Sales 402 FINALS Reviewer 2009

Sales Reviewer 2009
CHAPTER 4
OBLIGATIONS OF THE VENDOR
GENERAL OBLIGATION
A. To PRESERVE the thing
to take care of the thing sold with the diligence of a good father of a family unless the
law or the stipulation requires another standard of care. (Art. 1163, 1480).
In case of loss, deterioration or improvement of the thing BEFORE delivery, the rules
under Art. 1189 shall be observed, the vendor being considered the debtor. (Art.
1538)
B. to DELIVER the thing sold
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. All the fruits
shall pertain to the vendee from the day on which the contract is PERFECTED. (Art.
1537)
As a RULE, the creditor has the right to the fruits of the thing from the time the
obligation to deliver arises (Art. 1164), but in a contract of sale, the fruits shall
pertain to the buyer from the day the contract was perfected. (Art. 1537) The parties
may, however, stipulate that the fruits of the thing sold shall pertain to the buyer at
some future tie such as when the obligation is one with a period.
FORM of DELIVERY
1. Physical/Actual/Real Delivary delivery by physically placing the thing in the
hands of the vendee in case of movables or placing it in his possession and
control in the case of immovables.
2. Constructive or legal delivery
a. by legal formalities through public instrument (1498)
b. traditio simbolica e.g. delivery of the keys (also called traditio clavium)
(1498)
c. traditio longa manu delivery of a movable by mere consent or agreement of
the parties (1499)
d. traditio brevi manu vendee is already in possession of the thing
e. Constitutum possessorium vendor continues to be in possession of the thing
sold but in another capacity such as that of a lessee or depositary. (1500)
a and e applies to both movables and immovables while b, c and d applies to

movables only
CASES
i.
Kinds of Delivery
SAN LORENZO DEVELOPMENT CORPORATION vs. COURT OF APPEALS, PABLO S. BABASANTA, SPS.
MIGUEL LU and PACITA ZAVALLA LU
G.R. No. 124242
January 21, 2005
Topic: Kinds of Delivery

Facts
The Spouses Lu owned two parcels of land situated in Sta. Rosa, Laguna. On August 1986, the Spouses Lu
purportedly sold the two parcels of land to respondent Pablo Babasanta for the price of P15.00 per square meter.
Babasanta made a downpayment of P50,000.00 as evidenced by a memorandum receipt issued by Pacita Lu.
Other payments totaling P200,000.00 were made by Babasanta. Sometime in May 1989, Babasanta wrote a letter
to Lu to demand the execution of a final deed of sale in his favor so that he could effect full payment of the
purchase price. He also notified the spouses about having received information that the spouses sold the same
property to another without his knowledge and consent and demanded that the second sale be cancelled. Lu
acknowledged having agreed to sell the property to him but reminded him that when the balance of the purchase
By: Maila Omolon, Michele Espina, Janel Obnimaga, Jesa Carla Balahadia, Eduard Conde
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price became due, he requested for a reduction of the price and when she refused, Babasanta backed out of the
sale. Pacita added that she returned the sum of P50,000.00 to Babasanta through Eugenio Oya.
Babasanta filed before the Regional Trial Court of San Pedro, Laguna, a Complaint for Specific Performance and
Damages against the Spouses Lu. Babasanta alleged that the lands had been sold to him by the spouses at
P15.00 per square meter. Despite his repeated demands for the execution of a final deed of sale in his favor, the
spouses allegedly refused. On their part, the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta
and when the total advances of Pacita reached P50,000.00, the latter and Babasanta, without the knowledge and
consent of Miguel Lu, had verbally agreed to transform the transaction into a contract to sell the two parcels of
land to Babasanta with the P50,000.00 to be considered as the downpayment for the property and the balance to
be paid on or before 31 December 1987. The spouses Lu added that as of November 1987, total payments made
by Babasanta amounted to only P200,000.00 and the latter allegedly failed to pay the balance of P260,000.00
despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the price from P15.00 to
P12.00 per square meter and when the Spouses Lu refused to grant Babasantas request, the latter rescinded the
contract to sell and declared that the original loan transaction just be carried out in that the spouses would be
indebted to him in the amount of P200,000.00.
Meanwhile, San Lorenzo Development Corporation (SLDC) filed a Motion for Intervention before the trial court.
SLDC alleged that it had legal interest in the subject matter under litigation because on May 1989, the two parcels
of land involved had been sold to it in a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in
good faith and for value and therefore it had a better right over the property in litigation. SLDC alleged that on
February 1989, the Spouses Lu executed in its favor an Option to Buy the lots subject of the complaint.
Accordingly, it paid an option money in the amount of P316,160.00 out of the total consideration for the purchase
of the two lots of P1,264,640.00. After the Spouses Lu received a total amount of P632,320.00 they executed on
May 1989 a Deed of Absolute Sale with Mortgage in its favor. SLDC added that the certificates of title over the
property were delivered to it by the spouses clean and free from any adverse claims and/or notice of lis pendens.
SLDC further alleged that it only learned of the filing of the complaint sometime in the early part of January 1990
which prompted it to file the motion to intervene without delay. Claiming that it was a buyer in good faith, SLDC
argued that it had no obligation to look beyond the titles submitted to it by the Spouses Lu particularly because
Babasantas claims were not annotated on the certificates of title at the time the lands were sold to it.
Issue
Who between SLDC and Babasanta has a better right over the two parcels of land subject of the instant case in
view of the successive transactions executed by the Spouses Lu?
Held
SLDCs right is superior to that of Babasantas.
The agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale. Contracts,
in general, are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance
upon the thing which are to constitute the contract. The offer must be certain and the acceptance absolute.
Moreover, contracts shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present.
The evidence presented, the receipt signed by Pacita Lu, merely states that she accepted the sum of P50,000.00
from Babasanta as partial payment of the subject lot. While there is no stipulation that the seller reserves the
ownership of the property until full payment of the price which is a distinguishing feature of a contract to sell, the
subsequent acts of the parties convinced the Court that the Spouses Lu never intended to transfer ownership to
Babasanta except upon full payment of the purchase price.
In a contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by
agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. In a
contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or
rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the
obligation of the vendor to convey title from becoming effective.
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price.
There being an obligation to pay the price, Babasanta should have made the proper tender of payment and
consignation of the price in court as required by law. Mere sending of a letter by the vendee expressing the
intention to pay without the accompanying payment is not considered a valid tender of payment. Babasanta did
not acquire ownership by the mere execution of the receipt by Pacita Lu acknowledging receipt of partial payment
for the property. For one, the agreement between Babasanta and the Spouses Lu, though valid, was not
embodied in a public instrument. Hence, no constructive delivery of the lands could have been effected.
Babasanta had not taken possession of the property at any time after the perfection of the sale in his favor or
exercised acts of dominion over it despite his assertions that he was the rightful owner of the lands. There was no
delivery to Babasanta, whether actual or constructive, which is essential to transfer ownership of the property.
Thus, even on the assumption that the perfected contract between the parties was a sale, ownership could not
have passed to Babasanta in the absence of delivery, since in a contract of sale ownership is transferred to the
vendee only upon the delivery of the thing sold.
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The juridical relationship between the parties in a double sale is primarily governed by Article 1544 which lays
down the rules of preference between the two purchasers of the same property. It provides:
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.
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.
SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasantas claim.
Babasanta strongly argues that the registration of the sale by SLDC was not sufficient to confer upon the latter
any title to the property since the registration was attended by bad faith. Specifically, he points out that at the time
SLDC registered the sale on June 1990, there was already a notice of lis pendens on the file with the Register of
Deeds, the same having been filed one year before on June 1989.
In this case, the Court held that the registration of the sale after the annotation of the notice of lis pendens did not
obliterate the effects of delivery and possession in good faith which admittedly had occurred prior to SLDCs
knowledge of the transaction in favor of Babasanta. As early as February 1989, the Spouses Lu executed the
Option to Buy in favor of SLDC upon receiving the option money from SLDC. After SLDC had paid more than one
half of the agreed purchase price, the Spouses Lu subsequently executed on May 1989 a Deed of Absolute Sale
in favor or SLDC. From the time of execution of the first deed up to the moment of transfer and delivery of
possession of the lands to SLDC, SLDC had no knowledge of the prior transaction of the Spouses Lu with
Babasanta, it had acted in good faith and the subsequent annotation of lis pendens has no effect at all on the
consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some other person has a right
to, or interest in, such property and pays a full and fair price for the same at the time of such purchase, or before
he has notice of the claim or interest of some other person in the property. Following the foregoing definition, we
rule that SLDC qualifies as a buyer in good faith since there is no evidence extant in the records that it had
knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the
vendors were still the registered owners of the property and were in fact in possession of the lands. A person
dealing with the owner of registered land is not bound to go beyond the certificate of title as he is charged with
notice of burdens on the property which are noted on the face of the register or on the certificate of title.
Since SLDC acquired possession of the property in good faith in contrast to Babasanta, who neither registered
nor possessed the property at any time, SLDCs right is definitely superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in the
Courts decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a
contract to sell. Article 1544 does not apply to a case where there was a sale to one party of the land itself while
the other contract was a mere promise to sell the land or at most an actual assignment of the right to repurchase
the same land.
ii.
Possession vs Ownership
MEDINA vs. GREENFIELD DEVELOPMENT CORPORATION
G.R. No. 140228, November 19, 2004
Facts
On June 5, 1962, Pedro, his brother Alberto Medina and his niece Nazaria Cruz (Alberto's daughter)
executed a notarized Contract to Sell in favor of respondent Greenfield Development Corporation over a parcel of
land in Muntinlupa City, covered by Transfer Certificate of Title (TCT) No. 100177 (Lot 90-A). A notarized Deed of
Sale covering said property was subsequently entered into on June 27, 1962, in favor of respondent, and this time
signed by Pedro, Cornelio, Brigida, Balbino, Gregoria, Crisanta, Rosila, and Alberto, all surnamed Medina, and
Nazaria Cruz, as vendors. Thereafter, a notarized Deed of Absolute Sale with Mortgage was executed on
September 4, 1964 in favor of respondent over Lot 90-B covered by TCT No. 100178, and was signed by Pedro,
Cornelio, Brigida, Balbino, Gregoria, Crisanta, Rosila, and Alberto, all surnamed Medina, and Nazaria Cruz.
By virtue of these sales, respondent was able to register in its name the title to the two parcels of land.
These properties were consolidated with other lots and were eventually registered on July 19, 1995, in the name
of respondent.
On November 6, 1998, petitioners instituted an action for annulment of titles and deeds, reconveyance,
damages with preliminary injunction and restraining order, against respondent alleging that they are co-owners of
those two parcels of land. While the titles were registered in the names of Pedro, Alberto, Cornelio, Brigida and
Gregoria, all surnamed Medina, they alleged that they were recognized as co-owners thereof. In support of their
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case, petitioners maintain that the deeds of sale on these properties were simulated and fictitious, and the
signatures of the vendors therein were fake. Despite the transfer of the title to respondent's name, they remained
in possession thereof and in fact, their caretaker, a certain Santos Arevalo and his family still reside on a portion of
the property.
On July 13, 1998, petitioners caused an adverse claim to be annotated on the titles and upon the
discovery of the annotation, respondent constructed a fence on the property and posted security personnel,
barring their ingress and egress. Thus, petitioners sought, among others, the issuance of a temporary restraining
order and a writ of preliminary injunction enjoining respondent and its agents and representatives from preventing
petitioners to exercise their rights over the properties.
On January 18, 1999, the trial court issued its resolution granting petitioners' prayer for injunctive relief.
Respondent filed a special civil action for certiorari and prohibition with the Court of Appeals which nullified the
trial court's resolution. Hence, this recourse.
Issue
1.
Whether or not respondent was in constructive possession of the subject premises notwithstanding those
petitioners are in actual possession thereof.
Held
The respondent was in constructive possession of the subject lots. Possession and ownership are two
different legal concepts. Just as possession is not a definite proof of ownership, neither is non-possession
inconsistent with ownership. Even assuming that petitioners' allegations are true, it bears no legal consequence in
the case at hand because the execution of the deeds of conveyances is already deemed equivalent to delivery of
the property to respondent, and prior physical delivery or possession is not legally required. Under Article 1498 of
the Civil Code, "when the sale is made through a public instrument, the execution thereof shall be equivalent to
the delivery of the object of the contract, if from the deed the contrary does not appear or cannot be inferred."
Possession is also transferred, along with ownership thereof, to respondent by virtue of the notarized deeds of
conveyances.
In sum, the trial court committed grave abuse of discretion in issuing the writ of preliminary injunction,
and the Court of Appeals was correct in nullifying the same. Hence, the present petition is denied for lack of merit.
iii.
When execution of public document not equivalent to delivery

Vive Eagle Land vs. CA (janel)
Asset Privitization Trust vs. T.J. Enterprises
G.R. No. 167195; May 8, 2009
FACTS:
Petitioner Asset Privitization Trust (APT) was a government entity created for the purpose to conserve, to
provisionally manage and to dispose assets of government institutions. Petitioner had acquired from the
Development Bank of the Philippines (DBP) assets consisting of machinery and refrigeration equipment which
were then stored at Golden City compound, Pasay City. The compound was then leased to and in the physical
possession of Creative Lines, Inc. These assets were being sold on an as-is-where-is basis.
Petitioner and respondent entered into an absolute sale over certain machinery and refrigeration equipment.
Respondent paid the full amount and demanded the delivery of the machinery it had purchased. APT in turn
issued a gate pass. Respondent was able to pull out from the compound the properties. During the hauling of Lot
No.2 consisting of 16 items, only 9 items were pulled out by respondent. This prompted the respondent to file a
complaint for specific performance and damages against petitioner and Creative Lines. During the pendency of
the case, respondent was able to pull out the remaining machinery and equipment. However, upon inspection it
was discovered that the machinery and equipment were damaged and had missing parts.
APT argued that there has already been constructive delivery by virtue of the deed of sale executed and being
a sale of as-is-where-is basis, it was the duty of TJ Enterprises to take care of the property.
RTC ruled that there was no constructive delivery at the time of the sale, APT did not have control over the
machinery and equipment. Thus, it could not transfer ownership. CA affirmed the decision of the trial court.
ISSUE:
Whether or not the presence of the disclaimer or warranty in the deed of absolute sale absolves it from all
warranties.
RULING:
SC held that APTs position is untenable.
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The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object
of the sale. 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.
A perusal of the deed of absolute sale shows that both the vendor and the vendee represented and warranted
to each other that each had all the requisite power and authority to enter into the deed of absolute sale and that
they shall perform each of their respective obligations under the deed of absolute in accordance with the terms
thereof. There was no actual or constructive delivery of the things sold. Thus, petitioner has not performed its
obligation to transfer ownership and possession of the things sold to respondent.
iv.
Transfer of ownership by placing titles of ownership in the possession of the

vendee
BARTOLOME TABLANTE vs. JOSE AQUINO
G.R. No. 8675
September 18, 1914
Topic: Transfer of ownership by placing titles of ownership in the possession of the vendee.
Facts
On May 9, 1904, the sheriff of Nueva Ecija publicly announced that pursuant to a judgment rendered by the justice
of the peace of Cabanatuan against Paulino Mendiola and his property, a lot and a warehouse situated in
Sumacab of the case municipality is to be put in auction. The description of the property is given in the notice and
corresponds with that contained in the complaint. At the auction on June 2, 1904, Emilio Vergara was the highest
bidder and the lot and warehouse were knocked down to him. On February 10, 1906, Emilio Vergara sold the said
lot and warehouse acquired at auction to Maria Ramares; and the latter, in turn, sold them, on December 29,
1910, to Jose Aquino, their present possessor. In 1906 the lot was still assessed as being the property of Paulino
Mendiola.
The record in this case shows the following evident facts; (1) That as far back as 1895 the said lot was recorded in
the property registry of Nueva Ecija in the name of owners, who, on December 18, 1894, had conferred upon
Mateo del Rosario power to administer their property and especially to sell it, and, in the exercise of this authority,
Mateo del Rosario sold the lot and warehouse in question to Paulino Mendiola who in turn sold them to Ciriaco
Bautista on August 13, 1895, all of which sales were recorded in the said property registry. (2) That Paulino
Mendiola, notwithstanding the sale made to Ciriaco Bautista, continued in the possession of the lot and
warehouse, pursuant to a contract of lease executed between himself and the latter. Hence, in 1904, when the
judgment of the justice of the peace of Cabanatuan was rendered against Mendiola, the said property was
attached as though it still at that time belonged to him.
However, it is not Ciriaco Bautista, the last owner recorded in the registry, but Bartolome Tablante who now
intervenes for the recovery of the said property. The latter averred in his complaint that he purchased it from the
former and presented as the only proof of such purchase a letter addressed to him by Ciriaco Bautista.
With this proof and the titles aforementioned presented by the plaintiff, the Court of First Instance of Nueva Ecija
rendered judgment in the case "by sentencing Jose Aquino to deliver the plaintiff, Bartolome Tablante, the
property in litigation and to pay to the said plaintiff the sum of P387.50 with interest thereon at the rate of 6 per
cent per annum from this date, and to pay the costs of this suit."
Issue
Who between Tablante and Aquino is the rightful owner of the lot and the warehouse?
Held
Bartolome Tablante is the owner of the lot and warehouse described in the complaint.
The ownership of things is not transferred from one person to another by mere consent in the contract, but
through the delivery of the thing that is the subject of the contract. In the present case, it is admitted by the
appellee that there was no material delivery of the lot and warehouse by Ciriaco Bautista to Bartolome Tablante,
as up to now no proof has been presented of a contract of sale made between Bautista and Tablante.
Nevertheless, the law prescribes that the "the placing of the titles of ownership in the possession of the vendee or
the use which he may make of his right with the consent of the vendor shall be considered as a delivery." (Civil
Code, art. 1464.) The title deeds form the plaintiff's Exhibit A, and the use of his right by the purchaser who in his
complaint lays claim to the lot and the warehouse, appear to have been consented to by the vendor, by means of
the aforementioned Exhibit B (letter). It is the same as though Ciriaco Bautista were the intervener, and if he had
been, there would have been no cause for discussion.
Aquino was a possessor in good faith. "Any person who is aware that there is in his title or in the manner of
acquiring it any flaw invalidating the same shall be considered a possessor in good faith."(Civil Code, art. 433.)
"Good faith is always presumed, and any person alleging bad faith on the part of the possessor is obliged to prove
it." (Civil Code, art. 234.) Tablante could not have averred, nor did he aver in his complaint the defendant was
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possessor in bad faith, and if he had made such a claim he neither produced nor attempted to produce any proof
whatever of possession in bad faith on the part of the defendant and his predecessors.
Therefore, after first declaring the sale made by the sheriff, together with the subsequent ones, to be null and void,
the Court declared Bartolome Tablante to be the owner of the lot and warehouse described in the complaint, and
the defendant, Jose Aquino, is sentenced to restore them to the plaintiff, without special finding as to costs of both
instances.
v.
Rule in sale of registered land

VALDEVIESO vs. DAMALERIO
G.R. No. 133303, February 17, 2005
Facts
On December 5, 1995, Valdevieso bought from spouses Uy a parcel of land consisting at Bo. Tambler, General
Santos City, and covered by Transfer Certificate of Title (TCT) No. T-30586. However, the deed of sale was not
registered, nor was the title of the land transferred to petitioner. On December 7, 1995, the said property was
immediately declared by petitioner for taxation purposes with the City Assessors Office.
On April 19, 1996, spouses Damalerio filed with the RTC of General Santos City, a complaint for a sum of money
against spouses Uy with application for the issuance of a Writ of Preliminary Attachment. On April 23, 1996, the
RTC issued a Writ of Preliminary Attachment by virtue of which the property, then still in the name of Lorenzo Uy
but which had already been sold to petitioner, was levied. This has been annotated.
On June 6, 1996, TCT No. T-30586 in the name of Lorenzo Uy was cancelled and, in lieu thereof, TCT No. T74439 was issued in the name of Valdevieso. This new TCT carried with it the attachment in favor of respondents.
On August 14, 1996, petitioner filed a third-party claim to discharge or annul the attachment levied on the property
covered by TCT No. T-74439 on the ground that the said property belongs to him and no longer to spouses Uy.
In a resolution dated October 21, 1996, the trial court ruled for the petitioner, it opined that although defendant
Lorenzo Uy remained the registered owner of the property attached, yet the fact was that he was no longer the
owner thereof as it was already sold earlier to petitioner, hence, the writ of attachment was unlawful. The
respondents appealed to the Court of Appeals which reversed the resolution and by judgment, it declared that an
attachment or levy of execution, though posterior to the sale, but if registered before the sale is registered, takes
precedence over the sale. The writ of attachment in favor of the respondents, being recorded ahead of the sale to
petitioner, will therefore take precedence. Hence, this Petition for Review on Certiorari.
Issue
1.
Whether or not a registered writ of attachment on the land is a superior lien over that of an earlier
unregistered deed of sale.
Held
It is a settled rule that levy on attachment, duly registered, takes preference over a prior unregistered sale. This
result is a necessary consequence of the fact that the property involved was duly covered by the Torrens system
which works under the fundamental principle that registration is the operative act which gives validity to the
transfer or creates a lien upon the land.
The preference created by the levy on attachment is not diminished even by the subsequent registration of the
prior sale. This is so because an attachment is a proceeding in rem. It is against the particular property,
enforceable against the whole world. The attaching creditor acquires a specific lien on the attached property which
nothing can subsequently destroy except the very dissolution of the attachment or levy itself. Such a proceeding,
in effect, means that the property attached is an indebted thing and a virtual condemnation of it to pay the owners
debt. The lien continues until the debt is paid, or sale is had under execution issued on the judgment, or until the
judgment is satisfied, or the attachment discharged or vacated in some manner provided by law.
It bears stressing that in this case, though the subject land was deeded to petitioner as early as December 5,
1995, it was not until June 6, 1996 that the conveyance was registered, and, during that interregnum, the land was
subjected to a levy on attachment. It should also be observed that, at the time of the attachment of the property on
April 23, 1996, the spouses Uy were still the registered owners of said property.
Under the law, the execution of the deed of sale in favor of petitioner was not enough as a succeeding step had to
be taken, which was the registration of the sale from the spouses Uy to him. Insofar as third persons are
concerned, what validly transfers or conveys a persons interest in real property is the registration of the deed.
Thus, when petitioner bought the property on December 5, 1995, it was, at that point, no more than a private
transaction between him and the spouses Uy. It needed to be registered before it could bind third parties,
including respondents. When the registration finally took place on June 6, 1996, it was already too late because,
by then, the levy in favor of respondents, pursuant to the preliminary attachment ordered by the General Santos
City RTC, had already been annotated on the title.
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Thus, in the registry, the attachment in favor of respondents appeared in the nature of a real lien when petitioner
had his purchase recorded. The effect of the notation of said lien was to subject and subordinate the right of
petitioner, as purchaser, to the lien. Petitioner acquired ownership of the land only from the date of the recording
of his title in the register, and the right of ownership which he inscribed was not absolute but a limited right, subject
to a prior registered lien of respondents, a right which is preferred and superior to that of petitioner. Hence, the
decision of CA is affirmed.
vi.
Effect of affidavit of adverse claim in lieu of registration

Navotas Indl vs Cruz (janel)
C. To TRANSFER OWNERSHIP
The ownership of the thing sold is acquired by the vendee from the moment the thing
is delivered to him. (Art. 1496)
Determination of place consummation of contract for purposes of imposing sales tax
(see 1503)
Butuan Sawmill, Inc. vs. Court of Tax Appeals
G.R. No. L-20601; February 28, 1966
Expenses of delivery are borne by the seller: In sales F.O.B (free on board) or F.A.S (free alongside ship)
FACTS:
During the period of January 31, 1951 to June 8, 1953, Butuan Sawmill Inc. sold logs to Japanese firms at
prices FOB Vessel Magallanes, Agusan. The FOB prices included costs of loading, wharfage stevedoring and other
costs in the Philippines. The freight was paid by the Japanese buyers and the payments of the logs were effected by
means of letters of credit in favor of petitioner and payable through the Philippine National Bank or any other bank
named by it. Upon investigation by the Bureau of Internal Revenue, it was ascertained that no sales tax was filed by
petitioner and neither did it pay the corresponding tax on sales. Petitioner contends that the disputed sales were
consummated in Japan, and, therefore, not subject to the taxing jurisdiction of our Government.
The lower court upheld the legality and correctness of the amended assessment of the sales tax and surcharge, ruling
that the sales in question were domestic or local sales, and therefore subject to sales tax under the provisions of the
Tax Code.
ISSUE:
Who shall bear the expenses of delivery?
RULING:
SC ruled that the export sales have been consummated in the Philippines and were, accordingly, subject to
sales tax therein. Expenses of and incidental to putting the goods into a deliverable state must be borne by the seller
unless otherwise agreed by the parties.
That the specification in the bill of lading to the effect that goods are deliverable to the order of the seller or his agent
does not necessarily negate the passing of title to the goods upon delivery to the carrier is clear from the 2 nd paragraph
of Article 1503 of the Civil Code.
WHEN DELIVERY DOES NOT TRANSFER TITLE
a. Delivery on approval, trial or satisfaction

Sale on approval or on trial or satisfaction ownership of the goods remains with
the seller despite delivery but shall be transferred to the buyer in the following
cases:
When he signifies his approval or acceptance
When he does an act adopting the transaction
When he retains the goods without giving notice of rejection within the time
fixed or within a reasonable time, and such time has expired. (Art. 1502)
b. In case of express reservation of the title in the seller
REYES vs. SALVADOR
September 11, 2008
Topic: Transfer of ownership to the buyer: express reservation of title in the seller
Facts
Domingo Lozada (Domingo) owned a parcel of unregistered agricultural land located in Tungtong, Las Pias. During
the lifetime of Domingo, he was married twice. From his first marriage to Hisberta Guevarra, he fathered two children,
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namely Bernardo and Anatalia. After the death of Hisberta, Domingo married Graciana San Jose and their marriage
produced two children, namely Nicomedes and Pablo.
On 18 March 1965, years after the death of Domingo and Graciana, Nicomedes and the heirs of his brother Pablo
entered into an Extrajudicial Settlement of the Estate of their parents. According to the settlement, the entire parcel of
agricultural land declared in the name of Domingo was divided into two, Lot 1 (subject property) and Lot 2. The subject
property was adjudicated to Nicomedes; while Lot 2 was given to the heirs of Pablo. Nicomedes then declared the
subject property in his name in 1965 under Tax Declaration No. 2050.
On 23 June 1965, Nicomedes executed a Deed of Conditional Sale over the subject property in favor of Emma Ver
Reyes (Emma). The Deed of Conditional Sale was registered in the Registry of Property for Unregistered Lands in
August 1965. Emma was only able to pay the first installment of the total purchase price agreed upon by the parties.
Nicomedes filed an application for the registration of the subject property but the grandchildren of Domingo by his
former marriage opposed the application for registration and Emma and her husband Ramon filed their intervention.
Nicomedes did not succeed in his attempt to have any title to the subject property issued in his name.
On 14 June 1968, Nicomedes entered into another contract, Agreement of Purchase and Sale, involving the subject
property with Rosario D. Bondoc (Rosario). On 7 March 1969, Nicomedes and Rosario executed a Joint Affidavit,
whereby they confirmed the sale of the subject property by Nicomedes to Rosario through the Agreement of Purchase
and Sale dated 14 June 1968. They likewise registered the said Agreement with the Registry of Deeds. Of the entire
consideration stipulated upon in the Agreement, only the first installment was paid by Rosario. No title to the subject
property was ever delivered to her since, at the time of the execution of the above contract, Nicomedess application for
the registration of the subject property was still pending.
Nicomedes executed on 10 August 1969 a third contract, a Deed of Absolute Sale of Unregistered Land, involving a
portion of the subject property measuring 2,000 square meters, in favor of Maria Q. Cristobal (Maria). Nicomedes
passed away on 29 June 1972. The Deed of Absolute Sale of Unregistered Land between Nicomedes and Maria was
registered only on 8 February 1973.
On 10 August 1979, Nicomedess heirs executed a Deed of Extrajudicial Settlement of the Estate of the Late
Nicomedes J. Lozada with Ratification of a Certain Deed of Absolute Sale of Unregistered Land. The heirs declared in
said Deed of Extrajudicial Settlement that the only property left by Nicomedes upon his death was the subject
property. They also ratified therein the prior sale of a portion of the subject property made by Nicomedes in favor of
Maria, but they clarified that the actual area of the portion sold. After excluding the portion sold to Maria, the heirs
claimed equal pro indiviso shares in the remaining area of the subject property.
On 27 June 1980, Domingos grandchildren from his first marriage, Dominador, et al., filed an Application for
Registration of title to the subject property. In their Application, Dominador, et al., alleged, inter alia, that they were the
owners of the subject property by virtue of inheritance; they were the actual occupants of the said property; and, other
than Emma, they had no knowledge of any encumbrance or claim of title affecting the same.
On 30 July 1980, Nicomedess heirs collectively sold their shares in the subject property in favor of Dulos Realty and
Development Corporation (Dulos Realty), as represented by its President Juan B. Dulos, via a Deed of Absolute Sale
of an Unregistered Land. The said Deed of Absolute Sale dated 30 July 1980, however, was not registered.
Issue
In consideration of all the contracts executed by Nicomedes and/or his heirs involving the subject property, which party
acquired valid and registrable title to the same.
Held
The Court recognizes the valid and registrable rights of Maria and Dulos Realty to the subject property, but without
prejudice to the rights of Emma and Rosario to seek damages against the estate and heirs of Nicomedes.
The Court finds that the Deed of Conditional Sale between Nicomedes and Emma and the Agreement of Purchase and
Sale between Nicomedes and Rosario were both mere contracts to sell and did not transfer ownership or title to either
of the buyers in light of their failure to fully pay for the purchase price of the subject property.
The Court looks beyond the title of said document, since the denomination or title given by the parties in their contract
is not conclusive of the nature of its contents. In the construction or interpretation of an instrument, the intention of the
parties is primordial and is to be pursued. If the terms of the contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of its stipulations shall control. If the words appear to be contrary to the
evident intention of the parties, the latter shall prevail over the former.
A simple reading of the terms of the Deed of Conditional Sale readily discloses that it contains stipulations
characteristic of a contract to sell. It provides for the automatic cancellation of the contract should Emma fail to pay the
purchase price as required therein; and, in such an event, it grants Nicomedes the exclusive right to thereafter sell the
subject property to a third person. The contract between Nicomedes and Emma does not provide for reversion or
reconveyance of the subject property to Nicomedes in the event of nonpayment by Emma of the purchase price. More
importantly, the Deed in question clearly states that Nicomedes will issue a final deed of absolute sale only upon the full
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payment of the purchase price for the subject property. There is evident intention of the parties to reserve ownership
over the subject property to Nicomedes pending payment by Emma of the full purchase price for the same.
While the Deed of Conditional Sale dated 23 June 1965 was indeed contained in a public instrument, it did not
constitute constructive delivery of the subject property to Emma in view of the contrary inference in the Deed itself that
the ownership over the subject property was reserved by Nicomedes. Moreover Emma did not present any evidence
that she took actual and physical possession of the subject property at any given time.
This Court also finds that the Agreement of Purchase and Sale executed by Nicomedes in favor of Rosario on 14 June
1968 is likewise a mere contract to sell. The Agreement itself categorically states that Nicomedes only undertakes to
sell the subject property to Rosario upon the payment of the stipulated purchase price and that an absolute deed of
sale is yet to be executed between the parties. Only the rights to possess the property and construct improvements
thereon have been evidently given to Rosario. The provisions of the Agreement do not in any way indicate that the
ownership of the subject property has likewise been transferred to Rosario. That Nicomedes shall appropriate the
improvements as his own should Rosario default in her payment of the purchase price only further supports the
conclusion that title to the subject property itself still remained with Nicomedes.
As both contracts remained unperfected by reason of the non-compliance with conditions thereof by all of the parties
thereto, Nicomedes can still validly convey the subject property to another buyer. This fact, however, is without
prejudice to the rights of Emma and Rosario to seek relief by way of damages against the estate and heirs of
Nicomedes to the extent that the latter were benefited by the sale to succeeding buyers.
Thus, the Deeds of Absolute Sale in favor of Maria and Dulos Realty were the only conveyances of the subject property
in this case that can be the source of a valid and registrable title. Both contracts were designated as absolute sales
and the provisions thereof leave no doubt that the same were true contracts of sale. The total considerations for the
respective portions of the subject property were fully paid by the buyers and no conditions whatsoever were stipulated
upon by the parties as regards the transmission of the ownership of the said property to the said buyers.
The fact that Rosario was the first among the parties to register her contract in the Registry of Property for Unregistered
Lands on 10 March 1969 is of no moment. Act No. 3344, which amended Section 194 of the Administrative Code,
enunciates that any registration made under Section 194 of the Administrative Code shall be understood to be without
prejudice to a third party who has a better right. In this case, Maria and Dulos Realty acquired their title to the property
in separate deeds of absolute sale executed in their favor by Nicomedes and his heirs. Upon the execution of these
deeds, the ownership of the subject property was vested unto the said buyers instantly, unlike the contracts to sell
executed in favor of Emma and Rosario. Consequently, the rights to the subject property of Maria and Dulos Realty,
acquired through the contracts of sale in their favor, are undeniably better or superior to those of Emma or Rosario, and
can thus be confirmed by registration.
c. Implied reservation of the title

(please add something about this one.. hheehe galibog ko ani dapita wahahha)
d. Sale to two different persons by the same seller (1544)
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.
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 food faith.
e. When the seller is not the owner (1505)
When goods are sold by a person who is not the owner thereof, the buyer acquires no
better title than the seller had, except in the following cases:
i.
Made under the authority or with the consent of the owner
ii.
Owner is precluded by his conduct from denying the sellers authority to sell
iii.
Made under the provisions of any factors acts, recording laws or any other
provisions of law enabling the apparent owner to dispose of the goods as if he
were the true owner thereof. (1505)
iv.
Made under statutory power of sale or under the order of court (1505)
v.
Made in a merchants store, or in fairs, or markets. (1505)
REVESTING OF TITLE THAT HAS PASSED TO THE BUYER
1. Stoppage in transitu
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This right involves the right of the unpaid seller to resume possession of the goods at
any time while they are in transit, and he will then become entitled to the goods as
he would have had if he had never parted with the possession. (Art. 1530)
2. Delivery to the buyer on sale or return
Sales or return the ownership of the goods is transferred to the buyer on delivery,
but the buyer has the option to revest their ownership on the seller by returning
them within the time fixed in the contract, or if no time has been fixed, within a
reasonable time. (Art. 1502)
3. In case of danger of loss of the thing and the price
DOCUMENTS OF TITLE TO THE GOODS

I.
DEFINITION (Art 1636)

(1) "Document of title to goods" includes any bill of lading, dock warrant, "quedan,"
or warehouse receipt or order for the delivery of goods, or any other 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.
II.
KINDS
A. Negotiable
i.
Definition
A negotiable document of title is one in which it is stated that the goods will be
delivered to bearer, or to the order of any persin named in such document.
(1507)
ii.
Negotiable
i.
Definition
ii.
WAYS
A. By Delivery (1508 par. 1)
If by the terms of the document of title, the carrier,
warehouseman or other bailee issuing it undertakes to deliver the
goods to bearer.
Effect of special indorsement of a document of title which states
that the goods are deliverable to bearer:
The document of title becomes an order document of title.
Consequently, it may be further negotiated by the indorsee only
by indorsement completed by delivery.
If by the terms of the document of title, the carrier,

warehouseman, or other bailee issuing it undertakes to deliver
the goods to the order of a specified person and such person or a
subsequent indorsee of the document has indorsed it in blank or
to bearer.
B. By Indorsement plus delivery

If by the terms f the document of title, the goods are to be
delivered to the order of a specified person, the document of title
may be negotiated by him only by indorsement coupled with
delivery. Such indorsement may take any of the following forms:
a. Blank indoresment It does not specify the name of
the indorsee and can be negotiated further by mere
delivery.
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b. To bearer where the indorsement
goods are deliverable to bearer. It
negotiated by delivery.
c. Special indorsement where the
indorsee is specified. It can only
further by indorsement and delivery.
states that the

can be further
name of the
be negotiated
Effect of endorsement and delivery of negotiable quedans

PHILIPPINE TRUST COMPANY, as assignee of Salvador Hermanos, insolvent vs. PHILIPPINE
NATIONAL BANK
G.R. No. L-16483, December 7, 1921
Facts
Salvador Hermanos was a copartnership and during the month of January, 1919, executed to the defendant
eight promissory notes aggregating P156,000, payable on demand, and each secured by a quedan, or
warehouse receipt, issued by the firm of Nieva, Ruiz and Company, Each note recites that it is payable on
demand after date, for value received, and that the firm has deposited "with the said bank as collateral
security for the payment of this note, or any note given in extension or renewal thereof, as well as for the
payment of any other liability or liabilities of the undersigned to the said bank due or to become due, whether
now existing or hereafter arising, the following property owned by the undersigned." The note then specifies
the number of the quedan and the amount of copra in piculs, and states that the quedan was issued by Nieva,
Ruiz and Company to the firm of Salvador Hermano, and by that firm pledged as collateral to the defendant to
secure the payment of the eight above-described notes. Each of them further recites that "on the
nonperformance of this promise, or upon the non-payment of any of the liabilities above-mentioned, or upon
the failure of the undersigned forthwith, with or without notice, to furnish satisfactory additional securities in
case of decline, as aforesaid, then and in either such case, this note and all liabilities of the undersigned, or
any of them, shall forthwith become due and payable, without demand or notice, and full power and authority
are hereby given to said bank to sell, assign, transfer and deliver the whole of the said securities, or any part
thereof, or any substitutes therefor or any additions thereto, or any other securities or property given unto or
left in the possession of or hereafter give unto or left in the possession of said bank by the undersigned for
safe keeping or otherwise, at any brokers' board or at public or private sale, at the option of said bank or of its
president or secretary, without either demand, advertisement or notice of any kind, which are hereby expressly
waived. At any such sale, the said bank may itself purchase the whole or any part of the property sold, free
from any right of redemption on the part of the undersigned, which is hereby waived and released." Stamped
in red ink across the face of each quedan are the words "Negotiable Warrant," and each of them was in the
usual form of warehouse receipts.
On February 10, 1919, the firm of Salvador Hermanos withdrew from the defendant bank, by and with its
consent, warehouse receipts Nos. 33, 36, and 39, which the bank was holding as collateral security for each
of the three 18,000-peso notes amounting to P54,000. The total amount of copra evidenced by the receipts
withdrawn was 6,024.55 piculs, the declared value of which, shown on the face of such receipts, was
P90,368.25.
Neither writing was in any manner authenticated by a notary or by a competent public official. The writing of
February 10 is in form a receipt from the firm of Salvador Hermanos to the Philippine National Bank of the
quedans, or warehouse receipts, for the copra therein described. The one of February 8 is, in legal effect, the
certificate of Salvador Hermanos "that there exist the following articles in our bodegas as follows:" (Here
follows the described property.) That is to say, that the firm certifies that the property described is in the
warehouse of the firm.
On April 21, 1919, Salvador Hermanos filed a petition of insolvency in the Court of First Instance of the city of
Manila.
On and between May 6, 1919 and August 7, 1919, acting under the terms and provisions of its respective
notes, the defendant bank sold all of the personal property for which it held warehouse receipts, or which had
been surrendered to it by the Hermanos firm, save and except the property described in the three warehouse
receipts, which were released and surrendered to the firm on February 10, 1919.
Based upon its insolvency petition, and in the ordinary course of business, the firm of Salvador Hermanos was
adjudged insolvent, and on July 19, 1919, the Philippine Trust Company was elected assignee of said firm and
duly qualified. September 13, 1919, as such assignee, it made a demand upon the bank for the surrender and
delivery of the property described in all of the above receipts, and, upon the bank's refusal, commenced this
action to recover its value alleged to be P242,579.61, claiming that on April 21, 1919, the firm of Salvador
Hermanos was the sole and exclusive owner of the property, and that, as to the copra, about June 28, 1919,
and after the filing of the insolvency petition, the bank unlawfully seized and converted the copra to its own
use, the value of which was P192,260. For a second cause of action, the plaintiff alleges that, as such
assignee, it was the owner of the remaining personal property, and that, after the insolvency petition was filed,
the defendant unlawfully seized and converted such property to its own use, and that it was of the value of
P50,319.61.
Issue
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1.
Whether or not the bank is the owner and is entitled to possession of the property.
Held
The court hold that in January, 1919, the bank became and remained the owner of the five quedans Nos. 30,
35, 38, 41 and 42; that they were in form negotiable, and that, as such owner, it was legally entitled to the
possession and control of the property therein described at the time the insolvency petition was filed and had
a right to sell it and apply the proceeds of the sale to its promissory notes, including the three notes of
P18,000 each, which were formerly secured by the three quedans Nos. 33, 36, and 39, which the bank
surrendered to the firm. That is to say, the bank had a legal right to apply the proceeds from the property
descried in the five remaining quedans to the payment of its eight promissory notes.
The execution of the notes, the physical possession of the negotiable quedan, or warehouse receipt, and the
recognition of ownership by the warehouseman, legally carried with it both the titled to, and the possession of,
the property. In such a case, a title is not founded on a public instrument which should be authenticated by a
notary or by competent public official. Legally speaking, the execution of the promissory notes and the
pledging of the quedans, or warehouse receipts, as collateral, and the describing of them in the notes, and the
manual delivery of the quedan, or warehouse receipt itself carries with it not only the title, but the legal
possession of the property.
In other words, as to the property described in the quedans, or warehouse receipts, which were pledged, as
collateral, in January, 1919, to secure the eight respective promissory notes, both the title and the possession
of that property were delivered to and vested in the defendant bank in January, 1919. Three of those quedans,
or warehouse receipts, were returned to the firm by the bank on February 10, 1919, but the bank still owned
and held the notes, which were secured by those warehouse receipts, and no part of the debt itself was paid
by or through the surrender of the receipts. For such reason, as to the first cause of action, the plaintiff cannot
recover, and, as to it, the judgment of the lower court should be affirmed.
iii.
Validity of negotiation
Art. 1518. The validity of the negotiation of a negotiable document of
title is not impaired by the fact that the negotiation was a breach of duty
on the part of the person making the negotiation, or by the fact that the
owner of the document was deprived of the possession of the same by
loss, theft, fraud, accident, mistake, duress, or conversion, if the person
to whom the document was negotiated or a person to whom the
document was subsequently negotiated paid value therefor in good faith
without notice of the breach of duty, or loss, theft, fraud, accident,
mistake, duress or conversion. (n)
The validity of the negotiation, if the person to whom the document is
negotiated or a person to whom the document is subsequently
negotiated was a purchaser for value in good faith and without notice, is
not impaired by the following:
a. That the negotiation was made in breach of duty of the
person negotiating
b. That the owner of the document was deprived of the
possession of the same by loss, theft, fraud, accident,
mistake, duress or conversion.
iv.
v.
Who may negotiate (1512)

a. By the owner thereof
b. By the person to whom the possession or custody of the document has
been entrusted by the owner in the following cases:
i. If by the terms of the document, the bailee issuing the
document, undertakes to deliver the goods to the person to
whom the possession or custody of the document has been
entrusted.
ii. If, at the time of such entrusting the document, it is in such
form that it may be negotiated by delivery.
Warranties of the person negotiating (1516)
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A person who for value negotiates or transfers a document of title by
indorsement or delivery, inlcuding one who assigns for value a claim
secured by a document of title unless a contrary intention appears warrants
the following:
1. The the document is genuine
2. That he has the 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
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 impaired if the contract of the
parties had been to transfer without a document of title the goods
represented thereby. ( These refer to the warranty against
eviction and warranty against hidden defects )
B. Non negotiable
A non negotiable document of title is one in which its is stated that the goods
are to be delivered to a specified person. (e.g. Deliver the goods to EDUARD)
III.
Rights of the transferee of a document of title

1. Non negotiable document of title
a. As against the transferor, the title to the goods, subject to the terms of
any agreement with the transferor.
b. The right to notify the bailee (warehouseman or carrier) of the transfer
to him of the document of title.
Effect of notification
Upon notification to the bailee, the transferee acquires the direct
obligation of the bailee to hold possession of the goods for him according
to the terms of the document.
Effect of lack of notification
The title of the transferee to the goods and right to acquire the
obligation of the bailee may be defeated by the following:
The levy of an attachment or execution upon the goods by the
creditor of the transferor
A notification to such bailee by the transferor or a subsequent
purchaser from the transferor of a subsequent sale of the goods
by the transferor
2. Negotiable document of title
a. As against the transferor, the title to the goods, subject to the terms of
any agreement with the transferor. (1514)
b. The right to notify the bailee (warehouseman or carrier) of the transfer
to him of the document of title. (1514)
Effect of notification
Upon notification to the bailee, the transferee acquires the direct
obligation of the bailee to hold possession of the goods for him
according to the terms of the document.
Effect of lack of notification
The title of the transferee to the goods and right to acquire the
obligation of the bailee may be defeated by the following:
The levy of an attachment or execution upon the goods by the
creditor of the transferor
A notification to such bailee by the transferor or a subsequent
purchaser from the transferor of a subsequent sale of the goods
by the transferor
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c. The right to compel the transferor to indorse the document unless a
contrary intention appears (1515)
IV.
Levy, or garnishment of goods covered by a document of title

a. When covered by a negotiable document of title
1. The goods covered by a negotiable document of title
cannot be attached or levied upon except:
When the document is surrendered to the bailee; or
The negotiation of the document is enjoined.
Remedy of the creditor of a debtor-owner of goods
The creditor can ask the courts for an order attaching the
document of title or enjoining the delivery of the goods to
the debtor owner. (1520)
2. The bailee cannot be compelled to surrender the goods,
except:
When the document is surrendered to him; or
The document is impounded by the court
b. When covered b y a non-negotiable document of title
The goods covered by a non-negotiable document of title may be
attached or levied upon in execution although the document is
not surrendered to the bailee.
ARTICLE 1521 - 1524

I.
TIME AND PLACE OF DELIVERY

A. TIME
i.
Time stipulated
Smith Bell & Co vs Matti
ii.
If there is no stipulation, delivery must be made within a reasonable time

from the execution of the contract. (1521)
Lorenzo Shipping Corp. vs. BJ Marthel, Inc.
G.R. No. 145483; November 19, 2004
Delivery: when time is of the essence
FACTS:
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping. It
used to own the cargo vessel M/V Dadiangas Express. Upon the other hand, respondent BJ Marthel
International, Inc. is a business entity engaged in trading, marketing, and selling of various industrial
commodities. It is also an importer and distributor of different brands of engines and spare parts.
Respondent was a supplier of spare parts petitioners marine engines. Sometime in May 1989,
petitioner asked respondent for a quotation for various machine parts. Acceding to this request,
respondent furnished petitioner with a formal quotation. In the said quotation, it was stipulated that
delivery is within 2 months after receipt of firm order and the terms is 25% upon delivery, balance
payable in 5 bi-monthly equal installments not to exceed 90 days. It was made known to the petitioner
that in order that delivery be made within 2 months (per advice of the Japanese supplier of the
respondent), purchase orders must be made within June 1989. Respondent issued their 1 st purchase
order sometime in November 1989 and the 2nd purchase order sometime in January 1990.
Respondent thereafter placed the order for the two cylinder liners with its principal in Japan, Daiei
Sangyo Co. Ltd. Respondent sent a Statement of Account to petitioner. While the other items listed in
said statement of account were fully paid by petitioner, the two cylinder liners delivered to petitioner
remained unsettled. Consequently, Mr. Alejandro Kanaan, Jr., respondent's vice-president, sent a
demand letter to petitioner requiring the latter to pay the value of the cylinder liners subjects of this
case. Instead of heeding the demand of respondent for the full payment of the value of the cylinder
liners, petitioner sent the former a letter offering to pay only P150,000 for the cylinder liners. In said
letter, petitioner claimed that as the cylinder liners were delivered late and due to the scrapping of the
M/V Dadiangas Express, petitioner would have to sell the cylinder liners in Singapore and pay the
balance from the proceeds of said sale.
Due to failure of the parties to settle the matter, BJ Marthel Inc. filed an action for sum of money and
damages against Lorenzo Shipping. Trial Court ruled in favor of respondent stating that respondent is
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bound to the quotation it submitted to petitioner particularly with respect to the terms of payment and
delivery of the cylinder liners.
Aggrieved, respondent filed an appeal before the Court of Appeals. CA ruled that time was not of the
essence in the contract of sale between the parties. It is shown in the significant period of time which
had lapsed between the respondents offer and the issuance by petitioner of their purchase orders.
ISSUE:
Whether or not time was of the essence in the contract of sale entered into by Lorenzo
Shipping Corp. and BJ Marthel Inc.
RULING:
SC ruled that time was not of the essence in the contract entered into by the parties.
In determining whether time is of the essence in a contract, the ultimate criterion is the actual or
apparent intention of the parties and before time may be so regarded by a court, there must be a
sufficient manifestation, either in the contract itself or the surrounding circumstances of that intention.
The law implies, however, that if no time is fixed, delivery shall be made within a reasonable time, in the
absence of anything to show that an immediate delivery intended.
It is a cardinal rule in interpretation of contracts that if the terms thereof are clear and leave no doubt as
to the intention of the contracting parties, the literal meaning shall control. However, in order to
ascertain the intention of the parties, their contemporaneous and subsequent acts should be
considered. While this Court recognizes the principle that contracts are respected as the law between
the contracting parties, this principle is tempered by the rule that the intention of the parties is
primordial and "once the intention of the parties has been ascertained, that element is deemed as an
integral part of the contract as though it has been originally expressed in unequivocal terms."
In the present case, we cannot subscribe to the position of petitioner that the documents, by
themselves, embody the terms of the sale of the cylinder liners. One can easily glean the significant
differences in the terms as stated in the formal quotation and the 1 st Purchase Order with regard to the
due date of the down payment for the first cylinder liner and the date of its delivery as well as the 2 nd
Purchase Order with respect to the date of delivery of the second cylinder liner. While the quotation
provided by respondent evidently stated that the cylinder liners were supposed to be delivered within
two months from receipt of the firm order of petitioner and that the 25% down payment was due upon
the cylinder liners' delivery, the purchase orders prepared by petitioner clearly omitted these significant
items. The petitioner's 1st Purchase Order made no mention at all of the due dates of delivery of the first
cylinder liner and of the payment of 25% down payment. Its 2 nd Purchase Order likewise did not
indicate the due date of delivery of the second cylinder liner.
SC finds significant the fact that while petitioner alleges that the cylinder liners were to be used for dry
dock repair and maintenance of its M/V Dadiangas Express between the later part of December 1989
to early January 1990, the record is bereft of any indication that respondent was aware of such fact.
The failure of petitioner to notify respondent of said date is fatal to its claim that time was of the
essence in the subject contracts of sale.
Thus, SC holds that in the subject contracts, time was not of the essence. The delivery of the cylinder
liners on 20 April 1990 was made within a reasonable period of time considering that respondent had to
place the order for the cylinder liners with its principal in Japan and that the latter was, at that time,
beset by heavy volume of work.
B. PLACE
i.
Place stipulated
ii.
If there is no stipulation, place fixed by usage or trade
iii.
In the absence of both, the sellers place of business if he has one; if non,
the sellers place of residence. However, in the case of sale of specific
goods, which to the knowledge of the parties when the contract was
made were in some other place, that place shall be the place of delivery.
(1521)
II.
DELIVERY TO THE CARRIER

A. Rule
B. Case: At what point the articles were delivered to the buyer
BEHN, MEYER & CO. (LTD.) vs. TEODORO R. YANCO
G.R. No. 13203
September 18, 1918
Topic: Delivery
Facts
A memorandum of agreement was executed between Yangco and Behn, Meyer & Co. The contract provided that
the vendor Behn, Meyer & Co will deliver to Yangco "80 drums Caustic Soda 76 per cent "Carabao" brand al
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precio de Dollar Gold Nine and 75/100 1-lbs." The contract provided for "c.i.f. Manila, pagadero against delivery of
documents." The contract provided for: "Embarque: March 1916." The merchandise was in fact shipped from New
York on the Steamship Chinese Prince on April 12, 1916. The steamship was detained by the British authorities at
Penang, and part of the cargo, including seventy-one drums of caustic soda, was removed. Yangco refused to
accept delivery of the remaining nine drums of soda on the ground that the goods were in bad order. Yangco also
refused the optional offer of the Behn, Meyer & Co, of waiting for the remainder of the shipment until its arrival, or
of accepting the substitution of seventy-one drums of caustic soda of similar grade from plaintiff's stock. The
plaintiff thereupon sold, for the account of the defendant, eighty drums of caustic soda from which there was
realized the sum of P6,352.89. Deducting this sum from the selling price of P10,063.86, we have the amount
claimed as damages for alleged breach of the contract.
Issue
Whether or not Yangco is liable for breach of contract.
Held
Yangco is not liable. The specific merchandise was never tendered. The soda which the plaintiff offered to
defendant was not of the "Carabao" brand, and the offer of drums of soda of another kind was not made within the
time that a March shipment, according to another provision the contract, would normally have been available.
Determination of the place of delivery resolves itself into a question of act. If the contract be silent as to the person
or mode by which the goods are to be sent, delivery by the vendor to a common carrier, in the usual and ordinary
course of business, transfers the property to the vendee. A specification in a contact relative to the payment of
freight can be taken to indicate the intention of the parties in regard to the place of delivery. If the buyer is to pay
the freight, it is reasonable to suppose that he does so because the goods become his at the point of shipment. On
the other hand, if the seller is to pay the freight, the inference is equally so strong that the duty of the seller is to
have the goods transported to their ultimate destination and that title to property does not pass until the goods
have reached their destination.
The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They signify that the price fixed
covers not only the cost of the goods, but the expense of freight and insurance to be paid by the seller. The
contract, in addition to the letters "c.i.f.," has the word following, "Manila." Under such a contract, an Australian
case is authority for the proposition that no inference is permissible that a seller was bound to deliver at the point
of destination. In mercantile contracts of American origin the letters "F.O.B." standing for the words "Free on
Board," are frequently used. The meaning is that the seller shall bear all expenses until the goods are delivered
where they are to be "F.O.B." According as to whether the goods are to be delivered "F.O.B." at the point of
shipment or at the point of destination determines the time when property passes.
The Court believes that the word Manila in conjunction with the letters "c.i.f." must mean that the contract price,
covering costs, insurance, and freight, signifies that delivery was to be made at Manila. If the plaintiff company has
seriously thought that the place of delivery was New York and Not Manila, it would not have gone to the trouble of
making fruitless attempts to substitute goods for the merchandise named in the contract, but would have permitted
the entire loss of the shipment to fall upon the defendant. Under plaintiffs hypothesis, the defendant would have
been the absolute owner of the specific soda confiscated at Penang and would have been indebted for the
contract price.
This view is corroborated by the facts. The goods were not shipped nor consigned from New York to plaintiff. The
bill of lading was for goods received from Neuss Hesslein & Co. the documents evidencing said shipment and
symbolizing the property were sent by Neuss Hesslein & Co. to the Bank of the Philippine Islands with a draft upon
Behn, Meyer & Co. and with instructions to deliver the same, and thus transfer the property to Behn, Meyer & Co.
when and if Behn, Meyer & Co. should pay the draft.
The place of delivery was Manila and plaintiff has not legally excused default in delivery of the specified
merchandise at that place.
The plaintiff has not proved the performance on its part of the conditions precedent in the contract. The warranty
the material promise of the seller to the buyer has not been complied with. The buyer may therefore rescind the
contract of sale because of a breach in substantial particulars going to the essence of the contract. As
contemplated by article 1451 of the Civil Code, the vendee can demand fulfillment of the contract, and this being
shown to be impossible, is relieved of his obligation. There thus being sufficient ground for rescission, the
defendant is not liable.
III.
EXPENSES OF DELIVERY ARE BORNE BY THE SELLER (1247) (1521 last par.)
The seller bears the expenses of and incidental to putting the goods into a
deliverable state, unless otherwise stipulated. (1521)
A. In sales C.I.F. (see Behn, Meyer & Co. vs Yangco, 38 Phil 602)
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B. In sales F.O.B. or F.A.S. (see Butaun Sawmill, Inc. vs CTA, 16 SCRA 277,
supra)
ARTICLE 1525 1535
RIGHTS OF THE UNPAID SELLER
I.
DEFINITION
An unpaid seller is one who has not been paid or tendered the whole of the price has
received a bill of exchange or other negotiable instrument as conditionla payment
and the condition under which it was received has been broken by reason of the
dishonor of the instrument, the insolvency of the buyer, or otherwise. (1525)
II.
RIGHTS
a. Possessory lien, or lien on the goods or right to retain them while he is
in possessionof the (1526)
When available
This right is available to the seller and notwithstanding the he may be in
possession of the goods as agent or bailee for the buyer in the following
instances:
When the goods have been sold without any stipulation as to credit
Where the goods have been sold on credit, but the credit term has expired
Where the buyer is insolvent (1527)
Lien where there is partial delivery he may exercise his right of lien on the
remainder, unless such part delivery has been made under such circumstances as
to show and intent to waive or right of retention. (1528)
When lien is lost
The unpaid seller losses his lien on the goods in the following cases:
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.
When the buyer or his agent lawfully obtains possession of the goods
By waiver thereof (1529)
The unpaid seller having lien on the goods does not lose his lien by reason only
that he has obtained judgment or decree for the price of the goods. (1529)
b. Right of stoppage in transitu
When available
The buyer is insolvent
Unpaid seller has parted with the possession of the goods
Effect of partial delivery
How exercised
1. By obtaining actual possession
2. By giving notice of his claim to the carrier or other bailee in whose possession
the goods are
The notice maybe given either to the person in actual possesion of the goods
or to his principal. If given to the principal, 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 delivery to the buyer.
When notice is given to the carrier or other bailee for the buyer, he must
redeliver the goods to, or according to the instructions of the seller, with the
seller bearing the expenses of the delivery. However, if a negotiable document
of title representing the goods has been issued, the carrier or other bailee shall
not be obliged or justified in delivering the goods to the seller unless such
document is first surrendered to him. (1532)
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Effects of the exercise of this right
The goods are no longer in transit
Carrier shall be liable as depositary or other bailee
Carrier must deliver the goods to, or according to the instructions of the
seller
c. Right of RESALE
When available
The buyer has defaulted
The seller has the right of lien or has stopped the goods in transitu
Title to the goods has passed to the buyer
The grounds must be any of the following:
1. Goods are of a perishable nature
2. Seller has expressly reserved the right to resell in case of default
3. The buyer has been in default for an unreasonable time (1533)
Notice of resale to the buyer
Notice need not be given to the original buyer of the intention to resell the goods
for the validity of the resale. However, if the basis of the resale is not the
perishable nature of the goods or upon an express provision in a contract of sale,
the giving or failure to give notice shall be relevant in any issue involving the
question whether the buyer has been in default for an unreasonable time before
the resale was made.
It is not likewise essential to the validity of the resale that notice of the time and
place of such resale should be given by the seller to the original buyer. (1533)
How resale is made
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) (1533)
Effects of resale
The seller shall not thereafter be liable to the original buyer upon the
contract of sale or for any profit made by such resale
Seller may recover from the buyer damages for any loss occasioned by the
breach of the contract of sale.
Where a resale is made, the buyer acquires a good title as against the
original buyer.
Right to recover deficiency (case)
KATIGBAK vs. COURT OF APPEALS
G.R. No. L-16480, January 31, 1962
Facts
Katigbak upon reading an advertisement for the sale of the Double Drum Carco Tractor Winch placed by V. K.
Lundberg, owner and operator of the International Tractor and Equipment Co., Ltd., went to see Lundberg and
inspected the equipment. The price quoted was P12,000.00. It was agreed that Katigbak was to purchase the
winch for P12,000.00, payable at P5,000.00 upon delivery and the balance of P7,000.00 within 60 days. The
condition of the sale was that the winch would be delivered in good condition. Katigbak was apprised that the
winch needed some repairs, which could be done in the shop of Lundberg. It was then stipulated that the amount
necessary for the repairs will be advanced by Katigbak but deductible from the initial payment of P5,000.00. The
repairs were undertaken and the total of P2,029.85 for spare parts was advanced by Katigbak for the purpose.
For one reason or another, the sale was not consummated and Katigbak sued Evangelista, Lundberg and the
latter's company, for the refund of such amount.
The lower court rendered judgment, ordering the defendants Daniel Evangelista and V. K. Lundberg to pay
plaintiff the sum of P2,029.85, with legal interest thereon from the filing of the complaint until fully paid, plus the
sum of P300.00 as attorney's fees, and the costs. The Court of Appeals, on September 5, 1959, reversed the
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judgment by dismissing the complaint as to V. K. Lundberg; by reducing the judgment in favor of appellee to the
sum of P29.85, and by sentencing him, in turn, to pay appellant Evangelista the sum of P700.00 as attorney's
fees. Hence, this present petition.
Issue
1.
Whether or not private respondent has a right to recover deficiency.
Held
Katigbak claims that the Court of Appeals erroneously applied the doctrine enunciated in the Hanlon v.
Hausserman case which states that:
.... In the present case the contract between Hanlon and the mining company was executory as to both parties,
and the obligation of the company to deliver the shares could not arise until Hanlon should pay or tender payment
of the money. The situation is similar to that which arises every day in business transactions in which the
purchaser of goods upon an executory contract fails to take delivery and pay the purchase price. The vendor in
such case is entitled to resell the goods. If he is obliged to sell for less than the contract price, he holds the buyer
for the difference; if he sells for as much as or more than the contract price, the breach of contract by the original
buyer is damnum absque injuria. But it has never been held that there is any need of an action of rescission to
authorize the vendor, who is still in possession, to dispose of the property where the buyer fails to pay the price
and take delivery...
The facts of the case under consideration are identical to those of the Hanlon case. The herein petitioner failed to
take delivery of the winch, subject matter of the contract and such failure or breach was, according to the Court of
Appeals, attributable to him, a fact which We are bound to accept under existing jurisprudence. The right to resell
the equipment, therefore, cannot be disputed. It was also found by the Court of Appeals that in the subsequent
sale of the winch to a third party, the vendor thereof lost P2,000.00, the sale having been only for P10,000.00,
instead of P12,000.00 as agreed upon, said difference to be borne by the supposed vendee who failed to take
delivery and/or to pay the price.
d. Right to rescind the sale

When available
Buyer has defaulted in the payment
Seller has the right of lien or has stopped the goods in transitu
Title to the goods has passed on to the buyer
The grounds must be any of the following:
1. The seller has expressly reserved the right to rescind the sale in case
the buyer should make default
2. The buyer has been in default for an unreasonable time
Ocejo, Perez & Co. vs Intl Banking Corp., 37 Phil 631
How rescission is made
1. By giving notice to the buyer of the intention to rescind
2. By doing an overt act manifesting the intention to rescind
Importance of notice when rescission is made by doing an overt act
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. (1534)
Effects of rescission
The seller shall not thereafter be liable to the buyer upon the contract of
sale
may recover from the buyer damages for any loss occasioned by the
breach of the contract.
The seller resumes the ownership of the goods
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III.
Effect of sale or other disposition of the goods by the original buyer on the
right of the unpaid seller
A. General rule
The sellers possessory lien or right of stoppage in transitu is not affected by
any sale or disposition of the goods made by the buyer.
B. Exceptions
When the seller has assented to the sale of the buyer
When a negotiable document of title representing the goods has been
negotiated to a purchaser for value in good faith (1535)
ARTICLE 1536 1543

I.
Completeness of Delivery
A. Real estate
Where it is sold per unit or number
The vendor shall deliver the are mentioned in the contract of sale. However, if
the actual area is more or less than the area specified in the contract, or if a
part of the immovable is not of the quality specified therein, the following rules
shall be observed
1. If the actual area is less than the stated in the contract. (1539) The
buyer may:
Ask for the reduction of the price if the lack in area is less than
1/10 of that stated in the contract, unless the vendee would have
not bought the thing had he known of its smaller area, in which
case, he may opt to rescind the sale
Rescind the sale if the lack in the area is not less than 1/10 of that
stated
2. If the
buyer
actual area is more than that stated in the contract (1540) The
may:
Accept the area stated in the contract and reject the rest
Accept the whole area and pay for them at the contract rate
3. If the areas is the same but a part of the immovable is not of the quality
specified in the contract (1539)
Ask for the reduction of the price if the lack in area is less than
1/10 of that stated in the contract, unless the vendee would have
not bought the thing had he known of its inferior quality, in which
case, he may opt to rescind the sale
Rescind the sale if the inferior value of the thing exceeds 1/10 of
the price agreed
Cebu Winland Development Corporation vs. Ong Siao Hua
G.R. No. 173215; May 21, 2009
Completeness of Delivery; Real Estate: where it is sold per unit or number; prescription of the action
FACTS:
Cebu Winland Development Corporation is the owner and developer of a condominium project called the
Cebu Winland Tower Condominium. Ong Siao Hua is a buyer of two condominium units and four parking slots
from petitioner.
Respondent bought two condominium units as well as four parking slots. The area per condominium unit as
indicated in petitioners price list is 155 square meters and the price per square meter is P22,378.95.
The price for the parking lot is P240,000 each. Respondent, therefore, paid P2,298,655.08 as down payment
and issued 24 postdated checks in the amount of P223,430.70 per check for the balance of the purchase
price in the total amount of P5,362,385.
On October 10, 1996, possession of the subject properties was turned over to respondent. The deeds of
absolute sale have yet to be signed by Ong Siao Hua.
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In the deed of absolute sale of Units, respondent was distressed to find that the stated floor area is only
127 square meters contrary to the area indicated in the price list which was 155 square meters. Respondent
caused a verification survey of the said condominium units and discovered that the actual area is only 110
square meters per unit. Respondent demanded from petitioner to refund the amount of P2,014,105.50
representing excess payments for the difference in the area.
However, petitioner refused to refund the said amount to respondent. On August 7, 1998, respondent filed a
complaint before House and Land Regulatory Board (HLURB) to refund the amount representing excess
payments for the difference in the area.
HLURB Arbiter dismissed the complaint. It ruled that Cebu Winland is not guilty of misrepresentation and the
action of Ong Siao Hua has already prescribed pursuant to Art. 1543 of the Civil Code. The subject properties
have been delivered on October 10, 1996 and respondent filed his complaint only on August 7, 1998.
Aggrieved, Ong Siao Hua appealed to the Board of HLURB. It affirmed the decision of the Arbiter with
modifications. It ruled that the contract is subject to rescission based on Arts. 1330 and 1331 of the Civil Code.
It said that there was a mistake in the object of sale.
Not satisfied with the decision of the Board, petitioner appealed to the Office of the President. It rendered a
decision that the action of the respondent has already prescribed.
Ong Siao Hua appealed before the Court of Appeals. It rendered a decision that the action of respondent has
not prescribed.
Hence, Cebu Winland Corporation made an appeal before the Supreme Court.
ISSUE:
1.
2.
3.
4.
Whether or not there has been complete delivery;

Whether or not Ong Sia Huas action has already prescribed;
Whether the sale is sold per unit or lump sum.
Applicable rules in the sale sold per unit or lump sum.
RULING:
1.
On the issue of delivery
SC ruled that there has been no complete delivery yet.

Delivery as used in the Law on sales refers to the concurrent transfer of 2 things: possession and ownership.
This is the rationale behind the jurisprudential doctrine that presumptive delivery via execution of a public
instrument is negated by the reality that the vendee actually failed to obtain material possession of the land
subject of the sale. In the same vein, if the vendee is placed in actual possession of the property, but by
agreement of the parties ownership of the same is retained by the vendor until the vendee has fully paid the
price, the mere transfer of the possession of the property subject of the sale is not the delivery contemplated
in the Law on Sales or as used in Article 1543 of the Civil Code.
In the case at bar, it appears that respondent was already placed in possession of the subject properties.
However, it is crystal clear that the deeds of absolute sale were still to be executed by the parties upon
payment of the last installment. This fact shows that ownership of the said properties was withheld by
petitioner. Following case law, it is evident that the parties did not intend to immediately transfer ownership of
the subject properties until full payment and the execution of the deeds of absolute sale. Consequently, there
is no delivery to speak of in this case since what was transferred was possession only and not ownership of
the subject properties.
2.
On the issue of prescription
SC ruled that the action of the respondent has not yet prescribed.
Under Article 1543, the actions arising from Articles 1539 and 1542 shall prescribe in six months, counted
from the date of delivery.
In the case at bar, it has already been ruled that there has been no delivery yet. There has been no transfer of
ownership of the subject properties since the deeds of absolute sale have not yet been executed by the
parties. What has been transferred was possession only and not of the subject properties.
3.
Is the sale sold per unit or lump sum?
The sale entered into is a sale sold per unit.

In the case at bar, it is undisputed by the parties that the purchase price of the subject properties was
computed based on the price list prepared by petitioner, or P22,378.95 per square meter. Clearly, the parties
agreed on a sale at a rate of a certain price per unit of measure and not one for a lump sum. Hence, it is
Article 1539 and not Article 1542 which is the applicable law. Accordingly, respondent is entitled to the relief
afforded to him under Article 1539, that is, either a proportional reduction of the price or the rescission of the
contract, at his option. Respondent chose the former remedy since he prayed in his Complaint for the refund
of the amount of P2,014,105.50 representing the proportional reduction of the price paid to petitioner.
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4.
Rules applicable in sale sold per unit or number and lump sum.
Sold per unit

--- vendor shall be obliged to deliver to the vendee all that may been stated in contract.
---IF NOT POSSIBLE, the vendee has two options:
(a) proportional reduction of the price or
(b) rescission of the contract.
Lump sum
---no increase or decrease of the price, although there be a greater or lesser area or number than that stated
in the contract.
Where it is sold for a lump sum or a single price (1542)

a. Area to be delivered. The vendor is bound to deliver all that it is included
within the boundaries stated in the contract although there be greater
or less area or number than that stated in the contract.
b. The price to be paid by vendee. He shall pay the lump sum stipulated
with no increase or decrease in the price although there be greater or
less area or number than that stated in the contract.
c. Buyers remedies if the vendor does not deliver the area within the
boundaries stated in the contract
Proportionate reduction in price OR
Rescind the contract
CASES:
Distinction between 1539 (unit price contract) and 1542 (lump sum
contract)
RUDOLF LIETZ INC vs CA
G.R. No. 122463 December 19, 2005
Topic: Distinction between Unit Price Contact and Lump Sum Contract
Facts
Respondent Agapito Buriol previously owned a parcel of unregistered land situated at Capsalay Island, Port
Barton, San Vicente, Palawan. On August 15, 1986, Buriol entered into a lease agreement with Flavia
Turatello and respondents Turatello and Sani, all Italian citizens, involving 1 hectare of Buriols property. The
lease agreement was for a period of 25 years, renewable for another 25 years. The lessees took possession
of the land after paying respondent Buriol a down payment of P10,000.00. The lease agreement, however,
was reduced into writing only in January 1987.
On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz, Inc. the same parcel of land for the
amount of P30,000.00. The Deed of Absolute Sale embodying the agreement described the land as
comprising 5 hectares. Petitioner later discovered that respondent Buriol owned only 4 hectares, and with one
more hectare covered by lease, only three (3) hectares were actually delivered to petitioner.
Petitioner instituted a complaint for Annulment of Lease with Recovery of Possession with Injunction and
Damages against respondents and Flavia Turatello before the RTC. The complaint alleged that with evident
bad faith and malice, Buriol sold to petitioner five (5) hectares of land when Buriol knew for a fact that he
owned only four (4) hectares and managed to lease one more hectare to respondents.
Issue
Whether or not petitioner is entitled to the delivery of the entire five hectares or its equivalent.
Held
The sale between Lietz Inc and Buriol is one made for a lump sum, therefore Lietz is not entitled to the
delivery of the entire five ha or its equivalent.
Lietz Inc contends that it is entitled to the corresponding reduction of the purchase price because the
agreement was for the sale of five (5) hectares although Buriol owned only four (4) hectares. Petitioner
anchors its argument on the second paragraph of Article 1539 of the Civil Code, which provides:
Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of the vendee
all that is mentioned in the contract, in conformity with the following rules:
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If the sale of real estate should be made with a statement of its area, at the rate of a certain price for
a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should
demand it, all that may have been stated in the contract; but, should this be not possible, the vendee
may choose between a proportional reduction of the price and the rescission of the contract,
provided that, in the latter case, the lack in the area be not less than one-tenth of that stated.
The Court of Appeals Decision declared as inapplicable the abovequoted provision and instead ruled
that petitioner is no longer entitled to a reduction in price based on the provisions of Article 1542 of
the Civil Code, which read:
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a
unit of measure or number, there shall be no increase or decrease of the price, although there be a
greater or lesser area or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price; but if,
besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its
area or number should be designated in the contract, the vendor shall be bound to deliver all that is
included within said boundaries, even when it exceeds the area or number specified in the contract;
and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is
lacking in the area or number, unless the contract is rescinded because the vendee does not accede
to the failure to deliver what has been stipulated.
Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit area. In a unit price
contract, the statement of area of immovable is not conclusive and the price may be reduced or increased
depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the vendee
may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate
reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in
the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area,
provided he pays for the additional area at the contract rate.
In some instances, a sale of an immovable may be made for a lump sum and not at a rate per unit. The
parties agree on a stated purchase price for an immovable the area of which may be declared based on an
estimate or where both the area and boundaries are stated.
In the case where the area of the immovable is stated in the contract based on an estimate, the actual area
delivered may not measure up exactly with the area stated in the contract. According to Article 1542 of the
Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of
measure or number, there shall be no increase or decrease of the price although there be a greater or lesser
area or number than that stated in the contract. However, the discrepancy must not be substantial. A vendee
of land, when sold in gross or with the description more or less with reference to its area, does not thereby
ipso facto take all risk of quantity in the land. The use of more or less or similar words in designating quantity
covers only a reasonable excess or deficiency.
Where both the area and the boundaries of the immovable are declared, the area covered within the
boundaries of the immovable prevails over the stated area. In cases of conflict between areas and
boundaries, it is the latter which should prevail. What really defines a piece of ground is not the area,
calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as
enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is well established that the
specific boundaries stated in the contract must control over any statement with respect to the area contained
within its boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose the
area with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to
enable one to identify it. An error as to the superficial area is immaterial. Thus, the obligation of the vendor is
to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the
determinate object.
The sale between Lietz Inc and Buriol involving the latters property is one made for a lump sum. The Deed of
Absolute Sale shows that the parties agreed on the purchase price on a predetermined area of five hectares
within the specified boundaries and not based on a particular rate per area. In accordance with Article 1542,
there shall be no reduction in the purchase price even if the area delivered to petitioner is less than that stated
in the contract. In the instant case, the area within the boundaries as stated in the contract shall control over
the area agreed upon in the contract.
The Court rejects petitioners contention that the propertys boundaries as stated in the Deed of Absolute Sale
are superficial and unintelligible and, therefore, cannot prevail over the area stated in the contract. At an
ocular inspection prior to the perfection of the contract of sale, Buriol pointed to petitioner the boundaries of
the property. Hence, petitioner gained a fair estimate of the area of the property sold to him. Petitioner cannot
now assail the contents of the Deed of Absolute Sale, particularly the description of the boundaries of the
property, because petitioners subscription to the Deed of Absolute Sale indicates his assent to the correct
description of the boundaries of the property.
Petitioner also asserts that respondent Buriol is guilty of misleading petitioner into believing that the latter was
buying five hectares when he knew prior to the sale that he owned only four hectares. The review of the
circumstances of the alleged misrepresentation is factual and, therefore, beyond the province of the Court.
Besides, this issue had already been raised before and passed upon by the trial court and the Court of
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Appeals. The factual finding of the courts below that no sufficient evidence supports petitioners allegation of
misrepresentation is binding on the Court.
Sale Indicated by boundaries

MIGUEL SEMIRA vs. COURT OF APPEALS and BUENAVENTURA AN
G.R. No. 76031, March 2, 1994
Facts
Juana Gutierrez owned a parcel of land, later designated as Lot 4221, situated Batangas which she sold to
private respondent Buenaventura An for P850.00 by means of a "Kasulatan ng Bilihan ng Lupa" executed on
January 4, 1961. Aside from the estimated area of 822.5 square meters appearing in the deed of sale, the
following boundaries of the lot are also stated: on the north, by Taysan-Lobo-Sto. Nio-Pinagbayanan and Sto.
Nio-Dagatan Road (Junction or Intersection road); on the east, by Sto. Nio-Pinagbayanan Road and Juana
Gutierrez; on the south, by Sto. Nio School site; and, on the west, by Sto. Nio-Dagatan Road.
Subsequently, he acquired two (2) other parcels of land, Lot 4215 with an area of 8,606-square meters located
on the east of Lot 4221 from the spouses Pascual Hornilla and Gliceria Ilao on June 30, 1964, and another lot
with an area of 11,000-square meters from Santiago Asi.
On October 18, 1972, Buenaventura An sold Lot 4221 to his nephew, Cipriano Ramirez, and spouse by
means of another "Kasulatan ng Bilihan ng Lupa" for P2,500.00, where the lot was described with the same
area and boundaries previously mentioned with the exception of the boundary on the east; which was
changed from "Juana Gutierrez" to "Buenaventura An" to reflect the acquisition by private respondent of the
adjoining Lot 4215.
On 12 March 1979, Cipriano Ramirez sold the lot to petitioner Miguel Semira for P20,000.00. However, the
area stated in the "Kasulatan ng Bilihan ng Lupa" was 2,200 square meters and not 822.5 appearing in the
previous document. As delimited by its boundaries, the lot is actually much bigger than 822.5 square meters.
This was confirmed by the Taysan Cadastral Mapping Survey conducted in 1974 where it is definitely stated
that the area of Lot 4221 is 2,200 square meters; hence, the reason for the change.
On 17 March 1979, Miguel Semira entered the very same premises previously occupied by Ramirez and
began the construction of a new rice-mill. However, on 18 April 1979, a complaint for forcible entry was filed
against him by Buenaventura An in the Municipal Circuit Trial Court of Taysan-Lobo. The latter claimed that
the area of Lot 4221 was 822.5 square meters only and that the excess of 1,377 square meters forcibly
occupied by petitioner formed part of Lot 4215 which he acquired from the Hornillas in 1964.
Issue
1. Whether or not the boundaries of the land stated in the contract determine the effects and scope of the
sale.
Held
The court sustains the petitioner as did the Municipal Circuit Trial Court. We have repeatedly ruled that where
land is sold for a lump sum and not so much per unit of measure or number, the boundaries of the land stated
in the contract determine the effects and scope of the sale, not the area thereof. Hence, the vendors are
obligated to deliver all the land included within the boundaries, regardless of whether the real area should be
greater or smaller than that recited in the deed. This is particularly true where the area is described as
"humigit kumulang," that is, more or less. These conclusions are drawn from Art. 1542 of the Civil code which
states
In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price, although there be a greater or less are or number
than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price; but if, besides
mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number
should be designated in the contract, the vendor shall be bound to deliver all that is included within said
boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to
do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the
contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated.
Hence, when private respondent Buenaventura An sold Lot 4221 to his nephew Cipriano Ramirez by means
of a "Kasulatan ng Bilihan ng Lupa" which incorporated both the area and the definite boundaries of the lot,
the former transferred not merely the 822.5 square meters stated in their document of sale but the entire area
circumscribed within its boundaries.
The fact that the area turned out to be 2,200 square meters; instead of only 822.5 square meters, is of no
moment and does not entitle private respondent to the difference because the definite object sold was Lot
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4221 in its entirety and not just any unit of measure or number. That the sale resulted in a disadvantage to
private respondent does not confer on him any cause of action against petitioner.
Roble vs Arbasa, GR No. 130707

Prescription of Action (1543)
The actions arising from Articles 1539 and 1542 shall prescribe in six months,
counted from the day of delivery. (1472a)
(see Cebu Windland Development Corp. vs Ong Siano Hua)
B. Movables
Where there is defeciency in quantity or quality
a. Reject the goods
b. Accept the goods
But if the buyer accepts or retains the goods so delivered, knowing that
the seller is not going to perform the contract in full, he must pay for
them at the contract rate. If, however, the buyer has used or disposed of
the goods delivered before he knows that the seller is not going to
perform his contract in full, the buyer shall not be liable for more than
the fair value to him of the goods so received.
Where there is an excess
a. Accept the goods agreed upon and reject the rest
b. Accept the whole of the goods delivered and pay for them at the
contract rate
c. Reject the whole of the goods if they are indivisible
Where goods are mixed in others
a. Accept the goods agreed upon and reject the rest if the sale is divisible
b. Reject the whole of the goods, if the sale is indivisible
C. Delivery in installments (guys please add)
D. Delivery is to include fruits (guys please add)
II.
When seller is excused from delivering (1527)

A. In cash sales (1524)
The vendor shall not be bound to deliver the thing sold, if the vendee has not
paid him the price, or if no period for the payment has been fixed in the
contract. (1466)
B. In sales on credit (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. (1198 is
when one loses the right to make use of the period, recall OBLICON) just
remember IFIDVAS
I insolvency
F fails to furnish the guaranties or securities
I Impairs the guarantees or securities by his own acts or
D Disappears through event furtuitous event
V Violates the undertaking in consideration of which the creditor
agreed to the period
A ATTEMPTS to abscond
S Stipulation
Hope this would help guys wakekekeke.. IFIDVAS..
pwede pd IPIDVAS hahahahaha by jep
ARTICLE 1544 DOUBLE SALE

I.
Sales to two different persons
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A. Rules as to Immovables
Ownership of immovable subject of a double sale
Gabriel vs. Mabanta et. al
G.R. No. 142403. March 26, 2003
Double sale: ownership of immovable subject of a double sale; what constitutes good faith
FACTS:
Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in Patul and
Capaltitan, Santiago, Isabela. On October 25, 1975, they mortgaged both lots with the Development
Bank of the Philippines (DBP) as collateral for a loan. Five years thereafter (September 1980), spouses
Mabanta sold the lots to Susana Soriano by way of a Deed of Sale of Parcels of Land With Assumption
of Mortgage. Included in the Deed is an agreement that they could repurchase the lots within a period of
two (2) years.
Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to convince
Alejandro Gabriel to purchase the lots from Susana Soriano. As consideration, Alejandro delivered to
Susana a 500-square meter residential lot with an actual value of P40,000.00 and paid spouses Mabanta
the sum of P5,000.00. Spouses Mabanta executed a Deed of Sale with Assumption of Mortgage in
favor of Alejandro. For her part, Susana executed a document entitled Cancellation of Contract
whereby she transferred to Alejandro all her rights over the two lots.
Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of spouses
Mabantas loan with the DBP. However, when they were ready to pay the entire loan, they found that
spouses Benito and Pura Tan had paid it and that the mortgage was already cancelled.
Benito Tan, father of Zenaida Tan-Reyes, approached the Gabriels to refund the sum of P5, 000 which
they paid to the Spouses Mabanta. Alejandro refused because Tan was unwilling to return the formers
500-square meter lot delivered to Susana as purchase price for the lots. Thereafter, spouses Tan tried to
eject Alejandro.
Alejandro and Alfredo filed a complaint against spouses Mabanta, spouses Tan, the DBP and barangay
officials Dominador Maylem and Alejandro Tridanio. During the proceedings, it turned out that it was
spouses Tans daughter, Zenaida Tan-Reyes who bought one of the lots from spouses Mabanta on
August 21, 1985. Not having been impleaded as party-defendant, she filed an answer-in-intervention
alleging that she is the registered owner of the lot and that she is an innocent purchaser in good faith and
for value.
Trial Court ruled in favor of Alejandro and Alfredo Gabriel. It ratiocinated that Zenaida Tan was not an
innocent purchaser for value. Her registration was not made in good faith. Unsatisfied, spouses Mabanta
and Zenaida Tan-Reyes appealed before the CA.
CA reversed the decision of the Trial Court and held that the second sale between spouses Mabanta and
Zenaida was valid. Its basis is the principle that a person dealing with registered land may simply rely on
the correctness of the certificate of title and, in the absence of anything to engender suspicion, he is
under no obligation to look beyond it.
Aggrieved, the Gabriels filed a petition before the Supreme Court.
ISSUE:
1.
Whether or not the registration of the second sale confers better right to Zenaida Reyes-Tan over the
disputed property;
2.
Whether or not Zenaida Tan is an innocent purchaser for value and good faith.
RULING:
1.
On the issue of the registration of the second sale by Zenaida Reyes-Tan
The registration made by Zenaida Tan was made in bad faith. Hence, she does not have a better right
over the Gabriels.
The requirement under the law is two-fold: acquisition in good faith and registration in good faith.
The prior registration of the disputed property by the second buyer does not by itself confer ownership or
a better right over the property. Article 1544 requires that such registration must be coupled with
good faith. Jurisprudence teaches us that the governing principle is primus tempore, potior jure (first in
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time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first
buyers right except where the second buyer registers in good faith the second sale ahead of the first, as
provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights
under the law, among them, to register first her purchase as against the second buyer. But in converso,
knowledge gained by the second buyer of the first sale defeats his right even if he is first to register the
second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted
by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer, that
before the second buyer can obtain priority over the first, he must show that he acted in good
faith throughout (i.e. in ignorance of the first sale and of the first buyers right) from the time of
acquisition until the title is transferred to him by registration or failing registration, by delivery of
possession.
In the case at bar, certain pieces of evidence, put together, would prove that respondent Reyes is not a
buyer in good faith. The records show that on August 18, 1985, spouses Mabanta offered to her for sale
the disputed lot. They told her it was mortgaged with respondent DBP and that she had to pay the loan if
she wanted to buy it. She readily agreed to such a condition. The following day, her father Benito Tan,
accompanied by barangay official Tridanio, went to petitioner Alejandros house offering to return to him
the P5,000.00 he had paid to spouses Mabanta. Tan did not suggest to return the 500-square meter lot
petitioner delivered to Susana Soriano. For this reason, petitioner refused Tans offer and even prohibited
him from going to respondent DBP.
2.
On the issue of innocent purchaser for value and good faith
Zenaida Tan is not an innocent purchaser in good faith.

Good faith is something internal. Actually, it is a question of intention. In ascertaining ones intention, this
Court must rely on the evidence of ones conduct and outward acts. From her actuations as specified
above, respondent Reyes cannot be considered to be in good faith when she bought the lot.
Moreover, it bears noting that on September 16, 1985, both petitioners filed with the trial court their
complaint involving the lot in question against respondents. After a month, or on October 17, 1985,
respondent Reyes had the Deed of Absolute Sale registered with the Registry of Property. Evidently, she
wanted to be the first one to effect its registration to the prejudice of petitioners who, although in
possession, have not registered the same. This is another indicum of bad faith.
We have consistently held that in cases of double sale of immovables, what finds relevance and
materiality is not whether or not the second buyer was a buyer in good faith but whether or not said
second buyer registers such second sale in good faith, that is, without knowledge of any defect in the
title of the property sold.
1. First registrant in good faith

BELINDA TAEDO and TEOFILA CORPUZ TAEDO vs.
THE COURT OF APPEALS, SPOUSES RICARDO M. TAEDO AND TERESITA BARERA
TAEDO
G.R. No. 104482
January 22, 1996
Topic: Sale to two different persons: Rules as to immovables
Facts
On October 20, 1962, Lazardo Taedo executed a notarized deed of absolute sale in favor of his
eldest brother, Ricardo Taedo, and the latter's wife, Teresita Barera, private respondents herein,
whereby he conveyed to the latter in consideration of P1,500.00, "one hectare of whatever share I
shall have over Lot No. 191 of the cadastral survey of Gerona, Province of Tarlac and covered by
Title T-13829 of the Register of Deeds of Tarlac", the said property being his "future inheritance" from
his parents. Upon the death of his father Matias, Lazaro executed an "Affidavit of Conformity" dated
February 28, 1980 to "re-affirm, respect, acknowledge and validate the sale I made in 1962." On
January 13, 1981, Lazaro executed another notarized deed of sale in favor of private respondents
covering his "undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 . . . ". He
acknowledged therein his receipt of P10,000.00 as consideration therefor. In February 1981, Ricardo
learned that Lazaro sold the same property to his children, petitioners herein, through a deed of sale
dated December 29, 1980. On June 7, 1982, private respondents recorded the Deed of Sale in their
favor in the Registry of Deeds and the corresponding entry was made.
Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of sale
executed by Lazaro in favor of private respondents covering the property inherited by Lazaro from his
father. Petitioners claimed that their father, Lazaro, executed an "Absolute Deed of Sale" dated
December 29, 1980 conveying to his ten children his allotted portion tinder the extrajudicial partition
executed by the heirs of Matias, which deed included the land in litigation.
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Private respondents,presented in evidence a "Deed of Revocation of a Deed of Sale" dated March
12, 1981, wherein Lazaro revoked the sale in favor of petitioners for the reason that it was "simulated
or fictitious without any consideration whatsoever".
Shortly after the case a quo was filed, Lazaro executed a sworn statement which virtually repudiated
the contents of the Deed of Revocation of a Deed of Sale and the Deed of Sale in favor of private
respondents. However, Lazaro testified that he sold the property to Ricardo, and that it was a lawyer
who induced him to execute a deed of sale in favor of his children after giving him five pesos (P5.00)
to buy a "drink".
Issue
Is the sale of a future inheritance valid?
Was the subsequent execution on January 13, 1981 (and registration with the Registry of Property)
of a deed of sale covering the same property to the same buyers valid?
Held
Pursuant to Article 1347 of the Civil Code, "(n)o contract may be entered into upon a future
inheritance except in cases expressly authorized by law."
Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales, as
follows:
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.
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.
The property in question is land, an immovable, and following the above-quoted law, ownership shall
belong to the buyer who in good faith registers it first in the registry of property. Thus, although the
deed of sale in favor of private respondents was later than the one in favor of petitioners, ownership
would vest in the former because of the undisputed fact of registration. On the other hand, petitioners
have not registered the sale to them at all.
Petitioners contend that they were in possession of the property and that private respondents never
took possession thereof. As between two purchasers, the one who registered the sale in his favor
has a preferred right over the other who has not registered his title, even if the latter is in actual
possession of the immovable property.
CORONEL, et al. vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA
PATRICIA ALCARAZ
G.R. No. 103577, October 7, 1996
Facts
On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as
Coronels) executed a document entitled "Receipt of Down Payment" in favor of plaintiff Ramona
Patricia Alcaraz the sum of Fifty Thousand Pesos purchase price of their inherited house and lot,
covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00. They bind themselves to effect the transfer in their names from their deceased father,
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down payment
above-stated. On their presentation of the TCT already in their name, they will immediately execute
the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay
the balance of the P1,190,000.00. On the same date (January 15, 1985), plaintiff-appellee
Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the down
payment of Fifty Thousand (P50,000.00) Pesos
On February 6, 1985, the property originally registered in the name of the Coronels' father was
transferred in their names under TCT No. 327043. On February 18, 1985, the Coronels sold the
property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter
referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after
the latter has paid Three Hundred Thousand (P300,000.00) Pesos. For this reason, Coronels
canceled and rescinded the contract with Ramona by depositing the down payment paid by
Concepcion in the bank in trust for Ramona Patricia Alcaraz.
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On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the
Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403. On
April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same
property with the Registry of Deeds of Quezon City.
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor
of Catalina and a new title over the subject property was issued in the name of Catalina under TCT
No. 351582.
Issue
1.
Whether or not Catalina registered the land in good faith.
Held
The court is not persuaded with petitioners contention that the notice of lis pendens in the case at
bar was annoted on the title of the subject property only on February 22, 1985, whereas, the second
sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or
on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer,
bought the property under a clean title, she was unaware of any adverse claim or previous sale, for
which reason she is buyer in good faith.
In a case of double sale, what finds relevance and materiality is not whether or not the second buyer
was a buyer in good faith but whether or not said second buyer registers such second sale in good
faith, that is, without knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a
notice of lis pendens had been annotated on the transfer certificate of title in the names of
petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time
of registration, therefore, petitioner Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was charged with knowledge that a previous
buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in
petitioners' title to the property at the time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers that sale after he has acquired knowledge that there was a
previous sale of the same property to a third party or that another person claims said property in a
pervious sale, the registration will constitute a registration in bad faith and will not confer upon him
any right.
Pagaduan vs Ocuma
Melencion et. al. vs. CA and Aznar Brothers Realty Co.
G.R. No. 148846; September 25, 2007
Rule on Double Sale: to the one who registers the sale in good faith
FACTS:
The subject property is a 30,351 square meter parcel of land located at Suba-basbas, Marigondon,
Lapu-Lapu City, Cebu in the name of the late petitioner Go Kim Chuan.
The entire property was originally owned by Esteban Bonghanoy who had only one child, Juana
Bonghanoy-Amodia, mother of the late Leoncia Amodia and petitioners Cecilia Amodia Vda. de
Melencion, Veneranda Amodia, Felipe Amodia, and Eutiquio Amodia (the Amodias). The entire
property was brought under the operation of the Torrens System. However, the title thereto was lost
during the Second World War.
The Amodias allegedly executed an Extra-Judicial Partition of Real Estate with Deed of Absolute
Sale whereby they extra-judicially settled the estate of Esteban Bonghanoy and conveyed the subject
property to respondent Aznar Brothers Realty Company. The said Extra-Judicial Partition of Real
Estate with Deed of Absolute Sale was registered under Act 3344 as there was no title on file at
the Register of Deeds of Lapu-Lapu City (Register of Deeds). Thereafter, AZNAR made some
improvements and constructed a beach house thereon.
Melencion and the Amodias executed a Deed of Extra-Judicial Settlement with Absolute Sale,
conveying the subject property in favor of Go Kim Chuan. The lost title covering the subject property
was reconstituted pursuant to Republic Act No. 26. A reconstituted title designated as Original
Certificate of Title was issued in the name of Esteban Bonghanoy and, subsequently, a derivative title
was issued in the name of Go Kim Chuan. Thereafter, Go Kim Chuan exercised control and dominion
over the subject property in an adverse and continuous manner and in the concept of an owner.
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Aznar wrote a letter to petitioners Amodias asking the latter to withdraw and/or nullify the sale
entered into between them and Go Kim Chuan. Because petitioners did not heed to Aznars demand,
Aznar filed a case against petitioners Amodias and Go Kim Chuan for Annulment of Sale and
Cancellation of the TCT alleging that the sale to Go Kim Chuan was an invalid second sale of the
subject property which had earlier been sold to it. Petitioners Amodias denied that they executed the
Extra-Judicial Partition of Real Estate with Deed of Absolute Sale in favor of AZNAR, claiming that
their purported signatures thereon were forged.
RTC declared Go Kim Chuan as the real owner of the subject property. It stated that the deed of sale
in favor of Aznar has been forged and that the subject property has been registered already.
Aggrieved, Aznar appealed before CA
CA ruled in favor of Aznar holding that the Extra-Judicial Partition of Real Estate with Deed of
Absolute Sale executed by the Amodias in favor of AZNAR was registered ahead of the Deed of
Extra-Judicial Settlement with Absolute Sale in favor of Go Kim Chuan, thus, pursuant to Article 1544
of the New Civil Code, the former deed should be given preference over the latter.
ISSUE:
Who between Go Kin Chuan and Aznar has a better right over the subject property?
RULING:
Go Kim Chuan has the better right over the subject property.
The registration contemplated under Article 1544 refers to the registration under the Torrens System,
which considers the act of registration as the operative act that gives validity to the transfer or
creates a lien upon the land. This rule precisely applies to cases involving conflicting rights over
registered property and those of innocent transferees who relied on the clean title of the properties.
Thus, we held that registration must be done in the proper registry in order to bind the same.
In the case at bench, it is uncontroverted that the subject property was under the operation of the
Torrens System even before the respective conveyances to AZNAR and Go Kim Chuan were made.
AZNAR knew of this, and admits this as fact. Yet, despite this knowledge, AZNAR registered the sale
in its favor under Act 3344 on the contention that at the time of sale, there was no title on file. We are
not persuaded by such a lame excuse.
Act 3344 provides for the system of recording of transactions or claims over unregistered real estate
without prejudice to a third party with a better right. But if the land is registered under the Land
Registration Act (and therefore has a Torrens Title), and it is sold and the sale is registered not under
the Land Registration Act but under Act 3344, as amended, such sale is not considered registered,
as the term is used under Art. 1544 of the New Civil Code.
Although it is obvious that Go Kim Chuan registered the sale in his favor under Act 496 while AZNAR
did not, we still cannot make an outright award of the subject property to the petitioners solely on that
basis. For the law is clear: mere registration of title is not enough. Good faith must accompany the
registration.
Thus, to be able to enjoy priority status, the second purchaser must be in good faith, i.e., he must
have no knowledge of the previous alienation of the property by the vendor to another. Notably, what
is important for this purpose is not whether the second buyer is a buyer in good faith, but whether he
registers the second sale in good faith, meaning, he does so without knowledge of any defect in the
title over the property sold.
Go Kim Chuan registered the property in good faith. Before buying the subject property, Go Kim
Chuan made verifications with the Office of the City Assessor of Lapu-Lapu City and the Register of
Deeds. He likewise visited the premises of the subject property and found that nobody interposed
any adverse claim against the Amodias. After he decided to buy the subject property, he paid all
taxes in arrears, caused the publication of the Deed of Extra-Judicial Settlement with Absolute Sale
in a newspaper of general circulation, caused the reconstitution of the lost certificate of title and
caused the issuance of the assailed TCT in his name. Given these antecedents, good faith on the
part of Go Kim Chuan cannot be doubted.
2. First possesssor in good faith

NARCISA SANCHEZ vs. ROQUE RAMOS
G.R. No. L-13442 December 20, 1919
Topic: Sales to two different persons
Facts
On July 1, 1910, Ciriaco Fernandez sold the subject piece of land to the spouses Marcelino Gomez
and Narcisa Sanchez under pacto de retro for the period of one year. This also was executed in a
public instrument. Marcelino Gomez and Narcisa Sanchez never took material possession of the
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land. The period for repurchase elapsed without the vendor making use of it. On July 3, 1912, Ciriaco
Fernandez again sold the same land, by means of a private document, to Roque Ramos who
immediately took material possession thereof. By applying article 1473 of the Civil Code, the trial
court declared preferable the sale executed to the defendant and absolved him from the complaint.
Issue
Which of the two buyers has a better right over the property.
Held
Not one of the documents of sale in this case having been recorded, preference must be decided in
favor of the vendee who first took possession.
The sale executed to Sanchez must be declared preferable. ART. 1473 provides:
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 personal
property.
Should it be real property, it shall belong to the purchaser who first recorded it in the registry of
deeds.
Should it not be recorded, the property shall belong to the person who first took possession of it in
good faith, or, in default of possession, to the person who presents the oldest title, provided there is
good faith.
Possession is acquired by the material occupancy of the thing or right possessed, or by the fact that
the latter is subjected to the action of our will, or by the appropriate acts and legal formalities
established for acquiring possession (art. 438, Civil Code.). By a simple reasoning, it appears that,
because the law does not mention to which of these kinds of possession the article refers, it must be
understood that it refers to all of these kinds, material possession or symbolic possession.
The execution of a public instrument is equivalent to the delivery of the realty sold (art. 1462, Civil
Code) and its possession by the vendee (art. 438). Under these conditions the sale is considered
consummated and completely transfers to the vendee all of the vendor's rights of ownership including
his real right over the thing. The vendee by virtue of this sale has acquired everything and nothing,
absolutely nothing, is left to the vendor. From this moment the vendor is a stranger to the thing sold
like any other who has never been its owner. As the thing is considered delivered, the vendor has no
longer the obligation of even delivering it. If he continues taking material possession of it, it is simply
on account of vendee's tolerance and, in this sense, his possession is vendor's possession. And if
the latter should have to ask him for the delivery of this material possession; it would not be by virtue
of the sale, because this has been already consummated and has produced all its effects, but by
virtue of the vendee's ownership, in the same way as said vendee could require of another person
although same were not the vendor. This means that after the sale of a realty by means of a public
instrument, the vendor, who resells it to another, does not transmit anything to the second vendee
and if the latter, by virtue of this second sale, takes material possession of the thing, he does it as
mere detainer, and it would be unjust to protect this detention against the rights to the thing lawfully
acquired by the first vendee.
The Court is of the opinion that the possession mentioned in article 1473 (for determining who has
better right when the same piece of land has been sold several times by the same vendor) includes
not only the material but also the symbolic possession, which is acquired by the execution of a public
instrument. From the foregoing it follows that the plaintiff was the first to take possession of the land,
and consequently the sale executed to him is preferable.
3. In the absence of both registration and

possession, ownership shall belong to the person
who represents the oldest title
ABELARDO CRUZ (deceased) substituted by Heirs Consuelo C. Cruz, Claro C. Cruz and
Stephen C. Cruz, vs. LEODEGARIA CABANA, TEOFILO LEGASPI , ILUMINADA CABANA and
THE HONOR- ABLE COURT OF APPEALS
G.R. No. L-56232, June 22, 1984
Facts
On October 21, 1968, defendant Leodegaria Cabana sold the land in question to defendantsspouses Teofilo Legaspi and Iluminada Cabana. The said defendants-spouses attempted to register
the deed of sale but said registration was not accomplished because they could not present the
owner's duplicate of title which was at that time in the possession of the PNB as mortgage.
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Likewise, when plaintiff Cruz tried to register the deed of sale executed by Leodegaria Cabana on
September 3, 1970, said plaintiff was informed that the owner thereof had sold the land to
defendants-spouses on October 21, 1968. Plaintiff was able to register the land in his name on
February 9, 1971.
Issue
1.
Who of the said vendees has a better title to said land?
Held
The court held that Teofilo Legaspi and Iluminada Cabana are the true and rightful owners of the
property in litigation. As the Court stated in Carbonell vs. Court of Appeals "it is essential that the
buyer of realty must act in good faith in registering his deed of sale to merit the protection of the
second paragraph of Article 1544."
As the writer stressed in his concurring opinion therein, "(T)he governing principle here is prius
tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second
sale cannot defeat the first buyer's rights except only as provided by the Civil Code and that is where
the second buyer first registers in good faith the second sale ahead of the first. Such knowledge of
the first buyer does not bar her from availing of her rights under the law, among them, to register first
her purchase as against the second buyer. But in converso knowledge gained by the second buyer of
the first sale defeats his rights even if he is first to register the second sale, since such knowledge
taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code
for the second buyer being able to displace the first buyer; that before the second buyer can obtain
priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance of the first
sale and of the first buyer's rights) from the time of acquisition until the title is transferred to him by
registration or failing registration, by delivery of possession. The second buyer must show continuing
good faith and innocence or lack of knowledge of the first sale until his contract ripens into full
ownership through prior registration as provided by law."
B. Rule as to movables (1544)

Ownership shall be transferred to the person who first took possession of the
property in good faith. The possession referred to here may either be actual or
constructive.
C. GOOD FAITH in the buyer
What GF consists
Cui vs Henson
See San Lorenzo Devt Corp vs CA
See Gabriel vs Mabanta
Leung Yee vs. Strong Machinery and Williamson
37 Phil. 644
Good faith in the buyer: what good faith consists
FACTS:
The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery company from
Strong Machinery Company, and executed a chattel mortgage thereon to secure payment of the purchase
price. It included in the mortgage deed the building of strong materials in which the machinery was installed,
without any reference to the land on which it stood. The indebtedness secured by this instrument not having
been paid when it fell due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the
mortgage instrument, and was bought in by the machinery company. The mortgage was registered in the
chattel mortgage registry, and the sale of the property to the machinery company in satisfaction of the
mortgage was annotated in the same registry.
The "Compaia Agricola Filipina" executed another deed of sale of the land upon which the building stood to
the reference to the building erected on the land and would appear to have been executed for the purpose of
curing any defects which might be found to exist in the machinery company's title to the building under the
sheriff's certificate of sale. The machinery company went into possession of the building at or about the time
when this sale took place and it has continued in possession ever since.
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At or about the time when the chattel mortgage was executed in favor of the machinery company, the
mortgagor, the "Compaia Agricola Filipina" executed another mortgage to Leung Yee upon the building,
separate and apart from the land on which it stood, to secure payment of the balance of its indebtedness to
the plaintiff under a contract for the construction of the building. Upon the failure of the mortgagor to pay the
amount of the indebtedness secured by the mortgage, the plaintiff secured judgment for that amount, levied
execution upon the building, bought it in at the sheriff's sale and had the sheriff's certificate of the sale duly
registered in the land registry of the Province of Cavite.
Petitioner instituted an action to recover possession of the building from the machinery company.
ISSUE:
Whether or not Leung Yee is a purchaser in good faith.
RULING:
Leung Yee is not a purchaser in good faith as contemplated in Art. 1544 of the Civil Code.
It is "the honesty of intention," "the honest lawful intent," which constitutes good faith implies a "freedom from
knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of such
knowledge overcomes the presumption of good faith in which the courts always indulge in the absence of
proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched,
but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs."
One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he
has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the
same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry
and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser
cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he
acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to
believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in
his vendor's title, will not make him an innocent purchaser for value, if afterwards develops that the title was in
fact defective, and it appears that he had such notice of the defects as would have led to its discovery had he
acted with that measure of precaution which may reasonably be acquired of a prudent man in a like situation.
Good faith, or lack of it, is in its analysis a question of intention; but in ascertaining the intention by which one
is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward
acts by which alone the inward motive may, with safety, be determined.
The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the sheriff's
sale and inscribed his title in the land registry, was duly notified that the machinery company had bought the
building from plaintiff's judgment debtor; that it had gone into possession long prior to the sheriff's sale; and
that it was in possession at the time when the sheriff executed his levy. The execution of an indemnity bond by
the plaintiff in favor of the sheriff, after the machinery company had filed its sworn claim of ownership, leaves
no room for doubt in this regard. Having bought in the building at the sheriff's sale with full knowledge that at
the time of the levy and sale the building had already been sold to the machinery company by the judgment
debtor, the plaintiff cannot be said to have been a purchaser in good faith; and of course, the subsequent
inscription of the sheriff's certificate of title must be held to have been tainted with the same defect.
D. When rules do not apply

CASES:
CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC vs. THE HONORABLE COURT OF APPEALS
and HEIRS OF TEODORO DELA CRUZ
G.R. No. 132161
January 17, 2005
Topic: Sale to two different persons

Facts
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid were the registered owners of land
situated in San Mateo, Isabela. The said lot was subdivided into several lots and one of the resulting
subdivision lots was Lot No. 7036-A-7. Rizal Madrid sold part of his share identified as Lot No. 7036-A-7, to
Aleja Gamiao and Felisa Dayag by virtue of a Deed of Sale, to which his brothers Anselmo, Gregorio,
Filomeno and Domingo offered no objection as evidenced by their Joint Affidavit. The deed of sale was not
registered with the Office of the Register of Deeds of Isabela. However, Gamiao and Dayag declared the
property for taxation purposes in their names on March 1964 under Tax Declaration No. 7981.
Gamiao and Dayag later sold the southern half of Lot No. 7036-A-7 to Teodoro dela Cruz, and the northern
half to Restituto Hernandez. Thereupon, Teodoro dela Cruz and Restituto Hernandez took possession of and
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cultivated the portions of the property respectively sold to them. Later, Restituto Hernandez donated the
northern half to his daughter, Evangeline Hernandez-del Rosario. The children (heirs) of Teodoro dela Cruz
continued possession of the southern half after their fathers death.
In a Deed of Sale dated 15 June 1976, the Madrid brothers conveyed all their rights and interests over Lot No.
7036-A-7 to Pacifico Marquez. The deed of sale was registered with the Office of the Register of Deeds of
Isabela on March 1982. Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots. Marquez and
his spouse also mortgaged some of the lots to the Consolidated Rural Bank, Inc. of Cagayan Valley to secure
a loan of P100,000.00. These deeds of real estate mortgage were registered with the Office of the Register of
Deeds on 2 April 1984.
As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the mortgages in its favor
and the lots were sold to it as the highest bidder on 25 April 1986. On 31 October 1985, Marquez sold Lot No.
7036-A-7-G to Romeo Calixto.
Claiming to be null and void the issuance of new TCTs; the foreclosure sale of the lots; the mortgage to RBC;
and the sale to Calixto, the Heirs-now respondents herein, filed a case for reconveyance and damages
against Marquez, Calixto, RBC and CRB.
In the Answer to the Amended Complaint, Marquez, as defendant, alleged that apart from being the first
registrant, he was a buyer in good faith and for value. He also argued that the sale executed by Rizal Madrid
to Gamiao and Dayag was not binding upon him, it being unregistered. For his part, Calixto manifested that he
had no interest in the subject property as he ceased to be the owner thereof, the same having been
reacquired by defendant Marquez. CRB, as defendant, and co-defendant RBC insisted that they were
mortgagees in good faith and that they had the right to rely on the titles of Marquez which were free from any
lien or encumbrance.
Issue
Who has a better right over the property.
Held
The heirs have a better right over the subject property.
The subject property was not transferred to several purchasers by a single vendor. In the first deed of sale, the
vendors were Gamiao and Dayag whose right to the subject property originated from their acquisition thereof
from Rizal Madrid with the conformity of all the other Madrid brothers in 1957, followed by their declaration of
the property in its entirety for taxation purposes in their names. On the other hand, the vendors in the other or
later deed were the Madrid brothers but at that time they were no longer the owners since they had long
before disposed of the property in favor of Gamiao and Dayag.
Article 1544 is not applicable in this case. In the double sale of an immovable, the rules of preference are:
(a) the first registrant in good faith;
(b) should there be no entry, the first in possession in good faith; and
(c) in the absence thereof, the buyer who presents the oldest title in good faith.
Prior registration of the subject property does not by itself confer ownership or a better right over the property.
Article 1544 requires that before the second buyer can obtain priority over the first, he must show that he
acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyers rights) from the time of
acquisition until the title is transferred to him by registration or failing registration, by delivery of possession.
Moreover, it is an established principle that no one can give what one does not have nemo dat quod non
habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no
more than what the seller can transfer legally. In this case, since the Madrid brothers were no longer the
owners of the subject property at the time of the sale to Marquez, the latter did not acquire any right to it.
In any event, assuming arguendo that Article 1544 applies to the present case, the claim of Marquez still
cannot prevail over the right of the Heirs since according to the evidence he was not a purchaser and
registrant in good faith. The actions of Marquez have not satisfied the requirement of good faith from the time
of the purchase of the subject property to the time of registration.
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no
defect in the title of the vendor or mortgagor. His mere refusal to believe that such defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect in the vendors or mortgagors title, will not
make him an innocent purchaser or mortgagee for value, if it afterwards develops that the title was in fact
defective, and it appears that he had such notice of the defects as would have led to its discovery had he
acted with the measure of a prudent man in a like situation.
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Banks, their business being impressed with public interest, are expected to exercise more care and prudence
than private individuals in their dealings, even those involving registered lands. Hence, for merely relying on
the certificates of title and for its failure to ascertain the status of the mortgaged properties as is the standard
procedure in its operations, thus CRB is a mortgagee in bad faith.
In a situation where not all the requisites are present which would warrant the application of Art. 1544, the
principle of prior tempore, potior jure or simply "he who is first in time is preferred in right," should apply. The
only essential requisite of this rule is priority in time; in other words, the only one who can invoke this is the
first vendee. Undisputedly, he is a purchaser in good faith because at the time he bought the real property,
there was still no sale to a second vendee. In the instant case, the sale to the Heirs by Gamiao and Dayag,
who first bought it from Rizal Madrid, was anterior to the sale by the Madrid brothers to Marquez. The Heirs
also had possessed the subject property first in time. Thus, applying the principle, the Heirs, without a scintilla
of doubt, have a superior right to the subject property.
SPOUSES SALERA vs. SPOUSES RODAJE,
G.R. No. 135900, August 17, 2007
Facts
On May 7, 1993, spouses Salera, filed with the RTC, Calubian, Leyte, a complaint for quieting of titleagainst
spouses Rodaje. Petitioners alleged that they are the absolute owners of a parcel of land situated at Basud,
San Isidro, Leyte which they have acquired from the heirs of Brigido Tonacao as shown by a Deed of Absolute
Sale executed on June 23, 1986. They had the document registered in the Registry of Deeds of Iloilo on July
1, 1986. When they asked the Provincial Assessor to declare the property under their names for taxation
purposes, they found that Tax Declaration No. 2994 (R-5) in the name of Brigido was already cancelled and
another one, Tax Declaration No. 2408, was issued in the names of respondents. Petitioners further alleged
that they have been in possession of the property and the house they built thereon because they had paid the
purchase price even before the execution of the deed of sale.
In their answer to the complaint, respondents claimed that they are the absolute owners of the same property
which they acquired from Catalino Tonacao, the father of Brigido, in a Deed of Absolute Sale dated June 6,
1986. The sale was registered in the Registry of Deeds of Leyte on June 10, 1986 and Tax Declaration No.
2408 was issued in their names. Prior thereto, or on January 11, 1984, they had a verbal contract of sale with
Catalino. They paid him P1,000.00 as downpayment. They agreed that the balance of P4,000.00 shall be
paid upon execution of the deed of sale. Since then, they have been exercising their right of ownership over
the property and the building constructed thereon peacefully, publicly, adversely and continuously. Apart from
being the first registrants, they are buyers in good faith.
Issue
1. Whether or not Article 1544 has been correctly applied in this case.
Held
The Court of Appeals, in upholding the validity of the sale in favor of respondents by relying on Article 1544 of
the Civil Code on double sale is wrong. Article 1544 of the Civil Code contemplates a case of double sale or
multiple sales by a single vendor. More specifically, it covers a situation where a single vendor sold one and
the same immovable property to two or more buyers. It cannot be invoked where the two different contracts
of sale are made by two different persons, one of them not being the owner of the property sold.
In the instant case, the property was sold by two different vendors to different purchasers. The first sale was
between Catalino and herein respondents, while the second was between Brigidos heirs and herein
petitioners.
Cruzado vs Bustos, 34 Phil 17

Olsen vs. Yearsley
G.R. No. 4385; August 31, 1908
When rules on double sale not applicable
FACTS:
Myer Harris is the owner of a cash register. He sold it for P330 to Louis Heymann. Heymann paid a down of
P140, leaving a balance of P190. It was orally agreed that title to the property should not pass until the final
payment of the purchase price. Thereafter, Harris being about to depart for Iloilo, demanded the balance of
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the money. Heymann, being unable to pay it, made an offer to return the register, which was accepted. The
machine was left in the place of business of Heymann, who was then selling out to one Mrs. Booth.
Thereupon, Harris sold the register P195 to Carl Hess. Heyman certified that Harris was the owner. Hess
thereafter sold it to the plaintiff, Olsen.
In the meantime, the register remained in the place of business which Heymann had sold out to Mrs. Booth.
Mrs. Booth in turn sold the business to George M. Lack who transferred it to this defendant.
ISSUE:
Whether or not the rule on double sale is applicable in this case.
RULING:
SC held that the rule on double sale is not applicable.
It ratiocinated that of the previous history of the register, and of the claims thereto of Harris, Hess and Olsen,
these owners of the business all had knowledge, with the exception of Yearsley. He was a buyer in good faith,
and if he had bought from the true owner, would have brought himself under the protection of the Article 1473
(now Art. 1544) of the Civil Code, providing that, when a thing is sold to different buyers, the property goes to
him who first obtain possession. He bought it, however, from a person who was not the owner and who had
the knowledge of the true ownership. Therefore, his defense can not prevail. The plaintiff is entitled to
judgment for the possession of this machine, without any qualification obliging him to make further payment
therefore, or to surrender the machine upon payment to be made by the defendant.
Section 3 CONDITIONS and WARRANTIES

Article 1545 1547
I.
Conditions (precedent). (See 1179 et seq.)
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
o 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.
he may waive performance of the condition.
II.
Warranties:
A. Concept
JAIME D. ANG vs COURT OF APPEALS AND BRUNO SOLEDAD
G.R. No. 177874
September 29, 2008
Topic: Warranties
Facts
Under a "car-swapping" scheme, respondent Bruno Soledad (Soledad) sold his Mitsubishi GSR sedan 1982
model to petitioner Jaime Ang (Ang) by Deed of Absolute Sale dated July 28, 1992. For his part, Ang
conveyed to Soledad his Mitsubishi Lancer model 1988, also by Deed of Absolute Sale of even date. As Angs
car was of a later model, Soledad paid him an additional P55,000.00.
Ang, a buyer and seller of used vehicles, later offered the Mitsubishi GSR for sale through Far Eastern Motors,
a second-hand auto display center. The vehicle was eventually sold to a certain Paul Bugash (Bugash) for
P225,000.00, by Deed of Absolute Sale dated August 14, 1992. Before the deed could be registered in
Bugashs name, however, the vehicle was seized by virtue of a writ of replevin dated January 26, 1993 issued
by a Cebu City Regional Trial Court (RTC), "BA Finance Corporation vs. Ronaldo and Patricia Panes," on
account of the alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay the
mortgage debt constituted thereon.
To secure the release of the vehicle, Ang paid BA Finance the amount of P62,038.47 on March 23, 1993.
Soledad refused to reimburse the said amount, despite repeated demands, drawing Ang to charge him for
Estafa with abuse of confidence before the Office of the City Prosecutor, Cebu City.
Issue
Whether the complaint has already prescribed, depending on what kind of warranty is provided in the Deed of
Absolute Sale subject of the present case.
Held
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The complaint had already prescribed.
A warranty is a statement or representation made by the seller of goods, contemporaneously and as part of
the contract of sale, having reference to the character, quality or title of the goods, and by which he promises
or undertakes to insure that certain facts are or shall be as he then represents them.
Warranties by the seller may be express or implied. Art. 1546 of the Civil Code defines express warranty as
follows:
"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 purchases the thing relying thereon. No affirmation of the value of the thing, nor
any statement purporting to be a statement of the sellers 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.
On the other hand, an implied warranty is that which the law derives by application or inference from the
nature of the transaction or the relative situation or circumstances of the parties, irrespective of any intention
of the seller to create it. Among the implied warranty provisions of the Civil Code are: as to the sellers title
(Art. 1548), against hidden defects and encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562),
and against eviction (Art. 1548).
"The prescriptive period for instituting actions based on a breach of express warranty is that specified in the
contract, and in the absence of such period, the general rule on rescission of contract, which is four years
(Article 1389, Civil Code)."
As for actions based on breach of implied warranty, the prescriptive period is, under Art. 1571 (warranty
against hidden defects of or encumbrances upon the thing sold) and Art. 1548 (warranty against eviction), six
months from the date of delivery of the thing sold.
In declaring that he owned and had clean title to the vehicle at the time the Deed of Absolute Sale was forged,
Soledad gave an implied warranty of title. In pledging that he "will defend the same from all claims or any
claim whatsoever [and] will save the vendee from any suit by the government of the Republic of the
Philippines," Soledad gave a warranty against eviction. Given Angs business of buying and selling used
vehicles, he could not have merely relied on Soledads affirmation that the car was free from liens and
encumbrances. He was expected to have thoroughly verified the cars registration and related documents.
Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a breach thereof is
six months after the delivery of the vehicle, following Art. 1571. But even if the date of filing of the action is
reckoned from the date petitioner instituted his first complaint for damages on November 9, 1993, and not on
July 15, 1996 when he filed the complaint subject of the present petition, the action just the same had
prescribed, it having been filed 16 months after July 28, 1992, the date of delivery of the vehicle.
On the merits of his complaint for damages, even if Ang invokes breach of warranty against eviction as
inferred from the second part of the earlier-quoted provision of the Deed of Absolute Sale, the following
essential requisites for such breach, vz:
"A breach of this warranty requires the concurrence of the following circumstances:
(1) The purchaser has been deprived of the whole or part of the thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and
(4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the
vendee.
In the absence of these requisites, a breach of the warranty against eviction under Article 1547 cannot be
declared."
Finally, even under the principle of solutio indebiti which the RTC applied, Ang cannot recover from Soledad
the amount he paid BA Finance. For, as the appellate court observed, Ang settled the mortgage debt on his
own volition under the supposition that he would resell the car. It turned out that he did pay BA Finance in
order to avoid returning the payment made by the ultimate buyer Bugash. It need not be stressed that Soledad
did not benefit from Angs paying BA Finance, he not being the one who mortgaged the vehicle, hence, did not
benefit from the proceeds thereof.
B. Kinds
Express Warranties (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
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warranty, unless the seller made such affirmation or statement as an
expert and it was relied upon by the buyer.
Implied Warranties (1547)

In a contract of sale, unless a contrary intention appears, there is:
(1) An implied warranty on the part of the seller that he has a
right to sell the thing at the time when the ownership is to pass,
and that the buyer shall from that time have and enjoy the legal
and peaceful possession of the thing; (Warranty against eviction)
(2) An implied warranty that the thing shall be free from any
hidden faults or defects, or any charge or encumbrance not
declared or known to the buyer. (Warranty against hidden
defects)
See ANG vs CA
C. Statement of Sellers Opinion (1546)

This shall not be construed as a warranty, unless the seller made such
affirmation or statement as an expert and it was relied upon by the buyer.
D. Cases
Express Representation of payment of taxes and customs duties
HARRISON MOTORS CORPORATION vs. RACHEL A. NAVARRO
G.R. No. 132269, April 27, 2000
Facts
On June, 1987 Harrison Motors Corporation through its president, Renato Claros, sold two (2) Isuzu Elf trucks
to private respondent Rachel Navarro, owner of RN Freight Lines. Petitioner, a known importer, assembler
and manufacturer, assembled the two (2) trucks using imported component parts. Prior to the sale, Renato
Claros represented to private respondent that all the BIR taxes and customs duties for the parts used on the
two (2) trucks had been paid for.
In December of 1988 government agents seized and detained the two (2) Elf trucks of respondent after
discovering that there were still unpaid BIR taxes and customs duties thereon pursuant to the Memorandum of
Agreement (MOA) which provided that prior to registration in the LTO of any assembled or re-assembled
motor vehicle which used imported parts, a Certificate of Payment should first be obtained from the BIR to
prove payment of all taxes required under existing laws. The BIR and the BOC ordered private respondent to
pay the proper assessments or her trucks would be impounded.Private respondent went to Claros to ask for
the receipts evidencing payment of BIR taxes and customs duties; however, Claros refused to comply. Private
respondent then demanded from Claros that he pay the assessed taxes and warned him that he would have
to reimburse her should she be forced to pay for the assessments herself. Her demands were again ignored.
When petitioner still ignored her letter, she filed a complaint for a sum of money on 24 September 1990 with
the Regional Trial Court of Makati.
On March 5, 1992 the trial court rendered a decision ordering petitioner to reimburse private respondent in the
amount of P32,943.00 for the customs duties and internal revenue taxes the latter had to pay to discharge her
two (2) Elf trucks from government custody. Petitioner was also required to pay P7,500.00 for attorney's fees
plus the costs. The Court of Appeals subsequently sustained the lower court, hence this recourse of petitioner.
Issue
1.
2.
Who should pay the BIR taxes and customs duties which the administrative regulations sought to
enforce?
Whether or not the petitioner is correct in its claim that it had paid the taxes due on the imported parts
otherwise it would not have been able to obtain their release from the BOC and to register the vehicles
with the LTO.
3.
Whether or not there was an express representation of payment of taxes and custom duties.
Held
1.
The court held that petitioners contentions that private respondent should be the one to pay the internal
revenue taxes and customs duties; its claim that at the time the Memorandum Orders and the two (2)
Memoranda of Agreement took effect the two (2) Elf trucks were already sold to private respondent, thus,
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it no longer owned the vehicles; whatever payments private respondent made to the government after the
sale were solely her concern and such burden should not be passed on to petitioner; and it shall not be
applied retroactively, deserve scant consideration.
It is true that administrative rulings and regulations are generally prospective in nature. An inspection of
the two (2) Memoranda of Agreement however demonstrates that their intent is to enforce payment of
taxes on assemblers/manufacturers who import component parts without paying the correct
assessments.
Thus, although private respondent is the one required by the administrative regulations to secure the
Certificate of Payment for the purpose of registration, petitioner as the importer and the
assembler/manufacturer of the two (2) Elf trucks is still the one liable for payment of revenue taxes and
customs duties. Petitioner's obligation to pay does not arise from the administrative regulations but from
the tax laws existing at the time of importation. Hence, even if private respondent already owned the two
(2) trucks when the Memorandum Orders and Memoranda of Agreement took effect, the fact remains that
petitioner was still the one duty-bound to pay for the BIR taxes and customs duties.
2.
Non-sequitur. The fact that petitioner was able to secure the release of the parts from customs and to
register the assembled trucks with the LTO does not necessarily mean that all taxes and customs duties
were legally settled. As a matter of fact, the provisions of the two (2) Memoranda of Agreement clearly
establish that the government is aware of the widespread registration of assembled motor vehicles with
the LTO even if the taxes due on their imported component parts remain unpaid.
Obviously, the two (2) Memoranda of Agreement were executed to prevent the anomalous circumstance,
as in the case at bar, where assembled vehicles are registered with the LTO even if taxes and customs
duties remain unpaid.
3.
It is true that the ownership of the trucks shifted to private respondent after the sale. But petitioner must
remember that prior to its consummation it expressly intimated to her that it had already paid the taxes
and customs duties. Such representation shall be considered as a seller's express warranty under Art.
1546 of the Civil Code which covers any affirmation of fact or any promise by the seller which induces the
buyer to purchase the thing and actually purchases it relying on such affirmation or promise. It includes all
warranties which are derived from express language, whether the language is in the form of a promise or
representation. Presumably, therefore, private respondent would not have purchased the two (2) Elf
trucks were it not for petitioner's assertion and assurance that all taxes on its imported parts were already
settled.
This express warranty was breached the moment petitioner refused to furnish private respondent with the
corresponding receipts since such documents were the best evidence she could present to the
government to prove that all BIR taxes and customs duties on the imported component parts were fully
paid. Without evidence of payment, she was powerless to prevent the trucks from being impounded.
Under Art. 1599 of the Civil Code, once an express warranty is breached the buyer can accept or keep
the goods and maintain an action against the seller for damages. This was what private respondent did.
She opted to keep the two (2) trucks which she apparently needed for her business and filed a complaint
for damages, particularly seeking the reimbursement of the amount she paid to secure the release of her
vehicles.
Interpretation of warranty that land is free from all liens and

encumbrances
Investment and Development Corp vs Navarro, Cr No. 132269
Effect of non-fulfillment of express representaion
Soler vs. Chesley
G.R. No. L-17150; June 20, 1922
Warranties: Effect of non-fulfillment of express representation
FACTS:
Andres Soler agreed with H. Anderson and Co. for the purchase of a coconut oil machinery. It is stated in
their agreement that we can therefore make no guarantee as to prices and delivery, it being understood that
prices charged will be those shown on the invoices of the manufacturers, and shipment will be made by first
possible opportunity.
Subsequently, Soler (petitioner) sold to Edward Chesley (defendant) all his rights and interest in the contract
(dated November 1918) entered into between Soler and Anderson. In the contract between the parties herein,
it was stipulated that a part of the aforesaid machinery is at this time on the way, the other part being already
in this city of Manila, the price of which has not yet been paid by Mr. Soler to Wm. H. Anderson and Co. Since
Chesley is interested in acquiring the said machinery, parties herein further agreed that Chesley will assume
the obligation to pay Anderson and Co. for the amount unpaid in the invoices. The purchase price of the
machinery was P100, 000.
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Of the parts of the machinery covered by these contracts, only the "filter press," the "cooker" and the "chains"
were in Manila on November 1918 but the most important parts, such as the "oil expellers" and the "grinding
mills" were not then yet in the city. The important parts arrived only on August 1919. These effects were
received and paid for by the defendant under protest, on account of the fact that they were not delivered within
the period stipulated in the contract.
Sometime in April 1919, Mr. Chesley sent a letter to Mr. Soler asking that their contract be rescinded and
repayment of the sums advanced to Anderson & Co.
Soler brought an action before the Court asking the defendant to pay him the remaining balance of the
purchase price of the said machinery. As a defense, Mr. Chesley claimed that he entered into the contract
based on the representation of the plaintiff that the other parts of the machinery were on the way while in fact
the machinery did not arrive but long thereafter. Otherwise, he would not have signed the contract.
ISSUE:
What is the effect of the non-fulfillment of the express representation?
RULING:
Mr. Chesley is discharged from all the obligations contracted by him with Anderson and Co., relative to the
payment of the price of the machinery. SC find that the Mr. Soler has failed to carry out his obligation and,
therefore, has no right to compel the defendant to comply with his obligation to pay the plaintiff the sum
claimed in the complaint. With regard to the counterclaim set up by the defendant, it appears from the record
that he sold the aforesaid machinery to a third person, the Philippine Refining Co. In cases like this, the
rescission of the contract does not lie (art. 1295, Civil Code).
It appears sufficiently established in the record that if Mr. Chesley gave his consent to this contract, it was
because he expected that said machinery would arrive within a short time, the time reasonably necessary
for such machinery to reach Manila from America, as Mr. Soler asserted in the document itself that said
machinery was then on the way. The act of the defendant in insisting that this guaranty as to the arrival of the
machinery be stated in the contract, his repeated complaints and protests when he afterwards made
payments as the parts arrived, and his letter of April 1919, leave no room for doubt that the arrival of said
machinery within a reasonably short time was one of the determining elements of his consent. These acts of
the defendant disclose the fact that he intented the arrival of the machinery to be an essential element of the
contract (art. 1282, Civil Code).
We hold that in the case at bar the arrival of the machinery within a reasonable time was an essential element
of the contract, such time to be determined by taking into account the fact that is was then on the way to
Manila.
The fact that the plaintiff had no control of the prompt transportation of the said machinery to Manila, does not
relieve the plaintiff from making good the guaranty inserted in the contract that said machinery was already on
the way to Manila. The plaintiff elected to bind himself in that way, although he knew, as he ought to have
known that, had his rights not been transferred to the defendant, he could not have charged Messrs. Anderson
and Co. so much, who in their contract did not guarantee the delivery nor the amount of the price. The plaintiff
having bound himself in favor of the defendant for more than what Anderson and Co. had bound themselves
for in his favor, we entertain no doubt that he acted in good faith, encouraged by the information of Anderson
and Co., but it was he, not Anderson and Co., who contracted the obligation, and, therefore, he is the only one
to be responsible for the obligation arising from the contract. He who contracts and assumes an obligation
is presumed to know the circumstances under which said obligation can be complied with.
I.
Subsection I Warranty in case of Eviction

Concept
Eviction is the deprivation of the vendee of the whole or a part of the thing sold by
virtue of a final judgment based on a right prior to the sale of an act imputable to the
vendor.
A. Requisites
There must be a final judgment depriving the vendee of the whole or
part of the thing sold. (1548)
The vendee need not appeal from the decision in order that
the vendor may become liable for eviction. (1549)
The deprivation is based on a right to the sale or an act to the vendor
(1548)
Vendor must have been notified of the suit for eviction at the instance of
the vendee (1558)
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CASES: Seller is summoned
MARIA LUISA DE LEON ESCALER and ERNESTO ESCALER, CECILIA J. ROXAS and PEDRO ROXAS
vs. COURT OF APPEALS, JOSE L. REYNOSO, and AFRICA V. REYNOSO
G.R. No. L-42636 August 1, 1985
Topic: Warranty against eviction
Facts
On March 7, 1958, the spouses Africa V. Reynoso and Jose L, Reynoso sold to petitioners several others, a
parcel of land, situated in Antipolo, Rizal. The Deed of Sale contained the following covenant against eviction,
to wit:
That the VENDOR is the absolute owner of a parcel of land ... the ownership thereof being evidenced
by an absolute deed of sale executed in her favor by registered owner ANGELINA C. REYNOSO, ...;
That the VENDOR warrants valid title to and ownership of said parcel of land and further, warrant to
defend the property herein sold and conveyed, unto the VENDEES, their heirs, and assignees, from
any and all claims of any persons whatsoever.
On April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources Development, Inc. filed Case
No. 4252 before the Court of First Instance of Rizal for the cancellation of OCT No. 1526 issued in the name
of Angelina C. Reynoso (predecessor-in-interest of private respondents-vendors) on February 26, 1958, on
the ground that the property covered by said title is already previously registered in the name of A. Doronilla
Development, Inc. Petitioners as vendees filed their opposition to the said petition.
On June 10, 1964, an Order was issued in the said case, the dispositive portion of which reads:
IN VIEW OF THE ABOVE CONSIDERATIONS, this Court is constrained to set aside Decree No. 62373
issued in LRC. Rec. No. N-13783 and the Register of Deeds of Rizal is directed to cancel OCT No. 1526 of his
office and all Transfer Certificates of Title issued subsequently thereafter to purchaser of said property or
portions thereof, the same being null and void, the expenses for such cancellation to be charged to spouses
Angelina Reynoso and Floro Reynoso. The owner's duplicates in the possession of the transferees of the
property covered by OCT No. 1526 are declared null and void and said transferees are directed to surrender
to the Register of Deeds of Rizal, said owner's duplicates for cancellation.
The other reliefs sought for by the party oppositors are denied the same not falling within the jurisdiction of this
Court under this proceeding.
On August 31, 1965, herein petitioners, spouses Maria de Leon Escaler and Ernesto Escaler and spouses
Cecilia J. Roxas and Pedro Roxas, filed a civil case against their vendors spouses Jose L. Reynoso and Africa
Reynoso for the recovery of the value of the property sold to them plus damages on the ground that the latter
have violated the vendors' "warranty against eviction."
The complaint among others, alleged that the Order issued in Case No. 4252 which cancelled the title of
Angelina C. Reynoso and all subsequent Transfer Certificates of Title derived and/or emanating therefrom and
which includes the titles of petitioners, is now final, and by reason thereof petitioners lost their right over the
property sold; and that in said Case No. 4252, the respondents were summoned and/or given their day in
court at the instance of the petitioners.
Issue
Whether or not petitioners as vendees had given private respondents-vendors, formal notice of the eviction
case as mandated by Arts. 1558 and 1559 of the New Civil Code.
Held
Petitioners as vendees had not given private respondents-vendors, formal notice of the eviction case as
mandated by Arts. 1558 and 1559 of the New Civil Code.
Article 1548, in relation to Articles 1558. and 1559 of the New Civil Code reads as follows:
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.
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The contracting parties, however, may increase, diminish, or suppress this legal obligation 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. (emphasis supplied)
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 as co-defendant.
In order that a vendor's liability for eviction may be enforced, the following requisites must concura) there
must be a final judgment; b) the purchaser has been deprived of the whole or part of the thing sold; c) said
deprivation was by virtue of a right prior to the sale made by the vendor; and d) the vendor has been
summoned and made co-defendant in the suit for eviction at the instance of the vendee.
In the case at bar, the fourth requisitethat of being summoned in the suit for eviction at the instance of the
vendeeis not present. All that the petitioners did, per their very admission, was to furnish respondents, by
registered mail, with a copy of the opposition they (petitioners) filed in the eviction suit. Decidedly, this is not
the kind of notice prescribed by the aforequoted Articles 1558 and 1559 of the New Civil Code. The term
"unless he is summoned in the suit for eviction at the instance of the vendee" means that the respondents as
vendor/s should be made parties to the suit at the instance of petitioners-vendees, either by way of asking that
the former be made a co-defendant or by the filing of a third-party complaint against said vendors. Nothing of
that sort appeared to have been done by the petitioners in the instant case.
Warranty against eviction: Seller is duly summoned
BEATRIZ G. VDA. DE DIOS vs. LEANDRO BALAGOT
G.R. No. L-24103, August 10, 1967
Facts
An action for recovery of possession of land was filed on January 24, 1963 by Beatriz G. Vda. de Dios against
Leandro Balagot, in the Court of First Instance of Rizal, Quezon City branch. Plaintiff alleged in her complaint
that she is the registered owner of 1,296 square meters of land situated in Quezon City covered by Transfer
Certificate of Title No. 52577 issued in her name on September 6, 1960; that she had purchased the same
from J.M. Tuason & Co., then the registered owner of the land under Transfer Certificate of Title No. 49235;
that "prior to September 6, 1960 up to the present" defendant has been in possession of a portion of about
600 square meters of said parcel of land, without the knowledge and tolerance of J. M. Tuason & Co.; and that
in spite of demands on him by plaintiff and her predecessor-in-interest, defendant has failed and refused to
vacate the land and remove his house and other construction thereon.
The defendant, on February 12, 1963, filed an answer with a counterclaim. Plaintiff, on February 19, 1963,
answered defendant's counterclaim. On March 14, 1963 the court set the case for hearing on May 17, 1963.
Prior to this scheduled date, however, on April 1, 1963, defendant filed a motion for leave to file a third-party
complaint, attaching the same to the motion, against J. M. Tuason & Co. and Pedro Deudor, for payment of
the value of the house and lot in case of eviction.
Plaintiff, served with notice of the motion, opposed it on April 6, 1963, stating that a third-party complaint to
enforce the warranty of eviction should have been filed before the time for filing the answer, citing Article 1559,
Civil Code; and that the Tuason-Deudor agreement defendant mentioned has been declared rescinded, citing
this Court's ruling in J. M. Tuazon & Co. v. Sanvictores, L-16836, January 30, 1962.
Issue
1. Is the third-party complaint admissible or not?
Held
As a rule, the admission of a third-party complaint is left to the discretion of the trial court. The present case,
however, involves a third-party complaint seeking to enforce a vendor's warranty in case of eviction. And
pursuant to express provision of Article 1558 of the Civil Code, a defendant-vendee in a suit for eviction must
summon in said suit his vendor, otherwise the latter shall not be obliged to make good his aforesaid warranty.
As stated, appellee's contention is that this summoning of the vendor should take place before the answer is
filed, under Art. 1559 of the Civil Code stating that 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.
The act of summoning the vendor can be accomplished either under Article 1559 of the Civil Code, by asking
that said vendor be made a co-defendant, in which case the request should be made within the time for
answering the complaint; or thru the filing of a third-party complaint against said vendor, under Sec. 1, Rule
12, now Sec. 12 of Rule 6 of the Rules of Court, which provides that a third-party complaint is a claim that a
defending party may, with leave of court, file against a person not a party to the action, called the third party
defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponent's claim.
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In the first case, the vendor is summoned by being made a co-defendant; in the second, by being made a
third-party defendant. From this it can be seen that a third-party complaint filed after the answer but before
trial is not late; Article 1559's time-limit does not apply thereto. And Sec. 2 of Rule 12 of the old Rules of Court,
then applicable, provided that after service of his answer, defendant may, with notice to plaintiff, move for
leave as third-party plaintiff to file a complaint against a third-party defendant.
As adverted to above, in this case, the third-party complaint, as against Pedro Deudor, seeks enforcement of
the warranty against eviction. The same is thus required by law to be resorted to instead of being left to be
filed as a separate action. If not raised in the action for eviction, the same will not prosper and the vendor will
be released from his warranty. Not only does the admission of the third-party complaint against Pedro Deudor,
avoid multiplicity of suits; it is necessary for defendant to enforce said warranty against his vendor.
As regards J.M. Tuason & Co., and defendant, however, no relationship of vendor and vendee obtains and the
third-party complaint does not partake of the nature of an enforcement of a warranty against eviction; rather, it
seeks to enforce the Tuason-Deudor agreement. As such, the trial court properly disallowed the same. Article
1558 of the Civil Code requires defendant in eviction to summon to the suit his vendor, in this case Pedro
Deudor; non-parties to the sale, such as J.M. Tuason & Co., do not have to be summoned therein; hence,
there being no necessity for inclusion of J.M. Tuason & Co., the disallowance of the third-party complaint
against it was not erroneous.
OTHER CASES OF RE EVICTION:
Power Commercial and Industrial Corp. vs CA, 274 SCRA 579
see ANG vs CA
Uy vs. Ariza
G.R. No. 158370; August 17, 2006
Warranty in case of eviction
FACTS:
Spouses Michael and Bonita Uy, petitioners, purchased 200 square meters of the parcel of land. The said
parcels form part of a bigger parcel of land owned by the Arizas. The contract stipulated that petitioners had
the right of choice to designate which portion of the bigger parcel of land would be the subject of the sale.
Petitioners exercised their right to choose, selected and in fact occupied around 200 square meters of a
portion of land. Petitioners purchased another 200 square meters from the same with the same option to
choose which portion. They selected and occupied an adjoining portion to the lot in their first sale. It appears
that the parcels of land petitioners had chosen and occupied were already titled in the names of the Delgados.
Thus, at the time of the first sale by the respondents to petitioners, the two parcels of land had been cancelled
and were already part of the claimed lot by the Delgados.
Petitioners were sued for unlawful detainer by the Delgados. Petitioners entered into a compromise
agreement with the Delgados and surrendered possession of the subject parcels of land. Petitioners
compromised the case without giving notice to respondents.
Thereafter, petitioners demanded from respondents that they be allowed to choose again. When respondents
refused, petitioners filed a case for specific performance with delivery of possession of real property and
damages.
Petitioners anchored their claim for specific performance on the averment that they "could not exercise their
right to choose the portion bought from the parcel of land afore-described because the portion pointed out by
the petitioners were already sold and claimed by third persons.
On the other hand, respondents alleged that they had already complied with their obligation to deliver, as
petitioners had already chosen and been in possession of the parcels of land they chose. Respondents also
faulted petitioners for losing possession of the parcels of land by entering into a compromise agreement with
the Delgados on two grounds: first, because respondents have allegedly initiated the necessary legal steps to
defend their possessory rights to the disputed land by filing a case for the declaration of nullity of the title of
the Delgados, and second, because petitioners failed to interpose a third-party complaint to implead
respondents in the unlawful detainer case.
Trial Court denied the Arizas motion to dismiss. This prompted herein respondent to file before the Court of
Appeals on certiorari and prohibition. The Court of Appeals held that petitioners had no cause of action to file
a case of specific performance against respondents. It ruled that the proper remedy of the petitioners is an
action for enforcement of warranty against eviction.
ISSUE:
1.
Whether or not spouses Uy can still exercise their right to choose again from the bigger parcel of land;
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2.
Whether or not an action for warranty in case of eviction against the Arizas would prosper.
RULING:
1.
On petitioners right to choose again.

SC ruled that spouses Uy can no longer exercise their right to choose having entered into a compromise
agreement with the Delgados.
The case for specific performance which was filed by petitioners against respondents is not the proper
remedy in this case. Rather, said action was purely an afterthought on the part of petitioners when they
were eventually evicted from the lots they bought from respondents. If petitioners have a cause of action
against respondents, it would be one for the enforcement of warranty against eviction and not one for
specific performance.
It is clear that respondents were able to deliver the said parcels of land to petitioners. It could not be said
that petitioners were deprived of their choice on which parcel of land they were to buy and occupy. The
fact that they even decided to buy the lot adjacent to the first lot they bought would clearly indicate that
the said lots were their choice. Moreover, petitioners had been enjoying possession of the same until an
unlawful detainer case was filed against them by third persons. After having enjoyed the property for
sometime, petitioners cannot now come before the court claiming that respondents failed to deliver the
property subject of the sale.
2.
On the action for warranty in case of eviction

SC ruled that even if the petitioners filed an action for warranty in case of eviction. The same will not
prosper.
In order that a vendors liability for eviction may be enforced, the following requisites must concur
a) there must be a final judgment;
b) the purchaser has been deprived of the whole or part of the thing sold;
c) said deprivation was by virtue of a right prior to the sale made by the vendor; and
d) the vendor has been summoned and made co-defendant in the suit for eviction at the instance of
the vendee.
In the case at bar, the fourth requisite that of being summoned in the suit for eviction at the instance of
the vendee is not present. The records of the case reveal that the unlawful detainer case filed by third
persons against petitioners, which led to the ouster of the latter from the subject lots, was decided by
compromise agreement without impleading respondents as third-party defendants. It should be stressed
that in order for the case to prosper, it is a precondition that the seller must have been summoned in the
suit for the eviction of the buyer.
B. Kinds of deprivation or tresspass

Deprivation in law
Deprivation in fact
JOSE O. BARRIOS (deceased) (substituted by son Joselito Barrios) vs. COURT OF APPEALS,
HERACLEO B. VILLACIN, JR. and VICENTE B. VILLACIN
G.R. No. L-32531 August 31, 1977
Topic: Warranty against eviction
Facts
A certain Lorenzo Montano was the original registered owner of a large tract of land situated in Barrio Mabini
Cadiz, Negros Occidental. Ownership was evidenced by Original Certificate of Title No. F-1670 entered under
her name pursuant to Free Patent V-4415 issued to her on June 13, 1956.
However, prior to March 25, 1960, the area in controversy was part of the forestal zone. This notwithstanding
and before its release from the forestal zone, a certain Graciano Lamis entered the same and from then on,
was known to be in continuous and uninterrupted possession and occupation thereof, cultivating of the land.
On March 25, 1960, that area was declared part of the disposable patrimony of the State. On September 6,
1962, Lorenzo Montano sold her land to the petitioner herein Transfer Certificate of Title was issued in the
name of petitioner, Jose O. Barrios.
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On March 27, 1963, Graciano Lamis sold his rights over the area in controversy to a certain Virgilio Butaz.
However, on March 5, 1964, Lamis repurchased the same from Butaz and on the same day, Lamis sold all his
rights and interests in the controverted area and all the improvements found therein to respondents Villacins,
the sale being unsupported by any kind of evidence of title of the vendor, Lamis.
Meanwhile, Barrios received information that his land was being sold by one Valentine Botas, whom he
erroneously thought to be the vendor, to Mayor Heracleo Villacin, Sr. of Cadiz City and the father of herein
respondents. On March 31, 1964, petitioner thru his lawyer, sent a letter to Mayor Villacin informing the later of
the true ownership of the land.
Despite this letter, the mayor's men using tractors bearing the mayor's initials, entered and occupied, on April
7, 1964, the middle portion of the petitioners property and threatened petitioner's encargado, Bienvenido C.
Artegena, with bodily harm unless he vacates the premises.
On April 15, 1964, another letter was sent by the petitioner reiterating his ownership and demanding that the
mayor vacate the premises. There being non-compliance with said demand, Barrios filed a civil case for
forcible entry against the Mayor.
Issue
Whether or not the Villacins are buyers in good faith.
Held
The Villacins are not in good faith. When they bought the land from Lamis, the latter could not and did not at
any time produce any title or application to said land.
Well settled is the rule that,
The law protects to a greater degree a purchaser who buys from the registered owner himself. Corollarily, it
requires a higher degree of prudence from one who buys from a person who is not the registered owner,
although the land object of the transaction is registered. While one who buys from the registered owner does
not have to look behind the certificate of title, one who buys from one who is not the registered owner is
expected to examine not only the Certificate of Title bull all factual circumstances necessary, for him to
determine if there are any flaws in the title of the transferor, or in his capacity to transfer the land.
If such a degree of prudence is required of a purchaser of registered land from one who shows a Certificate of
Title but who appears not to be the registered owner, more so should the law require the utmost caution from
a purchaser of registered land from one who could not show any title nor any evidence of his capacity to
transfer the land. Failing to exercise caution of and kind whatsoever, as in the case of the respondents
Villacins, is tantamount to bad faith.
Barrios sent letters to the father of the respondents informing him of the true ownership of the aforesaid land.
It must be noted that it was never controverted in the trial that men of the mayor entered the premises of the
petitioner and that land tractors bearing the initials of the mayor were used. This being so, the mayor had
knowledge that his sons bought the land. Learning of this information, the more it is required of the
respondents that exercise of prudence required by law in inquiring as to the status of the land they bought. But
instead, they did nothing but took possession of the land and started planting sugar cane thereon.
The Villacins herein knew of the case of forcible entry brought by petitioner against their father, Mayor Villacin,
Sr., under the impression that the latter was the vendee. Such knowledge was a warning to them that the land
they bought is subject to the claim of other parties, but again they continued in their possession of the land
and planting thereon.
Considering these facts, the Court is constrained to hold that the respondents cannot now come to this Court
claiming the benefit of being purchasers of registered land in good faith.
Art. 256 of the New Civil Code is clear.
Art. 526: He is deemed a possessor in good faith who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it.
He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing.
In interpreting the above quoted provision, the Court has repeatedly ruled that if circumstances exist that
require a prudent man to investigate, and he does not, he is deemed to have acted in mala fide. A party's
mere refusal to believe that a defect exists or his willful closing of his eyes to the possibility of the existence of
a defect in his vendor's title will not make him an innocent purchaser for value, if it afterwards develops that
the title was in fact defective. Similarly, a buyer of registered land who fails to act with the diligence of a
prudent man cannot be a purchaser in good faith.
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C. Effect of warranty/Vendors Liability in case of eviction/Waiver of
warranty
I.
There is stipulation exempting the vendor from the obligation to answer
for eviction
Vendor acted in BF the waiver shall be void (1553) and vendor
shall be liable for the following:
1. The return of the value which the thing sold had at the time of
the eviction, be it greater or less than the price of the sale;
2. The income or fruits, if he has been ordered to deliver them
to the party who won the suit against him;
3. The costs of the suit which caused the eviction, and, in a
proper case, those of the suit brought against the vendor for
the warranty;
4. The expenses of the contract, if the vendee has paid them;
5. The damages and interests, and ornamental expenses, if the
sale was made in bad faith. (1555)
Vendor acted in good faith
If vendee made the waiver without knowledge of the risks of
eviction (waiver consciente), he shall pay only the value of
the thing sold at the time of eviction
If vendee made the waiver, with knowledge of the risks of
eviction
and
assumed
the
consequences
(waiver
intencionada), the vendor shall not be liable.
CASES of INTENTIONAL WAIVER
Andaya et. al vs. Manasala
G.R. No. L-14714; April 30, 1960
Intentional waiver of warranty against eviction by the buyer/vendee
FACTS:
Isidro Fenis sold the land in question to Eustaquia Llanes, with right of repurchase within a
period of five years. After the expiry of said period, and without repurchasing the said
property, Isidro Fenis sold it again to Maria Viloria. Maria Viloria sold by way of sale with
right to repurchase within a period of one year, the said property together with another
parcel of land to the herein defendant Melencio Manansala. Upon the expiry of the said
period, Manansala registered with the Register of Deeds an affidavit consolidating his title
on the property. Thereafter, Maria Viloria sold by way of absolute sale the same property to
Ciriaco Casio, Fidela Valdez, and the plaintiff spouses Ariston Andaya and Micaela Cabrito.
Because of subsequent sales, Eustaquia Llanes instituted a civil case to quiet title and to
recover possession of said parcel from Ciriaco Casio. Defendant Melencio Manansala sold
by way of absolute sale, the property in question to the spouses Ciriaco Casio and Fidela
Valdez, and the plaintiffs for P1,500.00. The deed contained the stipulation, that from and
after this date, the vendee herein named are the lawful owners of the land herein sold which
I warrant to be free from all kinds of liens and encumbrances whatever and in case of
eviction, I promise, agree and covenant to answer to and for the vendee in the form and
manner provided by law.
In the meantime, Eustaquia Llanes included as co-defendants Melencio Manansala. Fidela
Valdez and the spouses Andaya and Micaela Cabrito. The civil case filed by Llanes ruled in
favor of her. The judgment became final and a writ of execution was issued against Casino,
Valdez, Andaya and Cabrito.
Aggrieved, spouses Andaya and Cabrito filed a case against Manansala to recover
damages suffered by reason of the latters breach of warranty of title or against eviction
embodied in his sale of the land in question to plaintiffs.
Defendant Manansala denied liability for the damages claimed, and alleged that it was
plaintiffs and their co-purchasers who pleaded with him to sell said land to them at a low
price after they had been sued by Eustaquia Llanes, considering that Manansala had
registered the land in his name with the office of the Register of Deeds.
ISSUE:
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1.
Whether or not there was an intentional waiver of warranty of eviction made by spouses
Andaya and Cibrato (buyers/ vendees).
2.
Whether or not Manasala (vendor) is liable for payment of the price of the land at the
time of eviction.
RULING:
1.
On the issue of waiver of warranty of eviction
SC ruled that spouses Andaya and Cabrito had waived the warranty against eviction. At the
time that they purchased the land in question, they knew of the danger of eviction.
The vendor's liability for warranty against eviction in a contract of sale is waivable and may
be renounced by the vendee (last par., Art. 1475, Old Code; last par., Art. 1548, New). The
contract of sale between Manansala and spouses Andaya and Cabrito included a stipulation
as to the warranty. The lower court found that the parties understood that such stipulation
was merely pro forma and that the Manasala was not to be bound thereby, in view of the
fact that the same land had been previously bought by petitioners from Maria Viloria and
that their only purpose in buying the same again from Manansala was to enable them to
register their prior deed of sale; and the further fact that when the sale between the parties,
the property was already the subject of a pending litigation between petitioners and one
Eustaquia Llanes, who claimed its title and possession by virtue of an earlier sale from the
original owner. It was by final judgment in this litigation that petitioners were evicted from the
land. Not having appealed from the decision of the court below, petitioners are bound by
these findings, the implication of which is that they not only renounced or waived the
warranty against eviction, but that they knew of the danger of eviction and assumed its
consequences.
2.
On vendors liability for payment of the price of the land at the time of eviction.
As already stated, petitioners knew of the danger of eviction at the time they purchased the
land in question from defendant, and assumed its consequences. Therefore, Manansala is
not even obliged to restore to them the price of the land at the time of eviction, but is
completely exempt from liability whatsoever.
LEOCADIA ANGELO vs. CIPRIANO PACHECO

G.R. No. 32984
September 8, 1931
Topic: Kinds of Waiver of Warranty: Intencionada

Facts
On July 14, 1920, Angelo executed a deed of sale to Pacheco conveying a parcel of land
consisting of some 659 hectares in area situated in the municipality of Paniqui, Tarlac, and
five carabaos, for P13,500, of which the defendant paid P5,500 and promised to pay the
balance of P8,000 on or before the month of March, 1921. By that deed of sale, Pacheco
waived his right to warranty in case of eviction. In 1924, wishing to dispose freely on the
land but prohibited from doing so be a certain clause in the deed, Pacheco asked Angelo to
sign another deed eliminating that prohibition. The second deed of sale also provided for the
waiver of warranty in case of eviction. On the same date the defendant executed the
promissory note for P8,000 payable in three years from the date thereof, and secured the
payment of that amount with a real estate mortgage. But the land which the plaintiff sold to
the defendant through the deeds was at that time the subject of litigation as follows:
On July 2, 1920, or about twelve days before the sale of the realty, Angelo had instituted
proceedings for the registration of said land. Pacheco was aware of this action when the
sale took place on the 14th of the month that year, and he had even been told by Attorney
Natividad who the probable opponents would be. From that time on the defendant was in
charge of the registration proceeding the plaintiff taking no part therein, and he succeeded
in obtaining judgment on September 1923, decreeing the registration of the land in the
name of Leocadia Angelo, whose name had been retained as that of the party applicant. On
July 1924, the proper decree was issued in the name of Angelo. A month had already
elapsed when the deed of sale and the promissory note, as well as the mortgage, had been
executed.
On October 1924, a motion for the review of the decree was filed by the Director of Lands
and by two large groups of private opponents. On May 25, 1925, when the defendant
Cipriano Pacheco already appeared as the owner of the property, with a certificate of title,
he filed his answers to the petitions for review, and after a hearing thereon, the court set
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aside on June 23, 1925, the decree issued to Leocadia Angelo, the plaintiff herein, and the
transfer certificate of title in the name of the defendant Cipriano Pacheco.
From that decision an appeal was taken both by the latter and by Lucia F. de Valle Cruz to
whom the property had been sold by Cipriano Pacheco, the Supreme Court on December
31, 1926, affirmed the order setting aside the decree and the transfer certificate of title, but
"declaring that the appellant Lucia F. de Valle Cruz, or her successors in interest, shall have
a lien upon the land" for the sum of P15,000 with interest at the rate of 12 per cent per
annum from July 23, 1924, and with the right to foreclose the mortgage, in default of
payment, as provided in sections 254-259 of the Code of Civil Procedure, except that in the
sale under such foreclosure, the portions of the land occupied by the petitioners for review
should not be sold until the portions not so occupied have been sold and the proceeds of
the sale found insufficient for the satisfaction of the lien. In all other respects, the appealed
order was affirmed.
Later on Lucia F. de Valle Cruz brought an action against Cipriano Pacheco and obtained
judgment in the Court of First Instance of Tarlac in civil case No. 2459 on January 31, 1928,
for the same mortgage credit of P15,000 with the interest mentioned above.
Issue
Does the warranty obligation still bind Angelo as the vendor of that land?
Held
Pachecos formal and express waiver of warranty in case of eviction under the authority of
the last paragraph of article 1475 in the Civil Code, answers this question in the negative.
The evidence in this case shows that Leocadia Angelo took no part in the proceedings of
the reopening of the decree; that it was Cipriano Pacheco himself, the defendant herein,
who did so, and who is therefore to blame for not entering the denial for lack of which this
court assumed that allegation to be true. In the second place, even assuming for a moment
that the deliberate misrepresentation to which this court referred were chargeable to
Leocadia Angelo, such a falsehood in connection with the registration proceeding has
nothing to do with the eviction or its antecedents and consequences. The bad faith which
annuls the waiver according to article 1476, invoked by appellant's counsel, must bear some
relation to the fact or facts giving rise to eviction.
Not only did the defendant make a formal and express waiver of warranty for eviction, but
perhaps because he was convinced that he had waived that right entirely he failed to
notify the vendor, Angelo, or to have her summoned for the reopening of the decree, when
she should have done so because he was in danger of losing the property, as he indeed
did. For failure of that notice, the plaintiff is not bound to warranty, according to article 1481
of the Civil Code.
II.
Where no warranty has been agreed upon or there was no

stipulation
Vendor acted in bad faith vendors liability will be the same as
enumerated above
Vendor acted in good faith vendors liability will be only as to
nos. 1 to 4
E. Partial eviction (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; or
enforcement of the vendor's liability for eviction.
The same rule shall be observed when two or more things have been jointly
sold for a lump sum, or for a separate price for each of them, if it should
clearly appear that the vendee would not have purchased one without the
other.
CASES:
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Effect of sale of property excluded from the chattel mortgage
DE LA RIVA vs. AH KEE
G.R. No. L-40279, November 14, 1934
Facts
On October 26, 1928, the Panabutan Lumber & Plantation Co., Inc., executed an instrument whereby it
constituted a chattel mortgage on certain personal and real properties in favor of the Philippine National Bank
to secure payment of the sum of P120,000.
On February 15, 1930, judgment was rendered in civil case No. 1676 of the Court of First Instance of
Zamboanga, entitled Ah Kee et al., vs. Panabutan Lumber & Plantation Co., Inc., in favor of the therein
plaintiffs.
On November 20, 1930, the first writ of execution of said judgment was issued. By virtue of said writ,
provincial sheriff of Zamboanga, on December 24, 1930, attached certain properties of the Panabutan Lumber
& Plantation Co., Inc., which were not included in the mortgage in favor of the Philippine National Bank.
Inasmuch as the plaintiffs in whose favor the execution was to be made could not deposit the estimated
amount of the expenses and costs of execution, the sale of the attached properties could not be made and
said sheriff had to return to Zamboanga. The attached properties, together with those bought by the Philippine
National Bank at the foreclosure sale of the chattel mortgage constituted in its favor by the Panabutan Lumber
& Plantation Co., Inc., were delivered under receipt to E. A. Robertson.
During the pendency of case No. 1683 entitled Torrejon Jurika & Co., Inc., Ah Kee et al. vs. Panabutan
Lumber & Plantation Co., the Philippine National Bank and Luis Panaguiton, as provincial sheriff of
Zamboanga, wherein annulment of the chattel mortgage executed by the Panabutan Lumber & Plantation Co.,
in favor of the Philippine National Bank was sought and a writ of preliminary injunction which was later
dissolved had been issued, said bank, with Ah Kee's opposition, ordered said provincial sheriff to foreclose
said mortgage and sell all the mortgaged properties at public auction, which said sheriff did on December 24,
1930, with said Philippine National Bank as the highest bidder. When on February 19, 1931, judgment was
rendered in said civil case No. 1683 declaring said chattel mortgage null and void with respect to the real
properties included therein, all the properties covered thereby had already been sold to the Philippine National
Bank. All the properties of the Panabutan Lumber & Plantation Co., however, were not included in said
mortgage. The defendant Philippine National Bank received a copy of said decision from its attorney at
Zamboanga on February 28, 1931 and on May 14, 1931, said bank received notice from its attorney that the
decision in question had become final.
Inasmuch as the properties, the inclusion of which in the chattel mortgage was declared null and void, were
not specified in the decision of February 19, 1931, rendered in said civil case No. 1683, the court, on April 8,
1931, upon motion of Ah Kee, entered an order enumerating all the real properties excluded from the
mortgage, but not all those included therein. This gave rise to Ah Kee's appeal from said order. The appeal,
however, was not continued because the attorney for the Philippine National Bank had agreed to exclude all
the houses and buildings of whatever kind or description from the mortgage constituted in favor of said bank.
The stipulation was approved by the court in an order dated July 8, 1931. Said attorney for the Philippine
National Bank was not authorized to make said stipulation.
On December 4, 1931, the defendant-appellant Philippine National Bank sold to the plaintiff-appellant Antonio
de la Riva all the properties acquired by it in the sale of December 24, 1930, resulting from the foreclosure of
the chattel mortgage constituted by the Panabutan Lumber & Plantation Co.
On January 13, 1932, another writ of execution was issued in favor of Ah Kee in said civil case No. 1676 and
the properties which were not included in the mortgage as well as those which were excluded therefrom in the
order of April 8, 1931, and in the stipulation of July 8,1931, were attached on February 22, 1932, by the then
provincial sheriff Jose Bucoy. Serafin de la Riva, Antonio de la Riva's attorney in fact, was notified by deputy
sheriff Jose G. Fernando of the second writ of execution issued in favor of Ah Kee and was required to
surrender all the properties of the Panabutan Lumber & Plantation Co. in his possession which were not
covered by the mortgage and which had been attached by the sheriff by virtue of the first writ of execution
(Exhibits 21, 22 and 23-Ah Kee and Bucoy).
On March 2, 1932, plaintiff-appellant Antonio de la Riva filed a third party claim of better right to all the
properties attached by virtue of the first and second writs of execution, alleging that he had bought them from
the Philippine National Bank.
Issue:
1.
Whether or not the defendant-appellant Ah Kee is entitled to the real properties belonging to the
Panabutan Lumber & Plantation Co., which were excluded from the chattel mortgage.
Ruling:
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As was seen from the above statement of facts, the defendant-appellant, Ah Kee, obtained judgment in his
favor in civil case No. 1676 against the Panabutan Lumber & Plantation Co. A writ of execution was issued
against said Panabutan Lumber & Plantation Co. and its real properties which were excluded from the chattel
mortgage and those which were not included therein were attached. This writ of execution could not be
proceeded with, however, as it had to be dissolved because Ah Kee, as attachment-creditor, could not deposit
the expenses for the execution and had consequently lost his right to retain them. Another writ of execution
was later issued and the same properties were attached by virtue of said judgment in favor of Ah Kee but the
plaintiff-appellant Antonio de la Riva filed a third party claim of better right by virtue of the sale of said
properties to him by the defendant-appellant Philippine National Bank. Inasmuch as Ah Kee, upon being
required by the sheriff to file the necessary bond for his protection, failed to do so, the latter was compelled to
dissolve the writ of attachment. For the second time, therefore, the defendant-appellant Ah Kee lost his Right
of retention over said properties.
For the foregoing considerations, this court is of the opinion and so holds: (1) That a mortgage creditor, who
purchases real properties at an extrajudicial foreclosure sale thereof by virtue of a chattel mortgage
constituted in his favor, which mortgage has been declared null and void with respect to said properties,
acquires no right thereto by virtue of said purchase; and (2) neither does the subsequent purchaser of said
properties acquire any right to the real properties which were excluded from the chattel mortgage, and upon
being evicted therefrom by virtue of a judgment declaring that the vendor had no right the properties which
had been excluded from the chattel mortgage constituted in the latter's favor and which said vendor
purchased in the foreclosure sale thereof, said subsequent purchaser is entitled to be indemnified for the
value thereof at the time of the eviction.
Warranty in auction sale

Vizzara vs Rodriguez
Article 1560
Warranty
(easement/servitude)
against
hidden
encumbrance
for
immovables
I.
Requisities for vendors liability

The easement must be non apparent
It must not have been mentioned in the agreement
It must be of such nature that it must be presumed that the vendee would not
have acquired the immovable had he been aware thereof.
II.
Vendees remedies should it be encumbered with any non apparent

easement or servitude
Within one year from the execution of the deed of sale, the vendee may ask
for:
1. Rescission, OR
2. Damages
III.
After one year

Damages, within a period of one year from the discovery fo the easement or
servitude.
When not liable

Easement is apparent
Non apparent encumbrance is recorded in the Registry of Property unless
there is an express warranty that the thing is free from all burdens and
encumbrances
Vendee had knowledge at the time of the sale of the existence of the
easement or servitude, though it was non apparent, such as when it was
mentioned in the agreement.
CASE:
GOODYEAR PHILIPPINES, INC., vs. ANTHONY SY and JOSE L. LEE,
G.R. No. 154554, November 9, 2005
Facts:
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The subject of this case involves a 1984 Isuzu JCR 6-Wheeler. The vehicle was originally owned by Goodyear
Philippines, Inc. ([Goodyear]) which it purchased from Industrial and Transport Equipment, Inc. in 1983. The
subject vehicle was stolen but was later on recovered. The vehicle was used by [Goodyear] until 1996, when it
sold it to Anthony Sy on September 12, 1996. Sy, in turn, sold it to Jose L. Lee on January 29, 1997. But the latter
on December 4, 1997, filed an action for rescission of contract with damages against Sy because he could not
register the vehicle in his name due to the certification from the PNP Regional Traffic Management Office in
Legazpi City that it was a stolen vehicle and the alarm covering the same was not lifted. Instead, the PNP in
Legazpi City impounded the vehicle and charged Lee criminally.
Upon being informed by Sy of the denial of the registration of the vehicle in Lees name, Goodyear requested on
July 10, 1997 the PNP to lift the stolen vehicle alarm status. This notwithstanding, Goodyear was impleaded as
third-party defendant in the third-party complaint filed by Sy on January 9, 1998.
A motion to dismiss was filed by [Goodyear] on March 24, 1998 on the twin grounds that the third-party complaint
failed to state a cause of action and even if it did, such cause of action was already extinguished. An opposition
thereto was interposed by Sy on April 17, 1998.
The Regional Trial Court, r failure of the third party complaint to state a cause of action, ordered it to be dismissed.
However, it was reversed by CA. Hence, this present petition.
Issue:
1.
Whether or not there has already been a prescription due to buyers inaction.
Ruling:
Gratia argumenti that there was a breach of the implied warranty against hidden encumbrances, notice of the
breach was not given to petitioner within a reasonable time. Article 1586 of the Civil Code requires that notice be
given after the breach, of which Sy ought to have known. In his Third-Party Complaint against petitioner, there
was no allegation at all that respondent had given petitioner the requisite notice.
More important, an action for damages for a breach of implied warranties must be brought within six months from
the delivery of the thing sold. The vehicle was understood to have been delivered to Sy when it was placed in his
control or possession. Upon execution of the Deed of Sale on September 12, 1996, control and possession of the
vehicle was transferred to respondent. That the vehicle had been delivered is bolstered by the fact that no
contrary allegation was raised in the Third-Party Complaint. Whether the period should be reckoned from the
actual or from the constructive delivery through a public instrument, more than six months had lapsed before the
filing of the Third-Party Complaint.
Subsection 2 - WARRANTY AGAINST HIDDEN DEFECTS

OF OR ENCUMBRANCE UPON THE THING SOLD
Article 1561 1571
I.
Warranty against Redhibitory (hidden, physical) vices (of movables)

A. Requisites
the defect must exist at the time of sale (1561)
the defect must be hidden (1561)
the vendor, however, shall not be liable for defects that are not
visible if the vendee is an expert who, by reason for his trade or
profession, should have known them (1561)
the defect must render the thing unfit for the use for which it is intended
or diminishes its fitness for such use to such an extent, that had the
vendee been aware thereof, he would not have aacquired it or would
have given a lower price for it (1561)
the action to enforce it must be made within the period provided by law
CASE: Applicability of warranty sale to sale of second hand article
Moles vs IAC
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B. Knowledge of the vendor
GENERAL RULE: The vendor shall be liable to the vendee for any hidden
defects in the thing sold, even though he was not aware thereof.
EXCEPTION: The vendor shall not be liable if there is a stipulation exempting
him from such defects and he was not aware thereof. (1566)
C. Effects of warranty against defects or vices:
a. Choices of the vendee (1567)
Remedies of the vendee in case of breach (under 1561, 1562, 1564,
1565, 1566)
Withdrawing from the contract or recission (accion redhibitoria)
Demanding a proportionate reduction in the price (accion quanti
minoris)
CASE: Effect of sale of car with hidden defects
SUPERCARS MANAGEMENT & DEVELOPMENT CORPORATION vs. THE LATE FILEMON
FLORES, substituted by his surviving spouse, NORA C. FLORES
G.R. No. 148173
December 10, 2004
Topic: Effects of Warranty against defect or vices

Facts
In the second week of December 1988, Filemon Flores, purchased from Supercars Management and
Development Corporation, an Isuzu Carter Crew Cab for P212,000.00 payable monthly with a down
payment equivalent to 30% of the price or P63,600.00. The sale was coursed through Pablito
Marquez, petitioner's salesman. Upon delivery of the vehicle, respondent paid petitioner the 30%
down payment, plus premium for the vehicle's comprehensive insurance policy amounting to
P7,374.80. The Rizal Commercial Banking Corporation (RCBC) financed the balance of the
purchase price. Its payment was secured by a chattel mortgage of the same vehicle.
A day after the vehicle was delivered, respondent used it for his family's trip to La Union. The vehicle
malfunctioned on the trip. Upon their return to Manila in the first week of January 1989, respondent
complained to petitioner about the defects of the vehicle. Marquez then had the vehicle repaired and
returned it to respondent that same day, assuring the latter that it was already in good condition. But
after driving the vehicle for a few days, the same defects resurfaced, prompting respondent to send
petitioner a letter dated January 30, 1989 rescinding the contract of sale and returning the vehicle
due to breach of warranty against hidden defects. A copy of the letter was furnished RCBC.
In response to the letter, petitioner directed Marquez to have the vehicle fixed. Thereafter, he
returned the vehicle to respondent with the assurance that it has no more defects. However, when
respondent drove it for a few days, the vehicle was still defective.
Hence, on February 1989, respondent sent petitioner another letter restating that he is rescinding the
contract of sale, a copy of which was furnished RCBC. He then returned the vehicle to petitioner. On
March 1989, respondent sent petitioner a letter demanding the refund of his down payment, plus the
premium he paid for the vehicle's insurance. Petitioner failed to comply with the demand.
Consequently, respondent stopped paying the monthly amortization for the vehicle. Subsequently,
RCBC sent respondent a letter demanding that he settle his past overdue accounts for February 15
and March 15, 1989. In reply, respondent, through a letter dated March 31, 1989, informed RCBC
that he had rescinded the contract of sale and had returned the vehicle to petitioner. This prompted
RCBC to file with the Office of the Clerk of Court and Ex-Officio Sheriff, Regional Trial Court, Quezon
City, a Petition for Extra-judicial Foreclosure of Chattel Mortgage.
A Notice of Sheriff's Sale of the vehicle was set and subsequently the auction sale proceeded as
scheduled. RCBC, being the highest bidder, purchased the vehicle. Subsequently, RCBC sold the
vehicle to a third party. On November 1989, Flores filed with the Regional Trial Court in Makati City a
complaint for rescission of contract with damages against petitioner, Marquez, Catley and RCBC.
Issue
Whether or not Flores has the right to rescind the contract of sale and to claim damages as a result
thereof.
Held
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Flores has the right to rescind the contract of sale.
Respondent's complaint filed with the RTC seeks to recover from petitioner the money he paid for the
vehicle due to the latter's breach of his warranty against hidden defects under Articles 1547, 1561,
and 1566 of the Civil Code. The vehicle, after it was delivered to respondent, malfunctioned despite
repeated repairs by petitioner. Obviously, the vehicle has hidden defects. A hidden defect is one
which is unknown or could not have been known to the vendee.
The findings of both the RTC and Court of Appeals that petitioner committed a breach of warranty
against hidden defects are fully supported by the records. The Appellate Court correctly ruled:
"The evidence clearly shows that Flores [now respondent] was justified in opting to rescind
the sale given the hidden defects of the vehicle, allowance for the repair of which he
patiently extended, but which repair did not turn out to be satisfactory.
For when by three letters, Flores declared his rescission of the sale, which rescission was not
impugned or opposed by appellants as in fact they accepted the return of the vehicle on February 9,
1989, such extra-judicial rescission produced legal effect.
It is well within respondent's right to recover damages from petitioner who committed a breach of
warranty against hidden defects. Article 1599 of the Civil Code partly provides:
"Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his
election:
(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.
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.
Petitioner's contention that under Article 1191 of the Civil Code, rescission can no longer be availed
of as the vehicle was already in the hands of an innocent purchaser for value lacks merit. Rescission
is proper if one of the parties to a contract commits a substantial breach of its provisions. It creates
an obligation to return the object of the contract. It can be carried out only when the one who
demands rescission can return whatever he may be obliged to restore. Rescission abrogates the
contract from its inception and requires a mutual restitution of the benefits received. Petitioner is thus
mandated by law to give back to respondent the purchase price upon his return of the vehicle.
Records show that at the time respondent opted to rescind the contract, the vehicle was still in his
possession. He returned it to petitioner who, without objection, accepted it. Accordingly, the 30%
down payment equivalent to P63,600.00, plus the premium for the comprehensive insurance
amounting to P7,374.80 paid by respondent should be returned by petitioner.
b. If the thing is lost due to hidden defects (1568)

The vendor was aware of the defect, he shall be obliged:
To return the price
To refund the expenses of the contract; and
To pay damages
If the vendor was not aware of the defect, he shall be obliged:
To return the price
To pay the interest thereon; and
To refund the expenses of the contract
c. If the thing is lost by fortuitous event or by the fault of the
buyer
The vendor was aware of the defect, he shall be obliged:
To return the price paid less the value of the thing at the time of
the loss; and
To pay damages (1569)
The vendor was not aware of the defect
To return the price paid less the value of the thing at the time of
the loss (1569)
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D. Period to bring action for breach of warranty
The action to withdraw from the contract (accion redhibitoria) or reduction of
the price with damages (accion quanti minoris) (1561 to 1567), and all other
actions to enforce the sellers liability for hidden defects when the thing is lost
(1568 and 1569) and in judicial sales (1570), is six (6) months from the
delivery of the thing sold. (1571)
CASES
DINO vs. CA
G.R. No. 113564, June 20, 2001
Facts:
Petitioners spouses Dino, doing business under the trade name "Candy Claire Fashion Garment" are
engaged in the business of manufacturing and selling shirts. Respondent Sio is part owner and general
manager of a manufacturing corporation doing business under the trade name "Universal Toy Master
Manufacturing."
Petitioners and respondent Sio entered into a contract whereby the latter would manufacture for the
petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of vinyl mooseheads at P7.00 per piece in
accordance with the sample approved by the petitioners. These frogs and mooseheads were to be attached to
the shirts petitioners would manufacture and sell.
Respondent Sio delivered in several installments the 40,000 pieces of frogs and mooseheads. The last
delivery was made on September 28, 1988. Petitioner fully paid the agreed price. Subsequently, petitioners
returned to respondent 29,772 pieces of frogs and mooseheads for failing to comply with the approved
sample. The return was made on different dates: the initial one on December 12, 1988 consisting of 1,720
pieces, the second on January 11, 1989, and the last on January 17, 1989.
Petitioners then demanded from the respondent a refund of the purchase price of the returned goods in the
amount of P208,404.00. As respondent Sio refused to pay, petitioners filed on July 24, 1989 an action for
collection of a sum of money in the Regional Trial Court of Manila, Branch 38 which ruled in his favor.
However, CA previously affirmed RTCs decision but was subsequently reversed for having filed beyond the
prescriptive period.
Issue:
1. Whether or not the action had prescribed.
Ruling:
There is no dispute that respondent made the last delivery of the vinyl products to petitioners on September
28, 1988. It is also settled that the action to recover the purchase price of the goods petitioners returned to the
respondent was filed on July 24, 1989, more than nine months from the date of last delivery. Petitioners
having filed the action three months after the six-month period for filing actions for breach of warranty against
hidden defects stated in Art. 1571, the appellate court dismissed the action.
Petitioners fault the ruling on the ground that it was too late in the day for respondent to raise the defense of
prescription. Thus, they claim that since the respondent failed to raise the defense of prescription in a motion
to dismiss or in its answer, it is deemed waived and cannot be raised for the first time on appeal in a motion
for reconsideration of the appellate court's decision.
As a rule, the defense of prescription cannot be raised for the first time on appeal. Thus, we held in Ramos v.
Osorio, viz: "It is settled law in this jurisdiction that the defense of prescription is waivable, and that if it was not
raised as a defense in the trial court, it cannot be considered on appeal, the general rule being that the
appellate court is not authorized to consider and resolve any question not properly raised in the lower court.
However, this is not a hard and fast rule. In Gicano v. Gegato,19 we held: ". . .(T)rial courts have authority and
discretion to dimiss an action on the ground of prescription when the parties' pleadings or other facts on
record show it to be indeed time-barredand it may do so on the basis of a motion to dismiss or an answer
which sets up such ground as an affirmative defense or even if the ground is alleged after judgment on the
merits, as in a motion for reconsideration; or even if the defense has not been asserted at all, as where no
statement thereof is found in the pleadings; or where a defendant has been declared in default. What is
essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period be otherwise
sufficiently and satisfactorily apparent on the record; either in the averments of the plaintiff's complaint, or
otherwise established by the evidence."
In Aldovino, et al. v. Alunan, et al., the Court en banc reiterated the Garcia v. Mathis doctrine cited in the
Gicano case that when the plaintiff's own complaint shows clearly that the action has prescribed, the action
may be dismissed even if the defense of prescription was not invoked by the defendant.
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It is apparent in the records that respondent made the last delivery of vinyl products to the petitioners on
September 28, 1988. Petitioners admit this in their Memorandum submitted to the trial court and reiterate it in
their Petition for Review. It is also apparent in the Complaint that petitioners instituted their action on July 24,
1989. The issue for resolution is whether or not the respondent Court of Appeals could dismiss the petitioners'
action if the defense of prescription was raised for the first time on appeal but is apparent in the records.
Following the Gicano doctrine that allows dismissal of an action on the ground of prescription even after
judgment on the merits, or even if the defense was not raised at all so long as the relevant dates are clear on
the record, we rule that the action filed by the petitioners has prescribed. The dates of delivery and institution
of the action are undisputed. There are no new issues of fact arising in connection with the question of
prescription, thus carving out the case at bar as an exception from the general rule that prescription if not
impleaded in the answer is deemed waived.
Even if the defense of prescription was raised for the first time on appeal in respondent's Supplemental Motion
for Reconsideration of the appellate court's decision, this does not militate against the due process right of the
petitioners. On appeal, there was no new issue of fact that arose in connection with the question of
prescription, thus it cannot be said that petitioners were not given the opportunity to present evidence in the
trial court to meet a factual issue. Equally important, petitioners had the opportunity to oppose the defense of
prescription in their Opposition to the Supplemental Motion for Reconsideration filed in the appellate court and
in their Petition for Review in this Court.
GUZMAN vs TOYOTA
Article 1572 1581
Warranty against hidden vices of animals (redhibitory vices)
guys i did not follow the outline given to us coz i find it confusing instead i just followed
the book that i used
during my review
Remedies of vendee in case of sale of animal with redhibitory defects

GENERAL RULE: If two or more animals are sold together, whether for lump sum or
for a separate price for each of them, the redhibitory defect of one shall only give rise
to its redhibition. Accordinly, the vendee may only ask for:
The rescission of the sale of the defective animal (accion
redhibitoria) OR
Ask for proportionate reduction (accion quanti minoris) (1562,
1567, 1580)
EXCEPTION: The redhibitory defect of one shall give rise to the redhibition of all the
animals sold, including the sound ones, if the vendee would not have bought the
sound animals without the defective one. This intention by the vendee is 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. (1572) Accordingly, the vendee may
ask for the rescissionof the whole contract.
NOTE: The above rule and exception apply in like manner to the sale of other things.
(1573)
When must redhibitory action be filed
Art. 1577. The redhibitory action, based on the faults or defects of animals, must be
brought within forty days from the date of their delivery to the vendee.
This action can only be exercised with respect to faults and defects which are
determined by law or by local customs. (1496a)
When sale of animals is VOID
The animals are suffering from contagious diseases
The animals are found to be until for the use or service for which they were
acquired as stated in the contract (1575)
Vendors liability in case the animal sold dies of diseases
The vendor shall be liable for the death of the animal sold, whether the defect is
redhibitory or not, if the following requirements are present:
It existed at the time of sale
Is the cause of death of the animal, AND
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The animal dies within three (3) days from the time of purchase (1578)
Sale without warranty against hidden defects of animals

There is no warranty against hidden defects of animals sold at fairs or at public
auctions, or of livestock sold as condemned. (1574)
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OBLIGATIONS OF THE VENDOR

a and e applies to both movables and immovables while b, c and d applies to

January 21, 2005

Topic: Kinds of Delivery

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When execution of public document not equivalent to delivery

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Transfer of ownership by placing titles of ownership in the possession of the

September 18, 1914

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Rule in sale of registered land

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Effect of affidavit of adverse claim in lieu of registration

WHEN DELIVERY DOES NOT TRANSFER TITLE

a. Delivery on approval, trial or satisfaction

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c. Implied reservation of the title

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DOCUMENTS OF TITLE TO THE GOODS

DEFINITION (Art 1636)

If by the terms of the document of title, the carrier,

B. By Indorsement plus delivery

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states that the

Effect of endorsement and delivery of negotiable quedans

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Who may negotiate (1512)

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Rights of the transferee of a document of title

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Levy, or garnishment of goods covered by a document of title

ARTICLE 1521 - 1524

TIME AND PLACE OF DELIVERY

If there is no stipulation, delivery must be made within a reasonable time

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DELIVERY TO THE CARRIER

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ARTICLE 1525 1535

RIGHTS OF THE UNPAID SELLER

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Whether or not private respondent has a right to recover deficiency.

d. Right to rescind the sale

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ARTICLE 1536 1543

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Whether or not there has been complete delivery;

On the issue of delivery

SC ruled that there has been no complete delivery yet.

On the issue of prescription

Is the sale sold per unit or lump sum?

The sale entered into is a sale sold per unit.

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Sold per unit

Where it is sold for a lump sum or a single price (1542)

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Sale Indicated by boundaries