Capacity to Buy (Art.
1489-1492) 1
Additional Notes from previous topic:
PD 957
SECTION 4. Registration of Projects. The registered
owner of a parcel of land who wishes to convert the same into
a subdivision project shall submit his subdivision plan to the
Authority which shall act upon and approve the same, upon a
finding that the plan complies with the Subdivision Standards
and Regulations enforceable at the time the plan is submitted.
The same procedure shall be followed in the case of a plan for
a condominium project except that, in addition, said Authority
shall act upon and approve the plan with respect to the
building or buildings included in the condominium project in
accordance with the National Building Code (R.A. No. 6541).
The subdivision plan, as so approved, shall then be
submitted to the Director of Lands for approval in accordance
with the procedure prescribed in Section 44 of the Land
Registration Act (Act No. 496, as amended by R.A. No. 440):
Provided, that in case of complex subdivision plans, court
approval shall no longer be required. The condominium plan,
as likewise so approved, shall be submitted to the Register of
Deeds of the province or city in which the property lies and the
same shall be acted upon subject to the conditions and in
accordance with the procedure prescribed in Section 4 of the
Condominium Act (R.A. No. 4726).
The owner or the real estate dealer interested in the sale of
lots or units, respectively, in such subdivision project or
condominium project shall register the project with the
Authority by filing therewith a sworn registration statement
containing the following information:
a) Name of the owner;
b) The location of the owner's principal business
office, and if the owner is a non-resident Filipino,
the name and address of his agent or representative
in the Philippines authorized to receive notice;
c) The names and addresses of all the directors and
officers of the business firm, if the owner be a
corporation, association, trust, or other entity, and
of all the partners, if it be a partnership; cdt
d) The general character of the business actually
transacted or to be transacted by the owner; and
e) A statement of the capitalization of the owner,
including the authorized and outstanding amounts
of its capital stock and the proportion thereof which
is paid-up.
The following documents shall be attached to the
registration statement:
a) A copy of the subdivision plan or condominium
plan as approved in accordance with the first and
second paragraphs of this section;
b) A copy of any circular, prospectus, brochure,
advertisement, letter, or communication to be used
for the public offering of the subdivision lots or
condominium units;
c) In case of a business firm, a balance sheet
showing the amount and general character of its
assets and liabilities and a copy of its articles of
incorporation or articles of partnership or
association, as the case may be, with all the
amendments thereof and existing by-laws or
instruments corresponding thereto;
d) A title to the property which is free from all liens
and encumbrances: Provided, however, that in case
any subdivision lot or condominium unit is
mortgaged, it is sufficient if the instrument of
mortgage contains a stipulation that the mortgagee
shall release the mortgage on any subdivision lot or
condominium unit as soon as the full purchase
price for the same is paid by the buyer. cd
The person filing the registration statement shall pay
the registration fees prescribed therefor by the Authority.
Thereupon, the Authority shall immediately cause to be
published a notice of the filing of the registration statement at
the expense of the applicant owner or dealer, in two
newspapers of general circulation, one published in English
and another in Pilipino, once a week for two consecutive
weeks, reciting that a registration statement for the sale of
subdivision lots or condominium units has been filed in the
National Housing Authority; that the aforesaid registration
statement, as well as the papers attached thereto, are open to
inspection during business hours by interested parties, under
such regulations as the Authority may impose; and that copies
thereof shall be furnished to any party upon payment of the
proper fees.
The subdivision project or the condominium project shall
be deemed registered upon completion of the above
publication requirement. The fact of such registration shall be
evidenced by a registration certificate to be issued to the
applicant-owner or dealer.
SECTION 5. License to Sell. Such owner or dealer to
whom has been issued a registration certificate shall not,
however, be authorized to sell any subdivision lot or
condominium unit in the registered project unless he shall have
first obtained a license to sell the project within two weeks
from the registration of such project.
The Authority, upon proper application therefor, shall
issue to such owner or dealer of a registered project a license
to sell the project if, after an examination of the registration
statement filed by said owner or dealer and all the pertinent
documents attached thereto, he is convinced that the owner or
dealer is of good repute, that his business is financially stable,
and that the proposed sale of the subdivision lots or
condominium units to the public would not be fraudulent. c
SECTION 7. Exempt Transactions. A license to sell
and performance bond shall not be required in any of the
following transactions:
a) Sale of a subdivision lot resulting from the
partition of land among co-owners and co-heirs.
b) Sale or transfer of a subdivision lot by the
original purchaser thereof and any subsequent sale
of the same lot.
c) Sale of a subdivision lot or a condominium unit
by or for the account of a mortgagee in the
ordinary course of business when necessary to
liquidate a bona fide debt.
SECTION 24. Failure to Pay Installments. The rights
of the buyer in the event of his failure to pay the installments
due for reasons other than the failure of the owner or developer
to develop the project shall be governed by Republic Act No.
6552.
Where the transaction or contract was entered into prior to
the effectivity of Republic Act No. 6552 on August 26, 1972,
the defaulting buyer shall be entitled to the corresponding
refund based on the installments paid after the effectivity of
the law in the absence of any provision in the contract to the
contrary.
CHAPTER 2
CAPACITY TO BUY AND SELL
Art. 1489-1492
I. Parties and their Consent
A. Capacity in general
Art. 1489- All persons who are authorized in this Code to
obligate themselves, may enter into a contract of sale,
saving the modifications contained in the following
articles.
Where necessaries are sold and delivered to a minor or
other person without capacity to act, he must pay a
reasonable price therefor. Necessaries are those referred to
in article 290. (1457a)
- A person capacitated to contract is also generally capacitated to
buy or sell.

- The sellers incapacity to alienate the thing sold does not avoid
the contract, but may prevent performance and entitle the buyer
to rescind.
B. Special Disqualifications to buy:
a. Between Spouses (1490) while under the community
regime (absolute or relative)
ARTICLE 1490.The husband and the wife cannot sell property to
each other, except:
(1)When a separation of property was agreed upon in the marriage
settlements; or
(2)When there has been a judicial separation of property under
article 191.
Case:
1. Effect of sale of land to ones own spouse
Uy Siu Pin vs. Cantollas
The sale from Uy Siu Pin to his wife Chua Hue is null and void
not only because the former had no right to dispose of the land in
controversy in view of the existence of the contract Exhibit A, but
because such sale come within the prohibition of article 1458 of
the Civil Code.
2. Transfer in common law relationship
Ching vs. Goyanko
The proscription against sale of property between spouses
applies even to common law relationships. the law emphatically
prohibits the spouses from selling property to each other subject to
certain exceptions. Similarly, donations between spouses during
marriage are prohibited. And this is so because if transfers or
conveyances between spouses were allowed during marriage, that
would destroy the system of conjugal partnership, a basic policy in
civil law. It was also designed to prevent the exercise of undue
influence by one spouse over the other, as well as to protect the
institution of marriage, which is the cornerstone of family law. The
prohibitions apply to a couple living as husband and wife without
benefit of marriage, otherwise, "the condition of those who
incurred guilt would turn out to be better than those in legal
union." Those provisions are dictated by public interest and their
criterion must be imposed upon the will of the parties.
b. By a spouse without the consent of the other spouse
c. Persons in trust relations (1491), public or private (agents,
guardians, administrators, public officers, judges, attorneys, etc.)
1) Transactions included in the disqualification (1492):
redemption, compromise, arbitration, leases (1646)
2) Includes persons expressly disqualified by law in similar cases
(ejusdem generic)
i) Under the Constitution, aliens may not acquire residential
lands - such sales are void
aa) This prohibition was suspended during the Japanese
occupation
bb) Under the provisions of 1412, however, neither party
may set aside the contract since both are in pari delicto
cc) But subsequent naturalization of the alien buyer as a
Filipino citizen before the sale is attacked validates such
acquisition, retroacting to the date of the conveyance
ii) Krivenko ruling applied to unregistered religious
organizations
3) In auctions, the seller may not bid, unless notice is given (1476,
par 4) reserving such right.
4) The seller cannot buy in resale (after rescission or stoppage in
transitu) where directly or indirectly (1533)
Cases:
1. Sale to agent: Exception to prohibition against sale by principal
in favor of his agent.
Pelayo vs. Perez
Facts: Pelayo conveyed to Perez by a DOA 2 parcels of land.
Loreza, wife of Pelayo signed only the third page on account of
Capacity to Buy (Art. 1489-1492) 2
which, registration of Perez was denied. Lorenza refused to sign
the first and second pages. Perez was their attorney-in-fact to
make the necessary representation and negotiation with the
illegal occupants in the land of Pelayo. RTC ruled that the DOA
was null and void. CA reversed.
Issue: Whether the DOA was null and void for (a) lack of marital
consent; (b) being prohibited under Article 1491 (2) of the Civil
Code which prohibits agents from acquiring by purchase
properties from his principal under his charge.
Ruling: No. (a) Lorenza, by affixing her signature to the Deed of
Sale on the space provided for witnesses, is deemed to have
given her implied consent to the contract of sale. Sale is a
consensual contract that is perfected by mere consent, which
may either be express or implied. A wife's consent to the
husband's disposition of conjugal property does not always have
to be explicit or set forth in any particular document, so long as it
is shown by acts of the wife that such consent or approval was
indeed given. In the present case, although it appears on the face
of the deed of sale that Lorenza signed only as an instrumental
witness, circumstances leading to the execution of said document
point to the fact that Lorenza was fully aware of the sale of their
conjugal property and consented to the sale.
(b) Article 1491 (2): .The following persons cannot acquire by
purchase, even at a public or judicial auction, either in person or
through the mediation of another:
xxx xxx xxx
(2)Agents, the property whose administration or sale may have
been entrusted to them, unless the consent of the principal has
been given;
The prohibition against agents purchasing property in their hands
for sale or management is not absolute. It does not apply if the
principal consents to the sale of the property in the hands of the
agent or administrator.
Petitioners, by signing the Deed of Sale in favor of respondent,
are also deemed to have given their consent to the sale of the
subject property in favor of respondent, thereby making the
transaction an exception to the general rule that agents are
prohibited from purchasing the property of their principals.
2. Sale to guardians
Philippine Trust Co. vs. Roldan
Facts: Roldan, former guardian of a minor named Mariano
Bernardo who inherited 17 parcels of land from his deceased
father, sold it to Ramos who in turn after a week sold it back to her.
Phil Trust Co which replaced Roldan as the guardian sought to
nullify the aforementioned sales as they were in reality a sale by
the guardian to herself therefore, null and void under Article
1459 of the Civil Code.
Ruling: As Guardianship is a trust of the highest order, the trustee
cannot be allowed to have any inducement to neglect his ward's
interest; and whenever the guardian acquires the ward's property
through an intermediary, he violates the provision of Article 1459
of the Civil Code and such transaction and subsequent ones
emanating therefrom shall be annulled.
3. Sale to Public Officers
Maharlika Broadcasting Corp. vs. Tagle
Facts: GSIS entered into a conditional contract to sell the parcel of
land, buildings and equipment to Maharlika with the P969.94 until
the total purchase price shall have been fully paid and that upon the
failure of petitioner to pay any monthly installment within ninety
(90) days from due date, the contract shall be deemed
automatically cancelled. Due to Maharlika's failure to settle the
unpaid accounts, the GSIS notified Maharlika in writing that the
conditional contract of sale was annulled and cancelled and
required Maharlika to sign a lease contract. Maharlika refused to
vacate. GSIS published an invitation to bid several acquired
properties, among which was the property in question. Maharlika

addressed to GSIS a letter-proposal to repurchase their foreclosed
properties proposing that they be allowed to pay. It was noted by
GSIS Board V-Chairman and wrote the General Manager Cruz and
the latter wrote to one Mr. Ibaez to hold the bidding. But the
public bidding pursued prompting Maharlika to submit its bid for
P11,000. But the bidding committee rejected Maharlika's bid as an
imperfect bid and recommended acceptance of private respondent
Luz Tagle's bid of P130,000.00 with a ten percent (10%) deposit
and a
a Deed of Conditional Sale in favor of the Tagles was made. Luz
Tagle is the wife of Edilberto Tagle, a Chief of Retirement
Division in GSIS.
Issue: Whether the sale is void due to the fact that Edilberto Tagle's
being a GSIS officer at the time of the sale by the GSIS of the
subject property to his wife.
Ruling: Yes. It was incumbent under the law for GSIS to have
rejected the bid of the wife of a GSIS official and to have refused
to enter into the deed of conditional sale with the respondents
Tagle. It is a policy of the law that public officers who hold
positions of trust may not bid directly or indirectly to acquire
properties foreclosed by their offices and sold at public auction.
Under Article 1491 of the Civil Code the following persons cannot
acquire by purchase, even at a public or judicial auction, either in
person or through the mediation of another: xxxx
"(4)Public officers and employees, the property of the State or of
any subdivisions thereof, or of any government owned or
controlled corporation, or institution, the administration of which
has been intrusted to them; this provision shall apply to judges and
government experts who, in any manner whatsoever, take part in
the sale;
Code tends to prevent fraud, or more precisely, tends not to give
occasion for fraud, which is what can and must be done.
A Division Chief of the GSIS is not an ordinary employee without
influence or authority. The mere fact that he exercises ample
authority with respect to a particular activity, i.e., retirement,
shows that his influence cannot be lightly regarded.
There will always be the suspicion among other bidders and the
general public that the insider official had access to information
and connections with his fellow GSIS officials as to allow him to
eventually acquire the property. It is precisely the need to forestall
such suspicions and to restore confidence in the public service that
the Civil Code now declares such transactions to be void from the
beginning and not merely voidable. The reasons are grounded on
public order and public policy. We do not comment on the motives
of the private respondents or the officers supervising the bidding
when they entered into the contract of sale. Suffice it to say that it
falls under the prohibited transactions under Article 1491 of the
Civil Code and, therefore, void under Article 1409.
4. Sale/transfer to attorney
Gurrea vs. Suplico
Special Proceedings No. 7185 was instituted to have the will
executed during the lifetime of Adelina Guerra be probated and to
settle her estate. Ricardo Guerra opposed to the partition of shares
with Atty Suplico as his counsel. After amicable settlement,
Ricardo offered the San Juan lot to Atty. Suplico as payment of
attorneys fees. Then, Transfer of Rights and Interest was drafted
and Suplico registered it under his name. The heirs of Ricardo filed
for the settlement of Ricardos estate. Defendant claimed unpaid
attorneys fee relative to Special Proc. No. 7185. RTC ruled in
favor of defendant. CA affirmed.
Issue: Whether the Transfer of Rights and Interest was valid;
further assuming that respondent-attorney has not yet been paid his
attorney's fees in special proceedings no. 7185, the payment of said
fees by way of the whole property subject matter of the instant case
was valid
Ruling: No. There was no proof to show that at the time the deed of
Transfer of Rights and Interest was executed, the probate court had
Capacity to Buy (Art. 1489-1492) 3
issued an order granting the Motion for Termination of Proceeding
and Discharge of the Executor and Bond. Since the judge has yet to
act on the above-mentioned motion, it follows that the subject
property which is the subject matter of the deed of Transfer of
Rights and Interest, is still the object of litigation, that is Special
Proceedings No. 7185.
When the deed of Transfer of Rights and Interest was executed, the
title over the subject lot was still in the name of Adelina Gurrea
and that it was only on October 7, 1980 that the title was
transferred in the name of Ricardo. The rule is that as long as the
order for the distribution of the estate has not been complied with,
the probate proceedings cannot be deemed closed and terminated.
The probate court loses jurisdiction of an estate under
administration only after the payment of all the debts and the
remaining estate delivered to the heirs entitled to receive the same.
In the present case, while the subject lot was assigned as Ricardo's
share in the project of partition executed by the heirs of Adelina
Gurrea, the title over the subject lot was still in the name of the
latter and was not yet conveyed to Ricardo when the Transfer of
Rights and Interest was executed.
Since it was already held that the said property is still the object of
litigation at the time the subject Manifestation and Transfer of
Rights and Interest were executed and, thus, may not be acquired
by respondent pursuant to the provisions of Article 1491(5) of the
Civil Code: The following persons cannot acquire by purchase,
even at a public or judicial auction, either in person or through the
mediation of another: xxx xxx xxx (5)Justices, judges, prosecuting
attorneys, clerks of superior and inferior courts, and other officers
and employees connected with the administration of justice, the
property and rights in litigation or levied upon an execution before
the court within whose jurisdiction or territory they exercise their
respective functions; this prohibition includes the act of acquiring
by assignment and shall apply to lawyers, with respect to the
property and rights which may be the object of any litigation in
which they may take part by virtue of their profession.
C. Incapacity to Sell:
a) Homesteaders: can not sell within 5 years from issuance of
the patent or grant (Public Land Act, C.A. 141,
Sec. 118)
Cases:
1) Sale of portions of a parcel of land (1) prior to issuance and (2)
within 5 years from issuance of free patent.
Manlapat vs. CA
Eduardo sold an unregistered area of 553 square meters to Ricardo
on December 19, 1954. Then, on October 8, 1976, a free patent
was issued in Eduardos name. Another deed of sale conveying a
50 sq. m. lot as right of way was executed in March 18, 1981 by
Eduardo in favor of Ricardo to reach the portion covered by the
first sale. Banaag, as attorney-in-fact of his father-in-law Eduardo,
executed a mortgage with the Rural Bank with the subject lot as
collateral. Cruzes, heirs of Ricardo, immediately tried to confront
petitioners on the mortgage and obtain the surrender of the OCT.
Upon petitioners refusal to surrender it, Cruzes went to RBSP
which lent to them the duplicate certificate of the OCT. Cruzes
were able to register separate titles for them and for petitioners.
RTC ruled in favor of petitioners. CA reversed.
Issue: Whether the dispositions of the subject property and the
mortgage thereon was valid pursuant to the 5-year prohibition
against alienation or encumbrance under the Public Land Act on
free patents.
Ruling: Eduardo was issued a title in 1976 on the basis of his free
patent application. Such application implies the recognition of the
public dominion character of the land and, hence, the five (5)-year
prohibition imposed by the Public Land Act against alienation or
encumbrance of the land covered by a free patent or homestead
should have been considered.

The deed of sale covering the fifty (50)-square meter right of way
executed by Eduardo on 18 March 1981 is obviously covered by
the proscription, the free patent having been issued on 8 October
1976
The prohibition to alienate is predicated on the fundamental policy
of the State to preserve and keep in the family of the homesteader
that portion of public land which the State has gratuitously given to
him, and recovery is allowed even where the land acquired under
the Public Land Act was sold and not merely encumbered, within
the prohibited period.
The sale of the 553 square meter portion is a different story. It was
executed in 1954, twenty-two (22) years before the issuance of the
patent in 1976. Apparently, Eduardo disposed of the portion even
before he thought of applying for a free patent. Where the sale or
transfer took place before the filing of the free patent application,
whether by the vendor or the vendee, the prohibition should not be
applied. In such situation, neither the prohibition nor the rationale
therefor which is to keep in the family of the patentee that portion
of the public land which the government has gratuitously given
him, by shielding him from the temptation to dispose of his
landholding, could be relevant. Precisely, he had disposed of his
rights to the lot even before the government could give the title to
him.
The mortgage executed in favor of RBSP is also beyond the pale of
the prohibition, as it was forged in December 1981 a few months
past the period of prohibition.
2. Effect of Verbal sale within 5-year prohibitory period
Manzano vs. Ocampo
Manzano was granted a homestead patent on June 25, 1934. On
January 4, 1938, he and respondent Rufino Ocampo agreed on the
sale of said homestead for the amount of P1,900.00, P1,100.00 of
which paid by Ocampo to Manzano on the same day, and for the
balance, he executed a promissory note. Parties likewise agreed
that the deed of sale was to be made only after the lapse of five
years from the date of Manzano's patent. And to protect the buyer
Ocampo's rights in the agreed sale, Manzano executed in his favor
a "Mortgage of Improvements" over the homestead to secure the
amount of P1,100.00 already received as down payment on the
price. Manzano, on October 19, 1939, having received the approval
of the Undersecretary of Agriculture and Natural Resources of the
proposed sale executed the deed of sale in favor of Ocampo, on the
strength of which Ocampo obtained for himself Transfer
Certificates of Title No. 15584 over the homestead in question.
On June 22, 1954, Manzano commenced this action in the CFI for
the annulment of the sale of his homestead to Ocampo, on the
theory that it was within the prohibitory period of five years from
the issuance of his patent. CAA dismissed. CA affirmed the
dismissal.
Issue: Whether there was a perfected sale within the 5-year
prohibited period
Ruling: Yes. perfected contract of sale over the homestead in
question had already been entered into by the parties on January 4,
1938 (i. e., within the period of prohibition) for the price of
P1,900.00. If no perfected sale had existed in January, 1938, there
would have been no obligation on the part of Ocampo to pay part
of the price, nor any reason or occasion for his executing a
promissory note (an express acknowledgment of indebtedness) for
the balance.
Mortgage of Improvements" signed by Manzano is patently a
simulated contract since the subject matter thereof was the
homestead itself and the payment by Ocampo was not really a loan
but an advance on the agreed price. Even if not simulated, the
mortgage would have been void anyway, since section 118 of the
Public Land Law prohibited encumbrance of homestead land
within five years from issuance of the patent, unless the
encumbrance should be in favor of Government entities.
Capacity to Buy (Art. 1489-1492) 4
The execution of the formal deed after the expiration of the
prohibitory period did not and could not legalize a contract that
was void from its inception. It was executed only in compliance
and fulfillment of the vendor's previous promise, under the
perfected sale of January 4, 1938, to execute in favor of his vendee
the formal act of conveyance after the lapse of the period of
inhibition of five years from the date of the homestead patent.
What is more the execution of the formal deed of conveyance was
postponed by the parties precisely to circumvent the legal
prohibition of their sale.
The law prohibiting any transfer or alienation of homestead land
within five years from the issuance of the patent does not
distinguish between executory and consummated sales; and it
would hardly be in keeping with the primordial aim of this
prohibition to preserve and keep in the family of the homesteader
the piece of land that the state had gratuitously given to them, to
hold valid a homestead sale actually perfected during the period of
prohibition but with the execution of the formal deed of
conveyance and the delivery of possession of the land sold to the
buyer deferred until after the expiration of the prohibitory period,
purposely to circumvent the very law that prohibits and declares
invalid such transaction to protect the homesteader and his family.
To hold valid such arrangements would be to throw the door wide
open to all possible fraudulent subterfuges and schemes that
persons interested in land given to homesteaders may devise to
circumvent and defeat the legal provisions prohibiting their
alienation within five years from the issuance of the homesteader's
patent.
Being void from its inception, the approval thereof by the
Undersecretary of Agriculture and Natural Resources after the
lapse of five years from Manzano's patent did not legalize the sale
b. Sale by one who is not the owner: see 1505
D. When an incompetent buys (1489, par. 2): He must pay a
reasonable price for necessaries delivered to him.
a.The above rule seems to be founded on quasi-contract
E. Effect of forbidden sales:
a. Between husband and wife under the community regime, the
sale is void
1) But strangers cannot assail the transfer
b. Between persons in trust relations, as regards
1) Those based on public trust
i)Public officers, employees, government experts (1491, par.
4), and
ii) Judges, Justices, Prosecutors, Clerks of Court, lawyers
(1491, par.5) - such sales are void (1409,
No. 7)
2) Those based on private trust -
i) Guardians (1491, par. 1)
ii) Agents (1491, par. 2)
iii) Executors and administrators (1491, par. 3) - such sales
are voidable, not void