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CONSUMMATION OF SALE O
BLIGATIONS OF SELLER
have.
a. Types of Delivery
The Law on Sales under the Civil Code recognizes two
general types of delivery that will effectively transfer ownership of
the subject matter to the buyer and would constitute compliance
by the seller of his obligations under a valid contract of sale: (a)
actual or physical delivery; and (b) constructive delivery.
Froilan v. Pan Oriental Shipping Co., 11 held that in the
absence of stipulation to the contrary, the ownership of the thing
sold passes to the buyer upon the actual or constructive delivery
thereof.
Alfredo v. Borras, 12 held that it is not necessary that the
seller himself delivers title of the property to the buyer because
the thing sold is understood as delivered when it is placed in the
control and possession of the buyer. In that decision, the seller
himself introduced the tenant to the buyers as the new owners of
the land, and from that time on the buyers acted as landlord, and
thereby there was deem to have been delivery.
1. Actual Delivery
Under Article 1497 of the Civil Code, there is actual or
physical delivery when the thing sold is placed in the control and possession of the buyer. 13 Although
possession is the best gauge
when there is control, nonetheless control can take other forms
other than actual physical possession.
Thus, Power Commercial and Industrial Corp. v. Court of
Appeals, 14 held that for both actual or constructive delivery [t]he
key word is control, not possession,15 in determining the legal
effect of tradition. Power Commercial considered that the lot sold
had been placed under the control of the buyer, as evidenced
by the subsequent fi ling by the buyer of an ejectment suit, which
signifi ed that the buyer was the new owner which intended
to obtain for itself, and to terminate said occupants actual
possession thereof.
2. Constructive Delivery
Under Article 1496 of the Civil Code, constructive delivery
can take several forms, and may be any manner signifying an
agreement that the possession is transferred from the vendor
to the vendee. The essence of most forms of constructive
delivery is the existence of an agreement between the seller
and the buyer, and that the latter is understood to have control
of the subject matter of sale.
The discussions on the execution of a public instrument as
a form of constructive delivery should be considered as setting
the same basic premise or principles as to all other forms of
seller;
(c) When the seller reserves the right to use
and enjoy the property until the gathering of
the pending crops; or
(d) Where the seller has no control over the
thing sold at the moment of the sale, and,
therefore, its material delivery could not
have been made.
Phil. Suburban held that since the execution of the public
instrument was preceded by actual delivery of the subject real estate, then tradition was effected in spite
of the condition stated
in the instrument that the seller should fi rst register the deed of
sale and secure a new title in the name of the buyer before the
latter shall pay the balance of the purchase price, which did not
preclude the transmission of ownership, thus: In the absence
of an express stipulation to the contrary, the payment of the
purchase price of the goods is not a condition precedent to the
transfer of title to the buyer, but title passes by the delivery.28
This well-established rule is contrary to what was said in
Heirs of Severina San Miguel v. Court of Appeals, 29 that [i]n a
contract of sale, title only passes to the vendee upon full payment
of the stipulated consideration, or upon delivery of the thing
sold. In fact, Balatbat v. Court of Appeals, 30 held that [D]evoid
of stipulation that ownership in the thing shall not pass to the
purchaser until he has fully paid the price [Art. 1478], ownership
in the thing shall pass from the seller to the buyer upon actual or
constructive delivery of the thing sold even if the purchase price
has not yet been fully paid. Failure of the buyer to make good the
price does not, in law, cause the ownership to revest to the seller
unless the bilateral contract of sale is fi rst rescinded or resolved
pursuant to Art. 1191.31
In Fortune Tobacco Corp. v. NLRC, 32 where the resolution of
the issues boiled down to whether there was an actual sale of the
employers plant and facilities, the Court held that the execution
of the deed of conditional sale with provision that the fi nal deed of
sale was to be executed only upon full payment, did not transfer
ownership of the subject matter by the delivery thereof. It also
held that even accepting that the plant and its facilities have been
sold on a conditional basis, there can be no actual sale thereof
[i.e., transfer of ownership] unless the plant and its facilities are
unconditionally conveyed ... by virtue of a fi nal or absolute deed
of sale in accordance with the terms and conditions stated in the
agreement between the parties.
brevi manu.
e. Traditio Longa Manu
This is delivery of a thing merely by agreement, such as when
the seller points the property subject matter of the sale by way of
delivery without need of actually delivering physical possession
thereof. Thus, under Article 1499 of the Civil Code, the delivery of
movable property may be made by the mere consent or agreement
of the contracting parties, if the thing sold cannot be transferred to
the possession of the buyer at the time of the sale.
f. Delivery of Incorporeal Property
An incorporeal property having no physical existence, its
delivery can only be effected by constructive delivery. Article
1501 of the Civil Code recognizes three (3) types of constructive
delivery specifi cally applicable to incorporeal property, thus:
(a) When the sale is made through a public
instrument, the execution thereof shall be
equivalent to the delivery of the thing which
is the object of the contract, if from the deed
the contrary does not appear or cannot
clearly be inferred;
(b) By the placing of the titles of ownership in
the possession of the buyer; or
(c) The use and enjoyment by the buyer of the
rights pertaining to the incorporeal property,
with the sellers consent.
g. Delivery by Negotiable Document of Title
A person to whom a negotiable document of title has been
duly negotiated acquires thereby such title to the goods as
transferor had or had ability to convey to a purchaser in good
faith for value, and also the title of the persons to whom the
documents was originally. 55 Therefore, the buyer of the goods
Heirs of Pedro Escanlar v. Court of Appeals, 54 illustrates
the application of traditio brevi manu. In that case, prior to
the sale, would-be buyers were in possession of the subject
property as lessees. Upon sale to them of the rights, interests
and participation as to the one-half () portion pro indiviso, they
remained in possession, not in the concept of lessees anymore
can by the process of negotiation of the covering document have
a title better than that of his immediate seller.
On other hand, the buyer to whom a document of title has
been transferred by assignment, acquires only his transferors title
to the goods, and always subject to the terms of any agreement
with the transferor. 56
Since an invoice is not a negotiable document of title, the
On the other hand, if the seller is to pay the freight, the inference is equally 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.65
Nevertheless, Behn, Meyer & Co. upheld the principle
that both of the terms c.i.f. and f.o.b. merely make rules of
presumption which yield to proof of contrary intention.66 The Court
then held that since in the instant case the c.i.f. arrangement
was accompanied with the word Manila which was the point of
destination, then this must be taken to mean that the contract
price, covering costs, insurance, and freight, signifi es that the
delivery was to be made at Manila.67
In Pacifi c Vegetable Oil Corp. v. Singzon, 68 the Court held
that under an arrangement c.i.f. Pacifi c Coast (the point of
destination), the vendor is to pay not only the cost of the goods,
but also the freight and insurance expenses, and, as it was
judicially interpreted, this is taken to indicate that the delivery is
to be made at the port of destination.
Behn, Meyer & Co. and Pacifi c Vegetable agree with the
second school of thought that since c.i.f. includes both insurance
and freight expenses to be paid by the seller, ordinarily therefore,
in a c.i.f. arrangement, the risk of loss for the account of the buyer
arises only when the vessel arrives at the point of destination.
On the other hand General Foods v. NACOCO, 69 upholds
the fi rst school of thought that [t]here is no question that under
an ordinary C.I.F. agreement, delivery to the buyer is complete
upon delivery of the goods to the carrier and tender of the
shipping and other documents required by the contract and the
insurance policy taken in the buyers behalf.70 General Foods
therefore holds that although it is the seller who may make the
arrangement for the insurance coverage and freightage of the
goods, he does this for the account and benefi t of the buyer, who
has agreed to pay for such amounts.
In General Foods, the price was quoted CIF New York
(the point of destination), and although the Court did not place
signifi cance on the indication of New York it held that [t]here is
equally no question that the parties may, by express stipulation
or impliedly (by making the buyers obligation depend on arrival
and inspection of the goods), modify a CIF contract and throw
the risk upon the seller until arrival in the port of destination.71
The Court took into consideration that the price agreed upon was
to be based on net landed weights and it held that delivery by
the seller to the carrier in Manila of the goods covered was not
delivery to the buyer, and the risk of loss of the goods during the
has been fi xed for the return of the goods, on the expiration of
such time, and, if no time has been fi xed, on the expiration of a
reasonable time.
Vallarta v. Court of Appeals, 91 held that when the sale of a
movable is sale on acceptance, no ownership could have been
transferred to the buyer although he took possession thereof,
because [d]elivery, or tradition, as a mode of acquiring ownership
must be in consequence of a contract ..., e.g., sale,92 and in that
case there was as yet no contract when delivery was effected.
h. Form of Such Special Sales
Industrial Textile Manufacturing Co. v. LPJ Enterprises,
Inc., 93 held that for a sale to be considered and construed as a
sale or return or a sale on approval, there must be a clear agreement to either of such effect,
otherwise, the provisions of
Article 1502 of the Civil Code governing such sales cannot be
invoked by either party to the contract, and therefore must be in
writing, and cannot be proved by parol evidence:
... The provision in the Uniform Sales Act and the
Uniform Commercial Code from which Article 1502 was
taken, clearly requires an express written agreement
to make a sales contract either a sale or return or a
sale on approval. Parol or extrinsic testimony could
not be admitted for the purpose of showing that an
invoice or bill of sale that was complete in every aspect
and purporting to embody a sale without condition or
restriction constituted a contract of sale or return. If the
purchaser desired to incorporate a stipulation securing
to him the right to return, he should have done so at
the time the contract was made. On the other hand,
the buyer cannot accept part and reject the rest of the
goods since this falls outside the normal intent of the
parties in the on approval situation. 94