A C B O 2007 Civil Law: Donation Sale

QuickTime and a
TIFF (Uncompressed) decompressor

ATENEO CENTRAL BAR OPERATIONS 2007
Civil Law
SUMMER REVIEWER

Adviser: Dean Cynthia del Castillo Head: Joy Ponsaran, Eleanor Mateo; Understudy: Joy Tajan, John Paul Lim;
Subject Head: Patricia Marie Regina Roque; Pledgees: Melina Rose Gutierrez, Kristine Margret Malang
are needed to see this picture.
CH. 1 CONTRACT OF SALE

CONTRACT OF SALE One of the contracting
parties obligates himself to transfer the ownership of
and to deliver a determinate thing, and the other to
pay therefore a price certain in money or its
equivalent. A contract of sale may be absolute or
conditional.

Contract of Sale Contract to Sell
Absolute Conditional
Real obligation
obligation to give
Personal obligation
obligation to do
Title passes to the
buyer upon delivery
Ownership is reserved in
the seller and will pass to
the buyer only upon full
payment of the price
Non-payment of the
price is a negative
resolutory condition
Full payment is a positive
suspensive condition, the
failure of which is not a
breach but prevents the
obligation of the vendor to
convey title to arise
remedies available:
1. specific
performance
2. rescission
3. damages
remedies available:
1. resolution
2. damages

I. ELEMENTS OF A CONTRACT OF SALE
1. Consent
2. Determinate subject matter
3. Price certain in money or its equivalent

II. STAGES IN LIFE OF CONTRACT OF SALE
1. Negotiation
2. Perfection
3. Consummation

III. OBLIGATIONS CREATED - 2 sets of real
obligations to give

IV. CHARACTERISTICS OF CONTRACT OF
SALE:
1. Nominate
2. Principal
3. Consensual
4. Bilateral
5. Reciprocal
6. Onerous
7. Commutative
8. Title and not a mode

V. DISTINGUISHED FROM OTHER
CONTRACTS
Donation Sale
Gratuitous or onerous Onerous
Formal contract Consensual contract
Governed by law on
donation
Governed by law on sale

Barter Sale
Consideration: giving of a
thing
Consideration: giving of
money as payment
Governed by law on sales: species of the genus
sales
If consideration consists party in money
and partly by thing
look at manifest intention;
If intention is not clear:
value of thing is more
than amount of money
barter
If intention is not clear:
value of thing is equal
or less than amount of
money sale

Contract for piece of
work
Sale
Goods are to be
manufactured specially
for a customer and upon
special order and not for
the general market
Contract for delivery of
an article which the
vendor in the ordinary
course of business
manufactures or
procures for general
market (whether on hand
or not)
Essence is service Essence is object
Jurisprudence:
1. Timing test
under art 1467:
whether the thing
transferred would have
never existed but for the
order
2. Habituality test
if manufacturer
engages in activity with
need to employ
extraordinary skills and
equipment (Celestino v
CIR)
3. Nature of the object
test
each products nature
of execution differs from
the others; products are

Qu
(Uncompr
e need
Civil Law Summer Reviewer
Page 131 of 297
ickTime and a
essed) decompressor TIFF
ar ed to see this picture.
not ordinary products of
manufacturer (EEI v CIR)

Agency to Sell Sale
Agent not obliged to pay
for price, merely obliged
to deliver price received
from buyer.
Buyer pays for price of
object
Principal remains owner
even if object delivered
to agent
Buyer becomes owner of
thing; in agency
Agent assumes no
risk/liability as long as
within the authority given
Seller warrants
May be revoked
unilaterally because
fiduciary and even if
revoked w/o ground
Not unilaterally revocable
Agent not allowed to
profit
Seller receives profit
Personal Contract;
Rescission is not
available
Real Contract

Dation in Payment Sale
Pre-existing credit No pre-existing credit
Obligations are
extinguished
Obligations are created
Debtors consideration:
extinguishment of the
debt
Creditors consideration:
acquisition of the object
offered in lieu of the
original credit
Consideration of seller:
price
Consideration of buyer:
acquisition of the object
Less freedom in
determining the price
Greater freedom in
determining the price
Payment is received by
the debtor before the
contract is perfected
Buyer still has to pay the
price

Lease Sale
Use of thing is for a
specified period only with
an obligation to return
Obligation to absolutely
transfer ownership of
thing
Consideration is rent Consideration is price
Lessor need not be
owner
Seller needs to be owner
of thing to transfer
ownership

NOTE: Lease with option to buy: really a contract
of sale but designated as lease in name only; it is a
sale by installments

CH. 2 - PARTIES TO A CONTRACT OF SALE

NOTE: GENERAL RULE - All persons who are
authorized in this Code to obligate themselves may
enter into a contract of sale

I. MINORS, INSANE AND DEMENTED
PERSONS, AND DEAF-MUTES
1. Contracts are voidable, subject to annulment
or ratification
2. Also includes:
- State of drunkenness
- Hypnotic spell
- Where necessaries are those sold
and delivered to a minor or other
person without capacity to act, he
must pay a reasonable price
therefore

II. SPOUSES - A spouse may, without the consent
of the other spouse, enter into sales transactions
in the regular pursuit of their profession, vocation,
or trade

Art. 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 or property under Article
191.

NOTE: Prohibition likewise applies to common-law
spouses

III. OTHERS - TRUST RELATIONSHIPS
1. Art. 1491 Two groups of parties prohibited
from acquiring by purchase certain
properties:
a. Guardian/Agent/Executors and
Administrators
i. Direct or indirect
ii. May be ratified since only private
wrong is involved
b. Public Officers and employees/Officers of
the Court
i. Cannot be ratified since public wrong
is involved
ii. Requisites for the prohibition to apply
to attorneys:
1. existence of attorney client
relationship;
2. property is the subject matter
in litigation;
QuickTime and a
TIFF (Uncompresse
are needed to se
Page 132 of 297
d) decompressor
e this picture.
3. while in litigation (from filing
of complaint to final
judgment)
NOTE: Exception to the prohibition against attorneys:
contingent fee arrangement where the amount of
legal fees is based on a value of property involved in
litigation

Art. 1492. The prohibitions in the two preceding
articles are applicable to sales in legal
redemption, compromises and renunciations.

III. Legal Status of Contract
1. Void (case law) guardian/
executor/public officers / officers of the
court
2. Voidable (civil code) agent; VALID if
with consent

CH. 3 - SUBJECT MATTER OF SALE

1. REQUISITES:
1. Things
a. Possible - existing, future, and
contingent
i. whether the subject matter is
of a type and nature that
exists or could be made to
exist to allow the seller
reasonable certainty of being
able to comply with his
obligations
b. Licit
i. not outside the commerce of
man
ii. if illicit, contract is void
c. Determinate or determinable
i. determinate: particularly
designated or physically
segregated from all others of
the same class
ii. determinable:
1. thing is capable of
being made
determinate
2. without the necessity
of a new further
contract
2. Rights must be transmissible, except:
a. future inheritance
b. service

Emptio rei speratae Emptio spei
Sale of an expected thing Sale of a mere hope or
expectancy that the thing
will come to existence;
sale of the hope itself
Sale is subject to the
condition; that the thing
will exist; if it does not,
there is no contract
Sale is effective even if
the thing does not come
into existence, unless it is
a vain hope
Uncertainty is with regard
to the quantity and
quality of the thing and
not the existence of the
thing
The uncertainty is with
regard to the existence of
the thing
Object is a future thing Object is a present thing
which is the hope or
expectancy

NOTE: Quantity of subject matter is not essential for
perfection; must determine nature and quality of
subject matter

NOTE: Seller need not be the owner of the subject
matter at the time of perfection: sufficient that he is
the owner at the time of delivery. exception:
foreclosure sale

CH. 4 - PRICE

I. REQUISITES:
1. Real
a. when at the perfection of the contract
of sale, there is every intention on
the buyer to pay the price, and every
expectation on the part of the seller
to receive such price as the value of
the subject matter he obligates
himself to deliver
2. In money or its equivalent
a. consideration for a valid contract of
sale can be the price and other
valuable consideration; at the very
least, a true contract of sale must
have price as part of its
consideration
3. Certain or ascertainable
a. certain: expressed and agreed in
terms of specific pesos and/or
centavos
b. ascertainable:
i. by third persons
ii. by the courts in cases
where the third person fixes
the price in bad faith or by
mistake
iii. by reference to a definite
day, particular exchange or
market
iv. by reference to another thing
certain
QuickTime and a
TIFF (Uncompressed)
are needed to see t
decompressor
his picture.
Page 133 of 297
v. but never by one party to the
contract
4. Jurisprudence: Manner of payment must
be agreed upon (Marnelego v. Banco
Filipino Savings and Mortgage Bank)

II. EFFECT OF GROSS INADEQUACY OF PRICE

NOTE: Mere inadequacy of the price does not affect
the validity of the sale, except (1) When there is
fraud, mistake, or undue influence indicative of a
defect in consent is present, (2)When it shows that
the parties really intended a donation or some other
act or contract.

III. EFFECT WHERE PRICE IS SIMULATED
1. The act may be shown to have been in reality
a donation, or some other act or contract
2. If not and neither party had any intention
whatsoever that the amount will be paid
(absolutely simulated): the sale is void
3. If there is a real price but what is stated in the
contract is not the one intended to be paid
(only relatively simulated): the contract of
sale is valid but subject to reformation

Art. 1474. Where the price cannot be determined
in accordance with the preceding articles, or in
any other manner, the contract is inefficacious.
However, if the thing or any part thereof has been
delivered to and appropriated by the buyer he
must pay a reasonable price therefore. What is a
reasonable price is a question of fact dependent
on the circumstances of each particular case.

CH. 5 - FORMATION OF A CONTRACT OF SALE

I. 3 STAGES IN LIFE OF A CONTRACT OF SALE
1. Policitacion/Negotiation Stage - offer is
floated, acceptance is floated but they do
not meet; the time when parties indicate
their interest but no concurrence of offer and
acceptance.
2. Perfection - concurrence of all requisites;
meeting of the minds.
3. Consummation - parties perform their
respective undertakings

II. Policitacion
1. RULES:
1. offer is floated prior to acceptance,
may be withdrawn at
will by offeror
2. offer floated with a
period
without acceptance,
extinguished when
period has ended and
maybe withdrawn at will
by offeror; right to
withdraw must not be
arbitrary otherwise,
liable to damage under
Art 19, 20, 21 of Civil
Code
3. offer floated w/
condition
extinguished by
happening/non-
happening of condition
4. offer floated without
period/without condition
continues to be valid
depending upon
circumstances of time,
place and person
5. offer is floated and
there
is counter-offer
original offer is
destroyed, there is a
new offer; can not go
back to original offer
6. offer is floated no authority of offeror
to modify offer
7. offer accepted
absolutely
proceed to perfected
stage

III. OPTION CONTRACT - a contract granting
an exclusive right in one person, for which he
has paid a separate consideration, to buy a
certain object within an agreed period
1. no presumption of consideration, needs
to be proven
2. characteristics of Option Contract:
a. not the contract of sale by itself,
separate and distinc
b. nominate
c. principal; but can be attached
to other principal contracts
d. onerous
e. commutative
f. unilateral versus contract of
sale which is bilateral

San Miguel Philippines v Cojuangco
consideration in an option contract may be anything
of value, unlike in sale where it must be price certain
in money

3. how exercised: notice of acceptance
should be communicated to offeror
without actual payment as long as there
is delivery of payment in consummation
stage

QuickTime and a
Page 134 of 297

4. SITUATIONS IN AN OPTION
CONTRACT:
a. with separate consideration
i. option contract is valid
ii. offeror can not withdraw
offer until after expiry
period
iii. ubject to rescission,
damages but not to
specific performance
because this is not an
obligation to give
b. without separate consideration
i. OLD RULE - offer is still
valid, but option contract is
void and not subject to
rescission, damages
ii. NEW RULE: Right of first
refusal recognized

IV. RIGHT OF FIRST REFUSAL:
1. creates a promise to enter into a contract of
sale and it has no separate consideration,
not subject to specific performance because
there is no contractual relationship here and
it is not an obligation to give (not a real
contract)
2. New doctrine: may be subject to specific
performance.

Equatorial realty Devt Inc. v Mayfair Theater, the
right of first refusal is only subject to specific
performance insofar as it is attached to a valid written
principal contract (e.g. lease). RFR becomes one of
the considerations in the contract.]

3. Effect of new doctrine: turned the world of
policitacion upside down because while valid
option contract is not subject to specific
performance, right of first refusal which does
not even have a separate consideration may
be subject to specific performance
4. Recognizes recovery of damage based on
abuse of rights doctrine

CH. 6 - PERFECTION OF SALE

GENERAL RULE: A contract of sale is perfected at
the moment there is a meeting of the minds upon the
thing which is the object of the contract and upon the
price; consensual contract
Exception: When the sale is subject to a suspensive
condition

I. REQUIREMENTS:
1. When parties are face to face when there
is absolute acceptance of an offer that is
certain
2. When thru correspondence or telegram
when the offeror receives or had knowledge
of the acceptance
3. When the sale is subject to a suspensive
condition from the moment the condition is
fulfilled

NOTES: Qualified acceptance: mere counter-offer
which needs to be absolutely accepted to give rise to
perfected contract of sale
Business ads are mere invitations to make an offer
except when it appears to be otherwise

II. RULES GOVERNING AUCTION SALES:
1. Sales of separate lots by auction are
separate contracts of sale
2. Sale is perfected by the fall of the hammer
3. Seller has the right to bid at the auction
provided such right was reserved and notice
was given to that effect

III. EARNEST MONEY
1. Money given as part of purchase price
2. Acceptance is the proof that contract of sale
exists
3. Nothing in law prevents parties from treating
earnest money differently
4. Old concept: subject to forfeiture when
BUYER backs out
5. New concept: can not be forfeited part of
purchase price; must be restored
6. Qualification: if old concept is stipulated
VALID
7. Presumption of perfection of contract of sale
and such earnest money as part of purchase
price is disputable

OPTION MONEY EARNEST MONEY
Option Contract Right of First Refusal
Principal contract;
stands on its own
Accessory; can not
stand on its own
Needs separate
consideration
Does not need separate
consideration
Subject matter and
price must be valid
There must be subject
matter but price not
important
Not conditional Conditional
Not subject to specific
performance
Subject to specific
performance
QuickTime and a
Page 135 of 297
Money given
as distinct
consideration for an
option contract
Part of the purchase
price
Applies to a sale not
perfected
Given only when
there is already a
sale
Not required to buy When given, buyer is
bound to pay the
balance

Art. 1483. Subject to the provisions of the Statute
of Frauds and of any other applicable statute, a
contract of sale may be made in writing, or by
word of mouth, or partly in writing and partly by
word of mouth, or may be inferred from the
conduct of the parties. (n)

FORM OF SALES

I. Form not important in validity of sale
a. Sale being consensual, may be oral or
written, perfected by mere consent as to
price and subject matter
b. If particular form is required under the statute
of frauds:
i. valid and binding between parties but
not binding to 3
rd
persons
c. Reason: purposes of convenience only and
not for validity and enforceability; cause of
action is granted to sue and compel other
party to execute the document

II. When form is important for validity;
exception by specific provision of law;
a. Power to sell a piece of land granted to an
agent otherwise VOID
b. Sale of large cattle; must also be registered
with Municipal treasurer otherwise VOID
c. Sale of land by non-Christian if not approved
by Governor VOID
III. When form is important for enforceability
(STATUTE OF FRAUDS Article 1403 (2))
a. A sale agreement which by its terms is not to
be performed within a year from the making
thereof;
b. An agreement for the sale of goods, chattels
or things in action, at a price not less than
P500.00; and
c. A sale of real property or of an interest
therein.

IV. EXCEPTIONS TO COVERAGE OF
STATUTE IN SALES CONTRACTS:
1. When there is a note or memorandum in
writing and subscribed to by party or his
agent (contains essential terms of the
contract)
2. When there has been partial
performance/execution (seller delivers with
intent to transfer title/receives price)
3. When there has been failure to object to
presentation of evidence (oral)
4. When sales are effected through electronic
commerce

CH. 7 - CONSUMMATION STAGE/PERFORMANCE
STAGE

NOTE: Stage where parties both comply with their
obligation. Nature of diligence required: diligence of a
good father of the family unless other requirement is
stipulated
Consequence: Seller will be guilty of breach if thing is
lost through his fault

I. Delivery of the Thing - Transfer ownership
(tradicion) covers a twin obligations of the seller
which are:
1. to transfer the ownership; and
2. to deliver a determinate thing

PNB vs. Ling, 69 Phil. 611
Delivery of the thing together with the
payment of the price, marks the consummation of the
contract of sale

Norkis Distributor, Inc. vs. CA 195 SCRA 694
The act of delivery must be coupled with the
intention of delivering the thing and putting the buyer
under control

Addison vs. Felix, 38 Phil. 404
The execution of a public instrument is
equivalent to delivery. But to be effective, it is
necessary that the vendor have such control over the
thing sold that, at the moment of sale, its material
delivery could have been made

II. Different kinds of delivery:
1. Actual or real- when thing sold is placed
in the control and possession of the
buyer
2. Legal or Constructive- can take several
forms and may be any manner signifying
an agreement that the possession is
transferred from the vendor to the
vendee.

QuickTime and a
Page 136 of 297
III. Different forms of Constructive Delivery -
Constructive delivery has same legal effect
as actual or physical delivery

Ten Forty Realty vs. Cruz, 10 Sept. 2003
Gives rise only to a prima facie presumption of
delivery which is destroyed when actual delivery is
not effected because of a legal impediment

1. Traditio Longa Manu
Delivery of thing by mere agreement; when
SELLER points to the property without need
of actually delivering

2. Traditio Brevi Manu
Before contract of sale, the would be buyer
was already in possession of the would be
subject matter of sale (ex: as lessee)

3. Symbolic delivery
As to movables ex: delivery of the keys
to a car

4. Constitutum possessarium
When at the time of the perfection of the
contract of sale, seller had possession of the
subject matter in the concept of owner and
pursuant to the contract, seller continues to
hold physical possession no longer in the
concept of an owner but as a lessee or any
other form of possession other than in the
concept of owner.

5. Quasi-tradition
Delivery of rights, credits or incorporeal
property, made by:
a. Placing titles of ownership in the
hands of the buyer
b. Allowing buyer to make use of rights

6. Tradition by operation of law

IV. WHEN EXECUTION OF PUBLIC
INSTRUMENT DOES NOT PRODUCE THE
EFFECTS OF DELIVERY
1. When there is stipulation to contrary,
execution does not produce effect of delivery
2. When at the time of execution of instrument,
subject matter was not subject to control of
the seller
3. Subject matter should be within control of
seller; he should have capacity to deliver at
the time of execution of public instrument
when he wants to effect actual delivery
4. Such capacity should subsist for a
reasonable time after execution of instrument
(reasonable time depends on circumstances
of persons, places and things)

V. Delivery of Fruits and Accessions/
Accessories - Right to fruits and
accessions/accessories accrue from time
sale is perfected but no real right over it until
it is delivered

VI. Delivery Through Carrier - General Rule:
Where the seller is authorized or required to
send the goods to the buyer, delivery to the
carrier is delivery to the buyer.
Exceptions: a contrary intention appears or
implied reservation of ownership under pars.
1,2,3 of Art. 1503

1. FAS FREE ALONG SIDE - When
goods delivered alongside the ship, there is
already delivery to the buyer (twin effects
deemed fulfilled)

2. FOB - FREE ON BOARD - Shipment
when goods are delivered at ship at point of
shipment; delivery to carrier by placing goods
on vessel is delivery to buyer
Destination when goods reach the port
even if not disembarked yet from the vessel,
there is delivery to the buyer

3. CIF COST, INSURANCE, FREIGHT
When buyer pays for services of carrier
delivery to carrier is delivery to buyer; carrier
is agent of the buyer
When buyer pays seller the price from
moment the vessel is at port of destination,
there is already delivery to buyer.
See Arts. 1522, 1539, 1540, 1541, 1542, 1543.
VII. COMPLETENESS OF DELIVERY
1. MOVABLES
a. delivery of thing plus accessories
and accessions in the condition in
which they were upon the perfection
of the contract including the fruits
b. When the seller delivers to the buyer
a quantity of goods LESS than he
contracted to sell, buyer has the
option to reject or accept it.
a. When accepts with knowledge
that seller is not going to perform
QuickTime and a
(U mpressed) decompressor TIFF nco
Page 137 of 297
contract in full, he must pay at
price stipulated
b. When accepts and consumes
before knowledge that buyer
will not perform contract in full,
liable only for fair value of goods
delivered
c. When seller delivers to the buyer a
quantity of goods LARGER than he
contracted to sell the buyer has the
following options:
i. accept per contract and reject
the rest
ii. accept the whole pay price
stipulated
iii. eject whole if subject matter is
indivisible
d. When the seller delivers to the
buyer the goods he contracted to
sell, MIXED with goods of a
different description not included in
the contract, buyer has 2 options:
i. accept good w/c are in
accordance with contract and
reject the rest
ii. reject goods entirely if
indivisible

2. IMMOVABLES
a. Sold per unit or number
i. If the sale should be made with
statement of its area, rate at
certain price, deliver all that may
have been stated in the contract
if impossible, remedies of buyer:
ii. If Less in area:
- rescission
- proportional reduction of
price LACK IN AREA
SHLD NOT BE LESS
THAN 1/10 OF AREA
AGREED UPON
iii. If Greater in area:
- accept per stipulation and
reject the rest
- accept whole area pay
at contract rate
- Not applicable to judicial
sales
iv. Sold for lump sum
- When price per unit not
indicated
- If area delivered is either
greater or lesser price
will not be adjusted
accordingly

VIII. TIME AND PLACE OF DELIVERY
1. Follow stipulation in contact, or
2. Follow usage in trade, or
3. Sellers place of business or his residence
4. Specific goods place where the thing is
5. At reasonable hour

IX. EFFECTS OF DELIVERY - General Rule:
The ownership of the thing sold shall be
transferred to the buyer upon the actual or
constructive delivery thereof.
Except when the contrary is stipulated such
in the cases of:
1. contract to sell
2. sale on acceptance/approval
3. sale or return

NOTE: Who Bears Expenses of Delivery? Seller

X. SALE BY DESCRIPTION/SAMPLE
1. Sample goods must correspond with
sample shown
2. Description goods must correspond
with description or sample
3. Effect if there is no compliance:
RESCISSION may be availed of by
the buyer

XI. OBLIGATIONS OF BUYER
1. Pay the price
a. Buyer is obligated to pay price
according to terms agreed upon
regarding time, place and amount
b. If payment of interest is stipulated
must pay; if amount of interest not
mentioned apply legal rate
c. When buyer defaults constitutes
breach: subject to specific
performance/rescission and
damages; interest to be paid also
from default

2. Accept delivery of thing sold
a. Where to accept: at time and place
stipulated in the contract; if none
specified at the time and place of
delivery goods; there is acceptance
when:
i. He intimates to seller that
he has accepted
QuickTime and a
Page 138 of 297
ii. When delivered and does
any act inconsistent with
ownership of seller
iii. Retains without intimating
to seller that he has
rejected

3. Sale of Goods on installment
a. Goods must be delivered in full,
except when stipulated
b. When not examined by buyer not accepted
until examined or at least had reasonable
time to examine

4. Acceptance of goods in general, absent contrary
express stipulation, does not discharge seller
from liability in case of breach of warranties
(unless no notice or failure to give it within
reasonable time)

5. When buyer has a right to refuse goods, no
need to return; shall be considered as
depositary; unless there is stipulation to the
contrary

Art. 1544. If the same thing should have been
sold to different vendees, the ownership shall be
transferred to the person who may have first
taken possession thereof in good faith, if it
should be movable property.
Should it be immovable property, the ownership
shall belong to the person acquiring it who in
good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership
shall pertain to the person who in good faith was
first in the possession; and, in the absence
thereof, to the person who presents the oldest
title, provided there is good faith. (1473)

DOUBLE SALE

General Rule: FIRST IN TIME, PRIORITY IN RIGHT
When does it apply: when not all requisites
embodied in 1544 concur.

I. REQUISITES FOR DOUBLE SALES TO
EXIST: (VOCS)
1. Two or more sales transactions must
constitute valid sales;
2. Two or more sales transactions must
pertain to the same object or subject
matter;
3. Two or more buyers at odds over the
rightful ownership of the subject matter
must each represent conflicting interests;
and
4. Two or more buyers must each have
bought from the very same seller.

Consolidated Rural Bank (Cagayan Valley_ vs.
CA [Jan. 17, 2005]
If not all the elements are present for Art.
1544 to aply, the priniciple of prior tempore, potior
jure or simply he who is first in time is preferred in
right should apply. Undisputably, he is a purchaser
in good faith because at the time he bought the real
property, there was still no sale to as a second
vendee.

II. RULES ACCORDING TO 1544:
1. MOVABLE
a. Owner is first to posses in good faith

2. IMMOVABLE
a. First to register in good faith
b. No inscription, first to possess in
good faith
c. No inscription and no possession in
good faith Person who presents
oldest title in good faith
d. Good Faith - one who buys property
without notice that another person
has a right or interest in such
property; one who has paid price
before notice that another has claim
or interest

III. LIS PENDENS notice that subject matter is
in litigation

IV. ADVERSE CLAIM notice that somebody is
claiming better right

V. POSSESSION Both actual or constructive

VI. REGISTRATION: any entry made in the
books of the registry, including both
registration in its ordinary and strict sense,
and cancellation, annotation, and even
marginal notes. It is the entry made in the
registry which records solemnly and
permanently the right of ownership and other
real rights.
1. registered under Torrens system 1544
applies
QuickTime and a
Page 139 of 297
2. not registered under the Torrens system
1544 still applies

Jurisprudence
if 2
nd
sale is a judicial sale (by way of levy on
execution), buyer merely steps into the shoes of the
judgment debtor. Outside of such situation must
apply to conflicting sales over the same unregistered
parcel of land
If sale 1 occurs when land is not yet
registered and sale 2 is done when land is already
registered apply FIRST IN TIME, PRIORITY IN
RIGHT

Gabriel v. Mabanta, et al. [2003]
Good faith must concur with registration. To
be entitled to priority, the second purchaser must not
only establish prior recording of his deed, but must
have acted in good faith.

CONDITION

1. Effect of Non-Fulfillment of Condition
The other party may
a. refuse to proceed with the contract
b. proceed with the contract, waiving the
performance of the condition
If the condition is in the nature of a promise that it
should happen, the non-performance of such
condition may be treated by the other party as
breach of warranty.

2. Effect if buyer has already sold the goods

General Rule: The unpaid sellers right to lien or
stoppage in transitu remains even if buyer has sold
the goods
Exception:
o When the seller has given consent thereto, or
o When the buyer is a purchaser in good faith
for value of a negotiable document of title.

NEGOTIABLE DOCUMENTS OF TITLE
See Article 1636

1. Not creation of law but by merchants to allow
them to deal with merchandise without having
to physically carry them around
2. Pertains to specific type of movables only :
GOODS
a. Documents of title serve two (2)
functions:
i. evidence of existence and
possession of goods
described therein
ii. medium by which seller is able
to transfer possession of
goods
3. A document of title which states that the goods
referred to therein will be delivered to the
bearer, or to the order of any person named in
such document
4. Negotiable by delivery or indorsement

TYPES
1. NEGOTIABLE
a. deliver to bearer (negotiation by mere
delivery)
b. deliver to specific person or his order
(negotiation by endorsement + delivery)
i. even if face of instrument says NON-
NEGOTIABLE, it is still
NEGOTIABLE; limiting words does
not destroy negotiability
ii. If order instrument and no
endorsement was made equivalent
to assignment

2. NON-NEGOTIABLE

EFFECTS OF UNAUTHORIZED NEGOTIATION
The validity of the negotiation of a negotiable
document is not impaired by the fact that negotiation
was done in breach of duty or that the owner of the
document was deprived of the same by loss, theft,
accident, fraud, mistake if the person to whom the
document is delivered is in good faith and without
notice of the said irregularities.

Important Considerations
1. Negotiation gives better right than
assignment
2. Assignee takes document with defects of the
assignor
3. Obligation of bailee bailee is immediately
bound to the document

Warranties on Negotiation
1. the document is genuine
2. he has legal right to negotiate or transfer it
3. he has knowledge of no fact which would
impair the validity or worth of the document
4. he has right to transfer title to goods and
goods are merchantable/fit

QuickTime and a
Page 140 of 297

Rules of Levy/Garnishment of Goods Covered by
Documents of Title
2. NON NEGOTIABLE:
a. Notification is operative act to transfer
title/possession of goods in favor
assignee
b. Before notification can still be
garnished

3. NEGOTIABLE:
a. Can not be levied or garnished when
documents are already with purchaser in
good faith, unless:
b. Document is first surrendered
c. Document is pounded by court
d. Negotiation is enjoined

SALE BY NON-OWNER OR BY ONE HAVING
VOIDABLE TITLE
See Articles 1475, 1477, 1505, 1506

I. SALE BY NON-OWNER
1. PERFECTION STAGE
a. Sale by owner VALID
b. Sale by non-owner VALID;
c. Reason why both sales are valid:
ownership is necessary only at time
when transfer title to goods; at
perfection stage, no obligation on
part of seller to transfer ownership
d. Law on estoppel further bolsters it:
title passes by operation of law to
grantee when person who is not
owner of the goods sold delivers it
and later on acquires title thereto
e. Since valid, action to annul is
improper; there is already a
perfected contract

2. CONSUMMATION STAGE
a. Contract of sale is valid because it
has passed perfected stage, despite
seller not being the owner or seller
having no authority to sell
b. What is void is the transfer of title/
ownership did not pass
c. Effect: buyer acquired no better right
than transferor
d. Legal effect: CAVEAT EMPTOR
BUYER BEWARE
e. Sale of co-owner of whole property
or definite portion
GENERAL RULE:
i. co-owner sells whole property prior
to partition sale of property itself is
void but valid as to his spiritual share
ii. co-owner sells definite portion to
partition sale is void as to other co-
owner but valid as to his spiritual
share if the buyer would have still
bought such spiritual share had he
known that the definite portion sold
would not be acquired by him.
NEGOTIATION ASSIGNMENT

transferor/holder acquires
title to goods
acquires title to goods against
transferor

II. EXCEPTIONS TO THE RULE ON THE EFFECT
OF SALE OF A DEFINITE PORTION OBY A CO-
OWNER
bailee has direct obligation acquires right to notify bailee so
1. Subject matter is indivisible in nature or by
intent;
2. Sale of a particular portion of a property is
with consent of other co-owners;
3. Co-owner sells 1 of 2 commonly-owned
lands and does not turn over of the
proceeds, other co-owner, by law and equity,
has exclusive claim over remaining land.

III. RULES ON LEGAL EFFECTS OF SALE BY A
NON-OWNER
GENERAL RULE: Sale by non-owner, buyer
acquires no better title than seller had.
EXCEPTIONS:
1. Owner by his conduct is precluded
from denying sellers authority
(ESTOPPEL)
2. Contrary is provided for in recording
laws (PD 1529)
3. Sale is made under statutory power
of sale or under order of a
court of competent jurisdiction
4. Sale is made in a merchants store in
accordance with code of commerce
and special laws

IV. SALE BY SELLER WITH VOIDABLE TITLE
1. PERFECTION STAGE
a. Valid sale buyer acquires title of goods
to holder as if directly dealt that he acquires obligation of
with him bailee to hold goods for him
QuickTime and a
Page 141 of 297

2. CONSUMMATION STAGE
a. Valid sale if title has not yet been
avoided, buyer buys goods under following
condition:
o in good faith
o for value
o without notice of sellers defect of
title

V. TITLE AS TO MOVABLE PROPERTIES
GENERAL RULE: Possession is equivalent
to title
Requisites: Possession of movable and
Good Faith

VII. EXCEPTIONS:
1. Owner lost movable owner can recover w/o
reimbursing price
2. Owner is unlawfully deprived owner can
recover w/o reimbursing price

VIII, EXCEPTIONS TO THE EXCEPTIONS:
movable is bought at public sale owner
can only recover after reimbursing price
acquired in good faith and for value from
auction

LOSS, DETERIORATION, FRUITS and OTHER
BENEFITS
See Articles 1493 and 1494

Legal consequences from point of perfection are the
same in both legal systems: upon perfection of an
unconditional contract of sale involving specific or
determinate subject matter, the risk of loss
deterioration and the benefits of fruits and
improvements, were fro the account of the buyer.

WHO BEARS RISK OF LOSS/ DETERIORATION/
FRUITS:
1. BEFORE PERFECTION
a. Res perit domino
b. Owner is seller so seller bears risk of
loss

2. AT PERFECTION
o Res perit domino
o Contract is merely inefficacious
because loss of the subject matter
does not affect the validity of the
sale
o Seller cannot anymore comply with
obligation so buyer cannot anymore be
compelled

3. AFTER PERFECTION BUT BEFORE
DELIVERY
o Loss confused state
o Paras: BUYER
o Tolentino: SELLER
o Deterioration and fruits - Buyer
bears loss;

4. AFTER DELIVERY
o Res perit domino
o Delivery extinguishes ownership vis-
a-vis the seller and creates a new
one in favor of the buyer

REMEDIES OF PARTIES FOR BREACH OF
CONTRACT OF SALE
See Articles 1594-1596. 1484-1486, 1592

SUBJECT MATTER: MOVABLES (IN GENERAL)

Remedies of Unpaid Seller
GENERAL RULE: Any man may not take law in his
own hands, must seek remedy through courts
EXCEPTION:
DOCTRINE OF SELF HELP
SPECIAL REMEDIES
Requisites:
1. Subject matter goods
2. Seller is unpaid not completely paid
or received negotiable instrument
under a condition and condition has
been breached by reason of
dishonor
3. Physical possession is with seller

The following are the special remedies of unpaid
seller
1. possessory lien
2. stoppage in transitu
3. special right of re-sale
4. special right to rescind

NOTE: Hierarchical Application - only when unpaid
seller has exercised possessory lien or stoppage in
transitu can the seller proceed with his other special
rights of resale or to rescind.

I. Possessory Lien
1. Seller not bound to deliver if buyer has not
paid him the price
QuickTime and a
Page 142 of 297
2. Right to retain; cannot be availed when seller
does not have custody
3. Exercisable only in following circumstances:
a. goods sold without stipulation as to credit
b. goods sold on credit but term of credit
has expired
c. buyer becomes insolvent
d. When part of goods delivered, may still
exercise right on goods undelivered

Instances when possessory lien lost:
1. seller delivers goods to carrier for
transmission to buyer without reserving
ownership in goods or right to possess them
2. buyer or his agent lawfully obtains
possession of goods
3. waiver
4. loses lien when he parts with goods (still has
stoppage in transitu)
5. notice by seller to buyer not essential

II. Stoppage In Transitu
Goods are in transit
Requisites when goods are in transit
1. From the time goods are delivered to
carrier for purpose of transmission to
buyer
2. Goods rejected by buyer and carrier
continues to possess them

When goods no longer in transit
1. Reached point of destination
2. Before reaching destination, buyer obtains
delivery of the goods
3. Goods are supposed to have been delivered
to buyer but carrier refused
4. Shown by seller that buyer is insolvent
(failure to pay when debts become due )

How is right exercised
1. Obtain actual possession of goods
2. Give notice of claim to carrier / bailee in
possession thereof
3. Notice by seller to buyer is not required;
notice to carrier is essential

III. Special Right to Resell the Goods
1. goods are perishable
2. stipulated the right of resale in case buyer
defaults in payment
3. buyer in default for unreasonable time
4. notice by seller to buyer not essential

why special? there are things which seller cannot
do in ordinary sale:

1. ownership is with buyer but seller can
sell goods
2. title accorded to buyer is destroyed
even without court intervention

IV. Special Right to Rescind
1. Expressly stipulated
2. Buyer is in default for unreasonable time
3. Notice needed to be given by seller to buyer

why special? ownership of goods already with
buyer but seller may still rescind; ownership is
destroyed even without court intervention but in
ordinary sale, need to go to court to destroy transfer
of ownership

Remedies of Buyer
When Seller fails to deliver, buyer may seek
SPECIFIC PERFORMANCE WITHOUT GIVING
SELLER OPTION TO RETAIN GOODS ON
PAYMENT OF DAMAGES

SALE OF MOVABLES ON INSTALLMENT

Remedies of Unpaid Seller (1484)
1. Exact fulfillment should the buyer fail to pay.
2. Cancel the sale if buyer fails to pay 2 or more
installments.
3. Foreclose on chattel mortgage if buyer fails to
pay 2 or more installments

Incidents:
1. If buyer chooses foreclosure, no further
action against buyer to recover any unpaid
balance of the price
2. When is the law applicable? Sale on
movables by installment
o Sale on installment: payment by
several partial payments in small
amount
4. Rationale of the law: Buyer is lulled into
thinking that he could afford because of
small amounts per installment and
at the same time remedy abuse of
commercial houses
5. Nature of remedies: alternative and not
cumulative
6. Coverage: sale and financing transaction
and contracts of lease with option to
purchase
7. Action : Judicial and Extrajudicial
QuickTime and a
Page 143 of 297
o Specific Performance
i. If already chose specific
performance, can no longer
choose other remedies
Except: after choosing, it has
become impossible, rescission may
be pursued
b. Rescission
- When chosen, there is
correlative obligation to
restitute
- But stipulation that
installments paid are
forfeited are valid if not
unconscionable
- Deemed chosen when:
o Notice of rescission is
sent
o Takes possession of
subject matter of sale
o Files action for
rescission
Barring effect on recovery of
balance

3. Foreclosure
i. Barring effect on recovery of
balance
ii. Extent of barring effect: purchase
price
iii. Exception: mortgagor refuses to
deliver property to effect
foreclosure, recover also
expenses incurred in attorneys
fees, etc. (Perverse Buyer-
Mortgagor)

IMMOVABLES (IN GENERAL)

Remedies of Seller
Anticipatory breach
1. Seller has reasonable grounds to fear loss of
immovable sold and its price, sue for
RESCISSION
2. Nonpayment of price, sue for RESCISSION

Remedies of Buyer
1. In case of subdivision or condo projects,
suspend payment.
2. If real estate developer fails to comply with
obligation according to approved plan:
- RESCIND
- SUSPEND PAYMENT UNTIL SELLER
COMPLIES

IMMOVABLES (BY INSTALLMENT)
Article 1592 Applies only to contract of sale

I. Maceda Law
1. applies to COS and CTS and Financing
2. Coverage: REAL ESTATE defined space vs.
CONDO not defined space (w/ common
areas)
3. Excluded:
a. Industrial
b. Commercial
c. Sale to tenants under agrarian laws

Rights Granted to Buyers:

o Buyer paid at least 2 years installment
1. Pay without interest the balance within
grace period of 1 month for every year of
installment payment
2. Grace to be exercised once every 5
years
3. When no payment - cancelled; buyer
entitled to 50% of what he has paid + if
after 5 years of installments, 5% for
every year but not to exceed 90% of total
payments made
4. Cancellation to be effected 30 days from
notice and upon payment of cash
surrender value

o Buyer paid less than 2 years installment
1. 1
st
Grace period is 60 days from date
installment became due
2. 2
nd
grace period of 30 days from notice of
cancellation/demand for rescission
buyer can still pay within the 30
day period
with interest
No payment after 30 day period,
can cancel.

Purpose of law - Protect buyers in installments
against oppressive conditions

Notice needed - waiver thereof if oppressive

Applies to contracts even before law was
enacted
Stipulation to contrary is void

Other rights:
o Sell rights to another
o Reinstate contract by updating during
grace period and before actual
cancellation
o Deed of Sale to be done by notarial act
QuickTime and a
Page 144 of 297
o To pay in advance any installment or the
full balance of price anytime without
interest
o Have full payment annotated in certificate
of title

REMEDY OF RESCISSION IN CONTRACTS
COVERING IMMOVABLES
See Articles 1191, 1592

o Nature: Judicial
o Extra judicial Rescission
a. allowed if stipulated; burden to sue shifts
to party who does not like rescission
b. court still has final say as to propriety of
rescission
c. Forfeiture of amounts valid being in
nature of penal clause
o Contract of Sale Rescission is Applicable
o Contract to Sell Rescission not Applicable
Nonpayment of purchase price would
automatically cancel even without further
action for rescission
Except: If subject matter is residential
lots, law on rescission applies when
there is substantial breach. Maceda law
applies.

CONDITION and WARRANTIES
See Articles 1545-1547

I. Condition
1. When a contract contains a condition, the non
happening of which would not constitute a breach
but extinguishes the obligation
2. However, if party to the sales contract has
promised that the condition should happen or be
performed, the non-performance of which may be
treated by parties as breach

II. Warranties
A statement or representation made by the seller
contemporaneously and as a part of the contract of
sale, having reference tot eh character, quality, or
title of the goods, and by which he promises or
undertakes to insure that certain facts are or shall be
as he then represents

Express Warranties ( requisites ):
1. it must be an affirmation of fact or any promise by
seller relating to the subject matter of sale
2. natural tendency of affirmation or promise is to
induce buyer to purchase subject matter
3. buyer purchases the subject matter relying
thereon
4. when breached, seller is liable for damages

Implied Warranties
Deemed included in all contracts of sale whether
parties are actually aware or not, whether they were
intended or not; by operation of law

1. warranty that seller has a right to sell
o refers to consummation stage since in
consummation stage, it is where
ownership is transferred by tradition
o not applicable to sheriff, auctioneer,
mortgagee, pledge

2. warranty against eviction
a. implied, unless contrary provision appears in
contract
b. when ownership is transferred, buyer shall
enjoy the legal and peaceful possession of
the thing
c. Requisites of breach of warranty against
eviction:
- buyer is evicted in whole or in part
from the subject matter of sale
- there is a final judgement
- basis of eviction is a right prior to
sale or an act imputable to vendor
- seller has been summoned in the
suit for eviction at the instance of
buyer; or made 3
rd
party defendant
through 3
rd
party complaint brought
by buyer

Vendors liability shall consists of (Total
Eviction)(VICED)
1. Value of the thing at the time of eviction;
2. Income or fruits if he has been ordered to deliver
the to the party who won the suit
3. Cost of the suit
4. Expenses of the contract; and
5. Damages and interests if the sale was in bad
faith

Partial Eviction
1. to enforce vendors liability for eviction
(VICED); or
2. to demand rescission of contract.

a. no appeal needed nor a need for
buyer to resist eviction for right to
accrue; it is enough that the
aforementioned requisites are
complied with
b. warranty cannot be enforced until
aforementioned requisites concur
QuickTime and a
Page 145 of 297
c. applies to judicial sale; judgment
debtor responsible for eviction unless
otherwise decreed in judgment
d. vendor not liable for eviction if
adverse possession had been
commenced before sale but
prescriptive period is completed after
transfer
e. Rights of buyer when deprived of
only part of the subject matter but
would not have bought such part if
not in relation for the whole:
1. Rescission
2. Mutual restitution

3. warranty against encumbrances (non-
apparent)
o Requisites:
a. immovable sold is encumbered
with nonapparent burden or
servitude not mentioned in the
agreement
b. nature of nonapparent servitude
or burden is such that it must be
presumed that the buyer would
not have acquired it had he been
aware thereof
c. when breach of warranty exist: buyer
may ask for rescission of indemnity
d. warranty not applicable when non
apparent burden or servitude is
recorded in the Registry of Property
unless there is express warranty
that the thing is free from all
burdens and encumbrances

4. warranty against hidden defects
o SELLER does not warrant patent
defect; caveat emptor
o Except when hidden
1. subject matter may be movable
or immovable
2. nature of hidden defect is such
that it should render the subject
matter unfit for the use of which it
was intended or should diminish
its fitness
3. had the buyer been aware, he
would not have acquired it or
would have given a lower price
a. when defect is visible or even if not visible
but buyer is an expert by reason of his trade
or profession, seller is not liable
b. obligation of seller for breach depends on
whether he has knowledge of such defect or
not
c. seller is aware seller should return price
and refund expenses of contract with
damages
d. seller is not aware - seller should return
price and interest and refund expenses ( no
damages )
e. buyer may elect between withdrawing from
contract or demanding proportionate
reduction of price with damages in either
case
f. applicable to judicial sale except that
judgment debtor not liable for damages
g. action to prescribe 6 months from delivery of
subject matter

5. defects on animals
a. even in the case of professional inspection
but hidden defect is of such nature that
expert knowledge is not sufficient to discover
it - defect shall be considered as
REDHIBITORY
b. if vet fails to discover through ignorance or
bad faith he is liable for damages
c. sale of animals on teams (2 or more)
- when only one is defective, only one is
redhibited and not the others
- exception: when it appears buyer would
not have purchased the team without the
defective one
- apply to sale of other things
d. animals at fair or public auction
- no warranty against hidden defects
e. sale of animals with contagious disease is
void
f. sale of unfit animals
- void if use / service for which they are
acquired has been stated in the contract
and they are found to be unfit therefor
o prescription of action:40 days from date of
delivery to buyer
o if sale is rescinded, animals to be returned in
same condition when they were acquired;
buyer shall answer for injury / loss due to his
fault
- buyer may elect between withdrawing
from sale and demanding proportionate
reduction of price with damages in either
case

Specific Implied Warranties in the Sale of Goods
Warranty as to fitness and quality; requisites:
1. Buyer makes known to seller the particular
purpose for which goods are acquired
and it appears that the buyer relied on the
sellers skill or judgment
QuickTime and a
Page 146 of 297
2. Goods are bought by description from seller
who deals in goods of that description
3. in case of sale of specified article under its
patent or trade name, no warranty unless
there is a stipulation to the contrary
4. measure of damage: difference between value
of goods at time of delivery and value they
would have had if they had answered to the
warranty

Sale of Goods by sample
If seller is a dealer in goods of that kind, there is an
implied warranty that the goods shall be free from
defect rendering them unmerchantable which would
not be apparent on reasonable examination of the
sample

Effects of Waiver
o Waiver in Warranty against eviction -
Parties may increase or diminish implied
warranty against eviction; but effect
depends on good faith or bad faith on the
part of the seller.
1. Seller in bad faith and there is
waiver against eviction null and
void
2. buyer without knowledge of a
particular risk, made general
renunciation of warranty not
waiver but merely limits liability
of seller in case of eviction (pay
value of subject matter at time of
eviction)
3. buyer with knowledge of risk of
eviction assumed its
consequences and made a
waiver vendor not liable
(applicable only to waiver of
warranty against eviction)
4. waiver to a specific case of
eviction - wipes out warranty as
to that specific risk but not as to
eviction caused by other
reasons.

Waiver against Hidden Defects
1. If there has been a stipulation exempting
seller from hidden defects
2. If seller not aware of hidden defects loss of
the thing due to such defect will not make
seller liable
3. If seller aware waiver is in bad faith, thus
seller still liable

Buyers Option in Case of Breach of Warranty
1. Accept goods and set up breach of warranty
by way of recoupment in diminution or
extinction of the price.
2. Accept goods and maintain action against
seller for damages
3. Refuse to accept goods and maintain action
against seller for damages
4. Rescind contract of sale and refuse to receive
goods/return them when already received.

When rescission by buyer not allowed:
1. if the buyer accepted the goods knowing the
breach of warranty WITHOUT protest
2. if he fails to notify the seller within a reasonable
time of his election to rescind
3. if he fails to return or offer to return the goods in
substantially as good condition as they were in at
the time of the transfer of ownership to him

EXTINGUISHMENT
See Arts. 1600 -1623

I. Grounds (same grounds whereby
obligations in general are extinguished)
1. payment or performance
2. loss of the subject matter
3. condonation or remission
4. confusion or merger of rights of creditor
and debtor
5. compensation
6. novation
7. annulment
8. rescission
9. fulfillment of a resolutory condition
10. prescription

II. Conventional redemption
1. only extinguishes obligations pertaining
to contract of sale, not extinguish
contract itself; only applies to contract of
sale
2. The right which the vendor reserves to
himself to reacquire the property sold
provided he returns to the vendee:
a. the price of the sale,
b. expenses of contract,
c. other legitimate payments,
d. he necessary and useful expenses
made on the thing sold
e. and fulfills other stipulations which
may have been agreed upon
3. The right is exercised only be seller in
whom right is recognized in the contract
or by any person to whom right was
transferred; must be in the same contract

QuickTime and a
e needed to see this picture. ar
Page 147 of 297
III. Legal redemption
1. Only applies to contracts of sale.
2. The right to be subrogated upon the
same terms and conditions stipulated in
the contract, in the place of one who
acquires the thing by (1) purchase OR
(2) by dation in payment OR (3) by other
transaction whereby ownership is
transmitted by onerous title.
3. Types of Legal Redemption:
a. among co-heirs
i. any of the heirs sell his
hereditary rights to stranger
before partition
ii. any of the co-heirs may be
subrogated to the rights of the
purchaser by redeeming said
hereditary right: reimburse buyer
of the price of the sale
iii. co-heirs has 1 month from
receipt of notice in writing
b. among co-owners
i. any or all of co-owners sells their
shares to 3
rd
person
ii. any co-owner may exercise right
of redemption by paying
reasonable price of property to
the buyer
iii. if 2 or more co-owners desire to
exercise right of redemption,
they may only do so in proportion
to the share they respectively
have in thing owned in common
c. among adjoining owners
i. rural land
a. where piece of rural land has
an area not exceeding 1
hectare, adjoining owner has
right to redeem unless
grantee does not own a rural
land
b. if two or more adjacent lot
owners desire to exercise
right to redeem, owner of
adjoining lot with smaller
area shall be preferred
c. if two or more adjacent lit
owners desire to exercise
right to redeem and both
have same lot area, one who
first requested shall be
granted
ii. urban land
a. when piece of land is small
and cannot be used for any
practical purpose and bought
merely for speculation,
owner of adjoining land can
redeem
b. 2 or more owners of
adjoining lot desire to
exercise right to redeem,
owner whose intended use is
best justified shall be
preferred.
d. sale of credit in litigation
i. when a credit or other
incorporeal right in litigation is
sold, debtor shall have a right to
extinguish it by reimbursing the
assignee for the price the latter
paid therefor plus judicial costs,
interest
ii. debtor may exercise right within
30 days from the date assignee
demands payment from him

4. Other Instances When Right of Legal
Redemption is Granted
a. Redemption of homesteads
b. Public Land Act
c. Land acquired under free patent
homestead subject to repurchase by
wife, legal heirs within 5 years from
date of conveyance granted by law,
need not be stipulated

5. Redemption in tax sales
a. in case of tax delinquency/failure to
pay tax assessments, property is
foreclosed
b. delinquent payer has 1 year from date
of sale to redeem by paying to the
revenue District Officer the amount of
tax delinquencies, and interest or
purchase price.

6. Redemption by judgment debtor - 1 year
from date of registration of certificate of
sale to redeem by paying purchaser at
public auction with interest
7. Redemption in extrajudicial foreclosure - 1
year from date of sale and registration
8. Redemption in judicial foreclosure of
mortgage - no right to redeem is granted to
debtor mortgagor except when mortgagee
is bank of a banking institution 90 days
after finality of judgment
9. When Period of Redemption Begins to Run
- Right of legal pre-emption of redemption
QuickTime and a
Page 148 of 297
shall be exercised within 30 days from
notice by the seller
10. How exercised - tender of payment is not
necessary; offer to redeem is enough.
a. There is no prescribed form for an
offer to redeem to be properly
effected. Hence, it can either be
through a formal tender with
consignation of the redemption
price within the prescribed period.
What is paramount is the availment
of the fixed and definite period
within which to exercise the right of
legal redemption.
b. deeds of sale are not to be recorded
in Register of Deeds unless
accompanied by affidavit of seller
that he has given notice to all
possible redemptioners

NOTE: Written notice under Art. 1623 is mandatory
for the right of redemption to commence (PSC vs.
Sps. Valencia, 19 Aug. 2003). Thus, the General
Rule is that actual knowledge notwithstanding,
written notice is still required Except when actual
knowledge is acquired by co-heirs living in same land
with purchaser, or co-owner was middleman in sale
to 3
rd
party.

Etcuban vs. CA, et. al. 148 SCRA 507 Art. 1623
does not prescribe any distinctive method for notifying
the redemptioner

IV. Option to Purchase - Right to repurchase
the thing sold granted to the vendor in a
separate instrument from the deed of sale

V. Equitable Mortgage

Cachola vs. CA, 208 SCRA 496
One which lacks the proper
formalities, form of words, or other requisites
prescribed by law for a mortgage, but shows the
intention of the parties to make the property subject
of the contract as security for a debt and contains
nothing impossible contrary to law.

1. A contract with right to repurchase is
deemed to be an equitable mortgage if
the following requisites concur (IPERTI):
a. price of sale with right to repurchase
is unusually inadequate
b. seller remains in possession as
lessee or otherwise
c. upon or after expiration of right to
repurchase, another instrument
extending the period of redemption
or granting new period is executed
d. buyer retains for himself a part of
the purchase price
e. seller binds himself to pay taxes on
thing sold
f. real intention of parties is to secure
the payment of a debt or
performance of other obligation

NOTE: In case of doubt in determining whether it is
an equitable mortgage or a sale a retro, the sale shall
be construed as an equitable mortgage.

2. What to Look for in Determining Nature
of Contract
a. language of the contract
b. conduct of parties to reveal real
intent

3. Remedy available to vendor: ask for
reformation of contract

4. Rationale behind provision on Equitable
Mortgage:
a. Circumvention of usury law
b. Circumvention of prohibition against
pactum commissorium creditor
cannot appropriate the things given
by way of pledge or mortgage;
remedy here is foreclosure. The real
intention of parties is that the
pretended purchase price is money
loaned and to secure payment of the
loan, sale with pacto de retro is
drawn up
5. Period of Redemption
a. No period agreed upon 4 years
from date of contract
b. Period agreed upon should not
exceed 10 years; if it exceeded, valid
only for the first 10 years.
c. When period to redeem has expired
and there has been a previous suit
on the nature of the contract seller
still has 30 days from final judgment
on the basis that contract was a sale
with pacto de retro:
d. Rationale: no redemption due to
erroneous belief that it is equitable
mortgage which can be extinguished
by paying the loan.
QuickTime and a
TIFF (Uncompressed) decom
are needed to see this pi
pressor
cture.
Page 149 of 297
e. This refers to cases involving a
transaction where one of the parties
contests or denies that the true
agreement is one of sale with the
right to repurchase; not to cases
where the transaction is conclusively
a pacto de retro sale.
f. Example: Where a buyer a retro
honestly believed that he entered
merely into an equitable mortgage,
not a pacto de retro transaction, and
because of such belief he had not
redeemed within the proper period.

NOTE: When period has expired and seller allowed
the period of redemption to expire seller is at fault
for not having exercised his rights so should not be
granted a new period

Paez vs. Magno
Tender of payment is SUFFICIENT to compel
redemption, but is not in itself a payment that relieves
the vendor from his liability to pay the redemption
price

VI. Effect when There is No Redemption
Made
1. jurisprudence before the NCC: buyer a
retro automatically acquires full
ownership
2. under present art 1607: there must be
judicial order before ownership of real
property is consolidated in the buyer a
retro

VII. How is Redemption Effected
1. Seller a retro must first pay the following:
a. the price of the thing sold
b. expenses of the contract and other
legitimate payments made by reason
of the sale
c. necessary and useful expenses
made on the thing sold
d. Valid tender of payment is sufficient
e. Mere sending of notice without valid
tender is insufficient
f. Failure to pay useful and
unnecessary expenses entitles
vendee to retain land unless actual
reimbursement is made

VIII. In Case of Multi-Parties
1. When an undivided thing is sold because
co- owners cannot agree that it be
allotted to one of them vendee a retro
may compel the vendor to redeem the
whole thing
2. When an undivided thing is sold by co-
owners / co-heirs, vendors a retro may
only exercise his right over his respective
share; vendee a retro may demand that
they must come to an agreement first
and may not be compelled to consent to
a partial redemption
3. When rights of co-owners over an
undivided thing is sold as regards to their
own share vendee retro cannot compel
one to redeem the whole property
4. Should one of the co-heirs/co-owners
succeed in redeeming the property
such vendor a retro shall be considered
as trustee with respect to the share of
the other co-owners/co-heirs.

IX. Fruits
1. what controls is the stipulation between
parties as regards the fruits; if none:
a. at time of execution of the sale a
retro there are visible or growing
fruits there shall be no pro-rating
at time of redemption if no
indemnity was paid by the vendee a
retro
b. at time of execution sale a retro
there be no fruits but there are fruits
at time of redemption pro-rated
between vendor a retro and vendee
a retro giving the vendee a retro a
part corresponding to the time he
possessed the land.

PRE-EMPTION REDEMPTION
1. Arises before sale Arises after sale
2. No rescission
because no sale exists
yet
There can be rescission
of the original sale
3. The action is directed
against prospective
seller
Action is directed against
buyer

ASSIGNMENT
See Arts . 1624 1634

I. ASSIGNMENT: The owner of a credit
transfers to another his rights and actions in
consideration of a price certain in money or its
equivalent
QuickTime and a
Page 150 of 297
1. transfers the right to collect the full value
of the credit, even if he paid a price less
than such value
2. transfers all the accessory rights (e.g.
guaranty, mortgage, pledge, preference)
3. debtor can set up against the assignee
all the defenses he could have set up
against the assignor

II. What Makes Assignment Different From
Species Sale?

1. Technical term but basically a sale
2. Sale of credits and other incorporeal
things

III. Effects of Assignment
1. lack of knowledge or consent of debtor
not essential for validity but has legal
effects
2. assignment of rights made w/o
knowledge of debtor debtor may
set up against assignee the
compensation w/c would pertain to
him against assignor of all
credits prior to assignment and of later
ones until he had knowledge of the
assignment
3. debtor has consented to assignment
cannot set up
4. compensation unless assignor was
notified by debtor that he reserved his
right to the compensation
5. debtor has knowledge but no consent -
may still set up compensation of
debts previous to assignment but not
the subsequent ones.

IV. Transfer of Ownership
1. by tradition and not by perfection
2. by execution of public instrument
because intangibles cannot be
physically transferred
3. Without necessity of delivering the
document evidencing the credit.
4. This rule does not apply to negotiable
documents and documents of title
which are governed by special laws.

V. Effect of payment of debtor after
assignment of credit
1. Before Notice of the Assignment
a. Payment to the original creditor is
valid and debtor shall be released
from his obligation
2. After Notice
a. Payment to the original creditor is
not valid as against the assignee
b. He may be made to pay again by
the assignee

VI. Warranties of the assignor of credit
1. NO warranty against hidden defect -
N/A because intangibles has no
physical existence
2. He warrants the existence and legality
of credit - there is warranty except
when expressly sold as a doubtful
account
a. NO warranty as to the solvency of
debtor unless it is expressly
stipulated OR unless the
insolvency was already existing
and of public knowledge at the
time of the assignment
b. warranty shall last for 1 year only
c. one who assigns inheritance right
w/o enumerating rights shall be
answerable for his character as
an heir
d. one who sells whole of certain
rights for a lump sum, shall be
answerable for legitimacy of the
whole in general but not for each
of the various parts

VII. Breach of Warranty: Liabilities of the
assignor of credit for violation of his
warranties
1. Assignor in good faith
a. Liability is limited to price
received, expenses of the
contract and other legitimate
payments made by reason of the
assessment
2. Assignor in bad faith
a. Liable ALSO for (expenses of
contract and other legitimate
payments plus useful and
necessary expenses) damages

VIII. Assignment of Credit or Incorporeal Right
in Litigation - Requisites:
1. There must be a sale or assignment of
credit
2. There must be a pending litigation
3. The debtor must pay the assignee:
a. price paid by him AND
QuickTime and a
Page 151 of 297
b. judicial costs incurred by him AND
c. interest on the price from the date of
payment
4. The right must be exercised by the
debtor within 30 days from the date the
assignee demands (judicially or extre-
judicially) payment from him

NOTE: Presumption: buyers purpose is speculation
and; law would rather benefit the debtor of such
credits rather than the one who merely speculates for
profit.

NOTE: When credit or incorporeal right in litigation is
assigned or sold, debtor has a right to extinguish it by
reimbursing the assignee for the price the buyer paid
plus interest

IX. Right to redeem by debtor not available in
the following instances (not considered
speculative
1. assignment of credit / incorporeal right
to co-heir or co-owner; the law does
not favor co-ownership
2. assignment to creditor in payment for
his credit
a. presumption is that the
assignment is above suspicion;
assignment is in the form of
dacion en pago, thus perfectly
legal
3. assignment to possessor of tenement
or piece of land which is subject
to the right in litigation assigned
a. purpose is to presumably
preserve the tenement

BULK SALES LAW

I. Purpose: Protect creditor of merchant
stores.

II. When sale or transfer in bulk? - Any sale,
transfer, mortgage, or assignment
1. of goods other than in ordinary course
of business
2. of all or substantially all of business
3. of all or substantially all of fixtures and
equipments

III. Should cover only merchants because
creditors cannot get adequate security
because goods are sold ordinarily in
course of business

IV. When sale or transfer NOT covered by
Bulk Sales Law:
1. If the transfer is in the ordinary course of
trade and the regular prosecution of the
business of the vendor
2. If it is made by one who produces and
delivers a written waiver of the provisions
of the Bulk Sales Law from its creditors
3. If it is made by an executor,
administrator, receiver, assignee in
insolvency, or public officer, acting under
judicial process (Section 8); and
4. If it refers to properties exempt from
attachment or execution (ROC, Rule 39,
Sec. 12)

V. Protection accorded to creditors by Bulk
Sales Law:
1. It requires the vendor, mortgagor,
transferor, or assignor to deliver to the
vendee, mortgagee, or to his or its agent
or representative a sworn written
statement of names and addresses of all
creditors to whom said vendor, etc. may
have been indebted together with the
amount due or to be due (Section 3)
2. It requires the vendor, mortgagor,
transferor, or assignor, at least 10 days
before the sale, transfer, mortgage,
assignment to make a full detailed
inventory showing the quantity and the
cost of the price, terms and conditions of
the sale, etc. (Sec. 5)

VI. Duty of seller to perform the following
when transaction is within the coverage
of law
1. make sworn statement of listing of
creditors
2. delivery of sworn statement to buyer
3. apply the proceeds pro-rata to claims of
creditors shown in verified statement
4. written advance disclosure to creditors

VII. Effects of False Statements in the
Schedule of Creditors
1. Without knowledge of buyer
a. If the statement is fair upon its face
and the buyer has no knowledge of
its incorrectness and nothing to put
him on inquiry about it, he will be
protected in its purchase
b. The remedy of the creditor is not
against the goods but to prosecute
the seller criminally
QuickTime and a
Page 152 of 297
2. With knowledge or imputed
knowledge of buyer
a. The vendee accepts it at his peril
b. The sale is valid only as between
the vendor and the vendee but void
against the creditors
3. With names of certain creditors
without notice are omitted from the list
a. The sale is VOID as to such
creditors, whether the omission was
fraudulent or not.
4. With respect to an innocent
purchaser for value from the original
purchaser
a. An IPV from the original purchaser
is protected
b. However if the circumstances are
such as to bind the subsequent
purchaser with constructive notice
that the sale to the vendor (original
purchaser) was fraudulent, the
property will be liable in his hands to
creditors of the original vendor

VIII. Effects of violation of Law on Transfer
1. As between parties
a. The Bulk Sales Law does NOT in
any way affect the validity of the
transfer as between the
intermediate parties thereto
b. A sale not in compliance with the
Bulk Sales Law is valid against all
persons other than creditors
2. As against creditors
a. A purchaser in violation of the law
acquires no right in the property
purchased as against the creditors
of the seller
b. His status is that of a trustee or
receiver for the benefit of the
creditors of the seller; as such, he is
responsible for the disposition of the
property

IX. Remedies available to creditors
1. The proper remedy is one against the
goods to subject them to the payment of
the debt, such as execution,
attachment, garnishment, or by a
proceeding in equity
2. An ordinary action against the
purchaser to obtain money judgment will
NOT lie, unless the purchaser has sold
or otherwise disposed of, or dealt with
the property, so as to become
personally liable to the creditors for
value of it.

X. Effects of Non-Compliance

Failure to On On Seller
Transaction
Prepare and deliver
sworn listing of
creditors
Fraudulent and
void
Criminal
Liability
Apply proceeds pro-
rata to listed creditors
Fraudulent and Criminal
void Liability
Make advance written
disclosure of
transactions to
creditors
Not void No Criminal
Liability
Register sworn
statement with DTI
Not void No Criminal
Liability
Include or omit names
of creditors and
correct amount due in
the statement
Void Criminal
Liability
Sale for no
consideration
Void Criminal
Liability

Anti-Dummy Law

I. Penalizes Filipinos who permit aliens to
use them as nominees or dummies
to enjoy privileges reserved only for
Filipinos.
II. Management, operation as officers,
employees or laborers.
III. Includes Control or non-control positions.

QuickTime and a
Page 153 of 297

A C B O 2007 Civil Law: Donation Sale

Transféré par

Informations du document

Description originale:

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

A C B O 2007 Civil Law: Donation Sale

Transféré par

Droits d'auteur :

Formats disponibles

QuickTime and a

TIFF (Uncompressed) decompressor

Vous aimerez peut-être aussi