Sales Week 9

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2.
a.
Implied Warranties
Warranty in case of eviction Art. 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased. The vendor shall answer for the eviction even though nothing has been said in the contract on the subject. The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor. (1475a) Art. 1549. The vendee need not appeal from the decision in order that the vendor may become liable for eviction. (n) Art. 1550. When adverse possession had been commenced before the sale but the prescriptive period is completed after the transfer, the vendor shall not be liable for eviction. (n) Art. 1551. If the property is sold for nonpayment of taxes due and not made known to the vendee before the sale, the vendor is liable for eviction. (n) Art. 1552. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment. (n) Art. 1553. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void, if he acted in bad faith. (1476) Art. 1554. If the vendee has renounced the right to warranty in case of eviction, and eviction should take place, the vendor shall only pay the value which the thing sold had at the time of the eviction. Should the vendee have made the waiver with knowledge of the risks of eviction and assumed its consequences, the vendor shall not be liable. (1477) Art. 1555. When the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the vendee shall have the right to demand of the vendor: (1) The return of the value which the thing sold had at the time of the eviction, be it greater or less than the price of the sale; (2) The income or fruits, if he has been ordered to deliver them to the party who won the suit against him; (3) The costs of the suit which caused the eviction, and, in a proper case, those of the suit brought against the vendor for the warranty; (4) The expenses of the contract, if the vendee has paid them; (5) The damages and interests, and ornamental expenses, if the sale was made in bad faith. (1478) Art. 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole, that he would not have bought it without said part, he may demand the rescission of the contract; but with the obligation to return the thing without other encumbrances that those which it had when he acquired it. He may exercise this right of action, instead of enforcing the vendor's liability for eviction. The same rule shall be observed when two or more things have been jointly sold for a lump sum, or for a separate price for each of them, if it should clearly appear that the vendee would not have purchased one without the other. (1479a) Art. 1557. The warranty cannot be enforced until a final judgment has been rendered, whereby the vendee loses the thing acquired or a part thereof. (1480) Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee. (1481a) Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the complaint, that the vendor be made a co-defendant. (1482a) Art. 1560. If the immovable sold should be encumbered with any non-apparent burden or servitude, not mentioned in the agreement, of such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof, he may ask for the rescission of the contract, unless he should prefer the appropriate indemnity. Neither right can be exercised if the non-apparent burden or servitude is recorded in the Registry of Property, unless there is an express warranty that the thing is free from all burdens and encumbrances.
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Within one year, to be computed from the execution of the deed, the vendee may bring the action for rescission, or sue for damages. One year having elapsed, he may only bring an action for damages within an equal period, to be counted from the date on which he discovered the burden or servitude. (1483a) Mendoza vs. Caparros Pedro Mendoza, plaintiff and appellee, vs. Justina Caparros and others, defendants. Paulino Peleja, defendant and appellant. Date: 30 January 1954 Ponente: Pablo, J. Facts: Agapito Ferreras sold to Paulino Peleja 2 parcels of landsituated in Camagon, Alabat, Quezon for Php3,650.00 More than a decade later, Peleja sold the same lots to spouses Victoriano Mendoza and Bernabela Tolentino. The latter spouses died, leaving as heirs Pedro (plaintiff-appellee), Leandro and Justiniano all surnamed Mendoza. Upon conducting an extrajudicial partition as their parents heirs, the 2 lots aforementioned was allotted to Pedro Mendoza. However, subsequently, Agapito Ferreras obtained an OCT over the 2 parcels of land mentioned above. Later, Agapitos heirs, defendants Justina Caparros, Socorro and Policornia Ferrereas (his widow and 2 daughters, respectively) obtained a TCT over the lots in question after conducting an extrajudicial partition. Pedro Mendoza then instituted an action against defendants Paulino Peleja (seller to his parents), Justina Caparros, Socorro and Policornia Ferreras (heirs of Agapito Ferreras) for cancellation of the TCT in favor of Agapitos heirs and that another be issued in his name, married to Alfonsa Perez. The trial court ruled in favor of plaintiff Mendoza. No bad faith was found either on the part of Agapito Ferreras or his heirs in the registration of the lots in question even if such were recorded incorrectly. The defendants, except Peleja, were ordered to pay costs. The heirs of Agapito Ferreras did not appeal. Peleja filed a motion for reconsideration, seeking for the award of attorneys fees amounting to Php500.00, claiming that his inclusion in the case as defendant was unfounded and of malicious character as he was not an indispensable party said case. He based such claim in NCC Art.2208 (4) providing that attorneys fees can be recovered, even without express stipulation, in case of a clearly unfounded civil action or proceeding against him. The trial court denied Pelejas motion. Hence, this appeal.
Issue: Whether or not appellant Peleja was not an indispensable party to the action instituted by appellee Mendoza. Held: Yes. Order denying Pelejas motion for reconsideration affirmed. Ratio: Defendant Peleja sold to plaintiff Mendozas parents the 2 lots with the following condition, defender ahora y siempre contra reclamaciones Justas de quien las presentare (Google Translate says: now and forever defend against just claims of the person filing or that the seller undertook to perpetually defend the buyers against adverse claims over the lots (?)). Hence, under the said condition, defendant made himself liable to plaintiffs predecessors-in-interest and to him as heir, in case of eviction or in the event that the buyer or his heirs would be deprived of the lots or part thereof by final judgment. Even if such stipulation was not included in the deed of sale, the seller would still be responsible in case of eviction of buyers pursuant to NCC Art. 1548 (old CC Art. 1475) The plaintiff filed the suit against defendant acting with the knowledge that the suit as regards appellant Peleja was not unfounded as it was based clearly grounded on the express condition of the sale abovementioned and on NCC Art.1548. (Such was evident in the prayer of the plaintiff that in case of cancellation or reconveyance be impossible, that the defendants [including appellant Peleja], or any of them be required to pay the herein plaintiff the purchase price paid by the plaintiffs predecessor in interest.). Plaintiff merely exercised his right under the law and did not intend to merely disturb appellant Peleja in including the latter as defendant in the suit he instituted Had appellant Peleja not been included as defendant to the suit and he was made to pay indemnity, he could raise the defense that he was not given fair opportunity to prove his title over the 2 lots at the time he sold such to Victoriano Mendoza and they had been improperly recorded. In the case that Agapito Ferreras heirs sued Pedro Mendoza, demanding that possession of the parcels of land be transferred to them and with the corresponding TCT to bolster their claim, Peleja must be notified of the application of eviction at the instance of Mendoza in order that he (Peleja) must be bound to indemnify plaintiff (Mendoza).
(Caveat: the original case was in Spanish and was merely translated with Google Translate in order to arrive with this digest.)
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POWER COMMERCIAL AND INDUSTRIAL CORPORATION vs. CA, SPOUSES QUIAMBAO and PNB June 20, 1997 PANGANIBAN, J Facts: Power Commercial & Industrial Development Corporation entered into a contract of sale with the spouses Reynaldo and Angelita R. Quiambao involving a 612-sq. m. parcel of land located at the corner of Bagtican and St. Paul Streets, San Antonio Village, Makati City for P108,000.00 as down payment, and the balance of P295,000.00 upon the execution of the deed of transfer of the title over the property. As part of the purchase price, the existing mortgage on the land was also assumed. He paid P79,145.77 to Philippine National Bank for the full satisfaction of the mortgage. However, spouses mortgaged again said land to PNB to guarantee a loan of P145,000.00, P80,000.00 of which was paid to the spouses. PCID agreed to assume payment of the loan. On June 26, 1979, the parties executed a Deed of Absolute Sale With Assumption of Mortgage. The Deed contained the following: Spouses sell, transfer and convey by way of absolute sale the property with all the improvements free from all liens and encumbrances They certify that there are no agricultural lessee and/or tenant They are the lawful and absolute owners Spouses agree and warrant to defend its title and peaceful possession in favor of PCID, its successors and assigns, against any claims whatsoever of any and all third persons Except: It is mortgaged to the Philippine National Bank Assumes to pay in full the entire amount of the said mortgage above described plus interest and bank charges They agree to seek and secure the agreement and approval of the said Philippine National Ban Mrs. C.D. Constantino, then General Manager of PCID, submitted to PNB said deed with a formal application for assumption of mortgage. For PDICs failure to submit papers necessary for approval, PNB considered the application for assumption of mortgage as withdrawn. Hence the mortgage became due and demandable within 15 days. PDIC paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on December 23, 1980, payments which were to be applied to the outstanding loan. PNB received a letter from PDIC which says that there are people present in the lot and it desires that the title be transferred to its name so that it may undertake the necessary procedures to make use of the lot. PNB replied by requesting PCID to remit payments to cover interest, charges, and at least part of the principal. However on March 17, 1982, PCID filed against the spouses for rescission and damages before the Regional Trial Court of Pasig then it demanded from PNB the amounts it has paid. Pending the case, the mortgage was foreclosed and the property was awarded to PNB, the highest bidder. RTC Pasig- Recission is available and PNB is obliged to return the payments made by PCID Court of Appeals - reversed the trial court No Substantial Breach no obligation to eject the lessees from the land in question as a condition of the sale, nor was the occupation by lessees a violation of the warranty against eviction. Issues: Is the seller's failure to eject the lessees from a lot that is the subject of a contract of sale with assumption of mortgage a ground (1) for rescission of such contract and (2) for a return by the mortgagee of the amortization payments made by the buyer who assumed such mortgage? Held: (1) No (2) No Ratio: (1) No Subtantial Breach for 2 reasons: irst, such "failure" was not stipulated as a condition whether resolutory or suspensive in the contract; and second, its effects and consequences were not specified either. By the admission of Anthony Powers, General Manager of PCID, they did not ask the corporation's lawyers to stipulate in the contract that Reynaldo was guaranteeing the ejectment of the occupants, because there was already a proviso in said deed of sale that the sellers were guaranteeing the peaceful possession by the buyer of the land in question. This must be construed against the party who caused it. Romero vs. Court of Appeals this case is not applicable because in this case the contract specifically stipulated that the ejectment was a condition to be fulfilled; otherwise, the obligation to pay the balance would not arise. Ang vs. C.A. in this case Rescission was not allowed because the breach was not substantial and fundamental to the fulfillment by the sellers of the obligation to sell. Connected Issue: There was delivery to PCID through symbolic delivery. It has been in control of the land. The filing of the ejectment suit is proof of this.
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A breach warranty against eviction requires the concurrence of the following circumstances: (1) The purchaser has been deprived of the whole or part of the thing sold; (2) This eviction is by a final judgment; (3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and (4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee. The presence of lessees does not constitute an encumbrance of the land nor does it deprive PCID of its control. It lost control after foreclosure due to its own fault.
(2)
Solutio indebiti does not apply in this case. PCID was under obligation to pay the amortizations on the mortgage under the contract of sale and the deed of real estate mortgage.
b.
Warranty against hidden defects Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they 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 would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them. (1484a) Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows: (1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose; (2) Where the goods are brought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be of merchantable quality. (n) Art. 1563. In the case of contract of sale of a specified article under its patent or other trade name, there is no warranty as to its fitness for any particular purpose, unless there is a stipulation to the contrary. (n) Art. 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade. (n) Art. 1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample. (n) Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold. (1485) Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case. (1486a) Art. 1568. If the thing sold should be lost in consequence of the hidden faults, and the vendor was aware of them, he shall bear the loss, and shall be obliged to return the price and refund the expenses of the contract, with damages. If he was not aware of them, he shall only return the price and interest thereon, and reimburse the expenses of the contract which the vendee might have paid. (1487a) Art. 1569. If the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by a fortuitous event or through the fault of the vendee, the latter may demand of the vendor the price which he paid, less the value which the thing had when it was lost. If the vendor acted in bad faith, he shall pay damages to the vendee. (1488a) Art. 1570. The preceding articles of this Subsection shall be applicable to judicial sales, except that the judgment debtor shall not be liable for damages. (1489a) Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold. (1490)
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Art. 1572. If two or more animals are sold together, whether for a lump sum or for a separate price for each of them, the redhibitory defect of one shall only give rise to its redhibition, and not that of the others; unless it should appear that the vendee would not have purchased the sound animal or animals without the defective one. The latter case shall be presumed when a team, yoke pair, or set is bought, even if a separate price has been fixed for each one of the animals composing the same. (1491) Art. 1573. The provisions of the preceding article with respect to the sale of animals shall in like manner be applicable to the sale of other things. (1492) Art. 1574. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of live stock sold as condemned. (1493a) Art. 1575. The sale of animals suffering from contagious diseases shall be void. A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor. (1494a) Art. 1576. If the hidden defect of animals, even in case a professional inspection has been made, should be of such a nature that expert knowledge is not sufficient to discover it, the defect shall be considered as redhibitory. But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be liable for damages. (1495) Art. 1577. The redhibitory action, based on the faults or defects of animals, must be brought within forty days from the date of their delivery to the vendee. This action can only be exercised with respect to faults and defects which are determined by law or by local customs. (1496a) Art. 1578. If the animal should die within three days after its purchase, the vendor shall be liable if the disease which cause the death existed at the time of the contract. (1497a) Art. 1579. If the sale be rescinded, the animal shall be returned in the condition in which it was sold and delivered, the vendee being answerable for any injury due to his negligence, and not arising from the redhibitory fault or defect. (1498) Art. 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy the right mentioned in article 1567; but he must make use thereof within the same period which has been fixed for the exercise of the redhibitory action. (1499) Art. 1581. The form of sale of large cattle shall be governed by special laws. (n) RA 7394 (Consumer Act) Article 68. Additional Provisions on Warranties. In addition to the Civil Code provisions on sale with warranties, the following provisions shall govern the sale of consumer products with warranty: d) Minimum standards for warranties. For the warrantor of a consumer product to meet the minimum standards for warranty, he shall: 1) remedy such consumer product within a reasonable time and without charge in case of a defect, malfunction or failure to conform to such written warranty; 2) permit the consumer to elect whether to ask for a refund or replacement without charge of such product or part, as the case may be, where after reasonable number of attempts to remedy the defect or malfunction, the product continues to have the defect or to malfunction. The warrantor will not be required to perform the above duties if he can show that the defect, malfunction or failure to conform to a written warranty was caused by damage due to unreasonable use thereof.
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Engineering and Machinery Corp. v. CA Date: Jan. 24, 1996 Ponente: Panganiban, J. Facts: Sept. 10, 1962 Petitioner undertook to fabricate, furnish and install the air-conditioning system in respondent Ponciano Almedas building along Buendia Avenue, Makati for P210,000. The system was completed in 1963 and accepted by Almeda, who paid in full the contract price. Sept. 2, 1965 Almeda sold the building to the National Investment and Development Corporation (NIDC). NIDC took possession of the building but on account of NIDC's noncompliance with the terms and conditions of the deed of sale, Almeda was able to secure judicial rescission thereof. The ownership of the building having been decreed back to him, he re-acquired possession sometime in 1971. It was then that he learned of the defects of the air-conditioning system of the building. Acting on this information, Almeda commissioned Engineer David R. Sapico to render a technical evaluation of the system in relation to the contract with petitioner. Sapico enumerated the defects of the system and concluded that it was not capable of maintaining the desired room temperature of 76F - 2F. On the basis of this report, Almeda filed an action for damages against petitioner alleging that the air-conditioning system installed by petitioner did not comply with the agreed plans and specifications. Petitioner moved to dismiss the complaint, alleging that the prescriptive period of six months had set in pursuant to Articles 1566 and 1567, in relation to Article 1571, regarding the responsibility of a vendor for any hidden faults or defects in the thing sold. Almeda countered that the contract dated September 10, 1962 was not a contract for sale but a contract for a piece of work under Article 1713 of the Civil Code. Thus, in accordance with Article 1144 (1), the complaint was timely brought within the ten-year prescriptive period. Petitioner argued that Article 1571 of the Civil Code providing for a six-month prescriptive period is applicable to a contract for a piece of work by virtue of Article 1714, which provides that such a contract shall be governed by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale. TC: The complaint was filed within the ten-year court prescriptive period although the contract was one for a piece of work. CA affirmed. Petitioner contends that: (1) Almedas acceptance of the work and his payment of the contract price extinguished any liability with respect to the defects in the air-conditioning system; (2) CA erred when it held that the defects in the installation were not apparent at the time of delivery and acceptance of the work considering that Almeda was not an expert who could recognize such defects; and (3) assuming arguendo that there were indeed hidden defects, the complaint was barred by prescription under Article 1571 of the Civil Code, which provides for a six-month prescriptive period.
Issue: W/N the action has prescribed Held: NO. Ratio: The first 2 contentions were not resolved as they raise questions of fact. Obligations of a contractor for a piece of work: o Art. 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale. o Art. 1715. The contractor shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contractor fails or refuses to comply with this obligation, the employer may have the defect removed or another work executed, at the contractor's cost. Provisions on warranty against hidden defects [Art. 1714]: o Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they 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 would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them.
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o
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold. The remedy against violations of the warranty against hidden defects is either to withdraw from the contract (redhibitory action) or to demand a proportionate reduction of the price (accion quanti manoris), with damages in either case. Villostas vs. Court of Appeals: While it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action, a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties; and where there is an express warranty in the contract, the prescriptive period is the one specified in the express warranty, and in the absence of such period, "the general rule on rescission of contract, which is four years (Article 1389, Civil Code) shall apply. It would appear that the suit is barred by prescription because the complaint was filed more than four years after the execution of the contract and the completion of the air-conditioning system. However, the original action is not really for enforcement of the warranties against hidden defects, but one for breach of the contract itself. The trial court, after evaluating the evidence presented, held that, indeed, petitioner failed to install items and parts required in the contract and substituted some other items which were not in accordance with the specifications. The governing law is Article 1715. However, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. The mere fact that Almeda accepted the work does not, ipso facto, relieve the petitioner from liability for deviations from and violations of the written contract, as the law gives him 10 years within which to file an action based on breach thereof. Castle Brothers, Wolfe and Sons v. Gutierrez Hermanos Date: April 1, 1908 Ponente: Willard, J. Facts: Defendant was the seller while petitioner was the buyer. Mr. Knight is the representative of the buyer and Don Leopoldo Criado is the representative of the seller. Gutierrez Hermanos Castle Brothers, Wolfe and Sons Portland Cordage Defendant/seller Petitioner/buyer 1 Buyer 2 Sept. 13, 1906: buyer received telegram from Portland Cordage company asking the former to make an offer for sale of 500 bales of good current Leyte hemp. buyer sent telegram stating that they could not furnish Leyte hemp but offered good current Manila hemp. o Mr. Knight said that before such telegrams, he met with Don leopoldo who said that they could furnish 500 bales at P24/picul and on such offer, the former made the offer. Sept. 17, 1906: buyer entered into contract with seller in which latter agreed to sell 500 bales or hemp at P24/picul. It was a verbal contract and was made in office of the buyer between the representatives. o On this date, a telegram was sent by Portland accepting the offer of the buyer. Such telegram was just received and was shown to Don Leopoldo. Sept. 18, 1906: Mr. Higginbotham, assistant in the office of the buyer, inspected the bales with Don Leopoldo because Mr. Knight was sick. Sept. 19, 1906: letter was written by Mr. Higginbotham, assistant in the office of buyer. In the letter, he stated that he does not consider the bales he inspected to be fair tender against Manila good current. Of the 500 bales, buyer refused to accept 299 as it was not good current manila hemp. Buyer notified the seller that latter should deliver the 299 bales of same quality or former will buy from the market and latter will be charged with increased cost. Buyer bought from the market and action was brought to recover the loss (increase in price).
Issue: WON parties agreed to sell/buy hemp which is good current Manila or that which is indicated by the 4 marks. (4 marks is not equal to good current) Held: They agreed to buy/sell GOOD CURRENT MANILA hemp. Ratio: Buyer Mr. Knight testified that he agreed to buy and Don Leopoldo agreed to sell 500 bales of good current Manila hemp. Seller Don Leopoldo testified that the phrase good current was never mentioned in the conversation. Court Testimony of buyer is corroborated by Mr. Higginbotham, who stated that Don Leopoldo agreed to sell 500 bales of
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Some marks were made, but Mr. Knight said that he could not accept those marks unless they turned out to be up to quality of good current. He said that he never saw the telegram. good current manila. Also, telegrams stated that hemp should be good current
NOTE: read first part re custom in trading Manila hemp. Hemp bears marks combinations of letters which may indicate ownership and district from which it came. Such marks indicate the quality of the hemp contained in the bales. In general, such was sold by the marks upon the bales. When buyers purchase bales, they expect to find hemp of certain quality as specified by the marks. Hemp can also be classified in another way: in grades such as: extra superior, superior, good current, midway, fair current. Scales are made without reference to the marks. J. Carson dissenting opinion: There was no agreement or meeting of minds, whereby it was understood that on this particular occasion the usual and customary method adopted by hemp merchants in Manila in buying and selling hemp should be set aside, the defendants assuming the unusual risk of guaranteeing not only that the hemp delivered would come up to the local "letter mark" standard but also to the export "good current" standard. No evidence that seller undertake this special risk or that they intended to do such. PACIFIC COMMERCIAL CORP. v. ERMITA MARKET AND COLD STORES (1932) 09 Mar 1932; Ostrand, J. Buyer: Ermita Market and Cold Stores Seller: Pacific Commercial Corporation Subject: Automatic Refrigerating Machine FACTS: Pacific Commercial (Pacific) sold to Ermita Market and Cold Stores (Ermita) the subject Automatic refrigerating machine. A sales contract was made evidencing the transaction. The total payment to be made by Ermita consists of the purchase price, P2,550, and the installation costs, including the materials, P250.67. Ermita paid the amount of P810, leaving a balance of P1,740. A few days after the installation, Ermita complained that the machine was not serving the purpose, and that it lacked an ammonia receiver and oil separator. Pacific responded by saying that the installation was complete, but to appease Ermita, it installed an additional oil separator without charge. Ermita still not being satisfied, it discontinued the payments. Pacific brought action to recover the balance unpaid. Ermita raised the defense that the machine delivered to it was not the one stated in the contract as it was not automatic, and that it lacked essential parts to make it automatic. By way of counter-claim, it alleged that the machine was not serving its purpose, and that the refrigerating rooms never reached the temperatures it had to maintain, and that due to the negligence of Pacific in not repairing or not putting in good condition the machine, Ermita suffered losses and had to close its establishment. In response to Ermitas allegation, Pacific claimed it was the imperfections and defects of the coils which Ermita installed, and the incompetence of Ermitas personnel which caused the defects and deficiencies in the machine and in Ermitas refrigerating rooms.
TC: Rendered judgment in favor of Pacific. ISSUE/ HELD/ RATIO: W/N Pacific could be faulted for the deficiencies of the machine. It could not. It is clear that the machine delivered to Ermita was the one in the sales contract executed by the parties. The deficiencies were caused by Ermita as it did not sufficiently understand the use of the machine: 1. It expected the machine to operate automatically when it had three refrigerating rooms with three different temperatures, 2. It complains of the lack of thermostat, which is not included in the sales contract, and would not have been of any help in automatically maintaining the refrigerating rooms given Ermitas insufficient equipment 3. It complains the lack of an oil separator when in fact the same is in a single combined piece machine together with the receiver and condenser. It was Ermitas fault that the machine was not performing its function; the fault lies in the deficiency of the coils installed by Ermita and the manner by which Ermita operated the machine. Nutrimix Feeds Corp v CA Topic: Implied Warranties (Heavy on FACTS to determine if with breach of implied warranty)
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Facts: Spouses Efren and Maura Evangelista are regular buyers of various kinds of animal feeds from petitioner Nutrimix Feeds Corporation. Initially, the respondents were good paying customers. In some instances, however, they failed to issue checks despite the deliveries of animal feeds which were appropriately covered by sales invoices. Consequently, the respondents incurred an aggregate unsettled account with the petitioner in the amount of P766,151.00. They issued checks to cover this amount but were dishoneored since Maura Evangelista already closed the account. Nutrimix filed a complaint to collect the amount due and damages. Spouses Evangelista asserted that the nine checks issued by respondent Maura Evangelista were made to guarantee the payment of the purchases, which was previously determined to be procured from the expected proceeds in the sale of their broilers and hogs. They contended that inasmuch as the sudden and massive death of their animals was caused by the contaminated products of the petitioner, the nonpayment of their obligation was based on a just and legal ground. Spouses Evangelista, in turn, lodged a complaint for damages against the petitioner, for the untimely and unforeseen death of their animals supposedly effected by the adulterated animal feeds the petitioner sold to them. FACTS prior to the complaints are as follows: Incident #1: DEATH of THE CHICKENS It appears that in the morning of July 26, 1993, three various kinds of animal feeds, numbering 130 bags, were delivered to the residence of the respondents in Sta. Rosa, Marilao, Bulacan. The deliveries came at about 10:00 a.m. and were fed to the animals at approximately 1:30 p.m. at the respondents farm in Balasing, Sta. Maria, Bulacan. At about 8:30 p.m., respondent Maura Evangelista received a radio message from a worker in her farm, warning her that the chickens were dying at rapid intervals. When the respondents arrived at their farm, they witnessed the death of 18,000 broilers, averaging 1.7 kilos in weight, approximately forty-one to forty-five days old. Incident #2: DEATH of CHICKENS and HOGS On July 27, 1993, the respondents received another delivery of 160 bags of animal feeds from the petitioner, some of which were distributed to the contract growers of the respondents. At that time, respondent Maura Evangelista requested the representative of the petitioner to notify Mr. Bartolome (president of Nutrimix) of the fact that their broilers died after having been fed with the animal feeds delivered by the petitioner the previous day. She, likewise, asked that a technician or veterinarian be sent to oversee the untoward occurrence. Nevertheless, the various feeds delivered on that day were still fed to the animals. On July 27, 1993, the witness recounted that all of the chickens and hogs died. TESTIMONIES Dr. Rodrigo Diaz, veterinarian, accompanied Efren at the Bureau of Animal Industry. Efren sought for his advice regarding the death of the chickens. He suggested that the remaining feeds from their warehouse be brought to a laboratory for examination. Dr. Diaz claimed that the feeds brought to the laboratory came from one bag of sealed Nutrimix feeds which was covered with a sack. DR GARCIA, Doctor of veterinary medicine and the Supervising Agriculturist of the Bureau of Animal Industrytestified that on October 20, 1993, sample feeds for chickens contained in a pail were presented to her for examination by respondent Efren Evangelista and a certain veterinarian. The Clinical Laboratory Report revealed that the feeds were negative of salmonella and that the very high aflatoxin level found therein would not cause instantaneous death if taken orally by birds DR. MEDINA- reported that he divided the chickens into two categories, which he separately fed at 6:00 a.m. with the animal feeds of a different commercial brand and with the sample feeds supposedly supplied by the petitioner. At noon of the same day, one of the chickens which had been fed with the Nutrimix feeds died, and a second chicken died at 5:45 p.m. of the same day. Samples of blood and bone marrow were taken for chromosome analysis, which showed pulverized chromosomes both from bone marrow and blood chromosomes. On cross-examination, the witness admitted that the feeds brought to him were merely placed in a small unmarked plastic bag and that he had no way of ascertaining whether the feeds were indeed manufactured by the petitioner. AIDA MAGSIPOC, FORENSIC CHEMIST- verified that the sample feeds yielded positive results to the tests for COUMATETRALYL Compound, the active component of RACUMIN, a brand name for a commercially known rat poison PAZ AUSTRIA, Chief of the Pesticide Analytical Section of the Bureau of Plants Industry- conducted a laboratory examination to determine the presence of pesticide residue in the animal feeds submitted by respondent Maura Evangelista and Dr. Garcia. The tests disclosed that no pesticide residue was detected in the samples received but it was discovered that the animal feeds were positive for Warfarin, a rodenticide (anticoagulant), which is the chemical family of Coumarin. TC: FOR NUTRIMIX. Subject feeds were contaminated sometime between their storage at the bodega of the Evangelistas and their consumption by the poultry and hogs fed therewith, and that the contamination was perpetrated by unidentified or unidentifiable ill-meaning mischief-maker(s) over whom Nutrimix had no control in whichever way. CA: REVERSED, FOR SPOUSES EVANGELISTA. The CA gave much credence to the testimony of Dr. Rodrigo Diaz, who attested that the sample feeds distributed to the various governmental agencies for laboratory examination were taken from a sealed sack bearing the brand name Nutrimix. The CA further argued that the declarations of Dr. Diaz were not effectively impugned during cross-examination, nor was there any contrary evidence adduced to destroy his damning allegations.
SALES | SANCHEZ | 10
ISSUE: WON there is sufficient evidence to hold the petitioner guilty of breach of warranty due to hidden defects. HELD: NO. Burden of proof is with the buyer and the same wasnt met by the spouses Evangelista. RATIO: In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable to be used for the purpose which both parties contemplated. To be able to prove liability on the basis of breach of implied warranty, three things must be established by the respondents. (1) They sustained injury because of the product; (2) That the injury occurred because the product was defective or unreasonably unsafe; and (3) The defect existed when the product left the hands of the petitioner. A manufacturer or seller of a product cannot be held liable for any damage allegedly caused by the product in the absence of any proof that the product in question was defective. The defect must be present upon the delivery or manufacture of the product; or when the product left the sellers or manufacturers control; or when the product was sold to the purchaser; or the product must have reached the user or consumer without substantial change in the condition it was sold. Tracing the defect to the petitioner requires some evidence that there was no tampering with, or changing of the animal feeds. The nature of the animal feeds makes it necessarily difficult for the respondents to prove that the defect was existing when the product left the premises of the petitioner. FACTS AGAINST THE SPOUSES EVANGELISTA: LAG TIME. Petitioner delivered the animal feeds, allegedly containing rat poison, on July 26, 1993; but it is astonishing that the respondents had the animal feeds examined only on October 20, 1993, or barely three months after their broilers and hogs had died. In a span of three months, the feeds could have already been contaminated by outside factors and subjected to many conditions unquestionably beyond the control of the petitioner. NO EVIDENCE THAT SPECIMEN TESTED WAS THE SAME FEEDS GIVEN TO THE ANIMALS. There is no evidence on record to prove that the animal feeds taken to the various governmental agencies for laboratory examination were the same animal feeds given to the respondents broilers and hogs for their consumption. Moreover, Dr. Diaz even admitted that the feeds that were submitted for analysis came from a sealed bag. There is simply no evidence to show that the feeds given to the animals on July 26 and 27, 1993 were identical to those submitted to the expert witnesses in October 1993. NO ATTEMPT TO EXAMINE THE DEAD CHICKENS. The chickens brought to the Philippine Nuclear Research Institute for laboratory tests were healthy animals, and were not the ones that were ostensibly poisoned. There was even no attempt to have the dead fowls examined. Neither was there any analysis of the stomach of the dead chickens to determine whether the petitioners feeds really caused their sudden death. Mere sickness and death of the chickens is not satisfactory evidence in itself to establish a prima facie case of breach of warranty. SPOUSES EVANGELISTA COMBINED NUTRIMIX FEEDS WITH PTHER FEEDS. Respondent Maura Evangelista testified that it was common practice among chicken and hog raisers to mix animal feeds. HENCE, the petitioner is guilty of breach of warranty due to hidden defects. Remedies against breach of warranty against hidden defect: withdraw from the contract (accion redhibitoria) or to demand a proportionate reduction of the price (accion quanti minoris), with damages in either case. The Spouses Evangelista, contrary to the remedies, admitted indebtedness. For this reason alone, they should be held liable for their unsettled obligations to the petitioner.
IV. Obligations of the Vendee/Buyer

A. Obligation to accept delivery Art. 1524. The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for the payment has been fixed in the contract. (1466) Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declare; or (2) When from the nature and the circumstances of the obligation 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 for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. (1100a) Art. 1521. Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, express or implied, or usage of trade to the contrary, the place of delivery is the seller's place of business if he has one, and if not his residence; but in case of a contract of sale of specific goods, which to the knowledge of the parties when the contract or the sale was made were in some other place, then that place is the place of delivery. Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time. Where the goods at the time of sale are in the possession of a third person, the seller has not fulfilled his obligation to deliver to the buyer unless and until such third person acknowledges to the buyer that he holds the goods on the buyer's behalf. Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact. Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller. (n) Art. 1536. The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the terms as provided in Article 1198. (1467a) Art. 1198. The debtor shall lose every right to make use of the period: (1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt; (2) When he does not furnish to the creditor the guaranties or securities which he has promised; (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory; (4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period; (5) When the debtor attempts to abscond. (1129a) Art. 1522. Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts or retains the goods so delivered, knowing that the seller is not going to perform the contract in full, he must pay for them at the contract rate. If, however, the buyer has used or disposed of the goods delivered before he knows that the seller is not going to perform his contract in full, the buyer shall not be liable for more than the fair value to him of the goods so received. Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest. If the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate. Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest. In the preceding two paragraphs, if the subject matter is indivisible, the buyer may reject the whole of the goods. The provisions of this article are subject to any usage of trade, special agreement, or course of dealing between the parties. (n) Art. 1584. Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract if there is no stipulation to the contrary. Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. Where goods are delivered to a carrier by the seller, in accordance with an order from or agreement with the buyer, upon the terms that the goods shall not be delivered by the carrier to the buyer until he has paid the price, whether such terms are indicated by marking the goods with the words "collect on delivery," or otherwise, the buyer is not
entitled to examine the goods before the payment of the price, in the absence of agreement or usage of trade permitting such examination. (n) Art. 1585. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. (n) Art. 1586. In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract of sale. But, if, after acceptance of the goods, the buyer fails to give notice to the seller of the breach in any promise of warranty within a reasonable time after the buyer knows, or ought to know of such breach, the seller shall not be liable therefor. (n) Art. 1587. Unless otherwise agreed, where goods are delivered to the buyer, and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he notifies the seller that he refuses to accept them. If he voluntarily constitutes himself a depositary thereof, he shall be liable as such. (n) Art. 1588. If there is no stipulation as specified in the first paragraph of article 1523, when the buyer's refusal to accept the goods is without just cause, the title thereto passes to him from the moment they are placed at his disposal. (n) Republic v. Litton REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, v. LITTON & CO., ET AL., defendants-appellants. Facts: On December 22, 1945, the defendants Litton & Co. and George Litton (vendor), managing partner or agent of the defendant partnership, entered into a contract with the plaintiff (vendee) to supply and deliver to the latter on or before March 1, 1946, 96,000 padlocks at P1.87 each and certain quantities of indelible pencils, lead pencils, bottles of ink, pen points, chalks, clips, etc., with a total value of P25,979.55 in accordance with the specifications and under the terms and conditions set forth in the said contract; that to guarantee and secure the faithful performance of their obligation, the co-defendant Central Surety Co., Inc. executed on January 3, 1946, a surety bond in favor of the plaintiff. The defendant Litton & Co. delivered on or about April 8, 1946, 34,200 padlocks only, which is much less than the quantity called for in the contract, and failed to deliver the balance of 61,800 padlocks which were to be used during the elections of April 23, 1946. Also, the defendant failed to deliver the stationary and office supplies. For such failure of the defendant Litton & Co., the plaintiff was compelled to make open market purchases of 25,613 padlocks, thereby incurring losses and damages in the amount of P176,243.41, representing the difference between the price actually paid for said open market purchases and the price which the government would have paid to Litton & Co. in accordance with the contracts. Also, due to the default in the delivery of the stationary and office supplies the government was compelled to make open market purchases of said articles, thereby having suffered damages and losses in the sum of P20,164.17, representing the difference between the price of said articles purchased in the open market and the price stipulated in the contract. Defendants theory: The purchases of padlocks by the plaintiff in the open market were made at exorbitant prices, much in excess of their ceiling prices which should not be more than 70 per cent over the landed costs; that the defendants are not liable for the alleged losses and damages resulting from said purchases, as their delay or failure to deliver the padlocks was due to plaintiff's fault (allegedly that it was a condition that the plaintiff would timely obtain the corresponding export license and shipping priority) and to circumstances beyond their control. Litton's defense is therefore that he is excused by the plaintiff's failure to obtain in due time the export license and shipping priority. TC: for the government.
Issue: Whether the defendant obligates to deliver the materials unconditionally.1 Held: The bonds, prepared by the surety company on the basis of data furnished by Litton, made express reference to and guaranteed the fulfillment of the contracts entered into on December 22 and 26, 1945, and under said bonds delivery was to be made on or before March 1, 1946. This negatives the contention that the delivery of the padlocks and stationery was subject to any contingency, much less to plaintiff's ability to secure export license and shipping priority. It is true that the Philippine Government exerted some efforts with a view to the granting by the United States authorities of the necessary export license and shipping space, but the same do not prove that it was plaintiff's obligation to do so or that Litton's
1
The issue presented in the case was factual more than legal. Now for the relevance with the topic, I am at a loss as to how can they be related. Maybe, it is related with article 1169, and that this case was an example of time is of the essence considering it will be used for election. Or maybe that part where the SC mitigated the amount of damages considering that the Government accepted some deliveries after the election but did not pay it. The SC did not however, made an in-depth elaboration on that note.
duty to deliver the articles on or before March 11, 1946 was conditional. Rather it should be treated only as friendly accommodations. Under the contract, the plaintiff was authorized to make open market purchases as a result of Litton's default, and in view of the attending urgency the plaintiff was compelled to pay higher prices; and Litton's criticisms against said purchases is therefore not well taken. At any rate, Litton had not taken any steps to protect himself or minimize his damages by buying in the open market at lower prices than those paid by the plaintiff for the articles needed in the elections which Litton failed to deliver on time. Dispositive: The total price of the padlocks delivered to the plaintiff computed at P1.87 each, is P17,009.52, and the total price of the stationery delivered to the plaintiff after the elections, is P9,806.94, and these amounts have not been paid by the plaintiff which claims that they should be deducted from the damages due from Litton. While Litton was not excused from performing his obligation, on purely equitable considerations we hereby reduce the damages awarded by the trial court by the sum of P90,000. This roughly represents the difference between the stipulated unit price of P1.87 under Litton's contract and the price paid in the open market by the plaintiff for the quantity of padlocks delivered by Litton to and accepted by the plaintiff after the elections, which articles were loaded in the SS. Adrastus which arrived in Manila on April 1, butwas able to berth only on May 5. Azarraga v Gay 1928 Villamor, J. Facts:
By a public document, Azarraga sold two parcels of lands to Gay for the lump sum of P47,000, payable in installments. The conditions of the payment were: 1. P5,000 at the time of signing the contract 2. P20,000 upon delivery by the vendor to the purchaser of the Torrens title to the first parcel described in the deed of sale, 3. P10,000 upon delivery by the vendor to the purchaser of Torrens title to the second parcel; and 4. lastly the sum of P12,000 one year after the delivery of the Torrens title to the second parcel. st 1 condition: The vendee paid P5,000 to the vendor when the contract was signed. 2nd condition: The vendor delivered the Torrens title to the first parcel to the vendee who, pursuant to the agreement, paid him P20,000. 3rd condition: In the month of March 1921, Torrens title to the second parcel was issued and forthwith delivered by the vendor to the vendee who, however, failed to pay the P10,000 as agreed, 4th condition: Neither did the vendee pay the remaining P12,000 one year after having received the Torrens title to the second parcel. Vendee, in her defense, contends: 1. That the vendor knowing that the second parcels of land he sold had an area of 60 hectares, by misrepresentation lead the vendee to believe that said second parcel contained 98 hectares, and thus made it appear in the deed of sale and induced the vendee to bind herself to pay the price of P47,000 for the two parcels of land, which he represented contained an area of no less than 200 hectares, to which price the defendant would not have bound herself had she known that the real area of the second parcel was 60 hectares, and, consequently, she is entitled to a reduction in the price of the two parcels in proportion to the area lacking, that is, that the price be reduced to P38,000 2. That the vendee, in addition to the amounts acknowledged by the venndor, had paid other sums amounting to P4,000; and 3. That the vendee never refused to pay the justly reduced price, but the vendor refused to receive the just amount of the debt Vendor contends that the contract of sale in question was made only for the lump sum of P47,000, and not at the rate of so much per hectare.
TC: ordered the vendor to pay the remaining balance of P19,300 with legal interest; No fraud re: area of the land Held/Ratio: Re: Alleged fraud on the calculations as to the area of the two parcels The vendee went over the vendors land and made her own calculations as to the area of said two parcels. Moroever, there was a delivery of the documents covering the land he was trying to sell. The vendee had document deed, in which document it appears that the area of the second parcel is about 70 hectares. It is to be presumed that both the vendee and the lawyer who
drew the deed of sale between Azarraga(vendor) and Gay(vendee), had read the contents of the document Exhibit 4 (original deed between vendor and original owner containing the area of the land). Furthermore, there is no evidence of record that the vendor made representation to the defendant as to the area of said second parcel, and even if he did make such false representations as are now imputed to him by the vendee, the latter accepted such representations at her own risk and she is the only one responsible for the consequences of her inexcusable credulousness. Moreover, the record contains several of the vendee's letters to the vendor in the years 1921 to 1925, in which the vendee acknowledges her debt, and confining herself to petitioning for extentions of time within which to make payment for the reasons given therein. But in none of these letters is there any allusion to such lack of area, nor did she complain of the supposed deceit of which she believes she is a victim. Re: Reduction of price and delivery Said two parcels are defined by means of the boundaries given in the instrument. Therefore, the case falls within the provision of article 1471 of the Civil Code, which reads as follows: ART. 1471. In case of the sale of real estate for a lump sum and not at the rate of a specified price for each unit of measure, there shall be no increase or decrease of the price even if the area be found to be more or less than that stated in the contract. The same rule shall apply when two or more estates are sold for a single price; but, if in addition to a statement of the boundaries, which is indispensable in every conveyance of real estate, the area of the estate should be designated in the contract, the vendor shall be obliged to deliver all that is included with such boundaries, even should it exceed the area specified in the contract; and, should he not be able to do so, he shall suffer a reduction of the price in proportion to what is lacking of the area, unless the contract be annulled by reason of the vendee's refusal to accept anything other than that which was stipulated. As Manresa puts it, It follows that the provisions of article 1471 concerning the delivery of determinate objects had to be materially different from those governing the delivery of things sold a price per unit of measure or number. The first paragraph and the first clause of the second paragraph of article 1471 deal with the first of said cases; that is where everything included within the boundaries as set forth in the contract has been delivered. The second possible case in the delivery of determinate objects is that in which, on account or circumstances of diverse possible origins, everything included within the boundaries is not delivered. 1st rule: Whether or not the object of sale be one realty for a lump sum, or two or more for a single price also a lump sum, and, consequently, not for so much per unit of measure or number, there shall be no increase or decrease in the price even if the area be found to be more or less than that stated in the contract. 2nd rule: Whether or not the object of the sale be one realty for a lump sum, or two or more for a single price also a lump sum, and, consequently not at the rate of a specified price for each unit of measuring or number, the vendor shall be bound to deliver everything that is included within the boundaries stated, although it may exceed the area or number expressed in the contract; in case he cannot deliver it, the purchaser shall have the right either to reduce the price proportionately to what is lacking of the area or number, or to rescind the contract at his option. In the case at bar, the rule formulated for the second paragraph or article 1471 is INAPPLICABLE inasmuch as all the land included within the boundaries of the two parcels sold has been delivered in its entirety to the vendee. There is no division of the land enclosed within the boundaries of the properties sold; the determinate object which is the subject matter of the contract has been delivered by the vendor in its entirety as he obligate himself to do. Therefore, there is no right to complain either on the part of the vendor, even if there be a greater area than that stated in the deed, or on the part of the vendee, though the area of the second parcel be really much smaller. Thus, there was an obligation on the part of the vendee, Gay, to accept the delivery of the property though the area of the second parcel be really much smaller than that stated in the deed. B. Obligation to pay the price Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract. If the time and place should not have been stipulated, the payment must be made at the time and place of the delivery of the thing sold. (1500a)
Art. 1589. The vendee shall owe interest for the period between the delivery of the thing and the payment of the price, in the following three cases: (1) Should it have been so stipulated; (2) Should the thing sold and delivered produce fruits or income; (3) Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price. (1501a) Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease, unless the latter gives security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment. A mere act of trespass shall not authorize the suspension of the payment of the price. (1502a) Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. (1504a) Art. 1593. With respect to movable property, the rescission of the sale shall of right take place in the interest of the vendor, if the vendee, upon the expiration of the period fixed for the delivery of the thing, should not have appeared to receive it, or, having appeared, he should not have tendered the price at the same time, unless a longer period has been stipulated for its payment. (1505) Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. (1124) Arra Realty Corp v Gurantee Dev. Corp and Insurance Agency FACTS: Arra Realty Corporation (ARC) owner of a parcel of land, decided to construct a five-story building on its property and engaged the services of Eng. Pealoza as project and structural engineer. Pealoza and the ARCagreed on November 18, 1982 that Pealoza would share the purchase price of one floor of the building, consisting of 552 square meters for the price of P3,105,838: P901,738, payable within sixty (60) days from November 20, 1982, and the balance payable in twenty (20) equal quarterly installments of P110,205. Sometime in May 1983, Pealoza took possession of the 2nd flr (the property she bought), where she put up her office and operated her school. Unknown to her, ARC had executed a real estate mortgage over the lot and the entire building in favor of the China Banking Corporation as security for a loan on May 12, 1983. From February 23, 1983 to May 31, 1984, Pealoza paid P1,175,124.59 for 2nd flr she had purchased. After discovering that the property had been mortgaged to Bank, she stopped paying the installments due on the purchase price of the property. She then inform ARC that China Banking Corp rejected her offer to assume its equivalent loan from the bank and reminded it that it had conformed to her proposal to assume the payment of its loan from the bank up to the equivalent amount of the balance of the purchase price of the second floor of the building as agreed upon, and the consequent execution by the ARC of a deed of absolute sale over the property in her favor. In the meantime that ARC has not issued her the title, she withheld her payments. Oct. 3, 1984, Pealoza transferred the school to another building she had purchased, but retained her office therein. She later discovered that her office had been padlocked. She had the office reopened and continued holding office thereat. To protect her rights as purchaser, she executed on Nov. 26, 1984 an affidavit of adverse claim over the property which was annotated at the dorsal portion of TCT No. 112269 on Nov. 27, 1984 however, the adverse claim was cancelled on Feb. 11, 1985. ARC failed to pay its loan to China Banking Corporation, the subject property was foreclosed, thereafter sold to the Bank. On Apr. 29, 1987, ARC and Guarantee Development Corporation and Insurance Agency (GDCIA) executed a deed of conditional sale covering the building and the lot for P22,000,000. With the money advanced by the GDCIA, the property was redeemed.
On May 14, 1987, ARC executed a deed of absolute sale over the lot and building in favor of the GDCIA for P22,000,000. The Register of Deeds, thereafter, issued TCT in favor of the GDCIA over the property without any liens or encumbrances. Pealoza then filed a complaint against ARC & GDCIA for specific performance to execute a deed of sale of the second floor of the building in her for OR sum of money.ARC and GDCIA filed its defenses and counter-claims as well. RTC: Granted the award of sum of money and ordered ARC to pay Pealoza BUT dismissed the specific performance on grounds that the TCT was already issued in the name of GUARANTEE; dismissed ARC & GDCIAs counterclaim for insufficiency of evidence. CA: Affirmed RTC decision ISSUE: 1. W/N there was perfected contract of sale exists bet. Arra Realty and Eng. Pealoza, despite the failure of Eng. Pealoza to pay the balance of purchase price? YES there is a perfected contract of sale. RATIO: ARC (seller) s Argument Supreme Court
No contract of sale over the one floor of the building was perfected. Eng. Pealoza (buyer) failed to pay the down payment on its due date on Jan 1983. It was only on Mar. 4, 1983 that the buyer was able to pay and buyer was only able to pay 3 quarterly instalments and a part of 4th instalment. Pealoza failed to pay for rentals for her occupancy of the property in the total amount of P2,177,935. The petitioners contend that, even if the payments of respondent Pealoza amounting to P1,735,500 would be deducted from the agreed purchase price, she would still end up owing the petitioner ARC the net amount of P930,815.56. They aver that respondent Pealoza should be ordered to pay damages under Article 19 CC
In May 1983, Pealoza took possession of a portion of the second floor, she put up her office and operated the St. Michael International Institute of Technology. Thenceforth, respondent Pealoza became the owner of the property, conformably to Article 1477 CC until and unless the contract is resolved or rescinded in accordance with law, seller cant recover the thing sold even if the vendee failed to pay in full the initial payment for the property. Such failure will merely give the vendor the option to rescind the contract of sale judicially or by notarial demand as provided for by Article 1592 CC. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the buyer may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act.
Admittedly, buyer Pealoza failed to pay the downpayment on time. But then, the petitioner ARC accepted, without any objections, the delayed payments of the respondent; hence, as provided in Article 1235 CC the obligation of the respondent is deemed complied with:
Art. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with.
Buyer was justified in withholding her payment because when she asked for the issuance of her title to the property after taking possession thereof, the ARC failed to comply. Even before she took possession of the property, the petitioner ARC had already mortgaged the lot and the building to the China Banking Corporation; when she offered to pay the balance of the purchase price of the property to enable her to secure her title thereon, the petitioner ARC ignored her offer. Under Article 1590 CC, a vendee may suspend the payment of the price of the property sold:
Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease, unless the latter gives security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment. A mere act of trespass shall not authorize the suspension of the payment of the price.
The petitioner ARC is, thus, barred from raising the claim that respondent Pealoza is liable for P2,177,935 by way of advances and unpaid rentals ARC did not interpose any counterclaims for actual damages in the form of unpaid rentals nor it was only when they moved for the reconsideration of the decision of the CA did they claim, for the first time on appeal. Likewise they cant claim on the basis of Art 19 CC Pealoza while she failed to pay the purchase price on time, the petitioner ARC nevertheless accepted such delayed payments. The respondent even proposed to assume the loan of ARC with the China Banking Corp. in an amount equivalent to the balance of the purchase price of the subject property, which the petitioner ARC rejected. In fine, respondent Pealoza acted in accord with law and in utmost good faith. Hence, she is not liable for damages to the petitioners under Article 19 of the New Civil Code.
Luzon Brokerage v. Maritime Building VICENTE BARENG vs. COURT OF APPEALS, PATROCINIO SELLER and AGUSTIN RUIZ, respondents. Date: April 25, 1960 Ponente: REYES, J.B.L., J. Facts: Buyer Bareng purchased from Seller Alegria the cinematographic equipment installed at the Pioneer (now Rosamil) Theater in Laoag, Ilocos Norte, for the sum of P15,000, P10,000 of which was paid, and for the balance, Buyer signed four promissory notes. The first promissory note was duly paid by Buyer. Shortly before the second note fell due, Agustin Ruiz informed Buyer that he was a co-owner of the equipment in question, and sent Buyer a telegram instructing him to suspend payments to Seller of the balance of the price as he was not agreeable to the sale. When Seller sought to collect upon the second note, Buyer refused to pay on account of Ruiz's claims. Only P400 was paid on the second note and thereafter, Buyer refused to make any more payments to Seller until the latter had settled his dispute with Ruiz. Ruiz filed suit against Seller and Buyer for his share in the price of the cinema equipment in question. Seller and Ruiz reached a compromise in the case, wherein Seller recognized Ruiz as co-owner of the equipment sold to Buyer, and promised to pay him 2/3 of whatever amount he could recover from the latter. Seller sued Buyer for the amount of P13,500 allegedly representing the unpaid balance of the price of said equipment. Buyer alleged that only P3,600 had not been paid and prayed for the rescission of the sale for supposed violation by Seller of certain express warranties as to the quality of the equipment, and asked for payment of damages for alleged violation of Seller's warranty of title. TC: Seller and Ruiz as co-owners of the cinema equipment in question. CA: Reversed. Buyer was ordered to pay Seller the sum of P3,600 plus legal interest from the filing of the complaint; Seller was ordered to pay Ruiz 2/3 of the total amount he would recover from Buyer. Buyer claims he is not liable to pay interests to Seller because he was justified in suspending payment of the balance of the price of the equipment in question from the time he learned of Ruiz' adverse claims over said equipment. The right of a vendee to suspend payment of the price of the thing sold in the face of any danger that he might be disturbed in its possession of ownership is conferred by Article 1590.
Issue: W/N Buyer was in default of payment. Held/Ratio: YES. Buyer had the right to suspend payment from the time he was informed by Ruiz of the latter's claims of co-ownership thereof, especially upon his receipt of Ruiz' telegram wherein the latter asserted that he was not agreeable to the sale. Nevertheless, said right of Buyer ended as soon as "the vendor has caused the disturbance or danger to cease". In this case, Seller had caused the disturbance or danger to Buyer's ownership or possession to cease when he (Seller) reached a compromise with Ruiz whereby Ruiz expressed his conformity to the sale to Buyer, subject to the payment of his share in the price by Seller. From this time, there was no longer any danger of threat to Buyer's ownership and full enjoyment of the equipment he bought from Seller. It is clear, therefore, that Buyer was in default on the unpaid balance of the price of the equipment in question.
Lui v Loy FACTS: Teodoro Vao, as attorney-in-fact of Jose Vao, sold seven lots to Benito Liu and Cirilo Pangalo. Teodoro Vao dealt with Frank Liu, the brother of Benito Liu, in the sale of the lots to Benito Liu and Cirilo Pangalo. The lots sold to Benito Liu were Lot Nos. 5, 6, 13, 14, and 15 of Block 12 for a total price of P4,900. Benito Liu gave a down payment of P1,000, undertaking to pay the balance of P3,900 in monthly installments of P100 beginning at the end of January 1950. The lots sold to Cirilo Pangalo were Lot Nos. 14 and 15 of Block 11 for a total price of P1,967.50. Cirilo Pangalo gave P400 as down payment, undertaking to pay the balance of P1,567.50 in monthly installments of P400 beginning at the end of January 1950. Meanwhile, Jose Vao passed away. Benito Liu subsequently paid installments totaling P2,900, leaving a balance of P1,000. Apparently, Benito Liu stopped further payments because Teodoro Vao admitted his inability to transfer the lot titles to Benito Liu. Later, in a letter Teodoro Vao informed Frank Liu that the Supreme Court had already declared valid the will of his father Jose Vao. Thus, Teodoro Vao could transfer the titles to the buyers names upon payment of the balance of the purchase price. When Frank Liu failed to reply, Teodoro Vao sent him another letter, reminding him of his outstanding balance. It appears that it was only after nine years that Frank Liu responded through a letter where, Frank Liu informed Teodoro Vao that he was ready to pay the balance of the purchase price of the seven lots. He requested for the execution of a deed of sale of the lots in his name and the delivery of the titles to him. Benito Liu sold to Frank Liu the five lots and Frank Liu assumed the balance of P1,000 for the five lots. Cirilo Pangalo likewise sold to Frank Liu the two that Pangalo purchased from Teodoro Vao. Frank Liu likewise assumed the balance of P417 for the two lots. In another letter, Frank Liu reiterated his request for Teodoro Vao to execute the deed of sale. According to Frank Liu, he enclosed a check for P1,417, which is the total balance of the accounts of Benito Liu and Cirilo Pangalo on the seven lots. However, Frank Liu did not offer in evidence the letter or the check. Teodoro Vao sold Lot No. 5 to respondent Alfredo Loy for P3,910. Teodoro Vao died. His widow, Milagros Vao, succeeded as administratrix of the Estate of Jose Vao.Probate court approved the claim of BOTH Frank Liu and the Loys. Milagros Vao, as administratrix of the estate, filed a motion for reconsideration and contended that she already complied with the probate courts order to execute a deed of sale covering the seven lots, including Lot Nos. 5 and 6, in favor of Frank Liu. No one notified her of the motion of the Loys, and if the Loys or the court notified her, she would have objected to the sale of the same lots to the Loys. Regional Trial Court: held that the contract between Teodoro Vao and Benito Liu was a contract to sell. Since title to Lot Nos. 5 and 6 never passed to Benito Liu due to non-payment of the balance of the purchase price, ownership of the lots remained with the vendor. Sales to Alfredo Loy, Jr. and Teresita Loy of Lot Nos. 5 and 6, respectively, were valid. Court of Appeals: Affirming trial courts decision; sales to Alfredo Loy, Jr. and Teresita Loy of Lot Nos. 5 and 6, respectively, were valid despite lack of prior approval by the probate court. ISSUE: Whether Frank Liu has a superior right over Lot Nos. 5 and 6 HELD: Yes. No valid cancellation of the contract to sell because there was no written notice of the cancellation to Benito Liu or Frank Liu. There was even no implied cancellation of the contract to sell. Letter could not be construed as a unilateral extrajudicial rescission of the contract to sell. As clearly stated in the letter, the only action that Teodoro Vao would take if Frank Liu did not reply was that Teodoro Vao would write directly to Benito Liu and Cirilo Pangalo. The letter does not mention anything about rescinding or cancelling the contract to sell. ISSUE: Whether the lis pendens in the served as notice to the Loys HELD: No. The lis pendens in the Davao case did not serve as notice to the Loys. The Register of Deeds of Cebu City denied registration of the lis pendens. Frank Lius failure to appeal the denial of the registration rendered the lis pendens ineffective.
ISSUE: Whether the registration by the Loys of their contracts of sale made them the first registrants in good faith to defeat prior buyers HELD: The registration by the Loys of their contracts of sale did not defeat the right of prior buyers because the person who signed the Loys contracts was not the registered owner. The registered owner of Lot Nos. 5 and 6 was the Estate of Jose Vao. Teodoro Vao was the seller in the contract of sale with Alfredo Loy, Jr. The Estate of Jose Vao was the seller in the contract of sale with Teresita Loy. Teodoro Vao signed both contracts of sale. The rule is well-settled that one who buys from a person who is not the registered owner is not a purchaser in good faith.
Recto Law: Sales of Movables on Installments Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a) Art. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. (1454-A-a) Art. 1486. In the case referred to in two preceding articles, a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. (n) Levy Hermanos, Inc. vs. Gervacio Levy Hermanos, Inc., plaintiff-appellant, vs. Lazaro Blas Gervacio, defendant-appellee. Date: 27 October 1939 Ponente: Moran, J. Facts: Levy Hermanos, Inc. sold to Lazaro Blas Gervacio a Packard car. Gervacio made an initial payment and executed a promissory note for the remaining balance of Php2,400.00, payable on or before 15 June 1937 with an interest ogf 12% per annum. Gervacio mortgaged the car to plaintiff Levy Hermanos to secure the payment of the promissory note. Defendant Gervacio failed to pay the note upon its maturity, hence prompting plaintiff Levy Hermanos to foreclose the mortgage. The car was sold at public auction wherein plaintiff Levy Hermanos was highest bidder at Php1,800.00. Plaintiff seller then instituted the current action to collect the Php1,600.00 balance and interest. The trial court applied Act No.4122, inserted as articles 1454-A of the (old) Civil Code. TC decided for defendant Gervacio. Hence, this appeal.
Issue: WON plaintiff Levy Hermanos can still collect the balance and interest of the unpaid note issued by defendant Gervacio even after plaintiff succeeded in selling and acquiring the mortgaged car in auction. Held: Yes. Judgment reversed, defendant-appellee sentenced to pay plaintiff-appellant the sum of Php1,600.00 with interest at 12% per annum from 15 June 1937 and the sum of Php52.08 with interest of 6% from date of filing of complaint. Costs against appellee. Ratio: Art.1454-A of the Civil Code provides: In a contract for the sale of personal property payable in installments shall confer upon the vendor the right to cancel the sale or foreclose the mortgage if one has been given on the property, without reimbursement to the purchase of the installments already paid, if there be an agreement to this effect. However, it the vendor has chosen to foreclose the mortgage he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same and any agreement to the contrary shall be null and void. The Court held in Macondray and Co. vs. De Santos, 33 Off. Gaz. 2170, that in order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a contract for the sale of personal property payable in installments and that there has been a failure to pay two or more installments. The contract in the case at bar, even if a sale of personal property, is however not one on installments but on a straight term- wherein after payment of the initial sum, the balance must be paid entirely at the time specified in the promissory note. Hence, the contract herein is not the one contemplated in Act No.4122 (inserting Art.1454-A of the old Civil Code) and therefore the mortgagee is not prohibited to recover to recover the unpaid balance.
Even if the cash payment in the case at bar shall be considered an installment, still the law does not apply because said law requires non-payment in two or more installments so as to make Art.1454-A operational. In the instant case, however, only one installment (of two, assuming the payment was indeed in installment) was unpaid. The law abovementioned is aimed at sales where the price is payable in several installments as it is in these cases that partial payments are in relatively small amounts thus giving rise to temptation for improvident purchasers to spend beyond their means. Such temptation is not present where the price is to be paid on cash or partly in cash and partly in one term (as in the current case) because in this case the partial payments are not small as to place buyers off guard and lead to miscalculation in their ability to pay.
Delta Motor Sales Corporation vs Niu Kim Duan September 2, 1992 Nocon, J. Facts: Niu Kim Duan and Chan Fue Eng purchased from Delta Motors Sales Corporation three (3) units of Daikin air-conditioner all valued at P19,350 as evidenced by the Deed o Conditional Sale. Duan and Fue are assailing the Deed of Conditional Sale as being contrary to law, morals, good custom, public order or public policy. They point to the contracts paragraphs 5 and 7 as iniquitous. Par 5- failure to pay any of the installments or failure to comply with the terms and conditions will make the contract automatically null and void and the payments made will be considered as rentals and the seller may take possession Par7- In case of rescission, buyer will peacefully deliver the property. If a suit is brought by seller for the judicial declaration of nullity, buyer will pay the cost plus damages (25% of the unpaid obligation), penalty and attorneys fees. Duan and Eng pointed out that the enforcement of the Deed of Conditional Sale will unjustly enrich Delta because by putting a few touches here and there, the same units can be sold again to the next imprudent customer. TC- in favor of Delta CA-elevated to SC since the questions are purely law Issues/Held: (1) WON the treatment of the payments made as rentals is unconscionable. No (2) WON Delta can still exact payment of the balance from Duan and Eng. NO Ratio: (1) P 774.00 (downpayment) + P5,655.92 (installment payments) = P 6,429.92 (1/3 of the cost of the 3 air conditioners) The stipulation is valid and not unconscionable and is sanctioned by Article 1486 of the NCC: They stipulation may not be unconscionable under the circumstances. The installment payments correspond only to 7 monthly installments. They did not pay the 15 monthly installments and were using the same for free. (2) The three remedies are (1) exact fulfillment (2) cancel the sale (3) foreclose the mortgage. These remedies are alternative and not cumulative. Delta clearly chose the second. Having done so, it is barred from exacting payment of the balance of the 3 air conditioning units it has already possessed. It cannot have its cake and eat it too.
Tajanlangit v. Southern Motors Date: May 28, 1957 Ponente: Bengzon, J. Facts: April 1953 Amador Tajanlangit and his wife Angeles bought from the Southern Motors Inc. of Iloilo two tractors and a thresher. In payment for the same, they executed a promissory note whereby they undertook to satisfy the total purchase price of P24,755.75 in several installments (with interest) payable on stated dates from May 18, 1953 to December 10, 1955. The note stipulated that if default be made in the payment of interest or of any installment, then the total principal sum still unpaid with interest shall at once become demandable etc. The buyers failed to meet any installment. Thus, they were sued for the amount of the promissory note. The buyers defaulted, and the court ruled in favor of Southern Motors in the total sum of P24,755.75 together with interest at 12 per cent, plus 10 per cent of the total amount due as attorney's fees and costs of collection.
Carrying out the order of execution, the sheriff levied on the same machineries and farm implements which had been bought by the spouses; and later sold them at public auction to the highest bidder (Southern Motors) for P10,000. Since the proceeds were deficient, Southern Motors subsequently asked and obtained, an alias writ of execution; and pursuant thereto, the provincial sheriff levied attachment on the Tajanlangits' rights and interests in certain real properties, with a view to another sale on execution. To prevent such sale, the Tajanlangits instituted an action for annulling the alias writ of execution and all proceedings subsequent thereto, on the following grounds: (1) They had returned the machineries and farm implements to Southern Motors, the latter accepted them, and had thereby settled their accounts; for that reason, said spouses did not contest the action against them (2) As Southern Motors had repossessed the machines purchased on installment (and mortgaged) the buyers were relieved from further responsibility, in view of the Recto Law, now article 1484 of the New Civil Code. Southern Motors denied the alleged "settlement and understanding" during the pendency of the case. It also denied having repossessed the machineries, the truth being that they were attached by the sheriff and then deposited by the latter in its shop for safekeeping, before the sale at public auction. TC denied the spouses complaint. The buyers seek to prohibit and forbid the Sheriff of Iloilo from attaching and selling at public auction sale their real properties because that is now forbidden by the law after the chattels that have been purchased and duly mortgaged had already been repossessed by the same vendor-mortgagee and later on sold at public auction sale and purchased by the same. Issue: W/N the buyers can still be held liable for the deficiency Held: YES. Ratio: Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. The spouses would invoke the last paragraph. But there has been no foreclosure of the chattel mortgage nor a foreclosure sale. Therefore the prohibition against further collection does not apply. Manila Motor Co. vs. Fernandez: At any rate it is the actual sale of the mortgaged chattel in accordance with section 14 Act No. 1508 that would bar the creditor (who chooses to foreclose) from recovering any unpaid balance. It is true that there was a chattel mortgage on the goods sold. But Southern Motors elected to sue on the note exclusively, i.e. to exact fulfillment of the obligation to pay. It had a right to select among the three remedies established in Article 1484. In choosing to sue on the note, it was not thereby limited to the proceeds of the sale, on execution, of the mortgaged good. Southern Motors Inc. vs. Magbanua [similar to the case]: As the plaintiff has chosen to exact the fulfillment of the defendant's obligation, the former may enforce execution of the judgment rendered in its favor on the personal and real properties of the latter not exempt from execution sufficient to satisfy the judgment. The buyers argue that upon the return of the same chattels and due acceptance of the same by the vendor-mortgagee, the conditional sale is ipso facto cancelled, with the right of the vendor-mortgagee to appropriate whatever downpayment and posterior monthly installments made by the purchaser. However, it assumes that acceptance of the goods by the seller is with a view to "cancellation" of the sale. The company denies such acceptance and cancellation, asserting the goods, were deposited in its shop when the sheriff attached them in pursuance of the execution, as corroborated by the sheriff. Ridad v. Filipinas Investment and Finance Corporation Date: January 27, 1983 Ponente: De Castro, J. Facts: Apr. 14, 1964: Petitioners purchased from Supreme Sales arid Dev. Corp. 2 brand new Ford Consul Sedans with accessories for P26,887 payable in 24 installments. To secure payment, buyer executed chattel mortgage on the 2 vehicles, another car (Chevrolet) and on the franchise or certificate of public convenience granted by Public Service Commission for the operation of taxi fleet. Seller assigned rights to Filipinas Investment and Finance Corp.
Buyers failed to pay their monthly installments. All mortgage were foreclosed. o 2 Ford consul cars > to Filipinas Investment as highest bidder o Franchise was sold to Sebastian for P8000. Buyers filed action to annul the contracts against defendants (Filipinas Investment, Sebastian and the sheriff) Lower court: chattel mortgage on the taxicab franchise and used chevrolet car is null and void.
Issue: WON chattel mortgages on Chevrolet car and taxicab franchise are valid. Held: NO. Ratio: Art. 1484 of CC In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise y of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. Whichever right the vendor elects, he cannot avail of the other, these remedies being alternative, not cumulative. Furthermore, if the vendor avails himself of the right to foreclose his mortgage, the law prohibits him from further bringing an action against the vendee for the purpose of recovering whatever balance of the debt secured not satisfied by the foreclosure sale. Purpose of the law: prevent mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment, otherwise, the mortgagor-buyer would find himself without the property and still owing practically the full amount of his original indebtedness Filipinas investment elected to foreclose the mortgage upon default of the buyer/mortgagor. It submitted itself to the consequences of the law.
NORTHERN MOTORS v. SAPINOSO (1970) 29 May 1970; Villamor, J. Buyer: Casiano Sapinoso Seller: Northern Motors Inc. Subject: Opel Kadett Car FACTS: Casiano Sapinoso purchased from Northern Motors Inc. an Opel Kadett car for P12,171. Downpayment was made, with the balance payable in instalments, promissory note. A mortgage contract was likewise executed. The mortgage contract provided that should the mortgagor default on the payments of the principal or interests due, the remedies available to the mortgagee are 1. Sale of the car, 2. Cancellation of the sale, 3. Extrajudicial foreclosure, 4. Judicial foreclosure, 5. Ordinary civil action to exact fulfilment of the contract. It further provided that in case of election of any of the remedies, the mortgagor waives his right to reimbursement of any and all amounts paid by him. Sapinoso failed to pay the first until the fifth instalments. However, several payments were made amounting to P1410.52, with the amount partially applied to the interest, and partially to the principal amount. He failed to make further payments prior to the action filed by Northern Motors. 22 Jul 1966 Northern Motors filed the complaint availing itself of the right to extrajudicially foreclose the mortgage, with a prayer for the issuance of the writ of replevin. The writ was issued on 09 Oct after posting of a bond. 22 Aug and 27 Sep Sapinoso made subsequent payments, amounting to P1250. 20 Oct Copies of the summons and complaint were served on Capinoso. The sheriff, through a seizure warrant, seized the subject vehicle; its possession was later turned over to Northern Motors on 25 Oct. Sapinoso assails the actual value of the car, and claims that there were defects in the vehicle, which Northern Motors failed to address, and which made him procrastinate in making payments. He likewise alleges that the payments made by him were made due to Northern Motors promise to have the car fixed, and that the present action was filed in bad faith. TC: Due to Sapinosos non-payment of more than 2 instalments, Northern Motors was entitled to both the foreclosure of the mortgage and to the writ of replevin as a preliminary step to the foreclosure. It held, however, that Northern Motors should reimburse Sapinoso for the subsequent payments made by the latter. It reasoned that by electing to foreclose the mortgage, Northern Motors could no longer make a claim on the promissory note, and is no longer entitled to the additional payments made by Sapinoso.
Northern Motors argues that it is the exercise of the right, and not the election of the right, which bars further recovery on the balance to be paid by the mortgagor
ISSUE/ HELD/ RATIO: W/N the issuance of the writ of replevin has the effect of barring recovery of unpaid amounts due on the obligation. It does not. Although replevin is the preliminary act to a foreclosure sale, it is only the actual foreclosure and sale of the mortgaged chattel which bars recovery of any unpaid amount on the mortgagors obligation. What Art. 1484 prohibits is the further action against the purchaser to recover any unpaid balance of the price. What is the meaning of the word action in Art. 1484. Although held in a previous case to refer to "any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy", the facts of this case do not merit such restrictive application as there was yet no foreclosure effected. W/N further action was made by Northern Motors to exact payment from Sapinoso. It was not. Sapinosos subsequent payments were voluntary and did not result from any further action instituted by Northern Motors. W/N Sapinoso is entitled to the reimbursement. He is not. As mortgagees are not precluded from receiving payment prior to foreclosure sale, or desisting therefrom prior to acceptance of any benefit, there is no reason why a mortgagee should be barred from receiving voluntary payments made to him. As Northern Motors is entitled to Sapinosos voluntary payment, Sapinoso is not entitled to reimbursement. * Art. 1484. In a contract of sale of personal property the price of which is payable in instalments, the vendor may exercise any of the following remedies: (1) Exact fulfilment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more instalments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more instalments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a)
Borbon II v Servicewide Specialists Inc Topic: Recto Law (Sale of Movables in Installments) Facts: 1984- Daniel L. Borbon and Francisco Borbon signed a promissory note for the purchase of a vehicle (crew cab) bought from Pangasinan Auto Mart, Inc. Payment is in installment with the terms as follows: P10,238.00 monthly for Twelve (12) months due and payable on the 7 day of each month starting January, 1985. A chattel mortgage was executed on the crew cab to secure the loan. The rights of Pangasinan Auto Mart, Inc. was later assigned to Filinvest Credit Corporation, with notice to the defendants. Filinvest Credit Corporation assigned all its rights, interest and title over the Promissory Note and the chattel mortgage to the Servicewide Specialists. Because the defendants did not pay their monthly installments, Filinvest demanded from the defendants the payment of their installments due on January 29, 1985 by telegram. After the accounts were assigned to the Servicewide Specialists, it attempted to collect by sending a demand letter to the defendants for them to pay their entire obligation which, as of March 12, 1985, totaled P185,257.80. Defense of Borbon: What they intended to buy was a jeepney type Isuzu K. C. Cab. The vehicle that they bought was not delivered. Instead, through misrepresentation and machination, what was delivered was an Isuzu crew cab, as this is the unit available at their warehouse. They were told that the available stock is an Isuzu Cab but minus the rear body, which the Borbons agreed to deliver with the understanding that they will be refunded the amount of P10,000.00 to have the rear body completed. They are not in default of their obligation because the Pangasinan Auto Mart was first guilty of not fulfilling its obligation in the contract. They claim that neither party incurs delay if the other does not comply with his obligation. TC: IN FAVOR OF SERVICEWIDE SPECIALISTS- awarded liquidated damages and attorney's fees. The parties here concede that the action for replevin has been instituted for the foreclosure of the vehicle in question (now in the possession of private respondent Servicewide Specialists). ISSUE: WON TC erred in awarding liquidated damages despite replevin action for foreclosure of the vehicle. HELD: YES RATIO:
ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage or the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. The remedies under Article 1484 of the Civil Code are not cumulative but alternative and exclusive. When the seller assigns his credit to another person, the latter is likewise bound by the same law. Accordingly, when the assignee forecloses on the mortgage, there can be no further recovery of the deficiency, and the seller-mortgagee is deemed to have renounced any right thereto. A contrario, in the event the seller-mortgagee first seeks, instead, the enforcement of the additional mortgages, guarantees or other security arrangements, he must then be held to have lost by waiver or non-choice his lien on the chattel mortgage of the personal property sold by any mortgaged back to him, although, similar to an action for specific performance, he may still levy on it. In ordinary alternative obligations, a mere choice categorically and unequivocally made and then communicated by the person entitled to exercise the option concludes the parties. The creditor may not thereafter exercise any other option, unless the chosen alternative proves to be ineffectual or unavailing due to no fault on his part. This rule, in essence, is the difference between alternative obligations, on the one hand, and alternative remedies, upon the other hand, where, in the latter case, the choice generally becomes conclusive only upon the exercise of the remedy. o For instance, in one of the remedies expressed in Article 1484 of the Civil Code, it is only when there has been a foreclosure of the chattel mortgage that the vendee-mortgagor would be permitted to escape from a deficiency liability. Thus, if the case is one for specific performance, even when this action is selected after the vendee has refused to surrender the mortgaged property to permit an extrajudicial foreclosure, that property may still be levied on execution and an alias writ may be issued if the proceeds thereof are insufficient to satisfy the judgment credit. So, also, a mere demand to surrender the object which is not heeded by the mortgagor will not amount to a foreclosure, but the repossession thereof by the vendormortgagee would have the effect of foreclosure. Since with replevin already, "any unpaid balance" can only mean the deficiency judgment to which the mortgagee may be entitled to when the proceeds from the auction sale are insufficient to cover the "full amount of the secured obligation which x x x include interest on the principal, attorney's fees, expenses of collection, and costs." DISPOSITIVE: DELETED LIQUIDATED DAMAGES, SUSTAINED ATTYS FEES. Elisco Tool Manufacturing v. Court of Appeals ELISCO TOOL MANUFACTURING CORPORATION, petitioner, v. COURT OF APPEALS, ROLANDO LANTAN, and RINA LANTAN, respondents Facts: Rolando was the head of the cash department of Elisco Tool Manufacturing Corporation when he entered into a car plan agreement with the latter. The contract entered into on January 9, 1980 provides that the lease rental was for P1,010.65 a month for five years payable thru salary deduction, with option to purchase at the end of the 5-year period or upon payment of the 60th monthly rental where all monthly rentals paid shall be applied to the full purchase price. In 1981, however, Elisco Tool ceased operations and Rolando was laid off. Nonetheless, as of December 4, 1984, Rolando was able to make payments for the car in the total amount of P61,070.94. On June 6, 1986, petitioner filed a complaint, entitled replevin plus sum of money, against private respondent Rolando Lantan, his wife Rina, and two other persons, identified only as John and Susan Doe, before the Regional Trial Court of Pasig, Metro Manila. Petitioner alleged that private respondents failed to pay the monthly rentals which, as of May 1986, totalled P39,054.86; that despite demands, private respondents failed to settle their obligation thereby entitling petitioner to the possession of the car. The writ of seizure was issued and possession was reverted to petitioner. Respondents theory: That their true agreement was to buy and sell and not lease with option to buy the car in question at a monthly amortization of P1,000; and that petitioner accepted the installment payments made by them after he was laid-off constitutes waiver. Petitioner theory: He maintained that the contract between the parties was one of lease with option to purchase and that the promissory note was merely a nominal security for the agreement. It contended that the mere acceptance of the amounts paid by private respondents and for indefinite periods of time was not evidence that the parties agreement was one of purchase and sale. The trial court held that it is one of sale and that Rolando had fully paid the price of the car. On appeal to the Court of Appeals, the decision of the trial court was affirmed in toto. Hence, this petition for review.
Issue: Whether it was a contract of lease with an option to purchase or a contract of sale on installments. Held: It is one of sale. This is indeed a classic case of one having his cake and eating it too! Under the Recto law (Arts. 1484 & 1485, Civil Code), the vendor who repossesses the goods sold on installments, has no right to sue the vendee for the unpaid balance thereof. The remedies are alternative not cumulative. The Court took judicial notice of the practice wherein executives enjoy car plans in progressive companies. The agreement of January 9, 1980 between the parties is one such car plan. If defendant Rolando Lantan failed to keep up with his amortizations on the car in question, it was not because of his own liking but rather he was pushed to it by circumstances when his employer folded up and sent him to the streets. That plaintiff was giving all the chance to defendants to pay the value of the car and acquire full ownership thereof is shown by the delay in instituting the instant case. The Court has long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. The so-called monthly rentals are in truth monthly amortizations on the price of the car. Rolandos default in paying the installments was due to the cessation of operations of Elizalde Steel Corporation, and the latters aceptance of payments through cash and checks from Rolando could have been impelled solely by petitioners inability to deduct the amortizations from Rolando because of the termination. Hence, when petitioner accepted even late payments from Rolando more than 2 years after the latters employment had been terminated, the same constituted a waiver of petitioners right to collect interest upon the delayed payments. Consequently, the P61,070.94 already paid to petitioner would be considered payment of the full purchase price of the car or the total installments paid. Thus, it was correctly ruled that Rolando had already fulfilled his part of the obligation.
PCI Leasing v UCPB General Insurance Co 2008 Austria Martinez, J. Facts: A Misubishi Lancer car owned by UCPB and insured by UCPB Genral Insurance Co. was hit and bumped by an 18wheeler Fuso Tanker Truck and Trailer, owned by PCI Leasing & Finance Inc, allegedly leased to and operated by Superior Gas & Equitable Co (SUGECO). The impact caused heavy damage to the Mitsubishi Lancer car resulting in an explosion of the rear part of the car. The driver and passenger suffered physical injuries. However, the driver of the truck continued on his way to his [sic] destination and did not bother to bring his victims to the hospital. Petitioner insurance co. then paid the assured UCPB the amount of P244,500.00 representing the insurance coverage of the damaged car. PCI Leasing and Finance, Inc., contends: o It could not be held liable for the collision, since the driver of the truck, Gonzaga, was not its employee, but that of its SUGECO o In fact, it was SUGECO, and not PCI, that was the actual operator of the truck, pursuant to a Contract of Lease signed by petitioner and SUGECO o PCI, however, admitted that it was the owner of the truck in question TC: in favor of UCPB General Insurance Co.; ordered the defendants PCI Leasing and Finance, Inc. and Renato Gonzaga (driver), to pay jointly and severally UCPB the amount of the insurance coverage CA: affirmed TC with certain modifications Held/Ratio: The registered owner of a vehicle may be held liable for quasi-delicts. However, even if PCI is primarily responsible for the damage caused to the vehicle of the UCPB, but the former has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused. Even if a sale has been executed before a tortious incident, the sale, if unregistered, has no effect as to the right of the public and third persons to recover from the registered owner. The public has the right to conclusively presume that the registered owner is the real owner, and may sue accordingly. In the case at bar, there is not even a sale of the vehicle involved, but a mere lease, which remained unregistered up to the time of the occurrence of the quasi-delict. A financial lease or financing lease is defined as, o [A] mode of extending credit through a non-cancelable lease contract under which the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business and office
machines, and other movable or immovable property in consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less than two (2) years during which the lessee has the right to hold and use the leased property, x x x but with no obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease contract Republic Act 8556 provides, o Section 12. Liability of lessors. - Financing companies shall not be liable for loss, damage or injury caused by a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third person or entity except when the motor vehicle, aircraft, vessel, equipment or other property is operated by the financing company, its employees or agents at the time of the loss, damage or injury.
RA 8566 does not apply to the case at hand. It does not absolve PCI from its liability in the present case.
The new law, R.A. No. 8556, do NOT supersede or repeal the law on compulsory motor vehicle registration. No part of the law expressly repeals Section 5(a) and (e) of R.A. No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code, to wit: o Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and trailer of any type used or operated on or upon any highway of the Philippines must be registered with the Bureau of Land Transportation (now the Land Transportation Office, per Executive Order No. 125, January 30, 1987, and Executive Order No. 125-A, April 13, 1987) for the current year in accordance with the provisions of this Act. xxxx (e) Encumbrances of motor vehicles. - Mortgages, attachments, and other encumbrances of motor vehicles, in order to be valid against third parties must be recorded in the Bureau (now the Land Transportation Office). Voluntary transactions or voluntary encumbrances shall likewise be properly recorded on the face of all outstanding copies of the certificates of registration of the vehicle concerned. Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be recorded, and in the absence of such cancellation, no certificate of registration shall be issued without the corresponding notation of mortgage, attachment and/or other encumbrances. xxxx Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not registered with the Land Transportation Office, still does not bind third persons who are aggrieved in tortious incidents, for the latter need only to rely on the public registration of a motor vehicle as conclusive evidence of ownership. The non-registration of the lease contract between petitioner and its lessee precludes the former from enjoying the benefits under Section 12 of R.A. No. 8556. Petition denied. CA affirmed.
RA 6552 REPUBLIC ACT No. 6552 AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS. (Rep. Act No. 6552) Section 1. This Act shall be known as the "Realty Installment Buyer Act." Section 2. It is hereby declared a public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions. Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments: (a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. (b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act. Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void. Section 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be affected thereby.lawphi1 Section 9. This Act shall take effect upon its approval. Approved: August 26, 1972. Rillo v CA FACTS:
Jun. 18, 1985, Rillo (buyer) excuted "Contract To Sell of Condominium Unit" with Corb Realty Invest Corp.(seller) of condo unit for P150,000.00, one half of which was paid upon its execution, while the balance of P75,000.00 was to be paid in 12 equal monthly installments of P7,092.00 beginning Jul. 18, 1985. It was stipulated that all outstanding balance would bear an interest of 24% per annum; the installment in arrears would be subject to liquidated penalty of 1.5% for every month of default from due date. It was further agreed that should petitioner default in the payment of 3 or 4 monthly installments, forfeiture proceedings would be governed by existing laws, particularly the Condominium Act. Rillo defaulted on his monthly instalment and was only able to pay his 1st instalment only on Aug 18, the second on Sep 20, 1985 and 3rd monthly instalment on Feb 2, 1986. 17 months after Rillos last payment, CORB REALTY informed him by letter that it is cancelling their contract but expressed its willingness to refund RILLO's money. CORB REALTY, however, did not cancel the contract but RILLO defaulted again in his monthly installment payment. A "compromise" was entered into by the parties on March 12, 1989 Rillo once more failed to honor their agreement. Apr 3, 1990, CORB sent Rillo SOA which fixing his total arrearages interests and penalties, to P155,129.00. When RILLO failed to pay this amount, CORE REALTY filed a complaint for cancellation of the contract to sell in RTC.
RTC: dismissed Corbs petition to rescind the Contract to Sell it found that RILLO substantially complied with the "Contract to Sell" by paying a total of P154,184.00. It ruled that the remedy of CORB REALTY is to file a case for specific performance to collect the outstanding balance of the purchase price. CA: Reversed RTC; ordered to cancel the contract to sell and to refund Rillo 50% of payments he made. ISSUE: 1. W/N Corby Realty Corp can cancel the contract to sell due to Rillos failure to the instalment? YES RATIO:
The parties executed a contract to sell. In a contract to sell real property on installments, the full payment of the purchase price is a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation of the vendor to convey title from acquiring any obligatory force. Given the nature of the contract of the parties, the respondent court correctly applied Republic Act No. 6552. Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. As provided in Maceda law:
(1) Where he has paid at least two years of installments,
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. (2) Where he has paid less than two years in installments, Sec. 4. . . . the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.
Rillo paid less than two years in installment payments, hence, he is only entitled to a grace period of not less than sixty (60) days from the due date within which to make his installment payment. CORB REALTY, on the other hand, has the right to cancel the contract after thirty (30) days from receipt by RILLO of the notice of cancellation. Hence, the respondent court did not err when it upheld CORB REALTY's right to cancel the subject contract upon repeated defaults in payment by RILLO. Also the right of the buyer to a refund of 50% of the total payments made accrues only when he has paid at least two (2) years of installments. In the case at bar. Rillo has paid less than two (2) years in installments, hence, he is not entitled to a refund. There is no novation of the old contract. Stated in Article 1292 CC "In order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other." Novation is never presumed. Parties to a contract must expressly agree that they are abrogating their old contract in favor of a new one. In the absence of an express agreement, novation takes place only when the old and the new obligations are incompatible on every point. In the case at bar, the parties executed their May 12, 1989 "compromise agreement" precisely to give life to their "Contract to Sell". It merely clarified the total sum owed by petitioner RILLO to private respondent CORB REALTY with the view that the former would find it easier to comply with his obligations under the Contract to Sell. In fine, the "compromise agreement" can stand together with the Contract to Sell.
Vallarao v. CA ACTIVE REALTY & DEVELOPMENT CORPORATION, vs. NECITA G. DAROYA Date: May 9, 2002 Ponente: PUNO, J.: Facts: ARDC is the owner and developer of Town & Country Hills Executive Village in Antipolo, Rizal. ARDC entered into a Contract to Sell with DAROYA, a contract worker in the Middle East, whereby the latter agreed to buy a 515 sq. m. lot for P224,025.00 in Sellers subdivision. The contract to sell stipulated that the Buyer shall pay the initial amount of P53,766.00 upon execution of the contract and the balance of P170,259.00 in 60 monthly installments of P4,893.35. The total amount is P346,367.00, a figure higher than that stated as the contract price. Buyer was in default of (3) monthly amortizations. Seller sent Buyer a notice of cancellation of their contract to sell. When Buyer offered to pay for the balance of the contract price, Seller refused as it has allegedly sold the lot to another buyer. Buyer filed a complaint for specific performance and damages against Seller before the Housing and Land Use Regulatory Board (HLURB). HLURB Arbiter found for the Buyer. Cancellation of the contract to sell was void as Seller failed to pay the cash surrender value to Buyer as mandated by law. On appeal, the HLURB Board of Commissioners reversed the Arbiters Decision. The Board refused to apply the remedies provided under the Maceda Law. As both parties were at fault, i.e., Buyer incurred in delay in her installment payments and Buyer failed to send a notarized notice of cancellation, Seller was ordered to refund to the Buyer one half of the total amount she has paid akin to the remedy provided under the Maceda Law. On appeal to the Office of the President, then Chief Presidential Counsel Renato C. Corona modified the Decision of the HLURB as it was not in accord with the provisions of the Maceda Law. As Seller did not comply with the legal requisites for a valid cancellation of the contract, the contract to sell between the parties subsisted and concluded that Buyer was entitled to the lot after payment of her outstanding balance. Seller is compelled to refund to the Buyer the value of the lot or to deliver a substitute lot at Buyers option. Court of Appeals denied petition for review.
Issue: W/N the Seller can be compelled to refund to the Buyer the value of the lot or to deliver a substitute lot at Buyers option.
Held/Ratio: YES. The contract to sell between the parties is governed by R.A. 6552 -- The Realty Installment Buyer Protection Act, or the Maceda Law -- which came into effect in September 1972. Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default in the payment of succeeding installments, where he has already paid at least two (2) years of installments, thus: (a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made; x x x (b) If the contract is cancelled, the shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made; provided, that the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. In this case, Buyer has already paid in four (4) years a total of P314,860.76 or P90,835.76 more than the contract price of P224,035.00. When Seller decided to cancel the contract, Buyer incurred in delay in the payment of (3) monthly amortizations. Seller refused to accept Buyers subsequent tender of payment. However, Seller also failed to comply with the mandatory twin requirements for a valid and effective cancellation under the law when he failed to send a notarized notice of cancellation and refund the cash surrender value. It is illegal and iniquitous that Seller, without complying with the mandatory legal requirements for canceling the contract, forfeited both Buyers land and hard-earned money after she has paid for, not just the contract price, but more than the consideration stated in the contract to sell. Thus, for failure to cancel the contract in accordance with the procedure provided by law, we hold that the contract to sell between the parties remains valid and subsisting. Following Section 3(a) of R.A. No. 6552, Buyer has the right to offer to pay for the balance of the purchase price, without interest, which she did in this case. Ordinarily, Seller would have had no other recourse but to accept payment. However, Buyer can no longer exercise this right as the subject lot was already sold by the Seller to another buyer which lot, as admitted by the Seller, was valued at P1,700.00 per square meter. As Buyer lost her chance to pay for the balance of the P875,000.00 lot, it is only just and equitable that the Seller be ordered to refund to Buyer the actual value of the lot resold or to deliver a substitute lot at the option of the Buyer. Fabregas v San Francisco Del Monte FACTS:
Petitioner spouses Isaias and Marcelina Fabrigas (Spouses Fabrigas or petitioners) and respondent San Francisco Del Monte, Inc. (Del Monte) entered into an agreement, denominated as Contract to Sell No. 2482-V, whereby the latter agreed to sell to Spouses Fabrigas a parcel of residential land situated in Barrio Almanza, Las Pias, Manila for and in consideration of the amount of P109,200.00. The agreement stipulated that Spouses Fabrigas shall pay P30,000.00 as downpayment and the balance within ten (10) years in monthly successive installments of P1,285.69. ]Among the clauses in the contract is an automatic cancellation clause in case of default, which states as follows:
7. Should the PURCHASER fail to make any of the payments including interest as herein provided, within 30 days after the due date, this contract will be deemed and considered as forfeited and annulled without necessity of notice to the PURCHASER, and said SELLER shall be at liberty to dispose of the said parcel of land to any other person in the same manner as if this contract had never been executed. In the event of such forfeiture, all sums of money paid under this contract will be considered and treated as rentals for the use of said parcel of land, and the PURCHASER hereby waives all right to ask or demand the return thereof and agrees to peaceably vacate the said premises.
After paying P30,000.00, Spouses Fabrigas took possession of the property but failed to make any installment payments on the balance of the purchase price. In Del Montes third letter, it demanded the payment of arrears in the amount of P8,999.00 and granted the petitioners a fifteen-day grace period within which to settle their accounts. Upon failure of spouses to pay, another grace period of fifteen days was given. Petitioners received Del Montes final demand letter wherein Del Monte considered Contract to Sell No. 2482-V cancelled fifteen days thereafter, but did not furnish petitioners any notice regarding its cancellation. Petitioner Fabrigas again remitted the amount of P12,000.00. A few days thereafter petitioner Fabrigas and Del Monte entered into another agreement denominated as Contract to Sell No. 2491-V, covering the same property but under restructured terms of payment. Under the second contract, the parties agreed on a new purchase price of P131,642.58, the amount of P26,328.52 as downpayment and the balance to be paid in monthly installments of P2,984.60 each. Thereafter, Spouses Fabrigas made irregular payments under Contract to Sell No. 2491-V Del Monte sent a demand letter dated February 3, 1986, informing petitioners of their overdue account equivalent to nine (9) installments or a total amount of P26,861.40. Petitioner then paid a total of P18,000 from February to July. Del Monte sent a letter demanding the payment of accrued installments under Contract to Sell No. 2491-V in the amount of P165,759.60 less P48,128.52, representing the payments made under the restructured contract, or the net
amount of P117,631.08. Del Monte allowed petitioners a grace period of thirty (30) days within which to pay the amount asked to avoid rescission of the contract. For failure to pay, Del Monte notified petitioners on March 30, 1989 that Contract to Sell No. 2482-V had been cancelled and demanded that petitioners vacate the property. Action by Del Monte: Recovery of Possession with Damages alleging that Spouses Fabrigas owed Del Monte the principal amount of P206,223.80 plus interest of 24% per annum. TC: Upholding the validity of Contract to Sell No. 2491-V (second contract) and ordering Spouses Fabrigas either to complete payments thereunder or to vacate the property. CA: Contract to Sell No. 2482-V (first contract) had been rescinded pursuant to the automatic rescission clause therein. While the Court of Appeals declared Contract to Sell No. 2491-V as merely unenforceable for having been executed without petitioner Marcelinas signature, it upheld its validity upon finding that the contract was subsequently ratified.
TOPCAL ISSUE: Did Del Monte validly rescind the contract through the demand letters it sent? HELD: No, letters did not constitute valid rescission under RA 6552 The Court of Appeals erred in ruling that Del Monte was well within its right to cancel the contract by express grant of paragraph 7 without the need of notifying [petitioners], instead of applying the pertinent provisions of R.A. 6552. Petitioners contention that none of Del Montes demand letters constituted a valid rescission of Contract to Sell No. 2482-V is correct. Petitioners defaulted in all monthly installments. They may be credited only with the amount of P30,000.00 paid upon the execution of Contract to Sell No. 2482-V, which should be deemed equivalent to less than two (2) years installments. Given the nature of the contract between petitioners and Del Monte, the applicable legal provision on the mode of cancellation of Contract to Sell No. 2482-V is Section 4 and not Section 3 of R.A. 6552. Section 4 is applicable to instances where less than two years installments were paid. It reads:
SECTION 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.
Thus, the cancellation of the contract under Section 4 is a two-step process. First, the seller should extend the buyer a grace period of at least sixty (60) days from the due date of the installment. Second, at the end of the grace period, the seller shall furnish the buyer with a notice of cancellation or demand for rescission through a notarial act, effective thirty (30) days from the buyers receipt thereof. It is worth mentioning, of course, that a mere notice or letter, short of a notarial act, would not suffice. While the Court concedes that Del Monte had allowed petitioners a grace period longer than the minimum sixty (60)-day requirement under Section 4, it did not comply, however, with the requirement of notice of cancellation or a demand for rescission. Instead, Del Monte applied the automatic rescission clause of the contract. Contrary, however, to Del Montes position which the appellate court sustained, the automatic cancellation clause is void under Section 7 in relation to Section 4 of R.A. 6552. ISSUE: Was the first contract novated by the second? HELD: Yes. Notwithstanding the improper rescission, the facts of the case show that Contract to Sell No. 2482-V was subsequently novated by Contract to Sell No. 2491-V. The execution of Contract to Sell No. 2491-V accompanied an upward change in the contract price, which constitutes a change in the object or principal conditions of the contract. In entering into Contract to Sell No. 2491-V, the parties were impelled by causes different from those obtaining under Contract to Sell No. 2482-V. On the part of petitioners, they agreed to the terms and conditions of Contract to Sell No. 2491-V not only to acquire ownership over the subject property but also to avoid the consequences of their default under Contract No. 2482-V. On Del Montes end, the upward change in price was the consideration for entering into Contract to Sell No. 2491-V. ISSUE: If a contract entered into by one spouse involving a conjugal property lacks the consent of the other spouse, as in the case at bar, is it automatically void for that reason alone? HELD: No. Any transaction entered by the wife without the court or the husbands authority is unenforceable in accordance with Article 1317 of the Civil Code. That is the status to be accorded Contract to Sell No. 2491-V, it having been executed by petitioner Marcelina without her husbands conformity. Being an unenforceable contract, Contract to Sell No. 2491-V is susceptible to ratification. As found by the courts below, after being informed of the execution of the contract, the husband, petitioner Isaias Fabrigas, continued remitting payments for the satisfaction of the obligation under Contract to Sell No. 2491-V. These acts constitute ratification of the contract. Such ratification cleanses the contract from all its defects from the moment it was constituted. The factual findings of the courts below are beyond review at this stage.

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SALES | SANCHEZ | 1

IV. Obligations of the Vendee/Buyer

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