UP Law F2021 La Fuerza v.

CA
Sales Article 1571, 1582 1497, 1496 1968 Concepcion, J.

SUMMARY

Appellant La Fuerza contested the CA decision made in favor of Associated Engineering, which acting
upon a motion for reconsideration denied their counterclaim for their downpayment of P5,000, with a prayer
for rescission and recovery of damages. This is concerning the manufacturing and installation of a conveyor
belt in La Fuerza’s plant. CA ruled that La Fuerza’s right to avail of rescission has prescribed based on Art.
1571, which La Fuerza challenged in the SC case, saying that delivery was not fulfilled since La Fuerza has yet
to accept. SC ruled that acceptance is not a condition for delivery.

FACTS

Associated Engineering Co., Inc. is a corporation engaged in the manufacture and install​ation of flat belt
conveyors, while La Fuerza, Inc. is a corporation engaged in the manufacture of wines.

January, 1960 - ​Engineer Antonio Co, the manager of the Associated Engineering, called Mariano Lim, the
President and general manager of the La Fuerza to say how he was impressed by the size and beauty of La
Fuerza’s plant, and offered to manufacture and install a conveyor system which would increase production
and efficiency of the plant.

The belt would convey empty bottles from the storage room in the plant to the bottle washers in the
production room thereof. Lim did not make up his mind then but suggested to Antonio Co to put down his
offer in writing.

February 4, 1960 ​- Antonio Co submitted his offer in writing in a letter. Mariano Lim did not act on the said
offer until February 11, 1960, when Antonio Co returned to inquire about the action of the defendant on his
said offer.

February 11, 1960 - ​Lim ex​pressed his conformity to the offer. He caused, however, to be added to this offer
at the foot a note which reads: "All specifications shall be in strict accordance with the approved plan made
part of this agreement hereof".

A few days later, ​Antonio Co made the demand for the down payment of P5,000.00 which was readily
delivered by the Lim in the form of a check for the said amount. After that agreement, the Co start​ed to
prepare the premises for the installations of the conveyor system by digging holes in the ce​ment floor of the
plant.

April 18, 1960 - ​Co delivered one unit of 110' 26" wide flat belt conveyor, valued at P3, 750.00, and another
unit mea​suring 190' and 4" wide flat conveyor, valued at P4,500.00, or a total of P13,250.00. Deducting the
down payment of P5,000.00 from this value, there is a balance of P8,250.00 to be paid by the defendant upon
the completion of the installation.

The work went under way during the months of March and April, during which time Lim was duly apprised of
the progress of the same because his plant mechanic, one Mr. Santos, had kept him informed of the
ins​tallation for which he gave the go signal.​ The work was completed during the month of May, 1960.

After five trial runs, which continued during the month of June where about three trial runs were made, it was
discovered by Lim that the conveyor system did not function to their satisfaction. This is because when
operated, several bot​tles collided with each other, some jumping off the conveyor belt and were broken,
causing consider​able damage. ​Furthermore, the flow of the system was so sluggish that according to Lim,
their old system of carrying the bottles from the storage room to the washers by hand carrying them was
even more efficient and faster.

After the last trial run made in the month of July, ​at which point Co’s technical manager has been advised
several times to make the neces​sary and proper adjustments or corrections, the defects indicated by Lim had
not been remedied.

Thus, when Associated Engineering billed La Fuerza for the balance of the contract price, the latter refused to
pay for the reason that the conveyor system ins​talled did not serve the purpose for which the same was
manufactured and installed at such a heavy expense. The flat belt conveyors installed in the factory of the
defendant are still there.

March 22, 1961 - ​Associated Engineering commenced an action to recover the sums of P8,250, the balance of
the stipulated price of the aforementioned conveyors, and P2,000, as attorney's fees, in addition to the costs.
La Fuerza alleged that the "conveyors furnished and installed by the plaintiff do not meet the conditions and
warrantings" (warranties?) of the latter, and set up a counterclaim for the P5,000, praying ​that the
complaint be dismissed; that its contract with the Associated Engineering be rescinded; and that
Associated Engineering be sentenced to refund said sum of P5,000 to La Fuerza as well as to pay
thereto P1,000 as attorney's fees, apart from the costs.

The Court of First Instance ruled in favor of La Fuerza, rescinding the contract and ordering Associated
Engineers to return the downpayment of P5,000. The CA, after first affirming the CFI decision, later reversed
the decision upon reconsideration, citing Art. 1571 of the Civil Code, which says that: “an action to rescind
'shall be barred after six months from delivery of the thing sold'." In this case, ruled the CA, La Fuerza did not
avail of the right to demand rescission until the filing of its answer in the Court of First Instance, on April 17,
1961, or over ten (10) months after the installation of the conveyors in question had been completed on May
30, 1960.

La Fuerza assailed the decision as it contested that since Associate Engineering has not complied with the
conditions or requirements of the contract between them, and La Fuerza has yet to accept the conveyors,
there is still no delivery from the part of Associated Engineers.

RATIO

ISSUE: W/N there was delivery of conveyors from the part of Associated Engineering
YES. SC concurred with the opinion of the CA that for contracts of sale, acceptance is not a condition for
delivery.

Con​sidering that Article 1571 is a provision on sales, the delivery mentioned therein should be construed in
the light of the provisions on sales. Article 1497 provides that the thing sold shall be understood as delivered
when it is placed in the control and possession of the vendee. Therefore, when the thing subject of the sale is
placed in the control and possession of the vendee, delivery is complete. Delivery is an act of the vendor.
Thus, one of the obligations of the vendor is the delivery of the thing sold (Art. 1495). The vendee has nothing
to do with the act of delivery by the vendor. On the other hand, acceptance is an obligation on the part of the
vendee (art. 1582). Delivery and accep​tance are two distinct and separate acts of different parties.
Consequently, acceptance cannot be regard​ed as a condition to complete delivery.
W/N the six-month prescription in Art. 1571 pertains to “an action to demand compliance of the
warranty against hidden defects", not the action for rescission of the contract.
NO.

Art. 1571 of the Civil Code provides that "actions arising from the provisions of the preceding ten articles
shall be barred after six months, from the delivery of the thing sold.” Among the "ten articles" referred to in
this provision, are Articles 1566 and 1567, reading:
"Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even
though he was not aware thereof.

"This provision shall not apply if the con​trary has been stipulated, and the vendor was not aware of the
hidden faults or defects in the thing sold.

"Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either
case.

Pursuant to these two (2) articles, if the thing sold has hid​den faults or defects, La Fuerza "may elect between
withdrawing from the contract and demanding a pro​portional reduction of the price, with damages in either
case." In the exercise of this right of election, La Fuerza had chosen to with​draw from the contract, by praying
for its rescission; but the action therefor - in the language of Art. 1571 - "shall be barred after six months,
from the delivery of the thing sold." The period of four (4) years, provided in Art. 1389 of said Code, for "the
action to claim rescission," applies to contracts, in general, and must yield, in the, instant case, to said Art.
1571, which refers to sales in particular.

In contracts of sale, especially when goods merchandise, machinery or parts or equipment thereof are
involved, it is obviously wise to require the parties to define their position, in relation thereto, within the
shortest possible time. Public interest demands that the status of the relations between the vendor and the
vendee be not left in a condition of uncertainty for an unreasonable length of time, which would be the case, if
the lifetime of the vendee's right of rescission were four (4) years.

FALLO

WHEREFORE, the appealed resolution of the Court of Appeals is hereby affirmed, with costs against
appellant, La Fuerza, Inc.
 UP Law F2021 056 Azarraga v. Gay
Sales Art. 1542 1928 Villamor

SUMMARY
Gay purchased two parcels of Azarraga’s land for a lump sum. After paying the first two of the four payments,
she no longer paid the rest on the ground that the lump sum should be reduced because the size of the second
parcel was smaller than the stipulation in their agreement. The Court ruled that she is not entitled to a
reduction to the price because the determinate object they agreed upon pertained to the entire two parcels
and not their size thereof. Azarraga delivered everything within the boundaries of the lots. The lump sum,
therefore, should not be reduced.

FACTS
 By a public instrument in January 1921, Azarraga sold 2 parcels of land to Gay for the lump sum of
P47,000, payable in instruments, subject to the ff. conditions:
o P5k upon signing of contract
o P20k upon delivery of the Torrens title to the first parcel
o P10k upon delivery of the Torrens title to the second parcel
o P12k one year after the delivery of the second Torrens title
 Gay was able to pay upon signing and delivery of the first Tor rens title. However, she failed to pay
the P10k upon the delivery of the second Torrens title as well as the P12k after that
 Azarraga claims the sum of P22k with legal interest
 Gay poses the following arguments:
o Azarraga misrepresented to her that the second parcel had 98 hectares whereas it only had
60 hectares, thus, the total amount of the land should be reduced to only P38k
o She has already paid to Azarraga other sums amounting to P4k
o She never refused to pay the justly reduced price of the land and it was Azarraga who refused
to accept the amount of the debt
o She also demanded payment of damages due to the malicious filing of the complaint
 Azarraga’s arguments
o Contract of sale in question is made only for the lump sum of P47k and not at the rate of so
much per hectare
o Action has prescribed
 Trial court ruled in favor of Azarraga
o Neither party gave importance to the area of the land in consenting to the contract, hence no
fraud was committed when they agreed to the lump sum of the two parcels

RATIO

W/N Gay is entitled to a reduction in the lump sum due to the smaller size of the second parcel of
land from the stipulated size in their agreement
No.
I. What is considered in this case is the entirety of the thing delivered
 According to Manresa, “if the sale was made for a price per unit of measure or number, the
consideration of the contract with respect to the vendee, is the number of such units, or, if you
wish, the thin purchased as determined by the stipulated number of units. But if, on the other
hand, the sale was made for a lump sum, the consideration of the contract is the object sold,
independently of its number or measure, the thing as determined by the stipulated boundaries,
which has been called in law a determinate object”
 In delivering a determinate object, two cases may arise:
o Determinate object is delivered as stipulated (within the boundaries inasmuch as it is the
entirety thereof that distinguishes the determinate object)
 “Whether or not the object of the sale be one realty for a lump sum, or two or more
for a single price also a lump sum, and, consequently, not at the rate of a specified
price for each unit of measure or number, the vendor shall be bound to deliver
everything that is included within the boundaries stated, although it may exceed the
 area or number expressed in the contract; in case he cannot deliver it, the purchaser
shall have the right either to reduce the price proportionately to what is lacking of
the area or number or to rescind the contract at his option”
o Such entirety is impaired in the delivery by failing to deliver to the purchaser something
included within the boundaries
 The second case is inapplicable because all the land included in the boundaries of the two parcels
were delivered in its entirety to Gay

II. Gay went over to the land, before the execution of the contract, to make her own calculations as
to the area of the parcels and
 Azarraga even delivered to Gay the documents covering the land he was trying to sell
 Gay had in her possession the deed by which Azarraga acquired the land from its original owner,
which says that the second parcel is “about 70 hectares”
o It is presumed that she knows the contents of the document
 No evidence that Azarraga made false representations
o Assuming that he did, the representations are bore by Gay at her own risk because she is
the one responsible for the consequences of her inexcusable credulousness
o She had ample opportunity to appraise herself of the condition of the land which she
purchased and Azarraga did nothing to prevent her from investigating
 Songco v Sellner: when the purchaser proceeds to make investigations by himself
and the vendor does nothing to prevent such from being as complete, the purchaser
cannot later allege that the vendor made false representatio ns to him

FALLO
The judgment appealed from being in accordance with the law, it should be as it is hereby, affirmed, with
costs against the appellant. So ordered.
 UP Law F2021 057 Esguerra v. Trinidad
Sales Art. 1542 2007 Carpio-Morales

SUMMARY

Petitioners Feliciano Esguerra et. al sold to the Trinidad spouses a portion consisting of 5,000 sq.m. from the
land which they previously acquired from their grandparents. (Lot. No. 3591). During the cadastral survey it
was discovered that the 5,000 sqm portion actually measured 6,268 square meters. The Esguerras filed two
separate complaints for the nullification of the OCTs on the ground that they were procured through fraud or
misrepresentation. According to the SC, Article 1542 of the Civil Code applies. In the sale of real estate made
for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase
or decrease of the price, although there be a greater or less areas or number than that stated in the contract.

FACTS
The Esguerra spouses were the owners of several parcels of land in Meycauayan Bulacan, half of which they
sold to their grandchildren (Feliciano Esguerra et. al, herein petitioners). The remaining portion were sold to
their other grandchildren, the brothers Eulalio and Julian Trinidad.

Eulalio Trinidad later sold his share of the land to his daughters (Virginia & Primitiva, respondents herein)
via a notarized Kasulatan ng Bilihang Tuluyan ng Lupa 3 dated October 13, 1965. A portion of the land
consisting of 1,693 square meters was later assigned as Lot No. 3593. The Trinidad sisters applied for a
registration of title of Lot No. 3593 and the LRA awarded the lot in their favor and issued Original Certificate
of Title No. 0-3631.

Meanwhile, Feliciano Esguerra et. al (petitioners) sold to the parents of the Trinidad sisters (Eulalio and
Damiana) a portion consisting of 5,000 sq.m. from the land which they previously acquired from their
grandparents. (Lot. No. 3591)

During the cadastral survey conducted in the late 1960s, it was discovered that the about 5,000-square meter
portion of petitioner Esguerras' parcel of land sold to the Trinidad spouses which was assigned Lot No. 3591
actually measured 6,268 square meters. The lot was registered and the Register of Deeds of Bulacan issued
OCT No. 0-6498. The lot was then passed on to the Trinidad sisters upon the death of their parents.

The Esguerras filed two separate complaints for the nullification of the two OCTs on the ground that they
were procured through fraud or misrepresentation.

RTC dismissed the case. CA also dismissed the appeal.

RATIO
Issue 1: W/N Eulalio Trinidad acquired the lots from the Esguerra grandparents through fraud
NO. It is settled that fraud is a question of fact and the circumstances constituting the same must be
alleged and proved in the court below. In the present cases, as did the trial court, the appellate court
found no fraud in respondents' acquisition and registration of the land. Under the Torrens System, an
OCT enjoys a presumption of validity, which correlatively carries a strong presumption that the
provisions of the law governing the registration of land which led to its issuance have been duly followed.

Issue 2: W/N Article 1542 of the New Civil Code is applicable in this case
YES.

The courts below correctly characterized the sale of Lot No. 3591 as one involving a lump sum contract.
The Bilihan ng Lupa shows that the parties agreed on the purchase price of P1,000.00 on a predetermined,
albeit unsurveyed, area of 5,000 square meters and not on a particular rate per unit area.
According to Article 1542 of the Civil Code, in the sale of real estate, made for a lump sum and not at the
rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price,
although there be a greater or less areas or number than that stated in the contract.

Under Article 1542, what is controlling is the entire land included within the boundaries, regardless of
whether the real area should be greater or smaller than that recited in the deed. This is particularly true
since the area of the land in OCT No. 0-6498 was described in the deed as "humigit kumulang ," that is, more
or less.

Note: Comparison with a unit price contract

In sales involving real estate, the parties may choose between two types of pricing agreement:
a unit price contract wherein the purchase price is determined by way of reference to a stated rate per unit
area (e.g ., P1,000 per square meter), or a lump sum contract which states a full purchase price for an
immovable the area of which may be declared based on an estimate or where both the area and boundaries
are stated (e.g ., P1 million for 1,000 square meters, etc.).

In a unit price contract, the statement of area of immovable is not conclusive and the price may be reduced or
increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the
vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the
proportionate reduction of the purchase price if delivery is not possible. If the vendor delivers more than the
area stated in the contract, the vendee has the option to accept only the amount agreed upon or to accept the
whole area, provided he pays for the additional area at the contract rate.

Issue 3: W/N prescription has already set in

Yes.

The appellate court noted that when the complaints were filed in 1994, more than 27 years had elapsed
from the issuance of OCT No. 0-3631 and more than 20 years from the issuance of OCT No. 0-6498. The
prescriptive period of one (1) year had thus set in.

Even assuming that petitioners' actions are in the nature of a suit for quieting of title, which is
imprescriptible, the actions still necessarily fail since petitioners failed to establish the existence of fraud.

It is a fundamental principle in land registration that a certificate of title serves as evidence of an

indefeasible and incontrovertible title to the property in favor of the person whose name appears therein.
Such indefeasibility commences after the lapse or expiration of one year from the date of entry of the decree
of registration when all persons are considered to have a constructive notice of the title to the property.
After the lapse of one year, therefore, title to the property can no longer be contested.

FALLO

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals are AFFIRMED. Costs against petitioners.
 UP Law F2021 058 Alfredo v. Borras
Sales Art. 1497 2003 Villamor

SUMMARY
Spouses Alfredo, registered owners of subject land, sold the same to spouses Borras in consideration of
P15,000, which they used to pay a mortgage loan with DBP. Years later, spouses Borras found out that spouses
Alfredo sold parts of the said land to several persons, thus they filed an adverse claim. Spouses Alfredo said
that their contract of sale with spouses Borras was unenforceable because there is no written instrument to
prove such sale. The Court ruled in favor of the respondents, saying that the contract, having been perfected
and consummated, is no longer within the ambit of the Statute of Frauds.

FACTS
 Spouses Alfredo sold their parcel of land to spouses Borras for P15,000
o Said land is mortgaged with DBP
o Spouses Borras paid the said amount to DBP which released the mortage and returned the
owner’s OCT to spouses Alfredo
o After paying the rest of the balance to the Spouses Alfredo, the spouses Borras…
 Were issued by the spouses Alfredo with a receipt dated March 11, 1970 for the full
payment
 Were given the owner’s duplicate copy of the OCT and the document of the
cancellation of mortgage, official receipts of realty tax payments, and tax declaration
 Were introduced to the old tenants of the land, the Natanawans
 Were able to take possession of the subject land
 In 1994, several persons entered the subject land and cut trees allegedly “under the instruction of
the new owners” of the land
o Spouses Borras discovered that the spouses Alfredo resold portions of the subject land to
several persons
 Apparently, the spouses Alfredo secured a new copy of the OCT after saying they lost
their copy
 Spouses Borras filed an action for specific performance which included the subsequent buyers of the
land in the case (herein petitioners)
 Petitioners’ arguments
o Sale between Alfredo and Borras is unenforceable under the Statute of Frauds because there
is no written instrument evidencing the contract
o Subsequent buyers bought the lots in good faith
 RTC ruled in favor of Spouses Borras
 CA reaffirmed the ruling of the RTC
RATIO

W/N the Spouses Alfredo delivered the subject property to the Spouses Borras, thus the contract
of sale is already perfected and consummated?
Yes

I. There is a perfected contract between the parties.

 There was a meeting of the minds of the sale on the purchase price of P15,000

II. The sale has been consummated

 Seller and buyer performed their respective obligations under the contract
 Spouses Alfredo transferred the ownership of the subject land by placing the spouses
Borras in actual physical possession of the land
o They introduced the spouses Borras to the old tenants
o They delivered the owner’s duplicate OCT, tax declaration, and the receipts of realty tax
payments
o Under Art. 1497 of the Civil Code, the thing sold is understood as delivered when it is placed in
the control and possession of the vendee
  Spouses Borras paid the price of the said land

III. Subject property is taken out of the Statute of Frauds

 Spouses Alfredo cannot invoke the argument of unenforceability because they issued a receipt
dated March 11, 1970 to the spouses Borras
 The receipt is sufficient note or memorandum to evidence the sale between the parties

IV. Assuming that the sale was done without the husband’s consent, Godofredo Alfredo was proven
to have ratified the said sale
 Spouses Alfredo claim that the sale cannot be valid because Carmen did not seek the approval of
her husband
 This does not render a contract void, only voidable, and voidable contracts can be ratified
 Godofredo was one of the those who introduced the spouses Borras to the Natanawans
o Not having denied this, he is considered to have ratified the sale which he may initially have
not assented to
 Moreover, the proceeds of the sale were used to pay the mortgage loan
o The proceeds redounded to the benefit of the conjugal property

V. The sale of the lots to the subsequent buyers cannot be considered to have been made in good
faith
 Subsequent buyers had constructive knowledge of the prior sale
 Spouses Borras filed their adverse claim February 8, 1994 while the subsequent buyers purchased
their lots on Feburary 22, 1994
o The adverse claim is considered to be a constructive notice of the defect in the title of the
sellers Spouses Alfredo
o The adverse claim is a notice to the world

FALLO
WHEREFORE, the petitions is DENIED and appealed decision AFFIRMED. Treble costs against petitioners.
 UP Law F2021 Sarmiento v. Lesaca
Sales Art. 1498 1960 Bautista Angelo

SUMMARY
Two parties, Sarmiento and Lesaca, enter into a contract of sale of two parcels of land. The seller (Josefa
Lesaca) fails to make actual delivery of the property for failure to place the former in the actual physical
possession of the lands, so the buyer (Alejandra Sarmiento) opted to rescind the sale. The Court grants the
rescission holding that the seller’s failure to effect actual delivery of the property entitles the buyer to
rescission of the sale.

FACTS
 January 18, 1949: Plaintiff Sarmiento bought from defendant two parcels of land for P5,000. After
the sale, plaintiff tried to take actual physical possession of the lands but was prevented by Martin
Deloso who claims to be the owner thereof.
 February 1, 1949: Plaintiff Sarmiento instituted an action before the Tenancy Enforcement Division
of the Department of Justice to oust said Martin Deloso from the possession of the lands, which
action she later abandoned.
 December 12, 1949: Plaintiff Sarmiento wrote Defendant Lesaca asking the latter either to change
the lands sold with another of the same kind and class OR to return the purchase price together with
the expenses she had incurred in the execution of the sale, plus 6% interest.
- Since defendant Lesaca did not agree to this proposition, plaintiff Sarmiento filed the present
action.
 April 11, 1957: Trial Court declared the deed of sale rescinded.

RATIO

W/N the seller’s execution of the deed of sale in a public document is equivalent to delivery of
possession of the lands sold, thus relieving the seller Lesaca of her obligation to place buyer
Sarmiento in actual possession thereof?
NO. Articles 1461 and 1462 of the old Civil Code provide:
"ART. 1461. The vendor is bound to deliver and warrant the thing which is the subject-matter of the
sale."

"ART. 1462. The thing sold shall be deemed delivered when the vendee is placed in the control and
possession thereof.
"If the sale should be made by means of a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the subject-matter of the contract unless the contrary
appears or is clearly to be inferred from such instrument."

From these provisions, it is clear that when a contract of sale is executed, the vendor is bound to deliver to
the vendee the thing sold by placing the vendee in the control and possession of the subject-matter of the
contract. However, if the sale is executed by means of a public instrument, the mere execution of the
instrument is equivalent to delivery unless the contrary appears or is clearly to be inferred from such
instrument.
W/N there is a stipulation in the sale in question which shows that the vendor did not intend to
deliver outright the possession of the lands to the vendee?
NO. It can be clearly seen therein that the vendor intended to place the vendee in actual possession of the
lands immediately as can be inferred from the stipulation that the vendee "takes actual possession thereof . .
. with full rights to dispose, enjoy and make use thereof in such manner and form as would be most
advantageous to herself."

HOWEVER, the vendor was not able to comply with this commitment.

According to Article 1462, the thing sold shall be deemed delivered when the vendee is placed in the control
and possession thereof, which situation does not here obtain because from the execution of the sale up to
the present, the vendee was never able to take possession of the lands due to the insistent refusal of Martin
Deloso to surrender them claiming ownership thereof.

Although the article says that the execution of a public document is equivalent to delivery, this legal
fiction only holds true when there is no impediment that may prevent the passing of the property
from the hands of the vendor into those of the vendee.
W/N plaintiff Sarmiento can rescind the contract of sale in view of defendant Lesaca's failure to
deliver the possession of lands?
YES. We agree with plaintiff's contention that this action is based on Article 1124 of the same Code, which
provides:
"ART. 1124. The right to resolve reciprocal obligations, in case one of the obligors should fail to
comply with that which is incumbent upon him, is deemed to be implied.
"The person prejudiced may choose between exacting the fulfillment of the obligation or its
resolution with indemnity for losses and payment of interest in either case. He may also demand the
resolution of the obligation even after having elected its fulfillment, should the latter be found
impossible."

In a contract of purchase and sale the obligation of the parties is reciprocal, and, as provided by the law, in
case one of the parties fails to comply with what is incumbent upon him to do, the person prejudiced may
either exact the fulfillment of the obligation or rescind the sale. Plaintiff Sarmiento merely chose the latter.

FALLO

Wherefore, the decision appealed from is affirmed, with costs against defendant appellant.
 UP Law F2021 (060) Santos v Santos
Sales Art. 1477 and 1498 of the Civil Code 2001 Quisumbing, J

SUMMARY
Respondents Rosa et al filed an action for reconveyance against petitioner Zenaida asserting that the sale of the
subject property in question which was sold by their parents to her and Salvador, husband of petitioner Zenaida,
and the sale subsequently executed by Rosa, her share, to Salvador are simulated and therefore null and void. The
trial court ruled in favor of respondent Rosa et al, declared the deeds of sale void, and reinstated the TCT in the
name of their parents to be partitioned among all the heirs. The CA affirmed and held that the execution of a
public instrument is not enough to effect tradition since the vendor should have control over the things sold at the
moment of the sale. On appeal, the SC held that the execution of a deed of sale is not a conclusive presumption of
delivery of possession which can be rebutted by contrary evidence such as the failure of the vendee to take actual
possession of the land sold, and the intention of the vendor to make such delivery. As the facts conclusively show
that Salvador did not gain control over the property and such deeds of sale were simulated, the Court affirmed the
decision of the CA.

FACTS
• Jesus and Rosalia Santos owned a 154 sqm parcel of land located at Sta. Cruz, Manila. On it was a four-door
apartment administered by Rosalia who rented them out. The spouses had five children, petitioner Zenaida
Santos’ husband Salvador Santos, and respondents Calixto, Alberto, Antonio and Rosa, all surnamed Santos.
o In 1959, Jesus and Rosalia executed a deed of sale of the said properties in favor of their children
Salvador and Rosa. Rosa in turn sold her share to Salvador which resulted in the issuance of a new
TCT. However, despite the transfer of the property to Salvador, Rosalia continued to lease and
receive rentals from the apartment units.
o In 1979, Jesus died. Six years after Salvador also died, followed by Rosalia who died the following
month. Respondents Rosa et al. instituted an action for reconveyance of property with preliminary
injunction against petitioner Zenaida, widow of Salvador, in the RTC. They alleged that the two deeds
of sale executed in favor of Salvador were simulated for lack of consideration. They were executed
to accommodate Salvador in generating funds for his business ventures and providing him with
greater business flexibility.
• The trial court decided in favor of respondents Rosa et al. and ruled that notwithstanding the deeds of sale
transferring the property to Salvador and Rosa such sale was null and void for being fictitious or simulated
and inexistent and without any legal force and effect as their parents, Rosalia and Jesus, continued to possess
the property and to exercise rights of ownership not only by receiving the monthly rentals, but also by paying
the realty taxes. Accordingly, the subsequent sale by Rosa to Salvador is equally void and inexistent.
Moreover, Rosalia kept the owner's duplicate copy of the title even after it was already in the name of
Salvador. Further, the spouses had no compelling reason in 1959 to sell the property and Salvador was not
financially capable to purchase it. The deeds of sale were declared fictitious by the trial court. It also ruled
that the action to assail the same does not prescribe.
o The trial court basically ruled the initial sale of Jesus and Rosalia of the property to their children,
Salvador and Rosa as null and void for being absolutely simulated, and in turn, reinstated the original
title under Rosalia and Jesus Santos which shall be partitioned by the heirs in accordance with law.
• On appeal, the CA affirmed the trial court's decision (related to the topic in the syllabus where this case is
under).
o The CA held that in order for the execution of a public instrument to effect tradition, provided in Art.
1498 of the Civil Code, the vendor shall have had control over the things sold, at the moment of sale.
It was not enough to confer upon the purchaser the ownership and the right of possession. The thing
sold must be placed in his control.
o The subject sale did not confer upon Salvador the ownership over the subject property, because even
after the sale, the original vendors remained in dominion, control and possession thereof. Also, even
if the reason for Salvador’s failure to control and possess the property was due to his acquiescence
to his mother in deference to Filipino custom, petitioner Zenaida should have at least shown
 evidence that her husband, Salvador, declared the property for tax purposes in his name or paid the
land taxes which acts strongly indicate control and possession.
• In the petition before the SC, petitioner Zenaida re-asserted the argument that Salvador, in allowing his
mother to use the property even after the sale, did so out of respect for her and out of generosity.

RATIO
W/N the sale through a public instrument alone is tantamount to delivery of the thing sold
NO
Prefatorily, the SC first disposed of the issue with regards the sufficiency of payment of realty taxes and possession
by Salvador’s parents of the subject property since tax declarations are not conclusive evidence of ownership and
that the possession, again, was out of respect. The Court held that although it is true that tax declarations of
ownership for taxation purposes do not constitute sufficient proof of ownership, and therefore must be
supported by other effective proofs, the Court notes that such supporting proofs are present in the case. The
facts on record conclusively show that as admitted by petitioner Zenaida, Jesus and Rosalia continued to
administer the property and enjoy the fruits by leasing it to third persons despite the sale. Both Rosa and Salvador
did not exercise any right of ownership over it, where Salvador even sought permission from his mother before
Rosa could execute the deed of sale of her share to him, among others. Basically, such proof is contained in the
facts, the review of which is beyond the province of the SC. Moreover, with regards possession vis-à-vis the
Filipino custom of respect to parents, the SC noted that the buyer's immediate possession and occupation of the
property corroborated the truthfulness and authenticity of the deed of sale. Conversely, according to the Court,
the vendor's continued possession of the property makes dubious the contract of sale between the parties.

As for the main issue of whether the sale through a public instrument is tantamount to delivery of the thing sold,
the SC affirmed the CA in the way it disposed of the issue. Petitioner Zenaida asserts that Art. 1477 that provides
that ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery, when
combined with Art. 1498 which, in turn, provides that when the sale is made through a public instrument, its
execution is equivalent to the delivery of the thing subject of the contract, should lead to the conclusion that
Salvador became the owner of the property by virtue of the two deeds of sale executed in his favor. However,
the Court emphasizes that nowhere in the Civil Code does it provide that execution of a deed of sale is a conclusive
presumption of delivery of possession. The Code merely says that the execution shall be equivalent to delivery,
where such presumption can be rebutted by clear and convincing evidence, one of which is that presumptive
delivery can be negated by the failure of the vendee to take actual possession of the land sold (see notes, case of
Danguilan v IAC). The intention of the vendor to deliver and the acceptance by the vendee is also critical in the
different modes of effecting delivery, as such intention gives legal effect to the act (Abuan v Garcia). Therefore,
as it is found by both the trial and appellate courts and amply supported by the evidence on record that Salvador
was never placed in control of the property and that the original sellers retained their control and possession, as
well as the fact that Jesus and Rosalia executed the deed of sale merely to accommodate Salvador to enable him
to generate funds for his business venture, then, from the foregoing, there was no real transfer of ownership.

W/N the action has prescribed

NO
The complaint filed by respondents in the court a quo was for the reconveyance of the subject property to the
estate of Rosalia since the deeds of sale were simulated and fictitious. The complaint amounts to a declaration of
nullity of a void contract, which is imprescriptible, as provided in jursiprudence. Hence, the cause of action of
respondents Rosa et al. has not prescribed. Moreover, the action for reconveyance by respondents Rosa et al. is
also not barred by laches as the elements of laches were not effectively proved by petitioner Zenaida, primarily
the second requisite (delay in asserting the complainant’s rights, the complainant having had knowledge or notice
of the defendant’s conduct as having been afforded the opportunity to institute a suit), since only 4 years have
elapsed, and the fourth requisite (injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held barred) since petitioner Zenaida nor her husband have made considerable
investments to the subject property when the same was allegedly transferred to Salvador.

FALLO
WHEREFORE, the instant petition is DENIED. The assailed decision dated March 10, 1998 of the Court of Appeals,
which sustained the judgment of the Regional Trial Court dated March 17, 1993, in favor of herein private
respondents, is AFFIRMED. Costs against petitioner. SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.

NOTES

In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), the Court held that for the execution of a public instrument to effect tradition,
the purchaser must be placed in control of the thing sold. When there is no impediment to prevent the thing sold from
converting to tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public
instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment
and material tenancy nor make use of it himself or through another in his name, then delivery has not been effected.
 UP Law F2021 Board of Liquidators v. Floro
Sales Article 1499 1960 JBL Reyes

SUMMARY

The Board of Liquidator granted Melecio Malabanan the right to recover surplus properties sunk in
territorial waters in exchange for a price consideration. The issue is whether ownership is transferred from
the moment of recovery or upon payment and delivery. The Court held that in the absence of reservation of
title in the agreement, ownership is immediately transferred by virtue of constructive delivery or traditio
longa manu.

FACTS

▪ Melecio Malabanan entered into an agreement with the Board of Liquidator for the salvage of
surplus properties sunk in territorial waters of Mindoro, La Union, and Batangas. The pertinent
provision of the contract states that:

“For and in consideration of the assignment by the [Board] to [Malabanan] of all right, title,
and interest in [the salvaged properties, Malabanan shall pay to the Government P90 per long
ton]”

▪ Four months before the last contract ended, Malabanan also entered into an agreement with
Exequiel Floro. Floro was to advance to Malabanan certain sums of money to Malabanan, with the
steel mattings as security.
▪ Malabanan was not able to pay Floro, so Floro sold 11,047 pieces of steel mattings to a third person.

▪ 17 days after such sale, Malabanan filed a petition for voluntary insolvency.
o Both Board of Liquidator and Exequiel Floro were listed as creditors
o Included in the Inventory of Properties are 11,167 steel mattings

▪ The Board of Liquidator petitioned to exclude the remaining steel mattings from the inventory,
claiming its ownership because
1. Malabanan failed to comply with the terms of the contract by not paying the stipulated price of
the steel mattings
2. There was no delivery that would effect a transfer of ownership

RATIO

W/N failure to pay the purchase price prevents the transfer of ownership
NO. While there can be reservation of title in the seller until full payment of the price, or until fulfilment of a
condition, there is nothing in the contract in this case which may be deemed a reservation of title.

The fact that Malabanan was required to post a bond of P10,000 to guarantee compliance, that the
operations for salvage were entirely at his expense and risk, and that the expenses for storage as well as for
guard service were for his account indicates that ownership of the goods passed to Malabanan as soon as
they were recovered or salvaged.

W/N the absence of physical delivery means that no transfer of ownership was effected
NO. Delivery may be by agreement or traditio longa manu in conformity with Article 1499 of the Civil Code
which states that:

The delivery of movable property may likewise be made by the mere consent or agreement of the
contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time
of the sale
 FALLO

The order appealed from is hereby af?rmed in so far as it declares the disputed goods to be the property of
the insolvent; but without prejudice to the right of the assignee in insolvency to take whatever action may
be proper to attack the alleged fraudulent transfer of the steel matting to Eulalio Legaspi, and to make the
proper parties account for the difference between the number of pieces of steel matting stated in the
insolvent's recovery report, Annex "B"? (13,107), and that stated in his inventory (11,167). Costs against
appellant.
 UP Law F2021 Abuan v Garcia
Sales Constructive Delivery, Traditio 1965 Bengzon
Brevi Manu, NCC 1499

SUMMARY

 Abuan v Garcia is a case in contract law subject of our study. Abuan sold a parcel of land to Garcia. Abuan was
entitled to repurchase the property for a period of five years from the date of conveyance.1 Exercising this
right, Abuan moved to repurchase the land. Garcia refused and invoked the expiration of Abuan’s right to
repurchase the property.
 Garcia contended that conveyance (or delivery) was made on the date the agreement was entered into.
Abuan contended otherwise—and that conveyance (or delivery) was effective only on the date that full
payment was made.
 The Court ruled in favor of Garcia that there was constructive delivery when the agreement was entered into.

FACTS

 August 7, 1953, when the Deed of Absolute Sale was executed

 February 28, 1955, when the compromise "Agreement" was entered into
 May, 1955, full payment of the purchase price
 March, 1960, action for redemption
RATIO
W/N the five year period of redemption has expired (which depends on)
W/N the delivery had been made on the date the agreement was entered into

Yes, Art. 1496 explicitly provides that ownership of the thing sold is acquired by the vendee from the moment
it is delivered to him "in any other manner signifying an agreement that the possession is transferred from
the vendor to the vendee."

The intention to give possession (and ownership) is manifest in the agreement entered into by the parties specially
considering the following circumstances:

(1) the payment of part of the purchase price, there being no stipulation in the agreement that ownership will not
vest in the vendees until full payment of the price; and

(2) the fact that the agreement was entered into in consideration of Abuan’s desistance in prosecuting their
reivindicatory action, thereby leaving the property in the hands of Garcia— as owners thereof, necessarily.

This was delivery brevi manu permissible under Articles 1499 and 1501 of the New Civil Code.
NOTES:

Traditio brevi manu. This mode of legal delivery happens when the vendee has already the possession of the thing sold by
virtue of another title as when the lessor sells the thing leased to the lessee. Instead of turning over the thing to the vendor so that
the latter may, in turn, deliver it, all these are considered done by action of law. (p 181, De Leon, On Sales)

Traditio Brevi Manu. This mode of delivery is, where before the sale, the would-be buyer was already in possession of the
would-be subject matter of the sale, say as a lessee, and pursuant to sale, he would now hold possession in the concept of an
owner. (p 230 Villanueva, On Sales)

Art. 1499 The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties, if
the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his
possession for any other reason.

FALLO IN VIEW OF THE OF FOREGOING, the order of the court a quo dismissing the complaint is hereby
affirmed, with costs against plaintiffs- appellants.

1
Commonwealth Act No. 141 (Public Land Act) Sec. 119: Every conveyance of land acquired under the free patent or homestead
provisions, when proper, shall be subject to repurchase by the applicant, his widow, or legal heirs, within a period of five years from the
date of the conveyance.
 063 Heirs of Pedro Escanlar v. CA
Sales Art. 1477 1997 Romero

SUMMARY
The heirs of Cari-an sold the parcel of land they inherited to Pedro Escanlar and Holgado, the current lessees
of the land. Escanlar failed to pay the full purchase price so the heirs of Cari-an sold the lot to spouses Chua
and then filed an action for the cancellation of sale against Escanlar and Holgado. The Supreme Court reversed
the CA ruling and held that the sale to Escanlar is a valid contract of sale and not a contract to sell and that
the sellers Cari-an were fully paid the contract price.

FACTS

Spouses Nombre and Cari-an died without a child. Nombre’s heirs include his nephews and grandnephews.
Two parcels of land formed part of the estate of Nombre and Cari-an. The Private Respondents, heirs of
Cari-an executed a Deed of Sale in favor of petitioners Escanlar and Holgado. The sale must approved by the
CFI.

The purchase price is P275,000 to be fully paid on May 1979. Petitioners Escanlar paid P50,000.00 as a
form of down payment, but was unable to pay the remaining balance. However, said heirs received at least
12 installment payments from Escanlar and Holgado after May 1979. Rodolfo was fully paid by June 1979,
Generosa Martinez, Carmen and Fredisminda were likewise fully compensated for their individual shares.
The minor’s share was deposited with the RTC in September 1982. Being former lessees, Escanlar and
Holgado continued in possession of the said lots, and continued to pay rent.

Respondents heirs of Cari-an later sold the said lots to the Chua spouses in 1982. The Cari-an heirs then
filed an action for cancellation of sale against Escanlar, for failure to pay the balance. Petitioners Escanlar
however, sold their rights and interests over the said lots to Jayme, and turned over possession.

Regional Trial Court of Himamaylan ruled that the sale to petitioner Escanlar was nullified since all the
properties of the estate had been transferred and titled to in the name of the Chua spouses.

On appeal, the Court of Appeals affirmed the RTC ruling and held that the questioned deed of sale is a
contract to sell because it shall become effective only upon approval by the probate court and upon full
payment of the purchase price.

RATIO

Whether or not the sale was a contract to sell and not a contract of sale
NO. The sale of rights, interests and participation as to 1/2 portion pro indiviso of the two subject lots is
a contract of sale for the following reasons:

First, private respondents as sellers did not reserve unto themselves the ownership of the property until
full payment of the unpaid balance of P225,000.00. Second, there is no stipulation giving the sellers the
right to unilaterally rescind the contract the moment the buyer fails to pay within the fixed period. Prior
to the sale, petitioners were in possession of the subject property as lessees. Upon sale to them of the
rights, interests and participation as to the 1/2 portion pro indiviso, they remained in possession, not in
concept of lessees anymore but as owners now through symbolic delivery known as traditio brevi manu.
Under Article 1477 of the Civil Code, the ownership of the thing sold is acquired by the vendee upon
actual or constructive delivery thereof.

In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the
transaction that, for a time, existed and discharges the obligations created thereunder. The remedy of an
unpaid seller in a contract of sale is to seek either specific performance or rescission.
In contracts to sell, ownership is retained by the seller and is not to pass until the full payment of the
price. Such payment is a positive suspensive condition, the failure of which is not a breach of contract but
simply an event that prevented the obligation of the vendor to convey title from acquiring binding force.

To illustrate, although a deed of conditional sale is denominated as such, absent a proviso that title to the
property sold is reserved in the vendor until full payment of the purchase price nor a stipulation giving
the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed
period, by its nature, it shall be declared a deed of absolute sale.

Whether or not the sellers can demand the rescission of the contract
NO.
After the expiration of the period, the sellers continued accepting payments and made no move to rescind
the contract. The sellers are now estopped from exercising said right to rescind.

Receipt and acceptance of the numerous installments on the balance of the purchase price by the Cari-
ans, although the period to pay the balance of the purchase price expired in May 1979, and leaving
Escanlar and Holgado in possession of Lots 1616 and 1617 reveal their intention to effect the mutual
transmission of rights and obligations. The Cari-ans did not seek judicial relief until late 1982 or three
years later.

The requisite CFI approval was virtually rendered impossible by the Cari-ans because they opposed the
motion for approval of the sale filed by Escanlar and Holgado, and sued the latter for the cancellation of
that sale. Having provided the obstacle and the justification for the stipulated approval not to be granted,
the Cari-ans should not be allowed to cancel their first transaction with Escanlar and Holgado because of
lack of approval by the probate court, the lack of which is of their own making.

FALLO

The petitions are hereby GRANTED. The decision of the Court of Appeals under review is hereby
REVERSED AND SET ASIDE.
 UP Law F2021 Amigo v. Teves
Sales Art. 1500 1954 Bautista Angelo

SUMMARY
Marcelino Amigo, as attorney-in-fact, sold the subject parcel of land to respondent Teves, stipulating a lease
covenant embodied in the deed of sale. The SC held that such lease covenant is valid for such is common in
contracts involving sales of land with pacto de retro as a means of delivery or tradition by constitutum
possessorium.
FACTS

- August 11, 1937: Macario Amigo and Anacleto Cagalitan executed in favor of their son, Marcelino
Amigo, a power of attorney granting to the latter, among others, the power "to lease, let, bargain,
transfer, convey and sell, remise, release, mortgage and hypothecate, part or any of the properties . . .
upon such terms and conditions, and under such covenants as he shall think fit."
- October 30, 1938: Marcelino Amigo, in his capacity as attorney-in-fact, sold a parcel of land for a
price of P3,000 to Serafin Teves. The deed had the following stipulations:
1. the vendors could repurchase the land within a period of 18 months from the date of the sale;
2. the vendors would remain in possession of the land as lessees for a period of 18 months subject
to the following terms and conditions: (a) the lessees shall pay P180 as rent every six months
from the date of the agreement; (b) the period of the lease shall terminate on April 30, 1940; (c)
in case of litigation, the lessees shall pay P100 as attorney's fees; and (d) in case of failure to pay
any rental as agreed upon, the lease shall automatically terminate and the right of ownership of
vendee shall become absolute.
- July 20, 1939: The spouses Macario Amigo and Anacleta Cagalitan donated to their sons Justino
Amigo and Pastor Amigo several parcels of land including their right to repurchase the land in
litigation. The deed of donation was made in a public instrument, was duly accepted by the donees,
and was registered in the Office of the Register of Deeds.
- January 8, 1940: Serafin Teves, the vendee-lessor, executed an "Affidavit of Consolidation of Title" in
view of the failure of the lessees to pay the rentals as agreed upon, and registered said affidavit in the
Office of the Register of Deeds of Negros Oriental. The Register of Deeds issued to Serafin Teves the
corresponding transfer of title over the land in question.
- March 9, 1940: Justino Amigo and Pastor Amigo, as donees of the right to repurchase the land in
question, offered to repurchase the land from Serafin Teves by tendering to him the payment of the
redemption price but the latter refused on the ground that the ownership had already been
consolidated in him as purchaser a retro.
- Petitioner Amigos filed a petition in the CFI praying that judgment be rendered: (a) declaring that
the contract entered into between Marcelino M. Amigo and Serafin Teves on October 30, 1938 is
merely a contract of mortgage and not a sale with right to repurchase; (b) declaring that even if said
contract be one of sale with right to repurchase, the offer to repurchase by the vendors was made
within the period agreed upon; (c) condemning respondents to execute a deed of reconveyance; and
(d) condemning respondents to restore the property to petitioners and to pay P2,500 as damages.
- In the CA, petitioner-donees contend that Marcelino Amigo acted in excess of his powers as attorney-
in-fact when he stipulated in the covenant of lease that the vendors agreed to remain in possession
of the land as lessees.
- CA’s findings:
o Marcelino’s powers are broad enough to justify the execution of any contract concerning the
lands covered by the authority even if this be a contract of lease.
o Right to impugn the validity of the lease contract devolves upon the principals, who are the
only one who can claim that their agent has exceeded the authority granted to him, and
because said principals had tacitly ratified the act done by said agent.

RATIO

1. (Preliminary) WON Marcelino Amigo acted in excess of his powers as attorney-in-fact by
stipulating that the vendors agreed to remain in possession of the land as lessees – NO
NO. A mere examination of the power of attorney would reveal that the power granted to the agent is so
broad that it practically covers the celebration of any contract and the conclusion of any covenant or
stipulation. Thus, among the powers granted are: "to bargain, contract, agree for, purchase, receive, and
keep lands, tenements, hereditaments, and accept the seizing and possession of all lands," or "to lease, let,
bargain, transfer, convey and sell, remise, release, mortgage and hypothecate . . . upon such terms and
conditions, and under such covenants as he shall think fit." When the power of attorney says that the agent
can enter into any contract concerning the land, or can sell the land under any term or condition and
covenant he may think fit, it undoubtedly means that he can act in the same manner and with the same
breath and latitude as the principal could concerning the property. The fact that the agent has acted in
accordance with the wish of his principals can be inferred from their attitude in donating to the herein
petitioners the right to redeem the land under the terms and conditions appearing in the deed of sale
executed by their agent.
2. (Main) Whether or not the lease covenant embodied in the deed of sale is valid – YES.
The covenant regarding the lease of the land sold is germane to the contract of sale with pacto de retro. The
lease that a vendor executes on the property may be considered as a means of delivery or tradition by
constitutum possessorium. Where the vendor a retro continues to occupy the land as lessee, by fiction of
law, the possession is deemed to be constituted in the vendee by virtue of this mode of tradition (10
Manresa, 4th ed. p. 124).

While the lease covenant may be onerous or may work hardship on the vendor because of its clause
providing for the automatic termination of the period of redemption, however, the same is not contrary to
law, morals, or public order, which may serve as basis for its nullification. Rather than obnoxious or
oppressive, it is a clause common in a sale with pacto de retro, and as such it received the sanction of our
courts.

While petitioner Amigos’ contention that the penal clause should be considered as not written because the
selling price of 3,000 is unconscionable given its 1938 value at P4,280 may have some basis when
considered with reference to an absolute contract of sale, it loses weight when applied to a contract of sale,
with pacto de retro, where the price is usually less than in absolute sale for the reason that in a sale with
pacto de retro, the vendor expects to re-acquire or redeem the property sold.

FALLO
Finding no error in the decision appealed from, the same is hereby affirmed, without pronouncement as to
costs.
 UP Law F2021 065 Behn Meyer v. Yangco
Sales Art. 1523 – Delivery to a 1918 Malcolm
Common Carrier
SUMMARY
The parties entered into a contract of sale of caustic drums with the terms “c.i.f. Manila” as to the delivery of the
goods. While being shipped, the goods were confiscated in Penang, Malaysia; hence, Yangco, as the buyer, sought
damages for Behn Meyer’s failure to deliver the goods to him. The Court held Behn Meyer liable for the loss of the
goods while in transit since the terms “c.i.f. Manila” as provided for in the contract means that ownership of the goods
would pass to Yangco only at the point of destination, which was in Manila.
FACTS
 In March 1916, Plaintiff Behn Meyer as vendor and defendant Teodoro Yangco as buyer entered into a
contract of sale of 80 drums of caustic soda. As to the place of delivery, the contract provided for “c.i.f. Manila,
pagadero (payable) against delivery of documents.”
 The merchandise was to be shipped from New York to Manila. While on its way, the steamship carrying the
merchandise was detained at Penang, wherein 71 drums of the goods were confiscated. Yangco refused to
accept delivery of the remaining 9 drums because of their bad condition. Yangco rejected as well the offer of
Behn Meyer to have the goods substituted because the goods being offered were different from the ones
ordered.
 Yangco filed an action seeking for damages for alleged breach of contract.
RATIO
W/N vendor Behn Meyer should bear the loss of the merchandise
YES. The Court held that the determination of the place of delivery is always a question of fact.

The general rule is that delivery by the vendor to a common carrier, in the usual and ordinary course of business,
transfers the property to the vendee (buyer). However, if there is a specification in the contract that the buyer should
pay the freight (shipping costs), it is a reasonable assumption that he owns the goods at the point of shipment. On the
other hand, if the seller is to pay the freight, the assumption is that the title to the property does not pass until the
goods have reached their destination.

In British contracts, the letters “c. i. f.” stand for costs, insurance, and freight. These signify that the price fixed covers
not only the cost of the goods, but the expense of freight and insurance to be paid by the seller against the buyer’s risk
of loss or damage in transit to destination. Australian jurisprudence would tell us that no inference is permissible that
a seller was bound to deliver at the point of destination. This means that the risk of loss is transferred to the buyer
once the goods are loaded on the ship.

In American contracts, the letters “F.O.B.” stand for “Free on Board”, which means that the seller shall bear all
expenses until the goods are delivered. The determination of when ownership of the goods would pass to the buyer
depends on whether the goods are to be delivered F.O.B. at the point of shipment or at the point of destination.

The Court said that the terms “c. i. f.” and “F.O.B.” merely makes rule of presumption and can still be rebutted. The
issue as to where the place of delivery is can be ascertained by taking into consideration all the
circumstances.

In the present case, the parties stipulated “c.i.f. Manila”, which the Court interpreted as the price quoted includes
costs of the goods, insurance, and freight and that the delivery was to be made at Manila. If Behn Meyer believed that
Yangco became the owner at the point of shipment, which was in New York, it would not have gone to the trouble of
attempting to substitute the goods stipulated in the contract but would just let Yangco bear the loss of the shipment.

Moreover, this conclusion was corroborated by the following facts: (1) the goods were not shipped nor consigned
from New York to Behn Meyer; (2) the bill of lading [a detailed list of shipment of goods] was for goods received from
Neuss Hesslein & Co.; (3) the documents evidencing the shipment and symbolizing the goods were sent by Neuss
Hesslein & Co. to BPI with a draft [an order to pay] upon Behn Meyer; and (4) the instructions to deliver the goods
and transfer the same to Behn Meyer when and if the latter should pay the draft.

The Court held that the place of delivery was at Manila and that Behn Meyer had not performed its obligation to
deliver the goods to Yangco. Defendant Yangco may rescind the contract of sale because of substantial breach of the
contract by Behn Meyer.
FALLO

The judgment of the trial court ordering that the plaintiff take nothing by its action, without special finding as to costs,
is affirmed, with the costs of this instance against the appellant. So ordered.
 066 Express Credit v. Velasco
Sales Art. 1544 2005 Quisumbing

SUMMARY

Spouses Velasco bought a house and lot from spouses Garcia but never received the title to the property. They
later found out that the property was mortgaged to Express Credit Financing. Express Credit foreclosed the
property and secured a title in its own name. Express Credit claim that Art. 1544 on double sale should apply
and they have better rights because they registered it first and they are not required to go beyond the
certificate of title . The Court ruled that Express Credit is not a purchaser in good faith because they are in the
business of extending credit to the public and due diligence is required from such institution. They have the
resources to ascertain any encumbrances over the properties they are dealing with.

FACTS

The Velasco spouses bought a parcel of land in Diliman, QC from the Garcia spouses. Since the house on the
property was still under construction, the lot was still covered by the mother title and had no separate title
yet. The sellers promised to give the title after the construction was completed.

The spouses Velasco moved in and had applied for telephone connection and insurance. However, they still
haven’t received the title from the spouses Garcia despite repeated demands. Thus, they went to the
Register of Deeds in QC and found out that the property has been mortgaged to Express Credit Financing
one year after the Garcia spouses sold the house to them.

The Velascos filed a case for Quieting of Title. A notice of lis pendens was attached to the title. However,
despite this notice and writ of preliminary injunction, Express Credit still foreclosed the property and
bought it in a public auction as the highest bidder. Thereafter, it secured a certificate of title in its own
name.

RTC: Ruled that Express Credit is a purchaser in good faith. The purchaser is not required to go beyond the
certificate of title. However, Express Credit should reimburse the spouses Velasco for the amount spent in
purchasing the house.

CA: Reversed the RTC ruling.

RATIO

Whether Express Credit has a preferential right over the property for being a purchaser in good faith and
for registering the property first

NO. This is a case of double sale under Art. 1544. However, the rules provided in the that article only
applies to purchasers in good faith. Express Credit is not a purchaser in good faith.

Express Credit justifies its acquisition of the property by saying that when it was mortgaged, the previous
sale of the land was not annotated on the title and so its purchase was in good faith. It is true that a
person dealing with the owner of registered land is not bound to go beyond the certificate of title. He may
rely on the notices of the encumbrances on the property annotated on the certificate of title or absence of
any annotation.

However, we note that the Garcia spouses are unlike other mortgagors. They are in the business of
constructing and selling townhouses and are past masters in real estate transactions. Further, petitioner
is in the business of extending credit to the public, including real estate loans. In both these businesses, it
devolves upon both, greater charge than ordinary buyers or encumbrancers for value, who are not in
such venture. It is standard in their business, as a matter of due diligence required of banks and financing
companies, to ascertain whether the property being offered as security for the debt has already been sold
to another to prevent injury to prior innocent buyers. They also have the resources to ascertain any
encumbrances over the properties they are dealing with.

The caretaker of the house already told the investigators that the house was already sold to the Velasco
spouses. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard
and claim that he acted in good faith under the belief that there was no defect in the title of the vendor.

FALLO

WHEREFORE, the assailed Decision dated August 20, 2002 and Resolution dated November 12, 2002 of the
Court of Appeals in CA-G.R. CV No. 56491 are AFFIRMED.
SO ORDERED.