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Sales

PRINCIPLE/ DOCTRINE
Contract of Sale
That which where one of the contracting
parties obligates himself to transfer the
ownership of and to deliver a
determinate thing, and to pay there a
price certain in money or its equivalent.
(Art. 1458)

CASE TITLE
Dignos vs. CA

The vendor must have a right to


transfer the ownership thereof at the
time it is delivered. (Art. 1459)

Digests

(Dean

Sundiang) |1
2B 2010-2011

CASE DETAILS
Facts: The Dignos spouses owned a parcel of land, which was sold to plaintiffappellant Jabil for the sum of P28,000 payable in two installments. Meanwhile,
the Dignos spouses sold the same land to Cabigas spouses. As the Dignos
spouses refused to accept the second payment and upon discovery of the
second sale, Jabil brought this suit.

Issue: WON the contract is a Deed of Absolute Sale or a Contract to Sell.


Ruling: The contract is a Deed of Absolute Sale. A Deed of Sale is absolute in
nature although denominated as a Deed of Conditional Sale where nowhere in
the contract in question is a proviso or stipulation to the effect that title to the
property sold is reserved in the vendor until full payment of the purchase price,
nor is there a stipulation giving the vendor the right to unilaterally rescind the
contract the moment the vendee fails to pay within a fixed period.

2. Conditional one where the vendor is

Case

Petitioners contend that the Deed of Sale is a mere contract to sell and not an
absolute sale; that the same is subject to two positive conditions. It is further
contended that in said contract, title or ownership over the property was
expressly reserved in the vendor until the suspensive condition of full and
punctual payment of the balance of the purchase price shall have been met.
Thus, there is no actual sale until full payment is made.

A contract of sale may either be:


1. Absolute one where the title to the
property is not reserved to the vendor
or if the vendor is not granted the right
to rescind the contract based on the
fulfilment or non-fulfilment, as the case
may be, of the prescribed condition.

granted the right to unilaterally rescind


the
contract
predicated
on
the
fulfilment or non-fulfilment, as the case
may be, of the prescribed condition.
Object of Contract of Sale
Thing must be licit; and

Lawful, i.e., within the


commerce of man

Things may be licit:


a. Per se (of its nature)
b. Per accidens (made illegal
by possession of the law)

Reviewer:

Artates Pojas vs.


Urbi, Et. Al.

Facts: Spouses Artates and Pojas sought the annulment of the execution of a
homestead issued and duly registered in their names. A public sale was made to
satisfy a judgment against Artates, which amount was awarded to Urbi for
physical injuries. Plaintiff spouses alleged that said sale violated the provision of
the Public Land Law exempting said property from execution from any debt
contracted within the five-year period from the date of the issuance of the
patent.
Issue: WON the execution sale is valid.
Ruling: The execution sale is null and void. As thus prescribed by law, for a
period of five years from the date of the government grant, lands acquired by
free or homestead patent shall not only be incapable of being encumbered or
alienated in favour of the government itself or any of its institutions or of duly
constituted banking corporations, but also, they shall not be liable to the
satisfaction of any debt contracted within the said period, whether or not the
indebtedness shall mature during or after the prohibited time. This provision is
mandatory and a sale made in violation thereof is null and void and produces no
effect.
Though it may be a limitation on the right of ownership of the grantee, the
salutary purpose of the provision is to preserve and keep for the homesteader or
his family the land given to him gratuitously by the State, so that being a
property owner, he may become and remain a contented and useful member of

Sales

Heirs of Enrique
Zambales vs. CA

Reviewer:

Case

Digests

(Dean

Sundiang) |2
2B 2010-2011

the society.
Facts: The Zambales spouses were the homestead patentees of a parcel of land.
Claiming that the Nin Bay Mining Corp. had removed silica sand from their land
and destroyed the plants and other improvements therein, they instituted a case
claiming for damages. The Zambales spouses entered into a Compromise
Agreement with the Corporation; by virtue of which, the disputed property was
sold to one Preysley. Ten years after the Trial Courts decision based on the
Compromise Agreement and nine years after the sale, the Zambales spouses
filed a civil case for annulment of the Deed of Sale with recovery of possession
and ownership with damages, contending that it was their lawyer who prevailed
upon them to sign the Compromise Agreement; that they wer unschooled and
did not understand the contents thereof.
Issue: WON the Compromise Agreement violates the alienation and
encumbrance of a homestead lot within five years from the issuance of the
patent.
Ruling: The sale is void. The law does not distinguish between executor and
consummated sales. The bilateral promise to buy and sell the homestead lot at a
price certain, which was reciprocally demandable, was entered into within the
five-year prohibitory period and is therefore, illegal and void. To all interests and
purposes, therefore, there was an actual executory sale perfected during the
period of prohibition except that it was reciprocally demandable thereafter and
the agency to sell to any third person was deferred until after the expiration of
the prohibitory period, and the agency to sell made effective only after the lapse
of the said period, was merely a devise to circumvent the prohibition.

Contract of Sale vs. Agency to Sell


Contract of Sale
Buyer pays the price.

The buyer after the


delivery becomes the
owner.

The seller warrants.

Agency to Sell
The agent delivers
the price which he
turn he got from his
buyer.
The agent who is
supposed to sell does
not
become
the
owner, even if the
property has been
delivered to him.
The agent who sells
assumes no personal
liability as long as he
acts
within
his

Quiroga vs. Parsons


Hardware Co.

The bilateral promise to buy and sell and the agency to sell entered into within
five years from the date of the homestead patent was in violation of the Public
Land Law, although the executed sale was deferred until after the expiration of
the five-year prohibitory period.
Facts: A contract was entered into by and between Quiroga and Parsons for the
exclusive sale of Quiroga beds in the Visayan Islands. The tenor of said contract
provides that Quiroga shall furnish beds of his manufacture to Parsons for the
latters establishment in Iloilo, and shall invoice them at the same price he fixed
for sales in Manila, and in the invoices, shall make an allowance of a discount as
commission on the sales; and Parsons shall order the beds by the dozen,
whether of the same or different styles. Parsons further binds himself to pay
Quiroga for the beds received within 60 days from the date of their shipment,
and binds himself not to sell any other kind except Quiroga beds.
Quiroga contends that Parsons violated the following obligations: not to sell beds
at higher prices than those of the invoices, to have an open establishment in
Iloilo; to conduct the agency, to keep the beds on public exhibition, and to pay
for the advertisement expenses for the same, and to order the beds by the
dozen and in no other manner. He further alleged that Parsons was his agent for
the sale in Iloilo, and said obligations are implied in a contract of commercial
agency.

Sales

authority and in the


name
of
the
principal.
The buyer, as general The agent can return
rule, cannot return the object in case he
the object sold.
is unable to sell the
same to a third
person.
The buyer can deal The agent in dealing
with the thing sold as with
the
thing
he pleases being the received, must act
owner.
and
is
bound
according
to
the
instructions of his
principal.
Contract of Sale vs. Contract for a Piece of
Work
Rules To Determine if Sale/Piece of Work:
Sale if ordered in the ordinary course of
business.
Piece of work if manufactured especially for
the customer and upon his special order, and
not for the general market.
Sale
the thing transferred
is one which would
have existed and
would have been the
subject of sale to
some other person,
even if the order had
not been given
the primary objective
of the contract is sale
of the manufactured
item; it is a sale of
goods even though
the
item
is
manufactured
by
labor furnished by
the seller and upon
previous order of the
customer
governable by the
statute of frauds

Contract For Piece


Of Work
the thing transferred
is not in existence
and
would
never
have existed but for
the order of the party
desiring to acquire it
the
services
dominate
the
contract even though
there is a sale of
goods involved

not within the statute


of frauds

Reviewer:

Case

Digests

(Dean

Sundiang) |3
2B 2010-2011

Issue: WON Parsons, by reason of the contract, was a purchaser or an agent of


Quiroga.
Ruling: The contract entered into by the parties is one of a purchase and sale.
In the contract in question, what was essential, as constituting the cause and
subject matter, is that Quiroga was to furnish Parsons with beds which the latter
might order, at the price stipulated, and that Parsons was to pay the price in the
manner stipulated. These features exclude the legal conception of an Agency or
Order to Sell, whereby the mandatory or agent received the thing to sell it, and
does not pay its price, but delivers to the principal the price he obtains from the
sale of the thing to a third person, and if he does not succeed in selling it, he
returns it.

Concrete Aggregates
vs. CTA

Facts: Concrete Aggregates Inc. is a domestic corporation which processes rock


aggregates mined by it from private lands and produce ready-mixed concrete
and plant-mixed hot asphalt. Upon the investigation conducted by the CTA, the
peitioner is liable to pay taxes which the latter disputes. Petitioner contends that
it is a contractor subject only to the 3% contractor's tax under Section 191 of
the 1968 National Internal Revenue Code and not a manufacturer subject to the
7% sales tax under Section 186 of the same Code.
Issue: WON the petitioner is a contractor or a manufacturer.
Ruling: Concrete Aggregates Inc. is a manufacturer. Petitioner's raw materials
are processed under a prescribed formula and thereby changed by means of
machinery into a finished product, altering their quality, transforming them into
marketable state or preparing them for any of the specific uses of industry.
A contract to make is a contract of sale if the article is already
substantially in existence at the time of the order and merely requires
some alteration, modification or adaptation to the buyer's wishes or
purposes. A contract for the sale of an article which the vendor in the
ordinary course of his business manufactures or procures for the
general market, whether the same is on hand at the time or not is a
contract for the sale of goods.
CONTRACTOR
one who undertakes to do a specific job or piece of work for other persons,
using his own means and methods
TRUE TEST: renders service in the form of independent occupation,
representing the will of his employer only as to the result of his work

Sales

Perfection Of Contract of Sale


General Rule: The contract of sale is perfected
the moment there is a meeting of minds upon
the thing which is the object of the contract and
upon the price.(Art.1475)
Exception: When the sale is subject to a
suspensive condition by virtue of law or
stipulation.

Peoples Homesite
and Housing Corp.
vs. CTA

In CONDITIONAL OBLIGATIONS the acquisition of


rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the
happening of the event which constitutes the
condition. (Art. 1181)
Rules
1. When the offer is accepted without
conditions or qualifications, the sale is
perfected.
2. If the acceptance is with conditions or
qualifications, the sale is not perfected
for such is equivalent to a counter-offer.
*The acceptance must be certain, absolute and
complete.

For and offer to be valid, it must be

certain,
definite
and
intentional(Art.1319)
When the sale is subject to a suspensive
condition: from the moment the
condition is fulfilled.

Reviewer:

Case

Digests

(Dean

Sundiang) |4
2B 2010-2011

Facts: The PHHC board of directors passed Resolution No. 513 awarding to
Spouses Mendoza the Consolidation Subdivision Plan on Lot 4 subject to the
approval of the Quezon City Council. The city council disapproved the said
proposed plan. However approval was made by the said council upon submission
of a revised plan reducing the land area. Later on, PHHC board of directors
passed another resolution withdrawing the tentative award to the Mendoza
-spouses who never paid the price of the lot nor made the 20% initial deposit.
The spouses contend that there was a perfected sale of Lot 4 thus they can
enforce against the PHHC an action for specific performance.
Issue: WON there was a perfected contract of sale.

Toyota Shaw, Inc. vs.


CA

Ruling: There was no perfected contract of sale of Lot 4. It was conditionally or


contingently awarded to the Mendozas subject to the approval by the city council
of the proposed consolidation subdivision plan and the approval of the award by
the valuation committee and higher authorities. When the plan with the area of
Lot 4 reduced to 2,608.7 square meters was approved, the Mendozas should
have manifested in writing their acceptance of the award for the purchase of Lot
4 just to show that they were still interested in its purchase although the area
was reduced and to obviate ally doubt on the matter. They did not do so. The
PHHC board of directors acted within its rights in withdrawing the tentative
award. We cannot say there was a meeting of minds on the purchase of Lot 4.
Facts: Sosa wanted to purchase a Toyota Lite Ace. upon contacting Toyota
Shaw, Inc., he was told that there was an available unit. Sosa and his son,
Gilbert, went to the Toyota and met Bernardo, a sales representative of Toyota.
The parties agreed that the car shall be delivered on June 17, 1989 and that the
balance of the purchase price would be paid by credit financing through B.A.
Finance. They accomplished a printed Vehicle Sales Proposal (VSP) which shows
that the customer's name, home address , the model series of the vehicle, the
installment mode of payment with the initial cash outlay down. On the date of
the delivery, the vehicle was not delivered. Toyota alleged that no sale was
entered into between it and Sosa.
Issue: WON the stnadard VSP woulfd represent a contract of sale between the
parties.
Ruling: Neither logic nor recourse to one's imagination can lead to the
conclusion that VSP is a perfected contract of sale. It is not a contract of sale,
thus no obligation on the part of Toyota to transfer ownership of a determinate
thing to Sosa and no correlative obligation on the part of the latter to pay
therefor a price certain appears therein.
A definite agreement on the manner of payment of the price is an
essential element in the formation of a binding and enforceable
contract of sale. This is so because the agreement as to the manner of
payment goes into the price such that a disagreement on the manner of
payment is tantamount to a failure to agree on the price. Definiteness
as to the price is an essential element of a binding agreement to sell
personal property.
The VSP was a mere proposal which was aborted in lieu of subsequent

Sales

Limketkai Sons
Milling, Inc. vs. CA

Reviewer:

Case

Digests

(Dean

Sundiang) |5
2B 2010-2011

events. It follows that the VSP created no demandable right in favor of Sosa for
the delivery of the vehicle to him, and its non-delivery did not cause any legally
indemnifiable injury.
Facts: Philippine Remnants Co., Inc. constituted BPI as its trustee to manage,
administer, and sell its real estate property. BPI gave Revilla the formal
authority, to sell the lot for P1,000.00 per square meter. Revilla contacted
Limketkai Sons Milling who agreed to buy the land. There were negotiatons on
the price and the term of payment between BPI and the Limketkai until
agreement has been reached. BPI later on refused the payment tendered by the
petitioner and sold the property to NBS instead.
Issue: WON there was a meeting of mind between Limketkai and BPI.

Article 1479 & 1324


Promise to buy and sell vs. accepted unilateral
promise to buy or to sell:
A unilateral promise to sell, to be binding, must
be supported by a consideration distinct from a
price, which means that the option can still be
withdrawn, even if accepted , if the same is not
supported by a consideration

Southwestern Sugar
& Molasses Co. vs.
Atlantic Gulf &
Pacific Company
June 1955

Ruling: There was a perfected contract of sale between Limketkai and BPI. The
negotiation or preparation stage started with the authority given by Philippine
Remnants to BPI to sell the lot, followed by (a) the authority given by BPI and
confirmed by Philippine Remnants to broker Revilla to sell the property, (b) the
offer to sell to Limketkai, (c) the inspection of the property and finally (d) the
negotiations with Aromin and Albano at the BPI offices.
The perfection of the contract took place when Aromin and Albano, acting
for BPI, agreed to sell and Alfonso Lim with Albino Limketkai, acting for petitioner
Limketkai, agreed to buy the disputed lot at P1,000.00 per square meter. Aside
from this there was the earlier agreement between petitioner and the authorized
broker. There was a concurrence of offer and acceptance, on the object, and on
the cause thereof.
Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. So
long as it is clear that the meaning of the acceptance is positively and
unequivocally to accept the offer, whether such request is granted or
not, a contract is formed.
Facts: On March 24, 1953, Atlantic granted Southwestern an option period to
buy the formers barge. On May 11 of the same year, Southwestern Company
communicated its acceptance of the option to Atlantic. The latter replied that
their understanding was that the "offer of option" is to be a cash transaction and
to be effected "at the time the lighter is available." On June 25, Atlantic advised
the Southwestern Company that the barge could not be turned over to the latter
company.
On June 27, 1953, the Southwestern Company filed this action to compel Atlantic
to sell the barge in line with the option, depositing with the court a check
covering the amount, but said check was later withdrawn with the approval of
the court. On June 29, the Atlantic withdrew its "offer of option" with due notices
to Southwestern Company. The Atlantic contended that the option to sell it made
to Southwestern Company is null and void because said option to sell is not
supported by any consideration.

Sales

Reviewer:

Case

Digests

(Dean

Sundiang) |6
2B 2010-2011

Issue: Whether or not the option to sell made to Southwestern Company is null
and void because said option to sell is not supported by any consideration.

The acceptance of an offer to sell a determinate


thing for a price certain creates a bilateral
contract to sell and to buy. The offeree, upon
acceptance, ipso facto aacquires the obligation
as the purchaser. The offeror would be liable for
damages if he fails to deliver the thing he had
offered for sale.

Atkins Kroll & Co. vs.


Cu Hian Tek

Ruling: The Supreme Court reversed the trial courts decision applying Article
1479 of the new Civil Code. The Court reiterated that "an accepted unilateral
promise" can only have a binding effect if supported by a consideration, which
means that the option can still be withdrawn, even if accepted, if said option is
not supported by any consideration. The option that Atlantic had provided was
without consideration, hence, can be withdrawn notwithstanding Southwestern
Companys acceptance of said option.
Facts: On September 13, 1951, Atkins Kroll & Co. (Atkins) sent a letter to Cu
Hian Tek (Hian Tek) offering to sell sardines with corresponding quantity. Hian
Tek unconditionally accepted the said offer through a letter, but Atkins failed to
deliver the commodities due to the shortage of catch of sardines by the packers
in California.
Hian Tek, filed an action for damages in the CFI of Manila which granted the
same in his favor. Upon Atkins appeal, the Court of Appeals affirmed said
decision.
Issue: WON there was a contract of sale between the parties or only a unilateral
promise to buy

In order that unilateral promise may be binding


upon the promisor, Article 1479 requires that
the promise be supported by a consideration
distinct from the price.

Sanchez vs. Rigos

Ruling: The Supreme Court held that there was a contract of sale between the
parties. Petitioners argument assumed that only a unilateral promise arose
when the respondent accepted the offer, which is incorrect because a bilateral
contract to sell and to buy was created upon respondents acceptance.
After accepting the promise and before he exercises his option, the holder of the
option is not bound to buy. In this case at bar, however, upon respondents
acceptance of herein petitioner's offer, a bilateral promise to sell and to buy
ensued, and the respondent had immediately assumed the obligations of a
purchaser.
Facts: In an instrument entitled "Option to Purchase," executed on April 3, 1961,
Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-appellee
Nicolas Sanchez for the sum of P1,510.00 within two (2) years from said date, a
parcel of land situated in Nueva Ecija. It was agreed that said option shall be
deemed "terminated and elapsed," if Sanchez shall fail to exercise his right to
buy the property" within the stipulated period. On March 12, 1963, Sanchez
deposited the sum of P1,510.00 with the CFI of Nueva Ecija and filed an action
for specific performance and damages against Rigos for the latters refusal to
accept several tenders of payment that Sanchez made to purchase the subject
land.

Sales

Reviewer:

Case

Digests

(Dean

Sundiang) |7
2B 2010-2011

Issue: WON there was a contract to buy and sell between the parties or only a
unilateral promise to sell

A commitment by the bank to resell the


property within a specified period, although
accepted by the party in whose favor it was
made, is considered an option not supported by
consideration distinct from the price, and
therefore, not binding upon the promissor

Spouses Natino vs.


IAC

Ruling: The Supreme Court affirmed the lower courts decision. The instrument
executed in 1961 is not a "contract to buy and sell," but merely granted plaintiff
an "option" to buy, as indicated by its own title "Option to Purchase." The lower
court relied upon Article 1354 of the Civil Code when it presumed the existence
of said consideration, but the said Article only applies to contracts in general.
However, it is not Article 1354 but the Article 1479 of the same Code which is
controlling in the case at bar because the latters 2nd paragraph refers to "sales"
in particular, and, more specifically, to "an accepted unilateral promise to buy or
to sell." Since there may be no valid contract without a cause or consideration,
the promisor is not bound by his promise and may, accordingly, withdraw it.
Pending notice of its withdrawal, his accepted promise partakes, however, of the
nature of an offer to sell which, if accepted, results in a perfected contract of
sale.
Facts: On 12 October 1970, petitioners executed a real estate mortgage in favor
of respondent bank. Petitioners failed to pay the loan on due date. The bank
applied for the extrajudicial foreclosure of the mortgage. At the foreclosure sale,
the respondent bank was the highest and winning bidder. A certificate of sale
was executed in its favor by the sheriff and the same was registered with the
Office of the Register of Deeds. The certificate of sale expressly provided that
the redemption period shall be two years from the registration thereof.
No redemption was made by petitioners within the two-year period and the
sheriff issued a Final Deed of Sale.
Issue: WON the petitioners were given an extension of the period of redemption.

WHO BEARS THE RISK OF LOSS (Art 1480


& 1485)

Roman vs. Grimalt

Ruling: We find the petition to be devoid of merit. The attempts to redeem the
property were done after the expiration of the redemption period and that no
extension of that period was granted to petitioners.
Even if the President and Manager of the bank is to be understood to have
promised to allow the petitioners to buy the property at any time they have the
money, the Bank was not bound by the promise not only because it was not
approved or ratified by the Board of Directors but also because, and more
decisively, it was a promise unsupported by a consideration distinct from the repurchase price.
The second paragraph of Article 1479 of the Civil Code expressly provides:
An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissory if the promise is supported by a
consideration distinct from the price.
WHEREFORE, the instant petition is DISMISSED, with costs against the
Petitioners.
Facts: In between the 13th to the 23d of June, 1904, petitioner Pedro Roman,
the owner, and respondent Andres Grimalt, the purchaser, verbally agreed upon
the sale of the schooner Santa Marina. In his letter on June 23, Grimalt agreed to

Sales

1.

Object lost before perfection = seller


bears it
for there was no cause or
consideration. Being the owner,
the seller bears the loss.

Object lost after delivery to the buyer =


buyers bears it
Res perit domino the owner
bears the loss

3.

Thing is lost at the time of the


perfection = contracts is void and nonexistent

4.

Case

Digests

(Dean

Sundiang) |8
2B 2010-2011

buy the vessel and offered to pay in three installments of P500 each on July 15,
September 15, and November 15, provided the title papers to the vessel were in
proper form. The title of the vessel, however, was in the name of one Paulina
Giron and not in the name of Roman as the alleged owner. Roman promised to
perfect his title to the vessel, but failed so the papers he presented did not show
that he was the owner of the vessel. On June 25, 1904, the vessel sank in the
Manila harbor during a severe storm, even before Roman was able to produce for
Grimalt the proper papers showing that the former was in fact the owner of the
vessel in question and not Paulina Giron. As a result, Grimalt refused to pay the
purchase price when Roman made a demand on June 30, 1904.
On July 2, 1904, Roman filed this complaint in the CFI of Manila, which found
that the parties had not arrived at a definite understanding, and later dismissed
said complaint.

Reason: There was no contract,

2.

Reviewer:

Issue: Who should bear the risk of loss?

If the object is lost after perfection but


before delivery = buyer bears the loss
as an exception to the rule of res perit
domino
Reason: Art. 1480 pars. 1&2
clearly states that injuries
between perfection and delivery
shall be governed by Art. 1262.

Norkis Distributors,
In.c vs. CA

Ruling: The Supreme Court affirmed the decision of the lower court and
declared Roman as the one who should bear the risk of lost because there was
no actual contract of sale. If no contract of sale was actually executed by the
parties, the loss of the vessel must be borne by its owner and not by a party who
only intended to purchase it and who was unable to do so on account of failure
on the part of the owner to show proper title to the vessel and thus enable them
to draw up the contract of sale. Grimalt was under no obligation to pay the price
of the vessel, the purchase of which had not been concluded. The conversations
between the parties and the letter Grimalt had written to Roman did not
establish a contract sufficient in itself to create reciprocal rights between the
parties.
Facts: Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of
Yamaha motorcycles in Negros Occidental with office in Bacolod City with
Avelino Labajo as its Branch Manager. On September 20, 1979, private
respondent Alberto Nepales bought from the Norkis-Bacolod branch a brand new
Yamaha Wonderbike motorcycle Model YL2DX with Engine No. L2-329401K
Frame No. NL2-0329401, Color Maroon, then displayed in the Norkis showroom.
The price of P7,500.00 was payable by means of a Letter of Guaranty from the
Development Bank of the Philippines (DBP), Kabankalan Branch, which Norkis'
Branch Manager Labajo agreed to accept. Hence, credit was extended to
Nepales for the price of the motorcycle payable by DBP upon release of his
motorcycle loan. As security for the loan, Nepales would execute a chattel
mortgage on the motorcycle in favor of DBP. Branch Manager Labajo issued
Norkis Sales Invoice No. 0120 (Exh.1) showing that the contract of sale of the
motorcycle had been perfected. Nepales signed the sales invoice to signify his
conformity with the terms of the sale. In the meantime, however, the motorcycle
remained in Norkis' possession.On November 6, 1979, the motorcycle was
registered in the Land Transportation Commission in the name of Alberto
Nepales.
Issue: Who should bear the loss of the motorcycle?

Sales

PROMISE TO BUY AND SELL vs. ACCEPTED


UNILATERAL PROMISE TO BUY OR TO SELL
(ART. 1479 and 1324)
Kinds of Promises Treated in Art. 1479
1. An accepted unilateral promise to sell in
which the promise (acceptor) elects to
buy;
2. An accepted unilateral promise to buy
which the promise (acceptor) elects to
sell; and
3. A bilateral promise to buy and sell
reciprocally accepted in which either of
the parties chooses to exacts fulfilment.
Effect of Unaccepted Unilateral Promise

No judicial effect of legal bond.

Such unaccepted imperfect


promise or offer is called policitation.
Option
A privilege existing in one person for

Serra vs .CA

Reviewer:

Case

Digests

(Dean

Sundiang) |9
2B 2010-2011

Ruling: NORKIS, the seller. The issuance of a sales invoice does not prove
transfer of ownership of the thing sold to the buyer. An invoice is nothing more
than a detailed statement of the nature, quantity and cost of the thing sold and
has been considered not a bill of sale. In all forms of delivery, it is necessary that
the act of delivery whether constructive or actual, be coupled with the intention
of delivering the thing. The act, without the intention, is insufficient.
When the motorcycle was registered by Norkis in the name of private
respondent, Norkis did not intend yet to transfer the title or ownership to
Nepales, but only to facilitate the execution of a chattel mortgage in favor of the
DBP for the release of the buyer's motorcycle loan. The Letter of Guarantee
issued by the DBP, reveals that the execution in its favor of a chattel mortgage
over the purchased vehicle is a pre-requisite for the approval of the buyer's loan.
If Norkis would not accede to that arrangement, DBP would not approve private
respondent's loan application and, consequently, there would be no sale.
In other words, the critical factor in the different modes of effecting delivery,
which gives legal effect to the act, is the actual intention of the vendor to
deliver, and its acceptance by the vendee. Without that intention, there is no
tradition.
Article 1496 of the Civil Code which provides that "in the absence of an express
assumption of risk by the buyer, the things sold remain at seller's risk until the
ownership thereof is transferred to the buyer," is applicable to this case, for
there was neither an actual nor constructive delivery of the thing sold, hence,
the risk of loss should be borne by the seller, Norkis, which was still the owner
and possessor of the motorcycle when it was wrecked. This is in accordance with
the well-known doctrine of res perit domino.
Facts: Petitioner is the owner of a 374 square meter parcel of land located at
Quezon St., Masbate, Masbate. Sometime in 1975, respondent bank, in its desire
to put up a branch in Masbate, Masbate, negotiated with petitioner for the
purchase of the then unregistered property. A contract of LEASE WITH OPTION
TO BUY was instead forged by the parties. The foregoing agreement was
subscribed before Notary Public Romeo F. Natividad. Pursuant to said contract, a
building and other improvements were constructed on the land which housed
the branch office of RCBC in Masbate, Masbate. Within three years from the
signing of the contract, petitioner complied with his part of the agreement by
having the property registered and placed under the TORRENS SYSTEM, for
which Original Certificate of Title No. 0-232 was issued by the Register of Deeds
of the Province of Masbate.
Petitioner alleges that as soon as he had the property registered, he kept on
pursuing the manager of the branch to effect the sale of the lot as per their
agreement. It was not until September 4, 1984, however, when the respondent
bank decided to exercise its option and informed petitioner, through a letter, of
its intention to buy the property at the agreed price of not greater than P210.00
per square meter or a total of P78,430.00. But much to the surprise of the
respondent, petitioner replied that he is no longer selling the property.
Issue: WON the contract lease with option to buy is valid.

Sales

which he has paid a consideration,


which gives him a right to buy and sell
from/to another person, if he chooses,
at any time, within the agreed period at
a fixed price, or under, or in compliance
with certain terms and conditions.
An option without consideration = VOID
(effect is the same as if there is no
option.

Accepted Unilateral Promise to Sell


Since there may be no valid contract
without cause or consideration, the
promissory is not bound by his promise
and may, accordingly, withdraw it.
If acceptance is made before
withdrawal, it constitutes a binding
contract of sale although the option is
given without consideration.

Digests

(Dean

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In the present case, the consideration is even more onerous on the part of the
lessee since it entails transferring of the building and/or improvements on the
property to petitioner, should respondent bank fail to exercise its option within
the period stipulated. The bugging question then is whether the price "not
greater than TWO HUNDRED PESOS" is certain or definite.

Bilateral Promise to Buy AND Sell


Reciprocally demandable
Hence, it requires no consideration
distinct from the price.

Remedies of the Seller


1. Exact fulfilment of the obligation should
the buyer fail to pay any instalment;

Case

Ruling: YES. The contract lease with option to buy is valid , effective and
enforceable, the price being certain and that there was consideration distinct
from the price to support the option given to lessee.
Article 1324 of the Civil Code provides that when an offeror has allowed the
offeree a certain period to accept, the offer maybe withdrawn at anytime before
acceptance by communicating such withdrawal, except when the option is
founded upon consideration, as something paid or promised. On the other hand,
Article 1479 of the Code provides that an accepted unilateral promise to buy and
sell a determinate thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the price.
In a unilateral promise to sell, where the debtor fails to withdraw the promise
before the acceptance by the creditor, the transaction becomes a bilateral
contract to sell and to buy, because upon acceptance by the creditor of the offer
to sell by the debtor, there is already a meeting of the minds of the parties as to
the thing which is determinate and the price which is certain. In which case, the
parties may then reciprocally demand performance.
Jurisprudence has taught us that an optional contract is a privilege existing only
in one party the buyer. For a separate consideration paid, he is given the right
to decide to purchase or not, a certain merchandise or property, at any time
within the agreed period, at a fixed price. This being his prerogative, he may not
be compelled to exercise the option to buy before the time
expires.

Option Contract
A contract made to keep an offer open
for a specified period, so that the offer
cannot be revoked by the offeror during
that period.
Option is valid because it is supported
by a consideration.
Here, the buyer cannot be compelled to
buy.

RECTO LAW (Art. 1484 and 1485)

Reviewer:

Southern Motors vs.


Moscoso

A price is considered certain if it is so with reference to another thing certain or


when the determination thereof is left to the judgment of a specified person or
persons. And generally, gross inadequacy of price does not affect a contract of
sale.
Contracts are to be construed according to the sense and meaning of the terms
which the parties themselves have used. In the present dispute, there is
evidence to show that the intention of the parties is to peg the price at P210 per
square meter.
Moreover, by his subsequent acts of having the land titled under the Torrens
System, and in pursuing the bank manager to effect the sale immediately,
means that he understood perfectly the terms of the contract. He even had the
same property mortgaged to the respondent bank sometime in 1979, without
the slightest hint of wanting to abandon his offer to sell the property at the
agreed price of P210 per square meter.
Facts:
On June 6, 1957, plaintiff-appellee Southern Motors, Inc. sold to
defendant-appellant Angel Moscoso one Chevrolet truck, on installment basis, for
P6,445.00. Upon making a down payment, the defendant executed a promissory
note for the sum of P4,915.00, representing the unpaid balance of the purchase
price), to secure the payment of which, a chattel mortgage was constituted on

Sales

2.

3.

Cancel the sale, should the buyers


failure to pay cover two or more
instalments;
Foreclose the chattel mortgage on the
thing sold, if one has been constituted,
should the buyers failure to pay cover
two or more instalments.

Article 1484 of the Civil Code provides for the


remedies of a seller in contracts of sale of
personal
property
by
installments,
and
incorporates the provisions of Act No. 4122,
known as the Installment Sales Law or the
Recto Law, which then amended Article 1454
of the Civil Code of 1889.
RATIONALE
The object of Recto Law was to remedy the
abuses committed in connection with the
foreclosure of chattel mortgages and was
meant to prevent mortgagees from seizing the
mortgaged property, buying it at foreclosure
sale for a low price and then bringing suit
against the mortgagor for a deficiency
judgment.
Under Article 1484 of the New Civil Code:
In a contract of sale of personal property the
price of which is payable in installments, the
vendor may exercise REMEDIES stated
above.
The remedies have been recognized as
alternative, not cumulative, in that the exercise
of one would also bar the exercise of the others.
They cannot also be pursued simultaneously.
If the seller should foreclose on the mortgage
constituted on the thing sold, he shall have no
further action against the purchaser to recover
any unpaid balance of the price. Any agreement
to the contrary shall be void.
The provisions of Recto Law are applicable to
financing transactions derived or arising from

Reviewer:

Case

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(Dean

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2B 2010-2011

the truck in favor of the plaintif.


Of said account of P4,915.00, the defendant had paid a total of P550.00, of which
P110.00 was applied to the interest up to August 15, 1957, and P400.00 to the
principal, thus leaving an unpaid balance of P4,475.00. The defendant failed to
pay 3 installments on the balance of the purchase price.
On November 4, 1957, the plaintiff filed a complaint against the defendant, to
recover the unpaid balance of the promissory note. Upon plaintiff's petition,
embodied in the complaint, a writ of attachment was issued by the lower court
on the properties Of the defendant.
Pursuant thereto, the said Chevrolet truck, and a house and lot belonging to
defendant, were attached by the Sheriff of San Jose, Antique, where defendant
was residing on November 25, 1957, and said truck was brought to the plaintiff's
compound in Iloilo City, for safe keeping.
Issue: WON the remedy chosen by appellee is the foreclosure of the truck or a
specific performance of the defendants obligation.
Ruling:
Manifestly, the appellee had chosen the first remedy (specific
performance). The complaint is an ordinary civil action for recovery of the
remaining unpaid balance due on the promissory note. The plaintiff had not
adopted the procedure or methods outlined by Sec. 14 of the Chattel Mortgage
Law but those prescribed for ordinary civil actions, under the Rules of Court.
Had appellee elected the foreclosure, it would not have instituted this case in
court; it would not have caused the chattel to be attached under Rule 59, and
had it sold at public auction, in the manner prescribed by Rule 39. That the
herein appellee did not intend to foreclose the mortgage truck, is further evinced
by the fact that it had also attached the house and lot of the appellant at San
Jose, Antique.
As the plaintiff has chosen to exact the fulfillment of the defendant's obligation,
the former may enforce execution of the judgment rendered in its favor on the
personal and real property of the latter not exempt from execution sufficient to
satisfy the judgment. That part of the judgment against the properties of the
defendant except the mortgaged truck and discharging the writ of attachment
on his other properties is erroneous.
We perceive nothing unlawful or irregular in appellee's act of attaching the
mortgaged truck itself. Since herein appellee has chosen to exact the fulfillment
of the appellant's obligation, it may enforce execution of the judgment that may
be favorably rendered hereon, on all personal and real properties of the latter
not exempt from execution sufficient to satisfy such judgment. It should be
noted that a house and lot at San Jose, Antique were also attached. No one can
successfully contest that the attachment was merely an incident to an ordinary
civil action. (Sections 1 & 11, Rule 59; Sec. 16, Rule 39).

Sales

sales of movables on installments, even if the


underlying contract at issue is a loan because
the promissory note has been assigned or
negotiated by the original seller.
Take NOTE: In Filinvest vs. CA
Filinvest was held not liable for the defect only
by virtue of the waiver of warranty against
defect stipulated in the contract.

Pascual & Leonila


Torres vs. Universal
Motors

BUT:
If not for the waiver, Filinvest though a
financing institution, is not immune from any
recourse by the private respondents.

article

shall

be

applied

to

(Dean

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The mortgage creditor may recover judgment on the mortgage debt and cause
an execution on the mortgaged property and may cause an attachment to be
issued and levied on such property, upon beginning his civil action.
Facts: Spouses Torres executed a real estate mortgage on two parcel of land to
secure the payment of the indebtedness of PDP Transit, Inc. for the purchase of
five (5) Mercedes Benz trucks from Universal Motors Corp.
Separate deeds of chattel mortgages on the Mercedez Benz units were also
executed by PDP Transit in favor of UMC

Issue: WON UMC correct in its contentions?

Through the set-up, the vendor, by retaining


ownership over the property in the guise of
being the lessor, retains, likewise, the right to
repossess the same, without going through the
process of foreclosure, in the event the vendeelessee defaults in the
payment of the installments

Article 1485.
The preceding

Digests

UMC contends (on appeal) that what Article 1484 withholds from the vendor is
the right to recover any deficiency from the purchaser after the foreclosure of
the chattel mortgage and not a recourse to the additional security put up by a
third party to guarantee the purchaser's performance of his obligation

The device contract of lease with option to buy


is at times resorted to as a means to circumvent
Article 1484, particularly paragraph (3) thereof.

It is thus for these reasons that Article 1485 of


the new Civil Code provides that:

Case

PDP Transit Inc. was able to pay a sum of P92,964.91, leaving balance of
P68,641.69 including interest due as of February 8, 1965
On March 19, 1965, Universal Motors Corporation filed a complaint against PDP
Transit, and it was able to repossess all the units sold, including the five (5) units
guaranteed by the subject real estate mortgage, and to foreclose all the chattel
mortgages constituted thereon, resulting in the sale of the trucks at public
auction.
Spouses Lorenzo Pascual and Leonila Torres filed an action in the CFI Quezon
City for the cancellation of the mortgage. A judgment was rendered in their
favor.

The fact that the rock crusher was purchased


from Rizal Consolidated Corporation in the
name and with the funds of the Filinvest proves
beyond doubt that the ownership thereof was
effectively transferred to it. It is precisely this
ownership which enabled the petitioner to enter
into the "Contract of Lease of Machinery and
Equipment"

There arises therefore no need to constitute a


chattel mortgage over the movable sold. More
important, the vendor, after repossessing the
property and, in effect, canceling the contract of
sale, gets to keep all the installments-cumrentals already paid.

Reviewer:

Ruling: NO. if the guarantor should be compelled to pay the balance of the
purchase price, the guarantor will in turn be entitled to recover what she has
paid from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be
the vendee who will be made to bear the payment of the balance of the price,
despite the earlier foreclosure of the chattel mortgage given by him.

Filinvest Credit vs.


CA

Thus, the protection given by Article 1484 would be indirectly subverted, and
public policy overturned."
Facts: Spouses Tan sells gravel produced from crushed rocks used for
construction purposes. Wanting to increase production, they asked Mr. Ruben
Mercurio to look for a more efficient rock crusher and were referred to Rizal
Consolidated Corporation which then had for sale one such machinery.
After inspection of said machinery, couple decided to buy the same and applied
for financial assistance from Filinvest Credit Corporation on the conditions that:
that the machinery be purchased in the petitioner's name;
that it be leased (with option to purchase upon the termination of the lease
period) to the private respondents; and
that the private respondents execute a real estate mortgage in favor of the
petitioner as security for the amount advanced by the latter.

Sales

contracts purporting to be leases of personal


property with option to buy, when the lessor has
deprived the lessee of possession or enjoyment
of the thing.
Caveat emptor or "buyer beware"
Common sense dictates that a buyer inspects a
product before purchasing it and does not
return it for defects discovered later on,
particularly if the return of the product is not
covered by or stipulated in a contract or
warranty.

Reviewer:

Case

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A contract of lease of machinery (with option to purchase) was entered into by


the parties stipulating that at the end of the two-year period, the machine would
be owned by the spouses. The latter executed a real estate mortgage over two
parcels of land issued in favor Filinvest and issues check for P150,550.00, as
initial rental (or guaranty deposit), and twenty-four (24) postdated checks
corresponding to the 24 monthly rentals.
Three months after the delivery of the machinery, the couple claiming that they
had only tested the machine that month, sent a letter-complaint to the Filinvest,
alleging that contrary to the 20 to 40 tons per hour capacity of the machine as
stated in the lease contract, the machine could only process 5 tons of rocks and
stones per hour and refused to pay.
As a consequence of the non-payment of the rentals on the rock crusher as they
fell due despite the repeated written demands, Filinvest
extrajudicially
foreclosed the real estate mortgage.
To thwart the impending auction of their properties, Spouses Jose Sy Bang and
Iluminada Tan filed before the RTC (QC) a complaint against Filinvest, asked for
the rescission of the contract of lease, annullment of the real estate mortgage. A
judgment was rendered in their favor.
On appeal, the petitioner (Filinvest) reasserts that the cause of action should be
directed against Rizal Consolidated Corporation, the original owner-seller of the
subject rock crusher, or Gemini Motors Sales which served as a conduit facilitator
of the purchase of the said machine.
The petitioner argues that it is a financing institution engaged in quasi-banking
activities, primarily the lending of money to entrepreneurs such as the private
respondents and the general public, but certainly not the leasing or selling of
heavy machineries like the subject rock crusher. The petitioner denies being the
seller of the rock crusher and only admits having financed its acquisition by the
private respondents. Further, the petitioner absolves itself of any liability arising
out of the lease contract it signed with the private respondents due to the waiver
of warranty made by the latter.
Issue: WON Filinvest is immuned from liability arising from the defect of the
machinery?
Ruling: YES. The spouses has independently inspected and verified the leased
property and has selected and received the same from the Dealer of his own
choosing in good order and excellent running and operating condition and on the
basis of such verification, etc. the LESSEE has agreed to enter into this Contract.
One of the stipulations in the contract they entered into with the petitioner is an
express waiver of warranties in favor of the latter. By so signing the agreement,
the private respondents absolved the petitioner from any liability arising from
any defect or deficiency of the machinery they bought.

Sales

Art. 1497. The thing sold shall be understood


as delivered, when it is placed in the control
and possession of the vendee. (1462a)
Art. 1498. When the sale is made through a
public instrument, the execution thereof shall
be equivalent to the delivery of the thing which
is the object of the contract, if from the deed
the contrary does not appear or cannot clearly
be inferred.
With regard to movable property, its delivery
may also be made by the delivery of the keys of
the place or depository where it is stored or
kept. (1463a)
Art. 1499. The delivery of movable property
may likewise be made by the mere consent or
agreement of the contracting parties, if the
thing sold cannot be transferred to the
possession of the vendee at the time of the
sale, or if the latter already had it in his
possession for any other reason. (1463a)

Addison vs. Felix

Reviewer:

Case

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Facts: By a public instrument Addison sold to Marciana Felix, four parcels of


land, described in the instrument. Felix paid, at the time of the execution of the
deed, the sum of P3,000 on account of the purchase price, and bound herself to
pay the remainder in installments.
It was further stipulated that the purchaser was to deliver to the vendor 25 per
centum of the value of the products that she might obtain from the four parcels
"from the moment she takes possession of them until the Torrens certificate of
title be issued in her favor."
It was also covenanted that "within one year from the date of the certificate of
title in favor of Marciana Felix, Addison may rescind the present contract of
purchase and sale. Later on, Addison filed suit in Court of First Instance of Manila
to compel Marciana Felix to make payment of the first installment and of the
interest in arrears.
The defendant answered the complaint and alleged by way of special defense
that the plaintiff had absolutely failed to deliver to the defendant the lands that
were the subject matter of the sale, notwithstanding the demands made upon
him for this purpose. The evidence adduced shows that after execution of the
deed of the sale Addison, at the request of Felix, went to Lucena, accompanied
by a representative of the latter, for the purpose of designating and delivering
the lands sold. He was able to designate only two of the four parcels, and more
than two-thirds of these two were found to be in the possession of one Juan
Villafuerte, who claimed to be the owner of the parts so occupied by him.
Issue: WON there was delivery of the land sold.
Ruling: NO. The record shows that the plaintiff did not deliver the thing sold.
With respect to two of the parcels of land, he was not even able to show them to
the purchaser; and as regards the other two, more than two-thirds of their area
was in the hostile and adverse possession of a third person.
The Code imposes upon the vendor the obligation to deliver the thing sold. The
thing is considered to be delivered when it is placed "in the hands and
possession of the vendee." (Civ. Code, art. 1462.) It is true that the same article
declares that the execution of a public instruments is equivalent to the delivery
of the thing which is the object of the contract, but, in order that this symbolic
delivery may produce the effect of tradition, it is necessary that the vendor shall
have had such control over the thing sold that, at the moment of the sale, its
material delivery could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing sold must be
placed in his control. When there is no impediment whatever to prevent the
thing sold passing into the tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public instrument is
sufficient. But if, notwithstanding the execution of the instrument, the purchaser
cannot have the enjoyment and material tenancy of the thing and make use of it
himself or through another in his name, because such tenancy and enjoyment

Sales

Reviewer:

Case

Digests

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are opposed by the interposition of another will, then fiction yields to reality
the delivery has not been effected.
Art. 1477. The ownership of the thing sold
shall be transferred to the vendee upon the
actual or constructive delivery thereof. (n)

Sampaguita Pictures
vs. Jalwindor

Facts: Sampaguita leased to Capitol 300 Inc. the roof deck of its building with
the agreement that all permanent improvements Capitol will make on said
property shall belong to Sampaguita without any part on the latter to reimburse
Capitol for the expenses of said improvements.
Shortly, Capitol purchased on credit from Jalwindor glass and wooden jalousies,
which the latter itself delivered and installed in the leased premises, replacing
the existing windows
. Jalwindor filed with the CFI of Rizal, Quezon City an action for collection of a
sum of money with a petition for preliminary attachment against Capitol for its
failure to pay its purchases. Later, Jalwindor and Capitol submitted to the trial
court a Compromised Agreement wherein Capitol acknowledged its indebtedness
and that all the materials that Capitol purchased will be considered as security
for such undertaking. Meanwhile, Sampaguita filed a complaint for ejectment
and for collection of a sum of money against Capitol for the latters failure to pay
rentals and the City Court of Quezon City ordered Capitol to vacate the premises
and
to
pay
Sampaguita.
On the other hand, Capitol likewise failed to comply with the terms of the
Compromise Agreement, and a levy was made on the glass and wooden
jalousies. Sampaguita filed a third-party claim alleging that it is the owner of said
materials and not Capitol, but Jalwindor filed an idemnity bond in favor of the
Sheriff and the items were sold at public auction, with Jalwindor as the highest
bidder . Sampaguita filed with the CFI of Rizal, Quezon City an action to nullify
the Sheriff's sale and for an injunction to prevent Jalwindor from detaching the
glass and wooden jalousies.
Issue: WON there was a delivery made and, therefore, a transfer of ownership of
the
thing
sold?
Ruling: YES. When the glass and wooden jealousies were delivered and
installed in the lease premises, Capitol became the owner thereof. Ownership is
not transferred by perfection of the contract but by delivery, either actual or
constructive.

Article 1491
Par. 2 thereof; Agents cannot acquire the
property whose administration or sale may have
been intrusted to them, unless the consent of
the principal has been given.
The rule,
however, does not apply to mortgagee
purchasing the mortgaged property at a public

Fiestan vs. CA

Capitol entered into a lease contract with Sampaguita, and the latter became the
owner of the items mentioned by virtue of the contract agreement. When levy
was made on the items, Capitol ( the judgment debtor) was no longer the owner
thereof.
Facts: Spouses Fiestan mortgaged their land to DBP as security for a loan. Upon
failure to pay, the land was foreclosed an. DBP acquired lot as highest bidder.
One year redemption period having expired, DBP title over the land was
consolidated.
Issue: WON DBP is prohibited to acquire the property under Art. 1491(2)?

Sales

sale.

Article 1506 & 559


Owner has the right to recover the property
which he is unlawfully deprived of. Unlawful
deprivation is not limited to properties stolen. It
encompasses situations where there has been
invalid transmission of ownership.

Dizon vs. Suntay

Reviewer:

Case

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Ruling: NO. The prohibition does not apply in the instant case where the sale in
dispute was made pursuant to a special power inserted in or attached to the real
estate under Act No. 3135 as amended. As special statute, Act 3135 prevails
over provisions of Civil Code as general statute. Moreover, even in the absence
of such provision, the mortgagee may still purchase the subject property to
protect his interest.
Facts: Respondent Suntay delivered a diamond ring to certain Clarita Sison for
the latter to sell it on commission. Time lapses and there was no return of the
ring nor the purchase price. Demand was made and later Sison was found out to
have pledged it to petitioner Dizon. Suntay thereafter filed for the recovery of
the thing. Lower and appellate courts found in her favor under Art 559 as owner
thereof. Hence this petition.
Issue: May Suntay still recover possession of the thing pledged?

Article 1506 & 559


The non-payment of books sold after the check
given as payment thereof was dishonored does
not amount to unlawful deprivation.

EDCA Publishing vs.


Santos

Ruling: YES. Suntay may recover the diamond ring from the pawnshop with
which another person has pledged it without authority to do so. Art 559 applies
and the defense that the pawnshop acquired possession of the ring without
notice of any defect in the title of the pledge is unavailing. Since the thing was
pledged by a pledgor having no authority to do so, the real owner is not stopped
from pursuing an action against the pawnshop for the recovery of the possession
of the thing. Petitioner is engaged in the business where presumably ordinary
prudence would manifest itself to ascertain whether or not the individual offering
jewelry by way of pledge is entitled to do so. No such precaution was exercised
by petitioner. He, therefore, has only himself to blame for the fix he is now.
Facts: A person identifying himself as Joe Cruz placed an order by telephone
with EDCA Publishing & Distributing Co. for 406 books payable on delivery.
Books were delivered for which Cruz issued a personal check as payment. Cruz
was later found out to be an impostor and the check issued was dishonored after
its presentation for payment. EDCA, after knowing that the said books were
subsequently sold to Leonor Santos, asked help of the police to seize the books
without warrant claiming it was unlawfully deprived of the books.
Issue: WON EDCA was unlawfully deprived of the books since the check issued
was dishonored?

Double Sale
Rules of preference in case of double sale:
1. Personal Property- possessor in good
faith

Carbonell vs. CA

Ruling: NO. Non-payment only creates a right to demand payment or to rescind


the contract, or to criminal prosecution in case of bouncing checks. Unless
otherwise stipulated, delivery of the thing sold will effectively transfer ownership
to the buyer who can in turn transfer it to another. It would certainly be unfair
now to make private respondent bear the prejudice sustained by EDCA as a
result of its own negligence. The Court cannot see the justice in transferring
EDCAs loss to the Santoses who had acted in good faith, and with proper case,
when they bought the books from Cruz.
FACTS: Jose Poncio mortgaged his lot to Republic Savings Bank for P1,500.
Meanwhile, Poncio sold his mortgaged lot to Rosario Carbonell in a Sale with
Assumption of Mortgage- with the purchase price would come the money to be
paid to the bank. both went to bank to pay the arrears on mortgage. Poncio was

Sales

2.

Real Property- in the following order:


Registrant in good faith;
Possessor in good faith;
Person with the oldest title in
good faith

Reviewer:

Case

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allowed to live on the lot provided it will pay rents. Thereafter, Poncio sold the lot
to Emma Infante who immediately took possession of the lot and built
improvements thereon. Informed that the sale to Infante was not registered,
Carbonell registered her adverse claim on Feb 8, 1955. Four days after, a deed
of sale in favor of Infante was registered.
Issue: Who has a better right on the question lot?

NOTE: Good faith is always an element.

Ruling: CARBONELL. In case of double sale of immovable property, art 1544,


2nd par directs that ownership should be recognized in favor of one who in good
faith first recorded his right. Absent such inscription, what is decisive is prior
possession in good faith. When Carbonell bought the land, she was the only
buyer thereof and the title was still in Poncios name solely encumbered by bank
mortgage duly annotated thereon. Hence Carbonells prior purchase of the land
was made in good faith. Such good faith did not cease after Poncio told her of
the 2nd sale since Carbonell attempted to talk to Infate but the latter did not
accommodate her. Carbonell then registered her adverse claim.
The recording of the adverse claim should be deemed to have been done in good
faith and should compromise Infantes bad faith when she registered her deed of
sale four days later.
Double Sale
Rules as to Preference of Ownership in
case of a Double Sale
1. If the property sold is movable, the
ownership shall be acquired by the
vendee who first takes possession in
good faith.
2. If the property sold is immovable, the
ownership shall belong, in the following
order stated:
a. The vendee who first registers the
sale in good faith in the Registry of
Deeds has a preferred right over
another vendee who has not
registered his title even if the latter
is in actual possession of the
immovable property.
Reason: Registration is the
operative act to convey or
affect the land insofar as
third
persons
are
concerned.
b. In the absence of registration, the
vendee who first takes possession

Tanedo vs. CA

Facts: Lazaro Tanedo executed a deed of absolute sale in favor of his eldest
brother, Ricardo Tanedo and the latters wife where he conveyed his future
inheritance from his parents. Later, Ricardo discovered that the land in litigation
was sold to Lazaros children through another deed of sale which was recorded in
the Register of Deeds; the heirs of Lazaro wanted to have the rescission of the
deeds in favor of Ricardo.
Issue: WON the second sale and the act of registration are valid.
Ruling: Yes. In addition, applying 1544 of the NCC, the petitioners (heirs of
Lazaro) also have a better right over the land, because under the said provision,
ownership shall belong to the buyer who in good faith registers it first it in the
Registry of Property.

Radiowealth Finance
Company vs. Palileo

Facts: Spouses Castro sold a parcel of unregistered land evidenced in a


notarized deed of absolute sale to Palileo. Palielo through his mother performed
acts of ownership; appellee on the other hand continuously paid the real estate
taxes on said land. A judgment in a civil case against Castro resulted to a sale of
the land at a public auction and Radiowealth bought it. The period of redemption
expired and the sale was later registered.
Issue: WON the rule in 1544 of the NCC is applicable to the UNREGISTERED
LAND.

Sales

c.

in good faith; and


In the absence of both registration
and possession, the vendee who
presents the oldest title (who first
brought the property in good faith.

Reviewer:

Case

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(Dean

S u n d i a n g ) | 18
2B 2010-2011

Held: No. Apply Sec. 35, Rule 39 of the Revised Rules of Court instead. The
Court explained that the purchaser of an unregistered land in a sheriffs
execution sale only steps in the shoes of the judgment debtor.
Spouses Gabriel vs.
Mabanta

Facts: Mabanta spouses were the registered owners of two lots. They
mortgaged the said properties to DBP as collateral. Later, the spouses sold the
land to Susana Soriano (Deed of sale of parcels of land with assumption of
mortgage) with a right to repurchase; they failed to buy it back. Susana
executed a document entitled "Cancellation of Contract" whereby she
transferred to Alejandro all her rights over the two lots. Alejandro and his son
Alfredo cultivated the lots. However, when they were ready to pay the entire
loan, they found that Tans daughter already bought the land.
Issue: WON the Tan-Reyes is in good faith when she bought and registered the
land.
Ruling: No. Good faith is something internal; hence, we must rely on the
conduct and outward acts of Tan-Reyes. Good faith must concur with
registration.

Consolidated Rural
Bank va. CA

Facts: The Madrid brothers were the registered owners of a lot. It was
subdivided. Rizal Madrid sold part of his share to Aleja Gamiao and Felisa Dayag
by virtue of a Deed of Sale. The sale was not registered; however, Gamiao and
Dayag declared the property for taxation purposes. A part of the land was sold to
Hernandez and dela Cruz and the heirs of the latter continued possession. The
Madrid brothers sold the same land to Marquez. The sale was registered.
Marquez mortgaged the land; these were registered. The land was foreclosed
and was sold to Calixto. The heirs of dela Cruz filed a case for reconveyance.
Issue: WON 1544 would apply.
Held: No, 1544 cannot be invoked where two persons made the sale. Apply the
principle of prior tempore, potior jure. The Heirs have a superior right.

Hanopol va. Pilapil

Facts: Hanopol claims ownership over the land by virtue of a series of purchases
by means of private documents from the Siapos. Pilapil asserts his right on the
strength of a duly notarized deed executed by the owners executed in his favor
and registered under Act. No. 3344.
Issue: WON the registration of the second sale in favor of Pilapil affects
Hanopols rights as the first vendee.
Held: Yes. The better right referred to in Act No. 3344 is more than a mere prior
deed. It involves facts and circumstances which combined, would make it clear

Sales

Reviewer:

Case

Digests

(Dean

S u n d i a n g ) | 19
2B 2010-2011

that the first buyer has a better right than the second purchaser. There seems to
be no clear evidence of Hanopols possession of the land. Hanopol cannot have a
better right than Pilapil who, according to the Trial Court was not a purchaser in
bad faith.