UST Golden Notes 2011

SALES
SALES Q:Whatisasale? A: Sale is a contract where one party (seller) obligateshimselftotransfertheownershipofand to deliver a determinate thing, while the other party (buyer) obligates himself to pay for said thing a price certain in money or its equivalent. (Tolentino,p.1,2000ed.) I.INTRODUCTION A.DEFINITIONOFTHECONTRACTOFSALE Q:Whatisacontractofsale? A: By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in moneyoritsequivalent.(Art.1458,NCC) KINDSOFSALES Q:Whatarethedifferentkindsofsales? A:Asto: 1. Natureofthesubjectmatter: a. Saleofrealproperty; b. Saleofpersonalproperty 2. Valueofthethingsexchanged: a. Commutativesale; b. Aleatorysale 3. Whether the object is tangible or intangible: a. Sale of property (tangible or corporeal);
Note: A tangible object is also called choseinpossession
6.
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b. Illicitobject Presenceorabsenceofconditions: a. Absolute b. Conditional Wholesaleorretail: a. Wholesale b. Retail Proximateinducementforthesale: a. Salebydescription b. Salebysample c. Salebydescriptionandsample Whenthepriceistendered: a. Cashsale b. Saleoninstallmentplan
ASTOPRESENCEORABSENCEOFCONDITION ABSOLUTESALE Q:Whenisasaleabsolute?
4.
5.
Sale of a right (assignment of a right, or a credit or other intangibles such as copyright, trademark,orgoodwill); Note: An intangible object is a choseinaction. Validityordefectofthetransaction: a. Valid b. Rescissible c. Voidable d. Unenforceable e. Void Legalityoftheobject: a. Licitobject b.
A: The sale is absolute where the sale is not subject to any condition whatsoever and where the title passes to the buyer upon delivery of the thingsold.(DeLeon,p.15) Q:Whenisadeedofsaleconsideredabsolutein nature? A: A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay withinafixedperiod. CONDITIONALSALE Q:Whenisasaleconditional? A: It is conditional where the sale contemplates a contingency,andingeneral,wherethecontractis subject to certain conditions, usually in the case of the vendee, the full payment of the agreed purchase price and in the case of the vendor, the fulfillmentofcertainwarranties.(DeLeon,p.15)
ACADEMICSCHAIR:LESTERJAYALANE.FLORESII UNIVERSITYOFSANTOTOMAS VICECHAIRSFORACADEMICS:KARENJOYG.SABUGO&JOHNHENRYC.MENDOZA Facultad de Derecho Civil V ICE C HAIR FOR A DMINISTRATION AND F INANCE : J EANELLE C. L EE VICECHAIRSFORLAYOUTANDDESIGN:EARLLOUIEM.MASACAYAN&THEENAC.MARTINEZ
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UST GOLDEN NOTES 2011
Q: Distinguish a conditional sale from an absolutesale A:

CONDITIONALSALE Onewheretheselleris grantedtherightto unilaterallyrescindthe contractpredicatedon thefulfillmentornon fulfillment,asthecase maybe,ofthe prescribedcondition. ABSOLUTESALE Onewherethetitleto thepropertyisnot reservedtotheselleror ifthesellerisnot grantedtherightto rescindthecontract basedonthefulfillment ornonfulfillment,asthe casemaybe,ofthe prescribedcondition. Contracts,firstthe contracttosell(whichis conditionalor preparatorysale)and second,thefinaldeedof saleortheprincipal contractwhichis executedafterfull paymentofthepurchase price
B.ESSENTIALREQUISITES OFACONTRACTOFSALE Q:Whataretheelementsofacontractofsale? A:ANE 1. Accidental elements dependent on partiesstipulations;Examples: a. Conditions b. Interest c. time&placeofpayment d. penalty 2. Natural elements those that are inherent even in absence of contrary provision. E.g.warranties 3. Essentialelementsforvalidity: a. Consent b. Determinatesubjectmatter c. Consideration Q: What is the effect and/or consequence of the absence of consent of the owner in a contract of saleofsaidproperty? A: The contract of sale is void. One of the essential requirements of a valid contract of sale istheconsentoftheowneroftheproperty. FORMALITIESREQUIRED Q: Is there a formal requirement for the validity ofacontractofsale? A: GR: No form is required. It is a consensual contract.(Pineda,p.78) XPN: Under Statute of Frauds, the following contracts must be in writing; otherwise, they shallbeunenforceable: 1. Sale of personal property at a price not lessthanP500; 2. Sale of a real property or an interest therein; 3. Sale of property not to be performed withinayearfromthedatethereof; 4. When an applicable statute requires that the contract of sale be in a certain form.(Art.1403,par.2)
Note: Statute of Frauds applies only to executory contracts but not to partially executed contracts. (Pineda,p.81)
Contractexecuted betweenthesellerand thebuyer
Q: What is the effect of the nonperformance of the condition or if the condition did not take place? A: Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. Unlike in a non fulfillmentofawarrantywhichwouldconstitutea breach of the contract, the nonhappening of the condition, although it may extinguish the obligation upon which it is based, generally does notamounttoabreachofacontractofsale. Q: In a sale with assumption of mortgage, is the assumption of mortgage a condition without which there will be no perfected contract of sale? A: Yes. In sales with assumption of mortgage, the assumption of mortgage is a condition to the sellers consent so that without approval by the mortgagee, no sale is perfected (Ramos v. Court ofAppeals,G.R.No.108294Sept.15,1997)
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CIVILLAWTEAM: ADVISER:ATTY.ELMERT.RABUYA;SUBJECTHEAD:ALFREDOB.DIMAFELIXII; ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ. FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM
SALES
Q: Are there instances where the Statute of Frauds is not essential for the validity of a contractofsale? A:Yes. 1. When there is a note or memorandum inwritingandsubscribedtobytheparty or his agent (contains essential terms of thecontract); 2. When there has been partial performance/execution (seller delivers with the intent to transfer title/receives price); 3. When there has been failure to object to presentation of evidence aliunde as to the existence of a contract without being in writing and which is covered by theStatuteofFrauds; 4. When sales are effected through electroniccommerce.(Villanueva,p.92) C.STAGESOFACONTRACTOFSALE Q: What are the 3 stages involved in the formationofacontractofsale? A: 1. Negotiation/Policitation 2. Perfection 3. Consummation 1.NEGOTIATION/PREPARATORY A.OFFER Q:Whataretherulesintheconceptionstage abouttheoffer? A: OFFERIS RULE FLOATED ANDITIS:
Offeris floated Priortoacceptance,maybe withdrawnatwillbyofferorbutno authoritytomodifyit Mustbeacceptedwithintheperiod, otherwise,extinguishedattheendof periodandmaybewithdrawnatwill byofferorbutmustnotbearbitrary, otherwise,liablefordamages Extinguishedbyhappening/non happeningofcondition Continuestobevaliddependingupon circumstancesoftime,placeand person Originalofferisextinguished
B.OPTIONCONTRACT Q:Whatisanoptioncontract? A: A contract granting a privilege in one person, forwhichhehaspaidaconsideration,whichgives him the right to buy certain merchandise or specified property, from another person, at anytimewithintheagreedperiod,atafixedprice.
Note: Consideration in an option contract may be anything or undertaking of value, unlike in sale whereitmustbeapricecertaininmoney.
Q:Whatisthenatureofanoptioncontract? A: It is a preparatory contract in which one party grants to another, for a fixed period and at a determined price, the privilege to buy or sell, or to decide whether or not to enter into a principal contract. It binds the party who has given the option not to enter into the principal contract with any other person during the period designated, and within that period, to enter into such contract with the one whom the option was granted, if the latter should decide to use the option.Itisaseparateanddistinctcontract.
Note: If the option is perfected, it does not result in the perfection or consummation of the sale. (Diaz, p.7)
Q:Whatistheperiodwithinwhichtoexercise theoption? A: 1. Withinthetermstipulated 2. If there is no stipulation, the court may fixtheterm

Notes:Anactionforspecificperformancetoenforce theoptiontopurchasemustbefiledwithin10years fromthetimethecauseofactionaccrues. The implied renewal of the lease on a monthto monthbasisdidnothavetheeffectofextendingthe life of the option to purchase which expired at the end of the original lease period. The lessor is correct in refusing to sell on the ground that the option had expired.(2001BarQuestion)
Witha period
Witha condition without period/ condition Witha counter offer
Q:Howisanoptionexercised? A:Anoticeofacceptancemustbecommunicated toofferorevenwithoutactualpaymentaslongas paymentisdeliveredintheconsummationstage.
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Q:Whatistheeffectofaseparateconsideration inanoptioncontract? A: 1. Withseparateconsideration: a. Contractisvalid b. Offeror cannot withdraw offer untilafterexpirationoftheoption c. Is subject to rescission & damages butnotspecificperformance 2. Withoutseparateconsideration: a. the option contract is not deemed perfected b. offer may be withdrawn at any timepriortoacceptance
Note: However, even though the option was not supported by a consideration, the moment it was accepted,contractofsaleisperfected.(Art.1324)
Q: What is the effect of acceptance and withdrawaloftheoffer? A: If the offer had already been accepted and such acceptance has been communicated to before the withdrawal is communicated, the acceptance creates a perfected contract, even if noconsiderationwasasyetpaidfortheoption. In which case, if the offeror does not perform his obligations under the perfected contract, he shall be liable for all consequences arising from the breach thereof based on any of the available remedies such as specific performance, or rescissionwithdamagesinbothcases. C.RIGHTOFFIRSTREFUSAL Q:Whatistherightoffirstrefusal? A: It is a right of first priority, all things and conditions being equal; identity of the terms and conditions offered to the optionee and all other prospective buyers, with optionee to enjoy the right of first priority. It creates a promise to enter into a contract of sale and it has no separate consideration.
Note:Adeedofsaleexecutedinfavorofa3rdparty who cannot be deemed a purchaser in good faith, and which is in violation of the right of first refusal grantedtotheoptioneeisvalidbutrescissible.(Arts. 1380,1381[1])
Q: NDC and Firestone entered into a contract of lease wherein it is stipulated that Firestone has the right of first refusal to purchase the leased property "should lessor NDC decide to sell the same. After the rumor that NDC will transfer the lot to PUP, Firestone instituted an action for specific performance to compel NDC to sell the property in its favor. PUP moved to intervene arguing that the Memorandum issued by then President Aquino ordered the transfer of the whole NDC compound to the Government, which in turn would convey it in favor of PUP. CanFirestoneexerciseitsrightoffirstrefusal? A: Yes. It is a settled principle in civil law that when a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price until afterhehasmadeanoffertoselltothelatterata certainpriceandthelesseehasfailedtoacceptit. The lessee has a right that the lessor's first offer shall be in his favor. (PUP v. CA, G.R. No. 143513, Nov.14,2001) Q: In a 20year lease contract over a building, the lessee is expressly granted a right of first refusal should the lessor decide to sell both the land and building. However, the lessor sold the property to a third person who knew about the lease and in fact agreed to respect it. Consequently,thelesseebringsanactionagainst both the lessorseller and the buyer (a) to rescind the sale and (b) to compel specific performance of his right of first refusal in the sense that the lessor should be ordered to execute a deed of absolute sale in favor of the lessee at the same price. The defendants contend that the plaintiff can neither seek rescission of the sale nor compel specific performance of a "mere" right of first refusal. Decidethecase. A: a. The action filed by the lessee, for both rescission of the offending sale and specific performance of the right of first refusal which was violated, should prosper. The ruling in (Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., G.R. No. 106063, Nov. 21, 1996), a case with similar facts, sustains both rightsofactionbecausethebuyerinthe subsequent sale knew the existence of rightoffirstrefusal,hence,inbadfaith. b. The action to rescind the sale and to compel the right of first refusal will not prosper. (Ang Yu Asuncion v. CA, G.R.
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SALES
No. 109125, Dec. 2, 1994). The court ruled that the right of first refusal is not foundeduponacontractbutonaquasi delictual relationship covered by the principlesofhumanrelationsandunjust enrichment (Art 19, et seq. Civil Code). Hence, the only action that will prosper according to the Supreme Court is an action for damages in a proper forum forthepurpose.(1998BarQuestion)
Note:Itisapplicableonlytoexecutorycontractsand not to contracts which are totally or partially performed.
If a particular form is required under the Statute of Frauds: sale is valid & binding between the parties butnotto3rdpersons.
Q:Maytherightoffirstrefusalbewaived? A: Yes. Like other rights, the right of first refusal may be waived or when a party entered into a compromiseagreement.(Diaz,p.55) Q: Differentiate an option contract from a right offirstrefusal. A: An option contract is a preparatory contract in which one party grants to another, for a fixed period and at a determined price, the privilege to buy or sell, or to decide whether or not to enter into a principal contract. It binds the party who has given the option not to enter into the principal contract with any other person during the period designated, and within that period, to enter into such contract with the one whom the option was granted, if the latter should decide to use the option. It is a separate and distinct contract. In a right of first refusal, while the object may be determinate, the exercise of the right would be dependent not only on the grantors eventual intention to enter into a binding juridical relation with another but also on terms, including the price,thatareyettobefirmedup.(Diaz,p.54)
OPTION CONTRACT Principalcontract; standsonitsown Needs separate consideration Subjectmatter&price mustbevalid Notconditional Notsubject tospecific performance RIGHTOFFIRST REFUSAL Accessory;cannotstand onitsown Doesnotneedseparate consideration Theremustbesubject matterbutpricenot important Conditional Subjecttospecific performance
Note:Theofferofthepersoninwhosefavortheright offirstrefusalwasgivenmustconformwiththesame termsandconditionsasthosegiventotheofferee.
Q: Andres leased his house to Iris for a period of 2years,attherateofP25,000monthly,payable annuallyinadvance.Thecontractstipulatedthat it may be renewed for another 2year period upon mutual agreement of the parties. The contractalsograntedIristherightoffirstrefusal to purchase the property at any time during the lease, if Andres decides to sell the property at the same price that the property is offered for sale to a third party. Twentythree months after execution of the lease contract, Andres sold the house to his mother who is nota thirdparty. Iris filed an action to rescind the sale and to compel Andres to sell the property to her at the same price. Alternatively, she asked the court to extend the lease for another two years on the sameterms. Q: Can Iris seek rescission of the sale of the propertytoAndresmother? A: Iris can seek rescission because pursuant to EquatorialRealtyCo.v.MayfairTheaterrescission is a relief allowed for the protection of one of the contracting parties and even third persons from all injury and damage the contract of sale may causeortheprotectionofsomeincompatibleand preferredright. Q: Will the alternative prayer for extension of theleaseprosper? A: No, the extension of the lease should be upon the mutual agreement of the parties. (2008 Bar Question) Q:Isitnecessarythattherightoffirstrefusalbe embodiedinawrittencontract? A:Yes,thegrantofsuchrightmustbeclearand express.
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D.POLICITATION/MUTUALPROMISETOBUY ANDSELL/ Q:Whatispolicitation? A: Policitation is defined as an unaccepted unilateralpromisetobuyorsell.Thisproducesno judicial effect and creates no legal bond. This is a mereoffer,andhasnotyetbeenconvertedintoa contract. It covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected.(Villanueva,p.6). Q: Is there a legal bond already created in the negotiationstage? A: None. In negotiation (policitation) stage, the offerisfloatedaswellastheacceptance. 2.PERFECTION Q:Whenisacontractofsaledeemedperfected? A: GR: It is deemed perfected at the moment there is meeting of minds upon the thing which is the object of the contract and upon theprice.(Art.1475,par.1) XPN: When the sale is subject to a suspensive conditionbyvirtueoflaworstipulation. Q: Spouses Raet and Mitra negotiated with Gatusaboutthepossibilityofbuyinghisrightsto certain units at a subdivision developed by Phil Ville for them to be qualified to obtain loans fromGSIS.TheypaidanamountforwhichGatus issued them receipts in her own name. GSIS disapproved their loan application. PhilVille advised them to seek other sources of financing. In the meantime, they were allowed to remain inthesubjectpremises.Isthereaperfectedand enforceable contract of sale or at least an agreement to sell over the disputed housing units? A: None. There was no contract of sale perfected between the private parties over the said property, there being no meeting of the minds as to terms, especially on the price thereof. At best, only a proposed contract to sell obtained which did not even ripen into a perfected contract due at the first instance to private respondents' inability to secure approval of their GSIS housing loans. As it were, petitioners and private respondents have not hurdled the negotiation phase of a contract, which is the period from the time the prospective contracting parties indicate interest on the contract to the time the contract comes into existence the perfection stage upon the concurrence of the essential elements thereof. (Sps. Raet & Sps. Mitra v. CA, G.R. No. 128016,Sept.17,1998)
Q: Severino executed two deeds when he sold his property to Henry so that Henry can obtain a loan with Philam Life. He also authorized Henry to file an ejectment suit against the lessees and when the prayer for ejectment was granted, Henry took possession of the property. Severino now claims ownership over the property claimingthatthesaleisfictitiousthereforethere was no sale to speak of. Is Severinos contention correct? A:No.Thereisaperfectedcontractofsaledueto the second deed of sale in this case. The basic characteristic of an absolutely simulated or fictitious contract is that the apparent contract is not really desired or intended to produce legal effectsoralterthejuridicalsituationoftheparties in any way. However, in this case, the parties already undertook certain acts which were directed towards fulfillment of their respective covenants under the second deed, indicating that they intended to give effect to their agreement. Further, the fact that Severino executed the two deeds, primarily so that Henry could eject the tenant and enter into a loan/mortgage contract with Philam Life, is a strong indication that he intendedtotransferownershipofthepropertyto Henry.Forwhy(HernandoR.Penalosav.Severino Santos,G.R.No.133749,Aug.23,2001) Q: What is the effect of Severinos and Henrys failure to appear before the notary public who notarizedthedeed? A: None. The nonappearance of the parties before the notary public who notarized the deed does not necessarily nullify nor render the parties' transaction void ab initio. Article 1358, NCConthenecessityofapublicdocumentisonly for convenience, not for validity or enforceability. Where a contract is not in the form prescribed by law, the parties can merely compel each other to observe that form, once the contract has been perfected.
Note: Contracts are obligatory in whatever form they may have been entered into, provided all essential requisites are present. (Penalosa v. Santos, G.R.No.133749,Aug.23,2001)
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SALES
Q:Whenisanauctionsaleperfected? A: A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. (Art. 1476,par.2) Q: Does the seller have the right to bid in an auctionsale? A: Yes. The seller has the right to bid provided thatsuchrightwasreservedandnoticewasgiven tothateffect.(Pineda,p.53) Q:Whenisasaleofforeignexchangeconsidered perfected? A: A sale of foreign exchange is considered perfected from the moment the Bangko Sentral ng Pilipinas authorizes the purchase, even if the foreign bank has not yet honored the letter of credit. (Pacific Oxygen and Acetylene Co. v. CentralBank,G.R.No.L21881,Mar.1,1968) 3.CONSUMMATION Q: How does the consummation stage in a contractofsaletakeplace? A: It takes place by the delivery of the thing togetherwiththepaymentoftheprice. Q: A and PDS Development Corp. executed a contract to sell a parcel of land. A died without having completed the installment on the property. His heirs then took over the contract tosellandassumedhisobligationsbypayingthe selling price of the lot from their own funds, and completed the payment. To whom should the finalDeedofAbsoluteSalebeexecutedbyPDS? A: Having stepped into the shoes of the deceased with respect to the said contract, and being the ones who continued to pay the installments from their own funds, As heirs became the lawful owners of the said lot in whose favor the deed of absolute sale should have been executed by vendor PDS. (Dawson v. Register of Deeds of QuezonCity,G.R.No.120600Sept.22,1998) D.OBLIGATIONSCREATED OBLIGATIONSOFTHEBUYER Q:Whataretheobligationsofthebuyer? A: 1. Paymentoftheprice GR: Seller is not bound to deliver unless thepurchasepriceispaid XPN: A period of payment has been fixed 2. Acceptdeliveryofthingsold 3. Payforexpensesofdelivery
Note: A grace period granted the buyer in case of failure to pay is a right not an obligation. Non payment would still generally require judicial or extrajudicialdemandbeforedefaultcanarise.
Q:Whataretheotherobligationsofthebuyer? A: 1. To take care of the goods without the obligation to return, where the goods are delivered to the buyer and he rightfullyrefusestoaccept;
Note: The goods in the buyers possession areatthesellersrisk.
2. 3. To be liable as a depositary if he voluntarilyconstitutedhimselfassuch; To pay interest for the period between delivery of the thing and the payment ofthepriceinthefollowingcases: a. shouldithavebeenstipulated; b. shouldthethingsoldanddelivered producesfruitsorincome;or c. should he be in default, from the time of judicial or extrajudicial demand for the payment of the price.
OBLIGATIONSOFTHESELLER Q:Whataretheobligationsoftheseller? A:DDTWTP 1. Deliverthethingsold; 2. Deliver fruits & accessions/accessories accruingfromperfectionofsale; 3. Transfertheownership; 4. Warranties; 5. Takecareofthething,pendingdelivery, withproperdiligence; 6. Pay for the expenses of the deed of sale unless there is a stipulation to the contrary
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E.CHARACTERISTICSOFACONTRACTOFSALE Q: What are the characteristics of a contract of sale? A: 1. Consensual 2. Bilateral 3. GR:Commutative XPN: Aleatory In some contracts of sale, what one receives may in time be greater or smaller than what he has given.(Tolentino,p.2,2000ed) 4. Principal 5. Title and not a mode of acquiring ownership 6. Onerous 7. Reciprocal 8. Nominate Q: Is a contract of sale identified as such based on the nomenclature given to the contract by theparties? A: No. Contracts are not defined by the parties but by principles of law. To determine the nature of the contract, the courts are not bound by the name or title given to it by the contracting parties. It is the intention of the parties which controls. (Diaz, Law on Sales as expounded by Jurisprudence,2006ed.,p.1) Q: What are the factors to be considered in determiningthenatureofthecontract? A: 1. Languageofthecontract 2. Conductofparties F.DISTINCTIONSOFTHECONTRACTOFSALE WITHOTHERCONTRACTS Q:DistinguishSalefromthefollowing: 1. Donation.
SALE Onerous Consensual LawonSales DONATION Gratuitous/onerous Formalcontract LawonDonation
2.
Barter
SALE BARTER Considerationisgiving Considerationis ofmoneyaspayment givingofathing Ifconsiderationconsistspartyinmoney&partlyby thinglookatmanifestintention; IfintentionisnotclearArt.1468 Valueofthingismore Valueofthingisequal thanamountofmoney= orlessthanamountof Barter money=Sale Bothare governedbylawonsales
3. AgencytoSell
SALE Buyerpaysforprice ofobject AGENCYTOSELL Agentnotobligedtopay forprice;must accountforthe proceedsofthesale. Principalremainsthe ownerevenifthe objectdeliveredto agent Agentassumesnopersonal liabilityaslongas withinauthoritygiven Mayberevoked unilaterallyevenw/o ground Agentnotallowedtoprofit Personalcontract
Buyerbecomes ownerofthing
Sellerwarrants Notunilaterally revocable Sellerreceivesprofit Realcontract
4. DacionenPago
DACIONENPAGO Contractwherepropertyis alienatedtoextinguishpre existingcredit/debt Novatescreditordebtor relationshipintosellerbuyer SALE Nopreexisting credit Buyerseller relationship
5. Lease
SALE Obligationtoabsolutely transferownershipof thing Considerationistheprice Sellerneedstobeownerof thingtotransfer ownership. Note:Leasewithoptionto buyreallyacontractof salebutdesignatedas leaseinname. LEASE Useofthingisfor specifiedperiodonly withobligationto return Considerationisthe rental
Lessorneednotbe owner
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SALES
G.CONTRACTTOSELL Q:Whatisacontracttosell? A: It is one form of conditional sale where ownership or title is retained by the seller until the fulfillment of a positive suspensive condition, normally the payment of the purchase price by the buyer in the manner agreed upon. (Gomez v. CA,et.al.,G.R.120747,Sept.21,2000) Q: Distinguish a contract to sell from a contract ofsale. A:
CONTRACTOFSALE CONTRACTTOSELL Asregardstransferofownership Ownershipistransferred Ownershipis tothebuyerupon transferreduponfull deliveryoftheobjectto paymentofthe him. purchaseprice. Note:Vendorhaslost Note:Priortofull andcannotrecover payment,ownershipis ownershipuntiland retainedbytheseller. unlessthecontractis resolvedorrescinded Astonumbersofcontractsinvolved Therearetwocontracts: 1.Thecontracttosell Note:Conditionalor preparatorysale Thereisonlyone contractexecuted 2.Thedeedofabsolute betweenthesellerand sale thebuyer. Note:Theprincipal contractisexecuted afterfullpaymentofthe purchaseprice. Paymentasacondition Fullpaymentofthe priceisapositive Nonpaymentofthe suspensivecondition. priceisaresolutory Note:Failuretofully condition.Vendorloses paythepriceisnota ownershipoverthe breachbutanevent propertyandcannot thatpreventsthe recoverituntiland obligationofthevendor unlessthecontractis toconveytitlefrom resolvedorrescinded. becomingeffective. Remediesavailable 1. Specific 1. Resolution 2. Performance 2. Damages 3. Rescission 4. Damages
document entitled "Receipt of Down Payment" in favor of Alcaraz for the purchase of their house and lot, with the condition that Ramona will make a down payment upon execution of the document. The Coronels would then cause the transfer of the property in the name of Ramonaandwillexecuteadeedofabsolutesale in favor of Ramona. Ramona paid the downpayment as agreed. Is there a perfected contractofsaleoramerecontracttosell? A: The agreement could not have been a contract tosellbecausethesellershereinmadenoexpress reservation of ownership or title to the subject parcel of land. The Coronels had already agreed tosell thehouseandlot theyinheritedfromtheir father, completely willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order. However, the TCT was then still in the name of their father, that is why they caused the issuance of a new TCT in their names upon receipt of the down payment. As soon as the new TCT is issued in their names, they were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise. This suspensive condition was fulfilled. Thus, the conditional contract of sale became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which they unequivocally committed themselves to do as evidenced by the "Receipt of Down Payment." (Coronel, et al. v. CA, G.R. No. 103577, Oct. 7, 1996) Q: Instead of executing a deed of Absolute Sale in favor of Ramona, the Coronels sold the property to Catalina and unilaterally and extrajudicially rescinded the contract with Ramona. Ramona then filed a complaint for specific performance. Will Ramonas action prosper? A: Yes. Under Article 1187, the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition. Hence, petitionersellers' act of unilaterally and extrajudicially rescinding the contract of sale cannot be justified, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. (Coronel, et al. v. CA, G.R. No. 103577, Oct. 7, 1996)
Q: Having agreed to sell property which they inherited from their father, which was then still in their fathers name, the Coronels executed a
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Q:Whataretheinstanceswhenwhatisinvolved isacontracttosell? A: 1. Wheresubjectmatterisindeterminate 2. Saleoffuturegoods 3. Stipulation that deed of sale & corresponding certificate of sale would beissuedonlyafterfullpayment II.PARTIESTOACONTRACTOFSALE Q:Whoarethepartiestoacontractofsale? A: 1. Seller one who sells and transfers the thingandownershiptothebuyer 2. Buyer one who buys the thing upon payment of the consideration agreed upon A.CAPACITYOFTHEPARTIES Q:Whomayenterintoacontractofsale? A: GR: Any person who has capacity to contract or enter into obligations, may enter into a contract of sale, whether as partyseller or as partybuyer. XPN: 1. Minors, insane and demented persons and deafmutes who do not know how towrite 2. Persons under a state of drunkenness orduringhypnoticspell 3. Husband and wife sale by and betweenspouses
Note: Contracts of sale entered by such legally incapacitated persons are merely voidable, subject to annulment or ratification. However, the action for annulment cannot be instituted by the person who is capacitated since he is disqualified from alleging the incapacity of the personwithwhomhecontracts. However,statusofprohibitedsalesbetween spousesisnotmerelyvoidable,butnulland void.
a.
when a separation of property was agreed upon in the marriage settlements;or b. when there has been a judicial separation of property agreed uponbetweenthem B.ABSOLUTEINCAPACITY
Q:Whoarethoseabsolutelyincapacitatedto enterintoacontractofsale? A: 1. Unemancipatedminors(Art.1327,NCC); 2. Insane or demented persons, and deaf mutes who do not know how to write (Art.1327,NCC) Q: May a capacitated person file an action for annulment using as basis the incapacity of the incapacitatedparty? A: No. He is disqualified from alleging the incapacity of the person whom he contracts (Art. 1397,NCC); Q: In a defective contract, where such defect consists in the incapacity of a party, does the incapacitated party have an obligation to make restitution? A: GR:heincapacitatedpersonisnotobligedto makeanyrestitution. XPN:insofarashehasbeenbenefitedbythe thing or price received by him. (Art. 1399, NCC)
C.RELATIVEINCAPACITY Q: Who are those relatively incapacitated to enterintoacontractofsale? A: 1. Spouses(Art.1490,NCC) 2. Agents, Guardians, Executors and Administrators, Public Officers and Employees, Court Officers and Employees, and others specially disqualifiedbylaw.(Art.1491,NCC)
Note: Under Art. 1490 of the NCC, spouses cannot sellpropertytoeachother,except: a. When a separation of property was agreedinthemarriagesettlements;or b. When there hasbeen a judicialseparation ofpropertyagreeduponbetweenthem.
XPNtoXPN: 1. Where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonablepricetherefor. 2. Incaseofsalebetweenspouses:
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Q: What is the status of the following contracts ofsale? A: 1. Thatenteredintobyminors: a. Merely voidable, subject to annulmentorratification b. Action for annulment cannot be instituted by the person who is capacitated since he is disqualified from alleging the incapacity of the person with whom he contracts (with partial restitution in so far as the minor is benefited) where necessaries are sold and delivered toaminororotherpersonwithout capacity to act, he must pay a reasonableprice(Art.1489) 2. Saleby&betweenspouses(Art.1490): a. Status of prohibited sales between spouses: GR:Nullandvoid XPN: In case of sale between spouses: i. When a separation of property was agreed upon in themarriagesettlements;or When there has been a judicial separation of property agreeduponbetweenthem XPN: Even when the property regime prevailing was the conjugal partnership of gains, the Supreme Court held the sale by the husband of a conjugal property without the consent of the wife is void, not merely voidable under Art. 124 of the Family Code since the resulting contract lack one of the essential elements of full consent. (Guiang v. CA, G.R. No. 125172, June 26, 1998) Between Common Law Spouses also nullandvoid. In CalimlimCanullas v. Fortun, the Court decided that sale between common law spouses is null and void because Art. 1490 prohibits sales between spouses to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage. The prohibition applies to a couple living as husband and wife without the benefit of marriage, otherwise, the condition of those incurred guilt would turn out to be better than those in legal union. (CalimlimCanullasv.Fortun,et.al.,G.R. No.L57499,June22,1984) But when the registered property has been conveyed subsequently to a third party buyer in good faith and for value, then reconveyance is no longer available to commonlaw spouseseller, since under the Torrens system every buyer has a right to rely upon the title ofhisimmediateseller.(Cruzv.CA,G.R. No.120122,Nov.6,1997)
3.
ii.
b.
Reasons: i. Preventdefraudingcreditors ii. Avoid situation where dominant spouse takes advantage over the weaker spouse iii. Avoid circumvention on prohibition of donation betweenspouses rd Contractofsalewith3 parties: GR: Under the law on sales, it would seem that a spouse may, without the consent of the other spouse, enter into sales transactions in the regular or normal pursuit of their profession, vocation or trade. (in relation with Art.73,FamilyCode)
Q:Whohastherighttoassailthevalidityofthe transactionbetweenspouses? A:Thefollowingaretheonlypersonswhocan questionthesalebetweenspouses: 1. The heirs of either of the spouses who havebeenprejudiced; 2. Priorcreditors;and 3. The State when it comes to the paymentofthepropertaxesdueonthe transactions
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Q:Whoarethepersonswithrelativeincapacitytobethevendeeinacontractofsale? A:AGECOP
RELATIVELY INCAPACITATEDTOBUY PROPERTIESINVOLVED Propertyentrustedtothemfor administrationorsale XPN:Whenprincipalgavehis consent Propertyofthewardduring periodofguardianship Note:Contractsenteredby guardianinbehalfofwardare rescissibleifwardsufferslesion bymorethanofthevalueof property. Propertyoftheestateunder administration
Propertyandrightsinlitigationor leviedupononexecutionbefore thecourtundertheirjurisdiction PropertyoftheStateentrustedto themforadministration
STATUSOFSALE
RATIFICATION
Agents
Voidable
Guardian
Canberatifiedafterthe inhibitionhasceased Reason:theonlywrongthat subsistsistheprivatewrong totheward,principalor estate;andcanbecondoned bytheprivateparties themselves
Executorsand administrators Courtofficersand employees

Othersspecially disqualifiedbylaw Pubicofficersand employees
Void
Cannotberatified Reason:Itisaprivatewrong. (Villanueva,LawonSales,p. 3031)
Note:Prohibitionsareapplicabletosalesinlegalredemption,compromisesandrenunciations. In the case of Rubias v. Batiller (51 SCRA 120), it sought to declare the difference in the nullity between contracts entered into by guardians, agents, administrators and executors, from the contracts entered into by judges, judicial officers,fiscalsandlawyers.
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D.SPECIALDISQUALIFICATIONS Q:Whoarethosepersonsspeciallydisqualified bylawtoenterintocontractsofsale? A:ALIENUnOS 1. ALIENs who are disqualified to purchase private agricultural lands (Art. XII Secs. 3 &7) 2. Unpaid seller having a right of lien or having stopped the goods in transitu, is prohibited from buying the goods either directly or indirectly in the resale of the same at public/private sale which he maymake(Art.1533[5];Art.1476[4]) 3. The Officer holding the execution or deputy cannot become a purchaser or be interested directly or indirectly on any purchase at an execution. (Sec. 21 Rule39,RulesofCourt) 4. In Sale by auction, seller cannot bid unless notice has been given that such sale is subject to a right to bid in behalf oftheseller.(Art.1476) Q: Atty. Leon G. Maquera acquired his clients property as payment for his legal services, then sold it and as a consequence obtained an unreasonable high fee for handling his clients case.Didhevalidlyacquirehisclientsproperty? A: No. Article 1491 (5) of the New Civil Code prohibits lawyers acquisition by assignment of the clients property which is the subject of the litigation handled by the lawyer. Also, under Article 1492, the prohibition extends to sales in legal redemption. (In Re: Suspension from the Practice of Law in the territory of Guam of Atty. LeonG.Maquera,B.M.No.793,July30,2004)
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III.SUBJECTMATTEROFSALE A.REQUISITESOFAVALIDSUBJECTMATTER Q: What are the requisites of a proper object of sale? A: 1. Things a. Determinateordeterminable b. Lawful (licit), otherwise contract is void c. Should not be impossible (within thecommerceofmen) 2. Rights GR:Mustbetransmissible. XPN: a. Futureinheritance b. Service cannot be the object of sale. They are not determinate things and no transfer of ownershipisavailablebutitcanbe theobjectofcertaincontractssuch uas contract for a piece of work. (Pineda,Sales,2002ed.,p.13) Q: Rodriguez first purchased a portion of a Lot A consisting of 345 square meters located in the middle of Lot B, which has a total area of 854 square meters, from Juan. He then purchased another portion of said lot. As shown in the receipt, the late Juan received P500.00 from Rodriguez as "advance payment for the residential lot adjoining his previously paid lot on three sides excepting on the frontage. Juans heirs now contests the validity of the subsequent sale, alleging that the object is not determinateordeterminable.Decide. A: Their contention is without merit. There is no disputethatRodriguezpurchasedaportionofLot A consisting of 345 square meters. This portion is located in the middle of B, which has a total area of 854 square meters, and is clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to Rodriguez is said to adjointhe "previouslypaid lot" on three sides thereof, the subject lot is capable of being determined without the need of any new contract. The fact that the exact area of these adjoiningresidentiallotsissubjecttotheresultof a survey does not detract from the fact that they are determinate or determinable. Concomitantly, the object of the sale is certain and determinate. (Heirs of San Andres v. Rodriguez, G.R. No. 135634,May31,2000)
Note: Where land is sold for a lump sum and not so much per unit of measure or number, the boundaries of the land stated in the contract determine the effects and scope of the sale, not the areathereof.Thevendorsareobligatedtodeliverall the land included within the boundaries, regardless of whether the real area should be greater or smaller than that recited in the deed. This is particularly true where the area is described as "humigit kumulang," that is, more or less. (Semira v. CA,G.R.No.76031,Mar.2,1994)
Q:Canrightsbetheobjectsofsale? A:Yes,iftheyaretransmissible.(Art.1347) B.PARTICULARKINDS Q:Whatmaybeobjectsofsale? A: 1. Existing Goods owned/ possessed by selleratthetimeofperfection 2. Future Goods goods to be manufactured,raised,acquiredbyseller after perfection of the contract or whose acquisition by seller depends uponacontingency(Art.1462)
Note: Sale of future goods is valid only as an executory contract to be fulfilled by the acquisition &deliveryofgoodsspecified.
3.
4.
SaleofUndividedInterestorShare a. Sole owner may sell an undivided interest. (Art. 1463) Ex.Afractionorpercentageof suchproperty b. Saleofanundividedshareina specific mass of fungible goods makes the buyer a co owner of the entire mass in proportion to the amount he bought.(Art.1464) c. A coowner cannot sell more than his share (Yturralde v. CA) SaleofThingsinLitigation a. Sale of things under litigation isrescissibleifenteredintoby the defendant , without the approvalofthelitigantsorthe court(Art.1381) b. Norescissionisallowedwhere the thing is legally in the rd possession of a 3 person
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who did not acted in bad faith. Things subject to Resolutory Condition. Ex. Things acquired under legal or conventional right of redemption, or subjecttoreservatroncal.(Art.1465) Indeterminate Quantity of Subject Matter a. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract provided it is possible to determine the same, without need of a new contract.(Art.1349)

5.
6.
IV.OBLIGATIONOFTHESELLER TOTRANSFEROWNERSHIP Q: Should the seller be the owner at the time of perfectionofthecontract? A: GR: No. Seller must have the right to transfer ownership at the time of delivery or consummation stage. He need not be the owner at the time of perfection of the contract. XPN: Foreclosure sale wherein the mortgagor shouldbetheabsoluteowner. Q: EJ was subjected to a buybust operation where police officers posed to buy 500 pesos worth of S. She was then charged with a violation of the Dangerous Drugs Act for trafficking drugs. EJ uses as defense her lack of possession of the object of the sale. Would her contentionfreeherfromliability? A: No. Though she was not in possession of the object of sale, Article 1459 merely requires that the vendor must have the right to transfer ownership of the object sold at the time of delivery. In the case at bar, though Beth is not the owner, she had the right to dispose of the prohibited drug. Ownership was thereafter acquireduponherdeliverytothemeninthealley after her payment of the price. (People v. Ganguso,G.R.No.115430,Nov.23,1995)
A.SALEBYAPERSONWHODOESNOTOWNTHE THINGSOLD Q: What is the status of a sale by a person who doesnotownthethingsubjectofthesale? A:Itdependsuponthestageofthesale. 1. When seller is not owner at perfection stagethesaleisvalid. Ownership of the subject matter by the seller at this stage is not an essential requirement for the validity of sale. It is necessary at the time of delivery. Hence,avalidcontractofsalecancover subjectmatterthatisnotyetexistingor even a thing having only a potential existence at the time of perfection; or even a thing subject to a resolutory condition.
Note:Ifthesellerlateracquirestitlethereto anddeliversit,titlepassesbyoperationof law.
2. When seller is not owner at consummationstage a. Old view the contract of sale is valid, but the transfer of title is void. (MindanaoAcademy, Inc. v. Yap, G.R. No. L17681, Feb. 26, 1965) b. New view the sale by a non owner of the subject property is void instead of treating the tradition/delivery aspect as having no effect on transferring ownership to the buyer. (DBP v. CA,G.R.No.110053,Oct.16,1995)
Note:Nemodatquodnonhabetyou cannotgivewhatyoudonothave,properly applicabletotheconsummationofasale.
Q: What is the legal effect of sale by a non owner? A: GR: The buyer requires no better title to the goods than the seller had; caveat emptor (buyerbeware). XPN: 1. Estoppel when the owner of the goods is by his conduct precluded from denyingthesellersauthoritytosell 2. When the contrary is provided for in recordinglaws
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3. When the sale is made under statutory power of sale or under the order of a courtofcompetentjurisdiction When the sale is made in a merchants store in accordance with the Code of Commerceandspeciallaws When a person who is not the owner sells and delivers a thing, and subsequentlyacquiredtitlethereto When the seller has a voidable title which has not been avoided at the time ofthesale Sale by coowner of the whole property oradefiniteportionthereof Specialrightsofunpaidseller
existenceaslongas thehopeitselfvalidly existed.(eg.lotto) Note:ThepresumptionisEmptioReiSperatae
4.
5.
6.
7.
8. Q: What are the instances when the Civil Code recognizes sale of things not actually or already ownedbytheselleratthetimeofsale? A: 1. Sale of a thing having potential existence(Art.1461,NCC) 2. Saleoffuturegoods(Art.1462,NCC) 3. Contract for the delivery at a certain price of an article, which the seller in the ordinary course of business manufactures/ procures for the general market,whetherthesameisonhandat thetimeornot(Art.1467,NCC) B.SALEBYAPERONHAVINGAVOIDABLETITLE
Q:Whatistheeffectofasalemadebytheseller withvoidabletitleovertheobject? A: 1. Perfection stage: valid buyer acquires titleofgoods 2. Consummation stage: valid If the title has not yet been avoided at the time of sale and the buyer must buy the goods underthefollowingconditions: a. Ingoodfaith b. Forvalue c. Without notice of sellers defect of title
EMPTIOREISPERATAE Saleofthinghaving potentialexistence Uncertaintyisw/regard toquantity&quality Contractdealsw/future thing Saleisvalidonlyifthe expectedthingwill exist. EMPTIOSPEI Saleofmerehopeor expectancy Uncertaintyisw/regard toexistenceofthing Contractdealsw/ presentthinghope orexpectancy Saleisvalideventhough expectedthingdoes notcomeinto
Q: Jose, as coowner, sold the entire land in favor of his minor daughter, Ida. Alleging that Jose had fraudulently registered it in his name alone, his sisters, sued him for recovery of 2/3 share of the property. Ida did not pay for the land.Isthesalevalid? A: No. Jose did not have the right to transfer ownership of the entire property to petitioner since2/3thereofbelongedtohissisters.Also,Ida could not have given her consent to the contract, being a minor at the time. Consent of the contracting parties is among the essential requisites of a contract, including one of sale, absent which there can be no valid contract. Moreover,Idaadmittedlydidnotpayanycentavo for the property, which makes the sale void. Article1471oftheCivilCodeprovides:Iftheprice is simulated, the sale is void, but the act may be shown to have been in reality a donation, or someotheractorcontract.(Labagalav.Santiago, G.R.No.132305,Dec.4,2001) V.PRICE A.MEANINGOFPRICE Q:Whatisaprice? A: Price signifies the sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of thepriceputtothedebitofthebuyerandagreed tobyhim.(Villanueva,p.52) B.REQUISITESFORAVALIDPRICE Q:Whataretherequisitesofprice? A:Mustbe: 1. Real 2. Inmoneyoritsequivalent 3. Certain or ascertainable at the time of theperfectionofthecontract C.HOWPRICEISDETERMINED Q:Whenispricecertain? A: 1. Ifthereisastipulation 2. If it be with reference to another thing certain
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3. 4. If the determination of the price is left tothejudgmentofspecifiedperson(s) By reference to certain fact(s) as referredtoinArt.1472(Art.1469) Q: What is the effect on the contract of sale in case of a breach in the agreed manner of payment? A: None. It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract, as it goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. Failure to pay such results in a right to demand the fulfillment or cancellation of theobligationunderanexistingvalidcontract.On theotherhand,lackofconsiderationpreventsthe existence of a valid contract. (Sps. Bernardo Buenaventura and Consolacion Joaqui v. CA, GR No.126376,Nov.20,2003) Q: Is payment of the purchase price essential to transferownership? A: Unless the contract contains a stipulation that ownership of the thing sold shall not pass to the purchaser until he has fully paid the price, ownershipofthethingsoldshallbetransferredto the vendee upon the actual or constructive deliverythereof.(Diaz,p.48) E.WHENNOPRICEISAGREEDUPONBYTHE PARTIES Q:Whatistheeffectoffailuretodeterminethe price? A: 1. Where contract is executory ineffective 2. Where the thing has been delivered to and appropriated by the buyer the buyer must pay a reasonable price therefore
Note: The fixing of the price cannot be left to the discretionofoneoftheparties.However,iftheprice fixed by one of the parties is accepted by the other, thesaleisperfected.
Note:Ifthepriceisbasedonestimates,itis uncertain.
D.GROSSINADEQUACYOFTHEPRICE Q:Whatistheeffectofgrossinadequacyof price? A: GR:Itdoesnotaffectthevalidityofthesaleif itisfixedingoodfaithandwithoutfraud XPN:CoRDS 1. If Consent is vitiated (may be annulled orpresumedtobeequitablemortgage) 2. If the parties intended a Donation or someotheract/contract 3. If the price is so low as to be Shocking totheconscience 4. If in the event of Resale, a better price canbeobtained
Note: GR:Thevalidityofthesaleisnotnecessarilyaffected where the law gives the owner the right to redeem because the lesser the price, the easier it is for the ownertoeffectredemption. XPN:Whilethereisnodisputethatmereinadequacy of the price per se will not set aside a judicial sale of realproperty,nevertheless,wheretheinadequacyof the price is purely shocking to the conscience, such thatthemindrevoltsatitandsuchthatareasonable man would neither directly or indirectly be likely to consent to it, the same will be set aside. (Cometa v. CA351SCRA294)
Q:Whatistheeffectifthepriceissimulated? A: GR:Contractofsaleisvoid. XPN:Theactmaybeshowntohavebeenin realityadonationorsomeotheractor contract. Q:Whatisconsideredreasonableprice? A:Generallythemarketpriceatthetimeand placefixedbythecontractorbylawforthe deliveryofthegoods.
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F.MANNEROFPAYMENT Q: What is the effect of a breach of the agreed mannerofpaymenttothecontractofsale? A: None. A contract of sale being a consensual contract, it becomes binding and valid upon the meetingofthemindsastoprice. 1. If there is such meeting of the minds as to price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. 2. If the real price is not stated in the contract, then the contract of sale is validbutsubjecttoreformation. 3. If there is no meeting of the minds as to the price because the price stipulated in the contract is simulated, then the contract is void, in accordance with Article 1471 of the Civil Code. (Sps. Buenaventura v. CA, G.R. No. 126376, Nov.20,2003)
Note: A definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale.(Cov.CA,G.R.No.123908,Feb.9,1998)
Q: Distinguish the failure to pay the considerationfromlackofconsideration. A:

FAILURETOPAY LACKOF CONSIDERATION CONSIDERATION Astovalidityofcontractofsale Itisnottheactofpayment ofpricethatdetermines thevalidityofacontractof sale. Lackofconsideration preventsthe Note:Paymentoftheprice existenceofavalid hasnothingtodowiththe contract. perfectionofthecontract. Instead,itgoesintothe performanceofthe contract. Astoresultantright Failuretopaythe Thecontractofsaleis considerationresultsina nullandvoidand righttodemandthe producesnoeffect fulfillmentorcancellation whatsoever oftheobligationunderan existingvalidcontract.
G.EARNESTMONEYVISAVISOPTIONMONEYY OPTIONMONEY Q:Whatistheeffectoffailuretodeterminethe price? A: 1. Where contract is executory ineffective 2. Where the thing has been delivered to and appropriated by the buyer the buyer must pay a reasonable price therefore
Note: The fixing of the price cannot be left to the discretionofoneoftheparties.However,iftheprice fixed by one of the parties is accepted by the other, thesaleisperfected.
Q: In an action for specific performance with damages,Xallegedthattherewasanagreement to purchase the lot of Y. As regards the manner of payment, however, Ys receipts contradicted the testimony of X. The receipts failed to state the total purchase price or prove that full payment was made. For this reason, it was contended that there was no meeting of their minds and there was no perfected contract of sale.Decide. A: The question to be determined should not be whethertherewasanagreedprice,butwhatthat agreed price was. The sellers could not render invalid a perfected contract of sale by merely contradicting the buyers obligation regarding the price, and subsequently raising the lack of agreement as to the price. (David v. Tiongson, G.R.No.108169,Aug.25,1999)
Q:Whatisanoptionmoney? A: The distinct consideration in case of an option contract. It does not form part of the purchase price hence, it cannot be recovered if the buyer didnotcontinuewiththesale. Q:Whenispaymentconsideredoptionmoney? A:Paymentisconsideredoptionmoneywhenitis given as a separate and distinct consideration from the purchase price. Consideration in an option contract may be anything or undertaking ofvalue.
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EARNESTMONEY Q:Whatisanearnestmoneyorarras? A: This is the money given to the seller by the prospective buyer to show that the latter is truly interestedinbuyingtheproperty,anditsaimisto bindthebargain.(Pineda,p.75) Q: What is the effect of giving an earnest money? A: It forms part of the purchase price which may be deductedfrom the total price. It also servesas a proof of the perfection of the contract of sale. The rule is no more than a disputable presumption and prevails only in the absence of contrary or rebuttable evidence. (PNB v CA, 262 SCRA464,1996)
Note: Option money may become earnest money if thepartiessoagree.
Q: When is payment considered an earnest money? A: When the payment constitutes as part of the purchase price. Hence, in case when the sale did not happen, it must be returned to the prospectivebuyer. Q: Distinguish option money from earnest money. A:
OPTIONMONEY Moneygivenas distinct considerationfor anoptioncontract Appliestoasale notyetperfected Prospectivebuyeris notrequiredto buy. Ifbuyerdoesnot decidetobuy,it cannotbe recovered. EARNESTMONEY Formspartofthe purchaseprice Givenonlywhenthereis alreadyasale Whengiven,thebuyeris boundtopaythe balance. Ifsaledidnotmaterialize, itmustbereturned. (Villanueva,p.87, Pineda,p.77)
Simeon suddenly has a changeof heart, claiming that the deal is disadvantageous to him as he has found out that the property can fetch three times the agreed purchase price. Bert seeks specific performance but Simeon contends that he has merely given Bert an option to buy and nothing more and offers to return the option moneywhichBertrefusestoaccept. 1. Will Bert's action for specific performanceprosper?Explain. 2. May Simeon justify his refusal to proceed with the sale by the fact that the deal is financially disadvantageous tohim?Explain. A: 1. Bert's action for specific performance will prosper because there was a binding agreement of sale, not just an option contract. The sale was perfected upon acceptance by Simeon of 10% of the agreed price. This amount is in reality an earnest money which, under Art. 1482, "shall be considered as part of the price and as proof of the perfection of the contract." (Topacio v. CA, G.R. No. 102606, July 3, 1992; Villongco Realty v. Bormaheco, G.R. No. L26872,July25,1975). 2. Simeon cannot justify his refusal to proceed with the sale by the fact that the deal is financially disadvantageous to him. Having made a bad bargain is not a legal ground for pulling out of a binding contract of sale, in the absence of some actionable wrong by the other party (Vales v. Villa, G.R. No. 10028, Dec. 16, 1916), and no such wrong has been committed by Bert. (2002 Bar Question) VI.FORMATIONOFCONTRACTOFSALE
Note:seeIntroduction,StagesofContractofSale pp.230234
Q: Bert offers to buy Simeon's property under the following terms and conditions: P1 million purchase price, 10% option money, the balance payable in cash upon the clearance of the property of all illegal occupants. The option money is promptly paid and Simeon clears the property of all illegal occupants in no time at all. However, when Bert tenders payment of the balance and asks for the deed of absolute sale,
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VII.TRANSFEROFOWNERSHIP A.MANNEROFTRANSFER Q:Whatistheeffectofdelivery? A: GR:Title/ownershipistransferred XPN:Contraryisstipulatedasinthecaseof: 1. Pactum reservatii in domini agreement that ownership will remain with seller until full payment of price (Contracttosell); 2. Saleonacceptance/approval; 3. Saleonreturn; 4. There is implied reservation of ownership;
Note:Sellerbearsexpensesofdelivery.
Q: Spouses Bernal purchased a jeepney from Union Motor to be paid in installments. They then executed a promissory note and a deed of chattel mortgage in favor of Union Motor which in turn assigned the same with Jardine Finance. To effectuate the sale as well as the assignment of the promissory note and chattel mortgage, the spouses were required to sign documents, one of which was a sales invoice. Although the Spouses have not yet physically possessed the vehicle, Union Motors agent required them to sign the receiptas a condition for thedeliveryof thevehicle.Itwasdiscoveredthatthesaidagent stole the vehicle even prior to its delivery to the spouses. Was there a transfer of ownership of thesubjectvehicle? A: No. The issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer; an invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered notabillofsale. The registration certificate signed by the spouses does not conclusively prove that constructive delivery was made nor that ownership has been transferred to the respondent spouses. Like the receipt and the invoice, the signing of the said documents was qualified by the fact that it was a requirement of Union Motor for the sale and financing contract to be approved. In all forms of delivery, it is necessary that the act of delivery, whether constructive or actual, should be coupledwiththeintentionofdeliveringthething. The act, without the intention, is insufficient. Inasmuch as there was neither physical nor constructive delivery of a determinate thing, (in
this case, the subject motor vehicle) the thing sold remained at the sellers risk. The Union Motor should therefore bear the loss of the subject motor vehicle after its agent allegedly stolethesame.(UnionMotorCorp.v.CA,G.R.No. 117187,July20,2001) Q:Howmaythebuyeracceptthedeliveryofthe thingsold? A: 1. Express he intimates to seller that he hasaccepted 2. Implied a. Buyer does not act inconsistent with ownership of seller after delivery b. Retainswithoutintimatingtoseller thathehasrejected Q: What is the effect if the buyer refuses to acceptdespitedeliveryoftheobjectofthesale? A: Delivery is completed. Since delivery of the subject matter of the sale is an obligation on the part of the seller, the acceptance thereof by the buyer is not a condition for the completeness of thedelivery.(Villanueva,p.117)
Note: Thus, even with such refusal of acceptance, delivery (actual/constructive), will produce its legal effects. (e.g. transferring the risk of loss of the subject matter to the buyer who has become the ownerthereof)(Villanueva,p.117) Under Art. 1588, when the buyers refusal to accept the goods is without just cause, the title thereto passes to him from the moment they are placed at hisdisposal.(Villanueva,p.117)
Q: Is payment of the purchase price essential to transferownership? A: Unless the contract contains a stipulation that ownership of the thing sold shall not pass to the purchaser until he has fully paid the price, ownershipofthethingsoldshallbetransferredto the vendee upon the actual or constructive deliverythereof.(Diaz,p.48) Q: What are the effects of a sale of goods on installment? A: 1. Goods must be delivered in full except whenstipulated
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2. When not examined by the buyer it is not accepted until examined or at least hadreasonabletimetoexamine c. when the seller of the goods draws on the buyer for the price and transmits the bill of exchange and the bill of lading to the buyer , and the latter does not honor the bill of exchange by returning the billofladingtotheseller 4. WhensaleisnotVALID 5. When the seller is not the owner of the goods XPNs: a. Estoppel: when the owner is precluded from denying the sellersauthoritytosell b. Registered land bought in good faith: Ratio: Buyer need not go beyond the Torrens title c. Order of Courts in a Statutory Sale d. When the goods are purchased in a Merchants store, Fair or Market (Art. 1505) SALEONTRIAL,APPROVALORSATISFACTION Q:Whatissaleontrial,approvalorsatisfaction? A: It is a contract in the nature of an option to purchaseifthegoodsprovetobesatisfactory,the approval of the buyer being a condition precedent. Q: What are the rules in case of sale on trial, approvalorsatisfaction? A:
Title Remainswithseller GR:Bornebyseller XPN: 1. Buyerisatfault 2. Buyeragreedto beartheloss GR:Buyermustgivegoodsa trial XPN:Buyerneednotdosoif itisevidentthatitcannot performthework. Itrunsonlywhenalltheparts essentialfortheoperationof theobjecthasbeendelivered
c.
Q:Whenmaythebuyersuspendpaymentofthe price? A: GR: 1. If he is disturbed in the possession or ownershipofthethingbought 2. If he has wellgrounded fear that his possession or ownership would be disturbed by a vindicatory action or foreclosureofmortgage.
Note: These grounds are not exclusive. It can only be exercised if the price or any part thereof has not yet been paid and the contract is not yet consummated. (Art. 1590) If the disturbance is caused by the existence of non apparentservitude,theremedyisrescission.
XPN: 1. Sellergivessecurityforthereturnofthe priceinapropercase; 2. A stipulation that notwithstanding any such contingency, the buyer must make payment; 3. Disturbance or danger is caused by the seller; 4. If the disturbance is a mere act of trespass; 5. Uponfullpaymentoftheprice. B.WHENDELIVERYDOESNOTTRANSFERTITLE Q:Whendoesdeliverydoesnottransfertitle? A: 1. SaleonTrial,Approval,orSatisfaction 2. When there is an EXPRESS RESERVATION a. If it was stipulated that ownership shall not pass to the purchaser until he has fullypaidtheprice(Art.1478) 3. When there is an IMPLIED RESERVATION a. a. When goods are shipped, but the bill of lading states that goods are deliverable to the seller or his agent, or to the order of the seller or his agent b. b. When the bill of lading is retained by the seller or his agent
RiskofLoss
Astotrial
Whenperiod withinwhichbuyer mustsignifyhis acceptanceruns
249
Validityof stipulationthata 3rdpersonmust satisfyapprovalor satisfaction Ifthesaleismade toabuyerwhois anexpertonthe objectpurchased

rd
Valid,providedthe3 person isingoodfath
Generally,itcannotbe consideredasaleonapproval
C.KINDSOFDELIVERY Q:Whatarethedifferentkindsofdelivery? A: 1. Actual thing sold is placed under the controlandpossessionofbuyer/agent; 2. Constructive does not confer physical possession of the thing, but by constructionoflaw,isequivalenttoacts ofrealdelivery. Requisites: a. The seller must have control over thething b. The buyer must be put under control c. There must be intention to deliver the thing for purposes of ownership i. Tradicion Symbolica delivery of certain symbols representingthething ii. Tradicion Instrumental delivery of the instrument of conveyance. iii. Traditio Longa Manu Delivery of thing by mere agreement; when seller points to the property without need ofactuallydelivering iv. Tradicion Brevi Manu Before contract of sale, the wouldbe buyer was already in possession of the wouldbe subjectmatterofsale v. ConstitutumPossessoriumat the time of perfection of contract, seller continues to have possession merely as a holder 3. Quasitradition delivery of rights, credits or incorporeal property, made by: a. Placing titles of ownership in the handsofthebuyer;
Allowing buyer to make use of rights 4. Tradition by operation of law Execution of a public instrument is equivalent to delivery. But to be effective, it is necessary that the seller have such control over the thing sold that, at the moment of sale, its material deliverycouldhavebeenmade. GR:Thereispresumptionofdelivery XPN: a. Contrarystipulation; b. When at the time of execution, subject matter was not subject to thecontrolofseller; c. Seller has no capacity to deliver at timeofexecution; d. Such capacity should subsist for a reasonable time after execution of instrument.
Note: Delivery should be coupled with intention of delivering the thing, and acceptance on the part of the buyer to give legal effect of the act. Without suchintention,thereisnosuchtradition.
b.
Q: Susan invested in commodity futures trading in OCP, which involves the buying or selling of a specified quantity and grade of a
commodity at a future date at a price established at the floor of the exchange. As per terms of the trading contract, customer's orders shall be directly transmitted byOCP as broker to itsprincipal,FrankwellEnterprises,whichinturn mustplacethecustomer'sorderswiththeTokyo Exchange. In this case, however, there is no evidence of such transmission. When Susan withdrew her investment, she was not able to recover the entire amount. She thus filed a complaint and the trial court ruled in her favor, saying that the contract is a species of gambling andthereforevoid.Isthecourtsrulingcorrect? A:Yes.Atradingcontractisacontractforthesale of products for future delivery, in which either seller or buyer may elect to make or demand delivery of goods agreed to be bought and sold, but where no such delivery is actually made. In this case, no actual delivery of goods and commodity was intended and ever made by the parties. In the realities of the transaction, the parties merely speculated on the rise and fall in the price of the goods/commodity subject matter of the transaction. If Susans speculation was correct, she would be the winner and OCP, the loser,soOCPwouldhavetopayherthe"margin".
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But if she was wrong in her speculation then she would emerge as the loser and OCP, the winner. OCP would then keep the money or collect the difference from her. This is clearly a form of gambling provided for with unmistakable certainty under Article 2018. (Onapal Phils. Commodities,Inc.vs.CAandSusanChua,G.R.No. 90707,Feb.1,1993)
Note: Futures Commission Merchant/Broker refers to a corporation or partnership, which must be registered and licensed as a Futures Commission Merchant/Broker and is engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on or subject to the rules of the contract market and that, in connection with such solicitation or acceptance of orders, accepts any money, securities or property (or extends credit in lieu thereof) to margin, guarantee or secure any trade or contract that results or may resulttherefrom.
2.
3.
4.
FOB (Free On Board) when goods are delivered at the point of shipment, delivery to carrier by placing the goods onvesselisdeliverytobuyer CIF(Cost,Insurance,Freight) a. When buyer pays for services of carrier, delivery to carrier is delivery to buyer, carrier as agent ofbuyer; b. When buyer pays seller the price from the moment the vessel is at the port of destination, there is alreadydeliverytobuyer COD (Collect On Delivery) the carrier acts for the seller in collecting the purchase price, which the buyer must paytoobtainpossessionofthegoods.
Q: Given that actual possession, control and enjoyment is a main attribute of ownership, is symbolicdelivery by mereexecution of the deed of conveyance sufficient to convey ownership overproperty? A: Yes, possession is also transferred along with ownership thereof by virtue of the deed of conveyance. The mere execution of the deed of conveyance in a public document is equivalent to the delivery of the property, prior physical delivery or possession is not legally required. The deed operates as a formal or symbolic delivery of the property sold and authorizes the buyer or transferee to use the document as proof of ownership. Nothing more is required. (Sps. Sabio v. International Corporate Bank, Inc. et. at. G.R. No.132709,Sept.4,2001) Q:Candeliverybeeffectedthroughacarrier? A: GR: Yes, if the seller is authorized. Delivery to carrierisdeliverytothebuyer. XPN: 1. Acontraryintentionappears 2. Implied reservation of ownership under Art.1503,pars1,2,3. Q:Whatarethekindsofdeliverytocarrier? A: 1. FAS (Free Along Side) when goods are delivered alongside the ship, there is alreadydeliverytothebuyer
Q: What are the sellers duties after delivery to thecarrier? A: 1. To enter on behalf of the buyer into such contract reasonable under the circumstances; 2. To give notice to the buyer regarding necessityofinsuringthegoods. Q:Whereistheplaceofdelivery? A: 1. Thatagreedupon 2. Placedeterminedbyusageoftrade 3. Sellersplaceofbusiness 4. Sellersresidence 5. In case of specific goods, where they canbefound Q:Whenshouldtheobjectbedelivered? A: 1. Stipulatedtime 2. Ifthereisnone,atareasonablehour. Q: What are the effects of a sale of goods on installment? A: 1. Goods must be delivered in full except whenstipulated 2. When not examined by the buyer it is not accepted until examined or at least hadreasonabletimetoexamine
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Q: When is the seller not bound to deliver the thingsold? A: 1. Ifthebuyerhasnotpaidtheprice; 2. Noperiodforpaymenthasbeenfixedin thecontract; 3. A period for payment has been fixed in the contract but the buyer has lost the righttomakeuseofthetime. D.DOUBLESALE Q:Whenisthereadoublesale? A: There is double sale when the same object of thesaleissoldtodifferentvendees.
Note:Requisites: 1. Samesubjectmatter 2. Sameimmediateseller 3. Twoormoredifferentbuyers 4. Bothsalesarevalid
property had not been delivered to Ten Forty; hence, it did not acquire possession either materially or symbolically. As between the two buyers, therefore, respondent was first in actual possession of the property. (Ten Forty Realty & Devt. Corp. v. Cruz, G.R. No. 151212, Sept. 10, 2003) Q: Explain the principle of prius tempore, potior jure. A:Knowledgebythefirstbuyerofthesecondsale cannotdefeatthefirstbuyersrightsexceptwhen the second buyer first registers in good faith the secondsale.Conversely,knowledgegainedbythe second buyer of the first sale defeats his rights evenifheisfirsttoregister,sincesuchknowledge taints his registration with bad faith to merit the nd protection of Art. 1544 (2 par.), the second realty buyer must act in good faith in registering hisdeedofsale.(Diaz,p.125)
Note: Where one sale is absolute and the other is a pacto de retro transaction where the period to redeemhasnotyetexpired,Art.1544willnotapply. (Pineda,p.223)
Q:Whatistheruleondoublesale? A:Firstintime,priorityinright
Note:RuleonDoubleSaleregardingimmovables: GR:ApplyArt.1544 XPN: Sale of registered lands apply Torrens System
Q: Juliet offered to sell her house and lot, together with all the furniture and appliances therein, to Dehlma. Before agreeing to purchase the property, Dehlma went to the Register of Deeds to verify Juliets title. She discovered that while the property was registered in Juliets name under the Land Registration Act, as amended by the Property Registration Decree, it wasmortgagedtoElainetosecureadebtofP80, 000. Wanting to buy the property, Dehlma told Juliet to redeem the property from Elaine, and gave her an advance payment to be used for purposes of releasing the mortgage on the property. When the mortgage was released, Juliet executed a Deed of Absolute Sale over the property which was duly registered with the Registry of Deeds, and a new TCT was issued in Dehlmas name. Dehlma immediately took possession over the house and lot and the movables therein. Thereafter, Dehlma went to the Assessors Office to get a new tax declaration under her name. She was surprised to find out that the property was already declared for tax purposes in the name of XYZ Bank which had foreclosed the mortgage on the propertybeforeitwassoldtoher.XYZBankwas also the purchaser in the foreclosure sale of the property. At that time, the property was still unregistered but XYZ Bank registered the Sheriffs Deed of Conveyance in the day book of the Register of Deeds under Act 3344 and obtainedataxdeclarationinitsname.
Q: What are the rules according to Article 1544 oftheCivilCode? A: c. MovableOwnerwhoisfirsttopossess ingoodfaith d. Immovable d. Firsttoregisteringoodfaith e. No inscription, first to possess in goodfaith f. No inscription & no possession in good faith Person who presents oldesttitleingoodfaith E.PROPERTYREGISTRATIONDECREE Q: Ten Forty Realty purchased from Galino a parcel of land. However, the Deed of Sale was not recorded in the Registry of Deeds. Subsequently, Galino sold the same property to Cruz who immediately took possession of the said property. Who has a better right between TenFortyandCruz? A:Intheabsenceoftherequiredregistration,the law gives preferential right to the buyer who in good faith is first in possession. The subject
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WasDehlmaapurchaseringoodfaith? A: Yes, Dehlma is a purchaser in good faith. She learned about the XYZ tax declaration and foreclosure sale only after the sale to her was registered. She relied on the certificate of title of her predecessorininterest. Under the Torrens System, a buyer of registered lands is not required by law to inquire further than what the Torrens certificate indicates on its face. If a person proceeds to but it relying on the title, that personisconsideredabuyeringoodfaith. The priority in time rule could not be invoked by XYZ Bank because the foreclosure sale of the landinfavourofthebankwasrecordedunderAct 3344, the law governing transactions affecting unregistered land, and thus, does not bind the land. Q: Who as between Dehlma and XYZ Bank has a betterrighttothehouseandlot? A: Between Dehlma and the bank, the former has abetterrighttothehouseandlot. Q:Whoownsthemovablesinsidethehouse? A: Unless there is a contrary stipulation in the absolutedeedofsale,Dehlmaownsthemovables covered by the Deed of Sale and her ownership is perfected by the execution and delivery of public document of sale. The delivery of the absolute deed of sale is a symbolical delivery of the house and lot, including the contents of the house. This is an obligation to deliver a specific thing, which includes the delivery of the specific thing itself and all of its accessions and accessories even though they may not have been mentioned (Art. 1166,CC).(2008BarQuestion) Q:Doespriorregistrationbythesecondbuyerof a property subject of a double sale confer ownership or preferred right in his favor over thatofthefirstbuyer? A: Prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property. Article 1544 requires that such registration must becoupledwithgoodfaith. 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, as providedbytheCivilCode. Knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith (Art. 1544) (Uraca, et. al v. CA, G.R. No. 115158, Sept. 5,1997) VIII.RISKOFLOSS Q:Whenisathingconsideredlost? A:Itisunderstoodthatthethingislostwhenit: 1. perishes,or 2. goesoutofcommerce,or 3. disappears in such a way that its existence is unknown or cannot be nd recovered.(Art.1189,2 par.) Q:Whatisdeterioration? A: Deterioration is the lowering of the value or character of a thing. It normally occurs by reason ofordinarywearandtear.(Pineda,Credit,p.20) Q:Whobearstheriskoflossordeterioration? A:
BEFORE PERFECTION Res perit domino Seller is the ownersosellerbearsriskofloss Resperitdomino Contractshallbewithoutany effectthesellerbearstheloss sincethebuyerisrelievedofhis obligationunderthecontract TwoViews: Paras:Buyer,except: 1. whenobjectsoldconsistsof fungiblegoodsforapricefixed 2. whensellerisguiltyoffraud, negligence,default,or violationofcontractualterms; or 3. whenobjectsoldisgeneric. Tolentino:Seller; Deterioration & fruits Buyer bearsloss Resperitdomino Buyerbecomestheownerso buyerbearsriskofloss Delivery extinguish ownership vis avis the seller & creates a new oneinfavorofthebuyer
AT PERFECTION
AFTER PERFECTION BUT BEFORE DELIVERY
AFTER DELIVERY
253
Q: What is the effect of the loss of the thing subjectofthecontractatthetimeofsale? A: 1. Totallosscontractisvoid&inexistent 2. Partial loss buyer may elect between withdrawing from the contract or demanding the remaining part, paying itsproportionateprice E.WhenOwnershipisTransferred SeeTransferofOwnership.p.247 IX.DOCUMENTSOFTITLE Q:WhatisaDocumentofTitle? A: A document used in the ordinary course of businessinthesaleortransferofgoods,asproof of the possession or control of the goods , or authorizing or purporting to authorize the possessorofthedocumenttotransferorreceive, either by endorsement or by delivery , goods representedbysuchdocument(Art.1636). Q: What is the purpose of the Documents of Title? A: 1. Evidence of possession or control of goodsdescribedtherein 2. Medium of transferring title and possession over the goods described therein without having to effect actual delivery(Villanueva,2009ed.) 3. The custody of a negotiable warehouse receipts issued to the order of the owner, or to bearer, is a representation of title upon which bona fide purchasers for value are entitled to rely , despite breaches of t rust or violations of agreement on the part of the apparent owner (Siy Cong Bieng v. HSBC,56Phil598) NegotiableDocumentsofTitle Q:WhatisaNegotiableDocumentofTitle? A: A document of title which states that the goods referred therein will be delivered to the bearer, or to the order of any person named in suchdocument(Art.1509,NCC). Q: Who may negotiate a Negotiable Document ofTitle? A: 1. Owner 2. Person to whom the possession pr custody of the document has been entrustedbytheowner a. If bailee undertakes to deliver the goods to such person b. If document is in such form that it may be negotiatedbydelivery. NonNegotiableDocumentsofTitle Q:WhatareNonnegotiabledocumentsoftitle? A: 1. They are delivered only to a specifiedperson 2. Carrierwillnotdeliverthegoodsto any holder of the document or to whom such document may have beenendorsedbytheconsignee 3. Must present the deed of sale or donationinhisfavour Q: What are the warranties of seller of documentsoftitle? A: 1. GenuinessoftheDocument 2. Legalrighttonegotiateortransfer 3. No knowledge of fact which would impair the validity or worth of the document 4. Right to transfer Title to the goods and merchantability or fitness for a particular purpose, whenever such warranties would have been implied had the contract transfer the goods withoutadocument. RulesRegardingLevyandGarnishmentofGoods Q: What does a person to whom a non negotiable instrument has been transferred but not negotiated, acquire as against the transferor? A:Heacquires: 1. Title to the goods, subject to the terms ofanyagreementwiththetransferor; 2. Right to notify the bailee who issued the document of the transfer thereof,
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and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the document. Q: How may the transferors creditor defeat the aforementionedrightsofthetransferee? A: Prior to the notification to such bailee by the transferor or transferee of a nonnegotiable document of title, the title of the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the transferors creditor by the levy of an attachment orexecutionuponthegoods.(Art.1514,NCC) Q: If the goods are delivered to a bailee by the ownerorbyapersonwhoseactinconveyingthe title to them to a purchaser in good faith for value and a negotiable instrument was issued for them, can the said goods be attached, garnishedorleviedupon? A: GR: No, the goods cannot be attached, garnished or levied upon while they are in thebaileespossession. XPN: 1. When the document is first surrendered;or 2.Whenitsnegotiationisenjoined.
Note: The bailee shall in no case be compelled to deliver the actual possession of the goods untilthedocumentis: 1.Surrenderedtohim;or 2.Impoundedbythecourt. (Art.1519,NCC)
X.REMEDIESOFANUNPAIDSELLER A.DEFINITIONOFUNPAIDSELLER Q:Whoisanunpaidseller? A: The seller of goods is deemed to be an unpaid sellereither: 1. when the whole of the price has not beenpaidortendered;or 2. when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has been broken by reason of the dishonor of the instrument, the insolvencyofthebuyer,orotherwise.
Note: It includes an agent of the seller to whom the bill of lading has been indorsed, or consignor or agentwhohashimselfpaid,orisdirectlyresponsible for the price, or any other person who is in the positionofaseller.
B.REMEDIESOFUNPAIDSELLER Q:WhataretheremediesofanUnpaidSeller? A: I. Ordinary 1. ActionforPrice Exercisedwhen: a. ownershiphaspassedtobuyer; b. priceispayableonadaycertain c. goods cannot readily be resold for reasonable price and Art. 1596 is inapplicable 2. Action for Damages In case of wrongfulneglectorrefusalbythebuyer toacceptorpayforthethingsold II. Special 1. Possessory Lien Seller not bound to deliver if buyer has not paid him the price. It is exercisable only in following circumstances: a. goods sold without stipulation as tocredit b. goods sold on credit but term of credithasexpired c. buyerbecomesinsolvent
Note: When part of goods delivered, may stillexerciserightongoodsundelivered
Q: What are the rights of a creditor whose debtoristheownerofanegotiabledocumentof title? A: He is entitled to such aid from courts of appropriatejurisdictionby: 1.injunction; 2.attachingsuchdocument; 3. as regards property which cannot be readily attached or levied upon by ordinary legal process satisfying the claim by means allowed by law or equity.(Art.1520,NCC)
255
2. StoppageinTransitu Requisites:ISENTU a. Insolventbuyer b. Seller must Surrender the negotiabledocumentoftitle,ifany c. Seller must bear the Expenses of delivery of the goods after the exerciseoftheright. d. Seller must either actually take possession of the goods sold or give Notice of his claim to the carrier or other person in possession e. GoodsmustbeinTransit f. Unpaidseller SpecialRighttoReselltheGoods Exercisedwhen: a. Goodsareperishable, b. Stipulated the right of resale in caseofdefault,or c. Buyer in default for unreasonable time SpecialRighttoRescind Requisites: a. Expressly stipulated OR buyer is in defaultforunreasonabletime b. Noticeneededtobegivenbyseller tobuyer Q:Whenaregoodsconsideredtobeintransit? A: 1. After delivery to a carrier or other baileeandbeforethebuyerorhisagent takesdeliveryofthem;and 2. If the goods are rejected by the buyer, and the carrier or other bailee continues in possession of them. (Art. 1531,par.1) Q: When are goods deemed to be no longer in transit? A: 1. Afterdeliverytothebuyerorhisagent 2. Ifthebuyer/agentobtainspossessionof the goods at a point before the destinationoriginallyfixed; 3. Ifthecarrierorthebaileeacknowledges that he holds the goods in behalf of the buyer/hisagent; 4. If the carrier or bailee wrongfully refuses to deliver the goods to the buyerorhisagent.(Villanueva,p.181) XI.PERFORMANCEOFCONTRACT A.SALEOFPERSONALPROPERTY. RULESONSALEOFPERSONALPROPERTY. INSTALLMENTSALESLAW Q:WhatistheInstallmentSalesLaw? A: Commonly known as the Recto Law. It is embodied in Art. 1484 of the NCC which provides for the remedies of a seller in the contracts of saleofpersonalpropertybyinstallments.
Note: Art. 1484 of the NCC incorporates the provisions of Act No. 4122 passed by the Philippine Legislature on Dec. 9, 1939, known as the "Installment Sales Law" or the "Recto Law," which thenamendedArt.1454oftheCivilCodeof1889.
3.
4.
Note: Ownership of goods already with buyer but seller may still rescind; ownership is destroyed even withoutcourtinterventionbutinordinarysale,need togotocourt.
Q: What are the instances when possessory lien islost? A: 1. Seller delivers without reserving ownership in goods or right to possess them 2. Buyer or agent lawfully obtains possessionofgoods 3. Waiver
Note:Sellerloseslienwhenhepartswithgoods(but still,stoppageintransitucanbeexercised)
Q:Whatistherightofstoppageintransitu? A:Thesellermayresumepossessionofthegoods at any time while they are in transit, and he will thenbecomeentitledtothesamerightsinregard to the goods as he would have had if he had never parted with the possession. (Art. 1530, NCC)
Q:TowhatdoestheRectoLawapply? A: This law covers contracts of sale of personal property by installments (Act No. 4122). It is also applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. (PCI Leasing and Finance Inc. v. Giraffe X Creative Imaging, Inc., G.R.No.142618,July12,2007)
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Q: What are the alternative remedies in case of saleofpersonalpropertyininstallments? A: 1. Specific Performance: Exact fulfillment shouldthebuyerfailtopay GR: If availed of, the unpaid seller cannot anymore choose other remedies; XPN: if after choosing, it has become impossible,rescissionmaybepursued 2.Rescission: Cancel the sale if buyer fails topay2ormoreinstallments Deemedchosenwhen: a. Noticeofrescissionissent b. Takes possession of subject matter ofsale c. Filesactionforrescission 3. Foreclosure: Foreclose on chattel mortgage if buyer fails to pay 2 or more installments GR: Actual foreclosure is necessary to barrecoveryofbalance Extent of barring effect: purchaseprice XPN: Mortgagor refuses to deliver propertytoeffectforeclosure;expenses incurredinattorneysfees,etc. Q: When the lessor of the property chose to deprive the lessee of the subject personal property, can the former recover any unpaid rentalsfromthelatter? A: In choosing, through replevin, to deprive the respondent of possession of the leased equipment, the petitioner waived its right to bring an action to recover unpaid rentals on the saidleaseditems. B.SALEOFREALPROPERTY. RULESONSALEOFREALPROPERTY REALTYINSTALLMENTBUYERACT Q:WhatistheRealtyInstallmentBuyerAct? A: Commonly known as the Maceda Law. It is embodied in R.A. 6552 which provides for certain protection to particular buyers of real estate payable on installments. The law declares as "public policy to protect buyers of real estate on installment payments against onerous and oppressiveconditions. Note:Thepurposeofthelawistoprotectbuyersin installmentagainstoppressiveconditions. Q: What are the transactions/sale covered by theMacedaLaw? A: The law involves the sale of immovables on installment(MacedaLaw,R.A.6552). 1. Coverage: Residential Real Estate (Villanueva,p.431) 2. Exclude: a. Industriallots b. Commercial buildings (and commerciallotsbyimplication) c. Saletotenantsunderagrarianlaws Q:Whataretherightsgrantedtobuyers? A: 1. Buyerpaidatleast2yearsinstallment a. Pay w/o interest the balance within grace period of 1 month for every year of installment payment. Grace period to be exercised once every5years. b. When no payment cancelled; buyer entitled to 50% of what he has paid + 5% for every year but not exceeding 90% of payments made
Note: Cancellation to be effected 30 daysfromnotice&uponpaymentof cashsurrendervalue.
2.
Buyerpaidlessthan2yearsinstallment a. Grace period is not less than 60 daysfromduedate b. Cancellation if failure to pay w/in 60daysgrace c. 30 days notice before final cancellation
Note: buyer can still pay w/in the 30 daysperiodwithinterest.
Q:Whataretheotherrightsgrantedtoabuyer? A: 1. Sellorassignrightstoanother 2. Reinstate contract by updating within 30daysbeforeandcancellation 3. DeedofSaletobedonebynotarialact
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4. 5.
Note: Applies to contracts even before the law was enacted.Stipulationtothecontraryisvoid
Pay full installment in advance the balanceofpriceanytimew/ointerest Have full payment annotated in certificateoftitle
Q:WhatarethesocalledMacedaandRecto laws in connection with sales on installments? Givethemostimportantfeaturesoneachlaw. A: The Maceda Law (R.A. 6552) is applicable to sales of immovable property on installments. The mostimportantfeaturesare: 1. After having paid installments for at least two years, the buyer is entitled to a mandatory grace period of one month for every year of installment payments made, to pay the unpaid installments without interest. If the contract is cancelled, the seller shall refund to the buyer the cash surrender value equivalent to fifty percent (50%) of the total payments made, and after five years of installments, an additional five percent (5%) every year but not to exceed ninety percent (90%) of the total paymentsmade. 2. In case the installments paid were less than2years,thesellershallgivethebuyer a grace period of not less than 60 days. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission by notarial act. (Rillo v. CA, G.R. No.125347June19,1997) The Recto Law (Art.1484) refers to sale of movables payable in installments and limiting the right of seller, in case of default by the buyer, to oneofthreeremedies: 1. Exactfulfillment; 2. Cancel the sale of two or more installmentshavenotbeenpaid; 3. Foreclose the chattel mortgage on the things sold, also in case of default of two or more installments, with no further action against the purchaser. (1999 Bar Question) Q: Bernie bought on installment a residential subdivision lot from DEVLAND. After having faithfully paid the installments for 48 months,
Bernie discovered that DEVLAND had failed to develop the subdivision in accordance with the approved plans and specifications within the time frame in the plan. He thus wrote a letter to DEVLAND informing it that he was stopping payment. Consequently, DEVLAND cancelled the sale and wrote Bernie, informing him that his paymentsareforfeitedinitsfavor. 1. Was the action of DEVLAND proper? Explain. 2. Discuss the rights of Bernie under the circumstances. 3. Supposing DEVLAND had fully developed the subdivision but Bernie failed to pay further installments after 4 years due to business reverses. Discuss the rights and obligations of theparties. A: 1. Assuming that the land is a residential subdivision project under P.D. No. 957 (The Subdivision and Condominium Buyers Protective Decree), DEVLAND's action is not properbecauseunderSection23ofsaid Decree,noinstallmentpaymentshallbe forfeited to the owner or developer when the buyer, after due notice, desistsfromfurtherpaymentduetothe failure of the ownerdeveloper to develop the subdivision according to the approved plans and within the time limitforcomplyingwiththesame. 2. Under the same Section of the Decree, Bernie may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests at the legal rate. He may also ask the Housing andLandUseRegulatoryBoardtoapply penal sanctions against DEVLAND consisting of payment of administrative fine of not more than P20.000.00 and/orimprisonmentfornotmorethan 20years. 3. Under R.A. No. 6552 (Maceda Law), DEVLAND has the right to cancel the contract but it has to refund Bernie the cash surrender value of the payments on the property equivalent to 50% of the total payments made. (2005 Bar Question)
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XII.WARRANTIES Q:Whatisawarranty? A: A statement or representation made by the seller of goods, as part of the contract of sale, havingreferencetothecharacter,quality,ortitle, of the goods, and by which he promises or undertakestoinsurethatcertainfactsareorshall beashethenrepresents.
Note:Mayeitherbeexpressorimplied.
Q:Whatistheeffectofabreachofwarranty? A:Buyermay: 1. Refusetoproceedwiththecontract;or 2. Proceed with the contract; waive the condition.
Note: If the condition is in the nature that it should happen, the nonperformance may be treated as a breachofwarranty.
Q: What are the kinds of warranties? Distinguish. A: i. Express ii. Implied A.EXPRESSWARRANTIES Q:Whatareexpresswarranties? A: Any affirmation of fact or any promise by the seller relating to the thing if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchasesthethingrelyingthereon.(Art.1546) Q: What are the requisites of express warranties? A:AIR 1. It must be an Affirmation of fact relatingtothesubjectmatterofsale 2. Natural tendency is to Induce buyer to purchasesubjectmatter 3. Buyer purchases the subject matter Relyingthereon Q: What is the liability of the seller for breach of expresswarranties? A: The seller is liable for damages. (Villanueva, p. 249)
B.IMPLIEDWARRANTIES Q:Whatareimpliedwarranties? A: Warranties deemed included in all contracts of salebyoperationoflaw.(Art.1547) 1. Warranty that seller has right to sell refers to consummation stage. Not applicable to sheriff, auctioneer, mortgagee,pledge 2. Warrantyagainsteviction Requisites:JPENS a. Buyer is Evicted in whole or in part fromthesubjectmatterofsale b. FinalJudgment c. Basis of eviction is a right Prior to saleoractimputabletoseller d. Seller has been Summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant through 3rd party complaintbroughtbybuyer e. Nowaiveronthepartofthebuyer
Note: For eviction disturbance in law is requiredandnotjusttrespassinfact.
3. Requisites: a. immovable sold is encumbered with nonapparent burden or servitude not mentioned in the agreement b. nature of nonapparent servitude or burden is such that it must be presumed that the buyer would not have acquired it had he been awarethereof XPN: warranty not applicable when nonapparent burden or servitude is recorded in the Registry of Property unless there is expressed warranty that the thing is free from all burdens & encumbrances 4. WarrantyagainstHiddenDefects Requisites:HENNAS a. DefectisimportantorSerious i. The thing sold is unfit for the usewhichitisintended ii. Diminishes its fitness for such use or to such an extent that Warranty against encumbrances (non apparent)
259
the buyer would not have acquiredithadhebeenaware thereof DefectisHidden DefectExistsatthetimeofthesale Buyer gives Notice of the defect to thesellerwithinreasonabletime Actionforrescissionorreductionof the price is brought within the properperiod i. 6 months from delivery of thethingsold ii. Within 40 days from the deliveryincaseofanimals There must be No waiver of warrantyonthepartofthebuyer. Q: What is covered by a warranty against eviction? A: It covers eviction by a final judgment based on arightpriortothesaleoranactimputabletothe vendor,thevendeeisdeprivedofthewholeor of apartofthethingpurchased. The vendor shall answer for the eviction even though nothing has been said in the contract on thesubject.(Art.1548,NCC) Q: What is the effect of a breach of warranty againsteviction? A: The buyer shall have the right to demand the seller: 1. The return of the value which the thing sold had at the time of the eviction, be it greater or lesser than the price of the sale 2. The income or fruits, if he has been ordered to deliver them to the party whowonthesuitagainsthim 3. The costs of suit which caused the eviction, and, in a proper case, those of suit brought against the vendor for the waranty 4. The expenses of contract if buyer has paidthem 5. The damages and interests and ornamental expenses if sale was made inbadfaith.
Note: Vendor is liable for any hidden defect even if heisnotaware.(CaveatVenditor) Purchaser must be aware of the title of the vendor. (CaveatEmptor)
b. c. d. e.
f.
Q:Whenisimpliedwarrantynotapplicable? A:ASAP 1. Asisandwhereissale 2. Saleofsecondhandarticles 3. Salebyvirtueofauthorityinfactorlaw 4. Sale at public auction for tax delinquency C.EFFECTSOFWAIVEROFIMPLIEDWARRANTIES Q:Whataretheeffectsofwaiverofanimplied warranty? A: 1. Seller in bad faith & there is waiver againstevictionvoid 2. When buyer w/o knowledge of a particular risk, made general renunciation of warranty is not a waiverbutmerelylimitsliabilityofseller incaseofeviction 3. When buyer with knowledge of risk of eviction assumed its consequences & made a waiver seller not liable (applicable only to waiver of warranty againsteviction) WARRANTYAGAINSTEVICTION Q:Whatisawarrantyagainsteviction? A: In a contract of sale, unless a contrary intention appears, there is an implied warranty on the part of the seller that when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession st ofthething.(Art.1547,1 paragraph)
Q:Whataretherightsofbuyerincaseofpartial eviction? A: 1. Restitution (with obligation to return thethingw/ootherencumbrancesthan thosewhichithadwhenheacquiredit) 2. Enforcement of warranty against eviction(Paras,p.153andArt.1556) WARRANTYAGAINSTHIDDENDEFECT Q:Whatisahiddendefect? A: A hidden defect is one which is unknown or couldnothavebeenknowntothebuyer.(Diaz,p. 145)
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Note: Seller does not warrant patent defect; Caveat emptor(buyerbeware)
3.
Q:Whatisaredhibitorydefect? A: It is a defect in the article sold against which defect the seller is bound to warrant. The vice must constitute an imperfection, a defect in its nature,ofcertainimportance;andaminordefect does not give rise to redhibition. (De Leon, Comments and Cases on Sales and Lease, 2005 ed,p.318) Q:Whatisaredhibitorydefectonanimals? A: If the hidden defect of animals, even in case a professionalinspectionhasbeenmade,shouldbe of such a nature that expert knowledge is not sufficient to discover it, the defect shall be consideredasredhibitory. Q:Whenisthesaleofanimalvoid? A:Thesaleisvoidifanimalis: 1. Sufferingfromcontagiousdiseases; 2. Unfit for the use or service for which theywerepurchasedasindicatedinthe contract Q: When is a vendor responsible for hidden defects? A: If the hidden defects which the thing sold may have: 1. Renderitunfitfortheuseforwhichitis intended,or 2. Diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower priceforit.(Art.1561) Q: Up to what extent does the seller warrant againsthiddendefects? A: The seller is responsible to the vendee for any hidden faults or defects in the thing sold, even thoughhewasnotawarethereof. Q: When is the seller not answerable for the defectsofthethingsold? A: 1. For patent defects or those which are visible,or 2. Even for those which are not visible if thebuyerisanexpertwho,byreasonof his trade or profession, should have knownthem(Art.1561),or
If the contrary has been stipulated, and thevendorwasnotawareofthehidden faults or defects in the thing sold. (Art. 1566)
Q: What is the effect of a breach of warranty againsthiddendefects? A: It would depend on whether the seller had knowledge of such defect and whether there has beenawaiverofthewarranty. 1. If the thing should be lost in consequence of the hidden faults, and sellerwasawareofthemheshall: a. beartheloss, b. returnthepriceand c. refund the expenses of the contract withdamages 2. If the thing is lost and seller was not awareofthehiddenfaultsheshall: a. returnthepriceandinterest b. reimburse the expenses of the contract which the buyer might have paid, but not for damages. (Villanueva, Law on Sales,2004 ed, pp.548549) Q:Whataretheremediesofthebuyerincaseof saleofthingswithhiddendefects? A:Thevendeemayelectbetween: 1. Withdrawingfromthecontract,or 2. Demanding a proportionate reduction of the price, with damages in either case. Q: Is there a waiver of warranty against hidden defects when the lessee inspected the premises andpushedthroughwiththecontract? A: Yes. Under Arts. 1561 and 1653 of the Civil Code, the lessor is responsible for warranty against hidden defects, but he is not answerable for patent defects or those, which are visible. Jon de Ysasi admitted on crossexamination that he inspectedthepremisesthreeorfourtimesbefore signing the lease contract. During his inspection, he noticed the rotten plywood on the ceiling, which in his opinion was caused by leaking water or termites. Yet, he decided to go through with the lease agreement. Hence, respondents cannot be held liable for the alleged warranty against hidden defects. (Jon and Marissa De Ysasi v. Arturo and Estela Arceo, G.R. No. 136586, Nov. 22,2001)
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IMPLIEDWARRANTIESINCASEOFSALEOF GOODS Q: What are the specific implied warranties in saleofgoods? A: 1. Warrantyoffitness GR:Noimpliedwarranty XPN: a. Buyer manifests to the seller the particular purpose for which the goodsarerequired;and b. Buyer relies upon the sellers skill orjudgment 2. Warranty of merchantability That goods are reasonably fit for the general purposeforwhichtheyaresold. CAVEATEMPTOR Q:Whatdoestheprincipleofcaveatemptor mean? A: It literally means, Let the buyer beware. The rule requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendors title takes all the risks and losses consequent to such failure. (Agcaoili,p.184) Q: In what particular sale transactions does caveatemptorapply? A: 1. Salesofanimals(Art.1574) 2. Doublesales(Art.1544) 3. Insheriffssales(Art.1570) 4. Taxsales(Art.1547,lastparagraph)
Note:Intheabovesales,thereisnowarrantyoftitle or quality on the part of the seller. The purchaser who buys without checking the title of the vendor is assumingallrisksofeviction. In sheriffs sales, the sheriff does not guarantee the title to real property and it is not incumbent upon him to place the buyer in possession of such property.(Pinedasales,p.275)
are inscribed on the face of certificate of title. (Pinedasales,p.275) Q:Doescaveatemptorapplyinjudicialsales? A:Yes.Thepurchaserinajudicialsaleacquiresno higher or better title or right than that of the judgment debtor. If it happens that the judgment debtorhasnoright,interest,orlienonandtothe property sold, the purchaser acquires none. (Pinedasales,p.280)
D.REMEDIESINCASEOFBREACHOFWARRANTY Q:Whataretheremediesofthebuyerincaseof breachofwarranty? A: 1. Accept goods & set up breach of warranty by way of recoupment in diminutionorextinctionortheprice. 2. Acceptgoods&maintainactionagainst sellerfordamages 3. Refuse to accept goods & maintain actionagainstsellerfordamages 4. Rescind contract of sale & refuse to receive goods/return them when alreadyreceived. Q: Are the remedies of the buyer in case of breachofwarrantyabsolute? A: No. The vendee's remedies against a vendor with respect to the warranties against hidden defects of or encumbrances upon the thing sold arenotlimitedtothoseprescribedinArticle1567 where the vendee, in the case of Arts. 1561, 1562, 1564, 1565 and 1566, may elect either to withdraw from the contract or demand a proportionate reduction of the price, with damagesineithercase. Thevendeemayalsoaskfortheannulmentofthe contract upon proof of error or fraud, in which case the ordinary rule on obligations shall be applicable. Under the law on obligations, responsibility arising from fraud is demandable in all obligations and any waiver of an action for future fraud is void. Responsibility arising from negligence is also demandable in any obligation, but such liability may be regulated by the courts, accordingtothecircumstances. The vendor could likewise be liable for quasi delict under Article 2176 of the Civil Code, and an action based thereon may be brought by the vendee.Whileitmaybetruethatthepreexisting contract between the parties may, as a general
Q: Is caveat emptor applicable in sales of registeredland? A: No. The purchaser of a registered land under the Torrens system is merely charged with notice of the burdens and claims on the property which
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rule, bar the applicability of the law on quasi delict, the liability may itself be deemed to arise from quasidelict, i.e., the acts which breaks the contract may also be a quasidelict. (CocaCola Bottlers Philippines, Inc. v. CA, G.R. No. 110295, Oct.18,1993) Q: What are the instances when the buyer cannot rescind the sale in case there is a breach ofwarranty? A: 1. Ifheknewofthebreachofwarranty 2. If he fails to return or offer to return goods to seller in substantially as good condition as they were at time ownershipwastransferred 3. If he fails to notify the seller within a reasonable time of his election to rescind E.CONDITIONVISVISWARRANTY Q: What is the effect of nonfulfillment of a condition? A: If imposed on the perfection of contract prevents the juridical relation itself from coming intoexistence Theotherpartymay: 1. Refusetoproceedwiththecontract 2. Proceed w/ contract, waiving the performanceofthecondition Q: What is the difference between a condition andawarranty? A:
CONDITION Purportstothe existenceofobligation Mustbestipulatedto formpartofthe obligation Mayattachitselfto obligationofsellerto deliverpossession& transfer WARRANTY Purportstothe performanceof obligation Neednotbestipulated; mayformpartof obligationbyprovision oflaw Relatestothesubject matteritselforto obligationoftheseller astothesubjectmatter ofthesale
XIII.BREACHOFCONTRACT A.REMEDIESOFTHESELLER
Note:seeRectoandMacedaLaw(XI.Performanceof Contract)p.258
B.REMEDIESOFTHEBUYER Q:Whataretheremediesofthebuyer? A: I. Immovablesingeneral 1. Disturbed in possession or with reasonable grounds to fear disturbance Suspendpayment 2. In case of subdivision or condo projects Ifrealestatedeveloperfailstocomply with obligation according to approved plan: a. Rescind b. Suspend payment until seller complies II. Movables 1. Failure of seller to deliver Action for specific performance without giving the seller the option of retaining the goods onpaymentsofdamages 2. Breach of sellers warranty The buyer may, at his election, avail of the followingremedies: a. Accept goods & set up breach of warranty by way of recoupment in diminution or extinction or the price. b. Accept goods & maintain action againstsellerfordamages c. RefusetoAcceptgoods&maintain actionagainstsellerfordamages d. Rescind contract of sale & refuse to receive goods/return them whenalreadyreceived.
Note: When the buyer has claimed and been grantedaremedyinanyoftheseways,noother remedy can thereafter be granted, without prejudice to the buyers right to rescind, even if previously he has chosen specific performance when fulfillment has become impossible. (Villanueva, p. 389 in relation with Art. 1191, NCC)
3. Disturbed in possession or with reasonable grounds to fear disturbance Suspendpayment
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XIV.EXTINGUISHMENTOFSALE A.CAUSESOFEXTINGUISHMENT Q: What are the causes for extinguishment of sale? A:Acontractofsaleisextinguishedby: 1. Same causes as all other obligations, namely: a. Paymentorperformance b. Lossofthethingdue c. Condonation or remission of the debt d. Confusion or merger of the rights ofcreditoranddebtor e. Compensation f. Novation g. Annulment h. Rescission i. Fulfillmentofresolutorycondition j. prescription 2. Causesstatedintheprecedingarticles; 3. ConventionalRedemption;or 4. Legalredemption B.REDEMPTION Q:Whatisredemption? A: It is a mode of extinguishment wherein the seller has the right to redeem or repurchase the thingsolduponreturnofthepricepaid. Q:Whatarethekindsofredemption? A: 1. Legal 2. Conventional Q:Shouldtherighttoredeembeincorporatedin everycontractofsale? A: The right of the vendor to redeem/ repurchase must appear in the same instrument. However, partiesmaystipulateontherightofrepurchasein a separate document but in this case, it is valid only between the parties and not against third persons.(Pineda,p.333) Q: What is the difference between preemption andredemption? A:
PREEMPTION Arisesbeforesale Rescissioninapplicable Actionisdirectedagainst prospectiveseller REDEMPTION Arisesaftersale Therecanberescission oforiginalsale Actionisdirected againstbuyer
B.PERIODOFREDEMPTION Q:Whatistheperiodofredemption? A: 1. No period agreed upon 4 years from dateofcontract 2. When there is agreement should not exceed 10 years; but if it exceeded, validonlyforthefirst10years. 3. When period to redeem has expired & there has been a previous suit on the nature of the contract seller still has 30 days from final judgment on the basis that contract was a sale with pactoderetro: Rationale: no redemption due to erroneous belief that it is equitable mortgage which can be extinguished by payingtheloan. 4. When period has expired & seller allowed the period of redemption to expire seller is at fault for not having exercised his rights so should not be grantedanewperiod
Note: Tender of payment is sufficient but it is not in itself a payment that relieves the seller from his liabilitytopaytheredemptionprice.
Q: When does period of redemption begin to run? A: 1. Right of legal preemption or redemption shall be exercised within 30 days from written notice by the buyer deed of sale not to be recorded in Registry of Property unless accompaniedbyaffidavitthatbuyerhas givennoticetoredemptioners 2. When there is actual knowledge, no need to give written notice; period of redemption begins to run from actual knowledge
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D.EXERCISEOFTHERIGHTTOREDEEM Q: Is written notice mandatory for the right of redemptiontocommence? A: Yes, the notice must be in writing stating the executionofthesaleanditsparticulars.Itmaybe made in a private or public document. (Pineda, p. 400) Q: Is there a prescribed form for an offer to redeem? A: There is no prescribed form for an offer to redeem to be properly effected. Hence, it can either be through a formal tender with consignation of the redemption price within the prescribed period. What is paramount is the availment of the fixed and definite period within whichtoexercisetherightoflegalredemption.
Note: Art. 1623 does not prescribe any distinctive methodfornotifyingtheredemptioner.
property which he ought not, in equity and good conscience, hold and enjoy. It has been broadly ruled that a breach of confidence, although in business or social relations, rendering an acquisition or retention of property by one person unconscionable against another, raises a constructive trust. It is raised by equity in respect of property, which has been acquired by fraud,or where, although acquired originally without fraud, it is against equity that it should be retained by the person holding it. (Arlegui v. CA G.R.No.126437,Mar.6,2002)
Note: "A constructive trust is substantially an appropriate remedy against unjust enrichment. It is raised by equity in respect of property, which has been acquiredby fraud,orwhere,although acquired originally without fraud, it is against equity that it shouldberetainedbythepersonholdingit."(76Am. Jur.2d,Sec.222,p.447citedinArleguiv.CAG.R.No. 126437,Mar.6,2002)
D.CONVENTIONALREDEMPTION Q:Whatisconventionalredemption? A: Seller reserved the right to repurchase thing soldcoupledwithobligationtoreturnpriceofthe sale, expenses of contract & other legitimate payments and the necessary & useful expenses madeonthethingsold
Note: Right to repurchase must be reserved at the timeofperfectionofsale.(Pineda,p.333)
Q: Is tender of payment necessary for redemptiontotakeeffect? A: Tender of payment is not necessary; offer to redeemisenough. Q:Whatistheeffectoffailuretoredeem? A: There must be judicial order before ownership of real property is consolidated to the buyer a retro. TRUSTDESONTORT Q:Whatisatrustdesontort? A: It is a trust created by the purchase or redemption of property by one other than the person lawfully entitled to do so and in fraud of theother. Q: Do constructive trusts arise only out of fraud orduress? A: No. A constructive trust, otherwise known as a trustexmaleficio,atrustexdelicto,atrustdeson tort, an involuntary trust,or an implied trust, is a trust by operation of law which arises contrary to intention and in invitum, against one who, by fraud, actual or constructive, by duress or abuse ofconfidence,bycommissionofwrong,orbyany form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to
E.LEGALREDEMPTION Q:Whatislegalredemption? A: Also referred to as retracto legal, it is the right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires the thing by purchase or by dation in payment or by other transaction whereby ownership is transmitted by onerous title. Q:Whataretheinstancesoflegalredemption? A: 1. Sale of a coowner of his share to a stranger(Art.1620) 2. Whenacreditorotherincorporealright inlitigationissold(Art.1634) 3. Saleofanheirofhishereditaryrightsto astranger(Art.1088) 4. Sale of adjacent rural lands not exceeding1hectare(Art.1621)
265
5. Sale of adjacent small urban lands bought merely for speculation (Art. 1622) extending the period of redemption or grantinganewperiodisexecuted Purchaser Retains for himself a part of thepurchaseprice Seller binds himself to pay the Taxes on thethingsold In any other case where the real intention of the parties is that the transaction shall Secure the payment of a debt or the performance of any other obligation. Art. 1602 shall also apply to a contract purporting to be an Absolute sale. (Art. 1604)
4. 5. 6.
Q: Are there other instances when the right of legalredemptionisalsogranted? A: 1. Redemptionofhomesteads 2. Redemptionintaxsales 3. Redemptionbyjudgmentdebtor 4. Redemptioninextrajudicialforeclosure 5. Redemption in judicial foreclosure of mortgage Q: When does legal redemption period begin to run? A: The right of legal redemption shall not be exercised except within 30 days from the notice in writing by the prospective seller, or seller, as the case may be. The deed of sale shall not be recorded in the Registry of Property unless accompanied by an affidavit of the seller that he has given written notice thereof to all possible redemptioners.(Art.1623,NCC) C.EQUITABLEMORTGAGE Q:Whatisanequitablemortgage? A:Onewhichlackstheproperformalities,formor words or other requisites prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of the contract as security for a debt and contains nothing impossibleorcontrarytolaw Q: What are the essential requisites of equitable mortgage? A: 1. Partiesenteredintoacontractofsale 2. Their intention was to secure an existingdebtbywayofamortgage. Q: What is the rule on the presumption of an equitablemortgage? A: A sale with conventional redemption is deemed to be an equitable mortgage in any of thefollowingcases:(Art.1602)AIRSTAR 1. Price of the sale with right to repurchaseisunusuallyInadequate 2. Seller Remains in possession as lessee orotherwise 3. Uponoraftertheexpirationoftheright to repurchase Another instrument
7.
Note: In case of doubt in determining whether it is equitable mortgage or sale a retro (with right of repurchase); it shall be construed as equitable mortgage. Remedyisreformation. Anequitablemortgageisonewhichalthoughlacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossibleorcontrarytolaw.
Q: Does inadequacy of price constitute proof sufficient to declare a contract as one of equitablemortgage? A: Mere inadequacy of the price is not sufficient. The price must be grossly inadequate, or purely shockingtotheconscience.(Diaz,p.186) Q: X transferred three parcels of land in favor of Y. The transaction was embodied in two Deeds of Absolute Sale for the price of P240, 000. The titles of said lots were transferred to Y. However, X failed to vacate and turn over the purchased lots. This prompted Y to file an ejectment suit against X. X claimed that the transactions entered between them were not actually sales, but an equitable mortgage. Does the transaction involve an absolute sale or an equitablemortgageofrealproperty? A: It is an absolute sale. Decisive for the proper determination of the true nature of the transaction between the parties is the intent of the parties. There is no conclusive test to determine whether a deed absolute on its face is really a simple loan accommodation secured by a mortgage.Todeterminewhetheradeedabsolute in form is a mortgage in reality, the court is not limited to the written memorials of the transaction. This is so because the decisive factor in evaluating such agreement is the intention of
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the parties, as shown not necessarily by the terminology used in the contract but by all the surrounding circumstances, such as the relative situations of the parties at that time; the attitudes, acts, conduct, and declarations of the parties; the negotiations between them leading to the deed; and generally, all pertinent facts having a tendency to fix and determine the real nature of their design and understanding. As such, documentary and parol evidence may be submitted and admitted to prove the intention of the parties. (Sps Austria v. Sps Gonzales, G.R. No. 147321,Jan.21,2004) Q: Ceballos was able to borrow from Mercado certain sum of money and as security, she executed a Deed of Real Estate Mortgage over the subject property. The saidmortgage was not registered. Ceballos defaulted. Thereafter, a Deed of Absolute Sale was executed by Ceballos and her husband whereby the mortgaged property was sold to Mercado for the price of P16, 500.00. Ceballos offered to redeem the property from Mercado for the price of P30, 000.00 but the latter's wife refused since the same was already transferred in their names by virtue of the Deed of Absolute Sale. As a consequence, Ceballos filed the case contending that the Contract should be declared as an equitable mortgage. Is the contention of Ceballoscorrect? A: No. The instances when a contract, regardless of its nomenclature, may be presumed to be an equitable mortgage are enumerated in Art. 1602 of the Civil Code. Here, none of those circumstances were present. The original transaction was a loan. Ceballos failed to pay the loan; consequently, the parties entered into anotheragreementtheassailed,dulynotarized DeedofAbsoluteSale,whichsupersededtheloan document. Ceballos had the burden of proving that she did not intend to sell the property and that Mercado did not intend to buy it; and that the new agreement did not embody the true intention of the parties. (Ceballos v. Intestate Estate of the Late Emigdio Mercado, G.R. No. 155856,May28,2004) Q: Eulalia was engaged in the business of buying and selling large cattle. In order to secure the financialcapitalsheadvancedforheremployees (biyaheros) she required them to surrender TCT of their properties and to execute the corresponding Deeds of Sale in her favor. Domeng Bandong was not required to post any security but when Eulalia discovered that he incurred shortage in cattle procurement operation, he was required to execute a deed of sale over a parcel of land in favor of Eulalia. She sold the property to her grandniece Jocelyn who thereafter instituted an action for ejectment against the Spouses Bandong. To assert their right, Spouses Bandong filed an action for annulment of sale against Eulalia and Jocelyn allegingthattherewasnosaleintendedbutonly equitable mortgage for the purpose of securing the shortage incurred by Domeng in the amount of P70, 000.00 while employed as biyahero by Eulalia. Was the deed of sale between Domeng and Eulalia a contract of sale or an equitable mortgage? A: It is an equitable mortgage. In executing the said deed of sale, Domeng and Eulalia never intended the transfer of ownership of the subject property but to burden the same with an encumbrance to secure the indebtedness incurred by Domeng on the occasion of his employment with Eulalia. The agreement between Dominador and Eulalia was not avoided in its entirety so as to prevent it from producing anylegaleffectatall.Instead,thesaidtransaction is an equitable mortgage, thereby merely altering the relationship of the parties from seller and buyer, to mortgagor and mortgagee, while the subject property is not transferred but subjected to a lien in favor of the latter. (Sps. Raymundo, et al.v.Sps.Bandong,G.R.No.171250,Jul.4,2007) G.DISTINGUISHEDFROM OPTIONTOBUY Q: On May 19, 1951, the spousessellers executed a public instrument of absolute sale in favor of the buyer for a consideration which is sufficiently adequate. A few days thereafter, the buyers executed in favor of the sellers an option to buy within one year, the property subject of the absolute sale, which option was extended for a month. Prior to the expiration of said one year period, the buyer sold said property to a thirdperson. If the spousessellers would file an action for reformation of instrument where they seek reformation of the absolute sale into one of equitablemortgage,willsaidactionprosper? A: No, it will not prosper. If a seller has been granted merely an option to buy (not a right to repurchase) within a certain period, and the price paidbythebuyerisadequate,thesaleisabsolute andcannotbeconstruednorpresumedtobeone of equitable mortgage, even if the period within which to exercise the option has been extended.
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(Villarica, et. al. v. CA, G.R. L19196, Nov. 29, 1968) Note: SC held that in this case, there was no sale a retro and that the right of repurchase is not a rightgrantedthesellerbythebuyerinaseparate instrument. Such right is reserved by the vendor in the same instrument of the sale as one of the stipulationsinthecontract. Also, once the instrument of absolute sale is executed, the seller can no longer reserve the right of repurchase and any right thereafter granted the seller by the buyer cannot be a right of repurchase but some other rights, like that of anoptiontobuy. XV.LAWONSALEOFSUBDIVISIONAND CONDOMINIUM(PD957) SCOPEOFAPPLICATION Q: Are sales or dispositions of subdivision lotsor condominium units prior to the effectivity of the decree exempt from compliance with the requirementsstatedtherein? A: No. It shall be incumbent upon the owner or developer of the subdivision or condominium project to complete compliance with his or its obligations as provided in the decree within two years from the date of effectivity of the Decree, unless otherwise extended by the Authority or unlessanadequateperformancebondisfiled.
Note: Failure of the owner or developer to comply with the obligations under this and the preceding provisions shall constitute a violation punishable underSections38and39oftheDecree.
7. 8.
9.
solicitationofasale; offer to sell, directly or by an agent, or by a circular, letter, advertisement or otherwise;and a. privilege given to a member of a cooperative, corporation, partnership, oranyassociationand/or b.theissuanceofacertificateorreceipt evidencing or giving the right of participation in, or right to, any land in consideration of payment of the membershipfeeordues.(Deemedsale)
Q: How are the terms buy and purchase definedundertheDecree? A: Shall include any contract to buy, purchase, or otherwise acquire for a valuable consideration a subdivision lot, including the building and other improvements,ifany,inasubdivisionprojectora condominiumunitinacondominiumproject. Q:Whatisasubdivisionproject? A: A tract or a parcel of land registered under Act No. 496 which is partitioned primarily for residential purposes into individual lots with or without improvements thereon, and offered to thepublicforsale,incashorininstallmentterms.
Note: It shall include all residential, commercial, industrial and recreational areas as well as open spaces and other community and public areas in the project.
Q:Whatisasubdivisionlot? A: Any of the lots, whether residential, commercial, industrial, or recreational, in a subdivisionproject. Q:Whatisacomplexsubdivisionplan? A: A subdivision plan of a registered land wherein a street, passageway or open space is delineated ontheplan. Q:Whatisacondominiumproject? A: The entire parcel of real property divided or to be divided primarily for residential purposes into condominium units, including all structures thereon. Q:Whatisacondominiumunit? A: A part of the condominium project intended for any type of independent use or ownership, including one or more rooms or spaces located in one or more floors (or part of parts of floors) in a
DEFINITIONOFTERMS Q: How is sale or sell defined under the Decree? A:Shallinclude: 1. Every disposition, or attempt to dispose, for a valuable consideration, of a subdivision lot, including the building andotherimprovementsthereof,ifany, in a subdivision project or a condominium unit in a condominium project; contracttosell; contractofpurchaseandsale; exchange; attempttosell; optionofsaleorpurchase;
2. 3. 4. 5. 6.
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building or buildings and such accessories as may beappendedthereto. Q:Definethefollowingterms: 3. 1. Owner. A: Registered owner of the land subject of a subdivision or a condominium project. Developer. A: person who develops or improves the subdivision project or condominium project for and in behalf of the owner thereof. Dealer. A: any person directly engaged as principal in the business of buying, selling or exchanging real estate whether on a fulltime or parttime basis. Broker. A: any person who, for commission or other compensation, undertakes to sell or negotiate the sale of a real estate belongingtoanother. Salesman. A: person regularly employed by a broker to perform, for and in his behalf, any or all functions of a real estate broker. the building or buildings included in the condominium project in accordance with the National Building Code (R.A. No.6541). The subdivision plan, as so approved, shall then be submitted to the Director ofLandsforapproval. In case of complex subdivision plans, court approval shall no longer be required. The condominium plan as likewise so approved, shall be submitted to the RegisterofDeedsoftheprovinceorcity in which the property lies and the same shall be acted upon subject to the conditions and in accordance with the procedureprescribedinSection4ofthe CondominiumAct(R.A.No.4726).
4.
2.
5.
3.
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Q: Part of the required documentary attachments to the application is a certificate of title to the property which is free from all liens and encumbrances. Does this bar an owner of mortgaged property from engaging in subdivision or condominium project while the mortgageisinforce? A:No.Incaseanysubdivisionlotorcondominium unit is mortgaged, it is sufficient if the instrument of mortgage contains a stipulation that the mortgagee shall release the mortgage on any subdivision lot or condominium unit as soon as the full purchase price for the same is paid by the buyer. Q: When is a subdivision or condominium projectdeemedtoberegistered? A: Upon completion of the publication requirement
Note: The fact of such registration shall be evidencedbyaregistrationcertificatetobeissuedto theapplicantownerordealer. Re: Publication requirement: This is complied with when the NHA has caused to be published a notice of the filing of the registration statement, at the expense of the applicantowner or dealer, in two newspapers general circulation, one published in English and another in Pilipino, once a week for two consecutive weeks, reciting that a registration statement for the sale of subdivision lots or condominium units has been filed in the National HousingAuthority;
5.
REGISTRATIONANDLICENSETOSELL Q: Upon what agency is exclusive jurisdiction to regulaterealestatetradeandbusinessvested? A:NationalHousingAuthority Q: What must a registered owner of a parcel of landdoifhewishestoconvertsaidpropertyinto asubdivisionorcondominiumproject? A:Heshall: 1. Submit his subdivision plan to the Authority which shall act upon and approve the same, upon a finding that the plan complies with the Subdivision Standards' and Regulations enforceable atthetimetheplanissubmitted. If the conversion desired involves a condominium project, the same procedure shall be followed except that,inaddition,theNHAshallactupon and approve the plan with respect to
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Q: After issuance of the registration certificate, may the owner or dealer already sell subdivision lotsorcondominiumunits? A: No. He must first obtain a license to sell the project within two weeks from the registration of suchproject. Q: What is the purpose of the requirement of posting of a performance bonds before a license tosellmaybeissued? A: It is to guarantee the construction and maintenance of the roads, gutters, drainage, sewerage,watersystem,lightingsystems,andfull development of the subdivision project or the condominium project and the compliance by the owner or dealer with the applicable laws and rulesandregulations. Q: Is a license to sell and performance bond required in all subdivision and condominium projects? A: No. The following transactions are exempt fromsaidrequirements: 1. Sale of a subdivision lot resulting from the partition of land among coowners andcoheirs. Sale or transfer of a subdivision lot by the original purchaser thereof and any subsequentsaleofthesamelot. Sale of a subdivision lot or a condominiumunitbyorfortheaccount of a mortgagee in the ordinary course of business when necessary to liquidate abonafidedebt. 3. 4. to work a fraud upon prospective buyers. Q:Whenmayalicensetosellorregistrationofa subdivisionorcondominiumprojectberevoked? A: The Authority may, motu proprio or upon verified complaint filed by a buyer of a subdivision lot or condominium unit, revoke the registration of any subdivision project or condominium project and the license to sell any subdivision lot or condominium unit in said project by issuing an order to this effect, with his findings in respect thereto, if upon examination into the affairs of the owner or dealer during a hearing, it shall appear there is satisfactory evidencethatthesaidownerordealer: 1. 2. isinsolvent;or hasviolatedanyoftheprovisionsofthis Decree or any applicable rule or regulation of the Authority, or any undertaking of his/its performance bond;or has been or is engaged or is about to engageinfraudulenttransactions;or has made any misrepresentation in any prospectus, brochure, circular or other literature about the subdivision project or condominium project that has been distributedtoprospectivebuyers;or isofbadbusinessrepute;or does not conduct his business in accordance with law or sound business principles.
2.
3.
5. 6.
Q:Whenmayalicensetosellbesuspended? A: 1. Upon verified complaint by a buyer of a subdivisionlotoracondominiumunitin anyinterestedparty,theAuthoritymay, in its discretion, immediately suspend the owner's or dealer's license to sell pending investigation and hearing of thecase. TheNHAmaymotupropriosuspendthe license to sell if, in its opinion, any information in the registration statement filed by the owner or dealer is or has become misleading, incorrect, inadequate or incomplete or the sale or offering for a sale of the subdivision or condominium project may work or tend
Note: Where the owner or dealer is a partnership or corporation or an unincorporated association, it shall be sufficient cause for cancellation of its registrationcertificateanditslicensetosell,ifany member of such partnership or any officer or director of such corporation or association has beenguiltyofanyactoromissionwhichwouldbe cause for refusing or revoking the registration of anindividualdealer,brokerorsalesman. DEALERS,BROKERSAMDSALESMEN Q: What is the duration of the registration of dealers,brokersandsalesmen? A: On the thirtyfirst day of December of each year. However, in the case of salesmen, their registration shall also cease upon termination of theiremploymentwithadealerorbroker.
2.
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Note: Renewal of registration for the succeeding year shall be granted upon written application therefore made not less than thirty nor more than sixty days before the first day of the ensuing year and upon payment of the prescribed fee, without the necessity of filing further statements or information, unless specifically required by the Authority. All applications filed beyond said period shall be treatedasoriginalapplications.
2.
Q: When can there be refusal or revocation of registrationasdealers,brokersorsalesmen? A:Suchregistrationmayberefusedorrevokedby theNHAif,afterreasonablenoticeandhearing,it shall determine that such applicant or registrant has: 1. violated any provision of this Decree or any rule or regulation made hereunder; or made a material false statement in his applicationforregistration;or been guilty of a fraudulent act in connection with any sale of a subdivisionlotorcondominiumunit;or demonstrated his unworthiness to transact the business of dealer, broker, orsalesman,asthecasemaybe.
must be presented in such manner that will not tend to mislead or deceive the public. The owner or developer shall answerable and liable for the facilities, improvements, infrastructures or other forms of development represented or promised in brochures, advertisements and other sales propaganda disseminated by the owner or developer or his agents and the same shall form part of the sales warranties enforceable against said owner or developer,jointlyandseverally.
Note: Failure to comply with these warranties shall also be punishable in accordance with the penaltiesprovidedforinthisDecree. Q: Within what period must the owner or developer construct and provide the facilities, improvements, infrastructures and other forms of development, including water supply and lighting facilities, which are offered and indicated in the approved subdivision or condominium plans, brochures, prospectus, printed matters, letters or in any form of advertisement? A: GR: Within one year from the date of the issuance of the license for the subdivision or condominiumproject XPN: Such other period of time as may be fixedbytheAuthority. ALTERATIONINAPPROVEDSUBDIVISIONPLAN Q: What is the rule if the owner desires to make alterationsintheapprovedsubdivisionplan? A: GR: No owner or developer shall change or alter the roads, open spaces, infrastructures, facilities for public use and/or other form of subdivision development as contained in the approved subdivision plan and/or representedinitsadvertisements XPN: If he has obtained the permission of the Authority and the written conformity or consent of the duly organized homeowners association, or in the absence of the latter, by the majority of the lot buyers in the subdivision.
2. 3.
4.
Note: In case of charges against a salesman, notice thereof shall also be given the broker or dealeremployingsuchsalesman. Pending hearing of the case, the Authority shall have the power to order the suspension of the dealer's, broker's, of salesman's registration; provided,thatsuchordershallstatethecausefor thesuspension. The suspension or revocation of the registration of a dealer or broker shall carry with it all the suspension or revocation of the registration of all hissalesmen. WARRANTIESOFTHEOWNERORDEVELOPER Q: In making advertisements, does the owner or developermakewarrantiesrelativetosuch? A:Yes. 1. Advertisements that may be made through newspaper, radio, television, leaflets, circulars or any other form about the subdivision or the condominium or its operations or activities must reflect the real facts and
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RIGHTSANDREMEDIESOFABUYER Q:Maypaymentmadebyabuyerbeforfeitedin favor of the owner or developer in case the buyer desists from further payment due to the failure of the owner or developer to develop the subdivisionorcondominiumprojectaccordingto theapprovedplanwithinthetimelimitprovided for such? What is the buyers remedy in this case? A: No, such forfeiture is not allowed. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereonatthelegalrate. Q: Does a defaulting buyer have any right under theDecree? A:Yes.Therightsofthebuyerintheeventofthis failure to pay the installments due for reasons other than the failure of the owner or developer to develop the project shall be governed by RepublicActNo.6552. Where the transaction or contract was entered into prior to the effectivity of Republic Act No. 6552 on August 26, 1972, the defaulting buyer shall be entitled to the corresponding refund based on the installments paid after the effectivity of the law in the absence of any provisioninthecontracttothecontrary. Q: What is the owner or developers obligation in case the lot bought and fullypaid by the buyerismortgaged? A: In the event a mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem the mortgage or the corresponding portion thereof within six months from such issuance in order that the title over any fully paid lot or unit may be secured and delivered to the buyerinaccordanceherewith. Q: May the parties waive compliance with the decree? A: No. Any condition, stipulation, or provision in contract of sale whereby any person waives compliancewithanyprovisionoftheDecreeorof any rule or regulation issued thereunder shall be void. TAKEOVERDEVELOPMENT Q: When can Development? there be a TakeOver
A: The NHA may take over or cause the development and completion of the subdivision or condominium project at the expenses of the ownerordeveloper,jointlyandseverally,incases where the owner or developer has refused or failedtodeveloporcompletethedevelopmentof theprojectasprovidedforintheDecree.
Note: The Authority may, after such takeover, demand, collect and receive from the buyers the installmentpaymentsdueonthelots,whichshallbe utilizedforthedevelopmentofthesubdivision.
XVI.THECONDOMINIUMACT(RA4726) PRELIMINARIES Q:Whatisacondominium? A: It is an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly,inthelandonwhichitislocatedandin othercommonareasofthebuilding.
Note: It may include, in addition, a separate interest inotherportionsofsuchrealproperty.
Q:Whatcomprisesarealrightincondominium? A: The real right in condominium may be ownership or any other interest in real property recognized by law, on property in the Civil Code andotherpertinentlaws. Q:Whatisacondominiumunit? A: It is a part of the condominium project intended for any type of independent use or ownership, including one or more rooms or spaces located in one or more floors (or part or parts of floors) in a building or buildings and such accessoriesasmaybeappendedthereto. Q:Whatisacondominiumproject? A: It is the entire parcel of real property divided or to be divided in condominiums, including all structuresthereon,
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Q:Whatarecommonareas? A: The entire project excepting all units separatelygrantedorheldorreserved. Q:Whatismeantbytodividerealproperty? A: To divide the ownership thereof or other interest therein by conveying one or more condominiums therein but less than the whole thereof. Q: What is the rule as regards acquisition of ownershipovercommonareas? A: Transfer or conveyance of aunit or apartment, officeorstoreorotherspacethereinshallinclude the transfer or conveyance of the undivided interests in the common areas or, in a proper case, the membership or shareholdings in the condominiumcorporation Q: Are there any restrictions as regards ownershipofcondominiumunitsprovidedunder theCondominiumAct? A: 1. Asregardsindividuals: GR:None. XPN: where the common areas in the condominium project are owned by the owners of separate units as coowners thereof, no condominium unit therein shall be conveyed or transferred to personsotherthan: 1. Filipinocitizens,or 2. Corporations at least sixty percent of the capital stock of whichbelongtoFilipinocitizens XPN to the XPN: in cases of hereditary succession. 2. Asregardscorporations: Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed the limits imposedbyexistinglaws.
Note: Whenever the common areas in a condominium project are held by a condominium corporation, such corporation shall constitute managementbodyoftheproject. the
Q: What are the incidents of a condominium grant? A: Unless otherwise expressly provided in the enabling or master deed or the declaration of restrictions,theincidentsofacondominiumgrant areasfollows: 1. The boundary of the unit granted are the interior surfaces of the perimeter walls, floors, ceilings, windows and doorsthereof.
Note: The following are not part of the unit bearing walls, columns, floors, roofs, foundations and other common structural elementsofthebuilding: a. lobbies, stairways, hallways, and other areas of common use, b. elevator equipment and shafts, centralheating, c. centralrefrigeration and central airconditioningequipment, d. reservoirs, tanks, pumps and other central services and facilities, e. pipes, ducts, flues, chutes, conduits, wires and other utility installations, wherever located, excepttheoutletsthereofwhen locatedwithintheunit.
2.
There shall pass with the unit, as an appurtenance thereof, an exclusive easement for the use of the air space encompassed by the boundaries of the unit as it exists at any particular time and as the unit may lawfully be altered orreconstructedfromtimetotime.
Note: Such easement shall be automatically terminated in any air spaceupondestructionoftheunitas torenderituntenantable.
3.
4.
Common areas are held in common by the holders of units, in equal shares, one for each unit, unless otherwise provided. A nonexclusive easement for ingress, egress and support through the common areas is appurtenant to each
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unit and the common areas are subject tosucheasements. Each condominium owner shall have theexclusiverighttopaint,repaint,tile, wax, paper or otherwise refinish and decoratetheinnersurfacesofthewalls, ceilings, floors, windows and doors boundinghisownunit. Each condominium owner shall have the exclusive right to mortgage, pledge or encumber his condominium and to have the same appraised independently of the other condominiums but any obligation incurred by such condominiumownerispersonaltohim. GR: Each condominium owner has also the absolute right to sell or dispose of hiscondominium. XPN: If the master deed contains a requirement that the property be first offered to the condominium owners within a reasonable period of time before the same is offered to outside parties; 2. damage or destruction to the project has rendered onehalf or more of the units therein untenantable and that condominium owners holding in aggregatemorethanthirtypercent interest in the common areas are opposed to repair or restoration of theproject;or theprojecthasbeeninexistencein excess of fifty years, that it is obsolete and uneconomic, and that condominium owners holding in aggregate more than fifty percent interest in the common areas are opposed to repair or restoration or remodeling or modernizingoftheproject;or the project or a material part thereof has been condemned or expropriated and that the project is no longer viable, or that the condominium owners holding in aggregate more than seventy percent interest in the common areas are opposed to continuation of the condominium regime after expropriation or condemnation of amaterialportionthereof;or theconditionsforsuchpartitionby sale set forth in the declaration of restrictions, duly registered in accordance with the terms of the Act,havebeenmet.
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Q: May common areas be divided through judicialpartition? A: GR: Common areas shall remain undivided, and there shall be no judicial partitionthereof. XPN: Where several persons own condominiums in a condominium project, an action may be brought by one or more such persons for partition thereof by sale of the entire project, as if the owners of all of the condominiums in such project were co ownersoftheentireprojectinthesame proportion as their interests in the commonareas: Note: However, a partition shall be madeonlyuponashowingthat: 1. three years after damage or destruction to the project which renders material part thereof unit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction, or
5.
Q: What is the rule regarding issuance of certificate of title where the enabling or master deed provides that the land included within a condominium project are to be owned in commonbythecondominiumownerstherein? A:TheRegisterofDeedsmay,attherequestofall the condominium owners and upon surrender of all their "condominium owner's" copies, cancel thecertificatesoftitleof thepropertyandissuea new one in the name of said condominium ownersasproindivisocoownersthereof. Q: How are deeds, declarations or plans for a condominiumprojectconstrued? A: 1. Liberally, to facilitate the operation of theproject
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2. DECLARATIONOFRESTRICTIONS Q: When should a declaration of restrictions be registeredandwhatistheeffectofsuch? A: The owner of a project shall, prior to the conveyance of any condominium therein, register a declaration of restrictions relating to such project. Such restrictions shall constitute a lien upon each condominium in the project, and shall insure to andbindallcondominiumownersintheproject. Note: Such liens, unless otherwise provided, may be enforced by any condominium owner in the project or by the management bodyofsuchproject. Q: What should a declaration of restrictions provide? A: The declaration of restrictions shall provide for the management of the project by anyone of the followingmanagementbodies: 1. acondominiumcorporation, 2. an association of the condominium owners, 3. a board of governors elected by condominiumowners,or 4. a management agent elected by the owners or by the board named in the declaration. 5. votingmajorities, 6. quorums, 7. notices, 8. meetingdate,and 9. other rules governing such body or bodies. Q: What may a declaration of restrictions provide? A: Such declaration of restrictions, among other things,mayalsoprovide: 1. Astoanysuchmanagementbody; a. For the powers thereof, including power to enforce the provisions of thedeclarationsofrestrictions; b. For maintenance of insurance policies, insuring condominium owners against loss by fire, casualty, liability, workmen's compensation and other insurable c. Provisions shall be presumed to be independentandseverable. risks, and for bonding of the members of any management body; Provisions for maintenance, utility, gardening and other services benefiting the common areas, for the employment of personnel necessary for the operation of the building, and legal, accounting and other professional and technical services; For purchase of materials, supplies and the like needed by the commonareas; For payment of taxes and special assessments which would be a lien upontheentireprojectorcommon areas, and for discharge of any lien or encumbrance levied against the entire project or the common areas; For reconstruction of any portion or portions of any damage to or destructionoftheproject; The manner for delegation of its powers; For entry by its officers and agents into any unit when necessary in connection with the maintenance or construction for which such bodyisresponsible; For a power of attorney to the management body to sell the entire project for the benefit of all of the owners thereof when partition of the project may be authorized under Section 8 of the Condominium Act, which said power shall be binding upon all of the condominium owners regardless of whether they assume the obligations of the restrictions ornot.
d.
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f.
g. h.
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The manner and procedure for amending such restrictions:Provided, Thatthevoteofnotlessthanamajority ininterestoftheownersisobtained. For independent audit of the accounts ofthemanagementbody; For reasonable assessments to meet authorized expenditures, each condominium unit to be assessed separately for its share of such expenses in proportion (unless otherwise provided) to its owners fractional interest in any common areas;
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5. For the subordination of the liens securing such assessments to other liens either generally or specifically described; For conditions, other than those provided for in Sections 8 and 13 of the Act, upon which partition of the project and dissolution of the condominium corporationmaybemade. Q: May the management body may acquire and hold, for the benefit of the condominium owners, tangible and intangible personal property and dispose of the same by sale or otherwise? A: Yes, unless otherwise provided for by the declarationofrestrictions.
Note: The beneficial interest in such personal property shall be owned by the condominium owners in the same proportion as their respective interestsinthecommonareas. A transfer of a condominium shall transfer to the transferee ownership of the transferor's beneficial interestinsuchpersonalproperty.
6.
Note:Suchrighttopartitionordissolution maybeconditionedupon: a. failure of the condominium owners torebuildwithinacertainperiod; b. specified inadequacy of insurance proceeds; c. specified percentage of damage to thebuilding; d. adecisionofanarbitrator;or e. upon any other reasonable condition.
Q: What is the duty of the Register of Deeds as regardsthisdeclarationofrestrictions? A:TheRegister ofDeedsshallenterandannotate thedeclarationofrestrictionsuponthecertificate of title covering the land included within the project,ifthelandispatentedorregisteredunder theLandRegistrationorCadastralActs. POWERSOFANDRESTRICTIONSUPON MANAGEMENTBODY Q: What are the restrictions imposed by the law upon corporations which is also the managementbodyofthecondominiumproject? A:Therestrictionsareasfollows: 1. The corporate purposes of such a corporationshallbelimitedtothe: a. holding of the common areas, either in ownership or any other interestinrealpropertyrecognized bylaw, b. managementoftheproject,and c. to such other purposes as may be necessary,incidentalorconvenient to the accomplishment of said purposes. 2. The articles of incorporation or bylaws of the corporation shall not contain any provision contrary to or inconsistent withthe: a. provisionsoftheAct; b. enablingormasterdeed;or c. declaration of restrictions of the project.
CONDOMINIUMCORPORATIONS Q:Whatisacondominiumcorporation? A: A corporation specially formed for the purpose,inwhichtheholdersofseparateinterest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in thecommonareas.
Note: As regards title to the common areas, including the land, or the appurtenant interests in such areas, these may be held by a condominium corporation.
Q: What is the term of a condominium corporation? A: Coterminus with the duration of the condominium project, the provisions of the CorporationLawtothecontrarynotwithstanding. Membership Q:Whataretherulesregardingmembershipina condominiumcorporation? A: Membership in a condominium corporation, regardless of whether it is a stock or nonstock corporation, shall not be transferable separately from the condominium unit of which it is an appurtenance.
Note:Whenamemberorstockholderceasestoown a unit in the project in which the condominium corporation owns or holds the common areas, he shall automatically cease to be a member or stockholderofthecondominiumcorporation.
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Q: May a condominium corporation sell, exchange, lease or otherwise dispose of the common areas owned or held by it in the condominiumproject? A: GR:Duringitsexistence,itcannotdoso. XPN: If authorized by the affirmative vote of allthestockholdersormembers. Q: Is the so called appraisal right under the Corporation Code available to stockholders or membersofacondominiumcorporation? A: GR:Notavailable.Thelawprovidesthatthe bylaws of a condominium corporation shall provide that a stockholder or member shall not be entitled to demand payment of his shares or interest in those cases where such right is granted under the Corporation Law xxx XPN:Ifsaidstockholderormemberconsents to sell his separate interest in the project to the corporation or to any purchaser of the corporation's choice who shall also buy from the corporation the dissenting member or stockholder'sinterest.
Note: In case of disagreement as to price, the procedure set forth in the appropriate provision of the Corporation Law for valuation ofsharesshallbefollowed. The corporation shall have two years within which to pay for the shares or furnish a purchaserofitschoicefromthetimeofaward. All expenses incurred in the liquidation of the interest of the dissenting member or stockholdershallbebornebyhim.
superior rights of the corporation creditors.

Note: Such transfer or conveyance shall be deemed to be a full liquidation of the interest of such members or stockholders inthecorporation.
2.
After such transfer or conveyance, the provisions of this Act governing undivided coownership of, or undivided interest in, the common areas in condominium projects shall fullyapply.
DissolutionandLiquidation Q: What is the effect of involuntary dissolution of a condominium corporation for any of the causesprovidedbylaw? A: 1. The common areas owned or held by the corporation shall, by way of liquidation, be transferred proindiviso andinproportiontotheirinterestinthe corporation to the members or stockholders thereof, subject to the
Q: When may voluntary dissolution of a condominiumcorporationbeallowed? A:Acondominiumcorporationmaybevoluntarily dissolvedonly: 1. when the enabling or the master deed of the project in which the condominium corporation owns or holdsthecommonareaisrevoked;and 2. uponashowingthat: a. three years after damage or destruction to the project in which the corporation owns or holds the common areas, which damage or destruction renders a material part thereof unfit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction;or b. damage or destruction to the project has rendered onehalf or more of the units therein untenantable and that more than thirty percent of the members of the corporation, if nonstock, or the shareholders representing more than thirty percent of the capital stock entitled to vote, if a stock corporation, are opposed to the repair or reconstruction of the project,or c. theprojecthasbeeninexistencein excess of fifty years, that it is obsolete and uneconomical, and that more than fifty percent of the members of the corporation, if nonstock, or the stockholders representing more than fifty percent of the capital stock entitled to vote, if a stock corporation, are opposed to the
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repairorrestorationorremodeling ormodernizingoftheproject;or d. the project or a material part thereof has been condemned or expropriated and that the project is no longer viable, or that the members holding in aggregate more than seventy percent interest in the corporation, if non stock, or the stockholders representing more than seventy percent of the capital stock entitled to vote, if a stock corporation, are opposed to the continuation of the condominium regime after expropriation or condemnation of a material portionthereof;or the conditions for such a dissolution set forth in the declaration of restrictions of the project in which the corporation owns or holds the common areas, havebeenmet. the corporate and of individual condominium creditors. Q: What should the Court do if, in an action for partition of a condominium project or for the dissolution of condominium corporation on the ground that the project or a material part thereof has been condemned or expropriated, the Court finds that the conditions provided for in the Condominium Act or in the declaration of restrictionshavenotbeenmet? A: The Court may decree a reorganization of the project,declaringwhichportionorportionsofthe project shall continue as a condominium project, the owners thereof, and the respective rights of said remaining owners and the just compensation, if any, that a condominium owner may be entitled to due to deprivation of his property.
Note: Upon receipt of a copy of the decree, the Register of Deeds shall enter and annotate thesame onthepertinentcertificateoftitle.
e.
Assessment,NoticethereofandLienCreated Q: If real property has been divided into condominiums, how will it be assessed for taxationpurposes? A: Each condominium separately owned shall be separatelyassessed,forpurposesofrealproperty taxation and other tax purposes to the owners thereof and the tax on each such condominium shallconstitutealiensolelythereon. Q: Who should pay for an assessment upon any condominium made in accordance with a duly registereddeclarationofrestrictions? A: It is an obligation of the owner thereof at the timetheassessmentismade. Q: What are the rules as regards the notice of assessment? A:Thenotice: 1. is to be registered with the Register of Deeds of the city or province where suchcondominiumprojectislocated. 2. shallstatethefollowing: a. amount of such assessment and such other charges thereon as may beauthorizedbythedeclarationof restrictions, b. a description of the condominium unit against which same has been assessed,and
Note: action for voluntary dissolution is that under Rule104oftheRulesofCourt.
Q: May the members or stockholders of a condominium corporation dissolve such corporation? A: Yes, by the affirmative vote of all the stockholders or members thereof at a general or special meeting duly called for the purpose:Provided, that all the requirements of Section 62 of the Corporation Law are complied with. Q: What is the consequence of voluntary dissolutionofacondominiumcorporation? A: GR:Thecorporationshallbedeemedtohold apowerofattorneyfromallthemembersor stockholders to sell and dispose of their separateinterestsintheproject. XPN: Unless otherwise provided for in the declarationofrestrictions Q: How is a condominium corporation liquidated? A:Liquidationofthecorporationshallbeeffected byasaleoftheentireprojectasifthecorporation owned the whole thereof, subject to the rights of
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the name of the registered owner thereof. Such notice shall be signed by an authorized representative of the management body or as otherwise provided in the declaration of restrictions. c. Q: What are the rules as regards labor performedorservicesormaterialsfurnished? A: 1. If with the consent of or at the request ofacondominiumownerorhis agentor hiscontractororsubcontractor: GR: it shall not be the basis of a lien against the condominium of any other condominiumowner XPN: such other owners have expressly consented to or requested the performance of such labor or furnishing ofsuchmaterialsorservices.
Note: Such express consent shall be deemed to have been given by the owner of any condominium in the case of emergency repairs of his condominiumunit.
3.
Q: What is the effect if the management body causes a notice of assessment to be registered withtheregisterofdeeds? A: The amount of any such assessment plus any other charges thereon, such as interest, costs (including attorney's fees) and penalties, as such may be provided for in the declaration of restrictions, shall be and become a lien upon the condominiumassessed.
Note: Effect of payment: Upon payment of said assessment and charges or other satisfaction thereof, the management body shall cause to be registeredareleaseofthelien.
If performed or furnished for the commonareasandifdulyauthorizedby the management body provided for in a declaration of restrictions governing the property: shall be deemed to be performed or furnished with the express consent of each condominium owner. Q: How may an owner of any condominium removehiscondominiumfromalienagainsttwo ormorecondominiumsoranypartthereof? A: By payment to the holder of the lien of the fraction of the total sum secured by such lien whichisattributabletohiscondominiumunit. 2.
Q:Whataretherulesasregardstheliencreated incaseofunpaidassessments,etc? A: GR: Such lien shall be superior to all other liens registered subsequent to the registrationofsaidnoticeofassessment XPNs: 1. realpropertytaxliensaresuperior; 2. whendeclarationofrestrictionsprovide for the subordination thereof to any otherliensandencumbrances. Q: What is the rule as regards enforcement of thelien? A: Such liens may be enforced in the same manner provided for by law for the judicial or extrajudicial foreclosure of mortgages of real property. Q: Can the management body bid in the foreclosure sale based on the lien for unpaid assessments? A: GR: No, the management body shall have powertobidatforeclosuresale. XPN: Unless otherwise provided for in the declarationofrestrictions, Note: The condominium owner shall have the samerightofredemptionasincasesofjudicialor extrajudicialforeclosureofmortgages.
279

UST Golden Notes 2011 - Sales

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SALES

ASTOPRESENCEORABSENCEOFCONDITION ABSOLUTESALE Q:Whenisasaleabsolute?

Q: Distinguish a conditional sale from an absolutesale A:

Contractexecuted betweenthesellerand thebuyer

CIVILLAWTEAM: ADVISER:ATTY.ELMERT.RABUYA;SUBJECTHEAD:ALFREDOB.DIMAFELIXII; ASST.SUBJECTHEADS:KARENFELIZG.SUPNAD,LAMBERTOL.SANTOSIII;MEMBERS:PAULELBERTE.AMON,ALSTONANARNA,OZANJ. FULLEROS,CECILIOM.JIMENO,JR.,ISMAELSARANGAYA,JR.;CONTRIBUTORS:LOISERAEG.NAVAL,MONICAJUCOM

Q:Whatistheperiodwithinwhichtoexercise theoption? A: 1. Withinthetermstipulated 2. If there is no stipulation, the court may fixtheterm

Witha condition without period/ condition Witha counter offer

Q:Howisanoptionexercised? A:Anoticeofacceptancemustbecommunicated toofferorevenwithoutactualpaymentaslongas paymentisdeliveredintheconsummationstage.