CIVIL LAW

REVIEW II -
LAW ON
SALES
Atty. Crisostomo Uribe - Course Outline (Dec.
2009)
Donnell R. Agaton | Recoletos de Manila - College
of Law

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Art. 1458 (CC) By the contract of sale, one of
the contracting parties obligates himself to Insurance contracts.
transfer ownership of and to deliver a
determinate thing, and the other to pay 6. Nominate contract - has a particular
therefor a price in money or its equivalent. name to distinguish it from others.

As to nature:
When one of the parties delivers a thing and
the other pays a price it constitute a contract 1. movable or immovable - This is important
of sale? because one must determine the object of the
sale.
Not necessarily. Not all delivery of a thing and
the concomitant payment of a price constitute a Statute of Frauds:
contract of sale. It could be a contract of lease.
What is necessary is the intent of the parties to a. movable
transfer ownership over the subject matter of the b. immovable
contract of sale. Maceda Law
Recto Law
Note: Sale is a contract and therefore, the
provision on obligations and contract under the 2. A thing or a right - important as to the mode of
civil code may generally apply. delivery.

What are the characteristics of a contract of 3. Va l i d , Vo i d a b l e , Vo i d , u n e n f o r

sale? ceable
Rescissible etc.
1. Consensual
2. Perfected by meeting of the minds as to the What are the distinctions between absolute
price and the object. sale and conditional sale?

except: in cattle registration decree to

be a perfected contract it requires to be in a
Absolute Sale Conditional Sale
public instrument, registered and a certificate
The seller does not Conditions are
of title be issued.
reserve his title over imposed by the
3. It is a principal contract such that it can stand the thing sold, seller in order that
on its own for its perfection and validity. ownership passes ownership will
upon delivery pass.
4. It is onerous where both parties are obliged to whether the buyer
give something. has actually paid a
single centavo or
5. Commutative because there is equivalence of not.
value to be performed by both parties.
Ownership
except: aleatory contracts or sale of automatically
hope. The obligation of a party will only arise passes from the
upon the happening of a certain event or moment the
conditions. The performance of one of the condition
parties or both is contingent on the happened.
occurrence of a particular event.

e.g. sale of lotto ticket is Contract to sell

contingent
upon the numbers would appear in the draw.
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A receipt was issued by A to B for the sum of 1245 but by novation by changing the object of
75k as partial payment for a car, the balance to the obligation.
be paid at the end of the month. Is this a
contract of sale? As to nature, dation in payment is a special form
of payment, while sales is a contract.
This is a contract of sale. This is not a contract
to sell because in a contract to sell ownership is In dation in payment there must be a pre
reserved by the seller, such that despite delivery existing obligation. Since this is a special form of
to the buyer, the buyer did not acquire payment, there has to be an obligation. There is
ownership over the thing upon delivery. no pre exiting obligation in a contract of sale.

In a contract to sell, upon the happening of the Massachusetts Rule

condition or conditions imposed by the seller,
ownership does not automatically pass to the It is a rule where a contract was entered into for
buyer. Though a contract to sell is a special form a contract for a piece of work. For example, a
of a conditional sale, it is a peculiar kind of sale person who entered a store to buy shoes, but
because despite the happening of all the since there is no size that would fit such person,
conditions, and despite actual delivery to the the store offered to make a pair of shoes
buyer, the buyer does not automatically acquire specially made for him. In a contract of sale, the
ownership. shoes ordinarily sold are for the general market,
while the shoes specially made, is a contract for
Upon the happening of the condition in a piece of work.
contract to sell, the buyer is only given the right
to compel the seller to execute a final deed of A obliged himself to deliver to B a car work
sale. 250k. B on the other hand, obliged himself to
deliver to B a watch plus cash in the amount
Dation in payment of 150k. What is the nature of the transaction
between A and B?
Art. 1245 Dation in payment, whereby property
is alienated to the creditor in satisfaction of a Depending on the intention of the parties, A and
debt in money, shall be governed by the law on B may consider as one of sale or barter. If the
sales. intention of the parties are not clear base on the
agreement, the nature of the contract would
For dation in payment to be governed by the law depend on the value of the watch. If the value of
on sales it is required that one of the pre existing the watch is greater than 150k, it will be barter,
obligation must be in money, if the other but if the value of the watch is equal or less than
consideration is not in money covered by dation 150k, then it would be sale. The value f the car
in payment, it will not be governed by the law on is irrelevant.
sales, such will be governed by the law on
novation. A gave B the exclusive right to sell his denim
jeans, promising B 20% discount on sales.
Practically there is a change in the object of the However, it was stipulated in their agreement
contract. Example: If A owes B 100k and A that B shall pay the price of this jeans 60
would offer a car to V, and if B accepts, such days from delivery. After the jeans was
would be dation in payment. This would be deliver to B and before B could sell the
governed by the law on sales because the pre jeans, the store was burned without the fault
exsiting obligation is in money. of anyone. Thus, can B still be compelled to
pay the price of this jeans?
However, if A is obliged to deliver a horse but
instead delivered a car and B accepts, this
would be dation in payment but not under Art. Under Art. 1466, in construing a contract
containing provisions characteristic of both the
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contract of sale and of the contract of agency to the parties in the sale was forged. If the
sell, the essential clauses of the whole signature of the seller was forged, that would be
instrument shall be considered. a fictitious contract. The alleged seller will not
have participation in the execution of the
If assuming this is a contract of agency the contract.
ownership does not pass to B, the owner-seller
shall bear the loss and noting that B is not Simulated Contract
negligent under the facts. If however it is a
contract of sale, then ownership passes to B, HEre the parties actually have participation.
and since he is the owner, he bears the loss. They (the parties) voluntarily sign the deed of
sale, however they do not intend to be bound by
Since both are characteristic of a contract of the terms of the contract, or they may intend to
sale and agency, the provisions of Art. 1466 be bound but not under a contract of sale but on
however shall be applied. Here, the essential some other contract.
clauses of the whole instrument must be
inquired into. One of the clauses or condition 2 Kinds of simulated contracts
agreed upon by the parties is that “B had to pay
the price within 60 days.” As such, that would 1. Absolutely simulated Contracts - Here, the
make the contract as one of sale and not of parties do not want to be bound by the
agency. This is because 60 days from delivery, contract, the common reason is to defraud
whether or not B has sold those jeans to other creditors. For example, the debtor wold sell
persons, he is already obliged to pay the price. his remaining properties in a simulated
Being a contract of sale therefor and there contract to make it appear that he has no
having a delivery, ownership passes to the property, that may be reached by his
buyer. Hence, the buyer bears the loss. creditors.
Therefore he cannot be compelled to pay the
price of the jeans. 2. Relatively simulated contracts - Here it may
appear to be in a valid deed of sale but they
Essential elements of a contract of sale? actually intend to enter into another contract
such that it is actually a donation or to
1. Consent of the contracting parties circumvent the provisions of the legitime.
2. O b j e c t o r s u b j e c t m a t t e r w h i
c h i s a determinate thing or determinate If consent is given, would it mean that the
subject matter (may either be a thing or right). contract is valid?

Service cannot be a subject matter of a Not necessarily, because when consent is given
contract of sale. by an incapacitated person, such is void or
voidable as the case may be. This is because
3. Cause or consideration there are specific rules followed depending on
the basis of incapacity.
As to the seller: the price in money or
its equivalent. What are the kinds of incapacity

What is the effect of a contract of sale when 1. Absolute incapacity - A party cannot validly
there is no consent given by one or both of give consent to any contract.
the parties?
2. Relative incapacity - The party is prohibited in
If consent is not given by one or both of the entering into specific contracts or specific
parties, the contract is void because one of the persons or things.
essential elements is lacking. Under the law, it is
considered as a fictitious contract. A fictitious
contract would normally be that “the signature of
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a. Sale between spouses - The SC would includes the act of acquiring by assignment and
consistently consider this contract as void, shall apply to lawyers, with respect to the
except: property and rights which may be the

a1. when the spouses in their marriage

settlement, and agreed they constitute
complete separation of property. They
can enter into a contract of sale with
each other.

a2. Even if they did not execute a

marriage settlement, if during their marriage
obtained a judicial declaration of complete
separation of property.

a. sale by persons mentioned under Art. 1491,

namely:

b1. The guardian, the property of the

person or persons who may be under
his guardianship;

b2. Agents, the property w

hoseadministration or sale may
h a v e b e e n entrusted to them, unless the
consent of
the principal has been given;

b3, Executors and administrators, the

property of the estate und
er
administration;

b4. Public officers and employees, the

property of the State or of
anysubdivision thereof, or o f
a n y government-owned or controlled
corporation, or institution, the
administration of which has been
intrusted to them; this provision shall
apply to judges and government
experts who, in any manner whatsoever, take
part in the sale;

b5. Justices, judges, pros

e c u t i n g attorneys, clerks of superior and
inferior courts, and other officers and
employees connected with the
administration of justice, the property
and rights in litigation or levied upon an
execution before the court within whose
jurisdiction or territory they exercise
their respective functions; this prohibition
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object of any litigation in which they may
take part by virtue of their profession.

b6. Any others specially disqualified by

law.

c. Aliens are prohibited from acquiring private

lands by purchase, except:

c1. former natural born citizens

Note: Even if consent is given by one

capacitated but such consent is vitiated consent,
the contract is merely voidable either by fraud,
mistake, intimidation, undue influence and
violence.

If the party giving consent is in the name of

another person, but without the authority of such
person or authority of the law, such contract
shall be unenforceable.

Two kinds of capacity

1. Juridical capacity

It is the fitness to be the subject of legal

relations.

If the party has no juridical capacity, the

contract is definitely void.

All living natural persons have juridical

capacity.

An alleged corporation which has not

been registered with the SEC has no
juridical capacity.

2. Capacity to act

It is the power to do acts with legal

effects.

Without capacity to act, normally the

contract shall be voidable.

Particular restriction with respect to

capacity to act is minority or insanity, deaf
mutes who does not know how to read and
write or persons suffering from
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 civil interdiction. considered void? May the seller be held
liable for damages?
H o w e v e r, i f s u c h m i n o r a c t
u a l l y misrepresented as to his age, he will Things having the potential existence may be
be bound to such contract, under the principle the object of a valid sale. As long as the the 3
of estoppel. essential requisites of a contract of sale is
present, then there is a valid contract of sale.
Note that when sale of items which are
necessary would bind that minor, but The seller may not be liable for damages
not as to the actual contract price but because there are excuses for non performance
only the reasonable price of those of obligation because it was due to fortuitous
items. event, as such it is excused. If however, the
failure to produce palay is through negligence,
Object of Subject matter of a contract of sale he is liable.
(determinate thing or right)
Sale of a lotto ticket is it a valid sale?
1. Thing - Requisites of sales as to things:
If before the draw such is a valid sale of the
a. The thing must be within the commerce of ticket whether the winning numbers appeared or
men, such as sale of navigable rivers, sale of not.
cadavers, sale of internal organs.
If after the draw, would depend on whether it is a
2. Must be licit (not prohibited by law) winning or a losing ticket. Sale of a vain hope is
3. They must be determinate a void sale as in the latter case.

Sale of a car and sale of a mitsubishi In an agreement between A and B where A

lancer glx forest black 2007 model. sold a parcel of land to B, with a right to
repurchase within 1 year. On the third
A thing is considered determinate only month,, B sold the same parcel of land to C.
when it is particularly designated or On the 11th month, A offered to repurchase
physically segregated from all others the land. Who had the better right between A
of the same class. and C? or, will the sale between B and C be a
valid sale noting that the sale is with a right
Sale of a car shall be void, but the sale to repurchase?
of a mitsubishi lancer glx forest black
2007 model is a valid sale because Sale is a consensual contract. As long as there
under Art. 1460 (2) of the new civil code is a meeting of the minds as to the object and as
provides that the requisite that a thing be to the price, then there is a valid and perfected
determinate is satisfied if at the time the sale. This is a valid sale even if the object of the
contract is entered into, the thing is capable of sale is with a right to repurchase. Further, under
being made Art. 1465 Things subject to a resolutory
determinate without the necessity of a condition may be the object of the contract of
new or further agreement between the sale. Note: It is the ownership of a thing which
parties. can be the subject of a resolutory condition and
not the thing.
If A and B agreed that A would sell and
transfer ownership over a palay that would Since, A had the right to repurchase, A had the
be harvested in a specific rice field and in a better right. However, when C is a innocent
specific season. However, upon the arrival of purchaser for value as when there is no
the period nothing has been harvested. What annotation at the back of the title of the parcel of
is the status of the sale? Since nothing has land that it is subject to a right to repurchase,
been harvested, would the contract be and in such case C will have a better right.
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 That would be a valid sale even if the currency
Sale of a right is otherwise known as? is not Philippine currency, as the law requires
only that it be in money or it may even be its
Assignment of a right. equivalent like promissory notes, or letters of
credit.
Is assignment of a right a sale?
If the contract would be entered into after RA
Not necessarily. If the asssignment is with a 529 was repealed by RA 8183 in 1996, then the
valuable consideration, it is a sale, if gratuitous seller can be compelled to pay in a currency
or by dation in payment it is not a sale as it is other than Philippine peso. Otherwise
not for consideration. Examples are sale of a the seller cannot compel the buyer to pa in
credit or sale of shares of stock are considered japanese currency.
considered as rights.
Can there be a valid payment in 10,000 1
Furthermore, the right must no peso coins?
t b e instransmissible. For a right to be the
object of a contract of sale, the same must not Yes, but the seller cannot be compelled to
be instransmissible. Under the law the only three accept because under Philippine law 1 peso
general reasons why a right may not be coins only have legal tender power up to 50
transmissble are 1) by nature, 2)by stipulation, pesos.
3)law.
Sale of shares of stocks valued at 5000 but
Rights which are purely personal cannot be a there was no date as to the value of the
subject of sale by nature are intransmissible, shares
rights where personal qualifications of a person
are considered. With respect to stipulations, The price must be certain as one of the
they may be transmissible by nature but by requirement in order that the sale shall be valid.
stipulation they may be consid The date is very material because the value of
e r e d instransmissible. Sublease of a property the shares changes depending on the date.
may be transmistted to another but by
stipulation, it cannot be done and hence Even if the date has been fixed but the time has
instransmissible. In partnership, the rights in a not been considered such as the opening and
specific property, where the law requires that closing with respect to such exchange would
assignment cannot be done without the consent affect the validity of the sale. Because if the
of all the partners, the assignment of one cannot value upon the opening is 50 pesos but in the
be done without the consent of all the partners. closing it is only 39 pesos, then such is not
certain when the time is not considered.
Is the sale of rights perfected by mere
consent? Who can fix the price of the sale?

Yes. By mere meeting of the minds, and without It is best that the parties shall agree as to the
the execution of a specific instrument, the sale price of the sale, but the parties may agree as to
shall be valid. However, to bind third persons who may fix the price.
such sale must be recorded in the registry of
property. May the sale be perfected if one of the
parties is designated to fix the price?
In a deed of sale, where the price stated in
the deed was 100 lapad (10,000 yen) = 1 It is valid provided the person designated to fix
million yen, as such the sale not being in the price, the price fixed must be accepted by
Philippine peso, a valid sale? Can the seller the other party. As to the price, if one of the
compel the buyer to pay in that currency? parties designated fixed it at 1 million but the
other party did not accept, there is no perfected
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contract of sale, because the latter did not
accept, there being no meeting of the minds. With respect to the auctioneer, he may withdraw
as a rule, before the fall of the hammer. Unless
May a third person be tasked by the original the bidding has been announced to be without
parties to fixed the price? reserved as far as the auctioneer is concerned.

It is void when the third person does not want to Option contracts
fix the price or unable to fix the price.
In the case of Sanchez vs. Rigos, Rigos offered
If such third person was able to fix the price but to sell a parcel of land to Sanchez for a certain
it is too high or it is too low and there is fraud price, and Rigos gave Sanchez 2 years within
employed, the contract is not void, the remedy which to decide whether he will buy it or not. In
of such party is to go to court to fix the price. options the optionee or offeree he is not bound
to purchase, but he has the option. Therefore
May a sale be valid if the price of a car is Sanchez has the option on whether to buy the
valued at 1 peso? land or not. Before the lapse of the 2 year
period, Sanchez told Rigos that he is buying the
Yes, because under the law gross inadequacy land, but Rigos refused to sell it and said that he
as to the price does not invalidate the contract, was not bound by this agreement because there
except as otherwise provided by law. was no option money given by Sanchez for lack
of consideration.
An example of this exception is that of lesion
where such would invalidate the contract of sale But the SC said that since Sanchez the offeree
under Art. 1381 where the guardian sells the accepted the offer and considered to buy within
property of the ward and there is lesion of more the period before the offer was withdrawn a
than 25% of the value of such thing such perfected contract of sale was created even
contract is rescissible. If the buyer should be the without the option money given by the offeree.
guardian Art. 1481 should apply and the contract In this case there was no option contract, and
shall be void. this is merely an option agreement whereby
what was given is merely an offer on the part of
If there is a gross inadequacy and the parties Rigos, therefore before the op
intend another contract, then such would be a t i o n w a s withdrawn regardless whether an
simulated sale, and as such the contract shall option money is given, a perfected contract of
be void, as when the real purpose of the sale is sale was created.
donation.
Assuming there was option money, before the
Is there a need for delivery in order that a offeree decide to buy the offerror withdraw on
contract of sale be perfected? the 6th month, but on the 10th month the offeree
decided that the offeror now want to buy. Can
the offeree compel the seller to sell the offer
As a consensual contract there is no need for having been withdrawn before it was accepted?
delivery in order that a contract of sale will be No. The action for specific performance will not
perfected. The only question is here the time prosper because the offeree who decided to
when the contract is perfected. buy, when the offerror withdraw the same, there
is no more offer to be considered.
Option sale
But the offeree can claim for damages because
An option sale is perfected upon the fall of the the offerror is bound to give the offeree 2 years
hammer or any other customary manner by within which to decide. He is liable not under a
which the same may be considered perfected. perfected contract of sale but on a perfected
Before the fall of the hammer, the buyer who contract to offer.
made his bid may actually withdraw his bid.
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Option money distinguished from earnest As a rule, there is no actual form as provided in
money Art. 1483 that a contract of sale may be in
writing, or by word of mouth, or partly in writing
Option money is not considered part of the and partly by word of mouth , or may be inferred
price; earnest money is considered as part of from the conduct of the parties for as long as the
the price but also considered as proof of a essential requisites are present. But however,
perfected contract of sale. when the law itself provides for a particular form
then the same must be complied with in order
Note however, as decided by the SC, when the for it to be enforceable, such as the statute of
option money will be treated by the parties as frauds and the cattle registration decree.
part of the price, the same shall be binding
between the parties. Without stipulation, it is not Statute of Frauds
considered part of the price. Option money is a
consideration for the option. In sale of a parcel of land which is not in writing,
is a valid contract but unenforceable.
Earnest money
If the object of the sale is a movable, the value
Earnest money may be called by any other of the price agreed upon must be considered
name but if it is considered by the parties as part and not the actual value of the price must be
of the price, such would be considered as considered. If the price is at least 500 pesos and
earnest money. the same is not in writing, the same is
unenforceable. Even if the price is less than 500
However, even if there is earnest money, it does pesos the same must be in writing when the
not mean that there is already a perfected same is not to be performed within 1 year.
contract of sale. If it is merely a proof of a
perfected contract of sale. Even if there is In the case of Paredes vs. Aquino, Paredes here
earnest money given, if the contracting parties was a prospective buyer and Aquino was the
have not agreed as to the total amount of the owner of a parcel of land. The negotiation was
purchase price, then there will never be a made through letters and telegrams. Ultimately
contract of sale. the owner made a letter signed by him to
Paredes stating that he and his wife already
Even though they have agreed as to the total agreed to sell the land at the specific price.
amount of the price and an earnest money is However, the execution of the sale shall be
given, and were able to agree as to the total made upon arrival of Paredes in Palawan, as
amount of the price, but not as to the object then the latter is from Northern Luzon. When Paredes
there will be no perfected contract of sale. arrived in Palawan, the seller said that he was
Earnest money is not the only requirement in a no longer interested in selling the land. Hence,
perfected contract of sale. Paredes filed an action to compel Aquino to sell
There is a perfected sale by the mere the land. Aquino’s defense on the other hand
meeting of the minds, does it mean that it is was he Statute of Frauds, since there was no
already enforceable? deed of sale, there was no perfected contract of
sale. The SC ruled that the contract was no
Not that upon perfection the parties to such longer covered by the statute of frauds since
contract, the parties already have the right to there was already a letter. Under the law,
compel the parties to perform their respective specifically under Art. 1403 even if the contract
obligations. But perfection is subject to does not comply with the statute of frauds, the
formalities required by law like the statute of same shall be enforceable and no longer
frauds. covered under the operation of the statute of
frauds when the same was made through some
There may be a meeting of the minds, but the note or memorandum, be in writing, and
same shall be unenforceable. subscribed by the party charged, or by his

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agent. Hence, Aquino can be compelled to on their agreement because until such time
execute a final deed of sale. there is no obligation to deliver which arise.

In a deed of sale there can be 100’s ob Secondly, the buyer cannot compel the buyer to
obligations of the vendors because of the receive the fruits because he shall not acquire
stipulation. There are only few obligations real rights over such fruits until the delivery of
imposed by law to the vendors, and these the thing. The buyer’s remedy is going after the
are: seller.

1. The obligation to transfer ownership Obligation to take care of the thing

2. The obligation to deliver
3. The obligation to warrant the thing The premise in this kind of obligation of the
4. The obligation to take care of the thing sold seller is a determinate thing. If the thing sold is a
with the diligence of a good father of the generic thing, there is nothing to be taken care
family from the time of perfection upto the of, it will become determinate only upon delivery.
time of delivery.
5. The obligations to pay the capital gains tax One scenario where the seller does not have the
6. The obligations to deliver the fruits obligation to take care of the thing from the time
of perfection, when the buyer already was in
Obligations to deliver the fruits possession of the thing at the time of perfection.

A sale of a mango plantation between A and Obligation to pay expenses or capital gains
B, A agreed to deliver to B the fruits only tax
after 6 months from the perfection of the
sale. Despite the arrival of the period, the Through stipulation, the parties can agree as to
seller took him 1 month to deliver the fruits who is going to pay the tax.
to the buyer. A however, sold the fruits to a
third person X in good faith. Can B recover May a person sell something which does not
the fruits from X? What are the remedies of belong to him? (Bar Question)
the buyer as against the seller?
Yes. Ownership over a thing is not a requisite in
Under the law under Art. 1537, The vendor is order for a sale to become valid. But if the seller
bound to deliver the thing sold and its does not own the thing he may have a problem
accessions and accessories in the condition in in performing his obligation to
which they were upon the perfection of the t r a n s f e r ownership. The problem actually is
contract. whether or not the buyer acquire ownership over
the thing sold by the person selling who does
All the fruits shall pertain to the vendee from the not own the thing. Thus, only those persons
day on which the contract was perfected. who have the right to sell can transfer
ownership.
Art. 1537 however should be considered in
relation to Art. 1164 which provides that “the The owner or even if not the owner a person has
creditor has a right to the fruits of the thing from been given authority by the owner, therefore he
the time the obligation to deliver it arises. will have the right to sell, or the law authorizes a
However, he shall acquire no real right over it person the power to sell (art. 1505 statutory
until the same has been delivered to him”. power to sell) (e.g. the notary public, the
pledgee under pledge, under the mortgage law
From the foregoing therefore the vendor actually the liquidators have authority to sell, the
has rights to the fruits but not from the time of guardian, receivers etc), those who have the
perfection. B is only entitled to the fruits of the authority of the court (sheriff in an execution
thing from the end of the 6 month period base sale or foreclosure sale).

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May the buyer actually acquire ownership that by operation of law, Y likewise acquired
over the thing sold if the seller has no right ownership by estoppel by deed.
to sell?
Sale by the nephew of the owner of a parcel
Under Art. 1505 the buyer does not acquire of land. Since the nephew could not deliver
better title than what the seller had. If the seller the land to the buyer, the buyer filed a
is neither the owner or does not have authority complaint for estafa. In this criminal case, for
to sell, the buyer acquires no better title than the accused to be acquitted, he asked his
what the seller had. As an exception, the buyer uncle to testify that he actually had the
can acquire better title than what the seller had, authority to sell. When the uncle testified in
even if the seller is not the owner or does not court, the nephew was acquitted because
have the right to sell, when: after all, he had the authority to sell. After the
acquittal of the nephew and the buyer
a. by estoppel in pait - by the principle of demanded from the uncle for the delivery,
estoppel a person will be precluded from the uncle refused for in reality he said that
denying that a person has authority to sell by he did not authorized his nephew. So when a
the owners acts or representations. This civil case was filed to compel the uncle to
estoppel is other wise known as estoppel in deliver and transfer ownership over the
pait (equitable kind of estoppel). thing, will that action prosper?

a. estoppel by deed (technical estoppel)-Art. Yes, because the owner cannot be allowed now
1434. When a person who is not the owner of that his nephew was not authorized when he
a thing sells or alienates and delivers it, and testified in court that he gave such authority.
later the seller or grantor acquires title This is considered as estoppel by record and
thereto, such title passes by operation of law also considered technical estoppel.
to the buyer or grantee.
Discuss “Sale by an apparent owner”?
a. Estoppel by record (technical estoppel)-
As provided by factors act, recording laws, and
a. A sale by an apparent owner - other laws which enable the apparent owner of
goods to dispose of them as if he were the real
a. Purchases from a merchant store owner.

A and B are co-owners of a parcel of land. A Under the Factors (an old name for agent)
and B sold it to X verbally. X sold the land for Act, even if the agent has no right to sell a
150,000 to Y. Would Y be considered to have specific thing a third person may actually
acquired ownership over the parcel of land? acquire ownership because he can only rely
on the power of attorney as written. If for
Under Art. 1434 or otherwise known as estoppel example an agent through a special power of
by deed or technical estoppel. When the seller attorney was given the power to purchase a
who was not the owner at the time of the sale car, however in the verbal instruction the
acquired ownership, automatically ownership agent was authorized to sell that car only to
passes to the buyer by operation of law. one of the members of a cert
a i n organization. But the agent sold the car
However, under Art. 1434 does not apply to a person other than to a member of the
because the law requires the delivery of the organization as directed by the principal.
parcel of land to X the buyer, and under the Would that buyer acquire ownership even if
facts art. 1434 would not apply because 1. there the agent has no right to sell to that buyer?
was no showing that there was delivery/payment
already due to the verbal nature of the sale Yes. Under Art 1900 so far as third persons are
hence unenforceable. Hence it could not be said concerned, they only have to rely on the SPA as
written even if the seller agent was not
12
authorized as instructed, the buyer acquire
ownership over the thing subject of the sale. The mortgagee did not acquire ownership by
virtue of a deed of sale. A forged deed is a void
The elder brother Miguel Mapalo donated instrument and cannot be the source of a valid
half of his land to his younger brother title to the buyer. This forged deed however, can
because the latter was about to get married. be the root of a valid title under the mirror
Instead of the younger brother asked his principle when the buyer bought it from the
elder brother to sign a deed of donation, he mortgagee in whose name it was registered,
asked the latter to sign a deed of sale not and relied on the TCT, then if he acquired the
only half of the land but the entire parcel of property in good faith, then he had acquired
land. He was therefore able to register the ownership over the parcel of land under Art.
property in his name. After 10 years, 1505 in relation to PD 1529, when the buyer
however, he sold this entire parcel of land to bought a parcel of land relying on the TCT alone
the Narcisos. Obviously, the younger brother and buying it in good faith then he will have a
is not authorized to sell with respect to the better right than the owner.
other half, because what was only given is
only half of the land. But the Narcisos By the mere fact that the buyer did not know the
claimed that they bought the land on an execution of the time of the deed necessarily
apparent owner because the entire property mean he is already a buyer in good faith? Not
was registered in the ame of the seller. Did necessarily because the law requires that he
the Narcisos acquired ownership because had fully paid without knowledge of defect in the
they bought the entire property from an title of the seller. He may have acquired
apparent owner? knowledge after the execution of the deed of
sale but before payment, he can no longer be
Not necessarily, because the seller must not considered a buyer in good faith.
only be an apparent owner but buyer must also
be a buyer in good faith. The buyers in this case *The owner of a parcel of land entrusted the
is not in good faith because before they bought secretary to take hold of the TCT only for
the land, they went first to the house of Miguel safekeeping. Thus the secretary forged the
Magpalo to inquire on whether he (younger signature of his boss in a deed of sale. Thus
brother) would allow his younger brother to sell he was able to register the property in his
that parcel of land. Therefore they are in bad name, and sold this parcel of land to a third
faith because they knew and because Miguel person, and such person is considered to be
also had the right to the half portion of the land in good faith, then he has ac
when they bought the entire parcel of land. q u i r e d ownership over the thing sold even
Therefore they did not acquire ownership over if the seller had nor right to sell. This is
the entire parcel of land (Mapalo vs. Mapalo) because the buyer bought it from an
apparent owner who disposed of the thing as
The owner of a parcel of land covered by a if it was really owned by him.
TCT or OCT, mortgaged a parcel of land to
the creditor and delivered the TCT or OCT. *Under the New Civil Code on negotiable
This mortgagee forged the signature of the documents of title, if goods are covered by a
owner in a deed of sale. Thus, he was able to negotiable document of title and there was a
register the property in his name with that negotiation of this document
forged deed. Thereafter, the mortgagee who a s a consequence of a sale, if the buyer
was a buyer in the forged deed, sold that bought the good in good faith and for value,
land to a third person who had no knowledge he will be protected under the law, and
of the transaction between the mortgagor A acquire ownership over the goods even if the
and mortgagee B. Did the mortgagee seller do not have the right to sell. The seller
acquired ownership? Did the buyer acquired may have acquired over the document of title
the property over the parcel of land? When through violence, but if it is negotiable
can a buyer said to be in good faith? document of title especially if it is a bearer
13
instrument, then the buyer may acquire Art. 559. The possession of movable property acquired in
ownership over the goods even if the seller good faith is equivalent to a title. Nevertheless, one who
has lost any movable or has been unlawfully deprived
had no right to sell. thereof may recover it from the person in possession of the
same.
Sun brothers was the owner
o f t h e refrigerator (they are engaged in If the possessor of a movable lost or which the owner has
the business of selling refrigerators) and been unlawfully deprived, has acquired it in good faith at a
sold it to Lopez in an installment basis. public sale, the owner cannot obtain its return without
reimbursing the price paid therefor. (464a)
As stipulated Sun brothers reserved
ownership over the refrigerator until full
One painting owned by A was stolen from
payment. The buyer Lopez paid only 300 and
her. Later on she noticed that the painting
the remaining balance to be paid on a
was in the room of B, and asked how he
monthly basis. However, Lopez sold the
acquired the painting, he said that he
refrigerator to Velasco the very next day in
acquired the same in a gallery auction. Can
his store to Co Cang Chiu. Sun brothers after
the owner of the painting from whom the
learning of the s a l e , fi l e d a n a c t i o n
painting was stolen recover the same from
t o r e c o v e r t h e refrigerator. Would the
B?
action prosper? Did Co Cang Chiu acquired
ownership over the refrigerator? Can Sun
A gallery auction is not a public sale. Since it is
brothers recover the refrigerator by
not a public sale, the owner can recover the
reimbursing the price paid by Co Cang Chiu?
property even without reimbursement.
As to Velasco, the rule under Art. 1505 is that
If it is a public sale, the owner can recover the
the buyer cannot acquire better title than what
painting provided the owner reimburses the
the seller had.
buyer of the price paid in that sale.
As to Co Cang Chiu, he acquired ownership
A diamond ring was robbed in a bus, and
over the refrigerator because he bought it in a
this same diamond ring has become the
merchant store. Under 1505 last paragraph, if
object of a public sale of a pawnshop. Can
the owner bought the thing in good faith from a
the owner recover the ring from the buyer in
merchant store he acquires ownership over the
the public sale initiated by the pawnshop?
thing. Note, he must have no knowledge of the
defect in the title of the goods.
Yes, if the buyer is in good faith, and so long the
owner is willing to reimburse the buyer of the
As to the issue on whether Sun Brothers recover
price paid in that sale, he may recover the
the refrigerator from Co Cang Chiu by
same.
reimbursing the price paid. The SC held that
Sun brothers cannot. This is because under Art
Can the owner recover a thing from the
1505, the ownership of the buyer who bought
buyer who bought in a merchant store?
that thing in the merchant store and in good faith
and for value, is absolute in character.
No. The owner cannot recover the thing from the
buyer even if the same was lost or the owner
Art. 559 does not apply to this scrnario because
was unlawfully deprived thereof, and even if the
Sun Bros. was not unlawfully deprived nor is the
owner wishes to reimburse the buyer for the
thing lost. If the thing was lost or the owner is
price paid. As a matter of right, the buyer in
unlawfully deprived, such owner can recover the
good faith acquires absolute title over the thing.
same even if it was sol through a public sale or
in a merchant store but such owner must
How is transfer of ownership over a thing
reimburse the person who bought in in good
effected?
faith and for value. (Sun brothers and company
vs. Jose Velasco and Co Cang Chu)
It is effected by delivery, actual or constructive.

14
Everytime there is delivery, the buyer A car was sold at 150,000, 75,000 was paid at
acquires ownership upon delivery? the execution of the deed of sale, the balance
payable on a monthly basis. The car was
Not necessarily. This is not an absolute that delivered to the buyer. However, before he could
upon delivery as a consequence of sale, there is pay the balance, the car was destroyed, can the
transfer of ownership. There are kinds of sale buyer still be compelled to pay the balance?
that despite delivery, the buyer does not acquire
ownership. Examples of which are: He can still be compelled to pay the balance.
This is because upon delivery of the car to the
a. Conditional sale - Here ownership is reserved buyer, there being no retention or reservation of
by the seller, such that despite delivery ownership by the seller, ownership passes to the
ownership does not pass to the buyer. The buyer. Under Art 1504, res perit domino rule, the
buyer does not acquire ownership upon owner bears the loss.
delivery but rather upon the happening of the
condition (usually upon full payment of the In sale on approval, who bears the loss?
price).
The seller and not the buyer even if there is no
a. A sale on Trial, sale on satisfaction or sale on delivery, because the owner is still the seller.
approval - Upon delivery, even if there is no Under the res perit domino rule, the owner bears
actual delivery, there is no transfer of the loss.
ownership at the time of delivery. The buyer
will acquire ownership over the thing sold A set of AMJUR was sold to Tabora on
when the buyer signifies his acceptance or installment basis. On the day these books
approval over the thing sold. Even If he does were delivered to the office of Atty. Tabora,
not signify his approval ownership may still the entire block where the office of the latter
pass to him if: 1) there is a period agreed is located was burned together with the
upon by the parties with which to decide and AMJUR. Atty Tabora refused to pay the
upon lapse of the period he had impliedly balance despite demand by lawyer’s co.
accepted or 2) even before the lapse of a Lawyer’s co therefore filed a case. Two
period, he may be considered as to have defenses were raised 1) res perit domino rule
impliedly accepted if he did an act wherein he because there is a stipulation in the contract
would be considered to have adopted the that the seller shall retain ownership over the
transaction then ownership w books until full payment, and if lawyers co
o u l d b e considered to have pass on the was the owner then it should bear the loss.
buyer (e.g. even if he has 10 days within Is the argument correct?
which to decide, after two days however from
delivery, he sold the car to another) 3) there No. If there was a stipulation in the contract that
may be no period the buyer is deemed to ownership shall be retained by lawyers co until
have accepted after the lapse of a full payment was made, there was also a
reasonable time. What is r e a s o n a b l e stipulation that the risk of loss shall pertain to
t i m e w i l l d e p e n d o n t h e the buyer at the time the books were delivered
circumstances surrounding the sale, the whatever the cause of the loss. This is an
purpose of the sale, or the nature of the thing exception to the res perit domino rule.
sold.
Assuming there was no stipulation that the
In Sale or Return, ownership passes to the risk of loss shall pertain to the buyer upon
buyer upon delivery? delivery, may the buyer still be held to
answer for the loss?
In this kind of sale ownership passes to the
buyer upon delivery. However in this kind of Under Art. 1504, when the owner reserved the
sale, the buyer is given the right to reimburse title to the property only to secure the payment
the title back to the seller.
15
of the price of the buyer, then by law, risk of loss
shall only pertain to the buyer. This is known as If the thing sold is a movable, the first person
a security title. Therefore, even if the buyer did who took possession over the thing shall have a
not acquire title upon delivery, he bears the loss. better right.

Whenever there is delay in the delivery of the If the thing sold is an immovable, the buyer who
thing sold, who bears the loss? first register in good faith will have the better
right, if there was no registration, then the
It depends who may be at fault for the delay in person who first took possession, if no one is in
the delivery. It may be the seller or the buyer. possession then it will be the buyer with the
If for example, there is a stipulation that the oldest title in good faith. Good faith here does
buyer must retrieve the goods on the not pertain to knowledge of a defect of title of
warehouse of the seller on a specific date. the second buyer since he is the first buyer,
On that date agreed upon, the seller good faith here means he has no knowledge of
demanded the buyer to get the goods at the the defect on the title of the seller.
warehouse. Despite such, the buyer failed to
obtain the goods. The next d If a thing is sold to two or more persons,
a y, t h e warehouse was burned. Who then what will be the effect of: 1) the first buyer
shall bear the loss? was the first to register with knowledge of
the second sale; 2) the second buyer was the
Here the seller was still the owner, however, the first to register with knowledge of the first
buyer was already in delay in retrieving the sale. Who will have a better right in these to
goods, hence, under Art. 1504, the buyer bears scenarios?
the loss, as an exception to the res perit domino
rule. 1. In the first scenario, his knowledge of the
second sale does not make him a registrant in
If the seller is the one at fault, who bears the bad faith. Knowledge should pertain to one
loss? which is prior sale in order to make one a
registrant in bad faith. Hence, here he has a
The premise here, the ownership should have better right.
been passed to the buyer but the goods are still
with the seller (this could happen by constructive 2. As to the second scenario, he is considered a
delivery but physical possession is still with the registrant in bad faith because of his prior
seller), even so, the seller shall bear the loss knowledge of a former sale. Hence, he will
because he was the one at fault for the delay in not have a better right.
the delivery of the thing sold despite demand by
the buyer. If a person bought the thing without
knowledge of the prior sale and registered
An owner of a registered land sold the land the same, would that mean he is a registrant
to B. B did not register the sale. A few days in good faith?
thereafter, A sold again the same parcel of
land to C, who this time registered the sale. Not necessarily. This is because he may have
Who between B and C have a better right to acquired knowledge prior to the registration. but
this parcel of land? after buying. What is required by law is not a
buyer in good faith, but a registrant in good faith.
It depends on whether or not C register the sale
in good faith. Bautista vs. Sioson

Note: In Art. 1544 pertaining to double sales, as The owner sold a registered parcel of land to
to which rule to apply would depend on the B who did not register, neither did he took
nature of the thing sold whether it is immovable physical possession. After the sale they
or a a movable. If it is a sale of a movable. executed a lease agreement in which the
16
buyer is now the lessor and that the seller Therefore, if ARt. 1544 would not apply, B would
became the lessee. Hence, the seller have a better right because there was actual
continued to be in possession of the land delivery to him. Therfore, under the general rule,
not as a concept of an owner but of a lessee. upon delivery, ownership passes to the buyer.
After the sale and the contract of lease, A When ownership had passed to the buyer when
sold this parcel of land to C, who also did the property was sold in the execution sale, the
not register the same, and this time C took buyer would not get anything from the execution
physical possession. Who between B and C sale because he merely steps into the shoes of
had a better right? the judgment debtor. Since the judgment debtor
had no ownership over the land at the time of
B would have a better right because when B sale, the he did not acquire ownership by virtue
executed a lease contract with A, B is in of that sale.
contemplation of law in possession of the
property, which is legal possession, he obviously Note: To determine that the land is under the
is therefore a possessor in good faith, the first torrens system, the ownership is proven by
who took possession in good faith. Though C TCT’s or OCT’s, otherwise if proof of ownership
had physical possession over the property, he is are mere tax declarations, it will not be
considered to be the one second in possession. considered as registered land.
B therefore was considered to have a better Obligation to deliver to object of the sale
right.
In this obligation one must distinguish first the
Note: Legal possession is sufficient to determine subject matter of the sale whether it is a thing or
as to who have a better right between two a right.
persons.
Ownership passes upon meeting of the
Carumba vs. CA minds as a consequence of sale?

Sale of a parcel of land to B who took False, there must be delivery.

possession of the land. However, this seller
a judgment debtor to one of his creditor. As to delivery of things as a consequence of
Because of a judgment in favor of a creditor sale known as tradition, there are two modes
C, the parcel of land had become the subject recognized by law, what are these?
of an execution sale. Then the buyer became
C who registered the sale. Who will have a
better right between B and C and C had no 1. Actual - Material delivery or real delivery
knowledge of the first sale?
To have a valid actual delivery the thing
B would have a better right because this parcel must be subject to possessio n and
of land was registered under the Torrens control of the vendee.
System. Art.1544 does not apply to unregistered
lands. Only those lands which are registered If the thing sold was delivered to a third
under the Torrens System can be covered by person, there may still be actual
the provisions of Art. 1544. delivery when such third perso
n h a s authority to receive from the vendee.
It could be noticed that C had registered the As such
land, but the same is not covered under the he becomes an agent of the vendee,
torrens system because, there is another thus, there is actual delivery.
system of registration of unregistered lands.
There is a different book covered by this kind of 2. Constructive delivery
registration, hence, Art 1544 would not apply.
a. By the execution of a public instrument (if the
contrary intention does not appear on the
document) by the mere execution of the
17
 public instrument, that is already equivalent to
delivery. Hence, ownership passes to the In order for the ownership to pass, it had to be in
buyer. a public instrument (constructive delivery).

a. Delivery of Keys (Tradicion Symbolica) If for example the seller and the buyer
pursuant to their agreement delivered the
a. By mere consent or agreement of the parties goods to a common carrier, upon delivery of
provided at the time of the sale; possession of the goods to a common carrier, would that
the goods cannot be transferred to the buyer result in transfer of ownership immediately?
(e.g. when the thing was the subject matter of
the lease, because before expiration of the If delivery to the common carrier is delivery to
lease the thing cannot be transferred to the the buyer, then ownership passes to the buyer
buyer). upon delivery to the common carrier. Such is a
general rule, the exceptions are:
a. Tradicion Brevi Manu - Here, the buyer was
already in possession the property, but there 1. if there was stipulation that ownership will not
is a change as to the status of possession pass to the buyer until full payment.
such as that of a lessee, depositary or agent
to possession in the concept of an owner. 2. Even if the deed of sale does not provide for
such stipulation, the seller may have obtained
a. Tradicion Constitutum Possesorium - Here a bill of lading which provides that the goods
the seller would still continue to be in are deliverable to the seller himself or his
possession of the thing after the sale but no agent. Thus despite delivery of the goods to
longer in the concept of an owner but in the ship, there is no transfer of ownership
another capacity. because it would still be the seller who would
have the right to obtain the goods from the
The original owner here, X & Y whose common carrier.
properties are fixtures in a salon, while Z &
D was a judgment creditor of X & Y. Because
of judgment rendered by a court in favor of Kinds of Delivery of Incorporeal properties
Z, the sheriff levied upon the properties of X (Quasi Tradicion)
and Y which was still in the latter’s physical
possession. This execution s What are the three modes of deliveries as to
a l e w a s questioned by A & B on the rights?
premise that these goods were already sold
to them prior to the levy. Hence, if these 1. Execution of a public instrument; (from the
goods were sold to them prior to the levy, delivery of certificates, ownership passes)
ownership already passed to A & B, and
as such there is nothing more to be 2. Use by the vendee of his rights with the
levied upon. But the d e b t o r w a s v e r vendors consent (e.g. in sales of shares of
y m u c h i n p h y s i c a l possession. stock, the vendee may not always necessarily
May A & B be considered as owners of have the right to exercise the stockholders
the land despite them not being in actual rights over the share, the buyer can only
physical possession of the good sold, and exercise such right with the consent of the
make them to have a better right over the vendor).
judgment creditors over an execution sale?
In a sale of 1000 pairs of shoes, as agreed
Even if there was no physical possession and upon by the parties. The seller delivered
there was no actual delivery, there may be a 1200 pairs of shoes instead of only 1000.
constructive delivery by the execution of a public May the buyer refused to accept everything?
instrument. Unfortunately in this case, the deed
of sale was merely in a private instrument.
18
Under the law, he would only have the right to can only be compelled the part which is
reject the excess, but he can be compelled to milagrosa, and reject the combodian rice.
accept the 1000.
Sale of a parcel of land and the price agreed
Assuming if what was agreed upon was upon is 1 million at 100 sq. m., the actual
1000, and the seller delivered only 800, can area delivered was only 95 square meters,
buyer be compelled to receive the 800? what are the remedies of the buyer?

No, because under the law, partial performance 1. Specific performance if it is possible for the
is non performance. As a rule, a creditor cannot seller to deliver the balance such when the
accept partial performance of the obligation, adjacent land is still owned by the seller; or
except when there is a stipulation that partial
deliveries is allowed, or when the obligation 2. proportional reduction of the price is with a
pertains to one which is partly liquidated and specific amount given to a specific measure.
partly unliquidated, obligation to different term If the sale is a lump sum sale, then any
and conditions. deficiency in the area, there is no right to
proportional reduction of the price. Further,
The buyer accepted only 800 at 1000 per pair even if there is an increase in the area
of shoes, it so happened the seller can no delivered, there will also be no additional
longer deliver the balance of 200, since what increase in the price.
was previously stipulated was 1000 pair of
shoes. How much can the buy 3. Rescission - As a rule it will not be a remedy
e r b e compelled to pay? base on the facts. Because rescission will
only be a remedy if the area lacking is more
It depends on whether the buyer was aware that than 10% of the area agreed upon. But even
the seller could no longer the balance or when if the area lacking is not more than 10%,
he accepted he was not aware that the seller rescission will be a remedy if the buyer can
could no longer deliver the balance. prove that he would not have bought the land
If he was aware that the seller can no longer had he known that it was less than 100 sq. m.
deliver the balance, then he can be compelled to
pay at the contract rate. In this case, 800,000. Note: Rescission and proportional reduction if
the property delivered is of inferior quality. If by
If he had no knowledge or awareness that the agreement the parties intend to sell a rice field,
seller can no longer deliver the balance when he but it turned out that 20% of the land is not
accepted, then under the law the buyer can only actually a rice field and cannot be planted by
be compelled to pay the fair value of this thing. palay. The remedy of the buyer is to make a
proportional reduction of the price if he still
An obligation to deliver 1000 cavans of a would want the land or rescission would be a
specific rice (milagrosa). However, the seller remedy if the area which is inferior is more than
delivered 1200 cavans of both milagrosa and 10% of the total area of the land.
combodian rice. May the buyer have the right
to reject everything? Place of Delivery

Generally, ownership passes at the place of delivery.

Yes he would have the right to reject everything Where should the thing or goods be delivered?
if the goods are deemed indivisible. Meaning in
each sack of rice, cambodian rice and milagrosa The seller delivered the goods to the place of business
rice are mixed. of the buyer and the buyer refused to accept the
goods. From that moment does it mean that the buyer
However, if in each sack it is clear from each is already in delay because he refused to accept the
goods?
that it is milagrosa or combadian then, that
would not be considered as indivisible, and he It depends on whether there is a stipulation as to the place
of delivery or not. If there was such a stipulation, and the

19
place agreed upon was not the place of business of the
buyer, of course he would have the right to refused to Is it possible in a CIF arrangement or in an FOB
accept the delivery of the goods in his place of business. arrangement, the place of delivery shall be the port of
destination?
In other words, with respect to the place of delivery the first
thing that should be considered is the: These delivery arrangements only make rules of
presumption. It must give way to the real intention of the
1. stipulation parties as to the place of delivery, without expressly
2. place fixed by usage or trade stipulating as to the place of delivery. The intention of the
3. place of business of the seller parties as to the place of delivery shall be determined by
4. seller’s place of residence the place and manner of the payment of the price. Where
5. If the thing is not in the place of business seller nor the price is paid, that is determinative of the place of
buyer, known both to the parties, but in some other delivery.
place. The place of delivery shall be where the thing is
located at the time of perfection of the contract. Under Art. 1582, as to the place of payment, if there is no
place agreed upon where payment should be made, the
Places fixed by usage or trade place of payment should be made to the place of delivery.

If there is no stipulation as to the place of delivery, the law In one case, it was stipulated in the contract that the seller
provides that, it will be the place fixed by the usage or can demand the payment of the price, upon the arrival of
trade. the goods at the port of destination in a CIF arrangement.
The SC ruled that the place of delivery is the port of
Shipping Arrangements; place of delivery destination because it is only at that port that the seller can
demand on the payment of the price. They have agreed on
1. F.O.B. (Free On Board) Arrangement (Point of a CIF arrangement (port of destination) for the purpose of
Destination) fixing of the price, because generally, CIF means port of
origin, however out of the price, it will be the port of
If there is no place stipulated as to the place of delivery and destination, and payment shall include the cost, the
the goods are to be shipped on an FOB basis, the place of insurance and the freight. The place of delivery being the
delivery shall be the place ownership is deemed to pass. In port of destination, ownership passes in the port of
an FOB arrangement, the parties should have agreed to a destination. Effectively the freight shall be shouldered by
specific port whether it is the port of origin or it could be the the buyer, but that amount will be taken to the price fixed
port of destination. by the seller.

In an FOB port of origin, the place of delivery shall be In another case, the parties agreed in an FOB
considered to be the port of origin. It would be the port of arrangement, but it was stipulated in the contract that the
origin because FOB mean Free On Board, and Free On seller can demand the payment of the price by presenting
Board means that the moment the goods arrived at the port the bill of lading to the buyer. The bill of lading can be
of origin, the seller will be free from any expense on presented at the port of origin to the buyer because a bill of
transportation of the goods to the buyer. From the port of lading can be taken from the common carrier at the port of
origin, it will be the buyer who will shoulder the expenses origin. Despite of an FOB arrange, the place of delivery is
for the transportation. It would appear since the buyer who the port of origin. FOB port of destination is arranged in this
shoulder the expenses, it is the buyer who is the owner of case because the buyer would want to have the seller to
the goods as it reached the port of origin. If he is already shoulder all the expenses for the transportation of the
the owner under this FOB arrangement therefore, the place goods up to the port of destination.
of delivery shall be the port of Manila.
Obligations of the Seller; Warranty
In FOB port of destination arrangement, the seller would
have to shoulder the expenses for the transportation of the Does Philippine law adopt the common law principle of
goods, upto and until the arrival of the goods at the port of caveat emptor (buyer beware)?
destination. Hence, delivery passes at the port of
destination. As a rule, Philippine Law does not adopt the common law
2. C.I.F. (costs, insurance,freight) Arrangement (Point of principle of buyer beware because of the implied
Origin) warranties. Even in the absence of stipulation, this
warranties are deemed attached to the contract, and the
buyer may hold the seller liable for breach of warranty.
In a CIF arrangement, the place of delivery is considered to
be the port of origin because, the price paid by the buyer
However, it is only a general rule. There are instances
would already include the costs, insurance, and freight.
where there can be no implied warranty. Examples, where
The buyer pays for the freight, it appears therefore that
there is no implied warranties are:
ownership passes at the port of origin, hence, delivery is
made at the port of origin.

20
1. In sale of animals in fair (no warranty against hidden 100,000 down payment shall be returned by the vendor
defects) (but with warranty against eviction or title) to the vendee. Salvador filed ejectment suits against
the squatters but despite of the decision of the Court
2. public auctions (no warranty against hidden defects) (but in his favor, the squatters would still would not leave.
with warranty against eviction or title) In August 1986, Salvador offered to return the 100,000
down to the vendee on the ground that he was unable
3. as is where is sales (no warranty as to the fitness of the to remove the squatters to the property. SSC refused
thing, but there is still warranty against eviction) to accept the money and demanded that Salvador
execute a deed of absolute sale of its property in its
4. sale of second hand items favor, in which time it will pay the balance of its price.
The value of the land had doubled at that time,
When would and affirmation of fact or promise of a Salvador consigned the 100k in court and filed an
vendor be the basis in holding the seller liable for action for rescission of the deed of conditional sale,
breach of an express warranty? plus damages. Will the action prosper?

The law requires that an affirmation of fact or promise of Under the facts, Salvador is not an aggrieved party, hence
the seller must relate to the thing itself. In other words, it he will not have any remedy under the law. In fact, he was
must relate to the character of the thing, or to the quality of the one who failed to evict the squatters.
the thing, or its title.
The payment of the balance as agreed upon is made to
Secondly, it is required that such affirmation of fact must depend upon the removal of the squatters within 6 mos.
have the natural tendency to induce a person to purchase Clearly, if not, impliedly from the facts, that is an obligation
the thing; of the seller, and such is the condition for the payment.
Since such condition did not happen, wherein the squatters
Thirdly, the buyer purchase the thing relying on the failed to flee, would such condition for the payment of the
affirmation of fact or promise made by the seller. balance would not arise.

If the seller told the buyer that this is the best fertilizer Under Art. 1545, it is the buyer who is given options under
in this world, would that be the basis in holding the the law, due to the non happening of the conditions due to
seller liable if it would came out that there are other the fault of the seller. The options of the seller are: 1) Not to
brands of fertilizer that are much better than what was proceed with the sale because the condition did not
sold to this buyer? happen; 2) Waive the happening of the condition and
proceed with the sale. In this case the second option was
That cannot be the basis in holding the seller liable chosen by the buyer. 3) Treat the non happening of the
because, that will be treated merely as an opinion. condition as a breach of warranty, which can be the basis
Unless such opinion is made by an expert, such statement of holding the seller liable for damages.
cannot be the basis in holding the seller liable under this
express warranty. Implied Warranties

In a sale of a car, the seller told the buyer that even 1. Warranty against eviction
only with one liter of gasoline, you can drive this car 2. Warranty against hidden defects
for 50 km. Is this an express warranty? 3. Warranty of quality (Warranty of fitness for a particular
purpose)
This is an example of an express warranty, and failure of
the car to consume gas at 1km/50km may hold the seller Is warranty against hidden defects include warranty of
liable for breach of his express warranty. fitness for a particular purpose?

Does it mean that the word guarantee is used, means No because, in an implied warranty of fitness for a
there is an express warranty? particular purpose, the thing may not have any hidden
defect. As to 1 million buyers they will be fine, but, as to 1
No. Such word if it does not go into the character of the person as to him, it may not be fit for his purpose.
thing, the quality of the thing or its title, such would not
pertain to an express warranty. 1. Warranty against eviction

In December 1985, Salvador and the Star Semi What is included in warranty against eviction?
Conductor Company, executed a deed of conditional
sale wherein the former agreed to sell his 2000 sq. m. 1. That the seller has the right to sell at the time ownership
lot in Cainta, Rizal to the latter for the price of 1million, is to pass; and
payable 100,000 down. The balance 60 days after the
squatters in the property have been removed. If the 2. that the buyer will have and enjoy the legal and peaceful
squatters have not been removed after 6 mos., the possession.

21
 In double sales where the first buyer was deprived of the
May the buyer hold the seller liable for breach of thing because of a right of a second buyer which is
warranty against eviction if the buyer was deprived of imputable to the vendor, such when the buyer was
enjoyment and peaceful possession, even if he was deprived if such thing because of an execution sale due to
not deprived of ownership? failure of the seller to pay real property tax if the tax
accrued before the sale.
Yes. Because there can be a judgment in favor of a third
person who would have the right to the possession of the If the buyer was deprived of the thing based on the
thing but he is not the owner. One such person is a lessee. judgment of the court that a third person acquired the
Once the court consider a lease contract as a valid and property by acquisitive prescription, can the seller be
binding lease, even as against the buyer, the buyer can be held liable for breach of warranty against eviction?
deprived of the possession but he is not deprived of
ownership. Thus, this could be a breach of warranty It depends on whether the prescribe period had already
against eviction because then, he would warrant that the been completed at the time of the sale or not. For example,
buyer would have a legal and peaceful possession of the if this is based on the 10 year acquisitive prescription with
thing. color of title, if the occupant in whose favor the court
decided who acquired the property resulting in the
What requisites provided by law in order to hold the deprivation of the buyer of such property was already in
seller liable for breach of warranty against eviction by possession for 7 years at the time of the sale, but the buyer
the buyer? never even bothered to examine the parcel of land. When
he arrived after 12 years there is a judgment in favor of the
1. There must be a final judgment depriving the buyer of occupant because the occupant was able to complete the
the thing in whole or in part; 10 year period prescribe by law without interruption. Here,
the buyer cannot hold the seller liable. This is no longer the
2. The seller must be notified (or summoned or considered fault of the seller when the occupant was able to complete
as party defendant) the period. If the buyer only wrote a letter demanding the
occupant to vacate the premises that would have
3. The reason why the buyer was deprived of the thing interrupted the running of the prescriptive period. It is the
must be based on a right of a third person existing even fault of the buyer why he is deprived of this land.
prior to the sale or even if such right of the third person
after such sale that must be baed on act imputable to If the seller would be liable under this warranty against
the vendor. eviction, what are the possible liabilities of the seller?

Will a mere letter of a third person claiming a right over Under the law, value of the thing at the time of eviction not
a property, which letter was received by the buyer, can the price, including the fruits, costs, income and expenses
the buyer hold the seller liable? and damages and interest.

Of course not. The law requires that there must be final A person can only be held liable for damages if he is in bad
judgment depriving the buyer of the thing in whole or in faith. A seller may be held liable for damages in relation to
part. this warranty against eviction if he was in bad faith.

In case there is a judgment, and such judgment was in When would the seller be considered to be in bad
favor of a third person against the buyer, is it required faith? If the seller knew of the defect of his title at the
for the buyer to appeal in order to hold the seller time of the sale, therefore he is a seller in bad faith?
liable?
Not necessarily, he may have known of the defect in his
No such appeal is required on the part of the buyer. But if title, but he had informed the buyer. Even if he knew of the
the seller does not want to be liable, then he should defect in his title and he did not inform the buyer of such
appeal. defect, he need not be in bad faith because probably the
buyer was already aware of the defect of his title.
A scenario where the buyer was deprived of the thing
based on a right of a third person existing even prior to If the seller executed a waiver even in case of eviction,
the sale? where such buyer agree that he will not hold the seller
liable for the deprivation of such thing, can the seller
One example is in double sales where the second buyer be held liable?
was deprived of a thing because of a right of a first buyer,
having the thing first registered in his name in good faith. Yes, if the seller is in bad faith, because under the law,
such waiver is void, and therefore the seller can be held
A scenario where a buyer was deprived of a thing after liable.
the sale which is imputable to the vendor?

22
If the buyer executed a waiver, and the seller acted in
good faith, may the seller be held liable? Damages will only be granted if the seller is in bad
faith. He is in bad faith when the seller did not inform
Yes, the seller may be held liable when the waiver is known the buyer of the defect.
as waiver consciente. It is a waiver consciente when the
buyer executed a waiver not knowing the defect of the title 2. If the thing was lost due to the defect itself
of the seller, at the same time the seller does not likewise
knew of such defect. The seller is liable for only the value The liability will be greater if the cause of the loss was
of the thing at the time of eviction, excluding the other due to the defect itself, than when the cause of the
liabilities. loss was due to the fault of the buyer or to a fortuitous
event.
If the waiver is an intencionada waiver, with full knowledge
of the possibility of eviction. In other words, he knows the In case of defect the seller has to return the price in
defect in the title of the seller when he bought and when he good faith or in bad faith.
executed the waiver. Of course the buyer can no longer
hold the seller liable for breach of warranty against eviction. Damages will only be granted if the seller is in bad
faith. He is in bad faith when the seller did not inform
If there is no waiver, and the buyer was deprived, will the buyer of the defect.
the seller be held liable?
Note: Damages and interest cannot concur in case of loss
Of, course, the only difference is the extent of the liability of due to the defect. When the seller is in bad faith (vendor
the seller whether he is in good faith or bad faith. If seller is was aware of the defect) damages is granted, if in good
in bad faith, he will be even liable for damages in case of faith (vendor was not aware of the defect) interest shall be
eviction. granted.

Warranty against hidden faults or defects In warranty against eviction, interest and damages concur.

What are the requirements in order for the seller to be If the thing was lost or destroyed due to a fortuitous
held liable for breach of warranty against hidden event, fault of the vendee, or due to the defect itself,
defects? how can the buyer prove that the thing had hidden
defects, when the thing was lost?
1. The defect must be hidden and not patent.
It is a matter of proof. The buyer might have allowed an
2. The defect must have already existed at the time of the expert to examine the thing before the loss of the thing. He
sale. has a proof of the defect of the thing before its loss.

If the buyer discovered the defect on the thing bought Even if the thing with hidden defects was lost or
10 days after the sale, the seller will be liable for destroyed, is it possible that the seller will not be liable
breach of warranty against hidden defects? for a single centavo, even without a waiver?

Not necessarily because the defect may be patent, hence When the loss was due to a fortuitous event or fault of the
the seller cannot be held liable. Secondly, the defect may vendee, and the vendor was not aware of the defect. In this
exist at the time after the sale, therefore the seller cannot scenario the liability of the seller is only to return the price
be held liable for breach of warranty against hidden less value. But when the value is greater than the price, the
defects. seller would no longer return the price less value hence no
liability. The value may be greater than the price when the
In case the seller is held liable for breach of warranty seller sold the thing less than its value or the thing was sold
against hidden defects, what are the possible liability at its value but there was appreciation of the value. Lesion
of the seller? does not affect the validity of the sale.

1. If the thing was lost or destroyed due to a fortuitous Included in this warrant against hidden defects, would
event or it was lost or destroyed due to the fault of the pertain to any charge or non-apparent encumbrance not
buyer, may the seller still be held liable? declared or known to the buyer.

Yes the seller will still be held liable because the thing 1. In relation to a sale of a parcel of land, and such is
had hidden defects. subject to a right of way, will the seller be liable in
relation to breach of warranty?
If the cause of the loss was due to the fault of the
buyer or to a fortuitous event, the liability of the seller Not necessarily. Maybe it was known to the buyer or it
is to return the price less value at the time of the loss was declared to the buyer. Even if it is not declared
whether the seller is on good faith or bad faith. and not known to the buyer but the encumbrance is

23
 apparent, hence the seller cannot be held liable for Are there no implied warranties in judicial sales?
breach of warranty. Even if not known or was declared
to the buyer or the encumbrance is non apparent, the False. There can be implied warranties in judicial sales.
seller may be liable when the encumbrance is
registered. 1. There seems to be a provision where certain persons
such as mortgagees, pledgees, auctioneers, and
The sale of a parcel of land was entered into January 2, sheriffs, cannot be held liable for breach of warranty.
2009. The buyer filed an action for breach of warranty Since a sheriff is the seller in a judicial sale, and under
against hidden defects pertaining to any charge or non the law he cannot be held liable, it is concluded that
apparent encumbrance unknown to the buyer, because there are no implied warranties in judicial sale. Such
of a right of way only last friday, will the action view is incorrect, it does not follow that the sheriff cannot
prosper? be held liable. It does not mean that when the sheriff
cannot be held liable, it does not follow that no one can
It depends on what kind of action. If the action is an action be held liable. The judgment debtor can be held liable,
for rescission, it will not prosper because the law requires unless the contrary was decreed in the judgment.
that the action for rescission should be filed within 1 year
from the date of the contract. It is more than 1 year. 2. In judicial sale, normally these are second hand items,
hence, there is no warranty as to hidden defects? False,
If this is an action for damages, it MAY prosper depending because the sheriff can levy brand new properties, such
on when the buyer discovered the encumbrance. The law when the seller was in the business of selling brand new
requires that an action for damages may be filed within 1 items. In this latter case, the judgment debtor may be
year from discovery of the encumbrance. When it is within held liable for breach of warranty against hidden defects.
such period, then the action will prosper.
Under Art. 1570, the law provides as to the rules
Sale of Animals with defects or diseases (redhibitory involving warranty against hidden defects they were
defects) made expressly applicable to judicial sales.

A redhibitory defect cannot be discovered despite an Rights and obligations of the vendee
examination by an expert.
What are the rights of the vendee?
If a buyer bought 7 dogs and one of them turned out to
have a redhibitory defect, will an action for redhibition 1. Right to the Fruits
be a remedy not only as to the animal with the defect
but also as to the other animals? By means of a public instrument, Mr. Nagbibili sold his
mango plantation to Abentorero effective immediately.
As a rule, no. Redhibition would only pertain to defective The parties agreed that the delivery will be effected 6
animals, unless the buyer can prove that he would not mos. from execution of the deed of sale. When the said
have bought the others had he known of the defect of one. period arrived Abenturero demanded the thing, but
Nagbibili dili dallied. It was only a month afterwards
The burden of proof in proving that the buyer would not when Nagbibili finally delivered the land to Abenturero.
have bought the dogs had he known of the defect of one is In the three weeks before delivery, Nagbibili sold and
the buyer, but under certain circumstances the law would deliver the entire produce of the Mango plantation to
presume that the buyer would not have bought the others Mr. Commerciante. Mr. Commerciante known nothing
had he known of the defect of one. This would happen of the contract between Nagbibili and Abenturero.
when he bought the animals in pairs, as a team or as a Abenturero now seeks to recover from Commerciante
group. either the full value of the mangoes or a similar amount
and quality of the mangoes sold. Does abenturero
If the animal bought died 5 days after the sale, can the have the right to the fruits against Commerciante?
buyer still demand for the return of the price?
Under the law particularly Art. 1567, the buyer shall have
The seller can no longer be held liable for breach of the right to the fruits of the thing from the time of the
warranty because the law requires that the animal should perfection of the sale. In relation to Art. 1164, the creditor
die within 3 days. The disease must be existing at the time shall be entitled to the fruits of the thing from the time the
of sale. obligation to deliver it arises.

The seller can however, be obliged to return if the death In their agreement the obligation to deliver will arise only
although it happened more than 3 days after the sale, was after 6 mos. therefore the buyer will not be entitled to the
caused by a contagious disease. Under the law, this fruits during the 6 mo. period. Though under the facts,
contract is void, hence the seller can be compelled to Abenturero already had the right to the fruits, Abenturero
return the price paid by the buyer. does not have the right to recover against Commerciante
because under Art. 1164, he will not have any real right

24
over the thing until the actual delivery of the thing to him. sometimes the employees of the seller will leave the
The only remedy of Abenturero is only against Nagbibili place immediately. After 1 hour the buyer called the
since, Commerciante had no knowledge of such sale seller informing him that he is rejecting the goods,
between Nagbibili and Abenturero. and told the seller to obtain the goods in the place of
the buyer. But before the seller could obtain the goods
What if during the 6 month period, Nagbibili harvested from the buyer’s place, all the goods were destroyed.
the fruits and sold it to Commerciante, can Abentuero Can the buyer be held liable for the price of these
recover these fruits or the value thereof? goods?

Abenturero does not have the right to the fruits because It depends on the reason for the refusal to accept. If there
Abenturero shall only have the right to the fruits of the thing is no just cause for the refusal, under the law ownership is
from the time the obligation to deliver it arises. Under the deemed to pass to the buyer, hence, the owner bears the
facts, it was harvested before the 6 month period and loss. As such, he can be compelled to pay the price.
during such time Nagbibili is under no obligation to deliver
the fruits. If there is a good and valid reason, probably the goods
were defective, such that he had to reject the goods, the
law expressly provides that ownership will not pass to him
and he cannot be compelled to pay the price.
2. Right of examination
Pursuant to a sale, the seller delivered the rice field 2
If the goods were delivered by the seller to the place of years ago, but the payment was only made today. Can
business of the buyer, and the goods were received by the seller demand to pay interest on the price?
the buyer, does it mean that ownership already passed
upon receipt of the goods? Ordinarily, the buyer cannot be held liable for the interest
on the price. Unless there is an express stipulation to the
Not necessarily. Receiving is different from accepting. In contrary, interest cannot be demanded. As an exception,
order that ownership is to pass, the law requires that the the seller can validly demand interest only if there was
buyer must have accepted the goods. Receiving is only such a stipulation to pay interest.
preliminary to accepting, in fact receiving is necessary for
him to exercise a right which is the right of examination or Even if there is no such stipulation to pay interest, the
inspection before he accepts. As to when he will be buyer may be held liable to pay interest if the thing is fruit
deemed to have accepted, when he intimates his bearing. Under the facts, the land sold is a rice field,
acceptance to the seller or when he did an act inconsistent hence, it is fruit bearing. And as such, the buyer can be
with the ownership of the seller, after the lapse of a compelled to pay interest on the price.
reasonable time.
Even if there is no stipulation and even if the thing is not
Is it possible that the vendee upon receiving, he fruit bearing, he may be held liable for interest in the price
already accepted? because the buyer is already in delay after judicial or
extrajudicial demand is made by the seller.
Yes, when the vendee had waived the right of examination
by express stipulation, or by certain arrangements that may It must be noted, under 1164, there is no need for
be agreed upon by the parties wherein there will be no right demand, when one of the parties had complied with his
of examination preliminary to acceptance. obligation, delay by the other begins. Under this scenario
this presupposes that there is a period within which to pay
E.g. In sale of coal from the location of the site of the and the period had already prescribed, and in such case
mining company, it will be delivered to Calaca plant in there has to be a judicial or extrajudicial demand.
Batangas, when the coal was received by Napocor, it is
deemed accepted. There will be no examination
preliminary to acceptance. However, there will be an 3. Maceda Law RA 6552 - Right of the vendee
examination after receiving not for the purpose of
determining whether it will be accepted or not, but the The Realty Installment Buyer Act - This law is intended to
purpose will only be for the fixing of the price, and ascertain protect ordinary buyers.
the quality of the coal.
This law can only be invoked when the object of the sale is
Are COD sales have right of examination? a realty. Clearly, this cannot be invoked if the object of the
sale is a personal property or a movable property.
None because upon delivery, the buyer pays, and the
buyer is deemed to have accepted. If it is an immovable property, is it covered by the
Maceda Law?
If the goods were delivered to the place of business of
the buyer which goods were received by the buyer but

25
Not necessarily. What is covered by the Maceda Law are
realties. Not every immovable is covered by the Maceda Priscilla purchased a condominium unit in Makati City
Law. from the Cityland Corporation for a price of 10 million
payable 3 million down and the balance thereon shall
If it is a realty is it covered by the Maceda Law? be paid in 60 equal monthly installments. They
executed a deed of conditional sale in which it is
Not necessarily. It must be a residential realty, and not stipulated that should the vendee fail to pay 3
commercial or industrial realty. successive monthly installments, the sale shall be
deemed automatically rescinded without the necessity
A sale on installment is a sale on credit? If a sale on of judicial action and the actual payments made by the
installment is a sale on credit, a sale on credit is vendee shall be forfeited in favor of the vendor by way
covered by the Maceda Law? of rental for the use and occupancy of the unit and
liquidated damages. For 46 months Priscilla paid
A sale on installment is a sale on credit, but a sale on credit monthly installments religiously, but on the 47th and
need not necessarily mean it is covered by the Maceda 48th month she failed to pay. On the 49th month she
Law, because a sale on credit need not be on installment tried to pay the installment due, but the vendor refused
basis. to receive the payments tendered by her. The following
month the vendor sent her a notice that he was
A sale of a condominium unit where 1/3 of the price will be rescinding the deed of conditional sale pursuant to the
paid upon signing of the contract, but the balance will be stipulation of automatic rescission and demanded that
paid within a year. Such is not covered by the Maceda Law she vacate the premises. She replied that the contract
because that is not a sale on installment basis. This is a cannot be rescinded without judicial demand or
sale on credit on a straight term basis. notarial act pursuant to Art. 1592 of the Civil Code.
Can the vendor rescind the contract?

In a sale on installment payable in 20 years or 30 years, No, because the object of sale is a residential unit and
a buyer was able to religiously pay his monthly under the Maceda Law, there are two stipulations that are
ammortization for 10 years, what if on the 11th year the declared void by this law. One of the stipulation is the
buyer for one reason or another, he was no longer able stipulation providing for the automatic rescission of the
to pay. What will be the effect? contract. Another void stipulation under the Maceda Law is
known as the forfeiture clause. In other words, the buyer is
Is the maceda law be invoked if the buyer was able to entitled to the Cash Surrender Value even if there is a
pay installments for at least two years? forfeiture clause. Such clause is a void clause under the
Maceda Law.
False. Even if the buyer was not able to pay installments
for a full two years, the buyer can have rights under the The vendor cannot rescind because under this Maceda
law. If he already paid for two years, he would have better Law, the buyer had already paid for at least two years. The
rights. buyer is entitled to a grace period which is 1 month for
every year. Under the facts Priscilla had already paid for 46
What are the rights of the buyer if he only paid for less months, and thus having completed paying 3 years she is
than 2 years? entitled to a 3 months grace period equivalent to 90 days.
On the 49th installment offered to pay, she dafaulted on the
He is given a minimum of 60 day grace period which can 47th and 48th month hence, there is 60 days within which
be increased at the option of the seller but no less than 60. she did not pay which was well within the 90 day grace
period. Had she not offered to pay on the 49th month,
In this grace period, the rights of the buyer are: 1) He can rescission may be a remedy on the part of the seller.
update his accounts 2) Pay the arrears without being held Hence, rescission cannot be a remedy on the part of the
liable for penalties, surcharges, interests, he can pay the seller.
entire balance during this grace period. 3) Sell his interest
under this contract 4)Assign his interest or rights under this If rescission is a remedy, the seller is obliged to return the
contract. cash surrender value to the buyer. There can be no valid
rescission without the return of this cash surrender value.
If the buyer was able to pay installments for at least
two years, what are the rights of the buyer? If the price is to be paid in 15 years and buyer failed to
pay on the 5th month of the first year, how long is the
The buyer will be entitled to a portion of the amounts paid, grace period? He has a grace period of 60 days.
known as the Cash Surrender Value in a minimum of 50% Thereafter he was able to pay the 5th, 6th, 7th, and in
for 2 years of all payments made. After another 5 years or if fact he was able to pay installments up to the 5th year.
he paid for a total of 7 years, entitled to another 5% which On the 5th month of the 5th year, he defaulted again.
means 55%, and every year thereafter, additional 5%, but How long is the grace period?
not to exceed 90%.

26
None. Under this law, the buyer can only avail of the grace the seller must still have possessory lien or he must have
period once in every 5 years of installments. exercised the right of stoppage in transitu.

Remedies Possessory Lien

What are the remedies of the unpaid seller? This possessory Lien is the right to withhold delivery or the
right to retain. Nowhere in the Code will one find
1. Possessory Lien possessory lien. But the popular name is possessory lien,
2. Right of Stoppage in Transitu to distinguish this lien of the seller from another lien of the
3. Right to Rescind seller in a scenario where the goods have already been
4. Right of Resale delivered to the buyer. Under the rules on preference on
5. Damages the concurrence and preference of credits, as to a thing
6. Specific Performance which was the object of a sale, which was already
7. Recto Law delivered to a buyer who thereafter became insolvent, the
seller has preference as to the unpaid price over the thing.
If the buyer paid 90% of the price can the seller still
invoke these remedies? Is insolvency required in order for this right to
withhold can be exercised?
Yes, as long as the price has not be fully paid, the seller is
still an unpaid seller. No. It is not necessary or required, but it is one of the
grounds for the seller to withhold the delivery of the goods.
Even if the buyer paid a check for the full amount, the seller Even if the buyer is not insolvent but there is no stipulation
may still have the right to invoke these remedies if the as to credit, the buyer still did not pay, the seller has the
check was dishonored, not due to the fault of the seller. right to retain the goods.

May a person who is not a party to the sale be able to Even if there was stipulation as to credit such that the
invoke any of these remedies? buyer was given a period, but despite the lapse of the
period the buyer still did not pay, the seller can still retain
Yes because the law provides that the word seller would the goods.
include certain third persons, such as assignees or heirs of
the seller, or an agent to whom a bill of lading was If the goods were delivered by the seller to a common
endorsed. carrier, pursuant to their stipulation in the contract for
May these remedies be invoked if theses remedies ultimate delivery to the buyer, does it mean that the
already passed to the buyer? seller has lost its lien over the goods?

Yes, by express provision of the law. As a rule, delivery to a common carrier is delivery to the
buyer. But even if the goods were delivered to the common
How can the seller have the right to retain or carrier, the seller may not have lost his lien. Therefore his
possessory lien if ownership already passed? remedy is possessory lien and not stoppage in transitu.
This would happen if he reserved ownership over the thing.
Possession by the seller may be retained because of What is provided under the law will include reservation of
constructive delivery. With constructive delivery, ownership ownership. There is something wrong with the view that
may already be with the buyer, but possession may still possessory lien may be invoked when the seller reserved
be with the seller, or the seller was merely constituted as a ownership, because it does not matter whether the seller
depositary. Ownership already passed but the seller still reserved ownership or not in relation to possessory lien.
has the right to withhold the delivery of the goods. Even if ownership had already passed he may still have the
right to retain the goods.
Are these remedies alternative or can be invoke all at
the same time? If there is a reservation of possession, there will be no
problem since the seller would have the right to obtain the
As to two remedies, they cannot exist at the same time, goods from the common carrier, he did not lose his
and these are possessory lien and stoppage in transitu possessory.
because a requirement for the right of stoppage in transitu
to arise is that the seller must have already parted Stoppage in Transitu
possession, and possession is a requirement in
possessory lien. But if the seller properly exercised the As to stoppage in transitu, once the seller had already
right of stoppage in transitu,the implication is that the seller parted possession and the goods are already in transit and
will be reverted back to its possessory lien. the as another requisite the buyer is already insolvent.
Take note that the insolvency of the buyer need not happen
However, as to the two other remedies of right of resale at the time of the perfection of the contract. Even if the
and right of rescission, the law even expressly requires that

27
insolvency occurred while the goods were already in
transit. that can be the basis of the exercise of this right. It is required that the seller must still have possessory lien
for the seller to exercise the right of resale.
There is no question as to taking actual possession over
the goods. But the other manner of exercising the right is Is insolvency required?
by giving notice to the common carrier as to the exercise of
the right. The problem here would be in the scenario where No, but it may be one of the scenarios where the seller will
even with notice given by the seller as to his exercise of the have the right to resell. One of the grounds for the exercise
right. However, the common carrier refused to deliver the of the right is because the buyer has been in default for an
goods back to the seller or to the place of the place unreasonable length of time. Another ground, is that this
specified by the seller, it does not necessarily mean that right is expressly reserved to the seller, and another ground
the common carrier would be liable because another is that the goods are perishable.
requirement in order for the common carrier to be obliged
to return the goods back to the seller under a certain In relation to this remedy, the law would mention two
situation is that the document of title which covers the notices coming from the vendor to the vendee. The first
goods must be surrendered first to the common carrier. notice is the intention of the vendor to resell. The second
This is a protection to common carriers because if goods notice is as to the date, the time and to the place of the
are covered by negotiable document of title a third person resale.
who is not the seller may have a better right over the
goods. This is in relation to the alienation made by the Are the notices necessary for the validity of the resale?
buyer to a third person.
These notices are not necessary for the validity of the
In a scenario where the seller has possessory lien or resale. Its relevance, as to the first notice pertaining to the
he just exercised his right to stoppage in transitu, what intention to resell will only be relevant if the ground for the
if the buyer sold the goods to a third person, can that resale is because the buyer had been in default for an
third person compel the seller to deliver the goods to unreasonable length of time. If there is such notice
the buyer? Will the alienation of the goods to a third especially if the notice was sent by a lawyer, it will be seen
person, will the seller lose his lien? when the notice was sent, when it as received by the
buyer, therefore, it would tell that the buyer had been in
As a rule, the seller will not lose his possessory lien. As an default for an unreasonable length of time. As to the two
exception, the seller will lose his lien when the seller other grounds of express reservation and goods are
assented to this alienation. Secondly, when the goods are perishable, as to the first notice will find not relevance.
covered by a negotiable document of title like a negotiable
bill of lading and the buyer sold this goods to a third person As to the second notice of the date, time and place of
in good faith and for value, which means he had no resale. This has something to do when the resale was
knowledge of the defect on the title of his seller. Thirdly, this done in good faith or not. So what if the sale is in good faith
negotiable document of title must have been negotiated to or in bad faith? When would it be considered on good faith
this third person. With these, the seller would lose his lien. or in bad faith? The effect of this, has something to do
The third person will have a better right over the goods. A with the right to recover the deficiency after the resale. For
negotiable instrument being a bearer instrument , he can example, the unpaid amount or the total contact price of
easily negotiate by delivery. Even if it is an order 100k, but the net proceeds of the resale is 60k, hence the
instrument, and it is deliverable to the order of the buyer, deficiency of 40k. Can the seller recover this deficiency
he can endorse such document to another buyer. Again, from the buyer? Yes, if the sale is a goods faith sale. Such
the unpaid seller will lose this lien when all these requisites notice is important because if the buyer was given notice
are present. at the date, time and place of resale, he would have been
present or he could have attended the resale, and he
If an action for specific performance was filed instead would have known if indeed the highest bid was only 60k.
of invoking the other remedies or together with the Whereas if there is no notice, there is a good possibility
other remedies, in the judgment of the court, the that the seller may have even sold the same property to
judgment was in favor of the seller, and if the judgment himself. Under the law he could not sell the property to
becomes final and executory ordering the buyer to pay himself directly or indirectly. Hence he could not connive to
the price, may the seller now lose his lien, and a third person to buy the goods for a less value so he can
therefore the buyer can demand for the delivery of the recover the deficiency from the buyer. Such would be a bad
goods to him so that he will thereafter pay the price? faith sale, and the seller could no longer have the right to
recover the deficiency. But if indeed there was a good faith
No. Even if there is such a judgment in favor of the seller, sale, and there was actual bidding and there are person
he will not lose his lien. Just because there is a judgment in who bid, but the highest bidder is 60, the buyer can be
favor of the seller, there is no guarantee at all that the compelled to pay the deficiency.
buyer will be able to pay or the buyer will in fact pay.
When the net proceeds is greater than the payable
Right of Resale amount, who is entitled to the excess amount?

28
 The Recto law is considered as a protection to buyers
Under the law it is the seller. The seller shall not be despite the fact that the law gives the seller remedies, and
responsible for the buyer for whatever profit he may obtain not to buyers. In the sense that these remedies are
out of the resale. alternative in character, it is meant to protect buyers
because once the seller invoke any of these remedies, he
If the buyer partially paid, but the seller resold it at a can no longer invoke the other remedies.
price higher than the amount payable, can the buyer
demand for the amount paid? Sale of a specific car worth 5 million, payable in 10
equal annual payments. The buyer failed to pay the
No. The law is clear that the seller shall not be responsible third installment. Can the seller invoke any of the three
for any profit he may obtain out of the resale. remedies?

If ownership had already passed to the buyer, in the No, because only one installment was unpaid. For the two
exercise of the right of resale, should the seller rescind other remedies to be available to the seller, the buyer must
the first contract, or the title of the first buyer for him have failed to pay two or more installments. If there is only
to be able to resell? one installment left unpaid, the only remedy by the seller is
exact fulfillment.
No need for rescission because the effect of the resale
would terminate the ownership of the first buyer by Despite demand, the buyer failed to pay the third
operation of law. Such ownership can be vested upon the installment, within a month the seller filed an action to
second buyer upon the delivery of the goods to the second recover a sum of money. In this action how much will
buyer. be recovered by the seller?

Rescission Since the buyer was able to pay only 2 installments

equivalent to 1 million, therefore there is yet a balance of 4
What are the grounds for rescission? million, the seller cannot recover the whole 4 million. What
the seller can recover is only the due amount left unpaid,
1. The buyer has been in default for an unreasonable which is the third installment in the amount of 500
length of time thousand.

2. The right is expressly reserved to the seller; Is it possible for the seller to recover the entire
balance?
Recto Law
Yes, if there is a clause in the contract of sale known as an
If the buyer fails to pay 2 or more installments remedies are acceleration clause stating that even if the buyer only failed
provided to the seller. In the first place, the Recto Law is to pay only one installment, the entire balance will become
considered related to the Maceda Law, that’s why the due and demandable.
examiner might require you to distinguish one from the
other, hence: Assuming the buyer failed to pay the third installment and
the 7th installment, may the seller invoke any of the three
remedies?
Maceda Law Recto Law
No. If the seller defaulted on the third and on the 7th
Contract of Sale Contract of Sale installment, the premise here is that the seller was able to
pay the third, fourth, fifth and the sixth installment. Since he
Sale on Installment Sale on Installment defaulted on the 7th, there is only one unpaid installment.
The law requires that the buyer must have failed to pay two
Passed to protect buyers Passed to protect buyers, or more installments (consecutive installments). The law
did not mention that the buyer failed to pay twice.
Object of sale is a Realty Object of the sale is a
for Residential purpose personal property or In a scenario, buyer failed to pay several installments,
movable property. such as the third and the 4th? May the seller invoke
any of the three remedies?
Remedies:
Yes.
Exact fulfillment
Cancellation of the Sale If the seller in the above scenario chose cancellation of
Foreclosure of Mortgage the sale, with cancellation of the sale, what is the effect
as to the right and obligation of the parties?

29
Since this is a form of rescission, the effect would be proceeds will be applied to the indebtedness which is
mutual restitution. The buyer will have to return the car to prohibited under the Recto Law.
the seller, and with mutual restitution the seller would
normally return all the amounts paid, but under this law, the Modes of Extinguishment of Sale
seller is not required to return all the amounts paid. The law
allows the seller to retain a reasonable amount which will 1. Cancellation of Sale of personal property payable in
be considered as compensation for the use of the thing. installment (Art. 1484).

May the seller retain all the amounts paid by the 2. Return of goods by the buyer to the seller in Sale or
buyer? Return or Sale on Trial (Art. 1502).

Yes, if there is a forfeiture clause. This is one big difference 3. Seller stopping the goods in transit (Art. 1532).
in the Maceda Law. In the Maceda Law, forfeiture clause is
void. 4. Unpaid seller reselling the goods (Art. 1533).

Even if there is a forfeiture clause, is it possible that 5. Unpaid seller rescinding the contract of sale (Art. 1534)
the seller, may not have the right to retain all the
amounts paid? 6. Rescission of sale when the thing delivered was lacking
in area or of inferior quality.
Yes, if to do so would be considered as unconscionable.
To determine if it is unconscionable would depend on the 7. Rescission of sale when there is a breach of warranty;
circumstances of the case or of the sale and the amount
involve and the parties. 8. Rescission of the sale of animals with redhibitory defect;

To secure the fulfillment of the buyers obligation on 9. Payment

the car sold, the buyer mortgage his blue diamond.
Thereafter the buyer failed to pay the third and the 10. Novation
fourth installments. The seller can now invoke any of
these remedies, but when the seller invoke foreclosure 11. Loss of the thing
of the mortgage and the net proceeds of the
foreclosure sale is less than the balance, hence there 12. Resale
is deficiency, can the seller recover the deficiency from
the buyer? What is the extra special mode of extinguishment of
sale?
Yes, because the Recto Law does not apply to this
scenario because the thing bought was not the same thing Redemption either conventional or legal.
which was mortgaged. For the Recto Law to apply, what is
bought, is the same thing which is mortgaged. What are the kinds of redemption?

A bought a truck from B payable in installment secured 1. Conventional - There is right to repurchase expressly
by a chattel mortgage executed by A on the truck. As reserved in the contract and this right may only arise in 1
additional security A’s brother C, executed a real estate kind of contract. This is a sale with a right to repurchase
mortgage in favor of B. A defaulted in the payment of or pacto de retro sale.
several installments. Consequently B filed an action
for replevin, repossessed the truck and foreclosed the 2. Legal - Those which may be exercised by co-owners or
chattel mortgage. Can B proceed the other properties by owners of adjacent lots.
of A and the real estate mortgage executed by C, to
recover the deficiency if any after the chattel mortgage Conventional
foreclosure sale?
If there was no stipulation as to the right of redemption then
No. B cannot procced against the other properties because no right of redemption.
under the Recto Law, since under the facts the sale is In the exercise of this right, how much would have to
covered being a sale of a movable on installment, would be offered by the seller a retro in order to redeem the
not allow the recovery of the deficiencies of foreclosure. property? Would the price paid by the buyer be
Going after the other properties is a form of recovery of sufficient in order to repurchase the same?
deficiency.
Not necessarily. Under the law, the amount which has to be
In the same manner, the foreclosure of the real estate offered by the seller a retro (vendor) in the exercise of the
mortgage is also a form of recovery of the deficiency, right of redemption are: 1) price paid; 2) the expenses
because the real estate property will be sold and the net incurred by the vendee (buyer a retro) for the execution of

30
the contract 3) necessary and useful expenses incurred by
the buyer (buyer a retro). a. The period is 4 years. Under the law, if there is a right of
redemption but the parties failed to provide for such a
Fruits at the time of sale period, the law itself says that the right may be exercised
only within 4 years. However, if the parties stipulated as
In a mango plantation, there may be fruits at the time to the period within which the right may be exercised, the
of redemption.The value of the fruits is 100k. Can the law provides that such cannot exceed 10 years, and if it
seller (buyer a retro) be compelled to pay for the value exceeds 10 years, the same will be reduced.
of the fruits?
b. To file an action for the consolidation of title.
It will depend on whether there are fruits at the time of the
sale. If there were fruits at the time of the sale, the seller In a sale with right to repurchase, ownership passes
(seller a retro) will only be obliged to pay the fruits at the upon the expiration of the right to repurchase?
time of redemption if at the time of the sale, the buyer
(buyer a retro) paid for the price of the value of the fruits. No, ownership passes to the buyer upon delivery. The
implication however of the expiration to the right to
But if at the time of the sale, there were fruits but the buyer repurchase, is that ownership by the buyer becomes
(buyer a retro) did not pay for the value of the fruits, then absolute.
the seller should not likewise be compelled to pay for the
value of the fruits at the time of redemption. What will be the effect of the expiration of the period to
repurchase without the seller exercising such right? Or
No fruits at the time of sale, but there are fruits at the time even if he did exercise, it was not a valid exercise of a
of redemption right? In the above scenarios, what is the effect on the
ownership of the buyer?
If a COS was entered into in January 2001 and there
were no fruits at the time of the sale. However, at the Buyers right of ownership over the thing becomes absolute.
time of redemption in April 1, 2005 there were fruits. During the period he has ownership, but this ownership is
The value of which is 100k. How much can the seller be subject to a resolutory condition which is the valid exercise
compelled to pay fro these fruits? of the right to repurchase. And upon repurchase, ownership
by the buyer (buyer a retro) shall be terminated.
Under the law the seller (seller a retro) can be compelled to
pay for the value of the fruits giving the buyer (buyer a Upon the lapse of the period without the seller having
retro) the part corresponding to the time he possessed the exercised his right to repurchase the ownership of the
land in the last year, counted from the anniversary of the buyer becomes absolute regardless of whether the
date of the sale. subject of the sale is an immovable or a movable
property?
Under the facts, the anniversary date is every January 1st.
The anniversary date (the last year) is January 1, 2005. Yes, ownership becomes absolute, and it does not matter
From January 1, 2005 to April 1, 2005, the buyer was whether the object of sale is an immovable or a personal
already in possession for 3 months out of 12 mos. of the property.
entire year, meaning it is 1/4 of the entire year. Therefore
the buyer a retro (seller) is compelled to pay 1/4 of the of Is an action for consolidation of title required in order
the 100k value of the fruits which is 25,000. that the buyer acquire ownership over the object of the
sale or at lease acquire absolute ownership?
Period of Conventional Redemption
No. This action is only necessary if he would want the
A sold a land to B for 10k with a right to repurchase property to be registered in his name. This action is in
expressly agreed upon between the parties. Because order to protect the buyer so that the seller cannot sell the
they were friends, they did not provide for a period property to another person.
within which the seller may exercise the right to
repurchase. But again, there was a reservation of the Assuming you are a lawyer, a client asked you to
right to repurchase, but the parties failed to fix the examine a document which is denominated as a
period. DOS with a right to repurchase and that client was
the buyer a retro (buyer). Howeve
a. When should the seller a retro exercise the right to r, u p o n examination of the terms and conditions
repurchase? of the contract, it appears that the right has long
expired. Thus, the client asked, may I still be able to
b. If the seller failed to repurchase within the period recover this parcel of land which is the subject
agreed upon or the period prescribed by law, what matter of this contract?
will be your advice to the buyer in order to protect
the buyer more?

31
Consider the possibility that the client may recover. Ask
the client of the circumstances surrounding the Are these presumptions conclusive?
execution of that document. Ask him “Why did you
execute this DOS?” If the answer is “kasi po atty. nagka No, this is merely a disputable presumption. In fact, the
utang ako sa kanya 150k tapos sabi nya instead of SC would sustain the validity of a sale with a right to
executing a mortgage agreement, DOS with a right to repurchase despite the gross inadequacy of price
repurchase”. Anyway, from the DOS with a right to because somehow it would be advantageous to the
repurchase, he may appear to be protected. Kasi if he seller a retro. In the exercise of the right to repurchase,
owes that person 1M and if he is given in the debt a it is more advantageous if the price is small because he
period of 1 year within which to pay in the DOS with a can easily come up with that amount and repurchase
right to repurchase, he would also have 1 year within the thing.
which to repurchase. Diba parang pareho lang? But
instead of mortgage he was asked to sign a DOS. If that What if there was a stipulation in the COS that the
is the case, clearly you can conclude that this is not an seller will shoulder the capital gains tax? Would the
honest to goodness sale with a right to repurchase. You presumption that this is an equitable mortgage will
can treat this transaction merely as an equitable arise?
mortgage. Hence, he may still be able to recover what
was the subject matter of that transaction. No, the presumption will only arise if the seller bound
himself to pay the tax on the thing not the capital gains
Why would the creditor (buyer) ask his debtor tax. That would be the real property tax.
(seller) to sign a DOS with a right to repurchase
instead of a mortgage to secure the fulfillment of his Note: Presumptions under 1602 would arise regardless
obligation? of whether the sale is denominated as a sale with a right
to repurchase or a DOS. It doesn’t matter. Even if it is a
To ensure that the property will be owned by him DOS if there is doubt as to whether or not it is an
automatically upon the expiration of the period within equitable mortgage. It has to be resolved as an
which to repurchase and the seller a retro failed to equitable mortgage.
exercise the right to repurchase which will not happen in
a mortgage. There is a principle in mortgage known as What is the remedy of the seller a retro?
pactum commissorium. Upon the default of the debtor
the mortgagee, cannot validly appropriate the thing for Reformation because the contract as written did not
himself. Ownership will not automatically pass by mere reflect the real intention of the parties. The real intention
default of the principal debtor because pactum is to secure the fulfillment of the obligation of the vendor
commissorium is void because the remedy of the a retro (debtor).
creditor is to have the property sold in a foreclosure sale
not to appropriate the thing. So to avoid those B. Legal Redemption
requirements sa mortgage, ang gagawin ng seller/
creditor is to have the debtor sign a DOS with a right to Who has the right to redeem?
repurchase because the moment the debtor failed to
repurchase within the period, absolute ownership goes A: 2 groups
to the creditor who is in that sale the buyer (creditor) a
retro. Wala na syang kailangan gawin. 1. Co-owners

If the instrument is a DOS with a right to repurchase it 2. Owners of adjacent lots (object is lot)
may actually be considered as an equitable mortgage - consider if rural or urban land
by just examining the terms and conditions of that
contract. There are certain instances when the law itself Co-owners
provides for a presumption that this is an equitable
mortgage under 1602. Co-owners of what thing, movable or immovable?

What are those instances where a DOS may actually It does not matter.
be disputably presumed to be as an equitable
mortgage? A, B, C, D co-owners of land. D donated his interest
in the land to X. would A, B, C, have the right to
1. The price is grossly inadequate. redeem?
2. If the vendor a retro would continue to be in the
possession of the thing after the sale, which is No, in legal redemption, the alienation by a co-
unusual because if indeed this is a sale then owner must be by onerous title (sale, dacion en
the vendee should be in possession after the
pago, barter). This act (donation) is gratuitous act.
sale.
Hence, no
right of redemption.
32
 cannot agree on the portion of the share of B which
What if B sold his interest in the land to D. would A will be redeemed by both of them - what would be
and C have the right to redeem? the final sharing?

No, because for A and C to have the right to reddem, C will have 2/3, A will have 1/3 because they will have
the alienation should be in favor of a 3rd person. the right to redeem in proportion to their share in that
property. Note: they may stipulate as to the sharing.
What if B sold his interest in the land to X. A, D, C,
wanted to redeem. May they be able to exercise the What if in the DOS executed between B and X, the
right of redemption? All of them? price stated in DOS was 3M. Hence, A and C can be
compelled to redeem by paying 3M?
Yes. All of
them. Not necessarily, under the law, if the price stated in this
sale is unconscionable, the redemptioners can only be
Is this the same rule in adjacent lots? compelled to pay the reasonable value. Ang posibleng
value could only be 1M pero ang nakalagay sa DOS
No, in adjacent lots, there can be so many owners 3M. Is it possible that X did not pay 3M? Yes. Why
depending on how it is big. The owner with the would they do that? The reason for that is to pre-empt
smallest land area would have the right to redeem. A and C from exercising the right of redemption. To
discourage them from redeeming the property kasi kung
What if the owners of adjacent lots would have mura yan they can easily exercise the right of
equal area? redemption.

The first one who manifested his desire to redeem. The law protects the redemptioners - if the price is
unconscionable - they may pay reasonable value.
As to Co - owners
What if the value is 3M but DOS stated 1M but X
Land owned by spouses was sold by them to their actually paid 3M (1M was stated to reduce tax
three sons in 3 different deeds of sale. In each DOS liability). How much can A and C be compelled to
the specific area was already described. After the pay?
execution of the DOS, these children would actually
harvest only their respective area. They wanted to Doromal vs CA
have their respective share registered in their own
name. They filed a petition for the cancellation of Held: The co-owners can only be compelled to pay the
the title of their parents for that property to be price stated in the deed of sale. The trial court sustained
divided, they submitted their individual DOS. But the claim of the buyer that they be reimbursed the
the petition was denied by the register of Deeds actual amount paid because according to the trial court
because they failed to submit a subdivision plan. that would be immoral to pay only the amount stated in
The RD cancelled the TCT in the name of the the contract. SC said it was more immoral when the
parents issued another TCT in the name of the 3 parties pay only a small amount where in fact the real
children in one TCT. One of the children sold the amount paid is a much higher amount. Because the
land to a 3rd person. Can the 2 other brothers only purpose of this is to defraud the government.
redeem as co-owners?
Owners of Adjacent Lots
No, because under the facts, they are no longer co- Make a distinction between a sale of an urban land and
owners because before hand their parents sold to them sale of rural land.
the property in three separate deeds of sale. Although a
single TCT was issued to them, is not conclusive as to Sale of Urban land
the rights of the parties to a certain property such as in
the case as co-owners. At its face they are co-owners Requisites:
but in reality there has already been a partition of the
property. In fact, a property may be registered in a 1. The land is so small and purchased only for
person who is not the owner because somebody forged speculation
the signature of the real owner. Thus, the requirement of
the law that the co-owner would have the right to If that is the case, then the adjacent lot owners
redeem is not present therefore, there would be no right would have the right not only of the right of redemption
of redemption. but also of right of pre-emption. (Article 1622)

A, B, C co-owners. A’s share ¼. B’s share ¼. C’s In rural there is no right of pre-emption meaning
share ½. B sold his interest in the land to X. even before the perfection of the sale, the adjacent lot
However, A and C both wanted to redeem. (As co- owners would already have the right to redeem by way
owners they may have the right to redeem). If they
33
of pre-emption, 30 days from notice of such intention to buyer. How would he know the terms and conditions of
sell. the sale if he is not given a copy of the DOS. So he
must have a copy.
But in rural lands and alienation is by onerous title. Double Sales
Another requisite: the land which was the object the
sale must not be greater than 1 hectare. If the same thing should have been sold to different
vendees, to whom shall ownership be transferred? Is it
Also, for the owners to have the right of redemption, possible that ownership have been transferred to both
the buyer from whom the property will be redeemed buyers?
must have another rural land.
It is possible that both buyers may have acquired
Another requisite - the land sold and the land of ownership but only one of them would have a better right.
redemptioner must not be separated by brooks, rivers in The real question in double sales is who has the better
order that these lot owners would have the right to right.
redeem.
What is the rule when there is a sale of a movable
BE: Sisters A and B co-owners of land. B sold her property to two or more persons, who has a better
interest in the land to X a 3 rd person. X sent a notice right?
to the sister of the seller, the other co-owner
The first person who took possession in good faith. If no
informing her of such sale and giving her copy of one took possession of the movable, it is the buyer who
the DOS. Despite notice, A did nothing. After that, X has the oldest title, and in good faith.
requested for the annotation of the sale in the title
of that property in the RD. RD sent another notice to What is the rule when there is a sale of an immovable
to two or more persons, who has a better right?
A. A did not do anything. After so many months, X
wanted the property to be partitioned. A then give 1. The first who registered the deed of sale in good faith;
notice to X that she is exercising the right to 2. The first who took possession in good faith
redeem. Does A have the right to redeem? Right of 3. The buyer who has the oldest title in good faith.
redemption must be exercise within 30 days from
what? JV, owner of a parcel of land sold it to PP. But the land
A: The co-owner still has the right to redeem. Under was not registered, one year later, JV sold the same
1623, the 30-day period would start to run only from the parcel of land to RR, who succeeded to register the
deed and to obtain a TCT over the property in his own
time the co-owner received from the vendor. Sino
name. Who has the better right over the parcel of land?
nagbigay ng notice from the facts? Una, yung
vendee pangalawa yung RD. so hindi yung vendor amd RR may have a better right, when RR registered the sale in
nagbigay. So 30-day period has not started to run. good faith. Under the facts, RR was able to register the
Hence, he still has the right to redeem. deed in his own name, there was no mention that he had
no knowledge of the prior sale at the time of registration.
Atty. Uribe: Under the facts, she received 2 notices, not
only written notices but also copies of the DOS. Under How to determine good faith between first and second
the principle of estoppel, she cannot claim that she still buyer?
has 30 days. In fact, in a decision of SC involving a sale
of a co-owner share which sale was facilitated by the As to the first buyer, it is the fact that he has no knowledge
other co-owner. But the latter claimed he can still of the defect on the title of the seller.
redeem because he did not receive notice. SC said sya
ang nag-facilitate ng sale so why he could not be given As to the second buyer, it is the fact that he has no
notice, hence he had knowledge of the sale. This is still knowledge of the title of the first buyer.
consistent in the case of Doromal. If you consider the
provision literally it says “30 days from the time of notice June 15, 1995, Jesus sold a parcel of land to Jaime. On
in writing is given by the vendor to the co-owner”. Ang June 30 1995, he sold the same land to Jose. Who has
nakalagay sa batas, notice in writing. Hence, the better right if the first sale is registered ahead of
apparently even a letter written by the vendor would the second sale, with knowledge of the latter and the
suffice and hence the 30 day period would start to second sale was registered ahead of the first sale with
run? SC said: No, the co-owner should be given a copy knowledge of the latter?
of the DOS and it is only from that moment that the 30-
day period will start to run. This is a good ruling - not As to the first sale, first sale was registered ahead of the
any ordinary notice but a copy of the DOS because in second even with knowledge of the second sale, the
redemption, the redemptioner is supposed to be registration is valid. Even though the first buyer acquired
subrogated under the same terms and conditions as the knowledge of the second sale, he may register the deed of

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sale after the second sale. Since he was the first buyer registered under the Torrens System can be covered by the
who registered the sale, knowing the second sale does not provisions of Art. 1544.
make the first buyer a buyer in bad faith.
It could be noticed that C had registered the land, but the
As to the second sale, though the deed of sale was same is not covered under the torrens system because,
registered first, but with knowledge of the first sale, then there is another system of registration of unregistered
the registration was in bad faith. lands. There is a different book covered by this kind of
If the second buyer had no knowledge of the prior sale registration, hence, Art 1544 would not apply.
when he signed the deed of sale, but when he is about
to register the deed of sale, he acquired knowledge of Therefore, if ARt. 1544 would not apply, B would have a
the first sale, would that make him a buyer in bad better right because there was actual delivery to him.
faith? Therfore, under the general rule, upon delivery, ownership
passes to the buyer. When ownership had passed to the
What is required under Art. 1544 is registration in good buyer when the property was sold in the execution sale, the
faith. At the time of perfection, signing or payment, he may buyer would not get anything from the execution sale
still have no knowledge of the prior sale but at the time of because he merely steps into the shoes of the judgment
registration he may already have knowledge, hence, he debtor. Since the judgment debtor had no ownership over
cannot be considered a registrant in good faith. He may not the land at the time of sale, the he did not acquire
have a better right over the first buyer. ownership by virtue of that sale.

Bautista vs. Sioson Note: To determine that the land is under the torrens
system, the ownership is proven by TCT’s or OCT’s,
The owner sold a registered parcel of land to B who otherwise if proof of ownership are mere tax declarations, it
did not register, neither did he took physical will not be considered as registered land.
possession. After the sale they executed a lease
agreement in which the buyer is now the lessor and
that the seller became the lessee. Hence, the seller Loss of the thing which is the subject of a contract of Sale
continued to be in possession of the land not as a
concept of an owner but of a lessee. After the sale and If the thing sold or the object of the sale is lost or
the contract of lease, A sold this parcel of land to C, destroyed, who will bear the loss, or who may be held
who also did not register the same, and this time C liable for the loss? Can the buyer still be compelled to
took physical possession. Who between B and C had a pay the price despite the loss of the thing which was
better right? the object of the sale?

B would have a better right because when B executed a The first thing that must be considered is the cause of the
lease contract with A, B is in contemplation of law in loss because even if the seller or the buyer is still the
possession of the property, which is legal possession, he owner, if the loss was due to the fault of one of the parties,
obviously is therefore a possessor in good faith, the first he would either be the one to bear the loss or he can be
who took possession in good faith. Though C had physical held liable for the loss.
possession over the property, he is considered to be the
one second in possession. B therefore was considered to For example if the seller was at fault resulting in the loss of
have a better right. the thing and he was still the owner, he will bear the loss.
But if at the time of the loss, the buyer was the owner, and
Note: Legal possession is sufficient to determine as to who the seller was at fault, the seller will be liable for the loss of
have a better right between two persons. the thing because he was at fault.

Carumba vs. CA Loss due to fortuitous event

Sale of a parcel of land to B who took possession of The common scenario in the bar exams is that the
the land. However, this seller a judgment debtor to one thing is lost due to a fortuitous event, without the fault
of his creditor. Because of a judgment in favor of a of the buyer or the seller, who bears the loss or who
creditor C, the parcel of land had become the subject can be held liable for the loss?
of an execution sale. Then the buyer became C who
registered the sale. Who will have a better right Another scenario which must be considered is when
between B and C and C had no knowledge of the first did the loss happen? This question will be relevant if
sale? the loss happen after the perfection. Because if the
loss of the thing happened before the perfection, if the
B would have a better right because this parcel of land was loss was due to a fortuitous event? It will be the seller
registered under the Torrens System. Art.1544 does not who shall bear the loss, if the seller is the owner. In
apply to unregistered lands. Only those lands which are such case, there will be no perfected contract of sale at

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all because there was no object to talk about. After the delivery of the car to X. The owner B therefore had to bear
perfection of the sale, who bears the loss? the loss.

As a rule, the owner bears the loss. This is not applicable Under what circumstance would a party to a contract
in sale of fungible goods, because in such sale, under Art. of sale who was not the owner at the time of the loss
1480, if these goods are sold at the price fixed according to be the one to bear the loss?
weight, number or measure and these goods had already
been weighed, counted or measured, the risk of loss will 1. If there is a stipulation (take note of Tabora Case).
already be with the vendee even before there is transfer of
ownership. Such is not correct, because such law is relied 2. When ownership is retained by the seller in order to
upon the old civil code. The New Civil Code under Art. secure payment of the price for the goods sold (Art.
1480 last paragraph is an amended version of Art 1452 of 1504).
the Old Civil Code. In the amended version it was provided
that Should fungible things be sold for a price fixed 3. When the seller is in possession but the buyer is at fault
according to weight, number or measure, the risk shall not because of the delay in retrieving the goods.
be imputed to the vendee until they have been weighed,
counted or measured, and delivered, unless the latter has 4. When the seller is in posession, but ownership had
incurred in delay. With delivery, ownership passes to the already passed to the buyer by constructive delivery, but
buyer and therefore, it is the vendee who shall bear the risk the seller will bear the loss due to the seller’s fault.
of loss. Therefore, there is seem to be no exception, as far
as fungible goods are concerned. A set of AMJUR was sold to Tabora on installment
basis. On the day these books were delivered to the
D sold a second hand car to E for 350k, the agreement office of Atty. Tabora, the entire block where the office
between D and E was that half of the purchase price of the latter is located was burned together with the
shall be paid upon delivery of the car to E and the AMJUR. Atty Tabora refused to pay the balance despite
balance of 175k shall be paid in 5 equal monthly demand by lawyer’s co. Lawyer’s co therefore filed a
installments of 15k each. The car was delivered to E case. Two defenses were raised 1) res perit domino
and D paid the amount of 175k to E. Less than one rule because there is a stipulation in the contract that
month thereafter, the car was stolen from E’s garage the seller shall retain ownership over the books until
with no fault on E’s part and was never recovered. Is D full payment, and if lawyers co was the owner then it
legally bound to pay the balance of 175k? should bear the loss. Is the argument correct?

Whether or not E would be legally bound to pay will depend No. If there was a stipulation in the contract that ownership
on who will bear the loss. Since the car was stolen, would shall be retained by lawyers co until full payment was
the buyer bear the loss? Or would the seller be the one to made, there was also a stipulation that the risk of loss shall
bear the loss? If E would have to bear the loss, he would pertain to the buyer at the time the books were delivered
still be compelled to pay the balance. whatever the cause of the loss. This is an exception to the
res perit domino rule.
From the facts, there was already delivery, there is nothing
under the facts that will show ownership was reserved. Assuming there was no stipulation that the risk of loss
Therefore upon delivery, ownership passes to E the buyer. shall pertain to the buyer upon delivery, may the buyer
Under the facts, there was no fault on the part of the seller. still be held to answer for the loss?
Hence, the buyer bears the loss. Therefore, E can be
compelled to pay such balance. Under Art. 1504, when the owner reserved the title to the
property only to secure the payment of the price of the
S, an American resident of Manila, about to leave on a buyer, then by law, risk of loss shall only pertain to the
vacation, sold his car to B, for 2000 USD. The payment buyer. This is known as a security title. Therefore, even if
to be made 10 days after delivery to X, a third party the buyer did not acquire title upon delivery, he bears the
depositary agreed upon who shall deliver the car to B loss.
upon receipt by X of the purchase price. It was
stipulated that ownership be retained by S until If the object of the sale is in possession of the seller,
delivery of the car to X. 5 days after delivery of the car and the same was lost due to fortuitous event, who will
to X, it was destroyed by fire which gutted the house of bear the loss? The seller?
X, without the fault of either X or B. Is buyer B legally
obligated to pay the purchase price? Not necessarily. It will be the party who was at fault
resulting in the delay in the delivery of the goods. It may be
From the agreement of the parties, ownership is retained the buyer or the seller.
by S until the delivery of the car. However, under the facts
the loss happened after the delivery of the car, therefore it As agreed upon by the parties, the buyer should have
is clear that ownership had already passed to B after obtained the goods from the seller yesterday. However,
due to the fault of the buyer, he failed to get the goods

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from the sellers place. Today all these goods were lost
or destroyed due to a fortuitous event. Who will bear
the loss?

Ordinarily, the buyer who would obtain possession from the

seller.

At that time there is yet no delivery because the goods are

still with the seller. The owner is still the seller but the
owner will not bear the loss because the delay in the
delivery was due to the fault of the buyer.

In another scenario, the goods are still with the seller,

but it will be the seller who would bear the loss even if
the buyer was already the owner. How could the buyer
already be the owner if the seller is still in possession
of the goods. The answer would be by reason of
constructive delivery. Philippine law recognizes not
only physical or actual but also constructive delivery.
One example of constructive delivery, is the execution
of a public document or instrument, ownership passed
to the buyer but possession is still with the seller. If it
was the seller who was at fault resulting in the delay in
the delivery of the goods, of course the buyer will not
bear the loss even if he was the owner already at the
time of the loss.

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