Title VI
condition.
SPECIAL CONTRACTS
SALES
(Arts. 1458-1637)
1. What is a contract of sale and what are its essential
requisites and characteristics?
ANS: By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing and the other to pay therefor a price certain in
money or its equivalent. (Art, 1458, NCC.)
The essential requisites of a contract of sale are:
(1) Consent of the contracting parties by virtue of which the vendor
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the vendee obligates himself to pay therefor
a price certain in money or its equivalent.
(2) Object certain which is the subject matter of the contract.
The object must be licit and at the same time determinate or, at
least, capable of being made determinate without the necessity of a
new or further agreement between the parties.
(3) Cause of the obligation which is established. The cause as
far as the vendor is concerned is the acquisition of the price certain
in money or its equivalent, while the cause as far as the vendee is
concerned is the acquisition of the thing which is the object of the
contract.
The characteristics of a contract of sale are: (1) consensual; (2)
bilateral and reciprocal; (3) principal; (4) onerous; (5) commutative;
and (6) nominate.
2. Distinguish between a contract of sale and a contract
to sell. ^
j.^
ANS: The two (2) may be distinguished from each other in the
following ways:
(1) In the first, title passes to the vendee upon delivery of
the thing sold, whereas in the second, by agreement, ownership is
reserved in the vendor and is not to pass until full payment of the
price.
(2) In the first, nonpayment is a negative resolutory condition,
whereas in the second, full payment is a positive suspensive
(3) In the first, the vendor has lost and cannot recover ownership
until and unless the contract is resolved or rescinded, whereas
in the second, title remains in the vendor, and when he seeks to
eject the vendee because of noncompliance by such vendee with the
suspensive condition stipulated, he is enforcing the contract and not
resolving the same. (Santos vs. Santos, CA, 47 Off. Gaz. 6372.)
3. Fidel gave Corazon a receipt which states:
“Receipt
Received from Corazon as down payment
For my 1995 Nissan Sentra with plate
No. XYZ-123.................................. P50,000.00
Balance payable: 12/30/01................... P50,000.00
September 15, 2001.
(Sgd.) Fidel
Does this receipt evidence a contract to sell? Why?
(2001)
ANS: It is a contract of sale because the seller did not reserve
ownership until he was fully paid.
4. Is a deed of sale where the stated consideration had
not in fact been paid valid?
ANS: A deed of sale where the stated consideration had not
in fact been paid, is null and void. It produces no effect whatsoever
where the same is without cause or consideration in that the
purchase price which appears thereon as paid has in fact never been
paid by the purchaser to the vendor. (Yu Bun Guan vs, Ong, G.R.
No. 144735, October 18, 2001.)
The sale is void for total lack of consideration. Under the law,
payment shall be made to the person in whose favor the obligation
has been constituted, or his successor in interest, or any person
authorized to receive it. (Art. 1240, NCC.)
5. “A” agrees to sell a sewing machine to “B” for P400
in cash, and places the machine aboard the truck of “B,”
while the latter goes home to fetch money. Before “B” returns,
“C” appears and claims ownership of the sewing machine,
1|TITLE V: SALES (1458-1637) JURADO 2009
exhibiting a document signed by “B” selling the machine to
“C.” “A” rejects “C’s” claim alleging that he is still the owner.
Decide with reasons. (1972)
ANS: It is submitted that the claim of “A” that he is still
the owner of the sewing machine is correct. While it is true that
there is already a perfected contract of sale between “A” and KB”
and that, apparently, there is already an actual delivery when the
former placed the sewing machine aboard the truck of the latter,
nevertheless, such delivery did not vest the ownership thereof in the
vendee. In other words, we have here a simple case of reservation
by the vendor of his right of ownership over the thing sold. That this
can be done either expressly or impliedly is well-settled. In the case
at bar, the agreement between “A” and.“B” is that the sale must be
in cash. Hence, it can easily be inferred that at that precise moment
while “A” was waiting for “B” to return with the P400 purchase
price, which the latter was supposed to fetch from his house, his
intention, in spite of actual delivery, was to reserve the ownership
in himself and to vest such ownership in the vendee only upon the
actual payment of the purchase price. (Masiclat vs. Centeno, 99 Phil.
1043.)
Besides, we have here a clear case of a contract to sell. Wellsettled
is the rule that in a contract to sell, as distinguished from a
contract of sale, ownership is reserved in the vendor and is not to
pass to the vendee until full payment of the purchase price.
6. (a) Is a Declaration of Heirship and Waiver of Rights
a recognized mode of acquiring ownership over a parcel of
land?
(b) Can a Declaration of Heirship and Waiver of
Rights be considered a Deed of Sale in favor of another?
Distinguish between a Declaration of Heirship and Waiver
of Rights.
ANS: Declaration of Heirship and Waiver of Rights operates as
a public instrument when filed with the Registry of Deeds whereby
the intestate heirs adjudicate and divide the estate left by the decedent
among themselves as they see fit. It is in effect an extrajudicial
settlement between the heirs under Rule 74 of the Rules of Court.
On the other hand, in a Contract of Sale, one of the contracting
parties obligates himself to transfer the ownership of and to deliver
a determinate thing, and the other party obligates himself to pay a
price certain in money or its equivalent.
In effect, a stranger cannot exclusively claim ownership over
a parcel of land on the sole basis of the waiver document which
neither recites the elements of either a sale, or a donation, or any
other derivative mode of acquiring ownership.
According to the High Court, “an asserted right or claim to
ownership or a real right over a thing arising from a judicial act,
however justified, is not per se sufficient to give rise to ownership
over the res. That right or title must be completed by fulfilling certain
conditions imposed by law. Hence, ownership and real rights
are acquired only pursuant to a legal mode or process. While title is
the juridical justification, mode is the actual process of acquisition
or transfer of ownership over a thing in question.” (Acap vs. Court of
Appeals, G.R. No. 118114, December 7, 1995j
7. Distinguish between emptio res speratae and emptio
spei.
ANS: The sale of a thing having a potential existence (emptio
res speratae) and the sale of a hope (emptio spei), both of which are
recognized in Art. 1461 of the NCC, may be distinguished from each
other in the following ways:
(1) The first refers to the sale of a thing having a potential
existence, whereas the second refers to the sale of a mere hope or
expectancy.
(2) In the first, the uncertainty is with regard the quantity
and quality but not with regard the existence of the thing; in the
second, the uncertainty with regard the existence of the thing.
(3) In the first, the contract deals with a future thing in
the second, the contract deals with a present thing — the hope or
expectancy.
(4) In the first, the sale is subject to the condition that; the
thing should exist, so that if it does not, there is no contract for
lack of an essential requisite, in the second, the sale produces effects
even though the thing itself does not come into existence, since the
subject matter is the hope itself.
8. X Co. granted to A the exclusive right to sell in the
Visayas a certain number of beds which the Company was
manufacturing at the invoice price of the beds in Manila,
with a discount of 20 percent, the price to be paid at the end
of 60 days. What contract is perfected — a contract of sale or
a contract of agency? Reasons.
2|TITLE V: SALES (1458-1637) JURADO 2009
ANS: The contract that is perfected here is a contract of sale.
The essential features of a contract of sale are present in this case.
There is the obligation on the part of X Co. to supply the beds and
the obligation on the part of A to pay the purchase price. These
features exclude the legal conception of a contract of agency to
sell where the agent receives the thing in order to sell it without
paying the price, but with the obligation to deliver to the principal
the price which he may obtain from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it. In the
contract between X Co. and A, the latter, on receiving the beds, was
necessarily obliged to pay the price within the term fixed, without
any other consideration and regardless as to whether he had or had
not sold the beds. (Quiroga vs. Parsons Hardware, 38 Phil. 501; Art.
1466, NCC.)
9. In a case where the consignor or firm delivers
goods to a distributor for resale to customers, retaining the
ownership of such goods, and the price and terms are still
subject to the control of the firm, but with the understanding
that the distributor is not the agent or legal representative of
the firm for any purpose whatsoever, what kind of contract
was perfected — a contract of sale or a contract of agency to
sell? Explain.
- ANS: The contract is still a contract of agency to sell. According
to Section 194(t) of the National Internal Revenue Code, a commercial
broker includes all persons, other than importers, manufacturers,
producers, or bona fide employees, who, for compensation or
profit, sell or bring but sales or purchases of merchandise for other
persons or bring proposed buyers and sellers together, or negotiate
freights or other business for owners of vessels or other means of
transportation, or for the shippers, or consignors or carried by vessels
or other means of transportation. The term includes “commission
merchants.” The controlling decision as to the test to be followed
as to who fall within the above definition is that of Commissioner of
Internal Revenue vs. Constantino (31 SCRA 779). In the language of
Justice J.B.L. Reyes, who penned the opinion: “Since the company
retained ownership of the goods, even as it delivered possession into
the dealer for resale to customers, the price terms of which were
subject to the company’s control, the relationship between the company
and the dealer is one of agency.” An excerpt from Salisbury
vs. Brook (94 SE 117) in support of such view (which we might as
well consider as the proper test to apply in cases similarly situated)
follows: “The difficulty in distinguishing between contracts of sale
and the creation of an agency to sell has led to the establishment of
rules by the application of which this difficulty may be solved. The
decisions say the transfer of title or agreement to transfer it for a
price paid or promised is the essence of sale. If such transfer puts
the transferee in the attitude or position of an owner and makes him
able as a debtor for the agreed price, and not merely as an agent who
must account for the proceeds of a resale, that transaction is a sale;
while the essence of an agency to sell is the delivery to an agent, not
as his property but as the property of the principal, who remains
the owner and has the right to control sales, fix the price and terms,
demand and receive the proceeds less the agent’s commission upon
sales made.” (Ker & Co. vs. Lingad, 38 SCRA 524.)
10. X Shoe Store, Inc. entered into separate contracts
with two (2) movie stars, A and B. With A, the agreement was
that the shoe store shall deliver at a specified date for a price
of PI,000 a pair of shoes of a specified brand which the store
had been manufacturing for the general public but which
at the time of the contract had already been sold out. With
B, the agreement was that the shoe store shall deliver at a
specified date for a price of P2,000 a pair of shoes to be made
specially for him, in accordance with a design submitted by
him. What is the nature of these two (2) contracts?
ANS: The contract with A is a contract of sale, whereas the
contract with B a contract for a piece of work. (Art. 1467, NCC.)
The test which must be applied in order to determine whether the
delivery of an article by one person to another at a certain price
is a contract of sale or a contract for a piece of work is simple. If
the article is one which the obligor in the ordinary course of his
business manufactures or procures for the general market, whether
the same is on hand at the time or not, the contract is a contract of
sale; however, if the article is to be manufactured (1) specially for
the customer and (2) upon his special order, and not for the general
market, the contract is a contract for a piece of work. (Ibid.)
11. A transferred to B a parcel of land for the price of
P 100,000. It was stipulated in the contract that B will pay
P40,000 in cash and that for the difference, he will convey
a Dodge automobile, valued at approximately P60,000. What
kind of contract is this? Explain your answer.
3|TITLE V: SALES (1458-1637) JURADO 2009
ANS: The contract is a barter. According to Art. 1468 of the
NCC, “if the consideration of the contract consists partly in money,
and partly in another thing, the transaction shall be characterized
by the manifest intention of the parties. If such intention does not
clearly appear, it shall be considered a barter if the value of the
thing given as part of the consideration exceeds the amount of the
money or its equivalent; otherwise, it is a sale.” It is evident from this
provision that the test that must be applied if the manifest intention
of the parties cannot be determined is as follows: If the cash added to
the thing traded in is more than the value of such thing, the contract
is sale; if less, the contract is barter. In the instant case, the cash of
P40,000 added to the automobile is less than its value. Therefore,
the contract is a barter.
12. “A” sells his 1976 Colt Lancer Sedan to “B,” a
compadre, and leaves it to “B” to determine the price. If
“B” refuses to fix a price and simply takes the car, is he still
obliged to pay the price? Explain. (1976)
ANS: Yes, “B” is still obliged to pay the price. This is clear from
Art 1474 of the NCC. True, Art, 1473 of the NCC declares that “the fixing
of the price can never be left to the discretion of one of the contracting
parties,”
Therefore, the act of “A” in leaving to “B” the power to determine the
price of the car is illegal. But this will not affect the validity of the
sale. “A” delivered the car to “B,” and the latter appropriated it. This
will bring into play the provisions of Art. 1474 of the NCC. According
to the article, if the thing or any part thereof has been delivered
to and appropriated by the buyer, he must pay a reasonable price
therefor. What is a reasonable price is a question of fact dependent
upon the circumstances of each particular case.
13. When is a contract of sale perfected? When is there
a transmission of ownership of the thing sold?
ANS: Since a contract of sale is consensual, it is perfected at
the moment when there is meeting of minds upon the thing which
is the object of the contract and upon the price. (Art. 1475, NCC.)
In the case of a sale by auction, the contract is perfected when the
auctioneer announces its perfection by the fall of the hammer or in
any other customary manner. (Art. 1476, NCC.)
The ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof. (Art, 1477,
NCC.) The parties, however, may stipulate that the ownership shall
not pass to the vendee until the latter shall have fully paid the
purchase price. (Art. 1478, NCC.)
14. During the months of May and June 1963, 16
trading entities (Sellers) unloaded locally grown Virginia
tobacco at the redrying plant of the CCE at Agoo, La Union
in accordance with the PVTA regulations and procedures.
While waiting inspection and grading, the shipments were
totally destroyed by a fire. The following facts are also
beyond dispute: The CCE is an agent of the PVTA; the PVTA
directs, supervises and controls the CCE in receiving tobacco
shipments and all activities pertaining thereto; and once
the shipments are received from the Sellers, they are under
its control and cannot be withdrawn without its authority.
Question: Is the PVTA liable to the Sellers for the loss of the
tobacco shipments? Why?
ANS: The PVTA is liable for the loss of the tobacco shipments.
At the time of the loss, of the shipments, there was already a perfected
contract of sale. This is clear from Art. 1475 of the NCC
which declares that the contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the object of
the contract and upon the price. Not only that. There was already a
delivery of the shipments. (Philippine Virginia Tobacco Adm. vs. De
los Angeles, 87 SCRA 197J
{Note: Read the dissent of Justice Aquino. It is interesting, and
we believe that he is correct. Delivery or tradition must be accepted.
If the shipments were still to be inspected and graded, how can there
be acceptance? Unloading is not the equivalent of delivery. Hence, the
PVTA was not yet the owner of the tobacco shipments at the time of
the fire. Therefore, under the principle of res perit domino, the PVTA
is not liable.)
15. Spouses Biong and Linda wanted to sell their
house. They found a prospective buyer, Ray. Linda negotiated
with Ray for the sale of the property. They agreed on a
fair price of P2 Million. Ray sent Linda a letter confirming
his intention to buy the property. Later, another couple,
Bernie and Elena, offered a similar house at a lower price of
PI.5 Million. But Ray insisted on buying the house of Biong
4|TITLE V: SALES (1458-1637) JURADO 2009
and Linda for sentimental reasons. Ray prepared a deed of
sale to be signed by the couple and a manager is check for
P2Million. After receiving the P2 Million, Biong signed the
deed of sale. However, Linda was not able to sign because she
was abroad. On her return, she refused to sign the document
saying she changed her mind. Linda filed suit for nullification
of the deed of sale and for moral and exemplary damages
against Ray.
(1) Will the suit prosper? Explain.
ANS: No, the suit will not prosper. The contract of sale was
perfected when Linda and Ray agreed on the object of the sale and
the price [Art, 1475, NCC], The consent of Linda has already been
given, as shown by her agreement to the price of the sale. There is
therefore consent on her part as the consent need not be given in
any specific form. Hence, her consent may be given by implication,
especially since she was aware of, and participated in the sale of the
property. (Pelayo vs. CA, G.R. No. 141323, June 8,2005.) Her action for
moral and exemplary damages will also not prosper because the case does
not fall under any of those mentioned in Art. 2219 and 2232 of the Civil
Code.
Alternative Answer:
The suit will prosper. Sale of community property requires
written consent of both spouses. The failure or refusal of Linda to
affix her signature on the deed of sale, coupled with her express
declaration of opposing the sale negates any valid consent on her
part. The consent of Biong by himself is insufficient to effect a valid
sale of community property (Art. 96, FC; Abalos vs. Macatangay, G.R.
No. 155043, September 30, 2004). (Suggested Answers to the 2006 Bar
Examination Questions, PALS)
(2) Does Ray have any cause of action against Biong
and Linda? Can he also recover damages from the spouses?
Explain. (2006)
Considering that the contract has already been perfected and
taken out of the operation of the statute of frauds, Ray can compel
Linda and Biong to observe the form required by law in order for
the property to be registered in the name of Ray which can be filed
together with the action for the recovery of house [Art. 1357 NCC].
In the alternative, he can recover the amount of P2 million that
he paid. Otherwise, it would result in solutio indebiti or unjust
enrichment.
Ray can recover moral damages on the ground that the action
filed by Linda is clearly an unfounded civil suit which falls under
malicious prosecution. (Ponce vs. Legaspi, G.R. No. 79184, May 6,
1992.) (Suggested Answers to the 2006 Bar Examination Questions,
PALS)
16. A sold his piano to B, who immediately paid the
price. Because the piano was at the repair shop at the time
the contract was perfected, no delivery was made. Before
delivery could be made, C, a creditor of A, who has filed a
suit against him, attached the piano. Question: What right
has B over the piano? May B oppose the attachment levied
by C? Reasons.
ANS: Upon the perfection of the contract, (and certainly, there
is a perfected contract in the instant case), B acquired a personal right
(jus ad rem) over the piano, in the sense that he can compel
A to deliver it to him in accordance with the contract. (Arts. 1475,
1537, NCC.) However, such right has become useless because of the
attachment of the piano by C, a creditor of A. B cannot oppose the
attachment because there was still no delivery of the piano to him. In
other words, A is still the owner thereof, not B. This is clear from the
provision of Art. 1477 of the NCC. Consequently, the only possible
remedy of B now would be to proceed against A for indemnification
for damages.
17. “X” entered the restaurant of “Y” and asked the
waiter to bring him a dozen fresh oysters in their shell. After
eating he noticed an almost perfect pearl in one of the shells.
He was about to take it when the restaurant owner claimed
the pearl. To whom does the pearl belong? Why? (1972)
ANS: The pearl belongs to “X.”
When “X” ordered a dozen oysters in their shells at “Y’s”
restaurant and ate the oysters, actually the contract that was
perfected and consummated was a simple contract of sale, with the
corresponding accessory contracts of services that a restaurant is
supposed to provide. Consequently. “X” was already the owner of the
oysters and their shells including their accessions and accessories.
Hence, when he discovered the pearl in one of the shells, what is
applicable is the old familiar rule that the owner of the principal is
also the owner of the accessory.
5|TITLE V: SALES (1458-1637) JURADO 2009
At any rate, whether we look at the pearl as an accession or as
hidden treasure, “X” is the owner. If it constitutes accession, which
I submit it is, as explained above, “X” is the owner. If it constitutes
hidden treasure within the meaning of Art. 439 of the NCC, what
is applicable is the rule enunciated in the first paragraph of Art.
438 reiterated by the rule enunciated in Art. 713 of the NCC with
respect to occupation as a mode of acquiring ownership and not the
rule enunciated in the second paragraph of Art. 438. “X” is the owner
because at the time of the discovery he was already the owner of the
shell where the pearl was found.
18. (1) Are promises to buy and/or to sell demandable?
(2) A offered to sell his house and lot to B who was
interested in buying the same for P200,000. In his letter to B, A
stated that he was giving B a period of one month within
which to raise the amount and that as soon as B is ready, they
will sign the deed of sale. One week before the expiration
of the one-month period, A went to B and told him that he
is no longer willing to sell the property unless the price is
increased to P250,000. May B compel A to accept the P200,000
first offered, and execute the deed of sale? Reasons.
ANS: (1) A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the promise
is supported by a consideration distinct from the price. (Art. 1479,
NCC; see Sanchez vs. Rigos, [1972] under Art. 1324, NCC, supra.)
(2) B cannot compel A to accept the P200,000 first
offered and execute the deed of sale.
In the instant case, it is undeniable that the offer of A is merely
a unilateral promise to sell his house and lot to B for P200,000
without any consideration distinct from the purchase price. Hence,
the general rule stated in Art. 1324 and the particular rule stated
in the second paragraph of Art. 1479 of the NCC are applicable. The
promise of A is not binding upon him. As a matter of fact, even if B
had formally accepted the option of one month given to him by A, such
acceptance would be of no moment since there is no consideration
thereof distinct from the purchase price. A can always change his
mind at any time. The option does not bind him for lack of a cause or
consideration. It would have been different if B had accepted terms
and conditions of the offer to sell and paid a consideration distinct
from the price within the period of the option before said offer was
withdrawn by A. In such a case, a contract of sale would have been
generated right then and there. As it turned out, A withdrew his
offer in time. (See Sanchez vs. Rigos, 45 SCRA 368.)
19. What is an option contract?
ANS: An option contract is an agreement granting a privilege
to buy or sell within an agreed time and at a determined price. It is a
separate and distinct contract from that which the parties may enter
into upon the consummation of the option. It must be supported by
consideration. (Equatorial Realty Dev. Corp. vs. Mayfair Theaters, Inc.,
264 SCRA 483.) An option contract conforms with the second
paragraph of Art. 1479 of the NCC which states that:
“An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the promise
is supported by a consideration distinct from the price.” (Ang Yu
Asuncion vs. CA, 238 SCRA 602).
20. There is a stipulation in a contract of a lease that
if the lessor should desire to sell the leased premises, the
lessee shall have a 30-day exclusive option to purchase the
same. However, if it is sold to another, the lessor is bound
and obliged to stipulate in the deed of sale that the purchaser
shall recognize the lease and be bound by all the terms and
conditions thereof. What right was granted to the lessee, a
right of first refusal or an option contract?
ANS: The lessee was granted a right of first refusal and not an
option clause or an option contract.
An option is a contract granting a privilege to buy or sell within
an agreed time and at a determined price. It is a separate and
distinct contract from that which the parties may enter into upon the
consummation of the option. It must be supported by consideration.
The right of first refusal is an integral part of the contract of lease.
The consideration is built into the reciprocal obligations of the
parties. (Sps. Litonjua vs. L & R, Corp., Ynares Santiago, March 27,
2000.)
21. Petitioner Serra is the owner of a 374-square meter
parcel of land. He entered into a “Contract of Lease With
Option To Buy” with the private respondent RCBC for 25
years, beginning 1975 to 2000. Under the contract, RCBC
was given an option to buy the land within 10 years from
the execution of the contract at P210.00 per square meter
6|TITLE V: SALES (1458-1637) JURADO 2009
with the condition that if it fails to exercise the option, the
building and/or the improvements thereon shall become
the property of the lessor after the expiration of the 25-year
lease without right of reimbursement. In 1984, RCBC decided
to exercise the option to buy and informed the lessor of its
intention. Petitioner replied that he is no longer selling the
property. Hence, private respondent filed an action
for specific performance against petitioner. As a defense,
petitioner contended that the contract was prepared by
RCBC, that it took advantage of him when it set lopsided
terms and that the option to buy was not supported by any
consideration distinct from the price and hence, not binding
upon him. The trial court ordered the petitioner to execute
the proper deed of sale conveying the property to RCBC. The
same was affirmed by the respondent CA.
Was the option to buy supported by a consideration
distinct from the price? Decide the case.
ANS: Yea. Art. 1324 of the NCC provides that when an offeror
has allowed the offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by communicating such
withdrawal, except when such option is founded upon consideration
as something paid or promised. On the other hand, Art. 1479 of the
NCC provides that an accepted unilateral promise to buy and sell a
determinate thing for a price certain is binding upon the promissor if
the promise is supported by a consideration distinct from the price.
In a unilateral promise to sell, where the debtor fails to
withdraw the promise before the acceptance by the creditor, the
transaction becomes a bilateral contract to sell and to buy, because
upon acceptance by the creditor of the offer to sell by the debtor,
there is already a meeting of the minds of the parties as to the thing
which is determinate and the price which is certain. In which case,
the parties may then reciprocally demand performance.
Jurisprudence says that an option contract is a privilege
existing only upon the buyer. For a separate consideration paid,
he is given the right to decide to buy a certain property or not, at
anytime within the agreed period, at a fixed price. This being his
prerogative, he may not be compelled to exercise the option to buy
before the time expires.
On the other hand, what may be regarded as a consideration
separate from the price is discussed in the case of Vda. de Quirino
vs. Palarca. The said case also involved a lease contract with option
to buy where the consideration for the lessor’s obligation to sell the
leased premises to the lessee, should he choose to exercise his option
to buy the same, is the obligation of the lessee to sell to the lessor the
improvements constructed by the former, if he fails to exercise
his option to buy said premises.
In the present case, the consideration is even more onerous on
the part of the lessee since it entails transferring the improvements
on the property to petitioner, should respondent bank fail to exercise
its option within the period stipulated.
As to whether the price “not greater than TWO HUNDRED
PESOS” is certain or definite, it was held that a price is considered
certain if it is so with reference to another thing certain or when the
determination thereof is left to the judgment of a specified person or
persons. (Art. 1469, NCC.) And generally, gross inadequacy of price
does not affect a contract of sale. (Art. 1470, NCC.)
On whether the contract is one of adhesion, the Supreme Court
said: f
“A contract of adhesion is one wherein a party, usually
a corporation, prepares the stipulation in the contract, while
the other party merely affixes his signature or his ‘adhesion’
thereto. These types of contracts are as binding as ordinary
contracts. In reality, the party who adheres to the contract is
free to reject it entirely. This Court will not hesitate to rule
out blind adherence to terms where facts and circumstances
will show that it is basically one-sided.” (PanAm vs. Rapadas,
G.R. No. 60673, May 19, 1992; BP1 Credit vs. CA, 204 SCRA
601.)
The situation in the present case is not inequitable. Petitioner
is a highly educated man. It is evident that a man of his stature
should have been more cautious in transactions he enters into,
particularly where it concerns valuable properties. (Serra vs. CA,
January 4,1994, 47 SCAD 55.)
22. A and B entered into a contract whereby the
former agreed to sell his automobile to the latter for P25,000.
Upon the perfection of the contract, B advanced the entire
purchase price of P25,000 to A. It was, however, stipulated
that the automobile shall be delivered to B at the end of
March, 1972. Unfortunately, before the arrival of that date, it
was completely destroyed without any fault of A- Can B now
recover the amount which he had already advanced to A?
Reasons.
7|TITLE V: SALES (1458-1637) JURADO 2009
ANS: Actually, the problem can be boiled down to the following
question — who shall bear the risk of loss after the contract of sale
has been perfected, but before the thing sold has been delivered
— the vendor or the vendee? There are three apparently conflicting
provisions of the NCC which we must consider in order to answer
this question. They are Arts, 1480,1504 and 1538.
If we apply the provisions of Art. 1504 only, it is clear that
the loss is imputable to the vendor; consequently, A must return
to B the P25,000 which the latter had advanced to him. If we apply
the provisions of Art. 1538 only, then we must observe the rules
provided for in Art. 1189, and according to this article, the obligation
is extinguished since the object thereof was lost without any fault of
the vendor. If we apply the provisions of Art. 1480 only, there is an
implication that the loss is imputable to the vendee, an implication
which is directly in conflict with that which is expressly declared
in Art. 1504, although the article declares categorically in the first
paragraph that the provision of Art. 1262, among others, shall govern
and according to this article, the obligation is extinguished since the
object thereof was lost without any fault of the vendor. What then
is meant by the law when it says that if the object of an obligation
is lost or destroyed without any fault of the debtor (vendor), the
obligation is extinguished? There are three views which have been
advanced. They are:
(1) The extinguishment of the obligation due to the loss of
the thing affects both vendor and vendee since their obligations are
reciprocal. If the obligation of the vendor to deliver is extinguished,
the correlative obligation of the vendee to pay, which depends
upon it, is also extinguished. Besides, a contract of sale is onerous
in character; the cause, as far as the vendee is concerned, is the
acquisition of the thing which is the object thereof. Hence, if he
cannot have the thing it would be juridically illogical and unjust to
make him pay its price. Furthermore, it is well known that if the
object of a contract is lost before delivery, it is the vendor who is
still the owner who bears the loss, and not the vendee. (5 Tolentino,
NCC, p. 23.) .
(2) When the thing sold is lost without any fault of the
vendor, he is released from his obligation to deliver the thing; while the
vendee’s obligation to pay the price subsists. If the vendee had
paid the price in advance, the vendor may retain the same. The
legal effect, therefore, is that the vendee assumes the risk of loss by
fortuitous event from the time of the perfection of the contract up to
the time of delivery. (3 Padilla, NCC, pp. 840-841.)
(3) Art. 1504 is applicable to specific goods, while Art. 1480 is
applicable only to fungible goods.
Which of these three views is correct? Undoubtedly, the
first two are backed up by sufficient authorities both Filipino and
Spanish in origin, while the third is backed up by some authorities
American in origin. It is, however, submitted that the first is more
just and equitable. Besides, it is in conformity with the principle of
res perit domino. The owner of the thing must bear the risk of loss.
Consequently, A must return the P25,000 to B.
23. A sold an automobile to B for P20,000 to be paid as
follows: P10,000 upon delivery of the car to B, and the balance
at the rate of P2,000 every three (3) months thereafter. The
automobile, however, was burned in the possession of B,
without his fault, before the payment of the balance. Is B
obliged to pay the balance? Reason.
ANS: Yes, B is still obliged to pay the balance. The ownership
of the automobile was transmitted to him upon delivery since
there was no stipulation to the contrary. (Arts. 1477, 1478, NCC.)
Consequently, applying the principle of res perit domino, the loss is
imputable to him. (Art. 1504, NCC.)
24. “S” an American resident of Manila, about to
leave on a vacation, sold his car to “B” for U.S. $2,000.00,
the payment to be made 10 days after delivery to “X,” a
third party depositary agreed upon, who shall deliver the
car to “B” upon receipt by “X” of the purchase price. It was
stipulated that ownership is retained by “S” until delivery
of the car to “X.” Five days after delivery of the car to “X,” it
was destroyed in a fire which gutted the house of “X” without
the fault of either “X” or “B.”
A. Is buyer “B” still legally obligated to pay the purchase
price? (1981)
ANS: It must be observed that “S” had already delivered the
car to “X ” the third party depositary or bailee. It was agreed that
ownership is retained by “S” until delivery to “X.” Therefore, in effect,
there was already a transfer of the right of ownership over the car
to “B.” Consequently, “B” shall assume the fortuitous loss of the car.
As a matter of fact, even if it was agreed that “S” shall retain the
ownership of the car until the purchase price has been paid by “B,”
8|TITLE V: SALES (1458-1637) JURADO 2009
the end result will still be the same. Since evidently, the purpose
is to secure performance by the buyer of his obligation to pay the
purchase price, by express mandate of the law, the fortuitous loss of
the car shall be assumed by “B.”
(Note: The above answer is based on Art, 1504 of the NCC.)
25. On January 5, A sold and delivered his truck together
with the corresponding certificate of public convenience
to B for the sum of P6,000 payable within 60 days, 2
weeks after the sale and while the certificate of public
convenience
was still in the name of A, it was revoked by the
Public Service Commission (now the Land Transportation
Franchising and Regulatory Board) through no fault of A.
Upon the-expiration of the 60-day period A demanded
payment
of the price from B. B refused to pay, alleging that the
contract of sale was void for the reason that the certificate
of public convenience which was the main consideration of
the sale no longer existed. Is the contention of B tenable?
Reasons.
ANS: The contention of B is untenable. The contract of sale
in the instant case is perfectly valid. It contains all of the essential
requisites of a valid contract of sale. Thus, there is consent, there
is an object certain, and there is a cause or consideration. True, the
certificate of public convenience was probably the main consideration
of the sale as far as B is concerned, but said consideration was still
existing at the time of the perfection of the contract on January 6.
It was revoked by the Public Service Commission (now the Land
Transportation Franchising and Regulatory Board) only two (2)
weeks after the sale had already been perfected. Besides, there
was already delivery made by the vendor to the vendee resulting in
the transfer of the right of ownership of the object of the sale to B.
Consequently, applying the principle of res perit domino (the owner bears
the loss), the loss or revocation of the certificate of public
convenience should be borne by B.
26. What is meant by earnest money? How does this
differ from earnest money under the Spanish Civil Code?
ANS: According to Art. 1482 of the NCC, "whenever earnest
money is given in a contract of sale, it shall be considered as part of
the price and as proof of the perfection of the contract.” From this
provision, it is clear that earnest money may simply be defined as a
part of the purchase price advanced by the vendee to the vendor as
a token of the perfection of the contract. This concept is, of course,
radically different from the earnest money as contemplated in the
Spanish NCC. In Art. 1464 of the latter Code, it was treated as a
pledge given by the vendee to the vendor for the purpose of binding
the two (2) parties to the contract of purchase and sale. Thus, if
the vendee desires the rescission of the contract, he must forfeit the
earnest money; if the vendor desires the rescission of the contract, he
must return double the amount to the vendee; and if both are willing
to go ahead with the contract, it becomes a part of the purchase
price.
27. In a contract of sale of personal property the price
of which is payable in installments:
(a) What are the different remedies which are available
to the vendor in case of breach?
(b) Are these remedies cumulative?
ANS: (a) In a contract of sale of personal property the price of
which is payable in installments, the vendor may exercise any of the
following remedies:
(1) Exact fulfillment of the obligation, should the vendee
fail to pay;
(2) Cancel the sale, should the vendee's failure to pay
cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if
one has been constituted, should the vendee’s failure to pay
' cover two or more installments. In the last case, he shall have
no further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be
void. (Art. 1484, NCC.)
(b) Well-accepted is the rule that the remedies of an unpaid
seller under Art. 1484 of the NCC are alternative, not cumulative.
Such rule is founded on the principle that no one shall enrich himself
at the expense of another. Hence, when the unpaid seller has already
enforced the contract by way of collecting the amount due, he can no
longer rescind or cancel the same. He cannot also foreclosure the
mortgage over the thing. For the exercise of one in full forecloses the
right to exercise other remedies. (Nonato vs. CA, G.R. No. 67181,
November 22,1985.)
The preceding articles shall be applied to contracts purporting
to be leases of personal property with option to buy, when the lessor
9|TITLE V: SALES (1458-1637) JURADO 2009
has deprived the lessee of the possession or enjoyment of the thing.
(Art. 1485, NCC.)
In the cases referred to in the two (2) preceding articles, a
stipulation that the installments or rents paid shall not be returned
to the vendee or lessee shall be valid insofar as the same may not be
unconscionable under the circumstances. (Art. 1486, NCC.)
28. A bought from X Co. a truck, payable in monthly
installments. As security for the payment of the balance of
the purchase price, he constituted a chattel mortgage on the
truck in favor of the company. Because of his failure to pay
three consecutive monthly installments, the company filed
a complaint against him to recover the unpaid balance. A
writ of attachment was subsequently issued against his
properties. Thereafter, the truck was sold at public auction
in which the company was the only bidder for PI,000. Since
there was still a deficiency of more than P1,000, the court
condemned A to pay to the company the deficiency plus
interest. Is this in accordance with law?
ANS: The order of the court is in accordance with law.
According to Art. 1484 of the NCC, the company could either exact
fulfillment of the obligation should the vendee fail to pay or cancel
the sale should the vendee’s failure to pay cover two (2) or more
installments or foreclose the CM should the vendee’s failure to pay
cover two (2) or more installments, in which case, he shall have no
further action against the vendee to recover any unpaid balance.
These remedies are alternative, not cumulative. Manifestly, the
company had chosen the first remedy. Consequently, it may enforce
execution. (Southern Motors vs. Moscoso, 2 SCRA 168. To the same
effect — see Tanjanlangit vs. Southern Motors, 54 Off. Gaz. 2502;
Industrial Financing Corp. vs. Ramirez, 77 SCRA 152; Nonato vs.
IACy 140 SCRA 255.)
29, C purchased by installment from X Co. a Diesel
truck for P45,000. To secure the payment of the purchase
price, he executed a chattel mortgage over the vehicle in favor
of the company. As additional security, R, a friend of C,
executed a real estate mortgage on a parcel of land owned by
her. Subsequently, X Co., by means of a discounting transaction,
assigned all of its rights in the two (2) mortgages to FIF
Co. with due notice of such assignment to C and R. Because
of C’s failure to pay any of the installments, FIF Co.
extrajudicially
foreclosed the chattel mortgage. At the foreclosure
sale, FIF Co., as highest bidder, bought the truck for P15,000.
C and R then brought this action to cancel the real estate
mortgage.
(a) May FIF Co. now foreclose the real mortgage in
order to recover the deficiency? (1976)
(b) Suppose that in the above problem, X Co. had made
an assignment of its right to FIF Co. “with a right of recourse”
against the vendor-assignor, would there be a violation
of the Recto Law (Art. 1484, NCC.) if the assignee will
proceed against the assignor for the deficiency?
(c) Suppose that the mortgagor refuses to deliver the
chattel subject of the mortgage upon failure to pay two or
more installments or suppose that he conceals the chattel,
and the vendor-mortgagee instituted a suit for replevin and
subsequently foreclosed the mortgage extrajudicially, would
there be a violation of the Recto Law if such vendor demands
reimbursement of expenses and attorney’s fees?
■ ANS: (a) Art. 1484 of the NCC is applicable here. This provision
is clear and simple. Should the vendee default in the payment of two
or more of the agreed installments, the vendor may exact fulfillment of
the obligation or cancel the sale or foreclose the chattel mortgage.
These remedies have been recognized as alternative not cumulative;
that the exercise of one would bar the exercise of the others. It is
well-established that the foreclosure and actual sale of a mortgaged
chattel bars further recovery by the vendor of any balance or the
purchase price. Here, the defendant has elected to foreclose the
chattel mortgage. The rule stated in No. 3 of Art. 1484 is, therefore,
applicable. The fact that he is seeking to collect the deficiency by
going against the real estate mortgage is of no moment. R is a
guarantor. If she is compelled to pay the deficiency, she will in turn
be entitled to recover what she has paid from the debtor-vendee.
(Art. 2066, NCC.) Ultimately, it will be the vendee who will be made
to pay despite the earlier foreclosure of the chattel mortgage. Thus,
the protection given by Art. 1484 would be indirectly subverted, and
public policy overturned. (Cruz vs. Filipinas Investment & Finance
Corp., 23 SCRA 791; Pascua vs. Universal Motors Corp., 61 SCRA
121.)
(b) There would be no violation of the law in such case. What
the law seeks to protect are only the buyers by installment and not
10 | T I T L E V : S A L E S ( 1 4 5 8 - 1 6 3 7 ) J U R A D O 2 0 0 9
the sellers. Congress could not have intended to impair the right of
the seller to make commercial use of his credit against the buyer,
provided said buyer is not burdened beyond what the law allows.
(Filipinas Investment & Finance Corp. vs. Vitug, 28 SCRA 658.)
(c) There would be no violation of the Recto Law. According to
the Supreme Court in Filipinas Investment & Finance Corporation
vs. Ridad (30 SCRA 564), when the mortgagor plainly refuses to
deliver the chattel or if he conceals such chattel to place it beyond
the reach of the mortgagee, the latter is entitled to recover necessary
expenses incurred by him in the prosecution of the action for replevin
so that he can regain possession of the chattel. Recoverable expenses
would include expenses properly incurred in effecting seizure of the
chattel and reasonable attorney’s fees in prosecuting the action for
replevin. While the basic philosophy of the Recto Law is that the
underprivileged mortgagors must be afforded full protection against
the rapacity of the mortgagees, said law should not be construed as
to deprive the mortgagee protection against perverse mortgagors.
30. Under a lease of personal property, with option
to buy, it was agreed that failure of the lessee to pay three
months rent would entitle the lessor to take back the property
and the option to buy would be lost. The lessee failed to pay
for three months. The lessor took back the property and then
instituted an action to recover the rents corresponding to
the three months. Can he recover? Reason.
ANS: No, he cannot recover. By express provision of Art. 1485
of the NCC, the preceding article (Art. 1484.) shall be applied to
contracts purporting to be leases of personal property with option
to buy, when the lessor has deprived the lessee of the possession
or enjoyment of the thing. Consequently, applying Art. 1484, upon
taking possession of the thing leased, the lessor shall have no further
action against the lessee to recover any unpaid rent. Any agreement
to the contrary shall be void. (U.S. Commercial Co. us. Halili, 93
Phil 371.)
31. “O,” owner of a copying machine, leased it to “L” at
a rental of P4,000.00 a month for a period of one year with
option on the part of “L” to buy the copying machine at the
end of one year for P80,000.00, to be paid by applying the
rentals, so that “L” needs only to pay P32,000.00.
"L” failed to pay rentals for the 4th, 5th and 6th months
so that “O” terminated the lease and repossessed the copying
machine, then sued “L” for the unpaid rental of three months,
or P12,000.00.
Is “OV* suit legally tenable? Explain. (1981)
ANS: “O’s” suit is legally untenable.
By express provision of Art. 1485 of the NCC, the preceding
article (Art. 1484.) shall be applied to contracts purporting to be
leases of personal property with option to buy, when the lessor has
deprived the lessee of the possession or enjoyment of the thing.
Consequently, applying Art. 1484, upon taking possession of the
copying machine, “O” has no further action against “L” to recover
the unpaid rents.
(Note: The above answer is based on the Recto Law [Arts. 1484,
No. 3 and 1485, NCC] and on U.S. Commercial Co. us. Halili, 93 Phil.
..371.)
32. What is the Realty Installment Buyer Protection
Act (also known as the “Maceda Law”) and what are its
provisions?
ANS: Realty Installment Buyer Protection Act is a law (Rep.
Act No. 6552) enacted by the Congress of the Philippines and
approved by the President of the Philippines on Sept. 14, 1972 to
provide protection to buyers of real estate on installment payments.
Its provisions are:
Sec. 1. This Act shall be known as the “Realty Installment Buyer
Protection Act.”
Sec. 2. It is hereby declared a public policy to protect buyers of
real estate on installment payments against onerous and oppressive
conditions.
Sec. 3. In all transactions or contracts involving the sale or
financing of real estate on installment payments, including residential
condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act Numbered Thirtyeight
hundred forty-four as amended by Republic Act Numbered Sixty
three hundred eight-nine, where the buyer has paid at least two years
of installments, the buyer is entitled to the following rights in case he
defaults in the payment of succeeding installments:
(a) To pay, without additional interest, the unpaid installments
due within the total grace period earned by him, which is hereby fixed
at the rate of one month grace period for every one year of installment
payments made: Provided, That this right shall be exercised by the
buyer only once in every five years of the life of the contract and its
extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the
11 | T I T L E V : S A L E S ( 1 4 5 8 - 1 6 3 7 ) J U R A D O 2 0 0 9
buyer the cash surrender value of the payments on the property
equivalent to fifty percent of the total payments made and, after five
years of installments, an additional five percent every year but not to
exceed ninety percent of the total payments made: Provided, That the
actual cancellation of the contract shall take place after thirty days
from receipt by the buyer of the notice of cancellation or the demand
for rescission of the contract by a notarial act and upon full payment
of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be
included in the computation of the total number of installments
made.
Sec. 4. In case where less than two years of installments were
paid, the seller shall give the buyer a grace period of not less than
60 days from the date the installment became due. If the buyer fails
to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the
buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act.
Sec. 5, Under Sections 3 and 4, the buyer shall have the right to
sell his rights or assign the same to another person or to reinstate the
contract by updating the account during the grace period and before
actual cancellation of the contract. The deed of sale or assignment
shall be done by notarial act.
Sec. 6. The buyer shall have the right to pay in advance any
installment or the full unpaid balance of the purchase price at any
time without interest and to have such full payment of the purchase
price annotated in the certificate of the title covering the property.
Sec. 7. Any stipulation in any contract hereafter entered into
contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and
void.
Sec. 8. If any provisions of this Act is held invalid or
unconstitutional, no other provisions shall be affected thereby.
Sec, 9. This Act shall take effect upon its approval.
33. Rosy purchased a condominium unit in Makati
City from the Houseland Corporation for a price of P10 Million,
payable P3 Million down and the balance with interest
thereon at 14% per annum payable in 60 equal monthly
installments of P201,000.00. They executed a Deed of Conditional
Sale in which it is stipulated that should the vendee
fail to pay three (3) successive installments, the sale shall
be deemed automatically rescinded without the necessary
judicial action and all payments made by the vendee shall
be forfeited in favor of the vendor by way of rent for the use
and occupancy of the unit and as liquidated damages. For 50
months, Rosy paid the monthly installments religiously, but
on the 51st and 52nd months, she failed to pay. On the 53rd
month, she tried to pay the installments due but the vendor
refused to receive the payments tendered by her. The following
month, the vendor sent her a notice that it was rescinding
the Deed of Conditional Sale pursuant to the stipulation for
automatic rescission, and demanded that she vacate the
premises. She replied that the contract cannot be rescinded
without judicial demand or notarial act pursuant to Article
1592 of the NCC.
a) Is Art. 1592, NCC applicable?
b) Can the vendor rescind the contract? (2000)
ANS: a) Art. 1592 of the NCC does not apply to a conditional
sale. In Valarao v. CA, 304 SCRA 155, the SC held that Art. 1592
applies only to a contract of sale and not to a Deed of Conditional
Sale where the seller has reserved title to the property until full
payment of the purchase price. The law applicable is the Maceda
Law.
b) No, the vendor cannot rescind the contract under the
circumstances. Under the Maceda Law, which is the law applicable,
the seller on installment may not rescind the contract till after
the lapse of the mandatory grace period of 30 days for every one
year of installment payments, and only after 30 days from notice
of cancellation or demand for rescission by a notarial act. In this
case, the refusal of the seller to accept payment from the buyer on
the 53rd month was not justified because the buyer was entitled to
60 days grace period and the payment was tendered within that
period. Moreover, the notice of rescission served by the seller on the
buyer was not effective because the notice was not by a notarial act.
Besides, the seller may still pay within 30 days from such notarial
notice before rescission may be effected. All these requirements for
a valid rescission were not complied with by the seller. Hence, the
rescission is invalid.
34. What are the rights of both the seller and the buyer
under K A 6552, the Realty Installment Buyer Protection
Act?
ANS: R.A. No. 6552 recognizes in conditional sales of all kinds
of real estate (industrial, commercial, residential) the right of the
12 | T I T L E V : S A L E S ( 1 4 5 8 - 1 6 3 7 ) J U R A D O 2 0 0 9
seller to cancel the contract upon non-payment of an installment
by the buyer, which is simply an event that prevents the obligation
of the seller to convey title from acquiring binding force. The .law
also provides for the rights of the buyer in case of cancellation, i.e.,
the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to 50% of the total payments
made and after five (5) years of installments, an additional 5%
every year but not to exceed 90% of the total payments. The actual
cancellation of the contract shall take place 30 days from receipt by
the buyer of the notice of cancellation or the demand for rescission
of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer. In case there is no payment of the
cash surrender value, there is no actual cancellation of the contract.
Hence, the buyer may still reinstate the contract by updating his
account during the grace period and before actual cancellation.
(Leano vs. Court of Appeals, G.R. No. 129318, November 15, 2001.)
35. In a case where the buyer failed to pay the price of
a real property in accordance with a contract to sell, what
law governs in case of cancellation of the contract?
ANS: The Realty Installment Buyer Protection Act (R.A.
No. 6552) applies. Said law recognizes in conditional sales of the
contract upon non-payment of an installment by the buyer, which
is simply an event that prevents the obligation of the vendors to
convey title from acquiring binding force. (Rillo vs. CA, 34 Phil. 570;
Luzon Brokerage Co., Inc. vs. Maritima Bldg., Co., Inc., 86 SCRA
305.) The Law provides in its Sec. 3(b) for the rights of the buyer in
case of cancellation of the contract. But if the buyer was not given
the cash surrender value of the payments that she made, there was
still no actual cancellation of the contract. Consequently, the buyer
may still reinstate the contract by updating the account during the
grace period and before actual cancellation. (R.A. No. 6552, Sec. 5;
Leano vs. CA, G.R. No. 129018, November 15, 2001.)
In the case of Jestra Development and Management Corporation
vs. Pacifico (G.R. No. 167452, January 30, 2007), the SC held
that R.A. No. 6552 was enacted to protect buyers of real estate on
installment against onerous and oppressive conditions While the
seller has, under the Act, the option to cancel the contract due to
non-payment of installments, he must afford the buyer a grace period
to pay them and, if at least two years installments have already
been paid, to refund the cash surrender value of the payments. A
buyer who fails to pay at least two (2) years of installments is not
entitled to refund of the cash surrender value of his payments. What
applies instead is Sec. 4 of the same law, viz; In case where less than
two (2) years of installments were paid, the seller shall give the buyer
a grace period of not less than 60 days from the date the installments
became due. If the buyer fails to pay the installment due at
the expiration of the grace period, the seller may cancel the contract
after 30 days from receipt by the buyer of the notice of cancellation
or the demand for rescission of the contract by a notarial act.
36. What is the two-step process covering the cancellation
of a contract under Sec. 4 of R.A. 6552?
ANS: In the above cited case, the SC described the cancellation
of the contract under Sec. 4 as a two (2)-step process. First, the seller
should extend the buyer a grace period of at least 60 days from the
due date of the installment. Second, at the end of the grace period,
the seller shall furnish the buyer with a notice of cancellation or
demand for rescission through a notarial act, effective 30 days from
the buyer’s receipt thereof.
37. Can husband and wife sell property to each other
during the marriage?
ANS: The husband and the wife cannot sell property to each
other, except:
(1) When a separation of property was agreed upon in the
marriage settlements; or
(2) When there has been a judicial separation of property
under Art. 191. (Art 1490, NCC.)
38. Who cannot acquire property by purchase, even
at public or judicial auction, either in person or through
the mediation of another? What is the reason behind these
prohibitions?
ANS: The following persons cannot acquire by purchase,
even at a public or judicial auction, either in person or through the
mediation of another.
(1) The guardian, the property of the person or person who
may be under his guardianship;
(2) Agents, the property whose administration or sale may
have been intrusted to them; unless the consent of the principal has
been given;
(3) Executors and administrators, the property of the estate
under administration;
(4) Public officers and employees, the property of the State
or of any subdivision thereof, or of any government owned or
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controlled corporation, or institution, the administration of which
has been intrusted to them; this provision shall apply to judges and
government experts who, in any manner whatsoever, take part in
the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior
and inferior courts, and other officers and employees connected with
the administration of justice, the property and rights in litigation or
levied upon on execution before the court within whose jurisdiction
or territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to
lawyers, with respect to the property and rights which may be the
object of any litigation in which they may take part by virtue of their
profession.
(6) Any others specially disqualified by law. (Art. 1491,
NCC.)
These prohibitions are based upon public policy and morality.
The law believes that human nature, being what it is, would not be
strong enough to resist temptations which might arise as a result of
the antagonism between the interest of the vendor and that of the
vendee. (Araneta vs. Tuazon, 49 Off\ Gaz. 45.)
39. At a mortgage foreclosure sale carried out as a
result of a judicial proceeding, A, attorney for the mortgage
creditor, bought the mortgaged real estate.
(1) If A had bought the property for himself, is the sale
void or voidable?
(2) If A had bought the property for his client, did he
violate the absolute terms of Art. 1491 of the NCC?
ANS: (1) The sale is void. This is so, because it is a contract
prohibited by law. (Art. 1491, No. 5, NCC.)
(2) If A bought the property for his client, there would be no
violation of the prohibition stated in Art. 1491 because then there
would be no breach of trust or confidence in such a case. He would be
merely acting as agent of his client; and under the law, such client is
not prohibited from buying the property.
40. Suppose that a client executed a deed of assignment
of the property which was the object of litigation in favor of
his lawyer who handled his case in said litigation, may such
deed of assignment be ratified?
ANS: The nullity of such prohibited contract is definite and
permanent and cannot be cured by ratification. In this aspect, the
permanent disqualification of public and judicial officers and lawyers
grounded on public policy differs from the first three (3) cases of
guardians, agents and administrators (Art. 1491, NCC.), as to whose
transactions, it has been opined that they may be “ratified” by means
of and in “the form of a new contract, in which case its validity shall
be determined only by the circumstances at the time of execution of
such new contract. The causes of nullity which have ceased to exist
cannot impair the validity of such new contract. Thus, the object
which was illegal at the time of the first contract may have already
become lawful at the time of the ratification of the second contract;
or the service which was impossible may have become possible; or
the intention which could not be ascertained may have been clarified
by the parties. The ratification of the second contract would then be
valid from its execution; however, it does not retroact to the date of
the first contract. (Rubias vs. Batiller, 51 SCRA 120.)
41. A offered to sell a set of furniture to B for P500. B
immediately accepted the offer. However, unknown to both
parties, the residence of A was gutted by a fire of accidental
origin, two (2) hours before A made the offer to B. All of the
effects of A including the furniture were destroyed by the
fire. A now demands payment of the P500 on the ground that
the sale was perfected. Can B be compelled to pay? Reasons.
ANS: B cannot be compelled to pay. The contract in this
particular case is inexistent. According to Art. 1493 of the NCC:
“If at the time the contract of sale is perfected, the thing which
is the object of the contract has been entirely lost, the contract shall
be without any effect. “But if the thing should have been lost in part only,
the vendee
may choose between withdrawing from the contract and demanding
the remaining part, paying its price in proportion to the total sum
agreed upon.”
42. D sold a second-hand car to E for P150,000.00. The
agreement between D and E was that half of the purchase
price, or P75,000.00, shall be paid upon delivery of the car
to E and the balance of P75,000.00 shall be paid in five (5)
equal monthly installments of PI5,000.00 each. The car was
delivered to E, and E paid the amount of P75,000.00 to D.
Less than one month thereafter, the car was stolen from E’s
garage with no fault on E’s part and was never recovered. Is
E legally bound to pay the said unpaid balance of P75,000.00?
Explain your answer. (1990)
ANS: Yes, E is legally bound to pay the balance of P75,000.00.
The ownership of the car sold was acquired by E from the moment it
14 | T I T L E V : S A L E S ( 1 4 5 8 - 1 6 3 7 ) J U R A D O 2 0 0 9
was delivered to him. Having acquired ownership, E bears the risk
of the loss of the thing under the doctrine of res perit domino. (Arts.
1496,1497, NCC.)
43. Suppose that the vendee is prevented from taking
actual possession of two (2) parcels of land which she bought
by a third person who claims to be the owner thereof. In
an action for rescission of the contract of sale brought by
such vendee against the vendor, can the latter prevent
the rescission by claiming that the execution of the public
instrument or deed of sale is equivalent to delivery or
tradition pursuant to Arts. 1497 and 1498 of the NCC?
ANS: In the earlier case of Sarmiento vs. Lesaca (108 Phil. 900),
he cannot. Although it is postulated in Art. 1498 of the NCC that
the execution of the public instrument is equivalent to delivery, this
legal fiction only holds true when there is no impediment that may
prevent the passing of the property from the hands of the vendor
into those of the vendee. If, notwithstanding the execution of the
instrument, the vendee cannot have the enjoyment and material
tenancy of the thing and make use of it himself, because such tenancy
and enjoyment are opposed by another, then delivery has not been
effected.
In the later case of Ong Ching vs. CA (239 SCRA 741), however,
and under Art. 1498, NCC, when the sale is made through a public
instrument, the execution thereof shall be equivalent to the delivery
of the object of the contract, if, from the deed, the contrary does
not appear or cannot be inferred. Possession is also transferred,
along with ownership thereof, to the vendees by virtue of the deed of
conveyance.
Further, in Dulay Enterprises, Inc. vs. CA (225 SCRA 678)
and Garcia vs. CA (312 SCRA 180), the Court held that since the
execution of the deed of conveyance is deemed equivalent to delivery,
prior physical delivery or possession is not legally required.
Notwithstanding the presence of illegal occupants on the
subject property, transfer of ownership by symbolic delivery can
still be effected through the execution of the deed of conveyance.
(Art. 1498, NCC.) The key word is control, not possession, of the
subject property. The rule is true especially where the deed of
conveyance does not stipulate or infer that the vendees could not
exercise control over said property, delivery can be effected through
the mere execution of said deed. (Power Commercial and Industrial
Corporation vs. CA, 274 SCRA 597.)
44. What provisions in our NCC apply in cases of
rescission?
ANS: Art. 1389, NCC applies to rescissible contracts, as
enumerated and defined in Arts. 1380 and 1381. The rescission
in Art. 1381 is not akin to the term “rescission” in Art. 1191 and
Art. 1592. (Ong vs. CA, 310 SCRA 1.) In Art. 1381, the action is
a subsidiary one limited to cases of rescission for lesion or those
enumerated in said article. In Arts. 1191 and 1592, the rescission is
a principal action which seeks the resolution or cancellation of the
contract. The prescriptive period applicable to rescission under Arts.
1191 and 1592, is found in Art. 1144, which provides that the action
upon a written contract should be brought within 10 years from the
time the right of action accrues. (Iringan vs. CA, G.R. No. 129107,
September 26, 2001.)
45. When goods are delivered to the buyer “on sale or
return” or “on approval” or “on trial” or “on satisfaction,”
when does the ownership thereof vest in the buyer?
ANS: When goods are delivered to the buyer Kon sale or return”
to give the buyer an option to return the goods instead of paying the
price, the ownership passes to the buyer on delivery, but he may
revest the ownership in the seller by returning or tendering the
goods within the time fixed in the contract, or if no time has been
fixed, within a reasonable time.
When goods are delivered to the buyer “on approval” or “on
trial” or “on satisfaction,” or other similar terms, the ownership
therein passes to the buyer:
(1) When he signifies his approval or acceptance to the seller
or does any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the
seller, but retains the goods without giving notice of rejection, then
if a time has been fixed for the return of the goods, on the expiration
of such time, and, if no time has been fixed, on the expiration of a
reasonable time. What is a reasonable time is a question of fact.
(Art 1502, NCC.)
46. What title is acquired by the vendee or buyer if the
object which he bought was sold by somebody who is not the
owner thereof and who was not authorized to sell it?
ANS: The vendee, in such a case acquires no better title to the
object than the vendor had. This rule, however, is subject to the
following exceptions.
(1) Where the true owner is estopped or precluded by his
15 | T I T L E V : S A L E S ( 1 4 5 8 - 1 6 3 7 ) J U R A D O 2 0 0 9
conduct from denying the vendor’s authority to sell;
(2) Where the sale is made by the registered or apparent
owner in accordance with recording or registration laws;
(3) Where the sale is made pursuant to a statutory power of
sale or under the order of a court of competent jurisdiction; and
(4) Where the purchase is made in a merchant’s store, or in
fairs, or markets, in accordance with the Code of Commerce and
special laws. (Art 1505, NCC.)
As far as the third exception is concerned, it must be observed
that if the object which was sold at the public sale is movable property,
the true owner who had lost it or who has been unduly
deprived of it can still recover the same from the vendee. However,
if the latter had acquired it in good faith, such owner cannot obtain
its return without reimbursing the price paid therefore. (Art. 559 of
the NCC is applicable.)
47. Define negotiable document of title.
ANS: A document of title in which it is stated that the goods
referred to therein will be delivered to the bearer, or to the order
of any person named in such document is a negotiable document of
title. (Art 1507, NCC.)
48. How may a negotiable document of title be negotiated
by delivery?
ANS: A negotiable document of title may be negotiated by
delivery:
(1) Where by the terms of the document the carrier,
warehouseman or other billee issuing the same undertakes to deliver
the goods to the bearer; or
(2) Where by the terms of the document the carrier,
warehousemen or other bailee issuing the same undertakes to
deliver the goods to the order of specified person, and such person or
a subsequent indorsee of the document has indorsed it in blank or to
the bearer.
Where by the terms of a negotiable document of title the goods
are deliverable to bearer or where a negotiable document of title
has been indorsed in blank or to bearer, any holder may indorse
the same to himself or to any specified person, and in such case the
document shall thereafter be negotiated only by the indorsement of
such indorsee. (Art. 15081 NCC.)
49. How may a negotiable document of title be
negotiated by indorsement?
ANS: A negotiable document of title may be negotiated by the
indorsement of the person to whose order the goods are by the terms
of the document deliverable. Such indorsement may be in blank to
bearer or to a specified person. If indorsed to a specified person, it may be
again negotiated by the indorsement of such person in blank
to bearer or to another specified pee^on^Subsequent negotiations
may be made in like manner. (Art. 1509, ^CC.)
50. Who may negotiates negotiable document of title?
ANS: A negotiable document of title may be negotiated.
(1) Bythe owner thereof; or
(2-K"By any person to whom the possession or custody of the
^do€ument has been entrusted by the owner, if, by the terms of the
document the bailee issuing the document undertakes to deliver the
goods to the order of the person to whom the possession or custody of
the document has been entrusted, or if at the time of such entrusting
the document in such form that it may be negotiated by delivery.
(Art 1512, NCC.)
51. What are the rights which are acquired by a person
to whom a negotiable document of title has been duly
negotiated?
ANS: A person to whom a negotiable document of title has been
duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the
document to him had or had ability to convey to a purchaser in good
faith for value and also such title to the goods as the person to whose
order the goods were to be delivered by the terms of the document
had or had ability to convey to a purchaser in good faith for value;
and
(2) The direct obligation of the bailee issuing the document
to hold possession of the goods for him according to the terms of the
document as fully as if such bailee had contracted directly with him.
(Art. 1513, NCC.)
52. What are the implied warranties of the person who
negotiates a document of title by indorsement or delivery?
ANS: A person who for value negotiates or transfers a document
of title by indorsement or delivery, including one who assigns for
value a claim secured by a document of title unless a contrary
intention appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair the
validity or worth of the document; and
(4) That he has a right to transfer the title to the goods and
that the goods are merchantable or fit for a particular purpose,
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whenever such warranties would have been implied if the contract
of the parties had been to transfer without a document of title the
goods represented thereby. (Art, 1516, NCC.)
53. What are the obligations of the seller and the buyer
in contracts of (1) “c.i.f' and (2) “f.o.b” sale?
ANS: (1) In “c.i.f” sales of goods, the buyer pays a fixed price,
while the seller pays the insurance and freight up to the place of
destination. In other words, the seller is responsible for the delivery
of the goods, pays for all expenses, such as insurance and freight,
pays for all charges, such as export taxes and other charges or fees,
and be responsible for the goods up to the point of destination. The
buyer, on the other hand, who paid a fixed price, shall accept delivery
of the goods at the point of destination, pays all charges, such as
taxes or duties at such point, and be responsible for the goods once
the seller’s responsibility ceases.
(2) In “f.o.b.” sales of goods, the goods are shipped by the seller
to a certain point without any expense to the buyer, but after delivery
at such point all subsequent expenses incident to the transportation
and delivery shall be paid by the buyer. Thus, if the sale is “f.o.b.” at
the place of shipment the buyer must pay the freight, if “f.o.b.” at the
place of destination, the seller must pay the freight.
54. When is the seller of goods deemed to be an unpaid
seller?
ANS: The seller of goods is deemed to be an unpaid seller:
(1) When the whole of the price has not been paid or tendered;
and
(2) When a bill of exchange or other negotiable instrument
has been received as conditional payment, and the condition on which it
was received has been broken by reason of the dishonor of
the instrument, the insolvency of the buyer, or otherwise.
The term “seller” includes any person who is in the position of
the seller, such as an agent of such seller to whom the bill of lading
has been indorsed, or a consignor or agent who has himself, paid, or
is directly responsible for the price. (Art. 1525, NCC.)
55. What are the remedies of the unpaid seller?
ANS: Notwithstanding that the ownership in the goods may
have passed to the buyer, the unpaid seller of goods, as such, has the
following remedies:
(1) A lien on the goods or right to retain them for the price
while he is in possession of them;
(2) In case of the insolvency of the buyer, a right of stopping
the goods in transitu after he has parted with the possession of
them;
(3) A right of resale;
(4) A right to rescind the sale.
Where the ownership in the goods has not passed to the buyer,
the unpaid seller has, in addition to his other remedies, a right of
withholding delivery similar to and co-existent with his rights of
lien and stoppage in transitu where the ownership has passed to the
buyer. (Art. 1526, NCC.)
56. (a) When is the right to retain the goods available
to the unpaid seller?
(b) When does the unpaid seller lose his lien on or
right of retention over the goods?
ANS: (a) The unpaid seller of goods who is in possession of
them is entitled to retain possession of them until payment or tender
of the price in the following cases:
(1) Where the goods have been sold without any stipulation
as to credit;
(2) Where the goods have been sold on credit, but the
term of credit has expired; and (3) Where the buyer becomes insolvent.
The seller may exercise his right of lien or retention
notwithstanding that he is in possession of the goods as agent or
bailee for the buyer, (Art. 1527, NCC.)
(b) The unpaid seller loses his right of lien or retention
in the following cases:
(1) When he delivers the goods to a carrier or other bailee
for the purpose of transmission to the buyer without reserving
the ownership in the goods or the right to the possession
thereof;
(2) When the buyer or his agent lawfully obtains possession
of the goods; and
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon, does not lose
his lien by reason only that he has obtained judgment for the price
of the goods. (Art. 1529, NCC.)
57. (a) What is meant by the right of stoppage in
transitu? (1961)
(b) When is this right available to the unpaid seller?
(1961)
(c) How is the right exercised?
ANS: (a) The right of stoppage in transitu refers to the right of
the unpaid seller to resume possession of the goods at anytime while
they are in transit by virtue of which he will then be entitled to the
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same rights in regard to the goods as he would have had if he had
never parted with the possession. (Art. 1530, NCC.)
(b) This right is available to the unpaid seller when he
has already parted with the possession of the goods and the buyer is
or becomes insolvent. (Art. 1530, NCC.)
(c) The unpaid seller may exercise his right of stoppage
in transitu either by obtaining actual possession of the goods or
by giving notice of his claim to the carrier or other bailee in whose
possession the goods are. Such notice may be given either to the
person in actual possession of the goods or to his principal. In the latter
case, the notice, to be effectual, must be given at such time
and under such circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to the
carrier, or other bailee in possession of the goods, he must redeliver
the goods to, or according to the directions of, the seller. The
expenses of such delivery must be borne by the seller. If, however, a
negotiable document of title representing the goods has been issued
by the carrier or other bailee, he shall not be obliged to deliver or
justified in delivering the goods to the seller unless such document
is first surrendered for cancellation. (Art. 1532, NCC.)
58. (a) When is the right of resale available to the
unpaid seller?
(b) What is the effect of such resale?
(c) How is the resale effected?
(d) Is it essential that notice of such resale should
be given to the original buyer?
ANS: (a) The right of resale is available to the unpaid seller of
goods in the following cases:
(1) Where the goods are of perishable nature;
(2) Where the seller has expressly reserved the right of
resale in case the buyer should make default; and
(3) Where the buyer has been in default in the payment
of the price for an unreasonable time.
It is, however, essential before the resale can be made that the
unpaid seller should have a right of lien or should have stopped the
goods in transitu. (Art. 1533, NCC.)
(b) Where a resale is properly made, the buyer acquires
a good title against the original buyers. The unpaid seller, on the
other hand, shall not be liable to the original buyer upon the contract
of sale or for any profit made by reason of the resale. As a matter
of fact, under the law, he may recover from the latter damages for
any loss occasioned by the breach of the contract of sale. (Art. 1533,
NCC; Katigbak vs. Court of Appeals, 4 SCRA 243.)
(c) The resale may be made either by public or private
sale. However, the unpaid seller, who is bound to exercise reasonable
care and judgment in making the resale, cannot directly or indirectly
buy the goods. (Art 1533, NCC.)
(d) It is not essential to the validity of a resale that
notice of an intention to resell the goods be given by the seller to
the original buyer. But where the right to resell is not based on the
perishable nature of the goods or upon an express provision of the
contract of sale, the giving or failure to give such notice shall be
relevant in any issue involving the question whether the buyer had
been in default for an unreasonable time before the resale was made.
(Art. 1533, NCC.)
59. (a) When is the right of rescission available to the
unpaid seller?
(b) What is the effect of such rescission?
(c) Is it essential that notice of such rescission
should be given to the buyer?
ANS: (a) The right of rescission is available to the unpaid
seller in the following cases:
(1) Where he expressly reserved the right to do so in
case the buyer should make default; and
(2) Where the buyer has been in default in the payment
of the price for an unreasonable time.
It is, however, essential before the rescission can be made that
the unpaid seller should have a right of lien or should have stopped
the goods in transitu. (Art. 1534, NCC.)
(b) Once the unpaid seller has rescinded the transfer
of title and resumed ownership in the goods, he shall not thereafter
be liable to the buyer upon the contract of sale. As a matter of fact,
under the law, he may recover from the buyer damages for any loss
occasioned by the breach of the contract. (Art. 1534, NCC.)
(c) Although the law requires that the intention to
rescind must be manifested by some overt act, it is not essential that
such overt act should be communicated to the buyer. However, the giving
or failure to the notice to the buyer of the intention to rescind
shall be relevant in any issue involving the question whether the
buyer has been in default for an unreasonable time before the right
of rescission was asserted. (Art. 1534, NCC.)
60. Suppose that the buyer sold the goods to another
18 | T I T L E V : S A L E S ( 1 4 5 8 - 1 6 3 7 ) J U R A D O 2 0 0 9
before the unpaid seller could exercise his right of lien or his
right of stoppage in transitu, what is the effect of such sale
upon the latter’s right?
ANS: The unpaid seller’s right of lien or stoppage in transitu is
not affected, unless he had assented thereto.
However, if a negotiable document of title had been issued
for the goods, and subsequently, such document was negotiated
to a purchaser in good faith and for value either before or after
notification to the carrier or bailee who issued the document of the
seller’s claim to a lien or right of stoppage in transitu, the right of
the purchaser would then be superior to that of the unpaid seller.
(Arts. 1535,1518, NCC.)
61. A sold two (2) parcels of land to B.
(a) Suppose that in the contract there is a statement of
the area of both immovables at the rate of a certain price for
a unit of measure or number, what are the remedies of B if
the actual area is less than that stated in the contract?
(b) Suppose that there is also a statement of the quality,
what are the remedies of B if the quality of a part of one of
the immovables is not the quality specified in the contract?
(c) Suppose that the sale is made for a lump sum or
single price and not at the rate of a certain sum for a unit of
measure or number, what are the remedies of B if the actual
area does not correspond with that stated in the contract?
(d) Assuming that B is entitled to the above remedies,
within what period must he bring the action?
ANS: (a) B may choose between a proportional reduction of the
price and the rescission of the contract, provided that, in the latter
case, the lack in the area be not less than one-tenth of that stated.
Nevertheless, if he can prove that he would not have bought the
immovables had he known of their smaller area, he may still rescind
the sale if he so desires. (Art. 1539, NCC.)
(b) B may choose between a proportional reduction of
the price and the rescission of the contract, provided that, in the
latter case, the inferior value of the immovable whose quality does
not correspond with the quality specified in the contract exceeds
one-tenth of the price agreed upon. Nevertheless, if he can prove
that he would not have bought the immovables had he known of the
inferior quality of one of them, he may still rescind the sale if he so
desires. (Ibid.)
(c) As a rule, there is no remedy of B. However, there
is an exception which the law recognizes. According to the NCC, “if,
besides mentioning the boundaries, which is indispensable in every
conveyance of real estate, its area or number should be designated in
the contract, the vendor shall be bound to deliver all that is included
within said boundaries, even when it exceeds the area or number
specified in the contract; and should he not be able to do so, he shall
suffer a reduction in the price, in proportion to what is lacking in the
area or number, unless the contract is rescinded because the vendee
does not accede to the failure to deliver what has been stipulated.”
This exception applies regardless of whether only the immovable is
sold for a lump sum or two or more immovables are sold for a single
price. (Art. 1542, NCC.)
(d) B must bring the action within six (6) months,
counted from the day of delivery. (Art. 1543, NCC.)
62. Where the same thing is sold to different purchasers,
to whom shall the ownership be transferred?
ANS: As to movables — The ownership shall be transferred
to the person who may have first taken possession thereof in good
faith.
As to immovables — The ownership shall be transferred:
(1) To the person acquiring it who in good faith first recorded
it in the Registry of Property.
(2) In default thereof, to the person who in good faith was
first in the possession.
(3) In default thereof, to the person who presents the oldest
title, provided there is good faith. (Art. 1544, NCC.)
63. (a) In 1955, the spouses A and B sold to C a parcel of
unregistered land for the sum of P350. The deed of sale was
not registered, but it is admitted that C took possession of the
property in good faith and has been in possession ever since.
Later, a decision was rendered against A and B in favor of
D in a civil case commenced in 1957. The land sold to C was
levied upon and subsequently sold to D in the sheriffs sale.
The deed of sheriffs sale was duly registered in good faith.
Who has the superior right over the property in dispute — C
or D? Reasons.
ANS: C has superior right over the disputed property.
The rule in Art. 1544 of the NCC applies to lands covered by
Torrens title where the prior sale is neither recorded nor known to
the execution purchaser prior to the levy. But where the land in
question is not registered under Act No. 496, the rule is different.
While under Art. 1544 of the NCC registration in good faith prevails
19 | T I T L E V : S A L E S ( 1 4 5 8 - 1 6 3 7 ) J U R A D O 2 0 0 9
over possession in the event of a double sale by the vendor of the
same piece of land to different vendees, said article is not applicable
even if the later vendee was ignorant of the prior sale made by his
judgment debtor in favor of another vendee. The reason is that the
purchaser of unregistered land at a sheriffs execution sale only
steps into the shoes of the judgment debtor, and merely acquires the
latter’s interest in the property sold as of the time the property was
levied upon, as provided in Sec. 35 of Rule 39 of the Revised Rules of
Court. (Carumba vs. Court of Appeals, 31 SCRA 558.)
(b) Can double sales under Art. 1544 of the NCC be
invoked where two (2) different contracts of sale are made
by two (2) different persons, one of them not being the owner
of the property sold?
ANS: No. Art. 1544 of the NCC contemplates a case of double
or multiple sales by a single vendor. More specifically, it covers a
situation where a single vendor sold one and the same immovable
property to two (2) or more buyers. It is necessary that the conveyance
must have been made by a party who has an existing right in the
thing and the power to dispose of it. It cannot be invoked where the two
(2) different contracts of sale are made by different persons,
one of them not being the owner of the property sold. And even if
the sale was made by the same person, if the second sale was made
when such person was no longer the owner of the property, because
it had been acquired by the first purchaser in full dominion, the
second purchaser cannot acquire any right. (Consolidated Rural
Bank [Cagayan Valley], Inc. vs. Court of Appeals, G.R. No. 132161,
January 17, 2005.)
64. “A” sold a piece of unregistered land to “B” who
immediately took possession and improved the same while
registration proceedings under the Torrens System was still
pending. The deed of sale was not registered. A month later,
the original certificate of title was issued in the name of
“A,” “free from all liens and encumbrances.” Subsequently,
the same land was sold at public auction to satisfy a debt
of “A” to “C,” the judgment creditor. The notice of levy, the
certificate of sale and the sheriffs certificate of final sale
were registered. “C,” sold his rights to the property to “D”
who then sued “B” in order that he be declared the owner
of the property. Who has the better right to the land, “B” or
“D”? Give reasons. (1972)
ANS: “B” has a better right than “D” to the land in question.
We are, of course, aware of the doctrine, repeatedly asserted by our
appellate courts, that in case of conveyance of registered real estate
the registration of the deed of sale is the operative act that gives
validity to the transfer. But it must be observed that the instant
case is exceptional in character. If both sales covered unregistered
land, undoubtedly, “B” would have a better right because it is now
well-settled that the law on double sales enunciated in Art. 1544
of the NCC is applicable only to lands covered by a Torrens Title.
If both sales had been made when the land was already registered
under our Torrens title system, undoubtedly, “D" would have a
better right applying literally the provision of Art. 1544 regarding
priority or preference of registration in good faith. The instant case,
however, does not fall under either situation. Therefore, the Rules of
Court shall govern. The purchaser of land sold in an execution sale
shall be substituted to, and acquire, all the rights, title, interest, and
claim of the judgment debtor to the property as of the time of the levy.
(Rule 39, Revised Rules of Court.) Since at the time of the levy
“A” no longer owned the land, “D” acquired nothing. Parenthetically,
the unregistered sale and subsequent transfer of the title and
ownership to “B” could not have been rendered of no effect by the
subsequent issuance of the Torrens title to the land. Besides, to
deprive “B” now of the land and the improvements made thereon
by sheer force of technicality would be both unjust and inequitable.
(Dagupan Trading Co. vs. Macam, 14 SCRA 179; Carumba vs. Court
of Appeals, 31 SCRA 558.)
65. (a) On Jan. 10,2000, Raul sold a parcel of registered
land to Eddie. On Jan. 25,2004, he sold the same land to Ping.
Who has a better right if:
(i) the first sale is registered ahead of the second
sale, with knowledge of the latter. Why?
(ii) the second sale is registered ahead of the first
sale, with knowledge of the latter? Why? (2001)
ANS: (a) (i) The first buyer has the better right if his sale was
first to be registered, even though the first buyer knew of the second
sale. The fact that he knew of the second sale at the time of his
registration does not make him as acting in bad faith because the
sale to him was ahead in time, hence, has a priority in right. What
creates bad faith in the case of double sale of land is knowledge of a
previous sale.
(ii) The first buyer is still to be preferred, where the second
sale is registered ahead of the first sale but with knowledge
of the latter. This is because the second buyer, who at the time
he registered his sale knew that the property had already been
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sold to someone else, acted in bad faith. (Art. 1544, NCC.)
(b) What are the rules of preference in double
sales?
ANS: Following Art. 1544 of the double sale of an immovable,
the rules of preference are:
(a) the first registrant in good faith; (b) should there be no
entry, the first in possession in good faith; and (c) in the absence
thereof, the buyer who presents the oldest title in good faith. Prior
registration of the subject property does not by itself confer ownership
or a better right over the property. Article 1544 requires that before
the second buyer can obtain priority over the first, he must show that
he acted in good faith throughout (i.e., in ignorance of the first sale
and of the first buyer’s rights) from the time of acquisition until the
title is transferred to him by registration or failing registration, by
delivery of possession. (Consolidated Rural Bank [Cagayan Valley],
Inc. vs. Court of Appeals, G.R. No. 132161, January 17, 2005.)
66. (a) Explain briefly the right of priority of a first
vendee of immovable property under Art. 1544 of the NCC.
How may this right of priority be preserved as against a
second vendee?
(b) Explain briefly how a second vendee may be
able to displace the first vendee.
ANS: (a) The first vendee’s right of priority is based upon the
principle of prius tempore, potior jure (first in time, stronger in
right). Its only essential requisite is priority in time; in other words,
the only one who can invoke it is the first vendee. Obviously, he is
a purchaser in good faith because at the time when he bought the
immovable, there was still no sale to a second vendee.
In order that such right of priority may be preserved as against
a second vendee, the law requires that the first vendee must register
the deed of sale in his favor in the Registry of Property ahead of any
registration in good faith by the second vendee or any subsequent
vendee. In other words, in order that there will be priority in right,
there must be both priority in time with respect to the sale and
priority in time with respect to the registration. If these priorities
are present, the first vendee can no longer be displaced by any
subsequent vendee.
It must be observed that so long as there is still no registration
in good faith by a subsequent vendee, a registration made by the first
vendee of his deed of sale regardless of whether he was unaware or
aware of the existence of a second sale is always in good faith. This
is so because knowledge gained by him of the second sale cannot
defeat his right except as provided by the NCC and that is where the
second vendee first registers in good faith the second sale ahead of
the first. The principle of “automatic registration” cannot, therefore, be
applied to the first vendee. Knowledge gained by him of the
existence of a second sale cannot be considered as the equivalent of
registration in good faith by the second vendee. (See separate opinion
of Justice Teehankee in Carbonell vs. CA, 69 SCRA 99, 120-123,)
(b) Under Art. 1544 of the NCC, the only way by which the
first vendee may be displaced by the second vendee is when said
second vendee first registers the second sale in good faith ahead of
the first. There can be no other way. And from the very nature of
his position as second vendee, the law requires that as far as he is
concerned, there must always be good faith throughout. He must
not only be a purchaser in good faith; he must also be a registrant in
good faith. This is the price exacted by Art. 1544 of the NCC in order
that there will be a displacement of the first vendee by the second
vendee. The latter must show continuing good faith and innocence
or lack of knowledge of the first sale until his contract ripens into
full ownership through prior registration as provided by law. (Ibid.)
67. On January 27, 1955, A sold a 195-square meter lot
located in San Juan, Rizal to B for P2,000. This is evidenced
by an informal memorandum agreement of sale written in
the Batanes dialect. Three (3) days later, he sold the same lot
to C for P4,000. This is evidenced by a formal deed of sale.
Upon buying the property, C, who was aware of the first
sale, immediately took possession of the lot. Informed of the
second sale, on February 8, 1955, B registered an adverse
claim to the property. On February 12,1955, C registered the
deed of sale in her favor. Subsequently, B brought an action
against both A and C, praying that she be declared the lawful
owner of the lot. Will the action prosper?
ANS: Yes, the action will prosper. B, the first vendee, is the
lawful owner of the lot.
Art. 1544 of the NCC, which is decisive in this case, declares
that if the same immovable property should have been sold to
different vendees, “the ownership shall pertain to the person who in
good faith first recorded it in the Registry of Property. Should there
be no inscription, the ownership shall pertain to the person who in
good faith was first in the possession; and, in the absence thereof,
to the person who presents the oldest title, provided there is good
faith.” Undoubtedly, B’s prior purchase of the questioned property
was in good faith. She could not have been aware of any sale to C
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as there was no such sale to C then. Her good faith subsisted and
continued to exist when she recorded her adverse claim four days
prior to the registration of C’s deed of sale. True, what was recorded
was an adverse claim, but such recording in good faith has all of
the effects of a registration in good faith of a deed of sale since B
did not have a formal registrable deed of sale. In other words, it
was the next best thing she could do in order to protect her legal
rights. This is so because there is already a perfected and binding
memorandum agreement of sale which can be the basis of an action
to compel the vendor to execute a formal registrable deed of sale
which would relate back to the date of the original memorandum
agreement. True, also, B was already aware of the second sale made
to C at the time when she recorded her adverse claim, but that is
of no moment. The governing principle here is prius tempore, potior
jure (first in time, stronger in right). Knowledge gained by the first
buyer of the second sale cannot defeat the first buyer’s rights except
only as provided by the NCC and that is where the second buyer first
registers in good faith the second sale ahead of the first.
C, on the other hand, is a purchaser in bad faith. She was
already aware of a first sale made to B when she bought the lot
frOm A. Therefore, her act of recording her formal deed of sale in the
Registry of Property was in bad faith. Hence, she cannot displace
B. (See Carbonell vs. CA, 69 SCRA 99; read separate op. of Justice
Teehankee, 69 SCRA 120-123.)
68. Through a private document, Waldo sold to Yamzon
a piece of land registered under the Torrens System. After
Waldo’s death, his heirs (who did not know of the sale)
sold the land to Zeppo who registered the deed of sale and
obtained a transfer certificate of title in his name. Yamzon
subsequently filed an action against Zeppo seeking recovery
of the land on the basis of Waldo’s prior conveyance. Who
has the better right to the land?
ANS: I distinguish.
If Zeppo, the second vendee, was not aware of the prior sale,
he has a better right to the land than Yamzon, the first vendee.
This is explicitly supported by the law on double sales of immovable
property as enunciated in Art. 1544 of the NCC. According to the
law, the ownership of the land shall belong to the person who in good
faith first recorded the sale in the Registry of Property. The fact that
the second sale was effected by the heirs of Waldo is of no moment.
Under the principle of relativity of contracts, the first sale effected
by Waldo is also binding upon said heirs. (Art, 1311, NCC.) Hence,
the instant case is clearly a case of double sale.
However, if Zeppo was aware of the prior sale, Yamzon, the
first vendee, has a better right. As far as the latter is concerned, the
recording of the sale in the Registry of Property is void or inexistent
because it was made in bad faith. This is true even if Zeppo was the
first to take possession of the land. The law is explicit. There must
be good faith even in the possession of land. Consequently, even if
we assume that Zeppo was the first to take possession of the land, so
long as he was aware of the prior sale, Yamzon has still the better
right. The reason is that he can present the older title. (Art. 1544,
NCC.)
(Note: True, under our land registration laws, the act of
registration is the operative act which binds the land, but it must be
observed that this rule, as applied to double sale, is always predicated
on good faith of the registrant as prescribed by Art. 1544 of the NCC,
Besides, knowledge by or notice to the second vendee of the prior sale
would be equivalent to registration of such prior sale.)
69. (a) A sold a piece of pasture land to B. On the same
day A sold it again to C. Both sales were made in private
documents, bearing the same date. Neither of the purchasers
succeeded in taking physical possession of the land because
it was already in the possession of another person under a
contract of lease for one year, executed by A a month before,
also in a private document. Please state your opinion as to:
(1) who is the rightful owner of the land, in the supposition
that both purchasers acted in good faith; and (2) whether the
owner is at liberty to oust the lessee before the expiration of
the lease. Why? (1922)
ANS: (1) According to Art. 1544 of the NCC:
“If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first
taken possession thereof in good faith, if it should be movable
property.
Should it be immovable property, the ownership shall belong
to the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to
the person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title, provided
there is good faith.”
Since the titles of B and C are not recorded in the Registry
of Property, and since neither had succeeded in taking possession
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of the property, therefore, B is the rightful owner because he can
present the older title.
(2) According to Art. 1676 of the NCC, “the purchaser of a piece
of land which is under a lease that is not recorded in the Registry of
Property may terminate the lease, save when there is a stipulation
to the contrary in the contract of sale, or when the purchaser knows
of the existence of the lease/’ Applying this provision, it is clear
that B may oust the lessee even before the expiration of the lease,
since the lease is not recorded in the Registry of Property and the
purchaser was not aware of the existence of the lease.
(b) Is a registration of a writ of attachment more superior
than an unregistered sale?
ANS: The levy on attachment, duly registered takes preference
over a prior unregistered sale. This result is a necessary consequence
of the fact that where the property involved was duly covered by
the Torrens System, said system works under the fundamental
principle that registration is the operative act which gives validity
to the transfer or creates a lien upon the land. This preference is
not diminished since an attachment is a proceeding in rem, which
means that the property attached is an indebted thing and a virtual
condemnation of it to pay the owner's debt. The lien continues until
the debt is paid, or the sale is had under execution issued on the
judgment, or until the judgment is satisfied or the attachment
discharged or vacated in some manner provided by law. (Valdevieso
vs. jDamalerio, G.R. No. 133303, February 15s 2005, supra.)
70, What are the implied warranties in a contract of
sale?
ANS: In a contract of sale, unless a contrary intention appears,
there is:
(1) An implied warranty on the part of the seller that he has
a right to sell the thing at the time when the ownership is to pass,
and that the buyer shall from that time have and enjoy the legal
peaceful possession of the thing; and
(2) An implied warranty that the thing shall be free from any
hidden faults or defects, or any charge or encumbrance not declared
or known to the buyer.
These warranties, however, do not mean that a sheriff,
auctioneer, mortgagee, pledgee, or other person professing to sell by
virtue of authority in fact or law, can be held liable for the sale of a
thing in which a third person has a legal or equitable interest. (Art.
1547, NCC.)
In a sale of goods, there is an implied warranty as to the quality
or fitness of the goods as follows:
(1) Where the buyer expressly or by implication makes
known to the seller the particular purpose for which the goods are
acquired, and it appears that the buyer relies on the seller’s skill or
judgment (whether he be the grower or manufacturer or not), there
is an implied warranty that the goods shall be reasonably fit for such
purpose; and
(2) Where the goods are bought by description from a seller
who deals in goods of that description (whether he be the grower or
manufacturer or not), there is an implied warranty that the goods
shall be of merchantable quality. (Art. 1562, NCC.)
71. What is meant by warranty in case of eviction?
What are its essential requisites?
ANS: Warranty in case of eviction is an implied warranty in
contracts of sale, by virtue of which if the vendee is deprived of the
whole or a part of the thing purchased by a final judgment based
on a right prior to the sale or an act imputable to the vendor, such vendor
shall answer for the eviction even though nothing has been
said in the contract on the subject. (Art. 1548, NCC.)
In order that such warranty may be enforced, it is essential
that the following requisites must concur:
(1) Deprivation of the vendee of the whole or part of the thing
purchased.
(2) The deprivation must be by virtue of a final judgment.
(3) The deprivation must be based on a right prior to the sale
or an act imputable to the vendor.
(4) The vendor must be summoned in the suit for eviction at
the instance of the vendee. (Arts. 1548, 1558, NCC.)
72. A sold a barge to B for P30,000 without express
warranty of title. Subsequently, C sued B in an action
of reinvindication and obtained final judgment for the
ownership and possession of the barge. Can B now compel A
to refund to him the P30,000? Reasons.
ANS: Our answer must be qualified. In order that B can compel
A to refund to him the P30,000, it is essential that he must prove
that all of the requisites for warranty against eviction exist. These
requisites are: first, deprivation of the vendee of the whole or a part
of the thing purchased; second, the deprivation must be by final
judgment; third, the deprivation must be based on a right prior to the
sale or an act imputable to the vendor; and fourth, the vendor must
be summoned in the suit for eviction at the instance of the vendee. If
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all of these requisites are present, B can compel A to refund to him
the P30,000. However, if B did not notify A of the action commenced
by C, A cannot be held liable.
73. Under the law, warranty against eviction may be
waived. What are the two (2) kinds of waiver of warranty
against eviction and what are their effects?
ANS: The waiver may be “consciente” or “intencionada” In
the first, there is merely a voluntary renunciation made by the
vendee of the right to warranty in case of eviction. The effect of such
renunciation is that the liability of the vendor in case of eviction shall
extend only to the payment of the value of the thing sold at the
time of eviction. In the second, there is a voluntary renunciation by
the vendee of the right to warranty against eviction, with knowledge
of the risk of eviction and assuming the consequences thereof. The
effect of such renunciation in case of eviction is to relieve the vendor
of any liability whatsoever. (Art. 1554, NCC.)
74. In 1934, A sold a parcel of land to B, with right to
repurchase within a period of five years. After the expiration
of said period, and without redeeming the property, A sold it
again to C, who, in turn, sold it to D, with right of repurchase
within a period of one year. Upon the expiration of the
oneyear
period, D consolidated his title over the property. This
was in 1946. A year later, in 1947, C sold the same property
to E, which sale contained a warranty of title. A few months
later, D also sold the same property again to E, which sale also
contained a warranty of title and against eviction. This sale
was registered in 1948. However, before this sale was made,
B had already brought an action against E for the recovery
of the property. In this litigation, the land was awarded to B.
The judgment having become final, a writ of execution was
issued and as a result the properties of E were attached and
sold at public auction. In 1956, E brought an action against
D.
(1) Can D be held liable for warranty against
eviction?
(2) Can the contract of sale entered into between D
and E be rescinded?
ANS: (1) The vendor’s liability for warranty against eviction is
waivable and maybe renounced by the vendee. (Art. 1548, NCC.) In
the case at bar, while there is a stipulation in the contract regarding
warranty against eviction, it was only pro forma and, therefore, the
vendor cannot be bound thereby, in view of the fact that the same
land had been previously bought by the vendee E from C and that his
only purpose in buying the same again from D was to enable him to
register his prior deed of sale. Furthermore, the property was already
the subject of a litigation between him and B who claimed its title
and possession by virtue of an earlier sale from the original owner,
and it was by final judgment in this litigation that E was finally evicted
from said land. Not having appealed from this decision the
implication is that he not only renounced the warranty, but he knew
the danger of eviction and assumed its consequences. Under what
is now Art. 1554 of the NCC, when the vendee has waived his right
of warranty against eviction and eviction shall occur, the vendor
shall only pay the price which the thing sold had at the time of the
eviction, unless the vendee has made the waiver with knowledge
of the danger of eviction and assumed its consequences. It is clear
that in the instant case, E knew of the danger of eviction at the
time he purchased the land from D and assumed its consequences.
Therefore, D is not even obliged to restore to him the price of the
land; in other words, he is completely exempt from any liability
whatsoever. (Andaya vs. Manansala, 107 Phil. 1151.)
(2) Neither may D be condemned to return the price on the
theory of rescission of the contract of sale. In the first place, the
remedy of rescission contemplates that the one demanding it is able
to return whatever he has received under the contract. When this
cannot be done rescission cannot be carried out. (Art 1385> NCC.)
It is for this reason that the law on sales does not make rescission
a remedy in case the vendee is totally evicted from the thing sold,
as in this case, for he can no longer restore the thing to the vendor.
It is only when the vendee loses “a part of the thing sold of such
importance, in relation to the whole that he would not have purchased
it without said part” that he may ask for rescission, but he has “the
obligation to return the thing without other encumbrances than
those which it had when he acquired it.” (Art. 15561 NCC.) In the
second place, E assumed the risk of eviction, which stops him from
asking for rescission even were it possible for him to restore what he
had received under the contract. (Andaya vs. Manansala, supra.)
74. If there is no agreement with regard to warranty
in case of eviction, what is the extent of the liability of the
vendor?
ANS: When the warranty has been agreed upon or nothing has
been stipulated on this point, in case eviction occurs, the vendee
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shall have the right to demand of the vendor:
(1) The return of the value which the thing sold had at the
time of the eviction be it greater or less than the price of the sale; (2) The
income or fruits, if he has been ordered to deliver
them to the party who won the suit against him;
(3) The cost of the suit which caused the eviction and, in a
proper case, those of the suit brought against the vendor for the
warranty;
(4) The expenses of the contract, if the vendee has paid
them;
(5) The damages and interests, and ornamental expenses, if
the sale was made in bad faith. (Art. 1555, NCC.)
Should the vendee lose, by reason of the eviction, a part of the
thing sold of such importance, in relation to the whole, that he would
not have bought it without said part, he may demand the rescission
of the contract; but with the obligation to return the thing without
other encumbrances than those which it had when he acquired it.
He may exercise this right of action, instead of enforcing the
vendor’s liability for eviction.
The same rule shall be observed when two or more things have
been jointly sold for a lump sum, or for a separate price for each of
them, if it should clearly appear that the vendee would not have
purchased one without the other. (Art. 1556, NCC.)
75. Define “accion redhibitoria” and “accion quanti
minoris.”
ANS: "Accion redhibitoria" is an action instituted by the vendee
against the vendor to avoid a sale on account of some vice or defect
in the thing sold which renders it unfit for the use intended or which
will diminish its fitness for such use to such an extent that, had the
vendee been aware thereof, he would not have acquired it. "Accion
quanti minoris” on the other hand, is an action to procure the return
of a part of the purchase price paid by the vendee to the vendor by
reason of such defect. (Arts. 1561, 1562, 1564, 1565, 1567, NCC.)
76. If there is a breach by the vendor of the implied
warranty against hidden defects of or encumbrances upon
the thing sold, what are the remedies of the vendee? What is
the period of prescription for such remedies?
ANS: The vendee may elect between withdrawing from the contract
(accion redhibitoria) and demanding a proportionate reduction
of the price (accion quanti minoris), with damages in either case.
(Art. 1567, NCC.) Generally, the period of prescription is 6 months.
(Art. 1571, NCC.) However, in redhibitory actions based on the
faults or defects of animals, the period is 40 days. (Art. 1577, NCC.)
Whether six (6) months or 40 days, the period must be counted from
the date of delivery to the vendee.
77. When is the vendee liable for interest on the price?
ANS: The vendee is liable for interest on the price in the
following cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or
income; and
(3) Should he be in default, from the time of judicial or extrajudicial
demand for the payment of the price. (Art. 1589, NCC.)
78. When may the vendee suspend the payment of the
price?
ANS: The vendee may suspend the payment of the price in the
following cases:
(1) Should he be disturbed in the possession or ownership of
the thing sold; or
(2) Should he have reasonable grounds to fear such
disturbance by a vindicatory action or by a foreclosure of mortgage.
The right, however, does not exist in the following cases:
(1) Should there be a stipulation to that effect; or
(2) Should the vendor give security for the return of the price;
or
(3) Should the vendor have caused the disturbance or danger
to cease; or
(4) Should the disturbance consist only of a mere act of
trespass. (Art. 1590, NCC.)-
79* C bought from A cinematographic equipment for
PI5,000. He made a down payment of P10,000, promising to
pay the balance in four (4) installments. After payment of the
first installment, B informed C that since he is a co-owner of
the equipment sold, payments to A must be suspended. When
A sought to collect from C, the latter refused to pay on
account
of B’s claim. Subsequently, B brought an action against both
A and C for his share in the price of the equipment. A and B,
however, arrived at a compromise agreement by virtue of
which the former recognized the latter as co-owner of the
equipment. After this agreement, A brought an action against
C for the unpaid balance. Is C liable for the payment of legal
25 | T I T L E V : S A L E S ( 1 4 5 8 - 1 6 3 7 ) J U R A D O 2 0 0 9
interest considering that he was justified in suspending
payment?
ANS: The right of a vendee to suspend payment of the price of
the thing sold in the face of any danger that he might be disturbed
in its possession or ownership is conferred by Art. 1590 of the NCC,
such suspension to continue until the vendor has caused the danger
or disturbance to cease, unless the latter gives security for the
return of the price in a proper case, or it has been stipulated that,
notwithstanding any such contingency, the vendee shall be bound to
make the payment. There is, therefore, no question that C had the
right to suspend payment from the time he was informed by B of the
latter’s claim of ownership thereof. Nevertheless, said right ended
as soon as the vendor had caused the disturbance or danger to cease.
In this case, the disturbance ceased when A reached a compromise
agreement with B. It is clear, therefore, that C was in default from
the date of the filing of the complaint by A, and under Art. 2209
of the NCC, he must pay legal interest from said date. (Bareng vs.
Court of Appeals, 107 Phil. 641.)
80. In 1949, Myers Building Co. entered into a contract
entitled “Deed of Conditional Sale” with the Maritime
Building Co., where it sold to the latter a big tract of land
located in Manila with all of the improvements thereon for
PI,000,000, P50,000 of which shall be paid upon the execution
of the contract and the balance to be paid in monthly
installments of PI0,000, which was later reduced to P5,000.
In the deed, there is a stipulation that in case of failure of the
vendee to pay any installment due and payable, the vendor at
his option can annul the contract and all payments already
made shall be forfeited and said vendor shall then have a
right to take possession of the property. In addition, there is
also a stipulation that the vendor shall retain the ownership
and that such ownership shall be vested in the vendee only
upon compliance with all of the terms of the contract. In 1961,
when the balance of the purchase price was only P319,300,
the vendee, because of financial difficulties, defaulted in the
payment of three consecutive monthly installments. As a
consequence, the vendor transmitted a letter to the vendee
rescinding the contract and declaring all payments already
made as forfeited. Is Art. 1592 of the NCC applicable in the
instant case? Reasons.
ANS: No, Art. 1592 of the NCC is not applicable in the instant
case.
The contract in the case at bar is not the ordinary sale
envisaged by Art. 1592, transferring ownership simultaneously with
the delivery of the real property sold, but one in which the vendor
retained ownership of the immovable object of the sale, merely
undertaking to convey it provided the buyer strictly complied with
the terms of the contract. In suing to recover possession of the
building from Maritime, Myers is not after the resolution or setting
aside of the contract and of the restoration of the parties to the status
quo ante, as contemplated in Art. 1592, but precisely enforcing the
provisions of the agreement that it is no longer obligated to part
with the ownership or possession of the property because Maritime
failed to comply with the specified condition precedent, which is to
pay the installments as they fell due.
The distinction between contracts of sale and contracts to
sell with reserved title has been recognized by the Supreme Court
in repeated decisions upholding the powers of promissors under
contracts to sell in case of failure of the other party to complete
payment, to extrajudicially terminate the operation of the contract,
refuse conveyance, and retain the sums or installments already
received, where such rights are expressly provided for. (Luzon
Brokerage Co., Inc. vs. Maritime Building Co., Inc., 43 SCRA 93.)
81. A sold to B a house and lot for P500,000 payable 30
days after the execution of the deed of sale. It was expressly
agreed in the deed that the sale would ipso facto be of no
effect upon the buyer’s failure to pay as agreed. B failed to
pay on maturity, and A sued to declare the contract of no
force and effect. If B tendered payment before the action
was filed, but subsequent to the stipulated date of payment,
would the action prosper?
ANS: The action would not prosper in such a case. According
to the law, “in the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price at the time
agreed upon the rescission of the contract shall of right take place,
the vendee may pay, even after the expiration of the period, so long
as no demand for the rescission of the contract has been made upon
him either judicially or by notarial act. After the demand, the court
may not grant him a new term.” (Art 1592, NCC.) Here, at the time
B tendered payment of the purchase price, there was still no demand
made upon him by A for the payment of said purchase price either
judicially or by notarial act,
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82. A sold his house and lot to B and gave B until May
1979 to pay the balance of the purchase price. After B failed
to pay the installments due, A made no judicial demand for
rescission of the contract nor did he execute any notarial act
demanding the same as required under Art. 1592 of the NCC.
B still made payments even after the May 1979 deadline,
which A accepted. Could A exercise his right to rescind the
sale?
ANS: With respect to rescission of a sale of real property,
Art. 1592 of the NCC governs. Thus, in the instant case, upon
the expiration of the period to pay, A made no move to rescind
but continued accepting late payments, an act which cannot but
be construed as a waiver of the right to rescind. When A, instead
of availing of his right to rescind, accepted and received delayed
payments of installments beyond the period stipulated, and B was
in arrears. A in effect waived and is now estopped from exercising
his right to rescind. (Justice Romero, Heirs of Pedro Escanlar vs.
CA, G.R. No. 119777; Holgado vs. CA, G.R. No. 120690, October 23,
1997.)
83. How is a contract of sale extinguished?
ANS: Sales are extinguished by the same causes as all other
obligations, and also by conventional or legal redemption. (Art. 1600,
84. Define conventional redemption. /
ANS: Conventional redemption is that which takes place when
the vendor reserves the right to repurchase the thing sold with
the obligation to reimburse to the vendee the price of the sale, the
expenses of the contract, other legitimate payments made by reason
of the sale, as well as necessary and useful expenses made on the
thing sold. (Arts. 1601,1616, NCC.)
85. When is conventional redemption presumed to be
an equitable mortgage?
ANS: The contract shall be presumed to be an equitable
mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is
unusually inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period of redemption
or granting a new period is executed;
(4) When the purchaser retains for himself a part of the
purchase price;
(5) When the vendor binds himself to pay the taxes on the
thing sold;
(6) In any other case where it may be fairly inferred that the
real intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation; and
(7) When there is a doubt as to whether the contract is a
contract of sale with right of repurchase or an equitable mortgage.
In any of the foregoing cases, any money, fruits, or other benefits
to be received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws. (Arts.
1602,1603, NCC.)
86. “S” Executed a Deed of Sale of a parcel of land in
favor of “T,” reserving for himselfs the right to repurchase
the same within five years from the date of the contract. The
contract provided that during the repurchase period “S” will
retain possession of the land as lessee and pay the land taxes
thereon. The consideration for the sale was P10,000.00 but the
land was worth double the price. “S” failed to repurchase the
land within the agreed period and “T” applied to the Court
for the consolidation of his title. “S” opposed the application
and claimed that he had the right to repurchase the land.
Whose stand should be upheld? (1980,1991,1993)
ANS: The stand of “S” should be upheld.
In reality, the contract in the instant case is an equitable
mortgage. The land is merely the collateral or security for the
payment of a loan of P10,000.00. This is obvious from the deed of sale
itself. In the first place, it says that “S” will retain possession of the
land as lessee; in the second place, it says that “S” the vendor a retro,
shall pay the taxes thereon; and in the third place, the purchase
price is unusually inadequate. These are badges of an equitable
mortgage. According to the NCC, the presence of any of these will be
sufficient to raise the presumption that the contract is an equitable
mortgage. Therefore, “S” can still insist on his right to pay to “T” his
indebtedness of P10,000.00 plus interest. (Art. 1602, NCC.)
87. What is the period for the redemption of property
sold with right of repurchase?
ANS: In the absence of any express agreement, the period of
redemption shall be four (4) years from the date of the contract.
Should there be an agreement, the period cannot exceed 10
years.
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However, the vendor may still exercise the right to repurchase
within 30 days from the time final judgment was rendered in a civil
action on the basis that the contract was a true sale with right to
repurchase. (Art. 1606, NCC.)
88. A sold a parcel of land to B for P5,000 with right of
repurchase. It was expressly stipulated in the contract of sale
that A shall have the right to redeem the property “at any
time when he has money.” What is the period of redemption
in such a case? Reason. (1955)
ANS: According to several decisions rendered by the Supreme
Court, the phrase “at any time” found in the deed of sale, although
indefinite, expresses an agreement as to the period within which the
right of redemption of the thing sold was reserved by the vendor to
himself. Consequently, the case is governed by the second paragraph
of Art. 1606 of the NCC, and not by the first paragraph. The period
of redemption is, therefore, 10 years counted from the date of the
execution of the contract. (Bandong vs. Austria, 31 Phil. 479; Alojado
vs. Lim, 51 Phil. 339; Soriano vs. Abalos, 47 Off. Gaz. 168; Corcega
vs. Brosas, CA, Off. Gaz. 3411.)
89. Suppose that in the above problem, it was expressly
stipulated that the right of repurchase could not be exercised
within three (3) years from the date of the sale, what would
be the period of redemption?
ANS: In Reyes vs. Rosales (25 Phil. 495), the Supreme Court
held that in such a case, the vendor should be allowed four (4) years
from the expiration of the time within which the right to redeem
could not be exercised. But, in the event that the 4-year period would
extend the life of the contract beyond 10 years, such as when it is
agreed that the right of repurchase could not be exercised within
7, or 8 or 9 years from the date of the sale, the vendor should be
allowed to redeem the property during the balance of the 10-year
period.
90. Suppose that in the above problem, it was expressly
stipulated that the vendor a retro can redeem the property
as soon as he has established a certain business, what would
be the period of redemption?
ANS: Actually, in this case, there is no agreement with respect
to a period. Consequently, the case is governed by the first paragraph
of Art. 1606 of the NCC, and not by the second paragraph. Hence,
the vendor a retro should be allowed 4 years within which to redeem
the property. (Medel vs. Francisco, 51 Phil. 367.)
91. B sold a parcel of land to defendant V for P4,000.
In the deed of sale, it was expressly stipulated that “at any
time after the expiration of ten years to be computed from
October 1, 1951, the vendor, his heirs or successors-ininterest
has the option and priority to purchase the land for
the same consideration of P4,000.” On July 18,1963, the heirs
of B commenced an action against V to compel the latter
to reconvey the land to them pursuant to the contractual
provisions of the aforequoted deed of sale. Defendant stands
squarely on the proposition that the stipulation in the
contract giving the vendor, his heirs or successor s-in-interest
the “option” to purchase the land is void and contrary to law,
particularly Art. 1606 of the NCC. Decide the case.
ANS: The factual backdrop of the above problem, is exactly the
same as that of Baluyot us, Venegas (22 SCRA 412).
According to the Supreme Court, the stipulation that “at any
time after the expiration of the period of 10 years to be computed
from October 1,1951, the vendor, his heirs or successors-in-interest
has the option and priority to purchase the land for the same
consideration of P4,000 is not legally feasible because it is prohibited
by Art. 1606 of the NCC, which limits the period for repurchase,
in case there is an agreement, to the maximum of 10 years from
the date of the contract. The contract here was executed in July,
1951. The option or right to repurchase was sought to be exercised
12 years thereafter, or in 1963. Indeed by express agreement it could
not have been exercised except after the expiration of 10 years. The
effect of an agreement of this tenor is that the right to repurchase
did not even arise, since by the time it was supposed to begin, it was
already interdicted by law. While the contracting parties are free to
establish any condition they may deem advisable, the same must
not be contrary to law, morals, good customs, public order or public
policy. (Art. 1306, NCC.)
92. Suppose that immediately prior to the expiration
of the period of redemption agreed upon the vendor a retro
brought an action to obtain a judicial declaration that the
agreement entered into is a simple mortgage and not a sale
with pacto de retro, and judgment declaring the contract to be a
true sale with pacto de retro was rendered several years
later, can such vendor a retro still redeem the property?
ANS: Yes, he can. Under Art. 1606, par, 3, of the NCC, he is
allowed to redeem the property within 30 days from the time the
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judgment has become final. If there was an appear the 30-day period
starts to run from the time the decision of the appellate court has
become final. (Ceynas vs. Ulanday, 105 Phil. 1007; Perez vs. Zulueta,
106 Phil. 264; Gerardino vs. Gloria, 80 SCRA 646.)
93. (a) Art. 1607 of the NCC provides: “In case of real
property, the consolidation of ownership in the vendee by
virtue of the failure of the vendor to comply with the
provisions
of Article 1616 shall not be recorded in the Registry
of Property without judicial order, after the vendor had been
duly heard.” Under this provision, how shall the consolidation
of ownership in the vendee a retro be effected? Explain.
(b) Against whom shall the action for consolidation
be brought?
(c) If the widow of the deceased (surviving
spouse) sold under pacto de retro a conjugal lot, what did
she dispose of? What is the effect of this upon the action for
consolidation?
ANS: (a) In Teodoro vs. Arcenas (110 Phil. 222) and again in
Ongcoco vs. Honorable Judge (15 SCRA 30), the Supreme Court
ruled that under Art. 1607 of the NCC, such consolidation shall
be effected through an ordinary civil action, not by a mere motion,
and that the vendor a retro should be made a party defendant,
who should be served with summons in accordance with Rule 14 of
the Revised Rules of Court; and that the failure on the part of the
court to cause the service of summons, as prescribed in Rule 14,
is sufficient cause for attacking the validity of the judgment and
subsequent orders on jurisdictional grounds. The Supreme Court in
the Arcenas case stressed that the reason behind the requirement
of a judicial order for consolidation as directed by Art. 1607 of the
NCC is because “experience has demonstrated too often that many
sales with right of repurchase have been devised to circumvent or
ignore our usury laws and for this reason, the law looks upon them
with disfavor.” (Report of the Code Commission, pp. 63-64.) When,
therefore, Art. 1607 speaks of a judicial order after the vendor shall have
been duly heard, it contemplates none other than a regular
court proceeding under the governing Rules of Court, wherein the
parties are given full opportunity to lay bare before the court the
real covenant. Furthermore, the obvious intent of our NCC, in
requiring a judicial confirmation of the consolidation in the vendee a
retro of the ownership over the property sold, is not only to have all
doubts over the true nature of the transaction speedily ascertained
and decided, but also to prevent the interposition of buyers in good
faith while such determination is being made. Under the former
method of consolidation by a mere extra-judicial affidavit of the
buyer a retro, the latter could easily cut off any claim of the seller
by disposing of the property, after such consolidation, to strangers
in good faith and without notice. The changes of the seller a retro to
recover his property would thus be nullified, even if the transaction
were really proved to be a mortgage and not a sale. (Yturralde vs.
Court of Appeals, 43 SCRA 413.)
(b) The action for consolidation should be brought against all
the indispensable parties, without whom no final determination can
be had of the action; and such indispensable parties who are joined
as party defendants must be properly summoned pursuant to Rule
14 of the Revised Rules of Court. If anyone of the party defendants,
who are all indispensable parties, is not properly summoned, the
court acquires no jurisdiction over the entire case and its decision
and orders therein are null and void. (Ibid.)
(c) Where the surviving spouse sold under pacto de retro a.
conjugal lot, what she validly dispose of under the said sale was
only her conjugal share in the lot plus her successional right as heir
in the conjugal share of her deceased husband. Consequently, the
vendee a retro cannot legally petition for the consolidation of his
ownership over the entire lot. (Ibid.)
94. Suppose that in the action for consolidation of
ownership over the land brought by the vendee a retro against
the vendor a retro, the court held that the contract of sale
with right of repurchase is in reality an equitable mortgage,
will an action brought by the heirs of the vendee a retro,
who had died in the meantime, against the vendor a retro
demanding payment of the obligation prosper? Reasons.
ANS: Yes, the action will prosper. The principle of res judicata
is not applicable. The decision of the court did not constitute an
adjudication of the right to collect the indebtedness or to foreclose
the mortgage. Therefore, if after a certain period designated by the
court in its discretion the debtor (vendor a retro) is unable to pay his
indebtedness, the creditors (heirs of the vendee a retro) can foreclose
the mortgage in a proper proceeding and sell the property to satisfy
the obligation. (Heirs of Arches vs. Vda. De Diaz, 50 SCRA 440.)
95. In a document dated June 10, 1960 and expressly
denominated; “Deed of Sale with Right to Repurchase,” AB
sold his land to CD. Substantially, the document provided
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among others: “I, AB, being in great need of money, hereby
sell my 10-hectare coconut land to CD for P2,000.00. It is
agreed that I have the right to repurchase this land in
10 years. If I fail to buy back the property, I shall deliver
possession thereof to CD.” Upon failure of AB to repurchase
the property, CD, in 1971, consolidated his title and files an
action to recover possession. AB files an answer offering to
return the P2,000.00 plus interest at the legal rate. Will the
action of CD prosper? Why?
ANS: (Note: The above problem, which was asked in the Bar
Examinations of 1979, is apparently a modification of the problem
resolved by the Supreme Court in Labasan vs. Lacueta, 86 SCRA
16. Unfortunately, the Bar Examiner changed the date of the
promissory note. In Lacasan, the date is April 20, 1927; in the bar
problem, the date is June 10, 1960. The change is fatal — to many
of the bar candidates. There is a second change which is even more
fatal. In Lacasan, there was no consolidation of title by the vendee a
retro; in the bar problem, there was a consolidation of title effected
in 1971. Now, “under Art. 1509 of the Old or Spanish NCC, if the
vendor failed to redeem within the period agreed upon, the vendee’s
title became irrevocable by the mere registration of an affidavit
of consolidation. Thus, under the old law, a judicial order was not
necessary as is required now under Article 1607 of the New NCC.”
[quoted from Labasan.] So, how shall we answer the bar problem?
The following answer is submitted for what it is worth.)
If the “consolidation of title” effected by CD in 1971 was
merely extrajudicial in character in the sense that CD executed an
affidavit consolidating his title over the subject property, then his
action for recovery of possession will not prosper. The contract in the
instant case is not a true contract of sale with right of repurchase. The
purchase price is unusually inadequate; the vendor is still in
possession of the property; and at the time when the Deed of Sale
was executed, the vendor was in great need of money. There is now
a presumption that the real covenant or agreement is an equitable
mortgage (See Labasan vs. Lacuesta, 86 SCRA 16; Gardner vs. Court
of Appeals, 80 SCRA 399; Gloria Diaz vs. Court of Appeals, 84 SCRA
483.) The land, therefore, is merely the security for the loan. At any
rate, the question of whether the agreement is a true contract of
sale with right of repurchase or merely an equitable mortgage has
become moot and academic. AB has offered to return the P2,000 plus
interest at the legal rate. So, even if judgment is rendered in favor
of the theory that the contract is a true contract of sale with right
of repurchase, he can still exercise his right of repurchase within
thirty days from the time that the judgment has become final. (Art.
1606, NCC.)
If the “consolidation of title” effected by CD in 1971 was the
result of a judicial order as contemplated in Art. 1607 of the NCC,
then that means that CD’s counsel has been remiss in his duty as
a lawyer. The present action for recovery of possession is not the
proper remedy. After the consolidation of title had become final, CD
should have filed a motion for the issuance of a writ of execution so
that, as owner of the subject property, he shall be installed in the
possession thereof.
96. A, B and C are owners of an undivided parcel of
land. They sold it to D jointly and in the same contract, with
a right to repurchase. A tried to repurchase the entire parcel
of land, hut D refused to accede to A’s demand. Is D’s refusal
justified? Reasons.
ANS: Yes, D’s refusal to accede to A’s demand is justified.
According to Art. 1612 of the NCC: “If several persons, jointly and in
the same contract, should sell an undivided immovable with a right
of repurchase, none of them may exercise this right for more than
his respective share.”
97. What are the obligations of the vendor a retro when
he exercises his right of repurchase?
ANS: The obligations of the vendor a retro are the following:
(1) To return to the vendee the price of the sale; (2) To pay the expenses
of the contract and other legitimate
payments made by reason of the sale; and
(3) To pay all necessary and useful expenses made on the
thing sold. (Art. 1616, NCC.)
98. Define legal redemption (retracto legal).
ANS: Legal redemption is the right to be subrogated upon the
same terms and conditions stipulated in the contract, in the place
of one who acquires a thing by purchase or dation in payment, or by
any other transaction whereby ownership is transmitted by onerous
title. (Art. 1619, NCC.)
99. What are the different instances of legal redemption
recognized in our law?
ANS: Under the New Civil Code:
(1) Redemption by the other co-owners, or by any or some of
them, should a co-owner sell his undivided share to a third person. If
two or more co-owners desire to exercise the right, they may only do
so in proportion to the share they may respectively have in the thing
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owned in common. (Art. 1620, NCC.)
(2) Redemption by the other co heirs, or by any or some of
them, should a co-heir sell his hereditary right to a stranger. (Art.
1088, NCC.)
(3) Redemption by an owner of adjoining land should the
owner of a piece of rural land, the area of which does not exceed one
hectare, alienate it to a third person. If two (2) or more adjoining
owners desire to exercise the right at the same time, the owner of
smaller area shall be preferred; and should both lands have the
same area, the one who first requested the redemption. (Art 1621,
NCC.)
(4) Redemption by an owner of adjoining land should the
owner of a piece of urban land, which is so small and so situated that
a major portion thereof cannot be used for any practical purpose
within a reasonable time and which said owner had bought merely
for speculation, resell it to a third person. If the resale has not yet been
perfected, an owner of adjoining land shall have a right of preemption;
in other words, his right to buy the property is preferred to
that of third persons. If two (2) or more adjoining owners desire to
exercise the right of pre-emption or redemption, as the case maybe,
the owner whose intended use of the land appears best justified shall
be preferred. (Art. 1622, NCC.)
(5) Redemption by a debtor should the credit or other
incorporeal right in litigation be sold by the creditor to a third
person. (Art. 1634, NCC.)
Under other laws:
(1) Redemption by the applicant, his widow, and legal heirs
within five (5) years should a piece of land under a homestead or free
patent be alienated to a third person. (Sec. 119, Com. Act No. 141.)
(2) Redemption by a judgment debtor within one year should
real property belonging to him be sold on execution. (Sec. 30, Rule
39, New Rules of Court.)
(3) Redemption by owner should property belonging to him
be sold for delinquent realty taxes. (Sec. 376, Rev. Adm. Code.)
(4) Redemption by mortgagor within one year should his
mortgaged property be foreclosed and subsequently sold. (Sec. 3,
Rule 68, New Rules o f Court.)
100. Angie and Gracie were co-owners of a parcel of
land. Last January 31, 2001, when she paid her real estate
tax, Angie discovered that Gracie had sold her share to Emily
on November 10, 2000. The following day, Angie offered to
redeem her share from Emily, but the latter replied that
Angie’s right to redeem has already prescribed. Is Emily
correct or not? Why? (2001)
ANS: Emily, the buyer, is not correct. Angie can still enforce her
right of legal redemption as a co-owner. Art. 1623 of the NCC gives
a co-owner 30 days from written notice of the sale by the vendor to
exercise his right of legal redemption. In the present problem, the
30-day period for the exercise by Angie of her right of redemption
had hot even begun to run because no notice in writing of the sale
appears to have been given to her by Gracie.
101. Distinguish between redemption and pre-emption.
ANS: Redemption and pre-emption maybe distinguished from
each other in the following ways:
(1) In redemption, the sale to a third person has already been
perfected, whereas in pre-emption, the sale to a third person has not
yet been perfected.
(2) The right of redemption has a much broader scope than
the right of pre-emption. As a matter of fact, the latter may be
exercised only where there is a prospective resale of a small piece of
urban land originally bought by the prospective vendor merely for
speculation.
(3) The right of redemption is directed against the third
person who bought the property, whereas the right of pre-emption
is directed against the prospective vendor who is about to resell the
property.
(4) The effect of redemption is to extinguish a contract that
has already been perfected or even consummated, whereas the effect
of pre-emption is to prevent the birth or perfection of a contract,
102. Within what period must the right of pre-emption
or redemption regulated by Arts. 1620 to 1622 of the NCC be
exercised?
ANS: The right must be exercised within 30 days from the
notice in writing by the prospective vendor, or by the vendor, as the
case may be. (Art. 1623, NCC.)
103. A died with a will in 1956. In his will, he left his
estate to his children and 1/3 of the free portion to a friend,
X. On December 9, 1960, B, one of the co-owners of a house
and lot located in Sta. Cruz, Manila, of which A was also a
co-owner, sold her undivided 1/6 share in said property to Y
Co. Formal notices were given by both vendor and vendee
to all the co-owners, including all of the heirs of A as well
as the judicial administrator of the estate of A. X offered to
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redeem the share sold and tendered payment thereof. The
tender was refused. X then consigned the amount in court
and filed the corresponding action for legal redemption. Is
from what time shall the period of redemption be counted
— from the time when formal notice was made to X or to the
judicial administrator?
ANS: X is entitled to exercise the right of legal redemption. The
rights to the succession are transmitted to the heirs from the moment
of the death of the decedent. (Art 777, NCC.) As a consequence,
the heirs of A acquired an undivided share in the house and lot
from the moment of his death in 1966, and from that instant, they
became co-owners, together with the original surviving co-owners of
the decedent. Wherefore, any one of them is entitled to exercise the
legal right of redemption as soon as another co-owner had sold her
undivided share to a stranger. ("Arts, 1620,1623, NCC.) The situation
is in no wise altered by the existence of a judicial administrator of
the estate. The right of administration does not include the right of
legal redemption because this right came into existence only when
the sale was perfected. Consequently, in computing the thirty days
for making the redemption, the period is counted, not from the time
the administrator was formally notified of the sale in writing by
the co-owner vendor, but from the time the co-owner who desires to
exercise the right of redemption was so notified. (Butte vs. Manuel
Uy and Sons, Inc., 4 SCRA 526, 864.)
104. In 1965, the spouses X and Y sold to A the northern
half of a lot located in Pasay City. The next year, they sold
the southern half to B. Upon learning that X and Y had sold
the remaining portion of the property to B, A immediately
brought an action against X, Y and B praying that he be
declared as entitled to purchase, by way of legal redemption,
the 1/2 portion of the lot that was sold to B. He contends
that when he bought the northern half of said property, he
became a co-owner; consequently, he is entitled to redeem
the southern half which was sold to B in accordance with the
provision of Art. 1620 of the NCC. Will the action prosper?
Reasons. (1971)
■ ANS: The action will not prosper. The theory of the plaintiff
is untenable. Tested against the concept of co-ownership, as
autjioritively expressed by the commentators, A is not a co-owner
of t^.laiid, taken as a unit or subject of co-ownership, since he and the
spouses do not “have a spiritual part of a thing which is not
physically divided” (3 Sanchez Roman 162.), nor is each of them an
“owner of the whole, and over the whole he exercises the right of
dominion, but he is at the same time the owner of a portion which
is truly abstract.” (3 Manresa 405.) The portions of the plaintiff and
of the defendant spouses are concretely determined and identifiable,
for to the former belongs the northern half and to the latter belongs
the remaining southern half, of the land. That their respective
portions are not technically described, or that said portions are still
embraced in one and the same certificate of title does not make said
portions less determinable or identifiable, or distinguishable, one
from the other, nor that dominion over each portion less exclusive,
in their respective owners. Hence, no right of redemption among
coowners
exists. (De la Cruz vs. Cruz, 32 SCRA 307; see also Felices vs.
Colegado, 35 SCRA 173.)
105. Suppose that in the above case, plaintiff A learned
of the proposed sale of the southern half of the property to
B before it could be perfected, would it have been possible
for him to prevent said sale by exercising the right of
preemption
granted to adjoining owners by Art. 1622 of the
NCC? Reasons.
ANS: In order that the right of pre-emption granted to adjoining
owners by Art. 1622 of the NCC can be availed of, it is necessary that
the following requisites should be present: (1) the property must be
a piece of urban land; (2) it must be so small that it cannot be used
for any practical purpose within a reasonable time; (3) it must be so
situated that it cannot be used for any practical purpose within a
reasonable time; and (4) it must have been previously bought merely
for speculation.
Although the right of pre-emption was invoked in both of the
cases cited (De la Cruz vs. Cruz, supra, and Felices vs. Colegado,
supra), the Supreme Court held that the right cannot be availed of
because the requisites of pre-emptions were not proved. Besides, the
sale to a third person had already been perfected.
106. A, B and C are co-owners of a small urban land, they
having inherited the same from their wealthy uncle. D owns
the adjoining land. C donated his portion to E, and B sold his
portion to F. Has D the right of redemption with respect
to the portion of B? In case both A and D want to redeem
the portion of C, who is preferred first, the co-owner or the
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owner of the adjoining land? (1962)
ANS: D has no right to redeem the portion of B which the latter
sold to F. Under Art. 1622 of the NCC, in order that the owner of
the adjoining land can redeem, it is essential among others, that the
vendor of the urban land should have previously bought the land
for speculation and has resold it. Here B did not buy the land from
the original owner for speculation. He inherited it from a wealthy
uncle.
As far as the portion donated by C to E is concerned, although
the NCC in Art. 1623 declares that the redemption by co-owners
excludes that of adjacent owners, the question of preferential rights
of redemption by A and D is moot and academic. The reason is
evident. Neither one has a right of legal redemption. Donation, being
an act of pure liberality, cannot be classified either as purchase, or as
dation in payment, or as any other transaction whereby ownership
is transmitted by onerous title. Consequently, there is no right of
redemption of co-owners or adjacent owners. (Art. 1619, NCC.)
107. X is the owner of a parcel of rural land less than one
hectare in area which is bounded by three (3) other parcels
of agriculture property owned, respectively, by A, B, and C.
X sells his property to Y and A, B, and C apply to redeem. On
what basis will one of them be preferred?
ANS: Assuming that Y owns one or more rural lands, the owner
of the adjoining land of smaller area shall be preferred; and should
the adjoining lands have the same area, the one who first requested
the redemption shall be preferred. (Art. 1621, par. 3, NCC.)

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