Caveat lector

SALES REVIEWER|1 SEM| AY 2010-2011|SANCHEZ I. INTRODUCTION

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One where a party gives something to another because of some service or benefit given or rendered by the latter to the former where such service or benefit was not due as a legal obligation E.g. bonuses

c. Contracts of pure beneficence (Gratuitous) Essentially agreements to give donations B. DEFINITIONS 1. CONTRACTS OF SALE ART. 1458: a) One party (SELLER) obligates himself to transfer ownership and to deliver a determinate thing b) Other party (BUYER) to pay a price certain in money or its equivalent Both REAL OBLIGATIONS = to give; cf. PERSONAL OBLIGATIONS = to do May be proper subject of Action for SPECIFIC PERFORMANCE; cf. PERSONAL OBLIGATIONS can only claim damages in case of breach Civil Code expands the meaning of determinate; as applied to the Law on Sales, also includes generic things which are at least determinable ELEMENTS OF A CONTRACT OF SALE 1. CONSENT: to transfer ownership in exchange for a price 2. DETERMINATE SUBJECT-MATTER 3. PRICE CERTAIN: in money or its equivalent CASES TOPACIO v CA: Contract of Sale Consent: Meeting of minds BPI agreed to sell as 1.25M (offer); accepted by Topacio (Nov. 27); BPI issued a receipt for the 375K downpayment Acceptance of earnest money; forms part of purchase price in COS (Art. 1482) BPI did not reserve title to property NO Rescission; in COS requires (both lacking): a. judicial notice/notarial act b. stipulation of automatic rescission LAFORTEZA v MACHUCA: Contract of Sale (and Lease) denominated as Contract to Sell a. no express reservation of title b. no stipulation that non-payment would make it unenforceable COS: elements are all present a. Consent b. Determinate subject-matter: house and lot c. Price: 600K balance to be paid upon issuance of a new certificate of title PERFECTED: a. earnest money paid b. 6month period only a condition for the payment

A. ESSENTIAL REQUIREMENTS OF A CONTRACT ART. 1318 ESSENTIAL ELEMENTS without which there would be no contract 1. Consent Consent is manifested by the MEETING of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer. 2. Object a. All things not outside the commerce of man b. All rights not intransmissible c. All services not contrary to law, morals, good customs, public, or public policy Requisite of Object of Contracts 1. Within the commerce of man (Art 1347) 2. Licit, not contrary to law, morals, good customs, public policy or public order (Art 1347) 3. Possible (Art 1348) 4. Determinate as to its kind Art 1349 The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. 3. Cause CAUSE the immediate and most proximate purpose of the contract, the essential reason which impels the contracting parties to enter into it and which explains and justifies the creation of the obligation through such contract The motive may be said to be the secondary or indirect purpose a. Onerous Contracts Prestation or promise of a thing or service by the other Need not be adequate or an exact equivalent in point of actual value especially in dealing with objects which have rapidly fluctuating price Remuneratory Contracts

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c. non-payment of rent if partition took longer than 6m = Machuca was already owner NOT RESCINDED (by Lafortezas) a. no notarial/judicial rescission b. no stipulation of automatic rescission *Letter from Lafortezas saying they were rescinding the contract given 5days after Machuca offered to pay *Right to ask for rescission vested on Machuca; he was ready to comply with his obligation when the Lafortezas were not. CAVITE v LIM: Contract of Sale in favor of Lim by CDB; NOT an Option Contract OPTION CONTRACT (Preparatory) - only when option is exercised may a sale be perfected CONTRACT OF SALE a. Consent: meeting of minds (PERFECTION) b. Thing: determinate subject matter c. Price NOT required at PERFECTION that the SELLER be the owner of the thing sold; only at CONSUMMATION does it matter (Nemo dat quod non habet) Re: 10% down payment; if: a. Option money: remains with CDB b. Earnest money: returned to Lim UNENFORCEABLE SALE recovery of money paid - cannot be consummated; incapacity to deliver - CDB liable = bad faith; Rodolfos title cancelled by the time CDB foreclosed mortgage ALMIRA v CA: Perfected Contract of Sale Almira sold to Briones (a) 65K; (b) 85K Separate title in the name of Julio Garcia condition on obligation (to pay 85K) NOT on PERFECTION. (NOT) Contract to Sell - Ownership, by agreement, reserved to vendor - Ownership shall NOT pass until full payment of the price Contract of Sale - Title passes to the vendee upon delivery of the thing sold - Non-payment of vendee entitles the vendor to demand specific performance or rescission, both with damages (Art. 1191) a) Object: lot 1642 b) Price: 150K - Separate title only a condition for Briones to pay balance BUT there was already a perfected contract. ALFREDO v BORRAS: Perfected and Consummated Contract of Sale Alfredo mortgaged to DBP (7K) Borras paid loan and balance to Alfredos (15K) DBP gave Borras copy of OCT; Carmen Alfredo issued a receipt for the received balance (8K) A re-sold property on the basis of a copy of the title obtained judicially; claims sale with B not valid under the Statutes of Fraud because it was oral Contract of Sale

1. Perfected a. consent b. object land c. price 15K 2. Consummated - Physical delivery of subject land transfer of ownership Even if orally entered into Receipt = note/memo of the sale Under SOF, only voidable and may be ratified when Godofredo A introduced B to tenants of land Redounded on the conjugal partnership (Art. 161) BLAS v HUTALLA: Contract of Sale (2 ) Executed 3 contracts a. Original (in PH): only to convince stepmom and nephew to vacate b. Deed of Sale (US) nd c. REPCRD (US): incidental to 2 agreement nd SC: 2 contract is binding st - 1 did not show the true intention of the parties - Blas made partial payments under REPCRD nd 2 Contract = Contract of Sale - Title passes to vendee upon constructive or actual delivery - May be rescinded by notarial deed Blas failed to pay balance; Hutalla judicially rescinded Abandoned MACEDA LAW of sale of real property is done on an installment basis, the buyer will be given a grace period. CRUZ v FERNANDO: Kasunduan is a Contract to Sell No definite manner of payment = no consent Absence of any formal deed (Aside from payment) failure to perform other suspensive condition - For Cruz to relocate house near the rear portion of the lot - Non-compliance prevented Gloriosos from proceeding with the sale VALDEZ v CA: Contract of Sale Sale to Lagon (Contract of Sale) - Consideration: a. Payment b. Transfer of Bank c. Build commercial building - No reservation of title; non-payment is resolutory MANILA METAL CONTAINER CORP. v PNB: NOT perfected contract of sale (repurchase) Acceptance of an offer should be absolute - Qualified acceptance = counter offer - No acceptance of purchase price by either MMCC of PNB = NO CONSENT 725K merely a deposit to be applied to purchase price in the event that PNB accepts/approves recommendation of SAMD to accept MMCCs offer. ABSOLUTE ACCEPTANCE = PERFECTION
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- Through acts; conduct; words - Clearly manifest intention ROBERTS v PAPIO: Contract of Sale and Lease; NOT Equitable Mortgage A. Sale of Papio to Roberts = SALE - Not pacto de retro with repurchase - Not equitable mortgage: (a) enteres into contract of sale; (b) intent: to secure debt by mortgage - No right to repurchase B. Payment of Lease Contract of Sale - No evidence that Ventura was given the authority as agent to receive payment (only lease) HERRERA v CAGUIAT: Contract to Sell Ownership reserved to seller - Not to pass until full payment of purchase price Receipt of Partial Payment shows true agreement 1. Ownership retained by Herrera - Not to pass until full payment - Right to rescind unilaterally 2. Agreement NOT embodied in a deed of sale - Shows that the parties did not intend immediate transfer of ownership 3. H retained possession of the CTC of the lot - No transfer either by actual or constructive delivery Money given NOT earnest money under Art. 1482 (Contract of Sale). In Contract to Sell EM only forms part of consideration if sale is consummated. 2. CONTRACT TO SELL CASES ADELFA PROPERTY INC. v CA: Contract to Sell No intention to transfer ownership except upon full payment of the purchase price NOT OPTION there was already CONSENT meeting of offer and acceptance OPTION (Period; Privilege) a. No Consent b. Object: Right to buy (privilege) refers to a specific property c. Price: option money (may or may not exist) May be unilaterally rescinded - Failure of Adelfa to consign purchase price after the case filed by the nieces and nephews was dismissed - July 27 letter: announced rescission LAFORTEZA v MACHUCA (supra): Contract of Sale and Lease CASTILLO v REYES: Contract of Sale Perfected by mere CONSENT - OFFER + ACCEPTANCE = meeting of minds re: subject-matter and price CHECK/CASH need not be considered (form of payment) as long as LEGAL TENDER

CITY OF CEBU v HEIRS OF RUBI: Contract of Sale Acceptance of City when it passed the RESOLUTION; letter from Mayor OFFER by buyer; delay in payment laches BUOT v CA: Contract to Sell No title; Reston had to apply for it Title transferred to vendee only upon full payment of purchase price NOT OPTION - Should have or be exercised within a SPECIFIED DURATION/PERIOD - Privilege to buy or sell PLATINUM PLANS INC. v CUCUECO: Contract to Sell nd Did not agree when 2 installment will be paid = NO CONSENT WITH express reservation LESSEE: even if in possession, title is still reserved to owner Platinum to return 2M; Cucuenco to pay rentals from date of agreement between parties BOWE v CA: Contract to Sell No formal deed of conveyance: intent: transfer title only upon full payment Albolarios asked for return of down payment - Would not have done so if they thought they owned the property - would have reduced it in writing New implied lease RAYOS v CA: Contract to Sell Retained ownership until full payment Non-fulfillment of Mirandas obligation to pay - Contract ineffective; without force and effect Case at bar, M may reinstate contract to sell by paying balance - Demand made by R - Action instituted to collect balance R ordered to convey property to M upon payment of the balance; provided, it has not rd been sold to a 3 party. UNITED MUSLIM & CHRISTIAN URBAN POOR ASSOCIATION INC. v BRYC-V DEVELOPMENT CORP.: Letter of Intent; neither contract of sale nor contract to sell. Executed to facilitate loan application with NHMF - Not a contract NOT binding upon parties - almost offer CONDITIONAL SALE - Automatic transfer of ownership upon suspensive condition CONTRACT TO SELL - No automatic transfer upon happening of condition Mere INTENT 3. CONDITIONAL CONTRACT OF SALE

CONDITIONAL CONTRACT OF SALE Failure to pay is a resolutory condition which puts an end to the transaction Title passes to the vendee after compliance with his obligation (automatic; United Muslim v BRYC-V) After delivery, ownership is loss, unless it is rescinded First element (consent) is present albeit conditioned upon the happening of contingent event which may or may not occur, in effect, contract of sale is automatically perfected without further act having to be performed by the seller With respect to sale to third person: Upon fulfillment of suspensive condition, sale becomes absolute which affects sellers title 3P becomes buyer in bad faith if possesses contrastive or actual knowledge of defect in sellers title Second buyer cannot defeat the first buyers title

CONTRACT TO SELL Failure to pay is a positive suspensive condition Ownership is retained by the seller

Things whose acquisition depends upon a contingency which may or may not happen ART. 1645 Things subject to a resolutory condition may be the object of the contract of sale. e.g. of thing subject to resolutory condition i. Legal or conventional right of redemption ii. Subject to reserva troncal ART. 1503: Bill of Lading: 1. CIF (Cost, Insurance, Freight): - Everything paid for by the buyer - Ownership transfers once the thing is given to the carrier 2. FOB (Fee on Board) - Seller pays for everything - Ownership transfers once the thing reaches the port of the buyer ART. 1478: Right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to the buyer CASES PEOPLES HOMESITE & HOUSING CORP. v CA: Conditional Contract of Sale Condition: subject to approval of QC council Art. 1181: Conditional obligations _ acquisition/extinguishment/loss of rights, shall depend upon happening of event which constitutes the condition st nd 1 offer was agreed upon; 2 offer NO agreement LIM v CA: Contract to Sell Condition: (1) 160 K full consideration; (2) conveyance of Caloocan lot Title remained with bank PINGOL v CA: Absolute Contract of Sale No reservation as to title Vendor delivered actual and constructive possession No judicial/notarial rescission Heirs are entitled to pay and become owners 4. OPTION ART. 1479: A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell (option contract) a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price.

Delivery does not affect loss of ownership Ownership not automatically transferred to the buyer (even if there has been previous delivery to him) upon fulfillment of suspensive condition (i.e. full payment of purchase price). Seller still has to convey title to prospective buyer by entering into a contract of absolute sale. With respect to sale to third person: No double sale (bec no previous sale of property despite fulfillment of suspensive condition) 3P not a buyer in bad faith Prospective buyer cannot seek relief of reconveyance of property, but only sue under Art 19 (unjustified disregard of right)

ART. 1461: Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. The sale of a vain hope or expectancy is void. ART. 1462: The goods which form the subject of a contract of sale may be either 1. Existing goods owned or possessed by the seller 2. Goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale Future goods There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. aleatory FUTURE GOODS are those still to be Manufactured Raised (e.g. young animals) Acquired by the seller after perfection of the contract (e.g. land which seller expects to buy)

 Also known as contract of option The period (which is supported by consideration) that is given to offeree within which to accept the offer OPTION generally unilateral; continuing offer upon sufficient consideration for a specified time. Implied obligation to to keep the offer open for the time specified. Can be withdrawn before acceptance if there is no consideration (Art 1324, CC). o UNACCEPTED OPTION unilateral contract, lacking the mutual elements of a contract o ACCEPTED OPTION an executory contract arises which is mutually binding upon the parties; ceases to become an option and becomes a mutual binding agreement of sale A privilege existing in one person (the buyer) for which he had paid a consideration which gives him the right to buy from another person if he chooses, at any time within the agreed period, at a fixed price. This being his prerogative, he may not be compelled to exercise the option to buy before the time expires. Parties are still undecided whether or not to buy the property A contract by virtue of the terms of which the parties thereto promise and obligate themselves to enter into another contract at a future time, upon the happening of certain events or the fulfillment of certain conditions A consideration for an optional contract is just as important for any other kind of contract. It is separate and distinct from the consideration in the contract in which the parties may enter into upon their exercise of the option An accepted unilateral promise to buy or sell a determinate thing for a price certain supported by consideration distinct from the price. Offeror is bound to comply with his undertaking but optionee (who has option) has the right but not obligation to buy or sell. The optionee can sue for damages only, but he cannot sue for specific performance on the proposed contract. POLICITACION unaccepted unilateral promise to buy or sell (opposite of option contract); imperfect promise which is merely an offer ART. 1482: Whenever earnest money is given in a contract of sale, it shall be considered as: o part of the price o proof of the perfection of the contract EARNEST MONEY paid in advance of the purchase price agreed upon by the parties in a contract of sale, given by the buyer to the seller, to bind the seller to the bargain EARNEST MONEY OPTION MONEY In giving an earnest money, buyer manifest Buyer is still undecided whether or not to buy his earnest desire to buy the property in or sell the property question Part of the purchase price Given only when there is a perfected contract of sale Given as a distinct consideration for an option contract Applies to a sale not yet perfected

Buyer is bound to pay the balance

Would-be buyer not required to buy at all

GENERAL RULE ACCEPTED OPTION: WITH or WITHOUT consideration: CANNOT be withdrawn. (Atkins, Kroll & Co. v Cua Hian Tek) CASES SOUTHWESTERN SUGAR v AG&P: Accepted option WITHOUT consideration may be withdrawn Accepted Option = Option ATKINS, KROLL & CO. v CUA HIAN TEK: Overturned Southwestern ACCEPTED OPTION (without consideration) = PERFECTED CONTRACT OF SALE/TO SELL If no separate consideration (option money) Option Acceptance without consideration cannot be withdrawn SANCHEZ v RIGOS: Prevailing doctrine: Reiterated Atkins Abandoned Southwestern ruling Acceptance of option = BILATERAL contract even without consideration LIMSON v CA (2000): Reiterated Sounthwestern Consideration necessary NOOL v CA: Southwestern Option valid If there is no consideration No perfected contract of sale TOPACIO v CA (supra): Contract of Sale Cannot be cancelled without following Art. 1592 - Judicial/notarial act - Stipulation of automatic rescission C. CONTRACT OF SALE DISTINGUISHED FROM OTHER CONTRACTS 1. PIECE OF WORK ART. 1713: By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill OR also furnish the material. ART. 1467: CONTRACT OF SALE A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not CONTRACT FOR A PIECE OF WORK if the goods are to be manufactured specially for the customer AND upon his special order, and not for the general market IMPORTANCE OF DISTINCTION

Difference in the rules governing both contracts (e.g. tax rates and other charges are lower for contractors) and application of SoF Inchausti v Cromwell - SC adopted Massachusetts rule that the test whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and been subject of sale to some other person, even if the order had not been given. True test of a Contractor he renders service in the course of an independent occupation, representing the will of his employer only as to the result of his work, and not as to the means by which it is accomplished (Luzon Stevedoring Co v Trinidad and La Carlota Sugar Central v Trinidad). More examples of CONTRACT OF SALE: o future sale of articles which he is habitually making although at the time not made or finished o article ordered is exactly such as plaintiff makes and keeps on hand for sale to anyone and no change or modification of it is made at defendants request although made after and in consequence of, defendants order for it

B. Piece of Work: one of the parties accept the undertaking on the basis of some plan, taking into account the work he will employ personally or through another DEL MONTE PHIL. INC. v ARAGONES: Piece of Work Supply agreement specified S-shaped blocks required 3 machines to be made for the exclusive use of MEGA-WAFF Aragones did not have those machined in his usual business = special order 2. AGENCY TO BUY OR SELL ART. 1466: In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, essential clauses of the whole instrument shall be considered. ART. 1868: By a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. SALE Buyer pays the price Buyer acquires ownership over the object of the contract Seller warrants Not unilaterally revocable CONTRACT OF AGENCY TO SELL Agent does not pay Agent does not acquire ownership Agent does not warrant, unless he agrees Essentially revocable becasue of fiduciary relationship; Agent disqualified from receiving any personla profit from the transaction Essence of agency: delivery to the agent of the goods not as the agents property but of the principal who remains the owner and has the right to control the sales by the agent, fix the price and terms, demand and receive the proceeds of the sales less the agents commission

CASES INCHAUSTI & CO. v CROMWELL: Contract of Sale Baled hemp TEST: Whether the thing transferred is (a) one not in existence and which never would have existed but for the order of the party desiring to acquire it; or (b) a thing which would have existed and been the subject of sale to some other person even without the order. CELESTINO v CIR: Sash factory: contract of Sale TEST of special orders under Art. 1467: Habit or Timing Sale of Service v Sale of Object Habitually makes doors, panes, sashes, etc. (TEST) Even contending that they make them upon order, there orders are not shown to be special work requiring extraordinary service of the factory. CIR v ENGINEERING EQUIPMENT & SUPPLY CO.: Piece of Work TEST: Nature of the object (Inchausti definition) Each product or system executed by it had, by its nature, to be unique and always different from the other orders. Even if it wanted to, EEI could not stock pile or even mass produce the products because of their very nature. CONCRETE AGGREGATES INC. v CTA: Contract of Sale Asphalt and concrete mix NOT specialty contractor: does not require special skill or use of specialized building trades or crafts ENGINEERING & MACHINERY CORP v CA: Piece of Work (air-con units) TEST (TOLENTINO): Intention of the parties A. Contract of Sale: at some future date and object has to be delivered; without considering the work or labor of the party bound to deliver

Essence of sale: transfer of title or agreement to transfer it for the price paid or promised

Agent receives the thing to be sold and does not pay for its price, but delivers to the principal the price he obtains form the sale of the thing to a third person, and if he does not succeed in selling it, he returns the thing. (Quiroga v Parsons Hardware Co) Agent is exempted from all liability in the discharge of his commission, provided he acts in accordance with the instructions received from his principals, and the latter (principal) must indemnify the agent for all the damages which he may incur in carrying out the agency without fault on his part.

CASES G. PUYAT & SONS v ARCO AMUSEMENTS: Contract of Sale Not Agency to buy Letter between the parties clearly stipulated for fixing of the price on the equipment

 Agreed to purchase from the petitioner the equipment in question QUIROGA v PARSONS HARDWARE: Contract of Sale Essential Clause: payment was to be made at the end of 60days, or before, at the plaintiffs request, or in cash, if the defendant so preferred, and in the last 2 cases an additional discount was to be allowed for prompt payment. Plaintiff was to supply beds; defendant was to pay the price ASBESTOS INTEGRATED MANUFACTURING INC. v PERALTA: Contract of Sale between Sanvar and Eternit (Sanvar NOT an agent) Essential clause: Savar buys from Eternit, receives and pays for them, sell them for its own account and NOT in behalf of Eternit. VICTORIAS MILLING CO. v CA: Contract of Sale between CSC and STM A1868: basis of agency is the REPRESENTATION and CONTROL CSC NOT an agent of STM, it BOUGHT SLDR, intent was not there. 3. BARTER AND EXCHANGE ART. 1638: By a contract of barter or exchange, one of the parties binds himself to give one thing in consideration of the others promise to give another thing. ART. 1641: As to all matters not specifically provided for in this Title, barter shall be governed by the provisions of the preceding Title relating to sales. ART. 1468: If the consideration of the contract consists partly in money and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a: BARTER: if value of the thing given as part of the consideration > amount of the money or its equivalent Because the true cause of the contract for the other party is the thing transferred and not the money. SALE: if value of thing < amount of money or its equivalent value of thing = value of money Manifest intention judged by the parties contemporaneous and subsequent acts Exceeds the amount of money CC does not provide to what extent the value of the thing given as a consideration should exceed the amount of money given for the contract to be considered as a barter IMPORTANCE: Statute of Frauds (Art. 1403), which applies to sale of real property and personal property bought at 500 or more, do not apply to the contract of barter.

CASE FULE v CA: Valid barter or sale SC only held that it was valid but made no substantial distinction as to the nature of the two contracts. Perfected by mere CONSENT 4. DACION EN PAGO ART. 1245: Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. There is a novation of the contract of loan into a contract of sale when creditor agrees to accept a thing in payment of the debt. If thing given in payment turns out to belong to another, creditors remedy governed by law on sales not on loan. SALE No pre-existing credit Gives rise to obligations Cause or consideration is the price from the viewpoint of the seller; or the obtaining of the object, from the viewpoint Greater freedom in the determination of the price Giving of the price may generally end the obligation of the buyer DACION EN PAGO Pre-existing credit Extinguishes obligations Cause or consideration from the viewpoint of the person offering the dation in payment is the extinguishment of his debt; from the viewpoint of the creditor is the acquisition of the object offered in lieu of the original credit Less freedom in determining the price Giving of the object in lieu of the credit may extinguish completely or partially the credit (depending on the agreement)

CASES YUSON v VITAN:NOT Dacion Atty. Vitan claims there was a valid Dacion: payment of a loan by PRCP. No Dacion in this case; 2nd deed of sale reconveyed land to Vitan No intention to sell or relinquish ownership over Bulacan property No extringuishment of obligation; true intention was to use property to facilitate payment AQUINTEY v TIBONG: VALID Dacion Requisites of Dacion 1) (animo solvendi) performance of the prestation in lieu of payment 2) (aliud pro alio) difference between prestation due and what is given as substitute 3) agreement between debtor and creditor that obligation is immediately extinguished by reason of the performance of a prestation different from that due PHILIPPINE LAWIN BUS CO. V CA:NOT dacion Transfer of property between debtor and creditor does not automatically amount to dacion en pago.

 Iti s essential that the transfer of property must be accompanied by a meeting of the minds between the parties on whether the loan... would be extinguished by dacion en pago. LO v KJS ECO-FORMWORK SYSTEM PHIL., INC.: VALID Dacion There was dacion en pago in the assignment of credit but the obligations are breached by Lo SALE The subject obliged is the whole world The vendor warrants against eviction and hidden defects ASSIGNMENT OF CREDIT After the transfer, a third person is obliged Assignor warrants the existence or legality of the credit and in some cases, the insolvency of the debtor

5. CHATTEL MORTGAGE ART. 2140: By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded is delivered to the creditor or a third person, the contract is pledge and not a chattel mortgage. 6. LEASE ART. 1484: Vendors alternative remedies in a contract of sale of personal property price of which is payable in installments 1. Exact fulfillment of obligation in case of failure to pay (specific performance) 2. Cancel sale in case of failure to pay two or more installments 3. Foreclose the chattel mortgage ART. 1485: Art 1484 also applicable to contracts purporting to be leases of personal property with option to buy, when lessor has deprived lessee of the possession or enjoyment of thing. So-called rents must be regarded as payment of prince in installments since due payment of the agreed amount results in the transfer of title to the lessee CASES JOSE v BARNUECO: Contract of Sale Ownership was intended to be transferred to Ando upon the compliance of the conditions of the contract Lease agreement which have stipulations that the title shall vest upon the buyer upon payment of the rents are really contracts of sale. ELISCO TOOL MANUFACTURING CORP. V CA: Contract of Sale Sale with payment in installments Practice of vendors of personal property of denominating a contract of sale on installment as a lease to prevent the ownership of the object from passing to the buyer until full payment. Rentals for the car were actually amortization for the price thereof FILINVEST CREDIT CORP. V CA: Contract of Sale When a lease clearly shown that the rentals are meant to be installment payments ti a sale contract despite the nomenclature given by the parties, it is a sale by installments. II. ESSENTIAL ELEMENTS OF A CONTRACT OF SALE

FILINVEST CREDIT CORP v PHILIPPINE ACETYLENE CO., INC.: NO Dacion VDA DE JAYME v CA: VALID Dacion Dacion: delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation SPECIAL MODE OF PAYMENT: Really in the nature of a sale: creditor is buying a thing or property from the debtor; payment from the debtors obligation Consent-Object-Cause also present OBJECTIVE NOVATION: thing offered as an accepted equivalent of the obligation is considered the object of the contract of sale; debt = purchase price SSS v CA (ATLANTIC GULF): SSS Commission has no jurisdition on suits for specific performance; VALID Dacion Dispute in this case: Non-implementation of the approved and agreed dacion en pago on the part of SSS due to the change of amount Not regarding the accountability of AG&P (would mean within the jurisdiction of the SSS Comission) PNB v PINEDA:NO Dacion Equipment and machinery were re-possessed to secure the paymen of a loan obligaton and not for the purpose of transferring owneship to the creditor in satisfaction of said loan. Dation in payment requires delivery and transmission of ownership pf a thing owned by the debtor to the creditor as an accepted equivalent of the obligation When there is no such transfer, as when re-possession of the subject-matter of a trust recipt is only by way of security, there is no dation in payment NOT A CONSENSUAL CONTRACT A REAL CONTRACT that novates the original debt relationship into a consummated sale. ESTANISLAO v EAST WEST BANKING CORP: VALID Dacion Deed of assignment; nature was a dation in payment whereby property is alienated to the creditor in satisfaction of a debt of money

A. CONSENT OF THE CONTRACTING PARTIES 1. PARTIES TO THE CONTRACT a. CAPACITY TO CONTRACT ART. 1327:

The following cannot give consent to a contract: (1) Unemancipated minors (2) Insane or demented persons and (3) Deaf-mutes who do not know how to write CASES RUBIAS v BATILLER: Invalid sale: Rubias got it from his father-in-law Rubias was the lawyer and barred from buying the proeprty of the client under litigation EXCEPTION: as contingent fee, AFTER litigation ONLY LAWYER OF CLIENT is barred ARANETA INC. V TUAZON DEL PATERNO: AGENT v BROKER AGENT: effects the sale on behalf of the principal BROKER: only looks for buyers for the seller MANGAYAO v DE GUZMAN: Executive approval of sale needed; without it = defect in capacity PARAGAS v HEIRS OF DOMINADOR BALACANO: Grand children; vitiated consent of the grandfather GENERAL RULE: a person is not incompetent to contract merely becasue of advanced years or by reason of physical infirmities. BUT: when such age or infirmity has impaired the mental faculties so as to prevent the person from proeprly, intelligently and firmly protecting his property right, then incapacitated. b. INCAPACITY ART. 1490: Husband and wife cannot sell property to each other, except 1. When separation of property was agreed upon in marriage settlements 2. When there has been judicial separation of property under Art 191 REASON FOR THE RULE Prevent commission of fraud or prejudice to third persons Prevent one from unduly influencing the other Avoid indirect donations ART. 1491: The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under his guardianship; o Actual collusion is hard to prove between purchaser and guardian, but such fact can be deduced from the very short time between the two sales and the relationship between them.

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; o Incapacity to buy rests on the fact that greed might get the better of the sentiments of loyalty and disinterestedness which should animate an administrator or agent. o A broker does not come within the prohibition because he is a mere go-between or middleman between the seller and the buyer, bringing them together to make the contract themselves. (3) Executors and administrators, the property of the estate under administration; o But an executor can buy the hereditary rights of an heir to the estate under his administration (Naval v Enriquez) (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been entrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; o Intended not only to move remove any occasion for fraud but also to surround them with the prestige necessary to carry out their functions by freeing them from all suspicion which although unfounded, tends to discredit the institution by putting into question the honor of said functionaries. (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice , the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. o Law intends to avoid improper interference by a judge in a thing levied upon or sold by his order (Gan Tingco v Pabinquit). o Incapacity of SC or CA Justice extends to properties or rights in litigation in their territorial jurisdiction. o CFI Judge can buy properties in litigation pending outside his territorial jurisdiction. o Prohibition likewise extends to properties levied upon an execution before the court within whose territorial jurisdiction they exercise their respective functions. o As to lawyers: curtail any undue influence of the lawyer on his client on account of their confidential association. o Violation of this prohibition also constitutes a breach of professional ethics. o No prohibition if client assigns to the lawyer after the judgment has been rendered and became final. Contingent fee of lawyer maybe annotated as an adverse claim on property awarded to client. (6) Any others specially disqualified by law. Such contracts made in violation of this provision are void for public policy. They cannot be ratified neither can the right to set up the defense of illegality be waived.

REASON FOR THE RULE: 1. The persons occupy fiduciary relationship with the owner of properties mentioned 2. Prevent them from being tempted to take advantage of their position

cf. ART. 1409: The following contracts are inexistent and void from the beginning: (7) Those whose expressly prohibited or declared void by the law These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. CONSTITUTION, ART. XII: Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof, by purchase, homestead, or grant. Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or leased and the conditions therefor. Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. Section 8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law. RA 6713: CODE OF CONDUCT AND ETHICAL STANDARDS FOR PUBLIC OFFICIALS AND EMPLOYEES Section 7. Prohibited Acts and Transactions. - In addition to acts and omissions of public officials and employees now prescribed in the Constitution and existing laws, the following shall constitute prohibited acts and transactions of any public official and employee and are hereby declared to be unlawful: (a) Financial and material interest. - Public officials and employees shall not, directly or indirectly, have any financial or material interest in any transaction requiring the approval of their office. (b) Outside employment and other activities related thereto. - Public officials and employees during their incumbency shall not: (1) Own, control, manage or accept employment as officer, employee, consultant, counsel, broker, agent, trustee or nominee in any private

enterprise regulated, supervised or licensed by their office unless expressly allowed by law; (2) Engage in the private practice of their profession unless authorized by the Constitution or law, provided, that such practice will not conflict or tend to conflict with their official functions; or (3) Recommend any person to any position in a private enterprise which has a regular or pending official transaction with their office. These prohibitions shall continue to apply for a period of one (1) year after resignation, retirement, or separation from public office, except in the case of subparagraph (b) (2) above, but the professional concerned cannot practice his profession in connection with any matter before the office he used to be with, in which case the one-year prohibition shall likewise apply. (c) Disclosure and/or misuse of confidential information. - Public officials and employees shall not use or divulge, confidential or classified information officially known to them by reason of their office and not made available to the public, either: (1) To further their private interests, or give undue advantage to anyone; or (2) To prejudice the public interest. (d) Solicitation or acceptance of gifts. - Public officials and employees shall not solicit or accept, directly or indirectly, any gift, gratuity, favor, entertainment, loan or anything of monetary value from any person in the course of their official duties or in connection with any operation being regulated by, or any transaction which may be affected by the functions of their office. As to gifts or grants from foreign governments, the Congress consents to: (i) The acceptance and retention by a public official or employee of a gift of nominal value tendered and received as a souvenir or mark of courtesy; (ii) The acceptance by a public official or employee of a gift in the nature of a scholarship or fellowship grant or medical treatment; or (iii) The acceptance by a public official or employee of travel grants or expenses for travel taking place entirely outside the Philippine (such as allowances, transportation, food, and lodging) of more than nominal value if such acceptance is appropriate or consistent with the interests of the Philippines, and permitted by the head of office, branch or agency to which he belongs. The Ombudsman shall prescribe such regulations as may be necessary to carry out the purpose of this subsection, including pertinent reporting and disclosure requirements. Nothing in this Act shall be construed to restrict or prohibit any educational, scientific or cultural exchange programs subject to national security requirements. RA 6766: ORGANIC ACT FOR THE CORDILLERA AUTONOMOUS REGION Section 7. The people of the Cordilleras have the right, especially through their voluntary organizations and movements, to participate and be equitably represented at appropriate

levels of social, economic and political decision-making and in the formulation and implementation of local, regional and national priorities, plans, programs and projects, and to monitor their implementation. CASES SOTTO v SAMSON: VOID SALE VOID under Art. 1491 (5); even if subsequently ratified (confirmation of the deed of sale) Lawyer since 1926: to curtail any undue influence of the lawyer upon the client on account of their confidential association RUBIAS v BATILLER (supra): INVALID SALE to lawyer CALIMLIM-CANULLAS v FORTUN: INVALID SALE TO MISTRESS Sale of land was contrary to law, public morals and public interest Prohibition (spouses selling to one another) applier to common-law relationships CHING v GOYNAKO, JR.: VOID SALE Selling and donating of spouses prohibited by law; include common-law relationships FABILLO v IAC: Lawyers contingent fee: ALLOWED Did not violate Art. 1491, did not take place during the pendency of the litigation Lawyer did not exert undue influence on his clietn; no fraud or imposition; compensation is clearly not an escesive amount = VALID CONTINGENT FEE Reduced amount since it was the lawyer Murillo who drafted it, excessive 2. PERFECTION OF THE CONTRACT ART. 1475: The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. ART. 1319: Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain, and the acceptance absolute. A qualified acceptance constitutes a counter-offer. ART. 1325: Unless it appears otherwise, business advertisements are of things for sale are not definite offers, but mere invitation to make an offer. ART. 1326: Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidders unless the contrary appears. ART. 1330: A contract where consent is given through mistake, violence, intimidation, undue influence or fraud is voidable.

ART. 1338: There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. Insidious machinations signifies a deceitful scheme or plot with an evil design or with frauduluent purpose Deceit need not be by means of misrepresentation in words Failure to disclose facts constitutes fraud when there is a duty to reveal them (e.g. parties are bound by confidential relations) - Art 1339 ART. 1476: In the case of a sale by auction: (1) Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale. (2) A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve. without reserve goods cannot be withdrawn from the sale after a bid is made (3) A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation. (4) Where notice has not been given that a sale by auction is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer. WHEN SELLER MAY BE ALLOWED TO PARTICIPATE IN THE BIDDING a. Upon notice of such fact b. Provided by law or by stipulation REASON FOR PROHIBITION AGAINST SELLER TO PARTICIPATE secret employment of puffers for the purpose of enhancing the price renders the sale fraudulent and consequently, void. ART. 1479: A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price. CASES SLDC v CA: Sale does NOT transfer OWNERSHIP Only upon delivery is ownership transferes

 No double sale in the case; 1st one was Contract to SELL only LIM, JR. V SUN: VALID SALE Vitiated consent must be established by clear and convincing evidence Brother did not vitiate Pazs consent No intent to file criminal charges ASIAIN v JALANDONI: VOID Mutual mistake as to the quantity of the land sold and the amount of the crop RESCISIBLE at the option of the buyer VOID sale DELA CAVADA v DIAZ: PROMISE TO SELL NOT an option Promise made by one party is sufficient cause for the other to comply with his obligation A promise made in accordance with forms required by law may be a good consideration for another partys promise ROBERTS v PAPIO (supra): NOT an equitable mortgage MMCC v PNB (supra): NO Perfecter contract VILLONCO v BORMAHECO: Perfected COntract Bromhecos acceptance of As counter offer Essentially, Counter Offer = Same as original offer 3. FORMALITIES ART. 1483: Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made: 1. In writing 2. Word of mouth 3. Partly in writing and partly by word of mouth 4. May be inferred from the conduct of parties If notary public is not authorized deed of sale of land is still valid because public instrument is not even essential for the validity of the sale (Soriano v Latono)

The following contracts are unenforceable unless they are ratified: 1. Entered into the name of another person by one who has been given no authority or legal representation or who has acted beyond the powers (unauthorized contracts) 2. Those that do not comply with the SoF as set forth in this number. Agreement shall be made unenforceable by action, UNLESS some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent, evidence therefore of the agreement cannot be received without the writing or a secondary evidence of its contents (Statute of Frauds) d. Agreement for the sale of goods, chattels or things in action, at a price not less than P500 unless: - buyer accept and receive part of such goods and chattels or evidences or some of them, of such things in action, or pay at the time some part of the purchase money (partial performance) e. Agreement for the leasing for a longer period than one year OR for the sale of real property or an interest therein 3. Those where both parties are incapable of giving consent to a contract (both parties incapacitated) ART. 1405: Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the Failure to object to the presentation of oral evidence to prove the same Acceptance of benefits under them Statute of Frauds apply only to executory contracts, not to contracts either totally or partially performed. SoF does not apply where the verbal contract of sale of land is adduced not for the purpose of enforcing performance thereof, but as the basis of lawful possession of the applicant entitling him to have the land registered in his name (Almirol v Monserrat). E.g of Partial performance which takes the matter away from the operation of Statue of Frauds: o Possession of a portion of the land o Relinquishment of her claim to the entire land, building improvements on the land o Tender of payment o Surveying and segregation of the portion which defendant promised to sell to plaintiffs Will constitute fraud if permitted to oppose the performance of his part after allowed or induced the other to perform in reliance upon the agreement.

Stages of a contract: a) Negotiation time when prospective contracting parties indicate interest in the contract to the time contract is perfected b) Perfection concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of contract upon the price c) Consummation parties perform their respective undertakings under contract of sale, culminating in the extinguishment thereof cf. ART. 1403: STATUTE OF FRAUDS:

ART. 1874: When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise the sale shall be void.

CASES CITY-LITE REALTY v CA: AGENT needs written authority No contract between parties since Meldin Roy was only an agent of the seller AGASEN v CA: VALID SALE Notarized documents = public document Sale by Leonora evidenced by memorandum = record of ionstallement payment LOPEZ v ALVAREZ: VOID Sale of Mortgage Credit When sale of mortgage credit was undertaken, it was no longer owned byEvaristo (debtor) but by Lopez (assignee) No effects as to the part of the credit owned by Lopez and could not deprive him of his property. SORIANO v LATONO: VALID Deed of Sale Need not be notarized to be valid Elements of a valid contract are present Perfertec Sale A sale by the guardian may be approved before the deed is executed, depending on the intention of the court and providing that faithful compliance with the conditions proposed or imposed has been made. PAREDES v ESPINO: NOT Barred by SOF Letter, together with telegram, constitutes an adequate memorandum of the transaction INIGO v MALOTO: VALID SALE SOF can only apply to executory contracts Contract in the case already consummated Inigo exercised possession and dominion over the property CLARIN v RULONA: PERFECTED Contract of Sales Authorization letter and receipt COS; but in themselves evidence that sale was perfected Contract already partially fulfilled and executed SOF no longer covers case; partially executed MAHARLIKA PUBLICHING CORP. v TAGLE: DONATO C. CRUZ TRADING CORP. v CA: FORMS and CIRCUMSTANCE sufficient to prove liability Business forms issued by the seller in the ordinary course of business are not always fully accomplished to contain every detail. Despite this, business forms are valid between the parties and at the very least they serve as an acknowlegment that a transaction has transpired. Documents by themselves not adegquate to establish the case, but becasue of circumstances (testimony, demand letters) = sufficient LAGON v HOOVEN COMALCO INDUSTRIES, INC.:

Receipts, order slips, and invoices are not mere scraps of paper bereft of probative value but vital pieces of evidence in commercial transactions. They are written memorials of the details of the consummation of contracts. FULE v CA (supra): Contracts are perfected by mere CONSENT DALION v CA: Need not be embodied in a public document ALFREDO v BORRAS (supra): Perfected and Consummated Contract of Sale TOYOTA SHAW, INC. V CA: Bernardo had no authority to bind Toyota If it was intended as contract of sale, it would only be on installment basis. NO CONSENT = BA Finance did not approve Sosas application of a sale on installment basis

B. OBJECT OF THE CONTRACT 1. REQUISITES ART. 1459: The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. (n) ART. 1347: All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a) ART. 1306: The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a) Cf. ART. 1409: The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. What may be the Objects of Contracts 1. All things not outside the commerce of man Including future things do not belong to the obligor at the time the contract is made; they may be made, raised or acquired by the obligor after the perfection of the contract o Conditional subject to the coming into existence of the thing 2. 3.

Aleatory one of the parties bears the risk of the thing never coming into existence Outside the commerce of man all kinds of things and interests whose alienation or free exchange is restricted by law or stipulation, which parties cannot modify at will o Services which imply an absolute submission by those who render them, sacrificing their liberty, independence or own beliefs or disregarding in any manner the equality and dignity of persons e.g. perpetual servitude or slavery o Personal rights e.g. patria postestas, marital authority, status, capacity of persons, honorary titles o Public offices, inherent attributes of the public authority, political rights of individuals e.g. right of suffrage o Property while they pertain to the public dominion; belonging to the State or its political subdivisions intended for public use or public service or for the development of national wealth o Churches o Sacred things e.g. air and sea o BUT public property when no longer intended for public use or service form part of the patrimonial property of the State All rights not intransmissible All services not contrary to law, morals, good customs, public order or public policy E.g. of things prohibited by law o Narcotics or dangerous drugs o Wild bird or mammal, rare wild plants protected by law o Tubli or other poisonous plants or fruits o Dynamited fish or other aquatic animals o Gunpowder, dynamite, explosive or blasting supplies, firearms or ammunitions

ART. 1411: When the nullity proceeds from the illegality of the cause or object of the contract, and the act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract.

This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given, and shall not be bound to comply with his promise. (1305)

ART. 1416: When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designated for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered.

ART. 422: Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State. (341a) a. LICIT The subject matter of a contract of sale must be licit (ART. 1459). A thing is licit and may be the object of a contract when it is not outside the commerce of men, and includes all rights which are not intransmissible (ART. 1347).

ART. 424: for public use, in the provinces, cities, and municipalities, consist of the provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or municipalities.

a) The sale of narcotics or dangerous drugs except upon prescription, or any wild bird or mammal, or rare wild plants protected by law or of tubli or other poisonous plants or fruits, dynamited fish or other aquatic animals, gunpowder, dynamite, explosives or blasting supplies, firearms or ammunitions are prohibited by law therefore are illicit.

All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the provisions of special laws. (344a)

CASE b) Properties belonging to the State or its political subdivision which are intended for public use or public service or for the development of natural wealth are outside the commerce of man. MARTINES v CA: Lands of Public Dominion intended for public use are outside the commerce of men Navigable public stream converted into fish ponds, registered under the Torrens system. Sold successively to different persons The right of reversion to the State does not prescribe as rivers are outside the commerce of man.

c) Churches are also outside the commerce of man.

d) But public property when no longer intended for public use or service form part of the patrimonial property of the State and therefore can be leased or sold.

b. PROHIBITIONS ART. 1347: All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts. No contract may be entered into upon future inheritance except in cases expressly authorized by law. All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract. (1271a)

Cf. ART. 420: The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (339a)

ART. 777: The rights to the succession are transmitted from the moment of the death of the decedent. (657a)

2. DETERMINATE ART. 1460: A thing is determinate when it is: 2. 3. Particularly designated or physically segregated from all others of the same class At the time of the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties

a) Law prohibits sale of future inheritance. The rights to succession are transmitted from the moment of the death of the decedent so one cannot sell or promise to sell what he expects to inherit from a living person. But the law allows an heir to sell his interests in an inheritance

b) The object of the contract of sale must be licit, meaning within the commerce of man, and determinate. Determinate has been expanded to cover generic things, future things and things in potential existence. c) Things subject to a resolutory condition may be the object of the contract of sale.(Article 1465)

Determinate v. determinable: a thing is determinate if it can be physically segregated, particularly designated; capable of being made determinate without need of another agreement. It is determinable if it is capable of being determined via another agreement.

a. FUTURE GOODS CASES MELIZA v CITY OF ILOILO: Determinate v Determinable The requirement of the law that a sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. ART. 1461: Things having a potential existence may be the object of the contract of sale.

GAITE v FONACIER: The subject-matter of the sale is, therefore, a determinate object, the mass, and not the actual number of units or tons contained therein, so that all that was required of the seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass, notwithstanding that the quantity delivered is less than the amount estimated by them Any condition that a buyer would NOT receive the subject matter of the contract, is VOID and will not constitute a valid contract of sale, although it may be some other contract.

The sale of a vain hope or expectancy is void. (n)

SALE OF THING EXISTENCE (expected thing) Emptio rei sperati

HAVING

POTENTIAL

SALE OF A HOPE (mere hope of expectancy; hope itself)

Emptio spei Sale produces effect even if the thing does not come into existence, unless it is a vain hope Uncertainty is with regard the existence of the thing The object is a present thing

ATILANO v ATILANO: Mistake as to the name of the Lots (A and B) The true contract of sale is intangible or properly a legal concept. The deed of sale is merely an evidence of the contract. And when the deed fails to cover the real contract or the true meeting of the minds of the parties, then the deed must give way to the real contract of the parties. Sale is subject to the condition that the thing will exist, if it does not, there is no contract

Uncertainty is with regard the quality and quantity of the thing The object is a future thing

3. NATURE OF OBJECT

 Consequently, the vendee a retro, ISABELO, cannot legally petition for the consolidation of his ownership over the entire lot ART. 1462: The goods which form the subject of a contract of sale may be either 1. 2. Existing goods owned or possessed by the seller Goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale Future goods b. DIVIDED INTEREST OF SHARE ART. 1463: The sole owner of a thing may sell an undivided interest therein. (n)

There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. aleatory

FUTURE GOODS are those still to be : Manufactured Raised (e.g. young animals) Acquired by the seller after perfection of the contract (e.g. land which seller expects to buy) Things whose acquisition depends upon a contingency which may or may not happen

ART. 1464: In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods

CASE YTURRALDE v CA: A co-owner cannot sell more than his share. Thus, where the surviving spouse sold the conjugal property under a pacto de retro and failed to redeem it, the vendee a retro acquired only the share of the vendor in the conjugal property, and not the entire property.

CASES REPUBLIC v LICAHAUCO: The hacienda, being already partitioned, is now owned by several owners distinct and separate from the others. Because of this, the valuation of the subject properties should depend on the specific properties despite the fact that it earlier formed part of a single piece of property. There was no necessary unity of ownership for lumping the parcels together for evaluation

c. THINGS IN LITIGATION ART. 1381: The following contracts are rescissible:

ONAPAL PHIL. COMMODITIES, INC. v CA: The pacto de retro sale executed by MARGARITA expressly stipulates that she only sold all her rights, interests and participation in the subject land MARGARITA therefore, could not, for she had no right to, sell the entire lot , since it was registered "in the name of Francisco Yturralde married to Margarita Yturralde." Said lot is the conjugal property of FRANCISCO and MARGARITA. Hence, what she validly disposed of under the aforesaid pacto de retro sale to ISABELO was only her conjugal share in the lot plus her successional right as heir in the conjugal share of her deceased husband.

(4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority

ART. 1385: (2) Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.

CASE 1) Sales of things under litigation entered into by defendants without the knowledge & approval of the litigants or of the court are rescissible. rd 2) However, rescission cannot take place when the things are legally in the possession of 3 persons who did not act in bad faith (& without knowledge of defect) 3) In an action affecting the title or the right of possession of real property, the plaintiff may record in the office of the Registrar of Deeds of the Province which the property is situated, a notice of the pendency of the action. rd 4) From the moment of the filing of such notice, 3 persons are charged with notice of the litigation & take the property subject to the outcome of the litigation. (Baviera and De Leon) ARSENAL v IAC: A contract which purports of alienate, transfer, convey or encumber any homestead within the prohibitory period of five years from the date of the issuance of the patent is void from its execution.

C. CAUSE OR CONSIDERATION ART. 1352: Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy. (1275a)

CASE ATKINS KROLL & CO. v DOMINGO: The filing of the lis pendens was intended to affect third persons with notice of the claim. But it will be remembered that the efforts of S. Domingo to get his claim recognized in those proceedings completely failed of effect. For this reason the lis pendens must be considered to have lost its efficacy. The effect of notice by lis pendens is, of course, to charge the stranger with notice of the particular litigation referred to in the notice, and, if the notice is effective, the stranger who acquires the property affected by the lis pendens takes subject to the eventuality of the litigation. But when the adverse right fails in such litigation, the lis pendens becomes innocuous.

ART. 1353: The statement of a false cause in contracts shall render them void, if it should not be proved that they were founded upon another cause which is true and lawful.

ART. 1471: If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation or some other act or contract.

Cf. ART. 1409: The following contracts are inexistent and void from the beginning: d. THINGS SUBJECT OF CONDITIONS ART. 1465: Things subject to a resolutory condition may be the object of the contract of sale. (n) (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; ART: 1608: The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. (1510) (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; E.g. of thing subject to resolutory condition: i. Legal or conventional right of redemption ii. Subject to reserva troncal (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

 That the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor ART. 1411: When the nullity proceeds from the illegality of the cause or object of the contract and the act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each other and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract.

MORALES DEV. CO. v CA: NO CONSIDERATION v FALSE CONSIDERATION Aside from the false consideration of P500, there was NO REAL CONSIDERATION. Therefore, the contract is one with NO CONSIDERATION and not merely one that states a false consideration It is VOID and its inexistence is permanent and incurable and cannot be the subject of prescription.

This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given and shall not be bound to comply with his promise.

PANGILINAN v CA: IN PARI DELICTO RULE (for illegal cause or object) 1. BOTH are in pari delicto No action against each other BOTH will be prosecuted RPC provision relative to the disposal of effects/instruments of a crime shall apply ONLY ONE is guilty INNOCENT PARTY may claim what he has given INNOCENT PARTY not bound to comply with his promise

RONGAVILLA v CA:

2.

1. FORM OF CONSIDERATION Price should be payable in money or its equivalent (e.g. letters of credit) otherwise it may be considered barter or an innominate contract. If price is life annuity or obligation to support, the contract is not sale because the price is a prestation which cannot be certain.

ART. 1416: When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designated for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered.

ART. 1468: If consideration is partly in money and partly in another thing (determination of sales or barter) A. B. C. D. Transaction to be characterized by manifest intention of parties Value of thing > money or equivalent BARTER Value of thing = money or equivalent SALE Value of thing < money or equivalent SALE

1. False Price there is a true price but it was not written down or stipulated in the contract. There was a consideration although it was not found in the contract (Real consideration not stated) 2. Simulated Price There was no price paid. The parties merely said there was a price and created their own price (no consideration but stated)

CASES MAPALO v MAPALO: without Cause or Consideration = VOID A contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration

ART. 1638: By a contract of barter or exchange, one of the parties binds himself to give one thing in consideration of the others promise to give another thing.

ART. 1245: Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales.

There is a novation of the contract of loan into a contract of sale when creditor agrees to accept a thing in payment of the debt. If thing given in payment turns out to belong to another, creditors remedy governed by law on sales not on loan.

Indisputably valuable real estate allegedly sold worth at least P10,500.00 going only by assessments for tax purposes It is well-known, are notoriously low indicators of actual value plainly and unquestionably demonstrates that they state a false and fictitious consideration, and no other true and lawful cause having been shown, the Court finds both said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio.

1. The price should be in money or its equivalent (e.g. letters of credit & other negotiable instruments). Otherwise, the transaction might be barter or an innominate contract. 2. Property given to the creditor in satisfaction of a debt in money with the PRICE PAID IN ADVANCE is a sale. 3. Fixing of the price is more or less arrived at with ample contractual freedom than the value of the thing given in dation.

2. ADEQUACY OF PRICE ART. 1355: Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence.

DATION IN PAYMENT Presupposes a prior existing credit & extinguishes the obligation

SALE Obligations are created from the perfection of the contract

ART. 1470: Gross inadequacy of price does not affect a contract of sale, except as it may indicate: a defect in consent, OR that the parties really intended a donation or some other act or contract o not applicable when the seller is given the right to redeem

CASES REPUBLIC v PHIL. RESOURCES DEV.: Although Art. 1458 of the new Civil Code provides that price . . . is always paid in terms of money and the supposed payment being in kind it is no payment at all," Yet the same article provides that the purchaser may pay "a price certain in money or its equivalent" which means that payment of the price need not be money. CASES LAPERAL v ROGERO: DE LEON v SALVADOR: BUENAVENTURA v CA:

ONG v ONG: The court ruled that P1.00 consideration does not automatically make Reyes and Abellas purchasers in bad faith. An inadequacy of the monetary consideration does not render a deed of sale inexistent, for the assignor's liberality may be sufficient cause for a valid contract so long as it has an object, a cause, and consent. The court also recognized the Anglo-Saxon practice of stating that the consideration given is the sum of P1.00, although the actual consideration may have been much more (If the price if FALSE, the contract of sale is VALID but subject to REFORMATION)

3. DEFINITENESS AND CERTAINTY ART. 1469: In order that a price may be considered certain, it shall be sufficient that it be so: 2. 3. With reference to another thing certain Determination thereof be left to the judgment of specified person/s rd (1) Should such 3 person/s acted in bad faith or by mistake courts may fix the price rd (2) Where such 3 person/s prevented from fixing the price or terms by fault of the seller or the buyer party not in fault

BAGNAS v CA: Upon the consideration alone that the apparent gross, not to say enormous, disproportion between the stipulated price (in each deed) of P1.00 plus unspecified and un-quantified services

may have such remedies (for fraud) against the party in fault as allowed the seller or the buyer as the case may be

1.

ART. 1470: Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (n)

2. 3.

4.

A contract of sale is null & void and produces no effect whatsoever if the same is without cause or consideration or that the price which appears to have been paid has in fact never been paid. The existence of a contract is permanent & incurable. The statement of a false cause in contracts shall render them void if it should not be proven that were founded upon another cause which is true & lawful (1471, 1353) If the price is simulated, the sale is void but the act may be shown to have been in reality a donation, or some other act or contract (1471)

ART. 1471: If the price is simulated, the sale is void, but the act may be shown to have been in reality a: 1. 2. Donation; or Some other act or contract

CASES ROBLES v LIZARRAGA HERMANOS:

ART. 1472: The price of securities, grain, liquids and other things shall also be considered certain, when the price fixed is that which the thing sold would have Provided said amount be certain On a definite day Particular exchange or market An amount is fixed above or below the price on such day or in such exchange or market

NAVARRO v SUGAR PRODUCERS CORP. When the manner of payment of purchase price is discussed after acceptance, acceptance did not produce a binding and enforceable contract of sale. There was no complete meeting of the minds

III. OBLIGATIONS OF THE VENDOR/SELLER

ART. 1473: The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected. (1449a)

A. OBLIGATION TO TRANSFER/DELIVER 1. IN GENERAL ART. 1477: The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

ART. 1474: Where the price cannot be determined in accordance to the preceding articles, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the buyer, he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

ART. 1496: The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. (n)

Ownership of thing shall transfer to the vendee upon the ACTUAL or CONSTRUCTIVE DELIVERY of the thing sold. OR: any manner signifying an agreement that possession is transferred from vendor to vendee (Art. 1496)

(1) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction; (2) If he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.

a. b.

Contract of sale constitutes a RIGHT to TRANSFER or ACQUISITION of OWNERSHIP Delivery is the method of accomplishing this right

b. SALE ON APPROVAL

CASES ASSET PRIVATIZATION TRUST v TJ ENTERPRISES:

SALE OR RETURN Buyer has the right to return the thing within the time fixed in the agreement or within a reasonable time as long as the things condition has not substantially changed Ownership passes to the buyer upon the delivery of the thing but he may revest it

SALE ON APPROVAL Buyer gets the thing sold on trial and signifies his acceptance or refusal within a certain period

PHIL. SUBURBAN DEV. CORP. v AUDITOR GENERAL: When there is no symbolic delivery of the object even after the execution of the public instrument when the intention of the parties is otherwise for example: a. Certain date is fixed for the purchaser to take possession b. In case of sale by installment, stipulated that until last payment is paid, title to property remains with the vendor c. Vendor reserves the right to use and enjoy property until gathering of the pending crops Vendor has no control over the goods at the moment of sale hence material delivery could not have been made

Title to the goods remain with the seller although it has already been delivered to the buyer (Vallarta v CA)

c. EXECUTION SALES ART. 1478: The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. EXPRESS RESERVATION ART. 1503: When there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. The right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer. IMPLIED RESERVATION

2. EXCEPTIONS a. SALE ON RETURN ART. 1502: When goods are delivered to the buyer on sale or return to give the buyer an option to return the goods instead of paying the price, the ownership passes to the buyer of delivery, but he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract, or, if no time has been fixed, within a reasonable time. (n)

i. ii.

Ownership of the thing shall not pass until the price is fully paid Seller may reserve the right of possession or ownership in the goods until certain conditions have been fulfilled

When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the ownership therein passes to the buyer:

CASES

VALLARTA v CA: When the sale of a movable is a sale on acceptance, no contract of sale existed at the time of the delivery of the subject matter, and consequently, ownership could not have been transferred to the buyer although he took possession thereof. Delivery or tradition, as a mode of acquiring ownership, must be un consequence of a contract.

OBANA v CA:

KUENZIE & STREIFF v MACKE & CHANDLER: The ownership of personal property cannot be transferred to the prejudice of third persons except by delivery of the property itself; And that a sale without delivery gives the would-be purchaser no rights in said property except those of a creditor

INDUSTRIAL TEXTILE MANUFACTURING CO. v LPI ENTERPRISES, INC.: For a sale to be considered and construed as a sale or return or sale on approval, there must be clear agreement to either of such effect, otherwise, the provisions of Art. 1502, governing such sales cannot be invoked be either party to the contract. Must be in writing.

OCEJO PEREZ & CO. v INTERNATIONAL BANK: Delivery produces its natural effects in law, the principal and most important of which being the conveyance of ownership, without prejudice to the right of the seller to claim the payment of the price.

MENDOZA v DAVID:

4. KINDS OF DELIVERY RUDOLF LIETZ, INC. v CA: ART. 1496: The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. (n)

3. MANNER OF TRANSFER ART. 1477: The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. a. REAL OR ACTUAL DELIVERY ART. 1497: The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee.

ART. 1496: The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. (n)

Delivered when placed in the control and possession of the vendee; conveyance of ownership without prejudice to the right of vendor to claim payment of the price

ART. 1497: The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee.

CASES BEAN v CADWALLER: Actual manual delivery of an article sold is not essential to the passing of the title thereto (art 1450, Civil Code) unless made so by the terms of the contract or by an understanding of the parties.

CASES

 The parties to the contract may agree when and on what conditions the property in the subject of the contract was passed to the prospective owner

ALFREDO v BORRAS: Perfected and Consummated Contract of Sale Alfredo mortgaged to DBP (7K) Borras paid loan and balance to Alfredos (15K) DBP gave Borras copy of OCT; Carmen Alfredo issued a receipt for the received balance (8K) A re-sold property on the basis of a copy of the title obtained judicially; claims sale with B not valid under the Statutes of Fraud because it was oral Contract of Sale 1. Perfected a. consent b. object land c. price 15K 2. Consummated - Physical delivery of subject land transfer of ownership Even if orally entered into Receipt = note/memo of the sale Under SOF, only voidable and may be ratified when Godofredo A introduced B to tenants of land Redounded on the conjugal partnership (Art. 161) b. CONSTRUCTIVE DELIVERY i. SYMBOLIC DELIVERY/DELIVERY BY PUBLIC INSTRUMENT ART. 1498: When the sale is made through a public instrument, the execution thereof shall be equivalent to delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot be clearly inferred.

Seller must have control over the thing, otherwise how can he put another in control. Fiction yields to reality, he cannot transfer constructive possession if there is legal impediment to actual possession. Buyer must be put under control. Intention to deliver the thing for purposes of ownership.

CASES FLORENDO v FOZ: It is the material delivery of the property sold which the defendant must make in compliance with the contract, inasmuch as the formal delivery de jure was made, according to the provisions of article 1462, 2nd paragraph, of the same code: o When the sale should be made by means of a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract; if in said instrument the contrary does not appear or may be clearly inferred. As the contrary does not appear nor is to be inferred from the public instrument executed by the defendant, its execution was really a formal or symbolical delivery of the property sold and authorized the plaintiff to use the tile of ownership as proof that he was thenceforth the owner of the property

MASALLO v CESAR: As Matea Crispino admits, however, that she did not have possession of the land when she executed and delivered her deed to plaintiff, the mere execution and delivery of the deed did not constitute a delivery of possession

With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept. When sale is made through a public instrument, the EXECUTION thereof shall be equivalent to delivery IF from the deed the contrary does not appear o operates as formal/symbolic delivery o authorizes buyer to use such document as proof of ownership Symbolic delivery may produce the effect of tradition if vendor have had such control over the thing sold that at the moment of the sale, its material delivery could have been made GENERAL RULE: he who purchases through a public instrument should be deemed a possessor in fact and this presumption should give way before proof to the contrary A person must be in ACTUAL POSSESSION to be able to transfer CONSTRUCTIVE POSSESSION through public instrument

AVILES v ARCEGA:

ALLIANCE TOBACCO v PVTA:

ASSET PRIVITIZATION TRUST v TJ ENTERPRISES:

REQUISITES OF CONSTRUCTIVE DELIVERY BEFORE OWNERSHIP MAY BE TRANSMITTED

DY, JR. v CA

 Brother bought from brother a tractor which was the subject of a mortgage and at the time of the execution of the deed of absolute sale, the tractor was in the possession of the mortgagee. Judgment for the brother-buyer. The mortgagor who gave the property as security under a chattel mortgage did not part with the ownership over the same. He had a right to sell it although he was under the obligation to secure the written consent of the mortgagor.

SANTOS v SANTOS

iii. TRADITION BREVI MANU (SHORT HAND) ADDISON v FELIX It is the duty of the seller to deliver the thing sold, and that symbolic delivery by the execution of a public instrument is equivalent to actual delivery only when the thing sold is subject to the control of the seller, so that at the moment of sale, its material delivery could have been made. The moment of sale: = consummation ART. 1499: The delivery of a movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale or if the latter already had it in his possession for any other reason.

CHUA v CA

Traditio Brevi Manu delivery of movable property takes place when the vendee had the thing already in his possession before the sale took place, not as owner but as lessee, borrower or depositary.

ii. TRADITIO LONGA MANU (LONG HAND) ART. 1498: When the sale is made through a public instrument, the execution thereof shall be equivalent to delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot be clearly inferred.

CASES ABUAN v GARCIA

ART. 1499: The delivery of a movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale or if the latter already had it in his possession for any other reason.

HEIRS OF PEDRO ESCANLAR v CA The September 15, 1978 sale of rights, interests and participation as to 1/2 portion pro indiviso of the two subject lots is a contract of sale for the following reasons: o First, private respondents as sellers did not reserve unto themselves the ownership of the property until full payment of the unpaid balance of P225,000.00. o Second, there is no stipulation giving the sellers the right to unilaterally rescind the contract the moment the buyer fails to pay within the fixed period. Prior to the sale, petitioners were in possession of the subject property as lessees. Upon sale to them of the rights, interests and participation as to the 1/2 portion pro indiviso, they remained in possession, not in concept of lessees anymore but as owners now through symbolic delivery known as traditio brevi manu. Under Article 1477 of the Civil Code, the ownership of the thing sold is acquired by the vendee upon actual or constructive delivery thereof

Traditio Longa Manu delivery takes place when the thing is placed in the sight of the purchaser so that he can take possession of it at pleasure

CASES BOARD OF LIQUIDATORS v FLORO:

iv. TRADITIO CONSTITUTUM POSSESSORIUM ART. 1500: There may also be tradition constitutum possessorium. (n) Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods and the other circumstances of the case. If the seller omit so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages.

In traditio constitutum possessorium, the vendor remains in possession of the property sold, by virtue of a lease agreement with the vendee. Vendee became as lessor, the legal possessor while the vendor is in material possession of the property in the name and representation of the vendee.

CASES BAUTISTA v SIOSON Even if the vendor sells the property again to another, the second purchaser cannot acquire ownership as he bought the property from a mere tenant. In a case which frequently occurs, where the vendor, on the same date on which the deed of sale is executed, by means of a constitutum possessorium agreement converts himself into a tenant or lessee of the property that he sold, and continues in possession thereof as such tenant, the purchaser who acquired the property through delivery or symbolic tradition, with all the consequent effects of a deed of conveyance, is deemed to be in possession thereof by the express will of the contracting parties, and therefore, it must be recognized that, through such constitutum possessorium agreement, the purchaser, who by that covenant becomes the lessor, is in lawful possession of the leased property, and that the vendor, by the same covenant, converted himself into the lessee and is in material possession of the leased property in the name and representation of the purchaser, its lawful owner.

Unless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in which the seller knows or ought to know that it is usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their transit, and, if the seller fails to do so, the goods shall be deemed to be at his risk during such transit.

ART. 1503: When there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. The right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.

AMIGO v TEVES A provision in the deed of sale granting the seller a right to lease the subject matter of the sale is VALID. Common in contracts of sale of land with pacto de retro; may be considered as a means of delivery or tradition by constitutum possessorium.

Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the goods. But, if except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of the goods, the seller's property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract.

c. DELIVERY TO A COMMON CARRIER ART. 1523: Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the case provided for in Article 1503, first, second and third paragraphs, or unless a contrary intent appears.

Where goods are shipped, and by the bill of lading the goods are deliverable to order of the buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the possession of the goods as against the buyer.

Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added right thereby. If, however, the bill of lading provides that the goods are deliverable to the buyer or to the

order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in good faith, for value, the bill of lading, or goods from the buyer will obtain the ownership in the goods, although the bill of exchange has not been honored, provided that such purchaser has received delivery of the bill of lading indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful.

If the contract is silent as to the person or mode by which the goods are to be sent, delivery by the vendee to a common carrier, in the usual and ordinary course of business, transfers the property to the vendee. Both the terms c.i.f. and f.o.b. merely make rules of presumption which yield to proof of contrary intention.

d. EFFECT OF BILLS OF LADING ON TRANSFER OF OWNERSHIP GENERAL RULE: Delivery of goods to carrier is considered delivery to the buyer, and hence, title passed to the buyer at the point of shipment EXCEPTION: Seller may reserve title by the form of the bill of lading with intent to remain the owner for all purposes and not merely for the sole purpose of securing payment, or unless contrary intent appears in the contract of sale ART. 1503: Ownership is retained: The seller may consign the goods to himself or to his agent and thus prevent title from passing to the buyer until the latter pays the price Mere possession is retained: The seller may consign the goods to the order of the buyer on the latters agent but by retaining the bill of lading, he thereby prevents the buyer from obtaining the goods from the carrier until price is paid

a. Terms, f.o.b.; c.i.f.; f.a.s. f.o.b. - free on board means that the seller bears expenses of transportation up to the f.o.b. point. c.i.f. - cost, insurance, freight signifies that the price quoted includes the costs of the goods, insurance, and freight charges on the goods up to the place of destination; paid by seller f.a.s. free alongside means that the seller bears the expenses of transportation until he delivers the goods alongside a vessel at a named post.

5. DOUBLE SALE ART. 1544: If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. These terms may be used only in connection with fixing the price and will not be construed as fixing the place of delivery to the buyer Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

Best indication of the intention of parties as to the place of delivery is the manner and place of payment agreed upon by the parties

o o

Where price is payable upon proof of shipment, then the buyer agrees to accept delivery at the point of shipment Where the price is payable only upon arrival of the goods at the point of destination, then that is the place of delivery to the buyer

RULES OF PREFERENCE 1) 2) Registrant in good faith Possessor in good faith (If there was no registration OR registration was done in bad faith) No distinction between actual or constructive POSSESSOR IN GOOD FAITH one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it; no knowledge of facts which should have put him upon such inquiry or

CASE BEN MEYER v YANGCO: Shipping terms were c.i.f. Manila on goods coming from New York

3)

investigation as might be necessary to acquaint him with the defects in the title of his vendor GOOD FAITH consists in an honest intention to abstain from taking any unconscientious advantage of another Good faith of second buyer must continue until his contract ripens into ownership by tradition or recording. REGISTERED LANDS purchaser is not required to do more than rely on the certificate of the title issued in the name of his vendor, he need not trace its origin to prior certificates of title Art 1544 (on double sales) not applicable to execution sales because the purchaser at such sales is substituted to or acquires only whatever rights, titles or interests the judgment debtor may have over the property as of the time of the levy (e.g. right of redemption). Person with the oldest title in good faith

o o o

good faith is always presumed; burden of proof is on person alleging bad faith good faith of second buyer must continue until his contract ripens into ownership by tradition or recording as to Torrens title: it is enough that purchaser examines the latest certificate of title issued in the name of his vendor and he need not trace its origin to prior certificates of title

CASES LEUNG YEE v FL STRONG MACHINERY INC.

CARUMBA v CA UNREGISTERED LANDS Art 1544 is also applicable to unregistered lands under Act 3444: registration of instruments is without prejudice to a third party with a better right mere registration of sale in ones favor does not give him any right over the land if the vendor was not the owner of the land As to matters which took place before the first recorded transfer of the land, one must conduct his own investigation because registration was without prejudice to a third party with a better right. Not applicable to unregistered lands under Act 496: prior unrecorded sale cannot rd prejudice execution sales, if no 3 party claim was presented before the execution sale took place Distinguished the applicability of Art. 1544 depending on whether the land is registered under the Torrens system or is unregistered land. Registration under the Torrens system was previously governed by Act. No. 496, but now governed by PD 1529. On the other hand, annotation of transactions affecting unregistered land was governed by Act. No. 3344, but now also governed by PD 1529. 1544 granting priority to the buyer who registers in good faith over the other who takes possession in good faith is INAPPLICABLE to UNREGISTERED LAND because the purchase of the unregistered land at a sheriffs execution sale only steps in the shoes of the judgment debtor, and merely acquires the latters interest in the property sold as of the time the property was levied upon.

RULES IN THE APPLICATION OF ARTICLE 1544: (1) Knowledge by the first buyer of the second sale cannot defeat the first buyers rights except when the second buyer first registers in good faith the second sale; and (2) Knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since such knowledge taints his registration with bad faith. Differently put, the act of registration by the second buyer must be coupled with good faith, meaning, the registrant must have no knowledge of the defect or lack of title of his vendor or must not have been aware of facts which should put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. ART. 526 and ART. 527: POSSESSOR IN GOOD FAITH: one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.

REMALANTE v TIBE

MATHAY v CA

QUIJADA v CA

DIAZ-DUARTE v ONG

NAVAL v CA

PO LAM v CA CARBONELL v CA 1 buyers good faith subsisted and continued to exist when she recorded her adverse nd claim prior to the registration of the 2 buyers deed of sale. Nor did the good faith cease when 1 found out about the subsequent sale to 2.
st

REPUBLIC v DE GUZMAN

TANGLAO v PARUNGAO TEN FORTY REALTY & DEV. CORP. v CRUZ Ownership is transferred not by contract but by tradition or delivery. Nowhere in the Civil Code is it provided that the execution of a Deed of Sale is a conclusive presumption of delivery of possession of a piece of real estate. The execution of a public instrument gives rise only to a prima facie presumption of delivery. Such presumption is destroyed when the delivery is not effected because of a legal impediment. Such constructive or symbolic delivery, being merely presumptive, was deemed negated by the failure of the vendee to take actual possession of the land sold. Good faith is essential, being the basic premise of the preferential rights granted to the person claiming ownership of the immovable. A buyer of real property in possession of persons other than the seller must be wary and should investigate the rights of those in possession, for without such inquiry the buyer can hardly be regarded as a buyer in good faith and cannot have any right over the property.

CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC. v CA

RURAL BANK OF STA. IGNACIA, INC. v DIMALUTAC SLDC v CA The perfection of a contract of sale should not, however, be confused with its consummation. In relation to the acquisition and transfer of ownership, it should be noted that sale is not a mode, but merely a title. Sale by itself does not transfer or affect ownership; the most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership.

OCCENA v ESPONILLA

PANGADUAN v SPOUSES OCUMA CHENG v GENATO

NAAWAN COMMUNITY RURAL BANK, INC. v CA 6. RISK OF LOSS It is a well-known rule in this jurisdiction that persons dealing with registered land have the legal right to rely on the face of the Torrens Certificate of Title and to dispense with the need to inquire further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry. ART. 1504: Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not, except that:

(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor; (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery;

(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary. (1122)

(2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party in fault. (n)

ART. 1538: In case of loss, deterioration or improvement of the thing before its delivery, the rules in Article 1189 shall be observed, the vendor being considered the debtor. (n)

ART. 1452: If two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each.

When loss occurs after perfection but before delivery, the seller bears the risk of loss. The buyer does not bear the risk of loss until the goods are delivered, actually or constructively. This is because the rule is a combination of the common-law rule that the owner bears the risk of loss (res perit domino), and the Roman law requiring delivery to transfer ownership.

ART. 1189: When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition:

GENERAL RULES: 1. The risk of loss shall be borne by the owner.

(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;

2. Ownership is transferred upon delivery.

(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered;

EXCEPTIONS: 1. Contrary stipulation 2. Security title

(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

3. Delay through the fault of the buyer or the seller at the risk of the party at fault

CASES (4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case; SUN BROS. APPLIANCES, INC. v PEREZ: The law allows an agreement which stipulates that (1) where goods are sold and delivered to the buyer, the title is to remain in the seller until full payment, [but] (2) the loss or destruction of the property while in the possession of the buyer before payment, does not

relieve him from the obligation to pay the price; in which case, the buyer suffers the loss. The reasons for its validity are: First, the absolute and unconditional nature of the vendees promise to pay for the goods. Second, the vendor has fully performed his contract and the vendee received what he bargained for. Third, the policy of providing an incentive to care properly for the goods, which is under the control and dominion of the vendee.

(2) Whereby the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the order of a specified person, and such person or a subsequent endorsee of the document has indorsed it in blank or to the bearer.

LAWYERS COOPERATIVE PUBLISHING CO. v TABORA Despite the loss of the books in a fire, the risk of loss would be borne by the buyer although he was not the owner yet. This is because the stipulation ownership shall only be transferred upon full payment was agreed merely to secure the performance by the buyer of his obligation. Moreover, in the contract, it was agreed that loss or damage to the books after delivery to the buyer shall be borne by the buyer. While under the rule, an obligor should be exempt from liability when the loss occurs in a fortuitous event, this cannot be used by the buyer as a defense to exempt himself from paying. His obligation does not pertain to the delivery of the subject matter, but to the payment of the purchase price. The ability to pay in money or legal tender is never lost through a fortuitous event.

Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a negotiable document of title has been indorsed in blank or to bearer, any holder may indorse the same to himself or to any specified person, and in such case the document shall thereafter be negotiated only by the endorsement of such endorsee. (n)

ART. 1509: A negotiable document of title may be negotiated by the endorsement of the person to whose order the goods are by the terms of the document deliverable. Such endorsement may be in blank, to bearer or to a specified person. If indorsed to a specified person, it may be again negotiated by the endorsement of such person in blank, to bearer or to another specified person. Subsequent negotiations may be made in like manner. (n)

7. DOCUMENTS OF TITLE ART. 1636: Document of title a document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by endorsement or by delivery, goods represented by such document.

TERMS OF THE DOCUMENT Goods are deliverable to bearer Endorsed in blank by the person to whose order the goods were deliverable Goods are deliverable to the order of a specified person

HOW NEGOTIATED By delivery of the document to another By indorsement of such person

The functions of documents of title are (1) Evidence of the possession or control of the goods described therein (2) Medium of transferring title and possession over the goods described therein without having to effect actual delivery thereof (Villanueva)

ART. 1516: A person who for value negotiates or transfers a document of title by endorsement or delivery, including one who assigns for value a claim secured by a document of title unless a contrary intention appears, warrants:

(1) That the document is genuine; ART. 1507: Negotiable document of title a document of title in which it is stated that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such document. (2) That he has a legal right to negotiate or transfer it; (3) That he has knowledge of no fact which would impair the validity or worth of the document; and (4) That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose, whenever such warranties would have been implied if the contract of the parties had been to transfer without a document of title the goods represented thereby. (n)

ART. 1508: A negotiable document of title may be negotiated by delivery: (1) Whereby the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the bearer; or

1. the document be first surrendered to the carrier; or ART. 1517: The endorsement of a document of title shall not make the endorser liable for any failure on the part of the bailee who issued the document or previous endorsers thereof to fulfill their respective obligations. (n) 2. impounded by the court; or 3. its negotiation be enjoined.

A person who negotiates a document of title warrants: 1. the genuineness and validity of the document; 2. his right to negotiate it; and, 3. all the warranties of a vendor of goods.

Rationale for the rule: A negotiable document of title represents the goods; hence it is not allowable for a carrier to deliver the goods without the surrender of the bill of lading to them, or for the law to allow attachment on the goods.

But he does not warrant that: 1. the common carrier will fulfill its obligation to the deliver the goods; or 2. the previous indorsers will fulfill their obligation.

ART. 1514 (3): A person to whom a document of title has been transferred, but not negotiated, acquires thereby, as against the transferor, the title to the goods, subject to the terms of any agreement with the transferor.

ART. 1519: If goods are delivered to a bailee by the owner or by a person whose act in conveying the title to them to a purchaser in good faith for value would bind the owner and a negotiable document of title is issued for them they cannot thereafter, while in possession of such bailee, be attached by garnishment or otherwise or be levied under an execution unless the document be first surrendered to the bailee or its negotiation enjoined. The bailee shall in no case be compelled to deliver up the actual possession of the goods until the document is surrendered to him or impounded by the court. (n)

If the document is non-negotiable, such person also acquires the right to notify the bailee who issued the document of the transfer thereof, and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the document.

Prior to the notification to such bailee by the transferor or transferee of a non-negotiable document of title, the title of the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an attachment of execution upon the goods by a creditor of the transferor, or by a notification to such bailee by the transferor or a subsequent purchaser from the transfer of a subsequent sale of the goods by the transferor. (n)

ART. 1520: A creditor whose debtor is the owner of a negotiable document of title shall be entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in attaching such document or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property which cannot readily be attached or levied upon by ordinary legal process. (n)

ART. 1515: Where a negotiable document of title is transferred for value by delivery, and the endorsement of the transferor is essential for negotiation, the transferee acquires a right against the transferor to compel him to endorse the document unless a contrary intention appears. The negotiation shall take effect as of the time when the endorsement is actually made. (n)

Goods in the hands of the carrier covered by a negotiable document cannot be attached or levied upon, UNLESS:

The law makes a distinction between negotiation [negotiable document of title] and transfer [non-negotiable document of title].

b) Seller includes the agent of the seller to whom the bill of lading was endorsed, or the consignor or agent who had paid the price or is responsible for the price, or any other person who is in the position of a seller.

Transfer: the assignment of rights of the consignee of a non-negotiable document of title to another where an order document of title was sold or assigned, without indorsement ART. 1526: Subject to the provisions of this Title, notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller of goods, as such, has:

The transferee does not acquire a better title than his transferor [unlike in a negotiable document of title, where the buyer may acquire a better title].

(1) A lien on the goods or right to retain them for the price while he is in possession of them; (2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them; (3) A right of resale as limited by this Title; (4) A right to rescind the sale as likewise limited by this Title.

8. UNPAID SELLER ART. 1525: The seller of goods is deemed to be an unpaid seller within the meaning of this Title:

(1) When the whole of the price has not been paid or tendered; (2) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise.

Where the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transitu where the ownership has passed to the buyer. (n)

a) If ownership over the goods had not yet passed to the buyer: the seller, as owner, could retain the goods or resell them to another, without prejudice to his liability for damages for any breach of contract committed by him.

In Articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of lading has been indorsed, or a consignor or agent who has himself paid, or is directly responsible for the price, or any other person who is in the position of a seller. (n)

a) Unpaid seller if the whole price has not been paid or tendered, or when the check received as conditional payment was dishonored by non-payment or insolvency of the buyer.

b) If ownership had passed to the buyer but the goods are still in the possession of the seller or are in transit to the buyer: the unpaid seller could withhold delivery or stop the goods in transit should the buyer become insolvent. As a consequence of his lien over the goods, the unpaid seller could resell the goods to another or resume ownership over them, without court order, and may still used the buyer for damages

LIEN

ART. 1527: Subject to the provisions of this Title, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely:

The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained judgment or decree for the price of the goods. (n)

a) (1) Where the goods have been sold without any stipulation as to credit;

The unpaid sellers lien implies that he has a right to retain possession of the goods until payment or tender of the whole price, unless he agreed to sell on credit.

(2) Where the goods have been sold on credit, but the term of credit has expired;

b)

If the unpaid seller agrees to sell on credit, he may refuse to deliver them if the buyer becomes insolvent, or if the term of the credit had expired and the price has not been paid.

(3) Where the buyer becomes insolvent.

c)

Loss of lien: the unpaid seller losses his lien when:

The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer. (n)

1.

2. 3. ART. 1528: Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an intent to waive the lien or right of retention. (n)

he delivers the goods to the carrier or other bailee, consigning them to the buyer under a straight or nonnegotiable bill of lading, or when the goods were delivered to the buyer, or when he waived his lien.

d)

It is not lost on the remainder of the goods when only partial delivery was made, unless such was intended to operate as symbolical delivery of the whole. The lien is not lost by the mere fact that the seller had already obtained judgment for the price.

ART. 1529: The unpaid seller of goods loses his lien thereon: e) Revival of lien: the unpaid sellers lien is revived if the goods are returned by the buyer in wrongful repudiation of the contract.

(1) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the ownership in the goods or the right to the possession thereof;

STOPPAGE IN TRANSITU ART. 1530: Subject to the provisions of this Title, when the buyer of goods is or becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu, that is to say, he may resume possession of the goods at any time while they are in transit, and he will then become entitled to the same rights in regard to the goods as he would have had if he had never parted with the possession. (n)

(2) When the buyer or his agent lawfully obtains possession of the goods;

(3) By waiver thereof. ART. 1531: Goods are in transit within the meaning of the preceding article:

(1) From the time when they are delivered to a carrier by land, water, or air, or other bailee for the purpose of transmission to the buyer, until the buyer, or his agent in that behalf, takes delivery of them from such carrier or other bailee;

ART. 1532: The unpaid seller may exercise his right of stoppage in transitu either by obtaining actual possession of the goods or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Such notice may be given either to the person in actual possession of the goods or to his principal. In the latter case the notice, to be effectual, must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may prevent a delivery to the buyer.

(2) If the goods are rejected by the buyer, and the carrier or other bailee continues in possession of them, even if the seller has refused to receive them back.

Goods are no longer in transit within the meaning of the preceding article:

When notice of stoppage in transitu is given by the seller to the carrier, or other bailee in possession of the goods, he must redeliver the goods to, or according to the directions of, the seller. The expenses of such delivery must be borne by the seller. If, however, a negotiable document of title representing the goods has been issued by the carrier or other bailee, he shall not obliged to deliver or justified in delivering the goods to the seller unless such document is first surrendered for cancellation. (n)

(1) If the buyer, or his agent in that behalf, obtains delivery of the goods before their arrival at the appointed destination;

ART. 1535: Subject to the provisions of this Title, the unpaid seller's right of lien or stoppage in transitu is not affected by any sale, or other disposition of the goods which the buyer may have made, unless the seller has assented thereto.

(2) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or his agent; and it is immaterial that further destination for the goods may have been indicated by the buyer;

(3) If the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf.

If, however, a negotiable document of title has been issued for goods, no seller's lien or right of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom such document has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier, or other bailee who issued such document, of the seller's claim to a lien or right of stoppage in transitu. (n)

a. If the goods are delivered to a ship, freight train, truck, or airplane chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the possession of the carrier as such or as agent of the buyer. If part delivery of the goods has been made to the buyer, or his agent in that behalf, the remainder of the goods may be stopped in transitu, unless such part delivery has been under such circumstances as to show an agreement with the buyer to give up possession of the whole of the goods. (n) b.

Old common law remedy which is an extension of the lien for the price and entitles the unpaid seller to resume possession of the goods while they are in transit before the goods come in possession of the vendee if the later is or becomes insolvent.

Goods are considered to be in transit from the time they are delivered to a carrier or other bailee by the seller for the purpose of transmission to the buyer, until the buyer or his agent takes delivery of them from the carrier. To terminate the transit by delivery to a middleman, it must be delivery to keep, not to transport.

c.

Goods are still considered to be in transit even if they reached their ultimate destination when the buyer rejects them and they remain in the possession of the carrier.

RESALE ART. 1533: Where the goods are of perishable nature, or where the seller expressly reserves the right of resale in case the buyer should make default, or where the buyer has been in default in the payment of the price for an unreasonable time, an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. He shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale, but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale.

d.

Goods are no longer in transit if the buyer or his agent obtained delivery of the goods even before they reached their ultimate destination, or when the goods arrived at the ultimate destination but the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent, or when the carrier, upon arrival of the goods at the ultimate destination, enters into a new contract with the buyer or his agent.

e.

If there was partial delivery of the goods to the buyer, the remainder of the goods may be stopped in transitu, unless such part delivery has been made under such circumstances as to show an agreement with the buyer to give up possession of the whole. Where the buyer has taken some portion of the whole mass which was then susceptible of possession, there is constructive possession of the whole.

Where a resale is made, as authorized in this article, the buyer acquires a good title as against the original buyer.

f.

Sale of goods in transit: the unpaid sellers right of lien or stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made unless the seller has assented thereto.

1 Where a negotiable document of title has been issued for the goods, no sellers lien or right of stoppage in transitu cannot defeat the rights of any purchaser for value in good faith to whom such document has been negotiated. 2 Where the document of title is a straight bill of lading, the sellers right of stoppage will not be cut off as the transferee acquires no greater or added rights than his transferor.

It is not essential to the validity of resale that notice of an intention to resell the goods be given by the seller to the original buyer. But where the right to resell is not based on the perishable nature of the goods or upon an express provision of the contract of sale, the giving or failure to give such notice shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the resale was made.

It is not essential to the validity of a resale that notice of the time and place of such resale should be given by the seller to the original buyer.

Right of Stoppage; How Exercised-The unpaid seller may exercise his right by 1. obtaining actual possession of the goods or 2. by giving notice of his claim to the carrier or other bailee in whose possession the goods are.

The seller is bound to exercise reasonable care and judgment in making a resale, and subject to this requirement may make a resale either by public or private sale. He cannot, however, directly or indirectly buy the goods. (n)

When notice of stoppage in transit is given to the carrier, the latte must redeliver the goods to, or according to the directions of, the seller. If however, a negotiable document of title representing the goods has been issued by the carrier, the latter shall not be obliged to deliver the goods unless such document is first surrendered for cancellation.

a) When the goods are of perishable nature, or where the seller expressly reserves the right of resale in case the buyer should default in payment, or where the buyer has been in default for an unreasonable length of time, the unpaid seller, having a right of lien or having stopped the goods in transitu, may resell the goods and recover from the buyer damages for breach of contract.

b) The resale may be in a public or private sale, but the seller cannot buy them directly or indirectly. The seller is entitled to any profit he may make out of the resale.

c) In case he sells them at a loss, he is entitled to recover the difference from the original buyer. It is not essential to the validity of a resale that previous notice of an intention to resell or notice of the time and place or resale be given to the original buyer.

a) An unpaid seller having the right of lien or having stopped the goods in transitu may rescind the transfer of title and resume ownership in the goods where he expressly reserved the right to do so in case the buyer defaults, or where the buyer has been in default in payment of the price for an unreasonable time. The transfer of title shall not be held to have been rescinded by the unpaid seller until he manifests by notice to the buyer or by some overt act an intention to rescind. After rescinding the transfer of title, the seller may still recover damages from the buyer for breach of contract.

d) Damages recoverable: Whether the action is for damages or to recover loss from a resale, the purpose is to compensate the seller for loss for breach of contract. Thus, if the purchaser fails to take delivery and pay the price, the vendor, without need of first rescinding the contract judicially, is entitled to resell, and if obliged to sell for less than the contract price, the buyer is liable for the difference.

As used in Art. 1534, the term rescind is equivalent to return of the title over the undelivered goods to the seller and the right to recover damages for loss due to breach of contract.

CASES BACHRACH MOTOR v MENDOZA

e) Due diligence must be exercised to secure the highest price obtainable in the best available market. The burden of showing it was exercised is on the vendor.

KATIGBAK v CA RESCISSION ART. 1534: An unpaid seller having the right of lien or having stopped the goods in transitu, may rescind the transfer of title and resume the ownership in the goods, where he expressly reserved the right to do so in case the buyer should make default, or where the buyer has been in default in the payment of the price for an unreasonable time. The seller shall not thereafter be liable to the buyer upon the contract of sale, but may recover from the buyer damages for any loss occasioned by the breach of the contract. If a purchases fails to take delivery and pay the purchase price of the subject matter of the contract, the vendor, without need of first rescinding the contract judicially, is entitled to resell the same, and if he is obliged to sell it for less than the contract price, the buyer is liable for the difference.

B. WARRANTIES

CASES The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by notice to the buyer or by some other overt act an intention to rescind. It is not necessary that such overt act should be communicated to the buyer, but the giving or failure to give notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the right of rescission was asserted. (n) LAFORTEZA v MACHUCA denominated as Contract to Sell a. no express reservation of title b. no stipulation that non-payment would make it unenforceable COS: elements are all present

a. Consent b. Determinate subject-matter: house and lot c. Price: 600K balance to be paid upon issuance of a new certificate of title PERFECTED: a. earnest money paid b. 6month period only a condition for the payment c. non-payment of rent if partition took longer than 6m = Machuca was already owner NOT RESCINDED (by Lafortezas) a. no notarial/judicial rescission b. no stipulation of automatic rescission *Letter from Lafortezas saying they were rescinding the contract given 5days after Machuca offered to pay *Right to ask for rescission vested on Machuca; he was ready to comply with his obligation when the Lafortezas were not.

Where the ownership in the thing has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. (n)

Condition an uncertain event or contingency fixed by parties, the existence or happening of which was necessary to the efficacy of the contract, and failure of which permits the injured party to treat the contract as at an end, but creates no right of action. Where a condition is not performed, the buyer may refuse to proceed with the contract, or accept the goods and waive performance of the condition. Distinctions according to Villanueva (Law on Sales , 2004)

POWER COMMERCIAL AND INDUSTRIAL CORP. v CA Condition 1. EXPRESS WARRANTIES Warranty where one party promised that the contingency or some act fixed by the contract shall be performed, like a promise that the goods are of a certain kind and character or that certain state of facts would exist, the promise constitutes a warranty, and failure of which gives rise to an action for its breach. Generally goes into the root of the existence of the obligation Warranty Goes into the performance of such obligation, and in fact may constitute an obligation in itself May form part of obligation by contract or provision of law, without parties having agreed thereto Whether express or implied, relates to subject matter itself or to the obligations of the seller as to the subject matter of the sale

Must be stipulated by the parties in order to form part of an obligation

Breach: the buyer may 1. 2. 3. 4. accept goods + maintain an action for damages accept goods + set up breach of warranty as a recoupment in diminution/ extinction of price refuse to accept goods and maintain action for damages rescind + refuse to accept goods; or return (or offer to return) goods + recover price paid

May attach itself either to obligation of seller to deliver possession or transfer ownership over subject matter of sale

ART. 1545: Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty.

ART. 1546: Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchase the thing relying thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the seller's opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer. (n)

a) Warranty an affirmation of fact or any promise by seller relating to the thing which has a natural tendency to induce the buyer to purchase the same, relying on such promise of affirmation

GUINHAWA v PEOPLE

b) Opinion/dealers talk an affirmation of the value of the thing or any statement of the sellers opinion shall not be construed as a warranty, unless the seller made such an affirmation as an expert and it was relied upon by the buyer

2. IMPLIED WARRANTIES a. WARRANTY IN CASE OF EVICTION

Test: whether the vendor assumes to assert a fact of which the buyer is ignorant, in which case it is a warranty, or whether it is merely an expression of an opinion or judgment on the part of the seller on a matter of which the seller has no special knowledge and on which the buyer may be expected also to have an opinion or exercise his judgment. In good condition v. Excellent quality the first relates to the quantity, kind or condition of the goods sold, it is an affirmation of fact or promise, and not a mere expression of an opinion; the second is not an express warranty and the purchaser must rely on the implied warranty that the goods are merchantable; mere expression of an opinion.

Art. 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased. The vendor shall answer for the eviction even though nothing has been said in the contract on the subject.

The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor. (1475a)

CASES PHIL. MANUF. CO. v GO JUCCO An intention to deceive or mislead the other party to his prejudice is an essential element of fraud. Concealment of facts does not necessarily amount to false representation, unless there was an active misstatement of fact or a partial statement of fact, such that withholding of that which is not stated makes that which is stated absolutely false. Art. 1549. The vendee need not appeal from the decision in order that the vendor may become liable for eviction. (n)

Art. 1550. When adverse possession had been commenced before the sale but the prescriptive period is completed after the transfer, the vendor shall not be liable for eviction. (n)

FILINVEST CREDIT CORP. v CA A provision in a contract of lease with option to purchase (which is treated as a sale of movable on installments) that the buyer-lessee absolutely releases the lessor from any liability whatsoever as to any and all matters in relation to warranty in accordance with the provisions hereinafter stipulated, was an EXPRESS WAIVER OF WARRANTY AGAINST HIDDEN DEFECTS if favor of the seller-lessor which absolved the seller-lessor from any liability arising from any defect or deficiency of the machinery they bought. Art. 1551. If the property is sold for nonpayment of taxes due and not made known to the vendee before the sale, the vendor is liable for eviction. (n)

Art. 1552. The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment. (n)

HARRISON MOTOR CO. v NAVARRO

Art. 1553. Any stipulation exempting the vendor from the obligation to answer for eviction shall be void, if he acted in bad faith. (1476)

He may exercise this right of action, instead of enforcing the vendor's liability for eviction.

Art. 1554. If the vendee has renounced the right to warranty in case of eviction, and eviction should take place, the vendor shall only pay the value which the thing sold had at the time of the eviction. Should the vendee have made the waiver with knowledge of the risks of eviction and assumed its consequences, the vendor shall not be liable. (1477)

The same rule shall be observed when two or more things have been jointly sold for a lump sum, or for a separate price for each of them, if it should clearly appear that the vendee would not have purchased one without the other. (1479a)

Art. 1557. The warranty cannot be enforced until a final judgment has been rendered, whereby the vendee loses the thing acquired or a part thereof. (1480) Art. 1555. When the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the vendee shall have the right to demand of the vendor: Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee. (1481a) (1) The return of the value which the thing sold had at the time of the eviction, be it greater or less than the price of the sale; Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the complaint, that the vendor be made a co-defendant. (1482a) (2) The income or fruits, if he has been ordered to deliver them to the party who won the suit against him; Art. 1560. If the immovable sold should be encumbered with any non-apparent burden or servitude, not mentioned in the agreement, of such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof, he may ask for the rescission of the contract, unless he should prefer the appropriate indemnity. Neither right can be exercised if the non-apparent burden or servitude is recorded in the Registry of Property, unless there is an express warranty that the thing is free from all burdens and encumbrances.

(3) The costs of the suit which caused the eviction, and, in a proper case, those of the suit brought against the vendor for the warranty;

(4) The expenses of the contract, if the vendee has paid them;

(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith. (1478)

Within one year, to be computed from the execution of the deed, the vendee may bring the action for rescission, or sue for damages.

Art. 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole, that he would not have bought it without said part, he may demand the rescission of the contract; but with the obligation to return the thing without other encumbrances that those which it had when he acquired it.

One year having elapsed, he may only bring an action for damages within an equal period, to be counted from the date on which he discovered the burden or servitude. (1483a)

CASES

MENDOZA v CAPARROS

Art. 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of trade. (n)

POWER COMMERCIAL AND INDUSTRIAL CORP. v CA

Art. 1565. In the case of a contract of sale by sample, if the seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample. (n)

b. WARRANTY AGAINST HIDDEN DEFECTS Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them. (1484a) Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof.

This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold. (1485)

Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows:

Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case. (1486a)

(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose;

Art. 1568. If the thing sold should be lost in consequence of the hidden faults, and the vendor was aware of them, he shall bear the loss, and shall be obliged to return the price and refund the expenses of the contract, with damages. If he was not aware of them, he shall only return the price and interest thereon, and reimburse the expenses of the contract which the vendee might have paid. (1487a)

(2) Where the goods are brought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be of merchantable quality. (n)

Art. 1569. If the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by a fortuitous event or through the fault of the vendee, the latter may demand of the vendor the price which he paid, less the value which the thing had when it was lost.

Art. 1563. In the case of contract of sale of a specified article under its patent or other trade name, there is no warranty as to its fitness for any particular purpose, unless there is a stipulation to the contrary. (n)

If the vendor acted in bad faith, he shall pay damages to the vendee. (1488a)

Art. 1570. The preceding articles of this Subsection shall be applicable to judicial sales, except that the judgment debtor shall not be liable for damages. (1489a) But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be liable for damages. (1495) Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold. (1490) Art. 1577. The redhibitory action, based on the faults or defects of animals, must be brought within forty days from the date of their delivery to the vendee. WARRANTIES IN SALE OF ANIMALS Art. 1572. If two or more animals are sold together, whether for a lump sum or for a separate price for each of them, the redhibitory defect of one shall only give rise to its redhibition, and not that of the others; unless it should appear that the vendee would not have purchased the sound animal or animals without the defective one. This action can only be exercised with respect to faults and defects which are determined by law or by local customs. (1496a)

Art. 1578. If the animal should die within three days after its purchase, the vendor shall be liable if the disease which cause the death existed at the time of the contract. (1497a) The latter case shall be presumed when a team, yoke pair, or set is bought, even if a separate price has been fixed for each one of the animals composing the same. (1491) Art. 1579. If the sale be rescinded, the animal shall be returned in the condition in which it was sold and delivered, the vendee being answerable for any injury due to his negligence, and not arising from the redhibitory fault or defect. (1498)

Art. 1573. The provisions of the preceding article with respect to the sale of animals shall in like manner be applicable to the sale of other things. (1492)

Art. 1574. There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of live stock sold as condemned. (1493a)

Art. 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy the right mentioned in article 1567; but he must make use thereof within the same period which has been fixed for the exercise of the redhibitory action. (1499)

Art. 1575. The sale of animals suffering from contagious diseases shall be void.

Art. 1581. The form of sale of large cattle shall be governed by special laws. (n)

A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor. (1494a)

CONSUMER ACT: RA 7394 Art. 68. Additional Provisions on Warranties. - In addition to the Civil Code provisions on sale with warranties, the following provisions shall govern the sale of consumer products with warranty:

Art. 1576. If the hidden defect of animals, even in case a professional inspection has been made, should be of such a nature that expert knowledge is not sufficient to discover it, the defect shall be considered as redhibitory.

(a) Terms of express warranty. - Any seller or manufacturer who gives an express warranty shall: (4) State what the warrantor will do in the event of a defect, malfunction of failure to conform to the written warranty and at whose expense;

2.

In case of sale of specific goods which, at the time of the sale, are known to the parties to be in ANOTHER PLACE, the buyer should take delivery from such place.

3.

CASES ENGINEERING MACHINERY CORP. v CA 4. CASTLE v GUTIERREZ HERMANOS 5. PACIFIC COMMERCIAL CORP. v ERMITA MARKET AND COLD STORES 6.

DEMAND or TENDER of PAYMENT shall be made at a reasonable hour. Where by agreement, the seller is bound to send the goods to the buyer, he is bound to send them within the time agreed upon, or if no time was fixed, within a reasonable time. REASONABLE TIME for delivery is determined by the circumstances attending the particular transaction

Where the goods at the time of the sale are in the possession of a THIRD PERSON, there is NO delivery UNLESS and UNTIL such their person ACKNOWLEDGES to the buyer that the holds the goods on the latters behalf.

EXPENSES of placing the goods in a DELIVERABLE STATE shall be borne by the SELLER unless otherwise stipulated.

NUTRIMIX FEEDS CORP. v CA

If the sale involves a specific thing, the vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon the perfection of the contract.

IV. OBLIGATIONS OF THE VENDEEE/BUYER

7.

8. A. OBLIGATION TO ACCEPT DELIVERY a) Generally, payment and delivery of the thing sold are concurrent acts, in consonance with the rule in reciprocal obligations. Agreement of the parties determines whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer. Absent stipulation to the contrary, the ff. rules shall be observed:

All of the fruits of the thing shall pertain to the vendee from the time of the perfection of the contract but he does not acquire a real right over it until they are delivered to him. The vendee has the obligation to pay the expenses incurred by the vendor in the production, gathering and preservation of the fruits.

When time is of essence Time is of the essence of the contract whenever the intention of the parties is clear that performance of its terms shall be accomplished exactly at the stipulated day or implied from the nature of the contract itself, the subject matter or the circumstances under which the contract is made

1.

the buyer should take delivery of the goods from the sellers place of business if he has one, and if none, his residence.

ART. 1524: The seller of goods is deemed to be an unpaid seller within the meaning of this Title: (1) When the whole of the price has not been paid or tendered; (2) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise.

Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact.

Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller. (n)

NOT BOUND TO DELIVER In Articles 1525 to 1535 the term "seller" includes an agent of the seller to whom the bill of lading has been indorsed, or a consignor or agent who has himself paid, or is directly responsible for the price, or any other person who is in the position of a seller. (n) cf. ART. 1536: The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the terms as provided in Article 1198. (1467a)

ART. 1169: xxx In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. (1100a)

ART. 1198: The debtor shall lose every right to make use of the period: (1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt; (2) When he does not furnish to the creditor the guaranties or securities which he has promised; (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory; (4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period; (5) When the debtor attempts to abscond. (1129a)

ART. 1521: Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, express or implied, or usage of trade to the contrary, the place of delivery is the seller's place of business if he has one, and if not his residence; but in case of a contract of sale of specific goods, which to the knowledge of the parties when the contract or the sale was made were in some other place, then that place is the place of delivery.

Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time. The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the stipulated term in the following cases: Where the goods at the time of sale are in the possession of a third person, the seller has not fulfilled his obligation to deliver to the buyer unless and until such third person acknowledges to the buyer that he holds the goods on the buyer's behalf. 1. 2. 3. When the vendee becomes insolvent When the vendee does not furnish the guaranties or securities he has promised When the guaranties or securities given were impaired through the vendees acts or were lost or destroyed through a fortuitous event, unless he gives new equally satisfactory guaranties or securities When the vendee violates any condition for which he was granted the term When the vendee attempts to abscond

4. 5.

absent any statement to the contrary. (The law applies peculiarly to installment and divisible contracts.) NOTE: Art. 1467 has been replaced by Art. 1198 which provides that the vendee shall lose the benefit of the term when, after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security. Insolvency under this article cannot be understood in the sense of a judicially declared insolvency or suspension of payments, because the debtor cannot give a security or guaranty in such case. The doctrine therefore in Visayan Distributors v Flores interpreting insolvency in Art 1467 old CC as something which must be judicially declared or something which involves suspension of payments, no longer holds.

RIGHT OF INSPECTION ART. 1584: The buyer is entitled to examine the goods to decide whether he will become the owner, and until the examination is completed or waived, he is under NO obligation to accept them. He may however waive this right by simply refusing to inspect the goods, taking them as they are or by any other similar act.

DELIVERY OF WRONG QUANTITY ART. 1522: a) GENERAL RULE: The buyer is not bound to accept delivery of a quantity of goods more or less than that agreed upon or to accept goods which are of a description different from that agreed upon. EXCEPTION: There is usage of trade, special stipulation or course of dealing to the contrary. MANIFESTATION OF ACCEPTANCE ART. 1585: The buyer is deemed to have accepted the goods when: 1. he intimates to the seller that the has accepted them REMEDIES: 1. Where the seller delivers a quantity less than that agreed upon, the buyer may reject them. If the buyer accepts or retains that goods delivered, knowing the inability of the seller to deliver the rest, the buyer is bound to pay for them at the contract rate. If the buyer has used or disposed of the goods before knowing the inability of the seller to deliver the rest, the buyer shall pay not more than the fair value of the goods. (NOTE: fair value means the price of the goods in the open market.) If the quantity delivered is more than that agreed upon, the buyer may reject the excess, unless the subject matter is indivisible, in which case, the buyer may reject the whole. Where the seller delivers the goods mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract, and reject the rest, unless the subject matter is indivisible, in which case, the buyer may reject the whole. 2. the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller 3. after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.

2.

Exercise of acts of ownership over the goods is a manifestation of acceptance, such as making use of them as owner, making alterations in the goods or subjecting it to the process of manufacture. EXCEPTION: Buyers right to make a test of goods, but only if necessary, to enable him to determine whether to accept or reject the goods.

3.

BREACH OF WARRANTY ART. 1586: a) The purpose of the notice of breach of warranty is to PROTECT the seller against belated damage claims which would prevent the seller from making an adequate and proper investigation of his alleged liability.

b) Delivery by the seller of only a part of an entire contract would itself be an indication that he might not intend to fully perform. PRESUMPTION: Buyer knows that the seller might intend to not fully perform, if said purchaser accepts a partial delivery on an entire contract,

b) Acceptance of delivery means an ASSENT to become OWNER of the goods on the part of the buyer, but not an assent that the goods fulfill the description and terms of the contract.

B. OBLIGATION TO PAY THE PRICE ART. 1582: The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract.

ART. 1587: Unless otherwise agreed, where goods are delivered to the buyer, and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he notifies the seller that he refuses to accept them. If he voluntarily constitutes himself a depositary thereof, he shall be liable as such. (n)

If the time and place should not have been stipulated, the payment must be made at the time and place of the delivery of the thing sold. (1500a)

ART. 1588: If there is no stipulation as specified in the first paragraph of article 1523, when the buyer's refusal to accept the goods is without just cause, the title thereto passes to him from the moment they are placed at his disposal. (n)

ART. 1589: The vendee shall owe interest for the period between the delivery of the thing and the payment of the price, in the following three cases: (1) Should it have been so stipulated; (2) Should the thing sold and delivered produce fruits or income;

a) Unless otherwise agreed, when the goods are delivered to the buyer and he has a right to refuse to accept them, he need not return them. It is sufficient that the buyer notifies the seller that he refuses to accept the goods, and thereafter, the former becomes the depository of the rejected goods.

(3) Should he be in default, from the time of judicial or extrajudicial demand for the payment of the price. (1501a)

b) However, where title already passed to the buyer and there was a breach of warranty, the buyer may RESCIND the contract by returning or offering to return the goods to the seller and recover the price which had been paid.

The buyer shall owe interest on the price from the time the thing is delivered up to the time of payment if there is stipulation requiring interests, or even if there is none, if the thing delivered produces fruits or income, or if the buyer incurs in default from the time of judicial or extra-judicial demand for payment.

SUSPENSION OF PAYMENT CASES REPUBLIC v LITTON Court ruled for plaintiff. It was shown that the goods were intended for election purposes, and the purchase order provided that the stipulated delivery period shall not be exceeded. ART. 1590: Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease, unless the latter gives security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment. A mere act of trespass shall not authorize the suspension of the payment of the price. (1502a)

AZARRAGA v GAY

a) disturbance or threat of disturbance must come through a vindicatory action or foreclosure of mortgage, and not through a mere threat or claim of a third person.

CASES ARRA REALTY CORP. v GUARANTEED DEV. CORP. AND INSURANCE AGENCY

b) If the third person claims a servitude on the thing sold, the remedy of the buyer is to demand rescission of the contract or payment of the proper indemnity.

LUZON BROKERAGE v MARITIME BUILDING c) In order that the buyer may have a right to suspend payment, it is absolutely necessary that the cause of disturbance or danger be based on a fact arising before the sale or if it arose after the sale, the cause is imputable to the vendor or his successor in interest. If Art. 1592 is applicable to a sale contract, the filing of a cross-claim in court may be constituted as a judicial demand for rescission that satisfies the requirement of said article. Art. 1592 has no application to a contract to sell

BARENG v CA SALE OF REAL PROPERTY ART. 1592: In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. (1504a) The vendee had a right to suspend payment from the time he was informed of the coowners claim. But such right ceased from the time a compromise was reached between the co-owners whereby the vendor agreed to give to the co-owner two-thirds of whatever he could collect from the buyer. After the compromise, when the vendor brought an action against the buyer to collect the balance, said buyer owed interests on the amount from the time of the filing of the complaint.

LIU v LOY ART. 1593: With respect to movable property, the rescission of the sale shall of right take place in the interest of the vendor, if the vendee, upon the expiration of the period fixed for the delivery of the thing, should not have appeared to receive it, or, having appeared, he should not have tendered the price at the same time, unless a longer period has been stipulated for its payment. (1505)

RECTO LAW: SALES OF MOVABLES ON INSTALLMENTS ART. 1484: In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:

EFFECT OF NON-PAYMENT cf. ART. 1191: In absolute sales of real property, even if there is a stipulation providing for ipso jure rescission, in case of default in payment, the law requires the seller to demand the resolution of the contract from the buyer judicially or by a notarial act, before such stipulation could be given effect. Otherwise, the buyer could still pay the price EVEN after the expiration of the period to pay.

(1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a)

ART. 1485: The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. (1454-A-a)

NORTHERN MOTORS v SAPINOSO What Art 1484 (3) prohibits is further action against the purchaser to recover any unpaid balance of the price; and although this Court has construed the word action to mean any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy, there is no occasion at this stage to apply the restrictive provision of the said article because there has not yet been a foreclosure sale resulting in a deficiency. The payment of the sum of P1,250 of Sapinoso was a voluntary act on his part and did not result from a further action instituted by Northern Motors.

ART. 1486: In the case referred to in two preceding articles, a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. (n)

CASES LEVY v GERVACIO Art 1454 is aimed at sales where the price is payable in several installments. A cash payment (in sales with two installments) cannot be considered as a payment in installments, and even if it can be so considered, still the law does not apply, for it requires nonpayment of two or more installments in order that its provisions may be invoked. In this case, only one installment was unpaid.

BORBON II v SERVICEWIDE SPECIALISTS INC. When the seller assigns his credit to another person, the latter is likewise bound by the same law. Accordingly, when the assignee forecloses on the mortgage, there can be no further recovery of the deficiency, and the seller-mortgagee is deemed to have renounced any right thereto.

ELISCO TOOL MANUFACTURING CORP. v CA DELTA MOTOR SALES CORP. v NIU KIM DUAN When the seller assigns his credit to another person, the latter may likewise avail of the remedies under Art 1484 (assuming case is one of sale of movables on installment). If the remedy chosen is rescission, a stipulation in the contract that the installments paid shall not be returned to the vendee is valid insofar as the same may not be unconscionable under the circumstances.

PCI LEASING AND FINANCE INC. v GIRAFFE-X CREATIVE IMAGING INC.

TAJANGLANGIT v SOUTHERN MOTORS It is true that there was a chattel mortgage on the goods sold, but Southern Motors elected to sue the note exclusively to exact fulfillment of the obligation to pay. It had the right to select among the three remedies established in Art 1484. In choosing to sue on the note, it was not thereby limited to the proceeds of the sale, on execution, of the mortgaged good.

RA 6552 (1972): MACEDA LAW

CASES RILLO v CA

RIDAD v FILIPINAS INVESTMENT Seller precluded from further extrajudicially foreclosing the additional security put up by the buyer himself. VALLARAO v CA

the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. (n)

ACTIVE REALTY & DEVELOPMENT CORP. v DAROYA ART. 1595. Where, under a contract of sale, the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract of sale, the seller may maintain an action against him for the price of the goods.

FABRIGAS v SAN FRANCISCO DEL MONTE

JESTRA DEV. AND MANGEMENT CORP v PACIFICO

Where, under a contract of sale, the price is payable on a certain day, irrespective of delivery or of transfer of title and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price although the ownership in the goods has not passed. But it shall be a defense to such an action that the seller at any time before the judgment in such action has manifested an inability to perform the contract of sale on his part or an intention not to perform it.

V. BREACH

ART. 1191: The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

Although the ownership in the goods has not passed, if they cannot readily be resold for a reasonable price, and if the provisions of article 1596, fourth paragraph, are not applicable, the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to receive them, may notify the buyer that the goods are thereafter held by the seller as bailee for the buyer. Thereafter the seller may treat the goods as the buyer's and may maintain an action for the price. (n)

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. ART. 1596. Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for nonacceptance. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. (1124) Where there is an available market for the goods in question, the measure of damages is, in the absence of special circumstances showing proximate damage of a different amount, the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept.

ART. 1192: In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of

If, while labor or expense of material amount is necessary on the part of the seller to enable him to fulfill his obligations under the contract of sale, the buyer repudiates the contract or notifies the seller to proceed no further therewith, the buyer shall be liable to the seller for labor performed or expenses made before receiving notice of the buyer's repudiation or countermand. The profit the seller would have made if the contract or the sale had been fully performed shall be considered in awarding the damages. (n)

When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without prejudice to the provisions of the second paragraph of Article 1191.

ART. 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. (n)

Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale.

ART. 1598. Where the seller has broken a contract to deliver specific or ascertained goods, a court may, on the application of the buyer, direct that the contract shall be performed specifically, without giving the seller the option of retaining the goods on payment of damages. The judgment or decree may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as the court may deem just. (n)

Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. If the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after an offer to return the goods in exchange for repayment of the price.

ART. 1599. Where there is a breach of warranty by the seller, the buyer may, at his election: (1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the price; (2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty; (3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty; (4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid.

Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure payment of any portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1526.

(5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. (n)

ART. 1571: Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold. (1490)

ART. 1484: In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a)

duration of the liability, it shall last for one year only, from the time of the assignment if the period had already expired.

If the credit should be payable within a term or period which has not yet expired, the liability shall cease one year after the maturity. (1530a)

ART. 1630. One who sells an inheritance without enumerating the things of which it is composed, shall only be answerable for his character as an heir. (1531)

ART. 1576. If the hidden defect of animals, even in case a professional inspection has been made, should be of such a nature that expert knowledge is not sufficient to discover it, the defect shall be considered as redhibitory.

ART. 1631. One who sells for a lump sum the whole of certain rights, rents, or products, shall comply by answering for the legitimacy of the whole in general; but he shall not be obliged to warrant each of the various parts of which it may be composed, except in the case of eviction from the whole or the part of greater value. (1532a)

But if the veterinarian, through ignorance or bad faith should fail to discover or disclose it, he shall be liable for damages. (1495) ART. 1632. Should the vendor have profited by some of the fruits or received anything from the inheritance sold, he shall pay the vendee thereof, if the contrary has not been stipulated. (1533) ART. 1628: The vendor in good faith shall be responsible for the existence and legality of the credit at the time of the sale, unless it should have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the sale and of common knowledge.

ART. 1633. The vendee shall, on his part, reimburse the vendor for all that the latter may have paid for the debts of and charges on the estate and satisfy the credits he may have against the same, unless there is an agreement to the contrary. (1534)

Even in these cases he shall only be liable for the price received and for the expenses specified in No. 1 of Article 1616. CASES SONG FO & CO. v HAWAIIAN PHIL CO. The vendor in bad faith shall always be answerable for the payment of all expenses, and for damages. (1529)

LUNETA MOTOR CO. v SALVADOR ART. 1629. In case the assignor in good faith should have made himself responsible for the solvency of the debtor, and the contracting parties should not have agreed upon the

IFC v RAMIREZ

Badges of an equitable mortgage ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

UMC v DY HIAN (1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; FILINVEST CREDIT CORP. v CA (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; SUPERCARS MANAGEMENT & DEV. CORP. v FLORES (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.

VI. EXTINGUISHMENT

Art. 1600. Sales are extinguished by the same causes as all other obligations, by those stated in the preceding articles of this Title, and by conventional or legal redemption. (1506)

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. (n)

CONVENTIONAL REDEMPTION ART. 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon. (1507) A contract shall be construed as an equitable mortgage when any of the circumstance in Art. 1602 is present. Reason for the rule: To curtail the practice of creditors in making their agreement of mortgage appear in the form of a sale with pacto de retro, in order to circumvent the prohibition of pactum commissorium in pledge and mortgage (Art. 2208. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void) [because in making it appear a pacto de retro sale, the creditors can do away with foreclosure proceedings] Remedy: reformation of the instrument [must be brought within 10 years] 1) If the agreement is construed to be an equitable mortgage, any money or other benefit received as rents, shall be considered as interest. 2) Where the agreement is upheld as a pacto de retro sale, the vendor may still exercise the right within 30 days from the time the judgment becomes final.

Conventional redemption the vendor reserves the right to repurchase the thing sold, with the obligation of returning the price of the sale the expenses of the contract, the necessary and useful expenses made on the thing, and other payments made by reason of the sale. Equitable mortgage one which, although lacking in some formality or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as a security for debt, and contains nothing impossible or contrary to law

GENERAL RULE: Period starts running at the date of the execution of the contract. EXCEPTION: when there is a suspensive condition. Right of redemption Not a separate contract, but merely part of a main contract of sale; cannot exist unless reserved at the time of the perfection of the main contract of sale Need not have separate consideration in order to be valid and effective May not be beyond the 10 year period Requires tender of payment of amount required by law, including consignment thereof if tender cannot be made effectively Option to buy Principal contract and may be created independent of another contract

NO PERIOD AGREED UPON: 4 years PERIOD AGREED UPON: The period is binding and it may also be extended, as long as it does not exceed 10 years. Reason for limitation: A pacto de retro is a suspension of title and it is against public interest to permit such uncertainty to continue for a long time.

Must have a consideration separate and distinct from purchase price May be beyond the 10 year period May be exercised by notice

Art. 1603. In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. (n)

Art. 1607. In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the provisions of article 1616 shall not be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard. (n)

a) The ownership of the vendee becomes absolute and irrevocable by operation of Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. (n) law. b) The vendee is not entitled to recover damages by virtue of non-redemption, notwithstanding a stipulation in the contract for payment of damages.

Art. 1605. In the cases referred to in Articles 1602 and 1604, the apparent vendor may ask for the reformation of the instrument. (n)

PERIOD OF REDEMPTION Art. 1606. The right referred to in Article 1601, in the absence of an express agreement, shall last four years from the date of the contract.

ART. 1608. The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. (1510)

ART. 1609. The vendee is subrogated to the vendor's rights and actions. (1511)

Should there be an agreement, the period cannot exceed ten years. Exercise of the right to redeem a) A vendor must manifest his right to redeem in writing. This must be accompanied with an actual or simultaneous tender of payment of the redemption price. Redemption price includes the amount of the sale, the expenses of the contract and other legitimate payments made by the vendee by reason of such sale, and the necessary and useful expenses made on the thing by the vendee.

However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase. (1508a)

b) It is only when the vendee flatly refused that tender of payment is not necessary. Consignation of the redemption price in court is not necessary to preserve the right. In the absence of the vendee a retro, the right may be exercised by filing a suit against him and consigning the amount in court. The exercise of redemption is not limited only to the total redemption price enumerated in Art 1616 of the CC, since said legal provision is not restrictive nor exclusive. It includes other stipulations which may have been agreed upon (Villanueva citing Solid Homes v. CA, 275 SCRA 267)

b) The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have exhausted the property of the vendor. c) If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may exercise this right for more than his respective share. The same rule shall apply if the person who sold an immovable alone has left several heirs. d) When the co-owners of an indivisible immovable, in order to end the co-ownership, sold their interests absolutely to the same person who previously bought the share of a co-owner subject to a right of redemption, the latter can be compelled to redeem the whole property.

ART. 1610. The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have exhausted the property of the vendor. (1512)

ART. 1611. In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in the case of article 498, may compel the vendor to redeem the whole property, if the latter wishes to make use of the right of redemption. (1513)

ART. 1614. Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently exercise the right of repurchase as regards his own share, and the vendee cannot compel him to redeem the whole property. (1516)

ART. 1612. If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may exercise this right for more than his respective share.

ART. 1615. If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for his own share, whether the thing be undivided, or it has been partitioned among them.

But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against him for the whole. (1517) The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of the latter may only redeem the part which he may have acquired. (1514) From whom to redeem 1. Vendee a retro 2. His heirs or assigns 3. His agent

ART. 1613. In the case of the preceding article, the vendee may demand of all the vendors or co-heirs that they come to an agreement upon the purchase of the whole thing sold; and should they fail to do so, the vendee cannot be compelled to consent to a partial redemption. (1515)

ART. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition: a) Who may redeem 1.Vendor 2. His heirs or assigns 3. His agent

(1) The expenses of the contract, and any other legitimate payments made by reason of the sale; REDEMPTION AMONG CO-OWNERS (2) The necessary and useful expenses made on the thing sold. (1518) ART. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one. ART. 1617. If at the time of the execution of the sale there should be on the land, visible or growing fruits, there shall be no reimbursement for or prorating of those existing at the time of redemption, if no indemnity was paid by the purchaser when the sale was executed. Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common. (1522a) Should there have been no fruits at the time of the sale and some exist at the time of redemption, they shall be prorated between the redemptioner and the vendee, giving the latter the part corresponding to the time he possessed the land in the last year, counted from the anniversary of the date of the sale. (1519a)

a) When the right may be exercised: when a share of a co-owner is sold to a third person, who is a stranger. b) Thrust of the law: to reduce the number of co-owners until the community is done away with. c) When the right is not available 1) Where the share of the co-owner is sold to another co-owner 2) Where the share of a co-owner was merely mortgaged d) Should two or more co-owners desire to exercise the right, they may only do so in proportion to the share they may respectively have in the thing owned in common.

ART. 1618. The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but he shall respect the leases which the latter may have executed in good faith, and in accordance with the custom of the place where the land is situated. (1520)

a) The vendor can eject a lessee only after the expiration of the period of lease or of the period for redemption. b) The vendor a retro is entitled to the return of the thing with damages for the use and occupation if the same.

RURAL LANDS ART. 1621. The owners of adjoining lands shall also have the right of redemption when a piece of rural land, the area of which does not exceed one hectare, is alienated, unless the grantee does not own any rural land.

LEGAL REDEMPTION right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title.

This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, roads and other apparent servitudes for the benefit of other estates. ART. 1619. Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title. (1521a)

If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the adjoining land of smaller area shall be preferred; and should both lands have the same area, the one who first requested the redemption. (1523a)

a) When the right may be exercised: when a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to be resold b) Thrust of the law: to discourage speculation in real estate and aggravate the housing problem. c) When the right is not available: When the urban land is transferred under an exchange of properties [because there is no resale] d) When two or more owners of adjoining lands wish to exercise the right of preemption or redemption, the owner whose intended use of the land in question appears best justified shall be preferred.

a) When the right may be exercised: when a piece of rural land not exceeding 1 ha., is alienated [unless the grantee does not own any rural land] b) Thrust of the law 1. to prevent the rural land not exceeding 1 ha. from passing into the hands of a person other than the adjacent owners who can make use of the alienated property for the development of their own lands 2. to consolidate scattered small agricultural lands under one ownership c) When the right is not available o Adjacent lands which are separated by brooks, drains, ravines, roads and other apparent servitudes for the benefit of other estates [because owners cannot be said to be adjoining owners anymore] d) If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the adjoining land of smaller area shall be preferred; and should both lands have the same area, the one who first requested the redemption.

ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.

URBAN LANDS ART. 1622. Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to be re-sold, the owner of any adjoining land has a right of pre-emption at a reasonable price.

The right of redemption of co-owners excludes that of adjoining owners. (1524a)

Laches seems to be a special exception to notice rule under Art 1623. (Villanueva citing Alonzo v. IAC)

cf. ART. 1231: Obligations are extinguished: If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable price. (1) By payment or performance: (2) By the loss of the thing due: When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption, the owner whose intended use of the land in question appears best justified shall be preferred. (n) (3) By the condonation or remission of the debt; (4) By the confusion or merger of the rights of creditor and debtor; (5) By compensation; (6) By novation.

ROBERTS v PAPIO Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code. (1156a)

MISTERIO v CEBU STATE COLLEGE OF SCIENCE & TECHNOLOGY CASES RIVERO v CA FRANCISCO v BOISER

DIAZ v CA VII. ASSIGNMENT OF CREDIT Art. 1624. An assignment of creditors and other incorporeal rights shall be perfected in accordance with the provisions of Article 1475. (n) GERARDINO v CA Art. 1625. An assignment of a credit, right or action shall produce no effect as against third person, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property. (1526)

VILLASON v MEDEL

DOROMAL v CA Although written notice is given to the co-owner, the 30-day redemption period does not begin to run from the receipt of such notice, because the transaction covered in the notice did not pertain to a perfected contract of sale, and must be accompanied by the actual execution and delivery of the deed of sale.

Art. 1626. The debtor who, before having knowledge of the assignment, pays his creditor shall be released from the obligation. (1527)

Art. 1627. The assignment of a credit includes all the accessory rights, such as a guaranty, mortgage, pledge or preference. (1528)

SANTOS v CA Art. 1628. The vendor in good faith shall be responsible for the existence and legality of the credit at the time of the sale, unless it should have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the sale and of common knowledge.

URACA v CA

Even in these cases he shall only be liable for the price received and for the expenses specified in No. 1 of Article 1616.

Art. 1634. When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor, the judicial costs incurred by him, and the interest on the price from the day on which the same was paid.

The vendor in bad faith shall always be answerable for the payment of all expenses, and for damages. (1529) A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the same is answered. Art. 1629. In case the assignor in good faith should have made himself responsible for the solvency of the debtor, and the contracting parties should not have agreed upon the duration of the liability, it shall last for one year only, from the time of the assignment if the period had already expired.

The debtor may exercise his right within thirty days from the date the assignee demands payment from him. (1535)

If the credit should be payable within a term or period which has not yet expired, the liability shall cease one year after the maturity. (1530a)

Art. 1635. From the provisions of the preceding article shall be excepted the assignments or sales made:

Art. 1630. One who sells an inheritance without enumerating the things of which it is composed, shall only be answerable for his character as an heir. (1531)

(1) To a co-heir or co-owner of the right assigned; (2) To a creditor in payment of his credit; (3) To the possessor of a tenement or piece of land which is subject to the right in litigation assigned. (1536)

Art. 1631. One who sells for a lump sum the whole of certain rights, rents, or products, shall comply by answering for the legitimacy of the whole in general; but he shall not be obliged to warrant each of the various parts of which it may be composed, except in the case of eviction from the whole or the part of greater value. (1532a)

CASES LO v KJS ECO FORMWORK SYSTEM PHIL. INC.

Art. 1632. Should the vendor have profited by some of the fruits or received anything from the inheritance sold, he shall pay the vendee thereof, if the contrary has not been stipulated. (1533)

NYCO SALES CORP. v BA FINANCE Art. 1633. The vendee shall, on his part, reimburse the vendor for all that the latter may have paid for the debts of and charges on the estate and satisfy the credits he may have against the same, unless there is an agreement to the contrary. (1534)

LICAROS v GATMAITAN

LEDONIO v CAPITOL DEV. CORP.