Escolar Documentos
Profissional Documentos
Cultura Documentos
1. Elements of Sale
Elements of sale: (a) consent or meeting of the minds; (b) determinate subject matter; and (c) price
certain in money or its equivalent. xNavarra v. Planters Dev. Bank , 527 SCRA 562 (2007). 4
Sale being a consensual contract, its essential elements must be proven. xVillanueva v. CA, 267
SCRA 89 (1997).
Absence of any essential elements negates a sale xDizon v. CA, 302 SCRA 288 (1999),5 even
when earnest money has been paid. xManila Metal Container Corp. v. PNB , 511 SCRA 444 (2006).
But once all elements are proven, a sales validity is not affec ted by a previously executed fictitious
deed of sale. xPeñalosa v. Santos, 363 SCRA 545 (2001); and the burden is on the other party to prove
otherwise. xHeirs of Ernesto Biona v. CA, 362 SCRA 29 (2001).
Policitacion
the contract to thecovers the contract
time the period from the time the
is perfected. prospective
Perfection contracting
takes place uponparties indicate interest
the concurrence in
of the
essential elements, which are the meeting of the minds of the parties as to the object of the contract and
upon the price. Consummation begins when the parties perform their respective undertakings,
culminating in the extinguishment thereof. xSan Miguel Properties Philippines, Inc. v. Huang, 336 SCRA
6
737 (2000).
1
The Outline presents the manner by which the Law on Sales will be taken-up in class. The x ’s and those footnoted in
the Outline represent cases or topics which need no extended discussions, either because the essence of the rulings
are already summarized in the Outline or they contain similar rulings or doctrines as other cases to be discussed.
Unless otherwise indicated, the numbered articles refer to articles of the Civil Code.
2
Ownership is the independent and general power of a person over a thing for purposes recognized by law and within the limits
established thereby, which includes the right to enjoy and dispose of a thing, without other limitations than those established by law. . . .
Aside from the jus utendi and the jus abutendi inherent in the right to enjoy the thing, the right to dispose, or the jus disponendi , is the
power of the owner to alienate, encumber, transform and even destroy the thing owned. Flancia v. CA, 457 SCRA 224 (2005).
3
Alfredo v. Borras, 404 SCRA 145 (2003); Manila Metal Container Corp. v. PNB , 511 SCRA 444 (2006); Roberts v. Papio , 515 SCRA
346 (2007); Hyatt Elevators and Escalators Corp. v. Cathedral Heights Building Complex Assn., 636 SCRA 401 (2010).
4
Jovan Land, Inc. v. CA, 268 SCRA 160 (1997); Quijada v. CA, 299 SCRA 695 (1998); Co v. CA , 312 SCRA 528 (1999); San Andres v.
Rodriguez, 332 SCRA 769 (2000); Roble v. Arbasa, 362 SCRA 69 (2001); Polytechnic University v. CA , 368 SCRA 691 (2001);
Katipunan v. Katipunan, 375 SCRA 199 (2002); Londres v. CA, 394 SCRA 133 (2002); Manongsong v. Estimo , 404 SCRA 683 (2003);
Jimenez, Jr. v. Jordana, 444 SCRA 250 (2004); San Lorenzo Dev. Corp. v. CA , 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458
(2005); Roberts v. Papio , 515 SCRA 346 (2007); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Republic v. Florendo, 549
SCRA 527 (2008); GSIS v. Lopez, 592 SCRA 456 (2009); Baladad v. Rublico, 595 SCRA 125 (2009); Del Prado v. Caballero, 614 SCRA
102 (2010); Montecalvo v. Heirs of Eugenia T. Primero , 624 SCRA 575 (2010); Hyatt Elevators and Escalators Corp. v. Cathedral
Heights
5 Building
Roberts Complex
v. Papio , 515 SCRA 636(2007);
Assn.,346 SCRAXYST
401 (2010).
Corp. v. DMC Urban Properties Dev., Inc. , 594 SCRA 598 (2009).
6
Limketkai Sons Milling, Inc. v. CA , 250 SCRA 523 (1995); Jovan Land, Inc. v. CA, 268 SCRA 160 (1997); Bugatti v. CA , 343 SCRA
335 (2000); Moreno, Jr. v. Private Management Office , 507 SCRA 63 (2006); Manila Metal Container Corp. v. PNB , 511 SCRA 444
(2006); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Province of Cebu v. Heirs of Rufina Morales , 546 SCRA 315 (2008);
GSIS v. Lopez, 592 SCRA 456 (2009); XYST Corp. v. DMC Urban Properties Dev., Inc. , 594 SCRA 598 (2009).
7
Bowe v. CA, 220 SCRA 158 (1993); Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Cavite Devt Bank v.
Lim, 324 SCRA 346 (2000).
8
Romero v. CA , 250 SCRA 223 (1995); Balatbat v. CA, 261 SCRA 128 (1996); Coronel v. CA , 263 SCRA 15 (1996); City of Cebu v.
Heirs of Candido Rubi, 306 SCRA 408 (1999); Agasen v. CA, 325 SCRA 504 (2000); Laforteza v. Machuca, 333 SCRA 643 (2000);
-2-
• Upon its perfection, the parties may reciprocally demand performance. x Heirs of Venancio Bejenting
9
v. Bañez, 502 SCRA 531 (2006); subject only to the provisions of the law gove rning the form of
contracts. xCruz v. Fernando, 477 SCRA 173 (2005).
• It remains valid even if parties have not affixed their signatures to its written form, xGabelo v. CA,
316 SCRA 386 (1999), or the manner of payment is breached. xPilipinas Shell Petroleum Corp v.
Gobonseng, 496 SCRA 305 (2006).
• In an Extrajudicial Settlement of Estate with Absolute Sale, it would be immaterial that the buyers
signature does not appear thereon since the contract of sale is consensual and perfected by mere
consent. xBaladad v. Rublico, 595 SCRA 125 (2009).
• Failure of the subdivision developer to obtain a license to sell does not render the sales void
especially that the parties have impliedly admitted that there was already a meeting of the minds as
to the subject of the sale and price. Cantemprate v. CRS Realty Dev. Corp . 587 SCRA 492 (2009).
The binding effect of sale is based on the principle that the obligations arising therefrom have the
force of law between the parties. xVeterans Federation of the Philippines v. CA, 345 SCRA 348
(2000).
Pe rfection Distinguished from De mandability – Not all contracts of sale become automatically
and immediately effective. In sales with assumption of mortgage, there is a condition precedent to the
sellers consent and without the approval of the mortgagee, the sale is not perfected. xBiñan Steel
Corp. v. CA , 391 SCRA 90 (2002).
“No Contract Situation” versus “Void Contract” – Absence of consent ( i.e., complete meeting
of minds) negates the existence of a perfected sale. xFirme v. Bukal Enterprises and Dev. Corp., 414
SCRA 190 (2003). The contract then is null and void ab initio, absolutely wanting in civil effects;
hence, it does not create, modify, or extinguish the juridical relation to which it refers. xCabotaje v.
Pudunan, 436 SCRA 423 (2004).
When there is no meeting of the minds on price, the contract “is not perfected” and does not
serve as a binding juridical relation between the parties. x Manila Metal Container Corp. v. PNB , 511
SCRA 444 (2006), 10 and should be more accurately denominated as inexistent, as it did not pass the
stage of generation to the point of perfection. xNHA v. Grace Baptist Church , 424 SCRA 147 (2004).
d. One rous and Commutative (√Gaite v. Fonacier, 2 SCRA 830 [1961]; B UT SEE : Arts. 1355 and
1470)
In a contract of sale, there is no requirement that the price be equal to the exact value of the
subject matter of sale; all that is required is that the parties believed that they will receive good value
in exchange for what they will give. √Buen aventura v. CA , 416 SCRA 263 (2003) .
Londres v. CA , 394 SCRA 133 (2002); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Buenaventura v. CA, 416 SCRA 263 (2003);
San Lorenzo Dev. Corp. v. CA , 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Ainza v. Padua, 462 SCRA 614 (2005);
Roberts
SCRA 193 v. Papio , 515
(2007); SCRA
XYST 346v.(2007);
Corp. MCC Industrial
DMC Urban Sales
Properties Corp.
Dev., Inc.v. Ssangyong
, 594 Corp.
SCRA 598 , 536 SCRA
(2009); 408 (2007);
Del Prado Castillo
v. Caballero v. Reyes
, 614 SCRA. 102
539
(2010); Duarte v. Duran, 657 SCRA 607 (2011).
9
Province of Cebu v. Heirs of Rufina Morales , 546 SCRA 315 (2008).
10
Roberts v. Papio , 515 SCRA 346 (2007).
11
Ong v. CA , 310 SCRA 1 (1999); Mortel v. KASSCO , 348 SCRA 391 (2000); Agro Conglomerates, Inc. v. CA , 348 SCRA 450 (2000);
Velarde v. CA, 361 SCRA 56 (2001); Carrascoso, Jr. v. CA , 477 SCRA 666 (2005); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53
(2008); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008).
12
Vda. De Quirino v. Palarca, 29 SCRA 1 (1969)
13
Acap v. CA, 251 SCRA 30 (1995).
-3-
Sellers ownership of the thing sold is not an element of perfection; what the law requires is that
seller has the right to transfer ownership at the time of delivery. x Quijada v. CA, 299 SCRA 695
(1998).14
B UT S EE : xTitong v. CA, 287 SCRA 102 (1998), which defined a “sale” as “ a contract transferring
dominion and other real rights in the thing sold. ”
14
Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Heirs of
Jesus M. Mascuñana v. CA , 461 SCRA 186 (2005).
15
Romero v. CA , 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Orden v. Aurea, 562 SCRA 660 (2008); Ver Reyes v.
Salvador, Sr., 564 SCRA 456 (2008)..
16
Commissioner of Internal Revenue v. Arnoldus Carpentry Shop , 159 SCRA 199 (1988); Del Monte Philippines, Inc. v. Aragones, 461
SCRA 139 (2005).
-4-
buyer to the contract effected he may voluntarily assume warranties of seller. xSchmid and Oberly, Inc.
v. RJL Martinez, 166 SCRA 493 (1988).
2. Minors, Insane and Demented Persons, Deaf-Mutes (Arts. 1327, 1397 and 1399)
A minor cannot be deemed to have given her consent to a contract of sale; consent is among the
essential requisites of a contract, including one of sale, absent of which there can be no valid contract.
[?] xLabagala v. Santiago , 371 SCRA 360 (2001).
a. NECESSARIES (Arts. 1489 and 290)
b. Protection of the Senile and Elderly (Art. 24) and Illiterates (Art. 1332)
Under Art. 1332, when one of the parties is unable to read, or if the contract is in a language not
understood by him,
the terms thereof have mistake
andbeen fully or fraud is to
explained alleged , the person
the former; enforcing
otherwise, sale isthe contract
void. must De
[?] xVda. show that
Ape v.
CA, 456 SCRA 193 (2005).
17
Dao Heng Bank, Inc. (now BDO) v. Laigo, 571 SCRA 434 (2008); Technogas Philippines Mfg. Corp. v. PNB , 551 SCRA 183 (2008);
Ocampo v. Land Bank of the Philippines, 591 SCRA 562 (2009); D.B.T. Mar-Bay Construction, Inc. v. Panes , 594 SCRA 578 (2009).
18
Aquintey v. Tibong 511 SCRA 414 (2006); Rockville Excel International Exim Corp. v. Culla , 602 SCRA 124 (2009).
19
Filinvest Credit Corp. v. Philippine Acetylene Co., Inc. 111 SCRA 421 (1982); Vda. de Jayme v. CA, 390 SCRA 380 (2002); Ong v.
Roban Lending Corp., 557 SCRA 516 (2008).
-5-
While a person is not incompetent to contract merely because of advanced years or by reason of
physical infirmities, when such age or infirmities have impaired the mental faculties so as to prevent
the person from properly, intelligently or firmly protecting his property rights, then he is undeniably
incapacitated, and the sale he entered into is void. [?] . √Paragas v. Heirs of Dom inador B alacano ,
468 SCRA 717 (2005) .20
b. Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code )
Sales between spouses who are not governed by a complete separation of property regime are
void, not just voidable. x Medina v. Collector , 1 SCRA 302 (1960).
Since the spouses cannot validly sell property to one another under Art. 1490, then policy
consideration and the dictates of morality require that the prohibition should apply also to common-law
relationships. cf. Matabuena v. Cervantes , 38 SCRA 284 (1971).
Sale by husband of conjugal land to his concubine is null and void for being contrary to morals and
public policy and “subversive of the stability of the family, a basic social institution which public policy
cherishes and protects.” √Calimlim-Canullas v. F ortu n, 129 SCRA 675 (1984) .22
Nevertheless, when property resold to a third-party buyer in good faith and for value,
reconveyance is no longer available. x Cruz v. CA, 281 SCRA 491 (1997).
The in pari delicto doctrine would not apply to the spouses-parties under Art. 1490, since only the
heirs and the creditors can question the sales nullity. x Modina v. CA, 317 SCRA 696 (1999).
b. Attorneys
(1) Prohibition against attorneys purch asing the properties of their clients in litigatio n applies:
• Only while litigation is pending. xDirector of Lands v. Ababa, 88 SCRA 513 (1979);
• Even though litigation is not adversarial in nature Rubias v. Batiller, 51 SCRA 120 (1973); or when it is a
certiorari proceeding that may has no merit xValencia v. Cabanting, 196 SCRA 302 (1991).
• Only to a lawyer of record, and does not cover assignment of the property given in judgment made by a
client to an attorney, who has not taken part in the case. Municipal Council of Iloilo v. Evangelista, 55 Phil.
290 (1930);24
• Not applicable to a lawyer who acquired property prior to the time he intervened as counsel in the suit
involving such property. Del Rosario v. Millado, 26 SCRA 700 (1969).
(b) Contingency fee arrangement granting the lawyer proprietary rights to the property in
litigation since the payment of said fee is not made during the pendency of litigation but only
after judgment has been rendered. [?] √Fabillo v. IAC , 195 SCRA 28 (1991) .25
c. Judges
A judge should restrain himself from participating in the sale of properties—it is incumbent upon
him to advise the parties to discontinue the transaction if it is contrary to law. Britanico v. Espinosa,
486 SCRA 523 (2006).
A judge who buys property in litigation before his court after the judgment becomes final does not
violate Art. 1491, but he can be administratively disciplined for violation of the Code of Judicial Ethics.
xMacariola v. Asuncion, 114 SCRA 77 (1982).
Even when the main cause is a collect ion of a sum of money, the prope rties levied are still
subject to the prohibition. xGan Tingco v. Pabinguit , 35 Phil. 81 (1916).
1. Subject Must at Perfe ction Be Existing, Future o r Contingent (Arts. 1347, 1348, and 1462 )
a. Empt io Rei Speratae (Arts. 1461 and 1347)
Pending crops which have potential existence may be valid object of sale. xSibal v. Valdez, 50
Phil. 512 (1927); and such transaction cannot be considered to effectively be sale of the land or any
part thereof. xPichel v. Alonzo, 111 SCRA 341 (1981).
a. Non-Specific T hings (Generic) May Be the Obj ect of Sale (Arts. 1246 and 1409[6])
Subject matter is determinable when from the formula or description adopted at perfection
there is a way by which the courts can delineate it independent of the will of the parties . √Melliza
v. City of Iloilo , 23 SCRA 477 (1968) .
Where the lot sold is said to adjoin the “previously paid lot” on three sides thereof, the subject
lot is capable of being determined without the need of any new contract, even when the exact area
of the adjoining residential lot is subject to the result of a survey. x San Andres v. Rodriguez, 332
SCRA 769 (2000).
25
Recto v. Harden, 100 Phil. 427 (1956); Vda. de Laig v. CA, 86 SCRA 641 (1978).
26
Londres v. CA , 394 SCRA 133 (2002).
-7-
As the above-quoted portion of the kasunduan shows [giving reference to the area, the
locality located, and vicinity with reference of old trees], there is no doubt that the object of the
sale is determinate. xCarabeo v. Dingco, 647 SCRA 200 (2011).
Determinable subject matter of sale are not subject to risk of loss until they are physically
segregated or particularly designated. √Yu Tek & Co. v. Gonzales , 29 Phil. 384 (1915) .
b. Undivided Interest (Art. 1463) or Undivided Share in a Mass of Fungible Goods (Art. 1464) –
May result it co-ownership .
4. Quantity of Goods as Subject Matter Not Essential for Perfection [?] (Art. 1349)
Sale of grains is perfected even when the exact quantity or quality is not known, so long as the
source of the subject is certain. √NGA v. IAC , 171 SCRA 131 (1989) .
Where seller quoted to buyer the items offered for sale, by item number, part number, description
and unit price, and the buyer had sent in reply a purchase order without indicating the quantity being
order, there was already a perfected contract of sale, even when required letter of credit had not
been opened by the buyer. √Johannes Schuback & Sons Phil. Tra ding Corp. v. CA , 227 SCRA
719 (1993).
5. Sellers Obligation to Transfer Title to Buyer (Art. 1459, 1462, and 1505)
a. Sellers Ownership Need Not Exist at Perfection:
Sale of copra for future delivery does not make seller liable for estafa for failing to deliver
because the contract is still valid and the obligation was civil and not criminal. xEsguerra v.
People, 108 Phil. 1078 (1960).
A perfected sale cannot be challenged on the ground of the sellers non-ownership of the thing
sold at the time of the perfection; it is at delivery that the law requires the seller to have the
ownership of the thing sold. xAlcantara-Daus v. de Leon , 404 SCRA 74 (2003). 27
It is
seller is essential thatthe
“to transfer seller is ownerof”ofthe
ownership theproperty
property sold
he is(Art.
selling. TheThis
1458). principal obligation
law stems from ofthe
a
principle that nobody can dispose of that which does not belong to him. NEMO DAT QUOD NON
HABET. Noel v. CA, 240 SCRA 78 (1995).
That the sellers are no longer owners of the goods at perfection does not appear to be one of
the void contracts enumerated in Art. 1409 of Civil Cod e; and Art. 1402 ther eof recognizes a sale
where the goods are to be “acquired . . . by the seller after the perfection of the contract of sale,”
clearly implying that a sale is possible even if the seller was not the owner at the time of sale,
provided he acquires title to the property later on; nevertheless such contract may be deemed to
be inoperative and may thus fall, by analogy, under Art. 1409(5): “Those which contemplate an
impossible service.” Nool v. CA, 276 SCRA 149 (1997).
b. Subsequent Acquis ition of Title by Non-Owner Sel ler (Art. 1434) – Title passes to th e seller
by op era tion of law .
X
6. Illegality of Subject Matter (Arts. 1409, 1458, 1461, 1462, and 1575 )
a. Special Laws: narcotics (R.A. 6425); wild bird or mammal (Act 2590, Sec. 7); rare wild plants (Act
3983); poisonous plants or fruits (R.A. 1288); dynamited fish (R.A 428); gunpowder and explosives
(Act 2255); firearms and ammunitions (P.D. 9); sale of realty by non-Christians (Sec. 145, Revised
Adm. Code, R.A. 4252)
b. Following Sales of Land Void:
• By Non-Christian if not approved by Provincial Governor per Sec. 145 of Revised Administrative Code.
xTac-an v. CA, 129 SCRA 319 (1984).
• Friar land without consent of Secretary of Agriculture required under Act No. 1120. xAlonso v. Cebu
Country Club, Inc., 375 SCRA 390 (2002); Liao v. CA, 323 SCRA 430 (2000).
• Made in violation of land reform laws declaring tenant-tillers as the full owners of the lands they tilled.
xSiacor v. Gigantana, 380 SCRA 306 (2002).
• Reclaimed lands are of the public domain and cannot, without congressional fiat, be sold, public or private.
Fisheries Dev. Authority v. CA, 534 SCRA 490 (2007).
27
Heirs of Arturo Reyes v. Socco-Beltran , 572 SCRA 211 (2008).
-8-
Seller cannot unilaterally increase the price previously agreed upon with the buyer, even when due to
increased construction costs. GSIS v. CA , 228 SCRA 183 (1993).
Buyer who opted to purchase the land on insta llment basis with imposed intere st, cannot unilaterally
disavow the obligation created by the stipulation in the contract which sets the interest at 24% p.a. “The
rationale behind having to pay a higher sum on the installment is to compensate the vendor for waiting a
number of years before receiving the total amount due. The amount of the stated contract price paid in
full today is worth much more than a series of small payments totaling the same amount. x x x To assert
that mere prompt payment of the monthly installments should obviate imposition of the stipulated interest
is to ignore an economic fact and negate one of the most important principles on which commerce
operates.” Bortikey v. AFP RSBS, 477 SCRA 511 (2005).
c. Non-Payment of Price
Sale being consensual, failure of buyer to pay the price does not make the contract void for lack
of consideration or simulation, but results in buyers default, for which the seller may exercise his
legal remedies. xBalatbat v. CA, 261 SCRA 128 (1996).29
“In a contract of sale, the non-p ayment of the price is a resolutory condition which extinguishes
the transaction
remedy that, for
of an unpaid a time,
seller existed and
in a contract discharges
of sale is to seekthe obligations
either specific created thereunder.
performance [?] The
or rescission.”
xHeirs of Pedro Escanlar v. CA, 281 SCRA 176 (1997).30
Badge That Price I s Simu lated, Not Jus t Unpaid: It is a badge of simulated price, which
render the sale void, when the price, which is stipulated thereon to have been paid, has in fact
never been paid by the purchaser to the seller. xVda. de Catindig. v. Heirs of Catalina Roque , 74
SCRA 83 (1976).31
28
Yu Bun Guan v. Ong, , 367 SCRA 559 (2001); Gonzales v. Trinidad, 67 Phil. 682 (1939)
29
Peñalosa v. Santos, 363 SCRA 545 (2001); Soliva v. The Intestate Estate of Marcelo M. Villalba , 417 SCRA 277 (2003); Province of
Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
30
Villaflor v. CA, 280 SCRA 297 (1997).
31
Ocejo v. Flores , 40 Phil. 921 (1920); Ladanga v. CA, 131 SCRA 361 (1984); Rongavilla v. CA, 294 SCRA 289 (1998); Labagala v.
Santiago, 371 SCRA 360 (2001); Cruz v. Bancom Finance Corp. , 379 SCRA 490 (2002); Montecillo v. Reynes , 385 SCRA 244 (2002);
Republic v. Southside Homeowners Asso. , 502 SCRA 587 (2006); Quimpo, Sr. v Abad Vda de Beltran, 545 SCRA 174 (2008); Solidstate
Multi-Products Corp. v. Catienza-Villaverde , 559 SCRA 197 (2008).
-9-
• Cancellation of liabilities on the property in favor of the seller. xPolytechnic University v. CA, 368 SCRA
691 (2001).
• Assumption of mortgage constituted on the property sold. xDoles v. Angeles, 492 SCRA 607 (2006).32
5. Inadequacy of Price Does Not Affect Ordinary Sale (Arts. 1355 and 1470)
Mere inadequacy of the price does not affect the validity of the sale when both parties are in a
position to form an independent judgment concerning the transaction, unless fraud, mistake, or undue
influence indicative of a defect in consent is present. The contract may be annulled for vitiated consent
and not due to the inadequacy of price. x Bautista v. CA , 436 SCRA 141 (2004). 35
32
The deed of sale with assumption of mortgage is a registrable instrument and must be registered with the Register of Deeds in order
to bind third parties. Rodriguez v. CA, 495 SCRA 490 (2006).
33
Boston Bank of the Philippines v. Manalo , 482 SCRA 108 (2006).
34
Velasco v. CA , 51 SCRA 439 (1973); Co v. CA, 286 SCRA 76 (1998); San Miguel Properties Philippines v. Huang, 336 SCRA 737
(2000); Montecillo v. Reynes , 385 SCRA 244 (2002); Edrada v. Ramos, 468 SCRA 597 (2005); Cruz v. Fernando, 477 SCRA 173
(2005); Marnelego v. Banco Filipino Savings and Mortgage Bank, 480 SCRA 399 (2006); Boston Bank of the Phil. v. Manalo, 482 SCRA
108 (2006); Platinum Plans Phil., Inc. v. Cucueco , 488 SCRA 156 (2006); Manila Metal Container Corp. v. PNB , 511 SCRA 444 (2006).
35
Ereñeta v. Bezore, 54 SCRA 13 (1973); Bacungan v. CA, 574 SCRA 642 (2008); Bacungan v. CA, 574 SCRA 642 (2008).
- 10 -
Absent any evidence of the fair market value of a land as of the time of sale, it cannot be concluded
that the price was inadequate. x Acabal v. Acabal, 454 SCRA 897 (2005). 36
b. Lesion of more than 1/4 o f value of thi ng makes sa le rescissible unless approved by court
(Art. 1386)
c. Gross inadequacy of price may raise the presumption of equitable mortgage (Art. 1602)
1. OPTION CONTRACT
Anspecified
under option is conditions,
a preparatory
the contract
power toindecide,
which one party orgrants
whether not toto enter
the other,
into aforprincipal
a fixed contract.
period andIt
binds the party who has given the option, not to enter into the principal contract with any other person
36
Avila v. Barabat, 485 SCRA 8 (2006).
37
Tayengco v. CA, 15 SCRA 306 (1965); Republic v. NLRC, 244 SCRA 564 (1995).
38
Vda. de Gordon v. CA, 109 SCRA 388 (1981).
39
Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007).
- 11 -
during the period designated, and, within that period, to enter into such contract with the one to whom
the option was granted, if the latter should decide to use the option. It is a separate agreement distinct
from the contract of sale which the parties may enter into upon the consummation of the option.
√Ca rcell er v. CA, 302 SCRA 718 (1999) .40
An option imposes no binding obligation on the person holding the option aside from the
consideration for the offer. Until accepted, it is not treated as a sale. √Tayag v. Lacson , 426 SCRA
282 (2004).41
Tenants, not being the registered owners, cannot grant an option on the land, much less any
“exclusive right” to buy the property under the Latin saying “ nem dat quod non habet.” xTayag v.
Lacson, 426 SCRA 282 (2004).
40
Laforteza v. Machuca, 333 SCRA 643 (2000); Buot v. CA, 357 SCRA 846 (2001); Abalos v. Macatangay, Jr., 439 SCRA 649
(2004); Vasquez v. Ayala Corp., 443 SCRA 231 (2004); Eulogio v. Apeles, 576 SCRA 561 (2009); Polytechnic University of the
Philippines
41 v. Golden Horizon
Adelfa Properties, Realty
Inc. v. CA Corp.
, 240 SCRA, 615565
SCRA 478 (2010).
(1995); Kilosbayan, Inc. v. Morato, 246 SCRA 540 (1995); San Miguel Properties
Philippines, Inc. v. Huang, 336 SCRA 737 (2000); Limson v. CA , 357 SCRA 209 (2001).
42
JMA House, Inc. v. Sta. Monica Industrial and Dev. Corp. , 500 SCRA 526 (2006).
43
De la Cavada v. Diaz, 37 Phil. 982 (1918); San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000)
44
Affirming Atkins, Kroll & Co., Inc. v. Cua , 102 Phil. 948 (1958); Overturning Southwestern Sugar Molasses Co. v. Atlantic Gulf &
Pacific Co. , 97 Phil. 249 (1955).
45
Limson v. CA, 357 SCRA 209 (2001).
46
Rosencor Dev. Corp. v. Inquing , 354 SCRA 119 (2001); Conculada v. CA, 367 SCRA 164 (2001); Polytechnic University v. CA , 368
SCRA 691 (2001); Riviera Filipina, Inv. v. CA, 380 SCRA 245 (2002); Lucrative Realty and Dev. Corp. v. Bernabe, Jr. , 392 SCRA 679
- 12 -
In a right of first refusal, while the object might be made determinate, the exercise of the right
would be dependent not only on the grantors eventual intention to enter into a binding juridical relation
with another but also on terms, including the price, that are yet to be firmed up. . . the “offer” may be
withdrawn anytime by communicating the withdrawal to the other party. √Vasquez v. Ayala Corp. ,
443 SCRA 231 (2004) .
A right of first refusal clause simply means that should the lessor decide to sell the leased property
during the term of the lease, such sale should first be offered to the lessee; and the series of
negotiations that transpire between the lessor and the lessee on the basis of such preference is
deemed a compliance of such clause even when no final purchase agreement is perfected between
the parties. The lessor was then at liberty to offer the sale to a third party who paid a higher price, and
there is no violation of the right of the lessee. √Riviera F ilipina, Inv. v. CA , 380 SCRA 245 (2002) .47
When
not to sell athe
lease contract
leased contains
property a rightatofany
to anyone firstprice
refusal,
untilthe lessor
after the has themade
lessor legal an
dutyoffer
to the lessee
to sell the
property to the lessee and the lessee has failed to accept it. Only after the lessee has failed to
exercise his right of first priority could the lessor sell the property to other buyers under the same terms
and conditions offered to the lessee, or under terms and conditions more favo rable to the lesso r.
Polytechnic University of the Philippines v. Golden Horizon Realty Corp. , 615 SCRA 478 (2010).
A right of first refusal is a contractual grant, not of the sale of a property, but of the first priority to
buy the property in the event the owner sells the same. As distinguished from an option contract, in a
right of first refusal, whole the object might be made determinate, the exercise of the right of first
refusal would be dependent not only on the owners eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that are yet to be firmed up. Polytechnic
University of the Philippines v. Golden Horizon Realty Corp. , 615 SCRA 478 (2010).
A right of first refusal in a lease in favor of the lessee cannot be availed of by the sublessee.
xSadhwani v. CA , 281 SCRA 75 (1997).
Mutual
parties promises
a right to buy
to demand and
from thesell a certain
other thing forof athe
the fulfillment certain price gives
obligation. each of
xBorromeo v. the contracting
Franco , 5 Phil.
49 (1905).
Even in this case the certainty of the price must also exist, otherwise, there is no valid and
enforceable contract to sell. xTan Tiah v. Yu Jose , 67 Phil. 739 (1939).
An accepted bilateral promise to buy and sell is in a sense similar to, but not exactly the same, as
a perfected contract of sale because there is already a meeting of minds upon the thing which is the
object of the contract and upon the price. 48 But a contract of sale is consummated only upon delivery
and payment, whereas in a bilateral promise to buy and sell gives the contracting parties rights in
personam, such that each has the right to demand from the other the fulfillment of their respective
undertakings. √Macion v. Guiani, 225 SCRA 102 (1993) .49
The cause of action under a mutual promise to buy and sell is 10 years. xVillamor v. CA , 202
SCRA 607 (1991).
(2002); Villegas v. CA, 499 SCRA 276 (2006); Polytechnic University of the Philippines v. Golden Horizon Realty Corp. , 615 SCRA 478
(2010).
47
Polytechnic University v. CA , 368 SCRA 691 (2001); Villegas v. CA, 499 SCRA 276 (2006).
48
El Banco Nacional Filipino v. Ah Sing, 69 Phil. 611 (1940); Manuel v. Rodriguez, 109 Phil. 1 (1960).
49
Borromeo v. Franco, 5 Phil. 49 (1905); Villamor v. CA , 202 SCRA 607 (1991); Coronel v. CA, 263 SCRA 15 (1996).
50
Valdez v. CA , 439 SCRA 55 (2004); Blas v. Angeles-Hutalla, 439 SCRA 273 (2004); Ainza v. Padua, 462 SCRA 614 (2005); Cruz v.
Fernando, 477 SCRA 173 (2005).
51
Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).
- 13 -
otherwise, the same constitutes a counter-offer and has the effect of rejecting the offer. XYST Corp. v.
DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009).
52
Beaumont v. Prieto , 41 Phil. 670 (1916); Zayco v. Serra, 44 Phil. 326 (1923); Tuazon v. Del Rosario-Suarez, 637 SCRA 728 (2010).
53
Reiterated in Limketkai Sons Milling, Inc. v. CA , 250 SCRA 523 (1995), but rev ersed in 255 SCRA
54
Limjoco v. CA , 37 SCRA 663 (1971); Villonco v. Bormaheco , 65 SCRA 352 (1975); Spouses Doromal, Sr. v. CA , 66 SCRA 575
(1975); PNB v. CA , 262 SCRA 464 (1996); San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000); Platinum Plans Phil.
Inc. v. Cucueco , 488 SCRA 156 (2006).
55
San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000).
56
XYST Corp. DMC Urban Properties Dev., Inc. , 594 SCRA 598 (2009).
- 14 -
5. Difference Between Earnest Money and Option Money. √ Oesmer v. Paraiso Dev. Corp., 514
SCRA 228 (2007).
57
F. Irureta Goyena v. Tambunting, 1 Phil. 490 (1902).
58
Heirs of Biona v. CA, 362 SCRA 29 (2001);The Estate of Pedro C. Gonzales v. The Heirs of Marcos Perez , 605 SCRA 47 (2009).
59
Yason v. Arciaga, 449 SCRA 458 (2005); Union Bank v. Ong, 491 SCRA 581 (2006); Tapuroc v. Loquellano Vda. De Mende, 512
SCRA 97 (2007); Alfaro v. CA, 519 SCRA 270 (2007); Santos v. Lumbao, 519 SCRA 408 (2007); Pedrano v. Heirs of Benedicto
Pedrano, 539 SCRA 401 (2007); Olivares v. Sarmiento, 554 SCRA 384 (2008).
60
Nazareno v. CA, 343 SCRA 637 (2000); Santos v. Heirs of Jose P. Mariano , 344 SCRA 284 (2000)
61
Domingo v. CA, 367 SCRA 368 (2001).
- 15 -
b. For Enforceability Between the Parties: STATUTE OF FRAUDS (Arts. 1403 and 1405)
The term “Statute of Frauds” is descriptive of the statutes which require certain classes of
contracts, such as agreements for the sale of real property, to be in writing, the purpose being to
prevent fraud and perjury in the enforcement of obligations depending for their evidence on the
unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be
evidenced by a writing signed by the party to be charged. Shoemaker v. La Tondeña , 68 Phil. 24
(1939).
Presuppo ses Valid C ontr act of Sale – “The application of the Statute of Frauds presupposes
the existence of a perfected contract.” When the records show that there was no perfected contract
of sale, there is no basis for the application of the Statute of Frauds. xFirme v. Bukal Enterprises
66
and Dev. Corp., 414 SCRA 190 (2003).
(1) Coverage:
(i) Sale of Real Propert y – A sale of realty cannot be proven by means of witnesses, but must necessarily
be evidenced by a written instrument, duly subscribed by the party charged, or by secondary evidence
of the contents of such document. No other evidence can be received except the documentary
evidence referred to. xGorospe v. Ilayat, 29 Phil. 21 (1914).67
(ii) Agency to Sell or to Buy – As contrasted from sale, an agency to sell does not belong to any of the
three categories of contracts covered by Arts. 1357 and 1358 and not one enumerated under the
Statutes of Frauds in Art. 1403. xLim v. CA , 254 SCRA 170 (1996).68
(iii) Rights of First Refusal – A “right of first refusal” is not covered by the statute of frauds. Furthermore,
Art. 1403(2)(e) of Civil Code presupposes the existence of a perfected, albeit unwritten, contract of
sale; a right of first refusal, such as the one involved in the instant case, is not by any means a
perfected contract of sale of real property. xRosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001).
(iv) Equitable Mortgage – Statute does not stand in the way of treating an absolute deed as a mortgage,
when such was the parties intention, although the agreement for redemption or defeasance is proved
by parol evidence. xCuyugan v. Santos, 34 Phil. 100 (1916).69
(v) Right to Repurchase – The deed and the verbal agreement allowing the right of repurchase should be
considered as an integral whole; the deed of sale is itself the note or memorandum evidencing the
contract. xMactan Cebu Intll Airport Authority v. CA, 263 SCRA 736 (1996).
(2) Memorandum (√Yuviengco v. Dacuycuy , 104 SCRA 668 [1981];
Under Art. 1403, an exception to the unenforceability of contracts pursuant to the Statute of
Frauds is the existence of a written note or memorandum evidencing the contract. The
memorandum may be found in several writings, not necessarily in one document, and constitutes
the written evidence that such a contract was entered into. The existence of a written contract of
the sale is not necessary so long as the agreement to sell real property is evidenced by a written
note or memorandum, embodying the essentials of the contract and signed by the party charged
or his agent. √Lim ketkai Sons Milling, Inc. v. C A , 250 SCRA 523 (1995) .
B UT : The memoranda must be signed by the party sought to be charged, and must clearly
provide a deed of sale categorically conveying the subject property. √Limketkai Sons Mill ing,
Inc. v. CA , 255 SCRA 6 (1996) ; 261 SCRA 464 (1996).
62
Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002).
63
Limketkai Sons Milling, Inc. v. CA , 250 SCRA 523 (1995); Agasen v. CA, 325 SCRA 504 (2000).
64
Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002).
65
Talusan v. Tayag, 356 SCRA 263 (2001); Santos v. Manalili, 476 SCRA 679 (2005).
66
Rosencor Devt Corp. v. Inquing, 354 SCRA 119 (2001).
67
Alba Vda. De Ray v. CA, 314 SCRA 36 (1999).
68
Torcuator v. Bernabe, 459 SCRA 439 (2005).
69
Rosales v. Suba , 408 SCRA 664 (2003); Ayson, Jr. v. Paragas, 557 SCRA 50 (2008).
- 16 -
For the memorandum to take the sale out of the coverage of the Statute of Frauds, it must
contain “all the essential terms of the contract” of sale. xTorcuator v. Bernabe, 459 SCRA 439
(2005),70 even when scattered into various correspondences which can be brought together
xCity of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999).71
(3) Partial Execution (Art. 1405) √Ortega v. Leonardo , 103 Phil. 870 (1958); √ Cla udel v. CA , 199
SCRA 113 (1991).
Delivery of the deed to buyers agent, with no intention to part with the title until the purchase
price is paid, does not take the case out of the Statute of Frauds. x Baretto v. Manila Railroad
Co., 46 Phil. 964 of
(1924).
The Statute Frauds does not apply to contracts either partially or totally performed. In
addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefits
under the contract, such as the acceptance of the purchase price and using the proceeds to pay
outstanding loans. √Alfredo v. Borras, 404 SCRA 145 (2003) .72
(4) Waiver – (Art. 1405) Cross-examination on the contract is deemed a waiver of the defense of
the Statute. xAbrenica v. Gonda, 34 Phil. 739 (1916); Talosig v. Vda. De Nieba , 43 SCRA 472
(1972).73
When the purported buyers exhibits failed to establish the perfection of the contract of sale,
oral testimony cannot take their place without violating the parol evidence rule. It was therefore
irregular for the trial court to have admitted in evidence testimony to prove the existence of a
contract of sale of a real property between the parties, despite the persistent objection made by
the purported sellers counsel as early as the first scheduled hearing, even when cross-
examination was made on the basis of the witnesses affidavit-form testimony. √Limketkai
Sons Milling, Inc. v. CA , 255 SCRA 6 (1996) ; 261 SCRA 464 (1996) .
c. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art. 1874)
When sale of a piece of land or any interest therein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void,75 even when:
• Agent is the son of the owner. x Delos Reyes v. CA, 313 SCRA 632 (1999)
• There is partial payment of the price received by the supposed agent. xDizon v. CA, 396 SCRA 154
(2003).76
• In the case of a corporate owner of realty. xCity-Lite Realty Corp. v. CA, 325 SCRA 385 (2000).77
70
71Paredes v. Espino , 22
Berg v. Magdalena SCRAInc.,
Estate, 100092(1968).
Phil. 110 (1952); Limketkai Sons Milling, Inc. v. CA , 250 SCRA 523 (1995); First Philippine Intl
Bank v. CA, 252 SCRA 259 (1996).
72
Vda. de Jomoc v. CA , 200 SCRA 74 (1991); Soliva v. The Intestate Estate of Marcelo M. Villalba , 417 SCRA 277 (2003); Ainza v.
Padua, 462 SCRA 614 (2005); De la Cena v. Briones, 508 SCRA 62 (2006); Yaneza v. CA, 572 SCRA 413 (2008); Duarte v. Duran, 657
SCRA 607 (2011).
73
Limketkai Sons Milling, Inc. v. CA , 250 SCRA 523 (1995); Lacanilao v. CA, 262 SCRA 486 (1996).
74
Limson v. CA , 357 SCRA 209 (2001).
75
Alcantara v. Nido, 618 SCRA 333 (2010); Camper Realty Corp. V. Pajo-Reyes , 632 SCRA 400 (2010).
76
Firme v. Bukal Enterprises and Dev. Corp. , 414 SCRA 190 (2003).
- 17 -
When Contract to Sell was signed by the co-owners themselves as witnesses, the written
authority for their agent mandated under Article 1874 of the Civil Code is no longer required. xOesmer
v. Paraiso Dev. Corp., 514 SCRA 228, 237 (2007).
d. Sale of Large Cattle (Art. 15851; Sec. 529, Revised Adm. Code )
X D. SIMULATED SALES
Characteristic of simulation is that the apparent contract is not really desired or intended to produce
legal effect or in any way alter the parties juridical situation, or that the parties have no intention to be
bound by the contract. The requisites are: (a) an outward declaration of will different from the will of the
parties; (b) false appearance must have been intended by mutual agreement; and (c) purpose is to
78
deceive third persons. x Manila Banking Corp. v. Silverio, 466 SCRA 438 (2005).
1. Badges and Non-b adges of Simulatio n:
• Non-payment of the stipulated consideration, absence of any attempt by the buyers to assert their alleged
rights over the subject property. xVillaflor v. CA, 280 SCRA 297 (1997).79
• Failure of alleged buyers to collect rentals from alleged seller. x Santiago v. CA, 278 SCRA 98 (1997); but not
when there appears a legitimate lessor-lessee relationship between the vendee and the vendor. x Union Bank
v. Ong, 491 SCRA 581 (2006).
• Although the agreement did not provide for the absolute transfer ownership of the land to buyer, that did not
amount to simulation, since delivery of certificate of ownership and execution of deed of absolute sale were
expressly stipulated as suspensive conditions, which gave rise to the corresponding obligation on part of
buyer to pay the last installments. xVillaflor v. CA, 280 SCRA 297 (1997).
• When signature on a deed of sale is a forgery. Fidel v. CA , 559 SCRA 186 (2008).80 But bare assertions that
the signature appearing on the Deeds of Sale is not that of her husband is not enough to allege simulation,
since forgery is not presumed; it must be proven by clear, positive and convincing evidence. xR.F. Navarro &
Co. v. Vailoces, 361 SCRA 139 (2001).
•
Simulation of contract and gros s inadequacy of price are distinct lega l concepts, with different effec ts – the
concept of a simulated sale is incompatible with inadequacy of price. When the parties to an alleged contract
do not really intend to be bound by it, the contract is simulated and void. Gross inadequacy of price by itself
will not result in a void contract, and it does not even affect the validity of a contract of sale, unless it signifies
a defect in the consent or that the parties actually intended a donation or some other contract. xBravo-
Guerrero v. Bravo , 465 SCRA 244 (2005).
77
Pineda v. CA, 376 SCRA 222 (2002).
78
Rosario v. CA, 310 SCRA 464 (1999); Loyola v. CA, 326 SCRA 285 (2000); Yu Bun Guan v. Ong, 367 SCRA 559 (2001);
Payongayong v. CA, 430 SCRA 210 (2004).
79
Solidstate Multi-Products Corp. v. Catienza-Villaverde , 559 SCRA 197 (2008).
80
Rufloe v. Burgos, 577 SCRA 264, 272-273 (2009).
81
Uy v. CA, 314 SCRA 69, 81 (1999).
- 18 -
A. OBLIGATIONS OF SELLER
1. Preserve Subject Matter (Art. 1163)
2. Deliver with Fruits and Accessories (Arts. 1164, 1166, 1495, 1537)
3. DELIVER THE SUBJECT MATTER (Art. 1477)
a. Legal Premises for Doctrines on Tradition
When the sale is void or fictitious, no valid title over the subject matter can be conveyed to the
buyer even with delivery. Nemo potest nisi quod de jure potest – No man can do anything except
what he can do lawfully . xTraders Royal Bank v. CA, 269 SCRA 15 (1997).
When seller had no ownership over the subject matter at the time of delivery, no valid title can
pass in favor of the buyer. Nemo dat quod non habet – No man can give that which he does not
have. xTsai v. CA, 366 SCRA 324 (2001). 82
A forged deed of sale is null and void and conveys no title. It is a well-settled principle that no
one can give what one does not have, nemo dat quod non habet. One can sell only what one
owns or is authorized to sell, and the buyer can acquire no more right than what the seller can
transfer legally. xRufloe v. Burgos , 577 SCRA 264, 272-273 (2009).
Article 1459 of the Civil Code on contracts of sale “specifically requires that the vendor must
have ownership of the property at the time it is delivered.” xHeirs of Arturo Reyes v. Socco-
Beltran, 572 SCRA 211, 220-221 (2008).
A contract to sell, or a condition contract of sale where the suspensive condition has not
happened, even when found in a public document, cannot be treated as constituting constructive
delivery,
owner of especially when
the property andfrom
wasthe faceexpecting
only of the instrument
to inherititit.”
is shown that the
(at p. 221) seller
Heirs “was not
of Arturo yet the
Reyes v.
Socco-Beltran, 572 SCRA 211 (2008).
One can sell only what one owns or is authorized to sell, and the buyer can acquire no more
than what the seller can transfer legally. Daclag v. Macahilig, 560 SCRA 137 (2008).
A tax declaration, by itself, is not considered conclusive evidence of ownership – it is merely
an indicium of a claim of ownership. Daclag v. Macahilig, 560 SCRA 137 (2008). Nevertheless
when at the time of delivery there is no proof that the seller had ownership and as in fact the tax
declaration to the subject property was in the name of another person, then there was no transfer
of ownership by delivery. xHeirs of Severina San Miguel v. CA , 364 SCRA 523 (2001).
in the control and possession of the vendee.” Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc. ,
370 SCRA 56 (2001).
“Delivery” as used in Sales refers to the concurrent transfer of two things: (1) possession and
(2) ownership. If the vendee is placed in actual possession of the property, but by agreement of
the parties ownership of the same is retained by the vendor until the vendee has fully paid the
price, the mere transfer of the possession of the property subject of the sale is not the “delivery”
contemplated in the Law on Sales or as used in Article 1543 of the Civil Code. Cebu Winland Dev.
Corp. v. Ong Siao Hua , 588 SCRA 120 (2009).
Since delivery of subject matter of sale is an obligation on the part of the seller, the
acceptance thereof by the buyer is not a condition for the completeness of delivery. xLa Fuerza v.
CA, 23 SCRA 1217 (1968).
In the absence of an express stipulation to the contrary, payment of purchase price of the
goods is not a condition precedent to the transfer of title to the buyer, but title pass es by the
delivery of the goods. x Phil. Suburban Dev. Corp. v. Auditor General, 63 SCRA 397 (1975).84
Failure of the buyer to make good the price does not, in law, cause the ownership to revest to
the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Art. 1191.
xBalatbat v. CA , 261 SCRA 128 (1996).
A contract to sell, or a condition contract of sale where the suspensive condition has not
happened, even when found in a public document, cannot be treated as constituting constructive
delivery, especially when from the face of the instrument it is shown that the seller “was not yet the
owner of the property and was only expecting to inherit it.” x Heirs of Arturo Reyes v. Socco-
Beltran, 572 SCRA 211, 221 (2008).
(i) As to Mo vables (Arts. 1498-1499, 1513-1514; √Dy, Jr. v. CA , 198 SCRA 826)
Where it is stipulated that deliveries must be made to the buyer or his duly authorized
representative named in the contracts, the seller is under obligation to deliver in accordance with
such instructions.. xLagon v. Hooven Comalco Industries, Inc., 349 SCRA 363 (2001).
84
Ocampo v. CA , 233 SCRA 551 (1994).
85
Tating v. Marcella, 519 SCRA 79 (2007); De Leon v. Ong, 611 SCRA 381 (2010).
86
Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001); Engreso v. De La Cruz, 401 SCRA 217 (2003); Ten Forty
Realty and Dev. Corp. v. Cruz, 410 SCRA 484 (2003); Copuyoc v. De Solas, 504 SCRA 176 (2006).
87
Beatingo v. Gasis, 642 SCRA 539 (2011).
- 20 -
Execution by supposed buyers of a chattel mortgage over subject vehicle in favor of the
financing company does not mean that ownership had been transferred to them, for delivery must
be on the part of the seller. xUnion Motor Corp. v. CA , 361 SCRA 506 (2001).
Neither issuance of an invoice, which is not a document of title xP.T. Cerna Corp. v. CA, 221
SCRA 19 (1993),88 nor of the registration certificate of vehicle xUnion Motor Corp. v. CA, 361
SCRA 506 (2001), 89 would constitute constructive delivery.
(1) Registration of Title I s Separate Mode from Execution o f Public Instrum ent – The
recording of the sale with the proper Registry of Deeds and the transfer of the certificate of
title in the name of the buyer are necessary only to bind third parties to the transfer of
ownership. As between the seller and the buyer, the transfer of ownership takes effect upon
the execution of a public instrument conveying the real estate. √Chu a v. CA, 401 SCRA 54
(2003).
B UT S EE : Under Art. 1495, seller is obliged to transfer title over the property and deliver the
same to the vendee. √Vive Ea gle Land, I nc. v. CA , 444 SCRA 445 (2004) .
(2) Customary Ste ps in Se lling Immov able s – “Customarily, in the absence of a contrary
agreement, the submission by an individual seller to the buyer of the following papers would
complete a sale of real estate: (1) owners duplicate copy of the Torrens title; (2) signed deed
of absolute sale; (3) tax declaration; and (4) latest realty tax receipt. They buyer can retain
the amount for the capital gains tax and pay it upon authority of the seller, or the seller can
pay the tax, depending on the agreement of the parties.” √Chu a v. CA, 401 SCRA 54 (2003) .
The execution of the notarized deed of sale and the delivery of the owners duplicate
copy of the srcinal certificate of title to the buyer is tantamount to constructive delivery of the
object of the sale. Kings Properties Corp. v. Galido , 606 SCRA 137 (2009).
e. Constitutum Possessorium (Art. 1500) – A provision in the deed of sale granting to seller a right to
lease the subject matter of the sale is valid: the possession is deemed to be constituted in the vendee
by virtue of this mode of tradition.” xAmigo v. Teves , 96 Phil. 252 (1954).
f. Traditio Brevi Manu – Prior to the sale, petitioners were in possession of the subject property as
lessees. Upon sale to them of the rights, interests and participation as to the ½ portion pro indiviso,
they remained in possession, not in the concept of lessees anymore but as owners now through
symbolic delivery known as traditio brevi manu . xHeirs of Pedro Escanlar v. CA, 281 SCRA 176
(1997).
88
Norkis Distributors v. CA, 193 SCRA 694 (1991).
89
Abuan v. Garcia, 14 SCRA 759 (1965); Santos v. Santos, 366 SCRA 395 (2001).
90
Florendo v. Foz, 20 Phil. 388 (1911); Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete , 87 Phil. 159 (1950); Phil. Suburban
Dev. v. Auditor, 63 SCRA 397 (1975).
- 21 -
4. Transfer Ownership to Vendee Upon Delivery (Arts. 1477, 1478, and 1496)
a. When Buyer Refuses to Accept (Art. 1588)
b. In Case of Express or Implied Reservation (Arts. 1478 and 1503)
7. Expenses of Execution and Registration (Art. 1487), and of Putting Goods in Deliverable Estate
(Art. 1521)
Unless otherwise
be shouldered by thestipulated: (a) under
vendor x Vive EagleArt. 1487Inc.
Land, thev.expenses
CA , 444for the registration
SCRA 445 (2004);of the
andsale should
(b) duty to
withhold taxes due on the sale is imposed on seller. xEquitable Realty Devt Inc. v. Mayfair Theater,
Inc., 332 SCRA 139 (2000).
Buyer has more interest in having the capital gains tax paid immediately since this is a pre-requisite
to the issuance of a new Torrens title in his name. Nevertheless, as far as the government is
concerned, the capital gains tax remains a liability of the seller since it is a tax on the sellers gain from
the sale of the real estate. Payment of the capital gai ns tax, however, is not a pre-requisite to the
transfer of ownership to the buyer. The transfer of ownership takes effect upon the signing and
notarization of the deed of absolute sale.” x Chua v. CA, 401 SCRA 54 (2003).
A judgment on a contract of sale that decrees sellers obliga tions to execute and deliver the deed
of absolute sale and the certificate of title, does not necessarily include within its terms the obligation to
pay for the expenses in notarizing a deed of sale and in obtaining new certificate of title. xJose
Clavano, Inc. v. HLRB , 378 SCRA 172 (2002).
(iii) CIF Sales √ General F ood s v. NACOCO , 100 Phil. 337 (1956) .
“C.I.F.” found in British contracts stand for costs, insurance, and freight; they signify that the
price fixed covers not only the costs of the goods, but the expense of freight and insurance to be
paid by the seller. √Behn Meyer & Co. v. Y angco , 38 Phil. 602, 606 (1918) .
Under an arrangement “c.i.f. Pacific Coast” (destination), “the vendor is to pay not only the
cost of the goods, but also the freight and insurance expenses, and, as it was judicially interpreted,
this is taken to indicate that the delivery is to be made at the port of destination.” √Pacific
Vegeta ble Oil Corp . v. Singzon , Supreme Court Advance Decisions, 29 April 1955.
In a “saletheondelivery
satisfaction”), approval”
of the(also
objectcalled “saletransfer
does not on acceptance,
ownership to“sale on trial”
the buyer sinceorthe“sale on
delivery
was not for purposes of transferring ownership, since the prestation to effect a meeting of the
minds to give rise to a valid contract is incumbent on the buyer. xVallarta v. CA , 150 SCRA 336
(1987).
91
Chua Ngo v. Universal Trading Co., Inc., 87 Phil. 331 (1950).
- 22 -
For a sale to be a “sale or return” or a “sale on approval,” there must be a clear agreement to
either of such effect, otherwise, the provisions of Art. 1502 of Civil Code governing such sales
cannot be invoked by either party to the contract. xIndustrial Textile Manufacturing Co. v. LPJ
Enterprises, Inc., 217 SCRA 322 (1993).
d. Buyer’s Right to Inspect Before Acceptance (Arts. 1481 and 1584) Except when carrier
delivers COD.
2. In Case of Immovables
a. Where Sold Per Uni t or Number (Arts. 1539 and 1540)
In a unit price sale, the statement of the area of immovable is not conclusive and the price may
be reduced
area agreedorupon,
increased depending
the vendee mayon the area
oblige actually to
the vendor delivered. If the
deliver all thatvendor delivers
is stated in theless than the
contract or
demand for the proportionate reduction of the purchase price if delivery is not possible. If the vendor
delivers more than the area stated in the contract, the vendee has the option to accept only the
amount agreed upon or to accept the whole area, provided he pays for the additional area at the
contract rate. √Rudolf Lietz , Inc. v. CA , 478 SCRA 451 (2005) .92
b. Where Sold for a Lump Sum [“ A cuerpo c iert o or por precio alzado” ] (Art. 1542)
In a contract of sale of land in a mass, the specific boundaries stated in the contract must control
over any statement with respect to the area contained within its boundaries. Salinas v. Faustino , 566
SCRA 18 (2008).
In a lump sum sale, when the land delivered to the buyer is exactly as that described in the deed
and covered within the boundaries designated, the difference in actual area (34 versus 10 hectares)
will not authorize the buyer to rescind the contract because the seller has complied with delivering the
subject matter agreed upon. x Teran v. Villanueva, 56 Phil. 677 (1932); this is the rule when evidence
shows that the parties never gave importance to the area of the land in fixing the price (97 versus 60
hectares). xAzarraga v. Gay, 52 Phil. 599 (1928).
Where the parties agreed on a sale at a rate of a certain price per unit of measure and not one
for a lump sum, it is Article 1539 and not Article 1542 which is the applicable law—the buyer is
entitled to the relief afforded to him under Article 1529, that is, either a proportional reduction of the
price or the rescission of the contract. xCebu Winland Dev. Corp. v. Ong Siao Hua, 588 SCRA 120
(2009).
EXCEPT: A buyer of land, when sold in gross or with the description “more or less” or similar words in
designating quantity covers only a reasonable excess of deficiency. In the case at bar an
area of “644 square meters more” is not reasonable excess or deficiency, to be deemed
included in the deed of sale. xRoble v. Arbasa , 362 SCRA 69 (2001);√Rudolf Lietz, I nc. v.
93
CA , 478 SCRA 451 (2005) .
EXCEPTION TO EXCEPTION: When buyer, who has been occupying the land for two years as lessee,
actually is deemed to take risk on the actual size of the property bought at lump sum.
xGarcia v. Velasco, 72 Phil. 248 (1941).
92
Goyena v. Tambunting, 1 Phil. 490 (1902); Santa Ana v. Hernandez, 18 SCRA 973 (1966).
93
Asiain v. Jalandoni, 45 Phil 296 (1923); Balantakbo v. CA, 249 SCRA 323 (1995); Esguerra v. Trinidad, 518 SCRA 186 (2007); Del
Prado v. Caballero, 614 SCRA 102 (2010).
94
Pudadera v. Magallanes, 633 SCRA 332 (2010).
- 23 -
(a) When two different titles are issued over the same registered land, the buyer who claims under a
title that was first issued shall be preferred. x Liao v. CA, 323 SCRA 430 (2000);
(b) Invoking the rules on double sales and “priority in time” under Art. 1544 would be misplaced by a
first buyer who bought the land not within the Torrens system but under Act No. 3344, as against
the second buyer who bought the same property when it was already registered under the
Torrens system, because:
• of the “well-known rule in this jurisdiction that persons dealing with registered land have the legal
right to rely on the fact of the Torrens Certificate of Title and to dispense with the need to inquire
further, except when the party concerned has actual knowledge of facts and circumstances that
would impel a reasonably cautious man to make such inquiry;” and
•
a. M AIN RULE UNDER ART. 1544: P RIOR T EMPORE , P RIOR J UR E . √Carbonell v. CA , 69 SCRA 99
(1976).96
3. Requisites for Double Sale: √Cheng v. Genato , 300 SCRA 722 (1998).97
a. There Must Be Two Different Valid Sales: Article 1544 does not apply where:
• There is only one valid sale, while the other sale over the same property is void. Fudot v.
Cattleya Land, Inc., 533 SCRA 350 (2007); 98 or
• Where one of the contract is a contract to sell. √San Lorenz o Dev. Corp. v. CA , 449 SCRA 99
(2005).99
When the seller sold the same properties to two buyers, first to the respondent and then to
Viloria on two separate occasions, the second sale was not void for the sole reason that petitioner
had previously sold the same properties to respondent. This case involves a double sale as the
disputed properties were sold validly on two separate occasions by the same seller to the two
different buyers in good faith. De Leon v. Ong , 611 SCRA 381, 388 (2010).
(1) Doctrine on Conditional Sales/Contracts to Sell and Adverse Claims: √Mendoza v. Kalaw,
42 Phil. 236 (1921); √Ad alin v. C A , 280 SCRA 536 (1997) .
The rules on double sales under Art. 1544 are not applicable to contract to sell, because of the
circumstances that must concur in order for the provisions to Art. 1544 on double sales to apply,
namely that there must be a valid sales transactions, and buyers must be at odds over the rightful
ownership of the subject matter who must have bought from the very same seller, are lacking in a
contract to sell for neither a transfer of ownership nor a sales transaction has been consummated,
and such contract is binding only upon the fulfillment or non-fulfillment of an event. Nevertheless,
the governing principle of Art. 1544 should apply, mainly the governing principle of primus
tempore,portior jure (first in time, stronger in right). √Cheng v . Ge nato , 300 SCRA 722 (1998) .
Article 1544
v. Oalsiman , 485applies
SCRA where the same
464 (2006); and thing is sold
therefore to different
does not applybuyers
whereby the
there same sale toxOng
was aseller. one
party of the land itself while the other contract was a mere promise to sell the land or at most an
95
Reiterated in Abrigo v. De Vera , 432 SCRA 544 (2005); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).
96
Tanglao v. Parungao, 535 SCRA 123 (2007); Calma v. Santos, 590 SCRA 359 (2009).
97
Reiterated in Mactan-Cebu International Airport Authority v. Tirol , 588 SCRA 635 (2009).
98
Espiritu v. Valerio, 9 SCRA 761 (1963);Remalante v. Tibe, 158 SCRA 138 (1988); Delfin v. Valdez, 502 SCRA 24 (2006).
99
Torrecampo v. Alindogan, Sr., 517 SCRA 84 (2007).
- 24 -
actual assignment of the rights to repurchase the same land. x Dischoso v. Roxas , 5 SCRA 781
(1962).
whoFor
hasArticle 1544 toright
an existing apply, it isthing
in the necessary thatpower
and the the conveyance must
to dispose of it. Ithave been
cannot bemade by awhere
invoked party
the two different contracts of sale are made by two different persons, one of them not being the
owner of the property sold. And even if the sale was made by the same person, if the second sale
was made when such person was no longer the owne r of the property, beca use it had been
acquired by the first purchaser in full dominion, the second purchaser cannot acquire any right.
√Consolidate d Rural Bank (Ca gayan Va lle y), Inc. v. CA , 448 SCRA 347 (2005),101 citing
VILLANUEVA, PHILIPPINE LAW ON SALES 100 (1995).
In a situation where a party has actual knowledge of the claimants actual, open and notorious
possession of a disputed property at the time of registration, the actual notice and knowledge are
equivalent to registration, because to hold otherwise would be to tolerate fraud and the Torrens
system cannot be used to shie ld fraud – while certificates of title are indefeas ible, unassailable and
binding against the whole world, they merely confirm or record title already existing and vested.
√Conso lidated Rural Bank (Cagayan Val ley), Inc. v. CA , 448 SCRA 347 (2005) .
In double sales, the first buyer always has priority rights over subsequent buyers of the same
property. The good faith of the first buyer remains all throughout despite his subsequent acquisition
of knowledge of the subsequent sale. Kings Properties Corp. v. Galido , 606 SCRA 137 (2009).
d. Registration in Good Faith Always Pre-empts Possession in Good Faith – Between two
purchasers,
has the onehis
not registered who registered
title, the latter
even if the sale inis his favor has
in actual a preferred
possession rightimmovable
of the over the other who
property.
xTañedo v. CA , 252 SCRA 80 (1996). 105
The registration of a sale after the annotation of the notice of lis pendens does not obliterate the
effects of delivery and possession in good faith. The rules on constructive notice upon registration
provided for under Section 52 of the Prope rty Registration Decree (P.D. No. 1529) operate only
from the time of the registration of the notice of lis pendens which in this case was effected only
after the time the sale in favor of the second buyer had long been consummated by delivery of the
subject matter. √Sa n Lorenzo Dev. Corp. v. CA , 449 SCRA 99 (2005).
a. Must Have Paid Price in Full – A purchaser is good faith is one who buys property without notice
that some other person has a right to, or interest in, such property and pays a full and fair price
for the same at the time of such purchase , or before he has notice of the claim or interest of
some other person in the property. Tanglao v. Parungao, 535 SCRA 123 (2007) 107
Under Article 1544, mere registration is not enough to acquire a new title. Good faith must
concur. Clearly, when the buyer has not yet fully paid the purchase price, and as long as seller
remains unpaid, the buyer cannot feign good faith. xPortic v. Cristobal, 546 SCRA 577 (2005).
B UT S EE : In the determination of whether or not the buyer is in good faith, the point in time to be
considered is the moment when the parties actually entered into the contract of sale. Estate of Lino
Olaquer v. Ongjoco, 563 SCRA 373 (2008).
b. Burden of Proof – The burden of proving the status of a purchaser in good faith lies upon him
who asserts that status. It is not sufficient to invoke the ordinary presumption of good faith, that is,
that everyone is presumed to have acted in good faith, since the good faith that is here essential is
integral with the very status that must be established. xTanglao v. Parungao, 535 SCRA 123
(2007).108
As a general rule, the question of whether or not a person is a purchaser in good faith is a
factual matter that will not be delved into by this Court, since only questions of law may be raised
in petitions for review. Tio v. Abayata, 556 SCRA 175 (2008).
B UT S EE : It is anxiomatic that good faith is always presumed in the absence of any direct
evidence of bad faith. xSantiago v. CA, 247 SCRA 336 (1995).
105
106Liao v. CA,
Sanchez v. 323 SCRA
Ramos , 40 430
Phil.(2000); Talusan
614 (1919); v. Tayag,
Quimson 356 SCRA
v. Rosete 263159
, 87 Phil. (2001); Dauz
(1950); Navera v. CA, ,184
v. Exchavez 533SCRA
SCRA584
637(1990).
(2007).
107
Agricultural and Home Extension Dev. v. CA., 213 SCRA 536 (1992); Veloso v. CA , 260 SCRA 593 (1996); Balatbat v. CA, 261
SCRA 128 (1996); Mathay v. CA, 295 SCRA 556 (1998); Diaz-Duarte v. Ong, 298 SCRA 388 (1998); Liao v. CA, 323 SCRA 430 (2000);
Tanongon v. Samson, 382 SCRA 130 (2002); Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002);
Aguirre v. CA, 421 SCRA 310 (2004); Galvez v. CA, 485 SCRA 346 (2006); Chua v. Soriano, 521 SCRA 68 (2007); Raymundo v.
Bandong, 526 SCRA 514 (2007); De Leon v. Ong, 611 SCRA 381 (2010); Kings Properties Corp. v. Galido , 606 SCRA 137 (2009); The
Heirs of Romana Saves v. The Heirs of Escolastico Saves , 632 SCRA 236 (2010).
108
Tsai v. CA , 366 SCRA 324 (2001); Aguirre v. CA, 421 SCRA 310 (2004) ; Raymundo v. Bandong, 526 SCRA 514 (2007); Eagle
Realty Corp. V. Republic , 557 SCRA 77 (2008); Pudadera v. Magallanes, 633 SCRA 332 (2010).
- 26 -
(2) Close Rela tionsh ip – The sale to ones daughter and sons will give rise to the conclusion
that the buyers, not being really third parties, knew of the previous sales and cannot be
considered in good faith. The buyers “are deemed to have constructive knowledge by virtue
of their relationship” to their sellers. xPilapil v. CA , 250 SCRA 566 (1995).
(3) Gross Inadequacy of Price – Mere inadequacy of price is not ipso facto a badge of lack of
good faith—to be so, the price must be grossly inadequate or shocking to the conscience
such that the mind revolts against it and such that a reasonable man would neither directly or
indirectly be likely to consent to it. Tio v. Abayata, 556 SCRA 175 (2008).
(4) Obligation to Investig ate or To Follow Leads – A purchaser who is aware of facts which
should put a reasonable man upon his guard cannot turn a blind eye and later claim that he
acted in good faith, such as —
A buyer of a registered land would be in bad faith when he purchases without asking to see the
owners copy of the title and/or without visiting the land where he would then have seen first buyer
occupying the same. xSantiago v. CA, 247 SCRA 336 (1995).111
When there are occupants to the land being bought, since it is the common practice in the real
estate industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent
purchaser usually takes. xMartinez v. CA, 358 SCRA 38 (2001).112
Any person engaged in business would be wary of buying from a company that is closing shop,
because it may be dissipating its assets to defraud creditors. Such buyer is bound to inquire whether
the owners had unsettled obligations encumbrance that could burden the property. x Samson v. CA,
238 SCRA 397 (1994).113
The property was titled and transferred with undue haste within a short period of time, “plus the fact
that the subject property is a vast tract of land in a prime location, should have, at the very least,
triggered petitioners curiosity.” Eagle Realty Corp v. Republic, 557 SCRA 77, 94 (2008).
(5) Land in Adverse Possession – Buyer who could not have failed to know or discover that the
land sold to him was in the adverse possession of another is a buyer in bad faith. x Heirs of
114
Ramon Durano, Sr. v. Uy, 344 SCRA 238 (2000).
(6) Existe nce of Lis Pe ndens or Adverse Cl aim – Registration of an adverse claim places any
subsequent buyer of the registered land in bad faith. Kings Properties Corp. v. Galido , 606
SCRA 137 (2009).
Settled is the rule that one wh o deals with property with a notic e of lis pendens, even
when at the time of sale the annotation was cancelled but there was a pending appeal,
cannot invoke the right of a purchaser in good faith. A purchaser cannot close his eyes to
facts which should put a reasonable man on guard and claim that he acted in the belief that
there was no defect in the title of the seller. xPo Lam v. CA, 316 SCRA 721 (1999).
EXCEPT: When knowledge of lis pendens was acquired at the time there was order to have it
cancelled. xPo Lam v. CA, 347 SCRA 86 (2000). 115
109
Adriano v. Pangilinan, 373 SCRA 544 (2002); Lloyds Enterprises and Credit Corp. v. Dolleton , 555 SCRA 142 (2008); Eagle Realty
Corp v. Republic, 557 SCRA 77 (2008); Eagle Realty Corp v. Republic , 557 SCRA 77 (2008).
110
Agag v. Alpha Financing Corp., 407 SCRA 602 (2003); Bank of Commerce v. San Pablo, Jr. , 522 SCRA 713 (2007); Lloyds
Enterprises and Credit Corp. v. Dolleton , 555 SCRA 142 (2008);Ty v. Queens Row Subdivision, Inc. , 607 SCRA 324 (2009).
111
112R.R. Paredes v. Calilung , 517 SCRA 369 (2007); Chua v. Soriano, 521 SCRA 68 (2007).
Mathay v. CA, 295 SCRA 556 (1998); Republic v. De Guzman, 326 SCRA 267 (2000); Heirs of Ramon Durano, Sr. v. Uy, 344 SCRA
238 (2000); Heirs of Celestial v. Heirs of Celestial , 408 SCRA 291 (2003); Erasusta, Jr. v. CA , 495 SCRA 319 (2006); De la Cena v.
Briones, 508 SCRA 62 (2006); Tanglao v. Parungao, 535 SCRA 123, 132 (2007).
113
Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
114
Modina v. CA, 317 SCRA 696, 706 (1999); Republic v. De Guzman, 326 SCRA 267 (2000); Martinez v. CA, 358 SCRA 38 (2001);
Heirs of Trinidad de Leon Vda. De Roxas v. CA, 422 SCRA 101 (2004); Occeñna v. Esponilla , 431 SCRA 116 (2004); PNB v. Heirs of
Estanislao Militar , 494 SCRA 308 (2006); Raymundo v. Bandong, 526 SCRA 514 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007);
Tio v. Abayata, 556 SCRA 175 (2008); Orduña v. Fuentebella, 622 SCRA 146 (2010); Deanon v. Mag-abo, 622 SCRA 180 (2010); The
Heirs of Romana Saves v. The Heirs of Escolastico Saves , 632 SCRA 236 (2010).
- 27 -
(7) Anno tati on of Lien in Settle ment of Estate – An annotation placed on new certificates of
title issued pursuant to the distribution and partition of a decedents real properties is a
warning to third persons on the possible interest of excluded heirs or unpaid creditors in
these properties—where a buyer purchases the real property despite the annotation, he must
be ready for the possibility that the title be subject to the rights of excluded parties. Tan v.
Benolirao, 604 SCRA 36 (2009).
(8) Banks Are Vested with Public Interest and Obligation to Exercise Extraordinary
Diligence – One of the protections afforded by P.D. 957 to buyers is the right to have her
contract to sell registered with the Register of Deeds in order to make it binding on third
parties. Nonetheless, despite the non-registration of the contract to sell, the mortgagee bank
cannot be considered, under the circumstances, an innocent purchaser for value of the lot
when it accepted
mortgagor the latter
developers (together with
obligation—the bankother
was assigned properties)
well aware that the as payment
assigned for the
properties
were subdivision lots and therefore within the purview of P.D. 957. Luzon Dev. Bank v.
Enriquez, 639 SCRA 332 (2011).
6. When Subject of Sale Is Unregistered Land √ Naa wan Comm unity Rural Bank v . CA , 395 SCRA
43 (2003).
The rules in double sale under Article 1544, whereby the buyer who is able to first register the
purchase in good faith “is in full accord with Section 51 of PD 1529 which provides that no deed,
mortgage, lease, or other volunt ary instrument – except a will purporting to convey o r affect registere d
land shall take effect as a conveyance or bind the land until its registration. Thus, if the sale is not
registered, it is binding only between the seller and the buyer but it does not affect innocent third
persons. √Abrig o v. De Ve ra , 432 SCRA 544 (2004) .
When first sale is over unregistered land and the second sale is when it is registered, the rules on
double sale do not apply. √Dagupan Trading Co . v. Ma cam , 14 SCRA 179 (1965).
Article 1544 is inapplicable to unregistered land because “the purchaser of unregistered land at a
sheriffsinterest
latters execution sale
in the only steps
property into
sold as of the time
shoestheofproperty
the judgment debtor,
was levied andasmerely
upon,” acquires
expressly the
provided
for in then Sec. 35, Rule 39 of the Revised Rules of Court on execution sale [now Sec. 33, Rule 39,
1997 Rules of Civil Procedure)]. √Carumb a v. C A , 31 SCRA 558 (1970) .
Under Act 3344, registration of instruments affecting unregistered lands is “without prejudice to a
third party with a better right,” which means that mere registration does not give the buyer any right
over the land if the seller was not anymore the owner of the land having previously sold the same to
somebody else even if the earlier sale was unrecorded. The rules on double sale under Art. 1544 has
no application to land no registered under the Torrens system.√Acabal v. Acabal, 454 SCRA 555
(2005).116
D. OBLIGATIONS OF BUYER
1. Pay the Price (Art. 1582)
When seller cannot show title to the subject matter, then he cannot compel the buyer to pay the
price. xHeirs of Severina San Miguel v. CA, 364 SCRA 523 (2001).
Mere sending of a letter by the buyer expressing the intention to pay without the accompanying
payment is order
essential in not considered a the
to extinguish validobligation
tender of payment
to pay and consignation
and oblige of the title.
the seller to convey amount due are
xTorcuator v.
Bernabe, 459 SCRA 439 (2005).
Unless the parties to a sale have agreed to the payment of the purchase price to any other party,
then its payment to be effective must be made to the seller in accordance with Article 1240 which
provides that “Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.” xMontecillo v.
Reynes, 385 SCRA 244 (2002).
115
Pudadera v. Magallanes, 633 SCRA 332 (2010).
116
Hanopol v. Pilapil, 7 SCRA 452 (1963); Radiowealth Finance Co. v. Palileo, 197 SCRA 245 (1991); Spouses Honorio Santiago v.
CA, 247 SCRA 336 (1995); Bayoca v. Nogales, 340 SCRA 154 (2000); Fidel v. CA , 559 SCRA 186 (2008); Daclag v. Macahilig, 560
SCRA 137 (2008); Amodia Vda. De Melencion v. CA, 534 SCRA 62, 82 (2007); Fidel v. CA, 559 SCRA 186 (2008).
- 28 -
117
Azcona v. Reyes, 59 Phil. 446 (1934); Coronel v. Ona, 33 Phil. 456 (1916).
- 29 -
steps into the shoes of the vendor as co-owner. x Panganiban v. Oamil, 542 SCRA 166 (2008); 118
except when the intention of the purchase was clearly the property itself and not just the spiritual
share. √Mindanao v. Yap , 13 SCRA 190 (1965) .
An agreement that purports a specific portion of an un-partitioned co-owned property is not void;
it shall effectively transfer the sellers ideal share in the co-ownership. Heirs of the Late Spouses
Aurelio and Esperanza Balite v. Lim , 446 SCRA 54 (2004). 119
In which case, the proper action is not for nullification of sale, or for the recovery of possession
of the property owned in common from the other co-owners, but for division or partition of the entire
property. xTomas Claudio Memorial College, Inc. v. CA , 316 SCRA 502 (1999).120
A co-owner who sells one of the two lands owned in common with another co-owner, and does
not turn-over one-half of the proceeds of the sale to the other co-owner, the latter may by law and
equity lay exclusive claim to the remaining parcel of land. xImperial v. CA , 259 SCRA 65 (1996).
2. Exceptions: When Ownership Transfers by Act of the Non-Owner
a. Estoppel on True Owner (Art. 1434) √Bucton v. Ga bar , 55 SCRA 499 (1974).
The owner of the goods who has been unlawfully deprived of it may recover it even from a
purchaser in good faith. Thus, the purchaser of property which has been stolen from the owner has
been held to acquire no title to it even though he purchased for value and in good faith. Exception is
when the true owner is estopped. xFrancisco v. Chemical Bulk Carriers, Inc., 657 SCRA 355
(2011).
3. Sale by One Having Voidable Title (Art. 1506, as an exception to Art. 559)
Whenever there is an underlying sale which grants to the culprit-buyer a voidable title, even when
this is accompanied by the criminal act of estafa or swindling, Art. 1506 would grant to the buyer in
good faith a better title as against the srcinal owner even though the latter may be classified to have
been
(1957“unlawfully deprived”v of .the
); √EDCA Publishing subject
Santos matter
, 184 SCRAunder
614 Art. 559. √Tagatac v. Jimenez
(1990). , 53 O.G. 3792
118
Estoque v. Pajimula , 24 SCRA 59 (1968); Aguirre v. CA, 421 SCRA 310 (2004); Acabal v. Acabal, 454 SCRA 555 (2005); Barcenas
v. Tomas, 454 SCRA 593 (2005).
119
Almendra v. IAC, 204 SCRA 142 (1991); Fernandez v. Fernandez, 363 SCRA 811 (2001); Aguirre v. CA, 421 SCRA 310 (2004);
Santos v. Lumbao , 519 SCRA 408 (2007); Republic v. Heirs of Francisca Dignos-Sorono , 549 SCRA 58 (2008).
120
Heirs of Romana Ingjug-Tiro v. Casals, 363 SCRA 435 (2001); Aguirre v. CA, 421 SCRA 310 (2004).
- 30 -
When owner did not voluntarily deliver possession of the car, and in effect it was stolen from him,
then one who buys the car even in good faith from the th ief will lose the car to the owne r who is
deemed to have been unlawfully deprived. √Aznar v. Ya pdiangc o , 13 SCRA 486 (1965).
In all other cases of unlawful deprivation done through estafa, the srcinal owner recovers even
from the buyer in good faith. √Cruz v. Pahati , 98 Phil. 788 (1956) . [CLV: Decision showed that
second buyer, or current possessor could not claim good faith because of erasures in the
covering documents presented by his seller]
Owner of diamond ring may recover possession of the same from pawnshop where the owners
agent had pledged it without authority to do so; Article 559 applies and the defense that the
pawnshop acquired possession without notice of any defect of the pledgor-agent is unavailing.
√Dizon v. Suntay , 47 SCRA 160 (1972) .121 [In those cases possessor is a merchant and only
has a pledge in his favor].
121
Valera v. Matute, 9 Phil. 479 (1908); Arenas v. Raymundo, 19 Phi. 47 (1911).
122
Song Fo & Co. v. Oria , 33 Phil. 3 (1915); Lawyer’s Coop v. Narciso, 55 O.G. 3313).
- 31 -
Seller in possession of the goods may sell them at buyer’s risk. xKatigbak v. CA , 4 SCRA 243
(1962).
Surrender
Quiambao of mortgaged
v. Manila property
Motors Co., is not444
Inc., 3 SCRA necessarily
(1961). equivalent to rescission. x Vda. de
Mutual restitution prevents recovering on the balance of the purchase price. √Nonato v. IAC ,
140 SCRA 255 (1985); but stipulation on non-return of payments is valid provided not
unconscionable. xDelta Motor Sales Corp. v. Niu Kim Duan, 213 SCRA 259 (1992).
f. Remedy of Foreclosure
Barring effect would cover a third-party mortgage, when it was the chattel mortgage that was
first foreclosed. √Ridad v. Fil ipinas Investm ent , 120 SCRA 246 (1983) .
When the seller assigns his credit to another person, the latter is likewise bound by the same
law. √Zayas v. Lun eta Motors , 117 SCRA 726 (1982).125
(i) “Barring” Effects of Forec losure – Filing of the action of replevin in order to foreclose on the
chattel mortgage does not produce the barring effect under the Recto Law; for it is the fact of
foreclosure and actual sale of the mortgaged chattel that bar further recovery by the seller of
any balance on the buyers outstanding obligation not satisfied by the sale . The voluntary
payment of the installment by the buyer-mortgagor is valid and not recoverable in spite the
restrictive provisions of Art. 1484(3). √Northern Motors v . Sa pinoso , 33 SCRA 356 (1970) .
126
Foreclosure on the chattel mortgage prevents further action on the supporting real estate
mortgage, whether the chattel mortgage is first foreclosed √Cruz v. Fi lipinas Investm ent &
Finance Corp. , 23 SC RA 791 (1968) ;127 and vice versa when the real estate mortgage is first
foreclosed. √Bor bon II v. Se rvicewid e Specialists, I nc. , 258 SCRA 634 (1996) .
All amounts barred from recovery. √Macondr ay & Co. v. Eustaquio , 64 Phil. 446 (1937).
(ii) Rule on “Pe rverse Buyer” . √Filipinas Investmen t & Finance Corp. v. Ridad , 30 SCRA 564
(1969).
123
De la Cruz v. Asian Consumer, 214 SCRA 103 (1992); Borbon II v. Servicewide Specialists, Inc. , 258 SCRA 634 (1996).
124
Southern Motors v. Moscoso , 2 SCRA 168 (1961); Industrial Finance Corp. v. Ramirez , 77 SCRA 152 (1977); Rosario v. PCI
Leasing and Finance, Inc., 474 SCRA 500 (2005).
125
Borbon II v. Servicewide Specialists, Inc. , 258 SCRA 634 (1996).
126
Manila Motor Co. v. Fernandez, 99 Phil. 782 (1956); Magna Financial Services Group, Inc. v. Colarina , 477 SCRA 245 (2005).
127
Pascual v. Universal Motors Corp. , 61 SCRA 121 (1974).
- 32 -
from passing to the vendee until and unless the price is fully paid. xElisco Tool Manufacturing
Corp. v. CA, 307 SCRA 731 (1999).128
Where a lease agreement over equipment is witho ut an express opti on to purchase, but
nevertheless when a final demand is given prior to suit, the demand letter indicates clearly it was
within the option of the lessee to fully pay the balance of the unpaid rentals and would be able to
keep the equipment, then the real contract between the parties was a sale of movable on
installment disguised as a lease agreement. √PCI Leasing and Finance, I nc. v . Giraffe-X
Creative I m aging, Inc. , 527 SCRA 405 (2007).
4. IN CASE OF IMMOVABLES:
a . Anticipatory Breach (Art. 1591) √Leg ard a v. Sald aña , 55 SCRA 324 (1974) .
b. Sales of Subdivision Lots and Condominium Units (Secs. 23 and 24, P.D. 957 )
P.D.957 “was issued in the wake of numerous reports that many real estate subdivision
owners, developers, operators and/or sellers have reneged on their representations and
obligations to provide and maintain properly subdivision roads, drainage, sewerage, water
systems, lighting systems and other basic requirements or the health and safety of home and lot
buyers. It was designed to stem the tide of fraudulent manipulations perpetrated by unscrupulous
subdivision and condominium sellers free from liens and encumbrances.” x Casa Filipinas Realty
Corp. v. Office of the President, 241 SCRA 165 (1995).
Section 20 of P.D. 957 directs every owner and developer of real property to provide the
necessary facilities, improvements, infrastructure and other forms of development, failure to carry
out which is sufficient cause for the buyer to suspend payment, and any sums of money already
paid shall not be forfeited. xTamayo v. Huang, 480 SCRA 156 (2006).
In case the developer of a subdivision or condominium fails in its obligation under Section
20, Section 23 gives the buyer:
•
the subdivision,
the option to demand reimbursement
and when of the
the buyer opts fortotal amount
the latter paid, or tohewait
alternative, mayforsuspend
further development of
payment of the
installments until such time that the owner or developer has fulfilled its obligations. x Tamayo v.
Huang, 480 SCRA 156 (2006);
• buyer required only to give due notice to the owner or developer of the buyers intention to suspend
payment. xZamora Realty and Dev. Corp. v. Office of the President, 506 SCRA 591 (2006);
• Sec. 23 does not require that a notice be given first by the buyer to the seller before a demand for
refund can be made as the notice and demand can be made in the same letter or communication.
xCasa Filipinas Realty Corp v. Office of the President, 241 SCRA 165 (1995);
• Option granted by law is with buyer and not the developer/seller. xRelucio v. Brillante-Garfin, 187
SCRA 405 (1990).
“Buyer” under P.D. 957 would include one who acquires for a valuable consideration a
condominium unit by way of assignment by the condominium project owner in payment of its
indebtedness for contractors fee. xAMA Computer College, Inc. v. Factora , 378 SCRA 121
(2002).
Buyers of condominium units would be justified in suspending payments, when the
developer-seller fails to give them a copy of the Contract to Sell despite repeated demands.
xGold Loop Properties, Inc. v. CA, 350 SCRA 371 (2001); or when they failed to provide for the
amenities mandated under their development plan. Fedman Dev. Corp. v. Agcaoili , 656 SCRA
354 (2011). However, when the Reservation Agreement provides that the buyer shall be entitled
to a Contract to Sell only upon its payment of at least 30% of the total contract price, the non-
happening yet of that condition does not render the seller in default as to warrant the buyer the
right to rescind the sale and demand a refund. G.G. Sportwear Mfg. Corp. v. World Class
Properties, Inc., 614 SCRA 75 (2010).
Nothing in P.D. 957 provides for the nullification of a contract to sell in the event the seller, at
the time the contract was entered into, did not pos sess a certificate of registration or a license to
sell, sale being a consensual contract. Co Chien v. Sta. Lucia Realty, 513 SCRA 570 (2007). 129
The dissatisfaction of the buyer under a Contract of Sale as to the completion date of the
project does not itself consti tute substantial breach as to authorize the buyer to rescind the
contract and ask for refund of the amounts paid to the seller. G.G. Sportwear Mfg. Corp. v.
World Class Properties, Inc. , 614 SCRA 75 (2010).
Under P.D. No. 957, a buyer cause of action against the developer for failure to develop
ripens only when the developer fails to complete the project on the lapse of the completion period
stated on the sale contract or the developers Licenses to Sell. Any premature demand prior to
128
Vda. de Jose v. Barrueco , 67 Phil. 191 (1939); U.S. Commercial v. Halili , 93 Phil. 271 (1953); H.E. Heacock v. Bantal
Manufacturing, 66 Phil. 245 (1938); Manila Gas Corp. v. Calupita, 66 Phil. 747 (1938); Filinvest Credit Corp. v. CA , 178 SCRA 188
(1989).
129
Cantemplate v. CRS Realty Dev. Corp. , 587 SCRA 492 (2009).
- 33 -
the indicated completion date would be premature. G.G. Sportwear Mfg. Corp. v. World Class
Properties, Inc., 614 SCRA 75 (2010).
The lack of Certificate of Registration or the License to Sell of the developer-seller merely
subjects the developer to administrative sanctions, but do not render the contracts to sell entered
into on the project null and void. G.G. Sportwear Mfg. Corp. v. World Class Properties, Inc. , 614
SCRA 75 (2010).
Since the lots are involved in litigation and there is a notice of lis pendens at the back of the
titles involved, the subdivision developer have to be given a reasonable period of time to work on
the adverse claims and deliver clean titles to the buyer, and should the former fail to deliver clean
titles at the end of the period, it ought to reimburse the buyers not only for the purchase price of
the subdivision lots sold to them but also the incremental value arising from the appreciation of
the lots. Cantemprate v. CRS Realty Dev. Corp. , 587 SCRA 492 (2009).
a. “Role” of Maceda Law – Maceda Laws declared policy is to protect buyers of real estate on
installment basis against onerous and oppressive conditions, and seeks to address the acute
housing shortage problem in our country that has prompted thousands of middle and lower class
buyers of houses, lots and condominium units to enter into all sorts of contracts with private
housing developers involving installment schemes. Active Realty & Dev. Corp. Daroya, 382 SCRA
152 (2002).130
Maceda
contract uponLaw recognizes of
non-payment in an
conditional sales
installment by of
theallbuyer,
kinds of real is
which estate sellers
simply right that
an event to cancel the
prevents
the obligation of the vendor to convey title from acquiring binding force. Pagtulunan v. Dela Cruz
Vda. De Manzano, 533 SCRA 242 (2008).131
b. Transactions Covered
The formal requirements of rescission under the Maceda Law apply even to contracts entered
into prior to its effectivity. xSiska Dev. Corp. v. Office of the President , 231 SCRA 674 (1994). 132
B UT S EE xPeoples Industrial and Commercial Corp. v. CA, 281 SCRA 206 (1997).
Maceda Law finds no application to a contract to sell where the suspensive condition has not
been fulfilled, because said Law presuppose the existence of a valid and effective contract to sell a
condominium. [?] xMortel v. KASSCO, Inc., 348 SCRA 391, 398 (2000). 133
Maceda Law makes no distinctio ns between “option” and “sale” which und er P.D. 957 also
includes “an exchange or attempt to sell, an option of sale or purchase, a solicitation of a sale or an
offer to sell directly,” and the all-embracing definition virtually includes all transactions concerning
land and housing acquisition, including reservation agreements. xRealty Exchange Venture Corp.
v. Sendino, 233 SCRA 665 (1994).
Maceda Law has no application to protect the developer or one who succeeds the developer.
xLagandaon v. CA, 290 SCRA 463 (1998).
The sale of large tracts of land (69,028 square meters) do not constitute residential real estate
within the contemplation of the Maceda Law. xGarcia v. CA, 619 SCRA 280 (2010).
c. How to Determine Years of Installments: √ Jestra Dev. and Management Corp . v. P acifico , 513
SCRA 413 (2007).
d. How Cancellation of Contract Can Be Effected – The cancellation of the contract under the
Maceda Law must follow the following steps:
First, the seller should extend the buyer a grace period of at least sixty (60) days from the due
•
130
OIympia Housing Inc. v. Panasiatic Travel Corp. , 395 SCRA 298 (2003); Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA
413 (2007).
131
Leaño v. CA, 369 SCRA 36 (2001); Cordero v. F.S. Management & Dev. Corp., 506 SCRA 451 (2006).
132
Eugenio v. Executive Secretary Franklin M. Drilon , 252 SCRA 106 (1996); PNB v. Office of the President , 252 SCRA 620 (1996).
133
Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006).
- 34 -
thereof; a mere notice or letter, short of a notarial act, would not suffice. √McLaug hlin v. CA ,
144 SCRA 693 (1986) .134
• Third,for contracts covering more than two years of payments, there must be return to the
buyer of the cash surrender value. xVilldara, Jr. v. Zabala , 545 SCRA 325 (2008).135
The additional formality of a demand on [the sellers] part for rescission by notarial act would
appear, in the premises, to be merely circuitous and consequently superfluous” since the seller
therein filed an action for annulment of contract, which is a kindred concept of rescission by
notarial act. xLayug v. IAC , 167 SCRA 627 (1988).
A decision rendered in an ejectment case operated as the required notice of cancellation under
the Maceda Law; but as the buyer was not given the cash surrender value of the payments she
made, there was still no actual cancellation of the contract. xLeaño v. CA, 369 SCRA 36 (2001).
A formal letter demand upon buyer to vacate the premises is not the same as the notice of
cancellation or demand for rescission by a notarial act required by R.A. No. 6552. Evidently, the
case of unlawful detainer filed by petitioner does not exempt him from complying with the said
requirement. xPagtulunan v. Dela Cruz Vda. De Manzano , 533 SCRA 242 (2008).
Where the buyers under a contract to sell offers to pay the last installment a year and a half
after the stipulated date, that was beyond the sixty-day grace period under Section 4 of the
Maceda Law. The buyers cannot use the second sentence of Section 4 of the Maceda Law
against the sellers alleged failure to give an effective notice of cancellation or demand for
rescission because the sellers merely sent the notice to the address supplied by the buyers in the
Contract to Sell. √Ga rcia v. CA , 619 SCRA 280 (2010).
B. ON PART OF BUYER
134
Luzon Brokerage v. Maritime Bldg., 86 SCRA 305 (1978); Luzon Brokerage v. Maritime Bldg. , 43 SCRA 93 (1972); Fabrigas v. San
Francisco del Monte , 475 SCRA 247 (2005).
135
Active Realty & Dev. Corp. v. Daroya , 382 SCRA 152 (2002); Olympia Housing v. Panasiatic Travel Corp., 395 SCRA 298 (2003);
Jestra Dev. and Management Corp. v. Pacifico , 513 SCRA 413 (2007).
136
Caridad Estates, Inc. v. Santero , 71 Phil. 114 (1940); Albea v. Inquimboy, 86 Phil. 477 (1950); Manuel v. Rodriguez, 109 Phil. 1
(1960); Joseph & Sons Enterprises, Inc. v. CA , 143 SCRA 663 (1986) Gimenez v. CA, 195 SCRA 205 (1991); Jacinto v. Kaparaz, 209
SCRA 246 (1992); Odyssey Park, Inc. v. CA, 280 SCRA 253 (1997); Rillo v. CA, 274 SCRA 461 (1997); Platinum Plans Phil., Inc. v.
Cucueco, 488 SCRA 156 (2006); Tan v. Benolirao, 604 SCRA 36 (2009); Garcia v. CA, 619 SCRA 280 (2010).
137
Escueta v. Pando , 76 Phil. 256 (1946).
- 35 -
138
Nonetheless, the law does not prohibit the parties from entering into agreement that violation of
the terms of the contract would cause cancellation thereof, even without court intervention. x Froilan
v. Pan Oriental Shipping Co., 12 SCRA 276 (1964). 144
salesTois be sure,
what a contract
is now of termed
popularly sale may
as aeither be absolute
“Contract to Sell,” or conditional.
where ownership One
or form
title isofretained
conditional
until
the fulfillment of a positive suspensive condition normally the payment of the purchase price in the
manner agreed upon. For a contract, like a contract to sell, involves a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something or to render some
service. xGomez v. CA, 340 SCRA 720, 728 (2000). 151
A contract to sell is akin to a conditional sale, in which the efficacy or obligatory force of the
vendors obligation to transfer title is subordinated to the happening of a future and uncertain event,
so that if the suspensive condition does not take place, the parties would stand as if the conditional
obligation never existed. Orden v. Aurea, 562 SCRA 660 (2008).152
144
Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 95 (1972); Luzon Brokerage v. Maritime Bldg., 86 SCRA 305
(1978).
145
Velarde v. CA, 361 SCRA 56 (2001); Orden v. Aurea, 562 SCRA 660 (2008).
146
The Manila Racing Club v. The Manila Jockey Club, 69 Phil. 55 (1939).
147
Sta. Lucia Realty & Dev., Inc. V. Uyecio, 562 SCRA 226 (2008); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).
148
Lim v. CA , 182 SCRA 564 (1990); Buot v. CA , 357 SCRA 846 (2001); Abesamis v. CA , 361 SCRA 328 (2001); Tuazon v. Garilao,
362 SCRA
(2002); 654v.(2001);
Almira Leaño
CA, 399 SCRA 351369
v. CA, SCRAChua
(2003); 36 (2001);
v. CA,Universal
401 SCRA Robina Sugar Flancia
54 (2002); Milling Corp.
v. CAv. HeirsSCRA
, 457 of Angel
224Teves, 389
(2005); SCRASr.316
Vidad, v.
Tayamen, 531 SCRA 147 (2007); Hulst v. PR Builders, Inc. , 532 SCRA 74 (2007); Heirs of Antonio F. Bernabe v. CA , 559 SCRA 53
(2008); Orden v. Aurea, 562 SCRA 660 (2008); Tan v. Benolirao, 604 SCRA36 (2009); Bank of P.I. v. SMP, Inc., 609 SCRA 134 (2009);
De Leon v. Ong, 611 SCRA 381 (2010); Montecalvo v. Heirs of Eugenia T. Primero , 624 SCRA 575 (2010).
149
Montecalvo v. Heirs of Eugenia T. Primero , 624 SCRA 575 (2010).
150
Platinum Plans Phil., Inc. v. Cucueco , 488 SCRA 156 (2006); Valenzuela v. Kalayaan Dev. and Industrial Corp., 590 SCRA 380
(2009);Tan v. Benolirao, 604 SCRA 36 (2009);
151
Demafelis v. CA, 538 SCRA 305 (2007).
152
De Leon v. De Leon, 593 SCRA 768 (2009).
- 37 -
153
Valenzuela v. Kalayaan Devt and Industrial Corp., 590 SCRA 380 (2009); Traders Royal Bank v. Cuison Lumber Co., Inc. , 588
SCRA 690 (2009).
154
Heirs of Spouses Sandejas v. Lina, 351 SCRA 183 (2001); Zamora Realty and Dev. Corp v. Office of the President , 506 SCRA 591
(2006).
155
Traders Royal Bank v. Cuison Lumber Co., Inc., 588 SCRA 690 (2009); Nabus v. Pacson , 605 SCRA 334 (2009).
156
157Topacio CA, 211
Roque v.v.Lapuz, 96 SCRA
SCRA 219741 (1992);
(1980); Laforteza
Angeles v.v.Calanz, 135333
Machuca, SCRA
SCRA 323643 (2000);
(1985); Almira
Alfonso v. CA
v. CA , 399
, 186 SCRA351
SCRA (2003).
400 (1990)
158
San Andres v. Rodriguez, 332 SCRA 769 (2000); Vda. De Mistica v. Naguiat, 418 SCRA 73 (2003); Blas v. Angeles-Hutalla, 439
SCRA 273 (2004); Villadar, Jr. V. Zabala, 545 SCRA 325 (2008); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Ver Reyes v.
Salvador, Sr., 564 SCRA 456 (2008).
159
Bowe v. CA, 220 SCRA 158 (1993); Rayos v. CA, 434 SCRA 365 (2004); Solidstate Multi-Products Corp. v. Catienza-Villaverde , 559
SCRA 197 (2008); Tan v. Benolirao, 604 SCRA 36 (2009); Nabus v. Pacson , 605 SCRA 334 (2009).
160
Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Bank of P.I. v. SMP, Inc., 609 SCRA 134 (2009).
161
Siska Dev. Corp. v. Office of the President , 231 SCRA 674 (1994); Sta. Lucia Realty & Dev., Inc. v. Uyecio, 562 SCRA 226 (2008).
162
Manuel v. Rodriguez, 109 Phil. 1 (1960); Laforteza v. Machuca, 333 SCRA 643 (2000); Villamaria, Jr. v. CA, 487 SCRA 571 (2006).
- 38 -
163
Jison v. CA , 164 SCRA 339 (1988); Lim v. CA, 182 SCRA 564 (1990); Cheng v. Genato, 300 SCRA 722 (1998).
164
Torralba v. De los Angeles, 96 SCRA 69 (1980).
165
Romero v. CA, 250 SCRA 223 (1995); Adalin v. CA, 280 SCRA 536 (1997); Republic v. Florendo , 549 SCRA 527 (2008).
166
Biñan Steel Corp. v. CA , 391 SCRA 90 (2002).
- 39 -
2. Conditions versus Warranties. √Power Commercial a nd Industrial C orp. v. CA , 274 SCRA 597
(1997).
law,Athe
hidden defecttoisrecover
requisites one which is unknown
on account or coulddefects
of hidden not have
arebeen known (a)
as follows: to the
Thebuyer.
defectUnder
must the
be
hidden; (b) The defect must exist at the time the sale was made; (c) The defect must ordinarily have
been excluded from the contract; (d) The defect, must be important (render the thing unfit or
167
Oro Land Realty Dev. Corp. v. Claunan, 516 SCRA 681 (2007)
168
Canizares Tiana v. Torrejos, 21 Phil. 127 (1911); J.M. Tuazon v. CA, 94 SCRA 413 (1979).
- 40 -
considerably decreases fitness); (e) The action must be instituted within the statute of limitations.
√Nutrimix Fe eds Corp. v. CA , 441 SCRA 357 (2004) .169
Sellers agent can by agreement be liable for the warranty against hidden defects. xSchmid and
Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988).
g. Additional Warranties for Consumer Products (Arts. 68, Consumer Act, R.A. 7394 ).
5. Effects and Prescription of Warranties
A breach in the warranties of the seller entitles the buyer to a proportionate reduction of the
purchase price. PNB v. Mega Prime Realty and Holding Corp. , 567 SCRA 633 (2008).
The prescriptive period for instituting actions based on a breach of express warranty is that
specified in the contract, and in the absence of such period, the general rule on rescission of contract,
which is four years, while for actions based on breach of implied warranty, the prescriptive period is six
months from the date of the delivery of the thing sold. Ang v. CA, 567 SCRA 53 (2008).
6. Effects of Waivers
The phrase “as is, where is” basis pertains solely to the physical condition of the thing sold, not to its
legal situation. In the case at bar, the US tax liabilities constitute a potential lien which applies to the
subjects matters leg al situation, not to its physical aspect. Thus, the buyer has no oblig ation to
shoulder the same. xNDC v. Madrigal Wan Hui Lines Corp., 412 SCRA 375 (2003).
169
Investments & Devt, Inc. v. CA , 162 SCRA 636 [1988]).
170
Claravall v. CA, 190 SCRA 439 (1990); Torres v. CA , 216 SCRA 287 (1992); Roberts v. Papio , 515 SCRA 346 (2007).
171
Ramos v. Icasiano, 51 Phil (1927).
- 41 -
In sales denominated as pacto de retro , the price agreed upon should not generally be considered
as the just value of the thing sold, absent other corroborative evidence—there is no requirement in
sales that the price be equal to the exact value of the thing subject matter of the sale. xDorado Vda.
De Delfin v. Dellota, 542 SCRA 397 (2008).
Sales with rights of repurchase, as defined by the Civil Code, are not favored. We will not construe
instruments to be sales with a right to repurchase, with the stringent and onerous effects which follow,
unless the terms of the document and the surrounding circumstances require it. Whenever, under the
terms of the writing, any other construction can fairly and reasonably be made, such construction will
be adopted and the contract will be construed as a mere loan unless the court can see that, if enforced
according to its terms, it is not an unconscionable one. Bautista v. Unangst, 557 SCRA 256 (2008).
[citing Ramos v. CA 180 SCRA 635 (1989) , which in turn cites Padilla v. Linsangan , 19 Phil. 65 (1911)
and Aquino v. Deala , 63 Phil. 582 (1936).
2. Redemption Period
The period to repurchase is not suspended merely because there is a divergence of opinion
between the parties as to the precise meaning of the phrase providing for the condition upon which the
right to repurchase is triggered. The existence of seller a retros right to repurchase the proper is not
dependent upon the prior final interpretation by the court of the said phrase. √Misterio v. Cebu State
College of Scie nce and Technolo gy , 461 SCRA 122 (2005) .
172
Reyes v. Hamada, 14 SCRA 215 (1965); Solid Homes, Inc. v. CA , 275 SCRA 267 (1997); Misterio v. Cebu State College of Science
and Technology, 461 SCRA 122 (2005); Cadungog v. Yap, 469 SCRA 561 (2005); Ramos v. Dizon, 498 SCRA 17 (2006); Lumayag v.
Heirs of Jacinto Nemeño , 526 SCRA 51 (2007).
- 42 -
vendor a retro may be duly heard. If the vendee succeeds in proving that the transaction was indeed a
pacto de retro, the vendor is still given a period of thirty days from the finality of the judgment within
which to repurchase the property. xSolid Homes v. CA, 275 SCRA 267 (1997).
Once the vendor fails to redeem the property within the stipulated period, irrevocable title shall be
vested in the vendee by operation of law. xVda. de Rigonan v. Derecho , 463 SCRA 627 (2005).
Under a sale a retro, the failure of the buyer to consolidate his title under Art. 1607 does not impair
such title and ownership because the method prescribed thereunder is merely for the purpose of
registering and consolidating titles to the property. In fact, the failure on the part of a seller a retro to
exercise the redemption right within the period agreed upon or provided for by law, vests upon the
buyer a retro absolute title and ownership over the property sold by operation of law. Consequently,
after the effect of consolidation, the mortgage or re-sale by the seller a retro of the same property
would not transfer title and ownership to the mortgagee or buyer, as the case may be, under the Latin
maxim NEMO DAT QUOD NON HABET . xCadungog v. Yap, 469 SCRA 561 (2005).
be doubted,
invariably considering
finding many
themselves in cases of unlettered
no position persons
whatsoever or even
to bargain those
fairly with with
theiraverage
creditors.intelligence
xSpouses
Miseña v. Rongavilla, 303 SCRA 749 (1999). 173
Besides, it is a fact that in time of grave financial distress which render persons hard-pressed to
meet even their basic needs or answer an emergency, such persons would have no choice but to sign
a deed of absolute sale of property or a sale thereof with pacto de retro if only to obtain a much-
needed loan from unscrupulous money lenders. xMatanguihan v. CA, 275 SCRA 380 (1997).174
An equitable mortgage is defined as one which although lacking in some formality or form or
words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to
charge real property as security for a debt, and contains nothing impossible or contrary to law.
xRaymundo v. Bandong, 526 SCRA 514 (2007).175
The provisions of the Civil Code governing equitable mortgage disguised as sale contracts are
primarily designed to curtail the evils brought about by contracts of sale with right to repurchase,
particularly the circumvention of the usury law and pactum commissorium. Heirs of Jose Reyes, Jr. v.
Reyes, 626 SCRA 758 (2010).
The essential requisites of an equitable mortgage are: (a) The parties entered into a contract
denominated as a contract
mortgage. xMolina of sale;
v. CA, 398 SCRA and
97 (b) Their176intention was to secure an existing debt by way of a
(2003).
The decisive factor in evaluating whether an agreement is an equitable mortgage is the intention of
the parties, as shown not necessarily by the terminology used in the contract but by all the surrounding
circumstances, such as the relative situation of the parties at that time, the attitude, acts, conduct,
declarations of the parties, the negotiations between them leading to the deed, and generally, all
pertinent facts having a tendency to fix and determine the real nature of their design and
understanding. Necessitous men are not always free, in that to answer a pressing emergency, they will
submit to any term that the crafty may impose on them. Banga v. Bello, 471 SCRA 653 (2005).177
That is why parol evidence is competent and admissible in support of the allegations that an
instrument in writing, purporting on its face to transfer the absolute title to property, or to transfer the
173
Lao v. CA, 275 SCRA 237 (1997).
174
Salonga v. Concepcion, 470 SCRA 291 (2005).
175
Ceballos ,v.490
v. Hernandez Intestate
SCRAEstate of the Lumayag
624 (2006); Late Emigdio Mercado
v. Heirs , 430Nemeño
of Jacinto SCRA 323
, 526(2004);
SCRAAlvaro v. Ternida
51 (2007); , 479
Olivares SCRA 288, 554
v. Sarmiento (2006);
SCRACirelos
384
(2008); Tio v. Abayata, 556 SCRA 175 (2008); Deheza-Inamarga v. Alano, 574 SCRA 651 (2008); Rockville Excel International Exim
Corp. v. Culla, 602 SCRA 124 (2009); Kings Properties Corp. v. Galido , 606 SCRA 137 (2009).
176
Matanguihan v. CA, 275 SCRA 380 (1997); Martinez v. CA , 358 SCRA 38 (2001); Hilado v. Heirs of Rafael Medlla, 37 SCRA 257
(2002); Ceballos v. Intestate Estate of the Late Emigdio Mercado , 430 SCRA 323 (2004); San Pedro v. Lee , 430 SCRA 338 (2005); Go
v. Bacaron, 472 SCRA 229 (2005), citing VILLANUEVA, CESAR L. PHILIPPINE LAW ON SALES, (1998 ed.), p. 271; Romulo v. Layug, Jr., 501
SCRA262 (2006); Roberts v. Papio , 515 SCRA 346 (2007); Raymundo v. Bandong, 526 SCRA 514 (2007); Dorado Vda. De Delfin v.
Dellota, 542 SCRA 397 (2008); Muñoz, Jr. V. Ramirez, 629 SCRA 38 (2010).
177
Austria v. Gonzales, Jr., 420 SCRA 414 (2004); Raymundo v. Bandong, 526 SCRA 514 (2007).
- 43 -
title with a right to repurchase under specified conditions reserved to the seller, was in truth and in fact
given merely as security for the repayment of a loan. xMariano v. CA, 220 SCRA 716 (1993). 178
178
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Cuyugan v. Santos, 34 Phil. 100 (1916); Matanguihan v. CA, 275 SCRA 380 (1997);
Hilado v. Heirs of Rafael Medlla, 37 SCRA 257 (2002); Madrigal v. CA, 456 SCRA 659 (2005); Legaspi v. Ong, 459 SCRA 122 (2005);
Banga v. Bello, 471 SCRA 653 (2005); Diño v. Jardines, 481 SCRA 226 (2006); Ayson, Jr. V. Paragas, 557 SCRA 50 (2008).
179
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Balatero v. IAC, 154 SCRA 530 (1987); Mariano v. CA, 220 SCRA 716 (1993);
Lobres v. CA, 351 SCRA 716 (2001).
180
Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256 (2008).
181
Claravall v. CA, 190 SCRA 439, 448 (1990); Uy v. CA, 230 SCRA 664 (1994); Lobres v. CA, 351 SCRA 716 (2001); Alvaro v.
Ternida, 479 SCRA 288 (2006); Diño v. Jardines, 481 SCRA 226 (2006); Raymundo v. Bandong, 526 SCRA 514 (2007); Aleligay v.
Laserna, 537 SCRA 699 (2007); Dorado Vda. De Delfin v. Dell ota, 542 SCRA 397 (2008); Bautista v. Unangst, 557 SCRA 256 (2008);
Rockville
182
ZamoraExcell
v.CAInternational
, 260 SCRAExim Corp. V. Culla , 602 SCRA 124 (2009); Heirs of Jose Reyes, Jr. v. Reyes , 626 SCRA 758 (2010).
10 (1996).
183
Romulo v. Layug, Jr., 501 SCRA262 (2006).
184
Romulo v. Layug, Jr., 501 SCRA262 (2006); Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256
(2008); Rockville Excell International Exim Corp. v. Culla , 602 SCRA 124 (2009).
185
Cruz v. CA , 412 SCRA 614 (2003).
186
Kings Properties Corp. v. Galido , 606 SCRA 137 (2009).
187
Lumayag v. Heirs of Jacinto Nemeño , 526 SCRA 51 (2007).
188
Austria v. Gonzales, Jr., 420 SCRA 414 (2004).
189
Oronce v. CA , 298 SCRA 133 (1998).
- 44 -
the parties, give rise to a presumption of equitable mortgage. xCeballos v. Intestate Estate of the Late
Emigdio Mercado, 430 SCRA 323 (2004).
The fact that the price in a pacto de retro sale is not the true value of the property does not justify
the conclusion that the contract is one of equitable mortgage; in fact a pacto de retro sale, the practice
is to fix a relatively reduced price to afford the seller a retro every facility to redeem the property.
xIgnacio v. CA, 246 SCRA 242 (1995). 190
Article 1602 being remedial in nature, may be applied retroactively in cases prior to the effectivity
of the Civil Code. x Olea v. CA, 247 SCRA 274 (1995).
190
De Ocampo v. Lim, 38 Phil. 579 (1918); Feliciano v. Limjuco, 41 Phil.147 (1920); Belonio v. Movella , 105 Phil. 756 (1959).
191
Guerrero v. Yñigo, 96 Phil. 37 (1954); Montevirgin v. CA , 112 SCRA 641 (1982); Vda. de Zulueta v. Octaviano , 121 SCRA 314
(1983); Ong v. Roban Lending Corp., 557 SCRA 516 (2008); Heirs of Jose Reyes, Jr. V. Reyes, 626 SCRA 758 (2010).
192
Legaspi v. Ong, 459 SCRA 122 (2005).
193
Tapas v. CA, 69 SCRA 393 (1976).
194
Vda. de Macoy v. CA,206 SCRA 244 (1992).
- 45 -
Redemption
particular propertyright pertain
of the estate.to xPlan
disposition
v. IACof right
, 135 to inherit,
SCRA and not when there is a sale of a
270 (1985).
When the heirs have partitioned the estate among themselves and each have occupied and
treated definite portions thereof as their own, co-ownership has ceased even though the property is
still under one title, and the sale by one of the heirs of his definite portion cannot trigger the right of
redemption in favor of the other heirs. xVda. De Ape v. CA, 456 SCRA 193 (2005).
The heirs who actually participated in the execution of the extrajudicial settlement, which included
the sale to a third person of their pro indiviso shares in the property, are bound by the same; while
the co-heirs who did not participate are given the right to redeem their shares pursuant to Article
1088. xCua v. Vargas , 506 SCRA 374 (2006).
c. Distinguishing Betweenthe
Article 1620 includes Right of Redemption
doctrine of Co-heirs
that a redemption by aand Co-owners
co-owner of the– property owned in
common, even when he uses his own fund, within the period prescribed by law inures to the benefit
of all the other co-owners. xAnnie Tan v. CA, 172 SCRA 660 (1989). 196
e. Sale of Cre dit in Litiga tion (Art. 1634) – 30 da ys from notice of demand to p ay .
195
Basa v. Aguilar, 117 SCRA 128 (1982).
196
De Guzman v. CA, 148 SCRA 75 (1987); Adille v. CA, 157 SCRA 455 (1988).
- 46 -
ownerThehas
notice required
signed underofArticle
the Deed 1623ialis Partition
Extrajudic deemed an to dhave been complied
Exchange with
of Shares whiwhen the other the
ch embodies co-
disposition of part of the property owned in common. xFernandez v. Tarun, 391 SCRA 653 (2002).
The existence of a clause in the deed of sale to the effect that the vendor has complied with the
provisions of Article 1623, cannot be taken to “being the written affirmation under oath, as well as the
evidence, that the required written notice to petitioner under Article 1623 has been meet, for the person
entitled to the right is not a party to the deed of sale. xPrimary Structures Corp. v. Valencia, 409 SCRA
371 (2003).
√Fra ncisco v. Boiser , 332 SCRA 305 (2000), summarized the case-law on Art. 1623, and with
definitiveness declared:
• For the 30-day redemption period to begin to run, notice must be given by the seller; and that notice given
by the buyer or even by the Register of Deeds is not sufficient. This expressly affirms the srcinal ruling in
Butte v. Manuel Uy and Sons, Inc., 4 SCRA 526 (1962), as affirmed in x Salatandol v. Retes, 162 SCRA 568
(1988). This expressly overruled the ruling in x Etcuban v. CA, 148 SCRA 507 (1987), which allowed the
giving of notice by the buyer to be effective under Article 1623;
• When notice is given by the proper party (i.e., the seller), no particular form of written notice is prescribed
under Article
sufficient, 1623,previously
as held so that the
in xfurnishing
Distrito v.ofCA
the copies
, 197 SCRAof the
606deeds
(1991);of Conejero
sale to the
v. co-owner would775
CA, 16 SCRA be
(1966); xBadillo v. Ferrer, 152 SCRA 407 (1987), but only on the form of giving notice but not on the ruling
of who is the proper party to give notice;
• Affirmed ruling in xAlonzo v. IAC, 150 SCRA 259 (1987), that the filing of the suit for ejectment or collection
of rentals against a co-owner actually dispenses with the need for a written notice, and must be construed
as commencing the running of the period to exercise the right of redemption, since the filing of the suit
amounted to actual knowledge of the sale from which the 30-day period of redemption commences to run.
a. Rare Exceptions:
When the sale to the buyer was effected thro ugh the co-owner who acted as the broke r, and
never indicated that he would exercise his right to redeem. xDistrito v. CA , 197 SCRA 606 (1991).
When the buyers took possession of the property immediately after the execution of the deed of
sale in their favor and lived in the midst of the other co-owners who never questioned the same.
xPilapil v. CA, 250 SCRA 560 (1995).
197
Citing Hernaez v. Hernaez, 32 Phil. 214 (1915); Castillo v. Samonte , 106 Phil. 1024 (1960).
198
Garcia v. Calaliman, 17 SCRA 201 (1989); Mariano v. CA, 222 SCRA 736 (1993).
- 47 -
Under the free patent or homestead provisions of the Public Land Act a period of five (5) years
from the date of conv eyance is provided, to be recko ned from the date of the sale and not from the
date of registration in the office of the Register of Deeds. x Lee Chuy Realty Corp. v. CA , 250 SCRA
596 (1995).199
c. Redemption by Judgment Debtor (Secs. 27-28, Rule 39, Rules of Civil Procedure)
Written notice must be given to the judgment debtor before the sale of the property on execution,
to give him the opportunity to prevent the sale by paying the judgment debt sought to be enforced and
the costs which have been incurred. xTorres v. Cabling, 275 SCRA 329 (1997).
the Where
highestthere is apayment
bidder, third-party
in claim,
cash ofsheriff should
his bid demand
instead from the
of merely judgment
crediting the creditor
amount who becomes
to the partial
satisfaction of the judgment debt. xTorres v. Cabling, 275 SCRA 329 (1997).
Under Sec. 28, Rule 39 of the 1997 Rules of Civil Procedure, the period of redemption shall be “at
any time within one (1) year from the date of registration of the certificate of sale,” so that the period is
now to be understood as composed of 365 days, unlike the 360 days under the old provisions of the
Rules of Court. xYsmael v. CA, 318 SCRA 215 (1999).
d. Redemption in Extrajudicial Foreclosure (Sec. 6, Act 3135)
The redemption of extra-judicially foreclosed properties is exercised within one (1) year from the
date of the auction sale as provided for in Act 3135. x Lee Chuy Realty Corp. v. CA, 250 SCRA 596
(1995).
The execution of a dacion en pago by sellers effectively waives the redemption period normally
given a mortgagor. xFirst Global Realty and Dev. Corp. v. San Agustin, 377 SCRA 341 (2002).
199
Mata v. CA, 318 SCRA 416 (1999).
200
Vaca v. CA, 234 SCRA 146 (1994).
201
Heirs of Felicidad Canque v. CA , 275 SCRA 741 (1997).
202
Springsun Management Systems Corp. v. Camerino , 449 SCRA 65 (2005).
- 48 -
the latter case, the assignment has an effect similar to that of a sale. xLicaros v. Gatmaitan , 362 SCRA
548 (2001).203
In its most general and comprehensive sense, an assignment is “a transfer or making over to
another of the whole of any property, real or personal, in possession or in action, or of any estate or
right therein. It includes transfers of all kinds of property, and is peculia rly applicable to intangible
personal property and, accordingly, it is ordinarily employed to describe the transfer of non-negotiable
choses in action and of rights in or connected with property as distinguished from the particular item or
property.” xPNB v. CA, 272 SCRA 291 (1997).
2. Perfection by Mere Consent (Art. 1624)
3. But Must Be in Public Instrument to Affect Third Parties (Art. 1625)
4. Effects of Assignment
a. Assignment of Credit
An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en pago , exchange or donation, and without the
consent of the debtor, transfers his credit and accessory rights to another, known as the assignee,
who acquires the power to enforce it to the same ext ent as the assignor could enforce it against the
debtor. xAquintey v. Tibong , 511 SCRA 414 (2006). 204
As a consequence, the third party steps into the shoes of the srcinal creditor as subrogee of the
latter. Although constituting a novation, such assignment does not extinguish the obligation under the
credit assigned, even when the assignment is effected without his consent. x South City Homes, Inc. V.
BA Finance Corp., 371 SCRA 603 (2001).
d. Tradition in Assignment
Notarization converts a private document Assignment of Credit into a public document, thus
complying with the mandate of Article 1625 of the Civil Code and making it enfo rceable even as
against third persons. xLedonio v. Capitol Dev. Corp., 526 SCRA 379 (2007).
203
Nyco Sales Corp. v. BA Finance Corp., 200 SCRA 637 (1991); Rodriguez v. CA, 207 SCRA 553 (1992); Project Builders, Inc. v. CA ,
358 SCRA 626 (2001).
204
Lo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182 (2003).
205
Sison & Sison v. Yap Tico, 37 Phil. 587 (1918); C & C Commercial Corp. v. PNB , 175 SCRA 1 (1989); Project Builders, Inc. v. CA ,
358 SCRA 626 (2001); .Aquintey v. Tibong, 511 SCRA 414 (2006); Ledonio v. Capitol Devt Corp., 526 SCRA 379 (2007).
- 49 -
a. The merchant
owing to eachmust givenature
and the the buyer
of thea debt.
certified schedule of his debts: names of creditors, amounts
b. Purchase price paid must be applied proportionately to these debts.
c. Ten (10) days before the sale, the seller must take an inventory of his stock and advise all his
creditors of the same.
EXCEPTION: When the seller obtai ns a written waiver from all creditors.
4. Effects of Non-Compliance
a. If purchase money or mortgage proceeds are not applied pro-rata to payment of the bona fide
claims of the creditors, the sale is deemed fraudulent and void. (Sec. 4)
b. Non-giving of the list of creditors or intentional omission of the names of some of the creditors, and
placing of wrong data required by law, would subject the seller or mortgagor to penal sanctions.
(Sec. 4)
c. Bulk transfer without consideration or for nominal consideration punishable. (Sec. 7)
d. Failure to comply
proportionately withcreditors,
to the other provisions of theof law
the preparation the non-application
the inventory, of the consideration
and the notification to creditors,
are also made punishable. (Sec. 11)
A bulk sale done without complying with the terms of the Law, makes the transaction fraudulent
and void, but does not change the basic relationship between the seller, assignor/encumbrancer and
206
Ledonio v. Capitol Dev. Corp. , 526 SCRA 379 (2007).
- 50 -
his creditor.The portion of a judgment providing for subsidiary liability is invalid, since the proper
remedy of the creditor is to collect on the credit against the defendant, and if they cannot pay, to attach
on the property fraudulently mortgage since the same still pertain to the debtors-defendants. xPeople
v. Mapoy, 73 Phil. 678 (1942).
Engaging in the sale of merchandise as an incident to the primary purpose of a corporation [ e.g.,
operation of a pharmacy by a hospital; sale of cellphones by a telecommunication company] does not
constitute “retail trad e” within the purvi ew of RTNL, as this is taken fro m the provision th ereof
excluding form the term “retail business” the operation of a restaurant by a hotel-owner or -keeper
since the same does not constitute the act of habitually selling direct to the general public
merchandise, commodities or goods for consumption. √SEC Opinion No. 11, series of 2002, 13
November 2002.
d. Meaning of “Consumption” (DOJ Opinion No. 325, series of 1945; IRR of Law ).
The Law limits its app lication to the sale of items sold for domest ic or household, or properly
called consumer goods; whereas, when the same items are sold to commercial users, they would
constitute non-consumer goods and not covered by the Law. √Balmaceda v. Union Carbide
Philippines, Inc. 124 SCRA 893 (1983) .207
207
Marsman & Co., Inc. v. First Coconut Central Co., Inc. , 162 SCRA 206 (1988); B.F. Goodrich Philippines, Inc. v. Reyes, Sr. , 121
SCRA 363 (1983).
- 51 -
b. Grandfather Rule on 100% Filipino Ownership of Corporate Entity: SEC Opinions, dated 20
March 1972 and 22 April 1983; DTI Opinion to Tanada, Teehankee & Carreon Law Office, dated
3 August 1959.
c. Public Offerings of Shares of Stock
6. Penalty Provision
7. Applicability of the Anti-Dummy Act (Comm. Act. 108, as amended by P.D. 715)
a. Law penalizes Filipinos who permit aliens to use them as nominees/dummies to enjoy privileges
reserved for Filipinos. Criminal sanctions are imposed on the president, manager, board member
or persons in charge of the violating entity and causing the latter to forfeit its privileges, rights and
franchises.
b. Section 2-A of the Law prohibits aliens from intervening in the management, operation,
administration or control of nationalized business, whether as officers, employees or laborers, with
or without remuneration. Aliens may not take part in technical aspects, provided no Filipino can
do such technical work, and with express authority from the Philippine President.
c. Later, Pres. Decree 715 amended the Law by adding of a proviso expressly allowing the election
of aliens as membe rs of the boards of directors of corporations or associations engaged in
partially nationalized activities in proportion to their allowable participation or share in the capital of
such entities.
The amendment was meant to settle the uncertainty created in the obiter opinion in Luzon
Stevedoring Corp. v. Anti-Dummy Board,46 SCRA 474 (1972), which rejected the argument that
the Anti-Dummy Law covered only employment in wholly nationalized businesses and not in those
that are only partly nationalized.
The Filipino common-law wife of a Chinese national is not barred from engaging in the retail
business provided she uses capital exclusively derived from her paraphernal properties; allowing
her common-law Chinese husband to take part in management of the retail business would be a
violation of the law. xTalan v. People , 169 SCRA 586 (1989).
—oOo—