!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !

"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Finals Reviewer
BECAUSE SHARING IS LOVING

A new command I give you: Love one another.
As I have loved you, so you must love one another
By this everyone will know that you are my disciples,
if you love one another.
John 13: 34-35

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1A8LL CI CCN1LN1S

Chapter I. 1he Nature Cf Sa|e

l. ueflnlLlon (ArLlcle 1438)
A. LlemenLs Cf Sale
8. SLages Cf ConLracL Cf Sale
a. !"#$%$&'%$"(
b. !)*+)%&$"(
c. ,"(-.//'&$"(
C. Sale CreaLes 8eal CbllgaLlons 1o Clve" (ArLlcle 1163)
a. naLure Cf CbllgaLlon CreaLed ln A Sale
u. LssenLlal CharacLerlsLlcs Cf Sale:
a. nomlnaLe And rlnclpal
b. Consensual (ArLlcle 1473) [!"#$%&'("$% *+ !,- ,%".$/
0%*+ !1('+ 234 -!,5 678 98::7;]
c. 8llaLeral And 8eclprocal (ArLlcles 1169 and 1191)
[!1($%< *+ !1=($ 1> 5''%".<? 676 -!,5 24: 98::@;A
!1#B(%B"$C1# 1> $D% ,%.CBC1=< 1> $D% EC(BC# F"(/ *+
G(1."? 22H -!,5 243 98::3;]
d. Cnerous [I"C$% *+ J1#"KC%(? 8 -!,5 3H: 9L7@L;]
e. CommuLaLlve [M=%#"*%#$=(" *+ !1=($ 1> 5''%".<? 6L@
-!,5 8@H 98::H;]
f. Sale ls 1lLle And noL Mode

ll. Sale ulsLlngulshed lrom Slmllar ConLracLs
A. uonaLlon (ArLlcles 723 and 1471)
1. Sale v. uonaLlon
2. needs lor 8elng Able 1o ulsLlngulsh
8. 8arLer (ArLlcles 1468, 1638 Lo 1641)
1. ueflnlLlon
2. 8ules 1o ulfferenLlaLe Sale lrom 8arLer (ArLlcle 1468)
3. 1wo lnsLances Where ulfference ls CrlLlcal
C. ConLracL lor lece-Cf-Work (ArLlcles 1467, 1713 Lo 1713)
1. ueflnlLlon
2. SLaLuLory 8ules 1o ulsLlngulsh Sale lrom A lece Cf
Work ConLracL (ArLlcle 1467)
a. PablLuallLy 1esL [!%.%<$C#1 N !1+ *+ !1..%K$1(? 77
ODC.+ 36L 9L72@;0 !1&&C<<C1#%( 1> P#$%(#".
,%*%#=% *+ Q#BC#%%(C#B QR=C'&%#$ N -=''./
!1+? @6 -!,5 27: 9L742;]
b. 1he 1esL Cf Speclal Crders" ls noL Cne Cf
1lmlng
3. racLlcal needs lor 8elng Able 1o ulsLlngulsh
u. Agency 1o Sell (ArLlcle 1466)
a. ueflnlLlon
b. ulsLlngulshlng Sale lrom Agency
c. SLaLuLory 8ule (ArLlcle 1466) [S=C(1B" *+
O"(<1#<, H3 ODC.+ 2:L 9L7L3;0 O=/"$ *+ 5(K1
5&=<%&%#$ !1+? 48 ODC.+ 6:8 9L76L;]
d. value lor 8elng Able 1o ulsLlngulsh
L. 2'%$"( 3( !'4" (ArLlcles 1243 And 1934)
1. LlemenLs Cf uaLlon ln aymenL [T1 *+ UV- QK1W
J1(&X1(Y -/<$%& ODC.+? P#K+, 6LH -!,5 L38 98::H;]
l. Lease (ArLlcles 1484 And 1483)
A. ueflnlLlon

~C~

Chapter II. art|es 1o A Contract Cf Sa|es (Art|c|es 1489-1492)

l. Ceneral 8ule:

ll. Mlnors, lnsane And uemenLed ersons, ueaf-MuLes (ArLlcles 1327,
1397 And 1399)
A. necessarles (ArLlcles 1489 And 290)
8. LmanclpaLlon (ArLlcles 399 And 1397, lnuLlle: Ma[orlLy age now
aL 18 years, ArLlcles 234 and 236, lamlly Code, amended by 8.A.
6809).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
C. roLecLlon Cf 1he Senlle And Llderly (ArLlcle 24) And llllLeraLes
(ArLlcle 1332) [O"("B"< *+ Z%C(< 1> 01&C#"[1( M"."K"#1, 6@3
-!,5 4L4 98::2;]

lll. Sales 8y And 8eLween Spouses:
A. ConLracLs WlLh 1hlrd arLles (ArLlcles 73, 96, And 124, lamlly
Code)
8. 8eLween Spouses (ArLlcles 133, 1490, 1492, Sec. 87, lamlly
Code)
1. SLaLus Cf rohlblLed Sales 8eLween Spouses
2. 8aLlonale lor rohlblLlon
3. 8aLlonale lor LxcepLlons 1o rohlblLlon under ArLlcle
1490
4. AppllcablllLy Cf lncapaclLy 1o Common Law Spouses
[!".C&.C&W!"#=.."< *+ J1($=#? L87 -!,5 @42 9L736;]

lv. CLhers 8elaLlvely ulsquallfled (ArLlcles 1491 And 1492)
1. Legal SLaLus Cf ConLracLs LnLered lnLo ln vlolaLlon Cf
ArLlcles 1491 And 1942: vold [,=\C"< *+ M"$C..%(, 2L
-!,5 L8: 9L74H;]
2. ulfferenL lorm Cf 8aLlflcaLlon"
3. roper arLy 1o 8alse lssue Cf nulllLy
4. lraud Cr Leslon noL 8elevanL lor nulllLy
A. AgenLs
8. Cuardlans And AdmlnlsLraLors [ODC.C''C#% ](=<$ !1+ *+ ,1.["#,
77 ODC.+ H78 9L72@;]
C. ALLorneys
1. 8eason lor 1he rohlblLlon
2. AppllcablllLy Cf 1he rohlblLlon
3. Where rohlblLlon uoes noL Apply [J"\C..1 *+ P5!? L72
-!,5 83 9L77L;]
u. !udges

~C~

Chapter III. Sub[ect Matter Cf Sa|e (Art|c|e 14S9-146S)

A. 8equlslLes lor A valld Sub[ecL MaLLer [O1./$%KD#CK ^#C*%(<C$/ *+
!1=($ 1> 5''%".<? H@3 -!,5 @7L 98::L;]
8. LffecL Cf Absence Cf Any 8equlslLe

l. MusL 8e LxlsLlng, luLure Cr ConLlngenL (ArLlcles 1347, 1348, And
1462)
A. 3/5&$" 6)$ 75)*'&') (ArLlcles 1461 And 1347)
8. 3/5&$" 75)$ (ArLlcle 1461)
C. Sub[ecL 1o 8esoluLory CondlLlon (ArLlcle 1463)

ll. MusL 8e LlclL
A. Sub[ecL MaLLer MusL 8e LlclL
8. Sales ueclared lllegal 8y Law

lll. MusL 8e ueLermlnaLe Cr AL LeasL ueLermlnable" (ArLlcle 1460)
A. Meanlng Cf ueLermlnaLe Cr ueLermlnable
1. A 1hlng ls ls ueLermlnaLe Cr Speclflc When lL ls:
2. 1esLs
3. 1esL Cf ueLermlnablllLy ls 1he MeeLlng Cf Mlnds Cf
arLles And noL 1he Coverlng ueed [5$C."#1 *+ 5$C."#1,
83 -!,5 8HL 9L7@7;]
4. lf 1he Sub[ecL MaLLer ls nelLher ueLermlnaLe Cr
ueLermlnable, 1he ConLracL ls vold
8. Cenerlc 1hlngs May 8e Cb[ecL Cf Sale
1. Cenerlc non-ueLermlnable Cb[ecLs [F%..C_" *+ !C$/ 1>
P.1C.1? 8H -!,5 644 9L7@3;A `= ]%Y N !1+ *+ I1#_".%<, 87
ODC.+ H36 9L7L2;]
2. ower Cf 1he CourLs 1o SeL CuallLy SLandard
C. lnsLances Where A Sale Wlll Clve 8lse 1o A Co-Cwnershlp,
1. Sale Cf An undlvlded lnLeresL (ArLlcle 1463)
2. Sale Cf An undlvlded Share ln A Mass Cf lunglble
1hlngs (ArLlcle 1464)

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
lv. CuanLlLy Cf Sub[ecL MaLLer noL LssenLlal lor erfecLlon? (ArLlcle
1349) [a"$C1#". I("C#< 5=$D1(C$/ *+ P5!? L4L -!,5 LHL 9L737;A
V1D"##%< -KD=\"KY N -1#< ODC.+ ]("[C#B !1('+ *+ !1=($ 1> 5''%".<, 884
-!,5 4L7 9L77H;8]

v. Seller's CbllgaLlon 1o 1ransfer 1lLle 1o 8uyer (ArLlcle 1439, 1462, And
1303)
A. Seller's Cwnershlp need noL LxlsL AL erfecLlon: [a11. *+ !1=($
1> 5''%".<? 84@ -!,5 L67 9L774;]
8. SubsequenL AcqulslLlon Cf 1lLle 8y non-Cwner Seller (ArLlcle
1434)
C. AcqulslLlon 8y 1he 8uyer May Lven uepend Cn ConLlngency
(ArLlcle 1462).

vl. lllegallLy Cf Sub[ecL MaLLer (ArLlcles 1409, 1438, 1461, 1462, And
1373)
A. Speclal Laws:
8. lollowlng Sales Cf Land vold:

~C~

Chapter IV. r|ce And Cther Cons|derat|on (Art|c|es 1469-1474)

l. Meanlng Cf rlce
A. 8equlslLes Cf A valld rlce

ll. rlce MusL 8e 8eal
A. When rlce ls 8eal
8. When rlce SlmulaLed" (Abso|ute|y S|mu|ated ! Vo|d)
1. [F"'".1 E+ F"'".1, L4 -K(" LL6 9L7@@;A ,1#B"*C.." E+
!1=($ G> 5''%".<? 876 -K(" 837 9L773;+]
2. [F"$% E+ !1=($ G> 5''%".<? 87: -K(" 6@H 9L773;A `= M=#
I="# E+ G#B? H@4 -K(" 227 98::L;]
3. LffecLs When rlce SlmulaLed
C. When rlce ls lalse" (ArLlcles 1333 And 1334) (8elaLlvely
SlmulaLed ! valld, 8eformaLlon)
u. non-aymenL Cf rlce
1. lallure 1o ay 1he rlce uoes noL Make 1he ConLracL
vold
2. 8adge 1haL rlce ls SlmulaLed, noL !usL unpald:

lll. MusL 8e ln Money Cr lLs LqulvalenL (ArLlcles 1438 And 1468) [G#B *+
G#B? LH7 -!,5 LHH 9L732;A M"B#"< *+ !1=($ 1> 5''%".<? L4@ -!,5 L27
9L737;0 ,%'=\.CK *+ ODC.+ ,%<1=(K%< 0%*+? L:8 ODC.+ 7@: 9L723;]

lv. MusL 8e CerLaln Cr AscerLalnable AL erfecLlon (ArLlcle 1469)
A. Pow rlce ueLermlned 1o 8e AscerLalnable
1. SeL 8y 1hlrd erson AppolnLed AL erfecLlon (ArLlcle
1469)
2. SeL 8y 1he CourLs (ArLlcle 1469)
3. 8y 8eference 1o A ueflnlLe uay, arLlcular Lxchange Cr
MarkeL (ArLlcle 1472)
4. 8y 8eference 1o AnoLher 1hlng CerLaln, Such As 1o
lnvolces 1hen ln LxlsLence And.
8. rlce never SeL 8y Cne Cr 8oLh arLles (ArLlcles 1473, 1182),
9(#)-- :;) !*$%) <- 7)5'*'&)#= >%%)5&)? @= :;) A&;)* !'*&=.
C. LffecLs Cf un-AscerLalnablllLy: 7'#) <- <()++$%'%$".-.
1. When rlce Can'L 8e ueLermlned ln Accordance WlLh
Any Cf 1he recedlng 8ules - Sale ls lnefflcaclous
2. 8uL: lf 8uyer ApproprlaLes 1he Cb[ecL, Pe MusL ay
8easonable rlce (ArLlcle 1474).
3. 1here Can 8e no ConcepL Cf ApproprlaLlon" When lL
Comes 1o Land?
u. Manner Cf aymenL Cf rlce LssenLlal

v. Manner Cf aymenL Cf rlce LssenLlal (ArLlcle 1179)
A. Ceneral olnLs [a"*"((" *+ O."#$%(< 0%*+ M"#Y, S27 SCkA S62
(2007)]
8. roper undersLandlng Cf Manner Cf aymenL
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

vl. lnadequacy Cf rlce uoes noL AffecL Crdlnary Sale (ArLlcles 1333
And 1470)
1. LffecL Cf lnadequacy
2. ulsLlngulshed lrom SlmulaLed rlce
A. Cross lnadequacy Cf rlce May Avold B.?$%$'# 7'#)C (LxcepLlon
1o 1he Ceneral 8ule 1haL CourLs CannoL lnLerfere And SeL A
rlce lor Sale)
1. 8equlslLes lor nulllLy Cf A !udlclal Sale
2. LxcepLlon
3. 8u1: When 8lghL Cf 8edempLlon Pas 8een LosL
8. Leslon Cf More 1han 1/4 Cf value Cf 1hlng Makes Sale
8esclsslble unless Approved 8y CourL (ArLlcle 1386)
C. Cross lnadequacy Cf rlce May 8alse 1he resumpLlon Cf
LqulLable MorLgage (ArLlcle 1602)
u. Sales WlLh 8lghL 1o 8epurchase

vll. 8ullngs Cn 8ecelpLs And CLher uocumenLs Lmbodylng rlce

~C~

Chapter V. Iormat|on Cf Contract Cf Sa|e (Art|c|es 147S-1488)

l. SLages ln 1he Llfe Cf Sale

ll. !"#$%$&'%$"( SLage (ArLlcle 1479) [F"#C." F%$". !1#$"C#%( !1('+ *+
OaM, 2LL -!,5 666 98::@;A F=<.C& "#[ !D(C<$C"# ^(\"# O11(
5<<1KC"$C1#? P#K+ *+ M,`!WE 0%*%.1'&%#$ !1('+? 276 -!,5 486 98::7;]
A. CpLlon ConLracL
1. ueflnlLlon And Lssence Cf CpLlon ConLracL [!"(K%..%( *+
!1=($ 1> 5''%".<? H:8 -!,5 4L3 9L777;, ]"/"B *+
T"K<1#? 68@ -!,5 838 98::6;]
2. LlemenLs Cf A valld CpLlon ConLracL
3. ConLracL Cf Sale v. CpLlon ConLracL
4. Meanlng Cf SeparaLe ConslderaLlon" (ArLlcles 1479
And 1324) [EC.."&1( *+ !1=($ 1> 5''%".<? 8:8 -!,5 @:4
9L77L;]
3. no SeparaLe ConslderaLlon: vold As CpLlon, valld As A
CerLaln Cffer [-"#KD%_ *+ ,CB1<? 62 -!,5 H@3 9L748;]
6. 1here MusL 8e AccepLance Cf CpLlon Cffer [E"_R=%_ *+
!5? L77 -!,5 L:8 9L77L;]
7. roper Lxerclse Cf CpLlon ConLracL [aC%$%< *+ !5, 46
-!,5 @26 9L748;]
8. CpLlon noL ueemed arL Cf 8enewal Cf Lease
9. erlod Cf Lxerclse Cf CpLlon
*Summary of 8ules When erlod ls CranLed 1o romlsee
8. 8lghL Cf llrsL 8efusal
1. ueflnlLlon
2. 8aslc ConcepLs ln 1he 8lghL Cf llrsL 8efusal [5#B `=
5<=#KC1# *+ !1=($ 1> 5''%".<? 8H3 -!,5 @:8 9L776;A
E"<R=%_ *+ 5/"." !1('+? 66H -!,5 8HL 98::6;A ,C*C%("
JC.C'C#"? P#*+ *+ !1=($ 1> 5''%".<? H3: -!,5 862 98::8;]
3. Pow 1o Comply WlLh 1he 8lghL Cf llrsL 8efusal When
1he Seller uecldes 1o Sell
4. AcLlon lf 1he 8lghL 1o llrsL 8efusal ls 8reached
[QR="$1(C". ,%".$/ 0%*+? P#K+ *+ F"/>"C( ]D%"$%(? P#K+?
8@6 -!,5 63H 9L77@;A O"("#"R=% UC#B< Q#$%('(C<%<? P#K+
*+ !5? 8@3 -!,5 484? 46L 9L774;]
3. 8lghL Cf llrsL 8efusal Lmbodled ln A Lease AgreemenL
6. 8lghL Cf llrsL 8efusal v. CpLlon ConLracL
*!"#$#%&' )#*+",-& #- .$+,#- /#-+"0*+% 1,%-!-vls 8lghL of
llrsL 8efusal
C. MuLual romlses 1o 8uy And Sell (ArLlcle 1479): :*.) ,"(&*'%&
:" 7)##" [F"KC1# *+ I=C"#C? 882 -!,5 L:8 9L77H;]

lll. erfecLlon SLage (ArLlcles 1473, 1319, 1323 And 1326)
A. 8equlslLe lor erfecLlon - MuLual ConsenL Lvldenced 8y:
1. Cffer MusL 8e CerLaln
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
2. AbsoluLe AccepLance Cf A CerLaln Cffer
8. AbsoluLe AccepLance Cf A CerLaln Cffer (ArLlcle 1473)
1. AccepLance May 8e Lxpress Cr lmplled
2. AccepLance 8y LeLLer Cr 1elegram
3. AccepLance Sub[ecL 1o A Suspenslve CondlLlon, <+ 7'#)
7.DE)%& :" 7.-5)(-$F) ,"(?$&$"(C
C. When uevlaLlon" Allowed:
u. Sale 8y AucLlon (ArLlcles 1476, 1403(2)(u), 1326) [EC..1#K1 *+
M1(&"D%K1? @2 -!,5 H28 9L742;]
L. LarnesL Money (ArLlcle 1482)
1. LarnesL Money ln A ConLracL Cf Sale
2. LarnesL Money ln A ConLracL 1o Sell
3. LarnesL Money ln A CondlLlonal ConLracL Cf Sale
4. varylng 1reaLmenLs Cf LarnesL Money
l. ulfference 8eLween LarnesL Money And CpLlon Money [G%<&%(
*+ O"("C<1 0%*+ !1('+? 2L6 -!,5 883 98::4;]
C. Sale ueemed erfecLed Where Cffer Was Made. (ArLlcle 1319)
P. LffecL Cf 8ecesslon Cn LarnesL Money 8ecelved
l. lace Cf erfecLlon
!. Lxpenses Cf LxecuLlon And 8eglsLraLlon
k. erformance Should noL AffecL erfecLlon

lv. lormal 8equlremenLs Cf Sales (ArLlcles 1337, 1338, 1406 And 1483)
A. lorm noL lmporLanL lor valldlLy Cf Sale
1. CLher 8ullngs Cn ueeds Cf Sale:
2. value Cf 8uslness lorms 1o rove Sale
8. When lorm lmporLanL ln Sale
1. 1o 8lnd 1hlrd arLles [J=.% *+ !5, 83@ -!,5 @73 9L773;0
0".C1# *+ !5? L38 -!,5 348 9L77:;A -%K=/" *+ E["+ 0%
-%.&"? H8@ -!,5 866 98:::;]
2. lor LnforceablllLy 8eLween 1he arLles: SLaLuLe Cf
lrauds (ArLlcles 1403 And 1403) [`=*C%#BK1 *+
0"K=/K=/? L:6 -!,5 @@3 9L73L;A TC&Y%$Y"C -1#<
FC..C#B? P#K+ *+ !5? 822 -!,5 @ 9L77@;A 8@L -!,5 6@6
9L77@), G($%B" *+ T%1#"([1? L:H ODC.+ 34: 9L723;A
!."=[%. *+ !1=($ 1> 5''%".<? L77 -!,5 LLH 9L77L;A
5.>(%[1 *+ M1(("<? 6:6 -!,5 L62 98::H;A ]1/1$" -D"X?
P#K+ *+ !1=($ 1> 5''%".<? 866 -!,5 H8: 9L772;]
3. lor valldlLy: Sale Cf 8ealLy 1hrough AgenL, AuLhorlLy
MusL 8e ln WrlLlng (ArLlcle 1874)
4. Sale Cf Large CaLLle (ArLlcle 1381, SecLlon 329, 8evlsed
Adm. Code)
3. Sales LffecLed as LlecLronlc Commerce (8.A. no. 8792)
6. lorm ln LqulLable MorLgage Clalms
7. lorm ln Sales on 8eLurn or Approval" (ArLlcle 1302)
8. 8lghL of llrsL 8efusal MusL 8e ConLalned ln WrlLLen
ConLracL

v. SlmulaLed Sales
A. 8equlslLes Cf SlmulaLed Sales
8. 8adges And non-8adges Cf SlmulaLlon
C. When MoLlve nulllfles 1he Sale
u. 8emedles Allowed When Sale SlmulaLed
L. LffecL When Sale ueclared vold

~C~

Chapter VI. Consummat|on (Art|c|es 1493-1S06) And erformance Cf
Contract Cf Sa|e (Art|c|es 1S36-1S44, 1S82-1S90)

l. CbllgaLlons Cf Seller
A. reserve Sub[ecL MaLLer (ArLlcle 1163)
8. uellver WlLh lrulLs And Accessorles (ArLlcles 1164, 1166, 1493,
1337)
C. uellver 1he Sub[ecL MaLLer (ArLlcle 1477)
1. Legal remlses lor uocLrlnes Cn 1radlLlon
2. Ceneral uocLrlnes Cn 1radlLlon, WheLher AcLual Cr
ConsLrucLlve:
3. Lssence of 1radlLlon (ArLlcle 1496)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
4. hyslcal uellvery (ArLlcle 1497)
3. ConsLrucLlve uellvery: LxecuLlon Cf A ubllc lnsLrumenL
(ArLlcle 1498)
l. As 1o Movables (ArLlcles 1498-1499,
1313-1314) [0/? V(+ *+ !5, L73 -!,5 38@
9L77L;]
ll. As 1o lmmovables (ArLlcle 1498)
[-"#$1< *+ -"#$1<? H@@ -!,5 H72
98::L;]
1. Cases Where LxecuLlon Cf
ubllc lnsLrumenL Coverlng
valld Sales uo noL roduce 1he
LffecLs Cf 1radlLlon [5[[C<1# E+
J%.Cb? H3 ODC.+ 6:6 9L7L3;]
a. Genera| ku|e:
[0"#B=C."# *+ P5!, 168
SCkA 22 (1988),
O"<"B=C *+ EC.."\."#K",
68 SCkA 18 (197S)]
b. Lxcept|on: [O1X%(
!1&&%(KC". 5#[
P#[=<$(C". !1('+ E+ !"?
846 -!,5 274 9L774;]
2. 8eglsLraLlon Cf 1lLle ls SeparaLe
Mode lrom LxecuLlon Cf ubllc
lnsLrumenL [!D=" *+ !1=($ 1>
5''%".<? 401 SCkA S4 (2003)]
l. 8uL SeeC [EC*%
Q"B.% T"#[? P#K+
E+ !1=($ G>
5''%".<? 666
-!,5 662
98::6;]
3. CusLomary SLeps ln Selllng
lmmovables
lll. As 1o lncorporeal roperLy (ArLlcles
1498 And 1301).
6. Symbollc uellvery
7. ConsLlLuLum ossessorlum (ArLlcle 1300)
8. 1radlLlo 8revl Manu
9. 1radlLlo Longa Manu
10. uellvery by negoLlable uocumenL of 1lLle
u. 1ransfer Cwnershlp 1o vendee upon uellvery (ArLlcles 1477,
1478, And 1496)
1. 2 1hlngs MusL 8e resenL 1o Make uellvery roduce lLs
Legal LffecL
2. 1o Whom uellvery MusL 8e Made
3. When 8uyer 8efuses 1o AccepL (ArLlcle 1388)
4. ln Case Cf Lxpress Cr lmplled 8eservaLlon (ArLlcles
1478 And 1303)
L. 1aklng-CuL lnsurance Coverage (ArLlcle 1323)
l. 1lme And lace Cf uellvery (ArLlcle 1321)
C. Lxpenses Cf LxecuLlon And 8eglsLraLlon (ArLlcle 1487), And Cf
uLLlng Coods ln uellverable LsLaLe (ArLlcle 1321)
1. Lxpenses Cf LxecuLlon And 8eglsLraLlon
2. Lxpenses Cf uellvery And 8eglsLraLlon on 8eal LsLaLe
3. Lxpenses Cf uellvery lor Movables

ll. Speclal 8ules Cn CompleLeness Cf uellvery
A. ln Case Cf Movables (ArLlcle 1322 And 1337, 1480)
1. When Coods Peld 8y 1hlrd arLy
2. 8eservaLlon Cf Cwnershlp
3. 8ules Cn uellvery 1o Carrler (ArLlcle 1323)
l. lAS Sales
ll. lC8 Sales [M%D# F%/%( N !1+ *+ `"#BK1? H3
ODC.+ @:8? @:@ 9L7L3;]
lll. Cll Sales [I%#%(". J11[< *+ a5!G!G? L:: ODC.+
HH4 9L72@;0 O"KC>CK E%B%$"\.% GC. !1('+ *+
-C#B_1#? -='(%&% !1=($ 5[*"#K% 0%KC<C1#<? 87
5'(C. L722]
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
4. CbllgaLlon As 1o Accessorles And Accesslons
3. Sales ln Mass Cf Movables
6. Sale Cn Approval, 1rlal Cr SaLlsfacLlon (ArLlcle 1302)
7. Sale 8y uescrlpLlon And/Cr Sample (ArLlcle 1481)
8. 8uyer's 8lghL 1o lnspecL 8efore AccepLance (ArLlcles
1481 And 1384) LxcepL When Carrler uellvers Cod.
8. ln Case Cf lmmovables
1. Where Sold er unlL Cr number (ArLlcles 1339 And
1340) [,=[1.> TC%$_? P#K+ *+ !1=($ 1> 5''%".<, 643 -!,5
62L 98::2;]
2. Where Sold lor A Lump Sum [> ,.)*5" ,$)*&" Cr !"*
!*)%$" >#G'?"H] (ArLlcle 1342)
3. Lump Sum Sale v. Sale 8y unlL Cf Measure Cr number
4. Where lmmovables Sold ln Mass

lll. uouble Sales (ArLlcles 1344 And 1163)
A. 8ule Cn uouble Sales MusL 8e Consldered As 8ules Cn 1radlLlon
8. 1wo ulvergenL SysLems When lL Comes 1o Land, rlorlLy Cf
1orrens SysLem Cf 8eglsLraLlon [a""X"# !1&&=#C$/ ,=(".
M"#Y? P#K+ *+ !1=($ 1> 5''%".<? H72 -!,5 6H 98::H;A a"*". *+
!1=($ 1> 5''%".<? 63H -!,5 L:8 98::@;]
C. 1esLs Appllcable under ArLlcle 1344: [!"(C..1 *+ !1=($ 1>
5''%".<? 2:H -!,5 @@ 98::@;]
A. Maln 8ule under ArLlcle 1344 [!"(\1#%.. *+ !5? @7 -!,5 77
9L74@;]
u. 8equlslLes lor uouble Sale: [!D%#B E+ I%#"$1? H:: -!,5 488
9L773;]
1. 1here MusL 8e 1wo ulfferenL valld SalesC ArLlcle 1344
uoes noL Apply Where: [-"# T1(%#_1 0%*+ !1('+ *+
!1=($ 1> 5''%".<, 667 -!,5 77 98::2;]
l. uocLrlne Cn CondlLlonal Sales/ConLracLs 1o Sell
And Adverse Clalms [F%#[1_" *+ U"."X? 68
ODC.+ 8H@ 9L78L;A 5[".C# *+ !5, 83: -!,5 2H@
9L774;]
2. LxacL Same Sub[ecL MaLLer
3. LxacL Same Seller lor 8oLh Sales [!1#<1.C["$%[ ,=(".
M"#Y 9!"B"/"# E"..%/;? P#K+ *+ !1=($ 1> 5''%".<, 448
SCkA 347 (200S;]
4. 1he 1wo Cr More 8uyers AL Cdds Cver 1he 8lghLful
Cwnershlp Cf 1he Sub[ecL MaLLer MusL Lach 8epresenL
ConfllcLlng lnLeresLs
L. 8eglsLraLlon ln Cood lalLh As llrsL rlorlLy
1. Meanlng Cf 8eglsLraLlon"
2. 8eglsLraLlon MusL Always 8e ln Cood lalLh
3. knowledge Cf llrsL 8uyer Cf 1he Second Sale uoes noL
AmounL 1o 8eglsLraLlon ln lavor Cf 1he Second 8uyer
4. 8eglsLraLlon ln Cood lalLh Always re-LmpLs ossesslon
ln Cood lalLh
l. ossesslon 8efers 8oLh 1o MaLerlal And Symbollc ossesslon
C. Who ls urchaser ln Cood lalLh? [Q<$"$% 1> TC#1 G."B=%( *+
G#Bc1K1? 2@H -!,5 H4H 98::3;]
1. 8equlslLes of Cood lalLh
2. 8urden Cf roof
3. lnsLances When no Cood lalLh:
l. 8elng ln 8uslness Cn 8ealLy
ll. Close 8elaLlonshlp
lll. Cross lnadequacy Cf rlce
lv. CbllgaLlon 1o lnvesLlgaLe Cr 1o lollow Leads
v. When Lhere are sLlpulaLlons ln Lhe deed
showlng bad falLh
vl. Land ln Adverse ossesslon
vll. LxlsLence Cf Lls endens Cr Adverse Clalm
vlll. AnnoLaLlon Cf Llen ln SeLLlemenL Cf LsLaLe
lx. When ArLlcle 1344 uoes noL Apply, rlorlLy ln
1lme 8ule Applles
x. When Sub[ecL Cf Sale ls unreglsLered Land
[5\(CB1 *+ 0% E%(", 6H8 -!,5 266 98::6;A
0"B='"# ]("[C#B !1+ *+ F"K"&, L6 -!,5 L47
9L7@2;A !"(=&\" *+ !1=($ 1> 5''%".<? HL -!,5
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
223 9L74:;A 5K"\". *+ 5K"\".? 626 -!,5 222
98::2;]

lv. CbllgaLlons Cf 8uyer
A. ay 1he rlce (ArLlcle 1382)
8. AccepL uellvery (ArLlcles 1382-1383)
1. CpporLunlLy Lo lnspecL Coods (ArLlcle 1384)
2. LffecL Cf AccepLance Cf Coods Cn Seller's WarranLy
(ArLlcle 1386)
3. 8efusal 1o AccepL Coods (ArLlcle 1387 and 1388)

~C~

Chapter VII. Documents Cf 1|t|e (Art|c|es 1S07-1S20)

l. ueflnlLlon (ArLlcle 1636)

ll. urpose Cf uocumenLs Cf 1lLle,
A. 2 luncLlons

lll. negoLlable uocumenLs Cf 1lLle
A. negoLlable uocumenL Cf 1lLle
1. LffecLs Cf use Cf non-negoLlable" 1erms Cn
negoLlable uocumenLs Cf 1lLle
8. Pow negoLlaLed (ArLlcles 1308-1309)
C. Who Can negoLlaLe (ArLlcle 1312)
u. LffecLs Cf negoLlaLlon (ArLlcle 1313)
L. LffecLs Cf Merely 1ransferrlng/uellverlng Cf Crder" negoLlable
uocumenLs Cf 1lLle
l. unauLhorlzed negoLlaLlon (ArLlcle 1318)

lv. non-negoLlable uocumenLs Cf 1lLle
A. Pow 1ransferred Cr Asslgned (ArLlcle 1314)
8. LffecLs Cf 1ransfer (ArLlcle 1314).

v. LffecL Cf Lrrors Cn uocumenLs Cf 1lLle

vl. WarranLles Cf Seller Cf uocumenLs Cf 1lLle (ArLlcle 1316)

vll. LffecLs When Cwner Cf 1he uocumenL Cf 1lLle Pas no Legal 1lLle 1o
1he Coods
A. When Coods Covered 8y non-negoLlable uocumenL
8. When Coods Covered 8y negoLlable uocumenL

vlll. 8ules Cf Levy/CarnlshmenL Cf Coods (ArLlcles 1314, 1319, 1320).
A. When non-negoLlable uocumenL Cf 1lLle
8. When negoLlable uocumenL Cf 1lLle

~C~

Chapter VIII. Sa|e 8y Non-Cwner Cr 8y Cne nav|ng Vo|dab|e 1|t|e:
"]D% TC>% G> 5 !1#$("K$ G> -".%d

l. LffecL Cf Sale Where Seller noL Cwner AL 1lme Cf erfecLlon

ll. LffecL Cf Sale Where Seller noL Cwner AL 1lme Cf uellvery (ArLlcle
1303) [O"=.&C$"# *+ !1=($ 1> 5''%".<, 8L2 -!,5 3@@ 9L778;]
A. Sales 8y Co-Cwners (ArLlcle 493)
1. 8lghL Cf A Co-owner rlor 1o arLlLlon [FC#["#"1 *+
`"', LH -!,5 L7: 9L7@2;]
2. 8emedy Where Co-Cwner Sells roperLy rlor 1o
arLlLlon
3. LxcepLlons Lo 8ule on LffecL of Sale of ueflnlLe orLlon
of Co-owner

lll. LxcepLlons: When Cwnershlp 1ransfers 8y AcL Cf 1he non-Cwner
A. LsLoppel Cn 1rue Cwner (ArLlcle 1434) [M=K$1# *+ I"\"(, 22
-!,5 677 9L746;]
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
8. 8ecordlng Laws, 1orrens SysLem (res. uecree 1329).
C. SLaLuLory ower Crder Cf CourLs
u. Sale ln MerchanLs SLores, lalrs Cr MarkeLs (ArLlcles 83 And 86,
Code Cf Commerce) [-=# M(1$D%(< N !1+ *+ E%."<K1? 26 G+I+
2L6H 9L723;A !C$/ 1> F"#C." *+ M=B<=Y T=&\%( !1+? L:L ODC.+ 327
9L724;]

lv. Sale 8y Cne Pavlng voldable 1lLle (ArLlcle 1306, As An LxcepLlon 1o
ArLlcle 339)
A. Appllcable 8ules 1o lmmovables
8. 1lLle" As 1o Movable roperLles []"B"$"K *+ VC&%#%_, 2H G+I+
H478 9L724;A Q0!5 O=\.C<DC#B *+ -"#$1<? L36 -!,5 @L6 9L77:;A
5_#"( *+ `"'[C"#BK1? LH -!,5 63@ 9L7@2;A !(=_ *+ O"D"$C, 73
ODC.+ 433 9L72@;A 0C_1# *+ -=#$"/? 64 -!,5 L@: 9L748;]

~C~

Chapter Ik. Loss, Deter|orat|on, Iru|ts And Cther 8enef|ts

l. no AppllcaLlon When Sub[ecL MaLLer ls ueLermlnable (ArLlcle 1263)

ll. LffecL Cf Loss/ueLerloraLlon Cf 1hlng Sold:
A. 8efore erfecLlon [,1&"# *+ I(C&".$, @ ODC.+ 7@ 9L7:@;]
8. AL 1lme Cf erfecLlon (ArLlcles 1493 And 1494).
C. AfLer erfecLlon 8uL 8efore uellvery (ArLlcles 1164, 1189, And
1262).
1. Ceneral 8ule
2. Loss 8y laulL Cf A arLy (ArLlcles 1480, 1304, 1338)
3. Loss 8y lorLulLous LvenL (ArLlcles 1480, 1163, 1164,
1163, 1304, 1338, And 1189, 8ead CommenLs Cf aras,
1olenLlno, adllla, And 8avlera).
4. ueLerloraLlon (ArLlcles 1480, 1163-63, And 1262,
ArLlcles 1189 And 1338)
3. lrulLs Cr lmprovemenLs lrom 1lme Cf erfecLlon
erLaln 1o 8uyer (ArLlcles 1480, 1337-1338)
u. AfLer uellvery (ArLlcle 1304) [T"X/%(e< !11' *+ ]"\1("? LH -!,5
4@8 9L7@2;]

~C~

Chapter k. kemed|es Ior 8reach Cf Contract Cr Sa|e (Art|c|es 1S94-
1S99)

l. Cn arL Cf Seller
A. ln Case Cf Movables (ArLlcles 1393, 1393 1o 1397)
1. Movables ln Ceneral
2. non-aymenL Cf rlce 8y 1he 8uyer (ArLlcle 1393)
3. When 8uyer Wrongfully neglecLs Cr 8efuses 1o AccepL
Coods (ArLlcle 1396 and 1397)
8. unpald Seller Cf Coods (ArLlcles 1324-1333)
1. ueflnlLlon Cf unpald Seller" (ArLlcle 1323)
2. 8lghLs Cf unpald Seller (ArLlcle 1326)
3. ossessory Llen (ArLlcles 1326-1329, 1303, 1333)
4. SLoppage <( :*'(-$&. (ArLlcles 1330-1332, 1333,
1636[2])
3. 8lghL Cf 8esale (ArLlcle 1333)
6. 8lghL 1o 8esclnd (ArLlcle 1334)
C. ln Case Cf lmmovables:
1. AnLlclpaLory 8reach (ArLlcle 1391)
2. lallure Cf 8uyer 1o ay rlce [T%B"([" Z%(!"#$% '(
!"#$"%"& (( !)*+ ,-. /012.3]
3. Sales Cf Subdlvlslon LoLs And Condomlnlum unlLs
(SecLlons 23 And 24, .u. 937)
4. 8lghL 1o Crace erlod SLlpulaLed
u. 8esclsslon Cn Sales Cf non-8esldenLlal lmmovables Cn
lnsLallmenLs (ArLlcles 1191 And 1392)

ll. Cn arL Cf 8uyer
A. ln Case Cf Movables (ArLlcles 1398-1399)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
8. ln Case Cf lmmovables (ArLlcles 1191, Secs. 23 And 24, .u.
937)
C. Suspenslon Cf aymenL (ArLlcle 1390)

lll. 8ecLo Law: Sales Cf Movables Cn lnsLallmenLs (ArLlcles 1484, 1483,
1486)
A. 8aLlonale
8. Coverage Cf 1he Law:
1. lnsLallmenL Sale" [T%*/ *+ I%(*"KC1, @7 ODC.+ 28 9L7H7;]
2. ConLracLs 1o Sell Movables noL Covered.
C. 8emedles Avallable 1o unpald Seller noL CumulaLlve 8uL
AlLernaLlve And Lxcluslve [0%.$" F1$1( -".%< !1('+ *+ aC= UC&
0="#, 8LH -!,5 827 9L778;]
u. 8emedy Cf Speclflc erformance []"c"#B."#BC$ *+ -1=$D%(#
F1$1(<? L:L ODC.+ @:@ 9L724;]
L. 8emedy Cf 8esclsslon
1. naLure Cf 8emedy Cf 8esclsslon [a1#"$1 *+
P#$%(&%[C"$% 5''%.."$% !1=($? L6: -!,5 822 9L732;]
2. When 8esclsslon ueemed Chosen
3. 8arrlng LffecL Cf 8esclsslon
l. 8emedy Cf loreclosure
1. When 8emedy Cf loreclosure ls ueemed Chosen [f"/"<
*+ T=#%$" F1$1(<? LL4 -!,5 48@ 9L738;]
2. 8arrlng LffecLs Cf loreclosure [a1($D%(# F1$1(< *+
-"'C#1<1, HH -!,5 H2@ 9L74:;]
3. 8arrlng LffecL Cn CLher SecurlLles Clven lor aymenL Cf
rlce [!(=_ *+ JC.C'C#"< P#*%<$&%#$ N JC#"#K% !1('+, 8H
-!,5 47L 9L7@3;A M1(\1# PP *+ -%(*CK%XC[% -'%KC".C<$<?
P#K+, 823 -!,5 @H6 9L77@;A ,C["[ *+ JC.C'C#"< P#*%<$&%#$
"#[ JC#"#K% !1('+? L8: -!,5 86@ 9L73H;]
4. LxLenL Cf 1he 8arrlng LffecL [F"K1#[("/ N !1+ *+
Q=<$"R=C1, @6 ODC.+ 66@ 9L7H4;]
3. 8ule Cn erverse 8uyer" [JC.C'C#"< P#*%<$&%#$ N
JC#"#K% !1('+ *+ ,C["[, H: -!,5 2@6 9L7@7;]
C. urporLed Lease WlLh CpLlon 1o 8uy [O!P T%"<C#B "#[ JC#"#K%?
P#K+ *+ IC(">>%Wg !(%"$C*% P&"BC#B? P#K+, 284 -!,5 6:2 98::4;]


lv. MACLuA Law: Sales Cf 8esldenLlal 8ealLy Cn lnsLallmenLs (8.A.
6332).
A. 8ole" Cf Maceda Law
8. 1ransacLlons Covered
C. 1ransacLlons Lxcluded lrom Coverage
u. Lxerclse Cf 1he Crace erlod (SecLlon 3)
L. Pow 1o ueLermlne ?ears Cf lnsLallmenLs [V%<$(" 0%*+ "#[
F"#"B%&%#$ !1('+ *+ O"KC>CK1? 2LH -!,5 6LH 98::4;]
l. Pow CancellaLlon Cf ConLracL Can 8e LffecLed [FKT"=BD.C# *+
!5, L66 -!,5 @7H 9L73@;A I"(KC" *+ !1=($ 1> 5''%".<, @L7 -!,5
83: 98:L:;]
C. lnLerpreLaLlon Cf Crace erlod And Mode Cf CancellaLlon
1. 1he rullng ln I%J'.4;#$( F8 ,".*& "+ >55)'#-K LMM 7,6>
NOP QLORNS provldes for 2 docLrlnes appllcable Lo Lhe
Maceda Law
2. 1he rullng ln I%J'.4;#$( F8 ,".*& "+ >55)'#-K LMM 7,6>
NOP QLORNS provldes for 2 grace perlods
3. 8equlremenLs lor A valld And LffecLlve CancellaLlon
under 1he Maceda Law
P. CLher 8lghLs CranLed 1o 8uyer (SecLlon 3 and 6)
l. LffecL Cf ConLrary SLlpulaLlon
!. Maceda Law CannoL 8e Avalled Cf 8y ueveloper

v. CancellaLlon of !udlclal Sale
~C~

Chapter kI. kemedy Cf kesc|ss|on In Sa|es Contracts Cover|ng
Immovab|es: !1#$("K$ G> -".% E%(<=< !1#$("K$ ]1 -%..

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
l. naLure Cf 8emedy Cf 8esclsslon (6)-"#.&$"() (ArLlcles 1191, 1479,
1392)
A. ulsLlngulshlng lrom CLher 8emedy Cf 8esclsslon
1. ArLlcle 1191 v. ArLlcle 1383
2. ArLlcle 1392
3. AcLlon lor 8esclsslon noL Slmllar 1o An AcLlon lor
8econveyance
8. 8emedy Cf 8esclsslon" Covered
1. 8asls Cf 8emedy Cf 8esclsslon (8esoluLlon), naLure Cf
1he 8emedy of 8esoluLlon or 8esoluLlon
2. Cround lor 8esclsslon under ArLlcle 1191: SubsLanLlal
8reach
C. Who May uemand 8esclsslon
u. Lxerclslng 8esclsslon
1. ower 1o 8esclnd Cenerally !udlclal ln naLure
2. When LxLra[udlclal 8esclsslon Allowed
3. 8esclsslon 8equlres oslLlve AcL
L. MuLual 8esLlLuLlon And lorfelLure (ArLlcle 1383)
1. 8esLlLuLlon As Consequence Cf 8esclsslon
2. When lorfelLure Cf aymenLs Allowed ln 8esclsslon

ll. ulsLlncLlons 8eLween ConLracL Cf Sale And ConLracL 1o Sell
A. ConLracL Cf Sale T)*-.- ConLracL 1o Sell (ArLlcle 1438) [5[%.>"
O(1'%($C%<? P#K+ *+ !1=($ 1> 5''%".<, 86: -!,5 242 9L772;]
1. 8aLlonale Cf ConLracLs 1o Sell
2. ls A ConLracL 1o Sell A Sale" under ArLlcle 1438?
[!1(1#%. *+ !1=($ 1> 5''%".<, 8@H -!,5 L2? 84 9L77@;0
OaM *+ !1=($ 1> 5''%".<? 8@8 -!,5 6@6 9L77@;]
3. ConLracL 1o Sell v. CondlLlonal ConLracL Cf Sale: Cn
Where" Lhe Suspenslve CondlLlon ls lnned ueLermlnes
naLure of a Sale
4. lmporLance Cf LocaLlng" 1he CondlLlon 1o ay rlce ln
lull [M"\"<" *+ !1=($ 1> 5''%".<? 87: -!,5 2H8 9L773;]
3. necessary SLlpulaLlons ln A ConLracL 1o Sell [E".[%_ *+
!1=($ 1> 5''%".<, 6H7 -!,5 22 98::6A 0CB#1< *+ !1=($
1> 5''%".<? L23 -!,5 H42 9L733;]
6. lssue Cf SubsLanLlal 8reach (ArLlcles 1191 And 1234)
8. CancellaLlon Cf ConLracL 1o Sell
1. 8emedy Cf 8esclsslon under ArLlcles 1191 And 1392
Pave no AppllcaLlon 1o ConLracLs 1o Sell
2. Mlnlmum 8equlremenL lor CancellaLlon Cf ConLracL 1o
Sell, lormal noLlce 8equlred Lo Cancel ConLracLs Lo Sell
[^#C*%(<C$/ 1> $D% ODC.C''C#%< *+ 0% .1< 5#B%.%<? H2
-!,5 L:H 9L74:;A O"."/ P#K+ *+ !."*%? L86 -!,5 @H3
9L73H;A TC& *+ !1=($ 1> 5''%".<? L38 -!,5 2@6 9L77:;,
5JO F=$=". M%#%>C$ 5<<#+? P#K+ *+ !1=($ 1> 5''%".<? H@6
-!,5 4@3 98::L;8h
3. lorm Cf noLlce 8equlred lor CancellaLlon Cf ConLracL
1o Sell
4. 8esclsslon rlnclples Applled 1o ConLracLs 1o Sell
C. LqulLy 8esoluLlons Cn ConLracLs 1o Sell

~C~

Chapter kII. Cond|t|ons And Warrant|es

l. CondlLlons (ArLlcle 1343) [T">1($%_" *+ F"KD=K"? HHH -!,5 @6H
98:::;A Z%C(< 1> O%[(1 Q<K"#."( *+ !1=($ 1> 5''%".<? 83L -!,5 L4@
9L774;]

ll. CondlLlons T)*-.- WarranLles [O1X%( !1&&%(KC". "#[ P#[=<$(C".
!1('+ *+ !1=($ 1> 5''%".<, 846 -!,5 274 9L774;]

lll. Lxpress WarranLles (ArLlcle 1346)
A. ueflnlLlon
8. 8equlslLes And LlablllLy lor Lxpress WarranL [I=C#D"X" *+
O%1'.%, 6@3 -!,5 843 98::2;]
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

lv. lmplled WarranLles (ArLlcle 1347)
A. ueflnlLlon
8. WarranLy 1haL Seller Pas 8lghL 1o Sell
C. WarranLy AgalnsL LvlcLlon (ArLlcles 1348-1360) [5#B *+ !1=($ 1>
5''%".<, 2@4 -!,5 2H 98::3;]
1. When 1here ls A 8reach Cf 1hls WarranLy
2. LvlcLlon ln arL (ArLlcle 1336)
3. arLlcular Causes Clven 8y Law (ArLlcle 1330-1331)
4. AppllcablllLy 1o !udlclal Sales (ArLlcle 1332)
3. AmounLs lor Whlch Seller ls Llable (ArLlcle 1333)
6. Walver Cf WarranLy And LffecLs (ArLlcle 1333)
u. WarranLy AgalnsL non-ApparenL ServlLudes (ArLlcles 1360)
1. 8equlslLes lor WarranLy AgalnsL non-ApparenL
ServlLude
2. 1hls WarranLy uoes noL Apply
3. 8emedles And rescrlpLlve erlod
L. WarranLy AgalnsL Pldden uefecLs (ArLlcles 1361-1380)
1. LlablllLy lor Pldden uefecLs
2. 8equlslLes lor 8reach [a=$(C&Cb J%%[< !1('+ *+ !1=($ 1>
5''%".<, 66L -!,5 H24 98::6;]
3. 8emedles lor 1he 8uyer (ArLlcle 1367)
4. CbllgaLlon Cf 1he Seller (ArLlcle 1368)
3. When 1here ls Walver Cf WarranLy (ArLlcle 1366)
6. AppllcablllLy 1o !udlclal Sales (ArLlcle 1370)
l. 8edhlblLory uefecLs Cf Anlmals (ArLlcle 1376)
a. Sale Cf 1eam (ArLlcle 1372-1673)
b. CLher 8ules Cn Sale Cf Anlmals (ArLlcle 1374-1673,
1377-1378)
c. CbllgaLlon Cf 8uyer 1o 8eLurn (ArLlcle 1679)
d. 8emedles Cf 8uyer (ArLlcle 1380)
C. WarranLy As 1o llLness Cr CuallLy Cf Coods (ArLlcle 1362)
1. 8equlslLes lor 8reach Cf WarranLy 1o Apply
2. Measure Cf uamage ln Case Cf 8reach Cf WarranLy Cn
CuallLy
P. Sale Cf Coods 8y Sample (ArLlcle 1363)

v. AddlLlonal WarranLles lor Consumer roducLs (ArLlcles 68, Consumer
AcL, 8.A. 7394).
A. Subsldlary LlablllLy Cf 8eLaller (ArLlcle 68(b)(3))
8. LnforcemenL Cf WarranLy (ArLlcle 68(b)(4))
C. uuraLlon Cf WarranLy (ArLlcle 68(e) and (f))
u. 8reach Cf WarranLles (ArLlcle 68(g))
1. ln Case Cf 8reach Cf Lxpress WarranLy
2. ln Case Cf 8reach Cf lmplled WarranLy
L. ConLrary SLlpulaLlons

vl. LffecLs And rescrlpLlon Cf WarranLles

vll. LffecLs Cf Walvers

vlll. 8uyer's CpLlons ln Case Cf 8reach Cf WarranLy (ArLlcle 1399)

~C~

Chapter kIII. Lxt|ngu|shment Cf Sa|e

l. ln Ceneral (ArLlcles 1231 And 1600)

ll. ConvenLlonal 8edempLlon
A. ueflnlLlon (ArLlcle 1601)
1. ConvenLlonal 8edempLlon 1akes lace:
8. roper 8eservaLlon Cf 8lghL 1o 8epurchase
1. valld Sale 8equlred lor 1here 1o 8e A valld 8lghL 1o
8epurchase [,1\%($< *+ O"'C1, 2L2 -!,5 H6@ 98::4;]
C. 8lghL Cf 8epurchase rovable 8y arol Lvldence
u. ulsLlngulshed lrom CpLlon 1o urchase
L. 8edempLlon erlod [FC<$%(C1 *+ !%\= -$"$% !1..%B% 1> -KC%#K%
"#[ ]%KD#1.1B/, 6@L -!,5 L88 98::2;]
1. When no erlod Agreed upon
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
2. When erlod Agreed upon
l. SlLuaLlon rlor 1o 8edempLlon
C. Who Can 8edeem (ArLlcles 1611 1o 1614)
P. Pow 8edempLlon LffecLed (ArLlcle 1616)
l. 8edempLlon rlce (ArLlcle 1616)
!. lrulLs (ArLlcle 1617)
k. LffecL When no 8edempLlon Made: ConsolldaLlon (ArLlcle
1607)
L. LqulLable MorLgage (ArLlcles 1602-1604)
1. ueflnlLlon
2. 8aLlonale 8ehlnd rovlslons Cn LqulLable MorLgage
3. When ln uoubL, ConsLrue As LqulLable MorLgage And
noL 8lghL 1o 8epurchase
4. When resumed LqulLable MorLgage (ArLlcle 1602)
3. 8adges of LqulLable MorLgage (ArLlcle 1602)
6. AppllcablllLy 1o ueeds Cf AbsoluLe Sale (ArLlcle 1604)
7. roof 8y arole Lvldence, 8esL Lvldence 8ule
8. 8emedles Allowed lor LqulLable MorLgage (ArLlcles
1434, 1602, 1603)
9. !'%&./ ,"//$--"*$./ (ArLlcle 2088) [-1.C[ Z1&%<? P#K+
*+ !1=($ 1> 5''%".<? 842 -!,5 8@4 9L774;A 5+ J("#KC<K1
,%".$/ *+ !1=($ 1> 5''%".<? 873 -!,5 H67 9L773;]
10. llnal Chance Lo 8edeem ln MlsLaken LqulLable
MorLgage" (ArLlcle 1606) [5\C.." *+ I1\1#<%#B? H46
-!,5 2L 98::8;]
11. lelgnlng LqulLable MorLgage SlLuaLlon Lo Avall of ArLlcle
1606

lll. Legal 8edempLlon
A. ueflnlLlon (ArLlcle 1619)
1. 8aLlonale lor Legal 8edempLlon
2. SallenL ulsLlncLlons 8eLween ConvenLlonal And Legal
8lghL Cf 8edempLlon
8. Legal 8edempLlon 8lghLs under 1he Clvll Code
1. Among Co-Pelrs (ArLlcle 1088)
2. Among Co-Cwners (ArLlcle 1620)
3. Lffect Cf De Iacto art|t|on Among Co-ne|rs And Co-
Cwners
4. ulsLlngulshlng 8eLween 8lghL Cf 8edempLlon Cf Co-
Pelrs And Co-Cwners -
3. Among Ad[olnlng Cwners Cf 8ural Lands (ArLlcle 1621)
6. Among Ad[olnlng Cwners of urban Lands (ArLlcle 1622)
7. Sale Cf CredlL ln LlLlgaLlon (ArLlcle 1634) - PU 2'=-
V*"/ W"&$%) A+ 2)/'(? :" !'=.
C. When erlod Cf Legal 8edempLlon 8eglns (ArLlcle 1623)
1. klnd Cf noLlce ConLemplaLed 8y Law
2. CounLlng Cf 1he erlod
3. noLlce MusL Cover erfecLed Sale
4. SummaLlon Cn SLrlcL 8ules Cn ArLlcle 1623 Concernlng
noLlce [J("#KC<K1 *+ M1C<%(, HH8 -!,5 H:2 98:::;]
3. 8are LxcepLlons
*SummaLlon Cn SLrlcL rules Cn noLlce
u. CLher Legal 8edempLlon 8lghLs
1. 8edempLlon ln aLenLs (Sec. 119, C.A. 141)
2. 8edempLlon ln 1ax Sales (Sec. 213, nlrc Cf 1997)
3. 8edempLlon 8y !udgmenL uebLor (Secs. 27-28, 8ule 39,
8ules Cf Clvll rocedure)
4. 8edempLlon ln LxLra[udlclal loreclosure (Sec. 6, AcL
3133)
3. 8edempLlon ln !udlclal loreclosure Cf MorLgage (Sec.
47, 8.A. 8791) [-1(C"#1 *+ M"=$C<$"? @ -!,5 76@ 9L7@8;]
6. 8edempLlon ln loreclosure 8y 8ural 8anks (8.A. no.
720)
7. Legal 8lghL 1o 8edeem under Agrarlan 8eform Code

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
~C~

Chapter kIV. Ass|gnment (Art|c|es 1624-163S)

l. ueflnlLlon And naLure Cf AsslgnmenL
A. ueflnlLlon
8. naLure of AsslgnmenL
C. WhaL Makes AsslgnmenL ulfferenL

ll. erfecLlon 8y Mere ConsenL (ArLlcle 1624)

lll. 8uL MusL 8e ln ubllc lnsLrumenL 1o AffecL 1hlrd arLles (ArLlcle
1623)

lv. LffecLs Cf AsslgnmenL
A. AsslgnmenL Cf CredlL
8. lssues 8e uebLor (ArLlcle 1626)
C. Accessorles And Accesslons (ArLlcle 1627)
u. 1radlLlon ln AsslgnmenL

v. WarranLles Cf Asslgnor (ArLlcle 1628)
A. Ceneral olnLs [a/K1 -".%< !1('+ *+ M5 JC#"#K%? 8:: -!,5 @H4
9L77L;]
8. CLher Speclflc WarranLles (ArLlcle 1630-1633)

vl. 8lghL Cf 8epurchase Cn AsslgnmenL Cf CredlL under LlLlgaLlon
(ArLlcles 1634 And 1633)

vll. SubrogaLlon T)*-.- AsslgnmenL Cf CredlL (ArLlcle 1301) [TCK"(1< *+
I"$&"C$"#? H@8 -!,5 263 98::L;]

vlll. AsslgnmenL Cf CopyrlghL (Sec. 180, lnLellecLual roperLy Code)

lx. AsslgnmenL As An LqulLable MorLgage

~C~

Chapter kV. 8u|k Sa|es Law (Act No. 39S2)

l. Scope [!DC# *+ ^/? 6: G+I+ 6 -=''+ 28A 0MO *+ ]D% Z1#1("\.% V=[B% 1>
$D% ,]! 1> F"#C."? 3@ G+I+ a1+ @ LLH4 9:2 J%\(="(/ L77:;]

ll. Coverage Cf 8ulk Sale" - Sale, 1ransfer, MorLgage Cr AsslgnmenL Cf:
1. LxLraordlnary Sale of Coods
2. LxLraordlnary Sale of llxLures and LqulpmenL
3. Sale of 8uslness LnLerprlse
A. 8ulk Sales noL Covered by Law
8. 8uslness Covered by Lhe Law

lll. CbllgaLlons of Seller/Lncumbrancer When 1ransacLlon ls a 8ulk Sale
1. 1o uellver a Sworn SLaLemenL of LlsLlng of CredlLors
(SecLlon 3)
2. ro-8aLa AppllcaLlon of roceeds (SecLlon 4)
3. WrlLLen Advance ulsclosure Lo CredlLors (SecLlon 3)
4. 8ulk 1ransfers for nomlnal value (SecLlon 7)

lv. Consequences of vlolaLlon of Lhe Law
A. Cn 1he 1ransacLlon lLself
1. lf sworn llsLlng of credlLors ls noL prepared, or lf Lhe
proceeds are noL applled Lo Lhem, Lhe sale shall be
fraudulenL and vold
2. lallure Lo make an advanced wrlLLen dlsclosure Lo
credlLors does noL render Lhe sale fraudulenL and vold
8. Cn Seller/MorLgagor/Asslgnor
1. Crlmlnal LlablllLy
2. no Crlmlnal LlablllLy
C. Cn 8uyer/MorLgagee/1ransferee

~C~
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Chapter kVI. keta|| 1rade L|bera||zat|on Act Cf 2000 And ke|ated
rov|s|ons Cf 1he Ant|-Dummy Law

l. Ceneral lnformaLlon Cn 8eLall 1rade LlberallzaLlon AcL of 2000"
A. PlsLory of 8epubllc AcL no. 8762
8. ubllc ollcy under 81LA 2000:

ll. Scope And ueflnlLlon Cf 8eLall 1rade"
A. lmporLance Cf 8eLalle 1rade 9UC#B E+ Z%(#"%_? 6 -!,5 478
iL7@:h)
8. LlemenLs:
1. Seller PablLually Lngaged ln Selllng,
2. Selllng ulrecL 1o 1he Ceneral ubllc, And
3. Cb[ecL Cf 1he Sale ls LlmlLed 1o Merchandlse,
CommodlLles Cr Coods lor ConsumpLlon.
C. Meanlng Cf PablLually Selllng"
u. Meanlng Cf ConsumpLlon" [M".&"K%[" *+ ^#C1# !"(\C[%
ODC.C''C#%<? P#K+ L86 -!,5 37H 9L73H;].
L. Meanlng Cf Ceneral ubllc" [I11[/%"( ]C(% *+ ,%/%<? -(+? L8H
-!,5 84H 9L73H;A 0MO *+ Z1#1("\.% V=[B% 1> $D% ,]! 1> F"#C."?
3@ G+I+ a1+ @ LLH4 9:2 J%\(="(/ L77:;]

lll. CaLegorles Cf 8eLall 1rade LnLerprlses
A. CaLegory A - Lxcluslve 1o llllplno ClLlzens And 100 llllplno
LnLlLles
8. CaLegory 8
C. CaLegory C
u. CaLegory u - Luxury lLems
L. LxempLed Areas
l. 8lghLs CranLed 1o lormer naLural-8orn llllplnos

lv. lorelgn lnvesLmenL Cr Lngage ln 8eLall 1rade ln 1he hlllpplnes
A. 8equlremenLs lor lorelgn lnvesLors
8. CrandfaLher 8ule Cn 100 llllplno Cwnershlp Cf CorporaLe
LnLlLy: Sec Cplnlons, uaLed 20 March 1972 And 22 Aprll 1983,
uLl Cplnlon 1o 1anada, 1eehankee & Carreon Law Cfflce, uaLed
3 AugusL 1939.
C. ubllc Cfferlngs Cf Shares Cf SLock

v. lorelgn 8eLallers ln 1he hlllpplnes
A. re-CuallflcaLlon 8equlremenLs
8. 8ules Cn 8ranches/SLores
a. ulrecL Cpenlng of 8ranches/SLores
b. Acqulrlng/lnvesLlng ln LxlsLlng 8eLall SLores
C. romoLlon Cf Locally-ManufacLured roducLs
u. rohlblLed AcLlvlLles Cf lorelgn 8eLallers
L. 8lndlng LffecL Cf Llcense 1o Lngage ln 8eLall Cn rlvaLe arLles

vl. enalLy rovlslons

vll. AppllcablllLy Cf 1he AnLl-uummy AcL (Comm. AcL. 108, As Amended
8y .u. 713)

vlll. lmplemenLlng Agency
A. u1l as lmplemenLlng Agency
8. 8ole of uC! and SLC

~C~

updaLed: 21 May 2014
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 1: NA1UkL CI SALL

I. Def|n|t|on (Art|c|e 14S8)

Art|c|e 14S8.
8y the contract of sa|e one of the contract|ng part|es ob||gates h|mse|f
to transfer the ownersh|p and to de||ver a determ|nate th|ng, and the
other to pay therefor a pr|ce certa|n |n money or |ts equ|va|ent.

A contract of sa|e may be abso|ute or cond|t|ona|. (144Sa)

ConLracL whereby one of Lhe conLracLlng parLles (seller)
obllgaLes hlmself Lo...
o 1ransfer Lhe ownershlp
1

o uellver Lhe possesslon
o Cf a deLermlnaLe Lhlng
1o Lhe oLher parLy, Lhe 8uyer, who obllgaLes hlmself
o 1o pay a prlce cerLaln
o ln money or lLs equlvalenL
!"#$% '( )*#+,+-./ 011 2"34 516 7899:;(
2


1
Cwnershlp ls Lhe lndependenL and general power of a person over a Lhlng for
purposes recognlzed by law and wlLhln Lhe llmlLs esLabllshed Lhereby.
Accordlng Lo ArLlcle 428 of Lhe Clvll Code, Lhls means LhaL: 1he owner has Lhe
rlghL Lo en[oy and dlspose of a Lhlng, wlLhouL oLher llmlLaLlons Lhan Lhose
esLabllshed by law. x x x Aslde from Lhe jos oteoJl and Lhe jos oboteoJl lnherenL
ln Lhe rlghL Lo en[oy Lhe Lhlng, Lhe rlghL Lo dlspose, or Lhe jos JlspooeoJl, ls Lhe
power of Lhe owner Lo allenaLe, encumber, Lransform and even desLroy Lhe
Lhlng owned. llooclo v. coott of Appeols, 437 SC8A 224 (2003).
2
AlfteJo v. 8ottos, 404 SC8A 143 (2003), Moollo Metol cootoloet cotp. v. lN8,
311 SC8A 444 (2006), kobetts v. loplo, 313 SC8A 346 (2007).

A. L|ements of Sa|e
1. ConsenL or meeLlng of Lhe mlnds
2. ueLermlnaLe sub[ecL maLLer
3. rlce cerLaln ln money or lLs equlvalenL.
!<,',##, '( =>,+?*#@ A*'( B,+C/ :81 2"34 :D8 78991;(
3

Sale belng a consensual conLracL, lLs essenLlal elemenLs musL be
proven. !EF>>,+$*', '( ".$#? .G 4HH*,>@/ 8D1 2"34 IJ 75JJ1;(
Absence of any essenLlal elemenLs negaLes a sale !AF%.+ '(
".$#? .G 4HH*,>@/ 698 2"34 8II 75JJJ;/
4
even when earnesL
money has been pald. !K,+F>, K*?,> ".+?,F+*# ".#H( '( =<B/
:55 2"34 000 7899D;(
8uL once all elemenLs are proven, a sale's valldlLy ls noL affecLed
by a prevlously execuLed flcLlLlous deed of sale. !=*L,>.@, '(
2,+?.@/ 6D6 2"34 :0: 78995;M nelLher ls lL affecLed by non-
performance LhereafLer.

3
Iovoo looJ, loc. v. coott of Appeols, 268 SC8A 160 (1997), OoljoJo v. coott of
Appeols, 299 SC8A 693 (1998), co v. coott of Appeols, 312 SC8A 328 (1999),
5oo AoJtes v. koJtlqoez, 332 SC8A 769 (2000), koble v. Atboso, 362 SC8A 69
(2001), lolytecbolc uolvetslty v. coott of Appeols, 368 SC8A 691 (2001),
kotlpoooo v. kotlpoooo, 373 SC8A 199 (2002), looJtes v. coott of Appeols, 394
SC8A 133 (2002), Mooooqsooq v. stlmo, 404 SC8A 683 (2003), Ilmeoez, It. v.
IotJooo, 444 SC8A 230 (2004), 5oo loteozo uev. cotp. v. coott of Appeols, 449
SC8A 99 (2003), osoo v. Atcloqo, 449 SC8A 438 (2003), kobetts v. loplo, 313
SC8A 346 (2007), Novotto v. llootets uev. 8ook, 327 SC8A 362 (2007), kepobllc
v. lloteoJo, 349 SC8A 327 (2008), C5l5 v. lopez, 392 SC8A 436 (2009), 8oloJoJ
v. kobllco, 393 SC8A 123 (2009), uel ltoJo v. cobolleto, 614 SC8A 102 (2010),
Mootecolvo v. nelts of oqeolo 1. ltlmeto, 624 SC8A 373 (2010).
4
kobetts v. loplo, 313 SC8A 346 (2007), \51 cotp. v. uMc utboo ltopettles
uev., loc., 394 SC8A 398 (2009).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1he burden ls on Lhe oLher parLy Lo prove oLherwlse. !N*F#@ .G
O#+*@?. BF.+, '( ".$#? .G 4HH*,>@/ 6D8 2"34 8J 78995;(
o Genera| ku|e: Pe who alleges exlsLence of a sale musL
show lL by compeLenL proof.
! Lxcept|on: ArLlcle 1332 of Lhe Clvll Code

8. Stages of Contract of Sa|e
SLrlcLly speaklng, only Lwo: perfecLlon and consummaLlon
8U1 Lhe Supreme CourL has consldered 1hree (3):
1. =.>FPF?,PF.+ " covers Lhe perlod from Lhe Llme Lhe prospecLlve
conLracLlng parLles lndlcaLe lnLeresL ln Lhe conLracL Lo Lhe Llme
Lhe conLracL ls perfecLed.
2. =*#G*P?F.+ " Lakes place upon Lhe concurrence of Lhe essenLlal
elemenLs, whlch are Lhe meeLlng of Lhe mlnds of Lhe parLles as
Lo Lhe ob[ecL of Lhe conLracL and upon Lhe prlce.
3. ".+@$QQ,?F.+ " beglns when Lhe parLles perform Lhelr
respecLlve underLaklngs, culmlnaLlng ln Lhe exLlngulshmenL
Lhereof. !2,+ KFR$*> =#.H*#?F*@ =SF>FHHF+*@/ T+P( '( N$,+R/ 66D
2"34 161 78999;.
1


C. Sa|e Creates kea| Cb||gat|ons "1o G|ve" (Art|c|e 116S)

Art|c|e 116S.

1
llmketkol 5oos Mlllloq, loc. v. coott of Appeols, 230 SC8A 323 (1993), Iovoo
looJ, loc. v. coott of Appeols, 268 SC8A 160 (1997), 8oqottl v. coott of Appeols,
343 SC8A 333 (2000), Moteoo, It. v. ltlvote Moooqemeot Offlce, 307 SC8A 63
(2006), Moollo Metol cootoloet cotp. v. lN8, 311 SC8A 444 (2006), Novotto v.
llootets uev. 8ook, 327 SC8A 362 (2007), ltovloce of cebo v. nelts of kofloo
Motoles, 346 SC8A 313 (2008), C5l5 v. lopez, 392 SC8A 436 (2009), \51 cotp.
v. uMc utboo ltopettles uev., loc., 394 SC8A 398 (2009).
When what |s to be de||vered |s a determ|nate th|ng, the cred|tor, |n
add|t|on to the r|ght granted h|m by art|c|e 1170, may compe| the
debtor to make the de||very.

If the th|ng |s |ndeterm|nate or gener|c, he may ask that the ob||gat|on
be comp||ed w|th at the expense of the debtor.

If the ob||gor de|ays, or has prom|sed to de||ver the same th|ng to two
or more persons who do not have the same |nterest, he sha|| be
respons|b|e for any fortu|tous event unt|| he has effected the de||very.
(1096)

1. Nature of Cb||gat|on Created |n a Sa|e
erfecLlon brlng abouL.
o CbllgaLlons of Lhe Seller
! 1ransfer ownershlp
! uellver Lhe ossesslon of Lhe Sub[ecL MaLLer
o CbllgaLlon of Lhe 8uyer
! ay Lhe rlce
1hese are real obllgaLlons (obllgaLlons Lo glve)
o 1hls means LhaL Lhey can be sub[ecL for acLlons of
speclflc performance.
o 1hus, one who defaulLs can'L lnslsL on [usL paylng
damages.

D. Lssent|a| Character|st|cs of Sa|e:
1. Nom|nate and r|nc|pa|
nomlnaLe " slnce lL has been glven a name by law
rlnclpal " ln conLrasL Lo accessorles llke morLgage conLracLs
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o lL can sLand on lLs own
o lndependenL of oLher conLracLs for valldlLy and
exlsLence
o arLles enLer lnLo a sale Lo achleve a sale
! noL ln preparaLlon for anoLher conLracL
Supreme Court Doctr|ne: 8eal characLer of conLracL ls lndlcaLed
by Lhe subsLance, noL by Lhe name glven Lo lL by Lhe parLles.
o A conLracL of sale ls whaL Lhe law deflnes lL Lo be, Laklng
lnLo conslderaLlon lLs essenLlal elemenLs, and noL whaL
Lhe conLracLlng parLles call lL. !2,+?.@ '( ".$#? .G
4HH*,>@/ 661 2"34 D1 78999;.
1

o CourLs musL look aL Lhe lnLenL of Lhe parLles ln order Lo
deLermlne Lhe naLure of a conLracL noL aL Lhe
nomenclaLure used Lo descrlbe lL. 1rue alm and purpose
can be shown by conducL, words, acLlons of Lhe parLles.
U,. '( ".$#? .G 4HH*,>@ 781: 2"34 861;
o ConLracLs are noL deflned by parLles buL by Lhe
prlnclples of law. ",'F?* A*'*>.HQ*+? B,+C '( UFQ 7680
2"34 80D;
1hus, all oLher conLracLs whlch have for Lhelr ob[ecLlve (1)
Lransfer of ownershlp and (2) possesslon of a deLermlnaLe
sub[ecL (3) for a valuable conslderaLlon wlll be governed by Lhe
law on Sales

2. Consensua| (Art|c|e 147S)


1
8owe v. coott of Appeols, 220 SC8A 138 (1993), kometo v. coott of Appeols,
230 SC8A 223 (1993), loo v. coott of Appeols, 273 SC8A 237 (1997), covlte
uevelopmeot 8ook v. llm, 324 SC8A 346 (2000).
Art|c|e 147S.
1he contract of sa|e |s perfected at the moment there |s a meet|ng of
m|nds upon the th|ng wh|ch |s the ob[ect of the contract and upon the
pr|ce.

Irom that moment, the part|es may rec|proca||y demand performance,
sub[ect to the prov|s|ons of the |aw govern|ng the form of contracts.
(14S0a)

Sale ls perfecLed by mere consenL " a conLracL of sale ls noL a
real, buL a consensual conLracL, and becomes valld and blndlng
upon Lhe meeLlng of Lhe mlnds of Lhe parLles as Lo Lhe ob[ecL
and Lhe prlce,
2
consequenLly:
o upon lLs perfecLlon, Lhe parLles may reclprocally
demand performance. !N*F#@ .G E*+,+PF. B*V*+?F+R '(
B,L*%/ :98 2"34 :65 7899D;M
6
sub[ecL only Lo Lhe
provlslons of Lhe law governlng Lhe form of conLracLs.
!"#$% '( )*#+,+-./ 011 2"34 516 7899:;(

2
kometo v. coott of Appeols, 230 SC8A 223 (1993), 8olotbot v. coott of
Appeols, 261 SC8A 128 (1996), cotooel v. coott of Appeols, 263 SC8A 13 (1996),
clty of cebo v. nelts of cooJlJo kobl, 306 SC8A 408 (1999), Aqoseo v. coott of
Appeols, 323 SC8A 304 (2000), lofottezo v. Mocboco, 333 SC8A 643 (2000),
looJtes v. coott of Appeols, 394 SC8A 133 (2002), Alcoototo-uoos v. Je leoo,
404 SC8A 74 (2003), 8oeooveototo v. coott of Appeols, 416 SC8A 263 (2003),
5oo loteozo uev. cotp. v. coott of Appeols, 449 SC8A 99 (2003), osoo v.
Atcloqo, 449 SC8A 438 (2003), Alozo v. loJoo, 462 SC8A 614 (2003), kobetts v.
loplo, 313 SC8A 346 (2007), Mcc loJosttlol 5oles cotp. v. 5sooqyooq cotp., 336
SC8A 408 (2007), costlllo v. keyes. 339 SC8A 193 (2007), \51 cotp. v. uMc
utboo ltopettles uev., loc., 394 SC8A 398 (2009), uel ltoJo v. cobolleto, 614
SC8A 102 (2010).
3
ltovloce of cebo v. nelts of kofloo Motoles, 346 SC8A 313 (2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
lL remalns valld even lf parLles have noL afflxed Lhelr slgnaLures
Lo lLs wrlLLen form, !W,X*>. '( ".$#? .G 4HH*,>@/ 65D 2"34 6ID
75JJJ;/ or Lhe manner of paymenL ls breached. !=F>FHF+,@ 2S*>>
=*?#.>*$Q ".#H '( W.X.+@*+R/ 0JD 2"34 69: 7899D;(
o 1he acLual dellvery of Lhe sub[ecL maLLer or paymenL of
Lhe prlce agreed upon are noL necessary componenLs Lo
esLabllsh Lhe exlsLence of a valld sale. 1hus, non-
dellvery or non-paymenL does noL lnvalldaLe or vold a
perfecLed sale. 1hese merely become legal basls for
remedles.
o ln an LxLra[udlclal SeLLlemenL of LsLaLe wlLh AbsoluLe
Sale, lL would be lmmaLerlal LhaL Lhe buyer's slgnaLure
does noL appear Lhereon slnce Lhe conLracL of sale ls
consensual and perfecLed by mere consenL. !B,>,-,- '(
3$X>FP./ :J: 2"34 58: 7899J;(
o lallure of Lhe subdlvlslon developer Lo obLaln a llcense
Lo sell Lhe subdlvlslon loLs does noL render Lhe sales
vold on LhaL ground alone especlally LhaL Lhe parLles
have lmplledly admlLLed LhaL Lhere was already a
meeLlng of Lhe mlnds as Lo Lhe sub[ecL of Lhe sale and
prlce of Lhe conLracL. ",+?*QH#,?* '( "32 3*,>?Y A*'(
".#H( :I1 2"34 0J8 7899J;(

",+?*QH#,?* '( "32 3*,>?Y A*'( ".#H(

Iacts: eLlLloners boughL on an lnsLallmenL basls subdlvlslon loLs from
respondenL C8S 8ealLy and had pald ln full Lhe agreed purchase prlces,
buL noLwlLhsLandlng Lhe full paymenL and desplLe demands,
respondenLs falled and refused Lo dellver Lhe correspondlng cerLlflcaLes
of LlLle Lo peLlLloners. 1hey alleged LhaL respondenL Casal was Lhe owner
of a parcel of land slLuaLed ln Ceneral Marlano Alvarez, CavlLe known as
Lhe C8S larm LsLaLe whlle respondenL Salvador was Lhe presldenL of
respondenL C8S 8ealLy, Lhe developer of C8S larm LsLaLe. eLlLloners
averred LhaL respondenLs falled Lo dellver Lhe LlLles Lo Lhelr respecLlve
properLles. Casal averred LhaL desplLe hls wllllngness Lo dellver Lhem,
peLlLloners refused Lo accepL Lhe cerLlflcaLes of LlLle wlLh noLlce of lls
pendens coverlng Lhe subdlvlslon loLs. 8espondenL Salvador alleged LhaL
Lhe fallure by respondenL Casal Lo comply wlLh hls obllgaLlon under Lhe
flrsL agreemenL Lo dellver Lo C8S or Lhe buyers Lhe cerLlflcaLes of LlLle
was caused by Lhe annoLaLlon of Lhe noLlce of lls pendens on Lhe
cerLlflcaLe of LlLle coverlng Lhe subdlvlslon properLy.

PLu88 ArblLer Ma. erpeLua ?. Aqulno declared LhaL Lhe regular courLs
and noL Lhe PLu88 had [urlsdlcLlon over peLlLloners' complalnL, Lhus,
Lhe complalnL for quleLlng of LlLle could noL be glven due course. 1he
Pelrs of Laudlza and Llgon were dropped as parLles on Lhe ground of
lack of cause of acLlon. Powever, she found respondenLs C8S 8ealLy,
Casal and Salvador llable on Lhelr obllgaLlon Lo dellver Lhe cerLlflcaLes of
LlLle of Lhe subdlvlslon loLs Lo peLlLloners who had pald ln full Lhe
purchase prlce of Lhe properLles. She also found as fraudulenL and
consequenLly nulllfled Lhe subsequenL Lransfer of a porLlon of Lhe
subdlvlslon Lo respondenLs Ang and Cuason.
1


Issue: WheLher or noL Lhe absence of a llcense Lo sell has rendered Lhe
sales vold

1
(2012, AugusL 12). Iojo's bloq-o-Joq. 8eLrleved from
hLLp://[ca[oLe.blogspoL.com/2012/08/vlcenLa-canLempraLe-eL-al-vs-crs-
realLy.hLml
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

ne|d: nC. lallure of Lhe subdlvlslon developer Lo obLaln a llcense Lo sell
Lhe subdlvlslon loLs does noL render Lhe sales vold on LhaL ground alone
especlally LhaL Lhe parLles have lmplledly admlLLed LhaL Lhere was
already a meeLlng of Lhe mlnds as Lo Lhe sub[ecL of Lhe sale and prlce of
Lhe conLracL.

Doctr|ne: See above.

1he blndlng effecL of sale ls based on Lhe prlnclple LhaL Lhe
obllgaLlons arlslng Lherefrom have Lhe force of law beLween Lhe
parLles. !E*?*#,+@ )*-*#,?F.+ .G ?S* =SF>FHHF+*@ '( ".$#? .G
4HH*,>@/ 60: 2"34 60I 78999;(
noncompllance wlLh formal requlremenLs does noL affecL
valldlLy of conLracL.
o ArLlcle 1338 requlrlng Lhe embodlmenL of cerLaln
conLracLs ln a publlc lnsLrumenL ls only for convenlence,
and reglsLraLlon of Lhe lnsLrumenL only adversely affecLs
Lhlrd parLles. lormal requlremenLs are for Lhe beneflL of
Lhlrd parLles. )$>* '( ".$#? .G 4HH*,>@/ 8ID 2"34 DJI
75JJI;
Moda||t|es that Affect Character|st|c of Consensua||ty.
Consensual characLerlsLlc may be affecLed by cerLaln modallLles
added by sLlpulaLlon
o Lxample: Suspenslve Lerm or condlLlon
erfect|on D|st|ngu|shed from Demandab|||ty.
o noL all conLracLs of sale become auLomaLlcally and
lmmedlaLely effecLlve. ln sales wlLh assumpLlon of
morLgage, Lhere ls a condlLlon precedenL Lo Lhe seller's
consenL and wlLhouL Lhe approval of Lhe morLgagee, Lhe
sale ls noL perfecLed. !BFL,+ 2?**> ".#H( '( ".$#? .G
4HH*,>@/ 6J5 2"34 J9 78998;(
o Lven dellvery and Laklng possesslon of sub[ecL maLLer,
wlLh consenL of Lhe seller, does noL perfecL sale when
meeLlng of mlnds ls lncompleLe. ln Lhls case, Lhere was
no agreemenL yeL on flnal prlce. <N4 '@( W#,P* B,H?F@?
"S$#PS 76J5 2"34 J9;
"No Contract S|tuat|on" versus "Vo|d Contract".
o Vo|d Contract " Absence of consenL (l.e., compleLe
meeLlng of mlnds) negaLes Lhe exlsLence of a perfecLed
sale( !)F#Q* '( B$C,> O+?*#H#F@*@ ,+- A*'( ".#H(/ 050
2"34 5J9 78996;( 1he conLracL Lhen ls null and vold ob
loltlo, absoluLely wanLlng ln clvll effecLs, hence, lL does
noL creaLe, modlfy, or exLlngulsh Lhe [urldlcal relaLlon Lo
whlch lL refers. !",X.?,V* '( =$-$+,+/ 06D 2"34 086
78990;(
o No Contract " When Lhere ls no meeLlng of Lhe mlnds
on prlce, Lhe conLracL ls noL perfecLed" and does noL
serve as a blndlng [urldlcal relaLlon beLween Lhe parLles.
!K,+F>, K*?,> ".+?,F+*# ".#H( '( =<B/ :55 2"34 000
7899D;/
5
and should be more accuraLely denomlnaLed as
lnexlsLenL, as lL dld noL pass Lhe sLage of generaLlon Lo
Lhe polnL of perfecLlon. !<N4 '( W#,P* B,H?F@? "S$#PS/
080 2"34 501 78990;(

3. 8||atera| and kec|proca| (Art|c|es 1169 and 1191)

1
kobetts v. loplo, 313 SC8A 346 (2007).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Art|c|e 1169.
1hose ob||ged to de||ver or to do someth|ng |ncur |n de|ay from the
t|me the ob||gee [ud|c|a||y or extra[ud|c|a||y demands from them the
fu|f|||ment of the|r ob||gat|on.

nowever, the demand by the cred|tor sha|| not be necessary |n order
that de|ay may ex|st:

(1) When the ob||gat|on or the |aw express|y so dec|are, or

(2) When from the nature and the c|rcumstances of the ob||gat|on |t
appears that the des|gnat|on of the t|me when the th|ng |s to be
de||vered or the serv|ce |s to be rendered was a contro|||ng mot|ve for
the estab||shment of the contract, or

(3) When demand wou|d be use|ess, as when the ob||gor has rendered
|t beyond h|s power to perform.

In rec|proca| ob||gat|ons, ne|ther party |ncurs |n de|ay |f the other does
not comp|y or |s not ready to comp|y |n a proper manner w|th what |s
|ncumbent upon h|m. Irom the moment one of the part|es fu|f|||s h|s
ob||gat|on, de|ay by the other beg|ns. (1100a)

Art|c|e 1191.
1he power to resc|nd ob||gat|ons |s |mp||ed |n rec|proca| ones, |n case
one of the ob||gors shou|d not comp|y w|th what |s |ncumbent upon
h|m.

1he |n[ured party may choose between the fu|f|||ment and the
resc|ss|on of the ob||gat|on, w|th the payment of damages |n e|ther
case. ne may a|so seek resc|ss|on, even after he has chosen fu|f|||ment,
|f the |atter shou|d become |mposs|b|e.

1he court sha|| decree the resc|ss|on c|a|med, un|ess there be [ust
cause author|z|ng the f|x|ng of a per|od.

1h|s |s understood to be w|thout pre[ud|ce to the r|ghts of th|rd
persons who have acqu|red the th|ng, |n accordance w|th art|c|es 138S
and 1388 and the Mortgage Law. (1124)

8llaLeral " lL lmposes obllgaLlons on boLh parLles
o CbllgaLlon/promlse of each parLy ls Lhe cause for Lhe
obllgaLlon of Lhe oLher.
o lL ls a requlslLe for a valld and enforceable sale LhaL lL ls
muLually obllgaLory. =.>Y?*PS+FP Z+F'*#@F?Y .G ?S*
=SF>FHHF+*@ '( ".$#? .G 4HH*,>@/ 6DI 2"34 DJ5 78995;
8eclprocal CbllgaLlons " each parLy ls slmulLaneously a debLor
and credlLor of Lhe oLher
o A conLracL of sale glves rlse Lo reclprocal obllgaLlons",
whlch arlse from Lhe same cause wlLh each parLy belng
a debLor and credlLor of Lhe oLher, such LhaL Lhe
obllgaLlon of one ls dependenL upon Lhe obllgaLlon of
Lhe oLher, and Lhey are Lo be performed
slmulLaneously, so LhaL Lhe performance of one ls
condlLloned upon Lhe slmulLaneous fulflllmenL of Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
oLher. ".#?*@ '( ".$#? .G 4HH*,>@/ 0J0 2"34 :19
7899D;(
5


".#?*@ '( ".$#? .G 4HH*,>@

Iacts: lor Lhe purchase prlce of 3.7M, vllla Lsperanza uevelopmenL
CorporaLlon (vendee) and AnLonlo CorLes (vendor) enLered lnLo a
conLracL of sale over Lhe loLs locaLed aL 8aclaran, aranaque, MeLro
Manlla. 1he CorporaLlon advanced Lo CorLes Lhe LoLal sum of
1,213,000.00. ln SepLember 1983, Lhe parLles execuLed a deed of
absoluLe sale on Lhe followlng Lerms:
1he CorporaLlon shall advance 2.2 M as downpaymenL, and
CorLes shall llkewlse dellver Lhe 1C1 for Lhe 3 loLs.
1he balance of 1.3M shall be payable wlLhln a year from Lhe
daLe of Lhe execuLlon.
1he CorporaLlon flled Lhe lnsLanL case for speclflc performance seeklng
Lo compel CorLes Lo dellver Lhe 1C1s and Lhe orlglnal copy of Lhe ueed
of AbsoluLe Sale. Accordlng Lo Lhe CorporaLlon, desplLe lLs readlness and
ablllLy Lo pay Lhe purchase prlce, CorLes refused dellvery of Lhe soughL
documenLs. lL prayed for damages, aLLorney's fees and llLlgaLlon
expenses. CorLes clalmed LhaL Lhe owner's dupllcaLe copy of Lhe Lhree
1C1s were surrendered Lo Lhe CorporaLlon and lL ls Lhe laLLer whlch
refused Lo pay ln full Lhe agreed down paymenL.

1
Ooq v. coott of Appeols, 310 SC8A 1 (1999), Mottel v. kA55cO, 348 SC8A 391
(2000), Aqto cooqlometotes, loc. v. coott of Appeols, 348 SC8A 430 (2000),
velotJe v. coott of Appeols, 361 SC8A 36 (2001), cottoscoso, It. v. coott of
Appeols, 477 SC8A 666 (2003), nelts of Aotoolo l. 8etoobe v. coott of Appeols,
339 SC8A 33 (2008), nelts of Aotoolo l. 8etoobe v. coott of Appeols, 339 SC8A
33 (2008).
Issue: WheLher or noL Lhere ls delay ln Lhe performance of Lhe parLles'
obllgaLlon LhaL would [usLlfy Lhe resclsslon of Lhe conLracL of sale

ne|d: 8C1P A8L ln uLLA?. CorLes avers LhaL he dellvered Lhe 1C1's
Lhrough Lhe broker's son. Pe furLher avers LhaL Lhe broker's son
dellvered lL Lo Lhe broker, who ln Lurn dellvered Lhem Lo Lhe
CorporaLlon. Marcosa Sanchez's unrebuLLed LesLlmony ls LhaL, she dld
noL recelve Lhe 1C1s. She also denled knowledge of dellvery Lhereof Lo
her son, Manny.

WhaL furLher sLrengLhened Lhe flndlngs LhaL CorLes dld noL surrender
Lhe sub[ecL documenLs was Lhe offer of CorLes' counsel aL Lhe pre-Lrlal
Lo dellver Lhe 1C1s and Lhe ueed of AbsoluLe Sale lf Lhe CorporaLlon wlll
pay Lhe balance of Lhe down paymenL. lndeed, lf Lhe sald documenLs
were already ln Lhe hands of Lhe CorporaLlon, Lhere was no need for
CorLes' counsel Lo make such offer.

Conslderlng LhaL Lhelr obllgaLlon was reclprocal, performance Lhereof
musL be slmulLaneous. 1he muLual lnacLlon of CorLes and Lhe
CorporaLlon Lherefore gave rlse Lo a compensaLlon morae or defaulL on
Lhe parL of boLh parLles because nelLher has compleLed Lhelr parL ln
Lhelr reclprocal obllgaLlon. CorLes ls yeL Lo dellver Lhe orlglnal copy of
Lhe noLarlzed ueed and Lhe 1C1s, whlle Lhe CorporaLlon ls yeL Lo pay ln
full Lhe agreed down paymenL of 2,200,000.00. 1hls muLual delay of
Lhe parLles cancels ouL Lhe effecLs of defaulL, such LhaL lL ls as lf no one
ls gullLy of delay.

under ArLlcle 1169 of Lhe Clvll Code, from Lhe momenL one of Lhe
parLles fulfllls hls obllgaLlon, delay by Lhe oLher beglns. Slnce CorLes dld
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
noL perform hls parL, Lhe provlslon of Lhe conLracL requlrlng Lhe
CorporaLlon Lo pay ln full Lhe down paymenL never acqulred obllgaLory
force.
1


Doctr|ne:

A perfecLed conLracL of sale carrles Lhe correlaLlve duLy of Lhe
seller Lo dellver Lhe properLy and Lhe obllgaLlon of Lhe buyer Lo
pay Lhe agreed prlce. ".+R#*R,?F.+ .G ?S* 3*>FRF.$@ .G ?S*
EF#RF+ K,#Y '( [#.>,/ ::6 2"34 :1I 7899I;(

".+R#*R,?F.+ .G ?S* 3*>FRF.$@ .G ?S* EF#RF+ K,#Y '( [#.>,

Iacts: Cn Aprll 1999, peLlLloner, acLlng Lhrough Sr. le Lnhenco, and
respondenLs meLs Lo Lalk abouL Lhe sale of Lhe properLy of respondenLs
ad[acenL Lo SL. Mary's Academy. Sald properLy ls LoL 1398-2 whlch ls
reglsLered ln Lhe name of Manuel Laserna. !osepehlne Crola wenL Lo
Manlla on May, 1999 for Lhe sub[ecL properLy and was eneLerLalned by
Ma. ClarlLa 8alleque. A conLracL Lo sale was made beLween Lhe parLles
where peLlLloners are bounde Lo pay Lhe properLy for 3,333,000.00
wlLh 10 of Lhe LoLal conslderaLlon payable upon Lhe execuLlon of Lhe
conLracL. 1hls was slgned by Sr. Lnhenco as wlLness. Cn !une 7, 1999,
!osephlne and AnLonlo recelved Lhe 8C8C check bearlng Lhe amounL of
333,330.00 as down paymenL by peLlLloner. An exLra[udlclal seLLlemenL
was execuLed for Lhe esLaLe of 1rlnldad Andrada Laserna ad[udlcaLlng Lo
Lhemselves Lhe sub[ecL properLy. 1ransfer CerLlflcaLes were now under

1
(!une 2010). 1he SLray ueclslon noLes. 8eLrleved from
hLLp://LhesLraydeclslon.wordpress.com/2010/06/21/corLes-vs-courL-of-
appeals/
Lhelr names. WlLh an undaLed AbsoluLe ueed of Sale, respondenLs
scheduled Lo meeL wlLh peLlLloner for Lhe remalnlng balance. eLlLloner
dld noL arrlve. 1hey lnsLead refused Lo pay respondenLs due Lo
unreasonable grounds. 1hls made respondenLs flle a complalnL before
Lhe 81C wlLh alLernaLlve causes of acLlon or resclsslon. 81C granLed
respondenLs. Cn appeal, Lhe maLLer was resolved by Lhe appellaLe courL
Lhrough ArLlcle 1378 of Lhe new Clvll Code.

Issue: WheLher or noL ArLlcle 1191 should be applled lnsLead of ArLlcle
1378 of Lhe new Clvll Code.

ne|d: ?LS. Such case falls under ArLlcle 1191 because lL applles Lo breach
of reclprocal obllgaLlons. ArLlcle1191 speaks of Lhe remedy of resclsslon
ln reclprocal obllgaLlons. ln Lhe presenL case, when 8vM refused Lo pay
Lhe balance whlch breached Lhe conLracL, respondenLs have avalled of
Lhe remedles granLed by ArLlcle 1191. 1hey are enLlLled Lo damages
regardless of Lhe rellef LhaL would be granLed by Lhe CourL. Pence, Lhe
courL should apply ArLlcle 1191 of Lhe new Clvll Code,
2


Doctr|ne:

1he power Lo resclnd ls lmplled ln reclprocal ones ln case one of
Lhe obllgors should noL comply wlLh whaL ls lncumbenL upon
hlm, and wlLhouL need of prlor demand. Almoceto v. Ooq, 346
SC8A 164 (2008).
3



2
urex Mendez. (2012 !uly 16). Obll coses 2. 8eLrleved from
hLLp://www.scrlbd.com/doc/100162338/Cbll-Cases-2
3
vJo. ue Ooltloo v. lolotco, 29 SC8A 1 (1969)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
4. Cnerous
Cnerous " lL lmposes a valuable conslderaLlon.
o ldeally, a prlce cerLaln ln money or lLs equlvalenL.
ku|es Cf Interpretat|on: we lnLerpreL ln favor of Lhe greaLer
reclproclLy of lnLeresLs. W,F?* '( ).+,PF*#/ 8 2"34 I69 75JD5;(

W,F?* '( ).+,PF*#

Iacts: lonacler owned lron lode mlneral clalms. 1hrough a deed of
asslgnmenL, he made CalLe as hls aLLorney-ln-facL Lo explore and
develop Lhe mlnlng clalms. CalLe Lhen developed Lhem. LaLer lonacler
declded Lo revoke Lhe deed of asslgnmenL. CalLe agreed provlded LhaL
he be pald hp73,000. lonacler agreed, buL only on Lhe condlLlon LhaL
hp 10,000 wlll be pald afLer Lhe slgnlng of Lhe revocaLlon of power of
aLLorney and conLracL" agreemenL and Lhe php63,000 wlll be pald from
and ouL of Lhe flrsL leLLer of credlL coverlng Lhe flrsL shlpmenL of lron
ores and of Lhe flrsL amounL derlved from Lhe local sale of lron ore made
by Lhe Larap Mlnes & SmelLlng Co. CalLe agreed Lo such condlLlon afLer
a sureLy bond, underwrlLLen by lar LasLern SureLy and lnsurance Co.
(lLSlC), was execuLed ln favour of CalLe Lo secure Lhe paymenL of Lhe
balance. 1he llablllLy of lLSlC would however, aLLach only when Lhere
had been an acLual sale of lron ore amounLlng Lo aL leasL php63,000. 1
year laLer Lhe bond explred wlLhouL any sale belng made. When CalLe
demanded paymenL, fonacler wasn'L able Lo pay. ln hls defense, he
clalmed LhaL lL was a condlLlon LhaL Lhe balance wlll be pald ouL of Lhe
flrsL leLLer of credlL. Slnce Lhey sLlll haven'L sold any lron ore, Lhe
condlLlon has noL yeL been fulfllled.

Issue: WheLher Lhe obllgaLlon of appellanL lonacler Lo pay appellee
CalLe Lhe 63,000.00 (balance of Lhe prlce of Lhe lron ore ln quesLlon)ls
one wlLh a perlod or Lerm or one wlLh a suspenslve condlLlon

ne|d: lL ls a perlod. 1he Supreme CourL sald LhaL lL was noL Lhe case as
Lhe wordlng of Lhe conLracL lmplles LhaL whaL was uncerLaln was Lhe
daLe/maLurlLy of Lhe paymenL and noL Lhe paymenL lLself. 8elng so lL ls a
perlod and noL a condlLlon. Also, Sale ls normally commuLaLlve and
onerous LhaL each parLy anLlclpaLe performance by Lhe oLher from Lhe
very sLArLlcle AlLhough a person can assume rlsk of recoverlng noLhlng
(l.e Lhrough a suspenslve condlLlon) for whaL he glves, lL ls noL usually ln
Lhe course of buslness Lo do so. lurLhermore, Lhe clvll code sLaLes lf Lhe
conLracL ls onerous, Lhe doubL shall be seLLled ln favor of Lhe greaLesL
reclproclLy of lnLeresLs. A sales conLracL ls an onerous conLracL, belng so,
Lhe lnLerpreLaLlon whlch favour Lhe greaLesL reclproclLy of lnLeresLs shall
be applled. 1here can be no quesLlon LhaL greaLer reclproclLy obLalns lf
Lhe buyer' obllgaLlon ls deemed Lo be acLually exlsLlng, wlLh only lLs due
daLe posLponed or deferred. ln accordance wlLh Lhe clvll code, slnce Lhe
securlLy was lmpalred and lonacler dld noL replace lL wlLh a new one,
lalnLlff losL Lhe rlghL Lo use Lhe perlod Lhus Lhe 63,000 ls due already.

Doctr|ne:

S. Commutat|ve (8U1 SLL\ Art|c|es 13SS and 1470)
CommuLaLlve " a Lhlng of value ls exchanged for equal value
o ldeally, Lhe value of Lhe sub[ecL maLLer ls equlvalenL Lo
Lhe prlce pald.

Art|c|e 13SS.
Lxcept |n cases spec|f|ed by |aw, |es|on or |nadequacy of cause sha||
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
not |nva||date a contract, un|ess there has been fraud, m|stake or
undue |nf|uence. (n)

Art|c|e 1470.
Gross |nadequacy of pr|ce does not affect a contract of sa|e, except as
|t may |nd|cate a defect |n the consent, or that the part|es rea||y
|ntended a donat|on or some other act or contract. (n)

no sLrlcL requlremenL Lhough
o ln a conLracL of sale, Lhere ls no requlremenL LhaL Lhe
prlce be equal Lo Lhe exacL value of Lhe sub[ecL maLLer
of sale, all LhaL ls requlred ls LhaL Lhe parLles belleved
LhaL Lhey wlll recelve good value ln exchange for whaL
Lhey wlll glve. B$*+,'*+?$#, '( ".$#? .G 4HH*,>@/ 05D
2"34 8D6 78996;.

B$*+,'*+?$#, '( ".$#? .G 4HH*,>@

Iacts: Spouses Leonardo and lellclano !oaquln execuLed deeds of sale
Lo some of Lhelr chlldren. 1he remalnlng chlldren flled a case because
Lhey belleve LhaL such sale (1) would lmpalr Lhelr leglLlme and (2) was
vold for lack of conslderaLlon.

Issue: WheLher or noL Lhe deeds of sale are vold for lack of
conslderaLlon and gross lnadequacy of prlnce.

ne|d: nC. 1he CourL held LhaL Lhelr rlghLs Lo Lhelr parenLs' properLles
would vesL only upon Lhelr parenLs' deaLh, and whlle Lhey are sLlll allve,
Lhey may dlspose of lL even wlLhouL Lhe consenL of Lhe helrs. Cn Lhe
lssue of conslderaLlon, Lhe Supreme CourL held LhaL a conLracL of sale ls
a consensual conLracL. As long as Lhe prlce of Lhe properLy was agreed
upon, Lhe conLracL ls valld. lallure of paymenL would noL resulL ln an
lnvalld conLracL, buL merely glves a rlghL Lo demand paymenL. Also,
lnadequaLe conslderaLlon does noL lnvalldaLe a conLracL.

Doctr|ne: Sale over sub[ecL maLLer ls noL real, buL consensual. lL
becomes valld and blndlng upon meeLlng of Lhe mlnds as Lo Lhe prlce.
1here ls no sLrlcL requlremenL as Lo Lhe prlce. All LhaL ls requlred ls LhaL
Lhe parLles belleved LhaL Lhey wlll recelve good value ln exchange for
whaL Lhey wlll glve.

W,F?* '( ).+,PF*#/ 8 2"34 I69 75JD5; " obllgaLlons ln a sale can
be subordlnaLed Lo a suspenslve condlLlon. 1hus,
commuLaLlveness ls noL ob[ecLlve, buL sub[ecLlve.
o Lx. Seller selllng old car for 200,000. Lven lf a more
ob[ecLlve revlew would say LhaL Lhe car ls worLh
300,000, Lhe conLracL would sLlll be a sale, as seller
really belleves LhaL he's recelvlng approprlaLe value
Powever, sub[ecLlve naLure cannoL be pushed Lo absurdlLy
o Seller, knowlng full well LhaL hls car ls worLh 200,000
sLlll opLs Lo sells lL for 100. Such could be consldered
more of a donaLlon, and Lherefore reformaLlon of Lhe
lnsLrumenL may be had Lo express parLles' Lrue lnLenL.
Sub[ecLlve naLure supporLed by prlnclple LhaL lnadequacy of
prlce does noL affecL ordlnary sale.
o noL a sufflclenL ground for cancelllng a volunLary
conLracL of sale.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
6. Sa|e Is 1|t|e And Not Mode
Sale ls noL a mode, buL merely a LlLle. A mode ls Lhe legal means
by whlch domlnlon or ownershlp ls creaLed, Lransferred or
desLroyed, buL LlLle ls only Lhe legal basls by whlch Lo affecL
domlnlon or ownershlp. Sale by lLself does noL Lransfer or affecL
ownershlp, Lhe mosL LhaL sale does ls Lo creaLe Lhe obllgaLlon Lo
Lransfer ownershlp. lL ls LradlLlon or dellvery, as a consequence
of sale, LhaL acLually Lransfers ownershlp. !2,+ U.#*+%. A*'(
".#H( '( ".$#? .G 4HH*,>@/ 00J 2"34 JJ 7899:;/
5
PF?F+R
EF>>,+$*',/ =SF>FHHF+* U,] .+ 2,>*@/ 5JJ: *-(/ ,? H( :(
Sale perfecLed by consenL buL ownershlp passes only upon
dellvery.
o [Sale] 8eal rlghL over a Lhlng arlslng from a [urldlcal acL
ls noL sufflclenL Lo glve rlse Lo ownershlp.
o [uellvery] .Such rlghL musL be compleLed by fulfllllng
cerLaln condlLlons lmposed by law. 4P,H '( ".$#? .G
4HH*,>@ 78:5 2"34 69;

Sa|e De||very
1lLle Mode
ConsLlLuLes Lhe legal basls
by whlch Lo affecL
ownershlp
Legal means by whlch ownershlp ls
creaLed, Lransferred, or desLroyed (e.g.
Successlon, uonaLlon, ulscovery)

Seller's ownershlp of Lhe Lhlng sold ls noL an elemenL of
perfecLlon, whaL Lhe law requlres ls LhaL seller has Lhe rlghL Lo

1
Acop v. coott of Appeols, 231 SC8A 30 (1993).
Lransfer ownershlp aL Lhe Llme of dellvery. !^$FV,-, '( ".$#? .G
4HH*,>@/ 8JJ 2"34 DJ: 75JJI;(
8

8U1 SLL: _F?.+R '( ".$#? .G 4HH*,>@/ 8I1 2"34 598 75JJI;/
whlch deflned a sale" as o coottoct ttoosfettloq Jomloloo ooJ
otbet teol tlqbts lo tbe tbloq solJ."

II. Sa|e D|st|ngu|shed from S|m||ar Contracts
Under|y|ng r|nc|p|e: lnLenL of parLles and elemenLs of
relaLlonshlp are more lmporLanL Lhan Lhe nomenclaLure used Lo
descrlbe a cerLaln conLracL.
o A conLracL ls whaL Lhe law deflnes lL Lo be, Laklng lnLo
conslderaLlon lLs essenLlal elemenLs, and Lhe LlLle glven
Lo lL by Lhe parLles ls noL as much slgnlflcanL as lLs
subsLance.
3
1he Lransfer of ownershlp ln exchange for a
prlce pald or promlsed ls Lhe very essence of a conLracL
of sale. !2,+?.@ '( ".$#? .G 4HH*,>@/ 661 2"34 D1
78999;(
o ln deLermlnlng Lhe real characLer of sale, courLs look aL
Lhe lnLenL of Lhe parLles, Lhelr Lrue alm and purpose ln
enLerlng lnLo Lhe conLracL, as well as by Lhelr conducL,
words, acLlons and deeds prlor Lo, durlng and
lmmedlaLely afLer execuLlng Lhe agreemenL," and noL aL
Lhe nomenclaLure used Lo descrlbe lL. !U,. '( ".$#? .G
4HH*,>@/ 81: 2"34 861 75JJ1;(

2
poototlol keolty uev. loc. v. Moyfolt 1beotet, loc., 370 SC8A 36 (2001),
Alcoototo-uoos v. Je leoo, 404 SC8A 74 (2003), nelts of Iesos M. Moscoooo v.
coott of Appeols, 461 SC8A 186 (2003).
3
kometo v. coott of Appeols, 230 SC8A 223 (1993), loo v. coott of Appeols, 273
SC8A 237 (1997), OtJeo v. Aoteo, 362 SC8A 660 (2008), vet keyes v. 5olvoJot,
5t., 364 SC8A 436 (2008)..
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

A. Donat|on (Art|c|es 72S and 1471)

Art|c|e 72S.
Donat|on |s an act of ||bera||ty whereby a person d|sposes gratu|tous|y
of a th|ng or r|ght |n favor of another, who accepts |t. (618a)

Art|c|e 1471.
If the pr|ce |s s|mu|ated, the sa|e |s vo|d, but the act may be shown to
have been |n rea||ty a donat|on, or some other act or contract. (n)

unllke a donaLlon, sale ls a dlsposlLlon for valuable
conslderaLlon wlLh no dlmlnuLlon of Lhe esLaLe buL merely
subsLlLuLlon of values, wlLh Lhe properLy sold replaced by Lhe
equlvalenL moneLary conslderaLlon, unllke donaLlon, a valld sale
cannoL have Lhe legal effecL of deprlvlng Lhe compulsory helrs
of Lhelr leglLlmes. !K,+.+R@.+R '( O@?FQ./ 090 2"34 DI6
78996;(
1he rules on double sales under ArLlcle 1344 flnd no relevance
Lo conLracLs of donaLlon. !N*Q*-*@ '( ".$#? .G 4HH*,>@/ 65D
2"34 601 75JJJ;(

1. Sa|e v. Donat|on

Sa|e Donat|on
LssenLlally onerous Cenerally graLulLous
Consensual ConLracL l.e. perfecLed by
consenL
Solemn ConLracL l.e.
requlrlng formallLles
(requlres consenL and
oLher formallLles requlred
by law ln order Lo be valld)
" Art|c|e 74S
uoes nC1 cause dlmlnuLlon of Lhe seller's
esLaLe, buL merely subsLlLuLlon of values,
wlLh Lhe properLy sold replaced by Lhe
equlvalenL moneLary conslderaLlon
Causes dlmlnuLlon of Lhe
seller's esLaLe and may
pre[udlce Lhe leglLlmes of
hls helrs. As such, lL can be
sub[ecL Lo resclsslon. A valld sale cannoL have Lhe legal effecL of
deprlvlng Lhe compulsory helrs of Lhelr
leglLlmes. K,+.+R@.+R '( O@?FQ.
7090 2"34 DI6;

2. Needs for be|ng ab|e to d|st|ngu|sh
When ls lL lmporLanL Lo know Lhe dlsLlncLlon? When Lhe
conslderaLlon for Lhe Lransfer ls noL clear.
When prlce of sale ls slmulaLed, Lhe sale ls vold, buL Lhe acL may
be shown Lo be a donaLlon or some oLher acL.
o ConLracL may be ln Lhe form of a sale" buL wlll end up
belng governed by some oLher provlslons of law.
Cn Lhe oLher hand, a supposed donaLlon may acLually have
dlfferenL conslderaLlons raLher Lhan llberallLy
o 8urdens placed upon Lhe donee
o ln LhaL case, lL becomes lmporLanL Lo deLermlne whaL
Lhe appllcable rule ls (Law on Sales vs. Law on uonaLlon)
o ArLlcle 726 of Lhe Clvll Code: Lven lf a burden ls lmposed
on donee, lL ls sLlll a donaLlon when such burden ls less
Lhan Lhe value of Lhe Lhlng glven.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o Legal lmpllcaLlon - when Lhe burden ls more valuable
Lhan Lhe Lhlng glven, lL ls an onerous donaLlon", and
may be a barLer or a sale.

8. 8arter (Art|c|es 1468, 1638 to 1641)

Art|c|e 1468.
If the cons|derat|on of the contract cons|sts part|y |n money, and
part|y |n another th|ng, the transact|on sha|| be character|zed by the
man|fest |ntent|on of the part|es. If such |ntent|on does not c|ear|y
appear, |t sha|| be cons|dered a barter |f the va|ue of the th|ng g|ven as
a part of the cons|derat|on exceeds the amount of the money or |ts
equ|va|ent, otherw|se, |t |s a sa|e. (1446a)

Art|c|e 1638.
8y the contract of barter or exchange one of the part|es b|nds h|mse|f
to g|ve one th|ng |n cons|derat|on of the other's prom|se to g|ve
another th|ng. (1S38a)

Art|c|e 1639
If one of the contract|ng part|es, hav|ng rece|ved the th|ng prom|sed
h|m |n barter, shou|d prove that |f d|d not be|ong to the person who
gave |t, he cannot be compe||ed to de||ver that wh|ch he offered |n
exchange, but he sha|| be ent|t|ed to damages. (1S39a)

Art|c|e 1640
Cne who |oses by ev|ct|on the th|ng rece|ved |n barter may recover
that wh|ch he gave |n exchange w|th a r|ght to damages. nowever, he
can on|y make use of the r|ght to recover the th|ng wh|ch he has
de||vered wh||e the same rema|ns |n the possess|on of the other party,
and w|thout pre[ud|ce to the r|ghts acqu|red |n good fa|th |n the
meant|me by a th|rd person. (1S40a)

Art|c|e 1641.
As to a|| matters not spec|f|ca||y prov|ded for |n th|s 1|t|e, barter sha||
be governed by the prov|s|ons of the preced|ng 1|t|e re|at|ng to sa|es.
(1S41a)

1. Def|n|t|ons
8arLer " Cne of Lhe parLles blnds hlmself Lo glve one Lhlng ln
conslderaLlon for Lhe oLher's promlse Lo glve anoLher Lhlng
Sale " Cne of Lhe parLles blnds hlmself Lo dellver a Lhlng ln
conslderaLlon of Lhe oLher's underLaklng Lo pay Lhe prlce ln
money or lLs equlvalenL.

2. ku|es 1o D|fferent|ate Sa|e from 8arter (Art|c|e 1468)
ManlfesL lnLenLlon of Lhe arLles
o Lven lf acqulslLlon of a Lhlng ls pald for by anoLher
ob[ecL LhaL's worLh more Lhan Lhe money componenL
o lL may sLlll be a sale lf such was Lhe lnLenLlon of Lhe
parLles.
When lnLenLlon uoes noL Appear and ConslderaLlon ConslsLs
arLly ln Money and arLly ln AnoLher 1hlng
o lL ls barLer when value of Lhe Lhlng glven as parL of Lhe
conslderaLlon exceeds Lhe amounL of money glven
o lL ls sale when Lhe value of Lhe Lhlng glven as parL of
conslderaLlon equals or ls less Lhan Lhe amounL of
money glven.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
AcLually, Lhese dlsLlncLlons are merely academlc
Aslde from Lwo separaLe rules appllcable Lo barLer, ArLlcle 1641
say LhaL barLer ls governed by Lhe Law on Sales
WhaL are Lhe Lwo separaLe rules? See ArLlcle 1639 and 1640

3. 1wo Instances Where D|fference Is Cr|t|ca|
o SLaLuLe of lrauds does noL apply Lo barLer.
o 8lghL of legal redempLlon granLed by law Lo an ad[olnlng
owner of an urban land does noL cover exchanges of
properLles.

C. Contract for |ece-of-Work (Art|c|es 1467, 1713 to 171S)

Art|c|e 1467
A contract for the de||very at a certa|n pr|ce of an art|c|e wh|ch the
vendor |n the ord|nary course of h|s bus|ness manufactures or
procures for the genera| market, whether the same |s on hand at the
t|me or not, |s a contract of sa|e, but |f the goods are to be
manufactured spec|a||y for the customer and upon h|s spec|a| order,
and not for the genera| market, |t |s a contract for a p|ece of work. (n)

Art|c|e 1713.
8y the contract for a p|ece of work the contractor b|nds h|mse|f to
execute a p|ece of work for the emp|oyer, |n cons|derat|on of a certa|n
pr|ce or compensat|on. 1he contractor may e|ther emp|oy on|y h|s
|abor or sk|||, or a|so furn|sh the mater|a|. (1S88a)

Art|c|e 1714.
If the contractor agrees to produce the work from mater|a| furn|shed
by h|m, he sha|| de||ver the th|ng produced to the emp|oyer and
transfer dom|n|on over the th|ng. 1h|s contract sha|| be governed by
the fo||ow|ng art|c|es as we|| as by the pert|nent prov|s|ons on
warranty of t|t|e and aga|nst h|dden defects and the payment of pr|ce
|n a contract of sa|e. (n)

Art|c|e 171S.
1he contract sha|| execute the work |n such a manner that |t has the
qua||t|es agreed upon and has no defects wh|ch destroy or |essen |ts
va|ue or f|tness for |ts ord|nary or st|pu|ated use. Shou|d the work be
not of such qua||ty, the emp|oyer may requ|re that the contractor
remove the defect or execute another work. If the contract fa||s or
refuses to comp|y w|th th|s ob||gat|on,the emp|oyer may have the
defect removed or another work executed, at the contractor's cost. (n)

1. Def|n|t|ons
lece of Work ConLracL ueflned:
o ConLracLor blnds hlmself Lo execuLe a plece of work for
Lhe employer, ln conslderaLlon of a cerLaln prlce or
compensaLlon.
o ConLracLor may elLher employ only hls labor or sklll, or
also furnlsh Lhe maLerlal.
"#$!\ lnelucLably, wheLher Lhe conLracL be one of sale or one
for a plece of work, a Lransfer of ownershlp ls lnvolved and a
parLy necessarlly walks away wlLh an ob[ecL." !".QQF@@F.+*# .G
T+?*#+,> 3*'*+$* '( ".$#? .G 4HH*,>@/ 815 2"34 D9: 75JJ1;/
PF?F+R EF>>,+$*',/ U,] .+ 2,>*@/ HH( 1`J 75JJ:;( ln boLh, Lhe
provlslons on warranLy of LlLle agalnsL hldden defecLs applles.
!AFL. '( ".$#? .G 4HH*,>@/ 6:J 2"34 J5 78995;(
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

2. Statutory ku|es 1o D|st|ngu|sh Sa|e Irom A |ece Cf Work
Contract (Art|c|e 1467)
a. "nab|tua||ty 1est"
o ManufacLurlng ln Lhe ordlnary course of buslness "
sales conLracLs
o ManufacLurlng upon speclal order for cusLomers "
plece of work
! upon speclal order" " based on Lhe ablllLy of
producer Lo manufacLure Lhe goods wlLhouL
walLlng for speclflc orders
o When a person sLlpulaLes for Lhe fuLure sale of arLlcles
whlch he ls hablLually maklng, and whlch aL Lhe Llme are
noL made or flnlshed, lL ls essenLlally a conLracL of sale
and noL a conLracL for labor !T+PS,$@?F a ".( '(
"#.Q]*>>/ 89 =SF>( 60: 75J55;M even when he execuLes
producLlon Lhereof only afLer an order ls placed by
cusLomers. "*>*@?F+. a ".( '( ".>>*P?.#/ JJ =SF>( I05
75J:D;.

"*>*@?F+. a ".( '( ".>>*P?.#

Iacts: Company used Lo pay sales Lax on lLs producLs as a manufacLurer-
seller. 1hey began clalmlng LhaL Lhey should only be assessed a
conLracLor's Lax, because Lhey manufacLured Lhelr producLs only upon
speclal cusLomers' speclal orders, ln accordance wlLh speclflcaLlons.
1hus, Lhelr servlces consLlLuLe a plece-of-work conLracL.

Issue: WheLher or noL Lhe Company's work consLlLuLe plece-of-work

ne|d: nC. CourL held LhaL company can'L clalm Lhe conLracLor's Lax -
Lhey were sellers. (1) 1hey hablLually made Lhe producLs. (2) 1haL Lhey
made producLs only upon order dld noL alLer Lhan naLure of Lhe
esLabllshmenL - Lhey would manufacLure Lhe producLs as Lhey always
had. Any bullder could order such producLs. 1hus Lhey dld noL serve
speclal cusLomers only. 1he essence of conLracL of plece of work ls sale
of servlce." 1hus, Lhe company musL accepL a [ob whlch requlres use of
servlces noL generally performed by lL.

Doctr|ne:

o lf Lhe Lhlng ls speclally done only upon Lhe speclflc order
of anoLher, Lhls ls a conLracL for a plece of work, lf Lhe
Lhlng ls manufacLured or procured for Lhe general
markeL ln Lhe ordlnary course of buslness, lL ls a
conLracL of sale. ".QQF@@F.+*# .G T+?*#+,> 3*'*+$* '(
O+RF+**#F+R Ob$FHQ*+? a 2$HH>Y ".(, D0 2"34 :J9
75J1:;.
1


".QQF@@F.+*# .G T+?*#+,> 3*'*+$* '( O+RF+**#F+R Ob$FHQ*+? a 2$HH>Y
".(

Iacts: LLl was engaged ln deslgn and lnsLallaLlon of alr-condlLlonlng
sysLems. An anonymous leLLer was senL Lo Lhe CollecLor, now Lhe
Commlsslon of lnLernal 8evenue (Cl8) denounclng Lnglneerlng for Lax

1
commlsslooet of lotetool keveooe v. AtoolJos cotpeotty 5bop, 139 SC8A 199
(1988), uel Moote lblllpploes, loc. v. Atoqooes, 461 SC8A 139 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
evaslon by mlsdeclarlng lLs lmporLed arLlcles and for connlvlng wlLh
forelgn suppllers. 1he assessed Lax deflclency ls 480, 912.01 from
mlsdeclared lmporLaLlon of alr-condlLlon unlLs and parLs and lLs
accessorles sub[ecL Lo SecLlon 183(m) of Lhe 1ax Code (as manufacLurer
and seller of alrcon unlLs, company ls sub[ecL Lo 30 advance sales Lax).
1he company clalmed LhaL lL ls noL a manufacLurer buL a seller of alr-
condlLlonlng unlLs and spare parLs and accessorles Lhereof, buL a
conLracLor whlch deslgns, supplles and lnsLalls alr-condlLlonlng sysLems,
and Lhus Lhe Lax appllcable Lo Lhelr buslness ls on Lhe sale of servlce or
labor raLher Lhan on Lhe sale of arLlcles.

Issue: WheLher or noL LLl ls a conLracLor of alr-condlLlonlng unlLs

ne|d: ?LS. 1he CourL held LhaL LLl was a conLracLor. lf Lhe arLlcle
ordered by Lhe purchaser ls exacLly such as [vendor] makes and keeps
on hand for sale Lo anyone, and no change ls made aL defendanL's
requesL, lL ls a conLracL of sale." ln Lhls case, LLl underLook negoLlaLlons
and execuLlon of lndlvldual conLracLs - each conLracL [ob was dlfferenL,
no Lwo were ldenLlcal.

Doctr|ne:

b. 1he test of "spec|a| orders" |s not one of t|m|ng
o 8aLher, lL ls done by deLermlnlng Lhe naLure of Lhe work
Lo be performed and Lhe producLs Lo be made.
o 1he producLs musL noL be ordlnary producLs of Lhe
manufacLurer.
o 1hey should requlre speclal skllls or equlpmenL.
o 1o 1olenLlno, tbe Jlstloctloo JepeoJs oo tbe loteotloo of
pottles: lf parLles lnLended LhaL aL some fuLure daLe an
ob[ecL has Lo be dellvered, wlLhouL conslderlng Lhe
work or labor of Lhe parLy bound Lo dellver, Lhe conLracL
ls one of sale, buL lf one of Lhe parLles accepLs Lhe
underLaklng on Lhe basls of some plan, Laklng lnLo
accounL Lhe work he wlll employ personally or Lhrough
anoLher, Lhe conLracL ls for a plece of work.
!O+RF+**#F+R a K,PSF+*#Y ".#H( '( ".$#? .G 4HH*,>@/
8:8 2"34 5:D 75JJD;(

3. ract|ca| Needs Ior 8e|ng Ab|e 1o D|st|ngu|sh
1ax rovlslons
Sale " real obllgaLlon
o CbllgaLlon Lo glve
o 8emedy: AcLlon for Speclflc erformance
lece of work " sub[ecL maLLer ls servlce rendered
o CbllgaLlon Lo do
o 8emedy: CannoL be sub[ecL Lo speclflc performance
lece of work ls noL governed by SLaLuLe of lrauds.

D. Agency 1o Se|| (Art|c|e 1466)

Art|c|e 1466.
In constru|ng a contract conta|n|ng prov|s|ons character|st|c of both
the contract of sa|e and of the contract of agency to se||, the essent|a|
c|auses of the who|e |nstrument sha|| be cons|dered. (n)

1. Def|n|t|on
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Agency " a person blnds hlmself Lo render some servlce or Lo
do someLhlng ln represenLaLlon or on behalf of Lhe prlnclpal,
wlLh Lhe consenL or auLhorlLy of Lhe laLLer.
Agency esLabllshes a represenLaLlve capaclLy ln Lhe agenL
o Plghly flduclary
o lnvolves obllgaLlons Lo do

2. D|st|ngu|sh|ng Sa|e from Agency

Sa|e Agency
noL unllaLerally revocable LssenLlally revocable by prlnclpal
8uyer hlmself pays for Lhe sub[ecL,
whlch ls hls maln obllgaLlon
AgenL noL obllged Lo pay Lhe prlce,
merely obllged Lo dellver prlce
whlch he may recelve from buyer
8uyer becomes owner of sub[ecL
maLLer afLer dellvery
AgenL never becomes owner
Seller warranLs AgenL assumes no personal
llablllLy as long as he acLs wlLhln
auLhorlLy and ln name of prlnclpal
1he seller recelves personal proflL
from Lhe sale
Agency ls a flduclary relaLlonshlp
and Lhus Lhe agenL dlsquallfled
from recelvlng personal proflL

3. Statutory ku|e (Art|c|e 1466)
AssumpLlon by agenL" of Lhe rlsk perLalnlng Lo Lhe cosL or prlce
of Lhe sub[ecL maLLer makes Lhe relaLlonshlp LhaL of buyer-
seller, for Lhe agenL does noL assume rlsk wlLh respecL Lo Lhe
prlce or Lhe properLy sub[ecL of Lhe relaLlonshlp. !c*# a ".(/ U?-(
'( UF+R,-/ 6I 2"34 :80 75J15;( ConsequenLly:
o 1he conLracLual relaLlonshlp ls noL lnherenLly revocable.
^$F#.R, '( =,#@.+@, 6I =SF>( :95 75J5I;, C8

^$F#.R, '( =,#@.+@

Iacts: lalnLlff Culroga granLed Lo arsons Lhe rlghL Lo sell as an agenL"
Lhe Culroga beds" ln vlsayas. under Lhe conLracL, arsons was obllged
Lo pay for Lhe beds wlLhln a speclfled perlod afLer dellvery even when lL
has noL been sold. LaLer, Culroga soughL Lhe resclsslon of Lhe
agreemenL clalmlng arsons vlolaLed hls obllgaLlon noL Lo sell Lhe beds
aL hlgher prlces Lhan Lhose of Lhe lnvolces, and oLhers. Culroga clalms
LhaL arsons ls hls agenL.

Issue: WheLher or noL arson ls Culroga's agenL.

ne|d: nC. 1he CourL found Lhe arrangemenL Lo be one of sale slnce Lhe
essenLlal clause provldes LhaL paymenL was Lo be made aL Lhe end of
60 days" Such feaLure exclude Lhe legal concepLlon of an agency or
order Lo sell whereby Lhe mandaLory or agency recelved Lhe Lhlng Lo sell
lL, and does noL pay lLs prlce, buL dellvers Lo Lhe prlnclpal Lhe prlce he
obLalns from Lhe sale of Lhe Lhlng Lo a Lhlrd person, and lf he does noL
succeed ln selllng Lhe Lhlng, he reLurns lL. 1he essenLlal clause provlded
for a Lransfer of ownershlp upon paymenL - preclsely Lhe essenLlal
feaLures of a sale.

Doctr|ne:

o 1he purporLed agenL does noL have Lo accounL for Lhe
proflL margln earned from acqulrlng Lhe properLy for
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe purporLed prlnclpal. =$Y,? '( 4#P. 4Q$@*Q*+? ".(,
18 =SF>( 098 75J05;.

=$Y,? '( 4#P. 4Q$@*Q*+? ".(

Iacts: Conzalo uyaL & Sons ls Lhe excluslve agenL of SLarr lano
Company. WanLlng Lo purchase sound equlpmenL from SLarr, Arco
approached Conzalo. 1hey agreed LhaL upon purchase, Conzalo would
recelve 10 commlsslon. 1wo LransacLlons happened - $1,700 and $
1,600 each. 3 years afLer Lhe LransacLlons, Arco dlscovered LhaL Lhey
pald Conzalo Lhe llsL prlce and noL Lhe neL prlce of Lhe equlpmenL.
WanLlng Lo geL relmbursemenL, Lhey flled a case ln courL clalmlng LhaL
Conzalo was Lhelr agenL. 1rlal courL absolved Conzalo sLaLlng LhaL Lhe
agreemenL was one of sale and noL agency. CCu81 Cl ALALS on Lhe
oLher hand ruled LhaL lL was one of agenL and prlnclpal.

Issue: WheLher or noL Lhe conLracL was one of agency.

ne|d: nC. 1he Supreme CourL held LhaL Lhe relaLlonshlp LhaL Lhe
conLracL was one of sale. Conzalo could noL have been Lhe agenL of Arco
for he was already SLarr's agenL. Cne could noL be boLh Lhe agenL of
buyer and seller. SC also sald LhaL slnce Conzalo would be llable for any
unforeseen evenLs, he ls lndeed noL an agenL for Lhls goes agalnsL Lhe
prlnclple of agency LhaL an agenL ls exempL from llablllLy as menLloned
by SecLlon 234, Code of Commerce:

Doctr|ne:

Cne facLor LhaL mosL clearly dlsLlngulshes agency from oLher
legal concepLs, lncludlng sale, ls coottol, one person - Lhe agenL
- agrees Lo acL under Lhe conLrol or dlrecLlon of anoLher - Lhe
prlnclpal( !EFP?.#F,@ KF>>F+R ".(/ T+P( '( ".$#? .G 4HH*,>@/ 666
2"34 DD6 78999;(
o Commerclal broker, commlsslon merchanL or lndenLor
ls a mlJJlemoo octloq lo bls owo oome, and acLs as
agenL for boLh seller and buyer Lo effecL a sale beLween
Lhem. AlLhough he ls nelLher seller nor buyer Lo Lhe
conLracL effecLed he may volunLarlly assume warranLles
of seller. !2PSQF- ,+- [X*#>Y/ T+P( '( 3dU K,#?F+*%/ 5DD
2"34 0J6 75JII;(

4. Va|ue for be|ng ab|e to d|st|ngu|sh
Genera| ku|e: ConLracL of Agency ls valld and enforceable ln any
form - noL under Lhe SLaLuLe of lrauds.
o Lxcept|on: AuLhorlLy Lo sell land musL be ln wrlLlng.

L. A,PF.+ O+ =,R. (Art|c|es 124S and 1934)

Art|c|e 124S.
Dat|on |n payment, whereby property |s a||enated to the cred|tor |n
sat|sfact|on of a debt |n money, sha|| be governed by the |aw of sa|es.
(n)

Art|c|e 1934.
An accepted prom|se to de||ver someth|ng by way of commodatum or
s|mp|e |oan |s b|nd|ng upon part|es, but the commodatum or s|mp|e
|oan |tse|f sha|| not be perfected unt|| the de||very of the ob[ect of the
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
contract. (n)

CovetoeJ by tbe low oo soles, daLlon ln paymenL ls a LransacLlon
LhaL Lakes place when properLy ls allenaLed Lo Lhe credlLor ln full
saLlsfacLlon of a debL ln money - lL lnvolves Lhe dellvery and
Lransmlsslon of ownershlp of a Lhlng as an accepLed equlvalenL
of Lhe performance of Lhe obllgaLlon. e$@.+ '( EF?,+/ 0JD 2"34
:09 78991;(

e$@.+ '( EF?,+

Iacts: ALLy. vlLan helped ?uson and hls wlfe buy a Laxl, buL he borrowed
100,000 from Lhem. Pe execuLed several posLdaLed checks Lo
guaranLee paymenL buL all were dlshonored. vlLan execuLed a ueed of
AbsoluLe Sale over hls properLy ln 8ulacan so ?uson can elLher sell or
morLgage lL, whlle vlLan clalmed Lhey were Lo reLurn Lo hlm Lhe excess
of Lhe proceeds afLer obLalnlng Lhe money represenLed by Lhe
dlshonored checks. 1hey execuLed a Second ueed of Sale whlch vlLan
clalmed was CounLer ueed of Sale as a collaLeral for Lhe accounL of a
cerLaln Lvelyn LsLur.

Issue: WheLher or noL Lhere was a daclon en pago

ne|d: nC. 1he CourL agreed, saylng he falled Lo honor hls debLs and hls
obllgaLlon was noL exLlngulshed because he dld noL mean Lo sell or
Lransfer ownershlp of hls properLy Lo Lhe ?usons. Pe also defrauded
complalnanL by lssulng posLdaLed checks.

Doctr|ne:

ln lLs modern concepL, whaL acLually Lakes place ln Jocloo eo
poqo ls an ob[ecLlve novaLlon of Lhe obllgaLlon where Lhe Lhlng
offered as an accepLed equlvalenL of Lhe performance of an
obllgaLlon ls consldered as Lhe ob[ecL of Lhe conLracL of sale,
whlle Lhe debL ls consldered as Lhe purchase prlce. !4b$F+?*Y '(
_FX.+R :55 2"34 050 7899D;(
5

o uaclon exlsLs ln Lhe sLage of consummaLlon.
o lL ls a speclal mode of paymenL.

1. L|ements of -,?F.+ |n payment:
a. erformance of Lhe presLaLlon ln lleu of paymenL
(oolmo solveoJl) whlch may conslsL ln Lhe dellvery of a
corporeal Lhlng or a real rlghL or a credlL agalnsL Lhe
Lhlrd person,
b. Some dlfference beLween Lhe presLaLlon due and LhaL
whlch ls glven ln subsLlLuLlon (olloJ pto ollo),
c. AgreemenL beLween Lhe credlLor and debLor LhaL Lhe
obllgaLlon ls lmmedlaLely exLlngulshed by reason of Lhe
performance of a presenLaLlon dlfferenL from LhaL due.
U. '( cd2 OP.`).#Q].#C 2Y@?*Q =SF>(/ T+P(, 056 2"34
5I8 78996;.
2



1
uoo neoq 8ook, loc. (oow 8ooco Je Oto uolvetsol 8ook) v. lolqo, 371 SC8A
434 (2008), 1ecbooqos lblllpploes Mfq. cotp. v. lN8, 331 SC8A 183 (2008),
Ocompo v. looJ 8ook of tbe lblllpploes, 391 SC8A 362 (2009), u.8.1. Mot-8oy
coosttoctloo, loc. v. looes, 394 SC8A 378 (2009).
2
Apolotey v. 1lbooq 311 SC8A 414 (2006), kockvllle xcel lotetootloool xlm
cotp. v. collo, 602 SC8A 124 (2009).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
U. '( cd2 OP.`).#Q].#C 2Y@?*Q =SF>(/ T+P(

Iacts: Lo purchased sLeel scaffoldlng from k!S on a monLhly lnsLallmenL
basls. When he falled Lo make paymenLs, he execuLed a ueed of
AsslgnmenL wlLh k!S so LhaL Lhe laLLer can collecL Lhe recelvables LhaL Lo
had from !omero. When k!S Lrled Lo collecL, !omero sald LhaL Lo's
prevlous debL wlLh Lhem compensaLed hls recelvables. k!S Lhen flled a
money clalm agalnsL !omero.

Issue: WheLher or noL Lhe ueed of AsslgnmenL exLlngulshed peLlLloner's
obllgaLlon.

ne|d: nC. 1he Supreme CourL ruled LhaL Lhough a ueed of AsslgnmenL,
as ln Lhls case, may exLlngulsh an obllgaLlon, lL ls lncumbenL on Lhe
Asslgnor Lo ensure Lhe exlsLence and legallLy of Lhe credlL. Lo falled Lo
do Lhls as he asslgned non-exlsLenL credlL.

Doctr|ne:

1here ls no daLlon ln paymenL where Lhere ls no Lransfer of
ownershlp ln Lhe credlLor's favor, as when Lhe possesslon of Lhe
Lhlng ls merely glven Lo Lhe credlLor by way of securlLy. ).#?
B.+FG,PF. A*'( ".#H( '( e>>,@ U*+-F+R ".#H(/ :D1 2"34 0:0
7899I;M as when Lhe possesslon ls only by way of securlLy. !=<B
'( =F+*-,/ 5J1 2"34 5 75JJ5;(
lor Jocloo Lo arlse, Lhere musL be acLual dellvery of Lhe
properLy Lo Lhe credlLor by way of exLlngulshmenL of Lhe pre-
exlsLlng debL. =SF>FHHF+* U,]F+ B$@ ".( '( ".$#? .G 4HH*,>@/ 610
2"34 668 78998;(
5

o 8U1 SLL C8I1Lk\ 222 '( ".$#? .G 4HH*,>@/ ::6 2"34
D11 7899I;(
ln a Lrue Jocloo eo poqo, Lhe asslgnmenL of Lhe properLy
exLlngulshes Lhe moneLary debL. [+R '( 3.X,+ U*+-F+R ".#H(/
::1 2"34 :5D 7899I;(
A credlLor, especlally a bank, whlch enLers lnLo Jocloo eo poqo,
should know and musL accepL Lhe legal consequence Lhereof,
LhaL Lhe pre-exlsLlng obllgaLlon ls LoLally exLlngulshed.
!O@?,+F@>,. '( O,@? f*@? B,+CF+R ".#H(/ :00 2"34 6DJ 7899I;(
A properLy sub[ecL Lo a real esLaLe morLgage, whlch has noL
been foreclosed, may valldly be Lhe sub[ecL of Jocloo eo poqo,
for a morLgage does noL Lake away Lhe properLy rlghLs of Lhe
morLgagor, however, Lhe credlLor who becomes Lhe buyer of
Lhe properLy ls sub[ecL Lo Lhe real esLaLe morLgage llen.
!_YHF+RP. '( UFQ/ D90 2"34 6JD 7899J;(

I. Lease (Art|c|es 1484 and 148S)

Art|c|e 1484.
In a contract of sa|e of persona| property the pr|ce of wh|ch |s payab|e
|n |nsta||ments, the vendor may exerc|se any of the fo||ow|ng
remed|es:

(1) Lxact fu|f|||ment of the ob||gat|on, shou|d the vendee fa|| to pay,

1
llllovest cteJlt cotp. v. lblllpploe Acetyleoe co., loc. 111 SC8A 421 (1982),
vJo. Je Ioyme v. coott of Appeols, 390 SC8A 380 (2002), Ooq v. koboo leoJloq
cotp., 337 SC8A 316 (2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

(2) Cance| the sa|e, shou|d the vendee's fa||ure to pay cover two or
more |nsta||ments,

(3) Iorec|ose the chatte| mortgage on the th|ng so|d, |f one has been
const|tuted, shou|d the vendee's fa||ure to pay cover two or more
|nsta||ments. In th|s case, he sha|| have no further act|on aga|nst the
purchaser to recover any unpa|d ba|ance of the pr|ce. Any agreement
to the contrary sha|| be vo|d. (14S4-A-a)

Art|c|e 148S.
1he preced|ng art|c|e sha|| be app||ed to contracts purport|ng to be
|eases of persona| property w|th opt|on to buy, when the |essor has
depr|ved the |essee of the possess|on or en[oyment of the th|ng.
(14S4-A-a)

1. Def|n|t|on
Lease " lessor blnds hlmself Lo glve Lo anoLher Lhe en[oymenL
or use of a Lhlng for a prlce cerLaln, for a perlod whlch may be
deflnlLe or lndeflnlLe.
Lease wlLh opLlon Lo buy" ls a condlLlonal sale.
o Such ls a lease only ln name
When renLals ln a lease" are clearly meanL Lo be lnsLallmenL
paymenLs Lo a sale conLracL, desplLe Lhe nomenclaLure glven by
Lhe parLles, lL ls a sale by lnsLallmenLs and governed by Lhe
8ecLo Law. !)F>F+'*@? "#*-F? ".#H( '( ".$#? .G 4HH*,>@/ 51I
2"34 5II 75JIJ;(

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 2: Ak1ILS 1C A CCN1kAC1
CI SALL

Art|c|e 1489.
A|| persons who are author|zed |n th|s Code to ob||gate themse|ves,
may enter |nto a contract of sa|e, sav|ng the mod|f|cat|ons conta|ned
|n the fo||ow|ng art|c|es.

Where necessar|es are those so|d and de||vered to a m|nor or other
person w|thout capac|ty to act, he must pay a reasonab|e pr|ce
therefor. Necessar|es are those referred to |n art|c|e 290. (14S7a)

Art|c|e 1490.
1he husband and the w|fe cannot se|| property to each other, except:

(1) When a separat|on of property was agreed upon |n the marr|age
sett|ements, or

(2) When there has been a [ud|c|a| separat|on of property under art|c|e
191. (14S8a)

Art|c|e 1491.
1he fo||ow|ng persons cannot acqu|re by purchase, even at a pub||c or
[ud|c|a| auct|on, e|ther |n person or through the med|at|on of another:

(1) 1he guard|an, the property of the person or persons who may be
under h|s guard|ansh|p,

(2) Agents, the property whose adm|n|strat|on or sa|e may have been
|ntrusted to them, un|ess the consent of the pr|nc|pa| has been g|ven,

(3) Lxecutors and adm|n|strators, the property of the estate under
adm|n|strat|on,

(4) ub||c off|cers and emp|oyees, the property of the State or of any
subd|v|s|on thereof, or of any government-owned or contro||ed
corporat|on, or |nst|tut|on, the adm|n|strat|on of wh|ch has been
|ntrusted to them, th|s prov|s|on sha|| app|y to [udges and government
experts who, |n any manner whatsoever, take part |n the sa|e,

(S) Iust|ces, [udges, prosecut|ng attorneys, c|erks of super|or and
|nfer|or courts, and other off|cers and emp|oyees connected w|th the
adm|n|strat|on of [ust|ce, the property and r|ghts |n ||t|gat|on or |ev|ed
upon an execut|on before the court w|th|n whose [ur|sd|ct|on or
terr|tory they exerc|se the|r respect|ve funct|ons, th|s proh|b|t|on
|nc|udes the act of acqu|r|ng by ass|gnment and sha|| app|y to |awyers,
w|th respect to the property and r|ghts wh|ch may be the ob[ect of any
||t|gat|on |n wh|ch they may take part by v|rtue of the|r profess|on,

(6) Any others spec|a||y d|squa||f|ed by |aw. (14S9a)

Art|c|e 1492.
1he proh|b|t|ons |n the two preced|ng art|c|es are app||cab|e to sa|es |n
|ega| redempt|on, comprom|ses and renunc|at|ons. (n)


!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
I. Genera| ku|e: Lvery erson nav|ng Lega| Capac|ty 1o Cb||gate
n|mse|f, May Va||d|y Lnter Into A Contract Cf Sa|e, Whether As Se||er
Cr As 8uyer. (Art|c|e 1489)
Genera| ku|e: any person who has capaclLy Lo acL, or Lhe power
Lo do acLs wlLh legal effecLs, or wlLh Lhe power Lo obllgaLe
hlmself may enLer lnLo a conLracL of sale.
naLural ersons ! age of ma[orlLy beglns aL 18 years, Lhey have
capaclLy Lo acL from Lhls polnL
!urldlcal ersons ! a [urldlcal personallLy dlsLlncL from Lhe
members or parLners
o Lxpressly recognlzed by law
o 1hey have full [urldlcal capaclLy

II. M|nors, Insane And Demented ersons, Deaf-Mutes (Art|c|es 1327,
1397 and 1399)

Art|c|e 1327.
1he fo||ow|ng cannot g|ve consent to a contract:

(1) Unemanc|pated m|nors,

(2) Insane or demented persons, and deaf-mutes who do not know
how to wr|te. (1263a)

Art|c|e 1397.
1he act|on for the annu|ment of contracts may be |nst|tuted by a|| who
are thereby ob||ged pr|nc|pa||y or subs|d|ar||y. nowever, persons who
are capab|e cannot a||ege the |ncapac|ty of those w|th whom they
contracted, nor can those who exerted |nt|m|dat|on, v|o|ence, or
undue |nf|uence, or emp|oyed fraud, or caused m|stake base the|r
act|on upon these f|aws of the contract. (1302a)

Art|c|e 1399.
When the defect of the contract cons|sts |n the |ncapac|ty of one of the
part|es, the |ncapac|tated person |s not ob||ged to make any
rest|tut|on except |nsofar as he has been benef|ted by the th|ng or
pr|ce rece|ved by h|m. (1304)

Genera| ku|e: Mlnors, lnsane or demenLed persons, deaf-muLes
who cannoL wrlLe have no legal capaclLy Lo conLracL and Lhus
cannoL be parLles Lo a sale. 1hls resulLs ln voldable conLracLs.
o Lxcept|on: necessarles
ConLracLs enLered lnLo by Lhese people are noL vold, buL
voldable, l.e.:
o Sub[ecL Lo annulmenL
o Sub[ecL Lo raLlflcaLlon
ConLracLlng parLy who ls capaclLaLed cannoL lnsLlLuLe Lhe acLlon
for annulmenL based on lncapaclLy of Lhe oLher parLy.
When enLered lnLo durlng a lucld lnLerval ! valld
When enLered durlng a sLaLe of drunkenness or under hypnoLlc
spell ! voldable.
Genera| ku|e: lncapaclLaLed person ls noL obllged Lo make
resLlLuLlon
o Lxcept|on: lnsofar as he has been beneflLLed by Lhe
Lhlng/prlce

A. Necessar|es (Art|c|es 1489 and 290)

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Art|c|e 290.
Support |s everyth|ng that |s |nd|spensab|e for sustenance, dwe|||ng,
c|oth|ng and med|ca| attendance, accord|ng to the soc|a| pos|t|on of
the fam||y.

Support a|so |nc|udes the educat|on of the person ent|t|ed to be
supported unt|| he comp|etes h|s educat|on or tra|n|ng for some
profess|on, trade or vocat|on, even beyond the age of ma[or|ty. (142a)

A mlnor cannoL be deemed Lo have glven her consenL Lo a
conLracL of sale, consenL ls among Lhe essenLlal requlslLes of a
conLracL, lncludlng one of sale, absenL of whlch Lhere can be no
valld conLracL. [?] x!"#"$"%" '( )"*+,"$-, ./0 )123 .45 675508(
Genera| ku|e (regard|ng m|nors): Slnce Lhey cannoL glve
consenL, Lhere can be no valld sale. 1hus, Lhe sale ls voldable
o Lxcept|on: Powever, where necessarles are sold and
dellvered Lo a mlnor or lncapaclLaLed person, he musL
pay a reasonable prlce Lherefore. ! ArLlcle 1489(2). 1he
sale here ls valld.
necessarles are deflned ln ArLlcle 194 of Lhe lamlly Code
o LveryLhlng lndlspensable for susLenance
o uwelllng
o CloLhlng
o Medlcal ALLendance
o LducaLlon and LransporLaLlon
o ln keeplng wlLh Lhe flnanclal capaclLy of Lhe famlly
kequ|s|tes Ior Sa|e Cf Necessar|es 1o M|nors 1o 8e Va||d
1. erfecLlon of sale
2. uellvery of sub[ecL necessarles

8. Lmanc|pat|on (Art|c|es 399 and 1397, Inut||e: Ma[or|ty age now at
18 years, Art|c|es 234 and 236, Iam||y Code, amended by k.A. 6809).

Art|c|e 399.
Lmanc|pat|on by marr|age or by vo|untary concess|on sha|| term|nate
parenta| author|ty over the ch||d's person. It sha|| enab|e the m|nor to
adm|n|ster h|s property as though he were of age, but he cannot
borrow money or a||enate or encumber rea| property w|thout the
consent of h|s father or mother, or guard|an. ne can sue and be sued
|n court on|y w|th the ass|stance of h|s father, mother or guard|an.
(317a)

IAMIL CCDL (as amended by k.A. 6809)
Art|c|e 234.
Lmanc|pat|on takes p|ace by the atta|nment of ma[or|ty. Un|ess
otherw|se prov|ded, ma[or|ty commences at the age of e|ghteen years.

Art|c|e 236.
Lmanc|pat|on sha|| term|nate parenta| author|ty over the person and
property of the ch||d who sha|| then be qua||f|ed and respons|b|e for
a|| acts of c|v|| ||fe, save the except|ons estab||shed by ex|st|ng |aws |n
spec|a| cases.

Contract|ng marr|age sha|| requ|re parenta| consent unt|| the age of
twenty-one.

Noth|ng |n th|s Code sha|| be construed to derogate from the duty or
respons|b|||ty of parents and guard|ans for ch||dren and wards be|ow
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
twenty-one years of age ment|oned |n the second and th|rd
paragraphs of Art|c|e 2180 of the C|v|| Code.

k.A. No. 6809 has lowered age of ma[orlLy Lo 18 years old
1hus, lssue on valldlLy of sales enLered lnLo by emanclpaLed
mlnors no longer exlsLs.

C. rotect|on Cf 1he Sen||e And L|der|y (Art|c|e 24) And I|||terates
(Art|c|e 1332)

Art|c|e 24.
In a|| contractua|, property or other re|at|ons, when one of the part|es
|s at a d|sadvantage on account of h|s mora| dependence, |gnorance,
|nd|gence, menta| weakness, tender age or other hand|cap, the courts
must be v|g||ant for h|s protect|on.

Art|c|e 1332.
When one of the part|es |s unab|e to read, or |f the contract |s |n a
|anguage not understood by h|m, and m|stake or fraud |s a||eged, the
person enforc|ng the contract must show that the terms thereof have
been fu||y exp|a|ned to the former. (n)

under ArLlcle 1332, when one of Lhe parLles ls unable Lo read,
or lf Lhe conLracL ls ln a language noL undersLood by hlm, and
mlsLake or fraud ls alleged, Lhe person enforclng Lhe conLracL
musL show LhaL Lhe Lerms Lhereof have been fully explalned Lo
Lhe former, oLherwlse, sale ls vold. [?] 9:;"( <= 3>= '( 1-?@+ -A
3>>="%BC DE4 )123 0F. 6755E8(
Genera| ku|e: A person ls noL lncompeLenL Lo conLracL merely
because of advanced years or by reason of physlcal lnflrmlLles.
o Lxcept|on: When such age or lnflrmlLles have lmpalred
Lhe menLal faculLles so as Lo prevenL Lhe person from
properly, lnLelllgenLly, and flrmly proLecLlng hls rlghLs,
Lhen he ls undenlably lncapaclLaLed.
Whlle a person ls noL lncompeLenL Lo conLracL merely because
of advanced years or by reason of physlcal lnflrmlLles, when
such age or lnflrmlLles have lmpalred Lhe menLal faculLles so as
Lo prevenL Lhe person from properly, lnLelllgenLly or flrmly
proLecLlng hls properLy rlghLs, Lhen he ls undenlably
lncapaclLaLed, and Lhe sale he enLered lnLo ls vold [?]. G"@"$"B
'( H=,@B -A <-I,*";-@ J"%"K"*-, D4L )123 /0/ 6755E8"
#

o CLv: Lhe essence of Lhe rullng declarlng Lhe sale vold
was LhaL Lhere was never any meeLlng of Lhe mlnds, and
no real conslderaLlon ! 1hls was caused by Lhe
lncapaclLy

G"@"$"B '( H=,@B -A <-I,*";-@ J"%"K"*-

Iacts: Cregorlo 8alacano ls Lhe faLher of uomlngo 8alacano who ln Lurn
ls Lhe faLher of defendanLs (and orlglnal plalnLlffs) uomlnlc, 8odolfo,
naneLLe and Cyrlc. ln Lhelr orlglnal complalnL, hereln defendanLs clalm
LhaL Lhe sale whlch Lhelr grandfaLher Cregorlo execuLed ln favor
Spouses aragas of lands for Lhe amounL of 300,000 ls null and vold.
1hey allege LhaL Lhe conLracL was execuLed when Cregorlo was serlously
lll as evldenced by hls hosplLal conflnemenL, weakness and lnablllLy Lo

1
$%&'()% *" +%,-. %/ 0112345, 367 SC8A 368 (2001).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lalk. 8ecause of Lhls, Lhey clalm LhaL Cregorlo dld noL compleLely
undersLand whaL he was slgnlng when 8udy aragas made hlm slgn Lhe
deed of sale. Cn Lhe oLher hand, Spouses aragas presenLed Lhe one
who noLarlzed Lhe deed, ALLy. ue Cuzman, as a wlLness who ln Lurn
LesLlfled LhaL Cregorlo 8alacano had approached hlm prlor Lo hls
hosplLallzaLlon asklng hlm Lo drafL a deed of sale Lo be execuLe by
Cregorlo and 8udy aragas. Such deed was personally broughL be ALLy.
ue Cuzman and 8udy Lo Cregorlo ln Lhe hosplLal, and wlLnessed by !ulla
and AnLonlo. ALLy. ue Cuzman also clalmed LhaL alLhough Lhe deed of
sale sLaLes LhaL lL was execuLed on !uly 22 aL SanLlago ClLy, lL was ln facL
execuLed on !uly 18 ln 8ayombong, nueva vlzcaya.

Issue: WheLher or noL Lhere was a valld conLracL of sale.

ne|d: nC. eLlLloners have falled Lo prove LhaL Lhere was a meeLlng of
mlnds beLween Lhem and Cregorlo, and Lhe laLLer's healLh aL Lhe Llme
he supposedly slgned Lhe deed of sale casLs serlous doubL on wheLher
he fully undersLood Lhe conLenLs of Lhe documenLs we was slgnlng. 1he
Supreme CourL ruled LhaL (1) ALLy ue Cuzman ls an unrellable wlLness
because he had noL falLhfully execuLed hls funcLlons as noLary publlc
and because hls LesLlmony does noL prove LhaL Lhere was a meeLlng of
mlnds beLween Cregorlo and 8udy especlally concernlng Lhe
conslderaLlon of Lhe sale, and (2) Cregorlo was llLerally on hls deaLh bed
and Lherefore an ocLogenarlan maklng lL hlghly doubLful LhaL he had
been of sound mlnd when he slgned Lhe deed of sale.

Doctr|ne: Sale execuLed by senlle person declared vold, and noL
voldable. 1he Supreme CourL used ArLlcle 24 of Lhe new Clvll Code
whlch proLecLs one wlLh menLal weakness.

III. Sa|es 8y And 8etween Spouses:

A. Contracts W|th 1h|rd art|es (Art|c|es 73, 96, And 124, Iam||y Code)

IAMIL CCDL
Art|c|e 73.
L|ther spouse may exerc|se any |eg|t|mate profess|on, occupat|on,
bus|ness or act|v|ty w|thout the consent of the other. 1he |atter may
ob[ect on|y on va||d, ser|ous, and mora| grounds.

In case of d|sagreement, the court sha|| dec|de whether or not:

(1) 1he ob[ect|on |s proper, and

(2) 8enef|t has occurred to the fam||y pr|or to the ob[ect|on or
thereafter. If the benef|t accrued pr|or to the ob[ect|on, the resu|t|ng
ob||gat|on sha|| be enforced aga|nst the separate property of the
spouse who has not obta|ned consent.

1he forego|ng prov|s|ons sha|| not pre[ud|ce the r|ghts of cred|tors who
acted |n good fa|th. (117a)

Art|c|e 96.
1he adm|n|strat|on and en[oyment of the commun|ty property sha||
be|ong to both spouses [o|nt|y. In case of d|sagreement, the husband's
dec|s|on sha|| preva||, sub[ect to recourse to the court by the w|fe for
proper remedy, wh|ch must be ava||ed of w|th|n f|ve years from the
date of the contract |mp|ement|ng such dec|s|on.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

In the event that one spouse |s |ncapac|tated or otherw|se unab|e to
part|c|pate |n the adm|n|strat|on of the common propert|es, the other
spouse may assume so|e powers of adm|n|strat|on. 1hese powers do
not |nc|ude d|spos|t|on or encumbrance w|thout author|ty of the court
or the wr|tten consent of the other spouse. In the absence of such
author|ty or consent, the d|spos|t|on or encumbrance sha|| be vo|d.
nowever, the transact|on sha|| be construed as a cont|nu|ng offer on
the part of the consent|ng spouse and the th|rd person, and may be
perfected as a b|nd|ng contract upon the acceptance by the other
spouse or author|zat|on by the court before the offer |s w|thdrawn by
e|ther or both offerors. (206a)

Art|c|e 124.
1he adm|n|strat|on and en[oyment of the con[uga| partnersh|p sha||
be|ong to both spouses [o|nt|y. In case of d|sagreement, the husband's
dec|s|on sha|| preva||, sub[ect to recourse to the court by the w|fe for
proper remedy, wh|ch must be ava||ed of w|th|n f|ve years from the
date of the contract |mp|ement|ng such dec|s|on.

In the event that one spouse |s |ncapac|tated or otherw|se unab|e to
part|c|pate |n the adm|n|strat|on of the con[uga| propert|es, the other
spouse may assume so|e powers of adm|n|strat|on. 1hese powers do
not |nc|ude d|spos|t|on or encumbrance w|thout author|ty of the court
or the wr|tten consent of the other spouse. In the absence of such
author|ty or consent, the d|spos|t|on or encumbrance sha|| be vo|d.
nowever, the transact|on sha|| be construed as a cont|nu|ng offer on
the part of the consent|ng spouse and the th|rd person, and may be
perfected as a b|nd|ng contract upon the acceptance by the other
spouse or author|zat|on by the court before the offer |s w|thdrawn by
e|ther or both offerors. (16Sa)

Genera| ku|e: under ArLlcle 124 of lamlly Code, sale by
husband of a con[ugal properLy wlLhouL Lhe wlfe's consenL ls
vold, noL merely voldable, slnce Lhe resulLlng conLracL lacks one
of Lhe essenLlal elemenLs of full consenL". 9M?,"*$ '( 13C 7F0
)123 ./7 60FFL8(
0

o A wlfe afflxlng her slgnaLure Lo a ueed of Sale as a
wlLness ls deemed Lo have glven her consenL. 9G=%"N- '(
G=@=OC DEF )123 D/E 6755E8(
o Lxcept|on: Pusband may dlspose of con[ugal properLy
wlLhouL wlfe's consenL lf such sale ls necessary Lo
answer for con[ugal llablllLles menLloned ln ArLlcles 161
and 162. 93#"%-B '( P"K"+"*$"NC Q@(C D.F )123 4D
6755D8(
Genera| ku|e: Spouse may enLer lnLo sales ln regular or normal
pursulL of hls or her professlon, wlLhouL consenL.
o Lxcept|on: When Lhe ob[ecLs of Lhe sale are con[ugal
properLles of Lhe spouses, lL ls sub[ecL Lo ArLlcle 96 and
124, lamlly Code

8. 8etween Spouses (Art|c|es 133, 1490, 1492, Sect|on 87, Iam||y Code)

Art|c|e 133.
Lvery donat|on between the spouses dur|ng the marr|age sha|| be

1
+'-24%5 *" 62-(3(728, 490 SC8A 623 (2006), 93,.'5.3 *" :'4*3, 302 SC8A 334
(2006).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
vo|d. 1h|s proh|b|t|on does not app|y when the donat|on takes effect
after the death of the donor.

Ne|ther does th|s proh|b|t|on app|y to moderate g|fts wh|ch the
spouses may g|ve each other on the occas|on of any fam||y re[o|c|ng.
(1334a)

IAMIL CCDL
Art|c|e 87.
Lvery donat|on or grant of gratu|tous advantage, d|rect or |nd|rect,
between the spouses dur|ng the marr|age sha|| be vo|d, except
moderate g|fts wh|ch the spouses may g|ve each other on the occas|on
of any fam||y re[o|c|ng. 1he proh|b|t|on sha|| a|so app|y to persons
||v|ng together as husband and w|fe w|thout a va||d marr|age. (133a)

1. Status Cf roh|b|ted Sa|es 8etween Spouses
Sales beLween spouses who are noL governed by a compleLe
separaLlon of properLy reglme are vold, noL [usL voldable.
9P=;,*" '( 1-%%=K+-@C 0 )123 .57 60F458(
o 1he '( 13-' 724';.% docLrlne would apply Lo Lhe spouses-
parLles under ArLlcle 1490, slnce only Lhe helrs and Lhe
credlLors can quesLlon Lhe sale's nulllLy( 9P-;,*" '(
1-?@+ -A 3>>="%BC .0/ )123 4F4 60FFF8(
noL everyone may assall valldlLy, Lhough
o Spouses Lhemselves cannoL - Lhey are ln parl dellcLo.
o CredlLors who became such afLer LransacLlon cannoL -
Lhey have noL been pre[udlced
Who can assall?
o Pelrs of elLher spouse, who have been pre[udlced
o rlor credlLors
o SLaLe - paymenL of Laxes due on LransacLlons
neverLheless, when properLy resold Lo a Lhlrd-parLy buyer ln
good falLh and for value, reconveyance ls no longer avallable.
91@?O '( 13C 7L0 )123 DF0 60FF/8(

2. kat|ona|e Ior roh|b|t|on
P=;,*" '( 1-%%=K+-@ -A R*+=@*"% 2='=*?=C 0 )123 .57 60F408
a. revenL a spouse defraudlng hls credlLors by
Lransferrlng hls properLles Lo Lhe oLher spouse
b. Avold slLuaLlon where domlnanL spouse unduly Lakes
advanLage of Lhe weaker spouse, defraudlng Lhe laLLer
c. Avold lndlrecL vlolaLlon of prohlblLlons agalnsL donaLlon
beLween spouses ! ArLlcle 133
" ArLlcle 133 now replaced by ArLlcle 87, lamlly
Code - prohlblLlon also applles Lo persons llvlng
LogeLher as husband and wlfe wlLhouL a valld
marrlage.
ArLlcle 86 does noL make Lhe same excepLlons for donaLlons
LhaL ArLlcle 1490 does for sales
o 1hus, even lf Lhere ls [udlclal separaLlon of properLy,
Lhey sLlll can'L donaLe Lo each oLher.
o LxplanaLlon: donaLlon necessarlly reduces esLaLe of
donor - sale would resulL ln boLh esLaLes belng of Lhe
same value
Sale beLween spouses governed by AbsoluLe CommunlLy of
roperLy ls noL posslble because Lhere ls slmply cannoL be a
purchase of whaL a parLy-buyer already owns.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
3. kat|ona|e Ior Lxcept|ons 1o roh|b|t|on Under Art|c|e 1490
lL would seem LhaL Lhe slLuaLlons ln Lhe excepLlons are also
suscepLlble Lo Lhe evlls soughL Lo be avolded.
a. CreaLer danger of undue lnfluence ln separaLlon of
properLy
b. Cne spouse can sLlll exerclse undue lnfluence or
pressure on Lhe oLher one.
c. Also, excepLlons allow Lhe clrcumvenLlon of Lhe
prohlblLlon agalnsL donaLlons beLween spouses.
CLv: key elemenL Lo excepLlons lles ln Lhe psychology of Lhe
slLuaLlon
a. Pardness of hearL on Lhe parL of Lhe spouses
b. 8uslnessllke approach Lo Lhe relaLlonshlp
c. 1hus, lL would be unllkely for one spouse Lo lnfluence
Lhe oLher.
d. 1hls sLlll doesn'L cover slLuaLlons where domlnanL
spouses could lnfluence Lhe oLher, weaker spouses

4. App||cab|||ty Cf Incapac|ty 1o Common Law Spouses
Slnce under ArLlcle 1490, Lhe spouses cannoL valldly sell
properLy Lo one anoLher, Lhen pollcy conslderaLlon and Lhe
dlcLaLes of morallLy requlre LhaL Lhe prohlblLlon should apply
also Lo common-law relaLlonshlps( KA( P"+"#?=*" '( 1=@'"*+=BC
.L )123 7LD 60F/08(
Sale by husband of con[ugal land Lo hls concublne ls null and
vold for belng conLrary Lo morals and publlc pollcy and
subverslve of Lhe sLablllLy of Lhe famlly, a baslc soclal
lnsLlLuLlon whlch publlc pollcy cherlshes and proLecLs."
1"%,I%,IS1"*?%%"B '( T-@+?*C 07F )123 4/E 60FLD8.
1


1"%,I%,IS1"*?%%"B '( T-@+?*

Iacts: uurlng Lhelr marrlage, lernando Canullas abandoned hls wlfe,
Mercedes Callmllm Canullas, and cohablLed wlLh Corazon uagulnes.
8efore hls deaLh, lernando sold Lhe land he excluslvely owned along
wlLh hls and Mercedes' con[ugal house bullL Lhereon Lo uagulnes. upon
fallure Lo Lake possesslon of Lhe loL and house sLlll occupled by
Mercedes, uagulnes flled for quleLlng of LlLle. 1he Lrlal courL earller
ruled ln favor of uagulnes, buL reversed upon an M8 by Mercedes.

Issue: WheLher or noL Lhe sale of Lhe loL LogeLher wlLh Lhe house and
lmprovemenLs Lhereon was valld.

ne|d: nC. 1he Supreme CourL resolved Lhe lssue by saylng LhaL Lhe sale
was vold for belng conLrary Lo morals and publlc pollcy, and because
conveyances by one spouse Lo anoLher ls prohlblLed by law, and such
prohlblLlon also applles Lo a couple llvlng as husband and wlfe wlLhouL
Lhe beneflL of marrlage.

Doctr|ne: CLherwlse, Lhose who lncurred gullL" (Lhus llvlng wlLhouL Lhe
beneflL of marrlage) would be ln a beLLer poslLlon LhaL Lhose who were
legally marrled.

IV. Cthers ke|at|ve|y D|squa||f|ed (Art|c|es 1491 and 1492)

1
+<'() *" =%>(3?%@ A-", 306 SC8A 733 (2006).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1he lncapaclLles ln ArLlcles 1491 and 1492 are applled also Lo
sales ln redempLlon, compromlse and renunclaLlon.
1. Lega| Status Cf Contracts Lntered Into In V|o|at|on Cf Art|c|es
1491 And 1942: Vo|d
ConLracLs enLered lnLo ln vlolaLlon of ArLlcles 1490 and 1492 are
noL merely voldable, B,. 3-2 (,44 3(7 *%'7. 2?#,"B '( J"+,%%=@, E0
)123 075 60F/.8"
1


2?#,"B '( J"+,%%=@

Iacts: 8ublas flled an e[ecLmenL case agalnsL 8aLlller, clalmlng LhaL he
was Lhe rlghLful owner of a loL ln llollo slnce he purchased sald properLy
from hls cllenL/faLher-ln-law, lranclsco MlllLanLe. 8aLlller clalmed LhaL
he and hls predecessors had acLual and publlc possesslon of Lhe
properLy slnce Llme lmmemorlal, and LhaL MlllLanLe was noL Lhe rlghLful
owner because hls appllcaLlon for land reglsLraLlon was denled, durlng
whlch 8ublas was Lhe lawyer of MlllLanLe.

Issue: WheLher or noL Lhe conLracL of sale beLween MlllLanLe and 8ublas
was vClu because 8ublas acqulred lL from MlllLanLe whlle he was sLlll
Lhe lawyer of Lhe laLLer ln a land reglsLraLlon case.

ne|d: ?LS. 1he Supreme CourL afflrmed Lhe declslon of Lhe lower courLs,
lnvoklng ArLlcles 1409 and 1421 of Lhe Clvll Code whlch expressly
prohlblL lawyers from purchaslng properLles belonglng Lo Lhelr cllenLs
LhaL were sub[ecL Lo a llLlgaLlon case.

1
C> :,' D'( *" +3(.%4435, 70 hll. 33 (1940), E27'(3 *" +%442;.%-, 1 SC8A 302
(1961)"

Doctr|ne: 1he CourL sald LhaL Lhey musL be vold, noL merely voldable.
Clvll Code recognlzes Lhe nulllLy of conLracLs whlch are expressly
prohlblLed or declared vold by law and declares such lnexlsLenL and vold
from Lhe beglnnlng. vlolaLlon of such provlslon cannoL be cured by
raLlflcaLlon

2. D|fferent form of "rat|f|cat|on"
8ublas Lrles Lo declare a dlfference ln Lhe voldness" of
guardlans, agenLs, admlnlsLraLors, as opposed Lo [udges, [udlclal
offlcers and lawyers.
o ermanenL dlsquallflcaLlon of publlc and [udlclal offlcers
and lawyers ls grounded on publlc pollcy.
o llrsL Lhree may be raLlfled" by means of and ln Lhe
form of a new conLracL."
" ln whlch case Lhe valldlLy wlll be deLermlned as
of Lhe Llme of Lhe execuLlon of Lhe new conLracL
" 1hus, Lhe conLracL may be lawful when aL Lhe
Llme of Lhe second conLracL, Lhe legal
lmpedlmenLs no longer exlsL
ln Lhe flrsL group (agenLs, guardlans, admlnlsLraLors)
o AfLer Lhe lnhlblLlon has ceased, only real wrong ls a
prlvaLe one.
o A wrong LhaL such prlvaLe parLles may choose Lo
condone.
Second group ([udges, [udlclal offlcers and lawyers)
o 1here also exlsLs a publlc wrong.
o uamage Lo Lhe publlc servlce.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o uamage Lo esLeem wlLh whlch we regard our [usLlce
sysLem.

3. roper arty to ka|se Issue of Nu|||ty
1he nulllLy of conLracLs enLered lnLo ln vlolaLlon of Art|c|e 1491,
may be ralsed by any person whenever [urldlcal effecLs found
Lhereon are asserLed agalnsL hlm.

4. Iraud or Les|on Not ke|evant for Nu|||ty

A. Agents
rohlblLlon agalnsL agenLs does noL apply lf Lhe prlnclpal
consenLs Lo Lhe sale of Lhe properLy ln Lhe hands of Lhe agenL.
9<,B+"U- '( 13C ..F )123 E7 675558(
8rokers do noL come wlLhln Lhls prohlblLlon
o 8roker ! one who ls engaged, for oLhers, on a
commlsslon, negoLlaLlng conLracLs relaLlve Lo properLy
wlLh Lhe cusLody of whlch he has no concern.
o 1helr auLhorlLy ls merely looklng for a buyer/seller
o SLrlcLly a mlddleman ! Pls occupaLlon ls Lo brlng
parLles LogeLher Lo bargaln and for Lhem Lo
consummaLe LransacLlon.
o Pe ls prohlblLed from buylng for hlmself.

8. Guard|ans, Adm|n|strators and Lxecutors
1hese are necessarlly offlcers of Lhe courLs ! as Lhey are
appolnLed Lo such poslLlons ln [udlclal proceedlngs
PeredlLary rlghLs are noL lncluded ln Lhe prohlblLlon lnsofar as
admlnlsLraLor or execuLor of Lhe esLaLe of Lhe deceased. 9V"'"%
'( W*@,X?=OC . GY,%( 44F 60F5D8(
no more need Lo comply wlLh 92-;@,X?=O '( P"K+"%C 45 GY,%( 0.
60F.D8 whlch requlred showlng LhaL a Lhlrd parLy boughL as
condulL/nomlnee of Lhe buyer dlsquallfled under ArLlcle 1491,
raLher, Lhe presumpLlon now ls LhaL such dlsquallfled parLy
obLalned Lhe properLy ln vlolaLlon of sald arLlcle. GY,%,>>,*=
Z@?B+ 1-( '( 2-%;"*, FF GY,%( .F7 60FE48"

GY,%,>>,*= Z@?B+ 1-( '( 2-%;"*

Iacts: Cuardlan flled a moLlon for auLhorlLy Lo sell parcels of land
belonglng Lo Lhe ward (Lo lnvesL ln a house for Lhe ward). Cuardlan sold
parcels of land ln favor of her broLher ln law, who lmmedlaLely resold
Lhe parcels Lo Lhe guardlan.

Issue: WheLher or noL Lhe 3 sales should be annulled pursuanL Lo ArLlcle
1439

ne|d: ?LS. 1he flrsL 2 sales vlolaLed ArLlcle 1439. 1he Lhlrd was annulled
because Socorro 8oldan could pass no LlLle Lo Lmlllo Cruz (slnce Lhe flrsL
2 were annulled). 1he Supreme CourL here overLurned an earller
docLrlne whlch requlred proof LhaL Lhe Lhlrd parLy was a mere
lnLermedlary. Lven wlLhouL such proof, Lhe sale may be resclnded.
Cuardlanshlp ls a LrusL of Lhe hlghesL order - Lhe sales were declared
vold.

Doctr|ne:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

C. Attorneys
1he nulllLy of such conLracLs ls deflnlLe and permanenL, and
cannoL be cured by raLlflcaLlon or compromlse. 2?#,"B '(
J"+,%%=@C E0 )123 075 60F/.8"

1. keason for the roh|b|t|on
1he reason for Lhe prohlblLlon ls Lhe flduclary relaLlonshlp.
lnLended Lo curLall any undue lnfluence of Lhe lawyer upon hls
cllenL.

2. App||cab|||ty of the roh|b|t|on
rohlblLlon applles only whlle llLlgaLlon ls 12(7'(). 9<,@=K+-@ -A
!"*;B '( 3#"#"C LL )123 E0. 60F/F8[ even when Lhe llLlgaLlon ls
noL adversarlal ln naLure 2?#,"B '( J"+,%%=@, E0 )123 075 60F/.8F
or when lL ls a cerLlorarl proceedlng LhaL may have no merlL
9:"%=*K," '( 1"#"*+,*$C 0F4 )123 .57 60FF08(
rohlblLlon applles only Lo a sale Lo a 43G>2- %/ -2;%-7, and does
noL cover asslgnmenL of Lhe properLy glven ln [udgmenL made
by a cllenL Lo an aLLorney, who has noL Laken parL ln Lhe case.
P?*,K,>"% 1-?*K,% -A R%-,%- '( W'"*$=%,B+"C EE GY,%( 7F5 60F.58[
0

nor Lo a lawyer who acqulred properLy prlor Lo Lhe Llme he
lnLervened as counsel ln Lhe sulL lnvolvlng such properLy. <=%
2-B"@,- '( P,%%";-C 74 )123 /55 60F4F8(
rohlblLlon only apples when llLlgaLlon ls pendlng. lncludlng lf
case ls on appeal, afLer flnal [udgmenL.


1
=-2)%-'% 0-3(2.3@ H(;" *" I,35%( 72 D3.2-(%, 49 C.C. 43 (1932).
3. Where proh|b|t|on does not app|y:
a. 1o sale of a land acqulred by a cllenL Lo saLlsfy a
[udgmenL ln hls favor, Lo hls aLLorney as long as Lhe
properLy was noL Lhe sub[ecL of Lhe llLlgaLlon. 9<"@-N '(
3#=K,"C 7FL )123 0/7 60FFL8[
b. 1o " K-*+,*$=*KN A== "@@"*$=I=*+ whlch granLs Lhe
lawyer of record proprleLary rlghLs Lo Lhe properLy ln
llLlgaLlon slnce Lhe paymenL of sald fee ls noL made
durlng Lhe pendency of llLlgaLlon buL only afLer
[udgmenL has been rendered. T"#,%%- '( R31C 0FE )123
7L 60FF08"
2


T"#,%%- '( R*+=@I=;,"+= 3>>=%%"+= 1-?@+

Iacts: eLlLloners seek Lhe reversal of Lhe CA's declslon lnLerpreLlng ln
favor of lawyer Alfredo M. Murlllo Lhe conLracL of servlces enLered lnLo
beLween hlm and hls cllenLs, spouses llorenclo lablllo and !osefa 1ana.
ln her lasL wlll and LesLamenL, !usLlna lablllo lefL Lo (a) her broLher,
llorenclo, a house and loL locaLed ln San Salvador SL, LeyLe, and (b) Lo
her husband, Cregorlo 8rloso, a plece of land ln ugahanay, LeyLe.
llorenclo flled for a probaLe of Lhe wlll, whlch was approved by Lhe
courL. Pe Lhen soughL Lhe asslsLance of ALLy. Murlllo Lo recover Lhe San
Salvador properLy wlLh Lhe conslderaLlon LhaL he wlll glve Murlllo 40
of Lhe value of Lhe house and loL ln case Lhey wln Lhe case. 1he
CCn18AC1 Cl SL8vlCLS baslcally sLlpulaLed LhaL ln case Lhe house and
loL shall be awarded Lo llorenclo, morLgaged, leased, or [usL occupled
by hlm or hls helrs, Murlllo wlll recelve 40 of Lhe of proceeds of

2
J2;.% *" 63-72(@ 100 hll. 427 (1936), K73" 72 L3') *" +0, 86 SC8A 641 (1978).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
whlchever LransacLlon as hls aLLorney's fees. Murlllo won Lhe case, and
llorenclo was declared Lhe lawful owner of boLh Lhe San Salvador and
ugahanay properLles. Murlllo Lhen proceeded Lo asserL hls rlghLs
sLlpulaLed ln Lhe conLracL, buL lablllo and hls helrs began Lo conLesL Lhe
same, saylng LhaL Lhe spouses' consenL was vlLlaLed, and LhaL Lhe fees
sLlpulaLed were unconsclonable, among oLhers. 1he lower courL
evenLually ruled ln favour of Murlllo, saylng LhaL he was Lhe Lrue and
lawful owner of 40 of Lhe parcels of land sLlpulaLed ln Lhelr conLracL,
and LhaL lablllo and hls helrs were Lo compensaLe hlm for damages,
aLLorney's fees, and llLlgaLlon cosLs.

Issue: WheLher or noL Lhe conLracL of servlces vlolaLed ArLlcle 1491 of
Lhe Clvll Code.

ne|d: nC. A conLracL beLween a lawyer and hls cllenL sLlpulaLlng a
conLlngenL fee ls noL covered under ArLlcle 1491 (3) of Lhe Clvll Code
because Lhe paymenL of sald fee ls noL made durlng Lhe pendency of Lhe
llLlgaLlon buL only afLer [udgmenL has been rendered ln Lhe case
handled by Lhe lawyer. As long as Lhe lawyer does noL exerL undue
lnfluence on hls cllenL, LhaL no fraud ls commlLLed or lmposlLlon applled,
or LhaL Lhe compensaLlon ls clearly noL excesslve as Lo amounL Lo
exLorLlon, a conLracL for conLlngenL fee ls valld and enforceable.
Moreover, Lhe SC held LhaL Lhe conLlngenL fee sLlpulaLed beLween Lhe
lablllo spouses and Murlllo (40 Cl 1PL 8CL81lLS) was a wrong
lnLerpreLaLlon of Lhe conLracL, for lf scruLlnlzed, whaL Lhe parLles
lnLended was 40 Cl 1PL vALuL of Lhe properLles as Murlllo's
conLlngenL fee. ln consonance wlLh Lhe rules of lnLerpreLaLlon, Lhe
amblgulLy of sald provlslon was resolved agalnsL Murlllo as lL was he
hlmself who drafLed Lhe conLracL. 1he SC Lhen ordered lablllo Lo pay
Murlllo 3000 for aLLorney's fees wlLh lnLeresL.

2=K+- '( H"@;=*C 055 GY,%( D7/ 60FE48 ! prohlblLlon does noL
apply Lo a conLlngenL fee agreemenL
o lee based on value of properLy lnvolved
o Lawyer can acqulre a cerLaln percenLage of Lhe value of
Lhe properLles, lf hls cllenL wlns.
:;"( <= !",$ '( 1-?@+ -A 3>>="%BC L4 )123 4D0 60F/L8 ! such
agreemenL noL prohlblLed because paymenL ls noL made durlng
pendency of llLlgaLlon
<,@=K+-@ -A !"*;B '( 3#"#"C LL )123 E0. 60F/F8 ! conLlngenL
fee always sub[ecL Lo supervlslon of courLs
o CourL may proLecL Lhe cllenL from any undue lnfluence
or fraud.
T"#,%%- '( R31C 0FE )123 7L 60FF08 ! lawyer sLlll musL noL exerL
undue lnfluence.

C. Iudges
A [udge should resLraln hlmself from parLlclpaLlng ln Lhe sale of
properLles-lL ls lncumbenL upon hlm Lo advlse Lhe parLles Lo
dlsconLlnue Lhe LransacLlon lf lL ls conLrary Lo law. J@,+"*,K- '(
WB>,*-B"C DL4 )123 E7. 675548(
A [udge who buys properLy ln llLlgaLlon before hls courL 3/.2- .<2
M,7)&2(. B2;%&25 /'(34 does noL vlolaLe ArLlcle 1491, buL he
can be admlnlsLraLlvely dlsclpllned for vlolaLlon of Lhe Code of
!udlclal LLhlcs( 9P"K"@,-%" '( 3B?*K,-*C 00D )123 // 60FL78(
Lven when Lhe maln cause ls a collecLlon of a sum of money, Lhe
properLles levled are sLlll sub[ecL Lo Lhe prohlblLlon. As Lo
[udges, lL ls noL requlred LhaL some conLesL or llLlgaLlon over Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
properLy lLself should have been Lrled by Lhe [udge. 1he
properLy ls ln llLlgaLlon from Lhe momenL lL becomes sub[ecL Lo
Lhe [udlclal acLlon of Lhe [udge. 9M"* Z,*$K- '( G"#,*$?,+C .E
GY,%( L0 60F048(
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 3: SU8ILC1 MA11Lk CI SALL

Art|c|e 14S9.
1he th|ng must be ||c|t and the vendor must have a r|ght to transfer
the ownersh|p thereof at the t|me |t |s de||vered. (n)

Art|c|e 1460.
A th|ng |s determ|nate when |t |s part|cu|ar|y des|gnated or phys|ca|
segregated from a|| others of the same c|ass.

1he requ|s|te that a th|ng be determ|nate |s sat|sf|ed |f at the t|me the
contract |s entered |nto, the th|ng |s capab|e of be|ng made
determ|nate w|thout the necess|ty of a new or further agreement
between the part|es. (n)

Art|c|e 1461.
1h|ngs hav|ng a potent|a| ex|stence may be the ob[ect of the contract
of sa|e.

1he eff|cacy of the sa|e of a mere hope or expectancy |s deemed
sub[ect to the cond|t|on that the th|ng w||| come |nto ex|stence.

1he sa|e of a va|n hope or expectancy |s vo|d. (n)

Art|c|e 1462. 1he goods wh|ch form the sub[ect of a contract of sa|e
may be e|ther ex|st|ng goods, owned or possessed by the se||er, or
goods to be manufactured, ra|sed, or acqu|red by the se||er after the
perfect|on of the contract of sa|e, |n th|s 1|t|e ca||ed "future goods."

1here may be a contract of sa|e of goods, whose acqu|s|t|on by the
se||er depends upon a cont|ngency wh|ch may or may not happen. (n)

Art|c|e 1463.
1he so|e owner of a th|ng may se|| an und|v|ded |nterest there|n. (n)

Art|c|e 1464.
In the case of fung|b|e goods, there may be a sa|e of an und|v|ded
share of a spec|f|c mass, though the se||er purports to se|| and the
buyer to buy a def|n|te number, we|ght or measure of the goods |n the
mass, and though the number, we|ght or measure of the goods |n the
mass, and though the number, we|ght or measure of the goods |n the
mass |s undeterm|ned. 8y such a sa|e the buyer becomes owner |n
common of such a share of the mass as the number, we|ght or
measure bought bears to the number, we|ght or measure of the mass.
If the mass conta|ns |ess than the number, we|ght or measure bought,
the buyer becomes the owner of the who|e mass and the se||er |s
bound to make good the def|c|ency from goods of the same k|nd and
qua||ty, un|ess a contrary |ntent appears. (n)

Art|c|e 146S.
1h|ngs sub[ect to a reso|utory cond|t|on may be the ob[ect of the
contract of sa|e. (n)

A. kequ|s|tes Cf A Va||d Sub[ect Matter:
1. lL musL be a posslble Lhlng
2. lL musL be llclL
3. lL musL be deLermlnaLe or aL leasL deLermlnable
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

1ransfer of LlLle or an agreemenL Lo Lransfer lL for a prlce pald
or promlsed Lo be pald ls Lhe essence of sale." !"#$$%&&%#'()
#+ ,'-()'./ 0(1('2( 13 "#2)- #+ 455(./& .'6 4-('(# 6( 7.'%/.
8'%1()&%-9: ;<= >"04 ?@A B=CC<D3
1he Clvll Code provlslons deflnlng sales ls a caLch-all" provlslon
whlch effecLlvely brlngs wlLhln lL grasp a whole gamuL of
Lransfers whereby ownershlp of a Lhlng ls ceded for a
conslderaLlon. E#/9-(FG'%F 8'%1()&%-9 13 "#2)- #+ 455(./&: H?I
>"04 ?C= B;@@=D!

E#/9-(FG'%F 8'%1()&%-9 13 "#2)- #+ 455(./&

Iacts: nuC owned a 10-hecLare properLy whlch was leased by llresLone
Ceramlcs wlLh a rlghL of flrsL refusal. near Lhe end of Lhe lease Lerm,
nuC looked Lo sell Lhe properLy Lo olyLechnlc unlverslLy of Lhe
hlllpplnes (u). Memorandum Crder no. 214, lssued by res. Cory
Aqulno, ordered Lhe conveyance of Lhe properLy Lo u. lL also
cancelled Lhe debL of nuC Lo Lhe naLlonal CovernmenL.

Issue: Was Lhere a conLracL of sale beLween nuC and u?

ne|d: ?LS, Lhere was a conLracL of sale ln vlolaLlon of llresLone's rlghL of
flrsL refusal. 1he provlslons on sale are caLch-all" provlslons whlch
covers Lransfers whereby ownershlp of a Lhlng ls ceded for a
conslderaLlon. 1he cancellaLlon of nuC's debL was Lhe conslderaLlon for
Lhe sale. Slnce Lhe nuC, u, and Lhe naLlonal governmenL are dlsLlncL
from each oLher, Lhe Lransfer was noL a Lransfer wlLhln Lhe same enLlLy,
and was Lhus a conveyance of LlLle.

Doctr|ne:

Where under an agreemenL, a parLy renounces and Lransfers
whaLever rlghLs, lnLeresLs, or clalms she has over a parcel of
land ln favor of anoLher parLy ln conslderaLlon of Lhe laLLer's
paymenL of Lhereln loan, Lhe agreemenL ls essenLlally a sale,
and Lhe rule on dellvery effecLed Lhrough a publlc lnsLrumenL
apply. !".#%J(&: K)3 13 ".#%J(&LE.'-#M.: NC? >"04 ;<H B;@@?D3

8. Lffect Cf Absence Cf Any kequ|s|te
Absence of any requlslLe resulLs ln elLher a no conLracL"
slLuaLlon, or a vold conLracL under ArLlcle 1409.
LffecL of no conLracL" slLuaLlon ! buyer can recover whaL he
has pald, based on Lhe prlnclple of un[usL enrlchmenL
LffecLs of vold conLracLs:
o lf vold because Lhe lllegallLy consLlLuLes a crlmlnal
offense (ArLlcle 1411) ! parl dellcLo wlll apply, courLs
leave Lhe parLles where Lhey are, wlLhouL pre[udlce Lo
crlmlnal prosecuLlon
o lf vold buL Lhe acL ls merely prohlblLed and noL lllegal
per se (ArLlcle 1416) ! lf publlc pollcy ls enhanced,
plalnLlff may recover.
o lf no crlme, buL boLh are aL faulL (ArLlcle 1412) !
nelLher may recover
o lf no crlme, and only one parLy ls aL faulL (ArLlcle 1412)
! lnnocenL parLy may recover
1he requlslLes of Lhe sub[ecL maLLer are meanL Lo safeguard Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
reallzablllLy and enforceablllLy of Lhe obllgaLlons of Lhe seller Lo
Lransfer ownershlp and dellver possesslon.

I. Must 8e Lx|st|ng, Iuture Cr Cont|ngent (Art|c|es 1347, 1348, And
1462)

Art|c|e 1347.
A|| th|ngs wh|ch are not outs|de the commerce of men, |nc|ud|ng
future th|ngs, may be the ob[ect of a contract. A|| r|ghts wh|ch are not
|ntransm|ss|b|e may a|so be the ob[ect of contracts.

No contract may be entered |nto upon future |nher|tance except |n
cases express|y author|zed by |aw.

A|| serv|ces wh|ch are not contrary to |aw, mora|s, good customs,
pub||c order or pub||c po||cy may ||kew|se be the ob[ect of a contract.
(1271a)

Art|c|e 1348.
Imposs|b|e th|ngs or serv|ces cannot be the ob[ect of contracts. (1272)

Sub[ect Matter Must be a "oss|b|e 1h|ng" l.e. lL ls:
o LxlsLlng or has a poLenLlal Lo exlsL, conslderlng Lhe sLaLe
of sclence and Lechnology aL Lhe Llme of perfecLlon of
Lhe conLracL (ArLlcle 1461)
" 1he sale of goods yeL Lo be manufacLured,
ralsed, or acqulred by Lhe seller ls valld,
provlded LhaL Lhey can come lnLo exlsLence.
" 8uL lf Lhe sub[ecL maLLer cannoL come Lo
exlsLence (l.e. an lmposslble Lhlng), Lhe conLracL
ls vold because of ArLlcle 1409(3).
o A fuLure Lhlng (ArLlcle 1462)
o ConLlngenL or sub[ecL Lo a resoluLory condlLlon (ArLlcle
1462 & ArLlcle 1463)
" lor Lhlngs whose exlsLence depends on a
condlLlon, capaclLy Lo exlsL ls sufflclenL.
CerLalnLy Lo exlsL ls noL necessary.
1he seller does noL have Lo be owner of Lhe Lhlng aL Lhe Llme
Lhe sale ls perfecLed, buL only LhaL he/she ls Lhe owner of Lhe
Lhlng come Lhe daLe of dellvery.

A. O$5-%# 0(% >5().-.( (Art|c|es 1461 And 1347)
LlLerally mean Lhe purchase of whaL we hope"
A conLracL of sale coverlng fuLure Lhlngs, and sub[ecL Lo a
suspenslve condlLlon LhaL Lhe sub[ecL maLLer wlll come lnLo
exlsLence.
o lf Lhe Lhlng does noL come lnLo exlsLence, conLracL ls
deemed exLlngulshed.
Covers only deLermlnaLe or speclflc Lhlngs. Cenerlc or
deLermlnable Lhlngs are noL covered slnce Lhey do noL come ouL
of exlsLence.
endlng crops whlch have poLenLlal exlsLence may be valld
ob[ecL of sale. !>%J./ 13 P./6(Q: A@ EG%/3 A=; B=C;<DR and such
LransacLlon cannoL be consldered Lo effecLlvely be sale of Lhe
land or any parL Lhereof. !E%FG(/ 13 4/#'Q#: === >"04 HN=
B=CI=D3

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
8. O$5-%# >5(% (Art|c|e 1461)
LlLerally means Lhe purchase of hope"
SLlll a valld sale. WhaL ls prohlblLed by Lhe Clvll Code ls Lhe sale
of a valn hope or expecLancy (ArLlcle 1461)
o Lxample: sale of sweepsLakes LlckeL. 1he ob[ecL of Lhe
sale ls Lhe chance Lo wln.
A sale "#$%&' )$"& ls a posslble slLuaLlon where Lhe
commuLaLlve naLure of sale ls noL complled wlLh. 1he buyer can
acLually geL more Lhan whaL he pald for.

C. Sub[ect 1o keso|utory Cond|t|on (Art|c|e 146S)
lf Lhe Lhlng ls exLlngulshed by Lhe resoluLory condlLlon, Lhe
conLracL of sale ls lLself exLlngulshed.
o 1he parLles should reLurn Lo each oLher whaL Lhey have
recelved (ArLlcle 1190), ln order Lo preserve Lhe
commuLaLlve naLure of sale.
o 1he frulLs and lnLeresLs of Lhe Lhlngs recelved need noL
be reLurned slnce Lhey are deemed Lo have been
muLually compensaLed (ArLlcle 1187).
1he suspenslve or resoluLory condlLlon does noL affecL Lhe
commuLaLlve naLure of sale. lL ls presumed LhaL Lhe parLles
consldered Lhese ln Lhe deLermlnaLlon of Lhe prlce or
conslderaLlon for Lhe sale.

II. Must 8e L|c|t (Art|c|es 1347, 14S9 and 1S7S)

Art|c|e 1347.
A|| th|ngs wh|ch are not outs|de the commerce of men, |nc|ud|ng
future th|ngs, may be the ob[ect of a contract. A|| r|ghts wh|ch are not
|ntransm|ss|b|e may a|so be the ob[ect of contracts.

No contract may be entered |nto upon future |nher|tance except |n
cases express|y author|zed by |aw.

A|| serv|ces wh|ch are not contrary to |aw, mora|s, good customs,
pub||c order or pub||c po||cy may ||kew|se be the ob[ect of a contract.
(1271a)

Art|c|e 1S7S.
1he sa|e of an|ma|s suffer|ng from contag|ous d|seases sha|| be vo|d.

A contract of sa|e of an|ma|s sha|| a|so be vo|d |f the use or serv|ce for
wh|ch they are acqu|red has been stated |n the contract, and they are
found to be unf|t therefor. (1494a)

A. Sub[ect Matter Must 8e L|c|t.
A Lhlng ls llclL and may be Lhe ob[eL of a conLracL when lL ls noL
ouLslde Lhe commerce of men, and all rlghLs whlch are noL
lnLransmlsslble.

8. Sa|es Dec|ared I||ega| by Law
1hlngs ouLslde Lhe commerce of man
Anlmals sufferlng from conLaglous dlsease, renderlng Lhem unflL
for use or servlce Lhey are lnLended for
under ArLlcle 1347, a sale lnvolvlng fuLure lnherlLance ls vold
and cannoL be Lhe source of any rlghL nor creaLe any obllgaLlon.
!S.T(6# 13 "#2)- #+ 455(./&: ;A; >"04 I@ B=CC?D3
1hose declared vold by speclal laws:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o narcoLlcs, gunpowder, exploslves, flrearms and
ammunlcLlons.
o Wlld anlmals and rare, wlld or polsonous planLs or frulLs
o Sale of frlar land wlLhouL consenL of SecreLary of
AgrlculLure
Sale of land Lo a forelgner ls vold because lL ls conLrary Lo Lhe
ConsLlLuLlon. U)('Q(/ 13 ".-%-#: N@? >"04 AA B;@@HD
ArLlcle 1347 does noL cover walver of heredlLary rlghLs whlch ls
noL equlvalenL Lo sale, slnce walver ls a mode of exLlncLlon of
ownershlp ln favor of Lhe oLher persons who are co-helrs.
!4F.5 13 "#2)- #+ 455(./&: ;A= >"04 H@ B=CCAD3
A morLgagor ls noL prevenLed from selllng Lhe properLy, slnce lL
ls merely encumbrance and effecL a loss of hls prlnclpal
aLLrlbuLe as owner Lo dlspose of Lhe properLy. Law even
conslders vold a sLlpulaLlon forblddlng Lhe owner from
allenaLlng morLgaged lmmovable. !E%'(6. 13 "#2)- #+ 455(./&:
N@C >"04 NHI B;@@HD3

III. Must 8e Determ|nate Cr At Least "Determ|nab|e" (Art|c|e 1460)

A. Mean|ng Cf Determ|nate Cr Determ|nab|e
1. A 1h|ng Is Determ|nate Cr Spec|f|c When It Is:
a. arLlcularly deslgnaLed, or
b. hyslcally segregaLed from oLhers of Lhe same class.

2. 1ests:
a. "Capac|ty to segregate" test ! aL perfecLlon, sub[ecL
maLLer ls capable of belng made deLermlnaLe.
b. "No further agreement" test ! wlLhouL necesslLy of a
new or furLher agreemenL beLween Lhe parLles.

3. 1est Cf Determ|nab|||ty Is 1he Meet|ng Cf M|nds Cf art|es
And Not 1he Cover|ng Deed
1he Lrue conLracL of sale ls lnLanglble and ls a legal concepL. lL ls
perfecLed by Lhe meeLlng of Lhe mlnds.
1he ueed of Sale ls merely an evldence of Lhe conLracL. lf lL does
noL reflecL Lhe Lrue meeLlng of Lhe mlnds, lL may be sub[ecL Lo
reformaLlon. lL does noL lnvalldaLe Lhe conLracL.
When Lhe deed of sale descrlbes a loL ad[acenL Lo Lhe land seen,
agreed upon and dellvered Lo Lhe buyer, such land ls Lhe one
upon whlch Lhe mlnds have meL, and noL LhaL erroneously
descrlbed ln Lhe deed. 4-%/.'# 13 4-%/.'#, ;I >"04 ;H= B=C?CD!
*


4-%/.'# 13 4-%/.'#

Iacts: Luloglo ALllano execuLed a deed of sale ln favor of hls broLher
whlch supposedly covered loL 333-L. lL was laLer on dlscovered LhaL
whaL was acLually occupled was loL 333-A, whlle Luloglo was occupylng
loL 333-L. Luloglo's helrs flled an acLlon seeklng possesslon of loL 333-A.

Issue: WhaL was Lhe real sub[ecL maLLer of Lhe deed of sale?

ne|d: 1he SC held LhaL Lhe broLhers lnLended Lo convey loL 333-A. 1he
error ln Lhe deed of sale dld noL lnvalldaLe Lhe Lransfer. lL was [usL a
mlsLake whlch dld noL vlLlaLe consenL. 1hus, Lhe conLracL of sale, as

1
+',-.") /! 0'1.% '2 3$$"45), 394 SC8A 133 (2002).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
evldenced by Lhe deed of sale, ls valld. ClLed here ls Lhe docLrlne LhaL
one sells or buys real properLy as he sees lL, ln lLs acLual seLLlng and by
lLs physlcal meLes and bonds, and noL by Lhe mere loL number asslgned
Lo lL ln Lhe cerLlflcaLe of LlLle."

Doctr|ne:

4. If 1he Sub[ect Matter Is Ne|ther Determ|nate Cr Determ|nab|e,
1he Contract Is VCID
vold by vlrLue of ArLlcle 1409(6) of Lhe Clvll Code whlch declares
lnexlsLenL Lhose [conLracLs] where Lhe lnLenLlon of Lhe parLles
relaLlve Lo Lhe prlnclpal ob[ecL of Lhe conLracL cannoL be
ascerLalned."

8. Gener|c 1h|ngs May 8e Cb[ect Cf Sa|e (Art|c|es 1246 and 1409[6])

Art|c|e 1246.
When the ob||gat|on cons|sts |n the de||very of an |ndeterm|nate or
gener|c th|ng, whose qua||ty and c|rcumstances have not been stated,
the cred|tor cannot demand a th|ng of super|or qua||ty. Ne|ther can
the debtor de||ver a th|ng of |nfer|or qua||ty. 1he purpose of the
ob||gat|on and other c|rcumstances sha|| be taken |nto cons|derat|on.
(1167a)

Art|c|e 1409.
1he fo||ow|ng contracts are |nex|stent and vo|d from the beg|nn|ng:

(1) 1hose whose cause, ob[ect or purpose |s contrary to |aw, mora|s,
good customs, pub||c order or pub||c po||cy,

(2) 1hose wh|ch are abso|ute|y s|mu|ated or f|ct|t|ous,

(3) 1hose whose cause or ob[ect d|d not ex|st at the t|me of the
transact|on,

(4) 1hose whose ob[ect |s outs|de the commerce of men,

(S) 1hose wh|ch contemp|ate an |mposs|b|e serv|ce,

(6) 1hose where the |ntent|on of the part|es re|at|ve to the pr|nc|pa|
ob[ect of the contract cannot be ascerta|ned,

(7) 1hose express|y proh|b|ted or dec|ared vo|d by |aw.

1hese contracts cannot be rat|f|ed. Ne|ther can the r|ght to set up the
defense of |||ega||ty be wa|ved.

1. Gener|c Non-Determ|nab|e Cb[ects
8efers Lo funglble Lhlngs (e.g. sugar, rlce, oll, eLc.)
Sale of funglble Lhlngs ls valld lf lL can be made deLermlnaLe aL
Lhe Llme of dellvery.
o AlLhough Lhe sale of deLermlnable generlc Lhlng ls valld,
Lhe obllgaLlon Lo dellver Lhe sub[ecL maLLer can only be
complled wlLh when Lhe sub[ecL maLLer has been made
deLermlnaLe, elLher by physlcal segregaLlon or parLlcular
deslgnaLlon.
Sub[ecL maLLer ls deLermlnable when by a formula or
descrlpLlon agreed upon aL perfecLlon Lhere ls a way by whlch
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe courLs can dellneaLe lndependenL of Lhe wlll of Lhe parLles.
7(//%Q. 13 "%-9 #+ ,/#%/#: ;H >"04 N<< B=C?ID3

7(//%Q. 13 "%-9 #+ ,/#%/#

Iacts: !ullana Melllza sold parLs of LoL no. 1214 Lo llollo ClLy. 1he loLs
menLloned were 1214-C, 1214-u, and Lhe area needed for Lhe
consLrucLlon of Lhe clLy hall slLe, avenues and parks accordlng Lo Lhe
Arellano lan." 1he rlghLs Lo Lhe properLy were evenLually Lransferred Lo
lo Slan Melllza. 1he 1C1 lssued Lo hlm conLalned Lhe annoLaLlon LhaL
loLs 1214-8-2 and 1214-8-3 also belonged Lo ClLy of llollo.

Issue: WheLher or noL loL 1214-8 dld belong Lo Lhe ClLy of llollo.

ne|d: ?LS, lL dld. lL was parL of Lhe sub[ecL maLLer of Lhe deed of sale
beLween !ullana Melllza and Lhe clLy. 1he requlremenL LhaL a sale musL
have a deLermlnaLe ob[ecL ls fulfllled as long as, aL Lhe Llme of
perfecLlon of Lhe conLracL, Lhe ob[ecL ls capable of belng deLermlned
wlLhouL furLher agreemenL. ln Lhls case, Lhe Arellano lan already
speclfled Lhe lands whlch were neede for Lhe clLy hall slLe.

Doctr|ne:

A deLermlnable sub[ecL maLLer ls a generlc ob[ecL because lL has
noL been physlcally segregaLed nor parLlcularly deslgnaLed aL
Lhe polnL of perfecLlon from Lhe resL of lLs klnd.
o Where Lhe loL sold ls sald Lo ad[oln Lhe prevlously pald
loL" on Lhree sldes Lhereof, Lhe sub[ecL loL ls capable of
belng deLermlned wlLhouL Lhe need of any new
conLracL, even when Lhe exacL area of Lhe ad[olnlng
resldenLlal loL ls sub[ecL Lo Lhe resulL of a survey. !>.'
4'6)(& 13 0#6)%V2(Q: HH; >"04 <?C B;@@@D3
ueLermlnable sub[ecL maLLer of sale are noL sub[ecL Lo rlsk of
loss unLll Lhey are physlcally segregaLed or parLlcularly
deslgnaLed. W2 S(X Y "#3 13 Z#'Q./(&, ;C EG%/3 HIN B=C=AD!

W2 S(X Y "#3 13 Z#'Q./(&

Iacts: 1he Lwo parLles enLered lnLo a conLracL where Conzales bound
hlmself Lo dellver 600 plculs of flrsL class sugar Lo ?1C, wlLhouL
deslgnaLlng a parLlcular source. Conzales falled Lo dellver clalmlng LhaL
Lhe sugar was supposed Lo come for hls harvesL, buL because of fore
ma[eure, he was noL able Lo harvesL anyLhlng. ?1C broughL sulL.

Issue: WheLher or noL force ma[eure ls a valld defense for Conzales.

ne|d: nC. Sugar ls a funglble and generlc ob[ecL whlch ls never losL. As
long as Lhe ob[ecL ls noL made deLermlnaLe, Lhe Lhlng ls noL losL, and Lhe
seller ls sLlll bound Lo dellver.

Doctr|ne: lunglble/generlc Lhlngs are never losL. 1herefore, Lhe
obllgaLlon Lo dellver ls noL exLlngulshed by loss.

2. ower Cf 1he Courts 1o Set ua||ty Standard
1he CourLs have Lhe power Lo seL Lhe approprlaLe quallLy of Lhe
sub[ecL maLLer of a sale when Lhe same ls deLermlnable generlc.
o ArLlcle 1246 covers only quallLy of a generlc sub[ecL
maLLer, so LhaL when lL ls Lhe klnd and quanLlLy LhaL
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
cannoL be deLermlned wlLhouL need of a new
agreemenL of Lhe parLles, Lhe conLracL ls vold.

C. Instances where a sa|e w||| g|ve r|se to a co-ownersh|p:
1. Sa|e Cf An Und|v|ded Interest (Art|c|e 1463)
Co-ownershlp wlll be proporLlonal Lo Lhe percenLage of Lhe
undlvlded lnLeresL wlLh respecL Lo Lhe whole.

2. Sa|e Cf An Und|v|ded Share In A Mass Cf Iung|b|e 1h|ngs
(Art|c|e 1464)
1he buyer wlll be a co-owner Lo Lhe exLenL of Lhe deflnlLe
number, welghL, or measure acLually boughL.
lf whaL was acLually boughL ls greaLer Lhan Lhe amounL
avallable, Lhe buyer wlll become owner of Lhe whole and Lhe
seller ls bound Lo supply Lhe deflclency.
lf Lhe sale covers a speclflc mass as a sub[ecL maLLer, wlLhouL
any provlslons as Lo Lhe measurlng or welghlng of Lhe sub[ecL
sold, and Lhe prlce was noL based on such measuremenL, Lhe
sub[ecL maLLer of Lhe sale ls Lhe whole mass lLself, as a
deLermlnaLe ob[ecL. 1he sale ls valld. Z.%-( 13 U#'.F%(): ; >"04
IH= B=C?=D

IV. uant|ty of Sub[ect Matter Not Lssent|a| for erfect|on? (Art|c|e
1349)
Genera| ku|e: CuanLlLy ls essenLlal
" lL goes lnLo Lhe deLermlnablllLy of Lhe sub[ecL
maLLer.
" lL also goes lnLo Lhe prlce or conslderaLlon ln
Lhe conLracL. (l.e. Lhe LoLal amounL Lo be pald ls
deLermlned by Lhe quanLlLy Lo be boughL)
" WlLh a speclflc quanLlLy, Lhe obllgaLlon Lo
dellver an ob[ecL becomes reallzable,
enforceable and demandable.
o Lxcept|on: When a maxlmum quoLa/quanLlLy ls agreed
upon. lL ls sLlll posslble Lo deLermlne Lhe quanLlLy
wlLhouL Lhe need of a new conLracL. [.-%#'./ Z).%'&
42-G#)%-9 13 ,4": =<= >"04 =H= B=CICD!

[.-%#'./ Z).%'& 42-G#)%-9 13 ,4"

Iacts: Leon Sorlano (respondenL) offered Lo sell palay gralns Lo Lhe
naLlonal Cralns AuLhorlLy. Sorlano's documenLs were processed and he
was glven a quoLa of 2,640 cavans of palay. Pe Lhen dellvered 630
cavans of palay Lo Lhe nCA warehouse. When he demanded paymenL
for Lhe cavans of palay, he was lnformed LhaL hls paymenL wlll be held ln
abeyance because he was noL a bona flde farmer, accuslng hlm of Laklng
Lhe palay from Lhe warehouse of 8en de Cuzman, a rlce Lrader. Leon
Sorlano was Lhen asked by Wllllam Cabal Lo wlLhdraw hls cavans of
palay from Lhe warehouse because Lhey cannoL be legally accepLed.
Sorlano lnslsLed LhaL Lhe palay gralns dellvered be pald, so he flled a
complalnL for speclflc performance and/or collecLlon of money agalnsL
nCA. 1he Lrlal courL and AppellaLe courLs granLed Lhe case ln Sorlano's
favor and asked nCA Lo pay hlm for Lhe cavans of palay dellvered. nCA
ls now appeallng wlLh Lhe Supreme courL for Lhe declslon on Lhe
grounds LhaL 1) 1here was no meeLlng of Lhe mlnds beLween hlm and
Sorlano slnce dellvery had noL been made 2) An essenLlal elemenL of a
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
conLracL: ConsenL, was mlsslng.

Issue: WheLher or noL Lhere was a conLracL of sale.

ne|d: ?LS. (1) When Lhe nlA accepLed Sorlano's offer by noLlng ln
Sorlano's larmer's lnformaLlon SheeL a quoLa of 2,640 cavans, Lhere was
already a meeLlng of Lhe mlnds beLween Lhe parLles. Accordlng Lo
ArLlcle 1349 of Lhe new Clvll Code, Lhe facL LhaL Lhe quanLlLy ls noL
deLermlnaLe shall noL be an obsLacle Lo Lhe exlsLence of Lhe conLracL,
provlded lL ls posslble Lo deLermlne Lhe same, wlLhouL Lhe need of a
new conLracL beLween Lhe parLles. (2) Accordlng Lo ArLlcle 1473 of Lhe
Clvll Code, Sale ls a consensual conLracL and Lhere ls perfecLlon when
Lhere ls consenL upon Lhe sub[ecL maLLer and prlce, even lf nelLher ls
dellvered."

Doctr|ne:

Where seller quoLed Lo buyer Lhe lLems offered for sale, by lLem
number, parL number, descrlpLlon and unlL prlce, and Lhe buyer
had senL ln reply a purchase order wlLhouL lndlcaLlng Lhe
quanLlLy belng order, Lhere was already a perfecLed conLracL of
sale, even when requlred leLLer of credlL had noL been opened
by Lhe buyer. K#G.''(& >FG2J.FX Y >#'& EG%/3 S).6%'V "#)53 13
"#2)- #+ 455(./&, ;;< >"04 <=C B=CCHD!

K#G.''(& >FG2J.FX Y >#'& EG%/3 S).6%'V "#)53 13 "#2)- #+ 455(./&

Iacts: hlllpplne S! lndusLrlal 1radlng (S!), Lhrough 8amon San !ose,
approached Schuback & Sons Lo purchase MAn bus spare parLs. AfLer
he submlLLed Lhe llsL of parLs he wanLed, Schuback coordlnaLed w/ lLs
Cermany Cfflce Lo quoLe Lhe prlces. upon recelvlng Lhe quoLed prlces,
he forwarded a formal offer Lo S!, whlch conLalned Lhe prlces, lLem
numbers, descrlpLlons, eLc. S! lnformed Schuback of hls deslre Lo
purchase such lLems and promlsed Lo submlL Lhe quanLlLy per unlL. S!
Lhen submlLLed such quanLlLles needed Lo Schuback's CM, Mr. 8elcherL.
S! lndlcaLed Lhe same ln Lhe urchase Crder w/ Lhe lnscrlpLlon Lhls wlll
serve as our lnlLlal purchase order. C wlll lnclude 3 dlscounL." ln
order Lo avall of Lhe old prlces, Schuback lmmedlaLely ordered Lhe
producLs from Cermany. arLlal dellverles were made. 1hen, for hls
fallure Lo secure leLLers of credlL, S! falled Lo purchase Lhe same and
alleged LhaL Lhere was no perfecLed conLracL of sale. Pence Lhe clalm of
Schuback for damages.

Issue: WheLher or noL Lhere was a perfecLed conLracL of sale.

ne|d: ?LS. 1he offer was manlfesLed on uecember 17, 1981 upon
submlsslon of Lhe proposal conLalnlng Lhe lLem number, quanLlLy, parL
number, descrlpLlon, Lhe unlL prlce and LoLal Lo prlvaLe respondenL. Cn
uecember 24, 1981, prlvaLe respondenL lnformed peLlLloner of hls
deslre Lo avall of Lhe prlces of Lhe parLs aL LhaL Llme and slmulLaneously
enclosed lLs urchase Crder daLed uecember 14, 1981. AL Lhls sLage, a
meeLlng of Lhe mlnds beLween vendor and vendee has occurred.
AlLhough sald purchase order dld noL conLaln Lhe quanLlLy he wanLed Lo
order, S! made good hls promlse Lo communlcaLe Lhe same on
uecember 29, 1981. AL Lhls polnL S! was already ln Lhe process of
execuLlng Lhe agreemenL prevlously reached beLween Lhe parLles.

Doctr|ne:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

ALLy. SanLlago: 1hls case proves LhaL quanLlLy" ls lmporLanL ln
sale.

V. Se||er's Cb||gat|on to 1ransfer 1|t|e to 8uyer (Art|c|e 14S9, 1462, and
1S0S)

A. Se||er's Cwnersh|p Need Not Lx|st at erfect|on:
Genera| ku|e: Cwnershlp ls requlred only upon dellvery. lL ls noL
requlred aL Lhe perfecLlon of Lhe conLracL, provlded, LhaL Lhe
seller wlll be able Lo LransmlL ownershlp aL Lhe Llme of
consummaLlon of Lhe conLracL.
o Lxcept|on: ln [udlclal sale, Lhe forced seller who ls
acLually Lhe morLgagor ln defaulL, ls Lhe owner because
only Lhe absoluLe owner of Lhe Lhlng can morLgage lL.
Sale of copra for fuLure dellvery does noL make seller llable for
")%424 for falllng Lo dellver because Lhe conLracL ls sLlll valld and
Lhe obllgaLlon was clvll and noL crlmlnal. !O&V2()). 13 E(#5/(:
=@I EG%/3 =@<I B=C?@D3
A perfecLed conLracL of sale cannoL be challenged on Lhe ground
of Lhe seller's non-ownershlp of Lhe Lhlng sold aL Lhe Llme of Lhe
perfecLlon of Lhe conLracL, lL ls aL dellvery LhaL Lhe law requlres
Lhe seller Lo have Lhe rlghL Lo Lransfer ownershlp of Lhe Lhlng
sold. !4/F.'-.).L\.2& 13 6( ](#': N@N >"04 <N B;@@HD3
=

lL ls essenLlal LhaL seller ls owner of Lhe properLy he ls selllng.
1he prlnclpal obllgaLlon of a seller ls Lo Lransfer Lhe ownershlp
of" Lhe properLy sold (ArLlcle 1438). 1hls law sLems from Lhe
prlnclple LhaL nobody can dlspose of LhaL whlch does noL belong

1
6"&.) '2 3.%1.' 7"8") /! 9'::';<"5%.4,, 372 SC8A 211 (2008).
Lo hlm. =>?@ A3B CD@A =@= 63<>B3 ![#(/ 13 "#2)- #+
455(./&: ;N@ >"04 <I B=CCAD3
1haL Lhe sellers are no longer owners of Lhe goods aL perfecLlon
does noL appear Lo be one of Lhe vold conLracLs enumeraLed ln
ArLlcle 1409 of Clvll Code, and under ArLlcle 1402 Lhe Clvll Code
lLself recognlzes a sale where Lhe goods are Lo be acqulred x x x
by Lhe seller afLer Lhe perfecLlon of Lhe conLracL of sale" clearly
lmplylng LhaL a sale ls posslble even lf Lhe seller was noL Lhe
owner aL Lhe Llme of sale, provlded he acqulres LlLle Lo Lhe
properLy laLer on, neverLheless such conLracL may be deemed Lo
be &,'$".4%&/" and may Lhus fall, by analogy, under ArLlcle
1409(3): 1hose whlch conLemplaLe an lmposslble servlce."
[##/ 13 "#2)- #+ 455(./&: ;<? >"04 =NC B=CC<D!

[##/ 13 "4

Iacts: vlcLorlno and lranclsco nool are owners of Lwo parcels of land ln
lsabela. ConchlLa nool and her spouse Caudenclo clalms LhaL Lhese
belong Lo Lhem because Lhey boughL. 1hey sald LhaL Lhey had
morLgaged lL wlLh u8, buL lL was foreclosed because Lhey were noL
able Lo pay. u8 Cfflcer, Manuel Mallorca, conflrmed LhaL u8 galned
absoluLe ownershlp of Lhe 2 lands because Lhe rlghL Lo redempLlon was
noL exerclsed. LaLer, boLh were sold Lo AnecleLo nool. ConchlLa and
Caudenclo clalms LhaL Lhey had asked AnecleLo Lo purchase Lhe land
from u8 for Lhem, buL Lhey had an agreemenL LhaL AnecleLo would buy
Lhe properLy for 100,000. AnacleLo was able Lo pay 30,000. Powever,
he and hls spouse, Lmllla nebre, were unable Lo pay Lhe balance of
14,000. ln Auul1lCn, ConchlLa clalms LhaL anoLher agreemenL was
made whereby AnecleLo would reLurn Lhe properLles Lo plalnLlffs
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
anyLlme LhaL Lhe plalnLlffs had Lhe money Lo redeem Lhe same.
uefendanLs on Lhe oLher hand, clalms LhaL Lhey boughL Lhe properLy
dlrecLly from u8 and were merely mlsled lnLo execuLlng a documenL
sLaLlng LhaL he would reLurn Lhe lands Lo plalnLlffs, because Lhey were
under Lhe bellef LhaL ConchlLa sLlll had Lhe rlghL Lo redeem Lhe same.

Issue: WheLher or noL Lhe conLracL of sale was valld.

ne|d: nC. Sellers no longer had any LlLle Lo Lhe parcels of land aL Lhe
Llme of sale, and evldence showed LhaL defendanLs boughL Lhe lands
dlrecLly from u8 afLer dlscoverlng LhaL peLlLloners dld noL own Lhem.
ln Lhls case, dellvery was ls no longer posslble because ConchlLa was no
longer Lhe owner.

Doctr|ne:

8. Subsequent Acqu|s|t|on of 1|t|e by Non-Cwner Se||er (Art|c|e 1434) -
va||dates the sa|e and t|t|e passes to the se||er by operat|on of |aw.

Art|c|e 1434.
When a person who |s not the owner of a th|ng se||s or a||enates and
de||vers |t, and |ater the se||er or grantor acqu|res t|t|e thereto, such
t|t|e passes by operat|on of |aw to the buyer or grantee.

lf a buyer sells someLhlng and dellvers lL Lo Lhe buyer wlLhouL
ownlng lL, Lhe conLracL of sale remalns valld buL Lhe buyer has
no beLLer LlLle Lo Lhe goods Lhan Lhe seller. (ArLlcle 1303)
o Powever, lf Lhe seller LhereafLer acqulres LlLle Lo Lhe
Lhlng sold and dellvered, such LlLle passes Lo Lhe buyer
by operaLlon of law. (ArLlcle 1434)

C. Acqu|s|t|on by the 8uyer May Lven Depend on Cont|ngency (Art|c|e
1462).

VI. I||ega||ty of Sub[ect Matter (Art|c|es 1409, 14S8, 1461, 1462, and
1S7S)

Art|c|e 14S8.
8y the contract of sa|e one of the contract|ng part|es ob||gates h|mse|f
to transfer the ownersh|p and to de||ver a determ|nate th|ng, and the
other to pay therefor a pr|ce certa|n |n money or |ts equ|va|ent.

A contract of sa|e may be abso|ute or cond|t|ona|. (144Sa)

A. Spec|a| Laws:
narcoLlcs (8.A. 6423), wlld blrd or mammal (AcL 2390, Sec. 7),
rare wlld planLs (AcL 3983), polsonous planLs or frulLs (8.A.
1288), dynamlLed flsh (8.A 428), gunpowder and exploslves (AcL
2233), flrearms and ammunlLlons (.u. 9), sale of realLy by non-
ChrlsLlans (Sec. 143, 8evlsed Adm. Code, 8.A. 4232)

8. Io||ow|ng Sa|es of Land Vo|d:
8y non-ChrlsLlan lf noL approved by rovlnclal Covernor per
Sec. 143 of 8evlsed AdmlnlsLraLlve Code. !S.FL.' 13 "#2)- #+
455(./&: =;C >"04 H=C B=CIND3
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
lrlar land wlLhouL consenL of SecreLary of AgrlculLure requlred
under AcL no. 1120. !4/#'&# 13 "(J2 "#2'-)9 "/2J: ,'F3: H<A
>"04 HC@ B;@@;DR ]%.# 13 "#2)- #+ 455(./&: H;H >"04 NH@
B;@@@D3
Made ln vlolaLlon of land reform laws declarlng LenanL-Llllers as
Lhe full owners of Lhe lands Lhey Lllled. !>%.F#) 13 Z%V.'-.'.:
HI@ >"04 H@? B;@@;D3
8eclalmed lands are of Lhe publlc domaln and cannoL, wlLhouL
congresslonal flaL, be sold, publlc or prlvaLe. U%&G()%(& \(13
42-G#)%-9 13 "#2)- #+ 455(./&: AHN >"04 NC@ B;@@<D3

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 4: kICL AND C1nLk
CCNSIDLkA1ICN

Art|c|e 1469.
In order that the pr|ce may be cons|dered certa|n, |t sha|| be suff|c|ent
that |t be so w|th reference to another th|ng certa|n, or that the
determ|nat|on thereof be |eft to the [udgment of a spec|a| person or
persons.

Shou|d such person or persons be unab|e or unw||||ng to f|x |t, the
contract sha|| be |neff|cac|ous, un|ess the part|es subsequent|y agree
upon the pr|ce.
If the th|rd person or persons acted |n bad fa|th or by m|stake, the
courts may f|x the pr|ce.

Where such th|rd person or persons are prevented from f|x|ng the
pr|ce or terms by fau|t of the se||er or the buyer, the party not |n fau|t
may have such remed|es aga|nst the party |n fau|t as are a||owed the
se||er or the buyer, as the case may be. (1447a)

Art|c|e 1470.
Gross |nadequacy of pr|ce does not affect a contract of sa|e, except as
|t may |nd|cate a defect |n the consent, or that the part|es rea||y
|ntended a donat|on or some other act or contract. (n)

Art|c|e 1471.
If the pr|ce |s s|mu|ated, the sa|e |s vo|d, but the act may be shown to
have been |n rea||ty a donat|on, or some other act or contract. (n)

Art|c|e 1472.
1he pr|ce of secur|t|es, gra|n, ||qu|ds, and other th|ngs sha|| a|so be
cons|dered certa|n, when the pr|ce f|xed |s that wh|ch the th|ng so|d
wou|d have on a def|n|te day, or |n a part|cu|ar exchange or market, or
when an amount |s f|xed above or be|ow the pr|ce on such day, or |n
such exchange or market, prov|ded sa|d amount be certa|n. (1448)

Art|c|e 1473.
1he f|x|ng of the pr|ce can never be |eft to the d|scret|on of one of the
contract|ng part|es. nowever, |f the pr|ce f|xed by one of the part|es |s
accepted by the other, the sa|e |s perfected. (1449a)

Art|c|e 1474.
Where the pr|ce cannot be determ|ned |n accordance w|th the
preced|ng art|c|es, or |n any other manner, the contract |s
|neff|cac|ous. nowever, |f the th|ng or any part thereof has been
de||vered to and appropr|ated by the buyer he must pay a reasonab|e
pr|ce therefor. What |s a reasonab|e pr|ce |s a quest|on of fact
dependent on the c|rcumstances of each part|cu|ar case. (n)

I. Mean|ng of r|ce
rlce" slgnlfles Lhe sum sLlpulaLed as Lhe equlvalenL of Lhe
Lhlng sold and also every lncldenL Laken lnLo conslderaLlon for
Lhe flxlng of Lhe prlce puL Lo Lhe deblL of Lhe buyer and agreed
Lo by hlm. !"#$%&'() + ,-. /. ,0-123445 67 8$)4. 9:; <=>==?.
o 1he ldeal conslderaLlon for a conLracL of sale would be
prlce" as a sum cerLaln ln money or lLs equlvalenL."
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o 8uL a sale can have oLher valuable conslderaLlons, noL
necessarlly money. 1he essence of sale ls Lhe Lransfer of
ownershlp for some valuable conslderaLlon. 8-4@(3#$")#
A")/30')(@ -B ($3 8$)4)CC)"3' /. ,-&0( -B DCC3%4'5 9EF
G,HD E>= <677=?.
Seller cannoL unllaLerally lncrease Lhe prlce prevlously agreed
upon wlLh Lhe buyer, even when due Lo lncreased consLrucLlon
cosLs. IG!G /. ,-&0( -B DCC3%4'5 66F G,HD =F9 <=>>9?.
8uyer who opLed Lo purchase Lhe land on lnsLallmenL basls wlLh
lmposed lnLeresL, cannoL laLer unllaLerally dlsavow Lhe
obllgaLlon creaLed by Lhe sLlpulaLlon ln Lhe conLracL whlch seLs
Lhe lnLeresL aL 24 per annum: 1he raLlonale behlnd havlng Lo
pay a hlgher sum on Lhe lnsLallmenL ls Lo compensaLe Lhe
vendor for walLlng a number of years before recelvlng Lhe LoLal
amounL due. 1he amounL of Lhe sLaLed conLracL prlce pald ln full
Loday ls worLh much more LhaL a serles of small paymenLs
LoLallng Lhe same amounL. x x x 1o asserL LhaL mere prompL
paymenL of Lhe monLhly lnsLallmenLs should obvlaLe lmposlLlon
of Lhe sLlpulaLed lnLeresL ls Lo lgnore an economlc facL and
negaLe one of Lhe mosL lmporLanL prlnclples on whlch
commerce operaLes." J-0()K3@ /. DL8 HGJG5 :MM G,HD ;==
<677;?.

A. kequ|s|tes Cf A Va||d r|ce
1he prlce musL be:
1. 8eal
2. ln Money or lLs LqulvalenL
3. lL musL be CerLaln or AscerLalnable

II. r|ce Must 8e kea|

A. When r|ce Is kea|
AL Lhe Llme of perfecLlon, Lhere ls legal lnLenLlon Lo pay on Lhe
parL of Lhe buyer, and legal expecLaLlon on Lhe parL of Lhe seller
Lo recelve Lhe prlce as Lhe value of Lhe sub[ecL maLLer he
obllgaLes hlmself Lo dellver.

8. When r|ce S|mu|ated (Abso|ute|y S|mu|ated ! Vo|d)
lL ls slmulaLed when nelLher parLy had any lnLenLlon LhaL Lhe
amounL wlll be pald ! Lhe sale ls vold.
o Powever, such a conLracL can ln reallLy be a donaLlon or
some oLher conLracL. ln Lhls way, Lhe conLracL's valldlLy
can be saved.
1he lssue Lhus bolls down Lo conLracLual lnLenL aL Lhe Llme of
perfecLlon of Lhe conLracL.
o lf Lhere was no lnLenL Lo pay and recelve Lhe sLlpulaLed
prlce, Lhe agreemenL ls wholly slmulaLed and Lhus vold.
o 1he parLles may recover from each oLher whaL Lhey may
have glven under Lhe conLracL."
lnLenL can be deLermlned by Lhe overL acLs of Lhe parLles.
1he !"#$ &'($)*+ rule - whlch denles all recovery of elLher parLy -
wlll apply ln Lhe followlng lnsLances of slmulaLed sales:
o 8oLh parLles are ln bad falLh
o 1here ls lllegal conslderaLlon
o 1he purpose of Lhe slmulaLlon ls lllegal

1. N%C%4- /. N%C%4-, =M G,HD ==: <=>EE?5 /30'&'O When Lwo aged
ladles, noL versed ln Lngllsh, slgn a ueed of Sale on
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
represenLaLlon by buyer LhaL lL was merely Lo evldence Lhelr
lendlng of money, Lhe slLuaLlon consLlLuLes more Lhan [usL fraud
and vlLlaLlon of consenL Lo glve rlse Lo a voldable conLracL, slnce
Lhere was ln facL no lnLenLlon Lo enLer lnLo a sale, Lhere was no
consenL aL all, and more lmporLanLly, Lhere was no
conslderaLlon or prlce agreed upon, whlch makes Lhe conLracL
vold ", $-$*$+. H-"P%/)44% /. ,-&0( -B DCC3%4'5 6>: G,HD 6F>
<=>>F?.

N%C%4- /. N%C%4-

Iacts: Mlguel and Candlda Mapalo were llllLeraLe farmers. 1hey owned
a resldenLlal land ln angaslnan. Maxlmo Mapalo - broLher of Mlguel -
was abouL Lo be marrled. Mlguel and candlda donaLed Lo Maxlmo Lhe
easLern half of Lhe land. Maxlmo decelved Lhem by maklng Lhem slgn a
deed of absoluLe sale over Lhe enLlre loL. ConslderaLlon ln Lhe amounL of
flve hundred pesos was sLaLed ln Lhe deed buL Lhe spouses never
recelved anyLhlng. Mlguel bullL a fence Lo dlvlde Lhe loL and conLlnued
Lo occupy Lhe wesLern parL. Maxlmo reglsLered Lhe enLlre loL. AfLer
LhlrLeen years, Maxlmo sold Lhe land Lo Lhe narclsos who Look
possesslon only of Lhe easLern half. 1he narclsos soughL Lo be declared
owners of Lhe enLlre land. 1he spouses clalmed LhaL Lhe sale Lo Lhe
narclsos was vold for lack of conslderaLlon.

Issue: WheLher Lhere was a cause or conslderaLlon Lo supporL Lhe
exlsLence of a conLracL of sale

ne|d: nC. WlLh respecL Lo Lhe easLern porLlon, Lhe conslderaLlon was
Lhe pure llberallLy of Lhe Mapalo spouses. 1he wesLern porLlon, on Lhe
oLher hand, had no conslderaLlon perLalnlng Lo lL. 1he 300 was an
absoluLely slmulaLed prlce. 1hus, Lhe wesLern porLlon was reconveyed
Lo plalnLlff spouses Mapalo.

Doctr|ne:

H-"P%/)44% /. ,-&0( -B DCC3%4'

Iacts: ln dlspuLe ls Lhe valldlLy of a ueed of Sale over a land ln Las lnas
owned by Lwo aunL respondenLs Mercedes (Age 60) and llorencla (Age
71), employed as splnsLers, who boLh could noL read Lngllsh buL can
read and wrlLe ln 1agalog. 1he AunLs borrowed 2000 from uolores for
Lhe repalr of Lhelr dllapldaLed roof. 1 monLh laLer uolores reLurned
brlnglng a documenL ln Lngllsh and Lo be slgned by her aunLs. When
asked, she sald lL was a documenL saylng LhaL Lhey owed her 2000.
AfLer 4 years, Lhe aunLs were asked Lo vacaLe Lhe premlses and when
Lhe aunL's wenL Lo Lhe reglsLry of deeds Lhey found LhaL Lhelr LlLle had
been cancelled and LhaL uolores had lL LlLled Lo her name. 1he aunL's
flled wlLh Lhe 81C Lo have Lhe deed of sale declared null and vold for
lack of conslderaLlon and for havlng been obLalned fraudulenLly.

Issue: WheLher or noL Lhe deed of sale ls null and vold for lack of
conslderaLlon

ne|d: ?LS. 1he 2000 glven whlch was exchanged was noL for Lhe sale of
Lhe properLy, buL for Lhe purposes of repalrs Lo Lhe house. 1he aunL's
never clearly lnLended Lo sell Lhe properLy as lL was Lhelr home and lf
Lhey wanLed Lo sell lL Lhey should never had flxed Lhe roof. ubllc pollcy
ls well served ln defendlng Lhe rlghLs of Lhe aged Lo legal proLecLlon
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
lncludlng Lhelr rlghL Lo properLy. 1he properLy was ordered reconveyed
Lo Lhe aunLs.

Doctr|ne:

2. N%(3 /. ,-&0( -B DCC3%4'5 6>7 G,HD :E9 <=>>F?5 /30'&'O When
ueed of Sale was execuLed Lo faclllLaLe Lransfer of properLy Lo
buyer Lo enable hlm Lo consLrucL a commerclal bulldlng and Lo
sell Lhe properLy Lo Lhe chlldren, such arrangemenL belng
merely a subLerfuge on Lhe parL of buyer, Lhe agreemenL cannoL
also be Laken as a conslderaLlon and sale ls vold. Q& J&" I&%" /.
R"P5 9EM G,HD ;;> <677=?.

N%(3 /. ,-&0( -B DCC3%4'

Iacts: !oseflna 8ey approached lernando MaLe asklng for help because
her famlly was Lo be sued by lnnocenclo 1an for lssulng bounclng checks
amounLlng Lo 4,432,067.00. She asked hlm Lo cede hls 3 loLs ln 1acloban
LeyLe Lo 1an wlLh a sLlpulaLlon for a rlghL Lo repurchase wlLhln 6
monLhs, and lL wlll be !oseflna who wlll repurchase Lhem for hlm. Pe
lnlLlally re[ecLed her as he was under no obllgaLlon Lo convey hls
properLles, buL afLer a long dlscusslon and convlnced LhaL he was golng
Lo execuLe a slmulaLed Lransfer of ownershlp, MaLe agreed Lo Lhe Lerms
and as such, !oseflna lssued hlm 2 checks, one for 1.4 mllllon,
perLalnlng Lo Lhe value of Lhe loL, and a check for 420,000.00
correspondlng Lo lnLeresL for 6 monLhs. Pe Lhen drafLed Lhe deed of
sale hlmself, and ceded hls properLles Lo 1an. LvenLually, boLh checks
bounced and he sued 1an for annulmenL of Lhe sale for lack of
conslderaLlon slnce he never recelved anyLhlng. Pe also sued !oseflna
crlmlnally, buL she was nowhere Lo be found.

Issue: WheLher or noL Lhe sale was valld.

ne|d: ?LS. ln preparlng and execuLlng Lhe deed of sale wlLh rlghL of
repurchase and ln dellverlng Lo 1an Lhe land LlLles, appellanL acLually
accommodaLed !oseflna so she would noL be charged crlmlnally by 1an.
1he sale was valld, Lhere was a conslderaLlon ln Lhe form of Lhe check
for 420,000.00. lL was hls fee for execuLlng Lhe sale. lL was noL only
klndness LhaL lmpelled hlm Lo cede hls properLles, lL was also hls
lnLeresL for proflL. Lven lf Lhe prlce sLlpulaLed ln Lhe coverlng lnsLrumenL
ls slmulaLed, Lhe sale ls sLlll valld and enforceable provlded Lhere ls
anoLher conslderaLlon (aparL from Lhe false prlce). lL ls of no momenL
LhaL he never recelved Lhe money, a sale ls a consensual conLracL.
Moreover, he also LaclLly admlLLed Lo Lhe sale when he flled crlmlnal
charges agalnsL !oseflna. lernando, belng a lawyer, has no one else Lo
blame buL hlmself for hls loss. Pe acLed negllgenLly ouL of deslre for
proflL.

Doctr|ne: AccommodaLlon uoes noL Make Sale vold for Lack of rlce

Q& J&" I%" /. R"P

Iacts: ?u 8un Cuan and Llvlra Cng were husband and wlfe who had 3
chlldren. uurlng Lhe marrlage, Llvlra Cng purchased a properLy ln !
8lzal wlLh her own personal funds. ?u 8un lefL Llvlra and her chlldren
buL before Lhelr separaLlon, ?u 8un lnduced Llvlra Lo execuLe a ueed of
AbsoluLe sale of Lhe ! 8lzal properLy ln hls name alone so LhaL he could
obLaln a loan Lo be used Lo bulld a commerclal bulldlng ln favor of Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
chlldren. 1he conslderaLlon for Lhe sald slmulaLed sale was LhaL afLer Lhe
execuLlon of Lhe ueed of Sale, ?u 8un wlll execuLe a ueed of Sale for hls
properLy called Lhe !uno loL. ln Lhe ueed of Sale Lhere was also a
200,000 peso paymenL whlch was sald Lo be Lhe acLual valuable
conslderaLlon. 1he LlLle was Lransferred Lo hlm buL Llvlra kepL Lhe
owner's copy. ?u 8un dld noL pay Lhe 200,000 and even Lrled Lo clalm
ownershlp of Lhe properLy for hlmself. Llvlra Lhen flled Lo have Lhe ueed
of Sale declared null and vold.

Issue: WheLher or noL Lhe Sale was vold for lack of conslderaLlon

ne|d: ?LS. 1he ueed of Sale was absoluLely slmulaLed and so vold and
wlLhouL effecL. no porLlon of Lhe 200,000 conslderaLlon was ever pald.
And from Lhe facLs, nelLher parLy had any lnLenLlon Lo pay Lhe amounL.
1he ueed of Sale was execuLed merely Lo faclllLaLe Lhe Lransfer of Lhe
properLy pursuanL Lo an agreemenL beLween Lhe parLles LhaL a
commerclal bulldlng wlll be bullL ln Lhe ! 8lzal land for Lhe chlldren and
a properLy Lransferred Lo Lhem.

Doctr|ne:

3. Lffects When r|ce S|mu|ated - 1he prlnclple of $- !"#$ &'($)*+
-+-+#$*.# ")*$+-, whlch denles all recovery Lo Lhe gullLy parLles
$-*'# /', where Lhe prlce ls slmulaLed, Lhe docLrlne applles only
where Lhe nulllLy arlses from Lhe lllegallLy of Lhe conslderaLlon
or Lhe purpose of Lhe conLracL. SN-T)"% /. ,-&0( -B DCC3%4'5
9=M G,HD E>E <=>>>?.
1


C. When r|ce Is Ia|se (ke|at|ve|y S|mu|ated ! Va||d, keformat|on)

Art|c|e 13S3.
1he statement of a fa|se cause |n contracts sha|| render them vo|d, |f |t
shou|d not be proved that they were founded upon another cause
wh|ch |s true and |awfu|. (1276)

Art|c|e 13S4.
A|though the cause |s not stated |n the contract, |t |s presumed that |t
ex|sts and |s |awfu|, un|ess the debtor proves the contrary. (1277)

lalse prlce" ! Lhere ls a real prlce agreed upon buL noL
declared, and whaL ls sLaLed ln Lhe deed of sale ls noL Lhe one
lnLended Lo be pald
o When Lhe parLles lnLended Lo be bound buL Lhe deed
dld noL reflecL Lhe acLual prlce agreed upon, Lhere ls
only a relaLlve slmulaLlon of Lhe conLracL whlch remalns
valld and enforceable, buL sub[ecL Lo reformaLlon.
SN%#%CP%4 /. H31-0)"5 :;F G,HD E;6 <677;?.
o When prlce lndlcaLed ln deed of absoluLe sale ls
undervalued conslderaLlon pursuanL Lo lnLenLlon Lo
avold paymenL of hlgher caplLal galns Laxes, Lhe prlce
sLaLed ls false, buL Lhe sale ls sLlll valld and blndlng on

1
0. 1.- 2."- 34 5-67 , 367 SC8A 339 (2001), 2+-8"('/ 34 9#$-$&"&7 67 hll. 682
(1939)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe real Lerms. SU3)0' -B GC-&'3' J%4)(3 /. V)15 ::E
G,HD ;: <677:?.
A false prlce ls a form of relaLlve slmulaLlon of conLracL.
Powever, Lhe parLles may be bound by esLoppel Lo follow Lhe
prlce ln Lhe lnsLrumenL when lnLeresLs of Lhlrd parLles wlll be
adversely affecLed by Lhe reformaLlon of Lhe lnsLrumenL.

D. Non-ayment of r|ce
1. It Is Not 1he Iact Cf ayment 1hat Determ|nes 1he Va||d|ty Cf
A Contract Cf Sa|e, S|nce Sa|e Is Not A kea| Contract.
Sale belng consensual, fallure of buyer Lo pay Lhe prlce does noL
make Lhe conLracL vold for lack of conslderaLlon or slmulaLlon,
buL resulLs ln buyer's defaulL, for whlch Lhe seller may exerclse
hls legal remedles4 SJ%4%(W%( /. ,-&0( -B DCC3%4'5 6E= G,HD
=6F <=>>E?.
=

8A1PL8: ln a conLracL of sale, Lhe non-paymenL of Lhe prlce ls a
resoluLory condlLlon whlch exLlngulshes Lhe LransacLlon LhaL, for
a Llme, exlsLed and dlscharges Lhe obllgaLlons creaLed
Lhereunder. [?] 1he remedy of an unpald seller ln a conLracL of
sale ls Lo seek elLher speclflc performance or resclsslon." SU3)0'
-B 83T0- X'#%"4%0 /. ,-&0( -B DCC3%4'5 6F= G,HD =ME <=>>M?.
6


2. 8adge 1hat r|ce Is S|mu|ated, Not Iust Unpa|d: lL ls a badge of
slmulaLed prlce, whlch render Lhe sale vold, when Lhe prlce,
whlch appears Lhereon as pald, has ln facL never been pald by

1
:';"(+/" 34 <"-*+/7 363 SC8A 343 (2001), <+($3" 34 9=' >-*'/*"*' ?/*"*' +@
A"#)'(+ A4 B$(("(,", 417 SC8A 277 (2003), :#+3$-)' +@ C',. 34 D'$#/ +@ E.@$-"
A+#"('/, 346 SC8A 313 (2008).
2
B$(("@(+# 34 C+.#* +@ F!!'"(/, 280 SC8A 297 (1997).
Lhe purchaser Lo Lhe seller. SYT%. T3 ,%()"T)P. /. U3)0' -B
,%(%4)"% H-Z&35 M: G,HD F9 <=>ME?.
9

lallure Lo pay goes lnLo Lhe consummaLlon of Lhe conLracL, noL
lLs perfecLlon. Such fallure Lo pay glves Lhe rlghL Lo Lhe seller Lo
demand speclflc performance or resclsslon of Lhe conLracL.
8u1 lf Lhe deed of sale says LhaL Lhe prlce has been pald when ln
facL lL hasn'L been, Lhls ls a badge of slmulaLlon" whlch would
render Lhe conLracL vold. N-"(3#)44- /. H3@"3'5 9F; G,HD 6::
<6776?

III. Must 8e |n Money or Its Lqu|va|ent: Va|uab|e Cons|derat|on
(Art|c|es 14S8 and 1468)

Art|c|e 14S8.
8y the contract of sa|e one of the contract|ng part|es ob||gates h|mse|f
to transfer the ownersh|p and to de||ver a determ|nate th|ng, and the
other to pay therefor a pr|ce certa|n |n money or |ts equ|va|ent.

A contract of sa|e may be abso|ute or cond|t|ona|. (144Sa)

Art|c|e 1468.
If the cons|derat|on of the contract cons|sts part|y |n money, and
part|y |n another th|ng, the transact|on sha|| be character|zed by the

3
5)'G+ 34 H(+#'/, 40 hll. 921 (1920), I"&"-6" 34 C+.#* +@ F!!'"(/, 131 SC8A
361 (1984), E+-6"3$((" 34 C+.#* +@ F!!'"(/7 294 SC8A 289 (1998), I","6"(" 34
<"-*$"6+, 371 SC8A 360 (2001), C#.8 34 1"-)+J H$-"-)' C+#!4, 379 SC8A 490
(2002), A+-*')$((+ 34 E'K-'/, 383 SC8A 244 (2002), E'!.,($) 34 <+.*=/$&'
D+J'+L-'#/ F//+4, 302 SC8A 387 (2006), M.$J!+7 <#4 3 F,"& B&" &' 1'(*#"-,
343 SC8A 174 (2008), <+($&/*"*' A.(*$N:#+&.)*/ C+#!4 34 C"*$'-8"NB$(("3'#&',
339 SC8A 197 (2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
man|fest |ntent|on of the part|es. If such |ntent|on does not c|ear|y
appear, |t sha|| be cons|dered a barter |f the va|ue of the th|ng g|ven as
a part of the cons|derat|on exceeds the amount of the money or |ts
equ|va|ent, otherw|se, |t |s a sa|e. (1446a)

CbllgaLlon of 8uyer - he musL pay Lhe prlce cerLaln ln money
or lLs equlvalenL." ! ArLlcle 1438
1he ldeal conslderaLlon for a conLracL of sale would be prlce"
as a sum cerLaln ln money or lLs equlvalenL."
8U1 a sale can have oLher valuable conslderaLlons, noL
necessarlly money. 1he essence of sale ls Lhe Lransfer of
ownershlp for some valuable conslderaLlon. 8-4@(3#$")#
A")/30')(@ -B ($3 8$)4)CC)"3' /. ,-&0( -B DCC3%4'5 9EF G,HD E>=
<677=?. ConslderaLlon for sale can Lake dlfferenL forms, such as
Lhe !#'/*"*$+- or promlse of a Lhlng or servlce by anoLher, Lhus:
o ArLlcle 1468: Lhe sale ls valld when Lhe conslderaLlon ls
parL money and parLly ln anoLher Lhlng. 1he
conslderaLlon for a valld sale can be Lhe prlce and oLher
addlLlonal conslderaLlons.
o When deed provldes LhaL Lhe conslderaLlon was Lhe
expecLed proflLs from Lhe subdlvlslon pro[ecL. S[-003'
/. ,-&0( -B DCC3%4'5 967 G,HD :6F <=>>>?.
o CancellaLlon of llablllLles on Lhe properLy ln favor of Lhe
seller. S8-4@(3#$")# A")/30')(@ /. ,-&0( -B DCC3%4'5 9EF
G,HD E>= <677=?.
o AssumpLlon of morLgage consLlLuLed on Lhe properLy
sold. S\-43' /. D"P343'5 :>6 G,HD E7M <677E?.
1

rlce musL be valuable conslderaLlon" as mandaLed by Clvll
Law, lnsLead of any prlce" mandaLed ln common law4 R"P /.
R"P5 =9> G,HD =99 <=>F;?] J%P"%' /. ,-&0( -B DCC3%4'5 =ME
G,HD =;> <=>F>?O H3C&W4)# /. 8$)4. H3'-&0#3' \3/.5 =76 8$)4. >E7
<=>;F?4

R"P /. R"P

Iacts: lmelda Cng clalmed LhaL Lhe 1.00 conslderaLlon conLalned ln Lhe
ueed of CulLclalm was clearly lnadequaLe and LhaL Sandra Maruzo,
belng a mlnor, could noL accepL Lhe donaLlon. 1he CourL ruled ln favor
of respondenL sLaLlng LhaL Lhe ueed sald LhaL lL was execuLed for oLher
valuable conslderaLlon. AlLhough Lhe cause ls noL sLaLed ln Lhe conLracL
lL ls presumed LhaL lL ls exlsLlng unless Lhe debLor proves Lhe conLrary.
lurLhermore, Lhe donaLlon Lo an lncapaclLaLed donee does noL need Lhe
accepLance by Lhe lawful represenLaLlve lf sald donaLlon does noL
conLaln any condlLlon. 1he CulLclalm does noL conLaln any condlLlon.

Issue: WheLher or noL Lhe ueed lf CulLclalm ls valld.

ne|d: ?LS. (1) AlLhough Lhe cause ls noL sLaLed ln Lhe conLracL lL ls
presumed LhaL lL ls exlsLlng unless Lhe debLor proves Lhe conLrary. lL ls a
legal presumpLlon of sufflclenL cause or conslderaLlon supporLlng a
conLracL even lf such cause ls noL sLaLed. 1hls presumpLlon cannoL be

1
1he deed of sale wlLh assumpLlon of morLgage ls a reglsLrable lnsLrumenL and
musL be reglsLered wlLh Lhe 8eglsLer of ueeds ln order Lo blnd Lhlrd parLles.
E+&#$6.'8 34 C+.#* +@ F!!'"(/, 493 SC8A 490 (2006).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
overcome by a slmple asserLlon of lack of conslderaLlon especlally when
Lhe conLracL lLself sLaLes LhaL conslderaLlon was glven, and Lhe same has
been reduced lnLo a publlc lnsLrumenL wlLh all due formallLles and
solemnlLles. (2) 1he donaLlon Lo an lncapaclLaLed donee does noL need
Lhe accepLance by Lhe lawful represenLaLlve lf sald donaLlon does noL
conLaln any condlLlon.

Doctr|ne:

R"P /. R"P5 =9> G,HD =99 <=>F;? ! a sale was held valld when
conslderaLlon for real properLy was one peso and oLher
valuable conslderaLlons."
o Slnce Lhere was no evldence LhaL Lhe conslderaLlon was
noL pald, lL ls presumed Lo exlsL.
o SC: lnadequacy ls unlmporLanL. 1he usual pracLlce ls Lo
place a nomlnal amounL, buL Lhere are more valuable
conslderaLlons Lo be glven
o Lssence of Lhls rullng ! lL ls posslble Lo agree on an
adequaLe conslderaLlon, even sLaLlng a false/nomlnal
conslderaLlon.
" 1hls assumes LhaL Lhe valuable conslderaLlon ln
addlLlon Lo Lhe nomlnal amounL was acLually
agreed upon.
o 1here musL be a valuable conslderaLlon.

J%P"%' /. ,-&0( -B DCC3%4'

Iacts: Pllarlo MaLeum, a man wlLh no ascendanLs or descendanLs, dled
wlLhouL leavlng a wlll. eLlLloners are hls nearesL relaLlves, whlle
respondenLs are more dlsLanLly relaLed. 2 ueeds of Sale were purporLly
enLered beLween MaLeum and respondenLs, Lransferrlng 10 parcels of
land ln conslderaLlon of 1.00 and for varlous unnamed and unvalued
servlces. eLlLloners wlsh Lo have Lhe ueeds of Sale annulled on Lhe
ground LhaL lL was flcLlLlous, fraudulenL, or falslfled, or, lf lL were a
donaLlon, vold for lack of accepLance ln a publlc lnsLrumenL.

Issue: WheLher or noL Lhe deeds of sale were vold ab lnlLlo or merely
voldable, slnce Lhe prlce of 1.00 and unspeclfled and unvalued pasL,
presenL and fuLure servlces are a far cry from Lhe assessed valuaLlon of
10,300.

ne|d: 8oLh were vold Ab lnlLlo. 1he SC ruled LhaL Lhe ueeds of Sale were
vold due Lo Lhe manlfesL dlsproporLlon beLween Lhe conslderaLlon and
Lhe acLual prlce of Lhe properLy. lL cannoL be a donaLlon because of Lhe
lack of legal solemnlLles. Slnce Lhe conLracLs are vold, Lhe properLles are
deemed as parL of Lhe esLaLe, and all lnLesLaLe helrs have Lhe capaclLy Lo
conLesL any conveyance of esLaLe properLy.

Doctr|ne: SomeLhlng equlvalenL" ls someLhlng represenLaLlve of
money. lor Lhls case, servlces are noL lncluded.

J%P"%' /. ,-&0( -B DCC3%4' <=ME G,HD =;>? ! a sale where
conslderaLlon ln Lhe conLracL was one peso and servlces
rendered."
o SC: dlsproporLlon beLween conslderaLlon sLlpulaLed and
Lhe value of Lhe properLy. 1hey concluded - prlce sLaLed
was false and flcLlLlous, Lhus Lhe sale was /-)T %W )")()-.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o SC: even Lhough Lhere was a conslderaLlon agreed
upon, and Lhe parLles lnLended Lo pay lL, Lhe sale ls vold
lf prlce was merely nomlnal
o CLv: Lhls does noL mean LhaL Lhe sale was vold because
Lhe servlces were noL acLually performed
" non-performance has noLhlng Lo do wlLh
valldlLy
o Sale here was vold because lL was found LhaL Lhere was
no lnLenLlon Lo pay any valuable conslderaLlon - Lhus,
vold for lack of conslderaLlon.

H3C&W4)# /. 8$)4. H3'-&0#3' \3/.

Iacts: Macarlo AposLol, presldenL of Lhe hlllpplne 8esources
uevelopmenL CorporaLlon, owed Lhe 8ureau of rlsons a sum of money
(34,013.06 ln LoLal). hlllpplne 8esources flled a moLlon Lo lnLervene,
alleglng LhaL AposLol dellvered some goods Lo Lhe 8ureau Lo seLLle hls
personal debL, wlLhouL Lhe knowledge or consenL of Lhe sLockholders.
1he CorporaLlon demanded Lo recover Lhe goods from Lhe 8ureau buL
Lhe 8ureau refused. 1he CourL of Appeals seL aslde Lhe lower courL's
order denylng Lhe moLlon Lo lnLervene. 1he 8epubllc of Lhe hlllpplnes
flled a peLlLlon ln Lhe SC conLendlng LhaL Lhe CorporaLlon has no legal
lnLeresL slnce Lhe acLlon only concerns a collecLlon of a sum of money
AposLol owed and noL Lhe goods Lurned over by AposLol Lo Lhe 8ureau.

Issue: WheLher or noL Lhe sub[ecL maLLer of Lhe orlglnal llLlgaLlon ls a
sum of money noL Lhe goods reporLedly Lurned over by AposLol as
paymenL of hls prlvaLe debLs.

ne|d: nC. 1he Supreme CourL held LhaL Lhe CorporaLlon had sLandlng
slnce sub[ecL of Lhe acLlon may be a prlce cerLaln ln money or lLs
equlvalenL, Lhus encompasslng Lhe goods AposLol dellvered. lf Lhe Lrlal
courL credlLs AposLol wlLh Lhe value of Lhe goods, Lhe CorporaLlon
would be negaLlvely affecLed.

Doctr|ne: 1he Supreme CourL sald LhaL paymenL need noL be ln money.
Powever, Lhls case covers Lhe consummaLlon sLage noL perfecLlon -
Lhey dldn'L agree LhaL such goods could be used as paymenL. LssenLlally
whaL happened here was a daclon en pago. (subsLlLuLlon of Lhe goods
for Lhe prlce), whlch ls valld.

H3C&W4)# /. 8$)4. H3'-&0#3' \3/.5 =76 8$)4. >E7 <=>;F? ! 1he
Supreme CourL sald LhaL paymenL need noL be ln money.
Powever, Lhls case covers Lhe consummaLlon sLage noL
perfecLlon - Lhey dldn'L agree LhaL such goods could be used as
paymenL. LssenLlally whaL happened here was a daclon en
pago. (subsLlLuLlon of Lhe goods for Lhe prlce), whlch ls valld.
8-4@(3#$")# A")/30')(@ /. ,-&0( -B DCC3%4'5 9EF G,HD E>=
<677=? ! cancellaLlon of llablllLles of seller was a valld
conslderaLlon.
CLv: requlslLe of money or lLs equlvalenL" has noL been held
sLeadfasL by Lhe SC.
o 1hls shows LhaL Lhe essence of a sale ls Lhe obllgaLlons -
for Lhe seller Lo dellver, and for Lhe buyer Lo pay
o rlce may be sub[ecL Lo varlaLlons - lL's essenLlally a
generlc obllgaLlon
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o 1he slgnlflcance of Lhe requlremenL - demonsLraLe Lhe
)T3%4 3S%1C43 -B ($3 -"30-&' "%(&03 -B '%43 - LhaL lL ls
supporLed by valuable conslderaLlon."

IV. Must 8e Certa|n Cr Ascerta|nab|e At erfect|on (Art|c|e 1469)
CerLalnLy ! when lL has been expressed and agreed upon ln
speclflc Lerms of speclflc pesos and cenLavos.
o 8elLeraLe: Money ls Lhe besL model of valuable
conslderaLlon
rlce ls ascerLalnable lf Lhe Lerms of Lhe conLracL furnlshes Lhe
courLs a basls or measure for deLermlnlng Lhe amounL agreed
upon, wlLhouL havlng Lo refer back Lo elLher or boLh parLles.
SY)44%"&3/% /. ,-&0( -B DCC3%4'5 6EM G,HD F> <=>>M?.
=

Where Lhe sale lnvolves an asseL under a prlvaLlzaLlon scheme
whlch aLLaches a pecullar meanlng or slgnlflcaLlon Lo Lhe Lerm
lndlcaLlve prlce" as merely consLlLuLlng a ball-park flgure, Lhen
Lhe prlce ls noL cerLaln. SN-03"-5 ^0. /. 80)/%(3 N%"%P313"(
RBB)#35 ;7M G,HD E9 <677E?.
ConslderaLlon ls generally agreed upon as whole even lf lL
conslsLs of several parLs, and even lf lL ls conLalned ln one or
more lnsLrumenLs, oLherwlse Lhere would be no prlce cerLaln,
and Lhe conLracL of sale noL perfecLed. SD0)1%' /. D0)1%'5 ;;
R.I. FEF6 <=>;>?.

A. now r|ce Determ|ned 1o 8e Ascerta|nab|e
1. Set 8y 1h|rd erson Appo|nted At erfect|on (Art|c|e 1469)
ueslgnaLlon of 3
rd
parLy Lo flx Lhe prlce ls valld.

1
1+/*+- 1"-P +@ *=' :=$($!!$-'/ 34 A"-"(+, 482 SC8A 108 (2006).
o 1hls deslgnaLlon already makes Lhe prlce ascerLalnable
o Powever - flxlng of prlce cannoL be lefL Lo dlscreLlon of
one of Lhe parLles - Lhe conLracL of sale does noL yeL
exlsL when Lhe prlce has yeL Lo be flxed.
" no muLuallLy or obllgaLory force
8efore prlce ls flxed by Lhlrd person ! Lhe sale ls perfecLed and
exlsLlng, alLhough condlLlonal.
o 1hus, a parLy cannoL unllaLerally wlLhdraw from Lhe
conLracL.
o 1he condlLlon ls a suspenslve condlLlon of Lhe Lhlrd
parLy flxlng Lhe prlce.
lf Lhlrd parLy flxes Lhe prlce ln bad falLh or by mlsLake:
o arLles can seek courL remedy Lo flx Lhe prlce
o 1hese are Lhe only Lwo lnsLances where Lhls ls posslble.
When parLy ls unable or unwllllng Lo flx Lhe prlce
o arLles cannoL seek ald from Lhe courL Lo flx Lhe prlce o
o 1he condlLlon lmposed has noL yeL happened
o non-happenlng exLlngulshed Lhe conLracL
o 1he sale here ls lnefflcaclous."
When Lhlrd parLy ls prevenLed from flxlng Lhe prlce by one of
Lhe parLles
o lnnocenL parLy has remedles agalnsL Lhe gullLy parLy.
o arLy may demand from Lhe courLs Lo flx Lhe prlce.
o 8ased on Art|c|e 1186, when a parLy prevenLs a
condlLlon from happenlng, lL's consldered as fulfllled.
I|x|ng Cf Sub[ect Matter 8y 1h|rd arty roh|b|ted: 1he sub[ecL
maLLer may noL be lefL up Lo Lhe wlll of a Lhlrd parLy.
o SlLuaLlon conLemplaLed: prlce agreed upon, buL Lhere
are slmllar sub[ecLs and Lhe parLles can'L choose.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o Such deslgnaLlon would ln facL auLhorlze wlLhdrawal of
Lhe parLles
o Sub[ecL MaLLer musL be deLermlnaLe/deLermlnable
" 1esL ls one of facL ! physlcal segregaLlon and
parLlcular deslgnaLlon.
" lL musL be so wlLhouL furLher agreemenL.
Why are Lhe rules dlfferenL?
o CbllgaLlon Lo pay Lhe prlce ls essenLlally a funglble
obllgaLlon
" Any money may be used
" cannoL be exLlngulshed by forLulLous evenL
o CbllgaLlon Lo dellver sub[ecL maLLer can only be
complled when lL ls already deLermlnaLe/deLermlnable
" lL ls noL a generlc obllgaLlon
" ueslgnaLlon cannoL be lefL Lo a 3
rd
person who
may choose a sub[ecL LhaL parLy mlghL be
unwllllng Lo glve.

2. Set 8y 1he Courts (Art|c|e 1469)

3. 8y keference 1o A Def|n|te Day, art|cu|ar Lxchange Cr Market
(Art|c|e 1472)

4. 8y keference 1o Another 1h|ng Certa|n, such as Lo lnvolces
Lhen ln exlsLence and clearly ldenLlfled by Lhe agreemenL
SN#,&44-&P$ /. D3"4435 9 8$)4. 6F; <=>7:?] or known facLors or
sLlpulaLed formula4 SN)('&) /. N%")4%5 9> 8$)4. E6: <=>=>?.
rlce of securlLles, gralns, eLc. wlll be consldered cerLaln when
prlce ls...
o 1haL whlch Lhe Lhlng would have on a deflnlLe day
o Cr ln a parLlcular exchange or markeL
rlce of Lhlng ls cerLaln aL Lhe polnL of perfecLlon when lL refers
Lo anoLher Lhlng cerLaln
o CerLaln lnvolces exlsLlng and ldenLlfled
o known facLors, or sLlpulaLed formula.

8. r|ce Never Set 8y Cne Cr 8oth art|es (Art|c|es 1473, 1182), A"43''
[$3 80)#3 !' G3C%0%(34@ D##3C(3T J@ [$3 R($30 8%0(@.

Art|c|e 1182.
When the fu|f|||ment of the cond|t|on depends upon the so|e w||| of
the debtor, the cond|t|ona| ob||gat|on sha|| be vo|d. If |t depends upon
chance or upon the w||| of a th|rd person, the ob||gat|on sha|| take
effect |n conform|ty w|th the prov|s|ons of th|s Code. (111S)

C. Lffects Cf Un-Ascerta|nab|||ty: Sa|e Is Ineff|cac|ous.
1. When r|ce Can't 8e Determ|ned In Accordance W|th Any Cf
1he reced|ng ku|es ! Sa|e Is Ineff|cac|ous
o WhaL does lnefflcaclous" mean?
" lnablllLy Lo produce Lhe effecL wanLed"
" uoes noL exclude vold sales
" 8aLher, lL lncludes valld sales whlch have
become lnefflcaclous ln Lhe same group as vold
sales (when lL comes Lo prlce)
Law does noL use Lhe Lerm vold"
o 1here ls acLually a conLracL, buL a condlLlonal one
o lL can'L be volded by whaL happens afLer perfecLlon

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
2. 8U1: If 8uyer Appropr|ates 1he Cb[ect, ne Must ay
keasonab|e r|ce (Art|c|e 1474)
Where Lhere ls sale even when no prlce has been agreed upon
! ln such a case, courLs have auLhorlLy Lo flx Lhe reasonable
prlce for Lhe sub[ecL maLLer. 1hls ls Lhe only excepLlon where
Lhere would sLlll be a valld sale even when Lhere ls no meeLlng
of Lhe mlnds as Lo prlce.
recedlng ArLlcles" (ArLlcle 1474) refer Lo ArLlcles 1469-1473
Concept of Appropr|at|on
o 8asls of ArLlcle 1474 ls H-W43' /. V)_%00%P% U301%"-'5
;7 8$)4. 9FM <=>6M?
" An un[usL enrlchmenL would occur ln allowlng
someone Lo approprlaLe Lhe movables wlLhouL
compensaLlng Lhe oLher person.
o 2 lmporLanL olnLs
" uocLrlne ls based on un[usL enrlchmenL agalnsL
Lhe buyer ! he can'L be allowed Lo reLaln Lhe
sub[ecL maLLer wlLhouL belng llable Lo pay Lhe
prlce
" Applles even ln a no conLracL" slLuaLlon where
Lhere ls no meeLlng of Lhe mlnds as Lo prlce.
May also apply Lo vold sale conLracL,
where defecL ls ln Lhe prlce.
o ArLlcle 1474 meanL Lo cover all sale conLracL slLuaLlons
" AgreemenL as Lo Lhe sub[ecL maLLer, along wlLh
LradlLlon.
" ArLlcle 1474 ls a remedy ln favour of Lhe seller
o WhaL lf he does noL wanL Lo Lake advanLage of Lhe
remedy, and lnsLead recover Lhe sub[ecL maLLer?
" Seems noL posslble lf approprlaLlon had Laken
place
" ArLlcle 1474 seems Lo conLemplaLe a slLuaLlon
where Lhere ls dellvery buL noL approprlaLlon
" 1hus we musL look aL whaL approprlaLlon
means
o ApproprlaLlon" ! covers slLuaLlon of accepLance, and
buyer LreaLs sub[ecL maLLer as hls own.
" noL appllcable Lo real esLaLe ! would fall under
bullders ln good falLh.
" Applled Lo movables ! enLalls a LransformaLlon
such LhaL lL cannoL be reLurned ln lLs orlglnal
sLaLe as Lo warranL Lhe flxlng of reasonable
prlce Lo prevenL un[usL enrlchmenL.

3. 1here Can 8e No Concept Cf "Appropr|at|on" When It Comes
1o Land? - Where a church organlzaLlon has been allowed
possesslon and lnLroduce lmprovemenLs on Lhe land as parL of
lLs appllcaLlon Lo purchase wlLh Lhe nPA, and LhereafLer lL
refused Lhe formal resoluLlon of Lhe nPA 8oard seLLlng Lhe prlce
and lnslsLed on paylng Lhe lower prlce allegedly glven by Lhe
nPA lleld Cfflce, Lhere can be no blndlng conLracL of sale upon
whlch an acLlon for speclflc performance can prosper, noL even
on flxlng Lhe prlce equal Lo Lhe falr markeL value of Lhe
properLy. S`UD /. I0%#3 J%C()'( ,$&0#$5 :6: G,HD =:M <677:).

V. Manner Cf ayment Cf r|ce LSSLN1IAL (Art|c|e 1179)

A. Genera| o|nts
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
A meeLlng of Lhe mlnds musL lnclude Lhe Lerms and manner of
paymenL of Lhe prlce.
o lL's an essenLlal lngredlenL before a valld sale can exlsL.
" no valld sale slnce Lhey were unable Lo arrlve aL
accepLable Lerms of paymenL scheme. G%"
N)P&34 80-C30()3' 8$)4)CC)"3' !"#. /. U&%"P5
99E G,HD M9M <6777?
o lL ls parL of Lhe presLaLlon of Lhe conLracL.
o Speclflc performance can'L be avalled of.
Manner of paymenL goes lnLo Lhe essence of whaL makes prlce
cerLaln, because.
o 1lme value of money
o Seller may be wllllng Lo accepL lower prlce lf lL ls Lo be
pald wlLhln a shorL perlod of Llme
A deflnlLe agreemenL on Lhe manner of paymenL of prlce ls an
essenLlal elemenL ln Lhe formaLlon of a blndlng and enforceable
conLracL sale, wlLhouL lL Lhe sale ls vold and an acLlon for
speclflc performance musL fall. `%/%00% /. 84%"(30' \3/. J%"K5
;6M G,HD ;E6 <677M?4
1


`%/%00% /. 84%"(30' \3/. J%"K

Iacts: 8oLh Lhe Spouses navarra and 888C goL loans from lanLers 8ank

1
B'("/)+ 34 C+.#* +@ F!!'"(/, 31 SC8A 439 (1973), C+ 34 C+.#* +@ F!!'"(/7 286
SC8A 76 (1998), <"- A$6.'( :#+!'#*$'/ :=$($!!$-'/ 34 D."-67 336 SC8A 737
(2000), A+-*')$((+ 34 E'K-'/, 383 SC8A 244 (2002), ?&#"&" 34 E"J+/, 468 SC8A
397 (2003), C#.8 34 H'#-"-&+, 477 SC8A 173 (2003), A"#-'('6+ 34 1"-)+ H$($!$-+
<"3$-6/ "-& A+#*6"6' 1"-P, 480 SC8A 399 (2006), 1+/*+- 1"-P +@ *=' :=$(4 34
A"-"(+, 482 SC8A 108 (2006), :("*$-.J :("-/ :=$(47 >-)4 34 C.).')+, 488 SC8A
136 (2006), A"-$(" A'*"( C+-*"$-'# C+#!4 34 :Q1, 311 SC8A 444 (2006).
and secured Lhem wlLh Lhelr properLles. 8oLh defaulLed and Lhelr lands
were foreclosed and boughL by lanLers. 1he navarras were unable Lo
exerclse Lhelr rlghL of redempLlon buL 888C managed Lo come lnLo an
agreemenL wlLh lanLers whlch, ln Lhe end, gave Lhem a recelvable of
300,000 from lanLers. !orge navarra senL a leLLer Lo lanLers
requesLlng LhaL he be glven a chance Lo repurchase Lhelr properLles,
whlle promlslng Lo pay a downpaymenL of 300,000 for lL. 1he lanLers
8ank agreed Lo hls requesL sub[ecL Lo cerLaln condlLlons. navarra senL
Lhem anoLher leLLer asklng Lhem Lo apply Lhe 300,000 excess of 888C
Lo Lhelr LransacLlon Lo serve as hls downpaymenL. lanLers Lold hlm Lo
secure a board resoluLlon from 888C auLhorlzlng hlm Lo do so. navarra
falled Lo submlL Lhls resoluLlon Lo lanLers, so Lhey denled hls requesL. A
case was flled by navarra for speclflc performance. Pe clalmed LhaL
Lhere was already a perfecLed conLracL of sale beLween hlm and
lanLers 8ank because of Lhelr leLLers so Lhey should be compelled Lo
sell hlm back hls properLles. 1he Lrlal courL ruled ln hls favor buL Lhe
CourL of Appeals reversed Lhls.

Issue: WheLher or noL Lhere was a perfecLed conLracL of sale.

ne|d: nC. 1here was no perfecLed conLracL of sale because Lhere was no
deflnlLe offer made and Lhere was no absoluLe accepLance. Also, before
a valld and blndlng conLracL of sale can exlsL, Lhe manner of paymenL of
Lhe purchase prlce musL flrsL be esLabllshed. 1he manner of paymenL
goes lnLo Lhe prlce, such LhaL a dlsagreemenL on Lhe manner of
paymenL ls LanLamounL Lo a fallure Lo agree on Lhe prlce. 1haL ls Lhe
case here as Lhe leLLers only accounL for an lnlLlal downpaymenL buL are
compleLely sllenL as Lo how Lhe succeedlng lnsLallmenL paymenLs shall
be made. navarra's leLLer also falled Lo speclfy a deflnlLe amounL of Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
purchase prlce for Lhe repurchase of Lhe sub[ecL properLles. lL merely
sLaLed LhaL Lhe "purchase prlce wlll be based on Lhe redempLlon value
plus accrued lnLeresL aL Lhe prevalllng raLe up Lo Lhe daLe of Lhe sales
conLracL." 1here ls Loo much amblgulLy here. ln flne, Lhere was no
accepLance of Lhelr offer ln Lhe flrsL place. 1he very clrcumsLance LhaL
Lhe navarras had Lo make a new requesL ln Lhelr 2
nd
leLLer, Lo use Lhe
300,000 excess of 8CCC, ls a clear lndlcaLlon LhaL no deflnlLe
agreemenL has yeL been reached aL LhaL polnL. As we see lL, Lhls requesL
consLlLuLes a new offer on Lhe parL of Lhe navarras, whlch offer was
agaln condlLlonally accepLed by Lhe 8ank as ln facL lL even requlred Lhe
navarras Lo submlL a board resoluLlon of 888C before lL could proceed
wlLh Lhe proposed sale/repurchase. 1he evenLual fallure of Lhe spouses
Lo submlL Lhe requlred board resoluLlon precludes Lhe perfecLlon of a
conLracL of sale/repurchase beLween Lhe parLles

Doctr|ne:

8. roper Understand|ng Cf Manner Cf ayment
Whlle lL ls lmperaLlve LhaL meeLlng of Lhe mlnds be made when
lL comes Lo Lerms of paymenL, Lhey do noL always have Lo be
expressly agreed upon - when Lhe law supplles Lhese by defaulL.
Genera| ku|e: rlce ls deemed Lo be demandable aL once.
o ArLlcle 1179: all obllgaLlons wlLhouL condlLlons or
perlods are demandable aL once.
o ln absence of sLlpulaLlon lndlcaLlng a dlfferenL form of
paymenL, prlce ls deemed by operaLlon of law Lo be
lmmedlaLely demandable
ln Lhe cases below (Q"3"##+7 B'("/)+7 I'",#'/), parLles were Lo
have a mode of paymenL oLher LhaL lmmedlaLe paymenL. ln
Lhese cases, Lhere could noL have been a meeLlng of Lhe mlnds
because boLh parLles expecLed more negoLlaLlons as Lo manner
of paymenL.
o When Lhe manner of paymenL of Lhe prlce ls dlscussed
afLer accepLance," Lhen such accepLance" dld noL
produce a blndlng and enforceable conLracL of sale.
1here was no compleLe meeLlng of Lhe mlnds and Lhere
ls no basls Lo sue on a conLracL LhaL does noL exlsL. 1hls
ls why Speclflc erformance cannoL be avalled of.
S`%/%00- /. G&P%0 80-T&#30a' ,-0C.5 = G,HD ==F7
<=>E=?.
o Lven lf downpaymenL had been made and recelved, no
valld sale where manner of paymenL was noL agreed
upon. A deflnlLe agreemenL on manner of paymenL ls an
essenLlal elemenL ln formaLlon of blndlng sale. Y34%'#-
/. ,-&0( -B DCC3%4'5 ;= G,HD :9> <=>M9?.
o Maln cause of acLlon ls a recelpL lssued for an alleged
sale. 8ecelpL was only an acknowledgemenL for 1000.
1here ls no lndlcaLlon of Lhe LoLal purchase prlce, or of
whaL Lhe lnsLallmenLs were. SC held LhaL recelpL cannoL
be basls of valld sale. V3%W03' /. ,-&0( -B DCC3%4'5 =:E
G,HD =;F <=>FE?.
Absence of sLlpulaLlon on manner of paymenL supporLs Lhe
poslLlon LhaL such conLracL was a conLracL Lo sell, noL a conLracL
of sale whlch essenLlal consLlLuLes obllgaLlons Lo do and noL
sub[ecL Lo an acLlon for speclflc performance. ,0&_ /. L30"%"T-5
G0.5 :MM G,HD =M9 <677;?.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CLv: Lerms of paymenL" has same requlslLes of prlce" ln order
Lo supporL a valld conLracL of sale l.e. lL musL be cerLaln or
ascerLalnable.
o lf Lerms of paymenL are provlded ln a formula/process
LhaL doesn'L requlre agreemenL of parLles, lL ls valld buL
wlLh a condlLlon.
" Where Lhere ls no oLher basls for Lhe paymenL
of Lhe subsequenL amorLlzaLlons ln a ueed of
CondlLlonal Sale, Lhe reasonable concluslon one
can reach ls LhaL Lhe subsequenL paymenLs shall
be made ln Lhe same amounL as Lhe flrsL
paymenL. [?] S\J8 /. ,-&0( -B DCC3%4'5 9::
G,HD :>6 <6777?.
o Slmllar Lo when prlce ls lefL up Lo 3rd person.

VI. Inadequacy Cf r|ce Does Not Affect Crd|nary Sa|e (Art|c|es 13SS
And 1470)

Art|c|e 13SS.
Lxcept |n cases spec|f|ed by |aw, |es|on or |nadequacy of cause sha||
not |nva||date a contract, un|ess there has been fraud, m|stake or
undue |nf|uence. (n)

1. Lffect Cf Inadequacy
ln a sale, Lhere ls no requlremenL LhaL Lhe prlce ls exacLly Lhe
value of Lhe sub[ecL maLLer.
o 8ecall: 1esL for commuLaLlveness ls Lhe bellef of Lhe
parLles LhaL Lhey recelved good value.
Mere lnadequacy of Lhe prlce does noL affecL Lhe valldlLy of Lhe
sale when boLh parLles are ln a poslLlon Lo form an lndependenL
[udgmenL concernlng Lhe LransacLlon, unless fraud, mlsLake, or
undue lnfluence lndlcaLlve of a defecL ln consenL ls presenL. 1he
conLracL may be annulled for vlLlaLed consenL and noL due Lo
Lhe lnadequacy of prlce. SJ%&()'(% /. ,-&0( -B DCC3%4'5 :9E
G,HD =:= <677:?.
=

AbsenL any evldence of Lhe falr markeL value of a land as of Lhe
Llme of lLs sale, lL cannoL be concluded LhaL Lhe prlce aL whlch lL
was sold was lnadequaLe. SD#%W%4 /. D#%W%45 :;: G,HD F>M
<677;?.
6


2. D|st|ngu|shed Irom S|mu|ated r|ce. SlmulaLlon of conLracL and
gross lnadequacy of prlce are dlsLlncL legal concepLs. J0%/-b
I&30030- /. J0%/-5 :E; G,HD 6:: <677;?.

S|mu|ated r|ce Inadequate r|ce
arLles Lo an alleged conLracL do
noL really lnLend Lo be bound,
Lhere ls noL real agreemenL.
arLles lnLend Lo be bound.
vold. no legal effecL. valldlLy of sale noL affecLed,
unless Lhere ls a defecL ln consenL
or parLles lnLended donaLlon or
oLher conLracL


1
?#';'*" 34 1'8+#', 34 SC8A 13 (1973), 1").-6"- 34 C+.#* +@ F!!'"(/, 374 SC8A
642 (2008), 1").-6"- 34 C+.#* +@ F!!'"(/, 374 SC8A 642 (2008).
2
F3$(" 34 1"#","*, 483 SC8A 8 (2006).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
lnadequacy of rlce may be a ground for resclsslon ln cases
covered under ArLlcle 1381 of Lhe Clvll Code.

A. Gross Inadequacy Cf r|ce May Avo|d Iud|c|a| Sa|e: (Lxcept|on 1o
1he Genera| ku|e 1hat Courts Cannot Interfere And Set A r|ce Ior
Sa|e)
Cross lnadequacy" ! presenL when a reasonable man would
noL agree Lo dlspose of hls properLy aL LhaL amounL.
o 1here ls gross lnadequacy ln prlce" lf a reasonable man
wlll noL agree Lo dlspose of hls properLy. \-0%T- YT%.
\3 \34B)" /. \344-(%5 ;:6 G,HD 9>M <677F?.
Genera| ku|e: lnadequacy of prlce may render vold [udlclal sale
of real properLy
o Why Lhe dlfference? Pere, Lhe sale ls noL a resulL of
negoLlaLlons. ln facL, properLy of Lhe Seller" ls Lo be
sold aL publlc aucLlon.
o SLaLe musL proLecL seller from a bad deal LhaL's noL hls
faulL.

1. kequ|s|tes Ior Nu|||ty Cf A Iud|c|a| Sa|e
a. Cnly when lL ls shocklng Lo Lhe consclence of man.
S8%'#&% /. G)13-"5 =E= G,HD = <=>FF?] and
b. 1here ls showlng LhaL, ln Lhe evenL of a resale, a beLLer
prlce can be obLalned4 S,& J)3 /. ,-&0( -B DCC3%4'5 =;
G,HD 97M <=>E;?.
1



1
9"K'-6)+ 34 C+.#* +@ F!!'"(/, 13 SC8A 306 (1963), E'!.,($) 34 QIEC, 244 SC8A
364 (1993).
2. Lxcept|onO 1here ls rlghL of redempLlon, ln whlch case Lhe
proper remedy ls Lo redeem. S\3 V3-" /. G%4/%T-05 9E G,HD ;EM
<=>M7?.
2

o Lower sale prlce ! easler Llme for Lhe owner Lo
redeem.
o roper remedy ls slmply for Lhe Seller" Lo exerclse such
rlghL.

3. 8U1: 8y way of exLraordlnary clrcumsLances percelved, when ln
a [udlclal sale Lhe rlghL of redempLlon has been losL, where Lhe
lnadequacy of Lhe prlce ls !.#'(K /=+)P$-6 *+ *=' )+-/)$'-)'7
such LhaL Lhe mlnd revolLs aL lL and such LhaL a reasonable man
would nelLher dlrecLly or lndlrecLly be llkely Lo consenL Lo lL, Lhe
same wlll be se aslde. S,-13(% /. ,-&0( -B DCC3%4'5 9;= G,HD
6>: <677=?.
Cross lnadequacy of prlce by lLself wlll noL resulL ln a vold
conLracL. Cross lnadequacy of prlce does noL even affecL Lhe
valldlLy of a conLracL of sale, unless lL slgnlfles a defecL ln Lhe
consenL or LhaL Lhe parLles acLually lnLended a donaLlon or
some oLher conLracL. lnadequacy of cause wlll noL lnvalldaLe a
conLracL unless Lhere has been fraud, mlsLake or undue
lnfluence. (aL p. 649) J%#&"P%" /. ,-&0( -B DCC3%4'5 ;M: G,HD
E:6 <677F?.
When [udlclal sale ls volded wlLhouL faulL of purchaser, Lhe
laLLer ls enLlLled reLurn of prlce wlLh slmple lnLeresL, LogeLher
wlLh all sums pald ouL by hlm ln lmprovemenLs lnLroduced on

2
B&"4 &' 2+#&+- 34 C+.#* +@ F!!'"(/, 109 SC8A 388 (1981).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe properLy, Laxes, and oLher expenses. SG3/3" J0-($30'
G$)CC)"P ,-0C. /. ,-&0( -B DCC3%4'5 6:E G,HD 99 <=>>;?.

8. Les|on of more than 1]4 of va|ue of th|ng makes sa|e resc|ss|b|e
un|ess approved by court (Art|c|e 1386)

Art|c|e 1386.
kesc|ss|on referred to |n Nos. 1 and 2 of art|c|e 1381 sha|| not take
p|ace w|th respect to contracts approved by the courts. (1296a)

C. Gross |nadequacy of pr|ce may ra|se the presumpt|on of equ|tab|e
mortgage (Art|c|e 1602)

Art|c|e 1602.
1he contract sha|| be presumed to be an equ|tab|e mortgage, |n any of
the fo||ow|ng cases:

(1) When the pr|ce of a sa|e w|th r|ght to repurchase |s unusua||y
|nadequate,

(2) When the vendor rema|ns |n possess|on as |essee or otherw|se,

(3) When upon or after the exp|rat|on of the r|ght to repurchase
another |nstrument extend|ng the per|od of redempt|on or grant|ng a
new per|od |s executed,

(4) When the purchaser reta|ns for h|mse|f a part of the purchase
pr|ce,

(S) When the vendor b|nds h|mse|f to pay the taxes on the th|ng so|d,

(6) In any other case where |t may be fa|r|y |nferred that the rea|
|ntent|on of the part|es |s that the transact|on sha|| secure the
payment of a debt or the performance of any other ob||gat|on.

In any of the forego|ng cases, any money, fru|ts, or other benef|t to be
rece|ved by the vendee as rent or otherw|se sha|| be cons|dered as
|nterest wh|ch sha|| be sub[ect to the usury |aws. (n)


D. Sa|es w|th k|ght to kepurchase
ln sales llke Lhls, Lhe gross lnadequacy glves rlse Lo a
presumpLlon of equlLable morLgage.
8emedy of Lhe seller ! have Lhe sale reformed or declared a
morLgage conLracL, Lhen pay off Lhe debL whlch ls secured.
8emedy of Lhe buyer ! foreclose on Lhe morLgage.
o CannoL approprlaLe Lhe sub[ecL maLLer - !")*.J
)+JJ$//+#$.J whlch ls noL allowed.

VII. ku||ngs Cn kece|pts And Cther Documents Lmbody|ng r|ce
X4 R0- X"P0%/30' /. ,-&0( -B DCC3%4'5 ;:E G,HD :6 <677F? !
sales lnvolces are noL evldence of paymenL, buL only of recelpL.
o 8esL evldence Lo prove paymen : offlclal recelpL lssued
by seller
V3%W03' /. ,-&0( -B DCC3%4'5 =:E G,HD =;F <=>FE? ! buyer
soughL Lo enforce purchase on land based on recelpL
o SC: 8ecelpL cannoL be regarded as conLracL of sale
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
" 1here was only recognlLlon of Lhe sum of 1000,
and Lhe requlslLes for valld conLracL were
lacklng. 1hus, sale ls noL valld noL enforceable.
o CLv: Leabres seems Lo deal wlLh Lhe SLaLuLe of lrauds
(l.e. sale was noL enforceable). Powever, readlng of
facLs was LhaL Lhere was parLlal paymenL and dellvery of
possesslon. 1hese Lhlngs would remove conLracL from
SLaLuLe of lrauds.
[-@-(% G$%2 /. ,-&0( -B DCC3%4'5 6:: G,HD 967 <=>>;?
!wrlLLen agreemenL was enLered beLween a prospecLlve buyer
and Lhe sales represenLaLlve. 1here was an acknowledged
downpaymenL of 100,000.
o SC: 1here was never a perfecLed conLracL beLween Lhe
parLles.
" AgreemenL only provlded for Lhe downpaymenL
" no purchase prlce or manner of paymenL of
balance
V)1'-" /. ,-&0( -B DCC3%4'5 9;M G,HD 67> <677=? ! noLhlng ln
Lhe recelpL lndlcaLed LhaL Lhe earnesL money was parL of Lhe
purchase prlce, much less any showlng of a perfecLed sale - only
concluslon ls no sale.
,-0-"34 /. ,-&0( -B DCC3%4'5 6E9 G,HD =; <=>>E? ! seller
execuLed a recelpL of downpaymenL, lndlcaLlng balance of
purchase prlce, wlLh obllgaLlon Lo Lransfer LlLle upon paymenL
o SC: 1here was a perfecLed conLracL of sale. no
reservaLlon of LlLle unLll paymenL.
o CLv: 1hls ls conslsLenL wlLh requlremenL LhaL
memoranda of sale musL lnclude all essenLlal requlslLes
ln order Lo remove lL from Lhe SLaLuLe of lrauds.
,$3"P /. I3"%(-5 977 G,HD M66 <=>>F? ! seller acknowledged
recelpL of sum as parLlal paymenL. uld noL provlde furLher
sLlpulaLlons as Lo balance or manner of paymenL.
o SC: no sale, slnce requlslLes were noL expressed ln Lhe
recelpL.
o CLv: lsn'L sale a consensual conLracL? uefecL ln
memorandum would affecL enforceablllLy, buL should lL
affecL valldlLy?
c3"(03S /. ,-&0( -B DCC3%4'5 6>= G,HD EE <=>>F? ! conLracL of
sale perfecLed upon meeLlng of Lhe mlnds.
o SC: Seller obllged lLself when lL accepLed deposlL and
pulled ouL a unlL.
\%/)T /. [)-"P'-"5 9=9 G,HD E9 <=>>>? ! sale of real properLy
on lnsLallmenLs
o SC: Lven when recelpLs do noL provlde for Lhe
lnsLallmenLs, when Lhere ls parLlal paymenL, SLaLuLe of
lrauds no longer applles.
[)P"- /. DZ&)"-5 ::: G,HD E= <6779? ! absence of recelpLs or
any proof of conslderaLlon ls noL concluslve as Lo Lhe
lnexlsLence of a sale slnce conslderaLlon always presumed.
o CLv: no consLanL docLrlne when lL comes Lo legal
consequences of recelpLs.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk S: ICkMA1ICN CI
CCN1kAC1 CI SALL

I. Stages In 1he L|fe Cf Sa|e
1. o||c|tac|on - negoLlaLlon and bargalnlng.
2. erfect|on - momenL when Lhere ls meeLlng of Lhe mlnds on
Lhe sub[ecL maLLer and prlce
3. Consummat|on - parLles perform Lhelr respecLlve obllgaLlons

II. o||c|tac|on Stage (Art|c|e 1479)

Art|c|e 1479.
A prom|se to buy and se|| a determ|nate th|ng for a pr|ce certa|n |s
rec|proca||y demandab|e.

An accepted un||atera| prom|se to buy or to se|| a determ|nate th|ng
for a pr|ce certa|n |s b|nd|ng upon the prom|sor |f the prom|se |s
supported by a cons|derat|on d|st|nct from the pr|ce. (14S1a)

Scope: negoLlaLlon covers Lhe perlod from Lhe Llme Lhe
prospecLlve conLracLlng parLles lndlcaLe lnLeresL ln Lhe conLracL
Lo Lhe Llme Lhe conLracL ls concluded/perfecLed.
Genera| ku|e: 8efore Lhe negoLlaLlon ls concluded by
accepLance, Lhere ls freedom Lo conLracL." An owner of
properLy ls free Lo offer Lhe sub[ecL properLy for sale Lo any
lnLeresLed person. 1here ls sLlll no obllgaLlon beLween Lhe
poLenLlal buyer and poLenLlal seller.
o Lxcept|on: opLlon conLracL.
o lollcltotloo sLage covers Lhe docLrlne of freedom of
conLracL" whlch slgnlfles or lmplles Lhe rlghL Lo choose
wlLh whom Lo conLracL. A properLy owner ls free Lo
offer hls properLy for sale Lo any lnLeresLed person, and
ls noL duLy bound Lo sell Lhe same Lo Lhe occupanL
Lhereof, absenL any prlor agreemenL vesLlng Lhe
occupanLs Lhe rlghL of flrsL prlorlLy Lo buy. x!"#$%& ()
*&+,- &. /00$"%12 345 6*7/ 385 94:::;)
A negoLlaLlon ls formally lnlLlaLed by an offer, whlch, however,
musL be cerLaln. AL any Llme prlor Lo Lhe perfecLlon of Lhe
conLracL, elLher negoLlaLlng parLy may sLop Lhe negoLlaLlon. AL
Lhls sLage, Lhe offer may be wlLhdrawn, Lhe wlLhdrawal ls
effecLlve lmmedlaLely afLer lLs manlfesLaLlon. 1o converL Lhe
offer lnLo a conLracL, Lhe accepLance musL be absoluLe and musL
noL quallfy Lhe Lerms of Lhe offer, lL musL be plaln, unequlvocal,
uncondlLlonal and wlLhouL varlance of any sorL from Lhe
proposal. <"=>%" <$-"% *&=-">=$, *&,0) () ?@A, B44 6*7/ CCC
9DEE5;.
1


<"=>%" <$-"% *&=-">=$, *&,0) () ?F>%>00>=$ @"->&="% A"=G

Iacts: n8 foreclosed Lhe morLgage MMCC consLlLuLed ln lLs favor. n8
won Lhe publlc aucLlon. MMCC requesLed for an exLenslon of Lhe 1-year
redempLlon perlod, whlch n8 re[ecLed. A speclal asseLs deparLmenL of
n8 lssued Lo peLlLloner a sLaLemenL of accounL lndlcaLlng bld prlce and
lnLeresL (abouL hp 1.3 mllllon), MMCC Lhen remlLLed hp 723,000 as

1
Novotto v. llootets uev. 8ook, 327 SC8A 362 (2007).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
deposlL for repurchase". n8 offered Lo MMCC Lo buy back Lhe
properLy for hp 2.66 mllllon. MMCC lnslsLs LhaL lL had already accepLed
Lhe offer of Lhe n8 deparLmenL of hp 1.3 mllllon, and lL had deposlLed
Lhe money as earnesL money (down paymenL). 1he amounL of hp 2.6
mllllon ls a unllaLeral lncrease by n8 of Lhe purchase prlce.

Issue: WheLher or noL Lhere was already a perfecLed conLracL of sale
when MMCC gave deposlL afLer Lhe deparLmenL lssued sLaLemenL of
accounL.

ne|d: nC. 1he exchanges were counLer offers and so Lhe conLracL never
moved beyond Lhe negoLlaLlon sLage. lL was sLlpulaLed by Lhe parLles
LhaL n8 wlll accepL Lhe deposlL on Lhe condlLlon LhaL Lhe purchase
prlce ls sLlll sub[ecL Lo Lhe approval of Lhe n8 board." 1hus, Lhere was
no deflnlLe prlce.

Doctr|ne:

o An unaccepLed unllaLeral promlse (offer Lo buy or Lo
sell) prlor Lo accepLance, does noL glve rlse Lo any
obllgaLlon or rlghL. H7",&I+$ () <",I+$J2 3K L)!)
4:44)
Where Lhe offer ls glven wlLh a sLaLed Llme for lLs accepLance,
Lhe offer ls LermlnaLed aL Lhe explraLlon of LhaL Llme. HM>%%$N"1
() *&+,- &. /00$"%12 C:: 6*7/ DK5 9DEE5;)
1he LeLLer of lnLenL Lo 8uy and Sell ls [usL LhaL - a
manlfesLaLlon of Sea loods CorporaLlon's (SlC) lnLenLlon Lo sell
Lhe properLy and unlLed Musllm and ChrlsLlan urban oor
AssoclaLlon, lnc. (uMCuAl) lnLenLlon Lo acqulre Lhe same -
whlch ls nelLher a conLracL Lo sell nor a condlLlonal conLracL of
sale. <+1%>O "=P *F,>1->"= Q,#"= ?&&, /11&R>"->&=2 S=R) ()
A7T*UM V$($%&0O$=- *&,0)2 B:C 6*7/ KDC 9DEE:;.

<+1%>O "=P *F,>1->"= Q,#"= ?&&, /11&R>"->&=2 S=R) () A7T*UM
V$($%&0O$=- *&,0)

Iacts: MCuAl enLered lnLo negoLlaLlon wlLh Seafood CorporaLlon (SlC)
for Lhe purchase of laLLer's land. MCuAl execuLed a LeLLer of lnLenL Lo
8uy and SlC a LeLLer of lnLenL Lo Sell Lo faclllLaLe Lhe former's loan
appllcaLlon. 1he sale dldn'L happen because hereln buyer wasn'L able Lo
obLaln a loan, even when lL was glven an exLenslon of 3 monLhs Lo
procure lL. LvenLually, SlC sold Lhe loL Lo 88?C-v. MCuAl alleged LhaL
Lhe sale vlolaLed lLs subslsLlng agreemenL wlLh SlC whlch gave lL a
preferred rlghL Lo purchase Lhe loL.

Issue: WheLher or noL Lhe leLLers of lnLenL creaLed a bllaLeral conLracL
wlLhln Lhe meanlng of ArLlcle 1479

ne|d: nC. A mere lnLenLlon or plan Lo do someLhlng does noL glve rlse
Lo an obllgaLlon, nor blnd a parLy Lo do or glve. lL was noL an offer, buL
merely an expresslon of Lhe lnLenLlon Lo enLer ln Lo Lhe conLracL. lL does
noL conLaln a commlLmenL Lo enLer lnLo Lhe conLracL. ln facL, SlC's
enLerlng lnLo a conLracL was condlLloned upon MCuAl's ablllLy Lo ralse
Lhe funds.

Doctr|ne:

A. Cpt|on Contract
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1. Def|n|t|on And Lssence Cf Cpt|on Contract
An opLlon ls a preparaLory conLracL ln whlch one parLy granLs Lo
Lhe oLher, for a flxed perlod and under speclfled condlLlons, Lhe
power Lo declde, wheLher or noL Lo enLer lnLo a prlnclpal
conLracL. lL blnds Lhe parLy who has glven Lhe opLlon, noL Lo
enLer lnLo Lhe prlnclpal conLracL wlLh any oLher person durlng
Lhe perlod deslgnaLed, and, wlLhln LhaL perlod, Lo enLer lnLo
such conLracL wlLh Lhe one Lo whom Lhe opLlon was granLed, lf
Lhe laLLer should declde Lo use Lhe opLlon. lL ls a separaLe
agreemenL dlsLlncL from Lhe conLracL of sale whlch Lhe parLles
may enLer lnLo upon Lhe consummaLlon of Lhe opLlon. *",R$%%$,
() *&+,- &. /00$"%12 3ED 6*7/ K48 94:::;.
1


*",R$%%", () *&+,- &. /00$"%1

Iacts: SlPl (landowner) enLered lnLo lease conLracL wlLh Carcellar wlLh
opLlon Lo purchase wlLhln a cerLaln perlod, exerclsed by a wrlLLen noLlce
Lo SlPl. nearlng LermlnaLlon, Carceller wroLe expresslng hls lnLenL Lo
exerclse Lhe opLlon, buL requesLed for an exLenslon Lo ralse funds,
whlch SlPl re[ecLed. Carceller sLlll laLer expressed lnLenLlon Lo exerclse
opLlon Lo purchase afLer Lhe perlod explred, whlch SlPl denled because
perlod had lapsed. Carceller flles acLlon for speclflc performance.

Issue: WheLher or noL Carceller should be allowed Lo exerclse opLlon
glven Lhe delay ln glvlng Lhe requlred noLlce


1
lofottezo v. Mocboco, 333 SC8A 643 (2000), 8oot v. cA, 337 SC8A 846 (2001),
Abolos v. Mocotooqoy, It., 439 SC8A 649 (2004), vospoez v. Ayolo cotp., 443
SC8A 231 (2004), oloqlo v. Apeles, 376 SC8A 361 (2009).
ne|d: ?LS. Carceller's leLLer Lo SlPl showed lnLenL Lo exerclse opLlon Lo
purchase desplLe Lhe requesL for Lhe exLenslon. CranLlng Lhe opLlon ls
conslsLenL wlLh Lhe lnLenLlon of Lhe parLles. 1he delay was noL
subsLanLlal or fundamenLal as Lo amounL Lo a breach LhaL would defeaL
Lhe lnLenLlon of Lhe parLles when Lhey enLered lnLo Lhe conLracL. Pls
flrsL leLLer and hls formal exerclse were wlLhln reasonable Llme frame

Doctr|ne:

An opLlon lmposes no blndlng obllgaLlon on Lhe person holdlng
Lhe opLlon aslde from Lhe conslderaLlon for Lhe offer. unLll
accepLed, lL ls noL LreaLed as a sale. W"X"N () Y"R1&=2 CD5 6*7/
D8D 9DEEC;)
2


W"X"N () *&+,- &. /00$"%1

Iacts: Lacsons are owners of a land, LenanLed by farmer Llllers who had
landholdlngs Lhereon. 1he farmers execuLed a deed of asslgnmenL ln
favor of 1ayag sLaLlng LhaL Lhey would asslgn Lhelr landholdlngs for
hp30/sq. meLer payable when legal lmpedlmenLs Lo Lhe sale of Lhe
properLy no longer exlsLed and lf Lhe Lacsons declde Lo sell Lhe
properLy. When 1ayag called for a meeLlng Lo dlscuss Lhelr agreemenL,
Lhe farmers expressed Lhey would noL aLLend and LhaL Lhey were golng
Lo sell Lhelr landholdlngs Lo Lhe Lacsons. 1ayag clalms LhaL Lhey had no
rlghL Lo deal dlrecLly wlLh Lhe Lacsons, whlle Lhelr conLracLs wlLh hlm

2
AJelfo ltopettles, loc. v. cA, 240 SC8A 363 (1993), kllosboyoo, loc. v. Mototo,
246 SC8A 340 (1993), 5oo Mlqoel ltopettles lblllpploes, loc. v. noooq, 336
SC8A 737 (2000), llmsoo v. cA, 337 SC8A 209 (2001).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
were valld and exlsLlng.

Issue: WheLher or noL Lhe deeds of asslgnmenL were opLlon conLracLs.

ne|d: nC. 1he paymenL of Lhe purchase prlce was condlLloned on Lhe
dlsappearance of any legal lmpedlmenLs ln sale of Lhe properLy and on
Lhe Lacsons acLually selllng lL-Lhere was no showlng LhaL Lhey ever
agreed Lo sell Lhelr properLy. 1here was no opLlon conLracL here
because ln an opLlon conLracL, Lhe one glvlng ls only bound Lo hold Lhe
land ln case Lhe opLlonee decldes Lhe recelve Lhe lands aL hls elecLlon.
Pere, Lhe farmers dld noL [usL glve 1ayag an opLlon, Lhey gave hlm an
excluslve rlghL Lo buy Lhe properLy. 1hey cannoL legally do Lhls because
Lhey are noL Lhe reglsLered owners of Lhe land. 1hey had no rlghL Lo
enLer lnLo Lhose conLracLs wlLh 1ayag wlLhouL Lhe knowledge of Lhe
Lacsons.

Doctr|ne:

An opLlon ls a conLlnulng offer or an unaccepLed offer whlch
musL be cerLaln. lL ls dlsLlncL from Lhe conLracL of sale, buL as
soon as Lhe offer ls accepLed, Lhe conLracL of sale ls perfecLed.
/P$%." ?,&0$,->$12 S=R) () *&+,- &. /00$"%12 DCE 6*7/ B5B
94::B;)
o 1he lndlvldual glvlng Lhe opLlon does noL sell hls land,
buL raLher Lhe rlghL Lo prlvllege Lo buy aL Lhe elecLlon or
opLlon of Lhe oLher parLy.
1enanLs, noL belng Lhe reglsLered owners, cannoL granL an
opLlon on Lhe land, much less any excluslve rlghL" Lo buy Lhe
properLy under Lhe LaLln saylng oem Jot pooJ ooo bobet."
HW"X"N () Y"R1&=2 CD5 6*7/ D8D 9DEEC;)

2. L|ements Cf A Va||d Cpt|on Contract
a. ConsenL
b. Sub[ecL MaLLer - Lhe rlghL Lo choose wheLher or noL Lo
buy a deLermlnaLe/deLermlnable ob[ecL for a prlce
cerLaln (lncludlng manner of paymenL).
c. ConslderaLlon whlch ls anyLhlng of value and ls separaLe
and dlsLlncL from Lhe purchase prlce
!usL llke ln a sale, Lhe opLlon conLracL wlll only be perfecLed lf
Lhe parLles agree on Lhe speclflc ob[ecL (l.e. Lhe rlghL lLself, and
Lhe condlLlons) and Lhe prlce and manner of paymenL of Lhe
conslderaLlon

3. Contract Cf Sa|e v. Cpt|on Contract

CCN1kAC1 CI SALL C1ICN CCN1kAC1
Cnerous, requlres a separaLe conslderaLlon. Lack of conslderaLlon
makes Lhe conLracL vold.
ConslderaLlon musL be money or
lLs equlvalenL, or essenLlally a
valuable conslderaLlon.
ConslderaLlon may be anyLhlng of
value, even lf lL's noL money.
Consensual ConLracL
8llaLeral ConLracL unllaLeral ConLracL
Sub[ecL maLLer ls a Lhlng Lo be
glven
Sub[ecL maLLer ls Lhe rlghL Lo
choose Lo purchase or noL
resLaLlon: 1o Clve resLaLlon: 1o uo or noL uo
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Covered by SLaLuLe of lrauds noL Covered by SLaLuLe of lrauds

lL ls a unllaLeral promlse Lo sell a deLermlnaLe Lhlng. lL only blnds
Lhe opLloner - even when Lhe opLlonee has noL pald a separaLe
conslderaLlon - wlLh Lhe followlng obllgaLlons:
1. noL Lo offer Lo any Lhlrd parLy Lhe sale of Lhe ob[ecL
2. noL Lo wlLhdraw Lhe offer durlng Lhe agreed perlod
3. 1o enLer lnLo a conLracL of sale when Lhe opLlon holder,
lf he uses Lhe opLlon (l.e. accepLs Lhe offer) wlLhln Lhe
speclfled perlod.
1he Lhree obllgaLlons are obllgaLlons Lo do. 1herefore, a breach
of Lhe opLlon conLracL wlll only be acLlonable for damages, noL
speclflc performance.
o When Lhe offer ls accepLed, Lhe obllgaLlons become
obllgaLlons Lo glve, slnce Lhe conLracL of sale ls already
perfecLed.
1he sub[ecL maLLer of an opLlon conLracL ls Lhe opLlon Lo
purchase a deLermlnaLe Lhlng. ln oLher words, lL ls Lhe sub[ecL
maLLer ls Lhe rlghL Lo choose Lo buy or noL.
o !usL llke ln a sale, Lhe opLlon conLracL wlll only be
perfecLed lf Lhe parLles agree on Lhe speclflc ob[ecL (l.e.
Lhe rlghL lLself, and Lhe condlLlons) and Lhe prlce and
manner of paymenL of Lhe conslderaLlon.
An opLlon conLracL ls noL covered by Lhe SLaLuLe of lrauds.
1herefore, lL can be proved by parol evldence and ls enforceable
even lf noL wrlLLen.

4. Mean|ng Cf "Separate Cons|derat|on" (Art|c|es 1479 and 1324)

Art|c|e 1324.
When the offerer has a||owed the offeree a certa|n per|od to accept,
the offer may be w|thdrawn at any t|me before acceptance by
commun|cat|ng such w|thdrawa|, except when the opt|on |s founded
upon a cons|derat|on, as someth|ng pa|d or prom|sed. (n)

An opLlon conLracL ls an offer and a preparaLory conLracL Lo LhaL
of sale. 1hls presupposes LhaL Lhere ls already a purchase prlce
on Lhe sub[ecL maLLer of Lhe sale whlch was agreed upon by Lhe
parLles. As long as Lhe conslderaLlon for Lhe opLlon conLracL ls
dlsLlncL and noL lncluded ln Lhe purchase prlce, lL ls consldered
separaLe conslderaLlon".
Genera| ku|e: An opLlon wlLhouL separaLe conslderaLlon ls vold
as a conLracL. ConslderaLlon ln an opLlon conLracL may be
anyLhlng of value, noL necessarlly money or lLs equlvalenL. As
long as Lhe conslderaLlon for Lhe opLlon conLracL ls dlsLlncL and
noL lncluded ln Lhe purchase prlce, lL ls consldered separaLe
conslderaLlon".
o Lxcept|on: An opLlon may be lncluded wlLhln anoLher
valld conLracL, such as a lease or morLgage. lL wlll be
blndlng even lf lL does noL have a separaLe
conslderaLlon. lL ls a sLlpulaLlon wlLhln Lhe conLracL
whlch acLs llke an opLlon conLracL.
A unllaLeral promlse Lo sell, ln order Lo be blndlng upon Lhe
promlssor, musL be for a prlce cerLaln and supporLed by a
conslderaLlon separaLe from such prlce. H6"%"O$ () *&+,- &.
/00$"%12 D3: 6*7/ 3B5 94::B;)
4


1
IMA noose, loc. v. 5to. Moolco loJosttlol ooJ uev. cotp., 300 SC8A 326 (2006).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1he separaLe conslderaLlon" ln an opLlon may be anyLhlng of
value, unllke ln sale where lL musL be Lhe prlce cerLaln ln money
or lLs equlvalenL. M>%%"O&, () *&+,- &. /00$"%12 DED 6*7/ 5EK
94::4;.
1


M>%%"O&, () *&+,- &. /00$"%1

Iacts: vlllamor purchased from 8eyes one half of a plece of land for
more Lhan Lhe markeL value. 1hey Lhen execuLed a ueed of CpLlon
sLaLlng LhaL Lhe reason only why vlllamor boughL Lhe half ln Lhe flrsL
place ls because 8eyes granLed hlm excluslve rlghL Lo buy Lhe oLher half
whenever Lhe need would arlse for elLher parLy. 8eyes soughL Lo
repurchase Lhe half already boughL by vlllamor buL Lhe laLLer refused.

Issue: WheLher or noL Lhe ueed of CpLlon was valld

ne|d: ?LS. 1he conslderaLlon for Lhe CpLlon was Lhe dlfference ln Lhe
hlgher purchase prlce of Lhe land compared Lo lLs acLual markeL value.
ConslderaLlon maybe anyLhlng of value. 1he opLlon here was Lhe
conslderaLlon for Lhe vlllamors buylng Lhe flrsL half of Lhe land. Slnce
Lhey expressed Lhelr lnLenLlon Lo exerclse Lhe opLlon (whlch ls an offer),
a valld conLracL was perfecLed.

Doctr|ne: 1he CourL ruled LhaL Lhe separaLe conslderaLlon for Lhe opLlon
Lo buy Lhe oLher half was Lhe dlfference beLween Lhe markeL value and
Lhe 70 prlce pald.

1
ue lo covoJo v. uloz, 37 hll. 982 (1918), 5oo Mlqoel ltopettles lblllpploes,
loc. v. noooq, 336 SC8A 737 (2000)

o ln reclprocal conLracLs llke lease, Lhe obllgaLlon or
promlse of each parLy ls Lhe conslderaLlon for LhaL of
Lhe oLher. (ArLlcle 1330) MP") V$ Z+>,>=& () ?"%",R"2 D:
6*7/ 4 94:5:;
o 1he monLhly lnLeresL pald by Lhe spouses on Lhe
foreclosed properLy durlng Lhe one-year perlod granLed
Lo Lhem by Lhe bank was consldered as Lhe separaLe
conslderaLlon Lo hold Lhe opLlon conLracL valld) V>["OR&
() *&+,- &. /00$"%12 CCE 6*7/ 4:E 9DEEC;
o 1he opLlon Lo buy lncluded ln a morLgage was deemed a
valld sLlpulaLlon slnce lL ls supporLed by Lhe same
conslderaLlon of Lhe morLgage, whlch ls lLself dlsLlncL
from LhaL of Lhe sale. H6&,>"=& () A"+->1-"2 5 6*7/ :C5
94:5D;)
AlLhough no conslderaLlon ls expressly menLloned ln an opLlon
conLracL, lL ls presumed LhaL lL exlsLs and may be proved, and
once proven, Lhe opLlon ls blndlng) H<&=->=&%" () *&[+"=NR&2
K8 ?F>%) C84 94:CK;)

S. No Separate Cons|derat|on: Vo|d As Cpt|on, Va||d As A Certa|n
Cffer. 6"=RF$J () 7>N&12 CB 6*7/ 358 94:KD;.
2


6"=RF$J () 7>N&1

Iacts: An CpLlon Lo urchase was execuLed where 8lgos would sell a

2
/..>,O>=N Atklos, ktoll & co., loc. v. coo, 102 hll. 948 (1938), L($,-+,=>=N
5ootbwesteto 5oqot Molosses co. v. Atlootlc Colf & loclflc co., 97 hll. 249
(1933).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
plece of land Lo Sanchez upon Lhe exerclse of Lhe opLlon wlLhln 2 years.
Sanchez made several Lenders of paymenL Lo 8lgos, whlch laLLer
re[ecLed. Sanchez Lhen deposlLed Lhe amounL wlLh Lhe Cll and
commenced sulL for speclflc performance agalnsL 8lgos. LaLLer asserLs
LhaL lL was noL a valld conLracL for absence of conslderaLlon.

Issue: WheLher or noL Lhere ls a valld opLlon conLracL

ne|d: nC. Seller cannoL revoke an offer lf Lhe opLlon Lo buy had a
separaLe conslderaLlon. lf Lhe opLlon ls glven wlLhouL a conslderaLlon, lL
ls a mere offer of a conLracL of sale, whlch ls noL blndlng unLll accepLed.
lf, however, accepLance ls made before a wlLhdrawal, lL consLlLuLes a
blndlng conLracL of sale, even Lhough Lhe opLlon was noL supporLed by a
sufflclenL conslderaLlon. Accordlngly, Lhe promlsee cannoL compel Lhe
promlsor Lo comply wlLh Lhe promlse, unless Lhe former esLabllshes Lhe
exlsLence of sald dlsLlncL conslderaLlon. ln oLher words, Lhe promlsee
has Lhe burden of provlng such conslderaLlon. lalnLlff hereln has noL
even alleged Lhe exlsLence Lhereof ln hls complalnL.

CCN1kCLLING DCC1kINL: 6"=RF$J () 7>N&12 CB 6*7/ 358
94:KD;) WlLhouL separaLe conslderaLlon, an opLlon conLracL ls
vold as a conLracL buL would sLlll be a valld offer. lf Lhe opLlon ls
exerclsed before lL ls wlLhdrawn, lL ls equlvalenL Lo an offer
belng accepLed. 1hus, a valld and blndlng sale would be
perfecLed.
o 1he burden of proof Lo show LhaL Lhe opLlon conLracL
has a separaLe conslderaLlon ls wlLh Lhe parLy seeklng Lo
show lL. ArLlcle 1334, whlch presumes LhaL
conslderaLlon exlsLs, cannoL apply slnce Art|c|e 1479,
Lhe more speclflc provlslon, requlres such separaLe
conslderaLlon for an opLlon Lo be valld.
8U1 LA1LL: 1here have been rullngs by Lhe SC whlch Lend Lo
dlverge from Lhe Sanchez docLrlne. Powever, Sanchez ls sLlll Lhe
conLrolllng docLrlne slnce lL has yeL Lo be expressly abandoned
by Lhe CourL) <&=->%%" () *&+,- &. /00$"%12 454 67/ 45K2 4K3
94:88;\ @"->=& () S/*2 4:K 6*7/ 3D3 94::4;\ T"> ]" 6>= W,"P>=N
() *&+,- &. /00$"%12 DE: 6*7/ K53 94::4;\ V>"O"=-$ () *&+,- &.
/00$"%12 DE5 6*7/ BD 94::D;

6. 1here Must 8e Acceptance Cf Cpt|on Cffer. M"JI+$J () */2 4::
6*7/ 4ED 94::4;.

M"1I+$J () *&+,- &. /00$"%1

Iacts: valle[era sold land Lo vasquez who Lhen secured 1ransfer
CerLlflcaLe of 1lLle. A separaLe lnsLrumenL LogeLher wlLh Lhe deed of
sale, a 8lghL Lo 8epurchase was execuLed by Lhem ln favor of valle[era.
LaLer, vasquez reslsLed Lhls acLlon for redempLlon on Lhe premlse LhaL
8lghL Lo 8epurchase ls [usL an opLlon Lo buy slnce lL ls noL embodled ln
Lhe same documenL of sale buL ln a separaLe documenL, and such opLlon
ls noL supporLed by a conslderaLlon dlsLlncL from Lhe prlce, Lhe deed for
rlghL Lo repurchase ls noL blndlng upon Lhem.

Issue: WheLher or noL Lhe rlghL of repurchase gave rlse Lo a valld
conLracL of sale.

ne|d: nC. 1he rlghL Lo repurchase was noL supporLed by a separaLe
conslderaLlon. 1hus, for lL Lo be blndlng on vasquez, lL musL have been
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
shown LhaL valle[era accepLed Lhe offer Lhereln before lL was wlLhdrawn
by vasquez. none was made, Lhe vendor a reLro musL make acLual and
slmulLaneous Lender of paymenL and conslgnaLlon. Mere expresslons of
readlness or wllllngness Lo repurchase are lnsufflclenL. 1he rlghL of
repurchase ls noL a rlghL granLed Lhe vendor by Lhe vendee ln a
subsequenL lnsLrumenL, buL ls a rlghL reserved by Lhe vendor ln Lhe
same lnsLrumenL of sale as one of Lhe sLlpulaLlons of Lhe conLracL.

Doctr|ne: lL was held ln M"JI+$J () *&+,- &. /00$"%12 4:: 6*7/ 4ED
94::4; LhaL for Lhe Sanchez docLrlne Lo apply Lhe opLlon musL be
accepLed and Lhe accepLance musL be communlcaLed Lo Lhe offeror.
1hls emphaslzes Lhe polnL LhaL an opLlon conLracL ls a dlsLlncL conLracL.

Classroom example: S ls selllng 8 a condomlnlum unlL. Pe Lells 8
LhaL he can pay 30,000 as reservaLlon fee whlch wlll enLlLle hlm
Lo a perlod of 1 monLh Lo Lhlnk abouL Lhe purchase. lf he
accepLs, Lhe 30,000 wlll be deducLed from Lhe purchase prlce.
1hls ls noL an opLlon conLracL because Lhe 30,000 ls noL a
separaLe conslderaLlon buL ls acLually parL of Lhe purchase prlce.
WhaL we have ls an lnnomlnaLe conLracL (do uL faclas). 8reach
of Lhe conLracL wlll enLlLle 8 Lo damages only. 1he lnnomlnaLe
conLracL lnvolves a presLaLlon Lo do, Lhus, speclflc performance
ls noL avallable.

7. roper Lxerc|se Cf Cpt|on Contract.
1he opLlonee may exerclse hls rlghL by merely advlslng Lhe
offeror of Lhe declslon Lo buy and expresslng hls readlness Lo
pay, provlded LhaL he ls acLually able Lo pay. AcLual paymenL ls
noL necessary Lo exerclse Lhe opLlon. @>$-$1 () */, 46 6*7/ 5BC
94:KD;)

@>$-$1 () *&+,- &. /00$"%1

Iacts: Carcla (owner and lessor) enLered lnLo a ConLracL of Lease wlLh
CpLlon Lo 8uy a school wlLh nleLes (lessee). Lessee ls granLed an opLlon
Lo buy Lhe land wlLhln Lhe perlod of Lhe conLracL of lease. LaLer, Carcla
expressed hls lnLenLlon Lo resclnd Lhe conLracL due Lo poor malnLenance
of Lhe bulldlng. ln hls reply, nleLes expressed lnenLlon Lo exerclse Lhe
opLlon Lo buy. ln Lhe speclflc performance case flled agalnsL Carcla, he
asserLs LhaL Lhe full purchase prlce musL flrsL be pald before Lhe opLlon
could be exerclsed.

Issue: WheLher or noL Carcla's asserLlon ls correcL.

ne|d: nC. ln Lhe case of an opLlon Lo buy, Lhe credlLor may valldly and
effecLlvely exerclse hls rlghL by merely advlslng Lhe debLor of Lhe
former's (1) declslon Lo buy and (2) hls readlness Lo pay Lhe sLlpulaLed
prlce, provlded LhaL Lhe same ls avallable and acLually dellvered Lo Lhe
debLor upon execuLlon and dellvery by hlm of Lhe correspondlng deed
of sale. ln oLher words, noLlce of Lhe credlLor's declslon Lo exerclse hls
opLlon Lo buy need noL be coupled wlLh acLual paymenL of Lhe prlce, so
long as Lhls ls dellvered Lo Lhe owner of Lhe properLy upon performance
of hls parL of Lhe agreemenL.

Doctr|ne:

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
roper exerclse of an opLlon glves rlse Lo Lhe reclprocal
obllgaLlons of sale H^$>,1 &. Y+>1 A"R+1 () *&+,- &. /00$"%12 3K4
6*7/ D:B 9DEE4;2
1
whlch musL be enforced wlLh Len (10) years
as provlded under ArLlcle 1144. HV>J&= () *&+,- &. /00$"%12 3ED
6*7/ D88 94:::;.
o 1he refusal by Lhe offeror Lo comply wlLh Lhe demand
by Lhe offeree wlLh Lhe exerclse of hls opLlon may be
enforced by speclflc performance.
o Lxerclse of Lhe opLlon ls accepLance of Lhe offer whlch
perfecLs Lhe conLracL of sale. 1hus, Lhe obllgaLlons Lo do
become obllgaLlons Lo glve.
8epeaLed Lenders of paymenL, whlch were refused by Lhe
opLloner for no reason, consLlLuLe evldence of a valld exerclse of
Lhe opLlon. 6"=RF$J () 7>N&12 CB 6*7/ 358 94:KD;.

8. Cpt|on Not Deemed art Cf kenewa| of Lease. An opLlon
aLLached Lo a lease when noL exerclsed wlLhln Lhe opLlon perlod
ls exLlngulshed and cannoL be deemed Lo have been lncluded ln
Lhe lmplled renewal (toclto tecooJoccloo) of Lhe lease. HV>J&= ()
*/2 3ED 6*7/ D88 94:::;)
under Lhe prlnclple of toclto tecooJoccloo, a lease ls lmplledly
renewed lf Lhe Lerm of Lhe orlglnal conLracL of lease has
explred, Lhe lessor has noL ordered Lhe lessee Lo vacaLe, and 13
days has passed wlLhouL Lhe acqulescence of Lhe lessor.
2


1
llmsoo v. coott of Appeols, 337 SC8A 209 (2001).
2
Samelo v. ManoLok Servlces, lnc., C.8. no. 170309 (noL ln Lhe book)
Cnly Lhe essenLlal sLlpulaLlons ln Lhe lease are deemed
renewed. An opLlon Lo purchase whlch ls sLlpulaLed ln a lease ls
noL essenLlal Lo Lhe lease. 1hus, Lhey lL ls noL renewed.

9. er|od Cf Lxerc|se Cf Cpt|on. lf Lhe opLlon conLracL does noL
speclfy Lhe perlod ln whlch Lhe opLlon can be exerclsed, lL
cannoL be presumed LhaL lL can be exerclsed lndeflnlLely.
AcLlons upon wrlLLen conLracLs musL be broughL wlLhln 10
years. AfLerwards, lL prescrlbes.
1here musL be vlrLual" exerclse of opLlon wlLh Lhe opLlon
perlod. noLlce wlLhln Lhe opLlon perlod of clear lnLenLlon Lo
purchase Lhe properLy, even wlLh a requesL for leeway or
exLenslon of Lhe perlod ln order Lo ralse money Lo buy Lhe
properLy, ls a valld and subsLanLlal exerclse of Lhe opLlon.
*",R$%%$, () *&+,- &. /00$"%1, 302 SCkA 718 (1999).

Summary Cf ku|es When er|od |s Granted to rom|see
/=N T+ /1+=R>&= () *&+,- &. /00$"%12 D38 6*7/ 5ED 94::C; summarlzed
Lhe appllcable rules:
1. lf Lhe perlod ls noL supporLed by a separaLe conslderaLlon, Lhe
offeror can sLlll wlLhdraw Lhe offer before lL ls accepLed, or
before he learns of an accepLance made by Lhe offeree.
2. 1he rlghL Lo wlLhdraw musL noL be done whlmslcally or
arblLrarlly, oLherwlse, Lhe oLher parLy may sue for damages
under Art|c|e 19. lf Lhere ls a separaLe conslderaLlon, an opLlon
conLracL ls perfecLed, and wlLhdrawal of Lhe opLlon wlLhln Lhe
perlod ls a breach of Lhe conLracL.
3. 1he opLlon conLracL ls an lndependenL conLracL by lLself. lf lL ls
wlLhdrawn, Lhere ls a breach whlch can be Lhe basls of an acLlon
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
for damages. Speclflc performance ls noL avallable.
4. 1he naLure of Lhe conslderaLlon musL be Laken lnLo accounL. lf
Lhe conslderaLlon was ln facL parL of Lhe purchase prlce, Lhen
Lhere ls no opLlon conLracL, buL a perfecLed conLracL of sale.

/=N T+ /1+=R>&= () *&+,- &. /00$"%12 D38 6*7/ 5ED 94::C; ruled LhaL
Lhe separaLe conslderaLlon merely guaranLees LhaL wlLhln Lhe opLlon
perlod, before Lhe opLloner wlLhdraws Lhe offer, an accepLance by Lhe
opLlonee would glve rlse Lo a valld sale. 1hls, ln effecL, ls slmllar Lo Lhe
docLrlne ln 5oocbez v. klqos whlch consldered an opLlon whlch dld noL
have separaLe conslderaLlon.
1he effecL ls LhaL as far as Lhe opLlonee ls concerned, wheLher
or noL he glves a separaLe conslderaLlon, hls rlghL can be
defeaLed slmply by Lhe opLloner's wlLhdrawal. Pe ls Lherefore
noL assured LhaL a sale wlll be perfecLed.
ALL. SanLlago: Lhe more loglcal acLlon ln case of a breach of an
opLlon conLracL ls speclflc performance. 8uL, Lhe reasonlng ln
Aoq o (l.e you can'L compel speclflc performance for
presLaLlons Lo do) ls also loglcal.
CLv: says Lhls does noL provlde for a commerclally sound
docLrlne because lL emasculaLes Lhe effecLlveness of an opLlon
supporLed by a separaLe conslderaLlon. 1here ls no lncenLlve or
moLlvaLlon for Lhe opLlonee Lo glve, and Lhe opLloner Lo
demand a separaLe conslderaLlon.

8. k|ght Cf I|rst kefusa|
1. Def|n|t|on: A promlse on Lhe parL of Lhe owner LhaL lf he
decldes Lo sell Lhe properLy ln Lhe fuLure, he would flrsL
negoLlaLe lLs sale Lo Lhe promlsee.
A rlghL of flrsL refusal cannoL be Lhe sub[ecL of speclflc
performance, buL breach would allow a recovery of damages.
H!+$,,$,& () T_>N&2 :5 ?F>%) 3K 94:BC;)

2. 8as|c Concepts In 1he k|ght Cf I|rst kefusa|
8lghLs of flrsL refusal only consLlLuLe lnnovaLlve [urldlcal
relaLlons", buL do noL rlse Lo Lhe level of conLracLual
commlLmenL slnce wlLh Lhe absence of agreemenL on prlce
cerLaln, Lhey are noL sub[ecL Lo conLracLual enforcemenL. /=N
T+ /1+=R>&= () *&+,- &. /00$"%12 D38 6*7/ 5ED 94::C;.

/=N T+ /1+=R>&= () *&+,- &. /00$"%1

Iacts: Ang ?u and oLhers were LenanLs and lessees of commerclal spaces
owned by Cngpln. Cn several occaslons, Cngpln lnformed Ang ?u LhaL
he ls offerlng Lo sell Lhe premlses and ls glvlng Lhem prlorlLy Lo acqulre
Lhe same. negoLlaLlons were had and counLer offers were glven by boLh
parLles. Ang ?u flled for speclflc performance Lo compel Cngpln Lo sell
Lhe properLy when he found ouL LhaL Lhe laLLer was abouL Lo sell Lhe
properLy. endlng resoluLlon of Lhe case, Cngpln sold Lhe properLy Lo
anoLher.

Issue: WheLher or noL Lhere was a perfecLed sale.

ne|d: nC. ln a rlghL of flrsL refusal, whlle Lhe ob[ecL mlghL be made
deLermlnaLe, Lhe exerclse of Lhe rlghL, would depend noL only on Lhe
vendor's lnLenLlon Lo sell buL also on Lerms, lncludlng Lhe prlce, LhaL are
yeL Lo be flrmed up. lLs breach cannoL [usLlfy an lssuance of a wrlL of
execuLlon under a [udgmenL or sancLlon an acLlon for speclflc
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
performance wlLhouL negaLlng consensuallLy ln Lhe perfecLlon of
conLracLs. 1he proper remedy ls an acLlon for damages.

Doctr|ne:

ln a rlghL of flrsL refusal, whlle Lhe ob[ecL mlghL be made
deLermlnaLe, Lhe exerclse of Lhe rlghL would be dependenL noL
only on Lhe granLor's evenLual lnLenLlon Lo enLer lnLo a blndlng
[urldlcal relaLlon wlLh anoLher buL also on Lerms, lncludlng Lhe
prlce, LhaL are yeL Lo be flrmed up. . . Lhe offer" may be
wlLhdrawn anyLlme by communlcaLlng Lhe wlLhdrawal Lo Lhe
oLher parLy. M"1I+$J () /X"%" *&,0)2 CC3 6*7/ D34 9DEEC;.

M"1I+$J () /X"%" *&,0)

Iacts: vasquez spouses own shares of sLocks wlLh CondulL CorporaLlon.
CondulL's maln asseL was a 49.9 hecLare land ln Ayala Alabang,
MunLlnlupa. Spouses enLer lnLo a MCA wlLh Ayala where Lhe laLLer
commlLLed Lo develop sald lands lncludlng Lhe 4 parcels of land Lo be
sold Lo peLlLloner spouses. ar. 3.13 of MCA sLaLes LhaL Ayala agrees Lo
granL Lhe spouses "a flrsL opLlon Lo purchase four developed loLs nexL Lo
Lhe 8eLalned Area" aL Lhe prevalllng markeL prlce aL Lhe Llme of Lhe
purchase."

Issue: WheLher or noL Lhe sLlpulaLlon ls a rlghL of flrsL refusal or an
opLlon conLracL. ! lL was a rlghL of flrsL refusal.

ne|d: Whlle Lhe ob[ecL may be deLermlnaLe, Lhe exerclse of Lhe rlghL
would depend noL only on Lhe granLor's evenLual lnLenLlon Lo sell buL
also on Lerms, lncludlng prlce, LhaL are yeL Lo be flrmed up. lL was noL an
opLlon conLracL because Lhere was no separaLe conslderaLlon.

Applled Lo Lhe lnsLanL case, paragraph 3.13 ls obvlously a mere rlghL of
flrsL refusal and noL an opLlon conLracL. AlLhough Lhe paragraph has a
deflnlLe ob[ecL, l.e., Lhe sale of sub[ecL loLs, Lhe perlod wlLhln whlch Lhey
wlll be offered for sale Lo peLlLloners and, necessarlly, Lhe prlce for
whlch Lhe sub[ecL loLs wlll be sold are noL speclfled.

Doctr|ne:

o A rlghL of flrsL refusal ls noL a conLracL. lL ls noL a sale,
nor an opLlon conLracL. Whlle lL has a deflnlLe sub[ecL
maLLer, Lhere ls no agreemenL as Lo Lhe prlce or Lhe
manner of paymenL. lurLhermore, Lhe exerclse of Lhe
rlghL would be dependenL upon Lhe granLor's evenLual
lnLenLlon Lo sell Lhe land.
A rlghL of flrsL refusal clause slmply means LhaL should Lhe lessor
declde Lo sell Lhe leased properLy durlng Lhe Lerm of Lhe lease,
such sale should flrsL be offered Lo Lhe lessee, ooJ tbe setles of
oeqotlotloos tbot ttoosplte betweeo tbe lessot ooJ tbe lessee oo
tbe bosls of socb ptefeteoce ls JeemeJ o compllooce of socb
cloose eveo wbeo oo flool potcbose oqteemeot ls petfecteJ
betweeo tbe pottles. 1he lessor was Lhen aL llberLy Lo offer Lhe
sale Lo a Lhlrd parLy who pald a hlgher prlce, and Lhere ls no
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
vlolaLlon of Lhe rlghL of Lhe lessee. 7>(>$," `>%>0>="2 S=() () *&+,-
&. /00$"%12 38E 6*7/ DCB 9DEED;.
1


7>(>$," `>%>0>=" () *&+,- &. /00$"%1

Iacts: !uan L. 8eyes leased hls land along LuSA, CC Lo 8lvlera llllplna
lnc. 1he conLracL of lease was for 10 years renewable. ar. 11 ln Lhe
lease conLalned LhaL Lhe lessee shall have Lhe rlghL of flrsL refusal should
Lhe lessee declded Lo sell Lhe properLy durlng Lhe Lerm of Lhe lease. 1he
sald loL was also sub[ecL Lo a 8LAL LS1A1L MC81CACL wlLh rudenLlal
8ank. 8eyes was noL able Lo pay for Lhe lnsLallmenL and rudenLlal 8ank
foreclosed Lhe properLy wlLh a 1 year redempLlon perlod. 8eyes declded
Lo sell Lhe properLy. 8eyes offered Lo sell for 3,000 per square meLer
buL 8lvlera Lhrough lLs presldenL only offered 3,300. 7 monLhs laLer
8lvlera offered 4000 and 8eyes now wanLs 6000. 8lvlera Lhen offers
3000 pesos saylng lL would be pald fully ln 60 days, LhaL Lhe offer ls
whaL we feel should be Lhe markeL prlce of your properLy" and Lhey
8eyes should declde ln 13 days. 8eyes replled LhaL you have
unforLunaLely falled Lo Lake advanLage of your rlghL of flrsL refusal.
8eyes Lhen offered Lo sell Lhe properLy Lo Cypress ConsLrucLlon
Company who pald 3300. 8eyes dld noL lnform 8lvlera of Lhe 3,300
offer. 8lvlera flled a sulL Lo have Lhe LlLle Lransferred ln hls name afLer lL
has pald Lhe 3300 pald by Cypress. 81C and CourL of Appeals ruled LhaL
8lvlera losL lLs rlghL of flrsL refusal.
Issue: WheLher or noL 8lvlera's rlghL of flrsL refusal was vlolaLed by
8eyes' sale of Lhe properLy Lo Cypress.

1
lolytecbolc uolvetslty v. cA, 368 SC8A 691 (2001), vllleqos v. cA, 499 SC8A 276
(2006).

ne|d: nC. 8lvlera sLrongly exhlblLed a "Lake-lL or leave-lL" aLLlLude ln lLs
negoLlaLlons wlLh 8eyes. lL quoLed lLs "flxed and flnal" prlce as 3,000
and noL any peso more. 8lvlera cannoL now be heard LhaL had lL been
lnformed of Lhe offer of 3,300 of Cypress, lL would have maLched sald
prlce. lLs sLubborn approach ln lLs negoLlaLlons wlLh 8eyes showed
crysLal-clear LhaL Lhere was never any need Lo dlsclose such lnformaLlon
and dolng so would be [usL a fuLlle efforL on Lhe parL of 8eyes. 8eyes
was under no obllgaLlon Lo dlsclose Lhe same.

Doctr|ne:

3. now 1o Comp|y W|th 1he k|ght Cf I|rst kefusa| When 1he
Se||er Dec|des 1o Se||
a. 1he seller musL flrsL offer Lo sell Lhe properLy Lo Lhe
granLee of Lhe opLlon.
b. 1he negoLlaLlons abouL Lhe sale beLween Lhe seller and
Lhe granLee would be deemed compllance wlLh Lhe
rlghL, even lf Lhere ls no flnal prlce agreed upon.
c. lf no prlce ls agreed upon, Lhe seller can Lhen offer Lo
sell Lo oLher parLles wlLh Lhe same Lerms as Lhose
offered Lo Lhe granLee.
d. lf Lhe seller and Lhe Lhlrd parLy negoLlaLe and agree
upon dlfferenL Lerms, Lhe seller musL flrsL offer Lhese
new Lerms agaln Lo Lhe granLee.
e. lf Lhe granLee agaln re[ecLs Lhe new Lerms, Lhe seller can
proceed wlLh Lhe sale of Lhe properLy Lo Lhe Lhlrd parLy

4. Act|on If 1he k|ght 1o I|rst kefusa| Is 8reached
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CCN1kCLLING DCC1kINL: 8lghL of flrsL refusal conLalned ln a
lease, when breached by promlssor allows enforcemenL by Lhe
promlsee by way of resclsslon of Lhe sale enLered lnLo wlLh Lhe
Lhlrd parLy, pursuanL Lo ArLlcles 1381(3) and 1383 of Clvll Code.
H!+JO"=2 A&R"%>=N a *&) () A&==$(>$2 DE5 6*7/ 558 94::D;\
bI+"-&,>"% 7$"%-X V$()2 S=R) () <"X.">, WF$"-$,2 S=R)2 D5C 6*7/
C83 94::5;\
4
?","="I+$ ]>=N1 b=-$,0,>1$12 S=R) () */2 D58 6*7/
KDK2 KC4 94::K;)

bI+"-&,>"% 7$"%-X V$() S=R) () <"X.">, WF$"-$, S=R)

Iacts: 1wo conLracLs of lease beLween Carmelo and Mayfalr provlded
LhaL lf Lhe LLSSC8 should deslre Lo sell Lhe leased premlses, Lhe LLSSLL
shall be glven 30 days excluslve opLlon Lo purchase Lhe same." Carmelo
lnlLlally offered Lo sell Lhe leased properLy Lo Mayfalr for slx Lo seven
mllllon pesos. Mayfalr lndlcaLed lnLeresL ln purchaslng Lhe properLy
Lhough lL lnvoked Lhe 30-day perlod. noLhlng was heard LhereafLer from
Carmelo. lour years laLer, Lhe laLLer sold lLs enLlre 8ecLo Avenue
properLy, lncludlng Lhe leased premlses, Lo LquaLorlal for 11,300,000
wlLhouL lnformlng Mayfalr. Mayfalr flled an acLlon for speclflc
performance Lo have Lhe properLy sold Lo lL and Lo annul Lhe sale Lo
LquaLorlal.


1
koseocot uev. cotp. v. lopoloq, 334 SC8A 119 (2001), coocoloJo v. cA, 367
SC8A 164 (2001), lolytecbolc uolvetslty v. cA, 368 SC8A 691 (2001), klvleto
llllploo, lov. v. coott of Appeols, 380 SC8A 243 (2002), loctotlve keolty ooJ uev.
cotp. v. 8etoobe, It., 392 SC8A 679 (2002), vllleqos v. coott of Appeols, 499
SC8A 276 (2006), lolytecbolc uolvetslty of tbe lblllpploes v. ColJeo notlzoo
keolty cotp., 613 SC8A 478 (2010).
Issues:
1. WheLher or noL Lhere was a rlghL of flrsL refusal. ! ?LS
2. WheLher or noL Lhe sale Lo LquaLorlal was valld. ! ?LS, buL
such conLracL of sale ls resclsslble.

ne|d: Carmelo vlolaLed Lhe rlghL of flrsL refusal when wlLhouL affordlng
lLs negoLlaLlons wlLh Mayfalr Lhe full process Lo rlpen Lo a deflnlLe offer
and a posslble accepLance wlLhln Lhe "30-day excluslve opLlon" Llme.
LquaLorlal ls a buyer ln bad falLh because lL had noLlce and full
knowledge of Mayfalr's rlghLs. Pence, Lhe sale Lo LquaLorlal ls
resclsslble.

Doctr|ne:

?","="I+$ ]>=N1 () *&+,- &. /00$"%1

Iacts! #$%$&'($ )*(+, +'-.% /$01+&2 )3 &$(, *.'1. *+0+ &+$2+, %) #.4$5
!"# %"&' ())*+'&, "*) -*+"%) %# .&& /"*'+ 0*'+1 .&& /"*'+ 0*'+ %"&'
!""#$%&' )*& +#$*)" ), -!+!.!/0& 1#%$2 3*#4* #%)+,'04&' "#$%#5#4!%)
lmprovemenLs on Lhe premlses. lL was sLlpul!"#$ &' "(# )#!*# !+,##-#'"
!"#!$ &'( )#*+ ,- *#.+$ !"+ .+**,/ *"#.. "#0+ !"+ ,1!',( ,/ 1/',/'!2 !, 342
!"# %&'( )*+)#*!'#%,- .&!&/'0&1 '0 2'+/&!'+0 +3 !"# %&'( %!')4/&!'+01 %+/(
!"# %&! !& '()*+,-& .&/ .01# *0%%0&,2 3(/(4(5+# 60,7 !"#, ,&!0.0#- "#/ &.
Lh! #$!%&'( )'! *++!,*%-!./ '%, -'! .0-1 $!&023!/!,( )'! -'!2 044!$!,
!"# %&! !& '()(*(+,# -./0 1&) 1.1!##/ 2.%%.&/3 !"# %(!!#) )#1,4#5 6%(.2./0
LhaL Lhe offer was rldlculous." CaLallna LhereafLer sold lL agaln Lo
8aymundo for nlne mllllon. 1he lower courL! #$!%$!!&# '(& )*%+,-$.' */
!"#"$"%&' )*+, -."*/*+, 01"0 2"0".*+" 1"3 4&540"+0*"..6 -7/8.*'3 9*01
her obllgaLlon Lo offer Lhe sald loL Lo Lhe former.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Issues:
1. WheLher Lhe complalnL alleglng breach of Lhe conLracLual rlghL
of flrsL opLlon or prlorlLy Lo buy" sLaLes a valld cause of acLlon.
! ?LS.
2. WheLher or noL Lhe granLee of such rlghL ls enLlLled Lo be
offered Lhe same Lerms and condlLlons as Lhose glven Lo a Lhlrd
parLy who evenLually boughL such properLles ! ?LS.

ne|d: 1he Supreme CourL held LhaL ln order Lo have full compllance
wlLh Lhe conLracLual rlghL granLlng peLlLloner Lhe flrsL opLlon Lo
purchase, Lhe sale of Lhe properLles for Lhe amounL of 9 mllllon, Lhe
prlce for whlch Lhey were flnally sold Lo respondenL 8aymundo, should
have llkewlse been flrsL offered Lo peLlLloner. Cnly lf Lhe peLlLloner
falled Lo exerclse Lhelr rlghL of flrsL prlorlLy could SanLos LhereafLer
lawfully sell Lhe sub[ecL properLy Lo oLhers, and only under Lhe same
Lerms and condlLlons prevlously offered Lo Lhe peLlLloner. 1he basls of
Lhe rlghL of Lhe flrsL refusal musL be Lhe currenL offer Lo sell of Lhe seller
or offer Lo purchase of any prospecLlve buyer

Doctr|ne:

1he buyer of a real properLy who knew LhaL such properLy was
sub[ecL Lo Lhe rlghL of flrsL refusal cannoL clalm good falLh.
o Where Lhe rlghL of flrsL refusal clause found ln a valld
lease conLracL was vlolaLed and Lhe properLy was sold
Lo a buyer who was aware of Lhe exlsLence of such rlghL,
Lhe resulLlng conLracL ls resclsslble by Lhe person ln
whose favor Lhe rlghL of flrsL refusal was glven.
lf Lhe promlse ls breached, an acLlon for speclflc performance ls
noL allowed, buL acLlon for damages ls allowed. !+$,,$,& ()
!"#$%& () *+#,- ./ 01(234

S. k|ght Cf I|rst kefusa| Lmbod|ed In A Lease Agreement
lf Lhe rlghL of flrsL refusal ls lncluded ln a lease, Lhere need noL
be a separaLe conslderaLlon for Lhe rlghL slnce lL ls already parL
and parcel of Lhe enLlre conLracL of lease. 1he conslderaLlon for
Lhe lease ls Lhe conslderaLlon for Lhe rlghL of flrsL refusal.
bI+"-&,>"% 7$"%-X V$()2 S=R) () <"X.">, WF$"-$,2 S=R)2 D5C 6*7/
C83 94::5;
o 1he enforceablllLy of Lhe rlghL of flrsL refusal ls based on
Lhe obllgaLory force of Lhe lease conLracL.
o lf Lhe rlghL ls vlolaLed by Lhe granLor who sold Lhe
properLy Lo anoLher, Lhe resulLlng conLracL ls resclsslble
by Lhe granLee of Lhe rlghL.
1he bI+"-&,>"% 7$"%-X V$()2 S=R) () <"X.">, WF$"-$,2 S=R)2 D5C
6*7/ C83 94::5; rullng would only apply Lo rlghLs of flrsL refusal
aLLached Lo a valld prlnclpal conLracL. lf Lhey are consLlLuLed as
separaLe conLracLs, Lhe rullng ln /=N T+ /1+=R>&= () *&+,- &.
/00$"%12 D38 6*7/ 5ED 94::C; would apply.
o verbal granLs of Lhe rlghL of flrsL refusal are
unenforceable slnce such rlghL musL be embodled ln a
wrlLLen conLracL. 6$= ?& bG <",G$->=N *&,0) ()
<",->=$J2 3DB 6*7/ D4E 9DEEE;
When a lease conLracL conLalns a rlghL of flrsL refusal, Lhe lessor
has Lhe legal duLy Lo Lhe lessee noL Lo sell Lhe leased properLy Lo
anyone aL any prlce unLll afLer Lhe lessor made an offer Lo sell
Lhe properLy Lo Lhe lessee and Lhe lessee has falled Lo accepL lL.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Cnly afLer Lhe lessee has falled Lo exerclse hls rlghL of flrsL
prlorlLy could Lhe lessor sell Lhe properLy Lo oLher buyers under
Lhe same Lerms and condlLlons offered Lo Lhe lessee, or under
Lerms and condlLlons more favorable Lo Lhe lessor. ?&%X-$RF=>R
Q=>($,1>-X &. -F$ ?F>%>00>=$1 () !&%P$= ^&,>J&= 7$"%-X *&,0)2
54B 6*7/ CK8 9DE4E;)
A rlghL of flrsL refusal ln a lease ln favor of Lhe lessee cannoL be
avalled of by Lhe sublessee. H6"PFc"=> () *&+,- &. /00$"%12 D84
6*7/ KB 94::K;)

6. k|ght Cf I|rst kefusa| v. Cpt|on Contract
A rlghL of flrsL refusal ls a conLracLual granL, noL of Lhe sale of a
properLy, buL of Lhe flrsL prlorlLy Lo buy Lhe properLy ln Lhe
evenL Lhe owner sells Lhe same. As dlsLlngulshed from an opLlon
conLracL, ln a rlghL of flrsL refusal, whole Lhe ob[ecL mlghL be
made deLermlnaLe, Lhe exerclse of Lhe rlghL of flrsL refusal
would be dependenL noL only on Lhe owner's evenLual lnLenLlon
Lo enLer lnLo a blndlng [urldlcal relaLlon wlLh anoLher buL also on
Lerms, lncludlng Lhe prlce, LhaL are yeL Lo be flrmed up.
?&%X-$RF=>R Q=>($,1>-X &. -F$ ?F>%>00>=$1 () !&%P$= ^&,>J&=
7$"%-X *&,0)2 54B 6*7/ CK8 9DE4E;)
Slmllar Lo an opLlon conLracL, Lhe rlghL of flrsL refusal lncluded ln
a lease ls noL renewed even ln LaclLa reconducclon. V>J&= ()
*&+,- &. /00$"%12 3:5 6*7/ 4BD 9DEE3;

!"#$#%&' )#*+",-& #- .$+,#- /#-+"0*+% 1,%-!-v|s k|ght of I|rst kefusa|

A. A|ternat|ve Doctr|ne of Lnforceab|||ty of k|ghts of I|rst kefusa|
!usLlce vlLug, ln hls declslon ln Aoq o Asoocloo and ln hls
dlssenL ln poototlol keolty sald LhaL a rlghL of flrsL refusal ls noL
a conLracL.
o ln hls vlew, breach would resulL ln damages pursuanL Lo
ArLlcle 19.
CLv poslLs LhaL a rlghL of flrsL refusal over a deLermlnaLe sub[ecL
maLLer and supporLed by a separaLe conslderaLlon would glve
rlse Lo an lnnomlnaLe conLracL (Jo ot foclos).
o 1hls would allow Lhe remedy of reclsslon whlch would
Lhen glve rlse Lo damages lf lL ls breached. (noLe: ArLlcle
19 would noL be Lhe basls for damages.)

8. Lnforceab|||ty of Cpt|on k|ghts Shou|d be at ar w|th, |f not at a
n|gher Leve| 1han, k|ghts of I|rst kefusa|
ln llghL of Lhe rullngs ln poototlol keolty and !"#"$"%&' )*+,-,
lL seems LhaL rlghLs of flrsL refusal aLLached Lo prlnclpal
conLracLs have greaLer legal enforceablllLy Lhan opLlon conLracLs
whlch are supporLed by separaLe conslderaLlon.
CLv's proposed beLLer rule:
o lf Lhe opLlon ls supporLed by a separaLe conslderaLlon,
Lhe opLlonee shall have Lhe rlghL Lo exerclse Lhe opLlon
anyLlme durlng Lhe perlod, and LhaL would glve rlse Lo a
valld sale.
o 1he opLloner, on Lhe oLher hand, cannoL wlLhdraw Lhe
offer durlng Lhe opLlon perlod, and any aLLempL Lo
wlLhdraw wlll be vold.
o lf a Lhlrd parLy boughL Lhe properLy ln bad falLh (l.e. he
knew Lhe exlsLence of Lhe opLlon ln favor of Lhe
opLlonee), Lhe opLlonee can go afLer Lhe opLloner and
Lhe Lhlrd-parLy buyer ln an acLlon for speclflc
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
performance.
o lf a Lhlrd parLy boughL Lhe properLy ln good falLh and for
value, Lhe opLlonee may sue Lhe opLloner for recovery
of damages for breach of conLracL of sale.

C. Mutua| rom|ses to 8uy and Se|| (Art|c|e 1479): "W,+$ *&=-,"R- -&
6$%%"
MuLual promlses Lo buy and sell a cerLaln Lhlng for a cerLaln
prlce glves each of Lhe conLracLlng parLles a rlghL Lo demand
from Lhe oLher Lhe fulflllmenL of Lhe obllgaLlon) HA&,,&O$& ()
`,"=R&2 B ?F>%) C: 94:EB;)
Lven ln Lhls case Lhe cerLalnLy of Lhe prlce musL also exlsL,
oLherwlse, Lhere ls no valld and enforceable conLracL Lo sell.
HW"= W>"F () T+ d&1$2 5K ?F>%) K3: 94:3:;)
An accepLed bllaLeral promlse Lo buy and sell ls ln a sense
slmllar Lo, buL noL exacLly Lhe same, as a perfecLed conLracL of
sale because Lhere ls already a meeLlng of mlnds upon Lhe Lhlng
whlch ls Lhe ob[ecL of Lhe conLracL and upon Lhe prlce.
1
8uL a
conLracL of sale ls consummaLed only upon dellvery and
paymenL, whereas ln a bllaLeral promlse Lo buy and sell glves
Lhe conLracLlng parLles rlghLs lo petsooom, such LhaL each has
Lhe rlghL Lo demand from Lhe oLher Lhe fulflllmenL of Lhelr
respecLlve underLaklngs. <"R>&= () !+>"=>2 DDB 6*7/ 4ED
94::3;.
2



1
l 8ooco Nocloool llllploo v. Ab 5loq, 69 hll. 611 (1940), Moooel v. koJtlqoez,
109 hll. 1 (1960).
2
8ottomeo v. ltooco, 3 hll. 49 (1903), vlllomot v. cA, 202 SC8A 607 (1991),
cotooel v. cA, 263 SC8A 13 (1996).
<"R>&= () d+PN$ !+>"=>

Iacts: eLlLloners and prlvaLe respondenL enLered lnLo a conLracL Lo sell
where peLlLloners was Lo sell Lwo loLs Lo prlvaLe respondenLs for
1,730,000. eLlLloners surrendered Lhe physlcal possesslon of Lhe 2
loLs Lo prlvaLe respondenL who prompLly bullL an edlflce worLh
800,000. Powever, Lhe sale falled Lo maLerlallze. eLlLloners flled a
complalnL for unlawful deLalner agalnsL prlvaLe respondenL whlle
prlvaLe respondenL flled a complalnL for reformaLlon of Lhe conLracL Lo
sell.

1he parLles enLered lnLo a compromlse agreemenL where prlvaLe
respondenLs were glven 3 monLhs Lo ralse 2,060,000 and upon
securlng Lhe amounL, peLlLloners were Lo execuLe a deed of sale for Lhe
2 loLs. 1he Lrlal courL approved Lhls compromlse. AfLer prlvaLe
respondenL secured a loan from 8l, lL wroLe leLLers Lo peLlLloner for Lhe
laLLer Lo execuLe a conLracL Lo sell. Cn Lhe oLher hand, peLlLloners flled a
moLlon for execuLlon of [udgmenL alleglng LhaL afLer a lapse of 3
monLhs, prlvaLe respondenL have falled Lo seLLle Lhelr obllgaLlons wlLh
peLlLloners. 8espondenL [udge ruled ln favor of respondenLs. Pence, Lhe
presenL peLlLlon.

Issue: WheLher or noL respondenL !udge may compel Maclon Lo execuLe
a conLracL Lo sell ln favor of uela vlda lnsLlLuLe.

ne|d: ?LS. 1he courL looked lnLo Lhe conLemporaneous and subsequenL
acLs of Lhe parLles and deLermlned Lhelr real lnLenLlons. A revlew of Lhe
facLs reveal LhaL even prlor Lo Lhe slgnlng of Lhe compromlse agreemenL
and Lhe flllng of Clvll Case no. 392 before Lhe Lrlal courL, Lhe parLles had
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
already enLered lnLo a conLracL Lo sell. ln conLracLs Lo sell, paymenL ls a
poslLlve suspenslve condlLlon, fallure of whlch does noL consLlLuLe a
breach buL an evenL LhaL prevenLs Lhe obllgaLlon of Lhe vendor Lo
convey LlLle from maLerlallzlng, ln accordance wlLh ArLlcle 1184 of Lhe
Clvll Code.

Doctr|ne:

1he cause of acLlon under a muLual promlse Lo buy and sell ls 10
years. HM>%%"O&, () *&+,- &. /00$"%12 DED 6*7/ 5EK 94::4;)

Contract of Sa|e Mutua| rom|se to 8uy and Se||
An accepLed bllaLeral promlse Lo buy and sell ls ln a sense slmllar Lo, buL
noL exacLly Lhe same, as a perfecLed conLracL of sale because Lhere ls
already a meeLlng of mlnds upon Lhe Lhlng whlch ls Lhe ob[ecL of Lhe
conLracL and upon Lhe prlce.
ConsummaLed only
upon dellvery and
paymenL
Clves Lhe conLracLlng parLles rlghLs ln personam,
such LhaL each has Lhe rlghL Lo demand from Lhe
oLher Lhe fulflllmenL of Lhelr respecLlve
underLaklngs.

An uncondlLlonal muLual promlse Lo buy and sell ls enforceable
by an acLlon for speclflc performance.

III. erfect|on Stage (Art|c|es 147S, 1319, 132S and 1326)

Art|c|e 147S.
1he contract of sa|e |s perfected at the moment there |s a meet|ng of
m|nds upon the th|ng wh|ch |s the ob[ect of the contract and upon
the pr|ce.

Irom that moment, the part|es may rec|proca||y demand
performance, sub[ect to the prov|s|ons of the |aw govern|ng the form
of contracts. (14S0a)

Art|c|e 1319.
Consent |s man|fested by the meet|ng of the offer and the acceptance
upon the th|ng and the cause wh|ch are to const|tute the contract.
1he offer must be certa|n and the acceptance abso|ute. A qua||f|ed
acceptance const|tutes a counter-offer.

Acceptance made by |etter or te|egram does not b|nd the offerer
except from the t|me |t came to h|s know|edge. 1he contract, |n such
a case, |s presumed to have been entered |nto |n the p|ace where the
offer was made. (1262a)

Art|c|e 132S.
Un|ess |t appears otherw|se, bus|ness advert|sements of th|ngs for
sa|e are not def|n|te offers, but mere |nv|tat|ons to make an offer. (n)

Art|c|e 1326.
Advert|sements for b|dders are s|mp|y |nv|tat|ons to make proposa|s,
and the advert|ser |s not bound to accept the h|ghest or |owest
b|dder, un|ess the contrary appears. (n)

Sale ls perfecLed aL Lhe momenL Lhere ls a meeLlng of mlnds
upon Lhe Lhlng whlch ls Lhe ob[ecL of Lhe conLracL and upon Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
prlce. lrom LhaL momenL, Lhe parLles may reclprocally demand
performance sub[ecL Lo Lhe law governlng Lhe form of conLracLs.
H<",=$%$N& () A"=R& `>%>0>=& 6"(>=N1 "=P <&,-N"N$ A"=G2 C8E
6*7/ 3:: 9DEE5;)
4

MuLual consenL belng a sLaLe of mlnd, lLs exlsLence may only be
lnferred from Lhe confluence of Lwo acLs of Lhe parLles: an offer
cerLaln as Lo Lhe ob[ecL of Lhe conLracL and lLs conslderaLlon,
and an accepLance of Lhe offer whlch ls absoluLe ln LhaL lL refers
Lo Lhe exacL ob[ecL and conslderaLlon embodled ln sald offer.
HM>%%"=+$(" () ?@A2 B4E 6*7/ DKB 9DEE5;)
D


A. kequ|s|te Ior erfect|on: Mutua| Consent Lv|denced 8y:
1. Cffer Must 8e Certa|n. An offer ls cerLaln when lL conLalns: (1) A
descrlpLlon of Lhe sub[ecL maLLer whlch ls a posslble Lhlng," llclL
and deLermlnaLe or aL leasL deLermlnable, and (2) a prlce whlch
ls real, ln money or lLs equlvalenL, cerLaln or aL leasL
ascerLalnable. 1he Lerms of paymenL musL also be lncluded.
o lf a maLerlal elemenL of a conLemplaLed conLracL ls lefL
for fuLure negoLlaLlons, Lhe same ls Loo lndeflnlLe Lo be
enforceable. lor a conLracL Lo be enforceable, lLs Lerms
musL be cerLaln and expllclL, noL vague or lndeflnlLe)
HA&1-&= A"=G &. -F$ ?F>%) () <"="%&2 C8D 6*7/ 4E8
9DEE5;)
o So long as Lhere ls any uncerLalnLy or lndeflnlLeness, or
fuLure negoLlaLlons or conslderaLlon yeL Lo be had

1
volJez v. coott of Appeols, 439 SC8A 33 (2004), 8los v. Aoqeles-notollo, 439
SC8A 273 (2004), Alozo v. loJoo, 462 SC8A 614 (2003), ctoz v. letoooJo, 477
SC8A 173 (2003).
2
Moteoo, It. v. ltlvote Moooqemeot Offlce, 307 SC8A 63 (2006).
beLween Lhe parLles, Lhere ls no conLracL aL all.
H<&,$=&2 d,) () ?,>("-$ <"="N$O$=- L..>R$2 BEK 6*7/
53 9DEE5;)

2. Abso|ute Acceptance Cf A Certa|n Cffer
o 1he essence of consenL ls Lhe conformlLy of Lhe parLles
on Lhe Lerms of Lhe conLracL, LhaL ls, Lhe accepLance by
one of Lhe offer made by Lhe oLher. Powever, Lhe
accepLance musL be absoluLe, oLherwlse, Lhe same
consLlLuLes a counLer-offer and has Lhe effecL of
re[ecLlng Lhe offer. eT6W *&,0) () V<* Q,#"= ?,&0$,->$1
V$()2 S=R)2 B:C 6*7/ B:8 9DEE:;)

8. Abso|ute Acceptance Cf A Certa|n Cffer (Art|c|e 147S)
under ArLlcle 1319, Lhe accepLance of an offer musL Lherefore
be unquallfled and absoluLe. ln oLher words, lL musL be ldenLlcal
ln all respecLs wlLh LhaL of Lhe offer so as Lo produce consenL or
meeLlng of Lhe mlnds. 1hls was noL Lhe case hereln conslderlng
LhaL peLlLloner's accepLance of Lhe offer was quallfled, whlch
amounLs Lo a re[ecLlon of Lhe orlglnal offer. Y>OG$-G"> 6&=1
<>%%>=N2 S=R) () *&+,- &. /00$"%12 DBB 6*7/ 5D5 94::5;)
o 1he accepLance musL be plaln and uncondlLlonal, and lL
wlll noL be so lf lL lnvolves any new proposlLlon. f"XR& ()
6$,,"2 CC ?F>% 3D5 94:D3;
o AccepLance musL be ln Lhe exacL Lerms ln whlch Lhey
are made. Any modlflcaLlon annuls Lhe offer. A$+O&=-
() ?,>$-&2 C4 ?F>%) 5KE 94:45;
1he momenL a parLy accepLs Lhe offer uncondlLlonally, Lhe
conLracL of sale ls perfecLed. lf Lhe seller subsequenLly requesLs
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
for a hlgher prlce, buL no agreemenL ls reached, Lhe flrsL sale ls
sLlll valld and ls noL novaLed. Q,"R" () *&+,- &. /00$"%12 DK8
6*7/ KED
A quallfled accepLance or one LhaL lnvolves a new proposal
consLlLuLes a counLer-offer and a re[ecLlon of Lhe orlglnal offer.
1he accepLance musL be ldenLlcal ln all respecLs wlLh LhaL of Lhe
offer so as Lo produce consenL or meeLlng of mlnds. <"=>%"
<$-"% *&=-">=$, *&,0) () ?@A, B44 6*7/ CCC 9DEE5;)
1

No Abso|ute Acceptance |n the fo||ow|ng:
o laclng Lhe word noLed" and slgnlng such noLe aL Lhe
boLLom of Lhe wrlLLen offer cannoL be consldered an
accepLance LhaL would glve rlse Lo a valld conLracL of
sale) HVA? () L=N2 C5E 6*7/ 4KE 9DEEB;)
o lf Lhe Lerm Lo negoLlaLe" ls lncluded ln Lhe accepLance
leLLer, Lhere ls sLlll no absoluLe accepLance. T+(>$=R& ()
V"R+XR+X2 4EC 6*7/ 558 94:84;
o lf a parLy accepLs buL wlLh a requesL LhaL paymenL
Lerms be modlfled, Lhere ls no absoluLe accepLance.
Y>OG$-G"> 6&=1 <>%%>=N2 S=R) () *&+,- &. /00$"%12 DBB
6*7/ 5D5 94::5;
o A documenL cannoL consLlLuLe a sale even when lL
provldes for a downpaymenL slnce Lhe provlslon on Lhe
downpaymenL made no speclflc reference Lo a sale of a
vehlcle. ueflnlLeness as Lo Lhe prlce ls an essenLlal
elemenL of a blndlng agreemenL Lo sell personal
properLy. W&X&-" 6F"c2 S=R) () *&+,- &. /00$"%12 DCC
6*7/ 3DE 94::B;

1
8eoomoot v. ltleto, 41 hll. 670 (1916), 2oyco v. Serra, 44 hll. 326 (1923).

1. Acceptance May 8e Lxpress Cr Imp||ed
AccepLance may be evldenced by some acL or conducL,
communlcaLed Lo Lhe offeror, elLher ln a formal or an lnformal
manner, LhaL clearly manlfesL Lhe lnLenLlon or deLermlnaLlon Lo
accepL Lhe offer Lo buy or sell.
AccepLance on Lhe parL of Lhe buyer was manlfesLed Lhrough
acLs such as paymenL of Lhe purchase prlce, declaraLlon of Lhe
properLy for Lax purposes, and paymenL of real esLaLe Laxes.
!&O$J () *&+,- &. /00$"%12 3CE 6*7/ KDE 9DEEE;
8y afflxlng Lhelr slgnaLures as wlLnesses, Lhe co-owners
accepLed Lhe Lerms of Lhe conLracL. L$1O$, () ?",">1&
V$($%&0O$=- *&,0)2 B4C 6*7/ DD8 9DEEK;

2. Acceptance 8y Letter Cr 1e|egram
uoes noL blnd Lhe offeror excepL from Lhe Llme lL came Lo hls
knowledge. 1herefore, mere malllng or sendlng Lhe accepLance
ls noL enough. 1he offeror may sLlll wlLhdraw before he learns
of Lhe accepLance.

3. Acceptance Sub[ect 1o A Suspens|ve Cond|t|on
If sa|e sub[ect to suspens|ve cond|t|on: no perfecLed sale of a
loL where Lhe award Lhereof was expressly made sub[ecL Lo
approval by Lhe hlgher auLhorlLles and Lhere evenLually was no
accepLance manlfesLed by Lhe supposed awardee. H?$&0%$g1
^&O$1>-$ a ^&+1>=N *&,0) () */2 433 6*7/ KKK 94:8C;)

C. When "Dev|at|on" A||owed:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
lL ls Lrue LhaL an accepLance may conLaln a requesL for cerLaln
changes ln Lhe Lerms of Lhe offer and yeL be a blndlng
accepLance, so long as lL ls clear LhaL Lhe meanlng of Lhe
accepLance ls poslLlvely and unequlvocally Lo accepL Lhe offer,
wheLher such requesL ls granLed or noL, a conLracL ls formed.
1he vendor's change ln a phrase of Lhe offer Lo purchase, whlch
change does noL essenLlally change Lhe Lerms of Lhe offer, does
noL amounL Lo a re[ecLlon of Lhe offer and Lhe Lender or a
counLer-offer. M>%%&=R& () A&,O"F$R&2 5B 6*7/ 3BD 94:KB;)
4


M>%%&=R& () A&,O"F$R&

Iacts: CervanLes (8ormaheco) owns a loL ln 8uendla. lL offered Lo sell
Lhe loL Lo vlllaconco who owns a loL ad[acenL Lo Lhe loL of Lhe laLLer wlLh
Lhe followlng condlLlons, (a) 100k as earnesL money whlch wlll become
parL of Lhe paymenL lf loL ln SLa. Ana ls purchased (b) lf Lhe sald properLy
ls noL purchased, Lhe money wlll be reLurned and Lhe sale wlll noL be
consummaLed, whlch wlll be known 43 days afLer negoLlaLlon. vlllonco
senL a counLer-offer LhaL Lhe 100k wlll have an lnLeresL of 10 per
annum. 1he check was dellvered by de 1agle Lo 8romaheco, whlch was
recelved by CervanLes. 1he voucher-recelpL evldenclng dellvery had Lhe
phrase sub[ecL Lo Lhe Lerms and condlLlons embodled ln 8ormaheco's
leLLer". LaLer, CervanLes reLurned Lhe earnesL money and reasoned LhaL
he acqulred Lhe properLy beyond Lhe 43 days perlod.

Issue: WheLher or noL Lhere was a perfecLed sale.

1
keltetoteJ lo llmketkol 5oos Mlllloq, loc. v. coott of Appeols, 230 SC8A 323
(1993), #+- ,$($,1$P >= DBB 6*7/

ne|d: ?LS. "Whenever earnesL money ls glven ln a conLracL of sale, lL
shall be consldered as parL of Lhe prlce and as proof of Lhe perfecLlon of
Lhe conLracL" (ArLlcle 1482, Clvll Code). 1he conLracL was already
consummaLed aL Lhe Llme respondenL accepLed Lhe check. ln facL, he
accepLed Lhe earnesL money, and furLhermore reLurned Lhe 100k wlLh
10 lnLeresL whlch serves as proof of Lhe accepLance. 1he alleged
changes or quallflcaLlons ln Lhe revlsed counLer-offer are noL maLerlal or
are mere clarlflcaLlons of whaL Lhe parLles had prevlously agreed upon.

Doctr|ne:

D. Sa|e 8y Auct|on (Art|c|es 1476, 1403(2)(d), 1326)

Art|c|e 1476.
In the case of a sa|e by auct|on:

(1) Where goods are put up for sa|e by auct|on |n |ots, each |ot |s the
sub[ect of a separate contract of sa|e.

(2) A sa|e by auct|on |s perfected when the auct|oneer announces |ts
perfect|on by the fa|| of the hammer, or |n other customary manner.
Unt|| such announcement |s made, any b|dder may retract h|s b|d, and
the auct|oneer may w|thdraw the goods from the sa|e un|ess the
auct|on has been announced to be w|thout reserve.

(3) A r|ght to b|d may be reserved express|y by or on beha|f of the
se||er, un|ess otherw|se prov|ded by |aw or by st|pu|at|on.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(4) Where not|ce has not been g|ven that a sa|e by auct|on |s sub[ect to
a r|ght to b|d on beha|f of the se||er, |t sha|| not be |awfu| for the se||er
to b|d h|mse|f or to emp|oy or |nduce any person to b|d at such sa|e on
h|s beha|f or for the auct|oneer, to emp|oy or |nduce any person to b|d
at such sa|e on beha|f of the se||er or know|ng|y to take any b|d from
the se||er or any person emp|oyed by h|m. Any sa|e contraven|ng th|s
ru|e may be treated as fraudu|ent by the buyer. (n)

Art|c|e 1403.
1he fo||ow|ng contracts are unenforceab|e, un|ess they are rat|f|ed:

(1) 1hose entered |nto |n the name of another person by one who has
been g|ven no author|ty or |ega| representat|on, or who has acted
beyond h|s powers,

(2) 1hose that do not comp|y w|th the Statute of Irauds as set forth |n
th|s number. In the fo||ow|ng cases an agreement hereafter made sha||
be unenforceab|e by act|on, un|ess the same, or some note or
memorandum, thereof, be |n wr|t|ng, and subscr|bed by the party
charged, or by h|s agent, ev|dence, therefore, of the agreement cannot
be rece|ved w|thout the wr|t|ng, or a secondary ev|dence of |ts
contents:

(a) An agreement that by |ts terms |s not to be performed
w|th|n a year from the mak|ng thereof,

(b) A spec|a| prom|se to answer for the debt, defau|t, or
m|scarr|age of another,

(c) An agreement made |n cons|derat|on of marr|age, other
than a mutua| prom|se to marry,

(d) An agreement for the sa|e of goods, chatte|s or th|ngs |n
act|on, at a pr|ce not |ess than f|ve hundred pesos, un|ess the
buyer accept and rece|ve part of such goods and chatte|s, or
the ev|dences, or some of them, of such th|ngs |n act|on or pay
at the t|me some part of the purchase money, but when a sa|e
|s made by auct|on and entry |s made by the auct|oneer |n h|s
sa|es book, at the t|me of the sa|e, of the amount and k|nd of
property so|d, terms of sa|e, pr|ce, names of the purchasers
and person on whose account the sa|e |s made, |t |s a suff|c|ent
memorandum,

(e) An agreement for the |eas|ng for a |onger per|od than one
year, or for the sa|e of rea| property or of an |nterest there|n,

(f) A representat|on as to the cred|t of a th|rd person.

(3) 1hose where both part|es are |ncapab|e of g|v|ng consent to a
contract.

1he Lerms and condlLlons provlded by Lhe owner of properLy Lo
be sold aL aucLlon are blndlng upon all bldders, wheLher Lhey
knew of such condlLlons or noL) HY$&I+>=R& () ?&1-"% 6"(>=N1
A"=G2 CK ?F>%) KKD 94:DB;)
An aucLlon sale ls perfecLed by Lhe fall of Lhe hammer or ln
oLher cusLomary manner and lL does noL maLLer LhaL anoLher
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
was allowed Lo maLch Lhe bld of Lhe hlghesL bldder) H?,&(>=R$
&. *$#+ () ^$>,1 &. 7+.>=" <&,"%$12 BC5 6*7/ 34B 9DEE8;)
o unLll such announcemenL ls made, any bldder may
reLracL hls bld, and Lhe aucLloneer may wlLhdraw Lhe
goods from Lhe sale, unless Lhe aucLlon has been
announced Lo be wlLhouL reserve.
Genera| ku|e: 1he seller and Lhe aucLloneer cannoL bld elLher by
Lhemselves or by an agenL.
o Lxcept|on: When Lhe seller reserves such rlghL. ln such
case, Lhere musL be noLlce.

L. Larnest Money (Art|c|e 1482)

Art|c|e 1482.
Whenever earnest money |s g|ven |n a contract of sa|e, |t sha|| be
cons|dered as part of the pr|ce and as proof of the perfect|on of the
contract. (14S4a)

1. Larnest Money In A Contract Cf Sa|e
ArLlcle 1482 glves a presumpLlon. 1hls prevalls only ln Lhe
absence of conLrary or rebuLLal evldence. ?@A () *&+,- &.
/00$"%12 D5D 6*7/ C5C 94::5;
LarnesL money glven by Lhe buyer shall be consldered as parL of
Lhe prlce and as proof of Lhe perfecLlon of Lhe conLracL. lL
consLlLuLes an advance paymenL Lo be deducLed from Lhe LoLal
prlce. Hb1R+$-" () Y>O2 B4D 6*7/ C44 9DEEK;)
Whenever earnesL money ls glven ln a conLracL of sale, lL shall
be consldered as parL of Lhe prlce and as proof of Lhe perfecLlon
of Lhe conLracL. 8uL when Lhere ls no conLracL of sale because
Lhe parLles never wenL pass Lhe negoLlaLlon sLage, or more
accuraLely, have noL reached Lhe perfecLlon sLage wlLh Lhe
presenL of Lhe Lhree essenLlal elemenLs of Lhe conLracL of sale,
Lhe concepL of earnesL money ls cerLalnly lnappllcable. 1he
earnesL money forms parL of Lhe conslderaLlon only lf Lhe sale ls
consummaLed upon full paymenL of Lhe purchase prlce. Pence,
Lhere musL flrsL be a perfecLed conLracL of sale before we can
speak of earnesL money. H!6S6 () Y&0$J2 B:D 6*7/ CB5 9DEE:;)
4

AbsenL proof of Lhe concurrence of all Lhe essenLlal elemenLs of
a conLracL of sale, Lhe glvlng of earnesL money cannoL esLabllsh
Lhe exlsLence of a perfecLed conLracL of sale. 1he presumpLlon ls
based on Lhe facL LhaL Lhere ls a valld sale. 1he glvlng of earnesL
money does noL esLabllsh Lhe exlsLence of a perfecLed sale. lL ls
sLlll Lhe concurrence of Lhe essenLlal elemenLs of sale whlch
perfecLs Lhe conLracL. <"=>%" <$-"% *&=-">=$, *&,0) () ?@A,
S11 SCkA 444 (2006).
2

When Lhere ls no provlslon for forfelLure of earnesL money ln
Lhe evenL Lhe sale falls Lo maLerlallze, Lhen wlLh Lhe resclsslon lL
becomes lncumbenL upon seller Lo reLurn Lhe earnesL money as
legal consequence of muLual resLlLuLlon. H!&%P$=,&P2 S=R) ()
*&+,- &. /00$"%12 D:: 6*7/ 4C4 94::8;)
o LxcepL lf expressly sLlpulaLed, Lhe seller cannoL keep Lhe
earnesL money Lo answer for damages susLalned ln Lhe
evenL LhaL Lhe sale falls due Lo Lhe faulL of Lhe buyer.

1
\51 cotp. uMc utboo ltopettles uev., loc., 394 SC8A 398 (2009).
2
llmjoco v. cA, 37 SC8A 663 (1971), vlllooco v. 8otmobeco, 63 SC8A 332
(1973), 5pooses uotomol, 5t. v. cA, 66 SC8A 373 (1973), lN8 v. cA, 262 SC8A
464 (1996), 5oo Mlqoel ltopettles lblllpploes, loc. v. noooq, 336 SC8A 737
(2000), llotloom lloos lbll. loc. v. cocoeco, 488 SC8A 136 (2006).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o lf Lhe sale ls resclnded, Lhe seller musL reLurn Lhe
earnesL money. 8esclsslon creaLes Lhe obllgaLlon Lo
reLurn Lhe Lhlngs whlch were Lhe ob[ecL of Lhe conLracL,
LogeLher wlLh Lhelr frulLs and lnLeresL.

2. Larnest Money In A Contract 1o Se||
ArLlcle 1482 does noL apply when earnesL money glven ln a
conLracL Lo sell H6$,,"=& () *"N+>"-2 B4K 6*7/ BK 9DEEK;2
especlally where by sLlpulaLlon Lhe buyer has Lhe rlghL Lo walk
away from Lhe LransacLlon, wlLh no obllgaLlon Lo pay Lhe
balance, alLhough he wlll forfelL Lhe earnesL money. H*F+" ()
*&+,- &. /00$"%12 CE4 6*7/ BC 9DEE3;)
4

o 1he money glven ln a conLracL Lo sell ls noL earnesL
money buL as parL of Lhe conslderaLlon Lo Lhe seller's
promlse Lo reserve Lhe sub[ecL properLy for Lhe buyer.
?@A () *&+,- &. /00$"%12 D5D 6*7/ C5C 94::5;

3. Larnest Money In A Cond|t|ona| Contract Cf Sa|e
ln a condlLlonal conLracL of sale, Lhe accepLance of earnesL
money would prove LhaL Lhe sale ls condlLlonally consummaLed
or parLy execuLed. M>%%&=R& () A&,O"F$R&2 5B 6*7/ 3BD 94:KB;)

4. Vary|ng 1reatments Cf Larnest Money
1he LreaLmenL of earnesL money ln ArLlcle 1482 ls Lhe preferred
concepL under Lhe law.
Powever, Lhere ls noLhlng whlch prevenLs Lhe parLles from
LreaLlng Lhe earnesL money dlfferenLly.

1
5oo Mlqoel ltopettles lblllpploes, loc. v. noooq, 336 SC8A 737 (2000).
o lor example, Lhe parLles LreaLed Lhe earnesL money as a
guaranLee LhaL Lhe buyer would noL back ouL from Lhe
sale. 1hls was Lhe concepL of earnesL money ln Lhe old
Clvll Code. 60&+1$1 V&,&O"% () *&+,- &. /00$"%12 55
6*7/ BKB 94:KB;

I. D|fference 8etween Larnest Money And Cpt|on Money. L$1O$, ()
?",">1& V$() *&,0)2 B4C 6*7/ DD8 9DEEK;.

L$1O$, () ?",">1& V$($%&0O$=- *&)

Iacts: eLlLloners are slbllngs and co-owners of Lwo parcels of land ln
CavlLe. LrnesLo, meL wlLh 8espondenL uC and slgned a ConLracL Lo Sell.
A 100,000 check, payable Lo LrnesLo, was glven as opLlon money.
SomeLlme LhereafLer, 4 oLher also slgned Lhe ConLracL Lo Sell.
eLlLloners Lhen wroLe a leLLer Lo uC Lo resclnd Lhe conLracL.

Issue: WheLher or noL Lhe sale ls valld on Lhe peLlLloners who slgned Lhe
conLracL

ne|d: ?LS. 1he oLher flve peLlLloners (excludlng LrnesLo) personally
afflxed Lhelr slgnaLures Lhereon. 1herefore, a wrlLLen auLhorlLy ls no
longer necessary ln order Lo sell Lhelr shares because, by afflxlng Lhelr
slgnaLures on Lhe ConLracL Lo Sell, Lhey were noL selllng Lhelr shares
Lhrough an agenL buL, raLher, Lhey were selllng dlrecLly and ln Lhelr own
rlghL. 6/8 of Lhe properLy ls sold.

1he courL also had Lhe occaslon of dlsLlngulshlng earnesL money and
opLlon money, (a) earnesL money ls parL of Lhe purchase prlce, whlle
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
opLlon money ls Lhe money glven as a dlsLlncL conslderaLlon for an
opLlon conLracL, (b) earnesL money ls glven only where Lhere ls already a
sale, whlle opLlon money applles Lo a sale noL yeL perfecLed, and (c)
when earnesL money ls glven, Lhe buyer ls bound Lo pay Lhe balance,
whlle when Lhe would-be buyer glves opLlon money, he ls noL requlred
Lo buy, buL may even forfelL lL dependlng on Lhe Lerms of Lhe opLlon

Doctr|ne:

Larnest Money Cpt|on Money
arL of Lhe purchase prlce ulsLlncL conslderaLlon for an
opLlon conLracL
Clven only where Lhere ls already
a sale
Applles Lo a sale noL yeL perfecLed
1hey buyer ls bound Lo pay Lhe
balance
1hey buyer ls noL requlred Lo buy.

ALLy. SanLlago: 1here ls no opLlon conLracL aL all lf Lhere ls no
dlsLlncL conslderaLlon for Lhe conLracL. 8aLher, a slLuaLlon where
Lhe money glven ls supposed Lo be credlLed Lo Lhe purchase
prlce lf Lhe sale pushes Lhrough C8 forfelLed lf Lhe sale does noL
push Lhrough, ls a hybrld of ArLlcle 1842. As such, Lhe arLlcle ls
noL sLrlcLly appllcable.

G. Sa|e Deemed erfected Where Cffer Was Made (Art|c|e 1319)
1he sale's place of perfecLlon ls where Lhe meeLlng of Lhe mlnds
as Lo Lhe deLermlnaLe sub[ecL maLLer and prlce occurs.
ln case of accepLance by Lelegram or leLLer, Lhe presumpLlon ls
LhaL Lhe conLracL was perfecLed ln Lhe place where Lhe offer
was made.

n. Lffect Cf kesc|ss|on Cn Larnest Money kece|ved
LxcepL lf expressly sLlpulaLed, Lhe seller cannoL keep Lhe earnesL
money Lo answer for damages susLalned ln Lhe evenL LhaL Lhe
sale falls due Lo Lhe faulL of Lhe buyer. !&%P$=,&P2 S=R () *&+,-
&. /00$"%12 D:: 6*7/ 4C4 94::8;)
lf Lhe sale ls resclnded, Lhe seller musL reLurn Lhe earnesL
money. 8esclsslon creaLes Lhe obllgaLlon Lo reLurn Lhe Lhlngs
whlch were Lhe ob[ecL of Lhe conLracL, LogeLher wlLh Lhelr frulLs
and lnLeresL.

I. |ace Cf erfect|on
1he sale's place of perfecLlon ls where Lhe meeLlng of Lhe mlnds
as Lo Lhe deLermlnaLe sub[ecL maLLer and prlce occurs.
ln case of accepLance by Lelegram or leLLer, Lhe presumpLlon ls
LhaL Lhe conLracL was perfecLed ln Lhe place where Lhe offer
was made.

I. Lxpenses Cf Lxecut|on And keg|strat|on
1he seller has Lo answer for Lhe followlng expenses:
1. LxecuLlon and reglsLraLlon of Lhe sale
2. uLLlng Lhe goods lnLo a dellverable sLaLe
3. WlLhholdlng Laxes due on Lhe sale

k. erformance Shou|d Not Affect erfect|on
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1he ablllLy of Lhe parLles Lo perform Lhe conLracL (afLer
perfecLlon) does noL affecL Lhe perfecLlon of Lhe conLracL.
Lxample:
o ln 6RF+#"RG () *&+,- &. /00$"%12 DDK 6*7/ K4: 94::3;2
Lhe CourL ruled LhaL Lhere was already a perfecLed sale
even when Lhe requlred leLLer of credlL (whlch was Lhe
means of paymenL agreed upon) had noL been opened
by Lhe buyer.
non-paymenL of Lhe prlce does noL render vold nor reverse Lhe
effecLs of Lhe perfecLlon of Lhe conLracL of sale. lL only creaLes a
rlghL Lo demand fulflllmenL of Lhe obllgaLlon or Lo resclnd Lhe
conLracL. A"%"-#"- () *&+,- &. /00$"%12 D54 6*7/ 4D8 94::5;
When Lhe seller ls noL Lhe owner boLh aL Lhe Llme of perfecLlon
and dellvery, lL ls slmllar Lo an lmposslble servlce" under ArLlcle
1409(3). 1hus, Lhe conLracL ls vold. @&&% () *&+,- &. /00$"%12
DK5 6*7/ 4C: 94::K;
o 8U1 CLv says LhaL Lhe comparlson Lo an lmposslble
servlce ls erroneous because Lhe obllgaLlons are Lo
glve," noL Lo do."

IV. Iorma| kequ|rements Cf Sa|es (Art|c|es 13S7, 13S8, 1406 and 1483)

Art|c|e 13S7.
If the |aw requ|res a document or other spec|a| form, as |n the acts and
contracts enumerated |n the fo||ow|ng art|c|e, the contract|ng part|es
may compe| each other to observe that form, once the contract has
been perfected. 1h|s r|ght may be exerc|sed s|mu|taneous|y w|th the
act|on upon the contract. (1279a)

Art|c|e 13S8.
1he fo||ow|ng must appear |n a pub||c document:

(1) Acts and contracts wh|ch have for the|r ob[ect the creat|on,
transm|ss|on, mod|f|cat|on or ext|ngu|shment of rea| r|ghts over
|mmovab|e property, sa|es of rea| property or of an |nterest there|n
are governed by art|c|es 1403, No. 2, and 140S,

(2) 1he cess|on, repud|at|on or renunc|at|on of hered|tary r|ghts or of
those of the con[uga| partnersh|p of ga|ns,

(3) 1he power to adm|n|ster property, or any other power wh|ch has
for |ts ob[ect an act appear|ng or wh|ch shou|d appear |n a pub||c
document, or shou|d pre[ud|ce a th|rd person,

(4) 1he cess|on of act|ons or r|ghts proceed|ng from an act appear|ng |n
a pub||c document.

A|| other contracts where the amount |nvo|ved exceeds f|ve hundred
pesos must appear |n wr|t|ng, even a pr|vate one. 8ut sa|es of goods,
chatte|s or th|ngs |n act|on are governed by art|c|es, 1403, No. 2 and
140S. (1280a)

Art|c|e 1406.
When a contract |s enforceab|e under the Statute of Irauds, and a
pub||c document |s necessary for |ts reg|strat|on |n the keg|stry of
Deeds, the part|es may ava|| themse|ves of the r|ght under Art|c|e
13S7.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Art|c|e 1483.
Sub[ect to the prov|s|ons of the Statute of Irauds and of any other
app||cab|e statute, a contract of sa|e may be made |n wr|t|ng, or by
word of mouth, or part|y |n wr|t|ng and part|y by word of mouth, or
may be |nferred from the conduct of the part|es. (n)

A. Iorm Not Important for Va||d|ty of Sa|e
Genera| ku|e: Sale, belng a consensual conLracL, no parLlcular
form ls requlred for lLs valldlLy.
8emember: unenforceable conLracLs are sLlll valld, so Lhe facL
LhaL Lhe sale over land was noL reglsLered does noL affecL Lhe
valldlLy of Lhe sale. Agaln, reglsLraLlon ls only for Lhe purpose of
greaLer efflcacy and blndlng Lhlrd persons. Q=>($,1"% 6+N",
<>%%>=N *&,0) () ^$>,1 &. /=N$% W$($12 38: 6*7/ D45 9DEED;
o 1he requlremenL ln Lhe SLaLuLe of lrauds LhaL sale of
real esLaLe should be embodled ln a publlc documenL ls
only for Lhe purpose of blndlng Lhlrd parLles.
o Sale of land under prlvaLe lnsLrumenL ls valld. !"%%", ()
^+1">=2 DE 6*7/ 485 94:5K;)
4

o ArLlcles 1337 and 1338, ln relaLlon Lo ArLlcle 1403(2),
requlre LhaL Lhe sale of real properLy musL be ln wrlLlng
for lL Lo be enforceable, lL need noL be noLarlzed for
Lhere ls noLhlng ln Lhose provlslons whlch requlre LhaL lL
musL be execuLed ln a publlc documenL Lo be valld.
H<",->=$J () */2 3B8 6*7/ 38 9DEE4;\
2
buL boLh lLs due
execuLlon and lLs auLhenLlclLy musL be proven, pursuanL

1
l. ltoteto Coyeoo v. 1ombootloq, 1 hll. 490 (1902).
2
nelts of 8looo v. cA, 362 SC8A 29 (2001), 1be stote of leJto c. Coozoles v.
1be nelts of Motcos letez, 603 SC8A 47 (2009).
Lo Sec. 20, 8ule 132 of Lhe 8ules of CourL. HW>N=& ()
/I+>=&2 CCC 6*7/ 54 9DEE3;)
o AlLhough Lhe conveyance of land ls noL made ln a publlc
documenL, lL does noL affecL Lhe valldlLy of such
conveyance. ArLlcle 1338 of Lhe Clvll Code does noL
requlre Lhe accompllshmenL of Lhe acLs or conLracLs ln a
publlc lnsLrumenL ln order Lo valldaLe Lhe acL or
conLracL buL only Lo lnsure lLs efflcacy. WF$ b1-"-$ &.
?$P,& *) !&=J"%$1 () WF$>, ^>$,1 &. <",R&1 ?$,$J2 5EB
6*7/ CK 9DEE:;)

1. Cther ku||ngs on Deeds of Sa|e:
Seller may agree Lo a deed of absoluLe sale before full paymenL
of Lhe purchase prlce. H?"= ?"R>.>R S=P+1-,>"% 6"%$1 *&)2 S=R) ()
*/2 C8D 6*7/ 45C 9DEE5;)
Assumlng LhaL Lhe buyers falled Lo pay Lhe full prlce sLaLed ln
Lhe ueed of Sale, such parLlal fallure would noL render Lhe sale
vold. A,"(&U!+$,,$,& () A,"(&2 C5B 6*7/ DCC 9DEEB;)
1haL marlLal consenL was execuLed prlor Lo Lhe ueed of
AbsoluLe Sale does noL lndlcaLe LhaL lL ls a phoney. ?"= ?"R>.>R
S=P+1-,>"% 6"%$1 *&)2 S=R) () */2 C8D 6*7/ 45C 9DEE5;)
A ueed of Sale when acknowledged before a noLary publlc,
en[oys Lhe presumpLlon of regularlLy and due execuLlon. 1o
overLhrow LhaL presumpLlon, sufflclenL, clear and convlnclng
evldence ls requlred, oLherwlse Lhe documenL should be
upheld. HA,"(&U!+$,,$,& () A,"(&2 C5B 6*7/ DCC 9DEEB;)
3


3
osoo v. Atcloqo, 449 SC8A 438 (2003), uoloo 8ook v. Ooq, 491 SC8A 381
(2006), 1opotoc v. lopoellooo vJo. ue MeoJe, 312 SC8A 97 (2007), Alfoto v.
coott of Appeols, 319 SC8A 270 (2007), 5ootos v. lomboo, 319 SC8A 408
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
noLarlzaLlon of ueeds of Sale by one who was noL a noLary
publlc does noL affecL Lhe valldlLy Lhereof, sald documenLs were
merely converLed lnLo prlvaLe documenLs) H7)`) @"(",,& a *&)
S=R) () M">%&R$12 354 6*7/ 43: 9DEE4;)
noLarlzaLlon of a deed of sale does noL guaranLee lLs valldlLy nor
ls lL concluslve of Lhe Lrue agreemenL of Lhe parLles LhereLo,
because lL ls noL Lhe funcLlon of Lhe noLary publlc Lo valldaLe an
lnsLrumenL LhaL was never lnLended by Lhe parLles Lo have any
blndlng legal effecL. H6"%&=N" () *&=R$0R>&=2 CKE 6*7/ D:4
9DEEB;)
4

8uyer's lmmedlaLe Laklng of possesslon of sub[ecL properLy
corroboraLes Lhe LruLhfulness and auLhenLlclLy of Lhe deed of
sale. H/%R&1 () S/*2 45D 6*7/ 8D3 94:88;) Conversely, Lhe seller's
conLlnued possesslon of Lhe properLy makes dublous Lhe
conLracL of sale beLween Lhem. H6"=-&1 () 6"=-&12 355 6*7/
3:B 9DEE4;)
D

Any subsLanLlal dlfference beLween Lhe Lerms of Lhe ConLracL Lo
Sell and Lhe concomlLanL ueed of AbsoluLe Sale (such as
dlfference ln sub[ecL maLLer, and dlfference ln prlce and/or Lhe
Lerms Lhereof), does noL make Lhe LransacLlon beLween Lhe
seller and Lhe buyer vold, for lL ls Lrulsm LhaL Lhe execuLlon of
Lhe ueed of AbsoluLe Sale effecLlvely rendered Lhe prevlous
ConLracL Lo Sell lneffecLlve and cancelled [Lhrough Lhe process
of novaLlon]. HY+O#,$1 () W"%#,"P2 d,)2 B45 6*7/ BKB 9DEEK;)

(2007), leJtooo v. nelts of 8eoeJlcto leJtooo, 339 SC8A 401 (2007), Ollvotes v.
5otmleoto, 334 SC8A 384 (2008).
1
Nozoteoo v. cA, 343 SC8A 637 (2000), 5ootos v. nelts of Iose l. Motlooo, 344
SC8A 284 (2000)
2
uomloqo v. cA, 367 SC8A 368 (2001).

2. Va|ue of 8us|ness Iorms to rove Sa|e
8uslness forms, e.q., order sllp, dellvery charge lnvolce and Lhe
llke, whlch are lssued by Lhe seller ln Lhe ordlnary course of Lhe
buslness are noL always fully accompllshed Lo conLaln all Lhe
necessary lnformaLlon descrlblng ln deLall Lhe whole buslness
LransacLlon-more ofLen Lhan noL Lhey are accompllshed
perfuncLorlly wlLhouL proper regard Lo any legal repercusslon
for such neglecL such LhaL desplLe Lhelr belng ofLen lncompleLe,
sald buslness forms are commonly recognlzed ln ordlnary
commerclal LransacLlons as valld beLween Lhe parLles and aL Lhe
very leasL Lhey serve as an acknowledgmenL LhaL a buslness
LransacLlon has ln facL Lransplred. 8y Lhemselves, Lhey are
lnadequaLe Lo esLabllsh Lhe case for Lhe vendor. 1helr probaLlve
value musL be evaluaLed ln con[uncLlon wlLh oLher evldence.
HV&="-& *) *,+J W,"P>=N *&,0) () */2 3CK 6*7/ 43 9DEEE;)
1hese documenLs are noL mere scraps of paper berefL of
probaLlve value buL vlLal pleces of evldence of commerclal
LransacLlons. 1hey are wrlLLen memorlals of Lhe deLalls of Lhe
consummaLlon of conLracLs. HY"N&= () ^&&($= *&O"%R&
S=P+1-,>$12 S=R)2 3C: 6*7/ 353 9DEE4;)

8. When Iorm Important |n Sa|e
Genera| ku|e: lorm does noL affecL valldlLy of sale.
o Lxcept|ons:
1. ower Lo sell a plece of land by an agenL musL be ln
wrlLlng, oLherwlse, Lhe sale wlll be vold.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
2. Sale of large caLLle musL be ln wrlLlng, oLherwlse Lhe
sale would be vold. lL musL also be reglsLered wlLh Lhe
munlclpal Lreasurer ln order Lo be valld.
3. Sale of land by non-Musllm hlll Lrlbe culLural mlnorlLles
all LhroughouL Lhe hlllpplnes" ls vold lf noL approved
by Lhe naLlonal Commlsslon on lndlgenous eoples
(nCl).

1. 1o 8|nd 1h|rd art|es
ArLlcle 1338 whlch requlres Lhe embodlmenL of cerLaln
conLracLs ln a publlc lnsLrumenL ls only for convenlence, and
reglsLraLlon of Lhe lnsLrumenL only adversely affecLs Lhlrd
parLles. lormal requlremenLs are, Lherefore, for Lhe beneflL of
Lhlrd parLles, and non-compllance LherewlLh does noL adversely
affecL Lhe valldlLy of Lhe conLracL nor Lhe conLracLual rlghLs and
obllgaLlons of Lhe parLles Lhereunder. `+%$ () */, D85 6*7/ 5:8
94::8;,
1
V"%>&= () */2 48D 6*7/ 8KD 94::E;.
2


`+%$ () *&+,- &. /00$"%1

Iacts: A land owned by lr. !acobe was foreclosed and puL up for publlc
aucLlon by 8ural 8ank. lule, Lhe bank's corporaLe secreLary, soughL a
buyer for Lhe land. Pls 2 agenLs recommended ura. Cruz. AL LhaL Llme
lule was lnLeresLed ln a palr of dlamond earrlngs LhaL Cruz had buL Lhe
laLLer re[ecLed all hls moneLary offers for lL. When he offered Lhe land Lo

1
uolvetsol kobloo 5oqot Mlllloq cotp. v. nelts of Aoqel 1eves, 389 SC8A 316
(2002).
2
llmketkol 5oos Mlllloq, loc. v. cA, 230 SC8A 323 (1993), Aqoseo v. cA, 323
SC8A 304 (2000).
ura. Cruz, she showed lnLeresL ln Lradlng so he redeemed Lhe properLy
ln lr. !acobe's name and execuLed a deed of sale Lo geL lL ln hls own
name. lule represenLed Lhe land Lo be acLually worLh 200,000 so Lhey
agreed LhaL lL would be Lraded for Lhe earrlngs, belng worLh 160,000,
plus 40,000, Lhls noLwlLhsLandlng LhaL Lhe conslderaLlon ln Lhelr deed
of sale says Lhe land ls only worLh 80,000. When lule had slgned Lhe
deed dellverlng" Lhe land Lo ura. Cruz, Lhey wenL Lo Lhe bank Lo
reLrleve Lhe earrlngs. upon a qulck glance, Cruz showed saLlsfacLlon aL
Lhe earrlngs and lefL wlLh Lhem. 2 hours laLer however, he wenL back
and clalmed LhaL Lhe earrlngs were fake. A sulL was broughL Lo vold Lhelr
conLracL of sale. 8oughL Lhe 81C and CourL of Appeals upheld Lhe sale
and awarded damages ln favor of respondenLs, hence Lhls appeal.
Issue: WheLher or noL Lhere was a valld conLracL of sale or barLer.

ne|d: ?LS. 1he Supreme CourL also ruled LhaL Lhelr conLracL of barLer,
whlch Look Lhe form of a sale, was compleLe by mere meeLlng of Lhe
mlnds and so legally blndlng on Lhem, especlally slnce Lhere was already
dellvery Lo boLh parLles of Lhelr respecLlve ob[ecLs and boLh had
accepLed Lhem - lule especlally, by hls acL ln leavlng Lhe bank wlLh Lhe
[ewelry. uamages were also proper slnce lule broughL sulL knowlng
hlmself Lo be gullLy and negllgenL ln noL boLherlng Lo lnspecL Lhe [ewelry
before leavlng wlLh lL, he should have known beLLer slnce he hlmself ls a
banker and a [eweler.

Doctr|ne:

V"%>&= () *&+,- &. /00$"%1

Iacts: Sabesa[e sued Lo recover ownershlp of land LhaL was sold Lo hlm
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
by uallon. uallon denles Lhe sale, and clalms LhaL Sabesa[e ls only
preempLlng uallon's LhreaL Lo sue for unpald commlsslon on sales of
copra and abaca LhaL peLlLloner spouses earned when Lhey were
admlnlsLerlng 3 parcels of land for Leonardo Sabesa[e.

Issue: WheLher or noL Lhe sale was valld desplLe Lhe fallure Lo embody lL
ln a publlc documenL

ne|d: ?LS. ArLlcle 1338 sLaLes LhaL acLs and conLracLs whlch have for
Lhelr ob[ecL Lhe creaLlon, Lransmlsslon, modlflcaLlon or exLlncLlon of real
rlghLs over lmmovable properLy musL appear ln a publlc lnsLrumenL" ls
only for convenlence, noL for valldlLy or enforceablllLy. lL ls noL a
requlremenL for Lhe valldlLy of a conLracL of sale of a parcel of land LhaL
Lhls be embodled ln a publlc lnsLrumenL.

A conLracL of sale ls a consensual conLracL, whlch means LhaL Lhe sale ls
perfecLed by mere consenL. no parLlcular form ls requlred for lLs
valldlLy. 1he Supreme CourL ruled LhaL Lhe auLhenLlclLy of Lhe sale has
been proved accordlngly slnce wlLnesses poslLlvely LesLlfled Lo Lhe
auLhenLlclLy of Lhe sale, and Lhe slgnaLure Lhereon was proved Lo be
auLhenLlc. 1he CourL also ruled LhaL execuLlon of Lhe sale ln a publlc
documenL ls noL a faLal defecL as a conLracL of sale ls consensual.

Doctr|ne:

ArLlcle 1338 of Lhe Clvll Code whlch requlres Lhe embodlmenL of
cerLaln conLracLs ln a publlc lnsLrumenL, ln only for convenlence,
and reglsLraLlon of Lhe lnsLrumenL only adversely affecLs Lhlrd
parLles, and non-compllance LherewlLh does noL adversely
affecL Lhe valldlLy of Lhe conLracL or Lhe conLracLual rlghLs and
obllgaLlons of Lhe parLles Lhereunder. Hb1-,$%%$, () T1O"$%2 B84
6*7/ DCK 9DEE:;)
4

Whlle sale of land appearlng ln a prlvaLe deed ls blndlng
beLween Lhe parLles, lL cannoL be consldered blndlng on Lhlrd
persons, lf lL ls noL embodled ln a publlc lnsLrumenL and
recorded ln Lhe 8eglsLry of ueeds. 6$R+X" () MP") V$ 6$%O"2
3D5 6*7/ DCC 9DEEE;.
2


6$R+X" () MP") V$ 6$%O"

Iacts: 1he parcel of land sub[ecL of Lhls case ls a porLlon of orlglnal LoL
!"#$% '() *+,*)+-. /01 ,+2324055. +)321-)+)6 746)+ 0 *0-)4- 2117)6 -,
!"#$%" '"("))*+, -."/ .* '"+$0,/ 12+$34 5*+ )$6*7$%*8 95* *37*+*. $37,
an agreemenL of parLlLlon ln 1938 wlLh aclencla Sabellona, whereby
she bound herself Lo Lransfer one-Lhlrd (1/3) of LoL 3679 ln favor of
aclencla. An acLlon for quleLlng of LlLle was flled by peLlLloners agalnsL
prlvaLe respondenL. Secuya alleged LhaL aclencla Look possesslon and
occupaLlon of LhaL one-Lhlrd porLlon of LoL 3679 ad[udlcaLed Lo her.
LaLer, she sold Lhe Lhree Lhousand square meLer porLlon Lhereof Lo
ualmaclo Secuya (predecessor-ln-lnLeresL of peLlLloners) ln 1933.
8espondenL clalmed LhaL she ls Lhe reglsLered owner of LoL 3679, havlng
boughL Lhe land someLlme ln lebruary 1973 from Cesarla Caballero and
has been ln possesslon of Lhe same slnce Lhen.


1
uolvetsol kobloo 5oqot Mlllloq cotp. v. nelts of Aoqel 1eves, 389 SC8A 316
(2002).
2
1olosoo v. 1oyoq, 336 SC8A 263 (2001), 5ootos v. Mooollll, 476 SC8A 679
(2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Issue: WheLher or noL Lhe sale Lo ualmaclo Secuya was valld.

ne|d: nC. 1here was no evldence of Lhe sale. eLlLloners lnslsL LhaL
aclencla sold Lhe dlspuLed properLy Lo ualmaclo Secuya on CcLober 20,
1933, and LhaL Lhe sale was embodled ln a prlvaLe documenL. Powever,
such documenL, whlch would have been Lhe besL evldence of Lhe
LransacLlon, was never presenLed ln courL, allegedly because lL had been
losL. Whlle a sale of a plece of land appearlng ln a prlvaLe deed ls
blndlng beLween Lhe parLles, lL cannoL be consldered blndlng on Lhlrd
persons, lf lL ls noL embodled ln a publlc lnsLrumenL and recorded ln Lhe
8eglsLry of roperLy.

Whlle peLlLloners alleged LhaL respondenL was aware of peLlLloners'
possesslon of Lhe dlspuLed properLles, Lhus, regardlng her as noL a
purchaser ln good falLh who ls enLlLled Lo Lhe proLecLlon of Lhe 1orrens
sysLem, Cesarla Caballero, assured respondenL LhaL peLlLloners were
[usL LenanLs on Lhe sald loL. rlvaLe respondenL cannoL be faulLed for
bellevlng Lhls represenLaLlon, conslderlng LhaL peLlLloners' clalm was noL
noLed ln Lhe cerLlflcaLe of Lhe LlLle coverlng LoL no. 3679. Moreover,
prlvaLe respondenL's LlLle ls amply supporLed by clear evldence, whlle
peLlLloners' clalm ls barren of proof.

Doctr|ne:

2. Ior Lnforceab|||ty 8etween the art|es: Statute of Irauds
(Art|c|es 1403 and 140S)

Art|c|e 140S.
Contracts |nfr|ng|ng the Statute of Irauds, referred to |n No. 2 of
art|c|e 1403, are rat|f|ed by the fa||ure to ob[ect to the presentat|on of
ora| ev|dence to prove the same, or by the acceptance of benef|t under
them.

1he Lerm SLaLuLe of lrauds" ls descrlpLlve of Lhe sLaLuLes whlch
requlre cerLaln classes of conLracLs, such as agreemenLs for Lhe
sale of real properLy, Lo be ln wrlLlng, Lhe purpose belng Lo
prevenL fraud and per[ury ln Lhe enforcemenL of obllgaLlons
dependlng for Lhelr evldence on Lhe unasslsLed memory of
wlLnesses by requlrlng cerLaln enumeraLed conLracLs and
LransacLlons Lo be evldenced by a wrlLlng slgned by Lhe parLy Lo
be charged. 6F&$O"G$, () Y" W&=P$_"2 58 ?F>%) DC 94:3:;)
o ALLy. SanLlago: 1he parLles cannoL and should noL
merely rely on Lhelr memory for cerLaln LransacLlons.
Nature And urpose Cf Statute Cf Irauds - 1o prevenL fraud
and per[ury ln Lhe enforcemenL of obllgaLlons. 1he wrlLLen noLe
musL emobody Lhe essenLlals of Lhe conLracL. W&,R+"-&, ()
A$,="#$2 CB: 6*7/ C3: 9DEEB).
resupposes Va||d Contract Cf Sa|e - 1he appllcaLlon of Lhe
SLaLuLe of lrauds presupposes Lhe exlsLence of a perfecLed
conLracL." When Lhe records show LhaL Lhere was no perfecLed
conLracL of sale, Lhere ls no basls for Lhe appllcaLlon of Lhe
SLaLuLe of lrauds. H`>,O$ () A+G"% b=-$,0,>1$1 "=P V$() *&,0)2
C4C 6*7/ 4:E 9DEE3;)
4

Coverage
a. Sa|e of kea| roperty - A sale of realLy cannoL be
proven by means of wlLnesses, buL musL necessarlly be

1
koseocot uevelopmeot cotp. v. lopoloq, 334 SC8A 119 (2001).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
evldenced by a wrlLLen lnsLrumenL, duly subscrlbed by
Lhe parLy charged, or by secondary evldence of Lhe
conLenLs of such documenL. no oLher evldence can be
recelved excepL Lhe documenLary evldence referred Lo.
H!&,&10$ () S%"X"-2 D: ?F>%) D4 94:4C;.
1


Sa|es Coverage |n Statute of Irauds
1he followlng klnds of sale are unenforceable lf noL embodled ln
a wrlLLen documenL: (1-300-8)
1. A sale whlch ls noL Lo be performed wlLhln one year.
2. AgreemenL for Lhe sale of goods, chaLLel or Lhlngs ln
acLlon noL less Lhan 300.
3. Sale of real properLy.
Lvldence of Lhe agreemenL musL be ln wrlLlng.

Lxcept|ons to Coverage of Statue of Irauds |n Sa|es Contracts
1he followlng are exempLed from Lhe SLaLuLe of lrauds and are
Lhus enforceable: (M-CL)
1. 1here ls a noLe or memorandum ln wrlLlng and
subscrlbed by Lhe parLy charged or hls agenL
2. When Lhere has been parLlal consummaLlon/parLlal
performance
3. lallure Lo ob[ecL Lo Lhe presenLaLlon of evldence allunde
(meanlng: from anoLher place) as Lo Lhe exlsLence of a
conLracL
4. Sales effecLed Lhrough elecLronlc commerce.


1
Albo vJo. ue koy v. coott of Appeols, 314 SC8A 36 (1999).
b. Agency to Se|| or to 8uy - As conLrasLed from sale, an
agency Lo sell does noL belong Lo any of Lhe Lhree
caLegorles of conLracLs covered by ArLlcles 1337 and
1338 and noL one enumeraLed under Lhe SLaLuLes of
lrauds ln ArLlcle 1403. HY>O () *&+,- &. /00$"%12 DBC
6*7/ 4KE 94::5;)
D

c. k|ghts of I|rst kefusa| - A rlghL of flrsL refusal" ls noL
covered by Lhe sLaLuLe of frauds. lurLhermore, ArLlcle
1403(2)(e) of Clvll Code presupposes Lhe exlsLence of a
perfecLed, albelL unwrlLLen, conLracL of sale, a rlghL of
flrsL refusal, such as Lhe one lnvolved ln Lhe lnsLanL
case, ls noL by any means a perfecLed conLracL of sale of
real properLy. H7&1$=R&, V$() *&,0) () S=I+>=N2 3BC
6*7/ 44: 9DEE4;.
d. Lqu|tab|e Mortgage - SLaLuLe does noL sLand ln Lhe way
of LreaLlng an absoluLe deed as a morLgage, when such
was Lhe parLles' lnLenLlon, alLhough Lhe agreemenL for
redempLlon or defeasance ls proved by parol evldence.
H*+X+N"= () 6"=-&12 3C ?F>%) 4EE 94:45;.
3

e. k|ght to kepurchase - 1he deed of sale and Lhe verbal
agreemenL allowlng Lhe rlghL of repurchase should be
consldered as an lnLegral whole, Lhe deed of sale ls lLself
Lhe noLe or memorandum evldenclng Lhe conLracL.
H<"R-"= *$#+ S=-$,="->&="% />,0&,- /+-F&,>-X () *&+,-
&. /00$"%12 D53 6*7/ K35 94::5;)
Memorandum. T+(>$=NR& () V"R+XR+X2 4EC 6*7/ 558 94:84;

2
1otcootot v. 8etoobe, 439 SC8A 439 (2003).
3
kosoles v. 5obo, 408 SC8A 664 (2003), Aysoo, It. v. lotoqos, 337 SC8A 30
(2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

T+(>$=NR& () V"R+XR+X

Iacts: eLlLloners own a properLy ln 1acloban ClLy whlch Lhey lnLend Lo
sell for 6.3M. 1hey gave Lhe respondenLs Lhe rlghL Lo purchase Lhe
properLy wlLhln !uly 31, 1978. 8espondenLs replled LhaL Lhey agree Lo
buy Lhe properLy and Lhey wlll negoLlaLe for deLalls, as soon as
peLlLloners send Lhelr represenLaLlve ln 1acloban. eLlLloner senL
anoLher Lelegram lnformlng respondenLs LhaL Lhelr proposal ls accepLed
and a conLracL wlll be prepared.

eLlLloners' lawyer, Mr. Camboa, arrlved brlnglng a conLacL changlng
Lhe mode of paymenL. lL now sLaLed LhaL Lhe balance paymenL should
be pald wlLhln 30 days lnsLead of Lhe former 90 days orlglnally agreed
upon. (1he orlglnal Lerms was 2M paymenL upon execuLlon of conLracL,
and Lhen 4.3M afLer 90 days)

Issue: WheLher or noL Lhere was a perfecLed conLracL of sale.

ne|d: nC. 1he Supreme CourL consldered Lhe correcL [urldlcal
slgnlflcance of Lhe Lelegram of respondenLs lnsLrucLlng ALLy. Camboa Lo
"proceed Lo 1acloban LonegoLlaLe deLalls." lL emphaslzes Lhe word
"negoLlaLe" advlsedly because Lo CourL's mlnd lL ls Lhe keyword LhaL
negaLes and makes lL legally lmposslble Lo hold LhaL respondenLs'
accepLance of peLlLloners' offer, assumlng LhaL lL was a "cerLaln" offer
lndeed, was Lhe "absoluLe" one LhaL ArLlcle 1319. aymenL on
lnsLallmenLs ls enLlrely dlfferenL from cash paymenL. 1he manner of
paymenL ls an essenLlal requlslLe ln a conLracL of sale. 1he alLeraLlon ln
Lhe Lerms of paymenL clearly showed Lhere was no meeLlng of Lhe
mlnds yeL Lo perfecL a conLracL of sale.

ln any sale of real properLy on lnsLallmenLs, Lhe SLaLuLe of lrauds read
LogeLher wlLh Lhe perfecLlon requlremenLs of ArLlcle 1473 of Lhe Clvll
Code musL be undersLood and applled ln Lhe sense LhaL Lhe ldea of
paymenL on lnsLallmenLs musL be ln Lhe requlslLe of a noLe or
memorandum Lhereln conLemplaLed. under Lhe SLaLuLe of lrauds, Lhe
conLenLs of Lhe noLe or memorandum, wheLher ln one wrlLlng or ln
separaLe ones merely lndlcaLlve for an adequaLe undersLandlng of all
Lhe essenLlal elemenLs of Lhe enLlre agreemenL, may be sald Lo be Lhe
conLracL lLself, excepL as Lo Lhe form.

Doctr|ne:

o under ArLlcle 1403, an excepLlon Lo Lhe unenforceablllLy
of conLracLs pursuanL Lo Lhe SLaLuLe of lrauds ls Lhe
exlsLence of a wrlLLen noLe or memorandum evldenclng
Lhe conLracL. 1he memorandum may be found ln
several wrlLlngs, noL necessarlly ln one documenL. 1he
memorandum or memoranda ls/are wrlLLen evldence
LhaL such a conLracL was enLered lnLo. 1he exlsLence of
a wrlLLen conLracL of Lhe sale ls noL necessary so long as
Lhe agreemenL Lo sell real properLy ls evldenced by a
wrlLLen noLe or memorandum, embodylng Lhe
essenLlals of Lhe conLracL and slgned by Lhe parLy
charged or hls agenL. Y>OG$-G"> 6&=1 <>%%>=N2 S=R) () */2
DBE 6*7/ BD3 94::B).
o 8U1: 1he memoranda musL be slgned by Lhe parLy
soughL Lo be charged, and musL clearly provlde a deed
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
of sale caLegorlcally conveylng Lhe sub[ecL properLy.
Y>OG$-G"> 6&=1 <>%%>=N2 S=R) () */2 DBB 6*7/ 5 94::5;\
D54 6*7/ C5C 94::5).

Y>OG$-G"> () *&+,- &. /00$"%1

Iacts: 8l as LrusLee of 8C, auLhorlzed edro 8evllla Lo sell a loL ln
8arrlo 8agong Pog, aslg. 8l v Albano, AssL. v Aromln and LlmkeLkal
had negoLlaLlons and evenLually seLLled on hp 1000/sq meLer. Llm
asked lf Lhey could pay on Lerms and so v Albano dlcLaLed Lhe Lerms of
paymenL. AbouL 3 days laLer, LlmkeLkal learned LhaL lLs offer Lo pay on
Lerms has been frozen. Llm wenL Lo 8l Lo Lender full paymenL of hp
33, 036, 000.00 Lo v Albano buL Lhe laLLer refused paymenL and sald
hls auLhorlLy Lo sell Lhe land had been wlLhdrawn. LlmkeLkal flled a case
Lo agalnsL 8l for speclflc performance.

Issues
1. WheLher or noL Lhere was a perfecLed conLracL of sale beLween
LlmkeLkal and 8l ! ?LS
2. WheLher or noL Lhe evldence admlLLed by Lhe Lrlal courL ln
rullng for Lhe perfecLlon of Lhe sale ls admlsslble, glven LhaL ln a
sale of real properLy, Lhe SLaLuLe of lrauds ls appllcable? !?LS
3. WheLher or noL Lhe sale Lo n8S durlng Lhe pendency of Lhe Lrlal
ln Lhe 81C was effecLed ln good falLh ! nC
ne|d
1. Contract of sa|e perfected. v and AssL. v have auLhorlLy Lo
sell slnce Lhelr prlmary responslblllLles were Lo manage and
admlnlsLer real esLaLe properLy. AssL. v Aromln LesLlfled LhaL
Lhere was already a perfecLed conLracL of sale. When Lhey meL,
Lalked and agreed LhaL Lhe loL would be sold Lo LlmkeLkal aL hp
1000/sq. meLer and on Lerms dlcLaLed by Albano, Lhe sale was
perfecLed.
2. Statute of Irauds. 1ransacLlon was ouLslde Lhe amblL of Lhe Sol,
Lhere ls Lhe exlsLence of a wrlLLen noLe or memorandum, Lhe
AuLhorlzaLlon LeLLers and leLLer from LlmkeLkal conflrmlng Lhe
sale. 8espondenLs cross-examlned Lhe wlLnesses aL lengLh
regardlng Lhe conLracL, prlce, Lender of paymenL, eLc.
3. N8S not a purchaser |n good fa|th. 1hey lgnored Lhe lls peoJeos
annoLaLed on Lhe LlLle.

Y>OG$-G"> () *&+,- &. /00$"%1 9<7;

1. No contract of sa|e perfected. eLlLloners fall Lo esLabllsh any
deflnlLe agreemenL or meeLlng of Lhe mlnd as regards Lhe prlce
or Lerm of paymenL. eLlLloner's accepLance of Lhe offer was
quallfled, whlch amounLs Lo a re[ecLlon of Lhe orlglnal offer.

2. Statute of Irauds. eLlLloner clalms as proof of perfecLed
conLracL of sale beLween lL and respondenL 8l were noL
subscrlbed by Lhe parLy charged, l.e. 8l, Lhus dld noL consLlLuLe
Lhe memoranda or noLes LhaL Lhe law speaks of.

o lor Lhe memorandum Lo Lake Lhe sale ouL of Lhe
coverage of Lhe SLaLuLe of lrauds, lL musL conLaln all
Lhe essenLlal Lerms of Lhe conLracL" of sale. HW&,R+"-&,
() A$,="#$2 CB: 6*7/ C3: 9DEEB;2
1
even when scaLLered

1
loteJes v. sploo, 22 SC8A 1000 (1968).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
lnLo varlous correspondences whlch can be broughL
LogeLher H*>-X &. *$#+ () ^$>,1 &. *"=P>P& 7+#>2 3E5
6*7/ CE8 94:::;)
1

" 1he manner of paymenL musL also be lncluded
ln Lhe memorandum. T+(>$=R& () V"R+XR+X2
4EC 6*7/ 558 94:84;
" 8uL Lhe CourL has held LhaL ln sales of real
properLy, Lhe sLaLuLe of frauds wlll noL apply lf
Lhere has already been parLlal paymenL even lf
Lhe memorandum evldenclng Lhe sale dld noL
menLlon paymenL by lnsLallmenL. V"(>P ()
W>&=N1&=2 343 6*7/ 53 94:::;)
o Lxcept|on: L|ectron|c Documents under the L-
Commerce Act (k.A. 8792)
" 1he maln polnL of Lhls enLlre secLlon ln Lhe book
ls Lhls: elecLronlc documenLs are glven Lhe same
legal recognlLlon as paper documenLs. 1hus,
Lhey are admlsslble as evldence ln courL.
" ln assesslng Lhe evldenLlal welghL of an
elecLronlc daLa message or elecLronlc
documenL, Lhe rellablllLy of Lhe manner ln whlch
lL was generaLed, sLored or communlcaLed, Lhe
rellablllLy of Lhe manner ln whlch lLs orlglnaLor
was ldenLlfled ls glven regard
art|a| Lxecut|on (Art|c|e 140S) L,-$N" () Y$&=",P&2 4E3 ?F>%)
8KE 94:B8;\ *%"+P$% () *&+,- &. /00$"%12 4:: 6*7/ 443 94::4;)

1
8etq v. MoqJoleoo stote, loc., 92 hll. 110 (1932), llmketkol 5oos Mlllloq, loc.
v. cA, 230 SC8A 323 (1993), lltst lblllpploe lotl 8ook v. cA, 232 SC8A 239
(1996).

L,-$N" () Y$&=",P&

Iacts: CrLega occupled a parcel of land. AfLer Lhe llberaLlon, Lhe
governmenL asslgned Lhe loL Lo Lhe 8ural rogress Admln. She asserLed
her rlghL LhereLo, buL was dlspuLed by Leonardo. CrLega and Leonardo
agreed Lo a compromlse. 1he agreemenL was for CrLega Lo deslsL from
presslng her clalm, and Leonardo, upon geLLlng Lhe loL, would sell Lo her
a porLlon Lhereof provlded she pald for Lhe surveylng of Lhe loL. lf he
acqulred LlLle, she could sLay as LenanL. CrLega Lhus deslsLed from her
clalm, pald for Lhe surveylng of Lhe loL and Lhe preparaLlon of Lhe plan,
and regularly pald hlm a monLhly renLal. When she remodeled her son's
house beslde Lhe loL, lL exLended over Lhe sub[ecL loL. When Leonardo
acqulred LlLle, he refused Lo sell Lhe porLlon agreed upon. Pe clalms LhaL
Lhe conLracL ls unenforceable based on Lhe SLaLuLe of lrauds.

Issue: WheLher or noL Lhe conLracL ls unenforceable.

ne|d: nC. 1he conLracL ls enforceable because Lhere was parLlal
performance. CrLega made subsLanLlal lmprovemenLs on Lhe loL,
deslsLed from her clalm, conLlnued possesslon, and pald for Lhe
surveylng, and also pald Lhe renLals. All Lhese puL LogeLher amounL Lo
parLlal performance, whlch Lakes Lhe verbal agreemenL ouL of Lhe
operaLlon of Lhe SLaLuLe of lrauds.

Doctr|ne: arLlal paymenL of Lhe purchase prlce ls noL Lhe only manner
of parLlal performance. CLher modes of parLlal performance lnclude:
ossesslon
Maklng of lmprovemenLs o 8endlLlon of servlces
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
aymenL of Laxes
8ellnqulshmenL of rlghLs

*%"+P$% () *&+,- &. /00$"%1

Iacts: Ceclllo Claudel acqulred a loL from Lhe 8ureau of Lands. Pe
occupled Lhe same, declared lL ln hls name and duLlfully pald hls Laxes.
AfLer hls deaLh, hls helrs and slbllngs conLesLed each oLher clalmlng
ownershlp Lhereof. lL was hls helrs who were ln possesslon of Lhe
properLy. 1hey parLlLloned lL amongsL Lhemselves, reglsLered each
porLlon under Lhe 1orrens SysLem, and each pald Lhelr respecLlve Laxes.
1he slbllngs flled a case for cancellaLlon of LlLles and reconveyance
argulng LhaL Lhere was a verbal sale beLween Ceclllo and Lhelr parenLs
over Lhe loL. As evldence, Lhey presenLed a subdlvlslon plan.

Issue: WheLher or noL Lhere was a valld sale.

ne|d: nC. 1he general rule ls LhaL a sale once consummaLed ls valld
regardless of lLs form, however, provlng LhaL Lhe sale ls valld and
exlsLlng ls a dlfferenL maLLer. Powever, ln Lhe evenL LhaL a 3
rd
parLy
dlspuLes Lhe ownershlp, Lhere ls no such proof ln supporL of Lhe
ownershlp. As such, lL cannoL pre[udlce Lhlrd persons, such as Lhe helrs
ln Lhls case. Also, Lhe helrs had a rlghL Lo rely upon Lhelr 1orrens LlLles,
whlch, as opposed Lo Lhe subdlvlslon plans, are deflnlLely more credlble.

Doctr|ne:

o kequ|s|tes of part|a| performance:
l. MusL perLaln Lo Lhe sub[ecL maLLer or Lhe prlce
of Lhe sale
ll. MusL lnvolve an acL or compllclLy" on Lhe parLy
soughL Lo be charged
o Def|n|t|on: arLlal performance ls noL llmlLed Lo Lhe
glvlng of money. ConLracLs covered by Lhe SLaLuLe of
lrauds are raLlfled by accepLance of beneflLs under
Lhem. (ArLlcle 1403)
" arLlal performance musL amounL Lo esLoppel
agalnsL Lhe parLy soughL Lo be charged.
" arLlal performance of a sale of real properLy
wlll Lake lL ouL of Lhe SLaLuLe of lrauds even lf
Lhe formal requlremenLs (l.e. lL musL be ln
wrlLlng) are noL complled wlLh, as long as Lhe
essenLlal requlslLes of sale are presenL. MP") P$
d&O&R () *&+,- &. /00$"%1 DEE 6*7/ KC 94::4;)
" Sale of real properLy whlch are noL ln wrlLlng
buL are parLlally execuLed sLlll do noL blnd Lhlrd
parLles. ln addlLlon, under our 1orrens sysLem,
execuLlon of a publlc documenL ls noL enough Lo
blnd Lhlrd persons. 8eglsLraLlon wlLh Lhe
8eglsLry of ueeds ls Lhe operaLlve acL. 6$R+X" ()
MP") V$ 6$%O"2 3D5 6*7/ DCC 9DEEE;.
o 8U1: uellvery of Lhe deed Lo buyer's agenL, wlLh no
lnLenLlon Lo parL wlLh Lhe LlLle unLll Lhe purchase prlce ls
pald, does noL Lake Lhe case ouL of Lhe SLaLuLe of
lrauds. HA",$--& () <"=>%" 7">%,&"P *&)2 C5 ?F>%) :5C
94:DC).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o 1he SLaLuLe of lrauds only applles Lo execuLory
conLracLs. 1he SLaLuLe of lrauds does noL apply Lo
conLracLs elLher parLlally or LoLally performed. ln
addlLlon, a conLracL LhaL vlolaLes Lhe SLaLuLe of lrauds ls
raLlfled by Lhe accepLance of beneflLs under Lhe
conLracL, such as Lhe accepLance of Lhe purchase prlce
and uslng Lhe proceeds Lo pay ouLsLandlng loans.
/%.,$P& () A&,,"12 CEC 6*7/ 4CB 9DEE3;.
1


60&+1$1 /%.,$P& () 60&+1$1 A&,,"1

Iacts: Codofredo & Carmen morLgaged Lhelr land Lo Lhe u8 for
7,000.00. 1o pay Lhelr debL, Lhey sold Lhe land Lo Armando & Adella for
13,000.00, Lhe laLLer also assumed Lo pay Lhe loan. Carmen lssued
Armando & Adella a recelpL for Lhe sale. 1hey also dellvered Lo Armando
& Adella Lhe Crlglnal CerL. of 1lLle, Lax declaraLlons, and Lax recelpLs.
1hey also lnLroduced Armando & Adella Lo Lhe naLanawans, Lhe LenanLs
of Lhe sald properLy as Lhe new lessors. 1hey LhereafLer Look possesslon
of Lhe sald land. LaLer Lhey found ouL LhaL Codofredo & Carmen sold Lhe
land agaln Lo oLher buyers by securlng dupllcaLe coples of Lhe CC1s
upon peLlLlon w/ Lhe courL. 1hus, Lhey flled a case enLlLled Speclflc
erformance. Codofredo & Carmen clalm LhaL Lhe sale, noL belng ln
wrlLlng, ls unenforceable under Lhe SLaLuLe of lrauds.

Issue:

1
vJo. Je Iomoc v. cA, 200 SC8A 74 (1991), 5ollvo v. 1be lotestote stote of
Motcelo M. vlllolbo, 417 SC8A 277 (2003), Alozo v. loJoo, 462 SC8A 614
(2003), ue lo ceoo v. 8tlooes, 308 SC8A 62 (2006), ooezo v. coott of Appeols,
372 SC8A 413 (2008).
1. WheLher or noL sale of land ln favor of 8orras ls valld even lf
orally enLered. ! ?LS
2. WheLher or noL SLaLuLe of lrauds ls appllcable ! nC

ne|d: 1he SLaLuLe of lrauds ln appllcable only Lo execuLory conLracLs,
noL Lhose LhaL have already been parLlally or compleLely consummaLed.
ln Lhls case Lhe sale of Lhe land Lo Armando & Adella had already been
consummaLed. 1he ownershlp over Lhe land was also Lransferred Lo
Armando & Adella when Lhey were lnLroduced Lo Lhe naLanawans and
Look possesslon Lhereof. 1herefore, when Codofredo & Carmen sold Lhe
land Lo Lhe oLher buyers, lL was no longer Lhelrs Lo sell. 1he SLaLuLe of
lrauds llkewlse does noL apply conslderlng LhaL Codofredo & Carmen
had already derlved Lhe beneflLs from Lhe sale - such as Lhe money Lo
pay for Lhe loan. 1he recelpL also sufflces Lo consLlLuLe Lhe
memorandum" requlred by Lhe SLaLuLe of lrauds

Doctr|ne:

o Lffect Cf art|a| Lxecut|on Cn 1h|rd art|es: Sale of real
properLy whlch are noL ln wrlLlng buL are parLlally
execuLed sLlll do noL blnd Lhlrd parLles.
" lormal requlremenLs are for Lhe beneflL of Lhlrd
parLles. non-compllance does noL affecL Lhe
valldlLy of Lhe conLracL. `+%$ () *&+,- &.
/00$"%12 D85 6*7/ 5:8 94::8;
" lf a Lhlrd parLy dlspuLes Lhe ownershlp of Lhe
properLy, Lhe person agalnsL whom LhaL clalm ls
broughL cannoL presenL any proof of such sale
and hence, has no means Lo enforce Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
conLracL. 1hus, Lhe SLaLuLe of lrauds ls for Lhe
beneflL of Lhe parLles ln Lhe sale. *%"+P$% ()
*&+,- &. /00$"%1 94:: 6*7/ 443;
1hls *%"+P$% () *&+,- &. /00$"%12 4::
6*7/ 443 94::4; conflrms Lhe varlance
ln prlnclples lnvolvlng movables and
lmmovables. ArLlcle 1403 LreaLs parLlal
execuLlon as appllcable only Lo goods
and chaLLel."
lor movables, mere possesslon ls
enough Lo glve a presumpLlon of
ownershlp (ArLlcle 339). lor
lmmovables, a 1orrens LlLle ls needed.
noLe Lhe dlfference ln Lhe rullng of
*%"+P$% () *&+,- &. /00$"%12 4:: 6*7/
443 94::4; and MP") P$ d&O&R () *&+,-
&. /00$"%1 DEE 6*7/ KC 94::4;) 1he
contro|||ng doctr|ne ls LhaL of MP") P$
d&O&R () *&+,- &. /00$"%1 DEE 6*7/ KC
94::4;. parLlal performance ln sales of
real properLy Lakes lL ouL of Lhe SLaLuLe
of lrauds. Powever, lL ls sLlll Lhe
reglsLraLlon ln Lhe 8eglsLry of ueeds
whlch wlll blnd Lhlrd parLles.
*%"+P$% () *&+,- &. /00$"%12 4:: 6*7/
443 94::4; shows Lhe effecL of havlng a
sale of real properLy whlch lsn'L reduced
Lo wrlLlng. 1hus, lL emphaslzes Lhe
lmporLance of Lhe SLaLuLe of lrauds.
(*%"+P$% () *&+,- &. /00$"%12 4:: 6*7/
443 94::4; was declded based on
prescrlpLlon, noL accordlng Lo Lhe
SLaLuLe of lrauds.)
" 8ellance on LesLlmony of wlLnesses as
secondary evldence Lo prove a sale of real
properLy wlll noL prosper because such a sale
musL be evldenced by a wrlLLen lnsLrumenL
when lL lnvolves 3
rd
parLles. /%#" MP") V$ 7"H ()
*&+,- &. /00$"%12 34C 6*7/ 352 BCUBB 94:::;)
" Y&=P,$1 () *&+,- &. /00$"%12 3:C 6*7/ 433
9DEED; summarlzed Lhe rullngs on Lhe maLLer:
ArLlcle 1338 ls only for convenlence
8eglsLraLlon of Lhe lnsLrumenL ls
needed only Lo adversely affecL Lhlrd
parLles
non-compllance wlLh formal
requlremenLs does noL affecL valldlLy
" ln Lhe 1orrens sysLem, execuLlon of a publlc
documenL ls noL enough Lo blnd Lhlrd persons.
8eglsLraLlon wlLh Lhe 8eglsLry of ueeds ls Lhe
operaLlve acL. 6$R+X" () MP") V$ 6$%O"2 3D5
6*7/ DCC 9DEEE;)
Wa|ver - (ArLlcle 1403) Cross-examlnaLlon on Lhe conLracL ls
deemed a walver of Lhe defense of Lhe SLaLuLe. H/#,$=>R" ()
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
!&=P"2 3C ?F>%) K3: 94:45;\ W"%&1>N () MP") V$ @>$#"2 C3 6*7/
CKD 94:KD).
1

o When a parLy falls Lo ob[ecL durlng Lrlal Lo Lhe
presenLaLlon of oral evldence Lo prove Lhe conLracL, he
ls deemed Lo have walved Lhe defecLs of Lhe conLracL.
1hus, Lhe conLracL wlll be enforceable. (ArLlcle 1403)
o When Lhe purporLed buyer's exhlblLs falled Lo esLabllsh
Lhe perfecLlon of Lhe conLracL of sale, oral LesLlmony
cannoL Lake Lhelr place wlLhouL vlolaLlng Lhe parol
evldence rule. lL was Lherefore lrregular for Lhe Lrlal
courL Lo have admlLLed ln evldence LesLlmony Lo prove
Lhe exlsLence of a conLracL of sale of a real properLy
beLween Lhe parLles, desplLe Lhe perslsLenL ob[ecLlon
made by Lhe purporLed seller's counsel as early as Lhe
flrsL scheduled hearlng, even when cross-examlnaLlon
was made on Lhe basls of Lhe wlLnesses' affldavlL-form
LesLlmony. Y>OG$-G"> 6&=1 <>%%>=N2 S=R) () */2 DBB 6*7/
5 94::5;\ D54 6*7/ C5C 94::5;)
ku||ngs Cn kece|pts And Cther Documentary Lv|dence Cf Sa|e
o Slnce a conLracL of sale ls perfecLed by mere consenL,
Lhen when Lhe dealer of moLor vehlcles accepLs a
deposlL of 30,0000 and pulls ouL a unlL from Lhe
assembler for LhaL purpose, lL was ln breach of conLracL
when lL sold Lhe car subsequenLly Lo anoLher buyer.
He$=-,$H /+-&O&->($2 S=R) () *&+,- &. /00$"%12 D:4
6*7/ 55 94::8;.

1
llmketkol 5oos Mlllloq, loc. v. cA, 230 SC8A 323 (1993), locoolloo v. cA, 262
SC8A 486 (1996).
o A sales lnvolce ls a commerclal documenL-commerclal
documenLs or papers are Lhose used by merchanLs or
buslnessmen Lo promoLe or faclllLaLe Lrade or credlL
LransacLlons-Lhey are noL mere scraps of paper berefL
of probaLlve value, buL vlLal pleces of evldence of
commerclal LransacLlons, wrlLLen memorlals of Lhe
deLalls of Lhe consummaLlon of conLracLs. 6$">&%
?$-,&%$+O *&,0) () /+-&R&,0 !,&+02 B5: 6*7/ 38K
9DEE8;.
o Sales lnvolces are noL evldence of paymenL of Lhe prlce,
buL evldence of Lhe recelpL of Lhe goods, slnce Lhe besL
evldence Lo prove paymenL ls Lhe offlclal recelpL. b% L,&
b=N,"($,1 *&,0) () *&+,- &. /00$"%12 BC5 6*7/ CD
9DEE8).
o A recelpL whlch ls merely an acknowledgmenL of Lhe
sum recelved, wlLhouL any lndlcaLlon Lhereln of Lhe
LoLal purchase prlce of Lhe land or of Lhe monLhly
lnsLallmenLs Lo be pald, cannoL be Lhe basls of valld sale.
HY$"#,$1 () */2 4C5 6*7/ 4B8 94:85;.
2

o ln lLself, Lhe absence of recelpLs, or any proof of
conslderaLlon, would noL be concluslve of Lhe
lnexlsLence of a sale slnce conslderaLlon ls always
presumed. HW>N=& () /I+>=&2 CCC 6*7/ 54 9DEE3;.
o 8ecelpLs proves paymenL whlch Lakes Lhe sale ouL of Lhe
SLaLuLe of lrauds. W&X&-" 6F"c2 S=R) () *&+,- &.
/00$"%12 DCC 6*7/ 3DE 94::B;)


2
llmsoo v. cA, 337 SC8A 209 (2001).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
W&X&-" 6F"c () *&+,- &. /00$"%1

Iacts: Luna Sosa wanLed Lo buy a 1oyoLa LlLe Ace. Pe wenL Lo 1oyoLa
Shaw where he meL opong 8ernardo, a sales rep. Sosa explalned LhaL
he needed Lhe LlLe Ace by !une 17, oLherwlse, he would become a
laughlng sLock. 8ernardo guaranLeed LhaL Lhe vehlcle would be
dellvered. 1hey execuLed a documenL enLlLled AgreemenLs beLween
Sosa & opong 8ernardo of 1oyoLa Shaw" where a 100k downpaymenL
was sLlpulaLed and LhaL Lhe LlLe Ace would be avallable aL a glven daLe.
When Lhe day of reckonlng arrlved, Lhe LlLe Ace was unavallable - Lhe
explanaLlon of 8ernardo belng nasuloL ng lbang malakas." Powever,
accordlng Lo 1oyoLa, Lhe Lrue reason was LhaL 8A llnance, whlch was
supposed Lo answer for Lhe balance of Lhe purchase prlce, dld noL
approve Sosa's appllcaLlon. 1oyoLa also reLurned Lhe downpaymenL.
1hus, Sosa sued for damages amounLlng Lo 1.2M due Lo hls
humlllaLlon, hurL feellngs, sleepless nlghLs, and so on.

Issue: WheLher or noL Lhere was a perfecLed conLracL of sale.

ne|d: nC. 1here was no agreemenL as Lo Lhe prlce and Lhe manner of
paymenL, whlch are boLh essenLlal Lo Lhe perfecLlon of Lhe sale

Doctr|ne:

3. Ior Va||d|ty: Sa|e Cf kea|ty 1hrough Agent, Author|ty Must 8e
In Wr|t|ng (Art|c|e 1874)

Art|c|e 1874.
When a sa|e of a p|ece of |and or any |nterest there|n |s through an
agent, the author|ty of the |atter sha|| be |n wr|t|ng, otherw|se, the
sa|e sha|| be vo|d. (n)

When sale of a plece of land or any lnLeresL Lhereln ls Lhrough
an agenL, Lhe auLhorlLy of Lhe laLLer shall be ln wrlLlng (speclal
power of aLLorney), otbetwlse, tbe sole sboll be volJ,
1
even
when:
o AgenL ls Lhe son of Lhe owner. An oral sale enLered lnLo
by Lhe son for Lhe real properLy of hls faLher ls vold.
HV$%&1 7$X$1 () */2 343 6*7/ 53D 94:::;
o 1here ls parLlal paymenL of Lhe prlce recelved by Lhe
supposed agenL. HV>J&= () */2 3:5 6*7/ 4BC 9DEE3;)
D

o ln Lhe case of a corporaLe owner of realLy. Llkewlse, Lhe
agenL of a corporaLlon musL have a wrlLLen auLhorlLy Lo
sell a plece of land, oLherwlse, lL wlll be vold. 8ecelpL of
parL of Lhe purchase prlce by Lhe agenL wlll noL valldaLe
Lhe sale. H*>-XUY>-$ 7$"%-X *&,0) () */2 3DB 6*7/ 38B
9DEEE;)
3

Powever, Lhe agenL's wrlLLen auLhorlLy alone wlll noL exempL
Lhe sale from Lhe SLaLuLe of lrauds. 1he ueed of Sale lLself musL
be ln wrlLlng and reglsLered ln order Lo be enforceable and
blndlng Lo 3rd persons. W&,R+"-&, () A$,="#$2 CB: 6*7/ C3:
9DEEB;
When ConLracL Lo Sell was slgned by Lhe co-owners Lhemselves
as wlLnesses, Lhe wrlLLen auLhorlLy for Lhelr agenL mandaLed

1
Alcoototo v. NlJo, 618 SC8A 333 (2010), compet keolty cotp. v. lojo-keyes,
632 SC8A 400 (2010).
2
lltme v. 8okol otetptlses ooJ uev. cotp., 414 SC8A 190 (2003).
3
lloeJo v. cA, 376 SC8A 222 (2002).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
under ArLlcle 1874 of Lhe Clvll Code ls no longer requlred.
HL$1O$, () ?",">1& V$() *&,0)2 B4C 6*7/ DD82 D3K 9DEEK;)

4. Sa|e Cf Large Catt|e (Art|c|e 1S81, Sect|on S29, kev|sed
Adm|n|strat|ve Code)

Art|c|e 1S81.
1he form of sa|e of |arge catt|e sha|| be governed by spec|a| |aws. (n)

kLVISLD ADMINIS1kA1IVL CCDL
Sect|on S29. keg|strat|on necessary to va||d|ty of transfer.
No transfer of |arge catt|e sha|| be va||d un|ess the same |s reg|stered
and a cert|f|cate of transfer obta|ned as here|n prov|ded, but |arge
catt|e under two years of age may be reg|stered and branded grat|s for
the purpose of effect|ng a va||d transfer, |f the reg|strat|on and
transfer are made at the same t|me.

S. Sa|es Lffected as L|ectron|c Commerce (k.A. No. 8792)
1he maln polnL of Lhls enLlre secLlon ln Lhe book ls Lhls:
elecLronlc documenLs are glven Lhe same legal recognlLlon as
paper documenLs. 1hus, Lhey are admlsslble as evldence ln
courL.
ln assesslng Lhe evldenLlal welghL of an elecLronlc daLa message
or elecLronlc documenL, Lhe rellablllLy of Lhe manner ln whlch lL
was generaLed, sLored or communlcaLed, Lhe rellablllLy of Lhe
manner ln whlch lLs orlglnaLor was ldenLlfled ls glven regard.

6. Iorm |n Lqu|tab|e Mortgage C|a|ms
1he SLaLuLe of lrauds does noL sLand ln Lhe way of LreaLlng an
absoluLe deed of sale as a morLgage, when such was Lhe
lnLenLlon of Lhe parLles. *+X+N"= () 6"=-&12 3C ?F>%) 4EE 94:45;
A conLracL should be consLrued as a morLgage or a loan lnsLead
of a pocto Je tetto sale when lLs Lerms are amblguous or Lhe
clrcumsLances surroundlng lLs execuLlon or lLs performance are
lncompaLlble wlLh a sale. arol evldence becomes admlsslble Lo
prove LhaL Lhe lnsLrumenL was lnLended Lo be a securlLy for a
loan. Y"0"- () 7&1",>&2 34D 6*7/ B3: 94:::;
An equlLable morLgage ls noL dlfferenL from a real esLaLe
morLgage, and Lhe llen creaLed Lhereby oughL noL Lo be
defeaLed by requlrlng compllance wlLh Lhe formallLles necessary
Lo Lhe valldlLy of a volunLary real esLaLe morLgage. 7&1"%$1 ()
6+#"2 CE8 6*7/ 55C 9DEE3;

7. Iorm |n "Sa|es on keturn or Approva|" (Art|c|e 1S02)

Art|c|e 1S02.
When goods are de||vered to the buyer "on sa|e or return" to g|ve the
buyer an opt|on to return the goods |nstead of pay|ng the pr|ce, the
ownersh|p passes to the buyer on de||very, but he may revest the
ownersh|p |n the se||er by return|ng or tender|ng the goods w|th|n the
t|me f|xed |n the contract, or, |f no t|me has been f|xed, w|th|n a
reasonab|e t|me. (n)

When goods are de||vered to the buyer on approva| or on tr|a| or on
sat|sfact|on, or other s|m||ar terms, the ownersh|p there|n passes to
the buyer:

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(1) When he s|gn|f|es h|s approva| or acceptance to the se||er or does
any other act adopt|ng the transact|on,

(2) If he does not s|gn|fy h|s approva| or acceptance to the se||er, but
reta|ns the goods w|thout g|v|ng not|ce of re[ect|on, then |f a t|me has
been f|xed for the return of the goods, on the exp|rat|on of such t|me,
and, |f no t|me has been f|xed, on the exp|rat|on of a reasonab|e t|me.
What |s a reasonab|e t|me |s a quest|on of fact. (n)

1he CourL has held LhaL Lhe condlLlons ln ArLlcle 1302 wlll only
apply lf Lhere ls an express sLlpulaLlon LhaL Lhe sale ls elLher a
sale on reLurn" or a sale on approval." S=P+1-,>"% W$H->%$
<"=+."R-+,>=N *&O0"=X &. -F$ ?F>%)2 S=R) () b=-$,0,>1$12 S=R)2
D4K 6*7/ 3DD 94::3;
arol evldence wlll noL be admlLLed Lo prove LhaL a sale was a
sale on reLurn" or sale on approval."
1he buyer cannoL accepL parL of Lhe goods and re[ecL Lhe resL.

8. k|ght of I|rst kefusa| Must 8e Conta|ned |n Wr|tten Contract
verbal granLs of such rlghL are noL enforceable. ln effecL, Lhls ls
an addlLlon Lo Lhe SLaLuLe of lrauds. 6$= ?& bG <",G$->=N *&,0)
() <",->=$J2 3DB 6*7/ D4E 9DEEE;

V. S|mu|ated Sa|es
SlmulaLlon" ! declaraLlon of a flcLlLlous wlll, made by
agreemenL of Lhe parLles, ln order Lo produce, for Lhe purposes
of decepLlon, Lhe appearance of a [urldlcal acL whlch does noL
exlsL or ls dlfferenL from whaL was really execuLed. Y&X&%" ()
*&+,- &. /00$"%12 3D5 6*7/ D8B 9DEEE;
o When a sale ls absoluLely slmulaLed, lL ls always
compleLely vold and non-exlsLenL.
o When a sale ls relaLlvely slmulaLed, Lhere ls anoLher
lnLenL. As such, lL ls valld and sub[ecL Lo reformaLlon.
lf Lhe parLles enLer lnLo a sale Lo whlch Lhey dld noL lnLend Lo be
legally bound, Lhe conLracL ls vold and noL suscepLlble Lo
raLlflcaLlon. 7&1",>& () *&+,- &. /00$"%12 34E 6*7/ C5C 94:::;
o ln slmulaLed conLracLs, Lhe parLles do noL lnLend Lo be
bound by Lhe conLracL and Lhe apparenL conLracL ls noL
really deslred or lnLended Lo produce legal effecL.
CharacLerlsLlc of slmulaLlon ls LhaL Lhe apparenL conLracL ls noL
really deslred or lnLended Lo produce legal effecL or ln any way
alLer Lhe parLles' [urldlcal slLuaLlon, or LhaL Lhe parLles have no
lnLenLlon Lo be bound by Lhe conLracL. 1he requlslLes are: (a) an
ouLward declaraLlon of wlll dlfferenL from Lhe wlll of Lhe parLles,
(b) false appearance musL have been lnLended by muLual
agreemenL, and (c) purpose ls Lo decelve Lhlrd persons) H<"=>%"
A"=G>=N *&,0) () 6>%($,>&2 C55 6*7/ C38 9DEEB;)
4


A. kequ|s|tes Cf S|mu|ated Sa|es
1. An ouLward declaraLlon of wlll dlfferenL from Lhe wlll of Lhe
parLles,
2. lalse appearance musL have been lnLended by muLual
agreemenL, and
3. urpose ls Lo decelve Lhlrd persons. <"=>%" A"=G>=N *&,0) ()
6>%($,>& (466 SCkA 438)


1
kosotlo v. cA, 310 SC8A 464 (1999), loyolo v. cA, 326 SC8A 283 (2000), o 8oo
Cooo v. Ooq, 367 SC8A 339 (2001), loyooqoyooq v. cA, 430 SC8A 210 (2004).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
8. 8adges And Non-badges Cf S|mu|at|on
non-paymenL of Lhe sLlpulaLed conslderaLlon, absence of any
aLLempL by Lhe buyers Lo asserL Lhelr alleged rlghLs over Lhe
sub[ecL properLy) HM>%%".%&, () */2 D8E 6*7/ D:K 94::K;)
4

lallure of alleged buyers Lo collecL renLals from alleged seller.
H6"=->"N& () */2 DK8 6*7/ :8 94::K;\ buL noL when Lhere
appears a leglLlmaLe lessor-lessee relaLlonshlp beLween Lhe
vendee and Lhe vendor. HQ=>&= A"=G () L=N2 C:4 6*7/ B84
9DEE5;)
AlLhough Lhe agreemenL dld noL provlde for Lhe absoluLe
Lransfer ownershlp of Lhe land Lo buyer, LhaL dld noL amounL Lo
slmulaLlon, slnce dellvery of cerLlflcaLe of ownershlp and
execuLlon of deed of absoluLe sale were expressly sLlpulaLed as
suspenslve condlLlons, whlch gave rlse Lo Lhe correspondlng
obllgaLlon on parL of buyer Lo pay Lhe lasL lnsLallmenLs.
HM>%%".%&, () */2 D8E 6*7/ D:K 94::K;)
When slgnaLure on a deed of sale ls a forgery. `>P$% () *&+,- &.
/00$"%12 BB: 6*7/ 485 9DEE8;.
2
8uL bare asserLlons LhaL Lhe
slgnaLure appearlng on Lhe ueeds of Sale ls noL LhaL of her
husband ls noL enough Lo allege slmulaLlon, slnce forgery ls noL
presumed, lL musL be proven by clear, poslLlve and convlnclng
evldence) H7)`) @"(",,& a *&) () M">%&R$12 354 6*7/ 43:
9DEE4;)
SlmulaLlon of conLracL and gross lnadequacy of prlce are dlsLlncL
legal concepLs, wlLh dlfferenL effecLs - Lhe concepL of a
slmulaLed sale ls lncompaLlble wlLh lnadequacy of prlce. When

1
5ollJstote Moltl-ltoJocts cotp. v. cotleozo-vlllovetJe, 339 SC8A 197 (2008).
2
kofloe v. 8otqos, 377 SC8A 264, 272-273 (2009).
Lhe parLles Lo an alleged conLracL do noL really lnLend Lo be
bound by lL, Lhe conLracL ls slmulaLed and vold. Cross
lnadequacy of prlce by lLself wlll noL resulL ln a vold conLracL,
and lL does noL even affecL Lhe valldlLy of a conLracL of sale,
unless lL slgnlfles a defecL ln Lhe consenL or LhaL Lhe parLles
acLually lnLended a donaLlon or some oLher conLracL. HA,"(&U
!+$,,$,& () A,"(&2 C5B 6*7/ DCC 9DEEB;)

C. When Mot|ve Nu|||f|es 1he Sa|e
Genera| ku|e: MoLlve does noL nulllfy a sale
o Lxcept|on: When moLlve predeLermlnes cause, lL may
be regarded as Lhe cause (e.g. when Lhere was a
mlsLake ln Lhe quallLy of land, Lhe moLlve/cause was
negaLed. And Lhus Lhe conLracL was lnexlsLenL.)
ln sale, conslderaLlon ls, as a rule, dlfferenL from Lhe moLlve of
parLles, and when Lhe prlmary moLlve ls lllegal, such as when
Lhe sale was execuLed over a land Lo lllegally frusLraLe a person's
rlghL Lo lnherlLance and Lo avold paymenL of esLaLe Lax, Lhe sale
ls vold because lllegal moLlve predeLermlned purpose of Lhe
conLracL) HL%$N",>& () */2 D38 6*7/ :5 94::C;)
3

Cause v. MoLlve
o Cause ! LssenLlal reason whlch moves parLles Lo enLer
lnLo Lhe conLracL and ls Lhe lmmedlaLe, dlrecL and
proxlmaLe reason" Lo creaLe Lhe obllgaLlon (e.g. cause
of vendor Lo sell Lhe land ls Lo obLaln Lhe prlce, and for
Lhe vendee, Lhe acqulslLlon of Lhe land.)

3
uy v. cA, 314 SC8A 69, 81 (1999).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o MoLlve ! arLlcular reason of a conLracLlng parLy whlch
does noL affecL Lhe oLher parLy (e.g. MoLlve of Lhe
vendor ls Lo use Lhe lands for houslng)
Where Lhe parLles Lo a conLracL of sale agreed Lo a
conslderaLlon, buL Lhe amounL reflecLed ln Lhe flnal ueed of Sale
was lower, Lhelr moLlvaLlon belng Lo pay lower Laxes on Lhe
LransacLlon, Lhe conLracL of sale remalns valld and enforceable
upon Lhe Lerms of Lhe real conslderaLlon. AlLhough lllegal, Lhe
moLlves nelLher deLermlne nor Lake Lhe place of Lhe
conslderaLlon) H^$>,1 &. 60&+1$1 A"%>-$ () Y>O2 CC5 6*7/ BC
9DEEC;)
An acLlon or defense for Lhe declaraLlon of Lhe lnexlsLence of a
conLracL ls lmprescrlpLlble. Cn Lhe oLher hand, an acLlon Lo
resclnd ls founded upon and presupposes Lhe exlsLence of a
conLracL. A conLracL whlch ls null and vold ls no conLracL aL all
and hence could noL be Lhe sub[ecL of resclsslon. H*"O0&1 ()
?"1-,"="2 5E8 6*7/ BB 9DEE:;)

D. kemed|es A||owed When Sa|e S|mu|ated
When a conLracL of sale ls vold, Lhe rlghL Lo seL up lLs nulllLy or
non-exlsLence ls avallable Lo Lhlrd persons whose lnLeresLs are
dlrecLly affecLed Lhereby. Llkewlse, Lhe remedy of occloo
poollooo ls avallable when Lhe sub[ecL maLLer ls a conveyance,
oLherwlse valld, underLaken ln fraud of credlLors. H<"=>%"
A"=G>=N *&,0) () 6>%($,>&2 C55 6*7/ C38 9DEEB;)
1he resclssory acLlon Lo seL aslde conLracLs ln fraud of credlLors
ls occloo poollooo, essenLlally a subsldlary remedy accorded
under ArLlcle 1383 whlch Lhe parLy sufferlng damage can avall
of only when he has no oLher legal means Lo obLaln reparaLlon
for Lhe same. ln such acLlon, lL musL be shown LhaL boLh
conLracLlng parLles have acLed mallclously so as Lo pre[udlce Lhe
credlLors who were prevenLed from collecLlng Lhelr clalms.
8esclsslon lf generally unavalllng should a Lhlrd person, acLlng ln
good falLh, ls ln lawful possesslon of Lhe properLy slnce he ls
proLecL by law agalnsL a sulL for resclsslon by Lhe reglsLraLlon of
Lhe Lransfer Lo hlm ln Lhe reglsLry. HQ=>&= A"=G () L=N2 C:4
6*7/ B84 9DEE5;

L. Lffect When Sa|e Dec|ared Vo|d
1he acLlon for Lhe declaraLlon of Lhe conLracL's nulllLy ls
lmprescrlpLlble-an acLlon for reconveyance of properLy on a
vold conLracL of sale does noL prescrlbe. `>%Ub1-"-$ !&%. "=P
V$()2 S=R) () @"(",,&2 BD5 6*7/ B4 9DEEK;)
ossessor ls enLlLled Lo keep Lhe frulLs durlng Lhe perlod for
whlch Lhe buyer held Lhe properLy ln good falLh. HVA? () */2
345 6*7/ 5BE 94:::;)
1hen resLoraLlon of whaL has been glven ls ln order, slnce Lhe
relaLlonshlp beLween parLles ln any conLracL even lf
subsequenLly volded musL always be characLerlzed and
puncLuaLed by good falLh and falr deallng. HV$ %&1 7$X$1 () */2
343 6*7/ 53D 94:::;\ H^$>,1 &. SN="R>" /N+>%",U7$X$1 ()
<>[",$12 C4E 6*7/ :K 9DEE3;)
Allen who purchases land ln Lhe name of hls llllplna lover, has
no sLandlng Lo seek legal remedles Lo elLher recover Lhe
properLy or Lhe purchase prlce pald, slnce Lhe LransacLlon ls vold
ob loltlo for belng ln vlolaLlon of Lhe consLlLuLlonal prohlblLlon.
H`,$=J$% () *"->-&2 CE5 6*7/ BB 9DEE3;)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 6: Consummat|on (Art|c|es
1493-1S06) and erformance of
Contract of Sa|e (Art|c|es 1S36-1S44,
1S82-1S90)

Lffects of the Contract When the 1h|ng So|d nas 8een Lost

Art|c|e 1493.
If at the t|me the contract of sa|e |s perfected, the th|ng wh|ch |s the
ob[ect of the contract has been ent|re|y |ost, the contract sha|| be
w|thout any effect.

8ut |f the th|ng shou|d have been |ost |n part on|y, the vendee may
choose between w|thdraw|ng from the contract and demand|ng the
rema|n|ng part, pay|ng |ts pr|ce |n proport|on to the tota| sum agreed
upon. (1460a)

Art|c|e 1494.
Where the part|es purport a sa|e of spec|f|c goods, and the goods
w|thout the know|edge of the se||er have per|shed |n part or have
who||y or |n a mater|a| part so deter|orated |n qua||ty as to be
substant|a||y changed |n character, the buyer may at h|s opt|on treat
the sa|e:

(1) As avo|ded, or

(2) As va||d |n a|| of the ex|st|ng goods or |n so much thereof as have
not deter|orated, and as b|nd|ng the buyer to pay the agreed pr|ce for
the goods |n wh|ch the ownersh|p w||| pass, |f the sa|e was d|v|s|b|e.
(n)

Cb||gat|ons of the Vendor

Art|c|e 149S.
1he vendor |s bound to transfer the ownersh|p of and de||ver, as we||
as warrant the th|ng wh|ch |s the ob[ect of the sa|e. (1461a)

Art|c|e 1496.
1he ownersh|p of the th|ng so|d |s acqu|red by the vendee from the
moment |t |s de||vered to h|m |n any of the ways spec|f|ed |n art|c|es
1497 to 1S01, or |n any other manner s|gn|fy|ng an agreement that the
possess|on |s transferred from the vendor to the vendee. (n)

Art|c|e 1497.
1he th|ng so|d sha|| be understood as de||vered, when |t |s p|aced |n
the contro| and possess|on of the vendee. (1462a)

Art|c|e 1498.
When the sa|e |s made through a pub||c |nstrument, the execut|on
thereof sha|| be equ|va|ent to the de||very of the th|ng wh|ch |s the
ob[ect of the contract, |f from the deed the contrary does not appear
or cannot c|ear|y be |nferred.

W|th regard to movab|e property, |ts de||very may a|so be made by the
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
de||very of the keys of the p|ace or depos|tory where |t |s stored or
kept. (1463a)

Art|c|e 1499.
1he de||very of movab|e property may ||kew|se be made by the mere
consent or agreement of the contract|ng part|es, |f the th|ng so|d
cannot be transferred to the possess|on of the vendee at the t|me of
the sa|e, or |f the |atter a|ready had |t |n h|s possess|on for any other
reason. (1463a)

Art|c|e 1S00.
1here may a|so be trad|t|on const|tutum possessor|um. (n)

Art|c|e 1S01.
W|th respect to |ncorporea| property, the prov|s|ons of the f|rst
paragraph of art|c|e 1498 sha|| govern. In any other case where|n sa|d
prov|s|ons are not app||cab|e, the p|ac|ng of the t|t|es of ownersh|p |n
the possess|on of the vendee or the use by the vendee of h|s r|ghts,
w|th the vendor's consent, sha|| be understood as a de||very. (1464)

Art|c|e 1S02.
When goods are de||vered to the buyer "on sa|e or return" to g|ve the
buyer an opt|on to return the goods |nstead of pay|ng the pr|ce, the
ownersh|p passes to the buyer on de||very, but he may revest the
ownersh|p |n the se||er by return|ng or tender|ng the goods w|th|n the
t|me f|xed |n the contract, or, |f no t|me has been f|xed, w|th|n a
reasonab|e t|me. (n)

When goods are de||vered to the buyer on approva| or on tr|a| or on
sat|sfact|on, or other s|m||ar terms, the ownersh|p there|n passes to
the buyer:

(1) When he s|gn|f|es h|s approva| or acceptance to the se||er or does
any other act adopt|ng the transact|on,

(2) If he does not s|gn|fy h|s approva| or acceptance to the se||er, but
reta|ns the goods w|thout g|v|ng not|ce of re[ect|on, then |f a t|me has
been f|xed for the return of the goods, on the exp|rat|on of such t|me,
and, |f no t|me has been f|xed, on the exp|rat|on of a reasonab|e t|me.
What |s a reasonab|e t|me |s a quest|on of fact. (n)

Art|c|e 1S03.
When there |s a contract of sa|e of spec|f|c goods, the se||er may, by
the terms of the contract, reserve the r|ght of possess|on or ownersh|p
|n the goods unt|| certa|n cond|t|ons have been fu|f|||ed. 1he r|ght of
possess|on or ownersh|p may be thus reserved notw|thstand|ng the
de||very of the goods to the buyer or to a carr|er or other ba||ee for the
purpose of transm|ss|on to the buyer.

Where goods are sh|pped, and by the b||| of |ad|ng the goods are
de||verab|e to the se||er or h|s agent, or to the order of the se||er or of
h|s agent, the se||er thereby reserves the ownersh|p |n the goods. 8ut,
|f except for the form of the b||| of |ad|ng, the ownersh|p wou|d have
passed to the buyer on sh|pment of the goods, the se||er's property |n
the goods sha|| be deemed to be on|y for the purpose of secur|ng
performance by the buyer of h|s ob||gat|ons under the contract.

Where goods are sh|pped, and by the b||| of |ad|ng the goods are
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
de||verab|e to order of the buyer or of h|s agent, but possess|on of the
b||| of |ad|ng |s reta|ned by the se||er or h|s agent, the se||er thereby
reserves a r|ght to the possess|on of the goods as aga|nst the buyer.

Where the se||er of goods draws on the buyer for the pr|ce and
transm|ts the b||| of exchange and b||| of |ad|ng together to the buyer
to secure acceptance or payment of the b||| of exchange, the buyer |s
bound to return the b||| of |ad|ng |f he does not honor the b||| of
exchange, and |f he wrongfu||y reta|ns the b||| of |ad|ng he acqu|res no
added r|ght thereby. If, however, the b||| of |ad|ng prov|des that the
goods are de||verab|e to the buyer or to the order of the buyer, or |s
|ndorsed |n b|ank, or to the buyer by the cons|gnee named there|n,
one who purchases |n good fa|th, for va|ue, the b||| of |ad|ng, or goods
from the buyer w||| obta|n the ownersh|p |n the goods, a|though the
b||| of exchange has not been honored, prov|ded that such purchaser
has rece|ved de||very of the b||| of |ad|ng |ndorsed by the cons|gnee
named there|n, or of the goods, w|thout not|ce of the facts mak|ng the
transfer wrongfu|. (n)

Art|c|e 1S04.
Un|ess otherw|se agreed, the goods rema|n at the se||er's r|sk unt|| the
ownersh|p there|n |s transferred to the buyer, but when the ownersh|p
there|n |s transferred to the buyer the goods are at the buyer's r|sk
whether actua| de||very has been made or not, except that:

(1) Where de||very of the goods has been made to the buyer or to a
ba||ee for the buyer, |n pursuance of the contract and the ownersh|p |n
the goods has been reta|ned by the se||er mere|y to secure
performance by the buyer of h|s ob||gat|ons under the contract, the
goods are at the buyer's r|sk from the t|me of such de||very,

(2) Where actua| de||very has been de|ayed through the fau|t of e|ther
the buyer or se||er the goods are at the r|sk of the party |n fau|t. (n)

Art|c|e 1S0S.
Sub[ect to the prov|s|ons of th|s 1|t|e, where goods are so|d by a
person who |s not the owner thereof, and who does not se|| them
under author|ty or w|th the consent of the owner, the buyer acqu|res
no better t|t|e to the goods than the se||er had, un|ess the owner of
the goods |s by h|s conduct prec|uded from deny|ng the se||er's
author|ty to se||.

Noth|ng |n th|s 1|t|e, however, sha|| affect:

(1) 1he prov|s|ons of any factors' act, record|ng |aws, or any other
prov|s|on of |aw enab||ng the apparent owner of goods to d|spose of
them as |f he were the true owner thereof,

(2) 1he va||d|ty of any contract of sa|e under statutory power of sa|e or
under the order of a court of competent [ur|sd|ct|on,

(3) urchases made |n a merchant's store, or |n fa|rs, or markets, |n
accordance w|th the Code of Commerce and spec|a| |aws. (n)

Art|c|e 1S06.
Where the se||er of goods has a vo|dab|e t|t|e thereto, but h|s t|t|e has
not been avo|ded at the t|me of the sa|e, the buyer acqu|res a good
t|t|e to the goods, prov|ded he buys them |n good fa|th, for va|ue, and
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762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
w|thout not|ce of the se||er's defect of t|t|e. (n)

Art|c|e 1S36.
1he vendor |s not bound to de||ver the th|ng so|d |n case the vendee
shou|d |ose the r|ght to make use of the terms as prov|ded |n art|c|e
1198. (1467a)

Art|c|e 1S37.
1he vendor |s bound to de||ver the th|ng so|d and |ts access|ons and
accessor|es |n the cond|t|on |n wh|ch they were upon the perfect|on of
the contract.

A|| the fru|ts sha|| perta|n to the vendee from the day on wh|ch the
contract was perfected. (1468a)

Art|c|e 1S38.
In case of |oss, deter|orat|on or |mprovement of the th|ng before |ts
de||very, the ru|es |n art|c|e 1189 sha|| be observed, the vendor be|ng
cons|dered the debtor. (n)

Art|c|e 1S39.
1he ob||gat|on to de||ver the th|ng so|d |nc|udes that of p|ac|ng |n the
contro| of the vendee a|| that |s ment|oned |n the contract, |n
conform|ty w|th the fo||ow|ng ru|es:

If the sa|e of rea| estate shou|d be made w|th a statement of |ts area,
at the rate of a certa|n pr|ce for a un|t of measure or number, the
vendor sha|| be ob||ged to de||ver to the vendee, |f the |atter shou|d
demand |t, a|| that may have been stated |n the contract, but, shou|d
th|s be not poss|b|e, the vendee may choose between a proport|ona|
reduct|on of the pr|ce and the resc|ss|on of the contract, prov|ded that,
|n the |atter case, the |ack |n the area be not |ess than one-tenth of
that stated.

1he same sha|| be done, even when the area |s the same, |f any part of
the |mmovab|e |s not of the qua||ty spec|f|ed |n the contract.

1he resc|ss|on, |n th|s case, sha|| on|y take p|ace at the w||| of the
vendee, when the |nfer|or va|ue of the th|ng so|d exceeds one- tenth
of the pr|ce agreed upon.

Neverthe|ess, |f the vendee wou|d not have bought the |mmovab|e
had he known of |ts sma||er area of |nfer|or qua||ty, he may resc|nd the
sa|e. (1469a)

Art|c|e 1S40.
If, |n the case of the preced|ng art|c|e, there |s a greater area or
number |n the |mmovab|e than that stated |n the contract, the vendee
may accept the area |nc|uded |n the contract and re[ect the rest. If he
accepts the who|e area, he must pay for the same at the contract rate.
(1470a)

Art|c|e 1S41.
1he prov|s|ons of the two preced|ng art|c|es sha|| app|y to [ud|c|a|
sa|es. (n)

Art|c|e 1S42.
In the sa|e of rea| estate, made for a |ump sum and not at the rate of a
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762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
certa|n sum for a un|t of measure or number, there sha|| be no
|ncrease or decrease of the pr|ce, a|though there be a greater or |ess
area or number than that stated |n the contract.

1he same ru|e sha|| be app||ed when two or more |mmovab|es as so|d
for a s|ng|e pr|ce, but |f, bes|des ment|on|ng the boundar|es, wh|ch |s
|nd|spensab|e |n every conveyance of rea| estate, |ts area or number
shou|d be des|gnated |n the contract, the vendor sha|| be bound to
de||ver a|| that |s |nc|uded w|th|n sa|d boundar|es, even when |t
exceeds the area or number spec|f|ed |n the contract, and, shou|d he
not be ab|e to do so, he sha|| suffer a reduct|on |n the pr|ce, |n
proport|on to what |s |ack|ng |n the area or number, un|ess the
contract |s resc|nded because the vendee does not accede to the
fa||ure to de||ver what has been st|pu|ated. (1471)

Art|c|e 1S43.
1he act|ons ar|s|ng from art|c|es 1S39 and 1S42 sha|| prescr|be |n s|x
months, counted from the day of de||very. (1472a)

Art|c|e 1S44.
If the same th|ng shou|d have been so|d to d|fferent vendees, the
ownersh|p sha|| be transferred to the person who may have f|rst taken
possess|on thereof |n good fa|th, |f |t shou|d be movab|e property.

Shou|d |t be |mmovab|e property, the ownersh|p sha|| be|ong to the
person acqu|r|ng |t who |n good fa|th f|rst recorded |t |n the keg|stry of
roperty.

Shou|d there be no |nscr|pt|on, the ownersh|p sha|| perta|n to the
person who |n good fa|th was f|rst |n the possess|on, and, |n the
absence thereof, to the person who presents the o|dest t|t|e, prov|ded
there |s good fa|th. (1473)

Cb||gat|ons of the Vendee

Art|c|e 1S82.
1he vendee |s bound to accept de||very and to pay the pr|ce of the
th|ng so|d at the t|me and p|ace st|pu|ated |n the
contract.

If the t|me and p|ace shou|d not have been st|pu|ated, the payment
must be made at the t|me and p|ace of the de||very of the th|ng so|d.
(1S00a)

Art|c|e 1S83.
Un|ess otherw|se agreed, the buyer of goods |s not bound to accept
de||very thereof by |nsta||ments.

Where there |s a contract of sa|e of goods to be de||vered by stated
|nsta|ments, wh|ch are to be separate|y pa|d for, and the se||er makes
defect|ve de||ver|es |n respect of one or more |nsta|ments, or the
buyer neg|ects or refuses w|thout [ust cause to take de||very of or pay
for one or more |nsta|ments, |t depends |n each case on the terms of
the contract and the c|rcumstances of the case, whether the breach of
contract |s so mater|a| as to [ust|fy the |n[ured party |n refus|ng to
proceed further and su|ng for damages for breach of the ent|re
contract, or whether the breach |s severab|e, g|v|ng r|se to a c|a|m for
compensat|on but not to a r|ght to treat the who|e contract as broken.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(n)

Art|c|e 1S84.
Where goods are de||vered to the buyer, wh|ch he has not prev|ous|y
exam|ned, he |s not deemed to have accepted them un|ess and unt||
he has had a reasonab|e opportun|ty of exam|n|ng them for the
purpose of ascerta|n|ng whether they are |n conform|ty w|th the
contract |f there |s no st|pu|at|on to the contrary.

Un|ess otherw|se agreed, when the se||er tenders de||very of goods to
the buyer, he |s bound, on request, to afford the buyer a reasonab|e
opportun|ty of exam|n|ng the goods for the purpose of ascerta|n|ng
whether they are |n conform|ty w|th the contract.

Where goods are de||vered to a carr|er by the se||er, |n accordance
w|th an order from or agreement w|th the buyer, upon the terms that
the goods sha|| not be de||vered by the carr|er to the buyer unt|| he
has pa|d the pr|ce, whether such terms are |nd|cated by mark|ng the
goods w|th the words "co||ect on de||very," or otherw|se, the buyer |s
not ent|t|ed to exam|ne the goods before the payment of the pr|ce, |n
the absence of agreement or usage of trade perm|tt|ng such
exam|nat|on. (n)

Art|c|e 1S8S.
1he buyer |s deemed to have accepted the goods when he |nt|mates to
the se||er that he has accepted them, or when the goods have been
de||vered to h|m, and he does any act |n re|at|on to them wh|ch |s
|ncons|stent w|th the ownersh|p of the se||er, or when, after the |apse
of a reasonab|e t|me, he reta|ns the goods w|thout |nt|mat|ng to the
se||er that he has re[ected them. (n)

Art|c|e 1S86.
In the absence of express or |mp||ed agreement of the part|es,
acceptance of the goods by the buyer sha|| not d|scharge the se||er
from ||ab|||ty |n damages or other |ega| remedy for breach of any
prom|se or warranty |n the contract of sa|e. 8ut, |f, after acceptance of
the goods, the buyer fa||s to g|ve not|ce to the se||er of the breach |n
any prom|se of warranty w|th|n a reasonab|e t|me after the buyer
knows, or ought to know of such breach, the se||er sha|| not be ||ab|e
therefor. (n)

Art|c|e 1S87.
Un|ess otherw|se agreed, where goods are de||vered to the buyer, and
he refuses to accept them, hav|ng the r|ght so to do, he |s not bound to
return them to the se||er, but |t |s suff|c|ent |f he not|f|es the se||er that
he refuses to accept them. If he vo|untar||y const|tutes h|mse|f a
depos|tary thereof, he sha|| be ||ab|e as such. (n)

Art|c|e 1S88.
If there |s no st|pu|at|on as spec|f|ed |n the f|rst paragraph of art|c|e
1S23, when the buyer's refusa| to accept the goods |s w|thout [ust
cause, the t|t|e thereto passes to h|m from the moment they are
p|aced at h|s d|sposa|. (n)

Art|c|e 1S89.
1he vendee sha|| owe |nterest for the per|od between the de||very of
the th|ng and the payment of the pr|ce, |n the fo||ow|ng three cases:

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(1) Shou|d |t have been so st|pu|ated,

(2) Shou|d the th|ng so|d and de||vered produce fru|ts or |ncome,

(3) Shou|d he be |n defau|t, from the t|me of [ud|c|a| or extra[ud|c|a|
demand for the payment of the pr|ce. (1S01a)

Art|c|e 1S90.
Shou|d the vendee be d|sturbed |n the possess|on or ownersh|p of the
th|ng acqu|red, or shou|d he have reasonab|e grounds to fear such
d|sturbance, by a v|nd|catory act|on or a forec|osure of mortgage, he
may suspend the payment of the pr|ce unt|| the vendor has caused the
d|sturbance or danger to cease, un|ess the |atter g|ves secur|ty for the
return of the pr|ce |n a proper case, or |t has been st|pu|ated that,
notw|thstand|ng any such cont|ngency, the vendee sha|| be bound to
make the payment. A mere act of trespass sha|| not author|ze the
suspens|on of the payment of the pr|ce. (1S02a)

I. Cb||gat|ons of Se||er

A. reserve Sub[ect Matter (Art|c|e 1163)

Art|c|e 1163.
Lvery person ob||ged to g|ve someth|ng |s a|so ob||ged to take care of |t
w|th the proper d|||gence of a good father of a fam||y, un|ess the |aw
or the st|pu|at|on of the part|es requ|res another standard of care.
(1094a)

ln Lhe sale of a deLermlnaLe ob[ecL, Lhe obllgaLlon of Laklng care
of Lhe sub[ecL maLLer arlses upon perfecLlon, even before
dellvery. CLherwlse, Lhe seller ls llable for breach.
lL ls an obllgaLlon Lo do."

8. De||ver w|th Iru|ts and Accessor|es (Art|c|es 1164, 1166, 149S, 1S37)

Art|c|e 1164.
1he cred|tor has a r|ght to the fru|ts of the th|ng from the t|me the
ob||gat|on to de||ver |t ar|ses. nowever, he sha|| acqu|re no rea| r|ght
over |t unt|| the same has been de||vered to h|m. (109S)

Art|c|e 1166.
1he ob||gat|on to g|ve a determ|nate th|ng |nc|udes that of de||ver|ng
a|| |ts access|ons and accessor|es, even though they may not have been
ment|oned. (1097a)

ln a sale lnvolvlng a deLermlnaLe sub[ecL maLLer, even prlor Lo
dellvery of ownershlp Lhereof Lo Lhe buyer, Lhe buyer already
has cerLaln rlghLs enforceable agalnsL Lhe seller.
Slnce Lhe sub[ecL maLLer ls lnLended for dellvery Lo Lhe buyer
from Lhe polnL of perfecLlon of Lhe sale, Lhen necessarlly Lhe
accessorles and frulLs musL from Lhen on be held for Lhe
accounL of Lhe buyer.

C. De||ver the Sub[ect Matter (Art|c|e 1477)

Art|c|e 1477.
1he ownersh|p of the th|ng so|d sha|| be transferred to the vendee
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
upon the actua| or construct|ve de||very thereof. (n)

1. Lega| rem|ses for Doctr|nes on 1rad|t|on
When Lhe sale ls vold or flcLlLlous, no valld LlLle over Lhe sub[ecL
maLLer can be conveyed Lo Lhe buyer even wlLh dellvery. Nemo
potest olsl pooJ Je jote potest - No moo coo Jo ooytbloq except
wbot be coo Jo lowfolly. !"#$%&#' )*+$, -$./ 01 2*3#4 *5
677&$,'8 9:; <2)6 => ?=;;@A1
When seller had no ownershlp over Lhe sub[ecL maLLer aL Lhe
Llme of dellvery, no valld LlLle can pass ln favor of Lhe buyer.
Nemo Jot pooJ ooo bobet - No moo coo qlve tbot wblcb be
Joes oot bove. !"'$B 01 2*3#4 *5 677&$,'8 C:: <2)6 C9D ?9EE=A1
=

A forged deed of sale ls null and vold and conveys no LlLle. lL ls a
well-seLLled prlnclple LhaL no one can glve whaL one does noL
have, oemo Jot pooJ ooo bobet. Cne can sell only whaL one
owns or ls auLhorlzed Lo sell, and Lhe buyer can acqulre no more
rlghL Lhan whaL Lhe seller can Lransfer legally1 !)35,*& 01 -3#F*'8
>@@ <2)6 9:D8 9@9G9@C ?9EE;A1
ArLlcle 1439 of Lhe Clvll Code on conLracLs of sale speclflcally
requlres LhaL Lhe vendor musL have ownershlp of Lhe properLy
aL Lhe Llme lL ls dellvered." !H&B#' *5 6#43#* )&+&' 01 <*II*G
-&,4#$.8 >@9 <2)6 9==8 99EG99= ?9EEJA1
A conLracL Lo sell, or a condlLlon conLracL of sale where Lhe
suspenslve condlLlon has noL happened, even when found ln a
publlc documenL, cannoL be LreaLed as consLlLuLlng consLrucLlve
dellvery, especlally when from Lhe face of Lhe lnsLrumenL lL ls

1
1ooqollo v. coott of Appeols, 371 SC8A 49 (2001), nelts of Attoto keyes v.
5occo-8elttoo, 372 SC8A 211 (2008).
shown LhaL Lhe seller was noL yeL Lhe owner of Lhe properLy
and was only expecLlng Lo lnherlL lL." (aL p. 221A H&B#' *5 6#43#*
)&+&' 01 <*II*G-&,4#$.8 >@9 <2)6 9== ?9EEJA1
Cne can sell only whaL one owns or ls auLhorlzed Lo sell, and Lhe
buyer can acqulre no more Lhan whaL Lhe seller can Lransfer
legally. K$I,$F 01 L$I$MB,BF8 >:E <2)6 =C@ ?9EEJA1
A Lax declaraLlon, by lLself, ls noL consldered concluslve
evldence of ownershlp - lL ls merely an loJlclom of a clalm of
ownershlp1 K$I,$F 01 L$I$MB,BF8 >:E <2)6 =C@ ?9EEJA1
neverLheless when aL Lhe Llme of dellvery Lhere ls no proof LhaL
Lhe seller had ownershlp and as ln facL Lhe Lax declaraLlon Lo Lhe
sub[ecL properLy was ln Lhe name of anoLher person, Lhen Lhere
was no Lransfer of ownershlp by dellvery1 !H&B#' *5 <&0&#B.$
<$. LBF3&, 01 2*3#4 *5 677&$,'8 C:D <2)6 >9C ?9EE=A1

2. Genera| Doctr|nes on 1rad|t|on, Whether Actua| or
Construct|ve:
1ransfer of ownershlp ls effecLed by dellvery, acLual or
consLrucLlve.
lf Lhere ls no express sLlpulaLlon LhaL LlLle shall noL pass unLll
paymenL of prlce, and Lhe Lhlng sold has been dellvered,
ownershlp passes from Lhe momenL Lhe Lhlng sold ls placed ln
Lhe possesslon and conLrol of Lhe buyer. aymenL of prlce does
noL deLermlne Lhe effecL of dellvery1 N3&.O,& P <4#&B55 01
Q$4'*. P 2*18 =C RMB,1 9: ?=;E;A
o lL may be sLlpulaLed LhaL ownershlp ln Lhe Lhlng shall
noL pass Lo buyer unLll he has fully pald prlce (ArLlcle
1478).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o ln Lhe absence of an express sLlpulaLlon Lo Lhe conLrary,
paymenL of purchase prlce of Lhe goods ls noL a
condlLlon precedenL Lo Lhe Lransfer of LlLle Lo Lhe buyer,
buL LlLle passes by Lhe dellvery of Lhe goods. !RMB,1
<3S3#S$. K&01 2*#71 01 63%B4*# T&.&#$,8 :C <2)6 C;@
?=;@>A1
=

o lallure of Lhe buyer Lo make good Lhe prlce does noL, ln
law, cause Lhe ownershlp Lo revesL Lo Lhe seller unless
Lhe bllaLeral conLracL of sale ls flrsL resclnded or
resolved pursuanL Lo ArLlcle 1191. !-$,$4S$4 01 2*3#4 *5
677&$,'8 9:= <2)6 =9J ?=;;:A1
uellvery Lransfers ownershlp lpso [ure, wlLhouL pre[udlce Lo Lhe
rlghL of Lhe seller Lo clalm paymenL of Lhe prlce. UI&V*8 R&#&O P
2*1 01 W.4X, -$./B.F 2*#718 C@ RMB,1 :C= ?=;=JA1
o ln Lhe absence of such sLlpulaLlon Lo Lhe conLrary,
LradlLlon produces lLs naLural effecLs ln law, mosL
lmporLanL of whlch belng conveyance of ownershlp,
wlLhouL pre[udlce Lo rlghL of Lhe seller Lo clalm paymenL
of Lhe prlce. !Y#*B,$. 01 R$. U#B&.4$, <MB77B.F 2*18 =9
<2)6 9@: ?=;:DA1
9

uellvery conLemplaLes Lhe absoluLe glvlng up of Lhe conLrol
and cusLody of Lhe properLy on Lhe parL of Lhe vendor, and Lhe
assumpLlon of Lhe same by Lhe vendee. Noo ooJls poctls seJ
ttoJltlooe Jomlolo tetom ttoosfetootot. And Lhere ls sald Lo be
dellvery lf and when Lhe Lhlng sold ls placed ln Lhe conLrol and

1
Ocompo v. coott of Appeols, 233 SC8A 331 (1994).
2
koeozle & 5ttelff v. wotsoo & co., 13 hll. 26 (1909), Ocejo, letez & co. v. lot'l
8ookloq cotp., 37 hll. 631 (1918).
possesslon of Lhe vendee." Z[3$4*#B$, )&$,4+ K&01 W.I1 01
L$+5$B# "M&$4&#8 W.I18 C@E <2)6 >: ?9EE=A1
o uellvery" as used ln Lhe Law on Sales refers Lo Lhe
concurrenL Lransfer of Lwo Lhlngs: (1) possesslon and (2)
ownershlp. lf Lhe vendee ls placed ln acLual posseslon of
Lhe properLy, buL by agreemenL of Lhe parLles
ownershlp of Lhe same ls reLalned by Lhe vendor unLll
Lhe vendee has fully pald Lhe prlce, Lhe mere Lransfer of
Lhe posseslon of Lhe properLy sub[ecL of Lhe sale ls noL
Lhe dellvery" conLemplaLed ln Lhe Law on Sales or as
used ln ArLlcle 1343 of Lhe Clvll Code. 2&S3 QB.,$.%
K&01 2*#71 01 U.F <B$* H3$8 >JJ <2)6 =9E ?9EE;A1
Slnce dellvery of sub[ecL maLLer of sale ls an obllgaLlon on Lhe
parL of Lhe seller, Lhe accepLance Lhereof by Lhe buyer ls oot a
condlLlon for Lhe compleLeness of dellvery. !\$ Y3&#O$ 01 2*3#4
*5 677&$,'8 9C <2)6 =9=@ ?=;:JA1
A conLracL Lo sell, or a condlLlon conLracL of sale where Lhe
suspenslve condlLlon has noL happened, even when found ln a
publlc documenL, cannoL be LreaLed as consLlLuLlng consLrucLlve
dellvery, especlally when from Lhe face of Lhe lnsLrumenL lL ls
shown LhaL Lhe seller was noL yeL Lhe owner of Lhe properLy
and was only expecLlng Lo lnherlL lL." !H&B#' *5 6#43#* )&+&' 01
<*II*G-&,4#$.8 >@9 <2)6 9==8 99= ?9EEJA1

3. Lssence of 1rad|t|on (Art|c|e 1496)
1here ls dellvery lf and when Lhe Lhlng sold ls placed ln Lhe
conLrol and possesslon of Lhe vendee. uellvery ls a composlLe
acL, ln whlch boLh parLles musL [oln and Lhe mlnds of boLh
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
parLles concur. Z[3$4*#B$, )&$,4+ K&018 W.I1 01 L$+5$B# "M&$4&#8
W.I1 C@E <2)6 >: ?9EE=A1
o 1radlLlon produces lLs legal consequences from Lhe facL
LhaL dellvery ls effecLed pursuanL Lo a valld sale. 1here ls
no Lransfer of ownershlp by Lhe execuLlon of a deed of
sale merely lnLended Lo accommodaLe Lhe buyer Lo
enable hlm Lo generaLe funds for hls buslness.
1he crlLlcal facLor ln Lhe dlfferenL modes of dellvery, whlch glves
legal effecL Lo Lhe acL, ls Lhe acLual lnLenLlon of Lhe vendor Lo
dellver, and lLs accepLance by Lhe vendee. WlLhouL LhaL
lnLenLlon, Lhere ls no LradlLlon. <$.4*' 01 <$.4*'8 C@E <2)6 >:
1he legal effecLs of Lhe parLles' lnLenLlon musL be gauged aL Lhe
polnL of perfecLlon by whlch Lhe obllgaLlon Lo dellver Lhe
sub[ecL maLLer ls creaLed.
o Was Lhere muLual lnLenLlon and agreemenL Lo Lransfer
Lhe ownershlp of Lhe sub[ecL maLLer
! lf yes, Lhere ls a valld sale.
! lf no, Lhe sale ls slmulaLed, and Lherefore vold.
2 Iactors of the r|nc|p|e of 1rad|t|on
a. AccepLance (alLhough an obllgaLlon of Lhe buyer) ls noL
essenLlal for dellvery (seller) Lo achleve lLs legal effecLs.
b. An express lnLenLlon on Lhe maLLer by Lhe parLles Lo a
sale, aL Lhe polnL of dellvery ls noL essenLlal for LradlLlon
Lo produce lLs legal consequences.

4. hys|ca| De||very (Art|c|e 1497)
AlLhough possesslon ls Lhe besL gauge when Lhere ls conLrol,
noneLheless conLrol can Lake oLher forms oLher Lhan acLual
physlcal possesslon.
o ln a case, Lhe loL was consldered Lo be ln Lhe buyer's
conLrol when Lhe buyer subsequenLly flled an e[ecLmenL
sulL agalnsL someone. R*]&# 2*^^&#IB$, $.% W.%3'4#B$,
2*#71 01 2*3#4 *5 677&$,'8 9@D <2)6 >;@ ?=;;@A1
lL ls noL necessary LhaL seller hlmself dellvers LlLle Lo Lhe buyer
because Lhe Lhlng sold ls undersLood as dellvered when lL ls
placed ln conLrol and possesslon of buyer. 1hus, when sellers
Lhemselves lnLroduced Lhe LenanL Lo Lhe buyer as Lhe new
owners of Lhe land, and from LhaL Llme on Lhe buyer acLed as
landlord Lhereof, Lhere was dellvery LhaL Lransferred LlLle Lo Lhe
buyer. !6,5#&%* 01 -*##$'8 DED <2)6 =D> ?9EECA1

S. Construct|ve De||very: Lxecut|on of a ub||c Instrument (Art|c|e
1498)
1he essence of mosL forms of consLrucLlve dellvery ls Lhe
exlsLence of an agreemenL beLween Lhe seller and Lhe buyer,
and LhaL Lhe laLLer ls undersLood Lo have conLrol of Lhe sub[ecL
maLLer of Lhe sale.
As to Movab|es (Art|c|es 1498-1499, 1S13-1S14)
o When lL comes Lo a Lhlrd-parLy and Lhe lssue cenLers on
Lhe LlLle or ownershlp of Lhe sub[ecL maLLer,
consLrucLlve dellvery by Lhe execuLlon of a publlc
lnsLrumenL would produce Lhe effecL of LradlLlon, buL
only lnsofar as LlLle ls concerned, provlded LhaL aL Lhe
Llme of Lhe execuLlon Lhere was no legal lmpedlmenL on
Lhe parL of Lhe seller Lo Lransfer LlLle Lo Lhe buyer, even
lf aL Lhe Llme of sale, conLrol of possesslon of Lhe
sub[ecL maLLer was noL ln Lhe hands of Lhe seller. K+8 _#1
01 2*3#4 *5 677&$,', =;J <2)6 J9: ?=;;=A1
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

K+8 _#1 01 2*3#4 *5 677&$,'

Iacts: Wllfredo uy obLalned a loan from Llbra Lo buy a Lruck and LracLor,
whlch were morLgaged Lo Llbra as securlLy. erfecLo uy purchased Lhe
LracLor from Wllfredo and assumed Lhe morLgage debL. 1he LracLor was
ln Llbra's possesslon because Wllfredo falled Lo pay Lhe amorLlzaLlon.
erfecLo offered Lo pay Lhe full amounL buL Llbra refused slnce Lhe loan
was obLalned noL only for Lhe LracLor buL Lhe Lruck as well. 1here was a
collecLlon case pendlng flled by Celac 1radlng agalnsL Wllfredo. 1he
LracLor was selzed and sold aL a publlc aucLlon where Celac 1radlng was
Lhe lone bldder. Celac 1radlng sold Lhe LracLor Lo AnLonlo Conzales.

Issue:
1. WheLher or noL Lhere was consLrucLlve dellvery aL Lhe Llme of
Lhe execuLlon of Lhe deed of sale ln favor erfecLo. " ?LS
2. WheLher or noL Wllfredo musL flrsL have conLrol and possesslon
of Lhe Lhlng before he could Lransfer ownershlp by consLrucLlve
dellvery. " nC

ne|d: ArLlcle 1496 sLaLes LhaL Lhe ownershlp of Lhe Lhlng sold ls acqulred
by Lhe vendee from Lhe momenL lL ls dellvered Lo hlm ln any of Lhe ways
speclfled ln ArLlcle 1497- 1301 or ln any oLher manner slgnlfylng an
agreemenL LhaL Lhe possesslon ls Lransferred from Lhe vendor Lo Lhe
vendee. AlLhough acLual dellvery of Lhe LracLor could noL be made,
Lhere was consLrucLlve dellvery already upon Lhe execuLlon of Lhe publlc
lnsLrumenL pursuanL Lo ArLlcle 1498 and upon Lhe consenL or
agreemenL of Lhe parLles when Lhe Lhlng sold cannoL be lmmedlaLely
Lransferred Lo Lhe possesslon of Lhe vendee

Doctr|ne:

o Where lL ls sLlpulaLed LhaL dellverles musL be made Lo
Lhe buyer or hls duly auLhorlzed represenLaLlve named
ln Lhe conLracLs, Lhe seller ls under obllgaLlon Lo dellver
ln accordance wlLh such lnsLrucLlons. !\$F*. 01 H**0&.
2*^$,I* W.%3'4#B&'8 W.I18 CD; <2)6 C:C ?9EE=A1
o LxecuLlon by supposed buyers of a chaLLel morLgage
over sub[ecL vehlcle ln favor of Lhe flnanclng company
does noL mean LhaL ownershlp had been Lransferred Lo
Lhem, for dellvery musL be on Lhe parL of Lhe seller.
!`.B*. L*4*# 2*#71 01 2*3#4 *5 677&$,'8 C:= <2)6 >E:
?9EE=A1
o nelLher lssuance of an lnvolce, whlch ls noL a documenL
of LlLle !R1"1 2&#.$ 2*#71 01 2*3#4 *5 677&$,'8 99= <2)6
=; ?=;;CA8
=
nor of Lhe reglsLraLlon cerLlflcaLe of vehlcle
!`.B*. L*4*# 2*#71 01 2*3#4 *5 677&$,'8 C:= <2)6 >E:
?9EE=A8
9
would consLlLuLe consLrucLlve dellvery.
As to Immovab|es (Art|c|e 1498)
o !urlsprudence has held LhaL a noLarlzed deed of sale has
Lwo funcLlons:
l. lL operaLes as a formal or symbollc dellvery of
Lhe properLy sold.
ll. lL auLhorlzes Lhe buyer Lo use Lhe documenL as
proof of ownershlp.

1
Notkls ulsttlbotots v. coott of Appeols, 193 SC8A 694 (1991).
2
Abooo v. Cotclo, 14 SC8A 739 (1963), 5ootos v. 5ootos, 366 SC8A 393 (2001).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o ConsLrucLlve dellvery has Lhe same legal effecL as acLual
or physlcal dellvery. L3.BIB7$,B4+ *5 aBI4*#B$' 01 2*3#4
*5 677&$,'8 =D; <2)6 C= ?=;J@A
! Where deed of sale or any agreemenL
analogous Lo a deed of sale, ls made Lhrough a
publlc lnsLrumenL, lLs execuLlon ls equlvalenL Lo
Lhe dellvery of Lhe properLy. 2$*BS&'8 _#1 01
2$*BS&'GR$.4*V$8 D;: <2)6 9@C ?9EE:A1
=

! under ArLlcle 1498, Lhe mere execuLlon of Lhe
deed of conveyance ln a publlc lnsLrumenL ls
equlvalenL Lo Lhe dellvery of Lhe properLy, and
LhaL prlor physlcal dellvery or possesslon ls noL
legally requlred, slnce ownershlp and
possesslon are Lwo enLlrely dlfferenL legal
concepLs. noLwlLhsLandlng Lhe presence of
lllegal occupanLs on Lhe sub[ecL properLy,
Lransfer of ownershlp by symbollc dellvery
under ArLlcle 1498 can sLlll be effecLed Lhrough
Lhe execuLlon of Lhe deed of conveyance.
!<$SB* 01 W.4&#.$4B*.$, 2*#7*#$4& -$./8 C:D
<2)6 CJ> ?9EE=A1
o As a general rule, when Lhe sale ls made Lhrough a
publlc lnsLrumenL, Lhe execuLlon Lhereof shall be
equlvalenL Lo Lhe dellvery of Lhe Lhlng whlch ls Lhe
ob[ecL of Lhe conLracL, lf from Lhe deed Lhe conLrary
does noL appear or cannoL clearly be lnferred. ln order
Lhe execuLlon of a publlc lnsLrumenL Lo effecL LradlLlon,

1
1otloq v. Motcello, 319 SC8A 79 (2007), ue leoo v. Ooq, 611 SC8A 381 (2010).
Lhe purchaser musL be placed ln conLrol of Lhe Lhlng
sold. A person who does noL have acLual possesslon of
Lhe Lhlng sold cannoL Lransfer consLrucLlve possesslon
by Lhe execuLlon and dellvery of a publlc lnsLrumenL.
6''&4 R#B0$4BO$4B*. "#3'4 01 "1_1 Z.4&#7#B'&'8 >J@ <2)6
DJ= ?9EE;A1
! 1here ls noLhlng ln ArLlcle 1498 LhaL provldes
LhaL execuLlon of a deed of sale ls a concluslve
presumpLlon of dellvery of possesslon,
presumpLlve dellvery can be negaLed by Lhe
fallure of Lhe vendee Lo Lake acLual possesslon
of Lhe land or Lhe conLlnued en[oymenL of
possesslon by Lhe vendor. <$.4*' 01 <$.4*'8 C::
<2)6 C;> ?9EE=A.
2


<$.4*' 01 <$.4*'

Iacts: !esus and 8osalla owned a loL wlLh a 4-door aparLmenL. 1hey sold
Lhrough a publlc lnsLrumenL Lhe sald properLy Lo Lhelr chlldren, Salvador
and 8osa-who sold her share Lo Salvador as well. noneLheless, ln splLe
of Lhe sale, 8osalla remalned ln possesslon and conLrol over Lhe
properLy. !esus, 8osalla and Salvador dled. Zenalda, clalmlng Lo be
Salvador's helr, demanded renL from Lhe LenanLs. 1he oLher chlldren of
!esus and 8osalla flled a case for reconveyance averrlng LhaL Lhe sale Lo
Salvador was flcLlLlous and done merely Lo accommodaLe hlm.


2
poototlol keolty uev. loc. v. Moyfolt 1beotet, loc., 370 SC8A 36 (2001),
oqteso v. ue lo ctoz, 401 SC8A 217 (2003), 1eo lotty keolty ooJ uev. cotp. v.
ctoz, 410 SC8A 484 (2003), copoyoc v. ue 5olos, 304 SC8A 176 (2006).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Issue: WheLher or noL a sale Lhrough a publlc lnsLrumenL LanLamounL Lo
dellvery of Lhe Lhlng sold.

ne|d: nC. 1here ls noLhlng ln ArLlcle 1498 LhaL provldes LhaL execuLlon
of a deed of sale ls a concluslve presumpLlon of dellvery of possesslon,
presumpLlve dellvery can be negaLed by Lhe fallure of Lhe vendee Lo
Lake acLual possesslon of Lhe land or Lhe conLlnued en[oymenL of
possesslon by Lhe vendor. lor Lhe execuLlon of a publlc lnsLrumenL Lo
effecL LradlLlon, Lhe purchaser musL be placed ln conLrol of Lhe Lhlng
sold. 1o effecL dellvery, Lhere musL be Lhe acLual lnLenLlon of Lhe vendor
Lo dellver, and lLs accepLance by Lhe vendee

! 1he presumpLlve dellvery by Lhe execuLlon of a
publlc lnsLrumenL can be negaLed by Lhe fallure
of Lhe vendee Lo Lake acLual possesslon of Lhe
land sold. 2&S3 QB.,$.% K&01 2*#71 01 U.F <B$*
H3$8 >JJ <2)6 =9E ?9EE;A1
o lssuance of an acknowledgmenL recelpL of parLlal
paymenL, when lL ls noL a publlc lnsLrumenL does noL
convey LlLle. !<$. \*#&.O* K&01 2*#71 01 2*3#4 *5
677&$,'8 DD; <2)6 ;; ?9EE>A1
o Cases where execut|on of pub||c |nstrument cover|ng
va||d sa|es do not produce the effects of trad|t|on:
a. When Lhere ls a conLrary sLlpulaLlon. RMB,1 <3S3#S$.
K&01 01 63%B4*#8 :C <2)6 C;@ ?=;@>A
b. AL Lhe Llme of Lhe execuLlon of Lhe publlc lnsLrumenL,
Lhe sub[ecL maLLer was noL sub[ecL Lo Lhe conLrol of Lhe
seller 6%%B'*. 01 Y&,B!, CJ RMB,1 DED ?=;=JA,

6%%B'*. 01 Y&,B!

Iacts: Spouses Marclana lellx and 8alblno 1loco boughL 4 parcels of
land from A. A. Addlson. lellx pald aL Lhe Llme of execuLlon 3000 and
Lhe manner of paymenL for subsequenL lnsLallmenLs were sLlpulaLed by
Lhe parLles. 1he conLracL also provlded for a sLlpulaLlon for resclsslon
wlLhln 1 year from Lhe lssuance of LlLle Lo Lhe properLy, and shall effecL
resLlLuLlon among Lhe parLles. Addlson flled a sulL ln Lhe Cll of Manlla
clalmlng Lhe flrsL lnsLallmenL of 2000. uefendanLs conLesLed LhaL Lhe
properLy was noL dellvered, hence Lhey asked for a refund.

Issue: WheLher or noL Lhere was dellvery and, Lherefore, a Lransfer of
ownershlp of Lhe Lhlng sold.

ne|d: nC. 1he Lhlng ls consldered Lo be dellvered when lL ls placed "ln
Lhe hands and possesslon of Lhe vendee." (ArLlcle 1462). lL ls Lrue LhaL
Lhe same arLlcle declares LhaL Lhe execuLlon of a publlc lnsLrumenLs ls
equlvalenL Lo Lhe dellvery of Lhe Lhlng whlch ls Lhe ob[ecL of Lhe
conLracL, buL, ln order LhaL Lhls symbollc dellvery may produce Lhe
effecL of LradlLlon, lL ls necessary LhaL Lhe vendor shall have had such
conLrol over Lhe Lhlng sold LhaL, aL Lhe momenL of Lhe sale, lLs maLerlal
dellvery could have been made. lL ls noL enough Lo confer upon Lhe
purchaser Lhe ownershlp and Lhe rlghL of possesslon. 1he Lhlng sold
musL be placed ln hls conLrol.

Doctr|ne:

! Powever, lf Lhere was an express agreemenL
LhaL Lhe buyer had Lo Lake necessary sLeps Lo
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
obLaln maLerlal possesslon, and lL was proven
LhaL Lhe buyer knew Lhe sub[ecL maLLer Lo be ln
possesslon of a Lhlrd parLy, such agreemenL ls
valld. 1he seller ls deemed Lo have complled
wlLh hls obllgaLlon Lo dellver by Lhe execuLlon of
Lhe publlc lnsLrumenL
c. Genera| ku|e: noL only musL Lhe seller have conLrol aL
Lhe execuLlon of Lhe lnsLrumenL, such conLrol or ablllLy
Lo Lransfer physlcal possesslon musL subslsL for a
reasonable lengLh of Llme. K$.F3B,$. 01 W.4&#^&%B$4&
677&,,$4& 2*3#4, =:J <2)6 99 ?=;JJAb R$'$F3B 01
aB,,$S,$.I$8 :J <2)6 =J ?=;@>A.

K$.F3B,$. 01 W.4&#^&%B$4& 677&,,$4& 2*3#4

Iacts: Apolonla flled a complalnL agalnsL uangullan for recovery of Lwo
loLs. She clalmed Lo have purchased Lhese loLs from uomlngo Melad and
moved ouL because uangullan asked lf he could culLlvaLe Lhe lands.
uomlngo clalms uomlngo slgned prlvaLe lnsLrumenLs conveylng sald
properLles on Lhe undersLandlng LhaL Lhe laLLer would Lake care of Lhe
granLor and arrange for hls burlal.

Issue: Who has a beLLer clalm Lo Lhe properLy?

ne|d: uACulLAn. AL Lhe onseL, Lhe donaLlon ln favor of uangullan was
valld even Lhough embodled ln a prlvaLe lnsLrumenL, because lL was an
onerous donaLlon. 1he deed of sale presenLed by Apolonla was also
susplclous. lL was only 3 years old and Lhe conslderaLlon was pald for by
her moLher. Assumlng LhaL lL was valld, sLlll Lhe presumpLlve dellvery ls
overcome by Lhe facL LhaL she falled Lo Lake possesslon of Lhe properLy.
Cwnershlp, afLer all, ls noL Lransferred by mere sLlpulaLlon buLby acLual
and adverse possesslon. She even Lransferred Lhe same Lo uangullan
possesslon of Lhe same. She cannoL have a beLLer rlghL ln Lhls case Lhan
uangullan.

Doctr|ne:

R$'$F3B 01 aB,,$S,$.I$

Iacts: asagul purchased a parcel of land form Lhe 8ocar Spouses for
2,800, whlch was embodled ln a publlc lnsLrumenL. 1hey falled Lo Lake
possesslon of Lhe properLy because Lhe vlllablancas lllegally Look
possesslon of Lhe properLy and harvesLed Lhe coconuLs Lhereln. 1hus,
asagul flled a case for e[ecLmenL before Lhe Cll. 1he 8ocar spouses
were llkewlse lmpleaded. 1he laLLer conLesLed LhaL Lhe case should be
dlsmlssed because Lhe Cll dld noL have [urlsdlcLlon over forclble enLry
cases.

lssue: WheLher or noL Lhls ls a case of forclble enLry.

ne|d: nC. 1he case was noL for forclble enLry because Lhere was no
allegaLlon LhaL asagul was ln prlor physlcal possesslon of Lhe land and
LhaL Lhe vlllablancas, Lhrough force, sLealLh, or LhreaL, deprlved Lhem
Lhereof. Whlle Lhe sale was made Lhrough a publlc documenL ls
equlvalenL Lo dellvery, Lhls presumpLlon only holds Lrue lf Lhere ls no
lmpedlmenL Lo Lhe possesslon of Lhe purchaser. Such ls noL Lhe case
here. Slnce asagul had noL yeL acqulred physlcal possesslon of Lhe land,
Lhe case was noL one for forclble enLry and Lhe Cll (noL munlclpal
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
courLs) has [urlsdlcLlon.

1he seller musL have acLual conLrol of Lhe ob[ecL of sale aL Lhe Llme of
Lhe execuLlon of Lhe lnsLrumenL, and such conLrol/ablllLy Lo Lransfer
physlcal possesslon musL subslsL for a reasonable amounL of Llme afLer
Lhe execuLlon of Lhe lnsLrumenL. asagul had noL yeL acqulred physlcal
possesslon of Lhe land because no dellvery was ever made by Lhe seller,
even by consLrucLlve dellvery LhaL proves acLual possesslon and conLrol.

Doctr|ne:

! 1hls ls an lmporLanL lngredlenL for consLrucLlve
dellvery, oLherwlse, Lhe execuLlon of a publlc
lnsLrumenL, as a mode of dellvery, would creaLe
undue burden on Lhe buyer, who would be
compelled Lo llLerally [ump" lnLo Lhe
possesslon of Lhe sub[ecL maLLer soon afLer
slgnlng Lhe lnsLrumenL, for he would Lhen
obLaln no remedy from Lhe seller
d. Lxcept|on: When buyer assumes Lhe rlsks of ownershlp
and possesslon. R*]&# 2*^^&#IB$, $.% W.%3'4#B$, 2*#71
01 2*3#4 *5 677&$,'8 274 SCkA S97 (1997).

R*]&# 2*^^&#IB$, $.% W.%3'4#B$, 2*#71 01 2*3#4 *5 677&$,'

Iacts: ClC boughL a properLy from spouses Culambao. ClC also
assumed morLgage on Lhe land ln favor of n8. Spouses agaln
morLgaged Lhe land Lo n8 Lo guaranLee a loan. ClC assumed Lhls
morLgage also, so parLles execuLed a ueed of AbsoluLe Sale wlLh
AssumpLlon of MorLgage, along wlLh Lhe appllcaLlon for assumpLlon of
morLgage, Lo n8. ClC flled for resclsslon of Lhe conLracL for
Culambaos' fallure Lo e[ecL Lhe lessees and Lransfer physlcal possesslon
Lo Lhem. uurlng Lhe pendency of Lhe case, Lhe morLgage was foreclosed
and n8 was Lhe hlghesL bldder aL Lhe publlc aucLlon.

Issues: WheLher or noL Lhe conLracL may be resclnded due Lo a
subsLanLlal breach of Lhe conLracL-fallure Lo e[ecL LenanLs and vlolaLlon
of warranLy agalnsL evlcLlon.

ne|d: nC. uellvery can be acLual or consLrucLlve. Symbollc dellvery, as a
specles of consLrucLlve dellvery, may be prevenLed lf Lhe vendor does
noL possess conLrol over Lhe Lhlng sold, ln whlch case Lhls legal flcLlon
musL yleld Lo reallLy. Pere, Lhe loL had been placed ln ClC's conLrol.
1haL's why Lhey were able Lo flle Lhe e[ecLmenL cases subsequenLly.
Slnce e[ecLmenL of lessees was noL sLlpulaLed as a condlLlon, lL cannoL
be lnvoked as a cause Lo allow ClC Lo resclnd lLs conLracL. ln facL, ClC
was aware of Lhe presence of Lhe LenanLs when lL enLered lnLo Lhe
conLracL of sale hence lL assumed Lhe rlsks of ownershlp and possesslon.
ower Commerclal was deprlved of ownershlp only afLer lL falled Lo
remlL Lhe amorLlzaLlons, buL noL due Lo fallure of dellvery.

Doctr|ne:

! LxecuLlon of ueed of CondlLlonal Sale wlLh
provlslon LhaL flnal deed of sale Lo be execuLed
upon full paymenL does noL Lransfer ownershlp
of Lhe sub[ecL maLLer. !Y*#43.& "*S$II* 2*#71
01 c\)28 9EE <2)6 @:: ?=;;=A
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o keg|strat|on of 1|t|e Is Separate Mode from Lxecut|on
of ub||c Instrument " 1he recordlng of Lhe sale wlLh
Lhe proper 8eglsLry of ueeds and Lhe Lransfer of Lhe
cerLlflcaLe of LlLle ln Lhe name of Lhe buyer are
necessary only Lo blnd Lhlrd parLles Lo Lhe Lransfer of
ownershlp. As beLween Lhe seller and Lhe buyer, Lhe
Lransfer of ownershlp Lakes effecL upon Lhe execuLlon
of a publlc lnsLrumenL conveylng Lhe real esLaLe. 2M3$
01 2*3#4 *5 677&$,'8 DE= <2)6 >D ?9EECA.

2M3$ 01 2*3#4 *5 677&$,'

Iacts: valdes-Choy ls Lhe owner of Lhe sub[ecL maLLer, when she
adverLlsed Lhe properLy for sale. Chua responded Lo Lhe adverLlsemenL,
and meL up wlLh valdes-Choy. 1hey agreed for Lhe purchase prlce of
10,800,000, Lo be pald on !uly 13, 1989. 1hls was evldenced by an
earnesL money for 100,000, whlch was puL on a recelpL, sLaLlng LhaL
Lhe money wlll be forfelLed upon fallure Lo pay on Lhe day sLlpulaLed.
Cn !uly 13, valdes-Choy execuLed Lwo deeds of absoluLe sale, flrsL,
perLalnlng Lo Lhe house and loL, valued aL 8,000,000, and second,
perLalnlng Lo Lhe movable properLles Lhereln. 1he nexL day, Chua lssued
a check worLh 483,000 for Lhe purpose paylng Lhe caplLal galns Lax.
1he value was deducLed from Lhe balance, wlLh an ouLsLandlng value of
10,293,000 (addlLlonal 80,000 for Lhe documenLary sLamp Lax). Chua
also showed a check worLh 10,213,00 Lo valdes-Choy, however, he
demanded LhaL Lhe 1C1 should flrsL be Lransferred Lo hls name before
paylng Lhe check. CuL of anger, valdes- Choy Lore Lhe deed of absoluLe
sale. Cn Lhe reckonlng daLe, valdes-Choy Lrled Lo make a compromlse
wlLh Chua, buL she dld noL geL any response. 1wo days laLer, Chua flled
an acLlon for speclflc performance, whlch Lhe Lrlal courL dlsmlssed. A
week laLer, he flled anoLher acLlon for speclflc performance, where Lhe
courL ruled ln favor of hlm. Cn appeal, CourL of Appeals reversed.
1


Issue: WheLher or noL Chua can compel valdes-Choy Lo cause Lhe
lssuance of a new 1C1 ln Chua's name even before paymenL of Lhe full
purchase prlce.

ne|d: nC. 1he obllgaLlon of Lhe seller ls Lo Lransfer Lo Lhe buyer
ownershlp of Lhe Lhlng sold. 1here ls a dlfference beLween Lransfer of
Lhe cerLlflcaLe of LlLle ln Lhe name of Lhe buyer, and Lransfer of
ownershlp Lo Lhe buyer. 8eglsLraLlon of LlLle ls separaLe mode from
execuLlon of publlc lnsLrumenL. 1he recordlng of Lhe sale wlLh Lhe
proper 8eglsLry of ueeds and Lhe Lransfer of Lhe cerLlflcaLe of LlLle ln Lhe
name of Lhe buyer are necessary only Lo blnd Lhlrd parLles Lo Lhe
Lransfer of ownershlp. As beLween Lhe seller and Lhe buyer, Lhe Lransfer
of ownershlp Lakes effecL upon Lhe execuLlon of a publlc lnsLrumenL
conveylng Lhe real esLaLe. 1he submlsslon by a seller Lo Lhe buyer of Lhe
followlng papers would compleLe a sale of real esLaLe: (1) owner's
dupllcaLe copy of Lhe 1orrens LlLle, (2) slgned deed of absoluLe sale, (3)
Lax declaraLlon, and (4) laLesL realLy Lax recelpL.

lurLhermore, Lhelr agreemenL ls a conLracL Lo sell. llrsL, when Lhe
agreemenL was made, Lhe earnesL money ls forfelLed ln favor of valdes-
Choy who may Lhen sell Lhe land Lo oLher lnLeresLed parLles. 1hls ls Lhe
naLure of reservlng Lhe ownershlp of Lhe properLy, sub[ecL Lo Lhe full

1
AnLonlo, PlpollLo, lmperlal & Zaragosa. (2012). 5oles clv cose ulqests.
8eLrleved from hLLp://www.scrlbd.com/doc/104486360/Sales-CLv-Case-
ulgesLs
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
paymenL of Lhe purchase prlce. Second, absenL of a formal deed of
conveyance of Lhe properLy ln favor of Lhe buyer shows LhaL Lhere was
no lnLenLlon Lo Lransfer ownershlp lmmedlaLely. 1he non-fulflllmenL of
Lhe suspenslve condlLlon, whlch ls paymenL of Lhe full purchase prlce
prevenLs Lhe obllgaLlon Lo sell from arlslng, where Lhe owner reLalns Lhe
ownershlp over Lhe properLy. ArLlcle 1482 speaks of earnesL money as
an evldence of a perfecLed conLracL of sale. Powever, ln Lhls case, Lhe
earnesL money was pald ln parL conslderaLlon of a conLracL Lo sell, and
Lherefore, ArLlcle 1482 does noL apply.

Doctr|ne:

o 8U1 SLLd under ArLlcle 1493, seller ls obllged Lo Lransfer
LlLle over Lhe properLy and dellver Lhe same Lo Lhe
vendee. aB0& Z$F,& \$.%8 W.I1 01 2*3#4 *5 677&$,', DDD
<2)6 DD> ?9EEDA.

aB0& Z$F,& \$.%8 W.I 01 2*3#4 *5 677&$,'

Iacts: ln 1987, Spouses llores, as owners, sold 2 parcels of land ln
Cubao Lo 1aLlc Square lnLernaLlonal Corp for 3.7M. 1aLlc applled for a
loan wlLh CaplLal 8ual 8ank of MakaLl Lo flnance lLs purchase of Lhe sald
loLs, whlch Lhe bank granLed provlded LhaL Lhe Lorrens LlLle over Lhe loLs
would be reglsLered under lLs name as collaLeral for Lhe paymenL of Lhe
loan. ln 1988, 1aLlc sold Lhese parcels of land Lo vlve Lagle Land lnc
(vLLl) for 6.3M, alLhough Lhe Lorrens LlLles over Lhe loLs were sLlll ln
Lhe cusLody of Lhe bank. uurlng Lhe same year, vLLl sold one of Lhese
parcels of land Lo Cenulno lce Co. lnc. for 4M. Also, a deed of
asslgnmenL of rlghLs ln whlch vLLl asslgned ln favor of Cenulno lce all
rlghLs and lnLeresLs under Lhe ueed of Sale execuLed by spouses llores
and Lhe oLher ueed of Sale execuLed by 1aLlc ln vLLl's favor, ln so far as
LhaL loL ls concerned.

llores " 1aLlc (2 loLs) " vLLl (2 loLs) " Cenulno lce (1 loL)

Cenulno lce demanded LhaL vLLl pay lLs caplLal galns Lax amounLlng Lo
283,000. Powever, vLLl refused saylng LhaL Lhe Spouses llores and
1oblas (broker of Lhe sale) are responslble Lo pay Lhe Lax. Cenulno lce
flled an acLlon for speclflc performance agalnsL vLLl, conLendlng LhaL
vLLl falled Lo Lransfer LlLle Lo and ln Lhe name of Cenulno lce, Lo cause
Lhe evlcLlon of Lhe occupanLs, and Lo pay Lhe Lax and oLher dues Lo
effecLuaLe Lhe Lransfer of Lhe LlLle of Lhe properLy. 81C ruled ln favor of
Cenulno lce, CourL of Appeals afflrmed.

Issue: WheLher or noL peLlLloner vLLl ls obllged Lo pay for Lhe expenses
for Lransfer of Lhe properLy and Lhe lssuance of Lhe LlLles Lo and under
Lhe name of Lhe Cenulno.

ne|d: ?LS. under ArLlcle 1487, Lhe expenses for Lhe reglsLraLlon of Lhe
sale should be shouldered by Lhe vendor (vLLl) unless Lhere ls a
sLlpulaLlon Lo Lhe conLrary. ln Lhe absence of Lhe sLlpulaLlon of Lhe
parLles relaLlng Lo Lhe expenses for Lhe reglsLraLlon of Lhe sale and Lhe
Lransfer of Lhe LlLle Lo Lhe vendee (Cenulno lce), ArLlcle 1487 shall be
applled ln a supplemenLary manner.

under ArLlcle 1493, vLLl, as vendor, ls obllged Lo Lransfer LlLle over Lhe
properLy and dellver Lhe same Lo Lhe vendee (Cenulno lce). Whlle
ArLlcle 1498 provldes LhaL Lhe execuLlon of a noLarlzed deed of absoluLe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
sale shall be equlvalenL Lo Lhe dellvery of Lhe properLy, Lhe same shall
noL apply lf from Lhe deed Lhe conLrary does noL appear or cannoL
clearly be lnferred. ln Lhls case, Cenulno lce and vLLl agreed LhaL Lhe
laLLer would cause Lhe evlcLlon of Lhe LenanLs and dellver possesslon of
Lhe properLy. lL ls clear LhaL aL Lhe Llme Lhe peLlLloner execuLed Lhe
deed of sale ln favor of Cenulno lce, Lhere were LenanLs ln Lhe properLy.
lL cannoL be concluded LhaL Lhe properLy was Lhereby dellvered Lo
Cenulno lce.

Doctr|ne:

o Customary Steps |n Se|||ng Immovab|es "
CusLomarlly, ln Lhe absence of a conLrary agreemenL,
Lhe submlsslon by an lndlvldual seller Lo Lhe buyer of
Lhe followlng papers would compleLe a sale of real
esLaLe: (1) owner's dupllcaLe copy of Lhe 1orrens LlLle,
(2) slgned deed of absoluLe sale, (3) Lax declaraLlon, and
(4) laLesL realLy Lax recelpL. 1hey buyer can reLaln Lhe
amounL for Lhe caplLal galns Lax and pay lL upon
auLhorlLy of Lhe seller, or Lhe seller can pay Lhe Lax,
dependlng on Lhe agreemenL of Lhe parLles." 2M3$ 01
2*3#4 *5 677&$,'8 DE= <2)6 >D ?9EECA.
o 1he execuLlon of Lhe noLarlzed deed of sale and Lhe
dellvery of Lhe owner's dupllcaLe copy of Lhe orlglnal
cerLlflcaLe of LlLle Lo Lhe buyer ls LanLamounL Lo
consLrucLlve dellvery of Lhe ob[ecL of Lhe sale. NB.F'
R#*7&#4B&' 2*#71 01 T$,B%*8 :E: <2)6 =C@ ?9EE;A1
As to Incorporea| roperty (Art|c|es 1498 and 1S01).
o 3 Lypes of consLrucLlve dellvery speclflcally appllcable Lo
lncorporeal properLy:
a. LxecuLlon of a publlc lnsLrumenL, lf Lhe conLrary
does noL appear.
b. laclng of Lhe LlLles of ownershlp ln Lhe
possesslon of Lhe buyer.
c. use and en[oymenL by Lhe buyer of Lhe rlghLs
perLalnlng Lo Lhe lncorporeal properLy, wlLh Lhe
seller's consenL.
o ln Lhe sale of shares of sLock, physlcal dellvery of a sLock
cerLlflcaLe ls one of Lhe essenLlal requlslLes for Lhe
Lransfer of ownershlp of Lhe sLocks purchased.
llllnvesL's fallure Lo dellvery Lhe sLock cerLlflcaLes
represenLlng Lhe shares of sLock purchased by 1LMl and
Carcla amounLed Lo a subsLanLlal breach of Lhelr
conLracL whlch gave rlse Lo a rlghL Lo resclnd Lhe sale.
)$[3&,G<$.4*' 01 2*3#4 *5 677&$,'8 >;9 <2)6 =:;
?9EE;A1

6. Symbo||c De||very
MusL lnvolve or cover Lhe sub[ecL maLLer, and cannoL Lake a
form relaLlng Lo Lhe paymenL of Lhe purchase prlce.
o 1he lssuance of a recelpL for parLlal paymenL cannoL be
Laken Lo mean a Lransfer of ownershlp. \*#&.O* K&01
2*#71 01 2*3#4 *5 677&$,' ?DD; <2)6 ;;A
o As Lo movables, consLrucLlve dellvery may also be made
by Lhe dellvery of Lhe keys of Lhe place or deposlLary
where Lhe movable ls sLored or kepL.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
7. Const|tutum ossessor|um (Art|c|e 1S00)
1he seller held possesslon ln Lhe concepL of owner, and
pursuanL Lo Lhe conLracL, Lhe seller conLlnues possesslon, buL as
lesee, or any oLher form of possesslon oLher Lhan ln Lhe concepL
of an owner.
A provlslon ln Lhe deed of sale granLlng Lo seller a rlghL Lo lease
Lhe sub[ecL maLLer of Lhe sale ls valld: Lhe possesslon ls deemed
Lo be consLlLuLed ln Lhe vendee by vlrLue of Lhls mode of
LradlLlon." !6^BF* 01 "&0&'8 ;: RMB,1 9>9 ?=;>DA.

8. 1rad|t|o 8rev| Manu
CpposlLe of consLlLuLum possessorlum.
1he buyer ls already ln Lhe possesslon of Lhe properLy before
Lhe sale, buL noL ln Lhe concepL of Lhe owner. AfLer Lhe sale, Lhe
buyer becomes possesor ln Lhe concepL of owner.
rlor Lo Lhe sale, peLlLloners were ln possesslon of Lhe sub[ecL
properLy as lessees. upon sale Lo Lhem of Lhe rlghLs, lnLeresLs
and parLlclpaLlon as Lo Lhe x porLlon pro lndlvlso, Lhey
remalned ln possesslon, noL ln Lhe concepL of lessees anymore
buL as owners now Lhrough symbollc dellvery known as LradlLlo
brevl manu. !H&B#' *5 R&%#* Z'I$.,$# 01 2*3#4 *5 677&$,'8 9J=
<2)6 =@: ?=;;@A.

9. 1rad|t|o Longa Manu
uellvery by mere agreemenL, such as when Lhe seller polnLs Lhe
properLy sub[ecL maLLer of Lhe sale by way of dellvery wlLhouL
need of acLually dellverlng physlcal possesslon.

10. De||very by Negot|ab|e Document of 1|t|e
A negoLlable documenL of LlLle represenLs Lhe acLual goods. lf lL
ls Lransferred ln good falLh and for value, and lf Lhe Lransferor
had Lhe ablllLy Lo convey, lL ls equlvalenL Lo Lhe Lransfer of Lhe
Lhlng lLself (Lxample: negoLlable warehouse recelpL).
lf Lhe documenL of LlLle has merely been asslgned, and noL
negoLlaLed, Lhe Lransferee/asslgnee only acqulres Lhe
Lransferor's LlLle.

D. 1ransfer Cwnersh|p to Vendee Upon De||very (Art|c|es 1477, 1478,
and 1496)

Art|c|e 1477.
1he ownersh|p of the th|ng so|d sha|| be transferred to the vendee
upon the actua| or construct|ve de||very thereof. (n)

Art|c|e 1478.
1he part|es may st|pu|ate that ownersh|p |n the th|ng sha|| not pass to
the purchaser unt|| he has fu||y pa|d the pr|ce. (n)

1. 2 1h|ngs Must 8e resent to make de||very produce |ts |ega|
effect:
a. De||very must be made pursuant to a va||d sa|e
o 1radlLlon perLalns Lo Lhe consummaLlon sLage of sale,
Lhus, lL presupposes a valld sale.
o When a sale ls flcLlLlous, no LlLle over Lhe sub[ecL maLLer
of Lhe sale can be conveyed.
b. De||very must be made when se||er has ownersh|p
over the sub[ect matter of sa|e so de||vered
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o no man can dlspose of LhaL whlch does noL belong Lo
hlm.

2. 1o Whom De||very Must 8e Made
Genera| ku|e: uellvery musL be made Lo Lhe buyer or hls duly
auLhorlzed represenLaLlves named ln Lhe conLracL. \$F**. 01
H**0&. 2*^$,I* W.%3'4#B&'8 W.I18 CD; <2)6 C:C
Lxcept|on: Powever, parLles can valldly sLlpulaLe how dellvery ls
Lo be made and Lo whom.

3. When 8uyer kefuses to Accept (Art|c|e 1S88)
Lven lf Lhe buyer refuses Lo accepL, Lhe dellvery by Lhe seller wlll
produce lLs legal effecLs. Powever, Lhe seller ls sLlll legally
obllged Lo Lake cerLaln sLeps as noL Lo be held llable for
consequenL loss or damage Lo Lhe goods.

4. In Case of Lxpress or Imp||ed keservat|on (Art|c|es 1478 and
1S03)

L. 1ak|ng-Cut Insurance Coverage (Art|c|e 1S23)

Art|c|e 1S23.
Where, |n pursuance of a contract of sa|e, the se||er |s author|zed or
requ|red to send the goods to the buyer, de||very of the goods to a
carr|er, whether named by the buyer or not, for the purpose of
transm|ss|on to the buyer |s deemed to be a de||very of the goods to
the buyer, except |n the cases prov|ded for |n art|c|e 1S03, f|rst, second
and th|rd paragraphs, or un|ess a contrary |ntent appears.

Un|ess otherw|se author|zed by the buyer, the se||er must make such
contract w|th the carr|er on beha|f of the buyer as may be reasonab|e,
hav|ng regard to the nature of the goods and the other c|rcumstances
of the case. If the se||er om|t so to do, and the goods are |ost or
damaged |n course of trans|t, the buyer may dec||ne to treat the
de||very to the carr|er as a de||very to h|mse|f, or may ho|d the se||er
respons|b|e |n damages.

Un|ess otherw|se agreed, where goods are sent by the se||er to the
buyer under c|rcumstances |n wh|ch the se||er knows or ought to know
that |t |s usua| to |nsure, the se||er must g|ve such not|ce to the buyer
as may enab|e h|m to |nsure them dur|ng the|r trans|t, and, |f the se||er
fa||s to do so, the goods sha|| be deemed to be at h|s r|sk dur|ng such
trans|t. (n)

1hls mode only applles Lo Lhe sale of goods.
Genera| ku|e: ln Lhe absence of conLrary sLlpulaLlon, dellvery Lo
Lhe carrler ls deemed dellvery Lo Lhe buyer. 1he carrler acLs as
an agenL of Lhe buyer.

I. 1|me and |ace of De||very (Art|c|e 1S21)

Art|c|e 1S21.
Whether |t |s for the buyer to take possess|on of the goods or of the
se||er to send them to the buyer |s a quest|on depend|ng |n each case
on the contract, express or |mp||ed, between the part|es. Apart from
any such contract, express or |mp||ed, or usage of trade to the
contrary, the p|ace of de||very |s the se||er's p|ace of bus|ness |f he has
one, and |f not h|s res|dence, but |n case of a contract of sa|e of spec|f|c
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
goods, wh|ch to the know|edge of the part|es when the contract or the
sa|e was made were |n some other p|ace, then that p|ace |s the p|ace
of de||very.

Where by a contract of sa|e the se||er |s bound to send the goods to
the buyer, but no t|me for send|ng them |s f|xed, the se||er |s bound to
send them w|th|n a reasonab|e t|me.

Where the goods at the t|me of sa|e are |n the possess|on of a th|rd
person, the se||er has not fu|f|||ed h|s ob||gat|on to de||ver to the buyer
un|ess and unt|| such th|rd person acknow|edges to the buyer that he
ho|ds the goods on the buyer's beha|f.

Demand or tender of de||very may be treated as |neffectua| un|ess
made at a reasonab|e hour. What |s a reasonab|e hour |s a quest|on of
fact.
Un|ess otherw|se agreed, the expenses of and |nc|denta| to putt|ng the
goods |nto a de||verab|e state must be borne by the se||er. (n)

G. Lxpenses of Lxecut|on and keg|strat|on (Art|c|e 1487), and of
utt|ng Goods |n De||verab|e Lstate (Art|c|e 1S21)

Art|c|e 1481.
In the contract of sa|e of goods by descr|pt|on or by samp|e, the
contract may be resc|nded |f the bu|k of the goods de||vered do not
correspond w|th the descr|pt|on or the samp|e, and |f the contract be
by samp|e as we|| as descr|pt|on, |t |s not suff|c|ent that the bu|k of
goods correspond w|th the samp|e |f they do not a|so correspond w|th
the descr|pt|on.

1he buyer sha|| have a reasonab|e opportun|ty of compar|ng the bu|k
w|th the descr|pt|on or the samp|e. (n)

1. Lxpenses of Lxecut|on and keg|strat|on
unless oLherwlse sLlpulaLed: (a) under ArLlcle 1487 Lhe expenses
for Lhe reglsLraLlon of Lhe sale should be shouldered by Lhe
vendor !aB0& Z$F,& \$.%8 W.I1 01 2*3#4 *5 677&$,'8 DDD <2)6
DD> ?9EEDAb and (b) duLy Lo wlLhhold Laxes due on Lhe sale ls
lmposed on seller. !Z[3B4$S,& )&$,4+ K&0&,*7^&.4 W.I1 01
L$+5$B# "M&$4&#8 W.I18 CC9 <2)6 =C; ?9EEEA1
8uyer has more lnLeresL ln havlng Lhe caplLal galns Lax pald
lmmedlaLely slnce Lhls ls a pre-requlslLe Lo Lhe lssuance of a new
1orrens LlLle ln hls name. neverLheless, as far as Lhe
governmenL ls concerned, Lhe caplLal galns Lax remalns a
llablllLy of Lhe seller slnce lL ls a Lax on Lhe seller's galn from Lhe
sale of Lhe real esLaLe. loymeot of tbe copltol qolos tox,
bowevet, ls oot o pte-tepolslte to tbe ttoosfet of owoetsblp to
tbe boyet. 1he Lransfer of ownershlp Lakes effecL upon Lhe
slgnlng and noLarlzaLlon of Lhe deed of absoluLe sale." !2M3$ 01
2*3#4 *5 677&$,'8 DE= <2)6 >D ?9EECA1
A [udgmenL on a conLracL of sale LhaL decrees seller's
obllgaLlons Lo execuLe and dellver Lhe deed of absoluLe sale and
Lhe cerLlflcaLe of LlLle, does noL necessarlly lnclude wlLhln lLs
Lerms Lhe obllgaLlon Lo pay for Lhe expenses ln noLarlzlng a
deed of sale and ln obLalnlng new cerLlflcaLe of LlLle1 !_*'&
2,$0$.*8 W.I1 01 H\)-8 C@J <2)6 =@9 ?9EE9A

2. Lxpenses of De||very and keg|strat|on on kea| Lstate
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
ln Lhe 2002 case of _*'& 2,$0$.* 01 H\`)-8 C@J <2)6 =@9
?9EE9A8 Lhe SC held LhaL a [udgmenL on a sale LhaL decrees Lhe
obllgaLlons of Lhe seller Lo execuLe and dellver Lhe deed of
absoluLe sale and Lhe cerLlflcaLe of LlLle, does noL necessarlly
lnclude Lhe obllgaLlon on Lhe parL of Lhe seller Lo pay for
expenses ln noLarlzlng Lhe deed of sale and ln obLalnlng a new
cerLlflcaLe of LlLle.
ln Lhe 2003 case of 2M3$ 01 2*3#4 *5 677&$,'8 DE= <2)6 >D
?9EECA Lhe CourL held LhaL Lhe obllgaLlon of Lhe seller ls Lo
Lransfer ownershlp whlch ls done by Lhe execuLlon of a publlc
lnsLrumenL. 1hus, expenses for reglsLraLlon ln Lhe 8eglsLry of
ueeds, whlch merely blnds Lhlrd persons buL does noL Lransfer
ownershlp, ls Lo be borne by Lhe buyer. CaplLal galns Lax
remalns llablllLy of Lhe seller.
ln Lhe 2004 case of aB0& Z$F,& \$.%8 W.I1 01 2*3#4 *5 677&$,'8
DDD <2)6 DD> ?9EEDA Lhe SC held LhaL reglsLraLlon of Lhe sale
should be shouldered by Lhe seller unless Lhere ls a conLrary
sLlpulaLlon.
CLv doesn'L say whlch case ls correcL, buL he seems Lo favor
cboo v. coott of Appeols slnce he keeps saylng LhaL Lhe oLher 2
cases are ln sLark conLrasL Lo Chua

3. Lxpenses of De||very for Movab|es
1he expenses for dellvery are Lo be borne by Lhe seller slnce
Lhey are expenses perLalnlng Lo puLLlng Lhe goods lnLo a
dellverable sLaLe."

II. Spec|a| ku|es on Comp|eteness of De||very

A. In Case of Movab|es (Art|c|e 1S22 and 1S37, 1480)

Art|c|e 1S22.
Where the se||er de||vers to the buyer a quant|ty of goods |ess than he
contracted to se||, the buyer may re[ect them, but |f the buyer accepts
or reta|ns the goods so de||vered, know|ng that the se||er |s not go|ng
to perform the contract |n fu||, he must pay for them at the contract
rate. If, however, the buyer has used or d|sposed of the goods
de||vered before he knows that the se||er |s not go|ng to perform h|s
contract |n fu||, the buyer sha|| not be ||ab|e for more than the fa|r
va|ue to h|m of the goods so rece|ved.

Where the se||er de||vers to the buyer a quant|ty of goods |arger than
he contracted to se||, the buyer may accept the goods |nc|uded |n the
contract and re[ect the rest. If the buyer accepts the who|e of the
goods so de||vered he must pay for them at the contract rate.

Where the se||er de||vers to the buyer the goods he contracted to se||
m|xed w|th goods of a d|fferent descr|pt|on not |nc|uded |n the
contract, the buyer may accept the goods wh|ch are |n accordance
w|th the contract and re[ect the rest.

In the preced|ng two paragraphs, |f the sub[ect matter |s |nd|v|s|b|e,
the buyer may re[ect the who|e of the goods.

1he prov|s|ons of th|s art|c|e are sub[ect to any usage of trade, spec|a|
agreement, or course of dea||ng between the part|es. (n)

Art|c|e 1480.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Any |n[ury to or benef|t from the th|ng so|d, after the contract has
been perfected, from the moment of the perfect|on of the contract to
the t|me of de||very, sha|| be governed by art|c|es 1163 to 116S, and
1262.

1h|s ru|e sha|| app|y to the sa|e of fung|b|e th|ngs, made |ndependent|y
and for a s|ng|e pr|ce, or w|thout cons|derat|on of the|r we|ght,
number, or measure.

Shou|d fung|b|e th|ngs be so|d for a pr|ce f|xed accord|ng to we|ght,
number, or measure, the r|sk sha|| not be |mputed to the vendee unt||
they have been we|ghed, counted, or measured and de||vered, un|ess
the |atter has |ncurred |n de|ay. (14S2a)

1. When Goods ne|d by 1h|rd arty
When goods are ln Lhe possesslon of a Lhlrd parLy aL Lhe Llme of
Lhe sale, Lhe seller has noL fulfllled hls obllgaLlon Lo dellver
unless and unLll Lhe Lhlrd person acknowledges Lo Lhe buyer
LhaL he holds Lhe goods on Lhe buyer's behalf. (ArLlcle 1321)
When Lhe conLracL does noL provlde for Lhe measurlng or
welghlng of a sold speclflc mass, and Lhe prlce agreed upon was
noL based on such measuremenL, Lhen [L]he sub[ecL maLLer of
Lhe sale ls, Lherefore, a deLermlnaLe ob[ecL, Lhe mass, and noL
Lhe acLual number of unlLs or Lons conLalned Lhereln, so LhaL all
LhaL ls requlred of seller was Lo dellver ln good falLh Lo hls buyer
all of Lhose found ln Lhe mass, noLwlLhsLandlng LhaL Lhe
quanLlLy dellvered ls less Lhan Lhe amounL esLlmaLed ln Lhe
conLracL." !T$B4& 01 Y*.$IB&#8 9 <2)6 JC= ?=;:=A1

2. keservat|on of Cwnersh|p
Cwnershlp wlll noL Lransfer Lo Lhe buyer ln case of express
reservaLlon ln Lhe conLracL, such as when Lhe parLles sLlpulaLe
LhaL ownershlp wlll noL Lransfer unLll Lhe purchase prlce ls full
pald, or unLll cerLaln condlLlons are fulfllled. (ArLlcle 1478,
ArLlcle 1303)
o 1echnlcally speaklng, Lhls does noL refer Lo condlLlonal
conLracLs of sale or conLracLs Lo sell where Lhe
condlLlons refer Lo Lhe perfecLlon of Lhe conLracL.
o 1he condlLlons menLloned here refer Lo Lhe
consummaLlon sLage of Lhe conLracL.
ArLlcle 1303 of Lhe Clvll Code glves lnsLances where reservaLlon
of ownershlp ls lmplled:
a. Coods are shlpped, and by Lhe blll of ladlng Lhe goods
are dellverable Lo Lhe seller or hls agenL, Lhe seller
reserves ownershlp of Lhe goods. 8uL, lf excepL from Lhe
form of Lhe blll of ladlng, ownershlp would have passed
Lo Lhe buyer, Lhe seller's properLy ln Lhe goods shall be
deemed Lo be only for purpose of securlng performance
of Lhe buyer's obllgaLlon, ln whlch case Lhe buyer bears
Lhe rlsk of loss.
b. Coods are shlpped, and by Lhe blll of ladlng Lhe goods
are dellverable Lo Lhe buyer, buL possesslon of Lhe blll of
ladlng ls reLalned by Lhe seller, Lhe seller reserves a rlghL
Lo Lhe possesslon of Lhe goods, and ownershlp ls sLlll
Lransferred Lo Lhe buyer
c. Seller draws on Lhe buyer for Lhe prlce, and LransmlLs
Lhe blll of exchange and Lhe blll of ladlng LogeLher Lo Lhe
buyer, Lhe buyer ls bound Lo reLurn Lhe blll of ladlng lf
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
he does noL honor Lhe blll of exchange. lf he reLalns Lhe
blll of ladlng, he does noL acqulre any added rlghL.
! lf Lhe blll of ladlng provldes LhaL Lhe goods are
dellverable Lo Lhe buyer, one who purchases ln
good falLh and for value Lhe blll of ladlng or Lhe
goods from Lhe buyer, wlll obLaln ownershlp,
provlded LhaL Lhe blll of ladlng ls lndorsed Lo
such purchaser

3. ku|es on De||very to Carr|er (Art|c|e 1S23)
a. IAS Sa|es ("Ire|ght A|ong S|de")" 1he seller pays all
charges and ls sub[ecL Lo rlsk unLll Lhe goods are placed
alongslde Lhe vessel". !61 <*#B$.* e 2B$1 01 2*,,&I4*#8 ;@
RMB,1 >E> ?=;>>A.
o uellvery of Lhe goods alongslde Lhe vessel compleLes
Lhe effecL of dellvery.
b. IC8 Sa|es ("Iree on board") " ln mercanLlle conLracLs
of Amerlcan orlgln, l.C.8." sLand for Lhe words lree
on 8oard," l.e., LhaL Lhe seller shall bear all expenses
unLll Lhe goods are dellvered accordlng as Lo wheLher
Lhe goods are Lo be dellvered l.C.8." aL Lhe polnL of
shlpmenL or aL Lhe polnL of desLlnaLlon deLermlnes Lhe
Llme when properLy passes. -&M. L&+&# P 2*1 01
e$.FI*8 CJ RMB,1 :E98 :E: ?=;=JA.
1

o l. C. 8. shlpplng polnL" " dellvery of Lhe goods Lo Lhe
carrler ls equlvalenL Lo dellvery Lo Lhe buyer. 8lsk of loss
perLalns Lo Lhe buyer.

1
cboo Nqo v. uolvetsol 1toJloq co., loc., 87 hll. 331 (1930).
o l. C. 8. desLlnaLlon" " dellvery Lo Lhe buyer Lakes
place upon arrlval of Lhe vessel aL Lhe polnL of
desLlnaLlon. rlor Lo arrlval, rlsk of loss perLalns Lo Lhe
seller.
c. CII Sa|es ("Costs, |nsurance, and fre|ght") " 1wo
schools of LhoughL:
o 1he carrler acLs as an agenL of Lhe buyer, and Lherefore,
dellvery Lo Lhe carrler ls dellvery Lo Lhe buyer. 1he buyer
Lhus obLalned ownershlp. T&.&#$, Y**%' 01 c62U2U8
=EE RMB,1 CC@ ?=;>:A.
o C.l.l." found ln 8rlLlsh conLracLs sLand for cosLs,
lnsurance, and frelghL, Lhey slgnlfy LhaL Lhe prlce flxed
covers noL only Lhe cosLs of Lhe goods, buL Lhe expense
of frelghL and lnsurance Lo be pald by Lhe seller. -&M.
L&+&# P 2*1 01 e$.FI*, 38 h||. 602, 606 (1918).
o under an arrangemenL c.l.f. aclflc CoasL"
(desLlnaLlon), Lhe vendor ls Lo pay noL only Lhe cosL of
Lhe goods, buL also Lhe frelghL and lnsurance expenses,
and, as lL was [udlclally lnLerpreLed, Lhls ls Laken Lo
lndlcaLe LhaL Lhe dellvery ls Lo be made aL Lhe porL of
desLlnaLlon." R$IB5BI a&F&4$S,& UB, 2*#71 01 <B.FO*.8
<37#&^& 2*3#4 6%0$.I& K&IB'B*.'8 9; 67#B, =;>>1
1hese shlpplng arrangemenLs creaLe presumpLlve effecLs whlch
can gulde Lhe courLs ln consLrulng when consLrucLlve dellvery
occurs. Powever, such presumpLlons musL necessarlly glve way
Lo any sLlpulaLlon or lnLlmaLlon Lo Lhe conLrary, as Lhese show
Lhe lnLenL of Lhe parLles. lL ls sLlll Lhe lnLenLlon of Lhe parLles
whlch conLrol Lhe agreemenL.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
-&M.8 L&+&# P 2*1 01 e$.FI*

Iacts: ?angco ordered 80 drums of causLlc soda Carabao 8rand" from
8hen & Meyer. 1he lnsLrumenL evldenclng Lhe agreemenL made use of
Lhe Lerms lC8" and Cll." 1he goods were deLalned by Lhe 8rlLlsh
auLhorlLles ln enang. 8hen & Meyer alleges LhaL ?angco had already
acqulred ownershlp of Lhe sald goods and should Lhus pay for Lhe
purchase prlce. Powever, ?angco refused Lo accepL Lhe same alleglng
LhaL Lhe goods were noL Carabao 8rand" and LhaL Lhe same were
adulLeraLed.

Issue: WheLher or noL Lhe seller ls llable.

ne|d: ?LS. ConLracL provlded for c.l.f. Manlla..." 1he Lerm c.l.f.
presumes LhaL properLy passes (consldered dellvered) Lo Lhe buyer
upon dellvery Lo Lhe common carrler. f.o.b." presumes LhaL Lhe seller ls
responslble unLll dellvery ls made Lo desLlnaLlon. 8uL Lhese are [usL
presumpLlons. lnLenL ls sLlll conLrolllng. AlLhough c.l.f." was used, lL ls
clear from Lhe conLracL LhaL Lhe parLles lnLended Lhe seller Lo be llable
unLll dellvery was made Lo desLlnaLlon (Manlla). noL havlng been
fulfllled, buyer has a rlghL Lo resclnd for subsLanLlal breach.

Doctr|ne:

T&.&#$, Y**%' 01 c62U2U

Iacts: nACCCC (based ln Manlla) sold 1000 Lons of copra Lo ClC. lL was
shlpped Lo ClC (new ?ork) aboard Lhe SS Mlndoro. nACCCC wlLhdrew
from ClC's leLLer of credlL Lhe amounL correspondlng Lo Lhe copra. 8uL
ClC only recelved 800 Lons so lL demanded a refund correspondlng Lo
Lhe prlce of Lhe deflclency. nACCCC's defense ls LhaL slnce Lhe conLracL
was c.l.f., dellvery Lo Lhe carrler (SS Mlndoro) was equlvalenL Lo dellvery
Lo Lhe buyer (ClC).

Issue: WheLher or noL nACCCC ls llable Lo refund.

ne|d: ?LS. Whlle ln ordlnary c.l.f. dellvery Lo Lhe carrler ls dellvery Lo Lhe
buyer, Lhe parLles can lnserL sLlpulaLlons. Pere, Lhe parLles sLlpulaLed
LhaL Lhe prlce Lo be pald would be based on Lhe exacL neL welghL upon
arrlval aL porL of desLlnaLlon. nACCCC had burden Lo prove LhaL Lhe
deflclency ln welghL was owlng Lo rlsks of Lhe voyage or allowable
welghlng errors and noL Lhe drylng up of Lhe copra. lL dld noL prove.

Doctr|ne:

R$IB5BI a&F&4$S,& UB, 2*#71 01 <B.FO*.

Iacts: eLlLloner and respondenL enLered lnLo a conLracL ln Lhe uS
whereby Slngzon agreed Lo shlp 300 Lons of copra, wlLh Lhe agreemenL
Cll, aclflc CoasL. Slngzon falled Lo dellver, buL Lhe parLles enLered lnLo
a seLLlemenL, whereby Slngzon would dellver 300 Lons aL Lhe same
Lerms Lhe conLracL provlded LhaL should Slngzon agaln defaulL, he would
pay $10,000 for damages and Lhe orlglnal conLracL would be revlved.
Slngzon agaln falled Lo shlp Lhe copra, and he dld noL pay Lhe flne or
shlp Lhe 300 Lons as orlglnally agreed. aclflc flled an acLlon Lo recover
damages. Slngzon clalms LhaL aclflc had no legal personallLy Lo sue
because lL ls a forelgn corporaLlon.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Issue: WheLher or noL Slngzon llable

ne|d: ?LS. under Lhelr arrangemenL, Lhe vendor was noL only Lo pay for
cosL, buL also frelghL and lnsurance expenses. So before arrlval aL Lhe
desLlnaLlon, Lhe rlsk of loss should be for Lhe accounL of Lhe seller.

Doctr|ne:

4. Cb||gat|on as to Accessor|es and Access|ons
1he seller musL dellver Lo Lhe buyer a quanLlLy of goods LhaL
should noL be less Lhan whaL he conLracLed Lo sell, oLherwlse
Lhe buyer may re[ecL Lhem

S. Sa|e |n Mass of Movab|es
Sale of movables ln ArLlcle 1322 musL be dlsLlngulshed from Lhe
sale of speclflc mass under ArLlcle 1480 whlch refers Lo sale of
funglble Lhlngs.
lf Lhere ls no provlslon ln Lhe conLracL for Lhe measurlng or
welghlng of Lhe funglble Lhlng, nor ls Lhe prlce agreed upon by
Lhe parLles Lo be based on such measuremenL, Lhe sub[ecL
maLLer of Lhe sale ls Lhe mass lLself, as a deLermlnaLe ob[ecL.
1he obllgaLlon Lherefore, of Lhe seller ls Lo dellver Lhe whole
mass, regardless of Lhe quanLlLy. T$B4& 01 Y*.$IB&#8 9 <2)6 JC=
?=;:=A1

6. Sa|e on Approva|, 1r|a| or Sat|sfact|on (Art|c|e 1S02)
ln a sale or reLurn," Lhe ownershlp passes Lo Lhe buyer on
dellvery pursuanL Lo a perfecLed conLracL of sale, and Lhe
subsequenL reLurn of Lhe goods reverLs ownershlp back Lo Lhe
seller. ln such case, LradlLlon as a mode of acqulrlng ownershlp
musL be lo coosepoeoce of a conLracL. !a$,,$#4$ 01 2*3#4 *5
677&$,'8 =>E <2)6 CC: ?=;J@A1
When goods are dellvered Lo Lhe buyer on sale on approval or
on Lrlal or on saLlsfacLlon," Lhe ownershlp Lhereln passes Lo Lhe
buyer only:
o When buyer slgnlfles hls approval or accepLance Lo Lhe
seller or does any oLher acL adopLlng Lhe LransacLlon, or
o lf Lhe buyer does noL slgnlfy hls approval or accepLance,
buL reLalns Lhe goods wlLhouL glvlng noLlce of re[ecLlon,
Lhen lf a Llme has been flxed for Lhe reLurn of Lhe goods,
on Lhe explraLlon of such Llme, and, lf noL Llme has been
flxed, on Lhe explraLlon of a reasonable Llme.
ln a sale on approval" (also called sale on accepLance, sale on
Lrlal" or sale on saLlsfacLlon"), Lhe dellvery of Lhe ob[ecL does
noL Lransfer ownershlp Lo Lhe buyer slnce Lhe dellvery was noL
for purposes of Lransferrlng ownershlp, slnce Lhe presLaLlon Lo
effecL a meeLlng of Lhe mlnds Lo glve rlse Lo a valld conLracL ls
lncumbenL on Lhe buyer1 !a$,,$#4$ 01 2*3#4 *5 677&$,'8 =>E
<2)6 CC: ?=;J@A1
o lncumbenL on Lhe buyer slnce lL ls dependenL on Lhe
buyer on wheLher or noL he wlll accepL such. 1he
accepLance or re[ecLlon would be Lhe deLermlnlng
facLor on wheLher or noL a valld conLracL wlll rlse.
When Lhe sale of a movable ls sale on accepLance," no
ownershlp could have been Lransferred Lo Lhe buyer desplLe
dellvery and possesslon because Lhere was sLlll no perfecLed
conLracL when dellvery was done. 1he accepLance by Lhe buyer
ls a suspenslve condlLlon whlch wlll glve rlse Lo Lhe perfecLed
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
conLracL of sale. !a$,,$#4$ 01 2*3#4 *5 677&$,'8 =>E <2)6 CC:
?=;J@A1
lor a sale Lo be a sale or reLurn" or a sale on approval," Lhere
musL be a clear agreemenL Lo elLher of such effecL, oLherwlse,
Lhe provlslons of ArLlcle 1302 of Clvll Code governlng such sales
cannoL be lnvoked by elLher parLy Lo Lhe conLracL. !W.%3'4#B$,
"&!4B,& L$.35$I43#B.F 2*1 01 \R_ Z.4&#7#B'&'8 W.I18 9=@ <2)6 C99
?=;;CA1

7. Sa|e by Descr|pt|on and]or Samp|e (Art|c|e 1481)

Art|c|e 1481.
In the contract of sa|e of goods by descr|pt|on or by samp|e, the
contract may be resc|nded |f the bu|k of the goods de||vered do not
correspond w|th the descr|pt|on or the samp|e, and |f the contract be
by samp|e as we|| as descr|pt|on, |t |s not suff|c|ent that the bu|k of
goods correspond w|th the samp|e |f they do not a|so correspond w|th
the descr|pt|on.

1he buyer sha|| have a reasonab|e opportun|ty of compar|ng the bu|k
w|th the descr|pt|on or the samp|e. (n)

Genera| ku|e: ArLlcle 1481(1), 1here ls a sale by sample when a
small quanLlLy ls exhlblLed by Lhe seller as a falr speclmen of Lhe
bulk, whlch ls noL presenL and Lhere ls no opporLunlLy Lo lnspecL
or examlne Lhe same, and Lhe parLles LreaLed Lhe sample as Lhe
sLandard of quallLy and LhaL Lhey conLracLed wlLh reference Lo
Lhe sample wlLh Lhe undersLandlng LhaL Lhe producL Lo be
dellvered would correspondenL wlLh Lhe sample. !L&.%*O$ 01
K$0B%8 DD= <2)6 =@9 ?EEDA
o ALLy. SanLlago " lf Lhe dellvered producLs does noL
conform Lo Lhe sample, Lhe buyer may choose Lo reLurn
Lhe producLs or ask for a reducLlon of prlce
o Lxcept|on: Lven ln sales by descrlpLlon and/or sample,
buyer wlll noL be released from hls obllgaLlon Lo accepL
and pay for Lhe goods by devlaLlons on Lhe parL of Lhe
seller from Lhe exacL Lerms of Lhe conLracL, lf buyer had
acqulesced Lo such devlaLlons afLer due noLlce Lhereof.
!Z.F&, 01 L$#B$.* a&,$'I* P 2*18 D@ RMB,1 ==> ?=;9DA1
When Lhe machlne dellvered ls ln accordance wlLh Lhe
descrlpLlon sLaLed ln Lhe sales conLracL, Lhe buyer cannoL refuse
Lo pay Lhe balance of Lhe purchase prlce and Lhe cosL of
lnsLallaLlon lf lL proves LhaL Lhe machlne cannoL be used
saLlsfacLorlly for Lhe purposes for whlch he boughL lL when such
purpose was noL made known Lo Lhe seller. !R$IB5BI 2*^^&#IB$,
2*1 01 Z#^B4$ L$#/&4 P 2*,% <4*#&'8 >: RMB,1 :=@ ?=;C9A1

8. 8uyer's k|ght to Inspect 8efore Acceptance (Art|c|es 1481 and
1S84), Lxcept when carr|er de||vers CCD.

8. In Case of Immovab|es
1. Where So|d er Un|t or Number (Art|c|es 1S39 and 1S40)
ln a unlL prlce sale, Lhe sLaLemenL of Lhe area of lmmovable ls
noL concluslve and Lhe prlce may be reduced or lncreased
dependlng on Lhe area acLually dellvered. lf Lhe vendor dellvers
less Lhan Lhe area agreed upon, Lhe vendee may obllge Lhe
vendor Lo dellver all LhaL ls sLaLed ln Lhe conLracL or demand for
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe proporLlonaLe reducLlon of Lhe purchase prlce lf dellvery ls
noL posslble. lf Lhe vendor dellvers more Lhan Lhe area sLaLed ln
Lhe conLracL, Lhe vendee has Lhe opLlon Lo accepL only Lhe
amounL agreed upon or Lo accepL Lhe whole area, provlded he
pays for Lhe addlLlonal area aL Lhe conLracL raLe. )3%*,5 \B&4O8
W.I1 01 2*3#4 *5 677&$,', D@J <2)6 D>= ?9EE>A
1

o lf Lhe vendor dellvers less Lhan Lhe area agreed upon,
Lhe vendee may obllge Lhe vendor Lo dellver all LhaL ls
sLaLed ln Lhe conLracL or demand for Lhe proporLlonaLe
reducLlon of Lhe purchase prlce lf dellvery ls noL
posslble.
o lf Lhe vendor dellvers more Lhan Lhe area sLaLed ln Lhe
conLracL, Lhe vendee has Lhe opLlon Lo accepL only Lhe
amounL agreed upon or Lo accepL Lhe whole area,
provlded he pays for Lhe addlLlonal area aL Lhe conLracL
raLe.

)3%*,5 \&B4O8 W.I1 01 2*3#4 *5 677&$,'

Iacts: 8espondenL 8urlol owned a parcel of unreglsLered land ln
Capsalay lsland, orL 8arLon, San vlcenLe, alawan. Pe leased 1 hecLare
of Lhls properLy Lo lLallan clLlzens 1uraLello and Sanl. 8urlol sold Lhe loL
along wlLh 4 more hecLares (LoLal of 3 hecLares) Lo peLlLloner 8udolf
LleLz, lnc. 1he deed of sale descrlbed Lhe properLy ln Lerms of area and
boundarles, noL prlce per unlL. LaLer on, 8udolf LleLz, lnc. dlscovered
LhaL 8urlol only owned 4 hecLares, noL 3, and 1 of whlch was leased Lo
hereln prlvaLe respondenLs. Pence, 8urlol was only able Lo dellver 3

1
Coyeoo v. 1ombootloq, 1 hll. 490 (1902), 5ooto Aoo v. netoooJez, 18 SC8A
973 (1966).
hecLares. 8udolf LleLz, lnc. flled a complalnL conLendlng LhaL he ls
enLlLled Lo reducLlon of Lhe purchase prlce ln accordance wlLh ArLlcle
1339 (sale wlLh sLaLemenL of area and prlce per unlL).

Issue: WheLher or noL 8udolf LleLz, lnc. ls enLlLled Lo Lhe dellvery of Lhe
enLlre flve hecLares or lLs equlvalenL.

ne|d: nC. ArLlcle 1342 (lump sum sale of land) applles. 1here shall be no
reducLlon ln prlce even lf Lhe area dellvered ls less Lhan LhaL sLaLed ln
Lhe conLracL. 1he area wlLhln Lhe boundarles as sLaLed ln Lhe conLracL
shall conLrol over shall conLrol over Lhe area agreed upon ln Lhe
conLracL.

Doctr|ne:

2. Where So|d for a Lump Sum ["6 I3&#7* IB&#4* or 7*# 7#&IB*
$,O$%*f] (Art|c|e 1S42)
Genera| ku|e: ln a conLracL of sale of land ln a mass, Lhe speclflc
boundarles sLaLed ln Lhe conLracL musL conLrol over any
sLaLemenL wlLh respecL Lo Lhe area conLalned wlLhln lLs
boundarles. <$,B.$' 01 Y$3'4B.*8 >:: <2)6 =J ?9EEJA1
o ln a lump sum sale, when Lhe land dellvered Lo Lhe
buyer ls exacLly as LhaL descrlbed ln Lhe deed and
covered wlLhln Lhe boundarles deslgnaLed, Lhe
dlfference ln acLual area (34 vetsos 10 hecLares) wlll noL
auLhorlze Lhe buyer Lo resclnd Lhe conLracL because Lhe
seller has complled wlLh dellverlng Lhe sub[ecL maLLer
agreed upon. !"&#$. 01 aB,,$.3&0$8 >: RMB,1 :@@ ?=;C9A,
Lhls ls Lhe rule when evldence shows LhaL Lhe parLles
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
never gave lmporLance Lo Lhe area of Lhe land ln flxlng
Lhe prlce (97 versus 60 hecLares). !6O$##$F$ 01 T$+8 >9
RMB,1 >;; ?=;9JA1
Where Lhe parLles agreed on a sale aL a raLe of a cerLaln prlce
per unlL of measure and noL one for a lump sum, lL ls ArLlcle
1339 and noL ArLlcle 1342 whlch ls Lhe appllcable law-Lhe
buyer ls enLlLled Lo Lhe rellef afforded Lo hlm under ArLlcle
1329, LhaL ls, elLher a proporLlonal reducLlon of Lhe prlce or Lhe
resclsslon of Lhe conLracL. !2&S3 QB.,$.% K&01 2*#71 01 U.F
<B$* H3$8 >JJ <2)6 =9E ?9EE;A1
Lxcept|on: A buyer of land, when sold ln gross or wlLh Lhe
descrlpLlon more or less" or slmllar words ln deslgnaLlng
quanLlLy covers only a reasonable excess of deflclency. ln Lhe
case aL bar an area of 644 square meLers more" ls noL
reasonable excess or deflclency, Lo be deemed lncluded ln Lhe
deed of sale. !)*S,& 01 6#S$'$8 C:9 <2)6 :; ?9EE=Ab )3%*,5
\B&4O8 W.I1 01 2*3#4 *5 677&$,'8 D@J <2)6 D>= ?9EE>A1
=

Lxcept|on to Lxcept|on: When buyer, who has been occupylng
Lhe land for Lwo years as lessee, acLually ls deemed Lo Lake rlsk
on Lhe acLual slze of Lhe properLy boughL aL lump sum. !T$#IB$
01 a&,$'I*8 @9 RMB,1 9DJ ?=;D=A1

3. Lump Sum Sa|e v. Sa|e by Un|t of Measure or Number
Genera| ku|e: lf Lhe prlce per unlL of measure or number ls noL
expressly provlded for ln Lhe conLracL, Lhe rules of lump sum
sale shall prevall ln Lhe sale of real properLy.

1
Aslolo v. IolooJool, 43 hll 296 (1923), 8olootokbo v. coott of Appeols, 249
SC8A 323 (1993), sqoetto v. 1tlolJoJ, 318 SC8A 186 (2007), uel ltoJo v.
cobolleto, 614 SC8A 102 (2010).

4. Where Immovab|es So|d |n Mass
A [udlclal sale ln mass of separaLe known loLs or parcels wlll noL
be seL aslde, unless lL ls made Lo appear LhaL a larger sum could
have been reallzed form a sale ln parcels or LhaL a sale of less
Lhan Lhe whole would have been sufflclenL Lo saLlsfy Lhe debL.

III. Doub|e Sa|es (Art|c|es 1S44
2
and 116S)

Art|c|e 116S.
When what |s to be de||vered |s a determ|nate th|ng, the cred|tor, |n
add|t|on to the r|ght granted h|m by art|c|e 1170, may compe| the
debtor to make the de||very.

If the th|ng |s |ndeterm|nate or gener|c, he may ask that the ob||gat|on
be comp||ed w|th at the expense of the debtor.

If the ob||gor de|ays, or has prom|sed to de||ver the same th|ng to two
or more persons who do not have the same |nterest, he sha|| be
respons|b|e for any fortu|tous event unt|| he has effected the de||very.
(1096)

A. ku|e on Doub|e Sa|es Must 8e Cons|dered as ku|es on 1rad|t|on
1he rules on uouble Sales cover Lhe effecLs and consequences
of LradlLlon ln a parLlcular slLuaLlon where Lhe same seller has
sold Lhe same sub[ecL properLy Lo Lwo or more buyers who do
noL represenL Lhe same lnLeresLs.

2
loJoJeto v. Moqollooes, 633 SC8A 332 (2010).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1. 1he confllcLlng sales are all valld and demandable sales,
pursuanL Lo whlch LradlLlon was or could be effecLed.
2. 1he seller who effecLed mulLlple sales Lo varlous buyers over Lhe
same sub[ecL maLLer acLually had ownershlp.
roblem: 1he rules on double sales, alLhough essenLlally
appllcable wlLhln Lhe sLage of consummaLlon, have a way of
dlcLaLlng or pre-empLlng Lhe prlnclples of perfecLlon.

8. 1wo D|vergent Systems When It Comes to Land: .D. 1S29 v. Art|c|e
1S44 - r|or|ty of 1orrens System of keg|strat|on.
SecLlon 31 of .u. 1329 embodles Lhe reglsLraLlon ln good falLh
as Lhe operaLlve acL" docLrlne.
ArLlcle 1344 does noL overcome Lhe prlorlLy rules under .u.
1329.

.D. 1S29 Art|c|e 1S44
8eglsLraLlon" ln .D. 1S29 ls Lhe
[udlclal or admlnlsLraLlve process
by whlch a parcel of land ls placed
for Lhe flrsL Llme wlLhln Lhe
coverage of Lhe 1orrens SysLem.
8eglsLraLlon" ln Art|c|e 1S44
refers Lo Lhe annoLaLlon of
conLracLs, LransacLlons and legal
processes ln Lhe 8eglsLry of ueeds.


1he rules on double sales under ArLlcle 1344 do noL overcome
Lhe rules provlded under Lhe roperLy 8eglsLraLlon uecree (.u.
1439), such as:
1. When Lwo cerLlflcaLes of LlLle are lssued Lo dlfferenL persons
coverlng Lhe same land, ArLlcle 1344 cannoL apply. lnsLead, Lhe
prlnclple of Lhe 1orrens sysLem wlll apply. " 1he earller LlLle
wlll prevall. !\B$* 01 2*3#4 *5 677&$,'8 C9C <2)6 DCE ?9EEEA,
2. ArLlcle 1344 wlll also noL apply ln a case where a flrsL buyer
boughL Lhe land noL under Lhe 1orrens sysLem, buL under AcL
no. 3344, and a subsequenL buyer boughL Lhe same properLy
when lL was already reglsLered under Lhe 1orrens sysLem of u
1329. " 1he 1orrens LlLle wlll prevall. 1hls ls because:
a. Cf Lhe well-known rule ln Lhls [urlsdlcLlon LhaL persons
deallng wlLh reglsLered land have Lhe legal rlghL Lo rely
on Lhe facL of Lhe 1orrens CerLlflcaLe of 1lLle and Lo
dlspense wlLh Lhe need Lo lnqulre furLher, excepL when
Lhe parLy concerned has acLual knowledge of facLs and
clrcumsLances LhaL would lmpel a reasonably cauLlous
man Lo make such lnqulry," and
b. 1he 1orrens sysLem rule LhaL formal reglsLraLlon
proceedlngs underLaken on Lhe properLy and Lhe
subsequenL lssuance of a LlLle over Lhe land had under
Lhe 1orrens sysLem had Lhe legal effecL of cleanslng LlLle
on Lhe properLy of all llens and clalms whlch were noL
annoLaLed Lhereln.
c$$]$. 2*^^3.B4+ )3#$, -$./8 W.I1 01 2*3#4 *5 677&$,'8 C;>
<2)6 DC ?9EECA.
1


c$$]$. 2*^^3.B4+ )3#$, -$./ 01 2*3#4 *5 677&$,'

Iacts: Comayas offered Lo sell Lo Lhe Lumo Spouses a house and loL ln
CuC ClLy. 1he properLy was already reglsLered under Lhe 1orrens
SysLem LhaL Llme and Lhey made approprlaLe lnqulrles wlLh Lhe 8eglsLer

1
keltetoteJ lo Abtlqo v. ue veto, 432 SC8A 344 (2003), vet keyes v. 5olvoJot,
5t., 364 SC8A 436 (2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
of ueeds of CuC as well as Lhe 8ureau of Lands regardlng Lhe legal
sLaLus of Lhe properLy. 1hey found ouL LhaL lL was morLgaged for 8,000,
pald Comayas Lo seLLle Lhe morLgage, and Lhe release of Lhe adverse
clalm was annoLaLed ln Lhe LlLle. 1hereafLer, Lhey execuLed an AbsoluLe
ueed of Sale over Lhe sub[ecL properLy and reglsLered Lhe same.
Powever, lL Lurns ouL LhaL lL was already prevlously sold Lo naawan
CommunlLy 8ural 8ank when lL was sLlll unreglsLered. 1he 8ank
foreclosed on Lhe properLy, purchased Lhe same, and reglsLered lL under
AcL 3344. 1hus, Lhe 8ank soughL Lo e[ecL Lhe spouses. Powever, Lhe
laLLer counLered wlLh an acLlon for quleLlng of LlLle. nC88 conLends LhaL
Lhe earller reglsLraLlon of Lhe ueed of Conveyance under AcL 3344
should prevall over Lhe laLer reglsLraLlon of Lhe Lumos spouses, under
.u. 1329, as Lhls ls a case of double sale under ArLlcle 1344.

Issue: WheLher or noL Lumos has beLLer rlghL over nC88.

ne|d: ?LS. rlvaLe respondenLs were noL requlred Lo go beyond Lhe
reglsLer Lo deLermlne legal condlLlon of Lhe properLy. 1hey were only
charged wlLh noLlce of such burdens on Lhe properLy as were noLed on
Lhe CC1 or on Lhe reglsLer. Lumo spouses were ln good falLh as Lhey
lnqulred ln Lhe 8ou and Lhe 8ureau of roperLy regardlng vendor's LlLle.
nelLher were Lhey aware of any adverse clalm, oLher Lhan Mrs. Calupo,
who Lhey seLLled wlLh. Conslderlng, Lhus, LhaL Lumo spouses exerclsed
Lhe requlred dlllgence ln ascerLalnlng Lhe legal sLaLus of LlLle, Lhey
should be consldered as lnnocenL purchasers for value and ln good
falLh.rlorlLy ln Llme" prlnclple lnvoked by nC88 refers Lo AcL 3344, noL
Lhe 1orrens sysLem.

Doctr|ne:

8U1 SLL: c$0$, 01 2*3#4 *5 677&$,'8 DJC <2)6 =E9 ?9EE:A.

c$0$, 01 2*3#4 *5 677&$,'

Iacts: unreglsLered parcel of land was sold by ldelfonso Lo Cregorlo ln
1969. Cregorlo sold lL Lo oLher people, who Lhen Look possesslon. ln
comes !uanlLa who was able Lo obLaln an CC1 ln her name, saylng Lhe
same land was sold Lo her by ldelfonso ln 1972. 8emember LhaL boLh
lnlLlal conveyances were made whlle land was unreglsLered.

Issue: WheLher or noL Cregorlo has beLLer rlghL over !uanlLa.

ne|d: ?LS. 1he land was unreglsLered under Lhe 1orrens sysLem aL Lhe
Llme of Lhe flrsL sale. 1he appllcable law ls AcL 3344, under whlch
reglsLraLlon by flrsL buyer under Lhe 8eglsLer of ueeds ls consLrucLlve
noLlce Lo Lhe second buyer. So Lhe laLLer cannoL be deemed ln good
falLh. !uanlLa havlng been able Lo obLaln an CC1 ln her name does noL
cleanse her LlLle of Lhe defecL carrled under Lhe provlslons of AcL 3344.

Doctr|ne:

C. 1ests App||cab|e under Art|c|e 1S44:
coveot emptot requlres Lhe buyer Lo be aware of Lhe supposed
LlLle of Lhe seller and he who buys wlLhouL checklng Lhe seller's
LlLle Lakes all Lhe rlsks and losses consequenL Lo such fallure.
!2$#$^8 _#1 01 \$3#&4$8 =EC <2)6 @ ?=;J=A1
1he provlslon on double sale presumes LlLle or ownershlp Lo
pass Lo flrsL buyer, excepLlon belng: (a) when Lhe second buyer,
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
ln good falLh, reglsLers Lhe sale ahead of Lhe flrsL buyer, and (b)
should Lhere be no lnscrlpLlon by elLher of Lhe Lwo buyers, when
Lhe second buyer, ln good falLh, acqulres possesslon of Lhe
properLy ahead of Lhe flrsL buyer. unless, Lhe second buyer
saLlsfles Lhese requlremenLs, LlLle or ownershlp wlll noL Lransfer
Lo hlm Lo Lhe pre[udlce of Lhe flrsL buyer." !2*#*.&, 01 2*3#4 *5
677&$,'8 9:C <2)6 => ?=;;:A1
ln splLe of Lhe Lhree levels of LesLs provlded under ArLlcle 1344,
Lhe CourL seems Lo recognlze only reglsLraLlon ln good falLh by
Lhe second buyer and does noL characLerlze Lhe meanlng of Lhe
lasL Lwo LesL of possesslon and oldesL LlLle. 2$#B,,* 01 2*3#4 *5
677&$,'8 >EC <2)6 :: ?9EE:A.

2$#B,,* 01 2*3#4 *5 677&$,'

Iacts: 8oLh Conazales and uabons clalm Lo have boughL Lhe land from
ArlsLoLle Manlo. ln llLglLaLlng agalnsL Manlo's alleged aLLorneys-ln-facL
for Lhe lssuance of Lhe deed of sale, Conzales never lmpleaded Manlo
hlmself, or Lhe uabons. CourL orders were lssued ln favor of Conzales
for execuLlon of deed of sale as well as lssuance of 1C1 ln her name.

Issue: WheLher or noL Lhe uabons have a rlghL Lo seek annulmenL of Lhe
courL order.

ne|d: ?LS. 1here was exLrlnslc fraud as Lhe necessary parLles ln lnLeresL
were noL glven Lhelr day ln courL. uabons may seek annulmenL of Lhe
courL orders. Cn Lhe lssue of double sale, courL ouLllned Lhe provlslons
of ArLlcle 1344 and sLressed LhaL ln order for Lhls provlslon Lo be avalled
of, Lhere musL have been boLh acqulslLlon ln good falLh and reglsLraLlon
ln good falLh. Case was remanded.

Doctr|ne:

1. Ma|n ku|e under Art|c|e 1S44: R#B*# "&^7*#&8 R#B*# _3#&1
2$#S*.&,, 01 2*3#4 *5 677&$,'8 :; <2)6 ;; ?=;@:A.
1


2$#S*.&,, 01 2*3#4 *5 677&$,'

Iacts: onclo was owner of land morLgaged Lo bank. Pe offered Lo sell
Lo Carbonell, who accepLed and applled for assumpLlon of morLgage.
LaLer on, onclo lnformed Carbonell LhaL he could no longer conLlnue
wlLh Lhelr sale because he'd already sold Lhe same land Lo one lnfanLe.
upon learnlng Lhls, Carbonell reglsLered an adverse clalm. SubsequenLly,
lnfanLe reglsLered her deed of sale. 1C1 was lssued ln lnfanLe's name
buL wlLh annoLaLlon of Lhe adverse clalm of Carbonell.

Issue: Who has a beLLer clalm?

ne|d: CA88CnLLL. When Carbonell's sale was perfecLed, she was ln
good falLh because onclo was Lhe owner. Per good falLh dld noL cease
even when she reglsLered Lhe adverse clalm, noLwlLhsLandlng
knowledge of Lhe second sale Lo lnfanLe. lnfanLe, on Lhe oLher hand,
was ln bad falLh because she acLually knew of Lhe flrsL sale.
lurLhermore, she was aware of an adverse clalm on Lhe land when she
reglsLered lL. Carbonell was also ln possesslon of Lhe land when lnfanLe

1
1ooqloo v. lotooqoo, 333 SC8A 123 (2007), colmo v. 5ootos, 390 SC8A 339
(2009).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
boughL lL, so Lhe laLLer should have lnqulred.

Doctr|ne:

D. kequ|s|tes for App||cat|on of Art|c|e 1S44 |n case of a Doub|e Sa|e:
2M&.F 01 T&.$4*, 300 SCkA 722 (1998).
1


2M&.F 01 T&.$4*

Iacts: CenaLo owned 2 parcels of land ln aradlse larms. Pe agreed
wlLh Lhe ua !ose spouses Lo enLer lnLo a conLracL Lo sell over Lhe sald
parcels, lL was embodled ln a publlc lnsLrumenL annoLaLed Lo Lhe
cerLlflcaLes of LlLle. 1hey asked for and were granLed an exLenslon for
Lhe paymenL of Lhe purchase prlce. unknown Lo Lhem, CenaLo dealL
wlLh Cheng regardlng Lhe loL, execuLed an AffldavlL Lo annul Lhe
ConLracL Lo Sell, appralsed Lhe laLLer of hls declslon Lo resclnd Lhe sale,
and recelved a down paymenL from Cheng upon Lhe guaranLee LhaL Lhe
sald conLracL Lo sell wlll be annulled. 8y chance, CenaLo and Lhe spouses
meL aL Lhe 8u, where he agaln agreed Lo conLlnue Lhe conLracL wlLh
Lhem. Pe advlsed Cheng of hls declslon, Lhe laLLer counLered LhaL Lhe
sale had already been perfecLed. Cheng execuLed an AffldavlL of
Adverse Clalm and had lL annoLaLed Lo Lhe 1C1s and sued for speclflc
performance.

Issue: Who has beLLer LlLle?


1
keltetoteJ lo Moctoo-cebo lotetootloool Altpott Aotbotlty v. 1ltol, 388 SC8A
633 (2009).
ne|d: uA !CSL SCuSLS. 8oLh agreemenLs lnvolve a conLracL Lo sell,
whlch makes ArLlcle 1344 lnappllcable slnce nelLher a Lransfer of
ownershlp nor a sales LransacLlon Look place. A conLracL Lo sell ls
premlsed upon a suspenslve condlLlon-Lhe full paymenL of Lhe
purchase prlce. 1haL belng Lhe case, Lhe elemenLary prlnclple of flrsL ln
Llme, prlorlLy ln rlghL should apply. As such, Lhe conLracL ln favor of Lhe
ua !ose spouses musL prevall conslderlng LhaL Lhe same had noL been
valldly resclnded. 8esldes, Cheng cannoL be consldered Lo have acLed ln
good falLh as he had knowledge of Lhe prlor LransacLlon ln favor of Lhe
spouses.
2


Doctr|ne: 8equlslLes for uouble Sale:
(a) 1he Lwo (or more) sales LransacLlons ln lssue musL perLaln Lo exacLly
Lhe same sub[ecL maLLer, and musL be valld sales LransacLlons.
(b) 1he Lwo (or more) buyers aL odds over Lhe rlghLful ownershlp of Lhe
sub[ecL maLLer musL each represenL confllcLlng lnLeresLs, and
(c) 1he Lwo (or more) buyers aL odds over Lhe rlghLful ownershlp of Lhe
sub[ecL maLLer musL each have boughL from Lhe very same seller

1. 1here Must 8e 1wo D|fferent Va||d Sa|esd ArLlcle 1344 does noL
apply where:
1here ls only one valld sale, whlle Lhe oLher sale over Lhe same
properLy ls vold. Y3%*4 01 2$44,&+$ \$.%8 W.I18 >CC <2)6 C>E
?9EE@Ab
3
or

2
AnLonlo, PlpollLo, lmperlal & Zaragosa. (2012). Salse CLv Case ulgesLs.
8eLrleved from hLLp://www.scrlbd.com/doc/104486360/Sales-CLv-Case-
ulgesLs
3
spltlto v. voletlo, 9 SC8A 761 (1963), kemoloote v. 1lbe, 138 SC8A 138
(1988), uelflo v. volJez, 302 SC8A 24 (2006).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
ArLlcle 1344 wlll noL apply when one conLracL ls LhaL of sale, and
Lhe oLher ls a conLracL Lo sell. SLrlcLly speaklng, ln a conLracL Lo
sell, Lhere ls sLlll no Lransfer of ownershlp lnvolved. <$. \*#&.O*
K&01 2*#71 01 2*3#4 *5 677&$,', DD; <2)6 ;; ?9EE>A.
1


<$. \*#&.O* K&01 2*#71 01 2*3#4 *5 677&$,'

Iacts: Spouses Lu owned 2 parcels of land, whlch Lhey purporLedly sold
Lo 8abasanLa. Pe demanded Lhe execuLlon of a llnal ueed of Sale ln hls
favor so he may effecL full paymenL of Lhe purchase prlce, however, Lhe
spouses decllned Lo push Lhrough wlLh Lhe sale. 1hey clalmed LhaL when
he requesLed for a dlscounL and Lhey refused, he resclnded Lhe
agreemenL. 1hus, 8abasanLa flled a case for Speclflc erformance. San
Lorenzo uevelopmenL Corp. (SLuC) lnLervened clalmlng LhaL Lhe loLs
have been sold Lo lL by vlrLue of a ueed of AbsoluLe Sale wlLh MorLgage
and LhaL lL was a purchaser ln good falLh. 8oLh sales were noL
reglsLered.

Issue: Who has beLLer LlLle?

ne|d: SLuC. 1here was no double sale ln Lhls case because Lhe conLracL
ln favor of 8abasanLa was a mere conLracL Lo sell, hence, ArL. 1344 ls noL
appllcable. 1he ownershlp of Lhe properLy was noL Lo be LransmlLLed ln
hls favor unLll Lhe full paymenL of Lhe purchase prlce. 1here was nelLher
acLual nor consLrucLlve dellvery as hls LlLle ls based on a mere recelpL.
8ased on Lhls alone, Lhe rlghL of SLuC musL be preferred.


1
1ottecompo v. AlloJoqoo, 5t., 317 SC8A 84 (2007).
Doctr|ne: SLuC has a beLLer rlghL. ArLlcle 1344 does nC1 apply where
one of Lhe conLracL ls a conLracL Lo sell.

Doctr|ne on Cond|t|ona| Sa|es]Contracts to Se|| and Adverse
C|a|ms:

Contract of Sa|e Contract to Se||
1lLle passes Lo Lhe vendee
upon Lhe dellvery of Lhe Lhlng
sold
8y agreemenL Lhe ownershlp ls
reserved ln Lhe vendor and ls noL Lo
pass unLll Lhe full paymenL of Lhe prlce
1he vendor has losL and
cannoL recover ownershlp
unLll and unless Lhe conLracL
ls resolved or resclnded
1lLle ls reLalned by Lhe vendor unLll Lhe
full paymenL of Lhe prlce, such
paymenL belng a poslLlve suspenslve
condlLlon and fallure of whlch ls noL a
breach buL an evenL LhaL prevenLs Lhe
obllgaLlon of Lhe vendor Lo convey LlLle
from becomlng effecLlve

L&.%*O$ 01 N$,$]8 D9 RMB,1 9C: ?=;9=A

L&.%*O$ 01 N$,$]

Iacts: Mendoza flled a peLlLlon for Lhe reglsLraLlon of a parcel of land he
purchased from CaneL by way of an absoluLe sale. kalaw opposed
sLaLlng LhaL he boughL Lhe same sub[ecL maLLer from CaneL (by way of a
condlLlonal sale).

Issue: Who has beLLer LlLle?
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

ne|d: MLnuCZA. 1wo sales were execuLed, a condlLlonal sale and an
absoluLe sale. AcLual possesslon was obLalned by Mendoza flrsL.
Mendoza also fully pald Lhe purchase prlce, whlle kalaw's paymenL
depended upon Lhe performance of cerLaln condlLlons menLloned ln Lhe
conLracL of sale. A condlLlonal sale, before Lhe performance of Lhe
condlLlon, can hardly be sald Lo be a sale of properLy. ArLlcle 1473 (now
ArLlcle 1344) wlll noL be appllcable.

Doctr|ne:

6%$,B. 01 2*3#4 *5 677&$,', 9JE <2)6 >C: ?=;;@A.

6%$,B. 01 2*3#4 *5 677&$,'

Iacts: Llena kado and her slbllngs owned a loL wlLh a 3-door commerclal
bulldlng fronLlng lmperlal PoLel. 1he unlLs were leased. Llena conLracLed
Lhe servlces of 8auLlsLa, who broughL ?u and Llm Lo her for Lhe purpose
of buylng Lhe premlses. uurlng Lhe meeLlng, lL was agreed LhaL Lhe ?u
and Llm would buy Lhe sald unlLs excepL for Lhe 3Lh whlch ls Lo be
boughL by Adalln. 1hey enLered lnLo a CondlLlonal Sale where Llena was
obllgaLed Lo evlcL Lhe LenanLs before Lhe full paymenL of Lhe purchase
prlce. Llena offered Lhe same for sale Lo Lhe lessees buL Lhey refused
clalmlng LhaL Lhey could noL afford, Lhus, she flled a case for e[ecLmenL
agalnsL Lhem. 1hereafLer, Lhe lessees declded Lo exerclse Lhelr rlghL Lo
buy Lhe unlLs-kalaw ruled LhaL slnce Lhe sale Lo ?u and Llm was
condlLlonal, Lhe subsequenL sale Lo Lhe lessees musL be preferred.

Issue: Who has beLLer LlLle?

ne|d: ?u Anu LlM. Llena, ln behalf of kado slbllngs, already commlLLed
Lo sell Lhe properLy Lo ?u and Llm and LoreLo Adalln. She undersLood
her obllgaLlon Lo e[ecL Lhe LenanLs on Lhe sub[ecL properLy. aymenL of
balance was sub[ecL Lo Lhe condlLlon LhaL she would secure evlcLlon of
LenanLs. Sale LransacLlon noL yeL compleLe and boLh sellers and buyers
have respecLlve obllgaLlons Lo be fulfllled-buyers, pay prlce, sellers,
e[ecLmenL. ueed of CondlLlonal Sale may be an accuraLe denomlnaLlon
of Lhe LransacLlon, and Lhe cholce of who Lo sell Lhe properLy Lo had
already been made by Lhe sellers and no longer sub[ecL Lo any
condlLlon. Sale made by Llena Lo ?u and Llm (consldered by Lhe CourL) ls
absoluLe.

CourL ruled LhaL no amounL of legal raLlonallzlng can sancLlon Lhe
breach of conLracL. Llena commlLLed ln accepLlng offer afLer havlng
earller sold properLy Lo ?u and Llm.

SubsequenL sale smacks of bad falLh conslderlng Lhe LenanLs knew of
negoLlaLlons beLween Llena and ?u Llm.

ueed of CondlLlonal Sale (?u, Llm and kado) was glven preference over
Lhe ueed of Sale of 8eglsLered Land (Carlos, Co and kado).

Doctr|ne:

o 1he rules on double sales under ArLlcle 1344 are noL
appllcable Lo conLracL Lo sell, because of Lhe
clrcumsLances LhaL musL concur ln order for Lhe
provlslons Lo ArLlcle 1344 on double sales Lo apply,
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
namely LhaL Lhere musL be a valld sales LransacLlons,
and buyers musL be aL odds over Lhe rlghLful ownershlp
of Lhe sub[ecL maLLer who musL have boughL from Lhe
very same seller, are lacklng ln a conLracL Lo sell for
nelLher a Lransfer of ownershlp nor a sales LransacLlon
has been consummaLed, and such conLracL ls blndlng
only upon Lhe fulflllmenL or non-fulflllmenL of an evenL.
neverLheless, Lhe govern|ng pr|nc|p|e of ArLlcle 1344
should apply, malnly Lhe governlng prlnclple of ptlmos
tempote,pottlot jote (flrsL ln Llme, sLronger ln rlghL).
2M&.F 01 T&.$4*8 CEE <2)6 @99 ?=;;JA.
When Lhe seller sold Lhe same properLles Lo Lwo buyers, flrsL Lo
Lhe respondenL and Lhen Lo vllorla on Lwo separaLe occaslons,
Lhe second sale was noL vold for Lhe sole reason LhaL peLlLloner
had prevlously sold Lhe same properLles Lo respondenL. 1hls
case lnvolves a double sale as Lhe dlspuLed properLles were sold
valldly on Lwo separaLe occaslons by Lhe same seller Lo Lhe Lwo
dlfferenL buyers ln good falLh. K& \&*. 01 U.F8 :== <2)6 CJ=8
CJJ ?9E=EA1

2. Lxact Same Sub[ect Matter
ArLlcle 1344 applles where Lhe same Lhlng ls sold Lo dlfferenL
buyers by Lhe same seller. !U.F 01 U$,'B^$.8 DJ> <2)6 D:D
?9EE:Ab and Lherefore does noL apply where Lhere was a sale Lo
one parLy of Lhe land lLself whlle Lhe oLher conLracL was a mere
promlse Lo sell Lhe land or aL mosL an acLual asslgnmenL of Lhe
rlghLs Lo repurchase Lhe same land. !KB'IM*'* 01 )*!$'8 > <2)6
@J= ?=;:9A1

3. Lxact Same Se||er for 8oth Sa|es
ArLlcle 1344 applles where Lhe some tbloq ls solJ Lo dlfferenL
vendees by tbe some veoJot. lL does noL apply where Lhe same
Lhlng ls sold Lo dlfferenL vendees by dlfferenL vendors.or even
Lo Lhe same buyer buL by dlfferenL sellers. <$,&#$ 01 )*%$V&8 >CE
<2)6 DC98 DCJ ?9EE@A1
=

ArLlcle 1344 on double sales has no appllcaLlon ln cases where
Lhe sales lnvolved were lnlLlaLed noL by [usL one vendor buL by
several successlve vendors. L$I4$.G2&S3 W.4&#.$4B*.$, 6B#7*#4
634M*#B4+ 01 "B#*,8 >JJ <2)6 :C> ?9EE;A1
lor ArLlcle 1344 Lo apply, lL ls necessary LhaL Lhe conveyance
musL have been made by a parLy who has an exlsLlng rlghL ln Lhe
Lhlng and Lhe power Lo dlspose of lL. lL cannoL be lnvoked where
Lhe Lwo dlfferenL conLracLs of sale are made by Lwo dlfferenL
persons, one of Lhem noL belng Lhe owner of Lhe properLy sold.
And even lf Lhe sale was made by Lhe same person, lf Lhe
second sale was made when such person was no longer Lhe
owner of Lhe properLy, because lL had been acqulred by Lhe flrsL
purchaser ln full domlnlon, Lhe second purchaser cannoL acqulre
any rlghL. 2*.'*,B%$4&% )3#$, -$./ ?2$F$+$. a$,,&+A8 W.I1 01
2*3#4 *5 677&$,', 448 SCkA 347 (200SA8
9
IB4B.F aB,,$.3&0$8
RMB,B77B.& \$] *. <$,&' =EE ?=;;>A

2*.'*,B%$4&% )3#$, -$./ ?2$F$+$. a$,,&+A8 W.I1 01 2*3#4 *5 677&$,'

Iacts: 1he Madrld 8roLhers owned a parcel of land, whlch was laLer

1
Ooq v. Oloslmoo, 483 SC8A 464 (2006).
2
CollotJo v. CollotJo, 46 C.C. no. 11 p. 3368, 5lqoyo v. Moyoqo, 467 SC8A 341,
337 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
subdlvlded. 8lzal Madrld sold hls share Lo Camalo and uayag, Lhe oLher
broLhers offered no ob[ecLlon. 1he sale was noL reglsLered under Lhe
1orrens SysLem. Camalo and uayag sold Lhe souLhern half Lo 1eodoro,
and Lhe norLhern half Lo Pernandez, who LhereafLer donaLed Lhe same
Lo hls daughLer. 1hey all malnLalned possesslon of Lhe properLles. LaLer
on, Lhe broLhers all sold Lhelr shared Lo Marquez who furLher
subdlvlded Lhe same, reglsLered Lhe lands, and morLgaged porLlons
Lhereof Lo ConsolldaLed 8ank and 8ank of Cauayan. lor fallure Lo seLLle
hls debL, C8 foreclosed Lhe properLy. 1he successors-ln-lnLeresL of
Camlao and uayag soughL reconveyance. C8 lnLerposed LhaL Lhe
morLgage musL be respecLed.

Issue: Who has a beLLer LlLle, Marquez or Lhe successors-ln-lnLeresL of
Camlao and uayag?

ne|d: 1PL SuCCLSSC8S-ln-ln1L8LS1 Cl CAMlAC Anu uA?AC. ArLlcle
1344 does noL apply as Lhe double-mulLlple sales were noL done by Lhe
slngle vendor - ln Lhls case by Lhe broLhers on Lhe one slde and Camlao
and uayag on Lhe oLher. 1haL belng Lhe case, Lhe slmple rule on prlorlLy
ln Llme, prlorlLy ln rlghL would apply. As such, Lhe successors-ln-lnLeresL
of Camlao and uayag would have a beLLer rlghL as Lhe sale ln Lhelr favor
came ahead of Llme. lurLher, Marquez was noL ln good falLh. Pe knew
LhaL Lhe properLy was belng clalmed by oLher parLles who were ln
possesslon Lhereof lnsLead, he wlllfully closed hls eyes Lo Lhe posslblllLy
of Lhe flaws.

4. 1he 1wo Cr More 8uyers At Cdds Cver 1he k|ghtfu| Cwnersh|p
Cf 1he Sub[ect Matter Must Lach kepresent Conf||ct|ng
Interests
no appllcaLlon when Lhe covered valld conLracLs are noL yeL
demandable sales, such as when one or boLh Lhe conLracLs ln
dlspuLe are conLracLs Lo sell. L&.%*O$ 01 N$,$]8 ?D9 RMB,1 9C:A

L. keg|strat|on |n Good Ia|th as I|rst r|or|ty
1. Mean|ng of "keg|strat|on"
1he annoLaLlon of adverse clalm can quallfy as Lhe reglsLraLlon
mandaLed under Lhe rules on double sale. 2$#S*.&,, 01 2*3#4 *5
677&$,'8 :; <2)6 ;; ?=;@:A1
8eglsLraLlon means any enLry made ln Lhe books of Lhe reglsLry,
lncludlng boLh reglsLraLlon ln lLs ordlnary and sLrlcL sense, and
cancellaLlon, annotat|on, and even marg|na| notes. lL ls Lhe
enLry made ln Lhe reglsLry whlch records solemnly and
permanenLly Lhe rlghL of ownershlp and oLher real rlghLs.
!2M&.F 01 T&.$4*8 CEE <2)6 @99 ?=;;JA1
=

o ueclaraLlon of purchase for LaxaLlon purposes does noL
comply wlLh Lhe requlred reglsLraLlon, and Lhe facL
alone does noL even lLself consLlLuLe evldence of
ownershlp1 !-$+*I$ 01 c*F$,&'8 CDE <2)6 =>D ?9EEEA1
o 8eglsLraLlon of Lhe LxLra-[udlclal arLlLlon whlch merely
menLlons Lhe sale ls noL Lhe reglsLraLlon covered under
ArLlcle 1344 and cannoL prevall over Lhe reglsLraLlon of
Lhe pocto Je tetto sale. !a%$1 %& 6,I$.4$#$ 01 2*3#4 *5
677&$,'8 9>9 <2)6 D>@ ?=;;:A1
1here can be no consLrucLlve noLlce Lo Lhe second buyer
Lhrough reglsLraLlon under AcL 3344 lf Lhe properLy ls reglsLered
under Lhe 1orrens sysLem." !6^*%B$ a%$1 K& L&,&.IB*. 01

1
ulep v. coott of Appeols, 472 SC8A 241 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
2*3#4 *5 677&$,'8 >CD <2)6 :98 J9 ?9EE@A8 4M&#&S+ *0&#43#.B.F
*SB4&# B. <$.4B$F* 01 2*3#4 *5 677&$,'8 9D@ <2)6 CC: ?=;;>A1

91 keg|strat|on Must A|ways 8e |n Good Ia|th
WhaL maLLers ls lf Lhe buyer reglsLers ln good falLh. lf he buys ln
good falLh, buL subsequenLly reglsLers ln bad falLh, he wlll noL
have a beLLer LlLle, even lf he reglsLers flrsL.
o Cood falLh " means no noLlce of defecL ln LlLle of Lhe
properLy sold. lor Lhe second buyer Lo be ln good falLh,
he musL noL know of Lhe prlor sale Lo Lhe flrsL buyer.
ln splLe of Lhe Lhree levels of LesLs provlded under ArLlcle 1344,
Lhe CourL seems Lo recognlze only reglsLraLlon ln good falLh by
Lhe second buyer and does noL characLerlze Lhe meanlng of Lhe
lasL Lwo LesLs of possesslon and oldesL LlLle. 2$#B,,* 01 2*3#4 *5
677&$,'8 >EC <2)6 :: ?9EE:A
ln cases of double sales of lmmovables, whaL flnds relevance
and maLerlallLy ls noL wheLher or noL Lhe second buyer was a
buyer ln good falLh or LhaL he was flrsL Lo reglsLer, buL wheLher
or noL sald second buyer reglsLers such second sale ln good
falLh, LhaL ls, wlLhouL knowledge of any defecL ln Lhe LlLle of Lhe
properLy sold. !L$#4B.&O 01 2*3#4 *5 677&$,'8 C>J <2)6 CJ
?9EE=A,
1
Lhls ls so because Lhe defense of lndefeaslblllLy of a
1orrens LlLle does noL exLend Lo a Lransferee who Lakes Lhe
cerLlflcaLe of LlLle ln bad falLh. !UII&g$ 01 Z'7*.B,,$8 DC= <2)6
==: ?9EEDA1

1
8looco v. klveto, 488 SC8A 148 (2006), Cobtlel v. Mobooto, 399 SC8A 373
(2003), ue lo ceoo v. 8tlooes, 308 SC8A 62 (2006), 1ooqloo v. lotooqoo, 333
SC8A 123 (2007), 8etootJez v. coott of Appeols, 333 SC8A 431 (2007), OtJoo
v. loeotebello, 622 SC8A 146 (2010).

3. know|edge of I|rst 8uyer of the Second Sa|e Does Not Amount
to keg|strat|on |n Iavor of the Second 8uyer.
lf Lhe flrsL buyer reglsLers Lhe sale desplLe knowlng abouL Lhe
second sale, he wlll sLlll have beLLer rlghL, provlded, LhaL Lhe
second buyer had noL reglsLered lL ln good falLh before Lhe flrsL
buyer's reglsLraLlon.
o ln double sales, Lhe flrsL buyer always has prlorlLy rlghLs
over subsequenL buyers of Lhe same properLy. 1he good
falLh of Lhe flrsL buyer remalns all LhroughouL desplLe
hls subsequenL acqulslLlon of knowledge of Lhe
subsequenL sale. NB.F' R#*7&#4B&' 2*#71 01 T$,B%*8 :E:
<2)6 =C@ ?9EE;A
lor Lhe second buyer Lo dlsplace Lhe flrsL, he musL prove LhaL he
acLed ln good falLh LhroughouL Lhe process, from acqulslLlon
unLll reglsLraLlon.
o knowledge galned by Lhe flrsL buyer of Lhe second sale
cannoL defeaL Lhe flrsL buyer's rlghLs excepL where Lhe
second buyer reglsLers ln qooJ foltb Lhe second sale
obeoJ of Lhe flrsL. Such knowledge of Lhe flrsL buyer
does noL bar her from avalllng of her rlghLs under Lhe
law, among Lhem, Lo reglsLer fltst her purchase as
agalnsL Lhe second buyer. 8uL lo coovetso, knowledge
galned by Lhe second buyer of Lhe flrsL sale defeaLs hls
rlghLs even lf he ls flrsL Lo reglsLer Lhe second sale, slnce
such knowledge LalnLs hls prlor reglsLraLlon wlLh bad
falLh. 1hls ls Lhe prlced exacLed by ArLlcle 1344 for Lhe
second buyer belng able Lo dlsplace Lhe flrsL buyer, LhaL
before Lhe second buyer can obLaln prlorlLy over Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
flrsL, be most sbow tbot be octeJ lo qooJ foltb
tbtooqboot (l.e., lo lqootooce of tbe fltst sole ooJ of tbe
fltst boyet's tlqbt) -ftom tbe tlme of ocpolsltloo ootll tbe
tltle ls ttoosfetteJ to blm by teqlsttotloo ot follloq
teqlsttotloo, by Jellvety of possessloo1f !`#$I$ 01 2*3#4
*5 677&$,'8 9@J <2)6 @E9 ?=;;@A1
=

ln a slLuaLlon where a parLy has acLual knowledge of Lhe
clalmanL's acLual, open and noLorlous possesslon of a dlspuLed
properLy aL Lhe Llme of reglsLraLlon, Lhe acLual noLlce and
knowledge are equlvalenL Lo reglsLraLlon, because Lo hold
oLherwlse would be Lo LoleraLe fraud and Lhe 1orrens sysLem
cannoL be used Lo shleld fraud - whlle cerLlflcaLes of LlLle are
lndefeaslble, unassallable and blndlng agalnsL Lhe whole world,
Lhey merely conflrm or record LlLle already exlsLlng and vesLed.
2*.'*,B%$4&% )3#$, -$./ ?2$F$+$. a$,,&+A8 W.I1 01 2*3#4 *5
677&$,', DDJ <2)6 CD@ ?9EE>A.

4. keg|strat|on |n Good Ia|th A|ways re-empts ossess|on |n
Good Ia|th - 8eLween Lwo purchasers, Lhe one who reglsLered
Lhe sale ln hls favor has a preferred rlghL over Lhe oLher who has
noL reglsLered hls LlLle, even lf Lhe laLLer ls ln acLual possesslon

1
ctoz v. cobooo, 129 SC8A 636 (1984), Cotmoltoo v. coott of Appeols, 200
SC8A 37 (1991), vJo. Je Iomoc v. coott of Appeols, 200 SC8A 74 (1991), 8ocoJ
v. coott of Appeols, 216 SC8A 423 (1992), 8etlco v. coott of Appeols, 223 SC8A
469 (1993), 8ootlsto v. coott of Appeols, 322 SC8A 294 (2000), 8ootlsto v. coott
of Appeols, 322 SC8A 294 (2000), ulep v. coott of Appeols, 472 SC8A 241
(2003), scoeto v. llm, 312 SC8A 411 (2007), lombtes v. 1obloJo, It., 316 SC8A
373 (2007), loJot v. cottleyo looJ, loc., 333 SC8A 330 (2007), 1ooqloo v.
lotooqoo, 333 SC8A 123 (2007).
of Lhe lmmovable properLy. !"$g&%* 01 2*3#4 *5 677&$,'8 9>9
<2)6 JE ?=;;:A1
2

1he reglsLraLlon of a sale afLer Lhe annoLaLlon of Lhe noLlce of lls
peoJeos does noL obllLeraLe Lhe effecLs of dellvery and
possesslon ln good falLh. 1he rules on consLrucLlve noLlce upon
reglsLraLlon provlded for under SecLlon 32 of Lhe roperLy
8eglsLraLlon uecree (.u. no. 1329) operaLe only from Lhe Llme
of Lhe reglsLraLlon of Lhe noLlce of lls peoJeos whlch ln Lhls case
was effecLed only afLer Lhe Llme Lhe sale ln favor of Lhe second
buyer had long been consummaLed by dellvery of Lhe sub[ecL
maLLer. <$. \*#&.O* K&01 2*#71 01 2*3#4 *5 677&$,'8 DD; <2)6
;; ?9EE>A1

I. ossess|on kefers 8oth to Mater|a| and Symbo||c ossess|on
ln Lhe absence of lnscrlpLlon under double sales, Lhe law glves
preferenLlal rlghL Lo Lhe buyer who ln good falLh ls flrsL ln
possesslon, under Lhe followlng [urlsprudenLlal parameLers:
1. ossesslon menLloned ln ArLlcle 1344 lncludes noL only maLerlal
buL also symbollc possesslon,
2. ossessors ln good falLh are Lhose who are noL aware of any
flaw ln Lhelr LlLle or mode of acqulslLlon,
3. 8uyers of real properLy LhaL ls ln Lhe possesslon of persons
oLher Lhan Lhe seller musL be wary - Lhey musL lnvesLlgaLe Lhe
rlghLs of Lhe possessors, and
4. Cood falLh ls always presumed, upon Lhose who allege bad falLh
on Lhe parL of Lhe possessors resLs Lhe burden of proof.
!"&. Y*#4+ )&$,4+ $.% K&01 2*#71 01 2#3O8 D=E <2)6 DJD ?9EECA1
=


2
lloo v. coott of Appeols, 323 SC8A 430 (2000), 1olosoo v. 1oyoq, 336 SC8A
263 (2001), uooz v. xcbovez, 333 SC8A 637 (2007).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

G. Who |s urchaser |n Good Ia|th?
ln Lhe deLermlnaLlon of wheLher or noL a buyer ls ln good falLh,
Lhe polnL ln Llme Lo be consldered ls Lhe momenL when Lhe
parLles acLually enLered lnLo Lhe conLracL of sale. Z'4$4& *5 \B.*
U,$F3&# 01 U.FV*I*8 >:C <2)6 C@C ?9EEJA.

Z'4$4& *5 \B.* U,$F3&# 01 U.FV*I*

Iacts: AdmlnlsLraLors of Lhe Llno Claguer's (deceased) esLaLe sold
parcels of lands (lncludlng LoL 76) Lo 8acanl. 1he laLLer sold back LoL 76
Lo Lhe admlnlsLraLors. LaLer on, a 1C1 for Lhe land was lssued Lo Lduardo
and Cllvla (Lhe admlnlsLraLors). !ose, husband of Cllvla, sold porLlons of
Lhe same land Lo Cng[oco. 1here were 2 deeds of sale for each
LransacLlon. Claguer's esLaLe flled annulmenL case agalnsL Cng[oco eL al.

Issue: WheLher or noL Cng[oco was a buyer ln good falLh

ne|d: nC. WlLh respecL Lo LoLs 1 and 2, he cannoL be consldered a buyer
ln good falLh slnce Lhere was no proof LhaL Lhe sale on boLh loLs was
evldenced by a wrlLLen power of aLLorney. Accordlng Lo Agency Law, a
sale of a plece of land musL be coupled wlLh a wrlLLen auLhorlLy of such
agenL, else Lhe sale ls vold. Slnce Lhe respondenL was noL able Lo show
proof LhaL Lhere really was an exlsLlng wrlLLen auLhorlLy, Lhe sale over
such loLs cannoL be consldered valld, and musL be reLurned Lo Lhe
LsLaLe of Llno Claguer.

1
5oocbez v. komos, 40 hll. 614 (1919), Oolmsoo v. kosete, 87 hll. 139 (1930),
Noveto v. coott of Appeols, 184 SC8A 384 (1990).

WlLh respecL Lo LoLs 76-u Lo 76-C, Lhere was a noLarlzed general power
of aLLorney Lo show evldence LhaL auLhorlLy had been glven by vlrglllo
Lo hls faLher Lo dlspose Lhe sub[ecL loLs. Slnce peLlLloners was noL able
Lo show any proof LhaL Lhe loLs belng sold Lwlce Lo respondenL show
bad falLh, good falLh musL be presumed. 8elng noLarlzed, Lhe regularlLy
of such general power of aLLorney musL also be presumed.

Doctr|ne: ln Lhe deLermlnaLlon of wheLher or noL a buyer ls ln good
falLh, Lhe polnL ln Llme Lo be consldered ls Lhe momenL Lhe parLles
acLually enLered lnLo Lhe conLracL of sale.

1. kequ|s|tes of Good Ia|th:
a. no noLlce LhaL anoLher person as a rlghL Lo or lnLeresL ln
Lhe properLy
b. MusL Pave ald rlce ln lull
o A purchaser ls good falLh ls one who buys properLy of
anoLher, wlLhouL noLlce LhaL some oLher person has a
rlghL Lo, or lnLeresL ln, such properLy ooJ poys o foll ooJ
folt ptlce fot tbe some ot tbe tlme of socb potcbose, or
before he has noLlce of Lhe clalm or lnLeresL of some
oLher person ln Lhe properLy. "$.F,$* 01 R$#3.F$*8 >C>
<2)6 =9C ?9EE@)
2


2
Aqtlcoltotol ooJ nome xteosloo uev. v. coott of Appeols., 213 SC8A 336
(1992), veloso v. coott of Appeols, 260 SC8A 393 (1996), 8olotbot v. coott of
Appeols, 261 SC8A 128 (1996), Motboy v. coott of Appeols, 293 SC8A 336
(1998), uloz-uootte v. Ooq, 298 SC8A 388 (1998), lloo v. coott of Appeols, 323
SC8A 430 (2000), 1ooooqoo v. 5omsoo, 382 SC8A 130 (2002), uolvetsol kobloo
5oqot Mlllloq cotp. v. nelts of Aoqel 1eves, 389 SC8A 316 (2002), Aqoltte v.
coott of Appeols, 421 SC8A 310 (2004), Colvez v. coott of Appeols, 483 SC8A
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o under ArLlcle 1344, mere reglsLraLlon ls noL enough Lo
acqulre a new LlLle. Cood falLh musL concur. Clearly,
when Lhe buyer has noL yeL fully pald Lhe purchase
prlce, and as long as seller remalns unpald, Lhe buyer
cannoL felgn good falLh. !R*#4BI 01 2#B'4*S$,8 >D: <2)6
>@@ ?9EE>A1
8U1 SLL: ln Lhe deLermlnaLlon of wheLher or noL Lhe buyer ls ln
good falLh, Lhe polnL ln Llme Lo be consldered ls Lhe momenL
when Lhe parLles acLually enLered lnLo Lhe conLracL of sale.
Z'4$4& *5 \B.* U,$[3&# 01 U.FV*I*8 >:C <2)6 C@C ?9EEJA1

2. 8urden of roof - 1he burden of provlng Lhe sLaLus of a
purchaser ln good falLh lles upon hlm who asserLs LhaL sLaLus. lL
ls noL sufflclenL Lo lnvoke Lhe ordlnary presumpLlon of good
falLh, LhaL ls, LhaL everyone ls presumed Lo have acLed ln good
falLh, slnce Lhe good falLh LhaL ls here essenLlal ls lnLegral wlLh
Lhe very sLaLus LhaL musL be esLabllshed. !"$.F,$* 01
R$#3.F$*8 >C> <2)6 =9C ?9EE@A1
1

As a general rule, Lhe quesLlon of wheLher or noL a person ls a
purchaser ln good falLh ls a facLual maLLer LhaL wlll noL be
delved lnLo by Lhls CourL, slnce only quesLlons of law may be

346 (2006), cboo v. 5otlooo, 321 SC8A 68 (2007), koymooJo v. 8ooJooq, 326
SC8A 314 (2007), ue leoo v. Ooq, 611 SC8A 381 (2010), kloqs ltopettles cotp.
v. CollJo, 606 SC8A 137 (2009), 1be nelts of komooo 5oves v. 1be nelts of
scolostlco 5oves, 632 SC8A 236 (2010).
1
1sol v. coott of Appeols, 366 SC8A 324 (2001), Aqoltte v. coott of Appeols, 421
SC8A 310 (2004), koymooJo v. 8ooJooq, 326 SC8A 314 (2007), oqle keolty
cotp. v. kepobllc, 337 SC8A 77 (2008), loJoJeto v. Moqollooes, 633 SC8A 332
(2010).
ralsed ln peLlLlons for revlew. "B* 01 6S$+$4$8 >>: <2)6 =@>
?9EEJA1
8U1 SLLd lL ls anxlomaLlc LhaL good falLh ls always presumed ln
Lhe absence of any dlrecL evldence of bad falLh1 !<$.4B$F* 01
2*3#4 *5 677&$,'8 9D@ <2)6 CC: ?=;;>A

3. Instances When No Good Ia|th
a. 8e|ng In 8us|ness on kea|ty - A person ln Lhe realLy
buslness ([usL llke banks) ls charged wlLh exLraordlnary
dlllgence ln ascerLalnlng LhaL Lhere are no oLher persons
wlLh rlghLs over Lhe land.
! A morLgagee who evenLually ended buylng Lhe
properLy aL Lhe publlc aucLlon, cannoL clalm Lo
be a buyer ln good falLh when hls buslness ln
Lhe consLrucLlng and selllng Lownhouses and
exLendlng credlL Lo Lhe publlc, lncludlng real
esLaLe loans, for he ls charged wlLh greaLer
dlllgence LhaL ordlnary buyers or encumbrances
for value, because lL would be sLandard ln hls
buslness, as a maLLer of due dlllgence requlred
of banks and flnanclng companles, Lo ascerLaln
wheLher Lhe properLy belng offered as securlLy
for Lhe debL has already been sold Lo anoLher Lo
prevenL ln[ury Lo prlor lnnocenL buyers.
!Z!7#&''I#&%B4 YB.$.IB.F 2*#71 01 a&,$'I*8 D@C
<2)6 >@E ?9EE>A1
! A banklng lnsLlLuLlon ls expecLed Lo exerclse due
dlllgence before enLerlng lnLo a morLgage
conLracL, and Lhe ascerLalnmenL of Lhe sLaLuLe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
or condlLlon of a proper offered Lo lL as securlLy
for a loan musL be a sLandard and lndlspensable
parL of lLs operaLlons, and lL cannoL slmply rely
upon revlewlng Lhe LlLle Lo Lhe properLy offered
for morLgage. "B* 01 6S$+$4$8 >>: <2)6 =@>
?9EEJA1
1

b. C|ose ke|at|onsh|p - lf Lhe buyer ls a chlld of Lhe seller,
or a close famlly frlend who llved ln Lhe same area, Lhey
are deemed Lo have known of Lhe clrcumsLances of Lhe
land and are Lhus, noL really Lhlrd parLles.
! 1he sale Lo one's daughLer and sons wlll glve
rlse Lo Lhe concluslon LhaL Lhe buyers, noL belng
really Lhlrd parLles, knew of Lhe prevlous sales
and cannoL be consldered ln good falLh. 1he
buyers are deemed Lo have consLrucLlve
knowledge by vlrLue of Lhelr relaLlonshlp" Lo
Lhelr sellers. !RB,$7B, 01 2*3#4 *5 677&$,'8 9>E
<2)6 >:: ?=;;>A1
c. Gross Inadequacy of r|ce - 1o be a badge of bad falLh,
Lhe prlce musL be grossly lnadequaLe or shocklng Lo Lhe
consclence such LhaL Lhe mlnd revolLs agalnsL lL and
such LhaL a reasonable man would nelLher dlrecLly or
lndlrecLly be llkely Lo consenL Lo lL1
! Mere lnadequacy of prlce ls noL lpso facLo a
badge of lack of good falLh-Lo be so, Lhe prlce
musL be grossly lnadequaLe or shocklng Lo Lhe

1
Aqoq v. Alpbo llooocloq cotp., 407 SC8A 602 (2003), 8ook of commetce v. 5oo
loblo, It., 322 SC8A 713 (2007), lloyJs otetptlses ooJ cteJlt cotp. v. uolletoo,
333 SC8A 142 (2008),1y v. Ooeeos kow 5obJlvlsloo, loc., 607 SC8A 324 (2009).
consclence such LhaL Lhe mlnd revolLs agalnsL lL
and such LhaL a reasonable man would nelLher
dlrecLly or lndlrecLly be llkely Lo consenL Lo lL.
"B* 01 6S$+$4$8 >>: <2)6 =@> ?9EEJA.
d. Cb||gat|on to Invest|gate or 1o Io||ow Leads - When
Lhere are cerLaln facLs whlch would puL a reasonable
man on guard and prompL hlm Lo lnvesLlgaLe Lhe
properLy, he ls expecLed Lo do so. AcLual lack of
knowledge of flaw ln LlLle ls noL enough lf Lhese facLs
exlsL1 L$4M$+ 01 2*3#4 *5 677&$,'8 9;> <2)6 >>: ?=;;JA
o A purchaser who ls aware of facLs whlch should puL a
reasonable man upon hls guard cannoL Lurn a bllnd eye
and laLer clalm LhaL he acLed ln good falLh, such as -
! A buyer of a reglsLered land would be ln bad
falLh when he purchases wlLhouL asklng Lo see
Lhe owner's copy of Lhe LlLle and/or wlLhouL
vlslLlng Lhe land where he would Lhen have seen
flrsL buyer occupylng Lhe same1 !<$.4B$F* 01
2*3#4 *5 677&$,'8 9D@ <2)6 CC: ?=;;>A1
2

! When Lhere are occupanLs Lo Lhe land belng
boughL, slnce lL ls Lhe common pracLlce ln Lhe
real esLaLe lndusLry, an ocular lnspecLlon of Lhe
premlses lnvolved ls a safeguard a cauLlous and
prudenL purchaser usually Lakes. !L$#4B.&O 01
2*3#4 *5 677&$,'8 C>J <2)6 CJ ?9EE=A1
3


2
k.k. loteJes v. colllooq, 317 SC8A 369 (2007), cboo v. 5otlooo, 321 SC8A 68
(2007).
3
Motboy v. coott of Appeols, 293 SC8A 336 (1998), kepobllc v. ue Cozmoo, 326
SC8A 267 (2000), nelts of komoo uotooo, 5t. v. uy, 344 SC8A 238 (2000), nelts
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
! Any person engaged ln buslness would be wary
of buylng from a company LhaL ls closlng shop,
because lL may be dlsslpaLlng lLs asseLs Lo
defraud credlLors. Such buyer ls bound Lo
lnqulre wheLher Lhe owners had unseLLled
obllgaLlons encumbrance LhaL could burden Lhe
properLy. !<$^'*. 01 2*3#4 *5 677&$,'8 9CJ
<2)6 C;@ ?=;;DA1
1

! 1he properLy was LlLled and Lransferred wlLh
undue hasLe wlLhln a shorL perlod of Llme, plus
Lhe facL LhaL Lhe sub[ecL properLy ls a vasL LracL
of land ln a prlme locaLlon, should have, aL Lhe
very leasL, Lrlggered peLlLloner's curloslLy."
Z$F,& )&$,4+ 2*#7 01 )&73S,BI8 >>@ <2)6 @@8 ;D
?9EEJA.
e. When there are st|pu|at|ons |n the deed show|ng bad
fa|th - ln a case, Lhe CourL held LhaL a sLlpulaLlon ln Lhe
deed of sale provldlng LhaL any losses whlch Lhe buyer
may lncur ln Lhe evenL Lhe LlLle Lurns ouL Lo be vesLed ln
anoLher person are Lo bo borne by Lhe buyer alone,
showed LhaL Lhe buyer dld noL purchase Lhe sub[ecL
maLLer ln good falLh wlLhouL noLlce of any defecL ln Lhe
LlLle of Lhe seller. \B^/&4/$B <*.' LB,,B.F8 W.I1 01 2*3#4
*5 677&$,'8 9>E <2)6 >9C ?=;;>A
f. Land |n Adverse ossess|on -

of celestlol v. nelts of celestlol, 408 SC8A 291 (2003), tososto, It. v. coott of
Appeols, 493 SC8A 319 (2006), ue lo ceoo v. 8tlooes, 308 SC8A 62 (2006),
1ooqloo v. lotooqoo, 333 SC8A 123, 132 (2007).
1
oqle keolty cotp v. kepobllc, 337 SC8A 77 (2008).
o When Lhe land ls ln possesslon of a Lhlrd person, Lhe
buyer should lnvesLlgaLe Lhe rlghLs of Lhose ln
possesslon. WlLhouL such lnqulry, Lhe buyer can hardly
be regarded as a buyer ln good falLh. )&73S,BI 01 K&
T3O^$.8 C9: <2)6 9:@ ?9EEEA1
o 8uyer who could noL have falled Lo know or dlscover
LhaL Lhe land sold Lo hlm was ln Lhe adverse possesslon
of anoLher ls a buyer ln bad falLh. !H&B#' *5 )$^*.
K3#$.*8 <#1 01 `+8 CDD <2)6 9CJ ?9EEEA.
2

g. Lx|stence of L|s endens or Adverse C|a|m -
o An annoLaLlon of lls peoJeos ls a noLlce Lo Lhe world
LhaL any rlghL LhaL anyone wlll acqulre over Lhe properLy
ls sub[ecL Lo Lhe resulL of Lhe sulL. )&73S,BI 01 K&
T3O^$.8 C9: <2)6 9:@ ?9EEEA1
o 8eglsLraLlon of an adverse clalm places any subsequenL
buyer of Lhe reglsLered land ln bad falLh. NB.F'
R#*7&#4B&' 2*#71 01 T$,B%*8 :E: <2)6 =C@ ?9EE;A1
o Genera| ku|e: SeLLled ls Lhe rule LhaL one who deals
wlLh properLy wlLh a noLlce of lls peoJeos, even when aL
Lhe Llme of sale Lhe annoLaLlon was cancelled buL Lhere
was a pendlng appeal, cannoL lnvoke Lhe rlghL of a

2
MoJloo v. coott of Appeols, 317 SC8A 696, 706 (1999), kepobllc v. ue
Cozmoo, 326 SC8A 267 (2000), Mottloez v. coott of Appeols, 338 SC8A 38
(2001), nelts of 1tlolJoJ Je leoo vJo. ue koxos v. coott of Appeols, 422 SC8A
101 (2004), Occeoo v. spoolllo, 431 SC8A 116 (2004), lN8 v. nelts of
stoolsloo Mllltot, 494 SC8A 308 (2006), koymooJo v. 8ooJooq, 326 SC8A 314
(2007), 1ooqloo v. lotooqoo, 333 SC8A 123 (2007), 1lo v. Aboyoto, 336 SC8A
173 (2008), OtJoo v. loeotebello, 622 SC8A 146 (2010), ueoooo v. Moq-obo,
622 SC8A 180 (2010), 1be nelts of komooo 5oves v. 1be nelts of scolostlco
5oves, 632 SC8A 236 (2010).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
purchaser ln good falLh. A purchaser cannoL close hls
eyes Lo facLs whlch should puL a reasonable man on
guard and clalm LhaL he acLed ln Lhe bellef LhaL Lhere
was no defecL ln Lhe LlLle of Lhe seller. !R* \$^ 01 2*3#4
*5 677&$,'8 C=: <2)6 @9= ?=;;;A1
! Lxcept|on: When knowledge of lls peoJeos was
acqulred aL Lhe Llme Lhere was order Lo have lL
cancelled1 !R* \$^ 01 2*3#4 *5 677&$,'8 CD@
<2)6 J: ?9EEEA.
1

h. Annotat|on of L|en |n Sett|ement of Lstate - An
annoLaLlon placed on new cerLlflcaLes of LlLle lssued
pursuanL Lo Lhe dlsLrlbuLlon and parLlLlon of a
decedenL's real properLles ls a warnlng Lo Lhlrd persons
on Lhe posslble lnLeresL of excluded helrs or unpald
credlLors ln Lhese properLles-where a buyer purchases
Lhe real properLy desplLe Lhe annoLaLlon, he musL be
ready for Lhe posslblllLy LhaL Lhe LlLle be sub[ecL Lo Lhe
rlghLs of excluded parLles. "$. 01 -&.*,B#$*8 :ED <2)6
C: ?9EE;A.

n. When Art|c|e 1S44 Does Not App|y, r|or|ty |n 1|me ku|e App||es
SlLuaLlons where ArLlcle 1344 wlll noL apply:
o noL all Lhe requlslLes are presenL
o 1he requlslLes are presenL, buL elLher Lhe flrsL Lo
reglsLer rule or flrsL Lo possess rule were noL complled
wlLh

1
loJoJeto v. Moqollooes, 633 SC8A 332 (2010).
ln Lhese cases, Lhe general rule of ltlos tempote, potlot jote
(rlorlLy ln Llme, prlorlLy ln rlghL) wlll apply.
o 1hls ls acLually Lhe maln rule for double sales1 2$#S*.&,,
01 2*3#4 *5 677&$,'8 :; <2)6 ;; ?=;@:A
o 1he rules ln ArLlcle 1344 only provlde for speclal rules
for cerLaln clrcumsLances.
1he prlorlLy conLemplaLed ln Lhls lnsLance ls LhaL of who
acqulred LlLle flrsL. 1he quesLlon Lo ask, Lherefore, ls who among
Lhe buyers had Lhe flrsL petfecteJ and vollJ conLracL of sale.

I. When Sub[ect of Sa|e Is Unreg|stered Land [c$$]$. 2*^^3.B4+
)3#$, -$./ 01 2*3#4 *5 677&$,', C;> <2)6 DC ?9EECA]
8ules on double sales for lmmovables under ArLlcle 1344 are
appllcable Lo unreglsLered land, buL only lnsofar as Lhey do noL
undermlne speclflc rules, such as Lhe wlLhouL pre[udlce Lo
beLLer rlghL" provlslon ln AcL no. 3344, now Sec. 113, .u. 1329.
1he rules ln double sale under ArLlcle 1344, whereby Lhe buyer
who ls able Lo flrsL reglsLer Lhe purchase ln good falLh ls ln full
accord wlLh SecLlon 31 of u 1329 whlch provldes LhaL no deed,
morLgage, lease, or oLher volunLary lnsLrumenL - excepL a wlll
purporLlng Lo convey or affecL reglsLered land shall Lake effecL
as a conveyance or blnd Lhe land unLll lLs reglsLraLlon. 1hus, lf
Lhe sale ls noL reglsLered, lL ls blndlng only beLween Lhe seller
and Lhe buyer buL lL does noL affecL lnnocenL Lhlrd persons.
6S#BF* 01 K& a&#$, DC9 <2)6 >DD ?9EEDA.

6S#BF* 01 K& a&#$

Iacts: 8y vlrLue of a compromlse agreemenL [udlclally approved,
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
vlllafanla sold Lo 8osenda and 8oslLa a house and loL. unknown Lo
Lhem, vlllafanla obLalned a free paLenL over Lhe sald land and sold lL Lo
ue vera. Cn Lhe oLher hand, 8osenda and 8oslLa sold Lhe properLy Lo
Lhe spouses Abrlgo. now ue vera and Abrlgo dlspuLe ownershlp over
Lhe properLy-Lhe former flllng an e[ecLmenL sulL agalnsL Lhe laLLer.

Issue: Who has a beLLer LlLle, Abrlgo or ue vera?

ne|d: uL vL8A. Pe boughL and reglsLered Lhe properLy ln good falLh.
Spouses Abrlgo reglsLered Lhe properLy under AcL no. 3344 because lL
was unknown Lo Lhem LhaL lL was covered under Lhe 1orrens SysLem,
whlle ue vera reglsLered Lhe same under Lhe 1orrens SysLem because
vlllafanla procured Lhe 1C1 upon purchase. ue vera's rlghL prevalls,
spouses Abrlgo cannoL valldly argue LhaL Lhey were fraudulenLly mlsled
lnLo bellevlng LhaL Lhe properLy was unreglsLered. A 1orrens LlLle, once
reglsLered, serves as a noLlce Lo Lhe whole world. All persons musL Lake
noLlce, and no one can plead lgnorance of Lhe reglsLraLlon.

1he rules ln double sale under Art|c|e 1S44, whereby Lhe buyer who ls
able Lo flrsL reglsLer Lhe purchase ln good falLh ls ln full accord wlLh
SecLlon 31 of u 1329 whlch provldes LhaL no deed, morLgage, lease, or
oLher volunLary lnsLrumenL - excepL a wlll purporLlng Lo convey or
affecL reglsLered land shall Lake effecL as a conveyance or blnd Lhe land
unLll lLs reglsLraLlon. 1hus, lf Lhe sale ls noL reglsLered, lL ls blndlng only
beLween Lhe seller and Lhe buyer buL lL does noL affecL lnnocenL Lhlrd
persons.

Doctr|ne:

When flrsL sale ls over unreglsLered land and Lhe second sale ls
when lL ls reglsLered, Lhe rules on double sale do noL apply.
K$F37$. "#$%B.F 2*1 01 L$I$^, =D <2)6 =@; ?=;:>A.

K$F37$. "#$%B.F 2*1 01 L$I$^

Iacts: Sammy Maron and hls 7 broLhers were co-owners of a parcel of
land for whlch Lhey applled for reglsLraLlon. endlng Lhe proceedlngs,
Lhey sold Lhe same Lo Macam, who LhereafLer lnLroduced subsLanLlal
lmprovemenLs Lhereon. LaLer on, Lhe properLy was levled upon and sold
ln favor of uagupan 1radlng, whlch LhereafLer reglsLered Lhe Sherlff's
llnal CerLlflcaLe of Sale

Issue: Who has a beLLer rlghL, Macam or uagupan?

ne|d: MACAM. ln Lhls case, Lhe sale ln favor of Macam was execuLed
before Lhe land was reglsLered, whlle Lhe sale ln favor of uagupan was
made afLer Lhe reglsLraLlon. ln such a case, Lhe 8ules of CourL wlll apply
such LhaL Lhe dellvery of Lhe Sherlff's llnal CerLlflcaLe of Sale ln favor of
uagupan merely subsLlLuLes Lhe laLLer lnLo Lhe shoes of Lhe seller Maron
and acqulres all rlghLs, lnLeresLs, and clalms of Lhe laLLer. Conslderlng
LhaL aL Lhe Llme of Lhe levy, Maron was no longer Lhe owner of Lhe land,
Lhen no LlLle can LhereafLer pass ln favor of uagupan. Macam's LlLle ls
Lhus susLalned.

Doctr|ne: When flrsL sale ls over unreglsLered land and Lhe second sale
ls when lL ls reglsLered, Lhe rules on double sale do noL apply.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
ArLlcle 1344 ls lnappllcable Lo unreglsLered land because Lhe
purchaser of unreglsLered land aL a sherlff's execuLlon sale only
sLeps lnLo Lhe shoes of Lhe [udgmenL debLor, and merely
acqulres Lhe laLLer's lnLeresL ln Lhe properLy sold as of Lhe Llme
Lhe properLy was levled upon," as expressly provlded for ln Lhen
Sec. 33, 8ule 39 of Lhe 8evlsed 8ules of CourL on execuLlon sale
[now Sec. 33, 8ule 39, 1997 8ules of Clvll rocedure)]. 2$#3^S$
01 2*3#4 *5 677&$,'8 C= <2)6 >>J ?=;@EA.
o lf a plece of land ls sold Lhrough a prlvaLe deed of sale
buL was never reglsLered. 1he land was Lhen sold ln
publlc aucLlon and Lhe sale Lo Lhe second buyer was
reglsLered under AcL no. 3344. 1he appllcable provlslon
ls LhaL of Sec. 33, 8ule 39 of Lhe 8ules of CourL, noL
Art|c|e 1344. 2$#3^S$ 01 2*3#4 *5 677&$,'8 C= <2)6 >>J
?=;@EA.

2$#3^S$ 01 2*3#4 *5 677&$,'

Iacts: Amado sold an unreglsLered land Lo Carumba Lhrough a prlvaLe
documenL. Amado owed a sum of money from 8albuena. 8albuena
successfully obLalned a [udgmenL on hls credlL agalnsL Amado. Sherlff
lssued a ueflnlLe ueed of Sale (on Lhe same properLy sold Lo Carumba)
ln favor of 8albuena and reglsLered lL before 8ou. Cll sald levy was vold
and declared Carumba as owner because he already had possesslon of
Lhe land. CourL of Appeals sald Lhere was a double sale and 8albuena
should be declared owner because hls sale was reglsLered ln good falLh.

Issue: WheLher or noL Lhere ls a double sale.

ne|d: nC. ArLlcle 1344 does noL apply Lo unreglsLered land. 1he
purchaser of an unreglsLered land aL a sherlff's execuLlon sale only sLeps
lnLo Lhe shoes of Lhe [udgmenL debLor and merely acqulres Lhe laLLer's
lnLeresL ln Lhe properLy sold as of Lhe Llme LhaL Lhe properLy was levled
upon. 1he flrsL ueed of Sale whlle only embodled ln a prlvaLe documenL
buL coupled wlLh Lhe facL LhaL Carumba had Laken possesslon of Lhe
land sold, sufflced Lo vesL ownershlp on Lhe buyer. So when Lhe levy was
made by Lhe Sherlff, Lhe [udgmenL debLor no longer had domlnlcal
lnLeresL nor any real rlghL over Lhe land. no double sale.

Doctr|ne:

under AcL 3344, reglsLraLlon of lnsLrumenLs affecLlng
unreglsLered lands ls wlLhouL pre[udlce Lo a Lhlrd parLy wlLh a
beLLer rlghL," whlch means LhaL mere reglsLraLlon does noL glve
Lhe buyer any rlghL over Lhe land lf Lhe seller was noL anymore
Lhe owner of Lhe land havlng prevlously sold Lhe same Lo
somebody else even lf Lhe earller sale was unrecorded. 1he
rules on double sale under ArLlcle 1344 has no appllcaLlon Lo
land no reglsLered under Lhe 1orrens sysLem. 6I$S$, 01 6I$S$,8
D>D <2)6 >>> ?9EE>A.
1


6I$S$, 01 6I$S$,

1
nooopol v. lllopll, 7 SC8A 432 (1963), koJloweoltb lloooce co. v. lollleo, 197
SC8A 243 (1991), 5pooses noootlo 5ootloqo v. coott of Appeols, 247 SC8A 336
(1993), 8oyoco v. Noqoles, 340 SC8A 134 (2000), llJel v. coott of Appeols, 339
SC8A 186 (2008), uocloq v. Mocoblllq, 360 SC8A 137 (2008), AmoJlo vJo. ue
Meleocloo v. coott of Appeols, 334 SC8A 62, 82 (2007), llJel v. coott of
Appeols, 339 SC8A 186 (2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Iacts: Spouses Acabal sold Lhelr loL Lo Lhelr son vlllaner Acabal who ln
Lurn Lransferred lL Lo hls godson-nephew Leonardo Acabal. 1hls was
laLer on sold Lo Leonardo and 8amon nlcolas hence a complalnL was
flled by vlllaner agalnsL Lhem and hls nephew argulng LhaL whaL he
slgned was a Lease conLracL and noL a sales conLracL. 1he 81C ruled ln
favor of nlcolas whlch was reversed by Lhe CourL of Appeals Lhus Lhe
case aL bar.

Issue: WheLher or noL Lhere was a valld sale

ne|d: ?LS. lL ls valld only lnsofar as 3/9 of Lhe land ls concerned. 1hls ls
so because Lhe properLy ln quesLlon was boughL durlng Lhe pendency of
Lhe marrlage of vlllaner Lherefore lL ls presumed Lo belong Lo Lhe
con[ugal parLnershlp. Leonarda falled Lo prove oLherwlse. neverLheless,
when !usLlnlana (wlfe) dled, her share vesLed on her 8 chlldren, and her
husband vesLlng hlm wlLh 3/9 share on Lhe properLy. Slnce lL ls noL yeL
parLlLloned, he cannoL yeL clalm LlLle Lo any deflnlLe porLlon of Lhe
properLy buL only Lo hls ldeal, absLracL or splrlLual share. Pe may sLlll
dlspose of Lhe same for every co-owner has absoluLe ownershlp over hls
undlvlded lnLeresL ln Lhe co-owned properLy. Powever, he cannoL
dlspose of Lhe shares of hls co-owners based on nemo daL qul non
habeL. Slnce he sold lL wlLhouL Lhe consenL of Lhe oLher co-owners, Lhe
sale ls sLlll valld only lnsofar as hls shares are concerned. And Lhe flndlng
LhaL boLh Leonardo and vlllaner were ln parl dellcLo, Lhe same ls
lrrelevanL because Lhe properLy concerned ls unreglsLered.

Doctr|ne: lf unreglsLered land, once lL ls reglsLered under Lhe 1orrens
SysLem, reglsLraLlon glves lndefeaslblllLy Lo Lhe LlLle. lL cleanses Lhe LlLle
lf reglsLraLlon was made ln good falLh.

WhaL lf land ls sold 8LlC8L lL was reglsLered and Lhen sold a
second Llme by Lhe same person Al1L8 lL was reglsLered, wlll
ArLlcle 1344 apply? no. ArLlcle 1344 wlll noL apply because
reglsLraLlon was dlfferenL for boLh LransacLlons, albelL, no
reglsLraLlon aL all ln Lhe flrsL one.
Cwnershlp of Lhe land wlll Lhen depend on:
1. lf 2nd buyer, ln good falLh, reglsLered Lhe land under Lhe
1orrens SysLem, he prevalls because of Lhe lndefeaslblllLy of a
1orrens 1lLle.
2. 8uL lf reglsLraLlon was made under AcL no. 3344, ownershlp by
Lhe buyer of Lhe land ls sLlll dependenL on oLher beLLer rlghLs of
a Lhlrd parLy. Mere reglsLraLlon does noL glve a buyer any rlghL
over Lhe land lf Lhe seller was noL anymore Lhe owner of Lhe
land havlng prevlously sold Lhe same Lo somebody else.

IV. Cb||gat|ons of 8uyer

A. ay the r|ce (Art|c|e 1S82)
When seller cannoL show LlLle Lo Lhe sub[ecL maLLer, Lhen he
cannoL compel Lhe buyer Lo pay Lhe prlce. !H&B#' *5 <&0&#B.$
<$. LBF3&, 01 2*3#4 *5 677&$,'8 C:D <2)6 >9C ?9EE=A1
Mere sendlng of a leLLer by Lhe buyer expresslng Lhe lnLenLlon
Lo pay wlLhouL Lhe accompanylng paymenL ls noL consldered a
valld Lender of paymenL and conslgnaLlon of Lhe amounL due
are essenLlal ln order Lo exLlngulsh Lhe obllgaLlon Lo pay and
obllge Lhe seller Lo convey LlLle. !"*#I3$4*# 01 -&#.$S&8 D>;
<2)6 DC; ?9EE>A1
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
unless Lhe parLles Lo a sale have agreed Lo Lhe paymenL of Lhe
purchase prlce Lo any oLher parLy, Lhen lLs paymenL Lo be
effecLlve musL be made Lo Lhe seller ln accordance wlLh ArLlcle
1240 whlch provldes LhaL aymenL shall be made Lo Lhe person
ln whose favor Lhe obllgaLlon has been consLlLuLed, or hls
successor ln lnLeresL, or any person auLhorlzed Lo recelve lL."
!L*.4&IB,,* 01 )&+.&'8 CJ> <2)6 9DD ?9EE9A1
non-paymenL of Lhe conslderaLlon ln Lhe sale does noL prove
slmulaLlon, aL mosL, lL glves Lhe seller Lhe rlghL Lo sue for
collecLlon.
o Cenerally ln a sale, paymenL of Lhe prlce ls a resoluLory
condlLlon" and Lhe remedy of Lhe seller ls Lo exacL
fulflllmenL or, ln case of a subsLanLlal breach, Lo resclnd
Lhe conLracL under ArLlcle 1191.

8. Accept De||very (Art|c|es 1S82-1S8S)
1he buyer ls bound Lo accepL dellvery of Lhe Lhlng boughL aL Lhe
Llme and place sLlpulaLed ln Lhe conLracL.
o lf Lhe Llme and place were noL sLlpulaLed, Lhe paymenL
musL be made aL Lhe Llme and place of Lhe dellvery of
Lhe Lhlng sold.
1he buyer ls deemed Lo have accepLed Lhe goods when he
lnLlmaLes Lo Lhe seller LhaL he has accepLed Lhem. (ArLlcle 1383)
Coods Sold uellverable 8y lnsLallmenLs (ArLlcle 1383)

1. Cpportun|ty to Inspect Goods (Art|c|e 1S84)
Genera| ku|e: ArLlcle 1384(1)
o Lxcept|on: ArLlcle 1384(3), C.C.u. Sales

2. Lffect Cf Acceptance Cf Goods Cn Se||er's Warranty (Art|c|e
1S86)

3. kefusa| 1o Accept Goods (Art|c|e 1S87 and 1S88)

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 7: DCCUMLN1S CI 1I1LL

I. Def|n|t|on (Art|c|e 1636)

Art|c|e 1636.
In the preced|ng art|c|es |n th|s 1|t|e govern|ng the sa|e of goods,
un|ess the context or sub[ect matter otherw|se requ|res:

(1) "Document of t|t|e to goods" |nc|udes any b||| of |ad|ng, dock
warrant, "quedan," or warehouse rece|pt or order for the de||very of
goods, or any other document used |n the ord|nary course of bus|ness
|n the sa|e or transfer of goods, as proof of the possess|on or contro| of
the goods, or author|z|ng or purport|ng to author|ze the possessor of
the document to transfer or rece|ve, e|ther by |ndorsement or by
de||very, goods represented by such document.

"Goods" |nc|udes a|| chatte|s persona| but not th|ngs |n act|on or
money of |ega| tender |n the h|||pp|nes. 1he term |nc|udes grow|ng
fru|ts or crops.

"Crder" re|at|ng to documents of t|t|e means an order by |ndorsement
on the documents.

"ua||ty of goods" |nc|udes the|r state or cond|t|on.

"Spec|f|c goods" means goods |dent|f|ed and agreed upon at the t|me a
contract of sa|e |s made.

An antecedent or pre-ex|st|ng c|a|m, whether for money or not,
const|tutes "va|ue" where goods or documents of t|t|e are taken e|ther
|n sat|sfact|on thereof or as secur|ty therefor.

(2) A person |s |nso|vent w|th|n the mean|ng of th|s 1|t|e who e|ther
has ceased to pay h|s debts |n the ord|nary course of bus|ness or
cannot pay h|s debts as they become due, whether |nso|vency
proceed|ngs have been commenced or not.

(3) Goods are |n a "de||verab|e state" w|th|n the mean|ng of th|s 1|t|e
when they are |n such a state that the buyer wou|d, under the
contract, be bound to take de||very of them. (n)

Any blll of ladlng, dock warranL, "quedan," or warehouse recelpL
or order for Lhe dellvery of goods, or any oLher documenL used
ln Lhe ordlnary course of buslness ln Lhe sale or Lransfer of
goods, as proof of Lhe possesslon or conLrol of Lhe goods, or
auLhorlzlng or purporLlng Lo auLhorlze Lhe possessor of Lhe
documenL Lo Lransfer or recelve, elLher by endorsemenL or by
dellvery, goods represenLed by such documenL. (ArLlcle 1636)
o Lxample: Warehouse 8ecelpLs, 8onded Warehouse
8ecelpLs
uellvery and possesslon of Lhe documenL of LlLle ls LanLamounL
Lo dellvery and possesslon of Lhe goods whlch Lhe documenL of
LlLle represenLs. lL represenLs LhaL one who has possesslon of
Lhe recelpL has been enLrusLed has Lhe LlLle Lo Lhe goods.
!"#$#%%#&' )*+,- ./0 10 23-#/&3$ 43&56 78 !"#$0 79: ;9<89=> ?#@
./&A 4#'&A 10 B/&A5/&A C ?"3&A"3# 43&56 DE !"#$0 D<F ;9<:8=

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
II. urpose of Documents of 1|t|e

A. 1wo Iunct|ons:
1. As evldence of Lhe possesslon or conLrol of Lhe goods descrlbed
Lhereln.
2. As Lhe medlum of Lransferrlng LlLle and possesslon over Lhe
goods descrlbed Lhereln, wlLhouL havlng Lo effecL acLual
dellvery Lhereof.
1hrough a documenL of LlLle, seller ls allowed by flcLlon of law Lo
deal wlLh Lhe goods descrlbed Lhereln as Lhough he had
physlcally dellvered Lhem Lo Lhe buyer, and buyer may Lake Lhe
documenL as Lhough he had acLually Laken possesslon and
conLrol over Lhe goods descrlbed Lhereln0 G!"#$#%%#&' )*+,- ./0
10 23-#/&3$ 43&56 78 !"#$0 79: ;9<89=0
1he provlslons on documenLs of LlLle are geared Lowards
assurlng Lhe publlc Lo Lake, accepL, and deal wlLh LransacLlons
over goods and merchandlse by means of Lhe documenLs of LlLle
lssued ln represenLaLlon Lhereof.
Warehouse recelpL represenLs Lhe goods, buL Lhe lnLrusLlng of
Lhe recelpL ls more Lhan Lhe mere dellvery of Lhe goods, lL ls a
represenLaLlon LhaL Lhe one Lo whom Lhe possesslon of Lhe
recelpL has been so enLrusLed has Lhe LlLle Lo Lhe goods. G?#@
./&A 4#'&A 10 B/&A5/&A C ?"3&A"3# 43&56 DE !"#$0 D<F ;9<:8=

III. Negot|ab|e Documents of 1|t|e

A. Negot|ab|e Document of 1|t|e

Art|c|e 1S07.
A document of t|t|e |n wh|ch |t |s stated that the goods referred to
there|n w||| be de||vered to the bearer, or to the order of any person
named |n such document |s a negot|ab|e document of t|t|e. (n)

1. Lffects Cf Use Cf "Non-Negot|ab|e" 1erms Cn Negot|ab|e
Documents Cf 1|t|e
Such documenL may neverLheless be negoLlaLed by Lhe holder
and ls a negoLlable documenL of LlLle

8. now Negot|ated (Art|c|es 1S08-1S09)

Art|c|e 1S08.
A negot|ab|e document of t|t|e may be negot|ated by de||very:

(1) Where by the terms of the document the carr|er, warehouseman or
other ba||ee |ssu|ng the same undertakes to de||ver the goods to the
bearer, or

(2) Where by the terms of the document the carr|er, warehouseman or
other ba||ee |ssu|ng the same undertakes to de||ver the goods to the
order of a spec|f|ed person, and such person or a subsequent |ndorsee
of the document has |ndorsed |t |n b|ank or to the bearer.

Where by the terms of a negot|ab|e document of t|t|e the goods are
de||verab|e to bearer or where a negot|ab|e document of t|t|e has
been |ndorsed |n b|ank or to bearer, any ho|der may |ndorse the same
to h|mse|f or to any spec|f|ed person, and |n such case the document
sha|| thereafter be negot|ated on|y by the |ndorsement of such
|ndorsee. (n)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Art|c|e 1S09.
A negot|ab|e document of t|t|e may be negot|ated by the |ndorsement
of the person to whose order the goods are by the terms of the
document de||verab|e. Such |ndorsement may be |n b|ank, to bearer or
to a spec|f|ed person. If |ndorsed to a spec|f|ed person, |t may be aga|n
negot|ated by the |ndorsement of such person |n b|ank, to bearer or to
another spec|f|ed person. Subsequent negot|at|ons may be made |n
||ke manner. (n)

C. Who Can Negot|ate (Art|c|e 1S12)

Art|c|e 1S12.
A negot|ab|e document of t|t|e may be negot|ated:

(1) 8y the owner thereof, or

(2) 8y any person to whom the possess|on or custody of the document
has been entrusted by the owner, |f, by the terms of the document the
ba||ee |ssu|ng the document undertakes to de||ver the goods to the
order of the person to whom the possess|on or custody of the
document has been entrusted, or |f at the t|me of such entrust|ng the
document |s |n such form that |t may be negot|ated by de||very. (n)

D. Lffects of Negot|at|on (Art|c|e 1S13)

Art|c|e 1S13.
A person to whom a negot|ab|e document of t|t|e has been du|y
negot|ated acqu|res thereby:

(1) Such t|t|e to the goods as the person negot|at|ng the document to
h|m had or had ab|||ty to convey to a purchaser |n good fa|th for va|ue
and a|so such t|t|e to the goods as the person to whose order the
goods were to be de||vered by the terms of the document had or had
ab|||ty to convey to a purchaser |n good fa|th for va|ue, and

(2) 1he d|rect ob||gat|on of the ba||ee |ssu|ng the document to ho|d
possess|on of the goods for h|m accord|ng to the terms of the
document as fu||y as |f such ba||ee had contracted d|rect|y w|th h|m.
(n)

1he endorsemenL and dellvery of a negoLlable !"#$%& operaLes
as Lhe Lransfer of possesslon and ownershlp of Lhe properLy
referred Lo Lhereln, and had Lhe effecL of dlvorclng Lhe properLy
covered Lhereln from Lhe esLaLe of Lhe lnsolvenL prlor Lo Lhe
flllng of Lhe peLlLlon for lnsolvency0 G!"#$#%%#&' )*+,- ./0 10
23-#/&3$ 43&56 78 !"#$0 79: ;9<89=0

L. Lffects of Mere|y 1ransferr|ng]De||ver|ng of "Crder" Negot|ab|e
Documents of 1|t|e

Art|c|e 1S1S.
Where a negot|ab|e document of t|t|e |s transferred for va|ue by
de||very, and the endorsement of the transferor |s essent|a| for
negot|at|on, the transferee acqu|res a r|ght aga|nst the transferor to
compe| h|m to endorse the document un|ess a contrary |ntent|on
appears. 1he negot|at|on sha|| take effect as of the t|me when the
endorsement |s actua||y made. (n)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

I. Unauthor|zed Negot|at|on (Art|c|e 1S18)

Art|c|e 1S18.
1he va||d|ty of the negot|at|on of a negot|ab|e document of t|t|e |s not
|mpa|red by the fact that the negot|at|on was a breach of duty on the
part of the person mak|ng the negot|at|on, or by the fact that the
owner of the document was depr|ved of the possess|on of the same by
|oss, theft, fraud, acc|dent, m|stake, duress, or convers|on, |f the
person to whom the document was negot|ated or a person to whom
the document was subsequent|y negot|ated pa|d va|ue therefor |n
good fa|th w|thout not|ce of the breach of duty, or |oss, theft, fraud,
acc|dent, m|stake, duress or convers|on. (n)

Lven when Lhe owner loses Lhe negoLlable documenL of LlLle Lo
a Lhlef, and lL ls dellverable Lo bearer, Lhe laLLer may valldly
lmparL LlLle LhereLo Lo a holder ln due course, who ls essenLlally
a buyer ln good falLh and for value.
1he only real defense LhaL can valldly be ralsed agalnsL Lhe
holder ln due course of a negoLlable documenL of LlLle would be
forgery of Lhe endorsemenL of Lhe owner when such
endorsemenL ls necessary Lo effecL proper negoLlaLlon.
As beLween Lhe owner of a negoLlable documenL of LlLle who
endorsed lL ln blank and enLrusLed lL Lo a frlend, and Lhe holder
of such negoLlable documenL of LlLle Lo whom lL was negoLlaLed
and who recelved lL ln good falLh and for value, Lhe laLLer ls
preferred, under Lhe prlnclple LhaL as beLween Lwo lnnocenL
persons, he who made Lhe loss posslble should bear Lhe loss.
G?#@ H/&A 4#'&A 10 B/&A5/&A 3&I ?"3&A"3# 43&5#&A ./*%06 DE
!"#$0 D<F ;9<:8=0

IV. Non-negot|ab|e Documents of 1|t|e
uocumenLs of LlLle whlch are noL dellverable Lo bearer" or Lo
order."

A. now 1ransferred or Ass|gned (Art|c|e 1S14)

Art|c|e 1S14.
A person to whom a document of t|t|e has been transferred, but not
negot|ated, acqu|res thereby, as aga|nst the transferor, the t|t|e to the
goods, sub[ect to the terms of any agreement w|th the transferor.

If the document |s non-negot|ab|e, such person a|so acqu|res the r|ght
to not|fy the ba||ee who |ssued the document of the transfer thereof,
and thereby to acqu|re the d|rect ob||gat|on of such ba||ee to ho|d
possess|on of the goods for h|m accord|ng to the terms of the
document.

r|or to the not|f|cat|on to such ba||ee by the transferor or transferee
of a non-negot|ab|e document of t|t|e, the t|t|e of the transferee to the
goods and the r|ght to acqu|re the ob||gat|on of such ba||ee may be
defeated by the |evy of an attachment of execut|on upon the goods by
a cred|tor of the transferor, or by a not|f|cat|on to such ba||ee by the
transferor or a subsequent purchaser from the transferor of a
subsequent sa|e of the goods by the transferor. (n)

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Slnce a non-negoLlable documenL of LlLle consLlLuLes an
lncorporeal rlghL, lLs sale consLlLuLes acLually an asslgnmenL
whlch under Art|c|e 1624 ls perfecLed by mere consenL, buL
whlch under Art|c|e 162S would requlre lLs appearance ln a
publlc lnsLrumenL, oLherwlse lL shall produce no effecL as
agalnsL Lhlrd persons"

8. Lffects of 1ransfer (Art|c|e 1S14).

V. Lffects of Lrrors on Documents of 1|t|e
Clerlcal errors do noL affecL Lhe negoLlablllLy of Lhe lnsLrumenL

VI. Warrant|es of Se||er of Documents of 1|t|e (Art|c|e 1S16)

Art|c|e 1S16.
A person who for va|ue negot|ates or transfers a document of t|t|e by
|ndorsement or de||very, |nc|ud|ng one who ass|gns for va|ue a c|a|m
secured by a document of t|t|e un|ess a contrary |ntent|on appears,
warrants:

(1) 1hat the document |s genu|ne,

(2) 1hat he has a |ega| r|ght to negot|ate or transfer |t,

(3) 1hat he has know|edge of no fact wh|ch wou|d |mpa|r the va||d|ty
or worth of the document, and

(4) 1hat he has a r|ght to transfer the t|t|e to the goods and that the
goods are merchantab|e or f|t for a part|cu|ar purpose, whenever such
warrant|es wou|d have been |mp||ed |f the contract of the part|es had
been to transfer w|thout a document of t|t|e the goods represented
thereby. (n)

1he seller/asslgnor of Lhe documenL of LlLle also warranLs Lhe
exlsLence and legallLy of Lhe documenLs of LlLle aL Lhe Llme of
sale, unless lL has been sold as doubLful, buL LhaL he does noL
warranL Lhe solvency of Lhe debLor (l.e. Lhe ballee), unless lL has
been so expressly sLlpulaLed or unless Lhe lnsolvency was prlor
Lo Lhe sale and of common knowledge.

VII. Lffects When Cwner of the Document of 1|t|e nas No Lega| 1|t|e to
the Goods

A. When Goods Covered by Non-Negot|ab|e Document

Where the owner had ne|ther |ost
nor been un|awfu||y depr|ved of
the goods
Where the owner had |ost the
goods or been un|awfu||y
depr|ved thereof.
1he asslgnee-buyer's LlLle Lo Lhe
goods ls preferred agalnsL Lhe
owner who can no longer recover
Lhe goods. ln such cases, Lhe
asslgnee-buyer's ownershlp Lo Lhe
goods ls noL derlved from Lhe
asslgnor-seller, buL ls granLed by
Art|c|e SS9
1he owner may recover agalnsL
Lhe asslgnee-buyer, even when Lhe
laLLer ls ln good falLh and boughL
for value, because Art|c|e SS9
expressly does noL glve Lo Lhe
asslgnee-buyer any orlglnal LlLle,
and ln such cases, Lhe LlLle of Lhe
asslgnee-buyer ls derlved from
LhaL of Lhe asslgnor-seller's.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
8. When Goods Covered by Negot|ab|e Document

Where the owner had ne|ther |ost
nor been un|awfu||y depr|ved of
the goods
Where the owner had |ost the
goods or been un|awfu||y
depr|ved thereof.
1he holder-buyer acqulres valld
ownershlp of such goods because
hls possesslon ln good falLh and for
value, whlch by lLself would
consLlLuLe as an orlglnal source or
ownershlp under Art|c|e SS9, ls
clearly evldenced by hls belng a
holder ln due course of Lhe
negoLlable documenL of LlLle
1he owner may recover agalnsL
Lhe ballee and Lherefore
agalnsL Lhe holder-buyer, even
when Lhe laLLer ls a holder ln
due course wlLh respecL Lo Lhe
negoLlable documenL of LlLle,
and a possessor ln good falLh
and for value wlLh respecL Lo
Lhe goods.

VIII. ku|es of Levy]Garn|shment of Goods (Art|c|es 1S14, 1S19, 1S20).

Art|c|e 1S19.
If goods are de||vered to a ba||ee by the owner or by a person whose
act |n convey|ng the t|t|e to them to a purchaser |n good fa|th for va|ue
wou|d b|nd the owner and a negot|ab|e document of t|t|e |s |ssued for
them they cannot thereafter, wh||e |n possess|on of such ba||ee, be
attached by garn|shment or otherw|se or be |ev|ed under an execut|on
un|ess the document be f|rst surrendered to the ba||ee or |ts
negot|at|on en[o|ned. 1he ba||ee sha|| |n no case be compe||ed to
de||ver up the actua| possess|on of the goods unt|| the document |s
surrendered to h|m or |mpounded by the court. (n)

Art|c|e 1S20.
A cred|tor whose debtor |s the owner of a negot|ab|e document of t|t|e
sha|| be ent|t|ed to such a|d from courts of appropr|ate [ur|sd|ct|on by
|n[unct|on and otherw|se |n attach|ng such document or |n sat|sfy|ng
the c|a|m by means thereof as |s a||owed at |aw or |n equ|ty |n regard
to property wh|ch cannot read||y be attached or |ev|ed upon by
ord|nary |ega| process. (n)

A. When Non-Negot|ab|e Document of 1|t|e
See ArLlcle 1314(3)
o rlor Lo noLlflcaLlon, garnlshmenL and levy may defeaL
Lhe non-negoLlable documenL of LlLle.
ln effecL, Lhe asslgnmenL or sale by Lhe orlglnal owner of Lhe
non-negoLlable documenL of LlLle, even when execuLed ln a
publlc, lnsLrumenL does noL Lransfer possesslon or LlLle over Lhe
goods covered by Lhe documenL of LlLle, unLll acLual noLlflcaLlon
ls made Lo Lhe ballee of Lhe Lransfer or asslgnmenL of goods.
ln Lhe case of a non-negoLlable documenL of LlLle, possesslon
and ownershlp of Lhe documenL of LlLle (by asslgnmenL) does
noL necessarlly brlng wlLh lL possesslon or LlLle over Lhe goods
covered. 8aLher, lL ls Lhe noLlflcaLlon of Lhe ballee of Lhe
asslgnmenL LhaL ls Lhe operaLlve acL LhaL wlll Lransfer LlLle
and/or possesslon of Lhe goods ln favor of Lhe Lransferee-
asslgnee.

8. When Negot|ab|e Document of 1|t|e
See ArLlcle 1319
1he speclal rules on goods covered by Lhe negoLlable documenL
of LlLle show LhaL ln such case ownershlp and possesslon of Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
documenL lLself ls equlvalenL Lo Lhe holder havlng acLual
ownershlp and possesslon of Lhe goods covered Lhereby.
1he goods are LreaLed Lo be lnseparable from Lhe negoLlable
documenL of LlLle coverlng Lhem and vlce versa.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 8: SALL 8 NCN-CWNLk Ck
8 CNL nAVING VCIDA8LL 1I1LL:
"1he LIIL CI A CCN1kAC1 CI SALL"

I. Lffect of Sa|e Where Se||er Not Cwner at 1|me of erfect|on
Seller need noL be Lhe owner aL perfecLlon, provlded he
acqulres LlLle laLer on, buL when dellvery of ownershlp ls no
longer posslble, Lhe sale should be consldered vold. !""# %& '()
*+, -'.( /01 2/11+3
erfecLlon merely creaLes Lhe obllgaLlon Lo Lransfer ownershlp,
buL lL does noL by lLself Lransfer ownershlp.
o 1herefore, lL ls noL crlLlcal for a valld perfecLlon of a sale
Lo come abouL, LhaL Lhe seller aL LhaL Llme ls Lhe owner.

II. Lffect of Sa|e Where Se||er Not Cwner at 1|me of De||very (Art|c|e
1S0S), 456#7895: %& '"6;9 "< (==>5#?, */@ -'.( A,, 2/11*3.

Art|c|e 1S0S.
Sub[ect to the prov|s|ons of th|s 1|t|e, where goods are so|d by a
person who |s not the owner thereof, and who does not se|| them
under author|ty or w|th the consent of the owner, the buyer acqu|res
no better t|t|e to the goods than the se||er had, un|ess the owner of
the goods |s by h|s conduct prec|uded from deny|ng the se||er's
author|ty to se||.

Noth|ng |n th|s 1|t|e, however, sha|| affect:

(1) 1he prov|s|ons of any factors' act, record|ng |aws, or any other
prov|s|on of |aw enab||ng the apparent owner of goods to d|spose of
them as |f he were the true owner thereof,

(2) 1he va||d|ty of any contract of sa|e under statutory power of sa|e or
under the order of a court of competent [ur|sd|ct|on,

(3) urchases made |n a merchant's store, or |n fa|rs, or markets, |n
accordance w|th the Code of Commerce and spec|a| |aws. (n

456#7895: %& '(

Iacts: When AgaLona dled, she was succeeded by 2 sons: ascual and
uonaLo. She lefL 2 parcels of land. ascual dled leavlng 7 helrs. 1he LlLles
remalned ln Lhe name of AgaLona and Lhe loLs were never parLlLloned.
uonaLo, LhereafLer, execuLed an affldavlL of ueclaraLlon of Pelrshlp-
unllaLerally ad[udlcaLlng one of Lhe loLs Lo hlmself. Pe LhereafLer sold
Lhe enLlre loL Lo hls daughLer !ullana. lor Lhe fallure Lo pay Laxes, Lhe loL
was forfelLed and sold aL a publlc aucLlon, buL !ullana laLer redeemed
Lhe properLy. 1he Pelrs of ascual Lhen surfaced and soughL Lo parLlLlon
Lhe properLy.
1


Issue: WheLher or noL !ullana became Lhe owner of Lhe enLlre loL afLer
she redeemed lL herself.


1
AnLonlo, PlpollLo, lmperlal & Zaragosa. (2012). Salse CLv Case ulgesLs.
8eLrleved from hLLp://www.scrlbd.com/doc/104486360/Sales-CLv-Case-
ulgesLs
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
ne|d: nC. When uonaLo aulmlLan sold on May 28, 1974 LoL no. 1091
Lo hls daughLer !ullana . lanesa, he was only a co-owner wlLh
respondenLs and as such, he could only sell LhaL porLlon whlch may be
alloLLed Lo hlm upon LermlnaLlon of Lhe co-ownershlp. A co-owner could
only sell LhaL porLlon whlch may be alloLLed Lo hlm upon LermlnaLlon of
Lhe co-ownershlp. A sale of Lhe enLlre properLy by one co-owner
wlLhouL Lhe consenL of Lhe oLher co-owners ls noL null and vold.
Powever, only Lhe rlghLs of Lhe co-owner-sell are Lransferred, Lhereby
maklng Lhe buyer a co-owner of Lhe properLy. 1he sale by peLlLloner
uonaLo aulmlLan of Lhe land Lo hls daughLer, peLlLloner !ullana .
lanesa, dld noL glve Lo Lhe laLLer ownershlp over Lhe enLlre land buL
merely Lransferred Lo her Lhe one half (1/2) undlvlded share of her
faLher, Lhus maklng her Lhe co- owner of Lhe land ln quesLlon wlLh Lhe
respondenLs, her flrsL couslns. Powever, !ulla dld acqulre Lhe rlghL Lo be
relmbursed for half of Lhe redempLlon prlce she pald Lo Lhe rovlnclal
CovernmenL of negros CccldenLal on behalf of her co-owners. unLll
relmbursed, she holds a llen upon Lhe sub[ecL properLy for Lhe amounL
due her.

Doctr|ne:

noLe LhaL Lhe provlslon does noL say LhaL Lhe conLracL ls vold
o AlLhough a slLuaLlon (where Lhe sellers were no longer
owners) does noL appear Lo be one of Lhe vold conLracLs
enumeraLed ln ArLlcle 1409 of Clvll Code, and under
ArLlcle 1402 Clvll Code lLself recognlzes a sale where Lhe
goods are Lo be acqulred x x x by Lhe seller afLer Lhe
perfecLlon of Lhe conLracL of sale" clearly lmplylng LhaL
a sale ls posslble even lf Lhe seller was noL Lhe owner aL
Lhe Llme of sale, provlded he acqulres LlLle Lo Lhe
properLy laLer on, buL when dellvery of ownershlp ls no
longer posslble, Lhe sale should be consldered vold, and
consequenLly, Lhe rlghL Lo repurchase provlded Lhereln
would also be vold !""# %& '() *+, -'.( /01 2/11+3&
A seller may valldly sell" (enLer lnLo a valld and blndlng sale)
properLles whlch he enLlrely does noL own aL Lhe Llme of
perfecLlon. Such conLracL ls valld, and an acLlon Lo annul such
conLracL ls lmproper, and lL ls hls fallure Lo comply wlLh hls
obllgaLlon Lo Lransfer ownershlp over Lhe sub[ecL maLLer LhaL
would glve rlse Lo an acLlon for resclsslon wlLh damages.
lL ls aL Lhe consummaLlon sLage where Lhe prlnclple of nemo daL
quod non habeL (one cannoL glve whaL one does noL have)
applles. '5%89> B>%C9& D5:E %& -="6?>? -F;6? G87) H*0 -'.( H0,
2*III3
o ln sale, lL ls essenLlal LhaL Lhe seller ls Lhe owner of Lhe
properLy he ls selllng. 1he prlnclpal obllgaLlon of a seller
ls Lo Lransfer Lhe ownershlp of" Lhe properLy sold
(ArLlcle 1438). 1hls law sLems from Lhe prlnclple LhaL
nobody can dlspose of LhaL whlch does noL belong Lo
hlm: !"#$ &'( )*$& !$! +',"(& !"># %& '() *0I
-'.( +A 2/11@3&
/

lf one buys Lhe land of anoLher, Lo whlch Lhe seller ls supposed
Lo have a good LlLle, and ln consequence of facLs unknown allke
Lo boLh parLles, Lhe seller has ln facL no LlLle aL all, equlLy wlll
cancel Lhe sale and cause Lhe purchase money Lo be resLored Lo

1
'-./01 23 45657, 39 hll. 446 (1934), 8/9/05: 23 $01, 33 hll. 436 (1916).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe buyer, puLLlng boLh parLles ln 7;1;<7 =</& BD4 %& '() *01
-'.( HH/ 2/11@3

A. Sa|es by Co-Cwners (Art|c|e 493)

Art|c|e 493.
Lach co-owner sha|| have the fu|| ownersh|p of h|s part and of the
fru|ts and benef|ts perta|n|ng thereto, and he may therefore a||enate,
ass|gn or mortgage |t, and even subst|tute another person |n |ts
en[oyment, except when persona| r|ghts are |nvo|ved. 8ut the effect of
the a||enat|on or the mortgage, w|th respect to the co-owners, sha|| be
||m|ted to the port|on wh|ch may be a||otted to h|m |n the d|v|s|on
upon the term|nat|on of the co-ownersh|p. (399)

1. k|ght Cf A Co-owner r|or 1o art|t|on
none of Lhe co-owners may clalm any rlghL, LlLle or lnLeresL Lo a
parLlcular porLlon of Lhe Lhlng owned ln common.
o ln a conLracL of sale of co-owned properLy, whaL Lhe
vendee obLalns by vlrLue of such a sale are Lhe same
rlghLs as Lhe vendor had as co-owner (l.e., hls splrlLual
share), and Lhe vendee merely sLeps lnLo Lhe shoes of
Lhe vendor as co-owner. J45:K5:8L5: %& M578#) @0*
-'.( /,, 2*IIA3N
/
excepL when Lhe lnLenLlon of Lhe
purchase was clearly Lhe properLy lLself and noL [usL Lhe
splrlLual share. O8:P5:5" %& Q5=, /H -'.( /1I 2/1,@33


1
"7;/=<5 23 >1?@A<:1, 24 SC8A 39 (1968), 'B<@995 23 8', 421 SC8A 310 (2004),
'.1C1: 23 '.1C1:D 434 SC8A 333 (2003), ,19.5017 23 (/A17D 434 SC8A 393
(2003).
O8:P5:5" (R5P>7F) S:R& %& Q5=

Iacts: 8osenda and SoLero were among co-owners of 4 parcels of land,
whlch Lhey sold Lo lldefonso ?ap for some 100k wlLhouL Lhe consenL of
Lhe oLher co-owners. 1hey lncluded ln Lhe sale cerLaln bulldlngs and
laboraLory and oLher educaLlonal equlpmenL wlLhln Lhe sald properLles,
whlch were acLually owned by Mlndanao Academy. Mlndanao Academy
and Lhe oLher co-owners assalled Lhe valldlLy of Lhe sale. 1he Lrlal courL
declared Lhe sale null and vold. ?ap conLends LhaL Lrllnda, one of Lhe co-
owners ownlng 3/12 share of Lhe co-ownershlp, does noL have Lhe
sLandlng Lo challenge Lhe sale for belng ln bad falLh.
2


Issue: WheLher or noL Lhe sale ls null and vold.

ne|d: ?LS. 1he presLaLlon was lndlvlslble and lncapable of parLlal
annulmenL ln as much as ?ap admlLLed LhaL he would noL have enLered
lnLo Lhe LransacLlon excepL Lo acqulre all of Lhe properLles. 1he conLracL
of sale was vold because Lhe problem wlLh Lhe sale wenL lnLo one of Lhe
essenLlal requlslLes of a sale. 1here was no meeLlng of Lhe mlnds as Lo
Lhe sub[ecL maLLer. lf Lhe problem ls one of Lhe essenLlal requlslLes and
was only found durlng Lhe consummaLlon sLage, Lhe conLracL can be
volded even lf already aL Lhe consummaLlon sLage. lf Lhe problem ls only
wlLh regard Lo Lhe performance of an obllgaLlon, lL does noL affecL Lhe
perfecLlon of Lhe sale.


2
AnLonlo, PlpollLo, lmperlal & Zaragosa. (2012). Salse CLv Case ulgesLs.
8eLrleved from hLLp://www.scrlbd.com/doc/104486360/Sales-CLv-Case-
ulgesLs
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o ALLy. SanLlago: ln Lhls case, you have Lo look aL Lhe
lnLenL of Lhe parLles. ?ap was noL lnLeresLed ln Lhe lands
as much as he was lnLeresLed ln Lhe whole properLy
lnCLuulnC Lhe school and lLs conLenLs.
A co-owner can demand parLlLlon, buL before such, he has no
rlghL Lo dlvlde Lhe loL lnLo Lwo parLs, and convey Lhe whole of
one parL by meLes and bounds. G"=>T %& S#6?9;>) @ 4U8# @,+
2/1I,3
A co-owner, however, has Lhe power Lo allenaLe hls undlvlded
share over Lhe properLy. 1hus, lf before parLlLlon, he sells Lhe
enLlre properLy or a deflnlLe porLlon Lhereof wlLhouL consenL of
oLher co-owners, Lhe sale wlll only be valld wlLh regard Lo hls
undlvlded share ln Lhe properLy. 1he sale cannoL be consldered
as null and vold. D58#":V'5?8#5" %& '() /,I -'.( +HA N 456#7895:
%& '() */@ -'.( A,, 2/11*3
o 1he buyer Lhus becomes a co-owner of Lhe properLy.
o An agreemenL LhaL purporLs a speclflc porLlon of an un-
parLlLloned co-owned properLy ls noL vold, lL shall
effecLlvely Lransfer Lhe seller's ldeal share ln Lhe co-
ownershlp. W>8;? "< 9U> G59> -="6?>? (6;>#8" 5:P
X?=>;5:T5 D5#89> %& G87) 00, -'.( @0 2*II03&
/


2. kemedy Where Co-Cwner Se||s roperty r|or 1o art|t|on
ln whlch case, Lhe proper acLlon ls noL for nulllflcaLlon of sale, or
for Lhe recovery of possesslon of Lhe properLy owned ln
common from Lhe oLher co-owners, buL for dlvlslon or parLlLlon

1
':A50E91 23 F'8, 204 SC8A 142 (1991), G59010E5- 23 G59010E5-, 363 SC8A 811
(2001), 'B<@995 23 8', 421 SC8A 310 (2004), H10;/7 23 I<AC1/, 319 SC8A 408
(2007), 45J<C:@. 23 +5@97 /K G910.@7.1 &@B0/7LH/9/0/, 349 SC8A 38 (2008).
of Lhe enLlre properLy& JY"75? '#56P8" O>7";85# '"##>K>) S:R&
%& '"6;9 "< (==>5#?) H/, -'.( @I* 2/1113&
*

A co-owner who sells one of Lhe Lwo lands owned ln common
wlLh anoLher co-owner, and does noL Lurn-over one-half of Lhe
proceeds of Lhe sale Lo Lhe oLher co-owner, Lhe laLLer may by
law and equlLy lay excluslve clalm Lo Lhe remalnlng parcel of
land& JS7=>;85# %& '"6;9 "< (==>5#?) *@1 -'.( ,@ 2/11,3&
CLv's commenL: 1he rullngs seem Lo dlsregard Lhe commerclal
facL LhaL sellers and buyers agree on Lhe prlce based on Lhe slze
of Lhe properLy (l.e. buyers wlll pay more lf Lhey expecL Lo
acqulre Lhe enLlre properLy, buyers wlll pay less lf Lhey expecL Lo
acqulre [usL a parL). 1he proper remedy, accordlng Lo CLv, ls Lo
uphold Lhe valldlLy of Lhe sale, buL allow Lhe buyer Lo elLher (1)
seek resclsslon for breach of Lhe seller's obllgaLlon Lo dellver Lhe
ob[ecL agreed upon, or (2) accepL parLlal dellvery wlLh
approprlaLe reducLlon ln prlce.
ALLy. SanLlago: llnd Lhe besL remedy LhaL sulLs Lhe facLs of Lhe
case.
o lf Lhe lnLenL was Lo buy a deflnlLe porLlon (wlLhouL Lhe
consenL of Lhe co-owners belng obLalned) buL such area
cannoL be sold, Lhen Lhere would be no meeLlng of Lhe
mlnds. As such, Lhere would be a vold sale because one
of Lhe essenLlal requlslLes of a sale ls mlsslng.
o ueLermlne wheLher Lhe buyer wanLs Lo be a co-owner
of Lhe properLy, or wheLher Lhe buyer wanLs Lo be an
owner of a parLlcular porLlon of Lhe co-owned properLy.

2
+5@97 /K 4/A101 F0B?<BL(@9/ 23 8171:7D 363 SC8A 433 (2001), 'B<@995 23 8/<9;
/K 'JJ51:7, 421 SC8A 310 (2004).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o lf lL ls unclear whaL Lhe lnLenL of Lhe buyer ls and Lhe co-
owner-seller dld noL dlsclose hls lncapaclLy Lo sell LhaL
parLlcular porLlon (fraud), Lhen annulmenL of Lhe sale ls
Lhe proper remedy.

3. Lxcept|ons to ku|e on Lffect of Sa|e of Def|n|te ort|on of Co-
owner
a. 1he sub[ecL maLLer ls lndlvlslble by naLure or by lnLenL.
lL renders Lhe conLracL vold slnce Lhe buyer would noL
have enLered lnLo Lhe LransacLlon excepL Lo acqulre all
of Lhe properLles purchased by hlm. O8:P5:5"
(R5P>7F) S:R& %& Q5=) /H -'.( /1I 2/1,@3&
b. lf Lhe sale of a parLlcular porLlon ls wlLh consenL of
oLher co-owners, Lhe sale as Lo LhaL porLlon ls valld.
Lack of ob[ecLlon by Lhe co-owners ls ln effecL already a
parLlal parLlLlon. 457=#":5 %& O";>9") 1, -'.( ++@
2/1AI3.
c. A co-owner who sells one of Lhe Lwo lands owned ln
common wlLh anoLher co-owner, and does noL Lurn
over one-half of Lhe proceeds of Lhe sale Lo Lhe oLher
co-owner, Lhe laLLer may by law and equlLy lay excluslve
clalm Lo Lhe remalnlng parcel of land. I7=>;85# %& '"6;9
"< (==>5#?) *@1 -'.( ,@ 2/11,3.
d. lpso [ure Lransfer of ownershlp under ArLlcle 1434.
When Lhe co-owner-seller subsequenLly acqulres LlLle Lo
Lhe deflnlLe porLlon or Lhe enLlre properLy sub[ecL
maLLer of Lhe sale, Lhe LlLle auLomaLlcally passes Lo Lhe
buyer. 48?6!"# %& '!()* +, -!.)# /0#.(012 343 5678 39:
2/1113.
e. 8eglsLraLlon under Lhe 1orrens sysLem. lf Lhe 1orrens
LlLle shows LhaL Lhe properLy ls owned solely by Lhe
seller (l.e. no lndlcaLlon LhaL properLy ls co- owned), Lhe
buyer can rely on Lhe 1orrens LlLle. ';6T %& G>8?) H*+
-'.( @+I 2*III3.

III. Lxcept|ons: When Cwnersh|p 1ransfers by Act of the Non-Cwner
1hls should noL be confused wlLh double sales.
ln Lhls case, Lhe orlglnal owner ls a sLranger Lo Lhe sale
LransacLlon beLween Lhe seller and buyer.

A. Lstoppe| on 1rue Cwner (Art|c|e 1434) D6R9": %& Z5L5;, @@ -'.( 011
2/1+033

Art|c|e 1434.
When a person who |s not the owner of a th|ng se||s or a||enates and
de||vers |t, and |ater the se||er or grantor acqu|res t|t|e thereto, such
t|t|e passes by operat|on of |aw to the buyer or grantee.

D6R9": %& Z5L5;

Iacts: !oseflna boughL a parcel of land from vlllarln. 8y verbal
agreemenL, !oseflna sold a 1/2 porLlon Lhereof Lo nlcanora for 3,000.
nlcanora pald 1,000 Lhen 400-all evldence by recelpLs-Lhen she
loaned !oseflna 1,000 and LhereafLer along wlLh her spouse, Look
possesslon of Lhe loL and bullL Lhelr house as well as aparLmenLs
Lhereon. vlllarln Lhen lssued a ueed of Sale Lo !oseflna, buL Lhe laLLer
refused Lo execuLe Lhe correspondlng ueed of Sale Lo nlcanora. !oseflna
clalmed LhaL Lhe amounLs pald by nlcanora were ln Lhe concepL of
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
loans. 1hus, nlcanora flled a case for speclflc performance.

Issue: WheLher or noL Lhere was a sale beLween !oseflna and nlcanora.

ne|d: ?LS. When a person who ls noL Lhe owner of a Lhlng sells and
dellvers lL, and laLer Lhe seller acqulres LlLle LhereLo, such LlLle passes by
operaLlon of law Lo Lhe buyer. Seller ls subsequenLly barred by esLoppel
from clalmlng oLherwlse. Assumlng LhaL aL Lhe Llme when !oseflna sold
Lhe loL Lo nlcanora, she was noL yeL Lhe owner Lhereof. When vlllarln
execuLed Lhe ueed of Sale ln her favor, LlLle passed Lo nlcanora by
operaLlon of law. AlLhough Lhe sale beLween !oseflna and nlcanora was
verbal, lL was as beLween Lhem. Conslderlng LhaL nlcanora has pald Lhe
purchase prlce, she became owner of 1/2 of Lhe loL. Llkewlse, alLhough
Lhe complalnL was LlLled speclflc performance" lL was acLually one for
quleLlng of LlLle, whlch ls lmprescrlpLlble so long as Lhe plalnLlff ls ln
possesslon of Lhe loL.

Doctr|ne:

8. kecord|ng Laws, 1orrens System (res|dent|a| Decree No. 1S29).
1he defense of lndefeaslblllLy of 1orrens LlLle where Lhe
dlspuLed bulldlngs and equlpmenL are locaLed ls unavalllng,
slnce such defense ls avallable Lo sale of lands and noL Lo sale of
properLles slLuaLed Lhereln& JY?58 %& '() H,, -'.( H*0 2*II/3&
A person who deals wlLh reglsLered land Lhrough someone who
ls noL Lhe reglsLered owner ls expecLed Lo look beyond Lhe
cerLlflcaLe of LlLle and examlne all Lhe facLual clrcumsLances
Lhereof ln order Lo deLermlne lf Lhe vendor has Lhe capaclLy Lo
Lransfer any lnLeresL ln Lhe land. -F %& '5=8?9;5:") [;&) @,I -'.(
/IH 2*IIA3&
o Where lnnocenL Lhlrd persons, relylng on Lhe
correcLness of Lhe cerLlflcaLe of LlLle Lhus lssued, acqulre
rlghLs over Lhe properLy, Lhe courL cannoL dlsregard
such rlghLs and order Lhe cancellaLlon of Lhe cerLlflcaLe,
slnce Lhe effecL of such ouLrlghL cancellaLlon wlll be Lo
lmpalr publlc confldence ln Lhe cerLlflcaLe of LlLle. Lvery
person deallng wlLh Lhe reglsLered land may safely rely
on Lhe correcLness of Lhe cerLlflcaLe of LlLle lssued
Lherefor and Lhe law wlll ln no way obllge hlm Lo go
behlnd Lhe cerLlflcaLe Lo deLermlne Lhe condlLlon of Lhe
properLy. JW>8;? "< -="6?>? D>:89" Z5%8:"& %& '"6;9 "<
(==>5#?) *1/ -'.( 01@ 2/11A3&
An lnnocenL purchaser for value ls one who purchases a LlLled
land by vlrLue of a deed execuLed by Lhe reglsLered owner
hlmself noL by a forged deed. JS:?6;5:R> ->;%8R>? 5:P
'"77>;R85# Y;5P>;?) S:R& %& '() H0/ -'.( @+* 2*III3&
o An lnnocenL purchaser for value ls one who buys Lhe
properLy of anoLher wlLhouL noLlce LhaL some oLher
person has a rlghL Lo or lnLeresL ln lL, and who pays a full
and falr prlce aL Lhe Llme of Lhe purchase or before
recelvlng any noLlce of anoLher person's clalm. 1he
burden of provlng Lhe sLaLus of a purchaser ln good
falLh and for value lles upon one who asserLs LhaL
sLaLus. 1hls /0<7 J9/C10E@ cannoL be dlscharged by
mere lnvocaLlon of Lhe ordlnary presumpLlon of good
falLh. .6<#"> %& D6;K"?) @++ -'.( *,0) *+*V*+H 2*II13&
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
ALLy. SanLlago: 1he lndefeaslblllLy of Lhe 1orrens sysLem
proLecLs an lv, even when Lhe real owner was unlawfully
deprlved Lhereof. 1hls ls ln conLrasL Lo Lhe rule on movables.

C. Statutory ower Crder Cf Courts
!udgmenLs of courLs dlvesLlng Lhe reglsLered owner of LlLle and
vesLlng Lhem ln Lhe oLher parLy are valld.
Sale by a sherlff of land levled upon aL publlc aucLlon would
valldly Lransfer ownershlp Lo Lhe hlghesL bldder.
When a defeaLed parLy refuses Lo execuLe Lhe absoluLe deed of
sale ln accordance wlLh Lhe [udgmenL, Lhe courL may dlrecL Lhe
acL Lo be done aL Lhe cosL of Lhe dlsobedlenL parLy by some
oLher person appolnLed by Lhe courL and Lhe acL when so done
shall have Lhe llke effecL as ls done by Lhe parLy. JO5:8#5
.>7:5:9 '"&) S:R& %& '() *H/ -'.( *A/ 2/1103

D. Sa|e In Merchants Stores, Ia|rs Cr Markets (Art|c|es 8S and 86, Code
of Commerce)
1hls ls an example of an lmperfecL or vold LlLle rlpenlng lnLo a
valld one. 1he rlghLs and lnLeresL of an lnnocenL purchaser for
value ls proLecLed ln order Lo faclllLaLe commerclal sales on
movables and Lo glve sLablllLy Lo buslness LransacLlon. -6:
D;"9U>;? \ '"& %& ]>#5?R") @0 M&Z& @/0H 2/1@A3

-6: D;"9U>;? \ '"& %& ]>#5?R"

Iacts: Sun 8roLhers sold an Admlral 8efrlgeraLor Lo Lopez upon Lhe
agreemenL LhaL ownershlp wlll only pass Lo Lhe laLLer upon paymenL of
Lhe full purchase prlce. Lopez pald only Lhe downpaymenL and sold Lhe
same Lo !v 1radlng (owned by velasco) and was dlsplayed ln Lhe laLLer's
sLore. lL was LhereafLer boughL by Co kang Chlu from !v 1radlng. Sun
8roLhers soughL Lo recover Lhe refrlgeraLor.

Issue: WheLher or noL Sun 8roLhers may recover Lhe refrlgeraLor.

ne|d: nC. 1he general rule ls LhaL when a person who ls noL Lhe owner
of a Lhlng sells Lhe same, Lhe buyer acqulres no beLLer LlLle Lhan Lhe
seller has. Applylng Lhe general rule, Lopez by reason of Lhe agreemenL
had no LlLle Lo Lhe goods for havlng falled Lo pay Lhe full prlce. lL
Lherefore follows LhaL !v 1radlng had no LlLle LhereLo as velasco was
obllged Lo lnqulre Lo lnqulre lf Lopez had good LlLle Lo Lhe refrlgeraLor.

Powever, a purchase ln good falLh ln a merchanL sLore, or falr, or
markeL ls proLecLed by law. When Lhe refrlgeraLor was sold Lo Co kang
Chlu, Lhe laLLer acqulred a valld LlLle Lo Lhe Lhlng. Co kang Chlu
purchased Lhe refrlgeraLor ln a merchanL sLore, for value and ln good
falLh. 1hus, he ls proLecLed by Lhe law as an lnnocenL purchaser.

lL ls an excepLlon Lo Lhe general rule LhaL no Lransfer of ownershlp may
be had Lhrough an acL of a non-owner. 1he rlghLs and lnLeresL of an
lnnocenL buyer for value who boughL a Lhlng from a merchanL sLore
should be proLecLed when lL comes lnLo clash wlLh Lhe rlghL and
lnLeresLs of a vendor. 1he buyer cannoL be reasonably expecLed Lo look
behlnd Lhe LlLle of arLlcles he buys ln a sLore.

Doctr|ne:

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
SLore" ! any place where goods are kepL for sale or where
goods are deposlLed and sold by one engaged ln buylng and
selllng Lhem. '89F "< O5:8#5 %& D6K?6E G67L>; '"&) /I/ 4U8#& A@1
2/1@+3

'89F "< O5:8#5 %& D6K?6E

Iacts: 8ugsuk Lumber had an offlce ln Manlla. lL was organlsed Lo buy
and sell lumber, and ln 1931 made sales of lumber Lo several flrms. ln
1932, Lhe ClLy 1reasurer assessed lL for llcense fees and mayor's
permlL-alleglng LhaL 8ugsuk sold aL wholesale and reLall Lo dlfferenL
lumber dealers ln Manlla. 8ugsuk refused Lo pay alleglng LhaL Lhe
lumber lL produced were dellvered dlrecLly from Lhe shlpper Lo Lhe
buyer, LhaL Lhey pald Lhe approprlaLe 1lmber Llcense lees and LhaL Lhelr
Manlla Cfflce only recelved orders and accepLed paymenLs. 8ugsuk
alleges LhaL lL ls noL a dealer and lLs offlce ls noL a sLore Lo warranL Lhe
lmposlLlon of Lhe addlLlonal Laxes. ln oLher words, Lhey produced Lhe
logs Lhemselves and senL Lhem dlrecLly Lo Lhe consumers - Lhey were
noL a mlddleman beLween a producer and a consumer, raLher Lhey were
a producer.

Issue: WheLher or noL appellanL, malnLalnlng a prlnclpal offlce ln
Manlla, recelvlng orders for lLs producLs and accepLlng ln sald offlce
paymenLs LhereLo, can be consldered a dealer ln Lhe clLy and Lherefore
llable for addlLlonal Laxes.

ne|d: nC. A dealer ls a mlddleman beLween Lhe producer and Lhe
consumer. A dealer buys Lo sell agaln, 8ugsuk produced lLs own lumber
from alawan. 1hus, lL ls noL a dealer. lLs Manlla offlce ls noL a sLore as
well. A sLore ls a place where goods are kepL for sale - wheLher for
reLall or wholesale. 1he Manlla offlce only processed Lhe orders and
paymenLs, lL dld noL keep goods Lhereln or acL as a dealer or
lnLermedlary beLween Lhe fleld offlce and Lhe cusLomers. 1hus, lL ls noL
llable for Lhe sald Laxes.

Doctr|ne: 1he necessary elemenL of sLore" ls LhaL Lhere are goods or
wares dlsplayed or sLored Lhereln. Also, Lhe flrm musL be acLually
engaged ln Lhe buslness of buylng and selllng. lf a flrm produces,
manufacLures, and dellvers lLs own produce from lLs warehouses and
Lhey have no sLores open for sale, flrm ls noL a merchanL sLore

IV. Sa|e by Cne nav|ng Vo|dab|e 1|t|e on the Sub[ect Matter (Art|c|e
1S06, as an except|on to Art|c|e SS9)

Art|c|e 1S06.
Where the se||er of goods has a vo|dab|e t|t|e thereto, but h|s t|t|e has
not been avo|ded at the t|me of the sa|e, the buyer acqu|res a good
t|t|e to the goods, prov|ded he buys them |n good fa|th, for va|ue, and
w|thout not|ce of the se||er's defect of t|t|e. (n)

Slnce Lhe provlslon Lalks of paymenL by Lhe buyer and Lransfer
of LlLle Lo Lhe buyer, Lhe provlslon applles Lo Lhe consummaLlon
sLage of Lhe conLracL.
o lf afLer perfecLlon buL before consummaLlon, Lhe seller's
voldable LlLle becomes vold, Lhe buyer does noL obLaln
good LlLle.
Cood falLh ls requlred.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o 1he language of Lhe deed of sale may show bad falLh on
Lhe parL of Lhe buyer, and such bad falLh would glve Lhe
buyer no rlghL greaLer Lhan LhaL of Lhe seller. G87E>9E58
-":? O8##8:K S:R& %& '"6;9 "< (==>5#?) *@I -'.( @*H
2/11@3

A. App||cab|e ku|es to Immovab|es
ArLlcles 1303 and 1306 do noL apply Lo lmmovables. When Lhe
seller of a parcel of land has only voldable or vold LlLle Lo Lhe
properLy, Lhe buyer, even Lhough ln good falLh and for value,
Lakes only Lhe same LlLle as Lhe seller had.
lor land, Lhe 1orrens sysLem sLlll prevalls. W>8;? "< -="6?>?
D>:89" Z5%8:"& %& '"6;9 "< (==>5#?) *1/ -'.( 01@ 2/11A3
Genera| ku|e: 1he rule LhaL Lhe dlrecL resulL of a prevlously vold
conLracL cannoL be valld ls unavalllng when lL wlll conLravene
Lhe 1orrens sysLem, where lL sLaLes LhaL lnnocenL Lhlrd persons,
relylng on Lhe correcLness of Lhe cerLlflcaLe of LlLle Lhus lssued,
acqulre rlghLs over Lhe properLy, Lhe courL cannoL dlsregard
such rlghLs and order Lhe cancellaLlon of Lhe cerLlflcaLe.
o Lxcept|on: Powever, Lhe defense of lndefeaslblllLy of
1orrens LlLle ls unavalllng Lo properLles and oLher
lmprovemenLs slLuaLed or bullL on Lhe land. Y?58 %& '()
H,, -'.( H*0 2*II/3
A person who deals wlLh reglsLered land Lhrough someone who
ls noL Lhe reglsLered owner ls expecLed Lo look beyond Lhe
cerLlflcaLe of LlLle and examlne all Lhe facLual clrcumsLances
Lhereof ln order Lo deLermlne lf Lhe vendor has Lhe capaclLy Lo
Lransfer any lnLeresL ln Lhe land. -F %& '5=8?9;5:") [;&) @,I -'.(
/IH 2*IIA3

8. "1|t|e" as to Movab|e ropert|es

Art|c|e SS9.
1he possess|on of movab|e property acqu|red |n good fa|th |s
equ|va|ent to a t|t|e. Neverthe|ess, one who has |ost any movab|e or
has been un|awfu||y depr|ved thereof may recover |t from the person
|n possess|on of the same.

If the possessor of a movab|e |ost or wh|ch the owner has been
un|awfu||y depr|ved, has acqu|red |t |n good fa|th at a pub||c sa|e, the
owner cannot obta|n |ts return w|thout re|mburs|ng the pr|ce pa|d
therefor. (464a)

Genera| ku|e: 1he lawful owner of movable properLy unlawfully
deprlved Lhereof may recover Lhe same. rovlded, lf such
recovery ls made from a person who lawfully boughL Lhe same
from a publlc sale, Lhe buyer ln good falLh musL be relmbursed.
o Lxcept|ons to Art|c|e SS9:
" 8y cross-reference Lo ArLlcle 1303, Lhe owner
cannoL recover Lhe movable lf lL was already
boughL from a merchanL sLore.
Lxcept|on: lf lL was merely dlsplayed aL
Lhe merchanL sLore aL Lhe Llme of
recovery, Lhen recovery ls sLlll posslble
- even wlLhouL relmbursemenL.
" 8y cross-reference Lo ArLlcle 1306, lf Lhe
possessor ln good falLh acqulred LlLle from a
seller who aL Lhe Llme of dellvery had a voldable
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
LlLle LhereLo, Lhe orlglnal owner cannoL recover
Lhe movable.
Whenever Lhere ls an underlylng conLracL of sale whlch granLs
Lo Lhe culprlL-buyer a voldable LlLle, even when Lhls ls
accompanled by Lhe crlmlnal acL of esLafa or swlndllng, ArLlcle
1306 would granL Lo Lhe buyer ln good falLh a beLLer LlLle as
agalnsL Lhe orlglnal owner even Lhough Lhe laLLer may be
classlfled Lo have been unlawfully deprlved" of Lhe sub[ecL
maLLer under ArLlcle 339. Y5K595R %& [87>:>T, @H M&Z& H+1*
2/1@+3N XB'( 46L#8?U8:K %& -5:9"?) /A0 -'.( ,/0 2/11I3&

Y5K595R %& [87>:>T

Iacts: 1agaLac boughL a car abroad and broughL lL Lo Lhe hlllpplnes.
Warner lelsL decelved her lnLo bellevlng LhaL he was very rlch and
purchased her car. She dellvered possesslon Lhereof. Levy (anoLher
name of lelsL) lssued her a posLdaLed check, whlch was dlshonored.
lelsL Lhen dlsappeared wlLh Lhe car. lelsL was able Lo reglsLer Lhe car ln
hls name and evenLually sold Lhe car Lo Sanchez, who Lhen sold Lhe
same Lo !lmenez. !lmenez even labored Lo verlfy Lhe car's records wlLh
MoLor vehlcle Cfflce. !lmenez Lhen dellvered Lhe car Lo Callfornla Car
Lxchange for dlsplay. 1agaLac, upon flndlng ouL, soughL Lo recover Lhe
car, buL !lmenez refused.

Issue: WheLher or noL 1agaLac may recover.

ne|d: nC. Whenever Lhere ls a conLracL of sale whlch granLs Lo Lhe
culprlL-buyer (lelsL) a voldable LlLle, even lf accompllshed Lhrough esLafa
or swlndllng, Lhe buyer ln good falLh (!lmenez) ls granLed a beLLer LlLle as
agalnsL Lhe orlglnal owner (1agaLac) even Lhough Lhe laLLer (1agaLac)
may be classlfled Lo have been unlawfully deprlved" of Lhe sub[ecL
maLLer (ArLlcle 1306).

!lmenez was a buyer ln good falLh of Lhe car - he had no knowledge of
any defecL ln Lhe LlLle of Lhe seller. lL ls Lrue LhaL one who has losL any
movable or has been unlawfully deprlved Lhereof may recover Lhe same
from Lhe possessor. Powever, 1agaLac was nC1 unlawfully deprlved
wlLhln Lhe conLexL of Lhe Clvll Code. 1he sale beLween lelsL and 1agaLac
was merely voldable (valld unLll annulled). 1here was a valld
Lransmlsslon of ownershlp. 1he facL LhaL lelsL dld noL pay only glves rlse
Lo an acLlon Lo resolve Lhe conLracL or demand paymenL. When lelsL
sold Lhe car Lo Sanchez, Lhe sale beLween hlm and 1agaLac was sLlll
valld, Lherefore, good LlLle passed Lo Sanchez. As beLween 2 lnnocenL
parLles, Lhe one who made posslble Lhe ln[ury musL bear Lhe loss.

Doctr|ne:

ALLy. SanLlago: lL was Lhe dellvery of Lhe car LhaL lawfully Lransferred Lhe
properLy from 1agaLac Lo lelsL. 1he bounclng Lhe check goes lnLo Lhe
consummaLlon of Lhe paymenL. Powever, slnce Lhere has been proper
dellvery, Lhe buyer may Lhen valldly sell lL anoLher. 1hls ls relnforced ln
LuCA ubllshlng v. SanLos.

XB'( 46L#8?U8:K %& -5:9"?

Iacts: LuCA sold 406 books Lo !ose Cruz whereln Lhe laLLer lssued a
check as paymenL. Cruz ln Lurn sold 120 of Lhose books Lo Leonor
SanLos. Meanwhlle, LuCA became susplclous of Cruz when he placed hls
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
second order. 1hey lnvesLlgaLed and found ouL LhaL !ose Cruz was an
lmposLor and Lhe check he lssued was drawn agalnsL a closed accounL.
LuCA Lhen forclbly Look Lhe 120 books from SanLos.
Issue: WheLher or noL LuCA may reLrleve Lhe books from SanLos

ne|d: nC. SanLos was a purchaser ln good falLh and exerclsed due
dlllgence when he asked for Lhe lnvolce from LuCA before purchaslng lL
from Cruz. non-paymenL only creaLes a rlghL Lo demand paymenL or Lo
resclnd Lhe conLracL, or Lo crlmlnal prosecuLlon ln Lhe case of bounclng
checks. 8uL absenL Lhe sLlpulaLlon LhaL ownershlp shall noL pass unLll full
paymenL, dellvery of Lhe Lhlng sold wlll effecLlvely Lransfer ownershlp Lo
Lhe buyer who can ln Lurn Lransfer lL Lo anoLher. Cwnershlp of Lhe
books passed Lo 1omas upon Lhe dellvery Lhereof. Pe had Lhe rlghL Lo
Lransfer Lhe same Lo SanLos. 1he facL LhaL he dld noL pay for Lhe books
only warranLs resclsslon or an acLlon for paymenL. LuCA cannoL be
consldered Lo have been unlawfully deprlved under Lhe CC as Lo warranL
recovery of Lhe books from SanLos. ossesslon of movable properLy
acqulred ln good falLh ls equlvalenL Lo LlLle

Doctr|ne:

1hus, when owner dld noL volunLarlly dellver possesslon of Lhe
car, and ln effecL lL was sLolen from hlm, Lhen one who buys Lhe
car even ln good falLh from Lhe Lhlef wlll lose Lhe car Lo Lhe
owner who ls deemed Lo have been unlawfully deprlved. (T:5;
%& Q5=P85:KR") /H -'.( 0A, 2/1,@3.

(T:5; %& Q5=P85:KR"

Iacts: 1eodoro SanLos adverLlsed for sale hls lord lalrlane car. ue ulos
approached Lhem purporLlng Lo be a nephew of Marella. 1eodoro,
LransacLed wlLh Marella who agreed Lo buy Lhe car, agreelng Lo pay Lhe
same only afLer Lhe car has been reglsLered ln hls name. 1eodoro
lnsLrucLed hls son, lrlneo noL Lo parL wlLh ue ulos unLll he has recelved
Lhe full paymenL of Lhe car. 1he ueed was reglsLered ln hls name, buL
Marella has yeL Lo pay so Lhe documenLs were noL dellvered Lo hlm.
Marella pleaded wlLh lreneo LhaL he and ue ulos proceed Lo Marella's
slsLer Lo secure Lhe shorLage of cash. Marella also lnduced lreneo Lo glve
hlm Lhe documenLs under Lhe preLexL LhaL he wlll show Lhem Lo hls
lawyer. lreneo agreed. 1hey proceeded LhereLo, lreneo was
accompanled by ue ulos and an anonymous person. ue ulos made
lreneo walL and LhereafLer escaped wlLh Lhe car and Lhe deed. Marella
was Lhen able Lo sell Lhe car Lo Aznar. 1he pollce LhereafLer selzed Lhe
car ln Aznar's possesslon. Aznar counLered wlLh a complalnL for
8eplevln.

Issue: WheLher or noL SanLos may recover from Aznar.

ne|d: ?LS. lL should be recalled LhaL whlle Lhere was lndeed a conLracL
of sale beLween Marella and SanLos, Lhe former, as vendee, Look
possesslon of Lhe sub[ecL maLLer Lhereof by sLeallng Lhe same whlle lL
was ln Lhe cusLody of Lhe laLLer's son. 1eodoro was clearly unlawfully
deprlved of Lhe car. 1here was no valld dellvery Lo Marella, hence Lhe
laLLer acqulred no LlLle Lo Lhe car. Pe nelLher had a voldable LlLle under
ArLlcle 1306 nor was lL dellvered Lo hlm. SanLos has a beLLer rlghL.
Moreover ArLlcle 339 (lrrevlndlcablllLy) does noL apply. 1he common
law prlnclple LhaL where 1 of 2 lnnocenL persons musL suffer by a fraud
perpeLraLed by anoLher, Lhe law lmposes Lhe loss upon Lhe parLy who,
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
by hls mlsplaced confldence, has enabled Lhe fraud Lo be commlLLed,
cannoL be applled ln a case whlch ls covered by an express provlslon of
law.

Doctr|ne: 1hus, when owner dld noL volunLarlly dellver possesslon of
Lhe car, and ln effecL lL was sLolen from hlm, Lhen one who buys Lhe car
even ln good falLh from Lhe Lhlef wlll lose Lhe car Lo Lhe owner who ls
deemed Lo have been unlawfully deprlved.

ALLy. SanLlago: Lhere was noL proper dellvery as conLemplaLed by law

ln all oLher cases of unlawful deprlvaLlon done Lhrough esLafa,
Lhe orlglnal owner recovers even from Lhe buyer ln good falLh.
';6T %& 45U598, 1A 4U8#& +AA 2/1@,33 ^'G]_ B>R8?8": ?U"`>P 9U59
?>R":P L6F>;) "; R6;;>:9 ="??>??"; R"6#P :"9 R#587 K""P <589U
L>R56?> "< >;5?6;>? 8: 9U> R"%>;8:K P"R67>:9? =;>?>:9>P LF
U8? ?>##>;a

';6T %& 45U598

Iacts: !ose Cruz dellvered hls car Lo 8ellzo for Lhe laLLer Lo sell Lhe same.
8ellzo forged Lhe leLLer of Cruz Lo Lhe MoLor SecLlon of Lhe 8ureau of
ubllc Works and converLed Lhe same lnLo a ueed of Sale. uslng Lhe
forged deed, he had Lhe car reglsLered ln hls name. 1hereafLer, 8ellzo
sold Lhe car Lo 8ulahan, who ln Lurn sold Lhe same Lo ahaLl. Powever,
Lhe car was lmpounded by Lhe pollce, and Lhe sale Lo ahaLl was
cancelled. 8ulahan now conLends LhaL beLween 2 lnnocenL parLles
(8ulahan and Cruz), Lhe person who made posslble Lhe ln[ury musL bear
Lhe loss-ln Lhls case, supposedly Cruz.

Issue: WheLher or noL Cruz may recover Lhe car.

ne|d: ?LS. 8oLh Cruz and 8ulahan are ln good falLh. Cruz as a beLLer rlghL
Lo Lhe car ln quesLlon Lhan defendanL 8ulahan for lL cannoL be dlspuLed
LhaL Cruz had been lllegally deprlved Lhereof because of Lhe lngenlous
scheme uLlllzed by 8ellzo Lo enable hlm Lo dlspose of lL as lf he were Lhe
owner Lhereof. undlspuLed ls Lhe facL LhaL Lhe leLLer was falslfled and
Lhls facL can be clearly seen by a cursory examlnaLlon of Lhe documenL.
lf 8ulahan had been more dlllgenL he could have seen LhaL Lhe perLlnenL
porLlon of Lhe leLLer had been erased whlch would have placed hlm on
guard Lo make an lnqulry as regards Lhe auLhorlLy of 8ellzo Lo sell Lhe
car. 1hls he falled Lo do.

ArLlcle 339, one who has losL any movable or has been lawfully
deprlved Lhereof, may recover lL from Lhe person ln possesslon of Lhe
same and Lhe only defense ls lf Lhe oLher parLy has acqulred lL ln good
falLh and aL a publlc sale" and ArLlcle 1303, sellers who are noL owners
xxx buyer acqulres no beLLer rlghL Lhan Lhe seller" are appllcable ln Lhls
slLuaLlon.

Doctr|ne: ln all oLher cases of unlawful deprlvaLlon done Lhrough esLafa,
Lhe orlglnal owner recovers even from Lhe buyer ln good falLh. ';6T %&
45U598 21A 4U8#& +AA3
CLv: ueclslon showed LhaL second buyer, or currenL possessor
could noL clalm good falLh because of erasures ln Lhe coverlng
documenLs presenLed by hls seller

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Cwner of dlamond rlng may recover possesslon of Lhe same
from pawnshop where Lhe owner's agenL had pledged lL
wlLhouL auLhorlLy Lo do so, ArLlcle 339 applles and Lhe defense
LhaL Lhe pawnshop acqulred possesslon wlLhouL noLlce of any
defecL of Lhe pledgor-agenL ls unavalllng. B8T": %& -6:95F) 0+
-'.( /,I 2/1+*33
M
^S: 9U"?> R5?>? ="??>??"; 8? 5 7>;RU5:9 5:P
":#F U5? 5 =#>PK> 8: U8? <5%";a&

B8T": %& -6:95F

Iacts: Lourdes SunLay ls Lhe owner of a 3-caraL dlamond rlng valued aL
3,300. She and ClarlLa Slson enLered lnLo a LransacLlon whereln Lhe
rlng would be sold on commlsslon. ClarlLa recelved Lhe rlng and lssued a
recelpL. AfLer some Llme, Lourdes made demands for Lhe reLurn of Lhe
rlng buL Lhe laLLer refused Lo comply. When Lourdes lnslsLed on Lhe
reLurn, ClarlLa gave her Lhe pawnshop LlckeL whlch ls Lhe recelpL of Lhe
pledge and she found ouL LhaL 3 days afLer Lhe rlng was recelved by
ClarlLa, lL was pledged by Mella Slson, Lhe nlece of ClarlLa's husband ln
connlvance wlLh ClarlLa wlLh Lhe pawnshop of uomlnador ulzon for
2,600. Lourdes Lhen flled an esLafa case. She Lhen asked uomlnador
ulzon for Lhe reLurn of Lhe rlng pledged buL refused Lo reLurn Lhe rlng
Lhus Lhe case flled by Lourdes. 1he Cll lssued a wrlL of replevln so
Lourdes was able Lo have possesslon of Lhe rlng durlng Lhe pendency of
Lhe case. 1he Cll also ruled ln her favor whlch was afflrmed by Lhe CA
on appeal. 1hus Lhe case aL bar.

Issue: WheLher or noL SunLay may recover Lhe rlng from Lhe pawnshop.

1
N1:591 23 #1;<;5, 9 hll. 479 (1908), '95017 23 416A<0E/, 19 hl. 47 (1911).

ne|d: ?LS. Art|c|e SS9 applles here. Lourdes, belng unlawfully deprlved
of her rlng Lhus she has a rlghL Lo recover lL from Lhe currenL possessor.
ulzon ls engaged ln a buslness where presumably ordlnary prudence
would requlre hlm Lo lnqulre wheLher or noL an lndlvldual who ls
offerlng Lhe [ewelry by pledge ls enLlLled Lo do so. 1he prlnclple of
esLoppel cannoL help hlm aL all. Slnce Lhere was no precauLlon avalled
of, perhaps because of Lhe dlfflculLy of reslsLlng opporLunlLy for proflL,
he only has hlmself Lo blame and should be Lhe lasL Lo complaln lf Lhe
rlghL of Lhe Lrue owner of Lhe [ewelry should be recognlzed.

Doctr|ne: Cwner of dlamond rlng may recover possesslon of Lhe same
from pawnshop where Lhe owner's agenL had pledged lL wlLhouL
auLhorlLy Lo do so, ArLlcle 339 applles and Lhe defense LhaL Lhe
pawnshop acqulred possesslon wlLhouL noLlce of any defecL of Lhe
pledgor-agenL ls unavalllng.
CLv: ln Lhose cases possessor ls a merchanL and only has a
pledge ln hls favor.


!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 9: LCSS, DL1LkICkA1ICN,
IkUI1S AND C1nLk 8LNLII1S

1he prevalllng docLrlnes ln our [urlsdlcLlon on rlsk of loss and
deLerloraLlon and Lhe beneflLs of Lhe frulLs and lmprovemenL ls
a comblnaLlon of clvll law and common law concepLs.
o 1he hybrld rule on Lhe rlsk of loss under Lhe presenL
Clvll Code happens noL aL Lhe polnL of perfecLlon buL aL
Lhe polnL of dellvery.
1he baslc concepL ls res perlL domlno (Lhe owner shall bear Lhe
rlsk of loss). (1hls ls derlved from common law.)
Cwnershlp can only be Lransferred by dellvery. (1hls ls from clvll
law.)

I. No App||cat|on When Sub[ect Matter |s Determ|nab|e (Art|c|e 1263)

Art|c|e 1263.
In an ob||gat|on to de||ver a gener|c th|ng, the |oss or destruct|on of
anyth|ng of the same k|nd does not ext|ngu|sh the ob||gat|on. (n)

II. Lffect of Loss]Deter|orat|on of 1h|ng So|d:

A. 8efore erfect|on ("#$%& '( )*+$%,-, . /0+,( 1. 2314.5).
1he purporLed seller owns Lhe Lhlng. Loss, deLerloraLlon, frulLs
and lmprovemenLs perLaln Lo hlm.
1he purporLed buyer sLlll has no legal relaLlonshlp Lo Lhe Lhlng.

"#$%& '( )*+$%,-

Iacts: 8oman and CrlmalL enLered lnLo a conLracL of sale for a schooner
payable by 3 lnsLallmenLs provlded Lhe LlLle papers Lo Lhe vessel were ln
proper form. lL musL be noLed LhaL Lhe LlLle of Lhe vessel was ln Lhe
name of aullna Clron and noL 8oman. 1he vessel sank before 8oman
could presenL hls LlLle and as a resulL, CrlmalL refused Lo pay Lhe prlce ln
Lhe conLracL.

Issue: WheLher or noL Lhe sale was perfecLed maklng CrlmalL llable Lo
pay Lhe purchase prlce.

ne|d: nC. 1he defendanL was under no obllgaLlon Lo pay Lhe prlce of Lhe
vessel, Lhe purchase of whlch had noL been concluded. 1he
conversaLlons had beLween Lhe parLles and Lhe leLLer wrlLLen by
defendanL Lo plalnLlff dld noL esLabllsh a conLracL sufflclenL ln lLself Lo
creaLe reclprocal rlghLs beLween Lhe parLles. 1here was yeL Lo be a
perfecLed conLracL beLween Lhem for Lhe fallure of 8oman Lo perfecL hls
LlLle. 1haL belng Lhe case, Lhe loss ls for Lhe accounL of 8oman as Lhe
owner Lhereof.

Doctr|ne: lf no conLracL of sale was acLually execuLed by Lhe parLles Lhe
loss of Lhe vessel musL be borne by lLs owner and noL by a parLy who
only lnLended Lo purchase lL and who was unable Lo do so on accounL of
fallure on Lhe parL of Lhe owner Lo show proper LlLle Lo Lhe vessel and
Lhus enable Lhem Lo draw up Lhe conLracL of sale.

8. At 1|me of erfect|on (Art|c|es 1493 and 1494).

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Art|c|e 1493.
If at the t|me the contract of sa|e |s perfected, the th|ng wh|ch |s the
ob[ect of the contract has been ent|re|y |ost, the contract sha|| be
w|thout any effect.

8ut |f the th|ng shou|d have been |ost |n part on|y, the vendee may
choose between w|thdraw|ng from the contract and demand|ng the
rema|n|ng part, pay|ng |ts pr|ce |n proport|on to the tota| sum agreed
upon. (1460a)

Art|c|e 1494.
Where the part|es purport a sa|e of spec|f|c goods, and the goods
w|thout the know|edge of the se||er have per|shed |n part or have
who||y or |n a mater|a| part so deter|orated |n qua||ty as to be
substant|a||y changed |n character, the buyer may at h|s opt|on treat
the sa|e:

(1) As avo|ded, or

(2) As va||d |n a|| of the ex|st|ng goods or |n so much thereof as have
not deter|orated, and as b|nd|ng the buyer to pay the agreed pr|ce for
the goods |n wh|ch the ownersh|p w||| pass, |f the sa|e was d|v|s|b|e.
(n)

noLe LhaL ArLlcle 1493 says LhaL Lhe conLracL ls wlLhouL any
effecL." lL does noL use Lhe Lerm vold because lL hlghllghLs Lhe
facL LhaL Lhe perfecLlon of Lhe conLracL ls noL affecLed by Lhe
loss of Lhe sub[ecL maLLer.
o Powever, Lhe effecL of Lhe loss ls LhaL as lf Lhe sale was
vold.
lf Lhe sub[ecL maLLer ls losL aL Lhe polnL of perfecLlon, and Lhe
seller bears Lhe loss and Lhe buyer ls relleved of hls obllgaLlons
under Lhe conLracL, Lhen Lhe lmpllcaLlon ls LhaL afLer perfecLlon
Lhe buyer Lhen bears Lhe rlsk of loss and deLerloraLlon even
wlLhouL prlor dellvery Lo hlm.

C. After erfect|on 8ut 8efore De||very (Art|c|es 1164, 1189, and
1262).

Art|c|e 1164.
1he cred|tor has a r|ght to the fru|ts of the th|ng from the t|me the
ob||gat|on to de||ver |t ar|ses. nowever, he sha|| acqu|re no rea| r|ght
over |t unt|| the same has been de||vered to h|m. (109S)

Art|c|e 1189.
When the cond|t|ons have been |mposed w|th the |ntent|on of
suspend|ng the eff|cacy of an ob||gat|on to g|ve, the fo||ow|ng ru|es
sha|| be observed |n case of the |mprovement, |oss or deter|orat|on of
the th|ng dur|ng the pendency of the cond|t|on:

(1) If the th|ng |s |ost w|thout the fau|t of the debtor, the ob||gat|on
sha|| be ext|ngu|shed,

(2) If the th|ng |s |ost through the fau|t of the debtor, he sha|| be
ob||ged to pay damages, |t |s understood that the th|ng |s |ost when |t
per|shes, or goes out of commerce, or d|sappears |n such a way that |ts
ex|stence |s unknown or |t cannot be recovered,
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

(3) When the th|ng deter|orates w|thout the fau|t of the debtor, the
|mpa|rment |s to be borne by the cred|tor,

(4) If |t deter|orates through the fau|t of the debtor, the cred|tor may
choose between the resc|ss|on of the ob||gat|on and |ts fu|f|||ment,
w|th |ndemn|ty for damages |n e|ther case,

(S) If the th|ng |s |mproved by |ts nature, or by t|me, the |mprovement
sha|| |nure to the benef|t of the cred|tor,

(6) If |t |s |mproved at the expense of the debtor, he sha|| have no
other r|ght than that granted to the usufructuary. (1122)

Art|c|e 1262.
An ob||gat|on wh|ch cons|sts |n the de||very of a determ|nate th|ng
sha|| be ext|ngu|shed |f |t shou|d be |ost or destroyed w|thout the fau|t
of the debtor, and before he has |ncurred |n de|ay.

When by |aw or st|pu|at|on, the ob||gor |s ||ab|e even for fortu|tous
events, the |oss of the th|ng does not ext|ngu|sh the ob||gat|on, and he
sha|| be respons|b|e for damages. 1he same ru|e app||es when the
nature of the ob||gat|on requ|res the assumpt|on of r|sk. (1182a)

ln case of deLerloraLlon or lmprovemenL of Lhe Lhlng before lLs
dellvery, Lhe rules of ArLlcle 1189 shall be observed.

1. Genera| ku|e: 8efore dellvery, rlsk of loss ls borne by seller
under Lhe rule of !"# %"!&' ()*&+), 670*89,:* /0+,( '( 7#;*- #<
=>>:%,9? 3@@ A7"= B.C D31EFG.
ln Lhe case of a moLor vehlcle, where Lhere was nelLher physlcal
nor consLrucLlve dellvery of a deLermlnaLe Lhlng, Lhe Lhlng sold
remalned aL Lhe seller's rlsk( 6H&+#& I#-#* 7#*> '( 7#;*- #<
=>>:%,9? @.3 A7"= B4. DJ443G(

2. Loss 8y Iau|t Cf A arty (Art|c|es 1480, 1S04, 1S38)

Art|c|e 1480.
Any |n[ury to or benef|t from the th|ng so|d, after the contract has
been perfected, from the moment of the perfect|on of the contract to
the t|me of de||very, sha|| be governed by art|c|es 1163 to 116S, and
1262.

1h|s ru|e sha|| app|y to the sa|e of fung|b|e th|ngs, made |ndependent|y
and for a s|ng|e pr|ce, or w|thout cons|derat|on of the|r we|ght,
number, or measure.

Shou|d fung|b|e th|ngs be so|d for a pr|ce f|xed accord|ng to we|ght,
number, or measure, the r|sk sha|| not be |mputed to the vendee unt||
they have been we|ghed, counted, or measured and de||vered, un|ess
the |atter has |ncurred |n de|ay. (14S2a)

Art|c|e 1S04.
Un|ess otherw|se agreed, the goods rema|n at the se||er's r|sk unt|| the
ownersh|p there|n |s transferred to the buyer, but when the ownersh|p
there|n |s transferred to the buyer the goods are at the buyer's r|sk
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
whether actua| de||very has been made or not, except that:

(1) Where de||very of the goods has been made to the buyer or to a
ba||ee for the buyer, |n pursuance of the contract and the ownersh|p |n
the goods has been reta|ned by the se||er mere|y to secure
performance by the buyer of h|s ob||gat|ons under the contract, the
goods are at the buyer's r|sk from the t|me of such de||very,

(2) Where actua| de||very has been de|ayed through the fau|t of e|ther
the buyer or se||er the goods are at the r|sk of the party |n fau|t. (n)

Art|c|e 1S38.
In case of |oss, deter|orat|on or |mprovement of the th|ng before |ts
de||very, the ru|es |n art|c|e 1189 sha|| be observed, the vendor be|ng
cons|dered the debtor. (n)

lf Lhe loss ls Lhru Lhe faulL of Lhe seller, Lhe buyer shall have Lhe
rlghL Lo recover damages. (ArLlcle 1189)

3. Loss 8y Iortu|tous Lvent (Art|c|es 1480, 1163, 1164, 116S,
1S04, 1S38, And 1189, kLAD Comments Cf aras, 1o|ent|no,
ad|||a, And 8av|era).

Art|c|e 1163.
Lvery person ob||ged to g|ve someth|ng |s a|so ob||ged to take care of |t
w|th the proper d|||gence of a good father of a fam||y, un|ess the |aw
or the st|pu|at|on of the part|es requ|res another standard of care.
(1094a)

Art|c|e 116S.
When what |s to be de||vered |s a determ|nate th|ng, the cred|tor, |n
add|t|on to the r|ght granted h|m by art|c|e 1170, may compe| the
debtor to make the de||very.

If the th|ng |s |ndeterm|nate or gener|c, he may ask that the ob||gat|on
be comp||ed w|th at the expense of the debtor.

If the ob||gor de|ays, or has prom|sed to de||ver the same th|ng to two
or more persons who do not have the same |nterest, he sha|| be
respons|b|e for any fortu|tous event unt|| he has effected the de||very.
(1096)

aras and adllla say LhaL even lf Lhe sub[ecL maLLer ls losL by
forLulLous evenL, Lhe buyer ls sLlll obllged Lo pay. 1hey don'L clLe
any auLhorlLy for Lhls poslLlon.
1olenLlno says LhaL Lhe obllgaLlon of Lhe buyer Lo pay ls also
exLlngulshed slnce sale creaLes a reclprocal obllgaLlon. 1he seller
should Lhus reLurn whaLever was pald by Lhe buyer, lf Lhere had
been paymenL already.
CLv agrees wlLh 1olenLlno's vlew. Pe says LhaL Lhls vlew beLLer
harmonlzes ArLlcle 1480, 1338 and 1304.

4. Deter|orat|on (Art|c|es 1480, 1163-6S, And 1262, Art|c|es 1189
And 1S38)
ArLlcle 1189 shall apply

S. Iru|ts Cr Improvements Irom 1|me Cf erfect|on erta|n 1o
8uyer (Art|c|es 1480, 1S37-1S38)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Art|c|e 1S37.
1he vendor |s bound to de||ver the th|ng so|d and |ts access|ons and
accessor|es |n the cond|t|on |n wh|ch they were upon the perfect|on of
the contract.

A|| the fru|ts sha|| perta|n to the vendee from the day on wh|ch the
contract was perfected. (1468a)

When Lhe LlLle and beneflclal lnLeresL over Lhe sub[ecL maLLer of
Lhe sale do noL perLaln Lo Lhe same person, who should suffer
Lhe loss and deLerloraLlon Lhereof, and beneflL from Lhe frulLs
and lmprovemenLs?
o CLv: 1he proper resoluLlon Lherefore should be
obLalned from Lhe same legal auLhorlLles from whence
Lhe Code Commlsslon copled Lhe res perlL domlno
docLrlne - Lhe common law sysLem. 1he resoluLlon Lo
Lhls lssue would be and should be LhaL Lhe person who
should bear Lhe rlsk of loss should be Lhe parLy who had
greaLer sLake on Lhe sub[ecL maLLer aL Lhe polnL of loss,
deLerloraLlon or lmprovemenL.

D. After De||very (Art|c|e 1S04) K%L8:*M9 7##> '( N%O#*%? 3@ A7"= C.J
D31.BG,
-


K%L8:*M9 7##>:*%-+': '( N%O#*%


1
Song Fo & Co. v. Oria, 33 Phil. 3 (1915); Lawyer's Coop v. Narciso, 55 O.G. 3313).
Iacts: 1abora purchased volumes of Am!ur from Lawyers Coop. 1he
agreemenL was for ownershlp Lo remaln wlLh Lawyers Coop unLll
paymenL of Lhe full prlce. Loss or damage Lo Lhe goods afLer dellvery Lo
Lhe buyer ls for Lhe accounL of Lhe laLLer." 1he books were dellvered Lo
hls offlce, LhaL same nlghL, hls offlce was razed by flre. 1abora falled Lo
pay Lhe full purchase prlce. now Lawyers Coop sues hlm for Lhe balance.
1abora lnvokes force ma[eure.

Issue: WheLher or noL 1abora musL bear Lhe loss.

ne|d: ?LS. 1he conLracL speclflcally sLaLed LhaL afLer dellvery, 8uyer
would bear Lhe loss. Moreover under Art|c|e 1S04, when
LlLle/ownershlp remalns ln seller merely Lo secure performance by
buyer of hls obllgaLlons, Lhe goods are aL Lhe buyer's rlsk from Llme of
dellvery." 1he rule LhaL Lhe obllgor should be exempL when loss occurs
Lhrough force ma[eure only applled when Lhe obllgaLlon conslsLs ln Lhe
dellvery of a deLermlnaLe Lhlng. 1he obllgaLlon of 1abora conslsLs of Lhe
dellvery noL a deLermlnaLe Lhlng, buL a generlc Lhlng - money. 1hus, he
ls noL absolved from llablllLy.

Doctr|ne:

Genera| ku|e: AfLer dellvery Lo Lhe buyer, ownershlp ls
Lransferred Lo Lhe buyer. 1he goods shall Lhen be aL Lhe buyer's
rlsk. (ArLlcle 1304)
o Lxcept|ons:
! lf dellvery Lo Lhe buyer was made, buL
ownershlp was reLalned by Lhe seller only for
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe purpose of securlng Lhe buyer's obllgaLlon
Lo pay, Lhe buyer shall sLlll bear Lhe rlsk.
! lf acLual dellvery had been delayed Lhrough Lhe
faulL of elLher Lhe buyer or seller, Lhe goods are
aL Lhe rlsk of Lhe parLy aL faulL.
lf Lhe Lhlng ls losL when Lhe buyer bears Lhe rlsk, Lhe buyer shall
sLlll pay Lhe balance of Lhe purchase prlce. A#&P Q# R 7#( '(
S*+%? @@ /0+,( @ D313BG(

SUMMAk

Se||er 8uyer
erfect|on x
After perfect|on,
8efore de||very
x
(Loss and deLerloraLlon
" owner)
x
(lrulLs " beneflclal
owner)
De||very x
Confus|on
" lf Lhe Lhlng has
been dellvered buL
Lhe ownershlp
remalns wlLh Lhe
seller
x
" SLlll Lhe owner lf Lhe
prlce has noL been fully
pald.
x
" Cwner once fully
pald, condlLlon ls
saLlsfled
*8efore perfecLlon and afLer dellvery " Lhe owner ls always llable,
whlch ls merged ln one person.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 10: kLMLDILS ICk 8kLACn
CI CCN1kAC1 Ck SALL (Ak1ICLLS
1S94-1S99)

Act|ons for 8reach of Contract of Sa|e of Goods

Art|c|e 1S94.
Act|ons for breach of the contract of sa|e of goods sha|| be governed
part|cu|ar|y by the prov|s|ons of th|s Chapter, and as to matters not
spec|f|ca||y prov|ded for here|n, by other app||cab|e prov|s|ons of th|s
1|t|e. (n)

Art|c|e 1S9S.
Where, under a contract of sa|e, the ownersh|p of the goods has
passed to the buyer and he wrongfu||y neg|ects or refuses to pay for
the goods accord|ng to the terms of the contract of sa|e, the se||er may
ma|nta|n an act|on aga|nst h|m for the pr|ce of the goods.

Where, under a contract of sa|e, the pr|ce |s payab|e on a certa|n day,
|rrespect|ve of de||very or of transfer of t|t|e and the buyer wrongfu||y
neg|ects or refuses to pay such pr|ce, the se||er may ma|nta|n an act|on
for the pr|ce a|though the ownersh|p |n the goods has not passed. 8ut
|t sha|| be a defense to such an act|on that the se||er at any t|me before
the [udgment |n such act|on has man|fested an |nab|||ty to perform the
contract of sa|e on h|s part or an |ntent|on not to perform |t.

A|though the ownersh|p |n the goods has not passed, |f they cannot
read||y be reso|d for a reasonab|e pr|ce, and |f the prov|s|ons of art|c|e
1S96, fourth paragraph, are not app||cab|e, the se||er may offer to
de||ver the goods to the buyer, and, |f the buyer refuses to rece|ve
them, may not|fy the buyer that the goods are thereafter he|d by the
se||er as ba||ee for the buyer. 1hereafter the se||er may treat the goods
as the buyer's and may ma|nta|n an act|on for the pr|ce. (n)

Art|c|e 1S96.
Where the buyer wrongfu||y neg|ects or refuses to accept and pay for
the goods, the se||er may ma|nta|n an act|on aga|nst h|m for damages
for nonacceptance.

1he measure of damages |s the est|mated |oss d|rect|y and natura||y
resu|t|ng |n the ord|nary course of events from the buyer's breach of
contract.

Where there |s an ava||ab|e market for the goods |n quest|on, the
measure of damages |s, |n the absence of spec|a| c|rcumstances
show|ng prox|mate damage of a d|fferent amount, the d|fference
between the contract pr|ce and the market or current pr|ce at the t|me
or t|mes when the goods ought to have been accepted, or, |f no t|me
was f|xed for acceptance, then at the t|me of the refusa| to accept.

If, wh||e |abor or expense of mater|a| amount |s necessary on the part
of the se||er to enab|e h|m to fu|f||| h|s ob||gat|ons under the contract
of sa|e, the buyer repud|ates the contract or not|f|es the se||er to
proceed no further therew|th, the buyer sha|| be ||ab|e to the se||er for
|abor performed or expenses made before rece|v|ng not|ce of the
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
buyer's repud|at|on or countermand. 1he prof|t the se||er wou|d have
made |f the contract or the sa|e had been fu||y performed sha|| be
cons|dered |n award|ng the damages. (n)

Art|c|e 1S97.
Where the goods have not been de||vered to the buyer, and the buyer
has repud|ated the contract of sa|e, or has man|fested h|s |nab|||ty to
perform h|s ob||gat|ons thereunder, or has comm|tted a breach
thereof, the se||er may tota||y resc|nd the contract of sa|e by g|v|ng
not|ce of h|s e|ect|on so to do to the buyer. (n)

Art|c|e 1S98.
Where the se||er has broken a contract to de||ver spec|f|c or
ascerta|ned goods, a court may, on the app||cat|on of the buyer, d|rect
that the contract sha|| be performed spec|f|ca||y, w|thout g|v|ng the
se||er the opt|on of reta|n|ng the goods on payment of damages. 1he
[udgment or decree may be uncond|t|ona|, or upon such terms and
cond|t|ons as to damages, payment of the pr|ce and otherw|se, as the
court may deem [ust. (n)

Art|c|e 1S99.
Where there |s a breach of warranty by the se||er, the buyer may, at
h|s e|ect|on:

(1) Accept or keep the goods and set up aga|nst the se||er, the breach
of warranty by way of recoupment |n d|m|nut|on or ext|nct|on of the
pr|ce,

(2) Accept or keep the goods and ma|nta|n an act|on aga|nst the se||er
for damages for the breach of warranty,

(3) kefuse to accept the goods, and ma|nta|n an act|on aga|nst the
se||er for damages for the breach of warranty,

(4) kesc|nd the contract of sa|e and refuse to rece|ve the goods or |f
the goods have a|ready been rece|ved, return them or offer to return
them to the se||er and recover the pr|ce or any part thereof wh|ch has
been pa|d.

When the buyer has c|a|med and been granted a remedy |n anyone of
these ways, no other remedy can thereafter be granted, w|thout
pre[ud|ce to the prov|s|ons of the second paragraph of art|c|e 1191.

Where the goods have been de||vered to the buyer, he cannot resc|nd
the sa|e |f he knew of the breach of warranty when he accepted the
goods w|thout protest, or |f he fa||s to not|fy the se||er w|th|n a
reasonab|e t|me of the e|ect|on to resc|nd, or |f he fa||s to return or to
offer to return the goods to the se||er |n substant|a||y as good
cond|t|on as they were |n at the t|me the ownersh|p was transferred to
the buyer. 8ut |f deter|orat|on or |n[ury of the goods |s due to the
breach or warranty, such deter|orat|on or |n[ury sha|| not prevent the
buyer from return|ng or offer|ng to return the goods to the se||er and
resc|nd|ng the sa|e.

Where the buyer |s ent|t|ed to resc|nd the sa|e and e|ects to do so, he
sha|| cease to be ||ab|e for the pr|ce upon return|ng or offer|ng to
return the goods. If the pr|ce or any part thereof has a|ready been
pa|d, the se||er sha|| be ||ab|e to repay so much thereof as has been
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
pa|d, concurrent|y w|th the return of the goods, or |mmed|ate|y after
an offer to return the goods |n exchange for repayment of the pr|ce.

Where the buyer |s ent|t|ed to resc|nd the sa|e and e|ects to do so, |f
the se||er refuses to accept an offer of the buyer to return the goods,
the buyer sha|| thereafter be deemed to ho|d the goods as ba||ee for
the se||er, but sub[ect to a ||en to secure the payment of any port|on of
the pr|ce wh|ch has been pa|d, and w|th the remed|es for the
enforcement of such ||en a||owed to an unpa|d se||er by art|c|e 1S26.

(S) In the case of breach of warranty of qua||ty, such |oss, |n the
absence of spec|a| c|rcumstances show|ng prox|mate damage of a
greater amount, |s the d|fference between the va|ue of the goods at
the t|me of de||very to the buyer and the va|ue they wou|d have had |f
they had answered to the warranty. (n)

ln Lhe realm of performance, Lhe maln rule ln Sales was !"#$"%
$'(%)* (leL Lhe buyer beware), whlch requlred Lhe buyer Lo be
aware of Lhe supposed LlLle of Lhe seller Lo Lhe sub[ecL maLLer,
and LhaL a buyer who buys wlLhouL checklng Lhe seller's LlLle
Lakes all Lhe rlsks and losses consequenL Lo such fallure.
Genera| ku|e: 1oday, Lhe docLrlne of caveaL empLor ls used Lo
deLermlne wheLher Lhe buyer, ln Laklng dellvery of Lhe sub[ecL
maLLer of Lhe sale, can be consldered a buyer ln good falLh, or
Lo deLermlne wheLher Lhe buyer assumed Lhe rlsks and
conLlngencles aLLached Lo Lhe sub[ecL maLLer of Lhe sale.
o Lxcept|on: 1he prlnclpal embodled ln our 1orrens
sysLem presenL an excepLlon Lo Lhe caveaL empLor rule,
slnce under such sysLem a buyer need only rely upon
Lhe LlLle of a reglsLered land and has no obllgaLlon Lo
look beyond such LlLle.

I. Cn art Cf 1he Se||er

A. In Case Cf Movab|es (Art|c|es 1S93, 1S9S to 1S97)

1. Movab|es In Genera|

Art|c|e 1S93.
W|th respect to movab|e property, the resc|ss|on of the sa|e sha|| of
r|ght take p|ace |n the |nterest of the vendor, |f the vendee, upon the
exp|rat|on of the per|od f|xed for the de||very of the th|ng, shou|d not
have appeared to rece|ve |t, or, hav|ng appeared, he shou|d not have
tendered the pr|ce at the same t|me, un|ess a |onger per|od has been
st|pu|ated for |ts payment. (1S0S)

2. Non-ayment Cf r|ce 8y 1he 8uyer (Art|c|e 1S9S)
ArLlcle 1393(1) ! Cwnershlp Lransferred Lo buyer
ArLlcle 1393(2) ! no Lransfer of ownershlp Lo buyer
ArLlcle 1393(3) ! When prlce payable on cerLaln day

3. When 8uyer Wrongfu||y Neg|ects Cr kefuses 1o Accept Goods
(Art|c|e 1S96 and 1S97)
under ArLlcle 1397, when Lhe buyer of scrap lron falls Lo puL up
Lhe leLLer of credlL ln favor of Lhe seller as Lhe condlLlon of Lhe
sale, Lhe seller had a rlghL Lo LermlnaLe Lhe conLracL, and non-
compllance wlLh Lhe condlLlon meanL LhaL Lhe seller's obllgaLlon
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lo sell never dld arlse. !"#$%&%' )%*+#,, -./ 0/ -.123 .4
5667%,$8 9:; )-<5 =>? @:;;=A/

8. Unpa|d Se||er Cf Goods (Art|c|es 1S24-1S3S)

Art|c|e 1S24.
1he vendor sha|| not be bound to de||ver the th|ng so|d, |f the vendee
has not pa|d h|m the pr|ce, or |f no per|od for the payment has been
f|xed |n the contract. (1466)

Art|c|e 1S2S.
1he se||er of goods |s deemed to be an unpa|d se||er w|th|n the
mean|ng of th|s 1|t|e:

(1) When the who|e of the pr|ce has not been pa|d or tendered,

(2) When a b||| of exchange or other negot|ab|e |nstrument has been
rece|ved as cond|t|ona| payment, and the cond|t|on on wh|ch |t was
rece|ved has been broken by reason of the d|shonor of the |nstrument,
the |nso|vency of the buyer, or otherw|se.

In art|c|es 1S2S to 1S3S the term "se||er" |nc|udes an agent of the
se||er to whom the b||| of |ad|ng has been |ndorsed, or a cons|gnor or
agent who has h|mse|f pa|d, or |s d|rect|y respons|b|e for the pr|ce, or
any other person who |s |n the pos|t|on of a se||er. (n)

Art|c|e 1S26.
Sub[ect to the prov|s|ons of th|s 1|t|e, notw|thstand|ng that the
ownersh|p |n the goods may have passed to the buyer, the unpa|d
se||er of goods, as such, has:

(1) A ||en on the goods or r|ght to reta|n them for the pr|ce wh||e he |s
|n possess|on of them,

(2) In case of the |nso|vency of the buyer, a r|ght of stopp|ng the goods
|n trans|tu after he has parted w|th the possess|on of them,

(3) A r|ght of resa|e as ||m|ted by th|s 1|t|e,

(4) A r|ght to resc|nd the sa|e as ||kew|se ||m|ted by th|s 1|t|e.

Where the ownersh|p |n the goods has not passed to the buyer, the
unpa|d se||er has, |n add|t|on to h|s other remed|es a r|ght of
w|thho|d|ng de||very s|m||ar to and coextens|ve w|th h|s r|ghts of ||en
and stoppage |n trans|tu where the ownersh|p has passed to the
buyer. (n)

Art|c|e 1S27.
Sub[ect to the prov|s|ons of th|s 1|t|e, the unpa|d se||er of goods who |s
|n possess|on of them |s ent|t|ed to reta|n possess|on of them unt||
payment or tender of the pr|ce |n the fo||ow|ng cases, name|y:

(1) Where the goods have been so|d w|thout any st|pu|at|on as to
cred|t,

(2) Where the goods have been so|d on cred|t, but the term of cred|t
has exp|red,

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(3) Where the buyer becomes |nso|vent.

1he se||er may exerc|se h|s r|ght of ||en notw|thstand|ng that he |s |n
possess|on of the goods as agent or ba||ee for the buyer. (n)

Art|c|e 1S28.
Where an unpa|d se||er has made part de||very of the goods, he may
exerc|se h|s r|ght of ||en on the rema|nder, un|ess such part de||very
has been made under such c|rcumstances as to show an |ntent to
wa|ve the ||en or r|ght of retent|on. (n)

Art|c|e 1S29.
1he unpa|d se||er of goods |oses h|s ||en thereon:

(1) When he de||vers the goods to a carr|er or other ba||ee for the
purpose of transm|ss|on to the buyer w|thout reserv|ng the ownersh|p
|n the goods or the r|ght to the possess|on thereof,

(2) When the buyer or h|s agent |awfu||y obta|ns possess|on of the
goods, (3) 8y wa|ver thereof.

1he unpa|d se||er of goods, hav|ng a ||en thereon, does not |ose h|s ||en
by reason on|y that he has obta|ned [udgment or decree for the pr|ce
of the goods. (n)

Art|c|e 1S30.
Sub[ect to the prov|s|ons of th|s 1|t|e, when the buyer of goods |s or
becomes |nso|vent, the unpa|d se||er who has parted w|th the
possess|on of the goods has the r|ght of stopp|ng them |n trans|tu, that
|s to say, he may resume possess|on of the goods at any t|me wh||e
they are |n trans|t, and he w||| then become ent|t|ed to the same r|ghts
|n regard to the goods as he wou|d have had |f he had never parted
w|th the possess|on. (n)

Art|c|e 1S31.
Goods are |n trans|t w|th|n the mean|ng of the preced|ng art|c|e:

(1) Irom the t|me when they are de||vered to a carr|er by |and, water,
or a|r, or other ba||ee for the purpose of transm|ss|on to the buyer,
unt|| the buyer, or h|s agent |n that beha|f, takes de||very of them from
such carr|er or other ba||ee,

(2) If the goods are re[ected by the buyer, and the carr|er or other
ba||ee cont|nues |n possess|on of them, even |f the se||er has refused
to rece|ve them back.

Goods are no |onger |n trans|t w|th|n the mean|ng of the preced|ng
art|c|e:

(1) If the buyer, or h|s agent |n that beha|f, obta|ns de||very of the
goods before the|r arr|va| at the appo|nted dest|nat|on,

(2) If, after the arr|va| of the goods at the appo|nted dest|nat|on, the
carr|er or other ba||ee acknow|edges to the buyer or h|s agent that he
ho|ds the goods on h|s beha|f and cont|nues |n possess|on of them as
ba||ee for the buyer or h|s agent, and |t |s |mmater|a| that further
dest|nat|on for the goods may have been |nd|cated by the buyer,

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(3) If the carr|er or other ba||ee wrongfu||y refuses to de||ver the goods
to the buyer or h|s agent |n that beha|f. If the goods are de||vered to a
sh|p, fre|ght tra|n, truck, or a|rp|ane chartered by the buyer, |t |s a
quest|on depend|ng on the c|rcumstances of the part|cu|ar case,
whether they are |n the possess|on of the carr|er as such or as agent of
the buyer.

If part de||very of the goods has been made to the buyer, or h|s agent
|n that beha|f, the rema|nder of the goods may be stopped |n trans|tu,
un|ess such part de||very has been under such c|rcumstances as to
show an agreement w|th the buyer to g|ve up possess|on of the who|e
of the goods. (n)

Art|c|e 1S32.
1he unpa|d se||er may exerc|se h|s r|ght of stoppage |n trans|tu e|ther
by obta|n|ng actua| possess|on of the goods or by g|v|ng not|ce of h|s
c|a|m to the carr|er or other ba||ee |n whose possess|on the goods are.
Such not|ce may be g|ven e|ther to the person |n actua| possess|on of
the goods or to h|s pr|nc|pa|. In the |atter case the not|ce, to be
effectua|, must be g|ven at such t|me and under such c|rcumstances
that the pr|nc|pa|, by the exerc|se of reasonab|e d|||gence, may prevent
a de||very to the buyer.

When not|ce of stoppage |n trans|tu |s g|ven by the se||er to the
carr|er, or other ba||ee |n possess|on of the goods, he must rede||ver
the goods to, or accord|ng to the d|rect|ons of, the se||er. 1he expenses
of such de||very must be borne by the se||er. If, however, a negot|ab|e
document of t|t|e represent|ng the goods has been |ssued by the
carr|er or other ba||ee, he sha|| not be ob||ged to de||ver or [ust|f|ed |n
de||ver|ng the goods to the se||er un|ess such document |s f|rst
surrendered for cance||at|on. (n)

Art|c|e 1S33.
Where the goods are of per|shab|e nature, or where the se||er
express|y reserves the r|ght of resa|e |n case the buyer shou|d make
defau|t, or where the buyer has been |n defau|t |n the payment of the
pr|ce for an unreasonab|e t|me, an unpa|d se||er hav|ng a r|ght of ||en
or hav|ng stopped the goods |n trans|tu may rese|| the goods. ne sha||
not thereafter be ||ab|e to the or|g|na| buyer upon the contract of sa|e
or for any prof|t made by such resa|e, but may recover from the buyer
damages for any |oss occas|oned by the breach of the contract of sa|e.

Where a resa|e |s made, as author|zed |n th|s art|c|e, the buyer
acqu|res a good t|t|e as aga|nst the or|g|na| buyer.

It |s not essent|a| to the va||d|ty of resa|e that not|ce of an |ntent|on to
rese|| the goods be g|ven by the se||er to the or|g|na| buyer. 8ut where
the r|ght to rese|| |s not based on the per|shab|e nature of the goods or
upon an express prov|s|on of the contract of sa|e, the g|v|ng or fa||ure
to g|ve such not|ce sha|| be re|evant |n any |ssue |nvo|v|ng the quest|on
whether the buyer had been |n defau|t for an unreasonab|e t|me
before the resa|e was made.

It |s not essent|a| to the va||d|ty of a resa|e that not|ce of the t|me and
p|ace of such resa|e shou|d be g|ven by the se||er to the or|g|na| buyer.

1he se||er |s bound to exerc|se reasonab|e care and [udgment |n
mak|ng a resa|e, and sub[ect to th|s requ|rement may make a resa|e
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
e|ther by pub||c or pr|vate sa|e. ne cannot, however, d|rect|y or
|nd|rect|y buy the goods. (n)

Art|c|e 1S34.
An unpa|d se||er hav|ng the r|ght of ||en or hav|ng stopped the goods |n
trans|tu, may resc|nd the transfer of t|t|e and resume the ownersh|p |n
the goods, where he express|y reserved the r|ght to do so |n case the
buyer shou|d make defau|t, or where the buyer has been |n defau|t |n
the payment of the pr|ce for an unreasonab|e t|me. 1he se||er sha|| not
thereafter be ||ab|e to the buyer upon the contract of sa|e, but may
recover from the buyer damages for any |oss occas|oned by the breach
of the contract.

1he transfer of t|t|e sha|| not be he|d to have been resc|nded by an
unpa|d se||er unt|| he has man|fested by not|ce to the buyer or by
some other overt act an |ntent|on to resc|nd. It |s not necessary that
such overt act shou|d be commun|cated to the buyer, but the g|v|ng or
fa||ure to g|ve not|ce to the buyer of the |ntent|on to resc|nd sha|| be
re|evant |n any |ssue |nvo|v|ng the quest|on whether the buyer had
been |n defau|t for an unreasonab|e t|me before the r|ght of resc|ss|on
was asserted. (n)

Art|c|e 1S3S.
Sub[ect to the prov|s|ons of th|s 1|t|e, the unpa|d se||er's r|ght of ||en or
stoppage |n trans|tu |s not affected by any sa|e, or other d|spos|t|on of
the goods wh|ch the buyer may have made, un|ess the se||er has
assented thereto.

If, however, a negot|ab|e document of t|t|e has been |ssued for goods,
no se||er's ||en or r|ght of stoppage |n trans|tu sha|| defeat the r|ght of
any purchaser for va|ue |n good fa|th to whom such document has
been negot|ated, whether such negot|at|on be pr|or or subsequent to
the not|f|cat|on to the carr|er, or other ba||ee who |ssued such
document, of the se||er's c|a|m to a ||en or r|ght of stoppage |n
trans|tu. (n)

1he remedles of an unpald seller are slmllar Lo Lhe docLrlne of
self-help ln ArLlcle 429.
lor an unpald seller, Lhe mlnlmum requlremenL ls LhaL Lhe
goods are ln Lhe possesslon of Lhe seller so as Lo prevenL an
acLual physlcal Lussle wlLh Lhe buyer ln Lhe exerclse of such
remedles.

1. Def|n|t|on Cf "Unpa|d Se||er" (Art|c|e 1S2S)

2. k|ghts Cf Unpa|d Se||er: (Art|c|e 1S26)
1hese remedles have a hlerarchlchal appllcaLlon.
1he lasL Lwo are called speclal" because Lhey are rlghLs
accorded only Lo Lhe unpald seller, and are of a dlfferenL naLure
from Lhe rlghL of resclsslon ln ArLlcle 1191.
4 Speclal 8emedles Avallable 1o 1he unpald Seller: (1)
ossessory llen, (2) SLoppage ln LranslLu, (3) Speclal rlghL Lo
resell goods, and (4) Speclal rlghL Lo resclnd.

3. ossessory L|en (Art|c|es 1S26-1S29, 1S03, 1S3S)

Art|c|e 1S03.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
When there |s a contract of sa|e of spec|f|c goods, the se||er may, by
the terms of the contract, reserve the r|ght of possess|on or ownersh|p
|n the goods unt|| certa|n cond|t|ons have been fu|f|||ed. 1he r|ght of
possess|on or ownersh|p may be thus reserved notw|thstand|ng the
de||very of the goods to the buyer or to a carr|er or other ba||ee for the
purpose of transm|ss|on to the buyer.

Where goods are sh|pped, and by the b||| of |ad|ng the goods are
de||verab|e to the se||er or h|s agent, or to the order of the se||er or of
h|s agent, the se||er thereby reserves the ownersh|p |n the goods. 8ut,
|f except for the form of the b||| of |ad|ng, the ownersh|p wou|d have
passed to the buyer on sh|pment of the goods, the se||er's property |n
the goods sha|| be deemed to be on|y for the purpose of secur|ng
performance by the buyer of h|s ob||gat|ons under the contract.

Where goods are sh|pped, and by the b||| of |ad|ng the goods are
de||verab|e to order of the buyer or of h|s agent, but possess|on of the
b||| of |ad|ng |s reta|ned by the se||er or h|s agent, the se||er thereby
reserves a r|ght to the possess|on of the goods as aga|nst the buyer.

Where the se||er of goods draws on the buyer for the pr|ce and
transm|ts the b||| of exchange and b||| of |ad|ng together to the buyer
to secure acceptance or payment of the b||| of exchange, the buyer |s
bound to return the b||| of |ad|ng |f he does not honor the b||| of
exchange, and |f he wrongfu||y reta|ns the b||| of |ad|ng he acqu|res no
added r|ght thereby. If, however, the b||| of |ad|ng prov|des that the
goods are de||verab|e to the buyer or to the order of the buyer, or |s
|ndorsed |n b|ank, or to the buyer by the cons|gnee named there|n,
one who purchases |n good fa|th, for va|ue, the b||| of |ad|ng, or goods
from the buyer w||| obta|n the ownersh|p |n the goods, a|though the
b||| of exchange has not been honored, prov|ded that such purchaser
has rece|ved de||very of the b||| of |ad|ng |ndorsed by the cons|gnee
named there|n, or of the goods, w|thout not|ce of the facts mak|ng the
transfer wrongfu|. (n)

lf Lhe ownershlp of Lhe goods has passed Lo Lhe buyer, Lhe
unpald seller sLlll has a llen on Lhe goods or rlghL Lo reLaln Lhem
for Lhe prlce whlle he ls ln possesslon.
lf ownershlp has noL passed Lo Lhe buyer, Lhe unpald seller has a
rlghL of wlLhholdlng dellvery.
When possessory llen may be exerclsed ! ArLlcle 1327
When negoLlable uocumenL Cf 1lLle Pas 8een lssued ! no
seller's llen shall defeaL Lhe rlghLs of an lnnocenL purchaser for
value Lo whom such documenL has been negoLlaLed.
When arLlal uellvery ls Made ! ArLlcle 1328
lnsLances When ossessory Llen ls LosL ! ArLlcle 1329
o 1he unpald seller losses hls possessory llen when he
parLs wlLh physlcal possesslon of Lhe goods. ln Lhls case,
he sLlll has Lhe remedy of sLoppage ln LranslLu, buL only
when Lhe buyer ls lnsolvenL.

4. Stoppage #' 32%'$#31 (Art|c|es 1S30-1S32, 1S3S, 1636[2])

Art|c|e 1636.
In the preced|ng art|c|es |n th|s 1|t|e govern|ng the sa|e of goods,
un|ess the context or sub[ect matter otherw|se requ|res:

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(1) "Document of t|t|e to goods" |nc|udes any b||| of |ad|ng, dock
warrant, "quedan," or warehouse rece|pt or order for the de||very of
goods, or any other document used |n the ord|nary course of bus|ness
|n the sa|e or transfer of goods, as proof of the possess|on or contro| of
the goods, or author|z|ng or purport|ng to author|ze the possessor of
the document to transfer or rece|ve, e|ther by |ndorsement or by
de||very, goods represented by such document.

"Goods" |nc|udes a|| chatte|s persona| but not th|ngs |n act|on or
money of |ega| tender |n the h|||pp|nes. 1he term |nc|udes grow|ng
fru|ts or crops.

"Crder" re|at|ng to documents of t|t|e means an order by |ndorsement
on the documents.

"ua||ty of goods" |nc|udes the|r state or cond|t|on.

"Spec|f|c goods" means goods |dent|f|ed and agreed upon at the t|me a
contract of sa|e |s made.

An antecedent or pre-ex|st|ng c|a|m, whether for money or not,
const|tutes "va|ue" where goods or documents of t|t|e are taken e|ther
|n sat|sfact|on thereof or as secur|ty therefor.

(2) A person |s |nso|vent w|th|n the mean|ng of th|s 1|t|e who e|ther
has ceased to pay h|s debts |n the ord|nary course of bus|ness or
cannot pay h|s debts as they become due, whether |nso|vency
proceed|ngs have been commenced or not.

(3) Goods are |n a "de||verab|e state" w|th|n the mean|ng of th|s 1|t|e
when they are |n such a state that the buyer wou|d, under the
contract, be bound to take de||very of them. (n)

When A negoLlable uocumenL Cf 1lLle ls lssued ! ArLlcle 1333
When 8uyer ls ueemed lnsolvenL"
o A buyer ls deemed lnsolvenL when he elLher has
ceased Lo pay hls debLs ln Lhe ordlnary course of
buslness or cannoL pay hls debLs as Lhey become due."
! ArLlcle 1636(2)
o lnsolvency proceedlngs need noL be commenced.
o 8uyer musL be lnsolvenL for sLoppage ln LranslLu Lo
apply.
When Coods Are ueemed ln 1ranslL" Cr noL, And When arL
uellvery Already Made ! ArLlcle 1331
o ArLlcle 1331 presupposes LhaL Lhe carrler Lhrough hlm
dellvery ls made ls nC1 an agenL of Lhe buyer. uellvery
Lo such carrler ls noL dellvery Lo Lhe buyer.
Pow SLoppage ln 1ranslLu May 8e Lxerclsed, And When Coods
Covered 8y A negoLlable uocumenL Cf 1lLle ! ArLlcle 1332

S. k|ght Cf kesa|e (Art|c|e 1S33)
Lven before Lhe formal sLaLuLory adopLlon of Lhe remedles of an
unpald seller, Lhe Supreme CourL had already recognlzed Lhe
rlghL of a seller, +,$- %,$ !)-%*"!% ). /"0$ 1/ /%100 $2$!3%)*4 1-
/%"5$6 Lo resell Lhe movables sub[ecL maLLer of Lhe sale, when
Lhe buyer falls Lo pay Lhe purchase prlce. !B%',.' 0/
B%1$$72+%'8 CD EF#,/ >;G @:;9DA/
When 1he 8lghL ls Lxerclsable
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
a. 1he unpald seller has prevlously excerclsed possessory
llen or sLoppage ln LranslL
b. 1he goods are of perlshable naLure
c. Seller has expressly reserved such rlghL
d. 8uyer has been ln defaulL for an unreasonable lengLh of
Llme
noLe: 1he buyer need noL resclnd Lhe flrsL conLracL [udlclally
before reselllng Lhe Lhlng. lf he ls obllged Lo sell lL for less Lhan
Lhe conLracL prlce, Lhe non-paylng buyer ls llable for Lhe
dlfference. H%3#IJ%K 0/ -.123 .4 5667%,$8 C )-<5 9C= @:;G9A/
1he seller ls noL obllged Lo glve Lhe orlglnal owner Lhe proflLs
(l.e. dlfference of conLracL prlce and sale prlce), lf any. (ArLlcle
1333)
LffecL Cf Pavlng Lxerclsed 8lghL Cf 8esale
o 1he seller shall noL LhereafLer be llable Lo Lhe orlglnal
buyer upon Lhe conLracL of sale or for any proflL made
by such resale, buL may recover from Lhe buyer
damages for any loss occasloned by Lhe breach of Lhe
conLracL of sale."
1ransfer Cf Cwnershlp
o Speclal rlghL Lo resell can be exerclsed even lf Lhe seller
had already Lransferred ownershlp Lo Lhe orlglnal buyer.
o Powever, because of ArLlcle 1333, Lhe second buyer wlll
sLlll be able Lo geL a good LlLle agalnsL Lhe orlglnal buyer.
o 1hls ls a speclal feaLure of Lhls rlghL Lo resell. 1he seller
can sLlll vesL ownershlp ln Lhe second buyer even lf aL
Lhe Llme of Lhe second sale, he dld noL have ownershlp
anymore.
" Crdlnarlly, Lhe desLrucLlon or Laklng away of
ownershlp ln one person and placlng lL ln
anoLher person ln such manner can only be
done Lhrough courL acLlon.
" 8uL ln Lhls case of an unpald seller, he can effecL
Lransfer of ownershlp even wlLhouL [udlclal
acLlon
noLlce Lo uefaulLlng 8uyer ! ArLlcle 1333(3) and (4)
SLandard of Care And ulsquallflcaLlon ln 8esale ! ArLlcle
1333(3)

6. k|ght 1o kesc|nd (Art|c|e 1S34)
When 1he 8lghL May 8e Lxerclsed (8Lu)
o unpald seller has exerclsed hls possessory llen or
sLoppage ln LranslLu
o Seller expressly reserved Lhe rlghL Lo resclnd ln case of
defaulL
o 8uyer has been ln defaulL for an unreasonable lengLh of
Llme
LffecL Cf Lxerclse Cf Such 8lghL ! LasL senLence of ArLlcle
1334(1)
1ransfer Cf 1lLle !ArLlcle 1334(2)
Seller ln possesslon of Lhe goods may sell Lhem aL buyer's rlsk.
!H%3#IJ%K 0/ -.123 .4 5667%,$8 C )-<5 9C= @:;G9A/

C. IN CASL CI IMMCVA8LLS
1. Ant|c|patory 8reach (Art|c|e 1S91)

Art|c|e 1S91.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Shou|d the vendor have reasonab|e grounds to fear the |oss of
|mmovab|e property so|d and |ts pr|ce, he may |mmed|ate|y sue for the
resc|ss|on of the sa|e.

Shou|d such ground not ex|st, the prov|s|ons of art|c|e 1191 sha|| be
observed. (1S03)

2. Ia||ure Cf 8uyer 1o ay r|ce (Art|c|e 1S92)
1he CourL has Lended Lo lnLerpreL Art|c|e 1S92 llberally ln favor
of Lhe buyer Lo glve hlm every opporLunlLy Lo comply wlLh hls
obllgaLlon and proceed Lo Lake Lhe sub[ecL lmmovable.
Art|c|e 1S92 only covers conLracLs of sale. ConLracLs Lo sell are
noL covered.
1he CourL has also resorLed Lo equlLable resoluLlons ln Lhe
appllcaLlon of Art|c|e 1S92. Such was Lhe case ln L7I%2M%
!"#$%&'( *+ ,%-.%/%0 11 ,234 567 89:;7<+

!"#$%&$ ("%)$*+, -. /$0&$1$

Iacts: Saldana boughL Lwo loLs from Legarda for 1,300 each, payable ln
10 years, dlvlded lnLo 120 equal monLhly lnsLallmenLs wlLh 10 lnLeresL
per annum. Saldana pald for 8 conLlnuous years abouL 93 monLhly
lnsLallmenLs LoLal 3, 382 (1.8k lnLeresL, 1.6k applled Lo prlnclpal),
Lhen he sLopped paymenL. 1rlal CourL upheld cancellaLlon of conLracL Lo
sell, CourL of Appeals reversed saylng LhaL Saldana suspended paymenL
because Lhe loLs were under waLer/ no lmprovemenLs he so lL could noL
be dellvered Lo hlm.

Issue: WheLher or noL Lhe clalm of Permanos Legarda be upheld, as he
clalms LhaL Lhe paymenL should be consldered as renL and LhaL Lhe sale
should be cancelled.

ne|d: nC. 1he LoLal amounL pald as prlnclpal amounLed Lo 1,682.23
more Lhan Lhe amounL of one loL. 1herefore, lL ls [usL and falr ln
accordance wlLh law and equlLy Lo conslder one loL as fully pald. 1here
was already subsLanLlal performance. under ArLlcle 1234, lf Lhe
obllgaLlon has been subsLanLlally performed ln good falLh, Lhe obllgor
may recover as Lhough Lhere had been a sLrlcL and compleLe fulflllmenL,
less damages suffered by Lhe obllgee.

Doctr|ne:

3. Sa|es of Subd|v|s|on Lots and Condom|n|um Un|ts (Sect|on 23
and 24, .D. 9S7)

kLSIDLN1IAL DLCkLL NC. 9S7
Sect|on 23. Non-Iorfe|ture of ayments.
No |nsta||ment payment made by a buyer |n a subd|v|s|on or
condom|n|um pro[ect for the |ot or un|t he contracted to buy sha|| be
forfe|ted |n favor of the owner or deve|oper when the buyer, after due
not|ce to the owner or deve|oper, des|sts from further payment due to
the fa||ure of the owner or deve|oper to deve|op the subd|v|s|on or
condom|n|um pro[ect accord|ng to the approved p|ans and w|th|n the
t|me ||m|t for comp|y|ng w|th the same. Such buyer may, at h|s opt|on,
be re|mbursed the tota| amount pa|d |nc|ud|ng amort|zat|on |nterests
but exc|ud|ng de||nquency |nterests, w|th |nterest thereon at the |ega|
rate.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Sect|on 24. Ia||ure to pay |nsta||ments.
1he r|ghts of the buyer |n the event of th|s fa||ure to pay the
|nsta||ments due for reasons other than the fa||ure of the owner or
deve|oper to deve|op the pro[ect sha|| be governed by kepub||c Act
No. 6SS2.

.u.937 was lssued ln Lhe wake of numerous reporLs LhaL many
real esLaLe subdlvlslon owners, developers, operaLors and/or
sellers have reneged on Lhelr represenLaLlons and obllgaLlons Lo
provlde and malnLaln properly subdlvlslon roads, dralnage,
sewerage, waLer sysLems, llghLlng sysLems and oLher baslc
requlremenLs or Lhe healLh and safeLy of home and loL buyers. lL
was deslgned Lo sLem Lhe Llde of fraudulenL manlpulaLlons
perpeLraLed by unscrupulous subdlvlslon and condomlnlum
sellers free from llens and encumbrances." !-%$% N#,#6#'%$
<7%,3& -.26/ 0/ O44#P7 .4 3F7 E27$#M7'38 9C: )-<5 :GQ @:;;QA/
SecLlon 20 of .u. 937 dlrecLs every owner and developer of real
properLy Lo provlde Lhe necessary faclllLles, lmprovemenLs,
lnfrasLrucLure and oLher forms of developmenL, fallure Lo carry
ouL whlch ls sufflclenL cause for Lhe buyer Lo suspend paymenL,
and any sums of money already pald shall noL be forfelLed.
!R%+%&. 0/ B1%'I8 C?D )-<5 :QG @9DDGA/
ln case Lhe developer of a subdlvlslon or condomlnlum falls ln
lLs obllgaLlon under SecLlon 20, SecLlon 23 glves Lhe buyer:
o 1he opLlon Lo demand relmbursemenL of Lhe LoLal
amounL pald, or Lo walL for furLher developmenL of Lhe
subdlvlslon, and when Lhe buyer opLs for Lhe laLLer
alLernaLlve, he may suspend paymenL of Lhe
lnsLallmenLs unLll such Llme LhaL Lhe owner or
developer has fulfllled lLs obllgaLlons. xR%+%&. 0/
B1%'I8 C?D )-<5 :QG @9DDGAS
o 8uyer requlred only Lo glve due noLlce Lo Lhe owner or
developer of Lhe buyer's lnLenLlon Lo suspend paymenL.
!T%+.2% <7%,3& %'M U70/ -.26/ 0/ O44#P7 .4 3F7
E27$#M7'38 QDG )-<5 Q;: @9DDGAS
o SecLlon 23 does noL requlre LhaL a noLlce be glven flrsL
by Lhe buyer Lo Lhe seller before a demand for refund
can be made as Lhe noLlce and demand can be made ln
Lhe same leLLer or communlcaLlon. !-%$% N#,#6#'%$
<7%,3& -.26 0/ O44#P7 .4 3F7 E27$#M7'38 9C: )-<5 :GQ
@:;;QAS and
o CpLlon granLed by law ls wlLh buyer and noL Lhe
developer/seller. !<7,1P#. 0/ V2#,,%'37WX%24#'8 :?> )-<5
CDQ @:;;DA/
8uyer" under .u. 937 would lnclude one who acqulres for a
valuable conslderaLlon a condomlnlum unlL by way of
asslgnmenL by Lhe condomlnlum pro[ecL owner ln paymenL of
lLs lndebLedness for conLracLor's fee. !5Y5 -.+61372 -.,,7I78
Z'P/ 0/ N%P3.2%8 =>? )-<5 :9: @9DD9A/
8uyers of condomlnlum unlLs would be [usLlfled ln suspendlng
paymenLs, when Lhe developer-seller falls Lo glve Lhem a copy
of Lhe ConLracL Lo Sell desplLe repeaLed demands/ !X.,M L..6
E2.6723#7$8 Z'P/ 0/ -58 =QD )-<5 =>: @9DD:A/ Powever, when Lhe
8eservaLlon AgreemenL provldes LhaL Lhe buyer shall be enLlLled
Lo a ConLracL Lo Sell only upon lLs paymenL of aL leasL 30 of Lhe
LoLal conLracL prlce, Lhe non-happenlng yeL of LhaL condlLlon
does noL render Lhe seller ln defaulL as Lo warranL Lhe buyer Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
rlghL Lo resclnd Lhe sale and demand a refund. X/X/ )6.23*7%2
Y4I/ -.26/ 0/ [.2,M -,%$$ E2.6723#7$8 Z'P/8 G:C )-<5 >Q @9D:DA/
o 1he dlssaLlsfacLlon of Lhe buyer under a ConLracL of Sale
as Lo Lhe compleLlon daLe of Lhe pro[ecL does noL lLself
consLlLuLe subsLanLlal breach as Lo auLhorlze Lhe buyer
Lo resclnd Lhe conLracL and ask for refund of Lhe
amounLs pald Lo Lhe seller. X/X/ )6.23*7%2 Y4I/ -.26/
0/ [.2,M -,%$$ E2.6723#7$8 Z'P/8 G:C )-<5 >Q @9D:DA/
1he buyer has Lhe rlghL Lo compel Lhe seller Lo compleLe Lhe
roads and oLher faclllLles on Lhe subdlvlsloln, even lf lL wasn'L
sLlpulaLed ln Lhe sale. 1he seller cannoL shlfL Lo Lhe buyer Lhe
burden of provldlng for access Lo and from Lhe subdlvlslon. L#+
0/ U7,.$ )%'3.$8 ? )-<5 >;? @:;G=AS -.'$#'I 0/ -.123 .4
5667%,$8 :>> )-<5 :C @:;?;A
o lf Lhe seller defaulLs, Lhe buyer should be enLlLled Lo a
proporLlonaLe reducLlon ln Lhe purchase prlce.
o under .u. no. 937, a buyer cause of acLlon agalnsL Lhe
developer for fallure Lo develop rlpens only when Lhe
developer falls Lo compleLe Lhe pro[ecL on Lhe lapse of
Lhe compleLlon perlod sLaLed on Lhe sale conLracL or Lhe
developer's Llcenses Lo Sell. Any premaLure demand
prlor Lo Lhe lndlcaLed compleLlon daLe would be
premaLure. X/X/ )6.23*7%2 Y4I/ -.26/ 0/ [.2,M -,%$$
E2.6723#7$8 Z'P/8 G:C )-<5 >Q @9D:DA/
Slnce Lhe loLs are lnvolved ln llLlgaLlon and Lhere ls a noLlce of 01/
($-7$-/ aL Lhe back of Lhe LlLles lnvolved, Lhe subdlvlslon
developer have Lo be glven a reasonable perlod of Llme Lo work
on Lhe adverse clalms and dellver clean LlLles Lo Lhe buyer, and
should Lhe former fall Lo dellver clean LlLles aL Lhe end of Lhe
perlod, lL oughL Lo relmburse Lhe buyers noL only for Lhe
purchase prlce of Lhe subdlvlslon loLs sold Lo Lhem buL also Lhe
lncremenLal value arlslng from Lhe appreclaLlon of Lhe loLs.
-%'37+62%37 0/ -<) <7%,3& U70/ -.26/8 Q?> )-<5 C;9 @9DD;A/
Not|ce kequ|red Under Sect|on 23 Cf .D. 9S7
o noLhlng ln .u. 937 provldes for Lhe nulllflcaLlon of a
conLracL Lo sell ln Lhe evenL Lhe seller, aL Lhe Llme Lhe
conLracL was enLered lnLo, dld noL possess a cerLlflcaLe
of reglsLraLlon or a llcense Lo sell, sale belng a
consensual conLracL. -. -F#7' 0/ )3%/ L1P#% <7%,3&8 Q:=
)-<5 Q>D @9DD>A/
:

o 1he lack of CerLlflcaLe of 8eglsLraLlon or Lhe Llcense Lo
Sell of Lhe developer-seller merely sub[ecLs Lhe
developer Lo admlnlsLraLlve sancLlons, buL do noL
render Lhe conLracLs Lo sell enLered lnLo on Lhe pro[ecL
null and vold. X/X/ )6.23*7%2 Y4I/ -.26/ 0/ [.2,M -,%$$
E2.6723#7$8 Z'P/8 G:C )-<5 >Q @9D:DA/
ketroact|ve App||cat|on Cf .D. 9S7
o .D. 9S7 may be applled reLroacLlvely slnce lL ls Lhe
lnLenL of Lhe law as shown from lLs preamble. lL ls an
lnsLrumenL of soclal [usLlce. \1I7'#. 0/ U2#,.'8 9Q9 )-<5
:DG @:;;GA/

4. k|ght 1o Grace er|od St|pu|ated
When a grace perlod ls provlded for ln Lhe conLracL of sale, lL
should be consLrued as a rlghL, noL an obllgaLlon of Lhe debLor,
and when uncondlLlonally conferred, Lhe grace perlod ls

1
8"-%$'(0"%$ #9 8:; :$"0%4 <$#9 8)*(9, 387 SC8A 492 (2009).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
effecLlve wlLhouL furLher need of demand elLher calllng for Lhe
paymenL of Lhe obllgaLlon or for honorlng Lhe rlghL. V2#PK3.*'
U70/ -.26/ 0/ 5+.2 R#722% U70/ -.26/8 9=; )-<5 :9G @:;;CA/

D. kesc|ss|on on Sa|es of Non-kes|dent|a| Immovab|es on Insta||ments
(Art|c|es 1191 and 1S92)

Art|c|e 1191.
1he power to resc|nd ob||gat|ons |s |mp||ed |n rec|proca| ones, |n case
one of the ob||gors shou|d not comp|y w|th what |s |ncumbent upon
h|m.

1he |n[ured party may choose between the fu|f|||ment and the
resc|ss|on of the ob||gat|on, w|th the payment of damages |n e|ther
case. ne may a|so seek resc|ss|on, even after he has chosen fu|f|||ment,
|f the |atter shou|d become |mposs|b|e.

1he court sha|| decree the resc|ss|on c|a|med, un|ess there be [ust
cause author|z|ng the f|x|ng of a per|od.

1h|s |s understood to be w|thout pre[ud|ce to the r|ghts of th|rd
persons who have acqu|red the th|ng, |n accordance w|th art|c|es 138S
and 1388 and the Mortgage Law. (1124)

Art|c|e 1S92.
In the sa|e of |mmovab|e property, even though |t may have been
st|pu|ated that upon fa||ure to pay the pr|ce at the t|me agreed upon
the resc|ss|on of the contract sha|| of r|ght take p|ace, the vendee may
pay, even after the exp|rat|on of the per|od, as |ong as no demand for
resc|ss|on of the contract has been made upon h|m e|ther [ud|c|a||y or
by a notar|a| act. After the demand, the court may not grant h|m a
new term. (1S04a)

ArLlcles 1191 and 1392 on resclsslon cannoL apply Lo a conLracL
Lo sell slnce Lhere can be no resclsslon of an obllgaLlon LhaL ls
sLlll non-exlsLenL, Lhe suspenslve condlLlon noL havlng
happened." !"%,%2%. 0/ -58 =DC )-<5 :QQ @:;;;A/
:

ArLlcle 1392 allows Lhe buyer of an lmmovable Lo pay as long as
no demand for resclsslon has been made, and Lhe conslgnaLlon
of Lhe balance of Lhe purchase prlce before Lhe Lrlal courL
operaLes as full paymenL/ !E2.0#'P7 .4 -7J1 0/ B7#2$ .4 <14#'%
Y.2%,7$8 QCG )-<5 =:Q @9DD?A/
AuLomaLlc resclsslon clauses are noL valld nor can be glven legal
effecL under ArLlcles 1191 and 1392. !Z2#'I%' 0/ -.123 .4
5667%,$8 =GG )-<5 C: @9DD:A/
9
lndeed, resclsslon requlres under
Lhe law a poslLlve acL of cholce on Lhe parLy of Lhe non-
defaulLlng parLy. !O,&+6#% B.1$#'I 0/ E%'%$#%3#P R2%07, -.26/8
=;Q )-<5 9;? @9DD=A/
vendor cannoL recover ownershlp of Lhe Lhlng sold unLll and
unless Lhe conLracL lLself ls resolved and seL aslde, a parLy who
falls Lo lnvoke [udlclally or by noLarlal acL Lhe resoluLlon of a

1
8"*17"7 =/%"%$/6 >-!9 #9 ;"-%$*), 71 hll. 114 (1940), ?0@$" #9 >-A31'@)46 86
hll. 477 (1930), B"-3$0 #9 :)7*153$C, 109 hll. 1 (1960), D)/$(, E ;)-/
=-%$*(*1/$/6 >-!9 #9 8?, 143 SC8A 663 (1986) F1'$-$C #9 8?, 193 SC8A 203
(1991), D"!1-%) #9 G"("*"C, 209 SC8A 246 (1992), H74//$4 I"*J6 >-!9 #9 8)3*% ).
?(($"0/6 280 SC8A 233 (1997), :100) #9 8)3*% ). ?(($"0/6 274 SC8A 461 (1997),
I0"%1-3' I0"-/ I,1096 >-!9 #9 83!3$!), 488 SC8A 136 (2006), K"- #9 L$-)01*"), 604
SC8A 36 (2009), F"*!1" #9 8)3*% ). ?(($"0/, 619 SC8A 280 (2010).
2
=/!3$%" #9 I"-7), 76 hll. 236 (1946).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
conLracL of sale would be prevenLed from blocklng Lhe
consummaLlon of Lhe same ln llghL of Lhe precepL LhaL mere
fallure Lo fulflll Lhe conLracL does noL operaLe 1(/) ."!%) as
resclsslon. E,%3#'1+ E,%'$ EF#,/8 Z'P/ 0/ -1P17P.8 C?? )-<5 :QG
@9DDGA/

II. CN Ak1 CI 8ULk

A. In case of Movab|es (Art|c|es 1S98-1S99)
lallure of Seller Lo uellver ! ArLlcle 1398
8reach of Se||er's Warranty: ArLlcle 1399 provldes Lhe followlng
remedles Lo Lhe buyer ln case Lhe seller breaches hls warranLy:
1. AccepL or keep Lhe goods and seL up agalnsL Lhe seller Lhe
breach of warranLy by way of recoupmenL ln dlmlnuLlon or
exLlncLlon of Lhe prlce
2. AccepL or keep Lhe goods and malnLaln an acLlon for damages
agalnsL Lhe seller
3. 8efuse Lo accepL Lhe goods and malnLaln an acLlon for damages
4. 8esclnd Lhe sale and refuse Lo recelve Lhe goods or lf Lhe goods
have already been recelved, reLurn Lhem or offer Lo reLurn Lhem
Lo Lhe seller and recover Lhe prlce pald.
o 1hese remedles are alLernaLlve. Powever, Lhe buyer sLlll
has a rlghL Lo resclnd lf he has chosen speclflc
performance buL lL has become lmposslble. 1hls ls
based on ArLlcle 1191(2).
Suspens|on of ayments |n Ant|c|pat|on of 8reach ! 1he
pendency of sulL over Lhe sub[ecL maLLer of Lhe sale [usLlfles Lhe
buyer ln suspendlng paymenL of Lhe balance of Lhe purchase
prlce by reason of aforesald vlndlcaLory acLlon flled agalnsL lL.

8. In case of Immovab|es (Art|c|es 1191, Sect|ons. 23 and 24, .D. 9S7)

C. Suspens|on of ayment (Art|c|e 1S90)

Art|c|e 1S90.
Shou|d the vendee be d|sturbed |n the possess|on or ownersh|p of the
th|ng acqu|red, or shou|d he have reasonab|e grounds to fear such
d|sturbance, by a v|nd|catory act|on or a forec|osure of mortgage, he
may suspend the payment of the pr|ce unt|| the vendor has caused the
d|sturbance or danger to cease, un|ess the |atter g|ves secur|ty for the
return of the pr|ce |n a proper case, or |t has been st|pu|ated that,
notw|thstand|ng any such cont|ngency, the vendee sha|| be bound to
make the payment. A mere act of trespass sha|| not author|ze the
suspens|on of the payment of the pr|ce. (1S02a)

1he pendency of sulL over Lhe sub[ecL maLLer of Lhe sale [usLlfles
Lhe buyer ln suspendlng paymenL of Lhe balance of Lhe purchase
prlce by reason of aforesald vlndlcaLory acLlon flled agalnsL lL.
1he assurance made by Lhe seller LhaL Lhe buyer dld noL have Lo
worry abouL Lhe case because lL was pure and slmple
harassmenL ls noL Lhe klnd of guaranLy conLemplaLed under
ArLlcle 1390 whereln Lhe buyer ls bound Lo make paymenL lf Lhe
seller should glve a securlLy for Lhe reLurn of Lhe prlce. !5M7,4%
E2.6723#7$8 Z'P/ 0/ -.123 .4 5667%,$8 9CD )-<5 QGQ @:;;QA/

III. kLC1C LAW: Sa|es Cf Movab|es Cn Insta||ments (Art|c|es 1484,
148S, 1486)

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Art|c|e 1484.
In a contract of sa|e of persona| property the pr|ce of wh|ch |s payab|e
|n |nsta||ments, the vendor may exerc|se any of the fo||ow|ng
remed|es:

(1) Lxact fu|f|||ment of the ob||gat|on, shou|d the vendee fa|| to pay,

(2) Cance| the sa|e, shou|d the vendee's fa||ure to pay cover two or
more |nsta||ments,

(3) Iorec|ose the chatte| mortgage on the th|ng so|d, |f one has been
const|tuted, shou|d the vendee's fa||ure to pay cover two or more
|nsta||ments. In th|s case, he sha|| have no further act|on aga|nst the
purchaser to recover any unpa|d ba|ance of the pr|ce. Any agreement
to the contrary sha|| be vo|d. (14S4-A-a)

Art|c|e 148S.
1he preced|ng art|c|e sha|| be app||ed to contracts purport|ng to be
|eases of persona| property w|th opt|on to buy, when the |essor has
depr|ved the |essee of the possess|on or en[oyment of the th|ng.
(14S4-A-a)

Art|c|e 1486.
In the case referred to |n the two preced|ng art|c|es, a st|pu|at|on that
the |nsta||ments or rents pa|d sha|| not be returned to the vendee or
|essee sha|| be va||d |nsofar as the same may not be unconsc|onab|e
under the c|rcumstances. (n)

A. kat|ona|e of kecto Law
lL was orlglnally passed ln 1939 and was evenLually lncorporaLed
ln Lhe Clvll Code as ArLlcle 1484.
1he purpose ls Lo prevenL Lhe abuses of morLgagees who
foreclose on Lhe chaLLel morLgage, buy Lhe properLy aL a low
prlce, and Lhen sulng Lhe morLgagor for deflclency.
1he 8ecLo Law prevenLs morLgagee from selzlng Lhe morLgaged
properLy, buylng lL aL foreclosure sale for a low prlce and Lhen
brlnglng Lhe sulL agalnsL Lhe morLgagor for a deflclency
[udgmenL. 1he almosL lnvarlable resulL was LhaL Lhe morLgagor
found hlmself mlnus Lhe properLy and sLlll owlng pracLlcally Lhe
full amounL of hls orlglnal lndebLedness. !Y%I'% N#'%'P#%,
)720#P7$ X2.168 Z'P/ 0/ -.,%2#'%8 C>> )-<5 9CQ @9DDQA/

8. Coverage Cf 1he Law:
1. "Insta||ment Sa|e" requlres aL leasL sLlpulaLed Lwo (2)
paymenLs ln Lhe fuLure, wheLher or noL Lhere ls a
downpaymenL. L70& 0/ X720%P#., G; EF#,/ Q9 @:;=;A/

L70& B72+%'.$ 0/ X720%P#.

Iacts: Levy Permanos, lnc., sold Lo Lazaro 8las Cervaclo, who afLer
downpaymenL, execuLed a promlssory noLe for Lhe balance of 2,400,
payable on or before !une 13, 1937, and morLgaged Lhe car as securlLy
for balance. Cervaclo falled Lo pay. 1he morLgage was foreclosed and
sold aL 800. Permanos lnsLlLuLed a clvll acLlon for Lhe balance.

Issue: WheLher or noL Levy Permanos can recover Lhe balance.

ne|d: ?LS. ArLlcle 1484 applles. 1he suggesLlon LhaL Lhe cash paymenL
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
made ln Lhls case should be consldered as an lnsLallmenL ln order Lo
brlng Lhe conLracL sued upon under Lhe operaLlon of Lhe law, ls
unLenable. A cash paymenL cannoL be consldered as a paymenL by
lnsLallmenL, and even lf lL can be so consldered, sLlll Lhe law does noL
apply, for lL requlres non-paymenL of Lwo or more lnsLallmenLs ln order
LhaL lLs provlslons may be lnvoked. Pere, only one lnsLallmenL was
unpald. AlLhough lL ls a sale of personal properLy, lL ls noL payable ln
lnsLallmenLs. lL ls payable ln a sLralghL Lerm ln whlch Lhe balance should
be pald ln lLs LoLallLy aL maLurlLy daLe of Lhe n, Lherefore Lhe
prohlblLlon does noL apply.

Doctr|ne:

llnanclng LransacLlons derlved or arlslng from sales of movables
on lnsLallmenLs are covered.
o Where Lhe flnanclng LransacLlon ls noL born from a sale
buL a morLgage, lL ls noL covered by Lhe 8ecLo Law
E5Y\-5 [..M R27%3+7'3 E,%'38 Z'P/ 0/ -.123 .4
5667%,$8 =:D )-<5 9?:8 9?; @:;;;A
o ln Lhls case, Lhe seller asslgned hls credlL Lo Lhe
flnanclng company. 1he flnanclng company ls Lhus
bound by ArLlcle 1484. T%&%$ 0/ L1'73% Y.3.2
-.+6%'&8 ::> )-<5 >9G @:;?9A
2. Contracts 1o Se|| Movab|es Not Covered/ !"#$%&%' )%*+#,,
-.+6%'&8 Z'P/ 0/ -.123 .4 5667%,$8 9:; )-<5 =>? @:;;=A/

C. kemed|es Ava||ab|e 1o Unpa|d Se||er Not Cumu|at|ve 8ut A|ternat|ve
And Lxc|us|ve. U7,3% Y.3.2 )%,7$ -.26/ 0/ ]#1 H#+ U1%', 9:= )-<5 9Q;
@:;;9A.
1


U7,3% Y.3.2 )%,7$ -.26/ 0/ ]#1 H#+ U1%'

Iacts: nlu klm uuan purchased from uelLa MoLors 3 alr condlLlonlng
unlLs. nlu pald Lhe downpaymenL, Lhe balance payable ln 24
lnsLallmenLs. 1lLle Lo Lhe properLy remalned wlLh uelLa unLll Lhe
paymenL of Lhe full purchase prlce. under Lhe agreemenL, fallure Lo pay
2 monLhly lnsLallmenLs makes Lhe obllgaLlon enLlrely due and
demandable. 1he unlLs were dellvered, nlu falled Lo pay. 1hus, uelLa
flled a complalnL for 8eplevln and applled Lhe lnsLallmenLs pald by nlu
as renLals, nlu conLends LhaL Lhe conLracLual sLlpulaLlons are
unconsclonable.

Issue: WheLher or noL Lhe remedy uelLa avalled of was unconsclonable

ne|d: nC. A sLlpulaLlon ln Lhe conLracL LreaLlng lnsLallmenLs as renLals ln
case of fallure Lo pay ls vALlu-so long as Lhey are noL unconsclonable.
1he provlslon ln Lhls case ls reasonable. An unpald seller has 3
alLernaLlve (noL cumulaLlve) remedles: (1) exacL fulflllmenL of Lhe
obllgaLlon, (2) cancel Lhe sale for defaulL ln 2 lnsLallmenLs, and (3)
foreclose Lhe chaLLel morLgage (lf any) buL Lhe seller cannoL anymore
clalm Lhe unpald balance of Lhe prlce. uelLa chose Lhe 2nd remedy.
Pavlng done so, lL ls now barred from clalmlng Lhe balance of Lhe
purchase prlce.

1
<$ 0" 8*3C #9 ?/1"- 8)-/3'$*, 214 SC8A 103 (1992), L)*@)- >> #9 ;$*#1!$+17$
;($!1"01/%/6 >-!9, 238 SC8A 634 (1996).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Doctr|ne:

1. Vert|ca| 8arr|ng Lffect ! 1hese are alLernaLlve and excluslve,
and Lhe exerclse of one would bar Lhe exerclse of Lhe oLhers.
o Powever, seeklng a wrlL of replevln conslsLenL wlLh any
of Lhe Lhree remedles. !^'#072$%, Y.3.2$ -.26/ 0/ U&
B#%' R%38 9? )-<5 :G: @:;G;A/
2. nor|zonta| 8arr|ng Lffect ! 8ecovery of unpald balance ls also
barred when Lhe remedy of elLher resclsslon or foreclosure ls
chosen.
o ln lnsLallmenL sales, lf Lhe acLlon lnsLlLuLed ls for speclflc
performance and Lhe morLgaged properLy ls
subsequenLly aLLached and sold, Lhe sale does noL
amounL Lo a foreclosure of Lhe morLgage, has been
upheld ln subsequenL declslons and seems now well-
esLabllshed/ Z'M1$32#%, N#'%'P7 -.26/ 0/ <%+#27_8 >>
)-<5 :Q9 @:;>>A/

D. kemedy of Spec|f|c erformance
1hls remedy ls alLernaLlve. Powever, lL can be argued LhaL lf Lhe
obllgaLlon Lo pay becomes lmposslble, Lhe seller may sLlll seek
resclsslon based on Art|c|e 1191.
o CLv: however says LhaL Lhe generlc obllgaLlon Lo pay
can'L become lmposslble.
1he seller ls deemed Lo have chosen speclflc performance when
he flles an acLlon ln courL for recovery. Sendlng of demand
leLLer Lo Lhe buyer ls noL enough and should noL be consldered
has havlng barred Lhe resorL Lo elLher Lhe remedles of resclsslon
or foreclosure.
When [udgmenL ls rendered ln favor of Lhe seller, Lhe buyer
becomes a [udgmenL debLor. Pls obllgaLlon can be execuLed on
all personal and real properLles of Lhe buyer whlch are noL
exempL from execuLlon.
1he facL LhaL Lhe seller obLalned a wrlL of execuLlon agalnsL Lhe
properLy morLgaged, buL pursuanL Lo an acLlon for speclflc
performance wlLh a plea for a wrlL of replevln, does noL amounL
Lo a foreclosure of Lhe chaLLel morLgage covered by Lhe 8ecLo
Law. R%`%'I,%'I#3 0/ ).13F72' Y.3.2$8 :D: EF#,/ GDG @:;Q>A9
1


R%`%'I,%'I#3 0/ ).13F72' Y.3.2$

Iacts: Spouses 1a[anlanglL boughL 2 LracLors and 1 1hresher from
SouLhern MoLors on lnsLallmenL basls by lssulng a romlssory noLe Lo
LhaL effecL. 1hey Lhen defaulLed on Lhe lnsLallmenL paymenLs. 1he courL
enLered [udgmenL for Lhe LoLal sum of Lhe purchased machlnerles
(23,373) plus lnLeresL and collecLlon cosLs. 1he sherlff Lhen levled on
Lhe machlnerles and sold Lhem on aucLlon for 10k Lo Lhe hlghesL
bldder, whlch was also SouLhern MoLors. Slnce Lhe [udgmenL called for
so much more, SouLhern MoLors obLalned an allas wrlL of execuLlon so
LhaL Lhe sherlff could levy aLLachmenL on Lhe oLher real properLles of
Lhe 1a[anlanglLs.

Issue: WheLher or noL SouLhern MoLors had already foreclosed on Lhe

1
;)3%,$*- B)%)*/ #9 B)/!)/), 2 SC8A 168 (1961), >-73/%*1"0 M1-"-!$ 8)*(9 #9
:"'1*$C, 77 SC8A 132 (1977), :)/"*1) #9 I8> N$"/1-5 "-7 M1-"-!$6 >-!9, 474 SC8A
300 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
chaLLel morLgage and Lhus have no more furLher acLlon agalnsL Lhem.

ne|d: nC. 1here was no foreclosure sale slnce SouLhern MoLors elecLed
1484(1) and sued on Lhe noLe excluslvely. SouLhern MoLors had Lhe
cholce whaL remedy ln ArLlcle 1484 Lo use. nelLher was Lhere
cancellaLlon of Lhe sale whlch was also afflrmed by Lhe sherlff. 1here
was an execuLlon agalnsL on Lhe properLy morLgaged noL a
cancellaLlon/foreclosure on Lhe sale. 1he facL LhaL Lhe seller obLalned a
wrlL of execuLlon agalnsL Lhe properLy morLgaged, buL pursuanL Lo an
acLlon for speclflc performance wlLh a plea for a wrlL of replevln, does
noL amounL Lo a foreclosure of Lhe chaLLel morLgage covered by Lhe
8ecLo Law.

Doctr|ne:

L. kemedy Cf kesc|ss|on
1. Nature of kemedy of kesc|ss|on
8esclsslon obllges boLh parLles Lo make resLlLuLlon.
o MuLual resLlLuLlon prevenLs recoverlng on Lhe balance
of Lhe purchase prlce. ].'%3. 0/ Z'372+7M#%37
5667,,%37 -.1238 :CD )-<5 9QQ @:;?QAS buL sLlpulaLlon
on non-reLurn of paymenLs ls valld provlded noL
unconsclonable. !U7,3% Y.3.2 )%,7$ -.26/ 0/ ]#1 H#+
U1%'8 9:= )-<5 9Q; @:;;9A/

].'%3. 0/ Z'372+7M#%37 5667,,%37 -.123

Iacts: 8esLlLuLo and LsLer nonaLo purchased a volkswagen Sakbayan
from Lhe eople's Car, lnc., on lnsLallmenL basls. 1he defendanLs
execuLed a promlssory noLe and a chaLLel morLgage ln favor of eople's
Car, lnc. lL Lhen asslgned lLs rlghLs and lnLeresLs over Lhe noLe and
morLgage ln favor of lnvesLor's llnance CorporaLlon (llC). lor fallure of
defendanLs Lo pay Lwo or more lnsLallmenLs, desplLe demands, Lhe car
was repossessed by llC. uesplLe repossesslon, llC demanded LhaL
nonaLos pay Lhe balance of Lhe prlce of Lhe car.

Issue: WheLher a vendor who had cancelled Lhe sale of a moLor vehlcle
for fallure of Lhe buyer Lo pay Lwo or more of Lhe sLlpulaLed
lnsLallmenLs, may also demand paymenL of Lhe balance of Lhe purchase
prlce.

ne|d: nC. 1he appllcable law ln Lhe case aL bar ls ArLlcle 1484. 1hese
remedles have been recognlzed as alLernaLlve, noL cumulaLlve, LhaL Lhe
exerclse of one would bar Lhe exerclse of Lhe oLhers. 1he acLs
performed by Lhe corporaLlon are wholly conslsLenL wlLh Lhe concluslon
LhaL lL had opLed Lo cancel Lhe conLracL of sale of Lhe vehlcle. lL ls Lhus
barred from exacLlng paymenL of Lhe balance of Lhe prlce of Lhe vehlcle.
lL cannoL have lLs cake and eaL lL Loo.

Doctr|ne:

o A sLlpulaLlon whlch provldes for Lhe forfelLure of Lhe
amounLs pald by Lhe buyer when Lhe conLracL ls
resclnded ls noL conLrary Lo law. Such forfelLed amounLs
are llke Lhe damages whlch can also be recovered ln
resclsslon.

2. When kesc|ss|on Deemed Chosen:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Genera| ku|e: 8esclsslon ls chosen when Lhere ls a clear
lndlcaLlon by Lhe seller LhaL he wanLs Lo end Lhe conLracL.
o Sends a noLlce of resclsslon Lo Lhe buyer
o 1akes possesslon of Lhe sub[ecL maLLer of Lhe sale
o llles an acLlon for resclsslon
When Lhe seller's asslgnee, a flnanclng company, ls able Lo Lake
back possesslon of Lhe moLor vehlcle wlLh a condlLlon LhaL Lhe
car can be redeemed by Lhe buyers wlLhln 13 days, such
possesslon ls clearly wlLh Lhe lnLenL Lo cancel Lhe conLracL.
].'%3. 0/ Z'372+7M#%37 5667,,%37 -.1238 :CD )-<5 9QQ @:;?QA
1he reLaklng of possesslon of Lhe properLy musL be coupled
wlLh an unequlvocal deslre on Lhe parL of Lhe seller Lo resclnd.
As such, surrender of morLgaged properLy ls noL necessarlly
equlvalenL Lo resclsslon. !"M%/ M7 a1#%+J%. 0/ Y%'#,% Y.3.2$
-./8 Z'P/8 = )-<5 CCC @:;G:A/

3. 8arr|ng Lffect Cf kesc|ss|on:
Lven lf noL expllclLly sLaLed ln Lhe law, resclsslon sLlll bars Lhe
seller from recoverlng deflclency or unpald balance, ln Lhe same
way LhaL foreclosure on chaLLel morLgage does.
o Powever, Lhe seller may recover damages.

I. kemedy of Iorec|osure
1. When kemedy Cf Iorec|osure Is Deemed Chosen: 1he seller ls
deemed Lo have chosen Lo foreclose only aL Lhe Llme of acLual
sale of Lhe sub[ecL properLy aL publlc aucLlon. Y%'#,% R2%M#'I b
)166,& -./ 0/ <7&7$8 G9 EF#,/ CG: @:;=QAS Y%'#,% Y.3.2 -./8 Z'P/
0/ N72'%'M7_8 ;; EF#,/ >?9 @:;QGA/
o 1he flllng for and lssuance of a wrlL of replevln (and Lhe
subsequenL recovery of possesslon) does noL mean LhaL
Lhe seller wlll foreclose on Lhe morLgage. ^'#072$%,
Y.3.2$ -.26/ 0/ )& B#%' R%38 9? )-<5 :G: @:;G;A
o llllng of a wrlL of replevln ls usually a prellmlnary sLep Lo
foreclose so LhaL Lhe seller wlll be able Lo regaln
possesslon.
o lf Lhe seller flles an acLlon denomlnaLed as replevln
wlLh damages" whlch seeks Lo recover possesslon and
ln Lhe alLernaLlve, Lo recover Lhe unpald balance of Lhe
prlce, he ls sLlll noL consldered as havlng chosen
foreclosure as a remedy. Z'M1$32#%, N#'%'P7 -.26/ 0/
<%+#27_8 >> )-<5 :Q9 @:;>>A
8arrlng effecL would cover a Lhlrd-parLy morLgage, when lL was
Lhe chaLLel morLgage LhaL was flrsL foreclosed. <#M%M 0/ N#,#6#'%$
Z'07$3+7'3 b N#'%'P7 -.26/, :9D )-<5 9CG @:;?=A9
When Lhe seller asslgns hls credlL Lo anoLher person, Lhe laLLer
ls llkewlse bound by Lhe same law. T%&%$ 0/ L1'73% Y.3.2$8 ::>
)-<5 >9G @:;?9A/
:


T%&%$ 0/ L1'73% Y.3.2 -.+6%'&

Iacts: !"#$#$%&"' )*#'%+$% ,-.-/0 1'2 +*'34-/"5 %& $&/#-667"&# 8-/$/ -
!"#"$ &'()*+' ,$"! -.*/0" -1#'$2$).'. )1 3/4/5/1 6' 7$" 3)#58 6'/+'$ ",
8espondenL LuneLa MoLor Company. Car was dellvered Lo Zayas who
execuLed a promlssory noLe on Lhe balance and ln addlLlon a chaLLel
morLgage on Lhe car ln favor of LuneLa. Zayas was unable Lo pay furLher

1
L)*@)- >> #9 ;$*#1!$+17$ ;($!1"01/%/6 >-!9, 238 SC8A 634 (1996).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
prompLlng LuneLa Lo exLra-[udlclally foreclose chaLLel morLgage, car sold
aL publlc aucLlon wlLh LuneLa as hlghesL bldder. LuneLa flled clvll case for
recovery of balance of 1,331.74 plus lnLeresL. Pe denled appllcablllLy of
ArLlcle 1484 because conLracL was only a mere loan and noL sale on
lnsLallmenL

Issue: WheLher or noL ArLlcle 1484 would apply Lo a person or enLlLy
whlch flnanced purchase on lnsLallmenLs of a moLor vehlcle where Lhe
seller subsequenLly asslgns loan documenLs Lo Lhe flnanclng person or
enLlLy.

ne|d: !"#$ "&'()* +(& (, (-.,/ *0 12,./( 3*/*4 5*67(,8 (,9 /:(/ /:.
!"#$%&%!'$%() &#(+ !!"# %&'"(#) *+ ,'%&-* ,.!#)/)('#' 0'123(!!#4 (.
evldence) on mon!"#$ &'(!)##*+'!( !!"# %& '!&!( )*+,"-+*# ,.!, ,.*
!"#$ &'( )! *'+", "* -.!$#'/ 0(1'2" '(()3!$4 )#( !!"#$%& ("&-!-vls Lhe
sale Lo LuneLa MoLor Company, Lhe naLure of Lhe LransacLlon dldn'L
change and as an asslgnee, LuneLa had no beLLer rlghLs Lhan asslgnor
Lscano under Lhe same LransacLlon. 1ransacLlon would sLlll be a sale of
personal properLy ln lnsLallmenLs covered by ArLlcle 1484, Lo rule
oLherwlse would pave Lhe way for subverLlng Lhe pollcy underlylng ArL
1484 on Lhe foreclosure of chaLLel morLgages.

Doctr|ne:

2. "8arr|ng" Lffects Cf Iorec|osure:
lL ls Lhe foreclosure and acLual sale aL publlc aucLlon whlch bars
furLher recovery by Lhe seller.
llllng of Lhe acLlon of replevln ln order Lo foreclose on Lhe
chaLLel morLgage does noL produce Lhe barrlng effecL under Lhe
8ecLo Law, .)* 1% 1/ %,$ ."!% ). .)*$!0)/3*$ "-7 "!%3"0 /"0$ ). %,$
')*%5"5$7 !,"%%$0 %,"% @"* .3*%,$* *$!)#$*4 @4 %,$ /$00$* ). "-4
@"0"-!$ )- %,$ @34$*O/ )3%/%"-71-5 )@015"%1)- -)% /"%1/.1$7 @4
%,$ /"0$. 1he volunLary paymenL of Lhe lnsLallmenL by Lhe buyer-
morLgagor ls valld and noL recoverable ln splLe Lhe resLrlcLlve
provlslons of ArLlcle 1484(3). ].23F72' Y.3.2$ 0/ )%6#'.$., ==
)-<5 =QG @:;>DA9
1


].23F72' Y.3.2$8 Z'P/ 0/ )%6#'.$.

Iacts: 8espondenL Caslano Saplnoso purchased from peLlLloner
norLhern MoLors an Cpel kadeLL car for 12,171 maklng a
downpaymenL and execuLlng a promlssory noLe for Lhe balance of
10,340 payable ln lnsLallmenLs. 1o secure Lhe paymenL of Lhe noLe,
Saplnoso execuLed ln favor of norLhern MoLors a chaLLel morLgage on
Lhe car, Lhe morLgage provlded among oLhers LhaL upon Saplnoso's
defaulL ln paymenL of any parL of Lhe prlnclpal or lnLeresL, norLhern
MoLors may elecL any of Lhe ff. remedles (a) sale of Lhe car by norLhern
(b) cancellaLlon of Lhe sale Lo Saplnoso (c) exLra[udlclal foreclosure (d)
ordlnary clvll acLlon for fulflllmenL of Lhe morLgage conLracL,
addlLlonally, whlchever remedy ls chosen, Saplnoso walves hls rlghL Lo
relmbursemenL of any and all amounLs on Lhe prlnclpal and lnLeresL
already pald. Saplnoso falled Lo pay Lhe flrsL 3 lnsLallmenLs due from
AugusL-november 1963, he made paymenLs Lhough on november and
uecember and on Aprll Lhe nexL year buL falled Lo make subsequenL
paymenLs. norLhern MoLors flled a complalnL sLaLlng LhaL lL was avalllng
of Lhe opLlon of exLra[udlcally forecloslng Lhe morLgage and prayed LhaL

1
B"-10" B)%)* 8)9 #9 M$*-"-7$C, 99 hll. 782 (1936), B"5-" M1-"-!1"0 ;$*#1!$/
F*)3(6 >-!9 #9 8)0"*1-", 477 SC8A 243 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(a) a wrlL of replevln be lssued upon lLs flllng of a bond (b) lL be declared
Lo have Lhe rlghLful possesslon of Lhe car (c) ln defaulL of dellvery,
Saplnoso be ordered Lo pay Lhe balance wlLh lnLeresL. SubsequenL Lo
Lhe commencemenL of Lhe acLlon buL before flllng of hls answer,
Saplnoso made 2 paymenLs amounLlng Lo 1,230 on Lhe promlssory
noLe, ln Lhe meanLlme, a wrlL of replevln was lssued and Lhe car was
Lurned over Lo norLhern MoLors. Saplnoso clalmed LhaL he wlLhheld
paymenLs because Lhe car was defecLlve and norLhern MoLors falled Lo
flx lL desplLe hls repeaLed demands.

Issue: WheLher or noL as under ArLlcle 1484 of Lhe Clvll Code, plalnLlff
norLhern MoLors ls barred from recoverlng unpald balance of Lhe debL
havlng elecLed Lo foreclose on Lhe chaLLel morLgage.

ne|d: nC. ln lssulng Lhe wrlL of replevln and upholdlng afLer Lrlal Lhe
rlghL Lo possesslon of Lhe car by norLhern MoLors, Lhe courL below
correcLly consldered Lhe acLlon as one of replevln Lo secure possesslon
of Lhe car as prellmlnary sLep Lo a foreclosure sale. 1he courL below
however erred ln concludlng LhaL Lhe legal effecL of Lhe acLlon was Lo
bar norLhern MoLors from accepLlng furLher paymenLs on Lhe
promlssory noLe. lL ls Lhe facL of foreclosure and acLual sale of Lhe
morLgaged chaLLel LhaL bars furLher recovery by Lhe vendor of any
balance on Lhe vendee's ouLsLandlng obllgaLlon noL saLlsfled by Lhe sale.
ln Lhe presenL case, Lhere ls no occaslon Lo apply Lhe resLrlcLlve
provlslon of ArLlcle 1484 as Lhere has noL yeL been a foreclosure sale
resulLlng ln a deflclency. A morLgage credlLor before Lhe acLual
foreclosure sale ls noL precluded from recoverlng Lhe unpald balance
alLhough he has flled for replevln for Lhe purpose of exLra[udlclal
foreclosure. Also, a morLgage credlLor who has elecLed Lo foreclose buL
subsequenLly deslsLs from proceedlng wlLh Lhe aucLlon sale wlLhouL
galnlng any advanLage and wlLhouL causlng any dlsadvanLage Lo Lhe
morLgagor ls noL barred from sulng on Lhe unpald accounL. And as
appllcable here, a morLgage credlLor ls noL barred from accepLlng before
a foreclosure sale paymenLs volunLarlly Lendered by Lhe debLor-
morLgagor who admlLs lndebLedness.

Doctr|ne:

3. 8arr|ng Lffect Cn Cther Secur|t|es G|ven Ior ayment Cf r|ce
loreclosure on Lhe chaLLel morLgage prevenLs furLher acLlon on
Lhe supporLlng real esLaLe morLgage, wheLher Lhe chaLLel
morLgage ls flrsL foreclosed -21_ 0/ N#,#6#'%$ Z'07$3+7'3 b
N#'%'P7 -.26/, 9= )-<5 >;: @:;G?AP
1


-21_ 0/ N#,#6#'%$ Z'07$3+7'3 b N#'%'P7 -.26/

Iacts: 8uperLo Cruz boughL a bus from lar LasL MoLor Corp whlch was
payable on lnsLallmenLs of 1,487.20/monLh for 30 monLhs wlLh 12
lnLeresL. Cruz execuLed a promlssory noLe ln Lhe sum of Lhe purchase
prlce. 1o secure Lhe paypenL of Lhe promlssory noLe, Cruz execuLed a
chaLLel morLgage on Lhe bus. Slnce no downpaymenL was made, lar
LasL requlred Cruz Lo execuLe anoLher securlLy and for Lhe a 8LM was
execuLed on Lhe land and bulldlng of Mrs. 8eyes whlch aL LhaL Llme was
morLgaged Lo u8. lar LasL Lhen asslgned all lLs rlghLs and lndorsed Lhe
promlssory noLe Lo llllplnas lnvesLmenL and llnanclng Corp. Cruz
defaulLed ln paymenL of Lhe promlssory noLe wlLh only 300 belng ever

1
I"/!3"0 #9 Q-1#$*/"0 B)%)*/ 8)*(9, 61 SC8A 121 (1974).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
pald. llllplnas had Lhe chaLLel morLgage foreclosed and lL was Lhe
hlghesL bldder aL Lhe foreclosure sale. Powever, Lhe proceeds were noL
sufflclenL Lo cover Lhe balance so lL pald Lhe lndebLedness of Mrs. 8eyes
and requesLed LhaL lL be sold aL foreclosure sale as well. 1hus Cruz and
Mrs. 8eyes flled an acLlon wlLh Lhe Cll Lo have Lhe 8LM consLlLuLed on
her land cancelled. 1he Cll ruled ln favor of Cruz and 8eyes flndlng LhaL
Lhe exLra[udlclal foreclosure barred furLher acLlon for recovery Lhus Lhe
case aL bar.
1


Issue: WheLher or noL recovery from an addlLlonal securlLy ls lncluded ln
Lhe prohlblLlon Lhus allowlng llllplnas Lo recover Lhe balance.

ne|d: ?LS. ArLlcle 1484 applles. lL has Lhus Lhe exerclse of one bars Lhe
exerclse of Lhe oLhers. 1hls ls so Lo prevenL he abuses commlLLed ln
connecLlon wlLh foreclosure morLgages whereln Lhe morLgagees would
selze Lhe morLgaged properLy and buylng Lhem aL a very low prlce aL Lhe
sale and Lhen brlnglng sulL for collecLlon of Lhe unpald balance resulLlng
ln Lhe morLgagor sLlll llable Lo pay hls orlglnal debL plus loslng Lhe
properLy. 1o allow llllplnas Lo recover Lhru Lhe addlLlonal securlLy would
resulL ln a clrcumvenLlon of Lhe law. Should Lhe guaranLor be compelled
Lo pay Lhe balance Lhen Lhe guaranLor would be enLlLled Lo recover from
Lhe debLor-vendee. ln Lhe end, lL would sLlll be Lhe debLor-vendee who
would bear Lhe paymenL of Lhe purchase prlce. Also, Lhe word acLlon"
ln ArLlcle 1484 covers all Lypes of legal demand of one's rlghL wheLher
[udlclal or exLra[udlclal Lhus Lhe barrlng effecL applles Lo an exLra[udlclal
foreclosure.

1
AnLonlo, PlpollLo, lmperlal & Zaragosa. (2012). Salse CLv Case ulgesLs.
8eLrleved from hLLp://www.scrlbd.com/doc/104486360/Sales-CLv-Case-
ulgesLs

Doctr|ne:

And #1!$ #$*/" when Lhe real esLaLe morLgage ls flrsL foreclosed.
V.2J.' ZZ 0/ )720#P7*#M7 )67P#%,#$3$8 Z'P/, 9Q? )-<5 G=C @:;;GA9

V.2J.' ZZ 0/ )720#P7*#M7 )67P#%,#$3$8 Z'P/

Iacts: (8&8) [olnLly and severally slgned a promlssory noLe ln favor
angaslnan AuLo MarL, lnc. for 122,836.00 Lo be payable ln
lnsLallmenLs wlLhouL need of noLlce or demand wlLh a ChaLLel MorLgage
on 1 8rand new 1984 lsuzu kCu 20 Crew Cab. 1he rlghLs of angaslnan
AuLo MarL, lnc. was laLer asslgned Lo llllnvesL CredlL CorporaLlon, wlLh
noLlce Lo Lhe defendanLs. 8ecause Lhe defendanLs dld noL pay Lhelr
monLhly lnsLallmenLs, llllnvesL demanded from Lhe defendanLs Lhe
paymenL of Lhelr lnsLallmenLs due on !anuary 29, 1983 by Lelegram.
llllnvesL CredlL CorporaLlon LhereafLer asslgned all lLs rlghLs, lnLeresL
and LlLle over Lhe romlssory noLe and Lhe chaLLel morLgage Lo
Servlcewlde SpeclallsLs, lnc. (SSl). 1he plalnLlff aLLempLed Lo collecL by
sendlng a demand leLLer Lo Lhe defendanLs for Lhem Lo pay Lhelr enLlre
obllgaLlon. 1he defendanLs clalm LhaL whaL Lhey lnLended Lo buy
from angaslnan AuLo MarL was a [eepney Lype lsuzu k. C. Cab.
uefendanLs furLher clalm LhaL Lhey are noL ln defaulL of Lhelr obllgaLlon
because Lhe angaslnan AuLo MarL was flrsL gullLy of noL fulfllllng lLs
obllgaLlon ln Lhe conLracL. 1he defendanLs clalm LhaL nelLher parLy
lncurs delay lf Lhe oLher does noL comply wlLh hls obllgaLlon

Issue: WheLher or noL Lhe awards made by Lhe courL a quo of llquldaLed
damages and aLLorney's fees Lo prlvaLe respondenL approprlaLe.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

ne|d: ALLorney's fees ! ?LS. LlquldaLed uamages ! nC. When Lhe
seller asslgns hls credlL Lo anoLher person, Lhe laLLer ls llkewlse bound
by Lhe same law. Accordlngly, when Lhe asslgnee forecloses on Lhe
morLgage, Lhere can be no furLher recovery of Lhe deflclency, and Lhe
seller-morLgagee ls deemed Lo have renounced any rlghL Lo Lhe unpald
balance. 1hus Lhere musL be no paymenL of llquldaLed damages,
however granL of aLLorney's fees were allowed.

Doctr|ne:

o 1he CourL held LhaL lf Lhe Lhlrd-parLy morLgagor ls
forced Lo pay, Lhen he as Lhe guaranLor wlll be allowed
Lo recover from Lhe prlnclpal debLor. 1hls would be an
lndlrecL subverslon of ArLlcle 1484.
o 1he acLlon belng barred also lncludes exLra[udlclal
proceedlngs, noL [usL [udlclal proceedlngs.
1he seller ls llkewlse precluded from furLher exLra[udlclally
forecloslng on any addlLlonal securlLy whlch Lhe buyer hlmself
has consLlLuLed. <#M%M 0/ N#,#6#'%$ Z'07$3+7'3 %'M N#'%'P7
-.26/8 :9D )-<5 9CG @:;?=A

<#M%M 0/ N#,#6#'%$ Z'07$3+7'3 b N#'%'P7 -.26/

Iacts: lalnLlffs 8ldad boughL 2 brand new lord Consul sedans. 1hey
execuLed a promlssory noLe and a chaLLel morLgage on Lhe Lwo cars
Anu anoLher car Anu plalnLlff's Laxl operaLlon franchlse or cerLlflcaLe of
publlc convenlence. 1he vendor asslgned lLs rlghLs, LlLle and lnLeresL Lo
Lhe promlssory noLe and chaLLel morLgage Lo llllplnas lnvesLmenL and
llnance Corp. 1he buyers defaulLed on Lhelr paymenL. lllC foreclosed
exLra-[udlclally on Lhe chaLLel morLgage and Lhey were Lhe hlghesL
bldder. AnoLher aucLlon sale was held aL a laLer daLe for Lhe remalnlng
properLles, lncludlng Lhe Laxl franchlse. lllC was agaln Lhe hlghesL
bldder. lL subsequenLly sold and conveyed Lhe Laxl franchlse Lo !ose
SebasLlan who flled wlLh Lhe SC for approval of Lhe sale. lalnLlff Lhen
flled an acLlon for annulmenL of conLracL and Lhe subsequenL sales wlLh
Lhe Cll of 8lzal.

Issue: WheLher or noL Lhe foreclosure on Lhe chaLLel morLgage was
valld.

ne|d: nC. ArLlcle 1484 of Lhe Clvll Code applles. 1hese remedles are
alLernaLlve, noL cumulaLlve. ln Lhls case, Lhe morLgagee chose Lo
foreclose on Lhe chaLLel morLgage on Lhe 2 new lord vehlcles. 8ecause
Lhey chose Lhls opLlon, Lhey may noL anymore have any furLher acLlon
Lo recover Lhe unpald balance pursuanL Lo ArLlcle 1484(3). 1hey are Lhus
precluded from havlng a recourse agalnsL Lhe addlLlonal securlLy puL up
by a guaranLor.

Doctr|ne:

4. Lxtent Cf 1he 8arr|ng Lffect:
All amounLs barred from recovery. Y%P.'M2%& b -./ 0/
\1$3%c1#., GC EF#,/ CCG @:;=>A9

Y%P.'M2%& b -./8 Z'P/ 0/ \1$3%c1#.

Iacts: Macondray sold a ue SoLo car Sedan from LusLaqulo for 393,
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
and for whlch he execuLed a promlssory noLe where he underLook Lo
pay Lhe car ln 12 monLhly lnsLallmenLs, 12 lnLeresL per annum. Pe
morLgaged same car Lo guaranLee hls noLe, he pald Lhe flrsL lnsLallmenL
buL falled Lo pay any of Lhe remalnlng. So plalnLlff broughL an acLlon Lo
obLaln possesslon of Lhe car Anu recover Lhe balance owlng hlm
(lnLeresL, aLLorney's fees, expenses and cosLs).

Issue: WheLher or noL Macondray may sLlll clalm Lhe lnLeresLs and
aLLorney's fees sLlpulaLed

ne|d: nC. 1he 8ecLo law prevenLs Lhe morLgagee from selzlng Lhe
morLgaged properLy, buylng lL aL foreclosure sale and Lhen brlnglng a
sulL agalnsL Lhe morLgagor for a deflclency [udgmenL. 1hls ls Lo close Lhe
door Lo abuses already commlLLed ln connecLlon wlLh Lhe foreclosure of
Lhe chaLLel morLgages when sales were payable ln lnsLallmenLs.
"All amounLs barred from recovery."
"Any unpald balance" refers Lo Lhe deflclency [udgmenL lncludlng
lnLeresL on prlnclpal, aLLorney's fees, expenses of collecLlon, and Lhe
cosLs.

Doctr|ne:

1he orlglnal wordlng of Lhe 8ecLo Law conLalned any unpald
balance" lnsLead of any unpald balance of Lhe prlce." 1he CourL
has lnLerpreLed any unpald balance" Lo lnclude even lnLeresL
on Lhe prlnclpal, aLLorney's fees, expenses of collecLlon, and
oLher cosLs. Y%P.'M%& b -./8 Z'P/ 0/ \1$3%c#./ @GC EF#,/ CCGA
o Lven lf Lhls case ls a 1937 case, lL remalns good law,
desplLe Lhe change ln wordlng ln whaL ls now ArLlcle
1484 of Lhe Clvll Code. 1hls docLrlne was relLeraLed ln
Lhe 1969 case of llllplnas lnvesLmenL & llnance Corp. v.
8ldad, lnfra.

S. ku|e Cn "erverse 8uyer":
Genera| ku|e: 1he LusLaqulo docLrlne bars all amounLs from
recovery ln case Lhe seller-morLgagee forecloses on Lhe chaLLel
morLgage.
o Lxcept|on: When Lhe buyer-morLgagor refuses Lo
surrender Lhe chaLLel Lo allow Lhe seller Lo be able Lo
proceed wlLh foreclosure, Lhe seller ls allowed Lo
recover expenses and aLLorney's fees lncurred ln Lrylng
Lo obLaln possesslon of Lhe chaLLel. N#,#6#'%$ Z'07$3+7'3
b N#'%'P7 -.26/ 0/ <#M%M, =D )-<5 QGC @:;G;A9

N#,#6#'%$ Z'07$3+7'3 b N#'%'P7 -.26/ 0/ <#M%M

Iacts: 1he 8ldad Spouses purchased a lord Consul Sedan from Supreme
Sales and uev'L. Corp. Supreme Sales was Lhe asslgnor-ln-lnLeresL of
llLllnAS lnvesLmenL and llnance. 1he car was worLh 13,371 of whlch
1,160 was pald upon dellvery, and Lhe remalnlng balance Lo be pald ln
24 monLhly lnsLallmenLs. A promlssory noLe and chaLLel morLgage were
execuLed by Lhe 8ldad's Lo ensure fulflllmenL of Lhelr obllgaLlon. 1he
8ldad Spouses falled Lo pay Lhe lasL 3 lnsLallmenLs, whlch prompLed
llllplnas Lo flle a replevln sulL ln Lhe clLy courL of Manlla, or ln Lhe
alLernaLlve, Lo recover Lhe unpald balance lf dellvery could noL be
effecLed. 1he complalnL of llllplnas sLaLed LhaL Lhere was an
un[usLlflable fallure and refusal of Lhe 8ldad Spouses Lo surrender Lhe
car for foreclosure. 1he sherlff was able Lo selze Lhe car and sell lL ln a
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
publlc aucLlon. 1he 8ldad Spouses were declared ln defaulL durlng Lhese
proceedlngs due Lo Lhelr alleged non-recelpL of summons, and Lhe order
of defaulL lncluded an order Lo pay llllplnas 300 for aLLorney's fees and
163 for expenses lncurred ln selzlng Lhe car. 1helr moLlon Lo seL aslde
Lhe order of defaulL was denled by Lhe clLy courL of Manlla, Lhus Lhe
8ldad's appealed Lo Lhe Cll Manlla. 1he Cll sald LhaL Lhe only lssue Lo be
resolved was wlLh regard Lo Lhe aLLy's fees and Lhe expenses lncurred
due Lo Lhe selzure of Lhe car. lL ruled LhaL llllplnas was enLlLled Lo
recover boLh amounLs, for Lhe selzure of Lhe car, and Lhe lowered Lhe
aLLys fees of 300.

Issue: WheLher or noL under ArLlcle 1484 (Lhe 8ecLo Law) lllplnas ls
enLlLled Lo Lhe award for aLLorneys fees and expenses lncurred due Lo
Lhe selzure of Lhe car.

ne|d: ?LS, buL wlLh cerLaln quallflcaLlons. AlLhough Lhe purpose of Lhe
8ecLo law ls Lo proLecL Lhe buyers on lnsLallmenL who were vlcLlmlzed
by sellers who succeeded ln un[usLly enrlchlng Lhemselves aL Lhe
expense of Lhe buyers, Lhe morLgagee (seller) ls also enLlLled proLecLlon
agalnsL L8vL8SL MC81CACC8S. erverse morLgagors are Lhose where
afLer falllng Lo pay 2 or more lnsLallmenLs, refuse Lo dellver chaLLel Lo
Lhe morLgagee or conceals lL ln a place ouLslde Lhe reach of Lhe
morLgagor. Slnce Lhe morLgagee would enforce hls rlghLs Lhrough Lhe
means and wlLhln Lhe llmlLs dellneaLed by law, Lhe nexL sLep ls Lo flle an
acLlon for replevln Lo recover lmmedlaLe possesslon of Lhe chaLLel. ln
Lhls case, Lhe necessary expenses should be borne by Lhe morLgagor.

Doctr|ne:

I. urported Lease W|th Cpt|on 1o 8uy
Some sellers opL Lo maklng conLracLs ln Lhe form of leases wlLh
an opLlon Lo buy for a small conslderaLlon aL Lhe end of Lhe
Lerm. 1hese conLracLs musL be regarded as lnsLallmenL sales,
wlLh Lhe renL paymenLs as Lhe lnsLallmenLs pald. "M%/ U7 d.$7 0/
V%2217P.8 G> EF#,/ :;: @:;=;A
o 1he CourL Look [udlclal noLlce of Lhe pracLlce of vendors
of personal properLy of denomlnaLlng a conLracL of sale
on lnsLallmenL as one of lease Lo prevenL Lhe ownershlp
of Lhe ob[ecL of Lhe sale from passlng Lo Lhe vendee
unLll and unless Lhe prlce ls fully pald. !\,#$P. R..,
Y%'14%P312#'I -.26/ 0/ -58 =D> )-<5 >=: @:;;;A/
:

Where a lease agreemenL over equlpmenL ls wlLhouL an express
opLlon Lo purchase, buL neverLheless when a flnal demand ls
glven prlor Lo sulL, Lhe demand leLLer lndlcaLes clearly lL was
wlLhln Lhe opLlon of Lhe lessee Lo fully pay Lhe balance of Lhe
unpald renLals and would be able Lo keep Lhe equlpmenL, Lhen
Lhe real conLracL beLween Lhe parLles was a sale of movable on
lnsLallmenL dlsgulsed as a lease agreemenL. E-Z L7%$#'I %'M
N#'%'P78 Z'P/ 0/ X#2%447We -27%3#07 Z+%I#'I8 Z'P/, Q9> )-<5 CDQ
@9DD>A/

E-Z L7%$#'I b N#'%'P78 Z'P/ 0/ X#2%447We -27%3#07 Z+%I#'I8 Z'P/

Iacts: Cl Leaslng and Clraffe enLered lnLo a Lease AgreemenL whereby

1
R7"9 7$ D)/$ #9 L"**3$!), 67 hll. 191 (1939), Q9;9 8)''$*!1"0 #9 S"0101, 93 hll.
271 (1933), S9=9 S$"!)!J #9 L"-%"0 B"-3."!%3*1-5, 66 hll. 243 (1938), B"-10"
F"/ 8)*(9 #9 8"03(1%", 66 hll. 747 (1938), M101-#$/% 8*$71% 8)*(9 #9 8?, 178 SC8A
188 (1989).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Cl Leaslng leased several machlnerles for a renL of 116, 878.
21/monLh for 36 monLhs and 181, 362/monLh for 36 monLhs for a LoLal
of 10, 736, 647.36. Clraffe pald Lhe amounL of 3, 120, 000 as guaranLy
deposlL. Powever , afLer 1 year , Clraffe defaulLed ln lLs monLhly-renLal
paymenL obllgaLlons. AfLer a 3-monLh defaulL, Cl demanded a formal
pay-or- surrender-equlpmenL Lype buL Lhe demand wenL unheeded Lhus
Cl lnsLlLuLed Lhe lnsLanL case and prayed for Lhe lssuance for Lhe wrlL
of replevln. 1he Lrlal courL lssued a wrlL of replevln. Clraffe flled a
moLlon Lo dlsmlss argulng LhaL Cl was barred from pursulng any oLher
clalm slnce Lhe selzure of Lhe 2 leased equlpmenLs because Lhe conLracL
was ln reallLy a lease wlLh opLlon Lo buy. 1he 81C granLed Lhe moLlon Lo
dlsmlss rullng LhaL lL was akln Lo a conLracL covered by arL. 1483 hence
can no longer pursue lLs clalm. Pence Lhe case aL bar.

Issue: WheLher or noL Lhe conLracL was covered by ArLlcle 1483 and
1484 hence barred Cl from recoverlng

ne|d: ?LS. 1he 8ecLo Law applles because Lhe conLracL ls acLually a lease
wlLh opLlon Lo buy. lL was noL a sLralghL lease because Lhe peLlLloner
sLands Lo make 13M++ ln a year's Llme ouL of an lnvesLmenL of 8.1M.
1he lnLenLlon of Lhe parLles musL be looked lnLo. Also, Lhe demand
leLLer was fashloned ln Lhe alLernaLlve: paymenL of Lhe unpald full
balance C8 Lhe surrender of Lhe flnanced asseL, suggesLlng LhaL Clraffe
can keep Lhe equlpmenL lf lL exerclses lLs opLlon Lo acqulre Lhe same.
1hls reflecLs a slLuaLlon where a flnanclng company conceals up Lo Lhe
lasL momenL lLs lnLenLlon Lo sell Lhe properLy ln an aLLempL Lo
clrcumvenL Lhe 8ecLo law. Sellers ln Lhls case have resorLed Lo Lhe
devlce of maklng conLracLs ln Lhe form of leases elLher wlLh opLlons Lo
Lhe buyer Lo purchase for a small conslderaLlon aL Lhe end of Lerm,
provlded Lhe so- called renL has been duly pald, or wlLh sLlpulaLlons LhaL
lf Lhe renL LhroughouL Lhe Lerm ls pald, LlLle shall Lhereupon vesL ln Lhe
lessee. lL ls obvlous LhaL such LransacLlons are leases only ln name. ln
chooslng replevln, Cl now walved lLs rlghL Lo brlng an acLlon Lo recover
unpald renLals on Lhe leased lLems. 8emedles under ArLlcle 1484 are
alLernaLlve, noL cumulaLlve.

Doctr|ne:

1. What Is 1he 8arr|ng Lffect Cn Such Contracts?
key quesLlon: When Lhe lessor reLakes possesslon of Lhe ob[ecL
upon non-paymenL, ls Lhls consldered as a foreclosure or a
resclsslon?
o CLv clLes a loL of cases whlch show LhaL Lhe CourL hasn'L
really made a deflnlLlve answer Lo Lhls quesLlon.
Powever, CLv says LhaL Lhe CourL seems Lo LreaL lnsLallmenL
sales of movables whlch are sLrucLured as lease wlLh opLlon Lo
purchase as equlvalenL Lo a chaLLel morLgage execuLed on Lhe
Lhlng lLself.
1herefore, when Lhe purporLed lessor Lakes possesslon of Lhe
sub[ecL maLLer, lL ls LreaLed legally as a foreclosure. 1hus, Lhe
barrlng effecL of foreclosure applles.

IV. MACLDA LAW: Sa|es of kes|dent|a| kea|ty on Insta||ments (k.A. No.
6SS2)
kepub||c Act No. 6SS2 ls known as Lhe 8ealLy lnsLallmenL
8uyer roLecLlon AcL."
o So long as Lhe parLles' sLlpulaLlon do noL conLradlcL Lhe
Maceda Law, Lhen Lhelr sLlpulaLlons would be valld.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
" Lxample: AcceleraLlon Clause
1he conLracL for Lhe purchase of a plece of land on lnsLallmenL
basls ls noL only lawful, lL ls also of wldespread usage or cusLom
ln our economlc sysLem. . . . lf [buyer] evenLually found Lhe
lnLeresL sLlpulaLlon ln Lhe conLracL flnanclally dlsadvanLageous
Lo hlm, he cannoL now Lurn Lo Lhls CourL for succor wlLhouL
lmpalrlng Lhe consLlLuLlonal rlghL Lo Lhe obllgaLlon of conLracLs.
1hls CourL wlll noL relleve peLlLloner of Lhe necessary
consequences of hls free and volunLary, and oLherwlse lawful,
acL." V.23#K7& 0/ 5NE <73#27+7'3 %'M )76%2%3#.' V7'74#3$
)&$37+8 C>> )-<5 Q:: @9DDQA/

A. "ko|e" of Maceda Law
lL declared a publlc pollcy Lo proLecL buyers of real esLaLe on
lnsLallmenL paymenLs agalnsL onerous and oppresslve
condlLlons. (Sect|on 2, k.A. No. 6SS2)
1he courLs have used Lhe Maceda Law as a pollcy sLaLemenL of
Lhe SLaLe ln proLecLlng Lhe lnLeresLs of buyers of resldenLlal real
esLaLe on lnsLallmenLs.
o Maceda Law's declared pollcy ls Lo proLecL buyers of
real esLaLe on lnsLallmenL basls agalnsL onerous and
oppresslve condlLlons, and seeks Lo address Lhe acuLe
houslng shorLage problem ln our counLry LhaL has
prompLed Lhousands of mlddle and lower class buyers
of houses, loLs and condomlnlum unlLs Lo enLer lnLo all
sorLs of conLracLs wlLh prlvaLe houslng developers
lnvolvlng lnsLallmenL schemes. 5P3#07 <7%,3& b U70/
-.26/ U%2.&%8 =?9 )-<5 :Q9 @9DD9A/
1

Maceda Law recognlzes ln condlLlonal sales of all klnds of real
esLaLe seller's rlghL Lo cancel Lhe conLracL upon non-paymenL of
an lnsLallmenL by Lhe buyer, whlch ls slmply an evenL LhaL
prevenLs Lhe obllgaLlon of Lhe vendor Lo convey LlLle from
acqulrlng blndlng force. E%I31,1'%' 0/ U7,% -21_ "M%/ U7
Y%'_%'.8 Q== )-<5 9C9 @9DD?A/
9

AL Llmes, Lhe CourL has also applled Lhe Maceda Law
reLroacLlvely. )#$K% U70/ -.26/ 0/ O44#P7 .4 3F7 E27$#M7'38 9=:
)-<5 G>C @:;;CA/
=

o 8U1 SLL: !E7.6,7f$ Z'M1$32#%, %'M -.++72P#%, -.26/ 0/
-58 9?: )-<5 9DG @:;;>A/
o 1he law lLself does noL expressly provlde for reLroacLlve
appllcaLlon.

8. 1ransact|ons Covered
lL covers prlmarlly resldenLlal real esLaLe boughL on lnsLallmenL.
o 1he sale of large LracLs of land (69,028 square meLers)
do noL consLlLuLe resldenLlal real esLaLe wlLhln Lhe
conLemplaLlon of Lhe Maceda Law. !X%2P#% 0/ -.123 .4
5667%,$8 G:; )-<5 9?D @9D:DA/
lL also covers Lhe flnanclng of real esLaLe on lnsLallmenL.

1
H>4'(1" S)3/1-5 >-!9 #9 I"-"/1"%1! K*"#$0 8)*(9, 393 SC8A 298 (2003), D$/%*"
<$#9 "-7 B"-"5$'$-% 8)*(9 #9 I"!1.1!), 313 SC8A 413 (2007).
2
N$"T) #9 8)3*% ). ?(($"0/, 369 SC8A 36 (2001), 8)*7$*) #9 M9;9 B"-"5$'$-% E
<$#9 8)*(9, 306 SC8A 431 (2006).
3
=35$-1) #9 =2$!3%1#$ ;$!*$%"*4 M*"-J01- B9 <*10)-, 232 SC8A 106 (1996), IUL #9
H..1!$ ). %,$ I*$/17$-%, 232 SC8A 620 (1996).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1he Maceda Law also covers conLracLs Lo sell. 1hls ls evldenced
by Lhe use of Lhe word cancellaLlon" ln Lhe law lLself.
o Maceda Law flnds no appllcaLlon Lo a conLracL Lo sell
where Lhe suspenslve condlLlon has noL been fulfllled,
because sald Law presuppose Lhe exlsLence of a valld
and effecLlve conLracL Lo sell a condomlnlum. [?]
!Y.237, 0/ H5))-O8 Z'P/8 =C? )-<5 =;:8 =;? @9DDDA/
:

Maceda Law makes no dlsLlncLlons beLween opLlon" and sale"
whlch under .u. 937 also lncludes an exchange or aLLempL Lo
sell, an opLlon of sale or purchase, a sollclLaLlon of a sale or an
offer Lo sell dlrecLly," and Lhe all-embraclng deflnlLlon vlrLually
lncludes all LransacLlons concernlng land and houslng
acqulslLlon, lncludlng reservaLlon agreemenLs. !<7%,3&
\!PF%'I7 "7'3127 -.26/ 0/ )7'M#'.8 9== )-<5 GGQ @:;;CA/
1he Maceda Law uses Lhe same deflnlLlon of sale on
lnsLallmenL" as Lhe 8ecLo Law.
lncludes subdlvlslons, condomlnlums and Lhose under .D. 9S7

C. 1ransact|ons Lxc|uded Irom Coverage
1he followlng LransacLlons are excluded from coverage of Lhe
Maceda Law: (CourL of Appeals)
a. Sales coverlng lndusLrlal loLs
b. Sales coverlng commerclal bulldlngs and loLs
c. Sales Lo LenanLs under agrarlan reform laws
noLe: 1hls enumeraLlon ls noL excluslve slnce oLher
LransacLlons lnvolvlng lmmovable - alLhough noL wlLhln Lhe

1
L)/%)- L"-J ). %,$ I,109 #9 B"-"0), 482 SC8A 108 (2006).
llsL - are Lo be consldered as excluded because Lhey are noL
wlLhln Lhe clearly expressed coverage.
1he Maceda Law CannoL be lnvoked by Lhe PlghesL 8ldder ln
loreclosure roceedlngs
o Such person ls noL Lhe real parLy Lo Lhe orlglnal
lnsLallmenL sales.
o Pe does noL have any rlghLs promoLed under Lhe
Maceda Law.
Maceda Law has no appllcaLlon Lo proLecL Lhe developer or one
who succeeds Lhe developer. !L%I%'M%.' 0/ -.123 .4 5667%,$8
9;D )-<5 CG= @:;;?A/

D. Lxerc|se Cf 1he Grace er|od (Sect|on 3)
When Lhe buyer has pald aL leasL 2 years of lnsLallmenL (See
formula Lo compuLe lnsLallmenL mode)

kLU8LIC AC1 NC. 6SS2
Sect|on 3.
In a|| transact|ons or contracts |nvo|v|ng the sa|e or f|nanc|ng of rea|
estate on |nsta||ment payments, |nc|ud|ng res|dent|a| condom|n|um
apartments but exc|ud|ng |ndustr|a| |ots, commerc|a| bu||d|ngs and
sa|es to tenants under kA 3844, as amended by kA 6389, where the
buyer has pa|d at |east two years of |nsta||ments, the buyer |s ent|t|ed
to the fo||ow|ng r|ghts |n case he defau|ts |n the payment of
succeed|ng |nsta||ments:

(a) 1o pay, w|thout add|t|ona| |nterest, the unpa|d |nsta||ments due
w|th|n the tota| grace per|od earned by h|m wh|ch |s hereby f|xed at
the rate of one (1) month grace per|od for every one (1) year of
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
|nsta||ment payments made: rov|ded, 1hat th|s r|ght sha|| be
exerc|sed by the buyer on|y once |n every f|ve (S) years of the ||fe of
the contract and |ts extens|ons, |f any.

(b) If the contract |s cance||ed, the se||er sha|| refund to the buyer the
cash surrender va|ue of the payments on the property equ|va|ent to
f|fty per cent (S0) of the tota| payments made, and, after f|ve (S)
years of |nsta||ments, an add|t|ona| f|ve per cent (S) every year but
not to exceed n|nety per cent (90) of the tota| payments made:
rov|ded, 1hat the actua| cance||at|on of the contract sha|| take p|ace
after th|rty (30) days from rece|pt by the buyer of the not|ce of
cance||at|on or the demand for resc|ss|on of the contract by a notar|a|
act and upon fu|| payment of the cash surrender va|ue to the buyer.

Down payments, depos|ts or opt|ons on the contract sha|| be |nc|uded
|n the computat|on of the tota| number of |nsta||ment payments
made.

Sect|on 4.
In case where |ess than two (2) years of |nsta||ments were pa|d, the
se||er sha|| g|ve the buyer a grace per|od of not |ess than s|xty (60) days
from the date the |nsta||ment became due.

If the buyer fa||s to pay the |nsta||ments due at the exp|rat|on of the
grace per|od, the se||er may cance| the contract after th|rty (30) days
from rece|pt by the buyer of the not|ce of cance||at|on or the demand
for resc|ss|on of the contract by a notar|a| act.

1he rlghL Lo make sure of Lhe grace perlod can be exerclsed by
Lhe buyer only once every flve (3) years of Lhe llfe of Lhe
conLracL and lLs exLenslons, lf any.
lL ls only Lhls grace perlod LhaL cannoL be used when Lhe buyer
defaulLed prlor Lo Lhe 3 years. Powever, Lhe seller musL sLlll
comply wlLh all Lhe requlremenLs for resclsslon.
o Lxample: uebLor defaulLed ln Lhe second year, Lhen
made good wlLh all hls paymenLs. Cn Lhe flfLh year, he
defaulLed agaln. uebLor ls noL enLlLled Lo Lhe grace
perlod, buL ls sLlll enLlLled Lo noLlce by noLarlal acL.
When Lhe buyer has pald less Lhan 2 years of lnsLallmenLs !
SecLlon 4

L. now 1o Determ|ne ears Cf Insta||ments:
1he proper formula Lo apply ln deLermlnlng how many
lnsLallmenLs have been made ls Lo lnclude any paymenL made as
downpaymenL or reservaLlon fee as parL of Lhe lnsLallmenLs
made, and Lhen dlvlde Lhem by Lhe sLlpulaLed mode of
paymenL, l.e., wheLher lL ls monLhly, quarLerly, seml-annual or
annual. d7$32% U70/ %'M Y%'%I7+7'3 -.26/ 0/ E%P#4#P.8 Q:=
)-<5 C:= @9DD>A

d7$32% U70/ YI3/ -.26 0/ E%P#4#P.

Iacts: uanlel aclflco slgned a 8eservaLlon appllcaLlon wlLh lll-LsLaLe
MarkeLlng Assn for Lhe purchase of a house nad loL and pald Lhe
reservaLlon fee. 1he 8eservaLlon appllcaLlon conLalned Lhe amounLs Lo
be pald ln lnsLallmenLs wlLh lnLeresLs. unable Lo comply wlLh Lhe
schedule of paymenLs, aclflco requesLed !esLra Lo allow hlm Lo make
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
perlodlc paymenLs whlch Lhe laLLer granLed. 1hey laLer on execuLed a
conLracL Lo sell when Lhe remalnlng balance was only 260k. aclflco
requesLed Lwlce for a resLrucLurlng of hls unseLLled obllgaLlon whlch
!esLra granLed sub[ecL Lo cerLaln condlLlons of addlLlonal penalLles eL al.
As compllance Lo Lhe condlLlon, aclflco lssued 12 posL- daLed checks
however he ls unable Lo pay so he requesLed LhaL he be allowed Lo
dlspose Lhe properLy Lo recover hls lnLeresL and he could recover Lhe 12
posL daLed checks, whlch was Lhls Llme was denled by !esLra. !esLra Lhen
senL a noLarlal noLlce of cancellaLlon LhaL Lhey are glvlng hlm unLll a
cerLaln daLe Lo pay or else Lhe conLracL wlll be auLomaLlcally cancelled.
aclflco Lhen flled a complalnL before Lhe PLu88 clalmlng LhaL desplLe
hls full paymenL of Lhe downpaymenL, !esLra falled Lo dellver Lo hlm Lhe
properLy and lnsLead sold lL Lo anoLher buyer. P8Lu88 ArblLer declded
ln aclflco's favor flndlng !esLra llable.

Issue: WheLher or noL aclflco has pald aL leasL 2 years of lnsLallmenLs.

ne|d: nC. 1he proper formula Lo apply ln deLermlnlng how many
lnsLallmenLs have been made ls Lo lnclude any paymenL made as down
paymenL C8 reservaLlon fee as parL of Lhe lnsLallmenLs made, and Lhen
Lo dlvlde Lhe sLlpulaLed mode of paymenL (l.e. monLhly, quarLerly,
annually, seml-annually).
1
Slnce afLer applylng Lhls formula, aclflco
falled Lo pay aL leasL 2 years of lnsLallmenLs, he ls noL enLlLled Lo a
refund of Lhe cash surrender value of hls paymenLs. SecLlon 4 ls
appllcable. 1he cancellaLlon ls a 2-sLep process: (1) 1he seller should
exLend Lhe buyer a grace perlod of aL leasL 60 days from Lhe due daLe of
Lhe lnsLallmenL, (2) AL Lhe end of Lhe grace perlod, Lhe seller shall

1
p.419. Sales 8ook.
furnlsh Lhe buyer wlLh a noLlce of cancellaLlon or demand for resclsslon
Lhrough a noLarlal acL, effecLlve 30 days from Lhe buyer's recelpL
Lhereof. uesplLe Lhe noLlce of dlshonor, aclflco Look no acLlon and 60
days had lapsed.

Doctr|ne:

ALLy. SanLlago: lL's Lhe over-all amounL you have pald vls-a-vls
Lhe amounL due. 1hls ls noL necessarlly 2-years of monLhly
lnsLallmenLs

I. now Cance||at|on Cf Contract Can 8e Lffected - 1he cancellaLlon of
Lhe conLracL under Lhe Maceda Law musL follow Lhe followlng sLeps:
1. M1*/%, Lhe seller should exLend Lhe buyer a grace perlod of aL
leasL slxLy (60) days from Lhe due daLe of Lhe lnsLallmenLs.
2. ;$!)-7, aL Lhe end of Lhe grace perlod, Lhe seller shall furnlsh
Lhe buyer wlLh a noLarlal noLlce of cancellaLlon or demand for
resclsslon, effecLlve LhlrLy (30) days from Lhe buyer's recelpL
Lhereof, a mere noLlce or leLLer, shorL of a noLarlal acL, would
noL sufflce. YPL%1IF,#' 0/ -5, :CC )-<5 G;= @:;?GA9
V

3. K,1*7, for conLracLs coverlng more Lhan Lwo years of paymenLs,
Lhere musL be reLurn Lo Lhe buyer of Lhe cash surrender value.
!"#,,M%2%8 d2/ 0/ T%J%,%8 QCQ )-<5 =9Q @9DD?A/
3



2
N3C)- L*)J$*"5$ #9 B"*1%1'$ L0759, 86 SC8A 303 (1978), N3C)- L*)J$*"5$ #9
B"*1%1'$ L0759, 43 SC8A 93 (1972), M"@*15"/ #9 ;"- M*"-!1/!) 7$0 B)-%$, 473
SC8A 247 (2003).
3
?!%1#$ :$"0%4 E <$#9 8)*(9 #9 <"*)4", 382 SC8A 132 (2002), H04'(1" S)3/1-5
#9 I"-"/1"%1! K*"#$0 8)*(96 393 SC8A 298 (2003), D$/%*" <$#9 "-7 B"-"5$'$-%
8)*(9 #9 I"!1.1!), 313 SC8A 413 (2007).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
YPL%1IF,#' 0/ -.123 .4 5667%,$

Iacts: A conLracL of condlLlonal sale payable ln lnsLallmenLs was enLered
lnLo by McLaughlln and llores. uue Lo Lhe laLLer's fallure Lo pay Lhe
balance, a complalnL for resclsslon was flled ln courL. arLles submlLLed
a Compromlse AgreemenL whlch had a sLlpulaLlon LhaL ln case of fallure
Lo comply, McLaughlln ls enLlLled Lo a wrlL of execuLlon resclndlng Lhe
ueed of CondlLlonal Sale of 8eal roperLy and llores walves hls rlghL Lo
appeal. Also, ln case of resclsslon all paymenLs made by llores wlll be
forfelLed ln favor of llores. Cn CcLober 13, 1980, peLlLloner wroLe Lo
llores demandlng paymenL of Lhe balance on or before CcLober 31.

Cn november 7, peLlLloner flled a moLlon for wrlL of execuLlon alleglng
LhaL llores falled Lo pay Lhe lnsLallmenL due on !une 1980 and also
falled Lo pay Lhe monLhly renLals from LhaL daLe. She prayed LhaL Lhe
deed of condlLlonal sale be resclnded wlLh forfelLure of all paymenLs
and paymenL of Lhe monLhly renLals and evlcLlon of llores. 1he Lrlal
courL granLed Lhe moLlon.

Cn november 17, llores flled a moLlon for reconslderaLlon Lenderlng aL
Lhe same Llme a cerLlfled manager's check payable Lo peLlLloner and
coverlng Lhe enLlre obllgaLlon lncludlng Lhe uecember 1980 lnsLallmenL.
1he Lrlal courL denled Lhe moLlon.

Cn appeal, Lhe CA ruled ln favor of llores holdlng LhaL Lhe delay ln
paymenL was noL a vlolaLlon of an essenLlal condlLlon whlch would
warranL a resclsslon slnce Cn november 17 or [usL 17 days from Lhe
CcLober 31 deadllne seL by peLlLloner, llores Lendered Lhe cerLlfled
manager's check and LhaL lL was lnequlLable for llores Lo forfelL all Lhe
paymenLs made (101,330).

Issue: WheLher or noL lL ls lnequlLable Lo cancel Lhe conLracL and Lo
have Lhe amounL pald by llores be forfelLed Lo peLlLloner parLlcularly
afLer llores had Lendered Lhe cerLlfled manager's check ln full paymenL
of Lhe obllgaLlon.

ne|d: ?LS. 1here ls already subsLanLlal compllance by llores wlLh Lhe
compromlse agreemenL. More lmporLanLly, Lhe Maceda law recognlzes
Lhe vendor's rlghL Lo cancel Lhe conLracL Lo sell upon Lhe breach and
nonpaymenL of Lhe sLlpulaLed lnsLallmenLs buL requlres a grace perlod
afLer aL leasL 2 years of regular lnsLallmenL paymenLs.

8uL ln cases where less Lhan 2 years of lnsLallmenLs were pald, Lhe seller
shall glve Lhe buyer a grace perlod of noL less Lhan 60 days from Lhe
daLe Lhe lnsLallmenL became due. lf Lhe buyer falls Lo pay Lhe
lnsLallmenLs due aL Lhe explraLlon of Lhe grace perlod, Lhe seller may
cancel Lhe conLracL afLer 30 days from Lhe recelpL by Lhe buyer of Lhe
noLlce of Lhe cancellaLlon or Lhe demand for resclsslon of Lhe conLracL
by a noLarlal acL. Assumlng LhaL under Lhe Lerms of agreemenL Lhe
uecember 31 lnsLallmenL was due when on CcLober 13 peLlLloner
demanded paymenL of Lhe balance on or before CcLober 31, peLlLloner
could cancel Lhe conLracL afLer 30 days from Lhe recelpL by llores of Lhe
noLlce of cancellaLlon. Conslderlng peLlLloner's moLlon for execuLlon
flled on november 7 as a noLlce of cancellaLlon, peLlLloner could cancel
Lhe conLracL afLer 30 days from Lhe recelpL by llores of sald moLlon.

llores' Lender of paymenL LogeLher wlLh hls moLlon for reconslderaLlon
on november 17 was well wlLhln Lhe 30 day perlod granLed by law. 1he
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lender made by llores of a cerLlfled bank manager's check was a valld
Lender of paymenL. lL covered Lhe full amounL of Lhe obllgaLlon.
Powever, alLhough he had made a valld Lender of paymenL whlch
preserved hls rlghLs as a vendee, he dld noL follow lL wlLh conslgnaLlon
or deposlL of Lhe sum due wlLh Lhe courL. Pence he remalns llable for
Lhe paymenL of hls obllgaLlon because of hls fallure Lo deposlL Lhe
amounL.

Doctr|ne:

1he addlLlonal formallLy of a demand on [Lhe seller's] parL for
resclsslon by noLarlal acL would appear, ln Lhe premlses, Lo be
merely clrculLous and consequenLly superfluous" slnce Lhe seller
Lhereln flled an acLlon for annu|ment of contract, whlch ls a
klndred concepL of resclsslon by noLarlal acL. !L%&1I 0/
Z'372+7M#%37 5667,,%37 -.1238 :G> )-<5 G9> @:;??A/
A declslon rendered ln an e[ecLmenL case operaLed as Lhe
requlred noLlce of cancellaLlon under Lhe Maceda Law, buL as
Lhe buyer was noL glven Lhe cash surrender value of Lhe
paymenLs she made, Lhere was sLlll no acLual cancellaLlon of Lhe
conLracL. !L7%g. 0/ -.123 .4 5667%,$8 =G; )-<5 =G @9DD:A/
A formal leLLer demand upon buyer Lo vacaLe Lhe premlses ls
noL Lhe same as Lhe noLlce of cancellaLlon or demand for
resclsslon by a notar|a| act requlred by 8.A. no. 6332. LvldenLly,
Lhe case of unlawful deLalner flled by peLlLloner does noL
exempL hlm from complylng wlLh Lhe sald requlremenL.
!E%I31,1'%' 0/ U7,% -21_ "M%/ U7 Y%'_%'.8 Q== )-<5 9C9
@9DD?A/
Where Lhe buyers under a conLracL Lo sell offers Lo pay Lhe lasL
lnsLallmenL a year and a half afLer Lhe sLlpulaLed daLe, LhaL was
beyond Lhe slxLy-day grace perlod under SecLlon 4 of Lhe
Maceda Law. 1he buyers cannoL use Lhe second senLence of
SecLlon 4 of Lhe Maceda Law agalnsL Lhe sellers' alleged fallure
Lo glve an effecLlve noLlce of cancellaLlon or demand for
resclsslon because Lhe sellers merely senL Lhe noLlce Lo Lhe
address supplled by Lhe buyers ln Lhe ConLracL Lo Sell. X%2P#% 0/
-.123 .4 5667%,$, G:; )-<5 9?D @9D:DA/

X%2P#% 0/ -.123 .4 5667%,$

Iacts: A conLracL Lo sell was enLered lnLo beLween seller uela Cruz and
Lhe Spouses Carcla and Spouses Calvez, downpaymenL was made, and
Lhe resL was payable ln 3 lnsLallmenLs. 1he lasL lnsLallmenL was noL pald.
ln Lhe conLracL lL sald LhaL fallure Lo comply wlLh Lhe Lerms of paymenL
would cause resclsslon, and possesslon shall be reLalned unLll a deed of
absoluLe sale ls execuLed by Lhe buyers. ueed of AbsoluLe Sale shall be
execuLed upon full paymenL.

Issue: WheLher or noL Lhe Maceda Law applles.

ne|d: nC. Maceda law lnappllcable slnce Lhe sald law applles Lo
conLracLs of real esLaLe on lnsLallmenL paymenLs, example:
condomlnlum. Sub[ecL lands are noL resldenLlal real esLaLe wlLhln Lhe
conLemplaLlon of Lhe Maceda Law. Lven lf lL dld apply, offer of paymenL
was made beyond Lhe 60-day grace perlod

Doctr|ne:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

G. Interpretat|on of Grace er|od and Mode of Cance||at|on
1. 1he ru||ng |n YPL%1IF,#' 0/ -.123 .4 5667%,$8 :CC )-<5 G;=
@:;?GA prov|des for 2 doctr|nes app||cab|e to the Maceda Law:
a. AlLhough Lhe law seem Lo requlre resclsslon and
cancellaLlon Lo be boLh by noLarlal acL, B!N"35,01-
would hold LhaL noLarlal acL as merely appllcable Lo
resclsslon where as noLlce of cancellaLlon" need noL be
by noLarlal acL.
b. B!N"35,01- would hold LhaL even afLer Lhe explraLlon of
Lhe grace perlod provlded by Lhe Law, Lhe buyer sLlll can
prevenL resclsslon or cancellaLlon of Lhe conLracL, wlLhln
Lhe 30-day perlod when resclsslon and cancellaLlon ls Lo
Lake effecL.
o 1hls ls Lhe 30-day grace perlod beLween Lhe explraLlon
of Lhe sLaLuLory grace perlod and Lhe acLual cancellaLlon
of Lhe conLracL. under Lhls perlod, lnLeresL musL already
be pald. Any cancellaLlon wlLhln Lhls 30-day perlod ls
lnvalld.

2. 1he ru||ng |n YPL%1IF,#' 0/ -.123 .4 5667%,$8 :CC )-<5 G;=
@:;?GA prov|des for 2 grace per|ods:
a. 1he 60-day perlod provlded by law before a noLlce of
cancellaLlon ls served Lo Lhe buyer
|. SLaLuLory Crace erlod ! avallmenL of Lhe rlghL
Lo updaLe lnsLallmenL paymenLs ls wlLhouL
lnLeresL and penalLles, even when such are
sLlpulaLed ln Lhe parLles' conLracL.
b. 1he before resclsslon or cancellaLlon acLually Lakes
place.
|. erlod prlor Lo Lhe effecLlvlLy of resclsslon or
cancellaLlon, !urlsprudenLlal grace perlod ! Lhe
buyer would be llable for and would have Lo
lnclude ln hls paymenLs Lhe sLlpulaLed lnLeresLs
and penalLles lncurred.
AcLual cancellaLlon occurs 30 days afLer Lhe noLlce of
cancellaLlon or demand for resclsslon ls recelved by Lhe buyer.
o Powever, lf Lhe seller does noL refund Lhe buyer
pursuanL Lo SecLlon 3(b) of Lhe Maceda Law, resclsslon
or cancellaLlon wlll noL Lake place desplLe Lhe effecLlvlLy
of Lhe noLlce of cancellaLlon. !"#$% '( )%*+, %- .//"#012
=G; )-<5 =G @9DD:A

3. kequ|rements Ior A Va||d And Lffect|ve Cance||at|on Under
1he Maceda Law
a. noLarlal acL of resclsslon (noLlce).
b. 1he seller musL refund Lo Lhe buyer Lhe cash surrender
value of Lhe paymenLs on Lhe properLy.

n. Cther k|ghts Granted to 8uyer (Sect|on S and 6)

Sect|on S.
Under Sect|on 3 and 4, the buyer sha|| have the r|ght to se|| h|s r|ghts
or ass|gn the same to another person or to re|nstate the contract by
updat|ng the account dur|ng the grace per|od and before actua|
cance||at|on of the contract. 1he deed of sa|e or ass|gnment sha|| be
done by notar|a| act.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

When Lhe debLor has made currenL hls paymenL ! Lhe conLracL
cannoL be resclnded.
AsslgnmenL or Selllng ! so long as Lhe conLracL has noL been
cancelled, Lhe debLor may sell or asslgn hls rlghLs. 1he
subsequenL buyer or asslgnee may Lhen Lake over Lhe
paymenLs.

Sect|on 6.
1he buyer sha|| have the r|ght to pay |n advance any |nsta||ment or the
fu|| unpa|d ba|ance of the purchase pr|ce any t|me w|thout |nterest
and to have such fu|| payment of the purchase pr|ce annotated |n the
cert|f|cate of t|t|e cover|ng the property.

o Sect|on 6 render nugaLory all provlslons ln loan agreemenLs
coverlng Lhe flnanclng of resldenLlal real esLaLe and
condomlnlum unlLs whereby any paymenL ahead of Lhe
schedule amorLlzaLlon was meL wlLh a penalLy clause.

I. Lffect Cf Contrary St|pu|at|on

Sect|on 7.
Any st|pu|at|on |n any contract hereafter entered |nto contrary to the
prov|s|ons of Sect|ons 3, 4, S and 6, sha|| be nu|| and vo|d.

I. Maceda Law Cannot 8e Ava||ed Cf 8y Deve|oper
o 1he Maceda Law ls almed aL proLecLlng Lhe buyers of real esLaLe
on lnsLallmenL paymenLs. Cne who buys Lhe developmenL from
Lhe developer and Lhen becomes hls successor-ln-lnLeresL ls noL
covered by Lhe law. L%I%'M%. 0/ -.123 .4 5667%,$8 9;D )-<5
==D @:;;?A

V. Cance||at|on of Iud|c|a| Sa|e
Where a [udlclal sale ls volded wlLhouL faulL of Lhe purchaser,
Lhe laLLer ls enLlLled Lo relmbursemenL of Lhe purchase money
pald by hlm. A [udlclal sale can only be seL aslde upon Lhe reLurn
Lo Lhe buyer of Lhe purchase prlce wlLh slmple lnLeresL, LogeLher
wlLh all sums pald ouL by hlm ln lmprovemenLs lnLroduced on
Lhe properLy, Laxes, and oLher expenses by hlm. )707' V2.3F72$
)F#66#'I -.26/ 0/ -.123 .4 5667%,$8 9CG )-<5 == @:;;QA/

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 11:
kLMLDILS ICk kLSCISSICN AND
CANCLLLA1ICN ICk IMMCVA8LLS:
CCN1kAC1 CI SALL VLkSUS
CCN1kAC1 1C SLLL

I. Nature Cf kemedy Cf kesc|ss|on (!"#$%&'($)) (Art|c|es 1191, 1479,
1S92)

Art|c|e 1191.
1he power to resc|nd ob||gat|ons |s |mp||ed |n rec|proca| ones, |n case
one of the ob||gors shou|d not comp|y w|th what |s |ncumbent upon
h|m.

1he |n[ured party may choose between the fu|f|||ment and the
resc|ss|on of the ob||gat|on, w|th the payment of damages |n e|ther
case. ne may a|so seek resc|ss|on, even after he has chosen fu|f|||ment,
|f the |atter shou|d become |mposs|b|e.

1he court sha|| decree the resc|ss|on c|a|med, un|ess there be [ust
cause author|z|ng the f|x|ng of a per|od.

1h|s |s understood to be w|thout pre[ud|ce to the r|ghts of th|rd
persons who have acqu|red the th|ng, |n accordance w|th art|c|es 138S
and 1388 and the Mortgage Law. (1124)

Art|c|e 1479.
A prom|se to buy and se|| a determ|nate th|ng for a pr|ce certa|n |s
rec|proca||y demandab|e.

An accepted un||atera| prom|se to buy or to se|| a determ|nate th|ng
for a pr|ce certa|n |s b|nd|ng upon the prom|sor |f the prom|se |s
supported by a cons|derat|on d|st|nct from the pr|ce. (14S1a)

Art|c|e 1S92.
In the sa|e of |mmovab|e property, even though |t may have been
st|pu|ated that upon fa||ure to pay the pr|ce at the t|me agreed upon
the resc|ss|on of the contract sha|| of r|ght take p|ace, the vendee may
pay, even after the exp|rat|on of the per|od, as |ong as no demand for
resc|ss|on of the contract has been made upon h|m e|ther [ud|c|a||y or
by a notar|a| act. After the demand, the court may not grant h|m a
new term. (1S04a)

ArLlcle 1191 ls resclsslon grounded on SubsLanLlal 8reach and ls
acLually resoluLlon.

A. D|st|ngu|sh|ng Irom Cther kemedy Cf kesc|ss|on *+)(,"-#.% 0$$1
2$-34 ,4 2$&-' $5 633".%#7 88 92!6 :: ;<=>?@
<
4 A&' #"" B$)'-. 9&-(. ,4
C627 <D< 92!6 EE< ;<=F>@G4


1
"#$%#&'%#( $) *+),&#,'%$+) +- %.# "#/$,$+01 +- %.# 2$&,$) 3'&4 56 7&+/', 333
SC8A 378 (2008), 8#$&1 +- 9)%+)$+ :6 ;#&)'<# 56 *+0&% +- 9==#'/1, 339 SC8A 33
(2008), *+),&#,'%$+) +- %.# "#/$,$+01 +- %.# 2$&,$) 3'&4 56 7&+/', 333 SC8A 378
(2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1. Art|c|e 1191 v. Art|c|e 1383

Art|c|e 1191 Art|c|e 1383
naLure ls acLually a 8esoluLlon naLure ls a subsldlary acLlon
1he premlse ls subsLanLlal
breach of conLracL
remlse ls llmlLed Lo cases under
ArLlcle 1381 (resclsslble conLracLs)
May only be lnsLlLuLed lf Lhe parLy
sufferlng damage has no oLher legal
means Lo obLaln reparaLlon
AcLlon prescrlbes wlLhln 10
years from Lhe Llme Lhe rlghLs
Lo brlng an acLlon accrues
AcLlon prescrlbes wlLhln 4 years from
Lhe Llme Lhe rlghL Lo brlng an acLlon
accrues
1here ls an obllgaLlon Lo reLurn Lhe Lhlngs whlch were Lhe ob[ecL of Lhe
conLracL, LogeLher wlLh Lhe frulLs, and Lhe prlce wlLh lLs lnLeresL, and
LhaL consequenLly, such resclsslon can be carrled ouL only when he who
demands resclsslon can reLurn whaLever he may be obllged Lo resLore.

Whlle ArLlcle 1191 uses Lhe Lerm resclsslon," Lhe orlglnal Lerm
whlch was used ln Lhe old Clvll Code was resoluLlon."
8esoluLlon ls a prlnclpal acLlon whlch ls based on breach of a
parLy, whlle resclsslon under ArLlcle 1383 ls a subsldlary acLlon
llmlLed Lo cases of resclsslon for leslon under ArLlcle 13814
HI)J ,4 2$&-' $5 633".%#7 8<? 92!6 < *<===G4
<


2. Art|c|e 1S92

1
>&$),') 56 *+0&% +- 9==#'/1, 366 SC8A 41 (2001).
ArLlcle 1392 has been consLrued Lo apply Lo all sales of
lmmovables even when Lhere ls no sLlpulaLlon on auLomaLlc
resclsslon, because of Lhe use of Lhe phrase even Lhough."
2


3. Act|on Ior kesc|ss|on Not S|m||ar 1o An Act|on Ior
keconveyance - ln Lhe sale of real properLy, Lhe seller ls noL
precluded from golng Lo Lhe courL Lo demand [udlclal resclsslon
ln lleu of a noLarlal acL of resclsslon. 8uL such acLlon ls dlfferenL
from an acLlon for reconveyance of possesslon on Lhe Lhesls of a
prlor resclsslon of Lhe conLracL coverlng Lhe properLy. 1he
effecLs LhaL flow from an afflrmaLlve [udgmenL ln elLher case
would be maLerlally dlsslmllar ln varlous respecLs: [udlclal
resoluLlon of a conLracL glves rlse Lo muLual resLlLuLlon whlch ls
noL necessarlly Lhe slLuaLlon LhaL arlse ln an acLlon for
reconveyance. ln an acLlon for resclsslon, unllke ln an acLlon for
reconveyance predlcaLed on an exLra[udlclal resclsslon
(resclsslon by noLarlal acL), Lhe courL, lnsLead of decreelng
resclsslon, may auLhorlze for a [usL cause Lhe flxlng of a perlod.
HI%KL3(. M$&#()J ,4 N.).#(.'(B O-.,"% 2$-347 8=D 92!6 :=F
*:??8G.

8. kemedy of "kesc|ss|on" Covered
1. 8as|s Cf kemedy Cf kesc|ss|on, Nature Cf 1he kemedy of
keso|ut|on or keso|ut|on
8esclsslon under ArLlcle 1191 ls predlcaLed on a breach of falLh
by Lhe oLher parLy who vlolaLes Lhe reclproclLy beLween Lhem,
and Lhe breach conLemplaLed ls Lhe obllgor's fallure Lo comply

2
!aclnLo v. kaparaz, 209 SC8A 246 (1992).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
wlLh an exlsLlng obllgaLlon. When Lhe obllgee may seek
resclsslon and, ln Lhe absence of any [usL cause for Lhe courL Lo
deLermlne Lhe perlod of compllance, Lhe courL shall decree Lhe
resclsslon. HP"%.-1" ,4 2$&-' $5 633".%#7 8E< 92!6 DE *:??<G4
<

1o resclnd ls Lo declare a conLracL vold aL lLs lncepLlon and Lo
puL an end Lo lL as Lhough lL never was. lL ls noL merely Lo
LermlnaLe lL and release Lhe parLles from furLher obllgaLlons Lo
each oLher, buL Lo abrogaLe lL from Lhe beglnnlng and resLore
Lhe parLles Lo Lhelr relaLlve poslLlons as lf no conLracL has been
made4 HP"%.-1" ,4 2$&-' $5 633".%#7 8E< 92!6 DE *:??<G4
:

When a parLy asks for Lhe resoluLlon or cancellaLlon of a
conLracL lL ls lmplled LhaL he recognlzes lL exlsLence - a non-
exlsLenL conLracL cannoL be cancelled. HN.) N.B(5(B C)1&#'-(.%
9.%"# 2$47 C)B4 ,4 2$&-' $5 633".%#7 QF: 92!6 <EQ *:??EG4
non-paymenL of Lhe purchase prlce ls a resoluLory condlLlon for
whlch Lhe remedy ls elLher resclsslon or speclflc performance
under ArLlcle 1191. 1hls ls Lrue for reclprocal obllgaLlons where
Lhe obllgaLlon ls a resoluLory condlLlon of Lhe oLher. Cn Lhe
oLher hand, Lhe buyer ls enLlLled Lo reLaln Lhe purchase prlce or
a parL Lhereof lf Lhe seller falls Lo perform any essenLlal
obllgaLlon of Lhe conLracL. Such rlghL ls premlsed on Lhe general
prlnclples of reclprocal obllgaLlon. HR(% ,4 2$&-' $5 633".%#7 Q<<
92!6 <F *:??8G4
8


1
9/?$&' 56 *+0&% +- 9==#'/1, 399 SC8A 331 (2003).
2
7@'?=+ 56 *+0&% +- 9==#'/1A 233 SC8A 331 (1994), *+ 56 *+0&% +- 9==#'/1A 312
SC8A 328 (1999).
3
*#)%&'/ B.$/$==$)# C)$5#&1$%4 56 *+0&% +- 9==#'/1A 246 SC8A 311 (1993), "+?#+
56 *+0&% +- 9==#'/1A 230 SC8A 223 (1993), *.#), 56 D#)'%+A 300 SC8A 722
(1998), C4 56 *+0&% +- 9==#'/1A 314 SC8A 63 (1999).
ConslgnaLlon by Lhe buyer of Lhe purchase prlce of Lhe properLy,
Lhere havlng been no prevlous recelpL of a noLarlal demand for
resclsslon, ls sufflclenL Lo defeaL Lhe rlghL of Lhe seller Lo
demand for a resclsslon of Lhe deed of absoluLe sale. HR(% ,4
2$&-' $5 633".%#7 Q<< 92!6 <F *:??8G4
CredlLors do noL have such maLerlal lnLeresL as Lo allow Lhem Lo
sue for resclsslon of a sale - Lhelrs ls only a personal rlghL Lo
recelve paymenL for Lhe loan, noL a real rlghL over Lhe properLy
sub[ecL of Lhe deed of sale. H61$-.S%" ,4 2$&-' $5 633".%#7 8<=
92!6 :?? *<===G4

2. Ground Ior kesc|ss|on Under Art|c|e 1191: Substant|a| 8reach
1he power Lo resclnd under ArLlcle 1191 ls based only on
subsLanLlal breach, pursuanL Lo Lhe prlnclple lald down ln ArLlcle
1234.
o Lven when Lhere ls subsLanLlal breach as Lo allow Lhe
rlghLful parLy Lo resclnd, and ln facL he does resclnd Lhe
conLracL, lL ls wlLhln Lhe power of Lhe courLs Lo flx a
perlod Lo allow Lhe defaulLlng parLy an opporLunlLy Lo
comply wlLh hls obllgaLlon. 1hls ls especlally so when
Lhe breach consLlLuLes mere negllgence (culpa) as
dlsLlngulshed from fraud or mallce (dolo) whlch ls
deflned as a consclous and lnLenLlonal deslgn Lo evade
Lhe normal fulflllmenL of exlsLlng obllgaLlons."
4


C. Who May Demand kesc|ss|on

4
Luzon 8rokerage Co., lnc. v. MarlLlme 8ulldlng Co., lnc., 43 SC8A 93 (1972).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Slnce resclsslon ls predlcaLed on a breach of falLh by Lhe oLher
parLy LhaL vlolaLes Lhe reclproclLy beLween Lhem, Lhe power Lo
resclnd ls glven only Lo Lhe ln[ured parLy. +K ,4 2$&-' $5
633".%#7 8<Q 92!6 E= *<===G4
8esclsslon can be carrled ouL only when Lhe one who demands
resclsslon can reLurn whaLever he may be obllged Lo resLore.
T.5$-'"U. ,4 V.BW&B.7 888 92!6 EQ8 *:???G4

D. Lxerc|s|ng kesc|ss|on
1. ower 1o kesc|nd Genera||y Iud|c|a| In Nature
ln a Lrue conLracL of sale, a provlslon granLlng Lhe non-
defaulLlng parLy a rlghL Lo resclnd would be superfluous because
such remedy ls lnherenL ln a conLracL of sale under ArLlcle 1191,
consequenLly, Lhe speclflcaLlon ln Lhe conLracL LhaL ln case of
breach, Lhe oLher parLy has a rlghL Lo resclnd does noL generally
confer any addlLlonal rlghL. noneLheless, wheLher express or
lmplled, Lhe remedy of resclsslon ls lnherenLly [udlclal ln naLure.
IB"X$7 N"-"U Y 2$4 ,4 C)'"-).'($).% A.)Z()J 2$-347 8> NW(%4 E8<
*<=<FG[ !"3&S%(B ,4 M$#3('.% 1" 9.) \&.) 1" ]($#7 FQ NW(%4 F:?
*<=Q=G[ ]" %. !.L. 9'".L#W(3 2$4 ,4 O.)7 R4!4 ^$4 F>FQ7 V.K
:<7 <=DE7 == NW(%4 <?8Q +)-"34 *<=DEG4
1he remedy of resclsslon ln reclprocal conLracLs ls noL absoluLe,
slnce Lhe Lhlrd paragraph of ArLlcle 1191 whlch provldes LhaL
Lhe courLs shall decree Lhe resclsslon clalmed, unless Lhere be
[usL cause auLhorlzlng Lhe flxlng of Lhe perlod," has been Lhe
sLaLuLory basls by whlch Lhe CourL has held LhaL Lhe ln[ured
parLy hlmself cannoL resolve Lhe obllgaLlon,
1
and requlres
conflrmaLlon of such remedy by Lhe courLs.
2
ln Lhe case of
lmmovables, Lhe general provlslons of ArLlcle 1191 should glve
way Lo Lhe parLlcular provlslons of ArLlcle 1392 whlch provldes
LhaL when Lhere has been a demand made on Lhe buyer for
resclsslon elLher [udlclally or by a noLarlal acL, Lhe courL may
noL granL hlm a new Lerm."
3

A seller cannoL unllaLerally and exLra[udlclally resclnd a conLracL
of sale where Lhere ls no express sLlpulaLlon auLhorlzlng lL.
unllaLeral resclsslon wlll noL be [udlclally favored or allowed lf
Lhe breach ls noL subsLanLlal and fundamenLal Lo Lhe fulflllmenL
of Lhe obllgaLlon. HA")('$ ,4 9._&('.)`!&(U7 8=Q 92!6 :D?
*:??:G4
Q


2. When Lxtra[ud|c|a| kesc|ss|on A||owed
noneLheless, Lhe law does noL prohlblL Lhe parLles from
enLerlng lnLo agreemenL LhaL vlolaLlon of Lhe Lerms of Lhe
conLracL would cause cancellaLlon Lhereof, even wlLhouL courL

1
1CLLn1lnC, CCMMLn1A8lLS Anu !u8lS8uuLnCL Cn 1PL ClvlL CCuL Cl
1PL PlLllnLS, vol. lv, p. 171 (1973). Angeles v. Calasanz, 133 SC8A 323
(1983).
2
Caboya v. Cul, 38 SC8A 83 (1971), Luzon 8rokerage Co., lnc. v. MarlLlme
8ulldlng Co., lnc., 43 SC8A 93 (1972).
3
Luzon 8rokerage Co., lnc. v. MarlLlme 8ulldlng Co., lnc., 86 SC8A 303 (1978).
4
7@#E+A B#&#F G *+6 56 >)%#&)'%$+)'/ ;')H$), *+&=6 37 hll. 631 (1918), "#=0</$@
56 8+1=$%'/ (# I') J0') (# K$+1A 84 hll. 820 (1949), K# /' "'?' I%#'?1.$= *+6
56 L'), C.8. no. 8784, May 21, 1936, 99 hll. 1034 (unrep.) (1936), 8#$&1 +-
J#101 36 3'1@0M')' 56 *+0&% +- 9==#'/1, 461 SC8A 186 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
lnLervenLlon. H0-$(%.) ,4 N.) I-(")'.% 9W(33()J 2$47 <: 92!6
:>E *<=EQG4
<

o 1here ls noLhlng ln Lhls law whlch prohlblLs Lhe parLles
from enLerlng lnLo an agreemenL LhaL a vlolaLlon of Lhe
Lerms of Lhe conLracL would cause lLs cancellaLlon even
wlLhouL courL lnLervenLlon. 1he raLlonale for Lhe
foregolng ls LhaL ln conLracLs provldlng for auLomaLlc
revocaLlon, [udlclal lnLervenLlon ls necessary noL for
purposes of obLalnlng a [udlclal declaraLlon resclndlng a
conLracL already deemed resclnded by vlrLue of an
agreemenL provldlng for resclsslon wlLhouL [udlclal
lnLervenLlon, buL ln order Lo deLermlne wheLher or noL
Lhe resclsslon was proper. Where such proprleLy ls
susLalned, Lhe declslon of Lhe courL wlll be merely
declaraLory of Lhe revocaLlon, buL lL ls noL ln lLself Lhe
revocaLory acL. N.)J(%().) ,4 2$&-' $5 633".%#7 :>=
92!6 D=? *<==>G4
Lega| consequences when there |s no contractua| c|ause
a||ow|ng extra[ud|c|a| resc|ss|on: ConsequenLly, even lf Lhe rlghL
Lo resclnd ls made avallable Lo Lhe ln[ured parLy, Lhe obllgaLlon
ls noL lpso facLo erased by Lhe fallure of Lhe oLher parLy Lo
comply wlLh whaL ls lncumbenL upon hlm. 1he parLy enLlLled Lo
resclnd should apply Lo Lhe courL for a decree of resclsslon. 1he
rlghL cannoL be exerclsed solely on a parLy's own [udgmenL LhaL
Lhe oLher commlLLed a breach of Lhe obllgaLlon. 1he operaLlve
acL whlch produces Lhe resoluLlon of Lhe conLracL ls Lhe decree
of Lhe courL and noL Lhe mere acL of Lhe vendor. Slnce a [udlclal

1
N0F+) ;&+H#&',# *+6A >)@6 56 3'&$%$?# ;0$/($), *+6A >)@6A 43 SC8A 93 (1972),
N0F+) ;&+H#&',# 56 3'&$%$?# ;/(,6, 86 SC8A 303 (1978).
or noLarlal acL ls requlred by law for a valld resclsslon Lo Lake
place, Lhe leLLer wrlLLen by respondenL declarlng hls lnLenLlon Lo
resclnd dld noL operaLe Lo valldly resclnd Lhe conLracL. C-()J.) ,4
2$&-' $5 633".%#7 8EE 92!6 Q< *:??<G4

3. kesc|ss|on kequ|res os|t|ve Act
8esclsslon ls a remedy LhaL would have no auLomaLlc
appllcaLlon, even when Lhe facLual basls Lherefor (subsLanLlal
breach) be presenL ln Lhe slLuaLlon. 8elng prlmarlly a remedy,
resclsslon requlres a poslLlve acL on Lhe parL of Lhe ln[ured
parLy, slnce lL ls legally posslble LhaL he may walve resclsslon
and proceed wlLh speclflc performance.
o 1hls prlnclple ls afflrmed ln Lhe language of ArLlcle 1392
LhaL does noL allow auLomaLlc resclsslon Lo Lake place
even by sLlpulaLlon, and mandaLes a poslLlve acL of
noLarlal or [udlclal demand on Lhe parL of Lhe unpald
seller.
ln a case lnvolvlng a sale of real properLy, when Lhe buyer falled
Lo pay Lhe sLlpulaLed purchase prlce ln accordance wlLh Lhe
Lerms of Lhe conLracL, buL Lhe seller dld noL glve a noLlce of
resclsslon, and Lhe only noLlce glven Lo Lhe buyer was a demand
Lo vacaLe Lhe premlses, Lhe CourL held LhaL such wrlLLen
demand dld noL amounL Lo a demand for resclsslon under
ArLlcle 1392. 2('K $5 2"S& ,4 M"(-# $5 2.)1(1$ !&S(7 8?E 92!6
Q?F *<===G4

L. Mutua| kest|tut|on And Iorfe|ture (Art|c|e 138S)

Art|c|e 138S.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
kesc|ss|on creates the ob||gat|on to return the th|ngs wh|ch were the
ob[ect of the contract, together w|th the|r fru|ts, and the pr|ce w|th |ts
|nterest, consequent|y, |t can be carr|ed out on|y when he who
demands resc|ss|on can return whatever he may be ob||ged to restore.

Ne|ther sha|| resc|ss|on take p|ace when the th|ngs wh|ch are the
ob[ect of the contract are |ega||y |n the possess|on of th|rd persons
who d|d not act |n bad fa|th.

In th|s case, |ndemn|ty for damages may be demanded from the
person caus|ng the |oss. (129S)

1. kest|tut|on As Consequence Cf kesc|ss|on
1he lasL paragraph ln ArLlcle 1191 cross-refers Lo ArLlcles 1383
and 1388 whlch apply Lo resclsslble conLracLs. 1he prlmary
consequence of an effecLlve exerclse of Lhe remedy of resclsslon
or resoluLlon would be muLual resLlLuLlon.
When sale ls annulled, parLles are governed by ArLlcle 1398
whereunder Lhey shall resLore Lo each oLher Lhe Lhlngs whlch
have been Lhe sub[ecL maLLer of Lhe conLracL, wlLh Lhelr frulLs,
and prlce wlLh lnLeresL. HC)"# ,4 2$&-' $5 633".%#7 :Q> 92!6 8<:
*<==DG4
<

ursuanL Lo ArLlcle 1188, ln a conLracL Lo sell, even lf Lhe buyers
dld noL mlsLakenly make parLlal paymenLs, lnasmuch as Lhe
suspenslve condlLlon was noL fulfllled, lL ls only falr and [usL LhaL
Lhe buyers be allowed Lo recover whaL Lhey had pald ln
expecLancy LhaL Lhe condlLlon would happen, oLherwlse, Lhere

1
2#/'&(# 56 *+0&% +- 9==#'/1, 361 SC8A 36 (2001), 7&(#) 56 90&#', 362 SC8A
660 (2008).
would be un[usL enrlchmenL on Lhe parL of Lhe seller. HA&$' ,4
2$&-' $5 633".%#7 8D> 92!6 FQE *:??<G4

2. When Iorfe|ture Cf ayments A||owed In kesc|ss|on
1he effecL of resLlLuLlon ln Lhe remedy of resclsslon may be
sLlpulaLed agalnsL, and such sLlpulaLlon would be enforceable Lo
Lhe exLenL LhaL lL ls reasonable.
A provlslon ln Lhe conLracL provldlng for forfelLure of Lhe
amounLs pald ln a conLracL of sale ls valld belng ln Lhe naLure of
a penal clause (now governed by ArLlcle 1226) and wlLhln Lhe
amblL of Lhe freedom of Lhe parLles Lo sLlpulaLe ln a conLracL
(now governed by ArLlcle 1306), slnce [l]n lLs double purpose of
lnsurlng compllance wlLh Lhe conLracL and of oLherwlse
measurlng beforehand Lhe damages whlch may resulL from non-
compllance, lL ls noL conLrary Lo law, morals or publlc order
because lL was volunLarlly and knowlngly agreed upon." V.)(%.
!.B()J 2%&S ,4 OW" V.)(%. \$BZ"K 2%&S7 E= NW(%4 DD *<=8=G4
1he seller's rlghL ln a conLracL Lo sell wlLh reserved LlLle Lo
exLra[udlclally cancel Lhe sale upon fallure of Lhe buyer Lo pay
Lhe sLlpulaLed lnsLallmenLs and reLaln Lhe sums and lnsLallmenLs
already recelved has long been recognlzed by Lhe well-
esLabllshed docLrlne of 39 years sLandlng. HN.)J(%().) ,4 2$&-'
$5 633".%#7 :>= 92!6 D=? *<==>G4
:

neverLheless, lL should be noLed LhaL Lhe CourL may sLlll allow
such forfelLure even ln Lhe absence of a forfelLure clause, as a
reasonable compensaLlon for Lhe use of Lhe sub[ecL maLLer of
Lhe conLracL. R$L"U ,4 2$&-' $5 633".%#7 8Q? 92!6 >:? *:???G4

2
L.# 3')$/' "'@$), */0< 56 L.# 3')$/' J+@H#4 */0<, 69 hll. 33 (1939).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

II. D|st|nct|ons 8etween Contract Cf Sa|e And Contract 1o Se||

A. Contract Cf Sa|e P"-#&# Contract 1o Se|| (Art|c|e 14S8) 61"%5.
N-$3"-'("#7 C)B4 ,4 2$&-' $5 633".%#, :Q? 92!6 D>D *<==DG.
1


Art|c|e 14S8.
8y the contract of sa|e one of the contract|ng part|es ob||gates h|mse|f
to transfer the ownersh|p and to de||ver a determ|nate th|ng, and the
other to pay therefor a pr|ce certa|n |n money or |ts equ|va|ent.

A contract of sa|e may be abso|ute or cond|t|ona|. (144Sa)

61"%5. N-$3"-'("#7 C)B4 ,4 2$&-' $5 633".%#

Iacts: !"#$%&" (&)*+*,-!"#$"%&'"( *"+,' -./&%&0 "%' $1&.2 324$1&2#(
!"#$ &'( )"*+'&(", !+*$'$-. /$,$ 01$ ,$2+#0$,$( 3"-!"#$%& !( ) *)%+$,
!" $%&' (& )%* +(,%*- .& /0112 3!*4 %&' 5!6(&%'!7 *!$' Lhelr share
conslsLlng of 1/2 of sald parcel of land, speclflcally Lhe easLern porLlon
Lhereof, Lo Adelfa roperLles. SubsequenLly, a ConflrmaLory
LxLra[udlclal arLlLlon AgreemenL" was execuLed by Lhe !lmenezes,
whereln Lhe easLern porLlon of Lhe sub[ecL loL, was ad[udlcaLed Lo !ose
and uomlnador !lmenez, whlle Lhe wesLern porLlon was allocaLed Lo
8osarlo and Salud !lmenez. 1hereafLer, Adelfa roperLles expressed
lnLeresL ln buylng Lhe wesLern porLlon of Lhe properLy from 8osarlo and
Salud. Accordlngly, ln 1989, an Lxcluslve CpLlon Lo urchase" was

1
I%'6 N0@$' "#'/%4 G K#56A >)@6 26 C4#@$+, 362 SC8A 226 (2008), 2#& "#4#1 56
I'/5'(+&A I&6, 364 SC8A 436 (2008).
execuLed beLween Lhe parLles, wlLh Lhe condlLlon LhaL Lhe selllng prlce
shall be 2.86M, LhaL Lhe opLlon money of 30,000 shall be credlLed as
parLlal paymenL upon Lhe consummaLlon of sale, LhaL Lhe balance ls Lo
be pald on or before 30 november 1989, and LhaL ln case of defaulL by
Adelfa roperLles Lo pay Lhe balance, Lhe opLlon ls cancelled and 30 of
Lhe opLlon money shall be forfelLed and Lhe oLher 30 refunded upon
Lhe sale of Lhe properLy Lo a Lhlrd parLy.

Meanwhlle, a complalnL was flled by Lhe nephews and nleces of 8osarlo
and Salud agalnsL !ose and uomlnador for annulmenL of Lhe deed of
sale ln favor of Pousehold CorporaLlon and recovery of ownershlp of Lhe
properLy. As a consequence, Adelfa roperLles held paymenL of Lhe full
purchase prlce and suggesLed LhaL Lhey seLLle Lhe case wlLh Lhelr
nephews and nleces.

ln 1990, Adelfa roperLles caused Lo be annoLaLed on Lhe 1C1 Lhe
excluslve opLlon Lo purchase. Cn Lhe same day, 8osarlo and Salud
execuLed a ueed of CondlLlonal Sale ln favor of Lmylene Chua over Lhe
same parcel of land for 3M, of whlch 1.3M was pald Lo Lhe former on
sald daLe, wlLh Lhe balance Lo be pald upon Lhe Lransfer of LlLle Lo Lhe
speclfled 1/2 porLlon. ALLy. 8ernardo wroLe 8osarlo and Salud lnformlng
Lhe laLLer LhaL ln vlew of Lhe dlsmlssal of Lhe case agalnsL Lhem, Adelfa
roperLles was wllllng Lo pay Lhe purchase prlce, and he requesLed LhaL
Lhe correspondlng deed of absoluLe sale be execuLed. 1hls was lgnored
by 8osarlo and Salud. !lmenez' counsel senL a leLLer Lo Adelfa roperLles
encloslng Lhereln a check for 23,000.00 represenLlng Lhe refund of 30
of Lhe opLlon money pald under Lhe excluslve opLlon Lo purchase.
8osarlo and Salud Lhen requesLed Adelfa roperLles Lo reLurn Lhe
owner's dupllcaLe copy of Lhe cerLlflcaLe of LlLle of Salud !lmenez. Adelfa
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
roperLles falled Lo surrender Lhe cerLlflcaLe of LlLle.

8osarlo and Salud !lmenez flled a peLlLlon for Lhe annulmenL of conLracL,
whlle Lmylene Chua, Lhe subsequenL purchaser of Lhe loL, flled a
complalnL ln lnLervenLlon. 1he 8eglonal 1rlal CourL ruled ln favor of Lhe
!lmenezes and CourL of Appeals afflrmed.

Issue: WheLher or noL Lhe conLracL beLween Lhe !lmenezes and Adelfa
roperLles ls an opLlon conLracL

ne|d: nC. 1he alleged opLlon conLracL ls a conLracL Lo sell, raLher Lhan a
conLracL of sale. 1he parLles never lnLended Lo Lransfer ownershlp Lo
Adelfa roperLles Lo compleLlon of paymenL of Lhe purchase prlce, Lhls
ls lnferred by Lhe facL LhaL Lhe excluslve opLlon Lo purchase, alLhough lL
provlded for auLomaLlc resclsslon of Lhe conLracL and parLlal forfelLure
of Lhe amounL already pald ln case of defaulL, does noL menLlon LhaL
Adelfa roperLles ls obllged Lo reLurn possesslon or ownershlp of Lhe
properLy as a consequence of non-paymenL. 1here ls no sLlpulaLlon
anenL reverslon or reconveyance of Lhe properLy ln Lhe evenL LhaL
peLlLloner does noL comply wlLh lLs obllgaLlon. WlLh Lhe absence of such
a sLlpulaLlon, lL may legally be lnferred LhaL Lhere was an lmplled
agreemenL LhaL ownershlp shall noL pass Lo Lhe purchaser unLll he had
fully pald Lhe prlce. ArLlcle 1478 of Lhe Clvll Code does noL requlre LhaL
such a sLlpulaLlon be expressly made. ConsequenLly, an lmplled
sLlpulaLlon Lo LhaL effecL ls consldered valld and blndlng and enforceable
beLween Lhe parLles. A conLracL whlch conLalns Lhls klnd of sLlpulaLlon ls
consldered a conLracL Lo sell. Moreover, LhaL Lhe parLles really lnLended
Lo execuLe a conLracL Lo sell ls bolsLered by Lhe facL LhaL Lhe deed of
absoluLe sale would have been lssued only upon Lhe paymenL of Lhe
balance of Lhe purchase prlce, as may be gleaned from Adelfa
roperLles' leLLer daLed 16 Aprll 1990 whereln lL lnformed Lhe vendors
LhaL lL ls now ready and wllllng Lo pay you slmulLaneously wlLh Lhe
execuLlon of Lhe correspondlng deed of absoluLe sale."

Doctr|ne: 1he dlsLlncLlon beLween a conLracL of sale and a conLracL Lo
sell ls lmporLanL for ln conLracL of sale, Lhe LlLle passes Lo Lhe vendee
upon Lhe dellvery of Lhe Lhlng sold, whereas ln a conLracL Lo sell, by
agreemenL Lhe ownershlp ls reserved ln Lhe vendor and ls noL Lo pass
unLll Lhe full paymenL of Lhe prlce. ln a conLracL of sale, Lhe vendor has
losL and cannoL recover ownershlp unLll and unless Lhe conLracL ls
resolved or resclnded, whereas ln a conLracL Lo sell, LlLle ls reLalned by
Lhe vendor unLll Lhe full paymenL of Lhe prlce, such paymenL belng a
poslLlve suspenslve condlLlon and fallure of whlch ls noL a breach buL an
evenL LhaL prevenLs Lhe obllgaLlon of Lhe vendor Lo convey LlLle from
becomlng effecLlve. 1hus, a deed of sale ls consldered absoluLe ln
naLure where Lhere ls nelLher a sLlpulaLlon ln Lhe deed LhaL LlLle Lo Lhe
properLy sold ls reserved ln Lhe seller unLll Lhe full paymenL of Lhe prlce,
nor one glvlng Lhe vendor Lhe rlghL Lo unllaLerally resolve Lhe conLracL
Lhe momenL Lhe buyer falls Lo pay wlLhln a flxed perlod.

ln a conLracL of sale, LlLle Lo Lhe properLy passes Lo buyer upon
Lhe dellvery of Lhe Lhlng sold, ln a conLracL Lo sell, ownershlp ls,
by agreemenL, reserved ln Lhe seller and ls noL Lo pass Lo buyer
unLll full paymenL of purchase prlce. CLherwlse sLaLed, ln a
conLracL of sale, seller loses ownershlp over Lhe properLy and
cannoL recover lL unLll and unless Lhe conLracL ls resolved or
resclnded, whereas ln a conLracL Lo sell, LlLle ls reLalned by Lhe
seller unLll full paymenL of Lhe prlce. ln Lhe laLLer conLracL,
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
paymenL of Lhe prlce ls a poslLlve suspenslve condlLlon, fallure
of whlch ls noL a breach buL an evenL LhaL prevenLs Lhe
obllgaLlon of Lhe vendor Lo convey LlLle from becomlng
effecLlve. H2.#'(%%$ ,4 !"K"#7 D8= 92!6 <=8 *:??>G4
<


1. kat|ona|e Cf Contracts 1o Se||
A conLracL Lo sell ls commonly enLered lnLo so as Lo proLecL Lhe
seller agalnsL a buyer who lnLends Lo buy Lhe properLy ln
lnsLallmenLs by wlLhholdlng ownershlp over Lhe properLy unLll
Lhe buyer effecLs full paymenL Lherefor. lL cannoL be lnferred ln
a slLuaLlon where boLh parLles undersLood Lhe prlce Lo be pald
ln cash4 H2('K $5 2"S& ,4 M"(-# $5 2.)1(1$ !&S(7 8?E 92!6 Q?F
*<===G4
:


2. Is A Contract 1o Se|| A "Sa|e" Under Art|c|e 14S8?
A conLracL Lo sell" as a bllaLeral conLracL whereby Lhe
prospecLlve seller, whlle expressly reservlng Lhe ownershlp of
Lhe sub[ecL properLy desplLe dellvery Lhereof Lo Lhe prospecLlve
buyer, blnds hlmself Lo sell Lhe sald properLy excluslvely Lo Lhe

1
N$? 56 *+0&% +- 9==#'/1, 182 SC8A 364 (1990), ;0+% 56 *+0&% +- 9==#'/1, 337
SC8A 846 (2001), 9<#1'?$1 56 *+0&% +- 9==#'/1, 361 SC8A 328 (2001), L0'F+) 56
D'&$/'+, 362 SC8A 634 (2001), N#'M+ 56 *+0&% +- 9==#'/1A 369 SC8A 36 (2001),
C)$5#&1'/ "+<$)' I0,'& 3$//$), *+&=6 56 8#$&1 +- 9),#/ L#5#1, 389 SC8A 316
(2002), 9/?$&' 56 *+0&% +- 9==#'/1, 399 SC8A 331 (2003), *.0' 56 *+0&% +-
9==#'/1, 401 SC8A 34 (2002), :/')@$' 56 *+0&% +- 9==#'/1, 437 SC8A 224 (2003),
2$('(A I&6 56 L'4'?#), 331 SC8A 147 (2007), 80/1% 56 B" ;0$/(#&1A >)@6, 332 SC8A
74 (2007), 8#$&1 +- 9)%+)$+ :6 ;#&)'<# 56 *+0&% +- 9==#'/1, 339 SC8A 33 (2008),
7&(#) 56 90&#', 362 SC8A 660 (2008), L') 56 ;#)+/$&'+, 604 SC8A36 (2009),
;')H +- B6>6 56 I3BA >)@6, 609 SC8A 134 (2009), K# N#+) 56 7),, 611 SC8A 381
(2010), 3+)%#@'/5+ 56 8#$&1 +- O0,#)$' L6 B&$?#&+, 624 SC8A 373 (2010).
2
3+)%#@'/5+ 56 8#$&1 +- O0,#)$' L6 B&$?#&+, 624 SC8A 373 (2010).
prospecLlve buyer upon fulflllmenL of Lhe condlLlon agreed
upon, LhaL ls, full paymenL of Lhe purchase prlce." 2$-$)"% ,4
2$&-' $5 633".%#, :E8 92!6 <D7 :> *<==EG6
P
A&' #""a N^A ,4
2$&-' $5 633".%#7 :E: 92!6 QEQ *<==EG6

2$-$)"% ,4 2$&-' $5 633".%#

Iacts: ln 1983, Coronel execuLed a documenL enLlLled "8ecelpL of uown
aymenL" ln favor of Alcaraz for 30,000 down paymenL of 1.24M as
purchase prlce for an lnherlLed house and loL promlslng Lo execuLe a
deed of absoluLe sale as soon as lL has been Lransferred ln Lhelr name.
1he balance of 1.19M ls due upon Lhe execuLlon of Lhe deed. When
LlLle Lo Lhe properLy was flnally Lransferred Lo Lhelr names, Lhe Coronels
sold Lhe properLy Lo Mabanag for 1.38M afLer she pald 300k down
paymenL. 8ecause of Lhls, Lhey cancelled and resclnded Lhe conLracL
wlLh Alcaraz by reLurnlng Lhe 30,00 down paymenL

Alcaraz flled a complalnL for speclflc performance agalnsL Lhe Coronels
and cause Lhe annoLaLlon of a noLlce of lls pendens on Lhe 1C1.
Mabanag, on Lhe oLher hand, caused Lhe annoLaLlon of a noLlce of
adverse clalm wlLh Lhe 8u. Powever, Lhe Coronels execuLed a ueed of
AbsoluLe Sale ln favor Mabanag. 81C ruled ln favor of Alcaraz. CA
afflrmed.

Issue: WheLher or noL Lhe recelpL of downpaymenL" serves a conLracL
Lo sell or a condlLlonal conLracL of sale

3
B/'%$)0? B/')1 B.$/6A >)@6 56 *0@0#@+, 488 SC8A 136 (2006), 2'/#)F0#/' 56
Q'/'4'') K#56 ')( >)(01%&$'/ *+&=6, 390 SC8A 380 (2009),L') 56 ;#)+/$&'+, 604
SC8A 36 (2009),
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

ne|d: nC. 1he agreemenL could noL have been a conLracL Lo sell because
Lhe sellers made no express reservaLlon of ownershlp or LlLle Lo Lhe
sub[ecL parcel of land. lurLhermore, Lhe clrcumsLance, whlch prevenLed
Lhe parLles from enLerlng lnLo an absoluLe conLracL of sale, perLalned Lo
Lhe sellers Lhemselves (Lhe cerLlflcaLe of LlLle was noL ln Lhelr names)
and noL Lhe full paymenL of Lhe purchase prlce. under Lhe esLabllshed
facLs and clrcumsLances of Lhe case, had Lhe cerLlflcaLe of LlLle been ln
Lhe names of peLlLloners-sellers aL LhaL Llme, Lhere would have been no
reason why an absoluLe conLracL of sale could noL have been execuLed
and consummaLed rlghL Lhere and Lhen. Moreover, unllke ln a conLracL
Lo sell, peLlLloners dld noL merely promlse Lo sell Lhe properLy Lo prlvaLe
respondenL upon Lhe fulflllmenL of Lhe suspenslve condlLlon. Cn Lhe
conLrary, havlng already agreed Lo sell Lhe sub[ecL properLy, Lhey
underLook Lo have Lhe cerLlflcaLe of LlLle changed Lo Lhelr names and
lmmedlaLely LhereafLer, Lo execuLe Lhe wrlLLen deed of absoluLe sale.
WhaL ls clearly esLabllshed by Lhe plaln language of Lhe sub[ecL
documenL ls LhaL when Lhe sald 8ecelpL of uown aymenL" was
prepared and slgned by peLlLloners, Lhe parLles had agreed Lo a
condlLlonal conLracL of sale, consummaLlon of whlch ls sub[ecL only Lo
Lhe successful Lransfer of Lhe cerLlflcaLe of LlLle from Lhe name of
peLlLloners' faLher Lo Lhelr names. 1he suspenslve condlLlon was fulfllled
on 6 lebruary 1983 and Lhus, Lhe condlLlonal conLracL of sale beLween
Lhe parLles became obllgaLory, Lhe only acL requlred for Lhe
consummaLlon Lhereof belng Lhe dellvery of Lhe properLy by means of
Lhe execuLlon of Lhe deed of absoluLe sale ln a publlc lnsLrumenL, whlch
peLlLloners unequlvocally commlLLed Lhemselves Lo do as evldenced by
Lhe 8ecelpL of uown aymenL."

Doctr|ne: ln a conLracL Lo sell, Lhe prospecLlve seller expllclLly reserves
Lhe Lransfer of LlLle Lo Lhe prospecLlve buyer, meanlng, Lhe prospecLlve
seller does noL as yeL agree or consenL Lo Lransfer ownershlp of Lhe
properLy sub[ecL of Lhe conLracL Lo sell unLll Lhe happenlng of an evenL,
whlch for presenL purposes we shall Lake as Lhe full paymenL of Lhe
purchase prlce. WhaL Lhe seller agrees or obllges hlmself Lo do ls Lo
fulflll hls promlse Lo sell Lhe sub[ecL properLy when Lhe enLlre amounL of
Lhe purchase prlce ls dellvered Lo hlm. ln oLher words, Lhe full paymenL
of Lhe purchase prlce parLakes of a suspenslve condlLlon, Lhe non-
fulflllmenL of whlch prevenLs Lhe obllgaLlon Lo sell from arlslng and Lhus,
ownershlp ls reLalned by Lhe prospecLlve seller wlLhouL furLher
remedles by Lhe prospecLlve buyer... SLaLed poslLlvely, upon Lhe
fulflllmenL of Lhe suspenslve condlLlon whlch ls Lhe full paymenL of Lhe
purchase prlce, Lhe prospecLlve seller's obllgaLlon Lo sell Lhe sub[ecL
properLy by enLerlng lnLo a conLracL of sale wlLh Lhe prospecLlve buyer
becomes demandable as provlded ln ArLlcle 1479 of Lhe Clvll Code.

N^A ,4 2$&-' $5 633".%#

Iacts: n8 owned a parcel of land whlch Lapaz kaw ngo offered Lo buy.

LvenLs under Lhe flrsL leLLer-agreemenL. n8 accepLed Lapaz's offer
sub[ecL Lo cerLaln sLlpulaLlons. 1he lmporLanL ones are Lhe followlng:
1. 1he selllng prlce shall be 3.4mllllon. Lapaz had already pald 100,000
as deposlL.
2. upon fallure Lo pay Lhe addlLlonal deposlL worLh 970,000, Lhe
100,000 shall be forfelLed and n8 shall be auLhorlzed Lo sell Lhe
properLy Lo anoLher.
3. 1he properLy shall be cleared of lLs presenL LenanLs aL Lhe expense of
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lapaz.
4. Sale was sub[ecL Lo oLher Lerms and condlLlons Lo be lmposed.
Lapaz agreed, so she proceeded Lo clear Lhe loL of lLs LenanLs aL her own
expense. Powever, due Lo dlfflculLles ln money, she requesLed for
ad[usLmenL of paymenL proposals, whlch Lhe bank denled. n8 also
remlnded her LhaL she had noL yeL senL her leLLer of conformlLy Lo Lhe
agreemenL reached and Lold her Lo pay Lhe full prlce of 3.4mllllon. lf
noL, Lhe loL wlll be sold Lo oLher parLles. Lapaz requesLed for a reducLlon
of Lhe prlce as Lhe slze of Lhe land was subsLanLlally reduced. n8
agreed. Powever, n8 sLlll dld noL recelve paymenL from Lapaz, and
Lhus gave Lhe laLLer a lasL chance Lo pay Lhe balance of Lhe down
paymenL. lf she falled Lo pay, Lhe sale shall be cancelled and Lhe
100,000 paymenL shall be forfelLed. Lapaz falled Lo pay, so 100,000
was forfelLed and Lhe sale never maLerlallzed. n8 leased Lhe premlses
Lo a cerLaln 8lvera. Lapaz requesLed for a refund of her deposlL ln Lhe
LoLal amounL of 660,000 and asked LhaL Lhe forfelLed 100,000 be
reduced Lo 30,000. n8 agreed.

LvenLs under Lhe second leLLer-agreemenL. Lapaz requesLed for a revlval
of Lhe prevlously approved offer Lo n8. n8 approved. All condlLlons
as ln Lhe flrsL agreemenL were Lhe same, excepL for Lhe purchase prlce
and deposlL. 1he prlce was 3.1mllllon, Lhe deposlL was 200,000. Lapaz
refused, however, Lo conform Lo Lhe condlLlon of vacaLlng Lhe premlses
aL her expense as she had already done so under Lhe flrsL agreemenL.
(She apparenLly consldered Lhls second leLLer-agreemenL as a
conLlnuaLlon of Lhe flrsL so she sald LhaL she was no longer requlred Lo
evlcL Lhe LenanLs as she had already done so.) 8esldes, accordlng Lo her,
Lhe occupanLs of Lhe properLy were LenanLs of n8. n8 refused Lhls
offer . 1o prevenL Lhe forfelLure of her 200,000 deposlL, she slgned Lhe
leLLer-agreemenL. She Lold n8 LhaL she was wllllng Lo pay Lhe
remalnlng deposlL of 800k as long as lL was n8 who would clear Lhe
properLy. n8 refused, and forfelLed Lhe 200,000 of Lapaz. n8
lnformed Lapaz LhaL Lhey had already declded Lo sell Lhe properLy for
noL less Lhan 7M.

Issue: WheLher or noL Lhere was Lhere a perfecLed conLracL of sale
beLween ngo and n8

ne|d: nC. 1he leLLer agreemenLs were ln Lhe naLure of conLracLs Lo sell.
A conLracL Lo sell ls akln Lo a condlLlonal sale where Lhe efflcacy or
obllgaLory force of Lhe vendor's obllgaLlon Lo Lransfer LlLle ls
subordlnaLed Lo Lhe happenlng of a fuLure and uncerLaln evenL so LhaL lf
Lhe suspenslve condlLlon does noL Lake place, Lhe parLles would sLand as
lf Lhe condlLlonal obllgaLlon had never exlsLed. Commonly, Lhe
suspenslve condlLlon Lo Lransfer ownershlp ls full paymenL of Lhe
purchase prlce. ln Lhls case, ngo's obllgaLlon was Lo deposlL an lnlLlal
amounL (100k ln Lhe flrsL agreemenL, 200k ln Lhe 2nd) and Lhen
subsequenLly Lo deposlL an addlLlonal amounL represenLlng 20 of Lhe
purchase prlce (ln boLh agreemenLs). And under boLh leLLer-
agreemenLs, Lhe fallure of Lhe buyer Lo remlL Lhe addlLlonal deposlLs,
deposlLs already glven shall be forfelLed and Lhe bank can sell Lhe
properLy Lo oLhers.

1he fallure Lo remlL Lhe requlred amounLs gave occaslon for n8 Lo
cancel Lhe agreemenL. 1hls speclflc rlghL by n8 ls ln Lhe naLure of a
sLlpulaLlon reservlng LlLle ln Lhe vendor unLll full paymenL of Lhe
purchase prlce or glvlng Lhe vendor Lhe rlghL Lo unllaLerally resclnd Lhe
conLracL Lhe momenL Lhe buyer falls Lo pay wlLhln a flxed perlod. 1he
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
leLLer- agreemenLs were noL deeds of sale, no LlLle passes from seller Lo
buyer under such documenLs. 1he presumpLlon LhaL earnesL money
glven ln a sale LransacLlon ls consldered as parL of Lhe purchase prlce
and ls a proof of a perfecLed conLracL of sale ls rebuLLable. Clearly, Lhe
leLLer-agreemenLs show Lhe lnLenLlon of Lhe parLles Lo enLer lnLo
negoLlaLlons leadlng Lo a conLracL of sale. 1he lnlLlal deposlLs should be
consLrued as parL of Lhe conslderaLlon for n8's promlse Lo reserve
sub[ecL properLy for ngo.

lL should be noLed LhaL Lhere were Lwo separaLe LransacLlons-Lhe flrsL
was uncondlLlonally cancelled and Lhe effecLs Lhereof cannoL be
deemed appllcable Lo Lhe second LransacLlon.

Note: lnLeresLlng enough, 7 days afLer Lhls declslon, Coronel v. CA was
declded. ln LhaL case, Lhe SC sald LhaL ln a conLracL Lo sell, Lhe
happenlng of a suspenslve condlLlon does noL glve rlse Lo an execuLory
conLracL of sale sub[ecL Lo an acLlon for speclflc performance, slnce Lhe
obllgaLlon of Lhe seller ls Lo enLer lnLo a conLracL of sale (an obllgaLlon Lo
do). 8uL ln Lhe case above, Lhe SC sald LhaL Lhe happenlng of a condlLlon
ln a conLracL Lo sell converLs lL Lo a conLracL of sell or aL Lhe mosL an
execuLory sale Lo an execuLed one.

CLv: 1he foregolng rullngs all polnL Lo one Lhlng: LhaL Lhe
Supreme CourL uses Lhe same Lerm conLracL Lo sell" Lo ldenLlfy
Lwo dlfferenL Lypes of condlLlonal conLracLs - one where Lhe
underlylng conLracL embodles bllaLeral-reclprocal real
obllgaLlons Lo glve, buL LhaL Lhe conLracL's efflcacy ls sub[ecLed
Lo a suspenslve condlLlon, and Lhe oLher, where Lhe prlmary
obllgaLlons creaLed ls an obllgaLlon Lo do, l.e., Lo enLer lnLo a
conLracL of sale, sub[ecL Lo fulflllmenL of Lhe obllgaLlon of Lhe
buyer Lo fully pay Lhe purchase prlce. 1he confuslng, use of
Lerms has Lhereby undermlned Lhe [urlsprudenLlal rules
perLalnlng Lo Lhe remedles avallable Lo Lhe parLles.

3. Contract 1o Se|| v. Cond|t|ona| Contract Cf Sa|e: "Cn Where"
the Suspens|ve Cond|t|on Is |nned Determ|nes Nature of a
Sa|e

C|ass|c Contract to Se|| Cond|t|ona| Sa|e
MuLual promlse Lo buy and sell
Clear reservaLlon of ownershlp no reservaLlon of ownershlp
1here ls no Lransfer of ownershlp. 1ransfer of ownershlp ls
condlLloned on Lhe paymenL,
buL even lf Lhe buyer defaulLs,
Lhe ownershlp has already
vesLed ln Lhe buyer.
CondlLlon ls usually full paymenL,
before lnLenL Lo Lransfer ownershlp
would arlse.
lnLenL Lo Lransfer ownershlp ls
clear.
1here musL be a reservaLlon of Lhe
rlghL Lo resclnd (auLomaLlc resclsslon)

uoes noL requlre resclsslon (ln Lheory)
! 1hus Lhe acLlon should be for
reconveyance for properLy.
8equlres [udlclal resclsslon (ln
Lheory)

1he maln lngredlenL of a conLracL Lo sell, whlch lL shares wlLh a
condlLlonal conLracL of sale, ls LhaL lL conLalns clearly a
sLlpulaLlon LhaL musL amounL Lo a suspenslve condlLlon, for noL
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
every modallLy lnLroduced ln a sale conLracL would necessarlly
be a condlLlon.
o 1herefore, boLh a condlLlonal conLracL of sale and a
conLracL Lo sell are sub[ecL Lo a suspenslve condlLlon,
whlch usually Lakes Lhe form of Lhe full paymenL of Lhe
purchase prlce by Lhe buyer. Accordlng Lo a llne of
declslons, Lhe maln lngredlenL ln a conLracL Lo sell ls Lhe
exlsLence of a sLlpulaLlon or agreemenL lmposlng a
suspenslve condlLlon on Lhe effecLlvlLy or demandablllLy
of Lhe conLracL lLself, and noL [usL on Lhe obllgaLlon of
Lhe seller Lo Lransfer and dellver Lhe sub[ecL maLLer, for
ln Lhe laLLer case, lL would amounL Lo a condlLlonal
conLracL of sale.
1o be sure, a conLracL of sale may elLher be absoluLe or
condlLlonal. Cne form of condlLlonal sales ls whaL ls now
popularly Lermed as a ConLracL Lo Sell," where ownershlp or
LlLle ls reLalned unLll Lhe fulflllmenL of a poslLlve suspenslve
condlLlon )+&?'//4 Lhe paymenL of Lhe purchase prlce ln Lhe
manner agreed upon. lor a conLracL, llke a conLracL Lo sell,
lnvolves a meeLlng of mlnds beLween Lwo persons whereby one
blnds hlmself, wlLh respecL Lo Lhe oLher, Lo glve someLhlng or Lo
render some servlce. HR$L"U ,4 2$&-' $5 633".%#7 8Q? 92!6
>:?7 >:F *:???G4
<

o A conLracL Lo sell ls akln Lo a condlLlonal sale, ln whlch
Lhe efflcacy or obllgaLory force of Lhe vendor's
obllgaLlon Lo Lransfer LlLle ls subordlnaLed Lo Lhe
happenlng of a fuLure and uncerLaln evenL, so LhaL lf Lhe

1
K#?'-#/$1 56 *+0&% +- 9==#'/1, 338 SC8A 303 (2007).
suspenslve condlLlon does noL Lake place, Lhe parLles
would sLand as lf Lhe condlLlonal obllgaLlon never
exlsLed. I-1") ,4 6&-".7 DE: 92!6 EE? *:??FG4
:

A perfecLed conLracL of sale (as dlsLlngulshed from a conLracL Lo
sell) may elLher be absoluLe or condlLlonal dependlng on
wheLher Lhe agreemenL ls devold of, or sub[ecL Lo, any condlLlon
on Lhe passlng of LlLle of Lhe Lhlng Lo be conveyed or on Lhe
obllgaLlon of a parLy LhereLo. lL held LhaL Lhe Lerm condlLlon" ln
Lhe conLexL of a perfecLed conLracL of sale perLalns ln reallLy Lo
Lhe compllance by one parLy of an underLaklng Lhe fulflllmenL of
whlch would beckon ln Lurn Lhe demandablllLy of Lhe reclprocal
presLaLlon of Lhe oLher parLy. lL also held LhaL where Lhe so-
called poLesLaLlve condlLlon" ls lmposed noL on Lhe blrLh of Lhe
obllgaLlon buL on lLs fulflllmenL, only Lhe condlLlon ls avolded
leavlng unaffecLed Lhe obllgaLlon lLself. !$L"-$ ,4 2$&-' $5
633".%#7 :D? 92!6 ::8 *<==DG4
o lL dlsLlngulshed beLween one slLuaLlon where Lhe
condlLlon ls lmposed on an obllgaLlon of a parLy whlch ls
noL complled wlLh, Lhe oLher parLy may elLher refuse Lo
proceed or walve sald condlLlon, from Lhe oLher
slLuaLlon where Lhe condlLlon ls lmposed upon Lhe
perfecLlon of Lhe conLracL lLself, Lhe fallure of such
condlLlon would prevenL Lhe [urldlcal relaLlon lLself from
comlng lnLo exlsLence. Slnce under Lhe agreemenL, Lhe
seller was obllged Lo evlcL Lhe squaLLers on Lhe
properLy, Lherefore Lhe e[ecLmenL of Lhe squaLLers was
a condlLlon, Lhe operaLlve acL of whlch seLs lnLo moLlon

2
K# N#+) 56 K# N#+), 393 SC8A 768 (2009).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe perlod of Lhe paymenL of Lhe balance of Lhe
purchase prlce. 1he seller's fallure Lo remove Lhe
squaLLers from Lhe properLy wlLhln Lhe sLlpulaLed
perlod gave Lhe buyer Lhe rlghL Lo elLher refuse Lo
proceed wlLh Lhe agreemenL or walve LhaL condlLlon ln
consonance wlLh ArLlcle 1343 of Lhe Clvll Code. !$L"-$
,4 2$&-' $5 633".%#7 :D? 92!6 ::8 *<==DG4

4. Importance Cf "Locat|ng" 1he Cond|t|on 1o ay r|ce In Iu||
ln a conLracL of sale, Lhe non-paymenL of Lhe prlce ls a
resoluLory condlLlon whlch exLlngulshes Lhe LransacLlon LhaL, for
a Llme exlsLed, and dlscharges Lhe obllgaLlons creaLed
Lhereunder4 HA%.# ,4 6)J"%"#`M&'.%%.7 Q8= 92!6 :>8 *:??QG4
<

Whereas, ln a conLracL Lo sell, Lhe paymenL of Lhe purchase
prlce ls a poslLlve suspenslve condlLlon. 1he vendor's obllgaLlon
Lo convey Lhe LlLle does noL become effecLlve ln case of fallure
Lo pay. HA&$' ,4 2$&-' $5 633".%#7 8D> 92!6 FQE *:??<G4
:

When Lhe obllgaLlon of buyer Lo pay Lhe full amounL of Lhe
purchase prlce was made sub[ecL Lo Lhe condlLlon LhaL Lhe seller
flrsL dellvery Lhe clean LlLle over Lhe parcel bough wlLhln LwenLy
(20) monLhs from Lhe slgnlng of Lhe conLracL, such condlLlon ls
lmposed merely on Lhe performance of Lhe obllgaLlon, as
dlsLlngulshed from a condlLlon lmposed on Lhe perfecLlon of Lhe
conLracL. 1he non-happenlng of Lhe condlLlon merely granLed
Lhe buyer Lhe rlghL Lo resclnd Lhe conLracL or even Lo walve lL

1
2'/#)F0#/' 56 Q'/'4')) K#5#/+=?#)% ')( >)(01%&$'/ *+&=6, 390 SC8A 380
(2009), L&'(#&1 "+4'/ ;')H 56 *0$1+) N0?<#& *+6A >)@6, 388 SC8A 690 (2009).
2
8#$&1 +- I=+01#1 I')(#E'1 56 N$)'A 331 SC8A 183 (2001), R'?+&' "#'/%4 ')(
K#56 *+&= 56 7--$@# +- %.# B&#1$(#)%, 306 SC8A 391 (2006).
and enforce performance on Lhe parL of Lhe seller, all ln
consonance wlLh ArLlcle 1343 of Clvll Code whlch provldes LhaL
Where Lhe obllgaLlon of elLher parLy Lo a conLracL of sale ls
sub[ecL Lo any condlLlon whlch ls noL performed, such parLy may
refuse Lo proceed wlLh Lhe conLracL or he may walve
performance of Lhe condlLlon." A.S.#. ,4 2$&-' $5 633".%#7
:=? 92!6 D8: *<==FG6

A.S.#. ,4 2$&-' $5 633".%#

Iacts: ln 1981, a conLracL of CondlLlonal Sale of 8eglsLered Lands" was
execuLed beLween Lhe spouses vlvenclo and Llena 8abasa as vendors
and 1abangao 8ealLy lnc. (1abangao) as vendee over 3 parcels of land ln
8aLangas. Slnce Lhe cerLlflcaLes of LlLle over Lhe loLs were ln Lhe name of
Lhlrd persons who had already execuLed deeds of reconveyance and
dlsclalmer ln favor of Lhe 8abasas, lL was agreed LhaL Lhe LoLal purchase
prlce of 2,121,920.00 would be pald ln Lhe followlng manner:
300,000.00 upon slgnlng of Lhe conLracL, and 1,821,920.00 upon
presenLaLlon by Lhe 8abasas of Lransfer cerLlflcaLes of LlLles ln Lhelr
name, free from all llens and encumbrances, and dellvery of reglsLerable
documenLs of sale ln favor of 1abangao wlLhln 20 monLhs from Lhe
slgnlng of Lhe conLracL. ln Lhe meanLlme, Lhe reLalned balance of Lhe
purchase prlce would earn lnLeresL aL 17 per annum or 20,648.43
monLhly payable Lo Lhe 8abasas unLll 31 uecember 1982. lL was
expressly sLlpulaLed LhaL 1abangao would have Lhe absoluLe and
uncondlLlonal rlghL Lo Lake lmmedlaLe possesslon of Lhe loLs as well as
lnLroduce any lmprovemenLs Lhereon. Cn 18 May 1981 1abangao leased
Lhe loLs Lo Shell Cas hlllpplnes, lnc. (SPLLL), whlch lmmedlaLely sLarLed
Lhe consLrucLlon Lhereon of a Llquefled eLroleum Cas 1ermlnal ro[ecL,
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
an approved zone exporL enLerprlse of Lhe LxporL rocesslng Zone.
1abangao ls Lhe real esLaLe arm of SPLLL. 1he parLles subsLanLlally
complled wlLh Lhe Lerms of Lhe conLracL. 1abangao pald Lhe flrsL
lnsLallmenL of 300,000.00 Lo Lhe 8abasas whlle Lhe laLLer dellvered
acLual possesslon of Lhe loLs Lo Lhe former . ln addlLlon, 1 abangao pald
379,623.00 Lo Lhe LenanLs of Lhe loLs as dlsLurbance compensaLlon and
as paymenL for exlsLlng crops as well as 334,700.00 Lo Lhe owners of
Lhe houses sLandlng Lhereon ln addlLlon Lo granLlng Lhem resldenLlal
loLs wlLh Lhe LoLal area of 2,800 square meLers. 1abangao llkewlse pald
Lhe sLlpulaLed monLhly lnLeresL for Lhe 20- monLh perlod amounLlng Lo
408,380.80. Meanwhlle, Lhe 8abasas flled Clvll Case 319 and eLlLlon
373 for Lhe Lransfer of LlLles of Lhe loLs ln Lhelr name. Powever, 2 days
prlor Lo Lhe explraLlon of Lhe 20-monLh perlod, speclflcally on 31
uecember 1982, Lhe 8abasas asked 1abangao for an lndeflnlLe
exLenslon wlLhln whlch Lo dellver clean LlLles over Lhe loLs. 1hey asked
LhaL 1abangao conLlnue paylng Lhe monLhly lnLeresL of 20,648.43
sLarLlng !anuary 1983 on Lhe ground LhaL Clvll Case 319 and eLlLlon 373
had noL yeL been resolved wlLh flnallLy ln Lhelr favor. 1abangao refused
Lhe requesL. ln reLallaLlon Lhe 8abasas execuLed a noLarlzed unllaLeral
resclsslon daLed 28 lebruary 1983 Lo whlch 1abangao responded by
remlndlng Lhe 8abasas LhaL Lhey were Lhe ones who dld noL comply
wlLh Lhelr conLracLual obllgaLlon Lo dellver clean LlLles wlLhln Lhe
sLlpulaLed 20-monLh perlod, hence, had no rlghL Lo resclnd Lhelr
conLracL. 1he 8abasas lnslsLed on Lhe unllaLeral resclsslon and
demanded LhaL SPLLL vacaLe Lhe loLs.

Cn 19 !uly 1983 1abangao lnsLlLuLed an acLlon for speclflc performance
wlLh damages ln Lhe 81C 8aLangas ClLy Lo compel Lhe spouses Lo comply
wlLh Lhelr obllgaLlon Lo dellver clean LlLles over Lhe properLles. 1he
8abasas moved Lo dlsmlss Lhe complalnL on Lhe ground LhaL Lhelr
conLracL wlLh 1abangao became null and vold wlLh Lhe explraLlon of Lhe
20-monLh perlod glven Lhem wlLhln whlch Lo dellver clean cerLlflcaLes of
LlLle. SPLLL enLered Lhe dlspuLe as lnLervenor praylng LhaL lLs lease over
Lhe premlses be respecLed by Lhe 8abasas. 81C ruled ln favor of
1abangao and Shell. CA afflrmed.

Issue: WheLher or noL Lhere was a conLracL of absoluLe sale beLween
Lhe 8abasa and 1abagao

ne|d: ?LS. AlLhough denomlnaLed CondlLlonal Sale of 8eglsLered
Lands," Lhe conLracL beLween Lhe spouses and 1abangao ls one of
absoluLe sale. Aslde from Lhe Lerms and sLlpulaLlons used Lhereln
lndlcaLlng such klnd of sale, Lhere ls absoluLely no provlso reservlng LlLle
ln Lhe 8abasas unLll full paymenL of Lhe purchase prlce, nor any
sLlpulaLlon glvlng Lhem Lhe rlghL Lo unllaLerally resclnd Lhe conLracL ln
case of non-paymenL. A deed of sale ls absoluLe ln naLure alLhough
denomlnaLed a condlLlonal sale" absenL such sLlpulaLlons. ln such cases,
ownershlp of Lhe Lhlng sold passes Lo Lhe vendee upon Lhe consLrucLlve
or acLual dellvery Lhereof. ln Lhe lnsLanL case, ownershlp over LoLs
17827-A, 17827-8 and 17827-C passed Lo 1abangao boLh by
consLrucLlve and acLual dellvery. ConsLrucLlve dellvery was
accompllshed upon Lhe execuLlon of Lhe conLracL of 11 Aprll 1981
wlLhouL any reservaLlon of LlLle on Lhe parL of Lhe 8abasas whlle acLual
dellvery was made when 1abangao Look uncondlLlonal possesslon of Lhe
loLs and leased Lhem Lo lLs assoclaLe company SPLLL whlch consLrucLed
lLs mulLl-mllllon peso LC ro[ecL Lhereon.

ln 8omero v. CourL of Appeals and Llm v. CourL of Appeals, Lhe CourL
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
dlsLlngulshed beLween a condlLlon lmposed on Lhe perfecLlon of a
conLracL and a condlLlon lmposed merely on Lhe performance of an
obllgaLlon. Whlle fallure Lo comply wlLh Lhe flrsL condlLlon resulLs ln Lhe
fallure of a conLracL, fallure Lo comply wlLh Lhe second merely glves Lhe
oLher parLy Lhe opLlon Lo elLher refuse Lo proceed wlLh Lhe sale or Lo
walve Lhe condlLlon. ln Lhe presenL case, Lhe spouses' conLracL wlLh
1abangao dld noL lose lLs efflcacy when Lhe 20- monLh perlod sLlpulaLed
Lhereln explred wlLhouL Lhe spouses belng able Lo dellver clean
cerLlflcaLes of LlLle such LhaL 1abangao may no longer demand
performance of Lhelr obllgaLlon.

Doctr|ne:

1he remedy of resclsslon under ArLlcle 1191 of Lhe Clvll Code
cannoL apply Lo mere conLracLs Lo sell-ln a conLracL Lo sell, Lhe
paymenL of Lhe purchase prlce ls a poslLlve suspenslve
condlLlon, and fallure Lo pay Lhe prlce agreed upon ls noL a mere
breach, casual or serlous, buL a slLuaLlon LhaL prevenLs Lhe
obllgaLlon of Lhe vendor Lo convey LlLle from acqulrlng an
obllgaLory force. O.) ,4 A")$%(-.$7 E?Q 92!6 8E *:??=G4
<


S. Necessary St|pu|at|ons In A Contract 1o Se||:
A conLracL ls one of sale, absenL any sLlpulaLlon Lhereln (a)
reservlng LlLle over Lhe properLy Lo Lhe vendee unLll full
paymenL of Lhe purchase prlce,
2
and (b) glvlng Lhe vendor Lhe

1
L&'(#&1 "+4'/ ;')H 56 *0$1+) N0?<#& *+6A >)@6A 388 SC8A 690 (2009), S'<01 56
B'@1+), 603 SC8A 334 (2009).
2
L+='@$+ 56 *+0&% +- 9==#'/1, 211 SC8A 219 (1992), N'-+&%#F' 56 3'@.0@'A 333
SC8A 643 (2000), 9/?$&' 56 *+0&% +- 9==#'/1, 399 SC8A331 (2003).
rlghL Lo unllaLerally resclnd Lhe conLracL ln case of non-
paymenL.
3
P.%1"U ,4 2$&-' $5 633".%#, Q8= 92!6 DD *:??QGT ]"
T"$) ,4 I)J, E<< 92!6 8F< *:?<?G[
U
A+O 9bba ](J)$# ,4 2$&-' $5
633".%#7 <DF 92!6 8>D *<=FFG6

P.%1"U ,4 2$&-' $5 633".%#

Iacts: Carlos valdez Sr. and !oseflna valdez were owners of a parcel of
land. When Carlos Sr. dled, !oseflna subdlvlded Lhe properLy lnLo elghL
loLs. Cn May 1, 1979, she execuLed a speclal power aLLorney,
auLhorlzlng her son Carlos !r, who was a pracLlclng lawyer, Lo sell a
porLlon Lhereof (loLs 3-C and 3-u) Lo !ose Lagon for 80,000. arL of
conslderaLlon was also for Lagon Lo Lransfer Lhe 8ural 8ank of lsulan Lo
Lhe sub[ecL properLy, and Lo consLrucL a commerclal bulldlng beslde Lhe
bank. WlLhouL knowledge of !oseflna, Carlos !r. enLered lnLo a dlfferenL
agreemenL, selllng Lhe properLy for 40/square meLer, and lL was
lndlcaLed ln Lhe deed LhaL Lhe 80,000 had already been pald ln cash. A
downpaymenL of 20,000 was pald by Lhe wlfe of Lagon, Lo whlch
!oseflna lssued a recelpL. Carlos !r. prepared an affldavlL, slgned by
Lagon, Lhe Lransfer of Lhe bank and Lhe consLrucLlon of commerclal
bulldlng as parL of Lhe condlLlon, else Lhe deed of absoluLe sale shall be
null and vold wlLhouL need of demand. Lagon falled Lo comply wlLh Lhe
conslderaLlons sLaLed ln Lhe deed, Lo whlch Lhe valdez refused Lo dellver

3
"+V0# 56 N'=0FA 96 SC8A 741 (1980), 9),#/#1 56 *'/')F, 133 SC8A 323
(1983),9/-+)1+ 56 *+0&% +- 9==#'/1, 186 SC8A 400 (1990)
4
I') 9)(&#1 56 "+(&$,0#FA 332 SC8A 769 (2000), 2('6 K# 3$1%$@' 56 S',0$'%A
418 SC8A 73 (2003), ;/'1 56 9),#/#1W80%'//', 439 SC8A 273 (2004), 2$//'('&A J&6
26 R'<'/', 343 SC8A 323 (2008), 8#$&1 +- 9)%+)$+ :6 ;#&)'<# 56 *+0&% +- 9==#'/1,
339 SC8A 33 (2008), 2#& "#4#1 56 I'/5'(+&A I&6, 364 SC8A 436 (2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe Lorrens LlLle. Lagon had LoL 3-C Lo be subdlvlded lnLo Lhree separaLe
loLs, Lo whlch he pald Lhe professlonal servlces. !oseflna used Lhe
subdlvlslon survey, and sold LoL 3-C-2 Lo Cl8, evldenced by a deed of
absoluLe sale, execLued a real morLgage over LoL 3-C-3 Lo u8, and
execuLed a deed of absoluLe sale ln favor of Carlos !r. over LoL 3-C-1.
She also sold loL 3-u Lo Lngr. 8odolfo uelfln. Lagon flled a complalnL
agalnsL !oseflna and Carlos !r for speclflc performance and damages.
1rlal CourL ruled ln favor of Lagon. CA reversed, buL reversed lLself,
rullng ln favor or Lagon.

Issue: WheLher Lhe agreemenL was a conLracL of sale or conLracL Lo sell,
and wheLher Lhe conLracL was raLlfled.

ne|d: lL ls a conLracL of sale. 1he naLure of Lhe conLracL musL be lnferred
from Lhe express Lerms and agreemenL and from Lhe conLemporaneous
and subsequenL acLs of Lhe parLles LhereLo. When !oseflna, Lhrough her
son acLlng a an aLLorney-ln-facL, execuLed a deed of absoluLe sale ln
favor of Lagon, she dld noL reserve Lhe ownershlp of Lhe properLy,
sub[ecL Lo Lhe compleLlon of paymenL of Lhe conslderaLlon. Powever,
Carlos !r. exceeded hls auLhorlLy when he enLered lnLo a dlfferenL
agreemenL wlLh Lagon, maklng Lhe conLracL unenforceable, unless
raLlfled. ln Lhls case, lL was raLlfled when !oseflna accepLed Lhe
downpaymenL of 20,000 and lssued a recelpL as a consequence of
raLlfylng Lhe conLracL. lL musL be noLed, however, LhaL an affldavlL was
slgned by Lagon as parL of Lhe conslderaLlon, Lo Lransfer Lhe 8ural 8ank
of lsulan as well as consLrucLlng a commerclal bank beslde Lhe bank,
boLh falled Lo perform by Lagon, maklng Lhe deed of absoluLe sale null
and vold. lL cannoL be consldered as an afLerLhoughL conLrlved by Carlos
!r. slnce Lagon admlLLed ln courL Lhe auLhenLlclLy of Lhe affldavlL, and lLs
blndlng effecL agalnsL hlm. 1here was no need Lo resclnd Lhe conLracL
because lL was clearly sLlpulaLed LhaL fallure Lo comply wlLh such
obllgaLlon makes Lhe deed null and vold, Lhough peLlLloners are obllged
Lo refund Lhe respondenL's parLlal paymenL of Lhe sub[ecL properLy.

Doctr|ne:

](J)$# ,4 2$&-' $5 633".%#

Iacts: ulgnos ls Lhe owner of a parcel of land ln Lapu- Lapu ClLy, whlch
Lhey sold Lo !abll for 28,000, payable ln 2 lnsLallmenLs and wlLh an
assumpLlon of lndebLedness wlLh llrsL lnsular 8ank of Cebu for 12,000.
Powever, ulgnos also sold Lhe same land ln favor of Cablgas, who were
uS clLlzens, for 33,000. A ueed of AbsoluLe Sale was execuLed ln favor
of Lhe Cablgas spouses.

!abll flled a sulL agalnsL ulgnos wlLh Cll of Cebu. 81C ruled ln favor of
!abll and declared Lhe sale Lo Cablgas null and vold. Cn appeal, CA
afflrmed 81C declslon wlLh modlflcaLlon.

Issue: WheLher or noL Lhe conLracL beLween ulgnos and !abll ls a
conLracL of sale (as opposed Lo a conLracL Lo sale)

ne|d: ?LS. A deed of sale ls absoluLe ln naLure alLhough denomlnaLed as
a ueed of CondlLlonal Sale" where nowhere ln Lhe conLracL ln quesLlon
ls a provlso or sLlpulaLlon Lo Lhe effecL LhaL LlLle Lo Lhe properLy sold ls
reserved ln Lhe vendor unLll full paymenL of Lhe purchase prlce, nor ls
Lhere a sLlpulaLlon glvlng Lhe vendor Lhe rlghL Lo unllaLerally resclnd Lhe
conLracL Lhe momenL Lhe vendee falls Lo pay wlLhln a flxed perlod. ln
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe presenL case, Lhere ls no sLlpulaLlon reservlng Lhe LlLle of Lhe
properLy on Lhe vendors nor does lL glve Lhem Lhe rlghL Lo unllaLerally
resclnd Lhe conLracL upon non-paymenL of Lhe balance Lhereof wlLhln a
flxed perlod.

Whlle Lhere was no consLrucLlve dellvery of Lhe land sold ln Lhe presenL
case, as sub[ecL ueed of Sale ls a prlvaLe lnsLrumenL, lL ls beyond
quesLlon LhaL Lhere was acLual dellvery Lhereof. As found by Lhe Lrlal
courL, Lhe ulgnos spouses dellvered Lhe possesslon of Lhe land ln
quesLlon Lo !abll as early as 27 March 1963 so LhaL Lhe laLLer
consLrucLed Lhereon Sally's 8each 8esorL also known as !abll's 8each
8esorL ln March, 1963, MacLan WhlLe 8each 8esorL on 13 !anuary 1966
and 8evlrlyn's 8each 8esorL on 1 SepLember 1963. Such facLs were
admlLLed by Lhe ulgnos spouses.

Doctr|ne:

CCN1kCLLING DCC1kINL: AbsenL any sLlpulaLlon ln Lhe deed or
ln Lhe meeLlng of mlnds reservlng LlLle over Lhe properLy Lo Lhe
seller unLll full paymenL of Lhe purchase prlce and glvlng Lhe
seller Lhe rlghL Lo unllaLerally resclnd Lhe conLracL ls case of non-
paymenL, makes Lhe conLracL one of sale raLher Lhan a conLracL
Lo sell.
1


1
1ugaba v. vda. ue Leon, 132 SC8A 722 (1984), ulgnos v. CourL of Appeals, 138
SC8A 373 (1988), 1opaclo v. CourL of Appeals, 211 SC8A 291 (1992), Almlra v.
CourL of Appeals, 399 SC8A 331 (2003), vda. ue MlsLlca v. nagulaL, 418 SC8A
73 (2003), valdez v. CourL of Appeals, 439 SC8A 33 (2004), 8las v. Angeles-
PuLalla, 439 SC8A 273 (2004), orLlc v. CrlsLobal, 436 SC8A 377 (2003).
keservat|on of Cwnersh|p by Se||er: 1he exlsLence or non-
exlsLence of Lhe reservaLlon of ownershlp wlLh seller" clause,
has been a crlLlcal conslderaLlon for Lhe CourL ln deLermlnlng
Lhe naLure of a sale conLracL because lL conslders LhaL Lhe
essence of a Lrue conLracL of sale under ArLlcle 1438 ls Lhe
passlng of ownershlp of Lhe sub[ecL maLLer." 1hus, Lhe CourL
has ofLen ruled LhaL ln a conLracL of sale, ownershlp over Lhe
sub[ecL maLLer generally passes Lo Lhe buyer as a resulL of Lhe
LradlLlon Lhereof, whereas, ln a conLracL Lo sell, Lhe dellvery of
Lhe sub[ecL maLLer does noL pass ownershlp Lo Lhe buyer even
Lhough he possesses Lhe same, under Lhe sLlpulaLlon LhaL
ownershlp shall pass only upon full paymenL of Lhe purchase
prlce,
2
and LhaL Lhe remedles avallable Lo Lhe seller would
depend on Lhls parLlcular polnL.
o lL was enough for Lhe CourL Lo characLerlze Lhe K##( +-
*+)($%$+) I'/# as a conLracL Lo sell" alone by Lhe
reservaLlon of ownershlp. M"(-# $5 6)'$)($ 04 A"-).S"
,4 2$&-' $5 633".%#7 DD= 92!6 D8 *:??FG4
o 1he reservaLlon of LlLle may noL be found ln express
provlslon of Lhe conLracL, buL may also be deLermlned
from proven acLs of Lhe parLles. H9.%.U.- ,4 2$&-' $5
633".%#7 :DF 92!6 8:D *<==EG4
o 1he agreemenL beLween Lhe buyer and seller LhaL Lhe
offer and accepLance was for a bld prlce Lo be pald ln

2
valarao v. CourL of Appeals, 304 SC8A 133 (1999), unlversal 8oblna Sugar
Mllllng Corp. v. Pelrs of Angel 1eves, 389 SC8A 316 (2002), Chua v. CourL of
Appeals, 401 SC8A 34 (2003), uemafells v. CourL of Appeals, 338 SC8A 303
(2007), CasLlllo v. 8eyes, 339 SC8A 193 (2007), vlllador, !r. v. Zaballa, 343 SC8A
323 (2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
cash, noL ln sLaggered paymenLs, Laken LogeLher wlLh
Lhe facL LhaL Lhere was no expressed or apparenL lnLenL
Lo reserve ownershlp over Lhe loL unLll full paymenL was
made, lead Lo no oLher concluslon LhaL Lhe parLles
enLered lnLo a conLracL of sale and noL a conLracL Lo sell.
2('K $5 2"S& ,4 M"(-# $5 2.)1(1$ !&S(7 8?E 92!6 Q?F
*<===G4
o An agreemenL ln whlch ownershlp ls reserved ln Lhe
vendor and ls noL Lo pass Lo Lhe vendee unLll full
paymenL of Lhe purchase prlce ls known as a conLracL Lo
sell. 1he absence of full paymenL suspends Lhe vendors'
obllgaLlon Lo convey LlLle, even lf Lhe sale has already
been reglsLered. 8eglsLraLlon does noL vesL, buL merely
serves as evldence of, LlLle Lo a parLlcular properLy. Cur
land reglsLraLlon laws do noL glve LlLle holders any
beLLer ownershlp Lhan whaL Lhey acLually had prlor Lo
reglsLraLlon. HN$-'(B ,4 2-(#'$S.%7 QDE 92!6 D>> *:??DG4
<

Agreement As 1o Deed Cf Abso|ute Sa|e: ln a number of
declslons, Lhe Supreme CourL has consldered as an lmporLanL
facLor wheLher Lhere ls a sLlpulaLlon or promlse LhaL Lhe seller
shall execuLe a deed of absoluLe sale upon compleLlon of
paymenL of Lhe purchase prlce by Lhe buyer, or wheLher Lhe
agreemenL beLween Lhe parLles ls embodled ln a prlvaLe
documenL. ln oLher words, such slLuaLlons are LreaLed as
equlvalenL Lo reservaLlon of LlLle ln Lhe name of Lhe seller unLll
Lhe buyer shall have compleLed Lhe paymenL of Lhe prlce.

1
9)%+)$+ :6 ;#&)'<# 56 *+0&% +- 9==#'/1, 339 SC8A 33 (2008), ;')H +- B6>6 56
I3BA >)@6, 609 SC8A 134 (2009).
o CCN1kCLLING DCC1kINL: 1he absence of a formal
deed of conveyance ls Laken as a sLrong conslderaLlon
LhaL Lhe underlylng agreemenL ls a conLracL Lo sell, slnce
Lhere ls a sLrong lndlcaLlon LhaL Lhe parLles dld noL
lnLend Lo lmmedlaLely Lransfer LlLle, buL only a Lransfer
afLer full paymenL of Lhe prlce.
2

o 1he absence of a formal deed of conveyance [or a
sLlpulaLlon Lo execuLe Lhe deed of sale only full paymenL
of Lhe purchase prlce] ls a sLrong lndlcaLlon LhaL Lhe
parLles dld noL lnLend lmmedlaLe Lransfer of ownershlp,
buL only a Lransfer afLer full paymenL of Lhe purchase
prlce,
3
and Lhe seller reLalned possesslon of Lhe
cerLlflcaLe of Llle and all oLher documenLs relaLlve Lo Lhe
sale unLll Lhere was full paymenL of Lhe purchase prlce4
H2W&. ,4 2$&-' $5 633".%#7 Q?< 92!6 DQ *:??8G4
keservat|on Cf k|ght 1o Lxtra[ud|c|a||y kesc|nd In Lvent Cf
Non-Iu|f|||ment Cf Cond|t|on:

CCN1kAC1 1C SLLL CCN1kAC1 CI SALL
ln a conLracL Lo sell, where Lhe suspenslve
condlLlon has noL been fulfllled, no furLher
remedy ls necessary slnce lpso [ure Lhe conLracL
ln a conLracL of sale,
Lhe non-fulflllmenL of
Lhe condlLlon would

2
Manuel v. 8odrlguez, 109 hll. 1 (1960), 8oque v. Lapuz, 96 SC8A 741 (1980),
Alfonso v. CourL of Appeals, 186 SC8A 400 (1990), Lacanllao v. CourL of Appeals,
262 SC8A 486 (1996), uavld v. 1longson, 313 SC8A 63 (1999), 8ayos v. CourL of
Appeals, 434 SC8A 363 (2004), Cruz v. lernando, 477 SC8A 173 (2003).
3
;+X# 56 *+0&% +- 9==#'/1, 220 SC8A 138 (1993), "'4+1 56 *+0&% +- 9==#'/1, 434
SC8A 363 (2004), I+/$(1%'%# 30/%$WB&+(0@%1 *+&=6 56 *'%$#)F'W2$//'5#&(#, 339
SC8A 197 (2008), L') 56 ;#)+/$&'+, 604 SC8A 36 (2009), S'<01 56 B'@1+), 603
SC8A 334 (2009).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
would have already been exLlngulshed by non-
happenlng of Lhe condlLlon. Powever, lf Lhere
has been prevlous dellvery of Lhe sub[ecL
maLLer Lo Lhe buyer, alLhough seller has by
reservaLlon reLalned ownershlp over Lhe
sub[ecL maLLer, slnce Lhe seller sLlll cannoL Lake
Lhe law lnLo hls own hands, Lhe seller would
sLlll have Lo seek courL acLlon Lo recover
possesslon from Lhe buyer lf Lhe laLLer refuses
Lo volunLarlly reLurn Lhe sub[ecL maLLer.
Powever, such acLlon ls noL for resclsslon buL
acLually merely a recovery of possesslon.
auLhorlze Lhe seller Lo
resclnd Lhe conLracL
or Lo walve Lhe
condlLlon and seek
enforcemenL of Lhe
conLracL, ln
accordance wlLh
ArLlcle 1343 of Lhe
Clvll Code.
ln a conLracL Lo sell, by express agreemenL,
dellvery of Lhe sub[ecL maLLer does noL Lransfer
ownershlp Lo Lhe buyer, and Lherefore when
Lhe condlLlon ls noL fulfllled (l.e., non-paymenL
of Lhe purchase prlce) no courL lnLervenLlon ls
needed Lo resclnd" Lhe conLracL slnce
ownershlp has remalned wlLh Lhe seller. lf
courL lnLervenLlon ls necessary, lL ls noL for Lhe
resclsslon of Lhe conLracL, buL for Lhe recovery
of Lhe possesslon from Lhe buyer who ls noL
enLlLled LhereLo, and refuses Lo volunLarlly
reLurn Lhe sub[ecL maLLer of Lhe sale.

ln a conLracL of sale,
dellvery would
Lransfer ownershlp Lo
Lhe buyer, and
Lherefore resclsslon
musL necessarlly be
done [udlclally slnce
only Lhe courLs can
granL Lhe remedy of
recalllng ownershlp
LhaL has passed Lo Lhe
buyer and reverLlng lL
Lo Lhe seller.

CLv: ln some cases, Lhere ls an lmpllcaLlon LhaL a conLracL of
sale ls one LhaL ls perfecLed because Lhe parLles have agreed on
Lhe Lhree (3) elemenLs Lo consLlLuLe a valld sale: sub[ecL maLLer
and Lhe prlce and lLs mode of paymenL, whereas, a conLracL Lo
sell ls noL a perfecLed conLracL. Such lmpllcaLlon ls mlsleadlng,
for boLh a conLracL of sale and a conLracL Lo sell are perfecLed
conLracLs, alLhough Lhe flrsL ls blndlng and demandable, Lhe
laLLer ls blndlng buL wlLh obllgaLlons sub[ecL Lo suspenslve
condlLlons. And [usL because earnesL money has been glven,
does noL deLermlne wheLher lL ls a conLracL of sale or a conLracL
Lo sell, for lndeed even ln a conLracL Lo sell a subsLanLlal porLlon
of Lhe purchase prlce may have been pald, buL LhaL alone does
noL converL lL lnLo a conLracL of sale.

6. Issue Cf Substant|a| 8reach (Art|c|es 1191 And 1234)

Art|c|e 1234.
If the ob||gat|on has been substant|a||y performed |n good fa|th, the
ob||gor may recover as though there had been a str|ct and comp|ete
fu|f|||ment, |ess damages suffered by the ob||gee. (n)

1he concepL of subsLanLlal breach ls lrrelevanL Lo a conLracL of
sale. HT&U$) A-$Z"-.J" 2$47 C)B4 ,4 V.-('(L" A&(%1()J 2$47 C)B47
Q8 92!6 =8 *<=>:G4
<

ln a conLracL Lo sell real properLy on lnsLallmenLs, Lhe full
paymenL of Lhe purchase prlce ls a poslLlve condlLlon, Lhe fallure
of whlch ls noL consldered a breach, casual or serlous, buL
slmply an evenL LhaL prevenLed Lhe obllgaLlon of Lhe vendor Lo
convey LlLle from acqulrlng any obllgaLory force. 1he Lransfer of

1
I$1H' K#56 *+&=6 56 7--$@# +- %.# B&#1$(#)%, 231 SC8A 674 (1994), I%'6 N0@$'
"#'/%4 G K#56A >)@6 56 C4#@$+, 362 SC8A 226 (2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
ownershlp and LlLle would occur afLer full paymenL of Lhe prlce.
HT".c$ ,4 2$&-' $5 633".%#7 8E= 92!6 8E *:??<G4
<


8. Cance||at|on Cf Contract 1o Se||
1. kemedy Cf kesc|ss|on Under Art|c|es 1191 And 1S92 nave No
App||cat|on 1o Contracts 1o Se||
ArLlcles 1191 and 1392, whlch requlre resclsslon elLher by
[udlclal acLlon, or noLarlal acL, do noL apply Lo conLracLs Lo sell.
2

Llkewlse, Lhe remedy of resclsslon under ArLlcles 1380 eL seq.
have no appllcaLlon Lo a conLracL Lo sell, noL belng lncluded
wlLhln Lhe enumeraLed conLracLs Lhereln, nor ls leslon or
damage Lhe basls upon whlch remedy can be soughL under a
conLracL Lo sell.
3

o 1he reasonlng ls Lo Lhe effecL LhaL slnce a conLracL Lo
sell ls consLlLuLed by a suspenslve condlLlon on Lhe full
paymenL of Lhe prlce, Lhe non-paymenL of Lhe prlce
would auLomaLlcally, even wlLhouL Lhe need of furLher
acLlon nor of Lhe remedy of resclsslon, exLlngulsh Lhe
conLracL. V.)&"% ,4 !$1-(J&"U7 <?= NW(%4 < *<=E?G4

2. M|n|mum kequ|rement Ior Cance||at|on Cf Contract 1o Se||,
Iorma| Not|ce kequ|red to Cance| Contracts to Se||
1he acL of a parLy ln LreaLlng a conLracL as cancelled should be
made known Lo Lhe oLher parLy because Lhls acL ls sub[ecL Lo

1
3')0#/ 56 "+(&$,0#F, 109 hll. 1 (1960), N'-+&%#F' 56 3'@.0@'A 333 SC8A 643
(2000), 2$//'?'&$'A J&6 56 *+0&% +- 9==#'/1, 487 SC8A 371 (2006).
2
anglllnan v. CourL of Appeals, 279 SC8A 390 (1997), valarao v. CourL of
Appeals, 304 SC8A 133 (1999), adllla v. Spouses aredes, 328 SC8A 434
(2000), Comez v. CourL of Appeals, 340 SC8A 720 (2000).
3
Cng v. CourL of Appeals, 310 SC8A 1 (1999).
scruLlny and revlew of Lhe courLs ln case Lhe alleged defaulLer
brlng Lhe maLLer for [udlclal deLermlnaLlon. +)(,"-#('K $5 'W"
NW(%(33()"# ,4 ]" %$# 6)J"%"#7 8D 92!6 <?8 *<=>?G[ N.%.K C)B4 ,4
2%.,"7 <:Q 92!6 E8F *<=F8G4
Q


+)(,"-#('K $5 'W" NW(%(33()"# ,4 ]" %$# 6)J"%"#

Iacts: u was glven a land granL whlch shall be developed Lo obLaln
addlLlonal lncome for lLs supporL. u and ALuMCC enLered lnLo a
logglng agreemenL where ALuMCC was granLed Lhe excluslve auLhorlLy
for an exLendlble perlod of 3 years (by muLual agreemenL), Lo cuL and
remove Llmber from Lhe land granL lnconslderaLlon of royalLles and fees
Lo be pald Lo u. ALuMCC lncurred an unpald amounL of 219,363. u
demanded paymenL buL lL falled Lo pay. ALuMCC recelved a leLLer LhaL
u would resclnd or LermlnaLe Lhelr logglng agreemenL. 1hey execuLed
an lnsLrumenL AcknowledgemenL of uebL & roposed Manner of
aymenL" whlch Lhe u resldenL approved. ALuMCC agreed Lo glve
Lhelr credlLor (u) Lhe rlghL Lo conslder Lhe logglng agreemenL as
resclnded wlLhouL necesslLy of any [udlclal sulL and credlLor wlll be
enLlLled Lo 30,000 for llquldaLed damages. ALuMCC conLlnued logglng
buL sLlll lncurred unpald accounLs. u Lhen lnformed Lhem LhaL as of
LhaL daLe, Lhey consldered resclnded Lhe agreemenL and of no furLher
legal effecL. u Lhen flled for collecLlon of Lhe unpald accounLs and Lhe
Lrlal courL gave Lhem prellmlnary ln[uncLlon Lo prevenL ALuMCC from
conLlnulng Lhelr logglng. 1hrough a publlc blddlng, Lhe concesslon was
awarded Lo SLa. Clara Lumber Company and a new agreemenL was
enLered lnLo beLween Lhem and u. ALuMCC Lrled Lo en[oln Lhe blddlng

4
J$1+) 56 *9, 164 SC8A 339 (1988), N$? 56 *9, 182 SC8A 364 (1990), *.#), 56
D#)'%+, 300 SC8A 722 (1998).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
buL Lhe conLracL was already concluded and SLa. Clara sLarLed lLs
operaLlon. upon moLlon by ALuMCC, u was declared ln conLempL of
courL for vlolaLlng Lhe wrlL of ln[uncLlon agalnsL Lhem. ALuMCC's
conLenLlons are Lhe followlng:
a. lL blamed lLs former general manager for Lhelr fallure Lo pay Lhelr
accounL.
b. Logs cuL were roLLen, Lhus, Lhey were unable Lo sell Lhem.
c. u's unllaLeral resclsslon was lnvalld wlLhouL a courL order.

Issue: WheLher or noL u can valldly resclnd lLs agreemenL wlLh
ALuMCC even wlLhouL courL order.

ne|d: ?LS. u can unllaLerally resclnd Lhe agreemenL. u and ALuMCC
expressly sLlpulaLed ln Lhelr AcknowledgemenL of uebL" LhaL upon
defaulL of paymenL, credlLor u has Lhe rlghL and power Lo resclnd Lhelr
Logglng AgreemenL wlLhouL Lhe necesslLy of a [udlclal sulL. 1here ls
noLhlng ln Lhe law LhaL prohlblLs Lhe parLles from enLerlng lnLo
agreemenLs LhaL vlolaLlon of Lerms of Lhe conLracL would cause lLs
cancellaLlon even wlLhouL courL lnLervenLlon. AcL of a parLy ln LreaLlng a
conLracL as cancelled on accounL of any lnfracLlon by Lhe oLher parLy
musL be made known Lo Lhe oLher and ls always provlslonal, belng
sub[ecL Lo scruLlny and revlew by Lhe proper courL. lf Lhe oLher parLy
deems Lhe resclsslon un[usLlfled, he free Lo resorL Lo [udlclal acLlon. 1he
courL shall, afLer due hearlng, declde lf Lhe resclsslon was proper, ln
whlch case lL wlll be afflrmed and lf noL proper, Lhe responslble parLy
wlll be llable for damages. A parLy who deems Lhe conLracL vlolaLed may
conslder lL resclnded and acL accordlngly, even wlLhouL courL acLlon buL
lL proceeds aL lLs own rlsk. Cnly Lhe flnal [udgmenL of Lhe courL wlll
concluslvely seLLle wheLher Lhe acLlon Laken was proper or noL. 8uL Lhe
law does noL prohlblL Lhe parLles from exerclslng due dlllgence Lo
mlnlmlze Lhelr own damages. u was able Lo show a prlma facle case of
breach of conLracL and defaulL ln paymenL by ALuMCC. Lxcuses by
ALuMCC are noL proper for Lhem Lo suspend Lhelr paymenLs. 1hus, Lhe
Supreme CourL llfLed Lhe ln[uncLlon

Doctr|ne: Cf course, lL musL be undersLood LhaL Lhe acL of a parLy ln
LreaLlng a conLracL as cancelled or resolved on accounL of lnfracLlons by
Lhe oLher conLracLlng parLy musL be made known Lo Lhe oLher and ls
always provlslonal, belng ever sub[ecL Lo scruLlny and revlew by Lhe
proper courL. lf Lhe oLher parLy denles Lhe resclsslon ls [usLlfled, lL ls free
Lo resorL Lo [udlclal acLlon ln lLs own behalf, and brlng Lhe maLLer Lo
courL. 1hen, should Lhe courL, afLer due hearlng, declde LhaL Lhe
resoluLlon of Lhe conLracL was noL warranLed, Lhe responslble parLy wlll
be senLenced Lo damages, ln Lhe conLrary case, Lhe resoluLlon wlll be
afflrmed, and Lhe consequenL lndemnlLy awarded Lo Lhe parLy
pre[udlced. ln oLher words, Lhe parLy who deems Lhe conLracL vlolaLed
may conslder lL resolved or resclnded, and acL accordlngly, wlLhouL
prevlous courL acLlon, buL lL proceeds aL lLs own rlsk. lor lL ls only Lhe
flnal [udgmenL of Lhe correspondlng courL LhaL wlll concluslvely and
flnally seLLle wheLher Lhe acLlon Laken was or was noL correcL ln law. 8uL
Lhe law deflnlLely does noL requlre LhaL Lhe conLracLlng parLy who
belleves lLself ln[ured musL flrsL flle sulL and walL for a [udgmenL before
Laklng exLra[udlclal sLeps Lo proLecL lLs lnLeresL. CLherwlse, Lhe parLy
ln[ured by Lhe oLher's breach wlll have Lo passlvely slL and waLch lLs
damages accumulaLe durlng Lhe pendency of Lhe sulL unLll Lhe flnal
[udgmenL of resclsslon ls rendered when Lhe law lLself requlres LhaL he
should exerclse due dlllgence Lo mlnlmlze lLs own damages.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
N.%.K C)B4 ,4 2%.,"

Iacts: ln 1963, alay lnc., Lhrough lLs resldenL CnsLoLL, execuLed ln
favor of uumplL (respondenL) a ConLracL Lo Sell a parcel of land ln
AnLlpolo, 8lzal. 1he sale was for 23,300 wlLh 9 lnLeresL p.a., payable
wlLh a downpaymenL of 4,660 and monLhly lnsLallmenLs of leasL, Lhere
was a wrlLLen noLlce senL Lo Lhe defaulLer lnformlng hlm of Lhe
resclsslon. ar. 6 cannoL be consldered a walver of uumplL's rlghL Lo be
noLlfled because lL was a conLracL of adheslon. A walver musL be cerLaln
and unequlvocal and lnLelllgenLly made, such walver follows only where
Lhe llberLy of cholce has been fully accorded.

Moreover, Lhe lndlspensablllLy of noLlce of cancellaLlon Lo Lhe buyer ls
proLecLed under 8A 6331. lL ls a maLLer of publlc pollcy Lo proLecL Lhe
buyers of real esLaLe on lnsLallmenL paymenLs agalnsL onerous and
oppresslve condlLlons. Walver of noLlce ls one such onerous and
oppresslve condlLlon Lo buyers of real esLaLe on lnsLallmenL paymenLs.

Issue: WheLher or noL alay should be llable for Lhe refund of Lhe
lnsLallmenL paymenLs made by uumplL.

ne|d: ?LS. As a consequence of Lhe resclsslon of Lhe conLracL, rlghL Lo
Lhe loL should be resLored Lo uumplL or Lhe same should be replaced by
anoLher accepLable loL. Powever, conslderlng LhaL Lhe loL had been
resold Lo a Lhlrd person, uumplL ls enLlLled Lo refund of Lhe lnsLallmenLs
pald plus legal lnLeresL of 12.

Doctr|ne: Well seLLled ls Lhe rule, as held ln prevlous [urlsprudence, LhaL
[udlclal acLlon for resclsslon of a conLracL ls noL necessary where Lhe
conLracL provldes LhaL lL may be revoked and cancelled for vlolaLlon of
any of lLs Lerms and condlLlon. Powever, even ln Lhe clLed cases, Lhere
was aL leasL a wrlLLen noLlce senL Lo Lhe defaulLer lnformlng hlm of Lhe
resclsslon.

neverLheless, [seller] ls noL relleved from Lhe glvlng of a noLlce,
verbal or wrlLLen, Lo Lhe [buyers] for hls declslon Lo resclnd Lhelr
conLracL. ln many cases, even Lhough we upheld Lhe valldlLy of a
sLlpulaLlon ln a conLracL Lo sell auLhorlzlng auLomaLlc resclsslon
for a vlolaLlon of lLs Lerms and condlLlon, aL leasL a wrlLLen
noLlce musL be senL Lo Lhe defaulLer lnformlng hlm of Lhe same.
1he acL of a parLy ln LreaLlng a conLracL as cancelled should be
made known Lo Lhe oLher. lor such acL ls always provlslonal. lL ls
always sub[ecL Lo Lhe scruLlny and revlew by Lhe courLs ln case
Lhe alleged defaulLer brlngs Lhe maLLer Lo Lhe proper courLs.
2W")J ,4 R").'$7 8?? 92!6 >:: *<==FG4
A conLracL Lo sell lmposes reclprocal obllgaLlons and so cannoL
be LermlnaLed unllaLerally by elLher parLy. !udlclal resclsslon ls
requlred under ArLlcle 1191. Powever, Lhls rule ls noL absoluLe.
We have held LhaL ln proper cases, a parLy may Lake lL upon
lLself Lo conslder Lhe conLracL resclnded and acL accordlngly
albelL sub[ecL Lo [udlclal conflrmaLlon, whlch may or may noL be
glven. T(L ,4 2$&-' $5 633".%#7 <F: 92!6 DEQ *<==?G.
o 8U1 SLL: ln a conLracL Lo sell, upon fallure of buyer Lo
comply wlLh lLs obllgaLlon, Lhere was no need Lo
[udlclally resclnd Lhe conLracL Lo sell. lallure by one of
Lhe parLles Lo ablde by Lhe condlLlons ln a conLracL Lo
sell resulLed ln Lhe resclsslon of Lhe conLracL. 60N
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
V&'&.% A")"5(' 6##)47 C)B4 ,4 2$&-' $5 633".%#7 8EQ
92!6 >EF *:??<G6
Y


T(L ,4 2$&-' $5 633".%#

Iacts: ln 1963, Crllnos (3 co-owners) morLgaged a parcel of land ln
ulllman, CC Lo rogresslve Commerclal 8ank as securlLy for a 100k
loan. 1hey falled Lo pay Lhe loan and Lhe morLgage was foreclosed,
where Lhe bank acqulred Lhe properLy as Lhe hlghesL bldder aL Lhe
aucLlon sale. 1he bank Lransferred all lLs asseLs, 246.42 unLll fully pald.
ar. 6 of Lhe conLracL provlded for auLomaLlc exLra[udlclal resclsslon
upon defaulL ln paymenL of any monLhly lnsLallmenL afLer Lhe lapse of
90 days from Lhe explraLlon of Lhe grace perlod of a monLh, wlLhouL
need of noLlce and forfelLure of all lnsLallmenLs pald. uumplL was able
Lo pay Lhe down paymenL and several lnsLallmenLs amounLlng Lo
13,722.30, wlLh Lhe lasL paymenL made on uec. 3, 1967 for
lnsLallmenLs up Lo SepL. 1967.

ln 1973, uumplL requesLed alay lnc Lo updaLe hls overdue accounLs
and soughL lLs permlsslon Lo asslgn hls rlghLs Lo ulzon. Powever, alay
lnformed hlm LhaL hls ConLracL Lo Sell had long been resclnded pursuanL
Lo ar. 6 and LhaL Lhe loL had already been resold.

uumplL flled a complalnL wlLh Lhe nPA for reconveyance wlLh an
alLernaLlve prayer for refund. nPA ruled ln favor of uumplL, sLaLlng LhaL
Lhe resclsslon ls vold for lack of elLher [udlclal or noLarlal demand. Cfflce
of Lhe resldenL afflrmed.

1
L+&&'/<' 56 K# /+1 9),#/#1, 96 SC8A 69 (1980).

Issue: WheLher or noL Lhe LransacLlon beLween Lhe Crllnos and 8C a
conLracL Lo sell.

ne|d: ?LS. 1here was no lmmedlaLe Lransfer of LlLle Lo Lhe Crllnos as
whaL would have happened lf Lhere had been a sale. 1he supposed sale
was never reglsLered and Lhere was no new 1C1 ln favor of Lhe Crllnos.
1hey also acknowledged LhaL Lhe LlLle Lo Lhe properLy would remaln
wlLh Lhe bank unLll Lhelr LransacLlon shall be flnallzed. Moreover , Lhe
conslderaLlon agreed upon was never pald Lo converL Lhe agreemenL
lnLo a conLracL of sale. As paymenL of Lhe conslderaLlon was a poslLlve
suspenslve condlLlon, LlLle Lo Lhe properLy never passed Lo Lhe prlvaLe
respondenLs. 1hus, Lhe properLy was legally unencumbered and sLlll
belonged Lo 8C when lL was sold Lo Llm.

Cn 8LSClSSlCn: AlLhough a conLracL Lo sell lmposes reclprocal
obllgaLlons and cannoL be LermlnaLed unllaLerally by elLher parLy,
[udlclal resclsslon ls requlred under ArL. 1911 of Lhe CC. Powever, Lhls
rule ls noL absoluLe. !urlsprudence has shown LhaL a parLy may Lake lL
upon lLself Lo conslder Lhe conLracL resclnded and acL accordlngly albelL
sub[ecL Lo [udlclal conflrmaLlon, whlch may or may noL be glven. lL ls
Lrue LhaL Lhe resclndlng parLy Lakes a rlsk LhaL lLs acLlon may noL be
approved by Lhe courL. 1he Crllnos obllgaLed Lhemselves Lo dellver Lo
8C 160k and Lhelr share on Lhe properLy ln Caloocan ClLy. Powever,
Lhe Crllnos dld noL acL on Lhelr obllgaLlons. 8C could noL be requlred Lo
walL for Lhem forever. 1hus, 8C had Lhe rlghL Lo conslder Lhe conLracL
Lo sell beLween Lhem LermlnaLed for non-paymenL of Lhe sLlpulaLed
conslderaLlon.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Doctr|ne: 1he seller ls allowed Lo conslder Lhe conLracL Lo sell beLween
Lhem LermlnaLed for non-paymenL of Lhe sLlpulaLed conslderaLlon," and
Lhe only rlsk lnvolved ls LhaL Lhe courLs may noL afflrm Lhe facLual basls
upon whlch Lo base Lhe non-happenlng of Lhe suspenslve condlLlon.

60N V&'&.% A")"5(' 6##)47 C)B4 ,4 2$&-' $5 633".%#

Iacts: 1hls case lnvolved Solld Pomes lnc's M8 of Lhe SC's declslon
reverslng Lhe CA's declslon and orderlng Lhe 8u Lo cancel Lhe noLlce of
lls pendens on Lhe LlLles lssued Lo AlM8Al, declarlng lL as buyer ln good
falLh and for value. lnvesLco lnc and Solld Pomes lnc enLered lnLo a
conLracL Lo sell. uurlng Lhls Llme, Lhe LlLles Lo Lhe Cuezon ClLy and
Marlklna properLles had noL been Lransferred ln Lhe name of lnvesLco
lnc as aslgnee of Lhe owners, Angela erez SLaley and AnLonlo erez.
1hus, lnvesLco lnc merely agreed Lo sell and Solld Pomes Lo buy Lhe
former's rlghLs and lnLeresL ln Lhe properLles. Powever, Solld Pomes lnc.
reneged or defaulLed on lLs obllgaLlon. 1hus, lnvesLco lnc resclnded
exLra-[udlclally such conLracL Lo sell. AfLer such evenL, AlM8Al and
lnvesLco lnc enLered lnLo a conLracL of absoluLe sale, whereln Lhe
former pald ln full, causlng Lhe Lransfer of LlLles ln lLs name.

Issue: WheLher or noL lnvesLco lnc properly resclnded lLs conLracL Lo sell
and buy wlLh Solld Pomes lnc.

ne|d: ?LS. upon Solld Pomes lnc's fallure Lo comply wlLh lLs obllgaLlon
under Lhe conLracL, Lhere was no need Lo [udlclally resclnd Lhe conLracL.
lallure by one of Lhe parLles Lo ablde by Lhe condlLlons ln a conLracL Lo
sell resulLed ln Lhe resclsslon of Lhe conLracL.

Doctr|ne:

A grace perlod ls a rlghL, noL an obllgaLlon of Lhe debLor, and
when uncondlLlonally conferred, Lhe grace perlod ls effecLlve
wlLhouL furLher need of demand elLher calllng for Lhe paymenL
of Lhe obllgaLlon or for honorlng Lhe rlghL. HA-(BZ'$d) ]",4
2$-34 ,4 6L$- O("--. ]",447 :8= 92!6 <:E *<==DG4
1he acL of Lhe seller ln noLlfylng Lhe buyer of hls lnLenLlon Lo sell
Lhe properLles Lo oLher lnLeresL persons lf Lhe laLLer falled Lo
pay Lhe balance of Lhe purchase prlce ls sufflclenL noLlce for Lhe
cancellaLlon or resoluLlon of Lhelr conLracL Lo sell. I-1") ,4
6&-".7 DE: 92!6 EE? *:??FG4

3. Iorm Cf Not|ce kequ|red Ior Cance||at|on Cf Contract 1o Se||
Such noLlce should be ln a publlc lnsLrumenL pursuanL Lo Lhe
provlslon of ArLlcle 1338 of Lhe Clvll Code whlch requlres LhaL
acLs and conLracLs whlch have for Lhelr ob[ecL Lhe
exLlngulshmenL of real rlghLs over lmmovable properLy musL
appear ln a publlc documenL." ](J)$# ,4 2$&-' $5 633".%#7 <DF
92!6 8>D *<=FFG4

4. kesc|ss|on r|nc|p|es App||ed 1o Contracts 1o Se||
8y Lhe naLure of a conLracL Lo sell, Lhe remedy of resclsslon ls
lrrelevanL Lo conLracLs Lo sell because Lhe non-fulflllmenL of Lhe
suspenslve condlLlon of full paymenL of Lhe purchase prlce
prevenLs a conLracL of sale from even maLerlallzlng, and
Lherefore Lhere ls really noLhlng Lo resolve or resclnd. And
cerLalnly, any sLlpulaLlon auLhorlzlng Lhe seller Lo resclnd" Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
conLracL Lo sell ln Lhe evenL Lhe buyer falls Lo fully pay Lhe
purchase prlce ls a mere surplusage.

C. Lqu|ty keso|ut|ons Cn Contracts 1o Se||
AlLhough buyer clearly defaulLed ln hls lnsLallmenL paymenLs ln
a conLracL Lo sell coverlng Lwo parcels of land, Lhe Supreme
CourL neverLheless awarded ownershlp over one of Lhe Lwo (2)
loLs [olnLly purchased by Lhe buyer, on Lhe basls LhaL Lhe LoLal
amounL of lnsLallmenLs pald, alLhough noL enough Lo cover Lhe
purchase prlce of Lhe Lwo loLs were enough Lo cover fully Lhe
purchase prlce of one loL, rullng Lhere was subsLanLlal
performance lnsofar as one of Lhe loLs concerned as Lo prevenL
resclsslon LhereLo. HT"J.-1. M"-L.)$# ,4 9.%1.c.7 DD 92!6
8:QE *<=>QG4
Where buyer had rellglously been paylng monLhly lnsLallmenLs
for 8 years, buL even afLer defaulL he was wllllng and had
offered Lo pay all Lhe arrears, Lhe CourL granLed addlLlonal
perlod of 60 days from recelpL of [udgmenL for buyer Lo make all
lnsLallmenLs paymenLs ln arrears plus lnLeresLs, alLhough
demand for resclsslon had already been made4 H\4V4 O&.U$)
2$47 C)B4 ,4 \.,("-7 8< 92!6 F:= *<=>?G4

kLCA CI kULINGS

A. At erfect|on
1. kequ|s|te Contractua| St|pu|at|ons - ln a conLracL Lo sell, Lhere
musL be a sLlpulaLlon LhaL:
a. lull paymenL of Lhe purchase prlce by Lhe buyer
consLlLuLes a suspenslve condlLlon on Lhe obllgaLlon of
Lhe seller Lo sell and Lransfer ownershlp of Lhe sub[ecL
maLLer,
1

b. Accompanled by sLlpulaLlons or agreemenLs LhaL:
l. Cwnershlp of Lhe sub[ecL maLLer shall remaln
wlLh Lhe seller unLll full paymenL of Lhe prlce,
ll. Speclflc rlghL ls granLed Lo Lhe seller Lo
exLra[udlclally resclnd or cancel Lhe conLracL ln
case of defaulL.
2

1he lack of sLlpulaLlon expressly reservlng LlLle Lo Lhe seller ln
splLe dellvery of Lhe sub[ecL maLLer Lo Lhe buyer would noL
consLlLuLe Lhe LransacLlon lnLo a conLracL Lo sell.
3

1he lack of a sLlpulaLlon allowlng Lhe seller Lo resclnd Lhe
conLracL ln Lhe evenL Lhe buyer falls Lo comply wlLh hls
obllgaLlon Lo pay Lhe purchase prlce clearly prevenLs Lhe
conLracL from belng classlfled as a conLracL Lo sell.
4

ConLra Lo (a) !WhaL really deflnes a conLracL Lo sell ls Lhe
express sLlpulaLlon LhaL Lhe effecLlvlLy or demandablllLy of Lhe
conLracL ls sub[ecL Lo Lhe happenlng of a suspenslve condlLlon
(usually full paymenL of Lhe prlce), as dlsLlngulshed from a slLu-

1
Pelrs of San Andres v. 8odrlguez, 332 SC8A 769 (2000).
2
vda. ue MlsLlca v. nagulaL, 418 SC8A 73 (2003), valdez v. CourL of Appeals,
439 SC8A 33 (2004), 8las v. Angeles-PuLalla, 439 SC8A 273 (2004).
3
Coronel v. CourL of Appeals, 263 SC8A 13 (1996), uavld v. 1longson, 313 SC8A
63 (1999), Comez v. CourL of Appeals, 340 SC8A 720 (2000), vlllanueva, !r. v.
CourL of Appeals, 487 SC8A 371 (2006), uemafells v. CourL of Appeals, 338
SC8A 303 (2007), vlllador, !r. v. Zaballa, 343 SC8A 323 (2008).
4
Luzon 8rokerage Co., lnc. v. MarlLlme 8ulldlng Co., lnc., 43 SC8A 93 (1972),
!aclnLo v. kaparaz, 209 SC8A 246 (1992), 1opaclo v. CourL of Appeals, 211 SC8A
219 (1992), Adelfa roperLles, lnc. v. CourL of Appeals, 240 SC8A 373 (1993),
Cng v. CourL of Appeals, 240 SC8A 363 (1993), 8abasa v. CourL of Appeals, 290
SC8A 332 (1998), Almlra v. CourL of Appeals, 399 SC8A 331 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
aLlon where Lhe suspenslve condlLlon modlfles noL Lhe conLracL
lLself buL raLher only Lhe obllgaLlon of Lhe seller Lo sell and
dellver Lhe sub[ecL maLLer, ln whlch case lL ls a condlLlonal
conLracL of sale.
1

ConLra Lo (b) ! 1he CourL has also ruled LhaL even ln Lhe
absence of such sLlpulaLlons, Lhe conLracL would sLlll be
consldered a conLracL Lo sell, because of Lhe absence of deeds
of conveyance coverlng reglsLered land where Lhe operaLlve acL
of sale ls reglsLraLlon of Lhe deed of sale.
2

8uL See ConLra 8ullngs ln ulgnos v. CourL of Appeals and ln
orLlc v. CrlsLobal whlch held LhaL reglsLraLlon does noL vesL
LlLle, buL when Lhe conLracL Lo sell expressly reserves LlLle wlLh
Lhe seller unLll full paymenL of Lhe purchase prlce.

2. St|pu|at|on on Lxecut|on of Deed of Abso|ute Sa|e When
Lhere ls a sLlpulaLlon or promlse LhaL Lhe seller shall execuLe a
deed of absoluLe sale upon compleLlon of paymenL of Lhe
purchase prlce by Lhe buyer, Lhe agreemenL ls a conLracL Lo sell,
because lL would be equlvalenL Lo reservaLlon of LlLle clause.
3

ConLra: Where Lhere ls an express sLlpulaLlon LhaL Lhe sellers
would execuLe a flnal deed of absoluLe sale ln favor of Lhe buyer
upon paymenL of Lhe balance of Lhe purchase prlce, Lhe
conLracL would sLlll noL be a conLracL Lo sell, where nowhere ln

1
8omero v. CourL of Appeals, 230 SC8A 223 (1993), Coronel v. CourL of
Appeals, 263 SC8A 13, 27 (1996), Pelrs of edro Lscanlar v. CourL of Appeals,
281 SC8A 176 (1997), Almocera v. Cng, 346 SC8A 164 (2008).
2
8oque v. Lapuz, 96 SC8A 741 (1980).
3
8oque v. Lapuz, 96 SC8A 741 (1980), Lacanllao v. CourL of Appeals, 262 SC8A
486 (1996), adllla v. Spouses aredes, 328 SC8A 434 (2000), 8ayos v. CourL of
Appeals, 434 SC8A 363 (2004), Cruz v. lernando, 477 SC8A 173 (2003).
Lhe conLracL ln quesLlon ls a provlso or sLlpulaLlon Lo Lhe effecL
LhaL LlLle Lo Lhe properLy sold ls reserved ln Lhe seller unLll full
paymenL of Lhe purchase prlce, nor ls Lhere a sLlpulaLlon glvlng
Lhe seller Lhe rlghL Lo unllaLerally resclnd Lhe conLracL Lhe
momenL Lhe buyer falls Lo pay wlLhln a flxed perlod.
4


3. St|pu|at|on on the ayment of r|ce - ln conLracL Lo sell,
paymenL of Lhe prlce ls a suspenslve condlLlon, fallure of whlch
ls noL a breach, casual or serlous, buL an evenL LhaL prevenLs Lhe
obllgaLlon of Lhe seller Lo convey LlLle from acqulrlng obllgaLory
force.
3

ConLra: lf Lhere has been subsLanLlal compllance wlLh Lhe
obllgaLlon Lo pay Lhe prlce, Lhen cancellaLlon cannoL be
effecLed, for unllaLeral resclsslon wlll noL be [udlclally favored or
allowed lf Lhe breach ls noL subsLanLlal and fundamenLal Lo Lhe
fulflllmenL of Lhe obllgaLlon.
6


8. Dur|ng Consummat|on Stage
1. Lega| Lffect Cf De||very Made - ln conLracL of sale, Lhe LlLle Lo
Lhe properLy passes Lo Lhe buyer upon Lhe dellvery of Lhe Lhlng
sold, whereas, ln a conLracL Lo sell, ownershlp ls, by agreemenL,

4
ulgnos v. CourL of Appeals, 138 SC8A 373 (1988).
3
Salazar v. CourL of Appeals, 238 SC8A 323 (1996), Lacanllao v. CourL of
Appeals, 262 SC8A 486 (1996), 8lllo v. CourL of Appeals, 274 SC8A 461 (1997),
Cdyssey ark, lnc. v. CourL of Appeals, 280 SC8A 233 (1997), Cng v. CourL of
Appeals, 310 SC8A 1 (1999), 8las v. Angeles-PuLalla, 439 SC8A 273 (2004), Cruz
v. lernando, 477 SC8A 173 (2003).
6
!"#$%&% (&)*+# ,- !./$*+.)-!"#$% '() *+!, -./ 0-//-12 34#56 78 946"6 :;
!"#$%&"'" )* +,%-. ,/ 0112"3#4 567 SC8A 186 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
reserved ln Lhe seller and ls noL Lo pass Lo Lhe buyer unLll full
paymenL of Lhe purchase prlce.
1


2. Lega| Lffect of Iu|| ayment of r|ce ln a conLracL Lo sell, full
paymenL of Lhe prlce consLlLuLes Lhe happenlng of Lhe condlLlon
whlch would converL lL lnLo an execuLory conLracL of sale,
2
Lhus:
a. lf dellvery of Lhe sub[ecL maLLer had prevlously been
made, Lhen ownershlp ls Lransferred lpso [ure Lo Lhe
buyer.
3

b. lf dellvery of Lhe sub[ecL maLLer has noL been made,
Lhen lL allows Lhe buyer Lo demand for speclflc
performance.
4

ConLra: 1here ls sLlll no perfecLed or execuLory conLracL of sale,
lL merely glves rlse Lo an acLlon Lo enforce Lhe obllgaLlon of Lhe
seller Lo enLer lnLo a conLracL of sale, Lhere ls no Lransfer of
ownershlp Lo buyer even when dellvery was prevlously made,
and much less can Lhere be demand Lo dellver Lhe sub[ecL
maLLer when no conLracL of sale has been execuLed.
3


3. Lega| Lffect Cf Non-ayment Cf r|ce -

1
Salazar v. CourL of Appeals, 238 SC8A 323 (1996), unlversal 8oblna Sugar
Mllllng Corp. v. Pelrs of Angel 1eves, 389 SC8A 3167 (2002), Chua v. CourL of
Appeals, 401 SC8A 34 (2002), vldal, Sr. v. 1ayamen, 331 SC8A 147 (2007), PulsL
v. 8 8ullders, lnc., 332 SC8A 74 (2007), CasLlllo v. 8eyes, 339 SC8A 193 (2007).
2
hlllpplne naLlonal 8ank v. CourL of Appeals, 262 SC8A 464 (1996).
3
!"#$% '( )%*+, %- .//"#012 345 6)7. 34 89::;<= )#++#1>%1%2 ?+( '( )%*+, %-
Appeals, 477 SC8A 666 (2003).
4
uavld v. 1longson, 313 SC8A 63 (1999).
3
Coronel v. CourL of Appeals, 263 SC8A 13, 27 (1996), Abesamls v. CourL of
Appeals, 361 SC8A 328 (2001), PulsL v. 8 8ullders, lnc., 332 SC8A 74 (2007).
a. ln conLracL of sale, Lhe non-paymenL of Lhe purchase
prlce ls a breach, and when subsLanLlal ln naLure, would
allow Lhe seller Lo resclnd Lhe sale.
b. ln conLracL Lo sell, where ownershlp ls reLalned by Lhe
seller unLll paymenL of Lhe prlce ln full, such paymenL ls
a poslLlve suspenslve condlLlon, fallure of whlch ls noL
really a breach buL an evenL LhaL prevenLs Lhe obllgaLlon
of Lhe vendor Lo convey LlLle ln accordance wlLh ArLlcle
1184 of Lhe Clvll Code."
6

ConLra Lo (b):
o Lven when Lhe basls for Lhe breach of Lhe condlLlon ls
presenL, a noLlce of resclsslon" or cancellaLlon musL be
made on buyer Lo effecL Lhe exLlngulshmenL of Lhe
conLracL Lo sell.
7

" 8u1 SLL ConLra 8ullng ln 1orralba v. ue los
Angeles
o ln resldenLlal real esLaLe, when Lhe non-paymenL of Lhe
purchase prlce consLlLuLe merely a casual breach, lL
would noL exLlngulsh Lhe conLracL Lo sell, and Lhe courLs
may exLend equlLy rlghLs Lo Lhe buyer.

C. kemed|es Ava||ab|e

6
Lacanllao v. CourL of Appeals, 262 SC8A 486 (1996), Cdyssey ark, lnc. v.
CourL of Appeals, 280 SC8A 233 (1997), vldal, Sr. v. 1ayamen, 331 SC8A 147
(2007), PulsL v. 8 8ullders, lnc., 332 SC8A 74 (2007).
7
unlverslLy of Lhe hlllpplnes v. ue los Angeles, 33 SC8A 103 (1970), alay, lnc.
v. Clave, 124 SC8A 638 (1983), !lson v. CourL of Appeals, 164 SC8A 339 (1988),
Slska uevelopmenL Corp. v. Cfflce of Lhe resldenL, 231 SC8A 674 (1994),
Ccampo v. CourL of Appeals, 233 SC8A 331 (1994), Spouses 8enlLo v. SaqulLan-
8ulz, 394 SC8A 230 (2002).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1. When Cond|t|on Cn r|ce ayment Not Iu|f|||ed:
a. ln conLracL of sale, lf seller had dellvered Lhe sub[ecL
maLLer prevlously wlLhouL reservlng LlLle, lL would mean
LhaL ownershlp has been Lransferred Lo Lhe buyer, and
seller cannoL recover ownershlp unLll and unless Lhe
conLracL ls resolved or resclnded by courL acLlon.
Whereas ln conLracL Lo sell, slnce ownershlp was
reLalned by Lhe seller by express reservaLlon unLll full
paymenL of Lhe prlce, and Lhe conLracL ls exLlngulshed,
Lhen no acLlon ls necessary oLher Lhan recovery of
possesslon ln case buyer refuses Lo volunLarlly dellver.
1

b. ln condlLlonal conLracL of sale, Lhe non-happenlng of
Lhe condlLlon may be walved by Lhe obllgee who may
sLlll seek speclflc performance.
Whereas, ln conLracL Lo sell, Lhe non-happenlng of Lhe
condlLlon prevenLs Lhe conLracL from comlng lnLo
exlsLence (l.e., exLlngulshes Lhe conLracL) and con-
sequenLly nelLher resclsslon or speclflc performance
may be pursued.
2

c. ln condlLlonal conLracL of sale, Lhe basls of resclsslon
musL be subsLanLlal breach.
Whereas, ln a conLracL Lo sell, Lhe lssue of breach ls
compleLely lrrelevanL.
3


1
1he Carldad LsLaLes, lnc. v. SanLero, 71 hll. 114 (1940), Manuel v. 8odrlguez,
109 hll. 1 (1960), Salazar v. CourL of Appeals, 238 SC8A 323 (1996), anglllnan
v. CourL of Appeals, 279 SC8A 390 (1997), vldal, Sr. v. 1ayamen, 331 SC8A 147
(2007), PulsL v. 8 8ullders, lnc., 332 SC8A 74 (2007).
2
8omero v. CourL of Appeals, 230 SC8A 223 (1993), Llm v. CourL of Appeals,
263 SC8A 369 (1996).
3
Luzon 8rokerage Co., lnc. v. MarlLlme 8ulldlng Co., lnc., 43 SC8A 93 (1972).
d. ln conLracL of sale and condlLlonal conLracL of sale,
resclsslon may be pursued wlLh forfelLure of Lhe
amounLs pald when LhaL has been expressly pro- vlded
for.
Whereas, ln conLracL Lo sell, lL becomes lmperaLlve LhaL
Lhe amounLs pald musL be reLurned and Lhere would be
no basls upon whlch Lo reLaln Lhem slnce Lhere was no
breach upon whlch a clalm of damage may be
lnLerposed.
4

o ConLra Lo (d): 8ased on equlLy prlnclples, Lhe docLrlne of
subsLanLlal breach Lo allow resclsslon and courL
dlscreLlon under ArLlcle 1191 have been made Lo apply
Lo conLracLs Lo sell lnvolvlng resldenLlal lmmovables.
3

" 8u1 SLL conLrary rullng ln Lacanllao v. CourL of
Appeals. Lven when Lhe suspenslve condlLlon
has noL happened, whlch would exLlngulsh
Lhereby Lhe conLracL Lo sell, neverLheless, such
exLlngulshmenL can only have legal effecL lf
noLlce of cancellaLlon ls glven Lo Lhe buyer.
6

" 8u1 SLL conLrary rullng ln 1orralba v. ue los
Angeles.

2. Laws App||cab|e - ln conLracL of sale, Lhe appllcable rules are

4
1he Manlla 8aclng Club v. 1he Manlla !ockey Club, 69 hll. 33 (1939).
3
!.M. 1uazon Co., lnc. v. !avler, 31 SC8A 829 (1970), Legarda Permanos v.
Saldana, 33 SC8A 3246 (1974), Slska uev. Corp. v. Cfflce of Lhe resldenL, 231
SC8A 674 (1994).
6
unlverslLy of Lhe hlllpplnes v. ue los Angeles, 33 SC8A 103 (1970), alay, lnc.
v. Clave, 124 SC8A 638 (1983), Slska uev. Corp. v. Cfflce of Lhe resldenL, 231
SC8A 674 (1994).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
found ln ArLlcles 1191 and 1392 provldlng for Lhe remedy of
resclsslon, buL when Lhere ls a suspenslve condlLlon, ArLlcle
1343 allows Lhe seller Lo choose beLween resclsslon or walvlng
Lhe condlLlon, whereas, ln conLracL Lo sell, Lhe remedles of
resclsslon belng lncompaLlble LhereLo,
1
Lhe appllcable rules are
found ln ArLlcles 1184 and 1343.
2
1he lssue of wheLher Lhe
breach was casual or serlous under ArLlcle 1191 ls compleLely
lrrelevanL ln a conLracL Lo sell.
3

ConLra: 1here have been several lnsLances when ArLlcle 1191
was made Lo apply Lo a conLracL Lo sell lnvolvlng resldenLlal real
esLaLe, wlLh appllcaLlon of Lhe docLrlne of subsLanLlal breach.
4

8u1: 1he requlremenLs of Lhe Maceda Law on grace perlod,
cash surrender value and prescrlbed manner of noLarlal
resclsslon or cancellaLlon musL always apply, wheLher lL ls a

1
Luzon 8rokerage Co., lnc. v. MarlLlme 8ulldlng Co., lnc., 46 SC8A 381 (1972),
8lllo v. CourL of Appeals, 274 SC8A 461 (1997), anglllnan v. CourL of Appeals,
279 SC8A 390 (1997), Cdyssey ark, lnc. v. CourL of Appeals, 280 SC8A 233
(1997), valarao v. CourL of Appeals, 304 SC8A 133 (1999), Conzales v. Pelrs of
1homas and aula Cruz, 314 SC8A 383 (1999), adllla v. Spouses aredes, 328
SC8A 434 (2000),
2
1opaclo v. CourL of Appeals, 211 SC8A 219 (1992), Lacanllao v. CourL of
Appeals, 262 SC8A 486 (1996), 8lllo v. CourL of Appeals, 274 SC8A 461 (1997),
Cdyssey ark, lnc. v. CourL of Appeals, 280 SC8A 233 (1997).
3
Luzon 8rokerage Co., v. MarlLlme 8ulldlng Co., lnc., 86 SC8A 303 (1978),
SanLos v. CourL of Appeals, 337 SC8A 67 (2000).
4
Carldad LsLaLes, lnc. v. SanLero, 71 hll. 114 (1940), Albea v. lnqulmboy, 86
hll. 477 (1930), Manuel v. 8odrlguez, 109 hll. 1 (1960), Luzon 8rokerage v.
MarLlme 8ulldlng, lnc., 86 SC8A 303 (1978), 8oque v. Lapuz, 96 SC8A 741, 739
(1980), Angeles v. Calasanz, 133 SC8A 323 (1983), !oseph & Sons LnLerprlses,
lnc. v. CourL of Appeals, 143 SC8A 663 (1986), Llm v. CourL of Appeals, 182
SC8A 364 (1990), !aclnLo v. kaparaz, 209 SC8A 246 (1992).
conLracL of sale or conLracL Lo sell, lnvolvlng lnsLallmenL sales of
resldenLlal real esLaLe and resldenLlal condomlnlum unlL.
3



3
8lllo v. CourL of Appeals, 274 SC8A 461 (1997).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 12: CCNDI1ICNS AND
WAkkAN1ILS

I. Cond|t|ons (Art|c|e 1S4S)

Art|c|e 1S4S.
Where the ob||gat|on of e|ther party to a contract of sa|e |s sub[ect to
any cond|t|on wh|ch |s not performed, such party may refuse to
proceed w|th the contract or he may wa|ve performance of the
cond|t|on. If the other party has prom|sed that the cond|t|on shou|d
happen or be performed, such f|rst ment|oned party may a|so treat the
nonperformance of the cond|t|on as a breach of warranty.

Where the ownersh|p |n the th|ng has not passed, the buyer may treat
the fu|f|||ment by the se||er of h|s ob||gat|on to de||ver the same as
descr|bed and as warranted express|y or by |mp||cat|on |n the contract
of sa|e as a cond|t|on of the ob||gat|on of the buyer to perform h|s
prom|se to accept and pay for the th|ng. (n)

1wo alLernaLlve remedles where obllgaLlon of Lhe oLher parLy Lo
a conLracL of sale ls sub[ecL Lo a condlLlon, and such ls noL
performed.
1. 8efusal Lo proceed wlLh conLracL.
2. Walve performance of Lhe condlLlon.
ulsLlncLlon beLween condlLlon lmposed on perfecLlon and
lmposed on performance. !"#$%" '( )"*%+ ", -..$/01 234 5)!-
226 78993:(
lallure Lo comply wlLh condlLlon lmposed upon perfecLlon of
Lhe conLracL resulLs ln fallure of a conLracL, whlle Lhe fallure Lo
comply wlLh a condlLlon lmposed on Lhe performance of an
obllgaLlon only glves Lhe oLher parLy Lhe opLlon elLher Lo refuse
Lo proceed wlLh sale or walve Lhe condlLlon. ;/,"%+$</ '(
=/>?*>/@ 666 5)!- AB6 72444:.
1


Cond|t|on |mposed on perfect|on Cond|t|on |mposed on
performance
lallure Lo comply resulLs ln fallure
of conLracL
lallure Lo comply resulLs ln Lhe
Lwo remedles belng avallable Lo
Lhe oLher parLy.

;/,"%+$</ '( =/>?*>/

Iacts: ln Lhe exerclse of Lhe auLhorlLy of Speclal ower Cf ALLorney, on
!anuary 20, 1989, Lhe helrs of Lhe laLe lranclsco C. LaforLeza
represenLed by 8oberLo Z. LaforLeza and Conzalo Z. LaforLeza, !r.
enLered lnLo a Memorandum of AgreemenL (ConLracL Lo Sell) wlLh Lhe
plalnLlff over Lhe sub[ecL properLy for Lhe sum of 630,000 payable as
follows:
30,000 -earnesL money, Lo be forfelLed ln favor of LaforLezas lf
Lhe sale ls noL effecLed due Lo Lhe faulL of Machuca
600,000 - upon lssuance of Lhe new cerLlflcaLe of LlLle ln Lhe
name of laLe lranclsco LaforLeza and upon execuLlon of an exLra
[udlclal seLLlemenL of Lhe decedenL's esLaLe wlLh sale ln favor of

1
"#$%&# '( )#*&+ #, -..%/01, 230 SC8A 223 (1993), -2/034 '( )-5 280 SC8A 336
(1997), "%.*6037 '( 80#&%42#, 349 SC8A 327 (2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Machuca

aragraph 4 of Lhe Memorandum conLalned a provlslon LhaL: upon
lssuance of Lhe new LlLle, Lhe Machuca shall be noLlfled ln wrlLlng and he
shall have 30 days Lo produce Lhe balance of 600k whlch shall be pald Lo
LaforLeza upon execuLlon of Lhe exLra[udlclal seLLlemenL. Machuca pald
earnesL money of 30k plus renLals for sub[ecL properLy. upon fallure of
Machuca Lo comply wlLh Lhe paymenL of Lhe balance, LaforLezas
lnformed Lhe formed LhaL Lhey were cancellng Lhe conLracL. Machuca
requesLed LhaL he lnLends Lo Lender paymenL of Lhe balance whlch was
refused by Lhe LaforLezas who lnslsLed for Lhe resclsslon of Lhe
memorandum. Machuca flled an acLlon for speclflc performance

Issue: WheLher Lhe conLracL execuLed by Lhe parLles ls a conLracL of sale
or a conLracL Lo sell

ne|d: CCn18AC1 Cl SALL Anu LLASL. 1he Memorandum of AgreemenL
shows LhaL Lhe LransacLlon beLween Lhe peLlLloners and respondenL was
one of sale and lease. A conLracL of sale ls a consensual conLracL and ls
perfecLed aL Lhe momenL Lhere ls a meeLlng of Lhe mlnds upon Lhe Lhlng
whlch ls Lhe ob[ecL of Lhe conLracL and upon Lhe prlce. lrom LhaL
momenL Lhe parLles may reclprocally demand performance sub[ecL Lo
Lhe provlslons of Lhe law governlng Lhe form of conLracLs. ln Lhls case,
Lhere was a perfecLed agreemenL beLween Lhe peLlLloners and
respondenL whereby LaforLezas obllgaLed Lhemselves Lo Lransfer Lhe
ownershlp of and dellver Lhe house and loL and Machuca Lo pay Lhe
prlce amounLlng Lo 630k. All Lhe elemenLs of a conLracL of sale were
Lhus presenL. Powever, Lhe balance of Lhe purchase prlce was Lo be pald
only upon Lhe lssuance of Lhe new cerLlflcaLe of LlLle ln lleu of Lhe one ln
Lhe name of Lhe laLe lranclsco LaforLeza and upon Lhe execuLlon of an
exLra[udlclal seLLlemenL of hls esLaLe.

rlor Lo Lhe lssuance of Lhe reconsLlLuLed" LlLle, Machuca was already
placed ln possesslon of Lhe house and loL as lessee Lhereof for 6 monLhs
aL a monLhly raLe of 3,300k. lL was sLlpulaLed LhaL should Lhe lssuance of
Lhe new LlLle and execuLlon of Lhe exLra[udlclal seLLlemenL be
compleLed prlor Lo explraLlon of 6monLh perlod, Machuca would be
llable only for Lhe renLals perLalnlng Lo Lhe perlod commenclng from Lhe
daLe of Lhe execuLlon of Lhe agreemenL up Lo Lhe execuLon of Lhe
exLra[udlclal seLLlemenL.

ln Lhls case, Lhe 6-monLh perlod merely delayed Lhe demandablllLy of
Lhe conLracL of sale and dld noL deLermlne perfecLlon for afLer Lhe
explraLlon of Lhe 6 monLh perlod, Lhere was a absoluLe obllgaLlon on Lhe
parL of LaforLezas and Machuca Lo comply wlLh Lhe Lerms of Lhe sale.
1he facL LhaL afLer Lhe explraLlon of Lhe 6-monLh perlod, Machuca
would reLaln possesslon of Lhe house and loL wlLhouL need of paylng
renLals for Lhe use Lherefore, clearly lndlcaLed LhaL Lhe parLles
conLemplaLed LhaL ownershlp over Lhe properLy would already be
Lransferred by LhaL Llme.

WhaL furLher lndlcaLed LhaL Lhls was a conLracL of sale was Lhe paymenL
of earnesL money. LarnesL money ls someLhlng of value Lo show LhaL
buyer was really ln earnesL, and glven Lo Lhe seller Lo blnd Lhe bargaln.
Whenever earnesL money ls glven ln a conLracL of sale, lL ls consldered
as parL of Lhe purchase prlce and proof of Lhe perfecLlon of Lhe conLracL.

Doctr|ne:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

ln a Sale wlLh AssumpLlon of MorLgage," Lhe assumpLlon of
morLgage ls a condlLlon Lo Lhe seller's consenL so LhaL wlLhouL
approval by Lhe morLgagee, no sale ls perfecLed. ln such case,
Lhe seller remalns Lhe owner and morLgagor of Lhe properLy and
reLalns Lhe rlghL Lo redeem Lhe foreclosed properLy. C!/#"1 '(
)-@ 2D9 5)!- 88E 7899D:(
8
8uL such condlLlon ls deemed
fulfllled when Lhe seller Lakes any acLlon Lo prevenL lLs
happenlng( F$ ;$"G '( HGI@ A88 5)!- 6E8 72484:(
o ConLracL of sale Lo become effecLlve upon happenlng of
Lhe condlLlon. J$K%1 ", L1>/G0/% '( )"*%+ ", -..$/01@ 2E8
5)!- 8DA 7899D:( non-happenlng dld noL affecL valldlLy
of Lhe conLracL only Lhe effecLlvlLy.
1here has arlsen here a confuslon ln Lhe concepLs of valldlLy and
Lhe efflcacy of a conLracL. under ArLlcle 1318 of Clvll Code, Lhe
essenLlal requlslLes of a conLracL are: consenL of Lhe conLracLlng
parLles, ob[ecL cerLaln whlch ls Lhe sub[ecL maLLer of Lhe
conLracL and cause of Lhe obllgaLlon whlch ls esLabllshed.
AbsenL one of Lhe above, no conLracL can arlse. Conversely,
where all are presenL, Lhe resulL ls a valld conLracL. Powever,
some parLles lnLroduce varlous klnds of resLrlcLlons or
modallLles, Lhe lack of whlch wlll noL, however, affecL Lhe
valldlLy of Lhe conLracL. 1hus, a provlslon Lhls ConLracL of Sale
of rlghLs, lnLeresLs and parLlclpaLlons shall become effecLlve
only upon Lhe approval by Lhe Ponorable CourL," ln Lhe evenL of
non-approval by Lhe courLs, affecL only Lhe effecLlvlLy and noL

1
93:/4 ;+%%0 )#&.( '( )#*&+ #, -..%/01, 391 SC8A 90 (2002).
Lhe valldlLy of Lhe conLracL of sale. J$K%1 ", M$N%" L1>/G0/% '(
)"*%+ ", -..$/01@ 2E8 5)!- 8DA 7899D:.

J$K%1 ", M$N%" L1>/G0/% '( )"*%+ ", -..$/01

Iacts: 1he Pelrs of Carl-an execuLed a ueed of Sale of 8lghLs, lnLeresLs,
and arLlclpaLlon over a parcel of undlvlded land ln favor of Lhe Pelrs of
Lscanlar. lL was sLlpulaLed LhaL Lhe conLracL shall become effecLlve only
upon approval of Lhe Cll of negros CccldenLal." 1he Pelrs of Lscanlar
falled Lo pay Lhe balance of Lhe purchase prlce, buL Lhe Pelrs of Carl-an
never demanded paymenL and conLlnued Lo accepL belaLed paymenLs.
1hey laLer on sold Lhelr lnLeresLs over Lhe same land Lo Lhe Chuas and
assalled Lhe valldlLy of Lhe ueed of Sale Lhey execuLed wlLh Lhe Pelrs of
Lscanlar. 1he lower courLs annulled Lhe conLracL for noL havlng Lhe
approval of Lhe courL as sLlpulaLed.

Issue: WheLher or noL Lhe ueed of Sale Lo Lhe Pelrs of Lscanlar ls valld

ne|d: ?LS. 1here ls a dlsLlncLlon beLween Lhe valldlLy and effecLlvlLy.
Cnly Lhe effecLlvlLy was made sub[ecL Lo Lhe condlLlon. So long as all Lhe
requlslLes (consenL, sub[ecL maLLer, and prlce) are presenL, as ln Lhls
case, Lhe conLracL ls already perfecLed. noneLheless, Lhe lnLenL of Lhe
parLles clearly manlfesLs Lhelr lnLenLlon Lo glve efflcacy Lo Lhe conLracL.
ln facL, Lhe vendors conLlnued Lo accepL paymenLs. 1haL belng Lhe case,
Lhe sale ln favor of Lhe Pelrs of Lscanlar musL be preferred as lL ls a valld
and subslsLlng one.

Doctr|ne:

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1he phrase as ls, where ls" ln sale perLalns solely Lo Lhe
physlcal condlLlon of Lhe Lhlng sold, noL Lo lLs legal slLuaLlon.
-11$+1 M%K'/+K</+K"G O%*1+ '( O(P( LG+$%.%K1$1@ 3ED 5)!- BE8
72449:(
1he vendor ls bound Lo Lransfer Lhe ownershlp of and dellver, as
well as warranL Lhe Lhlng whlch ls Lhe ob[ecL of Lhe sale. -11$+1
M%K'/+K</+K"G O%*1+ '( O(P( LG+$%.%K1$1@ 3ED 5)!- BE8 72449:(

II. Cond|t|ons '$%1*1 Warrant|es.
When ownershlp has noL passed, buyer may LreaL Lhe
fulflllmenL of Lhe seller of hls obllgaLlon under Lhe conLracL as a
condlLlon for hls obllgaLlon Lo accepL and pay.
lf Lhe parLy promlsed LhaL a condlLlon would be performed or
would happen, oLher parLy may LreaL non-performance of such
as a breach of warranLy.
o Such sLlpulaLlon elevaLes Lhe condlLlon Lo a warranLy
o And enLlLle Lhe oLher parLy Lo damages

Cond|t|on Warranty
non-happenlng of condlLlon
does noL amounL Lo a breach
non-fulflllmenL of warranLy
consLlLuLes a breach
Coes lnLo rooL of exlsLence of
Lhe obllgaLlon
Coes lnLo performance
May consLlLuLe an obllgaLlon ln lLself
MusL be sLlpulaLed by Lhe
parLles
May form parL of Lhe obllgaLlon by
provlslon of law, even wlLhouL
sLlpulaLlon.
May aLLach Lo Lhe seller or Lo
Lhe buyer
8elaLes Lo sub[ecL maLLer lLself, or
obllgaLlons of Lhe seller as Lo Lhe
sub[ecL maLLer.

M"Q$% )"##$%>K/0 /GN RGN*1+%K/0 )"%.( '( )"*%+ ", -..$/01,
2DB 5)!- 39D 7899D:(

M"Q$% )"##$%>K/0 /GN RGN*1+%K/0 )"%.( '( )"*%+ ", -..$/01

Iacts: ower Commerclal Corp enLered lnLo a conLracL of sale wlLh Lhe
Culambao spouses. lL agreed Lo assume Lhe morLgages Lhereon. A ueed
of AbsoluLe Sale wlLh AssumpLlon of MorLgage was execuLed. ower
Commerclal Corp falled Lo seLLle Lhe morLgage debL conLracLed by Lhe
spouses, Lhus lL could noL underLake Lhe proper acLlon Lo evlcL Lhe
lessees on Lhe loL. ower Commerclal Corp LhereafLer soughL Lo resclnd
Lhe conLracL of sale alleglng LhaL lL falled Lo Lake acLual and physlcal
possesslon of Lhe loL.

Issue: WheLher or noL Lhere was a breach of warranLy on Lhe parL of Lhe
spouses LhaL lL would evlcL Lhe lessees

ne|d: nC. llrsL, such condlLlon LhaL Lhe Culambao spouses would have
Lo evlcL Lhe lessees was noL sLlpulaLed ln Lhe conLracL. 1hus, lL cannoL be
consldered a condlLlon lmposed upon lLs perfecLlon. ln facL, ower
Commerclal Corp. was well aware of Lhe presence of Lhe LenanLs
Lhereln. lL was also glven conLrol over Lhe sald loL and lL endeavored Lo
LermlnaLe Lhe occupaLlon of lLs acLual LenanLs. Also, slnce lL was ower
Commerclal LhaL knowlngly underLook Lhe rlsk of evlcLlng Lhe lessees, lL
cannoL now clalm LhaL Lhere was a breach of warranLy on Lhe parL of Lhe
vendor.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
III. Lxpress Warrant|es (Art|c|e 1S46)

Art|c|e 1S46.
Any aff|rmat|on of fact or any prom|se by the se||er re|at|ng to the
th|ng |s an express warranty |f the natura| tendency of such
aff|rmat|on or prom|se |s to |nduce the buyer to purchase the same,
and |f the buyer purchase the th|ng re|y|ng thereon. No aff|rmat|on of
the va|ue of the th|ng, nor any statement purport|ng to be a statement
of the se||er's op|n|on on|y, sha|| be construed as a warranty, un|ess
the se||er made such aff|rmat|on or statement as an expert and |t was
re||ed upon by the buyer. (n)

A. Def|n|t|on
A warranLy ls a sLaLemenL or represenLaLlon made by Lhe seller
of goods, conLemporaneously and as parL of Lhe conLracL of
sale, havlng reference Lo Lhe characLer, quallLy or LlLle of Lhe
goods, and by whlch he promlses or underLakes Lo lnsure LhaL
cerLaln facLs are or shall be as he Lhen represenLs Lhem -GI '(
)"*%+ ", -..$/01@ 3AD 5)!- 36 7244E:(
A warranLy ls an afflrmaLlon of facL or any promlse made by a
vendor ln relaLlon Lo Lhe Lhlng sold. 1he declslve LesL ls wheLher
Lhe vendor assumes Lo asserL a facL of whlch Lhe vendee ls
lgnoranL. CS""NT$/% M?K0K..KG$1@ RG>( '( 5T@ BDB 5)!- B2D
72443:(

8. kequ|s|tes and L|ab|||ty for Lxpress Warrant
8reach of an express warranLy makes Lhe seller llable for
damages. 1he followlng requlslLes musL be esLabllshed ln order
LhaL Lhere be an express warranLy ln sale: (1) Lhe express
warranLy musL be an afflrmaLlon of facL or any promlse by Lhe
seller relaLlng Lo Lhe sub[ecL maLLer of Lhe sale, (2) Lhe naLural
Lendency of such afflrmaLlon or promlse ls Lo lnduce Lhe buyer
Lo purchase Lhe Lhlng, and (3) Lhe buyer purchases Lhe Lhlng
relylng on such afflrmaLlon or promlse Lhereon. C)/%%/1>"1"@ P%(
'( )-@ BDD 5)!- AAA 72443:(
1he prlnclple of 7/'%/+ %$.+#& only requlres Lhe purchaser Lo
exerclse care and aLLenLlon ordlnarlly exerclsed by prudenL men
ln llke buslness affalrs, and only applles Lo defecLs whlch are
open and paLenL Lo Lhe servlce of one exerclslng such care. lL
can only be applled where lL ls shown or conceded LhaL Lhe
parLles Lo Lhe conLracL sLand on equal fooLlng and have equal
knowledge or equal means of knowledge and Lhere ls no
relaLlon of LrusL or confldence beLween Lhem. lL does noL apply
Lo a represenLaLlon LhaL amounLs Lo a warranLy by Lhe seller
and Lhe slLuaLlon requlres Lhe buyer Lo rely upon such promlse
or afflrmaLlon. S*KG?/Q/ '( M$".0$, BAE 5)!- 2DE 72443:.
1


S*KG?/Q/ '( M$".0$

Iacts: !alme Culnhawa ls engaged ln Lhe buslness of selllng brand new
vehlcles, and had a showroom dlsplaylng hls producLs. Culnhawa
purchased a brand new MlLsublshl L-300 from Manlla. Culnhawa's
drlver, Leopoldo Clayan, drove Lhe van from Manlla Lo naga. Powever,
Clayan suffered a hearL aLLack durlng Lhe Lrlp causlng Lhe damage Lo Lhe
under chassls slnce Lhe lefL fronL Llre had Lo be replaced. 1hls was
repalred and Lhe van was puL on dlsplay ln Culnhawa's showroom. 1hls

1
<&# =/42 "%/0+> ?%'( )#&.( '( )0/*4/4, 316 SC8A 681 (2007)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
same van was laLer sold Lo Spouses Sllo who are engaged ln Lhe buslness
of buylng garmenLs ln Manlla and selllng Lhem ln naga. 1hey saw Lhe
van ln Culnhawa's showroom and lnspecLed lLs lnLerlor buL noL Lhe
under chassls. 1hey also dld noL conducL a LesL drlve, and so boughL Lhe
van wlLhouL any knowledge of Lhe damage lL had prevlously lncurred.
AzoLea, Lhe sales manager, was Lhe one who LransacLed wlLh Lhe
Spouses Sllo and furnlshed Lhe couple wlLh a Servlce Manual conLalnlng
Lhe warranLy Lerms and condlLlons. 1he day afLer Lhe van was boughL by
Lhe spouses, !osephlne Sllo (wlfe) wenL Lo Manlla wlLh Clenda lngol
and Lhe laLLer's husband (drlver). Cn Lhe way back, Lhey heard a
squeaklng sound and laLer dlscovered LhaL lL was caused by parLs
underneaLh Lhe vehlcle LhaL were welded LogeLher. Culnhawa lnslsLed
LhaL Lhe defecLs were mere facLory defecLs. As Lhe defecLs perslsLed, Lhe
spouses requesLed LhaL Culnhawa replace Lhe van wlLh 2 Charade-
ualhaLsu vehlcles wlLhln a week or Lwo, wlLh Lhe addlLlonal cosLs Lo be
Laken from Lhelr downpaymenL. Powever, Lhe spouses laLer asked for
Lhe resclsslon of Lhe conLracL upon dlscoverlng LhaL Lhe van was really
noL brand new.

Issue: WheLher or noL Lhere were fraudulenL represenLaLlons by
Culnhawa.

ne|d: ?LS. 1he Supreme CourL ruled LhaL !alme Culnhawa ls gullLy of
oLher decelLs. 1he CourL polnLed ouL LhaL Lhe crlme could be commlLLed
by omlsslon. lf, ln a conLracL of sale, Lhe vendor knowlngly allowed Lhe
vendee Lo be decelved as Lo Lhe Lhlng sold ln a maLerlal maLLer by falllng
Lo dlsclose an lnLrlnslc clrcumsLance LhaL ls vlLal Lo Lhe conLracL,
knowlng LhaL Lhe vendee ls acLlng upon Lhe presumpLlon LhaL no such
facL exlsLs, decelL ls accompllshed by Lhe suppresslon of Lhe LruLh.
AzoLea knew LhaL Lhe van had flgured ln an accldenL, was damaged and
had Lo be repalred. neverLheless, Lhe van was placed ln Lhe showroom,
Lhus maklng lL appear Lo Lhe publlc LhaL lL was a brand new unlL. 1he
peLlLloner was mandaLed Lo reveal Lhe foregolng facLs Lo Lhe prlvaLe
complalnanL.

Doctr|ne:

AfflrmaLlon of value or sLaLemenL of seller's oplnlon ls noL a
warranLy (ArLlcle 1341). unless seller made such sLaLemenL as
an experL, and was relled upon by Lhe buyer.
o 1he law allows conslderable laLlLude Lo seller's
sLaLemenLs, or dealer's Lalk, and experlence Leaches
LhaL lL ls exceedlngly rlsky Lo accepL lL aL lLs face value.
AsserLlons concernlng Lhe properLy whlch ls Lhe sub[ecL
of a conLracL of sale, or ln regard Lo lLs quallLles and
characLerlsLlcs, are Lhe usual and ordlnary means used
by sellers Lo obLaln a hlgh prlce and are always
undersLood as affordlng Lo buyers no ground for
omlLLlng Lo make lnqulrles. A man who relles upon such
an afflrmaLlon made by a person whose lnLeresL mlghL
so readlly prompL hlm Lo exaggeraLe Lhe value of hls
properLy does so as hls perll, and musL Lake Lhe
consequences of hls own lmprudence." C5"GI>" '(
5$00G$%@ 6D M?K0( 23B 7898D:(
AsserLlons concernlng Lhe properLy's characLerlsLlcs are Lhe
usual and ordlnary means of sellers Lo geL a hlgh prlce. A man
who relles upon such afflrmaLlon...does so aL hls own perll.
-</%%/I/ '( S/T@ 32 M?K0( 399 7892E:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

IV. Imp||ed Warrant|es (Art|c|e 1S47)

Art|c|e 1S47.
In a contract of sa|e, un|ess a contrary |ntent|on appears, there |s:

(1) An |mp||ed warranty on the part of the se||er that he has a r|ght to
se|| the th|ng at the t|me when the ownersh|p |s to pass, and that the
buyer sha|| from that t|me have and en[oy the |ega| and peacefu|
possess|on of the th|ng,

(2) An |mp||ed warranty that the th|ng sha|| be free from any h|dden
fau|ts or defects, or any charge or encumbrance not dec|ared or known
to the buyer.

1h|s Art|c|e sha|| not, however, be he|d to render ||ab|e a sher|ff,
auct|oneer, mortgagee, p|edgee, or other person profess|ng to se|| by
v|rtue of author|ty |n fact or |aw, for the sa|e of a th|ng |n wh|ch a th|rd
person has a |ega| or equ|tab|e |nterest. (n)

A. Def|n|t|on
lmplled WarranLles (deflnlLlon) ! Lhose whlch by law consLlLuLe
parL of every conLracL of sale, wheLher or noL Lhe parLles were
aware of or lnLended Lhem.
Who ls llable? Genera| ku|e: Cnly a seller ls bound by Lhe
lmplled warranLles.
o Lxcept|on: Lxpress sLlpulaLlon ln conLracL may make Lhe
agenL of Lhe seller bound by Lhese.

8. Warranty 1hat Se||er nas k|ght to Se||
1he lmplled warranLy LhaL seller has Lhe rlghL Lo sell Lhe Lhlng aL
Lhe Llme Lhe ownershlp ls Lo pass refers only Lo Lhe Lransfer of
ownershlp aL Lhe polnL of consummaLlon, nC1 any
represenLaLlon as Lo ownershlp aL Lhe polnL of perfecLlon.
lL shall noL be appllcable Lo render llable a sherlff, aucLloneer,
morLgagee, pledgee or any oLher person professlng Lo sell by
vlrLue of auLhorlLy ln facL or law.
o lor Lhe sale of a Lhlng ln whlch a Lhlrd person has a
legal/equlLable lnLeresL
1here can be no legal walver of Lhls warranLy wlLhouL changlng
baslc naLure of Lhe relaLlonshlp
o unless lL amounLs Lo clear assumpLlon of rlsk on Lhe
parL of Lhe buyer

C. Warranty Aga|nst Lv|ct|on (Art|c|es 1S48-1S60)

Art|c|e 1S48.
Lv|ct|on sha|| take p|ace whenever by a f|na| [udgment based on a r|ght
pr|or to the sa|e or an act |mputab|e to the vendor, the vendee |s
depr|ved of the who|e or of a part of the th|ng purchased.

1he vendor sha|| answer for the ev|ct|on even though noth|ng has
been sa|d |n the contract on the sub[ect.

1he contract|ng part|es, however, may |ncrease, d|m|n|sh, or suppress
th|s |ega| ob||gat|on of the vendor. (147Sa)

Art|c|e 1S49.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1he vendee need not appea| from the dec|s|on |n order that the
vendor may become ||ab|e for ev|ct|on. (n)

Art|c|e 1SS0.
When adverse possess|on had been commenced before the sa|e but
the prescr|pt|ve per|od |s comp|eted after the transfer, the vendor
sha|| not be ||ab|e for ev|ct|on. (n)

Art|c|e 1SS1.
If the property |s so|d for nonpayment of taxes due and not made
known to the vendee before the sa|e, the vendor |s ||ab|e for ev|ct|on.
(n)

Art|c|e 1SS2.
1he [udgment debtor |s a|so respons|b|e for ev|ct|on |n [ud|c|a| sa|es,
un|ess |t |s otherw|se decreed |n the [udgment. (n)

Art|c|e 1SS3.
Any st|pu|at|on exempt|ng the vendor from the ob||gat|on to answer
for ev|ct|on sha|| be vo|d, |f he acted |n bad fa|th. (1476)

Art|c|e 1SS4.
If the vendee has renounced the r|ght to warranty |n case of ev|ct|on,
and ev|ct|on shou|d take p|ace, the vendor sha|| on|y pay the va|ue
wh|ch the th|ng so|d had at the t|me of the ev|ct|on. Shou|d the
vendee have made the wa|ver w|th know|edge of the r|sks of ev|ct|on
and assumed |ts consequences, the vendor sha|| not be ||ab|e. (1477)

Art|c|e 1SSS.
When the warranty has been agreed upon or noth|ng has been
st|pu|ated on th|s po|nt, |n case ev|ct|on occurs, the vendee sha|| have
the r|ght to demand of the vendor:

(1) 1he return of the va|ue wh|ch the th|ng so|d had at the t|me of the
ev|ct|on, be |t greater or |ess than the pr|ce of the sa|e,

(2) 1he |ncome or fru|ts, |f he has been ordered to de||ver them to the
party who won the su|t aga|nst h|m,

(3) 1he costs of the su|t wh|ch caused the ev|ct|on, and, |n a proper
case, those of the su|t brought aga|nst the vendor for the warranty,

(4) 1he expenses of the contract, |f the vendee has pa|d them,

(S) 1he damages and |nterests, and ornamenta| expenses, |f the sa|e
was made |n bad fa|th. (1478)

Art|c|e 1SS6.
Shou|d the vendee |ose, by reason of the ev|ct|on, a part of the th|ng
so|d of such |mportance, |n re|at|on to the who|e, that he wou|d not
have bought |t w|thout sa|d part, he may demand the resc|ss|on of the
contract, but w|th the ob||gat|on to return the th|ng w|thout other
encumbrances that those wh|ch |t had when he acqu|red |t.

ne may exerc|se th|s r|ght of act|on, |nstead of enforc|ng the vendor's
||ab|||ty for ev|ct|on.

1he same ru|e sha|| be observed when two or more th|ngs have been
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
[o|nt|y so|d for a |ump sum, or for a separate pr|ce for each of them, |f
|t shou|d c|ear|y appear that the vendee wou|d not have purchased
one w|thout the other. (1479a)

Art|c|e 1SS7.
1he warranty cannot be enforced unt|| a f|na| [udgment has been
rendered, whereby the vendee |oses the th|ng acqu|red or a part
thereof. (1480)

Art|c|e 1SS8.
1he vendor sha|| not be ob||ged to make good the proper warranty,
un|ess he |s summoned |n the su|t for ev|ct|on at the |nstance of the
vendee. (1481a)

Art|c|e 1SS9.
1he defendant vendee sha|| ask, w|th|n the t|me f|xed |n the ku|es of
Court for answer|ng the comp|a|nt, that the vendor be made a co-
defendant. (1482a)

Art|c|e 1S60.
If the |mmovab|e so|d shou|d be encumbered w|th any non-apparent
burden or serv|tude, not ment|oned |n the agreement, of such a
nature that |t must be presumed that the vendee wou|d not have
acqu|red |t had he been aware thereof, he may ask for the resc|ss|on of
the contract, un|ess he shou|d prefer the appropr|ate |ndemn|ty.
Ne|ther r|ght can be exerc|sed |f the non-apparent burden or serv|tude
|s recorded |n the keg|stry of roperty, un|ess there |s an express
warranty that the th|ng |s free from a|| burdens and encumbrances.

W|th|n one year, to be computed from the execut|on of the deed, the
vendee may br|ng the act|on for resc|ss|on, or sue for damages.

WarranLy agalnsL evlcLlon ls an lmplled warranLy LhaL when
ownershlp wlll pass, buyer shall have legal and peaceful
possesslon.
vendor shall answer for Lhe evlcLlon even lf Lhere ls no
sLlpulaLlon regardlng evlcLlon
1he seller, ln declarlng LhaL he owned and had clean LlLle Lo Lhe
vehlcle, gave an lmplled warranLy of LlLle, and ln pledglng LhaL
he wlll defend Lhe same from all clalms or any clalm
whaLsoever [and] wlll save Lhe vendee from any sulL by Lhe
governmenL of Lhe 8epubllc of Lhe hlllpplnes," he gave a
warranLy agalnsL evlcLlon, and Lhe prescrlpLlve perlod Lo flle a
breach Lhereof ls slx monLhs afLer Lhe dellvery of Lhe vehlcle.
-GI '( )"*%+ ", -..$/01, 3AD 5)!- 36 7244E:(

-GI '( )"*%+ ", -..$/01

Iacts: under a "car-swapplng" scheme, 8runo Soledad sold hls
MlLsublshl CS8 sedan 1982 model Lo !alme Ang. lor hls parL, Ang
conveyed Lo Soledad hls MlLsublshl Lancer model 1988. Ang, a buyer
and seller of used vehlcles, laLer offered Lhe MlLsublshl CS8 for sale
Lhrough lar LasLern MoLors, a second-hand auLo dlsplay cenLer. 1he
vehlcle was evenLually sold Lo aul 8ugash. 8efore Lhe deed could be
reglsLered ln 8ugash's name, however, Lhe vehlcle was selzed by vlrLue
of a wrlL of replevln on accounL of Lhe alleged fallure of 8onaldo anes,
Lhe owner of Lhe vehlcle prlor Lo Soledad, Lo pay Lhe morLgage debL
consLlLuLed Lhereon.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

1o secure Lhe release of Lhe vehlcle, Ang pald 8A llnance. Soledad
refused Lo relmburse, desplLe repeaLed demands, drawlng Ang Lo
charge hlm for LsLafa wlLh abuse of confldence. 8y 8esoluLlon, Lhe ClLy
rosecuLor's Cfflce dlsmlssed Lhe complalnL for lnsufflclency of
evldence, drawlng Ang Lo flle for consecuLlve complalnLs for damages
agalnsL Soledad before Lhe 8eglonal 1rlal CourL (81C) of Cebu ClLy.
SubsequenLly, Lhe 81C rendered [udgmenL ln favor of Ang "for Lhe sake
of [usLlce and equlLy, and ln consonance wlLh Lhe saluLary prlnclple of
non-enrlchmenL aL anoLher's expense. 1he 81C Lhen ordered Soledad Lo
pay Ang Lhe amounL Lhe laLLer pald Lo 8A llnance.

Soledad Lhen appealed Lo Lhe AppellaLe CourL, whlch reverses Lhe
declslon of Lhe 81C. 1he CourL of Appeals dlsmlssed Ang's peLlLlon on
Lhe ground LhaL Lhe flllng of sald complalnL seeklng Lhe awardlng of
damages for breach of warranLy has already prescrlbed.

Issue: WheLher or noL Ang's cause of acLlon had noL yeL prescrlbed
when he flled Lhe complalnL

ne|d: ?LS. ln declarlng LhaL he owned and had clean LlLle Lo Lhe vehlcle
aL Lhe Llme Lhe ueed of AbsoluLe Sale was forged, Soledad gave an
lmplled warranLy of LlLle. ln pledglng LhaL he "wlll defend Lhe same from
all clalms or any clalm whaLsoever and wlll save Lhe vendee from any
sulL by Lhe governmenL of Lhe 8epubllc of Lhe hlllpplnes," Soledad gave
a warranLy agalnsL evlcLlon.

Clven Ang's buslness of buylng and selllng used vehlcles, he could noL
have merely relled on Soledad's afflrmaLlon LhaL Lhe car was free from
llens and encumbrances. Pe was expecLed Lo have Lhoroughly verlfled
Lhe car's reglsLraLlon and relaLed documenLs.

Slnce whaL Soledad, as seller, gave was an lmplled warranLy, Lhe
prescrlpLlve perlod Lo flle a breach Lhereof ls slx monLhs afLer Lhe
dellvery of Lhe vehlcle, followlng ArLlcle 1371. 8uL even lf Lhe daLe of
flllng of Lhe acLlon ls reckoned from Lhe daLe peLlLloner lnsLlLuLed hls
flrsL complalnL for damages on november 9, 1993, and noL on !uly 13,
1996 when he flled Lhe complalnL sub[ecL of Lhe presenL peLlLlon, Lhe
acLlon [usL Lhe same had prescrlbed, lL havlng been flled 16 monLhs
afLer !uly 28, 1992, Lhe daLe of dellvery of Lhe vehlcle

Doctr|ne:

1. When 1here Is 8reach Cf 1h|s Warranty
a. urchaser has been deprlved of/evlcLed from Lhe whole
or parL of Lhe Lhlng sold
" 1he buyer need noL reslsL Lhe evlcLlon.
b. LvlcLlon ls by flnal [udgmenL
" 1he warranLy cannoL be enforced unLll a flnal
[udgmenL has been rendered whereby Lhe
buyer loses Lhe Lhlng acqulred or a parL Lhereof.
" 1he buyer need noL appeal from Lhe declslon ln
order LhaL Lhe seller may become llable for
evlcLlon.
c. 8asls Lhereof ls a rlghL prlor Lo Lhe sale made by Lhe
seller
d. Seller has been summoned and made co-defendanL ln
Lhe sulL for evlcLlon aL Lhe lnsLance of Lhe buyer
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
" ln order Lo consLlLuLe noLlce of evlcLlon Lo Lhe
seller, Lhe seller musL have been made a parLy
Lo Lhe case.
WarranLy cannoL be enforced agalnsL
seller when buyer merely malled seller
a copy of Lhe opposlLlon of buyer Lo Lhe
evlcLlon sulL. Seller musL be summoned
ln Lhe sulL for evlcLlon aL Lhe lnsLance of
Lhe buyer (ArLlcle 1338), and be made a
co-defendanL (ArLlcle 1339), or made a
Lhlrd-parLy defendanL. L1>/0$% '( )"*%+
", -..$/01@ 86E 5)!- 8 (89E3:(
8

" 1hls ls Lhe only condlLlon LhaL ls requlred Lo be
complled wlLh by Lhe vendee. Cnce Lhls ls
proven, Lhe buyer's rlghL Lo Lhe warranLy ls
perfecL, and Lhe seller cannoL seL up anyLhlng
agalnsL lL. P"'$00/G" '( ;*/0?/+K@ BD M?K0( 6D8
78923:
no acLlon for breach of Lhls warranLy when buyer was well
aware of Lhe presence of LenanLs, and even underLook Lhe [ob
of e[ecLlng Lhese squaLLers. M"Q$% )"##$%>K/0 '( )-@ 2DB 5)!-
39D 7899D:

2. Lv|ct|on In art (Art|c|e 1SS6)

3. art|cu|ar Causes G|ven 8y Law (Art|c|e 1SS0 - 1SS1)


1
)/43@/&%1 A3/4/ '( A#&&%B#1, 21 hll. 127 (1911), C(D( A*/@#4 '( )-, 94 SC8A
413 (1979).
4. App||cab|||ty to Iud|c|a| Sa|es (Art|c|e 1SS2)
8u1 ln Lhe followlng cases:
o 5/G+K/I" ;/GN F$'( )"%.( '( )"*%+ ", -..$/01@ 2DA 5)!-
ADB 7899D:, Lhe CourL ruled LhaL a buyer aL execuLlon
sales Lakes properLy sub[ecL Lo superlor rlghL of oLher
parLles. 1herefore, Lhe [udgmenL debLor-seller ls noL
llable for evlcLlon.
o CaveaL empLor applles ln execuLlon sales, and Lhe
sherlff does noL warranL Lhe LlLle Lo Lhe properLy sold by
hlm. lL ls noL lncumbenL upon hlm Lo place purchaser ln
possesslon. -00*%$ =/G*,/>+*%KGI@ RG>( '( )"*%+ ",
-..$/01@ 899 5)!- 2E3 78998:
No Warranty Aga|nst Lv|ct|on When Lxecut|on Sa|e - ln
volunLary sales, vendor can be expecLed Lo defend hls LlLle
because of hls warranLy Lo Lhe vendees buL no such obllgaLlon ls
owed by Lhe owner whose land ls sold aL execuLlon sale.
C5/G+K/I" ;/GN F$'( )"%.( '( )-@ 2DA 5)!- ADB 7899D:(
o 8U1 SLLU Art|c|e 1SS2
ALLy. SanLlago: ln [udlclal sales, someLlmes whaL ls belng sold ls
noL Lhe properLy of Lhe [udlclal debLor, buL LhaL of Lhe
guaranLor. 1he owner ln Lhls case cannoL be held llable for
warranLy of evlcLlon, buL raLher lL ls [udgmenL-debLor who
should be held llable for evlcLlon.

S. Amounts Ior Wh|ch Se||er Is L|ab|e In Case Cf Lv|ct|on (Art|c|e
1SSS)

6. Wa|ver Cf Warranty And Lffects (Art|c|e 1SS3)
LffecL of walver depends on naLure of such walver. WheLher:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o lL ls a general or speclflc walver, and
o uone ln good falLh or bad falLh on seller's parL
lf seller acLed ln bad falLh, Lhen any sLlpulaLlon exempLlng seller
from answerlng evlcLlon shall be vold. ArLlcle 1333.
lf buyer merely renounces Lhe warranLy ln general Lerms, and
wlLhouL knowledge of a parLlcular rlsk, and evlcLlon Lakes place,
Lhe seller shall only pay Lhe value of Lhlng aL Llme of evlcLlon.
o Ceneral walver llmlLs llablllLy of seller.
lf buyer walved wlLh knowledge of rlsks (speclflc walver) seller
shall noL be llable.
o Lven when Lhere ls no speclflc walver, buyer cannoL
hold seller llable when he ls aware of a Lhlrd parLy clalm
(8u?L8 MuS1 8L ln CCCu lAl1P). P= O*/<"G '( )-@ 9B
5)!- B86 789D4:

D. Warranty Aga|nst Non-Apparent Serv|tudes (Art|c|es 1S60)
1. kequ|s|tes for Warranty Aga|nst Non-Apparent Serv|tude
a. lmmovable sold ls encumbered by non-apparenL
burden/servlLude, noL menLloned ln Lhe agreemenL.
b. naLure of such makes lL so LhaL Lhe buyer would noL
have acqulred Lhe lmmovable had be been aware of lL.

2. 1h|s warranty does not app|y
a. When servlLude ls menLloned ln Lhe agreemenL
b. lf Lhe non-apparenL burden ls recorded ln Lhe 8eglsLry
of ueeds
o unless Lhere ls an express warranLy LhaL Lhe Lhlng ls free
from all burdens and encumbrances.

3. kemed|es and rescr|pt|ve er|od
8uyer may brlng acLlon for resclsslon or sue for damages wlLhln
one (1) year from execuLlon of Lhe deed.
lf Lhls has elapsed, he may only brlng an acLlon for damages
wlLhln one year from when he dlscovered Lhe servlLude.

L. Warranty Aga|nst n|dden Defects (Art|c|es 1S61-1S80)

Art|c|e 1S61.
1he vendor sha|| be respons|b|e for warranty aga|nst the h|dden
defects wh|ch the th|ng so|d may have, shou|d they render |t unf|t for
the use for wh|ch |t |s |ntended, or shou|d they d|m|n|sh |ts f|tness for
such use to such an extent that, had the vendee been aware thereof,
he wou|d not have acqu|red |t or wou|d have g|ven a |ower pr|ce for |t,
but sa|d vendor sha|| not be answerab|e for patent defects or those
wh|ch may be v|s|b|e, or for those wh|ch are not v|s|b|e |f the vendee |s
an expert who, by reason of h|s trade or profess|on, shou|d have
known them. (1484a)

Art|c|e 1S62.
In a sa|e of goods, there |s an |mp||ed warranty or cond|t|on as to the
qua||ty or f|tness of the goods, as fo||ows:

(1) Where the buyer, express|y or by |mp||cat|on, makes known to the
se||er the part|cu|ar purpose for wh|ch the goods are acqu|red, and |t
appears that the buyer re||es on the se||er's sk||| or [udgment (whether
he be the grower or manufacturer or not), there |s an |mp||ed warranty
that the goods sha|| be reasonab|y f|t for such purpose,

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(2) Where the goods are brought by descr|pt|on from a se||er who
dea|s |n goods of that descr|pt|on (whether he be the grower or
manufacturer or not), there |s an |mp||ed warranty that the goods sha||
be of merchantab|e qua||ty. (n)

Art|c|e 1S63.
In the case of contract of sa|e of a spec|f|ed art|c|e under |ts patent or
other trade name, there |s no warranty as to |ts f|tness for any
part|cu|ar purpose, un|ess there |s a st|pu|at|on to the contrary. (n)

Art|c|e 1S64.
An |mp||ed warranty or cond|t|on as to the qua||ty or f|tness for a
part|cu|ar purpose may be annexed by the usage of trade. (n)

Art|c|e 1S6S.
In the case of a contract of sa|e by samp|e, |f the se||er |s a dea|er |n
goods of that k|nd, there |s an |mp||ed warranty that the goods sha|| be
free from any defect render|ng them unmerchantab|e wh|ch wou|d not
be apparent on reasonab|e exam|nat|on of the samp|e. (n)

Art|c|e 1S66.
1he vendor |s respons|b|e to the vendee for any h|dden fau|ts or
defects |n the th|ng so|d, even though he was not aware thereof.

1h|s prov|s|on sha|| not app|y |f the contrary has been st|pu|ated, and
the vendor was not aware of the h|dden fau|ts or defects |n the th|ng
so|d. (148S)

Art|c|e 1S67.
In the cases of art|c|es 1S61, 1S62, 1S64, 1S6S and 1S66, the vendee
may e|ect between w|thdraw|ng from the contract and demand|ng a
proport|onate reduct|on of the pr|ce, w|th damages |n e|ther case.
(1486a)

Art|c|e 1S68.
If the th|ng so|d shou|d be |ost |n consequence of the h|dden fau|ts,
and the vendor was aware of them, he sha|| bear the |oss, and sha|| be
ob||ged to return the pr|ce and refund the expenses of the contract,
w|th damages. If he was not aware of them, he sha|| on|y return the
pr|ce and |nterest thereon, and re|mburse the expenses of the contract
wh|ch the vendee m|ght have pa|d. (1487a)

Art|c|e 1S69.
If the th|ng so|d had any h|dden fau|t at the t|me of the sa|e, and
shou|d thereafter be |ost by a fortu|tous event or through the fau|t of
the vendee, the |atter may demand of the vendor the pr|ce wh|ch he
pa|d, |ess the va|ue wh|ch the th|ng had when |t was |ost.

If the vendor acted |n bad fa|th, he sha|| pay damages to the vendee.
(1488a)

Art|c|e 1S70.
1he preced|ng art|c|es of th|s Subsect|on sha|| be app||cab|e to [ud|c|a|
sa|es, except that the [udgment debtor sha|| not be ||ab|e for damages.
(1489a)

Art|c|e 1S71.
Act|ons ar|s|ng from the prov|s|ons of the preced|ng ten art|c|es sha||
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
be barred after s|x months, from the de||very of the th|ng so|d. (1490)

Art|c|e 1S72.
If two or more an|ma|s are so|d together, whether for a |ump sum or
for a separate pr|ce for each of them, the redh|b|tory defect of one
sha|| on|y g|ve r|se to |ts redh|b|t|on, and not that of the others, un|ess
|t shou|d appear that the vendee wou|d not have purchased the sound
an|ma| or an|ma|s w|thout the defect|ve one.

1he |atter case sha|| be presumed when a team, yoke pa|r, or set |s
bought, even |f a separate pr|ce has been f|xed for each one of the
an|ma|s compos|ng the same. (1491)

Art|c|e 1S73.
1he prov|s|ons of the preced|ng art|c|e w|th respect to the sa|e of
an|ma|s sha|| |n ||ke manner be app||cab|e to the sa|e of other th|ngs.
(1492)

Art|c|e 1S74.
1here |s no warranty aga|nst h|dden defects of an|ma|s so|d at fa|rs or
at pub||c auct|ons, or of ||ve stock so|d as condemned. (1493a)

Art|c|e 1S7S.
1he sa|e of an|ma|s suffer|ng from contag|ous d|seases sha|| be vo|d.

A contract of sa|e of an|ma|s sha|| a|so be vo|d |f the use or serv|ce for
wh|ch they are acqu|red has been stated |n the contract, and they are
found to be unf|t therefor. (1494a)

Art|c|e 1S76.
If the h|dden defect of an|ma|s, even |n case a profess|ona| |nspect|on
has been made, shou|d be of such a nature that expert know|edge |s
not suff|c|ent to d|scover |t, the defect sha|| be cons|dered as
redh|b|tory.

8ut |f the veter|nar|an, through |gnorance or bad fa|th shou|d fa|| to
d|scover or d|sc|ose |t, he sha|| be ||ab|e for damages. (149S)

Art|c|e 1S77.
1he redh|b|tory act|on, based on the fau|ts or defects of an|ma|s, must
be brought w|th|n forty days from the date of the|r de||very to the
vendee.
1h|s act|on can on|y be exerc|sed w|th respect to fau|ts and defects
wh|ch are determ|ned by |aw or by |oca| customs. (1496a)

Art|c|e 1S78.
If the an|ma| shou|d d|e w|th|n three days after |ts purchase, the
vendor sha|| be ||ab|e |f the d|sease wh|ch cause the death ex|sted at
the t|me of the contract. (1497a)

Art|c|e 1S79.
If the sa|e be resc|nded, the an|ma| sha|| be returned |n the cond|t|on
|n wh|ch |t was so|d and de||vered, the vendee be|ng answerab|e for
any |n[ury due to h|s neg||gence, and not ar|s|ng from the redh|b|tory
fau|t or defect. (1498)

Art|c|e 1S80.
In the sa|e of an|ma|s w|th redh|b|tory defects, the vendee sha|| a|so
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
en[oy the r|ght ment|oned |n art|c|e 1S67, but he must make use
thereof w|th|n the same per|od wh|ch has been f|xed for the exerc|se
of the redh|b|tory act|on. (1499)

1. L|ab|||ty for n|dden Defects
Seller shall be responslble when...
a. naLure of hldden defecL ls such LhaL lL would render Lhe
sub[ecL manner unflL for Lhe use for whlch lL was
lnLended.
b. ulmlnlsh lLs flLness Lo such an exLenL LhaL buyer would
noL have boughL lL or he would have pald a lower prlce
for lL.
noLe: Seller responslble even lf he was noL aware of Lhese
hldden defecLs. ArLlcle 1366(1)
Seller noL answerable for paLenL defecLs, or Lhose whlch are
vlslble.
o Lven for Lhose whlch are lnvlslble, lf Lhe buyer should
know abouL Lhem by reason of hls Lrade/professlon
1he warranLy applles Lo boLh movable and lmmovable
Seller's agenL can 6> /E&%%$%4+ be llable for Lhe warranLy
agalnsL hldden defecLs. C5>?#KN /GN HV$%0T@ RG>( '( !P;
=/%+KG$<@ 8AA 5)!- B96 789EE:(

2. kequ|s|tes for 8reach
A hldden defecL ls one whlch ls unknown or could noL have been
known Lo Lhe buyer. under Lhe law, Lhe requlslLes Lo recover on
accounL of hldden defecLs are as follows: (a) 1he defecL musL be
hldden, (b) 1he defecL musL exlsL aL Lhe Llme Lhe sale was made,
(c) 1he defecL musL ordlnarlly have been excluded from Lhe
conLracL, (d) 1he defecL, musL be lmporLanL (render Lhe Lhlng
unflL or conslderably decreases flLness), (e) 1he acLlon musL be
lnsLlLuLed wlLhln Lhe sLaLuLe of llmlLaLlons. W*+%K#KC X$$N1 )"%.(
'( )"*%+ ", -..$/01, BB8 5)!- 63D 7244B:.
1


W*+%K#KC X$$N1 )"%.( '( )"*%+ ", -..$/01

Iacts: LvangellsLa spouses purchased feeds from nuLrlmlx. 1hey refused
Lo pay Lhelr unseLLled debL clalmlng LhaL Lhousands of Lhelr llvesLock
were polsoned by Lhe nuLrlmlx feeds. nuLrlmlx sued Lhem for collecLlon
of money. 1he spouses counLered wlLh a sulL for LhaL Llme, Lhey may
have already been conLamlnaLed.

Issue: WheLher or noL nuLrlmlx ls gullLy of breach of warranLy due Lo
hldden defecLs

ne|d: nC. ln Lhe sale of anlmal feeds, Lhere ls an lmplled warranLy LhaL lL
ls reasonably flL and sulLable Lo be used for Lhe purpose whlch boLh
parLles conLemplaLed. 1o be able Lo prove llablllLy on Lhe basls of breach
of lmplled warranLy, Lhree Lhlngs musL be esLabllshed by Lhe
respondenLs.
llrsL ls LhaL Lhey susLalned ln[ury because of Lhe producL, Lhe
Second ls LhaL Lhe ln[ury occurred because Lhe producL was
defecLlve or unreasonably unsafe, and
llnally, Lhe defecL exlsLed when Lhe producL lefL Lhe hands of
Lhe peLlLloner.


1
F4'%1+$%4+1 G ?%'%0#.$%4+5 F47( '( )-, 162 SC8A 636 [1988]).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
A manufacLurer or seller of a producL cannoL be held llable for any
damage allegedly caused by Lhe producL ln Lhe absence of any proof
LhaL Lhe producL ln quesLlon was defecLlve. 1he defecL musL be presenL
upon Lhe dellvery or manufacLure of Lhe producL, or when Lhe producL
lefL Lhe seller's or manufacLurer's conLrol, or when Lhe producL was sold
Lo Lhe purchaser, or Lhe producL musL have reached Lhe user or
consumer wlLhouL subsLanLlal change ln Lhe condlLlon lL was sold.

ln alleglng LhaL Lhere was a vlolaLlon of warranLy agalnsL hldden defecLs,
Lhe spouses assumed Lhe burden of proof. Powever, Lhls Lhey falled Lo
overcome. under Lhe law, Lhe defecL musL exlsL aL Lhe Llme Lhe sale was
made and aL Lhe Llme Lhe producL lefL Lhe hands of Lhe seller, whlch Lhe
spouses falled Lo prove. 1he feeds were belaLedly LesLed-3 monLhs
afLer Lhe deaLh of Lhe brollers and hogs. 1hls means LhaL LhaL Llme, Lhey
may have already been conLamlnaLed. 1hey falled Lo prove LhaL Lhe
feeds dellvered Lo be LesLed were Lhe same feeds LhaL allegedly
polsoned Lhe anlmals.

Doctr|ne:

3. kemed|es for the 8uyer (Art|c|e 1S67)
1he buyer may elLher:
o WlLhdraw (acclon redhlblLorla), or
o uemand a reducLlon of Lhe prlce (acLlon quanLl mlnorls)
uamages ln elLher case.
1he cholce of remedles ls avallable only when Lhe Lhlng has noL
been losL.

4. Cb||gat|on of the Se||er (Art|c|e 1S68)
lf lL has been losL, obllgaLlons of seller depend on cause of loss,
knowledge of hldden defecL by seller, and wheLher Lhere was a
walver of Lhe warranLy.
o LosL Lhrough hldden faulLs
" lf seller was aware ! he shall bear Lhe loss, and
reLurn Lhe prlce and expenses of Lhe conLracL,
wlLh damages.
" lf seller was noL aware ! only obllged only Lo
reLurn Lhe prlce and lnLeresL Lhereon, and
relmburse Lhe expenses of conLracL, buL no
damages.
o lf losL Lhrough forLulLous evenL or Lhrough faulL of buyer
" lf seller was noL aware l.e. ln good falLh !
buyer may demand Lhe prlce he pald, less value
of Lhe Lhlng when lL was losL.
" lf seller ln bad falLh ! he shall pay damages Lo
Lhe buyer,

S. When 1here |s Wa|ver of Warranty (Art|c|e 1S66)
lf seller noL aware ! loss wlll noL make seller llable
lf seller was ln bad falLh ! seller sLlll llable on Lhe warranLy
1he sLlpulaLlon ln a lease wlLh opLlon Lo purchase (LreaLed as a
sale of movable on lnsLallmenLs) LhaL Lhe buyer-lessee
absoluLely releases Lhe lessor from any llablllLy whaLsoever as
Lo any and all maLLers ln relaLlon Lo warranLy ln accordance wlLh
Lhe provlslons herelnafLer sLlpulaLed," was held as an express
walver of warranLy agalnsL hldden defecL ln favor of Lhe seller-
lessor whlch absolved Lhe [seller-lessor] from any llablllLy
arlslng from any defecL or deflclency of Lhe machlnery Lhey
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
boughL(Y CXK0KG'$1+ )%$NK+ )"%.( '( )"*%+ ", -..$/01@ 8DE 5)!-
8EE 789E9:(

6. App||cab|||ty to Iud|c|a| Sa|es (Art|c|e 1S70)
AlLhough Lhere may be hldden defecLs, Lhe debLor may noL have
been ln bad falLh especlally lf Lhe properLy was noL hls own buL
Lhe guaranLor's. As such, Lhe [udgmenL-debLor cannoL be held
llable for damages for Lhe hldden defecLs.

I. kedh|b|tory Defects of An|ma|s (Art|c|e 1S76)
1. Sa|e of 1eam (Art|c|e 1S72 - 1S73)

2. Cther ku|es on Sa|e of An|ma|s (Art|c|e 1S74 - 1S7S, 1S77 -
1S78)

3. Cb||gat|on Cf 8uyer 1o keturn (Art|c|e 1679)

4. kemed|es of the 8uyer (Art|c|e 1S80)

G. Warranty as to I|tness or ua||ty of Goods (Art|c|e 1S62)
1. kequ|s|tes for 8reach of Warranty to App|y
ln order Lo enforce Lhe lmplled warranLy LhaL Lhe goods are
reasonably flL and sulLable Lo be used for Lhe purpose whlch
boLh parLles conLemplaLed, Lhe followlng musL be esLabllshed:
(a) LhaL Lhe buyer susLalned ln[ury because of Lhe producL, (b)
LhaL Lhe ln[ury occurred because Lhe producL was defecLlve or
unreasonably unsafe, and flnally (c) Lhe defecL exlsLed when Lhe
producL lefL Lhe hands of Lhe peLlLloner. W*+%K#KC X$$N1 )"%.( '(
)"*%+ ", -..$/01, BB8 5)!- 63D 7244B:(
A manufacLurer or seller of a producL cannoL be held llable for
any damage allegedly caused by Lhe producL ln Lhe absence of
any proof LhaL Lhe producL ln quesLlon ls defecLlve, whlch was
presenL upon Lhe dellvery or manufacLure of Lhe producL, or
when Lhe producL lefL Lhe seller's or manufacLurer's conLrol, or
when Lhe producL was sold Lo Lhe purchaser, or Lhe producL
musL have reached Lhe user or consumer wlLhouL subsLanLlal
change ln Lhe condlLlon lL was sold. W*+%K#KC X$$N1 )"%.( '(
)"*%+ ", -..$/01, BB8 5)!- 63D 7244B:.

2. Measures of Damage In Case of 8reach of Warranty Cn ua||ty
ulfference beLween value of goods aL Lhe Llme of dellvery and
Lhe value Lhey would have had lf Lhe warranLy was complled
wlLh. (ArLlcle 1399)
o Applles ln absence of speclal clrcumsLances showlng
damage of a greaLer amounL

n. Sa|e of Goods by Samp|e (Art|c|e 1S6S)
A seller's descrlpLlon of Lhe goods whlch ls made parL of Lhe
basls of Lhe LransacLlon creaLes a warranLy LhaL Lhe goods wlll
conform Lo LhaL descrlpLlon. C=$GN"</ '( F/'KN@ BB8 5)!- 8D2
7244B:(
1here ls a sale by sample when a small quanLlLy ls exhlblLed by
Lhe seller as a falr speclmen of Lhe bulk, whlch ls noL presenL
and Lhere ls no opporLunlLy Lo lnspecL or examlne Lhe same. 1o
consLlLuLe a sale by sample, lL musL appear LhaL Lhe parLles
LreaLed Lhe sample as Lhe sLandard of quallLy and LhaL Lhey
conLracLed wlLh reference Lo Lhe sample wlLh Lhe undersLandlng
LhaL Lhe producL Lo be dellvered would correspondenL wlLh Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
sample. ln a conLracL of sale by sample, Lhere ls an lmplled
warranLy LhaL Lhe goods shall be free from any defecL whlch ls
noL apparenL on reasonable examlnaLlon of Lhe sample and
whlch would render Lhe goods unmerchanLable. C=$GN"</ '(
F/'KN@ BB8 5)!- 8D2 7244B:(

V. Add|t|ona| Warrant|es for Consumer roducts (Art|c|es 68,
Consumer Act, k.A. 7394).

kLU8LIC AC1 NC. 7394
Art|c|e 68. -NNK+K"G/0 M%"'K1K"G1 "G Z/%%/G+K$1.
In add|t|on to the C|v|| Code prov|s|ons on sa|e w|th warrant|es, the
fo||ow|ng prov|s|ons sha|| govern the sa|e of consumer products w|th
warranty:

a) 1erms of express warranty. - Any se||er or manufacturer who
g|ves an express warranty sha||:
1) set forth the terms of warranty |n c|ear and read||y
understandab|e |anguage and c|ear|y |dent|fy h|mse|f
as the warrantor,
2) |dent|fy the party to whom the warranty |s extended,
3) state the products or parts covered,
4) state what the warrantor w||| do |n the event of a
defect, ma|funct|on of fa||ure to conform to the
wr|tten warranty and at whose expense,
S) state what the consumer must do to ava|| of the r|ghts
wh|ch accrue to the warranty, and
6) st|pu|ate the per|od w|th|n wh|ch, after not|ce of
defect, ma|funct|on or fa||ure to conform to the
warranty, the warrantor w||| perform any ob||gat|on
under the warranty.
b) Lxpress warranty - operat|ve from moment of sa|e. - A||
wr|tten warrant|es or guarantees |ssued by a manufacturer,
producer, or |mporter sha|| be operat|ve from the moment of
sa|e.
1) Sa|es keport. - A|| sa|es made by d|str|butors of
products covered by th|s Art|c|e sha|| be reported to
the manufacturer, producer, or |mporter of the
product so|d w|th|n th|rty (30) days from date of
purchase, un|ess otherw|se agreed upon. 1he report
sha|| conta|n, among others, the date of purchase,
mode| of the product bought, |ts ser|a| number, name
and address of the buyer. 1he report made |n
accordance w|th th|s prov|s|on sha|| be equ|va|ent to a
warranty reg|strat|on w|th the manufacturer,
producer, or |mporter. Such reg|strat|on |s suff|c|ent to
ho|d the manufacturer, producer, or |mporter ||ab|e, |n
appropr|ate cases, under |ts warranty.
2) Ia||ure to make or send report. - Ia||ure of the
d|str|butor to make the report or send them the form
requ|red by the manufacturer, producer, or |mporter
sha|| re||eve the |atter of |ts ||ab|||ty under the
warranty: rov|ded, however, 1hat the d|str|butor who
fa||ed to comp|y w|th |ts ob||gat|on to send the sa|es
reports sha|| be persona||y ||ab|e under the warranty.
Ior th|s purpose, the manufacturer sha|| be ob||gated
to make good the warranty at the expense of the
d|str|butor.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
3) keta||. - 1he reta||er sha|| be subs|d|ar||y ||ab|e under
the warranty |n case of fa||ure of both the
manufacturer and d|str|butor to honor the warranty. In
such case, the reta||er sha|| shou|der the expenses and
costs necessary to honor the warranty. Noth|ng
there|n sha|| prevent the reta||er from proceed|ng
aga|nst the d|str|butor or manufacturer.
4) Lnforcement of warranty or guarantee. - 1he warranty
r|ghts can be enforced by presentment of a c|a|m. 1o
th|s end, the purchaser needs on|y to present to the
|mmed|ate se||er e|ther the warranty card of the
off|c|a| rece|pt a|ong w|th the product to be serv|ced or
returned to the |mmed|ate se||er. No other
documentary requ|rement sha|| be demanded from
the purchaser. If the |mmed|ate se||er |s the
manufacturer's factory or showroom, the warranty
sha|| |mmed|ate|y be honored. If the product was
purchased from a d|str|butor, the d|str|butor sha||
||kew|se |mmed|ate|y honor the warranty. In the case
of a reta||er other than the d|str|butor, the former sha||
take respons|b|||ty w|thout cost to the buyer of
present|ng the warranty c|a|m to the d|str|butor |n the
consumer's beha|f.
S) kecord of purchases. - D|str|butors and reta||ers
covered by th|s Art|c|e sha|| keep a record of a||
purchases covered by a warranty or guarantee for such
per|od of t|me correspond|ng to the ||fet|me of the
product's respect|ve warrant|es or guarantees.
6) Contrary st|pu|at|ons - nu|| and vo|d. - A|| covenants,
st|pu|at|ons or agreements contrary to the prov|s|ons
of th|s Art|c|e sha|| be w|thout |ega| effect.
c) Des|gnat|on of warrant|es. - A wr|tten warranty sha|| c|ear|y
and consp|cuous|y des|gnate such warranty as:
1) "Iu|| warranty" |f the wr|tten warranty meets the
m|n|mum requ|rements set forth |n paragraph (d), or
2) "L|m|ted warranty" |f the wr|tten warranty does not
meet such m|n|mum requ|rements.
d) M|n|mum standards for warrant|es. - Ior the warrantor of a
consumer product to meet the m|n|mum standards for
warranty, he sha||:
1) remedy such consumer product w|th|n a reasonab|e
t|me and w|thout charge |n case of a defect,
ma|funct|on or fa||ure to conform to such wr|tten
warranty,
2) perm|t the consumer to e|ect whether to ask for a
refund or rep|acement w|thout charge of such product
or part, as the case may be, where after reasonab|e
number of attempts to remedy the defect or
ma|funct|on, the product cont|nues to have the defect
or to ma|funct|on.
1he warrantor w||| not be requ|red to perform the
above dut|es |f he can show that the defect,
ma|funct|on or fa||ure to conform to a wr|tten
warranty was caused by damage due to unreasonab|e
use thereof.
e) Durat|on of warranty. - 1he se||er and the consumer may
st|pu|ate the per|od w|th|n wh|ch the express warranty sha||
be enforceab|e. If the |mp||ed warranty on merchantab|||ty
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
accompan|es an express warranty, both w||| be of equa|
durat|on.
Any other |mp||ed warranty sha|| endure not |ess than s|xty
(60) days nor more than one (1) year fo||ow|ng the sa|e of new
consumer products.
f) 8reach of warrant|es. -
1) In case of breach of express warranty, the consumer
may e|ect to have the goods repa|red or |ts purchase
pr|ce refunded by the warrantor. In case the repa|r of
the product |n who|e or |n part |s e|ected, the warranty
work must be made to conform to the express
warranty w|th|n th|rty (30) days by e|ther the
warrantor or h|s representat|ve. 1he th|rty-day per|od,
however, may be extended by cond|t|ons wh|ch are
beyond the contro| of the warrantor or h|s
representat|ve. In case the refund of the purchase
pr|ce |s e|ected, the amount d|rect|y attr|butab|e to the
use of the consumer pr|or to the d|scovery of the non-
conform|ty sha|| be deducted.
2) In case of breach of |mp||ed warranty, the consumer
may reta|n |n the goods and recover damages, or re[ect
the goods, cance| and contract and recover from the
se||er so much of the purchase pr|ce as has been pa|d,
|nc|ud|ng damages.

8epubllc AcL no. 7394 ! Consumer AcL of Lhe hlllpplnes
Consumer roducLs, ArLlcle 4(q) ! cover goods whlch are
o rlmarlly for personal, famlly, household, or agrlculLural
purposes
o Whlch shall lnclude buL noL llmlLed Lo food, drugs,
cosmeLlcs, and devlces.
(ArLlcle 68) 1erms of express warranLy - Any seller or
manufacLurer who glves an express warranLy shall:
1. SeL forLh Lhe Lerms of warranLy ln clear and readlly
undersLandable language and clearly ldenLlfy hlmself as
warranLor,
2. ldenLlfy Lhe parLy Lo whom Lhe warranLy ls exLended,
3. SLaLe Lhe producLs or parLs covered,
4. SLaLe whaL Lhe warranLor wlll do ln Lhe evenL of a defecL,
malfuncLlon of fallure Lo conform Lo Lhe wrlLLen warranLy and aL
whose expense,
3. SLaLe whaL Lhe consumer musL do Lo avall of Lhe rlghLs whlch
accrue Lo Lhe warranLy, and
6. SLlpulaLe Lhe perlod wlLhln whlch, afLer noLlce of defecL,
malfuncLlon or fallure Lo conform Lo Lhe warranLy, Lhe
warranLor wlll perform any obllgaLlon under Lhe warranLy.

A. Subs|d|ary L|ab|||ty Cf keta||er ! Art|c|e 68(b)(3)
1he reLaller shall be subsldlarlly llable under Lhe warranLy ln
case of fallure of boLh Lhe manufacLurer and dlsLrlbuLor Lo
honor Lhe warranLy.
o ln such case, Lhe reLaller shall shoulder Lhe expenses
and cosLs necessary Lo honor Lhe warranLy.
noLhlng Lhereln shall prevenL Lhe reLaller from proceedlng
agalnsL Lhe dlsLrlbuLor or manufacLurer.

8. Lnforcement Cf Warranty ! Art|c|e 68(b)(4)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
WarranLy rlghLs may be enforced by presenLmenL Lo Lhe
lmmedlaLe seller elLher Lhe warranLy card or Lhe offlclal recelpL
along wlLh Lhe producL Lo be servlced or reLurned Lo Lhe
lmmedlaLe seller.
no oLher documenLary requlremenL shall be demanded from
Lhe purchaser.

C. Durat|on Cf Warranty ! Art|c|e 68(e) and (f)
A perlod may be sLlpulaLed for when Lhe warranLy may be
enforced.
8uL lf Lhe lmplled warranLy on merchanLablllLy accompanles an
express warranLy, boLh wlll be of equal duraLlon.
Any oLher lmplled warranLy shall endure noL less Lhan 60 days
nor more Lhan 1 year followlng Lhe sale of new consumer
producLs.

D. 8reach Cf Warrant|es ! Art|c|e 68(g)
1. In Case Cf 8reach Cf Lxpress Warranty
1he consumer may elecL Lo have Lhe goods repalred or lLs
purchase prlce refunded.
ln case of repalr ! Lhe warranLy work musL be made Lo
conform Lo Lhe express warranLy wlLhln 30 days.
o 1he 30-day perlod may be exLended by condlLlons
whlch are beyond Lhe conLrol of Lhe warranLor.
ln case of refund ! Lhe amounL dlrecLly aLLrlbuLable Lo Lhe use
of Lhe consumer prlor Lo Lhe dlscovery of Lhe non-conformlLy
shall be deducLed.

2. In Case Cf 8reach Cf Imp||ed Warranty
1he consumer may:
o 8eLaln Lhe goods and recover damages C8
o 8e[ecL Lhe goods, cancel Lhe conLracL and recover from
Lhe seller so much of Lhe purchase prlces as has been
pald, lncluded damages.

L. Contrary St|pu|at|ons
All conLrary sLlpulaLlons are vold.

VI. Lffects and rescr|pt|on of Warrant|es (Art|c|e 1S71)
A breach ln Lhe warranLles of Lhe seller enLlLles Lhe buyer Lo a
proporLlonaLe reducLlon of Lhe purchase prlce. MW[ '( =$I/
M%K#$ !$/0+T /GN J"0NKGI )"%.(@ 3AD 5)!- A66 7244E:(
1he prescrlpLlve perlod for lnsLlLuLlng acLlons based on a breach
of express warranLy ls LhaL speclfled ln Lhe conLracL, and ln Lhe
absence of such perlod, Lhe general rule on resclsslon of
conLracL, whlch ls four years, whlle for acLlons based on breach
of lmplled warranLy, Lhe prescrlpLlve perlod ls slx monLhs from
Lhe daLe of Lhe dellvery of Lhe Lhlng sold. -GI '( )"*%+ ",
-..$/01@ 3AD 5)!- 36 7244E:(

VII. Lffects of Wa|vers
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1he phrase as ls, where ls" basls perLalns solely Lo Lhe physlcal
condlLlon of Lhe Lhlng sold, noL Lo lLs legal slLuaLlon. ln Lhe case
aL bar, Lhe uS Lax llablllLles consLlLuLe a poLenLlal llen whlch
applles Lo Lhe sub[ecL's maLLer's legal slLuaLlon, noL Lo lLs
physlcal aspecL. 1hus, Lhe buyer has no obllgaLlon Lo shoulder
Lhe same. CWF) '( =/N%KI/0 Z/G J*K ;KG$1 )"%.(@ B82 5)!-
6D3 72446:(

VIII. 8uyer's Cpt|ons |n Case of 8reach of Warranty (Art|c|e 1S99)

Art|c|e 1S99.
Where there |s a breach of warranty by the se||er, the buyer may, at
h|s e|ect|on:

(1) Accept or keep the goods and set up aga|nst the se||er, the breach
of warranty by way of recoupment |n d|m|nut|on or ext|nct|on of the
pr|ce,

(2) Accept or keep the goods and ma|nta|n an act|on aga|nst the se||er
for damages for the breach of warranty,

(3) kefuse to accept the goods, and ma|nta|n an act|on aga|nst the
se||er for damages for the breach of warranty,

(4) kesc|nd the contract of sa|e and refuse to rece|ve the goods or |f
the goods have a|ready been rece|ved, return them or offer to return
them to the se||er and recover the pr|ce or any part thereof wh|ch has
been pa|d.

When the buyer has c|a|med and been granted a remedy |n anyone of
these ways, no other remedy can thereafter be granted, w|thout
pre[ud|ce to the prov|s|ons of the second paragraph of Art|c|e 1191.

Where the goods have been de||vered to the buyer, he cannot resc|nd
the sa|e |f he knew of the breach of warranty when he accepted the
goods w|thout protest, or |f he fa||s to not|fy the se||er w|th|n a
reasonab|e t|me of the e|ect|on to resc|nd, or |f he fa||s to return or to
offer to return the goods to the se||er |n substant|a||y as good
cond|t|on as they were |n at the t|me the ownersh|p was transferred to
the buyer. 8ut |f deter|orat|on or |n[ury of the goods |s due to the
breach or warranty, such deter|orat|on or |n[ury sha|| not prevent the
buyer from return|ng or offer|ng to return the goods to the se||er and
resc|nd|ng the sa|e.

Where the buyer |s ent|t|ed to resc|nd the sa|e and e|ects to do so, he
sha|| cease to be ||ab|e for the pr|ce upon return|ng or offer|ng to
return the goods. If the pr|ce or any part thereof has a|ready been
pa|d, the se||er sha|| be ||ab|e to repay so much thereof as has been
pa|d, concurrent|y w|th the return of the goods, or |mmed|ate|y after
an offer to return the goods |n exchange for repayment of the pr|ce.

Where the buyer |s ent|t|ed to resc|nd the sa|e and e|ects to do so, |f
the se||er refuses to accept an offer of the buyer to return the goods,
the buyer sha|| thereafter be deemed to ho|d the goods as ba||ee for
the se||er, but sub[ect to a ||en to secure payment of any port|on of the
pr|ce wh|ch has been pa|d, and w|th the remed|es for the enforcement
of such ||en a||owed to an unpa|d se||er by Art|c|e 1S26.(S)

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
In the case of breach of warranty of qua||ty, such |oss, |n the absence
of spec|a| c|rcumstances show|ng prox|mate damage of a greater
amount, |s the d|fference between the va|ue of the goods at the t|me
of de||very to the buyer and the va|ue they wou|d have had |f they had
answered to the warranty. (n)

1he buyer may elecL elLher of Lhe remedles ln ArLlcle 1399(1)
o 1hese remedles are alLernaLlve. ArLlcle 1399(2)
1he remedy agalnsL vlolaLlon of warranLy agalnsL hldden defecLs
ls elLher Lo wlLhdraw from Lhe conLracL (/773#4 &%2H363+#&3/) or
Lo demand a proporLlonaLe reducLlon of Lhe prlce (/773#4 I*/4+3
$34#&31), wlLh damages ln elLher case. W*+%K#KC X$$N1 )"%.( '(
)"*%+ ", -..$/01, BB8 5)!- 63D 7244B:(

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 13: Lk1INGUISnMLN1 CI
SALL

I. In Genera| (Art|c|es 1231 and 1600)

Art|c|e 1231.
Cb||gat|ons are ext|ngu|shed:

(1) 8y payment or performance,

(2) 8y the |oss of the th|ng due,

(3) 8y the condonat|on or rem|ss|on of the debt,

(4) 8y the confus|on or merger of the r|ghts of cred|tor and debtor,

(S) 8y compensat|on,

(6) 8y novat|on.

Cther causes of ext|ngu|shment of ob||gat|ons, such as annu|ment,
resc|ss|on, fu|f|||ment of a reso|utory cond|t|on, and prescr|pt|on, are
governed e|sewhere |n th|s Code. (11S6a)

Art|c|e 1600.
Sa|es are ext|ngu|shed by the same causes as a|| other ob||gat|ons, by
those stated |n the preced|ng art|c|es of th|s 1|t|e, and by convent|ona|
or |ega| redempt|on. (1S06)

Same grounds by whlch obllgaLlons ln general are exLlngulshed
also apply Lo exLlngulshmenL of obllgaLlons arlslng from sale
o A-LC-8L-CC-CC-nC
! aymenL
Cnly exLlngulshes obllgaLlons Lo whlch
Lhey perLaln ln a conLracL of sale
noL necessarlly Lhe conLracL lLself
! Loss
! 8emlsslon
! CompensaLlon
! Confuslon
! novaLlon
o AnnulmenL
o 8esclsslon
o 8esoluLory CondlLlon
o rescrlpLlon
o ConvenLlonal or Legal 8edempLlon (ArLlcle 1600)

II. Convent|ona| kedempt|on

A. Def|n|t|on (Art|c|e 1601)

Art|c|e 1601.
Convent|ona| redempt|on sha|| take p|ace when the vendor reserves
the r|ght to repurchase the th|ng so|d, w|th the ob||gat|on to comp|y
w|th the prov|s|ons of art|c|e 1616 and other st|pu|at|ons wh|ch may
have been agreed upon. (1S07)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

1. Convent|ona| kedempt|on 1akes |ace:
When Lhe seller reserved for hlmself Lhe rlghL Lo repurchase Lhe
Lhlng sold, wlLh obllgaLlon Lo:
a. 8eLurn prlce of Lhe sale
b. 8eLurn expenses of Lhe conLracL
c. Any oLher leglLlmaLe paymenLs made by reason of Lhe
sale
d. necessary and useful expenses of Lhe Lhlng sold.
Lven when sale ls one wlLh rlghL Lo repurchase, buyer ls
subrogaLed Lo Lhe seller's rlghLs and acLlons even durlng Lhe
perlod where redempLlon can be made by Lhe seller.
o ln oLher words, rlghL Lo redempLlon does noL prevenL
full consummaLlon.
Who may exerclse?
a. Seller ln whom rlghL ls recognlzed by conLracL
b. Any person Lo whom such rlghL may have been
Lransferred
c. ln Lhe case of legal redempLlon, Lhe person so enLlLled
by law.

8. roper keservat|on Cf k|ght 1o kepurchase
ulsLlngulshlng rlghL Lo redeem from opLlon Lo purchase.
o ArLlcle 1601: 8lghL of repurchase musL be reserved by
Lhe vendor Lhrough sLlpulaLlon Lo LhaL effecL ln Lhe
conLracL of sale
! noL a rlghL granLed Lo Lhe vendor by Lhe vendee
! lL ls one of Lhe sLlpulaLlons ln Lhe conLracL
! Cnce lnsLrumenL execuLed, vendor may no
longer reserve
o Any rlghL LhereafLer granLed Lo Lhe vendor, by Lhe
vendee cannoL be consldered a rlghL Lo repurchase, buL
some oLher rlghL, llke an opLlon Lo buy.
Lssence of pacLo de reLro " LlLle and ownershlp ls lmmedlaLely
vesLed ln Lhe vendee a reLro, sub[ecL Lo a resLrlcLlve condlLlon of
repurchase by Lhe vendor wlLhln Lhe redempLlon perlod.
Sales wlLh rlghLs of repurchase, as deflned by Lhe Clvll Code, are
noL favored. We wlll noL consLrue lnsLrumenLs Lo be sales wlLh a
rlghL Lo repurchase, wlLh Lhe sLrlngenL and onerous effecLs
whlch follow, unless Lhe Lerms of Lhe documenL and Lhe
surroundlng clrcumsLances requlre lL. Whenever, under Lhe
Lerms of Lhe wrlLlng, any oLher consLrucLlon can falrly and
reasonably be made, such consLrucLlon wlll be adopLed and Lhe
conLracL wlll be consLrued as a mere loan unless Lhe courL can
see LhaL, lf enforced accordlng Lo lLs Lerms, lL ls noL an
unconsclonable one. !"#$%&$" () *+"+,&$- ../ 0123 4.5 647789)
:;%$%+, 2"<=& () 1=#>$ =? 3@@A"B& C87 0123 5D. 6CE8E9- FG%;G
%+ $#>+ ;%$A& H"I%BB" () J%+&"+,"+- CE HG%B) 5. 6CECC9 "+I 3K#%+=
() LA"B"- 5D HG%B) .84 6CED59)

1. Va||d Sa|e kequ|red Ior 1here 1o 8e A Va||d k|ght 1o
kepurchase
valld exlsLence of a rlghL Lo repurchase hlnges upon facL LhaL
Lhe underlylng conLracL of sale ls valld, and LhaL Lhere has been
performance.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o 8lghL Lo repurchase musL be consLlLuLed as parL of a
vollJ sale aL perfecLlon. MN%BB">%;" () 13- 45 0123 C8E
6CE589)
1

An agreemenL Lo repurchase becomes a promlse Lo sell when
made afLer Lhe sale because when Lhe sale ls made wlLhouL
such agreemenL Lhe purchases acqulres Lhe Lhlngs sold
absoluLely, and, lf he afLerwards granLs Lhe vendor Lhe rlghL Lo
repurchase, lL ls a new conLracL enLered lnLo by Lhe purchases
as absoluLe owner. 2=OA>$& () H"@%=, .C. 0123 DP5 6477/9.
2


2=OA>$& () H"@%=

Iacts: Spouses MarLln and Luclna aplo were owners of a resldenLlal loL
locaLed ln MakaLl. 1hey execuLed a real esLaLe morLgage on sald
properLy Lo obLaln a long from Amparo lnvesLmenLs. upon aplo's
fallure Lo pay Lhe loan, Lhe corporaLlon flled a peLlLlon for exLra[udlclal
foreclosure of morLgage. Slnce Lhe couple needed money Lo prevenL Lhe
foreclosure, Lhey execuLed a ueed of AbsoluLe Sale over Lhe properLy ln
favor of Amella 8oberLs. Cf Lhe 83,000 purchase prlce, 39,000 was
pald Lo Amparo lnvesLmenLs whlle Lhe 26,000 dlfference was reLalned
by Lhe spouses. 1he LlLle Lo Lhe properLy was dellvered Lo Amella
8oberLs.

1hereafLer, Lhe parLles execuLed a 2-year conLracL of lease over Lhe
properLy, wlLh 8oberLs as lessor and aplo as lessee. AL flrsL, aplo pald
hls monLhly renLals, buL sLopped paylng afLer 1983. Powever, he and hls

1
clotovoll v. cA, 190 SC8A 439 (1990), 1ottes v. cA, 216 SC8A 287 (1992),
kobetts v. loplo, 313 SC8A 346 (2007).
2
komos v. lcoslooo, 31 hll (1927).
famlly remalned ln possesslon of Lhe properLy for almosL 13 years.
uesplLe repeaLed demand, aplo refused Lo pay and refused Lo leave
Lhe premlses. Pence, 8oberLs flled a complalnL for unlawful deLalner.

aprlo ralsed Lhe defense LhaL ln Lhe orlglnal conLracL of sale, 8oberLs
gave hlm Lhe rlghL Lo redeem Lhe properLy aL any Llme for a reasonable
amounL. ln facL, on 1983 he remlLLed Lo 8oberLs' auLhorlzed
represenLaLlve, erllLa venLura, Lhe amounL of 230,000 as repurchase
prlce. Allegedly, 8oberLs only refused Lo execuLe a deed of absoluLe sale
because venLura mlsapproprlaLed Lhe amounL of 39,000 from Lhe
supposed repurchase prlce

Issue: WheLher or noL Lhe conLracL of sale enLered lnLo by aplo and
8oberLs ls acLually an equlLable morLgage.

ne|d: nC. lL ls Lhe conLracL of sale. Cne repurchases only whaL one has
prevlously sold. 1he rlghL Lo repurchase presupposes a valld conLracL of
sale beLween same parLles. 8y lnslsLlng LhaL he had repurchased Lhe
properLy, aplo Lhereby admlLLed LhaL Lhe deed of absoluLe sale
execuLed by hlm and 8oberLs was ln facL and ln law a deed of absoluLe
sale and noL an equlLable morLgage, he had acqulred ownershlp over
Lhe properLy based on sald deed. 8espondenL, ls Lhus esLopped from
asserLlng LhaL Lhe conLracL under Lhe deed of absoluLe sale ls an
equlLable morLgage unless Lhere ls an allegaLlon and evldence of
palpable mlsLake on Lhe parL of respondenL, or a fraud on Lhe parL of
8oberLs.

Doctr|ne:

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
ln sales denomlnaLed as pocto Je tetto, Lhe prlce agreed upon
should noL generally be consldered as Lhe [usL value of Lhe Lhlng
sold, absenL oLher corroboraLlve evldence-Lhere ls no
requlremenL ln sales LhaL Lhe prlce be equal Lo Lhe exacL value
of Lhe Lhlng sub[ecL maLLer of Lhe sale. ML=>"I= NI") LA LAB?%+
() LABB=$"- .P4 0123 DE/ 647789)

C. k|ght Cf kepurchase rovab|e 8y aro| Lv|dence
8lghL Lo repurchase: merely a feaLure ln Lhe conLracL of sale
o 1hus, lL ls governed by Lhe SLaLuLe of lrauds
o Powever, SC has held: when Lhe conLracL of sale ls ln
wrlLlng, parol evldence may be adduced Lo prove Lhe
rlghL Lo repurchase
! 1hls ls because Lhe ueed of Sale and Lhe verbal
agreemenL allowlng Lhe rlghL Lo repurchase are
an lnLegral whole.
! 1he deed of sale lLself ls Lhe noLe or
memorandum" requlred Lo remove Lhe conLracL
from Lhe SLaLuLe of lrauds.
o Also, lf Lhere ls no ob[ecLlon Lo such parol evldence, lL
wlll be admlsslble ln Lrlal.
SC: 8esL Lvldence" 8ule noL an obsLacle Lo Lhe adducemenL of
such parol evldence.
o When parol agreemenL was Lhe movlng cause of Lhe
wrlLLen conLracL.
o When wrlLLen conLracL was execuLed on Lhe
falLh/represenLaLlon of Lhe parol conLracL.
o 8lghL Lo repurchase proved orally ls conslsLenL wlLh
Lerms of wrlLLen conLracL.

D. D|st|ngu|shed Irom Cpt|on 1o urchase

k|ght to kedeem Cpt|on to urchase
noL a separaLe conLracL - merely
parL of a maln conLracL of sale -
cannoL exlsL unless reserved aL
Llme of perfecLlon
Cenerally a prlnclpal conLracL,
creaLed lndependenL of anoLher
conLracL
MusL be lmbedded lnLo Lhe
conLracL of sale upon lLs perfecLlon
May exlsL before or afLer Lhe
perfecLlon of Lhe sale, or be
lmbedded ln anoLher conLracL
upon lLs perfecLlon
uoes noL need a separaLe
conslderaLlon Lo be valld and
effecLlve
MusL have conslderaLlon separaLe
and dlsLlncL from Lhe purchase
prlce
8edempLlon perlod cannoL exceed
10 years
erlod for an opLlon may exceed
10 years
Lxerclse requlres LhaL noLlce be
accompanled by Lender of
paymenL - conslgnmenL when
Lender cannoL be made
8equlres only a noLlce of exerclse
Lo be glven Lo Lhe opLloner
Lxerclse exLlngulshes conLracL of
sale
8esulLs ln perfecLlon of a conLracL
of sale

L. kedempt|on er|od
1he perlod Lo repurchase ls noL suspended merely because
Lhere ls a dlvergence of oplnlon beLween Lhe parLles as Lo Lhe
preclse meanlng of Lhe phrase provldlng for Lhe condlLlon upon
whlch Lhe rlghL Lo repurchase ls Lrlggered. 1he exlsLence of
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
seller o tettos rlghL Lo repurchase Lhe proper ls noL dependenL
upon Lhe prlor flnal lnLerpreLaLlon by Lhe courL of Lhe sald
phrase. Q%&$A>%= () 1AO# 0$"$A 1=BBA,A =? 0;%A+;A "+I
RA;G+=B=,S, P5C 0123 C44 6477.9.

Q%&$A>%= () 1AO# 0$"$A 1=BBA,A =? 0;%A+;A "+I RA;G+=B=,S

Iacts: Asunclon sold Lo Sudlon AgrlculLural Plgh School (SAPS) a parcel
of land, reservlng Lhe rlghL Lo repurchase Lhe same ln case (1) Lhe school
ceases Lo exlsL, or (2) Lhe school Lransfers locaLlon. She had her rlghL
annoLaLed. She dled. 8y vlrLue of 8 412, SAPS was merged wlLh Lhe
Cebu SLaLe College, effecLlve !une 1983. ln 1990, Lhe helrs of Asunclon
soughL Lo exerclse Lhelr rlghL Lo redeem, clalmlng LhaL school has ceased
Lo exlsL.

Issue: WheLher or noL Lhe helrs of Asunclon may sLlll exerclse Lhelr rlghL
Lo redeem Lhe properLy

ne|d: nC. 1helr rlghL has already prescrlbed. Conslderlng LhaL no perlod
for redempLlon was agreed upon, Lhe law lmposes a 4-year llmlLaLlon.
1hls means LhaL from Lhe Llme Lhe school was merged Lo Cebu SLaLe
College, Lhey had 4 years, or unLll !une 1987 Lo redeem Lhe properLy.
Powever, Lhey falled Lo do so wlLhln Lhe perlod. lallure Lo redeem
auLomaLlcally consolldaLes ownershlp ln favor of Lhe vendee. 1he facL
LhaL Lhe rlghL Lo redeem was annoLaLed does noL make lL
lmprescrlpLlble, lL only serves Lo noLlfy Lhlrd persons.

Doctr|ne:

1. When No er|od Agreed Upon
Genera| ku|e: lf lL ls sLlpulaLed LhaL Lhere ls a rlghL Lo redeem,
and ln Lhe absence of agreemenL as Lo perlod of exerclse, lL shall
lasL 4 years from daLe of Lhe conLracL.
Q%&$A>%= () 1AO# 0$"$A 1=BBA,A- P5C 0123 C44 6477.9
o lL was held LhaL Lhe four-year perlod began from
happenlng of condlLlon conLalned ln deed of sale (raLher
Lhan daLe of conLracL).
o CLv: 1hls ls lnexpllcable! (1o be dlscussed laLer)

2. When er|od Agreed Upon
Genera| ku|e: lf Lhere ls an agreemenL as Lo perlod, lL cannoL
exceed 10 years lf lL exceeds 10 years, Lhe agreemenL ls only
valld for Lhe flrsL 10 years.
3+;G#AB () T+$A><AI%"$A 3@@ABB"$A 1=#>$- CP/ 0123 PDP 6CE8/9
o SLlpulaLlon: vendor cannoL redeem wlLhln 19 years from
execuLlon.
o SC: Such ls vold for belng vlolaLlve of Art|c|e 1601, and
flxed Lhe perlod of redempLlon aL Len years.
R"S"= () L#B"S- CD 0123 /.8 6CE5.9
o SLlpulaLlon: rlghL of redempLlon cannoL be exerclsed
wlLhln 10 years
o SC: SLlpulaLlon was vold. Powever, such nulllLy does noL
converL conLracL lnLo a mere lndebLedness nor an
equlLable morLgage.
! ArLlcle 1606 would apply " seller may exerclse
rlghL Lo redempLlon wlLhln a perlod of 10 years
form daLe of conLracL
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o AlLhough sLlpulaLlon as Lo Lhe perlod may be unclear or
vold, Lhere ls sLlll a sLlpulaLlon.
! 1hus, we follow Lhe 10-year perlod for
redempLlon.
! We do noL conslder Lhe rlghL of redempLlon as
belng one wlLhouL a sLlpulaLed perlod.
!"+I=+, () 3#&$>%"- DC HG%B) P/E 6CEC.9
o SLlpulaLlon: sellers could exerclse ln March of any year.
o Such could be exerclsed for a perlod of 10 years from
daLe LhereafLer, buL noL afLer 10 years
U;G","O%" () 1=#>$ =? 3@@A"B&- D7P 0123 85/ 6CEEE9
o 8lghL Lo redeem had prescrlbes when exerclsed afLer 10
years.

3. endency of Act|on 1o||s kedempt|on er|od
U+, 1G#" () 1">>- .D HG%B) E./ 6CE4E9 " pendency of an acLlon
broughL ln good falLh and relaLlng Lo Lhe valldlLy of a sale a reLro
Lolls Lhe runnlng of Lhe perlod of redempLlon.
o noLe: 1he seller a reLro had glven noLlce of Lhe exerclse
of Lhe redempLlon rlghL wlLhln Lhe redempLlon perlod.
8U1
Q%&$A>%= () 1AO# 0$"$A 1=BBA,A- P5C 0123 C44 6477.9 "
endency of a llLlgaLlon does noL Loll Lhe perlod.
o Such perlod ls noL suspended merely because Lhere ls a
dlvergence of oplnlon beLween Lhe parLles as Lo when
Lhe condlLlon upon whlch Lhe rlghL Lo repurchase ls
Lrlggered.
o LxlsLence of rlghL Lo repurchase ls noL dependenL upon
Lhe lnLerpreLaLlon by Lhe courL of sald condlLlon
o noLe: 1he successors-ln-lnLeresL of Lhe seller a reLro
soughL Lo exerclse Lhe redempLlon rlghL afLer Lhe
explraLlon of Lhe four-year redempLlon perlod.
CLv: no conLradlcLlon beLween Lhese Lwo cases
o lmporLanL conslderaLlon: vesLlng" of Lhe exerclse of
Lhe rlghL by lLs proper exerclse (requlrlng noLlce and
Lender)
o 1hus, ln essence, compleLlon of redempLlon process
(paymenL of amounLs requlred ln ArLlcle 1616) ls Lolled
by Lhe flllng of a clvll acLlon relaLlng Lo Lhe lssue of such
redempLlon
! rovlded LhaL boLh exerclse and flllng would be
done wlLhln redempLlon perlod

4. Non-payment of r|ce Does Not Affect kunn|ng of kedempt|on
er|od
1"$"+,;"$"+, () JA,"S"I"- 84 0123 .C 6CE/89 " nonpaymenL
of purchase prlce does noL serve Lo suspend Lhe perlod of
redempLlon.
o Sale was consummaLed upon execuLlon of documenL,
and dellvery of land Lo Lhe vendee.
o nonpaymenL of Lhe balance of Lhe prlce does noL
suspend Lhe efflcacy of Lhe provlslons of Lhe valld
conLracL.

I. S|tuat|on r|or to kedempt|on
ln a sale o tetto, buyer has a rlghL Lo Lhe lmmedlaLe possesslon
of Lhe properLy sold, unless oLherwlse agreed upon, slnce LlLle
and ownershlp of Lhe properLy sold are lmmedlaLely vesLed ln
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lhe buyer o tetto, sub[ecL only Lo Lhe resoluLory condlLlon of
repurchase by Lhe seller o tetto wlLhln Lhe sLlpulaLed perlod.
MNI") IA 2%,=+"+ () LA>A;G=- P5D 0123 54/ 6477.9)
C

endlng repurchase, Lhe buyer may allenaLe, morLgage, or
encumber Lhe properLy.
o 8uL such allenaLlon, morLgage or encumbrance ls as
revocable as hls rlghL.
o When rlghL exerclsed, Lhe buyer has Lo reLurn Lhe
properLy free from all encumbrances lmposed by hlm.

G. Who Can kedeem (Art|c|es 1611 to 1614)

Art|c|e 1611.
In a sa|e w|th a r|ght to repurchase, the vendee of a part of an
und|v|ded |mmovab|e who acqu|res the who|e thereof |n the case of
art|c|e 498, may compe| the vendor to redeem the who|e property, |f
the |atter w|shes to make use of the r|ght of redempt|on. (1S13)

Art|c|e 1612.
If severa| persons, [o|nt|y and |n the same contract, shou|d se|| an
und|v|ded |mmovab|e w|th a r|ght of repurchase, none of them may
exerc|se th|s r|ght for more than h|s respect|ve share.

1he same ru|e sha|| app|y |f the person who so|d an |mmovab|e a|one
has |eft severa| he|rs, |n wh|ch case each of the |atter may on|y redeem

1
keyes v. nomoJo, 14 SC8A 213 (1963), 5ollJ nomes, loc. v. cA, 273 SC8A 267
(1997), Mlstetlo v. cebo 5tote colleqe of 5cleoce ooJ 1ecbooloqy, 461 SC8A 122
(2003), coJooqoq v. op, 469 SC8A 361 (2003), komos v. ulzoo, 498 SC8A 17
(2006), lomoyoq v. nelts of Iocloto Nemeo, 326 SC8A 31 (2007).
the part wh|ch he may have acqu|red. (1S14)

Art|c|e 1613.
In the case of the preced|ng art|c|e, the vendee may demand of a|| the
vendors or co-he|rs that they come to an agreement upon the
repurchase of the who|e th|ng so|d, and shou|d they fa|| to do so, the
vendee cannot be compe||ed to consent to a part|a| redempt|on.
(1S1S)

Art|c|e 1614.
Lach one of the co-owners of an und|v|ded |mmovab|e who may have
so|d h|s share separate|y, may |ndependent|y exerc|se the r|ght of
repurchase as regards h|s own share, and the vendee cannot compe|
h|m to redeem the who|e property. (1S16)

ArLlcle 1611 " Seller wanLs Lo repurchase only hls parL: 8uyer
may compel hlm Lo repurchase Lhe whole Lhlng.
ArLlcle 1614 " CredlLors of Lhe seller cannoL make use of Lhe
rlghL of redempLlon agalnsL Lhe buyer, unLll afLer Lhey have
exhausLed Lhe properLy of Lhe seller.
LA V#W<"+ () 1=#>$ =? 3@@A"B&- CP8 0123 /P 6CE8/9
o lf one of Lhe co-owners/co-helrs alone redeem Lhe
whole properLy, he wlll be a mere LrusLee wlLh respecL
Lo Lhe shares of Lhe co-owners/co- helrs.
o 1hus, no prescrlpLlon lles agalnsL Lhe rlghLs of Lhese co-
owners/co-helrs Lo demand from Lhe redempLloner
Lhelr share ln Lhe properLy

n. now kedempt|on Lffected (Art|c|e 1616)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Art|c|e 1616.
1he vendor cannot ava|| h|mse|f of the r|ght of repurchase w|thout
return|ng to the vendee the pr|ce of the sa|e, and |n add|t|on:

(1) 1he expenses of the contract, and any other |eg|t|mate payments
made by reason of the sa|e,

(2) 1he necessary and usefu| expenses made on the th|ng so|d. (1S18)

1hree Lhlngs need Lo be reLurned (Art|c|e 1616)
1. rlce of Lhe sale.
2. Lxpenses of conLracL, and any oLher leglLlmaLe
paymenLs made by reason of Lhe sale.
3. necessary and useful expenses made on Lhe Lhlng sold.
Seller may brlng hls acLlon agalnsL every possessor who derlves
rlghL from Lhe buyer.
o Lven lf Lhere ls no menLlon of Lhe rlghL Lo repurchase ln
Lhe conLracL beLween buyer and subsequenL buyer.
o WlLhouL pre[udlce Lo provlslons of roperLy 8eglsLraLlon
uecree and Lhe MorLgage Law, wlLh respecL Lo
morLgagees/purchasers ln good falLh and for value.
lallure Lo pay useful lmprovemenLs enLlLles buyer a reLro Lo
reLaln possesslon of Lhe land unLll acLual relmbursemenL ls
done.
ArLlcle 1616 ls noL excluslve
o lL should be consLrued wlLh ArLlcle 1601 whlch sLaLes
LhaL ln order Lo redeem, ArLlcle 1616 musL be complled
wlLh as well as oLher sLlpulaLlons agreed upon."
Well-seLLled ls Lhe rule LhaL a formal offer Lo redeem musL be
accompanled by a valld Lender of Lhe redempLlon prlce and Lhe
flllng of a [udlclal acLlon, plus Lhe conslgnaLlon of Lhe
redempLlon prlce wlLhln Lhe perlod of redempLlon, ls equlvalenL
Lo a formal offer Lo redeem. MN%BBA,"& () 1=#>$ =? 3@@A"B&- PEE
0123 4/5 647759)
o ln order Lo exerclse Lhe rlghL Lo redeem, only Lender of
paymenL ls sufflclenL MJA,"&@% () 13- CP4 0123 84
6CE859X conslgnaLlon ls noL requlred afLer Lender ls
refused MQ">%"+= () 13- 444 0123 /D5 6CEED9)
o 1he facL LhaL Lhe seller a reLro deposlLed Lhe amounL of
Lhe repurchase money wlLh Lhe Clerk of CourL was
slmply an addlLlonal securlLy.
o Mere sendlng of leLLers expresslng deslre Lo repurchase,
wlLhouL Lender, does noL comply wlLh Lhe requlremenL
of law.
8uL when Lender noL posslble, conslgnaLlon should be made
M1"$"+,;"$"+, () JA,"S"I"- 8P 0123 .C 6CE/89)
A formal offer Lo redeem, accompanled by a booo flJe Lender of
redempLlon prlce, ls noL essenLlal where Lhe rlghL Lo redeem ls
exerclsed Lhrough a [udlclal acLlon wlLhln Lhe redempLlon perlod
and slmulLaneously deposlLlng Lhe redempLlon prlce. MJAA 1G#S
2A"B$S 1=>@) () 13- 4.7 0123 .E5 6CEE.9)
o no prescrlbed form for an offer Lo redeem
o 1hus, we have Lwo ways of redeemlng
! lormal offer Lo pay accompanled by bona flde
Lender of paymenL.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Cnly necessary Lo preserve rlghL of
redempLlon for furLher enforcemenL.
(as opposed Lo exerclsed).
! Lxerclse Lhrough [udlclal acLlon accompanled
wlLh slmulLaneous deposlL of Lhe redempLlon
prlce.
llllng of acLlon ls equlvalenL Lo formal
offer.
o When ls rlghL of redempLlon deemed vesLed"
! lormal offer Lo redeem, accompanled by bona
flde Lender of paymenL, wlLhln redempLlon
perlod.
! 1hus, Lhe rlghL ls vesLed" - lL may be enforced
even beyond redempLlon perlod

I. kedempt|on r|ce (Art|c|e 1616)
A sLlpulaLlon ln a sale o tetto requlrlng as parL of Lhe
redempLlon prlce lnLeresL for Lhe cosL of money, ls noL ln
conLravenLlon wlLh ArLlcle 1616, slnce Lhe provlslon ls noL
resLrlcLlve nor excluslve, and does noL bar addlLlonal amounLs
LhaL Lhe parLles may agree upon, slnce Lhe arLlcle lLself provldes
and oLher sLlpulaLlons whlch may have been agreed upon."
M0=B%I Y=<A& () 1=#>$ =? 3@@A"B&- 4/. 0123 45/ 6CEE/9)

I. Iru|ts (Art|c|e 1617)

Art|c|e 1617.
If at the t|me of the execut|on of the sa|e there shou|d be on the |and,
v|s|b|e or grow|ng fru|ts, there sha|| be no re|mbursement for or
prorat|ng of those ex|st|ng at the t|me of redempt|on, |f no |ndemn|ty
was pa|d by the purchaser when the sa|e was executed.

Shou|d there have been no fru|ts at the t|me of the sa|e and some ex|st
at the t|me of redempt|on, they sha|| be prorated between the
redempt|oner and the vendee, g|v|ng the |atter the part correspond|ng
to the t|me he possessed the |and |n the |ast year, counted from the
ann|versary of the date of the sa|e. (1S19a)

ArLlcle 1617 on Lhe dlsposlLlon of frulLs of properLy redeemed
applles only when Lhe parLles falled Lo provlde a sharlng
arrangemenL Lhereof, oLherwlse, Lhe parLles conLracLual
sLlpulaLlons prevall) M3B<AI" () L"B#>=- /E 0123 D4/ 6CE//9)
ArLlcle 448 of Lhe Clvll Code on Lhe rlghLs of a bullder ln good
falLh ls lnappllcable ln cases lnvolvlng conLracLs of sale wlLh rlghL
of repurchase-lL ls lnappllcable when Lhe owner of Lhe land ls
Lhe bullder, sower, or planLer. Where Lhe Lrue owner hlmself ls
Lhe bullder of Lhe works on hls own land, Lhe lssue of good falLh
or bad falLh ls enLlrely lrrelevanL. 1he rlghL Lo repurchase may
be exerclsed only by Lhe vendor ln whom Lhe rlghL ls recognlzed
by conLracL or by any person Lo whom Lhe rlghL may have been
Lransferred. ln a sale wlLh rlghL of repurchase, Lhe appllcable
provlslons are ArLlcles 1606 and 1616 of Lhe Clvll Code, and noL
ArLlcle 448. Z">("AW () 3B;%&=- .EP 0123 57 6477E9)

k. Lffect When No kedempt|on Made: Conso||dat|on (Art|c|e 1607)

Art|c|e 1607.
In case of rea| property, the conso||dat|on of ownersh|p |n the vendee
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
by v|rtue of the fa||ure of the vendor to comp|y w|th the prov|s|ons of
art|c|e 1616 sha|| not be recorded |n the keg|stry of roperty w|thout a
[ud|c|a| order, after the vendor has been du|y heard. (n)

8efore Lhe new Clvll Code: when no redempLlon made, buyer
auLomaLlcally acqulred full ownershlp. 1oday, ArLlcle 1607.
o 1hls proceedlng for consolldaLlon ls an ordlnary clvll
acLlon, noL a moLlon lncldenL Lo anoLher acLlon.
o lf such ls denled because conLracL was acLually an
equlLable morLgage, Lhen anoLher acLlon may be flled Lo
collecL/foreclose
ArLlcle 1607 abollshed auLomaLlc consolldaLlon of ownershlp ln
Lhe vendee o tetto upon explraLlon of Lhe redempLlon perlod by
requlrlng Lhe vendee Lo lnsLlLuLe an acLlon for consolldaLlon
where Lhe vendor o tetto may be duly heard. lf Lhe vendee
succeeds ln provlng LhaL Lhe LransacLlon was lndeed a pocto Je
tetto, Lhe vendor ls sLlll glven a perlod of LhlrLy days from Lhe
flnallLy of Lhe [udgmenL wlLhln whlch Lo repurchase Lhe
properLy. M0=B%I Y=<A& () 1=#>$ =? 3@@A"B&- 4/. 0123 45/
6CEE/9)
Cnce Lhe vendor falls Lo redeem Lhe properLy wlLhln Lhe
sLlpulaLed perlod, lrrevocable LlLle shall be vesLed ln Lhe vendee
by operaLlon of law) MNI") IA 2%,=+"+ () LA>A;G=- P5D 0123
54/ 6477.9)
under a sale o tetto, Lhe fallure of Lhe buyer Lo consolldaLe hls
LlLle under ArLlcle 1607 does noL lmpalr such LlLle and
ownershlp because Lhe meLhod prescrlbed Lhereunder ls merely
for Lhe purpose of reglsLerlng and consolldaLlng LlLles Lo Lhe
properLy. ln facL, Lhe fallure on Lhe parL of a seller o tetto Lo
exerclse Lhe redempLlon rlghL wlLhln Lhe perlod agreed upon or
provlded for by law, vesLs upon Lhe buyer o tetto absoluLe LlLle
and ownershlp over Lhe properLy sold by operaLlon of law.
ConsequenLly, afLer Lhe effecL of consolldaLlon, Lhe morLgage or
re-sale by Lhe seller o tetto of Lhe same properLy would noL
Lransfer LlLle and ownershlp Lo Lhe morLgagee or buyer, as Lhe
case may be, under Lhe LaLln maxlm NMO uA1 OuOu NON
nA81. x1"I#+,=, () ["@- P5E 0123 .5C 6477.9)
o noLwlLhsLandlng ArLlcle 1607, recordlng ln Lhe 8eglsLry
of ueeds of Lhe consolldaLlon of ownershlp Lo Lhe buyer
ls noL a condlLlon slne qua non Lo Lransfer of ownershlp
! 8uyer would sLlll be Lhe owner.
! Lssence of pacLo de reLro " LlLle and ownershlp
are lmmedlaLely vesLed ln buyer, sub[ecL Lo
resoluLory condlLlon of repurchase.
! lallure of seller Lo perform Lhe sald condlLlon
vesLs absoluLe LlLle and ownershlp over Lhe
properLy sold.
! lallure Lo consolldaLe LlLle under ArLlcle 1607
does noL lmpalr buyer's ownershlp. 1he meLhod
prescrlbed ls merely for purposes of
reglsLraLlon.

L. Lqu|tab|e Mortgage (Art|c|es 1602-1604)

Art|c|e 1602.
1he contract sha|| be presumed to be an equ|tab|e mortgage, |n any of
the fo||ow|ng cases:

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(1) When the pr|ce of a sa|e w|th r|ght to repurchase |s unusua||y
|nadequate,

(2) When the vendor rema|ns |n possess|on as |essee or otherw|se,

(3) When upon or after the exp|rat|on of the r|ght to repurchase
another |nstrument extend|ng the per|od of redempt|on or grant|ng a
new per|od |s executed,

(4) When the purchaser reta|ns for h|mse|f a part of the purchase
pr|ce,

(S) When the vendor b|nds h|mse|f to pay the taxes on the th|ng so|d,

(6) In any other case where |t may be fa|r|y |nferred that the rea|
|ntent|on of the part|es |s that the transact|on sha|| secure the
payment of a debt or the performance of any other ob||gat|on.

In any of the forego|ng cases, any money, fru|ts, or other benef|t to be
rece|ved by the vendee as rent or otherw|se sha|| be cons|dered as
|nterest wh|ch sha|| be sub[ect to the usury |aws. (n)

Art|c|e 1603.
In case of doubt, a contract purport|ng to be a sa|e w|th r|ght to
repurchase sha|| be construed as an equ|tab|e mortgage. (n)

Art|c|e 1604.
1he prov|s|ons of art|c|e 1602 sha|| a|so app|y to a contract purport|ng
to be an abso|ute sa|e. (n)

1. Def|n|t|on
An equlLable morLgage ls one whlch alLhough lacklng ln some
formallLy, or form or words, or oLher requlslLes demanded by a
sLaLuLe, neverLheless reveals Lhe lnLenLlon of Lhe parLles Lo
charge real properLy as securlLy for a debL, and conLalns noLhlng
lmposslble or conLrary Lo law." 2"S<#+I= () !"+I=+,- .45
0123 .CP 6477/9
1

LssenLlal requlslLes of equlLable morLgage: MQ=B%+" () 1=#>$ =?
3@@A"B&- DE8 0123 E/ 6477D9)
4

a. arLles enLered lnLo a conLracL denomlnaLed as a
conLracL of sale, and
b. 1he lnLenLlon was Lo secure an exlsLlng debL by way of a
morLgage.
0"+ HAI>= () JAA- PD7 0123 DD8 6477.9 " when Lhe Lwo above
condlLlons are noL proven, Lhe exlsLence of any clrcumsLance

1
cebollos v. lotestote stote of tbe lote mlqJlo MetcoJo, 430 SC8A 323
(2004), Alvoto v. 1etolJo, 479 SC8A 288 (2006), cltelos v. netoooJez, 490 SC8A
624 (2006), lomoyoq v. nelts of Iocloto Nemeo, 326 SC8A 31 (2007), Ollvotes
v. 5otmleoto, 334 SC8A 384 (2008), 1lo v. Aboyoto, 336 SC8A 173 (2008),
uebezo-loomotqo v. Alooo, 374 SC8A 631 (2008), kockvllle xcel lotetootloool
xlm cotp. v. collo, 602 SC8A 124 (2009), kloqs ltopettles cotp. v. CollJo, 606
SC8A 137 (2009).
2
Motooqolboo v. cA, 273 SC8A 380 (1997), Mottloez v. cA, 338 SC8A 38
(2001), nlloJo v. nelts of kofoel MeJllo, 37 SC8A 237 (2002), cebollos v.
lotestote stote of tbe lote mlqJlo MetcoJo, 430 SC8A 323 (2004), 5oo leJto
v. lee, 430 SC8A 338 (2003), Co v. 8ocotoo, 472 SC8A 229 (2003), cltloq
vlLLAnuLvA, CLSA8 L. PlLllnL LAW Cn SALLS, (1998 ed.), p. 271, komolo v. loyoq,
It., 301 SC8A262 (2006), kobetts v. loplo, 313 SC8A 346 (2007), koymooJo v.
8ooJooq, 326 SC8A 314 (2007), uotoJo vJo. ue uelflo v. uelloto, 342 SC8A 397
(2008), Mooz, It. v. komltez, 629 SC8A 38 (2010).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
enumeraLed ln ArLlcle 1602 cannoL be Lhe basls Lo LreaL Lhe
LransacLlon as an equlLable morLgage.
Genera| ku|e: ln oLher words, we look aL Lhe Lwo requlslLes flrsL
before golng Lo ArLlcle 1602.
1he declslve facLor ln evaluaLlng wheLher an agreemenL ls an
equlLable morLgage ls Lhe lnLenLlon of Lhe parLles, as shown noL
necessarlly by Lhe Lermlnology used ln Lhe conLracL buL by all
Lhe surroundlng clrcumsLances, such as Lhe relaLlve slLuaLlon of
Lhe parLles aL LhaL Llme, Lhe aLLlLude, acLs, conducL, declaraLlons
of Lhe parLles, Lhe negoLlaLlons beLween Lhem leadlng Lo Lhe
deed, and generally, all perLlnenL facLs havlng a Lendency Lo flx
and deLermlne Lhe real naLure of Lhelr deslgn and
undersLandlng. necesslLous men are noL always free, ln LhaL Lo
answer a presslng emergency, Lhey wlll submlL Lo any Lerm LhaL
Lhe crafLy may lmpose on Lhem. !"+," () !ABB=- P/C 0123 5.D
6477.9
1

1hls klnd of arrangemenL, where Lhe ownershlp of Lhe land ls
supposedly Lransferred Lo Lhe buyer who provldes for Lhe funds
Lo redeem Lhe properLy from Lhe bank buL noneLheless allows
Lhe seller Lo laLer on buy back Lhe properLles, ls ln Lhe naLure of
an equlLable morLgage governed by ArLlcles 1602 and 1604 of
Lhe Clvll Code. !";#+,"+ () 1=#>$ =? 3@@A"B&- ./P 0123 5P4
647789)
lf Lhe Lerms of Lhe pocto Je tetto sale were unfavorable Lo Lhe
vendor, courLs have no buslness exLrlcaLlng her from LhaL bad
bargaln-courLs are noL guardlans of persons who are legally

1
Aosttlo v. Coozoles, It., 420 SC8A 414 (2004), koymooJo v. 8ooJooq, 326
SC8A 314 (2007).
compeLenL. L=>"I= NI") LA LAB?%+ () LABB=$"- .P4 0123 DE/
647789)

2. kat|ona|e 8eh|nd rov|s|ons Cn Lqu|tab|e Mortgage
1he provlslons of Lhe Clvll Code governlng equlLable morLgage
dlsgulsed as sale conLracLs are prlmarlly deslgned Lo curLall Lhe
evlls broughL abouL by conLracLs of sale wlLh rlghL Lo
repurchase, parLlcularly Lhe clrcumvenLlon of Lhe usury law and
poctom commlssotlom. YA%>& =? \=&A 2ASA&- \>) () 2ASA&- 545
0123 /.8 647C79)
o 1hey envlslon conLracLs of sale w/ rlghL Lo repurchase
where Lhe real lnLenLlon of Lhe parLles ls LhaL Lhe
repurchase prlce ls money loaned, and Lhe pacLo de
reLro sale" ls a means of securlng Lhe loan.
o Slnce ArLlcle 1602 ls remedlal ln naLure, lL was applled
reLroacLlvely ln cases prlor Lo Lhe effecLlvlLy of Lhe new
Clvll Code.

3. When In Doubt, Construe As Lqu|tab|e Mortgage And Not
k|ght 1o kepurchase
When ln doubL, courLs consLrue LransacLlons as equlLable
morLgages slnce lL provldes for lesser Lransmlsslon of rlghLs.
o 1he law on equlLable morLgage favors Lhe leasL
Lransmlsslon of rlghLs and lnLeresL over a properLy ln
conLroversy, slnce Lhe law seeks Lo prevenL
clrcumvenLlon of Lhe law on usury and Lhe prohlblLlon
agalnsL poctom commlssotlom provlslons. AddlLlonally,
lL ls almed Lo end un[usL or oppresslve LransacLlons or
vlolaLlons ln connecLlon wlLh a sale or properLy. 1he
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
wlsdom of Lhese provlslons cannoL be doubLed,
conslderlng many cases of unleLLered persons or even
Lhose wlLh average lnLelllgence lnvarlably flndlng
Lhemselves ln no poslLlon whaLsoever Lo bargaln falrly
wlLh Lhelr credlLors. M0@=#&A& Q%&A]" () 2=+,"(%BB"-
D7D 0123 /PE 6CEEE9)
C

J"@"$ () 2=&">%=- DC4 0123 .DE 6CEEE9 " conLracL should be
consldered as a morLgage or as a loan lnsLead of pacLo de reLro
when lLs Lerms are amblguous or Lhe clrcumsLances are
lnconslsLenL wlLh a sale.
Q=B%+" () 1=#>$ =? 3@@A"B&- DE8 0123 E/ 6477D9 " lnLenLlon of
parLles ls showed by all surroundlng clrcumsLances, noL by Lhe
Lermlnology used ln Lhe conLracL.
LqulLable morLgage seeks Lo prevenL slLuaLlon where
necesslLous men, who are noL always free ln LhaL Lo answer a
presslng emergency, wlll submlL Lo any Lerm LhaL Lhe crafLy may
lmpose on Lhem. !"+," () !ABB=- P/C 0123 5.D 6477.9
o 8esldes, lL ls a facL LhaL ln Llme of grave flnanclal dlsLress
whlch render persons hard-pressed Lo meeL even Lhelr
baslc needs or answer an emergency, such persons
would have no cholce buL Lo slgn a deed of absoluLe
sale of properLy or a sale Lhereof wlLh pocto Je tetto lf
only Lo obLaln a much-needed loan from unscrupulous
money lenders. MQ"$"+,#%G"+ () 1=#>$ =? 3@@A"B&- 4/.
0123 D87 6CEE/9)
4


4. When resumed Lqu|tab|e Mortgage (Art|c|e 1602)

1
loo v. coott of Appeols, 273 SC8A 237 (1997).
2
5olooqo v. coocepcloo, 470 SC8A 291 (2003).
Genera| ku|e: LxlsLence of any one of Lhese condlLlons sufflces
Lo glve rlse Lo Lhe non-concluslve presumpLlon LhaL Lhe conLracL
ls an equlLable morLgage.
Lxcept|on: Art|c|e 1602 ls noL concluslve and may be rebuLLed
by compeLenL and saLlsfacLory proof Lo Lhe conLrary.
J%< () 1"B",#"& 6P. U)V) Z=) 8- @)DDEP9 " ln order for
presumpLlon Lo apply, Lhe parLles musL have lnLended Lhe
conLracL Lo be a morLgage and noL a pacLo de reLro.
Llm enumeraLes Lhe followlng clrcumsLances Lo LreaL Lhe
conLracL as an equlLable morLgage.
o 1erms used ln power-of-aLLorney lndlcaLe LhaL
conveyance was lnLended Lo be a loan secured by a
morLgage
o rlce pald ln relaLlon Lo value of properLy ls grossly
lnadequaLe
! Powever, mere allegaLlon of lnsufflclency of
selllng prlce does noL creaLe Lhe presumpLlon lf
Lhere ls no proof regardlng Lhe markeL values of
Lhe area and properLy ln quesLlon
lnadequacy of prlce: ConslderaLlon so
far shorL of Lhe real value as Lo sLarLle
Lhe mlnd.
Lven wlLh Lhe asserLlon LhaL Lhe prlce ln
a pacLo de reLro ls noL Lhe assessed
prlce, does noL [usLlfy Lhe concluslon
LhaL Lhe conLracL ls one of equlLable
morLgage.
o racLlce ln pacLo de reLro sale ls
Lo flx a relaLlvely reduced prlce
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lo afford Lhe seller a reLro every
faclllLy Lo redeem Lhe properLy.
o Seller aL Llme of alleged sale was ln urgenL need of
money.
o Supposed seller lnvesLed money he obLalned ln maklng
lmprovemenLs on Lhe properLy sold.
o Seller remalned ln possesslon.
! AlLhough Lhe seller only remalned ln possesslon
for a year, such sLlpulaLlon dld noL deLracL from
Lhe facL LhaL possesslon (an lndlclum of
ownershlp) was reLalned by Lhe vendor, and
LhaL Lhe vendor reLalned parL of Lhe purchase
prlce.
! 1hls polnLed Lo an equlLable morLgage.
! ConLlnued possesslon where sellers promlsed Lo
vacaLe, buL dld noL. 1oleraLed possesslon ls noL
enough Lo prove equlLable morLgage.
o Seller pald land Lax
o 8uyer accepLed parLlal paymenLs, such accepLance
belng lncompaLlble wlLh ldea of lrrevocablllLy of Lhe LlLle
of ownershlp of Lhe purchaser aL Lhe explraLlon of Lhe
Lerm sLlpulaLed ln Lhe orlglnal conLracL for Lhe exerclse
of Lhe rlghL Lo redempLlon
o Seller remalned bound for Lhe repaymenL of Lhe money
o 1ransacLlon had orlgln ln a borrowlng of money.
! When Lrue lnLenLlon was noL Lo convey
ownershlp, buL Lo secure houslng loan of
buyer" ln whlch seller" had a dlrecL lnLeresL
slnce proceeds were Lo be applled Lo Lhelr
ouLsLandlng morLgage obllgaLlons. - LqulLable
MorLgage
! Alleged loan dlsbursed on lnsLallmenLs - no
proof as Lo lnadequacy of prlce - conLlnued
recelpL of renLals by seller was found Lo be a
gesLure of generoslLy : consldered sale on
lnsLallmenLs
o 1here was a prevlous debL beLween Lhe parLles LhaL was
noL exLlngulshed by Lhe sale buL remalned subslsLlng.
uelay ln Lransferrlng LlLle does noL glve rlse Lo presumpLlon.

S. 8adges of Lqu|tab|e Mortgage (Art|c|e 1602
1
)
A conLracL of sale acLually lnLended Lo secure Lhe paymenL of an
obllgaLlon ls presumed an equlLable morLgage. M2=<#B= ()
J"S#,- \>)- .7C 0123 454 647759)
4

1he presence of only one clrcumsLance deflned ln ArLlcle 1602 ls
sufflclenL for a conLracL of sale o tetto Lo be presumed an
equlLable morLgage) MY%B"I= () QAI"BB" D// 0123 4./ 647749)
D

1he presumpLlon ln ArLlcle 1602 [lbes wlLh Lhe rule LhaL Lhe law
favors Lhe leasL Lransmlsslon of properLy rlghLs. M^+>%K#AW- 0>) ()

1
llm v. coloqoos, 43 C.C. no. 8, p. 3394 (1948), 8oloteto v. lAc, 134 SC8A 330
(1987), Motlooo v. cA, 220 SC8A 716 (1993), lobtes v. cA, 331 SC8A 716 (2001).
2
Aysoo, It. v. lotoqos, 337 SC8A 30 (2008), 8ootlsto v. uoooqst, 337 SC8A 236
(2008).
3
clotovoll v. cA, 190 SC8A 439, 448 (1990), uy v. cA, 230 SC8A 664 (1994),
lobtes v. cA, 331 SC8A 716 (2001), Alvoto v. 1etolJo, 479 SC8A 288 (2006),
ulo v. IotJloes, 481 SC8A 226 (2006), koymooJo v. 8ooJooq, 326 SC8A 314
(2007), Alellqoy v. losetoo, 337 SC8A 699 (2007), uotoJo vJo. ue uelflo v.
uelloto, 342 SC8A 397 (2008), 8ootlsto v. uoooqst, 337 SC8A 236 (2008),
kockvllle xcell lotetootloool xlm cotp. v. collo, 602 SC8A 124 (2009), nelts of
Iose keyes, It. v. keyes, 626 SC8A 738 (2010).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
YA%>& =? 0@=#&A& Z%A(A& "+I 3B?>AI= !"BI=+"I=- PE8 0123 D5.
647759X buL lL ls noL concluslve, for lL may be rebuLLed by
compeLenL and saLlsfacLory proof Lo Lhe conLrary. M0"+$%",= ()
L%W=+- .PD 0123 P74 647789)
1he provlslons of ArLlcle 1602 on Lhe presumpLlon of equlLable
morLgage applles also Lo a conLracL purporLlng Lo be an absoluLe
sale. MR#"W=+ () 13- DPC 0123 /7/ 647779)
C

A conLracL purporLlng Lo be an absoluLe sale ls presumed Lo be
an equlLable morLgage: (a) when Lhe prlce of Lhe sale ls
unusually lnadequaLe,
2
(b) when Lhe vendor remalns ln
possesslon as lessee or oLherwlse,
3
(c) when afLer Lhe explraLlon
of Lhe rlghL of repurchase, lL ls exLended by Lhe buyer. MY%B"I=
() YA%>& =? 2"?"AB QAI"BB"- D/ 0123 4./ 647749X
P
(d) when Lhe
purporLed seller conLlnues Lo collecL renLals from Lhe lessees of
Lhe properLy sold. 2"<=& () L%W=+- PE8 0123 C/ 647759X (e)
when Lhe purporLed seller was ln desperaLe flnanclal slLuaLlon
when he execuLed Lhe purporLed sale. !"#$%&$" () *+"+,&$- ../
0123 4.5 647789X or under LhreaL of belng sued crlmlnally.
3S&=+- \>) N) H">","&- ../ 0123 .7 647789)
lnadequacy of purchase prlce" ls consldered so far shorL of Lhe
real value of Lhe properLy as Lo sLarLle a correcL mlnd. M0"+$%",=
() L%W=+- .PD 0123 P74 647789X or LhaL Lhe mlnd revolLs aL lL as
such LhaL a reasonable man would nelLher dlrecLly or lndlrecLly
be llkely Lo consenL Lo lL. MNI" IA 3B(">AW () 13- 4DC 0123 D7E

1
2omoto v.cA, 260 SC8A 10 (1996).
2
komolo v. loyoq, It., 301 SC8A262 (2006).
3
komolo v. loyoq, It., 301 SC8A262 (2006), Aysoo, It. v. lotoqos, 337 SC8A 30
(2008), 8ootlsto v. uoooqst, 337 SC8A 236 (2008), kockvllle xcell lotetootloool
xlm cotp. v. collo, 602 SC8A 124 (2009).
4
ctoz v. coott of Appeols, 412 SC8A 614 (2003).
6CEEP9X lL musL be grossly lnadequaLe or shocklng Lo Lhe
consclence. R%= () 3O"S"$"- ..5 0123 C/. 647789)
1o presume a conLracL ls an equlLable morLgaged based on
gross lnadequacy of prlce, lL musL be clearly shown from Lhe
evldence presenLed LhaL Lhe conslderaLlon was ln facL grossly
lnadequaLe aL Lhe Llme Lhe sale was execuLed. Mere lnadequacy
of prlce ls noL sufflclenL Lo creaLe Lhe presumpLlon. MUB%(">A& ()
0"><%A+$=- ..P 0123 D8P 647789)
.

Mere LoleraLed possesslon ls noL enough Lo prove LhaL Lhe
LransacLlon was an equlLable morLgage. M2AI=+I= () \%<A+AW-
.D5 0123 5DE 6477/9)
aymenL of real esLaLe Laxes ls a usual burden aLLached Lo
ownershlp, and when such paymenL ls coupled wlLh conLlnuous
possesslon of Lhe properLy, lL consLlLuLes evldence of greaL
welghL LhaL a person under whose name Lhe realLy Laxes were
declared has a valld and rlghL clalm over Lhe land. MV= ()
!";">=+- P/4 0123 44E 6477.9)
5

Powever mere allegaLlons wlLhouL proof Lo supporL lnadequacy
of prlce, or when conLlnued possesslon by Lhe seller ls
supporLed by a valld arrangemenL conslsLenL wlLh Lhe sale,
would noL supporL Lhe allegaLlon of equlLable morLgage.
M1%>AB=& () YA>+"+IAW- PE7 0123 54P 647759)
/

AlLhough under Lhe agreemenL Lhe seller shall remaln ln
possesslon of Lhe properLy for only one year, such sLlpulaLlon
does noL deLracL from Lhe facL LhaL possesslon of Lhe properLy,
an lndlclum of ownershlp, was reLalned by Lhe alleged vendor Lo

3
kloqs ltopettles cotp. v. CollJo, 606 SC8A 137 (2009).
6
lomoyoq v. nelts of Iocloto Nemeo, 326 SC8A 31 (2007).
7
Aosttlo v. Coozoles, It., 420 SC8A 414 (2004).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
quallfy Lhe arrangemenL as an equlLable morLgage, especlally
when lL was shown LhaL Lhe vendor reLalned parL of Lhe
purchase prlce) MJA,"&@% () U+,- P.E 0123 C44 6477.9)
C

under ArLlcle 1602, delay ln Lransferrlng LlLle ls noL one of Lhe
lnsLances enumeraLed by law-lnsLances ln whlch an equlLable
morLgage can be presumed. nor does Lhe facL LhaL Lhe orlglnal
LransacLlon on Lhe land was Lo supporL a loan, whlch when lL
was noL pald on due daLe was negoLlaLed lnLo a sale, wlLhouL
evldence LhaL Lhe subsequenL deed of sale does noL express Lhe
Lrue lnLenLlons of Lhe parLles, glve rlse Lo a presumpLlon of
equlLable morLgage. M1AO"BB=& () T+$A&$"$A ^&$"$A =? $GA J"$A
^<%,I%= QA>;"I=- PD7 0123 D4D 6477P9)
1he facL LhaL Lhe prlce ln a pocto Je tetto sale ls noL Lhe Lrue
value of Lhe properLy does noL [usLlfy Lhe concluslon LhaL Lhe
conLracL ls one of equlLable morLgage, ln facL a pocto Je tetto
sale, Lhe pracLlce ls Lo flx a relaLlvely reduced prlce Lo afford Lhe
seller o tetto every faclllLy Lo redeem Lhe properLy . MT,+";%= ()
13- 4P5 0123 4P4 6CEE.9)
4

ArLlcle 1602 belng remedlal ln naLure, may be applled
reLroacLlvely ln cases prlor Lo Lhe effecLlvlLy of Lhe Clvll Code.
MUBA" () 13- 4P/ 0123 4/P 6CEE.9)

6. App||cab|||ty 1o Deeds Cf Abso|ute Sa|e (Art|c|e 1604)
1wo requlslLes for Art|c|e 1604 (ln relaLlon Lo Art|c|e 1602) Lo
apply

1
Otooce v. cA, 298 SC8A 133 (1998).
2
ue Ocompo v. llm, 38 hll. 379 (1918), lellclooo v. llmjoco, 41 hll.147 (1920),
8eloolo v. Movello, 103 hll. 736 (1939).
a. arLles enLered lnLo conLracL denomlnaLed as a conLracL
of sale.
b. lnLenLlon was Lo secure an exlsLlng debL by way of
morLgage.

7. roof 8y aro|e Lv|dence, 8est Lv|dence ku|e
1haL ls why parol evldence ls compeLenL and admlsslble ln
supporL of Lhe allegaLlons LhaL an lnsLrumenL ln wrlLlng,
purporLlng on lLs face Lo Lransfer Lhe absoluLe LlLle Lo properLy,
or Lo Lransfer Lhe LlLle wlLh a rlghL Lo repurchase under speclfled
condlLlons reserved Lo Lhe seller, was ln LruLh and ln facL glven
merely as securlLy for Lhe repaymenL of a loan. MQ">%"+= ()
1=#>$ =? 3@@A"B&- 447 0123 /C5 6CEED9)
D

Q"$"+,#%G"+ () 1=#>$ =? 3@@A"B&- 4/. 0123 D87 6CEE/9
o arol evldence ls compeLenL Lo prove LhaL Lhe
lnsLrumenL ln quesLlon was glven merely as a securlLy.
o upon proof of Lhe LruLh of such allegaLlons, courL wlll
enforce Lhe agreemenL as Lhey Lruly lnLended.
3#&$>%" () V=+W"BA& P47 0123 PCP 6477P9 " non-appllcaLlon of
besL evldence rule" Lo equlLable morLgage slLuaLlons.
o ueclslve facLor ln evaluaLlng lnLenL ln such agreemenLs
ls noL always Lhe documenL lLself.
o 8uL all Lhe surroundlng clrcumsLances. 1hus, parole
evldence ls accepLable.

3
llm v. coloqoos, 43 C.C. no. 8, p. 3394 (1948), coyoqoo v. 5ootos, 34 hll. 100
(1916), Motooqolboo v. cA, 273 SC8A 380 (1997), nlloJo v. nelts of kofoel
MeJllo, 37 SC8A 237 (2002), MoJtlqol v. coott of Appeols, 436 SC8A 639
(2003), leqospl v. Ooq, 439 SC8A 122 (2003), 8ooqo v. 8ello, 471 SC8A 633
(2003), ulo v. IotJloes, 481 SC8A 226 (2006), Aysoo, It. v. lotoqos, 337 SC8A
30 (2008).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

8. kemed|es A||owed Ior Lqu|tab|e Mortgage (Art|c|es 14S4,
1602, 160S)

Art|c|e 14S4.
If an abso|ute conveyance of property |s made |n order to secure the
performance of an ob||gat|on of the grantor toward the grantee, a
trust by v|rtue of |aw |s estab||shed. If the fu|f|||ment of the ob||gat|on
|s offered by the grantor when |t becomes due, he may demand the
reconveyance of the property to h|m.

Art|c|e 160S.
In the cases referred to |n art|c|es 1602 and 1604, the apparent vendor
may ask for the reformat|on of the |nstrument.
(n)

When a conLracL ls consLrued Lo be an equlLable morLgage, Lhe
followlng may resulL:
o Any money, frulL or beneflL Lo be recelved by Lhe buyer
as renL shall be consldered as lnLeresL sub[ecL Lo usury
laws,
o 1he apparenL Seller" may ask for reformaLlon of Lhe
lnsLrumenL,
o CourL may decree LhaL buyer"-debLor musL pay hls
ouLsLandlng loan Lo seller"-credlLor
o Where Lrlal courL dld noL pass upon Lhe morLgagor's
clalm LhaL he pald Lhe morLgage obllgaLlon, a remand of
Lhe case Lo Lrlal courL ls ln order
! 1o deLermlne wheLher Lhe morLgage had been
seLLled.
! And lf noL, how much morLgagor should pay Lo
seLLle Lhe same.
ln Lhe case of an equlLable morLgage, alLhough ArLlcle 1603
whlch allows for Lhe remedy of reformaLlon, noLhlng Lhereln
precludes an aggrleved parLy from pursulng oLher remedles Lo
effecLlvely proLecL hls lnLeresL and recover hls properLy, such as
an acLlon for declaraLlon of nulllLy of Lhe deed of sale and
speclflc performance) MR=BA+$%+= () 1=#>$ =? 3@@A"B&- D85 0123
D5 647749)
o CLv: Powever, nulllflcaLlon proposed by 1olenLlno
would be unfalr - lL would leave buyer wlLhouL Lhe
necessary securlLy conLracL, whlch remalns valld.
8eformaLlon should be Lhe proper remedy Lo enforce
Lrue lnLenLlon. 8uL, ln Lhe evenL properLy had been sold
Lo a Lhlrd parLy, nulllflcaLlon of LhaL sale and
reconveyance should be allowed provlded securlLy
arrangemenL over Lhe properLy ls preserved.
lf a sale a reLro ls consLrued Lo be an equlLable morLgage,
execuLlon of an affldavlL of consolldaLlon ls of no consequence,
and consLrucLlve possesslon" would noL rlpen Lo ownershlp
slnce such was noL ln concepL of an owner. !"B"$A>= ()
T+$A><AI%"$A 3@@ABB"$A 1=#>$- C.P 0123 .D7 6CE8/9
ln an equlLable morLgage slLuaLlon, Lhe consolldaLlon of
ownershlp ln Lhe person of Lhe morLgagee ln equlLy upon fallure
of Lhe morLgagor ln equlLy Lo pay Lhe obllgaLlon, would amounL
Lo a poctom commlssotlom. 1he only proper remedy ls Lo cause
Lhe foreclosure of Lhe morLgage ln equlLy) M!>%=+A&_N"&K#AW ()
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1=#>$ =? 3@@A"B&- P.7 0123 5PP 6477.9X or Lo deLermlne lf Lhe
prlnclpal obllgaLlon secured by Lhe equlLable morLgage has been
pald or seLLled. M!"+," () !ABB=- P/C 0123 5.D 6477.9)
LxplraLlon of perlod of redempLlon" ln an equlLable morLgage
does noL prevenL Lhe purporLed seller from exLlngulshlng Lhe
maln conLracL of loan, and Lhus also Lhe equlLable morLgage
conLracL.
o As long as foreclosure has noL been done.

9. H";$#< 1=<<%&&=>%#< (Art|c|e 2088)

Art|c|e 2088.
1he cred|tor cannot appropr|ate the th|ngs g|ven by way of p|edge or
mortgage, or d|spose of them. Any st|pu|at|on to the contrary |s nu||
and vo|d. (18S9a)

A sLlpulaLlon whlch ls a poctom commlsotlom enables Lhe
morLgagee Lo acqulre ownershlp of Lhe morLgaged properLles
wlLhouL need of any foreclosure proceedlngs-lL ls a nulllLy
belng conLrary Lo Lhe provlslons of ArLlcle 2088 of Lhe Clvll
Code. MJ#<"S", () YA%>& =? \";%+$= ZA<A]=- .45 0123 DC.
6477/9)
C

1he elemenLs of poctom commlssotlom, whlch enable Lhe
morLgagee Lo acqulre ownershlp of Lhe morLgaged properLy
wlLhouL Lhe need of any foreclosure proceedlngs, are: (1) Lhere

1
Coetteto v. lqo, 96 hll. 37 (1934), Mootevltqlo v. cA, 112 SC8A 641 (1982),
vJo. Je 2oloeto v. Octovlooo, 121 SC8A 314 (1983), Ooq v. koboo leoJloq
cotp., 337 SC8A 316 (2008), nelts of Iose keyes, It. v. keyes, 626 SC8A 738
(2010).
should be a properLy morLgaged by way of securlLy for Lhe
paymenL of Lhe prlnclpal obllgaLlon, and (2) Lhere should be a
sLlpulaLlon for auLomaLlc approprlaLlon by Lhe credlLor of Lhe
Lhlng morLgaged ln case of non-paymenL of Lhe prlnclpal
obllgaLlon wlLhln Lhe sLlpulaLed perlod. U+, () 2=O"+ JA+I%+,
1=>@)- ../ 0123 .C5 647789)
lL does noL apply when Lhe securlLy for a debL ls also money ln
Lhe form of Llme deposlL. M1=+&%+, () 13- C// 0123 CP 6CE8E9)
NI") IA `#B#A$" () U;$"(%"+=- C4C 0123 DCP 6CE8D9
o SLlpulaLlon: upon redempLlon by buyer from Lhlrd parLy,
LhaL lnsLrumenL would be consldered a deed of absoluLe
sale from seller Lo buyer. AnoLher lnsLrumenL was
execuLed enLlLled opLlon Lo repurchase."
o 1hls was noL a sale a reLro as Lhe opLlon Lo repurchase
was ln a separaLe documenL.
o nelLher was lL an equlLable morLgage as lL was noL
meanL Lo secure a loan - no appllcaLlon of Art|c|e 1602.
o SC: lL was noL a pacLum commlssorlum elLher
! Seller was noL a debLor
! noLhlng was offered as securlLy.
o ubllc ollcy on pacLum commlssorlum applles only
when Lhe LransacLlon ls a morLgage or oLher securlLy
conLracL - no appllcaLlon Lo a Lrue sale or Lransfer
LransacLlon.
V#A>>A>= () []%,=- E5 HG%B) D/ 6CE.P9 " morLgage wlLh
condlLlonal sale"
o SLlpulaLlon: MorLgagor reserved for hlmself Lhe rlghL Lo
redeem properLy by paylng back Lhe amounL loaned. Cn
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
fallure of morLgagor Lo exerclse such rlghL, LlLle would
pass and be vesLed ln Lhe morLgagee.
o SC: Such sLlpulaLlon cannoL be consLrued as glvlng
morLgagee rlghL Lo own Lhe properLy upon fallure of Lhe
morLgagor Lo pay. 1hls ls vold for belng pacLum
commlssorlum.
Q=+$A(%>,%+ () 1=#>$ =? 3@@A"B&- CC4 0123 5PC 6CE849
o LqulLable morLgage gulsed as a sale a reLro cannoL be
enforced as a sale
o When a purporLed sale a reLro ls found Lo be an
equlLable morLgage, Lhe proper remedy ln case Lhe
borrower does noL pay Lhe prlce" ls Lo foreclose on Lhe
morLgage.
! 1here can be no loss of Lhe seller's" rlghL Lo
redeem for LhaL would be pacLum
commlssorlum.
! 8eLurn of redempLlon prlce would be equaL Lo
paylng Lhe prlnclpal loan, Lhus exLlngulshlng Lhe
equlLable morLgage.
1he provlslon ln a MCA/uocloo eo loqo wlLh a 8lghL Lo
8epurchase LhaL ln Lhe evenL Lhe borrower falls Lo comply wlLh
Lhe new Lerms of resLrucLurlng Lhe loan, Lhe agreemenL shall
auLomaLlcally operaLe Lo be an lnsLrumenL of docloo eo poqo
wlLhouL need of execuLlng any new documenL does noL
consLlLuLe poctom commlssotlom. 0=B%I Y=<A&- T+;) () 1=#>$ =?
3@@A"B&- 4/. 0123 45/ 6CEE/9X Lhe quesLloned conLracLs were
freely and volunLarlly execuLed by peLlLloners and respondenL ls
of no momenL, poctom commlssotlom belng vold for belng
prohlblLed by law. U+, () 2=O"+ JA+I%+, 1=>@)- ../ 0123 .C5
647789)

0=B%I Y=<A& () 1=#>$ =? 3@@A"B&

Iacts: Solld Pomes execuLed ln favor of SLaLe llnanclng CenLer a 8eal
LsLaLe MorLgage on lLs properLles embraced ln Lhe 1C1, ln order Lo
secure Lhe paymenL of a loan of 10M whlch Lhe former obLalned from
Lhe laLLer.

A year laLer, Solld Pomes applled for and was granLed an addlLlonal loan
of 1, 311,270.03 by SLaLe llnanclng, and Lo secure lLs paymenL, Solld
execuLed an amendmenL Lo real esLaLe morLgage whereby Lhe credlLs
secured by Lhe flrsL morLgage on Lhe abovemenLloned properLles were
lncreased from 10M Lo 11,311,270.03.
Solld homes obLalned addlLlonal credlLs and flnanclng faclllLles from
SLaLe llnanclng ln Lhe sum of 1,499,811.97 and Lo secure lLs paymenL,
Lhe former execuLed Lhe amendmenL Lo real esLaLe morLgage whereby
Lhe morLgage execuLed on lLs properLles was agaln amended so LhaL Lhe
loans or credlLs secured Lhereby were furLher lncreased from 11,311,
270.03 Lo 13,011,082.00.

When Lhe obllgaLlons became due and payable, SLaLe llnanclng made
repeaLed demands upon Solld homes for Lhe paymenL Lhereof, buL Lhe
laLLer falled Lo do so.

SLaLe llnanclng flled a peLlLlon for exLra[udlclal foreclosure of Lhe
morLgages who ln pursuance of Lhe peLlLlon, lssued a noLlce of sherlff's
sale whereby Lhe morLgaged properLles of Solld homes and Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
lmprovemenLs exlsLlng Lhereon, lncludlng Lhe v.v. Sollven 1owers ll
8ulldlng were seL for publlc aucLlon sale ln order Lo saLlsfy Lhe full
amounL of Solld homes' morLgage lndebLedness, Lhe lnLeresL Lhereon,
and Lhe fees and expenses lncldenLal Lo Lhe foreclosure proceedlngs.

8efore Lhe scheduled publlc aucLlon sale, Lhe morLgagor Solld homes
made represenLaLlons and lnduced SLaLe llnanclng Lo forego wlLh Lhe
foreclosure of Lhe real esLaLe morLgage. 8y reason Lhereof, SLaLe
llnanclng agreed Lo suspend Lhe foreclosure of morLgaged properLles,
sub[ecL Lo Lhe Lerms and condlLlons Lhey agreed upon, and ln pursuance
of Lhe sald agreemenL, Lhey execuLed a documenL enLlLled
MLMC8AnuuM Cl AC8LLMLn1/uAClCn Ln ACC.


Issue:
1. WheLher or noL Lhe memorandum of agreemenL/daclon en
pago execuLed by Lhe parLles ls valld and blndlng " ?LS
2. WheLher or noL solld homes can clalm damages arlslng from Lhe
non-annoLaLlon of lLs rlghL of repurchase ln Lhe consolldaLed
LlLles " nC

ne|d: 1he Memorandum of AgreemenL/uaclon Ln ago was valld and
blndlng, and LhaL Lhe reglsLraLlon of sald lnsLrumenL ln Lhe 8eglsLer of
ueeds was ln accordance wlLh law and Lhe agreemenL of Lhe parLles.

Solld homes uLLerly falled Lo prove LhaL respondenL corporaLlon had
mallclously and ln bad falLh caused Lhe non-annoLaLlon of peLlLloner's
rlghL of repurchase so as Lo prevenL Lhe laLLer from exerclslng such rlghL.
Cn Lhe conLrary, lL ls admlLLed by boLh parLles LhaL SLaLe llnanclng
lnformed Solld homes of Lhe reglsLraLlon wlLh Lhe reglsLer of deeds of
Lhelr memorandum of agreemenL/daclon en pago and Lhe lssuance of
Lhe new cerLlflcaLes of LlLle ln Lhe name of SLaLe llnanclng.

Clearly, peLlLloner was noL pre[udlced by Lhe non- annoLaLlon of such
rlghL ln Lhe cerLlflcaLes of LlLle lssued ln Lhe name of SLaLe llnanclng.
Also, lL was noL Lhe funcLlon of Lhe corporaLlon Lo cause sald
annoLaLlon. lL was equally Lhe responslblllLy of peLlLloner Lo proLecL lLs
own rlghLs by maklng sure LhaL lLs rlghL of repurchase was lndeed
annoLaLed ln Lhe consolldaLed LlLles of SLaLe llnanclng.

1he only legal Lransgresslon of SLaLe was lLs fallure Lo observe Lhe
proper procedure ln effecLlng Lhe consolldaLlon of Lhe LlLles ln lLs name.
8uL Lhls does noL auLomaLlcally enLlLle Lhe peLlLloner Lo damages absenL
convlnclng proof of mallce and bad falLh on Lhe parL of prlvaLe
respondenL-corporaLlon.

Doctr|ne:

8U1 SLLa 1he sLlpulaLlon ln Lhe promlssory noLe provldlng LhaL
upon fallure of Lhe makers Lo pay lnLeresLs, ownershlp of Lhe
properLy would auLomaLlcally be Lransferred Lo Lhe payee, and
Lhe coverlng deed of sale would be reglsLered ls ln subsLance a
poctom commlssotlom ln vlolaLlon of ArLlcle 2088, and
consequenLly, Lhe resulLanL sale ls vold and Lhe reglsLraLlon and
obLalnlng of new LlLle ln Lhe name of Lhe buyer would have be
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
declared vold also. 3) b>"+;%&;= 2A"B$S () 1=#>$ =? 3@@A"B&- 4E8
0123 DPE 6CEE89.
1


3) b>"+;%&;= 2A"B$S () 1=#>$ =? 3@@A"B&

Iacts: A. lranclsco 8ealLy and uevelopmenL Corp. granLed a loan worLh
7.3M ln favor of spouses !avlllonar, Lo whlch Lhe laLLer execuLed Lhree
documenLs: a) a promlssory noLe conLalnlng Lhe lnLeresL charge of 4
monLhly, b) a deed of morLgage over Lhe sub[ecL properLy, c) an
undaLed deed of sale of Lhe morLgaged properLy. Slnce Lhe spouses
allegedly falled Lo comply wlLh Lhe paymenLs, peLlLloner reglsLered Lhe
sale ln lLs favor, geLLlng a 1C1 lssued ln lLs name wlLhouL knowledge by
Lhe spouses. SubsequenLly, Lhe spouses obLalned anoLher loan worLh
2.3M, slgnlng anoLher promlssory noLe ln favor of peLlLloner. eLlLloner
demanded Lhe possesslon of Lhe properLy, as well as Lhe lnLeresL
paymenLs, Lo whlch Lhe spouses refused Lo comply. eLlLloner flled an
acLlon for possesslon ln Lhe 81C. 81C ruled ln favor of peLlLloner, buL CA
reversed.

Issue: WheLher or noL Lhe sale was consldered as an equlLable morLgage

ne|d: ?LS. 1he Lransfer was ln Lhe naLure of pacLum commlssorlum,
slnce Lhe sale was really consldered as an equlLable morLgage. lL was
really lnLended by Lhe spouses Lo make such undaLed deed of sale a
securlLy. Also, when peLlLloners Lransferred Lhe LlLle ln lLs name, Lhe
spouses was never lnformed of such acLlon. Such Lransfer was Lherefore
vold, maklng Lhe 1C1 held by peLlLloners null and vold as well.

1
leqospl v. Ooq, 439 SC8A 122 (2003).

Doctr|ne:

10. I|na| Chance to kedeem |n "M|staken Lqu|tab|e Mortgage"
(Art|c|e 1606)

Art|c|e 1606.
1he r|ght referred to |n art|c|e 1601, |n the absence of an express
agreement, sha|| |ast four years from the date of the contract.

Shou|d there be an agreement, the per|od cannot exceed ten years.

nowever, the vendor may st||| exerc|se the r|ght to repurchase w|th|n
th|rty days from the t|me f|na| [udgment was rendered |n a c|v|| act|on
on the bas|s that the contract was a true sa|e w|th r|ght to repurchase.
(1S08a)

Grant Cf 30-Day kedempt|on k|ght In Case Cf L|t|gat|on And
Art|c|e 1606: LxplraLlon of perlod lpso [ure exLlngulshes rlghL Lo
redeem. Powever, when Lhere was a prevlous sulL concernlng
Lhe naLure of Lhe conLracL, Lhe seller may sLlll exerclse rlghL Lo
repurchase wlLhln 30-days from Lhe Llme flnal [udgmenL was
rendered
o 1he 30-day perlod conLemplaLes a case lnvolvlng a
conLroversy as Lo Lhe naLure of Lhe conLracL. CourL
decldes wheLher lL ls a pacLo de reLro or an equlLable
morLgage. R"@"& () 1=#>$ =? 3@@A"B&- 5E 0123 DED
6CE/59)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o 1he 30-day perlod under ArLlcle 1606 does noL apply lf
Lhe courLs should flnd Lhe sale Lo be absoluLe.
H"+,%B%+"+ () 2"<=&- C8C 0123 D.E 6CEE79)
kat|ona|e Ior 30-Day er|od
o Seller may have consldered Lhe sale Lo be an equlLable
morLgage. 8elng such, Lhe seller has every rlghL Lo
exLlngulsh Lhe equlLable morLgage by paylng-up Lhe
loan aL any Llme before Lhe buyer has foreclosed on Lhe
morLgage.
o Allowlng Lhe explraLlon of Lhe redempLlon perlod ls
conslsLenL wlLh hls clalm LhaL Lhe sale was an equlLable
morLgage.
o 1hus, upon flndlng of Lhe courL LhaL lL was lndeed a
pacLo de reLro, Lhen Lhe seller musL be granLed a flnal
30-day perlod wlLhln whlch Lo declde and lf ever,
exerclse hls rlghL Lo redeem.
Powever: lf lssue was wheLher Lhe conLracL was an absoluLe
sale or sale a reLro
o !udgmenL of sale a reLro does noL glve Lhe seller Lhe 30-
day perlod.
o ln such a case, seller ls negllgenL for noL exerclslng Lhe
rlghL Lo redeem.
Sellers ln a sale [udlclally declared as pocto Je tetto may noL
exerclse Lhe rlghL Lo repurchase wlLhln Lhe 30-day perlod
provlded under ArLlcle 1606, alLhough Lhey have Laken Lhe
poslLlon LhaL Lhe same was an equlLable morLgage, lf lL ls shown
LhaL Lhere was no honesL bellef Lhereof slnce: (a) none of Lhe
clrcumsLances under ArLlcle 1602 were shown Lo exlsL Lo
warranL a concluslon LhaL Lhe LransacLlon was an equlLable
morLgage, and (b) LhaL lf Lhey Lruly belleved Lhe sale Lo be an
equlLable morLgage, as a slgn of good falLh, Lhey should have
conslgned wlLh Lhe Lrlal courL Lhe amounL represenLlng Lhelr
alleged loan, on or before Lhe explraLlon of Lhe rlghL Lo
repurchase. 3O%BB" () V=O=+&A+,- D/P 0123 .C 647749.
1


3O%BB" () V=O=+&A+,

Iacts: Spouses Abllla lnsLlLuLed agalnsL Spouses Cobonseng an acLlon for
speclflc performance, recovery of sum of money and damages, seeklng
Lhe relmbursemenL of Lhe expenses Lhey lncurred ln Lhe preparaLlon
and reglsLraLlon of 2 publlc lnsLrumenLs-- ueed of Sale and CpLlon Lo
8uy. As a defense, Spouses Cobonseng conLended LhaL Lhe LransacLlon
covered by Lhese lnsLrumenLs was a morLgage. 81C ruled ln favor of
Spouses Abllla, sLaLlng LhaL lL was a sale glvlng Spouses Cobonseng unLll
AugusL 31, 1983 wlLhln whlch Lo buy back Lhe 17 loLs sub[ecL of Lhe sale.
CA afflrmed and held LhaL Lhe LransacLlon was a pacLo de reLro sale, and
noL an equlLable morLgage.
ln 1999, Spouses Cobonseng flled wlLh Lhe 81C an urgenL moLlon Lo
repuchase Lhe loLs wlLh Lender of paymenL, whlch was denled.
Powever, afLer Lhe [udge lnhlblLed hlmself from Lhe case, lL was
reraffled Lo a dlfferenL branch, whlch granLed Lhe moLlon Lo repurchase.

Issue: WheLher or noL Spouses Cobonseng may exerclse Lhe rlghL Lo
repurchase, as sLlpulaLed ln ArLlcle 1606(3).

ne|d: nC. Sellers ln a sale [udlclally-declared as pacLo de reLro may nC1

1
vJo. Je Mocoy v. cA, 206 SC8A 244 (1992).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
exerclse Lhe rlghL Lo repurchase wlLhln Lhe 30-day perlod provlded
under ArLlcle 1606, alLhough Lhey have Laken Lhe poslLlon LhaL Lhe same
was an equlLable morLgage, lf lL shown LhaL Lhere was no honesL bellef
Lhereof slnce: (a) none of Lhe clrcumsLances under ArLlcle 1602 were
shown Lo exlsL Lo warranL a concluslon LhaL Lhe LransacLlon was an
equlLable morLgage, and (b) LhaL lf Lhey Lruly belleved Lhe sale Lo be an
equlLable morLgage, as a slgn of good falLh, Lhey should have conslgned
wlLh Lhe Lrlal courL Lhe amounL represenLlng Lhelr alleged loan, on or
before Lhe explraLlon of Lhe rlghL Lo repurchase.

Doctr|ne:

An equlLable morLgage ls a voldable conLracL. lL may be
annulled wlLhln four (4) years from Lhe Llme Lhe cause of acLlon
accrues. 3S&=+- \>) () H">","&- ../ 0123 .7 647789) :1JNa
RGA>A"?$A>- %$ <"S OA A+?=>;AI ","%+&$ $GA @>=(%&%=+ =+
@";$#< ;=<<%&&=>%#<cd

11. Ie|gn|ng Lqu|tab|e Mortgage S|tuat|on to Ava|| of Art|c|e 1606
WhaL lf seller felgns defense of equlLable morLgage ln order Lo
geL Lhe 30-day perlod?
Where evldence esLabllshed no honesL doubL as Lo parLles'
lnLenLlons Lo make lL a sale pacLo de reLro, seller would noL be
enLlLled Lo ArLlcle 1606's beneflLs. 3I=>"OBA () T+";"B"- C7D
0123 P8C 6CE.89
1here musL be honesL bellef on parL of vendor LhaL Lhe
agreemenL was ln reallLy a morLgage, merely Lo glve securlLy for
an obllgaLlon. NI") LA Q";=S () 1=#>$ =? 3@@A"B&- 475 0123
4PP 6CEE49 and bAB%;A+ () U>%"&- C.5 0123 .85 6CE8/9
When sale ls [udlclally declared pacLo de reLro, and afLer
vendors Lake Lhe poslLlon LhaL lL was an equlLable morLgage,
havlng no honesL bellef Lo LhaL effecL - vendors may noL avall of
Lhe addlLlonal 30-day perlod. 3O%BB" () V=O=+&A+,- D/P 0123
P4E 647749
o lf Lhey Lruly belleved LhaL Lhe sale was an equlLable
morLgage, Lhey should have conslgned wlLh Lhe Lrlal
courL Lhe amounL represenLlng Lhe alleged loan.
Powever, Lhls was reversed. ArLlcle 1606 only applles when Lhe
naLure of Lhe LransacLlon was puL ln lssue before Lhe courL.
o lL applles ln a slLuaLlon where one parLy clalms LhaL lL
was a pacLo de reLro, and Lhe oLher clalmed LhaL lL was
an equlLable morLgage, and Lhe courLs declded LhaL lL
was a pacLLo de reLro sale.
o Powever, appllcablllLy sLlll resLs on Lhe bona flre lnLenL
of Lhe seller a reLro, lf he Lruly belleved LhaL Lhe
LransacLlon was an equlLable morLgage.
o lL doesn'L maLLer whaL Lhe buyer lnLended Lhe
LransacLlon Lo be.

III. Lega| kedempt|on

A. Def|n|t|on (Art|c|e 1619)

Art|c|e 1619.
Lega| redempt|on |s the r|ght to be subrogated, upon the same terms
and cond|t|ons st|pu|ated |n the contract, |n the p|ace of one who
acqu|res a th|ng by purchase or dat|on |n payment, or by any other
transact|on whereby ownersh|p |s transm|tted by onerous t|t|e.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(1S21a)

Legal redempLlon ls ln Lhe naLure of a prlvllege creaLed by law
parLly for reasons of publlc pollcy and parLly for Lhe beneflL and
convenlence of Lhe redempLloner, Lo afford hlm a way ouL of
whaL mlghL be a dlsagreeable or [an] lnconvenlenL assoclaLlon
lnLo whlch he has been LhrusL. lL ls lnLended Lo mlnlmlze co-
ownershlp. MbA>+"+IAW () R">#+- DEC 0123 5.D 647749)
C


1. kat|ona|e Ior Lega| kedempt|on
8easons of publlc pollcy
8eneflL and convenlence of redempLloner, Lo afford hlm a way
ouL of whaL mlghL be an lnconvenlenL assoclaLlon
lnLended Lo mlnlmlze co-ownershlp
o Law granLs a co-owner Lhe exerclse of sald rlghL of
redempLlon when shares of oLher owners are sold Lo a
Lhlrd person
Cnce properLy ls subdlvlded and dlsLrlbuLed among Lhe co-
owners, no more reason Lo susLaln any rlghL of legal
redempLlon. 3(%B" () !">"O"$- P8. 0123 8 647759

2. Sa||ent D|st|nct|ons 8etween Convent|ona| And Lega| k|ght Cf
kedempt|on

Convent|ona| ("r|ght a retro") Lega| ("subrogat|on")
Can only be consLlLuLed by express
reservaLlon ln a conLracL of sale aL
uoes noL have Lo be expressly
reserved, covers oLher onerous

1
8oso v. Aqollot, 117 SC8A 128 (1982).
Llme of perfecLlon Lransfers of LlLle
ln favor of Lhe seller Clven Lo a Lhlrd-parLy Lo Lhe sale.
Lxerclse exLlngulshes Lhe
underlylng conLracL of sale, as
Lhough Lhere was never any
conLracL aL all
ConsLlLuLes a new sale ln
subsLlLuLlon of Lhe orlglnal sale

8. Lega| kedempt|on k|ghts Under 1he C|v|| Code
1. Among Co-ne|rs (Art|c|e 1088)

Art|c|e 1088.
Shou|d any of the he|rs se|| h|s hered|tary r|ghts to a stranger before
the part|t|on, any or a|| of the co-he|rs may be subrogated to the r|ghts
of the purchaser by re|mburs|ng h|m for the pr|ce of the sa|e, prov|ded
they do so w|th|n the per|od of one month from the t|me they were
not|f|ed |n wr|t|ng of the sa|e by the vendor. (1067a)

no rlghL of legal redempLlon avallable Lo co-helrs when sale
covers a parLlcular properLy of Lhe esLaLe.
8edempLlon rlghL perLaln Lo dlsposlLlon of rlghL Lo lnherlL, and
noL when Lhere ls a sale of a parLlcular properLy of Lhe esLaLe.
MHB"+ () T+$A><AI%"$A 3@@ABB"$A 1=#>$- CD. 0123 4/7 6CE8.9)
When Lhe helrs have parLlLloned Lhe esLaLe among Lhemselves
and each have occupled and LreaLed deflnlLe porLlons Lhereof as
Lhelr own, co-ownershlp has ceased even Lhough Lhe properLy ls
sLlll under one LlLle, and Lhe sale by one of Lhe helrs of hls
deflnlLe porLlon cannoL Lrlgger Lhe rlghL of redempLlon ln favor
of Lhe oLher helrs) MNI") LA 3@A () 1=#>$ =? 3@@A"B&- P.5 0123
CED 6477.9)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1he helrs who acLually parLlclpaLed ln Lhe execuLlon of Lhe
exLra[udlclal seLLlemenL, whlch lncluded Lhe sale Lo a Lhlrd
person of Lhelr pto loJlvlso shares ln Lhe properLy, are bound by
Lhe same, whlle Lhe co-helrs who dld noL parLlclpaLe are glven
Lhe rlghL Lo redeem Lhelr shares pursuanL Lo ArLlcle 1088. M1#"
() N">,"&- .75 0123 D/P 647759)

2. Among Co-Cwners (Art|c|e 1620)

Art|c|e 1620.
A co-owner of a th|ng may exerc|se the r|ght of redempt|on |n case the
shares of a|| the other co-owners or of any of them, are so|d to a th|rd
person. If the pr|ce of the a||enat|on |s gross|y excess|ve, the
redempt|oner sha|| pay on|y a reasonab|e one.

Shou|d two or more co-owners des|re to exerc|se the r|ght of
redempt|on, they may on|y do so |n proport|on to the share they may
respect|ve|y have |n the th|ng owned |n common. (1S22a)

1he rlghL of redempLlon may be exerclsed by a co-owner only
when parL of Lhe communlLy properLy ls sold Lo a sttooqet, now
when sold Lo anoLher co-owner because a oew parLlclpanL ls noL
added Lo Lhe co-ownershlp. MbA>+"+IAW () R">#+- DEC 0123 5.D
647749)
o Should Lwo or more co-owners deslre Lo exerclse Lhe
rlghL of redempLlon, Lhey may do so only ln proporLlon
Lo Lhe share Lhey have ln Lhe co-owned Lhlng.
o 8lghL of redempLlon of co-owners excludes ad[olnlng
owners. ArLlcle 1623(2)
When Lhe seller o tetto dles, Lhe rlghL Lo redeem cannoL be
exerclsed by a co-helr alone, slnce Lhe rlghL Lo redeem belonged
ln common Lo all Lhe helrs. MLA V#W<"+ () 1=#>$ =? 3@@A"B&-
CP8 0123 /. 6CE8/9)
8edempLlon by co-owner redounds Lo Lhe beneflL of all oLher
co-owners. MQ">%"+= () 1=#>$ =? 3@@A"B&- 444 0123 /D5 6CEED9X
and Lhe 30-day perlod for Lhe commencemenL of Lhe rlghL Lo
exerclse Lhe legal redempLlon rlghL, even when such rlghL has
been recognlzed Lo exlsL ln a flnal and execuLory courL declslon,
does noL begln from Lhe enLry of [udgmenL, buL from Lhe
wrlLLen noLlce served by Lhe seller Lo Lhe parLy enLlLled Lo
exerclse such redempLlon rlghL. V#%BBA+ () 1=#>$ =? 3@@A"B&- .8E
0123 DEE 6477E9)
1he requlslLes for Lhe exerclse of legal redempLlon are as
follows: (1) Lhere musL be co-ownershlp, (2) one of Lhe co-
owners sold hls rlghL Lo a sLranger, (3) Lhe sale was made before
Lhe parLlLlon of Lhe co-owned properLy, (4) Lhe rlghL of
redempLlon musL be exerclsed by one or more co-owners wlLhln
a perlod of LhlrLy days Lo be counLed from Lhe Llme he or Lhey
were noLlfled ln wrlLlng by Lhe co-owner vendor, and (3) Lhe
vendee musL be relmbursed Lhe prlce of Lhe sale. 1"B<" ()
0"+$=&- .E7 0123 D.E 6477E9)

3. Lffect Cf De Iacto art|t|on Among Co-ne|rs And Co-Cwners
When Lhe helrs have parLlLloned Lhe esLaLe among Lhemselves
and each have occupled and LreaLed deflnlLe porLlons Lhereof as
Lhelr own, co-ownershlp has ceased even Lhough Lhe properLy ls
sLlll under one LlLle, and Lhe sale by one of Lhe helrs of hls
deflnlLe porLlon cannoL Lrlgger Lhe rlghL of redempLlon ln favor
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
of Lhe oLher helrs. NI") LA 3@A () 1=#>$ =? 3@@A"B&- P.5 0123
CED 6477.9
lor Lhe rlghL of redempLlon Lo be exerclsed, co-ownershlp musL
exlsL aL Lhe Llme of Lhe conveyance ls made by a co-owner and
Lhe redempLlon ls demanded by Lhe oLher co-owner or co-
owners. M3(%B" () !">"O"$- P8. 0123 8 647759)

4. D|st|ngu|sh|ng 8etween k|ght Cf kedempt|on Cf Co-ne|rs And
Co-Cwners -
ArLlcle 1620 lncludes Lhe docLrlne LhaL a redempLlon by a co-
owner of Lhe properLy owned ln common, even when he uses
hls own fund, wlLhln Lhe perlod prescrlbed by law lnures Lo Lhe
beneflL of all Lhe oLher co-owners. M3++%A R"+ () 1=#>$ =?
3@@A"B&- C/4 0123 557 6CE8E9)
C

ArLlcle 1088, Lhe helr may redeem for hlmself Lhe heredlLy
rlghLs sold by a co-helr.
Q">%"+= () 1=#>$ =? 3@@A"B&- 447 0123 /C5 6CEED9 " co-helr
exerclsed legal redempLlon over parcel of land belonglng Lo
esLaLe of decedenL. 1hus, whlch redempLlon clause Lo apply?
o ulsLlncLlon beLween 1088 and 1620
o When sake of parLlcular properLy or lnLeresL ln
properLy, ArLlcle 1620.
o When sale of heredlLary rlghL lLself, ArLlcle 1088.

S. Among Ad[o|n|ng Cwners Cf kura| Lands (Art|c|es 1621)

Art|c|e 1621.

1
ue Cozmoo v. cA, 148 SC8A 73 (1987), AJllle v. cA, 137 SC8A 433 (1988).
1he owners of ad[o|n|ng |ands sha|| a|so have the r|ght of redempt|on
when a p|ece of rura| |and, the area of wh|ch does not exceed one
hectare, |s a||enated, un|ess the grantee does not own any rura| |and.

1h|s r|ght |s not app||cab|e to ad[acent |ands wh|ch are separated by
brooks, dra|ns, rav|nes, roads and other apparent serv|tudes for the
benef|t of other estates.

If two or more ad[o|n|ng owners des|re to exerc|se the r|ght of
redempt|on at the same t|me, the owner of the ad[o|n|ng |and of
sma||er area sha|| be preferred, and shou|d both |ands have the same
area, the one who f|rst requested the redempt|on. (1S23a)

8lghL of redempLlon covers only resale" and does noL cover
exchanges or barLer of properLles. LA 0"+$=& () 1%$S =? Q"+%B"-
P. 0123 P7E 6CE/49)
8equlslLe Lo show properLy prevlously boughL on speculaLlon"
dropped. MJA,"&@% () 13- 5E 0123 D57 6CE/59)
8lghL of redempLlon covers only resale" and does noL cover
exchanges or barLer of properLles xue 5ootos v. clty of Moollo,
43 SC8A 409 (1972), and cannoL arlse unless boLh ad[acenL
lands are rural lands. MH>%<">S 0$>#;$#>A& 1=>@) () N"BA+;%"- P7E
0123 D/C 6477D9)
When Lhere ls no lssue LhaL when Lhe ad[olnlng lands lnvolved
are boLh rural lands, Lhen Lhe rlghL of redempLlon can be
exerclsed and Lhe only exempLlon provlded ls when Lhe buyer
can show LhaL he dld noL own any oLher rural land. 8uL Lhe
burden of proof Lo provlde for Lhe excepLlon lles wlLh Lhe buyer.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
MH>%<">S 0$>#;$#>A& 1=>@) () N"BA+;%"- P7E 0123 D/C- D/P
6477D9)

6. Among Ad[o|n|ng Cwners of Urban Land (Art|c|e 1622)

Art|c|e 1622.
Whenever a p|ece of urban |and wh|ch |s so sma|| and so s|tuated that
a ma[or port|on thereof cannot be used for any pract|ca| purpose
w|th|n a reasonab|e t|me, hav|ng been bought mere|y for specu|at|on,
|s about to be re-so|d, the owner of any ad[o|n|ng |and has a r|ght of
pre-empt|on at a reasonab|e pr|ce.

If the re-sa|e has been perfected, the owner of the ad[o|n|ng |and sha||
have a r|ght of redempt|on, a|so at a reasonab|e pr|ce.

When two or more owners of ad[o|n|ng |ands w|sh to exerc|se the r|ght
of pre-empt|on or redempt|on, the owner whose |ntended use of the
|and |n quest|on appears best [ust|f|ed sha|| be preferred. (n)

U>$A," () U>;%+A- D8 0123 4/5 6CE/C9 " Lhe purpose of Lhls
provlslon ls Lo dlscourage speculaLlon ln real esLaLe and Lhe
aggravaLlon of Lhe houslng problems.
o urban" " refers Lo Lhe characLer of Lhe communlLy or
vlclnlLy ln whlch Lhe land ls found.
8edempLlon of urban land only applles when Lhere ls resale
o no rlghL of redempLlon when urban land ls Lransferred
under exchange" of properLles.
JA,"&@% () 1=#>$ =? 3@@A"B&- 5E 0123 D57 6CE/59 " pracLlcally
dld away wlLh requlremenL of havlng purchased land prevlously
for speculaLlon.
0A+ H= ^e Q">eA$%+, () Q">$%+AW- D4. 0123 4C7 647779 held
LhaL ArLlcle 1622 only deals wlLh small urban lands boughL for
speculaLlon.
o 8lghL does noL apply Lo a lessee Lrylng Lo buy Lhe land
he ls leaslng.

7. Sa|e of Cred|t |n L|t|gat|on (Art|c|e 1634) - D7 I"S& ?>=< +=$%;A
=? IA<"+I $= @"S.

Art|c|e 1634.
When a cred|t or other |ncorporea| r|ght |n ||t|gat|on |s so|d, the debtor
sha|| have a r|ght to ext|ngu|sh |t by re|mburs|ng the ass|gnee for the
pr|ce the |atter pa|d therefor, the [ud|c|a| costs |ncurred by h|m, and
the |nterest on the pr|ce from the day on wh|ch the same was pa|d.

A cred|t or other |ncorporea| r|ght sha|| be cons|dered |n ||t|gat|on from
the t|me the comp|a|nt concern|ng the same |s answered. 1he debtor
may exerc|se h|s r|ght w|th|n th|rty days from the date the ass|gnee
demands payment from h|m. (1S3S)

C. When er|od of Lega| kedempt|on 8eg|ns (Art|c|e 1623)

Art|c|e 1623.
1he r|ght of |ega| pre-empt|on or redempt|on sha|| not be exerc|sed
except w|th|n th|rty days from the not|ce |n wr|t|ng by the prospect|ve
vendor, or by the vendor, as the case may be. 1he deed of sa|e sha||
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
not be recorded |n the keg|stry of roperty, un|ess accompan|ed by an
aff|dav|t of the vendor that he has g|ven wr|tten not|ce thereof to a||
poss|b|e redempt|oners.

1he r|ght of redempt|on of co-owners exc|udes that of ad[o|n|ng
owners. (1S24a)

1. k|nd Cf Not|ce Contemp|ated 8y Law
8oLh Lhe leLLer and Lhe splrlL of Lhe law argue agalnsL any
aLLempL Lo wlden Lhe scope of Lhe noLlce speclfled ln Lhe Clvll
Code Lo lnclude any oLher klnd of noLlce, such as verbal or by
reglsLraLlon. Q">%+"= () 1=#>$ =? 3@@A"B&- 444 0123 /D5
6CEED9)
C

o nelLher Lhe reglsLraLlon of Lhe sale M1"O>A>" ()
N%BB"+#A("- C57 0123 54/ 6CE889, nor Lhe annoLaLlon of
an adverse clalm MNI") LA 3@A () 1=#>$ =? 3@@A"B&- P.5
0123 CED 6477.9, nor noLlce belng glven by Lhe clLy
Lreasurer MNA>I"I () 1=#>$ =? 3@@A"B&- 4.5 0123 .ED
6CEE59, comply wlLh Lhe wrlLLen noLlce requlred under
ArLlcle 1623 Lo begln Lhe Lolllng of Lhe 30-day perlod of
redempLlon.
1he wrlLLen noLlce of sale ls mandaLory, noLwlLhsLandlng acLual
knowledge of a co-owner, ln order Lo remove all uncerLalnLles
abouL Lhe sale, lLs Lerms and condlLlons, as well as lLs efflcacy
and sLaLus) MNA>I"I () 1=#>$ =? 3@@A"B&- 4.5 0123 .ED 6CEE59)
noLlce Lo mlnors may valldly be served upon parenLs even when
Lhe laLLer have noL been [udlclally appolnLed as guardlans slnce

1
cltloq netooez v. netooez, 32 hll. 214 (1913), costlllo v. 5omoote, 106 hll.
1024 (1960).
Lhe same ls beneflclal Lo Lhe chlldren. M!"I%BB= () bA>>A>- C.4
0123 P7/ 6CE8/9)
1he noLlce requlred under ArLlcle 1623 ls deemed Lo have been
complled wlLh when Lhe oLher co-owner has slgned Lhe ueed of
LxLra[udlclal arLlLlon and Lxchange of Shares whlch embodles
Lhe dlsposlLlon of parL of Lhe properLy owned ln common.
MbA>+"+IAW () R">#+- DEC 0123 5.D 647749)
1he exlsLence of a clause ln Lhe deed of sale Lo Lhe effecL LhaL
Lhe vendor has complled wlLh Lhe provlslons of ArLlcle 1623,
cannoL be Laken Lo belng Lhe wrlLLen afflrmaLlon under oaLh,
as well as Lhe evldence, LhaL Lhe requlred wrlLLen noLlce Lo
peLlLloner under ArLlcle 1623 has been meeL, for Lhe person
enLlLled Lo Lhe rlghL ls noL a parLy Lo Lhe deed of sale. MH>%<">S
0$>#;$#>A& 1=>@) () N"BA+;%"- P7E 0123 D/C 6477D9)

2. Count|ng Cf 1he er|od
1he 30-day perlod for Lhe commencemenL of Lhe rlghL Lo
exerclse Lhe legal redempLlon rlghL, even when such rlghL has
been recognlzed Lo exlsL ln a flnal and execuLory courL declslon,
does noL begln from Lhe enLry of [udgmenL, buL from Lhe
wrlLLen noLlce served by Lhe seller Lo Lhe parLy enLlLled Lo
exerclse such redempLlon rlghL) V#%BBA+ () 1=#>$ =? 3@@A"B&- .8E
0123 DEE 6477E9)
1he lnLerpreLaLlon of ArLlcle 1623 where Lhere ls a need for
noLlce ln wrlLlng, should always LllL ln favor of Lhe redempLloner
and agalnsL Lhe buyer, slnce Lhe purpose ls Lo reduce Lhe
number of parLlclpanLs unLll Lhe communlLy ls LermlnaLed, belng
a hlndrance Lo Lhe developmenL and beLLer admlnlsLraLlon of
Lhe properLy. lL ls a one-way sLreeL," ln favor of Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
redempLloner slnce he can compel Lhe buyer Lo sell Lo hlm buL
he cannoL be compelled by Lhe vendee Lo buy. MYA><=&= ()
1=#>$ =? 3@@A"B&- D77 0123 .C5 6CEE89)

3. Not|ce Must Cover erfected Sa|e
1he 30-day perlod does noL begln Lo run ln Lhe absence of
wrlLLen noLlflcaLlon comlng from Lhe seller. M1#" () N">,"&- .75
0123 D/P 647759X
C
and lL musL be a wrlLLen noLlce of a perfecLed
sale. M0@=#&A& L=>=<"B () 1=#>$ =? 3@@A"B&- 55 0123 ./.
6CE/.9)
noLlce musL be wlLh execuLlon and dellvery of Lhe deed of sale.
o erlod should noL be deemed Lo have commenced
unless noLlce ls made afLer execuLlon of formal deed of
dlsposal.
1hls docLrlne cannoL be applled Lo legal pre-empLlon.

4. Summat|on Cn Str|ct ku|es Cn Art|c|e 1623 Concern|ng Not|ce
b>"+;%&;= () !=%&A>, DD4 0123 D7. 647779, summarlzed Lhe case-
law on ArLlcle 1623, and wlLh deflnlLlveness declared:
o lor Lhe 30-day redempLlon perlod Lo begln Lo run,
noLlce musL be glven by Lhe seller, and LhaL noLlce glven
by Lhe buyer or even by Lhe 8eglsLer of ueeds ls noL
sufflclenL. 1hls expressly afflrms Lhe orlglnal rullng ln
!#$$A () Q"+#AB *S "+I 0=+&- T+;)- P 0123 .45 6CE549-
as afflrmed ln M0"B"$"+I=B () 2A$A&- C54 0123 .58
6CE889) 1hls expressly overruled Lhe rullng ln M^$;#O"+

1
Cotclo v. colollmoo, 17 SC8A 201 (1989), Motlooo v. coott of Appeols, 222
SC8A 736 (1993).
() 13- CP8 0123 .7/ 6CE8/9- whlch allowed Lhe glvlng of
noLlce by Lhe buyer Lo be effecLlve under ArLlcle 1623,
o When noLlce ls glven by Lhe proper parLy (l.e., Lhe
seller), no parLlcular form of wrlLLen noLlce ls prescrlbed
under ArLlcle 1623, so LhaL Lhe furnlshlng of Lhe coples
of Lhe deeds of sale Lo Lhe co-owner would be
sufflclenL, as held prevlously %+ ML%&$>%$= () 13- CE/
0123 575 6CEEC9X 1=+AfA>= () 13- C5 0123 //. 6CE559X
M!"I%BB= () bA>>A>- C.4 0123 P7/ 6CE8/9- buL only on Lhe
form of glvlng noLlce buL noL on Lhe rullng of who ls Lhe
proper parLy Lo glve noLlce,
o Afflrmed rullng ln M3B=+W= () T+$A><AI%"$A 3@@ABB"$A
1=#>$- C.7 0123 4.E 6CE8/9- LhaL Lhe flllng of Lhe sulL
for e[ecLmenL or collecLlon of renLals agalnsL a co-owner
acLually dlspenses wlLh Lhe need for a wrlLLen noLlce,
and musL be consLrued as commenclng Lhe runnlng of
Lhe perlod Lo exerclse Lhe rlghL of redempLlon, slnce Lhe
flllng of Lhe sulL amounLed Lo acLual knowledge of Lhe
sale from whlch Lhe 30-day perlod of redempLlon
commences Lo run.

b>"+;%&;= () !=%&A>

Iacts: eLlLloner Adalla lranclsco and Lhree of her slsLers, LsLer,
LllzabeLh, and Adelulsa, were co-owners of four parcels of reglsLered
land ln Caloocan ClLy. Cn AugusL 1979, Lhey sold 1/3 of Lhelr undlvlded
share Lo Lhelr moLher, Adela 8las, for h10,000, maklng her a co-owner
of Lhe real properLy Lo LhaL exLenL.

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
7 years laLer, ln 1986, however, Adela sold her 1/3 share for h10,000
Lo respondenL Zenalda 8olser, anoLher slsLer of peLlLloner.
ln 1992 or 6 years afLer Lhe sale, Adalla recelved summons wlLh a copy
of a complalnL by Zenalda demandlng her share ln Lhe renLals belng
collecLed from Lhe LenanLs of Lhe 1en CommandmenLs 8ulldlng, whlch
sLands on Lhe co-owned properLy. Adalla Lhen lnforms Zenalda LhaL she
was exerclslng her rlghL of redempLlon as co-owner of Lhe sub[ecL
properLy, deposlLlng for LhaL purpose h10,000 wlLh Lhe Clerk of CourL
1he case was however dlsmlssed afLer Zenalda was declared non-sulLed,
and Adalla's counLerclalm was Lhus dlsmlssed as well.

3 years afLer, Adalla lnsLlLuLes a complalnL demandlng Lhe redempLlon
of Lhe properLy, conLendlng LhaL Lhe 30- day perlod for redempLlon
under ArL. 1623 had noL begun Lo run agalnsL her or any of Lhe oLher co-
owners, slnce Lhe vendor Adela dld noL lnform Lhem abouL Lhe sale,
whlch facL Lhey only came Lo know of when Adalla recelved Lhe
summons ln 1992. Zenalda on Lhe oLher hand conLends LhaL Adalla
already knew of Lhe sale even before she recelved Lhe summons slnce
Zenalda had lnformed Adalla by leLLer of Lhe sale wlLh a demand for her
share of Lhe renLals Lhree monLhs before flllng sulL, aLLachlng Lo lL a
copy of Lhe deed of sale. Adalla's recelpL of Lhe sald leLLer ls proven by
Lhe facL LhaL wlLhln a week, she advlsed Lhe LenanLs of Lhe bulldlng Lo
dlsregard Zenalda's leLLer-demand. 1he Lrlal courL dlsmlssed Lhe
complalnL for legal redempLlon, holdlng LhaL ArL. 1623 does noL
prescrlbe any parLlcular form of noLlfylng co-owners on appeal, Lhe CA
afflrmed.

Issue: WheLher or noL Lhe leLLer-demand by Zenalda Lo Adalla, Lo whlch
Lhe deed of sale was aLLached, can be consldered as sufflclenL
compllance wlLh Lhe noLlce requlremenL of ArLlcle 1623 for Lhe purpose
of legal redempLlon.

ne|d: 1he peLlLloner polnLs ouL LhaL Lhe case does noL concern Lhe
parLlcular form ln whlch such noLlce musL be glven, buL raLher Lhe
sufflclency of noLlce glven by a vendee ln lleu of Lhe requlred noLlce Lo
be glven by Lhe vendor or prospecLlve vendor.

1he LexL of ArLlcle 1623 clearly and expressly prescrlbes LhaL Lhe 30 days
for maklng Lhe redempLlon shall be counLed from noLlce ln wrlLlng by
Lhe vendor lL makes sense Lo requlre LhaL noLlce be glven by Lhe vendor
and nobody else, slnce Lhe vendor of an undlvlded lnLeresL ls ln Lhe besL
poslLlon Lo know who are hls co-owners, who under Lhe law musL be
noLlfled of Lhe sale.

noLlce by Lhe co-owner llkewlse removes all doubL as Lo Lhe facL of Lhe
sale, lLs perfecLlon, and lLs valldlLy by noL lmmedlaLely noLlfylng, or noL
noLlfylng aL all, a co- owner, Lhe vendor can delay or even effecLlvely
prevenL Lhe meanlngful exerclse of Lhe rlghL of redempLlon.

Powever, lL would be un[usL ln Lhe case aL bar Lo requlre Lhe vendor
Adela Lo serve noLlce of Lhe sale, when Lhe facL has already been
esLabllshed ln boLh lower courLs Adalla has effecLlvely exerclsed her
rlghL when she deposlLed Lhe 10,000 redempLlon prlce 7 days afLer
recelvlng Lhe summons.

S. kare Lxcept|ons:
3B=+W= () T+$A><AI%"$A 3@@ABB"$A 1=#>$- C.7 0123 4.E 6CE8/9
As An Lxcept|on 1o Art|c|e 1088
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o SlLuaLlon where co-helrs llved wlLh purchaser ln Lhe
same loL, buL Lhe acLlon was broughL only afLer 13 years
of knowlng abouL Lhe same. 1he co-helrs are deemed Lo
have recelved acLual noLlce of Lhe same (even lf no
wrlLLen noLlce). Laches seems Lo be Lhe maln prlnclpal.
o When Lhe buyers Look possesslon of Lhe properLy
lmmedlaLely afLer Lhe execuLlon of Lhe deed of sale ln
Lhelr favor and llved ln Lhe mldsL of Lhe oLher co-owners
who never quesLloned Lhe same. MH%B"@%B () 13- 4.7
0123 .57 6CEE.9)
Lxcept|on 1o 1he Lxcept|on (|.e. Lxcept|on 1o 1he A|onzo
Doctr|ne) When Lhe sale Lo Lhe buyer was effecLed Lhrough Lhe
co-owner who acLed as Lhe broker, and never lndlcaLed LhaL he
would exerclse hls rlghL Lo redeem. ML%&$>%$= () 13- CE/ 0123
575 6CEEC9)
NA>I"I () 1=#>$ =? 3@@A"B&- 4.5 0123 .ED 6CEE59 g Alonzo and
ulsLrlLo are speclal excepLlons
o Co-owner learned of Lhe sale Lhrough clLy Lreasurer
o Per exerclse of rlghL of redempLlon was Llmely: no
wrlLLen noLlce of sale was ever glven Lo her, Lhus Lhe 30-
day perlod had noL yeL run.

Summat|on Cn Str|ct ku|es Cn Not|ce

A. YA><=&= () 1=#>$ =? 3@@A"B&- D77 0123 .C5 6CEE89) noLlce ln wrlLlng
ls needed ln 3 oLher specles of legal redempLlon
1. Case where share of co-owners are sold Lo a Lhlrd person
2. 8edempLlon of ad[olnlng rural land
3. 8edempLlon of ad[olnlng urban land.
lnLerpreLaLlon ln Lhese cases LllLs ln favor of Lhe redempLloner.
1he wrlLLen noLlce of sale ls mandaLory, noLwlLhsLandlng acLual
knowledge of a co-owner, ln order Lo remove all uncerLalnLles
abouL Lhe sale, lLs Lerms and condlLlons, as well as lLs efflcacy
and sLaLus. NA>I"I () 1=#>$ =? 3@@A"B&- 4.5 0123 .ED 6CEE59
o WrlLLen noLlce requlred was enacLed Lo remove all
doubLs abouL Lhe allenaLlon.

8. b>"+;%&;= () !=%&A>- DD4 0123 D7. 647779 g 8equlremenLs under
Art|c|e 1623
1. noLlce musL be glven by seller ln order for 30-day redempLlon
perlod Lo run.
2. no parLlcular form ls prescrlbed.
3. llllng of sulL for e[ecLmenL or collecLlon of renLals dlspenses
wlLh need for wrlLLen noLlce - flllng of Lhe sulL amounLs Lo
acLual knowledge of Lhe sale.
CLher co-owner slgns deed of parLlLlon embodylng dlsposlLlon
of properLy - proper noLlce) bA>+"+IAW () R">#+- DEC 0123 5.D
647749

D. Cther Lega| kedempt|on k|ghts
1. kedempt|on |n atents (Sec. 119, C.A. 141)

CCMMCNWLAL1n AC1 NC. 141
Sect|on 119.
Lvery conveyance of |and acqu|red under the free patent or
homestead prov|s|ons, when proper, sha|| be sub[ect to repurchase by
the app||cant, h|s w|dow, or |ega| he|rs, w|th|n a per|od of f|ve years
from the date of the conveyance.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Sale wlLhln 3 years vold even when ln favor of homesLeader's
own chlld.
8lghL Lo repurchase ls granLed by law and need noL be provlded
for ln Lhe deed of sale. M!A>%+ () 1=#>$ =? 3@@A"B&- CEP 0123
.78 6CEEC9)
Genera| ku|e: under Lhe free paLenL or homesLead provlslons of
Lhe ubllc Land AcL a perlod of flve (3) years from Lhe daLe of
conveyance ls provlded, Lo be reckoned from Lhe daLe of Lhe
sale and noL from Lhe daLe of reglsLraLlon ln Lhe offlce of Lhe
8eglsLer of ueeds) MJAA 1G#S 2A"B$S 1=>@) () 13- 4.7 0123 .E5
6CEE.9)
C

o Lxcept|on: Where homesLead was sold aL exLra[udlclal
foreclosure, 3 year perlod beglns Lo run afLer explraLlon
of one year perlod of repurchase allowed ln
exLra[udlclal foreclosure.
SecLlon 119 of ubllc Land acL should be read wlLh ArLlcle 1616
of new Clvll Code - Lhere should be a reLurn of Lhe prlce/Lender
of paymenL.
o Mere noLlce of lnLenL Lo redeem ls lnsufflclenL.

2. kedempt|on |n 1ax Sa|es (Sec. 21S, NIkC of 1997)

NA1ICNAL IN1LkNAL kLVLNUL CCDL CI 1997
Sect|on 21S. Iorfe|ture to Government for Want of 8|dder.
In case there |s no b|dder for rea| property exposed for sa|e as here|n
above prov|ded or |f the h|ghest b|d |s for an amount |nsuff|c|ent to

1
Moto v. coott of Appeols, 318 SC8A 416 (1999).
pay the taxes, pena|t|es and costs, the Interna| kevenue Cff|cer
conduct|ng the sa|e sha|| dec|are the property forfe|ted to the
Government |n sat|sfact|on of the c|a|m |n quest|on and w|th|n two (2)
days thereafter, sha|| make a return of h|s proceed|ngs and the
forfe|ture wh|ch sha|| be spread upon the records of h|s off|ce. It sha||
be the duty of the keg|ster of Deeds concerned, upon reg|strat|on w|th
h|s off|ce of any such dec|arat|on of forfe|ture, to transfer the t|t|e of
the property forfe|ted to the Government w|thout the necess|ty of an
order from a competent court.

W|th|n one (1) year from the date of such forfe|ture, the taxpayer, or
any one for h|m may redeem sa|d property by pay|ng to the
Comm|ss|oner or the |atter's kevenue Co||ect|on Cff|cer the fu||
amount of the taxes and pena|t|es, together w|th |nterest thereon and
the costs of sa|e, but |f the property be not thus redeemed, the
forfe|ture sha|| become abso|ute.

3. kedempt|on by Iudgment Debtor (Secs. 27-28, ku|e 39, ku|es
of C|v|| rocedure)

1997 kULLS CI CIVIL kCCLDUkL
Sect|on 27. Who may redeem rea| property so so|d.
kea| property so|d as prov|ded |n the |ast preced|ng sect|on, or any
part thereof so|d separate|y, may be redeemed |n the manner
here|nafter prov|ded, by the fo||ow|ng persons:

(a) 1he [udgment ob||gor, or h|s successor |n |nterest |n the who|e or
any part of the property,

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(b) A cred|tor hav|ng a ||en by v|rtue of an attachment, [udgment or
mortgage on the property so|d, or on some part thereof, subsequent
to the ||en under wh|ch the property was so|d. Such redeem|ng
cred|tor |s termed a redempt|oner. (29a)

Sect|on 28. 1|me and manner of, and amounts payab|e on, success|ve
redempt|ons, not|ce to be g|ven and f||ed.
1he [udgment ob||gor, or redempt|oner, may redeem the property
from the purchaser, at any t|me w|th|n one (1) year from the date of
the reg|strat|on of the cert|f|cate of sa|e, by pay|ng the purchaser the
amount of h|s purchase, w|th the per centum per month |nterest
thereon |n add|t|on, up to the t|me of redempt|on, together w|th the
amount of any assessments or taxes wh|ch the purchaser may have
pa|d thereon after purchase, and |nterest on such |ast named amount
at the same rate, and |f the purchaser be a|so a cred|tor hav|ng a pr|or
||en to that of the redempt|oner, other than the [udgment under wh|ch
such purchase was made, the amount of such other ||en, w|th |nterest.

roperty so redeemed may aga|n be redeemed w|th|n s|xty (60) days
after the |ast redempt|on upon payment of the sum pa|d on the |ast
redempt|on, w|th two per centum thereon |n add|t|on and the amount
of any assessments or taxes wh|ch the |ast redempt|oner may have
pa|d thereon after redempt|on by h|m, w|th |nterest on such |ast
named amount, and |n add|t|on, the amount of any ||ens he|d by sa|d
|ast redempt|oner pr|or to h|s own, w|th |nterest. 1he property may be
aga|n, and as often as a redempt|oner |s so d|sposed, redeemed from
any prev|ous redempt|oner w|th|n s|xty (60) days after the |ast
redempt|on, on pay|ng the sum pa|d on the |ast prev|ous redempt|on,
w|th two per centum thereon |n add|t|on, and the amounts of any
assessments or taxes wh|ch the |ast prev|ous redempt|oner pa|d after
the redempt|on thereon, w|th |nterest thereon, and the amount of any
||ens he|d by the |ast redempt|oner pr|or to h|s own, w|th |nterest.

Wr|tten not|ce of any redempt|on must be g|ven to the off|cer who
made the sa|e and a dup||cate f||ed w|th the reg|stry of deeds of the
p|ace, and |f any assessments or taxes are pa|d by the redempt|oner or
|f he has or acqu|res any ||en other than that upon wh|ch the
redempt|on was made, not|ce thereof must |n ||ke manner be g|ven to
the off|cer and f||ed w|th the reg|stry of deeds, |f such not|ce be not
f||ed, the property may be redeemed w|thout pay|ng such
assessments, taxes, or ||ens. (30a)

under SecLlon 28, 8ule 39 of Lhe 1997 8ules of Clvll rocedure,
Lhe perlod of redempLlon shall be aL any Llme wlLhln one (1)
year from Lhe daLe of reglsLraLlon of Lhe cerLlflcaLe of sale," so
LhaL Lhe perlod ls now Lo be undersLood as composed of 363
days, unllke Lhe 360 days under Lhe old provlslons of Lhe 8ules
of CourL. M[&<"AB () 13- DC8 0123 4C. 6CEEE9)
ln execuLlon sales, Lhe sherlff does noL warranL Lhe LlLle Lo Lhe
properLy sold by hlm and lL ls noL lncumbenL on hlm Lo place Lhe
purchaser ln possesslon of Lhe properLy.
o 1he rule of caveaL empLor applles Lo execuLlon sales.
WrlLLen noLlce musL be glven Lo Lhe [udgmenL debLor before Lhe
sale of Lhe properLy on execuLlon, Lo glve hlm Lhe opporLunlLy
Lo prevenL Lhe sale by paylng Lhe [udgmenL debL soughL Lo be
enforced and Lhe cosLs whlch have been lncurred. MR=>>A& ()
1"OB%+,- 4/. 0123 D4E 6CEE/9)
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Where Lhere ls a Lhlrd-parLy clalm, sherlff should demand from
Lhe [udgmenL credlLor who becomes Lhe hlghesL bldder,
paymenL ln cash of hls bld lnsLead of merely credlLlng Lhe
amounL Lo Lhe parLlal saLlsfacLlon of Lhe [udgmenL debL)
MR=>>A& () 1"OB%+,- 4/. 0123 D4E 6CEE/9)

4. kedempt|on |n Lxtra[ud|c|a| Iorec|osure (Sec. 6, Act 313S)

AC1 NC. 313S
Sect|on 6.
In a|| cases |n wh|ch an extra[ud|c|a| sa|e |s made under the spec|a|
power here|nbefore referred to, the debtor, h|s successors |n |nterest
or any [ud|c|a| cred|tor or [udgment cred|tor of sa|d debtor, or any
person hav|ng a ||en on the property subsequent to the mortgage or
deed of trust under wh|ch the property |s so|d, may redeem the same
at any t|me w|th|n the term of one year from and after the date of the
sa|e, and such redempt|on sha|| be governed by the prov|s|ons of
sect|ons four hundred and s|xty-four to four hundred and s|xty-s|x,
|nc|us|ve, of the Code of C|v|| rocedure, |n so far as these are not
|ncons|stent w|th the prov|s|ons of th|s Act.

1hls ls Lhe Genera| ku|e
8efore Lhe explraLlon of Lhe 1-year redempLlon perlod wlLhln
whlch Lhe [udgmenL-debLor or morLgagor may redeem Lhe
properLy, Lhe purchaser Lhereof ls noL enLlLled, as a maLLer of
rlghL, Lo Lhe possesslon of Lhe sub[ecL maLLer.
1he CourL may allow Lhe purchaser Lo recelve Lhe renLals of Lhe
purchased properLy, buL Lhe purchaser ls accounLable Lo Lhe
[udgmenL-debLor for LhaL amounL, and may be credlLed agalnsL
Lhe redempLlon prlce when Lhe sald [udgmenL debLor or
morLgagor effecLs Lhe redempLlon.
1he redempLlon of exLra-[udlclally foreclosed properLles ls
exerclsed wlLhln one (1) year from Lhe daLe of Lhe aucLlon sale
as provlded for ln AcL 3133. MJAA 1G#S 2A"B$S 1=>@) () 13- 4.7
0123 .E5 6CEE.9)
1he execuLlon of a Jocloo eo poqo by sellers effecLlvely walves
Lhe redempLlon perlod normally glven a morLgagor) Mb%>&$
VB=O"B 2A"B$S "+I LA() 1=>@) () 0"+ 3,#&$%+- D// 0123 DPC
647749)

S. kedempt|on In Iud|c|a| Iorec|osure Cf Mortgage (Sec. 47, k.A.
8791)

kLU8LIC AC1 NC. 8791
Sect|on 47. Iorec|osure of kea| Lstate Mortgage.
In the event of forec|osure, whether [ud|c|a||y or extra-[ud|c|a||y, of
any mortgage on rea| estate wh|ch |s secur|ty for any |oan or other
cred|t accommodat|on granted, the mortgagor or debtor whose rea|
property has been so|d for the fu|| or part|a| payment of h|s ob||gat|on
sha|| have the r|ght w|th|n one year after the sa|e of the rea| estate, to
redeem the property by pay|ng the amount due under the mortgage
deed, w|th |nterest thereon at rate spec|f|ed |n the mortgage, and a||
the costs and expenses |ncurred by the bank or |nst|tut|on from the
sa|e and custody of sa|d property |ess the |ncome der|ved therefrom.
nowever, the purchaser at the auct|on sa|e concerned whether |n a
[ud|c|a| or extra-[ud|c|a| forec|osure sha|| have the r|ght to enter upon
and take possess|on of such property |mmed|ate|y after the date of
the conf|rmat|on of the auct|on sa|e and adm|n|ster the same |n
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
accordance w|th |aw. Any pet|t|on |n court to en[o|n or restra|n the
conduct of forec|osure proceed|ngs |nst|tuted pursuant to th|s
prov|s|on sha|| be g|ven due course on|y upon the f|||ng by the
pet|t|oner of a bond |n an amount f|xed by the court cond|t|oned that
he w||| pay a|| the damages wh|ch the bank may suffer by the en[o|n|ng
or the restra|nt of the forec|osure proceed|ng.

Notw|thstand|ng Act 313S, [ur|d|ca| persons whose property |s be|ng
so|d pursuant to an extra[ud|c|a| forec|osure, sha|| have the r|ght to
redeem the property |n accordance w|th th|s prov|s|on unt||, but not
after, the reg|strat|on of the cert|f|cate of forec|osure sa|e w|th the
app||cab|e keg|ster of Deeds wh|ch |n no case sha|| be more than three
(3) months after forec|osure, wh|chever |s ear||er. Cwners of property
that has been so|d |n a forec|osure sa|e pr|or to the effect|v|ty of th|s
Act sha|| reta|n the|r redempt|on r|ghts unt|| the|r exp|rat|on.

SecLlon 47(1) refers Lo foreclosures by banklng lnsLlLuLlons.
SecLlon 47(2) ls Lhe LxcepLlon Lo AcL 3133.
A sLlpulaLlon Lo render Lhe rlghL Lo redeem defeaslble by an
opLlon Lo buy on Lhe parL of Lhe credlLor. 0=>%"+= () !"#$%&$"- 5
0123 EP5 6CE549.

0=>%"+= () !"#$%&$"

Iacts: 8auLlsLa spouses morLgaged Lhelr loL Lo Sorlano, who Look
possesslon Lhereof and culLlvaLed Lhe same. ursuanL Lo ar. 3 of Lhelr
agreemenL, Sorlano declded Lo buy Lhe loL. 8auLlsLa refused Lo sell
clalmlng LhaL belng morLgagors, Lhey cannoL be deprlved of Lhelr rlghL
Lo redeem Lhe properLy.

Issue: WheLher or noL Sorlano may buy Lhe morLgaged properLy of
8auLlsLa

ne|d: ?LS. 1rue LhaL Lhe LransacLlon ls a morLgage, whlch carrled wlLh lL
a cusLomary rlghL of redempLlon. Powever, Lhe morLgagor's rlghL Lo
redeem was rendered defeaslble aL Lhe elecLlon of Lhe morLgagees by
vlrLue of ar. 3, allowlng Lhem Lhe opLlon Lo purchase Lhe sald loL. 1here
ls noLhlng lmmoral or lllegal abouL such sLlpulaLlon. lL was supporLed by
Lhe same conslderaLlon as Lhe morLgage conLracL and consLlLuLed an
lrrevocable conLlnulng offer wlLhln Lhe Llme sLlpulaLed. 1haL belng Lhe
case, 8auLlsLa spouses musL be compelled Lo honor Lhe sale.

Doctr|ne:

no rlghL Lo redeem from a [udlclal foreclosure sale, excepL Lhose
granLed by banks or banklng lnsLlLuLlons. MV0T0 () 1bT- C/. 0123
CE 6CE8E9)
1he one-year redempLlon perlod ln Lhe case of foreclosure ls
noL lnLerrupLed by Lhe flllng of an acLlon assalllng Lhe valldlLy of
Lhe morLgage, so LhaL aL Lhe explraLlon Lhereof, Lhe morLgagee
who acqulres Lhe properLy aL Lhe foreclosure sale can proceed
Lo have LlLle consolldaLed ln hls name and a wrlL of possesslon
lssued ln hls favor. M*+%=+ !"+e () 13&- D.E 0123 P87 6477C9)
C

AfLer bank has foreclosed Lhe properLy as hlghesL bldder ln Lhe
aucLlon sale, Lhe accepLed offer of spouses-borrowers Lo
repurchase" Lhe properLy was acLually a new opLlon conLracL,

1
voco v. cA, 234 SC8A 146 (1994).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
and Lhe condlLlon LhaL Lhe spouses-borrowers wlll pay monLhly
lnLeresL durlng Lhe one-year opLlon perlod ls consldered Lo be
Lhe separaLe conslderaLlon Lo hold Lhe opLlon conLracL valld.
ML%f"<;= () 1=#>$ =? 3@@A"B&- PP7 0123 CE7 6477P9)
no rlghL Lo redeem ls granLed Lo Lhe debLor-morLgagor when
Lhere has been a [udlclal foreclosure of a real esLaLe morLgage,
excepL when Lhe morLgagee ls a bank or a banklng lnsLlLuLlon.
LqulLy of 8edempLlon" " Lhe rlghL of Lhe defendanL-
morLgagor Lo exLlngulsh Lhe morLgage and reLaln ownershlp of
Lhe properLy by paylng Lhe secured debL wlLhln 90 days afLer
Lhe [udgmenL becomes flnal, or even afLer Lhe foreclosure sale
buL before Lhe conflrmaLlon of lL by Lhe CourL.

6. kedempt|on |n Iorec|osure by kura| 8anks (k.A. No. 720)
lf Lhe land ls morLgaged Lo a rural bank, morLgagor may redeem
wlLhln Lwo (2) years from Lhe daLe of foreclosure or from Lhe
reglsLraLlon of Lhe sherlff's cerLlflcaLe of sale aL such foreclosure
lf Lhe properLy ls noL covered or ls covered, respecLlvely, by
1orrens LlLle. lf Lhe morLgagor falls Lo exerclse such rlghL, he or
hls helrs may sLlll repurchase wlLhln flve (3) years from
explraLlon of Lhe Lwo (2) year redempLlon perlod pursuanL Lo
Sec. 119 of Lhe ubllc Land AcL (C.A. 141). M2#>"B !"+e =? L"("=
1%$S () 13- 4C/ 0123 ..P 6CEED9)
C


7. Lega| k|ght to kedeem under Agrar|an keform Code

kLU8LIC AC1 NC. 3844

1
nelts of lellclJoJ coopoe v. cA, 273 SC8A 741 (1997).
Sect|on 12. Lessee's k|ght of kedempt|on
In case the |andho|d|ng |s so|d to a th|rd person w|thout the
know|edge of the agr|cu|tura| |essee, the |atter sha|| have the r|ght to
redeem the same at a reasonab|e pr|ce and cons|derat|on: rov|ded,
1hat the ent|re |andho|d|ng so|d must be redeemed: rov|ded, further,
1hat where these are two or more agr|cu|tura| |essees, each sha|| be
ent|t|ed to sa|d r|ght of redempt|on on|y to the extent of the area
actua||y cu|t|vated by h|m. 1he r|ght of redempt|on under th|s Sect|on
may be exerc|sed w|th|n two years from the reg|strat|on of the sa|e,
and sha|| have pr|or|ty over any other r|ght of |ega| redempt|on.

under SecLlon 12 of 8.A. 3844, as amended, ln Lhe evenL LhaL
Lhe landholdlng ls sold Lo a Lhlrd person wlLhouL Lhe knowledge
of Lhe agrlculLural lessee, Lhe laLLer ls granLed by law Lhe rlghL Lo
redeem lL wlLhln 180 days from noLlce ln wrlLlng and aL a
reasonable prlce and conslderaLlon. Mh#%]= () 13- 4EC 0123
4PE 6CEE89)
4



2
5ptloqsoo Moooqemeot 5ystems cotp. v. cometloo, 449 SC8A 63 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 14: ASSIGNMLN1

I. Def|n|t|on and Nature of Ass|gnment

A. Definition
AsslgnmenL ! Lhe sale of credlLs and oLher lncorporeal rlghLs
o AsslgnmenL ls Lhe process of Lransferrlng Lhe rlghL of
asslgnor Lo asslgnee who would Lhen have Lhe rlghL Lo
proceed agalnsL Lhe debLor. 1he asslgnmenL may be
done graLulLously or onerously, ln Lhe laLLer case, Lhe
asslgnmenL has an effecL slmllar Lo LhaL of a sale.
!"#$%&'( *+ ,%-.%#-%/0 123 4567 89: ;3<<=>+
=

ln lLs mosL general and comprehenslve sense, an asslgnmenL ls
a Lransfer or maklng over Lo anoLher of Lhe whole of any
properLy, real or personal, ln possesslon or ln acLlon, or of any
esLaLe or rlghL Lhereln. lL lncludes Lransfers of all klnds of
properLy, and ls pecullarly appllcable Lo lnLanglble personal
properLy and, accordlngly, lL ls ordlnarlly employed Lo descrlbe
Lhe Lransfer of non-negoLlable choses ln acLlon and of rlghLs ln
or connecLed wlLh properLy as dlsLlngulshed from Lhe parLlcular
lLem or properLy+? !@AB *+ 5'C&- 'D 7EEF%G(0 3H3 4567 3I=
;=IIH>+

8. Nature of Ass|gnment

1
"#$% &'()* +%,-. /. 01 234'4$) +%,-.5 200 SC8A 637 (1991), 6%7,389): /. +15
207 SC8A 333 (1992), ;,%<)$= 093(7),*5 >4$. /. +%9,= %? 1--)'(*, 338 SC8A 626
(2001).
1hough lnLanglble Lhlngs may be Lhe ob[ecL of sale as deflned ln
ArLlcle 1438, Lhe more proper Lerm ls asslgnmenL."
AsslgnmenL, more or less, ls Lhe same as sale - why Lhen do we
have a separaLe chapLer ln our Clvll Code?
o Lven Lhough Lhey're noL Lechnlcally Lhe same, Lhey
come from Lhe same genus ! sale"
WhaL's Lhe polnL? - CharacLerlsLlcs of Lhe genus sale" musL
necessarlly perLaln Lo asslgnmenL
o All [urlsprudenLlal docLrlnes perLalnlng Lo sale perLaln Lo
asslgnmenL, wlLh some modlflcaLlons.
AsslgnmenL shares characLerlsLlcs of sale
o nomlnaLe
o Consensual
o 8eclprocal
o Cnerous
" Powever, asslgnmenLs may be done
graLulLously or onerously. AJ$' *+ B7 K#/%/$F0
3<< 4567 21H ;=II=>
o CommuLaLlve
Some deflnlLlons of AsslgnmenL
o rlor Lo new Clvll Code, asslgnmenL was noL llmlLed Lo
Lhe genus of sale ! lL could be daLlon, or donaLlon, eLc.
o Powever, wlLh Lhe provlslons of Lhe nCC, Lhere should
be llLLle doubL ! asslgnmenL should only cover sales"
of credlLs.
o LxcepL ln case of donaLlon, Lhe LransacLlon of
asslgnmenL ls sLlll covered by Lhe law on sales.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
" AsslgnmenL by daLlon, asslgnmenL by barLer and
asslgnmenL of credlL as guaranLy (morLgage
conLracL) are covered by Lhe Law on Sales

C. What Makes Ass|gnment D|fferent?
@L#G#EE#/F A%-#'/%G B%/M *+ 5'C&- 'D 7EEF%G(0 3H3 4567 3I=
;=IIH> characLerlzed asslgnmenL as a Lransfer or maklng over Lo
anoLher of Lhe whole of any properLy, real or personal, ln
possesslon or ln acLlon, or of any esLaLe or rlghL Lhereln.
o lncludes Lransfers of all klnds of properLy, and ls
pecullarly appllcable Lo lnLanglble personal properLy.
o Crdlnarlly employed Lo descrlbe Lhe Lransfer of non-
negoLlable choses ln acLlon and rlghLs connecLed wlLh
properLy dlsLlngulshed from Lhe acLual lLem.
@L#G#EE#/F A%-#'/%G B%/M *+ 5'C&- 'D 7EEF%G(0 3H3 4567 3I=
;=IIH> lmplles LhaL asslgnmenL may also refer Lo Langlble
properLy.
o CLv: roperly speaklng, Lransfer of ownershlp and
possesslon of Langlble properLy ls a sale, noL an
asslgnmenL

II. erfect|on by Mere Consent (Art|c|e 1624)

Art|c|e 1624.
An ass|gnment of cred|tors and other |ncorporea| r|ghts sha|| be
perfected |n accordance w|th the prov|s|ons of Art|c|e 147S. (n)

Sa|e Ass|gnment
Sub[ecL maLLer ls Langlble properLy Sub[ecL maLLer ls lnLanglble
properLy
Consensual

AsslgnmenL does noL cover donaLlon lnvolvlng lnLanglbles
o uonaLlons are formal conLracLs
Any amblgulLy ln Lhe meanlng of an asslgnmenL shall be
resolved agalnsL Lhe parLy who prepared Lhe deed of
asslgnmenL.

III. 8ut Must 8e |n ub||c Instrument to Affect 1h|rd art|es (Art|c|e
162S)

Art|c|e 162S.
An ass|gnment of a cred|t, r|ght or act|on sha|| produce no effect as
aga|nst th|rd person, un|ess |t appears |n a pub||c |nstrument, or the
|nstrument |s recorded |n the keg|stry of roperty |n case the
ass|gnment |nvo|ves rea| property. (1S26)

8lndlng effecL as Lo Lhlrd persons noL presenL unless lL appears
ln a publlc documenL, or ln Lhe 8eglsLry of roperLy lf real rlghLs
are asslgned.
o 8ecause asslgnmenL deals wlLh lnLanglble properLy, Lhe
only evldence as Lo Lhe Lransfer ls Lhe publlc lnsLrumenL.
WlLhouL Lhe publlc lnsLrumenL, asslgnmenL ls sLlll valld.
o 8uL ln such case, lL ls enforceable only beLween asslgnor
and asslgnee, and Lhelr successors ln lnLeresL.
When asslgnmenL ls sLlll aL Lhe execuLory sLage (and noL
evldenced ln wrlLlng) lL ls covered by Lhe SLaLuLe of lrauds.
LxcepLlon: When asslgnmenL lnvolves documenL of LlLle
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
o AsslgnmenL does noL blnd Lhe ballee unless speclflc
noLlce of Lhe Lransfer of Lhe coverlng documenL of LlLle
ls glven by Lransferor/Lransferee Lo Lhe ballee

IV. Lffects of Ass|gnment

A. Ass|gnment of Cred|t
An asslgnmenL of credlL ls an agreemenL by vlrLue of whlch Lhe
owner of a credlL, known as Lhe asslgnor, by a legal cause, such
as sale, 7'$3%4 )4 -'8%, exchange or donaLlon, and wlLhouL Lhe
consenL of Lhe debLor, Lransfers hls credlL and accessory rlghLs
Lo anoLher, known as Lhe asslgnee, who acqulres Lhe power Lo
enforce lL Lo Lhe same exLenL as Lhe asslgnor could enforce lL
agalnsL Lhe debLor+ !7NC#/-FJ *+ O#P'/Q0 8== 4567 9=9 ;3<<2>+
=

As a consequence, Lhe Lhlrd parLy sLeps lnLo Lhe shoes of Lhe
orlglnal credlLor as subrogee of Lhe laLLer. AlLhough consLlLuLlng
a novaLlon, such asslgnmenL does noL exLlngulsh Lhe obllgaLlon
under Lhe credlL asslgned, even when Lhe asslgnmenL ls effecLed
wlLhouL hls consenL. !4'C-L 5#-J R'.F(0 S/$+ T+ B7 K#/%/$F
5'&E+0 1H= 4567 2<1 ;3<<=>+
5 U5 5'..F&$#%G 5'&E+ *+ @L#G#EE#/F A%-#'/%G B%/M0 =H8 4567 =
;=I:I> held LhaL Lhe meeLlng of mlnds ln asslgnmenL
conLemplaLes LhaL beLween Lhe asslgnor and asslgnee. 1he
debLor's consenL ls noL necessary, and lL ls sufflclenL LhaL Lhe
asslgnmenL be broughL Lo Lhe debLor's knowledge ln order Lo be
blndlng.

1
@% /. AB& C$%D2%,EF%,G &#*=)E ;H3(.5 >4$.5 413 SC8A 182 (2003).
uebLor's consenL noL needed for asslgnmenL Lo produce legal
effecLs. ASV5 *+ VF G'( 7/QFGF(0 9< 4567 9:I ;=IH=>
o uuLy Lo pay asslgnee does noL depend on debLor's
consenL. CLherwlse, credlLors would have a hard Llme
asslgnlng credlL.
o urpose of noLlce: only Lo lnform debLor LhaL he should
pay someone else, noL Lhe orlglnal credlLor.
o 1hls change ls a novaLlon. Powever, llablllLy ls noL
exLlngulshed.
Lven Lhough knowledge/consenL of debLor ls noL requlred for
valldlLy of Lhe asslgnmenL, lack of such has legal effecLs.

8. Issues re Debtor (Art|c|e 1626)

Art|c|e 1626.
1he debtor who, before hav|ng know|edge of the ass|gnment, pays h|s
cred|tor sha|| be re|eased from the ob||gat|on. (1S27)

ln an asslgnmenL of credlL, Lhe consenL of Lhe debLor ls noL
essenLlal for lLs perfecLlon, hls knowledge Lhereof or lack of lL
affecLlng only Lhe efflcaclousness or lnefflcaclousness of any
paymenL he mlghL make. !@&'WF$- BC#GXF&(0 S/$+ *+ 5'C&- 'D
7EEF%G(0 18: 4567 232 ;3<<=>+
o When a credlL ls asslgned, lf Lhe debLor pays hls credlLor
because he dldn'L know of Lhe asslgnmenL, hls paymenL
shall release hlm from furLher obllgaLlons.
ConsenL of debLor ls noL necessary ln order LhaL asslgnmenL
may fully produce legal effecLs, and Lhe duLy Lo pay does noL
depend on Lhe consenL of Lhe debLor. CLherwlse, all credlLors
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
would be prevenLed from asslgnlng Lhelr credlLs because of Lhe
posslblllLy of Lhe debLors' refusal Lo glven consenL. WhaL Lhe law
requlres ln an asslgnmenL of credlL ls mere noLlce Lo debLor, and
Lhe purpose of Lhe noLlce ls only Lo lnform Lhe debLor LhaL from
Lhe daLe of Lhe asslgnmenL, paymenL should be made Lo Lhe
asslgnee and noL Lo Lhe orlglnal credlLor. !ASV5 *+ VF G'(
7/QFGF(0 9< 4567 9:I ;=IH=>+
=

o 1hls change ls a novaLlon. Powever, llablllLy ls noL
exLlngulshed.
Lven Lhough knowledge/consenL of debLor ls noL requlred for
valldlLy of Lhe asslgnmenL, lack of such has legal effecLs.
o When a credlL ls asslgned, lf Lhe debLor pays hls credlLor
because he dldn'L know of Lhe asslgnmenL, hls paymenL
shall release hlm from furLher obllgaLlons.
o (ArLlcle 1283) AsslgnmenL of rlghLs made by credlLor Lo
a Lhlrd person wlLhouL knowledge of debLor.
" uebLor may seL up agalnsL Lhe asslgnee Lhe
compensaLlon perLalnlng Lo hlm agalnsL Lhe
asslgnor.
All credlLs prlor Lo Lhe asslgnmenL
All laLer ones unLll he had knowledge of
Lhe asslgnmenL.
" lf debLor consenLed Lo such asslgnmenL: he
cannoL seL up such compensaLlon unless debLor
reserved Lhe rlghL

1
&3*%4 I &3*%4 /. J'- K3$%5 37 hll. 387 (1918), + I + +%EE),$3'( +%,-. /. ;"0,
173 SC8A 1 (1989), ;,%<)$= 093(7),*5 >4$. /. +%9,= %? 1--)'(*, 338 SC8A 626
(2001), .1L934=)# /. K3M%48, 311 SC8A 414 (2006), @)7%43% /. +'-3=%(
N)/)(%-E)4= +%,-., 326 SC8A 379 (2007).
" lf he had knowledge, buL no consenL: he may
seL up compensaLlon of prevlous debLs, buL noL
subsequenL ones

C. Accessor|es and Access|ons (Art|c|e 1627)

Art|c|e 1627.
1he ass|gnment of a cred|t |nc|udes a|| the accessory r|ghts, such as a
guaranty, mortgage, p|edge or preference. (1S28)

AsslgnmenL of a credlL lncludes all Lhe accessory rlghLs, such as
guaranLy, morLgage, pledge or preference. !Y/#-FX @G%/-F&(
4CQ%& Z#GG#/Q 5'+0 S/$+ ;Y@4YZ5[> *+ 5'C&- 'D 7EEF%G(0 83H
4567 112 ;3<<H>+

D. 1rad|t|on |n Ass|gnment
noLarlzaLlon converLs a prlvaLe documenL AsslgnmenL of CredlL
lnLo a publlc documenL, Lhus complylng wlLh Lhe mandaLe of
ArLlcle 1623 of Lhe Clvll Code and maklng lL enforceable even as
agalnsL Lhlrd persons. !"FX'/#' *+ 5%E#-'G VF*+ 5'&E+0 832 4567
1HI ;3<<H>+
AsslgnmenL of credlL ls an acL of Lransferrlng Lhe rlghL of an
asslgnor Lo an asslgnee who could proceed agalnsL prlnclpal
debLor. @&'WF$- BC#GXF&( *+ 5'C&- 'D 7EEF%G(0 18: 4567 232
;3<<=>
o 1ransfer Lakes place on perfecLlon of conLracL

V. Warrant|es of Ass|gnor (Art|c|e 1628)

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
A. Genera| o|nts

Art|c|e 1628.
1he vendor |n good fa|th sha|| be respons|b|e for the ex|stence and
|ega||ty of the cred|t at the t|me of the sa|e, un|ess |t shou|d have been
so|d as doubtfu|, but not for the so|vency of the debtor, un|ess |t has
been so express|y st|pu|ated or un|ess the |nso|vency was pr|or to the
sa|e and of common know|edge.

Lven |n these cases he sha|| on|y be ||ab|e for the pr|ce rece|ved and for
the expenses spec|f|ed |n No. 1 of Art|c|e 1616.

1he vendor |n bad fa|th sha|| a|ways be answerab|e for the payment of
a|| expenses, and for damages. (1S29)

WarranLy agalnsL hldden defecLs does noL apply Lo an lnLanglble
slnce lL has no physlcal exlsLence.
Asslgnor responslble for exlsLence and legallLy of credlL, aL Lhe
Llme of sale.
o unless lL was really sold as a doubLful accounL
Asslgnor does noL warranL Lhe solvency of Lhe debLor, unless:
1. 1here ls a sLlpulaLlon Lo LhaL effecL, or
2. lnsolvency of Lhe debLor was prlor Lo Lhe asslgnmenL
3. lnsolvency of Lhe debLor was of common knowledge.
AJ$' 4%GF( 5'&E+ *+ B7 K#/%/$F0 3<< 4567 21H ;=II=>

AJ$' 4%GF( 5'&E+ *+ B7 K#/%/$F

Iacts: n?CC Sales Corp exLended a credlL accommodaLlon Lo Lhe
lernandez 8roLhers. 1he broLhers, acLlng ln behalf of Sanshell Corp,
dlscounLed a 8l check for 60,000 wlLh n?CC, whlch Lhen lndorsed Lhe
sald check Lo 8A llnance accompanled by a ueed of AsslgnmenL. 8A
llnance, ln Lurn, released Lhe funds, whlch were used by Lhe broLhers.
1he 8l check was dlshonored. 1he broLhers lssued a subsLlLuLe check,
whlch was also dlshonored. now 8A llnance goes afLer n?CC, whlch
dlsclalms llablllLy.

Issue: WheLher or noL n?CC, as Lhe asslgnor, ls llable for breach of
warranLles

ne|d: ?LS. 1he asslgnor (n?CC) warranLs boLh Lhe exlsLence and legallLy
of Lhe credlL, as well as Lhe solvency of Lhe debLor. lf Lhere ls a breach of
any of Lhe 2 warranLles, Lhe asslgnor ls llable Lo Lhe asslgnee. 1haL belng
Lhe case, n?CC cannoL evade llablllLy. So long as Lhe credlL remalns
unpald, Lhe asslgnor remalns llable noLwlLhsLandlng fallure Lo glve
noLlce of dlshonor LhaL ls because Lhe llablllLy of n?CC sLems form Lhe
asslgnmenL, noL on Lhe checks alone.

Doctr|ne:

Lven when Lhere ls a warranLy as Lo Lhe debLor's solvency, lL
doesn'L lasL forever.
o 1 year from Lhe asslgnmenL, lf credlL was already due
o CLherwlse, 1 year from Lhe maLurlLy of Lhe credlL
lf asslgnor ln good falLh ls llable for a warranLy
o Cnly expenses of Lhe conLracL
o CLher leglLlmaLe paymenLs made by reason of
asslgnmenL.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
lf asslgnor was ln bad falLh, and he breached warranLles
o AddlLlonal llablllLy for necessary and useful expenses
When 7'$3%4 )4 -'8% Lakes Lhe form of an asslgnmenL of credlL,
lL produces Lhe effecLs of a daLlon ln paymenL, whlch may
exLlngulshes Lhe obllgaLlon, however, by vlrLue of Lhe warranLy
ln ArLlcle 1628, whlch makes Lhe vendor llable for Lhe exlsLence
and legallLy of Lhe credlL aL Lhe Llme of sale, when lL ls shown
LhaL Lhe asslgned credlL no longer exlsLed aL Lhe Llme of daLlon,
Lhen lL behooves Lhe asslgnor Lo make good lLs warranLy and
pay Lhe obllgaLlon. !"' *+ \]4 ^$'_K'&.`'&M 4J(-F. @L#G+0 S/$+0
9=1 4567 =:3 ;3<<1>+

8. Cther Spec|f|c Warrant|es (Art|c|e 1630-1633)

Art|c|e 1630.
Cne who se||s an |nher|tance w|thout enumerat|ng the th|ngs of wh|ch
|t |s composed, sha|| on|y be answerab|e for h|s character as an he|r.
(1S31)

Art|c|e 1631.
Cne who se||s for a |ump sum the who|e of certa|n r|ghts, rents, or
products, sha|| comp|y by answer|ng for the |eg|t|macy of the who|e |n
genera|, but he sha|| not be ob||ged to warrant each of the var|ous
parts of wh|ch |t may be composed, except |n the case of ev|ct|on from
the who|e or the part of greater va|ue. (1S32a)

Art|c|e 1632.
Shou|d the vendor have prof|ted by some of the fru|ts or rece|ved
anyth|ng from the |nher|tance so|d, he sha|| pay the vendee thereof, |f
the contrary has not been st|pu|ated. (1S33)

Art|c|e 1633.
1he vendee sha||, on h|s part, re|mburse the vendor for a|| that the
|atter may have pa|d for the debts of and charges on the estate and
sat|sfy the cred|ts he may have aga|nst the same, un|ess there |s an
agreement to the contrary. (1S34)

VI. k|ght of kepurchase on Ass|gnment of Cred|t under L|t|gat|on
(Art|c|es 1634 and 163S)

Art|c|e 1634.
When a cred|t or other |ncorporea| r|ght |n ||t|gat|on |s so|d, the debtor
sha|| have a r|ght to ext|ngu|sh |t by re|mburs|ng the ass|gnee for the
pr|ce the |atter pa|d therefor, the [ud|c|a| costs |ncurred by h|m, and
the |nterest on the pr|ce from the day on wh|ch the same was pa|d.

A cred|t or other |ncorporea| r|ght sha|| be cons|dered |n ||t|gat|on from
the t|me the comp|a|nt concern|ng the same |s answered.

1he debtor may exerc|se h|s r|ght w|th|n th|rty days from the date the
ass|gnee demands payment from h|m. (1S3S)

Art|c|e 163S.
Irom the prov|s|ons of the preced|ng art|c|e sha|| be excepted the
ass|gnments or sa|es made:

(1) 1o a co-he|r or co-owner of the r|ght ass|gned,

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(2) 1o a cred|tor |n payment of h|s cred|t,

(3) 1o the possessor of a tenement or p|ece of |and wh|ch |s sub[ect to
the r|ght |n ||t|gat|on ass|gned. (1S36)

8eason for Lhe rule on asslgnmenLs ln llLls pendencla
o Such asslgnemenLs are deemed speculaLlve.
o Law would raLher beneflL Lhe debLor, Lhan Lhe one who
merely speculaLes for proflL.
o lf asslgnor ls wllllng Lo dlspose of Lhe credlL aL a low
prlce, debLor should beneflL.
8lghL Lo redeem on debLor's parL shall noL exlsL when Lhe law
conslders Lhe asslgnmenL as noL for speculaLlon.
Lxample:
o AsslgnmenL of credlL Lo Lhe co-helr or co-owner of such
credlL/rlghL
o AsslgnmenL Lo a credlLor ln paymenL for hls own credlL,
o AsslgnmenL Lo Lhe possessor of a LenemenL/plece of
land whlch ls sub[ecL Lo Lhe rlghL ln llLlgaLlon LhaL was
asslgned
ln Lhe foregolng cases, asslgnee has a leglLlmaLe purpose for
Laklng Lhe asslgnmenL - noL merely speculaLlon.

VII. Subrogat|on *F&(C( Ass|gnment of Cred|t (Art|c|e 1301)

Art|c|e 1301.
Convent|ona| subrogat|on of a th|rd person requ|res the consent of the
or|g|na| part|es and of the th|rd person. (n)

Subrogat|on Ass|gnment
LxLlngulshes orlglnal obllgaLlon,
glves rlse Lo a new one
Same rlghL passed from one
person Lo anoLher
nulllLy of an old obllgaLlon may be
cured by subrogaLlon (new one ls
valld)
nulllLy of obllgaLlon noL remedled
Lhrough asslgnmenL
AgreemenL requlred beLween
orlglnal parLles and new credlLor
ConsenL of debLor noL requlred Lo
produce legal effecLs

SubrogaLlon exLlngulshes Lhe obllgaLlon and glves rlse Lo a new
one, asslgnmenL refers Lo Lhe same rlghL whlch passes from one
person Lo anoLher. 1he nulllLy of an old obllgaLlon may be cured
by subrogaLlon, such LhaL a new obllgaLlon wlll be perfecLly
valld, buL Lhe nulllLy of an obllgaLlon ls noL remedled by Lhe
asslgnmenL of Lhe credlLor's rlghL Lo anoLher. ln an asslgnmenL
of credlL, Lhe consenL of Lhe debLor ls noL necessary ln order
LhaL Lhe asslgnmenL may fully produce legal effecLs, whereas,
convenLlonal subrogaLlon requlres an agreemenL among Lhe
Lhree parLles concerned - orlglnal credlLor, debLor, and new
credlLor. lL ls a new conLracLual relaLlon based on Lhe muLual
agreemenL among all Lhe necessary parLles. "#$%&'( *+
,%-.%#-%/0 123 4567 89: ;3<<=>+
=


"#$%&'( *+ ,%-.%#-%/

Iacts: Abelardo Llcaros lnvesLed hls money worLh $130,000 wlLh Anglo-
Asean 8ank, a money markeL placemenL by way of deposlL, based ln Lhe

1
@)7%43% /. +'-3=%( N)/. +%,-., 326 SC8A 379 (2007).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
8epubllc of venaLu. unexpecLedly, he had a hard Llme geLLlng back hls
lnvesLmenLs as well as Lhe lnLeresL earned. Pe Lhen soughL Lhe counsel
of AnLonlo CaLmalLan, a repuLable banker and lnvesLor. 1hey enLered
lnLo an agreemenL, where a non-negoLlable promlssory noLe was Lo be
execuLed ln favor of Llcaros worLh $130,000, and LhaL CaLmalLan would
Lake over Lhe value of Lhe lnvesLmenL made by Llcaros wlLh Lhe Anglo-
Asean 8ank aL Lhe former's expense. When CaLmalLan conLacLed Lhe
forelgn bank, lL sald Lhey wlll look lnLo lL, buL lL dldn'L prospered.
8ecause of Lhe lnablllLy Lo collecL, CaLmalLan dld noL boLher Lo pay
Llcaros Lhe value of Lhe promlssory noLe. Llcaros, however, bellevlng
LhaL he had a rlghL Lo collecL from CaLmalLan regardless of Lhe ouLcome,
demanded paymenL, buL was lgnore. Llcaros flled a complalnL agalnsL
CaLmalLan for Lhe collecLlon of Lhe noLe. 1he Lrlal courL ruled ln favor of
Llcaros, buL CourL of Appeals reversed.

Issue: WheLher Lhe memorandum of agreemenL beLween peLlLloner and
respondenL ls one of asslgnmenL of credlL or one of convenLlonal
subrogaLlon

ne|d: CCnvLn1lCnAL Su88CCA1lCn. An asslgnmenL of credlL has been
deflned as Lhe process of Lransferrlng Lhe rlghL of Lhe asslgnor Lo Lhe
asslgnee who would Lhen have a rlghL Lo proceed agalnsL Lhe debLor.
ConsenL of Lhe debLor ls noL requlred ls noL necessary Lo producL lLs
legal effecLs, slnce noLlce of Lhe asslgnmenL would be enough. Cn Lhe
oLher hand, subrogaLlon of credlL has been deflned as Lhe Lransfer of all
Lhe rlghLs of Lhe credlLor Lo a Lhlrd person, who subsLlLuLes hlm ln all hls
rlghLs. lL requlres LhaL all Lhe relaLed parLles LhereLo, Lhe orlglnal
credlLor, Lhe new credlLor and Lhe debLor, enLer lnLo a new agreemenL,
requlrlng Lhe consenL of Lhe debLor of such Lransfer of rlghLs. ln Lhe case
aL hand, lL was clearly sLlpulaLed by Lhe parLles ln Lhe memorandum of
agreemenL LhaL Lhe express conformlLy of Lhe Lhlrd parLy (debLor) ls
needed. 1he memorandum conLalns a space for Lhe slgnaLure of Lhe
Anglo-Asean 8ank wrlLLen Lhereln "wlLh our conforme". WlLhouL such
slgnaLure, Lhere was no Lransfer of rlghLs. 1he usage of Lhe word
"AsslgnmenL" was used as a general Lerm, slnce CaLmalLan was noL a
lawyer, and Lherefore was noL well-versed wlLh Lhe language of Lhe law.

Doctrine:

VIII. Ass|gnment of Copyr|ght (Sect|on 180, Inte||ectua| roperty Code)

IN1LLLLC1UAL kCLk1 CCDL
Sect|on 180. k|ghts of Ass|gnee.
180.1. 1he copyr|ght may be ass|gned |n who|e or |n part. W|th|n the
scope of the ass|gnment, the ass|gnee |s ent|t|ed to a|| the r|ghts and
remed|es wh|ch the ass|gnor had w|th respect to the copyr|ght.

180.2. 1he copyr|ght |s not deemed ass|gned |nter v|vos |n who|e or |n
part un|ess there |s a wr|tten |nd|cat|on of such |ntent|on.

180.3. 1he subm|ss|on of a ||terary, photograph|c or art|st|c work to a
newspaper, magaz|ne or per|od|ca| for pub||cat|on sha|| const|tute on|y
a ||cense to make a s|ng|e pub||cat|on un|ess a greater r|ght |s express|y
granted. If two (2) or more persons [o|nt|y own a copyr|ght or any part
thereof, ne|ther of the owners sha|| be ent|t|ed to grant ||censes
w|thout the pr|or wr|tten consent of the other owner or owners. (Sec.
1S, .D. No. 49a)

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Cwner of copyrlghL may asslgn lL ln whole or ln parL
o Asslgnee enLlLled Lo all rlghLs and remedles whlch
asslgnor had wlLh respecL Lo copyrlghL
noL deemed asslgned lnLer vlvos unless Lhere ls wrlLLen
lndlcaLlon of such lnLenLlon
Submlsslon of a work Lo a newspaper or magazlne for
publlcaLlon shall consLlLuLe an asslgnmenL
o 8uL only for one publlcaLlon
o unless a greaLer rlghL ls granLed
1wo or more persons [olnLly own a copyrlghL
o ConsenL of oLher owners ls needed for an owner Lo
granL llcenses
CopyrlghL ls dlsLlncL from properLy sub[ecL Lo lL
o 1ransfer of copy rlghL ls noL Lransfer of maLerlal ob[ecL
o ln Lhe same way, Lransfer of Lhe work does noL lmply
asslgnmenL of Lhe copyrlghL.

Ik. Ass|gnment as an Lqu|tab|e Mortgage
When an asslgnor execuLes a ueed of AsslgnmenL coverlng her
leasehold rlghLs ln order Lo secure Lhe paymenL of promlssory
noLes coverlng Lhe loan she obLalned from Lhe bank, such
asslgnmenL ls equlvalenL Lo an equlLable morLgage, and Lhe
non-paymenL of Lhe loan cannoL auLhorlze Lhe asslgnee Lo
reglsLer Lhe asslgned leasehold rlghLs ln lLs name as lL would be
a vlolaLlon of ArLlcle 2088 agalnsL -'$=9E $%EE3**%,39E. 1he
proper remedy of Lhe asslgnee ls Lo proceed Lo foreclose on Lhe
leasehold rlghL asslgned as securlLy for Lhe loan. !VB@ *+ 5'C&-
'D 7EEF%G(0 3:9 4567 =9 ;=II:>+
o AsslgnmenL of lnLanglbles may be used Lo secure loans
o rlnclples perLalnlng Lo LqulLable MorLgage wlll apply.
" AsslgnmenL Lo secure paymenL of promlssory
noLes
" Such ls equlvalenL Lo an equlLable morLgage
" 1hus, nonpaymenL of loan cannoL auLhorlze
asslgnee Lo reglsLer Lhe asslgned rlghLs ln hls
name (lL would be LanLamounL Lo acLum
Commlssorlum)

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk 1S: 8ULk SALLS LAW
(AC1 NC. 39S2)

I. Scope (!"#$ &' (), *+ ,'-' * ./00' 12)

!"#$ &' ()

Doctr|ne: A sale made of all Lhe effecLs ln Lhe vendor's sLore wlLhouL Lhe
buyer belng furnlshed a sworn llsL of credlLors as requlred by Sec 3, ls
null and vold lrrespecLlve of Lhe good or bad falLh of Lhe buyer, and
[udgmenL credlLors may LreaL such sale as never havlng been made and
proceed Lo have execuLlon levled on Lhe properLles Lhus sold.
l. 1ransacLlons covered by Lhe law

lnLended as a specles of bankrupLcy law Lo proLecL supply
credlLors/buslnessmen agalnsL preferenLlal/fraudulenL Lransfers
done by merchanLs
lnLended Lo prevenL a slLuaLlon where merchanLs would sell
Lhelr buslnesses Lhen vanlsh, leavlng Lhelr credlLors wlLhouL
recourse agalnsL Lhe buyers ln good falLh and for value."
Law covers all LransacLlons, good falLh or noL, LhaL are wlLhln
Lhe descrlpLlon of a bulk sale"
rlmary Cb[ecLlve ls Lo compel seller ln bulk Lo:
o LxecuLe and dellver a verlfled llsL of credlLors Lo Lhe
buyer
o Clve noLlce of Lhe lnLended sale Lo Lhe credlLors
o use Lhe proceeds Lo pay ouLsLandlng llablllLles
1hls ls consldered as belng a valld exerclse of Lhe SLaLe's pollce
power. 3#45$56 &' 78$6"95:; <2 ="#>' *?+
1he 8ulk Sales Law musL be consLrued sLrlcLly. 1hus, Lhe dlsposal
by Lhe owner of a foundry shop of all hls lron bars and oLhers
does noL fall under Lhe law, because Lhe conLenLs of a foundry
shop are noL wares and merchandlse. 1he Law only covers sales
ln bulk of flxLures and equlpmenL used ln Lhe mercanLlle
buslness, whlch lnvolves Lhe buylng and selllng of merchandlse.
@=8A0>8 &' BA$6; C!DE 1+ ,'-' *FG< H?I1*J'
1he Law applles Lo merchanLs who are ln Lhe buslness of selllng
goods and wares and slmllar merchandlse, and cannoL cover Lhe
sale of asseLs by a manufacLurer slnce Lhe naLure of hls buslness
does noL parLake of merchandlse. KL= &' M"8 NA$A95O>8 P/Q68
AR S"8 TM! AR 75$#>5; FG ,'-' UA' G ??V< H+1 W8O9/59) ?II+J!

K8&8>A0X8$S L5$Y AR S"8 ="#>#00#$8Z &' TM! AR 75$#>5

Iacts: ln 1978, loneer Class ManufacLurlng Corp.purchased from ?u
(under Ancar LqulpmenL arLs and 1onlcar) equlpmenL parLs worLh
7,000. Powever, loneer falled or refused Lo pay upon demand.
WlLhouL lnformlng ?u, loneer Class Lransferred all lLs asseLs Lo u8 ln a
"deed of cesslon of properLy ln paymenL of obllgaLlon" or daclon en
pago. ln Lurn, u8 sold Lhese asseLs Lo unlon Class LhaL same year.
ln 1983, ?u lnsLlLuLed an acLlon agalnsL loneer Class, u8, and unlon
Class, asserLlng LhaL Lhe Lransfer of Lhe asseLs Lo u8 was vold by
reason of fraud.

Issue: WheLher or noL Lhe 8ulk Sales Law covers Lhe conveyance ln
quesLlon (lLs vlolaLlon would make u8, unlon Class, and loneer Class
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
llable Lo ?u)

ne|d: nC. under Lhe 8ulk Sales Law, Lhe Lerms "goods" and
"merchandlse," havlng acqulred a flxed meanlng, refer Lo Lhlngs and
arLlcles, whlch are kepL for sale by a merchanL. Llkewlse, Lhe Lerm
"flxLures" has been lnLerpreLed Lo mean Lhe chaLLels, whlch Lhe
merchanLs usually possess and annex Lo Lhe premlses occupled by Lhem
ln order Lo sLore, handle and dlsplay Lhelr goods and wares. 1he
LechnlcallLy of Lhese Lerms conveys Lhe lnLenLlon of Lhe law Lo apply lL
Lo merchanLs who are ln Lhe buslness of selllng goods and wares and
slmllar merchandlse.

ln Lhls case, loneer Class manufacLured glass only on speclflc orders
and lL dld noL sell dlrecLly Lo consumers buL manufacLured lLs producLs
only for parLlcular cllenLs. 1hus, loneer Class was nC1 a merchandlser.
Moreover, Lhe daclon en pago beLween loneer and u8 Lransferred
and conveyed Lhe bulk of lLs corporaLe asseLs Lo exLlngulsh lLs
ouLsLandlng debLs Lo u8. 1hus, Lhe sub[ecL maLLer of Lhe deed of
cesslon was Lhe asseLs, noL sLock-ln-Lrade. Such conveyance was clearly
ouLslde Lhe amblL of Lhe 8ulk Sales Law. SC ordered loneer Class, noL
u8 and unlon Class, Lo pay ?u Lhe prlce of Lhe equlpmenL purchased
plus lnLeresL.

Doctr|ne:

II. Coverage of "8u|k Sa|e" - Sa|e, transfer, mortgage or ass|gnment of:

AC1 NC. 39S2
Sect|on 2. Sa|e and transfer |n bu|k.
Any sa|e, transfer, mortgage or ass|gnment of a stock of goods, wares,
merchand|se, prov|s|ons, or mater|a|s otherw|se than |n the ord|nary
course of trade and the regu|ar prosecut|on of the bus|ness of the
vendor, mortgagor, transferor, or ass|gnor, or sa|e, transfer, mortgage
or ass|gnment of a||, or substant|a||y a||, of the bus|ness or trade
theretofore conducted by the vendor, mortgagor, transferor, or
ass|gnor, or of a||, or substant|a||y a||, of the f|xtures and equ|pment
used |n and about the bus|ness of the vendor, mortgagor, transferor,
or ass|gnor, sha|| be deemed to be a sa|e and transfer |n bu|k, |n
contemp|at|on of th|s Act: rov|ded, however, 1hat |f such vendor,
mortgagor, transferor or ass|gnor, produces and de||vers a wr|tten
wa|ver of the prov|s|ons of th|s Act from h|s cred|tors as shown by
ver|f|ed statements, then, and |n that case, the prov|s|ons of th|s
sect|on sha|| not app|y.

1hree 1ypes of 1ransacLlon
1. Lxtraord|nary Sa|e Cf Goods (e||ow) ! Coods, wares,
merchandlse, provlslons or maLerlal oLher Lhan ln Lhe ordlnary
course of buslness.
2. Lxtraord|nary Sa|e Cf I|xtures And Lqu|pment (|nk) ! All, or
subsLanLlally all of all or subsLanLlally all of Lhe flxLures and
equlpmenL used ln and abouL Lhe buslness.
3. Sa|e Cf 8us|ness Lnterpr|se (Green) ! All, or subsLanLlally all of
Lhe buslness or Lrade LhereLofore conducLed by Lhe vendor,
morLgagor, Lransferor, or asslgnor.
MoLlve/lnLenLlon/consequence of sale ls noL an elemenL
o As long as Lhe LransacLlon ls wlLhln Lhe descrlpLlon, no
maLLer whaL lL's belng done for, lL ls covered by Lhe 8ulk
Sales Law.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CuallflcaLlon of ln Lhe normal course of buslness" applles only
Lo Lhe flrsL Lype
o Second Lwo Lypes are by naLure noL ln Lhe normal
course of buslness.
8ulk sales are of a naLure LhaL Lhey do noL fall wlLhln Lhe normal
course, whlch Lhus should warn parLles Lo such LransacLlons

A. "8u|k Sa|es" Not Covered 8y Law
Some excepLlons: even lf LransacLlon comes wlLhln SecLlon 2,
8ulk Sales Law does noL apply Lo Lhese cases:
1. Seller produces and dellvers a wrlLLen walver of Lhe
provlslons of Lhe Law from hls credlLors as shown by
verlfled sLaLemenLs, and
2. 1ransacLlons effecLed by execuLors, admlnlsLraLors,
recelvers, asslgnees ln lnsolvency, or publlc offlcers,
acLlng under legal process.

8. "8us|ness" Covered by the Law
=8A0>8 &' BA$6; 1+ ,'-' *F<G
o 8ulk sales law should be consLrued sLrlcLly agalnsL Lhe
SLaLe and ln favor of Lhe accused.
o ln Lhls case, accused was held llable for selllng hls
foundry shop, along wlLh all oLher asseLs. 1he Supreme
CourL held LhaL Lhe 8ulk Sales Law conLemplaLes sale of
merchandlse, sLock, and goods - noL Lhe sale of Lhe
whole shop wlLh Lhe equlpmenL, credlLs, eLc. As such, a
foundry shop whlch does noL sell merchandlse ls noL
lncluded.
Meanlng of merchandlse and SLock
o Merchandlse ! someLhlng sold everyday, golng ln and
ouL of Lhe sLore, replaced by oLher goods - Lhlngs
usually boughL and sold ln Lrade by merchanLs
o SLock ! Lhose goods kepL for sale.
K8&8>A0X8$S L5$Y AR S"8 ="#>#00#$8Z &' TM! AR 75$#>5; FG ,'-';
UA' G; ??V< H+1 W8O9/59) ?II+J relLeraLed Lhe Wong rullng
regardlng appllcablllLy Lo bulk sales noL lnvolvlng merchandlse
and sLock.
1hus - enumeraLlon ln Lhe flrsL Lype of bulk sales: only covers
Lhose sold ln Lhe normal course of buslness.
o Wong: sale of flxLures and equlpmenL" excludes
maLerlals used ln Lhe process of producLlon.
Powever, Wong and u8 rullngs seem only Lo lnLerpreL Lhe flrsL
Lype
o When lL comes Lo Lhe oLher Lwo Lypes, law does noL
llmlL Lhe coverage Lo a parLlcular Lype of buslness.
o We do noL conslder Lhe Wong and u8 rullngs when lL
comes Lo Lhe oLher Lwo Lypes of 8ulk sales


III. Cb||gat|ons of Se||er]Lncumbrancer When 1ransact|on |s a 8u|k Sa|e

1. 1o De||ver a Sworn Statement of L|st|ng of Cred|tors (Sect|on 3)
- 8efore recelvlng from Lhe vendee, morLgagee, or hls, or lLs
agenL or represenLaLlve any parL of Lhe purchase prlce Lhereof,
or any promlssory noLe, memorandum, or oLher evldence
Lherefor, Lo dellver Lo such vendee, morLgagee, or agenL, or lf
Lhe vendee, morLgagee, or agenL be a corporaLlon, Lhen Lo Lhe
presldenL, vlce-presldenL, Lreasurer, secreLary or manager of
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
sald corporaLlon, or, lf such vendee or morLgagee be a
parLnershlp flrm, Lhen Lo a member Lhereof, a wrlLLen
sLaLemenL, sworn Lo subsLanLlally as herelnafLer provlded, of:
a. 1he names and addresses of all credlLors Lo whom sald
vendor or morLgagor may be lndebLed, LogeLher wlLh
b. 1he amounL of lndebLedness due or owlng, or Lo
become due or owlng by sald vendor or morLgagor Lo
each of sald credlLors
2. ro-kata App||cat|on of roceeds (Sect|on 4) - Applylng Lhe
purchase or morLgage money of Lhe sald properLy Lo Lhe pro
raLa paymenL of Lhe bona flde clalm or clalms of Lhe credlLors of
Lhe vendor or morLgagor, as shown upon such sworn sLaLemenL.
3. Wr|tten Advance D|sc|osure to Cred|tors (Sect|on S) - lL shall
be Lhe duLy of every vendor, Lransferor, morLgagor, or asslgnor:
a. AL leasL Len days before Lhe sale, Lransfer or execuLlon
of a morLgage upon any sLock of goods, wares,
merchandlse, provlslons or maLerlals, ln bulk, Lo make a
full deLalled lnvenLory Lhereof and Lo preserve Lhe same
showlng Lhe quanLlLy and, so far as ls posslble wlLh Lhe
exerclse of reasonable dlllgence, Lhe cosL prlce Lo Lhe
vendor, Lransferor, morLgagor or asslgnor of each arLlcle
Lo be lncluded ln Lhe sale, Lransfer or morLgage, and
b. noLlfy every credlLor whose name and address ls seL
forLh ln Lhe verlfled sLaLemenL of Lhe vendor, Lransferor,
morLgagor, or asslgnor, aL leasL Len days before
Lransferrlng possesslon Lhereof, personally or by
reglsLered mall, of Lhe prlce, Lerms condlLlons of Lhe
sale, Lransfer, morLgage, or asslgnmenL.
4. 8u|k 1ransfers for Nom|na| Va|ue (Sect|on 7) - lL shall be
unlawful for any person, flrm or corporaLlon, as owner of any
sLock of goods, wares, merchandlse, provlslons or maLerlals, ln
bulk, Lo Lransfer LlLle Lo Lhe same wlLhouL conslderaLlon or for a
nomlnal conslderaLlon only.

IV. Consequences of V|o|at|on of the Law
A sale ln bulk done wlLhouL complylng wlLh Lhe Lerms of Lhe
Law, makes Lhe LransacLlon fraudulenL and vold, buL does noL
change Lhe baslc relaLlonshlp beLween Lhe seller,
asslgnor/encumbrancer and hls credlLor. 1he porLlon of a
[udgmenL provldlng for subsldlary llablllLy ls lnvalld, slnce Lhe
proper remedy of Lhe credlLor ls Lo collecL on Lhe credlL agalnsL
Lhe defendanL, and lf Lhey cannoL pay Lo aLLach on Lhe properLy
fraudulenLly morLgage slnce Lhe same sLlll perLaln Lo Lhe
debLors-defendanLs. @=8A0>8 &' 750A); <V ="#>' G<F H?I*2J'
Sect|on 11: lmprlsonmenL of noL less LhaL 6 monLhs, noL more
Lhan 3 years, w/ flne noL exceedlng 3,000.
We evaluaLe Lhe effecLs of breaklng Lhe law from 3 dlfferenL
sLandpolnLs:
o Cn Lhe LransacLlon lLself
o Cn Lhe seller
o Cn Lhe buyer

A. Cn the 1ransact|on |tse|f
1. If sworn ||st|ng of cred|tors |s not prepared, or |f the proceeds
are not app||ed to them, the sa|e sha|| be fraudu|ent and vo|d.
o 1hls ls noL merely a presumpLlon: lL ls ln facL LreaLed as
vold.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
" no legal effecLs arlse from Lhe LransacLlon
" no rlghL of acLlon accrues
1hus, Lhe sub[ecL maLLer ls sLlll owned by Lhe asslgnor, and sLlll
sub[ecL Lo Lhe saLlsfacLlon of hls llablllLles
=8A0>8 &' 750A); <V ="#>' G<F H?I*2J
o Sale ls vold, buL Lhe relaLlonshlp beLween seller and
credlLor ls unchanged.
o roper remedy of credlLor ls Lo collecL on Lhe credlL
agalnsL Lhe defendanL, and lf he cannoL pay, Lo aLLach
on Lhe properLy fraudulenLly sold/morLgaged.

2. Ia||ure to make an advanced wr|tten d|sc|osure to cred|tors
does not render the sa|e fraudu|ent and vo|d.
Legal consequences of a sale ln 8ulk for nomlnal value
o Law declares lL unlawful, buL noL fraudulenL and vold
o Powever, lf Lhere was no oLher valuable conslderaLlon,
we have Lo declare lL vold for lack of cause or
conslderaLlon.

8. Cn Se||er]Mortgagor]Ass|gnor
1. Cr|m|na| L|ab|||ty
vlolaLlon of hls obllgaLlons Lo prepare a llsL of credlLors and
apply Lhe proceeds of Lhe sale Lo Lhese credlLors sub[ecLs hlm Lo
crlmlnal llablllLy.
lf Lhe llsL does noL lnclude all names of credlLors, or wlLh wrong
amounLs, lL sub[ecLs hlm Lo crlmlnal llablllLy.
1o sell Lhe sLocks/goods/merchandlse for no conslderaLlon, or
for nomlnal conslderaLlon only, sub[ecL seller Lo crlmlnal
llablllLy.

2. No Cr|m|na| L|ab|||ty
Sworn sLaLemenL should be reglsLered wlLh ueparLmenL of
1rade and lndusLry.
o noncompllance wlLh Lhls does noL affecL valldlLy nor
does lL sub[ecL hlm Lo crlmlnal penalLy.
lallure Lo dellver advance noLlce does noL sub[ecL hlm Lo
crlmlnal llablllLy.

C. Cn 8uyer]Mortgagee]1ransferee
no dlrecL obllgaLlon.
lL can be sald LhaL no crlmlnal llablllLy aLLaches Lo Lhe buyers
o Some argue LhaL Lhey are prlnclpals by lndlspensable
cooperaLlon, lf Lhey were aware of Lhe lnLenL/consplred
wlLh Lhe seller.
1here are sLlll effecLs Lhough slnce sale may be rendered
fraudulenL and vold. 1hus, he would flnd hlmself noL enLlLled Lo
Lhe Lhlngs he pald for.
o Pe may also be sued for recovery of whaL he has
obLalned.
o Pe may also be llable for damages for havlng helped
defraud credlLors.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
CnA1Lk kVI: kL1AIL 1kADL
LI8LkALI2A1ICN AC1 CI 2000 AND
kLLA1LD kCVISICNS CI 1nL AN1I-
DUMM LAW

I. Genera| Informat|on Cn "keta|| 1rade L|bera||zat|on Act of 2000"
A. n|story of kepub||c Act No. 8762
!"#$%&'( *(+ ,-. /0123 "4+'+&"5 67 +8" 9!"+6'& :;65" <'%"=
;6&'>6+'-4 *(+ -? 2@@@A B9!:<* 2@@@AC3 D67 "46(+"5 '4+- &6D -4
@0 E6;(8 2@@@3 D8'(8 7#"('?'(6&&F +--G +8" #&6(" -?3 645 +8";"%F
;"#"6&"53 !"#$%&'( *(+ ,-. HH/@3 I-;" #-#$&6;&F G4-D4 67 9:8"
!"+6'& :;65" ,6+'-46&'>6+'-4 <6D.A
:8" J$#;"I" K-$;+ 867 #;"L'-$7&F 5"(&6;"5 (-47+'+$+'-46& +8"
!"+6'& :;65" ,6+'-46&'>6+'-4 <6D 67 %"'4M 6 L6&'5 "N";('7" -?
#-&'(" #-D";.
H
:8";" '7 +8";"?-;" "L";F ;"67-4 +- (-47'5"; !:<*
2@@@ L6&'5 645 (-47+'+$+'-46&.

8. ub||c o||cy under k1LA 2000: A reversa| of parad|gm, focus from
the protect|ng the reta||ers to promot|ng the |nterests of consumers.
:8" (-4+;-& 645 ;"M$&6+'-4 -? +;65" '4 +8" '4+";"7+ -? +8" #$%&'(
D"&?6;" '7 -? (-$;7" 64 "N";('7" -? +8" #-&'(" #-D"; -? +8" J+6+".
:- +8" "N+"4+ +86+ !"#$%&'( *(+ ,-. /0123 +8" !"+6'& :;65"
<'%";6&'>6+'-4 *(+3 &"77"47 +8" ;"7+;6'4+ -4 +8" ?-;"'M4";7O ;'M8+
+- #;-#";+F -; +- "4M6M" '4 64 -;5'46;'&F &6D?$& %$7'4"773 '+

H
P4(8-4M L. Q";4645">3 H@H R8'&. HHSS BHTS0C.
(644-+ %" 76'5 +86+ +8" &6D 6I-$4+7 +- 6 5"4'6& -? +8" U'&'#'4-7O
;'M8+ +- #;-#";+F 645 +- 5$" #;-("77 -? &6D. !"#$%& () *&+,-&.
/01 2345 16 78919:)

II. Scope and Def|n|t|on of "keta|| 1rade"
A. Importance of keta|| 1rade (;$%< () =>-%&>?. @ 2345 6A8 B1A/9C)

;$%< () =>-%&>?

Iacts: E6(6;'- V'4M3 6 46+$;6&'>"5 U'&'#'4-3 -D4"5 +8" M;-(";F 7+-;"
PI#-;+ E"6+ W R;-5$(". Q" "I#&-F"5 X K8'46I"43 -4" 67 #$;(867";
645 2 -+8";7 67 76&"7I"4. Q" 7-$M8+ +8" #";I'77'-4 -? +8" R;"7'5"4+ +-
;"+6'4 +8" 7";L'("7 -? +8" X3 %$+ D67 5"4'"5 %67"5 -4 +8" !"+6'& :;65"
<6D 645 +8" *4+'=Y$IIF <6D3 D8'(8 #;-8'%'+ 6&'"47 ?;-I '4+";?";'4M '4
+8" I646M"I"4+ 645 -#";6+'-4 -? ;"+6'& "7+6%&'78I"4+7. V'4M (-4+"457
+86+ +8" X 6&'"47 6;" "I#&-F"5 '4 4-4=(-4+;-& #-7'+'-47 645 5- 4-+
#6;+'('#6+" '4 +8" I646M"I"4+3 +8$73 +8"F 6;" 4-+ (-L";"5 %F +8" *4+'=
Y$IIF <6D.

Issue: Z8"+8"; -; 4-+ +8" "I#&-FI"4+ -? +8" X K8'46I"4 '7 (-L";"5
$45"; +8" *4+'=Y$IIF <6D

ne|d: [\J. :8" #;-8'%'+'-4 (-L";7 +8" "4+';" ;64M" -? "I#&-FI"4+3
;"M6;5&"77 -? D8"+8"; +8"F 6;" (-4+;-& -; 4-4=(-4+;-& #-7'+'-47. :8$73
"I#&-FI"4+ -? 6&'"47 ?-; "L"4'4M (&";'(6& #-7'+'-47 '7 #;-8'%'+"5. :8"
;"67-4 '7 -%L'-$7] +- #&$M 64F &--#8-&"7 +86+ $47(;$#$&-$7 6&'"47 I6F
"N#&-'+ ?-; +8" #$;#-7" -? (';($IL"4+'4M +8" &6D.

Doctr|ne:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
9^45"; I-5";4 (-45'+'-47 645 7+6456;57 -? &'L'4M3 '4 D8'(8
I64O7 4""57 86L" I$&+'#&'"5 645 5'L";7'?'"5 +- $4&'I'+"5
"N+"4+7 645 #;-#-;+'-473 +8" ;"+6'&"; (-I"7 67 "77"4+'6& 67 +8"
#;-5$(";3 %"(6$7" +8;$ 8'I +8" '4?'4'+" L6;'"+F -? 6;+'(&"73 M--57
645 (-II-5'+'"7 4""5"5 ?-; 56'&F &'?" 6;" #&6("5 D'+8'4 +8"
"67F ;"6(8 -? (-47$I";7. !"+6'& 5"6&";7 #";?-;I +8" ?$4(+'-47
-? (6#'&&6;'"7 '4 +8" 8$I64 %-5F3 +8;$ D8'(8 6&& +8" 4""5"5 ?--5
645 7$##&'"7 6;" I'4'7+";"5 +- I"I%";7 -? +8" (-II$4'+'"7
(-I#;'7'4M +8" 46+'-4. ... :8" ;"+6'&";3 +8";"?-;"3 ?;-I +8" &-D&F
#"55&";3 +8" -D4"; -? 6 7I6&& 76;'=76;' 7+-;"3 +- +8" -#";6+-; -? 6
5"#6;+I"4+ 7+-;" -; 6 7$#";I6;G"+ '7 7- I$(8 6 #6;+ -? 56F=+-=
56F "N'7+"4(".A
H


8. L|ements:
1. Se||er hab|tua||y engaged |n se|||ng,
2. Se|||ng d|rect to the genera| pub||c, and
3. Cb[ect of the sa|e |s ||m|ted to merchand|se, commod|t|es or
goods for consumpt|on.

C. Mean|ng of "nab|tua||y Se|||ng"
\4M6M'4M '4 +8" 76&" -? I";(8645'7" 67 64 '4('5"4+ +- +8"
#;'I6;F #$;#-7" -? 6 (-;#-;6+'-4 _".M.3 -#";6+'-4 -? 6 #86;I6(F
%F 6 8-7#'+6&` 76&" -? ("&&#8-4"7 %F 6 +"&"(-II$4'(6+'-4
(-I#64Fa 5-"7 4-+ (-47+'+$+" 9;"+6'& +;65"A D'+8'4 +8" #$;L'"D
-? +8" !"+6'& :;65" ,6+'-46&'>6+'-4 <6D3 67 +8'7 '7 +6G"4 ?;-I +8"
#;-L'7'-4 +8";"-? "N(&$5'4M ?-;I +8" +";I 9;"+6'& %$7'4"77A +8"
-#";6+'-4 -? 6 ;"7+6$;64+ %F 6 8-+"&=-D4"; -; =G""#"; 7'4(" +8"

H
P4(8-4M L. Q";4645">3 H@H R8'&. HHSS BHTS0C.
76I" 5-"7 4-+ (-47+'+$+" +8" 6(+ -? 86%'+$6&&F 7"&&'4M 5';"(+ +-
+8" M"4";6& #$%&'( I";(8645'7"3 (-II-5'+'"7 -; M--57 ?-;
(-47$I#+'-4. D2!3 E#$%$,% F,) 11. ">-$>" ,G 8998. 10
F,(>+H>- 8998)

D. Mean|ng of "Consumpt|on" (DCI Cp|n|on No. 32S, ser|es of 194S,
Ikk of Law).
:8" <6D &'I'+7 '+7 6##&'(6+'-4 +- +8" 76&" -? '+"I7 7-&5 ?-;
5-I"7+'( -; 8-$7"8-&53 -; #;-#";&F (6&&"5 (-47$I"; M--57`
D8";"673 D8"4 +8" 76I" '+"I7 6;" 7-&5 +- (-II";('6& $7";73
+8"F D-$&5 (-47+'+$+" 4-4=(-47$I"; M--57 645 4-+ (-L";"5 %F
+8" <6D. I&J+&K>L& () M%$,% 3&-H$L> NO$J$##$%>". P%K) 18@ 2345
QA0 71AQ0:)
8


I&J+&K>L& () M%$,% 3&-H$L> NO$J$##$%>". P%K)

Iacts: ^4'-4 K6;%'5" D67 6 I64$?6(+$;"; 86L'4M 2 5'L'7'-47] +8"
K-47$I"; R;-5$(+7 Y'L'7'-4 645 +8" P45$7+;'6& R;-5$(+7 Y'L'7'-4.

Issue: Z8"+8"; -; 4-+ +8" P45$7+;'6& R;-5$(+7 Y'L'7'-4 '7 "4M6M"5 '4 +8"
;"+6'& %$7'4"77

ne|d: ,b. 9!"+6'&A #";+6'47 +- +8" 5';"(+ 7"&&'4M +- +8" M"4";6& #$%&'( -?
I";(8645'7" -? M--57 ?-; (-47$I#+'-4. :8"F #";+6'4 +- M--57 ?-;
#";7-46&3 ?6I'&F 645 8-$7"8-&5 (-47$I#+'-4. :8" #;-5$(+7 7-&5 $45";
+8'7 5'L'7'-4 6;" (&"6;&F 4-+ (-L";"5 %F +8" +";I 9(-47$I#+'-4 M--57.A

2
E6;7I64 W K-.3 P4(. L. U';7+ K-(-4$+ K"4+;6& K-.3 P4(.3 H12 JK!* 2@1 BHT//C`
c.U. d--5;'(8 R8'&'##'4"73 P4(. L. !"F"73 J;.3 H2H JK!* X1X BHT/XC.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
:8"F 6;" 7-&5 +- I64$?6(+$;";7 645 '45$7+;'"7 67 ;6D I6+";'6&7. :8"F
6;" '4+";I"5'6+" M--573 4-+ (-47$I#+'-4 M--57.

Doctr|ne: (CLV 8ook) :8" +";I 9;"+6'& +;65"A 78-$&5 %" 677-('6+"5 D'+83
645 &'I'+"5 +-3 M--57 ?-; #";7-46&3 ?6I'&F -; 8-$7"8-&5 $7"3
(-47$I#+'-4 645 $+'&'>6+'-4. P+ (-47+;$"5 +8" -&5 !"+6'& :;65"
,6+'-46&'>6+'-4 <6D +- ;"?"; +- 9(-47$I#+'-4 M--57A -; 9(-47$I";
M--57A D8'(8 5';"(+&F 76+'7?F 8$I64 D64+7 645 5"7';"7 645 6;" 4""5"5
?-; 8-I" 645 56'&F &'?". *((-;5'4M&F3 '+ "N(&$5"5 ?;-I +8" (-L";6M" -?
;"+6'& +;65" M--57 D8'(8 6;" (-47'5";"5 M"4";6&&F ;6D I6+";'6&7 $7"5 '4
+8" I64$?6(+$;" -? -+8"; M--573 -; '? 4-+3 67 -4" -? +8" (-I#-4"4+ ;6D
I6+";'6&3 -; 6+ &"67+ 67 "&"I"4+7 $+'&'>"5 '4 +8" #;-("77 -? #;-5$(+'-4
645 I64$?6(+$;'4M.
H


L. Mean|ng of "Genera| ub||c" (DCI Cp|n|on No. 2S3, ser|es of 19S4).
J6&" +- +8" 9M"4";6& #$%&'(A I$7+ I"64 +86+ +8" 6(+'L'+'"7 -? +8"
7"&&"; I$7+ %" 7$(8 +86+ +8" +6;M"+ (&'"4+"&" -; ($7+-I";7 I$7+
4-+ -4&F %" 6 #6;+'($&6; #";7-4 -; M;-$# -? #";7-47. :8'7 '7 4-+

H
c6&I6("56 '4 "??"(+ ;"e"(+"5 +8" Y"#6;+I"4+ -? f$7+'(" b#'4'-4 ,-. 2SX3
7";'"7 -? HTSg3 D8";" '+ D67 8"&5 +86+ +8" !"+6'& :;65" ,6+'-46&'>6+'-4 <6D D67
4-+ &'I'+"5 '4 '+7 (-L";6M" +- 8-$7"=-D4"; -; I"I%";7 -? 8'7 ?6I'&F D8-
#$;(867" M--57 ?-; +8"'; #";7-46& (-47$I#+'-4 645 78-$&5 '4(&$5" #$%&'( $+'&'+F
-#";6+-;7 D8- 4""5 &6;M" h$64+'+'"7 ?-; +8"'; 7";L'("7` 67 D"&& 67 +8" Ybf
b#'4'-43 56+"5 H2 J"#+"I%"; HT1X D8'(8 ;"e"(+"5 +86+ 6 76&" I65" +- 6
I64$?6(+$;"; -; #;-5$("; D-$&5 4-+ '4 '+7"&? %" 5"+";I'46+'L" -? +8" '77$" -?
D8"+8"; +8" +;6476(+'-4 '7 (-L";"5 %F +8" +8"4 !"+6'& :;65" ,6+'-46&'>6+'-4
<6D] 9U-; . . . '+ '7 4-+ +8" (86;6(+"; -? +8" %$7'4"77 (-45$(+"5 %F "'+8"; 7"&&";
-; %$F"; +86+ I6++";7` '+ '73 ;6+8";3 D8"+8"; +8" #$;(867"; $7"7 -; (-47$I"7
+8" M--57 -; D8"+8"; 8" ;"7"&&7 +8" 76I" -; #677"7 +8"I -4 +- +8" $&+'I6+"
(-47$I";.A
5"+";I'4"5 %F +8" 46+$;" -? +8" M--57 7-&5 -4 D8"+8"; +8"F
D-$&5 %" 6(("#+6%&" -; $76%&" -4&F %F 6 7"(+-; -? 7-('"+F.
\L"4 D8"4 +8" 76I" -? (-47$I"; M--57 '7 &'I'+"5 -4&F +- +8"
-??'(";7 -? +8" (-I#64F3 +8" 76I" D-$&5 7+'&& (-47+'+$+" ;"+6'&
+;65" (-L";"5 %F +8" <6D. R,,LS>&- T$-> () 4>S>". 2-). 180 2345
860 71AQ0:)

R,,LS>&- T$-> () 4>S>". 2-)

Iacts: d--5F"6;3 6 (-;#-;6+'-4 4-+ D8-&&F -D4"5 %F U'&'#'4-73 D67
"4M6M"5 '4 +8" I64$?6(+$;'4M 645 76&" -? ;$%%"; #;-5$(+7 7$(8 67 +';"73
%6++";'"73 (-4L"F-; %"&+73 7-&"7 -? 78-"73 "+(.

Issue: Z8"+8"; -; 4-+ d--5F"6; '7 (-L";"5 %F +8" !"+6'& :;65" <6D
'47-?6; 67 +8" #;-8'%'+'-4 6M6'47+ 6&'"47 ?;-I "4M6M'4M '4 ;"+6'& +;65" '7
(-4(";4"5.

ne|d: ,b. 9!"+6'&A #";+6'47 +- +8" 5';"(+ 7"&&'4M +- +8" M"4";6& #$%&'( -?
I";(8645'7" -? M--57 ?-; (-47$I#+'-4. :8"F #";+6'4 +- M--57 ?-;
#";7-46&3 ?6I'&F 645 8-$7"8-&5 (-47$I#+'-4. * I64$?6(+$;"; D8- 7"&&7
8'7 #;-5$(+7 +- '45$7+;'6& 645 (-II";('6& $7";7 7- +86+ +8" &6++"; I6F
$7" +8" 76I" +- ;"45"; 7-I" M"4";6& 7";L'(" +- +8" #$%&'( '7 (&"6;&F 4-+
(-L";"5 %F +8" #;-8'%'+'-4. :8" "4+";#;'7" -? d--5F"6; (&"6;&F ?6&&7
D'+8'4 +8'7 (6+"M-;F. :8" 76&" +- #;-#;'"+6;F #&64+";7 645 #";7-47
"4M6M"5 '4 +8" "N#&-;6+'-4 -? 46+$;6& ;"7-$;("7 '7 6&7- '4(&$5"5 '4 +8"
76'5 (&677'?'(6+'-4 645 (644-+ %" (-47'5";"5 9;"+6'&A 67 +- (-I" D'+8'4
+8" 6I%'+ -? +8" #;-8'%'+'-4. c$+ '47-?6; 67 76&" +- "I#&-F""7 645
-??'(";7 '7 (-4(";4"53 +8'7 I6F %" (-47'5";"5 9;"+6'&A 645 (-I"7 $45";
+8" #;-8'%'+'-4.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

Doctr|ne: (CLV 8ook) :8'7 ;$&'4M +86+ "L"4 &'I'+"5 76&"7 +- +8"
(-I#64FO7 -D4 -??'(";7 645 "I#&-F""7 D-$&5 ?6&& $45"; +8" #;-8'%'+'-4
-? +8" <6D3 "??"(+'L"&F 5"%$4G +8" 7+64(" +6G"4 D8";"%F 76&" +- 6
9&'I'+"5 (&677 645 4$I%";A '7 (-47'5";"5 67 4-4=;"+6'& 7'4(" +8"F
(-47'5"; +8"I 4-+ 76&"7 +- +8" 9M"4";6& #$%&'(A -; 76&"7 9(-4?'4"5 -4&F
+- 6 ?"D 645 4-+ +- +8" M"4";6& #$%&'(.A Q-D"L";3 +8" ;$&'4M
5"I-47+;6+"7 +86+ +8" +";I 9(-47$I"; M--57A 5-"7 4-+ 5"#"45
"4+';"&F -4 +8" 46+$;" -? +8" M--57 +8"I7"&L"73 %$+ 6&7- ;"h$';" 67 64
"&"I"4+ +8" #$;#-7" -; $7" ?-; D8'(8 +8" M--57 6;" %-$M8+.

Z8";" +8" M&677 (-I#64F I64$?6(+$;"7 M&677 #;-5$(+7 -4&F -4
7#"('?'( -;5";73 '+ 5-"7 4-+ 7"&& 5';"(+&F +- (-47$I";7 %$+
I64$?6(+$;";7 '+7 #;-5$(+7 -4&F ?-; +8" #6;+'($&6; (&'"4+73 '+
(644-+ %" 76'5 +86+ '+ '7 6 I";(8645'7";. UIN () =,%,-&HJ>
VWL<> ,G XO> 4T3 ,G Y&%$J&. Q/ E)R) F,) / 1106 79Z [>H-W&-S
1AA9:)

UIN () =,%,-&HJ> VWL<> ,G XO> 4T3 ,G Y&%$J&

Iacts: P4 HT0/3 R'-4""; d&677 E64$?6(+$;'4M K-;#.#$;(867"5 ?;-I [$
B$45"; *4(6; \h$'#I"4+ R6;+7 645 :-4'(6;C "h$'#I"4+ #6;+7 D-;+8
R03@@@. Q-D"L";3 R'-4""; ?6'&"5 -; ;"?$7"5 +- #6F $#-4 5"I645.
Z'+8-$+ '4?-;I'4M [$3 R'-4""; d&677 +;647?";;"5 6&& '+7 677"+7 +- YcR '4 6
i5""5 -? ("77'-4 -? #;-#";+F '4 #6FI"4+ -? -%&'M6+'-4i -; 56('-4 "4
#6M-. P4 +$;43 YcR 7-&5 +8"7" 677"+7 +- ^4'-4 d&677 +86+ 76I" F"6;.

P4 HT/X3 [$ '47+'+$+"5 64 6(+'-4 6M6'47+ R'-4""; d&6773 YcR3 645 ^4'-4
d&6773 677";+'4M +86+ +8" +;647?"; -? +8" 677"+7 +- YcR D67 L-'5 %F
;"67-4 -? ?;6$5.

R'-4""; d&677] 5"4'"5 &'6%'&'+F +- [$ -4 +8" M;-$45 +86+ %F L';+$" -? +8"
56('-4 "4 #6M- '4 ?6L-; -? YcR3 +8" %64G 677$I"5 &'6%'&'+F +- '+7
(;"5'+-;7 '4(&$5'4M [$ $45"; 6 #6FI"4+ 7(8"I"3 D8'(8 '7 $45"; #"45'4M
'I#&"I"4+6+'-4

YcR] 5"4'"5 &'6%'&'+F +- [$ -4 +8" M;-$45 +86+ +8";" %"'4M 4- #;--? +86+
+8" $4#6'5 I";(8645'7" #$;(867"5 %F R'-4""; d&677 D";" 6I-4M +8-7"
+;647?";;"5 +- '+ ^4'-4 d&677] 5"4'"5 &'6%'&'+F +- [$ -4 +8" M;-$45 +86+
+8";" D67 4- #;'L'+F -? (-4+;6(+ %"+D""4 +8"I3 -; 677$I'4M 6##&'(6%'&'+F
-? +8" c$&G J6&"7 <6D3 4- &'6%'&'+F 6++6(8"5 +- ^4'-4 d&677.

E:K 5"4'"5 +8" I-+'-47 +- 5'7I'77 ?'&"5 %F ^4'-4 d&677 645 YcR 645
;$&"5 '4 ?6L-; -? [$. !:K 6??';I"5 E:Kj7 5"('7'-4.

Issue: Z8"+8"; -; 4-+ +8" R'-4""; d&677 '7 6 I";(8645'7";3 (-L";"5
$45"; +8" !"+6'& :;65" *(+

ne|d: ,b. :8";" D67 64 $45'7#$+"5 "L'5"4(" +86+ R'-4""; d&677
I64$?6(+$;"7 M&677 -4&F -4 7#"('?'( -;5";7 645 5-"7 4-+ 7"&& 5';"(+&F +-
(-47$I";7 %$+ I64$?6(+$;"7 '+7 #;-5$(+7 -4&F ?-; #6;+'($&6; (&'"4+7. *7
7$(83 '+ (644-+ %" 76'5 +8" R'-4""; d&677 '7 6 I";(8645'7"; D'+8'4 +8"
I"64'4M -? +8" !"+6'& :;65"

Doctr|ne:

III. Categor|es of keta|| 1rade Lnterpr|ses
A. Category A - Lxc|us|ve to I|||p|no c|t|zens and 100 I|||p|no ent|t|es
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
\4+";#;'7"7 D'+8 #6'5=$# (6#'+6&3
H
-? +8" #"7- "h$'L6&"4+ -? &"77
+864 ^Jk2.S E'&&'-4`

8. Category 8
\4+";#;'7"7 D'+8 6 I'4'I$I #6'5=$# (6#'+6& -? +8" #"7-
"h$'L6&"4+ -? ^Jk2.S E'&&'-43 %$+ &"77 +864 ^Jk0.S E'&&'-43
#;-L'5"5 +86+ '4 4- (67" 786&& +8" '4L"7+I"4+7 ?-; "7+6%&'78'4M 6
7+-;" %" &"77 +864 +8" #"7- "h$'L6&"4+ -? ^JkX@3@@@.@@`

C. Category C
\4+";#;'7"7 D'+8 6 #6'5=$# (6#'+6& -? +8" #"7- "h$'L6&"4+ -?
^Jk0.S E'&&'-4 -; I-;"3 #;-L'5"5 +86+ '4 4- (67" 786&& +8"
'4L"7+I"4+7 ?-; "7+6%&'78'4M 6 7+-;" %" &"77 +864 +8" #"7-
"h$'L6&"4+ -? ^Jk/X@3@@@.@@` 645

D. Category D - Luxury Items
\4+";#;'7"7 7#"('6&'>'4M '4 98'M8="45 -; &$N$;F #;-5$(+7A D'+8 6
#6'5=$# (6#'+6& -? +8" #"7- "h$'L6&"4+ -? ^Jk2S@3@@@.@@ #";
7+-;".
o 9Q'M8="45 -; &$N$;F M--57A ;"?";7 +- M--57 D8'(8 6;"
4-+ 4"("776;F ?-; &'?" I6'4+"464(" 645 D8-7" 5"I645
'7 M"4";6+"5 '4 &6;M" #6;+ %F +8" 8'M8"; '4(-I" M;-$#73
D8'(8 786&& '4(&$5"3 %$+ 6;" 4-+ &'I'+"5 +-3 #;-5$(+7
7$(8 67] e"D"&;F3 %;645"5 -; 5"7'M4"; (&-+8'4M 645

H
9R6'5=$# K6#'+6&A I"647 +8" +-+6& '4L"7+I"4+ '4 6 %$7'4"77 +86+ 867 %""4
#6'5=$# '4 6 (-;#-;6+'-4 -; #6;+4";78'# -; '4L"7+"5 '4 6 7'4M&" #;-#;'"+-;78'#3
D8'(8 I6F %" '4 (678 -; '4 #;-#";+F. P+ 786&& 6&7- ;"?"; +- 677'M4"5 (6#'+6& '4 +8"
(67" -? ?-;"'M4 (-;#-;6+'-47. J"(. HB&C3 !$&" P3 P!!.
?--+D"6;3 D"6;'4M 6##6;"&3 &"'7$;" 645 7#-;+'4M M--573
"&"(+;-4'(7 645 -+8"; #";7-46& "??"(+7.
2


L. Lxempted Areas: A|though a|| three (3) e|ements of reta|| trade may
be present, the fo||ow|ng transact|ons, or ser|es of transact|ons, are
express|y exempted from the coverage of "reta|| trade" under k1LA
2000, thus:
H. J6&"7 %F 6 I64$?6(+$;";3
X
#;-("77-;3
g
&6%-;";3 -; D-;G";3 +- +8"
M"4";6& #$%&'( -? +8" #;-5$(+7 I64$?6(+$;"53 #;-("77"5 -;
#;-5$("5 %F 8'I '? 8'7 (6#'+6& 5-"7 4-+ "N(""5 SH@@3@@@.@@`
2. J6&"7 %F 6 ?6;I"; -; 6M;'($&+$;'7+3
S
-? +8" #;-5$(+7 -? 8'7 ?6;I3
;"M6;5&"77 -? (6#'+6&`
1

X. J6&"7 '4 ;"7+6$;64+ -#";6+'-47 %F 6 8-+"& -D4"; -; '44=G""#";
';;"7#"(+'L" -? +8" 6I-$4+ -? (6#'+6&3 #;-L'5"5 +86+ +8"
;"7+6$;64+ '7 '4('5"4+6& +- +8" 8-+"& %$7'4"77`

2
J"(. XB2C3 !.*. ,-. /012.
X
9E64$?6(+$;";A ;"?";7 +- 6 #";7-4 D8- 6&+";7 ;6D I6+";'6& -; I64$?6(+$;"5
-; #6;+'6&&F I64$?6(+$;"5 #;-5$(+73 -; (-I%'4"7 +8" 76I" '4 -;5"; +- #;-5$("
?'4'78"5 #;-5$(+7 ?-; +8" #$;#-7" -? %"'4M 7-&5 -; 5'7+;'%$+"5 +- -+8";7. BJ"(.
H_'a3 !$&" P3 P!!C.
g
9R;-("77-;A ;"?";7 +- 6 #";7-4 D8- (-4L";+7 ;6D I6+";'6&7 '4+- I6;G"+6%&"
?-;I %F 7#"('6& +;"6+I"4+ -; 6 7";'"7 -? 6(+'-4 +86+ (864M"7 +8" 46+$;" -; 7+6+"
-? +8" #;-5$(+3 &'G" 7&6$M8+";'4M3 I'&&'4M3 #67+"$;'>6+'-43 5;F'4M3 -; 5"77'(6+'4M3
h$'(G ?;"">'4M 645 +8" &'G". E";" #6(G'4M3 #6(G6M'4M3 7-;+'4M -; (&677'?F'4M 5-"7
4-+ I6G" 6 #";7-4 6 #;-("77-;. BJ"(. H_Ia3 !$&" P3 P!!C.
S
9U6;I"; -; *M;'($&+$;'7+A ;"?";7 +- 64 '45'L'5$6&7 D8- '7 #";7-46&&F "4M6M"5 '4
+8" #;-5$(+'-4 -? #;'I6;F #;-5$(+7 7$(8 67 6M;'($&+$;6& (;-#73 #-$&+;F3
&'L"7+-(G3 56';F #;-5$(+7 645 ?'783 %F $7'4M '4#$+7 -? &645 645 46+$;6& ;"7-$;("73
&6%-; 645 (6#'+6&. BJ"(. H_(a3 !$&" P3 P!!C.
1
:8" #8;67" 9;"M6;5&"77 -? (6#'+6&A '7 655"5 $45"; J"(. 2B%C3 !$&" P3 P!!.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
g. J6&"7 +- +8" M"4";6& #$%&'(3 +8;-$M8 6 7'4M&" -$+&"+ -D4"5 %F 6
I64$?6(+$;"; -? #;-5$(+7 I64$?6(+$;"53 #;-("77"5 -;
677"I%&"5 '4 +8" R8'&'##'4"73 ';;"7#"(+'L" -? (6#'+6&'>6+'-4`
H

S. J6&"7 +- '45$7+;'6& 645 (-II";('6& $7";7 -; (-47$I";7 D8- $7"
+8" #;-5$(+7 %-$M8+ %F +8"I +- ;"45"; 7";L'(" +- +8" M"4";6&
#$%&'( 645l-; #;-5$(" -; I64$?6(+$;" -? M--57 D8'(8 6;" '4
+$;4 7-&5 %F +8"I`
2
645
1. J6&"7 +- +8" M-L";4I"4+ 645l-; '+7 6M"4('"7 645 M-L";4I"4+=
-D4"5 645 (-4+;-&&"5 (-;#-;6+'-47.
X


I. k|ghts Granted to Iormer Natura|-8orn I|||p|nos
* 46+$;6&=%-;4 ('+'>"4 -? +8" R8'&'##'4"7 D8- 867 &-7+ 8'7
R8'&'##'4" ('+'>"478'# %$+ D8- ;"7'5"7 '4 +8" R8'&'##'4"7 786&& %"
M;64+"5 +8" 76I" ;'M8+7 67 U'&'#'4- ('+'>"47 ?-; #$;#-7"7 -? ;"+6'&
+;65" $45"; !:<* 2@@@.
g

9,6+$;6&=%-;4 U'&'#'4- ('+'>"47A 6;" +8-7" D8- 6;" ('+'>"47 -? +8"
R8'&'##'4"7 ?;-I %';+8 D'+8-$+ 86L'4M +- #";?-;I 64F 6(+ +-
6(h$';" -; #";?"(+ +8"'; ('+'>"478'#. :8-7" D8- "&"(+ R8'&'##'4"
('+'>"478'# '4 6((-;564(" D'+8 *;+'(&" Pm3 #6;6M;6#8 X -? +8"

H
:8" h$6&'?'(6+'-4 -? 976&" +- +8" M"4";6& #$%&'(A 645 9677"I%&"5 '4 +8"
R8'&'##'4"7A 6;" 655"5 %F J"(+'-4 2B5C3 !$&" P3 P!!.
2
:8'7 D67 ?-$45 $45"; +8" 6I"45"5 L";7'-4 -? +8" -&5 !"+6'& :;65"
,6+'-46&'>6+'-4 <6D3 645 4-+ ?-$45 '4 +8" +"N+ -? +8" ($;;"4+ *(+3 %$+ D8'(8 867
%""4 '4(&$5"5 $45"; J"(. 2B"C3 !$&" P3 P!!3 645 '7 (-47'7+"4+ D'+8 +8" ;$&'4M7 -?
+8" J$#;"I" K-$;+ +86+ 9;"+6'& +;65"A 5"?'4'+'-4 (-L";7 -4&F (-47$I#+'-4
M--57.
X
:8'7 867 %""4 655"5 $45"; J"(. 2B?C3 !$&" P3 P!! 645 7'I'&6; +- +8" 655'+'-4
'4+;-5$("5 '4+- +8" !"+6'& :;65" ,6+'-46&'>6+'-4 <6D $45"; '+7 'I#&"I"4+'4M
;$&"7.
g
J"(. g3 !.*. ,-. /012.
HT/0 K-47+'+$+'-4 786&& %" 5""I"5 46+$;6&=%-;4 ('+'>"47.
S
*
?-;I"; 46+$;6& %-;4 U'&'#'4- ('+'>"4 '7 5""I"5 9;"7'5'4M '4 +8"
R8'&'##'4"7A '? 8" #8F7'(6&&F 7+6F7 '4 +8" (-$4+;F ?-; 6+ &"67+ H/@
56F7 D'+8'4 6 M'L"4 F"6;.
1


IV. Iore|gn Investment or Lngage |n keta|| 1rade |n the h|||pp|nes
A. kequ|rements for Iore|gn Investors

8. Grandfather ku|e on 100 I|||p|no Cwnersh|p of Corporate Lnt|ty:
SLC Cp|n|ons, dated 20 March 1972 and 22 Apr|| 1983, D1I Cp|n|on to
1anada, 1eehankee & Carreon Law Cff|ce, dated 3 August 19S9.
c-+8 +8" J\K 645 +8" Y:P 86L" 6##&'"5 +8" 7-=(6&&"5
9M;645?6+8"; ;$&"A D8'(8 '7 6 #;-("77 -? (86;6(+";'>'4M +8"
('+'>"478'# -? 786;"7 '4 -4" (-;#-;6+'-4 8"&5 %F 64-+8";
(-;#-;6+'-4 %F 6++;'%$+'4M +8" (-4+;-&&'4M '4+";"7+ -? '45'L'5$6&
7+-(G8-&5";7 '4 +8" 7"(-45 &6F"; -? (-;#-;6+" -D4";78'#.
J86;"7 %"&-4M'4M +- (-;#-;6+'-47 -; #6;+4";78'#7 6+ &"67+ 1@n -?
+8" (6#'+6& -? D8'(8 '7 -D4"5 %F U'&'#'4- ('+'>"47 786&& %"
(-47'5";"5 67 -? R8'&'##'4" 46+'-46&'+F3 %$+ '? +8" #";("4+6M" -?
U'&'#'4- -D4";78'# '4 +8" (-;#-;6+'-4 -; #6;+4";78'# '7 &"77 +864
1@n -4&F +8" 4$I%"; -? 786;"7 (-;;"7#-45'4M +- 7$(8
#";("4+6M" 786&& %" (-$4+"5 67 -? R8'&'##'4" 46+'-46&'+F. :8$73 '?
H@@3@@@ 786;"7 6;" ;"M'7+";"5 '4 +8" 46I" -? 6 (-;#-;6+'-4 -;
#6;+4";78'# 6+ &"67+ 1@n -? +8" (6#'+6& 7+-(G -; (6#'+6&
;"7#"(+'L"&F3 -? D8'(8 %"&-4M +- U'&'#'4- ('+'>"473 6&& -? +8" 76'5
786;"7 786&& %" ;"(-;5"5 67 -D4"5 %F U'&'#'4-7. c$+ '? &"77 +864
1@n -;3 76F3 -4&F S@n -? +8" (6#'+6& 7+-(G -; (6#'+6& -? +8"

S
J"(. HBeC3 !$&" P3 P!!.
1
J"(. HB-C3 !$&" P3 P!!.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(-;#-;6+'-4 -; #6;+4";78'#3 ;"7#"(+'L"&F %"&-4M7 +- U'&'#'4-
('+'>"473 -4&F S@3@@@ 786;"7 786&& %" (-$4+"5 67 -D4"5 %F
U'&'#'4-7 645 +8" -+8"; S@3@@@ 786;"7 786&& %" ;"(-;5"5 67
%"&-4M'4M +- 6&'"47.
H

Q-D"L";3 +8" J\K b#'4'-4 (&6;'?'"5 +86+ 9D8'&" 6 (-;#-;6+'-4
D'+8 1@n U'&'#'4- 645 g@n U-;"'M4 "h$'+F -D4";78'# '7
(-47'5";"5 6 R8'&'##'4" 46+'-46& B'.".3 67 H@@n U'&'#'4- "h$'+FC
?-; #$;#-7"7 -? '4L"7+I"4+3 '+ '7 4-+ h$6&'?'"5 +- '4L"7+ '4 -;
"4+"; '4+- 6 e-'4+ L"4+$;" 6M;""I"4+ D'+8 (-;#-;6+'-47 -;
#6;+4";78'#73 +8" (6#'+6& -; -D4";78'# -? D8'(8 $45"; +8"
K-47+'+$+'-4 -; -+8"; 7#"('6& &6D7 6;" &'I'+"5 +- U'&'#'4- ('+'>"47
-4&F.
2


C. ub||c Cffer|ngs of Shares of Stock
*&& ;"+6'& +;65" "4+";#;'7"7 $45"; K6+"M-;'"7 c 645 K3 '4 D8'(8
?-;"'M4 -D4";78'# "N(""57 "'M8+F #";("4+ B/@nC -? "h$'+F3 786&&
-??"; 6 I'4'I$I -? +8';+F #";("4+ BX@nC -? +8"'; "h$'+F +- +8"
#$%&'( +8;-$M8 64F 7+-(G "N(864M" '4 +8" R8'&'##'4"7 D'+8'4
"'M8+ B/C F"6;7 ?;-I +8"'; 7+6;+ -? -#";6+'-47.
X


V. Iore|gn keta||ers |n the h|||pp|nes
A. re-qua||f|cat|on requ|rements
H. * I'4'I$I ,"+ Z-;+8 -?]

H
ooPm J\K p$6;+";&F c$&&"+'4 S1 B,-. H3 E6;(8 HTT@C.
2
J\K b#'4'-43 56+"5 Hg Y"("I%"; HT/T3 ooPm J\K p$6;+";&F c$&&"+'4 0 B,-. 23
f$4" HTT@C` J\K b#'4'-43 56+"5 2H ,-L"I%"; HT023 J\K Ub<Pb HT1@=HT013 #.
S/H3 #$%&'78"5 %F E"5'6 JF7+"I73 P4(.` J\K b#'4'-43 56+"5 22 U"%;$6;F HT0X3
'%'53 #. ST/.
X
J"(. 03 !.*. ,-. /012. 9J+6;+ -? -#";6+'-47A 786&& I"64 +8" 56+" D8"4 +8"
#6;+'($&6; "4+";#;'7" 6(+$6&&F 7+6;+7 7"&&'4M '+7 '4L"4+-;F. BJ"(. H_;a3 !$&" P3 P!!C.
6. ^Jk2@@ E'&&'-4 -? +8" ;"M'7+;64+ (-;#-;6+'-4 '4
K6+"M-;'"7 c 645 K` 645
%. ^JkS@ E'&&'-4 -? +8" ;"M'7+;64+ (-;#-;6+'-4 '4 K6+"M-;F
Y.
2. U'L" BSC ;"+6'&'4M %;64(8"7 -; ?;64(8'7"73 '4 -#";6+'-4 64FD8";"
6;-$45 +8" D-;&5 $4&"77 7$(8 ;"+6'&"; 867 6+ &"67+ -4" BHC 7+-;"3
(6#'+6&'>"5 6+ 6 I'4'I$I -? ^Jk2S E'&&'-4`
X. U'L" BSC=F"6; +;6(G ;"(-;5 '4 ;"+6'&'4M` 645
g. :8"F I$7+ %" 46+'-46&7 ?;-I3 -; e$;'5'(6& "4+'+'"7 ?-;I"5 -;
'4(-;#-;6+"5 '43 (-$4+;'"7 D8'(8 6&&-D +8" "4+;F -? U'&'#'4-
;"+6'&";7.

8. ku|es on 8ranches]Stores
1. D|rect Cpen|ng of 8ranches]Stores
* ;"M'7+";"5 ?-;"'M4 ;"+6'&"; I6F -#"4 %;64(8"7 645l-; 7+-;"7 '4
+8" R8'&'##'4"7 ?6&&'4M $45"; K6+"M-;'"7 c 645 K3 #;-= L'5"5 +86+
+8" '4L"7+I"4+7 ?-; "6(8 %;64(8l7+-;" I$7+ %" 4- &"77 +864 +8"
#"7- "h$'L6&"4+ -? ^Jk/X@3@@@.@@.1H J$(8 ;"h$';"I"4+ 786&& %"
(-I#&'"5 D'+8 6&7-3 D8"4 6+ &"67+ SHn -? +8" -$+7+645'4M (6#'+6&
7+-(G -? 64F "N'7+'4M ;"+6'& 7+-;" '7 6(h$';"5 %F 6 7'4M&" ?-;"'M4
;"+6'&";.
g


2. Acqu|r|ng]Invest|ng |n Lx|st|ng keta|| Stores
Z8"4"L"; 6 ?-;"'M4 '4L"7+-; '7 6&7- "4M6M"5 '4 ;"+6'& +;65" B'.".3
?-;"'M4 ;"+6'&";C 645 7$(8 ?-;"'M4 '4L"7+-; 6(h$';"7 SHn -; I-;"
-? +8" -$+7+645'4M (6#'+6& 7+-(G -? 64 "N'7+'4M ;"+6'& 7+-;"3 4-
+;647?"; -? 786;"7 +- 64F 7$(8 ?-;"'M4 '4L"7+-; 786&& %" ;"(-;5"5

4
Sec. 3, Rule IV, IRR.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
%F +8" K-;#-;6+" J"(;"+6;F '4 +8" (-;#-;6+" %--G7 +8";"-?3
$4&"77 6 K";+'?'(6+" -? K-I#&'64(" D'+8 R;"h$6&'?'(6+'-4 '7
#;"7"4+"5.
H


C. romot|on of Loca||y-Manufactured roducts
U-; +"4 BH@C F"6;7 6?+"; +8" "??"(+'L'+F -? !:<* 2@@@3 6+ &"67+
+8';+F #";("4+ BX@nC -? +8" 6MM;"M6+" (-7+ -? +8" 7+-(G '4L"4+-;F
-? ?-;"'M4 ;"+6'&";7 ?6&&'4M $45"; K6+"M-;'"7 c 645 K 645 +"4
#";("4+ BH@nC ?-; K6+"M-;F Y 786&& %" I65" '4 +8" R8'&'##'4"7.
2


D. roh|b|ted Act|v|t|es of Iore|gn keta||ers
p$6&'?'"5 ?-;"'M4 ;"+6'&";7 786&& 4-+ %" 6&&-D"5 +- "4M6M" '4
(";+6'4 ;"+6'&'4M 6(+'L'+'"7 -$+7'5" +8"'; 6((;"5'+"5 7+-;"5
+8;-$M8 +8" $7" -? I-%'&" -; ;-&&'4M 7+-;"7 -; (6;+73 +8" $7" -?
76&"7 ;"#;"7"4+6+'L"73 5--;=+-=5--; 7"&&'4M3 ;"7+6$;64+7 645 76;'=
76;' 7+-;"7 645 7$(8 -+8"; 7'I'&6; ;"+6'&'4M 6(+'L'+'"7.
X


L. 8|nd|ng Lffect of L|cense to Lngage |n keta|| on r|vate art|es
Z8"4 6 &'("47" +- "4M6M" '4 (-(G+6'& &-$4M" 645 ;"7+6$;64+ '7
'77$"5 +- 6 U'&'#'4- ('+'>"43 '+ '7 (-4(&$7'L" "L'5"4(" -? +8"
&6++";j7 -D4";78'# -? +8" ;"+6'& %$7'4"77 67 ?6; 67 #;'L6+" #6;+'"7
6;" (-4(";4"5. \U&%L, () [-&">-. 886 2345 18/ 71AA0:)

VI. ena|ty rov|s|ons: Any person who sha|| be found gu||ty of
v|o|at|on of any prov|s|on of k1LA 2000 sha|| be pun|shed by:

1
Sec. 2, Rule IV, IRR.
2
Sec. 9, R.A. No. 8762.
3
Sec. 10, R.A. No. 8762.
H. PI#;'7-4I"4+ -? 4-+ &"77 +864 7'N B1C F"6;7 645 -4" BHC 56F %$+
4-+ I-;" +864 "'M8+ B/C F"6;7` 645
2. U'4" -? 4-+ &"77 +864 SH.@ E'&&'-43 %$+ 4-+ I-;" +864 S2@.@
E'&&'-4.
P4 +8" (67" -? 677-('6+'-473 #6;+4";78'#7 -; (-;#-;6+'-473 +8"
#"46&+F 786&& %" 'I#-7"5 $#-4 '+7 #6;+4";73 #;"7'5"4+3 5';"(+-;73
I646M"; 645 -+8"; -??'(";7 ;"7#-47'%&" ?-; +8" L'-&6+'-4. P? +8"
-??"45"; '7 4-+ 6 ('+'>"4 -? +8" R8'&'##'4"3 8" 786&& %" 5"#-;+"5
'II"5'6+"&F 6?+"; 7";L'(" -? 7"4+"4(".
P? +8" U'&'#'4- -??"45"; '7 6 #$%&'( -??'("; -; "I#&-F""3 8" 786&&3
'4 655'+'-4 +- +8" #"46&+F #;"7(;'%"5 8";"'43 7$??"; 5'7I'776& 645
#";I64"4+ 5'7h$6&'?'(6+'-4 ?;-I #$%&'( -??'(".

VII. App||cab|||ty of the Ant|-Dummy Act (Comm. Act. 108, as amended
by .D. 71S)

A.
<6D #"46&'>"7 U'&'#'4-7 D8- #";I'+ 6&'"47 +- $7" +8"I 67
4-I'4""7 -; 5$II'"7 +- "4e-F #;'L'&"M"7 ;"7";L"5 ?-; U'&'#'4-7
-; U'&'#'4- (-;#-;6+'-47. K;'I'46& 764(+'-47 6;" 'I#-7"5 -4 +8"
#;"7'5"4+3 I646M";3 %-6;5 I"I%"; -; #";7-47 '4 (86;M" -? +8"
L'-&6+'4M "4+'+F 645 (6$7'4M +8" &6++"; +- ?-;?"'+ '+7 #;'L'&"M"73
;'M8+7 645 ?;64(8'7"7.

8.
J"(+'-4 2=* -? +8" <6D #;-8'%'+7 6&'"47 ?;-I '4+";L"4'4M '4 +8"
I646M"I"4+3 -#";6+'-43 65I'4'7+;6+'-4 -; (-4+;-& -?
46+'-46&'>"5 %$7'4"773 D8"+8"; 67 -??'(";73 "I#&-F""7 -;
&6%-;";73 D'+8 -; D'+8-$+ ;"I$4";6+'-4. *&'"47 I6F 4-+ +6G"
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86


762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
#6;+ '4 +"(84'(6& 67#"(+73 #;-L'5"5 4- U'&'#'4- (64 5- 7$(8
+"(84'(6& D-;G3 645 D'+8 "N#;"77 6$+8-;'+F ?;-I +8" R;"7'5"4+ -?
+8" R8'&'##'4"7.

C.
<6+";3 R;"7. Y"(;"" 0HS D67 "46(+"5 6I"45'4M +8" &6D %F +8"
655'+'-4 -? 6 #;-L'7- "N#;"77&F 6&&-D'4M +8" "&"(+'-4 -? 6&'"47 67
I"I%";7 -? +8" %-6;57 -? 5';"(+-;7 -; +8" M-L";4'4M %-5'"7 -?
(-;#-;6+'-47 -; 677-('6+'-47 "4M6M"5 '4 #6;+'6&&F 46+'-46&'>"5
6(+'L'+'"7 '4 #;-#-;+'-4 +- +8"'; 6&&-D6%&" #6;+'('#6+'-4 -; 786;"
'4 +8" (6#'+6& -? 7$(8 "4+'+'"7.
:8" 6I"45I"4+ D67 I"64+ +- 7"++&" +8" $4(";+6'4+F (;"6+"5 '4
+8" -%'+"; -#'4'-4 '4 ]W?,% 2X>(>L,-$%< 3,-#) () 5%X$^UW++S
I,&-L. @/ 2345 @6@ 71A68:. D8'(8 ;"e"(+"5 +8" 6;M$I"4+ -? 6
#$%&'( $+'&'+F (-;#-;6+'-4 +86+ 865 4-=*I";'(64 6&'"47 '4 '+7
"I#&-F3 +86+ +8" *4+'=Y$IIF <6D (-L";"5 -4&F "I#&-FI"4+ '4
D8-&&F 46+'-46&'>"5 %$7'4"77"7 645 4-+ '4 +8-7" +86+ 6;" -4&F
#6;+&F 46+'-46&'>"5.
:8" U'&'#'4- (-II-4=&6D D'?" -? 6 K8'4"7" 46+'-46& '7 4-+
%6;;"5 ?;-I "4M6M'4M '4 +8" ;"+6'& %$7'4"77 #;-L'5"5 78" $7"7
(6#'+6& "N(&$7'L"&F 5";'L"5 ?;-I 8"; #6;6#8";46& #;-#";+'"7`
6&&-D'4M 8"; (-II-4=&6D K8'4"7" 8$7%645 +- +6G" #6;+ '4
I646M"I"4+ -? +8" ;"+6'& %$7'4"77 D-$&5 %" 6 L'-&6+'-4 -? +8"
&6D. \T&J&% () N>,#J>. 1/A 2345 ZQ/ 71AQA:)

VIII. IMLLMLN1ING AGLNC
A. D1I as Imp|ement|ng Agency
:8" Y:P '7 6M"4(F 6$+8-;'>"5 +- #;"=h$6&'?F 6&& ?-;"'M4 ;"+6'&";7
%"?-;" +8"F 6;" 6&&-D"5 +- (-45$(+ %$7'4"77 '4 +8" R8'&'##'4"73
645 +- '77$" +8" 'I#&"I"4+'4M ;$&"7 645 ;"M$&6+'-47. :8" Y:P
786&& G""# 6 ;"(-;5 -? h$6&'?'"5 ?-;"'M4 ;"+6'&";7 D8- I6F3 $#-4
(-I#&'64(" D'+8 &6D3 "7+6%&'78 ;"+6'& 7+-;"7 '4 +8" R8'&'##'4"7. P+
786&& "47$;" +86+ +8" #6;"4+ ;"+6'& +;65'4M (-I#64F -? +8"
?-;"'M4 '4L"7+-; (-I#&'"7 D'+8 +8" h$6&'?'(6+'-47 -4
(6#'+6&'>6+'-4 645 +;6(G ;"(-;5 #;"7(;'%"5 '4 +8'7 7"(+'-4.
:8" P4+";=*M"4(F K-II'++"" -4 :6;'?? 645 !"&6+"5 E6++";7 -?
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