Documente Academic
Documente Profesional
Documente Cultură
REVIEWER
Compiled by:
JUSTIN RYAN D. MORILLA
A.Y. 2015-2016
OTHER SOURCES:
Notes of Atty. Sarona, CPA, Atty. Ong-Abrates, CPA, & Atty. Rizada
2015 Class TSN
BQs with Suggested Answer
UP Reviewer
Page 1
LAST UPDATED: 01/13/16
CONCEPT OF SALE When there is no meeting of the minds on price, the contract ―is
not perfected‖ and does not serve as a binding juridical relation
between the parties. Manila Metal Container Corp. v. PNB, 511
Article 1458. By the contract of sale one of the contracting parties
SCRA 444 (2006), and should be more accurately denominated as
obligates himself to transfer the ownership and to deliver a
inexistent, as it did not pass the stage of generation to the point of
determinate thing, and the other to pay therefor a price certain in
perfection. NHA v. Grace Baptist Church, 424 SCRA 147 (2004).
money or its equivalent.
4. BILATERAL& RECIPROCAL- A contract of sale is a
A contract of sale may be absolute or conditional.
―synallagmatic‖ contract which means contracts interest in
reciprocal prestations.
NATURE OF OBLIGATIONS CREATED IN A SALE
BILATERAL CONTRACTS - where both parties are
I. Two OBLIGATIONS of the SELLER to:
principally obliged
(i) Transfer the Ownership,3 and
(ii) Deliver the Possession, of the
A contract of sale gives rise to ―reciprocal obligations‖, which arise
SUBJECTMATTER;
from the same cause with each party being a debtor and creditor of the
other, such that the obligation of one is dependent upon the
II. An OBLIGATION for the BUYER to:
obligation of the other; and they are to be performed
(i) Pay the PRICE.
simultaneously, so that the performance of one is conditioned upon
the simultaneous fulfillment of the other. Cortes v. CA, 494 SCRA 570
Both sets of obligations, are real obligations or obligations ―to
(2006).
give,‖ as contrasted from personal obligations ―to do‖ and―not to do,‖
and can be the proper subject of actions for specific performance.
A perfected contract of sale is bilateral because it carries the
correlative duty of the seller to deliver the property and the
Article 1480 of the Civil Code, which cross refers to Article
obligation of the buyer to pay the agreed price. Congregation of
1165 thereof, provides that when what is to be delivered is a
the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008).
determinate thing, the buyer, in addition to the right to
recover damages, may compel the seller to make the
WHAT IS THE CONSEQUENCE OF THE CHARACTERIZATION OF
delivery. In other words, a defaulting party in a sale
THE CONTRACT OF SALE AS CONSENSUAL AND RECIPROCAL?
cannot insist on just paying damages when the non-
defaulting party demands performance.
MACASAET VS. R. TRANSPORT CORPORATION
CHARACTERISTICS OF A CONTRACT OF SALE: October 10, 2007
G.R. No. 172446
1. NOMINATE which means that it has been given a particular TINGA, J.
name by law. A certain set of provisions will be applicable n
trying to construe issues related to the contract. 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.
A contract of sale is what the law defines it to be, taking into From that moment, the parties may reciprocally demand
consideration its essential elements, and not what the contracting performance, subject to the provisions of the law governing the form
parties call it. Santos v. CA, 337 SCRA 67 (2000). of contracts. A perfected contract of sale imposes reciprocal
obligations on the parties whereby the vendor obligates himself to
2. PRINCIPAL - As distinguished from mere accessory transfer the ownership of and to deliver a determinate thing to the
contracts, it can stand on its own and does not depend buyer who, in turn, is obligated to pay a price certain in money or its
upon existence and validity of other contracts. It is in itself equivalent. Failure of either party to comply with his obligation entitles
valid. the other to rescission as the power to rescind is implied in reciprocal
obligations.
As distinguished from preparatory contracts, a contract of
sale is entered into for its own sake and not for the purpose When a contract is possessed of reciprocal prestations, the power to
of entering into further juridical relations. rescind is implied in reciprocals. So it calls the application of Aricle
1191 of the Civil Code.
3. CONSENSUAL - It is perfected by mere consent. Its
perfection is not subordinated by some other condition like Take note that the power to rescind is only given to the INJURED
the execution of deeds, forms and solemnities. It is not a party.
real contract which requires delivery in order for the
contract to be perfected. It is not also a formal contract Article 1191. The power to rescind obligations is implied in
because a contract of sale is valid in whatever form it may reciprocal ones, in case one of the obligors should not comply
have been entered into. with what is incumbent upon him.
Article 1475. The contract of sale is perfected at the moment there The injured party may choose between the fulfillment and the
is a meeting of minds upon the thing which is the object of the rescission of the obligation, with the payment of damages in
contract and upon the price. either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the The court shall decree the rescission claimed, unless there be
form of contracts. (1450a) just cause authorizing the fixing of a period.
Perfection Distinguished from Demandability – Not all contracts of This is understood to be without prejudice to the rights of third
sale become automatically and immediately effective. In sales with persons who have acquired the thing, in accordance with articles
assumption of mortgage, there is a condition precedent to the 1385 and 1388 and the Mortgage Law.
seller‘s consent and without the approval of the mortgagee, the
sale is not perfected. Biñan Steel Corp. v. CA, 391 SCRA 90 The power need not be stipulated in the contract in order for the
(2002). innocent party to invoke the remedy and also under Article 1169:
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Article 1169. Those obliged to deliver or to do something incur in XxxIf the contract is onerous, the doubt shall be settled in favor of
delay from the time the obligee judicially or extrajudicially the greatest reciprocity of interests.
demands from them the fulfillment of their obligation.
Look at the value of the matters that are exchanged—the objects that
However, the demand by the creditor shall not be necessary in are exchanged. If it is more in keeping with a sale, then you actually
order that delay may exist: construe the doubt in favor of a contract being a sale.
(1) When the obligation or the law expressly so declare; or Between sale and lease, where the amount is considerably high, it will
be considered a sale rather than a lease because it involves the
(2) When from the nature and the circumstances of the obligation greatest reciprocity of interest.
it appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive 6. COMMUTATIVE
for the establishment of the contract; or
A thing of value is exchanged for equal value as opposed to an
(3) When demand would be useless, as when the obligor has aleatory contract like insurance because the premium that you pay is
rendered it beyond his power to perform. not equivalent to the cash expectation that you will receive.
In reciprocal obligations, neither party incurs in delay if the other In a contract of sale, there is no requirement that the price be equal
does not comply or is not ready to comply in a proper manner to the exact value of the subject matter of sale; all that is required
with what is incumbent upon him. From the moment one of the is that the parties believed that they will receive good value in
parties fulfills his obligation, delay by the other begins. exchange for what they will give. Buenaventura v. CA, 416 SCRA
263 (2003).
The legal effects and consequences of sale being a bilateral
contract composed of reciprocal obligations are as follows: Equivalent values or at least relatively, the party believes that he is
getting his money‘s worth.
1) The power to rescind is implied, and such power need not be
stipulated in the contract in order for the innocent party to In aleatory contracts on the other hand, usually, the fulfillment of
invoke the remedy; the contract is dependent on chance. For example, contract of
insurance. The insurance contract says that if it is a cause covered by
2) Neither party incurs delay if the other party does not comply, the policy, you stand to get 5Million Pesos. Do you pay 5Million pesos?
or is not ready to comply in a proper manner, with what is No, you pay a minimal amount by way of premium.
incumbent upon him; and
It is similar in buying a lotto ticket where fulfillment depends on chance.
3) From the moment one of the parties fulfills his obligation, the You pay ten pesos, how much do you win? You get millions, but if
default by the other begins, without the need of prior you lose, you get nothing.
demand.
In onerous contracts, the cause for each contracting party is Sale is not a mode, but merely a title. A mode is the legal means by
understood to be the prestation or promise of a thing or service by the which dominion or ownership is created, transferred or
other and in remuneratory ones, the service or benefit which is destroyed, but title is only the legal basis by which to affect
remunerated and in contracts of pure beneficence, the mere dominion or ownership. Sale by itself does not transfer or affect
liberality of the benefactor. ownership; the most that sale does is to create the obligation to
transfer ownership. It is tradition or delivery, as a consequence of sale,
Article 1350. In onerous contracts the cause is understood to be, that actually transfers ownership. San Lorenzo Dev. Corp. v. CA, 449
for each contracting party, the prestation or promise of a thing or SCRA 99 (2005)
service by the other; in remuneratory ones, the service or benefit
which is remunerated; and in contracts of pure beneficence, the Seller‘s ownership of the thing sold is not an element of
mere liberality of the benefactor. (1274) perfection; what the law requires is that seller has the right to
transfer ownership at the time of delivery.Quijada v. CA, 299
Sale is onerous because it imposes valuable consideration as a SCRA 695 (1998).
prestation which is the payment of a price certain in money or its
equivalent. Non nudis pactis, sed traditionis dominia rerum transferantur.
WHAT IS THE CONSEQUENCE OF THE CHARACTERIZATION OF ―It is delivery as a consequence of certain contracts that transfers
A CONTRACT OF SALE AS AN ONEROUS CONTRACT? ownership not the contract itself‖
Article 1378. When it is absolutely impossible to settle doubts by Ownership is only acquired by a legal mode or process. While the
the rules established in the preceding articles, and the doubts title is only the justication, mode is the actual process of acquisition or
refer to incidental circumstances of a gratuitous contract, the transfer of ownership of a thing in question.
least transmission of rights and interests shall prevail.xxx
Article 712. Ownership is acquired by occupation and by
Al things being equal therefore, if there is doubt as to whether or not a intellectual creation. [ORIGINAL MODE]
contract is one of donation or a contract of commodatum, which has a
least of transmission of rights and interest? It would be the contract Ownership and other real rights over property are acquired and
of commodatum. Therefore, you resolve the doubt accordingly. transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by tradition.
WHAT ABOUT FOR ONEROUS CONTRACTS? [DERIVATIVE MODE]
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―BY TRADITION‖ DISTINCTION OF SALE
This is otherwise known as delivery as a result of a certain WITH OTHER CONTRACTS
contracts such as sale, barter, assignment or mutuum.Sale is
merely a title that creates the obligation on the part of the seller to WHY DISTINGUISH? 3 REASONS
transfer ownership and to deliver it, but by its own, it does not transfer
ownership. 1) A contract is what the law defines it to be, taking into
consideration its essential elements, and the title given to it
It is delivery as a consequence of certain contracts that transfers by the parties is not as much significant as its substance.
ownership, not the contract itself. So in the contract of sale, the mere Santos v. CA, 337 SCRA 67 (2000).
fact that you enter into a contract does not necessarily transfer
ownership. When there is delivery however, whether it is actual or 2) A contract which is called otherwise by the parties is
symbolic, that is the time when you can say that there is transfer of susceptible of the remedy of reformation.
ownership.
3) It can be called void ab initio when you enter into something
ACAP VS. CA what you feel is a binding contract but the law tells you that it
G.R. No. 118114 is not. This contract cannot be ratified.
December 7, 1995
PADILLA, J. 1. SALE VS. BARTER
Sale by itself does not transfer or affect ownership. It only creates the Article 1468. If the consideration of the contract consists partly in
obligation—the juridical justification to transfer ownership is tradition or money, and partly in another thing, the transaction shall be
delivery as consequence of sale that actually transfers ownership. 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 a part of the consideration exceeds
the amount of the money or its equivalent; otherwise, it is a sale.
Barter is one of the contracts where the consideration and the subject
matter of the contract are practically the same class. They are both
objects.
The distinctions between the two are practically academic. Aside from
Articles 1639 and 1640 of the Civil Code, barter shall be governed by
the provisions of the title of sale.
Under the law, somebody who is in good faith, whether a buyer in good
faith or a possessor in good faith, will always be preferred.
Statute of frauds applies on Statute of frauds does not apply. Consensual Formal or Solemn
certain sales Bilateral Purely Unilateral
Statute of frauds does not apply to Onerous Gratuitous
executed or partially executed Title Act, Contract, Mode of Acquisition
contracts.
3. SALE VS. CONTRACT OF A PIECE OF WORK
RULES ON BARTER
1) If one of the contracting parties, having received the Finally a contract for a piece-of-work, unlike a sale, is not
promised thing via barter, should prove that it did not belong governed by the Statute of Frauds.
to the other party who gave it, the former cannot be
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JUSTIN RYAN MORILLA
CONTRACT FOR A PIECE OF WORK– contractor binds himself to 1)Hence, to impose the three percent contractor‘s tax on Ateneo‘s
execute a piece of work for the employer, in consideration of a Institute of Philippine Culture, it should be sufficiently proven that the
certain price or compensation. private respondent is indeed selling its services for a fee in pursuit of
an independent business.
TEST: thing is specially manufactured for the customer
and upon his special order(Dino v. CA, June 20, 2001) 2) Records do not show that Ateneo‘s IPC in fact contracted to sell its
research services for a fee. In the first place, the petitioner has
SALE – if the article is manufactured or procured for the general presented no evidence to prove its bare contention that, indeed,
market in the ordinary course of business, WHETHER THE SAME contracts for sale of services were ever entered into by the private
IS ON HAND AT THE TIME OR NOT respondent. Funds received by the Ateneo de Manila University are
technically not a fee. They may however fall as gifts or donations which
TEST: thing is manufactured in the ordinary course of are tax-exempt. Another fact that supports this contention is that for
business (1467) about 30 years, IPC had continuously operated at a loss, which means
that sponsored funds are less than actual expenses for its research
projects.
ARTICLE 1467. A contract for the delivery at a certain price of an
article which the vendor in the ordinary course of his business In fact, private respondent is mandated by law to undertake research
manufactures or procures for the general market, whether the activities to maintain its university status. In fact, the research activities
same is on hand at the time or not, is a contract of sale, but if the being carried out by the IPC is focused not on business or profit but on
goods are to be manufactured specially for the customer and social sciences studies of Philippine society and culture. Since it can
upon his special order, and not for the general market, it s a only finance a limited number of IPC‘s research projects, private
contract for a piece of work. (n) respondent occasionally accepts sponsorship for unfunded IPC
research projects from international organizations, private foundations
Quantity will not determine if it is a piece of work. and governmental agencies. However, such sponsorships are subject
to private respondent‘s terms and conditions, among which are, that
the research is confined to topics consistent with the private
If anyone can buy it, it is a contract of sale. If it is exclusive, it is a
respondent‘s academic agenda; that no proprietary or commercial
contract for a piece of work. If it is displayed thereafter, it is a sale.
purpose research is done; and that private respondent retains not only
Example: A cake which has a face of you on it – contract for a piece the absolute right to publish but also the ownership of the results of the
research conducted by the IPC.
of work
SALE vs. CONTRACT FOR PIECE OF WORK
Crux: ―Ineluctably, whether the contract be one of sale or one for a
piece of work, a transfer of ownership is involved and a party
By the contract of sale, one of the contracting parties obligates himself
necessarily walks away with an object.‖
to transfer the ownership of and to deliver a determinate thing, and the
other to pay therefore a price certain in money or its equivalent. By its
Take note of:
very nature, a contract of sale requires a transfer of ownership. In the
case of a contract for a piece of work, the contractor binds himself to
Article 1714. If the contractor agrees to produce the work from execute a piece of work for the employer, in consideration of a certain
material furnished by him, he shall deliver the thing produced to price or compensation. If the contractor agrees to produce the work
the employer and transfer dominion over the thing. This contract from materials furnished by him, he shall deliver the thing produced to
shall be governed by the following articles as well as by the the employer and transfer dominion over the thing. Whether the
pertinent provisions on warranty of title and against hidden contract be one of sale or one for a piece of work, a transfer of
defects and the payment of price in a contract of sale. ownership is involved and a party necessarily walks away with an
object. In this case, there was no sale either of objects or services
CIR vs. AdMU because there was no transfer of ownership over the research data
G.R. No. 115349 obtained or the results of research projects undertaken by the Institute
April 18, 1997 of Philippine Culture.
PANGANIBAN, J.:
INCHAUSTI & CO. V. CROMWELL
FACTS: ADMU Institute of Philippine Culture is engaged in social TEST OF EXISTENCE
science studies of Philippine society and culture. Occasionally, it
accepts sponsorships for its research activities from international Inchausti & Co. held that the distinction between a sale and a contract
organizations, private foundations and government agencies. for work, labor, and materials is tested by the inquiry of whether the
thing transferred is one not in existence and which never would have
On July 1983, CIR sent a demand letter assessing the sum of existed but for the order of the party desiring to acquire it, or a thing
P174,043.97 for alleged deficiency contractor‘s tax. Accdg to CIR, which would have existed and been the subject of sale to some other
ADMU falls under the purview of independent contractor pursuant to person, even if the order had not been given. In that case, the Court
Sec 205 of Tax Code and is also subject to 3% contractor‘s tax under held that the hemp was in existence in baled form before the
Sec 205 of the same code. (Independent Contractor means any agreements of sale were made, or, at least, would have been in
person whose activity consists essentially of the sale of all kinds of existence even if none of the individual sales in question had been
services for a fee regardless of whether or not the performance of the consummated; and that it would have been baled, nevertheless, for
service calls for the exercise or use of the physical or mental faculties sale to someone else, since it was proven customary to sell hemp in
of such contractors or their employees.) bales.
ISSUES:
CELESTINO V. COLLECTOR
WON ADMU is an independent contractor hence liable for tax? NO. 99 PHIL 841 (1956)
WON the acceptance of research projects by the IPC of ADMU a TEST OF HABITUALITY
contract of sale or a contract for a piece of work? NEITHER.
CIR V ENGINEERING EQUIPMENT
HELD:
ENGINEERING V CA (1996)
The distinction depends on the intention of parties.
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JUSTIN RYAN MORILLA
Thus, if parties intended that at some future date an object has to be
delivered, without considering the work or labor of the party bound to
deliver, the contract is one of sale; but if one of the parties accepts the
undertaking on the basis of some plan, taking into account the work he
will employ personally or through another, the contract is for a piece of
work
DMPI V ARAGONES
JUNE 23, 2005
The distinction between a contract of sale and one for work, labor and
materials is tested by inquiry whether the thing transferred is one not in
existence and which never would have existed but for the order of the
party desiring to acquire it, or a thing which would have existed but has
been the subject of sale to some other persons even if the order had
not been given. If the article ordered by the purchaser is exactly such
as the seller makes and keeps on hand for sale to anyone, and no
change or modification of it is made at purchaser‘s request, it is a
contract of sale even though it may be entirely made after, and in
consequence of the purchaser‘s order for it.
In the case at bench, the modular paving blocks are not exactly what
the plaintiff-appellee makes and keeps on hand for sale to anyone, but
with a modification that the same be "S" in shape. Hence, the
agreement falls within the ambit of Article 1467 making Article 1729
likewise applicable in the instant case.
COMMISSIONER OF
INTERNAL REVENUE V. CA, 271 SCRA 605 (1997)
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1) Performance of the prestation in lieu of payment (animo defendant. Because of SSS failure to come up with the required Deed
solvendi) which may consist in the delivery of a corporeal of Assignment to effect said transfer, AG&P prepared the draft and
thing or a real right or a credit against the third person; submitted it to the Office of the VicePresident. Unfortunately, the
defendant failed to take any action on said Deed of Assignment
2) Some difference between the prestation due and that which causing AG&P to re-submit it to the same office.
is given in substitution (aliud pro alio); and
More than a year after the approval of AG&P‘s proposal, defendant
3) An agreement between the creditor and debtor that the sent the revised copy of the Deed of Assignment to AG&P. However,
obligation is immediately extinguished by reason of the the amount of the plaintiffs‘ obligation appearing in the approved Deed
performance of a presentation different from that due. of Assignment has ballooned allegedly because of the additional
interests and penalty charges assessed on plaintiffs‘ outstanding
FILINVEST VS. PHIL. ACETYLENE - The mere return of the obligation from April 2001, the date of approval of the proposal, up to
mortgaged motor vehicle by the mortgagor, the herein appellant, to the January 2003.
mortgagee, the herein appellee, does not constitute dation in payment
or dacion en pago in the absence, express or implied of the true AG&P demanded for the waiver and deletion of the additional interests
intention of the parties. on the ground that delay in the approval of the deed and the
subsequent delay in conveyance of the property in defendant‘s name
SALE DACION EN PAGO was solely attributable to the defendant. Defendant, however, refused
Contract Mode to Extinguish the contract to accept the payment through dacion en pago, unless plaintiffs also
pay the additional interests and penalties being charged.
SSS moved for the dismissal of the complaint for lack of jurisdiction
Creates an obligation Obligation previously and non-exhaustion of administrative remedies.
contracted is extinguished
ISSUE: Which body has jurisdiction to entertain a controversy arising
from the non-implementation of a dacion en pago agreed upon by the
parties as a means of settlement of private respondents‘ liabilities.
HELD: The action then is one for specific performance which case law
holds is an action incapable of pecuniary estimation falling under the
jurisdiction of the Regional Trial Court, and does not fall within the
jurisdiction of the Social Security Commission.
LEASE - use of thing for a price and return of the same after the
SSS vs. AGP period
(April 30, 2008)
If use of thing without the price, it is commodatum.
FACTS: Plaintiff informed the SSS in writing of its premiums and loan
amortization delinquencies. AG&P chose to settle its obligation with
the SSS through dacion en pago. AG&P was, thereafter, directed by
the defendant to submit certain documents, such as Transfer
Certificate of Title, Tax Declaration covering the subject lot, and the
proposed subdivision plan, which requirements AG&P immediately
complied. SSS approved AG&P‘s proposal to settle its and
SEMIRARA‘s delinquencies through dacion en pago. A Deed of
Assignment has to be executed between the plaintiffs and the
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JUSTIN RYAN MORILLA
ELEMENTS OF
A CONTRACT OF SALE
Article 1318. There is no contract unless the following requisites
concur:
ARTICLE 1484. In a contract of sale of personal property the WHAT IS THE EFFECT IF ONE OF THE ELEMENTS OF A
price of which is payable in instalments, the vendor may exercise CONTRACT OF SALE IS MISSING? The contract is void. (Mapalo
any of the following remedies: vs. Mapalo 17 SCRA 114)
Exact fulfillment of the obligation, should the vendee fail to pay; Article 1409. The following contracts are inexistent and void from the
beginning:
Cancel the sale, should the vendee‘s failure to pay cover two or
more installments; (1) Those whose cause, object or purpose is contrary to law, morals,
good customs, public order or public policy;
Foreclose the chattel mortgage on the thing sold, if one has been (2) Those which are absolutely simulated or fictitious;
constituted, should the vendee‘s failure to pay cover two or more
installments. In this case, he shall have no further action against (3) Those whose cause or object did not exist at the time ofthe
the purchaser to recover any unpaid balance of the price. Any transaction;
agreement to the contrary shall be void. (1454-A-a)
(4) Those whose object is outside the commerce of men;
1484 – relief available to an unpaid installment seller
(5) Those which contemplate an impossible service;
ARTICLE 1485. The preceding article shall be applied to contract
(6) Those where the intention of the parties relative to the principal
purporting to be leases of personal property with option to buy,
object of the contract cannot be ascertained;
when the lessor has deprived the lessee of the possession or
enjoyment of the thing. (7) Those expressly prohibited or declared void by law.
1485- 1484 is applicable if there is lease of personal property and These contracts cannot be ratified. Neither can the right to set up the
lessor deprives the lessee of possession or enjoyment of the SM defense of illegality be waived.
INCAPACITATED PARTIES
ABSOLUTELY INCAPACITATED
Unemancipated minors;
In cases of intimidation, violence or undue influence, from the 2 REQUISITES FOR SALE OF NECESSARIES TO MINOR TO BE
time the defect of the consent ceases. VALID AND NOT MERELY VOIDABLE:
In case of mistake or fraud, from the time of the discovery of the 1) Perfection of the sale
same. 2) Delivery of the necessaries
And when the action refers to contracts entered into by minors or SPECIAL DISQUALIFICATION
other incapacitated persons, from the time the guardianship
ceases. (1301a) Special disqualifications to persons under civil interdiction
RESTITUTION Article 34. Civil interdiction. - Civil interdiction shall deprive the
offender during the time of his sentence of the rights of parental
When the defect of the contract consists in the incapacity of one of the authority, or guardianship, either as to the person or property of
parties, the incapacitated person is not obliged to make any restitution, any ward, of marital authority, of the right to manage his property
except insofar as he has been benefited by the thing or price and of the right to dispose of such property by any act or any
received by him. conveyance inter vivos.
2015 BQ: Jackie inherited a townhouse. She wanted to study in an 1) Minors, insane, and demented persons
2) Deaf-mutes who do not know how to write
exclusive school so she sold the townhouse. When the buyer found out
that Jackie was still a minor, Jackie promised to execute another 3) Persons under the state of drunkenness or under hypnotic
contract of sale upon reaching the age of majority. When Jackie turned spell, unless of course if it is done under lucid interval
4) Persons suffering from civil interdiction
25, she wanted to annul the contract of sale.
What is the status of the contract—valid, void, or voidable? PERSONS RELATIVELY INCAPACITATED
Can Jackie annul the contract?
SPOUSES AS PARTIES
SUGGESTED ANSWER OF ATTY. ESPEJO: The sale is voidable.
Under Art 1390 of the Civil Code, a sale where one of the parties is CONTRACTS WITH THIRD PARTIES
incapable of giving consent to a contract including minors, is voidable
but subject to annulment or ratification. In this case, since Jackie was Art. 73. Either spouse may exercise any legitimate profession,
still a minor when she sold the property the sale is voidable. occupation, business or activity without the consent of the other.
The latter may object only on valid, serious, and moral grounds.
However, Jackie could no longer recover the property. Under Art.
1391, the action for annulment shall be brought within four years In case of disagreement, the court shall decide whether or not:
counted from the time the minor attained the age of majority or when
the guardianship ceases. Since Jackie is already 25 years old which is (1) The objection is proper, and
7 years after reaching the age of majority, the action to annul has
clearly prescribed. (2) Benefit has occurred to the family prior to the objection or
thereafter. If the benefit accrued prior to the objection, the
WHEN BOTH PARTIES ARE INCAPACITATED: Contract is resulting obligation shall be enforced against the separate
UNENFORCEABLE not void subject to ratification when both parties property of the spouse who has not obtained consent.
are incapable of giving consent to a contract.
The foregoing provisions shall not prejudice the rights of
BILDO CASE creditors who acted in good faith. (117a)
DECEMBER 1917
Art. 96. The administration and enjoyment of the community
SC did not allow the minor to allege his incapacity. This is a contract property shall belong to both spouses jointly. In case of
entered into by minors when they pretended that they are of age. disagreement, the husband's decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which must
EXCEPTION: If contracts of these incapacitated persons are for be availed of within five years from the date of the contract
NECESSARIES or those things which are indispensable for his implementing such decision.
support, they must pay a reasonable price therefor (1489)
In the event that one spouse is incapacitated or otherwise unable
Where necessaries are sold and delivered to a minor or other person to participate in the administration of the common properties, the
without capacity to act, he must pay a reasonable price therefore,‖ and other spouse may assume sole powers of administration. These
the resulting sale is valid, and not merely voidable. powers do not include disposition or encumbrance without
authority of the court or the written consent of the other spouse.
WHAT ARE NECESSARIES? In the absence of such authority or consent, the disposition or
encumbrance shall be void. However, the transaction shall be
Art. 194. Support compromises everything indispensable for construed as a continuing offer on the part of the consenting
sustenance, dwelling, clothing, medical attendance, education spouse and the third person, and may be perfected as a binding
and transportation, in keeping with the financial capacity of the contract upon the acceptance by the other spouse or
family. authorization by the court before the offer is withdrawn by either
or both offerors. (206a)
The education of the person entitled to be supported referred to
in the preceding paragraph shall include his schooling or training Art. 124. The administration and enjoyment of the conjugal
for some profession, trade or vocation, even beyond the age of partnership shall belong to both spouses jointly. In case of
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disagreement, the husband's decision shall prevail, subject to For as long as the provisions of the FC does not impair vested rights,
recourse to the court by the wife for proper remedy, which must the FC should be given retroactive effect.
be availed of within five years from the date of the contract
implementing such decision.
Art. 1410. The action or defense for the declaration of the
In the event that one spouse is incapacitated or otherwise unable inexistence of a contract does not prescribe.
to participate in the administration of the conjugal properties, the
other spouse may assume sole powers of administration. These
powers do not include disposition or encumbrance without Art. 239. When a husband and wife are separated in fact, or one
authority of the court or the written consent of the other spouse. has abandoned the other and one of them seeks judicial
In the absence of such authority or consent, the disposition or authorization for a transaction where the consent of the other
encumbrance shall be void. However, the transaction shall be spouse is required by law but such consent is withheld or cannot
construed as a continuing offer on the part of the consenting be obtained, a verified petition may be filed in court alleging the
spouse and the third person, and may be perfected as a binding foregoing facts.
contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by either The petition shall attach the proposed deed, if any, embodying
or both offerors. (165a) the transaction, and, if none, shall describe in detail the said
transaction and state the reason why the required consent thereto
cannot be secured. In any case, the final deed duly executed by
GENERAL RULE: Spouses can enter into contract as to third persons
the parties shall be submitted to and approved by the court.
because of Art. 73 of the Family Code.
AINZA VS PADUA 2015 BQ: Marco and Gina were married in 1989. 10 years later, Gina
left Marco and lived with another man, leaving their 2 children with
NOTE: SC applied Civil Code here not the family Code since the sale Marco. When Marco needed money for the children‘s education, he
was made in 1987 sold their conjugal property which Marco acquired before their
marriage without Gina‘s consent.
The legal ground which deserves attention is the legal effect of a sale
of lands belonging to the conjugal partnership made by the wife Is the sale valid, void or voidable?
without the consent of the husband.
SUGGESTED ANSWER OF ATTY. ESPEJO: At the onset, it shall be
The sale made by Gimena is certainly a defective contract but of what noted that Marco and Gina were married during the effectivity of the
category? The answer: it is a voidable contract. Family Code. Thus, in the absence of a marriage settlement, the
appropriate matrimonial regime is absolute community property. Under
According to Art. 1390 of the Civil Code, among the voidable contracts Article 96 of the FC which applies to the aforesaid matrimonial regime,
are "[T]hose where one of the parties is incapable of giving a sale of property without the other spouse‘s written consent is void.
consent to the contract." (Par. 1.) In the instant case, Gimena had no In this case, the separation in fact between Marco and Gina did not
capacity to give consent to the contract of sale. The capacity to give affect their regime of absolute community property. Hence, the consent
consent belonged not even to the husband alone but to both spouses. of both spouses must still be obtained in every transaction involving
The view that the contract made by Gimena is a voidable contract is their absolute community property. In the absence of judicial
supported by the legal provision that contracts entered by the authorization, Marco could not validly sell the property without Gina‘s
husband without the consent of the wife when such consent is consent.
required, are annullable at her instance during the marriage and
within ten years from the transaction questioned. (Art. 173, Civil Contract of Sale; Marital Community Property; Formalities (2006)
Code).
Spouses Biong and Linda wanted to sell their house. They found a
Gimena‘s contract is not rescissible for in such a contract all the prospective buyer, Ray. Linda negotiated with Ray for the sale of the
essential elements are untainted but Gimena‘s consent was tainted. property. They agreed on a fair price of P2 Million. Ray sent Linda a
Neither can the contract be classified as unenforceable because it letter confirming his intention to buy the property. Later, another
does not fit any of those described in Art. 1403 of the Civil Code. And couple, Bernie and Elena, offered a similar house at a lower price of P
finally, the contract cannot be void or inexistent because it is not one of 1.5 Million. But Ray insisted on buying the house of Biong and Linda
those mentioned in Art. 1409 of the Civil Code. By process of for sentimental reasons. Ray prepared a deed of sale to be signed
elimination, it must perforce be a voidable contract. by the couple and a manager's check for P2 Million. After receiving the
P2 Million, Biong signed the deed of sale. However, Linda was not able
Under Art. 124 of Family Code, sale by husband of a conjugal to sign it because she was abroad. On her return, she refused to sign
property without the wife‘s consent is void and not merely the document saying she changed her mind. Linda filed suit for
voidable, since the resulting contract lacks one of the essential nullification of the deed of sale and for moral and exemplary damages
elements of ―full consent‖. Guiang v. CA, 291 SCRA 372 (1998). against Ray. Will the suit prosper? Explain. (2.5%)
A wife affixing her signature to a Deed of Sale as a witness is ALTERNATIVE ANSWER: No, the suit will not prosper. The contract
deemed to have given her consent. Pelayo v. Perez, 459 SCRA of sale was perfected when Linda and Ray agreed on the object of the
475 (2005). sale and the price [Art. 1475, New Civil Code]. The consent of Linda
has already been given, as shown by her agreement to the price of the
As an EXCEPTION, husband may dispose of conjugal property sale. There is therefore consent on her part as the consent need not
without wife‘s consent if such sale is necessary to answer for be given in any specific form. Hence, her consent may be given by
conjugal liabilities mentioned in Articles 161 and 162. Abalos v. implication, especially since she was aware of, and participated in the
Macatangay, Jr., 439 SCRA 64 (2004). sale of the property (Pelayo v. CA, G.R. No. 141323, June 8, 2005).
Her action for moral and exemplary damages will also not prosper
FUENTES V ROCA because the case does not fall under any of those mentioned in Art.
APRIL 21, 2010. 2219 and 2232 of the Civil Code.
Family Code applies. Although Paciano and Rosario married in 1950,
Paciano sold the conjugal property to the Fuentes spouses on Jan 8, ALTERNATIVE ANSWER: The suit will prosper. Sale of community
1989 a few month after the FC took effect. 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
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JUSTIN RYAN MORILLA
consent on her part. The consent of Biong by himself is insufficient to that the prohibition should apply also to common-law relationships. cf.
effect a valid sale of community property (Art. 96, Family Code; Abalos Matabuena v. Cervantes, 38 SCRA 284 (1971).
v. Macatangay, G.R. No. 155043, September 30, 2004). Sale by husband of conjugal land to his concubine is null and void for
being contrary to morals and public policy and ―subversive of the
Does Ray have any cause of action against Biong and Linda? Can stability of the family, a basic social institution which public policy
he also recover damages from the spouses? Explain. (2.5%) cherishes and protects.‖ Agapay vs Palang; Calimlim-Canullas v.
Fortun, 129 SCRA 675 (1984).
Considering that the contract has already been perfected and taken
out of the operation of the statute of frauds, Ray can compel Linda and Nevertheless, when property resold to a third-party buyer in good
Biong to observe the form required by law in order for the property to faith and for value, reconveyance is no longer available. Cruz v.
be registered in the name of Ray which can be filed together with the CA, 281 SCRA 491 (1997).
action for the recovery of house [Art. 1357 New Civil Code]. In the
alternative, he can recover the amount of Two million pesos SALE BETWEEN SPOUSES
(P2,000,000.00) that he paid. Otherwise, it would result in solutio
indebiti or unjust enrichment. Ray can recover moral damages on the GENERAL RULE: NO (Article 1490),
ground that the action filed by Linda is clearly an unfounded civil suit
which falls under malicious prosecution {Ponce v. Legaspi, G.R. No. UNLESS:
79184, May 6,1992).
When a separation of property was agreed upon in the
BETWEEN SPOUSES marriage settlements; OR
Neither does this prohibition apply to moderate gifts which the Because sale is an ONEROUS and
spouses may give each other on the occasion of any family COMMUTATIVE contract while
rejoicing. (1334a) DONATION is gratuitous
Article 1490. The husband and the wife cannot sell property to In sale, value was exchanged for equal
each other, except: value and there would be no deficiency
in property of each spouse whereas in
When a SEPARATION OF PROPERTY was agreed upon in the donation, the estate of the donor would
MARRIAGE SETTLEMENTS; or necessarily be reduced and increase the
estate of the donee
When there has been a JUDICIAL SEPARATION OF PROPERTY
under article 191. (1458a) When there has been a judicial separation of property under
Article 191 (when spouse is sentenced to a penalty which
carries with it civil interdiction or has been declared absent
Article 1492. The prohibitions in the two preceding articles are
or in case of legal separation)
APPLICABLE TO SALES IN LEGAL REDEMPTION,
COMPROMISES AND RENUNCIATIONS. (n)
If the spouses are separated only in fact, apply the general rule that
they cannot sell property to each other.
Art. 87. Every DONATION OR GRANT OF GRATUITOUS
ADVANTAGE, direct or indirect, between the spouses during the IF THEY ARE NOT LEGALLY SEPARATED, CAN THEY STILL
marriage shall be VOID, EXCEPT moderate gifts which the SELL TO EACH OTHER? Yes, if they go for a voluntary separation of
spouses may give each other on the occasion of any family property.
rejoicing. THE PROHIBITION SHALL ALSO APPLY TO PERSONS
LIVING TOGETHER AS HUSBAND AND WIFE WITHOUT A VALID WHO CAN QUESTION THE SALE?
MARRIAGE. (133a)
The in pari delicto doctrine would not apply to the spouses-
REASON: Spouses are one in law. He cannot give or sell something to parties under Art. 1490, since only the heirs and the creditors can
himself. question the sale‘s nullity. Modina v. CA, 317 SCRA 696 (1999).
Sales between spouses who are not governed by a complete However in Medina vs Collector:
separation of property regime are void, not just voidable. Medina v.
Collector, 1 SCRA 302 (1960). The government, as correctly pointed out by the Tax Court, is always
an interested party to all matters involving taxable transactions and,
Medina gave the rationale for the relative incapacity of spouses to sell needless to say, qualified to question their validity or legitimacy
properties to one another to be as follows: whenever necessary to block tax evasion.
1) To prevent a spouse defrauding his creditors by transferring WHAT OTHER SALES WHERE CONSENT IS DEFECTIVE MAKING
his properties to the other spouse; THEM VOIDABLE CONTRACTS?
2) To avoid a situation where the dominant spouse would
Art. 1390. The following contracts are voidable or annullable, even
unduly take advantage of the weaker spouse, thereby
though there may have been no damage to the contracting
effectively defrauding the latter; and
parties:
3) To avoid an indirect violation of the prohibition against
donations between spouses under Article 133 of the Civil
(1) Those where one of the parties is incapable of giving consent
Code.
to a contract;
(2) Those where the consent is vitiated by mistake, violence,
Since the spouses cannot validly sell property to one another under
intimidation, undue influence or fraud.
Art. 1490, then policy consideration and the dictates of morality require
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JUSTIN RYAN MORILLA
These contracts are binding, unless they are annulled by a proper (1) The guardian, the property of the person or persons who may
action in court. They are susceptible of ratification. be under his guardianship;
RODRIGUEZ vs.MACTAL
G.R. No. L-39720
April 4, 1934
GODDARD, J.:
The prohibition cannot be made to apply unless there was a proof that
a third party buyer is a mere intermediary of the guardian or that the
latter had previously agreed with the third party buyer to buy the
property for the disqualified person.
SUGGESTED ANSWER OF ATTY. ESPEJO: The deed of sale is void
for the following reasons: However, in a later case:
Under Art 1409 of the Civil Code, a contract whose cause, subject or PHILIPPINE TRUST COMPANY vs. ROLDAN
purpose is contrary to law, morals, public customs, order, or public G.R. No. L-8477
policy is void. May 31, 1956
BENGZON, J.:
Furthermore, contracts declared by law as void are likewise void. In Yu
v PAGCOR (2009) contracts expressly declared by law as void such This totally reverses Rodriguez vs. Mactal. Even arguendo the
as gambling contracts cannot be ratified. guardian without malice besets a guardian so circumstanced,
necessitates the annulment of the transaction, even if no actual
In this case, the contract was executed in connection to a gambling collusion is proved between such guardian and the intermediate
debt making it void. Z can therefore file an action from the deed of sale purchaser. This would uphold a sound principle of equity and justice.
and recover his loss.
In Roldan case, even if there is no actual collusion that is proved, it is
Art 2014 CC Any loser in a game of chance may recover his loss from
void because of that incapacity.
the winner, with legal interest from the time he paid the amount lost,
and subsidiarily from the operator or manager of the gambling house.
(2) Agents, the property whose administration or sale may have
been intrusted to them, unless the consent of the principal has
RELATIVE INCAPACITY been given;
Article 1491. The following persons cannot acquire by purchase, “Brokers” do not come within the coverage of the prohibition as their
even at a public or judicial auction, either in person or through authority consist merely in looking for a buyer or a seller, and to bring
the mediation of another: the former and the latter together to consummate the transaction;
therefore, they are not prohibited to buy for themselves.
(1) The guardian, the property of the person or persons who may
be under his guardianship; (3) Executors and administrators, the property of the estate under
administration;
(2) Agents, the property whose administration or sale may have
been intrusted to them, unless the consent of the principal has Hereditary Rights are Not Included in the Coverage because
been given; hereditary rights pertain immediately to the heirs upon death of the
decedent and do not form part of the estate under administration.
(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
(4) Public officers and employees, the property of the State or of controlled corporation, or institution, the administration of which
any subdivision thereof, or of any government-owned or has been intrusted to them; this provision shall apply to judges
controlled corporation, or institution, the administration of which and government experts who, in any manner whatsoever, take
has been intrusted to them; this provision shall apply to judges part in the sale;
and government experts who, in any manner whatsoever, take
part in the sale;
REASON FOR PROHIBITION: To prevent some sort of insider trading
(5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with MAHARLIKA VS. SPOUSES TAGLE
the administration of justice, the property and rights in litigation G.R. NO. L-65594
or levied upon an execution before the court withinwhose JULY 9, 1986
jurisdiction or territory they exercise their respective functions; GUTIERREZ, JR., J.:
this prohibition includes the act of acquiring by assignment and
shall apply to lawyers, with respect to the property and rights FACTS: Land was foreclosed by GSIS and was sold in public auction.
which may be the object of any litigation in which they may take It was bought by the wife of the chief of the Retirement Division of
part by virtue of their profession; GSIS.
(6) Any others specially disqualified by law. HELD: A Division Chief of the GSIS is not an ordinary employee
without influence or authority. The mere fact that he exercises ample
REASON FOR PROHIBITION: Public policy.
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authority with respect to a particular activity, i.e., retirement, shows that
his influence cannot be lightly regarded. IS IT ALSO ACCEPTABLE IF THE LAWYER HIMSELF
UNDERTAKES TO UNDERWRITE THE EXPENSES OF THE CASE?
The point is that he is a public officer and his wife acts for and in his
name in any transaction with the GSIS. If he is allowed to participate in FORNILDA vs. RTC
the public bidding of properties foreclosed or confiscated by the GSIS, G.R.No. L-72306
there will always be the suspicion among other bidders and the general January 24, 1989
public that the insider official had access to information and MELENCIO-HERRERA, J.:
connections with his fellow GSIS officials as to allow him to eventually
acquire the property. It is precisely the need to forestall such FACTS: Property was mortgaged to the lawyer while the case is
suspicions and to restore confidence in the public service that the Civil pending. It was foreclosed after the termination of the case and the
Code now declares such transactions to be void from the beginning lawyer sold it in public auction.
and not merely voidable.
SC said it is VOID.
SC extended the prohibition. The prohibition applies not only in terms
of office being held but in terms of relations. Spouses are included. GENERAL RULE: Once the case is still pending, you do not consider
the sale valid.
(5) Justices, judges, prosecuting attorneys, clerks of superior and
inferior courts, and other officers and employees connected with But if there are special considerations, such as when the facts of the
the administration of justice, the property and rights in litigation case are similar to Fornilda vs. RTC, consider it as an EXCEPTION to
or levied upon an execution before the court withinwhose general rule.
jurisdiction or territory they exercise their respective functions;
this prohibition includes the act of acquiring by assignment and THE CONJUGAL PARTNERSHIP OF THE SPOUSES CADAVEDO
shall apply to lawyers, with respect to the property and rights vs. LACAYA
which may be the object of any litigation in which they may take G.R. No. 173188
part by virtue of their profession; January 15, 2014
BRION, J.:
The early case of GAN TINGCO V. PABINGUIT, clarified that for the
prohibition under Article 1491 to apply to judges, it is not required that FACTS: Lawyer represents the clients. And their fee stipulation, where
some contest or litigation over the property itself should have they were also able to present the contract for attorney‘s fees with the
been tried by the said judge; such property is in litigation from the lawyer — contingent fee basis and if they would become the prevailing
moment that it became subject to the judicial action of the judge, such parties they would pay the sum of P2,000 for attorney‘s fees.
as levy on execution.
What the lawyer was trying to do here was to represent the clients not
1. The property sold to the lawyer pending appeal. only in one case, but several interrelated cases involving conjugal
property.
The question here simply is, “Is it still pending litigation?”
September 1981, Atty. Lacaya entered his appearance in Civil Case
If the case is no longer pending, there is no longer prohibition, No. 1721 by filing a motion for the issuance of the execution. The case
but if the property is still in litigation, then the sale is void. is already in the execution stage.
Property was purchased by counsel pending certiorari September 23, 1981, Spouses Ames filed Civil Case No. 3352 against
proceeding (Valencia vs. Cabanting) Sps. Cadavedo represented by Atty. Lacaya.
There were 2 cases and the lawyer represented the party in Then, in October 16, 1981, the RTC granted the motion for the
both of these cases. In one of those cases, the lawyer issuance of the writ of execution and the spouses took possession of
acquired the property as payment of professional services the subject lot on October 24, 1981.
while the other case is still pending. The sale is VALID with
respect to the case that is not pending. (Municipal Council Soon after the subject matter was subdivided, the lawyer took one of
of Iloilo vs. Evangelista). the subdivided portions alleging that the contingent fees was orally
amended – that they orally agreed to novate their contract and instead
The lawyer acquired the property long before he of receiving money, the lawyer will receive half of the property.
intervened in the case of the party. SC said that the
purchase is valid. On May 13, 1982, Ames and Atty. Lacaya executed the Compromise
Agreement whereby Atty. Lacaya ultimately obtained 10 hectares of
CFI Judge can buy properties in litigation pending outside the property.
his territorial jurisdiction.
Atty. Lacaya undertook to advance all expenses of the litigation.
2. Purchase of property before action in courts
HELD: SC ruled A thing is in litigation if there is a contest or
No case has yet been filed so it is not yet in litigation. litigation over it in court or when it is subject of the judicial
action. Following this definition, we find that the subject lot was still in
3. Purchase after the finality of the litigation litigation when Atty. Lacaya acquired the disputed one-half portion.
Sale is valid. (Vda. de Laig, et al. vs. Court of Appeals; 86 SCRA From these timelines, whether by virtue of the alleged oral contingent
641) fee agreement or an agreement subsequently entered into, Atty.
Lacaya acquired the disputed one-half portion (which was after
4. Property to serve as contingent fee October 24, 1981) while Civil Case No. 3352 and the motion for the
issuance of a writ of execution in Civil Case No. 1721 were already
CONTINGENT FEE - payment paid to a lawyer or an arrangement pending before the lower courts. Similarly, the compromise agreement,
where professional service would depend upon the outcome of the including the subsequent judicial approval, was effected during the
case. That is s valid because transfer of assignment takes effect pendency of Civil Case No. 3352. In all of these, the relationship of a
only after finality of the judgment. lawyer and a client still existed between Atty. Lacaya and the spouses
Cadavedo.
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JUSTIN RYAN MORILLA
purchased by the vendor Richard using his lottery winnings, as his
Likewise, this agreement is champertous and is contrary to public marriage to Rica was not yet dissolved, such lotto winnings were still
policy. In Bautista v. Atty. Gonzales, the Court struck down the part of the absolute community of property and so was the parcel
contingent fee agreement between therein respondent Atty. Ramon A. of land bought out of the proceeds thereof. Rica‘s consent was
Gonzales and his client for being contrary to public policy. There, the not obtained in either of the sales making both void.
Court held that an reimbursement of litigation expenses paid by
the former is against public policy, especially if the lawyer has Finally it must be noted that when the lot was purchased by Atty. Cruz,
agreed to carry on the action at his expense in consideration of there was a pending annulment case filed by Rita against the vendor
some bargain to have a part of the thing in dispute. It violates the Richard. As previously noted, the property was bought by Richard to
fiduciary relationship between the lawyer and his client. his lottery winnings obtained during the subsistence of the marriage.
Hence, the lot is still technically part of the community property.
The rule of the profession that forbids a lawyer from contracting with Annulment proceedings involved determination of the properties and
his client for part of the thing in litigation in exchange for conducting the may be resolved to the separation of properties between the spouses.
case at the lawyer‘s expense is designed to prevent the lawyer from For this reason, when the lot was sold to Atty Cruz, the sale was
acquiring an interest between him and his client. To permit these technically property in litigation which under Article 1491, a
arrangements is to enable the lawyer to "acquire additional stake in the lawyer cannot buy while the case is still pending. Thus, from this
outcome of the action which might lead him to consider his own POV, the sale of a parcel of land is void.
recovery rather than that of his client or to accept a settlement which
might take care of his interest in the verdict to the sacrifice of that of his
client in violation of his duty of undivided fidelity to his client‘s cause.
AGENT – PRINCIPAL
GUARDIAN - WARD
EXECUTOR / ADMINISTRATOR - ESTATE
2013 BQ: Rica petitioned the annulment of their 10-year old marriage
with Richard. Richard hired Atty. Cruz to represent him in the
proceedings. In payment of Atty. Cruz‘s acceptance and attorney‘s
fees, Richard conveyed to Atty. Cruz a parcel of land in Taguig that he
recently purchased with his lotto winnings. The transfer of documents
was duly signed and Atty. Cruz immediately took possession by
fencing of the properties in the perimeter. Despite the transfer to Atty.
Cruz, Richard offered the same parcel of land to the Spouses Garcia.
After inspection of the land and considering it as a good investment,
they purchased it from Richard. Immediately after the sale, the
spouses Garcia commenced the construction of a three-storey building
over the land but they were prevented from doing so by Atty. Cruz who
claimed that he has a better right in ling to the prior conveyance of the
property. Is Atty. Cruz‘s claim correct?
Neither Atty. Cruz nor the spouses were vendees in a perfectly valid
sale. In both instances, the property sold to them, were in turn
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JUSTIN RYAN MORILLA
SUBJECT MATTER A valid sale may be made of a thing, which though not yet
actually in existence, is reasonably certain to come into
REQUISITESOF VALID SUBJECT MATTER existence. A man may sell property of which he is potentially and not
actually possessed.
A valid contract of sale would result from the meeting of the minds of
the parties on a subject matter that has at the time of perfection In PICHEL V. ALONZO, where the issue was whether the grantee of a
thefollowing requisites: public land under the Public Land Act had violated the statutory
prohibition from disposing, assigning or encumbering the land, the
1) It must be existing, having potential existence, a future thing, Court held no such violation of the law, since the subject matter of the
or even contingent or subject to a resolutory condition; in contract of sale were fruits of the coconut trees on the land over
other words, it must be a―POSSIBLE THING;‖ specified years, and the same could be dealt with separately from the
2) It must be LICIT; and land itself, and even from the coconut trees themselves. The Court
3) It must be DETERMINATE or at least DETERMINABLE. also held that the subject matter was determinate, although with a
potential existence.
1. Existing, but it may be future and it may even have
contingent existence. EMPTIO SPEI
Article 1461. Things having a potential existence may be the WHAT ABOUT THIS EMPTIO SPEI? This is the SALE OF A HOPE. It
object of the contract of sale. is subject to the following elements:
The efficacy of the sale of a mere hope or expectancy is deemed a. Thing itself is not certain to exist
subject to the condition that the thing will come into existence. b. Object of the contract is the hope itself
c. The hope or expectancy must not be made
The sale of a vain hope or expectancy is void.
In emptio spei, what are you selling? PRESENT THING. You are
FUTURE - goods to be manufactured, acquired by the seller after the selling HOPE.
perfection of the contract of sale
Example: Sale of lotto tickets for 10 pesos. The buyer purchases the
Example: A entered into a contract of sale with B where A agrees to hope that upon the draw the ticket would win 20M pesos. The object of
buy all crops to be harvested from the property of B. Does it make the the sale is the ticket which represents the hope or expectancy not the
contract of sale void on the simple possibility that the subject prize itself. Therefore, if the ticket will not win, the sale would still be
may not arise from? No because contract of sale can be made over valid. You are not buying the 20M. You are only buying the hope of
future goods. getting 20M.
When you determine the existence of goods as subject matter of Now, if it is a vain hope, for example, the ticket is already expired, or it
contract of sale, do not think in terms of physical existence or non has been falsified, the sale is void because it is a vain hope or
existence. You have to determine whether strict science and expectancy.
technology will allow the subject matter to come into existence.
BETWEEN EMPTIO REI SPERATAE AND EMPTIO SPEI WHICH
Example: A expects or hopes to acquire a house and lot on January AMONG THE TWO OF THEM IS VALID? BOTH OF THEM ARE
14, 2016. Can A sell the lot? YES. Under Article 1461, the efficacy of VALID. The only time it becomes void is when the expectancy or hope
the sale of a mere hope or expectancy is deemed subject to the is a vain one.
condition that the thing will come into existence.
EMPTIO REI SPERATAE EMPTIO SPEI
When you talk about buying future property, the contract is perfectly
valid because the subject matter is only required at the time of The subject matter is a Present thing—THE HOPE
delivery of the subject matter. future thing or something
that has potential or future
Remember the difference between a suspensive condition and a existence.
resolutory condition. Suspensive condition suspends the efficacy
of an obligation. It is subordinated to the happening to a future and
uncertain event. If the condition does not take place, the parties would The thing must exist for it Whether the hope or expectancy is
stand as if the obligation had never existed. to be valid. not fulfilled and therefore do not
exist, the sale is still valid provided
The efficacy of the sale of a mere hope or expectancy is deemed it is not vain.
subject to the [suspensive] condition that the thing will come into
existence.
Contract of sale is onerous and commutative.
This is also known as EMPTIO REI SPERATAE. It is a contract
covering future things subject toa suspensive condition that the subject Equivalence of values- You pay for something hoping to get the exact
matter will come into existence. same thing or the exact value. That is not in emptio spei.
Example: Sale of piglets which are yet to be born. The sale is subject
to the condition that the piglets will be born alive. If it does not come
into existence, then the contract is extinguished.
JURISPRUDENCE
In SIBAL V. VALDEZ, the Court held that pending crops which have
potential existence may be the valid subject matter of sale, and may be
dealt with separately from the land on which they grow.
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GENERIC OBJECTS are allowed even if technically speaking they are
generic. This is the most common sale. When you buy meat or
vegetables at the market, those are not determinate. You buy
according to the quality, not necessarily designating it physically from
the class. That is still valid.
Wrong designation of the lot does not vitiate the sale since the
parties before entering into the contract saw the actual setting
and the meets and bounds of the subject matter.
3. DETERMINATE OR AT LEAST DETERMINABLE. This position is supported by Article 1349 of the Civil Code which
provides that ―every contract must be determinate as to its kind.
Article 1460 states that the ―requisite that the thing be determinate The fact that the quantity is not determinate shall not be an
is satisfied if at the time the contract is entered into, the thing is obstacle to the existence of the contract, provided it is possible to
capable of being made determinate without the necessity of a new determine the same, without the need of a new contract between
or further agreement between the parties,‖ which includes the parties.‖
―determinable‖ albeit generic objects as valid subject matters of
sale. NATIONAL GRAINS AUTHORITY vs. IAC
G.R. No. 74470
DETERMINATE - particularly designated or physically segregated March 8, 1989
from all others of the same class. MEDIALDEA, J.:
SALE OF UNDIVIDED INTEREST Art. 1354. Although the cause is not stated in the contract, it is
presumed that it exists and is lawful, unless the debtor proves the
Under Article 1463 of the Civil Code, the sole owner of thing may sell contrary. (1277)
an undivided interest therein, and there would result co-ownership over
the subject matter. REQUISITESFOR VALID PRICE
SALE OF MORTGAGED PROPERTY 1) THE PRICE MUST BE REAL; IT MUST NOT BE MERELY
SIMULATED OR FICTITIOUS.
Pineda v. Court of Appeals, affirmed the principle that a prior
mortgage of the property does not prevent the mortgagor from selling Price is ―real‖ when at the perfection of the sale, there is
the property, since a mortgage is merely encumbrance on the property legal intention on the part of the buyer to pay the price, and
and does not extinguish the title of the debtor who does not lose his legal expectation on the part of the seller to receive such
principal attribute as owner to dispose of the property. It also noted that price as the value of the subject matter he obligates himself
the law even considers void a stipulation forbidding the owner of the to deliver.
property from alienating the mortgaged immovable.
When the price is simulated because neither party to the
MUST OWNERSHIP OF THE THING SOLD BE VESTED TO THE Deed of Sale had any intention whatsoever that the amount
OWNER AT THE TIME OF THE PERFECTION OF THE CONTRACT? will be paid, the sale is void, although the act may be shown
NO. to have been in reality a donation, or some other contract.
The whole issue therefore boils down to contractual intent: if
there was no intent by the parties at the time of perfection to
Article 1459. xxx the vendor must have a right to transfer the
pay and to receive the price stipulated, then it is a wholly
ownership thereof at the time it is delivered.
simulated price, and the underlying contract of sale is void
for lack of consideration.
DELIVERY IS THE MODE OF TRANSFERING OWNERSHIP.
Ownership is actually not required at the time of perfection; only at the Price is ―false‖ when there is a real price upon which the
time of delivery. minds of the parties had met, but not declared, and what is
stated in the covering deed is not the one intended to be
EXCEPTION: WHEN SELLER MUST BE OWNER paid. If the price indicated in the covering instrument is false,
AT TIME OF SALE the contract of sale is valid, but the underyling deed is
subject to reformation to indicate the real price upon
The exception to the rule that ownership by the seller is not essential at which the minds of the parties have met.
the time of perfection would be in the case of judicial sale.
2 TESTS TO DETERMINE IF PRICE IS REAL:
This is the reason why Article 2085 of the Civil Code, in providing for
the essential requisites of the contract of mortgage, requires among 1) TEST OF INTENTION – whether or not the parties intended
other things, that the mortgagor or pledgor be the absolute owner of to give/receive a price
the thing mortgaged, in anticipation of a possible foreclosure sale
should the mortgagor default in the payment of the loan. 2) TEST OF VALUABLE CONSIDERATION – if price is
nominal [merely titular], then there is no real price
SUBSEQUENT ACQUISITION OF TITLE BY SELLER
EFFECT IF THE CONTRACT STATES THE PRICE
Article 1434 of the Civil Code provides that when at the time of BUT IT WAS NEVER PAID
perfection, the seller sells a subject matter over which he is not the
owner, the subsequent acquisition of title by a seller validates the It is null and void as a Sales question because there was never any
sale and title passes to the buyer by operation of law, provided real consideration. (Montecillo vs. Reynes, Mapalo vs. Mapalo)
there has been previous delivery of the subject matter by the
seller to the buyer. But the contract may be shown in reality a donation or some other
contract.
QUIJADA V. COURT OF APPEALS, recognized that the sale of a
land previously donated by the seller to a local government unit under In Ong vs. Ong, the consideration is 1 peso and other valuable
a resolutory condition, was a valid sale even though at the time of sale, considerations. That is a void sale. However, because of the fact that
ownership in the property was still with the local government. However, the consideration was so small, it may be proven to be instead a
when the resolutory condition did occur which effectively reverted donation.
ownership back to the seller, under Article 1434 the seller‘s ―title
passes by operation of law to the buyer.‖ The Court expresslly Bagnas vs. CA. There is a gross disproportion between the
recognized that the rule under Article 1434 applies not only to sale of consideration stipulated and the value of the thing and therefore it
goods, but also to other kinds of property, including real property. shows that the price is false and fictitious and therefore the contract
is void.
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JUSTIN RYAN MORILLA
SIMULATION OF PRICE AFFECTS
DELIVERY OF SUBJECT MATTER
Article 1473, Civil Code The fixing of the price can never be left to
the discretion of one of the contracting parties. However, if the
price fixed by one of the parties is accepted by the other, the sale
is perfected.
Under Article 1469 of the Civil Code, in order that the price may be If manner of payment has not been agreed upon, there is NO
considered ascertainable, it shall be sufficient that it be so with CONTRACT unless there has already been appropriation by the
reference to another thing certain, or that the determination thereof be buyer.
left to the judgment of a specified person or persons.
Although the Civil Code provisions governing the contract of sale do
Consent is manifested by the meeting of the offer and the acceptance not explicitly require that a meeting of the minds of the parties must
upon the thing and the cost which are constituted in contract. So, at include the terms or manner of payment of the price, the same is
the time of perfection, the price must be fixed already. deemed to be an essential ingredient before a valid and binding
contract of sale can be said to exist, since it is part of the prestation of
the contract, and without which there can be no valid sale, nor can an
WHO MAY FIX THE PRICE
action for specifi c performance be made against the alleged seller.
Manner of payment of the price goes into the essence of what
Price can be fixed by the third person. makes price certain or ascertainable.
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JUSTIN RYAN MORILLA
price was an essential element in the formation of a binding and EQUITABLE MORTGAGE – If there is a deed of sale and there is a
enforceable contract of sale. right to repurchase of a very small amount, it creates a presumption of
equitable mortgage because the transaction is in effect in actuality a
contract of loan with mortgage. The repurchase price is too small
because it represents the last installment of the payment.
The failure to pay the price does not cancel a sale for lack of
consideration, for there is still consideration. The failure to pay a
real price goes not into perfection of the sale but into its
consummation.
But if it is a judicial sale (auction sale), the general rule is the court
may avoid the judicial sale when it is shocking to the conscience
of man and in event of resale, a better price can be obtained.
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JUSTIN RYAN MORILLA
acceptance, and it is not even necessary that the offeree learns of the
FORMATION OF THE withdrawal.
If the offer is given for a period, the expiration of the period or its
withdrawal prior to acceptance would destroy the offer.
a. Death
b. Civil Interdiction
c. Insanity
d. Insolvency
An offer, prior to acceptance, is subject to the complete will of the When the offeror has allowed the offeree a certain period to
offeror and may be withdrawn or destroyed by the offeror prior to its accept, the offer may be withdrawn at any time before acceptance
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JUSTIN RYAN MORILLA
by communicating such withdrawal, except when the option is
founded upon a consideration, as something paid or promised.
It will only give rise for a case for damages and not for specific CONTRACT TO SELL V. OPTION CONTRACT/LEGAL
performance. The seller cannot escape liability by claiming economic REDEMPTION
lesion since the seller renders an option contract as the obligation to
sustain the offer until the end of the agreement. But it doesn‘t mean The rule is different in case of an option contract or in legal redemption
that you cannot withdraw the offer. You can sell it to somebody else. or in a sale with right to repurchase; wherein consignation is not
necessary because these cases involve an exercise of a right or
This is the basis for damages: privilege (to buy, redeem or repurchase) rather than the discharge of
an obligation, hence tender of payment would be sufficient to preserve
the right or privilege. This is because the provisions on consignation
Article 19. Every person must, in the exercise of his rights and in
are not applicable when there is no obligation to pay.
the performance of his duties, act with justice, give everyone his
due, and observe honesty and good faith.
A contract to sell, as in the case before us, involves the performance of
an obligation, not merely the exercise of a privilege or a right.
If there is no consideration and the option contract is violated, Consequently, performance or payment may be effected not tender of
then there is no cause of action. payment alone but by both tender and consignation.
If there is consideration and it was violated, it gives rise to a
cause of action for damages only. You cannot ask for specific
OPTION CONTRACT (2002)
performance.
Explain the nature of an option contract. (2%)
If there is no consideration, but the offer is not withdrawn and the
property is not sold to anybody in the meantime, then the buyer
SUGGESTED ANSWER:
can still buy.
An OPTION CONTRACT is one granting a privilege to buy or sell
The most important distinction with sale is that the subject matter of
within an agreed time and at a determined price. It must be supported
an option contract is actually not the subject matter of the sought
sale, but rather the option to purchase such subject matter, by a consideration distinct from the price. (Art. 1479 and 1482, NCC)
essentially an intangible subject matter or a right.
OPTION CONTRACT; EARNEST MONEY (1993)
ADELFA PROPERTIES held that ―[t]he distinction between an
‗option‘ and a contract of sale is that an option is an unaccepted LT applied with BPI to purchase a house and lot in Quezon City, one of
offer: It states the terms and conditions on which the owner is willing to its acquired assets. The amount offered was Pl,000,000.00 payable, as
sell his land, if the holder elects to accept them within the time limited. follows: P200,000.00 down payment, the balance of P800,000.00
If the holder does so elect, he must give notice to the other party, and payable within 90 days from June 1, 1985. BPI accepted the offer,
the accepted offer thereupon becomes a valid and binding contract. If whereupon LT drew a check for P200,000.00 in favor of BPI which the
an acceptance is not made within the time fixed, the owner is no longer latter thereafter deposited in its account. On September 5, 1985, LT
bound by his offer, and the option is at an end. wrote BPI requesting extension until October 10, 1985 within which
to pay the balance, to which BPI agreed. On October 5, 1985, due to
A contract of sale, on the other hand, fixes defi nitely the relative rights the expected delay in the remittance of the needed amount by his
and obligations of both parties at the time of its execution, and leaves financier from the United States, LT wrote BPI requesting a last
no choice to either party whether to withdraw or to proceed with the extension until October 30, 1985, within which to pay the balance. BPI
contract. The offer and the acceptance are concurrent, since the minds denied LTs request because another had offered to buy the same
of the contracting parties meet in the terms of the agreement.‖ property for P1,500,000.00. BPI cancelled its agreement with LT and
offered to return to him the amount of P200,000.00 that LT had paid to
it. On October 20, 1985, upon receipt of the amount of P800,000.00
from his US financier, LT offered to pay the amount by tendering a
cashier's check therefor but which BPI refused to accept. LT then filed
a complaint against BPI in the RTC for specific performance and
deposited in court the amount of P800,000.00. Is BPI legally correct in
canceling its contract with LT?
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JUSTIN RYAN MORILLA
SUGGESTED ANSWER: BPI is not correct in canceling the contract acceptance has been made, before the offeror‘s coming to
with LT. In Lina Topacio v Court of Appeals and BPI Investment (G. R know of such fact, by communicating that withdrawal to the
No. 102606, July 3. 1993, 211 SCRA 291) the Supreme Court held offeree. (This is in accordance with the Sanchez doctrine.)
that the earnest money is part of the purchase price and is proof of the
perfection of the contract. Secondly, notarial or judicial rescission b) The right to withdraw, however, must not be exercised
under Art. 1592 and 1991 of the Civil Code is necessary (Taguba v. de whimsically or arbitrarily; otherwise, it could give rise to a
Leon, 132 SCRA 722.) damage claim under Article 19 of the Civil Code which
ordains that ―every person must, in the exercise of his right
ALTERNATIVE ANSWER: BPI is correct in canceling its contract with and in the performance of his duties, act with justice, give
LT but BPI must do so by way of judicial rescission under Article 1191 everyone his due, and observe honesty and good faith.‖
Civil Code. The law requires a judicial action, and mere notice of
rescission is insufficient if it is resisted. The law also provides that c) If the period has a separate consideration, a contract of
slight breach is not a ground for rescission (Song Fo & Co, vs, ―option‖ is deemed perfected, and it would be a breach of
Hawaiian Phil Co., 47 Phils. 821), Delay in the fulfillment of the that contract to withdraw the offer during the agreed period.
obligation (Art. 1169, Civil Code) is a ground to rescind, only if time is
of the essence. Otherwise, the court may refuse the rescission if there d) The option, however, is an independent contract by itself,
is a just cause for the fixing of a period. and it is to be distinguished from the projected main
agreement which is obviously yet to be concluded. If, in fact,
the optioner-offeror withdraws the offer before its acceptance
OBLIGATIONS ON THE PART OF THE OFFEROR by the optionee-offeree, the latter may not sue for specifi c
performance on the proposed contract since it has failed to
1) Personal obligation not to offer to any third party the sale of reach its own stage of perfection. The optioner-offeror,
the object of the option during the option period; however, renders himself liable for damages for breach of
the option.
2) Personal obligation not to withdraw the offer or option during
option period; and e) In these cases, care should be taken of the real nature of the
consideration given, for if in fact, it has been intended to be
3) Obligation to hold the subject matter for sale to the offeree in part of the consideration for the main contract with a right of
the event that offeree exercises his option during the option withdrawal on the part of the optionee, the main contract
period. could be deemed perfected; a similar instance would be an
―earnest money‖ in sale that can evidence its perfection.
Since an option contract, prior to its valid exercise, is not a species of
the genus sale, it is not covered by the Statute of Frauds, and EFFECT OF ACCEPTANCE
therefore can be proved by parol evidence.
LIMSON V CA - When there is an option contract, the timely
OPTION NOT DEEM PART OF RENEWAL OF LEASE affirmative and clear acceptance of the offer would convert the option
contract into a bilateral promise to sell and to buy where both
An option to purchase attached to a contract of lease when not parties were then reciprocally bound to comply with their respective
exercised within the original period is extinguished and cannot be undertakings.
deemed to have been included in the implied renewal of the lease
even under the principle of tacita reconduccion. RIGHT OF FIRST REFUSAL
PERIOD OF EXERCISE OF OPTION It grants a person the right to buy a property before it is offered to
sell to another.
VILLAMOR V. COURT OF APPEALS, held that when the option
contract does not contain a period when the option can be exercised, it The right of first refusal is usually part and parcel of a contract where
cannot be presumed that the exercise thereof can be made indefi the right is granted. It usually happens in a contract of lease.
nitely, and even render uncertain the status of the subject matter.
Under Article 1144(1) of the Civil Code, actions upon written contract
ANG YU ASUNCION VS. CA
must be brought within ten (10) years, and thereafter, the right of
238 SCRA 602
option would prescribe.
In the law on sales, the so-called "right of first refusal" is an
PROPER EXERCISE OF OPTION
innovative juridical relation. Needless to point out, it cannot be
deemed a perfected contract of sale under Article 1458 of the Civil
NIETES V. COURT OF APPEALS - Notice of the exercise of the
Code. Neither can the right of first refusal, understood in its normal
option need not be coupled with actual payment of the price, so long
concept, per se be brought within the purview of an option under the
as this is delivered to the owner of the property upon performance of
second paragraph of Article 1479, aforequoted, or possibly of an offer
his part of the agreement.
under Article 1319 of the same Code. An option or an offer would
require, among other things, a clear certainty on both the object and
CARCELLER V. COURT OF APPEALS – Court recognized that
the cause or consideration of the envisioned contract. In a right of first
notice within the option period of clear intention to purchase the
refusal, while the object might be made determinate, the exercise of
property pursuant to such option, with request for leeway within which
the right, however, would be dependent not only on the grantor's
to be able to raise the funds to close the deal is a valid or at least
eventual intention to enter into a binding juridical relation with another
substantial exercise of the option.
but also on terms, including the price, that obviously are yet to be later
firmed up. Prior thereto, it can at best be so described as merely
SUMMARY RULES WHEN PERIOD IS GRANTED TO PROMISEE belonging to a class of preparatory juridical relations governed
not by contracts (since the essential elements to establish the
ANG YU ASUNCION V. COURT OF APPEALS summarized the vinculum juris would still be indefinite and inconclusive) but by,
applicable rules where a period is given to the offeree within which to among other laws of general application, the pertinent scattered
accept the offer, i.e., the option, thus: provisions of the Civil Code on human conduct.
SUGGESTED ANSWER: Yes, the answer will be the same. The action
will not prosper because an option must be supported by a
consideration separate and distinct from the purchase price. In this
case there is no separate consideration. Therefore, the option may
be withdrawn by Ubaldo at any time. (Art. 1324, NCC)
WHAT IS THE STATUS OF CONTRACT OF SALE THAT WAS
MADE IN VIOLATION OF ANOTHER PARTIES‘ RIGHT OF FIRST RIGHT OF FIRST REFUSAL; LESSEE; EFFECT (1998)
REFUSAL?
In a 20-year lease contract over a building, the lessee is expressly
If there is uniformity in terms and conditions of the owner and the granted a right of first refusal should the lessor decide to sell both the
lessee, but the owner sells to another, the contract of sale is land and building. However, the lessor sold the property to a third
rescissible. person who knew about the lease and in fact agreed to respect it.
Consequently, the lessee brings an action against both the lessor-
seller and the buyer (a) to rescind the sale and (b) to compel specific
performance of his right of first refusal in the sense that the lessor
should be ordered to execute a deed of absolute sale in favor of the
lessee at the same price. The defendants contend that the plaintiff can
neither seek rescission of the sale nor compel specific performance of
a "mere" right of first refusal. Decide the case. [5%]
OPTION CONTRACT RIGHT OF FIRST REFUSAL 2) Sublessee May Not Take Advantage of Right of First Refusal
Right granted under a contract Usually something granted in the of Sublessor
distinct from the sale. same contract which is usually a
lease at the inception of the 3) Right Does Not Extend with the Extension of the Lease
contract
The elements of sale are already The elements of sale except the
definite when the option contract subject matter are yet to be
is created firmed up. CONTRACT TO SELL
Dependent on the exercise of the It‘s not dependent only upon
option itself. If the person holding grantor‘s eventual intention to Bilateral contract whereby the prospective seller, while expressly
the option decides to buy, he can enter into a sale with the other but reserving the ownership of the subject property despite delivery
buy based on the terms already also on terms that are yet to be thereof to the prospective buyer, binds himself to sell the said property
established in the option contract. firmed up. exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, that is, full payment of the purchase price.
Violation would give rise to a case Depending on whether or not
for damages and not for there is good faith or bad faith, NOTE: Contract to sell is different from conditional sale
specific performance and uniformity of the terms,
violation would give rise for an CONTRACT TO SELL IS NOT A CONTRACT OF SALE
action for rescission or
damages. The first essential element of consent of parties is ABSENT
Rescission can be a remedy The seller does not consent to transfer ownership to the buyer
because unless the contract of until the happening of an event, which may be the full payment of
sale is not rescinded, the party price which is a suspensive condition, the non-fulfillment of
cannot exercise his right of first which prevents the obligation from arising (Coronel v. CA, Oct.
refusal. 7,1996)
What is involved in the case is not a right of first refusal but a mere
offer. A right of first refusal is a right granted to a party offered to buy
CONTRACT TO SELL VS. CONTRACT OF SALE (1997)
the property before he offers to sell to anyone else. An option contract
on the other hand is a contract on which the owner of the property
State the basic difference (only in their legal effects) Between a
agrees to the person that he shall have the right to buy the property at
contract to sell, on the one hand, and a contract of sale, on the other.
a fixed price within a certain time. This must be supported by a
consideration same by the price.
SUGGESTED ANSWER: In a CONTRACT OF SALE, ownership is
transferred to the buyer upon delivery of the object to him while in a
In the instant case, this is just an option contract as it grants Ruth a
CONTRACT TO SELL, ownership is retained by the seller until the
fixed period of 2 years to buy the property at a price certain of
purchase price is fully paid. In a contract to sell, delivery of the object
7.5M.Furthermore, because the option of this case is without
does not confer ownership upon the buyer. In a contract of sale, there
consideration, it may be withdrawn at anytime and the property can be
is only one contract executed between the seller and the buyer, while
sold to another person.
in a contract to sell, there are two contracts, first the contract to sell
(which is a conditional or preparatory sale) and a second, the final
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JUSTIN RYAN MORILLA
deed of sale or the principal contract which is executed after full
payment of the purchase price. CORONEL vs CA
263 SCRA 15 October 7, 1996
BQ 1997: Compare a conditional sale from an absolute sale
FACTS:This case has its roots in a complaint for specific performance
to compel herein petitioners to consummate the sale of a parcel of land
ANSWER:
with its improvements located along Roosevelt Ave., QC entered in to
by the parties sometime in January 1985 for the price of
An absolute sale is a contract where the seller has transferred P1,240,000.00.
ownership over a property to the buyer and the latter has given
the seller the full consideration for the sale On January 19, 1985, Coronel, et. al executed a document entitled
―Receipt of Down Payment‖ in favor of plaintiff Ramona Patricia
A conditional sale is likewise a contract of sale where the seller Alcaraz after plaintiff-appellee Concepcion Alcaraz, mother of Ramona,
agrees to transfer ownership to the buyer, however, subject to paid the down payment of P50,000.00. However, on February 18,
the happening of suspensive condition. 1985, the Coronels sold the property to intervenor-appellant Catalina
Mabanag for P1,580,000.00 after the latter has paid P300,000.00. For
CONTRACT TO SELL IS NOT A CONDITIONAL SALE this reason, Coronels cancelled and rescinded the contract with
Ramona by depositing the down payment paid in the bank in trust for
In a conditional sale, the first element of consent is Ramona.
present although it is conditioned on the happening of
an event. On February 22, 1985, Concepcion, et.al filed a complaint for specific
performance against the Coronels.
There is no consent to transfer ownership in a contract
RTC-QC rendered judgment favorable to Concepcion and ordered the
to sell
cancellation of sale to Mabanag. Concepcion‘s Motion for
Reconsideration was denied; hence an appeal was made to Ca which
affirmed RTC‘s decision.
A contract to sell is akin to a conditional sale where the efficacy Sale, by its very nature, is a consensual contract because it is
or obligatory force of the vendor's obligation to transfer title is perfected by mere consent. The essential elements of a contract
subordinated to the happening of a future and uncertain event, so of sale are the following:
that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed. x x Consent or meeting of the minds, that is, consent to transfer
x. ownership in exchange for the price;
To note, while the quality of contingency inheres in a contract to sell, Determinate subject matter; and
the same should not be confused with a conditional contract of sale. In
a contract to sell, the fulfillment of the suspensive condition will Price certain in money or its equivalent.
not automatically transfer ownership to the buyer although the
property may have been previously delivered to him. The Contract to sell may not be considered as a Contract of Sale
prospective seller still has to convey title to the prospective buyer because the first essential element is lacking. In Contract to Sell,
by entering into a contract of absolute sale. On the other hand, in the prospective seller explicitly reserves the transfer of title to the
a conditional contract of sale, the fulfillment of the suspensive prospective buyer, meaning, the prospective seller does not as
condition renders the sale absolute and the previous delivery of yet agree or consent to transfer ownership of property subject of
the property has the effect of automatically transferring the the contract to sell until the happening of an event, which for
seller‘s ownership or title to the property to the buyer present purposes we shall take as the full payment of the
purchase price. What the seller agrees or obliges himself to do is
to fulfill his promise to sell the subject property when the entire
2012 BQ: a) A contract to sell is the same as a conditional contract of
amount of the purchase price is delivered to him. In other words,
sale. Do you agree? Explain your answer. (5%) Disagree
the full payment of the purchase price partakes of a suspensive
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JUSTIN RYAN MORILLA
condition, the nonfulfillment of which prevents the obligation to
sell from arising and thus, ownership is retained by the Does this receipt evidence a contract to sell? Why? (5%)
prospective seller without further remedies by the prospective SUGGESTED ANSWER: It is a contract of sale because the seller did
buyer. not reserve ownership until he was fully paid.
Jazzie Sarona
In DBP v. Ong, the Court held that placing the word Part of the purchase price Distinct and separate from the
―Noted‖ and signing such note at the bottom of the purchase price
written offer cannot be considered an acceptance that
would give rise to a valid sale
Presupposes perfected No perfected contract of sale yet
LIMKETKAI SONS MILLING INC V CA - If buyer inquires if contract of sale
it is possible to pay on credit terms the purchase price even
after there had already been an agreement to pay in cash,
Buyer is bound to pay the Optioner is not required to pay
there was already a perfected contract between the seller
and the buyer despite the inquiry. balance after the earnest money
is paid
URUCA V CA - From the moment of acceptance of the
original offer of the sellers by the buyers, there arose a valid
and binding contract of sale since undisputedly, the Prima facie evidence of the Perfection of the option
contractual elements of consent, object certain and cause perfected contract contract only
occurred. The subsequent bargaining for an increase in price
did not result into a novation since there was no final
agreement nor was there a resulting new contract
An EARNEST PAYMENT is a specific form of security deposit to
Although the acceptance may not be absolute, in that it contains demonstrate an earnest of good faith about wanting to complete the
certain deviations or amendments to the offer, such acceptance is transaction. In ancient times, the earnest payment was called
binding and gives rise to a valid contract of sale when the deviations variously an earnest penny, Aries penny, or God's silver (in Latin
are NOT MATERIAL AT ALL. Argentum Dei). It was either money or a valuable coin or token given
to bind a bargain, notably for the purchase or hiring of a servant.
QUALIFIED ACCEPTANCE is merely a counter-offer which in turn
must be absolutely accepted to give rise to a valid and binding WHAT IS THE TREATMENT OF EARNEST MONEY IN THE CIVIL
contract CODE?
If A is selling his property for P 5M and B is willing to pay P Article 1482. Whenever earnest money is given in a contract of
4M for it, there is no meeting of the minds. The counter- sale, it shall be considered as part of the price and as proof of
offer has to be accepted by the seller before we can say the perfection of the contract. (1454a)
that there is a meeting of the minds
WHEN CAN YOU SAY THAT IT IS EARNEST AND NOT OPTION
ACCEPTANCE MAY BE EXPRESS OR IMPLIED
CONTRACT? It depends.
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C. May Simeon justify his refusal to proceed with the sale by
If given during the negotiation stage, it is not earnest but mere the fact that the deal is financially disadvantageous to him?
guaranty for buyer not to back out. Explain. (4%)
If given during the perfection stage, it is earnest money and SUGGESTED ANSWER:
therefore, proof of the perfection of the contract.
B. Bert‘s action for specific performance will prosper because there
was a binding agreement of sale, not just an option contract. The sale
If it is a means to reserve the property for the prospect of a future
was perfected upon acceptance by Simeon of 10% of the agreed price.
transaction, the rules on option will apply.
This amount is in really earnest money which, under Art. 1482, ―shall
be considered as part of the price and as proof of the perfection of the
ADELFA PROPERTIES VS CA contract.‖ (Topacio v. CA, 211 SCRA 291 [1992]; Villongco Realty v.
Bormaheco, 65 SCRA 352 [1975]).
There are clear distinctions between earnest money and option
money, viz.: C. Simeon cannot justify his refusal to proceed with the sale by the fact
that the deal is financially disadvantageous to him. Having made a bad
bargain is not a legal ground for pulling out a biding contract of sale, in
(a) Earnest money is part of the purchase price, while option money is the absence of some actionable wrong by the other party (Vales v.
the money given as a distinct consideration for an option contract; Villa, 35 Phil 769 [1916]), and no such wrong has been committed by
Bert.
(b) Earnest money is given only where there is already a sale, while
option money applies to a sale not yet perfected; and BQ 2006:
(c) When earnest money is given, the buyer is bound to pay the Biong and Linda are spouses who own real property.
balance, while when the would-be buyer gives option money, he is not Ray prepared a deed of sale and a manager‘s check for P2M.
required to buy. After receiving the P2M, Biong signed the deed of sale but Linda was
abroad
When Linda returned, she refused to sign since she changed her mind.
ADDITIONAL DISTINCTIONS:
Linda filed a case to nullify the sale and for damages against
Ray
Earnest money is merely creates disputable presumption of the
contract of sale. In option, payment is evidence of a contract of Will the case prosper?
privilege to buy at a certain property at a certain price and for a
certain period. ANSWER: Linda‘s case to annul the sale will not prosper since all the
elements of a perfected contract of sale are present.
In Philippine National Bank v. Court of Appeals, the receipt
of ―earnest money‖ could not lead to the conclusion that When the couple‘s offer was accepted by Ray and the acceptance was
there was a valid and binding sale because of documentary made known to the couple, there was already a perfected contract of
evidence showing that the parties entered into a contract to sale. Absent any ground to annul, Linda‘s action will not prosper.
sell, which is akin to a conditional sale where the effi cacy or
obligatory force of the vendor‘s obligation to transfer title is
subordinated to the happening of a future and uncertain BQ 2013:
event, so that if the suspensive condition does not take
Sergio is the registered owner of a 500-square meter land. His friend,
place, the parties would stand as if the conditional obligation
had never existed. The Court treated the initial deposit given Marcelo, who has long been interested in the property, succeeded in
by the buyer to the sell in Philippine National Bank ―not persuading Sergio to sell it to him. On June 2, 2012, they agreed on
the purchase price of P600,000 and that Sergio would give Marcelo up
strictly as earnest money, but as part of the consideration to
[seller‘s] promise to reserve the subject property for the to June 30, 2012 within which to raise the amount. Marcelo, in a light
[buyer].‖ tone usual between them, said that they should seal their agreement
through a case of Jack Daniels Black and P5,000 "pulutan" money
Earnest Money can be recovered if there is stipulation. Option which he immediately handed to Sergio and which the latter accepted.
Money, cannot be recovered unless stipulated. The friends then sat down and drank the first bottle from the case of
bourbon.
The payment of Earnest Money would mean that it is partially
executed hence, statute of frauds will not apply while Option On June 15, 2013, Sergio learned of another buyer, Roberto, who was
Money as a consideration is not governed by Statute of frauds. offering P800,000 in ready cash for the land. When Roberto confirmed
that he could pay in cash as soon as Sergio could get the
documentation ready, Sergio decided to withdraw his offer to Marcelo,
PERFECTED SALE; ACCEPTANCE OF EARNEST MONEY (2002) hoping to just explain matters to his friend. Marcelo, however, objected
when the withdrawal was communicated to him, taking the position that
Bert offers to buy Simeon‘s property under the following terms and they have a firm and binding agreement that Sergio cannot simply walk
conditions: P1 million purchase price, 10% option money, the balance away from because he has an option to buy that is duly supported by a
payable in cash upon the clearance of the property of all illegal duly accepted valuable consideration.
occupants. The option money is promptly paid and Simeon clears the
property of illegal occupants in no time at all. However, when Bert Does Marcelo have a cause of action against Sergio? (5%)
tenders payment of the balance and ask Simeon for the deed for
absolute sale, Simeon suddenly has a change of heart, claiming that Can Sergio claim that whatever they might have agreed upon
the deal is disadvantageous to him as he has found out that the cannot be enforced because any agreement relating to the sale of
property can fetch three time the agreed purchase price. Bert seeks real property must be supported by evidence in writing and they
specific performance but Simeon contends that he has merely given never reduced their agreement to writing? (3%)
Bert an option to buy and nothing more, and offers to return the option
money which Bert refuses to accept. SUGGESTED ANSWER:
B. Will Bert‘s action for specific performance prosper? Explain. (4%)
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Yes, Marcelo has a cause of action against Sergio because there
existed an option to buy through the payment of pulutan money. FORM OF SALES
Applying Ang Yu case, Marcelo has a cause of action for damages.
Subject to the provision of statute of frauds, a contract of sale may be
Yes, Sergio can claim that whatever they might have agreed upon made in writing, by word of mouth or partly in writing and party by word
cannot be enforced because any agreement relating to the sale of real of mouth or may be inferred from the conduct of the parties.
property must be supported by evidence in writing and they never
reduced their agreement to writing. The SOF provides that any sale of GENERAL RULE: No form required
real property or interest must be in writing to be enforceable. EXCEPTIONS:
Atty. Espejo‘s Answer:
a) Statute of frauds (Art 1403 and 1405)
Yes, Marcelo has a cause of action. There exists a perfected contract b) Sale of realty through agent
of sale for the following reasons:
REQUIREMENT FOR PUBLIC INSTRUMENT FOR IMMOVABLES
There is already a meeting of the minds. There was acceptance of the UNDER ARTICLE 1358
thing and the cause which are to constitute the contract. The fact that
Marcelo is given a period is not the duration of the option to buy but the Article 1358 of the Civil Code provides that ―acts and contracts which
period within which to pay the consideration of the contract itself. have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property‖ must
Based on the facts, the parties sealed their agreement by the payment appear in a public document; however, it specifically provides that
of P5,000 pulutan money. It is submitted that this constitute earnest ―sales of real property or an interest therein are governed by Articles
money which is proof of the contract between the parties. 1403, No. 2, and 1405.‖
No, Sergio cannot claim that whatever they might have agreed upon Despite the seemingly mandatory provisions of Article 1358, Dalion v.
cannot be enforced because any agreement relating to the sale of real Court of Appeals, held that the provisions thereof on the necessity of
property must be supported by evidence in writing. In effect, Sergio is public document are for purposes of convenience, not for validity
claiming that any sale of real property or interest therein must be in or enforceability. Thus, even documents enumerated under Article
writing to be enforceable. However, jurisprudence dictates that SOF 1358 which are not found in a public instrument are still valid and
only applies to executory and not to executed or partially executed enforceable, and that the article merely grants a cause of action to
contracts. the party to the contract in a suit to sue to compel the other party
to have the document covering the contract, acknowledged
In this case, there is already payment which takes it out of the purview before a notary public.
of statute of frauds.
WHEN FORM OF SALE AFFECTS ITS VALIDITY
BQ 2012
1) The power to sell a piece of land or interest therein must be
Which of the following statements is correct? in writing, otherwise, the sale thereof by the agent (even
when the sale itself is in writing) would be void;
a) Offers in interrelated contracts are perfected upon consent.
b) Offers in interrelated contracts require a single acceptance. Renewal or extension of said authority should also be in
c) Business advertisements are definite offers that require writing (Rio v Yu Tec)
specific acceptance.
d) Advertisements for Bidders are only invitations to make 2) Sale of large cattle must be in writing, otherwise the sale
proposals and the advertiser is not bound to accept the would be void; and no sale of large cattle shall be valid
highest/lowest bidder, unless it appears otherwise. unless the sale is registered with the municipal treasurer
who shall issue a certifi cate of transfer; and
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JUSTIN RYAN MORILLA
(a) An agreement that by its terms is not to be performed within a To make such payments as are not usually considered as acts of
year from the making thereof; administration;
(d) An agreement for the sale of goods, chattels or things in To waive any obligation gratuitously;
action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or To enter into any contract by which the ownership of an
the evidences, or some of them, of such things in action or immovable is transmitted or acquired either gratuitously or for a
pay at the time some part of the purchase money; but when a valuable consideration;
sale is made by auction and entry is made by the auctioneer
in his sales book, at the time of the sale, of the amount and To make gifts, except customary ones for charity or those made
kind of property sold, terms of sale, price, names of the to employees in the business managed by the agent;
purchasers and person on whose account the sale is made, it
is a sufficient memorandum; To loan or borrow money, unless the latter act be urgent and
indispensable for the preservation of the things which are under
administration;
(e) An agreement of the leasing for a longer period than one year,
or for the sale of real property or of an interest therein;
To lease any real property to another person for more than one
year;
(f) A representation as to the credit of a third person.
To bind the principal to render some service without
(3) Those where both parties are incapable of giving compensation;
consent to a contract.
To bind the principal in a contract of partnership;
ARTICLE 1405. Contracts infringing the Statute of Frauds,
referred to in No. 2 of Article 1403, are ratified by the failure to To obligate the principal as a guarantor or surety;
object to the presentation of oral evidence to prove the same, or
by the acceptance of benefit under them. To create or convey real rights over immovable property;
2) Agreement for sale of goods, chattels or movables valued at The special power of attorney mandated by law must be one that
P500 or more expressly mentions a sale or that includes a sale as a necessary
ingredient of the authorized act. We unequivocably declared in Cosmic
3) Sale of real property or any interest therein Lumber Corporation v. Court of Appeals that a special power of
attorney must express the powers of the agent in clear and
unmistakable language for the principal to confer the right upon an
EXCEPTIONS TO COVERAGE OF STATUTE agent to sell real estate. When there is any reasonable doubt that the
IN SALES CONTRACTS language so used conveys such power, no such construction shall be
given the document. The purpose of the law in requiring a special
1) When there is a note or memorandum thereof in writing, and power of attorney in the disposition of immovable property is to protect
subscribed by the party charged or his agent the interest of an unsuspecting owner from being prejudiced by the
unwarranted act of another and to caution the buyer to assure himself
2) When there has been partial consummation of the sale; of the specific authorization of the putative agent.
3) When there has been a failure to object to the presentation BQ 2012: Which of the following contracts is void?
of evidence aliunde as to the existence of a contract; and
a) An oral sale of a parcel of land.
4) When sales are effected through electronic commerce.
b) A sale of land by an agent in a public instrument where
his authority from the principal is oral.
Article 1878. SPECIAL POWERS OF ATTORNEY are necessary in c) A donation of a wrist watch worth P 4,500.00.
the following cases: d) A relatively simulated contract.
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Which of the following contracts of sale is void?
CONSUMMATION and
a) Sale of EGM‘s car by KRP, EGM‘s agent, whose authority is
not reduced into writing. PERFORMANCE
b) Sale of EGM‘s piece of land by KRP, EGM‘s agent,whose
authority is not reduced into writing. Obligations of the Seller
c) Sale of EGM‘s car by KRP, a person stranger to EGM,
Obligations of the Buyer
without EGM‘s consent or authority.
Double Sales
d) Sale of EGM‘s piece of land by KRP, a person stranger to
EGM, without EGM‘s consent or authority. Sale by non-owner
Sale by one having voidable title
Aligada orally offered to sell his two-hectare rice land to Balane for P
10Million. The offer was orally accepted. By agreement, the land was OBLIGATIONS OF THE SELLER
to be delivered (through execution of a notarized Deed of Sale) and
the price was to be paid exactly one-month from their oral agreement. Preserve the thing (1163)
Which statement is most accurate? Deliver the subject matter
Warrant the subject matter
a) If Aligada refuses to deliver the land on the agreed date Pay expenses with regard to execution of contract
despite payment by Balane, the latter may not successfully unless otherwise agreed upon
sue Aligada because the contract is oral.
b) If Aligada refused to deliver the land, Balane may ARTICLE 1163. Every person obliged to give something is also
successfully sue for fulfillment of the obligation even if he obliged to take care of it with the proper diligence of a good
has not tendered payment of the purchase price. father of a family, unless the law or the stipulation of the parties
c) The contract between the parties is rescissible. requires another standard of care. (1094a)
d) The contract between the parties is subject to
ratification by the parties.
WHY DELIVER?
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JUSTIN RYAN MORILLA
or the use by the vendee of his rights, with the vendor's consent, REQUISITES
shall be understood as a delivery. (1464)
1) Seller must have control over the thing
2) Buyer is already in control and possession over the thing.
3) Intention of the parties
o Sale through public instrument, execution of DY JR. V. CA - Even when thing is mortgaged, seller can still deliver
instrument = delivery if the contrary does not because naked title still belongs to him & can still do acts of ownership
appear in the deed (1498) including conveyance
DOCUMENTS OF TITLE
MUNICIPALITY OF VICTORIAS V. COURT OF APPEALS
held that the legal effects and consequences of actual or
physical delivery, also apply equally to constructive delivery ARTICLE 1513. A person to whom a negotiable document of title
has been duly negotiated acquires thereby:
WHEN EXECUTION OF PUBLIC INSTRUMENT DOES NOT
PRODUCE EFFECTS OF DELIVERY 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
First, when in the execution of a public instrument, there is a stipulation for value and also such title to the goods as the person to whose
to the contrary. Phil. Suburban Dev. v. Auditor, held that such order the goods were to be delivered by the terms of the
express reservation or contrary inference would be present when:
document had or had ability to convey to a purchaser in good
a) A certain date is fi xed for the purchaser to take possession faith for value; and
of the property subject of the conveyance;
b) In case of sale by installments, it is stipulated that until the The direct obligation of the bailee issuing the document to hold
last installment is made, the title to the property should possession of the goods for him according to the terms of the
remain with the seller; document as fully as if such bailee had contracted directly with
c) When the seller reserves the right to use and enjoy the him. (n)
property until the gathering of the pending crops; or
d) Where the seller has no control over the thing sold at the
moment of the sale, and, therefore, its material delivery Bill of lading, dock warrant, quedan, warehouse receipt or any
could not have been made. document used in the ordinary course of business in the sale or
transfer of goods as proof of possession and control or authorizing or
o Placing the title of ownership in vendee‘s purporting to authorize the possessor of the document to transfer or
possession with vendor's consent (1501) receive either by endorsement or delivery the goods covered by the
document (1636)
CONSTRUCTIVE DELIVERY- MOVABLES
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ARTICLE 1636. In the preceding articles in this Title governing the ibaba nito. Ako ay walang karapatang magpautang o kaya ay
sale of goods, unless the context or subject matter otherwise magpalako sa ibang tao ng nasabing mga hiyas.
requires:
Based on the express terms and tenor of the Kasunduan at Katibayan ,
"Document of title to goods" includes any bill of lading, dock Degaños received and accepted the items under the obligation to sell
warrant, "quedan," or warehouse receipt or order for the delivery them in behalf of the complainants ("ang mga hiyas (jewelries) na
of goods, or any other document used in the ordinary course of natatala sa ibaba nito upang ipagbili ko sa kapakanan ng nasabing
business in the sale or transfer of goods, as proof of the Ginang"), and he would be compensated with the overprice as his
possession or control of the goods, or authorizing or purporting to commission ("Ang bilang kabayaran o pabuya sa akin ay ano mang
authorize the possessor of the document to transfer or receive, halaga na aking mapalabis na mga halagang nakatala sa ibaba nito.").
either by endorsement or by delivery, goods represented by such Plainly, the transaction was a consignment under the obligation to
document. account for the proceeds of sale, or to return the unsold items. As
such, he was the agent of the complainants in the sale to others of the
"Goods" includes all chattels personal but not things in action or items listed in the Kasunduan at Katibayan.
money of legal tender in the Philippines. The term includes
growing fruits or crops. In contrast, according the first paragraph of Article 1458 of the Civil
Code, one of the contracting parties in a contract of sale obligates
"Order" relating to documents of title means an order by himself to transfer the ownership of and to deliver a determinate thing,
endorsement on the documents. while the other party obligates himself to pay therefor a price certain in
money or its equivalent. Contrary to the contention of Degaños, there
"Quality of goods" includes their state or condition. was no sale on credit to him because the ownership of the items did
not pass to him.
"Specific goods" means goods identified and agreed upon at the
time a contract of sale is made. Although the novation of a contract of agency to make it one of sale
may relieve an offender from an incipient criminal liability, that did not
An antecedent or pre-existing claim, whether for money or not, happen here, for the partial payments and the proposal to pay the
constitutes "value" where goods or documents of title are taken balance the accused made during the barangay proceedings were not
either in satisfaction thereof or as security therefor. at all incompatible with Degafios liability under the agency that had
already attached. Rather than converting the agency to sale, therefore,
A person is insolvent within the meaning of this Title who either he even thereby confirmed his liability as the sales agent of the
has ceased to pay his debts in the ordinary course of business or complainants.
cannot pay his debts as they become due, whether insolvency
proceedings have been commenced or not. DELIVERY THROUGH CARRIER
TYPES OF DOCUMENTS OF TITLE Unless otherwise authorized by the buyer, the seller must make
such contract with the carrier on behalf of the buyer as may be
1) NEGOTIABLE – states that goods will be delivered to reasonable, having regard to the nature of the goods and the
bearer or to the order of one person other circumstances of the case. If the seller omit so to do, and
2) NON-NEGOTIABLE- does not state that the goods referred the goods are lost or damaged in course of transit, the buyer
to therein will be delivered to the bearer or the order of any may decline to treat the delivery to the carrier as a delivery to
person himself, or may hold the seller responsible in damages.
DEGAÑOS vs. PEOPLE Unless otherwise agreed, where goods are sent by the seller to
G.R. No. 162826 the buyer under circumstances in which the seller knows or
October 14, 2013 ought to know that it is usual to insure, the seller must give such
BERSAMIN, J.: notice to the buyer as may enable him to insure them during their
transit, and, if the seller fails to do so, the goods shall be deemed
The text and tenor of the relevant Kasunduan at Katibayan follow: to be at his risk during such transit. (n)
KASUNDUAN AT KATIBAYAN
xxxx
F.A.S. SALES - seller pays all charges and is subject to all
Akong nakalagda sa ibaba nito ay nagpapatunay na tinanggap ko kay risks until the goods are places alongside the vessel
Ginang LYDIA BORDADOR ng Calvario, Meycauayan, Bulacan ang
mga hiyas (jewelries) [sic] na natatala sa ibaba nito upang ipagbili ko F.O.B. SALES - ―free on board‖ seller shall bear all
sa kapakanan ng nasabing Ginang. Ang pagbibilhan ko sa nasabing expenses until the goods are delivered whether at the point
mga hiyas ay aking ibibigay sa nasabing Ginang, sa loob ng of shipment or the point of destination
__________ araw at ang hindi mabili ay aking isasauli sa kanya sa
loob din ng nasabing taning na panahon sa mabuting kalagayan
katulad ng aking tanggapin. Ang bilang kabayaran o pabuya sa akin ay C.I.F. SALES - ―cost, insurance & freight‖ price covers cost
ano mang halaga na aking mapalabis na mga halagang nakatala sa of goods and freight and insurance costs paid by the seller
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ACCESSORY OBLIGATIONS WARRANTY AGAINST EVICTION
Delivery of the fruits In order that a vendor's liability for eviction may be enforced, the
following requisites must concur—a) there must be a final judgment; b)
the purchaser has been deprived of the whole or part of the thing sold;
Article 1537. The vendor is bound to deliver the thing sold and its
c) said deprivation was by virtue of a right prior to the sale made by the
accessions and accessories in the condition in which they were vendor; and d) the vendor has been summoned and made co-
upon the perfection of the contract. defendant in the suit for eviction at the instance of the vendee.
All the fruits shall pertain to the vendee from the day on which the The term "unless he is summoned in the suit for eviction at the
contract was perfected. (1468a) instance of the vendee" means that the respondents as vendor/s
should be made parties to the suit at the instance of petitioners-
vendees, either by way of asking that the former be made a co-
Article 1164. The creditor has a right to the fruits of the thing from
defendant or by the filing of a third-party complaint against said
the time the obligation to deliver it arises. However, he shall vendors.(Escaler v CA 138 SCRA 1)
acquire no real right over it until the same has been delivered to
him. (1095) WARRANTY AGAINST HIDDEN DEFECTS (ARTS. 1561-1580)
Warranty of the thing sold Article 1561. The vendor shall be responsible for warranty against
the hidden defects which the thing sold may have, should they
Express Warranty render it unfit for the use for which it is intended, or should they
diminish its fitness for such use to such an extent that, had the
vendee been aware thereof, he would not have acquired it or
Article 1546. Any affirmation of fact or any promise by the seller
would have given a lower price for it; but said vendor shall not be
relating to the thing is an express warranty if the natural answerable for patent defects or those which may be visible, or for
tendency of such affirmation or promise is to induce the buyer to those which are not visible if the vendee is an expert who, by
purchase the same, and if the buyer purchases the thing relying reason of his trade or profession, should have known them.
thereon. No affirmation of the value of the thing, nor any (1484a)
statement purporting to be a statement of the seller's opinion
only, shall be construed as a warranty, unless the seller made Article 1566. The vendor is responsible to the vendee for any
such affirmation or statement as an expert and it was relied upon hidden faults or defects in the thing sold, even though he was not
aware thereof.
by the buyer. (n)
This provision shall not apply if the contrary has been stipulated,
Implied Warranties and the vendor was not aware of the hidden faults or defects in
the thing sold. (1485)
1) Warranty that the seller has the right to sell.
Warranty against eviction
2) Warranty against non-apparent servitudes REMEDY
3) Warrant against hidden defects
WHAT‘S YOUR REMEDY IF THERE‘S A VIOLATION?
4) Warrant as to fitness and quality
2 remedies: The vendee may elect between
Article 1547. In a contract of sale, unless a contrary intention 1) Withdrawing from the contract and
appears, there is: 2) Demanding a proportionate reduction of the price with
damages in either case
(1) An implied warranty on the part of the seller that he has a right Rescission or an action quanti minoris
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 and ACTION QUANTI MINORIS
peaceful possession of the thing; Article 1567. In the cases of articles 1561, 1562, 1564, 1565 and
1566, the vendee may elect between withdrawing from the
(2) An implied warranty that the thing shall be free from any contract and demanding a proportionate reduction of the price,
hidden faults or defects, or any charge or encumbrance not with damages in either case. (1486a)
declared or known to the buyer.
WARRANTY FOR REDHIBITORY DEFECTS
This article shall not, however, be held to render liable a sheriff,
auctioneer, mortgagee, pledgee, or other person professing to Article 1576. If the hidden defect of animals, even in case a
sell by virtue of authority in fact or law, for the sale of a thing in professional inspection has been made, should be of such a
which a third person has a legal or equitable interest. (n) nature that expert knowledge is not sufficient to discover it, the
defect shall be considered as redhibitory.
Buyer is Evicted in whole or in part from the subject matter of But if the veterinarian, through ignorance or bad faith should fail
sale to discover or disclose it, he shall be liable for damages. (1495)
Final Judgment
Basis of eviction is a right Prior to sale or act imputable to
seller
REDHIBITORY does not refer to the defect but it refers to the nature
Seller has been Summoned in the suit for eviction at the
of the remedy given by law.
instance of buyer; or made 3rd party defendant through 3rd
party complaint brought by buyer
No waiver on the part of the buyer Note: For eviction –
disturbance in law is required and not just trespass in fact.
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OBLIGATIONS OF THE BUYER 4) 2 buyers must each have bought from the very same
seller
ARTICLE 1584. Where goods are delivered to the buyer, which he BQ DOUBLE SALES (2001)
has not previously examined, he is not deemed to have accepted
them unless and until he has had a reasonable opportunity of On June 15, 1995, Jesus sold a parcel of registered land to Jaime. On
examining them for the purpose of ascertaining whether they are June 30, 1995, he sold the same land to Jose.
in conformity with the contract if there is no stipulation to the
Who has a better right if:
contrary.
the first sale is registered ahead of the second sale, with knowledge of
Unless otherwise agreed, when the seller tenders delivery of the latter. Why? (3%)
goods to the buyer, he is bound, on request, to afford the buyer a
reasonable opportunity of examining the goods for the purpose The second sale is registered ahead of the first sale, with knowledge of
of ascertaining whether they are in conformity with the contract. the latter? Why? (5%)
SUGGESTED ANSWER:
Where goods are delivered to a carrier by the seller, in
accordance with an order from or agreement with the buyer, (a) The first buyer has the better right if his sale was first to be
upon the terms that the goods shall not be delivered by the registered, even though the first buyer knew of the second sale. The
carrier to the buyer until he has paid the price, whether such fact that he knew of the second sale at the time of his registration does
terms are indicated by marking the goods with the words "collect not make him as acting in bad faith because the sale to him was ahead
on delivery," or otherwise, the buyer is not entitled to examine in time, hence, has a priority in right. What creates bad faith in the case
the goods before the payment of the price, in the absence of of double sale of land is knowledge of a previous sale.
agreement or usage of trade permitting such examination. (n)
b) The first buyer is still to be preferred, where the second (2) years, or
until 3 June 1973. It is further stated therein sale is registered ahead of
ARTICLE 1585. The buyer is deemed to have accepted the goods
the first sale but with knowledge of the latter. This is because the
when he intimates to the seller that he has accepted them, or second buyer, who at the time he registered his sale knew that the
when the goods have been delivered to him, and he does any act property had already been sold to someone else, acted in bad faith.
in relation to them which is inconsistent with the ownership of (Article 1544, C.C.)
the seller, or when, after the lapse of a reasonable time, he
retains the goods without intimating to the seller that he has DOUBLE SALES (2004)
rejected them. (n)
JV, owner of a parcel of land, sold it to PP. But the deed of sale was
not registered. One year later, JV sold the parcel again to RR, who
DOUBLE SALES succeeded to register the deed and to obtain a transfer certificate of
title over the property in his own name. Who has a better right over the
ELEMENTS: parcel of land, RR or PP? Why?
1) 2 or more sales must be valid sales Explain the legal basis for your answer. (5%)
2) 2 or more sales must pertain to exactly the same subject
3) 2 buyers must each represent conflicting interests SUGGESTED ANSWER:
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It depends on whether or not RR is an innocent purchaser for value.
Under the Torrens System, a deed or instrument operated only as a Under PD 1529
contract between the parties and as evidence of authority to the
Register of Deeds to make the registration. It is the registration of the Section 113. Recording of instruments relating to unregistered
deed or the instrument that is the operative act that conveys or affects lands. No deed, conveyance, mortgage, lease, or other voluntary
the land. (Sec. 51, P.D. No. 1529). instrument affecting land not registered under the Torrens system shall
be valid, except as between the parties thereto, unless such instrument
In cases of double sale of titled land, it is a well-settled rule that the shall have been recorded in the manner herein prescribed in the office
buyer who first registers the sale in good faith acquires a better right to of the Register of Deeds for the province or city where the land lies.
the land. (Art. 1544, Civil Code).
As an exception to Article 1544, in sales of unregistered land, there
Persons dealing with property covered by Torrens title are not required must be recording for you to get preference.
to go beyond what appears on its face. (Mirror Principle) (Orquiola v.
CA 386, SCRA 301, [2002]; Domingo v. Races 401 SCRA 197,
[2003]). Thus, absent any showing that RR knew about, or ought to
have known the prior sale of the land to PP or that he acted in bad
faith, and being first to register the sale, RR acquired a good and a
clean title to the property as against PP.
APPLICABILITY OF RULES ON DOUBLE SALES TO CONTRACTS
Take note in order for article 1544 to apply: TO SELL AND ADVERSE CLAIMS
Both conveyances must be sales. It does not apply if Since the rules on double sales are rules pertaining to tradition at
one is a mortgage and the other is a sale. consummation stage, they have no application when the covered
valid contracts are not yet demandable sales, such as when one
Example: A sold the land to B. After the sale, A mortgaged the land to or both the contracts in dispute are contracts to sell.
C. C with knowledge of the sale, registers the mortgage. Who is
preferred? Again, it‘s not 1544 because there is a mortgage MENDOZA V. KALAW - rules on double sales under the then Article
subsequent to the sale. A is preferred even if C registers the mortgage. 1473 of the old Civil Code were not applicable on the ground that there
It is not a double sale under Article 1544 and it will not give C any was no double sales situation since the first sale was a conditional sale
preference. 2nd when A mortgage the property, he was no longer the
owner. C‘s knowledge of the prior sale makes him a mortgagee in bad
faith.
NO because there is still a chance that A can deliver the car to B. Nemo dat quod non habet, literally meaning "no one gives what he
Delivery to B is not impossible thus there is no double sale. doesn't have‖
The principle to remember is if delivery is impossible to both Article 1505. Subject to the provisions of this Title, where goods
transaction, delivery to one of them is impossible because of the are sold by a person who is not the owner thereof, and who does
double sales transactions, then article 1544 applies. not sell them under authority or with the consent of the owner,
the buyer acquires no better title to the goods than the seller
Both contract must be valid sales where it not for the
had, unless the owner of the goods is by his conduct precluded
fact that there had been a double sale.
from denying the seller's authority to sell.
X was the owner of an unregistered parcel of land in Cabanatuan City. Nothing in this Title, however, shall affect:
As she was abroad, she advised her sister Y via overseas call to sell
the land and sign a contract of sale on her behalf.
The provisions of any factors' act, recording laws, or any other
Y thus sold the land to B1 on March 31, 2001 and executed a deed of provision of law enabling the apparent owner of goods to
absolute sale on behalf of X. B1 fully paid the purchase price. dispose of them as if he were the true owner thereof;
B2, unaware of the sale of the land to B1, signified to Y his interest to The validity of any contract of sale under statutory power of sale
buy it but asked Y for her authority from X. Without informing X that or under the order of a court of competent jurisdiction;
she had sold the land to B1, Y sought X for a written authority to sell.
Purchases made in a merchant's store, or in fairs, or markets, in
X e-mailed Y an authority to sell the land. Y thereafter sold the land on
May 1, 2001 to B2 on monthly installment basis for two years, the first accordance with the Code of Commerce and special laws. (n)
installment to be paid at the end of May 2001.
WHAT IS THE EFFECT? The buyer acquires no title therefrom. So
Who between B1 and B2 has a better right over the land? Explain. if you are a buyer, as a general rule, you merely step in the shoes of
(5%) your immediate transferor. If your transferor has a voidable title, you
cannot acquire higher rights except in land titles where sometimes,
Answer: Neither sale is valid. Subject matter here is unregistered land. sale by non-owner can lead to a valid title.
Sale of unregistered land must appear in public instrument. Also,
the authority of an agent to sell must be in writing. Status of contract here is VOID
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JUSTIN RYAN MORILLA
entire property or of a particular portion thereof is void,
SALE BY CO-OWNER OF THE WHOLE PROPERTY nevertheless, when Torrens title to the conjugal property
OR DEFINITE PORTION THEREOF indicates that the wife is the only owner thereof being
described as a ―widow,‖ then one who buys such property
The rule in co-ownership is that none of the co-owners may claim any from the wife in good faith and for value, will acquire valid
right, title or interest to a particular portion of the thing owned in title thereto against the heirs of the deceased spouse:
common. A co-owner has no right to sell a divided part of the real
estate; although he is the owner of an undivided half of a tract of land, Although Article 1505 provides that where goods are sold by a person
he has a right to sell and convey an undivided half, but he has no right who is not the owner thereof, and who does not sell them under
to divide the lot into two parts, and convey the whole of one part by authority or with the consent of the owner, the buyer acquires no better
metes and bounds. title to the goods than the seller had, it also provides for the following
EXCEPTIONS:
The general rule on the effect of the sale of the entire property owned
in common by one of the co-owners, to be void as a sale of the whole 1) When the owner is precluded from denying title the sellers
property or any defi nite portion thereof (i.e., to validly effect transfer of authority on account of his action. There is estoppel.
ownership), but valid as to the co-owner-seller‘s spiritual share, is
subject to a number of exceptions: 2) When the contrary is provided for in recording clause (under
the Torrens system). There are cases under the Torrens
EDC V SAMSON system where unlawful deprivation/forgery can be a source
OCTOBER 2014 of valid title for innocent purchaser for value and in good
faith.
EXCEPTIONS TO RULE ON EFFECT OF SALE OF DEFINITE
3) When sale is made under statutory or order of the court such
PORTION BY CO-OWNER
as foreclosure sale.
1) It does not apply to a situation where the subject matter is 4) When the sale is made in Merchant‘s store. But this should
indivisible in nature or by intent. not relieve the Merchant‘s from liability under fencing laws.
In MINDANAO ACADEMY, INC. V. YAP, where one of the
Other exceptions to the main principle enunciated under Article 1505
co-owners sold the school and its properties owned in would be the following:
common with other co-owners, the Court held that the sale
of the entire property owned in common by one of the co-
owners was ―void,‖ and could not even be binding as to the
5) Under Article 1506, the sale by a seller who at the time of
delivery had voidable title to the thing delivered;
spiritual share of the seller since the prestation involved in
the sale was indivisible, and therefore incapable of partial
annulment, inasmuch as the buyer would not have entered 6) In case of movables, under Article 559, acquisition of
into the transaction except to acquire all of the properties possession in good faith under a claim of ownership, where
purchased by him. the real owner has not lost or been unlawfully deprived of the
movable, makes the possessor the rightful owner of the
2) When a sale of a particular portion of the thing owned in movable; and
common is with the consent of the other co-owners, the legal
effect is different. 7) Special rights of an unpaid seller of goods to resell under
Articles 1526 and 1533 of the Civil Code.
In PAMPLONA V. MORETO, the Court held that when there
has been no express partition of the subject matter owned in RULE ON IRREIVINDICABILITY
common, but the co-owners who sells points out to his
buyers the boundaries of the part he was selling, and the Article 559. The possession of movable property acquired in good
other co-owners make no objection, there is in effect already faith is equivalent to a title. Nevertheless, one who has lost any
a partial partition, and the sale of the defi nite portion can no movable or has been unlawfully deprived thereof, may recover it
longer be assailed by the other co-owners. from the person in possession of the same.
Pablo sold his car to Alfonso who issued a postdated check in full In 2006, the spouses Teodoro and Anita came to the Philippines for a
payment therefor. Before the maturity of the check, Alfonso sold the visit and discovered what had happened to their property. They
car to Gregorio who later sold it to Gabriel. When presented for immediately hire you as lawyer. What action or actions will you institute
payment, the check issued by Alfonso was dishonored by the drawee in order to vindicate their rights? Explain fully. (4%)
bank for the reason that he, Alfonso, had already closed his account
even before he issued his check. Pablo sued to recover the car from Answer: Atty. Tan did not acquire title because he forged the
Gabriel alleging that he (Pablo) had been unlawfully deprived of it by signature of the real owner. Since the vendor is a non owner, Luis did
reason of Alfonso's deception. Will the suit prosper? not acquire title to the land despite his registration. He acquires no
better title than the non owner who sold the lot to him.
SUGGESTED ANSWER: No. The suit will not prosper because Pablo
was not unlawfully deprived of the car although he was unlawfully SELLER HAS VOIDABLE TITLE
deprived of the price. The perfection of the sale and the delivery of the
car was enough to allow Alfonso to have a right of ownership over the
Article 1506. Where the seller of goods has a voidable title
car, which can be lawfully transferred to Gregorio. Art. 559 applies only
thereto, but his title has not been avoided at the time of the sale,
to a person who is in possession in good faith of the property, and not
the buyer acquires a good title to the goods, provided he buys
to the owner thereof. Alfonso, in the problem, was the owner, and,
them in good faith, for value, and without notice of the seller's
hence, Gabriel acquired the title to the car. Non-payment of the price in
defect of title. (n)
a contract of sale does not render ineffective the obligation to deliver.
The obligation to deliver a thing is different from the obligation to pay
its price. EDCA Publishing Co. v. Santos (1990) ELEMENTS (1506)
2005 BQ: Rod, the owner of an FX taxi, found in his vehicle an 1) Seller has a voidable title
envelope containing TCT No. 65432 over a lot registered in Cesar's 2) Title has not been avoided at the time of the sale
name. Posing as Cesar, Rod forged Cesar's signature on a Deed of
Sale in Rod's favor. Rod registered the said document with the What does ―time of the sale‖ mean? The phrase means at the time
Register of Deeds, and obtained a new title in his name. After a year, of the delivery of the subject matter since it is the fact of DELIVERY
he sold the lot to Don, a buyer in good faith and for value, who also which transfers ownership
registered the lot in his name.
3) The buyer acquires a good title to the goods, provided he
a) Did Rod acquire title to the land? Explain. (2%) buys them in good faith, for value, and without notice of the
seller's defect of title
SUGGESTED ANSWER: No, Rod did not acquire title to the land. The
inscription in the registry, to be effective, must be made in good ―It is delivery as a consequence of contracts that transfers
faith. The defense of indefeasibility of a Torrens Title does not ownership not the contract itself.‖
extend to a transferee who takes the certificate of title with notice
of a flaw. A holder in bad faith of a certificate of title is not entitled SCENARIO 1
to the protection of the law, for the law cannot be used as a shield
for frauds. (Samonte v. Court of Appeals, G.R. No. 104223, July 12, A and B already agreed on a sale
2001)
A has voidable title, B does not know about it
A‘s title is annulled after perfection but BEFORE delivery
In the case at bar, Rod only forged Cesar's signature on the -Deed of
Sale. It is very apparent that there was bad faith on the part of Rod
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B does not obtain good title over the thing because during the car and A can only recover the car by reimbursing C the purchase
the transfer of ownership, the title of the seller has already price the latter paid.
been avoided; even if it was annulled only after perfection
BQ: Using a falsified manager‘s check, Justine, as the buyer, was able
SCENARIO 2 to take delivery of a second hand car which she had just bought from
United Car Sales Inc. The sale was registered with the Land
A and B already agreed on a sale Transportation Office. A week later, the seller learned that the check
A has voidable title, B does not know about it had been dishonored, but by that time, Justine was nowhere to be
Annulment takes place after perfection and AFTER delivery seen. It turned out that Justine had sold the car to Jerico, the present
B obtains good title over the thing as long as he is an possessor who knew nothing about the falsified check. In a suit by
innocent purchaser for value United Car Sales, Inc. against Jerico for recovery of the car, plaintiff
alleges it had been unlawfully deprived of its property through fraud
INNOCENT PURCHASER FOR VALUE and should, consequently, be allowed to recover it without having to
reimburse the defendant for the price the latter had paid. Should the
suit prosper?
One who buys property of another,
Without notice that some other person has a right to, or an SUGGESTED ANSWER: The suit should prosper as to the recovery of
interest in such property the car. However, since Jerico was not guilty of any fraud and appears
pays a full and fair price for the same at the time of such to be an innocent purchaser for value, he should be reimbursed for the
purchase, or before he has notice of the claim or interest of price he paid. This is without prejudice to United Car Sales, Inc. right of
some other person in the property action against Justine. As between two innocent parties, the party
causing the injury should suffer the loss. Therefore, United Car Sales,
TAGACTAC VS. JIMENEZ Inc. should suffer the loss.
FACTS: Tagactac sold the car to Feist, who sold it to Sanchez, who ALTERNATIVE ANSWER: Yes, the suit will prosper because the
sold it to Jimenez. Feist failed to pay, so Tagactac wants to recover the criminal act of estafa should be deemed to come within the meaning of
vehicle from Jimenez on the ground that she had been unlawfully unlawful deprivation under Art. 559, Civil Code, as without it
deprived of it by reason of Feist‘s deception. plaintiff would not have parted with the possession of its car.
HELD: No unlawful deprivation since there was delivery ANOTHER ANSWER: No, the suit will not prosper. The sale is valid
and Jerico is a buyer in good faith.
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagactac
has been unlawfully deprived of her car. At first blush, it would seem ANOTHER ANSWER: Under the law on Sales, when the thing sold is
that she was unlawfully deprived thereof, considering that she was delivered by the seller to the buyer without reservation of ownership,
induced to part with it by reason of the chicanery practiced on her by the ownership is transferred to the buyer. Therefore in the suit of
Feist. Certainly, swindling, like robber is an illegal method of United Car Sales, Inc. against Jerico for the recovery of the car, the
deprivation of property. In a manner of speaking, plaintiff-appellant was plaintiff should not be allowed to recover the car without reimbursing
"illegally deprived' of her car, for the way by which Feist induced her to the defendant for the price that the latter paid. (EDCA Publishing and
part with it is illegal and punishable by law. But does this ―unlawful Distributing Corp. vs. Santos, 184 SCRA 614. April 26, 1900).
deprivation‖ come within the scope of Article 559 of the New Civil
Code? BQ 2001:
The fraud and deceit practiced by Feist earmarks this sale as a A bought condominium from developer
voidable contract (Art 1390). Being a voidable contract, it is susceptible A was not given CTC
of either ratification or annulment. If the contract is ratified, the action to Developer mortgaged condominium to bank and mortgage
annul it is extinguished (Art 1392) and the contract is cleansed from all was foreclosed, valid auction sale?
its defects (Article 1396, NCC); if the contract is annulled, the
contracting parties are restored to their respective situations before the NO. Bank is not an innocent purchaser for value (IPV), a financial
contract and mutual restitution follows as a consequence (Art 1398). institution is unlike a normal buyer since SOP requires a bank to look
beyond the title and investigate
However, as long as no action is taken by the party entitled, either that
of annulment or of ratification, the contract of sale remains valid and
binding. When plaintiff-appellant Tagactac delivered the car to Feist by
virtue of said voidable contract of sale, the title to the car passed to
Feist. Of course, the title that Feist acquired was defective and
voidable. Nevertheless, at the time he sold the car to Felix his title was
avoided and he therefore conferred good title on the latter, provided he
bought the car in good faith, for value and without notice of the defect
in Feist‘s title (Art 1506).
BQ 1998:
A sold car to B
B paid by using a falsified check
B registered the sale with LTO
B sold the car to C who knew nothing about the check
ANSWER: A can recover from C only when the court annuls the sale
between B and C.
In this case, B had a voidable title which was not yet annulled at the
time C purchased the car. C acquired the car for value, in good faith
and without notice as to defect in B's title. Hence, C has good title to
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LOSS, DETERIORATION, FRUITS If you are the owner of the thing at that point of the transaction, you will
bear the risk of loss. The owner also bears the benefits and the
AND OTHER BENEFITS deterioration subject to certain exceptions.
LOSS At the time of perfection but before delivery, suppose the buyer or
seller or both are not aware that the subject matter is lost, it will
depend if the subject matter is specific/determinate or
That definition of LOSS should be memorized because that is the only generic/indeterminate.
definition of loss.
If SPECIFIC AND TOTAL LOSS, the obligation is
Article 1189. When the conditions have been imposed with the extinguished; the seller cannot demand payment and he
intention of suspending the efficacy of an obligation to give, the bears the loss.
following rules shall be observed in case of the improvement, loss
or deterioration of the thing during the pendency of the condition: If GENERIC, its loss will not extinguish the contract of sale
based on genus nunquam perit (genus never perishes).
(1) If the thing is lost without the fault of the debtor, the obligation
shall be extinguished; IF LOSS IS IN PART ONLY, the vendee can choose
between withdrawing and demanding the remaining part
(2) If the thing is lost through the fault of the debtor, he shall be paying only in proportion to the total price. There is
obliged to pay damages; it is understood that the thing is lost recoupment or reduction of the price (quanti minoris) (an
when it perishes, or goes out of commerce, or disappearsin such a action quanti minoris)
way that its existence is unknown or it cannot berecovered;
SALE OF SEVERAL GOODS
When the thing deteriorates without the fault of the debtor, the
impairment is to be borne by the creditor;
Article 1494. Where the parties purport a sale of specific goods,
If it deteriorates through the fault of the debtor, the creditor may and the goods without the knowledge of the seller have perished
choose between the rescission of the obligation and its fulfillment, in part or have wholly or in a material part so deteriorated in
with indemnity for damages in either case; quality as to be substantially changed in character, the buyer may
at his option treat the sale:
If the thing is improved by its nature, or by time, the improvement
shall inure to the benefit of the creditor;
(1) As avoided; or
If it is improved at the expense of the debtor, he shall have no (2) As valid in all of the existing goods or in so much thereof as
other right than that granted to the usufructuary. (1122) have not deteriorated, and as binding the buyer to pay the agreed
price for the goods in which the ownership will pass, if the sale
TIME LOSS DETERIORATION FRUITS was divisible. (n)
AFTER Paras‘ view: The buyer still has to pay the price because pursuant
PERFECTION BUYER to Article 1189, the obligation of the seller is extinguished. So the
obligation of the seller to transfer ownership is extinguished since
AND
compliance therewith is impossible.
AFTER
DELIVERY Tolentino‘s view: The buyer‘s obligation to pay the price is
extinguished because a contract of sale involves reciprocal
obligations.
D sold a second-hand car to E for P150,000.00 The agreement The buyer as owner already bears the loss, fruits and benefits
between D and E was that half of the purchase price, or P75,000.00, pursuant to the rule of res perit domino.
shall be paid upon delivery of the car to E and the balance of
P75,000.00 shall be paid in five equal monthly installments of WHAT IF THERE IS TRANSFER OF OWNERSHIP BUT THE THING
P15,000.00 each. The car was delivered to E, and E paid the amount IS NOT DELIVERED TO THE BUYER?
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 Article 1504. Unless otherwise agreed, the goods remain at the
legally bound to pay the said unpaid balance of P75.000.00? Explain seller's risk until the ownership therein is transferred to the buyer,
your answer. but when the ownership therein is transferred to the buyer the
goods are at the buyer's risk whether actual delivery has been
SUGGESTED ANSWER: Yes, E is legally bound to pay the balance of made or not, except that:
P75,000.00. The ownership of the car sold was acquired by E from the
moment it was delivered to him. Having acquired ownership, E bears (1) Where delivery of the goods has been made to the buyer or to
the risk of the loss of the thing under the doctrine of res perit domino. a bailee for the buyer, in pursuance of the contract and the
[Articles 1496. 1497, Civil Code). ownership in the goods has been retained by the seller merely to
secure performance by the buyer of his obligations under the
HOW ABOUT DETERIORATION OR IMPROVEMENT? contract, the goods are at the buyer's risk from the time of such
delivery;
WHAT ABOUT DETERIORATION AFTER PERFECTION BUT
(2) Where actual delivery has been delayed through the fault of
BEFORE DELIVERY?
either the buyer or seller the goods are at the risk of the party in
fault. (n)
Article 1538. In case of loss, deterioration or improvement of the
thing before its delivery, the rules in article 1189 shall be
observed, the vendor being considered the debtor. (n)
Article 1189. When the conditions have been imposed with the
intention of suspending the efficacy of an obligation to give, the
following rules shall be observed in case of the improvement,
loss or deterioration of the thing during the pendency of the
condition:
(1) If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be
obliged to pay damages; it is understood that the thing is lost
when it perishes, or goes out of commerce, or disappears in such
a way that its existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the
impairment is to be borne by the creditor;
Article 1164. The creditor has a right to the fruits of the thing from
the time the obligation to deliver it arises. However, he shall
acquire no real right over it until the same has been delivered to
him. (1095)
Article 1537. The vendor is bound to deliver the thing sold and
its accessions and accessories in the condition in which they
were upon the perfection of the contract.
All the fruits shall pertain to the vendee from the day on which
the contract was perfected. (1468a)
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JUSTIN RYAN MORILLA
REMEDIES IN CASE OF BREACH
BREACH BY SELLER:
BREACH RELIEF
WARRANTY Accept goods plus recoupment Accept goods plus Don‘t accept plus Rescind, refuse to
damages damages accept or return
-- Seller has right to sell RECOUPMENT – means to get (warranty against
-- Against eviction everything back, restored to the hidden defects)
-- Hidden defects place where you were before the
-- Nonapparent servitude contract
Mutually exclusive
Not cumulative
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JUSTIN RYAN MORILLA
BREACH BY BUYER
BREACH RELIEF
DELIVERY IS ACCEPTED
BUT NO PRICE IS PAID Rescission or Sue for the
price
REPUDIATION OF SALE
BEFORE DELIVERY Rescission with damages
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REMEDIES IN CASES OF SPECIAL REMEDIESOF
MOVABLES ―UNPAID SELLER‖ OF GOODS
NON-PAYMENT OF PRICE BY BUYER UNPAID SELLER
OWNERSHIP TRANSFERRED TO BUYER — Where the Whole of the price has not been paid or tendered
ownership of the goods has passed to the buyer who negotiable document of title was received as conditional
wrongfully neglects or refuses to pay for them according to payment and condition was broken
the terms of the contract, the seller may maintain an action
against him for the price of the goods, i.e., an action for Article 1525. The seller of goods is deemed to be an unpaid seller
specific performance. within the meaning of this Title:
NO TRANSFER OF OWNERSHIP TO BUYER — When the (1) When the whole of the price has not been paid or tendered;
ownership in the goods has not passed, if they cannot
readily be resold for a reasonable price, the seller may offer (2) When a bill of exchange or other negotiable instrument has
to deliver the goods to the buyer, and, if the buyer refuses to been received as conditional payment, and the condition on
receive them, may notify the buyer that the goods are which it was received has been broken by reason of the dishonor
thereafter held by the seller as bailee for the buyer; of the instrument, the insolvency of the buyer, or otherwise.
thereafter, the seller may treat the goods as the buyer‘s and
may maintain an action for the price. In articles 1525 to 1535 the term "seller" includes an agent of the
seller to whom the bill of lading has been indorsed, or a
WHEN PRICE PAYABLE ON CERTAIN DAY — Where the consignor or agent who has himself paid, or is directly
price is payable on a certain day, irrespective of delivery or responsible for the price, or any other person who is in the
of transfer of title, and the buyer wrongfully neglects or position of a seller. (n)
refuses to pay such price, the seller may maintain an action
for the price although the ownership in the goods has not
passed. SPECIAL REMEDIES
However, it shall be a defense to such an action that the
seller at any time before the judgment in such action has
1) Possessory Lien
manifested an inability to perform the sale on his part or an 2) Stoppage in transitu
intention not to perform it. 3) Special right of resale
4) Special right to rescind
WHEN BUYER WRONGFULLY NEGLECTS/REFUSES
TO ACCEPT GOODS Special Rights 3&4 (resale and rescind) can only be used when
Right 1 or 2 has been exercised
Where the buyer wrongfully neglects or refuses to accept and pay for
As special rights, you must first choose either possessory lien or
the goods, the seller may maintain an action against him for damages
stoppage in transitu before you can choose between resale or rescind.
for non-acceptance.
POSSESSORY LIEN (1526)
A lien on the goods or right to retain them for the price while he is
in possession of them;
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 coextensive with his rights of
lien and stoppage in transitu where the ownership has passed to
the buyer. (n)
ARTICLE 1530. Subject to the provisions of this Title, when the If buyer sells thing without consent of seller while in transitu, the
buyer of goods is or becomes insolvent, the unpaid seller who seller's right of stoppage in transitu IS NOT AFFECTED (1535)
has parted with the possession of the goods has the right of
stopping them in transitu, that is to say, he may resume Right of stoppage DOES NOT defeat title of an innocent purchaser for
possession of the goods at any time while they are in transit, and value who is issued a negotiable document of title (1535)
he will then become entitled to the same rights in regard to the
goods as he would have had if he had never parted with the SPECIAL RIGHT TO RESELL GOODS
possession. (n)
The special right of resale can be made only when the unpaid seller
Notwithstanding that the ownership in the goods may have passed to has previously exercised either his right of possessory lien or stoppage
the buyer, the unpaid seller of goods has, in case of the insolvency of in transitu, and under any of the following conditions:
the buyer, a right of stopping the goods in transitu after he has parted
with the possession of them. 1) The goods are of perishable nature;
2) Where the seller has been expressly reserved in case the
Seller no longer has possession of thing buyer should make default; or
Buyer becomes insolvent 3) Where the buyer has been in default in the payment of the
Seller can stop the goods in transitu or resume possession price for an unreasonable time.
at any time while goods are in transit
Seller enjoys same rights as if he never parted possession EFFECT OF HAVING EXERCISED RIGHT OF RESALE
with thing
When the unpaid seller has exercised his right of resale, he shall not
GOODS ARE DEEMED IN TRANSIT thereafter be liable to the original buyer upon the sale or for any profi t
made by such resale, but may recover from the buyer damages for any
1) Period between delivery to the carrier for transmission to the loss occasioned by the breach of the sale.
buyer until buyer claims them from the carrier
SPECIAL RIGHT TO RESCIND – 1526, 1534
2) Goods are rejected by the buyer and carrier continues to
have possession even if the seller refuses to take goods
An unpaid seller having the right of lien or having stopped the goodsin
back
transitu, may rescind the transfer of title and resume the ownership in
the goods, where:
WHEN GOODS ARE DEEMED NO LONGER IN TRANSIT
1) The seller has expressly reserved the right to do so in case
Goods are no longer in transit when: the buyer should make default; or
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2) The buyer has been in default in the payment of the price for
an unreasonable time. REMEDIESOF BUYER
EFFECT OF EXERCISE OF SUCH RIGHT FAILURE OF SELLER TO DELIVER
The seller shall not thereafter be liable to the buyer upon the sale, but Where the seller has broken a contract to deliver specific or
may recover from the buyer damages for any loss occasioned by the ascertained goods, the buyer may seek action for specific performance
breach of the contract. to direct that the contract shall be performed specifically, without giving
the seller the option of retaining the goods on payment of damages.
RESCISSION OF SALE OF IMMOVABLE
BREACH OF SELLER‘S WARRANTY
1592 - in the sale of immovables, even if it was stipulated that upon
failure to pay the price at the time agreed upon the rescission of the Under Article 1599 of the Civil Code, where there is a breach of
contract shall of right take place, the vendee may pay, even after the warranty by the seller in the sale of goods, the buyer may, at his
expiration of the period FOR AS LONG AS NO DEMAND FOR election, avail of the following remedies:
RESCISSION OF THE CONTRACT HAS BEEN MADE UPON HIM
EITHER JUDICIALLY OR BY A NOTARIAL ACT
1) Accept or keep the goods and set up against the seller, the
breach of warranty by way of recoupment in diminution or
ARTICLE 1592. In the sale of immovable property, even though it extinction of the price;
may have been stipulated that upon failure to pay the price at the 2) Accept or keep the goods and maintain an action against the
time agreed upon the rescission of the contract shall of right take seller for damages for the breach of warranty;
place, the vendee may pay, even after the expiration of the period,
3) Refuse to accept the goods, and maintain an action against
as long as no demand for rescission of the contract has been
the seller for damages for breach of warranty;
made upon him either judicially or by a notarial act. After the
demand, the court may not grant him a new term. (1504a) 4) Rescind the sale and refuse to receive the goods or if the
goods have already been received, return them or offer to
return them
Immovable Property; Rescission of Contract (2003) 5) to the seller and recover the price or any part thereof which
has been paid.
X sold a parcel of land on 01 January 2001, payment and delivery to
be made on 01 February 2002. It was stipulated that if payment were When the buyer has claimed and been granted a remedy in any of
not to be made by Y on 01 February 2002, the sale between the these ways, no other remedy can thereafter be granted, without
parties would automatically be rescinded. Y failed to pay on 01 prejudice to the buyer‘s right to rescind, even if previously he has
February 2002, but offered to pay three days later, which payment X chosen specific performance when fulfillment has become impossible.
refused to accept, claiming that their contract of sale had already been
rescinded. Is X‘s contention correct? Why? 5%
SUSPENSION OF PAYMENTS IN ANTICIPATION OF BREACH
SUGGESTED ANSWER: No, X is not correct. In the sale of
immovable property, even though it may have been stipulated, as in Under Article 1590 of the Civil Code, should the buyer be disturbed in
this case, that upon failure to pay the price at the time agreed upon the the possession or ownership of the thing acquired, or should he have
rescission of the contract shall of right take place, the vendee may pay, reasonable grounds to fear such disturbance, by a vindicatory action or
even after the expiration of the period, as long as no demand for a foreclosure of mortgage, he may suspend the payment of the price
rescission of the contract has been made upon him either judicially or until the seller has caused the disturbance or danger to cease, unless
by a notarial act (Article 1592, New Civil code). Since no demand for the latter gives security for the return of the price in a proper case, or it
rescission was made on Y, either judicially or by a notarial act, X has been stipulated that, notwithstanding any such contingency, the
cannot refuse to accept the payment offered by Y three (3) days after buyer shall be bound to make the payment. A mere trespass shall not
the expiration of the period. authorize the suspension of the payment of the price.
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price and then bringing suit against the mortgagor for a defi ciency
SALE ON INSTALLMENT judgment.
(1) Exact fulfillment of the obligation, should the vendee fail to pay; The Court held that when there is only one payment to be
paid in the future, there is no basis to apply the Recto Law,
(2) Cancel the sale, should the vendee's failure to pay cover two or since under the language of then Article 1454-A, the buyer
more installments; needs to have defaulted in the payment of two or more
installments to allow the seller to rescind or foreclose on the
(3) Foreclose the chattel mortgage on the thing sold, if one has chattel mortgage.
been constituted, should the vendee's failure to pay cover action
against the purchaser to recover any unpaid balance of the price. LOANS AND FINANCING TRANSACTIONS
Any agreement to the contrary shall be void. (1454A-a)
The provisions of the Recto Law are applicable to financing
transactions derived or arising from sales of movables on installments,
OPTIONS WHEN SELLER DISCONTINUES INSTALMENTS even if the underlying contract at issue is a loan because the
promissory note had been assigned or negotiated by the original seller.
1) EXACT FULFILLMENT OF THE OBLIGATION
CONTRACTS TO SELL MOVABLES NOT COVERED
The seller is deemed to have chosen specific performance to foreclose
the resort to the other two remedies under Article 1484, when he files REMEDIES UNDER 1484 ARE ALTERNATIVE AND NOT
an action in court for recovery. Generally, the mere sending of demand CUMULATIVE. This is based on the principle that no one should
letters to the buyer to pay the balance of the purchase price should not enrich himself at the expense of another.
be considered as having barred the resort to either the remedies of
rescission or foreclosure. When the unpaid seller has already enforced the obligation by
collecting the amount due, he can no longer rescind or cancel the
If the seller chooses specific performance in the replevin suit for same. He cannot also foreclose the mortgage over the subject matter.
damages, seller is still entitled to an alias writ of execution for the For the exercise of one in full forecloses the right to exercise remedies
unsatisfied balance. (Nonato v. CA, Nov. 22, 1985)
2) CANCEL THE SALE IF THE BUYER FAILS TO PAY TWO TWO GROUPS OF BARRING EFFECTS OF REMEDIES
OR MORE INSTALLMENTS
Article 1484 of the Civil Code actually has two (2) levels of barring
When a seller chooses the remedy of rescission, then generally he is effects: the fi rst level on the choice of remedies (vertical); and the
under obligation to make restitution, which would include the return of second level, on the non-recovery of any unpaid balance when it
any amount of the purchase price that the buyer may have paid. comes to the remedies of rescission and foreclosure (horizontal).
However, under the terms of Article 1486 of the Civil Code which
provides that ―a stipulation that the installments or rents paid shall not If the seller forecloses the chattel mortgage, it can no longer sue for
be returned to the vendee or lessee shall be valid insofar as the same deficiency/balance of purchase price
may not be unconscionable under the circumstances.‖
If the seller chooses specific performance in a replevin suit for
The general rule is that the seller is deemed to have chosen the damages, seller is still entitled to alias writ of execution for unsatisfied
remedy of rescission, and can no longer avail of the other two (2) balance (Industrial v. Ramirez)
remedies under Article 1484, when he has clearly indicated to end the
contract, such as when he sends a notice of rescission, or takes Recall: In chattel mortgage, the general rule is that there is right
possession of the subject matter of the sale, or when he files an action to the balance and to the excess. The exception is the Recto law.
for rescission.
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4 years of installments at P100,000 per year = 50% of P400,000 =
MACEDA LAW – RA 6552 P200,000
REALTY INSTALLMENT BUYER PROTECTION ACT 6 years of installments at P100,000 a year = 50% of P600,000 =
P300,000 + 5% (P600,000) = P330,000
COVERED SALES
OTHER RIGHTS GRANTED TO BUYER
1) Residential real estate
2) Sales on installments In addition, the Maceda Law provides for the following rights to the
3) Financing of real estate on installment payments buyer:
4) Residential condominium apartments
5) Contract of sale 1) To sell his rights or assign the same to another person or to
6) Contract to sell reinstate the contract by updating the account during the
7) Conditional contract of sale grace period and before actual cancellation of the contract.
8) Financing transactions The deed of sale assignment shall be done by notarial act.
TRANSACTIONS EXCLUDED FROM COVERAGE 2) To pay in advance any installment or the full unpaid balance
of the purchase price any time without interest and to have
The following transactions, although involving sales on installments, such full payment of the purchase price annotated in the
are expressly excluded from the coverage of the Law, thus: certificate of title covering the property.
SUGGESTED ANSWER:
2 or more Pay without interest CASH SURRENDER Article 1592 of the Civil Code does not apply to a conditional sale.
annual within grace period VALUE = 50% In Valarao v. CA, 304 SCRA 155, the Supreme Court held that Article
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
Grace period: 1 month PLUS 5% for every full payment of the purchase price. The law applicable is the Maceda
for every year of year in excess of 5 Law.
installment made years BUT
SUGGESTED ANSWER:
No, the vendor cannot rescind the contract under the circumstances.
Grace period: used NOT MORE THAN
Under the Maceda Law, which is the law applicable, the seller on
once every 5 years 90% of installments
installment may not rescind the contract till after the lapse of the
made
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
Installments include case, the refusal of the seller to accept payment from the buyer on the
option money, 49th month was not justified because the buyer was entitled to 60 days
downpayment 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
CASH SURRENDER VALUE
rescission is invalid.
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Maceda Law; Recto Law (1999) Bernie discovered that DEVLAND had failed to develop the
subdivision in accordance with the approved plans and specifications
What are the so-called "Maceda" and "Recto" laws in connection with within the time frame in the plan. He thus wrote a letter to DEVLAND
sales on installments? Give the most important features of each law. informing it that he was stopping payment. Consequently, DEVLAND
(5%) cancelled the sale and wrote Bernie, informing him that his payments
are forfeited in its favor.
SUGGESTED ANSWER:
The MACEDA LAW (R.A. 655) is applicable to sales of immovable Was the action of DEVLAND proper? Explain. (2%)
property on installments. The most important features are (Rillo v. CA,
247 SCRA 461): SUGGESTED ANSWER: No, the action of DEVLAND is not proper.
Under Section 23 of Presidential Decree No. 957, otherwise known as
After having paid installments for at least two years, the buyer is the Subdivision and Condominium Buyer's Protection Decree,
entitled to a mandatory grace period of one month for every year of nonpayment of amortizations by the buyer is justified if nonpayment is
installment payments made, to pay the unpaid installments without due to the failure of the subdivision owner to develop the subdivision
interest. project according to the approved plans and within the limit for
complying. (Eugenio v. Drilon, G.R. No. 109404, January 22, 1996)
If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value equivalent to fifty percent (50%) of the total payments Discuss the rights of Bernie under the circumstances. (2%)
made, and after five years of installments, an additional five percent
(5%) every year but not to exceed ninety percent (90%) of the total SUGGESTED ANSWER: Under P.D. No. 957, a cancellation option is
payments made. available to Bernie. If Bernie opts to cancel the contract, DEVLAND
must reimburse Bernie the total amount paid and the amortizations
In case the installments paid were less than 2 years, the seller shall interest, excluding delinquency interest, plus interest at legal rate
give the buyer a grace period of not less than 60 days. If the buyer fails (Eugenio v. Drilon, G.R. No. 109404, January 22, 1996)
to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after 30 days from receipt by the buyer Supposing DEVLAND had fully developed the subdivision but Bernie
of the notice of cancellation or demand for rescission by notarial act. failed to pay further installments after 4 years due to business
The RECTO LAW (Art. 1484} refers to sale of movables payable in reverses. Discuss the rights and obligations of the parties. (2%)
installments and limiting the right of seller, in case of default by the
buyer, to one of three remedies: SUGGESTED ANSWER: In this case, pursuant to Section 24 of P.D.
No. 957, R.A. No. 6552 otherwise known as the Realty Installment
- Exact fulfillment; Buyer Protection Act, shall govern. Under Section 3 thereof, Bernie is
- Cancel the sale if two or more installments have not been paid; entitled: 1) to pay without additional interest the unpaid installments
- Foreclose the chattel mortgage on the things sold, also in case of due within a grace period of four (4) months or one month for every
default of two or more installments, with no further action against the year of installment paid; 2) if the contract is cancelled, Bernie is entitled
purchaser. to the refund of the cash surrender value equal to 50% of the total
payments made.
WHEN DEVELOPER COMMITS BREACH OF CONTRACT: PD 957
DEVLAND on the other hand has the right to cancel the contract after
30 days from receipt by Bernie of notice of cancellation. DEVLAND is
Sections 23 and 24 of Pres. Decree 957, provide that no installment however obliged to refund toBernie e 50% of the total payments made
payments made by the buyer in a subdivision or condominium (Rillo vs CA 1997)
project for the lot or unit he contracts to buy shall be forfeited in
favor of the owner or developer when the buyer, after due notice
to the owner or developer desists from further payment due to the CANTEMPRATE V CRS REALTY
failure of the owner or developer to develop the subdivision or MAY 8, 2009
condominium project according to the approved plans and within
the time limit for complying with the same. The sections also Petitioners here bought on installments subdivision lots from
grant to the buyer the option to be reimbursed the total amount respondent CRS Realty and had paid in full the agreed purchase price.
paid. Respondents failed to deliver the certificates of title. The complaint
prayed that respondents be ordered to deliver the certificates and to
In CASA FILIPINAS REALTY CORP. V. OFFI CE OF THE pay petitioner damages. HLURB dismissed the complaint. The Office
PRESIDENT, the Court held that Pres. Decree 957 ―was issued in the of the President affirmed the HLURB. The CA found out that CRS did
wake of numerous reports that many real estate subdivision owners, not have the required license to sell and therefore the sales are void so
developers, operators and/or sellers ‗have reneged on their neither party can compel the other to perform his obligation in the
representations and obligations to provide and maintain properly contract.
subdivision roads, drainage, sewerage, water systems, lighting
systems and other basic requirements‘ for the health and safety of Is license to sell a ground to invalidate the sale?
home and lot buyers. It was designed to stem the tide of ‗fraudulent
manipulations perpetrated by unscrupulous subdivision and SC: It‘s not one of the grounds to make a sale void. The only requisite
condominium sellers free from liens and encumbrances.‘‖ for a contract of sale or a contract to sell to exist in law is meeting of
the minds. The failure to obtain the license does not render the sale
Section 23 of Pres. Decree 957 does not require that a notice be void on that ground alone specially the parties have impliedly admitted
given first by the buyer to the seller before a demand for refund that there was already meeting of the minds as to the subject of the
can be made as the notice and demand can be made in the same sale and price of the contract. The absence of the license here only
letter or communication. subjects CSR Realty civilly and criminally liable for the said violation.
The absence of the license does not affect the contract of sale
between petitioner and CRS Realty.
BQ Non-Payment of Amortizations; Subdivision Buyer; When
justified (2005)
GROUNDS
CONVENTIONAL REDEMPTION
1) Payment/performance
2) Loss of SM
3) Condonation/remission Conventional redemption shall take place when the seller reserved for
4) Confusion/merger of rts of creditor & debtor himself the right to repurchase the thing sold, with the obligation to:
5) Compensation
6) Novation a) return the price of the sale
7) Annulment b) the expenses of the contract
8) Rescission c) any other legitimate payments made by reason of the sale
9) Conventional/legal redemption (additional) d) and the necessary and useful expenses made on the thing
sold.
REDEMPTION
AMONG CO-OWNERS
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Debtor may reimburse within 30 days from time assignee
demands payment from him
PERIOD OF REDEMPTION
If two or more adjoining owners desire to exercise the right of Seller is obligated to co-owner, adjoining owner, debtor, coheir to
redemption at the same time, the owner of the adjoining land of smaller serve a written notice if he sells to a stranger. This is not strictly
area shall be preferred; and should both lands have the same area, the followed but it is nonetheless, it is the law. If you were not informed,
one who first requested the redemption. you can file an action for breach of this provision.
URBAN LAND – small urban land is situated that a major REDEMPTION; LEGAL; FORMALITIES (2001)
portion cannot be used for any practical purpose within a
reasonable period , owner of any adjoining land has a right Betty and Lydia were co-owners of a parcel of land. Last January 31,
of pre-emption at a reasonable price 2001, when she paid her real estate tax, Betty discovered that Lydia
had sold her share to Emma on November 10, 2000. The following
When two or more owners of adjoining lands wish to exercise the right day, Betty offered to redeem her share from Emma, but the latter
of pre-emption or redemption, the owner whose intended use of the replied that Betty's right to redeem has already prescribed. Is Emma
land in question appears best justified shall be preferred. correct or not? Why? (5%)
SALE OF CREDIT IN LITIGATION (1634) SUGGESTED ANSWER: Emma, the buyer, is not correct. Betty can
ARTICLE 1634. When a credit or other incorporeal right in still enforce her right of legal redemption as a co-owner. Article 1623 of
litigation is sold, the debtor shall have a right to extinguish it by the Civil Code gives a co-owner 30 days from written notice of the sale
reimbursing the assignee for the price the latter paid therefore, by the vendor to exercise his right of legal redemption. In the present
the judicial costs incurred by him, and the interest on the price problem, the 30-day period for the exercise by Betty of her right of
from the day on which the same was paid. A credit or other redemption had not even begun to run because no notice in writing of
incorporeal right shall be considered in litigation from the time the sale appears to have been given to her by Lydia.
the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date REDEMPTION; LEGAL; FORMALITIES (2002)
the assignee demands payment from him. (1535)
Adela and Beth are co-owners of a parcel of land. Beth sold her
Creditor assigns his right to credit to a third person undivided share of the property to Xandro, who promptly notified Adela
Debtor may extinguish the credit by reimbursing the of the sale and furnished the latter a copy of the deed of absolute sale.
assignee for the price he paid for the credit When Xandro presented the deed for registration, the register of deeds
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JUSTIN RYAN MORILLA
also notified Adela of the sale, enclosing a copy of the deed with the
notice. However, Adela ignored the notices. A year later, Xandro filed a
petition for the partition of the property. Upon receipt of summons,
Adela immediately tendered the requisite amount for the redemption.
Xandro contends that Adela lost her right of redemption after the
expiration of 30 days from her receipt of the notice of the sale given by
him.
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