relying
thereon. No affirmation of the value of the thing,
nor any statement purporting to be a statement of the
seller's opinion only, shall be construed as a warranty,
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unless the seller made such affirmation or statement
as an expert and it was relied upon
by the buyer. (n)
REQUISITES OF EXPRESS WARRANTY
1. It must be an affirmation of fact or any
promise by the seller relating to the subject
matter of the sale;
2. The natural tendency of such affirmation or
promise is to induce the buyer to purchase
the thing; and
3. The buyer purchases the thing relying on such
affirmation or promise thereon.
XPNS:
Article 1340. The usual exaggerations in trade,
when the other party had an opportunity to
know the facts, are not in themselves
fraudulent. (n)
Article 1341. A mere expression of an opinion
does not signify fraud, unless made by an
expert and the other party has relied on the
former's special knowledge. (n)
Article 1343. Misrepresentation made in good
faith is not fraudulent but may constitute error.
(n)
1. Affirmation of the value of the thing
2. Any statement purporting to be a statement of
the seller’s opinion only
XPN TO XPN:
1. When the seller made such an affirmation or
statement as an expert.
2. The buyer relied
HARRISON v. NAVARRO
It is true that the ownership of the trucks shifted to
private respondents after the sale. But petitioner must
remember that prior to its consummation it expressly
intimated to her that it had already paid the taxes
and customs duties. Such representation shall be
considered as a seller's express warranty under
Art. 1546 of the Civil Code which covers any
affirmation of fact or any promise by the seller which
induces the buyer to purchase the thing and actually
purchases it relying on such affirmation or promise. It
includes all warranties which are derived from express
language, whether the 7 languages are in the form of
a promise or representation. Presumably, therefore,
NAVARRO would not have purchased the 2 Elf
trucks were it not for petitioner's assertion and
assurance that all taxes on its imported parts were
already settle
HERE: Expressed warranty was breached because
the taxes were not really paid by the seller.
Q: Can the buyer ask for the reimbursement she
paid for the taxes from the seller?
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A: Yes. Art. 1599, she may accept and keep the goods
and set up the breach of warranty by way of damages.
Q: Is there a warranty of second hand items?
A: No. Second hand items do not have a warranty under
the law.
MOLES v. IAC
👉 Involves a sale of a printing machine.
👉 The seller issued a certification that the second
hand machine bought from him is in A-1
condition.
👉 The machine was destroyed and was told that
the expenses would be more costly than the
price bought.
On the basis of the foregoing circumstances, the
inescapable conclusion is that the private respondent
is indeed bound by the express warranty he executed
in favor of the petitioner.
We disagree with the respondent court that private
respondents express warranty as to the A-1 condition
of the machine was merely dealer's talk.
Private respondent was not a dealer of printing or
linotype machines to whom could be ascribed the
supposed resort to the usual exaggerations of trade in
said items. His certification as to the condition of the
machine was not made to induce petitioner to
purchase it but to confirm in writing for purposes of the
financing aspect of the transaction his representations
thereon. Ordinarily, what does not appear on the face
of the written instrument should be regarded as
dealer's or trader's talk; conversely, what is specifically
represented as true in said document, as in the instant
case, cannot be considered as mere dealer's talk.
SALE OF SECONDHAND ITEMS
It is generally held that in the sale of a designated and
specific article sold as secondhand, there is no implied
warranty as to its quality or fitness for the purpose
intended, at least where it is subject to inspection at
the time of the sale.
On the other hand, there is also authority to the effect
that in a sale of a secondhand articles there may be,
under some circumstances, an implied warranty of
fitness for the ordinary purpose of the article sold or
for the particular purpose of the buyer.
TAKE NOTE: there is no implied warranty as to sale of
second hand items.
HOWEVER: Moles Case involves an express
warranty because there’s a certification that the
machine was in A-1 condition, but has actually a
defect. Therefore, there is a breach of an
express warranty.
SO—
GR: Second hand items cannot have implied
warranties.
XPN: If you put an express warranty in it. (Moles
Case, there’s an express warranty because of
the issued certificate)
NOTE: if it is an express warranty, the period to demand
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is 4 years based on the rule of rescissible contracts.
If implied warranty against hidden defects, 6 months.
IMPLIED WARRANTY
KINDS OF IMPLIED WARRANTIES
1. Warranty that the Seller has Right to Sell (1547)
2. Warranty Against Eviction (1548, 1557)
3.
4.
Warranty Against Non-Apparent Servitudes
Warranty Against Hidden Defects
5.
6.
Redhibitory Defects of Animals
Warranty as to Fitness or Quality (Sale of
Goods)
NO IMPLIED WARRANTIES
1. As is, where is sale – buy the thing on its own
condition. Vendors do not give warranty to the
quality of goods, unless there is expressed
warranty.
2. Secondhand articles
3. Sale by authority of law (e.g., foreclosure sale,
judicial sale)
WARRANTY THAT SELLER HAS RIGHT TO SELL
Article 1547. In a contract of sale, unless a contrary
intention appears, there is:
(1) An implied warranty on the part of the seller
that he has a right to sell the thing at the time
when the ownership is to pass, and that the
buyer shall from that time have and enjoy the
legal and peaceful possession of the thing;
(2) An implied warranty that the thing shall be
free from any hidden faults or defects, or any
charge or encumbrance not declared or
known to the buyer.
This article shall not, however, be held to render liable
a sheriff, auctioneer, mortgagee, pledgee, or other
person professing to sell by virtue of authority in fact
or law, for the sale of a thing in which a third person
has a legal or equitable interest. (n)
AT THE TIME WHEN THE OWNERSHIP IS TO PASS
There can be no legal waiver of such warranty without
changing the basic nature of the relationship, for the
warranty on the part of the seller that he has the capacity
to sell, i.e., to transfer ownership of the subject matter
pursuant to the sale, is the essence of sale
WARRANTY AGAINST EVICTION
Article 1548. Eviction shall take place whenever by
a final judgment (judicial process) based on a
right prior to the sale or an act imputable to the
vendor, the vendee is deprived of the whole or of a
part of the thing purchased.
The vendor shall answer for the eviction even though
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nothing has been said in the contract on the subject.
The contracting parties, however, may increase,
diminish, or suppress this legal obligation of the
vendor. (1475a)
TECHNICAL DEFINITION OF EVICTION: refers to a
judicial process; whereby the vendee is deprived of the
whole or part of the thing purchased, either by reason of:
1. Right prior to the sale; or
2. Act imputable to the vendor
Article 1557. The warranty cannot be enforced until a
final judgment has been rendered, whereby the
vendee loses the thing acquired or a part thereof.
(1480)
DISCUSSION: When you buy a property, you expect
that you won't get evicted from the property you bought.
You expect that no other person will buy the property you
bought. The seller impliedly warrants the buyer of the
property not to be evicted.
NOTE: Warranty against eviction: warranty against sa
pagpapaalis sayo sa property.
In Power Commercial v. CA — the presence of lessees
in the property is not eviction. For disturbance to amount
as an eviction, it must be disturbance in law; not
merely a trespass.
REQS FOR THE BREACH OF WARRANTY AGAINST
EVICTION
1. The purchaser has been deprived of, or evicted
from, the whole or part of the thing sold;
2. Eviction is by Final judgment;
3. Basis thereof is by virtue of a Right prior to the
sale made by the seller or an act imputable to
the vendor; and
4. Seller/Vendor has been Summoned and made
co-defendant in the suit for eviction at the
instance of the buyer
HERE: make the buyer as co-defendant.
(Third-party complaint)
In Pilipinas Makro v. Coco Charcoal — there was no
judicial action in the first place. Essentially, you cannot
acquire a final judgment.
TAKE NOTE: If you were evicted from the property you
bought because the seller was not the owner, DO NOT
FORGET to include the seller in the case.
Article 1558. The vendor shall not be obliged to make
good the proper warranty, UNLESS he is summoned
in the suit for eviction at the instance of the
vendee. (1481a)
Article 1559. The defendant vendee shall ask, within
the time fixed in the Rules of Court for answering the
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
complaint, that the vendor be made a co-defendant.
(1482a)
It is not enough that there is final judgment, there must
be eviction and that the seller must be summoned
because it is the fault of the seller that you are in that
situation.
Article 1549. The vendee need not appeal from the
decision in order that the vendor may become
liable for eviction. (n)
As long as you have summoned the seller, he can now
be made liable for eviction. There is no such requirement
that there is an appeal to make the seller liable for
warranty.
NOTE: There must be judgment before the seller can
be made liable to the warranty.
Article 1550. When adverse possession had been
commenced before the sale but the prescriptive
period is completed after the transfer, the vendor
shall not be liable for eviction. (n)
If the period of prescription ended after being sold to
you, the seller is not liable for eviction.
REMEMBER: If the property is registered under the
Torrens system, it cannot be acquired through
prescription.
If the acquisitive period of prescription was completed
after the sale (found out that it is already owned by
another person by way of acquisitive prescription), the
warranty applies.
To know if there is a breach, check the requirements and
that there is a case filed against the one who committed
the breach.
Article 1551. If the property is sold for nonpayment
of taxes due and not made known to the vendee
before the sale, the vendor is liable for eviction. (n)
If the government goes after the property, the seller is
liable for eviction because it is an act imputable to the
vendor.
In Calma v. Lachica — the buyer investigated the
property and did not rely on the title itself .
Article 1552. The judgment debtor is also
responsible for eviction in judicial sales, unless it
is otherwise decreed in the judgment. (n)
Sheriff is not liable for warranty but the owner of the
property that was sold in the foreclosure is liable for
eviction.
Article 1553. Any stipulation exempting the vendor
from the obligation to answer for eviction shall be
void, if he acted in bad faith. (1476)
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If you were evicted from the property you bought and the
4 requisites are present, you may go after the seller for
breach of warranty against eviction.
Q: Can you, in the deed of sale exempt the seller
from liability?
A: Yes, But can only be void if the waiver was done in
bad faith. (i.e the seller is aware that the property is
subjected to a pending case)
Article 1554. If the vendee has renounced the right
to warranty in case of eviction, and eviction
should take place, the vendor shall only pay the
value which the thing sold had at the time of the
eviction. Should the vendee have made the waiver
with knowledge of the risks of eviction and
assumed its consequences, the vendor shall not
be liable. (1477)
(VICED)
1. Return of the value which the thing sold had
at the time of the eviction, be it greater or lesser
than the price of the sale;
2. Income or fruits, if buyer has been ordered to
deliver them to the party who won the suit
against him;
3. Costs of the suit which caused the
eviction,and, in a proper case, those of the suit
brought against the seller for the warranty;
4. Expenses of the contract, if the buyer has paid
them; and
5. Damages and interests and ornamental
expenses, if the sale was made in bad faith.
REVIEW

WAIVER If you were ejected from the property you bought, you
cannot immediately ask for reimbursement from the
Good Faith (liability Bad faith (VOID) seller. YOU MUST WAIT FOR THE FINAL
depends on the kind of JUDGMENT and make sure to include the seller as
waiver)
co-defendant by way of third-party complaint for him to
receive summons.
2 KINDS OF WAIVER
There can be WAIVER so long as it is in good faith.
CONSCIENTE INTENCIONADA But the KIND of WAIVER will affect the consequence.

Waiver voluntarily made Buyer waives the

without the knowledge warranty against eviction
and assumption of risk of with full knowledge that WARRANTY AGAINST NON-APPARENT
eviction there is a risk SERVITUDES
As to liability
APPARENT SERVITUDE can be readily seen by the
Vendor’s liability is value Vendors in case of external sign (i.e., right of way)
of the thing sold (at the eviction are exempted
time of eviction) from any liability.
NON-APPARENT SERVITUDE (i.e easement of light
and view)
Article 1555. When the warranty has been agreed
upon or nothing has been stipulated on this point, Article 1560. If the immovable sold should be
in case eviction occurs, the vendee shall have the encumbered with any non-apparent burden or
right to demand of the vendor: servitude, not mentioned in the agreement, of such a
nature that it must be presumed that the vendee
1. The return of the value which the thing sold would not have acquired it had he been aware
had at the time of the eviction, be it greater or thereof, he may ask for the rescission of the
less than the price of the sale; contract, unless he should prefer the appropriate
indemnity. Neither right can be exercised if the
2. The income or fruits, if he has been ordered to non-apparent burden or servitude is recorded in
deliver them to the party who won the suit the Registry of Property, unless there is an
against him; express warranty that the thing is free from all
burdens and encumbrances.
3. The costs of the suit which caused the
eviction, and, in a proper case, those of the Within one year, to be computed from the execution
suit brought against the vendor for the of the deed, the vendee may bring the action for
warranty; rescission, or sue for damages.
4. The expenses of the contract, if the vendee One year having elapsed, he may only bring an
has paid them; action for damages within an equal period, to be
counted from the date on which he discovered the
5. The damages and interests, and ornamental burden or servitude. (1483a)
expenses, if the sale was made in bad faith.
(1478)
EASEMENT: a burden on the real property imposed on
the property suffered by the servient property.
AMOUNT FOR WHICH SELLER IS LIABLE

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RULES ON WARRANTY AGAINST NON-APPARENT
SERVITUDES
GR: If the immovable sold should be encumbered with
any non-apparent burden or servitude, not mentioned in
the agreement, of such a nature that it must be
presumed that the vendee would not have acquired it
had he been aware thereof, he may ask for:
1. the rescission of the contract;
2. unless he should prefer the appropriate
indemnity
XPN: The non-apparent burden or servitude is recorded
in the Registry of Property.
XPN to XPN: There is an express warranty that the thing
is free from all burdens and encumbrances.
REMEDIES AND PRESCRIPTIVE PERIOD
1. Within one year from the execution of the
deed - RESCISSION / DAMAGES
2. After one year – DAMAGES only
WARRANTY AGAINST HIDDEN DEFECTS
Article 1561. The vendor shall be responsible for
warranty against the hidden defects which the thing
sold may have, should they render it unfit for the
use for which it is intended, or should they diminish
its fitness for such use to such an extent that, had
the vendee been aware thereof, he would not have
acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects
or those which may be visible, or for those which are
not visible if the vendee is an expert who, by
reason of his trade or profession, should have known
them. (1484a)
REDHIBITORY DEFECTS
A defect that constitutes an imperfection of a certain
importance, an important defect which if you knew at the
time of sale you would not have bought the property.
👉 A kind of defect that is so serious, so important
that you would not have bought the property in
the first place if you are aware of the defect.
REDHIBITION: an action for the avoidance of the sale
because of the redhibitory defect.
NOTE: It is only by knowing the redhibitory defect that
you can move for redhibition.
SPOUSES BATALLA v. PRUDENTIAL BANK
FACTS:
SPS BATALLA purchased a brand new Honda Civic
from HONDA CARS. RANTAEL, acting manager of
Pilipinas Bank, merged with Prudential and brokered
the deal.
To finance the purchase of the vehicle, SPS BATALLA
applied for a car loan with Prudential. They executed a
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
PN for the sum of P292K payable within 36 months.
On May 29, 1998, the Car Loan Agreement was
approved. Thus, Prudential issued a manager’s check
in the said amount payable to Honda.
SPS BATALLA paid P214K corresponding to the
remaining portion of the purchase price for the Honda
Civic, they also paid P11K for the delivery cost and
installation of a remote control and door mechanism
and P28K for insurance.
On April 21, 1998, BATALLA received the car after
RANTAEL informed the spouses that the vehicle was
parked near Prudential. However, after 3 days, the
right rear door of the car broke down. The spouses
were informed by SANCHEZ that the power lock of
the rear right door was defective and that the car
was no longer brand new because the paint of the
roof was merely retouched.
On May 3, 1998, SPS BATALLA informed the
manager of Prudential notifying it of the said defects
and demanding the immediate replacement of the car.
By Aug 27, 1998, they took the car to Auto Body Shop
for a thorough evaluation of the status of the vehicle
and it was found out by VILLANUEVA that the car was
no longer brand new because the rooftop was no
longer shiny in appearance. Hence, the manager of
Prudential with the individuals from HONDA, offered
the Spouses to repair the car.
However, SPS BATALLA rejected it because they
wanted the car to be replaced with a brand new one
without hidden defects.
SPS BATALLA filed the complaint for rescission of
contracts and damages against Prudential and Honda.
RTC - dismissed the complaint and ruled that the car
was a brand new one and that any perceived defects
could not be attributed to Honda. It ruled that the
spouses failed to prove that the defects in the car
were due to the default of Honda and the car was
merely repainted to make it appear brand new.
CA - affirmed with modification. It ruled that the
spouses cannot rescind the PN and car loan
agreement on the car’s alleged defects because they
are distinct from the Contract of Sale entered into with
Honda.
ISSUE: W/N SPOUSES BATALLA MAY RESCIND
THE CONTRACT OF SALE CAR LOAN
AGREEMENT AND PROMISSORY NOTE DUE TO
THE DEFECTS OF THE MOTOR VEHICLE SOLD
RULING:
NO. SPOUSES BATALLA MAY NOT RESCIND THE
CONTRACT OF SALE, CAR LOAN AGREEMENT
AND PN DUE TO THE DEFECTS OF THE VEHICLE.
Article 1561 of the CC provides provides for an
implied warranty against hidden defects in that the
vendor shall be responsible for any hidden
defects which render the thing sold unfit for the use
for which it is intended, or should they diminish its
fitness for such use to such an extent that, had the
vendee been aware thereof, he would not have
acquired it or would have given a lower price.
In an implied warranty against hidden defects,
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vendors cannot raise the defense of ignorance as
they are responsible to the vendee for any hidden
defects even if they were not aware of its
existence.
REQUISITES:
1. Defect is serious or important
a. The thing sold is unfit for the use which it is
intended;
b. Diminishes its fitness for such use or to
such an extent that the buyer would not
have acquired it had he been aware
thereof
2. Defect is Hidden
3. Defect Exists at the time of the sale
4. Buyer gives Notice of the defect to the
seller within reasonable time.
In case of breach of an implied warranty against
hidden defects, the buyer may either elect:
1. Withdrawing from the contract
2. Demand the proportionate reduction of the
price
NOTE: in both cases, with damages.
IN THIS CASE:
1. It was not proven that the defects were
serious.
HERE: the car had no problem as to the road's
worthiness. The hidden defect contemplated under
1561 is an imperfection of such nature as to engender
a certain degree of importance and not merely one of
little consequence.
2. It cannot be ascertained whether the defects
existed at the time of the sale.
HERE: the remote control door mechanism was
immediately installed after the car was delivered to
Spouses Batalla.
As to the issue on the loan agreement
A contract of loan is distinct and separate from
a contract of sale.
The transactions of SPS BATALLA with
PRUDENTIAL and Honda are distinct and separate
from each other. From the time Spouses Batalla
accepted the loan proceeds from Prudential, the loan
agreement had been perfected. As such, they were
bound to comply with their obligations under the loan
agreement regardless of the outcome of the contract
of sale with Honda. Even assuming that the car that
Spouses Batalla received was not brand new or had
hidden defects, they could not renege on their
obligation of paying Prudential the loan amount.
REQS FOR WARRANTY AGAINST HIDDEN
DEFECTS:
1. Defect is serious or important
A. The thing sold is unfit for the use which it is
intended;
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B. Diminishes its fitness for such use or to such an
extent that the buyer would not have acquired it
had he been aware thereof
2. Defect is hidden (1566)
XPN: if you are an EXPERT over the SM, it will
not be hidden from you.
3. Defect exists at the time of the sale
In Nutrimix v. CA — chickens died, the
purchased feeds were blamed by the owners of
the chickens. The buyer of the feeds was not
able to prove that at the time they bought the
feeds there was already a defect. Anything could
happen during the storage. Thus, the claimant
must be able to prove that the defect existed at
the time the feed was bought, though it becomes
apparent later on.
DEFECT (Nutrimix Feeds Corp v. CA)
The defect must be present:
1. upon the delivery or manufacture of the
product; or
2. when the product left the seller’s or
manufacturer’s control; or
3. when the product was sold to the
purchaser; or
4. the product must have reached the user
or consumer without substantial change
in the condition it was sold.
4. Buyer gives notice of the defect to the seller
within reasonable time.
Article 1563. In the case of contract of sale of a
specified article under its patent or other trade name,
there is no warranty as to its fitness for any particular
purpose, unless there is a stipulation to the contrary.
(n)
Article 1564. An implied warranty or condition as to
the quality or fitness for a particular purpose may be
annexed by the usage of trade. (n)
REQS FOR BREACH OF WARRANTY OF
MERCHANTABILITY
1. That buyer sustained Injury because of the
product;
2. That the injury occurred because the product
was
Defective or unreasonably unsafe;
3. The defect Existed when the product left the
hands of the seller (citing Nutrimix Feeds v. CA)
Article 1565. In the case of a contract of sale by
sample, if the seller is a dealer in goods of that kind,
there is an implied warranty that the goods shall be
free from any defect rendering them unmerchantable
which would not be apparent on reasonable
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ART. 1568 & 1569

examination of the sample. (n)

Art. 1568. If the thing sold should be lost as a

Article 1566. The vendor is responsible to the vendee consequence of hidden faults:
for any hidden faults or defects in the thing sold, even
though he was not aware thereof. If seller was aware Seller shall bear the loss and
of them shall be obliged to return the
This provision shall not apply if the contrary has been price and refund the
stipulated, and the vendor was not aware of the expenses of the contract, with
hidden faults or defects in the thing sold. (1485) damages.

If the seller was no Seller is obliged only to return

REMEDIES AGAINST HIDDEN DEFECTS aware of them the price and interest thereon,
and reimburse expenses of
the contract which the buyer
might have paid, but not for
Article 1567. In the cases of articles 1561, 1562, damages.
1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a Art. 1569. If the thing is lost through fortuitous event
proportionate reduction of the price, with or through the fault of the buyer, then:
damages in either case. (1486a)
If seller was not Buyer may demand from the
REMEDIES OF BUYER AND OBLIGATION OF aware of the seller the price which he had
hidden defects paid, less the value of the thing
SELLER FOR BREACH OF WARRANTY
when it was lost.
If the thing has not been lost
If seller acted in In addition, he shall pay
bad faith damages to the buyer.
1. Accion redhibitoria – withdraw from the
contract
Article 1570. The preceding articles of this
2. Accion quanti minoris – to demand a
Subsection shall be applicable to judicial sales, except
proportionate reduction of the price with that the judgment debtor shall not be liable for
damages in either case. damages. (1489a)

NOTE: These remedies cannot be availed if subject

matter is lost. APPLICABILITY TO JUDICIAL SALES

GR: Applicable to judicial sales

WAIVER OF WARRANTY
XPN: The judgment debtor shall not be liable for
If there has been a stipulation exempting the seller
damages
from hidden defects, then:

1. If the seller was not aware of the hidden defects,
the loss of the thing by virtue of such defect will
not make the seller liable at all to the buyer;
or
Article 1571. Actions arising from the provisions of
the preceding ten articles (warranty against hidden
defects) shall be barred after six months, from the
delivery of the thing sold. (1490)

2. If the seller was fully aware of such defect, such PRESCRIPTION

waiver is in bad faith, and the seller would still
Actions on warranties against hidden defects shall be
be liable for the warranty.
barred after six (6) months from the delivery of the
thing sold.
Article 1568. If the thing sold should be lost in
consequence of the hidden faults, and the vendor was In Moles Case — where the seller is contending that the
aware of them, he shall bear the loss, and shall be buyer is already barred because it exceeded the 6
obliged to return the price and refund the expenses of months. Remember, in this case, it was considered as
the contract, with damages. If he was not aware of
express warranty so it’s 4 years
them, he shall only return the price and interest
thereon, and reimburse the expenses of the contract
which the vendee might have paid. (1487a) REDHIBITORY DEFECTS OF ANIMALS

SALE OF A TEAM IN PAIR OR SET

Article 1569. If the thing sold had any hidden fault at
the time of the sale, and should thereafter be lost by a
fortuitous event or through the fault of the vendee, the
latter may demand of the vendor the price which he
paid, less the value which the thing had when it was
lost.
If the vendor acted in bad faith, he shall pay damages
to the vendee. (1488a)
Article 1572. If two or more animals are sold
together, whether for a lump sum or for a separate
price for each of them, the redhibitory defect of one
shall only give rise to its redhibition, and not that
of the others; unless it should appear that the vendee
would not have purchased the sound animal or
animals without the defective one.

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The latter case shall be presumed when a team, yoke
pair, or set is bought, even if a separate price has
been fixed for each one of the animals composing the
same. (1491)
ILLUSTRATION: if you bought the 2 cows for the
purposes of breeding, the other one died because of
disease, it does not mean that the sale of the cow
suffers the redhibitory defect. UNLESS, you would not
have bought the other without the other one.
Article 1573. The provisions of the preceding article
with respect to the sale of animals shall in like manner
be applicable to the sale of other things. (1492)
NOTE: this also applies to things. i.e., keyboard and a
mouse.
NOTE: Redhibitory defect does not apply in (Art. 1574):
Article 1574. There is no warranty against hidden
defects of animals sold at fairs or at public auctions, or
of livestock sold as condemned. (1493a)
EX: You bought a goat in a fiesta, you cannot file a case
for the seller in case there is something wrong with the
goat against hidden defects because there is no
warranty.
Article 1575. The sale of animals suffering from
contagious diseases shall be void.
A contract of sale of animals shall also be void if the
use or service for which they are acquired has been
stated in the contract, and they are found to be unfit
therefore. (1494a)
VOID SALE OF ANIMALS
1. Animals suffering from contagious disease
2. If the animal is rendered unfit for the use or
service which they are dependent (i.e.,
racehorse na nabali ang tiil)
REDHIBITORY DEFECT DESPITE EXAMINATION
Article 1576. If the hidden defect of animals, even in
case a professional inspection has been made, should
be of such a nature that expert knowledge is not
sufficient to discover it, the defect shall be considered
as redhibitory.
But if the veterinarian, through ignorance or bad faith,
should fail to discover or disclose it, he shall be liable
for damages. (1495)
ILLUSTRATION: This refers to the disease suffered by
the animal. Even after the examination by the
veterinarian and the disease cannot be determined, this
is a hidden defect.
But if the veterinarian knows of the disease but did not
disclose it, the veterinarian is liable for DAMAGES.
PRESCRIPTIVE PERIOD
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Article 1577. The redhibitory action, based on the
faults or defects of animals, must be brought within 40
days from the date of their delivery to the vendee.
This action can only be exercised with respect to
faults and defects which are determined by law or by
local customs. (1496a)
The redhibitory action based on the fault or defects must
be brought within 40 days from the delivery to the buyer.
NOTE: This provision applies to livestock but not
to pets.
WHEN VENDOR IS LIABLE FOR DEATH OF ANIMAL
Article 1578. If the animal should die within three
days after its purchase, the vendor shall be liable
if the disease which caused the death existed at
the time of the contract. (1497a)
Article 1579. If the sale be rescinded, the animal
shall be returned in the condition in which it was
sold and delivered, the vendee being answerable for
any injury due to his negligence, and not arising from
the redhibitory fault or defect. (1498)
Article 1580. In the sale of animals with redhibitory
defects, the vendee shall also enjoy the right
mentioned in article 1567; but he must make use
thereof within the same period which has been
fixed for the exercise of the redhibitory action.
(1499)
Article 1581. The form of sale of large cattle shall
be governed by special laws. (n)
WARRANTY AS TO FITNESS OR QUALITY OF
GOODS
Determined upon if the seller had been informed by the
buyer that he is buying a certain thing for a certain
purpose.
Art. 1562. In a sale of goods, there is an implied
warranty or condition as to the quality or fitness of the
goods, as follows:
(1) Where the buyer, expressly or by implication,
makes known to the seller the particular
purpose for which the goods are acquired,
and it appears that the buyer relies on the
seller's skill or judgment (whether he be the
grower or manufacturer or not), there is an
implied warranty that the goods shall be
reasonably fit for such purpose;
(2) Where the goods are brought by description
from a seller who deals in goods of that
description (whether he be the grower or
manufacturer or not), there is an implied
warranty that the goods shall be of
merchantable quality.
Refers to merchantability of products. Bought something
for a specific purpose and the seller sold it after knowing
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your reason for buying the product, then there is an
implied warranty as to its fitness and quality.
RA 7394: CONSUMER ACT OF THE PHILIPPINES
NOTE: This covers only consumer products (i.e.,
household purposes)
CONSUMER PRODUCTS AND SERVICES
Goods, services and credits, debts or obligations which
are primarily for personal, family, household or
agricultural purposes, which shall include but not limited
to food, drugs, cosmetics, and devices.
EX: Cellphones, calculators, zonrox, those that
are used everyday.
ADDITIONAL PROVISIONS ON WARRANTIES
ARTICLE 66. Implementing Agency. — The
Department of Trade and Industry, shall strictly
enforce the provision of this Chapter and its
implementing rules and regulations.
ARTICLE 67. Applicable Law on Warranties. — The
provisions of the Civil Code on conditions and warranties
shall govern all contracts of sale with conditions and
warranties.
ARTICLE 68. Additional Provisions on Warranties. —
In addition to the Civil Code provisions on sale with
warranties, the following provisions shall govern the
sale of consumer products with warranty:
A. Terms of express warranty. — Any seller or
manufacturer who gives an express warranty shall:
1. set forth the terms of warranty in clear and
readily understandable language and clearly
identify himself as the warrantor;
2. identify the party to whom the warranty is
extended;
3. state the products or parts covered;
4. state what the warrantor will do in the event
of a defect, malfunction of failure to conform
to the written warranty and at whose expense;
5. state what the consumer must do to avail of
the rights which accrue to the warranty; and
6. stipulate the period within which, after notice of
defect, malfunction or failure to conform to the
warranty, the warrantor will perform any
obligation under the warranty.
B. Express warranty — operative from the moment of
sale.
All written warranties or guarantees issued by a
manufacturer, producer, or importer shall be operative
from the moment of sale.
1. Sales Report. — All sales made by distributors
of products covered by this Article shall be
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reported to the manufacturer, producer, or
importer of the product sold within thirty (30)
days from date of purchase, unless otherwise
agreed upon. The report shall contain, among
others, the date of purchase, model of the
product bought, its serial number, name and
address of the buyer. The report made in
accordance with this provision shall be
equivalent to a warranty registration with the
manufacturer, producer, or importer. Such
registration is sufficient to hold the manufacturer,
producer, or importer liable, in appropriate
cases, under its warranty.
2. Failure to make or send a report. — Failure of
the distributor to make the report or send them
the form required by the manufacturer, producer,
or importer shall relieve the latter of its
liability under the warranty: PROVIDED,
however, That the distributor who failed to
comply with its obligation to send the sales
report shall be personally liable under the
warranty. For this purpose, the manufacturer
shall be obligated to make good the warranty at
the expense of the distributor.
3. Retail. — The retailer shall be subsidiarily
liable under the warranty in case of failure of
both the manufacturer and distributor to
honor the warranty. In such cases, the retailer
shall shoulder the expenses and costs
necessary to honor the warranty. Nothing
therein shall prevent the retailer from
proceeding against the distributor or
manufacturer.
SUMMARY
Hierarchy of liability
1. manufacturer, producer, or importer of
the product sold – liable if a sales report
is presented by the distributor
2. distributor – personally liable if there is
failure to make or send report
3. retailer - subsidiarily liable under the
warranty in case of failure of both the
manufacturer and distributor to honor the
warranty.
4. Enforcement of warranty or guarantee. —
The warranty rights can be enforced by
presentment of a claim. To this end, the
purchaser needs only to present to the
immediate seller either the warranty card or
the official receipt along with the product to
be serviced or returned to the immediate
seller. No other documentary requirement
shall be demanded from the purchaser. If the
immediate seller is the manufacturer’s
factory or showroom, the warranty shall
immediately be honored. If the product was
purchased from a distributor, the distributor
shall likewise immediately honor the
warranty. In the case of a retailer other than the
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distributor, the former shall take responsibility
without cost to the buyer of presenting the
warranty claim to the distributor on the
consumer’s behalf.
EX: appliance displayed in the
distributor shop. The warranty is
immediate.
IF: in case the thing was bought in a
retailer shop, the retailer shall present
the same before the distributor.
2 THINGS TO DO:
1. Present the warranty card
2. If none, the official receipt + the
thing itself.
5. Record of purchases. — Distributors and
retailers covered by this Article shall keep a
record of all purchases covered by a warranty or
guarantee for such period of time
corresponding to the lifetime of the product’s
respective warranties or guarantees.
6. Contrary stipulations — null and void. — All
covenants, stipulations or agreements contrary
to the provisions of this Article shall be without
legal effect.
C. Designation of warranties. — A written warranty
shall clearly and conspicuously designate such warranty
as:
1. “Full warranty” if the written warranty meets
the minimum requirements set forth in
paragraph; o
2. “Limited warranty” if the written warranty does
not meet such minimum requirements.
D. Minimum standards for warranties. — For the
warrantor of a consumer product to meet the minimum
standards for warranty, he shall:
1. remedy such consumer product within a
reasonable time and without charge in case
of a defect, malfunction or failure to conform
to such written warranty;
2. permit the consumer to elect whether to ask for
a refund or replacement without charge of
such product or part, as the case may be,
where after a reasonable number of attempts
to remedy the defect or malfunction, the
product continues to have the defect or to
malfunction.
The warrantor will not be required to perform the above
duties if he can show that the defect, malfunction or
failure to conform to a written warranty was caused by
damage due to unreasonable use thereof.
SUMMARY
GR: Minimum standards for warranties
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1. Remedy the defect or malfunction
2. Where after a reasonable number of attempts
to remedy the defect or malfunction, the
product continues to have the defect or to
malfunction.
👉
👉 Ask
Ask for a refund
for a replacement without charge
XPN: if he can show that the defect, malfunction or
failure to conform to a written warranty was caused by
damage due to unreasonable use thereof
E. Duration of warranty. — The seller and the
consumer may stipulate the period within which the
express warranty shall be enforceable. If the implied
warranty of merchantability accompanies an express
warranty, both will be of equal duration.
Any other implied warranty shall endure not less
than sixty (60) days nor more than one (1) year
following the sale of new consumer products.
SUMMARY
Duration of warranty
1. Express warranty – seller and consumer
may stipulate the period
2. Implied warranty – not less than 60 days nor
more than 1 years following the sale of new
consumer products
3. Express warranty with implied warranty of
merchantability – both will be of equal
duration
F. Breach of warranties. —
1. In case of breach of express warranty, the
consumer may elect to have the goods
repaired or its purchase price refunded by
the warrantor. In case the repair of the product
in whole or in part is elected, the warranty work
must be made to conform to the express
warranty within thirty (30) days by either the
warrantor or his representative. The
thirty-day period, however, may be extended
by conditions which are beyond the control
of the warrantor or his representative. In case
the refund of the purchase price is elected, the
amount directly attributable to the use of the
consumer prior to the discovery of the
non-conformity shall be deducted.
2. In case of breach of implied warranty, the
consumer may retain in the goods and recover
damages, or reject the goods, cancel and
contract and recover from the seller so much of
the purchase price as has been paid, including
damages.
SUMMARY
REMEDIES:
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REMEDIES
Express Have the goods repaired - the
Warranty warranty work must be made to
conform to the express warranty
within thirty (30) days by either
the warrantor or his
representative.
may be extended by
conditions which are
beyond the control of the
warrantor or his
representative
Have the refund of the purchase
price - amount directly attributable
to the use of the consumer prior to
the discovery of the non-conformity
shall be deducted
Implied Retain and recover damages
Warranty
Reject the goods, cancel the
contract and recover from the
seller so much of the purchase
price as has been paid, including
damages.
ARTICLE 72. Prohibited Acts. — The following acts
are prohibited:
a. refusal without any valid legal cause by the
total manufacturer or any person obligated
under the warranty or guarantee to honor a
warranty or guarantee issued;
b. unreasonable delay by the local manufacturer
or any person obligated under the warranty or
guarantee in honoring the warranty;
c. removal by any person of a product’s
warranty card for the purpose of evading said
warranty obligation;
d. any false representation in an advertisement
as to the existence of a warranty or guarantee.
ARTICLE 73. Penalties. —
a. Any person who shall violate the provisions of
Article 67 shall be subject to fine of not less than
Five hundred pesos (P500.00) but not more than
Five thousand pesos (P5,000.00) or an
imprisonment of not less than three (3) months
but not more than two (2) years or both upon the
discretion of the court. A second conviction
under this paragraph shall also carry with it the
penalty or revocation of his business permit and
license.
b. Any person, natural or juridical, committing any
of the illegal acts provided for in Chapter III,
except with respect to Article 67, shall be liable
for a fine of not less than One thousand pesos
(P1,000.00) but not more than Fifty thousand
pesos (P50,000.00) or imprisonment for a period
of at least one (1) year but not more than five (5)
years, or both, at the discretion of the court.
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The imposition of any of the penalties herein provided is
without prejudice to any liability incurred under the
warranty or guarantee.
PRICE TAG LAW
Article 81. Price Tag Requirement. – It shall be
unlawful to offer any consumer product for retail
sale to the public without an appropriate price tag,
label or marking publicly displayed to indicate the
price of each article and said products shall not be
sold at a price higher than that stated therein and
without discrimination to all buyers: PROVIDED That
lumber sold, displayed or offered for sale to the public
shall be tagged or labeled by indicating thereon the
price and the corresponding official name of the wood:
Provided, further, That if consumer products for sale
are too small or the nature of which makes it
impractical to place a price tag thereon price list
placed at the nearest point where the products are
displayed indicating the retail price of the same may
suffice.
Article 82. Manner of Placing Price Tags. – Price
tags, labels or markings must be written clearly,
indicating the price of the consumer product per unit in
pesos and centavos.
Article 83. Regulations for Price Tag Placement. –
The concerned department shall prescribe rules and
regulations for the visible placement of price tags for
specific consumer products and services. There shall
be no erasures or alterations of any sort of price tags,
labels or markings.
APPLICABILITY TO ONLINE SELLERS
Sec. 8.3.1. Joint Administrative Order No. 22-01
8.3 Price Tag Placement – Pursuant to Art. 81 and
83 of RA 7394, the ff rules and regulations shall apply
to only business as regards the price of the product or
service offered online:
8.3.1. Product listings by e-retailers or
merchants on marketplace/platforms must
contain the price(s) of the product/service in
Philippine persons and must display payment
policies, delivery options, returns, refunds,
and exchange policy, and other charges if
applicable
PENALTIES
Article 95. Penalties. –
Any person who shall violate the provisions of Title III,
Chapter IV of this Act, or its implementing rules and
regulations, except Articles 81 to 83 of the same
Chapter, shall be subject to a fine of not less than Five
hundred pesos (P500.00) but not more than Twenty
thousand pesos (P20,000.00) or imprisonment of not
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A. conventional redemption; and

less than three (3) months but not more than two (2)
years or both, at the discretion of the court: Provided, B. legal redemption.
That, if the consumer product is one which is not a
food, cosmetic, drug, device or hazardous substance, COMMON SPECIAL EXTRA
the penalty shall be a fine of not less than Two SPECIAL
hundred pesos (P200.00) but not more than Five
thousand pesos (P5,000.00) or imprisonment of not
AS TO CAUSES
less than one (1) month but not more than one (1)
year or both, at the discretion of the court.
This refers to This refers to This refers to
causes which are causes which are causes that are
Any person who violates the provisions of Article 81 to
83 for the first time shall be subject to a fine of not less also the means of recognized by given special
than Two hundred pesos (P200.00) but not more than extinguishing all the law on sales. discussion by the
Five thousand pesos (P5,000.00) or by imprisonment other contracts. Civil Code and
of not less than one (1) month but not more than six these are
(6) months or both, at the discretion of the court. A conventional
second conviction under this paragraph shall also redemption and
carry with it the penalty of revocation of business legal redemption.
permit and license.
AS TO LEGAL BASIS

EXTINGUISHMENT OF SALE Article 1231 of Those covered Conventional

the New Civil by Arts. 1484, redemption (Arts.
Code 1532, 1539, 1601- 1618); and
GROUNDS 1540, 1542, Legal
1556, 1560, Redemption
1567, and 1591 (Arts. 1619-
Article 1600. Sales are extinguished by the same 1623)
causes as all other obligations, by those stated in the
preceding articles of this Title, and by conventional or AS TO APPLICABILITY
legal redemption. (1506)
Payment or Exact fulfillment Conventional
CAUSES FOR EXTINGUISHMENT OF SALE performance, loss of the obligation, and legal
of the thing, cancellation of redemption.
1. Common – those causes that are also the condonation or the sale,
means of extinguishing all other contracts. remission, foreclosure of the
confusion or mortgage,
merger, stoppage in
REVIEW compensation, transit, and etc.
and novation.
Article 1231. Obligations are extinguished:

(1) By payment or performance;

(2) By the loss of the thing due;
(3) By the condonation or remission of the
debt;
(4) By the confusion or merger of the
rights of creditor and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations,
such as annulment, rescission, fulfillment
of a resolutory condition, and prescription,
are governed elsewhere in this Code. (1156a)
(PA LO CO CO CO NO A R F, P)
Payment or performance only extinguishes the
obligations to which they pertain to in a contract
of sale, but not necessarily the contract itself,
since the relationship between buyer and seller
remains after performance or payment, such as
the continuing enforceability of the warranties of
the seller.
CONVENTIONAL REDEMPTION
Article 1601. Conventional redemption shall take
place when the vendor reserves the right to
repurchase the thing sold, with the obligation to
comply with the provisions of article 1616 and other
stipulations which may have been agreed upon.
(1507)
Article 1616. The vendor cannot avail himself of the
right of repurchase without returning to the vendee the
price of the sale, and in addition:
1. The expenses of the contract, and any other
legitimate payments made by reason of the
sale;
2. The necessary and useful expenses made on
the thing sold. (1518)
Art. 1606. The right referred to in Article 1601, in the
absence of an express agreement, shall last four
years from the date of the contract.

Should there be an agreement, the period cannot

2. Special – causes that are recognized by the law
exceed ten years.
of sales
However, the vendor may still exercise the right to
3. Extra-special – those causes that are given repurchase within thirty days from the time final
special discussion by the Civil Code and these judgment was rendered in a civil action on the basis
are:

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that the contract was a true sale with right to Required notice to be Requires only a notice of
repurchase. (1508a) accompanied by a tender such exercise be given
of payment or the optioner
Price + necessary expenses + useful expenses consignment when tender
of payment cannot be
made effectively on the
In David v. David — Conventional redemption shall take buyer
place when the seller reserved for himself the right to
repurchase the thing sold, with the obligation to: AS TO EFFECT

1. return the price of the sale, Extinguishes an existing Results into the
contract of sale perfection of a contract of
2. the expenses of the contract, sale

3. any other legitimate payments made by reason

of the sale, and Once the instrument of absolute sale is executed, the
vendor can no longer reserve the right to repurchase,
4. the necessary and useful expenses made on the and any right thereafter granted the vendor by the
thing sold. vendee in a separate instrument cannot be a right to
repurchase but some other right like an option to buy.
Right which the vendor reserves to himself, to reacquire (Torres v. CA)
the property sold provided he returns to the vendee the
price of the sale, the expenses of the contract, any
EQUITABLE MORTGAGE
other legitimate payments made therefor and the
necessary and useful expenses made on the thing sold
One which, although lacking in some formality, or form or
(Art. 1616.), and fulfills other stipulations which may
words, or other requisites demanded by a statute,
have been agreed upon.
nevertheless reveals the intention of the parties to
charge real property as security for a debt, and contains
SALE W/ RIGHT TO REPURCHASE/PACTO DE
nothing impossible or contrary to law.
RETRO SALE
TAKE NOTE:
title and ownership of the property sold are immediately
vested in the vendee, subject to the resolutory condition
of repurchase by the vendor within the stipulated period. ARTICLE 1602. The contract shall be presumed to be
A sale with the right to repurchase is governed by Article an equitable mortgage, in any of the following cases:
1601 of the Civil Code.
(1) When the price of a sale with right to
RIGHT OF OPTION TO PURCHASE repurchase is unusually inadequate;
REDEMPTION
(2) When the vendor remains in possession as
AS TO ITS NATURE lessee or otherwise;

(3) When upon or after the expiration of the

Part of the main contract Generally a principal
and cannot exist unless contract, albeit
reserved at the time of preparatory and may be
the perfection of the created
contract of sale independent another
contract
AS TO ITS EXISTENCE
Must be embedded in a May exist prior to or after
contract of sale at its the perfection of the sale,
perfection or be embedded in
another contract upon
that contract’s perfection
AS TO NECESSITY OF CONSIDERATION
Does not need a separate Must have a other benefit to be received by the vendee as rent
consideration to be valid consideration separate
and effective and distinct from the
purchase price
right to repurchase another instrument
extending the period of redemption or
granting a new period is executed;
(4) When the purchaser retains for himself a
part of the purchase price;
(5) When the vendor binds himself to pay the
taxes on the thing sold;
(6) In any other case where it may be fairly
inferred that the real intention of the
parties is that the transaction shall secure
the payment of a debt or the performance
of any other obligation.
In any of the foregoing cases, any money, fruits, or
or otherwise shall be considered as interest which
shall be subject to the usury laws. (n)

AS TO PERIOD REQS (Kings Properties v. Galido)

1. The parties entered into a contract denominated
Redemption period An option right may as a contract of sale; and
cannot exceed 10 years exceed 10 years
2. Their intention was to secure existing debt by
AS TO REQUIREMENT OF NOTICE way of a mortgage.

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PRESUMPTION
In order for the presumption of equitable mortgage to
apply, there must be:
1. something in the language of the contract; or
2. Something in the conduct of the parties which
shows clearly and beyond doubt that they
intended the contract to be a mortgage and not
a pacto de retro sale.
IN CASE OF DOUBT: a contract purporting to be a
sale with right to repurchase shall be considered as
an equitable mortgage. In a contract of mortgage, the
mortgagor merely subjects the property to a lien, but the
ownership and possession thereof are retained by him.
(Saclolo v. Marquito)
In determining whether a deed absolute in form is a
mortgage, the court is not limited to the written
memorials of the transaction. The decisive factor in
evaluating such agreement is the intention of the
parties, as shown not necessarily by the terminology
used in the contract but by all the surrounding
circumstances, such as the relative situation of the
parties at that time, the attitude acts, conduct,
declarations of the parties, the negotiations between
them leading to the deed, and generally, all pertinent
facts having a tendency to fix and determine the real
nature of their design and understanding. (Spouses
Raymundo v. Spouses Bandong)
The presence of even one of the circumstances
enumerated in Article 1602, and not a concurrence or an
overwhelming number thereof, suffices. (San Pedro v.
Lee)
RAYMUNDO v. BANDONG
FACTS:
EULALIA employed “biyaheros” who were tasked to
procure large cattle with the capital provided by her
and to deliver the cattle to her for disposal. She
requires the biyaheros to surrender the (TCTs) of their
properties and to execute the corresponding DOS in
her favor in order to secure the capital she provided.
DOMINADOR had been working for EULALIA as one
of her biyaheros for 3 decades. So, EULALIA no
longer required DOMINADOR to post any security in
the performance of his duties.
In 1989, EULALIA found out that DOMINADOR
incurred a shortage in his cattle procurement
operation in the amount of P70K. DOMINADOR AND
ROSALIA executed DOS in favor of EULALIA
covering a land with an area of 96 sqm.
The property was registered under the name of
EULALIA and CARLOS and was sold to JOCELYN
BUENAOBRA, grandniece of EULALIA. It was
subsequently registered under their names.
CASE: SPS BUENAOBRA filed an action for
ejectment against SPS BANDONG. SPS BANDONG
opposed on the ground that they are the rightful
owners and possessors.
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
SPS BANDONG filed an action for annulment of sale
against EULALIA and JOCELYN contending that:
1. There was no sale intended but only an
equitable mortgage for the purpose of
securing the shortage incurred by Dominador
in the amount of ₱70,000 while employed as
"biyahero" by Eulalia.
RTC - dismissed the complaint.
CA - reversed and found that the transaction was an
equitable mortgage considering that the price was
grossly inadequate and the spouses Bandong
remained as possessors even after the alleged
purchase. It further negates the ruling that SPS
BUENAOBRA are purchasers in good faith because
they are charged with knowledge that the SPS
RAYMUNDO were not the absolute owners of the
property, which negates the presumption.
ISSUE: W/N the DOS between DOMINADOR and
EULALIA is valid and binding.
RULING:
NO. The DOS was not valid and binding.
The agreement was not avoided in its entirety so as to
prevent it from producing any legal effect at all.
Instead, the SC ruled that the transaction was an
equitable mortgage, thereby merely altering the
relationship of the parties from seller and buyer to
mortgagor and mortgagee.
An equitable mortgage is one that - although lacking
in some formality, forms and words, or other requisites
demanded by a statute - nevertheless reveals the
intention of the parties to charge a real property
as security for a debt and contains nothing
impossible or contrary to law.
Article 1602 provides for the instances when a
contract may be presumed as an equitable mortgage.
1. When the price of a sale with right to
repurchase is unusually inadequate;
2. When the vendor remains in possession
as lessee or otherwise;
3. When upon or after the expiration of the right
to repurchase another instrument extending
the period of redemption or granting a new
period is executed;
4. When the purchaser retains for himself a part
of the purchase price;
5. When the vendor binds himself to pay the
taxes on the thing sold.
6. In any other case where it may be fairly
inferred that the real intention of the parties is
that the transaction shall secure the payment
of a debt or the performance of any other
obligation.
For 1602 and 1604 to apply, the requisites must be
present:
1. The parties entered into a contract of sale
2. Their intention was to secure an existing debt
by way of an equitable mortgage.
IN THIS CASE:
The intention of DOMINADOR and EULALIA was not
to transfer the ownership of the property but to burden
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the same with an encumbrance to secure the
indebtedness incurred by Dominador on the
occasion of his employment with Eulalia.
REITERATION: existence of any one of the conditions
in 1602, not concurrence, suffices to give rise to the
presumption that the contract is an equitable
mortgage.
THEREFORE, EULALIA has no right to transfer
ownership of the land by virtue of the principle
that nobody can dispose of what he does not
have. EXCEPT if the seller has voidable title to a
property but the title has not yet been nullified at
the time of the sale and the subsequent buyer was
in good faith.
JOCELYN WAS NOT AN INNOCENT PURCHASER
FOR VALUE
- She is burdened in proving that she is an
innocent purchaser in good faith.
However, JOCELYN failed to discharge the burden.
She is the grandniece of EULALIA and resides in the
same locality where EULALIA lives and conducts her
principal business. Thus, it is impossible for JOCELYN
not to acquire knowledge of her grand aunt’s business
practice of requiring her biyaheros to surrender titles
to their properties and to sign the DOS as security
APPARENTLY, JOCELYN was aware that
DOMINADOR and LOURDES were in possession of
the property. A buyer of real property that is in the
possession of a person other than the seller must
be wary.
A buyer who does not investigate the rights of the
one in possession can hardly be regarded as a
buyer in good faith.
REPUELA V. ESTATE OF LARAWAN
FACTS:
SPS LORENZO and MAGDALENA REPUELA owned
lot 3357. After they passed away, MARCELINO, and
CIPRIANO succeeded them as owners of the
property.
REPUELA BROTHERS ALLEGATIONS:
1. They went to LARAWAN to borrow P200;
2. To secure the loan, SPS LARAWAN required
them to turn over the TCT for the lot 3357;
3. They were made to sign the mortgage
contract but were not given a copy of it
4. MARCELINO merely placed his thumb mark
as he is an illiterate;
5. They remained in possession of the land
despite the mortgage and even planted crops
thereon;
6. They also paid the taxes.
CIPRIANO’s daughter, CRISTINA learned that SPS
LARAWAN did not pay the taxes and that a new TCT
was issued to OTILLO. That they were able to transfer
the TCT by virtue of Extrajudicial Declaration of Heirs
and Sale with the signature of her father CIPRIANO
and thumb mark of MARCELLINO.
CASE: CIPRIANO and MARCELINO filed an
annulment of Extrajudicial Declaration of Heirs and
Sale and the cancellation of TCT No. 10506.
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RTC - ruled in favor of REPUELA BROTHER and held
that the transaction was an equitable mortgage. It
relied on the evidence of possession and was
bolstered by the fact that they paid taxes on the land,
which is an indication of possession of the property.
CA - reversed. It held that the brothers failed to
present any direct and positive proof to rebut the
presumption of the document’s due execution.
ISSUE: Whether the Extrajudicial Declaration of
Heirs and Sale amounted to an equitable
mortgage.
RULING:
YES. the transaction was an equitable mortgage
EQUITABLE MORTGAGE - is one which, although
lacking in some formality, or form, or words, or other
requisites demanded by a statute, reveals the
intention of the parties to charge real property as
security for a debt, and contains nothing impossible or
contrary to law
2 requisites:
1. The parties entered into a contract of sale
2. The intention was to secure an existing debt
by way of mortgage.
ART. 1602. The contract shall be presumed to be an
equitable mortgage, in any of the following cases:
1. When the price of a sale with right to
repurchase is unusually inadequate;
2. When the vendor remains in possession
as lessee or otherwise;
3. When upon or after the expiration of the right
to repurchase another instrument extending
the period of redemption or granting a new
period is executed;
4. When the purchaser retains for himself a part
of the purchase price;
5. When the vendor binds himself to pay the
taxes on the thing sold;
6. In any other case where it may be fairly
inferred that the real intention of the
parties is that the transaction shall secure
the payment of a debt or the performance
of any other obligation.
IN THIS CASE: 2 instances are present. 1602(2&6)
REPUELA brothers remained in possession of the
land. The fact that SPS LARAWAN registered the
property does not change the situation.
- Conveyance of the land with registration in the
name of the transferee and the issuance of
new TCT is no more secured from the
operation of this equitable doctrine than the
most informal conveyance that could be
devised.
In an equitable mortgage, title to the property in issue,
which has been transferred to the respondents
actually remains or is transferred back to the petitioner
as owner-mortgagor, conformably to the
well-established doctrine that the mortgagee does not
become the owner of the mortgaged property because
the ownership remains with the mortgagor. (Art 2088)
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INFERENCE CAN BE MADE THAT THE
TRANSACTION WAS AN EQUITABLE MORTGAGE
The real intention of REPUELA brothers was to
secure their indebtedness from Spouses Larawan. In
determining whether a deed, absolute in form, is a
mortgage, the court is not limited to the written
memorials of the transaction. The decisive factor in
evaluating such an agreement is the intention of the
parties.
There is presumption of mistake
The signature and thumb mark of CIPRIANO and
MARCELINO was done without understanding the
real nature and effects and consequences of what
they did as they were never explained to them.
CIPRIANO, only finished grade one and
MARCELINO, an illiterate, were in dire need of money.
REMEDY: REFORMATION
PRESCRIPTIVE PERIOD OF EQUITABLE
MORTGAGE: 10 YEARS.
SACLOLO V. MARQUITO
FACTS:
MAXIMA, and TERESITA inherited from their father
the coconut land.
SACLOLO ALLEGATIONS:
1. They obtain a loan of P3,500 from FELIPE
MARQUITO, father of ROMEO, MONICO,
CLEMENTO, ESTER, MARINA, LOURDES,
LORNA
2. The coconut land was used as collateral
3. FELIPE occupied the land
4. OGATIA borrowed an additional P6K and
used her aliquot share as collateral
5. SACLOLO borrowed P10K using her aliquot
share as collateral
SACLOLO verbally informed MARQUITO of their
intention to redeem the property, but MARQUITO
refused. Hence the case for redemption of mortgaged
properties.
MARQUITO’s ALLEGATIONS:
1. SACLOLO sold the land for P1K as evidenced
by Memo of DOS with Right of Repurchase
2. They have been in actual possession of the
land and introduced improvements thereon
3. That SACLOLO, on numerous occasions
borrowed money from them but only extended
the said loans on the understanding that
SACLOLO would execute a DOAS in their
favor.
RTC - found that the transaction was an equitable
mortgage. MARQUITO refused to challenge the
finding thus it attained finality.
CA - applied the immutability doctrine and
nevertheless agreed that the transaction was an
equitable mortgage.
ISSUE: W/N the action to redeem had prescribed.
RULING:
No. The action to redeem had not prescribed.
Since the transaction was an equitable mortgage and
not a sale with right of repurchase, there is no
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redemption or repurchase to speak of and the
periods in Article 1606 does not apply, instead,
Article 1144 will apply.
The parties had 10 years from the time the cause of
action accrued to file the action.
IN THIS CASE:
The cause of action of SACLOLO have accrued only
in 2004 when MARQUITO rejected SACLOLO’s offer
to pay and extinguish the loan and to cover the
mortgaged property as it was only at this time that
respondents manifested their intention not to comply
with the true agreement of the parties.
THUS, the filing of the complaint in 2005 was made
well within the 10 year prescriptive period.
Although the Memo of DOS with Right of Repurchase
was executed in 1984 and the period to redeem
lapsed in 1994 if such contract were a true sale with
right to repurchase, the subsequent loans were
extended to either MAXIMA or TERESITA or both in
1987, 2003 and 2004, using the same land as security
for the loan.
The release of additional loans on the basis of the
same security, coupled with the fact that MARQUITO
never filed an action to consolidate ownership over the
subject property under Article 1607, evidently shows
that for 19 years, MARQUITO expressly recognized:
1. that SACLOLO continued to own the subject
property and
2. that the loan and equitable mortgage subsisted.
REMEDY OF MARQUITO
1. To collect the outstanding amount of loan +
interest, and
2. To foreclose on the property if SACLOLO fail
to pay
NOTE: allowing MARQUITO to appropriate the lot
without prior foreclosure would produce the same
effect as pactum commissorium.
PACTUM COMMISSORIUM
A stipulation empowering the creditor to appropriate the
thing given as guaranty for the fulfillment of the
obligation in the event the obligor gails to live up to his
undertakings, without further formality, such as
foreclosure proceedings, and a public sale. It is explicitly
prohibited under Article 2088 of the Civil Code, which
provides that a creditor cannot appropriate the things
given by way of pledge or mortgage, or dispose of them;
any stipulation to the contrary is null and void.
Article 2088. The creditor cannot appropriate the
things given by way of pledge or mortgage, or dispose
of them. Any stipulation to the contrary is null and
void. (1859a)
ELEMENTS
1. There should be a property mortgaged by way of
security for the payment of the principal
obligation;
2. There should be a stipulation for automatic
appropriation by the creditor of the thing
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mortgaged in case of non-payment of the
principal obligation within the stipulated period,
and which thereby enable the mortgagee to
acquire ownership of the mortgaged property
without any foreclosure proceedings.
PROPER REMEDIES (Montevirgin v. CA)
The proper remedy if the borrower refuses to pay the
“price” is to foreclose on the mortgage. In such a case,
the return of the redemption price would be equivalent to
the payment of the principal loan, which has the effect of
extinguishing the equitable mortgage as an ancillary
security contract.
PERIOD OF REDEMPTION
Article 1606. The right referred to in article 1601, in
the absence of an express agreement, shall last four
years from the date of the contract.
Should there be an agreement, the period cannot
exceed ten years.
However, the vendor may still exercise the right to
repurchase within thirty days from the time final
judgment was rendered in a civil action on the basis
that the contract was a true sale with right to
repurchase. (1508a)
RULES ON PERIOD FOR CONVENTIONAL
REDEMPTION:
If agreed upon the period cannot exceed ten
years
IF IT EXCEEDS: the agreement
is only valid for the first 10 years.
If not agreed four years from the date of the
upon contract
After finality of 30 days from the time of final
judgment of a judgment
civil action filed
EFFECT OF FILING OF CIVIL ACTION
The completion of the redemption process is tolled by
the filing of a civil action relating to the issue of such
redemption, provided that the exercise of redemption
right and the filing of the suit are done within the
redemption period.
The vendor may still exercise the right to repurchase
within 30 days from the time final judgment was
rendered in a civil action on the basis that the contract
was a true sale with right to repurchase.
ARTICLE 1607. In case of real property, the
consolidation of ownership in the vendee by virtue of
the failure of the vendor to comply with the provisions
of article 1616 shall not be recorded in the Registry
of Property without a judicial order, after the
vendor has been duly heard. (n)
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
Article 1607 abolished automatic consolidation of
ownership in the buyer a retro upon expiration of the
redemption period by requiring the buyer to institute an
action for consolidation where the vendor a retro may be
duly heard.
OTHER RULES
Article 1608. The vendor may bring his action against
every possessor whose right is derived from the
vendee, even if in the second contract no mention
should have been made of the right to repurchase,
without prejudice to the provisions of the Mortgage
Law and the Land Registration Law with respect to
third persons. (1510)
Article 1609. The vendee is subrogated to the
vendor's rights and actions. (1511)
Article 1610. The creditors of the vendor cannot make
use of the right of redemption against the vendee, until
after they have exhausted the property of the vendor.
(1512)
Article 1611. In a sale with a right to repurchase, the
vendee of a part of an undivided immovable who
acquires the whole thereof in the case of article 498,
may compel the vendor to redeem the whole property,
if the latter wishes to make use of the right of
redemption. (1513)
Article 1612. If several persons, jointly and in the
same contract, should sell an undivided immovable
property with a right of repurchase, none of them may
exercise this right for more than his respective share.
The same rule shall apply if the person who sold an
immovable alone has left several heirs, in which case
each of the latter may only redeem the part which he
may have acquired. (1514)
Article 1613. In the case of the preceding article, the
vendee may demand of all the vendors or co- heirs
that they come to an agreement upon the repurchase
of the whole thing sold; and should they fail to do so,
the vendee cannot be compelled to consent to a
partial redemption. (1515)
Article 1614. Each one of the co-owners of an
undivided immovable who may have sold his share
separately, may independently exercise the right of
repurchase as regards his own share, and the vendee
cannot compel him to redeem the whole property.
(1516)
Article 1615. If the vendee should leave several heirs,
the action for redemption cannot be brought against
each of them except for his own share, whether the
thing be undivided, or it has been partitioned among
them.
But if the inheritance has been divided, and the thing
sold has been awarded to one of the heirs, the action
for redemption may be instituted against him for the
whole. (1517)
Article 1617. If at the time of the execution of the sale
there should be on the land, visible or growing fruits,
there shall be no reimbursement for or prorating of
those existing at the time of redemption, if no
indemnity was paid by the purchaser when the sale
was executed.
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Should there have been no fruits at the time of the It is in favor of the seller Given to a third party to
sale and some exist at the time of redemption, they the sale
shall be prorated between the redemptioner and the
vendee, giving the latter the part corresponding to the AS TO EFFECT
time he possessed the land in the last year, counted
from the anniversary of the date of the sale. (1519a) The exercise of the right The exercise of the legal
a retro extinguishes the right of redemption,
underlying contract of although it extinguishes
SUMMARY
sale as though there was the original sale, actually
Rules on fruits never any contract at all constitutes a new sale in
1. When there is a sharing agreement – shall substitution of the original
sale.
be respected

2. When there is no sharing agreement RULES UNDER THE CIVIL CODE

➔ Existing at the time of the execution

of the sale - no reimbursement for or Among An heir may validly redeem for
prorating of those existing at the Co-heirs himself alone the hereditary rights
time of redemption, if no indemnity (Art. 1088) sold by another co-heir.
was paid by the purchaser when the
sale was executed. Among Redemption by a co- owner of the
Co-owners property owned in common, even
➔ no fruits at the time of the sale (Art. 1620) when he uses his own fund, within
and some exist at the time of the period prescribed by law inures
redemption - prorated between the to the benefit of all the other co-
redemptioner and the vendee owners.

NOTE: The right of redemption to be

Article 1618. The vendor who recovers the thing sold exercised, co-ownership must exist
shall receive it free from all charges or mortgages at the time of the conveyance is
constituted by the vendee, but he shall respect the made by a co-owner and the
leases which the latter may have executed in good redemption is demand
faith, and in accordance with the custom of the place
where the land is situated. (1520) Among In order for the right of redemption to
Adjoining apply, both lands sought to be
Owners of redeemed and the adjacent property
Article 1619. Legal redemption is the right to be Rural Lands
subrogated, upon the same terms and conditions belonging to the person exercising
(Art. 1621)
stipulated in the contract, in the place of one who the right of redemption must be rural
acquires a thing by purchase or dation in payment, or lands; if one or both are urban lands,
by any other transaction whereby ownership is the right under Article 1621 cannot
transmitted by onerous title. (1521a) be invoked.

PREFERENCE: the owner of the

LEGAL REDEMPTION
adjoining land of a smaller area shall
be preferred
Right to be subrogated upon the same terms and
conditions stipulated in the contract, in the place of one SHOULD BOTH LANDS HAVE THE
who acquires a thing by purchase or dation in payment, SAME AREA: the one who first
or by any other transaction whereby ownership is requested the redemption
transmitted by onerous title.
Among The owner of any adjoining land has
RATIONALE Adjoining a right of pre-emption at a
Owners of reasonable price whenever a piece
1. nature of a privilege created by law partly for Urban Lands of urban land which is so small and
(Art. 1622) so situated that a major portion
reasons of public policy and partly for the benefit
thereof cannot be used for any
and convenience of the redemptioner, practical purpose
2. It is intended to minimize co-ownership. PREFERENCE: the owner whose
intended use of the land in question
appears best justified shall be
CONVENTIONAL LEGAL
preferred.
AS TO HOW IT CAN BE CONSTITUTED

Can only be constituted Does not have to be Article 1088. Should any of the heirs sell his
by express reservation in expressly reserved (it is a hereditary rights to a stranger before the partition,
a contract of sale at time right granted by law), and any or all of the co-heirs may be subrogated to the
of perfection covers sales and other rights of the purchaser by reimbursing him for the
“onerous transfers of title” price of the sale, provided they do so within the
period of one month from the time they were notified
AS TO WHO POSSESSES THE RIGHT in writing of the sale by the vendor. (1067a)

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Article 1620. A co-owner of a thing may exercise the
right of redemption in case the shares of all the other
co-owners or of any of them, are sold to a third
person. If the price of the alienation is grossly
excessive, the redemptioner shall pay only a
reasonable one.
Should two or more co-owners desire to exercise
the right of redemption, they may only do so in
proportion to the share they may respectively have in
the thing owned in common. (1522a)
Article 1621. The owners of adjoining lands shall also
have the right of redemption when a piece of rural
land, the area of which does not exceed one
hectare, is alienated, unless the grantee does not
own any rural land.
This right is not applicable to adjacent lands which
are separated by brooks, drains, ravines, roads and
other apparent servitudes for the benefit of other
estates.
If two or more adjoining owners desire to exercise the
right of redemption at the same time, the owner of
the adjoining land of a smaller area shall be
preferred; and should both lands have the same area,
the one who first requested the redemption.
(1523a)
ARTICLE 1622. Whenever a piece of urban land
which is so small and so situated that a major
portion thereof cannot be used for any practical
purpose within a reasonable time, having been
bought merely for speculation, is about to be
re-sold, the owner of any adjoining land has a right of
pre-emption at a reasonable price.
If the resale has been perfected, the owner of the
adjoining land shall have a right of redemption, also at
a reasonable price.
When two or more owners of adjoining lands wish to
exercise the right of pre- emption or redemption, the
owner whose intended use of the land in question
appears best justified shall be preferred. (n)
WHEN TO EXERCISE
Article 1623. The right of legal preemption or
redemption shall not be exercised except within thirty
days from the notice in writing by the prospective
vendor, or by the vendor, as the case may be. The
deed of sale shall not be recorded in the Registry of
Property, unless accompanied by an affidavit of the
vendor that he has given written notice thereof to all
possible redemptioners.
The right of redemption of co-owners excludes that of
adjoining owners. (1524a)
PERIOD: 30 days from:
👉 from the notice in writing by the prospective
vendor, or
👉 by the vendor
TAKE NOTE OF THESE REQS:
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In Garcia v. Calaliman — Written notice is
indispensable, actual knowledge of the sale acquired in
some other manners by the redemptioner,
notwithstanding. He or she is still entitled to written
notice, as exacted by the Code, to remove all
uncertainty as to the sale, its terms and its validity, and
to quiet any doubt that the alienation is not definitive.
HERE: Petitioner heirs, therefore, have not lost
their right to redeem the property, for in the
absence of a written notification of the sale by
the vendors, the 30-day period has not even
begun to run.
In Primary Structures v. Valencia — In stressing the
mandatory character of the requirement, the law states
that the deed of sale shall not be recorded in the
Registry of Property unless the same is accompanied by
an affidavit of the vendor that he has given notice thereof
to all possible redemptioners.
The existence of a clause in the deed of sale to the
effect that the seller has complied with the provisions of
Article 1623 cannot be taken to being the written
affirmation under oath, as well as the evidence, that the
required written notice to petitioner under Article 1623
has been met since party entitled to redemption is not a
party to the deed of sale and has had no hand in the
preparation and execution of the deed of sale. It could
not thus be considered a binding equivalent of the
obligatory written notice prescribed by the Code.
OTHER RULES
1. Notice must cover a perfected sale — to avoid
any controversy as to the terms and conditions
under which the right to redeem may be
exercised, it is best that the period therefore
should not be deemed to have commenced
unless the notice of the disposition is made after
the formal deed of disposal has been duly
executed.
2. XPN to the written notice
👉 Alonzo doctrine: as a matter of
exception in Alonzo and due to the
peculiar circumstances of the case
where the co-heirs only brought an
action for redemption of hereditary right
sold by another coheir only after 13
years after having actual knowledge
thereof, by their actuations, they are
deemed to have lost their right to
redeem. (Alonzo c. IAC)
👉 Under free/homestead patent provisions
of the Public Land Act a period of 5
years from the date of conveyance is
provided, to be reckoned from the date
of the sale and not from the date of
registration in the Register of Deeds
(Berin v. CA)
OTHER REDEMPTIONS COVERED BY LAW
1. Redemption in tax sales - within one (1) year
from the date of sale (Sec 214, NIRC)
2. Redemptions by judgment debtor - at any time
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within one (1) year from the date of registration of
the certificate of sale; 365 days (Sec. 28, Rule 39
of the 1997 Rules of Civil Procedure)
3. Redemption in extrajudicial foreclosure -
within 1-year from the date of auction sale (Sec
6, Act 3135)
4. Redemption in judicial foreclosure - No right to
redeem from a judicial foreclosure sale, except
those granted by banks or banking institutions.
5. Foreclosure by banking institutions within
two (2) years from the date of foreclosure or
from the registration of the sheriff's certificate of
sale at such foreclosure if the property is not
covered or is covered, respectively, by Torrens
title.
If the mortgagor fails to exercise such right, he or
his heirs may still repurchase within five (5) years
from expiration of the two (2) year redemption
period pursuant to Sec. 119 of the Public Land
Act (C.A. 141)
6. Legal right to redeem under the Agrarian
Reform Code - within 180 days from notice in
writing and at a reasonable price and
consideration (Sec 12, RA 3844)
ASSIGNMENT
Article 1624. An assignment of creditors and other
incorporeal rights shall be perfected in accordance
with the provisions of article 1475. (n)
§1. Define “assignment of credits.”
It is a contract where by the owner of the credit or
other incorporeal rights (assignor) either gratuitously
or onerously transfers to another (assignee) his rights
and against a third person (debtor). It is the process
of transferring the right of the assignor to the
assignee who would then be allowed to proceed
against the debtor for the enforcement or satisfaction
of the credit to the same extent as the assignor could.
If the assignment is gratuitously made, the
assignment partakes of the nature of a donation. If
there is a valuable consideration, the assignment
partakes of the nature of a contract or of a sale.
§2. How is an “assignment of credit” perfected?
Under Article 1624, it is in accordance with the
provisions of Article 1475, which is from the moment
the parties agree upon the credit or right assigned
and upon the price even if neither has been delivered.
But the ownership only upon delivery.
§3. When is an assignment of credit effective against
third persons?
When: (1) it appears on a public instrument; or (2) the
instrument is recorded in the Registry of Property
when the assignment involves real property (Article
1625).
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However, as between the parties the assignment is
valid it is in a private instrument. In order to bind third
persons, the assignment must appear in a public
instrument but when it involves a real property, it must
be recorded in the Registry of Property.
§4. Is the consent of the debtor required for an
assignment of credit?
No. In an assignment of credit, the consent of the
debtor is not essential in order that it may produce
legal effects. Hence, the duty to pay does not depend
on the consent of the debtor, otherwise, all creditors
would be prevented from assigning their credits
because of the possibility of the debtor’s refusal to
give consent.
§5. What happens if the debtor pays to the original
creditor?
If done without knowledge of the assignment. – The
debtor is released from the obligation as the payment
is deemed valid. Since once assignment has been
made it is the duty to notify the debtor of the
assignment. In the absence of a notice, the debtor’s
payment to the original creditor (assignee) will
extinguish the obligation (Article 1626)
If done with knowledge of the assignment. – It is not
valid against the assignee. However, the rule as to
payment by third person will apply.
§6. What is included in an assignment of credit?
It includes all the accessory rights, such as a
guaranty, mortgage, pledge, or preference (Article
1627).
§7. Are the warranties on the part of the assignor?
Yes. Under Article 1628, when a creditor-assignor
assigns his credit, he warrants only the: 1.) existence
of the credit; and 2.) legality of the credit at the
perfection of the contract. However, if the
creditor-assignor assigned the credit as “doubtful” the
assignee assumes risk and thus the assignor is not
liable for the said warranty.
§8. Is the assignor deemed to have warranted the
solvency of the debtor?
As a general rule, the assignor does not warrant the
solvency of the debtor. Therefore, upon assignment
to the assignee, it turns out that the debtor becomes
insolvent later on (unable to pay the obligation or
credit assigned) the assignee cannot go against the
assignor since there is no warranty as to the solvency
of the debtor.
This admits of 2 exceptions:
1. There is an express warranty as to
the solvency of the debtor;
2. The insolvency of the debtor was
existence and of public knowledge at the
time of the assignment.
§9. What are the liabilities of the assignor for breach
of warranty under Article 1628?
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If the assignor is in good faith. – The liability is limited
only to the: 1.) price received; 2.) expenses of the
contract; and 3.) and any other legitimate payments
made by reason of the assignment.
If the assignor is in bad faith. – Similar to (1) (2) (3)
above but this time with damages. An assignor is
deemed in “bad faith” if he knew the illegality or
non-existence of the credit at the time of the
assignment.
§10. Assuming that the parties expressly agreed on
warranty as to the solvency of the debtor for how
long should it last?
Under Article 1629, if there is such stipulation as to
warranty as to the solvency of the debtor, then the
period shall be as follows:
1. If there is a period stipulated then such
period shall be followed;
2. If there is no period;
a. For one year from the assignment
of the credit when the period for
payment of the credit has expired;
b. For one year after its maturity,
when such period for payment has
not expired.
The law provides for duration in order to prevent fraud
and to oblige the assignee to exert efforts in the
recovery of the credit and thereby avoid that by his
oversight, the assignor may suffer.
§11. Can you sell your hereditary rights or right to
the inheritance?
Yes. Under Article 1630 what is validly sold is the
right but not the inheritance itself. Prior to partition, an
heir only owned a pro-indiviso share over the estate
of the decedent and therefore could only sell the
“right” but not the objects which make up the
inheritance. However, take note that this refers to a
present inheritance since a sale involving future
inheritance is void (cf. Art. 1347, Civil Code).
Further, Article 1630 provides that in case a right to
the inheritance is sold, what the heir warrants is only
the fact that he or she is an heir but does not warrant
the objects which make up his inheritance. Thus, the
assignee/buyer bears the risk of the possibility that
the assignor-heir may not actually receive anything
from the estate of the decedent. For example, upon
the settlement of the estate it turns out that the
decedent has more liabilities than assets, thus the
assignee/buyer at the end will not receive anything.
§12. If inheritance is sold, does it include the fruits?
Yes. It is fundamental in a sale that the buyer, at the
time of perfection, is entitled to the accessions and
accessories, which include the fruits. Thus, under
Article 1632, if there are fruits out of the inheritance,
the assignor/vendor must deliver it to the
assignee/vendee. If consumed, he must reimburse
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the vendee. If sold, he must deliver the price of the
sale.
§13. If there are charges or debts as to the estate is
the assignee of an inheritance liable?
Under Article 1633, the vendee is required to
reimburse the vendor for whatever the vendor has
paid for the debts and charges on the estate (to the
extent of the right assigned). But they may stipulate
otherwise.
§14. What is the rule as to the sale of lump sum over
the whole of certain rights, rents, or products?
Under Article 1631, the subject matter of the sale or
assignment is the totality of such rights, rents, or
products. As a consequence, the vendor warrants
only the legitimacy of the whole but not the various
parts of which it may be composed. (e.g., liability for
eviction as a whole but not to specific parts.)
§15. What is the rule as to assignment of credit in
litigation?
This contemplates of a situation that a creditor
assigned his credit that is subject of a pending case –
hence “credit in litigation.” There is a pending case
where X is the creditor demanding payment of sum of
money from F, but during the pendency of the case, X
assigned the “credit in litigation” to QBank. Once
assigned to the assignee, the debtor himself (F) can
extinguish the debt.
Article 1634 allows the debtor to redeem the credit in
litigation that was assigned. Thus, Article 1634 is
considered a legal redemption provided that the
following requisites are present:
1. There must be a sale or assignment of credit
(not a donation);
2. There must be a pending litigation at the
time of assignment.
3. The debtor must pay the assignee:
a. Price paid by assignee;
b. The judicial costs incurred by
him; and
c. The interest on the price from
the date of payment; and
4. The right must be exercised by the debtor
within 30 days from the date the
assignee demands (judicially or
extrajudicially) payment from him.
Demand is necessary in order for the 30-day period
to run. As discussed in the case of Eagleridge
Development Corporation v. Cameron Granville 3
Asset Management (G.R. No. 204700, November
24, 2014):
“Under the last paragraph of Article
1634, the debtor may extinguish his
or her debt within 30 days from the
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date the assignee demands
payment. In this case, insofar as the
actual parties to the deed of
assignment are concerned, no
demand has yet been made, and the
30-day period did not begin to run.
Indeed, petitioners assailed before
the trial court the validity of the deed
of assignment on the grounds that it
did not comply with the mandatory
requirements of the Special Purpose
Vehicle Act, and it referred to
Cameron Granville Asset
Management (SPV-AMC), Inc., as
the assignee, and not respondent
Cameron Granville 3 Asset
Management, Inc. The law requires
that payment should be made only
"to the person in whose favor the
obligation has been constituted, or
his [or her] successor in interest, or
any person authorized to receive it."
It was held that payment made to a
person who is not the creditor, his or
her successor-in-interest, or a person
who is authorized to receive
payment,
even through error or good faith, is
not an effective payment which will
bind the creditor or release the
debtor from the obligation to pay.
Therefore, it was important for
petitioners to determine for sure the
proper assignee of the EIB credit or
who to pay, in order to effectively
extinguish their debt. Moreover, even
assuming that respondent is the
proper assignee of the EIB credit,
petitioners could not exercise their
right of extinguishment because they
were not informed of the
consideration paid for the
assignment.
Respondent must, pursuant to Article
1634 of the Civil Code, disclose how
much it paid to acquire the EIB credit,
so that petitioners could make the
corresponding offer to pay, by way of
redemption, the same amount in final
settlement of their obligation.”
§16. In what instances is the legal redemption by
debtor in Article 1634 not applicable?
Article 1635 enumerates three instances of
assignments or sales as exceptions to the provisions of
Article 1634:
(1) Sale to a co-heir or co-owner;
(2) Sale to a creditor (since this would
technically be a dation in payment).
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EX: Dodong (debtor) owes Inday
(creditor) the sum of P10 Million.
Dodong (debtor) also owes
Marites the sum of P8 Million.
Inday filed a case for a sum of
money against Dodong for the P10
Million. If Inday assigns her credit
in litigation to Marites, Dodong
cannot avail of Art. 1634 by paying
the “debt” in litigation to Marites as
it would just be a mere payment in
another form.
(3) Sale to the possessor of property in
question.
EX: Dodong (debtor) owes Inday
(creditor) the sum of P10 Million,
secured by a mortgage over a land
owned by Dodong. If Dodong sells
the land to Marites, and Inday
assigns her credit in litigation
against Dodong to Marites,
Dodong cannot redeem.
LEASE
– allowing another person to use or enjoy the property or
services without making you an employee for
compensation.
ARTICLE 1642. The contract of lease may be of
things, or of work and service.
LEASE OF THINGS
Article 1643. In the lease of things, one of the
parties binds himself to give to another the
enjoyment or use of a thing for a price certain, and
for a period which may be definite or indefinite.
However, no lease for more than 99 years shall be
valid.
LEASE OF WORK OR SERVICE
ARTICLE 1644. In the lease of work or service, one
of the parties binds himself to execute a piece of
work or to render to the other some service for a
price certain, but the relation of principal and agent
does not exist between them. (1544a)
Article 1648. Every lease of real estate may be
recorded in the Registry of Property. Unless a lease
is recorded, it shall not be binding upon third
persons.
ASSIGNMENT AND SUBLEASE
Article 1649. The lessee cannot assign the lease
without the consent of the lessor, unless there is a
stipulation to the contrary. (n)
Article 1650. When in the contract of lease of things
there is no express prohibition, the lessee may
sublet the thing leased, in whole or in part, without
prejudice to his responsibility for the performance of
the contract toward the lessor.
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Republic Act No. 9653 July 14, 2009
AN ACT ESTABLISHING REFORMS IN THE
REGULATION OF RENT OF CERTAIN
RESIDENTIAL UNITS, PROVIDING THE
MECHANISMS THEREFOR AND FOR OTHER
PURPOSES
Section 8. Assignment of Lease or Subleasing. -
Assignment of lease or subleasing of the whole or any
portion of the residential unit, including the acceptance
of boarders or bedspacers, without the written
consent of the owner/lessor is prohibited.
OBLIGATIONS OF THE LESSOR
SECTION 2
Rights and Obligations of the Lessor and the
Lessee
Article 1654. The lessor is obliged:
(1) To deliver the thing which is the object of the
contract in such a condition as to render it fit for the
use intended;
(2) To make on the same during the lease all the
necessary repairs in order to keep it suitable for
the use to which it has been devoted, unless there is
a stipulation to the contrary;
(3) To maintain the lessee in the peaceful and
adequate enjoyment of the lease for the entire
duration of the contract. (1554a)
OBLIGATIONS OF THE LESSEE
Article 1658. The lessee may suspend the payment
of the rent in case the lessor fails to make the
necessary repairs or to maintain the lessee in
peaceful and adequate enjoyment of the property
leased.
Article 1659.If the lessor or the lessee should not
comply with the obligations set forth in articles 1654
and 1657, the aggrieved party may ask for the
rescission of the contract and indemnification for
damages, or only the latter, allowing the contract to re
main in force.
Article 1660. If a dwelling place or any other building
intended for human habitation is in such a condition
that its use brings imminent and serious danger to
life or health, the lessee may terminate the lease at
once by notifying the lessor, even if at the time the
contract was perfected the former knew of the
dangerous condition or waived the right to rescind the
lease on account of this condition. (n)
Article 1661. The lessor cannot alter the form of the
thing leased in such a way as to impair the use to
which the thing is devoted under the terms of the
lease. (1557a)
Article 1662. If during the lease it should become
necessary to make some urgent repairs upon the
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thing leased, which cannot be deferred until the
termination of the lease, the lessee is obliged to
tolerate the work, although it may be very annoying
to him, and although during the same, he may be
deprived of a part of the premises.
If the repairs last more than forty days the rent shall
be reduced in proportion to the time - including the
first forty days - and the part of the property of which
the lessee has been deprived.
When the work is of such a nature that the portion
which the lessee and his family need for their dwelling
becomes uninhabitable, he may rescind the
contract if the main purpose of the lease is to provide
a dwelling place for the lessee.
Article 1663. The lessee is obliged to bring to the
knowledge of the proprietor, within the shortest
possible time, every usurpation or untoward act
which any third person may have committed or may
be openly preparing to carry out upon the thing
leased.
He is also obliged to advise the owner, with the
same urgency, of the need of all repairs included in
No. 2 of article 1654.
In both cases the lessee shall be liable for the
damages which, through his negligence, may be
suffered by the proprietor.
If the lessor fails to make urgent repairs, the lessee, in
order to avoid an imminent danger, may order the
repairs at the lessor's cost.
Article 1664. The lessor is not obliged to answer
for a mere act of trespass which a third person may
cause on the use of the thing leased; but the lessee
shall have a direct action against the intruder.
There is a mere act of trespass when the third
person claims no right whatever. (1560a)
Article 1665. The lessee shall return the thing
leased, upon the termination of the lease, as he
received it, save what has been lost or impaired by the
lapse of time, or by ordinary wear and tear, or from an
inevitable cause. (1561a)
Article 1666. In the absence of a statement
concerning the condition of the thing at the time the
lease was constituted, the law presumes that the
lessee received it in good condition, unless there is
proof to the contrary.
Article 1667. The lessee is responsible for the
deterioration or loss of the thing leased, unless he
proves that it took place without his fault. This
burden of proof on the lessee does not apply when the
destruction is due to earthquake, flood, storm or other
natural calamity.
Article 1668. The lessee is liable for any
deterioration caused by members of his household
and by guests and visitors.
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RACELIS v. SPS JAVIER
A contract of lease is a "consensual, bilateral, onerous
and commutative contract by which the owner
temporarily grants the use of his property to another
who undertakes to pay rent therefor."
Article 1658 allows a lessee to postpone the payment
of rent if the lessor fails to either
(1) "make the necessary repairs" on the property or
(2) "maintain the lessee in peaceful and adequate
enjoyment of the property leased."
This provision implements the obligation imposed on
lessors under Article 1654(3) of the Civil Code.
The failure to maintain the lessee in the peaceful and
adequate enjoyment of the property leased does not
contemplate all acts of disturbance. Lessees may
suspend the payment of rent under Article 1658 of
the Civil Code only if their legal possession is
disrupted.
In Chua Tee Dee vs CA, the lease contract stated
that the lessor was obliged to "maintain the [lessee] in
the quiet peaceful possession and enjoyment of the
leased premises during the effectivity of the lease."71
The lessees were harassed by claimants of the leased
property. Hence, the lessee withheld rental payments
for the lessor's failure to comply with his contractual
obligation.
Citing Goldstein, this Court in Chua Tee Dee struck
down the lessee's argument and held that "[t]he duty
'to maintain the lessee in the peaceful and adequate
enjoyment of the lease for the duration of the contract'
mentioned in [N]o. 3 of [Article 1654] is merely a
warranty that the lessee shall not be disturbed in
his legal, and not physical, possession."
Furthermore, this Court found that there was no
disturbance in the lessee's legal possession because
her right to possess the property was neither
questioned nor raised as an issue in any legal
proceeding. Hence, she was not entitled to suspend
the payment of rent.
IN THIS CASE: The disconnection of electrical service
over the leased premises on May 14, 2004 was not
just an act of physical disturbance but one that is
meant to remove the Sps from the leased premises
and disturb their legal possession as lessees.
Ordinarily, this would have entitled respondents to
invoke the right accorded by Article 1658 of the Civil
Code.
The rule does not apply because the lease had
already expired when Racelis requested for the
temporary disconnection of electrical service.
1) Racelis demanded the Sps to vacate the
premises by May 30, 2004. Instead of
surrendering the premises to Racelis, the Sps
unlawfully withheld possession of the property.
2) The Sps continued to stay in the premises
until they moved to their new residence on
September 26, 2004. At that point, Racelis
was no longer obligated to maintain Sps
the "peaceful and adequate enjoyment of
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the lease for the entire duration of the
contract."
THEREFORE, the Sps cannot use the disconnection
of electrical service as justification to suspend the
payment of rent.
Assuming that the Sps Javier were entitled to invoke
their right under Article 1658 of the Civil Code, this
does exonerate them from their obligation under
Article 1657 of the civil Code "to pay the price of the
lease according to the terms stipulated." Lessees who
exercise their right under Article 1658 of the Civil
Code are not freed from the obligations imposed by
law or contract.
TACITA RECONDUCCION
Article 1670. If at the end of the contract the lessee
should continue enjoying the thing leased for fifteen
days with the acquiescence of the lessor, and unless a
notice to the contrary by either party has previously
been given, it is understood that there is an implied
new lease, not for the period of the original contract,
but for the time established in articles 1682 and 1687.
The other terms of the original contract shall be
revived. (1566a)
RURAL LANDS
Article 1682. The lease of a piece of rural land, when
its duration has not been fixed, is understood to have
been for all the time necessary for the gathering of the
fruits which the whole estate leased may yield in one
year, or which it may yield once, although two or more
years have to elapse for the purpose. (1577a)
URBAN LANDS
Article 1687. If the period for the lease has not been
fixed, it is understood to be from year to year, if the
rent agreed upon is annual; from month to month, if it
is monthly; from week to week, if the rent is weekly;
and from day to day, if the rent is to be paid daily.
However, even though a monthly rent is paid, and no
period for the lease has been set, the courts may fix a
longer term for the lease after the lessee has occupied
the premises for over one year. If the rent is weekly,
the courts may likewise determine a longer period
after the lessee has been in possession for over six
months. In case of daily rent, the courts may also fix a
longer period after the lessee has stayed in the place
for over one month. (1581a)
In Samelo v. Manotok — the lease contract was for a
period of 1 yr and for monthly rental, upon the expiration,
Samelo still continued occupying the w/o paying rent.
Manotok sent a letter to Samelo demanding that she
vacate the premises and take compensation of its use
and of the occupancy.
Same lo refused such a demand, so Manotok filed a
case for Unlawful Detainer against him in MeTC and
prayed for Samelo to vacate and to pay for the use and
occupancy.
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Metc: in favor of Manotok and ordered Samelo
to vacate the subject premises + deliver the
possession to Manotok.
HERE: There is an implied lease. It is undisputed that
they entered into a lease contract. Under the lease
contract, Samelo obligated herself to pay a monthly
rental of P3K for a year, but Manotok did not give notice
to vacate upon expiration. Samelo continued enjoying
the premises for more than 15 days w/o objection of
Manotok
MEANING: by the inaction of Manotok as lessor,
there can be inference that it intended to
discontinue the lease contract. An implied new
lease was therefore created pursuant to Art.
1670 of CC.
§1. What are the types of lease?
1.) Lease of things; and
2.) Lease of work or service (Art. 1642).
§2. What are the characteristics of a contract of
lease?
It is consensual, bilateral, onerous, commutative,
nominate, and principal. It does not transfer
ownership to the lessee but only the right to the
enjoyment and use of the thing.
§3. For how long can there be a lease on things?
Under Article 1643, a lease of things may be a period
which may be definite or indefinite.
However, no lease for more than 99 years shall be
valid.
§4. Can consumable goods be subject of lease?
Under Article 1645, as a general rule, consumable
goods cannot be subject matter of a contract of lease
this is because there is no other way to use them but
to consume them thus depriving the lessor ownership
thereafter. The exception is when the consumable
goods are only for (1) exhibition; or (2) accessory to
an industrial establishment.
§5. What is the main distinction then between a
lease and a usufruct?
The usufruct requires that the owner must be the
one who will create the usufructuary. In lease, even a
lessee may sublease a property. On the other hand, a
usufructuary cannot constitute another usufruct on
the property. Lastly, as a rule, death of usufructuary
extinguishes the usufruct (Art. 603[1]), while lease
persists, unless contrary stipulation exists.
§6. When is a lease binding to third persons?
Every lease of real estate must be registered in the
Registry of Property for it to be binding upon third
persons (Art.1648).
§7. Can the lessee assign the lease?
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
GR: No, the lessee cannot assign the lease
without the consent of the lessor.
XPN: Unless there is a stipulation to the
contrary (Art. 1649).
§8. Can the lessee sublease the subject matter of the
lease?
GR: Yes, the lessee can sublet the thing
leased, in whole or in part. This is without
prejudice to his performance of obligations
under the contract to the lessor.
XPN: When there is an express prohibition in
the contract (Art. 1650).
§9. What are some of the obligations of the lessor?
Under Article 1654, the lessor is obliged to: 1.)
deliver the thing as to render it fit for the use intended;
2.) make necessary repairs during the lease, unless
otherwise stipulated; 3.) maintain the lessee in the
peaceful and adequate enjoyment of the lease for the
entire duration of the contract; 4.) responsible for
warranty against eviction and hidden defects; 5.) not
to alter the form of the thing as to impair the use
thereof.
§10. What are some of the rights and obligations of
the lessee?
Under Articles 1658 to 1668, the following are the
rights of the lessee:
1. demand the delivery of the thing leased;
2. be in peaceful and adequate enjoyment of the
lease for the duration of the contract;
3. the right to sublease unless contrary stipulation
exists;
4. if the thing is partially destroyed by fortuitous
event, the lessee may choose proportionate
reduction or rescission;
5. suspend payment*** in case lessor:
a. fails to make necessary repairs; or
b. maintain peaceful and adequate
enjoyment;
6. terminate the lease if it bring imminent and
serious danger to his life or health or it becomes
uninhabitable;
7. ask for a proportional reduction for urgent
repairs made by lessor no lasting for more than
40 days.
The following are the obligations of the lessee:
1. pay the price of lease;
2. use the thing lease;
3. pay expenses for the execution of the deed for
the lease;
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4. notify owner for urgent repairs;
5. notify lessor in case of usurpation and untoward
act of third persons;
6. return the thing leased after termination;
7. liability for loss or deterioration due to fault or
negligence;
8. liability for deterioration caused by household
and by guests and visitors.
*** In Racelis v. Javier (G.R. No. 189609, January
29, 2018), the Supreme Court stated that “Lessees
are entitled to suspend the payment of rent under
Article 1658 of the Civil Code if their legal possession
is disturbed. Acts of physical disturbance that do not
affect legal possession is beyond the scope of this
rule.”
Q. Is the disconnection of electrical service
over the leased premises a ground to
suspend payments in this case? Why? Are
they entitled to stop payment in the first
place?
§11. What is an implied new lease?
Under Article 1670, an implied new lease or tacita
reconduccion arises when the lessee with the
acquiescence of the lessor, holds over after the
expiration of the contract of lease, under the same
terms and conditions except that instead of the
original period, the period of the new lease will be
according to the character of the property:
1. rural lease which is 1 year or period necessary
to gather fruits (Art. 1682); or
2. urban lease where the period depends upon
the periods of payment (month to month) (Art.
1687).
§12. What are the requisites of an implied new
lease?
The requisites for an implied new lease are:
1. the term of the original contract of lease has
expired;
2. the lessor has not given the lessee a notice to
vacate;
3. the lessee continues in possession for 15 days
with the acquiescence of the lessor;
4. the notice to the contrary by either party should
not have been given;
5. There is no express contract entered after the
old contract has expired.
Q. Was there an implied new lease in the case of
Samelo v. Manotok (G.R. No. 170509, June 27,
2012)? If yes, how did it arise? Was it aborted?
§13. In case of an implied new lease, are all terms of
the original contract revived?
Crisostomo · Clerigo · Escleto · Lizada · Malazarte · Padilla · Pongan · Trujillo · Villareal
Only those which are germane to the lessee’s right of
continued enjoyment of the property leased or related
to such possession, such as the amount rental, the date
when it must be paid, the care of the property, the
responsibility for repairs. This, however, does not
extend to special agreements which by their nature are
foreign to the right of occupation or enjoyment inherent
in a contract of lease (e.g., right of first refusal).
§14. What are the periods of the implied new lease?
For rural lands. – Applying Article 1682, the
period of the new lease shall be 1.) one (1)
year in case of agricultural crops; or 2.) more
than one year, as time necessary to gather
the fruits;
For urban lands. – Applying Article 1687, the
period of the new lease shall be the agreed
period to pay the rentals (e.g., annually,
monthly, weekly, daily) but not the original
period. In the case of Samelo v. Manotok, it
was ruled that: “Since the rent was paid on a
monthly basis, the period of lease is
considered to be from month to month, in
accordance with Article 1687 of the Civil
Code. "[A] lease from month to month is
considered to be one with a definite period
which expires at the end of each month upon
a demand to vacate by the lessor."
§15. What are the grounds to terminate a lease? Can
the sale of the leased property include the
termination of the lease?
A lease may be terminated 1.) by expiration of the
contract’s term; or 2.) by agreement of the parties.
However, if the property is sold while there is a
subsisting lease, Article 1676 provides:
1. If the lease is not recorded in the Registry of
Property, the purchaser may terminate the
lease except when:
a. There is a stipulation to the
contrary;
b. Purchaser knows of the
existence of the lease.
2. If the lease is recorded in the Registry of
Property, the purchaser cannot terminate the
lease.
3. If the sale is fictitious for the purpose only to
extinguish the lease, the termination of lease is
not allowed. It is presumed to be fictitious if at
the time the supposed vendee demands
termination of the lease, the sale is not
recorded in the Registry of Property.
- END OF 2ND EXAM COVERAGE -
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