SALES (BOOK IV TITLE VI) Arts. 1458-1637 I. Nature an !"r# O$ T%e &"ntra't (&%a(ter 1) Arts.

s. 1458-1488 Contract Of Sale- one of the contracting parties ")*+,ates %+#se*$ t" trans$er t%e "-ners%+( of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. (Art. 1458) Sale is a title not a mode of acquiring o nership. Essential Requisites of a Contract of Sale 1. consent or meeting of the minds! ". determinate su#$ect matter! %. price certain in money or its equivalent Characteristics of a Contract of Sale &onsensual (as distinguished from real) 'ilateral reciprocal (nerous &ommutative )rincipal (as distinguished from accessory) *ominate &ase Studies+ .u+r",a /s. 0ars"ns 1ar -are &". (38 0%+* 521) (,istinction #et een &ontract of Sale and Agency to Sell) -he cause and su#$ect matter of the contract as that the plaintiff as to furnish the defendant ith the #eds hich the latter might order, at the stipulated price, and that the defendant as to pay this price in the manner agreed upon. -hese are the essential features of a contract of purchase and sale. -here as the o#ligation on the part of the plaintiff to supply the #eds, and, on that of the defendant, to pay their price. -his is not an agency or order to sell here#y the mandatary or agent receives the thing to sell it, and does not pay its price, #ut delivers to the principal the price he o#tains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. A'a( /s. &A (351 S&4A 32) A declaration of heirship and waiver of rights is an extrajudicial settlement between the heirs under Rule 74 of the Rules of Court. In a sale of hereditary rights a contract or deed of sale between the parties is presumed to exist. A waiver of hereditary rights is a mode of extinction of ownership where there is an abdication or intentional relin!uishment of a "nown right with "nowledge of its existence and intention to relin!uish it in favor of other persons who are co#heirs in the succession . A stranger to the succession of the subject estate cannot conclusively claim ownership over the subject lot on the sole basis of the waiver document because it does not recite the elements of either a sale or a donation or any other derivative mode of ac!uiring ownership. Naran5a /s. &A (586 S&4A 31) $o be valid a contract of sale need not contain a technical description of the subject property. Contracts of sale of real property have no prescribed form for their validity% they follow the general rule on contracts that they may be entered into in whatever form provided all the essential re!uisites for their

validity are present. &CI'I( C)*+ Art. ,-./.0. $he failure of the parties to specify with absolute clarity the object of a contract by including its technical description is of no moment. 1hat is important is that there is in fact an object that is determinate or at least determinable as subject of the contract of sale. $he form of a deed of sale provided in 2ection ,37 of Act 4o. 45/ is only a suggested form and is not a mandatory form. 6e*(%er Tra e &"r( /s. &A (157 S&4A 347) $he 6*eed of +xchange6 of property between the 7achecos and *elpher $rades Corporation cannot be considered a contract of sale. $here was no transfer of actual ownership interests by the 7achecos to a third party. $he 7acheco family merely changed their ownership from one form to another. $he ownership remained in the same hands. 8ence the private respondent has no basis for its claim of a right of first refusal under the lease contract. Stages of Contract of Sale 1. 0re(arat"r8 Art. 1477 a. (ffer . Art. 14/5 #. &ontract of (ption . Arts. 14/0, 1%"4 1ight of 2irst 1efusal 3utual )romise to 'uy and Sell . Art. 14/0 3. 0er$e't+"n Arts. 14759 13179 13359 1336 &ase Study+ .u+5a a /s. &A (377 S&4A 675) $he law re!uires that the seller has the right to transfer ownership at the time the thing sold is delivered and not ownership by the seller on the thing sold at the time of the perfection of the contract of sale. 7erfection per se does not transfer ownership which occurs upon the actual or constructive delivery of the thing sold. A perfected contract of sale cannot be challenged on the ground of non#ownership on the part of the seller at the time of its perfection9 hence the sale is still valid. $he consummation occurs upon the constructive or actual delivery of the subject matter to the buyer when the seller subse!uently ac!uires ownership thereof. 2uch circumstance happened in this case when sellers became the owners of the subject property upon the reversion of the ownership of the land to them. Conse!uently ownership is transferred to buyer respondent :ondejar and those who claim their right from him. Article ,4-4 of the 4ew Civil Code supports the ruling that the seller;s 6title passes by operation of law to the buyer.6 $his rule applies not only when the subject matter of the contract of sale is goods but also to other "inds of property including real property. Mutual Promise To Buy and Sell . a #ilateral reciprocal contract here#y #oth parties ma4e promises (the #uyer to #uy and the seller to sell). 5quivalent to a perfected sale. (Art. 14/0) Accepted nilateral Promise To Either Buy Or Sell . only one party ma4es a promise and this promise is accepted #y the other. -his is #inding on promissor only if the promise is supported #y a consideration distinct from price. (Art. 14/0) Option to Buy or Sell- a party agrees, promises and commits to sell6#uy land ithout a consideration distinct from the price. A party may still ithdra the promise #efore acceptance #y the other party.

Earnest Money !s" Option Money Earnest :"ne8 O(t+"n :"ne8 part of the purchase price money given as a distinct consideration for an option contract given only here there is already a sale applies to a sale not yet perfected! the #uyer is #ound to pay the #alance, hen the ould7#e #uyer gives option money, he is not required to #uy, #ut may even forfeit it depending on the terms of the option. &ase Studies+ Eu*",+" /s. A(e*es (576 S&4A 561) An option is9 &a0 a contract by which the owner of the property agrees with another person that the latter shall have the right to buy the former;s property at a fixed price within a certain time% &b0 a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time or under or in compliance with certain terms and conditions% or which gives to the owner of the property the right to sell or demand a sale. &$ayag v. (acson <.R. 4o. ,-457, 3. :arch 3==4 43/ 2CRA 3>3 -=4.0 An accepted unilateral promise can only have a binding effect if supported by a consideration which means that the option can still be withdrawn even if accepted if the same is not supported by any consideration. 1ithout consideration that is separate and distinct from the purchase price an option contract cannot be enforced% that holds true even if the unilateral promise is already accepted by the optionee. $he consideration is 6the why of the contracts the essential reason which moves the contracting parties to enter into the contract6. $he consideration contemplated to support an option contract need not be monetary. Actual cash need not be exchanged for the option. An option contract is an onerous contract for which the consideration must be something of value although its "ind may vary. San'%e; /s. 4+,"s (45 S&4A 368) In the 6)ption to 7urchase 6 the defendant 6agreed promised and committed6 herself to sell the land therein described to the plaintiff but there is nothing in the contract to show that the underta"ing is supported by a consideration 6distinct from the price.6 It is not a 6contract to buy and sell6 but an 6option6 to buy. $here is no distinction between Articles ,-34 and ,475 of the Civil Code and the former applies where a unilateral promise to sell similar to the one sued upon was involved treating such promise as an option which although not binding as a contract in itself for lac" of a separate consideration nevertheless generated a bilateral contract of purchase and sale upon acceptance. 2ince there may be no valid contract without a cause or consideration the promisor is not bound by his promise and may accordingly withdraw it. 7ending notice of its withdrawal his accepted promise parta"es however of the nature of an offer to sell which if accepted results in a perfected contract of sale. Serra /s. &A (337 S&4A 62) In a unilateral promise to sell where the debtor fails to withdraw the promise before the acceptance by the creditor the transaction becomes a bilateral contract to sell and to buy because upon acceptance by the creditor of the offer to sell by the debtor there is already a meeting of the minds of the parties as to the thing which is determinate and the price which is certain. In which case the parties may then reciprocally demand performance. An optional contract is a privilege existing only in one party ? the buyer. @or a separate consideration paid he is given the right to decide to purchase or not a certain merchandise or property at any time within the agreed period at a fixed price. $his being his prerogative he may not be compelled to exercise the option to buy before the time expires.

Contract of Sale !s" Contract To Sell &"ntra't "$ Sa*e *on7payment of price is resolutory condition hich ends transaction -itle to property generally passes to #uyer upon delivery Seller loses o nership upon delivery and may recover only if contract is rescinded &ase Study+

&"ntra't T" Se** (&"n +t+"na* &"ntra't O$ Sa*e) *on7payment of price is suspensive condition and the o#ligation of seller to deliver never #ecomes effective ( nership is retained #y seller regardless of delivery and passes only upon full payment of price Seller retains o nership (even if there is delivery). 8e is merely enforcing contract if he ousts the #uyer for failure to pay

4a#"s /s. 1erue*a (473 S&4A 77) Article ,4.> 4CC provides that a contract of sale may be absolute or conditional. A contract of sale is absolute9 &a0 when title to the property passes to the vendee upon delivery of the thing sold% &b0 there is no stipulation in the contract that title to the property remains with the seller until full payment of the purchase price% &c0 if there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed period. In a conditional sale &contract to sell09 &a0 ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price% &b0the full payment of the purchase price parta"es of a suspensive condition and non#fulfillment of the condition prevents the obligation to sell from arising. 3. !"r#a*+t+es "$ t%e &"ntra't Art. 1423 ( ) (e) 4. 0r+'e 3eaning (f )rice . Arts. 1490714/4 1equisites 2or A :alid )rice 8o )rice ;s ,etermined 7 ith reference to another thing certain 73ay #e left to $udgment of a specified person(s) 7 #y the courts if the %rd persons acted in #ad faith 7#y the innocent party if the %rd person(s) are prevented #y the other contracting party from fi<ing price ;nadequacy (f )rice . Arts. 1%55, 14/= 4u*e< ,oes not affect contract of sale #ut may indicate defect in consent or that parties intended donation &ase Studies+ =arner Barnes /s. Sant"s (14 0%+* 446) 7laintiff brought an action to foreclose the mortgage on defendantAs property. Based on judgment by default execution was issued and the mortgaged property duly sold. 1hen the plaintiff filed a motion for the confirmation of the sale of said property the defendant opposed it. 8eld9 A judicial sale of real estate in an action to foreclose will not be set aside for inade!uacy of price unless the inade!uacy be so great as to shoc" the conscience or unless there be additional circumstances against its fairness. 6e Le"n /s. Sa*/a "r (36 S&4A 567) In ordinary sales a transaction may be invalidated on the ground of inade!uacy of price or when such inade!uacy shoc"s one;s conscience as to justify the courts to interfere. $his is not so when the law gives to the owner the right to redeem as when a sale is made at public auction because the lesser

the price the easier it is for the owner to redeem. ;1hen there is the right to redeem inade!uacy of price should not be material because the judgment debtor may reac!uire the property or also sell his right to redeem and thus recover the loss he claims to have suffered by reason of the price obtained at the auction sale.; 6 >hen *o )rice Agreed . Art. 14/4 3anner (f )ayment 3ust 'e Agreed ?pon II. A. &a(a'+t8 T" Bu8 Or Se** (&%a(ter 3) Arts. 1487-1473 &apacity to 'uy or Sell . Arts. 14807140" 4u*e< &ontracts entered into #y minors are generally voida#le

'. A#solute ;ncapacity . Arts. 1%"/, 1%0/, 1%00 &. 1elative ;ncapacity+ (Art. 140=) 4u*e< 3arried )ersons6&ommon @a 8us#ands A >ives cannot sell to each other E>'e(t+"ns< hen there is separation of property in marriage settlement hen there has #een $udicial separation of property &ase Studies+ &%+n, /s. ?"8an,@" Ar. (526 S&4A 735) $he proscription against sale of property between spouses applies even to common law relationships. In Calimlim#Canullas v. 8on. @ortun etc. et al. &3,4 7hil. .5- &,5>40. It was ruled that the contract of sale was null and void for being contrary to morals and public policy and for being violative of Articles ,-.3 ,4=5 and ,45= of the Civil Code. &a*+#*+#-&anu**as /s. 1"n. !"rtun (137 S&4A 675) $he lot on which husband and his wife built their conjugal house became conjugal property from the time the house was first built thereon. $he husband could not have alienated the house and lot to the concubine since the wife had not given her consent to said sale &Article ,// Civil Code0. $he contract of sale was null and void for being contrary to morals and public policy. Article ,4=5 of the Civil Code states9 Ccontracts whose cause object or purpose is contrary to law morals good customs public order or public policy are void and inexistent from the very beginning. Article ,-.3 also provides that9 6Contracts without cause or with unlawful cause produce no effect whatsoever. $he cause is unlawful if it is contrary to law morals good customs public order or public policy.6 $he law prohibits the spouses from sellingDdonating property to each other to prevent9 &a0 the destruction of the system of conjugal partnership a basic policy in civil law% &b0 the exercise of undue influence by one spouse over the other% &c0 as well as to protect the institution of marriage which is the cornerstone of family law. $he prohibitions apply to a couple living as husband and wife without benefit of marriage otherwise 6the condition of those who incurred guilt would turn out to be better than those in legal union.6 $hose provisions are dictated by public interest and their criterion must be imposed upon the will of the parties.& Buenaventura vs. Bautista &CA0 .= ).<. -/75 and cited in :atabuena vs. Cervantes -> 2CRA 3>4 &,57,0. ,. Special ,isqualifications . Arts. 14017140" (applies also to sales in legal redemption, compromises and renunciations) Agents (property here administration6sale entrusted to them) 5<ecutors (property under administration) )u#lic (fficers A 5mployees (property of State6su#division thereof6 B(&&, etc. under their administration)

&ase Study+

Custices, $udges, prosecuting attorneys, cler4s of superior6inferior courts and other employees (property in litigation6levied upon in e<ecution ithin their territorial $urisdiction) @a yers (property6right in litigation here they ta4e part) (thers specially disqualified #y la

6ar"8 /s. A)e'+a (378 S&4A 337) $he prohibition in Art. ,45, does not apply to the sale of a parcel of land ac!uired by a client to satisfy a judgment in his favor to his attorney as long as the property was not the subject of the litigation. 1hile judges prosecuting attorneys and others connected with the administration of justice are prohibited from ac!uiring 6property or rights in litigation or levied upon in execution 6 the prohibition with respect to attorneys in the case extends only to 6property and rights which may be the object of any litigation in which they may ta"e part by virtue of their profession.6 A. Sellers >ho Are *ot ( ners or >ith :oida#le -itles 1. Sale 'y A )erson *ot -he ( ner At -ime (f )erfection (f &ontract (f Sale 4u*e< :alid #ecause sale may cover future goods so long as seller has right to transfer o nership at the time of delivery ". Sale #y a )erson >ho ;s *ot ( ner And >ho Sells >ithout Authority6&onsent of ( ner 4u*e< 'uyer acquires no #etter title than seller E>'e(t+"ns< a. ( ner is precluded from denying sellerDs authority to sell #. Sale under statutory po er of sale or under order of court of competent $urisidiction c. Sale made under recording la s (5<ample+ ), 15"0 )roperty 1egn ,ecree) ena#ling apparent o ner to dispose as if he ere true o ner d. )urchases made in a merchantDs store or fairs or mar4ets Store . any place here goods are 4ept and sold #y one engaged in #uying and selling. %. Sale 'y A )erson 8aving A :oida#le -itle . Arts. 15=9, 550 4u*e< 'uyer acquires good title provided sellerDs title not avoided at time of sale, #uyer acquires in good faith and for value and ithout notice of defect of sellerDs title

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E$$e'ts "$ T%e &"ntra't =%en T%+n, S"* 1as Been L"st (&%a( 3)Arts. 140%71404 A. 4+s@ "$ L"ss 1. Beneral 1ule . Arts. 1"9%, 1180 L"ss "$ ?ener+' T%+n,+ ,oes not e<tinguish o#ligation .Art. 1"9% L"ss "$ 6eter#+nate T%+n,+ 5<tinguishes o#ligation if lost #efore delay and ithout fault of seller6de#tor . Art. 1"9" a. >hen -otal @oss (ccurred At -ime (f )erfection . Arts. 140% And 1404 #. >hen @oss ;s (nly )artial7 vendee may choose #et een 1escission or

 Specific )erformance (proportional reduction in price) 4u*e< 1is4 of @oss is ith seller #efore delivery (Art. 15=4, *&&) E>'e(t+"n< 1is4 of loss is ith #uyer hen o nership is transferred #y delivery (a) Boods are at #uyerDs ris4 hen o nership is transferred6goods delivered if o nership as retained #y seller merely to secure payment! (#) -he party at fault #ears ris4 of loss hen there is delay in delivery =%en O-ners%+(B4+s@ "$ L"ss Trans$erre T" Bu8er 6e(en +n, "n K+n "$ Transa't+"n &Art. ,.=30 Transa't+"n =%en O-ners%+( =%" Bears 4+s@ "$ L"ss Trans$erre T" Bu8er E(n Sale (r 1eturnF ?pon delivery unless he 'uyer 7 if goods lost after delivery returns ithin time fi<ed or reasona#le time E(n Approval (r (n >hen #uyer signifies his Seller . if goods lost #efore #uyer signifies acceptance -rial (r approval acceptance to 'uyer . if goods lost after #uyer signified acceptance SatisfactionF seller or hen he fails to or hen #uyer retains goods ithout giving notice of signify his approval #ut re$ection (after a fi<ed period for return e<pires or retains goods #eyond after a reasona#le time if no fi<ed period) fi<ed time =%en O-ners%+(B4+s@ "$ L"ss Trans$erre T" Bu8er 6e(en +n, On 0"+ntB0*a'e "$ 6e*+/er8 &Art. ,.3-0 4u*e< ,elivery to carrier is delivery to #uyer if it is sellerDs duty to deliver 2(' (2ree on 'oard) . +xample+ 2(' (place of shipment) . freight paid #y #uyer E>'e(t+"ns< &;2 (&ost, ;nsurance, 2reight) . freight is paid #y seller 2(' (place of destination) . freight paid #y seller +xample+ &;262(' (place of destination ). goods to #e delivered to &e#u. ;f loss occurred #efore goods reach &e#u, seller #ears loss IV. O)*+,at+"ns "$ t%e Ven "r (&%a(ter 4) Arts. 1475-1581 A. Beneral )rovisions (Section 1) . Arts. 140571409 '. ,elivery (f -he -hing Sold (Section ") . Arts. 140/71544 3anner of -ransfer . Arts. 14//, 1409715=1 >hen ,elivery ,oes *ot -ransfer -itle #inds Of $eli!ery%Tradition 1. 1eal -radition . delivery or transfer of a thing from hand to hand, if it is mova#le property! #y certain material or possessory acts #y the vendee done in the presence and ith consent of vendor such as entering property, gathering fruits, ta4ing possession, if it is immova#le property &onstructive -radition . hen delivery of the mova#le or immova#le is not actual or material and is represented #y other signs or acts indicative thereof such as e<ecution of a pu#lic instrument

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a. #. Gc.

Sym#olic ,elivery (Art. 1408) .delivery of "eys to place where goods are "ept -radicion @onga 3anu (2irst parties part, Art. 1400) .mere consentDagreement of

-radicion 'revi 3anu (Second part, Art. 1400) . vendee has thing sold in his possession at time of sale

Gd. -radicion &onstitutum )ossesorium (Art. 15==) . vendeeAs possession changes li"e that from owner to lessee of new purchaser %. Huasi7-radition (Art. 15=1) . the transfer of rights or incorporeal things #y the e<ercise of the right #y the grantee ith the acquiescence of the vendor -radition 'y (peration of @a . covers all other cases not already enumerated and in hich delivery is effected #y e<press provision of la $eli!ery Of Thing Sold 1. 3ova#les . ( 6 all accessions A accessories at time of perfection of contract) ". ;mmova#les . ;f contract has contract rate ith a statement of area, seller must deliver all. C&. 6"'u#ents "$ T+t*e $ocuments of Title To &oods . includes any #ill of lading, doc4 arrant, quedan, or arehouse receipt or order for the delivery of goods, or any other document used in the ordinary course of #usiness in the sale or transfer of goods or any other document used in the ordinary course of #usiness in the sale or transfer of goods, as proof of the possession or control of the goods or authoriIing or purporting to authoriIe the possessor of the document to transfer or receive, either #y endorsement or #y delivery, goods represented #y such document. (Art. 19%9) 'arranties Of Seller Of $ocuments Of Title . Art. 1519 (1) -hat the document is genuine! (") -hat he has a legal right to negotiate or transfer it! (%) -hat he has 4no ledge of no fact hich ould impair the validity or orth of the document! and (4) -hat he has a right to transfer the title to the goods and that the goods are merchanta#le or fit for a particular purpose, henever such arranties ould have #een implied if the contract of the parties had #een to transfer ithout a document of title the goods represented there#y (egotia)le $ocuments Of Title . in hich it is stated that the goods referred therein ill #e delivered to the #earer (negotiated #y delivery), or to the order of any person named in such document (negotiated #y indorsement A delivery). (Arts. 15=/715=0, 151", 151%, 1518). &an #e negotiated #y indorsement or delivery. (on-(egotia)le $ocuments Of Title

4.

1ules (n @evy6Barnishment (f Boods . Arts. 1514, 1510, 15"= ,. 6"u)*e Sa*es . Art. 1544 1. )ersonal )roperty 4u*e+ )ossessor in good faith G". 1eal )roperty 4u*e< (+n t%e $"**"-+n, "r er) o 2irst 1egistrant in good faith o 2irst )ossessor in good faith o )erson ith oldest title in good faith 4u*e 6"es N"t A((*8< a. ,ou#le sale of land as not made #y same seller or his agent #. Sale of same land to t o different #uyers if first deed is a forgery c. Sale of same land here one sale is a#solute sale and another as a pacto de retro sale here redemption period has not yet e<pired d. Sale of same land here one sale as su#$ect to suspensive condition here one condition not complied ith e. ?nregistered land &ase Studies+ &ar)"ne** /s. &A (67 S&4A 77) Ender second paragraph of Article ,.44 of the 4ew Civil Code the buyer of realty must act in good faith in registering his deed of sale. Ender the first and third paragraphs of Article ,.44 &a0 preference is to the one who first ta"es possession in good faith of personal or real property the second paragraph% &b0 good faith must characteriFe prior possession. If there is no inscription what is decisive is prior possession in good faith. If there is inscription prior registration in good faith is a pre#condition to support title. $he first buyer has superior right to the land if she was not aware # and could not have been aware # of any sale to another person as there was no such sale her prior purchase of the land being made in good faith. $he first buyerAs good faith continued to exist9 &a0 when she recorded her adverse claim four days prior to the registration of the second buyer;s deed of sale% &b0 even after the seller told her of his second sale of the same lot to the second buyer. &aru#)a /s. &A (31 S&4A 558) Article ,.44 of the Civil Code is not applicable to unregistered lands . In a double sale of the unregistered land the first sale was made by the original owners and was unrecorded while the second was an execution sale that resulted from a complaint for a sum of money filed against the said original owners. 7er 2ection -. Rule -5 of the Revised Rules of Court Article ,.44 of the Civil Code cannot be invo"ed to benefit the purchaser at the execution sale though the latter was a buyer in good faith and even if this second sale was registered since the purchaser of unregistered land at a sheriff;s execution sale only steps into the shoes of the judgment debtor and merely ac!uires the latter;s interest in the property sold as of the time the property was levied upon. 4a +"-ea*t% !+nan'e &"#(an8 /s. 0a*+*e" (177 S&4A 345) Article ,.44 of the Civil Code provides that in case of double sale of an immovable property ownership shall be transferred9 &,0 to the person ac!uiring it who in good faith first recorded it in the Registry of 7roperty% &30 in default thereof to the person who in good faith was first in possession% and &-0 in default thereof to the person who presents the oldest title provided there is good faith.. 2ection ., of 7residential *ecree 4o. ,.35 provides that the act of registration is the operative act to convey or affect registered lands insofar as third persons are concerned. A person dealing with registered land is9

&a0 not re!uired to go behind the register to determine the condition of the property% &b0is only charged with notice of the burdens on the property which are noted on the face of the register or certificate of title. A purchaser in good faith of registered land &covered by a $orrens $itle0 ac!uires a good title as against all the transferees thereof whose right is not recorded in the registry of deeds at the time of the sale. Sant+a," /s. &A (347 S&4A 336) If the second buyer in a double sale of real property does not9 &a0 insist in obtaining possession of the owner;s copy of the $orrens title% &b0 inspect the property in the absence of said copy to ascertain who is in possession% &c0 try to have the deed of sale registered until after he learns that there was a buyer of the same lot ahead of him his rights cannot prevail over the first buyer who did all these things. +ven if first buyers had "nown of the second sale they still have the superior right if there is no prior registration in good faith by second buyer of the second sale in his favor. $he principle is prius tempore potior jure &first in time stronger in right0. Gnowledge by the first buyer of the second sale cannot defeat the first buyer;s rights except when the second buyer first registers in good faith the second sale &)livares vs. <onFales ,.5 2CRA --0. Conversely "nowledge gained by the second buyer of the first sale defeats his rights even if he is first to register since such "nowledge taints his registration with bad faith &see also Astorga vs. Court of Appeals <.R. 4o. .>.-= 3/ *ecember ,5>40. In CruF vs. Cabana &<.R. 4o. ./3-3 33 Hune ,5>4% ,35 2CRA /./0 it was held that it is essential to merit the protection of Art. ,.44 second paragraph that the second realty buyer must act in good faith in registering his deed of sale &citing Carbonell vs. Court of Appeals /5 2CRA 55 Crisostomo vs. CA <.R. 5.>4- =3 2eptember ,5530. Registration of the second buyer under Act --44 providing for the registration of all instruments of unregistered land cannot improve his standing since Act --44 itself expresses that registration thereunder would not prejudice prior rights in good faith &see Carumba vs. Court of Appeals -, 2CRA ..>0. Registration however by the first buyer under Act --44 can have the effect of constructive notice to the second buyer that can defeat his right as such buyer in good faith &see Arts. 7=>#7=5 Civil Code% see also Revilla vs. <alindeF ,=7 7hil. 4>=% $aguba vs. 7eralta ,-3 2CRA 7==0. San L"ren;" 6e/t. &"r(. /s. &A (447 S&4A 77) 'hen the thing sold t*ice is an immo!a)le+ the one *ho acquires it and first records it in the Registry of Property+ )oth made in good faith+ shall )e deemed the o*ner . Registration must be coupled with good faith without "nowledge of the defect or lac" of title of his vendor or of facts which should have put him upon such in!uiry and investigation as might be necessary to ac!uaint him with the defects in the title of his vendor. $he first criterion is priority of entry in the registry of property% there being no priority of such entry the second is priority of possession% and in the absence of the two priorities the third priority is of the date of title with good faith as the common critical element. Sa*era /s. 4" a5e (532 S&4A 433) Article ,.44 of the Civil Code covers double sale or multiple sales by a single vendor. It covers a situation where a single vendor sold one and the same immovable property to two or more buyers. It cannot be invo"ed where the two different contracts of sale are made by two different persons one of them not being the owner of the property sold &Consolidated Rural Ban" &Cagayan 'alley0 Inc. v. Court of Appeals <.R. 4o. ,-3,/, Hanuary ,7 3==4 44> 2CRA -47.0. E. 0r"(ert8 4e,+strat+"n 6e'ree (0.6. 757) 1. 1equisites for registration of deed of sale in good faith ". Accompanied #y vendors duplicate certificate of title, payment of capital gains ta<, and documentary ta<, registration fees

C!. &"n +t+"ns An =arrant+es (Se't+"n 3) Arts. 1545-1581 E,press 'arranty 7Any affirmation of fact or any promise #y the seller relating to the thing is an e<press arranty if the natural tendency of such affirmation or promise is to induce the #uyer to purchase the same, and if the #uyer purchases the thing relying thereon. *o affirmation of the value of the thing, nor any statement purporting to #e a statement of the sellerJs opinion only, shall #e construed as a arranty, unless the seller made such affirmation or statement as an e<pert and it as relied upon #y the #uyer. -mplied 'arranty -n Contract of Sale (1) An implied arranty on the part of the seller that he has a right to sell the thing at the time hen the o nership is to pass, and that the #uyer shall from that time have and en$oy the legal and peaceful possession of the thing! (") An implied arranty that the thing shall #e free from any hidden faults or defects, or any charge or encum#rance not declared or 4no n to the #uyer. Prescripti!e Period. 1= years 1. =arrant8 In &ase "$ E/+'t+"n (Su#section 1) . Arts. 15487159= E!iction /ta4e place henever #y a final $udgment #ased on a right prior to the sale or an act imputa#le to the vendor, the vendee is deprived of the hole or a part of the thing purchased. (5<ample+ property sold for non7payment of ta< not made 4no n to #uyer #efore sale) 7 arranty against eviction may #e aived unless seller in #ad faith Requisites of Breach of 'arranty in Case of E!iction + a. -here is a final $udgment #. ,eprivation of the vendee of hole or part of the thing purchased c. ,eprivation #ased on a right prior to the sale or an act imputa#le to the vendor d. :endor must #e summoned in a suit for eviction at the instance of vendee -n case of e!iction+ seller must return+ value, income, costs, e<penses A damages ". >arranty Against 8idden ,efects (f (r 5ncum#rances ?pon A -hing Sold (Su#section 1) . Arts. 159171581 T*o Remedies -n Case of Breach Of 'arranty Against 0idden $efects 9 a. Accion Redhi)itoria . action to void sale on account of vice6defect of the thing sold or diminish its fitness such that vendee ould not have purchased it #. Accion 1uanti Minoris . action to procure return of a part of the purchase price #y reason of defect of the thing sold. Prescripti!e Periods9 4u*e+ 9 months after delivery of thing sold 1edhi#itory action (,efect of Animals) + 4= days from delivery

&ase Study+ 0"-er &"## D In &"r( /s. &A (374 S&4A 577) $he re!uisites of a breach of warranty against eviction are9 &,0 $he purchaser has been deprived of the whole or part of the thing sold% &30 $his eviction is by a final judgment% &-0 $he basis thereof is by virtue of a right prior to the sale made by the vendor% and &40 $he vendor has been summoned and made co#defendant in the suit for eviction at the instance of the vendee. V. VI. O)*+,at+"ns "$ t%e Ven ee (&%a(ter 5) Arts. 1583-1573 A't+"ns !"r Brea'% O$ &"ntra't O$ Sa*e O$ ?"" s (&%a(ter 6) Arts. 1574-1577 A. 1emedies of &ontracting )arties 1. 4E:E6IES O! T1E BEFE4 a. Sale of 3ova#les

6e*+/er8 "$ :"/a)*es =%+'% 6" N"t &"rres("n =+t% 6es'r+(t+"n Or Sa#(*e (Art. 1481) K+n "$ &"ntra't &ontract of Boods #y ,escription or 'y Sample &ontract of Boods 'y ,escription and 'y ,escription 4e#e 8 "$ Bu8er 1. 1escission 1. 1escission if #ul4 of goods do not correspond ith description even if #ul4 of goods correspond ith description

6e*+/er8 "$ :"/a)*es In A .uant+t8 N"t In A''"r an'e =+t% &"ntra't (Art. 15"") .uant+t8 6e*+/ere B8 Se**erG 1. .uant+t8 Less T%an =%at Se**er &"ntra'te T" Se** Bu8erHs 4e#e 8 1. 3ay re$ect them ". ;f accept goods 4no ing seller is not going to perform contract in full, pay at contract rate %. ;f used goods #efore 4no ing seller is not going to perform contract in full, pay only for fair value to him of goods so received 1. 3ay re$ect them ". Accept only goods included in contract A re$ect rest %. Accept hole of goods delivered #ut pay at contract rate 1. Accept only goods included in contract A re$ect rest

C3. .uant+t8 Lar,er T%an =%at Se**er &"ntra'te T" Se** C3. 6e*+/ere ?"" s =+t% Ot%ers "$ 6+$$erent 6es'r+(t+"n

K;f Su#$ect 3atter is indivisi#le, #uyer may re$ect hole of goods L"ss O$ T%+n, =+t% 1+ en !au*ts (Arts. 159871590) Prescripti!e Period. 9 months counted from day of delivery of thing sold &ause "$ L"ss 8idden 2aults Se**erHs Kn"-*e ,e "$ 1+ en L"ss Seller A are Bu8erHs 4e#e 8 Seller #ears loss and he shall return price and refund

Seller *ot A are 2ortuitous 5vent62ault of 'uyer Seller *ot in 'ad 2aith Seller in 'ad 2aith

e<penses of contract ith damages to #uyer Seller #ears loss and he shall return price ith interest and reim#urse e<penses of contract hich ere paid #y #uyer Seller #ear loss and he shall pay price less value of thing hen lost to #uyer Seller #ear loss and he shall pay price plus damages to #uyer

#. Sale of ;mmova#les . 0r")*e#s In 6e*+/er8 "$ I##"/a)*e (Art. 15%07154" and 159=) Prescripti!e Period. 9 months counted from day of delivery for *os. 1, " and % #elo Area 6e*+/ere 1. Sa*e =+t% State#ent "$ Area At A 4ate "$ &erta+n 0r+'e 0er En+t Area is less than area stated in contract or Area is same #ut if any part is not of quality specified Area is greater than stated in contract Bu8erHs 4e#e 8 G1. )roportional reduction in price ". 1escission if lac4 in area is not less than 161= of that stated 1. Accept only area included in contract and re$ect rest ". Accept hole area #ut pay for same at contract rate

C3. Sa*e :a e !"r Lu#( Su# Area is greater6lesser than stated in contract " or more immova#les sold for single price G%. Sa*e =+t% :ent+"n "$ B"un ar+es

1. *o increase6decrease in the price 1. *o increase6decrease in the price 1. ,eliver all included ithin the #oundaries even hen it e<ceeds area stated in contract other ise suffer+ (a) reduction in price in proportion to hat is lac4ing in area unless contract is rescinded C4. S"* =+t% En'u#)ran'e "$ N"n-A((arent 1. 1escission in contract or Bur en Ser/+tu e N"t :ent+"ne In A,ree#ent D =%+'% +s N"t 4e'"r e +n 4e,+str8 "$ 0r"(ert8 (En*ess E>(ress*8 =arrante ) ". As4 for damages Prescripti!e Period 2for *o. 4) . 1 year from e<ecution of deed. After 1 year, only an action for damages ithin 1 year from date of discovery of #urden or servitude 3. 4E:E6IES O! T1E SELLE4 a. Sa*e "$ :"/a)*e =%ere O)5e'tGN"t 6e*+/ere (Art. 1573) 4eIu+s+tes+ 'uyer does not appear to receive after e<piration of period fi<ed for delivery

'uyer appears #ut does not tender price at the time agreed unless longer period stipulated

4e#e 8< 1ight to 1escind 'y Seller G here o#$ect is delivered, apply Art. 1101 ). Sa*e "$ :"/a)*es 0a8a)*e In Insta**#ents (Art. 1484) Requisites Before Art" 3454 2Recto 6a*7 May Be Applied -here must #e a contract &ontract must #e one of sale (not pacto de retro) ;nvolving personal property -he sale must #e on installment plan (i.e. any part or portion of #uying price, including do npayment) Applies to leases of personal property ith option to #uy hen lessor has deprived lessee of the possession or en$oyment of thing 4e#e 8 En er 4e't" La-K+ Arts. 148471489 (1) 5<act fulfillment of the o#ligation, should the vendee fail to pay! (") &ancel the sale, should the vendeeJs failure to pay cover t o or more installments! (this requires restitution #y parties) (%) 2oreclose the chattel mortgage on the thing sold, if one has #een constituted, should the vendeeJs failure to pay cover t o or more installments. ;n this case, he shall have no further action against the purchaser to recover any unpaid #alance of the price. Any agreement to the contrary shall #e void.L K1emedies are alternative and not cumulative. 5lection of one is a another &ase Study+ Ta5an*an,+t /s. S"ut%ern :"t"rs (121 0%+* 626) In a contract of sale of personal property payable in installments secured by a mortgage on the goods sold the vendor who chooses to exact fulfillment of the obligation to pay &instead of foreclosing the chattel mortgage0 is not limited to the proceeds of the sale on execution of the mortgaged goods. $he vendor may still recover from the purchaser the unpaid balance of the price if any. #. Sale of ;mmova#les i. 4.A. 6553 (:a'e a La-)< Sale of ;mmova#les on ;nstallment A((*+es T"+ Sale or financing of real estate (residential lots and residential condominiums) on installment payments (e<cluding industrial lots and commercial #uildings and sales to tenants under 1A %844) aiver of

&ase Studies+ Va*ara" /s. &A (324 S&4A 155) $he *eed of Conditional 2ale is a sale on installment or a contract to sell since sellers unmista"ably reserved for themselves the title to the property until full payment of the purchase price by

the vendee. $he stipulations of the contract being the law between the parties courts have no alternative but to enforce them as they were agreed IuponJ and written there being no law or public policy against the stipulated forfeiture of payments already made.6 8owever it must be shown that private respondent# vendee failed to perform her obligation thereby giving petitioners#vendors the right to demand the enforcement of the contract. Article ,.53 of the Civil Code applies only to contracts of sale and not to contracts to sell or conditional sales where title passes to the vendee only upon full payment of the purchase price. $o enforce the automatic forfeiture clause in a deed of conditional sale the vendors have the burden of proving a contractual breach on the part of the vendee. Automatic forfeiture clause which deems any previous payments forfeited and the contract automatically rescinded upon the failure of the vendee to pay three successive monthly installments or any one year#end lump sum payment are valid. $he rescission of the contract and the forfeiture of the payments already made could not be effected because the case falls s!uarely under Republic Act 4o. /..3 otherwise "nown as the 6:aceda (aw. O*8#(+a 1"us+n, In'. /s. 0anas+at+' Tra/e* &"r(. (375 S&4A 327) Republic Act 4o. /..3 otherwise "nown as the 6Realty Installment Buyer 7rotection Act ;; too" effect on ,/ 2eptember ,573. It is a special law governing transactions that involve subject to certain exceptions the sale on installment basis of real property and was enacted mainly 6to protect buyers of real estate on installment payments against onerous and oppressive conditions.6 It recogniFes the right of the seller to cancel the contract but any such cancellation must be done in conformity with the re!uirements therein prescribed. In addition to the notarial act of rescission the seller is re!uired to refund to the buyer the cash surrender value of the payments on the property. $he actual cancellation of the contract can only be deemed to ta"e place upon the expiry of a -=#day period following the receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and the full payment of the cash surrender value. $he 2eller can go to the court to demand judicial rescission in lieu of a notarial act of rescission. A demand for rescission by notarial act would appear to be merely circuitous with the filing by the seller of an action for annulment of contract and for recovery of damages. An action for annulment of contract is similar to rescission. $he instant case before the Court is one for recovery of possession on the thesis of a prior rescission of the contract covering the property. 4ot only is an action for reconveyance conceptually different from an action for rescission but that also the effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects. $he judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can arise in an action for reconveyance. Additionally in an action for rescission &also often termed as resolution0 unli"e in an action for reconveyance predicated on an extrajudicial rescission &rescission by notarial act0 the Court instead of decreeing rescission may authoriFe for a just cause the fixing of a period. =%ere )u8er %as (a+ at *east 3 8ears "$ +nsta**#ents 7Sec. % Sec. %. ;n all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments #ut e<cluding industrial lots, commercial #uildings and sales to tenants under 1epu#lic Act *um#ered -hirty7eight hundred forty7four as amended #y 1epu#lic Act *um#ered Si<ty7three hundred eighty7nine, here the #uyer has paid at least t o years of installments, the #uyer is entitled to the follo ing rights in case he defaults in the payment of succeeding installments+

(a) -o pay, ithout additional interest, the unpaid installments due ithin the total grace period earned #y him, hich is here#y fi<ed at the rate of one month grace period for every one year of installment payments made+ )rovided, -hat this right shall #e e<ercised #y the #uyer only once in every five years of the life of the contract and its e<tensions, if any. (#) ;f the contract is cancelled, the seller shall refund to the #uyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made and, after five years of installments, an additional five per cent every year #ut not to e<ceed ninety per cent of the total payments made+ )rovided, -hat the actual cancellation of the contract shall ta4e place after thirty days from receipt #y the #uyer of the notice of cancellation or the demand for rescission of the contract #y a notarial act and upon full payment of the cash surrender value to the #uyer.,o n payments, deposits or options on the contract shall #e included in the computation of the total num#er of installments made. =%ere )u8er %as (a+ *ess t%an 3 8ears "$ +nsta**#ents . Sec.4 Sec. 4. ;n case here less than t o years of installments ere paid, the seller shall give the #uyer a grace period of not less than si<ty days from the date the installment #ecame due. ;f the #uyer fails to pay the installments due at the e<piration of the grace period, the seller may cancel the contract after thirty days from receipt #y the #uyer of the notice of cancellation or the demand for rescission of the contract #y a notarial act. &ase Studies+ !a)r+,as /s. San !ran'+s'" e* :"nte9 In'. (476 S&4A 347) 7etitioners defaulted in all monthly installments. $hey may be credited only with the e!uivalent to less than two &30 years; installments. $he applicable legal provision on the mode of cancellation of Contract to 2ell is 2ection 4 of R.A. /..3 which is applicable to instances where less than two years installments were paid. $he cancellation of the contract under 2ection 4 is a two#step process. @irst the seller should extend the buyer a grace period of at least sixty &/=0 days from the due date of the installment. 2econd at the end of the grace period the seller shall furnish the buyer with a notice of cancellation or demand for rescission through a notarial act effective thirty &-=0 days from the buyer;s receipt thereof. It is worth mentioning of course that a mere notice or letter short of a notarial act would not suffice. Lean" /s. &A (367 S&4A 36) $he transaction between the parties was a conditional sale not an absolute sale. $he intention of the parties was to reserve the ownership of the land in the seller until the buyer has paid the total purchase price.. As the land is covered by a torrens title the act of registration of the deed of sale was the operative act that could transfer ownership over the lot. $here is not even a deed that could be registered since the contract provides that the seller will execute such a deed 6upon complete payment by the vendee of the total purchase price of the property6 with the stipulated interest. Article ,,/5 of the Civil Code provides that 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. @rom the moment one of the parties fulfills his obligation delay by the other begins. In the case at bar seller performed his part of the obligation by allowing buyer to continue in possession and use of the property. Clearly when buyer did not pay the monthly amortiFations in accordance with the terms of the contract she was in delay and liable for damages. 4"Iue /s. La(u; (76 S&4A 741) $he lots subject of the sale was delivered by the seller to the buyer who too" possession thereof and occupied the same and thereafter built his house thereon. But the property being registered under the (and Registration Act it is the act of registration of the *eed of 2ale which could legally effect the transfer of title of ownership to the transferee pursuant to 2ection .= of Act 45/. &:anuel vs. RodrigueF et al. ,=5 7hil. ,% BuFon vs. (ichauco ,- 7hil. -.4% $uaFon vs. Raymundo 3> 7hil. /-.% 1orcester vs. )campo -4 7hil. /4/0. $he contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price such payment being a positive suspensive condition and failure of which is not a breach casual or serious but simply an event that prevented the obligation of the vendor to convey title from ac!uiring binding force" Art. ,,5, of the 4ew Civil Code is the applicable provision where the seller elects to rescind or cancel his obligation to deliver the ownership of the two lots in !uestion for failure of the buyer to pay in full the purchase price on the basis of ,3= monthly e!ual installments promptly and punctually for a period of ,= years. 'uyer is not entitled to the benefits of paragraph - of Art. ,,5, 4.C.C. 8aving been in default he is not entitled to the new period of 5= days from entry of judgment within which to pay petitioner the balance with interest due on the purchase price. $here is no just cause authoriFing the fixing of a new period within which buyer may pay the balance of the purchase price even if buyer had constructed valuable improvements on the land and that he has built his house on the property. )therwise the seller at the mercy of the buyer can easily construct substantial improvements on the land but beyond the capacity of the seller to reimburse in case seller elects to rescind the contract by reason of the buyer;s default or deliberate refusal to pay or continue paying the purchase price of the land. Ender this design stratagem or scheme the buyer can cleverly and easily 6improve out6 the vendor of his land. ii. Art. 1573 N&& <Sa*e "$ I##"/a)*es N"t On Insta**#ent A((*+es T"+ Requisites. Sale of immova#le property even if it may have #een stipulated that upon failure to pay price at the time agreed upon, the rescission of the contract shall of right ta4e place.

1. Sale of real property (not a contract to sell or a promise to sell) ". -here is demand #y seller for the rescission of the contract of sale, not payment of price %. -he demand may #e $udicial or e<tra7$udicial (#y notarial act)
Steps to Cancellation of Contract of Sale nder Art" 389:. 2ailure of #uyer to pay ithin agreed period 'uyer may pay even after e<piration of agreed period if no notarial demand for rescission of contract is made #y the seller Seller needs to go to court to avail of rescission under Art. 1101 *&& ?nder Art. 1101, court may order rescission unless there is a $ust cause authoriIing the fi<ing of a period ithin hich #uyer may pay

&ase Studies+ Lu;"n Br"@era,e &". /s. :ar+t+#e B* ,. &". (43 S&4A 73) (,ifference 'et een &ontract (f Sale and &ontract -o Sell) $he difference between contracts of sale and contracts to sell with reserved title is that the seller under contracts to sell has the power to extrajudicially terminate the operation of the contract refuse conveyance and retain the sums or installments already received in case of failure of the buyer to complete payment. 6A judicial action for the rescission of a contract is not necessary where the contract provides that it may be revo"ed and cancelled for violation of any of its terms and conditions6 &(opeF vs. Commissioner of Customs (#3>3-. -= Hanuary ,57, -7 2CRA -37 --4 and cases cited therein0. $he remedy of the party opposing the rescission for any reason being to file the corresponding action to !uestion the rescission and enforce the agreement. $he act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made "nown to the other and is always provisional being ever subject to scrutiny and review by the proper court. If the other party denies that rescission is justified it is free to resort to judicial action in its own behalf and bring the matter to court. 2hould the court after due hearing decide that the resolution of the contract was not warranted the responsible party will be sentenced to damages% in the contrary case the resolution will be affirmed and the conse!uent indemnity awarded to the party prejudiced. -he party who deems the contract violated may consider it resolved or rescinded and act accordingly without previous court action but it proceeds at its own ris". )nly the final judgment of the corresponding court will conclusively and finally settle whether the action ta"en was or was not correct in law. $he contracting party who believes itself injured is not re!uired to first file suit and wait for a judgment before ta"ing extrajudicial steps to protect its interest. )therwise the party injured by the other;s breach will have to passively sit and watch its damages accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself re!uires that he should exercise due diligence to minimiFe its own damages &Civil Code Article 33=-0.6 &+t8 "$ &e)u /s. 1rs. "$ &an + " 4u)+ (326 S&4A 428) $he rescission of a sale of an immovable property is specifically governed by Article ,.53 of the 4ew Civil Code which reads9 6In the sale of immovable property even though it may have been stipulated that upon the failure to pay the price at the time agreed upon the rescission of the contract shall of right ta"e 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.6 $he vendor City of Cebu did not give notice of rescission much less ma"e a judicial or notarial demand for rescission in its Contract of 2ale with Rubi. $he only subse!uent action ta"en by petitioner was to send to the respondents a 6@ormal 4otice ordering the latter to vacate the premises within fifteen days from receipt of notice for the reason that the occupancy of lot subject lot is presumed to be illegal as the lot is still registered in the name of the City of Cebu. $his letter did not amount to a demand for rescission as indeed there was no reference to the sale much less a declaration that the sale was being rescinded or abrogated from the beginning. It was only when the City of Cebu filed its Answer on Hune ,. ,5>5 to the instant complaint for specific performance that the city invo"ed 6automatic rescission6 and prayed for relief allowing it to rescind the contract. Ir+n,an /s. &A (366 S&4A 41) (,istinction 'et een 1escission ?nder Art. 1%81 and 1escission ?nder Art. 1101 and 150")

Article ,.53 of the Civil Code applies in the sale of an immovable property. It re!uires the rescinding party to serve judicial or notarial notice of his intent to resolve the contract before a valid rescission can ta"e place whether or not automatic rescission has been stipulated. $he law uses the phrase 6even though6 emphasiFing that when no stipulation is found on automatic rescission the judicial or notarial re!uirement still applies. Ender Article ,,5, of the Civil Code9 &a0 the right to resolve reciprocal obligations is deemed implied in case one of the obligors shall fail to comply with what is incumbent upon him. But that right must be invo"ed judicially &b0the Court shall decree the resolution demanded unless there should be grounds which justify the allowance of a term for the performance of the obligation.6 $his re!uirement has been retained in the third paragraph of Article ,,5, which states that 6the court shall decree the rescission claimed unless there be just cause authoriFing the fixing of a period.6 $he party entitled to rescind should apply to the court for a decree of rescission and the operative act which produces the resolution of the contract is the decree of the court and not the mere act of the vendor. 2ince a judicial or notarial act is re!uired by law for a valid rescission to ta"e place the letter written by respondent declaring his intention to rescind did not operate to validly rescind the contract. Rescission6 in Article ,->, is not a"in to the term 6rescission6 in Article ,,5, and Article ,.53. In Articles ,,5, and ,.53 the rescission is a principal action which see"s the resolution or cancellation of the contract while in Article ,->, the action is a subsidiary one limited to cases of rescission for lesion as enumerated in said article. $he prescriptive period applicable to rescission under Articles ,,5, and ,.53 is found in Article ,,44 which provides that the action upon a written contract should be brought within ten years from the time the right of action accrues. VII. E>t+n,u+s%#ent O$ Sa*e (&%a(ter 7) Arts. 1622-1633 A. &onventional 1edemption (Section 1) . Arts. 19=171918 Con!entional Redemption . shall ta4e place hen the vendor reserves the right to repurchase the thing sold, ith the o#ligation to comply ith the provisions of Art. 1919 (return price of sale and reim#urse e<penses of contract, necessary A useful e<penses on the thing sold) and other stipulations agreed upon. (Art. 19=1) Equita)le Mortgage . Arts. 19="719=4 Instances when a contract may be presumed to be an e!uitable mortgage + (Art. 19=") &ase Studies+ Lu#a8a, /s. 1rs. "$ Ne#en" (536 S&4A 315) An e!uitable mortgage has been defined 6as one which although lac"ing in some formality or form or words or other re!uisites demanded by a statute nevertheless reveals the intention of the parties to charge real property as security for a debt and contains nothing impossible or contrary to law. $he existence of any one of the conditions under Article ,/=3 not a concurrence nor an overwhelming number of such circumstances suffices to give rise to the presumption that the contract is an e!uitable mortgage since the law favors the least transmission of property rights V+**ar+'a /s. &A (36 S&4A 187) $he contract between the parties cannot be presumed to be an e!uitable mortgage since the right of repurchase was not reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. )nce the instrument of absolute sale is executed the vendor can no longer reserve the right

to repurchase in a subse!uent instrument. Any right thereafter granted the vendor by the vendee cannot be a right of repurchase but some other right li"e an option to buy. An instrument different from the deed of sale evidences merely an option to buy. Conse!uently the extension by one month of the period for the exercise of the option does not fall under 4o. - of Article ,/=3 of the Civil Code which refers to the right of repurchase. Period Of Con!entional Redemption . Art. 19=9 &ase Studies+ Le"nar " /s. &A (332 S&4A 354) Art. ,/=/ par. - of the 4ew Civil Code is applicable only in a civil action where the main issue is the true nature of the contract between the parties where the seller a retro honestly believed that the contract he had entered into was an e!uitable mortgage not a pacto de retro transaction and because of such belief he had not redeemed the property within the proper period. $he sale with assumption of real estate mortgage with right to repurchase provides that the vendor has the power to redeem the subject property within seven &70 years from the execution of the document. 'endor failed to exercise his right to repurchase one#half of the property within the agreed period. In vendorAs belated letter to vendee he categorically admitted that he is exercising his right to repurchase the subject property and tendering for that purpose his repurchase payment for said property. It was only after vendee filed his petition for consolidation of ownership with the trial court that vendor denied the true nature of their agreement by alleging in the Answer that the contract is one of e!uitable mortgage. Article ,/=/ paragraph &-0 of the 4ew Civil Code allowing the vendor thirty &-=0 days from the time final judgment is rendered within which to repurchase property sold under a contract of sale with a right to repurchase is not applicable A)+**a /s. ?")"nsen, (386 S&4A 437) $he deed of sale together with the option to buy executed on the same day was meant to serve as security for the indebtedness of respondent which had become long overdue. 2aid obligation would have been satisfied had respondent exercised the option to buy within the stipulated period. $hese circumstances peculiar to the case at bar ma"e this case fall s!uarely within the situation contemplated in the above#!uoted doctrine ? that there was a belief on the part of the vendor a retro founded on facts attendant upon the execution of the sale with pacto de retro honestly and sincerely entertained that the agreement was in reality a mortgage one not intended to affect the title to the property ostensibly sold but merely to give it as security for a loan or other obligation. 2ince vendor a retro has maintained that transaction between him and vendee a retro was really an e!uitable mortgage vendor a retro may avail of the third paragraph of Article ,/=/ of the Civil Code which allows him to repurchase the property within the thirty#day period counted from the date of finality of the decision declaring the transaction to be a pacto de retro sale. If the urgent motion to repurchase the lots with tender of payment which vendor a retro is filed within the -=#day period vendees a retro should therefore be ordered to accept the tendered payment for the lots and to execute the necessary deed of sale conveying the same to vendor a retro. &a un,", /s. Fa( (467 S&4A 561) $he vendee a retro &even if he failed to consolidate his title under Art. ,/=7 of the 4ew Civil Code.0 had ac!uired absolute title and ownership over the six parcels of when the petitioner as vendor a 4 Mears from the date of the contract in the a#sence of e<press agreement &annot e<ceed 1= years if there is an agreement %= days from time of final $udgment in a civil action on the #asis that contract as a true sale ith right to repurchase

retro failed to repurchase the same within the period fixed by the parties in the *eed of 2ale with Right of Repurchase. A sale with pacto de retro transfers the legal title to the vendee a retro. In a pacto de retro sale the title and ownership of the property sold are immediately vested in the vendee a retro subject to the resolutory condition of repurchase by a vendor a retro within the stipulated period. @ailure on the part of a vendor a retro to repurchase the property within the period agreed upon by them or in the absence thereof as provided for by law vests upon the vendee a retro absolute title and ownership over the property sold by operation of law. $hus the vendor a retro had no right to mortgage or sell the same to the based on the (atin adage goes9 4+:) *A$ KE)* 4)4 8AB+$. 4ot being the owner of the parcels of land the vendor a retro could not have lawfully sold the same to the respondent. '. @egal 1edemption (Section ") . Arts. 1910719"% 6egal Redemption . the right to #e su#rogated, upon the same terms and conditions stipulated in the contract, in the place of one ho acquires a thing #y purchase or dation in payment or #y any other transaction here#y o nership is transmitted #y onerous title (Art. 1910). 4e e#(t+"n )roperty ?nder (nly if sale is to stranger, not &o7( nership co7o ner @and (1ural) Area does not e<ceed 1 ha. =%" Is 0re$erre right is in proportion to share of redeeming o ners ad$acent o ner ith smaller area preferred! if equal area, first one ho requested redemption 1esale of Area so small that 7o ner of ad$oining land at a ma$or area cannot #e used for reasona#le price practical purpose ithin 7 " or more o ners, the one hose reasona#le period (#ough merely intended use is $ustified for speculation)

@and (?r#an)

Period Of 6egal Redemption%Pre-emption . Art. 19"% >ithin %= days from the notice in riting #y the prospective vendor or #y the vendor, as the case may #e, &ase Studies+ S8 /s. &A (173 S&4A 135) 2ection 7> of the <eneral Ban"ing Act as amended by 7.*. 4o. ,>3> states that9 . . .to redeem the property by paying the amount fixed by court in the order of execution or the amount due under the mortgage deed as the case may be with interest thereon at the rate specified under the mortgage and all the costs and judicial and other expenses incurred by the ban" or institution concerned by reason of the execution and sale and as a result of the custody of said property less the income received from the property. 2aid section is applicable not only to 6ban"s and ban"ing institutions 6 but also to 6credit institutions.6 2I8I is a credit institution i.e. financial intermediary engaged in !uasi#ban"ing functions within the purview of 2ection 7> it being an entity authoriFed to engage in the lending of funds or purchasing of receivables or other obligations with funds obtained from the public as provided in the <eneral Ban"ing Act under 2ection 3#A &a0% and to lend invest or place funds deposited with them ac!uired by them or otherwise coursed through them either for their own account or for the account of others under 2ection 3#*&c0.

Le,as(+ /s. &A (67 S&4A 362) $he issue of who among the adjoining owners has the a better right to buy the small piece of land whereon part of the house of petitioner is standing is to be resolved by applying paragraph - of Art. ,/33 of the Civil Code ? the intended use that appears best justified. $he following circumstances prove that petitioner has the preferential right over the property in !uestion9 &a0 the parcel of land involved is urban land a portion of the house of the petitioner is standing on a portion of the lot in !uestion&b0 her possession and improvements thereon were tolerated by the adjoining owners% &c0 the right of pre# emption was availed of by petitioner when she offered to buy said lot but was refused Et'u)an /s. &A (148 S&4A 527) 7laintiff failed to ma"e a valid tender of the sale price of the land paid by the defendants within the period fixed by Art. ,/3- of the Civil Code which provides that the right of legal pre#emption or redemption shall not be exercised except within thirty &-=0 days from the notice in writing by the prospective vendor or by the vendor as the case may be. Art. ,/3- does not prescribe any particular form of notice nor any distinctive method for notifying the redemptioner.6 2o long therefore as the latter is informed in writing of the sale and the particulars thereof the -= days for redemption start running and the redemptioner has no real cause to complain. &*e Conejero et al v. Court of Appeals et al. ,/ 2CRA 77.0. In the Conejero case 1e ruled that the furnishing of a copy of the disputed deed of sale to the redemptioner was e!uivalent to the giving of written notice re!uired by law in 6a more authentic manner than any other writing could have done 6 and that 1e cannot adopt a stand of having to sacrifice substance to technicality. :ore so in the case at bar where the vendors or co#owners of petitioner stated under oath in the deeds of sale. 4otice of sale had been given to prospective redemptioners in accordance with Art. ,/3- of the Civil Code. !ran'+s'" /s. B"+ser ( 333 S&4A 773) Art. ,/3- of the Civil Code re!uires that the written notification should come from the vendor or prospective vendor not from any other person. In the case at bar the written notice came from the buyer or vendee and not from the vendor of the property subject of legal redemption. $he receipt by petitioner of summons in Civil Case 4o. ,..,= on August . ,553 amounted to actual "nowledge of the sale from which the -=#day period of redemption commenced to run. 7etitioner then had until 2eptember 4 ,553 within which to exercise her right of legal redemption but in August ,3 ,553 she deposited the redemption price. As petitioner;s exercise of said right was timely the same should be given effect. Butte /. E8 (4 S&4A 5370 $he written notice should be given by the vendor and not the vendees conformably to a similar re!uirement under Article ,/3-. A*"n;" /s. IA& (152 S&4A 357) In Article ,/3- a particular method of giving notice was specified and that notice must be deemed exclusive . $he notice given by the vendees and not the vendor would not toll the running of the -=#day period. $he below is merely exception to the *e Conejero and Buttle doctrines in view of the peculiar circumstances of this case.. $he purpose of the law re!uiring written notice is to ma"e sure that the redemptioners are duly notified. $he co#heirs in this case were undeniably informed of the sales although no notice in writing was given them. $he -=#day period began and ended during the ,4 years between the sales in !uestion and the filing of the complaint for redemption in ,577 without the co#heirs exercising their right of redemption. $hese are the justifications for this exception. VIII. &ase Study+ Ass+,n#ent "$ &re +t D Ot%er In'"r("rea* 4+,%ts (&%a(ter 8) Arts. 1634-1635

Le "n+" /s. &a(+t"* 6e/t &"r( (536 S&4A 377) An assignment of credit has been defined as an agreement by virtue of which the owner of a credit &"nown as the assignor0 by a legal cause ? such as sale dation in payment or exchange or donation ? and without need of the debtor;s consent transfers that credit and its accessory rights to another &"nown as the assignee0 who ac!uires the power to enforce it to the same extent as the assignor could have enforced it against the debtor. &@ar +ast Ban" L $rust Company v. *iaF Realty Inc. 4,/ 7hil. ,47 ,/, &3==,0. )n the other hand subrogation by definition is the transfer of all the rights of the creditor to a third person who substitutes him in all his rights. It may either be legal or conventional. (egal subrogation is that which ta"es place without agreement but by operation of law because of certain acts. Conventional subrogation is that which ta"es place by agreement of parties. &Chemphil +xport L Import Corporation v. Court of Appeals -3, 7hil. /,5 /43 &,55.0. Assignment of credit and conventional subrogation are not the same. Ender our Code conventional subrogation is not identical to assignment of credit. In the former the debtor;s consent is necessary% in the latter it is not re!uired. 2ubrogation extinguishes an obligation and gives rise to a new one% assignment refers to the same right which passes from one person to another. $he nullity of an old obligation may be cured by subrogation such that the new obligation will be perfectly valid% but the nullity of an obligation is not remedied by the assignment of the creditor;s right to another. IJ. ?enera* 0r"/+s+"ns (&%a(ter 7) Arts. 1636-1637 E;C6 $E. +lectronic Commerce Act 7ublic (and (aw Retail $radeand (iberaliFation Act Bul" 2ales (aw BA4TE4 O4 EJ&1AN?E (BOOK IV TITLE VII) Arts. 1638 - 1641