Sales Pre Final 402 Reviewer

SALES PRE-MIDTERM REVIEWER ATTY.
ADVIENTO
PARADO, GUINGOYON, LEGARDE, DINGAL, GESTOPA, EMBAY, PAGADOR,
SALVA, MRS. CONDE, NUEZ
particular purpose
Take Note:
1.
2.
Familiarize various rights and remedies under

each topic. Under each, try to familiarize the
requirements. If 1 of the requirements is not
present, strike down the right and do not
apply it to the case.
As for the cases, familiar a little on the facts.
And take note of the corresponding ruling.
NEGOTIABLE INSTRUMENTS
I. A document is negotiable only where it
contains:
VII. Effects of the indorsement of a negotiable

instrument:
1.
Conveyance of the instrument
2.
Contract Between the endorser and the

endorsee
VIII. Effects of the endorsement of a document of

title:
1.
Conveyance of the document only
2.
No contract of guarantee
IX. These do not impair the validity of the

negotiation:
1.
Deliver to bearer
2.
Deliver to the order of specified person
3.
Deliver to Juan De La Cruz or his order
Deliver to a specified person (not

negotiable)
II. A negotiable document may be negotiated by:
1.
Breach of duty; or
2.
Loss, Theft, Fraud, Accident, Mistake,

Duress, Conversion
X. Requirements for the 2 conditions not to impair

the validity:
1.
Mere Delivery
1.
Paid a consideration and in good faith
2.
Indorsement coupled with delivery
2.
Without notice of the defect (conditions

above)
III. Who can negotiate:
PLACE, TIME AND MANNER OF DELIVERY
1.
Owner
2.
Person to whom the possession and

custody of the document has been
entrusted
IV. Rights
Document:
1.
of
the
Bearer
of
Negotiable
Title to the good s which the person

negotiating has
2.
Title to the goods which the person to

whose order the goods were delivered
3.
DIRECT obligation of the bailee to hold

the possession of the goods for him
V. Rights of the Bearer to a Non-negotiable

Document (Deliver a specified person):
1.
Title to the
transferor
goods
as
against
the
2.
Right to notify of the transfer and order

the bailee to hold possession of the goods
for him
*Take note, if it is a negotiable document, it

directly acquires the obligation of the bailee
to hold the goods for the transferee.
VI. Execution and Levy
1.
NEGOTIABLE: Cannot be attached or

levied unless the document is first
surrendered to the bailee or the
negotiation is enjoined or prohibited by
the court. (See XI for the requisites)
I. PLACE delivered according to:

1.
Place stipulated
2.
As determined by the usage of trade
3.
Place of Business
4.
Sellers Residence
*For specific goods: place of delivery

II. TIME of delivery
1.
Agreed
2.
Made within a reasonable time.
*When there is no stipulation on the contract

(irrelevant if there was a stipulation on the
proposal) of the time of delivery, it is deemed
not of time is of the essence and thus, you
apply the rule on reasonable time.
* Time is of the essence: buyer must notify
the seller of his intention to cancel the sale
unless delivery is made on or before a fixed
time.
III. When delivery is lesser than the quantity
stipulated:
1.
May reject and have no liability
2.
May accept and pay at the contract price
IV. When delivery is more than the quantity

stipulated:
1.
NON-NEGOTIABLE: Before notice, the title

of the transferee can be defeated by a
writ or attachment or levy
Reject all and not be burdened with

segregation
2.
Accept those contracted and reject the

rest
VII. What a person who negotiates or transfers

warrants:
3.
Accept all and pay for them at the

contracted price
2.
1.
Document is genuine
2.
He has a legal right to negotiate
1.
Accept which he contract to buy; AND
3.
Has knowledge of no fact which would

impair the validity of document
2.
Reject the rest
4.
Has a right to transfer title
5.
Goods are merchantable or fit for a
V. When delivery is mixed
(May also reject the whole if indivisible)

VI. GR: Delivery to the carrier is delivery to the
buyer
Exemptions:
SALES PRE-MIDTERM REVIEWER ATTY. ADVIENTO

4.Right to rescind the sale
1.
seller reserves ownership
5.Action for the price
2.
delivery is directed to the place of

destinatitio, himself or his agent
6.Action for damages
3.
when it is deliverable to the buyer but the

seller retains possession of the bill of
lading
VII. Duties of the seller upon transfer

ownership to the buyer through carrier:
FIRST: Possessory Lien

I. When may be exercised:
1.
Where the goods have been sold without

any stipulation as to credit
2.
When the term of credit has expired
3.
Where the buyer becomes insolvent

unless he gives a guarantee or security
for the debt
of
1.
enter into a contract of carriage as may

be necessary and reasonable for the
protection and safe carriage
2.
notify the buyer of the necessity of

insuring the goods
VIII. Classification of Delivery of Goods:

1.
CIF (Cost, Insurance, and Freight). All

risks while goods are in transit are for the
account of the buyer.
* CIF Manile: ownership is transferred in
Manila. Thus, since plaintiff failed to
deliver the goods as contracted to Manila,
then buyer may rescind the contract.
2.
FOB (Free on Board): the seller shall bear

the expenses until goods are delivered
where they are to be FOB.
* FOB Origin: buyer pays the freight.
Ownership transferred immediately to
buyer.
* FOB Destination: seller pays the freight.
Seller maintains ownership
3.
COD (Collect on Delivery): carrier acts for

the seller in collecting the price
4.
Letter of Credit
*Generally, if freight is paid by the seller, this

usually indicates that he maintains ownership
until the buyer received the goods. Contrarily,
when the buyer pays, this indicates that the
goods become his at the point of shipment and
thus acquires ownership upon delivery to the
carrier.
IX. Periods:
GR: Thing shall not be delivered, unless the price
is paid.
Exemption: when a time for payment haas been
fixed in the contract
Excemp. To Exem: vendee would lose the benefit
of the term. Thus vendor is not obliged to deliver
RIGHTS OF AN UNPAID SELLER
1.
He has not been totally paid
2.
No full payment
3.
When negotiable instrument has been

impaired. Mere delivery of the document
does not ipso fact extinguish the
obligation
II. Rights of an Unpaid Seller:

1.Possessory lien over the goods
2.Right of stoppage in transitu after he has
parted in the possession of the goods
and the buyer becomes insolvent
if partial delivery, the vendor has lien

over the remainder
an action for the

extinguish the lien
price
does
not
II. When lost:

1.
Delivery of the goods to an agent or

bailee of the buyer without reserving
ownership or right of possession
2.
When
the
buyer
lawfully
possession of the goods
3.
By waiver of the lien
obtains
Second: Stoppage of goods in transitu

I. Requisites:
1.
Seller must be unpaid
2.
Buyer must be insolvent
3.
Goods must be in transit:

a.
Delivered to a carrier of bailee

abd before the buyer or his agent
takes possession
b.
Goods are rejected by the buyer

and carrier continues possessing
them
4.
Seller
must
either
actually
take
possession of the goods sold or give
notice of his claim to the carrier or other
person in possession
5.
Seller must surrender the negotiable

document of title, if any, issued by the
carrier or bailee
6.
Seller must bear the expenses of delivery

of the goods after the exercise of the
right
II. No longer in transit:

1.
Premature
Delivery,
when
intercepted the shipment
2.
After arrival, when carrier acknowledges

that he is holding the goods in his behalf.
3.
Carrier wrongfully refuses to deliver the

goods to the buyer or his agent.
I. Unpaid Seller when:
3.Right of resale
buyer
Issuance of bill of lading, already

considered in transit.
III. Ways of exercising the right of Stoppage in

transitu:
1.
Obtaining actual possession of the goods
2.
Giving notice to the sellers claim to the

carrier in possession of the goods.
Duty of carrier/bailee: Redeliver the goods to

the seller

Exemption: When a negotiable document

of title was issued. Document must be
surrendered.
in the contract exceeds 1/10 of the

price agreed upon
c)
If the vendee would not have bought

the immovable had he known of its
smaller area of inferior quality
irrespective of the extent of lack of
area or quality
Third: Resale
I. When may be exercised:
1.
Where the goods are perishable in nature
2.
Where the right to resell is expressly

reserved in case the buyer should make a
default
3.
Where the buyer delays in the payment

of the price for an unreasonable time
Applicable only if title HAS PASSED to the

buyer.
Seller may recover for DAMAGES on the

breach of contract
Action for rescission of the sale is not

necessary
If seller is obliged to sell for less the value,

seller may hold the buyer for the difference.
But he is not liable to the buyer for any profit.
May be done through a public or private sale
Seller is prohibited from becoming the new

buyer.
Notice to the buyer of the of intention to

resell and notice of the time and place of
resale is not necessary.
Fourth: Rescission
will
from
Vendor is obligated to deliver all the land

included within the boundaries, regardless of
whether the real area should be greater or
smaller.
Exemption: Boundaries relied do not identify
the land beyond doubt. In such case, the area
shall prevail.
Ordinarily, there can be no rescission or

reduction or increase whether the area be
greater or lesser, unless there is gross
mistake.
The rules for sale in lump sum coveres only

reasonable excess or deficiency
I. If unable to deliver all that is stated in the

boundary, vendee may:
1.
Reduce the price in proportion to the

deficiency
2.
Rescind the contract for breach

DOUBLE SALE (Art. 1544)
1.
Must notify of the seller of intention to

rescind
2.
Seller is not allowed to file a suit for

recovery of price because seller is given
the right to recover damages.
I. Requisites:
1.
two or more transactions must constitute

valid sales;
2.
they must pertain exactly to the same

subject matter;
3.
they must be bought from the same or

immediate seller; and
4.
two or more buyers who are at odds over

the rightful ownership of the subject
matter
must
represent
conflicting
interests.
I. Types:
Action
available
here
prescribe in 6 months
delivery.
Sale for a Lump Sum (A Cuerpo Cierto)
I. Notes
Under Art. 1534 If the seller has either the

right of lien or a right to stop the goods in
transitu; and under either of 2 situations:
a.
Where the right to rescind on default has

been expressly reserved
b.
Where the buyer has been in default for

an unreasonable time
Under Art. 1597 (technical rescission)
Action for the price
Action for damages
1. Personal Property
a. first possessor in good faith
2. Real Property
Other Actions:
1
II. Rules of preference:
first registrant in good faith

first possessor in good faith
person with oldest title in good faith
SALE OF REAL PROPERTY
III. Additional Notes:
Sale of Real Property by Unit
1.
Buyer in good faith is one who buys the

property without notice that some other
person has a right or interest in such
property and pays a full and fair price at
the time of purchase or before the notice
of the claim.
2.
2 fold requirement:
I. Entire area stated in the contract must be

delivered
II. When entire area could not be delivered,
vendee may:
1.
Enforce
the
contract
with
corresponding decrease in price
2.
Rescind the sale:
the
a) If the lack in area is at least 1/10

than that stated or stipulated
b) If the deficiency in quality specified
3.
a.
Registration in good faith
b.
Acquisition in good faith
Possession includes symbolic possession

or the delivery of a public document.

Warranty in which the seller guarantees that

he has the right to sell the thing sold and to
transfer ownership to the buyer who shall not be
disturbed in his legal and peaceful possession
thereof.
Thus, if the first, merely obtained a public

document and the second buyer, had
actual possession. First buyer, still has a
better right.
4.
Rules on double sale apply to double

donations mortis causa.
Elements:
IV. When rules do not apply:

1.
When one is a contract to sell.
2.
When the seller is no longer the owner at

the time of the second sale since he has
no right anymore over the property.
1.
vendee is
purchased;
2.
the deprivation is by virtue of a final

judgment;
3.
the judgment is based on a prior right to

the sale or an act imputable to the
vendor;
4.
the vendor was summoned in the suit for

eviction at the instance of the vendee;
and
5.
no waiver of warranty by the vendee.
CONDITIONS AND WARRANTS

CONDITION
Effect of Non-fulfillment of Condition
1.
If the obligation of either party is subject

to any condition and such condition is not
fulfilled, such party may either:
a) refuse to
contract
proceed
with
2.
If the condition is in the nature of a

promise that it should happen, the nonperformance of such condition may be
treated by the other party as breach of
warranty.
a.
Definition: a statement or representation made

by the seller of goods, contemporaneously and as
a 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.
Value of the thing at the time of eviction;
ii.
Income or fruits if he has been ordered to deliver

them to the party who won the suit;
iii.
Costs of the suit;
iv.
Expenses of the contract; and

* If they originally stipulated
expenses will be born by the vendee,
this will be reimbursed if vendee is
evicted.
Damages and interests if the sale was in bad
faith.
b.
Partial eviction:
i.
(i) to (v) above (VICED); or
ii.
rescission of contract.
Vendors liability is waivable but any stipulation

exempting the vendor from the obligation to
answer for eviction shall be void if he acted in
bad faith.
EXPRESS any affirmation of fact or any

promise by the seller relating to the thing 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
a.
A mere expression of opinion, no matter

how positively asserted, does not import a
warranty unless the seller is an expert and his
opinion was relied upon by the buyer.
b.
For breach of an express warranty, the

buyer can accept or keep the goods and
maintain an action against the seller for
damages.
2.
thing
Kinds of Waiver:
Kinds:
1.
the
i.
v.
1. 6 months for implied warranty; 4 years for

express warranty and 40 days if animals are
involved.
of
Total eviction: (VICED)
WARRANTY
Rules on Prescription under warranty:
deprived
Vendor's liability shall consist of:
the
b) proceed with the contract ,

waiving the performance of the
condition.
IMPLIED - that which the law derives by

implication or inference from the nature of
the transaction or the relative situation or
circumstances of the parties
a.
Warranty against eviction
b.
Warranty against hidden defects
c.
Warranty
as
Merchantability
to
Fitness
Warranty against eviction (WAE)
and
Consciente voluntarily made by the

vendee without the knowledge and
assumption of the risks of eviction
vendor shall pay only the value
which the thing sold had at the time
of eviction
Intencionada made by the vendee
with knowledge of the risks of
eviction and assumption of its
consequences
vendor not liable
Warranty against lien and encumbrances does

not include warranty against tenants unless
specifically stated. Tenancy cannot be considered
a lien or encumbrance. (Investment and
Development v. CA, 162 scra 641)
There must be deprivation in law not
deprivation in fact. In Deprivation in law, there is
a judicial judgment. As for deprivation in fact, it is
just a mere trespassing such as the existence of
informal settlers or squatters.
In a sale made by the sheriff, auctioneer,
mortgagee, pledgee, or a person with authority, it
is the judgment debtor who is responsible.
(Applies to all warranties)

Final judgment means it is already final and

executory and rendered by a competent authority
and in conformity with procedure.
Vendee need not appeal for the vendor to
become liable to eviction.
Buyer in bad faith cannot invoke the this right.
Effect of Prescription of the right to WAE.
1. Prescription consummated before transfer:

Vendor is liable for WAE except if the vendee
still proceeded knowing of the prescription
2. Prescription consummated
vendor is not liable.
after
transfer:
Any stipulation exempting the vendor shall be

void is vendor is in bad faith. Bad faith must be
relevant to the facts that gave rise to the
eviction.
How vendor is summoned to the case:
1.
Impleading the vendor as a co-defendant
2.
Directly filing a third

against the vendor
party complaint
Warranty against hidden defects

the thing sold is free from any hidden faults or
defects or any charge or encumbrance not
declared or known to the buyer.
by the vendee
If the thing with hidden defect was lost through

fortuitous event or through the fault of the
vendee, vendor is obliged to return the price paid
less the value of the thing at the time of its loss.
Caveat Venditor (Let the seller beware):
the vendor is liable to the vendee for any hidden
faults or defects in the thing sold, even though he
was not aware thereof.
Caveat Emptor (Let the buyer beware):
requires the purchaser to be aware of the
supposed title of the vendor and one who buys
without checking the vendors title takes all the
risks and losses consequent to such failure
Warranty as to Fitness or Merchantability
the thing sold is reasonably fit for the known
particular purpose for which it was acquired by
the buyer or, where it was bought by description,
that it is of merchantable quality.
GENERAL RULE: There is no implied warranty as
to the quality or fitness for any particular purpose
of goods under a contract of sale
EXCEPTIONS:
1.
Where the buyer, expressly or by

implication manifests to the seller the
particular purpose for which the goods
are required
2.
Where the buyer relies upon the sellers

skill or judgment
Elements: (SHENPW)
1.
defect must be Serious or important;
2.
it must be Hidden;
3.
it must Exist at the time of the sale;
Instances where
inapplicable:
4.
vendee must give Notice of the defect to

the vendor within a reasonable time;
1.
5.
no Prescription (6 mos. from delivery of

thing or 40 days in case of animals); and
6.
no Waiver of the warranty.
As is and where is sale - vendor makes no

warranty as to the quality or workable
condition of the goods, and that the vendee
takes them in the condition in which they are
found and from the place where they are
located.
2.
Sale of second-hand articles
Remedies of the Vendee:

a.
Accion redhibitoria (rescission)
b.
Accion quanti minoris (reduction of the

price)
implied
Exemption: when there

warranty by the seller
3.
warranties
is
an
are
express
Sale by virtue of authority in fact or law
Effect of loss of thing on account of hidden

defects:
Remedies of buyer for breach of warranty

by seller:
1.
1.
Recoupment accept the goods and set up

the sellers breach to reduce or extinguish the
price
2.
Accept the goods and maintain an action for

damages for breach of warranty
3.
Refuse to accept the goods and maintain an

action for damages for breach of warranty
4.
Rescind the contract
2.
If vendor was aware of hidden defects, he

shall bear the loss and vendee shall have the
right to recover:
a.
the price paid
b.
expenses of the contract
c.
damages
If vendee was not aware, he shall be obliged

to return:
a.
price paid
b.
interest thereon
c.
expenses of the contract if paid
Note: These are alternative remedies.

Art. 1507- 1520 (NEGOTIABLE DOCUMENT OF TITLE)

I. Defined (1636, No. 1)
Art. 1507. A document of title in which it is stated that the goods referred to therein will be delivered
to the bearer, or to the order of any person named in such document is a negotiable document of title.
(n)
Art. 1636. In the preceding articles in this Title governing the sale of goods, unless the context or
subject matter otherwise requires:
(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.
"Goods" includes all chattels personal but not things in action or money of legal tender in the
Philippines. The term includes growing fruits or crops.
"Order" relating to documents of title means an order by endorsement on the documents.
"Quality of goods" includes their state or condition.
"Specific goods" means goods identified and agreed upon at the time a contract of sale is
made.
An antecedent or pre-existing claim, whether for money or not, constitutes "value" where
goods or documents of title are taken either in satisfaction thereof or as security therefor.
(2) A person is insolvent within the meaning of this Title who either has ceased to pay his debts
in the ordinary course of business or cannot pay his debts as they become due, whether
insolvency proceedings have been commenced or not.
(3) Goods are in a "deliverable state" within the meaning of this Title when they are in such a
state that the buyer would, under the contract, be bound to take delivery of them. (n)
The law did not define a meaning of document of title although it explains what a
document of title is.
Kinds of Documents of Title:
(a) Negotiable Art. 1508

- the carrier or other bailee who issued it (a) undertakes to deliver the subject goods to the bearer of
the document itself; (b) or undertakes to deliver the goods to the order of a specified person and such
person or a subsequent endorsee has indorsed it in blank or to the bearer
- commands:
(a) Deliver to bearer
(b) Deliver to the order of Juan de la Cruz
(c) Deliver to Juan de la Cruz or his order
(b) Non-negotiable Art. 1511
- the subject goods are deliverable to a specified person
Subject Matter of Documents of Title covers goods and not money; receipts of a
bailee or orders upon a bailee; proofs of possession of the goods and are also
authority or purporting to be an authority to transfer goods covered by them
Misdescription of goods when there can be no doubt on them as the very goods
referred to, will not affect the negotiability of the document of title
Some forms of documents of title:
(1) Bill of Lading a receipt for the goods shipped; contract to transport and to deliver. It is an element
of a two-fold character: a receipt and a contract. It is sometimes called a shipping receipt, a
forwarders receipt, and a receipt for transportation.
(2) Dock Warrant instrument given by dock owners to an importer of goods warehoused on the dock
as a recognition of the importers title to said goods, upon the production of the bill of lading.
(3) Quedan warehouse receipt for commodities
(4) Warehouse Receipt a receipt which states the certain goods were received by the bailee to be
delivered to the bearer or to the order of any person named in such receipt or to a specified person

(5) Letter of Credit commitment by the issuer that the party in whose favor it is issued and who can
collect upon will have his credit against the applicant of the letter duly paid in the amount specified
The Civil Code is the primary law governing documents of title. The Code of
Commerce suppletorily governs bills of lading issued by common carriers.
Warehouse receipts are primarily governed by Warehouse Receipts Law.
As instruments of Credit, warehouse receipts play an important role modern

commerce and the present day tendency of the courts is towards a liberal
construction of law in favor of bona fide holders of such receipt.
II. Kinds
A. Negotiable
NEGOTIATION Art. 1508. A negotiable document of title may be negotiated by delivery:
(1) Where by the terms of the document the carrier, warehouseman or other bailee issuing
the same undertakes to deliver the goods to the bearer; or
(2) Where by the terms of the document the carrier, warehouseman or other bailee issuing
the same undertakes to deliver the goods to the order of a specified person, and such person
or a subsequent endorsee of the document has indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a
negotiable document of title has been indorsed in blank or to bearer, any holder may indorse the
same to himself or to any specified person, and in such case the document shall thereafter be
negotiated only by the endorsement of such endorsee. (n)
Ways of Negotiating a Negotiable Document of Title by Delivery:
(a) By mere delivery;

(b) By indorsement coupled by delivery.
Delivery: Mere delivery without indorsement is sufficient if the document is

deliverable to the bearer. However, even though the document is deliverable to the
order of a specified person, if the latter has indorsed if the latter has indorsed it to
the bearer, the document may now be negotiated by mere delivery.
Indorsement: If the document was indorsed to a specified person, negotiation can

be effected only by the indorsement of the indorsee. This is a special indorsement
because it specifies the person to whom or to whose order the goods are to be
delivered by the carrier or bailee.
Distinctions between Special Indorsement and Indorsement by Blank
(a) Special Indorsement specifies the person to whom, or to whose order, the instrument to be
payable, and the indorsement of such indorsee is necessary to further the negotiation of the
instrument.
(b) Indorsement in blank specifies no indorsee, and an instrument so indorsed is payable to bearer,
and may be negotiated by delivery.
INDORSEMENT Art. 1509. A negotiable document of title may be negotiated by the endorsement of
the person to whose order the goods are by the terms of the document deliverable. Such
endorsement may be in blank, to bearer or to a specified person. If indorsed to a specified person, it
may be again negotiated by the endorsement of such person in blank, to bearer or to another
specified person. Subsequent negotiations may be made in like manner. (n)
Ways of Negotiating a Negotiable Document of Title by Indoresment
(a) in blank,
(b) to the bearer, or
(c) to a specified person.
- (a) and (b) negotiated by delivery;
- specified person it may be negotiated in blank, to bearer or to another person
Case: Effect of endorsement and delivery of negotiable document of title (quedan)

Phil Trust Co. v. Phil. National Bank, 42 Phil 413
Facts: In January 1919, the firm of Salvador Hermanos executed to the Philippine National Bank the eight
promissory notes. Each note was secured by the quedan, or warehouse receipt, of Nieva, Ruiz and

Company, issued to the firm of Salvador Hermanos for so many piculs of copra. That the notes are of the
same form, the only difference being the date and the amount of the note, and the number of the quedan,
or warehouse receipt, and the amount of copra in piculsThe quedan itself was delivered to and held by the
bank, and the warehouseman recognized the bank as the owner of the property. Legally speaking, the
owner of the quedans, or warehouse receipts, was the owner of the property described in them, and the
quedans were given as collateral to secure promissory notes, which, for value received, were executed to
the bank. . In April 1919, Hermanos filed a petition of insolvency in the CFI of the city of Manila.
Issue: What is the effect of the indorsement and delivery of the quedans.
Held: 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, the plaintiff cannot recover.
Art. 1510. If a document of title which contains an undertaking by a carrier, warehouseman or other
bailee to deliver the goods to bearer, to a specified person or order of a specified person or which
contains words of like import, has placed upon it the words "not negotiable," "non-negotiable" or the like,
such document may nevertheless be negotiated by the holder and is a negotiable document of title
within the meaning of this Title. But nothing in this Title contained shall be construed as limiting or
defining the effect upon the obligations of the carrier, warehouseman, or other bailee issuing a document
of title or placing thereon the words "not negotiable," "non-negotiable," or the like. (n)
Negotiation of Negotiable Documents of Title Marked Non-Negotiable
- A negotiable document of title may be negotiated by delivery or by indorsement. If the words nonnegotiable or not negotiable or words of similar import are placed upon a document of title wich is
actually a negotiable document, such words will not affect the said document.
- Under the Warehouse Receipts Law, no provision shall be inserted in a negotiable instrument receipt
that is non-negotiable. Such provision, if inserted shall be void.
Art. 1511. A document of title which is not in such form that it can be negotiated by delivery may be
transferred by the holder by delivery to a purchaser or donee. A non-negotiable document cannot be
negotiated and the endorsement of such a document gives the transferee no additional right. (n)
Definition of Non-negotiable and Negotiable Documents
(a) A non-negotiable document is by the terms of which the goods are deliverable to a specified person.
It cannot be negotiated by the holder. However, it can be assigned or transferred by delivery to a
purchaser or donee.
(b) A negotiable document is one where by its terms, it is deliverable to the bearer, or to the order of
any person named in the document. It may be negotiated delivery or by indorsement. It may be
negotiated by indorsement of the person to whose order the goods are by the terms of the document
deliverable.
Effect of Indorsement of Non-Negotiable Document the transferee acquires no

additional rights. He will just be entitled to the rights of a transferee provided in Art.
1514 whether the conveyance is by indorsement, delivery or assignment.
Art. 1512. A negotiable document of title may be negotiated:

(1) By the owner therefor; or
(2) By any person to whom the possession or custody of the document has been entrusted
by the owner, if, by the terms of the document the bailee issuing the document undertakes
to deliver the goods to the order of the person to whom the possession or custody of the
document has been entrusted, or if at the time of such entrusting the document is in such
form that it may be negotiated by delivery. (n)
Concept of Negotiation
- An instrument is negotiable when it is transferred from one person to another in such manner as to
constitute the transferee the holder. If payable to bearer, it is negotiated by delivery; if payable to
order, it is negotiated by the indorsement of the older completed by delivery.

Concept of Delivery
Delivery refers to transfer of possession of the document with intent to transfer title. It consists
principally in placing the transferee in possession of the instrument but accompanied by intent to
transfer title.
III. RIGHTS ACQUIRED BY TRANSFEREE OF DOCUMENT OF TITLE.

A. Under a Negotiable Document of Title
a. Which has been duly negotiated:
Art. 1513. A person to whom a negotiable document of title has been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the document to him had or had ability to
convey to a purchaser in good faith for value and also such title to the goods as the person to
whose order the goods were to be delivered by the terms of the document had or had ability to
convey to a purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold possession of the goods for
him according to the terms of the document as fully as if such bailee had contracted directly with
him. (n)
Rights of Persons to whom a Document of Title has been Negotiated
- acquires: (a) such title to goods which the person negotiating had in the goods or which he can convey to
a purchaser in good faith for value; and (b) such title to the goods which the person to whose order the
goods were to be delivered had or which he can convey to a purchaser in good faith; and (c) the direct
obligation of the bailee issuing the document to hold the possession of the goods for him as fully as if the
bailee had contracted directly with him.
Concept of Bailee In the law of contracts, a bailee is one to whom goods are
bailed; one to whom goods are entrusted by a bailor; the party to whom personal
property is delivered under a contract of bailment.
Concept of a Purchaser in Good Faith A purchaser in good faith is one who has
purchased the property in good faith without notice of the defect of the title of the
seller and fro a valuable consideration.
b. Which has been transferred (not duly negotiated)

Art. 1514. A person to whom a document of title has been transferred, but not negotiated, acquires
thereby, as against the transferor, the title to the goods, subject to the terms of any agreement with the
transferor.
If the document is non-negotiable, such person also acquires the right to notify the bailee who issued the
document of the transfer thereof, and thereby to acquire the direct obligation of such bailee to hold
possession of the goods for him according to the terms of the document.
Prior to the notification to such bailee by the transferor or transferee of a non-negotiable document of
title, the title of the transferee to the goods and the right to acquire the obligation of such bailee may be
defeated by the levy of an attachment of execution upon the goods by a creditor of the transferor, or by a
notification to such bailee by the transferor or a subsequent purchaser from the transfer of a subsequent
sale of the goods by the transferor. (n)
Rights of Persons to whom Document of Title has been transferred (but not
negotiated)
- Negotiation refers to negotiable documents while transfer refers to non-negotiable document

1. The title to the goods as against the transferor but subject to the terms of any agreement.
2. The right to notify the bailee of the transfer and to order the bailee to hold possession of the goods
for him according to the terms of the agreement.
- The transferee does not acquire directly the obligation of the bailee to hold him for the goods covered
by the document. He must first notify the bailee of the transfer. However, the person to whom the
document was duly negotiated directly acquires the obligation of the bailee to hold him for the goods as
if he contracted with him directly.
Conditions for Allowance of Attachments of Goods.
- If the document of title is negotiable, the goods covered cannot be attached or levied upon on
execution unless the document is first surrendered to the bailee or its negotiation restrained by the
court. Reason: the document might have been negotiated to other persons who may enjoy superior
SALES PRE-MIDTERM REVIEWER ATTY. ADVIENTO 10

rights and for which the bailee could be made liable should he fail to deliver the goods later when
demanded by such persons.
If the document is non-negotiable, the mere transfer of the document does not
constitute delivery of the goods. Thus, before notification of the bailee about the
transfer, the bailee is not bound to the transferee. Before notice, the transferees
title and his right to hold the bailee responsible to him for goods may be defeated
by a writ of attachment or levy on execution upon the goods by the creditor/s of the
transferor.
B. Under a Non-negotiable Document

Art. 1515. Where a negotiable document of title is transferred for value by delivery, and the
endorsement of the transferor is essential for negotiation, the transferee acquires a right against the
transferor to compel him to endorse the document unless a contrary intention appears. The
negotiation shall take effect as of the time when the endorsement is actually made. (n)
Transfer of Negotiable Document of Title without Indorsement:
By its nature, a negotiable instrument of title may not be negotiated by mere delivery. It must be
indorsed by the person to whose order the goods are deliverable. If the document was transferred to
another for value, the latter as the transferee of the document has acquired the right to compel the
transferor to indorse the document. Except is when the parties have agreed otherwise, or a contrary
intention appears.
Moment of Effectivity of the Negotiation
The negotiation takes effect at the time the indorsement was made. There is no retroactivity. Reason:
Negotiation becomes complete only at the time of the indorsement of the negotiable document by the
transferor. Thus, if at the time of the indorsement, the transferee knew of the defect or flaw in the title
of the transferor, he will not be considered a buyer in good faith. The fact that he was ignorant of this at
the time he purchased the document will not excuse him if at the time of indorsement he came to know
of the flaw in the document.
WHAT A PERSON WHO NEGOTIATES WARRANTS
Art. 1516. A person who for value negotiates or transfers a document of title by endorsement or
delivery, including one who assigns for value a claim secured by a document of title unless a contrary
intention appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair the validity or worth of the
document; and
(4) That he has a right to transfer the title to the goods and that the goods are merchantable
or fit for a particular purpose, whenever such warranties would have been implied if the
contract of the parties had been to transfer without a document of title the goods
represented thereby. (n)
Warranties of the person negotiating:
A person who negotiates, transfers or assigns for value a document of title by indorsement or delivery,
warrants the ff:
1.) Genuineness of the document
2.) Possession of legal right to negotiate or transfer it
3.) He has no knowledge of any fact of impairing the validity of the document
4.) He has a right to transfer the title of the goods
5.) That the goods are merchantable or fit for a particular purpose for which they are purchased.
Warranty attaches if the document is found a forgery; if the negotiating person who transfers or assign has
no legal right over the document as when he only found it; or when he has notice of the flaw or defect in
the document or title.
Warranty on Merchantability or Fitness:
The warranty that the goods are merchantable or fit would be binding upon the transferor only if these are
implied in the contract.
Warranties Limitative: only four. They are not liable for failure on the part of the
bailee who issued the document, or of the previous indorsee of the document to
perform their respective obligations.
Art. 1517. The endorsement of a document of title shall not make the endorser liable for any failure
on the part of the bailee who issued the document or previous endorsers thereof to fulfill their
respective obligations. (n)

Warranties of an Indorser of a Document of Title:
The indorser of a document of title warrants only the four warranties in the preceding article. He
does not warrant the fulfillment of the obligation of the bailess who issued the document; neither, does he
warrant the fulfillment of the obligations of the previous indorsers.
Illustrations:
a.) A negotiated a warehouse receipt issued by a warehouseman. The goods covered were lost due to
the fault of the warehouseman. A is not liable for the failure of the warehouseman to deliver the
goods to the holder.
b.) Assuming that the warehouse receipt is a forgery and the warehouse refused to deliver the goods to
the holder, the transferor is liable to the said holder. The reason for this is that the transferor warrants
the genuineness of the warehouse receipt.
Effects of indorsement of negotiable instrument not applicable to document of title. The provision of the
Negotiable Instruments Act (Act 2130) are not applicable to document of title.
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)
- This refers to the validity of the negotiation of a negotiable document of title, whereas Art. 1513 (No. 1)
refers to the validity of title over the goods.
The following do not impaired the validity of negotiation of a negotiable document of title:
1.) The fact that the negotiation constitutes a breach of duty by the transferor
2.) The fact that the owner of the document was deprived of his possession over the document of title
by loss, fraud, theft, accident, mistake, duress, or conversion.
The only conditions being required is that the transferee, direct or subsequent, has (a) paid consideration or
value therefore, acted in good faith, and (b) without notice of the defect in the title of the transferor.
Art. 1519. If goods are delivered to a bailee by the owner or by a person whose act in conveying the
title to them to a purchaser in good faith for value would bind the owner and a negotiable document
of title is issued for them they cannot thereafter, while in possession of such bailee, be attached by
garnishment or otherwise or be levied under an execution unless the document be first surrendered
to the bailee or its negotiation enjoined. The bailee shall in no case be compelled to deliver up the
actual possession of the goods until the document is surrendered to him or impounded by the court.
(n)
IV. LEVY, GARNISHMENT OR GOODS COVERED BY A DOCUMENT OF TILE
Conditions when Goods in the Possession of Bailee may not be Attached or Levied
upon:
The goods delivered to a bailee may not be attached or levied upon if any of the following exigencies or
matters are present:
1.) Goods were delivered by the owner or his authorized representative to the bailee or delivered by
someone by whose act of conveying the title to them would bind the owner;
2.) A document of title is issued for the goods by the bailee;
3.) The goods are in the possession of the bailee;
4.) The document of title is not surrendered to the bailee;
5.) Its negotiation is enjoined or prohibited by the court.
The bailee can only be compelled to deliver the possession of the goods to the attaching creditor of the
owner of the goods if the document has been surrendered, or there is a court order enjoining the
negotiation of the document of title, or requiring its surrender to the court.
Reason: to protect the bailee from liability as the document may have been negotiated by the holder to the
subsequent transferees for value and in good faith.
When Attachment or Levy cannot be Restricted:
The rights, however, acquired by an attaching creditor cannot be defeated under the following cases:
1.) when the party who deposited the goods is not the owner
2.) when the depositor has no right to convey title to the goods and his acts are not binding upon the
owner

3.) when the owner himself files the action for the recovery of the goods in the possession of the bailee
4.) when the attachment or levy of the goods was made prior to the issuance of the negotiable
document of title.
Remedy of the creditor of a holder:
Courts may grant reliefs such as by injunction, in favor of creditors in regard to the property of the
debtor-owner of document of title which cannot be readily attached or levied upon by ordinary process
of law. Thus, warehouseman may be restrained or enjoined from delivering the goods to the debtorowner until the claim of the creditor shall have been settled.
II. Delivery to the carrier
A.
Rule
B. At what point the articles were considered delivered to the buyer

Behn, Meyer & Co. vs. Yanco
Facts: Stipulation is C.I.F. (cost, insurance and freight is already included in the price) Manila. On its way to
Manila, the cargo was intercepted somewhere in Penang Malaysia. 80 drums were ordered, 71 drums were
intercepted. When only 9 drums of Carabao brand of caustic soda arrived in Manila, the seller offered to
deliver a substitute of a different brand. The buyer refused and insisted on the Carabao brand.
Issue: Because the buyer refuses to pay, the seller now claims that ownership was transferred to the buyer
in New York and that therefor he should pay 80 drums of Carabao brand caustic soda (76%).
Ruling: Determination of the place of delivery always 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 instant 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.
We believe 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 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 of the same.
Adviento: The agreement was C.I.F. Manila and therefor the place of delivery, the point where ownership is
transferred to the buyer is in Manila. Unless the goods arrived in Manila safely in merchantable condition,
then the buyer has no obligation to pay the purchase price because delivery is made in Manila. Moreover,
the fact that you offered to deliver a substitute indicates an acknowledgement that
you were still the
owner of the goods when they were shipped from New York through Penang and then eventually to Manila.
For our purposes, what we need to know is only the point of delivery to determine the respective obligation
of the parties. On the point of the seller, can it compel the buyer to accept the delivery? No. Can it compel
the buyer to accept a substitute? No. Can you compel buyer to pay for the 80 drums of soda even if you are
not able to deliver by claiming that ownership was transferred to the buyer at the point of shipment? No,
because here the point of delivery is in Manila and ownership is transferred only in Manila. If you cannot
transfer ownership in Manila, then you have not complied with your obligation therefore the pursuant
obligation of the buyer to pay does not arise.
III. Expenses of delivery are borne by the seller (1247) (1521 last paragraph)
Article 1247 Unless it is otherwise stipulated, the extrajudicial expenses required by the payment
shall be for the account of the debtor. With regard to judicial costs, the Rules of Court shall govern.
Article 1521 Unless otherwise agreed, the expenses of and incidental to putting the goods into a
deliverable state must be borne by the seller.
A.
In sales C.I.F.
Behn, Meyer & Co. vs. Yanco (see facts above)

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.
B. In sales F.O.B. (free on board) or F.A.S (free alongside ship)
"F.O.B." - "Free on Board," 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.

F.A.S Free Alongside Ship, term of sale signifying that the price invoiced or
quoted by a seller includes all charges only up to the ship at the port of departure. The
buyer is responsible for loading and all subsequent charges.
Butuan Sawmill vs CTA, February 28, 1966, GR L-20601

Facts: Butuan Sawmill sells logs to Japanese firms at prices FOB vessel. Freight is paid by Japanese buyers,
and the payments were effected by means of irrevocable letters of credit in favor of Butuan Sawmill. Upon
investigation by the BIR it was ascertained that no sales tax return was filed by Butuan Sawmill and neither
did t pay the corresponding tax on the sales. Thereafter, BIR assessed against Butuan Sawmill sales tax and
surcharges. Butuan challenged the assessment on the ground that the disputed sales were consummated
in Japan and therefore not subject to the taxing jurisdiction of the Philippines.
Issue: The place of consummation of sale to determine whether or not petitioner is liable to pay the sales
tax.
Ruling: It points out that the "FOB" feature of the sales contract was made only to fix its price and not to
fix the place of delivery; that the requirement of certification of quality, quantity, and measurement
specifications of the logs by local authorities was done to comply with local laws, rules, and regulations, and
was not a part of the sales arrangement; that the payment of freight by the Japanese buyers is not an
uncommon feature of "FOB" shipments; and that the payment of prices by means of irrevocable letters of
credit is but a common established business practice to secure payment of the price to the seller. It also
insists that, even assuming that the "FOB" feature of the disputed sales determines the situs of transfer of
ownership, the same is merely a prima facie presumption which yields to contrary proof such as that the
logs were made deliverable to the "order of the shipper" and the logs were shipped at the risk of the
shipper, which circumstances, if considered, would negate the above implications. Hence, petitioner herein
contends that the disputed sales were consummated in Japan, and, therefore, not subject to the taxing
jurisdiction of our Government. It is admitted that the agreed price was "F.O.B. Agusan", thus indicating,
although prima facie, that the parties intended the title to pass to the buyer upon delivery of the logs in
Agusan; on board the vessels that took the goods to Japan.
When delivery does not transfer title
In delivery on approval, trial, or satisfaction
Paragraph 2 of Article 1502 provides:
When goods are delivered to the buyer on approval or on trial or on satisfaction, or
other similar terms, the ownership therein passes to the buyer:
i.
When he signifies his approval or acceptance to the seller or does any other act
adopting the transaction;
ii.
If he does not signify his approval or acceptance to the seller, but retains the
goods without giving notice of rejection, then if a time has been fixed for the
return of the goods, on the expiration of such time, and if no time has been
fixed, on the expiration of a reasonable time. What is a reasonable time is a
question of fact.
In case of express reservation of title in the seller

Paragraph 1 of Article 1503 provides:
Where there is a contract of sale of specific goods, the seller may, by the terms of
the contract, reserve the right of possession or ownership in the goods until certain
conditions have been fulfilled. The right of possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the
purpose of transmission to the buyer.
Art. 1521
Art. 1521. Whether it is for the buyer to take possession of the goods or of the seller to send them
to the buyer is a question depending in each case on the contract, express or implied, between the
parties. Apart from any such contract, express or implied, or usage of trade to the contrary, the
place of delivery is the seller's place of business if he has one, and if not his residence; but in case
of a contract of sale of specific goods, which to the knowledge of the parties when the contract or
the sale was made were in some other place, then that place is the place of delivery.
Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for
sending them is fixed, the seller is bound to send them within a reasonable time.
Where the goods at the time of sale are in the possession of a third person, the seller has not
fulfilled his obligation to deliver to the buyer unless and until such third person acknowledges to the
buyer that he holds the goods on the buyer's behalf.
Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour.
What is a reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable
state must be borne by the seller. (n)

Place, Time and Manner of Delivery
Place in order
1. the place stipulated
2. the place determined by usage of trade
3. the sellers place of business
4. the sellers place of residence
Rule for Specific Goods place where they are found; in the absence: usage of trade
Waiver If the goods were accepted by the buyer in some other place not specified in the contract.
Time and Manner of Delivery of Goods depend whether or not the parties had fixed and the time for
the delivery of the goods
a. If there is a specific date and time agreed upon for the delivery of the goods, then this shall be
controlling;
b. If there is no specific date and time agreed upon for the delivery of the goods, the delivery of the
goods, the delivery must be made within reasonable time, which depends upon the circumstances.
When Time is of the Essence The buyer must notify the seller of his intention to cancel the sale unless
delivery is made on or before a fixed time.
Hour of Delivery must be within a reasonable hour
When Goods are in the Possession of a Third Person

The seller is not discharged from his responsibility where the goods are in the possession of a third
person, unless that third person has acknowledged to the buyer that he holds the goods in behalf of
said buyer.
Expenses shall be borne by the seller unless otherwise agreed upon.

Cases:
Timeliness of delivery in light of the stipulations in the contracts:
SMITH, BELL & CO., LTD. v. VICENTE SOTELO MATTI
Facts: In August 1918, the parties entered into contracts whereby the company obligated itself to sell two
steel tanks to be shipped from New York and delivered at Manila "within three or four months;" two
expellers to be shipped from San Francisco in the month of September, 1918, or as soon as possible; and
two electric motors, as to the delivery of which stipulation was made, couched in these words:
"Approximate delivery within ninety days. This is not guaranteed." The tanks arrived at Manila on the
27th of April, 1919: the expellers on the 26th of October, 1918; and the motors on the 27th of February,
1919. The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr.
Sotelo refused to receive them and to pay the prices stipulated.
Issue: Whether or not the plaintiff has fulfilled, in due time, its obligation to bring the goods in question to
Manila.
Held: The plaintiff is not guilty of delay.
To solve this question, it is necessary to determine what period was fixed for the delivery of the goods.
Under these stipulations, it cannot be said that any definite date was fixed for the delivery of the goods.
The term which the parties attempted to fix is so uncertain that one cannot tell just whether those articles
could be brought to Manila or not. The obligations must be regarded as conditional.
Obligations for the performance of which a day certain has been fixed shall be demandable
only when the day arrives.
A day certain is understood to be one which must necessarily arrive, even though its date be
unknown.
If the uncertainty should consist in the arrival or non-arrival of the day, the obligation is
conditional and shall be governed by the rules of the next preceding section. (referring to pure and
conditional obligations). (Art. 1125, Civ. Code.)
And as the export of the machinery was, as stated in the contract, contingent upon the sellers obtaining
certificate of priority and permission of the United States Government, subject to the rules and regulations,
as well as to railroad embargoes, then the delivery was subject to a condition the fulfillment of which
depended not only upon the effort of the herein plaintiff, but upon the will of third persons who could in no
way be compelled to fulfill the condition. The obligor will be deemed to have sufficiently performed his part
of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in
reality.

Delivery: when time is of the essence
LORENZO SHIPPING CORP. v. BJ MARTHEL INTERNATIONAL, INC.

Facts: From 1987 up to the institution of this case, respondent supplied petitioner with spare parts for the
latter's marine engines. Sometime in 1989, petitioner asked respondent for a quotation for various machine
parts. Petitioner thereafter issued to respondent Purchase Order dated 02 November 1989, for the
procurement of one set of cylinder liner to be used for M/V Dadiangas Express. Respondent placed the order
for the two cylinder liners with its principal in Japan, Daiei Sangyo Co. Ltd., by opening a letter of credit on
23 February 1990 under its own name with the First Interstate Bank of Tokyo.
On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in North Harbor,
Manila. Respondent sent a Statement of Account dated 15 November 1990 to petitioner. While the other
items listed in said statement of account were fully paid by petitioner, the two cylinder liners delivered to
petitioner on 20 April 1990 remained unsettled. Respondent's vice-president sent a demand letter dated 02
January 1991 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 dated 12 March 1991offering 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, it (petitioner) would have to sell the cylinder liners in Singapore and pay the
balance from the proceeds of said sale.
Issue: Was there late delivery of the subjects of the contract of sale to justify petitioner to disregard the
terms of the contract considering that time was of the essence thereof?
Held: Time is not of the essence. There was no late delivery.
That a contract of sale was entered into by the parties is not disputed. 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 Purchase
Order made no mention at all of the due dates of delivery.
We find the case of Smith, Bell & Co., Ltd. v. Matti, instructive. There, we held that W hen the time of
delivery is not fixed or is stated in general and indefinite terms, time is not of the essence of the
contract. . . .
In such cases, the delivery must be made within a reasonable time.
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. . . .
We also find 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.
Even where time is of the essence, a breach of the contract in that respect by one of the parties may be
waived by the other party's subsequently treating the contract as still in force." Petitioner's receipt of the
cylinder liners when they were delivered to its warehouse on 20 April 1990 clearly indicates that it
considered the contract of sale to be still subsisting up to that time. Indeed, had the contract of sale been
cancelled already as claimed by petitioner, it no longer had any business receiving the cylinder liners even
if said receipt was "subject to verification." By accepting the cylinder liners when these were delivered to its
warehouse, petitioner indisputably waived the claimed delay in the delivery of said items.
Therefore, 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. There is no
showing that petitioner notified respondent of its intention to rescind the contract of sale between them.
Quite the contrary, respondent's act of proceeding with the opening of an irrevocable letter of credit on 23
February 1990 belies petitioner's claim that it notified respondent of the cancellation of the contract of sale.
Articles 1525 1535 Rights of the Unpaid Seller
Definition:
Unpaid seller a. when the whole of the price has not been tendered
b. when a bill of exchange or other negotiable instrument has been received as
conditional payment, and the condition on which it was received has been broken
by reason of the dishonor of the instrument, the insolvency of the buyer, or
otherwise.

- seller is unpaid within the definition whether title has or has not passed.
Seller - includes an agent of the seller to whom the bill of lading has been indorsed, or a
consignor or agent who has himself paid, or is directly responsible for the price, or any other person who is
in the position of a seller.
I.
Rights of an unpaid seller (1526)

A.
Lien on the goods or right to retain them

a.
When the lien exists
b.
Art. 1526 Subject to the provisions of this Title, notwithstanding that the ownership
in the goods may have passed to the buyer, the unpaid seller of goods, as such,
has: A lien on the goods or right to retain them for the price while he is in
possession of them;
When the lien is lost if the unpaid seller still retains ownership in the goods, he cannot
be said to have a lien
Where the ownership in the goods has not passed to the buyer, the unpaid seller
has, in addition to his other remedies a right of withholding delivery similar to
and coextensive with his rights of lien and stoppage in transitu where the ownership
has passed to the buyer.
B. Right to stop in transit

a.
b.
c.
Requisites for the exercise

1.
The buyer becomes insolvent
In case of the insolvency of the buyer, a right of stopping the goods in transitu after
he has parted with the possession of them;
when the buyer of goods is or becomes insolvent, the unpaid seller who has parted
with the possession of the goods has the right of stopping them in transitu, that is
to say, he may resume possession of the goods at any time while they are in
transit, and he will then become entitled to the same rights in regard to the goods
as he would have had if he had never parted with the possession.
2.
The goods are in transit
Seller must be unpaid
Buyer must be insolvent
Goods must be in transit
Seller must either actually take in possession of the goods sold or give notice of
his claim to the carrier or other person in possession
Seller must surrender the negotiable document of title, if any, issued by the
carrier or bailee
Seller must bear the expenses of deliver of the goods after the exercise of the
right
Effect of partial delivery
If part delivery of the goods has been made to the buyer, or his agent in that
behalf, the remainder of the goods may be stopped in transitu, unless such part
delivery has been under such circumstances as to show an agreement with the
buyer to give up possession of the whole of the goods.
The mere fact that part of the goods has been delivered does not deprive the
seller of the right to stop with respect to the remainder.
Seller may still exercise his right of lien on the remainder after part of the goods
had been delivered.
How stoppage in transit is exercised
The unpaid seller may exercise his right of stoppage in transitu either
(1) by obtaining actual possession of the goods
(2) by giving notice of his claim to the carrier or other bailee in whose
possession the goods are.
C. Right of resale (1533)

a.
Requisites for the exercise of the right

1. The unpaid seller can exercise the right to resell only when he has either right of lien or
has stopped the goods in transit.
2. Instances when resale may be made
where the goods are perishable

b.
c.
where the right to resell is expressly reserved, in case the buyer should make a
default does not require that goods are perishable
where the buyer delays in the payment if the price for an unreasonable time
Notice of resale to the buyer
General rule: Not essential
Except: In the case of perishable goods, which obviously may require an expeditious
sale, and where the right to resell is reserved, the failure to give notice is relevant
upon the question whether the buyer has been in default for an unreasonable time
Manner of resale
d.
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.
Right to recover deficiency
In case of resell, the seller is not liable for any profit made by such resale; but if he
sells for less than the price, he has a right to sue for the balance. As against the
original buyer, the new buyer acquires a good title to the goods.
Katigbak vs. CA
Facts: Parties agreed purchase and sale of a Tractor Winch. Katigbak went to see Lundberg (owner and
operator) and inspected the equipment. Desiring a reduction of the price, 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. The sale was not consummated and Katigbak sued for the
refund of such amount. Lundberg and Evangelista alleged non-liability for the amount since the same
(obligation for refund) was purely a personal account between defendant Evangelista and plaintiff Katigbak.
Evangelista claimed that while there was an agreement between him and Katigbak for the purchase and
sale of the winch and that Katigbak advanced the payment for the spare parts, Katigbak refused to comply
with his contract to purchase the same; that as a result of such refusal he (Evangelista) was forced to sell
the same to a third person for only P10,000.00, thus incurring a loss of P2,000.00, which amount Katigbak
should be ordered to pay.
Ruling: Notwithstanding the breach of contract committed by him, we may concede appellee's right to a
refund of the sum of P2,029.85, but equally undeniable is appellant Evangelista's right to recover from him
his loss of P2,000.00, which is the difference between the contract price for the sale of the winch between
him and appellee and the actual price for which it was sold after the latter had refused to carry out his
agreement. As held in the above-cited case of Hanlon, if the purchaser fails to take delivery and pay the
purchase price of the subject matter of the contract, the vendor, without the need of first rescinding the
contract judicially, is entitled to resell the same, and if he is obliged to sell it for less than the contract price,
the buyer is liable for the difference. This loss, which is the subject matter of Evangelista's main
counterclaim, should therefore be set off against the sum claimed by appellee, which would leave in favor
of the latter a balance of P29.85.
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 herein petitioner failed to take delivery of the winch, subject matter of the contract and such failure or
breach was to him. The right to resell the equipment, therefore, cannot be disputed. 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 (1526)
a. Requisites
Where the right to rescind is expressly reserved in case the buyer should make a
default
Where the buyer delays in the payment of the price for an unreasonable time.
Ocejo, Perez & Co. vs International Banking Corp.

Facts: Chua Teng Chong of Manila, executed and delivered to the International Banking Corporation a
promissory note and deposited with the bank, as security 5,000 piculs of sugar, stored in a warehouse. The
bank did not take possession of it when the document was executed and delivered. The bank made no

effort to exercise any active ownership over said merchandise until when it discovered that the amount of
sugar stored in the said warehouse was much less than the 5,000 piculs. Plaintiff partnership Ocejo, Perez
and Co., entered into contract with Chua Teng Chong for the sale to him of a lot of sugar and 5,000 piculs
were delivered by plaintiff to Chua Teng Chong and stored in his warehouse. Plaintiff partnership presented,
for collection, its account for the purchase price of the sugar, but the buyer (Chua Teng Chong) refused to
make payment.
The bank inspected the sugar described in the pledge agreement. The bank discovered that the amount of
sugar in that warehouse did not exceed 1,800 piculs. The bank went immediately to see Chua Teng Chong,
and the latter informed him that the rest of the sugar covered by the pledge agreement was stored in the
warehouse of plaintiff. The took immediate possession, closing the warehouse with the bank's padlocks. It is
admitted that the sugar seized by the bank is the same sugar which the plaintiff firm delivered to Chua
Teng Chong. The bank took possession of the sugar, the promissory note had fallen due and was unpaid. In
the written contract by which the plaintiff firm undertook to sell the sugar in question to Chua Teng Chong
nothing was said concerning the time and place for payment. After Chua Teng Chong had refused to pay the
bill for the price of the sugar which the plaintiff firm presented to him, the day after its delivery, an attempt
was made by the plaintiff to recover possession of the sugar, and to that end, the plaintiff made a demand
on the bank for the delivery of the sugar, to which demand the bank refused to accede. Chua Teng Chong
was judicially declared to be insolvent. The plaintiff partnership filed a complaint, upon which this action
was commenced, naming the bank as defendant, alleging that said defendant was unlawfully holding the
sugar, the property of the plaintiff firm, which the bank had received from Chua Teng Chong. Subsequently,
by agreement of the parties, the sugar was sold and the proceeds of the sale deposited in the bank, subject
to the order of the court upon the final disposition of the case. After the answer of the defendant bank was
filed, a complaint in intervention was filed by Chua Seco, in which he asserts a preferential right to the
sugar, or to the proceeds of its sale, upon the ground that the delivery of the sugar by plaintiff, by virtue of
which it passed into the possession and control of Chua Teng Chong, had the effect of transmitting the title
of the pledge asserted by the bank was null and void. Upon these allegations the interveners contends that
the sugar is the property of the insolvent estate represented by him.
Issue: Assuming that the title passed to the buyer, did his failure to pay the purchase price authorize the
seller to rescind the sale?
Ruling: Having concluded that the effect of the delivery was to transmit the title of the sugar to the buyer,
we will now consider the legal effect of the failure on the part of the buyer to pay the price on demand.
Article 1506 of the Civil Code provides that the contract of sale may be rescinded for the same causes as all
other obligations, in addition to the special causes enumerated in the preceding articles. It is also observed
that the article does not distinguish the consummated sale from the merely perfected sale, and we do not
believe that there is any reason for making this distinction. Article 1124 of the Civil Code establishes the
principle that all reciprocal obligations are rescindible in the event that one of the parties bound should fail
to perform that which is incumbent upon him. In the contract of the sale the obligation to pay the price is
correlative to the obligation to deliver the thing sold. Nonperformance by one of the parties authorizes the
other to exercise the right, conferred upon him by the law, to elect to demand the performance of the
obligation or its rescission, together with damages in either event. But the right to rescind the sale for
nonperformance on the part of the buyer is not absolute. The law subordinates it to the rights of third
persons to whom bad faith is not imputable, and the defendant bank seeks to invoke in its defense this
principle, alleging that the sugar in question was pledge to it, after its delivery to the buyer and before the
latter was placed in default with respect to the payment of the price.
The judgment of the court below awards the plaintiff the product of the sale of the sugar, it having been so
disposed of by agreement by the parties during the pendency of the suit. The intervener excepted to the
decision and joined in the bank's appeal. In his brief in this court the intervener raises a question as to the
sufficiency of the complaint to support the decision of the court below, adopting the argument of the bank
upon this point. That is, assuming that by reason of the nonpayment of the purchase price, the seller is
entitled to elect to rescind the sale, is the rescission effected ipso facto by such election, or is it necessary
for him to bring an action of rescission? The action of replevin, the intervener contends, is based upon the
assumption that the plaintiff at the time of bringing the action is either the owner of the thing which is the
subject matter of the suit or entitled to its possession. But the question presented is whether, in cases in
which title has passed by delivery and in which the buyer has failed to pay the purchased price on demand,
title is revested in the seller by the mere fact that he has mentally determined to elect to rescind? In its
brief the plaintiff partnership contends for the affirmative, saying that the acts of the seller the filing of
its complaint imply that it has made the election. But the intervener, adopting the argument of the bank,
contends that the party to whom article 1124 of the Civil Code grants the right to rescind "must apply to
the court for a decree for the rescission of the contract. . . ."; and this conclusion is supported by the last
paragraph of the article cited. Of course, if the action of the court is necessary in order to effectuate the
rescission of the sale, such rescission does not follow ipso jure by reason of nonpayment and the
determination of the seller to elect to rescind. Consequently, the action of replevin cannot be maintained.
The right to rescind a sale, established by article 1506, in no wise differs from that which is established, in
general terms, with respect to reciprocal obligations, by article 1124 in "true event that one of the obligors
fails to perform the obligation incumbent upon him." But the right so conferred is not an absolute one. The
same article provides that "the court shall decree the rescission demanded, unless there are causes which
justify him in allowing a term."
Therefore, it is the judgment of the court and not the mere will of the plaintiff which produces the rescission
of the sale. This being so, the action of replevin will no lie upon the theory that the rescission has already
taken place and that the seller has recovered title to the thing sold.

b. Rules on notice of intention to rescind
An election of the seller to rescind may be manifested by notice to the buyer or by

some overt act showing an intention to rescind. Communication of such election to
the buyer is not necessary. But, as in regard to resale, the giving and failure to give
notice is relevant in determining the reasonableness of the time given the buyer to
make good his obligations under the contract.
c. Effect of rescission
II.
The seller resumes ownership of the goods. While the seller shall not be liable to
the buyer upon the contract of sale, the latter, however, may be made liable to the
seller for damages for any loss occasioned by the breach of contract.
Effect of sale or other disposition of the goods by the original owner on the right of the unpaid seller
a.
General Rule: Sales or dispositions of the goods made by the seller shall NOT affect the unpaid
sellers right of lien or right of stoppage in transitu.
b.
Exemption: Unless the seller has given his conformity thereto
ARTICLE 1536-1543
I.
Completeness of Delivery
A.
Real Estate
B.
a.
Where it is sold per unit or number
Cebu Windland Development Corporation vs. Ong Siao Hua

G.R. No. 173215 May 21, 2009
Facts:
Petitioner is the owner and developer of a condominium project called Cebu Windland Tower Condominium.
Respondent is a buyer of two condominium units and four parking slots from petitioner. Petitoner offered to
sell to respondent condominium units at promotional prices. As an added incentive, petitioner offered a 3%
discount provided 30% of the purchase price is paid as down payment and the balance paid in 24 monthly
installments.
Respondent accepted to offer of petitioner and bought two condominium units designed as Unit Nos. 2405
and 2406, as well as four parking sltos designated as slots 91, 99, 101 and 103. The area per condominium
unit is 155 square meters and the price per square meter is P22,378.95. The price for the parking slot is
P240,000 each. Possession of the subject properties was turned over to respondent on October 10, 1996.
Upon examination of the deed of absolute sale of Unit No. 2405 and 2406, 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 representing the excess payments for the difference in the area. Petitioner refused to
refund the said amount to respondent. Consequently, respondent filed a complaint on August 7, 1998
praying for the refund plus interest, moral damages and attorneys fees, including the suspension of
petitioners license to sell.
Issue:
Whether or not the respondent can demand for refund of the amount representing the excess payments for
the difference in area.
Held:
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.
Issue:
Whether or not respondents action has prescribed.
Held:
Article 1543. The action arising from Articles 1539 and 142 shall prescribe in six months, counted
from the day of delivery.
Petitioner argues that it delivered possession of the subject properties to respondent on October 10, 1996,
hence, respondents action filed on August 7, 1998 has already prescribed. Respondent, on the one hand,
contends that his action has not prescribed because the prescriptive period has not begun to run as the
same must be reckoned from the execution of the deeds of sale which has not yet been done.
In the light of the foregoing, delivery as used in the Law Sales refers to the concurrent transfer of two
things: (1) possession and (2) ownership. This is the rationale behind the jurisprudential doctrine that
presumptive delivery via execution of a public instrument is negated by te realty 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 the 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.
We, therefore, hold that the transfer of possession of the subject properties on October 10, 1996 to
respondent cannot be considered as "delivery" within the purview of Article 1543 of the Civil Code. It
follows that since 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, the action filed by respondent has not prescribed.
a.
Where it is sold for a lump sum or a single price

1) DISTINCTION BETWEEN 1539 (UNIT PRICE CONTRACT) AND 1542 (LUMPSUM CONTRACT)
Rudolf Lietz, Inc. vs. Court of Appeals
G.R. No. 122463 December 19, 2005
Facts:
Respondent Buriol previously owned a parcel of unregistered land. On August 15, 1986, he entered into a
lease agreement with respondents Turatello and Sani, all Italian citizens involving one hectare of Buriols
property. The lease agreement was for a period of 25 years, renewable for another 25 years but it was
reduced into writing only in January 1987.
On November 17, 1986, respondent Buriol sold to petitioner Lietz the same parcel of land. Petitioner later
discovered that respondent Buriol owned only four hectares and with one or more hectare covered by lease,
only three hectares were actually delivered to petitioner. Thus, petitioner instituted a complaint for
Annulment of Lease with Recovery of Possession with Injunction and Damages against respondents and
Turatello. The complaint alleged that with evident bad faith and malice, respondent sold to petitioner five
hectares of land when respondent knew for a fact that he owned only four hectares and managed to lease
one more hectare to Turatello
Issue:
Whether or not petitioner is entitled to the delivery of the entire five hectares or its equivalent.
Held:
As correctly noted by the trial court and the Court of Appeals, the sale between petitioner and respondent
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.
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:
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.
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.
2. 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, which she sold to private respondent Buenaventura An by means of
a "Kasulatan ng Bilihan ng Lupa." Aside from the estimated area of 822.5 square meters appearing in the
deed of sale, the boundaries of the lot are also stated. Thereafter, private respondent entered the premises
observing thereby the boundaries of the property and not the area given.
On 18 October 1972, private respondent sold Lot 4221 to his nephew, Cipriano Ramirez where the lot was
described with the same area and boundaries mentioned. Like his uncle before him, Cipriano Ramirez
occupied the lot by observing the boundaries stated in the document of sale. On 12 March 1979, Cipriano
Ramirez sold the lot to petitioner Miguel Semira. However, the area stated 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, a complaint for forcible entry was filed against him by
private respondent 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.
Petitioner admits having entered the disputed portion on 17 March 1979, but denies having illegally done
so. In his answer, petitioner claims ownership over the property by invoking the 1979 deed of sale in his
favor by Cipriano Ramirez. Petitioner claims that owns the entire 2,200 square meters since it is the size of
Lot 4221 following its established boundaries. On the other hand, private respondent insists that he only
sold 822.5 square meters, hence, his nephew could not have transferred a bigger area to petitioner.
Issue:
Whether the boundaries of the land stated in the contract or the area thereof would prevail in a lump sum.
Held:
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 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
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.
Veronica Roble vs. Dominador Arbasa

G.R. No. 130707 July 31, 2001
Facts:
Spouses Dominador Arbasa and Adelaida Roble (hereinafter referred to as respondents) purchased from
Fidela Roble an unregistered parcel of land at Poblacion, Isabel, Leyte. As reflected on the deed of sale, the
property had a total land area of two hundred forty (240) square meters. Due to their diligent efforts in
reclaiming a portion of the sea, using stones, sand and gravel, the original size of two hundred forty (240)
square meters increased to eight hundred eighty four (884) square meters.
Adelaida tolerated her sister Fidelas continued stay at the house. Shortly after Fidelas death, petitioners
Veronica and Lilibeth Roble (daughters of Gualberto Roble, deceased brother of Fidela and Adelaida)
claimed ownership of the house and the southern portion of the land with an area of 644 square meters.
Fidela died intestate and without issue. Meanwhile, Gualberto Roble, petitioners father, died sometime in
December 1986.
As efforts to have them vacate the house and desist from claiming the parcel of land failed, respondent
spouses Dominador and Adelaida Roble-Arbasa, referred the dispute to the barangay authorities for
conciliation. Nothing happened at the barangay level. Hence, spouses Arbasa filed an action for quieting of
title with damages.
Petitioners filed an answer to the complaint. They said that the total area of the lot which respondents
bought from Fidela consisted only of two hundred forty (240) square meters, located at the northern portion
of the property. This property was originally classified as foreshore land, but due to the effort of Ireneo
Roble, father of Fidela, Adelaida and Gualberto, a portion of the sea was reclaimed and filled up. This was
the piece of property where respondents exercised open, public and continuous possession in the concept
of owner, and which had been declared for taxation purposes in the name of Adelaida Roble. With the
issuance of a new tax declaration in the name of Adelaida, Tax Declaration No. 5108-R-5 originally
registered in the name of Fidela Roble, was cancelled.
Petitioners attached as an integral part of their answer a copy of the deed of sale dated January 2, 1976,
executed by Fidela Roble in favor of Adelaida Arbasa.
Issue:
Whether or not the sale was a lumpsum or a per unit sale.
Held:
The sale that transpired on January 2, 1976 between vendor Fidela and vendee Adelaida was one of cuerpo
cierto or a sale for lump sum. Pursuant to Article 1542, Civil Code of the Philippines, 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. 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.
However, this rule admits of an exception. 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.
In the case at bar, the parties to the agreement described the land subject of the sale in this wise:
"This is a whole parcel of residential land, located at Poblacion, Isabel, Leyte, per Tax Declaration No. 5108R-5, under the name of Fidela Roble, being bounded in the North, by Matilde Evangelista; East, by Harrison
now Roxas Street; South, by Seashore; and West, by Cristito Manipes, having an approximate area of 240
square meters more or less, with all improvements thereon:"
An area of "644 square meters more" is not reasonable excess or deficiency, to be deemed included in the
deed of sale of January 2, 1976.
Moreover, at the time of the sale, the only piece of land existing was 240 square meters, the subject of the
deed of sale. This 240 square meters parcel of land was originally foreshore land, hence, not alienable and
disposable. It was only in 1952, that Fidela applied for and was granted a foreshore lease.
With regard to the ownership over the 644 square meters of land located at the southern portion of the
original 240 square meters conveyed to Adela, there is a question regarding the true nature of the land,
which has the features of a foreshore land.
Even though respondents claim that they were responsible for reclaiming the portion of the foreshore land
adjacent to the property they bought from petitioners predecessor in interest, there is no evidence that
respondents subsequently filed an application for lease with regard to the 644 square meters of reclaimed
land.
Foreshore land is a part of the alienable land of the public domain and may be disposed of only by lease
and not otherwise. It is the strip of land that lies between the high and low water marks and is alternatively
wet and dry according to the flow of tide. It is that part of the land adjacent to the sea, which is alternately
covered and left dry by the ordinary flow of tides.
There is a need, therefore, to determine whether the lands subject of the action for quieting of title are
foreshore lands. The classification of public lands is a function of the executive branch of government,
specifically the director of lands (now the director of the Lands Management Bureau). Due to the dearth of
evidence on this particular issue, we cannot arrive at a conclusive classification of the land involved. The
instant case has to be remanded to the trial court for that determination.
c.
Prescription of the action:
Actions arising from Article 1539-1542 shall prescribe in 6 months from the day of
delivery.
B. Movables
a.
Where there is deficiency or quality
b.
Where there is an excess
C. Delivery in installments
D. Delivery is to include fruits
II. When Seller is excused from delivering
A. In Cash Sales
The vendor is not bound to deliver if the vendee has not paid the price
B. In Sales on Credit
The vendor may withhold delivery if the vendee h Sales to Two Different Persons (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 good faith.

A. Rules as to Immovable Properties
In case of double sale, the ownership of property belongs to the following (in priority):
1.
To the one who registers the sale in good faith (REGISTRATION IS CONTEMPLATED
UNDER THE TORRENS SYSTEM AND NOT UNDER ACT NO. 3344);
2.
To the one who was in the first possession in good faith, if there was no registration
(POSSESSION IS NOT ONLY PHYSICAL OR MATERIAL BUT AS WELL AS SYMBOLIC);
and
3.
To the one who presents the oldest title, if in good faith (IF THERE IS NO REGISTRATION
NOR POSSESSION, THEN, THE OLDEST TITLE MAY BE THE ABSOLUTE DEED OF
SALE OR ANY OTHER DOCUMENT THAT WOULD PROVE THE FIRST VALID SALE).
******NOTE: ALL THREE INSTANCES MUST BE DONE IN GOOD FAITH!!!!!******
Case: Ownership of immovable subject of a double sale

GABRIEL v. MABANTA,
G.R. No. 142403
March 26, 2003
FACTS:
Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in Patul and
Capaltitan, Santiago, Isabela with TCT No. 72705 and 72707, which was mortgaged with the Development
Bank of the Philippines as loan collateral. Five years thereafter or on September 1, 1980, spouses
Mabanta sold the lots to Susana Soriano by way of a "Deed of Sale of Parcels of Land With Assumption of
Mortgage."4 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. Alejandro and his son Alfredo
cultivated the lots. They also caused the restructuring of spouses Mabantas loan with the
DBP.7 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. 8
On September 17, 1985, Alejandro and Alfredo filed with the RTC Branch 21, Santiago, Isabela a complaint
(involving the lot covered by TCT No. 72707) for specific performance, reconveyance and damages
with an application for a preliminary injunction 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 (covered by TCT No. 72707) from spouses Mabanta on August 21, 1985. Not having been
impleaded as a party-defendant, she filed an answer-in-intervention alleging that she is the registered
owner of the lot covered by TCT No. 72707; that she purchased it from spouses Mabanta "in good
faith and for value"; that she paid their loan with the DBP in the amounts of P17,580.88 and P16,845.17
per Official Receipts Nos. 1749539 and 1749540, respectively; that the mortgage with the DBP was
cancelled and spouses Mabanta executed a "Deed of Absolute Sale" 9 in her favor; and that TCT No. T-72707
was cancelled and in lieu thereof, TCT No. T-160391 was issued in her name.
On April 12, 1991, the trial court rendered its Decision sustaining the right of Alejandro and Alfredo Gabriel
over the lot covered by TCT No. 72707 (now TCT No. T-160391).
However, on appeal to the Court of Appeals by the Spouses Mabanta, the Court modified the trial courts
decision, declaring the second sale to Zenaida Tan-Reyes as valid.
ISSUE:
Whether or not respondent Zenaida Tan-Reyes acted in good faith when she purchased the lot and had the
sale registered.
HELD:
"ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person Otherwise stated, where it is an immovable property that is the subject of a
double sale, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it
in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession;
and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. 14 The
requirement of the law then is two-fold: acquisition in good faith and registration in good faith.15 The
rationale behind this is well-expounded in Uraca vs. Court of Appeals,16 where this Court held:
"Under the foregoing, 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 "(t)he governing principle is primus tempore, potior
jure (first in 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."
We are thus convinced that respondent Reyes had knowledge that petitioner previously bought the
disputed lot from respondent spouses Mabanta. Now respondent Reyes claims that she is a purchaser in
good faith. This is preposterous. 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.
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."
In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when she bought the lot and
had the sale registered.
a. To the one who registers the sale in good faith

TAEDO v. CA,
G.R. No. 104482
January 22, 1996
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 in Transfer
Certificate of Title No. 166451.
ISSUE:
Whether or not there was a valid registration of the Deed of Sale executed on January 13, 1981 in favor of
private respondents covering his undivided 1/12 share of a parcel of land known as Lot 191, which is the
same property disposed of on December 29, 1980, through a deed of sale, in favor of petitioners.
HELD:
Critical in determining which of these two deeds should be given effect is the registration of the sale in
favor of private respondents with the register of deeds on June 7, 1982.
Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales.
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 v. CA,
FACTS:
G.R. No. 103577
October 7, 1996

On January 19, 1985, defendants-appellants Romulo Coronel, et al. executed a document entitled "Receipt
of Down Payment", in favor of plaintiff Ramona Patricia Alcaraz which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 Total amount
50,000
Down payment
P1,190,000.00 Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos
purchase price of our 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.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the
transfer certificate of title immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We 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, mother of Ramona, paid the
down payment of P50,000.00. 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 for
P1,580,000.00 after the latter has paid P300,000.00. 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. 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. On June 5, 1985, a new title over the subject property was
issued in the name of Catalina under TCT No. 351582.
ISSUE:
Whether or not there was a there was a valid sale between the Coronels and Mabanag that would be
sufficient proof for its registration with the Register of Deeds giving rise to the issuance of a new TCT under
the name of Catalina Mabanag.
HELD:
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of
double sale where Article 1544 of the Civil Code will apply, to wit:
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 if be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in 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 record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second
contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a
new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of
Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the first buyer,
the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the
first buyer, and (b) should there be no inscription by either of the two buyers, when the second
buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the
second buyer satisfies these requirements, title or ownership will not transfer to him to the
prejudice of the first buyer.

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.
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on
February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was
correctly upheld by both the courts below.
PAGADUAN v. OCUMA,
G.R. No. 176308
May 8, 2009
FACTS:
The subject lot used to be part of a big parcel of land that originally belonged to Nicolas Cleto as evidenced
by Certificate of Title (C.T.) No. 14. The big parcel of land was the subject of two separate lines of
dispositions. The first line of dispositions began with the sale by Cleto to Antonio Cereso on May 11, 1925.
Cereso in turn sold the land to the siblings with the surname Antipolo on September 23, 1943. The
Antipolos sold the property to Agaton Pagaduan, father of petitioners, on March 24, 1961. All the
dispositions in this line were not registered and did not result in the issuance of new certificates of title in
the name of the purchasers.
The second line of dispositions started on January 30, 1954, after Cletos death, when his widow Ruperta
Asuncion as his sole heir and new owner of the entire tract, sold the same to Eugenia Reyes. This resulted
in the issuance of Transfer Certificate of Title (TCT) No. T-1221 in the name of Eugenia Reyes in lieu of TCT
No. T-1220 in the name of Ruperta Asuncion.
On November 26, 1961, Eugenia Reyes executed a unilateral deed of sale where she sold the northern
portion with an area of 32,325 square meters to respondents for P1,500.00 and the southern portion
consisting of 8,754 square meters to Agaton Pagaduan for P500.00. Later, on June 5, 1962,
Eugenia executed another deed of sale, this time conveying the entire parcel of land, including the
southern portion, in respondents favor. Thus, TCT No. T-1221 was cancelled and in lieu thereof TCT
No. T-5425 was issued in the name of respondents. On June 27, 1989, respondents subdivided the land into
two lots. The subdivision resulted in the cancellation of TCT No. T-5425 and the issuance of TCT Nos. T37165 covering a portion with 31,418 square meters and T-37166 covering the remaining portion with
9,661 square meters.
On July 26, 1989, petitioners instituted a complaint for reconveyance of the southern portion with an area of
8,754 square meters, with damages, against respondents before the RTC of Olongapo City.
ISSUE:
Whether or not there was good faith upon the respondents, as second buyers, in buying and registering the
said southern portion of the property consisting of 8, 754 square meters.
HELD:
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 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
possession; and, in the absence thereof; to the person who presents the oldest title, provided there is good
faith.
Otherwise stated, where it is an immovable property that is the subject of a double sale, ownership shall be
transferred: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in
default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the
person who presents the oldest title, provided there is good faith. The requirement of the law then is twofold: acquisition in good faith and registration in good faith. 12
In this case there was a first sale by Eugenia Reyes to Agaton Pagaduan and a second sale by Eugenia
Reyes to the respondents.13 For a second buyer like the respondents to successfully invoke the

second paragraph, Article 1544 of the Civil Code, it must possess good faith from the time of
the sale in its favor until the registration of the same. Respondents sorely failed to meet this
requirement of good faith since they had actual knowledge of Eugenias prior sale of the southern portion
property to the petitioners, a fact antithetical to good faith. This cannot be denied by respondents since in
the same deed of sale that Eugenia sold them the northern portion to the respondents for P1,500.00,
Eugenia also sold the southern portion of the land to Agaton Pagaduan for P500.00.14
It is to be emphasized that the Agaton Pagaduan never parted with the ownership and possession of that
portion of Lot No. 785 which he had purchased from Eugenia Santos. Hence, the registration of the deed of
sale by respondents was ineffectual and vested upon them no preferential rights to the property in
derogation of the rights of the petitioners.
Respondents had prior knowledge of the sale of the questioned portion to Agaton Pagaduan as the same
deed of sale that conveyed the northern portion to them, conveyed the southern portion to Agaton
Pagaduan.15 Thus the subsequent issuance of TCT No. T-5425, to the extent that it affects the Pagaduans
portion, conferred no better right than the registration which was the source of the authority to issue the
said title. Knowledge gained by respondents of the first sale defeats their rights even if they were first to
register the second sale. Knowledge of the first sale blackens this prior registration with bad faith. 16 Good
faith must concur with the registration. 17 Therefore, because the registration by the respondents
was in bad faith, it amounted to no registration at all.
MELENCION v. CA,
G.R. No. 148846
September 25, 2007
FACTS:
The subject property is a 30,351 square meter parcel of land (subject property) particularly denominated as
Lot No. 3368, located at Suba-basbas, Marigondon, Lapu-Lapu City, Cebu, and part of a total area of
30,777 square meters covered by Transfer Certificate of Title (TCT) No. 20626 (entire property) in the name
of the late petitioner Go Kim Chuan (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.
On July 10, 1964, the Amodias allegedly executed an Extra-Judicial Partition of Real Estate with Deed of
Absolute Sale they extra-judicially settled the estate of Esteban Bonghanoy and conveyed the subject
property to respondent Aznar Brothers Realty Company (AZNAR) for a consideration of P10,200.00. On
August 10, 1964, 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.
On February 18, 1989, petitioners Cecilia Amodia Vda. de Melencion, Veneranda Amodia, Felipe Amodia
and Eutiquio Amodiapetitioners Amodias) executed a Deed of Extra-Judicial Settlement with Absolute Sale,
conveying the subject property in favor of Go Kim Chuan for and in consideration of P70,000.00. The lost
title covering the subject property was reconstituted pursuant to Republic Act (RA) No. 26. A reconstituted
title particularly designated as Original Certificate of Title (OCT) No. RO-2899 was issued in the name of
Esteban Bonghanoy and, subsequently, a derivative title (TCT No. 20626) was issued in the name of Go Kim
Chuan on December 1, 1989. 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.
On February 14, 1990, 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. On the same date, a Notice of Adverse
Claim was annotated by AZNAR on TCT No. 20626. Because petitioners did not heed AZNAR's demand, on
April 25, 1990, AZNAR filed a case against petitioners Amodias and Go Kim Chuan for Annulment of Sale
and Cancellation of TCT No. 20626 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. on the merits ensued.
ISSUE:
Whether or not Go Kim Chuan is a registrant in good faith, to give him a better right than Aznar Brothers
Realty over the subject property.
HELD:
Without doubt, we have here a case of double sale of registered land. Apropos is Article 1544 of the New
Civil Code which 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.
We have already ruled that the registration contemplated in this provision refers to
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. 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., we held that registration must be done in
the proper registry in order to bind the same.
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.
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.
Moreover, 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.
b. To the one who was in the first possession in good faith
SANCHEZ v. RAMOS,
G.R. No. L-13442 December 20, 1919
FACTS:
This is an action for the recovery of a piece of land described in the second paragraph of the complaint.
This land is in the defendant's possession and formerly belonged to Ciriaco Fernandez. On July 1, 1910,
Ciriaco Fernandez sold it 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 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:
Whether or not possession only contemplates material or physical possession and excludes symbolic
possession such as the execution of a public instrument.
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.
We are of the opinion that the possession mentioned in article 1473 [now ART. 1544 of the NEW CIVIL
CODE] (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.
c. To the one who presents the oldest title, if in good faith
CRUZ v. CABANA,
G.R. No. L-56232
June 22, 1984

FACTS:
Defendants' evidence shows that on October 21, 1968, defendant Leodegaria Cabana sold the land in
question to defendants-spouses 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.
Likewise, when plaintiff 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. With the
admission of both parties that the land in question was sold to two persons, the main issue to be resolved
in this appeal is as to who of said vendees has a better title to said land.
There is no dispute that the land in question was sold with right of repurchase on June 1, 1965 to
defendants- spouses Teofilo Legaspi and Iluminada Cabana (Exh. 1). The said document 'Bilihang Muling
Mabibili' stipulated that the land can be repurchased by the vendor within one year from December 31,
1966 (see par. 5, Exh. 1).lwphl@it Said land was not repurchased and in the meantime, however, said
defendants-spouses took possession of the land.
Upon request of Leodegaria Cabana, the title of the land was lent to her in order to mortgage the property
to the Philippine National Bank. Said title was, forthwith, deposited with the PNB. On October 21, 1968,
defendant Leodegaria Cabana sold the land by way of absolute sale to the defendants- spouses (Exh. 2).
However, on November 29, 1968 defendant sold the same property to herein plaintiff and the latter was
able to register it in his name.
ISSUE:
Whether or not the respondents-spouses Teofilo Legaspi and Iluminada Cabana had better title to the land.
HELD:
The Court finds that in this case of double sale of real property, respondent appellate court, on the basis of
the undisputed facts, correctly applied the provisions of Article 1544 of the Civil Code that:
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.
There is no question that respondents-spouses Teofilo Legaspi and Iluminada Cabana were the
first buyers, first on June 1, 1965 under a sale with right of repurchase and later on October 21,
1968 under a deed of absolute sale and that they had taken possession of the land sold to
them; that petitioner was the second buyer under a deed of sale dated November 29, 1968, which to all
indications, contrary to the text, was a sale with right of repurchase for ninety (90) days. There is no
question either that respondents Legaspi spouses were the first and the only ones to be in possession of
the subject property.
Said respondents spouses were likewise the first to register the sale with right of repurchase in their favor
on May 13, 1965 under Primary Entry No. 210113 of the Register of Deeds. They could not register the
absolute deed of sale in their favor and obtain the corresponding transfer certificate of title
because at that time the seller's duplicate certificate was still with the bank. But there is no
question, and the lower courts so found conclusively as a matter of fact, that when petitioner Cruz
succeeded in registering the later sale in his favor, he knew and he was informed of the prior sale in favor
of respondents-spouses. Respondent appellate court correctly held that such "knowledge of a prior transfer
of a registered property by a subsequent purchaser makes him a purchaser in bad faith and his knowledge
of such transfer vitiates his title acquired by virtue of the latter instrument of conveyance which creates no
right as against the first purchaser."
as lost the benefit of the term.
B. Rule as to movables possessor in good faith
Article 1544, Civil Code 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.
C. Good faith in buyer

POSSESSOR IN GOOD FAITH one who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it; no knowledge of facts which should have put him
upon such inquiry or investigation as might be necessary to acquaint him with the defects
in the title of his vendor
GOOD FAITH consists in an honest intention to abstain from taking any unconscientious
advantage of another
Good faith of second buyer must continue until his contract ripens into ownership by
tradition or recording.
Cui v. Henson
Facts:
On January 8, 1926, the respondents Henson filed an application in the Court of First Instance of the
Province of Pampanga for the registration of a tract of land composed of nine lots with an aggregate area of
186 hectares, 48 ares and 65 centares, more particularly described in the plan and technical description
attached to said application. Various oppositions were presented, all of which were withdrawn except the
opposition as to lot 7-A.
When the appellants filed their petition for registration there was an action pending between Maria Abriol
Santos as defendant, and Mariano Cui, as plaintiff. In said action Mariano Cui, as administrator of the estate
of Rosario Cruz Herrera, was trying to recover a portion of the land sought to be registered.
On July 19, 1926, the applicants filed a motion, praying that an order for the issuance of the corresponding
decree of registration be made, and that lots 6 and 7-A be excluded from the registration. On July 29, 1926
the decree was issued, ordering the registration of lots 1, 2, 3, 4, 5, 7 and 8, with an aggregate area of 182
hectares, 5 ares and 83 centares, in the name of the applicants, subject to the encumbrances mentioned in
section 39 of the Land Registration Act as may be subsisting. On the same date original certificate of title
No. 14507 covering said lots was issued in the name of the applicants, subject to the mortgage lien.
On August 18 and 19, 1926, the applicants Anatolio Henson and his brothers sold the land covered by the
said certificate of title No. 14507 to Isidro Aragon for P25,000, with the right to repurchase the same within
five years. On August 19, 1926, the mortgage lien on the land was cancelled and proper notation was
entered on the back of the certificate of title.
On October 21, 1926, the petitioners filed a motion for the annulment of the decree and a reopening of the
case on the ground of fraud. In their motion, the petitioners alleged that the applicants had willfully and
fraudulently misrepresented to the court that there were no other claimants to the land covered by their
application.
Issue: WON Isidoro Aragon was a buyer in good faith
Ruling:
There is no evidence in the record, showing that when Isidoro Aragon bought the land on August 18 and 19,
1926, he knew or had the slightest notice that the same was under litigation that third parties had claim to
said land. He testified positively, without having been contradicted, that he did not know anything about
the claims of the estates of Rosario Cruz Herrera and Arsenio Cruz Herrera, until after he had bought the
land, and only then, when the register of deeds demanded of him the certificate of title for notation thereon
of "lis pendens" or the litigation between his vendors and the estates, on August 21, 1926.
As above stated, the deed of sale of said land was executed on August 18 and 19, 1926. The fact that the
balance of the price of said land, amounting to P10,000 was paid on August 21, 1926, after Isidoro Aragon
had been advised by counsel for the estates not to pay that amount because of the claim of the estates,
does not prove that he bought the land in bad faith. As a matter of fact, the sale was consummated on the
dates of the execution of the deed of sale, August 18 and 19, 1926, that is prior to his knowledge of the
claims of the estates. He paid P15,000 at the time of the execution of the deed and the balance of P10,000
on August 21st. In other words, he had knowledge of the claim of the estates after he had purchased the
land, after he had taken possession of the same, and after the ownership had been conveyed to him. He is
therefore a purchaser in good faith.
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. Good faith
consists in an honest intention to abstain from taking any unconscientious advantage of another. Good
faith is an opposite of fraud and of bad faith, and its non existence must be established by competent
proof.

San Lorenzo Devt Corp v. CA

Facts:
Respondents Miguel Lu and Pacita Zavalla owned two (2) parcels of land situated in Sta. Rosa, Laguna
covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808 square meters or a total of
3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta
for the price of fifteen pesos (P15.00) per square meter. Babasanta made a downpayment of fifty thousand
pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several
other payments totaling two hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita 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. In the same letter, Babasanta
notified the spouses about having received information that the spouses sold the same property to another
without his knowledge and consent. He demanded that the second sale be cancelled and that a final deed
of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the
property to him at fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when
the balance of the purchase 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 fifty thousand pesos
(P50,000.00) to Babasanta through Eugenio Oya.
Issue: Did the registration of the sale after the annotation of the notice of lis pendens 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?
Ruling:
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor
of SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half
of the agreed purchase price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a
Deed of Absolute Sale in favor or SLDC. At the time both deeds were executed, SLDC had no knowledge of
the prior transaction of the Spouses Lu with Babasanta. Simply stated, from the time of execution of the
first deed up to the moment of transfer and delivery of possession of the lands to SLDC, 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.
Leung Yee v. Strong Machinery

Facts:
The "Compaia Agricola Filipina" bought rice-cleaning machinery from the machinery company, and
executed a chattel mortgage. The indebtedness secured by this instrument not having been paid when it
fell due, the mortgaged property was sold by the sheriff, 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 on 29 December 1913. On 14
January 1914, the "Compaia Agricola Filipina" executed a deed of sale of the land upon which the building
stood to the machinery company, but this deed of sale, although executed in a public document, was not
registered and made no 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.
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 Leung Yee
under a contract for the construction of the building. Upon the failure of the mortgagor to pay the amount,
Leung Yee secured judgment, levied execution upon the building, bought it in at the sheriff's sale on or

about the 18 December 1914, and had the sheriff's certificate of sale duly registered in the land registry of
the Province of Cavite. At the time when the execution was levied upon the building, the machinery
company, which was in possession, filed with the sheriff a sworn statement setting up its claim of title and
demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, Leung Yee
executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which the sheriff
sold the property at public auction to the plaintiff, who was the highest bidder at the sheriff's sale.
Issue: WON Leung Yee acted in good faith
Ruling:
We are of opinion, however, that the judgment must be sustained on the ground that the agreed statement
of facts in the court below discloses that neither the purchase of the building by the plaintiff nor his
inscription of the sheriff's certificate of sale in his favor was made in good faith, and that the machinery
company must be held to be the owner of the property.
The force and effect given by law to an inscription in a public record presupposes the good faith of him who
enters such inscription; and rights created by statute, which are predicated upon an inscription in a public
registry, do not and cannot accrue under an inscription "in bad faith," to the benefit of the person who thus
makes the inscription.
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.
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. So it is that "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." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann.,
2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)
Gabriel v. Mabanta
Facts: refer to rules as to immovables
Issue: WON Zenaida Tan-Reyes acted in good faith when she purchased the subject lot and had the sale
registered
Ruling:
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.17 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.18 For this reason, petitioner refused Tans offer and even prohibited
him from going to respondent DBP.
We are thus convinced that respondent Reyes had knowledge that petitioner previously bought the
disputed lot from respondent spouses Mabanta. Why should her father approach petitioner and offer to
return to him the money he paid spouses Mabanta?
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
D. When rules do not apply

When there are two different contracts of sale made by two different persons/vendors, one of
whom not being the owner of the property
Consolidated Rural Bank Inc v. CA
Facts:
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid, were the registered owners of Lot
No. 7036-A of plan Psd-10188, Cadastral Survey 211, situated in San Mateo, Isabela. On October 1956, Lot
No. 7036-A was subdivided into several lots under subdivision plan Psd- 50390.
On 15 August 1957, 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,7 to which his brothers Anselmo, Gregorio, Filomeno and Domingo
offered no objection as evidenced by their Joint Affidavit dated 14 August 1957. The deed of sale was not
registered with the Office of the Register of Deeds of Isabela.
On 28 May 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-A-7, denominated as Lot No.
7036-A-7-B, to Teodoro dela Cruz, 10 and the northern half, identified as Lot No. 7036-A-7-A, 11 to Restituto
Hernandez.12 Thereupon, Teodoro dela Cruz and Restituto Hernandez took possession of and cultivated the
portions of the property respectively sold to them.13
In a Deed of Sale15 dated 15 June 1976, the Madrid brothers conveyed all their rights and interests over Lot
No. 7036-A-7 to Pacifico Marquez (hereafter, Marquez), which the former confirmed 16 on 28 February 1983.17
The deed of sale was registered with the Office of the Register of Deeds of Isabela on 2 March 1982. 18
Claiming to be null and void the issuance of TCT Nos. T-149375 to T-149382; the foreclosure sale of Lot Nos.
7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and the sale to Calixto, the Heirs-now respondents hereinrepresented by Edronel dela Cruz, filed a case 24 for reconveyance and damages the southern portion of Lot
No. 7036-A (hereafter, the subject property) against Marquez, Calixto, RBC and CRB in December 1986.
Issue: Won defendants Pacific Marquez and Romeo Calixto are buyers in good faith and for vale of Lot
7036-A-7
Ruling:
Article 1544 is not applicable in the present case. It contemplates a case of double 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. 42 According to a noted civil law author, it is necessary that the
conveyance must have been made by a party who has an existing right in the thing and the power to
dispose of it.43 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. 44 And even if the sale was made by the
same person, if the second sale was made when such person was no longer the owner of the property,
because it had been acquired by the first purchaser in full dominion, the second purchaser cannot acquire
any right.45
In the case at bar, 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.
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," 50 should
apply.51 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
Moreover, it is an established principle that no one can give what one does not havenemo 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.
Thus, applying the principle, the Heirs, without a scintilla of doubt, have a superior right to the subject
property.
Salera v. Rodaje
Facts:
On May 7, 1993, spouses Avelino and Exaltacion Salera, petitioners, filed with the Regional Trial Court
(RTC), Branch 11, Calubian, Leyte, a complaint for quieting of title, against spouses Celedonio and Policronia

Rodaje, herein respondents. Petitioners alleged that they are the absolute owners of a parcel of land
situated at Basud, San Isidro, Leyte with an area of 448.98 square meters, more or less. They acquired the
property 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.
Respondents claimed that they are the absolute owners of the same property. They acquired it 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. 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.
RTC rendered a Decision declaring petitioners the rightful and legal owners of the property.
On appeal, the Court of Appeals, in a Decision dated October 9, 1998, reversed and set aside the trial
courts Decision, declaring respondents the true and lawful owners of the property in dispute. The Court of
Appeals, in upholding the validity of the sale in favor of respondents, relied on Article 1544 of the Civil Code
on double sale.
Issue: Which of the two contracts of sale is valid?
Ruling:
Article 1544 of the Civil Code is not applicable in the instant case.
The Court of Appeals is wrong. Article 1544 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.
Evidence submitted to the court, oral and documentary, established that respondents knew
beforehand that the property was declared in the name of Brigido Tonacao for taxation purposes.
Respondents claim that they have been in possession of the lot even before the execution of the Deed of
Absolute Sale on June 6, 1986. Catalino allowed them to take possession after they made an initial payment
on January 11, 1984. They constructed a house thereon which they use as a store. They are the ones
paying the electric bills and realty taxes.
However, a perusal of the records of the case shows that petitioners are the ones in prior
possession of the property. After they purchased it from the heirs of Brigido in 1981, they started building
a house thereon.
The Court is convinced that respondents had knowledge that the disputed property was previously
sold to petitioners by Brigidos heirs. Obviously, aware that the sale to petitioners was not registered, they
purchased the property and have the sale registered ahead of petitioners, who although in possession,
failed to have their contract of sale registered immediately in the Registry of Deeds.
Olsen v. Yearsley
Facts:
One Myer Harris the owner of a cash register, sold it for 330 to Louis Heymann, who paid down P140 and
agreed that title to the property should not pass until the final payment of the purchase price. Heymann
being unable to pay, returned the machine, being left in the place of business of Heymann. Thereupon,
Harris sold the register to Carl Hess, Heymann certifying 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,
who in turn sold the business to George M. Lack who transferred it to this defendant. 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.
Ruling:
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 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 Wararnties

Art. 1545- 1547
Conditions
Art 1545- Where the obligation of either party to a contract of sale is subject to any condition which is
not performed such party may
Refuse to proceed with the contract
May waive performance of the condition.
If the other party has promised that the condition should happen or be performed, such party may treat
the non performance as a Breach of Warranty.
Applicability Only to Conditional Sales

A. Concept
a.
Suspensive Condition- Fulfillment of which gives rise to an obligation.
b.
Resolutory Condition- Fulfillment of which extinguishes an obligation.
B. Consequence of non fulfillment of Suspensive condition.

If the condition imposed upon a party is not fulfilled by such party, the other party may choose any of these
two options.
a.
He may refuse to proceed with the contract. (Resind)
b.
Waive the performance of the condition and proceed with the contract.
Warranties
A. Concept.
Ang vs. Ca GR 177874
Facts: Under a "car-swapping" scheme, respondent Bruno Soledad(Seller) sold his Mitsubishi to petitioner
Jaime Ang (Buyer) by Deed of Absolute Sale 1 dated July 28, 1992. For his part, Ang conveyed to Soledad his
Mitsubishi Lancer model 1988.
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.
However, the vehicle was seized by virtue of a writ of replevin 4 dated January 26, 1993 issued by the Cebu
City Regional Trial Court (RTC), on account of the alleged failure of Ronaldo Panes, the owner of the vehicle
prior to Soledad, to pay the mortgage debt.
To secure the release of the vehicle Ang paid for the mortgage and asked to reimbursement from Soledad
wherein the latter refused thereto. Now a civil case has been filed 16 months from date of delivery of
vehicle for the reimbursement of the amount and for damages.
Dans note: The date of delivery was used as the reckoning point for prescription.
Issue: - What kind of warranty Soledad gave?
Whether a breach Thereof would give rise to the claim of reimbursement and damages
Whether the action has prescribed?
Sc: Soledad Gave an Implied warranty against eviction.
-The following provision of the Deed of Absolute Sale reflecting the kind of warranty made by Soledad
reads:
I hereby covenant my absolute ownership to (sic) the above-described property and the same is
free from all liens and encumbrances and I will defend the same from all claims or any claim
whatsoever; will save the vendee from any suit by the government of the Republic of the Philippines.
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.
- Normally a breach of warranty by the buyer would give rise for the seller to

Refuse to proceed with the contract
May waive performance of the condition

However since the above case is an Implied warranty the prescriptive period to file a breach thereof is 6
months from delivery of the thing. The action has already prescribed and he cannot anymore claim for
reimbursement or damages.
For Breach of express warranty, The earlier cited ruling in Engineering & Machinery Corp. states that "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)."
B. Kinds of Warranty
Express( 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.
Implied ( Art. 1547)- If there is an implied warranty on the part of the seller that.
1. ) He has the a right to sell the thing at the time when the ownership
is to pass. (Sale of future things allowed)
2.) That the buyer shall from that time have and enjoy the legal and
peaceful possession of the thing.
-
That the thing will be free from any hidden faults or defects or any charge or encumbrance
not known to the buyer.
This article shall not, however be held to render liable a sheriff,auctioneer, mortagagee,
pledgee, or other person professing to sell by virtue of authority in fact or in law.
( Provided they do not act in their personal capacity)
Dans notes: An implied warranty may be modified or suppressed by agreement of the parties.
C. Statement of Sellers Opinion
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.
D. Cases
a.
Express representation of payment of taxes and customs duties.
Harrison Motors Corp vs. Navarro G.r 13229

Facts: Harrison Motors Corporation through its president, Renato Claros, sold two (2) Isuzu Elf trucks to
private respondent Rachel Navarro, owner of RN Freight Lines, a franchise holder operating and maintaining
a fleet of cargo trucks all over Luzon. Petitioner, a known importer, assembler and manufacturer, assembled
the two (2) trucks using imported component parts. 2 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. 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 thus this case was filed.
Issue: Whether the breach of an express warranty gives right to the buyer ask for reimbursement?
Sc: Yes, it does.

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.
WHEREFORE, the Decision of the Court of Appeals dated 22 January 1998 ordering petitioner HARRISON
MOTORS CORPORATION to reimburse private respondent RACHEL A. NAVARRO for the taxes and duties she
paid in the amount of P32,943.00 and to pay her attorney's fees in the amount of P7,500.00 is AFFIRMED.
b.
Interpretation of warranty that the land is free from all liens and encumbrances
Investment and development vs. Ca.

In the case at bar, since the object of sale by Gatpayat to the petitioner is an agricultural land, the existing
tenancy relationship with respect to the land is not considered as a hidden fault or defect. It is not a lien or
encumbrance that the vendor warranted did not exist at the time of the sale. It is a relationship which is
any buyer of agricultural land should reasonably expect to be present and which it is duty to specifically
look into.
Please read book. Page 237.
c.
Effect of non fulfillment or express representation
Soler vs. Chesley, 43 Phil 529

Facts: Andres Soler has purchased from H. Anderson and Co. a certain coconut oil machinery. That a part of
which is on its way to Manila and the other is already in Manila. The price of which has not yet been paid by
Mr. Soler.
Mr. Chesley is interested in purchasing the machine. Whereby Soler should transfer to him all the rights and
interest of the machine and that Chesley should assume the obligation to pay H. Anderson and Co. and
remaining amount thereof.
Soler warranted that the parts are on its way were not in fact and did not arrive in Manila. That the
promises made by Soler had in effect succeeding to induce Chesley to buy the machine as he had wanted
the machine delivered immediately. Therefore Chesley wanted to rescind the contract.
Issue: Whether there was a breach of warranty and it would it give right to Chesley to rescind the contract?
Sc: Yes, it would
Although Soler did not specify the date the date or time of the arrival of said mechanical devices, but he did
assert that they were on the way on the date of contract. That is tantamount to saying that they would
arrive early on Jan 1919. We find that plaintiff has failed to carry out the obligations contracted by him
therefore he has no right no compel defendant to comply with his obligations.
ARTICLE 1548-1559: WARRANTY AGAINST EVICTION

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.
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.
Sec. 12. Third-party complaint. 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.
CASE CONCEPTS:
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 absence of these requisites, a breach of the warranty against
eviction under Article 1547 cannot be declared.
(De Dios v. Balagot) 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.
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
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 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 thirdparty defendant.
(Ang v. CA) 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.
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.
(Uy v. Ariza) The third-party complaint, is a procedural device whereby a third

party who is neither a party nor privy to the act or deed complained of by the
plaintiff, may be brought into the case with leave of court, by the defendant, who
acts as third-party plaintiff to enforce against such third-party defendant a right for
contribution, indemnity, subrogation or any other relief, in respect of the plaintiffs
claim.
The third-party complaint is actually independent of and separate and distinct from
the plaintiffs complaint. Prior leave of Court is necessary, so that where the
allowance of a third-party complaint would delay the resolution of the original case
the salutary object of the rule would not be defeated, and the court should in such
cases require the defendant to institute a separate action.
Escaler v. CA and Reynoso

Facts: Spouses Reynoso sold to Escaler a land in Antipolo, Rizal. The Deed of Sale contained a covenant
against eviction: That the VENDOR is the absolute owner of a parcel of land ... That the VENDOR warrants
valid title to and ownership and further, warrants to defend the property herein sold and conveyedThe
Register of Deeds of Rizal filed a case for the cancellation of OCT of the predecessor Reynoso since it was
already was previously registered under Doronilla Development, Inc. Escalers, filed a case for the recovery
of the value plus since the latter has violated the vendors' "warranty against eviction."
Ruling: In the case at bar, the fourth requisite is not present. All that the petitioners did, per their very
admission, was to furnish respondents, by registered mail, with a copy of the opposition 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.
The Court hereby grants the motion for summary judgment, and to return the value of the property at
the time of eviction, reimburse expenses of contract and litigation and the attorney's fees.
De Dios v. Balagot; Balagot v. JM Tuason
Facts: De Dios is the registered owner of a land previously owned by JM Tuason by way of a sale. Balagot
was in possession of the 700sqm portion of the said land alleging that he bought it from Telesforo Deudor.
That, there was an agreement between Deudors and Tuason as well. Prior to hearing, Balagot filed a motion
for leave to file a third-party complaint, attaching 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. De Dios opposed stating that a
third-party complaint to enforce the warranty of eviction should have been filed before the time for filing
the answer.
In the first case, the vendor is summoned by being made a co-defendant; in the second, by being made a
third-party defendant.
Ruling:
From this it can be seen that the third-party complaint against Deudor, seeks enforcement of the
warranty against eviction. The same is thus required by law to be resorted to instead filing 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 it avoid multiplicity of suits; it is necessary for defendant to enforce
said warranty.
J.M. Tuason & Co., and defendant, however, no relationship of vendor and vendee obtains and the thirdparty complaint does not partake of the nature of an enforcement of a warranty against eviction;
rather, it seeks to enforce the Tuason-Deudor agreement.
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 thirdparty complaint against it was not erroneous.
Order appealed from is modified, so as to allow the filing of the third-party complaint as against Pedro
Deudor but not against J.M. Tuason & Co. Case remanded to the court a quo for further proceedings.
Power Commercial and Industrial Corp v. CA
If the parties intended to impose on the spouses the obligation to eject the tenants from the lot sold, it
should have included in the contract a provision similar to that referred to in Romero vs. Court of
Appeals, where the ejectment of the occupants of the lot sold was the operative act which set into
motion the period of buyers compliance with his own obligation, i.e., to pay the balance of the
purchase price. Failure to remove the squatters within the stipulated period gave the other party the
right to either refuse to proceed with the agreement or to waive that condition of ejectment in
consonance with Article 1545 of the Civil Code.
In the case cited, the contract specifically stipulated that the ejectment was a condition to be fulfilled;
otherwise, the obligation to pay the balance would not arise. This is not so in the present case. Absent a
stipulation therefor, the parties could not have intended to make its nonfulfillment a ground for
rescission. If they did intend this, their contract should have expressly stipulated so.
The provision adverted to in the contract pertains to the usual warranty against eviction, and not to a
condition that was not met. The terms of the contract are so clear as to leave no room for any other
interpretation.
Considering that the deed of sale between the parties did not stipulate or infer otherwise, delivery was
effected through the execution of said deed.
Ang v. CA and Soledad
Facts: Under a "car-swapping", Soledad sold his Mitsubishi GSR to Jaime Ang. Soledad paid an additional
P55,000.00. Ang later offered the car for sale through Far Eastern Motors, a second-hand auto display
center. The vehicle was sold to a certain Paul Bugash (Bugash) for P225,000.00, by Deed of Absolute Sale
Before the deed could be registered, the vehicle was seized by virtue of a writ of replevin.
Ruling:
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. The action had prescribed, it
having been filed 16 months after the date of delivery of the vehicle.
(On requisites) For one, there is no judgment which deprived Ang of the vehicle. For another, there was
no suit for eviction in which Soledad as seller was impleaded as co-defendant at the instance of the
vendee.
Solutio indebiti could not apply because Ang settled the mortgage debt on his own volition under the
supposition that he would resell the car.
Uy v. Ariza
Facts: Uy bought from Ariza a 200 sqm lot which was part of a bigger parcel of land registered in the names
of Ariza, and which Uy immediately took possession. After a year, Uy again bought from Ariza and took
possession of the adjacent lot. Uy(s) were evicted by third persons claiming to be the owners of the said
lots. Uys files a case of specific performance. Petition denied.
Ruling:
Although third persons later on claimed ownership over the property, it does not mean that Arizas failed
to deliver the lots subject matter of the sale. It is also worth mentioning that the claim of these third is
filed in a separate action for the declaration of nullity of the title. This action on the part of Arizawould
show that they do not recognize the right of these third persons to the subject lots and that] Uys still
maintain that they are the lawful owners of the same.
What is before Us is a clear case of eviction. Thus, the action for specific performance filed by
[petitioners] against [respondents] must necessarily fail. If at all, Uys may file an action for the
enforcement of warranty in case of eviction.
But even if [petitioners] would file an action for the enforcement of warranty in case of eviction against
Arizas, we are afraid that the same will not prosper. The records of the case reveal that the unlawful
detainer case filed by third persons against Uys, which led to the ouster of the latter from the subject
lots, was decided by compromise agreement without impleading Arizas 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.
If petitioners filed the third-party complaint against the respondents, they could have sought from the
respondents "x x x contribution, indemnity, subrogation or any other relief" in respect of the claim of
the Delgados. The phrase "any other relief" includes a claim of a vendee for warranty against the
vendor.
Barrios v. CA and Villacin
Lorenzo Montano was the original registered owner of a large tract of land which was previously part of the
forestal zone. Before its release from the forestal zone, a certain Graciano Lamis entered the same and took
possession and occupation thereof. On September 6, 1962, Lorenzo Montano sold her land to Barrios and
was registered. Graciano Lamis sold his rights to Virgilio Butaz which they sold as well to respondents
Villacins, the sale being unsupported by any kind of evidence of title.
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.
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.
De la Riva v. Ah Kee
Restitution of the value, at the time of eviction, of the thing sold whether it be greater or lesser than the
price it was sold.
Angelo v. Pacheco
Angelo sold to Pacheco a parcel of land. When Pacheco sold the land, it was subject of a registration
proceeding in court. Contract stipulated that: vendee waives
Art. 1560
Art. 1560. If the immovable sold should be encumbered with any non-apparent burden or
servitude, not mentioned in the agreement, of such a nature that it must
be presumed that the
vendee would not have acquired it had he been aware thereof, he may ask for the rescission of the
contract, unless he should prefer the appropriate
indemnity. Neither right can be exercised if the nonapparent burden or servitude is
recorded in the Registry of Property, unless there is an express
warranty that the
thing is free from all burdens and encumbrances.

Within one year, to be computed from the execution of the deed, the vendee may
action for rescission, or sue for damages.
bring
One year having elapsed, he may only bring an action for damages within an equal
counted from the date on which he discovered the burden or servitude.
period, to be
I.
A.
the
Warranty against hidden encumbrance (1560)

Requisites: [The Artice applies only to an immovable encumbered with a servitude which is nonapparent, that is, one which does not have any external indication or sign of its existence.]
B. Effects: Buyers Action

Case:
Goodyear vs. Sy
[G.R. No. 154554; November 9, 2005]
Facts:
Goodyear Philippines, Inc sold a motor vehicle to Anthony Sy. Sy, in turn, sold it to Jose Lee. But the
latter 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 that it was a stolen vehicle and the alarm covering
the same was not lifted. Instead, the PNP 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 the PNP to lift the stolen vehicle alarm status. However, the police did not lift the alert status.
Issue:
Whether or not petitioner [Goodyear] violated its obligation as a vendor to respondent [Sy].
Whether or not petitoner breach the implied warranty against hidden encumbrances.
Held:
NO. The impoundment of the vehicle and the failure to register it were clearly acts that were not
deliberately caused by petitioner, but that resulted solely from the failure of the PNP to lift the latters own
alarm over the vehicle. Petitioner had no authority, musch less power, over the PNP. Hence, Goodyear did
not breach its obligation as a vendor to Sy; neither did it violate his right for which he could maintain an
action for recovery of damages.
A warranty is an affirmation of fact or any promise made by a vendor in relation to the
thing sold. The vendor impliedly warrants that which is being sold is free from any charge or
encumbrances not declared or known to the vendee. The decisive test is whether the vendor assumes to
assert a fact of which the vendee is ingnorant.
In this case, petitioner did not breach the implied warranty against hidden encumbrances. The
subject vehicle that had earlier been stolen by a third party was subsequently recovered by the authorities
and restored to petitioner, its rightful owner. Whether Sy had knowledge of the loss and subsequent
recovery, the fact remained that the vehicle continued to be owned by petitioner, free from any charge or
encumbrance whatsoever.
[Note: A lien is a legal right or interest that a creditor has in anothers property, lasting usually until a debt
or duty that it secures is satisfied. An encumbrance is a claim or liability that is attached to property or
some other right and that may lessen its value, such as a lien or mortgage. A legal impediment is a legal
hindrance or obstruction.]
Note again: [cant understand why this case is included in this section] kamo na lang reconcile..hehehe.
notsniw
Subsection 2 Warranty Against Hidden Defects of or Encumbrance Upon the Thing Sold (Arts
1561 1571)
I.
A.
Warranty against Redhibitoy (Hidden, Physical) Vices (of movables)

Requisites
(1) The defect must be important or serious;
(2) It must be hidden;
(3) It must exist at the time of the sale;
(4) The vendee must give notice of the defect to the vendor within a reasonable time;
(5) The actions for rescission or reduction of the price must be brought within the proper period
six (6) months from the delivery of the thing sold or within forty (40) days from the date of the
delivery in case of animals; and
(6) There must be no waiver of warranty on the part of the vendee.
a.
Moles vs. IAC
Case: applicability of warranty to sale of second-hand article

[G.R. No. 73913; January 31, 1989]

Facts:
Petitioner bought from private respondent Mariano linotype printing machine for his printing
business. He was informed that the machine was secondhand but functional. The machine was delivered to
petitioners publishing house. Mariano issued a certification wherein he warranted that the
machine sold was in A-1 condition, together with other express warranties.
After 3 months, petitoner wrote Mariano that the machine was not functioning properly as it
needed a new distributor bar. Unheeded, petitoner filed a complaint for rescission of the contract.
Issue:
Whether or not there is an implied warranty in the sale of secondhand articles.
Held:
As a general rule, there is NO implied warranty in the sale of secondhand articles. Said general
rule, however, is not without exceptions. Article 1562 of our Civil Code provides:
Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the
goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for
which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether
he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably
fit for such purpose;
xxx
Private respondent is indeed bound by the express warranty he executed in favor of petitioner, that
the machine sold was in A-1 condition. An express warranty can be made by and also binding on the seller
even in the sale of a secondhand article.
B. Knowledge of the vendor (1566)
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in
the thing sold, even though he was not aware thereof.
Even though the vendor was not aware of the hidden defects in the things he sold,
nevertheless, he is responsible therefor. His good faith does not excuse him.
Rationale: The vendor has to correct or repair the damage done. The purpose of the law is
not to exact punishment but reparation.
Exception: The vendor is not liable if there was a stipulation freeing him from responsibility
if there are hidden defects in the thing, provided that, he is in good faith, that is, he was not
actually aware of the existence of any defect.
If the vendor is in bad faith, the stipulation or waiver of warranty by the vendee is void. The
vendor shall remain bound to his warranty. Reason: No one shall benefit from his wrongful
acts.
C. Effects of warranty against defects or vices:

a.
Choices of the vendee (1567)

i)
Case: Effect of sale of car with hidden defects
Supercars Mgmt. & Devt. Corp. vs. Flores

[G.R. No. 148173; December 10, 2004]
Facts:
Respondent Flores purchased a vehicle (Isuzu carter Crew cab) from Supercars. The vehicle, after it
was delivered to respondent, malfunctioned. Flores complained about the defects. It was repaired and
returned assuring that it was already in good condition. After few days, the same defects resurfaced,
prompting respondent to send petitioner a letter rescinding the contract of sale and returning the vehicle
due to breach of warranty against hidden defects.
Petitoner contend that the vehicle had only minor and inconsequential defects which were
promptly and satisfactorily repaired pursuant to its warranty as the seller.
Issue:
Whether respondent has the right to rescind the contract of sale and to claim damages as a result
thereof.
Held:
YES. The evidence clearly shows that Flores 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. It is well within respondents right to recover damages from petitioner who
committed a breach of warranty against hidden defects.

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.
b.
If the thing is lost due to hidden vice (1568)

Art. 1568. If the thing sold should be lost in consequence of the hidden faults, and
the vendor was aware of them, he shall bear the loss, and shall be obliged to return
the price and refund the expenses of the contract, with damages. If he was not
aware of them, he shall only return the price and interest thereon, and reimburse
the expenses of the contract which the vendee might have paid.
In Bad faith
In Good faith
(1) Vendor bears the loss;
(1) Vendor bears the loss;
(2) Vendor returns the price paid;
(2) Vendor returns the price paid with

interest;
(3) Vendor refunds the expenses of the

contract;
(4) Vendor is liable for damages
(3) Vendor reimburses expenses of the

contract paid by the vendee;
Note: No damages are imposable because vendor
is in good faith.
c.
If the thing is lost by fortuitious event or by the fault of the buyer
If the defective thing is lost not becasue of its defect but because of fortuitious event for
which no one is to be blamed, the loss shall be borne by the vendee because at the time of
the loss, he is already the owner.
However, the vendor is not totally exempt form responsibility there being hidden defects in
the thing he sold. He shall return the price of the thing less the value of the things at the
time of the loss.
If the thing is lost due to the fault of the vendee himself, the vendor remains liable to the
extent of the value of the defects, if corrective measures were made.
Example:
(a) A purchased a 53-inch television from B at the price of P250,000.00 which was be
paid in full. The television has hidden defects, the repair of which will cost P50,000.00.
The television, however, was lost through fortuitious event. At the time of the loss, the
television is worth P200,000.00. B is liable to refund A the sum of P50,000.00.
(b) If it is the vendee who caused the loss of the thing, the vendor is still liable by virtue of
the existence of the defects or faults in the thing. He will be liable in the amount of
P50,000.00, the amount needed for the repairs of the thing had it not been lost.
D. Period to bring action for breach of warranty
a.
Cases: Effect of action to recover purchase price filed after 6 months
Dino vs. Ca
[G.R. No. 113564; June 20, 2001]
Facts:
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.
The controversy started when petitioners returned some pieces of frogs and mooseheads for failing
to comply with the approved sample. Petitioners then demanded from the respondent a refund of the
purchase price of the returned goods. Respondent Sio refused to pay.
Petitioners claim that the Complaint they filed in the trial court on July 24, 1989 was one for the
collection of a sum of money. Respondent contends that it was an action for breach of warranty as the sum
of money petitioners sought to collect was actually a refund of the purchase price they paid for the alleged
defective goods they bought from the respondent.
Issue:

Whether or not petitioners' action for collection of sum of money based on a breach of warranty had
already prescribed.
Held:
YES. The action has prescribed. Article 1567 provides for the remedies available to the vendee in
case of hidden defects:
"Art. 1567. In the cases of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect
between withdrawing from the contract and demanding a proportionate reduction of the price, with
damages in either case."
By returning the 29,772 pieces of vinyl products to respondent and asking for a return of their
purchase price, petitioners were in effect "withdrawing from the contract" as provided in Art. 1567. The
prescriptive period for this kind of action is provided in Art. 1571 of the New Civil Code.
"Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after
six months from the delivery of the thing sold."
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 is correct in dismissing the action.
Guzman vs. Toyota Cubao, Inc.

[G.R. No. 141480; November 29, 2006]
Facts:
On November 27, 1997, petitioner purchased from respondent a motor vehicle. The vehicle was
delivered to petitioner two days later. On October 18, 1998, petitioner demanded the replacement of the
engine of the vehicle because it developed a crack after traversing Marcos Highway during a heavy rain. On
April 20, 1999, petitioner filed a compalint for damages. Petitioner asserted that respondent should
replace the engine with a new one based on an implied warranty. Respondent countered that the alleged
damage on the engine was not covered by a warranty.
Issue:
Whether petitioners cause of action had prescribed as the case was filed more than 6 months from
the date the vehicle was sold and/or delivered.
Held:
YES. Under Art. 1571. Actions arising from the provisions of the preceding ten articles
shall be barred after six months from the delivery of the thing sold.
In the absence of an existing express warranty on the part of the respondent, as in this case, the
allegations in petitioners complaint for damages were clearly anchored on the enforcement of an implied
warranty against hidden defects, i.e., that the engine of the vehicle which respondent had sold to him was
not defective.
By filing this case, petitioner wants to hold respondent responsible for breach of implied warranty
for having sold a vehicle with defective engine. Such being the case, petitioner should have exercised this
right within six months from the delivery of the thing sold.
Since petitioner filed the complaint on April 20, 1999, or more than nineteen months counted from
November 29, 1997 (the date of the delivery of the motor vehicle), his cause of action had become timebarred.
Arts. 1572-1581
I.
A.
Warranty against hidden vices of animals (Redhibitory vices)

When no warranty exists (1574, 1575, 1576, 1577)
Art. 1574. There is no warranty against hidden defects of animals sold at fairs or at
public auctions, or of live stock sold as condemned.
Animals purchased at fairs or public auctions are not covered by warranty. Neitheir , are
livestock sold as condemned subject to warranty.
However, it is necessary that the buyer be informed that the livestock being sold are
condemned, otherwise, the seller shall remain liable for the warranty against redhibitory
defect.
Art. 1575. The sale of animals suffering from contagious diseases shall be void.
A contract of sale of animals shall also be void if the use or service for which they
are acquired has been stated in the contract, and they are found to be unfit therefor.
The sale of the following animals are void:

(a) animals suffering from contagious diseases;
(b) animals which are found unfit for the use or service for which they were purchased as
indicated in the contract.
The remedy is not rescission or reduction of price but declaration of nullity (Art 1409).
Art. 1576. If the hidden defect of animals, even in case a professional inspection has
been made, should be of such a nature that expert knowledge is not sufficient to
discover it, the defect shall be considered as redhibitory.
But if the veterinarian, through ignorance or bad faith should fail to discover or
disclose it, he shall be liable for damages.
Redhibitory Defect of Animals: This kind of defect of animals is not only hidden but also of such
nature that even with the employment of professional inspection, it could not be discovered.
B. Liability of vendor if animal dies within three days after its purchase
Art. 1578. If the animal should die within three days after its purchase, the vendor shall
be liable if the disease which cause the death existed at the time of the contract.
C. Effects of warranty (buyers options) (1579, 1580)
Art. 1579. If the sale be rescinded, the animal shall be returned in the condition in which
it was sold and delivered, the vendee being answerable for any injury due to his
negligence, and not arising from the redhibitory fault or defect.
If the sale be rescinded, there shall be restitution. The animals shall be returned in the condition
when it was sold and delivered. Should there be any injury caused to the animal not arising from its
redhibitory fault or defect, the vendee shall be liable therefor.
Art. 1580. In the sale of animals with redhibitory defects, the vendee shall also enjoy
the right mentioned in article 1567; but he must make use thereof within the same
period which has been fixed for the exercise of the redhibitory action.
Right of the vendee in sale of animal with Redhibitory Defect:

(a) withdraw or rescind the contract of sale (accion redhibitoria)
(b) reduce the price with damages (accion quanti minoris)
D. Prescription of action
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.

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SALES PRE-MIDTERM REVIEWER ATTY.

Familiarize various rights and remedies under

VII. Effects of the indorsement of a negotiable

Conveyance of the instrument

Contract Between the endorser and the

VIII. Effects of the endorsement of a document of

Conveyance of the document only

IX. These do not impair the validity of the

Deliver to the order of specified person

Deliver to Juan De La Cruz or his order

Deliver to a specified person (not

II. A negotiable document may be negotiated by:

Loss, Theft, Fraud, Accident, Mistake,

X. Requirements for the 2 conditions not to impair

Paid a consideration and in good faith

Indorsement coupled with delivery

Without notice of the defect (conditions

III. Who can negotiate:

PLACE, TIME AND MANNER OF DELIVERY

Person to whom the possession and

Title to the good s which the person

Title to the goods which the person to

DIRECT obligation of the bailee to hold

V. Rights of the Bearer to a Non-negotiable

Right to notify of the transfer and order

*Take note, if it is a negotiable document, it

NEGOTIABLE: Cannot be attached or

I. PLACE delivered according to:

As determined by the usage of trade

*For specific goods: place of delivery

Made within a reasonable time.

*When there is no stipulation on the contract

May reject and have no liability

May accept and pay at the contract price

IV. When delivery is more than the quantity

NON-NEGOTIABLE: Before notice, the title

Reject all and not be burdened with

Accept those contracted and reject the

VII. What a person who negotiates or transfers

Accept all and pay for them at the

He has a legal right to negotiate

Accept which he contract to buy; AND

Has knowledge of no fact which would

Reject the rest

Has a right to transfer title

Goods are merchantable or fit for a

V. When delivery is mixed

(May also reject the whole if indivisible)

SALES PRE-MIDTERM REVIEWER ATTY. ADVIENTO

4.Right to rescind the sale

seller reserves ownership

5.Action for the price

delivery is directed to the place of

6.Action for damages

when it is deliverable to the buyer but the

VII. Duties of the seller upon transfer

FIRST: Possessory Lien

Where the goods have been sold without

When the term of credit has expired

Where the buyer becomes insolvent

enter into a contract of carriage as may

notify the buyer of the necessity of

VIII. Classification of Delivery of Goods: