Assignment in

Law on Sales, Credit Transaction

and other Special Commercial Law

Submitted by: Bautista, Bryan Joshua S.

Submitted to: Prof. Edison Pagalilauan

Case 1. ASSET PRIVATIZATION TRUST (Petitioner) vs. T.J. ENTERPRISES (Respondent)

Petitioner Asset Privatization Trust - (petitioner) was a government entity created for the purpose to
conserve, to provisionally manage and to dispose assets of government institutions. Petitioner had
acquired from the Development Bank of the Philippines (DBP) assets consisting of machinery and
refrigeration equipment which were then stored at Golden City compound, Pasay City. The
compound was then leased to and in the physical possession of Creative Lines, Inc., (Creative
Lines). These assets were being sold on an as-is-where-is basis.

On 7 November 1990, petitioner and respondent entered into an absolute deed of sale over certain
machinery and refrigeration equipment identified as Lots Nos. 2, 3 and 5. Respondent paid the full
amount of ₱84,000.00 as evidenced by petitioner’s Receipt No. 12844. After two (2) days,
respondent demanded the delivery of the machinery it had purchased. Sometime in March 1991,
petitioner issued Gate Pass No. 4955. Respondent was able to pull out from the compound the
properties designated as Lots Nos. 3 and 5. However, during the hauling of Lot No. 2 consisting of
sixteen (16) items, only nine (9) items were pulled out by respondent.

The seven (7) items that were left behind consisted of the following:

1) one Reefer Unit 1 6) one (1) unit room air-conditioner

2) one Reefer Unit 2 7) one (1) unit air compressor.
3 one (1) Reefer Unit 3
4) one (1) unit blast freezer with all accessories
5) one (1) unit chest freezer

Creative Lines’ employees prevented respondent from hauling the remaining machinery and equipment.

Respondent filed a complaint for specific performance and damages against petitioner and Creative
Lines.7 During the pendency of the case, respondent was able to pull out the remaining machinery
and equipment. However, upon inspection it was discovered that the machinery and equipment were
damaged and had missing parts.

Petitioner argued that upon the execution of the deed of sale it had complied with its obligation to
deliver the object of the sale since there was no stipulation to the contrary. It further argued that
being a sale on an as-is-where-is basis, it was the duty of respondent to take possession of the
property. Petitioner claimed that there was already a constructive delivery of the machinery and
equipment.

The RTC ruled that the execution of the deed of absolute sale did not result in constructive delivery
of the machinery and equipment. It found that at the time of the sale, petitioner did not have control
over the machinery and equipment and, thus, could not have transferred ownership by constructive
delivery. The RTC ruled that petitioner is liable for breach of contract and should pay for the actual
damages suffered by respondent.

On petitioner’s appeal, the Court of Appeals affirmed into the decision of the RTC.
Issues:

a.) The Court of Appeals erred in not finding that petitioner had complied with its obligation to
make delivery of the properties subject of the contract of sale.
b.) The Court of Appeals erred in not considering that the sale was on an "as-is-where-is" basis
wherein the properties were sold in the condition and in the place where they were located.
c.) The Court of Appeals erred in not considering that respondent’s acceptance of petitioner’s
disclaimer of warranty forecloses respondent’s legal basis to enforce any right arising from the
contract.
d.) The reason for the failure to make actual delivery of the properties was not attributable to the
fault and was beyond the control of petitioner. The claim for damages against petitioner is
therefore bereft of legal basis.

Opinion:

Note: General rule, when the sale is made through a public instrument, the execution thereof shall
be equivalent to the delivery of the thing which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred. And with regard to movable property, its
delivery may also be made by the delivery of the keys of the place or depository where it is stored or
kept.11 In order for the execution of a public instrument to effect tradition, the purchaser must be
placed in control of the thing sold.

- There was no constructive delivery of the machinery and equipment upon the execution of
the deed of absolute sale it was not the petitioner but Creative Lines has the possession of
the property. So presumption that the constructive delivery will be not applicable to yield to
the reality that the purchaser was not placed in possession and control of the property it will
be deemed void.

- Petitioner suggested that the sale being in an as-is-where-is basis, respondent agreed to
take possession of the things sold in the condition where they are found and from the place
where they are located. The phrase as-is where-being basis pertains solely to the physical
condition of the thing sold, not to its legal situation.1It is merely descriptive of the state of the
thing sold. Thus, the as-is where-is basis merely describes the actual state and location of
the machinery and equipment sold by petitioner to respondent. The depiction does not alter
petitioner’s responsibility to deliver the property to respondent.

“As is Where is” Basis - simply means that the buyer will inherit all of the physical and legal
conditions of the foreclosed property they are going to buy.
 Republic Act no. 6552 (Maceda Law) and Article 1484 (Recto Law)

Note:
Maceda Law

The Maceda Law, RA 6552, is the real estate equivalent of the Recto Law. Like the Recto
Law, it also covers financing of sales of real property (which is why mortgages also come in.) It
doesn’t apply, however, to the following sales:

1. Industrial lots
2. Commercial buildings and lots
3. Lands under the CARP Law

MACEDA LAW (RA6552) Maceda Law in the Philippines applies to the purchaser of real
property by installment payments when the purchase becomes cancelled by a delinquency in
payment. It provides the buyer with a right to a refund as a requisite for cancellation of contract
due to delinquency when the buyer has paid at least two years. The refund is 50% of total
payments; additional 5% per year after 5th year.

Recto Law

The Recto Law comprises Articles 1484 to 1486 of the Civil Code. It was added to the Civil
Code to prevent abuses in the foreclosure of chattel mortgages, such as when mortgagee-
creditors foreclosed mortgaged property, bought them at a low price (on purpose,) then
prosecuted the mortgagor-debtors to recover the deficiencies.

In the event a buyer of personal property defaults by failing to pay two or more of the agreed
installments, the seller can do any of the following:

1. Demand that the buyer pays (a.k.a. specific performance)

2. Cancel or rescind the sale
3. Foreclose the mortgage on the property bought (if there ever was a chattel mortgage)
Comments:

Recto law covers the contract of sale of personal property by installment. Payments acquired by
loan of a specific thing must have valid contract of sale, subject matter must be determined as a
personal property.

If the fulfillment of the buyer fails to pay for two or more installment foreclosure will be held valid
because of the meeting of two parties of a buyer(loaner) and seller(bank). The process of
payment terms the remaining balance of the loan of a thing may be taken by the seller(bank)
and also the specified thing. Selling of the movable object will not cover due to suspensive
condition

Maceda Law covers the installment basis of real properties to protect buyers from oppressive
conditions like overpricing of the sale of real properties and not committing to the allegations or
the memorandum agreement of the both contracting parties with a formal contract of sale with
terms and conditions that will not be violate by both parties.

Sale of Marijuana for recreational/ medical purpose

I Agree and Disagree in the positive side the use of marijuana for medical purpose research
show that it can be beneficial to treat other disease but there must be restriction to the use or
dosage that must be implemented by the state with this law legalizing the use of marijuana

I disagree because prescription or high dosage of the use of marijuana can lead to mental
disability to consumers may cause addiction and abuse.

Inclusion of contracts of lease with option to buy in Recto law

Depends on the agreement of the lessee and lessor to buy the unit or property as long as the
lessor(owner) is willing to sell with a terms and conditions agreed by both parties and the owner
must assure that lessee is capable of paying the remaining amount in order for his to get the
ownership of the property.

Lina Law (housing programs for informal settlers)

Agree and disagree, For some reason because there are many housing projects but still
there are informal settlers who rather choose to use the housing projects for their own benefit by
leasing or to make profit for it that will violate the law given that their duties is for them to live in
it not to make profit out of it.
Issues and Sentiments:

a. Inclusion of contract of lease with option to buy in Recto Law