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LAW ON SALES OUTLINE
First Semester, SY 2011-2012 I. THE NATURE
DEAN CESAR L. VILLANUEVA ATTY. ALEXANDER C. DY ATTY. RAY PAOLO J. SANTIAGO
A. DEFINITION (Art. 1458)
Sale is a contract whereby one of the contracting parties [the seller] obligates himself to transfer the ownership2 and to deliver the possession, of a determinate thing, and the other party [the buyer] to pay therefor a price certain in money or its equivalent. xCruz v. Fernando, 477 SCRA 173 (2005).3 1. Elements of Sale Elements of sale: (a) consent or meeting of the minds; (b) determinate subject matter; and (c) price certain in money or its equivalent. xNavarra v. Planters Dev. Bank, 527 SCRA 562 (2007).4 Sale being a consensual contract, its essential elements must be proven. xVillanueva v. CA, 267 SCRA 89 (1997). Absence of any essential elements negates a sale xDizon v. CA, 302 SCRA 288 (1999),5 even when earnest money has been paid. xManila Metal Container Corp. v. PNB, 511 SCRA 444 (2006). But once all elements are proven, a sale’s validity is not affected by a previously executed fictitious deed of sale. xPeñalosa v. Santos, 363 SCRA 545 (2001); and the burden is on the other party to prove otherwise. xHeirs of Ernesto Biona v. CA, 362 SCRA 29 (2001). 2. Stages of Contract of Sale Policitacion covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected. Perfection takes place upon the concurrence of the essential elements, which are the meeting of the minds of the parties as to the object of the contract and upon the price. Consummation begins when the parties perform their respective undertakings, culminating in the extinguishment thereof. xSan Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000).6 3. Sale Creates Real Obligations “To Give” (Art. 1165) 4. Essential Characteristics of Sale: a. Nominate and Principal A contract of sale is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it. xSantos v. Court of Appeals, 337 SCRA 67 (2000).7 b. Consensual (Art. 1475)
The Outline presents the manner by which the LAW ON SALES will be taken-up in class. The x's and those footnoted in the Outline represent cases or topics which need no extended discussions, either because the essence of the rulings are already summarized in the Outline or they contain similar rulings or doctrines as other cases to be discussed. Unless otherwise indicated, the numbered articles refer to articles of the Civil Code of the Philippines. 2 Ownership is the independent and general power of a person over a thing for purposes recognized by law and within the limits established thereby. According to Art. 428 of the Civil Code, this means that: The owner has the right to enjoy and dispose of a thing, without other limitations than those established by law. x x x Aside from the jus utendi and the jus abutendi inherent in the right to enjoy the thing, the right to dispose, or the jus disponendi, is the power of the owner to alienate, encumber, transform and even destroy the thing owned. Flancia v. Court of Appeals, 457 SCRA 224 (2005). 3 Alfredo v. Borras, 404 SCRA 145 (2003); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Roberts v. Papio, 515 SCRA 346 (2007). 4 Jovan Land, Inc. v. CA, 268 SCRA 160 (1997); Quijada v. CA, 299 SCRA 695 (1998); Co v. CA, 312 SCRA 528 (1999); San Andres v. Rodriguez, 332 SCRA 769 (2000); Roble v. Arbasa, 362 SCRA 69 (2001); Polytechnic University v. CA, 368 SCRA 691 (2001); Katipunan v. Katipunan, 375 SCRA 199 (2002); Londres v. CA, 394 SCRA 133 (2002); Manongsong v. Estimo, 404 SCRA 683 (2003); Jimenez, Jr. v. Jordana, 444 SCRA 250 (2004); San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Roberts v. Papio, 515 SCRA 346 (2007); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Republic v. Florendo, 549 SCRA 527 (2008); GSIS v. Lopez, 592 SCRA 456 (2009); Baladad v. Rublico, 595 SCRA 125 (2009); Del Prado v. Caballero, 614 SCRA 102 (2010); Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010). 5 Roberts v. Papio, 515 SCRA 346 (2007); XYST Corp. v. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009). Limketkai Sons Milling, Inc. v. Court of Appeals, 250 SCRA 523 (1995); Jovan Land, Inc. v. CA, 268 SCRA 160 (1997); Bugatti v. Court of Appeals, 343 SCRA 335 (2000); Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008); GSIS v. Lopez, 592 SCRA 456 (2009); XYST Corp. v. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009). 7 Bowe v. CA, 220 SCRA 158 (1993); Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Cavite Development Bank v. Lim, 324 SCRA 346 (2000).
A contract of sale is not a real, but a consensual contract, and becomes valid and binding upon the meeting of the minds of the parties as to the object and the price,8 consequently: •
Upon its perfection, the parties may reciprocally demand performance. xHeirs of Venancio Bejenting v. Bañez, 502 SCRA 531 (2006);9 subject only to the provisions of the law governing the form of contracts. xCruz v. Fernando, 477 SCRA 173 (2005). It remains valid even if parties have not affixed their signatures to its written form, xGabelo v. CA, 316 SCRA 386 (1999), or the manner of payment is breached. xPilipinas Shell Petroleum Corp v. Gobonseng, 496 SCRA 305 (2006). In an Extrajudicial Settlement of Estate with Absolute Sale, it would be immaterial that the buyer’s signature does not appear thereon since the contract of sale is consensual and perfected by mere consent. xBaladad v. Rublico, 595 SCRA 125 (2009). Failure of the subdivision developer to obtain a license to sell the subdivision lots does not render the sales void on that ground alone especially that the parties have impliedly admitted that there was already a meeting of the minds as to the subject of the sale and price of the contract. Cantemprate v. CRS Realty Dev. Corp. 587 SCRA 492 (2009).
The binding effect of sale is based on the principle that the obligations arising therefrom have the force of law between the parties. xVeterans Federation of the Philippines v. Court of Appeals, 345 SCRA 348 (2000). Perfection Distinguished from Demandability – Not all contracts of sale become automatically and immediately effective. In sales with assumption of mortgage, there is a condition precedent to the seller’s consent and without the approval of the mortgagee, the sale is not perfected. xBiñan Steel Corp. v. Court of Appeals, 391 SCRA 90 (2002). “No Contract Situation” versus “Void Contract” – Absence of consent (i.e., complete meeting of minds) negates the existence of a perfected sale. xFirme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003). The contract then is null and void ab initio, absolutely wanting in civil effects; hence, it does not create, modify, or extinguish the juridical relation to which it refers. xCabotaje v. Pudunan, 436 SCRA 423 (2004). When there is no meeting of the minds on price, the contract “is not perfected” and does not serve as a binding juridical relation between the parties. xManila Metal Container Corp. v. PNB, 511 SCRA 444 (2006),10 and should be more accurately denominated as inexistent, as it did not pass the stage of generation to the point of perfection. xNHA v. Grace Baptist Church, 424 SCRA 147 (2004). c. Bilateral and Reciprocal (Arts. 1169 and 1191) A contract of sale gives rise to “reciprocal obligations”, which arise from the same cause with each party being a debtor and creditor of the other, such that the obligation of one is dependent upon the obligation of the other; and they are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other. Cortes v. Court of Appeals, 494 SCRA 570 (2006).11 A perfected contract of sale carries the correlative duty of the seller to deliver the property and the obligation of the buyer to pay the agreed price. Congregation of the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008). The power to rescind is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him, and without need of prior demand. Almocera v. Ong, 546 SCRA 164 (2008).12 d. Onerous (√Gaite v. Fonacier, 2 SCRA 830 ) e. Commutative (BUT SEE: Arts. 1355 and 1470) In a contract of sale, there is no requirement that the price be equal to the exact value of the subject matter of sale; all that is required is that the parties believed that they will receive good value in exchange for what they will give. √Buenaventura v. CA, 416 SCRA 263 (2003). f. Sale Is Title and Not Mode
Romero v. CA, 250 SCRA 223 (1995); Balatbat v. CA, 261 SCRA 128 (1996); Coronel v. CA, 263 SCRA 15 (1996); City of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999); Agasen v. CA, 325 SCRA 504 (2000); Laforteza v. Machuca, 333 SCRA 643 (2000); Londres v. Court of Appeals, 394 SCRA 133 (2002); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Buenaventura v. Court of Appeals, 416 SCRA 263 (2003); San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Ainza v. Padua, 462 SCRA 614 (2005); Roberts v. Papio, 515 SCRA 346 (2007); MCC Industrial Sales Corp. v. Ssangyong Corp., 536 SCRA 408 (2007); Castillo v. Reyes. 539 SCRA 193 (2007); XYST Corp. v. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009); Del Prado v. Caballero, 614 SCRA 102 (2010). 9 Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
10 11 8
Roberts v. Papio, 515 SCRA 346 (2007).
Ong v. Court of Appeals, 310 SCRA 1 (1999); Mortel v. KASSCO, 348 SCRA 391 (2000); Agro Conglomerates, Inc. v. CA, 348 SCRA 450 (2000); Velarde v. Court of Appeals, 361 SCRA 56 (2001); Carrascoso, Jr. v. Court of Appeals, 477 SCRA 666 (2005); Heirs of Antonio F. Bernabe v. Court of Appeals, 559 SCRA 53 (2008); Heirs of Antonio F. Bernabe v. Court of Appeals, 559 SCRA 53 (2008). 12 Vda. De Quirino v. Palarca, 29 SCRA 1 (1969)
Sale is not a mode, but merely a title. A mode is the legal means by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership. Sale by itself does not transfer or affect ownership; the most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership. xSan Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005),13 citing VILLANUEVA, PHILIPPINE LAW ON SALES, 1995 ed., at p. 5. Seller’s ownership of the thing sold is not an element of perfection; what the law requires is that seller has the right to transfer ownership at the time of delivery. xQuijada v. CA, 299 SCRA 695 (1998).14 BUT SEE: xTitong v. CA, 287 SCRA 102 (1998), which defined a “sale” as “a contract transferring dominion and other real rights in the thing sold.”
B. SALE DISTINGUISHED FROM SIMILAR CONTRACTS
A contract is what the law defines it to be, taking into consideration its essential elements, and the title given to it by the parties is not as much significant as its substance.15 The transfer of ownership in exchange for a price paid or promised is the very essence of a contract of sale. xSantos v. Court of Appeals, 337 SCRA 67 (2000). In determining the real character of sale, courts look at the intent of the parties, their true aim and purpose in entering into the contract, as well as “by their conduct, words, actions and deeds prior to, during and immediately after executing the agreement,” and not at the nomenclature used to describe it, xLao v. Court of Appeals, 275 SCRA 237 (1997). 1. Donation (Arts. 725 and 1471) Unlike a donation, sale is a disposition for valuable consideration with no diminution of the estate but merely substitution of values, with the property sold replaced by the equivalent monetary consideration; unlike donation, a valid sale cannot have the legal effect of depriving the compulsory heirs of their legitimes. xManongsong v. Estimo, 404 SCRA 683 (2003). The rules on double sales under Art. 1544 find no relevance to contracts of donation. xHemedes v. Court of Appeals, 316 SCRA 347 (1999). 2. Barter (Arts. 1468, 1638 to 1641) 3. Contract for Piece-of-Work (Arts. 1467, 1713 to 1715) Crux: “Ineluctably, whether the contract be one of sale or one for a piece of work, a transfer of ownership is involved and a party necessarily walks away with an object.” xCommissioner of Internal Revenue v. CA, 271 SCRA 605 (1997), citing VILLANUEVA, LAW ON SALES, pp. 7-9 (1995). In both, the provisions on warranty of title against hidden defects applies. xDiño v. CA, 359 SCRA 91 (2001). When a person stipulates for the future sale of articles which he is habitually making, and which at the time are not made or finished, it is essentially a contract of sale and not a contract for labor xInchausti & Co. v. Cromwell, 20 Phil. 345 (1911); even when he executes production thereof only after an order is placed by customers. √Celestino & Co. v. Collector, 99 Phil. 841 (1956). If the thing is specially done only upon the specific order of another, this is a contract for a piece of work; if the thing is manufactured or procured for the general market in the ordinary course of business, it is a contract of sale. √Commissioner of Internal Revenue v. Engineering Equipment & Supply Co., 64 SCRA 590 (1975).16 To Tolentino, the distinction depends on the intention of parties: if parties intended that at some future date an object has to be delivered, without considering the work or labor of the party bound to deliver, the contract is one of sale; but if one of the parties accepts the undertaking on the basis of some plan, taking into account the work he will employ personally or through another, the contract is for a piece of work. xEngineering & Machinery Corp. v. CA, 252 SCRA 156 (1996). 4. Agency to Sell (Art. 1466) Assumption by “agent” of the risk pertaining to the cost or price of the subject matter makes the relationship that of buyer-seller, for the agent does not assume risk with respect to the price or the property subject of the relationship. xKer & Co., Ltd. v. Lingad, 38 SCRA 524 (1971). Consequently: (a) the contractual relationship is not inherently revocable. √Quiroga v. Parsons, 38 Phil. 501 (1918); or (b) the purported agent does not have to account for the profit margin earned from
Acap v. CA, 251 SCRA 30 (1995).
Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Heirs of Jesus M. Mascuñana v. Court of Appeals, 461 SCRA 186 (2005). 15 Romero v. CA, 250 SCRA 223 (1995); Lao v. Court of Appeals, 275 SCRA 237 (1997); Orden v. Aurea, 562 SCRA 660 (2008); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).. 16 Commissioner of Internal Revenue v. Arnoldus Carpentry Shop, 159 SCRA 199 (1988); Del Monte Philippines, Inc. v. Aragones, 461 SCRA 139 (2005).
acquiring the property for the purported principal. √Puyat v. Arco Amusement Co., 72 Phil. 402 (1941). One factor that most clearly distinguishes agency from other legal concepts, including sale, is control; one person – the agent – agrees to act under the control or direction of another – the principal. xVictorias Milling Co., Inc. v. CA, 333 SCRA 663 (2000). Commercial broker, commission merchant or indentor is a middleman acting in his own name, and acts as agent for both seller and buyer to effect a sale between them. Although he is neither seller nor buyer to the contract effected he may voluntarily assume warranties of seller. xSchmid and Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988). 5. Dacion En Pago (Arts. 1245 and 1934) Governed by the law on sales, dation in payment is a transaction that takes place when property is alienated to the creditor in full satisfaction of a debt in money – it involves the delivery and transmission of ownership of a thing as an accepted equivalent of the performance of the obligation. Yuson v. Vitan, 496 SCRA 540 (2007). In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. xAquintey v. Tibong 511 SCRA 414 (2006).17 Elements of dation in payment: (a) performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person; (b) some difference between the prestation due and that which is given in substitution (aliud pro alio); and (c) agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a presentation different from that due. √Lo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182 (2003).18 There is no dation in payment where there is no transfer of ownership in the creditor’s favor, as when the possession of the thing is merely given to the creditor by way of security. Fort Bonifacio Dev. Corp. v. Yllas Lending Corp., 567 SCRA 454 (2008); as when the possession is only by way of security. xPNB v. Pineda, 197 SCRA 1 (1991). For dacion to arise, there must be actual delivery of the property to the creditor by way of extinguishment of the pre-existing debt. Philippine Lawin Bus Co. v. CA, 374 SCRA 332 (2002).19 BUT SEE OBITER: SSS v. Court of Appeals, 553 SCRA 677 (2008). In a true dacion en pago, the assignment of the property extinguishes the monetary debt. Ong v. Roban Lending Corp., 557 SCRA 516 (2008). A creditor, especially a bank, which enters into dacion en pago, should know and must accept the legal consequence thereof, that the pre-existing obligation is totally extinguished. xEstanislao v. East West Banking Corp., 544 SCRA 369 (2008). A property subject to a real estate mortgage, which has not been foreclosed, may validly be the subject of dacion en pago, for a mortgage does not take away the property rights of the mortgagor; however, the creditor who becomes the buyer of the property is subject to the real estate mortgage lien. xTypingco v. Lim, 604 SCRA 396 (2009). 6. Lease (Arts. 1484 and 1485) When rentals in a “lease” are clearly meant to be installment payments to a sale contract, despite the nomenclature given by the parties, it is a sale by installments and governed by the Recto Law. xFilinvest Credit Corp. v. CA, 178 SCRA 188 (1989).
CONTRACT OF SALES
1. General Rule: Every person having legal capacity to obligate himself, may validly enter into a contract of sale, whether as seller or as buyer. (Art. 1489) 2. Minors, Insane and Demented Persons, Deaf-Mutes (Arts. 1327, 1397 and 1399) A minor cannot be deemed to have given her consent to a contract of sale; consent is among the essential requisites of a contract, including one of sale, absent of which there can be no valid contract. [?] xLabagala v. Santiago, 371 SCRA 360 (2001). a. Necessaries (Arts. 1489 and 290)
Dao Heng Bank, Inc. (now Banco de Oro Universal Bank) v. Laigo, 571 SCRA 434 (2008); Technogas Philippines Mfg. Corp. v. PNB, 551 SCRA 183 (2008); Ocampo v. Land Bank of the Philippines, 591 SCRA 562 (2009); D.B.T. Mar-Bay Construction, Inc. v. Panes, 594 SCRA 578 (2009). 18 Aquintey v. Tibong 511 SCRA 414 (2006); Rockville Excel International Exim Corp. v. Culla, 602 SCRA 124 (2009). Filinvest Credit Corp. v. Philippine Acetylene Co., Inc. 111 SCRA 421 (1982); Vda. de Jayme v. Court of Appeals, 390 SCRA 380 (2002); Ong v. Roban Lending Corp., 557 SCRA 516 (2008).
b. xEmancipation (Arts. 399 and 1397; Inutile: Majority age now at 18 years, Arts. 234 and 236, Family Code, amended by R.A. 6809). c. Protection of the Senile and Elderly (Art. 24) and Illiterates (Art. 1332) Under Art. 1332, when one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former; otherwise, sale is void. [?] xVda. De Ape v. Court of Appeals, 456 SCRA 193 (2005). While a person is not incompetent to contract merely because of advanced years or by reason of physical infirmities, when such age or infirmities have impaired the mental faculties so as to prevent the person from properly, intelligently or firmly protecting his property rights, then he is undeniably incapacitated, and the sale he entered into is void [?]. √Paragas v. Heirs of Dominador Balacano, 468 SCRA 717 (2005).20 3. Sales By and Between Spouses: a. Contracts with Third Parties (Arts. 73, 96, and 124, Family Code) Under Art. 124 of Family Code, sale by husband of a conjugal property without the wife’s consent is void, not merely voidable, since the resulting contract lacks one of the essential elements of full “consent”. xGuiang v. CA, 291 SCRA 372 (1998).21 A wife affixing her signature to a Deed of Sale as a witness is deemed to have given her consent. xPelayo v. Perez, 459 SCRA 475 (2005). As an exception, husband may dispose of conjugal property without wife’s consent if such sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162. xAbalos v. Macatangay, Jr., 439 SCRA 64 (2004). b. Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code) Sales between spouses who are not governed by a complete separation of property regime are void, not just voidable. xMedina v. Collector, 1 SCRA 302 (1960). Sale by husband of conjugal land to his concubine is null and void for being contrary to morals and public policy and “subversive of the stability of the family, a basic social institution which public policy cherishes and protects.” √Calimlim-Canullas v. Fortun, 129 SCRA 675 (1984).22 Since under Art. 1490, the spouses cannot validly sell property to one another, then policy consideration and the dictates of morality require that the prohibition should apply also to commonlaw relationships. cf. Matabuena v. Cervantes, 38 SCRA 284 (1971). Nevertheless, when property resold to a third-party buyer in good faith and for value, reconveyance is no longer available. xCruz v. CA, 281 SCRA 491 (1997). The in pari delicto doctrine would apply to the spouses-parties under Art. 1490, since only the heirs and the creditors can question the sale’s nullity. xModina v. Court of Appeals, 317 SCRA 696 (1999). 4. Others Relatively Disqualified (Arts. 1491 and 1492) Contracts entered into in violation of Arts. 1490 and 1492 are not merely voidable, but are null and void. √Rubias v. Batiller, 51 SCRA 120 (1973).23 a. Guardians, Agents and Administrators No more need to comply with xRodriquez v. Mactal, 60 Phil. 13 (1934) which required showing that a third party bought as conduit/nominee of the buyer disqualified under Art. 1491; rather, the presumption now is that such disqualified party obtained the property in violation of said article. √Philippine Trust Co. v. Roldan, 99 Phil. 392 (1956). Prohibition against agents does not apply if the principal consents to the sale of the property in the hands of the agent. xDistajo v. CA, 339 SCRA 52 (2000). Hereditary rights are not included in the prohibition insofar as administrator or executor of the estate of the deceased. xNaval v. Enriquez, 3 Phil. 669 (1904). b. Attorneys Prohibition applies only while litigation is pending. xDirector of Lands v. Ababa, 88 SCRA 513 (1979); even when the litigation is not adversarial in nature √Rubias v. Batiller, 51 SCRA 120 (1973); or when it is a certiorari proceeding that may have no merit xValencia v. Cabanting, 196 SCRA 302 (1991).
20 21 22 23
Domingo v. Court of Appeals, 367 SCRA 368 (2001). Cirelos v. Hernandez, 490 SCRA 625 (2006); Bautista v. Silva, 502 SCRA 334 (2006). Ching v. Goynako, Jr., 506 SCRA 735 (2006). Uy Sui Pin v. Cantollas, 70 Phil. 55 (1940); Medina v. Collector, 1 SCRA 302 (1961).
de Laig v. 394 SCRA 133 (2002). Emptio Rei Speratae (Arts.” xCommissioner of Internal Revenue v. Even when the main cause is a collection of a sum of money. who has not taken part in the case. and the rule on delivery effected through a public instrument apply. 1461 and 1347) Pending crops which have potential existence may be valid object of sale. 290 (1930).1 a. Inc. SUBJECT MATTER OF SALE (Arts. III. CA. xDaroy v. 1. xMacariola v. CA and Ateneo de Manila University. Must Be Licit (Arts. b. 45 (1952). 427 (1956). Prohibition does not apply: (a) to sale of a land acquired by a client to satisfy a judgment in his favor. 1460) When the deed of sale describes a lot adjacent to the land seen. Alonzo. √Polytechnic University v. a sale involving future inheritance is void and cannot be the source of any right nor create any obligation. 81 (1916). to his attorney as long as the property was not the subject of the litigation. √Fabillo v. IAC. or (b) to a contingency fee arrangement which grants the lawyer of record proprietary rights to the property in litigation since the payment of said fee is not made during the pendency of litigation but only after judgment has been rendered. agreed upon and delivered to the buyer. Article 1347 does not cover waiver of hereditary rights which is not equivalent to sale. v. Jr. the properties levied are still subject to the prohibition.24 nor to a lawyer who acquired property prior to the time he intervened as counsel in the suit involving such property. since it is merely encumbrance and effect a loss of his principal attribute as owner to dispose of the property. CA. 1465) 2. the agreement is essentially a sale. xAcap v. A judge who buys property in litigation before his court after the judgment becomes final does not violate Art. xGan Tingco v. 35 Phil.25 c. 1347. 496 SCRA 273 (2006). 26 SCRA 700 (1969). Court of Appeals. Abecia. Caoibes-Pantoja. Evangelista. 1491. A mortgagor is not prevented from selling the property.G. and 1462) a. Britanico v. Millado. 86 SCRA 641 (1978). 1459 and 1575) Under Art. 100 Phil. Law even considers void a stipulation forbidding the owner from alienating mortgaged immovable. Recto v. 1246 and 1409) 24 25 1 Gregorio Araneta. or claims she has over a parcel of land in favor of another party in consideration of the latter’s payment of therein loan. Court of Appeals. and such transaction cannot be considered to effectively be sale of the land or any part thereof. but he can be administratively disciplined for violation of the Code of Judicial Ethics. xTañedo v. Generic things may be object of sale (Arts. Tuason de Paterno. such land is the one upon which the minds have met. a party renounces and transfers whatever rights. 409 SCRA 438 (2003). 1347. 486 SCRA 523 (2006). 49 O. √Atilano v. Must Be Existing. and does not cover assignment of the property given in judgment made by a client to an attorney. xSibal v. 3. 195 SCRA 28 (1991). . 114 SCRA 77 (1982). Atilano. Vda. xPineda v. 252 SCRA 80 (1996). 512 (1927). 251 SCRA 30 (1995). 271 SCRA 605 (1997). xPichel v. CA. Emptio Spei (Art. Subject to Resolutory Condition (Art. Future or Contingent (Arts. Espinosa. Harden. The Civil Code provisions defining sales is a “catch-all” provision which effectively brings within it grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration. Asuncion. CA. interests. Del Rosario v. and not that erroneously described in the deed. Valdez. Must Be Determinate or At Least “Determinable” (Art. 55 Phil. Londres v. v. 28 SCRA 231 (1969).6 Prohibition applies only to a sale to a lawyer of record. 1461) c. Municipal Council of Iloilo v. 368 SCRA 691 (2001). 111 SCRA 341 (1981). Where under an agreement. 1459 to 1465) “Transfer of title or an agreement to transfer it for a price paid or promised to be paid is the essence of sale. xCaoibes. 298 SCRA 172 (1998). 1348. since waiver is a mode of extinction of ownership in favor of the other persons who are co-heirs. Judges A judge should restrain himself from participating in the sale of properties—it is incumbent upon him to advise the parties to discontinue the transaction if it is contrary to law. 50 Phil. Pabinguit. 1347.
7 Subject matter is determinable when by a formula or description agreed upon at perfection there is a way by which the courts can delineate independent of the will of the parties. 1459. 1434) – validates the sale and title passes to the seller by operation of law. This law stems from the principle that nobody can dispose of that which does not belong to him. by item number. xNoel v. sale of realty by non-Christians (Sec. 9). People. 1120. CA. Socco-Beltran. v. and the buyer had sent in reply a purchase order without indicating the quantity being order. 4252) b. CA. 1078 (1960). A perfected contract of sale cannot be challenged on the ground of the seller’s nonownership of the thing sold at the time of the perfection of the contract. be sold. 1462. 5. √NGA v. dynamited fish (R. 404 SCRA 74 (2003). Sec. Rodriguez. 1458). b. c.A. even when required letter of credit had not been opened by the buyer. 380 SCRA 306 (2002). 171 SCRA 131 (1989). 108 Phil. The principal obligation of a seller is “to transfer the ownership of” the property sold (Art. Court of Appeals. √Johannes Schuback & Sons Phil. 375 SCRA 390 (2002). City of Iloilo. so long as the source of the subject is certain. 145. 129 SCRA 319 (1984). poisonous plants or fruits (R. wild bird or mammal (Act 2590. Where seller quoted to buyer the items offered for sale. 1458. Special Laws: narcotics (R. part number. 323 SCRA 430 (2000).2 It is essential that seller is owner of the property he is selling. there was already a perfected contract of sale. firearms and ammunitions (P. Where the lot sold is said to adjoin the “previously paid lot” on three sides thereof. 1409(5): “Those which contemplate an impossible service. xAlonso v.A 428). Cebu Country Club. 1409. 4. 1462. Undivided Interest (Art. xSan Andres v. 1409 of Civil Code. xEsguerra v. NEMO DAT QUOD NON HABET. 1464) – May result it co-ownership. gunpowder and explosives (Act 2255).D. 572 SCRA 211 (2008). Seller’s Obligation to Transfer Title to Buyer (Art. 1402 the Civil Code itself recognizes a sale where the goods are to be “acquired x x x by the seller after the perfection of the contract of sale” clearly implying that a sale is possible even if the seller was not the owner at the time of sale. Subsequent Acquisition of Title by Non-Owner Seller (Art. xTac-an v. v. 1462). Acquisition by the Buyer May Even Depend on Contingency (Art. Liao v.. Quantity of Subject Matter Not Essential for Perfection? (Art. CA. 23 SCRA 477 (1968). That the sellers are no longer owners of the goods at perfection does not appear to be one of the void contracts enumerated in Art.” √Nool v. description and unit price. 2 Heirs of Arturo Reyes v. b. and under Art.A. √Yu Tek & Co. 384 (1915). even when the exact area of the adjoining residential lot is subject to the result of a survey. under Art. and 1575) a. 7). Gigantana. Gonzales. 227 SCRA 719 (1993). 1288). Inc. X6 . Determinable subject matter of sale are not subject to risk of loss until they are physically segregated or particularly designated. Seller's Ownership Need Not Exist at Perfection: Sale of copra for future delivery does not make seller liable for estafa for failing to deliver because the contract is still valid and the obligation was civil and not criminal. xAlcantaraDaus v. xSiacor v. CA. Fisheries Dev. 332 SCRA 769 (2000). without congressional fiat. Revised Adm.A. IAC. Following Sales of Land Void: • By Non-Christian if not approved by Provincial Governor per Sec. by analogy. Code. 145 of Revised Administrative Code. rare wild plants (Act 3983). . R. 240 SCRA 78 (1995). it is at delivery that the law requires the seller to have the right to transfer ownership of the thing sold. 6425). • Made in violation of land reform laws declaring tenant-tillers as the full owners of the lands they • Reclaimed lands are of the public domain and cannot. 1349) Sale of grains is perfected even when the exact quantity or quality is not known. Illegality of Subject Matter (Arts. the subject lot is capable of being determined without the need of any new contract. tilled. 534 SCRA 490 (2007). public or private. 276 SCRA 149 (1997). 1461. √Melliza v. and 1505) a. de Leon. • Friar land without consent of Secretary of Agriculture required under Act No. 29 Phil. provided he acquires title to the property later on. Trading Corp. nevertheless such contract may be deemed to be inoperative and may thus fall. Authority v. 1463) or Undivided Share in a Mass of Fungible Goods (Art. CA.
Court of Appeals. 261 SCRA 128 (1996). Seller cannot unilaterally increase the price previously agreed upon with the buyer.8 IV. (3) Effects When Price Simulated – The principle of in pari delicto nonoritur action. When Price “Simulated” (1) √Mapalo v. which appears thereon as paid. Lim. where the price is simulated. the non-payment of the price is a resolutory condition which extinguishes the transaction that. 17 SCRA 114 (1966). 1471) a. the agreement cannot also be taken as a consideration and sale is void. 290 SCRA 463 (1998). 367 SCRA 559 (2001). when the price. xVda. Non-Payment of Price Sale being consensual. Court of Appeals. Gonzales v. the price stated is false. xModina v. cannot later unilaterally disavow the obligation created by the stipulation in the contract which sets the interest at 24% per annum: “The rationale behind having to pay a higher sum on the installment is to compensate the vendor for waiting a number of years before receiving the total amount due. for which the seller may exercise his legal remedies. xBalatbat v. Court of Appeals. v. AFP RSBS. Soliva v. not versed in English. . 682 (1939) Peñalosa v.” Bortikey v. even when due to increased construction costs. 228 SCRA 183 (1993). versus: When two aged ladies. Heirs of Catalina Roque. 317 SCRA 696 (1999). since there was in fact no intention to enter into a sale. sign a Deed of Sale on representation by buyer that it was merely to evidence their lending of money. Court of Appeals. failure of buyer to pay the price does not make the contract void for lack of consideration or simulation. 546 SCRA 315 (2008). versus: When Deed of Sale was executed to facilitate transfer of property to buyer to enable him to construct a commercial building and to sell the property to the children.4 “In a contract of sale. but subject to reformation. Buyer who opted to purchase the land on installment basis with imposed interest. c. such arrangement being merely a subterfuge on the part of buyer. Mapalo. there was no consent at all. . 446 SCRA 54 (2004). but the sale is still valid and binding on the real terms. 367 SCRA 559 (2001). 417 SCRA 277 (2003). GSIS v. 1. CA. de Catindig. Price Must Be Real (Art. and more importantly. 363 SCRA 545 (2001). 294 SCRA 289 (1998). 74 SCRA 83 (1976). Court of Appeals. 477 SCRA 511 (2005). v. 281 SCRA 176 (1997). (2) √Mate v. 458 SCRA 652 (2005). When Price is “False” (Arts. 20 Phil. Not Just Unpaid: It is a badge of simulated price. 5 Villaflor v. which render the sale void. the situation constitutes more than just fraud and vitiation of consent to give rise to a voidable contract. CA. Remorin. there was no consideration or price agreed upon. Inchausti & Co. the doctrine applies only where the nullity arises from the illegality of the consideration or the purpose of the contract. Villalba. The Intestate Estate of Marcelo M.” xHeirs of Pedro Escanlar v. The amount of the stated contract price paid in full today is worth much more that a series of small payments totaling the same amount. xHeirs of Spouses Balite v. existed and discharges the obligations created thereunder. 345 (1911). which makes the contract void ab initio. 1353 and 1354) When the parties intended to be bound but the deed did not reflect the actual price agreed upon. Ong. there is only a relative simulation of the contract which remains valid and enforceable. [?] The remedy of an unpaid seller in a contract of sale is to seek either specific performance or rescission.3 b. Ong.6 3 4 Yu Bun Guan v. √Yu Bun Guan v. √Rongavilla v. Trinidad.5 Badge That Price Is Simulated. 280 SCRA 297 (1997). has in fact never been paid by the purchaser to the seller. When price indicated in deed of absolute sale is undervalued consideration pursuant to intention to avoid payment of higher capital gains taxes. x x x To assert that mere prompt payment of the monthly installments should obviate imposition of the stipulated interest is to ignore an economic fact and negate one of the most important principles on which commerce operates. Santos. 67 Phil. PRICE AND OTHER CONSIDERATION (Arts. 1469-1474) “Price” signifies the sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the price put to the debit of the buyer and agreed to by him. Province of Cebu v. Cromwell. for a time. but results in buyer’s default. Heirs of Rufina Morales. xMacapgal v. which denies all recovery to the guilty parties inter se.
. without it the sale is void and an action for specific performance must fail. 495 SCRA 490 (2006). 55 O. Court of • Assumption of mortgage constituted on the property sold. Court of Appeals. [?] xDBP v. 545 SCRA 174 (2008). San Miguel Properties Philippines v. Banco Filipino Savings and Mortgage Bank. b. Montecillo v. v. Santiago. 385 SCRA 244 (2002). Ramos. 480 SCRA 399 (2006). v. Manalo. 1474) There can be no concept of “appropriation” when it comes to land? – Where a church organization has been allowed possession and introduce improvements on the land as part of its application to purchase with the NHA. CA. and the contract of sale not perfected. instead of “any price” mandated in common law. Cruz v. xDoles v. v. 40 Phil. xTorres v. He Must Pay Reasonable Price (Art. thus: • When deed provides that the consideration was the expected profits from the subdivision project. Private Management Office. such as to invoices then in existence and clearly identified by the agreement xMcCullough v. 176 SCRA 159 (1989). PNB. xArimas v. Court of Appeals. 385 SCRA 244 (2002). unless the price is separately accepted by the other party. 4. Cucueco. Boston Bank of the Phil. Fernando. Price is ascertainable if the terms of the contract furnishes the courts a basis or measure for determining the amount agreed upon. • Cancellation of liabilities on the property in favor of the seller. Aenlle. Manila. 502 SCRA 587 (2006). Flores. Platinum Plans Phil. √Bagnas v. Grace Baptist Church. 102 Phil.9 2. Consideration is generally agreed upon as whole even if it consists of several parts. Angeles. √Republic v. Co v. xNavarro v. otherwise there would be no price certain. 1472) (iv) By reference to another thing certain. Inc. BUT: If Buyer Appropriates the Object. Bancom Finance Corp. Resources Dev. 477 SCRA 173 (2005). Catienza-Villaverde. Edrada v. 7 The deed of sale with assumption of mortgage is a registrable instrument and must be registered with the Register of Deeds in order to bind third parties. 468 SCRA 597 (2005). particular exchange or market (Art. 294 SCRA 289 (1998). 368 SCRA 691 (2001).9 When the manner of payment of the price is discussed after “acceptance. Manalo. the reasonable conclusion one can reach is that the subsequent payments shall be made in the same amount as the first payment. Montecillo v.. 8 Boston Bank of the Philippines v. CA. 320 SCRA 428 (1999). 424 SCRA 147 (2004). Cruz v. then the price is not certain. √Navarra v. 379 SCRA 490 (2002). Rodriguez v. such as the prestation or promise of a thing or service by another. 131 SCRA 361 (1984). xNHA v. 960 (1958). 285 (1904). 39 Phil. Court of Appeals. there can be no binding contract of sale upon which an action for specific performance can prosper. and even if it is contained in one or more instruments. Bank. Velasco v. Jr. Reynes. not even on fixing the price equal to the fair market value of the property. 507 SCRA 63 (2006). c. 344 SCRA 492 (2000). 336 SCRA 737 (2000). 8682. xPolytechnic University v. xVillanueva v.7 3. √Ong v. Reynes. Consideration for sale can take different forms. Ladanga v. 371 SCRA 360 (2001).8 Where the sale involves an asset under a privatization scheme which attaches a peculiar meaning or signification to the term “indicative price” as merely constituting a ball-park figure. Marnelego v.G. Solidstate Multi-Products Corp. v. Must Be Certain or Ascertainable at Perfection (Art. Ong. 267 SCRA 89 (1997). 921 (1920).” then such “acceptance” did not produce a binding and enforceable contract of sale. 482 SCRA 108 (2006). Labagala v. Ocejo v. 1 SCRA 1180 (1961). 1469) a. Manner of Payment of Price ESSENTIAL (Art. and thereafter it refused the formal resolution of the NHA Board setting the price and insisted on paying the lower price allegedly given by the NHA Field Office. Republic v. Court of Appeals. CA. Southside Homeowners Asso. 492 SCRA 607 (2006). 482 SCRA 108 (2006). Price Never Set By One or Both Parties (Arts. Manila Metal Container Corp.. Must Be in Money or Its Equivalent (Arts. 527 SCRA 562 (2007). Phil. 51 SCRA 439 (1973).. Court of Appeals. without having to refer back to either or both parties. Quimpo. Sr. 559 SCRA 197 (2008). Appeals. How Price Determined to Be Ascertainable (i) Set by third person appointed at perfection (Art. Rongavilla v. Where there is no other basis for the payment of the subsequent amortizations in a Deed of Conditional Sale. v Abad Vda de Beltran. 9 6 . Sugar Producer's Corp. xMoreno. Arimas. 1458 and 1468) Price must be “valuable consideration” as mandated by Civil Law. 1469) (iii) By reference to a definite day. Huang. 286 SCRA 76 (1998). 1182). Court of Appeals. 511 SCRA 444 (2006). 624 (1919). v. 139 SCRA 133 (1985). 488 SCRA 156 (2006). Effects of Un-Ascertainability: Sale is inefficacious. 1179) A definite agreement on the manner of payment of price is an essential element in the formation of a binding and enforceable contract sale. or known factors or stipulated formula (xMitsui v. 1469) (ii) Set by the courts (Art. 3 Phil. Planters Dev. 1473..
542 SCRA 397 (2008).12 UNLESS: There is right of redemption. the withdrawal is effective immediately after its manifestation. 485 SCRA 8 (2006). 1479) Policitation stage covers the doctrine of “freedom of contract” which signifies or implies the right to choose with whom to contract. either negotiating party may stop the negotiation. 574 SCRA 642 (2008). Barabat.10 Absent any evidence of the fair market value of a land as of the time of its sale. xDe Leon v. 1386) c. unless fraud. 1355 and 1470) Mere inadequacy of the price does not affect the validity of the sale when both parties are in a position to form an independent judgment concerning the transaction. 12 13 14 10 Tayengco v. (at p. in the event of a resale. and (ii) There is showing that. 11 Avila v. Lesion of more than 1/4 of value of thing makes sale rescissible unless approved by court (Art. Gross inadequacy of price by itself will not result in a void contract. Bacungan v. Gross inadequacy of price does not even affect the validity of a contract of sale. FORMATION OF CONTRACT OF SALE (Arts. does not give rise to any obligation or right. Court of Appeals. such that the mind revolts at it and such that a reasonable man would neither directly or indirectly be likely to consent to it. v. 54 SCRA 13 (1973).13 BUT: By way of extraordinary circumstances perceived. the acceptance must be absolute and must not qualify the terms of the offer. Court of Appeals.11 a. 15 SCRA 306 (1965). Court of Appeals. Simeon. 1602) V. . Ereñeta v. At any time prior to the perfection of the contract. unconditional and without variance of any sort from the proposal. To convert the offer into a contract. 454 SCRA 897 (2005). taxes. A property owner is free to offer his property for sale to any interested person. Where the offer is given with a stated time for its acceptance. 36 SCRA 567 (1970). Acabal. 574 SCRA 642 (2008). unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract. xAcabal v. it cannot be concluded that the price at which it was sold was inadequate. Vda. must be certain. and other expenses. POLICITACION STAGE (Art. Salvador. 1475-1488) A. it must be plain. Court of Appeals. 649) Bacungan v. the same will be se aside. Marquez. v. however. 246 SCRA 33 (1995). and is not duty bound to sell the same to the occupant thereof. Navarra v. xPascua v. Gross inadequacy of price may raise the presumption of equitable mortgage (Art. which. Court of Appeals. √Manila Metal Container Corp.10 5. Republic v. Dellota. Bacungan v. 244 SCRA 564 (1995). 527 SCRA 562 (2007). or undue influence indicative of a defect in consent is present. xBautista v. Bank. together with all sums paid out by him in improvements introduced on the property. xCometa v. The contract may be annulled for vitiated consent and not due to the inadequacy of price. in which case the proper remedy is to redeem. 316 SCRA 386 (1999). mistake. 15 SCRA 307 (1965). when in a judicial sale the right of redemption has been lost. Court of Appeals. PNB.14 An unaccepted unilateral promise (offer to buy or to sell) prior to acceptance. the latter is entitled return of price with simple interest. 511 SCRA 444 (2006). When judicial sale is voided without fault of purchaser. Court of Appeals. 37 O. xCu Bie v. mistake or undue influence. A negotiation is formally initiated by an offer. xVillegas v. Court of Appeals. 574 SCRA 642 (2008). Inadequacy of cause will not invalidate a contract unless there has been fraud. Planters Dev. Court of Appeals. NLRC. Dorado Vda. 1911. There is “gross inadequacy in price” if a reasonable man will not agree to dispose of his property. 351 SCRA 294 (2001). Court of Appeals. 161 SCRA 1 (1988). where the inadequacy of the price is purely shocking to the conscience. 499 SCRA 276 (2006). De Delfin v. b. de Gordon v. Court of Appeals. At this stage. Gross Inadequacy of Price May Avoid Judicial Sale: (i) Only when it is shocking to the conscience of man. unequivocal. Bezore. Inadequacy of Price Does Not Affect Ordinary Sale (Arts. 436 SCRA 141 (2004).G. the offer may be withdrawn. the offer is terminated at the expiration of that time. absent any prior agreement vesting the occupants the right of first priority to buy. a better price can be obtained. 109 SCRA 388 (1981). xSeven Brothers Shipping Corp. xGabelo v. xRaroque v.
Overturning Southwestern Sugar Molasses Co.” xTayag v. Apeles. Court of Appeals. Inc. unlike in sale where it must be the price certain in money or its equivalent. √Villamor v. Inc. c. Rigos. It is a separate agreement distinct from the contract of sale which the parties may enter into upon the consummation of the option. 371 SCRA 295 (2001). San Miguel Properties Philippines. not to enter into the principal contract with any other person during the period designated. for a fixed period and under specified conditions. 17 JMA House. CA. within that period. CA. Vasquez v. in order to be binding upon the promissor. 246 SCRA 540 (1995). 426 SCRA 282 (2004). 948 (1958). An option attached to a lease when not exercised within the option period is extinguished and cannot be deemed to have been included in the implied renewal (tacita reconduccion) of the lease. CA. 982 (1918). 336 SCRA 737 (2000) Affirming Atkins. Court of Appeals. xMontilla v. Inc. 1. it is not treated as a sale. v. No Separate Consideration: Void as Option. a. √Nietes v. 576 SCRA 561 (2009). Morato. 426 SCRA 282 (2004). the option is binding. Machuca. 239 SCRA 356 (1995).. b. d. Court of Appeals. 199 SCRA 102 (1991).11 The Letter of Intent to Buy and Sell is just that—a manifestation of Sea Foods Corporation’s (SFC) intention to sell the property and United Muslim and Christian Urban Poor Association. 1479 and 1324) A unilateral promise to sell. Lacson. 45 SCRA 368 (1972). √Tayag v. There must be “virtual” exercise of option with the option period. to enter into such contract with the one to whom the option was granted. Inc. v. 302 SCRA 288 (1999). xNatino v. 302 SCRA 718 (1999). whether or not to enter into a principal contract. 481 (1947). 37 Phil. Eulogio v. CA. but do not rise to the level of contractual commitment since with the absence of agreement on price certain. Inc. Kilosbayan. and once proven. cannot grant an option on the land. Monica Industrial and Dev. 357 SCRA 209 (2001). xDizon v. 18 19 15 De la Cavada v.19 BUT LATELY: xYao Ka Sin Trading v. 357 SCRA 209 (2001).. 16 Adelfa Properties. 443 SCRA 231 (2004). 209 SCRA 763 (1991). Cua. Limson v.15 An option imposes no binding obligation on the person holding the option aside from the consideration for the offer.20 which must be enforced with ten (10) years as provided under Art. Sta. √Carceller v. CA. CA. 439 SCRA 649 (2004). √Muslim and Christian Urban Poor Association. 96 Phil. xMontinola v. 161 SCRA 855 (1988). v.18 such when the option is attached to a real estate mortgage xSoriano v. Huang. Buot v. CA. xDizon v. 102 Phil. Abalos v. not being the registered owners. Proper exercise of an option gives rise to the reciprocal obligations of sale xHeirs of Luis Bacus v. Ayala Corp. 37 (1954). CA. 46 SCRA 654 (1972). Macatangay. Although no consideration is expressly mentioned in an option contract. 1144. 2. 302 SCRA 718 (1999). Inc.. 357 SCRA 846 (2001). 202 SCRA 607 (1991). (UMCUPAI) intention to acquire the same—which is neither a contract to sell nor a conditional contract of sale.17 The “separate consideration” in an option may be anything of value. much less any “exclusive right” to buy the property under the Latin saying “nem dat quod non habet. 197 SCRA 323 (1991). 206 SCRA 52 (1992). There Must Be Acceptance of Option Offer. Court of Appeals. OPTION CONTRACT An option is a preparatory contract in which one party grants to the other. Court of Appeals. they are not Laforteza v. Rights of first refusal only constitute “innovative juridical relations”. Atlantic Gulf & Pacific Co. CA.. √Vazquez v. Cojuangco. √Carceller v. It binds the party who has given the option. .. 6 SCRA 946 (1962). if the latter should decide to use the option. 333 SCRA 643 (2000). Inc. Proper Exercise of Option Contract. San Miguel Properties Philippines. 336 SCRA 737 (2000). 594 SCRA 724 (2009). Kroll & Co. Valid as a Certain Offer √Sanchez v.16 Tenants. RIGHT OF FIRST REFUSAL A right of first refusal cannot be the subject of specific performance. but breach would allow a recovery of damages. Court of Appeals. 78 Phil. v. 20 Limson v. Until accepted. the power to decide. v. xSalame v.. must be for a price certain and supported by a consideration separate from such price. Court of Appeals. IAC. Yñigo. Bautista. Jr. 240 SCRA 565 (1995). Diaz. 500 SCRA 526 (2006). Meaning of “Separate Consideration” (Arts. v. and. Huang. 97 Phil. BRYC-V Development Corp. v. 249 (1955). Corp. v. 302 SCRA 288 (1999). Lacson. and xDiamante v. it is presumed that it exists and may be proved. Inc. xGuerrero v.
pursuant to Arts. and there is no violation of the right of the lessee. .. 480 SCRA 399 (2006). 49 (1905).. Inc. Mayfair Theater. 1 (1960). CA. xVillamor v. Bernabe. Court of Appeals. A right of first refusal clause simply means that should the lessor decide to sell the leased property during the term of the lease. v. Even in this case the certainty of the price must also exist. its existence may only be inferred from the confluence of two acts of the parties: an offer certain as to the object of the contract and its consideration. 499 SCRA 276 (2006). An accepted bilateral promise to buy and sell is in a sense similar to. when breached by promissor allows enforcement by the promisee by way of rescission of the sale entered into with the third party. 263 SCRA 15 (1996). such sale should first be offered to the lessee. 206 SCRA 668 (1992). √Riviera Filipina. whole the object might be made determinate. 202 SCRA 607 (1991). Blas v. 5 Phil. Coronel v. or under terms and conditions more favorable to the lessor.12 subject to contractual enforcement. Court of Appeals. xSadhwani v. The lessor was then at liberty to offer the sale to a third party who paid a higher price. 615 SCRA 478 (2010). √Vasquez v. that are yet to be firmed up. xMarnelego v. xBorromeo v. CA. . 443 SCRA 231 (2004). A right of first refusal in a lease in favor of the lessee cannot be availed of by the sublessee. Inquing. √Equatorial Realty Dev. Court of Appeals. 1475. 741 (1997). that are yet to be firmed up. Court of Appeals. 439 SCRA 273 (2004). Golden Horizon Realty Corp. Polytechnic University of the Philippines v. Borromeo v. 49 (1905). Villamor v. in a right of first refusal. 238 SCRA 602 (1994). PERFECTION STAGE (Arts. 368 SCRA 691 (2001). CA. xGuzman. Inv.. the lessor has the legal duty to the lessee not to sell the leased property to anyone at any price until after the lessor made an offer to sell the property to the lessee and the lessee has failed to accept it. Banco Filipino Savings and Mortgage Bank.. such that each has the right to demand from the other the fulfillment of their respective undertakings. Manuel v.24 The cause of action under a mutual promise to buy and sell is 10 years. xTan Tiah v. 268 SCRA 727.21 √Paranaque Kings Enterprises. Padua. 380 SCRA 245 (2002). 4.22 When a lease contract contains a right of first refusal. 739 (1939). including the price. and the series of negotiations that transpire between the lessor and the lessee on the basis of such preference is deemed a compliance of such clause even when no final purchase agreement is perfected between the parties. 1319. 368 SCRA 691 (2001). 615 SCRA 478 (2010). 202 SCRA 607 (1991). Court of Appeals. 69 Phil. including the price. Polytechnic University of the Philippines v. v. Franco. Villegas v. 499 SCRA 276 (2006). CA. 225 SCRA 102 (1993). Rodriguez. 477 SCRA 173 (2005). v. MUTUAL PROMISES TO BUY AND SELL (Art. 264 SCRA 483 (1996). A right of first refusal is a contractual grant. 615 SCRA 478 (2010). v. 23 24 25 21 El Banco Nacional Filipino v. v. Right of first refusal contained in a lease. Yu Jose. Inc. 67 Phil. Corp. the exercise of the right of first refusal would be dependent not only on the owner’s eventual intention to enter into a binding juridical relation with another but also on terms. Valdez v.. Angeles-Hutalla. √Ang Yu Asuncion v. Franco. v. B. but not exactly the same. the exercise of the right would be dependent not only on the grantor’s eventual intention to enter into a binding juridical relation with another but also on terms. 109 Phil. 281 SCRA 75 (1997). 367 SCRA 164 (2001). CA. as a perfected contract of sale because there is already a meeting of minds upon the thing which is the object of the contract and upon the price. As distinguished from an option contract. Guiani. 392 SCRA 679 (2002). Corp. Golden Horizon Realty Corp. there is no valid and enforceable contract to sell. 439 SCRA 55 (2004). 354 SCRA 119 (2001). 22 Polytechnic University v. the “offer” may be withdrawn anytime by communicating the withdrawal to the other party. Inc. Conculada v. Bonnevie. Polytechnic University v. whereas in a bilateral promise to buy and sell gives the contracting parties rights in personam. Court of Appeals.25 Mutual consent being a state of mind. the parties may reciprocally demand performance subject to the law governing the form of contracts. In a right of first refusal. Ainza v. 1325 and 1326) Sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Ah Sing. Cruz v.. Jr. Fernando. but of the first priority to buy the property in the event the owner sells the same. 1381(3) and 1385 of Civil Code. Ayala Corp. 1479): “TRUE CONTRACT TO SELL” Mutual promises to buy and sell a certain thing for a certain price gives each of the contracting parties a right to demand from the other the fulfillment of the obligation. v. From that moment. Villegas v. √Macion v. 380 SCRA 245 (2002). Court of Appeals. 5 Phil. 23 But a contract of sale is consummated only upon delivery and payment. . CA. 462 SCRA 614 (2005). Only after the lessee has failed to exercise his right of first priority could the lessor sell the property to other buyers under the same terms and conditions offered to the lessee. Riviera Filipina. CA. while the object might be made determinate. Lucrative Realty and Dev. 611 (1940). Polytechnic University of the Philippines v. and an Rosencor Dev. Golden Horizon Realty Corp. Bocaling & Co. not of the sale of a property.. otherwise. Inv.
Limketkai Sons Milling. Lim. 460 SCRA 170 (2005). Prieto. 262 SCRA 464 (1996). 255 SCRA 626 (1996). CA. Court of Appeals. 488 SCRA 156 (2006). So long as there is any uncertainty or indefiniteness. 44 Phil. When “Deviation” Allowed: It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. CA. Zayco v. √Manila Metal Container Corp. 66 SCRA 575 (1975). For a contract to be enforceable. it must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. whether they knew of such conditions or not. Villonco v. 65 SCRA 352 (1975).28 3. or future negotiations or consideration yet to be had between the parties. xProvince of Cebu v. 482 SCRA 108 (2006). v. xPeople's Homesite & Housing Corp. A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. xVillanueva v. PNB. √Villonco v. v. Inc. The vendor’s change in a phrase of the offer to purchase. 1326) The terms and conditions provided by the owner of property to be sold at auction are binding upon all bidders. 1476. In other words. 401 SCRA 54 (2003). 29 Article 1482 does not apply when earnest money given in a contract to sell xSerrano v. Sr. xMoreno. not vague or indefinite. Inc. PNB. 507 SCRA 63 (2006). Private Management Office. Private Management Office. XYST Corp. the same is too indefinite to be enforceable. 326 (1923). 507 SCRA 63 (2006). 336 SCRA 737 (2000). v.13 acceptance of the offer which is absolute in that it refers to the exact object and consideration embodied in said offer. Huang. 517 SCRA 57 (2007). 546 SCRA 315 (2008). √Manila Metal Container Corp. 37 SCRA 663 (1971). 1482) Earnest money given by the buyer shall be considered as part of the price and as proof of the perfection of the contract. PNB v. the acceptance by one of the offer made by the other. Earnest Money (Art. xChua v. the acceptance must be absolute. 30 San Miguel Properties Philippines. Court of Appeals. v. Bormaheco. which amounts to a rejection of the original offer.26 If a material element of a contemplated contract is left for future negotiations. Inc. An auction sale is perfected by the fall of the hammer or in other customary manner and it does not matter that another was allowed to match the bid of the highest bidder. 4. 47 Phil.. otherwise. . The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of minds. Sale by Auction (Arts. 1403(2)(d). xLeoquinco v. Inc. 511 SCRA 444 (2006). This was not the case herein considering that petitioner’s acceptance of the offer was qualified. DMC Urban Properties Dev. with no obligation to pay the balance. 510 SCRA 275 (2006). 772 (1925). the same constitutes a counter-offer and has the effect of rejecting the offer. that is. v. Absolute Acceptance of a Certain Offer (Art. there is no contract at all. v. However. Spouses Doromal. Inc. It constitutes an advance payment to be deducted from the total price. especially where by stipulation the buyer has the right to walk away from the transaction. v. 250 SCRA 523 (1995). 670 (1916). 1475) Under Article 1319. xEscueta v. although he will forfeit the earnest money. v. Ong.. which change does not essentially change the terms of the offer. Court of Appeals. Manalo. Reiterated in Limketkai Sons Milling. a contract is formed. whether such request is granted or not.27 Placing the word “Noted” and signing such note at the bottom of the written offer cannot be considered an acceptance that would give rise to a valid contract of sale. 133 SCRA 777 (1984). v. The essence of consent is the conformity of the parties on the terms of the contract. does not amount to a rejection of the offer and the tender or a counter-offer. 336 SCRA 737 (2000). If sale subject to suspensive condition: No perfected sale of a lot where the award thereof was expressly made subject to approval by the higher authorities and there eventually was no acceptance manifested by the supposed awardee. Serra. CA. so long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer. 41 Phil. v. 65 SCRA 352 (1975). 511 SCRA 444 (2006). Heirs of Rufina Morales. 512 SCRA 411 (2007). Cucueco. PNB. Jr. the acceptance of an offer must therefore be unqualified and absolute. Jr. v. v. CA. Absent proof of the concurrence of all the essential elements of a contract of sale. Beaumont v. xBoston Bank of the Phil. Postal Savings Bank. v. its terms must be certain and explicit. the giving of earnest money cannot establish the existence of a perfected contract of sale.30 26 27 28 29 Moreno. San Miguel Properties Philippines. but reversed in 255 SCRA Limjoco v. Platinum Plans Phil. Bormaheco. xDBP v. Inc. 1. 594 SCRA 598 (2009). Caguiat. Huang. 2.
there must first be a perfected contract of sale before we can speak of earnest money. 31 32 33 34 XYST Corp. Inc. F. Ong. 1403(2). Tapuroc v. Article 1358 of the Civil Code does not require the accomplishment of the acts or contracts in a public instrument in order to validate the act or contract but only to insure its efficacy. The Estate of Pedro C. Hence.31 When there is no provision for forfeiture of earnest money in the event the sale fails to materialize. Santos v. Rule 132 of the Rules of Court. A Deed of Sale when acknowledged before a notary public. it need not be notarized for there is nothing in those provisions which require that it must be executed in a public document to be valid. have not reached the perfection stage with the present of the three essential elements of the contract of sale. xTigno v. CA. Difference Between Earnest Money and Option Money. Inc. xMartinez v. 361 SCRA 139 (2001). 519 SCRA 270 (2007). 343 SCRA 637 (2000). require that the sale of real property must be in writing for it to be enforceable. Court of Appeals. 444 SCRA 61 (2003). 344 SCRA 284 (2000) 36 Domingo v. xSalonga v. it does not affect the validity of such conveyance. Assuming that the buyers failed to pay the full price stated in the Deed of Sale. 6. Union Bank v. Other Rulings on Deeds of Sale: Seller may agree to a deed of absolute sale before full payment of the purchase price. the seller’s continued possession of the property makes dubious the contract of sale between them. Talbrad. CA. Inc. Gonzales v. sufficient. The Estate of Pedro C.. Heirs of Benedicto Pedrano.32 Articles 1357 and 1358. DMC Urban Properties Dev. 1406 and 1483) 1. Although the conveyance of land is not made in a public document. 1357. 519 SCRA 408 (2007). clear and convincing evidence is required.35 Buyer’s immediate taking of possession of subject property corroborates the truthfulness and authenticity of the deed of sale. 554 SCRA 384 (2008). 465 SCRA 244 (2005). CA. 465 SCRA 244 (2005). v. 482 SCRA 164 (2006). Inc. 490 (1902). Inc.36 Any substantial difference between the terms of the Contract to Sell and the concomitant Deed of Absolute Sale (such as difference in subject matter. 605 SCRA 47 (2009). 362 SCRA 29 (2001). CA.. Yason v. Corp. 1319) C. Sarmiento. for it is truism that the execution of the Deed of Absolute Sale effectively rendered the previous Contract to Sell ineffective and cancelled [through the process of novation]. 539 SCRA 401 (2007). Form Not Important for Validity of Sale Sale of land under private instrument is valid. That marital consent was executed prior to the Deed of Absolute Sale does not indicate that it is a phoney. . 491 SCRA 581 (2006). 1 Phil. xAlcos v. in relation to Art. Bravo. 512 SCRA 97 (2007). Jr. 366 SCRA 395 (2001). then with the rescission it becomes incumbent upon seller to return the earnest money as legal consequence of mutual restitution. Arciaga. CA. Bravo. xSantos v. 449 SCRA 458 (2005).33 but both its due execution and its authenticity must be proven. Lumbao. Their Hiers of Marcos Perez. Bravo-Guerrero v. FORMAL REQUIREMENTS OF SALES (Arts. CA. v. Alfaro v. 594 SCRA 598 (2009). or more accurately. Pan Pacific Industrial Sales Co. De Mende. said documents were merely converted into private documents. Tambunting. otherwise the document should be upheld. √Oesmer v. But when there is no contract of sale because the parties never went pass the negotiation stage. 592 SCRA 456 (2009).14 Whenever earnest money is given in a contract of sale. 516 SCRA 575 (2007). IAC.. xBravo-Guerrero v. because it is not the function of the notary public to validate an instrument that was never intended by the parties to have any binding legal effect. Paraiso Dev. xLumbres v. To overthrow that presumption. 605 SCRA 47 (2009). Conversely. 20 SCRA 186 (1967). The Heirs of Marcos Perez. Pedrano v. it shall be considered as part of the price and as proof of the perfection of the contract. Court of Appeals.. 35 Nazareno v. xR. Heirs of Biona v. 482 SCRA 164 (2006). Gallar v. Navarro & Co. Notarization of a deed of sale does not guarantee its validity nor is it conclusive of the true agreement of the parties thereto. and difference in price and/or the terms thereof). Olivares v. (Art. 367 SCRA 368 (2001). The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Sale Deemed Perfected Where Offer Was Made.F. 5. v. 299 SCRA 141 (1998). 162 SCRA 823 (1988). Irureta Goyena v. Husain. Vailoces. 470 SCRA 291 (2005). Lopez. v. Mariano. Heirs of Jose P. the concept of earnest money is certainly inapplicable. Santos v.. pursuant to Sec.34 Notarization of Deeds of Sale by one who was not a notary public does not affect the validity thereof. a. such partial failure would not render the sale void. Aquino. Gonzales v. 514 SCRA 228 (2007). enjoys the presumption of regularity and due execution. 20.. xGSIS v. xGoldenrod. Concepcion. 1358. does not make the transaction between the seller and the buyer void. Loquellano Vda. 358 SCRA 38 (2001). xPan Pacific Industrial Sales Co. Santos.
347 SCRA 13 (2000). such as agreements for the sale of real property. for the benefit of third parties. 389 SCRA 316 (2002). CA. and non-compliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder. 29 Phil. v.42 (ii) Agency to Sell or to Buy – As contrasted from sale. v. Court of Appeals. and registration of the instrument only adversely affects third parties. delivery charge invoice and the like. xRosencor Dev. CA. Inquing. . order slip. Corp. v. To Bind Third Parties Article 1358 which requires the embodiment of certain contracts in a public instrument is only for convenience. Furthermore. but must necessarily be evidenced by a written instrument.15 b. and non-compliance therewith does not adversely affect the validity of the contract or the contractual rights and obligations of the parties thereunder. there is no basis for the application of the Statute of Frauds.37 √Dalion v.41 (1) Coverage: (i) Sale of Real Property – A sale of realty cannot be proven by means of witnesses. it cannot be considered binding on third persons. No other evidence can be received except the documentary evidence referred to. in only for convenience. WHEN FORM IMPORTANT IN SALE a.. 286 SCRA 698 (1998). 354 SCRA 119 (2001). 1357 and 1358 and not one enumerated under the Statutes of Frauds in Art. √Fule v. 414 SCRA 190 (2003). 314 SCRA 36 (1999). 68 Phil. 2. Inc. a right of first refusal. Talusan v. Bukal Enterprises and Dev. v. Vda. Court of Appeals. 476 SCRA 679 (2005). Formal requirements are.. 182 SCRA 872 (1990). xLagon v. Limketkai Sons Milling. Universal Robina Sugar Milling Corp. 250 SCRA 523 (1995). CA. La Tondeña. Torcuator v.” When the records show that there was no perfected contract of sale. xLim v. Inc. xGorospe v. 581 SCRA 247 (2009). Cruz Trading Corp. and registration of the instrument only adversely affects third parties. to be in writing. is not by any means a perfected contract of sale of real property.40 b.38 Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument. if it is not embodied in a public instrument and recorded in the Registry of Deeds. For Enforceability Between the Parties: STATUTE OF FRAUDS (Arts. Manalili. De Ray v. xEstreller v. 389 SCRA 316 (2002). or by secondary evidence of the contents of such document.39 While sale of land appearing in a private deed is binding between the parties. contract of sale. therefore. CA. Alba Vda. Santos v. 1403(2)(e) of Civil Code presupposes the existence of a perfected.43 (iii) Rights of First Refusal – A “right of first refusal” is not covered by the statute of frauds. Tayag. said business forms are commonly recognized in ordinary commercial transactions as valid between the parties and at the very least they serve as an acknowledgment that a business transaction has in fact transpired. 24 (1939). such as the one involved in the instant case. Value of Business Forms to Prove Sale Business forms. Shoemaker v. xFirme v.g. De Selma. Corp. xDonato C. e. Heirs of Angel Teves. Hooven Comalco Industries. 356 SCRA 263 (2001). Ilayat. 1403 and 1405) The term “Statute of Frauds” is descriptive of the statutes which require certain classes of contracts.. 325 SCRA 504 (2000). They are written memorials of the details of the consummation of contracts. Rosencor Development Corp. Bernabe. v. 459 SCRA 439 (2005). Heirs of Angel Teves. √Secuya v. an agency to sell does not belong to any of the three categories of contracts covered by Arts. 254 SCRA 170 (1996). 21 (1914). Agasen v. Art. CA. Presupposes Valid Contract of Sale – “The application of the Statute of Frauds presupposes the existence of a perfected contract. Ysmael. v. Inquing. 37 38 39 40 41 42 43 Universal Robina Sugar Milling Corp. 354 SCRA 119 (2001). These documents are not mere scraps of paper bereft of probative value but vital pieces of evidence of commercial transactions. 1403. 349 SCRA 363 (2001). duly subscribed by the party charged. albeit unwritten. the purpose being to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged. which are issued by the seller in the ordinary course of the business are not always fully accomplished to contain all the necessary information describing in detail the whole business transaction—more often than not they are accomplished perfunctorily without proper regard to any legal repercussion for such neglect such that despite their being often incomplete. 326 SCRA 244 (2000).
Espino. oral testimony cannot take their place without violating the parol evidence rule. xTorcuator v. Padua.48 When the purported buyer’s exhibits failed to establish the perfection of the contract of sale. xAbrenica v. the deed of sale is itself the note or memorandum evidencing the contract. but vital pieces of evidence of commercial transactions. v. Vda. v. Autocorp Group. Talosig v. The memorandum or memoranda is/are written evidence that such a contract was entered into. 870 (1958). 306 SCRA 408 (1999).. The Statute of Frauds does not apply to contracts either partially or totally performed.47 (4) Waiver – (Art. The memorandum may be found in several writings. The existence of a written contract of the sale is not necessary so long as the agreement to sell real property is evidenced by a written note or memorandum. 739 (1916). 964 (1924). with no intention to part with the title until the purchase price is paid. A sales invoice is a commercial document-commercial documents or papers are those used by merchants or businessmen to promote or facilitate trade or credit transactions— they are not mere scraps of paper bereft of probative value. Inc. v. 22 SCRA 1000 (1968). 462 SCRA 614 (2005). The Intestate Estate of Marcelo M. For the memorandum to take the sale out of the coverage of the Statute of Frauds. Delivery of the deed to buyer’s agent. 47 Vda. 104 SCRA 668 . 199 SCRA 113 (1991). Jr. when such was the parties’ intention. 34 Phil. 255 SCRA 6 (1996). 8792) (3) Partial Execution (Art. Santos. CA. 263 SCRA 736 (1996). CA. then when the dealer of motor vehicles accepts a deposit of P50. √Alfredo v. Berg v. 262 SCRA 486 (1996). Yaneza v. De Nieba. CA. 1405) √Ortega v.. and must clearly provide a deed of sale categorically conveying the subject property. despite the persistent objection made by the purported seller’s counsel as early as the first scheduled hearing.A. √Limketkai Sons Milling. √Limketkai Sons Milling. 110 (1952). Inc.16 (iv) Equitable Mortgage – Statute does not stand in the way of treating an absolute deed as a mortgage. 46 Phil. it must contain “all the essential terms of the contract” of sale.44 (v) Right to Repurchase – The deed of sale and the verbal agreement allowing the right of repurchase should be considered as an integral whole. √Limketkai Sons Milling. Court of Appeals. 261 SCRA 464 (1996). . xXentrex Automotive. v. It was therefore irregular for the trial court to have admitted in evidence testimony to prove the existence of a contract of sale of a real property between the parties. Briones. 34 Phil. 250 SCRA 523 (1995). 250 SCRA 523 (1995). does not take the case out of the Statute of Frauds.46 EXCEPTION: Electronic Documents under the E-COMMERCE ACT (R. Bernabe. embodying the essentials of the contract and signed by the party charged or his agent. 459 SCRA 439 (2005). 92 Phil. 44 45 46 Rosales v.45 even when scattered into various correspondences which can be brought together xCity of Cebu v. 43 SCRA 472 (1972). such as the acceptance of the purchase price and using the proceeds to pay outstanding loans. 569 SCRA 387 (2008). 572 SCRA 413 (2008). v. 261 SCRA 464 (1996). CA. 100 (1916). Lacanilao v. In addition. 557 SCRA 50 (2008). 1405) Cross-examination on the contract is deemed a waiver of the defense of the Statute. (5) Rulings on Receipts and Other Documentary Evidence of Sale Since a contract of sale is perfected by mere consent. Suba. De la Cena v. Seaiol Petroleum Corp. Paredes v. it was in breach of contract when it sold the car subsequently to another buyer. Ayson. written memorials of the details of the consummation of contracts. de Jomoc v. 103 Phil. Court of Appeals. Inc. Court of Appeals. 404 SCRA 145 (2003). Dacuycuy. 291 SCRA 66 (1998). Limketkai Sons Milling. Inc. Leonardo. Paragas. 250 SCRA 523 (1995). 255 SCRA 6 (1996). 252 SCRA 259 (1996). v. v. Inc. v. a contract that violates the Statute of Frauds is ratified by the acceptance of benefits under the contract.0000 and pulls out a unit from the assembler for that purpose. Heirs of Candido Rubi. Villalba. Soliva v. 48 Limketkai Sons Milling. Inc. xMactan Cebu International Airport Authority v. xBaretto v. CA. Manila Railroad Co. 200 SCRA 74 (1991). although the agreement for redemption or defeasance is proved by parol evidence. 417 SCRA 277 (2003). an exception to the unenforceability of contracts pursuant to the Statute of Frauds is the existence of a written note or memorandum evidencing the contract. even when cross-examination was made on the basis of the witnesses’ affidavit-form testimony. Magdalena Estate. Court of Appeals. BUT: The memoranda must be signed by the party sought to be charged. (2) Memorandum (√Yuviengco v. CA. Ainza v. 508 SCRA 62 (2006). not necessarily in one document. Inc. CA. Under Article 1403. First Philippine Int’l Bank v. xCuyugan v. 408 SCRA 664 (2003). CA. Gonda. √Claudel v. Borras.
and when the primary motive is illegal. the concept of a simulated sale is incompatible with inadequacy of price. 280 SCRA 297 (1997). 237 (2007). 466 SCRA 438 (2005). 430 SCRA 210 (2004). CA. v. and it does not even affect the validity of a contract of sale.51 • In the case of a corporate owner of realty. Court of Appeals. 559 SCRA 186 (2008). 396 SCRA 154 (2003). xVillaflor v. CA. different from the motive of parties. Corp. Nido. • Although the agreement did not provide for the absolute transfer ownership of the land to buyer. 1874) When sale of a piece of land or any interest therein is through an agent. 414 SCRA 190 (2003).50 even when: • Agent is the son of the owner. xTigno v. xOesmer v. 465 SCRA 244 (2005).49 In itself. When Motive Nullifies the Sale In sale. otherwise. 15851. Ong. CA. v. For Validity: Sale of Realty Through Agent. but evidence of the receipt of the goods. Payongayong v. 632 SCRA 400 (2010). xDizon v.. the contract is simulated and void. 491 SCRA 581 (2006). with different effects – 2. CA. Ong. as a rule. CA. 367 SCRA 559 (2001). 577 SCRA 264. SIMULATED SALES Characteristic of simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the parties’ juridical situation. 361 SCRA 139 (2001). CA. Catienza-Villaverde. Revised Adm. Firme v. v. 514 SCRA 228. it must be proven by clear. xR. Court of Appeals. Corp. Gross inadequacy of price by itself will not result in a void contract. the absence of receipts. 55 Rufloe v. Silverio. Inc. or that the parties have no intention to be bound by the contract. 313 SCRA 632 (1999) • There is partial payment of the price received by the supposed agent. CA. A receipt which is merely an acknowledgment of the sum received. Paraiso Dev. CA. . Bukal Enterprises and Dev. xSantiago v. v. but not when there appears a legitimate lessor-lessee relationship between the vendee and the vendor. 272-273 (2009). 325 SCRA 385 (2000). Fidel v. absence of any attempt by the buyers to assert their alleged rights over the subject property. When the parties to an alleged contract do not really intend to be bound by it. Navarro & Co. c. Rosario v. which gave rise to the corresponding obligation on part of buyer to pay the last installments. 559 SCRA 197 (2008). Court of Appeals.52 When Contract to Sell was signed by the co-owners themselves as witnesses. or any proof of consideration. that did not amount to simulation. Yu Bun Guan v. Bravo. c. would not be conclusive of the inexistence of a sale since consideration is always presumed. since the best evidence to prove payment is the official receipt. CA. xManila Banking Corp. 546 SCRA 42 (2008). unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract. without any indication therein of the total purchase price of the land or of the monthly installments to be paid. 54 Solidstate Multi-Products Corp. xUnion Bank v. consideration is.. Vailoces. since forgery is not presumed. Receipts proves payment which takes the sale out of the Statute of Frauds.53 1.54 • Failure of alleged buyers to collect rentals from alleged seller.F. since delivery of certificate of ownership and execution of deed of absolute sale were expressly stipulated as suspensive conditions. such as when the sale was executed over a land to illegally frustrate a person's 49 50 51 52 53 Limson v. the sale shall be void. CA. El Oro Engravers Corp. v. CA. 618 SCRA 333 (2010). 244 SCRA 320 (1995). 326 SCRA 285 (2000). bare assertions that the signature appearing on the Deeds of Sale is not that of her husband is not enough to allege simulation. • When signature on a deed of sale is a forgery. Loyola v. CA. 278 SCRA 98 (1997). xDelos Reyes v. 444 SCRA 61 (2003). 529. Camper Realty Corp. Aquino. 280 SCRA 297 (1997). positive and convincing evidence. xVillaflor v. (b) false appearance must have been intended by mutual agreement. Burgos. Alcantara v. the written authority for their agent mandated under Article 1874 of the Civil Code is no longer required. Code) X D. 310 SCRA 464 (1999). and (c) purpose is to deceive third persons. xBravo-Guerrero v. V. xLeabres v. √Toyota Shaw. Pajo-Reyes. 357 SCRA 209 (2001).55 But • Simulation of contract and gross inadequacy of price are distinct legal concepts. the authority of the latter shall be in writing. v. 146 SCRA 158 (1986). Sec. Authority Must Be in Writing (Art. Pineda v. 376 SCRA 222 (2002). cannot be the basis of valid sale. The requisites are: (a) an outward declaration of will different from the will of the parties. Sale of Large Cattle (Art.17 Sales invoices are not evidence of payment of the price. Badges and Non-badges of Simulation: • Non-payment of the stipulated consideration. xCity-Lite Realty Corp.
1495. 366 SCRA 324 (2001). 410 SCRA 97 (2003). Although illegal. 446 SCRA 54 (2004). The rescissory action to set aside contracts in fraud of creditors is accion pauliana. xRufloe v..56 Where the parties to a contract of sale agreed to a consideration. • Possessor is entitled to keep the fruits during the period for which the buyer held the property in good • Then restoration of what has been given is in order. 1477) a. Effect When Sale Declared Void: • The action for the declaration of the contract’s nullity is imprescriptible—an action for reconveyance of property on a void contract of sale does not prescribe. the contract of sale remains valid and enforceable upon the terms of the real consideration. CA. has no standing to seek legal remedies to either recover the property or the purchase price paid. xTraders Royal Bank v. OBLIGATIONS OF SELLER AND PERFORMANCE OF CONTRACT OF SALE 1. DELIVER THE SUBJECT MATTER (Art. Nemo potest nisi quod de jure potest – No man can do anything except what he can do lawfully. Nemo dat quod non habet – No man can give that which he does not have. but the amount reflected in the final Deed of Sale was lower. 269 SCRA 15 (1997). 1536-1544. One can sell only what one owns or is authorized to sell. v. no valid title can pass in favor of the buyer. 1493-1506) A. Mijares. xHeirs of Ignacia Aguilar-Reyes v. Fil-Estate Golf and Dev. When seller had no ownership over the subject matter at the time of delivery. 3. 4. An action or defense for the declaration of the inexistence of a contract is imprescriptible. since the transaction is void ab initio for being in violation of the constitutional prohibition. Heirs of Arturo Reyes v. no valid title over the subject matter can be conveyed to the buyer even with delivery. CA. an action to rescind is founded upon and presupposes the existence of a contract. CA. xOlegario v. CA. 1163) (Arts. 316 SCRA 650 (1999). 371 SCRA 49 (2001). 406 SCRA 55 (2003). nemo dat quod non habet. Rescission if generally unavailing should a third person. 314 SCRA 69. Lim. Navarro. CA. . On the other hand. essentially a subsidiary remedy accorded under Article 1383 which the party suffering damage can avail of only when he has no other legal means to obtain reparation for the same. Court of Appeals. 608 SCRA 55 (2009). 466 SCRA 438 (2005). 81 (1999). Pastrana.18 right to inheritance and to avoid payment of estate tax. Socco-Beltran. Likewise. xTsai v. undertaken in fraud of creditors. VI. xUnion Bank v. xCampos v. 313 SCRA 632 (1999). Ong. their motivation being to pay lower taxes on the transaction. faith. Silverio. 238 SCRA 96 (1994). 491 SCRA 581 (2006). and the buyer can acquire no more right than what the seller can transfer legally. Deliver with Fruits and Accessories (Arts. Remedies Allowed When Sale Simulated When a contract of sale is void. 526 SCRA 51 (2007). 1164. Burgos. 572 SCRA 211 (2008). xDe los Reyes v. 577 SCRA 264. the sale is void because illegal motive predetermined purpose of the contract. 1537) 3. xFrenzel v. is in lawful possession of the property since he is protect by law against a suit for rescission by the registration of the transfer to him in the registry. It is a well-settled principle that no one can give what one does not have. 56 57 Uy v. otherwise valid. Catito. 1166. Alien who purchases land in the name of his Filipina lover. the motives neither determine nor take the place of the consideration. 272-273 (2009). xManila Banking Corp. Preserve Subject Matter (Art. acting in good faith. CA. Legal Premises for Doctrines on Tradition When the sale is void or fictitious. xDBP v. since the relationship between parties in any contract even if subsequently voided must always be characterized and punctuated by good faith and fair dealing. Inc. v. 1582-1590) 2. A contract which is null and void is no contract at all and hence could not be the subject of rescission.57 A forged deed of sale is null and void and conveys no title. the right to set up its nullity or non-existence is available to third persons whose interests are directly affected thereby. it must be shown that both contracting parties have acted maliciously so as to prejudice the creditors who were prevented from collecting their claims. the remedy of accion pauliana is available when the subject matter is a conveyance. xHeirs of Spouses Balite v. Tangalin v. CONSUMMATION (Arts. In such action.
d. Pan Oriental Shipping Co. . Socco-Beltran. v. xBalatbat v. 37 Phil. and the buyer can acquire no more than what the seller can transfer legally. by itself. In the absence of an express stipulation to the contrary. 1191. Corp. most important of which being conveyance of ownership. 26 (1909). De Leon v. Suburban Dev. 572 SCRA 211 (2008). Daclag v. xAlfredo v. Socco-Beltran.” Equatorial Realty Dev. the mere transfer of the possesion of the property subject of the sale is not the “delivery” contemplated in the Law on Sales or as used in Article 1543 of the Civil Code. 261 SCRA 128 (1996). Marcella. Ocampo v. xFroilan v. Mayfair Theater. Ong. 221) Heirs of Arturo Reyes v. 631 (1918). then there was no transfer of ownership by delivery. Constructive Delivery: EXECUTION OF A PUBLIC INSTRUMENT (Art.58 Delivery contemplates “the absolute giving up of the control and custody of the property on the part of the vendor. Whether Actual or Constructive: It may be stipulated that ownership in the thing shall not pass to buyer until he has fully paid price (Art. xLa Fuerza v. 611 SCRA 381 (2010).59 Failure of the buyer to make good the price does not. 364 SCRA 523 (2001). even when found in a public document. is not considered conclusive evidence of ownership – it is merely an indicium of a claim of ownership. without prejudice to right of the seller to claim payment of the price. And there is said to be delivery if and when the thing sold “is placed in the control and possession of the vendee. v. If the vendee is placed in actual possesion of the property. tradition produces its natural effects in law. In the absence of such stipulation to the contrary. or a condition contract of sale where the suspensive condition has not happened. General Doctrines on Tradition. 404 SCRA 145 (2003). is made through a public instrument. CA.19 Article 1459 of the Civil Code on contracts of sale “specifically requires that the vendor must have ownership of the property at the time it is delivered. 560 SCRA 137 (2008). CA.. 588 SCRA 120 (2009). Borras. payment of purchase price of the goods is not a condition precedent to the transfer of title to the buyer. Watson & Co. Ong Siao Hua. its execution is equivalent to the delivery of the property. cause the ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Art. Nevertheless when at the time of delivery there is no proof that the seller had ownership and as in fact the tax declaration to the subject property was in the name of another person.. v.” xHeirs of Arturo Reyes v... 1478). 12 SCRA 276 (1964). Cebu Winland Dev. Caoibes. Jr. when sellers themselves introduced the tenant to the buyer as the new owners of the land. Daclag v. Auditor General. Inc. 220-221 (2008). 23 SCRA 1217 (1968). 560 SCRA 137 (2008). 221 (2008). Since delivery of subject matter of sale is an obligation on the part of the seller. Int'l Banking Corp. v. and the assumption of the same by the vendee. Court of Appeals. Court of Appeals.” xHeirs of Arturo Reyes v. Socco-Beltran. Caoibes-Pantoja. Macahilig. in law. especially when from the face of the instrument it is shown that the seller “was not yet the owner of the property and was only expecting to inherit it. v. but title passes by the delivery of the goods. cannot be treated as constituting constructive delivery. b. even when found in a public document.60 58 59 60 Kuenzle & Streiff v. 1497) It is not necessary that seller himself delivers title to the buyer because the thing sold is understood as delivered when it is placed in control and possession of buyer. 496 SCRA 273 (2006). especially when from the face of the instrument it is shown that the seller “was not yet the owner of the property and was only expecting to inherit it. c. 572 SCRA 211. One can sell only what one owns or is authorized to sell. 63 SCRA 397 (1975). there was delivery that transferred title to the buyer. Non nudis pactis sed traditione dominia rerum transferantur. 572 SCRA 211. 370 SCRA 56 (2001). A contract to sell. 519 SCRA 79 (2007). “Delivery” as used in the Law on Sales refers to the concurrent transfer of two things: (1) possession and (2) ownership.” (at p. the acceptance thereof by the buyer is not a condition for the completeness of delivery. but by agreement of the parties ownership of the same is retained by the vendor until the vendee has fully paid the price. Thus. Macahilig. and from that time on the buyer acted as landlord thereof. Perez & Co. Physical Delivery (Art. Tating v. or a condition contract of sale where the suspensive condition has not happened. 13 Phil. A contract to sell. 233 SCRA 551 (1994). 1498) Where deed of sale or any agreement analogous to a deed of sale. xPhil. xHeirs of Severina San Miguel v. Ocejo. A tax declaration. Inc. Corp. cannot be treated as constituting constructive delivery.
the seller is under obligation to deliver in accordance with such instructions. Villablanca. and (b) Such control should remain within a reasonable period after the execution of the instrument √Danguilan v.62 nor of the registration certificate of vehicle xUnion Motor Corp. Court of Appeals. Inc. 404 (1918).T.. 587 SCRA 481 (2009). 168 SCRA 22 (1988). 14 SCRA 759 (1965). Asset Privatization Trust v. There is nothing in Article 1498 that provides that execution of a deed of sale is a conclusive presumption of delivery of possession. 1498 can still be effected through the execution of the deed of conveyance. CA. 63 SCRA 397 (1975). 366 SCRA 395 (2001). Execution by supposed buyers of a chattel mortgage over subject vehicle in favor of the financing company does not mean that ownership had been transferred to them. Engreso v. 63 64 61 Abuan v. (ii) As to Immovables (Art. 401 SCRA 54 (2003). xLagon v. xFortune Tobacco Corp. xSabio v. 149 SCRA 31 (1987). CA. Cruz. Hooven Comalco Industries.61 The presumptive delivery by the execution of a public instrument can be negated by the failure of the vendee to take actual possession of the land sold. Suburban Dev. 1498) Issuance of an acknowledgment receipt of partial payment. 221 SCRA 19 (1993). v. √Santos v. Felix. v. v. NLRC. 361 SCRA 506 (2001).20 Under Art. √Dy. √Pasagui v. EXCEPT: When buyer assumes the risks of ownership and possession. 274 SCRA 597 (1997). 364 SCRA 385 (2001).64 and that prior physical delivery or possession is not legally required since execution of the deed is deemed equivalent to delivery. Enterprises. CA. when the sale is made through a public instrument. Phil. 87 Phil. the transfer of ownership takes effect upon the execution of a public instrument conveying the real estate. Garcia.. Cerna Corp. Foz. 388 (1911). Ramos. 159 (1950). √Chua v. xUnion Motor Corp. De La Cruz. (i) As to Movables (Arts. Santos. v. 370 SCRA 56 (2001). 40 Phil. 449 SCRA 99 (2005). 1513-1514. Santos v. Ten Forty Realty and Dev.. Corp. if from the deed the contrary does not appear or cannot clearly be inferred. T. 198 SCRA 826) Where it is stipulated that deliveries must be made to the buyer or his duly authorized representative named in the contracts. In case of immovables. xManuel R. Dulay Enterprises. Auditor. . Rosete. IAC. 225 SCRA 678 (1993). CA. presumptive delivery can be negated by the failure of the vendee to take actual possession of the land or the continued enjoyment of possession by the vendor. Inc. A person who does not have actual possession of the thing sold cannot transfer constructive possession by the execution and delivery of a public instrument. v. since ownership and possession are two entirely different legal concepts. and that prior physical delivery or possession is not legally required. 349 SCRA 363 (2001). Court of Appeals. v. 38 Phil. As a general rule. Sanchez v. if from the deed the contrary does not appear or cannot clearly be inferred. 200 SCRA 766 (1991). 1498. Execution of Deed of Conditional Sale with provision that final deed of sale to be executed upon full payment does not transfer ownership of the subject matter. 366 SCRA 395 (2001). 410 SCRA 484 (2003). CA. CA. transfer of ownership by symbolic delivery under Art. Corp. Mayfair Theater. √Power Commercial and Industrial Corp. 504 SCRA 176 (2006). v. which is not a document of title xP. 1498-1499. the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. CA. v. 68 SCRA 18 (1975). Inc. 401 SCRA 217 (2003). xSan Lorenzo Dev. Cebu Winland Dev. Florendo v. Copuyoc v. Inc. Neither issuance of an invoice. 20 Phil. 588 SCRA 120 (2009). 62 Norkis Distributors v. (1) Registration of Title Is Separate Mode from Execution of Public Instrument – The recording of the sale with the proper Registry of Deeds and the transfer of the certificate of title in the name of the buyer are necessary only to bind third parties to the transfer of ownership. v. Jr.63 would constitute constructive delivery. Ong Siao Hua. Quimson v. when sale is made through a public instrument. for delivery must be on the part of the seller. the mere execution of the deed of conveyance in a public instrument is equivalent to the delivery of the property. Provided That: (a) The thing sold is subject to the control of the seller √Addison v. v. 614 (1919). 193 SCRA 694 (1991). 361 SCRA 506 (2001). the purchaser must be placed in control of the thing sold. Equatorial Realty Dev. De Solas. In order the execution of a public instrument to effect tradition. Court of Appeals. As between the seller and the buyer. v. International Corporate Bank. Notwithstanding the presence of illegal occupants on the subject property. when it is not a public instrument does not convey title. Corp.J. the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. xMunicipality of Victorias v. Santos. v.
and the price agreed upon was not based on such measurement. or the seller can pay the tax. so that all that is required of seller was to deliver in good faith to his buyer all of those found in the mass. (iii) As to Incorporeal Property (Arts. interests and participation as to the ½ portion pro indiviso. 444 SCRA 445 (2004). and (b) duty to withhold taxes due on the sale is imposed on seller. 1478 and 1503) 5. 1480) When the contract does not provide for the measuring or weighing of a sold specific mass. Teves. (2) Customary Steps in Selling Immovables – “Customarily. 1521) 7. is not a pre-requisite to the transfer of ownership to the buyer. seller is obliged to transfer title over the property and deliver the same to the vendee. 252 (1954). 1521) Unless otherwise stipulated: (a) under Art. Court of Appeals. Fonacier. Payment of the capital gains tax. Transfer Ownership to Vendee Upon Delivery (Arts. 444 SCRA 445 (2004). does not necessarily include within its terms the obligation to pay for the expenses in notarizing a deed of sale and in obtaining new certificate of title. v. f. Court of Appeals. SPECIAL RULES ON COMPLETENESS OF DELIVERY 1. then “[t]he subject matter of the sale is. Mayfair Theater. In Case of Express or Implied Reservation (Arts. 1523) 6. In the sale of shares of stock. B.” xGaite v. v. as far as the government is concerned. Galido. 2 SCRA 831 (1961). depending on the agreement of the parties. v. Inc. xJose Clavano. the submission by an individual seller to the buyer of the following papers would complete a sale of real estate: (1) owner’s duplicate copy of the Torrens title. 1477. √Vive Eagle Land. Expenses of Execution and Registration (Art. HLRB. physical delivery of a stock certificate is one of the essential requisites for the transfer of ownership of the stocks purchased. xHeirs of Pedro Escanlar v. Court of Appeals.21 BUT SEE: Under Art. and of Putting Goods in Deliverable Estate (Art. the mass.” √Chua v. The execution of the notarized deed of sale and the delivery of the owner’s duplicate copy of the original certificate of title to the buyer is tantamount to constructive delivery of the object of the sale. 401 SCRA 54 (2003). 1478. therefore. Time and Place of Delivery (Art. CA. 1495. and (4) latest realty tax receipt. Rules on Delivery to Carrier (Art. Kings Properties Corp. 1588) b. 1487). Filinvest’s failure to delivery the stock certificates representing the shares of stock purchased by TEMI and Garcia amounted to a substantial breach of their contract which gave rise to a right to rescind the sale. 332 SCRA 139 (2000). 606 SCRA 137 (2009). Inc. 401 SCRA 54 (2003). (2) signed deed of absolute sale. Inc.” xChua v. 592 SCRA 169 (2009). (3) tax declaration. and not the actual number of units or tons contained therein. xEquitable Realty Development Inc. Court of Appeals. however. Raquel-Santos v. notwithstanding that the quantity delivered is less than the amount estimated in the contract. They buyer can retain the amount for the capital gains tax and pay it upon authority of the seller. e. petitioners were in possession of the subject property as lessees. 1523) . 96 Phil. When Buyer Refuses to Accept (Art. in the absence of a contrary agreement. In Case of Movables (Art. 1498 and 1501). 1522 and 1537. they remained in possession. Constitutum Possessorium (Art. Court of Appeals. 1487 the expenses for the registration of the sale should be shouldered by the vendor xVive Eagle Land.. Inc. the capital gains tax remains a liability of the seller since it is a tax on the seller’s gain from the sale of the real estate. Buyer has more interest in having the capital gains tax paid immediately since this is a prerequisite to the issuance of a new Torrens title in his name. A judgment on a contract of sale that decrees seller’s obligations to execute and deliver the deed of absolute sale and the certificate of title. Upon sale to them of the rights. not in the concept of lessees anymore but as owners now through symbolic delivery known as traditio brevi manu. a. Nevertheless.” xAmigo v. v. Taking-Out Insurance Coverage (Art. 4. The transfer of ownership takes effect upon the signing and notarization of the deed of absolute sale. 378 SCRA 172 (2002). v. Traditio Brevi Manu – Prior to the sale. and 1496) a. 1500) – A provision in the deed of sale granting to seller a right to lease the subject matter of the sale is valid: the possession is deemed to be constituted in the vendee by virtue of this mode of tradition. 281 SCRA 176 (1997). a determinate object.
Inc. “C. Santa Ana v.22 (i) FAS Sales – “The seller pays all charges and is subject to risk until the goods are placed alongside the vessel”. tradition as a mode of acquiring ownership must be in consequence of a contract. 602. 56 Phil.” √Pacific Vegetable Oil Corp. In such case. Sale by Description and/or Sample (Art. Pacific Coast” (destination). xVallarta v. and the subsequent return of the goods reverts ownership back to the seller. In Case of Immovables a. “sale on trial” or “sale on satisfaction”). the vendee has the option to accept only the amount agreed upon or to accept the whole area. √Rudolf Lietz. In a “sale on approval” (also called “sale on acceptance. the provisions of Art. If the vendor delivers less than the area agreed upon. When the machine delivered is in accordance with the description stated in the sales contract.” i. insurance. 87 Phil. “the vendor is to pay not only the cost of the goods.” there must be a clear agreement to either of such effect. Trial or Satisfaction (Art. (ii) FOB Sales – In mercantile contracts of American origin. this is taken to indicate that the delivery is to be made at the port of destination. Inc.65 (iii) CIF Sales √General Foods v. Buyer's Right to Inspect Before Acceptance (Arts. Under an arrangement “c. 217 SCRA 322 (1993). and the parties treated the sample as the standard of quality and that they contracted with reference to the sample with the understanding that the product to be delivered would correspondent with the sample. 331 (1950). Collector. Court of Appeals. 478 SCRA 451 (2005). the buyer cannot refuse to pay the balance of the purchase price and the cost of installation if it proves that the machine cannot be used satisfactorily for the purposes for which he bought it when such purpose was not made known to the seller. 617 (1932). Court of Appeals. the vendee may oblige the vendor to deliver all that is stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. xEngel v. buyer will not be released from his obligation to accept and pay for the goods by deviations on the part of the seller from the exact terms of the contract. 1502 of Civil Code governing such sales cannot be invoked by either party to the contract.” at the point of shipment or at the point of destination determines the time when property passes. v. “F. 606 (1918). since the prestation to effect a meeting of the minds to give rise to a valid contract is incumbent on the buyer. Supreme Court Advance Decisions. NACOCO. 606 (1918). as it was judicially interpreted. Soriano Y Cia. Yangco. xMendoza v. xA. √Behn Meyer & Co. otherwise.” found in British contracts stand for costs.B. 29 April 1955. 1502) In a “sale or return. √Behn Meyer & Co. Goyena v. 150 SCRA 336 (1987). 490 (1902). v..O. . Where Sold for a Lump Sum [“A cuerpo cierto or por precio alzado”] (Art. the delivery of the object does not transfer ownership to the buyer since the delivery was not for purposes of transferring ownership. For a sale to be a “sale or return” or a “sale on approval. Sale on Approval. 1539 and 1540) In a unit price sale. v. 115 (1924). Universal Trading Co. v. Mariano Velasco & Co. Tambunting. Singzon. 18 SCRA 973 (1966)..” the ownership passes to the buyer on delivery pursuant to a perfected contract of sale. Yangco.66 b. LPJ Enterprises. 1481 and 1584) Except when carrier delivers COD. 441 SCRA 172 (004) Even in sales by description and/or sample.B. v. and freight.” stand for the words “Free on Board. and. that the seller shall bear all expenses until the goods are delivered according as to whether the goods are to be delivered “F.. 47 Phil.e. If the vendor delivers more than the area stated in the contract..I. the statement of the area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. d. if buyer had acquiesced to such deviations after due notice thereof.O. 100 Phil. 505 (1955). but also the freight and insurance expenses. David. but the expense of freight and insurance to be paid by the seller. 150 SCRA 336 (1987).f. 1542) 65 66 Chua Ngo v. 1 Phil. 97 Phil.F. which is not present and there is no opportunity to inspect or examine the same. they signify that the price fixed covers not only the costs of the goods. xIndustrial Textile Manufacturing Co. Court of Appeals. c. b. 337 (1956). Ermita Market & Cold Stores. 2. 38 Phil. 602. Inc. 38 Phil. xVallarta v.. Where Sold Per Unit or Number (Arts. xPacific Commercial Co. provided he pays for the additional area at the contract rate. v.i. Hernandez. v. 1481) There is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of the bulk.
518 SCRA 186 (2007). Court of Appeals. Magallanes. to be deemed included in the deed of sale. 154468 and 1165) 1. 323 SCRA 430 (2000). DOUBLE SALES (Arts. √Carbonell v. The provision on double sale presumes title or ownership to pass to first buyer. EXCEPT: A buyer of land. 248 (1941). 1544 would be misplaced by a first buyer who bought the land not within the Torrens system but under Act No.” and the Torrens system rule that formal registration proceedings undertaken on the property and the subsequent issuance of a title over the land had under the Torrens system had the legal effect of cleansing title on the property of all liens and claims which were not annotated therein. acquires possession of the property ahead of the first buyer. 566 SCRA 18 (2008). 503 SCRA 66 (2006). Ong Siao Hua.D. xAzarraga v. this is the rule when evidence shows that the parties never gave importance to the area of the land in fixing the price (97 versus 60 hectares). 103 SCRA 7 (1981). 395 SCRA 43 (2003). 52 Phil. the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. either a proportional reduction of the price or the rescission of the contract. 432 SCRA 544 (2005). 263 SCRA 15 (1996). 45 Phil 296 (1923). and (b) should there be no inscription by either of the two buyers. when the second buyer. In spite of the three levels of tests provided under Art. De Vera. Laureta. in good faith. Unless. as against the second buyer who bought the same property when it was already registered under the Torrens system. 588 SCRA 120 (2009). Del Prado v.” xCoronel v. 483 SCRA 102 (2006). 614 SCRA 102 (2010). the second buyer satisfies these requirements. Jr. 56 Phil. 249 SCRA 323 (1995). xTeran v. 68 Pudadera v. CA. 535 SCRA 123 (2007). in good faith. it is Article 1539 and not Article 1542 which is the applicable law—the buyer is entitled to the relief afforded to him under Article 1529. In the case at bar an area of “644 square meters more” is not reasonable excess or deficiency. title or ownership will not transfer to him to the prejudice of the first buyer. Jalandoni. In a lump sum sale. Ver Reyes v. Corp. a. 564 SCRA 456 (2008). Court of Appeals. v. Arbasa. xCaram.70 67 Asiain v. Esguerra v. Santos. 633 SCRA 332 (2010). such as: (a) When two different titles are issued over the same registered land. Trinidad. Salvador. Inc. xRoble v. Parungao. 1544 do not overcome the rules provided under the Property Registration Decree (P. actually is deemed to take risk on the actual size of the property bought at lump sum. Where the parties agreed on a sale at a rate of a certain price per unit of measure and not one for a lump sum. Tests Applicable under Article 1544: Caveat emptor requires the buyer to be aware of the supposed title of the seller and he who buys without checking the seller's title takes all the risks and losses consequent to such failure. v. xGarcia v. Caballero. Velasco. 599 (1928). xCebu Winland Dev. exception being: (a) when the second buyer. 677 (1932).67 EXCEPTION TO EXCEPTION: When buyer. Faustino. except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry. when the land delivered to the buyer is exactly as that described in the deed and covered within the boundaries designated. the buyer who claims under a title that was first issued shall be preferred. 362 SCRA 69 (2001). 1544. CA. Balantakbo v. when sold in gross or with the description “more or less” or similar words in designating quantity covers only a reasonable excess of deficiency. the Court seems to recognize only registration in good faith by the second buyer and does not characterize the meaning of the last two test of possession and oldest title. Calma v. 478 SCRA 451 (2005). Court of Appeals. 590 SCRA 359 (2009).23 In a contract of sale of land in a mass.69 BUT SEE: √Naval v. 3344. Court of Appeals. Sr. the difference in actual area (34 versus 10 hectares) will not authorize the buyer to rescind the contract because the seller has complied with delivering the subject matter agreed upon. 69 70 Reiterated in Abrigo v. xLiao v. Gay. v. Court of Appeals. Court of Appeals. that is. 1459).√Rudolf Lietz. who has been occupying the land for two years as lessee. Tanglao v. • √Naawan Community Rural Bank. PRIOR JURE. 2. MAIN RULE UNDER ART. v. 1544: PRIOR TEMPORE. Villanueva. Priority of Torrens System of Registration – The rules on double sales under Art. 72 Phil. C. registers the sale ahead of the first buyer. Inc. Salinas v. (b) Invoking the rules on double sales and “priority in time” under Art. . because: • of the “well-known rule in this jurisdiction that persons dealing with registered land have the legal right to rely on the fact of the Torrens Certificate of Title and to dispense with the need to inquire further. √Carillo v. 69 SCRA 99 (1976)..
and the fact alone does not even itself constitute evidence of ownership. 71 72 Reiterated in Mactan-Cebu International Airport Authority v.74 Article 1544 on double sales has no application in cases where the sales involved were initiated not by just one vendor but by several successive vendors. It cannot be invoked where the two different contracts of sale are made by two different persons. it is necessary that the conveyance must have been made by a party who has an existing right in the thing and the power to dispose of it. Valdez. Genato. (1) Doctrine on Conditional Sales/Contracts to Sell and Adverse Claims: √Mendoza v. Nogales.72 or • Where one of the contract is a contract to sell. xOng v. v. Alindogan. 236 (1921). Ong v. the governing principle of Art. xDischoso v. b. Nevertheless. Gallardo v. 485 SCRA 464 (2006). Court of Appeals. Court of Appeals. 449 SCRA 99 (2005). 69 SCRA 99 (1976).75 citing VILLANUEVA. 530 SCRA 432. annotation. 11 p. This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same seller to the two different buyers in good faith. including both registration in its ordinary and strict sense. namely that there must be a valid sales transactions. and even marginal notes. 438 (2007). Requisites for Double Sale: √Cheng v. Mactan-Cebu International Airport Authority v. Inc. Ulep v. √Consolidated Rural Bank (Cagayan Valley). Registration means any entry made in the books of the registry. Genato. Espiritu v. Court of Appeals. and buyers must be at odds over the rightful ownership of the subject matter who must have bought from the very same seller. Valerio. and such contract is binding only upon the fulfillment or non-fulfillment of an event. Exact Same Seller for Both Sales Article 1544 applies where the same thing is sold to different vendees by the same vendor. 340 SCRA 154 (2000). Tirol. if the second sale was made when such person was no longer the owner of the property. The rules on double sales under Art. c. 42 Phil. first to the respondent and then to Viloria on two separate occasions. the second sale was not void for the sole reason that petitioner had previously sold the same properties to respondent. 588 SCRA 635 (2009). Tibe. Rodaje. 1544 on double sales to apply. Olasiman. Registration in Good Faith as First Priority a. xBayoca v. and therefore does not apply where there was a sale to one party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the rights to repurchase the same land.24 3. xCheng v. And even if the sale was made by the same person. It does not apply where the same thing is sold to different vendees by different vendors. 1544 are not applicable to contract to sell. while the other sale over the same property is void. √Carbonnel v. because of the circumstances that must concur in order for the provisions to Art. are lacking in a contract to sell for neither a transfer of ownership nor a sales transaction has been consummated.G. 158 SCRA 138 (1988). 388 (2010). 46 O. 472 SCRA 241 (2005). 3.. 73 74 75 76 . the second purchaser cannot acquire any right. Mayuga. Meaning of “Registration” The annotation of adverse claim can qualify as the registration mandated under the rules on double sale. Torrecampo v. Cattleya Land. 533 SCRA 350 (2007).or even to the same buyer but by different sellers. It is the entry made in the registry which records solemnly and permanently the right of ownership and other real rights. Oalsiman. 9 SCRA 761 (1963). Fudot v. 485 SCRA 464 (2006). Genato. 467 SCRA 341. PHILIPPINE LAW ON SALES 100 (1995). 300 SCRA 722 (1998). 5568. Court of Appeals.73 When the seller sold the same properties to two buyers. Gallardo. and cancellation. v. 1544 should apply. √Cheng v. √San Lorenzo Dev. 611 SCRA 381. 280 SCRA 536 (1997). because it had been acquired by the first purchaser in full dominion. 300 SCRA 722 (1998). Remalante v. 5 SCRA 781 (1962). Salera v. √Adalin v.71 a. Sigaya v. 300 SCRA 722 (1998). 502 SCRA 24 (2006). Delfin v. stronger in right). Exact Same Subject Matter Article 1544 applies where the same thing is sold to different buyers by the same seller. For Article 1544 to apply. 448 SCRA 347 (2005). Kalaw. CA. Inc. De Leon v. Roxas. mainly the governing principle of primus tempore.portior jure (first in time. No. Tirol. Corp. Sr. 517 SCRA 84 (2007). Ong. 588 SCRA 635 (2009). one of them not being the owner of the property sold. 357 (2005).76 Declaration of purchase for taxation purposes does not comply with the required registration.. There Must Be Two Different Valid Sales: Article 1544 does not apply where: • There is only one valid sale.
Ulep v. 516 SCRA 575 (2007). Vda. 533 SCRA 350 (2007). among them. 508 SCRA 62 (2006). This is the priced exacted by Article 1544 for the second buyer being able to displace the first buyer. v. that before the second buyer can obtain priority over the first.77 this is so because the defense of indefeasibility of a Torrens title does not extend to a transferee who takes the certificate of title in bad faith. Orduña v. 78 Cruz v. 129 SCRA 656 (1984).” xUraca v. (c) Buyers of real property that is in the possession of persons other than the seller must be wary – they must investigate the rights of the possessors. No. CA. 322 SCRA 294 (2000).e. CA. CA. but whether or not said second buyer registers such second sale in good faith. √San Lorenzo Dev. to register first her purchase as against the second buyer. 472 SCRA 241 (2005). 358 SCRA 38 (2001). and (d) good faith is always Blanco v. because to hold otherwise would be to tolerate fraud and the Torrens system cannot be used to shield fraud – while certificates of title are indefeasible. xVda. Jr. 252 SCRA 80 (1996). even if the latter is in actual possession of the immovable property. thereby overturning obiter in Santiago v. what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith or that he was first to register. Galido. he must show that he acted in good faith throughout (i.79 The registration of a sale after the annotation of the notice of lis pendens does not obliterate the effects of delivery and possession in good faith. Briones. 431 SCRA 116 (2004). 535 SCRA 123 (2007). the actual notice and knowledge are equivalent to registration. (b) possessors in good faith are those who are not aware of any flaw in their title or mode of acquisition. CA. 4. CA. de Jomoc v. Court of Appeals. Knowledge of First Buyer of the Second Sale Does Not Amount to Registration in Favor of the Second Buyer Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights except where the second buyer registers in good faith the second sale ahead of the first. 449 SCRA 99 (2005). Bernardez v. de Alcantara v. CA. Cattleya Land. in ignorance of the first sale and of the first buyer's right) –from the time of acquisition until the title is transferred to him by registration or failing registration. Gatmaitan v. 247 SCRA 336 (1995). xOcceña v. 533 SCRA 637 (2007). Mabanta. without knowledge of any defect in the title of the property sold. since such knowledge taints his prior registration with bad faith. Possession Refers Both to Material and Symbolic Possession In the absence of inscription under double sales. CA. 322 SCRA 294 (2000). Bautista v. 534 SCRA 62. 356 SCRA 263 (2001). Corp. “There can be no constructive notice to the second buyer through registration under Act 3344 if the property is registered under the Torrens system. Lim. 535 SCRA 123 (2007)..” xAmodia Vda. Court of Appeals. Court of Appeals. CA. 225 SCRA 469 (1993).78 In a situation where a party has actual knowledge of the claimant’s actual. 82 (2007). Escueta v. But in converso. 200 SCRA 74 (1991).D. 278 SCRA 702 (1997). 488 SCRA 148 (2006). 323 SCRA 430 (2000). Bautista v. Rivera. 448 SCRA 347 (2005).. 1544 and cannot prevail over the registration of the pacto de retro sale. unassailable and binding against the whole world. v. De Melencion v. Tanglao v. Kings Properties Corp. CA. v. The rules on constructive notice upon registration provided for under Section 52 of the Property Registration Decree (P. CA. 252 SCRA 457 (1996). Such knowledge of the first buyer does not bar her from availing of her rights under the law. Berico v. Inc. Parungao. xMartinez v.. that is. Gabriel v. 200 SCRA 37 (1991). Court of Appeals. Registration in Good Faith Always Pre-empts Possession in Good Faith – Between two purchasers. b.25 Registration of the Extra-judicial Partition which merely mentions the sale is not the registration covered under Art. 216 SCRA 423 (1992). Fudot v. Registration Must Always Be in Good Faith – In cases of double sales of immovables. Tanglao v. 512 SCRA 411 (2007). De la Cena v. xTañedo v. Tablada. 79 Liao v. 606 SCRA 137 (2009). Fuentebella. Tayag. In double sales. Dauz v. open and notorious possession of a disputed property at the time of registration. Cabana. Esponilla. the first buyer always has priority rights over subsequent buyers of the same property. under the following jurisprudential parameters: (a) Possession mentioned in Article 1544 includes not only material but also symbolic possession. 1529) operate only from the time of the registration of the notice of lis pendens which in this case was effected only after the time the sale in favor of the second buyer had long been consummated by delivery of the subject matter. 77 . √Consolidated Rural Bank (Cagayan Valley). Exchavez. 622 SCRA 146 (2010). 533 SCRA 451 (2007). knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale. Court of Appeals. CA. c. they merely confirm or record title already existing and vested. Parungao. Bucad v. Lumbres v. d. Inc. Talusan v. the one who registered the sale in his favor has a preferred right over the other who has not registered his title. The good faith of the first buyer remains all throughout despite his subsequent acquisition of knowledge of the subsequent sale. the law gives preferential right to the buyer who in good faith is first in possession. by delivery of possession. 399 SCRA 573 (2003). Court of Appeals.
298 SCRA 388 (1998). or interest in. Republic. Tanongon v. 557 SCRA 77 (2008). Ong. CA. 522 SCRA 713 (2007). a. √Estate of Lino Olaguer v. 535 SCRA 123 (2007)81 Under Article 1544. 526 SCRA 514 (2007). Court of Appeals. Velasco. Kings Properties Corp. Bank of Commerce v. or before he has notice of the claim or interest of some other person in the property. CA. CA. 40 Phil.. CA. Eagle Realty Corp. cannot claim to be a buyer in good faith when his business in the constructing and selling townhouses and extending credit to the public. BUT SEE: It is anxiomatic that good faith is always presumed in the absence of any direct evidence of bad faith. Heirs of Angel Teves. xPilapil v. Magallanes. Parungao. without notice that some other person has a right to. 373 SCRA 544 (2002). Samson. b. Balatbat v. 87 Phil. Lloyd’s Enterprises and Credit Corp. The Heirs of Escolastico Saves. Abayata. Jr. V. Raymundo v. Republic. Bandong. 84 Agag v. because it would be standard in his business. Mathay v. Rosete. xTen Forty Realty and Dev. 557 SCRA 77 (2008). 247 SCRA 336 (1995). 82 Tsai v. CA. 389 SCRA 316 (2002). c. since only questions of law may be raised in petitions for review. since the good faith that is here essential is integral with the very status that must be established. Pangilinan... Cristobal. 421 SCRA 310 (2004). xTanglao v. CA. upon those who allege bad faith on the part of the possessors rests the burden of proof. Ongjoco. v. Soriano. 546 SCRA 577 (2005). 526 SCRA 514 (2007). the question of whether or not a person is a purchaser in good faith is a factual matter that will not be delved into by this Court.83 A banking institution is expected to exercise due diligence before entering into a mortgage contract. the point in time to be considered is the moment when the parties actually entered into the contract of sale. v. and as long as seller remains unpaid. knew of the previous sales and cannot be considered in good faith. Ongjoco. Eagle Realty Corp v. xSantiago v.82 As a general rule. Agricultural and Home Extension Dev. to ascertain whether the property being offered as security for the debt has already been sold to another to prevent injury to prior innocent buyers. Veloso v. Parungao. 555 SCRA 142 (2008). when the buyer has not yet fully paid the purchase price. Bandong. 260 SCRA 593 (1996). v. the buyer cannot feign good faith. 556 SCRA 175 (2008). Eagle Realty Corp v. and it cannot simply rely upon reviewing the title to the property offered for mortgage. (3) Gross Inadequacy of Price – Mere inadequacy of price is not ipso facto a badge of lack of good faith—to be so. 521 SCRA 68 (2007).26 presumed. 407 SCRA 602 (2003). CA. Tio v. Chua v. Lloyd’s Enterprises and Credit Corp. 535 SCRA 123 (2007). Navera v. Universal Robina Sugar Milling Corp. 563 SCRA 373 (2008). 295 SCRA 556 (1998). Who is Purchaser in Good Faith? In the determination of whether or not a buyer is in good faith. Must Have Paid Price in Full – A purchaser is good faith is one who buys property of another. the point in time to be considered is the moment when the parties actually entered into the contract of sale. Instances When No Good Faith: (1) Being In Business on Realty – A mortgagee who eventually ended buying the property at the public auction. v. Corp. Alpha Financing Corp. that is. Pudadera v. v. 382 SCRA 130 (2002). 563 SCRA 373 (2008). not being really third parties. Inc. The Heirs of Romana Saves v. CA. Queen’s Row Subdivision. including real estate loans. xPortic v. Dolleton. Aguirre v. 184 SCRA 584 (1990). Galvez v. 611 SCRA 381 (2010). Tio v. Diaz-Duarte v. Estate of Lino Olaquer v. 485 SCRA 346 (2006). 83 Adriano v. Good faith must concur. such property and pays a full and fair price for the same at the time of such purchase. Quimson v.80 5. v. 410 SCRA 484 (2003). 250 SCRA 566 (1995). 556 SCRA 175 (2008). Dolleton. 633 SCRA 332 (2010). . 606 SCRA 137 (2009). Court of Appeals. 323 SCRA 430 (2000).Ty v. Tanglao v. 614 (1919). Abayata. Aguirre v. The buyers “are deemed to have constructive knowledge by virtue of their relationship” to their sellers. mere registration is not enough to acquire a new title. 261 SCRA 128 (1996). 473 SCRA 570 (2005). 607 SCRA 324 (2009). 632 SCRA 236 (2010). Clearly. 555 SCRA 142 (2008). and the ascertainment of the statute or condition of a proper offered to it as security for a loan must be a standard and indispensable part of its operations. the price must be grossly inadequate or shocking to the conscience such that the mind revolts against it and such that a reasonable man would 80 81 Sanchez v. for he is charged with greater diligence that ordinary buyers or encumbrances for value. that everyone is presumed to have acted in good faith. v. 213 SCRA 536 (1992). San Pablo. De Leon v.. 421 SCRA 310 (2004). 366 SCRA 324 (2001). BUT SEE: In the determination of whether or not the buyer is in good faith. CA.84 (2) Close Relationship – The sale to one’s daughter and sons will give rise to the conclusion that the buyers. 159 (1950). Burden of Proof – The burden of proving the status of a purchaser in good faith lies upon him who asserts that status. Ong. as a matter of due diligence required of banks and financing companies. Republic. Liao v. 557 SCRA 77 (2008). xExpresscredit Financing Corp. Galido. It is not sufficient to invoke the ordinary presumption of good faith. Cruz. Court of Appeals. Ramos. Raymundo v.
Jr. Deanon v. xMartinez v. 326 SCRA 267 (2000). because it may be dissipating its assets to defraud creditors. 431 SCRA 116 (2004). 14 SCRA 179 (1965). xHeirs of Ramon Durano. 88 . 1997 Rules of Civil Procedure)]. 535 SCRA 123 (2007). 632 SCRA 236 (2010). at the very least. Martinez v. “plus the fact that the subject property is a vast tract of land in a prime location. Uy. mortgage. Sr. 89 Pudadera v. xPo Lam v. Orduña v. Erasusta.87 The property was titled and transferred with undue haste within a short period of time. When first sale is over unregistered land and the second sale is when it is registered. 87 Eagle Realty Corp v. v. 358 SCRA 38 (2001). The Heirs of Escolastico Saves. xSamson v. it is binding only between the seller and the buyer but it does not affect innocent third persons. Paredes v. triggered petitioner’s curiosity. an ocular inspection of the premises involved is a safeguard a cautious and prudent purchaser usually takes. 535 SCRA 123. v. xPo Lam v. Raymundo v. 604 SCRA 36 (2009). he must be ready for the possibility that the title be subject to the rights of excluded parties. lease. Esponilla.” Eagle Realty Corp v. Republic v. Fuentebella. Galido. 494 SCRA 308 (2006). Heirs of Celestial. 622 SCRA 180 (2010). Tio v. 422 SCRA 101 (2004). 526 SCRA 514 (2007). Heirs of Trinidad de Leon Vda. Court of Appeals. The rules in double sale under Article 1544. 556 SCRA 175 (2008). 347 SCRA 86 (2000). 495 SCRA 319 (2006). v. Mathay v. 317 SCRA 696. The Heirs of Romana Saves v. Tanglao v. 238 SCRA 397 (1994). Tio v. √Carumba v. Soriano. 344 SCRA 238 (2000). 31 SCRA 558 (1970). Rule 39. (5) Land in Adverse Possession – Buyer who could not have failed to know or discover that the land sold to him was in the adverse possession of another is a buyer in bad faith. Article 1544 is inapplicable to unregistered land because “the purchaser of unregistered land at a sheriff’s execution sale only steps into the shoes of the judgment debtor. the rules on double sale do not apply. De Roxas v. 94 (2008). cannot invoke the right of a purchaser in good faith. CA. Republic. Abayata. Abayata. Heirs of Celestial v. Parungao. PNB v. Briones. 344 SCRA 238 (2000). Tanglao v.R. and merely acquires the latter’s interest in the property sold as of the time the property was levied upon. 633 SCRA 332 (2010). CA. 132 (2007). or other voluntary instrument – except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land until its registration. 508 SCRA 62 (2006). EXCEPT: When knowledge of lis pendens was acquired at the time there was order to have it cancelled. CA. Tan v. 35.85 When there are occupants to the land being bought. 556 SCRA 175 (2008). 408 SCRA 291 (2003). Kings Properties Corp. De Guzman. 33. A purchaser cannot close his eyes to facts which should put a reasonable man on guard and claim that he acted in the belief that there was no defect in the title of the seller. 521 SCRA 68 (2007). CA. 85 86 R. Court of Appeals.89 (7) Annotation of Lien in Settlement of Estate – An annotation placed on new certificates of title issued pursuant to the distribution and partition of a decedent’s real properties is a warning to third persons on the possible interest of excluded heirs or unpaid creditors in these properties—where a buyer purchases the real property despite the annotation. Such buyer is bound to inquire whether the owners had unsettled obligations encumbrance that could burden the property. since it is the common practice in the real estate industry. whereby the buyer who is able to first register the purchase in good faith “is in full accord with Section 51 of PD 1529 which provides that no deed. 557 SCRA 77 (2008). Benolirao. √Dagupan Trading Co. Modina v. 622 SCRA 146 (2010). Rule 39 of the Revised Rules of Court on execution sale [now Sec. When Subject of Sale Is Unregistered Land √Naawan Community Rural Bank v. 6. Magallanes. 706 (1999). 395 SCRA 43 (2003). 557 SCRA 77.88 (6) Existence of Lis Pendens or Adverse Claim – Registration of an adverse claim places any subsequent buyer of the registered land in bad faith.” as expressly provided for in then Sec. 432 SCRA 544 (2004). Heirs of Estanislao Militar. De la Cena v. 316 SCRA 721 (1999). Heirs of Ramon Durano. (4) Obligation to Investigate or To Follow Leads – A purchaser who is aware of facts which should put a reasonable man upon his guard cannot turn a blind eye and later claim that he acted in good faith. CA. Occeñna v. Uy. 295 SCRA 556 (1998). CA. should have. 606 SCRA 137 (2009). CA. 517 SCRA 369 (2007). Thus. Settled is the rule that one who deals with property with a notice of lis pendens.86 Any person engaged in business would be wary of buying from a company that is closing shop. Court of Appeals. CA. such as — A buyer of a registered land would be in bad faith when he purchases without asking to see the owner’s copy of the title and/or without visiting the land where he would then have seen first buyer occupying the same. CA. v. Republic. v. Parungao. even when at the time of sale the annotation was cancelled but there was a pending appeal. √Abrigo v. Sr. Calilung. Chua v. Republic v. 358 SCRA 38 (2001). Macam. De Vera. 326 SCRA 267 (2000). if the sale is not registered. De Guzman. xSantiago v.27 neither directly or indirectly be likely to consent to it. 247 SCRA 336 (1995). Mag-abo. Bandong.
28 Under Act 3344. 534 SCRA 62. National Bank. How Negotiated (Arts. Nogales. 1508-1509) b. Court of Appeals. Fidel v. Amodia Vda. registration of instruments affecting unregistered lands is “without prejudice to a third party with a better right. xSiy Cong Bieng v. 1582-1585) VII. 340 SCRA 154 (2000). 42 Phil. Bernabe. 56 Phil. Hongkong and Shanghai Banking Corp. v. Reynes. Acabal. 197 SCRA 245 (1991). seller is allowed by fiction of law to deal with the goods described therein as though he had physically delivered them to the buyer. Warranties of Seller of Documents of Title (Art. Negotiable Documents of Title a. Court of Appeals. under the principle that as between two innocent persons. then its payment to be effective must be made to the seller in accordance with Article 1240 which provides that “Payment shall be made to the person in whose favor the obligation has been constituted. 5. v. or any person authorized to receive it. or his successor in interest. 364 SCRA 523 (2001).” which means that mere registration does not give the buyer any right over the land if the seller was not anymore the owner of the land having previously sold the same to somebody else even if the earlier sale was unrecorded.. 559 SCRA 186 (2008). xPhilippine Trust Co. v. De Melencion v. Spouses Honorio Santiago v. Who Can Negotiate (Art. 82 (2007). 1582) When seller cannot show title to the subject matter.” xMontecillo v. 1513) The endorsement and delivery of a negotiable quedan operates as the transfer of possession and ownership of the property referred to therein. 56 Phil. Non-negotiable Documents of Title a. Palileo. and buyer may take the document as though he had actually taken possession and control over the goods described therein. CA. 1514) b. he who made the loss possible should bear the loss. 2. Warehouse receipt represents the goods. 413 (1921). 1512) c. Pilapil.90 D. Definition (Art. 1514). 1518) As between the owner of a negotiable document of title who endorsed it in blank and entrusted it to a friend. Mere sending of a letter by the buyer expressing the intention to pay without the accompanying payment is not considered a valid tender of payment and consignation of the amount due are essential in order to extinguish the obligation to pay and oblige the seller to convey title. Pay the Price (Art. Fidel v. it is a representation that the one to whom the possession of the receipt has been so entrusted has the title to the goods. 385 SCRA 244 (2002). Bayoca v. DOCUMENTS OF TITLE (Arts. 413 (1921). and the holder of such negotiable document of title to whom it was negotiated and who received it in good faith and for value. 3. xTorcuator v. Effects of Transfer (Art. and had the effect of divorcing the property covered therein from the estate of the insolvent prior to the filing of the petition for insolvency. 4. Daclag v. CA. 560 SCRA 137 (2008). 1636) 2. 1544 has no application to land no registered under the Torrens system. but the intrusting of the receipt is more than the mere delivery of the goods. d. the latter is preferred. Effects of Negotiation (Art. Purpose of Documents of Title Through a document of title. Macahilig. 1516) 90 Hanopol v. 598 (1932). xPhilippine Trust Co. 1507-1520) 1. OBLIGATIONS OF BUYER 1. 454 SCRA 555 (2005). Court of Appeals. 459 SCRA 439 (2005).√Acabal v. 559 SCRA 186 (2008). . 42 Phil. How Transferred or Assigned (Art. then he cannot compel the buyer to pay the price. Unauthorized Negotiation (Art. Unless the parties to a sale have agreed to the payment of the purchase price to any other party. 598 (1932). Radiowealth Finance Co. The rules on double sale under Art. xHeirs of Severina San Miguel v. 247 SCRA 336 (1995). National Bank. Hongkong & Shanghai Bank. xSiy Long Bieng v. Accept Delivery (Arts. 7 SCRA 452 (1963).
e. Gabar. it is essential that the seller is the owner of the property he is selling. 1434) √Bucton v. An innocent purchaser for value is one who purchases a titled land by virtue of a deed executed by the registered owner himself not by a forged deed. Aguirre v. Lim. provided he acquires title to the property later on. 1409 of Civil Code. 55 SCRA 499 (1974). since such defense is available to sale of lands and not to sale of properties situated therein. Fernandez v. xInsurance Services and Commercial Traders. 1519.. 259 SCRA 65 (1996). the proper action is not for nullification of sale. 2. CA. 59 Phil. CA. what the vendee obtains by virtue of such a sale are the same rights as the vendor had as co-owner (i. putting both parties in status quo. IAC. 446 SCRA 54 (2004). Republic v. the right to repurchase provided therein would also be void Nool v. b. Estoque v. xTsai v. 446 (1934). Torrens System (Pres. Exceptions: When Ownership Transfers by Act of the Non-Owner a. In sale. Inc. and under Art. 1514. 456 (1916). the seller has in fact no title at all. Sy v. The defense of indefeasibility of Torrens title where the disputed buildings and equipment are located is unavailing. 363 SCRA 811 (2001). VIII. 92 . 421 SCRA 310 (2004). 493) In a contract of sale of co-owned property. Lumbao. 316 SCRA 502 (1999). 1402 Civil Code itself recognizes a sale where the goods are to be “acquired x x x by the seller after the perfection of the contract of sale” clearly implying that a sale is possible even if the seller was not the owner at the time of sale. and consequently. Rules of Levy/Garnishment of Goods (Arts. 341 SCRA 572 (2000). 454 SCRA 555 (2005). his spiritual share). CA.29 6. Capistrano.94 A co-owner who sells one of the two lands owned in common with another co-owner. 249 SCRA 331 (1995). Aguirre v.92 except when the intention of the purchase was clearly the property itself and not just the spiritual share. CA. Santos v. since the effect of such outright cancellation will be to impair 91 Azcona v. 94 Heirs of Romana Ingjug-Tiro v. 215 SCRA 866 ). Effect of Sale Where Seller Not Owner at Time of Delivery (Art. Heirs of Francisca Dignos-Sorono. Ona. Acabal. Court of Appeals. Fernandez. 1520). 240 SCRA 78 (1995). xPanganiban v. If one buys the land of another. the sale should be considered void. but when delivery of ownership is no longer possible. Coronel v. Recording Laws. Inc. Noel v.91 Although a situation (where the sellers were no longer owners) does not appear to be one of the void contracts enumerated in Art.. the latter may by law and equity lay exclusive claim to the remaining parcel of land. or for the recovery of possession of the property owned in common from the other co-owners. and in consequence of facts unknown alike to both parties. it shall effectively transfer the seller’s ideal share in the co-ownership. Tomas. √Paulmitan v. √Mindanao v. 13 SCRA 190 (1965). 421 SCRA 310 (2004). 519 SCRA 408 (2007). Pajimula. An agreement that purports a specific portion of an un-partitioned co-owned property is not void. 421 SCRA 310 (2004). 93 Almendra v. CA. Court of Appeals. 542 SCRA 166 (2008). 549 SCRA 58 (2008). Sales by Co-Owners (Art. SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE: “THE LIFE OF A CONTRACT OF SALE” 1. 204 SCRA 142 (1991). 1458). a. 1505. Oamil. v. v. The principal obligation of a seller is “to transfer the ownership of” the property sold (Art. but for division or partition of the entire property.93 In which case. A person who deals with registered land through someone who is not the registered owner is expected to look beyond the certificate of title and examine all the factual circumstances thereof in order to determine if the vendor has the capacity to transfer any interest in the land. 276 SCRA 149 (1997). Where innocent third persons. xImperial v. Acabal v. DBP v. 363 SCRA 435 (2001). 33 Phil. CA. and does not turn-over one-half of the proceeds of the sale to the other co-owner. Decree 1529). 454 SCRA 593 (2005). Court of Appeals. Barcenas v. and the vendee merely steps into the shoes of the vendor as co-owner. Estoppel on True Owner (Art. the court cannot disregard such rights and order the cancellation of the certificate. equity will cancel the sale and cause the purchase money to be restored to the buyer. CA. acquire rights over the property. Heirs of the Late Spouses Aurelio and Esperanza Balite v. This law stems from the principle that nobody can dispose of that which does not belong to him: NEMO DAT QUOD NON HABET. relying on the correctness of the certificate of title thus issued. Jr. to which the seller is supposed to have a good title. 560 SCRA 103 (2008). Reyes. 366 SCRA 324 (2001). 24 SCRA 59 (1968). Aguirre v. Casals. xTomas Claudio Memorial College. Court of Appeals. Yap.
This onus probandi cannot be discharged by mere invocation of the ordinary presumption of good faith. when owner did not voluntarily deliver possession of the car. Arenas v. 1480. Court of Appeals. xChrysler Phil. 133 SCRA 567 (1984). 231 SCRA 281 (1994) d. [CLV: Decision showed that second buyer. CA. xManila Remnant Co. √Sun Bros. Arts. and 1189. 98 Phil. 13 SCRA 486 (1965). and who pays a full and fair price at the time of the purchase or before receiving any notice of another person’s claim. 1189 and 1538) (5) Fruits or Improvements from time of perfection pertain to buyer (Arts. 1506. Jimenez. 1480. the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done shall have the like effect as is done by the party. 5143 (1958). The burden of proving the status of a purchaser in good faith and for value lies upon one who asserts that status. 1263) 2. Velasco. √Dizon v.. Sale in Merchants Stores. xHeirs of Spouses Benito Gavino. risk of loss is borne by seller under the rule of res perit domino. 788 (1956). Thus. 54 O. √Cruz v. v. √EDCA Publishing v. and BAVIERA). TOLENTINO. Effect of Loss/Deterioration of Thing Sold: a. 1504. or current possessor could not claim good faith because of erasures in the covering documents presented by his seller] Owner of diamond ring may recover possession of the same from pawnshop where the owner’s agent had pledged it without authority to do so. 1493 and 1494). In the case of a motor vehicle. Yapdiangco. 577 SCRA 264. (4) Deterioration (Arts. 479 (1908). 1189. Sale by One Having Voidable Title (Art. Bugsuk. b. LOSS. c. 559.G. Rufloe v. 85 and 86. Every person dealing with the registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property. 559) Whenever there is an underlying contract of sale which grants to the culprit-buyer a voidable title. READ Comments of PARAS. 19 Phi. Court of Appeals. 1538) (3) Loss by Fortuitous Event (Arts. An innocent purchaser for value is one who buys the property of another without notice that some other person has a right to or interest in it. 9 Phil. 859 (1957). No Application When Subject Matter is Determinable (Art. then one who buys the car even in good faith from the thief will lose the car to the owner who is deemed to have been unlawfully deprived. Fairs or Markets (Arts. Pahati. Article 1506 would grant to the buyer in good faith a better title as against the original owner even though the latter may be classified to have been “unlawfully deprived” of the subject matter under Art. IX. 1165. After Perfection But Before Delivery (Arts. as an exception to Art. In all other cases of unlawful deprivation done through estafa. DETERIORATION. 1504. 1164. . 3. Burgos. c.G. 3792 (1957). 272-273 (2009). 6 Phil.30 public confidence in the certificate of title. & Co. At Time of Perfection (Arts. Code of Commerce) √City of Manila v. and 1262). √Tagatac v. Before Perfection (√Roman v. Suntay. 1480. FRUITS AND OTHER BENEFITS 1. Matute. 361 SCRA 506 (2001). (1) General Rule: Before delivery. Santos. where there was neither physical nor constructive delivery of a determinate thing. v. 1164. v. (2) Loss by Fault of a Party (Arts. 184 SCRA 614 (1990). 1538.95 [In those cases possessor is a merchant and only has a pledge in his favor]. and in effect it was stolen from him. 1537-1538) 95 Valera v. 101 Phil. Statutory Power Order of Courts When a defeated party refuses to execute the absolute deed of sale in accordance with the judgment. √Aznar v. the original owner recovers even from the buyer in good faith. even when this is accompanied by the criminal act of estafa or swindling. 47 SCRA 160 (1972). the thing sold remained at the seller’s risk. Inc. Court of Appeals. 96 ). 1163. 1480. 291 SCRA 495 (1998). Grimalt. 1163-65. 53 O. Article 559 applies and the defense that the pawnshop acquired possession without notice of any defect of the pledgor-agent is unavailing. PADILLA. 47 (1911). and 1262. Raymundo. xUnion Motor Corp v. v.
Borbon II v. √Nonato v. xVisayan Sawmill Company. 101 Phil. Inc. Narciso. IAC. ON PART OF SELLER 1.. Seller in possession of the goods may sell them at buyer's risk. 1525) b. de Quiambao v. 1526-1529. Court of Appeals.31 d. 69 Phil. v. v. √Delta Motor Sales Corp. Asian Consumer. Rosario v. xMagna Financial Services Group. 214 SCRA 103 (1992). xUniversal Motors Corp. Unpaid Seller of Goods (Arts. Hausserman. De la Cruz v. does not amount to a foreclosure of the chattel mortgage covered by the Recto Law. Court of Appeals. d. 4 SCRA 243 (1962). when the buyer fails to pay the purchase price. 1485. 1593. xKatigbak v. buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. Tabora. √Tajanglangit v. 219 SCRA 378 (1993). xDelta Motor Sales Corp.. 1530-1532. Remedy of Specific Performance The fact that the seller obtained a writ of execution against the property mortgaged. Mutual restitution prevents recovering on the balance of the purchase price. 3313). 2. Servicewide Specialists. v. 55 O. 1636) • Right of Resale (Art. 33 Phil. 140 SCRA 255 (1985). Contracts to Sell Movables Not Covered. 40 Phil.G.. Inc. v. “Installment Sale” requires at least stipulated two (2) payments in the future.. v. Colarina. the seller had a right to terminate the contract. 52 (1939). 1524-1535) a. v. a. 213 SCRA 259 (1992). to resell the movables subject matter of the sale. Moscoso. Ramirez. Southern Motors. Remedies Available to Unpaid Seller Not Cumulative But Alternative and Exclusive. Gervacio. xVda. Lawyer's Coop v. f. 1594-1599) A. 28 SCRA 161 (1969). 2 SCRA 168 (1961). 477 SCRA 245 (2005). 606 (1957). 1503. Manila Motors Co. 13 SCRA 762 (1965). Inc. v. b. Inc. 1484. 1595 to 1597) Under Article 1597. Definition of “Unpaid Seller” (Art. the Supreme Court had already recognized the right of a seller. 1535. 3 SCRA 444 (1961). when the buyer of scrap iron fails to put up the letter of credit in favor of the seller as the condition of the sale. REMEDIES FOR BREACH OF CONTRACT OR SALE (Arts. . v. Southern Motors v. xHanlon v. 77 SCRA 152 (1977). Nature of Remedy of Rescission Surrender of mortgaged property is not necessarily equivalent to rescission. Remedy of Foreclosure 96 97 98 Song Fo & Co. 219 SCRA 378 (1993). Oria.98 e.97 Seeking a writ of replevin consistent with any of the three remedies. 1504) √Lawyer's Coop v. 3 (1915). xVisayan Sawmill Co. After Delivery (Art. 258 SCRA 634 (1996). Niu Kim Duan. but pursuant to an action for specific performance with a plea for a writ of replevin. 1486) The Recto Law prevents mortgagee from seizing the mortgaged property. c. and noncompliance with the condition meant that the seller’s obligation to sell never did arise. 1534) Even before the formal statutory adoption of the remedies of an unpaid seller. when the contract of sale is still executory in stage. 474 SCRA 500 (2005). RECTO LAW: SALES OF MOVABLES ON INSTALLMENTS (Arts. In Case of Movables (Arts. The almost invariable result was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. 1535) • Stoppage in transitu (Arts. Industrial Finance Corp. Appeals. Niu Kim Duan. Court of 3. Dy Hian Tat.96 X. PCI Leasing and Finance. Rights of Unpaid Seller: • Possessory lien (Arts. but stipulation on non-return of payments is valid provided not unconscionable. 796 (1920). √Levy v. 1533) • Right to Rescind (Art. 213 SCRA 259 (1992). whether or not there is a downpayment. Inc.
” xCasa Filipinas Realty Corp. Inc. Bantal Manufacturing. 23 SCRA 791 (1968). 117 SCRA 726 (1982). 191 (1939).99 (i) “Barring” Effects of Foreclosure – Filing of the action of replevin in order to foreclose on the chattel mortgage does not produce the barring effect under the Recto Law. v. then the real contract between the parties was a sale of movable on installment disguised as a lease agreement. 1484(3). 271 (1953). 477 SCRA 245 (2005).. 30 SCRA 564 (1969). Pascual v. for it is the fact of foreclosure and actual sale of the mortgaged chattel that bar further recovery by the seller of any balance on the buyer’s outstanding obligation not satisfied by the sale. H. GiraffeX Creative Imaging. water systems. 66 Phil. √Macondray & Co.D. improvements. Servicewide Specialists. 245 (1938). 4. Office of the President.. Office of the President. 782 (1956). Magna Financial Services Group. 258 SCRA 634 (1996).101 and vice versa when the real estate mortgage is first foreclosed. (ii) Rule on “Perverse Buyer”. v. 1591) √Legarda v.S. Purported Lease with Option to Buy The Court took judicial notice of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. 527 SCRA 405 (2007). 23 and 24. 100 101 102 Vda. xElisco Tool Manufacturing Corp.957 “was issued in the wake of numerous reports that many real estate subdivision owners. Commercial v. 33 SCRA 356 (1970). Manila Motor Co. Sales of Subdivision Lots and Condominium Units (Secs. 506 SCRA 591 (2006). 100 Foreclosure on the chattel mortgage prevents further action on the supporting real estate mortgage. Filipinas Investment. drainage. v. 957) P. CA. When the seller assigns his credit to another person. lighting systems and other basic requirements or the health and safety of home and lot buyers. All amounts barred from recovery.D. 61 SCRA 121 (1974).. operators and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads. 99 Phil.. In case the developer of a subdivision or condominium fails in its obligation under Section 20. Ridad. b. Filipinas Investment & Finance Corp. the latter is likewise bound by the same law. but nevertheless when a final demand is given prior to suit. 120 SCRA 246 (1983). Saldaña. CA. 957 directs every owner and developer of real property to provide the necessary facilities. v. Inc. suspend payment. Manila Gas Corp. Corp. 241 SCRA 165 (1995). √PCI Leasing and Finance. √Borbon II v. and any sums of money already paid shall not be forfeited. P.102 Where a lease agreement over equipment is without an express option to purchase. 178 SCRA 188 (1989). v. Eustaquio. IN CASE OF IMMOVABLES: a . Universal Motors Corp.D. Section 20 of P. Inc. √Northern Motors v. Filinvest Credit Corp. 258 SCRA 634 (1996). Halili. Servicewide Specialists. Heacock v. √Ridad v. 480 SCRA 156 (2006). he may suspend payment of the installments until such time that the owner or developer has fulfilled its obligations. Huang. Colarina. xTamayo v. and when the buyer opts for the latter alternative. when it was the chattel mortgage that was first foreclosed. U. Fernandez. 446 (1937). failure to carry out which is sufficient cause for the buyer to suspend payment. • buyer required only to give due notice to the owner or developer of the buyer’s intention to 99 Borbon II v. 66 Phil. . v. xTamayo v. Section 23 gives the buyer: • the option to demand reimbursement of the total amount paid.E. v. √Filipinas Investment & Finance Corp. sewerage. Huang. 55 SCRA 324 (1974). g. It was designed to stem the tide of fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers free from liens and encumbrances. de Jose v. √Zayas v. v.. or to wait for further development of the subdivision. developers. 64 Phil. 93 Phil. xZamora Realty and Dev. Barrueco. Sapinoso. 307 SCRA 731 (1999). Inc. Calupita. Anticipatory Breach (Art. infrastructure and other forms of development. Inc. whether the chattel mortgage is first foreclosed √Cruz v. v. The voluntary payment of the installment by the buyer-mortgagor is valid and not recoverable in spite the restrictive provisions of Art.32 Barring effect would cover a third-party mortgage. 67 Phil. the demand letter indicates clearly it was within the option of the lessee to fully pay the balance of the unpaid rentals and would be able to keep the equipment. 747 (1938). 480 SCRA 156 (2006). Luneta Motors. v.
. 382 SCRA 152 (2002). CRS Realty Dev. 23 does not require that a notice be given first by the buyer to the seller before a demand for refund can be made as the notice and demand can be made in the same letter or communication.G. Any premature demand prior to the indicated completion date would be premature.A. Corp. Inc. and otherwise lawful. 957 provides for the nullification of a contract to sell in the event the seller. sale being a consensual contract. 614 SCRA 75 (2010). 513 SCRA 570 (2007). 378 SCRA 121 (2002). Corp. World Class Properties. Sportwear Mfg. v. “The contract for the purchase of a piece of land on installment basis is not only lawful. Corp. Brillante-Garfin. he cannot now turn to this Court for succor without impairing the constitutional right to the obligation of contracts. 369 SCRA 36 (2001). Inc. Under P. at the time the contract was entered into. Factora. F.105 b.G. Corp. G. Cordero v. v. AFP Retirement and Separation Benefits System. This Court will not relieve petitioner of the necessary consequences of his free and voluntary. If [buyer] eventually found the interest stipulation in the contract financially disadvantageous to him. 957. 614 SCRA 75 (2010). Management & Dev. Inc. Pagtulunan v. 957 would include one who acquires for a valuable consideration a condominium unit by way of assignment by the condominium project owner in payment of its indebtedness for contractor’s fee. Pacifico. World Class Properties. . v. However.. CA.” Bortikey v. Co Chien v. 506 SCRA 451 (2006). Panasiatic Travel Corp. 614 SCRA 75 (2010). Inc. did not possess a certificate of registration or a license to sell. 6552). act. Corp. “Buyer” under P. Court of Appeals. Lucia Realty. v.104 Maceda Law recognizes in conditional sales of all kinds of real estate seller’s right to cancel the contract upon non-payment of an installment by the buyer.. Since the lots are involved in litigation and there is a notice of lis pendens at the back of the titles involved. when the developer-seller fails to give them a copy of the Contract to Sell despite repeated demands. but do not render the contracts to sell entered into on the project null and void. it ought to reimburse the buyers not only for the purchase price of the subdivision lots sold to them but also the incremental value arising from the appreciation of the lots. 350 SCRA 371 (2001). it is also of widespread usage or custom in our economic system. the subdivision developer have to be given a reasonable period of time to work on the adverse claims and deliver clean titles to the buyer. Sportwear Mfg. G. “Role” of Maceda Law – Maceda Law’s declared policy is to protect buyers of real estate on installment basis against onerous and oppressive conditions. • Option granted by law is with buyer and not the developer/seller. xRelucio v. 614 SCRA 75 (2010).G. . 241 SCRA 165 (1995). Inc. CRS Realty Dev. No. World Class Properties. Corp. and should the former fail to deliver clean titles at the end of the period. 5. xGold Loop Properties. World Class Properties. Office of the President. v.. the non-happening yet of that condition does not render the seller in default as to warrant the buyer the right to rescind the sale and demand a refund.. a buyer cause of action against the developer for failure to develop 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. Daroya. 477 SCRA 511 (2005). . Inc. . which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force.. OIympia Housing Inc.33 • Sec. and 187 SCRA 405 (1990). Sta. xCasa Filipinas Realty Corp v. Jestra Dev. Corp.. 587 SCRA 492 (2009). Transactions Covered 103 104 Cantemplate v.D. Active Realty & Dev. De Manzano. v. G.D.G.103 The dissatisfaction of the buyer under a Contract of Sale 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. 395 SCRA 298 (2003). MACEDA LAW: SALES OF RESIDENTIAL REALTY ON INSTALLMENTS (R. Nothing in P.S. Buyers of condominium units would be justified in suspending payments. 105 Leaño v. v. Cantemprate v. and seeks to address the acute housing shortage problem in our country that has prompted thousands of middle and lower class buyers of houses. The lack of Certificate of Registration or the License to Sell of the developer-seller merely subjects the developer to administrative sanctions.. G. 533 SCRA 242 (2008).D. 587 SCRA 492 (2009). 513 SCRA 413 (2007). Sportwear Mfg. v. and Management Corp. Sportwear Mfg. a. lots and condominium units to enter into all sorts of contracts with private housing developers involving installment schemes. Corp. xAMA Computer College. Dela Cruz Vda. when the Reservation Agreement provides that the buyer shall be entitled to a Contract to Sell only upon its payment of at least 30% of the total contract price.
v. 86 Phil. Rillo v. which is a kindred concept of rescission by notarial act. CA. √McLaughlin v. CA. Benolirao. The sale of large tracts of land (69. the case of unlawful detainer filed by petitioner does not exempt him from complying with the said requirement.028 square meters) do not constitute residential real estate within the contemplation of the Maceda Law. xRealty Exchange Venture Corp. v. 110 Caridad Estates.. Inc. xVilldara. 143 SCRA 663 (1986) Gimenez v. Sendino. 395 SCRA 298 (2003). Boston Bank of the Phil. v. Pacifico. at the end of the grace period. √Garcia v. Tan v. A decision rendered in an ejectment case operated as the required notice of cancellation under the Maceda Law. Garcia v. effective thirty (30) days from the buyer’s receipt thereof. Court of Appeals. KASSCO. there must be return to the buyer of the cash surrender value. 71 Phil. IAC. Jr. [?] xMortel v. Maritime Bldg. Evidently.” and the all-embracing definition virtually includes all transactions concerning land and housing acquisition. xLayug v. v. 209 SCRA 246 (1992). d. v.108 • Third. No. Pacifico. the seller should extend the buyer a grace period of at least sixty (60) days from the due date of the installments. . Daroya. v. RESCISSION ON SALES OF NON-RESIDENTIAL IMMOVABLES ON INSTALLMENTS (Arts. Inc. 109 Active Realty & Dev. Fabrigas v. for contracts covering more than two years of payments. xPagtulunan v. v. • Second. Kaparaz. to be merely circuitous and consequently superfluous” since the seller therein filed an action for annulment of contract.106 BUT SEE xPeople’s Industrial and Commercial Corp. 144 SCRA 693 (1986). How to Determine Years of Installments: √Jestra Dev..110 106 107 108 Eugenio v. v.109 The additional formality of a demand on [the seller’s] part for rescission by notarial act would appear. 369 SCRA 36 (2001). Panasiatic Travel Corp. the suspensive condition not having happened. 304 SCRA 155 (1999). 167 SCRA 627 (1988). Olympia Housing v. an option of sale or purchase. Santero. 348 SCRA 391. xLagandaon v. the seller shall furnish the buyer with a notarial notice of cancellation or demand for rescission. Jestra Dev. 274 SCRA 461 (1997). Corp. Court of Appeals. Dela Cruz Vda. 957 also includes “an exchange or attempt to sell. Manuel v. 545 SCRA 325 (2008). Maritime Bldg. v. Corp. Maceda Law has no application to protect the developer or one who succeeds the developer. 109 Phil.107 Maceda Law makes no distinctions between “option” and “sale” which under P. 231 SCRA 674 (1994). v. 195 SCRA 205 (1991). Office of the President. v. 477 (1950). 604 SCRA 36 (2009). 252 SCRA 620 (1996). 43 SCRA 93 (1972). 281 SCRA 206 (1997). 513 SCRA 413 (2007).. Jacinto v. 290 SCRA 463 (1998). Albea v. 1191 and 1592) Articles 1191 and 1592 on rescission cannot apply to a contract to sell since “there can be no rescission of an obligation that is still non-existent. Inc.. 513 SCRA 413 (2007). CA. Zabala. Executive Secretary Franklin M. Rodriguez. Luzon Brokerage v.” xValarao v. 619 SCRA 280 (2010). 398 (2000). Joseph & Sons Enterprises. Court of Appeals. 475 SCRA 247 (2005). CA. xGarcia v. c. Maceda Law finds no application to a contract to sell where the suspensive condition has not been fulfilled. A formal letter demand upon buyer to vacate the premises is not the same as the notice of cancellation or demand for rescission by a notarial act required by R. but as the buyer was not given the cash surrender value of the payments she made. v. PNB v. in the premises. Inc. De Manzano. Luzon Brokerage v.A. a mere notice or letter. 382 SCRA 152 (2002). Inquimboy. would not suffice. 488 SCRA 156 (2006).. 86 SCRA 305 (1978). 114 (1940). Court of Appeals. Where the buyers under a contract to sell offers to pay the last installment a year and a half after the stipulated date. 280 SCRA 253 (1997). that was beyond the sixty-day grace period under Section 4 of the Maceda Law. and Management Corp. xLeaño v. Court of Appeals. CA. 6. 619 SCRA 280 (2010). 233 SCRA 665 (1994).D. Court of Appeals.34 The formal requirements of rescission under the Maceda Law apply even to contracts entered into prior to its effectivity. there was still no actual cancellation of the contract. a solicitation of a sale or an offer to sell directly. and Management Corp. Court of Appeals. Inc. 1 (1960). The buyers cannot use the second sentence of Section 4 of the Maceda Law against the sellers’ alleged failure to give an effective notice of cancellation or demand for rescission because the sellers merely sent the notice to the address supplied by the buyers in the Contract to Sell. San Francisco del Monte. Office of the President. because said Law presuppose the existence of a valid and effective contract to sell a condominium. 252 SCRA 106 (1996). including reservation agreements. 6552. 482 SCRA 108 (2006). short of a notarial act. How Cancellation of Contract Can Be Effected – The cancellation of the contract under the Maceda Law must follow the following steps: • First. Cucueco. 619 SCRA 280 (2010). Drilon. Odyssey Park. Platinum Plans Phil. 533 SCRA 242 (2008). Manalo. xSiska Dev.
But see contra Suria v. 1479. 482 SCRA 164 (2006). the court shall decree the rescission. 256 (1946). Such right is premised on the general principles of reciprocal obligation. Ocampo v.. Cucueco.114 To rescind is to declare a contract void at its inception and to put an end to it as though it never was. xAdelfa Properties. 33 SCRA 22 112. Secs. 546 SCRA 315 (2008). 361 SCRA 56 (2001). 23 and 24. 76 Phil. CA. 1598-1599) 2. v. Distinguishing from Other Remedy of Rescission (Universal Food Corp. 395 SCRA 298 (2003). 488 SCRA 156 (2006). 151 SCRA 661 ). Reiterated in Congregation of the Religious of the Virgin Mary v. 1191. B. xOlympia Housing v. Heirs of Antonio F. 361 SCRA 56 (2001).” the original term which was used in the old Civil Code was “resolution. XI. 1191 uses the term “rescission. xVelarde v. and the consignation of the balance of the purchase price before the trial court operates as full payment. 957) 3. xPan Pacific Industrial Sales Co. 366 SCRA 41 (2001).. 310 SCRA 1 (1999). Pando. Court of Appeals. Court of Appeals. rescission requires under the law a positive act of choice on the party of the non-defaulting party. . 114 115 Almira v.35 Article 1592 allows the buyer of an immovable to pay as long as no demand for rescission has been made. 553 SCRA 578 (2008). 1590) The pendency of suit over the subject matter of the sale justifies the buyer in suspending payment of the balance of the purchase price by reason of aforesaid vindicatory action filed against it. Orola. Inc. Platinum Plans Phil. the buyer is entitled to retain the purchase price or a part thereof if the seller fails to perform any essential obligation of the contract. Inc. 399 SCRA 351 (2003). Bernabe v. 553 SCRA 578 (2008). 1383 is a subsidiary action limited to cases of rescission for lesion under Art. Court of Appeals. 312 SCRA 528 (1999). In case of Movables (Arts.D. Court of Appeals. ON PART OF BUYER 1. 1381. in the absence of any just cause for the court to determine the period of compliance. P. Court of Appeals. 1191 is predicated on a breach of faith by the other party who violates the reciprocity between them. xProvince of Cebu v. The assurance made by the seller that the buyer did not have to worry about the case because it was pure and simple harassment is not the kind of guaranty contemplated under Article 1590 wherein the buyer is bound to make payment if the seller should give a security for the return of the price. Co v. v. xIringan v. When the obligee may seek rescission and. Court of Appeals. CA. Heirs of Rufina Morales. This is true for reciprocal obligations where the obligation is a resolutory condition of the other. It is not merely to terminate it and release the parties from further obligations to each other. and the breach contemplated is the obligor’s failure to comply with an existing obligation. Court of Appeals. a party who fails to invoke judicially or by notarial act the resolution of a contract of sale would be prevented from blocking the consummation of the same in light of the precept that mere failure to fulfill the contract does not operate ipso facto as rescission. Court of Appeals. 1191. xOng v. REMEDY OF RESCISSION IN SALES CONTRACTS COVERING IMMOVABLES: CONTRACT OF SALE versus CONTRACT TO SELL A. v. 240 SCRA 565 (1995). Basis of Remedy of Rescission (Resolution) Rescission under Art. In case of Immovables (Arts. but to abrogate it from the beginning and restore the parties to their relative positions as if no contract has been made. While Art. xVelarde v. Orola. On the other hand. Automatic rescission clauses are not valid nor can be given legal effect under Articles 1191 and 1592 .” Resolution is a principal action which is based on breach of a party. 411 SCRA 18 (2003). 366 SCRA 41 (2001). CA. Suspension of Payment (Art.115 When a party asks for the resolution or cancellation of a contract it is implied that he recognizes it existence – a non-existent contract cannot be cancelled. 233 SCRA 551 (1994). 113 Iringan v. while rescission under Art. NATURE OF REMEDY OF RESCISSION (RESOLUTION) (Arts. Non-payment of the purchase price is a resolutory condition for which the remedy is either rescission or specific performance under Article 1191. Congregation of the Religious of the Virgin Mary v. xGil v. Inc.116 111 112 Escueta v. Vendor cannot recover ownership of the thing sold until and unless the contract itself is resolved and set aside. 1592) 1. Court of Appeals. Panasiatic Travel Corp. Court of Appeals.111 Indeed. v.. 559 SCRA 53 (2008).113 2. IAC.
247 SCRA 312 (1995). in a contract of sale. 604 SCRA36 (2009). 250 SCRA 223 (1995). by agreement. failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. title is retained by the seller until full payment of the price. v. CA. v. 119 120 121 122 116 Velarde v. Almira v. 99 Phil. unlike in an action for reconveyance predicated on an extrajudicial rescission (rescission by notarial act). The effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects: judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that arise in an action for reconveyance. xBenito v. G. The Manila Racing Club v. 399 SCRA 351 (2003). 361 SCRA 56 (2001). De la Rama Steamship Co. 84 Phil. Inc. xCastillo v. In the latter contract. Abesamis v. 461 SCRA 186 (2005). . title to the property passes to buyer upon the delivery of the thing sold. in a contract to sell.118 4. Tan. Sr. Tan v. 395 SCRA 298 (2003). 532 SCRA 74 (2007). 394 SCRA 250 (2002). 279 SCRA 590 (1997). PR Builders. there would be unjust enrichment on the part of the seller. Salvador. 411 SCRA 18 (2003).. No. Ver Reyes v. payment of the price is a positive suspensive condition. Benolirao. Hulst v. 609 SCRA 134 (2009). Perez & Co. 357 SCRA 846 (2001). B. Court of Appeals. 319 SCRA 200 (1999). Court of Appeals. 389 SCRA 316 (2002). CA. 12 SCRA 276 (1964). Inc. 69 Phil.117 Nonetheless. 631 (1918). Tuazon v. seller loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded. v. v. Bank of P. ownership is. Tayamen. the court. xInes v. 1188.. DISTINCTIONS BETWEEN CONTRACT OF SALE AND CONTRACT TO SELL 1.. 240 SCRA 575 (1995). 820 (1949). CA. CA. Cheng v. 86 SCRA 305 (1978). Aurea. 55 (1939). 8784. there having been no previous receipt of a notarial demand for rescission. Bernabe v. De Leon v. Aurea. Inc. 1034 (unrep.122 Central Philippine University v. Romeo v. v. 401 SCRA 54 (2002). 1385) When sale is annulled.. Hospital de San Juan de Dios. Vidad. CA. 539 SCRA 193 (2007). 611 SCRA 381 (2010). 314 SCRA 63 (1999). Action for Rescission Not Similar to An Action for Reconveyance – In the sale of real property. In an action for rescission. Court of Appeals. 1398 whereunder they shall restore to each other the things which have been the subject matter of the contract. Otherwise stated. But such action is different from an action for reconveyance of possession on the thesis of a prior rescission of the contract covering the property. Inc. Leaño v. is sufficient to defeat the right of the seller to demand for a rescission of the deed of absolute sale. even if the buyers did not mistakenly make partial payments. CA. parties are governed by Art. Mascuñana v. Court of Appeals. Power to Rescind Generally Judicial in Nature A seller cannot unilaterally and extrajudicially rescind a contract of sale where there is no express stipulation authorizing it. 362 SCRA 654 (2001). 562 SCRA 660 (2008). Heirs of Eugenia T. Saquitan-Ruiz. CA.119 The seller’s right in a contract to sell with reserved title to extrajudicially cancel the sale upon failure of the buyer to pay the stipulated installments and retain the sums and installments already received has long been recognized by the well-established doctrine of 39 years standing. inasmuch as the suspensive condition was not fulfilled. Unilateral rescission will not be judicially favored or allowed if the breach is not substantial and fundamental to the fulfillment of the obligation. whereas in a contract to sell.121 In a contract of sale. Ong. May 21. Court of Appeals. Lim v. Mutual Restitution and Forfeiture (Art. Republic v. Garilao. not a real right over the property subject of the deed of sale. Uyecio. 562 SCRA 226 (2008). Reyes. 3. 624 SCRA 575 (2010). Court of Appeals. 118 Luzon Brokerage Co. SMP. Inc. xGil v. 37 Phil. Montecalvo v. the seller is not precluded from going to the court to demand judicial rescission in lieu of a notarial act of rescission.. 457 SCRA 224 (2005). V.. Court of Appeals.36 Consignation by the buyer of the purchase price of the property. CONTRACT OF SALE versus CONTRACT TO SELL (Art. Heirs of Angel Teves. CA. Primero. The Manila Jockey Club. International Banking Corp. instead of decreeing rescission. 564 SCRA 456 (2008). and price with interest. Sr. 562 SCRA 660 (2008).I. 559 SCRA 53 (2008). Genato. Panasiatic Travel Corp. Luzon Brokerage v. Court of Appeals. the law does not prohibit the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof. Chua v... 357 SCRA 846 (2001). xBuot v. Maritime Bldg. 1956. Buot v. Creditors do not have such material interest as to allow them to sue for rescission of a sale – theirs is only a personal right to receive payment for the loan.R. CA. Flancia v. 43 SCRA 95 (1972). v. Sta. xAdorable v. with their fruits. xFroilan v. may authorize for a just cause the fixing of a period. CA. otherwise.) (1956). Court of Appeals. Heirs of Jesus M. 1458) √Adelfa Properties. 531 SCRA 147 (2007). Maritime Building Co. 369 SCRA 36 (2001). it is only fair and just that the buyers be allowed to recover what they had paid in expectancy that the condition would happen. 182 SCRA 564 (1990). reserved in the seller and is not to pass to buyer until full payment of purchase price. Orden v. v.. Heirs of Antonio F. xOlympia Housing v. Uy v. xPangilinan v. Universal Robina Sugar Milling Corp. in a contract to sell. 117 Ocejo. Inc. 246 SCRA 511 (1995). 361 SCRA 328 (2001). Orden v.120 Pursuant to Art.. 300 SCRA 722 (1998). Lucia Realty & Dev. Pan Oriental Shipping Co. even without court intervention.
Lapuz. that is. absent any stipulation therein (a) reserving title over the property to the vendee until full payment of the purchase price. binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon. To be sure. Corp v. 439 SCRA 273 (2004).” √Babasa v. Tan v.. 211 SCRA 219 (1992). CA. xBlas v. Court of Appeals.131 √Valdez v. Pacson. The vendor’s obligation to convey the title does not become effective in case of failure to pay. Court of Appeals. but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force.Alfonso v. Naguiat. The remedy of rescission under Article 1191 of the Civil Code cannot apply to mere contracts to sell—in a contract to sell. Calanz. in which the efficacy or obligatory force of the vendor’s obligation to transfer title is subordinated to the happening of a future and uncertain event. Inc. Nabus v. 564 SCRA 456 (2008). Angeles-Hutalla.126 c.123 b. CA. 506 SCRA 591 (2006). 605 SCRA 334 (2009). 130 131 132 Topacio v. 126 127 De Leon v. 604 SCRA 36 (2009).. and failure to pay the price agreed upon is not a mere breach.. Roque v. Cucueco. 186 SCRA 400 (1990) San Andres v. with respect to the other. Heirs of Candido Rubi. Court of Appeals. 538 SCRA 305 (2007). Is a Contract to Sell a “Sale” under Article 1458? A “contract to sell” as “a bilateral contract whereby the prospective seller.” where ownership or title is retained until the fulfillment of a positive suspensive condition normally the payment of the purchase price in the manner agreed upon. Primero. For a contract. Angeles v. Court of Appeals. Inc. Kalayann Development and Industrial Corp. 590 SCRA 380 (2009). . a contract of sale may either be absolute or conditional. 27 (1996). 332 SCRA 769 (2000). 588 SCRA 690 (2009). 439 SCRA 55 (2004). 357 SCRA 846 (2001). The non-happening of the condition merely granted the buyer the right to rescind the contract or even to waive it and enforce performance on the part of the seller. Benolirao. Court of Appeals. the payment of the purchase price is a positive suspensive condition. Lina. such condition is imposed merely on the performance of the obligation. Salvador.. Cuison Lumber Co. 135 SCRA 323 (1985). De Leon v. Valenzuela v.125 A contract to sell is akin to a conditional sale. casual or serious. De Mistica v. 624 SCRA 575 (2010). Rodriguez. to give something or to render some service. One form of conditional sales is what is now popularly termed as a “Contract to Sell. 262 SCRA 464 (1996). all in consonance with Art. 593 SCRA 768 (2009). Ong. 129 Traders Royal Bank v. 399 SCRA351 (2003). and Industrial Corp. 158 SCRA 375 (1988). Machuca. Jr. Zamora Realty and Dev. Traders Royal Bank v.. 590 SCRA 380 (2009). Court of Appeals. Vda. Laforteza v.127 Whereas.132 BUT SEE: √Dignos v. for a time existed. xBuot v. Cuison Lumber Co. Blas v. and discharges the obligations created thereunder. as distinguished from a condition imposed on the perfection of the contract. Aurea. xCity of Cebu v. Rationale of Contracts to Sell A contract to sell is commonly entered into so as to protect the seller against a buyer who intends to buy the property in installments by withholding ownership over the property until the buyer effects full payment therefor. in a contract to sell. 351 SCRA 183 (2001).Tan v. Court of Appeals. Sr. V. Court of Appeals.. Angeles-Hutalla..124 BUT SEE: √PNB v. Importance of “Locating” the Condition to Pay Price in Full In a contract of sale. 588 SCRA 690 (2009). the parties would stand as if the conditional obligation never existed. 128 Heirs of Spouses Sandejas v. 545 SCRA 325 (2008). such party may refuse to proceed with the contract or he may waive performance of the condition. the payment of the purchase price is a positive suspensive condition.37 a. involves a meeting of minds between two persons whereby one binds himself. while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer. Benolirao. 263 SCRA 15. Heirs of Eugenia T. 604 SCRA 36 (2009). 439 SCRA 273 (2004). 1545 of Civil Code which provides that “Where the obligation of either party to a contract of sale is subject to any condition which is not performed. Valenzuela v. so that if the suspensive condition does not take place. Necessary Stipulations in a Contract to Sell: A contract is one of sale. like a contract to sell. 340 SCRA 720. CA.128 When the obligation of buyer to pay the full amount of the purchase price was made subject to the condition that the seller first delivery the clean title over the parcel bough within twenty (20) months from the signing of the contract. Kalayaan Dev.129 d. 96 SCRA 741 (1980).” √Coronel v. 418 SCRA 73 (2003).130 and (b) giving the vendor the right to unilaterally rescind the contract in case of non-payment. Almira v. Zabala. v. xGomez v. 559 SCRA 53 (2008). 306 SCRA 408 (1999). Villadar. 290 SCRA 532 (1998). 611 SCRA 381 (2010). 728 (2000). Ver Reyes v. full payment of the purchase price. 123 124 Montecalvo v. the non-payment of the price is a resolutory condition which extinguishes the transaction that. Inc. De Leon. 562 SCRA 660 (2008). It cannot be inferred in a situation where both parties understood the price to be paid in cash.. 488 SCRA 156 (2006). 125 Demafelis v. Bernabe v. Orden v. Heirs of Antonio F. Office of the President. 333 SCRA 643 (2000). CA. Platinum Plans Phil.
Inc. A contract to sell imposes reciprocal obligations and so cannot be terminated unilaterally by either party. 137 Jison v. The act of the seller in notifying the buyer of his intention to sell the properties to other interest persons if the latter failed to pay the balance of the purchase price is sufficient notice for the cancellation or resolution of their contract to sell. Catienza-Villaverde. CA. Inc. Inc. and when unconditionally conferred. Registration does not vest.133 and the seller retained possession of the certificate of tile and all other documents relative to the sale until there was full payment of the purchase price. v. Aurea. 562 SCRA 226 (2008). v. 258 SCRA 325 (1996). Heirs of Antonio F. 487 SCRA 571 (2006). v. We have held that in proper cases. 456 SCRA 577 (2005). but merely serves as evidence of. the Supreme Court nevertheless awarded ownership over one of the two (2) lots jointly purchased by the buyer. Rayos v. the grace period is effective without further need of demand either calling for the payment of the obligation or for honoring the right. 231 SCRA 674 (1994). 124 SCRA 638 (1983). De los Angeles. Bank of P. xBricktown Dev. 1 (1960). √AFP Mutual Benefit Assn. 55 SCRA 3246 (1974). Clave. Sta.. 333 SCRA 643 (2000). Office of the President. CA.134 e.135 In a contract to sell real property on installments. The absence of a formal deed of conveyance [or a stipulation to execute the deed of sale only full payment of the purchase price] is a strong indication that the parties did not intend immediate transfer of ownership. v. 182 SCRA 564 (1990). but simply an event that prevented the obligation of the vendor to convey title from acquiring any obligatory force. although not enough to cover the purchase price of the two lots were enough to cover fully the purchase price of one lot. Jr. Amor Tierra Dev. there was no need to judicially rescind the contract to sell. a party may take it upon itself to consider the contract rescinded and act accordingly albeit subject to judicial confirmation. SMP. 364 SCRA 768 (2001). Judicial rescission is required under Article 1191. 109 Phil. 35 SCRA 103 (1970). 138 Torralba v. xSalazar v. Maritime Building Co. Court of Appeals. 96 SCRA 69 (1980). Our land registration laws do not give title holders any better ownership than what they actually had prior to registration. Cristobal. v. 605 SCRA 334 (2009). Bowe v. xLuzon Brokerage Co.38 It was enough for the Court to characterize the Deed of Condition Sale as a “contract to sell” alone by the reservation of ownership. 559 SCRA 197 (2008). CA. 609 SCRA 134 (2009). which may or may not be given. Solidstate Multi-Products Corp. xPortic v. Equity Resolutions on Contracts to Sell Although buyer clearly defaulted in his installment payments in a contract to sell covering two parcels of land.I. BUT SEE: In a contract to sell. √Palay Inc. Laforteza v. v. 220 SCRA 158 (1993). 134 Antonio F... Villamaria. Lucia Realty & Dev. Court of Appeals. 43 SCRA 93 (1972). The transfer of ownership and title would occur after full payment of the price. Benolirao. xChua v. 559 SCRA 53 (2008). The reservation of title may not be found in express provision of the contract. Orden v. 434 SCRA 365 (2004). ruling there was substantial performance insofar as one of the lots concerned as to prevent rescission thereto. Bernabe v. 300 SCRA 722 (1998). 239 SCRA 126 (1995). but may also be determined from proven acts of the parties. Court of Appeals. v. However. CA. Tan v. √Lim v. title to a particular property. xLegarda Hermanos v. but only a transfer after full payment of the purchase price. on the basis that the total amount of installments paid. the failure of which is not considered a breach. The absence of full payment suspends the vendors’ obligation to convey title. v. Nabus v. 562 SCRA 660 (2008). Inc. Minimum Requirement for Cancellation of Contract to Sell The act of a party in treating a contract as cancelled should be made known to the other party because this act is subject to scrutiny and review of the courts in case the alleged defaulter bring the matter for judicial determination. Lim v. xLeaño v. not an obligation of the debtor. Genato. this rule is not absolute. CA. Corp.. 559 SCRA 53 (2008). the full payment of the purchase price is a positive condition. An agreement in which ownership is reserved in the vendor and is not to pass to the vendee until full payment of the purchase price is known as a contract to sell. De los Angeles. 562 SCRA 660 (2008). √University of the Philippines v. 164 SCRA 339 (1988).138 A grace period is a right. Uyecio.136 2. 369 SCRA 36 (2001).. Bernabe v... Pacson. Orden v.137 The act of the seller in notifying the buyer of his intention to sell the properties to other interested persons if the latter failed to pay the balance of the purchase price is sufficient notice for the cancellation or resolution of their contract to sell. 3. Cheng v. Court of Appeals. Failure by one of the parties to abide by the conditions in a contract to sell resulted in the rescission of the contract. Court of Appeals. Inc. even if the sale has already been registered. Manuel v. 135 136 133 Siska Dev. Saldaña. 1191 and 1234) The concept of substantial breach is irrelevant to a contract of sale.. Court of Appeals. Issue of Substantial Breach (Arts. 604 SCRA 36 (2009). Court of Appeals. Corp. . 182 SCRA 564 (1990). casual or serious. Machuca. 401 SCRA 54 (2003). Aurea. v. Rodriguez. upon failure of buyer to comply with its obligation.
the essential requisites of a contract are: consent of the contracting parties. People. Javier. 37 Phil. Ong. Court of Appeals. De Leon v. Claunan. Biñan Steel Corp. v. Oro Land Realty Dev.” in the event of non-approval by the courts. 274 SCRA 597 (1997). Assets Privatization Trust v. CONDITIONS AND WARRANTIES 1. not to its legal situation.140 But such condition is deemed fulfilled when the seller takes any action to prevent its happening. where all are present. and by which he promises or undertakes to insure that certain facts are or shall be as he then represents them Ang v.J. affect the validity of the contract. 254 (1917). 280 SCRA 536 (1997). Sellner. where is” in sale pertains solely to the physical condition of the thing sold. 3.M. There has arisen here a confusion in the concepts of validity and the efficacy of a contract. XII. v. 391 SCRA 90 (2002). Enterprises. Absent one of the above. 468 SCRA 278 (2005). having reference to the character. the result is a valid contract. 1546) A warranty is a statement or representation made by the seller of goods. and only applies to defects which are open and patent to the service of one exercising such care. √Heirs of Pedro Escanlar v. Adalin v. Inc. the seller remains the owner and mortgagor of the property and retains the right to redeem the foreclosed property. xGoodyear Philippines. CA. a provision “this Contract of Sale of rights. Conversely. √Power Commercial and Industrial Corp. Enterprises. 281 SCRA 176 (1997). but even after default he was willing and had offered to pay all the arrears. Conditions versus Warranties. or in regard to its qualities and characteristics.141 “The law allows considerable latitude to seller’s statements. 31 SCRA 829 (1970). It does not apply to a representation that amounts to a warranty by the seller and the situation requires the buyer to rely upon such promise or affirmation. 587 SCRA 481 (2009). 567 SCRA 53 (2008). Corp. and must take the consequences of his own imprudence. Conditions (Art. affect only the effectivity and not the validity of the contract of sale. Machuca.” xSongco v. xRamos v. Court of Appeals. Court of Appeals. however. and experience teaches that it is exceedingly risky to accept it at its face value.139 In a “Sale with Assumption of Mortgage. The following requisites must be established in order that there be an express warranty in sale: (1) the express warranty 139 140 141 Romero v. √Guinhawa v. Thus. The principle of caveat emptor only requires the purchaser to exercise care and attention ordinarily exercised by prudent men in like business affairs. √Laforteza v.J. 549 SCRA 527 (2008). The decisive test is whether the vendor assumes to assert a fact of which the vendee is ignorant. 474 SCRA 427 (2005). 279 SCRA 118 (1997). v. However. 611 SCRA 381 (2010). CA.. Inc. The phrase “as is. Tuazon Co. contemporaneously and as part of the contract of sale. no sale is perfected. 516 SCRA 681 (2007) . Assertions concerning the property which is the subject of a contract of sale. while the failure to comply with a condition imposed on the performance of an obligation only gives the other party the option either to refuse to proceed with sale or waive the condition. Republic v. Express Warranties (Art. Florendo. 1318 of Civil Code. In such case. Court of Appeals. 250 SCRA 223 (1995).39 Where buyer had religiously been paying monthly installments for 8 years. interests and participations shall become effective only upon the approval by the Honorable Court. are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no ground for omitting to make inquiries. or dealer’s talk. v. A man who relies upon such an affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his property does so as his peril. Under Art. Assets Privatization Trust v. quality or title of the goods. although demand for rescission had already been made. 587 SCRA 481 (2009). 333 SCRA 643 (2000). object certain which is the subject matter of the contract and cause of the obligation which is established.” the assumption of mortgage is a condition to the seller’s consent so that without approval by the mortgagee. Breach of an express warranty makes the seller liable for damages. the lack of which will not. 2. Sy. the Court granted additional period of 60 days from receipt of judgment for buyer to make all installments payments in arrears plus interests. xJ. T. Court of Appeals. A warranty is an affirmation of fact or any promise made by a vendor in relation to the thing sold. T. 1545) Failure to comply with condition imposed upon perfection of the contract results in failure of a contract. The vendor is bound to transfer the ownership of and deliver. no contract can arise. as well as warrant the thing which is the object of the sale. some parties introduce various kinds of restrictions or modalities. v. It can only be applied where it is shown or conceded that the parties to the contract stand on equal footing and have equal knowledge or equal means of knowledge and there is no relation of trust or confidence between them.
gave an implied warranty of title. (2) the natural tendency of such affirmation or promise is to induce the buyer to purchase the thing. (e) The action must be instituted within the statute of limitations. 1547) a.40 must be an affirmation of fact or any promise by the seller relating to the subject matter of the sale. Implied Warranties (Art. xSantiago Land Dev. Court of Appeals. CA. (c) The defect must ordinarily have been excluded from the contract. Court of Appeals. 441 SCRA 357 (2004). In a contract of sale by sample.142 No Warranty Against Eviction When Execution Sale – In voluntary sales.M. 477 SCRA 666 (2005).” he gave a warranty against eviction. or when the product was sold to the purchaser. CA. and be made a co-defendant (Art. in declaring that he owned and had clean title to the vehicle. it must appear that the parties treated the sample as the standard of quality and that they contracted with reference to the sample with the understanding that the product to be delivered would correspondent with the sample. Sale of Goods by Sample There is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of the bulk. 1558). which is not present and there is no opportunity to inspect or examine the same. Torrejos. Warranty Against Hidden Defects (Arts. Court of Appeals. 94 SCRA 413 (1979).” xFilinvest Credit Corp. Under the law. or made a third-party defendant. 276 SCRA 674 (1997). A hidden defect is one which is unknown or could not have been known to the buyer. e. Inc. xCarrascoso. 567 SCRA 53 (2008). Inc. RJL Martinez. 4. vendor can be expected to defend his title because of his warranty to the vendees but no such obligation is owed by the owner whose land is sold at execution sale. Warranty Against Eviction (Arts. the requisites to recover on account of hidden defects are as follows: (a) The defect must be hidden. 1559). v. 178 SCRA 188 (1989). √Nutrimix Feeds Corp. BUT SEE: Art. David. √Ang v. v. 138 SCRA 1 (1985). Seller Has Right to Sell b. 21 Phil. v. Jr. √Nutrimix Feeds Corp. and in pledging that he “will defend the same from all claims or any claim whatsoever [and] will save the vendee from any suit by the government of the Republic of the Philippines. Investments & Development. 162 SCRA 636 ). v. Warranty Against Non-Apparent Servitudes (Arts. or the product must have reached the user or consumer without substantial change in the condition it was sold. Tuazon v. xMendoza v. Corp. CA. 441 SCRA 357 (2004). which was present upon the delivery or manufacture of the product. or when the product left the seller’s or manufacturer’s control. J. f. v. 1561-1580) The stipulation in a lease with option to purchase (treated as a sale of movable on installments) that the buyer-lessee “absolutely releases the lessor from any liability whatsoever as to any and all matters in relation to warranty in accordance with the provisions hereinafter stipulated. The seller. must be important (render the thing unfit or considerably decreases fitness). To constitute a sale by sample. . Warranty as to Fitness or Quality of Goods In order to enforce the implied warranty that the goods are reasonably fit and suitable to be used for the purpose which both parties contemplated.143 Seller’s agent can by agreement be liable for the warranty against hidden defects. 1560) d. c. 127 (1911). 142 143 Canizares Tiana v. CA. and finally (c) the defect existed when the product left the hands of the petitioner. Court of Appeals. and the prescriptive period to file a breach thereof is six months after the delivery of the vehicle. xSchmid and Oberly. Escaler v. (b) The defect must exist at the time the sale was made. v. 441 SCRA 172 (2004). v. 441 SCRA 357 (2004). (b) that the injury occurred because the product was defective or unreasonably unsafe. the following must be established: (a) that the buyer sustained injury because of the product. there is an implied warranty that the goods shall be free from any defect which is not apparent on reasonable examination of the sample and which would render the goods unmerchantable. v. 1548-1560) Seller must be summoned in the suit for eviction at the instance of the buyer (Art. and (3) the buyer purchases the thing relying on such affirmation or promise thereon. CA. (d) The defect.” was held as an express waiver of warranty against hidden defect in favor of the sellerlessor which “absolved the [seller-lessor] from any liability arising from any defect or deficiency of the machinery they bought. 1552. Court of Appeals. 166 SCRA 493 (1988). √Nutrimix Feeds Corp. A manufacturer or seller of a product cannot be held liable for any damage allegedly caused by the product in the absence of any proof that the product in question is defective.
The prescriptive period for instituting actions based on a breach of express warranty is that specified in the contract. CA. Dellota. Court of Appeals 180 SCRA 635 (1989). v. . 557 SCRA 256 (2008). 412 SCRA 375 (2003). the buyer has no obligation to shoulder the same. unless the terms of the document and the surrounding circumstances require it. the prescriptive period is six months from the date of the delivery of the thing sold. Effects and Prescription of Warranties A breach in the warranties of the seller entitles the buyer to a proportionate reduction of the purchase price. Deala. 19 Phil. Roberts v. since title and ownership of the property sold are immediately vested in the buyer a retro. 515 SCRA 346 (2007). Solid Homes. Papio. 441 SCRA 357 (2004). are not favored. it is not an unconscionable one. CA. and in the absence of such period. 582 (1936). and. Thus. CONVENTIONAL REDEMPTION 1.146 144 145 146 Claravall v. not to its legal situation. CA. 1599) The remedy against violation of warranty against hidden defects is either to withdraw from the contract (accion redhibitoria) or to demand a proportionate reduction of the price (accion quanti minoris). Bautista v. which is four years. 6. absent other corroborative evidence—there is no requirement in sales that the price be equal to the exact value of the thing subject matter of the sale. 65 (1911) and Aquino v. Papio. 542 SCRA 397 (2008). Definition (Art. any other construction can fairly and reasonably be made. xDorado Vda..41 g. 463 SCRA 627 (2005). subject only to the resolutory condition of repurchase by the seller a retro within the stipulated period. 1231 and 1600) B. 68. Hamada. 14 SCRA 215 (1965). De Delfin v. The existence of seller a retro’s right to repurchase the proper is not dependent upon the prior final interpretation by the court of the said phrase. Torres v. 3. Court of Appeals. unless otherwise agreed upon. Linsangan. EXTINGUISHMENT OF SALE A. √Roberts v. Sales with rights of repurchase. 7. de Rigonan v. R. Ang v. with damages in either case. 567 SCRA 53 (2008). 2. Cadungog v. √Misterio v. such construction will be adopted and the contract will be construed as a mere loan unless the court can see that. if he afterwards grants the vendor the right to repurchase. 461 SCRA 122 (2005). the general rule on rescission of contract. Ramos v. Madrigal Wan Hui Lines Corp. 216 SCRA 287 (1992). not to its physical aspect. 63 Phil. Consumer Act. buyer has a right to the immediate possession of the property sold. PNB v. v. the US tax liabilities constitute a potential lien which applies to the subject’s matter’s legal situation. it is a new contract entered into by the purchases as absolute owner. Buyer’s Options in Case of Breach of Warranty (Art. We will not construe instruments to be sales with a right to repurchase. Ramos v. CA. Icasiano. Mega Prime Realty and Holding Corp. 51 Phil (1927). 469 SCRA 561 (2005). Inc.144 An agreement to repurchase becomes a promise to sell when made after the sale because when the sale is made without such agreement the purchases acquires the things sold absolutely. Unangst. the price agreed upon should not generally be considered as the just value of the thing sold. which in turn cites Padilla v. as defined by the Civil Code. XIII. Cebu State College of Science and Technology. Derecho. 567 SCRA 633 (2008). 461 SCRA 122 (2005). under the terms of the writing. if enforced according to its terms. xVda.. IN GENERAL (Arts. Dizon. 26 SCRA 189 (1968). Misterio v. Effects of Waivers The phrase “as is. Whenever. 190 SCRA 439 (1990). Yap. 498 SCRA 17 (2006). Heirs of Jacinto Nemeño. Situation Prior to Redemption In a sale a retro. √Nutrimix Feeds Corp. Court of Appeals. while for actions based on breach of implied warranty. Lumayag v. Additional Warranties for Consumer Products (Arts.A. 1601) Right to repurchase must be constituted as part of a valid sale at perfection. Cebu State College of Science and Technology. 5. Redemption Period The period to repurchase is not suspended merely because there is a divergence of opinion between the parties as to the precise meaning of the phrase providing for the condition upon which the right to repurchase is triggered. with the stringent and onerous effects which follow. xNDC v. 7394). 526 SCRA 51 (2007). In the case at bar. 515 SCRA 346 (2007). Reyes v. [citing Ramos v.145 In sales denominated as pacto de retro. xVillarica v. 275 SCRA 267 (1997). where is” basis pertains solely to the physical condition of the thing sold.
A formal offer to redeem. where the ownership of the land is supposedly transferred to the buyer who provides for the funds to redeem the property from the bank but nonetheless allows the seller to later on buy back the properties. 469 SCRA 561 (2005). But when tender not possible. De Delfin v. 7. 1616. de Rigonan v. EQUITABLE MORTGAGE (Arts. 499 SCRA 276 (2006). is equivalent to a formal offer to redeem. 222 SCRA 736 (1993). as the case may be. Daluro. 1607 does not impair such title and ownership because the method prescribed thereunder is merely for the purpose of registering and consolidating titles to the property. accompanied by a bona fide tender of redemption price. Court of Appeals. Court of Appeals. xSolid Homes v. the failure of the buyer to consolidate his title under Art. Well-settled is the rule that a formal offer to redeem must be accompanied by a valid tender of the redemption price and the filing of a judicial action. plus the consignation of the redemption price within the period of redemption. 1616) In order to exercise the right to redeem. xAlmeda v. 1602-1604) This kind of arrangement. 8. is not essential where the right to redeem is exercised through a judicial action within the redemption period and simultaneously depositing the redemption price. 6. 463 SCRA 627 (2005). xVillegas v. 1617) Article 1617 on the disposition of fruits of property redeemed applies only when the parties failed to provide a sharing arrangement thereof. Narvaez v. 9. or planter. sower. the failure on the part of a seller a retro to exercise the redemption right within the period agreed upon or provided for by law. 594 SCRA 60 (2009). Court of Appeals. under the Latin maxim NEMO DAT QUOD NON HABET. Fruits (Art. Where the true owner himself is the builder of the works on his own land. CA. 84 SCRA 51 (1978). 142 SCRA 82 1986).” xSolid Homes v. CA. since the article itself provides “and other stipulations which may have been agreed upon. Derecho. Bacungan v. Redemption Price (Art. irrevocable title shall be vested in the vendee by operation of law. 574 SCRA 642 (2008). is in the nature of an equitable mortgage governed by Articles 1602 and 1604 of the Civil Code. after the effect of consolidation. consignation should be made xCatangcatang v. CA. 275 SCRA 267 (1997). If the terms of the pacto de retro sale were unfavorable to the vendor. 1607) Article 1607 abolished automatic consolidation of ownership in the vendee a retro upon expiration of the redemption period by requiring the vendee to institute an action for consolidation where the vendor a retro may be duly heard. Alciso. the mortgage or re-sale by the seller a retro of the same property would not transfer title and ownership to the mortgagee or buyer. Effect When No Redemption Made: Consolidation (Art. consignation is not required after tender is refused xMariano v. In a sale with right of repurchase. and not Article 448. xCadungog v. the parties contractual stipulations prevail. Article 448 of the Civil Code on the rights of a builder in good faith is inapplicable in cases involving contracts of sale with right of repurchase—it is inapplicable when the owner of the land is the builder. 79 SCRA 327 (1977). 542 SCRA 397 (2008). 1616) A stipulation in a sale a retro requiring as part of the redemption price interest for the cost of money. 1611 to 1614) 5. 250 SCRA 596 (1995). Yap.42 4. the applicable provisions are Articles 1606 and 1616 of the Civil Code. xVda. In fact. The right to repurchase may be exercised only by the vendor in whom the right is recognized by contract or by any person to whom the right may have been transferred. Under a sale a retro. since the provision is not restrictive nor exclusive. and does not bar additional amounts that the parties may agree upon. the vendor is still given a period of thirty days from the finality of the judgment within which to repurchase the property. Consequently. If the vendee succeeds in proving that the transaction was indeed a pacto de retro. v. Who Can Redeem (Arts. Legayada. courts have no business extricating her from that bad bargain—courts are not guardians of persons who are legally competent. the issue of good faith or bad faith is entirely irrelevant. is not in contravention with Art. How Redemption Effected (Art. Court of Appeals. . Dorado Vda. only tender of payment is sufficient xLegaspi v. xLee Chuy Realty Corp. 275 SCRA 267 (1997). otherwise. vests upon the buyer a retro absolute title and ownership over the property sold by operation of law. Once the vendor fails to redeem the property within the stipulated period. Dellota.
556 SCRA 175 (2008). was in truth and in fact given merely as security for the repayment of a loan. Bandong. CA. 220 SCRA 716 (1993). 3394 (1948). p. Heirs of Spouses Nieves and Alfredo Baldonado. 154 Ayson. they will submit to any term that the crafty may impose on them. Hilado v. Dellota.. Bacaron. CA. it is aimed to end unjust or oppressive transactions or violations in connection with a sale or property. Lim v.. 557 SCRA 256 (2008). Bandong. Muñoz. V. Dorado Vda.151 That is why parol evidence is competent and admissible in support of the allegations that an instrument in writing. Necessitous men are not always free. Ternida. Tio v. 602 SCRA 124 (2009). 501 SCRA262 (2006). since the law seeks to prevent circumvention of the law on usury and the prohibition against pactum commissorium provisions. 629 SCRA 38 (2010). Lobres v. 45 O. 481 SCRA 226 (2006). 358 SCRA 38 (2001). Matanguihan v. and contains nothing impossible or contrary to law. 3394 (1948). Intestate Estate of the Late Emigdio Mercado. Bandong. 153 Lim v. 8. Paragas. 459 SCRA 122 (2005). 557 SCRA 50 (2008).G. The wisdom of these provisions cannot be doubted. 526 SCRA 514 (2007). 472 SCRA 229 (2005). 275 SCRA 380 (1997). such persons would have no choice but to sign a deed of absolute sale of property or a sale thereof with pacto de retro if only to obtain a much-needed loan from unscrupulous money lenders. Gonzales. Jr. CA. and generally. v. Madrigal v. Abayata. 230 SCRA 664 (1994). Calaguas. Diño v. Raymundo v. Jr. Dellota. Lumayag v. 1602 is sufficient for a contract of sale a retro to be presumed an equitable mortgage. or to transfer the title with a right to repurchase under specified conditions reserved to the seller.155 The presumption in Article 1602 jibes with the rule that the law favors the least transmission of property rights. Calaguas. 430 SCRA 338 (2005). xRomulo v. Olivares v. Romulo v. 220 SCRA 716 (1993). Hilado v. 1602153) A contract of sale actually intended to secure the payment of an obligation is presumed an equitable mortgage. Santos. 479 SCRA 288 (2006). 602 SCRA 124 (2009).148 An equitable mortgage is defined as one which although lacking in some formality or form or words. De Delfin v. xEnriquez. 155 152 . 151 Austria v. Jr. Bello. it is a fact that in time of grave financial distress which render persons hard-pressed to meet even their basic needs or answer an emergency. Heirs of Jose Reyes. No. 37 SCRA 257 (2002). CA. PHILIPPINE LAW ON SALES. Badges of Equitable Mortgage (Art. Bautista v. Court of Appeals. for it may be rebutted by competent and satisfactory proof to the contrary. 554 SCRA 384 (2008). Ternida. 430 SCRA 323 (2004). xMolina v. Alano. Galido. p. 557 SCRA 50 (2008). 448 (1990). Salonga v. 526 SCRA 514 (2007). 37 SCRA 257 (2002). xRaymundo v. Bandong. Alvaro v. Heirs of Rafael Medlla. nevertheless reveals the intention of the parties to charge real property as security for a debt. 515 SCRA 346 (2007). CA. Martinez v. the negotiations between them leading to the deed. 626 SCRA 758 (2010). Reyes. Jr. Layug. and (b) Their intention was to secure an existing debt by way of a mortgage. Ceballos v. Reyes. v. in that to answer a pressing emergency. but it is not conclusive. 481 SCRA 226 (2006). San Pedro v. citing VILLANUEVA. Jardines. 271. 430 SCRA 323 (2004). conduct. Jr. Court of Appeals. v. No. Jardines. acts. Bello. 490 SCRA 624 (2006).147 Besides. 498 SCRA 365 (2006). Rockville Excel International Exim Corp. Ayson. Papio. Uy v.43 The law on equitable mortgage favors the least transmission of rights and interest over a property in controversy. Legaspi v. 526 SCRA 514 (2007). 147 148 149 Lao v. Diño v. CA. 537 SCRA 699 (2007). Medalla 377 SCRA 257 (2002). p. V. Unangst. Heirs of Jose Reyes. 34 Phil. 526 SCRA 51 (2007). Alvaro v. Jr.. 470 SCRA 291 (2005).154 The presence of only one circumstance defined in Art. Balatero v. 542 SCRA 397 (2008). all pertinent facts having a tendency to fix and determine the real nature of their design and understanding. 456 SCRA 659 (2005). Raymundo v. particularly the circumvention of the usury law and pactum commissorium. Unangst. 150 Matanguihan v. Raymundo v. Lee. 471 SCRA 653 (2005). 479 SCRA 288 (2006). 398 SCRA 97 (2003). 526 SCRA 514 (2007). (1998 ed. Sarmiento. Jr. Paragas. Culla. xMariano v. 351 SCRA 716 (2001). v. the attitude. Roberts v. CA. Concepcion. Ong. purporting on its face to transfer the absolute title to property. Lobres v. Culla. Hernandez. Jr.G. 420 SCRA 414 (2004). V. declarations of the parties. 100 (1916). Kings Properties Corp. 351 SCRA 716 (2001).149 The provisions of the Civil Code governing equitable mortgage disguised as sale contracts are primarily designed to curtail the evils brought about by contracts of sale with right to repurchase. Layug. Banga v. Court of Appeals. Claravall v.152 a. Laserna. Cuyugan v. 303 SCRA 749 (1999). Additionally. 471 SCRA 653 (2005). Rongavilla. or other requisites demanded by a statute. V. Rockville Excell International Exim Corp. Ramirez. 45 O. 275 SCRA 380 (1997). 626 SCRA 758 (2010). 543 SCRA 402 (2008). Intestate Estate of the Late Emigdio Mercado. 275 SCRA 380 (1997). Cirelos v. IAC. such as the relative situation of the parties at that time. Court of Appeals. 154 SCRA 530 (1987). Deheza-Inamarga v. 574 SCRA 651 (2008). Banga v. considering many cases of unlettered persons or even those with average intelligence invariably finding themselves in no position whatsoever to bargain fairly with their creditors. Heirs of Jacinto Nemeño. Heirs of Rafael Medlla.). Sr. 190 SCRA 439. CA. De Delfin v. The essential requisites of an equitable mortgage are: (a) The parties entered into a contract denominated as a contract of sale. 501 SCRA262 (2006). xSantiago v. xSpouses Miseña v. Ceballos v. v. 275 SCRA 237 (1997). Mariano v. CESAR L. xMatanguihan v. 606 SCRA 137 (2009). Court of Appeals. Bautista v. 8. as shown not necessarily by the terminology used in the contract but by all the surrounding circumstances. Dizon. Go v. 557 SCRA 256 (2008). Aleligay v. xHilado v. Dorado Vda.150 The decisive factor in evaluating whether an agreement is an equitable mortgage is the intention of the parties. 542 SCRA 397 (2008).
Remedies Allowed for Equitable Mortgage (Arts. In an equitable mortgage situation. it constitutes evidence of great weight that a person under whose name the realty taxes were declared has a valid and right claim over the land. the consolidation of ownership in the person of the mortgagee in equity upon failure of the mortgagor in equity to pay the obligation. Hernandez.161 However mere allegations without proof to support inadequacy of price. Ong. Romulo v. Jr. Movella. Culla. Oronce v. Nor does the fact that the original transaction on the land was to support a loan. Dizon. 606 SCRA 137 (2009). De Ocampo v. xBriones-Vasquez v. it is extended by the buyer. Unangst. 1605 which allows for the remedy of reformation. 41 Phil. such as an action for declaration of nullity of the deed of sale and specific performance. nothing therein precludes an aggrieved party from pursuing other remedies to effectively protect his interest and recover his property. 472 SCRA 229 (2005). 247 SCRA 274 (1995). 579 (1918). although Art. Heirs of Jacinto Nemeño. 498 SCRA 17 (2006). and when such payment is coupled with continuous possession of the property. 557 SCRA 256 (2008). Layug. Layug. Austria v. 756 (1959). Ayson. 157 (b) when the vendor remains in possession as lessee or otherwise. The only proper remedy is to cause the foreclosure of the mortgage in equity. “Inadequacy of purchase price” is considered so far short of the real value of the property as to startle a correct mind. Jr. Rockville Excell International Exim Corp. 105 Phil.. Court of Appeals. 231 SCRA 309 (1994). which when it was not paid on due date was negotiated into a sale. Abayata. 556 SCRA 175 (2008). . 260 SCRA 10 (1996). Heirs of Rafael Medalla. 341 SCRA 707 (2000). Paragas. xCirelos v. the practice is to fix a relatively reduced price to afford the seller a retro every facility to redeem the property . 1454. or that the mind revolts at it as such that a reasonable man would neither directly or indirectly be likely to consent to it. Jr.CA. 554 SCRA 384 (2008).160 Mere tolerated possession is not enough to prove that the transaction was an equitable mortgage. 38 Phil. xCeballos v. such stipulation does not detract from the fact that possession of the property. Bautista v.147 (1920). Bautista v. Ramos v. 160 161 162 163 164 Kings Properties Corp. 1605) In the case of an equitable mortgage. CA. Jimenez. 246 SCRA 242 (1995). Galido. 557 SCRA 50 (2008). it must be grossly inadequate or shocking to the conscience. xLegaspi v.159 (d) when the purported seller continues to collect rentals from the lessees of the property sold. xRedondo v. 543 SCRA 402 (2008). v. or when continued possession by the seller is supported by a valid arrangement consistent with the sale.162 Although under the agreement the seller shall remain in possession of the property for only one year. 459 SCRA 122 (2005). give rise to a presumption of equitable mortgage. 501 SCRA262 (2006). may be applied retroactively in cases prior to the effectivity of the Civil Code. xIgnacio v. xHilado v. xSantiago v. Gonzales. 526 SCRA 51 (2007). xOlea v. 501 SCRA262 (2006). Belonio v. Romulo v. xVda de Alvarez v. b. 450 SCRA 644 (2005). Intestate Estate of the Late Emigdio Mercado. Bacaron. or to determine if the 156 157 158 Zamora v. 557 SCRA 50 (2008). CA. (e) when the purported seller was in desperate financial situation when he executed the purported sale. The fact that the price in a pacto de retro sale is not the true value of the property does not justify the conclusion that the contract is one of equitable mortgage. 159 Cruz v. in fact a pacto de retro sale. 557 SCRA 256 (2008). Court of Appeals. 37 SCRA 257 (2002).. xTolentino v. v.164 Article 1602 being remedial in nature. CA. 536 SCRA 639 (2007). delay in transferring title is not one of the instances enumerated by law— instances in which an equitable mortgage can be presumed. without evidence that the subsequent deed of sale does not express the true intentions of the parties. 412 SCRA 614 (2003). 490 SCRA 624 (2006). Unangst. Tio v.44 The provisions of Article 1602 on the presumption of equitable mortgage applies also to a contract purporting to be an absolute sale. xOlivares v. Paragas. 420 SCRA 414 (2004). it must be clearly shown from the evidence presented that the consideration was in fact grossly inadequate at the time the sale was executed. 602 SCRA 124 (2009). Lumayag v. To presume a contract is an equitable mortgaged based on gross inadequacy of price. V. 1602. especially when it was shown that the vendor retained part of the purchase price. or under threat of being sued criminally. Lim.156 A contract purporting to be an absolute sale is presumed to be an equitable mortgage: (a) when the price of the sale is unusually inadequate. CA. 386 SCRA 36 (2002). Ayson. Payment of real estate taxes is a usual burden attached to ownership. Jr.. CA. Mere inadequacy of price is not sufficient to create the presumption. xGo v. would amount to a pactum commissorium. Dizon. Feliciano v. an indicium of ownership. V. was retained by the alleged vendor to qualify the arrangement as an equitable mortgage. 298 SCRA 133 (1998). xTuazon v. 430 SCRA 323 (2004).163 Under Article 1602. Limjuco. would not support the allegation of equitable mortgage. Jr. Court of Appeals. Sarmiento.158 (c) when after the expiration of the right of repurchase.
275 SCRA 267 (1997). de Zulueta v. Court of Appeals. V. 2088) A stipulation which is a pactum commisorium enables the mortgagee to acquire ownership of the mortgaged properties without need of any foreclosure proceedings—it is a nullity being contrary to the provisions of Article 2088 of the Civil Code. 166 Legaspi v. 1619) Legal redemption is in the nature of a privilege created by law partly for reasons of public policy and partly for the benefit and convenience of the redemptioner. xConsing v. CA. 96 Phil.166 e. Final Chance to Redeem in “Mistaken Equitable Mortgage” (Art. . √A. xLumayag v. 112 SCRA 641 (1982). as a sign of good faith. Pactum Commissorium (Art. Pangilinan v. 69 SCRA 393 (1976). 298 SCRA 349 (1998). c. 1088) Redemption right pertain to disposition of right to inherit.45 principal obligation secured by the equitable mortgage has been paid or settled. 374 SCRA 51 (2002). Ong v. Tarun.167 Sellers in a sale judicially declared as pacto de retro may not exercise the right to repurchase within the 30-day period provided under Art. The provision in a MOA/Dacion en Pago with a Right to Repurchase that in the event the borrower fails to comply with the new terms of restructuring the loan. Court of Appeals. √Solid Homes. 37 (1954).168 An equitable mortgage is a voidable contract.. although they have taken the position that the same was an equitable mortgage. Bello. 206 SCRA 244 (1992). co-ownership has ceased even though the property Guerrero v. 167 168 169 165 Tapas v. 391 SCRA 653 (2002). Vda. v. which enable the mortgagee to acquire ownership of the mortgaged property without the need of any foreclosure proceedings. Legal Redemption Rights under the Civil Code a. CA. 626 SCRA 758 (2010). to afford him a way out of what might be a disagreeable or [an] inconvenient association into which he has been thrust. 1606) The 30 day period under Art. and consequently. pactum commissorium being void for being prohibited by law. Yñigo. xBanga v. v. BUT SEE: The stipulation in the promissory note providing that upon failure of the makers to pay interests. and the covering deed of sale would be registered is in substance a pactum commissorium in violation of Art. the questioned contracts were freely and voluntarily executed by petitioners and respondent is of no moment. Inc.. 121 SCRA 314 (1983). Jr. Reyes.165 The elements of pactum commissorium. IAC. Roban Lending Corp. Ong v. and not when there is a sale of a particular property of the estate. 557 SCRA 516 (2008). Court of Appeals. 459 SCRA 122 (2005). It is intended to minimize co-ownership. Heirs of Jacinto Nemeño. if it is shown that there was no honest belief thereof since: (a) none of the circumstances under Art. Ong. [CLV: Thereafter. LEGAL REDEMPTION 1. the agreement shall automatically operate to be an instrument of dacion en pago without need of executing any new document does not constitute pactum commissorium. ownership of the property would automatically be transferred to the payee. Roban Lending Corp. de Macoy v. Octaviano. 117 SCRA 128 (1982). 526 SCRA 315 (2007). CA. Basa v. 135 SCRA 270 (1985). It may be annulled within four (4) years from the time the cause of action accrues. Roban Lending Corp. When the heirs have partitioned the estate among themselves and each have occupied and treated definite portions thereof as their own. 471 SCRA 653 (2005). 557 SCRA 516 (2008). 181 SCRA 359 (1990). and (b) that if they truly believed the sale to be an equitable mortgage. it may be enforced against the provision on pactum commissorium?] C. 557 SCRA 50 (2008). Definition (Art. Jr. Among Co-Heirs (Art. 1606.. Vda. Francisco Realty v. on or before the expiration of the right to repurchase. 2088. 177 SCRA 14 (1989). 1606 does not apply if the courts should find the sale to be absolute. Aguilar. √Abilla v. the resultant sale is void and the registration and obtaining of new title in the name of the buyer would have be declared void also. Heirs of Jose Reyes. Montevirgin v. 1602 were shown to exist to warrant a conclusion that the transaction was an equitable mortgage. It does not apply when the security for a debt is also money in the form of time deposit. Paragas. xFernandez v. Ong v.169 2. xPlan v. Ayson. 557 SCRA 516 (2008). they should have consigned with the trial court the amount representing their alleged loan. Ramos. Gobonseng. are: (1) there should be a property mortgaged by way of security for the payment of the principal obligation. and (2) there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period.
When the seller a retro dies. City of Manila. The heirs who actually participated in the execution of the extrajudicial settlement. which included the sale to a third person of their pro indiviso shares in the property. then the right of redemption can be exercised and the only exemption provided is when the buyer can show that he did not own any other rural land. Court of Appeals. Court of Appeals. xPrimary Structures Corp. 300 SCRA 516 (1998). are bound by the same. Court of Appeals. When Period of Legal Redemption Begins (Art. 589 SCRA 399 (2009). Barabat. 106 Phil. xMariano v. Right of redemption covers only “resale” and does not cover exchanges or barter of properties xDe Santos v. Citing Hernaez v. Castillo v. 32 Phil. 1620) The right of redemption may be exercised by a co-owner only when part of the community property is sold to a stranger. such as verbal or by registration. 170 171 De Guzman v. 374 (2003). Redemption by co-owner redounds to the benefit of all other co-owners. CA. xHermoso v. since the right to redeem belonged in common to all the heirs. 589 SCRA 399 (2009). Adille v. being a hindrance to the development and better administration of the property. Court of Appeals. even when he uses his own fund. Court of Appeals. Santos. 506 SCRA 374 (2006). does not begin from the entry of judgment. and the sale by one of the heirs of his definite portion cannot trigger the right of redemption in favor of the other heirs. CA. xDe Guzman v. v. Among Co-Owners (Art. 148 SCRA 75 (1987). Court of Appeals. now when sold to another co-owner because a new participant is not added to the co-ownership. since the purpose is to reduce the number of participants until the community is terminated. 409 SCRA 371 (2003). But the burden of proof to provide for the exception lies with the buyer. xPrimary Structures Corp. the right to redeem cannot be exercised by a co-heir alone. Among Adjoining Owners (Arts. xVda. “It is a one-way street. CA. 222 SCRA 736 (1993). 148 SCRA 75 (1987). 409 SCRA 371. Samonte. The interpretation of Art. (3) the sale was made before the partition of the co-owned property. v. xAvila v. 1623) Both the letter and the spirit of the law argue against any attempt to widen the scope of the notice specified in the Civil Code to include any other kind of notice. Court of Appeals. 45 SCRA 409 (1972). and cannot arise unless both adjacent lands are rural lands. When there is no issue that when the adjoining lands involved are both rural lands. 222 SCRA 736 (1993). (4) the right of redemption must be exercised by one or more co-owners within a period of thirty days to be counted from the time he or they were notified in writing by the co-owner vendor. 172 SCRA 660 (1989). 1623 where there is a need for notice in writing. c. 1634) – 30 days from notice of demand to pay. (2) one of the co-owners sold his right to a stranger. Sale of Credit in Litigation (Art. while the co-heirs who did not participate are given the right to redeem their shares pursuant to Article 1088. De Ape v. Distinguishing Between Right of Redemption of Co-heirs and Co-owners – Article 1620 includes the doctrine that a redemption by a co-owner of the property owned in common.46 is still under one title.171 The 30-day period for the commencement of the right to exercise the legal redemption right. and the 30-day period for the commencement of the right to exercise the legal redemption right. co-ownership must exist at the time of the conveyance is made by a co-owner and the redemption is demanded by the other co-owner or co-owners. 157 SCRA 455 (1988). within the period prescribed by law inures to the benefit of all the other co-owners. 485 SCRA 8 (2006). but from the written notice served by the seller to the party entitled to exercise such redemption right. Court of Appeals. The requisites for the exercise of legal redemption are as follows: (1) there must be coownership. 391 SCRA 653 (2002). even when such right has been recognized to exist in a final and executory court decision. xLegaspi v. 214 (1915). xFernandez v. 1621 and 1622) Requisite to show property previously bought on “speculation” dropped. Calma v. Vargas. 1024 (1960). 2.170 d. Valencia. . 590 SCRA 359 (2009). e. even when such right has been recognized to exist in a final and executory court decision. should always tilt in favor of the redemptioner and against the buyer. 69 SCRA 360 (1976). Tarun. xCua v. does not begin from the entry of judgment. and (5) the vendee must be reimbursed the price of the sale. xAnnie Tan v. 456 SCRA 193 (2005). Guillen v. Hernaez. but from the written notice served by the seller to the party entitled to exercise such redemption right. For the right of redemption to be exercised. Guillen v. Valencia.” in favor of the redemptioner since he can compel the buyer to sell to him but he cannot be compelled by the vendee to buy. b. Marinao v.
Notice to minors may validly be served upon parents even when the latter have not been judicially appointed as guardians since the same is beneficial to the children. notice must be given by the seller. Vargas. prescribed under Article 1623. 215. Court of Appeals. v. . This expressly affirms the original ruling in Butte v. 409 SCRA 371 (2003). CA. 162 SCRA 568 (1988). Court of Appeals. xBadillo v. 148 SCRA 507 (1987). Ferrer. CA. as held previously in xDistrito v. so that the furnishing of the copies of the deeds of sale to the co-owner would be sufficient. √Francisco v. for the person entitled to the right is not a party to the deed of sale. 332 SCRA 305 (2000). 1623 to begin the tolling of the 30-day period of redemption. • When notice is given by the proper party (i. Ferrer. xSpouses Doromal v. Neither the registration of the sale xCabrera v. 4 SCRA 526 (1962). Court of Appeals. De Ape v. as well as its efficacy and status. The notice required under Article 1623 is deemed to have been complied with when the other co-owner has signed the Deed of Extrajudicial Partition and Exchange of Shares which embodies the disposition of part of the property owned in common. that the required written notice to petitioner under Article 1623 has been meet. Rare Exceptions: When the sale to the buyer was effected through the co-owner who acted as the broker. Court of Appeals. but only on the form of giving notice but not on the ruling of who is the proper party to give notice. Redemption by Judgment Debtor (Secs. 506 SCRA 374 (2006). and never indicated that he would exercise his right to redeem. 152 SCRA 407 (1987). its terms and conditions.173 b. cannot be taken to “being the written affirmation under oath. Redemption in Tax Sales (Sec.. 172 173 Garcia v. xPilapil v. The existence of a clause in the deed of sale to the effect that the vendor has complied with the provisions of Article 1623. 160 SCRA 627 (1988). 256 SCRA 593 (1996).. 275 SCRA 329 (1997). CA. since the filing of the suit amounted to actual knowledge of the sale from which the 30-day period of redemption commences to run. 141) Right to repurchase is granted by law and need not be provided for in the deed of sale. Mariano v. CA. 391 SCRA 653 (2002). Manuel Uy and Sons. the seller). Mata v. no particular form of written notice is • Affirmed ruling in xAlonzo v. nor notice being given by the city treasurer xVerdad v. nor the annotation of an adverse claim xVda. Tarun.. Court of Appeals. Court of Appeals. comply with the written notice required under Art. 150 SCRA 259 (1987). xDistrito v. Retes. 27-28. 250 SCRA 560 (1995). Villanueva. Boiser. OTHER LEGAL REDEMPTION RIGHTS a. 256 SCRA 593 (1996). Calaliman. and that notice given by the buyer or even by the Register of Deeds is not sufficient. 197 SCRA 606 (1991). xLee Chuy Realty Corp. xTorres v. IAC.A. 1623. Inc. 197 SCRA 606 (1991). 4. Under the free patent or homestead provisions of the Public Land Act a period of five (5) years from the date of conveyance is provided. 16 SCRA 775 (1966). xVerdad v. 456 SCRA 193 (2005). xBadillo v. Court of Appeals.47 The 30-day period does not begin to run in the absence of written notification coming from the seller. notwithstanding actual knowledge of a co-owner. When the buyers took possession of the property immediately after the execution of the deed of sale in their favor and lived in the midst of the other co-owners who never questioned the same. that the filing of the suit for ejectment or a. Valencia. as well as the evidence. and must be construed as commencing the running of the period to exercise the right of redemption. 222 SCRA 736 (1993). as affirmed in xSalatandol v. 17 SCRA 201 (1989). which allowed the giving of notice by the buyer to be effective under Article 1623. 318 SCRA 416 (1999). 194 SCRA 508 (1991). to give him the opportunity to prevent the sale by paying the judgment debt sought to be enforced and the costs which have been incurred. Cabling. v. summarized the case-law on Art. Rules of Civil Procedure) Written notice must be given to the judgment debtor before the sale of the property on execution. The written notice of sale is mandatory. Conejero v. xPrimary Structures Corp. to be reckoned from the date of the sale and not from the date of registration in the office of the Register of Deeds.e. xBerin v.172 and it must be a written notice of a perfected sale. 119. and with definitiveness declared: • For the 30-day redemption period to begin to run. NIRC of 1997) c. CA. CA. 152 SCRA 407 (1987). xCua v. C. in order to remove all uncertainties about the sale. xFernandez v. Redemption in Patents (Sec. Rule 39. 250 SCRA 596 (1995). collection of rentals against a co-owner actually dispenses with the need for a written notice. 66 SCRA 575 (1975). This expressly overruled the ruling in xEtcuban v.
v. 3844. √Soriano v. the latter is granted by law the right to redeem it within 180 days from notice in writing and at a reasonable price and consideration. xUnion Bank v. Project Builders. Rodriguez v. unlike the 360 days under the old provisions of the Rules of Court. so that at the expiration thereof. Act 3135) The redemption of extra-judicially foreclosed properties is exercised within one (1) year from the date of the auction sale as provided for in Act 3135. CA. CA. xLicaros v. accordingly. 272 SCRA 291 (1997). San Agustin. real or personal. except those granted by banks or banking institutions. 1624-1635) 1. the accepted offer of spouses-borrowers to “repurchase” the property was actually a new option contract. xYsmael v. 1624) 174 175 176 177 Vaca v. Springsun Management Systems Corp. 449 SCRA 65 (2005). he or his heirs may still repurchase within five (5) years from expiration of the two (2) year redemption period pursuant to Sec. 200 SCRA 637 (1991).” xPNB v. v. sheriff should demand from the judgment creditor who becomes the highest bidder. 217 SCRA 554 (1993). the mortgagee who acquires the property at the foreclosure sale can proceed to have title consolidated in his name and a writ of possession issued in his favor. 47. 362 SCRA 548 (2001). 234 SCRA 146 (1994). Court of Appeals. Legal Right to Redeem under Agrarian Reform Code Under Section 12 of R. 291 SCRA 249 (1998). mortgagor may redeem 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. 275 SCRA 329 (1997). Definition and Nature of Assignment Assignment is the process of transferring the right of assignor to assignee who would then have the right to proceed against the debtor. 119 of the Public Land Act (C.48 Where there is a third-party claim.A. CA.A. 207 SCRA 553 (1992). v. v. Corp. No. 318 SCRA 215 (1999). the assignment has an effect similar to that of a sale.. It includes transfers of all kinds of property. CA. xDijamco v. R.176 XIV. CA. 250 SCRA 596 (1995).” so that the period is now to be understood as composed of 365 days. 6 SCRA 946 (1962). xFirst Global Realty and Dev. payment in cash of his bid instead of merely crediting the amount to the partial satisfaction of the judgment debt. CA. in possession or in action. xGSIS v.175 g. Nyco Sales Corp. Court of Appeals. the period of redemption shall be “at any time within one (1) year from the date of registration of the certificate of sale. Redemption in Extrajudicial Foreclosure (Sec. Bautista. in the event that the landholding is sold to a third person without the knowledge of the agricultural lessee. Rule 39 of the 1997 Rules of Civil Procedure. BA Finance Corp.177 In its most general and comprehensive sense. Heirs of Felicidad Canque v. 275 SCRA 741 (1997). ASSIGNMENT (Arts. Under Sec. Redemption in Foreclosure by Rural Banks (R. Redemption in judicial foreclosure of mortgage (Sec. respectively. 440 SCRA 190 (2004). 141). 6. If the mortgagor fails to exercise such right. as amended. v. xTorres v. Court of Appeals. and is peculiarly applicable to intangible personal property and. 8791) A stipulation to render the right to redeem defeasible by an option to buy on the part of the creditor. 28. an assignment is “a transfer or making over to another of the whole of any property. 377 SCRA 341 (2002). The execution of a dacion en pago by sellers effectively waives the redemption period normally given a mortgagor. 358 SCRA 626 (2001). The assignment may be done gratuitously or onerously. or of any estate or right therein. 2. CA. it is ordinarily employed to describe the transfer of non-negotiable choses in action and of rights in or connected with property as distinguished from the particular item or property. No right to redeem from a judicial foreclosure sale. Cabling. Gatmaitan. The one-year redemption period in the case of foreclosure is not interrupted by the filing of an action assailing the validity of the mortgage. in the latter case. 175 SCRA 19 (1989). CAs. 720) If the land is mortgaged to a rural bank. e. Perfection by Mere Consent (Art. d. xRural Bank of Davao City v. xQuiño v. . and the condition that the spouses-borrowers will pay monthly interest during the one-year option period is considered to be the separate consideration to hold the option contract valid.A. 359 SCRA 480 (2001). by Torrens title.174 After bank has foreclosed the property as highest bidder in the auction sale.A. Camerino. CFI. f. Inc. xLee Chuy Realty Corp.
.. v. Inc. 587 (1918). 200 SCRA 637 (1991). which makes the vendor liable for the existence and legality of the credit at the time of sale. 40 SCRA 489 (1971). Inc. pledge or preference. who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. such assignment does not extinguish the obligation under the credit assigned. when it is shown that the assigned credit no longer existed at the time of dation. all creditors would be prevented from assigning their credits because of the possibility of the debtors’ refusal to given consent.179 c. xLo v. xNIDC v. De los Angeles. d. Ledonio v. xAquintey v.. What the law requires in an assignment of credit is mere notice to debtor.. . Right of Repurchase on Assignment of Credit under Litigation (Arts. which may extinguishes the obligation. and without the consent of the debtor.178 As a consequence. But Must Be in Public Instrument to Affect Third Parties (Art. Court of Appeals. v.. 526 SCRA 379 (2007). 413 SCRA 182 (2003). such as guaranty. 1625) 4. exchange or donation. Otherwise. Project Builders. Sison & Sison v.Aquintey v. 6. by a legal cause. PNB. 526 SCRA 379 (2007). Warranties of Assignor (Art. the third party steps into the shoes of the original creditor as subrogee of the latter. 358 SCRA 626 (2001). however. (b) If insolvency is known by the assignor prior to assignment. Assignment of Credit An assignment of credit is an agreement by virtue of which the owner of a credit. Capitol Dev. and the purpose of the notice is only to inform the debtor that from the date of the assignment. 1634 and1635) 178 179 Lo v. EXCEPTIONS: (a) If this is expressly warranted.. b. Although constituting a novation.. 5. by virtue of the warranty in Art. 1626) In an assignment of credit. 371 SCRA 603 (2001). known as the assignor.49 3. 358 SCRA 626 (2001). Tradition in Assignment Notarization converts a private document Assignment of Credit into a public document. xSouth City Homes. KJS Eco-Formwork System Phil. Issues re Debtor (Art. BA Finance. Inc. 175 SCRA 1 (1989). v. 1628. xLedonio v. When dacion en pago takes the form of an assignment of credit. V. it produces the effects of a dation in payment. xProject Builders. Consent of debtor is not necessary in order that assignment may fully produce legal effects. Court of Appeals. BA Finance Corp. v.. Corp. (c) If insolvency is prior to assignment is common knowledge. transfers his credit and accessory rights to another. √Nyco Sales Corp. and the duty to pay does not depend on the consent of the debtor. Tibong. Inc. Effects of Assignment a. KJS Eco-Formwork System Phil. (UPSUMCO) v. 511 SCRA 414 (2006). Inc. his knowledge thereof or lack of it affecting only the efficaciousness or inefficaciousness of any payment he might make. thus complying with the mandate of Article 1625 of the Civil Code and making it enforceable even as against third persons. 37 Phil. then it behooves the assignor to make good its warranty and pay the obligation. such as sale.. Accessories and Accessions (Art. mortgage. the consent of the debtor is not essential for its perfection. Tibong. dacion en pago. C & C Commercial Corp. payment should be made to the assignee and not to the original creditor. 1627) Assignment of a credit includes all the accessory rights. 1628) Assignor warrants only the existence or legality of the credit but not the solvency of the debtor. 527 SCRA 336 (2007). Inc. Capitol Development Corp. Court of Appeals. even when the assignment is effected without his consent. known as the assignee. xUnited Planters Sugar Milling Co. Yap Tico. 511 SCRA 414 (2006). 413 SCRA 182 (2003).
Effects of Non-Compliance a. The nullity of an old obligation may be cured by subrogation. EXCEPTION: When the seller obtains a written waiver from all creditors. and cannot cover the sale of assets by a manufacturer since the nature of his business does not partake of merchandise.1301) Subrogation extinguishes the obligation and gives rise to a new one. the consent of the debtor is not necessary in order that the assignment may fully produce legal effects. If purchase money or mortgage proceeds are not applied pro-rata to payment of the bona fide claims of the creditors. The Law only covers sales in bulk of fixtures and equipment used in the mercantile business. would subject the seller or mortgagor to penal sanctions. Court of Appeals. makes the transaction fraudulent and void. and placing of wrong data required by law. debtor. 4) b. 180. √DBP v. merchandise. It is a new contractual relation based on the mutual agreement among all the necessary parties. Capitol Dev. transferor. 7) d. (Sec. conventional subrogation requires an agreement among the three parties concerned – original creditor. b. XV. No. The Honorable Judge of the RTC of Manila. 362 SCRA 548 (2001).. 40 O. mortgagor. [CA] 50 O. 180 Ledonio v. because the contents of a foundry shop are not wares and merchandise. amounts owing to each and the nature of the debt. 2. Wong. such that a new obligation will be perfectly valid. Purchase price paid must be applied to these debts. or assignor. the disposal by the owner of a foundry shop of all his iron bars and others does not fall under the law. and the non-payment of the loan cannot authorize the assignee to register the assigned leasehold rights in its name as it would be a violation of Art. 3952) 1. and the notification to creditors. Thus. c.G. xPeople v. √Licaros v. or substantially all of all or substantially all of the fixtures and equipment used in and about the business. Subrogation versus Assignment of Credit (Art. BULK SALES LAW (ACT NO. The merchant must give the buyer a certified schedule of his debts: names of creditors. Intellectual Property Code) 9. 11) A sale in bulk done without complying with the terms of the Law. . Gatmaitan. 526 SCRA 379 (2007). but does not change the basic relationship between the seller. (b) All.G. 4 Supp. Non-giving of the list of creditors or intentional omission of the names of some of the creditors. Assignment as an Equitable Mortgage When an assignor executes a Deed of Assignment covering her leasehold rights in order to secure the payment of promissory notes covering the loan she obtained from the bank. wares.G. or substantially all of the business or trade theretofore conducted by the vendor. xDBP v. The proper remedy of the assignee is to proceed to foreclose on the leasehold right assigned as security for the loan. mortgage or assignment of: (a) Goods. Bulk transfer without consideration or for nominal consideration punishable. transfer. 4. (Sec. (Sec. but the nullity of an obligation is not remedied by the assignment of the creditor’s right to another. 284 SCRA 14 (1998). and new creditor. 2088 against pactum commissorium. 3. 6 1137 (05 February 1990). The Law applies to merchants who are in the business of selling goods and wares and similar merchandise.50 7. 4867 (1954). Scope (√Chin v. are also made punishable. the sale is deemed fraudulent and void. Coverage of “Bulk Sale” – Sale. Failure to comply with other provisions of the law the non-application of the consideration proportionately to the creditors. In an assignment of credit. assignment refers to the same right which passes from one person to another. whereas. Compliance Requirements Under the Law a.180 8. which involves the buying and selling of merchandise. Assignment of Copyright (Sec. 52) The Bulk Sales Law must be construed strictly. (Sec. (c) All. such assignment is equivalent to an equitable mortgage. Uy. Ten (10) days before the sale. the preparation of the inventory. 4) c. 86 O. Corp. the seller must take an inventory of his stock and advise all his creditors of the same. provisions or material other than in the ordinary course of business.
v. Inc. and (3) Object of the sale is limited to merchandise. it cannot be said that it is a merchandiser. series of 1945. Teehankee & Carreon Law Office. Union Carbide Philippines. 3. 121 SCRA 363 (1983).. Importance of Retaile Trade (√King v. 124 SCRA 893 (1983). Meaning of “Consumption” (DOJ Opinion No. The portion of a judgment providing for subsidiary liability is invalid. 325. Espina v. OF 2000 AND RELATED PROVISIONS OF THE ANTI-DUMMY LAW 1. since the proper remedy of the creditor is to collect on the credit against the defendant. Reyes. Even when the same of consumer goods is limited only to the officers of the company. 162 SCRA 206 (1988). Hernaez. Sr. series of 2002. 6 1137 (05 February 1990). dated 3 August 1959. Honorable Judge of the RTC of Manila. 13 November 2002. No. XVI. Where the glass company manufactures glass products only on specific orders. or properly called consumer goods.. sale of cellphones by a telecommunication company] does not constitute “retail trade” within the purview of the Retail Trade Nationalization Law. Requirements for Foreign Investors b. To the extent that Republic Act No.F.G. they would constitute non-consumer goods and not covered by the Law. v. Mapoy. and if they cannot pay to attach on the property fraudulently mortgage since the same still pertain to the debtors-defendants. Categories of Retail Trade Enterprises a.181 e. as this is taken from the provision thereof excluding form the term “retail business” the operation of a restaurant by a hotel-owner or -keeper since the same does not constitute the act of habitually selling direct to the general public merchandise. √Balmaceda v. √DBP v. Elements: (1) Seller habitually engaged in selling.g.51 assignor/encumbrancer and his creditor. Category D – Luxury Items d. 253. DTI Opinion to Tanada. RETAIL TRADE LIBERALIZATION ACT Marsman & Co. 11. Sr. lessens the restraint on the foreigners’ right to property or to engage in an ordinarily lawful business. √Goodyear Tire v. c. The Law limits its application to the sale of items sold for domestic or household. commodities or goods for consumption. Inc. d. Public Policy under RTLA 2000: A reversal of paradigm. the Retail Trade Liberalization Act. commodities or goods for consumption.. focus from the protecting the retailers to promoting the interests of consumers. 181 . 86 O. √SEC Opinion No. 631 SCRA 17 (2010). the same would still constitute retail trade covered by the Law. Meaning of “General Public” (DOJ Opinion No. Reyes. when the same items are sold to commercial users. it cannot be said that the law amounts to a denial of the Filipinos’ right to property and to due process of law. Inc. Grandfather Rule on 100% Filipino Ownership of Corporate Entity: SEC Opinions. Categories B and C c. Zamora. First Coconut Central Co. Inc.. Goodrich Philippines. whereas. xPeople v. Foreign Investment or Engage in Retail Trade in the Philippines a. Exempted Areas e. 73 Phil. Rights Granted to Former Natural-Born Filipinos 4. 8762. it does not sell directly to consumers but manufacturers its products only for the particular clients. (2) Selling direct to the general public. series of 1954). Meaning of “Habitually Selling” Engaging in the sale of merchandise as an incident to the primary purpose of a corporation [e.. dated 20 March 1972 and 22 April 1983.. B. 123 SCRA 273 (1983). 2. The control and regulation of trade in the interest of the public welfare is of course an exercise of the police power of the State. Category A – Exclusive to Filipino citizens and 100% Filipino entities b. operation of a pharmacy by a hospital. 678 (1942). Scope and Definition of “Retail Trade” a. IRR of Law). 4 SCRA 792 ) b.
108. Pre-qualification requirements b. as amended by P. Anti-Dummy Board. Pres. Aliens may not take part in technical aspects. Prohibited Activities of Foreign Retailers e. Act. which rejected the argument of a public utility corporation that had no-American aliens in its employ. and with express authority from the President of the Philippines. employees or laborers. 169 SCRA 586 (1989). Criminal sanctions are imposed on the president. Rules on Branches/Stores c. rights and franchises. Decree 715 was enacted amending the law by the addition of a proviso expressly allowing the election of aliens as members of the boards of directors or the governing bodies of corporations or associations engaged in partially nationalized activities in proportion to their allowable participation or share in the capital of such entities. The amendment was meant to settle the uncertainty created in the obiter opinion in Luzon Stevedoring Corp. 227 SCRA 126 (1993). Section 2-A of the Law prohibits aliens from intervening in the management. with or without remuneration. Public Offerings of Shares of Stock 5. it is conclusive evidence of the latter's ownership of the retail business as far as private parties are concerned. The Filipino common-law wife of a Chinese national is not barred from engaging in the retail business provided she uses capital exclusively derived from her paraphernal properties. that the Anti-Dummy Law covered only employment in wholly nationalized businesses and not in those that are only partly nationalized. Penalty Provisions 7. 633 SCRA .D. whether as officers. Later. Applicability of the Anti-Dummy Act (Comm. v. 6. c. —oOo— UPDATED: 30 MAY 2011. 46 SCRA 474 (1972). allowing her common-law Chinese husband to take part in management of the retail business would be a violation of the law. Foreign Retailers in the Philippines a. board member or persons in charge of the violating entity and causing the latter to forfeit its privileges. Fraser. 715) a. People. xDando v.52 c. Binding Effect of License to Engage in Retail on Private Parties When a license to engage in cocktail lounge and restaurant is issued to a Filipino citizen. manager. xTalan v. b. operation. administration or control of nationalized business. provided no Filipino can do such technical work. Law penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved for Filipinos or Filipino corporations. Promotion of Locally-Manufactured Products d.