Chapter 11:

Remedies In
Sales of
Immovables

Rochelle Ann Formentera

Jose Antonio Vinluan

Question!

– Tino and Emily were former grade school seatmates. Decades of moons
later, Emily sold to Tino five parcels of land situated in Cavite City.
– Tino paid P500,000 upon signing of the contract. The balance was agreed
to be paid three installments. Their written agreement further contains
the following provisions:
– Failure of Tino to pay the purchase price in full shall cause the
rescission of the contract and forfeiture of one-half percent of the
total amount paid to Emily;
– Emily shall retain the possession of the property until a Deed of
Absolute Sale shall be executed by her in favor of the Tino; and
– Upon and after the full payment of the balance, a Deed of Absolute
Sale shall be executed by Emily in favor of Tino.
Question!

– For reasons unknown, Tino reneged on his promise to pay the last
installment.
– After giving her friend several chances to honor his contractual
commitment, Emily was thus constrained to send a notarized
letter to Tino stating the intended rescission of the contract and
forfeiture of payments he made.
– One year later, Tino offered to pay the balance. She told Tino to
keep his money. She also told him that she already sold the pieces
of property to her former high school boyfriend, Bart.
Question!

– Q: Who owns the property pending full payment of the purchase

price? Is the Contract one of Sale or to Sell?
– Q: Is it necessary for necessary for Emily to execute a notarial
rescission of the contract to sell?
– Q: Can Emily rescind or cancel the contract to sell without court
intervention?
– Q: Is R.A. 6552 (commonly known as the Maceda Law), applicable in
this case?
– Q: Did Emily acted within her rights when she sold the property to
Bart?
Overview: Contract of Sale vs
Contract to Sell
– Overall point: Distinction between the remedies available
to both types of contracts
– Contracts of sale: Rescission
– Contract to sell: Cancellation or extinguishment of
contract due to non fulfillment of suspensive condition.
– Due to the Maceda Law and subsequent jurisprudence,
both have become indistinguishable.
Remedy of Recission

– Defined under Art. 1191, Civil Code

– Remedy is principal in nature
– Legal premise is substantial breach of contract
– Not to be confused with Art. 1381, where
economic damage or lesion is the main basis for
allowing recission.
– Note: Subsidiary in nature, only invoked as a last
resort
Art. 1191

– The power to rescind obligations is implied in reciprocal ones, in case

one of the obligors should not comply with what is incumbent upon
him.
– The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
– The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
Art. 1592

– Rescission for sales of immovables on

installments
– Applies to all sales of immovables ,
including those with no stipulation on
automatic rescission, due to the phrase
“even though”
Art. 1592

– In the sale of immovable property, even though it

may have been stipulated that upon failure to pay
the price at the time agreed upon the rescission of
the contract shall of right take place, the vendee
may pay, even after the expiration of the period,
as long as no demand for rescission of the contract
has been made upon him either judicially or by a
notarial act. After the demand, the court may not
grant him a new term.
Distinction: Prescriptive Period

– Defined under Art. 1144

– The following actions must be brought within
ten years from the time the right of action
accrues:
– (1) Upon a written contract;
– (2) Upon an obligation created by law;
– (3) Upon a judgment.
Universal Food Corp. v. Court of
Appeals
– Rescission of a Bill of Assignment over Mafran brand to
petitioner , as one of the terms was violated.
– Respondent Magno Francisco was hired as permanent
chief chemist under the Bill of Assignment, and was
subsequently fired without cause
– SC ruled that the contract can be rescinded under Art.
1191
Justice JBL Reyes’ Concurring
Opinion
– “The rescission on account of breach of stipulations is not
predicated on injury to economic interests of the party plaintiff
but on the breach of faith by the defendant, that violates
the reciprocity between the parties. It is not a subsidiary action,
and Article 1191 may be scanned without disclosing anywhere
that the action for rescission thereunder is subordinated to
anything other than the culpable breach of his obligations by
the defendant. This rescission is in principal action retaliatory
in character, it being unjust that a party be held bound to
fulfill his promises when the other violates his. “
Justice JBL Reyes’ Concurring
Opinion
– On the contrary, in the rescission by reason of lesion or
economic prejudice, the cause of action is subordinated
to the existence of that prejudice, because it is
the raison d'etre as well as the measure of the right to
rescind. Hence, where the defendant makes good the
damages caused, the action cannot be maintained or
continued, as expressly provided in Articles 1383 and 1384.
But the operation of these two articles is limited to the cases
of rescission for lesion enumerated in Article 1381 of the
Civil Code of the Philippines, and does not, apply to cases
under Article 1191.
Application to Resolution of Sale

– Suria v. Intermediate Appellate Court

– Contract of sale with mortgage, when the buyer defaulted,
the sellers sought to rescind the entire contract instead of
foreclosing the mortgage
– SC: Rescission under Art. 1191 not applicable as the contract
of sale was already fulfilled, seller and buyer became
mortgagee and mortgager
– Objection: Mortgage was only to secure, not replace the
contract. Breach of mortgage could have been ground for
rescission.
When Rescission Should Have
Applied
– Uy v. Court of Appeals
– Contract of sale over 8 residential lots, 3 of which became
unusable due to landslide. Note: NHA (buyer) took quality of
land into account.
– SC: Cancellation of contract was justified under Art. 1318, as
the cause itself ceased to exist.
– Objection: Rescission should have been the remedy due to
breach of warranty. Quality of land was implied condition
under Art. 1545.
Nature of Rescission
(Resolution)
– Ocampo v. Court of Appeals: Rescind is to declare a
contract void at its inception, put an end to it as if it never
happened, to abrogate the contract from the beginning
and restore parties to relative positions had no contract
was made.
– Romero v. Court of Appeals: Breach of faith violates
reciprocity between parties.
– Odyssey Inc. v Court of Appeals: Breach of obligation
extant, not failure to cover condition which would bind the
obligation.
Rescission Judicial In Nature

– Art. 433, 539, Civil Code

– General Principle: No man may, even one
with a valid and lawful cause of action,
take the law into his own hands and must
resort to the aid of the courts to enforce his
rights.
When Extrajudicial Rescission
Allowed
– SC recognized validity and effectivity of express
stipulation by parties to a reciprocal contract with
stipulation of rescission done extrajudicially upon
default by a party.
– Froilan v. Pan Oriental Shipping Co.: Nothing in the
law stopping parties from including stipulation for
cancellation of contract via violation without court
intervention.
When Extrajudicial Rescission
Allowed
– Pangilinan v. CA: In contracts with automatic
revocation, judicial intervention necessary only to
obtain judicial declaration of rescission of a contract
already rescinded by the revocation
– Iringan v. CA: Stipulation for rescission is not
automatic rescission, the court has power to deny
rescission should there be grounds to justify
allowance of terms to perform obligations.
When Extrajudicial Rescission
Allowed
– Spouses Benito v. Sauitan-Ruiz: Seller
cannot unilaterally and extrajudicially
rescind a sale with no express stipulation
authorizing it, unilateral rescission will not
be judicially favored/allowed if breach is not
substantial & fundamental to the
obligation’s fulfillment.
Who May Demand Rescission

– Given only to injured party.

– Mutual restitution required for
rescission under Art. 1191, done
only when the party demanding
rescission can return what he is
obliged to restore
Rescission Based on Substantial
Breach, Power of Courts to Reprieve

– Power to rescind under Art. 1191 based on substantial

breach under Art. 1234
– If obligation substantially performed in good faith,
obligor may recover as if there was strict and complete
fulfillment less damages suffered by obligee
– Right to rescission not absolute, “just cause authorizing
the fixing of the period”
– Art. 1592: If demand made by buyer for rescission either
judicially/notarial act, no new term may be granted by
court
Rescission Requires Positive Act

– Rescission has no automatic application, even when

substantial breach present
– City of Cebu v Heirs of Candido Rubi: Demand to
vacate premises is not considered rescission
– Co v CA: Even if buyer failed to pay purchase price,
as seller did not sue for specific performance or
rescission, seller has no right to forfeit payments
made by buyer.
Rescission Requires Positive Act

– Rescission is not the same as action for

reconveyance to recover possession of subject
matter of sale
– Olympia Housing v. Panasiatic Travel: Judicial
resolution would include mutual restitution,
which is not included in action for reconveyance;
under judicial rescission, courts may find just
cause to fix a period instead of decreeing
rescission.
Restitution as Consequence of
Rescission
– Art. 1191 par. 3 references Art. 1385
– Rescission creates the obligation to return the
things which were the object of the contract,
together with their fruits, and the price with its
interest; consequently, it can be carried out only
when he who demands rescission can return
whatever he may be obliged to restore.
Restitution as Consequence of
Rescission
– Art. 1191 par. 3 references Art. 1388
– Whoever acquires in bad faith the things alienated in
fraud of creditors, shall indemnify the latter for
damages suffered by them on account of the alienation,
whenever, due to any cause, it should be impossible for
him to return them.
– If there are two or more alienations, the first acquirer
shall be liable first, and so on successively.
Restitution as Consequence of
Rescission
– Rescission shall not take place when things
considered object of contract are legally in possession
of third persons who did not act in bad faith,
indemnity may be demanded from person causing the
loss.
– Primary consequence of effective exercise of remedy of
rescission (resolution) is mutual restitution.
When Forfeiture of Payments
Allowed
– Effect of restitution in remedy of rescission may
be stipulated against, enforceable to however
extent it is reasonable.
– Manila Racing Club v. Manila Jockey Club:
Contractual provision for forfeiture of amounts
paid in sale valid as a penal clause (Art. 1226)
and freedom of parties to stipulate (Art. 1306).
Not contrary to law, morals and public order &
was voluntarily and knowingly agreed on.
When Forfeiture of Payments
Allowed
– Art. 1486: Sale of personal property under installments,
stipulation that installments/rent shall not be returned is
valid, as long as it is not unconscionable under the
circumstances
– Pangilinan v. CA: Seller’s right to extrajudicially cancel
the sale upon failure of buyer to pay installments and
right to retain installments already paid has been long
established.
– Courts may allow forfeiture as reasonable compensation,
even w/o forfeiture clause.
Contract of Sale vs. Contract to
Sell
– Both are covered under the genus of “sale” under Art.
1458
– By the contract of sale one of the contracting
parties obligates himself to transfer the ownership
and to deliver a determinate thing, and the other to
pay therefor a price certain in money or its
equivalent.
– A contract of sale may be absolute or conditional.
Contract of Sale vs. Contract to
Sell
– Supported by Art. 1479
– A promise to buy and sell a determinate thing
for a price certain is reciprocally demandable.
– An accepted unilateral promise to buy or to sell
a determinate thing for a price certain is
binding upon the promissor if the promise is
supported by a consideration distinct from the
price.
Contract of Sale vs. Contract to
Sell
– In general, laws affecting contracts of sale
affect contracts to sell as well.
– Exception: Primary obligation is not to give,
but to do (to enter into a contract of sale)
– Exception: Art. 1479 (mutual promise to buy
and sell), but would fall under the
policitation stage.
Contracts to Sell Not Under
Genus Sale
– Coronel v. CA: Contract to sell not a contract of sale as
there is no consent/meeting of the minds
– Contract to Sell: Bilateral contract where prospective
seller binds himself to sell property to prospective buyer
upon fulfillment of condition agreed upon. (Obligation is to
enter into a contract of sale)
– Even if suspensive condition fulfilled, ownership does not
automatically transfer as a contract of sale must be
entered into for the transfer.
Contracts to Sell Not Under
Genus Sale
– PNB v. CA: Contract to sell is similar to conditional
sale, where efficacy of vendor’s obligation to
transfer title is only after future event, that if
suspensive condition does not occur, parties would
stand as if conditional obligation never existed.
– If not full payment, then some other condition
which must be fulfilled before contract is converted
from one to sell to sale, or executory sale to
executed sale.
Contracts to Sell Not Under
Genus Sale
– David v. Tiongson: Even if underlying
agreement was contract to sell (stipulation
was deed of sale and title would be issued
only after full payment), there was a
perfected sale.
– Coronel doctrine rejected.
Contracts to Sell Not Under
Genus Sale
– Gomez v. CA: Contract to sell is within the same genus as
contract of sale
– For a contract, like a contract to sell, involves a meeting
of minds between two persons whereby one binds
himself, with respect to the other, to give something or to
render some service. Contracts, in general, are perfected
by mere consent, which is manifested by the meeting of
the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must
be certain and the acceptance absolute.
Contracts to Sell Not Under
Genus Sale
– Leano v CA: In a contract to sell real property on
installments, full payment of purchase price is positive
condition, transfer of ownership and title would occur
after full payment.
– Carrascoso Jr. v. CA: If suspensive condition fulfilled,
contract of sale is perfected. If there was previous delivery
of property, ownership automatically transfers to buyer by
operation of law, without any act from seller
Contracts to Sell Not Under
Genus Sale
– 2 types of contracts to sell:
– Underlying contract embodies bilateral – reciprocal
obligations to give, contract’s efficacy subjected to
suspensive condition
– Primary obligation is to do, to enter into a contract
of sale, subject to fulfillment of obligation of the
buyer to pay full purchase price
Rationale for Contract to Sell

– Coronel v. CA: To protect the seller from a buyer who

intends to buy the property in installment, by withholding
ownership over property until buyer has fully paid.
– Even in a true/conditional contract of sale, transfer of
ownership can be expressly withheld even after delivery.
– Depends on the intentions of the parties during the
consummation stage to determine what the contract is
supposed to be at the point of perfection.
Where Suspensive Condition Pinned
Determines Nature of Sale

– Contract to sell vs. Conditional

Contract of Sale: Contains stipulation
that amounts to suspensive condition
Where Suspensive Condition Pinned
Determines Nature of Sale

– Heirs of San Andres v. Rodriguez: Sale denominated as

Deed of Conditional Sale should be construed to be
absolute sale, without any provision that title is reserved
or the right to unilaterally rescind present until/unless
price is paid. Payment based on survey due and payable in
5 years from execution of formal contract of sale not
condition affecting the sale, merely the manner by which
the payment can be determined and when it should be
paid.
Where Suspensive Condition Pinned
Determines Nature of Sale

– Gonzales v. Heirs of Thomas and Paula Cruz: Provision where lessee-

buyer shall be obliged to purchase property only if lessor – seller can
obtain separate title to the property in his name is a conditional
obligation governed by Art. 1181.
– In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend
upon the happening of the event which constitutes the condition
– Both conditional contract of sale and contract to sell subject to
suspensive condition, main ingredient is stipulation imposing
suspensive condition over effectivity/demandability of the
contract.
Where Suspensive Condition Pinned
Determines Nature of Sale
– Romero v. CA: Parties entered into Deed of Conditional Sale, provision
where if seller fails to eject squatters from property w/in 60 days from
contract date, down payment shall be returned. Seller filed ejectment
case, decision rendered after the 60 day period. Seller offered to return
the down payment
– SC ruled that seller could not seek rescission/challenge contract as
duly perfected.
– 2 types of conditions:
– Imposed on party but not complied, party may refuse to
proceed/waive condition
– Upon perfection of contract, prevent judicial relation from
existing
Where Suspensive Condition Pinned
Determines Nature of Sale

– Seller’s failure to eject squatters gave buyer right

to refuse to proceed with agreement/waive such
agreement under Art. 1545.
– Perfected contract of sale may either be
absolute/conditional depending if the contract is
subject to condition on the passing of title to be
conveyed/obligation of a party.
Where Suspensive Condition Pinned
Determines Nature of Sale

– Condition in this sense pertains to reality of

compliance by one party, which would then lead
to demandability of the reciprocal prestation of
the other party
– Where potestative condition imposed not on the
birth of the obligation but on the fulfillment, only
condition is avoided.
Where Suspensive Condition Pinned
Determines Nature of Sale

– Heirs of Pedro Escanlar v. CA: Sale contract contained

stipulation where rights, interests and participations shall
become effective only upon approval by the Court.
– Held that non – happening of the condition does not affect the
validity of contract. Only effectivity, not validity of contract is
affected.
– Demandability/Efficacy of Sale vs Requisites by which it
becomes a valid contract: Contract to sell constitutes valid
contract, but may be not wholly demandable until suspensive
condition on which it was based is fulfilled.
Where Suspensive Condition Pinned
Determines Nature of Sale

– Akang v. Municipality of Isulan, Sultan Kudarat:

Distinguishes between Contract of Sale vs. Contract to
Sell:
– Contract of Sale: Based on Art. 1458, title passes to
buyer upon delivery of the thing sold
– Contract to Sell: Based on Art. 1479, ownership is
retained by seller and not to pass to buyer until full
payment of purchase price.
Requisite Stipulations for
Contract to Sell
– Reservation of ownership of subject matter with
the seller, even if there is prior delivery to the
buyer
– Reservation of right of seller to rescind the
contract extrajudicially in event suspensive
condtion does not happen
– Full payment of purchase price
Reservation of Ownership to
Seller
– Considers essence of contract of sale under Art. 1458
which is passing of ownership of subject matter.
– In contract of sale, ownership over subject matter
passes to buyer as result of tradition
– In contract to sell, delivery does not pass ownership
even if buyer is in possession, under stipulation that
ownership shall pass only upon full payment of
purchase price.
Reservation of Ownership to
Seller
– Manuel v. Rodriguez: In contract of sale, delivery
effectively transfers ownership of subject matter to buyer,
seller cannot recover ownership due to non-payment of
price w/o rescinding contract via judicial action; In
contract to sell, delivery does not transfer ownership to
buyer, non-payment of price prevents obligation from
arising, seller retains ownership.
– Padilla v. Spouses Paredes: Stipulations which signify
intent by sellers to retain title until buyer fully paid
purchase price is characteristic of contract to sell.
Reservation of Ownership to
Seller
– Positive agreement/stipulation must accompany perfection
of sale, as delivery/tradition would transfer ownership
without any other express stipulation.
– City of Cebu v. Heirs of Candido Rubi: Agreement between
buyer and seller where offer and acceptance was for a bid
price paid in cash, not staggered payments, and with no
express or apparent intent to reserve ownership over
property until full price was paid, is indicative of a
contract of sale, not a contract to sell.
Reservation of Ownership to
Seller
– Even in absence of express stipulation, if clearly evidenced by
acts/omissions of parties subsequent to perfection of contract that the
seller does not intend to transfer title to buyer until full payment of
purchase price, then contract is to sell.
– Adelfa Properties Inc. v. CA: Intent of seller not to transfer ownership
until full payment was evident even without express stipulation.
Buyer was not obliged to return possession/ownership in the event of
non-payment, no stipulation regarding reversion or reconveyance of
property in the event buyer does not comply with obligation.
Considered implied agreement. Allowed under Art. 1478.
Reservation of Ownership to
Seller
– Babasa v. CA: Conditional Sale of Registered Lands requiring
final payment of balance of purchase price when seller is able to
obtain titles to the properties 20 months after date of sale, is
considered an absolute sale, ownership passed to buyer via
constructive delivery, obtained upon execution of contract
without reservation of title on the part of the seller, and actual
delivery, obtained when buyer took unconditional possession of
the lots and had them leased.
– Santos v. CA: Art. 1458 requires seller to transfer ownership to
buyer under a contract of sale. Absent a valid transfer it is
considered contract to sell.
Reservation of Ownership to
Seller
– Test to determine nature of contract: After
the fact(after perfection) determination of
whether seller has by tradition transferred
ownership to the buyer.
– Tradition does not determine contract, but
is a consequence of the contract.
Reservation of Ownership to
Seller
– If seller refuses to transfer despite obligation to
do so, then it is breach which entitles buyer to
rescission.
– If express stipulation that seller will not transfer
ownership until after payment of purchase price,
refusal of seller to follow tradition and transfer
ownership not considered breach.
Agreement as to Deed of
Absolute Sale
– Important factor: present stipulation that seller shall execute a
deed of absolute sale upon completion of payment of purchase
price by buyer, if agreement between parties embodied in private
document.
– Equivalent to reservation of title under seller until buyer has fully
paid.
– Chua v. CA: Absence of formal deed of reconveyance strong
indication that parties did not intend immediate transfer of
ownership, but transfer after purchase price was fully paid. Seller
retained possession of certificate of title and all other documents.
Agreement as to Deed of
Absolute Sale
– Existence of execution of deed of absolute sale only upon completion of
payment of purchase price is strong consideration that underlying
agreement was contract to sell.
– Dignos v. CA: Despite presence of express stipulation that sellers will
execute final deed of absolute sale upon payment of purchase price,
not considered contract to sell.
– Nowhere in the contract that there was a stipulation that seller
would retain title until payment
– No stipulation where seller has right to unilaterally rescind
contract the moment buyer fails to pay.
Agreement as to Deed of
Absolute Sale
– Only a receipt was issued by seller for partial payment,
considered connected with lack of formal deed of sale to
evidence such a sale.
– Chua v. CA: Meeting of minds evidenced by receipt where
earnest money will be forfeited should buyer fail to pay
balance of purchase price, indicator that agreement was
contract to sell. Similar to seller reserving ownership until
full payment, & grant of right by seller to unilaterally
rescind contract the moment buyer fails to pay.
Reservation of Right to Extrajudicially
Rescind In Event of Non-Fulfillment of
Condition
– Clause which reserves the right of seller to rescind
contract w/o judicial action once buyer fails to pay appears
inconsistent to the very nature of contract to sell, where
the contract is subject to suspensive condition.
– Contract to sell: when suspensive condition is not fulfilled,
no further remedy necessary.
– If delivery was already made, then seller has to seek court
action to recover possession if buyer refuses to return.
– Action is not rescission but recovery of possession.
Reservation of Right to Extrajudicially
Rescind In Event of Non-Fulfillment of
Condition
– Art. 539 & 433
– Possession is the holding of a thing or the
enjoyment of a right
– Actual possession under claim of ownership
raises disputable presumption of ownership.
The true owner must resort to judicial process
for the recovery of the property.
Reservation of Right to Extrajudicially
Rescind In Event of Non-Fulfillment of
Condition
– Contract of sale: Non fullfillment of condition would authorize
seller to rescind contract/waive the condition and seek
enforcement of contract under Art. 1545
– Babasa v. CA: Stipulation only affects performance of obligation,
not performance of contract. If other party promised that condition
would happen/be performed, the injured party may treat
nonperformance as breach.
– Dignos v. CA: Absence of stipulation giving the seller right to
unilaterally rescind contract once buyer fails to pay, indicator of
absolute sale despite it being titled as conditional.
Reservation of Right to Extrajudicially
Rescind In Event of Non-Fulfillment of
Condition
– Contract of sell does not require specific stipulation that seller has right
to rescind/terminate if condition does not happen.
– Such stipulation must be present in contract of sale
– Topacio v. CA: Nowhere in transaction was it indicated that seller
reserved title to property nor allowed for automatic rescission in case of
default. If buyer could not pay, then seller cannot rescind contract unless
through court action under Art. 1592 and Art. 1191.
– Earnest money does not determine if contract is for sale or to sell, as even
if a susbtantial part of the price was paid, it alone does not convert
contract to one of sale.
Reservation of Right to Extrajudicially
Rescind In Event of Non-Fulfillment of
Condition
– PNB v. CA: Art. 1482 on earnest
money only provides disputable
presumption, when latter agreements
between parties do not contain
substantial condition precedents,
cannot be concluded that contract was
one to sell.
 Issue of substantial breach issue
Relevant only in Contracts of Sale

In CONTRACT OF SALE, RECESSION

can be availed of only in case there has
been substantial breach;
In CONTRACT TO SELL, the doctrine of
substantial breach has no application since
the non-happening of the condition by
whatever means or reason(substantial or
not) EXTINGUISHES the contract.
 Crux of the distinction
 OBLIGATION TO TRANSFER OWNERSHIP
CONTRACT OF SALE - Reciprocal obligation in the nature of resolutory
condition.
CONTRACT TO SELL- Reciprocal obligation in the nature of suspensive
condition.

 PERFORMANCE STAGE
CONTRACT OF SALE – delivery would transfer the ownership and if failed
to do so recession must be necessarily done .
CONTRACT TO SELL- ownership is transferred upon full payment and in
case of non fulfillment court action is no longer needed.
 EXECUTION STAGE
CONTRACT OF SALE – Contract may be rescinded by mere notarial
notice of recession under Article 1592.
CONTRACT TO SELL- Mere notice of cancellation would be sufficient.
 GOVERNING PROVISIONS
AND PRINCIPLES FOR
REMEDIES OF RESCISSION
AND CANCELLATION
1. PRE-MACEDA LAW PERIOD
2. RULINGS AFTER THE PASSAGE OF MACEDA LAW.
1. Pre-Maceda
Law Period
Article 1191- Provides the power of rescission in reciprocal contracts in
general.
Article 1591 and 1592 ( THE POWER TO RESCIND CONTRACTS
OF SALE COVERING IMMOVABLES)
Article 1591- Should the vendor have reasonable grounds to fear the
loss of immovable property sold and its price may immediately sue for
rescission .
Article 1592- Provides when automatic rescission may have been
stipulated, buyer may still remove the default by payment if what is due
as long as no demand for rescission.
A. Remedy of Rescission under
Articles 1191 and 1592 have no
application to contracts to sell.
“ In a contract of sale, the title of the property passes to the vendee upon
the delivery of the thing sold; while in the contract to sell, ownership is,
by agreement reserved in the vendor and is not pass until full payment
of the purchase price. “ ONG VS. COURT OF APPEALS

The obligor’s failure to comply with an obligation is already extant, not a failure
of a condition to render binding that obligation.
 2. Rulings after the Passage of
Maceda Law
A. Maceda Law does not overcome other applicable rules to Contracts to
Sell.
B. The issue of “SUBSTANTIAL BREACH”
C. Equity resolution for contracts to sell.
D. Formal notice required to cancel contracts to sell
E. Rescission principles applied to contracts to sell
RECAP
OF THE
RULINGS
A. AT PERFECTION
1. REQUISITE CONTRACTUAL STIPULATIONS- IN A
CONTRACT TO SELL THERE MUST BE STIPULATIONS
THAT:
A. Full payment of the purchase price by the buyer constitutes a suspensive condition on
the obligation of the seller to sell and transfer ownership of the subject matter.
B. Accompanied by stipulations or agreements that:
(i) ownership shall remain with the seller until full payment
(ii) specific right is granted to the seller extra judicially rescind or cancel the
contract in case of default.
2. STIPULATION ON EXECUTION OF DEED OF ABSOLUTE
SALE
3. STIPULATION ON THE PAYMENT OF THE PRICE
B. DURING CONSUMMATION
1. LEGAL EFFECT OF DELIVERY MADE
CONTRACT OF SALE CONTRACT TO SELL

The title is passes to the buyer upon Ownership is by agreement,

delivery of the thing sold. reserved in the seller and is not pass
to the buyer until full payment.
1. LEGAL EFFECT OF FULL PAYMENT OF PRICE- In contract
to sell, full payment constitutes the happening of the condition which
would convert it into an executory of sale.
2. LEGAL EFFECT OF NON-PAYMENT OF PRICE

CONTRACT OF SALE CONTRACT TO SELL

Non-payment is a BREACH. Non payment is NOT A

(RECESSION) BREACH but PREVENTS TO
CONVEY THE TITLE.
C. REMEDIES AVAILABLE
1. When Condition on Price
payment not fulfilled.
CONTRACT OF
SALE(CONDITIONAL SALE)
1. If delivered, cannot recover
ownership unless rescinded.
2. Non-happening of conditions may
still seek specific performance
3. Basis of rescission is substantial
breach
4. Rescission may be pursued with
forfeiture of amount paid when
expressly provided
CONTRACT TO SELL
1. If buyer refuses to deliver, then
no action is necessary.
2. Non-happening of conditions
prevents contracts from existing.
3. Issue of breach is irrelevant
4. It becomes imperative to return
the amount paid since there is no
breach.
Question!

– Tino and Emily were former grade school seatmates. Decades of moons
later, Emily sold to Tino five parcels of land situated in Cavite City.
– Tino paid P500,000 upon signing of the contract. The balance was agreed
to be paid three installments. Their written agreement further contains
the following provisions:
– Failure of Tino to pay the purchase price in full shall cause the
rescission of the contract and forfeiture of one-half percent of the
total amount paid to Emily;
– Emily shall retain the possession of the property until a Deed of
Absolute Sale shall be executed by her in favor of the Tino; and
– Upon and after the full payment of the balance, a Deed of Absolute
Sale shall be executed by Emily in favor of Tino.
Question!

– For reasons unknown, Tino reneged on his promise to pay the last
installment.
– After giving her friend several chances to honor his contractual
commitment, Emily was thus constrained to send a notarized
letter to Tino stating the intended rescission of the contract and
forfeiture of payments he made.
– One year later, Tino offered to pay the balance. She told Tino to
keep his money. She also told him that she already sold the pieces
of property to her former high school boyfriend, Bart.
Question!

– Q: Who owns the property pending full payment of the purchase

price?
– Q: Is it necessary for necessary for Emily to execute a notarial
rescission of the contract to sell?
– Q: Can Emily rescind or cancel the contract to sell without court
intervention?
– Q: Is R.A. 6552 (commonly known as the Maceda Law), applicable in
this case?
– Q: Did Emily acted within her rights when she sold the property to
Bart?
THANKYOU