Académique Documents
Professionnel Documents
Culture Documents
Any error in this reviewer is the authors alone. The brilliance of her professor, Atty.
Manuel Casio, is not an assurance that nothing will be lost in the transmission.
Caveat Emptor - Buyers (of my ideas) beware. Read at your own risk.
dioryRabajante
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2.
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7.
Title & not a mode title gives rise to an obligation to transfer; it is not a mode w/c actually transfers ownership.
On its own, sale is not a mode which transfers ownership. It creates an obligation to transfer ownership. It is the delivery that
transfers ownership.
True Test:
A contract of sale gives rise to two obligations: for the seller, to transfer the ownership of and deliver a determinate thing; for
the buyer, the payment of the price.
If the condition is imposed upon the sellers obligation to transfer the ownership of and deliver the thing, there is a conditional
sale. Note that the essence of sale is the acquisition of ownership.
However, if the condition is imposed upon the buyers obligation to pay the price, the sale is still absolute. Payment of the
purchase price is part of the consummation stage (not perfection stage) of the contract of sale. Perfection of the contract of sale is
not affected by the fact that payment is subject to conditions, it being the case that a contract of sale is perfected by mere consent.
A and B entered into a contract of sale whereby A obliges himself to transfer the ownership of and deliver a certain piano
to B for P5,000. A and B further agreed that the piano will be delivered to B immediately after the execution of the
contract, and that B is given ten days to pay the price. The ownership is, however, reserved to A until the full payment of
the purchase price. Was the contract of sale entered into by A and B absolute?
No. The contract of sale between A and B was conditional because there was a condition imposed upon As obligation
to transfer the ownership of the piano. Bs ownership of piano is automatically transferred to the buyer by operation of
law upon fulfillment of a suspensive condition which is the payment of the purchase price.
2.
A and B entered into a contract of sale whereby A obliges himself to transfer the ownership of and deliver a certain piano
to B for P5,000. They further agreed that payment of the price by B is subject to the condition that B will receive money
from C. Is the contract of sale entered into by A and B absolute?
Yes. The condition is imposed only upon the payment of the price.
Jurisprudential Doctrines:
People's
Homesite &
Housing Corp. vs
CA
Dignos vs CA
There was no perfected sale of a lot when it was conditionally or contingently awarded 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 was approved, the Mendozas should have
manifested in writing their acceptance of the award for the purchase of the lot just to show that they were
still interested in its purchase, although the area was reduced. Yet, they did not do so. Article 1475 of the
NCC provides that the contract of sale is perfected at the moment there is a meeting of the minds..."
Under the facts of this case, there was no meeting of minds on the purchase of Lot 4 with an area of
2,608.7 square meters at P21 a square meter.
As to the conditional nature of the sale, Article 1181 of the NCC states that 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.
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. In this case,
there is no such stipulation reserving the title of the property on the vendors nor does it give them the right
to unilaterally rescind the contract upon non-payment of the balance thereof within a fixed period.
Furthermore, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are present.
Art. 1478: The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.
CONTRACT OF SALE
Title passes to buyer upon delivery
Failure to pay is a resolutory condition which puts an end to
the transaction;
Remedies:
(1) Specific performance
(2) Rescission (1191)
Seller loses ownership upon delivery
CONTRACT TO SELL
Ownership is retained and will be transferred upon payment
Failure to pay is a positive suspensive condition, failure of
which is not a breach but prevents the obligation of the
vendor to convey title to arise
Title remains in the vendor even after delivery
Article 1713: By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer,
in consideration of a certain price or compensation. The contractor may either employ only his labor or skill or also furnish
the material.
Article 1467:
CONTRACT OF SALE: A contract for the delivery at a certain price 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
CONTRACT FOR A PIECE OF WORK: if the goods are to be manufactured specially for the customer AND upon his special
order, and not for the general market. Here, service is the Subject Matter
BUT:
THERE CAN BE NO CONTRACT FOR PIECE OF WORK FOR PAST SERVICE RESULTING IN THE CREATION OF THE OBJECT
(ALWAYS A SALE)
JURISPRUDENTIAL DOCTRINES:
Celestino Co. vs Collector
When a factory accepts a job that requires the use of extraordinary or additional
equipment, or involves services not generally performed by it, it thereby contracts
for a piece of work.
- In the case at bar, the orders exhibited were not shown to be special. They
were merely orders for work nothing is shown to call them special requiring
extraordinary service of the factory. The factory sold materials ordinarily
manufactured by it sash, panels, mouldings to Teodoro & Co., although in
such form or combination as suited the fancy of the purchaser. Such new form
does not divest the factory of its character as manufacturer. Neither does it take
the transaction out of the category of sales under Article 1467 above quoted,
because although the Factory does not, in the ordinary course of its business,
manufacture and keep on stock doors of the kind sold to Teodoro, it could stock
and/or probably had in stock the sash, mouldings and panels it used therefor
(some of them at least).
The distinction between a contract of sale and one for work, labor and materials
is tested by the inquiry whether the thing transferred is one not in existence and
which never would have existed but for the order of the party desiring to acquire it,
or a thing which would have existed and has been the subject of sale to some
other persons even if the order had not been given.
If the article ordered by the purchaser is exactly such as the plaintiff makes and
keeps on hand for sale to anyone, and no change or modification of it is made at
defendant's request, it is a contract of sale, even though it may be entirely made
after, and in consequence of, the defendants order for it.
The word "contractor" has come to be used with special reference to a person
who, in the pursuit of the independent business, undertakes to do a specific job or
piece of work for other persons, using his own means and methods without
submitting himself to control as to the petty details.
IMPORTANCE OF DISTINCTION
Difference in the rules governing both contracts (e.g. tax rates and other charges are lower for contractors) and
application of SoF
Inchausti v Cromwell - SC adopted Massachusetts rule that the test whether the thing transferred is one not in existence
and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have
existed and been subject of sale to some other person, even if the order had not been given.
True test of a Contractor he renders service in the course of an independent occupation, representing the will of his
employer only as to the result of his work, and not as to the means by which it is accomplished (Luzon Stevedoring Co v
Trinidad and La Carlota Sugar Central v Trinidad).
Article 1868: By a contract of agency, a person binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.
Article 1322: An offer made through an agent is accepted from the time acceptance is communicated to him
SALE
Buyer pays the price
Buyer acquires ownership over the object of the
contract
Seller warrants
Essence of sale: transfer of title or agreement to
transfer it for the price paid or promised
JURISPRUDENTIAL DOCTRINES:
Quiroga vs Parsons Hardware Where the price of the objects is paid within the terms fixed without any other consideration and
Co.
regardless as to whether the objects are sold, the contract is one of sale.
(In order to classify a contract, due regard must be given to its essential clauses. A contract is what the
law defines it to be, and not what it is called by the contracting parties.)
- In the case at bar, it shows that the cause and subject matter which are to furnish the defendant with
beds and in turn, pay for the stipulated price, are precisely the essential features of contract of purchase
and sale. There was an obligation on the part of the plaintiff to supply beds and on defendants part, to pay
the price which in turn, excludes the legal conception of an agency.
Kerr vs Lingad
- In an agency, there is an order to sell whereby the agent receives a thing to sell it and he is not
required to pay its price but is required to turn over to the principal the price he obtains for the sale. If he
does not succeed in selling it, he will have to return the thing. This is not the case of the matter in the case
at bar. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds,
was necessarily obliged to pay their price within the term fixed, without any other consideration and
regardless as to whether he had or had not sold the beds. Hence, the contract by and between the parties
is one of purchase and sale.
The transfer of title or agreement to transfer it for a price paid is the essence of sale. If such transfer puts
the transferee in the position of an owner and makes him liable for the agreed price, the transaction is a
sale. On the other hand, the essence of an agency to sell is the delivery to an agent, not as his property,
but as the property of his principal, who remains the owner and has the right to control sales, fix the price
and terms, demand and receive the proceeds less the agent's commission upon sales made.
- In the case at bar, the relationship between the petitioner and US Rubber International is one of
brokerage or agency because of the following contractual stipulations:
*that petitioner can dispose of the products of the Company only to certain persons or entities and within
stipulated limits, unless excepted by the contract or by the Rubber Company (Par. 2);
*that it merely receives, accepts and/or holds upon consignment the products, which remain properties of
the latter company (Par. 8);
*that every effort shall be made by petitioner to promote in every way the sale of the products (Par. 3);
*that sales made by petitioner are subject to approval by the company (Par. 12);
*that on dates determined by the rubber company, petitioner shall render a detailed report showing sales
during the month (Par. 14);
*that the rubber company shall invoice the sales as of the dates of inventory and sales report (Par. 14);
*that the rubber company agrees to keep the consigned goods fully insured under insurance policies
payable to it in case of loss (Par. 15);
*that upon request of the rubber company at any time, petitioner shall render an inventory of the existing
stock which may be checked by an authorized representative of the former (Par. 15); and
*that upon termination or cancellation of the Agreement, all goods held on consignment shall be held by
petitioner for the account of the rubber company until their disposition is provided for by the latter (Par.
19).
Article 1245: Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be
governed by the law on sales.
There is a novation of the contract of loan into a contract of sale when creditor agrees to accept a thing in payment
of the debt.
If thing given in payment turns out to belong to another, creditors remedy is governed by law on sales, not on loan.
SALE
No pre-existing credit
Gives rise to obligations
Cause or consideration is the price from the viewpoint of
the seller; or the obtaining of the object, from the
viewpoint of the buyer
Greater freedom in the determination of the price
Giving of the price may generally end the obligation of
the buyer
DACION EN PAGO
Pre-existing credit
Extinguishes obligations
Cause or consideration from the viewpoint of the person offering the
dation in payment is the extinguishment of his debt; from the
viewpoint of the creditor, the cause is the acquisition of the object
offered in lieu of the original credit
Less freedom in determining the price
Giving of the object in lieu of the credit may extinguish completely or
partially the credit (depending on the agreement)
Article 1638: By a contract of barter or exchange, one of the parties binds himself to give one thing in consideration of
the others promise to give another thing.
Article 1468: if the consideration of the contract consists partly in money and partly in another thing, the transaction shall
be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered
a:
Because the true cause of the contract for the other party is the thing transferred and not the
money.
SALE: if
Article 1643: In the lease of things, one of the parties binds himself to give to another, the enjoyment or use of a thing
for a price certain, and for a period which may be definite or indefinite. However, no lease for more than 99 years shall
be valid.
Article 1484: Vendors alternative remedies in a contract of sale of personal property price of which is payable in
installments:
1. Exact fulfillment of obligation in case of failure to pay (specific performance)
2. Cancel sale in case of failure to pay two or more installments
3. Foreclose the chattel mortgage
Article 1485: Art 1484 is also applicable to contracts purporting to be leases of personal property with option to buy,
when lessor has deprived lessee of the possession or enjoyment of thing.
So-called rents must be regarded as payment of price in installments since due payment of the agreed amount
results in the transfer of title to the lessee
JURISPRUDENTIAL DOCTRINES:
Jose v. Barrueco, 67 Phil 747 (1939)
The total rents being equal to the value of the thing leased, the SC considered the
transaction as one of sale.
Article 1489: All persons authorized in this Code to obligate themselves, may enter into contract of sale, saving the
modifications contained in the following articles.
Where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable
price therefor. Necessaries are those referred to in Art 290 (now Art 194 of FC)
Art. 194, Family Code: Necessaries = everything indispensable for sustenance, dwelling, clothing, medical
Art 1399,Civil Code: obligation of incapacitated person who entered into contract to restitute that which he has
Article 234, Family Code: Emancipation takes place by the attainment of majority. Unless otherwise provided, majority
commences at the age of 18 years (as amended by R.A. 6809).
Article 46: Juridical persons may acquire and possess property of all kinds, as well as incur obligations and bring civil or
criminal actions, in conformity with the laws and regulations of their organization.
Article 36(6), Corporation Code: Every corporation incorporated under this Code has the power and capacity:
6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks to subscribers and to
sell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation if
it be a non-stock corporation;
a.
Absolute Incapacity
Article 1328: Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkenness or
during a hypnotic spell are voidable.
Article 1390: The following contracts are voidable or annullable, even though there may have been no damage to the
contracting parties:
(1) One of the parties is incapable of giving consent (want of capacity)
(2) Consent is vitiated by mistake, violence, intimidation, undue influence or fraud (vitiated consent)
These contracts are binding, unless they are annulled by a proper court action. They are susceptible of ratification.
Article 1393: Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if with
knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right
to invoke it should execute an act which necessarily implies an intention to waive his right.
Article 1397: The action for annulment of the contracts may be instituted by all who are thereby obliged principally or
subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can
those who exerted intimidation, violence or undue influence or employed fraud or caused mistake base their action upon
these flaws of the contract.
Article 1399: When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is
not obliged to make any restitution except insofar as he has been benefited by the price or thing received by him.
b.
Relative Incapacity
Articles 1490: Husband and wife cannot sell property to each other, except
1.
2.
Article 1492: The prohibitions in the two preceding articles are applicable to sales in:
Legal redemption [Article 1619: Legal redemption is the right to be subrogated, upon the same terms
and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or
dation in payment, or by any other transaction whereby ownership is transmitted by onerous title.]
Compromises [Article 2028: a compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced.] amicable settlement of a
controversy
Renunciations [Article 1270: Condonation or remission is essentially gratuitous, and requires the
acceptance of the obligor] exists when creditor gratuitously abandons his right against debtor as
in condonation or remission
Article 73, Family Code: Either spouse may exercise any legitimate profession, occupation, business or activity without the
consent of the other. The latter may object only on a valid, serious and moral grounds.
In case of disagreement, the court shall decide whether or not:
1. The objection is proper; and
2. Benefit has accrued to the family prior to the objection (resulting obligation shall be enforced against
the separate property of the spouse who has not obtained consent) or thereafter.
Foregoing provisions shall not prejudice the rights of creditors who acted in good faith.
Article 96, Family Code: The administration and enjoyment of the community property shall belong to both spouses
jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for
proper remedy, which must be availed of within five years from the date of the contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the common
properties, the other spouse may assume sole powers of administration. These powers do not include disposition or
encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority
or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing
offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the
acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.
Prohibition can be taken advantage of only by persons who bear such a relationship to the spouses making the transfer or to the
property itself that such transfer interferes with their rights or interest.
c.
Specific Incapacity
Article 1491: The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or
through the mediation of another: [GAEP-JS]
(1) The guardian, the property of the person or persons who may be under his guardianship;
o
Actual collusion is hard to prove between purchaser and guardian, but such fact can be deduced from the
very short time between the two sales and the relationship between them.
(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal
has been given;
o
Incapacity to buy rests on the fact that greed might get the better of the sentiments of loyalty and
disinterestedness which should animate an administrator or agent.
o
A broker does not come within the prohibition because he is a mere go-between or middleman between
the seller and the buyer, bringing them together to make the contract themselves.
(3) Executors and administrators, the property of the estate under administration;
o
But an executor can buy the hereditary rights of an heir to the estate under his administration ( Naval v
Enriquez)
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned
or controlled corporation, or institution, the administration of which has been entrusted to them; this provision shall apply
to judges and government experts who, in any manner whatsoever, take part in the sale;
o
Intended not only to remove any occasion for fraud but also to surround them with the prestige necessary
to carry out their functions by freeing them from all suspicion which although unfounded, tends to
discredit the institution by putting into question the honor of said functionaries.
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights in litigation or levied upon an
execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which
may be the object of any litigation in which they may take part by virtue of their profession.
o
Law intends to avoid improper interference by a judge in a thing levied upon or sold by his order (Gan
Tingco v Pabinquit).
o
Incapacity of SC or CA Justice extends to properties or rights in litigation in their territorial jurisdiction.
o
CFI Judge can buy properties in litigation pending outside his territorial jurisdiction.
Such contracts made in violation of this provision are void for public policy. They cannot be ratified neither can the
right to set up the defense of illegality be waived.
Bautista vs Montilla
Rubias vs Batiller
Fornilda vs RTC
The courts have laid down the rule that the sale of real property made by minors who have already
passed the ages of puberty and adolescence and are near the adult age when they pretend to have already
reached their majority, while in fact they have not, is valid, and they cannot be permitted afterwards to
excuse themselves from compliance with the obligation assumed by them or to seek their annulment. This
doctrine is entirely in accord with the provisions of the Rules of Court (Rule 131, Sec. 1) and the principle of
estoppel.
The ruling in Mercado case is affirmed.
To bind a minor who represents himself to be of legal age, it is not necessary for his vendee to actually
part with cash, as long as the contract is supported by a valid consideration. Since appellee's conveyance to
the appellants was admittedly for and in virtue of a pre-existing indebtedness (unquestionably a valid
consideration), it should produce its full force and effect in the absence of any other vice that may legally
invalidate the same. It is not here claimed that the deed of sale is null and void on any ground other than
the appellee's minority. Appellee's contract has become fully efficacious as a contract executed by parties
with full legal capacity.
The circumstance that, about one month after the date of the conveyance, the appellee informed the
appellants of his minority, is of no moment, because appellee's previous misrepresentation had already
estopped him from disavowing the contract. Said belated information merely leads to the inference that the
appellants in fact did not know that the appellee was a minor on the date of the contract, and somewhat
emphasizes appellee's bad faith, when it is borne in mind that no sooner had he given said information than
he ratified his deed of sale upon receiving from the appellants the sum of P500.
The sale from Uy Sui Pin to his wife Chua Hue is null and void not only because the former had no right to
dispose of the land in controversy in view of the existence of the contract but because such sale comes
within the prohibition of article 1458 of the Civil Code.
It is a policy of the law that public officers who hold positions of trust may not bid directly or indirectly to
acquireproperties foreclosed by their offices and sold at public auction. Article XIII, Section 1 of our
Constitution states that: Public office is a public trust. Public officers and employees shall serve with the
highest degree of responsibility, integrity, loyalty and efficiency, and shall remain accountable to the people.
A Division Chief of the GSIS is not an ordinary employee without influence or authority. The mere fact
that he exercises ample authority with respect to a particular activity, i.e., retirement, shows that his
influence cannot be lightly regarded.
The point is that he is a public officer and his wife acts for and in his name in any transaction with the
GSIS. If he is allowed to participate in the public bidding of properties foreclosed or confiscated by the
GSIS, there will always be the suspicion among other bidders and the general public that the insider official
had access to information and connections with his fellow GSIS officials as to allow him to eventually
acquire the property. It is precisely the need to forestall such suspicions and to restore confidence in the
public service that the Civil Code now declares such transactions to be void from the beginning and not
merely voidable. The reasons are grounded on public order and public policy. Assuming the transaction to
be fair and not tainted with irregularity, it is still looked upon with disfavor because it places the officer in a
position which might become antagonistic to his public duty.
The purchase by a lawyer of the property in litigation from his client is categorically prohibited by Article
1491, paragraph (5) of the Philippine Civil Code, and that consequently, plaintiff's purchase of the property
in litigation from his client (assuming that his client could sell the same since his client's claim to the
property was defeated and rejected) was void and could produce no legal effect, by virtue of Article 1409,
paragraph (7) of our Civil Code which provides that contracts "expressly prohibited or declared void by law
are inexistent and that "these contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived."
The fact that the property in question was first mortgaged by the client to his lawyer and only
subsequently acquired by the latter in a foreclosure sale long after the termination of the case will not
remove it from the scope of the prohibition for at the time the mortgage was executed the relationship of
lawyer and client still existed, the very relation of trust and confidence sought to be protected by the
Consent = meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. (Art.
1319)
ELEMENTS OF CONSENT:
1.
2.
3.
4.
* SUBJECT MATTER
It must be existing, future, or subject to resolutory condition. (It must be at least a possible subject matter)
It must be licit.
It must be determinate or determinable.
POSSIBLE THING Art. 1461: Things having a potential existence (Emptio rei speratae) may be the object of the contract of sale. The
efficacy of the sale of a mere hope or expectancy (Emptio Spei) is deemed subject to the condition that the thing will
10
Art. 1463: The sole owner of a thing may sell an undivided interest therein.
Art. 1464: In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller
purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the
number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer becomes owner in
common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure
of the mass. If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the
whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, unless a
contrary intent appears.
Art. 1465: Things subject to a resolutory condition (pacto de retro sale) may be the object of the contract of sale.
*EMPTIO SPEI sale of a mere hope or expectancy (e.g. sale of a sweepstake ticket for P100 where the buyer purchases
the ticket with the hope that upon the draw the ticket would win him a million pesos. The object of sale here is not the
prize, but rather the ticket or the chance to win)
*EMPTIO REI SPERATAE sale of a thing with potential existence, subject to a suspensive condition that the thing will
come into existence. If the subject matter does not come into existence, the contract is deemed extinguished as soon as
the time expires or if it has become indubitable that the event will not take place. (e.g. sale of pending crops)
LICIT
Art. 1459: The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is
delivered.
Art. 1347: All things which are not outside the commerce of men, including future things, may be the object of a contract. All
rights which are not intransmissible may also be the object of contracts.
No contract may be entered into upon future inheritance except in cases expressly authorized by law.
Art. 1409: The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
Art. 1416: When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designated for
the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered.
Property or goods which at the time of the sale are not owned by the seller but which
thereafter are to be acquired by him, cannot be the subject of an executed sale but may be
11
12
HYPOTHETICAL QUESTIONS:
1.
A brought B to the place where As property is located. A told B that the size of his land is as big as far as Bs eyes can
see. A offered to sell this land to B for P500k. B accepted the offer. Is there a perfected contract?
Yes. The subject matter is determinable or capable of being made determinate without the need for a new or further
agreement between A and B.
2.
In 1911, the sale of alcoholic drinks to members of the non-Christian tribes is prohibited. During that time, A sold B (a
member of the non-Christian tribe) an alcoholic drink. In 1912, Congress passed a law decriminalizing the sale of alcoholic
drinks to members of non-Christian tribes. Is the sale between A and B valid?
No. The contract of sale is still void for being illegal. The validity of the contract is determined as of the time it is
perfected.
3.
A sold B a very old lottery ticket (dated 1965). Is the sale valid?
It is void as it is a sale of vain hope. However, if the lottery ticket is a collectors item, there is a valid sale.
* PRICE
Art. 1469: In order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing
certain, or that the determination thereof be left to the judgment of specified person or persons.
Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties
subsequently agree upon the price.
If the third person or persons acted in bad faith or by mistake, the courts may fix the price.
Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer, the party
not in fault may have such remedies against party in fault as are allowed the seller or the buyer, as the case may be.
Art. 1470: Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent or
that the parties really intended a donation or some other act or contract.
Art. 1355: Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has
been fraud, mistake or undue influence.
Alarcon vs. Kasilag
Pascua vs. Simeon
Inadequacy of price may be a ground for setting aside an execution sale but is not a sufficient
ground for cancellation of a voluntary contract of sale otherwise free from invalidating effects.
Gross inadequacy of price may avoid judicial sale only when it is shocking to the conscience of
man.
Art. 1471: If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some
other act or contract.
Art. 1346: (simulated contract) An absolutely simulated or fictitious contract is void. A relative simulation, when it does
not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or
public policy binds the parties to their real agreement.
Art. 1472: The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that
which the thing sold would have on a definite day, or a particular exchange or market, or when an amount is fixed above or
below the price on such day, or in such exchange or market, provided said amount be certain.
Art. 1473: The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price
fixed by one of the parties is accepted by the other, the sale is perfected.
(The owner of a thing has the right to quote his own price, reasonable or unreasonable. It is up to the prospective buyer
to accept or reject it.)
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 therefor. What is a reasonable price is a question of fact dependent on the circumstances of each
particular case.
Requisites of 1474 as exception (however, if the thing or any part thereof has been delivered to and appropriated by the
buyer):
a. Meeting of the minds as to the subject matter;
b. Agreement that a price will be paid; and
c. Delivery by the seller and appropriation by the buyer of the subject matter
13
ELEMENTS OF PRICE
1. Real (not simulated) when at the perfection of the contract, there is every intention on the part of the buyer to pay the
2.
price, and every intention on the part of the seller to receive such price.
Certain or Ascertainable
a.
b.
3.
4.
HYPOTHETICAL QUESTIONS:
1.
A offered to sell his parcel of land to B. B accepted the offer. However, there is no agreement as to the price. A appointed
C to fix the price. C fixed the price at P500k. Is there a perfected contract?
No, there is none. There must be an agreement between A and B as to the price.
Art. 1324: When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before
acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or
promised.
Art. 1479: A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
What is an Option Contract?
o
It is a contract that grants an exclusive right in one person, for which he has paid a separate consideration, to
buy a certain object within an agreed period.
14
An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price.
[Laforteza vs. Machuca; Spouses Buot vs. CA]
EARNEST MONEY
Title passes to the buyer upon delivery of the thing sold
In case of non-payment, an action for specific performance or
for rescission can be filed by the injured party
Part of the purchase price
When given, the buyer is bound to pay the balance
There is already a sale
HYPOTHETICAL QUESTIONS:
1.
On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July
2009). B said he will give the consideration on 30 August 2009. Rule the case.
There is an offer, but there is no option contract. Even if B paid the consideration on 30 June, there is still no option
contract unless A agreed to enter into an option contract should B pay on 30 June.
2.
On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July
2009). On 2 July 2009, B accepted the offer. Rule the case.
There is no perfected contract of sale because As offer already expired.
3.
On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July
2009). On 2 June 2009, B accepted the offer. Rule the case.
The sale between A and B is perfected.
4.
On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July
2009). On 2 June 2009, B accepted the offer. However, on 3 June 2009, A said that he is no longer interested in selling
the land. Rule the case.
A can no longer withdraw the offer because B has already accepted the same. (Art. 1324)
5.
On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July
2009). On 2 June 2009, A wanted to withdraw the offer, but he was unable to communicate the withdrawal to B. B
accepted the offer on 3 June 2009. Rule the case.
The sale is perfected. Withdrawal of the offer, in order to be valid, must be communicated to the offeree.
6.
On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July
2009). They further agreed that should B give P5k, A will not withdraw the offer prior to the expiration of the period given
to B. On 2 June 2009, B offered to A the P5k consideration. A, however, said that he would not accept the P5k as he is
willing to enter into an option contract with B even without the payment of P5k. Rule the case.
(?)
7.
On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July
2009). They further agreed that should B give P5k, A will not withdraw the offer prior to the expiration of the period given
15
Ang Yu Asuncion vs CA
(1994)
16
Nietes vs CA (1972)
Consent = meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. (Art.
1319)
ELEMENTS OF CONSENT:
5.
6.
7.
8.
ELEMENTS OF OFFER:
1.
2.
3.
Complete
Definite as to the certainty of price and identity of the object
Intentional
Mirror Image theory The person making the offer may fix time, place, and manner of acceptance, all of which must be
complied with. (Art. 1321)
Cognition theory the offer is deemed accepted when the acceptance has come to the knowledge of the offeror.
*Form of offer
Article 1319: 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. A qualified acceptance constitutes
a counter-offer.
Article 1325: Unless it appears otherwise, business advertisements of things for sale are not definite offers, but mere
invitation to make an offer.
Article 1326: Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to
accept the highest or lowest bidders unless the contrary appears.
* Form of acceptance
Article 1319: 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. A qualified acceptance constitutes
a counter-offer.
Article 1322: An offer made through an agent is accepted from the time acceptance is communicated to him.
* When offer becomes ineffective
17
Article 1323: An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before
acceptance is conveyed
Acceptance must be plain and unconditional. Any condition necessarily involves a new proposal, which must be accepted by
the other party to give rise to a binding agreement. Acceptance must be in accordance with the terms and conditions of the
offer to effectively bind the offeror.
*The object need not be owned by the seller at the time of perfection. It is sufficient that the seller has the right to transfer
the ownership of the object at the time of delivery.
- LEGAL BASES: Art. 1459 (vendor must have the right to transfer the ownership of the thing at the time of delivery); and Art.
1434 (When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires
title thereto, such title passes by operation of law to the buyer or grantee.)
- EXCEPTION to this rule: CDB vs Lim and Nool vs CA
Cavite Development
Bank, et al vs Cyrus
Lim, et al.
Conchita Nool vs CA
In the case at bar, a contract of sale was perfected. The sum of P30,000.00, although
denominated in the offer to purchase as "option money," is actually in the nature of
earnest money or down payment when considered with the other terms of the offer.
Contracts are not defined by the parties thereto but by principles of law. In determining
the nature of a contract, the courts are not bound by the name or title given to it by the
contracting parties.
- However, a legal obstacle has rendered it impossible in the case at bar, to perform
its obligation. The sale to Lim of the property mortgaged by Rodolfo is deemed a nullity
for CDB never acquired a valid title to the property because the foreclosure sale, in which
CDB has been awarded the property is also a nullity since the mortgagor is not the real
owner of the said property.
Article 1505 of the Civil Code provides that "where goods are sold by a person who is
not the owner thereof, and who does not sell them under authority or with consent of
the owner, the buyer acquires no better title to the goods than the seller had, unless the
owner of the goods is by his conduct precluded from denying the seller's authority to
sell." Here, there is no allegation at all that petitioners were authorized by DBP to sell the
property to the private respondents. Jurisprudence, on the other hand, teaches us that
"a person can sell only what he owns or is authorized to sell; the buyer can as a
consequence acquire no more than what the seller can legally transfer." As petitioners
"sold" nothing, it follows that they can also "repurchase" nothing. In this light, the
contract of repurchase is also inoperative and by the same analogy, void.
HYPOTHETICAL QUESTIONS:
1.
A offered to transfer the ownership of and deliver a piano to B for P5k. B accepted the offer. However, before
delivery by A and payment by B, A sold the piano to C. Rule the case.
There is a double sale. (See Double Sale)
2.
A offered to sell a bag of shabu to B for P500k. B accepted the offer. Is there a perfected contract of sale?
Yes. There is a perfected, yet void, contract.
3.
A (a 15 year old boy) bought a kilo of rice from B for P35. Is the sale perfected?
Yes, this is considered a sale of necessaries.
4.
A owns Lot 1. B, a stranger to A, sold Lot 1 to C. Is the sale between B and C perfected?
Yes, the sale is perfected but the same is unenforceable as between A and B.
[Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers xxx]
5.
A wanted to sell his only car for P500k. He advertised this in a newspaper. B read the advertisement, and thereafter
went to A to purchase the car. A, however, told B that he is no longer interested in selling the car. Can B compel A
to sell the car?
No. See Article 1325.
6.
B offered to sell a parcel of land to A, and told the latter that the acceptance should be made only on the 3rd day
after the offer was communicated. Furthermore, B said that the acceptance of the offer should be sent through fax.
A was very much interested to buy the land, so he sent B an e-mail message on the 3rd day after the offer was
communicated, informing B that he is accepting the offer. Was there a perfected contract of sale?
18
EXTINGUISHMENT OF OBLIGATIONS
* Question: In a contract of sale, is delivery of the property the only means to transfer ownership? No. See Article 1434
(Estoppel: the seller is not the owner of the thing) - construe Art. 1434 in relation to Art. 1403(1)
Art. 1434: When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor
acquires title thereto, such title passes by operation of law to the buyer or grantee.
Art. 1403: The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers xxx
EFFECT OF ESTOPPEL
Hypothetical Question: A owns Lot 1. B, a stranger to A, sold Lot 1 to C. Thereafter, B was able to purchase Lot 1 from A.
(1) Was the sale of between B and C prior to Bs purchase of the land perfected?
Yes. The sale is perfected. However, it is unenforceable.
(2) Who has the better right to Lot 1? (Stated differently, who owns Lot 1?)
C is the owner. Title passes to C by operation of law.
* FORMATION OF CONTRACTS
* Article 1483: Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale
may be made:
1.
2.
3.
4.
In writing
Word of mouth
Partly in writing and partly by word of mouth
May be inferred from the conduct of parties
*Form of Contract:
Art. 1356: Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential
requisites for their validity are present. However, when the law requires that a contract be in some form in order that it
may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and
indispensable. In such cases, the right of the parties stated in the following article cannot be exercised.
Art. 1357: If the law requires a document or other special form, as in the acts and contracts enumerated in the following
article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This
right may be exercised simultaneously with the action upon the contract.
19
Section 11, Republic Act No. 8792, Electronic Commerce Act Authentication of Electronic Data Messages and Electronic Documents.
- Until the Supreme Court by appropriate rules shall have so provided, electronic documents, electronic data messages and
electronic signatures, shall be authenticated by demonstrating, substantiating and validating a claimed identity of a user, device, or
another entity in an information or communication system, among other ways, as follows:
(a) The electronic signature shall be authenticated by proof that a letter, character, number or other symbol in electronic
form representing the persons named in and attached to or logically associated with an electronic data message,
electronic document, or that the appropriate methodology or security procedures, when applicable, were employed or
20
A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. Is the contract valid?
The contract is valid but unenforceable. See Art. 1403 (2)(d).
1.1 May the contracting parties compel each other to observe the form?
Yes. See Arts. 1357 and 1406.
[Art. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the
following article, the contracting parties may compel each other to observe that form, once the contract has been
perfected. This right may be exercised simultaneously with the action upon the contract.
Art. 1406. When a contract is enforceable under the Statute of Frauds, and a public document is necessary for its
registration in the Registry of Deeds, the parties may avail themselves of the right under Article 1357.]
2.
A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. B already paid 500k
but A refused to deliver the land arguing that the contract they entered into is unenforceable.
As argument is untenable. The Statute of Frauds is applicable only to executory contracts.
3.
A owns a parcel of land. B is an agent of A. B sold As land to C. What is the status of the contract?
The contract is void, absent any written document giving B the authority to sell As land. See Regina Dizon vs CA.
Regina Dizon vs CA
4.
Article 1874 of the Civil Code is explicit that: "When a sale of a piece of
land or any interest therein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void."
A owes B P500k. To defraud B, A sold his only property to C, who was in good faith. What are the remedies available to
B?
See Article 1177.
Art. 1177: The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may
exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his
person; they may also impugn the acts which the debtor may have done to defraud them.
(Hence, the remedies available to B are:
a. To Exact fulfilment with right to damages
b. To Exhaust the debtors properties still in his possession writ of attachment (before judgment) or writ of
execution (for final judgment not yet executed)
21
A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. There is no written
note or memorandum to prove the contract but the offer and acceptance were made through e-mail. Is the contract
valid and enforceable?
Yes. The Electronic Commerce Act (RA 8792) is applicable.
5.1. If the offer and acceptance were made through SMS, is the contract still valid and enforceable?
I think so.
6.
A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. When the suit was
brought to the court to assail the enforceability of the contract, one party (A), failed to object to the presentation of
evidence aliunde made by B. Is the contract valid?
Yes. See Article 1405.
Art. 1405: Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the failure to
object to the presentation of oral evidence to prove the same, or by the acceptance of benefit under them.
7.
A entered into a contract of sale with B where the former engages to sell a parcel of land for $500k. B was mistaken to
believe that the price is P500k. Is there a perfected contract? If in the affirmative, is the sale valid? Can the contract be
reformed?
* LEGALITY OF SALE
Article 1409: the following contracts are inexistent and void from the beginning
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy
Those which are absolutely simulated or fictitious
Those whose cause or object did not exist at the time of the transaction
Those whose object is outside the commerce of men
Those which contemplate an impossible service
Those where the intention of the parties relative to the principal object of the contract cannot be ascertained
Those whose expressly prohibited or declared void by the law
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
Article 1411: when the nullity proceeds from the illegality of the cause or object of the contract and the act constitutes a criminal
offense, both parties being in pari delicto, they shall have no action against each other and both shall be prosecuted. Moreover, the
provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price
of the contract.
This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given and shall not
be bound to comply with his promise.
2.
Article 1416: When the agreement is not illegal per se but is merely prohibited, and the prohibition is designed for the protection of
the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered.
Article XII, Section 2, 1987 Constitution: All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State.
With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations
or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not
exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be
22
Article XII, Section 3, 1987 Constitution: Lands of the public domain are classified into agricultural, forest or timber, mineral lands
and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may
be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not
hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not
more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than
five hundred hectares, or acquire not more than twelve hectares thereof, by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian
reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or
leased and the conditions therefor.
Article XII, Section 7, 1987 Constitution : Save in cases of hereditary succession, no private lands shall be transferred or conveyed
except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
Article XII, Section 8, 1987 Constitution: Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the
Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.
Art. 1477: The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive
delivery thereof.
Art. 1496: The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any
of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession
is transferred from the vendor to the vendee.
Art. 1497: The thing sold shall be understood as delivered, when it is placed in the control and possession of the
vendee.
- The vendor must have the right to transfer the ownership of the thing at the time it is delivered (Art 1459)
Reason for this rule: NEMO DAT QUOD NON HABET (He who does not own the thing cannot dispose of the same)
Philippine Suburban
Development Corp. vs
Auditor General
23
Balatbat vs CA
delivery.
Devoid of any stipulation that "ownership in the thing shall not pass to the
purchaser until he has fully paid the price", ownership in thing shall pass
from the vendor to the vendee upon actual or constructive delivery of the
thing sold even if the purchase price has not yet been fully paid. The failure
of the buyer to make good the price does not, in law, cause the ownership
to revest to the seller unless the bilateral contract of sale is first rescinded or
resolved pursuant to Article 1191 of the New Civil Code. Non-payment only
creates a right to demand the fulfillment of the obligation or to rescind the
contract.
Identity
Integrity
Consing vs CA
sold in a condition suitable for its enjoyment by the buyer for the purposes
contemplated and a proper access to a residence is essential to its enjoyment.
The seller cannot shift to the buyer the burden of providing for an access to and
from the subdivision, and when the seller has so defaulted in such obligation, the
buyer should be entitled to a proportionate reduction in her purchase price of the
two lots.
3.
Intention
Abuan vs Garcia
Quijada vs CA
The critical factor in all different modes of effecting delivery, which gives legal
effect to the act, is the actual intention of the seller to deliver, and its acceptance
by the buyer. Without that intention, there is no tradition
In all forms of delivery, it is necessary that the act of delivery, whether
constructive or actual, should be coupled with the intention of delivering the
thing. The act, without the intention, is insufficient. 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.
The Supreme Court recognized that the sale of a land previously donated by
the seller to a local government unit under a resolutory condition, was a valid
sale even though at the time of sale, ownership in the property was still with the
local government. However, when the resolutory condition did occur which
effectively reverted ownership back to the seller, under Article 1434 the sellers
title passes by operation of law to the buyer. The Court expressly recognized that
the rule under Article 1434 of the Civil Code applies not only to sale of goods,
but also to other kinds of property, including real property.
HYPOTHETICAL QUESTIONS:
1.
A and B entered into a contract of sale whereby A engages to sell his watch at P1k to B. Because B was so excited to
have the watch, he stole the same from A. Three days later, he sold the same to C. Was there already a delivery of
the watch to B?
There was no delivery. Delivery must be intentional. There must be an actual intention on the part of the vendor to
deliver. Consequently, the contract of sale between B and C is unenforceable [1403(1)].
2.
A and B are friends. They entered into an agreement whereby A would deliver and transfer the ownership of a gold
bar to B in exchange of P500k. Instead of delivering a gold bar, A delivered a silver bar. Rule the case.
As obligation to B as to the delivery of the gold bar still subsists as there was no delivery of the subject matter yet.
In order to effect the delivery, the very object of the contract of sale (gold bar) must be delivered (this pertains to
the identity).
goods delivered do not correspond with the description or the sample, and if the contract be by sample as well as
24
25
Traditio constitutum possessorium at the time of perfection, the seller held possession of the subject
c.
Traditio brevi manu opposite of constitutum possessorium; Before contract of sale, the would-be buyer
d.
Traditio longa manu Delivery of thing by mere agreement; when SELLER points to the property without
e.
Symbolic delivery with regard to movable property, delivery may be effected by the delivery of the keys
of the place or depository where it is stored or kept. (Art. 1498)
f.
g.
h.
matter in the concept of owner, and pursuant to the contract, the seller continues to hold physical
possession thereof as lessee or other form of possession other than the concept of owner. (Art. 1500)
was already in possession of the would-be subject matter of sale (e.g. as lessee), and pursuant to sale, he
would now hold possession in the concept of an owner. (Art. 1499)
need of actually delivering (as when the thing sold cannot be transferred to the possession of the vendee
at the time of sale). (Art. 1499)
HYPOTHETICAL QUESTIONS:
1.
A entered into a contract of pledge with B where A is about to give his car to B in exchange of P500k loan. The
document is duly notarized. Is the delivery of the car to B equivalent to transfer of ownership?
No. The transfer of ownership through delivery is applicable only to a contract of sale.
2.
A and B entered into a contract whereby A engages to deliver his car to B, and B to pay a price therefor in the
amount of P50k. They executed a public instrument. Was there a delivery of the car?
Yes. The rule is applicable to both immovable and movable properties.
3.
A sold B a parcel of land. They executed a public instrument. However, B lost his copy of the instrument. Was there
a delivery of the land?
Yes. Mere execution of the public instrument constitutes delivery.
4.
A sold B a parcel of land at P500k. The sale is not evidenced by a public instrument, but B took possession of the
land after their agreement. When B died, his heir, C, took possession of the land. A contended that he is still the
owner of the land as there was no delivery of the land to B, and that the contract was unenforceable pursuant to the
statute of frauds. Rule the case.
As contention is untenable. Being the heir of B, C is now the owner of the land. The statute of frauds is not
applicable because this is not an executory contract. Likewise, there is no need to execute a public instrument to
effect delivery as there was already an actual delivery of the land when B took possession of the land.
The placing of the titles of ownership in the possession of the vendee or the use
which he may make of his right with the consent of the vendor shall be considered as
a delivery.
Any person who is aware that there is in his title or in the manner of acquiring it
any flaw invalidating the same shall be considered a possessor in good faith. Good
faith is always presumed, and any person alleging bad faith on the part of the
possessor is obliged to prove it.
Possession of the Thing / Physical Presence in the Property bought
Gonzales vs Haberer
The execution of the public instrument, without actual delivery of the thing, transfers
the ownership from the vendor to the vendee, who may thereafter exercise the rights
of an owner over the same. In the instant case, vendor Roque delivered the owner's
certificate of title to herein private respondent. It is not necessary that vendee be
physically present at every square inch of the land bought by him, possession of the
public instrument of the land is sufficient to accord him the rights of ownership.
Execution Sale and Notice of Sale in Mortgage Foreclosure Sale
Flores vs Lim
26
The effective conveyance of the land is accomplished by the deed which is issued only
after the period of redemption has expired.
- The certificate of sale issued to the purchaser at an auction sale is intended to be
a mere memorandum of the purchase. It does not transfer the property but merely
identifies the purchaser and the property, states the price and the date when the
right of redemption expires. The effective conveyance is made by the deed of
absolute sale executed after the expiration of the period of redemption.
Tambunting vs CA
Other cases
Bean vs Cadwaller
Actual manual delivery of an article sold is not essential to the passing of the title
thereto (art 1450, Civil Code) unless made so by the terms of the contract or by an
understanding of the parties. The parties to the contract may agree when and on
what conditions the property in the subject of the contract was passed to the
prospective owner.
In the present case the parties agreed that the delivery of the logs should be made
alongside a vessel of the defendant. That was done by the plaintiff. The vessel of the
defendant was sent to the point of delivery and the said defendant attempted to load
on said vessel the logs delivered along its side by the plaintiff. It is a rule well
established that a mere contract for the sale of goods, where nothing remains to be
done by the seller before making delivery, transfers the right of property, although
the price has not been paid, nor the thing sold actually delivered to the purchaser.
Sps. Pingol vs CA
Bucton vs Gabar
The distinction between a contract of sale and a contract to sell is important for in
a contract of sale, the title passes to the vendee upon the delivery of the thing sold,
whereas in a contract to sell, by agreement, ownership is reserved in the vendor and
is not to pass until the full payment of the price. In a contract of sale, the vendor has
lost and cannot recover ownership until and unless the contract is resolved or
rescinded, whereas in a contract to sell, title is retained by the vendor until the full
payment of the price, such payment being a positive suspensive condition, failure of
which is not a breach but an event that prevented the obligation of the vendor to
convey title from becoming effective.
By the delivery of the possession of the land, the sale was consummated and title
was transferred to the appellee, that the action is actually not for specific
performance, since all it seeks is to quiet title, to remove the cloud cast upon
appellee's ownership as a result of appellant's refusal to recognize the sale made by
his predecessor, and that as plaintiff-appellee is in possession of the land, the action
is imprescriptible.
* Is there an instance where the goods are delivered to a third person and yet delivery to the buyer is effected? YES, in
case of delivery to carrier.
General Rule: When the seller is authorized or required to send goods to the buyer (in pursuance of a contract), delivery
to carrier (whether named by the buyer or not) is delivery to buyer [Art. 1523].
Exceptions:
1. FAS (Free Along Side)
-the seller pays all charges and is subject to risk until the goods are placed alongside the vessel.
2. FOB (Free on Board)
- the seller shall bear all expenses until the goods are delivered according as to whether the goods are to be
delivered F.O.B. at the point of shipment or at the point of destination determines the time when property passes.
3. CIF (Cost, Insurance, Freight)
27
4.
- under an arrangement C.I.F. Pacific Coast (destination), the vendor is to pay not only the cost of the goods, but
also the freight and insurance expenses, and, as it was judicially interpreted, this is taken to indicate that the
delivery is to be made at the port of destination.
Article 1503, first, second and third paragraphs (where the ownership is retained by the seller)
(a) Where goods are shipped and by the bill of lading the goods are deliverable to the seller or his agent, or
to the order of seller or agent
(b) Where goods are shipped and by the bill of lading the goods are deliverable to the order of the buyer or
his agent but the possession of the bill of lading is retained by the seller or his agent
(c) Where the seller of goods draws on the buyer for the price and transmits the bill of lading and bill of
exchange to the buyer to secure acceptance or payment of the bill of exchange, and the buyer does not
honor the bill of exchange [Here, the drawer is the seller and the drawee is the buyer. If the buyer does
not honor the bill of exchange, he shall return the bill of lading. If he retains the same, he acquires no
added right thereby.]
* Without the bill of lading, or that the bill of lading is not deliverable to bearer or to the buyer or his
order, the buyer does not acquire the direct obligation of the bailee to hold the goods for him.
Document of title to goods includes any bill of lading, dock warrant, quedan or warehouse receipt or order for the delivery
of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the
possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or
receive, either by indorsement or by delivery, goods represented by such document. (Article 1636)
Negotiable Document of Title, defined
A document of title in which it is stated that the goods referred to therein will be delivered to the bearer, or to the order
of any person named in such document (Art. 1507)
Siy Cong Bieng vs
Hongkong &
Shanghai bank
Warehouse receipt represents the goods, but the intrusting of the receipt is more than the mere
delivery of the goods; it is a representation that the one to whom the possession of the receipt
has been so entrusted has the title to the goods.
Bill of Lading a document that serves as evidence of receipt of goods for shipment issued by a common carrier
Warehouse Receipt a document of title which is issued by a warehouseman
Quedan a warehouse receipt that covers sugar
Dock warrant a warrant given by dock-owners to the owner of merchandise imported and warehoused on the dock
upon the faith of the bills of lading, as a recognition of his title to the goods
(1) Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to
deliver the goods to the bearer; or
(2) Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to
deliver the goods to the order of a specified person, and such person or a subsequent endorsee of the document has
indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a negotiable
document of title has been indorsed in blank or to bearer, any holder may indorse the same to himself or to any
specified person, and in such case the document shall thereafter be negotiated only by the endorsement of such
endorsee. (n)
Art. 1509: A negotiable document of title may be negotiated by the endorsement of the person to whose order the
goods are by the terms of the document deliverable. Such endorsement may be in blank, to bearer or to a specified
person. If indorsed to a specified person, it may be again negotiated by the endorsement of such person in blank, to
bearer or to another specified person. Subsequent negotiations may be made in like manner.
28
(1) Such title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser
in good faith for value and also such title to the goods as the person to whose order the goods were to be delivered
by the terms of the document had or had ability to convey to a purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the
terms of the document as fully as if such bailee had contracted directly with him.
As between the owner of a negotiable document of title who indorsed it in blank and entrusted it to a friend, and the
holder of such negotiable document of title to whom it was negotiated in good faith and for value, the latter is
preferred, under the principle that as between two innocent persons, he who made the loss possible should bear the
loss.
Art. 1518: The validity of the negotiation of a negotiable document of title is not impaired by the fact that the
negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of
the document was deprived of the possession of the same by loss, theft, fraud, accident, mistake, duress, or
conversion, if the person to whom the document was negotiated or a person to whom the document was
subsequently negotiated paid value therefor in good faith without notice of the breach of duty, or loss, theft, fraud,
accident, mistake, duress or conversion.
against the transferor, the title to the goods, subject to the terms of any agreement with the transferor.
If the document is non-negotiable, such person also acquires the right to notify the bailee who issued the document
of the transfer thereof, and thereby to acquire the direct obligation of such bailee to hold possession of the goods for
him according to the terms of the document.
Prior to the notification to such bailee by the transferor or transferee of a non-negotiable document of title, the title of
the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an
attachment of execution upon the goods by a creditor of the transferor, or by a notification to such bailee by the
transferor or a subsequent purchaser from the transfer of a subsequent sale of the goods by the transferor.
29
A executed and gave B a negotiable document of title payable to the order of B. B negotiated the same through
indorsement and delivery to C. C, in turn, negotiated it to D, and D to E. Meanwhile, X, As creditor was able to
obtain a favorable judgment allowing for the attachment of the document of title in question. May X attach the
document of title to satisfy As indebtedness?
No. See Article 1519.
2.
A executed and gave B a negotiable document of title. B forged the document and indorsed the same to C. Who has
the title, A or C?
See Article 1518.
3.
COMPLETENESS OF DELIVERY
* MOVABLES (Article 1522)
LESS
- Buyer has 2 options:
(a) Reject the goods
(b) Accept them
[When the acceptance is with knowledge that the seller is not going to perform the contract = buyer
shall pay at contract rate;
When knowledge is after the acceptance and consummation or disposal of the goods = buyer is not
liable for more than the fair value to him of the goods delivered]
LARGER
- Buyer has 3 options:
(a) Accept per contract and reject the rest
(b) Accept the whole and pay at contract rate
(c) If indivisible, reject the whole or accept it entirely
30
GREATER IN AREA
(a) Accept per stipulation and reject the rest
(b) Accept the whole and pay at contract rate
[Articles 1539 and 1540 shall apply to judicial sales (Art. 1541)
GREATER / LESSER
- No rescission or adjustment of price, UNLESS there is gross mistake
There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment shall be
made wherever the thing might be at the moment the obligation was constituted.
In any other case the place of payment shall be the domicile of the debtor.
If the debtor changes his domicile in bad faith or after he has incurred in delay, the additional expenses shall be
borne by him.
These provisions are without prejudice to venue under the Rules of Court. (1171a)
Art. 1521: Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is
a question depending in each case on the contract, express or implied, between the parties. Apart from any such
contract, express or implied, or usage of trade to the contrary, the place of delivery is the seller's place of
business if he has one, and if not his residence; but in case of a contract of sale of specific goods, which to the
knowledge of the parties when the contract or the sale was made were in some other place, then that place is the
place of delivery.
Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is
fixed, the seller is bound to send them within a reasonable time.
Where the goods at the time of sale are in the possession of a third person, the seller has not fulfilled his
obligation to deliver to the buyer unless and until such third person acknowledges to the buyer that he holds the
goods on the buyer's behalf.
Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a
reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be
borne by the seller.
TIME = at a reasonable hour (question of fact)
PLACE
1. Stipulation of the parties; or
2. Sellers place of business if he has one; or
3. Sellers residence; or
4. In case of sale of specific goods, in the place where the thing is.
[Q] Who bears the expenses of delivery?
For execution and registration of sale = seller (Art. 1487)
For delivery = Buyer (Arts. 1521 and 1251)
31
Art. 1505: Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof,
and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to
the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's
authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or any other provision of law enabling the apparent owner
of goods to dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent
jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce and
special laws.
Art. 559: The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who
has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the
same.
If the possessor of a movable lost or which the owner has been unlawfully deprived, has acquired it in good faith
at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.
- GENERAL RULE: In a sale by the non-owner, the buyer acquires no better title to the goods than the seller had (he
merely steps into the shoes of the seller)
EXCEPTIONS (in which case the true owner cannot recover the thing):
1.
2.
3.
4.
Estoppel or when the owner is precluded, by his own conduct, from denying the sellers authority to sell (apply Art.
1438 by analogy) [Art. 1438: One who has allowed another to assume apparent ownership of personal property
for the purpose of making any transfer of it, cannot, if he received the sum for which a pledge has been constituted,
set up his own title to defeat the pledge of the property, made by the other to a pledgee who received the same in
good faith and for value.]
PD 1529 (Recording Laws; Torrens Title)
- even when the sale is void, the general rule that the direct result of a previous void contract cannot be valid is
inapplicable when it will directly contravene the Torrens system of registration. The Court cannot disregard such
rights and order the cancellation of the certificate, since the effect of such outright cancellation will be to impair
public confidence in the certificate of title.
Statutory power of sale or under the order of a court of competent jurisdiction
Sale in merchants store, or in fairs, or markets (Arts. 85 86, Code of Commerce)
- to allow recovery would retard commerce
Art. 559 provides for the right of recovery of the real owner of the movable property
- If the real/previous owner of a movable property has lost it or is unlawfully deprived of it, he may recover it from the
person who possesses the same without reimbursement, notwithstanding the good faith of the latter.
- If, however, the person who possesses the movable property has acquired the same in good faith at a public sale, the
owner has to reimburse him in order to recover the property.
Public Sale is defined as one where there has been a public notice of sale in which anyone is allowed to bid for the object
he desires to buy.
The exceptions to right to recover and exceptions to the rule that the buyer in a sale by non-owner does not acquire a
better title to the property than the seller had are just the same.
co-owner sells definite portion prior 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.
- Exceptions to (b):
32
As aforementioned, the seller need not have the title to the goods at the time of perfection of the contract. However, he
must have the title at the time of delivery.
Art. 1506: Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the
sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice
of the seller's defect of title.
If title has not been avoided, buyer acquires good title if he acquires them (a) in good faith;
(b) for value; and
(c) without notice of the sellers defect of title
HYPOTHETICAL QUESTIONS (1505 and 1506):
1.
A owns a Rolex watch. B stole As watch, and sold the same to C. C does not know that the watch was stolen and he
bought the same from B for value. May A recover the watch from C?
Yes. He may recover it without the need of reimbursing C. See Art. 559.
2.
A owns a Rolex watch. B stole As watch, and sold the same to C. C knows that the watch was stolen and he bought
the same from B for value. May A recover the watch from C?
Yes. The requirement that the possessor or the purchaser of the movable thing must be in good faith does not
pertain to the right of the owner to recover the property but to the doctrine of irrevindicability (that the possession
of movable property is equivalent to title). If A has the right to recover even if C is in good faith, it is but logical to
give A the right to recover the property from a possessor in bad faith. Likewise, it may be said that B may be held
criminally liable for violating the Anti-Fencing Law.
3.
Given the same facts in Question #2 only that B sold the watch at a public sale, where C, the highest bidder, was
the one who was able to purchase the watch. C, however, knows that the watch was stolen. If A has the right to
recover as stated in #2, should he reimburse C in recovering the watch?
No. Art. 559 implies that a possessor in bad faith (in this case, C) has no right to be reimbursed. But A may still
recover the property.
4.
A owns a Rolex watch. B stole As watch, and pawned the same to Villarica Pawnshop. For failure to pay the loan,
Villarica Pawnshop sold the watch at a public auction. C was the one who bought the watch. Rule the case.
A may recover the watch from C. He must, however, reimburse C as C obtained the watch from a public sale.
5.
A owns a Rolex watch. B stole As watch, and sold the same to C, a merchants store. D, who does not know that the
watch was stolen, bought the same from C. May A recover the watch from D?
No. In this case, Article 1505 is applicable. To allow A to recover would retard commerce.
6.
A owns a Rolex watch. B stole As watch, and sold the same to C, a merchants store. D, in bad faith, purchased the
watch from C. May A recover the watch from D?
No. Article 1505 does not require that the purchaser or buyer in a sale by non-owner must be in good faith.
7.
A owns a Rolex watch. B stole As watch, and sold the same to C, a seller of bagoong. D saw the watch from the
bagoong-seller while he was buying a bagoong. Without knowing that the watch was stolen, he offered to buy the
same from C. C accepted the offer. Thereafter, D bought the watch from C for P5k. May A recover the watch from
D?
Yes. The sale is not made in a merchants store, or in fairs, or markets.
8.
If D (referring to Question #6) purchased the same from a fish stall in a public market, may A still recover?
9.
A owns a Rolex watch. B stole As watch, and sold the same to C. C sold the same at ebay. D, in good faith, bought
the watch. May A recover the watch from D?
Yes. He must, however, reimburse D as a sale in ebay may be considered a public sale.
10. A entered into a contract of sale with B where A engages to deliver 100 sacks of corn for P100k. Before delivery, A
became insane. A delivered the sacks of corn to B while A is insane. May the guardian of A recover the goods
delivered to B?
No. The delivery was void pursuant to Article 1239, which provides that payment made by one who does not have
the free disposal of the thing due and capacity to alienate it shall not be valid. However, Article 1427 provides that
in payment by incapacitated such as this one, there shall be no right to recover the goods from the obligee who has
spent them or consumed them in good faith.
33
Before perfection
Seller still owns the thing because there is no delivery or transfer of ownership yet; hence, seller bears the risk of loss
At Perfection
Contract is merely inefficacious because loss of the subject matter does not affect the validity of the sale
Seller cannot anymore comply with obligation so buyer cannot anymore be compelled
to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during
the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the
thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown
or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the
obligation and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the
usufructuary.
After delivery
Union Motor
Corp. vs CA
The facts clearly show that no contract of sale had been perfected between the parties, and
therefore the loss of the vessel must be borne by its owner and not by a party who only intended
to purchase it.
Except as to quality and quantity, the first of which is itself generic, the contract sets no bounds
or limits to the palay to be paid, nor was there even any stipulation that the cereal was to be the
produce of any particular land. Any palay of the quality stipulated regardless of origin on however
acquired (lawfully) would be obligatory on the part of the obligee to receive and would discharge
the obligation. It seems therefore plain that the alleged failure of crops through alleged fortuitous
cause did not excuse performance.
The general rule is that after perfection but before delivery, the risk of loss is borne by the
seller under the rule of res perit domino.
34
Bunge Corp. vs
Camenforte
The ownership of the books purchased on installment were retained by the seller, although they
have already been delivered to the buyer, under the condition that ownership thereof will be
transferred to the buyer upon his full payment of the purchase price, it was held that despite the
loss of the books in a fire, the risk of loss would be borne by the buyer although he was not the
owner yet, not only because such was agreed merely to secure the performance by the buyer of
his obligation, but also because in the very contract itself, it was agreed that loss or damage to
the books after delivery to the buyer shall be borne by the buyer.
Gonzales (seller), who received payment, delivered no part of sugar promised. When a suit was
brought against him for failure to deliver, he interposed the defense of force majeure (there was a
storm). SC held that he was still liable because no specific lot of sugar was segregated and
specifically designated to make the subject matter of the contract determinate or specific; sugar
being generic, there was no risk of it being lost.
It appearing that the obligation of appellants is to deliver copra in a generic sense, this
obligation cannot be deemed extinguished by the destruction or disappearance of the copra they
had already stored in Samar. Their obligation subsists as long as that commodity is available. A
generic obligation is not extinguished by the loss of a thing belonging to a particular genus. Genus
nunquam pereat.
* DOUBLE SALES
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.
General Rule: FIRST IN TIME, PRIORITY IN RIGHT (PRIMUS TEMPORE, POTIOR JURE)
Application of the general rule: when not all requisites embodied in Art. 1544 concur
SPECIAL RULE: ART. 1544
* REQUISITES
1.
2.
3.
4.
No inscription & no possession in good faith Person who presents oldest title in good faith
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
35
1.
2.
3.
if sale 1 occurs when land is not yet registered & sale 2 is done when land is already registered apply FIRST IN TIME,
PRIORITY IN RIGHT
4.
Registration by the first buyer under Act 3344 can have the effect of constructive notice to the second buyer that can defeat
his right as such buyer.
HYPOTHETICAL QUESTIONS:
1.
A, the owner of Lot 1, applied for registration of his title to the said lot. During the pendency of the application, he sold
Lot 1 to B. However, after the certificate of title was granted to him, he sold the lot to C, to whom a transfer certificate of
title was issued. Who owns the land, B or C?
C. To grant B the ownership over the said lot would directly contravene the Torrens system of registration. The Court
cannot order the cancellation of the certificate, since the effect of such outright cancellation will be to impair public
confidence in the certificate of title. Persons dealing with registered land have the legal right to rely on the fact of the
Torrens certificate of title and to dispense with the need to inquire further except when the party concerned has actual
knowledge of facts and circumstances that would impel a reasonable cautious man to make such inquiry. (Naawan
Community Rural Bank vs CA)
2.
A sold 100 sacks of corn to B through the execution of a public instrument. A day after, A sold the same goods to C, in
which case C was given the bill of lading to the goods. Who owns the sacks of corn?
It would seem that B is the owner because the execution of a public instrument operates as a transfer of the ownership
of the goods to him. However, Cs possession of the bill of lading gives him the right to the direct obligation of the bailee
to hold the goods in trust for him and give the goods to him upon his presentment of the bill of lading. (?)
3.
A sold a parcel of land to B through an oral contract of sale. When A died, his heir, X (who does not know of the sale
between A and B) sold the same land to C, who bought the land in good faith and for value. The sale of the land was
through the execution of public instrument. Who owns the land, B or C?
C. The requisite that there be one immediate seller has been complied with, notwithstanding that it is X who made the
second sale, because as As heir, X merely steps into the shoes of A. The decedent and his heir have only 1 personality,
as the heirs ownership and possession of a property are merely continuation of the ownership and possession of the
decedent. The public instrument executed by A and C gives C the oldest title to the property.
4.
A, the owner of Lot 1, applied for registration of his title to the said lot. During the pendency of the application, he sold
Lot 1 to B, who immediately took possession of the land. However, after the certificate of title was granted to A, a levy
was made upon the land in favor of C. Who owns the land, B or C? (Compare with #1)
B. Section 35, Rule 39 (now Sec. 33, Rule 39) of the Rules of Court (on execution sale) shall govern. The judgment
creditor merely steps into the shoes of the judgment debtor. Since the land was previously sold to the first buyer, the
second buyer (judgment creditor) at the execution sale actually bought nothing since the judgment debtor no longer had
rights to the property previously sold. (Dagupan Trading Co. vs Macam)
5.
A sold his unregistered land to B. Thereafter, he sold the same land to C where a public instrument was executed. The
sale was duly registered. Who owns the land?
B. Art. 1544 does not apply to sale of unregistered land. Under Act No. 3344 (now PD 1529), registration of documents
affecting unregistered land is without prejudice to a third party with a better right.
* WARRANTIES
Condition vs Warranty
36
WARRANTY
Purports to performance of obligation
Need not be stipulated; may form part of obligation by provision
of law
Relates to the subject matter itself or to obligation of the seller
as to the subject matter of the sale
Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not
performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the
other party has promised that the condition should happen or be performed, such first mentioned party may also
treat the nonperformance of the condition as a breach of warranty.
Where the ownership in the thing has not passed, the buyer may treat the fulfilment by the seller of his obligation
to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition
of the obligation of the buyer to perform his promise to accept and pay for the thing.
Kinds of Warranty
1. Express (Art. 1546)
Art. 1546: Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the
natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer
purchases the thing relying thereon. No affirmation of the value of the thing, nor any statement purporting to
be a statement of the seller's opinion only, shall be construed as a warranty, unless the seller made such
affirmation or statement as an expert and it was relied upon by the buyer.
- Requisites: [AIR]
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
when breached, seller is liable for damages
Art. 1340: The usual exaggerations in trade, when the other party had an opportunity to know the facts,
are not in themselves fraudulent.
Art. 1341: A mere expression of an opinion does not signify fraud, unless made by an expert and the other
party has relied on the former's special knowledge.
Art. 1343: Misrepresentation made in good faith is not fraudulent but may constitute error.
Art. 1338: There is fraud when, through insidious words or machinations of one of the contracting parties,
the other is induced to enter into a contract which, without them, he would not have agreed to. (CAUSAL
FRAUD / DOLO CAUSANTE = FRAUD IN THE PERFECTION OF THE CONTRACT)
Art. 1344: In order that fraud may make a contract voidable, it should be serious and should not have been
Art. 1170: Those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for damages.
2.
(1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the
ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession
of the thing;
(2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or
encumbrance not declared or known to the buyer.
This Article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other
person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has
a legal or equitable interest.
IMPLIED WARRANTIES
37
refers to consummation stage since in consummation stage, it is where ownership is transferred by tradition
not applicable to sheriff, auctioneer, mortgagee, pledgee (the principle applicable to execution sales is caveat
emptor)
[There are 2 general classifications of implied warranty: (1) warranty against eviction; and (2) warranty against hidden
defects.]
REQUISITES OF BREACH OF WARRANTY AGAINST EVICTION: [EFBS]
1. buyer is evicted in whole or in part from the subject matter of sale (Art. 1548)
2. there is a final judgement (Art. 1557)
3. basis of eviction is a right prior to sale or an act imputable to vendor (Art. 1548)
4. seller has been summoned in the suit for eviction at the instance of buyer; or made 3 rd party defendant
through 3rd party complaint brought by buyer (Art. 1558)
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 [Art. 1549]
warranty cannot be enforced until aforementioned requisites concur
applies to judicial sale; judgment debtor responsible for eviction unless otherwise decreed in judgment [Art. 1552]
vendor not liable for eviction if adverse possession had been commenced before sale but prescriptive period is
completed after transfer [Art. 1550]
If the property is sold for nonpayment of taxes due and not made known to the vendee before the sale , vendor is
liable for eviction [Art. 1551]
Rescission is not a remedy in case of eviction because rescission contemplates that the one demanding it is able to
return whatever he has received under the contract. Since the vendee can no longer restore the subject-matter of
the sale to the vendor, rescission cannot be carried out. [See Art. 1385] EXCEPTION: Partial Eviction.
The suit for the breach can be directed only against the immediate seller, unless the sellers of the seller had
promised to warrant in favor of later buyers or the immediate seller has expressly assigned to the buyer his own
right to sue his own seller.
The disturbance referred to in the case of eviction is a disturbance in law which requires that a person go to courts
of justice claiming the thing sold, or part thereof and invoking reasons.
Mere trespass in fact does not give rise to the application of the doctrine of eviction.
Vendors liability is waivable but any stipulation exempting the vendor from the obligation to answer for eviction shall
be void if he acted in bad faith. [Art. 1553]
LIABILITY OF SELLER: (eviction w/c caused buyer to lose whole subject matter) [TISED]
1. value of thing at time of eviction ( be it greater/lesser than price of sale )
2. value of income of fruits
3. costs of suit which caused the eviction
4. expenses of contract if buyer paid for them
5. damages & interests and ornamental expenses if sale was made in bad faith
RIGHT OF BUYER WHEN DEPRIVED OF ONLY PART OF THE SUBJECT MATTER BUT WOULD NOT HAVE BOUGHT SUCH PART IF NOT
IN RELATION TO THE WHOLE:
1. demand rescission but with the obligation to return the thing without other encumbrances than those which it
has when the subject matter was acquired.
2. Enforce vendors liability for eviction (TISED)
HYPOTHETICAL QUESTIONS:
1.
A found a ring which he sold to B, honestly believing and representing to B that it was a diamond ring. In truth, the
ring was ordinary glass. Is there a breach of warranty?
38
Advertisement: the cigarette that will give you utmost smoking pleasure. Is this a warranty?
No. Consequently, breach of the same is not breach of warranty. (Arts. 1340 on usual exaggerations on trade)
3.
A sold to B a parcel of land which is claimed by C, who has been in possession of the property in the concept of
owner publicly and continuously for 30 years. Rule the case.
C is deemed to have acquired ownership over the land by prescription without need of title or good faith (apply Art.
1137). Hence, A shall be liable to be in case of eviction. (Art. 1550)
4.
Same facts as #3, only that C was in adverse possession of the land for only 25 years at the time of sale, and the
prescriptive period is completed after the sale.
S shall not be liable to B in case of eviction as B could have brought action against C during the remaining 5 year
period to recover the property. (Art. 1550)
5.
B purchased land from A after having been informed of prior right of another to purchase the same based on prior
occupancy. Is B entitled to the vendors warranty against eviction and damages under Art. 1555?
No. He had knowledge of facts which should have put him upon such inquiry and investigation as might be
necessary to acquaint him with the defects in the title of his vendor. (J.M Tuazon vs CA)
39
40
(Both Accion
Redhibitoria and
Accion Quanti
Minoris) (Art. 1571)
(c)
In case of
Warranty against
redhibitory defect on
animals: 40 days
from delivery
(Art.1577) this action
less than 60
days nor more
than 1 year
following the
sale of new
consumer
products
(a) expert knowledge is not sufficient to discover it [1576, 1st par., NCC]; or
(b) The veterinarian failed to discover or disclose it through ignorance or bad faith [1576, 2nd par., NCC]; or
(c) the animal dies within three days after its purchase and the disease which caused the death existed at the time of the
contract: [Art. 1578]
41
42
Gochanco vs Dean
Mccullough vs Aenle
Martinez vs CA
plaintiff did not, and its actual condition could not be determined without a physical
inspection. In other words, the defects in the lumber and material used in the
construction of the vessel were hidden and concealed and unknown to the plaintiff until
the official inspection.
It was not proven that the declaration made by the defendant in the contract of exchange
was made fraudulently. It does not appear in the record that the defendant deliberately
violated the truth in stating his belief that there were such a number of coconut trees on
said lands. Furthermore, it was shown that the plaintiff viewed the lands and estimated
that there were there more than six thousand coconut trees.
There is no evidence to show that any representations as to the quality of the tobacco were
made to the plaintiff by the defendant prior to the contract of August 27, nor that there
was any agreement prior to that time as to an exhibition of samples nor that the plaintiff
prior to that time made any examination or inquiry as to the quality of the tobacco. The
fact is that the plaintiff in order to get the building had to buy the factory and everything
that went with it. He saw himself obliged to take all the tobacco which the defendant had,
no matter what its quality was. The plaintiff bound himself by the contract of August 27 to
take all the tobacco which the defendant then had and pay therefor the prices that the
company had paid. He could relieve himself from this obligation only by showing either
that the tobacco in the inventory was not owned by the defendant on August 27 or that
the prices stated therein were not the prices which the defendant paid for it. He
undertook to do neither of these things, and his action must fail. The fact that an article is
of one grade or quality instead of another does not constitute a hidden defect within the
meaning of that article.
Note that the sole purpose of the inventory was to ascertain what the total purchase price
was. If it correctly gave the number of bales and the price paid therefor by the appellant,
according to the invoices, it was a sufficient compliance with the contract. The fact that
the tobacco was described as of one class instead of another would be unimportant. The
appellee did not purchase by class or quality, but by quantity.
In the case at bar, The ONLY defense presented by the defendant was that the tobacco
delivered by the plaintiff was not of good quality. The defendant admits that she had sold
the tobacco in question. The record does not disclose when the defendant sold the
tobacco in question.
In the absence of an express warranty, a vendor or merchandise only warrants:
First. The legal and peaceable possession of the thing sold; and
Second. That there are no hidden faults or defects therein. (Art. 1474, Old Civil Code.)
It not being proven that the plaintiff made any warranty or any misrepresentations with
reference to the quality of the tobacco in question, and it having been proven that the
defendant had an opportunity to and did examine the tobacco in question at the time of
purchase and not having made any objection whatever until after a lapse of more than
three years and not then until after an action had been brought, and making no objection
whatever as to the price agreed upon, nor as to the quantity of the tobacco delivered, in
our opinion she should be held liable for the payment of the amount agreed upon.
(defendant is therefore liable for the balance of the purchase price).
There is no weight in the appellants' argument that, being a purchaser for value and in good
faith of Lot No. 2, the nullification of its registration would be contrary to the law and to
the applicable decisions of the Supreme Court as it would destroy the stability of the title
which is the core of the system of registration. Appellants cannot be deemed purchasers
for value and in good faith by virtue of the deed of absolute conveyance which they
executed.
Before purchasing a parcel of land, it cannot be contended that the appellants who were the
vendees did not know exactly the condition of the land that they were buying and the
obstacles or restrictions thereon that may be put up by the government in connection
with their project of converting Lot No. 2 in question into a fishpond. Nevertheless, they
willfully and voluntarily assumed the risks attendant to the sale of said lot. One who buys
something with knowledge of defect or lack of title in his vendor cannot claim that he
acquired it in good faith (Leung Lee v. Strong Machinery Co., et al., 37 Phil. 664).
The ruling that a purchaser of a registered property cannot go beyond the record to make
inquiries as to the legality of the title of the registered owner, but may rely on the registry
to determine if there is no lien or encumbrances over the same, cannot be availed of as
against the law and the accepted principle that rivers are parts of the public domain for
public use and not capable of private appropriation or acquisition by prescription.
When an article is sold as a secondhand item, a question arises as to whether
there is an implied warranty of its quality or fitness. It is generally held that in the
43
condition as to the quality or fitness of the goods, as follows: (1) Where the buyer,
expressly or by implication, makes known to the seller the particular purpose for which
the goods are acquired, and it appears that the buyer relies on the seller's skill or
judgment (whether he be the grower or manufacturer or not), there is an implied
warranty that the goods shall be reasonably fit for such purpose;
In the case at bar, a certification to the effect that the linotype machine bought
by petitioner was in A-1 condition was issued by private respondent in favor of
the former. This cannot but be considered as an express warranty.
It must be remembered that the certification was a condition sine qua non for the
release of petitioner's loan which was to be used as payment for the purchase
price of the machine. Private respondent failed to refute this material fact. Neither does
he explain why he made that express warranty on the condition of the machine if he had
not intended to be bound by it. In fact, the respondent court, in declaring that petitioner
should have availed of the remedy of requiring repairs as provided for in said certification,
thereby considered the same as part and parcel of the verbal contract between the
parties.
Carlos De Guzman vs
Toyota Cubao
respondent was not a dealer of printing or linotype machines to whom could be ascribed
the supposed resort to the usual exaggerations of trade in said items. His certification
as to the condition of the machine was not made to induce petitioner to
purchase it but to confirm in writing for purposes of the financing aspect of the
transaction his representations thereon. Ordinarily, what does not appear on the
face of the written instrument should be regarded as dealer's or trader's talk; conversely,
what is specifically represented as true in said document, as in the instant case, cannot
be considered as mere dealer's talk.
The contract in question is one for a piece of work. It is not petitioner's line of business to
manufacture air-conditioning systems to be sold "off-the-shelf." Its business and
particular field of expertise is the fabrication and installation of such systems as ordered
by customers and in accordance with the particular plans and specifications provided by
the customers. Naturally, the price or compensation for the system manufactured and
installed will depend greatly on the particular plans and specifications agreed upon with
the customers.
a close scrutiny of the complaint filed in the trial court reveals that the original action is not
really for enforcement of the warranties against hidden defects, but one for breach of the
contract itself. It alleged that the petitioner, "in the installation of the air conditioning
system did not comply with the specifications provided" in the written agreement between
the parties.
Having concluded that the original complaint is one for damages arising from breach of a
written contract - and not a suit to enforce warranties against hidden defects - we here with declare that the governing law is Article 1715. However, inasmuch as this provision
does not contain a specific prescriptive period, the general law on prescription, which is
Article 1144 of the Civil Code, will apply. Said provision states, inter alia, that actions
"upon a written contract" prescribe in ten (10) years. Since the governing contract was
executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear
that the action has not prescribed.
Since no warranty card or agreement was attached to the complaint, the contract of sale of
the subject pick-up carried an implied warranty that it was free from any hidden faults or
defects, or any charge or encumbrance not declared or known to the buyer. The
prescriptive period thereof is six (6) months under the Civil Code (Art. 1571).
Under RA No. 7394, the provisions of the Civil Code on conditions and warranties shall
govern all contracts of sale with condition and warranties (Art. 67). The duration of the
implied warranty (not accompanied by an express warranty) shall endure not less than
sixty days nor more than one (1) year following the sale of new consumer products (Art.
68, par. [e]). The two (2) year prescriptive period under Art. 169 cannot prevail over Art.
68 because the latter is the specific provision on the matter.
Since petitioner filed the complaint on April 20, 1999, or more than nineteen months
counted from November 29, 1997 (the date of the delivery of the motor vehicle), his
cause of action had become time-barred. Consequently, even if the complaint is made to
44
fall under the Republic Act No. 7394, the same should still be dismissed since the
prescriptive period for implied warranty thereunder, which is one year, had likewise
lapsed.
(Relative to plaintiffs argument that the claim for moral and exemplary damages and
attorneys fees is based on quasi-delict or breach of contract, such are merely ancillary to
the main cause of action which is based on warranty against hidden defects. Without the
latter, the former cannot stand alone.)
Soledad gave an implied warranty of title in declaring that he owned and had clean title
to the vehicle. In pledging that he "will defend the same from all claims or any claim
whatsoever [and] will save the vendee from any suit by the government of the Republic
of the Philippines," Soledad gave a warranty against eviction.
Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a
breach thereof is six months after the delivery of the vehicle, following Art. 1571. But
even if the date of filing of the action is reckoned from the date petitioner instituted his
first complaint for damages on November 9, 1993, and not on July 15, 1996 when he filed
the complaint subject of the present petition, the action just the same had prescribed, it
having been filed 16 months after July 28, 1992, the date of delivery of the vehicle.
The vendee's remedies against a vendor with respect to the warranties against hidden
defects of or encumbrances upon the thing sold are not limited to those prescribed in
Article 1567 of the Civil Code. The vendor could likewise be liable for quasi-delict under
Article 2176 of the Civil Code, and an action based thereon may be brought by the
vendee. While it may be true that the pre-existing contract between the parties may, as a
general rule, bar the applicability of the law on quasi-delict, the liability may itself be
deemed to arise from quasi-delict, i.e., the acts which breaks the contract may also be a
quasi-delict. Otherwise put, liability for quasi-delict may still exist despite the presence of
contractual relations.
As regards the contention that the action for rescission is barred by prescription under Art.
1571 of the Civil Code, the same is bereft of merit. It must be pointed out that at the time
the Electrolux Aqua Guard water purifier was delivered and installed at petitioner Villostas'
residence a Warranty Certificate was issued by private respondent Electrolux.
The foregoing is clearly an express warranty regarding the efficiency of the water purifier.
On this regard the court said that while it is true that Article 1571 of the Civil Code
provides for a prescriptive period of six months for a redhibitory action, a cursory reading
of the ten preceding articles to which it refers will reveal that said rule may be applied
only in case of implied warranties. The present case involves one with an express
warranty. Consequently, the general rule on rescission of contract, which is four years
(Article 1389, Civil Code) shall apply. Inasmuch as the instant case involves an express
warranty, the filing of petitioner's amended answer on September 30, 1988 is well within
the four-year prescriptive period for rescission of contract from September 13, 1986,
which was the delivery date of the unit.
HYPOTHETICAL QUESTIONS:
1.
A mortgaged his unregistered parcel of land to X. Thereafter A sold the land to B, without informing the latter that the
land was mortgaged. The mortgage was foreclosed. X was the one who was able to buy the land in question. By virtue of
the same, B was evicted from the land. Is A liable for warranty against hidden defect?
No. A is liable for warranty against eviction, i.e. warranty against non-apparent burden or servitude.
2.
A sold Brand X pork and beans to B. When B opened the can, he found out that the pork and beans does not have pork.
Is there a violation of any warranty?
3.
On 11 June 2009, A and B entered into a contract of sale whereby A engages to deliver a particular car on or before 8
July 2009. The car incurred a hidden defect after the perfection of the contract but before delivery. When must the defect
exist, 11 June 2009 or 8 July 2009?
The defect must exist at the time of sale
4.
A sold a car with hidden defect to B, who does not have a knowledge of the defect. B sold the car to C. Does A have an
implied warranty in favor of C?
Yes. See Moles vs IAC.
45
A and B entered into a contract of sale where it is stipulated that B, the buyer, is bound to pay 15 days after the
perfection of the contract. May B demand the delivery of the thing from A even before the arrival of the day he is bound
to pay?
Yes. As obligation, not being dependent on a condition or a period, is pure. His obligation is thus demandable at once,
even at the time the contract is perfected (Art. 1179)
2.
A and B entered into a contract of sale of a parcel of land. A delivered the parcel of land to B upon perfection. B, on the
other hand, is bound to pay on October 9. A became incapacitated on October 8. On October 9, B went to A to pay. Is
payment of B to A valid?
As a rule, payment to the incapacitated is void. However, if the incapacitated has kept the thing delivered or if payment
has been beneficial to him, the payment is valid (Article 1241).
*Article 1427 implies that the incapacitated who voluntarily pays the buyer does not have the right to recover the price
from the seller who spent it in good faith.
3.
(?) A sold sacks of corn to B for P500k. They agreed that A will deliver on 1 June 2009, and B will pay on 31 July 2009. A
lives in Davao, while B lives in Manila. On 1 June 2009, A delivered the sacks of corn. B, on the other hand, did not pay
the price on 31 July 2009. A went to Manila and spent P6k for airfare and P5k for hotel accommodation in order to get
the payment of the purchase price from B. B tendered P500k, but A refused to accept. A contends that B should also pay
P11k which the former spent for airfare and hotel accommodation. Is As contention correct?
Yes. It is the duty of the debtor to correct payment. Applying Art. 1582 in relation to Art. 1521, B is bound to pay at the
place of delivery, in the absence of stipulation as to the place of payment. The place of delivery, when there is no
stipulation as to where the same is to be made, is the sellers place of business or residence. Hence, B is bound to go to
Davao to pay A.
- COMPANY BOUGHT-OUT
- if involves not considerable amount mere continuance of business
- if involves considerable amount such that the company is bought out to stop its operations there is no assumption of
obligations
(Art. 1583): VENDOR IS NOT BOUND TO ACCEPT PARTIAL DELIVERY
- relate Article 1233: There is no payment until the thing is completely delivered
- relate Article 1248: One cannot be compelled to receive partial payment; one has no right to make partial payment
* SEPARATE PRICE FOR EACH INSTALLMENT
- BREACH AFFECTS THE WHOLE CONTRACT (Injured party may sue for breach of entire contract)
- when seller makes defective or incomplete deliveries; or
46
47
EXCEPTIONS TO SUSPENSION OF PAYMENT (where vendee has no right to suspend payment): [SSCTP]
(a) S: vendor gives security for the return of the price
(b) S: stipulation that vendee must make payment notwithstanding such contingency
(c) C: cessation of disturbance or danger
(d) T: disturbance is a mere act of trespass
(e) P: vendee has paid the price in full
When the disturbance is caused by non-apparent servitude, the remedy is rescission, not suspension of
payment.
HYPOTHETICAL QUESTIONS:
1. A sold a parcel of land to B. Thereafter, C filed a suit against A and B for quieting of title. During
pendency, may B suspend payment?
Yes. B has reasonable ground to fear that his possession or ownership would be disturbed by a vindicatory
action.
2. (?) Same facts as #1 but C only claims for a part of the land. May there be suspension of payment?
Yes, B may still suspend payment for the entire amount.
(Art. 1591): RIGHT OF VENDOR TO RESCIND SALE OF IMMOVABLE PROPERTY / ANTICIPATORY BREACH
REQUISITES:
(a) There is delivery of immovable property
(b) Vendee has not paid the price
(c) Vendor has reasonable ground to fear the:
a. LOSS of PROPERTY; AND
b. LOSS of PRICE
-
When there is no such reasonable ground, Art. 1191 shall be observed (when the vendee does not comply with
what is incumbent upon him).
According to Villanueva and Pineda, the phrase even though means that this provision is also applicable in a
case where there is no stipulation in the contract as to automatic rescission.
Atty. Casio does not agree with them (this time, he agrees with De Leon)
Vendor is given an option to rescind UPON JUDICIAL OR NOTARIAL DEMAND
However, when there is no judicial or notarial demand, vendee may still pay. Offer to pay is sufficient to defeat
vendors prerogative.
Vendors right to rescind is not absolute.
o
Art. 1191, par. 3 provides that the court may grant vendee a new term
o
However, if there is already a demand, the court may no longer fix a term.
Breach must be substantial as to defeat the very object of parties.
NOT APPLICABLE TO:
o
Sale on installment of real estate (Caridad Estates vs Santero) governed by Maceda Law
o
Mere promise to sell real estate / Conditional sale there can be no rescission in contract to sell
o
Cases under RA 6552 (RA 6552 recognizes the vendors right to cancel unqualifiedly in case of
industrial lots, commercial buildings, etc. with a refund of certain percentages of payments made on
account of cancelled contract).
*In other words, the vendee in such cases may no longer pay the price after the expiration of the
time agreed upon although no demand has yet been made upon him by suit or notarial act.
48
Not applicable if the thing has already been delivered (reason: the vendor cannot take the law in his hands)
(a) exact fulfillment of the obligation should the vendee fail to pay
(b) cancel the sale should the vendees failure to pay cover two or more installments
(c) foreclose the chattel mortgage on the thing sold (if one has been constituted), should the vendees failure to pay cover two or
more installments.
[In this case, 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.]
Delta Motors Sales Corp. v. Niu
Kim Duan, 213 SCRA259, 1992
Elisco Tool Manufacturing Corp.
v. CA, 307 SCRA 731
The remedies under Art. 1484 have been recognized as alternative, not cumulative, in
that the exercise of one would bar the exercise of the others.
The Court has long been aware of the practice of vendors of personal property of
denominating a contract of sale on installment as one of lease to prevent the ownership
of the object of the sale from passing to the vendee until and unless the price is fully
paid.
When there is only one payment to be paid in the future, there is no basis to apply the
Recto law, since under the language of then Article 1454-A, the buyer needs to have
defaulted in the payment of two or more installments to allow the seller to rescind or
foreclose on the chattel mortgage.
Specific Performance:
GENERAL RULE: when the seller has chosen specific performance, he can no longer seek for rescission or foreclosure of the chattel
mortgage constituted on the thing sold.
EXCEPTION [Art. 1191]: Even if the seller had chosen specific performance, if the same has become impossible, the seller may still
choose rescission
see Chieng v. Sps. Santos, G.R. No. 169647, Aug. 31, 2007
Rescission
*When rescission is deemed chosen:
When the seller has clearly indicated to end the contract such as when [NPA]
(a) he sends a notice of rescission, or
(b) he takes possession of the subject matter of the sale, or
(c) he files an action for rescission.
*Forfeiture of installment or rentals paid:
GENERAL RULE [Art. 1385]: Rescission creates the obligation to return the things which were the object of the contract, together
with the fruits, and the price with interests. It can be carried out only when he who demands rescission can return whatever he
may be obliged to restore.
EXCEPTION [Art. 1486]: A stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid
insofar as the same may not be unconscionable under the circumstances.
* Effect of rescission:
Nonato v. IAC
When the sellers assignee, a financing company, is able to take back possession of the
49
Rule:
Manila Motor Co. vs Fernandez
Vda de Quiambao vs Manila Motor Inc
The remedies under Article 1484 are alternative, not cumulative, in that the exercise of
one would bar the exercise of the others.
Only the taking back of the property coupled with an unequivocal desire on its part to
rescind its contract or for the purpose of appropriating the same, would suffice to bar the
seller form proceeding with specific performance. In this case, it was not the seller who
demanded a return of the subject motor vehicle, but rather it was the buyer who
voluntarily returned the same to postpone the satisfaction of the enforcement of the
judgment debt obtained by the seller on the unpaid balance of the purchase price.
If prior to the actual sale of the subject property at public auction, the seller had received
further payments from the buyer, the seller is not obliged to refund said payments after
foreclosure to the buyer.
The filing by the seller of an action for the issuance of a writ of replevin, and the actual
recovery of possession of the subject property, would not amount to foreclosure, even
with the attachment of the mortgage contract itself, since no actual foreclosure pursuant
to the relevant provisions of the Rules of Court have been pursued.
The mere fact that the seller has secured possession of the truck in question does not
necessarily mean that it will foreclose its mortgage. Indeed, there is no showing at all
that the seller is causing the sale thereof at public auction or is even preparing to do so.
It is quite possible that the seller wanted merely to be sure that the truck is not lost or
rendered valueless, preparatory to having it levied upon under a writ of attachment.
No further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary is void. [Art.
1484(3)] [Note: unpaid balance here pertains to purchase price]
EXCEPTION:
- The further action being barred under Art. 1484 is not limited to judicial proceedings,
but should include extrajudicial proceedings by virtue of which the seller may be enabled
to exact recovery of the supposed unsatisfied balance of the purchase price from the
purchaser or his privy.
- A seller is precluded from having a recourse against the additional security put up by a
third party insofar as the burden would ultimately fall on the buyer himself is concerned
(e.g. the guarantor will later on proceed against the buyer). To rule otherwise would be
a circumvention of Art. 1484.
When the seller assigns his credit to another person, the latter is likewise bound by the same law. (Borbon II vs Servicewide
Specialists)
Art. 1484 (3) does not bar one to whom the vendor has assigned on with a recourse basis his
credit against the vendee from recovering from the vendor the assigned credit in full although
the vendor may have no right of recovery against the vendee for the deficiency.
50
Applicability of Recto Law: [Art. 1485]: Art. 1484 applies also to contracts purporting to be leases of personal property with option
to buy (when the lessor has deprived the lessee of the possession or enjoyment of the thing)
PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No. 142618, July 12, 2007;
BA Finance Corp. v. CA, 228 SCRA 530; Vda. de Jose v. Barrueco, 67 Phil. 191]
HYPOTHETICAL QUESTIONS:
1. A lease of personalty with option to buy was entered into by A and B. For failure to pay rentals, the lessor (A) took possession of
the thing sold. May A still collect the unpaid rentals?
No. Lessor is estopped from further action to recover the unpaid rentals which are deemed waived. The remedies are alternative.
The exercise of one would bar the exercise of the other.
2. The vendor elected to foreclose the chattel mortgage on the car sold. He filed an action for replevin. Before the vendee filed his
answer, he paid two installments amounting to P1,250. May the vendor retain the amount paid to him?
Yes. The said amount could be retained by the vendor since it was paid before the actual foreclosure of the chattel mortgage. See
Northern Motors, Inc vs Sapinoso.
3. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand, is
bound to pay half of the price at the time of perfection and the other half 15 days thereafter. There was no payment made by B.
(a) Is Art. 1484 applicable?
No. This is a sale on straight term. See Levy Hermanos, Inc. v. Gervacio.
(b) May A foreclose the chattel mortgage if one has been constituted?
Yes, under the Chattel Mortgage Law.
(c) May A cancel the contract?
Yes, under Art. 1191.
(d) May A recover the balance after foreclosing the chattel mortgage?
Yes. There is no barring effect because Art. 1484 is not applicable.
4. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand,
bound to pay P100k on ten equal monthly installments. B failed to pay the 4th, 5th and 6th installments (on 4th, 5th, and 6th months).
On the 7th month, B went to A and paid P10k. A accepted the payment and issued a receipt. May A avail of the remedies stated in
Art. 1484?
No. The receipt of a later installment of a debt without reservation as to prior installments shall raise the presumption that such
installments have been paid. (Art. 1176, par. 2)
5. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand,
bound himself to pay P100k on ten equal monthly installments. B failed to pay the 4th, 5th and 6th installments (on 4th, 5th, and 6th
months). May A rescind the contract?
No. There is no demand. In order for Art. 1484 to apply, the vendee must be in default. Applying Art. 1169, vendee is not in
default when there is no judicial or extra-judicial demand.
6. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand,
bound himself to pay P100k on ten equal monthly installments. B failed to pay 1 installment. May A rescind the contract?
No. The non-payment must pertain to two or more installments.
7. [(?) ESCALATION CLAUSE] A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular
car. B, on the other hand, bound himself to pay P100k on ten equal monthly installments. There is a stipulation in the contract that
failure to pay one of the installments shall automatically make all of the installments due and demandable. B failed to pay 1
installment. Assuming that there is a demand to pay on the part of A as to the unpaid installment, may A rescind the contract?
8. [(?) FACTS UNCLEAR] A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car.
B, on the other hand, bound to pay P100k on ten equal monthly installments. A chattel mortgage was constituted to secure Bs
payment of the price. Meanwhile, a real estate mortgage is also constituted on the property in favor of C. B failed to pay the 4th, 5th
and 6th installments (on 4th, 5th, and 6th months). If A would choose foreclosure of the chattel mortgage, may he proceed against C
as to the payment of the balance?
9. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand,
bound himself to pay P100k on ten equal monthly installments. C guaranteed Bs payment of the price. B failed to pay the 4th, 5th
and 6th installments (on 4th, 5th, and 6th months). May A proceed against C, the guarantor, for the payment of the unpaid balance?
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EXCEPTIONS TO SUSPENSION OF PAYMENT (where vendee has no right to suspend payment): [SSCTP]
(f) S: vendor gives security for the return of the price
(g) S: stipulation that vendee must make payment notwithstanding such contingency
(h) C: cessation of disturbance or danger
(i) T: disturbance is a mere act of trespass
(j) P: vendee has paid the price in full
When the disturbance is caused by non-apparent servitude, the remedy is rescission not suspension of
payment.
When a grace period is provided for in the contract of sale, it should be construed as a right, not
an obligation of the debtor, and when unconditionally conferred, the grace period is effective
without further need of demand either calling for the payment of the obligation or for honoring the
right.
Transactions Covered:
Transaction or contracts involving the sale of financing of real estate on installment payments, including residential condominium
apartments.
Covers:
1. contract of sale
2. contract to sell
3. financing transactions
Excluded:
1. industrial
2. commercial
3. sale to tenants under agrarian laws
[Sec. 3, RA 6552].
Applicability:
53
[Villanueva, Sales, 432; Rillo v. CA, 274 SCRA 461; Leano v. CA, 369 SCRA 674].
2. Rights Granted to Buyer Under Maceda Law:
(a) The buyer must pay, without additional interest, the unpaid installments due within the total grace period earned by him.
There shall be 1 month grace period for every 1 year of installment payments made. [NOTE: This is to be exercised only
once in every 5 years or the life of the contract and its extensions.]
(b) Actual cancellation can only take place after 30 days from receipt by the buyer of the notice of cancellation or demand for
rescission by a notarial act and upon full payment of the cash surrender value to buyer. [NOTE: The seller shall refund to
the buyer the cash surrender value of the payments on the property equivalent to 50% of the total payments made, After
5 years of the installments, there shall be an additional 5% every year but not to exceed 90% of the total payments
made.]
(c) The buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by
updating the account during the grace period and before actual cancellation of the contract.
(d) The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time
without interest and to have such full payment of the purchase price annotated in the certificate of title covering the
property.
(a) the seller shall give the buyer a grace period of not less than 60 days from the date the installment became due. If the
buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after 30
days from receipt by the buyer of the notice of cancellation or the demand for rescission of contract by notarial act.
(b) c and d above
[NOTE: downpayments, deposits or options on the contract shall be included in the computation of the total number of
installment payments made.]
Requisites:
Actual cancellation can only take place after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission
by a notarial act and upon full payment of the cash surrender value to buyer. [NOTE: The seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to 50% of the total payments made, After 5 years of the installments,
there shall be an additional 5% every year but not to exceed 90% of the total payments made.
[Sec. 3, RA 6552; Siska Development Corp. vs. Office of the President of the Philippines, 231 SCRA 674 and Marina Properties Corp.
vs. CA, 294 SCRA 272 (1998)]
[Active Realty & Development Corp. vs. Daroya, 382 SCRA 152; Olympia Housing v. Panasiatic Travel Corp., G.R. No. 140468, Jan.
16, 2003; Layug vs. Court of Appeals, 369 SCRA 36]
HYPOTHETICAL QUESTIONS:
1.
(?) A and B entered into a contract of sale whereby A bound himself to deliver a parcel of land through a public document
on 1 July 2010, and B bound himself to pay on 31 December 2010. On 31 July 2010, however, B became insolvent. Can A
sue for rescission?
Yes. B loses his right to a period because of his insolvency pursuant to Article 1198.
2.
(?) A and B entered into a contract of sale whereby A bound himself to deliver a parcel of land through a public document
on 1 July 2010, and B bound himself to pay on 31 December 2010. On 31 July 2010, however, B absconded. Can A sue
for rescission?
Yes. B loses his right to a period pursuant to Article 1198
3.
A and B entered into a contract of sale whereby A bound himself to deliver a parcel of land through a public document on
1 July 2010, and B bound himself to pay on 31 December 2010. B did not pay A on 31 December 2010. What is/are the
remedy/ies of A?
54
(?) (Soria/Suria?) A and B entered into a contract of sale whereby A bound himself to deliver a parcel of land through a
public document on 1 July 2010, and B bound himself to pay on 31 December 2010. A real estate mortgage was
constituted on the property, having A as the mortgagee. B did not pay A on 31 December 2010. May A rescind the sale?
No. Upon the constitution of Real estate mortgage, the contract has been changed into one of payment of a loan.
D. Sale of Goods
(a) when the whole of the price has not been paid or tendered to the seller; or
(b) when a bill of exchange or other negotiable instrument has been received (as conditional payment), and the condition on
which the instrument was received was broken by reason of the dishonor of the instrument, insolvency of buyer, or
otherwise.
* Stoppage In Transitu:
When can it be invoked: [Arts. 1526, 1530 and 1532]
55
When notice is given to the carrier or other bailee in possession of the goods, he must redeliver the goods
according to the directions of the seller [NOTE: Expenses must be borne by the seller]
EXCEPTION: a negotiable document of title representing the goods has been issued (in which case the carrier
or bailee is not obliged to redeliver the goods unless the seller surrendered the document for cancellation)
After delivery to a carrier or other bailee and before the buyer or his agent takes delivery of them; and
Goods are rejected by the buyer and the carrier or other bailee continues to possess them (even if the seller refused to
receive them back)
Seller is not liable to original buyer for profit made by virtue of resale
Seller may recover from buyer damages for loss due to breach of contract of sale
Buyer acquires good title as against original buyer
* Rescission of sale:
[A] Special right to rescind [Art.1534]
- seller has parted with possession of the goods
- seller may recover from the buyer damages for any loss due to breach of contract
- there must be NOTICE or some other OVERT ACT of intention to rescind [Overt act need not be communicated BUT the giving of
notice is relevant in case of default for an unreasonable time.
REQUISITES:
(1) first two remedies have been exercised
- unpaid seller has right of lien or has stopped goods in transitu
(2) under any of the following conditions:
(a) seller expressly reserves the right of rescind in case buyer defaulted
(b) buyer has been in default in payment for an unreasonable time
[B] Technical Rescission [Art. 1597]
- There is no delivery of goods yet
- seller may totally rescind by giving notice of his election to do so to the buyer
(1) Buyer has repudiated the contract of sale;
(2) Buyer has manifested his inability to perform obligations; or
(3) Buyer committed a breach
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2.
A entered into a contract of sale with B whereby B bound himself to pay P500k for the 100 sack of corn, which is to
be delivered by A. A gave B a bill of lading, deliverable to B or order. Subsequently, B became insolvent. May A
exercise to right of stoppage in transitu?
Yes.
A and B entered into a contract of sale of 100 sacks of corn. A is bound to send the goods to B through his ship,
which is being operated by C. Assuming that A became an unpaid seller, may he exercise the right of stoppage in
transitu while the goods are in the possession of C?
No. A is still in the possession of the goods. Cs possession is merely that of a holder, as he was acting as As
employee. Because A has not yet parted with the possession of the goods, his remedy is to exercise his lien on the
goods.
Specific performance, without giving the seller the option of retaining the goods on payment of damages. [Judgment may
be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as the court
may deem just] (Art. 1598)
In case of sellers breach of warranty (Art. 1599)
(a) Recoupment accept the goods and set up the sellers breach to reduce or extinguish the price
(b) Accept the goods and maintain an action for damages for breach of warranty
(c) Refuse to accept and maintain an action for damages for breach of warranty
(d) Rescission rescind the contract and refuse to receive the goods; or if goods have already been received, return
them and recover what was paid or any part of it concurrently with return or immediately after it.
These remedies are alternative, without prejudice to paragraph 2 of Art. 1191 (that a party may still seek rescission after
choosing specific performance if the latter is impossible)
Buyer cannot rescind if he knew of the breach and accepted the goods without protest, or fails within reasonable time to
notify the seller of his election to rescind, or fails to return or offer to return the goods in substantially as good condition
as it was
If seller refuses to accept an offer to return the goods and the buyer elected rescission, buyer shall be deemed to hold
the goods as bailee for the seller subject to lien to secure payment of any portion of the price which has been paid.
LOSS (in case of breach of warranty of quality) = difference between value of the goods at the time of delivery and value
they would have had if they had answered to the warranty
Provisions on Rescission
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RESCISSION 1381
legal basis is lesion (rescissible contract)
subsidiary remedy cannot be instituted except when other
remedies are exhausted
mutual restitution
mutual restitution
1592
Rescission based on stipulation regarding automatic rescission
- Vendor is given an option to rescind UPON JUDICIAL OR
NOTARIAL DEMAND
- However, when there is no judicial or notarial demand,
vendee may still pay. Offer to pay is sufficient to defeat
vendors prerogative.
- Vendors right to rescind is not absolute.
o Art. 1191, par. 3 provides that the court may grant
vendee a new term
However, if there is already a demand, the court may no longer
fix a term.
Principal/subsidiary (?)
1597
Technical Rescission
There is no delivery of goods yet
(1) Buyer has repudiated the contract of sale;
(2) Buyer has manifested his inability to perform
obligations; or
(3) Buyer committed a breach
1534 / 1597
Movable Property / goods
(See requisites)
VENDEE/BUYER
1191
1170
(IMMOVABLE)
1. Suspension of payment under 1591
2. Right to grace period under Maceda Law
(MOVABLE / GOODS)
1. (1598)
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2.
3.
* EXTINGUISHMENT OF SALE
Art. 1600: Sales are extinguished by the same causes as all other obligations, by those stated in the preceding articles of this Title,
and by conventional or legal redemption.
Sales are
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
extinguished by the same causes as all other obligations (Art. 1600), such as:
Payment or performance of obligation
Loss of the thing due
Condonation or remission of debt
Confusion or merger of rights
Compensation
Novation
Rescission
Annulment
Fulfillment of a resolutory condition
Prescription
Conventional redemption:
* A right of repurchase is an alienable right and within the commerce of man. It may be sold, attached and levied upon.
Art. 1601: Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon.
Art. 1602: The contract shall be presumed to be an equitable mortgage, in any of the following cases: [IPERTOD]
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption
or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be
considered as interest which shall be subject to the usury laws.
Art. 1603: In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable
mortgage.
Art. 1604: The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.
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Art. 1605: In the cases referred to in Articles 1602 and 1604, the apparent vendor may ask for the reformation of the instrument.
(See Art. 1359)
Art. 1606: The right referred to in Article 1601, in the absence of an express agreement, shall last four years from the date of the
contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a
civil action on the basis that the contract was a true sale with right to repurchase.
(This is not applicable to absolute sale. This is applicable only where the nature or character of the transaction, as to whether it is a
pacto de retro sale or equitable mortgage, was put in issue before the court.)
Art. 1607: In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply
with the provisions of article 1616 shall not be recorded in the Registry of Property without a judicial order, after the vendor has
been duly heard.
Art. 1608: The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second
contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law
and the Land Registration Law with respect to third persons.
Art. 1609: The vendee is subrogated to the vendor's rights and actions.
Art. 1610: The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have
exhausted the property of the vendor.
Art. 1611: In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in
the case of article 498, may compel the vendor to redeem the whole property, if the latter wishes to make use of the right of
redemption.
Art. 1612: If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none
of them may exercise this right for more than his respective share.
The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of the latter may
only redeem the part which he may have acquired.
Art. 1613: In the case of the preceding article, the vendee may demand of all the vendors or co-heirs that they come to an
agreement upon the purchase of the whole thing sold; and should they fail to do so, the vendee cannot be compelled to consent to
a partial redemption.
Art. 1614: Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently
exercise the right of repurchase as regards his own share, and the vendee cannot compel him to redeem the whole property.
Art. 1615: If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for
his own share, whether the thing be undivided, or it has been partitioned among them.
But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be
instituted against him for the whole.
Art. 1616: The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in
addition:
(1) The expenses of the contract, and any other legitimate payments made by reason of the sale;
(2) The necessary and useful expenses made on the thing sold.
(construe with Art. 547 and Art. 547; enumeration is not exclusive; tender of payment is enough because other expenses are still
subject to validation)
Art. 1617: If at the time of the execution of the sale there should be on the land, visible or growing fruits, there shall be no
reimbursement for or prorating of those existing at the time of redemption, if no indemnity was paid by the purchaser when the
sale was executed.
Should there have been no fruits at the time of the sale and some exist at the time of redemption, they shall be prorated between
the redemptioner and the vendee, giving the latter the part corresponding to the time he possessed the land in the last year,
counted from the anniversary of the date of the sale.
Art. 1618: The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but
he shall respect the leases which the latter may have executed in good faith, and in accordance with the custom of the place where
the land is situated.
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61
Article 1492 provides that the prohibitions as laid down in Arts. 1490 and 1491 are also applicable to legal redemption.
Art. 1619: Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the
place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted
by onerous title.
Art. 1303: Subrogation transfers to the persons subrogated the credit with all the rights thereto appertaining, either against the
debtor or against third person, be they guarantors or possessors of mortgages, subject to stipulation in a conventional
subrogation.
Art. 1620: A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of
them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable
one.
Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may
respectively have in the thing owned in common.
Requisites:
1. Co-ownership
2. Alienation of all or any of the shares
3. Sale to a stranger
4. Before partition
Art. 1621: The owners of adjoining lands shall also have the right of redemption when a piece of rural land, the area of which does
not exceed one hectare, is alienated, unless the grantee does not own any rural land.
This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, roads and other apparent servitudes
for the benefit of other estates.
If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the adjoining land of
smaller area shall be preferred; and should both lands have the same area, the one who first requested the redemption.
-Requisites:
1. both lands are rural
2. adjacent
3. there is an alienation
4. less than 1 hectare
- purpose is to encourage maximum development and utilization of agricultural lands
Art. 1622: Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any
practical purpose within a reasonable time, having been bought merely for speculation, is about to be re-sold, the owner of any
adjoining land has a right of pre-emption at a reasonable price. (Right of Pre-emption)
If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable price.
When two or more owners of adjoining lands wish to exercise the right of
pre-emption or redemption, the owner whose intended use of the land in question appears best justified shall be preferred. (Right
of redemption)
Art. 1623: The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by
the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property,
unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
HYPOTHETICAL QUESTIONS
1. A, B and C are co-owners of a parcel of land. A donated his share to X. May B or C exercise legal redemption as against
X?
No. The transmission of ownership is not by onerous title. See Article 1619.
2.
A, B and C are co-owners of a parcel of land. A, through a will, awarded his share to X. May B or C exercise legal
redemption as against X?
No. The transmission of ownership is not by onerous title. See Article 1619.
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A owns a land adjoining Bs, Cs, and Ds lands, all of which are of 10,000 sq. m. (1 hectare). Supposing B, C, and D
separately sold their lands to X who owns a rural land, may A redeem all of the lands sold to X?
Yes. All the requisites are satisfied.
4.
A owns a rural land adjoining Bs, Cs, and Ds rural lands, all of which are of 10,000 sq. m. (1 hectare). Supposing B, C,
and D, in a single contract, sold their lands to X who owns a rural land, may A redeem all of the lands sold to X?
Yes. All the requisites are satisfied. It is not necessary that the sales are made in separate contracts. There are still 4
parcels of land, each not exceeding 1 hectare.
5.
A owns a rural land adjoining Bs, Cs, and Ds rural lands, all of which are of 10,000 sq. m. (1 hectare). Supposing B sold
his land to C, whose land is adjoining Bs and As land, may A exercise the right of redemption?
No. Look into the purpose of the law.
6.
A owns a rural land adjoining Bs, Cs, and Ds rural lands. B sold his land to X for P500k but the property is only valued at
P300k
(a) May A exercise the right of repurchase? Yes
(b) How much should A pay? P500k. Art. 1620 (on grossly excessive price) applies only to co-owners
(c) If A, B, C and D are co-owners, how much should A pay? P300k, for Art. 1620 would be the applicable provision.
(d) What if B and X freely agreed that subject is to be sold for P500k, may A compel X to resell the land to him for
P300k only? Yes.
7.
A, B, and C are brothers and co-owners of a parcel of land. C died, leaving X as his sole heir. B sold his share to X. May A
redeem the share sold by B to X?
NO. X is not a stranger to a contract. He is a co-owner.
8.
Same facts as # 7, only that X is Cs wife. May A redeem the share sold by B to X?
NO. X is not a stranger to a contract. He is a co-owner.
* Assignment of Credit
Art. 1624: An assignment of creditors and other incorporeal rights shall be perfected in accordance with the provisions of Article
1475.
Art. 1475: The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form
of contracts.
Art. 1625: An assignment of a credit, right or action shall produce no effect as against third person, unless it appears in a public
instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property.
Art. 1626: The debtor who, before having knowledge of the assignment, pays his creditor shall be released from the obligation.
Art. 1285: The debtor who has consented to the assignment of rights made by a creditor in favor of a third person, cannot set
up against the assignee the compensation which would pertain to him against the assignor, unless the assignor was notified by
the debtor at the time he gave his consent, that he reserved his right to the compensation.
If the creditor communicated the cession to him but the debtor did not consent thereto, the latter may set up the
compensation of debts previous to the cession, but not of subsequent ones.
If the assignment is made without the knowledge of the debtor, he may set up the compensation of all credits prior to the
same and also later ones until he had knowledge of the assignment.
Art. 1627: The assignment of a credit includes all the accessory rights, such as a guaranty, mortgage, pledge or preference.
-reiteration of Art. 1637
Art. 1537: The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they
were upon the perfection of the contract.
All the fruits shall pertain to the vendee from the day on which the contract was perfected. (1468a)
Art. 1628: The vendor in good faith shall be responsible for the existence and legality of the credit at the time of the sale, unless it
should have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge.
Even in these cases he shall only be liable for the price received and for the expenses specified in No. 1 of Article 1616.
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(WARRANTIES)
Art. 1629: In case the assignor in good faith should have made himself responsible for the solvency of the debtor, and the
contracting parties should not have agreed upon the duration of the liability, it shall last for one year only, from the time of the
assignment if the period had already expired.
If the credit should be payable within a term or period which has not yet expired, the liability shall cease one year after the
maturity.
Art. 1630: One who sells an inheritance without enumerating the things of which it is composed, shall only be answerable for his
character as an heir. (Sale of Hereditary Rights)
Art. 1631: One who sells for a lump sum the whole of certain rights, rents, or products, shall comply by answering for the
legitimacy of the whole in general; but he shall not be obliged to warrant each of the various parts of which it may be composed,
except in the case of eviction from the whole or the part of greater value.
Art. 1632: Should the vendor have profited by some of the fruits or received anything from the inheritance sold, he shall pay the
vendee thereof, if the contrary has not been stipulated.
Art. 1633: The vendee shall, on his part, reimburse the vendor for all that the latter may have paid for the debts of and charges on
the estate and satisfy the credits he may have against the same, unless there is an agreement to the contrary.
Art. 1634: When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it by reimbursing
the assignee for the price the latter paid therefor, the judicial costs incurred by him, and the interest on the price from the day on
which the same was paid.
A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date the assignee demands payment from him.
Art. 1635: From the provisions of the preceding article shall be excepted the assignments or sales made:
The character of the transaction between the parties is not, however, determined by the language used
in the document but by their intention.
In case of doubt as to whether a transaction is a pledge or a dation in payment, the presumption is in
favor of a pledge, the latter being the lesser transmission of rights and interests.
The deed of assignment merely guarantees said obligations.
In subrogation, the third party pays the obligation of the debtor to the creditor with the latters consent.
As a consequence, the paying third party steps into the shoes of the original creditor as subrogee of the
latter. An assignment of credit on the other hand is the process of transferring the right of the assignor
to the assignee who would then have the right to proceed against the debtor. The assignment may be
done either gratuitously or onerously in which case the assignment has an effect similar to that of a
sale.
Consent of the debtor is not essential in assignment. (Art. 1624 in relation to Art. 1475)
His knowledge thereof affecting only the validity of the payment he might make (1626). Art. 1626
mandates that such payment of the existing obligation shall already be made to the new creditor from
the time the debtor acquires knowledge of the assignment of the obligation.
What the law requires in an assignment of credit is not the consent of the debtor but merely notice to
him. A creditor may, therefore, validly assign his credit and its accessories without the debtors consent.
The purpose of the notice is only to inform the debtor that from the date of the assignment, payment
should be made to the assignee and not to the original creditor.
Art. 1842: The right to an account of his interest shall accrue to any partner, or his legal representative as against the winding up
partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence of
any agreement to the contrary.
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A lease is a contract by which one of the parties agrees to give to the other for a fixed time and price
the use or profit of a thing, or of his service.
A lease is not a contract imposed by law. With the terms thereof also fixed by law Without the
agreement of both parties, no contract of lease can be said to have been created or established.
Nobody can force another to let the latter lease his property if the owner refuses. So the owner may
not be compelled by action to give his property for lease to another.
A lease is a consensual, bilateral, onerous and commutative contract by virtue of which the owner
temporarily grants the use of his property to another who undertakes to pay the rent therefor.
A lease is a consensual, bilateral, onerous and commutative contract by which one person binds
himself to grant temporarily the use of a thing or the rendering of some service to another who
undertakes to pay some rent, compensation or price.
* Kinds of Leases:
1. Lease of things or properties whether immovable or movable property;
2. Lease of work which refers to contract for a piece of work such as the making of a suit by a tailor;
3. Lease of service such as the repair of a car by a mechanic or painting of ones picture by a painter.
[Art. 1642: The contract of lease may be of things, or of work and service.]
* Lease of Personal Property; When it is a sale:
A lease of personal property with option to buy, where title is transferred at the end of the contract provided rents have been fully
paid, is a sale in installments and not a lease (Art. 1484; Heacock Co. vs. Buntal Mfg. Co.).
* Lease vs. Sale
SALE (Art. 1458)
The delivery of the thing sold transfers ownership
Price must be in money or its equivalent
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(Locatio Operatum)
(Locatio Operas)
AGENCY
It is based on representation agent represents his principal
and enters into juridical acts.
Preparatory contract
EMPLOYMENT
Employer and employee
The employer retains control or management over his chattel
The employer exercises control and supervision over the
employee
LEASE OF SERVICES
Object is some work or service
Lessor has to perform some work or service
In case of breach, no action for specific performance
HYPOTHETICAL QUESTION:
A parks his car in the parking area of B everyday upon payment of a fixed amount paid daily without special stipulations. Is the
contract one of deposit or lease?
If the owner of the lot has no obligation to take care of the car, it is a lease contract with an accessory obligation of securing the
parking area. If the car is parked there for safe keeping purposes, it is a deposit.
* General Provisions
Art. 1643: In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price
certain, and for a period which may be definite or indefinite. However, no lease for more than ninety-nine years shall be valid.
- Only things which are within the commerce of man may be the subject of lease.
- The lease of a building includes the lease of the lot where the building stands. If the building is lost, the lease does not
continue with the land in the absence of any contrary agreement.
- The death of the party does not excuse the non-performance of the contract (lease with option to buy) which is a property
right, by the heirs of the deceased. There is privity of interest between the heirs and their predecessor.
Art. 1644: In the lease of work or service, one of the parties binds himself to execute a piece of work or to render to the other
some service for a price certain, but the relation of principal and agent does not exist between them.
CONTRACT OF PIECE OF WORK (Locatio operis)
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The object of contract is the service itself and not the result
which it generates
Even if the result intended is not attained, the services of the
lessor must still be paid
Art. 1645: Consumable goods cannot be the subject matter of a contract of lease, except when they are merely to be exhibited or
when they are accessory to an industrial establishment
- General Rule: Consumable goods cannot be the subject matter of a contract of lease of things.
Reason: To use or enjoy them, they will have to be consumed. This cannot be done in lease since ownership
over them is not transferred by the contract of lease.
Exceptions:
(a) If they are merely exhibited
(b) If they are accessory to an industrial establishment
- If a lease is to be recorded, the following persons must have proper authority (power of attorney) to constitute the lease:
1. The husband with respect to the paraphernal real estate of the wife
2. The father or guardian with respect to the property of the minor or the ward
3. The manager (administrator) with respect to the property under his administration.
Manager may be:
a. The administrator of conjugal property (Rodriguez v. Borromeo, 43 Phil. 479, No. 17772, June 9, 1922);
b. Administrator of co-ownership (Melencio v. Dy Tiao Lay, G.R. No. L-32047, November 1, 1930); and
c. Administrator of state patrimonial property (Tipton v. Andueza, G. R. No. 2070, January 2, 1906).
Art. 1648. Every lease of real estate may be recorded in the Registry of Property. Unless a lease is recorded, it shall not be binding
upon third persons. (1549a)
Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary. (n)
- Reason: The objective of the law in prohibiting assignment of lease without the lessors consent is to protect the lessor or
owner of the leased property. (Tamio vs. Ticson, G.R. No. 154895, Nov. 18, 2004). Assignment of this nature constitutes a
novation (by substituting the person of the debtor) so the creditor-lessor must consent (Vda. De Hijos de Barretto v. Sevilla,
Inc. G.R. No. L-41768, December 17, 1935).
Art. 1650. When in the contract of lease of things there is no express prohibition, the lessee may sublet the thing leased, in whole
or in part, without prejudice to his responsibility for the performance of the contract toward the lessor. (1550)
SUBLEASE - A separate and distinct contract of lease wherein the original lessee becomes a sublessor to a
SUBLEASE
There are two leases and two distinct juridical
relationships although immediately connected and
related to each other
ASSIGNMENT OF LEASE
There is only one juridical relationship, that
of the lessor and the assignee, who is
converted into a lessee
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lessor
Unlike in assignment, a lessee may generally sublease the property in the absence of express prohibition.
Art. 1651. Without prejudice to his obligation toward the sublessor, the sublessee is bound to the lessor for all acts which refer to
the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee. (1551)
-GENERAL RULE: There is no juridical relationship between the lessor and the sublessee. The lessee is directly liable to the
lessor and the sublessee. Exceptions: Arts. 1651 and 1652.
Art. 1652. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sublessee shall not be
responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extrajudicial
demand by the lessor.
Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the lessor's claim is concerned,
unless said payments were effected in virtue of the custom of the place. (1552a)
-The purpose of the second paragraph is to prevent collusion between lessee and sublessee.
Art. 1653. The provisions governing warranty, contained in the Title on Sales, shall be applicable to the contract of lease.
In the cases where the return of the price is required, reduction shall be made in proportion to the time during which the lessee
enjoyed the thing. (1553)
SECTION 2. - Rights and Obligations of the Lessor and the Lessee
Art. 1654. The lessor is obliged:
(1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended;
(2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use to which it has
been devoted, unless there is a stipulation to the contrary;
(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract.
(1554a)
-The lessor is also obliged not to alter the form in such a way as to impair the use to which the thing is devoted [See
Art. 1661]
Art. 1655. If the thing leased is totally destroyed by a fortuitous event, the lease is extinguished. If the destruction is partial, the
lessee may choose between a proportional reduction of the rent and a rescission of the lease. (n)
Art. 1656. The lessor of a business or industrial establishment may continue engaging in the same business or industry to which the
lessee devotes the thing leased, unless there is a stipulation to the contrary. (n)
Art. 1657. The lessee is obliged:
(1) To pay the price of the lease according to the terms stipulated;
(2) To use the thing leased as a diligent father of a family, devoting it to the use stipulated; and in the absence of
stipulation, to that which may be inferred from the nature of the thing leased, according to the custom of the place;
(3) To pay expenses for the deed of lease. (1555)
-The lessee is also obliged to bring to the knowledge of the proprietor, within the shortest possible time, every
usurpation or untoward act which any third person may have committed or may be openly preparing to carry out
upon the thing leased [See Art. 1663].
Art. 1658. The lessee may suspend the payment of the rent in case the lessor fails to make the necessary repairs or to maintain the
lessee in peaceful and adequate enjoyment of the property leased. (n)
Art. 1659. If the lessor or the lessee should not comply with the obligations set forth in Articles 1654 and 1657, the aggrieved party
may ask for the rescission of the contract and indemnification for damages, or only the latter, allowing the contract to remain in
force. (1556)
Art. 1660. If a dwelling place or any other building intended for human habitation is in such a condition that its use brings imminent
and serious danger to life or health, the lessee may terminate the lease at once by notifying the lessor, even if at the time the
contract was perfected the former knew of the dangerous condition or waived the right to rescind the lease on account of this
condition. (n)
Art. 1661. The lessor cannot alter the form of the thing leased in such a way as to impair the use to which the thing is devoted
under the terms of the lease. (1557a)
Lessor can alter provided there is no impairment of the use to which the thing is devoted under the terms of the
-
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time he may be deprived of a part of the premises, if repairs last for not more than 40 days.
If 40 days or more, lessee can ask for reduction of the rent in proportion to the time including the 1st 40 days
and the part of the property of which he is deprived.
o
If less than 40 days, the lessee cannot ask for reduction of the price or for rescission
Note: In either case, rescission may be availed of if the main purpose of the lease is to provide a dwelling place and the
property becomes uninhabitable.
o
Art. 1663. The lessee is obliged to bring to the knowledge of the proprietor, within the shortest possible time, every usurpation or
untoward act which any third person may have committed or may be openly preparing to carry out upon the thing leased.
He is also obliged to advise the owner, with the same urgency, of the need of all repairs included in No. 2 of Article 1654.
In both cases the lessee shall be liable for the damages which, through his negligence, may be suffered by the proprietor.
If the lessor fails to make urgent repairs, the lessee, in order to avoid an imminent danger, may order the repairs at the lessor's
cost. (1559a)
Art. 1664. The lessor is not obliged to answer for a mere act of trespass which a third person may cause on the use of the thing
leased; but the lessee shall have a direct action against the intruder.
There is a mere act of trespass when the third person claims no right whatever. (1560a)
TRESPASS IN LEASE:
There is a mere physical disturbance on the property leased such as an intrusion of an intruder without any legal
claim to justify his entry into the property.
Lessor will not be held liable.
Reason: The duty to maintain the lessee in the peaceful enjoyment of the lease is a warranty that the lessee shall
not be disturbed in his legal, and not physical, possession (Bercero vs. Capitol Devt. Corp., G.R. No. 154765, Mar.
29, 2007).
Lessee is authorized by law to pursue a direct action like forcible entry against the intruder.
2. Trespass in law (perturbacion de derecho):
Note: In the Goldstein case, trespass in fact is distinguished from legal transfer; if the trespass is not accompanied or
preceded by anything which reveals a juridical intention on the part of the trespasser, in such wise that the lessee can only
distinguish the material fact, stripped of all legal forms or reasons, it is only trespass in fact (de mero hecho) (Goldstein v.
Roces, G.R. No. L-869, March 30, 1916).
While the Japanese Occupation was a fortuitous event, the lessor is still not excused from his obligation to warrant peaceful
legal possession. Lease is a contract that calls for prestations both reciprocal and repetitive; the obligations of either party are
not discharged at any given moment, but must be fulfilled all throughout the term of the contract (Villaruel v. Manila Motor
Co., G.R. No. 10394, December 13, 1958).
Art. 1665. The lessee shall return the thing leased, upon the termination of the lease, as he received it, save what has been lost or
impaired by the lapse of time, or by ordinary wear and tear, or from an inevitable cause. (1561a)
Art. 1666. In the absence of a statement concerning the condition of the thing at the time the lease was constituted, the law
presumes that the lessee received it in good condition, unless there is proof to the contrary. (1562)
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Art. 1668. The lessee is liable for any deterioration caused by members of his household and by guests and visitors. (1564a)
Art. 1669. If the lease was made for a determinate time, it ceases upon the day fixed, without the need of a demand. (1565)
Art. 1670. If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with the acquiescence
of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied
new lease, not for the period of the original contract, but for the time established in Articles 1682 and 1687. The other terms of the
original contract shall be revived. (1566a)
Art. 1671. If the lessee continues enjoying the thing after the expiration of the contract, over the lessor's objection, the former shall
be subject to the responsibilities of a possessor in bad faith. (n)
Art. 1672. In case of an implied new lease, the obligations contracted by a third person for the security of the principal contract
shall cease with respect to the new lease. (1567)
Art. 1673. The lessor may judicially eject the lessee for any of the following causes:
(1) When the period agreed upon, or that which is fixed for the duration of leases under Articles 1682 and 1687, has
expired;
(2) Lack of payment of the price stipulated;
(3) Violation of any of the conditions agreed upon in the contract;
(4) When the lessee devotes the thing leased to any use or service not stipulated which causes the deterioration thereof;
or if he does not observe the requirement in No. 2 of Article 1657, as regards the use thereof.
-The demand of payment must be coupled with demand to vacate the premises. Otherwise, the Unlawful Detainer
case will not prosper
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In ejectment cases where an appeal is taken, the lessor is entitled to a writ of preliminary injunction to restore him in his
possession in case the higher court is satisfied that the lessees appeal is frivolous or dilatory (i.e. without merit) or the
lessors appeal is prima facie meritorious.
Art. 1675. Except in cases stated in Article 1673, the lessee shall have a right to make use of the periods established in Articles
1682 and 1687. (1570)
Art. 1676. The purchaser of a piece of land which is under a lease that is not recorded in the Registry of Property may terminate the
lease, save when there is a stipulation to the contrary in the contract of sale, or when the purchaser knows of the existence of the
lease.
If the buyer makes use of this right, the lessee may demand that he be allowed to gather the fruits of the harvest which
corresponds to the current agricultural year and that the vendor indemnify him for damages suffered.
If the sale is fictitious, for the purpose of extinguishing the lease, the supposed vendee cannot make use of the right granted in the
first paragraph of this article. The sale is presumed to be fictitious if at the time the supposed vendee demands the termination of
the lease, the sale is not recorded in the Registry of Property. (1571a)
General Rule: Purchaser of thing leased can terminate lease.
Exceptions:
1.
2.
3.
4.
5.
Art. 1677. The purchaser in a sale with the right of redemption cannot make use of the power to eject the lessee until the end of
the period for the redemption. (1572)
Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended,
without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee onehalf of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment
upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental
objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at
the time the lease is extinguished. (n)
Art. 1679. If nothing has been stipulated concerning the place and the time for the payment of the lease, the provisions or Article
1251 shall be observed as regards the place; and with respect to the time, the custom of the place shall be followed. (1574)
SECTION 3. - Special Provisions for Leases of Rural Lands
Art. 1680. The lessee shall have no right to a reduction of the rent on account of the sterility of the land leased, or by reason of the
loss of fruits due to ordinary fortuitous events; but he shall have such right in case of the loss of more than one-half of the fruits
through extraordinary and unforeseen fortuitous events, save always when there is a specific stipulation to the contrary.
Extraordinary fortuitous events are understood to be: fire, war, pestilence, unusual flood, locusts, earthquake, or others which are
uncommon, and which the contracting parties could not have reasonably foreseen. (1575)
Art. 1681. Neither does the lessee have any right to a reduction of the rent if the fruits are lost after they have been separated from
their stalk, root or trunk. (1576)
Art. 1682. The lease of a piece of rural land, when its duration has not been fixed, is understood to have been for all the time
necessary for the gathering of the fruits which the whole estate leased may yield in one year, or which it may yield once, although
two or more years have to elapse for the purpose. (1577a)
Art. 1683. The outgoing lessee shall allow the incoming lessee or the lessor the use of the premises and other means necessary for
the preparatory labor for the following year; and, reciprocally, the incoming lessee or the lessor is under obligation to permit the
outgoing lessee to do whatever may be necessary for the gathering or harvesting and utilization of the fruits, all in accordance with
the custom of the place. (1578a)
Art. 1684. Land tenancy on shares shall be governed by special laws, the stipulations of the parties, the provisions on partnership
and by the customs of the place. (1579a)
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At the option of the lessor, he or she may engage the lessee in a written rent-to-own agreement that will result in the transfer
of ownership of the particular dwelling in favor of the latter. Such an agreement shall be exempt from the coverage of Section
5 of this Act.
LIMIT ON INCREASE IN RENT (Sec. 4)
For a period of one year from effectivity, no increase shall be imposed on the rent of any residential unit covered by this Act.
After such period until December 31, 2013, the rent shall not be increased by more than 7% annually as long as the unit is
occupied by the same lessee.
When the residential unit becomes vacant, the lessor may set the initial rent for the next lessee.
In case of boarding houses, dormitories, rooms and bedspaces offered to students, no increase in rental more than once per
year shall be allowed.
DEFINITION OF TERMS
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Assignment of lease or subleasing of residential units in whole or in part, including the acceptance of boarders or bedspacers,
without the written consent of the owner/lessor;
2.
3.
Legitimate need of the owner / lessor to repossess his share or her property for his or her own use or for the use of any
immediate member of his family as a residential unit
Conditions:
4.
Need of the lessor to make necessary repairs of the leased premises which is the subject of an existing order of condemnation
by appropriate authorities concerned in order to make the said premises safe and habitable
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Conditions:
5.
After said repair, the lessee ejected shall have the first preference to lease the same premises;
The new rent shall be reasonably commensurate with the expenses incurred for the repair of the said residential unit
That if the residential unit is condemned or completely demolished, the lease of the new building will no longer be subject
to the aforementioned first preference rule
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