I.

THE NATURE OF SALE

A. DEFINITION (Art. 1458)
Sale is a contract by which one of the contracting parties [the seller] obligates himself to transfer the ownership1 and to deliver possession, of a determinate thing, and the other [the buyer] to pay therefor a price certain in money or its equivalent. Cruz v. Fernando, 477 SC ! "7# $%&&'(.2 1. Elements of S le )lements of sale* $a( consent or meeting of the minds+ $b( determinate sub,ect matter+ and $c( price certain in money or its equivalent. Navarra v. Planters Dev. Bank, '%7 SC ! '-% $%&&7(.# !bsence of any essential elements negates a sale xDizon v. CA, #&% SC ! %.. $"///(, 4 even when earnest money has been paid. Manila Metal Container Corp. v. PNB, '"" SC ! 444 $%&&-(. Sale being a consensual contract, its essential elements must be proven xVillanueva v. CA, %-7 SC ! ./ $"//7(+ but once proven, a sale0s validity is not affected by a previously e1ecuted fictitious deed of sale xPealosa v. Santos, #-# SC ! '4' $%&&"(+ and the burden is on the other party to prove otherwise. 1Heirs o !rnesto Biona v. CA, #-% SC ! %/ $%&&"(. )ven an )1tra,udicial Settlement of )state with !bsolute Sale must comply with the requisites prescribed in !rticle "#". of the Civil Code for all three elements of sale. Baladad v. "u#li$o, '/' SC ! "%' $%&&/(. 2. St !es of "ontr #t of S le Policitacion covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected. Perfection ta2es place upon the concurrence of the essential elements, which are the meeting of the minds of the parties as to the ob,ect of the contract and upon the price. Consummation begins when the parties perform their respective underta2ings, culminating in the e1tinguishment thereof. 1 San Mi%uel Properties P&ilippines, 'n$. v. Huan%, ##- SC ! 7#7 $%&&&(.' $. S le "re tes Re l O%l&! t&ons 'To (&)e* $!rt. ""-'( 4. Essent& l "+ r #ter&st&#s of S le, . Nom&n te n- .r&n#&/ l ! contract of sale is what the law defines it to be, ta2ing into consideration its essential elements, and not what the contracting parties call it. xSantos v. Court o Appeals, ##7 SC ! -7 $%&&&(.%. "onsens0 l $!rt. "47'( ! contract of sale is not a real, but a consensual contract, and becomes valid and binding upon the meeting of the minds of the parties as to the ob,ect and the price 7, that*
" 3wnership is the independent and general power of a person over a thing for purposes recogni4ed by law and within the limits established thereby. !ccording to !rt. 4%. of the Civil Code, this means that* 5he owner has the right to en,oy and dispose of a thing, without other limitations than those established by law. 1 1 1 !side from the (us utendi and the (us a#utendi inherent in the right to en,oy the thing, the right to dispose, or the (us disponendi, is the power of the owner to alienate, en#0m%er, transform and even destroy the thing owned. Flan$ia v. Court o Appeals, 4'7 SC ! %%4 $%&&'(. % Al redo v. Borras, 4&4 SC ! "4' $%&&#(+ Manila Metal Container Corp. v. PNB , '"" SC ! 444 $%&&-(+ "o#erts v. Papio, '"' SC ! #4- $%&&7(. # )ovan *and, 'n$. v. CA, %-. SC ! "-& $"//7(+ +ui(ada v. CA, %// SC ! -/' $"//.(+ Co v. CA, #"% SC ! '%. $"///(+ San Andres v. "odri%uez, ##% SC ! 7-/ $%&&&(+ "o#le v. Ar#asa, #-% SC ! -/ $%&&"(+ Pol,te$&ni$ -niversit, v. CA, #-. SC ! -/" $%&&"(+ .atipunan v. .atipunan, #7' SC ! "// $%&&%(+ *ondres v. CA, #/4 SC ! "## $%&&%(+ Manon%son% v. !sti/o, 4&4 SC ! -.# $%&&#(+ )i/enez, )r. v. )ordana, 444 SC ! %'& $%&&4(+ San *orenzo Dev. Corp. v. CA , 44/ SC ! // $%&&'(+ 0ason v. Ar$ia%a, 44/ SC ! 4'. $%&&'(+ "o#erts v. Papio, '"' SC ! #4- $%&&7(+ Navarra v. Planters Dev. Bank, '%7 SC ! '-% $%&&7(+ "epu#li$ v. Florendo, '4/ SC ! '%7 $%&&.(+ 1S'S v. *opez, '/% SC ! 4'- $%&&/(+ Baladad v. "u#li$o, '/' SC ! "%' $%&&/(. 4 "o#erts v. Papio, '"' SC ! #4- $%&&7(+ 20S3 Corp. v. DMC -r#an Properties Dev., 'n$., '/4 SC ! '/. $%&&/(. ' *i/ketkai Sons Millin%, 'n$. v. Court o Appeals , %'& SC ! '%# $"//'(+ )ovan *and, 'n$. v. CA, %-. SC ! "-& $"//7(+ Bu%atti v. Court o Appeals, #4# SC ! ##' $%&&&(+ Moreno, )r. v. Private Mana%e/ent 4 i$e , '&7 SC ! -# $%&&-(+ Manila Metal Container Corp. v. PNB, '"" SC ! 444 $%&&-(+ Navarra v. Planters Dev. Bank, '%7 SC ! '-% $%&&7(+ Provin$e o Ce#u v. Heirs o "u ina Morales, '4- SC ! #"' $%&&.(+ 1S'S v. *opez, '/% SC ! 4'- $%&&/(+ 20S3 Corp. v. DMC -r#an Properties Dev., 'n$. , '/4 SC ! '/. $%&&/(. Bo5e v. CA, %%& SC ! "'. $"//#(+ "o/ero v. CA, %'& SC ! %%# $"//'(+ *ao v. CA, %7' SC ! %#7 $"//7(+ Cavite Develop/ent Bank v. *i/, #%4 SC ! #4- $%&&&(. 7 "o/ero v. CA, %'& SC ! %%# $"//'(+ Balat#at v. CA, %-" SC ! "%. $"//-(+ Coronel v. CA, %-# SC ! "' $"//-(+ Cit, o Ce#u v. Heirs o Candido "u#i, #&- SC ! 4&. $"///(+ A%asen v. CA, #%' SC ! '&4 $%&&&(+ *a orteza v. Ma$&u$a, ### SC ! -4# $%&&&(+ *ondres v. Court o Appeals, #/4 SC ! "## $%&&%(+ Al$antara6Daus v. de *eon, 4&4 SC ! 74 $%&&#(+ Buenaventura v. Court o Appeals, 4"- SC ! %-# $%&&#(+ San *orenzo Dev. Corp. v. CA , 44/ SC ! // $%&&'(+ 0ason v. Ar$ia%a, 44/ SC ! 4'. $%&&'(+ Ainza v. Padua, 4-% SC ! -"4 $%&&'(+ "o#erts v. Papio, '"' SC ! #4- $%&&7(+ MCC 'ndustrial Sales Corp. v. Ssan%,on%

2
6pon its perfection, the parties may reciprocally demand performance. 1 Heirs o Venan$io Be(entin% v. Baez, '&% SC ! '#" $%&&-(+. sub,ect only to the provisions of the law governing the form of contracts. xCruz v. Fernando, 477 SC ! "7# $%&&'(. 7t remains valid even if parties have not affi1ed their signatures to its written form 1 1a#elo v. CA, #"- SC ! #.- $"///(, or the manner of payment is breached. xPilipinas S&ell Petroleu/ Corp v. 1o#onsen%, 4/- SC ! #&' $%&&-(. 5he failure of the subdivision developer to obtain a license to sell the subdivision lots does not render the sales void on that ground alone especially that the parties have impliedly admitted that there was already a meeting of the minds as to the sub,ect of the sale and price of the contract. Cante/prate v. C"S "ealt, Dev. Corp. '.7 SC ! 4/% $%&&/(.

5he contract of sale constituted in an )1tra,udicial Settlement of )state with !bsolute Sale would be valid even if the buyer0s signature does not appear thereon8a contract of sale is perfected the moment there is a meeting of the minds upon the thing which is the ob,ect of the contract and upon the price. xBaladad v. "u#li$o, '/' SC ! "%' $%&&/(.

5he binding effect of sale is based on the principle that the obligations arising therefrom have the force of law between the parties. 1Veterans Federation o t&e P&ilippines v. Court o Appeals , #4' SC ! #4. $%&&&(. Perfection Distinguished from Demandability 9 :ot all contracts of sale become automatically and immediately effective. 7n sales with assumption of mortgage, there is a condition precedent to the seller0s consent and without the approval of the mortgagee, the sale is not perfected. xBian Steel Corp. v. Court o Appeals, #/" SC ! /& $%&&%(. No Contract Situation versus Void Contract 9 !bsence of consent $i.e., $o/plete /eetin% o /inds7 negates the e1istence of a perfected sale. xFir/e v. Bukal !nterprises and Dev. Corp., 4"4 SC ! "/& $%&&#(. 5he contract then is null and void a# initio, absolutely wanting in civil effects+ hence, it does not create, modify, or e1tinguish the ,uridical relation to which it refers. xCa#ota(e v. Pudunan, 4#- SC ! 4%# $%&&4(. ;hen there is no meeting of the minds on price, the contract <is not perfected= and does not serve as a binding ,uridical relation between the parties. 1 Manila Metal Container Corp. v. PNB , '"" SC ! 444 $%&&-(,/ and should be more accurately denominated as ine1istent, as it did not pass the stage of generation to the point of perfection. 1 NHA v. 1ra$e Baptist C&ur$&, 4%4 SC ! "47 $%&&4(. #. 1&l ter l n- Re#&/ro# l $!rts. ""-/ and ""/"( ! contract of sale gives rise to <reciprocal obligations=, which arise from the same cause with each party being a debtor and creditor of the other, such that the obligation of one is dependent upon the obligation of the other+ and they are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other. Cortes v. Court o Appeals, 4/4 SC ! '7& $%&&-(."& ! perfected contract of sale carries the correlative duty of the seller to deliver the property and the obligation of the buyer to pay the agreed price. Con%re%ation o t&e "eli%ious o t&e Vir%in Mar, v. 4rola, ''# SC ! '7. $%&&.(. 5he power to rescind is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him, and without need of prior demand. Al/o$era v. 4n%, '4- SC ! "-4 $%&&.(."" -. Onero0s $2Gaite v. Fonacier 2 S"RA 8$3 415617(. e. "omm0t t&)e $!"# S$$% Arts. 1$55 n- 1483( 7n a contract of sale, there is no requirement that the price be equal to the e1act value of the sub,ect matter of sale+ all that is required is that the parties believed that they will receive good value in e1change for what they will give. 2!uenaventura v. C&9 416 S"RA 26$ (233$). f. S le Is T&tle n- Not :o-e Sale is not a mode, but merely a title. ! mode is the legal means by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership. Sale by itself does not transfer or affect ownership+ the most that sale does is to create the obligation to transfer ownership. 7t is tradition or delivery, as a consequence
Corp., '#- SC ! 4&. $%&&7(+ Castillo v. "e,es. '#/ SC ! "/# $%&&7(+ 20S3 Corp. v. DMC -r#an Properties Dev., 'n$., '/4 SC ! '/. $%&&/(. . Provin$e o Ce#u v. Heirs o "u ina Morales, '4- SC ! #"' $%&&.(. / "o#erts v. Papio, '"' SC ! #4- $%&&7(. "& 4n% v. Court o Appeals, #"& SC ! " $"///(+ Mortel v. .ASSC4, #4. SC ! #/" $%&&&(+ A%ro Con%lo/erates, 'n$. v. CA, #4. SC ! 4'& $%&&&78 Velarde v. Court o Appeals, #-" SC ! '- $%&&"(+ Carras$oso, )r. v. Court o Appeals, 477 SC ! --- $%&&'(+ Heirs o Antonio F. Berna#e v. Court o Appeals, ''/ SC ! '# $%&&.(+ Heirs o Antonio F. Berna#e v. Court o Appeals, ''/ SC ! '# $%&&.(. "" Vda. De +uirino v. Palar$a, %/ SC ! " $"/-/(

3
of sale, that actually transfers ownership. xSan *orenzo Dev. Corp. v. CA , 44/ SC ! // $%&&'(,"% $itin% >7??!:6)>!, @A7?7@@7:) ?!; 3: S!?)S, "//' ed., at p. '. Seller0s ownership of the thing sold is not an element of perfection+ what the law requires is that seller has the right to transfer ownership at the time of delivery. 1 +ui(ada v. CA, %// SC ! -/' $"//.(."# !"# S$$, 13iton% v. CA, %.7 SC ! "&% $"//.(, which defined a <sale= as < a $ontra$t trans errin% do/inion and ot&er real ri%&ts in t&e t&in% sold. =

1. SALE DISTIN(UISHED FRO: SI:ILAR "ONTRA"TS

! contract is what the law defines it to be, ta2ing into consideration its essential elements, and the title given to it by the parties is not as much significant as its substance. "4 5he transfer of ownership in e1change for a price paid or promised is the very essence of a contract of sale. 1 Santos v. Court o Appeals, ##7 SC ! -7 $%&&&(. 7n determining the real character of sale, courts loo2 at the intent of the parties, their true aim and purpose in entering into the contract, as well as <by their conduct, words, actions and deeds prior to, during and immediately after e1ecuting the agreement,= and not at the nomenclature used to describe it, 1*ao v. Court o Appeals, %7' SC ! %#7 $"//7(. 1. Don t&on $!rts. 7%' and "47"( 6nli2e a donation, sale is a disposition for valuable consideration with no diminution of the estate but merely substitution of values, with the property sold replaced by the equivalent monetary consideration+ unli2e donation, a valid sale cannot have the legal effect of depriving the compulsory heirs of their legitimes. xManon%son% v. !sti/o, 4&4 SC ! -.# $%&&#(. 5he rules on double sales under !rt. "'44 find no relevance to contracts of donation. 1 He/edes v. Court o Appeals, #"- SC ! #47 $"///(. 2. 1 rter $!rts. "4-., "-#. to "-4"( $. "ontr #t for .&e#e;of;<or= $!rts. "4-7, "7"# to "7"'( #he Cru'% <7neluctably, whether the contract be one of sale or one for a piece of wor2, a transfer of ownership is involved and a party necessarily wal2s away with an ob,ect.= 1Co//issioner o 'nternal "evenue v. CA, %7" SC ! -&' $"//7(, $itin% >7??!:6)>!, ?!; 3: S!?)S, pp. 7B/ $"//'(. 7n both provisions on warranty of title against hidden defects applies. 1 Dio v. CA, #'/ SC ! /" $%&&"(. ;hen a person stipulates for the future sale of articles which he is habitually ma2ing, and which at the time are not made or finished, it is essentially a contract of sale and not a contract for labor 1'n$&austi 9 Co. v. Cro/5ell, %& @hil. #4' $"/""(+ even when he e1ecutes production thereof only after an order is placed by customers. 2Celestino ( Co. v. Collector9 55 .+&l. 841 (1556). 7f the thing is specially done only upon the specific order of another, this is a contract for a piece of wor2+ if the thing is manufactured or procured for the general mar2et in the ordinary course of business, it is a contract of sale. 2Commissioner of )nternal *evenue v. $ngineering $+ui,ment ( Su,,ly Co.9 64 S"RA 553 (1585)."' 5o 5olentino, t&e distin$tion depends on t&e intention o parties * if parties intended that at some future date an ob,ect has to be delivered, without considering the wor2 or labor of the party bound to deliver, the contract is one of sale+ but if one of the parties accepts the underta2ing on the basis of some plan, ta2ing into account the wor2 he will employ personally or through another, the contract is for a piece of wor2. 1!n%ineerin% 9 Ma$&iner, Corp. v. CA, %'% SC ! "'- $"//-(. 4. A!en#> to Sell $!rt. "4--( !ssumption by <agent= of the ris2 pertaining to the cost or price of the sub,ect matter ma2es the relationship that of buyerBseller, for the agent does not assume ris2 with respect to the price or the property sub,ect of the relationship. 1.er 9 Co., *td. v. *in%ad, #. SC ! '%4 $"/7"(. Consequently* $a( the contractual relationship is not inherently revocable. 2-uiroga v. Parsons9 $8 .+&l. 531 (1518)+ or $b( the purported agent does not have to account for the profit margin earned from acquiring the property for the purported principal. 2Puyat v. &rco &musement Co.9 82 .+&l. 432 (1541).

A$ap v. CA, %'" SC ! #& $"//'(. !:uatorial "ealt, Dev. 'n$. v. Ma, air 3&eater, 'n$. , #7& SC ! '- $%&&"(+ Al$antara6Daus v. de *eon, 4&4 SC ! 74 $%&&#(+ Heirs o )esus M. Mas$uana v. Court o Appeals, 4-" SC ! ".- $%&&'(. "4 "o/ero v. CA, %'& SC ! %%# $"//'(+ *ao v. Court o Appeals, %7' SC ! %#7 $"//7(+ 4rden v. Aurea, '-% SC ! --& $%&&.(+ Ver "e,es v. Salvador, Sr., '-4 SC ! 4'- $%&&.(.. "' Co//issioner o 'nternal "evenue v. Arnoldus Carpentr, S&op , "'/ SC ! "// $"/..(+ Del Monte P&ilippines, 'n$. v. Ara%ones, 4-" SC ! "#/ $%&&'(.
"#

"%

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3ne factor that most clearly distinguishes agency from other legal concepts, including sale, is $ontrol+ one person 9 the agent 9 agrees to act under the control or direction of another 9 the principal. 1Vi$torias Millin% Co., 'n$. v. CA, ### SC ! --# $%&&&(. Commercial bro2er, commission merchant or indentor is a /iddle/an a$tin% in &is o5n na/e , and acts as agent for both seller and buyer to effect a sale between them. !lthough he is neither seller nor buyer to the contract effected he may voluntarily assume warranties of seller. xS$&/id and 4#erl,, 'n$. v. ")* Martinez, "-- SC ! 4/# $"/..(. 5. Dacion $n Pago $!rts. "%4' and "/#4( 1overned #, t&e la5 on sales, dation in payment is a transaction that ta2es place when property is alienated to the creditor in full satisfaction of a debt in money 9 it involves the delivery and transmission of ownership of a thing as an accepted equivalent of the performance of the obligation. 0uson v. Vitan, 4/- SC ! '4& $%&&7(. 7n its modern concept, what actually ta2es place in da$ion en pa%o is an ob,ective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the ob,ect of the contract of sale, while the debt is considered as the purchase price. xA:uinte, v. 3i#on% '"" SC ! 4"4 $%&&-(.")lements of dation in payment* $a( performance of the prestation in lieu of payment $ ani/o solvendi( which may consist in the delivery of a corporeal thing or a real right or a credit against the third person+ $b( some difference between the prestation due and that which is given in substitution $aliud pro alio(+ and $c( agreement between the creditor and debtor that the obligation is immediately e1tinguished by reason of the performance of a presentation different from that due. 2.o v. /0S $co1Form2or3 System Phil. )nc.9 41$ S"RA 182 (233$)."7 5here is no dation in payment where there is no transfer of ownership in the creditor0s favor, as when the possession of the thing is merely given to the creditor by way of security. Fort Boni a$io Dev. Corp. v. 0llas *endin% Corp. , '-7 SC ! 4'4 $%&&.(+ as when the possession is only by way of security. 1PNB v. Pineda, "/7 SC ! " $"//"(. Cor da$ion to arise, there must be actual delivery of the property to the creditor by way of e1tinguishment of the preBe1isting debt. P&ilippine *a5in Bus Co. v. CA, #74 SC ! ##% $%&&%(. ". !"# S$$ 4!)#$*% SSS v. Court o Appeals, ''# SC ! -77 $%&&.(. 7n a true da$ion en pa%o, the assignment of the property e1tinguishes the monetary debt. 4n% v. "o#an *endin% Corp., ''7 SC ! '"- $%&&.(. ! creditor, especially a ban2, which enters into da$ion en pa%o, should 2now and must accept the legal consequence thereof, that the preBe1isting obligation is totally e1tinguished. x!stanislao v. !ast ;est Bankin% Corp., '44 SC ! #-/ $%&&.(. ! property sub,ect to a real estate mortgage, which has not been foreclosed, may validly be the sub,ect of da$ion en pa%o, for a mortgage does not ta2e away the property rights of the mortgagor+ however, the creditor who becomes the buyer of the property is sub,ect to the real estate mortgage lien. 3,pin%$o v. *i/, -&4 SC ! #/- $%&&/(. 6. Le se $!rts. "4.4 and "4.'( ;hen rentals in a <lease= are clearly meant to be installment payments to a sale contract, despite the nomenclature given by the parties, it is a sale by installments and governed by the ecto ?aw. 1Filinvest Credit Corp. v. CA, "7. SC ! ".. $"/./(.

"Dao Hen% Bank, 'n$. <no5 Ban$o de 4ro -niversal Bank7 v. *ai%o , '7" SC ! 4#4 $%&&.(+ 3e$&no%as P&ilippines M %. Corp. v. PNB, ''" SC ! ".# $%&&.(+ 4$a/po v. *and Bank o t&e P&ilippines , '/" SC ! '-% $%&&/(+ D.B.3. Mar6Ba, Constru$tion, 'n$. v. Panes, '/4 SC ! '7. $%&&/(. "7 A:uinte, v. 3i#on% '"" SC ! 4"4 $%&&-(+ "o$kville !x$el 'nternational !xi/ Corp. v. Culla, -&% SC ! "%4 $%&&/(. ". Filinvest Credit Corp. v. P&ilippine A$et,lene Co., 'n$. """ SC ! 4%" $"/.%(+ Vda. de )a,/e v. Court o Appeals , #/& SC ! #.& $%&&%(+ 4n% v. "o#an *endin% Corp., ''7 SC ! '"- $%&&.(.

5 II. .ARTIES TO A "ONTRA"T OF SALES (Arts. 1485;1452)

1. (ener l R0le, )very person having legal capacity to obligate himself, may validly enter into a contract of sale, whether as seller or as buyer. $!rt. "4./( 2. :&nors9 Ins ne n- Demente- .ersons9 De f;:0tes $!rts. "#%7, "#/7 and "#//( ! minor cannot be deemed to have given her consent to a contract of sale+ consent is among the essential requisites of a contract, including one of sale, absent of which there can be no valid contract. 4?7 1*a#a%ala v. Santia%o, #7" SC ! #-& $%&&"(. . Ne#ess r&es $!rts. "4./ and %/&( %. 'Em n#&/ t&on $!rts. #// and "#/7+ )nutile, Da,ority age now at ". years, !rts. %#4 and %#-, Camily Code, amended by .!. -.&/(. #. .rote#t&on of t+e Sen&le n- El-erl> $!rt. %4( n- Ill&ter tes $!rt. "##%( 6nder !rt. "##%, when one of the parties is unable to read, or if the contract is in a language not understood by him, and mista2e or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully e1plained to the former+ otherwise, sale is void. 4?7 xVda. De Ape v. Court o Appeals, 4'- SC ! "/# $%&&'(. ;hile a person is not incompetent to contract merely because of advanced years or by reason of physical infirmities, when such age or infirmities have impaired the mental faculties so as to prevent the person from properly, intelligently or firmly protecting his property rights, then he is undeniably incapacitated, and the sale he entered into is void 4?7. 2Paragas v. 5eirs of Dominador !alacano9 468 S"RA 818 (2335)."/ $. S les 1> n- 1et@een S/o0ses, . "ontr #ts @&t+ T+&r- . rt&es $!rts. 7#, /-, and "%4, Camily Code( 6nder !rt. "%4 of Camily Code, sale by husband of a con,ugal property without the wife0s consent is void, not merely voidable, since the resulting contract lac2s one of the essential elements of full <consent=. x1uian% v. CA, %/" SC ! #7% $"//.(.%& ! wife affi1ing her signature to a Eeed of Sale as a witness is deemed to have given her consent. xPela,o v. Perez, 4'/ SC ! 47' $%&&'(. !s an e1ception, husband may dispose of con,ugal property without wife0s consent if such sale is necessary to answer for con,ugal liabilities mentioned in !rticles "-" and "-%. xA#alos v. Ma$atan%a,, )r., 4#/ SC ! -4 $%&&4(. %. 1et@een S/o0ses $!rts. "##, "4/&, "4/%+ Sec. .7, Camily Code( Sales between spouses who are not governed by a complete separation of property regime are void, not ,ust voidable. 1Medina v. Colle$tor, " SC ! #&% $"/-&(. Sale by husband of con,ugal land to his concubine is null and void for being contrary to morals and public policy and <subversive of the stability of the family, a basic social institution which public policy cherishes and protects.= 2Calimlim1Canullas v. Fortun 125 S"RA 685 (1584).%" Since under !rt. "4/&, the spouses cannot validly sell property to one another, then policy consideration and the dictates of morality require that the prohibition should apply also to commonB law relationships. $ . Mata#uena v. Cervantes, #. SC ! %.4 $"/7"(. :evertheless, when property resold to a thirdBparty buyer in good faith and for value, reconveyance is no longer available. 1Cruz v. CA, %." SC ! 4/" $"//7(. 5he in pari deli$to doctrine would apply to the spousesBparties under !rt. "4/&, since only the heirs and the creditors can question the sale0s nullity. 1 Modina v. Court o Appeals, #"7 SC ! -/$"///(. 4. Ot+ers Rel t&)el> D&sA0 l&f&e- $!rts. "4/" and "4/%( Contracts entered into in violation of !rts. "4/& and "4/% are not merely voidable, #ut are null and void. 2*ubias v. !atiller9 51 S"RA 123 (158$).%% . (0 r-& ns9 A!ents n- A-m&n&str tors :o more need to comply with 1 "odri:uez v. Ma$tal, -& @hil. "# $"/#4( which required showing that a third party bought as conduitFnominee of the buyer disqualified under !rt. "4/"+
"/ %&

Do/in%o v. Court o Appeals, #-7 SC ! #-. $%&&"(. Cirelos v. Hernandez, 4/& SC ! -%' $%&&-(+ Bautista v. Silva, '&% SC ! ##4 $%&&-(. %" C&in% v. 1o,nako, )r., '&- SC ! 7#' $%&&-(. %% -, Sui Pin v. Cantollas, 7& @hil. '' $"/4&(+ Medina v. Colle$tor, " SC ! #&% $"/-"(.

6
rather, the presumption now is that such disqualified party obtained the property in violation of said article. 2Phili,,ine #rust Co. v. *oldan9 55 .+&l. $52 (1556). @rohibition against agents does not apply if the principal consents to the sale of the property in the hands of the agent. xDista(o v. CA, ##/ SC ! '% $%&&&(. Aereditary rights are not included in the prohibition insofar as administrator or e1ecutor of the estate of the deceased. 1Naval v. !nri:uez, # @hil. --/ $"/&4(. %. Attorne>s @rohibition applies only while litigation is pendin%. xDire$tor o *ands v. A#a#a, .. SC ! '"# $"/7/(+ even when the litigation is not adversarial in nature 2*ubias v. !atiller9 51 S"RA 123 (158$)+ or when it is a certiorari proceeding that may have no merit xValen$ia v. Ca#antin%, "/SC ! #&% $"//"(. @rohibition applies only to a sale to a la5,er o re$ord, and does not cover assignment of the property given in ,udgment made by a client to an attorney, who has not ta2en part in the case. Muni$ipal Coun$il o 'loilo v. !van%elista , '' @hil. %/& $"/#&(+%# nor to a lawyer who acquired property prior to the time he intervened as counsel in the suit involving such property. Del "osario v. Millado, %- SC ! 7&& $"/-/(. @rohibition does not apply* $a( to sale of a land acquired by a client to satisfy a ,udgment in his favor, to his attorney as long as the property was not the sub,ect of the litigation. 1 Daro, v. A#e$ia, %/. SC ! "7% $"//.(+ or $b( to a contingency fee arrangement which grants the lawyer of record proprietary rights to the property in litigation since the payment of said fee is not made during the pendency of litigation but only after ,udgment has been rendered. 2Fabillo v. )&C9 155 S"RA 28 (1551).%4 #. B0-!es ! ,udge should restrain himself from participating in the sale of properties8it is incumbent upon him to advise the parties to discontinue the transaction if it is contrary to law. Britani$o v. !spinosa, 4.- SC ! '%# $%&&-(. ! ,udge who buys property in litigation before his court a ter t&e (ud%/ent #e$o/es inal does not violate !rt. "4/", but he can be administratively disciplined for violation of the Code of Gudicial )thics. 1Ma$ariola v. Asun$ion, ""4 SC ! 77 $"/.%(. )ven when the main cause is a collection of a sum of money, the properties levied are still sub,ect to the prohibition. 11an 3in%$o v. Pa#in%uit, #' @hil. ." $"/"-(.

III. SU1BE"T :ATTER OF SALE (Arts. 1455 to 1465)

<5ransfer of title or an agreement to transfer it for a price paid or promised to be paid is the essence of sale.= 1Co//issioner o 'nternal "evenue v. CA and Ateneo de Manila -niversit, , %7" SC ! -&' $"//7(. 5he Civil Code provisions defining sales is a <catchBall= provision which effectively brings within it grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration. 2Polytechnic "niversity v. C&9 $68 S"RA 651 (2331). ;here under an agreement, a party renounces and transfers whatever rights, interests, or claims she has over a parcel of land in favor of another party in consideration of the latter0s payment of therein loan, the agreement is essentially a sale, and the rule on delivery effected through a public instrument apply. 1Caoi#es, )r. v. Caoi#es6Panto(a, 4/- SC ! %7# $%&&-(. 1. :0st 1e EC&st&n!9 F0t0re or "ont&n!ent $!rts. "#47, "#4., and "4-%( . $m,tio *ei S,eratae $!rts. "4-" and "#47( @ending crops which have potential e1istence may be valid ob,ect of sale. xSi#al v. Valdez, '& @hil. '"% $"/%7(+ and such transaction cannot be considered to effectively be sale of the land or any part thereof. 1Pi$&el v. Alonzo , """ SC ! #4" $"/."(. %. $m,tio S,ei $!rt. "4-"( #. S0%De#t to Resol0tor> "on-&t&on $!rt. "4-'( 2. :0st 1e L&#&t $!rts. "#47, "4'/ and "'7'( 6nder !rt. "#47, a sale involving future inheritance is void and cannot be the source of any right nor create any obligation. x3aedo v. Court o Appeals, %'% SC ! .& $"//-(.

%# %4

1re%orio Araneta, 'n$. v. 3uason de Paterno, 4/ 3.H. 4' $"/'%(. "e$to v. Harden, "&& @hil. 4%7 $"/'-(+ Vda. de *ai% v. CA, .- SC ! -4" $"/7.(.

7
!rticle "#47 does not cover waiver of hereditary rights which is not equivalent to sale, since waiver is a mode of e1tinction of ownership in favor of the other persons who are coBheirs. 1 A$ap v. Court o Appeals, %'" SC ! #& $"//'(. ! mortgagor is not prevented from selling the property, since it is merely encumbrance and effect a loss of his principal attribute as owner to dispose of the property. ?aw even considers void a stipulation forbidding the owner from alienating mortgaged immovable. xPineda v. CA, 4&/ SC ! 4#. $%&&#(. $. :0st 1e Determ&n te or At Le st 'Determ&n %le* $!rt. "4-&( ;hen the deed of sale describes a lot ad,acent to the land seen, agreed upon and delivered to the buyer, such land is the one upon which the minds have met, and not that erroneously described in the deed. 2&tilano v. &tilano9 28 S"RA 2$1 (1565)." . (ener&# t+&n!s m > %e o%De#t of s le $!rts. "%4- and "4&/[-]( Sub,ect matter is determinable when by a formula or description agreed upon at perfection there is a way by which the courts can delineate independent of the will of the parties. 26elli7a v. City of )loilo9 2$ S"RA 488 (1568). ;here the lot sold is said to ad,oin the <previously paid lot= on three sides thereof, the sub,ect lot is capable of being determined without the need of any new contract, even when the e1act area of the ad,oining residential lot is sub,ect to the result of a survey. 1 San Andres v. "odri%uez, ##% SC ! 7-/ $%&&&(. Eeterminable sub,ect matter of sale are not sub,ect to ris2 of loss until they are physically segregated or particularly designated. 28u #e3 ( Co. v. Gon7ales9 25 .+&l. $84 (1515). %. Un-&)&-e- Interest $!rt. "4-#( or Un-&)&-e- S+ re &n 9 Day result it coBownership. : ss of F0n!&%le (oo-s $!rt. "4-4(

4. E0 nt&t> of S0%De#t : tter Not Essent& l for .erfe#t&on? $!rt. "#4/( Sale of grains is perfected even when the e1act quantity or quality is not 2nown, so long as the source of the sub,ect is certain. 2NG& v. )&C9 181 S"RA 1$1 (1585). ;here seller quoted to buyer the items offered for sale, by item number, part number, description and unit price, and the buyer had sent in reply a purchase order without indicating the quantity being order, there was already a perfected contract of sale, even when required letter of credit had not been opened by the buyer. 20ohannes Schubac3 ( Sons Phil. #rading Cor,. v. C&9 228 S"RA 815 (155$). 5. SellerFs O%l&! t&on to Tr nsfer T&tle to 10>er $!rt. "4'/, "4-%, and "'&'( . SellerGs O@ners+&/ Nee- Not EC&st t .erfe#t&on, Sale of copra for future delivery does not ma2e seller liable for esta a for failing to deliver because the contract is still valid and the obligation was civil and not criminal. x!s%uerra v. People, "&. @hil. "&7. $"/-&(. ! perfected contract of sale cannot be challenged on the ground of the seller0s nonB ownership of the thing sold at the time of the perfection of the contract+ it is at delivery that the law requires the seller to have the right to transfer ownership of the thing sold. 1 Al$antara6 Daus v. de *eon, 4&4 SC ! 74 $%&&#(.% 7t is essential that seller is owner of the property he is selling. 5he principal obligation of a seller is <to transfer the ownership of= the property sold $!rt. "4'.(. 5his law stems from the principle that nobody can dispose of that which does not belong to him. N!M4 DA3 +-4D N4N HAB!3. xNoel v. CA, %4& SC ! 7. $"//'(. 5hat the sellers are no longer owners of the goods at perfection does not appear to be one of the void contracts enumerated in !rt. "4&/ of Civil Code, and under !rt. "4&% the Civil Code itself recogni4es a sale where the goods are to be <acquired 1 1 1 by the seller after the perfection of the contract of sale= clearly implying that a sale is possible even if the seller was not the owner at the time of sale, provided he acquires title to the property later on+ nevertheless such contract may be deemed to be inoperative and may thus fall, by analogy, under !rt. "4&/$'(* <5hose which contemplate an impossible service.= 2Nool v. C& 286 S"RA 145 (1558). %. S0%seA0ent A#A0&s&t&on of T&tle %> Non;O@ner Seller $!rt. "4#4( 9 validates the sale and title passes to the seller by operation of law. #. A#A0&s&t&on %> t+e 10>er : > E)en De/en- on "ont&n!en#> $!rt. "4-%(.
96.
" %

Ille! l&t> of S0%De#t : tter $!rts. "4&/, "4'., "4-", "4-%, and "'7'(

*ondres v. CA, #/4 SC ! "## $%&&%(. Heirs o Arturo "e,es v. So$$o6Beltran, '7% SC ! %"" $%&&.(.

8
. S/e#& l L @s* narcotics $ .!. -4%'(+ wild bird or mammal $!ct %'/&, Sec. 7(+ rare wild plants $!ct #/.#(+ poisonous plants or fruits $ .!. "%..(+ dynamited fish $ .! 4%.(+ gunpowder and e1plosives $!ct %%''(+ firearms and ammunitions $@.E. /(+ sale of realty by nonBChristians $Sec. "4', evised !dm. Code, .!. 4%'%( %. Follo@&n! S les of L n- Ho&-,
Iy :onBChristian if not approved by @rovincial Hovernor per Sec. "4' of evised !dministrative Code. 13a$6an v. CA, "%/ SC ! #"/ $"/.4(. Criar land without consent of Secretary of !griculture required under !ct :o. ""%&. 1 Alonso v. Ce#u Countr, Clu#, 'n$., #7' SC ! #/& $%&&%(+ *iao v. CA, #%# SC ! 4#& $%&&&(. Dade in violation of land reform laws declaring tenantBtillers as the full owners of the lands they tilled. xSia$or v. 1i%antana, #.& SC ! #&- $%&&%(. eclaimed lands are of the public domain and cannot, without congressional fiat, be sold, public or private. Fis&eries Dev. Aut&orit, v. Court o Appeals, '#4 SC ! 4/& $%&&7(.

IH. .RI"E AND OTHER "ONSIDERATION (Arts. 1465;1484)

<@rice= signifies the sum stipulated as the equivalent of the thing sold and also every incident ta2en into consideration for the fi1ing of the price put to the debit of the buyer and agreed to by him. 'n$&austi 9 Co. v. Cro/5ell, %& @hil. #4' $"/""(. Seller cannot unilaterally increase the price previously agreed upon with the buyer, even when due to increased construction costs. 1S'S v. Court o Appeals, %%. SC ! ".# $"//#(. Iuyer who opted to purchase the land on installment basis with imposed interest, cannot later unilaterally disavow the obligation created by the stipulation in the contract which sets the interest at %4J per annum* <5he rationale behind having to pay a higher sum on the installment is to compensate the vendor for waiting a number of years before receiving the total amount due. 5he amount of the stated contract price paid in full today is worth much more that a series of small payments totaling the same amount. 1 1 1 5o assert that mere prompt payment of the monthly installments should obviate imposition of the stipulated interest is to ignore an economic fact and negate one of the most important principles on which commerce operates.= Bortike, v. AFP "SBS, 477 SC ! '"" $%&&'(. 1. .r&#e :0st 1e Re l $!rt. "47"( . <+en .r&#e 'S&m0l te-* (1) 26a,alo v. 6a,alo9 18 S"RA 114 (1566)9 versus% ;hen two aged ladies, not versed in )nglish, sign a Eeed of Sale on representation by buyer that it was merely to evidence their lending of money, the situation constitutes more than ,ust fraud and vitiation of consent to give rise to a voidable contract, since there was in fact no intention to enter into a sale, there was no consent at all, and more importantly, there was no consideration or price agreed upon, which ma2es the contract void a# initio. 2*ongavilla v. Court of &,,eals 254 S"RA 285 (1558). (2) 26ate v. C& 253 S"RA 46$ (1558)9 versus% ;hen Eeed of Sale was e1ecuted to facilitate transfer of property to buyer to enable him to construct a commercial building and to sell the property to the children, such arrangement being merely a subterfuge on the part of buyer, the agreement cannot also be ta2en as a consideration and sale is void. 28u !un Guan v. 4ng9 $68 S"RA 555 (2331). ($) $ffects :hen Price Simulated 9 5he principle of in pari deli$to nonoritur a$tion, which denies all recovery to the guilty parties inter se, where the price is simulated+ the doctrine applies only where the nullity arises from the illegality of the consideration or the purpose of the contract. 1Modina v. Court o Appeals, #"7 SC ! -/- $"///(.# %. <+en .r&#e &s 'F lse* $!rts. "#'# and "#'4( ;hen the parties intended to be bound but the deed did not reflect the actual price agreed upon, there is only a relative simulation of the contract which remains valid and enforceable, but sub,ect to reformation. 1Ma$ap%al v. "e/orin, 4'. SC ! -'% $%&&'(. ;hen price indicated in deed of absolute sale is undervalued consideration pursuant to intention to avoid payment of higher capital gains ta1es, the price stated is false, but the sale is still valid and binding on the real terms. 1Heirs o Spouses Balite v. *i/, 44- SC ! '4 $%&&4(. #. Non;. >ment of .r&#e

0u Bun 1uan v. 4n%, , #-7 SC ! ''/ $%&&"(+ 1onzales v. 3rinidad, -7 @hil. -.% $"/#/(

9
Sale being consensual, failure of buyer to pay the price does not ma2e the contract void for lac2 of consideration or simulation, but results in buyer0s default, for which the seller may e1ercise his legal remedies. 1Balat#at v. CA, %-" SC ! "%. $"//-(.4 <7n a contract of sale, the nonBpayment of the price is a resolutory condition which e1tinguishes the transaction that, for a time, e1isted and discharges the obligations created thereunder. 4?7 5he remedy of an unpaid seller in a contract of sale is to see2 either specific performance or rescission.= 1Heirs o Pedro !s$anlar v. Court o Appeals, %." SC ! "7$"//7(.' !adge #hat Price )s Simulated Not 0ust "n,aid% 7t is a badge of simulated price, which render the sale void, when the price, which appears thereon as paid, has in fact never been paid by the purchaser to the seller. xVda. de Catindi%. v. Heirs o Catalina "o:ue , 74 SC ! .# $"/7-(.2. :0st 1e &n :one> or Its EA0&) lent $!rts. "4'. and "4-.( @rice must be <valuable consideration= as mandated by Civil ?aw, instead of <any price= mandated in common law. 24ng v. 4ng9 1$5 S"RA 1$$ (1585)I 2 !agnas v. C&9 186 S"RA 155 (1585)+ 2*e,ublic v. Phil. *esources Dev.9 132 .+&l. 563 (1558). Consideration for sale can ta2e different forms, such as the prestation or promise of a thing or service by another, thus*
;hen deed provides that the consideration was the e1pected profits from the subdivision pro,ect. 13orres v. Court o Appeals, #%& SC ! 4%. $"///(. Cancellation of liabilities on the property in favor of the seller. xPol,te$&ni$ -niversit, v. Court o Appeals, #-. SC ! -/" $%&&"(. !ssumption of mortgage constituted on the property sold. 1Doles v. An%eles, 4/% SC ! -&7 $%&&-(.7

$. :0st 1e "ert &n or As#ert &n %le t .erfe#t&on $!rt. "4-/( . Ho@ .r&#e Determ&ne- to 1e As#ert &n %le (&) Set %> t+&r- /erson //o&nte- t /erfe#t&on $!rt. "4-/( (&&) Set %> t+e #o0rts $!rt. "4-/( (&&&) 1> referen#e to -ef&n&te - >9 / rt&#0l r eC#+ n!e or m r=et $!rt. "47%( (&)) 1> referen#e to not+er t+&n! #ert &n9 such as to invoices then in e1istence and clearly identified by the agreement 1 M$Cullou%& v. Aenlle, # @hil. %.' $"/&4(+ or 2nown factors or stipulated formula $xMitsui v. Manila, #/ @hil. -%4 $"/"/(. @rice is ascertainable if the terms of the contract furnishes the courts a basis or measure for determining the amount agreed upon, without having to refer bac2 to either or both parties. 1Villanueva v. Court o Appeals, %-7 SC ! ./ $"//7(.. ;here the sale involves an asset under a privati4ation scheme which attaches a peculiar meaning or signification to the term <indicative price= as merely constituting a ballBpar2 figure, then the price is not certain. xMoreno, )r. v. Private Mana%e/ent 4 i$e, '&7 SC ! -# $%&&-(. Consideration is generally agreed upon as whole even if it consists of several parts, and even if it is contained in one or more instruments+ otherwise there would be no price certain, and the contract of sale not perfected. 1Ari/as v. Ari/as, '' 3.H. .-.%. %. .r&#e Ne)er Set 1> One or 1ot+ . rt&es $!rts. "47#, "".%(, unless the ,rice is se,arately acce,ted by the other ,arty. #. Effe#ts of Un;As#ert &n %&l&t>, Sale is inefficacious. 1UT, If 10>er A//ro/r& tes t+e O%De#t9 He :0st . > Re son %le .r&#e . $!rt. "474( #here can be no conce,t of a,,ro,riation 2hen it comes to land; 9 ;here a church organi4ation has been allowed possession and introduce improvements on the land as part of its application to purchase with the :A!, and thereafter it refused the formal resolution of the :A! Ioard setting the price and insisted on paying the lower price allegedly given by the :A! Cield 3ffice, there can be no binding contract of sale upon which an action
4 Pealosa v. Santos, #-# SC ! '4' $%&&"(+ Soliva v. 3&e 'ntestate !state o Mar$elo M. Villal#a , 4"7 SC ! %77 $%&&#(+ Provin$e o Ce#u v. Heirs o "u ina Morales, '4- SC ! #"' $%&&.(. ' Villa lor v. Court o Appeals, %.& SC ! %/7 $"//7(. 4$e(o v. Flores, 4& @hil. /%" $"/%&(+ *adan%a v. CA, "#" SC ! #-" $"/.4(+ "on%avilla v. Court o Appeals, %/4 SC ! %./ $"//.(+ *a#a%ala v. Santia%o, #7" SC ! #-& $%&&"(+ Cruz v. Ban$o/ Finan$e Corp., #7/ SC ! 4/& $%&&%(+ Monte$illo v. "e,nes, #.' SC ! %44 $%&&%(+ "epu#li$ v. Sout&side Ho/eo5ners Asso., '&% SC ! '.7 $%&&-(+ +ui/po, Sr. v A#ad Vda de Beltran , '4' SC ! "74 $%&&.(+ Solidstate Multi6Produ$ts Corp. v. Catienza6Villaverde, ''/ SC ! "/7 $%&&.(. 7 5he deed of sale with assumption of mortgage is a registrable instrument and must be registered with the egister of Eeeds in order to bind third parties. "odri%uez v. Court o Appeals, 4/' SC ! 4/& $%&&-(. . Boston Bank o t&e P&ilippines v. Manalo, 4.% SC ! "&. $%&&-(.

10
for specific performance can prosper, not even on fi1ing the price equal to the fair mar2et value of the property. xNHA v. 1ra$e Baptist C&ur$&, 4%4 SC ! "47 $%&&4(. 4. : nner of . >ment of .r&#e ESSENTIAL (Art. 1185) ! definite agreement on the manner of payment of price is an essential element in the formation of a binding and enforceable contract sale+ without it the sale is void and an action for specific performance must fail. 2Navarra v. Planters Dev. !an39 528 S"RA 562 (2338)./ ;hen the manner of payment of the price is discussed after <acceptance,= then such <acceptance= did not produce a binding and enforceable contract of sale. xNavarro v. Su%ar Produ$er=s Corp., " SC ! "".& $"/-"(. ;here there is no other basis for the payment of the subsequent amorti4ations in a Eeed of Conditional Sale, the reasonable conclusion one can reach is that the subsequent payments shall be made in the same amount as the first payment. 4?7 xDBP v. Court o Appeals, #44 SC ! 4/% $%&&&(. 5. In -eA0 #> of .r&#e Does Not Affe#t Or-&n r> S le $!rts. "#'' and "47&( Dere inadequacy of the price does not affect the validity of the sale when both parties are in a position to form an independent ,udgment concerning the transaction, unless fraud, mista2e, or undue influence indicative of a defect in consent is present. 5he contract may be annulled for vitiated consent and not due to the inadequacy of price. 1 Bautista v. Court o Appeals, 4#- SC ! "4" $%&&4(."& !bsent any evidence of the fair mar2et value of a land as of the time of its sale, it cannot be concluded that the price at which it was sold was inadequate. 1 A$a#al v. A$a#al, 4'4 SC ! ./7 $%&&'(."" . (ross In -eA0 #> of .r&#e : > A)o&- 0udicial Sale% (&) 3nly when it is shoc2ing to the conscience of man. xPas$ua v. Si/eon, "-" SC ! " $"/..(+ and (&&) 5here is showing that, in the event of a resale, a better price can be obtained. 1 Cu Bie v. Court o Appeals, "' SC ! #&7 $"/-'(."%

UNLESS% 5here is right of redemption, in which case the proper remedy is to redeem . xDe *eon
v. Salvador, #- SC ! '-7 $"/7&(."# 1UT, Iy way of e1traordinary circumstances perceived, when in a ,udicial sale the right of redemption has been lost, where the inadequacy of the price is purel, s&o$kin% to t&e $ons$ien$e, such that the mind revolts at it and such that a reasonable man would neither directly or indirectly be li2ely to consent to it, the same will be se aside. 1 Co/eta v. Court o Appeals, #'" SC ! %/4 $%&&"(.

Hross inadequacy of price by itself will not result in a void contract. Hross inadequacy of price does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract. 7nadequacy of cause will not invalidate a contract unless there has been fraud, mista2e or undue influence. $at p. -4/( Ba$un%an v. Court o Appeals, '74 SC ! -4% $%&&.(. 5here is <gross inadequacy in price= if a reasonable man will not agree to dispose of his property. Dorado Vda. De Del in v. Dellota, '4% SC ! #/7 $%&&.(. ;hen ,udicial sale is voided without fault of purchaser, the latter is entitled return of price with simple interest, together with all sums paid out by him in improvements introduced on the property, ta1es, and other e1penses. 1 Seven Brot&ers S&ippin% Corp. v. Court o Appeals , %4- SC ! ## $"//'(. %. Les&on of more t+ n 1J4 of ) l0e of t+&n! m =es s le res#&ss&%le 0nless //ro)e- %> #o0rt (Art. 1$86). #. (ross &n -eA0 #> of /r&#e m > r &se t+e /res0m/t&on of eA0&t %le mort! !e (Art. 1632).

/ Velas$o v. CA, '" SC ! 4#/ $"/7#(+ Co v. Court o Appeals, %.- SC ! 7- $"//.(+ San Mi%uel Properties P&ilippines v. Huan%, ##- SC ! 7#7 $%&&&(+ Monte$illo v. "e,nes, #.' SC ! %44 $%&&%(+ !drada v. "a/os, 4-. SC ! '/7 $%&&'(+ Cruz v. Fernando, 477 SC ! "7# $%&&'(+ Marnele%o v. Ban$o Filipino Savin%s and Mort%a%e Bank , 4.& SC ! #// $%&&-(+ Boston Bank o t&e P&il. v. Manalo, 4.% SC ! "&. $%&&-(+ Platinu/ Plans P&il., 'n$. v. Cu$ue$o, 4.. SC ! "'- $%&&-(+ Manila Metal Container Corp. v. PNB, '"" SC ! 444 $%&&-(. "& !reeta v. Bezore, '4 SC ! "# $"/7#(+ Ba$un%an v. Court o Appeals, '74 SC ! -4% $%&&.(+ Ba$un%an v. Court o Appeals, '74 SC ! -4% $%&&.(. "" Avila v. Bara#at, 4.' SC ! . $%&&-(. "% 3a,en%$o v. Court o Appeals, "' SC ! #&- $"/-'(+ "epu#li$ v. N*"C, %44 SC ! '-4 $"//'(. "# Vda. de 1ordon v. Court o Appeals, "&/ SC ! #.. $"/."(.

11 H. FOR:ATION OF "ONTRA"T OF SALE (Arts. 1485;1488)

A. P4.)C)#&C)4N STA(E (Art. 1485)
Poli$itation stage covers the doctrine of <freedom of contract= which signifies or implies the right to choose with whom to contract. ! property owner is free to offer his property for sale to any interested person, and is not duty bound to sell the same to the occupant thereof, absent any prior agreement vesting the occupants the right of first priority to buy. 1 1a#elo v. Court o Appeals, #"SC ! #.- $"///(. ! negotiation is formally initiated by an offer, which, however, must be certain. !t any time prior to the perfection of the contract, either negotiating party may stop the negotiation. !t this stage, the offer may be withdrawn+ the withdrawal is effective immediately after its manifestation. 5o convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer+ it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. 26anila 6etal Container Cor,. v. PN!9 511 S"RA 444 (2336)."4 !n unaccepted unilateral promise $offer to buy or to sell( prior to acceptance, does not give rise to any obligation or right. x"aro:ue v. Mar:uez, #7 3.H. "/"". ;here the offer is given with a stated time for its acceptance, the offer is terminated at the e1piration of that time. xVille%as v. Court o Appeals, 4// SC ! %7- $%&&-(. 5he ?etter of 7ntent to Iuy and Sell is ,ust that8a manifestation of Sea Coods Corporation0s $SCC( intention to sell the property and 6nited Duslim and Christian 6rban @oor !ssociation, 7nc. $6DC6@!7( intention to acquire the same8which is neither a contract to sell nor a conditional contract of sale. Musli/ and C&ristian -r#an Poor Asso$iation, 'n$. v. B"0C6V Develop/ent Corp. , '/4 SC ! 7%4 $%&&/(. 1. O/t&on "ontr #t !n option is a preparatory contract in which one party grants to the other, for a fi1ed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. 7t 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 to whom the option was granted, if the latter should decide to use the option. 7t is a separate agreement distinct from the contract of sale which the parties may enter into upon the consummation of the option. 2Carceller v. Court of &,,eals $32 S"RA 818 (1555)."' !n option imposes no binding obligation on the person holding the option aside from the consideration for the offer. 6ntil accepted, it is not treated as a sale. 2#ayag v. .acson9 426 S"RA 282 (2334)."5enants, not being the registered owners, cannot grant an option on the land, much less any <e1clusive right= to buy the property under the ?atin saying < ne/ dat :uod non &a#et.= x3a,a% v. *a$son, 4%- SC ! %.% $%&&4(. . :e n&n! of 'Se/ r te "ons&-er t&on* $!rts. "47/ and "#%4( ! unilateral promise to sell, in order to be binding upon the promissor, must be for a price certain and supported by a consideration separate from such price. xSala/e v. Court o Appeals, %#/ SC ! #'- $"//'(."7 5he <separate consideration= in an option may be anything of value, unli2e in sale where it must be the price certain in money or its equivalent. 2Villamor v. Court of &,,eals 232 S"RA 638 (1551),". such when the option is attached to a real estate mortgage xSoriano v. Bautista, SC ! /4- $"/-%(. !lthough no consideration is e1pressly mentioned in an option contract, it is presumed that it e1ists and may be proved, and once proven, the option is binding. xMontinola v. Co(uan%$o, 7. @hil. 4." $"/47(. %. No Se/ r te "ons&-er t&on, Ho&- s O/t&on9 H l&- s "ert &n Offer 2Sanche7 v. *igos9 45 S"RA $68 (1582)."/ !"# .&#$.8% x0ao .a Sin 3radin% v. CA , %&/ SC ! 7-# $"//"(+ xMontilla v. CA, "-" SC ! .'' $"/..(+ xNatino v. 'AC, "/7 SC ! #%# $"//"(+ and xDia/ante v. CA, %&SC ! '% $"//%(.
Navarra v. Planters Dev. Bank, '%7 SC ! '-% $%&&7(. *a orteza v. Ma$&u$a, ### SC ! -4# $%&&&(+ Buot v. CA, #'7 SC ! .4- $%&&"(+ 3a,a% v. *a$son, 4%- SC ! %.% $%&&4(+ A#alos v. Ma$atan%a,, )r., 4#/ SC ! -4/ $%&&4(+ Vas:uez v. A,ala Corp., 44# SC ! %#" $%&&4(. "Adel a Properties, 'n$. v. CA, %4& SC ! '-' $"//'(+ .ilos#a,an, 'n$. v. Morato, %4- SC ! '4& $"//'(+ San Mi%uel Properties P&ilippines, 'n$. v. Huan%, ##- SC ! 7#7 $%&&&(+ *i/son v. CA, #'7 SC ! %&/ $%&&"(. "7 )MA House, 'n$. v. Sta. Moni$a 'ndustrial and Dev. Corp., '&& SC ! '%- $%&&-(. ". De la Cavada v. Diaz, #7 @hil. /.% $"/".(+ San Mi%uel Properties P&ilippines, 'n$. v. Huan%, ##- SC ! 7#7 $%&&&( "/ &ffirming Atkins, .roll 9 Co., 'n$. v. Cua, "&% @hil. /4. $"/'.(+ 4verturning Sout&5estern Su%ar Molasses Co. v. Atlanti$ 1ul 9 Pa$i i$ Co., /7 @hil. %4/ $"/''(.
"' "4

12
#. T+ere :0st 1e A##e/t n#e of O/t&on Offer. 2Va7+ue7 v. C&9 155 S"RA 132 (1551). -. .ro/er ECer#&se of O/t&on "ontr #t. 2Nietes v. C&9 46 S"RA 654 (1582). !n option attached to a lease when not e1ercised within the option period is e1tinguished and cannot be deemed to have been included in the implied renewal $ ta$ita re$ondu$$ion( of the lease. 1Dizon v. CA, #&% SC ! %.. $"///(. @roper e1ercise of an option gives rise to the reciprocal obligations of sale 1 Heirs o *uis Ba$us v. Court o Appeals, #7" SC ! %/' $%&&"(,%& which must be enforced with ten $"&( years as provided under !rt. ""44. 1Dizon v. Court o Appeals, #&% SC ! %.. $"///(. 5here must be <virtual= e1ercise of option with the option period. 2Carceller v. Court of &,,eals9 $32 S"RA 818 (1555). 2. R&!+t of F&rst Ref0s l ! right of first refusal cannot be the sub,ect of specific performance, but breach would allow a recovery of damages. x1uerrero v. 0i%o, /- @hil. #7 $"/'4(. ights of first refusal only constitute <innovative ,uridical relations=, but do not rise to the level of contractual commitment since with the absence of agreement on price certain, they are not sub,ect to contractual enforcement. 2&ng 8u &suncion v. Court of &,,eals 9 2$8 S"RA 632 (1554). ight of first refusal contained in a lease, when breached by promissor allows enforcement by the promisee by way of rescission of the sale entered into with the third party, pursuant to !rts. "#."$#( and "#.' of Civil Code. 11uz/an, Bo$alin% 9 Co. v. Bonnevie, %&- SC ! --. $"//%(+ 2$+uatorial *ealty Dev. )nc. v. 6ayfair #heater )nc. 9 264 S"RA 48$ (1556) +%" 2Parana+ue /ings $nter,rises )nc. v. C& 268 S"RA 8289 841 (1558). 7n a right of first refusal, while the ob,ect might be made determinate, the e1ercise of the right would be dependent not only on the grantor0s eventual intention to enter into a binding ,uridical relation with another but also on terms, including the price, that are yet to be firmed up. . . the <offer= may be withdrawn anytime by communicating the withdrawal to the other party. 2Vas+ue7 v. &yala Cor,.9 44$ S"RA 2$1 (2334). ! right of first refusal clause simply means that should the lessor decide to sell the leased property during the term of the lease, such sale should first be offered to the lessee+ and t&e series o ne%otiations t&at transpire #et5een t&e lessor and t&e lessee on t&e #asis o su$& pre eren$e is dee/ed a $o/plian$e o su$& $lause even 5&en no inal pur$&ase a%ree/ent is per e$ted #et5een t&e parties. 5he lessor was then at liberty to offer the sale to a third party who paid a higher price, and there is no violation of the right of the lessee. 2*iviera Fili,ina )nv. v. Court of &,,eals9 $83 S"RA 245 (2332).%% ! right of first refusal in a lease in favor of the lessee cannot be availed of by the sublessee. 1Sad&5ani v. Court o Appeals, %." SC ! 7' $"//7(. 4. :0t0 l .rom&ses to 10> n- Sell $!rt. "47/(* <#rue Contract to Sell= Dutual promises to buy and sell a certain thing for a certain price gives each of the contracting parties a right to demand from the other the fulfillment of the obligation. xBorro/eo v. Fran$o, ' @hil. 4/ $"/&'(. )ven in this case the certainty of the price must also e1ist, otherwise, there is no valid and enforceable contract to sell. x3an 3ia& v. 0u )ose, -7 @hil. 7#/ $"/#/(. !n accepted bilateral promise to buy and sell is in a sense similar to, but not e1actly the same, as a perfected contract of sale because there is already a meeting of minds upon the thing which is the ob,ect of the contract and upon the price. %# Iut a contract of sale is consummated only upon delivery and payment, whereas in a bilateral promise to buy and sell gives the contracting parties rights in persona/, such that each has the right to demand from the other the fulfillment of their respective underta2ings. 26acion v. Guiani 225 S"RA 132 (155$).%4 5he cause of action under a mutual promise to buy and sell is "& years. xVilla/or v. Court o Appeals, %&% SC ! -&7 $"//"(.

1. .ERFE"TION STA(E $!rts. "47', "#"/, "#%' and "#%-(

*i/son v. Court o Appeals, #'7 SC ! %&/ $%&&"(. "osen$or Dev. Corp. v. 'n:uin%, #'4 SC ! ""/ $%&&"(+ Con$ulada v. CA, #-7 SC ! "-4 $%&&"(+ Pol,te$&ni$ -niversit, v. CA, #-. SC ! -/" $%&&"(+ "iviera Filipina, 'nv. v. Court o Appeals , #.& SC ! %4' $%&&%(+ *u$rative "ealt, and Dev. Corp. v. Berna#e, )r., #/% SC ! -7/ $%&&%(+ Ville%as v. Court o Appeals, 4// SC ! %7- $%&&-(. %% Pol,te$&ni$ -niversit, v. CA, #-. SC ! -/" $%&&"(+ Ville%as v. CA, 4// SC ! %7- $%&&-(. %# !l Ban$o Na$ional Filipino v. A& Sin%, -/ @hil. -"" $"/4&(+ Manuel v. "odri%uez, "&/ @hil. " $"/-&(. %4 Borro/eo v. Fran$o, ' @hil. 4/ $"/&'(+ Villa/or v. CA, %&% SC ! -&7 $"//"(+ Coronel v. CA, %-# SC ! "' $"//-(.
%"

%&

13
Sale is perfected at the moment there is a meeting of minds upon the thing which is the ob,ect of the contract and upon the price. Crom that moment, the parties may reciprocally demand performance sub,ect to the law governing the form of contracts. 1 Marnele%o v. Ban$o Filipino Savin%s and Mort%a%e Bank, 4.& SC ! #// $%&&-(.%' Dutual consent being a state of mind, its e1istence may only be inferred from the confluence of two acts of the parties* an offer certain as to the ob,ect of the contract and its consideration, and an acceptance of the offer which is absolute in that it refers to the e1act ob,ect and consideration embodied in said offer. xVillanueva v. PNB, '"& SC ! %7' $%&&-(.%7f a material element of a contemplated contract is left for future negotiations, the same is too indefinite to be enforceable. Cor a contract to be enforceable, its terms must be certain and e1plicit, not vague or indefinite. xBoston Bank o t&e P&il. v. Manalo, 4.% SC ! "&. $%&&-(. So long as there is any uncertainty or indefiniteness, or future negotiations or consideration yet to be had between the parties, there is no contract at all. xMoreno, )r. v. Private Mana%e/ent 4 i$e, '&7 SC ! -# $%&&-(. 5he essence of consent is the conformity of the parties on the terms of the contract, that is, the acceptance by one of the offer made by the other. Aowever, the acceptance must be absolute+ otherwise, the same constitutes a counterBoffer and has the effect of re,ecting the offer. 20S3 Corp. v. DMC -r#an Properties Dev., 'n$., '/4 SC ! '/. $%&&/(. 1. A%sol0te A##e/t n#e of "ert &n Offer $!rt. "47'(

6nder !rticle "#"/, the acceptance of an offer must therefore be unqualified and absolute. 7n other words, it must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. 5his was not the case herein considering that petitioner0s acceptance of the offer was qualified, which amounts to a re,ection of the original offer. *i/ketkai Sons Millin%, 'n$. v. Court o Appeals, %'' SC ! -%- $"//-(. ! qualified acceptance or one that involves a new proposal constitutes a counterBoffer and a re,ection of the original offer. 5he acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of minds. 26anila 6etal Container Cor,. v. PN! 9 511 S"RA 444 (2336).%7 @lacing the word <:oted= and signing such note at the bottom of the written offer cannot be considered an acceptance that would give rise to a valid contract of sale. xDBP v. 4n%, 4-& SC ! "7& $%&&'(. )f sale sub<ect to sus,ensive condition% :o perfected sale of a lot where the award thereof was e1pressly made sub,ect to approval by the higher authorities and there eventually was no acceptance manifested by the supposed awardee. xPeople=s Ho/esite 9 Housin% Corp. v. CA, "## SC ! 777 $"/.4(. 2. <+en 'De)& t&on* Allo@e-, 7t is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance, so long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granted or not, a contract is formed. 5he vendor0s change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not amount to a re,ection of the offer and the tender or a counterBoffer. 2Villonco v. !ormaheco9 65 S"RA $52 (1585).%. $. S le %> A0#t&on $!rts. "47-, "4&#$%($d(, "#%-( 5he terms and conditions provided by the owner of property to be sold at auction are binding upon all bidders, whether they 2new of such conditions or not. x*eo:uin$o v. Postal Savin%s Bank, 47 @hil. 77% $"/%'(. ! auction sale is perfected by the fall of the hammer or in other customary manner and it does not matter that another was allowed to match the bid of the highest bidder. 1 Provin$e o Ce#u v. Heirs o "u ina Morales, '4- SC ! #"' $%&&.(. 4. E rnest :one> $!rt. "4.%( )arnest money given by the buyer shall be considered as part of the price and as proof of the perfection of the contract. 7t constitutes an advance payment to be deducted from the total price. x!s$ueta v. *i/, '"% SC ! 4"" $%&&7(.

%' Valdez v. Court o Appeals, 4#/ SC ! '' $%&&4(+ Blas v. An%eles6Hutalla, 4#/ SC ! %7# $%&&4(+ Ainza v. Padua, 4-% SC ! -"4 $%&&'(+ Cruz v. Fernando, 477 SC ! "7# $%&&'(. %Moreno, )r. v. Private Mana%e/ent 4 i$e, '&7 SC ! -# $%&&-(. %7 Beau/ont v. Prieto, 4" @hil. -7& $"/"-(+ >a,$o v. Serra, 44 @hil. #%- $"/%#(. %. "eiterated in *i/ketkai Sons Millin%, 'n$. v. Court o Appeals, %'& SC ! '%# $"//'(, but reversed in =>> SC*&

14
!bsent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the e1istence of a perfected contract of sale. K 6anila 6etal Container Cor,. v. PN!9 511 S"RA 444 (2336). %/ !rticle "4.% does not apply when earnest money given in a contract to sell xSerrano v. Ca%uiat, '"7 SC ! '7 $%&&7(, especially where by stipulation the buyer has the right to wal2 away from the transaction, with no obligation to pay the balance, although he will forfeit the earnest money. 1C&ua v. Court o Appeals, 4&" SC ! '4 $%&&#(.#& ;henever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. Iut when there is no contract of sale because the parties never went pass the negotiation stage, or more accurately, have not reached the perfection stage with the present of the three essential elements of the contract of sale, the concept of earnest money is certainly inapplicable. 5he earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Aence, there must first be a perfected contract of sale before we can spea2 of earnest money. x1S'S v. *opez, '/% SC ! 4'- $%&&/(.#" ;hen there is no provision for forfeiture of earnest money in the event the sale fails to materiali4e, then with the rescission it becomes incumbent upon seller to return the earnest money as legal consequence of mutual restitution. x1oldenrod, 'n$. v. Court o Appeals , %// SC ! "4" $"//.(. 5. D&fferen#e 1et@een E rnest :one> n- O/t&on :one>. 24esmer v. Paraiso Dev. Cor,. 514 S"RA 228 (2338). 6. S le Deeme- .erfe#te- <+ere Offer < s : -e . $!rt. "#"/(

". FOR:AL REEUIRE:ENTS OF SALES $!rts. "#'7, "#'., "4&- and "4.#(
1. Form Not Im/ort nt for H l&-&t> of S le Sale of land under private instrument is valid. 1allar v. Husain, %& SC ! ".- $"/-7(.#% !rticles "#'7 and "#'., in relation to !rt. "4&#$%(, require that the sale of real property must be in writing for it to be enforceable, it need not be notari4ed for there is nothing in those provisions which require that it must be e1ecuted in a public document to be valid. 1 Martinez v. CA, #'. SC ! #. $%&&"(+## but both its due e1ecution and its authenticity must be proven, pursuant to Sec. %&, ule "#% of the ules of Court. x3i%no v. A:uino, 444 SC ! -" $%&&#(. . Ot+er R0l&n!s on Dee-s of S le,
Seller may agree to a deed of absolute sale before full payment of the purchase price. 1 Pan Pa$i i$ 'ndustrial Sales Co., 'n$. v. CA, 4.% SC ! "-4 $%&&-(. !ssuming that the buyers failed to pay the full price stated in the Eeed of Sale, such partial failure would not render the sale void. Bravo61uerrero v. Bravo, 4-' SC ! %44 $%&&'(. 5hat marital consent was e1ecuted prior to the Eeed of !bsolute Sale does not indicate that it is a phoney. Pan Pa$i i$ 'ndustrial Sales Co., 'n$. v. CA, 4.% SC ! "-4 $%&&-(. ! Eeed of Sale when ac2nowledged before a notary public, en,oys the presumption of regularity and due e1ecution. 5o overthrow that presumption, sufficient, clear and convincing evidence is required, otherwise the document should be upheld. 1Bravo61uerrero v. Bravo, 4-' SC ! %44 $%&&'(.#4 :otari4ation of Eeeds of Sale by one who was not a notary public does not affect the validity thereof+ said documents were merely converted into private documents. 1 ".F. Navarro 9 Co. 'n$. v. Vailo$es, #-" SC ! "#/ $%&&"(. :otari4ation of a deed of sale does not guarantee its validity nor is it conclusive of the true agreement of the parties thereto, because it is not the function of the notary public to validate an instrument that was never intended by the parties to have any binding legal effect. 1Salon%a v. Con$ep$ion, 47& SC ! %/" $%&&'(.#' Iuyer0s immediate ta2ing of possession of sub,ect property corroborates the truthfulness and authenticity of the deed of sale. 1 Al$os v. 'AC, "-% SC ! .%# $"/..(. Conversely, the seller0s continued possession of the property ma2es dubious the contract of sale between them. 1 Santos v. Santos, #-- SC ! #/' $%&&"(.#*i/(o$o v. CA, #7 SC ! --# $"/7"(+ >illon$o v. Bor/a&e$o, -' SC ! #'% $"/7'(+ Spouses Doro/al, Sr. v. CA , -- SC ! '7' $"/7'(+ PNB v. CA, %-% SC ! 4-4 $"//-(+ San Mi%uel Properties P&ilippines, 'n$. v. Huan%, ##- SC ! 7#7 $%&&&(+ Platinu/ Plans P&il. 'n$. v. Cu$ue$o, 4.. SC ! "'- $%&&-(. #& San Mi%uel Properties P&ilippines, 'n$. v. Huan%, ##- SC ! 7#7 $%&&&(. #" 20S3 Corp. DMC -r#an Properties Dev., 'n$., '/4 SC ! '/. $%&&/(. #% F. 'rureta 1o,ena v. 3a/#untin%, " @hil. 4/& $"/&%(. ## Heirs o Biona v. CA, #-% SC ! %/ $%&&"(. #4 0ason v. Ar$ia%a, 44/ SC ! 4'. $%&&'(+ -nion Bank v. 4n%, 4/" SC ! '." $%&&-(+ 3apuro$ v. *o:uellano Vda. De Mende , '"% SC ! /7 $%&&7(+ Al aro v. Court o Appeals, '"/ SC ! %7& $%&&7(+ Santos v. *u/#ao, '"/ SC ! 4&. $%&&7(+ Pedrano v. Heirs o Benedi$to Pedrano, '#/ SC ! 4&" $%&&7(+ 4livares v. Sar/iento, ''4 SC ! #.4 $%&&.(. #' Nazareno v. CA, #4# SC ! -#7 $%&&&(+ Santos v. Heirs o )ose P. Mariano, #44 SC ! %.4 $%&&&( #Do/in%o v. CA, #-7 SC ! #-. $%&&"(.
%/

15
!ny substantial difference between the terms of the Contract to Sell and the concomitant Eeed of !bsolute Sale $such as difference in sub,ect matter, and difference in price andFor the terms thereof(, does not ma2e the transaction between the seller and the buyer void, for it is truism that the e1ecution of the Eeed of !bsolute Sale effectively rendered the previous Contract to Sell ineffective and cancelled [through the process of novation]. x*u/#res v. 3al#rad, )r., '"- SC ! '7' $%&&7(.

%. H l0e of 10s&ness Forms to .ro)e S le Iusiness forms, e.%., order slip, delivery charge invoice and the li2e, which are issued by the seller in the ordinary course of the business are not always fully accomplished to contain all the necessary information describing in detail the whole business transaction8more often than not they are accomplished perfunctorily without proper regard to any legal repercussion for such neglect such that despite their being often incomplete, said business forms are commonly recogni4ed in ordinary commercial transactions as valid between the parties and at the very least they serve as an ac2nowledgment that a business transaction has in fact transpired. 1Donato C. Cruz 3radin% Corp. v. CA, #47 SC ! "# $%&&&(. 5hese documents are not mere scraps of paper bereft of probative value but vital pieces of evidence of commercial transactions. 5hey are written memorials of the details of the consummation of contracts. 1*a%on v. Hooven Co/al$o 'ndustries, 'n$., #4/ SC ! #-# $%&&"(. 2. <HEN FOR: I:.ORTANT
IN

SALE

. To 1&n- T+&r- . rt&es !rticle "#'. which requires the embodiment of certain contracts in a public instrument is only for convenience, and registration of the instrument only adversely affects third parties. Cormal requirements are, therefore, for the benefit of third parties+ and nonBcompliance therewith does not adversely affect the validity of the contract nor the contractual rights and obligations of the parties thereunder. 2Fule v. C&9 286 S"RA 658 (1558)+#7 2Dalion v. C&9 182 S"RA 882 (1553).#. !rticle "#'. of the Civil Code which requires the embodiment of certain contracts in a public instrument, in only for convenience+ and registration of the instrument only adversely affects third parties, and nonBcompliance therewith does not adversely affect the validity of the contract or the contractual rights and obligations of the parties thereunder. 1 !streller v. 0s/ael, '." SC ! %47 $%&&/(.#/ ;hile sale of land appearing in a private deed is binding between the parties, it cannot be considered binding on third persons, if it is not embodied in a public instrument and recorded in the egistry of Eeeds. 2Secuya v. Vda. De Selma $26 S"RA 244 (2333).4& %. For Enfor#e %&l&t> 1et@een t+e . rt&es, STATUTE OF FRAUDS $!rts. "4&# and "4&'( 5he term <Statute of Crauds= is descriptive of the statutes which require certain classes of contracts, such as agreements for the sale of real property, to be in writing, the purpose being to prevent fraud and per,ury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged. S&oe/aker v. *a 3ondea, -. @hil. %4 $"/#/(. Presu,,oses Valid Contract of Sale 9 <5he application of the Statute of Crauds presupposes the e1istence of a perfected contract.= ;hen the records show that there was no perfected contract of sale, there is no basis for the application of the Statute of Crauds. xFir/e v. Bukal !nterprises and Dev. Corp., 4"4 SC ! "/& $%&&#(.4" (1) "o)er !e,
(&) Sale of *eal Pro,erty 9 ! sale of realty cannot be proven by means of witnesses, but must necessarily be evidenced by a written instrument, duly subscribed by the party charged, or by secondary evidence of the contents of such document. :o other evidence can be received e1cept the documentary evidence referred to. 11orospe v. 'la,at, %/ @hil. %" $"/"4(.4% (&&) &gency to Sell or to !uy 9 !s contrasted from sale, an agency to sell does not belong to any of the three categories of contracts covered by !rts. "#'7 and "#'. and not one enumerated under the Statutes of Crauds in !rt. "4&#. 1*i/ v. Court o Appeals, %'4 SC ! "7& $"//-(.4# (&&&) *ights of First *efusal 9 ! <right of first refusal= is not covered by the statute of frauds. Curthermore, !rt. "4&#$%($e( of Civil Code presupposes the e1istence of a perfected, albeit
#7 #.

-niversal "o#ina Su%ar Millin% Corp. v. Heirs o An%el 3eves, #./ SC ! #"- $%&&%(. *i/ketkai Sons Millin%, 'n$. v. CA, %'& SC ! '%# $"//'(+ A%asen v. CA, #%' SC ! '&4 $%&&&(. #/ -niversal "o#ina Su%ar Millin% Corp. v. Heirs o An%el 3eves, #./ SC ! #"- $%&&%(. 4& 3alusan v. 3a,a%, #'- SC ! %-# $%&&"(+ Santos v. Manalili, 47- SC ! -7/ $%&&'(. 4" "osen$or Develop/ent Corp. v. 'n:uin%, #'4 SC ! ""/ $%&&"(. 4% Al#a Vda. De "a, v. Court o Appeals, #"4 SC ! #- $"///(. 4# 3or$uator v. Berna#e, 4'/ SC ! 4#/ $%&&'(.

16
unwritten, contract of sale+ a right of first refusal, such as the one involved in the instant case, is not by any means a perfected contract of sale of real property. x"osen$or Dev. Corp. v. 'n:uin%, #'4 SC ! ""/ $%&&"(. (&)) $+uitable 6ortgage 9 Statute does not stand in the way of treating an absolute deed as a mortgage, when such was the parties0 intention, although the agreement for redemption or defeasance is proved by parol evidence. xCu,u%an v. Santos, #4 @hil. "&& $"/"-(.44 ()) *ight to *e,urchase 9 5he deed of sale and the verbal agreement allowing the right of repurchase should be considered as an integral whole+ the deed of sale is itself the note or memorandum evidencing the contract. 1Ma$tan Ce#u 'nternational Airport Aut&orit, v. Court o Appeals, %-# SC ! 7#- $"//-(.

(2) :emor n-0m $28uviengco v. Dacuycuy9 134 S"RA 668 415817I 6nder !rticle "4&#, an e1ception to the unenforceability of contracts pursuant to the Statute of Crauds is the e1istence of a written note or memorandum evidencing the contract. 5he memorandum may be found in several writings, not necessarily in one document. 5he memorandum or memoranda isFare written evidence that such a contract was entered into. 5he e1istence of a written contract of the sale is not necessary so long as the agreement to sell real property is evidenced by a written note or memorandum, embodying the essentials of the contract and signed by the party charged or his agent. 2.im3et3ai Sons 6illing )nc. v. C&9 253 S"RA 52$ (1555). !"#% 5he memoranda must be signed by the party sought to be charged, and must clearly provide a deed of sale categorically conveying the sub,ect property. 2.im3et3ai Sons 6illing )nc. v. C&9 255 S"RA 6 (1556)+ %-" SC ! 4-4 $"//-(. Cor the memorandum to ta2e the sale out of the coverage of the Statute of Crauds, it must contain <all the essential terms of the contract= of sale. x3or$uator v. Berna#e, 4'/ SC ! 4#/ $%&&'(,4' even when scattered into various correspondences which can be brought together 1Cit, o Ce#u v. Heirs o Candido "u#i, #&- SC ! 4&. $"///(.4EK"E.TION, Ele#tron&# Do#0ments 0n-er t+e E;"O::ER"E A"T (R.A. 8852) ($) . rt& l ECe#0t&on $!rt. "4&'( 24rtega v. .eonardo9 13$ .+&l. 883 (1558)I 2Claudel v. Court of &,,eals9 155 S"RA 11$ (1551). Eelivery of the deed to buyer0s agent, with no intention to part with the title until the purchase price is paid, does not ta2e the case out of the Statute of Crauds. 1 Baretto v. Manila "ailroad Co., 4- @hil. /-4 $"/%4(. 5he Statute of Crauds does not apply to contracts either partially or totally performed. 7n addition, a contract that violates the Statute of Crauds is ratified by the acceptance of benefits under the contract, such as the acceptance of the purchase price and using the proceeds to pay outstanding loans. 2&lfredo v. !orras 434 S"RA 145 (233$).47 (4) < &)er 9 $!rt. "4&'( CrossBe1amination on the contract is deemed a waiver of the defense of the Statute. xA#reni$a v. 1onda, #4 @hil. 7#/ $"/"-(+ 3alosi% v. Vda. De Nie#a, 4# SC ! 47% $"/7%(.4. ;hen the purported buyer0s e1hibits failed to establish the perfection of the contract of sale, oral testimony cannot ta2e their place without violating the parol evidence rule. 7t was therefore irregular for the trial court to have admitted in evidence testimony to prove the e1istence of a contract of sale of a real property between the parties, despite the persistent o#(e$tion made by the purported seller0s counsel as early as the first scheduled hearing, even when crossBe1amination was made on the basis of the witnesses0 affidavitBform testimony. 2.im3et3ai Sons 6illing )nc. v. C&9 255 S"RA 6 (1556)+ 261 S"RA 464 (1556). (5) R0l&n!s on Re#e&/ts n- Ot+er Do#0ment r> E)&-en#e of S le Since a contract of sale is perfected by mere consent, then when the dealer of motor vehicles accepts a deposit of @'&,&&&& and pulls out a unit from the assembler for that purpose, it was in breach of contract when it sold the car subsequently to another buyer. x2entrex Auto/otive, 'n$. v. Court o Appeals , %/" SC ! -- $"//.(. ! sales invoice is a commercial documentBcommercial documents or papers are those used by merchants or businessmen to promote or facilitate trade or credit transactions8 they are not mere scraps of paper bereft of probative value, but vital pieces of evidence of
"osales v. Su#a, 4&. SC ! --4 $%&&#(+ A,son, )r. v. Para%as, ''7 SC ! '& $%&&.(. Paredes v. !spino, %% SC ! "&&& $"/-.(. 4Ber% v. Ma%dalena !state, 'n$., /% @hil. ""& $"/'%(+ *i/ketkai Sons Millin%, 'n$. v. CA , %'& SC ! '%# $"//'(+ First P&ilippine 'nt?l Bank v. CA, %'% SC ! %'/ $"//-(. 47 Vda. de )o/o$ v. CA, %&& SC ! 74 $"//"(+ Soliva v. 3&e 'ntestate !state o Mar$elo M. Villal#a, 4"7 SC ! %77 $%&&#(+ Ainza v. Padua, 4-% SC ! -"4 $%&&'(+ De la Cena v. Briones, '&. SC ! -% $%&&-(+ 0aneza v. Court o Appeals, '7% SC ! 4"# $%&&.(. 4. *i/ketkai Sons Millin%, 'n$. v. CA, %'& SC ! '%# $"//'(+ *a$anilao v. CA, %-% SC ! 4.- $"//-(.
4' 44

17
commercial transactions, written memorials of the details of the consummation of contracts. Seaiol Petroleu/ Corp. v. Auto$orp 1roup, '-/ SC ! #.7 $%&&.(. Sales invoices are not evidence of payment of the price, but evidence of the receipt of the goods+ since the best evidence to prove payment is the official receipt. !l 4ro !n%ravers Corp. v. Court o Appeals, '4- SC ! 4% $%&&.(. ! receipt which is merely an ac2nowledgment of the sum received, without any indication therein of the total purchase price of the land or of the monthly installments to be paid, cannot be the basis of valid sale. 1*ea#res v. CA, "4- SC ! "'. $"/.-(.4/ 7n itself, the absence of receipts, or any proof of consideration, would not be conclusive of the ine1istence of a sale since consideration is always presumed. 1 3i%no v. A:uino, 444 SC ! -" $%&&#(. eceipts proves payment which ta2es the sale out of the Statute of Crauds. 2#oyota Sha2 )nc. v. Court of &,,eals 244 S"RA $23 (1555). #. For H l&-&t>, S le of Re lt> T+ro0!+ A!ent9 A0t+or&t> :0st 1e &n <r&t&n! $!rt. ".74( ;hen sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing+ ot&er5ise, t&e sale s&all #e void, even when*
!gent is the son of the owner. 1Delos "e,es v. CA, #"# SC ! -#% $"///(

5here is partial payment of the price received by the supposed agent. xDizon v. CA, #/- SC ! "'4
$%&&#(.'& 7n the case of a corporate owner of realty. xCit,6*ite "ealt, Corp. v. CA, #%' SC ! #.' $%&&&(.'"

;hen Contract to Sell was signed by the coBowners themselves as witnesses, the written authority for their agent mandated under !rticle ".74 of the Civil Code is no longer required. x4es/er v. Paraiso Dev. Corp., '"4 SC ! %%., %#7 $%&&7(. #. S le of L r!e " ttle $!rt. "'.'"+ Sec. '%/, evised !dm. Code(
9D.

SI:ULATED SALES
Characteristic of simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the parties0 ,uridical situation, or that the parties have no intention to be bound by the contract. 5he requisites are* $a( an outward declaration of will different from the will of the parties+ $b( false appearance must have been intended by mutual agreement+ and $c( purpose is to deceive third persons. 1Manila Bankin% Corp. v. Silverio, 4-- SC ! 4#. $%&&'(.'% 1. 1 -!es n- Non;% -!es of S&m0l t&on,
:onBpayment of the stipulated consideration, absence of any attempt by the buyers to assert their alleged rights over the sub,ect property. 1Villa lor v. CA, %.& SC ! %/7 $"//7(.'# Cailure of alleged buyers to collect rentals from alleged seller. 1 Santia%o v. CA, %7. SC ! /. $"//7(+ but not when there appears a legitimate lessorBlessee relationship between the vendee and the vendor. 1-nion Bank v. 4n%, 4/" SC ! '." $%&&-(. !lthough the agreement did not provide for the absolute transfer ownership of the land to buyer, that did not amount to simulation, since delivery of certificate of ownership and e1ecution of deed of absolute sale were e1pressly stipulated as suspensive conditions, which gave rise to the corresponding obligation on part of buyer to pay the last installments. 1Villa lor v. CA, %.& SC ! %/7 $"//7(.

;hen signature on a deed of sale is a forgery. Fidel v. Court o Appeals, ''/ SC ! ".- $%&&.(.'4 Iut
bare assertions that the signature appearing on the Eeeds of Sale is not that of her husband is not enough to allege simulation, since forgery is not presumed+ it must be proven by clear, positive and convincing evidence. 1".F. Navarro 9 Co. v. Vailo$es, #-" SC ! "#/ $%&&"(. Simulation of contract and gross inadequacy of price are distinct legal concepts, with different effects 9 the concept of a simulated sale is incompatible with inadequacy of price. ;hen the parties to an alleged contract do not really intend to be bound by it, the contract is simulated and void. Hross inadequacy of price by itself will not result in a void contract, and it does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract. 1Bravo61uerrero v. Bravo, 4-' SC ! %44 $%&&'(.

2. <+en :ot&)e N0ll&f&es t+e S le

*i/son v. CA, #'7 SC ! %&/ $%&&"(. Fir/e v. Bukal !nterprises and Dev. Corp., 4"4 SC ! "/& $%&&#(. '" Pineda v. CA, #7- SC ! %%% $%&&%(. '% "osario v. CA, #"& SC ! 4-4 $"///(+ *o,ola v. CA, #%- SC ! %.' $%&&&(+ 0u Bun 1uan v. 4n%, #-7 SC ! ''/ $%&&"(+ Pa,on%a,on% v. CA, 4#& SC ! %"& $%&&4(. '# Solidstate Multi6Produ$ts Corp. v. Catienza6Villaverde, ''/ SC ! "/7 $%&&.(. '4 "u loe v. Bur%os, '77 SC ! %-4, %7%B%7# $%&&/(.
'& 4/

18
7n sale, consideration is, as a rule, different from the motive of parties, and when the primary motive is illegal, such as when the sale was e1ecuted over a land to illegally frustrate a personLs right to inheritance and to avoid payment of estate ta1, the sale is void because illegal motive predetermined purpose of the contract. 14le%ario v. CA, %#. SC ! /- $"//4(.'' ;here the parties to a contract of sale agreed to a consideration, but the amount reflected in the final Eeed of Sale was lower, their motivation being to pay lower ta1es on the transaction, the contract of sale remains valid and enforceable upon the terms of the real consideration. !lthough illegal, the motives neither determine nor ta2e the place of the consideration. 1 Heirs o Spouses Balite v. *i/, 44- SC ! '4 $%&&4(. $. Reme-&es Allo@e- <+en S le S&m0l te;hen a contract of sale is void, the right to set up its nullity or nonBe1istence is available to third persons whose interests are directly affected thereby. ?i2ewise, the remedy of a$$ion pauliana is available when the sub,ect matter is a conveyance, otherwise valid, underta2en in fraud of creditors. 1Manila Bankin% Corp. v. Silverio, 4-- SC ! 4#. $%&&'(. 5he rescissory action to set aside contracts in fraud of creditors is a$$ion pauliana, essentially a subsidiary remedy accorded under !rticle "#.# which the party suffering damage can avail of only when he has no other legal means to obtain reparation for the same. 7n such action, it must be shown that both contracting parties have acted maliciously so as to pre,udice the creditors who were prevented from collecting their claims. escission if generally unavailing should a third person, acting in good faith, is in lawful possession of the property since he is protect by law against a suit for rescission by the registration of the transfer to him in the registry. x-nion Bank v. 4n%, 4/" SC ! '." $%&&-(. 4. Effe#t <+en S le De#l re- Ho&-,
5he action for the declaration of the contract0s nullity is imprescriptible8an action for reconveyance of property on a void contract of sale does not prescribe. Fil6!state 1ol and Dev., 'n$. v. Navarro, '%SC ! '" $%&&7(. @ossessor is entitled to 2eep the fruits during the period for which the buyer held the property in good faith. 1DBP v. CA, #"- SC ! -'& $"///(. 5hen restoration of what has been given is in order, since the relationship between parties in any contract even if subsequently voided must always be characteri4ed and punctuated by good faith and fair dealing. 1De los "e,es v. CA, #"# SC ! -#% $"///(+ 1Heirs o '%na$ia A%uilar6"e,es v. Mi(ares , 4"& SC ! /7 $%&&#(.

!lien who purchases land in the name of his Cilipina lover, has no standing to see2 legal remedies to either recover the property or the purchase price paid, since the transaction is void a# initio for being in violation of the constitutional prohibition. xFrenzel v. Catito, 4&- SC ! '' $%&&#(.

''

-, v. CA, #"4 SC ! -/, ." $"///(.

19

HI. "ONSU::ATION (Arts. 145$;1536) AND

.ERFOR:AN"E OF "ONTRA"T
A. O1LI(ATIONS OF SELLER
1. .reser)e S0%De#t : tter $!rt. ""-#(

OF

SALE

(Arts. 15$6;15449 1582;1553)

2. Del&)er @&t+ Fr0&ts n- A##essor&es $!rts. ""-4, ""--, "4/', "'#7(

$. DELIHER THE SU1BE"T :ATTER $!rt. "477(

. Le! l .rem&ses for Do#tr&nes on Tr -&t&on ;hen the sale is void or fictitious, no valid title over the sub,ect matter can be conveyed to the buyer even with delivery. Ne/o potest nisi :uod de (ure potest 9 No /an $an do an,t&in% ex$ept 5&at &e $an do la5 ull, . 13raders "o,al Bank v. CA, %-/ SC ! "' $"//7(. ;hen seller had no ownership over the sub,ect matter at the time of delivery, no valid title can pass in favor of the buyer. Ne/o dat :uod non &a#et 9 No /an $an %ive t&at 5&i$& &e does not &ave. 13sai v. CA, #-- SC ! #%4 $%&&"(.'! forged deed of sale is null and void and conveys no title. 7t is a wellBsettled principle that no one can give what one does not have, ne/o dat :uod non &a#et. 3ne can sell only what one owns or is authori4ed to sell, and the buyer can acquire no more right than what the seller can transfer legally. x"u loe v. Bur%os, '77 SC ! %-4, %7%B%7# $%&&/(. !rticle "4'/ of the Civil Code on contracts of sale <specifically requires that the vendor must have ownership of the property at the time it is delivered.= xHeirs o Arturo "e,es v. So$$o6Beltran, '7% SC ! %"", %%&B%%" $%&&.(. ! contract to sell, or a condition contract of sale where the suspensive condition has not happened, even when found in a public document, cannot be treated as constituting constructive delivery, especially when from the face of the instrument it is shown that the seller <was not yet the owner of the property and was only e1pecting to inherit it.= $at p. %%"( Heirs o Arturo "e,es v. So$$o6Beltran, '7% SC ! %"" $%&&.(. 3ne can sell only what one owns or is authori4ed to sell, and the buyer can acquire no more than what the seller can transfer legally. Da$la% v. Ma$a&ili%, '-& SC ! "#7 $%&&.(. ! ta1 declaration, by itelf, is not considered conclusive evidence of ownership 9 it is merely an indi$iu/ of a claim of ownership. Da$la% v. Ma$a&ili%, '-& SC ! "#7 $%&&.(. :evertheless when at the time of delivery there is no proof that the seller had ownership and as in fact the ta1 declaration to the sub,ect property was in the name of another person, then there was no transfer of ownership by delivery. 1 Heirs o Severina San Mi%uel v. Court o Appeals, #-4 SC ! '%# $%&&"(. %. (ener l Do#tr&nes on Tr -&t&on9 <+et+er A#t0 l or "onstr0#t&)e, 7t may be stipulated that ownership in the thing shall not pass to buyer until he has fully paid price $!rt. "47.(. 7n the absence of such stipulation to the contrary, tradition produces its natural effects in law, most important of which being conveyance of ownership, without pre,udice to right of the seller to claim payment of the price. 1 Froilan v. Pan 4riental S&ippin% Co. , "% SC ! %7$"/-4(.'7 Eelivery contemplates <the absolute giving up of the control and custody of the property on the part of the vendor, and the assumption of the same by the vendee. Non nudis pa$tis sed traditione do/inia reru/ trans erantur . !nd there is said to be delivery if and when the thing sold <is placed in the control and possession of the vendee.= !:uatorial "ealt, Dev. 'n$. v. Ma, air 3&eater, 'n$., #7& SC ! '- $%&&"(. <Eelivery= as used in the ?aw on Sales refers to the concurrent transfer of two things* $"( possession and $%( ownership. 7f the vendee is placed in actual possesion of the property, but by agreement of the parties ownership of the same is retained by the vendor until the vendee has fully paid the price, the mere transfer of the possesion of the property sub,ect of the sale is not the <delivery= contemplated in the ?aw on Sales or as used in !rticle "'4# of the Civil Code. Ce#u ;inland Dev. Corp. v. 4n% Siao Hua, '.. SC ! "%& $%&&/(. Since delivery of sub,ect matter of sale is an obligation on the part of the seller, the acceptance thereof by the buyer is not a condition for the completeness of delivery. 1 *a Fuerza v. CA, %# SC ! "%"7 $"/-.(.
''7

3an%alin v. Court o Appeals, #7" SC ! 4/ $%&&"(+ Heirs o Arturo "e,es v. So$$o6Beltran, '7% SC ! %"" $%&&.(. .uenzle 9 Strei v. ;atson 9 Co., "# @hil. %- $"/&/(+ 4$e(o, Perez 9 Co. v. 'nt=l Bankin% Corp., #7 @hil. -#" $"/".(.

20
7n the absence of an e1press stipulation to the contrary, payment of purchase price of the goods is not a condition precedent to the transfer of title to the buyer, but title passes by the delivery of the goods. 1P&il. Su#ur#an Dev. Corp. v. Auditor 1eneral, -# SC ! #/7 $"/7'(.'. Cailure of the buyer to ma2e good the price does not, in law, cause the ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to !rt. ""/". 1Balat#at v. CA, %-" SC ! "%. $"//-(. ! contract to sell, or a condition contract of sale where the suspensive condition has not happened, even when found in a public document, cannot be treated as constituting constructive delivery, especially when from the face of the instrument it is shown that the seller <was not yet the owner of the property and was only e1pecting to inherit it.= 1 Heirs o Arturo "e,es v. So$$o6Beltran, '7% SC ! %"", %%" $%&&.(. #. .+>s&# l Del&)er> $!rt. "4/7( 7t is not necessary that seller himself delivers title to the buyer because the thing sold is understood as delivered when it is placed in control and possession of buyer. 5hus, when sellers themselves introduced the tenant to the buyer as the new owners of the land, and from that time on the buyer acted as landlord thereof, there was delivery that transferred title to the buyer. xAl redo v. Borras, 4&4 SC ! "4' $%&&#(. -. "onstr0#t&)e Del&)er>, EKE"UTION OF A .U1LI" INSTRU:ENT $!rt. "4/.( ;here deed of sale or any agreement analogous to a deed of sale, is made through a public instrument, its e1ecution is equivalent to the delivery of the property. Caoi#es, )r. v. Caoi#es6Panto(a, 4/- SC ! %7# $%&&-(.'/ 6nder !rt. "4/., the mere e1ecution of the deed of conveyance in a public instrument is equivalent to the delivery of the property, and that prior physical delivery or possession is not legally required, since ownership and possession are two entirely different legal concepts. :otwithstanding the presence of illegal occupants on the sub,ect property, transfer of ownership by symbolic delivery under !rt. "4/. can still be effected through the e1ecution of the deed of conveyance. 1Sa#io v. 'nternational Corporate Bank, #-4 SC ! #.' $%&&"(. !s a general rule, when the sale is made through a public instrument, the e1ecution thereof shall be equivalent to the delivery of the thing which is the ob,ect of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. 7n order the e1ecution of a public instrument to effect tradition, the purchaser must be placed in control of the thing sold. ! person who does not have actual possession of the thing sold cannot transfer constructive possession by the e1ecution and delivery of a public instrument. Asset Privatization 3rust v. 3.). !nterprises, '.7 SC ! 4." $%&&/(. 5here is nothing in !rticle "4/. that provides that e1ecution of a deed of sale is a conclusive presumption of delivery of possession+ presumptive delivery can be negated by the failure of the vendee to ta2e actual possession of the land or the continued en,oyment of possession by the vendor. 2Santos v. Santos $66 S"RA $55 (2331).-& 5he presumptive delivery by the e1ecution of a public instrument can be negated by the failure of the vendee to ta2e actual possession of the land sold. Ce#u ;inland Dev. Corp. v. 4n% Siao Hua, '.. SC ! "%& $%&&/(. (&) As to :o) %les $!rts. "4/.B"4//, "'"#B"'"4+ 2Dy 0r. v. C&9 158 S"RA 826(. ;here it is stipulated that deliveries must be made to the buyer or his duly authori4ed representative named in the contracts, the seller is under obligation to deliver in accordance with such instructions.. 1*a%on v. Hooven Co/al$o 'ndustries, 'n$., #4/ SC ! #-# $%&&"(. )1ecution by supposed buyers of a chattel mortgage over sub,ect vehicle in favor of the financing company does not mean that ownership had been transferred to them, for delivery must be on the part of the seller. 1-nion Motor Corp. v. CA, #-" SC ! '&- $%&&"(. :either issuance of an invoice, which is not a document of title xP.3. Cerna Corp. v. CA, %%" SC ! "/ $"//#(,-" nor of the registration certificate of vehicle x-nion Motor Corp. v. CA, #-" SC ! '&- $%&&"(,-% would constitute constructive delivery. (&&) As to Immo) %les $!rt. "4/.(

4$a/po v. Court o Appeals, %## SC ! ''" $"//4(. 3atin% v. Mar$ella, '"/ SC ! 7/ $%&&7( 60 !:uatorial "ealt, Dev. 'n$. v. Ma, air 3&eater, 'n$. , #7& SC ! '- $%&&"(+ !n%reso v. De *a Cruz, 4&" SC ! %"7 $%&&#(+ 3en Fort, "ealt, and Dev. Corp. v. Cruz, 4"& SC ! 4.4 $%&&#(+ Copu,o$ v. De Solas, '&4 SC ! "7- $%&&-(. -" Norkis Distri#utors v. CA, "/# SC ! -/4 $"//"(. -% A#uan v. 1ar$ia, "4 SC ! 7'/ $"/-'(+ Santos v. Santos, #-- SC ! #/' $%&&"(.
'/

'.

21
7ssuance of an ac2nowledgment receipt of partial payment, when it is not a public instrument does not convey title. 1San *orenzo Dev. Corp. v. Court o Appeals , 44/ SC ! // $%&&'(. 7n case of immovables, when sale is made through a public instrument, the e1ecution thereof shall be equivalent to the delivery of the thing which is the ob,ect of the contract, if from the deed the contrary does not appear or cannot clearly be inferred 1 Muni$ipalit, o Vi$torias v. CA, "4/ SC ! #" $"/.7(+-# and that prior physical delivery or possession is not legally required since e1ecution of the deed is deemed equivalent to delivery. xManuel ". Dula, !nterprises, 'n$. v. Court o Appeals, %%' SC ! -7. $"//#(, .ro)&-e- T+ t, $a( 5he thing sold is sub,ect to the control of the seller 2&ddison v. Feli'9 $8 .+&l. 434 (1518)+ and $b( Such control should remain within a reasonable period after the e1ecution of the instrument 2Danguilan v. )&C9 168 S"RA 22 (1588)I 2Pasagui v. Villablanca9 68 S"RA 18 (1585). EK"E.T, ;hen buyer assumes the ris2s of ownership and possession. 2Po2er Commercial and )ndustrial Cor,. v. C& 284 S"RA 558 (1558). )1ecution of Eeed of Conditional Sale with provision that final deed of sale to be e1ecuted upon full payment does not transfer ownership of the sub,ect matter. xFortune 3o#a$$o Corp. v. N*"C, %&& SC ! 7-- $"//"(. (1) *egistration of #itle )s Se,arate 6ode from $'ecution of Public )nstrument 9 5he recording of the sale with the proper egistry of Eeeds and the transfer of the certificate of title in the name of the buyer are necessary only to bind third parties to the transfer of ownership. !s between the seller and the buyer, the transfer of ownership ta2es effect upon the e1ecution of a public instrument conveying the real estate. 2Chua v. Court of &,,eals 431 S"RA 54 (233$). !"# S$$% 6nder !rt. "4/', seller is obliged to transfer title over the property and deliver the same to the vendee. 2Vive $agle .and )nc. v. Court of &,,eals 9 444 S"RA 445 (2334). (2) Customary Ste,s in Selling )mmovables 9 <Customarily, in the absence of a contrary agreement, the submission by an individual seller to the buyer of the following papers would complete a sale of real estate* $"( owner0s duplicate copy of the 5orrens title+ $%( signed deed of absolute sale+ $#( ta1 declaration+ and $4( latest realty ta1 receipt. 5hey buyer can retain the amount for the capital gains ta1 and pay it upon authority of the seller, or the seller can pay the ta1, depending on the agreement of the parties.= 2Chua v. Court of &,,eals 431 S"RA 54 (233$). (&&&) As to In#or/ore l .ro/ert> $!rts. "4/. and "'&"(. 7n the sale of shares of stoc2, physical delivery of a stoc2 certificate is one of the essential requisites for the transfer of ownership of the stoc2s purchased. Cilinvest0s failure to delivery the stoc2 certificates representing the shares of stoc2 purchased by 5)D7 and Harcia amounted to a substantial breach of their contract which gave rise to a right to rescind the sale. "a:uel6Santos v. Court o Appeals, '/% SC ! "-/ $%&&/(. e. Constitutum Possessorium $!rt. "'&&( 9 ! provision in the deed of sale granting to seller a right to lease the sub,ect matter of the sale is valid* the possession is deemed to be constituted in the vendee by virtue of this mode of tradition.= 1A/i%o v. 3eves, /- @hil. %'% $"/'4(. f. #raditio !revi 6anu 9 @rior to the sale, petitioners were in possession of the sub,ect property as lessees. 6pon sale to them of the rights, interests and participation as to the M portion pro indiviso, they remained in possession, not in the concept of lessees anymore but as owners now through symbolic delivery 2nown as traditio #revi /anu. 1Heirs o Pedro !s$anlar v. CA, %." SC ! "7- $"//7(. 4. Tr nsfer O@ners+&/ to Hen-ee U/on Del&)er> $!rts. "477, "47., and "4/-( . <+en 10>er Ref0ses to A##e/t $!rt. "'..( %. In " se of EC/ress or Im/l&e- Reser) t&on $!rts. "47. and "'&#( 5. T =&n!;O0t Ins0r n#e "o)er !e $!rt. "'%#( 6. T&me n- .l #e of Del&)er> $!rt. "'%"(. 8. EC/enses of ECe#0t&on Est te $!rt. "'%"(.
-#

n- Re!&str t&on $!rt. "4.7(,

n- of .0tt&n! (oo-s &n Del&)er %le

Florendo v. Foz, %& @hil. #.. $"/""(+ San$&ez v. "a/os, 4& @hil. -"4 $"/"/(+ +ui/son v. "osete, .7 @hil. "'/ $"/'&(+ P&il. Su#ur#an Dev. v. Auditor, -# SC ! #/7 $"/7'(.

22
6nless otherwise stipulated* $a( under !rt. "4.7 the e1penses for the registration of the sale should be shouldered by the vendor 1 Vive !a%le *and, 'n$. v. Court o Appeals , 444 SC ! 44' $%&&4(+ and $b( duty to withhold ta1es due on the sale is imposed on seller. 1 !:uita#le "ealt, Develop/ent 'n$. v. Ma, air 3&eater, 'n$., ##% SC ! "#/ $%&&&(. Iuyer has more interest in having the capital gains ta1 paid immediately since this is a preB requisite to the issuance of a new 5orrens title in his name. :evertheless, as far as the government is concerned, the capital gains ta1 remains a liability of the seller since it is a ta1 on the seller0s gain from the sale of the real estate. Pa,/ent o t&e $apital %ains tax, &o5ever, is not a pre6re:uisite to t&e trans er o o5ners&ip to t&e #u,er. 5he transfer of ownership ta2es effect upon the signing and notari4ation of the deed of absolute sale.= 1C&ua v. Court o Appeals, 4&" SC ! '4 $%&&#(. ! ,udgment on a contract of sale that decrees seller0s obligations to e1ecute and deliver the deed of absolute sale and the certificate of title, does not necessarily include within its terms the obligation to pay for the e1penses in notari4ing a deed of sale and in obtaining new certificate of title. 1)ose Clavano, 'n$. v. H*"B, #7. SC ! "7% $%&&%(.

1. S.E"IAL RULES ON "O:.LETENESS OF DELIHERL

1. In " se of :o) %les $!rt. "'%% and "'#7, "4.&( ;hen the contract does not provide for the measuring or weighing of a sold specific mass, and the price agreed upon was not based on such measurement, then <[t]he sub,ect matter of the sale is, therefore, a determinate ob,ect, the mass, and not the actual number of units or tons contained therein, so that all that is required of seller was to deliver in good faith to his buyer all of those found in the mass, notwithstanding that the quantity delivered is less than the amount estimated in the contract.= 11aite v. Fona$ier, % SC ! .#" $"/-"(. . R0les on Del&)er> to " rr&er $!rt. "'%#( (&) FAS S les 9 <5he seller pays all charges and is sub,ect to ris2 until the goods are placed alongside the vessel=. 1A. Soriano 0 Cia. v. Colle$tor, /7 @hil. '&' $"/''(. (&&) FO1 S les 9 7n mercantile contracts of !merican origin, <C.3.I.= stand for the words <Cree on Ioard,= i.e., that the seller shall bear all e1penses until the goods are delivered according as to whether the goods are to be delivered <C.3.I.= at the point of shipment or at the point of destination determines the time when property passes. 2!ehn 6eyer ( Co. v. 8angco9 $8 .+&l. 6329 636 (1518).-4 (&&&) "IF S les 2General Foods v. N&C4C49 133 .+&l. $$8 (1556). <C.7.C.= found in Iritish contracts stand for costs, insurance, and freight+ they signify that the price fi1ed covers not only the costs of the goods, but the e1pense of freight and insurance to be paid by the seller. 2!ehn 6eyer ( Co. v. 8angco9 $8 .+&l. 6329 636 (1518). 6nder an arrangement <c.i.f. @acific Coast= $destination(, <the vendor is to pay not only the cost of the goods, but also the freight and insurance e1penses, and, as it was ,udicially interpreted, this is ta2en to indicate that the delivery is to be made at the port of destination.= 2Pacific Vegetable 4il Cor,. v. Sing7on 9 S0/reme "o0rt A-) n#e De#&s&ons9 25 A/r&l 1555. %. S le on A//ro) l9 Tr& l or S t&sf #t&on $!rt. "'&%( 7n a <sale or return,= the ownership passes to the buyer on delivery pursuant to a perfected contract of sale+ and the subsequent return of the goods reverts ownership bac2 to the seller. 7n such case, tradition as a mode of acquiring ownership must be in $onse:uen$e o a contract. 1Vallarta v. Court o Appeals, "'& SC ! ##- $"/.7(. 7n a <sale on approval= $also called <sale on acceptance, <sale on trial= or <sale on satisfaction=(, the delivery of the ob,ect does not transfer ownership to the buyer since the delivery was not for purposes of transferring ownership, since the prestation to effect a meeting of the minds to give rise to a valid contract is incumbent on the buyer. xVallarta v. Court o Appeals, "'& SC ! ##- $"/.7(. Cor a sale to be a <sale or return= or a <sale on approval,= there must be a clear agreement to either of such effect, otherwise, the provisions of !rt. "'&% of Civil Code governing such sales cannot be invo2ed by either party to the contract. x'ndustrial 3extile Manu a$turin% Co. v. *P) !nterprises, 'n$., %"7 SC ! #%% $"//#(. #. S le %> Des#r&/t&on n-Jor S m/le $!rt. "4."( 5here is a sale by sample when a small quantity is e1hibited by the seller as a fair specimen of the bul2, which is not present and there is no opportunity to inspect or e1amine the same+ and the parties treated the sample as the standard of quality and that they

-4

C&ua N%o v. -niversal 3radin% Co., 'n$., .7 @hil. ##" $"/'&(.

23
contracted with reference to the sample with the understanding that the product to be delivered would correspondent with the sample. 1Mendoza v. David, 44" SC ! "7% $&&4( )ven in sales by description andFor sample, buyer will not be released from his obligation to accept and pay for the goods by deviations on the part of the seller from the e1act terms of the contract, if buyer had acquiesced to such deviations after due notice thereof. x!n%el v. Mariano Velas$o 9 Co., 47 @hil. ""' $"/%4(. ;hen the machine delivered is in accordance with the description stated in the sales contract, the buyer cannot refuse to pay the balance of the purchase price and the cost of installation if it proves that the machine cannot be used satisfactorily for the purposes for which he bought it when such purpose was not made 2nown to the seller. 1 Pa$i i$ Co//er$ial Co. v. !r/ita Market 9 Cold Stores, '- @hil. -"7 $"/#%(. -. 10>erGs R&!+t to Ins/e#t 1efore A##e/t n#e $!rts. "4." and "'.4( EC#e/t @+en # rr&er -el&)ers "OD. 2. In " se of Immo) %les . <+ere Sol- .er Un&t or N0m%er $!rts. "'#/ and "'4&( 7n a unit price sale, the statement of the area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. 7f the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that is stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. 7f the vendor delivers more than the area stated in the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate. 2*udolf .iet7 )nc. v. Court of &,,eals9 488 S"RA 451 (2335).-' %. <+ere Sol- for L0m/ S0m 4'& cuer,o cierto or ,or ,recio al7ado7 $!rt. "'4%(

7n a contract of sale of land in a mass, the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. Salinas v. Faustino, '-- SC ! ". $%&&.(. 7n a lump sum sale, when the land delivered to the buyer is e1actly as that described in the deed and covered within the boundaries designated, the difference in actual area $#4 versus "& hectares( will not authori4e the buyer to rescind the contract because the seller has complied with delivering the sub,ect matter agreed upon. 1 3eran v. Villanueva, '- @hil. -77 $"/#%(+ this is the rule when evidence shows that the parties never gave importance to the area of the land in fi1ing the price $/7 versus -& hectares(. 1Azarra%a v. 1a,, '% @hil. '// $"/%.(. ;here the parties agreed on a sale at a rate of a certain price per unit of measure and not one for a lump sum, it is !rticle "'#/ and not !rticle "'4% which is the applicable law8the buyer is entitled to the relief afforded to him under !rticle "'%/, that is, either a proportional reduction of the price or the rescission of the contract. xCe#u ;inland Dev. Corp. v. 4n% Siao Hua , '.. SC ! "%& $%&&/(. EK"E.T, ! buyer of land, when sold in gross or with the description <more or less= or similar words in designating quantity covers only a reasonable e1cess of deficiency. 7n the case at bar an area of <-44 square meters more= is not reasonable e1cess or deficiency, to be deemed included in the deed of sale. 1 "o#le v. Ar#asa, #-% SC ! -/ $%&&"(+2*udolf .iet7 )nc. v. Court of &,,eals9 488 S"RA 451 (2335).-EK"E.TION TO EK"E.TION, ;hen buyer, who has been occupying the land for two years as lessee, actually is deemed to ta2e ris2 on the actual si4e of the property bought at lump sum. 11ar$ia v. Velas$o, 7% @hil. %4. $"/4"(.

". DOU1LE SALES $!rts. "'44 and ""-'(

1. .r&or&t> of Torrens S>stem of Re!&str t&on 9 5he rules on double sales under !rt. "'44 do not overcome the rules provided under the @roperty egistration Eecree $@.E. "4'/(, such as* ( ) ;hen two different titles are issued over the same registered land, the buyer who claims under a title that was first issued shall be preferred. 1 *iao v. Court o Appeals, #%# SC ! 4#& $%&&&(+ (%) 7nvo2ing the rules on double sales and <priority in time= under !rt. "'44 would be misplaced by a first buyer who bought the land not within the 5orrens system but under !ct :o. ##44, as against the second buyer who bought the same property when it was already registered under the 5orrens system, because*
-' --

1o,ena v. 3a/#untin%, " @hil. 4/& $"/&%(+ Santa Ana v. Hernandez, ". SC ! /7# $"/--(. Asiain v. )alandoni, 4' @hil %/- $"/%#(+ Balantak#o v. Court o Appeals, %4/ SC ! #%# $"//'(+ !s%uerra v. 3rinidad, '". SC ! ".- $%&&7(.

24
of the <wellB2nown rule in this ,urisdiction that persons dealing with registered land have the legal right to rely on the fact of the 5orrens Certificate of 5itle and to dispense with the need to inquire further, e1cept when the party concerned has actual 2nowledge of facts and circumstances that would impel a reasonably cautious man to ma2e such inquiry+= and

the 5orrens system rule that formal registration proceedings underta2en on the property and
the subsequent issuance of a title over the land had under the 5orrens system had the legal effect of cleansing title on the property of all liens and claims which were not annotated therein.

2Naa2an Community *ural !an3 )nc. v. Court of &,,eals9 $55 S"RA 4$ (233$).-7 !"# S$$, 2Naval v. Court of &,,eals9 48$ S"RA 132 (2336). 2. Tests A//l&# %le 0n-er Art&#le 1544, Caveat e/ptor requires the buyer to be aware of the supposed title of the seller and he who buys without chec2ing the sellerLs title ta2es all the ris2s and losses consequent to such failure. 1Cara/, )r. v. *aureta, "&# SC ! 7 $"/."(. 5he provision on double sale presumes title or ownership to pass to first buyer, e1ception being* $a( when the second buyer, in good faith, registers the sale ahead of the first buyer, and $b( should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. 6nless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the pre,udice of the first buyer.= xCoronel v. CA, %-# SC ! "' $"//-(. 7n spite of the three levels of tests provided under !rt. "'44, the Court seems to recogni4e only registration in good faith by the second buyer and does not characteri4e the meaning of the last two test of possession and oldest title. 2Carillo v. Court of &,,eals9 53$ S"RA 66 (2336). . :AIN RULE (1586).-.
UNDER

ART. 1544, P*)4* #$6P4*$ P*)4* 0"*$. 2Carbonell v. C&9 65 S"RA 55

$. ReA0&s&tes for Do0%le S le, 2Cheng v. Genato9 $33 S"RA 822 (1558).-/ . T+ere :0st 1e T@o D&fferent H l&- S les% !rticle "'44 do not apply where* 5here is only one valid sale, while the other sale over the same property is void. Fudot v. Cattle,a *and, 'n$., '## SC ! #'& $%&&7(+7& or ;here one of the contract is a contract to sell. 2San .oren7o Dev. Cor,. v. Court of &,,eals9 445 S"RA 55 (2335).7" (1) Do#tr&ne on "on-&t&on l S lesJ"ontr #ts to Sell n- A-)erse "l &ms, 26endo7a v. /ala2 42 .+&l. 2$6 (1521)I 2&dalin v. C&9 283 S"RA 5$6 (1558). 5he rules on double sales under !rt. "'44 are not applicable to contract to sell, because of the circumstances that must concur in order for the provisions to !rt. "'44 on double sales to apply, namely that there must be a valid sales transactions, and buyers must be at odds over the rightful ownership of the sub,ect matter who must have bought from the very same seller, are lac2ing in a contract to sell for neither a transfer of ownership nor a sales transaction has been consummated, and such contract is binding only upon the fulfillment or nonBfulfillment of an event. :evertheless, the !o)ern&n! /r&n#&/le of !rt. "'44 should apply, mainly the governing principle of pri/us te/pore,portior (ure $first in time, stronger in right(. 2Cheng v. Genato9 $33 S"RA 822 (1558). %. EC #t S me S0%De#t : tter !rticle "'44 applies where the same thing is sold to different buyers by the same seller. x4n% v. 4alsi/an, 4.' SC ! 4-4 $%&&-(+ and therefore does not apply where there was a sale to one party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the rights to repurchase the same land. 1 Dis$&oso v. "oxas, ' SC ! 7." $"/-%(. #. EC #t S me Seller for 1ot+ S les !rticle "'44 applies where the sa/e t&in% is sold to different vendees #, t&e sa/e vendor. 7t does not apply where the same thing is sold to different vendees by different vendors.or even to the same buyer but by different sellers. Salera v. "oda(e, '#& SC ! 4#%, 4#. $%&&7(.7%
-7 -.

"eiterated in A#ri%o v. De Vera, 4#% SC ! '44 $%&&'(+ Ver "e,es v. Salvador, Sr., '-4 SC ! 4'- $%&&.(. 3an%lao v. Parun%ao, '#' SC ! "%# $%&&7(+ Cal/a v. Santos, '/& SC ! #'/ $%&&/(. -/ "eiterated in Ma$tan6Ce#u 'nternational Airport Aut&orit, v. 3irol, '.. SC ! -#' $%&&/(. 7& !spiritu v. Valerio, / SC ! 7-" $"/-#(+ "e/alante v. 3i#e, "'. SC ! "#. $"/..(+ Del in v. Valdez, '&% SC ! %4 $%&&-(.
7"
7%

3orre$a/po v. Alindo%an, Sr., '"7 SC ! .4 $%&&7(. 4n% v. 4lasi/an, 4.' SC ! 4-4 $%&&-(.

25
!rticle "'44 on double sales has no application in cases where the sales involved were initiated not by ,ust one vendor but by several successive vendors. Ma$tan6Ce#u 'nternational Airport Aut&orit, v. 3irol, '.. SC ! -#' $%&&/(. Cor !rticle "'44 to apply, it is necessary that the conveyance must have been made by a party who has an e1isting right in the thing and the power to dispose of it. 7t cannot be invo2ed where the two different contracts of sale are made by two different persons, one of them not being the owner of the property sold. !nd even if the sale was made by the same person, if the second sale was made when such person was no longer the owner of the property, because it had been acquired by the first purchaser in full dominion, the second purchaser cannot acquire any right. 2Consolidated *ural !an3 ?Cagayan Valley@ )nc. v. Court of &,,eals 9 448 S"RA $48 (2335),7# citing >7??!:6)>!, @A7?7@@7:) ?!; 3: S!?)S "&& $"//'(. $. Re!&str t&on &n (oo- F &t+ s F&rst .r&or&t> . :e n&n! of 'Re!&str t&on* 5he annotation of adverse claim can qualify as the registration mandated under the rules on double sale. 2Carbonnel v. Court of &,,eals9 65 S"RA 55 (1586). egistration means any entry made in the boo2s of the registry, including both registration in its ordinary and strict sense, and cancellation, nnot t&on9 n- e)en m r!&n l notes . 7t is the entry made in the registry which records solemnly and permanently the right of ownership and other real rights. xC&en% v. 1enato, #&& SC ! 7%% $"//.(.74 Eeclaration of purchase for ta1ation purposes does not comply with the required registration, and the fact alone does not even itself constitute evidence of ownership. xBa,o$a v. No%ales, #4& SC ! "'4 $%&&&(. egistration of the )1traB,udicial @artition which merely mentions the sale is not the registration covered under !rt. "'44 and cannot prevail over the registration of the pa$to de retro sale. 1Vda. de Al$antara v. CA, %'% SC ! 4'7 $"//-(. <5here can be no constructive notice to the second buyer through registration under !ct ##44 if the property is registered under the 5orrens system.= xA/odia Vda. De Melen$ion v. Court o Appeals, '#4 SC ! -%, .% $%&&7(, t&ere#, overturnin% o#iter in Santia%o v. Court o Appeals, %47 SC ! ##- $"//'(. %. Re!&str t&on :0st Al@ >s 1e &n (oo- F &t+ 9 7n cases of double sales of immovables, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith or that he was first to register, but whether or not said second buyer registers such second sale in good faith, that is, without 2nowledge of any defect in the title of the property sold. 1Martinez v. CA, #'. SC ! #. $%&&"(+ 7' this is so because the defense of indefeasibility of a 5orrens title does not e1tend to a transferee who ta2es the certificate of title in bad faith. x4$$ea v. !sponilla, 4#" SC ! ""- $%&&4(. #. Mno@le-!e of F&rst 10>er of t+e Se#on- S le Does Not Amo0nt to Re!&str t&on &n F )or of t+e Se#on- 10>er Nnowledge gained by the first buyer of the second sale cannot defeat the first buyerLs rights e1cept where the second buyer registers in %ood ait& the second sale a&ead of the first. Such 2nowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register irst her purchase as against the second buyer. Iut in $onverso, 2nowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such 2nowledge taints his prior registration with bad faith. 5his is the priced e1acted by !rticle "'44 for the second buyer being able to displace the first buyer+ that before the second buyer can obtain priority over the first, &e /ust s&o5 t&at &e a$ted in %ood ait& t&rou%&out <i.e., in i%noran$e o t&e irst sale and o t&e irst #u,er=s ri%&t7 @ ro/ t&e ti/e o a$:uisition until t&e title is trans erred to &i/ #, re%istration or ailin% re%istration, #, deliver, o possession.= 1-ra$a v. CA, %7. SC ! 7&% $"//7(.77n a situation where a party has actual 2nowledge of the claimant0s actual, open and notorious possession of a disputed property at the time of registration, the actual notice and 2nowledge are equivalent to registration, because to hold otherwise would be to tolerate fraud and the 5orrens system cannot be used to shield fraud 9 while certificates of title are indefeasible, unassailable and binding against the whole world, they merely confirm or record
1allardo v. 1allardo, 4- 3.H. :o. "" p. ''-.+ Si%a,a v. Ma,u%a, 4-7 SC ! #4", #'7 $%&&'(. -lep v. Court o Appeals, 47% SC ! %4" $%&&'(. 7' Blan$o v. "ivera, 4.. SC ! "4. $%&&-(+ 1a#riel v. Ma#anta, #// SC ! '7# $%&&#(+ De la Cena v. Briones, '&. SC ! -% $%&&-(+ 3an%lao v. Parun%ao, '#' SC ! "%# $%&&7(+ Bernardez v. Court o Appeals, '## SC ! 4'" $%&&7(. 7Cruz v. Ca#ana, "%/ SC ! -'- $"/.4(+ 1at/aitan v. CA, %&& SC ! #7 $"//"(+ Vda. de )o/o$ v. CA, %&& SC ! 74 $"//"(+ Bu$ad v. CA, %"- SC ! 4%# $"//%(+ Beri$o v. CA, %%' SC ! 4-/ $"//#(+ Bautista v. CA, #%% SC ! %/4 $%&&&(+ Bautista v. CA, #%% SC ! %/4 $%&&&(+ -lep v. Court o Appeals, 47% SC ! %4" $%&&'(+ !s$ueta v. *i/, '"% SC ! 4"" $%&&7(+ *u/#res v. 3a#lada, )r., '"- SC ! '7' $%&&7(+ Fudot v. Cattle,a *and, 'n$., '## SC ! #'& $%&&7(+ 3an%lao v. Parun%ao, '#' SC ! "%# $%&&7(.
74 7#

26
title already e1isting and vested. 2Consolidated *ural !an3 ?Cagayan Valley@ )nc. v. Court of &,,eals9 448 S"RA $48 (2335). -. Re!&str t&on &n (oo- F &t+ Al@ >s .re;em/ts .ossess&on &n (oo- F &t+ 9 Ietween two purchasers, the one who registered the sale in his favor has a preferred right over the other who has not registered his title, even if the latter is in actual possession of the immovable property. x3aedo v. CA, %'% SC ! .& $"//-(.77 5he registration of a sale after the annotation of the notice of lis pendens does not obliterate the effects of delivery and possession in good faith. 5he rules on constructive notice upon registration provided for under Section '% of the @roperty egistration Eecree $@.E. :o. "'%/( operate only from the time of the registration of the notice of lis pendens which in this case was effected only after the time the sale in favor of the second buyer had long been consummated by delivery of the sub,ect matter. 2San .oren7o Dev. Cor,. v. Court of &,,eals 9 445 S"RA 55 (2335). 4. .ossess&on Refers 1ot+ to : ter& l n- S>m%ol&# .ossess&on. 7n the absence of inscription under double sales, the law gives preferential right to the buyer who in good faith is first in possession, under the following ,urisprudential parameters* $a( @ossession mentioned in !rticle "'44 includes not only material but also symbolic possession+ $b( possessors in good faith are those who are not aware of any flaw in their title or mode of acquisition+ $c( Iuyers of real property that is in the possession of persons other than the seller must be wary 9 they must investigate the rights of the possessors+ and $d( good faith is always presumed, upon those who allege bad faith on the part of the possessors rests the burden of proof. 13en Fort, "ealt, and Dev. Corp. v. Cruz, 4"& SC ! 4.4 $%&&#(.7. 5. <+o &s .0r#+ ser &n (oo- F &t+? 7n the determination of whether or not a buyer is in good faith, the point in time to be considered is the moment when the parties actually entered into the contract of sale. 2$state of .ino 4laguer v. 4ng<oco9 56$ S"RA $8$ (2338). . :0st H )e . &- .r&#e &n F0ll 9 ! purchaser is good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property and ,ays a full and fair ,rice for the same at the time of such ,urchase , or before he has notice of the claim or interest of some other person in the property. 3an%lao v. Parun%ao, '#' SC ! "%# $%&&7(7/ 6nder !rticle "'44, mere registration is not enough to acquire a new title. Hood faith must concur. Clearly, when the buyer has not yet fully paid the purchase price, and as long as seller remains unpaid, the buyer cannot feign good faith. 1 Porti$ v. Cristo#al, '4- SC ! '77 $%&&'(. %. 10r-en of .roof 9 5he burden of proving the status of a purchaser in good faith lies upon him who asserts that status. 7t is not sufficient to invo2e the ordinary presumption of good faith, that is, that everyone is presumed to have acted in good faith, since the good faith that is here essential is integral with the very status that must be established. x3an%lao v. Parun%ao, '#' SC ! "%# $%&&7(..& !s a general rule, the question of whether or not a person is a purchaser in good faith is a factual matter that will not be delved into by this Court, since only questions of law may be raised in petitions for review. 3io v. A#a,ata, ''- SC ! "7' $%&&.(. !"# S$$% 7t is an1iomatic that good faith is always presumed in the absence of any direct evidence of bad faith. xSantia%o v. CA, %47 SC ! ##- $"//'(. #. Inst n#es <+en No (oo- F &t+, (1) !eing )n !usiness on *ealty 9 ! mortgagee who eventually ended buying the property at the public auction, cannot claim to be a buyer in good faith when his business in the constructing and selling townhouses and e1tending credit to the public, including real estate loans+ for he is charged with greater diligence that ordinary buyers or encumbrances for value, because it would be standard in his business, as a matter of due diligence required of ban2s and financing companies, to ascertain whether the property being offered as security for the debt has already been sold to another to prevent in,ury to prior innocent buyers. x!xpress$redit Finan$in% Corp. v. Velas$o , 47# SC ! '7& $%&&'(.."
*iao v. CA, #%# SC ! 4#& $%&&&(+ 3alusan v. 3a,a%, #'- SC ! %-# $%&&"(+ Dauz v. !x$&avez, '## SC ! -#7 $%&&7(. San$&ez v. "a/os, 4& @hil. -"4 $"/"/(+ +ui/son v. "osete, .7 @hil. "'/ $"/'&(+ Navera v. CA, ".4 SC ! '.4 $"//&(. 7/ A%ri$ultural and Ho/e !xtension Dev. v. CA. , %"# SC ! '#- $"//%(+ Veloso v. CA, %-& SC ! '/# $"//-(+ Balat#at v. CA, %-" SC ! "%. $"//-(+ Mat&a, v. CA, %/' SC ! ''- $"//.(+ Diaz6Duarte v. 4n%, %/. SC ! #.. $"//.(+ *iao v. CA, #%# SC ! 4#& $%&&&(+ 3anon%on v. Sa/son, #.% SC ! "#& $%&&%(+ -niversal "o#ina Su%ar Millin% Corp. v. Heirs o An%el 3eves , #./ SC ! #"- $%&&%(+ A%uirre v. Court o Appeals, 4%" SC ! #"& $%&&4(+ 1alvez v. Court o Appeals, 4.' SC ! #4- $%&&-(+ C&ua v. Soriano, '%" SC ! -. $%&&7(+ "a,/undo v. Bandon%, '%- SC ! '"4 $%&&7(. .& 3sai v. CA, #-- SC ! #%4 $%&&"(+ A%uirre v. CA, 4%" SC ! #"& $%&&4(8 "a,/undo v. Bandon%, '%- SC ! '"4 $%&&7(.
7. 77

27
! ban2ing institution is e1pected to e1ercise due diligence before entering into a mortgage contract, and the ascertainment of the statute or condition of a proper offered to it as security for a loan must be a standard and indispensable part of its operations+ and it cannot simply rely upon reviewing the title to the property offered for mortgage. 3io v. A#a,ata, ''- SC ! "7' $%&&.(..% (2) Close *elationshi, 9 5he sale to one0s daughter and sons will give rise to the conclusion that the buyers, not being really third parties, 2new of the previous sales and cannot be considered in good faith. 5he buyers <are deemed to have constructive 2nowledge by virtue of their relationship= to their sellers. 1 Pilapil v. Court o Appeals, %'& SC ! '-$"//'(. ($) Gross )nade+uacy of Price 9 Dere inadequacy of price is not ipso a$to a badge of lac2 of good faith8to be so, the price must be grossly inadequate or shoc2ing to the conscience such that the mind revolts against it and such that a reasonable man would neither directly or indirectly be li2ely to consent to it. 3io v. A#a,ata, ''- SC ! "7' $%&&.(. (4) 4bligation to )nvestigate or #o Follo2 .eads 9 ! purchaser who is aware of facts which should put a reasonable man upon his guard cannot turn a blind eye and later claim that he acted in good faith, such as ! buyer of a registered land would be in bad faith when he purchases without as2ing to see the
owner0s copy of the title andFor without visiting the land where he would then have seen first buyer occupying the same. xSantia%o v. CA, %47 SC ! ##- $"//'(..#

;hen there are occupants to the land being bought, since it is the common practice in the real
estate industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent purchaser usually ta2es. 1Martinez v. CA, #'. SC ! #. $%&&"(..4 !ny person engaged in business would be wary of buying from a company that is closing shop, because it may be dissipating its assets to defraud creditors. Such buyer is bound to inquire whether the owners had unsettled obligations encumbrance that could burden the property. 1Sa/son v. Court o Appeals, %#. SC ! #/7 $"//4(..'

(5) .and in &dverse Possession 9 Iuyer who could not have failed to 2now or discover that the land sold to him was in the adverse possession of another is a buyer in bad faith. 1Heirs o "a/on Durano, Sr. v. -,, #44 SC ! %#. $%&&&(..(6) $'istence of .is Pendens 9 Settled is the rule that one who deals with property with a notice of lis pendens, even when at the time of sale the annotation was cancelled but there was a pending appeal, cannot invo2e the right of a purchaser in good faith. ! purchaser cannot close his eyes to facts which should put a reasonable man on guard and claim that he acted in the belief that there was no defect in the title of the seller. 1 Po *a/ v. CA, #"- SC ! 7%" $"///(. EK"E.T, ;hen 2nowledge of lis pendens was acquired at the time there was order to have it cancelled. 1Po *a/ v. CA, #47 SC ! .- $%&&&(. (8) &nnotation of .ien in Settlement of $state 9 !n annotation placed on new certificates of title issued pursuant to the distribution and partition of a decedent0s real properties is a warning to third persons on the possible interest of e1cluded heirs or unpaid creditors in these properties8where a buyer purchases the real property despite the annotation, he must be ready for the possibility that the title be sub,ect to the rights of e1cluded parties. 3an v. Benolirao, -&4 SC ! #- $%&&/(. 6. <+en S0%De#t of S le Is Unre!&stere- L n- 2Naa2an Community *ural !an3 v. C& 9 $55 S"RA 4$ (233$). 5he rules in double sale under !rticle "'44, whereby the buyer who is able to first register the purchase in good faith <is in full accord with Section '" of @E "'%/ which provides that no deed, mortgage, lease, or other voluntary instrument 9 e1cept a will purporting to convey or affect registered land shall ta2e effect as a conveyance or bind the land until its registration. 5hus, if the sale is not registered, it is binding only between the seller and the buyer but it does not affect innocent third persons. 2&brigo v. De Vera9 4$2 S"RA 544 (2334).
Adriano v. Pan%ilinan, #7# SC ! '44 $%&&%(+ *lo,d?s !nterprises and Credit Corp. v. Dolleton , ''' SC ! "4% $%&&.(+ !a%le "ealt, Corp v. "epu#li$, ''7 SC ! 77 $%&&.(. .% A%a% v. Alp&a Finan$in% Corp., 4&7 SC ! -&% $%&&#(+Bank o Co//er$e v. San Pa#lo, )r. , '%% SC ! 7"# $%&&7(+ *lo,d?s !nterprises and Credit Corp. v. Dolleton, ''' SC ! "4% $%&&.(. .# ".". Paredes v. Calilun%, '"7 SC ! #-/ $%&&7(+ C&ua v. Soriano, '%" SC ! -. $%&&7(. .4 Mat&a, v. CA, %/' SC ! ''- $"//.(+ "epu#li$ v. De 1uz/an, #%- SC ! %-7 $%&&&(+ Heirs o "a/on Durano, Sr. v. -,, #44 SC ! %#. $%&&&(+ Heirs o Celestial v. Heirs o Celestial , 4&. SC ! %/" $%&&#(+ !rasusta, )r. v. Court o Appeals, 4/' SC ! #"/ $%&&-(+ De la Cena v. Briones, '&. SC ! -% $%&&-(+ 3an%lao v. Parun%ao, '#' SC ! "%#, "#% $%&&7(. .' !a%le "ealt, Corp v. "epu#li$, ''7 SC ! 77 $%&&.(. .Modina v. CA, #"7 SC ! -/-, 7&- $"///(+ "epu#li$ v. De 1uz/an, #%- SC ! %-7 $%&&&(+ Martinez v. CA, #'. SC ! #. $%&&"(+ Heirs o 3rinidad de *eon Vda. De "oxas v. Court o Appeals , 4%% SC ! "&" $%&&4(+ 4$$ena v. !sponilla, 4#" SC ! ""$%&&4(+ PNB v. Heirs o !stanislao Militar , 4/4 SC ! #&. $%&&-(+ "a,/undo v. Bandon%, '%- SC ! '"4 $%&&7(+ 3an%lao v. Parun%ao, '#' SC ! "%# $%&&7(+ 3io v. A#a,ata, ''- SC ! "7' $%&&.(.
."

28
;hen first sale is over unregistered land and the second sale is when it is registered, the rules on double sale do not apply. 2Dagu,an #rading Co. v. 6acam9 14 S"RA 185 (1565). !rticle "'44 is inapplicable to unregistered land because <the purchaser of unregistered land at a sheriff0s e1ecution sale only steps into the shoes of the ,udgment debtor, and merely acquires the latter0s interest in the property sold as of the time the property was levied upon,= as e1pressly provided for in then Sec. #', ule #/ of the evised ules of Court on e1ecution sale [now Sec. ##, ule #/, "//7 ules of Civil @rocedure(]. 2Carumba v. C&9 $1 S"RA 558 (1583). 6nder !ct ##44, registration of instruments affecting unregistered lands is <without pre,udice to a third party with a better right,= which means that mere registration does not give the buyer any right over the land if the seller was not anymore the owner of the land having previously sold the same to somebody else even if the earlier sale was unrecorded. 5he rules on double sale under !rt. "'44 has no application to land no registered under the 5orrens system. 2&cabal v. &cabal 454 S"RA 555 (2335)..7

D. O1LI(ATIONS OF 1ULER
1. . > t+e .r&#e $!rt. "'.%( ;hen seller cannot show title to the sub,ect matter, then he cannot compel the buyer to pay the price. 1Heirs o Severina San Mi%uel v. CA, #-4 SC ! '%# $%&&"(. Dere sending of a letter by the buyer e1pressing the intention to pay without the accompanying payment is not considered a valid tender of payment and consignation of the amount due are essential in order to e1tinguish the obligation to pay and oblige the seller to convey title. 13or$uator v. Berna#e, 4'/ SC ! 4#/ $%&&'(. 6nless the parties to a sale have agreed to the payment of the purchase price to any other party, then its payment to be effective must be made to the seller in accordance with !rticle "%4& which provides that <@ayment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authori4ed to receive it.= xMonte$illo v. "e,nes, #.' SC ! %44 $%&&%(. 2. A##e/t Del&)er> $!rts. "'.%B"'.'(

HII. DO"U:ENTS OF TITLE (Arts. 1538;1523)

1. Def&n&t&on (Art. 16$6) 2. .0r/ose of Do#0ments of T&tle 5hrough a document of title, seller is allowed by fiction of law to deal with the goods described therein as though he had physically delivered them to the buyer+ and buyer may ta2e the document as though he had actually ta2en possession and control over the goods described therein. 1P&ilippine 3rust Co. v. National Bank, 4% @hil. 4"# $"/%"(. ;arehouse receipt represents the goods, but the intrusting of the receipt is more than the mere delivery of the goods+ it is a representation that the one to whom the possession of the receipt has been so entrusted has the title to the goods. 1 Si, Con% Bien% v. Hon%kon% 9 S&an%&ai Bank, '- @hil. '/. $"/#%(. $. Ne!ot& %le Do#0ments of T&tle . Ho@ Ne!ot& te- $!rts. "'&.B"'&/( %. <+o " n Ne!ot& te $!rt. "'"%( #. Effe#ts of Ne!ot& t&on $!rt. "'"#( 5he endorsement and delivery of a negotiable :uedan operates as the transfer of possession and ownership of the property referred to therein, and had the effect of divorcing the property covered therein from the estate of the insolvent prior to the filing of the petition for insolvency. 1P&ilippine 3rust Co. v. National Bank, 4% @hil. 4"# $"/%"(. -. Un 0t+or&Ne- Ne!ot& t&on $!rt. "'".( !s between the owner of a negotiable document of title who endorsed it in blan2 and entrusted it to a friend, and the holder of such negotiable document of title to whom it was negotiated and who received it in good faith and for value, the latter is preferred, under the principle that as between two innocent persons, he who made the loss possible should bear the loss. 1Si, *on% Bien% v. Hon%kon% and S&an%&ai Bankin% Corp., '- @hil. '/. $"/#%(.
Hanopol v. Pilapil, 7 SC ! 4'% $"/-#(+ "adio5ealt& Finan$e Co. v. Palileo , "/7 SC ! %4' $"//"(+ Spouses Honorio Santia%o v. CA, %47 SC ! ##- $"//'(+ Ba,o$a v. No%ales, #4& SC ! "'4 $%&&&(+ Fidel v. Court o Appeals, ''/ SC ! ".- $%&&.(+ Da$la% v. Ma$a&ili%, '-& SC ! "#7 $%&&.(+ A/odia Vda. De Melen$ion v. Court o Appeals, '#4 SC ! -%, .% $%&&7(.
87

29
4. Non;ne!ot& %le Do#0ments of T&tle . Ho@ Tr nsferre- or Ass&!ne- $!rt. "'"4( %. Effe#ts of Tr nsfer (Art. "'"4(. 5. < rr nt&es of Seller of Do#0ments of T&tle $!rt. "'"-( 6. R0les of Le)>J( rn&s+ment of (oo-s $!rts. "'"4, "'"/, "'%&(.

HIII. SALE 1L NON;O<NER OR 1L ONE HAHIN( HOIDA1LE TITLE, .)F$ 4F & C4N#*&C# 4F S&.$
1. Effe#t of S le <+ere Seller Not O@ner t T&me of Del&)er> $!rt. "'&'+ 2Paulmitan v. Court of &,,eals9 215 S"RA 866 415527(. 7n sale, it is essential that the seller is the owner of the property he is selling. 5he principal obligation of a seller is <to transfer the ownership of= the property sold $!rt. "4'.(. 5his law stems from the principle that nobody can dispose of that which does not belong to him* N!M4 DA3 +-4D N4N HAB!3. Noel v. CA, %4& SC ! 7. $"//'(... !lthough a situation $where the sellers were no longer owners( does not appear to be one of the void contracts enumerated in !rt. "4&/ of Civil Code, and under !rt. "4&% Civil Code itself recogni4es a sale where the goods are to be <acquired 1 1 1 by the seller after the perfection of the contract of sale= clearly implying that a sale is possible even if the seller was not the owner at the time of sale, provided he acquires title to the property later on, but when delivery of ownership is no longer possible, the sale should be considered void, and consequently, the right to repurchase provided therein would also be void Nool v. CA, %7- SC ! "4/ $"//7(. 7f one buys the land of another, to which the seller is supposed to have a good title, and in consequence of facts un2nown ali2e to both parties, the seller has in fact no title at all, equity will cancel the sale and cause the purchase money to be restored to the buyer, putting both parties in status :uo. DBP v. CA, %4/ SC ! ##" $"//'(. . S les %> "o;O@ners $!rt. 4/#( 7n a contract of sale of coBowned property, what the vendee obtains by virtue of such a sale are the same rights as the vendor had as coBowner $i.e., his spiritual share(, and the vendee merely steps into the shoes of the vendor as coBowner. 1 Pan%ani#an v. 4a/il, '4% SC ! "-$%&&.(+./ e1cept when the intention of the purchase was clearly the property itself and not ,ust the spiritual share. 26indanao v. 8a,9 1$ S"RA 153 (1565). !n agreement that purports a specific portion of an unBpartitioned coBowned property is not void+ it shall effectively transfer the seller0s ideal share in the coBownership. Heirs o t&e *ate Spouses Aurelio and !speranza Balite v. *i/, 44- SC ! '4 $%&&4(./& 7n which case, the proper action is not for nullification of sale, or for the recovery of possession of the property owned in common from the other coBowners, but for division or partition of the entire property. 13o/as Claudio Me/orial Colle%e, 'n$. v. Court o Appeals , #"SC ! '&% $"///(./" ! coBowner who sells one of the two lands owned in common with another coBowner, and does not turnBover oneBhalf of the proceeds of the sale to the other coBowner, the latter may by law and equity lay e1clusive claim to the remaining parcel of land. 1 '/perial v. Court o Appeals, %'/ SC ! -' $"//-(. 2. EC#e/t&ons, <+en O@ners+&/ Tr nsfers %> A#t of t+e Non;O@ner . Esto//el on Tr0e O@ner $!rt. "4#4( 2!ucton v. Gabar9 55 S"RA 455 (1584). %. Re#or-&n! L @sI Torrens S>stem $@res. Eecree "'%/(. 5he defense of indefeasibility of 5orrens title where the disputed buildings and equipment are located is unavailing, since such defense is available to sale of lands and not to sale of properties situated therein. 13sai v. CA, #-- SC ! #%4 $%&&"(. !n innocent purchaser for value is one who purchases a titled land by virtue of a deed e1ecuted by the registered owner himself not by a forged deed. 1 'nsuran$e Servi$es and Co//er$ial 3raders, 'n$. v. CA, #4" SC ! '7% $%&&&(.
Az$ona v. "e,es, '/ @hil. 44- $"/#4(+ Coronel v. 4na, ## @hil. 4'- $"/"-(. !sto:ue v. Pa(i/ula, %4 SC ! '/ $"/-.(+ A%uirre v. CA, 4%" SC ! #"& $%&&4(+ A$a#al v. A$a#al, 4'4 SC ! ''' $%&&'(+ Bar$enas v. 3o/as, 4'4 SC ! '/# $%&&'(. /& Al/endra v. 'AC, %&4 SC ! "4% $"//"(+ Fernandez v. Fernandez, #-# SC ! ."" $%&&"(+ A%uirre v. CA, 4%" SC ! #"& $%&&4(+ Santos v. *u/#ao, '"/ SC ! 4&. $%&&7(+ "epu#li$ v. Heirs o Fran$is$a Di%nos6Sorono, '4/ SC ! '. $%&&.(. /" Heirs o "o/ana 'n%(u%63iro v. Casals, #-# SC ! 4#' $%&&"(+ A%uirre v. Court o Appeals, 4%" SC ! #"& $%&&4(.
89 ..

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! person who deals with registered land through someone who is not the registered owner is e1pected to loo2 beyond the certificate of title and e1amine all the factual circumstances thereof in order to determine if the vendor has the capacity to transfer any interest in the land. S, v. Capistrano, )r., '-& SC ! "&# $%&&.(. ;here innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the cancellation of the certificate, since the effect of such outright cancellation will be to impair public confidence in the certificate of title. )very person dealing with the registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property. 1 Heirs o Spouses Benito 1avino. v. Court o Appeals, %/" SC ! 4/' $"//.(. #. St t0tor> .o@er Or-er of "o0rts ;hen a defeated party refuses to e1ecute the absolute deed of sale in accordance with the ,udgment, the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done shall have the li2e effect as is done by the party. 1Manila "e/nant Co., 'n$. v. CA, %#" SC ! %." $"//4( -. S le &n :er#+ nts Stores9 F &rs or : r=ets $!rts. .' and .-, Code of Commerce( 2City of 6anila v. !ugsu39 131 .+&l. 855 (1558)I 2Sun !ros. ( Co. v. Velasco9 54 O.(. 514$ (1558). $. S le %> One H )&n! Ho&- %le T&tle $!rt. "'&-, as an e1ception to !rt. ''/( ;henever there is an underlying contract of sale which grants to the culpritBbuyer a voidable title, even when this is accompanied by the criminal act of estafa or swindling, !rticle "'&- would grant to the buyer in good faith a better title as against the original owner even though the latter may be classified to have been <unlawfully deprived= of the sub,ect matter under !rt. ''/. 2#agatac v. 0imene79 5$ O.(. $852 (1558)I 2$DC& Publishing v. Santos9 184 S"RA 614 (1553). 5hus, when owner did not voluntarily deliver possession of the car, and in effect it was stolen from him, then one who buys the car even in good faith from the thief will lose the car to the owner who is deemed to have been unlawfully deprived. 2&7nar v. 8a,diangco9 1$ S"RA 486 (1565). 7n all other cases of unlawful deprivation done through estafa, the original owner recovers even from the buyer in good faith. 2Cru7 v. Pahati9 58 .+&l. 888 (1556) . 4"LH, De#&s&on s+o@e- t+ t se#on- %0>er9 or #0rrent /ossessor #o0l- not #l &m !oo- f &t+ %e# 0se of er s0res &n t+e #o)er&n! -o#0ments /resente- %> +&s seller7 3wner of diamond ring may recover possession of the same from pawnshop where the owner0s agent had pledged it without authority to do so+ !rticle ''/ applies and the defense that the pawnshop acquired possession without notice of any defect of the pledgorBagent is unavailing. 2Di7on v. Suntay9 48 S"RA 163 (1582)./% 4In t+ose # ses /ossessor &s mer#+ nt n- onl> + s /le-!e &n +&s f )or7.

IK. LOSS9 DETERIORATION9 FRUITS AND OTHER 1ENEFITS

1. No A//l&# t&on <+en S0%De#t : tter &s Determ&n %le $!rt. "%-#( 2. Effe#t of LossJDeter&or t&on of T+&n! Sol-, . 1efore .erfe#t&on $2*oman v. Grimalt9 6 .+&l. 56 415367(. %. At T&me of .erfe#t&on $!rts. "4/# and "4/4(. #. After .erfe#t&on 10t 1efore Del&)er> $!rts. ""-4, ""./, and "%-%(. (1) General *uleA Iefore delivery, ris2 of loss is borne by seller under the rule of res perit do/ino. xC&r,sler P&il. v. Court o Appeals, "## SC ! '-7 $"/.4(. 7n the case of a motor vehicle, where there was neither physical nor constructive delivery of a determinate thing, the thing sold remained at the seller0s ris2. 1 -nion Motor Corp v. Court o Appeals, #-" SC ! '&- $%&&"(. (2) .oss by Fault of a Party $!rts. "4.&, "'&4, "'#.( ($) .oss by Fortuitous $vent $!rts. "4.&, ""-#, ""-4, ""-', "'&4, "'#., and ""./+ Comments of @! !S, 53?):57:3, @!E7??!, and I!>7) !(. (4) Deterioration $!rts. "4.&, ""-#B-', and "%-%+ !rts. ""./ and "'#.( (5) Fr0&ts or Im/ro)ements from time of perfection pertain to buyer $!rts. "4.&, "'#7B"'#.(.
/%

)!E

Valera v. Matute, / @hil. 47/ $"/&.(+ Arenas v. "a,/undo, "/ @hi. 47 $"/""(.

31
-. After Del&)er> $!rt. "'&4( 2.a2yerAs Coo, v. #abora9 1$ S"RA 862 (1565)./#

K. RE:EDIES FOR 1REA"H OF "ONTRA"T OR SALE (Arts. 1554;1555)

A. ON .ART OF SELLER
1. In " se of :o) %les $$!rts. "'/#, "'/' to "'/7( 6nder !rticle "'/7, when the buyer of scrap iron fails to put up the letter of credit in favor of the seller as the condition of the sale, the seller had a right to terminate the contract, and nonB compliance with the condition meant that the seller0s obligation to sell never did arise. 1 Visa,an Sa5/ill Co. v. Court o Appeals, %"/ SC ! #7. $"//#(. 2. Un/ &- Seller of (oo-s $!rts. "'%4B"'#'( . Def&n&t&on of 'Un/ &- Seller* $!rt. "'%'( %. R&!+ts of Un/ &- Seller, .ossessor> l&en $!rts. "'%-B"'%/, "'&#, "'#'( Sto// !e in transitu $!rts. "'#&B"'#%, "'#', "-#-[%]( R&!+t of Res le $!rt. "'##( R&!+t to Res#&n- $!rt. "'#4( )ven before the formal statutory adoption of the remedies of an unpaid seller, the Supreme Court had already recogni4ed the right of a seller, 5&en t&e $ontra$t o sale is still exe$utor, in sta%e, to resell the movables sub,ect matter of the sale, when the buyer fails to pay the purchase price. 1Hanlon v. Hausser/an, 4& @hil. 7/- $"/%&(. Seller in possession of the goods may sell them at buyerLs ris2. Appeals, 4 SC ! %4# $"/-%(. 1 .ati%#ak v. Court o

$. RE"TO LA<, SALES OF :OHA1LES ON INSTALL:ENTS $!rts. "4.4, "4.', "4.-(

5he ecto ?aw prevents mortgagee from sei4ing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency ,udgment. 5he almost invariable result was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. 1 Ma%na Finan$ial Servi$es 1roup, 'n$. v. Colarina, 477 SC ! %4' $%&&'(. . 'Inst llment S le* requires at least stipulated two $%( payments in the future, whether or not there is a downpayment. 2.evy v. Gervacio9 65 .+&l. 52 (15$5). %. "ontr #ts to Sell :o) %les Not "o)ere- . 1Visa,an Sa5/ill Co/pan,, 'n$. v. Court o Appeals, %"/ SC ! #7. $"//#(. #. Reme-&es A) &l %le to Un/ &- Seller Not "0m0l t&)e 10t Altern t&)e 2Delta 6otor Sales Cor,. v. Niu /im Duan9 21$ S"RA 255 (1552)./4 n- EC#l0s&)e .

See2ing a writ of replevin consistent with any of the three remedies. 1 -niversal Motors Corp. v. D, Hian 3at, %. SC ! "-" $"/-/(. -. Reme-> of S/e#&f&# .erform n#e 5he fact that the seller obtained a writ of e1ecution against the property mortgaged, but pursuant to an action for specific performance with a plea for a writ of replevin, does not amount to a foreclosure of the chattel mortgage covered by the ecto ?aw. 2#a<anglangit v. Southern 6otors9 131 .+&l. 636 (1558)./' e. N t0re of Reme-> of Res#&ss&on Surrender of mortgaged property is not necessarily equivalent to rescission. 1 Vda. de +uia/#ao v. Manila Motors Co., 'n$., # SC ! 444 $"/-"(. Dutual restitution prevents recovering on the balance of the purchase price. 2Nonato v. )&C9 143 S"RA 255 (1585)I but stipulation on nonBreturn of payments is valid provided not unconscionable. 1Delta Motor Sales Corp. v. Niu .i/ Duan, %"# SC ! %'/ $"//%(. f. Reme-> of Fore#los0re
Son% Fo 9 Co. v. 4ria, ## @hil. # $"/"'(+ *a5,er=s Coop v. Nar$iso, '' 3.H. ##"#(. De la Cruz v. Asian Consu/er, %"4 SC ! "&# $"//%(+ Bor#on '' v. Servi$e5ide Spe$ialists, 'n$., %'. SC ! -#4 $"//-(. /' Sout&ern Motors v. Mos$oso , % SC ! "-. $"/-"(+ 'ndustrial Finan$e Corp. v. "a/irez, 77 SC ! "'% $"/77(+ "osario v. PC' *easin% and Finan$e, 'n$., 474 SC ! '&& $%&&'(.
/4 /#

32
Iarring effect would cover a thirdBparty mortgage, when it was the chattel mortgage that was first foreclosed. 2*idad v. Fili,inas )nvestment9 123 S"RA 246 (158$). ;hen the seller assigns his credit to another person, the latter is li2ewise bound by the same law. 2Bayas v. .uneta 6otors9 118 S"RA 826 (1582).56 (&) '1 rr&n!* Effe#ts of Fore#los0re 9 Ciling of the action of replevin in order to foreclose on the chattel mortgage does not produce the barring effect under the ecto ?aw+ or it is t&e a$t o ore$losure and a$tual sale o t&e /ort%a%ed $&attel t&at #ar urt&er re$over, #, t&e seller o an, #alan$e on t&e #u,er?s outstandin% o#li%ation not satis ied #, t&e sale . 5he voluntary payment of the installment by the buyerBmortgagor is valid and not recoverable in spite the restrictive provisions of !rt. "4.4$#(. 2Northern 6otors v. Sa,inoso9 $$ S"RA $56 (1583). /7 Coreclosure on the chattel mortgage prevents further action on the supporting real estate mortgage, whether the chattel mortgage is first foreclosed 2Cru7 v. Fili,inas )nvestment ( Finance Cor,.9 2$ S"RA 851 (1568)+/. and vi$e versa when the real estate mortgage is first foreclosed. 2!orbon )) v. Service2ide S,ecialists )nc. 9 258 S"RA 6$4 (1556). !ll amounts barred from recovery. 26acondray ( Co. v. $usta+uio9 64 .+&l. 446 (15$8). (&&) *ule on Perverse !uyer. 2Fili,inas )nvestment ( Finance Cor,. v. *idad9 $3 S"RA 564 (1565). !. .0r/orte- Le se @&t+ O/t&on to 10> 5he Court too2 ,udicial notice of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the ob,ect of the sale from passing to the vendee until and unless the price is fully paid. x!lis$o 3ool Manu a$turin% Corp. v. CA, #&7 SC ! 7#" $"///(.// ;here a lease agreement over equipment is without an e1press option to purchase, but nevertheless when a final demand is given prior to suit, the demand letter indicates clearly it was within the option of the lessee to fully pay the balance of the unpaid rentals and would be able to 2eep the equipment, then the real contract between the parties was a sale of movable on installment disguised as a lease agreement. 2PC) .easing and Finance )nc. v. Giraffe1 9 Creative )maging )nc.9 528 S"RA 435 (2338).

4. IN "ASE OF I::OHA1LES,
. Ant&#&/ tor> 1re #+ $!rt. "'/"( 2.egarda v. SaldaCa9 55 S"RA $24 (1584). %. S les of S0%-&)&s&on Lots n- "on-om&n&0m Un&ts $Secs. %# and %4, @.E. /'7( @.E./'7 <was issued in the wa2e of numerous reports that many real estate subdivision owners, developers, operators andFor sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems and other basic requirements or the health and safety of home and lot buyers. 7t was designed to stem the tide of fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers free from liens and encumbrances.= 1Casa Filipinas "ealt, Corp. v. 4 i$e o t&e President , %4" SC ! "-' $"//'(. Section %& of @.E. /'7 directs every owner and developer of real property to provide the necessary facilities, improvements, infrastructure and other forms of development, failure to carry out which is sufficient cause for the buyer to suspend payment, and any sums of money already paid shall not be forfeited. 13a/a,o v. Huan%, 4.& SC ! "'- $%&&-(. 7n case the developer of a subdivision or condominium fails in its obligation under Section %&, Section %# gives the buyer*
the option to demand reimbursement of the total amount paid, or to wait for further development of the subdivision, and when the buyer opts for the latter alternative, he may suspend payment of the installments until such time that the owner or developer has fulfilled its obligations. 13a/a,o v. Huan%, 4.& SC ! "'- $%&&-(+ buyer required only to give due notice to the owner or developer of the buyer0s intention to suspend payment. x>a/ora "ealt, and Dev. Corp. v. 4 i$e o t&e President, '&- SC ! '/" $%&&-(+

Bor#on '' v. Servi$e5ide Spe$ialists, 'n$., %'. SC ! -#4 $"//-(. Manila Motor Co. v. Fernandez, // @hil. 7.% $"/'-(+ Ma%na Finan$ial Servi$es 1roup, 'n$. v. Colarina, 477 SC ! %4' $%&&'(. /. Pas$ual v. -niversal Motors Corp., -" SC ! "%" $"/74(. // Vda. de )ose v. Barrue$o, -7 @hil. "/" $"/#/(+ -.S. Co//er$ial v. Halili, /# @hil. %7" $"/'#(+ H.!. Hea$o$k v. Bantal Manu a$turin%, -- @hil. %4' $"/#.(+ Manila 1as Corp. v. Calupita, -- @hil. 747 $"/#.(+ Filinvest Credit Corp. v. CA, "7. SC ! ".. $"/./(.
/7

/-

33
Sec. %# does not require that a notice be given first by the buyer to the seller before a demand
for refund can be made as the notice and demand can be made in the same letter or communication. 1Casa Filipinas "ealt, Corp v. 4 i$e o t&e President , %4" SC ! "-' $"//'(+ and 3ption granted by law is with buyer and not the developerFseller. 1"elu$io v. Brillante61ar in, ".7 SC ! 4&' $"//&(.

<Iuyer= under @.E. /'7 would include one who acquires for a valuable consideration a condominium unit by way of assignment by the condominium pro,ect owner in payment of its indebtedness for contractor0s fee. xAMA Co/puter Colle%e, 'n$. v. Fa$tora , #7. SC ! "%" $%&&%(. Iuyers of condominium units would be ,ustified in suspending payments, when the developerBseller fails to give them a copy of the Contract to Sell despite repeated demands. 11old *oop Properties, 'n$. v. CA, #'& SC ! #7" $%&&"(. :othing in @.E. /'7 provides for the nullification of a contract to sell in the event the seller, at the time the contract was entered into, did not possess a certificate of registration and license to sell. Co C&ien v. Sta. *u$ia "ealt,, '"# SC ! '7& $%&&7(.

5. :A"EDA LA<, SALES OF RESIDENTIAL REALTL ON INSTALL:ENTS $ .!. -''%(.

<5he contract for the purchase of a piece of land on installment basis is not only lawful+ it is also of widespread usage or custom in our economic system. . . . 7f [buyer] eventually found the interest stipulation in the contract financially disadvantageous to him, he cannot now turn to this Court for succor without impairing the constitutional right to the obligation of contracts. 5his Court will not relieve petitioner of the necessary consequences of his free and voluntary, and otherwise lawful, act.= Bortike, v. AFP "etire/ent and Separation Bene its S,ste/, 477 SC ! '"" $%&&'(. . 'Role* of : #e- L @ 9 Daceda ?aw0s declared policy is to protect buyers of real estate on installment basis against onerous and oppressive conditions, and see2s to address the acute housing shortage problem in our country that has prompted thousands of middle and lower class buyers of houses, lots and condominium units to enter into all sorts of contracts with private housing developers involving installment schemes. A$tive "ealt, 9 Dev. Corp. Daro,a, #.% SC ! "'% $%&&%(."&& Daceda ?aw recogni4es in conditional sales of all 2inds of real estate seller0s right to cancel the contract upon nonBpayment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. Pa%tulunan v. Dela Cruz Vda. De Manzano, '## SC ! %4% $%&&.(."&" %. Tr ns #t&ons "o)ere5he formal requirements of rescission under the Daceda ?aw apply even to contracts entered into prior to its effectivity. xSiska Dev. Corp. v. 4 i$e o t&e President , %#" SC ! -74 $"//4(."&% !"# S$$ 1People?s 'ndustrial and Co//er$ial Corp. v. CA, %." SC ! %&- $"//7(. Daceda ?aw finds no application to a contract to sell where the suspensive condition has not been fulfilled, because said ?aw presuppose the e1istence of a valid and effective contract to sell a condominium. 4?7 xMortel v. .ASSC4, 'n$., #4. SC ! #/", #/. $%&&&(."&# Daceda ?aw ma2es no distinctions between <option= and <sale= which under @.E. /'7 also includes <an e1change or attempt to sell, an option of sale or purchase, a solicitation of a sale or an offer to sell directly,= and the allBembracing definition virtually includes all transactions concerning land and housing acquisition, including reservation agreements. x"ealt, !x$&an%e Venture Corp. v. Sendino, %## SC ! --' $"//4(. Daceda ?aw has no application to protect the developer or one who succeeds the developer. 1*a%andaon v. Court o Appeals, %/& SC ! 4-# $"//.(. #. Ho@ to Determ&ne Le rs of Inst llments, 2 0estra Dev. and 6anagement Cor,. v. Pacifico 9 51$ S"RA 41$ (2338). -. Ho@ " n#ell t&on of "ontr #t " n 1e Effe#te- 9 5he cancellation of the contract under the Daceda ?aw must follow the following steps* First, the seller should e1tend the buyer a grace period of at least si1ty $-&( days from the due date of the installments.
4',/pia Housin% 'n$. v. Panasiati$ 3ravel Corp. , #/' SC ! %/. $%&&#(+ )estra Dev. and Mana%e/ent Corp. v. Pa$i i$o , '"# SC ! 4"# $%&&7(. "&" *eao v. Court o Appeals, #-/ SC ! #- $%&&"(+ Cordero v. F.S. Mana%e/ent 9 Dev. Corp., '&- SC ! 4'" $%&&-(. "&% !u%enio v. !xe$utive Se$retar, Franklin M. Drilon , %'% SC ! "&- $"//-(+ PNB v. 4 i$e o t&e President , %'% SC ! -%& $"//-(. "&# Boston Bank o t&e P&il. v. Manalo, 4.% SC ! "&. $%&&-(.
"&&

34
Se$ond, at the end of the grace period, the seller shall furnish the buyer with a notarial notice of cancellation or demand for rescission, effective thirty $#&( days from the buyer0s receipt thereof+ a mere notice or letter, short of a notarial act, would not suffice. 26c.aughlin v. C&9 144 S"RA 65$ (1586)."&4 3&ird, for contracts covering more than two years of payments, there must be return to the buyer of the cash surrender value. xVilldara, )r. v. >a#ala, '4' SC ! #%' $%&&.(."&' 5he additional formality of a demand on [the seller0s] part for rescission by notarial act would appear, in the premises, to be merely circuitous and consequently superfluous= since the seller therein filed an action for nn0lment of #ontr #t, which is a 2indred concept of rescission by notarial act. x*a,u% v. 'AC, "-7 SC ! -%7 $"/..(. ! decision rendered in an e,ectment case operated as the required notice of cancellation under the Daceda ?aw+ but as the buyer was not given the cash surrender value of the payments she made, there was still no actual cancellation of the contract. x*eao v. Court o Appeals, #-/ SC ! #- $%&&"(. ! formal letter demand upon buyer to vacate the premises is not the same as the notice of cancellation or demand for rescission %> not r& l #t required by .!. :o. -''%. )vidently, the case of unlawful detainer filed by petitioner does not e1empt him from complying with the said requirement. xPa%tulunan v. Dela Cruz Vda. De Manzano , '## SC ! %4% $%&&.(.

6. RES"ISSION ON SALES OF NON;RESIDENTIAL I::OHA1LES ON INSTALL:ENTS $!rts. ""/" and

"'/%( !rticles ""/" and "'/% on rescission cannot apply to a contract to sell since <there can be no rescission of an obligation that is still nonBe1istent, the suspensive condition not having happened.= xValarao v. CA, #&4 SC ! "'' $"///(."&!rticle "'/% allows the buyer of an immovable to pay as long as no demand for rescission has been made+ and the consignation of the balance of the purchase price before the trial court operates as full payment. xProvin$e o Ce#u v. Heirs o "u ina Morales, '4- SC ! #"' $%&&.(. !utomatic rescission clauses are not valid nor can be given legal effect under !rticles ""/" and "'/% . 1'rin%an v. Court o Appeals, #-- SC ! 4" $%&&"(."&7 7ndeed, rescission requires under the law a positive act of choice on the party of the nonBdefaulting party. 1 4l,/pia Housin% v. Panasiati$ 3ravel Corp., #/' SC ! %/. $%&&#(. >endor cannot recover ownership of the thing sold until and unless the contract itself is resolved and set aside+ a party who fails to invo2e ,udicially or by notarial act the resolution of a contract of sale would be prevented from bloc2ing the consummation of the same in light of the precept that mere failure to fulfill the contract does not operate ipso a$to as rescission. Platinu/ Plans P&il., 'n$. v. Cu$ue$o, 4.. SC ! "'- $%&&-(.

1. ON .ART OF 1ULER
1. In # se of :o) %les $!rts. "'/.B"'//( 2. In # se of Immo) %les $!rts. ""/"+ Secs. %# and %4, @.E. /'7( $. S0s/ens&on of . >ment $!rt. "'/&( 5he pendency of suit over the sub,ect matter of the sale ,ustifies the buyer in suspending payment of the balance of the purchase price by reason of aforesaid vindicatory action filed against it. 5he assurance made by the seller that the buyer did not have to worry about the case because it was pure and simple harassment is not the 2ind of guaranty contemplated under !rticle "'/& wherein the buyer is bound to ma2e payment if the seller should give a security for the return of the price. 1Adel a Properties, 'n$. v. Court o Appeals, %4& SC ! '-' $"//'(.

KI. RE:EDL OF RES"ISSION IN SALES "ONTRA"TS "OHERIN( I::OHA1LES, C4N#*&C# 4F S&.$ versus C4N#*&C# #4 S$..
A. NATURE OF RE:EDL OF RES"ISSION (*$S4."#)4N) $!rts. ""/", "47/, "'/%(
*uzon Brokera%e v. Mariti/e Bld%. , .- SC ! #&' $"/7.(+ *uzon Brokera%e v. Mariti/e Bld%. , 4# SC ! /# $"/7%(+ Fa#ri%as v. San Fran$is$o del Monte, 47' SC ! %47 $%&&'(. "&' A$tive "ealt, 9 Dev. Corp. v. Daro,a , #.% SC ! "'% $%&&%(+ 4l,/pia Housin% v. Panasiati$ 3ravel Corp., #/' SC ! %/. $%&&#(+ )estra Dev. and Mana%e/ent Corp. v. Pa$i i$o, '"# SC ! 4"# $%&&7(. "&Caridad !states, 'n$. v. Santero, 7" @hil. ""4 $"/4&(+ Al#ea v. 'n:ui/#o,, .- @hil. 477 $"/'&(+ Manuel v. "odri%uez, "&/ @hil. " $"/-&(+ )osep& 9 Sons !nterprises, 'n$. v. CA, "4# SC ! --# $"/.-( 1i/enez v. CA, "/' SC ! %&' $"//"(+ )a$into v. .aparaz, %&/ SC ! %4- $"//%(+ 4d,sse, Park, 'n$. v. Court o Appeals, %.& SC ! %'# $"//7(+ "illo v. Court o Appeals, %74 SC ! 4-" $"//7(+ Platinu/ Plans P&il., 'n$. v. Cu$ue$o, 4.. SC ! "'- $%&&-(. 107 !s$ueta v. Pando, 7- @hil. %'- $"/4-(.
"&4

35
1. D&st&n!0&s+&n! from Ot+er Reme-> of Res#&ss&on $-niversal Food Corp. v. CA, ## SC ! %% ["/7&]"&.(. !ut see contra Suria v. 'AC, "'" SC ! --" ["/.7](. ;hile !rt. ""/" uses the term <rescission,= the original term which was used in the old Civil Code was <resolution.= esolution is a principal action which is based on breach of a party, while rescission under !rt. "#.# is a subsidiary action limited to cases of rescission for lesion under !rt. "#.". 14n% v. Court o Appeals, #"& SC ! " $"///(."&/ 2. 1 s&s of Reme-> of Res#&ss&on (Resol0t&on) escission under !rt. ""/" is predicated on a breach of faith by the other party who violates the reciprocity between them, and the breach contemplated is the obligor0s failure to comply with an e1isting obligation. ;hen the obligee may see2 rescission and, in the absence of any ,ust cause for the court to determine the period of compliance, the court shall decree the rescission. 1Velarde v. Court o Appeals, #-" SC ! '- $%&&"(.""& 5o rescind is to declare a contract void at its inception and to put an end to it as though it never was. 7t is not merely to terminate it and release the parties from further obligations to each other, but to abrogate it from the beginning and restore the parties to their relative positions as if no contract has been made. 1Velarde v. Court o Appeals, #-" SC ! '- $%&&"(.""" ;hen a party as2s for the resolution or cancellation of a contract it is implied that he recogni4es it e1istence 9 a nonBe1istent contract cannot be cancelled. 1 Pan Pa$i i$ 'ndustrial Sales Co., 'n$. v. Court o Appeals, 4.% SC ! "-4 $%&&-(. :onBpayment of the purchase price is a resolutory condition for which the remedy is either rescission or specific performance under !rticle ""/". 5his is true for reciprocal obligations where the obligation is a resolutory condition of the other. 3n the other hand, the buyer is entitled to retain the purchase price or a part thereof if the seller fails to perform any essential obligation of the contract. Such right is premised on the general principles of reciprocal obligation. x1il v. Court o Appeals, 4"" SC ! ". $%&&#(.""% Consignation by the buyer of the purchase price of the property, there having been no previous receipt of a notarial demand for rescission, is sufficient to defeat the right of the seller to demand for a rescission of the deed of absolute sale. x1il v. Court o Appeals, 4"" SC ! ". $%&&#(. Creditors do not have such material interest as to allow them to sue for rescission of a sale 9 theirs is only a personal right to receive payment for the loan, not a real right over the property sub,ect of the deed of sale. 1Adora#le v. CA, #"/ SC ! %&& $"///(. &ction for *escission Not Similar to &n &ction for *econveyance 9 7n the sale of real property, the seller is not precluded from going to the court to demand ,udicial rescission in lieu of a notarial act of rescission. Iut such action is different from an action for reconveyance of possession on the thesis of a prior rescission of the contract covering the property. 5he effects that flow from an affirmative ,udgment in either case would be materially dissimilar in various respects* ,udicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that arise in an action for reconveyance. 7n an action for rescission, unli2e in an action for reconveyance predicated on an e1tra,udicial rescission $rescission by notarial act(, the court, instead of decreeing rescission, may authori4e for a ,ust cause the fi1ing of a period. 14l,/pia Housin% v. Panasiati$ 3ravel Corp., #/' SC ! %/. $%&&#(. $. .o@er to Res#&n- (ener ll> B0-&#& l &n N t0re ! seller cannot unilaterally and e1tra,udicially rescind a contract of sale where there is no e1press stipulation authori4ing it. 6nilateral rescission will not be ,udicially favored or allowed if the breach is not substantial and fundamental to the fulfillment of the obligation. 1 Benito v. Sa:uitan6"uiz, #/4 SC ! %'& $%&&%(.""# :onetheless, the law does not prohibit the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention. 1Froilan v. Pan 4riental S&ippin% Co., "% SC ! %7- $"/-4(.""4 4. :0t0 l Rest&t0t&on n- Forfe&t0re $!rt. "#.'(
"&. "eiterated in Con%re%ation o t&e "eli%ious o t&e Vir%in Mar, v. 4rola , ''# SC ! '7. $%&&.(+ Heirs o Antonio F. Berna#e v. Court o Appeals, ''/ SC ! '# $%&&.(. "&/ 'rin%an v. Court o Appeals, #-- SC ! 4" $%&&"(. ""& Al/ira v. Court o Appeals, #// SC ! #'" $%&&#(. """ 4$a/po v. CA, %## SC ! ''" $"//4(+ Co v. CA, #"% SC ! '%. $"///(. ""% Central P&ilippine -niversit, v. CA, %4- SC ! '"" $"//'(+ "o/eo v. CA, %'& SC ! %%# $"//'(+ C&en% v. 1enato, #&& SC ! 7%% $"//.(+ -, v. CA, #"4 SC ! -# $"///(. ""# 4$e(o, Perez 9 Co. v. 'nternational Bankin% Corp. #7 @hil. -#" $"/".(+ "epu#li$ v. Hospital de San )uan de Dios, .4 @hil. .%& $"/4/(+ De la "a/a Stea/s&ip Co. v. 3an, H. . :o. .7.4, Day %", "/'-+ // @hil. "&#4 $unrep.( $"/'-(+ Heirs o )esus M. Mas$uana v. Court o Appeals, 4-" SC ! ".- $%&&'(. ""4 *uzon Brokera%e Co., 'n$. v. Mariti/e Buildin% Co., 'n$., 4# SC ! /' $"/7%(+ *uzon Brokera%e v. Mariti/e Bld%. , .- SC ! #&' $"/7.(.

36
;hen sale is annulled, parties are governed by !rt. "#/. whereunder they shall restore to each other the things which have been the sub,ect matter of the contract, with their fruits, and price with interest. x'nes v. Court o Appeals, %47 SC ! #"% $"//'(.""' 5he seller0s right in a contract to sell with reserved title to e1tra,udicially cancel the sale upon failure of the buyer to pay the stipulated installments and retain the sums and installments already received has long been recogni4ed by the wellBestablished doctrine of #/ years standing. 1Pan%ilinan v. CA, %7/ SC ! '/& $"//7(.""@ursuant to !rt. "".., in a contract to sell, even if the buyers did not mista2enly ma2e partial payments, inasmuch as the suspensive condition was not fulfilled, it is only fair and ,ust that the buyers be allowed to recover what they had paid in e1pectancy that the condition would happen+ otherwise, there would be un,ust enrichment on the part of the seller. 1 Buot v. Court o Appeals , #'7 SC ! .4- $%&&"(.

1. DISTIN"TIONS 1ET<EEN "ONTRA"T OF SALE AND "ONTRA"T TO SELL

1. "ONTRA"T
OF

SALE versus "ONTRA"T

TO

SELL $!rt. "4'.( 2&delfa Pro,erties )nc. v. C&9 243 S"RA 585 (1555).""7

7n a contract of sale, title to the property passes to buyer upon the delivery of the thing sold+ in a contract to sell, ownership is, by agreement, reserved in the seller and is not to pass to buyer until full payment of purchase price. 3therwise stated, in a contract of sale, seller loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded, whereas in a contract to sell, title is retained by the seller until full payment of the price. 7n the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. xCastillo v. "e,es, '#/ SC ! "/# $%&&7(."". . R t&on le of "ontr #ts to Sell ! contract to sell is commonly entered into so as to protect the seller against a buyer who intends to buy the property in installments by withholding ownership over the property until the buyer effects full payment therefor. 7t cannot be inferred in a situation where both parties understood the price to be paid in cash. 1 Cit, o Ce#u v. Heirs o Candido "u#i, #&- SC ! 4&. $"///(. %. Is "ontr #t to Sell 'S le* 0n-er Art&#le 1458?

! <contract to sell= as <a bilateral contract whereby the prospective seller, while e1pressly reserving the ownership of the sub,ect property despite delivery thereof to the prospective buyer, binds himself to sell the said property e1clusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.= 2Coronel v. C&9 26$ S"RA 159 28 (1556).""/ !"# S$$% 2PN! v. C& 262 S"RA 464 (1556). 5o be sure, a contract of sale may either be absolute or conditional. 3ne form of conditional sales is what is now popularly termed as a <Contract to Sell,= where ownership or title is retained until the fulfillment of a positive suspensive condition nor/all, the payment of the purchase price in the manner agreed upon. Cor a contract, li2e a contract to sell, involves a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. x1o/ez v. Court o Appeals, #4& SC ! 7%&, 7%. $%&&&(."%& ! contract to sell is a2in to a conditional sale, in which the efficacy or obligatory force of the vendor0s obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not ta2e place, the parties would stand as if the conditional obligation never e1isted. 4rden v. Aurea, '-% SC ! --& $%&&.(."%" #. Im/ort n#e of 'Lo# t&n!* t+e "on-&t&on to . > .r&#e &n F0ll 7n a contract of sale, the nonBpayment of the price is a resolutory condition which e1tinguishes the transaction that, for a time e1isted, and discharges the obligations created thereunder. xBlas v. An%eles6Hutalla, 4#/ SC ! %7# $%&&4(."%% ;hereas, in a contract to sell, the
Velarde v. Court o Appeals, #-" SC ! '- $%&&"(. 3&e Manila "a$in% Clu# v. 3&e Manila )o$ke, Clu#, -/ @hil. '' $"/#/(. ""7 Sta. *u$ia "ealt, 9 Dev., 'n$. V. -,e$io, '-% SC ! %%- $%&&.(+ Ver "e,es v. Salvador, Sr., '-4 SC ! 4'- $%&&.(. "". *i/ v. CA, ".% SC ! '-4 $"//&(+ Buot v. CA, #'7 SC ! .4- $%&&"(+ A#esa/is v. CA, #-" SC ! #%. $%&&"(+ 3uazon v. 1arilao, #-% SC ! -'4 $%&&"(+ *eao v. CA, #-/ SC ! #- $%&&"(+ -niversal "o#ina Su%ar Millin% Corp. v. Heirs o An%el 3eves , #./ SC ! #"- $%&&%(+ Al/ira v. Court o Appeals, #// SC ! #'" $%&&#(+ C&ua v. Court o Appeals, 4&" SC ! '4 $%&&%(+ Flan$ia v. Court o Appeals, 4'7 SC ! %%4 $%&&'(+ Vidad, Sr. v. 3a,a/en, '#" SC ! "47 $%&&7(+ Hulst v. P" Builders, 'n$., '#% SC ! 74 $%&&7(+ Heirs o Antonio F. Berna#e v. Court o Appeals, ''/ SC ! '# $%&&.(+ 4rden v. Aurea, '-% SC ! --& $%&&.(. ""/ Platinu/ Plans P&il., 'n$. v. Cu$ue$o, 4.. SC ! "'- $%&&-(+ #an v. !enolirao9 634 S"RA $6 (2335). "%& De/a elis v. Court o Appeals, '#. SC ! #&' $%&&7(. "%" De *eon v. De *eon, '/# SC ! 7-. $%&&/(. "%% Valenzuela v. .ala,ann Develop/ent and 'ndustrial Corp. , '/& SC ! #.& $%&&/(+ 3raders "o,al Bank v. Cuison *u/#er Co., 'n$., '.. SC ! -/& $%&&/(.
""""'

37
payment of the purchase price is a positive suspensive condition. 5he vendor0s obligation to convey the title does not become effective in case of failure to pay. 1 Buot v. Court o Appeals, #'7 SC ! .4- $%&&"(."%# ;hen the obligation of buyer to pay the full amount of the purchase price was made sub,ect to the condition that the seller first delivery the clean title over the parcel bough within twenty $%&( months from the signing of the contract, such condition is imposed merely on the performance of the obligation, as distinguished from a condition imposed on the perfection of the contract. 5he nonBhappening of the condition merely granted the buyer the right to rescind the contract or even to waive it and enforce performance on the part of the seller, all in consonance with !rt. "'4' of Civil Code which provides that <;here the obligation of either party to a contract of sale is sub,ect to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition.= 2!abasa v. Court of &,,eals 253 S"RA 5$2 (1558). 5he remedy of rescission under !rticle ""/" of the Civil Code cannot apply to mere contracts to sell8in a contract to sell, the payment of the purchase price is a positive suspensive condition, and failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. 3an v. Benolirao, -&4 SC ! #- $%&&/(. -. Ne#ess r> St&/0l t&ons &n "ontr #t to Sell,

! contract is one of sale, absent any stipulation therein $a( reserving title over the property to the vendee until full payment of the purchase price, "%4 n- $b( giving the vendor the right to unilaterally rescind the contract in case of nonBpayment. "%' 2Valde7 v. Court of &,,eals9 4$5 S"RA 55 (2334)."%- !"# S$$% 2Dignos v. Court of &,,eals9 158 S"RA $85 (1588). 5he reservation of title may not be found in e1press provision of the contract, but may also be determined from proven acts of the parties. 1Salazar v. CA, %'. SC ! #%' $"//-(. 5he absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price,"%7 and the seller retained possession of the certificate of tile and all other documents relative to the sale until there was full payment of the purchase price. xC&ua v. Court o Appeals, 4&" SC ! '4 $%&&#(. !n agreement in which ownership is reserved in the vendor and is not to pass to the vendee until full payment of the purchase price is 2nown as a contract to sell. 5he absence of full payment suspends the vendors0 obligation to convey title, even if the sale has already been registered. egistration does not vest, but merely serves as evidence of, title to a particular property. 3ur land registration laws do not give title holders any better ownership than what they actually had prior to registration. xPorti$ v. Cristo#al, 4'- SC ! '77 $%&&'(."%. e. Iss0e of S0%st nt& l 1re #+ $!rts. ""/" and "%#4( 5he concept of substantial breach is irrelevant to a contract of sale. x*uzon Brokera%e Co., 'n$. v. Mariti/e Buildin% Co., 'n$., 4# SC ! /# $"/7%(."%/ 7n a contract to sell real property on installments, the full payment of the purchase price is a positive condition, the failure of which is not considered a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring any obligatory force. 5he transfer of ownership and title would occur after full payment of the price. x*eao v. CA, #-/ SC ! #- $%&&"(."#& 2. :&n&m0m ReA0&rement for " n#ell t&on of "ontr #t to Sell 5he act of a party in treating a contract as cancelled should be made 2nown to the other party because this act is sub,ect to scrutiny and review of the courts in case the alleged defaulter bring the matter for ,udicial determination. 2"niversity of the Phili,,ines v. De los &ngeles $5 S"RA 13$ (1583)I 2Palay )nc. v. Clave9 124 S"RA 6$8 (158$)."#"
"%# Heirs o Spouses Sande(as v. *ina, #'" SC ! ".# $%&&"(+ >a/ora "ealt, and Dev. Corp v. 4 i$e o t&e President , '&SC ! '/" $%&&-(. "%4 3opa$io v. CA, %"" SC ! %"/ $"//%(+ *a orteza v. Ma$&u$a, ### SC ! -4# $%&&&(+ Al/ira v. Court o Appeals, #// SC !#'" $%&&#(. "%' "o:ue v. *apuz, /- SC ! 74" $"/.&(+ An%eles v. Calanz, "#' SC ! #%# $"/.'(+Al onso v. CA, ".- SC ! 4&& $"//&( "%San Andres v. "odri%uez, ##% SC ! 7-/ $%&&&(+ Vda. De Misti$a v. Na%uiat, 4". SC ! 7# $%&&#(+ Blas v. An%eles6Hutalla, 4#/ SC ! %7# $%&&4(+ Villadar, )r. V. >a#ala , '4' SC ! #%' $%&&.(+ Heirs o Antonio F. Berna#e v. Court o Appeals , ''/ SC ! '# $%&&.(+ Ver "e,es v. Salvador, Sr., '-4 SC ! 4'- $%&&.(. "%7 Bo5e v. Court o Appeals, %%& SC ! "'. $"//#(+ "a,os v. Court o Appeals , 4#4 SC ! #-' $%&&4(+ Solidstate Multi6 Produ$ts Corp. v. Catienza6Villaverde, ''/ SC ! "/7 $%&&.(+ 3an v. Benolirao, -&4 SC ! #- $%&&/(. "%. Antonio F. Berna#e v. Court o Appeals, ''/ SC ! '# $%&&.(. "%/ Siska Dev. Corp. v. 4 i$e o t&e President , %#" SC ! -74 $"//4(+ Sta. *u$ia "ealt, 9 Dev., 'n$. v. -,e$io , '-% SC ! %%$%&&.(. "#& Manuel v. "odri%uez, "&/ @hil. " $"/-&(+ *a orteza v. Ma$&u$a, ### SC ! -4# $%&&&(+ Villa/aria, )r. v. Court o Appeals, 4.7 SC ! '7" $%&&-(. "#" )ison v. CA, "-4 SC ! ##/ $"/..(+ *i/ v. CA, ".% SC ! '-4 $"//&(+ C&en% v. 1enato, #&& SC ! 7%% $"//.(.

38
5he act of the seller in notifying the buyer of his intention to sell the properties to other interested persons if the latter failed to pay the balance of the purchase price is sufficient notice for the cancellation or resolution of their contract to sell. 4rden v. Aurea, '-% SC ! --& $%&&.(. ! contract to sell imposes reciprocal obligations and so cannot be terminated unilaterally by either party. Gudicial rescission is required under !rticle ""/". Aowever, this rule is not absolute. ;e have held that in proper cases, a party may ta2e it upon itself to consider the contract rescinded and act accordingly albeit sub,ect to ,udicial confirmation, which may or may not be given. 2.im v. Court of &,,eals9 182 S"RA 564 (1553). !"# S$$, 7n a contract to sell, upon failure of buyer to comply with its obligation, there was no need to ,udicially rescind the contract to sell. Cailure by one of the parties to abide by the conditions in a contract to sell resulted in the rescission of the contract. 2&FP 6utual !enefit &ssn. )nc. v. C&9 $64 S"RA 868 (2331)."#% ! grace period is a right, not an obligation of the debtor, and when unconditionally conferred, the grace period is effective without further need of demand either calling for the payment of the obligation or for honoring the right. xBri$kto5n Dev. Corp. v. A/or 3ierra Dev.. , %#/ SC ! "%$"//'(. 5he act of the seller in notifying the buyer of his intention to sell the properties to other interest persons if the latter failed to pay the balance of the purchase price is sufficient notice for the cancellation or resolution of their contract to sell. 4rden v. Aurea, '-% SC ! --& $%&&.(. $. EA0&t> Resol0t&ons on "ontr #ts to Sell !lthough buyer clearly defaulted in his installment payments in a contract to sell covering two parcels of land, the Supreme Court nevertheless awarded ownership over one of the two $%( lots ,ointly purchased by the buyer, on the basis that the total amount of installments paid, although not enough to cover the purchase price of the two lots were enough to cover fully the purchase price of one lot, ruling there was substantial performance insofar as one of the lots concerned as to prevent rescission thereto. x*e%arda Her/anos v. Saldaa, '' SC ! #%4- $"/74(. ;here buyer had religiously been paying monthly installments for . years, but even after default he was willing and had offered to pay all the arrears, the Court granted additional period of -& days from receipt of ,udgment for buyer to ma2e all installments payments in arrears plus interests, although demand for rescission had already been made. 1 ).M. 3uazon Co., 'n$. v. )avier, #" SC ! .%/ $"/7&(.

KII. "ONDITIONS AND <ARRANTIES

1. "on-&t&ons $!rt. "'4'( Cailure to comply with condition imposed upon perfection of the contract results in failure of a contract, while the failure to comply with a condition imposed on the performance of an obligation only gives the other party the option either to refuse to proceed with sale or waive the condition. 2.aforte7a v. 6achuca $$$ S"RA 64$ (2333)."## 7n a <Sale with !ssumption of Dortgage,= the assumption of mortgage is a condition to the seller0s consent so that without approval by the mortgagee, no sale is perfected. 7n such case, the seller remains the owner and mortgagor of the property and retains the right to redeem the foreclosed property. 1"a/os v. CA, %7/ SC ! "". $"//7(."#4 5here has arisen here a confusion in the concepts of validity and the efficacy of a contract. 6nder !rt. "#". of Civil Code, the essential requisites of a contract are* consent of the contracting parties+ ob,ect certain which is the sub,ect matter of the contract and cause of the obligation which is established. !bsent one of the above, no contract can arise. Conversely, where all are present, the result is a valid contract. Aowever, some parties introduce various 2inds of restrictions or modalities, the lac2 of which will not, however, affect the validity of the contract. 5hus, a provision <this Contract of Sale of rights, interests and participations shall become effective only upon the approval by the Aonorable Court,= in the event of nonBapproval by the courts, affect only the effectivity and not the validity of the contract of sale. 25eirs of Pedro $scanlar v. Court of &,,eals 281 S"RA 186 (1558). 5he phrase <as is, where is= in sale pertains solely to the physical condition of the thing sold, not to its legal situation. Assets Privatization 3rust v. 3.). !nterprises, '.7 SC ! 4." $%&&/(. 5he vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the ob,ect of the sale. Assets Privatization 3rust v. 3.). !nterprises , '.7 SC ! 4." $%&&/(.

3orral#a v. De los An%eles, /- SC ! -/ $"/.&(. "o/ero v. Court o Appeals , %'& SC ! %%# $"//'(+ Adalin v. CA, %.& SC ! '#- $"//7(+ "epu#li$ v. Florendo, '4/ SC ! '%7 $%&&.(. "#4 Bian Steel Corp. v. Court o Appeals, #/" SC ! /& $%&&%(.
"##

"#%

39
2. "on-&t&ons versus < rr nt&es. 2Po2er Commercial and )ndustrial Cor,. v. Court of &,,eals9 284 S"RA 558 (1558). $. EC/ress < rr nt&es $!rt. "'4-( ! warranty is a statement or representation made by the seller of goods, contemporaneously and as part of the contract of sale, having reference to the character, quality or title of the goods, and by which he promises or underta2es to insure that certain facts are or shall be as he then represents them An% v. Court o Appeals, '-7 SC ! '# $%&&.(. ! warranty is an affirmation of fact or any promise made by a vendor in relation to the thing sold. 5he decisive test is whether the vendor assumes to assert a fact of which the vendee is ignorant. x1ood,ear P&ilippines, 'n$. v. S,, 474 SC ! 4%7 $%&&'(. 5he principle of $aveat e/ptor only requires the purchaser to e1ercise care and attention ordinarily e1ercised by prudent men in li2e business affairs, and only applies to defects which are open and patent to the service of one e1ercising such care. 7t can only be applied where it is shown or conceded that the parties to the contract stand on equal footing and have equal 2nowledge or equal means of 2nowledge and there is no relation of trust or confidence between them. 7t does not apply to a representation that amounts to a warranty by the seller and the situation requires the buyer to rely upon such promise or affirmation. 2Guinha2a v. Peo,le9 468 S"RA 288 (2335)."#' <5he law allows considerable latitude to seller0s statements, or dealer0s tal2+ and e1perience teaches that it is e1ceedingly ris2y to accept it at its face value. !ssertions concerning the property which is the sub,ect of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no ground for omitting to ma2e inquiries. ! man who relies upon such an affirmation made by a person whose interest might so readily prompt him to e1aggerate the value of his property does so as his peril, and must ta2e the consequences of his own imprudence.= xSon%$o v. Sellner, #7 @hil. %'4 $"/"7(. Ireach of an e1press warranty ma2es the seller liable for damages. 5he following requisites must be established in order that there be an e1press warranty in sale* $"( the e1press warranty must be an affirmation of fact or any promise by the seller relating to the sub,ect matter of the sale+ $%( the natural tendency of such affirmation or promise is to induce the buyer to purchase the thing+ and $#( the buyer purchases the thing relying on such affirmation or promise thereon. xCarras$oso, )r. v. CA, 477 SC ! --- $%&&'(. 4. Im/l&e- < rr nt&es $!rt. "'47( . Seller H s R&!+t to Sell %. < rr nt> A! &nst E)&#t&on $!rts. "'4.B"'-&( Seller must be summoned in the suit for eviction at the instance of the buyer $!rt. "''.(, and be made a coBdefendant $!rt. "''/(+ or made a thirdBparty defendant. !s$aler v. CA, "#. SC ! " $"/.'(."#No :arranty &gainst $viction :hen $'ecution Sale 9 7n voluntary sales, vendor can be e1pected to defend his title because of his warranty to the vendees but no such obligation is owed by the owner whose land is sold at e1ecution sale. 1 Santia%o *and Dev. Corp. v. CA, %7SC ! -74 $"//7(. !"# S$$% Art. 1552. 5he seller, in declaring that he owned and had clean title to the vehicle, gave an implied warranty of title, and in pledging that he <will defend the same from all claims or any claim whatsoever [and] will save the vendee from any suit by the government of the epublic of the @hilippines,= he gave a warranty against eviction, and the prescriptive period to file a breach thereof is si1 months after the delivery of the vehicle. 2&ng v. Court of &,,eals9 568 S"RA 5$ (2338). #. < rr nt> A! &nst Non;A// rent Ser)&t0-es $!rts. "'-&( -. < rr nt> A! &nst H&--en Defe#ts $!rts. "'-"B"'.&( 5he stipulation in a lease with option to purchase $treated as a sale of movable on installments( that the buyerBlessee <absolutely releases the lessor from any liability whatsoever as to any and all matters in relation to warranty in accordance with the provisions hereinafter stipulated,= was held as an e1press waiver of warranty against hidden defect in favor of the sellerB lessor which <absolved the [sellerBlessor] from any liability arising from any defect or deficiency of the machinery they bought.= 1Filinvest Credit Corp. v. Court o Appeals, "7. SC ! ".. $"/./(. ! hidden defect is one which is un2nown or could not have been 2nown to the buyer. 6nder the law, the requisites to recover on account of hidden defects are as follows* $a( 5he defect must be hidden+ $b( 5he defect must e1ist at the time the sale was made+ $c( 5he defect must ordinarily
"#' "#-

4ro *and "ealt, Dev. Corp. v. Claunan, '"- SC ! -." $%&&7( Canizares 3iana v. 3orre(os, %" @hil. "%7 $"/""(+ ).M. 3uazon v. CA, /4 SC ! 4"# $"/7/(.

40
have been e1cluded from the contract+ $d( 5he defect, must be important $render the thing unfit or considerably decreases fitness(+ $e( 5he action must be instituted within the statute of limitations. 2Nutrimi' Feeds Cor,. v. Court of &,,eals9 441 S"RA $58 (2334)."#7 Seller0s agent can #, a%ree/ent be liable for the warranty against hidden defects. xS$&/id and 4#erl,, 'n$. v. ")* Martinez, "-- SC ! 4/# $"/..(. e. < rr nt> s to F&tness or E0 l&t> of (oo-s 7n order to enforce the implied warranty that the goods are reasonably fit and suitable to be used for the purpose which both parties contemplated, the following must be established* $a( that the buyer sustained in,ury because of the product+ $b( that the in,ury occurred because the product was defective or unreasonably unsafe+ and finally $c( the defect e1isted when the product left the hands of the petitioner. 2Nutrimi' Feeds Cor,. v. Court of &,,eals9 441 S"RA $58 (2334). ! manufacturer or seller of a product cannot be held liable for any damage allegedly caused by the product in the absence of any proof that the product in question is defective, which was present upon the delivery or manufacture of the product+ or when the product left the seller0s or manufacturer0s control+ or when the product was sold to the purchaser+ or the product must have reached the user or consumer without substantial change in the condition it was sold. 2Nutrimi' Feeds Cor,. v. Court of &,,eals9 441 S"RA $58 (2334). f. S le of (oo-s %> S m/le 5here is a sale by sample when a small quantity is e1hibited by the seller as a fair specimen of the bul2, which is not present and there is no opportunity to inspect or e1amine the same. 5o constitute a sale by sample, it must appear that the parties treated the sample as the standard of quality and that they contracted with reference to the sample with the understanding that the product to be delivered would correspondent with the sample. 7n a contract of sale by sample, there is an implied warranty that the goods shall be free from any defect which is not apparent on reasonable e1amination of the sample and which would render the goods unmerchantable. 1Mendoza v. David, 44" SC ! "7% $%&&4(. !. A--&t&on l < rr nt&es for "ons0mer .ro-0#ts $!rts. -., Consumer !ct, 5. Effe#ts n- .res#r&/t&on of < rr nt&es ! breach in the warranties of the seller entitles the buyer to a proportionate reduction of the purchase price. PNB v. Me%a Pri/e "ealt, and Holdin% Corp., '-7 SC ! -## $%&&.(. 5he prescriptive period for instituting actions based on a breach of e1press warranty is that specified in the contract, and in the absence of such period, the general rule on rescission of contract, which is four years, while for actions based on breach of implied warranty, the prescriptive period is si1 months from the date of the delivery of the thing sold. An% v. Court o Appeals, '-7 SC ! '# $%&&.(. 6. Effe#ts of < &)ers 5he phrase <as is, where is= basis pertains solely to the physical condition of the thing sold, not to its legal situation. 7n the case at bar, the 6S ta1 liabilities constitute a potential lien which applies to the sub,ect0s matter0s legal situation, not to its physical aspect. 5hus, the buyer has no obligation to shoulder the same. xNDC v. Madri%al ;an Hui *ines Corp., 4"% SC ! #7' $%&&#(. 8. 10>erFs O/t&ons &n " se of 1re #+ of < rr nt> $!rt. "'//(. 5he remedy against violation of warranty against hidden defects is either to withdraw from the contract $a$$ion red&i#itoria( or to demand a proportionate reduction of the price $ a$$ion :uanti /inoris(, with damages in either case. 2Nutrimi' Feeds Cor,. v. Court of &,,eals 9 441 S"RA $58 (2334). .!. 7#/4(.

KIII. EKTIN(UISH:ENT OF SALE

A. IN (ENERAL $!rts. "%#", "-&&(. 1. "ONHENTIONAL REDE:.TION 1. Def&n&t&on $!rt. "-&"( ight to repurchase must be constituted as part of a valid sale at perfection. xVillari$a v. CA, %- SC ! "./ $"/-.(."#.

"#7 "#.

'nvest/ents 9 Develop/ent, 'n$. v. CA, "-% SC ! -#- ["/..](. Claravall v. CA, "/& SC ! 4#/ $"//&(+ 3orres v. CA, %"- SC ! %.7 $"//%(+ "o#erts v. Papio, '"' SC ! #4- $%&&7(.

41
!n agreement to repurchase becomes a promise to sell when made after the sale because when the sale is made without such agreement the purchases acquires the things sold absolutely+ and, if he afterwards grants the vendor the right to repurchase, it is a new contract entered into by the purchases as absolute owner. 2*oberts v. Pa,io9 515 S"RA $46 (2338)."#/ 7n sales denominated as pa$to de retro, the price agreed upon should not generally be considered as the ,ust value of the thing sold, absent other corroborative evidence8there is no requirement in sales that the price be equal to the e1act value of the thing sub,ect matter of the sale. xDorado Vda. De Del in v. Dellota, '4% SC ! #/7 $%&&.(. Sales with rights of repurchase, as defined by the Civil Code, are not favored. ;e will not construe instruments to be sales with a right to repurchase, with the stringent and onerous effects which follow, unless the terms of the document and the surrounding circumstances require it. ;henever, under the terms of the writing, any other construction can fairly and reasonably be made, such construction will be adopted and the contract will be construed as a mere loan unless the court can see that, if enforced according to its terms, it is not an unconscionable one. Bautista v. -nan%st, ''7 SC ! %'- $%&&.(. [ $itin% "a/os v. Court o Appeals ".& SC ! -#' $"/./(, 5&i$& in turn $ites Padilla v. *insan%an, "/ @hil. -' $"/""( and A:uino v. Deala, -# @hil. '.% $"/#-(. 2. Re-em/t&on .er&o5he period to repurchase is not suspended merely because there is a divergence of opinion between the parties as to the precise meaning of the phrase providing for the condition upon which the right to repurchase is triggered. 5he e1istence of seller a retro?s right to repurchase the proper is not dependent upon the prior final interpretation by the court of the said phrase. 26isterio v. Cebu State College of Science and #echnology9 461 S"RA 122 (2335). $. S&t0 t&on .r&or to Re-em/t&on 7n a sale a retro, buyer has a right to the immediate possession of the property sold, unless otherwise agreed upon, since title and ownership of the property sold are immediately vested in the buyer a retro, sub,ect only to the resolutory condition of repurchase by the seller a retro within the stipulated period. xVda. de "i%onan v. Dere$&o, 4-# SC ! -%7 $%&&'(."4& 4. <+o " n Re-eem $!rts. "-"" to "-"4( 5. Ho@ Re-em/t&on Effe#te- $!rt. "-"-( 7n order to e1ercise the right to redeem, only tender of payment is sufficient 1 *e%aspi v. CA, "4% SC ! .% "/.-(+ consignation is not required after tender is refused xMariano v. CA, %%% SC ! 7#- $"//#(. Iut when tender not possible, consignation should be made 1 Catan%$atan% v. *e%a,ada, .4 SC ! '" $"/7.(. ;ellBsettled is the rule that a formal offer to redeem must be accompanied by a valid tender of the redemption price and the filing of a ,udicial action, plus the consignation of the redemption price within the period of redemption, is equivalent to a formal offer to redeem. xVille%as v. Court o Appeals, 4// SC ! %7- $%&&-(. ! formal offer to redeem, accompanied by a #ona ide tender of redemption price, is not essential where the right to redeem is e1ercised through a ,udicial action within the redemption period and simultaneously depositing the redemption price. 1 *ee C&u, "ealt, Corp. v. CA, %'& SC ! '/- $"//'(. 6. Re-em/t&on .r&#e $!rt. "-"-( ! stipulation in a sale a retro requiring as part of the redemption price interest for the cost of money, is not in contravention with !rt. "-"-, since the provision is not restrictive nor e1clusive, and does not bar additional amounts that the parties may agree upon, since the article itself provides <and other stipulations which may have been agreed upon.= 1 Solid Ho/es v. Court o Appeals, %7' SC ! %-7 $"//7(. 8. Fr0&ts $!rt. "-"7( !rticle "-"7 on the disposition of fruits of property redeemed applies only when the parties failed to provide a sharing arrangement thereof+ otherwise, the parties contractual stipulations prevail. xAl/eda v. Daluro, 7/ SC ! #%7 $"/77(. !rticle 44. of the Civil Code on the rights of a builder in good faith is inapplicable in cases involving contracts of sale with right of repurchase8it is inapplicable when the owner of the land is the builder, sower, or planter. ;here the true owner himself is the builder of the wor2s on his own
"a/os v. '$asiano, '" @hil $"/%7(. "e,es v. Ha/ada, "4 SC ! %"' $"/-'(+ Solid Ho/es, 'n$. v. CA, %7' SC ! %-7 $"//7(+ Misterio v. Ce#u State Colle%e o S$ien$e and 3e$&nolo%,, 4-" SC ! "%% $%&&'(+ Cadun%o% v. 0ap, 4-/ SC ! '-" $%&&'(+ "a/os v. Dizon, 4/. SC ! "7 $%&&-(+ *u/a,a% v. Heirs o )a$into Ne/eo, '%- SC ! '" $%&&7(.
"4& "#/

42
land, the issue of good faith or bad faith is entirely irrelevant. 5he right to repurchase may be e1ercised only by the vendor in whom the right is recogni4ed by contract or by any person to whom the right may have been transferred. 7n a sale with right of repurchase, the applicable provisions are !rticles "-&- and "-"- of the Civil Code, and not !rticle 44.. Narvaez v. Al$iso, '/4 SC ! -& $%&&/(. 8. Effe#t <+en No Re-em/t&on : -e, "onsol&- t&on $!rt. "-&7( !rticle "-&7 abolished automatic consolidation of ownership in the vendee a retro upon e1piration of the redemption period by requiring the vendee to institute an action for consolidation where the vendor a retro may be duly heard. 7f the vendee succeeds in proving that the transaction was indeed a pa$to de retro, the vendor is still given a period of thirty days from the finality of the ,udgment within which to repurchase the property. 1 Solid Ho/es v. Court o Appeals, %7' SC ! %-7 $"//7(. 3nce the vendor fails to redeem the property within the stipulated period, irrevocable title shall be vested in the vendee by operation of law. xVda. de "i%onan v. Dere$&o, 4-# SC ! -%7 $%&&'(. 6nder a sale a retro, the failure of the buyer to consolidate his title under !rt. "-&7 does not impair such title and ownership because the method prescribed thereunder is merely for the purpose of registering and consolidating titles to the property. 7n fact, the failure on the part of a seller a retro to e1ercise the redemption right within the period agreed upon or provided for by law, vests upon the buyer a retro absolute title and ownership over the property sold by operation of law. Consequently, after the effect of consolidation, the mortgage or reBsale by the seller a retro of the same property would not transfer title and ownership to the mortgagee or buyer, as the case may be, under the ?atin ma1im N!M4 DA3 +-4D N4N HAB!3. xCadun%o% v. 0ap, 4-/ SC ! '-" $%&&'(. 5. EEUITA1LE :ORT(A(E $!rts. "-&%B"-&4( 5his 2ind of arrangement, where the ownership of the land is supposedly transferred to the buyer who provides for the funds to redeem the property from the ban2 but nonetheless allows the seller to later on buy bac2 the properties, is in the nature of an equitable mortgage governed by !rticles "-&% and "-&4 of the Civil Code. $at p. -4.( Ba$un%an v. Court o Appeals , '74 SC ! -4% $%&&.(. 7f the terms of the pa$to de retro sale were unfavorable to the vendor, courts have no business e1tricating her from that bad bargain8courts are not guardians of persons who are legally competent. Dorado Vda. De Del in v. Dellota, '4% SC ! #/7 $%&&.(. 5he law on equitable mortgage favors the least transmission of rights and interest over a property in controversy, since the law see2s to prevent circumvention of the law on usury and the prohibition against pa$tu/ $o//issoriu/ provisions. !dditionally, it is aimed to end un,ust or oppressive transactions or violations in connection with a sale or property. 5he wisdom of these provisions cannot be doubted, considering many cases of unlettered persons or even those with average intelligence invariably finding themselves in no position whatsoever to bargain fairly with their creditors. 1Spouses Misea v. "on%avilla, #&# SC ! 74/ $"///(."4" Iesides, it is a fact that in time of grave financial distress which render persons hardBpressed to meet even their basic needs or answer an emergency, such persons would have no choice but to sign a deed of absolute sale of property or a sale thereof with pa$to de retro if only to obtain a muchBneeded loan from unscrupulous money lenders. xMatan%ui&an v. Court o Appeals, %7' SC ! #.& $"//7(."4% !n equitable mortgage is defined as one which although lac2ing 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 impossible or contrary to law. x"a,/undo v. Bandon%, '%- SC ! '"4 $%&&7(."4# 5he essential requisites of an equitable mortgage are* $a( 5he parties entered into a contract denominated as a contract of sale+ and $b( 5heir intention was to secure an e1isting debt by way of a mortgage. xMolina v. Court o Appeals, #/. SC ! /7 $%&&#(."44 5he decisive factor in evaluating whether an agreement is an equitable mortgage is the intention of the parties, as shown not necessarily by the terminology used in the contract but by all
*ao v. Court o Appeals, %7' SC ! %#7 $"//7(. Salon%a v. Con$ep$ion, 47& SC ! %/" $%&&'(. "4# Ce#allos v. 'ntestate !state o t&e *ate !/i%dio Mer$ado , 4#& SC ! #%# $%&&4(+ Alvaro v. 3ernida, 47/ SC ! %.. $%&&-(+ Cirelos v. Hernandez, 4/& SC ! -%4 $%&&-(+ *u/a,a% v. Heirs o )a$into Ne/eo, '%- SC ! '" $%&&7(+ 4livares v. Sar/iento, ''4 SC ! #.4 $%&&.(+ 3io v. A#a,ata, ''- SC ! "7' $%&&.(+ De&eza6'na/ar%a v. Alano, '74 SC ! -'" $%&&.(+ "o$kville !x$el 'nternational !xi/ Corp. v. Culla, -&% SC ! "%4 $%&&/(. 144 Matan%ui&an v. CA, %7' SC ! #.& $"//7(+ Martinez v. CA, #'. SC ! #. $%&&"(+ Hilado v. Heirs o "a ael Medlla , #7 SC ! %'7 $%&&%(+ Ce#allos v. 'ntestate !state o t&e *ate !/i%dio Mer$ado , 4#& SC ! #%# $%&&4(+ San Pedro v. *ee, 4#& SC ! ##. $%&&'(+ 1o v. Ba$aron, 47% SC ! %%/ $%&&'(, $itin% >7??!:6)>!, C)S! ?. @A7?7@@7:) ?!; 3: S!?)S, $"//. ed.(, p. %7"+ "o/ulo v. *a,u%, )r., '&" SC !%-% $%&&-(+ "o#erts v. Papio, '"' SC ! #4- $%&&7(+ "a,/undo v. Bandon%, '%- SC ! '"4 $%&&7(+ Dorado Vda. De Del in v. Dellota, '4% SC ! #/7 $%&&.(.
"4% "4"

43
the surrounding circumstances, such as the relative situation of the parties at that time, the attitude, acts, conduct, declarations of the parties, the negotiations between them leading to the deed, and generally, all pertinent facts having a tendency to fi1 and determine the real nature of their design and understanding. :ecessitous men are not always free, in that to answer a pressing emergency, they will submit to any term that the crafty may impose on them. Ban%a v. Bello, 47" SC ! -'# $%&&'(."4' 5hat is why parol evidence is competent and admissible in support of the allegations that an instrument in writing, purporting on its face to transfer the absolute title to property, or to transfer the title with a right to repurchase under specified conditions reserved to the seller, was in truth and in fact given merely as security for the repayment of a loan. xMariano v. Court o Appeals, %%& SC ! 7"- $"//#(."4. 1 -!es of EA0&t %le :ort! !e $!rt. "-&%"47( ! contract of sale actually intended to secure the payment of an obligation is presumed an equitable mortgage. x"o/ulo v. *a,u%, )r., '&" SC !%-% $%&&-(."4. 5he presence of only one circumstance defined in !rt. "-&% is sufficient for a contract of sale a retro to be presumed an equitable mortgage. 1Hilado v. Medalla #77 SC ! %'7 $%&&%(."4/ 5he presumption in !rticle "-&% ,ibes with the rule that the law favors the least transmission of property rights. x!nri:uez, Sr. v. Heirs o Spouses Nieves and Al redo Baldonado , 4/. SC ! #-' $%&&-(+ but it is not conclusive, for it may be rebutted by competent and satisfactory proof to the contrary. xSantia%o v. Dizon , '4# SC ! 4&% $%&&.(. 5he provisions of !rt. "-&% on the presumption of equitable mortgage applies also to a contract purporting to be an absolute sale. 13uazon v. CA, #4" SC ! 7&7 $%&&&(."'& ! contract purporting to be an absolute sale is presumed to be an equitable mortgage* $a( when the price of the sale is unusually inadequate+ "'" $b( when the vendor remains in possession as lessee or otherwise+"'% $c( when after the e1piration of the right of repurchase, it is e1tended by the buyer. 1Hilado v. Heirs o "a ael Medalla, #7 SC ! %'7 $%&&%(+"'# $d( when the purported seller continues to collect rentals from the lessees of the property sold. "a/os v. Dizon, 4/. SC ! "7 $%&&-( ;hen the vendor is in urgent need of money when he e1ecutes the sale, the alleged sale with pa$to de retro will be construed as an equitable mortgage. Bautista v. -nan%st, ''7 SC ! %'$%&&.(. <7nadequacy of purchase price= is considered so far short of the real value of the property as to startle a correct mind. xSantia%o v. Dizon , '4# SC ! 4&% $%&&.(+ or that the mind revolts at it as such that a reasonable man would neither directly or indirectly be li2ely to consent to it. 1 Vda de Alvarez v. CA, %#" SC ! #&/ $"//4(. 5o presume a contract is an equitable mortgaged based on gross inadequacy of price, it must be clearly shown from the evidence presented that the consideration was in fact grossly inadequate at the time the sale was e1ecuted. Dere inadequacy of price is not sufficient to create the presumption. x4livares v. Sar/iento, ''4 SC ! #.4 $%&&.(. Dere tolerated possession is not enough to prove that the transaction was an equitable mortgage. x"edondo v. )i/enez, '#- SC ! -#/ $%&&7(. @ayment of real estate ta1es is a usual burden attached to ownership, and when such payment is coupled with continuous possession of the property, it constitutes evidence of great weight that a person under whose name the realty ta1es were declared has a valid and right claim over the land. x1o v. Ba$aron, 47% SC ! %%/ $%&&'(."'4

Austria v. 1onzales, )r., 4%& SC ! 4"4 $%&&4(+ "a,/undo v. Bandon%, '%- SC ! '"4 $%&&7(. *i/ v. Cala%uas, 4' 3.H. :o. ., p. ##/4 $"/4.(+ Cu,u%an v. Santos, #4 @hil. "&& $"/"-(+ Matan%ui&an v. CA, %7' SC ! #.& $"//7(+ Hilado v. Heirs o "a ael Medlla, #7 SC ! %'7 $%&&%(+ Madri%al v. Court o Appeals, 4'- SC ! -'/ $%&&'(+ *e%aspi v. 4n%, 4'/ SC ! "%% $%&&'(+ Ban%a v. Bello, 47" SC ! -'# $%&&'(+ Dio v. )ardines, 4." SC ! %%- $%&&-(+ A,son, )r. V. Para%as, ''7 SC ! '& $%&&.(. "47 *i/ v. Cala%uas, 4' 3.H. :o. ., p. ##/4 $"/4.(+ Balatero v. 'AC, "'4 SC ! '#& $"/.7(+ Mariano v. CA, %%& SC ! 7"$"//#(+ *o#res v. CA, #'" SC ! 7"- $%&&"(. "4. A,son, )r. V. Para%as, ''7 SC ! '& $%&&.(+ Bautista v. -nan%st, ''7 SC ! %'- $%&&.(. "4/ Claravall v. CA, "/& SC ! 4#/, 44. $"//&(+ -, v. CA, %#& SC ! --4 $"//4(+ *o#res v. CA, #'" SC ! 7"- $%&&"(+ Alvaro v. 3ernida, 47/ SC ! %.. $%&&-(+ Dio v. )ardines, 4." SC ! %%- $%&&-(+ "a,/undo v. Bandon%, '%- SC ! '"4 $%&&7(+ Aleli%a, v. *aserna, '#7 SC ! -// $%&&7(+ Dorado Vda. De Del in v. Dellota, '4% SC ! #/7 $%&&.(+ Bautista v. -nan%st, ''7 SC ! %'$%&&.(. "'& >a/ora v.CA, %-& SC ! "& $"//-(. "'" "o/ulo v. *a,u%, )r., '&" SC !%-% $%&&-(. "'% "o/ulo v. *a,u%, )r., '&" SC !%-% $%&&-(+ Bautista v. -nan%st, ''7 SC ! %'- $%&&.(+ "o$kville !x$ell 'nternational !xi/ Corp. v. Culla, -&% SC ! "%4 $%&&/(. "'# Cruz v. Court o Appeals, 4"% SC ! -"4 $%&&#(. "'4 *u/a,a% v. Heirs o )a$into Ne/eo, '%- SC ! '" $%&&7(.
"4-

"4'

44
Aowever mere allegations without proof to support inadequacy of price, or when continued possession by the seller is supported by a valid arrangement consistent with the sale, would not support the allegation of equitable mortgage. xCirelos v. Hernandez, 4/& SC ! -%4 $%&&-(."'' !lthough under the agreement the seller shall remain in possession of the property for only one year, such stipulation does not detract from the fact that possession of the property, an indicium of ownership, was retained by the alleged vendor to qualify the arrangement as an equitable mortgage, especially when it was shown that the vendor retained part of the purchase price. x*e%aspi v. 4n%, 4'/ SC ! "%% $%&&'(."'6nder !rticle "-&%, delay in transferring title is not one of the instances enumerated by law8 instances in which an equitable mortgage can be presumed. :or does the fact that the original transaction on the land was to support a loan, which when it was not paid on due date was negotiated into a sale, without evidence that the subsequent deed of sale does not e1press the true intentions of the parties, give rise to a presumption of equitable mortgage. xCe#allos v. 'ntestate !state o t&e *ate !/i%dio Mer$ado, 4#& SC ! #%# $%&&4(. 5he fact that the price in a pa$to de retro sale is not the true value of the property does not ,ustify the conclusion that the contract is one of equitable mortgage+ in fact a pa$to de retro sale, the practice is to fi1 a relatively reduced price to afford the seller a retro every facility to redeem the property . x'%na$io v. CA, %4- SC ! %4% $"//'(."'7 !rticle "-&% being remedial in nature, may be applied retroactively in cases prior to the effectivity of the Civil Code. 14lea v. CA, %47 SC ! %74 $"//'(. %. Reme-&es Allo@e- for EA0&t %le :ort! !e $!rts. "4'4, "-&%, "-&'(. 7n the case of an equitable mortgage, although !rt. "-&' which allows for the remedy of reformation, nothing therein precludes an aggrieved party from pursuing other remedies to effectively protect his interest and recover his property, such as an action for declaration of nullity of the deed of sale and specific performance. 13olentino v. Court o Appeals, #.- SC ! #- $%&&%(. 7n an equitable mortgage situation, the consolidation of ownership in the person of the mortgagee in equity upon failure of the mortgagor in equity to pay the obligation, would amount to a pa$tu/ $o//issoriu/. 5he only proper remedy is to cause the foreclosure of the mortgage in equity. 1Briones6Vas:uez v. Court o Appeals, 4'& SC ! -44 $%&&'(+ or to determine if the principal obligation secured by the equitable mortgage has been paid or settled. xBan%a v. Bello, 47" SC ! -'# $%&&'(. #. Pactum Commissorium $!rt. %&..( ! stipulation which is a pa$tu/ $o//isoriu/ enables the mortgagee to acquire ownership of the mortgaged properties without need of any foreclosure proceedings8it is a nullity being contrary to the provisions of !rticle %&.. of the Civil Code. x*u/a,a% v. Heirs o )a$into Ne/eo, '%- SC ! #"' $%&&7(."'. 5he elements of pa$tu/ $o//issoriu/, which enable the mortgagee to acquire ownership of the mortgaged property without the need of any foreclosure proceedings, are* $"( there should be a property mortgaged by way of security for the payment of the principal obligation, and $%( there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of nonBpayment of the principal obligation within the stipulated period. 4n% v. "o#an *endin% Corp. , ''7 SC ! '"- $%&&.(. 7t does not apply when the security for a debt is also money in the form of time deposit. xConsin% v. CA, "77 SC ! "4 $"/./(. 5he provision in a D3!FDa$ion en Pa%o with a ight to epurchase that in the event the borrower fails to comply with the new terms of restructuring the loan, the agreement shall automatically operate to be an instrument of d a$ion en pa%o without need of e1ecuting any new document does not constitute pa$tu/ $o//issoriu/. 2Solid 5omes )nc. v. Court of &,,eals 9 285 S"RA 268 (1558)I the questioned contracts were freely and voluntarily e1ecuted by petitioners and respondent is of no moment, pa$tu/ $o//issoriu/ being void for being prohibited by law. 4n% v. "o#an *endin% Corp., ''7 SC ! '"- $%&&.(. !"# S$$% 5he stipulation in the promissory note providing that upon failure of the ma2ers to pay interests, ownership of the property would automatically be transferred to the payee, and the covering deed of sale would be registered is in substance a pa$tu/ $o//issoriu/ in violation of !rt. %&.., and consequently, the resultant sale is void and the registration and obtaining of new title in the name of the buyer would have be declared void also. 2&. Francisco *ealty v. Court of &,,eals 258 S"RA $45 (1558)."'/
Austria v. 1onzales, )r., 4%& SC ! 4"4 $%&&4(. 4ron$e v. CA, %/. SC ! "## $"//.(. "'7 De 4$a/po v. *i/, #. @hil. '7/ $"/".(+ Feli$iano v. *i/(u$o, 4" @hil."47 $"/%&(+ Belonio v. Movella, "&' @hil. 7'- $"/'/(. "'. 1uerrero v. 0i%o, /- @hil. #7 $"/'4(8 Montevir%in v. CA, ""% SC ! -4" $"/.%(+ Vda. de >ulueta v. 4$taviano, "%" SC ! #"4 $"/.#(+ 4n% v. "o#an *endin% Corp., ''7 SC ! '"- $%&&.(. "'/ *e%aspi v. 4n%, 4'/ SC ! "%% $%&&'(.
"'"''

45
e. F&n l "+ n#e to Re-eem &n ':&st =en EA0&t %le :ort! !e* $!rt. "-&-( 5he #& day period under !rt. "-&- does not apply if the courts should find the sale to be absolute. Pan%ilinan v. "a/os, "." SC ! #'/ $"//&(."-& Sellers in a sale ,udicially declared as pa$to de retro may not e1ercise the right to repurchase within the #&Bday period provided under !rt. "-&-, although they have ta2en the position that the same was an equitable mortgage, if it is shown that there was no honest belief thereof since* $a( none of the circumstances under !rt. "-&% were shown to e1ist to warrant a conclusion that the transaction was an equitable mortgage+ and $b( that if they truly believed the sale to be an equitable mortgage, as a sign of good faith, they should have consigned with the trial court the amount representing their alleged loan, on or before the e1piration of the right to repurchase. 2&billa v. Gobonseng9 $84 S"RA 51 (2332)."-" ". LE(AL REDE:.TION 1. Def&n&t&on $!rt. "-"/( ?egal redemption is in the nature of a privilege created by law partly for reasons of public policy and partly for the benefit and convenience of the redemptioner, to afford him a way out of what might be a disagreeable or [an] inconvenient association into which he has been thrust. 7t is intended to minimi4e coBownership. 1Fernandez v. 3arun, #/" SC ! -'# $%&&%(."-% 2. Le! l Re-em/t&on R&!+ts 0n-er t+e "&)&l "o-e . Amon! "o;+e&rs $!rt. "&..( edemption right pertain to disposition of right to inherit, and not when there is a sale of a particular property of the estate. xPlan v. 'AC, "#' SC ! %7& $"/.'(. ;hen the heirs have partitioned the estate among themselves and each have occupied and treated definite portions thereof as their own, coBownership has ceased even though the property is still under one title, and the sale by one of the heirs of his definite portion cannot trigger the right of redemption in favor of the other heirs. xVda. De Ape v. Court o Appeals, 4'- SC ! "/# $%&&'(. 5he heirs who actually participated in the e1ecution of the e1tra,udicial settlement, which included the sale to a third person of their pro indiviso shares in the property, are bound by the same+ while the coBheirs who did not participate are given the right to redeem their shares pursuant to !rticle "&... xCua v. Var%as, '&- SC ! #74 $%&&-(. %. Amon! "o;o@ners $!rt. "-%&( 5he right of redemption may be e1ercised by a coBowner only when part of the community property is sold to a stran%er, now when sold to another coBowner because a ne5 participant is not added to the coBownership. 1Fernandez v. 3arun, #/" SC ! -'# $%&&%(. ;hen the seller a retro dies, the right to redeem cannot be e1ercised by a coBheir alone, since the right to redeem belonged in common to all the heirs. xDe 1uz/an v. Court o Appeals, "4. SC ! 7' $"/.7(. Cor the right of redemption to be e1ercised, coBownership must e1ist at the time of the conveyance is made by a coBowner and the redemption is demanded by the other coBowner or coBowners. xAvila v. Bara#at, 4.' SC ! . $%&&-(. edemption by coBowner redounds to the benefit of all other coBowners. 1 Mariano v. Court o Appeals, %%% SC ! 7#- $"//#(+ and the #&Bday period for the commencement of the right to e1ercise the legal redemption right, even when such right has been recogni4ed to e1ist in a final and e1ecutory court decision, does not begin from the entry of ,udgment, but from the written notice served by the seller to the party entitled to e1ercise such redemption right. 1uillen v. Court o Appeals, './ SC ! #// $%&&/(. 5he requisites for the e1ercise of legal redemption are as follows* $"( there must be coB ownership+ $%( one of the coBowners sold his right to a stranger+ $#( the sale was made before the partition of the coBowned property+ $4( the right of redemption must be e1ercised by one or more coBowners within a period of thirty days to be counted from the time he or they were notified in writing by the coBowner vendor+ and $'( the vendee must be reimbursed the price of the sale. Cal/a v. Santos, '/& SC ! #'/ $%&&/(. #. D&st&n!0&s+&n! 1et@een R&!+t of Re-em/t&on of "o;+e&rs n- "o;o@ners 9

"-& "-"

3apas v. Court o Appeals, -/ SC ! #/# $"/7-(. Vda. de Ma$o, v. CA, %&- SC ! %44 $"//%(. "-% Basa v. A%uilar, ""7 SC ! "%. $"/.%(.

46
!rticle "-%& includes the doctrine that a redemption by a coBowner of the property owned in common, even when he uses his own fund, within the period prescribed by law inures to the benefit of all the other coBowners. xAnnie 3an v. Court o Appeals, "7% SC ! --& $"/./(."-# -. Amon! A-Do&n&n! O@ners $!rts. "-%" and"-%%( equisite to show property previously bought on <speculation= dropped. 1 *e%aspi v. CA, -/ SC ! #-& $"/7-(. ight of redemption covers only <resale= and does not cover e1changes or barter of properties 1De Santos v. Cit, o Manila , 4' SC ! 4&/ $"/7%(+ and cannot arise unless both ad,acent lands are rural lands. xPri/ar, Stru$tures Corp. v. Valen$ia, 4&/ SC ! #7" $%&&#(. ;hen there is no issue that when the ad,oining lands involved are both rural lands, then the right of redemption can be e1ercised and the only e1emption provided is when the buyer can show that he did not own any other rural land. Iut the burden of proof to provide for the e1ception lies with the buyer. xPri/ar, Stru$tures Corp. v. Valen$ia, 4&/ SC ! #7", #74 $%&&#(. e. S le of "re-&t &n L&t&! t&on $!rt. "-#4( 9 #& days from notice of demand to pay. 2. <+en .er&o- of Le! l Re-em/t&on 1e!&ns $!rt. "-%#( 5he #&Bday period for the commencement of the right to e1ercise the legal redemption right, even when such right has been recogni4ed to e1ist in a final and e1ecutory court decision, does not begin from the entry of ,udgment, but from the written notice served by the seller to the party entitled to e1ercise such redemption right. 1uillen v. Court o Appeals, './ SC ! #// $%&&/(. 5he interpretation of !rt. "-%# where there is a need for notice in writing, should always tilt in favor of the redemptioner and against the buyer, since the purpose is to reduce the number of participants until the community is terminated, being a hindrance to the development and better administration of the property. <7t is a oneBway street,= in favor of the redemptioner since he can compel the buyer to sell to him but he cannot be compelled by the vendee to buy. 1 Her/oso v. Court o Appeals, #&& SC ! '"- $"//.(. 5he #&Bday period does not begin to run in the absence of written notification coming from the seller. xCua v. Var%as, '&- SC ! #74 $%&&-(+"-4 and it must be a written notice of a perfected sale. 1Spouses Doro/al v. Court o Appeals, -- SC ! '7' $"/7'(. 5he written notice of sale is mandatory, notwithstanding actual 2nowledge of a coBowner, in order to remove all uncertainties about the sale, its terms and conditions, as well as its efficacy and status. 1Verdad v. Court o Appeals, %'- SC ! '/# $"//-(.. :otice to minors may validly be served upon parents even when the latter have not been ,udicially appointed as guardians since the same is beneficial to the children. xBadillo v. Ferrer, "'% SC ! 4&7 $"/.7(. :either the registration of the sale 1Ca#rera v. Villanueva, "-& SC ! -%7 $"/..(, nor the annotation of an adverse claim 1 Vda. De Ape v. Court o Appeals, 4'- SC ! "/# $%&&'(, nor notice being given by the city treasurer 1Verdad v. Court o Appeals, %'- SC ! '/# $"//-(, comply with the written notice required under !rt. "-%# to begin the tolling of the #&Bday period of redemption. 5he notice required under !rticle "-%# is deemed to have been complied with when the other coBowner has signed the Eeed of )1tra,udicial @artition and )1change of Shares which embodies the disposition of part of the property owned in common. 1 Fernandez v. 3arun, #/" SC ! -'# $%&&%(. 5he e1istence of a clause in the deed of sale to the effect that the vendor has complied with the provisions of !rticle "-%#, cannot be ta2en to <being the written affirmation under oath, as well as the evidence, that the required written notice to petitioner under !rticle "-%# has been meet, for the person entitled to the right is not a party to the deed of sale. xPri/ar, Stru$tures Corp. v. Valen$ia, 4&/ SC ! #7" $%&&#(.
2Francisco v. !oiser9 $$2 S"RA $35 (2333) , summari4ed the caseBlaw on !rt. "-%#, and with definitiveness declared* Cor the #&Bday redemption period to begin to run, notice must be given by the seller+ and that notice given by the buyer or even by the egister of Eeeds is not sufficient. 5his e1pressly affirms the original ruling in Butte v. Manuel -, and Sons, 7nc., 4 SC ! '%- $"/-%(, as affirmed in 1Salatandol v. "etes, "-% SC ! '-. $"/..(. 5his e1pressly overruled the ruling in 1 !t$u#an v. CA, "4. SC ! '&7 $"/.7(, which allowed the giving of notice by the buyer to be effective under !rticle "-%#+ ;hen notice is given by the proper party $i.e., the seller(, no particular form of written notice is prescribed under !rticle "-%#, so that the furnishing of the copies of the deeds of sale to the coBowner would be sufficient, as held previously in 1 Distrito v. CA, "/7 SC ! -&- $"//"(+ Cone(ero v. CA, "SC ! 77' $"/--(+ 1Badillo v. Ferrer, "'% SC ! 4&7 $"/.7(, but only on the form of giving notice but not on the ruling of who is the proper party to give notice+
"-# "-4

De 1uz/an v. CA, "4. SC ! 7' $"/.7(+ Adille v. CA, "'7 SC ! 4'' $"/..(. 1ar$ia v. Calali/an, "7 SC ! %&" $"/./(+ Mariano v. Court o Appeals, %%% SC ! 7#- $"//#(.

47
!ffirmed ruling in 1Alonzo v. 'AC, "'& SC ! %'/ $"/.7(, that the filing of the suit for e,ectment or
collection of rentals against a coBowner actually dispenses with the need for a written notice, and must be construed as commencing the running of the period to e1ercise the right of redemption, since the filing of the suit amounted to actual 2nowledge of the sale from which the #&Bday period of redemption commences to run.

. R re EC#e/t&ons* ;hen the sale to the buyer was effected through the coBowner who acted as the bro2er, and never indicated that he would e1ercise his right to redeem. xDistrito v. CA, "/7 SC ! -&- $"//"(. ;hen the buyers too2 possession of the property immediately after the e1ecution of the deed of sale in their favor and lived in the midst of the other coBowners who never questioned the same. 1Pilapil v. CA, %'& SC ! '-& $"//'(. 4. OTHER LE(AL REDE:.TION RI(HTS . Re-em/t&on &n . tents $Sec. ""/, C.!. "4"( ight to repurchase is granted by law and need not be provided for in the deed of sale. xBerin v. Court o Appeals, "/4 SC ! '&. $"//"(. 6nder the free patent or homestead provisions of the @ublic ?and !ct a period of five $'( years from the date of conveyance is provided, to be rec2oned from the date of the sale and not from the date of registration in the office of the egister of Eeeds. 1 *ee C&u, "ealt, Corp. v. CA, %'& SC ! '/- $"//'(."-' %. Re-em/t&on &n T C S les $Sec. %"', :7 C of "//7( #. Re-em/t&on %> B0-!ment De%tor $Secs. %7B%., ule #/, ules of Civil @rocedure( ;ritten notice must be given to the ,udgment debtor before the sale of the property on e1ecution, to give him the opportunity to prevent the sale by paying the ,udgment debt sought to be enforced and the costs which have been incurred. 1 3orres v. Ca#lin%, %7' SC ! #%/ $"//7(. ;here there is a thirdBparty claim, sheriff should demand from the ,udgment creditor who becomes the highest bidder, payment in cash of his bid instead of merely crediting the amount to the partial satisfaction of the ,udgment debt. 13orres v. Ca#lin%, %7' SC ! #%/ $"//7(. 6nder Sec. %., ule #/ of the "//7 ules of Civil @rocedure, the period of redemption shall be <at any time within one $"( year from the date of registration of the certificate of sale,= so that the period is now to be understood as composed of #-' days, unli2e the #-& days under the old provisions of the ules of Court. 10s/ael v. CA, #". SC ! %"' $"///(. -. Re-em/t&on &n ECtr D0-&#& l Fore#los0re $Sec. -, !ct #"#'( 5he redemption of e1traB,udicially foreclosed properties is e1ercised within one $"( year from the date of the auction sale as provided for in !ct #"#'. 1 *ee C&u, "ealt, Corp. v. CA, %'& SC ! '/- $"//'(. 5he e1ecution of a da$ion en pa%o by sellers effectively waives the redemption period normally given a mortgagor. xFirst 1lo#al "ealt, and Dev. Corp. v. San A%ustin, #77 SC ! #4" $%&&%(. e. Re-em/t&on &n D0-&#& l fore#los0re of mort! !e $Sec. 47, .!. .7/"(

! stipulation to render the right to redeem defeasible by an option to buy on the part of the creditor. 2Soriano v. !autista9 6 S"RA 546 (1562). :o right to redeem from a ,udicial foreclosure sale, e1cept those granted by ban2s or ban2ing institutions. 11S'S v. CF', "7' SC ! "/ $"/./(. 5he oneByear redemption period in the case of foreclosure is not interrupted by the filing of an action assailing the validity of the mortgage, so that at the e1piration thereof, the mortgagee who acquires the property at the foreclosure sale can proceed to have title consolidated in his name and a writ of possession issued in his favor. 1-nion Bank v. CAs, #'/ SC ! 4.& $%&&"(."-!fter ban2 has foreclosed the property as highest bidder in the auction sale, the accepted offer of spousesBborrowers to <repurchase= the property was actually a new option contract, and the condition that the spousesBborrowers will pay monthly interest during the oneByear option period is considered to be the separate consideration to hold the option contract valid. xDi(a/$o v. Court o Appeals, 44& SC ! "/& $%&&4(. f. Re-em/t&on &n Fore#los0re %> R0r l 1 n=s $ .!. :o. 7%&( 7f the land is mortgaged to a rural ban2, mortgagor may redeem within two $%( years from the date of foreclosure or from the registration of the sheriffLs certificate of sale at such foreclosure if
"-' "--

Mata v. Court o Appeals, #". SC ! 4"- $"///(. Va$a v. CA, %#4 SC ! "4- $"//4(.

48
the property is not covered or is covered, respectively, by 5orrens title. 7f the mortgagor fails to e1ercise such right, he or his heirs may still repurchase within five $'( years from e1piration of the two $%( year redemption period pursuant to Sec. ""/ of the @ublic ?and !ct $C.!. "4"(. 1 "ural Bank o Davao Cit, v. CA, %"7 SC ! ''4 $"//#(."-7 !. Le! l R&!+t to Re-eem 0n-er A!r r& n Reform "o-e 6nder Section "% of .!. #.44, as amended, in the event that the landholding is sold to a third person without the 2nowledge of the agricultural lessee, the latter is granted by law the right to redeem it within ".& days from notice in writing and at a reasonable price and consideration. 1+uio v. CA, %/" SC ! %4/ $"//.(."-.

KIH. ASSI(N:ENT (Arts. 1624;16$5)

1. Def&n&t&on n- N t0re of Ass&!nment !ssignment is the process of transferring the right of assignor to assignee who would then have the right to proceed against the debtor. 5he assignment may be done gratuitously or onerously, in the latter case, the assignment has an effect similar to that of a sale. x*i$aros v. 1at/aitan, #-% SC ! '4. $%&&"(."-/ 7n its most general and comprehensive sense, an assignment is <a transfer or ma2ing over to another of the whole of any property, real or personal, in possession or in action, or of any estate or right therein. 7t includes transfers of all 2inds of property, and is peculiarly applicable to intangible personal property and, accordingly, it is ordinarily employed to describe the transfer of nonBnegotiable choses in action and of rights in or connected with property as distinguished from the particular item or property.= xPNB v. Court o Appeals, %7% SC ! %/" $"//7(. 2. .erfe#t&on %> :ere "onsent $!rt. "-%4( $. 10t :0st 1e &n .0%l&# Instr0ment to Affe#t T+&r- . rt&es $!rt. "-%'(. 4. Effe#ts of Ass&!nment . Ass&!nment of "re-&t !n assignment of credit is an agreement by virtue of which the owner of a credit, 2nown as the assignor, by a legal cause, such as sale, da$ion en pa%o, e1change or donation, and without the consent of the debtor, transfers his credit and accessory rights to another, 2nown as the assignee, who acquires the power to enforce it to the same e1tent as the assignor could enforce it against the debtor. xA:uinte, v. 3i#on%, '"" SC ! 4"4 $%&&-(."7& !s a consequence, the third party steps into the shoes of the original creditor as subrogee of the latter. !lthough constituting a novation, such assignment does not e1tinguish the obligation under the credit assigned, even when the assignment is effected without his consent. 1 Sout& Cit, Ho/es, 'n$. V. BA Finan$e Corp., #7" SC ! -&# $%&&"(. %. Iss0es re De%tor $!rt. "-%-( 7n an assignment of credit, the consent of the debtor is not essential for its perfection, his 2nowledge thereof or lac2 of it affecting only the efficaciousness or inefficaciousness of any payment he might ma2e. 1Pro(e$t Builders, 'n$. v. Court o Appeals, #'. SC ! -%- $%&&"(. Consent of debtor is not necessary in order that assignment may fully produce legal effects, and the duty to pay does not depend on the consent of the debtor. 3therwise, all creditors would be prevented from assigning their credits because of the possibility of the debtors0 refusal to given consent. ;hat the law requires in an assignment of credit is mere notice to debtor, and the purpose of the notice is only to inform the debtor that from the date of the assignment, payment should be made to the assignee and not to the original creditor. 1 N'DC v. De los An%eles, 4& SC ! 4./ $"/7"(.181 #. A##essor&es n- A##ess&ons $!rt. "-%7( !ssignment of a credit includes all the accessory rights, such as guaranty, mortgage, pledge or preference. 1-nited Planters Su%ar Millin% Co., 'n$. <-PS-MC47 v. Court o Appeals , '%7 SC ! ##- $%&&7(.
"-7 "-.

Heirs o Feli$idad Can:ue v. CA, %7' SC ! 74" $"//7(. Sprin%sun Mana%e/ent S,ste/s Corp. v. Ca/erino, 44/ SC ! -' $%&&'(. "-/ N,$o Sales Corp. v. BA Finan$e Corp., %&& SC ! -#7 $"//"(+ "odri%uez v. CA, %&7 SC ! ''# $"//%(+ Pro(e$t Builders, 'n$. v. Court o Appeals, #'. SC ! -%- $%&&"(. 170 *o v. .)S !$o6For/5ork S,ste/ P&il., 'n$., 4"# SC ! ".% $%&&#(.
"7" Sison 9 Sison v. 0ap 3i$o, #7 @hil. '.7 $"/".(+ C 9 C Co//er$ial Corp. v. PNB, "7' SC ! " $"/./(+ Pro(e$t Builders, 'n$. v. Court o Appeals, #'. SC ! -%- $%&&"(+ .A:uinte, v. 3i#on%, '"" SC ! 4"4 $%&&-(+ *edonio v. Capitol Develop/ent Corp., '%SC ! #7/ $%&&7(.

49
-. Tr -&t&on &n Ass&!nment :otari4ation converts a private document !ssignment of Credit into a public document, thus complying with the mandate of !rticle "-%' of the Civil Code and ma2ing it enforceable even as against third persons. 1*edonio v. Capitol Dev. Corp., '%- SC ! #7/ $%&&7(. 5. < rr nt&es of Ass&!nor $!rt. "-%.( !ssignor warrants only the e1istence or legality of the credit but not the solvency of the debtor. 2Nyco Sales Cor,. v. !& Finance9 233 S"RA 6$8 (1551). EK"E.TIONS, ( ) 7f this is e1pressly warranted. (%) 7f insolvency is 2nown by the assignor prior to assignment. (#) 7f insolvency is prior to assignment is common 2nowledge. ;hen da$ion en pa%o ta2es the form of an assignment of credit, it produces the effects of a dation in payment, which may e1tinguishes the obligation+ however, by virtue of the warranty in !rt. "-%., which ma2es the vendor liable for the e1istence and legality of the credit at the time of sale, when it is shown that the assigned credit no longer e1isted at the time of dation, then it behooves the assignor to ma2e good its warranty and pay the obligation. x*o v. .)S !$o6For/5ork S,ste/ P&il., 'n$., 4"# SC ! ".% $%&&#(. 6. R&!+t of Re/0r#+ se on Ass&!nment of "re-&t 0n-er L&t&! t&on $!rts. "-#4 and"-#'( 8. S0%ro! t&on versus Ass&!nment of "re-&t $!rt."#&"( Subrogation e1tinguishes the obligation and gives rise to a new one+ assignment refers to the same right which passes from one person to another. 5he nullity of an old obligation may be cured by subrogation, such that a new obligation will be perfectly valid+ but the nullity of an obligation is not remedied by the assignment of the creditor0s right to another. 7n an assignment of credit, the consent of the debtor is not necessary in order that the assignment may fully produce legal effects+ whereas, conventional subrogation requires an agreement among the three parties concerned 9 original creditor, debtor, and new creditor. 7t is a new contractual relation based on the mutual agreement among all the necessary parties. 2.icaros v. Gatmaitan9 $62 S"RA 548 (2331).182 8. Ass&!nment of "o/>r&!+t $Sec. ".&, 7ntellectual @roperty Code( 5. Ass&!nment s n EA0&t %le :ort! !e ;hen an assignor e1ecutes a Eeed of !ssignment covering her leasehold rights in order to secure the payment of promissory notes covering the loan she obtained from the ban2, such assignment is equivalent to an equitable mortgage, and the nonBpayment of the loan cannot authori4e the assignee to register the assigned leasehold rights in its name as it would be a violation of !rt. %&.. against pa$tu/ $o//issoriu/. 5he proper remedy of the assignee is to proceed to foreclose on the leasehold right assigned as security for the loan. 1 DBP v. Court o Appeals, %.4 SC ! "4 $"//.(.

KH.

1ULM SALES LA<

(A"T NO. $552)

1. S#o/e $2Chin v. "y9 43 O.(. 4 S0//. 52( 5he Iul2 Sales ?aw must be construed strictly. 5hus, the disposal by the owner of a foundry shop of all his iron bars and others does not fall under the law, because the contents of a foundry shop are not wares and merchandise. 5he ?aw only covers sales in bul2 of fi1tures and equipment used in the mercantile business, which involves the buying and selling of merchandise. xPeople v. ;on%, [C!] '& 3.H. 4.-7 $"/'4(. 5he ?aw applies to merchants who are in the business of selling goods and wares and similar merchandise, and cannot cover the sale of assets by a manufacturer since the nature of his business does not parta2e of merchandise. 2D!P v. #he 5onorable 0udge of the *#C of 6anila 9 86 O.(. No. 6 11$8 (35 Fe%r0 r> 1553). 2. "o)er !e of '10l= S le* 9 Sale, transfer, mortgage or assignment of* ( ) Hoods, wares, merchandise, provisions or material other than in the ordinary course of business+ (%) !ll, or substantially all of all or substantially all of the fi1tures and equipment used in and about the business. (#) !ll, or substantially all of the business or trade theretofore conducted by the vendor, mortgagor, transferor, or assignor+
"7%

*edonio v. Capitol Dev. Corp., '%- SC ! #7/ $%&&7(.

50
$. "om/l& n#e ReA0&rements Un-er t+e L @ . 5he merchant must give the buyer a certified schedule of his debts* names of creditors, amounts owing to each and the nature of the debt. %. @urchase price paid must be applied to these debts. #. 5en $"&( days before the sale, the seller must ta2e an inventory of his stoc2 and advise all his creditors of the same. EK"E.TION, ;hen the seller obtains a written waiver from all creditors. 4. Effe#ts of Non;"om/l& n#e . 7f purchase money or mortgage proceeds are not applied pro6rata to payment of the #ona ide claims of the creditors, the sale is deemed fraudulent and void. $Sec. 4( %. :onBgiving of the list of creditors or intentional omission of the names of some of the creditors, and placing of wrong data required by law, would sub,ect the seller or mortgagor to penal sanctions. $Sec. 4( #. Iul2 transfer without consideration or for nominal consideration punishable. $Sec. 7( -. Cailure to comply with other provisions of the law the nonBapplication of the consideration proportionately to the creditors, the preparation of the inventory, and the notification to creditors, are also made punishable. $Sec. ""( ! sale in bul2 done without complying with the terms of the ?aw, ma2es the transaction fraudulent and void, but does not change the basic relationship between the seller, assignorFencumbrancer and his creditor. 5he portion of a ,udgment providing for subsidiary liability is invalid, since the proper remedy of the creditor is to collect on the credit against the defendant, and if they cannot pay to attach on the property fraudulently mortgage since the same still pertain to the debtorsBdefendants. 1People v. Mapo,, 7# @hil. -7. $"/4%(.

KHI.

OF 2333 AND RELATED .ROHISIONS OF THE ANTI;DU::L LA<

1. .0%l&# .ol&#> 0n-er RTLA 2333, A reversal o paradi%/8 o$us ro/ t&e prote$tin% t&e retailers to pro/otin% t&e interests o $onsu/ers. 2. S#o/e n- Def&n&t&on of 'Ret &l Tr -e* . Im/ort n#e of Ret &le Tr -e $2/ing v. 5ernae79 4 S"RA 852( %. Elements, (1) Seller habitually engaged in selling+ (2) Selling direct to the general public+ and ($) 3b,ect of the sale is limited to merchandise, commodities or goods for consumption. #. :e n&n! of 'H %&t0 ll> Sell&n!* )ngaging in the sale of merchandise as an in$ident to t&e pri/ar, purpose of a corporation [e.%., operation of a pharmacy by a hospital+ sale of cellphones by a telecommunication company] does not constitute <retail trade= within the purview of the etail 5rade :ationali4ation ?aw, as this is ta2en from the provision thereof e1cluding form the term <retail business= the operation of a restaurant by a hotelBowner or B2eeper since the same does not constitute the act of habitually selling direct to the general public merchandise, commodities or goods for consumption. S)C 3pinion :o. "", series of %&&%, "# :ovember %&&%. -. :e n&n! of '"ons0m/t&on* $E3G 3pinion :o. #%', series of "/4'+ 7 of ?aw(.

RETAIL TRADE LI1ERALIOATION A"T

5he ?aw limits its application to the sale of items sold for domestic or household, or properly called consumer goods+ whereas, when the same items are sold to commercial users, they would constitute nonBconsumer goods and not covered by the ?aw. 2!almaceda v. "nion Carbide Phili,,ines )nc. 124 S"RA 85$ (158$)."7# e. :e n&n! of '(ener l .0%l&#* $E3G 3pinion :o. %'#, series of "/'4(. )ven when the same of consumer goods is limited only to the officers of the company, the same would still constitute retail trade covered by the ?aw. 2Goodyear #ire v. *eyes Sr. 9 12$ S"RA 28$ (158$). ;here the glass company manufactures glass products only on specific orders, it does not sell directly to consumers but manufacturers its products only for the particular clients, it cannot
Mars/an 9 Co., 'n$. v. First Co$onut Central Co., 'n$. , "-% SC ! %&- $"/..(+ B.F. 1oodri$& P&ilippines, 'n$. v. "e,es, Sr. , "%" SC ! #-# $"/.#(.
"7#

51
be said that it is a merchandiser. 2D!P v. 5onorable 0udge of the *#C of 6anila 9 86 O.(. No. 6 11$8 (35 Fe%r0 r> 1553). $. " te!or&es of Ret &l Tr -e Enter/r&ses . " te!or> A P EC#l0s&)e to F&l&/&no #&t&Nens n- 133Q F&l&/&no ent&t&es %. " te!or&es 1 n- " #. " te!or> D P L0C0r> Items -. ECem/te- Are s e. R&!+ts (r nte- to Former N t0r l;1orn F&l&/&nos 4. Fore&!n In)estment or En! !e &n Ret &l Tr -e &n t+e .+&l&//&nes . ReA0&rements for Fore&!n In)estors %. (r n-f t+er R0le on 133Q F&l&/&no O@ners+&/ of "or/or te Ent&t>, S)C 3pinions, dated %& Darch "/7% and %% !pril "/.#+ E57 3pinion to 5anada, 5eehan2ee O Carreon ?aw 3ffice, dated # !ugust "/'/. #. .0%l&# Offer&n!s of S+ res of Sto#= 5. Fore&!n Ret &lers &n t+e .+&l&//&nes . .re;A0 l&f&# t&on reA0&rements %. R0les on 1r n#+esJStores #. .romot&on of Lo# ll>;: n0f #t0re- .ro-0#ts -. .ro+&%&te- A#t&)&t&es of Fore&!n Ret &lers e. 1&n-&n! Effe#t of L&#ense to En! !e &n Ret &l on .r&) te . rt&es ;hen a license to engage in coc2tail lounge and restaurant is issued to a Cilipino citi4en, it is conclusive evidence of the latterLs ownership of the retail business as far as private parties are concerned. 1Dando v. Fraser, %%7 SC ! "%- $"//#(. 6. .en lt> .ro)&s&ons 8. A//l&# %&l&t> of t+e Ant&;D0mm> A#t $Comm. !ct. "&., as amended by @.E. 7"'( . ?aw penali4es Cilipinos who permit aliens to use them as nominees or dummies to en,oy privileges reserved for Cilipinos or Cilipino corporations. Criminal sanctions are imposed on the president, manager, board member or persons in charge of the violating entity and causing the latter to forfeit its privileges, rights and franchises. %. Section %B! of the ?aw prohibits aliens from intervening in the management, operation, administration or control of nationali4ed business, whether as officers, employees or laborers, with or without remuneration. !liens may not ta2e part in technical aspects, provided no Cilipino can do such technical wor2, and with e1press authority from the @resident of the @hilippines. #. ?ater, @res. Eecree 7"' was enacted amending the law by the addition of a proviso e1pressly allowing the election of aliens as members of the boards of directors or the governing bodies of corporations or associations engaged in partially nationali4ed activities in proportion to their allowable participation or share in the capital of such entities. 5he amendment was meant to settle the uncertainty created in the o#iter opinion in *uzon Stevedorin% Corp. v. Anti6Du//, Board , 4- SC ! 474 $"/7%(, which re,ected the argument of a public utility corporation that had noB!merican aliens in its employ, that the !ntiBEummy ?aw covered only employment in wholly nationali4ed businesses and not in those that are only partly nationali4ed. 5he Cilipino commonBlaw wife of a Chinese national is not barred from engaging in the retail business provided she uses capital e1clusively derived from her paraphernal properties+ allowing her commonBlaw Chinese husband to ta2e part in management of the retail business would be a violation of the law. x3alan v. People, "-/ SC ! '.- $"/./(.

RoOoR
U.DATED, 31 BUNE 2313I 634 S"RA