Professional Documents
Culture Documents
LAW ON SALES 1
DEAN CESAR L.
VILLANUEVA
FIRST SEMESTER, SY 2017-2018 ATTY. TERESA V.
TIANSAY
I. NATURE OF SALE
A. DEFINITION AND ESSENCE OF SALE (Art. 1458)
Sale is a contract whereby one party [seller] obligates himself to transfer the ownership2 and to
deliver the possession, of a determinate thing, and the other party [buyer] obligates himself to pay
therefor a price certain in money or its equivalent. xDantis v. Maghinang, Jr., 695 SCRA 599 (2013).3
1. Elements of Sale: (a) Consent: meeting of minds on, (b) Subject Matter, and (c) Consideration:
price certain in money or its equivalent. x Dantis v. Maghinang, Jr., 695 SCRA 599 (2013).4
Absence of any essential elements negates the existence of a perfected contract of sale. xDizon
v. Court of Appeals, 302 SCRA 288 (1999),5 even when earnest money or downpayment has
been paid. xManila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).6
2. Stages of the Contract of Sale: (a) Policitacion or Negotiation Stage, starts from the time the
prospective contracting parties indicate interest in the contract to the time the contract is
perfected; (b) Perfection, takes place upon the concurrence of the essential elements of the sale;
and (c) Consummation, commences when the parties perform their respective undertakings
under the contract of sale, culminating in the extinguishment of the contract of sale. xGSIS v.
Lopez, 592 SCRA 456 (2009).7
3. Sale Creates Real Obligations TO GIVE (Art. 1165) So, what gives?
1
The OUTLINE presents the manner by which Law on Sales will be taken-up in class. The x's and footnotes represent cases or topics which
need no extended discussions, either because the essence of the rulings are already summarized in the Outline or they contain similar
rulings or doctrines as the cases to be discussed. Unless otherwise indicated, numbered articles pertain to the Civil Code.
2
Ownership is the independent and general power of a person over a thing for purposes recognized by law and within the limits established
thereby, which includes the right to enjoy and dispose of a thing, without other limitations than those established by law. Aside from the jus
utendi and the jus abutendi inherent in the right to enjoy the thing, the right to dispose, or the jus disponendi, is the power of the owner to
alienate, encumber, transform and even destroy the thing owned. Flancia v. CA, 457 SCRA 224 (2005).
3Alfredo v. Borras, 404 SCRA 145 (2003); Cruz v. Fernando, 477 SCRA 173 (2005); Manila Metal Container Corp. v. PNB, 511 SCRA 444
(2006); Roberts v. Papio, 515 SCRA 346 (2007); Hyatt Elevators and Escalators Corp. v. Cathedral Heights Building Complex Assn., 636
SCRA 401 (2010).
4
Jovan Land v. CA, 268 SCRA 160 (1997); Quijada v. CA, 299 SCRA 695 (1998); Co v. CA, 312 SCRA 528 (1999); San Andres v.
Rodriguez, 332 SCRA 769 (2000); Roble v. Arbasa, 362 SCRA 69 (2001); Polytechnic University v. CA, 368 SCRA 691 (2001); Katipunan v.
Katipunan, 375 SCRA 199 (2002); Londres v. CA, 394 SCRA 133 (2002); Manongsong v. Estimo, 404 SCRA 683 (2003); Jimenez, Jr. v.
Jordana, 444 SCRA 250 (2004); San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Roberts v.
Papio, 515 SCRA 346 (2007); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Republic v. Florendo, 549 SCRA 527 (2008); GSIS v.
Lopez, 592 SCRA 456 (2009); Baladad v. Rublico, 595 SCRA 125 (2009); Del Prado v. Caballero, 614 SCRA 102 (2010); Montecalvo v.
Heirs of Eugenia T. Primero, 624 SCRA 575 (2010); Hyatt Elevators and Escalators Corp. v. Cathedral Heights Building Complex Assn., 636
SCRA 401 (2010); David v. Misamis Occidental II Electric Cooperative, 676 SCRA 367 (2012); First Optima Realty Corp. v. Securitron
Security Services, 748 SCRA 534 (2015).
5
Roberts v. Papio, 515 SCRA 346 (2007); XYST Corp. v. DMC Urban Properties Dev., 594 SCRA 598 (2009); Hyatt Elevators and
Escalators Corp. v. Cathedral Heights Building Complex Assn., 636 SCRA 401 (2010).
6
Del Prado v. Caballero, 614 SCRA 102 (2010); Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010); David v. Misamis
Occidental II Electric Coop., 676 SCRA 367 (2012); Dantis v. Maghinang, Jr., 695 SCRA 599 (2013).
7
Limketkai Sons Milling v. CA, 250 SCRA 523 (1995); Jovan Land v. CA, 268 SCRA 160 (1997); San Miguel Properties v. Huang, 336
SCRA 737 (2000); Bugatti v. CA, 343 SCRA 335 (2000); Moreno, Jr. v. PMO, 507 SCRA 63 (2006); Manila Metal Container Corp. v. PNB,
511 SCRA 444 (2006); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315
(2008); XYST Corp. v. DMC Urban Properties Dev., 594 SCRA 598 (2009); First Optima Realty Corp. v. Securitron Security Services, 748
SCRA 534 (2015).
8
Bowe v. CA, 220 SCRA 158 (1993); Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Cavite Devt Bank v. Lim,
324 SCRA 346 (2000).
9
Romero v. CA, 250 SCRA 223 (1995); Balatbat v. CA, 261 SCRA 128 (1996); Coronel v. CA, 263 SCRA 15 (1996); City of Cebu v. Heirs
of Candido Rubi, 306 SCRA 408 (1999); Agasen v. CA, 325 SCRA 504 (2000); Laforteza v. Machuca, 333 SCRA 643 (2000); Londres v. CA,
394 SCRA 133 (2002); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Buenaventura v. CA, 416 SCRA 263 (2003); San Lorenzo Dev.
Corp. v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Ainza v. Padua, 462 SCRA 614 (2005); Roberts v. Papio, 515
SCRA 346 (2007); MCC Industrial Sales Corp. v. Ssangyong Corp., 536 SCRA 408 (2007); Castillo v. Reyes. 539 SCRA 193 (2007); XYST
Corp. v. DMC Urban Properties Dev., 594 SCRA 598 (2009); Del Prado v. Caballero, 614 SCRA 102 (2010); Heirs of Fausto C. Ignacio v.
Home Bankers Savings, 689 SCRA 173 (2013); Dantis v. Maghinang, Jr., 695 SCRA 599 (2013); Lam v. Kodak Phils., 778 SCRA 96 (2016).
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executed fictitious deed of sale, xPealosa v. Santos, 363 SCRA 545 (2001); and the burden
is on the other party to prove otherwise, xHeirs of Ernesto Biona v. CA, 362 SCRA 29 (2001).
CONSEQUENTLY: UPON SALES PERFECTION
Its binding effect is based on the principle that the obligations arising therefrom have the force
of law between the parties. xVeterans Federation of the Phils. v. CA, 345 SCRA 348 (2000).
The parties may reciprocally demand performance, xHeirs of Venancio Bejenting v. Baez,
502 SCRA 531 (2006);10 subject only to the provisions of law governing the form of contracts.
xCruz v. Fernando, 477 SCRA 173 (2005).
It remains valid even though the parties have not affixed their signatures to its written form,
xGabelo v. CA, 316 SCRA 386 (1999);11 nor translated into written form, Duarte v. Duran, 657
SCRA 607 (2011); or the manner of payment is breached, xPilipinas Shell Petroleum Corp v.
Gobonseng, 496 SCRA 305 (2006).
Failure of developer to obtain a license to sell does not render its sales void especially that the
parties have admitted that there was already a meeting of the minds as to the subject of the
sale and price. xCantemprate v. CRS Realty Dev. Corp., 587 SCRA 492 (2009).
Perfection Distinguished from Demandability: Not all contracts of sale become
automatically and immediately effective. In sale with assumption of mortgage, there is a
condition precedent to the sellers consent and without the approval of the mortgagee, the sale
is not perfected. xBian Steel Corp. v. CA, 391 SCRA 90 (2002).
No Contract Situation versus Void Contract: Absence of complete meeting of minds
negates existence of a perfected sale, xFirme v. Bukal Enterprises, 414 SCRA 190 (2003); the
contract is void and absolutely wanting in civil effects, and does not create or modify the
juridical relation to which it refers, xCabotaje v. Pudunan, 436 SCRA 423 (2004).
When the contract of sale is not perfected, as when there is no meeting of minds on the
price, it cannot, as an independent source of obligation, serve as a binding juridical relation
between the parties, xHeirs of Fausto C. Ignacio v. Home Bankers Savings, 689 SCRA 173
(2013);12 and should be accurately denominated as inexistent, as it did not pass the stage of
generation to the point of perfection. xNHA v. Grace Baptist Church, 424 SCRA 147 (2004).
c. Bilateral and Reciprocal (Arts. 1169 and 1191) A contract of sale gives rise to reciprocal
obligations, which arise from the same cause with each party being a debtor and creditor of
the other, such that the obligation of one is dependent upon the obligation of the other; and
they are to be performed simultaneously, so that the performance of one is conditioned upon
the simultaneous fulfillment of the other. xCortes v. CA, 494 SCRA 570 (2006).13
A perfected contract of sale is bilateral because it carries the correlative duty of the seller to
deliver the property and the obligation of the buyer to pay the agreed price. xCongregation of
the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008).
The power to rescind without need of prior demand is implied in reciprocal ones when one
of the obligors does not comply with his obligation. xAlmocera v. Ong, 546 SCRA 164 (2008).14
When rescission of a contract of sale is sought under Article 1191 of the Civil Code, it need
not be judicially invoked because the owner to resolve is implied in reciprocal obligations. The
resolution immediately produces legal effects if the nonperforming party does not question the
resolution. Court intervention only becomes necessary when the party who allegedly failed to
comply with his or her obligation disputes the resolution of the contract. Lam v. Kodak
Philippines, 778 SCRA 96 (2016).
d. Onerous and Commutative (Arts. 1355 and 1470) The resolution of issues pertaining to
periods and conditions in a contract of sale must be based on its onerous and commutative
nature. Gaite v. Fonacier, 2 SCRA 830 (1961).
In a contract of sale, there is no requirement that the price be equal to the exact value of
the subject matter of sale; all that is required is that the parties believed that they will receive
good value in exchange for what they will give. Buenaventura v. CA, 416 SCRA 263 (2003).
e. Sale Is Title and Not Mode A mode is the legal means by which dominion or ownership is
created, transferred or destroyed, but title is only the legal basis by which to affect dominion or
ownership. Sale by itself does not transfer or affect ownership; the most that sale does is to
create the obligation to transfer ownership. It is tradition (delivery as a consequence of sale)
10
Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
11Baladad v. Rublico, 595 SCRA 125 (2009).
12
Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Roberts v. Papio, 515 SCRA 346 (2007).
13
Ong v. CA, 310 SCRA 1 (1999); Mortel v. KASSCO, 348 SCRA 391 (2000); Agro Conglomerates v. CA, 348 SCRA 450 (2000); Velarde
v. CA, 361 SCRA 56 (2001); Carrascoso, Jr. v. CA, 477 SCRA 666 (2005); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008);
Antonino v. Register of Deeds of Makati, 674 SCRA 227 (2012).
14
Vda. De Quirino v. Palarca, 29 SCRA 1 (1969); Cabrera v. Ysaac, 740 SCRA 612 (2014).
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that actually transfers ownership. xSan Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99
(2005),15 citing VILLANUEVA, PHILIPPINE LAW ON SALES, 1995 ed., at p. 5.
Ownership by seller of the thing sold is not an element of perfection; what the law requires
is seller has the right to transfer ownership at the time of delivery. xQuijada v. CA, 299 SCRA
695 (1998).16 BUT SEE: xTitong v. CA, 287 SCRA 102 (1998), which defined a sale as a
contract transferring dominion and other real rights in the thing sold.
1. Donation (Arts. 725 and 1471) Unlike donation, sale is a disposition for valuable
consideration with no diminution of sellers estate but merely substitution of valuesproperty sold
replaced by the equivalent monetary considerationand therefore cannot have the legal effect of
depriving compulsory heirs of their legitimes. xManongsong v. Estimo, 404 SCRA 683 (2003).
Art. 1544 double sales rules not relevant to donations. xHemedes v. CA, 316 SCRA 347 (1999).
3. Contract for a Piece-of-Work (Arts. 1467, 1713 to 1715) Ineluctably, whether the contract
be one of sale or one for a piece of work, a transfer of ownership is involved and a party
necessarily walks away with an object. xCommissioner of Internal Revenue v. CA, 271 SCRA
605 (1997), citing VILLANUEVA, LAW ON SALES, pp. 7-9 (1995). In both, the provisions on warranty
of title against hidden defects applies. xDio v. CA, 359 SCRA 91 (2001).
When one stipulates for the future sale of articles which he is habitually making, and which at
the time are not made or finished, it is essentially a contract of sale and not a contract for labor,
xInchausti & Co. v. Cromwell, 20 Phil. 345 (1911); even when he executes production thereof
only after an order is placed by customers. Celestino & Co. v. Collector, 99 Phil. 841 (1956).
If the thing is specially done only upon the specific order of another, this is a contract for a
piece of work; if it is manufactured or procured for the general market in the ordinary course of
business, it is a contract of sale. CIR v. Engineering Equipment, 64 SCRA 590 (1975).18
To Tolentino, the distinction depends on the parties intention: if they intended that at some
future date an object has to be delivered without considering the work or labor of the party bound
to deliver, the contract is one of sale; but if one party accepts the undertaking on the basis of
some plan, taking into account the particular work to be done by himself or through others, the
contract is for a piece of work. xEngineering & Machinery Corp. v. CA, 252 SCRA 156 (1996).
4. Agency to Sell (Art. 1466) Assumption by agent of the risk pertaining to the cost or price of
the subject matter makes the relationship that of buyer-seller, for the agent does not assume risk
with respect to the price or the property subject of the relationship. xKer & Co. v. Lingad, 38
SCRA 524 (1971).
CONSEQUENTLY:
(a) Contractual relation is not inherently revocable. Quiroga v. Parsons, 38 Phil. 501 (1918);
(b) Purported agent does not have to account for the profit margin earned from acquiring the
property for the purported principal. Puyat v. Arco Amusement Co., 72 Phil. 402 (1941).
One factor that most clearly distinguishes agency from other legal concepts, including sale, is
control; one person the agent agrees to act under the control or direction of another the
principal. xVictorias Milling Co. v. CA, 333 SCRA 663 (2000).
Commercial broker, commission merchant or indentor is a middleman acting in his own name,
and acts as agent for both seller and buyer to effect a sale between them. Although he is neither
seller nor buyer to the contract effected he may voluntarily assume warranties of seller. xSchmid
and Oberly v. RJL Martinez, 166 SCRA 493 (1988).
15
Acap v. CA, 251 SCRA 30 (1995).
16
Equatorial Realty Dev. v. Mayfair Theater, 370 SCRA 56 (2001); Alcantara-Daus v. De Leon, 404 SCRA 74 (2003); Heirs of Jesus M.
Mascuana v. CA, 461 SCRA 186 (2005).
17Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Orden v. Aurea, 562 SCRA 660 (2008); Ver Reyes v. Salvador,
6. Lease (Arts. 1484 and 1485) When rentals in a lease are meant to be installment payments
to an underlying sale contract, despite the nomenclature given by the parties, it is a sale by
installments and governed by Recto Law. xFilinvest Credit Corp. v. CA, 178 SCRA 188 (1989).
1. GENERAL RULE: Every person having legal capacity to obligate himself, may validly
enter into a contract of sale, whether as seller or as buyer. (Art. 1489)
2. Minors, Insane and Demented Persons, Deaf-Mutes (Arts. 1327, 1397 and 1399)
A minor cannot be deemed to have given her consent to a sale; consent is among the
essential requisites of a contract of sale, absent of which there can be no valid contract. [?]
xLabagala v. Santiago, 371 SCRA 360 (2001).
a. Necessaries (Arts. 1489 and 290)
b. Protection of the Senile and Elderly (Art. 24), Illiterates (Art. 1332)
While a person is not incompetent to contract merely because of advanced years or by
reason of physical infirmities, when such age or infirmities have impaired the mental faculties
so as to prevent the person from properly, intelligently or firmly protecting his property rights,
then he is undeniably incapacitated, and the sale he entered into is void. [?]. Paragas v.
Heirs of Dominador Balacano, 468 SCRA 717 (2005).24
19
Aquintey v. Tibong 511 SCRA 414 (2006); Rockville Excel International Exim Corp. v. Culla, 602 SCRA 124 (2009).
20
Vda. de Jayme v. CA, 390 SCRA 380 (2002); Dao Heng Bank v. Laigo, 571 SCRA 434 (2008); Technogas Phils. Mfg. Corp. v. PNB, 551
SCRA 183 (2008); Ocampo v. LBP, 591 SCRA 562 (2009); D.B.T. Mar-Bay Construction v. Panes, 594 SCRA 578 (2009).
21
Ong v. Roban Lending Corp., 557 SCRA 516 (2008).
22
Filinvest Credit Corp. v. Philippine Acetylene Co., 111 SCRA 421 (1982); Vda. de Jayme v. CA, 390 SCRA 380 (2002); Ong v. Roban
Lending Corp., 557 SCRA 516 (2008); Pen v. Julian, 778 SCRA 56 (2016).
23
PNB v. Pineda, 197 SCRA 1 (1991).
24
Domingo v. CA, 367 SCRA 368 (2001); Vda. De Ape v. Court of Appeals, 456 SCRA 193 (2005).
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Under Art. 124 of Family Code, sale by husband of a conjugal property without the wifes
consent is void, not merely voidable, since the resulting contract lacks one of the essential
elements of full consent. xGuiang v. CA, 291 SCRA 372 (1998).25
A wife affixing her signature to a Deed of Sale as a witness is deemed to have given her
consent. xPelayo v. Perez, 459 SCRA 475 (2005).
As an exception, husband may dispose of conjugal property without wifes consent if such
sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162. xAbalos
v. Macatangay, Jr., 439 SCRA 64 (2004).
b. Sales Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code)
Sales between spouses who are not governed by a complete separation of property regime
are void, not just voidable. xMedina v. Collector, 1 SCRA 302 (1960).
Since the spouses cannot validly sell property to one another under Art. 1490, then policy
consideration and the dictates of morality require that the prohibition should apply also to
common-law relationships. Matabuena v. Cervantes, 38 SCRA 284 (1971).
Sale by husband of conjugal land to his concubine is void for being contrary to morals and
public policy and subversive of the stability of the family, a basic social institution which public
policy cherishes and protects. xCalimlim-Canullas v. Fortun, 129 SCRA 675 (1984).26
The in pari delicto doctrine would not apply to the spouses-parties under Art. 1490, since
only the heirs and the creditors can question the sales nullity, xModina v. CA, 317 SCRA 696
(1999); nevertheless, when the property is re-sold to a third-party buyer in good faith and for
value, reconveyance is no longer available. xCruz v. CA, 281 SCRA 491 (1997).
b. Attorneys
(1) Prohibition Against Attorneys Purchasing Properties of Their Clients in Litigation Applies:
Even though litigation is not adversarial in nature, Rubias v. Batiller, 51 SCRA 120 (1973);
or a certiorari proceeding that has no merit, xValencia v. Cabanting, 196 SCRA 302 (1991).
Sale pursued while litigation is pending. xDirector of Lands v. Ababa, 88 SCRA 513 (1979).
Only to a lawyer of record, and does not cover assignment of the property given in
judgment made by a client to an attorney, who has not taken part in the case. xMunicipal
Council of Iloilo v. Evangelista, 55 Phil. 290 (1930).28
(2) Prohibition Does Not Apply To:
A lawyer who acquired property prior to the time he intervened as counsel in the suit
involving such property. xDel Rosario v. Millado, 26 SCRA 700 (1969).
Sale of the land acquired by a client to satisfy a judgment to his attorney as long as the
property was not the subject of the litigation. xDaroy v. Abecia, 298 SCRA 172 (1998);
Contingency fee arrangement granting the lawyer proprietary rights to the property in
litigation since the payment of said fee is not made during the pendency of litigation but
only after judgment has been rendered. Fabillo v. IAC, 195 SCRA 28 (1991).29
c. Judges
Even when the main cause is a collection of a sum of money, the properties levied are still
subject to the prohibition. xGan Tingco v. Pabinguit, 35 Phil. 81 (1916).
25
Cirelos v. Hernandez, 490 SCRA 625 (2006); Bautista v. Silva, 502 SCRA 334 (2006).
26
Ching v. Goynako, Jr., 506 SCRA 735 (2006).
27
Uy Sui Pin v. Cantollas, 70 Phil. 55 (1940); Medina v. Collector, 1 SCRA 302 (1961).
28
Gregorio Araneta, Inc. v. Tuason de Paterno, 49 O.G. 45 (1952).
29
Recto v. Harden, 100 Phil. 427 (1956); Vda. de Laig v. CA, 86 SCRA 641 (1978).
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A judge who buys property in litigation before his court after the judgment becomes final
does not violate Art. 1491, but he can be administratively disciplined for violation of the Code
of Judicial Ethics. xMacariola v. Asuncion, 114 SCRA 77 (1982).
A judge should restrain himself from participating in the sale of propertiesit is incumbent
upon him to advise the parties to discontinue the transaction if it is contrary to law. Britanico v.
Espinosa, 486 SCRA 523 (2006).
1. Subject Matter Must Be Existing, Future or Contingent (Arts. 1347, 1348, and 1462)
a. Emptio Rei Speratae (Arts. 1347 and 1461) Pending crops which have potential existence
may be valid object of sale. xSibal v. Valdez, 50 Phil. 512 (1927); and such transaction cannot
be considered to effectively be sale of the land or any part thereof. xPichel v. Alonzo, 111
SCRA 341 (1981).
Sale of copra for future delivery does not make non-delivering seller liable for estafa since sale
is valid and obligation was civil and not criminal. xEsguerra v. People, 108 Phil. 1078 (1960).
b. Emptio Spei (Art. 1461)
c. Subject to a Resolutory Condition (Art. 1465)
30
Typingco v. Lim, 604 SCRA 396 (2009).
31
Londres v. CA, 394 SCRA 133 (2002).
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Where seller quoted items offered for sale, by item number, part number, description and
unit price, and buyer had sent in reply a purchase order without indicating the quantity being
order, there was already a perfected contract of sale, even when required letter of credit had
not been opened by the buyer. Johannes Schuback & Sons v. CA, 227 SCRA 719 (1993).
c. Undivided Interest (Art. 1463), Undivided Share in a Mass of Fungible Goods (Art.
1464) May Result In Co-ownership
5. Sellers Obligation to Transfer Title to Buyer (Art. 1459, 1462, and 1505)
a. Seller Need Not Be the Owner at the Time of Perfection
A perfected sale cannot be challenged on the ground of the sellers non-ownership of the
thing sold at the time of the perfection; it is at delivery that the law requires the seller to have
the ownership of the thing sold. xAlcantara-Daus v. de Leon, 404 SCRA 74 (2003).32
BUT SEE: It is essential that seller is owner of the property he is selling. The principal
obligation of a seller is to transfer the ownership of the property sold (Art. 1458). This law
stems from the principle that nobody can dispose of that which does not belong to him. NEMO
DAT QUOD NON HABET. xNoel v. Court of Appeals, 240 SCRA 78 (1995).33
THEN SEE: Although it appears that seller is not owner of the goods at perfection is one of
the void contracts enumerated in Art. 1409, and Art. 1402 recognizes a sale where the goods
are to be acquired by the seller after the perfection of the contract of sale, clearly implying
that a sale is possible even if seller was not the owner at time of sale, nevertheless such
contract may be deemed to be inoperative and falls, by analogy, under Art. 1409(5): Those
which contemplate an impossible service. xNool v. Court of Appeals, 276 SCRA 149 (1997).
NOW SEE: Seller and buyer must agree as to the certain thing that will be subject of the sale,
as well as the price in which the thing will be sold. The thing to be sold is the object of the
contract, while the price is the cause or consideration. The object of a valid sale must be
owned by the seller, or seller must be authorized by the owner to sell the object; otherwise,
sale is null and void. xCabrera v. Ysaac, 740 SCRA 612 (2014).
X6. Illegality of Subject Matter (Arts. 1409, 1458, 1461, 1462, and 1575)
a. Special Laws: narcotics (R.A. 6425); wild bird or mammal (Act 2590); rare wild plants (Act
3983); poisonous plants/fruits (R.A. 1288); dynamited fish (R.A 428); gunpowder and
explosives (Act 2255); firearms and ammunitions (P.D. 9); sale of realty by non-Christians
(Sec. 145, Revised Adm. Code, R.A. 4252)
b. Following Sales of Land Void:
By Non-Christian if not approved by Provincial Governor per Sec. 145 of Revised
Administrative Code. xTac-an v. Court of Appeals, 129 SCRA 319 (1984).
Friar land without consent of Secretary of Agriculture required under Act No. 1120. xAlonso v.
Cebu Country Club, 375 SCRA 390 (2002); xLiao v. CA, 323 SCRA 430 (2000).
Made in violation of land reform laws declaring tenant-tillers as the full owners of the lands
they tilled. xSiacor v. Gigantana, 380 SCRA 306 (2002).
Reclaimed lands are of the public domain and cannot, without congressional fiat, be sold,
public or private. xFisheries Dev. Authority v. CA, 534 SCRA 490 (2007).
Alien who purchases land in the name of his Filipina lover, has no standing to recover the
property or the purchase price paid, since the transaction is void ab initio for being in violation
of the constitutional prohibition. xFrenzel v. Catito, 406 SCRA 55 (2003).
32
Heirs of Arturo Reyes v. Socco-Beltran, 572 SCRA 211 (2008).
33
Azcona v. Reyes, 59 Phil. 446 (1934); Coronel v. Ona, 33 Phil. 456 (1916); Francisco v. Chemical Bulk Carriers, 657 SCRA 355 (2011).
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Buyer who opted to purchase the land on installment basis with imposed interest at 24% p.a.,
cannot unilaterally disavow the obligation created by the stipulation in the contract: The rationale
behind having to pay a higher sum on the installment is to compensate the vendor for waiting a
number of years before receiving the total amount due. The amount of the stated contract price paid
in full today is worth much more than a series of small payments totaling the same amount. To
assert that mere prompt payment of the monthly installments should obviate imposition of the
stipulated interest is to ignore an economic fact and negate one of the most important principles on
which commerce operates. Bortikey v. AFP-RSBS, 477 SCRA 511 (2005).
34
Yu Bun Guan v. Ong, , 367 SCRA 559 (2001); Gonzales v. Trinidad, 67 Phil. 682 (1939)
35
Pealosa v. Santos, 363 SCRA 545 (2001); Soliva v. Intestate Estate of Marcelo M. Villalba, 417 SCRA 277 (2003); Province of Cebu v.
Heirs of Rufina Morales, 546 SCRA 315 (2008).
36
Villaflor v. CA, 280 SCRA 297 (1997).
37Ocejo v. Flores, 40 Phil. 921 (1920); Ladanga v. CA, 131 SCRA 361 (1984); Rongavilla v. CA, 294 SCRA 289 (1998); Labagala v.
Santiago, 371 SCRA 360 (2001); Cruz v. Bancom Finance Corp., 379 SCRA 490 (2002); Montecillo v. Reynes, 385 SCRA 244 (2002);
Republic v. Southside Homeowners Asso., 502 SCRA 587 (2006); Quimpo, Sr. v Abad Vda de Beltran, 545 SCRA 174 (2008); Solidstate
Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197 (2008); Clemente v. Court of Appeals, 772 SCRA 339 (2015).
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The expected profits from the subdivision project. xTorres v. CA, 320 SCRA 428 (1999).
The cancellation of liabilities on the property in favor of the seller. xPolytechnic University v.
Court of Appeals, 368 SCRA 691 (2001).
The assumption of mortgage constituted on property sold. xDoles v. Angeles, 492 SCRA 607
(2006).38
b. Price Can Never Set By One or Both Parties After Alleged Perfection, Unless Such Price
Is Separately Accepted by the Other Party. (Arts. 1473, 1182)
38
The deed of sale with assumption of mortgage is a registrable instrument and must be registered with the Register of Deeds in order to
bind third parties. Rodriguez v. CA, 495 SCRA 490 (2006).
39
Boston Bank of the Philippines v. Manalo, 482 SCRA 108 (2006).
40Velasco v. CA, 51 SCRA 439 (1973); Co v. CA, 286 SCRA 76 (1998); San Miguel Properties v. Huang, 336 SCRA 737 (2000); Montecillo
v. Reynes, 385 SCRA 244 (2002); Edrada v. Ramos, 468 SCRA 597 (2005); Cruz v. Fernando, 477 SCRA 173 (2005); Marnelego v. Banco
Filipino Savings Bank, 480 SCRA 399 (2006); Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006); Platinum Plans Phil. v. Cucueco,
488 SCRA 156 (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Dantis v. Maghinang, Jr., 695 SCRA 599 (2013).
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indicative of a defect in consent is present. The contract may be annulled for vitiated consent
and not due to the inadequacy of price. xBautista v. CA, 436 SCRA 141 (2004).41
b. Gross Inadequacy of Price May:
(1) Raise the Presumption of Equitable Mortgage in an Ordinary Sale (Art. 1602)
(2) Render Voidable a Judicial Sale: (i) Only when it is shocking to the conscience of
man. xPascua v. Simeon, 161 SCRA 1 (1988); and (ii) There is showing that, in the
event of a resale, a better price can be obtained. xCu Bie v. CA, 15 SCRA 307 (1965).42
UNLESS: There is right of redemption, in which case the proper remedy is to redeem.
xDe Leon v. Salvador, 36 SCRA 567 (1970).43
HOWEVER: By way of extraordinary circumstances perceived, when in a judicial sale the
right of redemption has been lost, where the inadequacy of the price is purely shocking
to the conscience, such that the mind revolts at it and such that a reasonable man would
neither directly or indirectly be likely to consent to it, the same will be se aside. xCometa
v. Court of Appeals, 351 SCRA 294 (2001).
(3) Render Rescissible a Sale by Fiduciary, where Beneficiary suffers lesion of more
than 1/4 of value of thing sold, unless approved by the courts (Arts. 1381and1386)
There can be no legal conclusion of inadequacy of price in the absence of any evidence of
the fair market value of a land at the time of sale. xAcabal v. Acabal, 454 SCRA 897 (2005).44
There is gross inadequacy in price if it is such that a reasonable man will not agree to
dispose of his property. xDorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008).
When judicial sale is voided without fault of purchaser, latter is entitled return of price with
simple interest, together with all sums paid out in improvements introduced on the property,
taxes, and other expenses. xSeven Brothers Shipping Corp. v. CA, 246 SCRA 33 (1995).
1. OPTION CONTRACT
An option is a preparatory contract in which one party grants to the other, for a fixed period
and under specified conditions, the power to decide, whether or not to enter into a principal
contract. It binds the party who has given the option, not to enter into the principal contract with
any other person during the period designated, and, within that period, to enter into such contract
with the one to whom the option was granted, if the latter should decide to use the option. It is a
41Ereeta v. Bezore, 54 SCRA 13 (1973); Bacungan v. CA, 574 SCRA 642 (2008).
42
Tayengco v. CA, 15 SCRA 306 (1965); Republic v. NLRC, 244 SCRA 564 (1995).
43
Vda. de Gordon v. CA, 109 SCRA 388 (1981).
44Avila v. Barabat, 485 SCRA 8 (2006).
45
Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); San Miguel Properties Phils. v. Huang, 391 Phil. 636 (2000). Reiterated in First
Optima Realty Corp. v. Securitron Security Services, 748 SCRA 534 (2015)
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separate agreement distinct from the contract of sale which the parties may enter into upon the
consummation of the option. Carceller v. Court of Appeals, 302 SCRA 718 (1999).46
An option imposes no binding obligation on the person holding the option aside from the
consideration for the offer. Until accepted (exercised), it is not treated as a sale. Tayag v.
Lacson, 426 SCRA 282 (2004).47
a. Meaning of Separate Consideration (Arts. 1479 and 1324) A unilateral promise to sell,
in order to be binding upon the promissor, must be for a price certain and supported by a
consideration separate from such price. xSalame v. CA, 239 SCRA 356 (1995).48
Separate consideration in an option may be anything of value, unlike in sale where it must
be the price certain in money or its equivalent. Villamor v. CA, 202 SCRA 607 (1991),49 such
when the option is attached to real estate mortgage xSoriano v. Bautista, 6 SCRA 946 (1962).
Although no consideration is expressly mentioned in an option, it may be proved, and once
proven, option is binding. xMontinola v. Cojuangco, 78 Phil. 481 (1947).
46
Laforteza v. Machuca, 333 SCRA 643 (2000); Buot v. CA, 357 SCRA 846 (2001); Abalos v. Macatangay, Jr., 439 SCRA 649 (2004);
Vasquez v. Ayala Corp., 443 SCRA 231 (2004); Eulogio v. Apeles, 576 SCRA 561 (2009); Polytechnic University of the Philippines v. Golden
Horizon Realty Corp., 615 SCRA 478 (2010).
47Adelfa Properties v. CA, 240 SCRA 565 (1995); Kilosbayan v. Morato, 246 SCRA 540 (1995); San Miguel Properties Phils. v. Huang, 336
SCRA 691 (2001); Riviera Filipina, Inv. v. CA, 380 SCRA 245 (2002); Lucrative Realty and Dev. Corp. v. Bernabe, Jr., 392 SCRA 679 (2002);
Villegas v. CA, 499 SCRA 276 (2006); Polytechnic University of the Philippines v. Golden Horizon Realty Corp., 615 SCRA 478 (2010).
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In a right of first refusal, while the object might be made determinate, the exercise of the right
would be dependent not only on the grantors eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that are yet to be firmed up. . . the
offer may be withdrawn anytime by communicating the withdrawal to the other party. Vasquez
v. Ayala Corp., 443 SCRA 231 (2004).
A right of first refusal simply means that should lessor decide to sell the leased property during
the term of the lease, such sale should first be offered to the lessee; and the series of
negotiations that transpire between the lessor and the lessee on the basis of such preference is
deemed a compliance of such clause even when no final purchase agreement is perfected
between the parties. The lessor was then at liberty to offer the sale to a third party who paid a
higher price, and there is no violation of the right of the lessee. Riviera Filipina, Inv. v. CA, 380
SCRA 245 (2002).54
Right of first refusal applies to a case where the owner of the property intends to sell it to a
third party, and does not apply to this situation where the owner to eject the tenant on the ground
that the former needs the premises for residential purposes. xEstanislao v. Gudito, 693 SCRA
330 (2013).
3. MUTUAL PROMISES TO BUY AND SELL (Art. 1479): TRUE CONTRACT TO SELL
Mutual promises to buy and sell a certain thing for a certain price gives parties a right to
demand from the other the fulfillment of the obligation, xBorromeo v. Franco, 5 Phil. 49 (1905);
even in this case the certainty of the price must also exist, otherwise, there is no valid and
enforceable contract to sell, xTan Tiah v. Yu Jose, 67 Phil. 739 (1939).
An accepted bilateral promise to buy and sell is in a sense similar to, but not exactly the same,
as a perfected contract of sale because there is already a meeting of minds upon the thing which
is the object of the contract and upon the price.55 But a contract of sale is consummated only
upon delivery and payment, whereas in a bilateral promise to buy and sell gives the contracting
parties rights in personam, such that each has the right to demand from the other the fulfillment of
their respective undertakings. Macion v. Guiani, 225 SCRA 102 (1993).56
Cause of action under a mutual promise to buy and sell is 10 years. xVillamor v. Court of
Appeals, 202 SCRA 607 (1991).
54
Polytechnic University v. CA, 368 SCRA 691 (2001); Villegas v. CA, 499 SCRA 276 (2006); Polytechnic University of the Philippines v.
Golden Horizon Realty Corp., 615 SCRA 478 (2010).
55
El Banco Nacional Filipino v. Ah Sing, 69 Phil. 611 (1940); Manuel v. Rodriguez, 109 Phil. 1 (1960).
56
Borromeo v. Franco, 5 Phil. 49 (1905); Villamor v. CA, 202 SCRA 607 (1991); Coronel v. CA, 263 SCRA 15 (1996).
57
Valdez v. CA, 439 SCRA 55 (2004); Blas v. Angeles-Hutalla, 439 SCRA 273 (2004); Ainza v. Padua, 462 SCRA 614 (2005); Cruz v.
Fernando, 477 SCRA 173 (2005).
58
Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).
59Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).
60
Beaumont v. Prieto, 41 Phil. 670 (1916); Zayco v. Serra, 44 Phil. 326 (1923); Limketkai Sons Milling, v. Court of Appeals, 255 SCRA 626
(1996); XYST Corp. v. DMC Urban Properties Dev., 594 SCRA 598 (2009); Tuazon v. Del Rosario-Suarez, 637 SCRA 728 (2010).
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It is true that an acceptance may contain a request for certain changes in the terms of the offer
and yet be a binding acceptance, so long as it is clear that the meaning of the acceptance is
positively and unequivocally to accept the offer, whether such request is granted or not, a
contract is formed. Vendors change in a phrase of the offer to purchase which do not essentially
change the terms of the offer, does not amount to a rejection of the offer and the tender or a
counter-offer. Villonco v. Bormaheco, 65 SCRA 352 (1975).61
5. Differences Between Earnest Money and Option Money. Oesmer v. Paraiso Dev. Corp.,
514 SCRA 228 (2007).
6. Sale Deemed Perfected at the Place Where Offer Was Made (Art. 1319)
61
Limketkai Sons Milling v. CA, 250 SCRA 523 (1995), but reversed in 255 SCRA 626,
62
Limjoco v. CA, 37 SCRA 663 (1971); Villonco v. Bormaheco, 65 SCRA 352 (1975); Spouses Doromal, Sr. v. CA, 66 SCRA 575 (1975);
PNB v. CA, 262 SCRA 464 (1996); San Miguel Properties v. Huang, 336 SCRA 737 (2000); Platinum Plans Phil. v. Cucueco, 488 SCRA 156
(2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); GSIS v. Lopez, 592 SCRA 456 (2009); XYST Corp. DMC Urban
Properties Dev., 594 SCRA 598 (2009).
63
San Miguel Properties v. Huang, 336 SCRA 737 (2000).
64F. Irureta Goyena v. Tambunting, 1 Phil. 490 (1902).
65
Martinez v. CA, 358 SCRA 38 (2001); Heirs of Biona v. CA, 362 SCRA 29 (2001); Estate of Pedro C. Gonzales v. Heirs of Marcos Perez,
605 SCRA 47 (2009).
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That marital consent executed prior to the Deed of Absolute Sale does not indicate that it is a
phoney. xPan Pacific Industrial Sales Co. v. Court of Appeals, 482 SCRA 164 (2006).
A notarized Deed of Sale enjoys the presumption of regularity and due execution; to overthrow
that presumption, sufficient, clear and convincing evidence is required, otherwise the document
should be upheld. xBravo-Guerrero v. Bravo, 465 SCRA 244 (2005).66
Notarization of Deeds of Sale by one who was not a notary public does not affect the validity
thereof; the documents merely remained private documents. xR.F. Navarro & Co. v. Vailoces,
361 SCRA 139 (2001).
Notarization does not guarantee a Deed of Sales validity nor the veracity of its contents, for it is
not the function of the notary public to validate an instrument that was never intended by the
parties to have any binding legal effect. xSalonga v. Concepcion, 470 SCRA 291 (2005).67
Buyers immediate taking of possession of subject property corroborates the truthfulness and
authenticity of the deed of sale. xAlcos v. IAC, 162 SCRA 823 (1988); conversely, the sellers
continued possession of the property makes dubious the contract of sale between them.
xSantos v. Santos, 366 SCRA 395 (2001).68
Any substantial difference between the terms of the Contract to Sell and the concomitant Deed
of Absolute Sale (such as difference in subject matter, in price and/or the terms thereof), does
not make the transaction between the seller and the buyer void, for it is truism that the execution
of the Deed of Absolute Sale effectively rendered the previous Contract to Sell ineffective and
cancelled [through the process of novation]. xLumbres v. Talbrad, Jr., 516 SCRA 575 (2007).
b. For Enforceability Between the Parties: STATUTE OF FRAUDS (Arts. 1403 and 1405)
The term Statute of Frauds is descriptive of the statutes which require certain enumerated
contracts and transactions, such as agreements for the sale of real property, to be in writing
and signed by the party to be charged, the purpose being to prevent fraud and perjury in the
enforcement of obligations depending for their evidence on the unassisted memory of
witnesses. xShoemaker v. La Tondea, 68 Phil. 24 (1939).
Presupposes Valid Contract of Sale: Application of the Statute of Frauds presupposes the
existence of a perfected contract; otherwise, there is no basis to apply the Statute. xFirme v.
Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).71
(1) Coverage:
(i) Sale of Real Property Cannot be proven by means of witnesses, but must necessarily be
evidenced by a written instrument, duly subscribed by party charged, or by secondary
evidence of the contents of such document. xGorospe v. Ilayat, 29 Phil. 21 (1914).72
(ii) Agency to Sell or to Buy As contrasted from sale, agency to sell does not belong to any
of the categories of contracts covered by Arts. 1357 and 1358 and not one enumerated
under the Statutes of Frauds in Art. 1403. xLim v. CA, 254 SCRA 170 (1996).73
(iii) Rights of First Refusal Are not covered since Art. 1403(2)(e) presupposes the existence
of a perfected, albeit unwritten, contract of sale; a right of first refusal, is not by any means
a perfected sale. xRosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001).
(iv) Right to Repurchase Deed and verbal agreement allowing the right of repurchase should
be considered as an integral whole; the deed of sale is itself the note or memorandum
evidencing the contract. xMactan Cebu Intl Airport Authority v. CA, 263 SCRA 736 (1996).
66
Yason v. Arciaga, 449 SCRA 458 (2005); Union Bank v. Ong, 491 SCRA 581 (2006); Tapuroc v. Loquellano Vda. De Mende, 512 SCRA
97 (2007); Alfaro v. CA, 519 SCRA 270 (2007); Santos v. Lumbao, 519 SCRA 408 (2007); Pedrano v. Heirs of Benedicto Pedrano, 539
SCRA 401 (2007); Olivares v. Sarmiento, 554 SCRA 384 (2008).
67
Nazareno v. CA, 343 SCRA 637 (2000); Santos v. Heirs of Jose P. Mariano, 344 SCRA 284 (2000)
68
Domingo v. CA, 367 SCRA 368 (2001).
69
Limketkai Sons Milling v. CA, 250 SCRA 523 (1995); Fule v. CA, 286 SCRA 698 (1998); Agasen v. CA, 325 SCRA 504 (2000); Universal
Robina Sugar Milling v. Heirs of Angel Teves, 389 SCRA 316 (2002); Estreller v. Ysmael, 581 SCRA 247 (2009).
70
Limketkai Sons Milling v. CA, 255 SCRA 6 (1996); 261 SCRA 464 (1996); Talusan v. Tayag, 356 SCRA 263 (2001); Santos v. Manalili,
476 SCRA 679 (2005).
71
Rosencor Devt Corp. v. Inquing, 354 SCRA 119 (2001).
72
Alba Vda. De Ray v. CA, 314 SCRA 36 (1999).
73
Torcuator v. Bernabe, 459 SCRA 439 (2005).
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(v) Equitable Mortgage Statute does not stand in the way of treating an absolute deed as a
mortgage, when such was the parties intention, although the agreement for redemption or
defeasance is proved by parol evidence. xCuyugan v. Santos, 34 Phil. 100 (1916).74
(2) Requisite of Memorandum For the memorandum to take the sale out of the coverage
of the Statute of Frauds, it must contain all the essential terms of the contract of sale.
Yuviengco v. Dacuycuy, 104 SCRA 668 (1981);75 even when scattered into various
correspondences which can be brought together, xCity of Cebu v. Heirs of Candido Rubi,
306 SCRA 408 (1999).76
EXCEPTION: Electronic Documents under the E-COMMERCE ACT (R.A. 8792)
(3) Waiver (Art. 1405) Cross-examination on the contract is deemed a waiver of the
defense of the Statute. xAbrenica v. Gonda, 34 Phil. 739 (1916).77
(4) Partial Execution (Art. 1405). Ortega v. Leonardo, 103 Phil. 870 (1958).
Claudel v. Court of Appeals, 199 SCRA 113 (1991).
Statute of Frauds does not apply to contracts either partially or totally performed. In addition,
a contract that violates the Statute of Frauds is ratified by the acceptance of benefits under the
contract, such as the acceptance of the purchase price and using the proceeds to pay
outstanding loans. Alfredo v. Borras, 404 SCRA 145 (2003).78
Delivery of the deed to buyers agent, with no intention to part with the title until the
purchase price is paid, does not take the case out of the Statute of Frauds. xBaretto v. Manila
Railroad Co., 46 Phil. 964 (1924).
Probative Value of Commercial Documents: Business forms, e.g., order slip, delivery
invoice, issued in the ordinary course of business are not always fully accomplished to contain
all the necessary information describing in detail the whole business transaction; despite their
being incomplete, they are commonly recognized in ordinary commercial transactions as valid
between the parties and serve as an acknowledgment that a business transaction has in fact
transpired. xDonato C. Cruz Trading Corp. v. CA, 347 SCRA 13 (2000).79
A sales invoice is a commercial document (i.e., those used by merchants or businessmen
to promote or facilitate trade or credit transactions) which is not a mere scrap of paper bereft
of probative value, but vital piece of evidence of commercial transactions, written memorials of
the details of the consummation of contracts. xSeaoil Petroleum Corp. v. Autocorp Group, 569
SCRA 387 (2008); it constitutes evidence of the receipt of the goods; since the best evidence
to prove payment is the official receipt. xEl Oro Engravers Corp. v. CA, 546 SCRA 42 (2008).
In itself, the absence of receipts, or any proof of consideration, would not be conclusive of
the inexistence of a sale since consideration is always presumed. xTigno v. Aquino, 444
SCRA 61 (2003); but a receipt proves payment which takes the sale out of the Statute of
Frauds. Toyota Shaw v. Court of Appeals, 244 SCRA 320 (1995).80
CONTRA: A receipt which is merely an acknowledgment of the sum received, without any
indication therein of the total purchase price of the land or of the monthly installments to be
paid, cannot be the basis of valid sale. xLeabres v. Court of Appeals, 146 SCRA 158 (1986).81
c. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art. 1874)
When sale of a piece of land or any interest therein is through an agent, the authority of the
latter shall be in writing; otherwise, the sale shall be void,82 even when:
Agent is the owners son. xDelos Reyes v. Court of Appeals, 313 SCRA 632 (1999).
There is partial payment of price received by agent. xDizon v. CA, 396 SCRA 154 (2003).83
Seller is a corporation. xCity-Lite Realty Corp. v. Court of Appeals, 325 SCRA 385 (2000).84
When the Contract to Sell was signed by the co-owners themselves as witnesses, the
written authority for their agent mandated under Article 1874 of the Civil Code is no longer
required. xOesmer v. Paraiso Dev. Corp., 514 SCRA 228, 237 (2007).
74
Rosales v. Suba, 408 SCRA 664 (2003); Ayson, Jr. v. Paragas, 557 SCRA 50 (2008).
75
Paredes v. Espino, 22 SCRA 1000 (1968); Torcuator v. Bernabe, 459 SCRA 439 (2005).
76
Berg v. Magdalena Estate, 92 Phil. 110 (1952); Limketkai Sons Milling v. CA, 250 SCRA 523 (1995); First Philippine Intl Bank v. CA, 252
SCRA 259 (1996).
77Talosig v. Vda. De Nieba, 43 SCRA 472 (1972); Limketkai Sons Milling v. CA, 250 SCRA 523 (1995); Lacanilao v. CA, 262 SCRA 486
(1996).
78
Vda. de Jomoc v. CA, 200 SCRA 74 (1991); Soliva v. Estate of Marcelo M. Villalba, 417 SCRA 277 (2003); Ainza v. Padua, 462 SCRA
614 (2005); De la Cena v. Briones, 508 SCRA 62 (2006); Yaneza v. CA, 572 SCRA 413 (2008); Duarte v. Duran, 657 SCRA 607 (2011).
79
Lagon v. Hooven Comalco Industries, 349 SCRA 363 (2001).
80
Xentrex Automotive v. CA, 291 SCRA 66 (1998).
81
Limson v. CA, 357 SCRA 209 (2001).
82
Alcantara v. Nido, 618 SCRA 333 (2010); Camper Realty Corp. v. Pajo-Reyes, 632 SCRA 400 (2010).
83
Firme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).
84
Pineda v. CA, 376 SCRA 222 (2002).
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Art. 1874 should be interpreted to mean that the sale is unenforceable to the principal, who
may otherwise ratify it. Pahud v. Court of Appeals, 597 SCRA13 (2009).85
d. Sale of Large Cattle (Art. 1581; Sec. 529, Revised Adm. Code)
1. Badges of Simulation:
Non-payment of the stipulated consideration, absence of any attempt by the buyers to assert their
alleged rights over the subject property. xVillaflor v. CA, 280 SCRA 297 (1997).87
Failure of alleged buyers to collect rentals from alleged seller. xSantiago v. CA, 278 SCRA 98
(1997); but not when there appears a legitimate lessor-lessee relationship between the vendee and
the vendor. xUnion Bank v. Ong, 491 SCRA 581 (2006).
Although agreement did not provide for absolute transfer ownership of the land to buyer, that did
not amount to simulation, since delivery of TCT and execution of deed of absolute sale were
expressly stipulated as suspensive conditions, which gave rise to the corresponding obligation on
part of buyer to pay the last installments. xVillaflor v. CA, 280 SCRA 297 (1997).
When signature on a deed of sale is a forgery, Fidel v. CA, 559 SCRA 186 (2008); but bare
assertions that the signature appearing on the Deeds of Sale is not enough to allege simulation,
since forgery is not presumed; it must be proven by clear, positive and convincing evidence. xR.F.
Navarro & Co. v. Vailoces, 361 SCRA 139 (2001).
Simulation of contract and gross inadequacy of price are distinct legal concepts, with different
effects the concept of a simulated sale is incompatible with inadequacy of price. When the
contracting parties do not really intend to be bound by it, the contract is simulated and void. Gross
inadequacy of price by itself will not result in a void contract, and it does not even affect the validity
of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a
donation or some other contract. xBravo-Guerrero v. Bravo, 465 SCRA 244 (2005).
2. When Motive Nullifies the Sale In sale, consideration is, as a rule, different from the motive
of parties, and when the primary motive is illegal, such as when the sale was executed over a
land to illegally frustrate a person's right to inheritance and to avoid payment of estate tax, the
sale is void because illegal motive predetermined purpose of the contract. xOlegario v. CA, 238
SCRA 96 (1994).88
Where the parties to a contract of sale agreed to a consideration, but the amount reflected in
the final Deed of Sale was lower, their motivation being to pay lower taxes on the transaction, the
contract of sale remains valid and enforceable upon the terms of the real consideration. Although
illegal, the motives neither determine nor take the place of the consideration. xHeirs of Spouses
Balite v. Lim, 446 SCRA 54 (2004).
3. Remedies Allowed When Sale Simulated When a contract of sale is void, the right to set up
its nullity or non-existence is available to third persons whose interests are directly affected
thereby. Likewise, the remedy of accion pauliana is available when the subject matter is a
conveyance, otherwise valid, undertaken in fraud of creditors. xManila Banking Corp. v. Silverio,
466 SCRA 438 (2005).
The rescissory action to set aside contracts in fraud of creditors is accion pauliana, a
subsidiary remedy accorded under Article 1383 which the party suffering damage can avail of
only when he has no other legal means to obtain reparation for the same. xUnion Bank v. Ong,
491 SCRA 581 (2006).
85
Escueta v. Lim, 512 SCRA 411 (2007).
86
Rosario v. CA, 310 SCRA 464 (1999); Loyola v. CA, 326 SCRA 285 (2000); Yu Bun Guan v. Ong, 367 SCRA 559 (2001); Payongayong
v. CA, 430 SCRA 210 (2004).
87
Solidstate Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197 (2008).
88
Uy v. CA, 314 SCRA 69, 81 (1999).
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Restoration of what has been given is in order. xDe los Reyes v. CA, 313 SCRA 632 (1999);
xHeirs of Ignacia Aguilar-Reyes v. Mijares, 410 SCRA 97 (2003).
A. OBLIGATIONS OF SELLER
1. Preserve with Due Diligence the Subject Matter (Art. 1163)
2. Deliver with Fruits and Accessories (Arts. 1164, 1166, 1495, 1537)
3. DELIVER THE SUBJECT MATTER (Art. 1477)
a. Legal Premises for Tradition Doctrines to Come Into Play
(i) Nemo Potest Nisi Quod De Jure Potest No man can do anything except what he can do
lawfully. When the sale is void, even when there is delivery, no valid title over the subject
matter can be conveyed to the buyer. xTraders Royal Bank v. CA, 269 SCRA 15 (1997).89
(ii) Nemo Dat Quod Non Habet No man can give that which he does not have. Even when
the sale is valid, if the seller had no ownership over the subject matter at the time of delivery,
no valid title can pass in favor of the buyer. xTsai v. CA, 366 SCRA 324 (2001).90
A tax declaration by itself is not considered conclusive evidence of ownership; it is merely
an indicium of a claim of ownership. Daclag v. Macahilig, 560 SCRA 137 (2008); nevertheless,
when at delivery there is no proof that seller had ownership and propertys tax declaration was
in the name of another person, then there was no transfer of ownership by delivery. xHeirs of
Severina San Miguel v. CA, 364 SCRA 523 (2001).
Article 1459 on contracts of sale specifically requires that the vendor must have ownership
of the property at the time it is delivered; ownership need not be with the seller at the time of
perfection. xHeirs of Arturo Reyes v. Socco-Beltran, 572 SCRA 211 (2008).
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. xDaclag v. Macahilig, 560 SCRA 137 (2008).
A contract to sell, or a conditional contract of sale where the suspensive condition has not
happened, even when found in a public document, cannot be treated as constituting
constructive delivery, especially when from the face of the instrument it is shown that the seller
was not yet the owner of the property and was only expecting to inherit it. xHeirs of Arturo
Reyes v. Socco-Beltran, 572 SCRA 211 (2008).
89
Rufloe v. Burgos, 577 SCRA 264, 272-273 (2009).
90Tangalin v. CA, 371 SCRA 49 (2001); Heirs of Arturo Reyes v. Socco-Beltran, 572 SCRA 211 (2008); Francisco v. Chemical Bulk
Carriers, 657 SCRA 355 (20
91
Ocampo v. CA, 233 SCRA 551 (1994).
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Failure of buyer to make good the price does not cause the ownership to revest to the
seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Art.
1191. xBalatbat v. Court of Appeals, 261 SCRA 128 (1996).
(3) Tradition Per Se Transfers Ownership to the Buyer (Arts. 1477, 1478, and 1496) In
the absence of a stipulation to the contrary, tradition produces its natural legal effects, most
important of which being conveyance of ownership, without prejudice to right of seller to
claim payment of price. xFroilan v. Pan Oriental Shipping, 12 SCRA 276 (1964).92
In a contract of sale, title to the property sold passes to buyer upon delivery of thing sold;
seller loses ownership by delivery and cannot recover it until and unless contract is
resolved or rescinded by court process. David v. Misamis Occidental II Electric Cooperative,
676 SCRA 367 (2012).
c. ACTUAL OR PHYSICAL DELIVERY (Art. 1497) Article 1477 recognizes that the ownership of
the thing sold shall be transferred to the vendee upon the actual or constructive delivery
thereof; related to this is Article 1497 which provides that [t]he thing sold shall be understood
as delivered when it is placed in the control and possession of the vendee. Santiago v.
Villamor, 686 SCRA 313 (2012).
It is not necessary that seller himself physically delivers title to the buyer because the thing
sold is understood as delivered when it is placed in control and possession of buyer. Thus,
when sellers themselves introduced the tenant to the buyer as the new owners of the land,
and from that time on the buyer acted as landlord thereof, there was delivery that transferred
title to the buyer. xAlfredo v. Borras, 404 SCRA 145 (2003).
92
Kuenzle & Streiff v. Watson & Co., 13 Phil. 26 (1909); Ocejo, Perez & Co. v. Int'l Banking Corp., 37 Phil. 631 (1918).
93
Tating v. Marcella, 519 SCRA 79 (2007); De Leon v. Ong, 611 SCRA 381 (2010); Villamar v. Mangaoil, 669 SCRA 2012 (2012); Santiago
v. Villamor, 686 SCRA 313 (2012).
94
Equatorial Realty Dev. v. Mayfair Theater, 370 SCRA 56 (2001); Engreso v. De La Cruz, 401 SCRA 217 (2003); Ten Forty Realty and
Dev. Corp. v. Cruz, 410 SCRA 484 (2003); Copuyoc v. De Solas, 504 SCRA 176 (2006); Cebu Winland Dev. Corp. v. Ong Siao Hua, 588
SCRA 120 (2009); Beatingo v. Gasis, 642 SCRA 539 (2011).
95
Fortune Tobacco Corp. v. NLRC, 200 SCRA 766 (1991).
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Neither issuance of an invoice, which is not a document of title xP.T. Cerna Corp. v. CA,
221 SCRA 19 (1993),96 nor of the registration certificate of vehicle xUnion Motor Corp. v. CA,
361 SCRA 506 (2001),97 would constitute constructive delivery of the vehicle.
(ii) As to Immovables (Art. 1498) In case of immovables, when sale is made through a
public instrument, execution thereof shall be equivalent to delivery of the thing object of the
sale, if from the deed the contrary does not appear or cannot clearly be inferred.
xMunicipality of Victorias v. Court of Appeals, 149 SCRA 31 (1987);98 and that prior physical
delivery or possession is not legally required since execution of the deed is deemed
equivalent to delivery. xManuel R. Dulay Enterprises v. CA, 225 SCRA 678 (1993);
PROVIDED THAT:
(a) Thing Sold Subject to Control of Seller, Addison v. Felix, 38 Phil. 404 (1918);
for a person who does not have actual possession or control of the thing sold
cannot transfer constructive possession by the execution and delivery of a public
instrument. xVillamar v. Mangaoil, 669 SCRA 426 (2012).99
and
(b) Such Control Should Remain within a Reasonable Period after Execution of
the instrument, Danguilan v. IAC, 168 SCRA 22 (1988).
EXCEPT: When Buyer Assumes Risks of Ownership and Possession. Power
Commercial and Industrial Corp. v. CA, 274 SCRA 597 (1997).100
96
Norkis Distributors v. CA, 193 SCRA 694 (1991).
97Abuan v. Garcia, 14 SCRA 759 (1965); Santos v. Santos, 366 SCRA 395 (2001).
98
Florendo v. Foz, 20 Phil. 388 (1911); Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159 (1950); Phil. Suburban
Dev. v. Auditor, 63 SCRA 397 (1975); Kings Properties Corp. v. Galido, 606 SCRA 137 (2009); Monasteriao-Pe v. Tong, 646 SCRA 161
(2011).
99
Asset Privatization Trust v. TY.J. Enterprises, 587 SCRA 481 (2009).
100
Villamar v. Mangaoil, 669 SCRA 426 (2012).
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Unless otherwise stipulated: (a) under Art. 1487 the expenses for the registration of the sale
should be shouldered by the seller. xVive Eagle Land, v. CA, 444 SCRA 445 (2004); and (b) duty
to withhold taxes due on the sale is imposed on seller. xEquitable Realty Devt v. Mayfair Theater,
332 SCRA 139 (2000).
Although buyer has more interest in having the capital gains tax paid immediately as a pre-
requisite to the issuance of a new Torrens title in his name, nonetheless, as far as the
government is concerned the capital gains tax remains sellers liability since it is a tax on the
sellers gain on sale of the real estate. Payment of the capital gains tax, however, is not a pre-
requisite to the transfer of ownership to the buyer since the delivery takes effect upon the signing
and notarization of the deed of absolute sale. xChua v. CA, 401 SCRA 54 (2003).
A judgment that decrees sellers obligations to execute and deliver the deed of absolute sale
and the certificate of title does not necessarily include within its terms the obligation to pay for the
expenses in notarizing a deed of sale and in obtaining new certificate of title. xJose Clavano, Inc.
v. HLRB, 378 SCRA 172 (2002).
(iii) CIF Sales. General Foods v. NACOCO, 100 Phil. 337 (1956).
C.I.F. found in British contracts stand for costs, insurance, and freight; they signify that the
price fixed covers not only the costs of the goods, but the expense of freight and insurance to
be paid by the seller. Behn Meyer & Co. v. Yangco, 38 Phil. 602, 606 (1918).
Under an arrangement c.i.f. U.S. Pacific Coast, the vendor is to pay not only the cost of
the goods, but also the freight and insurance expenses, and, as it was judicially interpreted,
this is taken to indicate that the delivery is to be made at the port of destination. Pacific
Vegetable Oil Corp. v. Singzon, Supreme Court Advance Decisions, 29 April 1955.
b. Sale on Approval, Trial or Satisfaction (Art. 1502)
In a sale or return, the ownership passes to the buyer on delivery pursuant to a perfected
contract of sale; and the subsequent return of the goods reverts ownership back to the seller.
In such case, tradition as a mode of acquiring ownership must be in consequence of a contract.
xVallarta v. CA, 150 SCRA 336 (1987).
In a sale on approval (also called sale on acceptance, sale on trial or sale on
satisfaction), the delivery of the object does not transfer ownership to the buyer since the
delivery was not for purposes of transferring ownership, since the prestation to effect a
meeting of the minds to give rise to a valid contract is incumbent on the buyer. xVallarta v. CA,
150 SCRA 336 (1987).
For a sale to be a sale or return or a sale on approval, there must be a clear agreement
to either of such effect, otherwise, the provisions of Art. 1502 of Civil Code governing such
sales cannot be invoked by either party to the contract. xIndustrial Textile Manufacturing Co. v.
LPJ Enterprises, 217 SCRA 322 (1993).
c. Sale by Description and/or Sample (Art. 1481)
There is a sale by sample when a small quantity is exhibited by the seller as a fair
specimen of the bulk, which is not present and there is no opportunity to inspect or examine
the same; and the parties treated the sample as the standard of quality and that they
contracted with reference to the sample with the understanding that the product to be
delivered would correspondent with the sample. xMendoza v. David, 441 SCRA 172 (004)
101
Chua Ngo v. Universal Trading Co., 87 Phil. 331 (1950).
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Even in sales by description and/or sample, buyer will not be released from his obligation to
accept and pay for the goods by deviations on the part of the seller from the exact terms of the
contract, if buyer had acquiesced to such deviations after due notice thereof. xEngel v.
Mariano Velasco & Co., 47 Phil. 115 (1924).
When the machine delivered is in accordance with the description stated in the sales
contract, the buyer cannot refuse to pay the balance of the purchase price and the cost of
installation if it proves that the machine cannot be used satisfactorily for the purposes for
which he bought it when such purpose was not made known to the seller. xPacific Commercial
Co. v. Ermita Market & Cold Stores, 56 Phil. 617 (1932).
2. In Case of Immovables
a. Sale Per Unit of Measure (Arts. 1539 and 1540) In a unit price sale, the statement of the
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 is 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. Rudolf Lietz, Inc. v. CA, 478 SCRA 451 (2005).102
Where parties agreed on a sale at a rate of a certain price per unit of measure and not one
for a lump sum, it is Art. 1539 and not Art. 1542 which is the applicable lawbuyer is entitled
to the relief afforded to him under Article 1529, that is, either a proportional reduction of the
price or the rescission of the contract. xCebu Winland Dev. Corp. v. Ong Siao Hua, 588 SCRA
120 (2009).
EXCEPT: A buyer of land, when sold in gross or with the description more or less or similar
words in designating quantity covers only a reasonable excess of deficiency. In the case at bar
an area of 644 square meters more is not reasonable excess or deficiency, to be deemed
included in the deed of sale. Roble v. Arbasa, 362 SCRA 69 (2001).103
EXCEPTION TO EXCEPTION: When buyer, who has been occupying the land for two years as
lessee, actually is deemed to take risk on the actual size of the property bought at lump sum.
xGarcia v. Velasco, 72 Phil. 248 (1941).
b. Sale for a Lump Sum (A cuerpo cierto or por precio alzado) (Art. 1542) In a contract
of sale of land in a mass, the specific boundaries stated in the contract must control over any
statement with respect to the area contained within its boundaries. Salinas v. Faustino, 566
SCRA 18 (2008).
In a lump-sum sale, when land delivered to buyer is exactly as that described in the deed
and covered within the boundaries designated, the difference in actual area (34 versus 10
hectares) will not authorize the buyer to rescind the contract because the seller has complied
with delivering the subject matter agreed upon. xTeran v. Villanueva, 56 Phil. 677 (1932); this
is the rule when evidence shows that the parties never gave importance to the area of the land
in fixing the price (97 versus 60 hectares). xAzarraga v. Gay, 52 Phil. 599 (1928).
1. Primacy of Torrens System of Registration The rules on double sales under Art. 1544 do
not overcome the rules provided under the Property Registration Decree (P.D. 1459), such as:
a. When two different titles are issued over the same registered land, the buyer who claims under
a title that was first issued shall be preferred. xLiao v. CA, 323 SCRA 430 (2000);
b. Invoking the rules on double sales and priority in time under Art. 1544 would be misplaced by
a first buyer who bought the land not within the Torrens system but under Act No. 3344, as
against the second buyer who bought the same property when it was already registered under
the Torrens system, because: (i) of the well-known rule in this jurisdiction that persons dealing
with registered land have the legal right to rely on the fact of the Torrens Certificate of Title and
to dispense with the need to inquire further, except when the party concerned has actual
knowledge of facts and circumstances that would impel a reasonably cautious man to make
such inquiry; and (ii) the Torrens system rule that formal registration proceedings undertaken
on the property and the subsequent issuance of a title over the land had under the Torrens
system had the legal effect of cleansing title on the property of all liens and claims not
annotated therein. Naawan Community Rural Bank v. CA, 395 SCRA 43 (2003).105
BUT SEE: Naval v. Court of Appeals, 483 SCRA 102 (2006).
102
Goyena v. Tambunting, 1 Phil. 490 (1902); Santa Ana v. Hernandez, 18 SCRA 973 (1966).
103
Asiain v. Jalandoni, 45 Phil 296 (1923); Balantakbo v. CA, 249 SCRA 323 (1995); Rudolf Lietz, Inc. v. CA, 478 SCRA 451 (2005);
Esguerra v. Trinidad, 518 SCRA 186 (2007); Del Prado v. Caballero, 614 SCRA 102 (2010).
104
Pudadera v. Magallanes, 633 SCRA 332 (2010).
105
Abrigo v. De Vera, 432 SCRA 544 (2005); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).
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Gopiao v. Metropolitan Bank, 731 SCRA 131 (2014).
3. Requisites for Double Sale Rule to Apply : Cheng v. Genato, 300 SCRA 722 (1998).108
a. There Must Be Two Different Valid Sales: Article 1544 does not apply where:
There is only one valid sale, while the other sale over the same property is void. xFudot v.
Cattleya Land, 533 SCRA 350 (2007);109 or
Where one or both of the contracts is a contract to sell. San Lorenzo Dev. Corp. v. CA,
449 SCRA 99 (2005).110
When the seller sold the same properties to two buyers, first to the respondent and then to
Viloria on two separate occasions, the second sale was not void for the sole reason that
petitioner had previously sold the same properties to respondent. This case involves a double
sale as the disputed properties were sold validly on two separate occasions by the same seller
to the two different buyers in good faith. xDe Leon v. Ong, 611 SCRA 381, 388 (2010).
When the seller sold the same properties to two buyers, first to the respondent and then to
Viloria on two separate occasions, the second sale was not void for the sole reason that
petitioner had previously sold the same properties to respondent. This case involves a double
sale as the disputed properties were sold validly on two separate occasions by the same seller
to the two different buyers in good faith. De Leon v. Ong, 611 SCRA 381, 388 (2010).
Rules on double sales applies even if one of the sales is an auction sale. Gopiao v.
Metrobank, 731 SCRA 131 (2014).
(1) Doctrine on Conditional Sales/Contracts to Sell and Adverse Claims: Adalin v. CA,
280 SCRA 536 (1997).111
106
Tanglao v. Parungao, 535 SCRA 123 (2007); Calma v. Santos, 590 SCRA 359 (2009).
107
Pudadera v. Magllanes, 633 SCRA 332 (2010); Calma v. Santos, 590 SCRA 359 (2009).
108
Mactan-Cebu International Airport Authority v. Tirol, 588 SCRA 635 (2009); Cano Vda. De Viray v. Usi, 686 SCRA 211 (2012); Roque v.
Aguado, 720 SCRA 780 (2014); Skunac Corp. v. Sylianteng, 723 SCRA 625 (2014).
109
Espiritu v. Valerio, 9 SCRA 761 (1963); Remalante v. Tibe, 158 SCRA 138 (1988); Delfin v. Valdez, 502 SCRA 24 (2006).
110Torrecampo v. Alindogan, Sr., 517 SCRA 84 (2007).
111
Mendoza v. Kalaw, 42 Phil. 236 (1921); Ruiz v. CA, 362 SCRA 40 (2001) and Valdevieso v. Damalerio, 451 SCRA 664 (2005); Rural
Bank of Sta. Barbara [Pangasinan] v. Manila Mission of the Church of Jesus Christ of Latter Day Saints, 596 SCRA 415 (2009).
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Rules on double sales under Art. 1544 are not applicable to contract to sell, because of the
circumstances that must concur in order for the provisions to Art. 1544 on double sales to
apply, namely that there must be a valid sales transactions, and buyers must be at odds over
the rightful ownership of the subject matter who must have bought from the very same seller,
are lacking in a contract to sell for neither a transfer of ownership nor a sales transaction has
been consummated, and such contract is binding only upon the fulfillment or non-fulfillment of
an event. Nevertheless, the governing principle of Art. 1544 should apply, mainly the
governing principle of primus tempore, portior jure (first in time, stronger in right). Cheng v.
Genato, 300 SCRA 722 (1998).
b. Exact Same Subject Matter Art. 1544 applies where the same thing is sold to different
buyers by the same seller. xOng v. Oalsiman, 485 SCRA 464 (2006); and does not apply
where there was a sale to one party of the land itself while the other contract was a mere
promise to sell the land or at most an actual assignment of the rights to repurchase the same
land. xDischoso v. Roxas, 5 SCRA 781 (1962).
c. Exact Same Seller for Both Sales Art. 1544 applies where the same thing is sold to
different vendees by the same vendor. It does not apply where the same thing is sold to
different vendees by different vendors, or even to the same buyer but by different sellers.
xSalera v. Rodaje, 530 SCRA 432, 438 (2007);112 or by several successive vendors. xMactan-
Cebu International Airport Authority v. Tirol, 588 SCRA 635 (2009).113
BUT SEE: Badilla v. Bragat, 757 SCRA 131 (2015).
For Article 1544 to apply, 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. 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. 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. Consolidated Rural Bank (Cagayan Valley) v. CA, 448 SCRA
347 (2005),114 citing VILLANUEVA, PHILIPPINE LAW ON SALES 100 (1995).
c. Knowledge of First Buyer of the Second Sale Does Not Amount to Registration in Favor
of the Second Buyer In double sales, first buyer always has priority rights over subsequent
buyers of the same property. Good faith of the first buyer remains all throughout despite his
112
Ong v. Olasiman, 485 SCRA 464 (2006).
113Roque v. Aguado, 720 SCRA 780 (2014); Skunac Corp. v. Sylianteng, 723 SCRA 625 (2014); Badilla v. Bragat, 757 SCRA 131 (2015).
114
Gallardo v. Gallardo, 46 O.G. No. 11 p. 5568; Sigaya v. Mayuga, 467 SCRA 341, 357 (2005).
115
Ulep v. CA, 472 SCRA 241 (2005).
116Blanco v. Rivera, 488 SCRA 148 (2006); Gabriel v. Mabanta, 399 SCRA 573 (2003); De la Cena v. Briones, 508 SCRA 62 (2006);
Tanglao v. Parungao, 535 SCRA 123 (2007); Bernardez v. CA, 533 SCRA 451 (2007); Ordua v. Fuentebella, 622 SCRA 146 (2010); Estate
of Margarita D. Cabacungan v. Laigo, 655 SCRA 366 (2011).
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subsequent acquisition of knowledge of the subsequent sale. xKings Properties Corp. v.
Galido, 606 SCRA 137 (2009).
Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights
except where the second buyer registers in good faith the second sale ahead of the first. Such
knowledge of the first buyer does not bar her from availing of her rights under the law, among
them, to register first her purchase as against the second buyer. But in converso, knowledge
gained by the second buyer of the first sale defeats his rights even if he is first to register the
second sale, since such knowledge taints his prior registration with bad faith. This is the priced
exacted by Article 1544 for the second buyer being able to displace the first buyer; that before
the second buyer can obtain priority over the first, he must show that he acted in good faith
throughout (i.e., in ignorance of the first sale and of the first buyer's right) from the time of
acquisition until the title is transferred to him by registration or failing registration, by delivery of
possession. xUraca v. CA, 278 SCRA 702 (1997).117
In a situation where a party has actual knowledge of the claimants actual, open and
notorious possession of a disputed property at the time of registration, the actual notice and
knowledge are equivalent to registration, because to hold otherwise would be to tolerate fraud
and the Torrens system cannot be used to shield fraud while certificates of title are
indefeasible, unassailable and binding against the whole world, they merely confirm or record
title already existing and vested. Consolidated Rural Bank (Cagayan Valley) v. CA, 448
SCRA 347 (2005).
d. Registration in Good Faith Always Pre-empts Possession in Good Faith 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. xTaedo v. CA, 252 SCRA 80 (1996).118
The registration of a sale after the annotation of the notice of lis pendens does not obliterate
the effects of delivery and possession in good faith. The rules on constructive notice upon
registration provided for under Section 52 of the Property Registration Decree (P.D. No. 1529)
operate only from the time of the registration of the notice of lis pendens which in this case
was effected only after the time the sale in favor of the second buyer had long been
consummated by delivery of the subject matter. San Lorenzo Dev. Corp. v. CA, 449 SCRA
99 (2005).
117
Cruz v. Cabana, 129 SCRA 656 (1984); Gatmaitan v. CA, 200 SCRA 37 (1991); Vda. de Jomoc v. CA, 200 SCRA 74 (1991); Bucad v.
CA, 216 SCRA 423 (1992); Berico v. CA, 225 SCRA 469 (1993); Bautista v. CA, 322 SCRA 294 (2000); Bautista v. CA, 322 SCRA 294
(2000); Ulep v. CA, 472 SCRA 241 (2005); Escueta v. Lim, 512 SCRA 411 (2007); Lumbres v. Tablada, Jr., 516 SCRA 575 (2007); Fudot v.
Cattleya Land, 533 SCRA 350 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007).
118
Liao v. CA, 323 SCRA 430 (2000); Talusan v. Tayag, 356 SCRA 263 (2001); Dauz v. Exchavez, 533 SCRA 637 (2007).
119Roman Catholic Church v. Pante, 669 SCRA 234 (2012).
120
Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159 (1950); Navera v. CA, 184 SCRA 584 (1990); The Roman
Catholic Church v. Pante, 669 SCRA 234 (2012).
121
Agricultural and Home Extension Dev. v. CA., 213 SCRA 536 (1992); Veloso v. CA, 260 SCRA 593 (1996); Balatbat v. CA, 261 SCRA
128 (1996); Mathay v. CA, 295 SCRA 556 (1998); Diaz-Duarte v. Ong, 298 SCRA 388 (1998); Liao v. CA, 323 SCRA 430 (2000); Tanongon
v. Samson, 382 SCRA 130 (2002); Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002); Aguirre v. CA, 421
SCRA 310 (2004); Galvez v. CA, 485 SCRA 346 (2006); Chua v. Soriano, 521 SCRA 68 (2007); Raymundo v. Bandong, 526 SCRA 514
(2007); Tanglao v. Parungao, 535 SCRA 123 (2007); Kings Properties Corp. v. Galido, 606 SCRA 137 (2009); De Leon v. Ong, 611 SCRA
381 (2010); The Heirs of Romana Saves v. The Heirs of Escolastico Saves, 632 SCRA 236 (2010); De Leon v. Ong, 611 SCRA 381 (2010);
Yared v. Tiongco, 660 SCRA545 (2011); PCSO v. New Dagupan Metro Gas Corp., 676 SCRA 156 (2012); Santiago v. Villamor, 686 SCRA
313 (2012); Angeles v. Domingo, 692 SCRA 277 (2013); Nobleza v. Nuega, 752 SCRA 602 (2015).
- 25 -
from he receives the property had title to it and had the capacity to convey it. In this case,
the buyers bought. Heirs of Soliva v. Soliva, 757 SCRA 26 (2015); Bliss Dev. Corp./HGC v.
Diaz, 765 SCRA 453 (2015).
Under Art. 1544, mere registration is not enough to acquire a new title; good faith must
concur. Clearly, when buyer has not yet fully paid purchase price, and as long as seller
remains unpaid, buyer cannot feign good faith. xPortic v. Cristobal, 546 SCRA 577 (2005).122
BUT SEE: In the determination of whether or not the buyer is in good faith, the point in time
to be considered is the moment when the parties actually entered into the contract of sale.
xEstate of Lino Olaquer v. Ongjoco, 563 SCRA 373 (2008).
Not being purchasers in good faith, buyers having registered the sale, will not, as against
the petitioners, carry the day for any of them under Article 1544 of the Civil Code prescribing
rules on preference in case of double sales of immovable properties. Ordua v. Fuentebella,
622 SCRA 146 (2010).
b. Burden of Proof The burden of proving the status of a purchaser in good faith lies upon him
who asserts that status. It is not sufficient to invoke the ordinary presumption of good faith, that
is, that everyone is presumed to have acted in good faith, since the good faith that is here
essential is integral with the very status that must be established. xTanglao v. Parungao, 535
SCRA 123 (2007).123
As a general rule, the question of whether or not a person is a purchaser in good faith is a
factual matter that will not be delved into by this Court, since only questions of law may be
raised in petitions for review. Tio v. Abayata, 556 SCRA 175 (2008).
BUT SEE: It is anxiomatic that good faith is always presumed in the absence of any direct
evidence of bad faith. xSantiago v. CA, 247 SCRA 336 (1995).
c. Instances When No Good Faith One who buys from one who is not the registered owner is
expected to examine not only the certificate of title but all factual circumstances necessary for
one to determine if there are any flaws in the title of the transferor, or in the capacity to transfer
the land. It is a well-settled rule that 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. xHeirs of Nicolas S. Cabigas v.
Limbaco, 654 SCRA 643 (2011).
(1) Being In Business on Realty A mortgagee who eventually ended buying the property at the
public auction, cannot claim to be a buyer in good faith when his business in the constructing
and selling townhouses and extending credit to the public, including real estate loans; for he is
charged with greater diligence that ordinary buyers or encumbrances for value, because it
would be standard in his business, as a matter of due diligence required of banks and
financing companies, to ascertain whether the property being offered as security for the debt
has already been sold to another to prevent injury to prior innocent buyers. xExpresscredit
Financing Corp. v. Velasco, 473 SCRA 570 (2005).124
A banking institution is expected to exercise due diligence before entering into a mortgage
contract, and the ascertainment of the statute or condition of a proper offered to it as security
for a loan must be a standard and indispensable part of its operations; and it cannot simply
rely upon reviewing the title to the property offered for mortgage. Tio v. Abayata, 556 SCRA
175 (2008).125
(2) Close Relationship The sale to ones daughter and sons will give rise to the conclusion that
the buyers, not being really third parties, knew of the previous sales and cannot be considered
in good faith. The buyers are deemed to have constructive knowledge by virtue of their
relationship to their sellers. xPilapil v. CA, 250 SCRA 566 (1995).
(3) Gross Inadequacy of Price Mere inadequacy of price is not ipso facto a badge of lack of
good faithto be so, the price must be grossly inadequate or shocking to the conscience such
that the mind revolts against it and such that a reasonable man would neither directly or
indirectly be likely to consent to it. xTio v. Abayata, 556 SCRA 175 (2008).
(4) Obligation to Investigate or To Follow Leads A purchaser who is aware of facts which should
put a reasonable man upon his guard cannot turn a blind eye and later claim that he acted in
good faith,126 such as
122
Uy v. Fule, 727 SCRA 456 (2014); Peralta v. Heirs of Bernardina Abalon, 727 SCRA 477 (2014); Locsin v. Hizon, 735 SCRA 547 (2014).
123
Tsai v. CA, 366 SCRA 324 (2001); Aguirre v. CA, 421 SCRA 310 (2004); Raymundo v. Bandong, 526 SCRA 514 (2007); Eagle Realty
Corp. v. Republic, 557 SCRA 77 (2008); Rufloe v. Burgos, 577 SCRA 264 (2009)Pudadera v. Magallanes, 633 SCRA 332 (2010), Nobleza v.
Nuega, 752 SCRA 602 (2015).
124
Adriano v. Pangilinan, 373 SCRA 544 (2002); Lloyds Enterprises and Credit Corp. v. Dolleton, 555 SCRA 142 (2008); Eagle Realty
Corp v. Republic, 557 SCRA 77 (2008); Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
125Agag v. Alpha Financing Corp., 407 SCRA 602 (2003); Bank of Commerce v. San Pablo, Jr., 522 SCRA 713 (2007); Lloyds Enterprises
and Credit Corp. v. Dolleton, 555 SCRA 142 (2008);Ty v. Queens Row Subdivision, 607 SCRA 324 (2009).
126
Filinvest Dev. Corp. v. Golden Haven Memorial Part, 634 SCRA 372 (2010); Yared v. Tiongco, 660 SCRA545 (2011).
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Buyer of a registered land would be in bad faith when he purchases without asking to see the
owners copy of the title and/or without visiting the land where he would then have seen first
buyer occupying the same. xSantiago v. CA, 247 SCRA 336 (1995).127
When there are occupants to the land being bought, since it is the common practice in the real
estate industry, an ocular inspection of the premises involved is a safeguard a cautious and
prudent purchaser usually takes. xMartinez v. CA, 358 SCRA 38 (2001).128
Any person engaged in business would be wary of buying from a company that is closing shop,
because it may be dissipating its assets to defraud creditors. Such buyer is bound to inquire
whether the owners had unsettled obligations encumbrance that could burden the property.
xSamson v. CA, 238 SCRA 397 (1994).129
Property was titled and transferred with undue haste, plus the fact that the subject property is a
vast tract of land in a prime location, should have, at the very least, triggered petitioners
curiosity. Eagle Realty Corp v. Republic, 557 SCRA 77, 94 (2008).
(5) Land in Adverse Possession Where land sold is in the possession of a person other than
vendor, purchaser must go beyond the certificate of title and make inquiries concerning the
actual possessor. Without such inquiry, the buyer cannot be said to be in good faith and
cannot have any right over the property. xTio v. Abayata, 556 SCRA 175 (2008).130
Buyer who could not have failed to know or discover that the land sold to him was in the
adverse possession of another is a buyer in bad faith. xHeirs of Ramon Durano, Sr. v. Uy,
344 SCRA 238 (2000).131
(6) Existence of Lis Pendens or Adverse Claim Registration of an adverse claim places any
subsequent buyer of the registered land in bad faith. xKings Properties Corp. v. Galido, 606
SCRA 137 (2009).132
Settled is the rule that one who deals with property with a notice of lis pendens, even
when at the time of sale the annotation was cancelled but there was a pending appeal,
cannot invoke the right of a purchaser in good faith. A purchaser cannot close his eyes to
facts which should put a reasonable man on guard and claim that he acted in the belief that
there was no defect in the title of the seller, xPo Lam v. CA, 316 SCRA 721 (1999).
CONTRA: When knowledge of lis pendens was acquired at the time there was order to
have it cancelled, xPo Lam v. CA, 347 SCRA 86 (2000).133 A buyer cannot be in bad faith
when it was shown that at the time of purchase the notice of lis pendens was already being
ordered cancelled and the cancellation of the notice terminated the effects of such notice.
xPudadera v. Magallanes, 633 SCRA 332 (2010).
(7) Annotation of Lien in Settlement of Estate An annotation placed on new certificates of title
issued pursuant to the distribution and partition of a decedents real properties is a warning to
third persons on the possible interest of excluded heirs or unpaid creditors in these
propertieswhere a buyer purchases the real property despite the annotation, he must be
ready for the possibility that the title be subject to the rights of excluded parties. xTan v.
Benolirao, 604 SCRA 36 (2009).
(8) Banks Are Vested with Public Interest and Obligation to Exercise Extraordinary Diligence
One of the protections afforded by P.D. 957 to buyers is the right to have her contract to sell
registered with the Register of Deeds in order to make it binding on third parties.
Nonetheless, despite the non-registration of the contract to sell, the mortgagee bank cannot
be considered, under the circumstances, an innocent purchaser for value of the lot when it
accepted the latter (together with other assigned properties) as payment for the mortgagor
developers obligationthe bank was well aware that the assigned properties were
subdivision lots and therefore within the purview of P.D. 957. xLuzon Dev. Bank v. Enriquez,
639 SCRA 332 (2011).
When financial institutions exercise extraordinary diligence in determining the validity of
the certificates of title to property being sold or mortgaged to them and still fail to find any
defect or encumbrance upon the subject properties after said inquiry, such financial
institutions should be protected like any other innocent purchaser for value if they paid a full
and fair price at the time of the purchase or before having notice of some other persons
claim on or interest in the property. xTy v. Queens Row Subdivision, 607 SCRA 324 (2009)
127
R.R. Paredes v. Calilung, 517 SCRA 369 (2007); Chua v. Soriano, 521 SCRA 68 (2007).
128
Mathay v. CA, 295 SCRA 556 (1998); Republic v. De Guzman, 326 SCRA 267 (2000); Heirs of Ramon Durano, Sr. v. Uy, 344 SCRA
238 (2000); Heirs of Celestial v. Heirs of Celestial, 408 SCRA 291 (2003); Erasusta, Jr. v. CA, 495 SCRA 319 (2006); De la Cena v. Briones,
508 SCRA 62 (2006); Tanglao v. Parungao, 535 SCRA 123, 132 (2007).
129
Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
130
Games and Garments Developers v. Allied Banking Corp., 762 SCRA 447 (2015).
131
Modina v. CA, 317 SCRA 696, 706 (1999); Republic v. De Guzman, 326 SCRA 267 (2000); Martinez v. CA, 358 SCRA 38 (2001); Heirs
of Trinidad de Leon Vda. De Roxas v. CA, 422 SCRA 101 (2004); Occena v. Esponilla, 431 SCRA 116 (2004); PNB v. Heirs of Estanislao
Militar, 494 SCRA 308 (2006); Raymundo v. Bandong, 526 SCRA 514 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007); Tio v. Abayata,
556 SCRA 175 (2008); Ordua v. Fuentebella, 622 SCRA 146 (2010); Deanon v. Mag-abo, 622 SCRA 180 (2010); The Heirs of Romana
Saves v. The Heirs of Escolastico Saves, 632 SCRA 236 (2010); Rosaroso v. Soria, 699 SCRA 232 (2013).
132
Tan v. Benolirao, 604 SCRA 36 (2009).
133
Pudadera v. Magallanes, 633 SCRA 332 (2010).
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7. When Subject of Sale Is Unregistered Land:
When first sale is over unregistered land and the second sale is when it is registered, the rules on
double sale do not apply. Dagupan Trading Co. v. Macam, 14 SCRA 179 (1965).
Article 1544 is inapplicable to unregistered land because the purchaser of unregistered land
at a sheriffs execution sale only steps into the shoes of the judgment debtor, and merely acquires
the latters interest in the property sold as of the time the property was levied upon, as expressly
provided for in then Sec. 35, Rule 39 of the Revised Rules of Court on execution sale [now Sec.
33, Rule 39, 1997 Rules of Civil Procedure)]. Carumba v. CA, 31 SCRA 558 (1970).
Article 1544 rules in double sale, whereby the buyer who is able to first register the purchase
in good faith, is in full accord with Sec. 51 of P.D. 1529 which provides that no deed, mortgage,
lease, or other voluntary instrument shall take effect as a conveyance or bind the land until its
registration. Thus, if the sale is not registered, it is binding only between seller and buyer, but it
does not affect innocent third persons. Abrigo v. De Vera, 432 SCRA 544 (2004).134
Under Act 3344, registration of instruments affecting unregistered lands is without prejudice to
a third party with a better right, which means that mere registration does not give buyer any right
over the land if seller was not anymore owner thereof, having previously sold it to somebody else
even if the earlier sale was unrecorded. The rules on double sale have no application to land no
registered under the Torrens system.Acabal v. Acabal, 454 SCRA 555 (2005).135
C. OBLIGATIONS OF BUYER
134
Sabitsana, Jr. v. Muertegui, 703 SCRA 145 (2013)
135Hanopol v. Pilapil, 7 SCRA 452 (1963); Radiowealth Finance Co. v. Palileo, 197 SCRA 245 (1991); Spouses Honorio Santiago v. CA,
247 SCRA 336 (1995); Bayoca v. Nogales, 340 SCRA 154 (2000); Fidel v. CA, 559 SCRA 186 (2008); Daclag v. Macahilig, 560 SCRA 137
(2008); Amodia Vda. De Melencion v. CA, 534 SCRA 62, 82 (2007); Fidel v. CA, 559 SCRA 186 (2008).
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c. Effects of Negotiation (Art. 1513) Endorsement and delivery of a negotiable quedan
operates as the transfer of possession and ownership of the property referred to therein, and
had the effect of divorcing the property covered therein from the estate of the insolvent prior to
the filing of the petition for insolvency. xPhilippine Trust Co. v. PNB, 42 Phil. 413 (1921).
d. Unauthorized Negotiation (Art. 1518) As between the owner of a negotiable document of
title who endorsed it in blank and entrusted it to a friend, and the holder of such negotiable
document of title to whom it was negotiated and who received it in good faith and for value, the
latter is preferred, under the principle that as between two innocent persons, he who made the
loss possible should bear the loss. xSiy Long Bieng v. HSBC, 56 Phil. 598 (1932).
136
Estoque v. Pajimula, 24 SCRA 59 (1968); Aguirre v. CA, 421 SCRA 310 (2004); Acabal v. Acabal, 454 SCRA 555 (2005); Barcenas v.
Tomas, 454 SCRA 593 (2005); Panganiban v. Oamil, 542 SCRA 166 (2008); Vda. de Figuracion v. Figuracion-Gerilla, 690 SCRA 495 (2013);
Heirs of Dela Rosa v. Batongbacal, 731 SCRA 263 (2014); Heirs of Gregotion Lopez v. DBP, 741 SCRA 153 (2014); Torres, Jr. v. Lapinid,
742 SCRA 646 (2014).
137
Almendra v. IAC, 204 SCRA 142 (1991); Fernandez v. Fernandez, 363 SCRA 811 (2001); Aguirre v. CA, 421 SCRA 310 (2004); Santos
v. Lumbao, 519 SCRA 408 (2007); Republic v. Heirs of Francisca Dignos-Sorono, 549 SCRA 58 (2008); Torres, Jr. v. Lapinid, 742 SCRA
646 (2014).
138
Heirs of Romana Ingjug-Tiro v. Casals, 363 SCRA 435 (2001); Aguirre v. CA, 421 SCRA 310 (2004).
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b. Estoppel on the True Owner (Art. 1434) Bucton v. Gabar, 55 SCRA 499 (1974).
Owner who has been unlawfully deprived of his goods may recover it even from a
purchaser in good faith. Thus, the purchaser of property which has been stolen from the owner
has been held to acquire no title to it even though he purchased for value and in good faith.
Exception is when the true owner is estopped. xFrancisco v. Chemical Bulk Carriers, 657
SCRA 355 (2011).
c. Recording Laws; Torrens System (P.D. 1529).
Where innocent third persons, relying on the correctness of the certificate of title, acquire
rights over the property, the court cannot disregard such rights and order the cancellation of
the certificate, since the effect of such outright cancellation will be to impair public confidence
in the certificate of title. Every person dealing with the registered land may safely rely on the
correctness of the certificate of title issued therefor. xHeirs of Spouses Benito Gavino. v. Court
of Appeals, 291 SCRA 495 (1998).
An innocent purchaser for value is one who purchases a titled land by virtue of a deed
executed by the registered owner himself not by a forged deed. xInsurance Services and
Commercial Traders v. Court of Appeals, 341 SCRA 572 (2000).
The defense of indefeasibility of Torrens title where the disputed buildings and equipment
are located is unavailing, since such defense is available to sale of lands and not to sale of
properties situated therein. xTsai v. Court of Appeals, 366 SCRA 324 (2001).
A person who deals with registered land through someone who is not the registered owner
is expected to look beyond the certificate of title and examine all the factual circumstances
thereof in order to determine if the vendor has the capacity to transfer any interest in the land.
xSy v. Capistrano, Jr., 560 SCRA 103 (2008).
c. Exercise by the Courts of Statutory Power to Make Sale Effective
When a defeated party refuses to execute the absolute deed of sale in accordance with the
judgment, the court may direct the act to be done at the cost of the disobedient party by some
other person appointed by the court and the act when so done shall have the like effect as is
done by the party. xManila Remnant Co. v. Court of Appeals, 231 SCRA 281 (1994)
d. Sales in Merchants Stores, Fairs or Markets (Arts. 85 and 86, Code of Commerce)
A merchant store requires a fixed establishment where the merchant not only stores his
merchandise, but where he conducts the ordinary court of business. City of Manila v.
Bugsuk, 101 Phil. 859 (1957).139
The owner of the goods who has been unlawfully deprived of it may recover it even from a
purchaser in good faith. Thus, the purchaser of property which has been stolen from the owner
has been held to acquire no title to it even though he purchased for value and in good faith.
xFrancisco v. Chemical Bulk Carriers, 657 SCRA 355 (2011).
3. SALE BY SELLER HAVING VOIDABLE TITLE (Art. 1506, as an exception to Art. 559)
Whenever there is an underlying sale which grants to the culprit-buyer a voidable title, even
when this is accompanied by the criminal act of estafa or swindling, Art. 1506 would grant to the
buyer in good faith a better title as against the original owner even though the latter may be
classified to have been unlawfully deprived of the subject matter under Art. 559. Tagatac v.
Jimenez, 53 O.G. 3792 (1957); EDCA Publishing v. Santos, 184 SCRA 614 (1990).
When owner did not voluntarily deliver possession of the car, and in effect it was stolen from
him, then one who buys the car even in good faith from the thief will lose the car to the owner who
is deemed to have been unlawfully deprived. Aznar v. Yapdiangco, 13 SCRA 486 (1965).
In all other cases of unlawful deprivation done through estafa, the original owner recovers
even from the buyer in good faith. Cruz v. Pahati, 98 Phil. 788 (1956). [Decision showed that
second buyer, or current possessor could not claim good faith because of erasures in the
covering documents presented by his seller]
Owner of diamond ring may recover it from pawnshop where owners agent had pledged it
without authority to do so; Art. 559 applies and the defense that the pawnshop acquired
possession without notice of any defect of the pledgor-agent is unavailing. Dizon v. Suntay, 47
SCRA 160 (1972).140 [Possessor is a merchant and only has a pledge in his favor]
c. After Perfection But Before Delivery (Arts. 1164, 1189, and 1262).
(1) General Rule: Before delivery, risk of loss is borne by seller under the rule of res perit
domino. xChrysler Phil. v. CA, 133 SCRA 567 (1984).
In sale of motor vehicle, where there was neither physical nor constructive delivery, the
thing sold remained at the sellers risk. xUnion Motor Corp v. CA, 361 SCRA 506 (2001).
(2) Loss by Fault of a Party (Arts. 1480, 1504, 1538)
(3) Loss by Fortuitous Event (Arts. 1480, 1163, 1164, 1165, 1504, 1538, and 1189; READ
Comments of PARAS, TOLENTINO, PADILLA, and BAVIERA).
(4) Deterioration (Arts. 1480, 1163-65, and 1262; Arts. 1189 and 1538)
(5) Fruits or Improvements from time of perfection pertain to buyer (Arts. 1480, 1537-1538)
d. After Delivery (Art. 1504). Lawyer's Coop v. Tabora, 13 SCRA 762 (1965).141
141
Song Fo & Co. v. Oria, 33 Phil. 3 (1915); Lawyer's Cooperative v. Narciso, 55 O.G. 3313.
142
De la Cruz v. Asian Consumer, 214 SCRA 103 (1992); Borbon II v. Servicewide Specialists, 258 SCRA 634 (1996).
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d. Remedy of Specific Performance That seller obtained a writ of execution against the
mortgaged property pursuant to an action for specific performance, does not amount to a
foreclosure of the chattel mortgage covered by the Recto Law. Tajanglangit v. Southern
Motors, 101 Phil. 606 (1957).143
f. Remedy of Foreclosure When the seller assigns his credit to another person, assignee is
likewise bound by the same law. Zayas v. Luneta Motors, 117 SCRA 726 (1982).144
Barring effect would cover a third-party mortgage, when it was the chattel mortgage that
was first foreclosed. Ridad v. Filipinas Investment, 120 SCRA 246 (1983).
BUT SEE: A judicious perusal of the records would reveal that mortgagor-buyer never
bought the subject vehicle from financing company but from a third party, and merely sought
financing from mortgagee for its full purchase price. Consequently Art. 184 does not apply
against financing company. Equitable Savings Bank v. Palces, 787 SCRA 260 (2016).
(1) Barring Effects of Foreclosure: All amounts due from the sale, including damages and
attorneys fees, barred from recovery. Macondray & Co. v. Eustaquio, 64 Phil. 446
(1937).
Action of replevin in order to foreclose on the chattel mortgage does not produce the
barring effect under the Recto Law; for it is the fact of foreclosure and actual sale of the
mortgaged chattel that bar further recovery by the seller of any balance on the buyers
outstanding obligation not satisfied by the sale. The voluntary payment of the installment by
the buyer-mortgagor is valid and not recoverable in spite the restrictive provisions of Art.
1484(3). Northern Motors v. Sapinoso, 33 SCRA 356 (1970). 145
Foreclosure on chattel mortgage prevents further action on the supporting real estate
mortgage, whether the chattel mortgage is first foreclosed Cruz v. Filipinas Investment &
Finance Corp., 23 SCRA 791 (1968);146 and vice versa when the real estate mortgage is first
foreclosed. Borbon II v. Servicewide Specialists, 258 SCRA 634 (1996).
(2) Rule on Perverse Buyer: Filipinas Investment. v. Ridad, 30 SCRA 564 (1969).
g. Purported Lease with Option to Buy
Judicial notice has been taken of the practice of vendors of personal property of
denominating a contract of sale on installment as one of lease to prevent the ownership of the
object of the sale from passing to the vendee until and unless the price is fully paid. xElisco
Tool Manufacturing Corp. v. Court of Appeals, 307 SCRA 731 (1999).147
Where a lease agreement over equipment is without an express option to purchase, but
nevertheless when a final demand is given prior to suit, the demand letter indicates clearly it
was within the option of the lessee to fully pay the balance of the unpaid rentals and would be
able to keep the equipment, then the real contract between the parties was a sale of movable
on installment disguised as a lease agreement. PCI Leasing and Finance v. Giraffe-X
Creative Imaging, 527 SCRA 405 (2007).
4. IN CASE OF IMMOVABLES:
a. Anticipatory Breach (Art. 1591). Legarda v. Saldaa, 55 SCRA 324 (1974).
b. Sales of Subdivision Lots and Condominium Units (P.D. 957) P.D.957 was issued in the
wake of numerous reports that many real estate subdivision owners, developers, operators
and/or sellers have reneged on their representations and obligations to provide and maintain
properly subdivision roads, drainage, sewerage, water systems, lighting systems and other
basic requirements or the health and safety of home and lot buyers. xCasa Filipinas Realty
Corp. v. Office of the President, 241 SCRA 165 (1995).
It is the intent of P.D. 957 to protect the buyer against unscrupulous developers, operators
and/or sellers who reneged on their obligations. Thus, in order to achieve this purpose, equity
and justice dictate that the injured party should be afforded full recompensed and as such, be
allowed to recover the prevailing market value of the undelivered lot which had ben fully paid
for. xGotesco Properties v. Fajardo, 692 SCRA 319 (2013).
143
Southern Motors v. Moscoso, 2 SCRA 168 (1961); Industrial Finance Corp. v. Ramirez, 77 SCRA 152 (1977); Rosario v. PCI Leasing
and Finance, 474 SCRA 500 (2005).
144
Borbon II v. Servicewide Specialists, 258 SCRA 634 (1996).
145
Manila Motor Co. v. Fernandez, 99 Phil. 782 (1956); Magna Financial Services Group, v. Colarina, 477 SCRA 245 (2005).
146Pascual v. Universal Motors Corp., 61 SCRA 121 (1974).
147
Vda. de Jose v. Barrueco, 67 Phil. 191 (1939); U.S. Commercial v. Halili, 93 Phil. 271 (1953); H.E. Heacock v. Bantal Manufacturing, 66
Phil. 245 (1938); Manila Gas Corp. v. Calupita, 66 Phil. 747 (1938); Filinvest Credit Corp. v. CA, 178 SCRA 188 (1989).
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Retroactive application of P.D. No. 957 to transactions entered into prior to its enactment in
1976 is already settled. xEugenio v. Exec. Sec. Drilon, 252 SCRA 106 (1996); xRotario v.
Alcantara, 736 SCRA 584 (2014).
(1) Buyer under P.D. 957 includes one who acquires for a valuable consideration a
condominium unit by way of assignment by project owner in payment of its indebtedness
for contractors fee. xAMA Computer College v. Factora, 378 SCRA 121 (2002).
(2) Section 20 of P.D. 957 directs every developer of real property to provide the necessary
facilities, improvements, infrastructure and other forms of development, failure to carry out
which is sufficient cause for the buyer to suspend payment, and any sums of money
already paid shall not be forfeited. xTamayo v. Huang, 480 SCRA 156 (2006).
In case the developer fails in its obligation under Section 20, the Sec. 23 provides:
Buyer has the option to demand reimbursement of the total amount paid, or to wait for
further development of the subdivision; if buyer opts for the latter, he may suspend
payment of the installments until such time that the owner or developer has fulfilled its
obligations. xTamayo v. Huang, 480 SCRA 156 (2006).
Option granted by law is with buyer and not the developer/seller. xRelucio v. Brillante-
Garfin, 187 SCRA 405 (1990).
In exercising the option, buyer required only to give due notice to owner or developer
of the buyers intention to suspend payment. xZamora Realty and Dev. Corp. v. Office
of the President, 506 SCRA 591 (2006);
It is not required that a notice be given first by buyer to seller before a demand for
refund can be made as the notice and demand can be made in the same letter or
communication. xCasa Filipinas Realty Corp v. Office of the President, 241 SCRA 165
(1995);
Even with a mortgage over the lot, seller is still bound to redeem said mortgage without
any cost to buyer apart from the balance of the purchase price and registration fees
subdivision developers and owners have the obligation to deliver the corresponding
clean certificates of title of the subdivision lots where the purchase price of which have
been paid in full by the buyers. xCantemprate v. CRS Realty Dev. Corp., 587 SCRA
492 (2009).
Buyers would be justified in suspending payments, when developer-seller fails to give
a copy of the Contract to Sell despite repeated demands, xGold Loop Properties v. CA,
350 SCRA 371 (2001); or when they failed to provide for the amenities mandated
under their development plan, xFedman Dev. Corp. v. Agcaoili, 656 SCRA 354 (2011).
However, when the Reservation Agreement provides that buyer shall be entitled to a
Contract to Sell only upon payment of at least 30% of contract price, the non-
happening yet of that condition does not render seller in default as to warrant the buyer
the right to rescind the sale and demand a refund. xG.G. Sportwear Mfg. Corp. v.
World Class Properties, 614 SCRA 75 (2010).
Buyers cause of action against the developer for failure to develop ripens only when
the developer fails to complete the project on the lapse of the completion period stated
on the sale contract or the developers Licenses to Sell. Any premature demand prior
to the indicated completion date would be premature. xG.G. Sportwear Mfg. Corp. v.
World Class Properties, 614 SCRA 75 (2010).
(3) One of the protections afforded by P.D. 957 to buyers is the right to have the Contract to
Sell registered with the Register of Deeds to bind third parties, THUS:
Nothing in P.D. 957 provides for the nullification of a contract to sell in the event the
seller, at the time the contract was entered into, did not possess a certificate of
registration or a license to sell, sale being a consensual contract. xCo Chien v. Sta.
Lucia Realty, 513 SCRA 570 (2007).148
Dissatisfaction of the buyer under a Contract of Sale as to the completion date of the
project does not itself constitute substantial breach as to authorize the buyer to rescind
the contract and ask for refund of the amounts paid to the seller. xG.G. Sportwear Mfg.
Corp. v. World Class Properties, 614 SCRA 75 (2010).
Despite non-registration of Contract to Sell, foreclosing mortgagee bank cannot be
considered, an innocent purchaser for value of the lots when it accepted the latter
(together with other assigned properties) as payment for the mortgagor developers
obligation bank was well aware that the assigned properties were subdivision lots
and therefore within the purview of P.D. 957. xLuzon Dev. Bank v. Enriquez, 639
SCRA 332 (2011).
148
Cantemplate v. CRS Realty Dev. Corp., 587 SCRA 492 (2009); Moldex Realty v. Saberon, 695 SCRA 34331 (2013).
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(4) Sec. 25 of P.D. 957 imposes on the subdivision owner or developer the obligation to
cause the transfer of the corresponding certificate of title to the buyer upon full payment.
xGotesco Properties v. Fajardo, 692 SCRA 319 (2013).
Since the lots are involved in litigation and there is a notice of lis pendens at the back
of the titles involved, the subdivision developer have to be given a reasonable period of
time to work on the adverse claims and deliver clean titles to the buyer, and should the
former fail to deliver clean titles at the end of the period, it ought to reimburse the buyers
not only for the purchase price of the subdivision lots sold to them but also the
incremental value arising from the appreciation of the lots. Cantemprate v. CRS Realty
Dev. Corp., 587 SCRA 492 (2009).
(5) Developers lack of Certificate of Registration or License to Sell merely subjects it to
administrative sanctions, but do not render the sales entered into on the project null and
void. xG.G. Sportswear Mfg. Corp. v. World Class Properties, 614 SCRA 75 (2010).
b. Transactions Covered The formal requirements of rescission under the Maceda Law apply
even to contracts entered into prior to its effectivity. xSiska Dev. Corp. v. Office of the
President, 231 SCRA 674 (1994).151 BUT SEE: xPeoples Industrial and Commercial Corp. v.
Court of Appeals, 281 SCRA 206 (1997).
Maceda Law makes no distinctions between option and sale which under P.D. 957 also
includes an exchange or attempt to sell, an option of sale or purchase, a solicitation of a sale
or an offer to sell directly, and the all-embracing definition virtually includes all transactions
concerning land and housing acquisition, including reservation agreements. xRealty Exchange
Venture Corp. v. Sendino, 233 SCRA 665 (1994).
Maceda Law has no application to protect the developer or one who succeeds the
developer. xLagandaon v. Court of Appeals, 290 SCRA 463 (1998).
Maceda Law finds no application to a contract to sell where the suspensive condition has
not been fulfilled, because said Law presuppose the existence of a valid and effective contract
to sell a condominium. [?] xMortel v. KASSCO Inc., 348 SCRA 391, 398 (2000).152
Since Maceda Law governs sales of real estate on installments, Communities Cagayan, Inc.
v. Nanol, 685 SCRA 453 (2012), it has no application to the sale of large tracts of land (69,028
square meters) which do not constitute residential real estate within the contemplation of the
Maceda Law. xGarcia v. Court of Appeals, 619 SCRA 280 (2010).
Maceda Law does not cover a loan extended by the employer to enable its employee to
finance the purchase of a house and lot. The law protects only a buyer acquiring the property
by installment, not a borrower whose rights are governed by the terms of the loan from the
employer xSpouses Sebastian v. BPI Family Bank, 739 SCRA 9 (2014).
c. How to Determine Years of Installments: Jestra Dev. and Management Corp. v.
Pacifico, 513 SCRA 413 (2007).
d. How Cancellation of Contract Can Be Effected: The cancellation of the contract under the
Maceda Law must follow the following steps:
149
OIympia Housing v. Panasiatic Travel, 395 SCRA 298 (2003); Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA 413 (2007).
150
Leao v. CA, 369 SCRA 36 (2001); Cordero v. F.S. Management & Dev. Corp., 506 SCRA 451 (2006); Manuel Uy & Sons v. Valbueco,
705 SCRA 537 (2013).
151
Eugenio v. E.S. Franklin M. Drilon, 252 SCRA 106 (1996); PNB v. Office of the President, 252 SCRA 620 (1996).
152
Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006).
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First, seller should extend the buyer a grace period of at least 60 days from the due date
of the installments.
Second, at end of grace period, seller shall furnish buyer with a notarial notice of
cancellation or demand for rescission, effective 30 days from buyers receipt thereof; a
mere notice or letter, would not suffice. McLaughlin v. CA, 144 SCRA 693 (1986).153
Third, for contracts covering more than two years of payments, there must be return to
the buyer of the cash surrender value. xVilldara, Jr. v. Zabala, 545 SCRA 325 (2008).154
Until and unless seller complies with these mandatory requirements, the contract to sell
between remains valid and subsisting. xCommunities Cagayan, Inc. v. Nanol, 685
SCRA 453 (2012).
Additional formality of a demand on [the sellers] part for rescission by notarial act would
appear, in the premises, to be merely circuitous and consequently superfluous since the seller
therein filed an action for annulment of contract, which is a kindred concept of rescission by
notarial act. xLayug v. IAC, 167 SCRA 627 (1988).
Decision rendered in an ejectment case operates as the required notice of cancellation
under the Maceda Law; but as buyer was not given the cash surrender value, there was still
no actual cancellation of the contract. xLeao v. CA, 369 SCRA 36 (2001).
Formal letter demand upon buyer to vacate the premises is not the same as the notice of
cancellation or demand for rescission by a notarial act required by R.A. No. 6552. Evidently,
the case of unlawful detainer filed by petitioner does not exempt him from complying with the
said requirement. xPagtulunan v. Dela Cruz Vda. De Manzano, 533 SCRA 242 (2008).
Where buyers under a contract to sell offers to pay the last installment a year and a half
after the stipulated date, that was beyond the sixty-day grace period under Section 4 of the
Maceda Law. The buyers cannot use the second sentence of Section 4 of the Maceda Law
against the sellers alleged failure to give an effective notice of cancellation or demand for
rescission because the sellers merely sent the notice to the address supplied by the buyers in
the Contract to Sell. Garcia v. CA, 619 SCRA 280 (2010).
Under the Maceda Law, the right of the buyer to refund accrues only when he has paid at
least two years of installments. xManuel Uy & Sons v. Valbueco, Inc., 705 SCRA 537 (2013).
153
Luzon Brokerage v. Maritime Bldg., 43 SCRA 93 (1972) & 86 SCRA 305 (1978); Fabrigas v. San Francisco del Monte, 475 SCRA 247
(2005).
154
Active Realty & Dev. Corp. v. Daroya, 382 SCRA 152 (2002); Olympia Housing v. Panasiatic Travel Corp., 395 SCRA 298 (2003); Jestra
Dev. and Management Corp. v. Pacifico, 513 SCRA 413 (2007).
155
Caridad Estates v. Santero, 71 Phil. 114 (1940); Albea v. Inquimboy, 86 Phil. 477 (1950); Manuel v. Rodriguez, 109 Phil. 1 (1960);
Joseph & Sons Enterprises v. CA, 143 SCRA 663 (1986) Gimenez v. CA, 195 SCRA 205 (1991); Jacinto v. Kaparaz, 209 SCRA 246 (1992);
Odyssey Park v. CA, 280 SCRA 253 (1997); Rillo v. CA, 274 SCRA 461 (1997); Platinum Plans Phil. v. Cucueco, 488 SCRA 156 (2006);
Tan v. Benolirao, 604 SCRA 36 (2009); Garcia v. CA, 619 SCRA 280 (2010).
156
Escueta v. Pando, 76 Phil. 256 (1946).
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extrajudicially. In case of an extrajudicial demand to rescind the contract, it should be notarized.
xCabrera v. Ysaac, 740 SCRA 612 (2014).
4. Mutual Restitution and Forfeiture (Art. 1385) When sale is rescinded, the general rule
under Art. 1398 is for the parties to restore to each other the things which have been the subject
matter of the contract, with their fruits, and price with interest. xInes v. CA, 247 SCRA 312
(1995);164 HOWEVER: sellers right in a contract to sell with reserved title to extrajudicially cancel
the sale upon failure of the buyer to pay the stipulated installments and retain the sums and
installments already received has long been recognized by the well-established doctrine of 39
years standing. xPangilinan v. CA, 279 SCRA 590 (1997).165
Pursuant to Art. 1188, in a contract to sell, even if buyers did not mistakenly make partial
payments, inasmuch as the suspensive condition was not fulfilled, it is only fair and just that
buyers be allowed to recover what they had paid in expectancy that the condition would happen;
otherwise, there would be unjust enrichment on part of seller. xBuot v. CA, 357 SCRA 846 (2001).
a. Does Contract to Sell Fall under the Definition of Sale in Article 1458? A Contract to
Sell as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds
himself to sell the said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price. Coronel v. CA, 263
SCRA 15, 27 (1996).167 BUT SEE: PNB v. Court of Appeals, 262 SCRA 464 (1996).
To be sure, a contract of sale may either be absolute or conditional. One form of conditional
sales is what is now popularly termed as a Contract to Sell, where ownership or title is
retained until the fulfillment of a positive suspensive condition normally the payment of the
purchase price in the manner agreed upon. For a contract, like a contract to sell, involves a
meeting of minds between two persons whereby one binds himself, with respect to the other,
to give something or to render some service. xGomez v. CA, 340 SCRA 720, 728 (2000).168
A Contract to Sell is akin to a conditional sale, in which the efficacy or obligatory force of the
sellers obligation to transfer title is subordinated to the happening of a future and uncertain
162
Ocejo, Perez & Co. v. International Banking Corp. 37 Phil. 631 (1918); Republic v. Hospital de San Juan de Dios, 84 Phil. 820 (1949);
De la Rama Steamship Co. v. Tan, G.R. No. 8784, May 21, 1956; 99 Phil. 1034 (unrep.) (1956); Heirs of Jesus M. Mascuana v. CA, 461
SCRA 186 (2005).
163Luzon Brokerage Co., v. Maritime Building Co., 43 SCRA 95 (1972); 86 SCRA 305 (1978); Pangilinan v. CA, 279 SCRA 590 (1997);
169
De Leon v. De Leon, 593 SCRA 768 (2009).
170
Luzon Dev. Bank v. Enriquez, 639 SCRA 332 (2011); Associated Marine Officers and Seamens Union of the Philippines PTGWO-ITF v.
Decena, 683 SCRA 308 (2012);Tumibay v. Lopez, 697 SCRA 21 (2013).
171Valenzuela v. Kalayaan Devt and Industrial Corp., 590 SCRA 380 (2009); Traders Royal Bank v. Cuison Lumber Co., 588 SCRA 690
(2009).
172
Heirs of Spouses Sandejas v. Lina, 351 SCRA 183 (2001); Zamora Realty and Dev. Corp v. Office of the President, 506 SCRA 591
(2006); Nabus v. Pacson, 605 SCRA 334 (2009); Union Bank v. Maunlad Homes, 678 SCRA 539 (2012).
- 38 -
and enforce performance on the part of the seller, all in consonance with Art. 1545 of Civil
Code which provides that Where the obligation of either party to a contract of sale is subject
to any condition which is not performed, such party may refuse to proceed with the contract or
he may waive performance of the condition. Babasa v. CA, 290 SCRA 532 (1998).
Rationale for Contracts to Sell: A contract to sell is commonly entered into so as to protect
the seller against a buyer who intends to buy the property in installments by withholding
ownership over the property until the buyer effects full payment therefor. It cannot be inferred
in a situation where both parties understood the price to be paid in cash. xCity of Cebu v.
Heirs of Candido Rubi, 306 SCRA 408 (1999).173
Remedy of Rescission Does Not Apply to Contracts to Sell: The remedy of rescission under
Article 1191 of the Civil Code cannot apply to mere contracts to sellin a contract to sell, the
payment of the purchase price is a positive suspensive condition, and failure to pay the price
agreed upon is not a mere breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory force. xTan v. Benolirao,
604 SCRA 36 (2009).174
In a contract to sell, payment of the price is a positive suspensive condition, failure of which
is not a breach of contract warranting rescission under Article 1191 of the Civil Code but rather
just an event that prevents the supposes seller from being bound to convey title to the
supposed buyer. xBonrostro v. Luna, 702 SCRA 1 (2013).
In a contract to sell, the sellers obligation to deliver the corresponding certificates of title is
simultaneous and reciprocal to the buyers full payment of the purchase price. xGotesco
Properties v. Fajardo, 692 SCRA 319 (2013).
173
Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010); Tumibay v. Lopez, 697 SCRA 21 (2013).
174
Traders Royal Bank v. Cuison Lumber Co., 588 SCRA 690 (2009); Nabus v. Pacson, 605 SCRA 334 (2009); Diego v. Diego, 691 SCRA
361 (2013).
175
Topacio v. CA, 211 SCRA 219 (1992); Laforteza v. Machuca, 333 SCRA 643 (2000); Almira v. CA, 399 SCRA351 (2003); Manuel Uy &
Sons v. Valbueco, Inc., 705 SCRA 537 (2013); Reyes v. Tuparan, 650 SCRA 238 (2011).
176
Roque v. Lapuz, 96 SCRA 741 (1980); Angeles v. Calanz, 135 SCRA 323 (1985); Alfonso v. CA, 186 SCRA 400 (1990)
177
San Andres v. Rodriguez, 332 SCRA 769 (2000); Vda. De Mistica v. Naguiat, 418 SCRA 73 (2003); Blas v. Angeles-Hutalla, 439 SCRA
273 (2004); Villadar, Jr. V. Zabala, 545 SCRA 325 (2008); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Ver Reyes v. Salvador,
Sr., 564 SCRA 456 (2008).
178
Bowe v. CA, 220 SCRA 158 (1993); Rayos v. CA, 434 SCRA 365 (2004); Solidstate Multi-Products Corp. v. Catienza-Villaverde, 559
SCRA 197 (2008); Tan v. Benolirao, 604 SCRA 36 (2009); Nabus v. Pacson, 605 SCRA 334 (2009).
179
Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Bank of P.I. v. SMP, Inc., 609 SCRA 134 (2009).
180
Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Solidstate Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197
(2008)Tan v. Benolirao, 604 SCRA 36 (2009); Nabus v. Pacson, 605 SCRA 334 (2009); Union Bank v. Maunlad Homes, 678 SCRA 539
(2012); Diego v. Diego, 691 SCRA 361 (2013).
181
Siska Dev. Corp. v. Office of the President, 231 SCRA 674 (1994); Sta. Lucia Realty & Dev. v. Uyecio, 562 SCRA 226 (2008).
- 39 -
an event that prevented the obligation of the vendor to convey title from acquiring any
obligatory force. The transfer of ownership and title would occur after full payment of the price.
xLeao v. Court of Appeals, 369 SCRA 36 (2001).182
3. Equity Resolutions on Contracts to Sell Although buyer clearly defaulted in his installment
payments in a contract to sell covering two parcels of land, he should nevertheless be awarded
ownership over one of the two (2) lots jointly purchased by the buyer, on the basis that the total
amount of installments paid, although not enough to cover the purchase price of the two lots were
enough to cover fully the purchase price of one lot, ruling there was substantial performance
insofar as one of the lots concerned as to prevent rescission thereto. xLegarda Hermanos v.
Saldaa, 55 SCRA 3246 (1974).
Where buyer had religiously been paying monthly installments for 8 years, but even after
default he was willing and had offered to pay all the arrears, on the basis of equity he shall be
granted additional period of 60 days from receipt of judgment to make all installments payments
in arrears plus interests, although demand for rescission had already been made. xJ.M. Tuazon
Co. v. Javier, 31 SCRA 829 (1970).
182
Manuel v. Rodriguez, 109 Phil. 1 (1960); Laforteza v. Machuca, 333 SCRA 643 (2000); Villamaria, Jr. v. CA, 487 SCRA 571 (2006);
Valenzuela v. Kalayaan Dev. and Industrial Corp. 590 SCRA 380 (2009).
183
Jison v. CA, 164 SCRA 339 (1988); Lim v. CA, 182 SCRA 564 (1990); Lim v. CA, 182 SCRA 564 (1990); Cheng v. Genato, 300 SCRA
722 (1998); Toledo v. Court of Appeals, 765 SCRA 104 (2015).
184
Torralba v. De los Angeles, 96 SCRA 69 (1980).
185
Romero v. CA, 250 SCRA 223 (1995); Adalin v. CA, 280 SCRA 536 (1997); Republic v. Florendo, 549 SCRA 527 (2008).
186
Bian Steel Corp. v. CA, 391 SCRA 90 (2002).
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The condition in the contract of sale of buyers assumption of the mortgage constituted on the
subject matter is deemed fulfilled when the seller prevented its fulfillment by paying his
outstanding obligation to the bank and taking back the certificates of title without even notifying
the buyer. xDe Leon v. Ong, 611 SCRA 381 (2010).
187
Oro Land Realty Dev. Corp. v. Claunan, 516 SCRA 681 (2007)
188
Canizares Tiana v. Torrejos, 21 Phil. 127 (1911); J.M. Tuazon v. CA, 94 SCRA 413 (1979).
- 41 -
warranty against hidden defect in favor of seller-lessor who is absolved from any liability
arising from any defect or deficiency of the machinery sold. xFilinvest Credit Corp. v. CA, 178
SCRA 188 (1989).
A hidden defect is one which is unknown or could not have been known to the buyer. Under
the law, the requisites to recover on account of hidden defects are as follows: 1. Defect must:
(a) be hidden; (b) exist at the time the sale was made; (c) ordinarily have been excluded from
the contract; and (d) be important to render the thing unfit or considerably decreases fitness;
and 2. The action must be instituted within the statute of limitations. Nutrimix Feeds Corp. v.
Court of Appeals, 441 SCRA 357 (2004).189
Sellers agent can by agreement be liable for the warranty against hidden defects. xSchmid
and Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988).
e. Warranty as to Fitness or Quality of Goods (Arts. 1562, 1565, 1599)
In order to enforce the implied warranty that the goods are reasonably fit and suitable to be
used for the purpose which both parties contemplated, the following must be established: (a)
that the buyer sustained injury because of the product; (b) that the injury occurred because the
product was defective or unreasonably unsafe; and finally (c) the defect existed when the
product left the hands of the petitioner. Nutrimix Feeds Corp. v. CA, 441 SCRA 357 (2004).
A manufacturer or seller of a product cannot be held liable for any damage allegedly
caused by the product in the absence of any proof that the product in question is defective,
which was present upon the delivery or manufacture of the product; or when the product left
the sellers or manufacturers control; or when the product was sold to the purchaser; or the
product must have reached the user or consumer without substantial change in the condition it
was sold. Nutrimix Feeds Corp. v. Court of Appeals, 441 SCRA 357 (2004).
f. Sale of Goods by Sample (Art. 1565)
There is a sale by sample when a small quantity is exhibited by the seller as a fair
specimen of the bulk, which is not present and there is no opportunity to inspect or examine
the same. To constitute a sale by sample, it must appear that the parties treated the sample as
the standard of quality and that they contracted with reference to the sample with the
understanding that the product to be delivered would correspondent with the sample. In a
contract of sale by sample, there is an implied warranty that the goods shall be free from any
defect which is not apparent on reasonable examination of the sample and which would render
the goods unmerchantable. xMendoza v. David, 441 SCRA 172 (2004).
g. Additional Warranties for Consumer Products (Arts. 68, Consumer Act, R.A. 7394).
5. Effects and Prescription of Warranties (Art. 1599) A breach in the warranties of the seller
entitles the buyer to a proportionate reduction of the purchase price. xPNB v. Mega Prime Realty
and Holding Corp., 567 SCRA 633 (2008).
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 4 years, while for actions based on breach of implied warranty, the prescriptive
period is 6 months from the date of the delivery of the thing sold. xAng v. Court of Appeals, 567
SCRA 53 (2008).
6. Effects of Waivers The phrase as is, where is basis pertains solely to the physical condition
of the thing sold, not to its legal situation. In the case at bar, the US tax liabilities constitute a
potential lien which applies to the subjects matters legal situation, not to its physical aspect.
Thus, the buyer has no obligation to shoulder the same. xNDC v. Madrigal Wan Hui Lines Corp.,
412 SCRA 375 (2003).
7. Buyers Options in Case of Breach of Warranty (Art. 1599) The remedy against violation
of warranty against hidden defects is either to withdraw from the contract (accion redhibitoria) or
to demand a proportionate reduction of the price (accion quanti minoris), with damages in either
case. Nutrimix Feeds Corp. v. CA, 441 SCRA 357 (2004).
189
Investments & Devt, Inc. v. CA, 162 SCRA 636 [1988]).
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Right to repurchase must be constituted as part of a valid sale at perfection. xVillarica v. CA,
26 SCRA 189 (1968).190
An agreement to repurchase becomes a promise to sell when made after the sale because
when the sale is made without such agreement the purchases acquires the things sold absolutely;
and, if he afterwards grants the vendor the right to repurchase, it is a new contract entered into by
the purchases as absolute owner. Roberts v. Papio, 515 SCRA 346 (2007).191
In sales denominated as pacto de retro, the price agreed upon should not generally be
considered as the just value of the thing sold, absent other corroborative evidencethere is no
requirement in sales that the price be equal to the exact value of the thing subject matter of the
sale. xDorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008).
2. Redemption Period
The period to repurchase is not suspended merely because there is a divergence of opinion
between the parties as to the precise meaning of the phrase providing for the condition upon
which the right to repurchase is triggered. The existence of seller a retros right to repurchase the
proper is not dependent upon the prior final interpretation by the court of the said phrase.
Misterio v. Cebu State College of Science and Technology, 461 SCRA 122 (2005).
7. Fruits (Art. 1617) Article 1617 on the disposition of fruits of property redeemed applies only
when the parties failed to provide a sharing arrangement thereof; otherwise, the parties
contractual stipulations prevail. xAlmeda v. Daluro, 79 SCRA 327 (1977).
190Claravall v. CA, 190 SCRA 439 (1990); Torres v. CA, 216 SCRA 287 (1992); Roberts v. Papio, 515 SCRA 346 (2007).
191
Ramos v. Icasiano, 51 Phil (1927).
192
Reyes v. Hamada, 14 SCRA 215 (1965); Solid Homes v. CA, 275 SCRA 267 (1997); Misterio v. Cebu State College of Science and
Technology, 461 SCRA 122 (2005); Cadungog v. Yap, 469 SCRA 561 (2005); Ramos v. Dizon, 498 SCRA 17 (2006); Lumayag v. Heirs of
Jacinto Nemeo, 526 SCRA 51 (2007).
193
Villegas v. CA, 499 SCRA 276 (2006).
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Under a sale a retro, failure of buyer to consolidate his title under Art. 1607 does not impair
such title and ownership because the method prescribed thereunder is merely for purpose of
registering and consolidating titles to the property. In fact, failure of a seller a retro to exercise the
redemption right within the period agreed upon or provided for by law, vests upon the buyer a
retro absolute title and ownership over the property sold by operation of law. Consequently, after
the effect of consolidation, the mortgage or re-sale by the seller a retro of the same property
would not transfer title and ownership to the mortgagee or buyer, as the case may be, under the
Latin maxim NEMO DAT QUOD NON HABET. xCadungog v. Yap, 469 SCRA 561 (2005).
194
Salonga v. Concepcion, 470 SCRA 291 (2005).
195
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Cuyugan v. Santos, 34 Phil. 100 (1916); Matanguihan v. CA, 275 SCRA 380 (1997);
Hilado v. Heirs of Rafael Medlla, 37 SCRA 257 (2002); Madrigal v. CA, 456 SCRA 659 (2005); Legaspi v. Ong, 459 SCRA 122 (2005);
Banga v. Bello, 471 SCRA 653 (2005); Dio v. Jardines, 481 SCRA 226 (2006); Ayson, Jr. v. Paragas, 557 SCRA 50 (2008).
196
Lao v. CA, 275 SCRA 237 (1997).
197
Ceballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004); Alvaro v. Ternida, 479 SCRA 288 (2006); Cirelos v.
Hernandez, 490 SCRA 624 (2006); Lumayag v. Heirs of Jacinto Nemeo, 526 SCRA 51 (2007); Olivares v. Sarmiento, 554 SCRA 384
(2008); Tio v. Abayata, 556 SCRA 175 (2008); Deheza-Inamarga v. Alano, 574 SCRA 651 (2008); Rockville Excel Intl Exim Corp. v. Culla,
602 SCRA 124 (2009); Kings Properties Corp. v. Galido, 606 SCRA 137 (2009); Martires v. Chua, 694 SCRA 38 (2013); Heirs of Soliva v.
Soliva, 757 SCRA 26 (2015).
198
Padilla v. Linsangan, 19 Phil. 65 (1911); Aquino v. Deala, 63 Phil. 582 (1936); Ramos v. CA 180 SCRA 635 (1989).
199
Austria v. Gonzales, Jr., 420 SCRA 414 (2004); Raymundo v. Bandong, 526 SCRA 514 (2007).
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An equitable mortgage is defined as one although lacking in some formality, or form or words,
or other requisites demanded by a statute, nevertheless reveals the parties intention to charge
real property as security for a debt, and contains nothing impossible or contrary to law. For
equitable mortgage to arise, two requisites must concur: (1) that the parties entered into a
contract denominated as a sale; and (2) the intention was to secure an existing debt by way of
mortgage.200 Consequently, the non-payment of the debt when due gives the mortgagee the right
to foreclose the mortgage, sell the property and apply the proceeds of the sale for the satisfaction
of the loan obligation. While there is no single test to determine whether the deed of absolute sale
on its face is really a simple loan accommodation secured by a mortgage, Art. 1602 of the Civil
Code, however, enumerates several instances when a contract is presumed to be an equitable
mortgage. xHeirs of Dela Rosa v. Batongbacal, 731 SCRA 263 (2014).201
a. Badges of Equitable Mortgage under Art. 1602202 A sale a retro actually intended to secure
the payment of an obligation is presumed an equitable mortgage. xRomulo v. Layug, Jr., 501
SCRA262 (2006);203 such presumption of equitable mortgage applies also to a contract
purporting to be an absolute sale. xTuazon v. CA, 341 SCRA 707 (2000).204
The presence of only one Art. 1602 circumstance is sufficient for a contract of sale a retro
to be presumed an equitable mortgage. xHilado v. Medalla 377 SCRA 257 (2002).205
When doubt exists as to the true nature of the transaction purporting to be a sale, courts
must construe it as an equitable mortgage, as the latter involves a lesser transmission of rights
and interest over the property. Solitarios v. Jaque, 740 SCRA 226 (2014).
The presumption in Art. 1602 jibes with the rule that the law favors the least transmission of
property rights. xEnriquez, Sr. v. Heirs of Spouses Baldonado, 498 SCRA 365 (2006); but it is
not conclusive, for it may be rebutted by competent and satisfactory proof to the contrary.
xSantiago v. Dizon, 543 SCRA 402 (2008).
A contract purporting to be an absolute sale is presumed to be an equitable mortgage: (a)
when the price of the sale is unusually inadequate;206 (b) when the vendor remains in
possession as lessee or otherwise;207 (c) when after the expiration of the right of repurchase, it
is extended by the buyer. xHilado v. Heirs of Rafael Medalla, 37 SCRA 257 (2002);208 (d) when
the purported seller continues to collect rentals from the lessees of the property sold. Ramos v.
Dizon, 498 SCRA 17 (2006); (e) when the purported seller was in desperate financial situation
when he executed the purported sale. xBautista v. Unangst, 557 SCRA 256 (2008); or under
threat of being sued criminally. xAyson, Jr. V. Paragas, 557 SCRA 50 (2008).
Payment of real estate taxes is a usual burden attached to ownership, and when such
payment is coupled with continuous possession of the property, it constitutes evidence of great
weight that a person under whose name the realty taxes were declared has a valid and right
claim over the land. xGo v. Bacaron, 472 SCRA 229 (2005).209
The fact that the price in a pacto de retro sale is not the true value of the property does not
justify the conclusion that the contract is one of equitable mortgage; in fact a pacto de retro
sale, the practice is to fix a relatively reduced price to afford the seller a retro every facility to
redeem the property. xIgnacio v. CA, 246 SCRA 242 (1995).210
To presume a contract is an equitable mortgaged based on gross inadequacy of price, it
must be clearly shown from the evidence presented that the consideration was in fact grossly
inadequate at the time the sale was executed. Mere inadequacy of price is not sufficient to
create the presumption. xOlivares v. Sarmiento, 554 SCRA 384 (2008).211
Inadequacy of purchase price is considered so far short of the real value of the property
as to startle a correct mind. xSantiago v. Dizon, 543 SCRA 402 (2008); or that the mind
revolts at it as such that a reasonable man would neither directly or indirectly be likely to
consent to it. xVda de Alvarez v. Court of Appeals, 231 SCRA 309 (1994); it must be grossly
inadequate or shocking to the conscience. xTio v. Abayata, 556 SCRA 175 (2008).
200
Muoz, Jr. v. Ramirez, 629 SCRA 38 (2010).
201Matanguihan v. CA, 275 SCRA 380 (1997); Martinez v. CA, 358 SCRA 38 (2001); Hilado v. Heirs of Rafael Medlla, 37 SCRA 257
(2002); Ceballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004); San Pedro v. Lee, 430 SCRA 338 (2005); Go v.
Bacaron, 472 SCRA 229 (2005), citing VILLANUEVA, CESAR L. PHILIPPINE LAW ON SALES, (1998 ed.), p. 271; Romulo v. Layug, Jr., 501
SCRA262 (2006); Roberts v. Papio, 515 SCRA 346 (2007); Raymundo v. Bandong, 526 SCRA 514 (2007); Dorado Vda. De Delfin v. Dellota,
542 SCRA 397 (2008); Muoz, Jr. V. Ramirez, 629 SCRA 38 (2010); Heirs of Soliva v. Soliva, 757 SCRA 26 (2015).
202
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Balatero v. IAC, 154 SCRA 530 (1987); Mariano v. CA, 220 SCRA 716 (1993); Lobres v.
CA, 351 SCRA 716 (2001).
203
Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256 (2008).
204
Zamora v.CA, 260 SCRA 10 (1996).
205
Claravall v. CA, 190 SCRA 439, 448 (1990); Uy v. CA, 230 SCRA 664 (1994); Lobres v. CA, 351 SCRA 716 (2001); Alvaro v. Ternida,
479 SCRA 288 (2006); Dio v. Jardines, 481 SCRA 226 (2006); Raymundo v. Bandong, 526 SCRA 514 (2007); Aleligay v. Laserna, 537
SCRA 699 (2007); Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008); Bautista v. Unangst, 557 SCRA 256 (2008); Rockville Excell
International Exim Corp. V. Culla, 602 SCRA 124 (2009); Heirs of Jose Reyes, Jr. v. Reyes, 626 SCRA 758 (2010); Heirs of Soliva v. Soliva,
757 SCRA 26 (2015).
206
Romulo v. Layug, Jr., 501 SCRA262 (2006).
207Romulo v. Layug, Jr., 501 SCRA262 (2006); Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256 (2008);
Rockville Excell International Exim Corp. v. Culla, 602 SCRA 124 (2009).
208
Cruz v. CA, 412 SCRA 614 (2003).
209
Lumayag v. Heirs of Jacinto Nemeo, 526 SCRA 51 (2007).
210
De Ocampo v. Lim, 38 Phil. 579 (1918); Feliciano v. Limjuco, 41 Phil.147 (1920); Belonio v. Movella, 105 Phil. 756 (1959).
211
Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
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Although under the agreement the seller shall remain in possession of the property for only
one year, such stipulation does not detract from the fact that possession of the property, an
indicium of ownership, was retained by the alleged vendor to qualify the arrangement as an
equitable mortgage, especially when it was shown that the vendor retained part of the
purchase price. xLegaspi v. Ong, 459 SCRA 122 (2005).212
Mere tolerated possession is not enough to prove that the transaction was an equitable
mortgage. xRedondo v. Jimenez, 536 SCRA 639 (2007).213
Mere allegations without proof to support inadequacy of price, or when continued
possession by seller is supported by a valid arrangement consistent with the sale, would not
support the allegation of equitable mortgage. xCirelos v. Hernandez, 490 SCRA 624 (2006).214
Under Art. 1602, delay in transferring title is not one of the instances enumerated by law
instances in which an equitable mortgage can be presumed. Nor does the fact that the original
transaction on the land was to support a loan, which when it was not paid on due date was
negotiated into a sale, without evidence that the subsequent deed of sale does not express the
true intentions of the parties, give rise to a presumption of equitable mortgage. xCeballos v.
Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004).
Where the ownership of the land is supposedly transferred to the buyer who provides for
the funds to redeem the property from the bank but nonetheless allows the seller to later on
buy back the properties, is in the nature of an equitable mortgage governed by Articles 1602
and 1604 of the Civil Code. xBacungan v. Court of Appeals, 574 SCRA 642 (2008).
An equitable mortgage is a voidable contract. It may be annulled within four (4) years from
the time the cause of action accrues. Ayson, Jr. v. Paragas, 557 SCRA 50 (2008).
b. Remedies Allowed in an Equitable Mortgage Situation (Arts. 1454, 1602, 1605) In the
case of an equitable mortgage, although Art. 1605 which allows for the remedy of reformation,
nothing therein precludes an aggrieved party from pursuing other remedies to effectively
protect his interest and recover his property, such as an action for declaration of nullity of the
deed of sale and specific performance. xTolentino v. CA, 386 SCRA 36 (2002).
In equitable mortgage, consolidation of ownership in the mortgagee in equity upon failure of
the mortgagor in equity to pay the obligation, would amount to a pactum commissorium. The
only proper remedy is to cause the foreclosure of the mortgage in equity. xBriones-Vasquez v.
CA, 450 SCRA 644 (2005); or to determine if the principal obligation secured by the equitable
mortgage has been paid or settled. xBanga v. Bello, 471 SCRA 653 (2005).
212
Oronce v. CA, 298 SCRA 133 (1998).
213Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
214
Austria v. Gonzales, Jr., 420 SCRA 414 (2004).
215
Guerrero v. Yigo, 96 Phil. 37 (1954); Montevirgin v. CA, 112 SCRA 641 (1982); Vda. de Zulueta v. Octaviano, 121 SCRA 314 (1983);
Ong v. Roban Lending Corp., 557 SCRA 516 (2008); Heirs of Jose Reyes, Jr. V. Reyes, 626 SCRA 758 (2010), Martires v. Chua, 694 SCRA
38 (2013).
216
Philnico Industrial Corp. v. PMO, 733 SCRA 703 (2014).
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of the buyer would have be declared void also. A. Francisco Realty v. CA, 298 SCRA 349
(1998).217
In this case, Sections 13.1 and 13.2 of the Contract of Guaranty call for the "prompt
assignment and conveyance to [Home Guaranty Corporation] of all the corresponding
properties in the Asset Pool" that are held as security in favor of the guarantor. Moreover,
Sections 13.1 and 13.2 dispense with the need of conducting foreclosure proceedings, judicial
or otherwise. Albeit requiring the intervention of the trustee of the Asset Pool, Sections 13.1
and 13.2 spell out what is, for all intents and purposes, the automatic appropriation by the
paying guarantor of the properties held as security. This is thus a clear case of pactum
commissorium. It is null and void. Accordingly, whatever conveyance was made by Planters
Development Bank to Home Guaranty Corporation in view of this illicit stipulation is ineffectual.
It did not vest ownership in Home Guaranty Corporation. . . All that this transfer engendered is
a constructive trust in which the properties comprising the Asset Pool are held in trust by
Home Guaranty Corporation, as trustee, for the trustor, La Savoie. . . . So, too, this case falls
squarely under Article 1456 of the Civil Code. Home Guaranty Corporation acquired the
properties comprising the Asset Pool by mistake or through the ineffectual transfer (i.e., for
being pactum commissorium) made by the original trustee, Planters Development Bank.
Home Guaranty Corp. v. La Savoie Dev. Corp., 748 SCRA 312 (2015).
d. Final Chance to Redeem in Mistaken Equitable Mortgage (Art. 1606) The 30 day
period under Art. 1606 does not apply if the courts should find the sale to be absolute.
xPangilinan v. Ramos, 181 SCRA 359 (1990).218
Sellers in a sale judicially declared as pacto de retro may not exercise the right to
repurchase within 30-day period under Art. 1606, although they have taken the position that
the same was an equitable mortgage, if it is shown that there was no honest belief thereof
since none of the circumstances under Art. 1602 were shown to exist; that if they truly believed
the sale to be an equitable mortgage, as a sign of good faith, they should have consigned with
the amount representing their alleged loan, on or before the expiration of the right to
repurchase. Abilla v. Gobonseng, 374 SCRA 51 (2002).219
C. LEGAL REDEMPTION
1. Definition (Art. 1619) Legal redemption is in the nature of a privilege created by law partly for
reasons of public policy and partly for the benefit and convenience of the redemptioner, to afford him
a way out of what might be a disagreeable or an inconvenient association into which he has been
thrust. It is intended to minimize co-ownership. xFernandez v. Tarun, 391 SCRA 653 (2002).220
217
Legaspi v. Ong, 459 SCRA 122 (2005); Home Guaranty Corp. v. La Savoie Dev. Corp., 748 SCRA 312 (2015).
218
Tapas v. CA, 69 SCRA 393 (1976).
219
Vda. de Macoy v. CA, 206 SCRA 244 (1992).
220
Basa v. Aguilar, 117 SCRA 128 (1982).
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Redemption by co-owner redounds to the benefit of all co-owners. xMariano v. CA, 222
SCRA 736 (1993); and the 30-day period for the exercise the legal redemption right, even
when such right has been recognized to exist in a final and executory court decision, does not
begin from the entry of judgment, but from the written notice served by the seller to the party
entitled to exercise such redemption right. xGuillen v. CA, 589 SCRA 399 (2009).
The requisites for the exercise of legal redemption are as follows: (1) there must be co-
ownership; (2) one of the co-owners sold his right to a stranger; (3) the sale was made before
the partition of the co-owned property; (4) the right of redemption must be exercised by one or
more co-owners within a period of thirty days to be counted from the time he or they were
notified in writing by the co-owner vendor; and (5) the vendee must be reimbursed the price of
the sale. xCalma v. Santos, 590 SCRA 359 (2009).
e. Sale of Credit in Litigation (Art. 1634) 30 Days from Notice of Demand to Pay.
For the debtor to be entitled to extinguish his credit by reimbursing the assignee under Art.
1634, the following requisites must concur: (a) there must be a credit or other incorporeal right;
(b) the credit or other incorporeal right must be in litigation; (c) the credit or other incorporeal
right must be sold to an assignee pending litigation; (d) the assignee must have demanded
payment from the debtor; (e) the debtor must reimburse the assignee for the price paid by the
latter, the judicial costs incurred by the latter and the interest on the price form the day on
which the same was paid; and (f) the reimbursement must be done within 30 days from the
date of the assignees demand. xSitus Dev. Corp. v. Asiatrust Bank, 677 SCRA 495 (2012).
221
De Guzman v. CA, 148 SCRA 75 (1987); Adille v. CA, 157 SCRA 455 (1988).
222
Hernaez v. Hernaez, 32 Phil. 214 (1915); Castillo v. Samonte, 106 Phil. 1024 (1960).
223
Garcia v. Calaliman, 17 SCRA 201 (1989); Mariano v. CA, 222 SCRA 736 (1993).
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Neither the registration of the sale xCabrera v. Villanueva, 160 SCRA 627 (1988), nor the
annotation of an adverse claim xVda. De Ape v. CA, 456 SCRA 193 (2005), nor notice being
given by the city treasurer xVerdad v. CA, 256 SCRA 593 (1996), comply with the written notice
required under Art. 1623 to begin the tolling of the 30-day period of redemption.
Notice required under Art. 1623 is deemed to have been complied with when other co-owner
has signed Deed of Extrajudicial Partition which embodies the disposition of part of the property
owned in common. xFernandez v. Tarun, 391 SCRA 653 (2002).
The existence of a clause in the deed of sale to the effect that the vendor has complied with
the provisions of Art. 1623, cannot be taken to being the written affirmation under oath, as well
as the evidence, that the required written notice to petitioner under Art. 1623 has been meet, for
the person entitled to the right is not a party to the deed of sale. xPrimary Structures Corp. v.
Valencia, 409 SCRA 371 (2003).
Francisco v. Boiser, 332 SCRA 305 (2000), summarized the case-law on Art. 1623, and
with definitiveness declared:
For the 30-day redemption period to begin to run, notice must be given by seller; notice given by
the buyer or even by the Register of Deeds is not sufficient. This expressly affirms the original
rulings in xButte v. Manuel Uy and Sons, 4 SCRA 526 (1962), and xSalatandol v. Retes, 162
SCRA 568 (1988); and expressly overruled the ruling in xEtcuban v. CA, 148 SCRA 507 (1987),
which allowed the giving of notice by the buyer to be effective under Art. 1623.
When notice is given by the proper party (seller), no particular form of written notice is prescribed
under Art. 1623, so that the furnishing of the copies of the deeds of sale to the co-owner would be
sufficient, as held previously in xDistrito v. CA, 197 SCRA 606 (1991); xConejero v. CA, 16 SCRA
775 (1966); xBadillo v. Ferrer, 152 SCRA 407 (1987.
Affirmed ruling in xAlonzo v. IAC, 150 SCRA 259 (1987), that filing of suit for ejectment or
collection of rentals against a co-owner actually dispenses with the written notice, and
commences running of period to exercise the right of redemption, since filing of the suit amounted
to actual knowledge of the sale.
a. Rare Exceptions When the sale to the buyer was effected through the co-owner who acted
as the broker, and never indicated that he would exercise his right to redeem. xDistrito v. CA,
197 SCRA 606 (1991).
When the buyers took possession of the property immediately after the execution of the
deed of sale in their favor and lived in the midst of the other co-owners who never questioned
the same. xPilapil v. CA, 250 SCRA 560 (1995).
c. Redemption by Judgment Debtor (Secs. 27-28, Rule 39, Rules of Civil Procedure)
Written notice must be given to the judgment debtor before the sale of the property on
execution, to give him the opportunity to prevent the sale by paying the judgment debt sought
to be enforced and the costs which have been incurred. xTorres v. Cabling, 275 SCRA 329
(1997).
Where there is a third-party claim, sheriff should demand from the judgment creditor who
becomes the highest bidder, payment in cash of his bid instead of merely crediting the amount
to the partial satisfaction of the judgment debt. xTorres v. Cabling, 275 SCRA 329 (1997).
Under Sec. 28, Rule 39 of the 1997 Rules of Civil Procedure, the period of redemption shall
be at any time within one (1) year from the date of registration of the certificate of sale, so
that the period is now to be understood as composed of 365 days, unlike the 360 days under
the old provisions of the Rules of Court. xYsmael v. Court of Appeals, 318 SCRA 215 (1999).
224
Mata v. CA, 318 SCRA 416 (1999).
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The execution of a dacion en pago by sellers effectively waives the redemption period
normally given a mortgagor. xFirst Global Realty and Dev. Corp. v. San Agustin, 377 SCRA
341 (2002).
3. Effects of Assignment
a. Assignment of Credit
An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the
consent of the debtor, transfers his credit and accessory rights to another, known as the assignee,
who acquires the power to enforce it to the same extent as the assignor could enforce it against
the debtor. xAquintey v. Tibong, 511 SCRA 414 (2006).229
As a consequence, the third party steps into the shoes of the original creditor as subrogee of
the latter. Although constituting a novation, such assignment does not extinguish the obligation
230Sison & Sison v. Yap Tico, 37 Phil. 587 (1918); C & C Commercial Corp. v. PNB, 175 SCRA 1 (1989); Project Builders, v. CA, 358
SCRA 626 (2001); Aquintey v. Tibong, 511 SCRA 414 (2006); Ledonio v. Capitol Devt Corp., 526 SCRA 379 (2007).
231
Ledonio v. Capitol Dev. Corp., 526 SCRA 379 (2007).
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XV. BULK SALES LAW (ACT NO. 3952)
1. Scope. Chin v. Uy, 40 O.G. 4 Supp. 52
2. Coverage of Bulk Sale Sale, transfer, mortgage or assignment of:
a. Goods, wares, merchandise, provisions or material other than in the ordinary course of
business;
b. All, or substantially all of all or substantially all of the fixtures and equipment used in
and about the business;
c. All, or substantially all of the business or trade theretofore conducted by the vendor,
mortgagor, transferor, or assignor.
The Bulk Sales Law (BSL) must be construed strictly. The disposal by the owner of a foundry
shop of all his iron bars and others does not fall under the law, because the contents of a foundry
shop are not wares and merchandise. BSL only covers sales in bulk of fixtures and equipment
used in the mercantile business, which involves the buying and selling of merchandise. xPeople v.
Wong, [CA] 50 O.G. 4867 (1954).
BSL applies to merchants who are in the business of selling goods and wares and similar
merchandise, and cannot cover the sale of assets by a manufacturer since the nature of his
business does not partake of merchandise. DBP v. Judge of the RTC of Manila, 86 O.G. No. 6
1137 (05 Feb. 1990).
4. Effects of Non-Compliance
a. If purchase money or mortgage proceeds are not applied pro-rata to payment of the bona fide
claims of the creditors, the sale is deemed fraudulent and void. (Sec. 4)
b. Non-giving of the list of creditors or intentional omission of the names of some of the creditors,
and placing of wrong data required by law, would subject the seller or mortgagor to penal
sanctions. (Sec. 4)
c. Bulk transfer without consideration or for nominal consideration punishable. (Sec. 7)
d. Failure to comply with other provisions of the law the non-application of the consideration
proportionately to the creditors, the preparation of the inventory, and the notification to
creditors, are also made punishable. (Sec. 11)
A bulk sale done without complying with the Law, makes the transaction fraudulent and void,
but does not change th relationship between seller/assignor/encumbrancer and his creditor.
Hence, a judgment providing for subsidiary liability is invalidproper remedy is to collect on the
credit against the defendants, and if they cannot pay, to attach on the property fraudulently
mortgage since it still pertain to the debtors-defendants. xPeople v. Mapoy, 73 Phil. 678 (1942).
6. Penalty Provision
7. Applicability of the Anti-Dummy Act (Comm. Act. 108, as amended by P.D. 715)
a. Law penalizes Filipinos who permit aliens to use them as nominees/dummies to enjoy
privileges reserved for Filipinos. Criminal sanctions are imposed on the president, manager,
board member or persons in charge of the violating entity and causing the latter to forfeit its
privileges, rights and franchises.
b. Section 2-A of the Law prohibits aliens from intervening in the management, operation,
administration or control of nationalized business, whether as officers, employees or laborers,
with or without remuneration. Aliens may not take part in technical aspects, provided no
Filipino can do such technical work, and with express authority from the Philippine President.
232
Marsman & Co. v. First Coconut Central Co., 162 SCRA 206 (1988); B.F. Goodrich Phils. v. Reyes, Sr., 121 SCRA 363 (1983).
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c. Later, P.D. 715 amended the Law by adding of a proviso expressly allowing the election of
aliens as members of the boards of directors of corporations or associations engaged in
partially nationalized activities in proportion to their allowable participation or share in the
capital of such entities.
The amendment was meant to settle the uncertainty created in the obiter opinion in Luzon
Stevedoring Corp. v. Anti-Dummy Board, 46 SCRA 474 (1972), which rejected the argument
that the Anti-Dummy Law covered only employment in wholly nationalized businesses and not
in those that are only partly nationalized.
The Filipino common-law wife of a Chinese national is not barred from engaging in the
retail business provided she uses capital exclusively derived from her paraphernal properties;
allowing her common-law Chinese husband to take part in management of the retail business
would be a violation of the law. xTalan v. People, 169 SCRA 586 (1989).
oOo