CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
AZNAR VS YAPDIANGCO
Facts: sometime in May, 1959, Teodoro Santos advertised in
two metropolitan papers the sale of his FORD FAIRLANE
500.
In the afternoon of May 28, 1959, a certain L. De Dios,
claiming to be a nephew of Vicente Marella, went to the Santos
residence to answer the ad. However, Teodoro Santos was out
during this call and only the latter's son, Irineo Santos,
received and talked with De Dios.
The latter told the young Santos that he had come in behalf of
his uncle, Vicente Marella, who was interested to buy the
advertised car.
On being informed of the above, Teodoro Santos instructed his
son to see the said Vicente Marella the following day at his
given address: 1642 Crisostomo Street, Sampaloc, Manila. And
so, in the morning of May 29, 1959, Irineo Santos went to the
above address. At this meeting, Marella agreed to buy the car
for P14,700.00 on the understanding that the price would be
paid only after the car had been registered in his name.
Irineo Santos then fetched his father who, together with L. De
Dios, went to the office of a certain Atty. Jose Padolina where
the deed of the sale for the car was executed in Marella's favor.
The parties to the contract thereafter proceeded to the Motor
Vehicles Office in Quezon City where the registration of the car
in Marella's name was effected. Up to this stage of the
transaction, the purchased price had not been paid.
Teodoro gave the registration papers and a copy of the deed of
sale to his son, Irineo, and instructed him not to part with
them until Marella shall have given the full payment for the
car.
Irineo Santos and L. De Dios then proceeded to 1642
Crisostomo Street, Sampaloc, Manila where the former
demanded the payment from Vicente Marella. Marella said
that the amount he had on hand then was short by some
P2,000.00 and begged off to be allowed to secure the shortage
from a sister supposedly living somewhere on Azcarraga
Street, also in Manila.
Thereafter, he ordered L. De Dios to go to the said sister and
suggested that Irineo Santos go with him. At the same time, he
requested the registration papers and the deed of sale from
1
Irineo Santos on the pretext that he would like to show them
to his lawyer. Trusting the good faith of Marella, Irineo
handed over the same to the latter and thereupon, in the
company of L. De Dios and another unidentified person,
proceeded to the alleged house of Marella's sister.
At a place on Azcarraga, Irineo Santos and L. De Dios
alighted from the car and entered a house while their
unidentified companion remained in the car. Once inside, L.
De Dios asked Irineo Santos to wait at the sala while he
went inside a room. That was the last that Irineo saw of him.
For, after a considerable length of time waiting in vain for
De Dios to return, Irineo went down to discover that neither
the car nor their unidentified companion was there
anymore. Going back to the house, he inquired from a
woman he saw for L. De Dios and he was told that no such
name lived or was even known therein. Whereupon, Irineo
Santos rushed to 1642 Crisostomo to see Marella. He found
the house closed and Marella gone.
Vicente Marella was able to sell the car in question to the
plaintiff-appellant herein, Jose B. Aznar, for P15,000.00.
While the car in question was thus in the possession of Jose
B. Aznar and while he was attending to its registration in his
name, agents of the Philippine Constabulary seized and
confiscated the same in consequence of the report to them
by Teodoro Santos that the said car was unlawfully taken
from him.
Issue:
Between Teodoro Santos and the plaintiff-appellant, Jose B.
Aznar, who has a better right to the possession of the
disputed automobile?
Ruling: Teodoro Santos
AZNAR’S CONTENTION
Aznar accepts that the car in question originally belonged to
and was owned by the intervenor-appellee, Teodoro Santos,
and that the latter was unlawfully deprived of the same by
Vicente Marella.
However, the appellant contends that upon the facts of this
case, the applicable provision of the Civil Code is Article
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 2
September 19, 2019

1506 and not Article 559 as was held by the decision under would be indisputable that he turned it over to the
review. Article 1506 provides: unidentified companion only so that he may drive Irineo
Santos and De Dios to the said place on Azcarraga and not
to vest the title to the said vehicle to him as agent of Vicente
Marella. Article 712 above contemplates that the act be
ART. 1506. Where the seller of goods has a voidable title
coupled with the intent of delivering the thing.
thereto, but his, title has not been voided 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. The lower court was correct in applying Article 559 of the
Civil Code to the case at bar, for under it, the rule is to the
effect that if the owner has lost a thing, or if he has been
unlawfully deprived of it, he has a right to recover it, not
The contention is clearly unmeritorious. UNDER THE
only from the finder, thief or robber, but also from third
AFOREQUOTED PROVISION, IT IS ESSENTIAL
persons who may have acquired it in good faith from such
THAT THE SELLER SHOULD HAVE A VOIDABLE
finder, thief or robber.
TITLE AT LEAST. It is very clearly inapplicable where, as in
this case, the seller had no title at all.

The said article establishes two exceptions to the general

VICENTE MARELLA DID NOT HAVE ANY TITLE TO
THE PROPERTY UNDER LITIGATION BECAUSE THE
SAME WAS NEVER DELIVERED TO HIM. He sought
ownership or acquisition of it by virtue of the contract. Vicente
Marella could have acquired ownership or title to the subject
matter thereof only by the delivery or tradition of the car to
him.
Under Article 712 of the Civil Code, "OWNERSHIP AND
OTHER REAL RIGHTS OVER PROPERTY ARE
ACQUIRED AND TRANSMITTED BY LAW, BY
DONATION, BY TESTATE AND INTESTATE
SUCCESSION, AND IN CONSEQUENCE OF CERTAIN
CONTRACTS, BY TRADITION."
As interpreted by this Court in a host of cases, by this
provision, ownership is not transferred by contract merely but
by tradition or delivery. Contracts only constitute titles or
rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same
In the case on hand, the car in question was never delivered to
the vendee by the vendor as to complete or consummate the
transfer of ownership by virtue of the contract. It should be
recalled that while there was indeed a contract of sale between
Vicente Marella and Teodoro Santos, the former, as vendee,
took possession of the subject matter thereof by stealing the
same while it was in the custody of the latter's son.
rule of irrevindicability, to wit, when the owner
(1) has lost the thing, or
(2) has been unlawfully deprived thereof.
In these cases, the possessor cannot retain the thing as
against the owner, who may recover it without paying any
indemnity except when the possessor acquired it in a public
sale.
Finally, the plaintiff-appellant here contends that inasmuch
as it was the intervenor-appellee who had caused the fraud
to be perpetrated by his misplaced confidence on Vicente
Marella, he, the intervenor-appellee, should be made to
suffer the consequences arising therefrom, following the
equitable principle to that effect.
Suffice it to say in this regard that the right of the owner to
recover personal property acquired in good faith by another,
is based on his being dispossessed without his consent. The
common law principle that where one of two innocent
persons must suffer by a fraud perpetrated by another, the
law imposes the loss upon the party who, by his misplaced
confidence, has enabled the fraud to be committed, cannot
be applied in a case which is covered by an express
provision of the new Civil Code, specifically Article 559.
Between a common law principle and a statutory provision,
the latter must prevail in this jurisdiction.

There is no adequate evidence on record as to whether Irineo

Santos voluntarily delivered the key to the car to the
unidentified person who went with him and L. De Dios to the
place on Azcarraga where a sister of Marella allegedly lived.
But even if Irineo Santos did, it was not the delivery
contemplated by Article 712 of the Civil Code. For then, it
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
TAGACTAC VS JIMENEZ
Facts:
Trinidad Tagatac bought a car for $4,500 in the US, and seven
months later, she brought the car to the Philippines. When her
friend Joseph Lee came to see her, he was with one Warner
Feist who posed as a wealthy man. Seeing that Tagatac seemed
to believe him, he offered to buy her car for P15,000, and
Tagatac was amenable to the idea.
The deed of sale was made, Feist paid by means of a postdated
check, and the car was delivered to Feist. When Tagatac tried
to encash the check, PNB refused to honor it and told her that
Feist had no account in said bank. Tagatac notified the law
enforcement agencies of the estafa committed on her by Feist,
but he was not apprehended and the car disappeared.
Meanwhile, Feist managed to have the private deed of sale
notarized, so he succeeded in having the car’s registration
certificate [RC] transferred in his name. He sold the car to
Sanchez, who was able to transfer the RC to his name. He
offered to sell the car to defendant Liberato Jimenez, who
bought the car for P10,000 after investigating in the Motor
Vehicles Office.
Jimenez delivered the car to the California Car Exchange so
that it may be displayed for sale. Masalonga offered to sell the
car for Jimenez, so the car was transferred to the former, but
when Masalonga failed to sell it right away, he transferred it to
Villanueva so he could sell it for Jimenez. Tagatac discovered
that the car was in California Car Exchange’s possession, so
she demanded from the manager for the delivery of the car,
but the latter refused. The RC was retransferred to Jimenez.
Tagatac filed a suit for the recovery of the car’s possession, and
the sheriff, pursuant to a warrant of seizure that Tagatac
obtained, seized and impounded the car, but it was delivered
back to Jimenez upon his filing of a counter-bond. The lower
court held that Jimenez had the right of ownership and
possession over the car.
Issue: Can Tagactac recover the said property?
Ruling: NO
JIMENEZ IS A PURCHASER IN GOOD FAITH;
TAGATAC NOT ENTITLED TO POSSESSION
PRESUMPTION
3
The disputable presumption that a person found in
possession of a thing taken in the doing of a recent wrongful
act is the taker and the doer of the whole act does NOT
apply in this case because the car was NOT STOLEN from
Tagatac, and Jimenez came into possession of the car two
months after Feist swindled Tagatac.
In addition, when Jimenez acquired the car, he had no
knowledge of any flaw in the title of the person from whom
he acquired it. It was only later that he became fully aware
that there were some questions regarding the car, when he
filed a petition to dissolve Tagatac’s search warrant which
had as its subject the car in question.
TAGACTAC’S CONTENTION
Re: Tagatac’s allegation that the lower court ignored the
judgment convicting Feist of estafa, and that it erred in not
declaring that restitution of the swindled property must
follow, SHE IS WRONG! The lower court noted that Feist
was accused of estafa because of the check and NOT because
of the delivery of the car.
Her legal basis for the restitution of thing is RPC 104-51 .
Now the question is WON she has beenunlawfully deprived
of her car. It seems like though, but it does not fall under the
scope of NCC 599. 2In this case, there is a valid
transmission of ownership from true owner [Tagatac] to the
swindler [Feist], considering that they had a contract of sale.
As long as no action is taken by the entitled party
[annulment / ratification], the contract of sale remains valid
and binding. Feist acquired defective and voidable title, but
when he sold it to Sanchez, he conferred a good title on the
latter. Jimenez bought the car from Sanchez in good faith,
for value, and without notice of any defect in Sanchez’ title,
so he acquired a good title to the car.
Good title means an indefeasible title to the car, even as
against original owner Tagatac. As between two innocent
parties, the one whose acts made possible the injury must
shoulder the consequences thereof.
————————-
1 Civil liability of person who is criminally liable includes
restitution of thing even though it is with a third person who
acquired it legally
2 Although possession of movable property acquired in good
faith is equivalent to a title, one who has lost any movable or
has been unlawfully deprived thereof may recover it from
the person who possesses it.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
TAGATAC VS JIMENEZ
FACTS:
Trinidad Tagatac bought a car for $4,500 in the US. After 7
months, she brought the car to the Philippines.
Warner Feist, who pretended to be a wealthy man, offered to
buy Trinidad’s car for P15,000, and Tagatac was amenable to
the idea. Hnece, a deed of sale was exceuted.
Feist paid by means of a postdated check, and the car was
delivered to Feist. However, PNB refused to honor the checks
and told her that Feist had no account in said bank.
Tagatac notified the law enforcement agencies of the estafa
committed by Feist, but the latter was not apprehended and
the car disappeared.
Meanwhile, Feist managed succeeded in having the car’s
registration certificate (RC) transferred in his name. He sold
the car to Sanchez, who was able to transfer the registration
certificate to his name.
Sanchez then offered to sell the car to defendant Liberato
Jimenez, who bought the car for P10,000 after investigating in
the Motor Vehicles Office.
Tagatac discovered that the car was in California Car
Exchange’s (place where Jimenez displayed the car for sale),
so she demanded from the manager for the delivery of the car,
but the latter refused.
Tagatac filed a suit for the recovery of the car’s possession, and
the sheriff, pursuant to a warrant of seizure that Tagatac
obtained, seized and impounded the car, but it was delivered
back to Jimenez upon his filing of a counter-bond.
The lower court held that Jimenez had the right of ownership
and possession over the car.
ISSUE: W/N Jimenez was a purchaser in good faith and thus
entitled to the ownership and possession of the car. YES
HELD:
4
It must be noted that Tagatac was not unlawfully
deprived of his car
In this case, there is a valid transmission of ownership from
true owner [Tagatac] to the swindler [Feist], considering
that they had a contract of sale (note: but such sale is
voidable for the fraud and deceit by Feist).
The disputable presumption that a person found in
possession of a thing taken in the doing of a recent wrongful
act is the taker and the doer of the whole act does NOT
apply in this case because the car was not stolen from
Tagatac, and Jimenez came into possession of the car two
months after Feist swindled Tagatac.
Jimenez was a purchaser in good faith for he was
not aware of any flaw invalidating the title from
the seller of the car
In addition, when Jimenez acquired the car, he had no
knowledge of any flaw in the title of the person from whom
he acquired it. It was only later that he became fully aware
that there were some questions regarding the car, when he
filed a petition to dissolve Tagatac’s search warrant which
had as its subject the car in question.
The contract between Feist and Tagactac was a
voidable contract, it can be annulled or ratified
. . . The fraud and deceit practiced by Warner L. Feist
earmarks this sale as a voidable contract (Article 1390).
Being a voidable contract, it is susceptible of either
ratification or annulment. (If the contract is ratified, the
action to annul it is extinguished -Article 1392) and the
contract is cleansed from all its defects (Article 1396); if the
contract is annulled, the contracting parties are restored to
their respective situations before the contract and mutual
restitution follows as a consequence (Article 1398).
Being a voidable contract, it remains valid and binding until
annulled.
However, as long as no action is taken by the party entitled,
either that of annulment or of ratification, the contract of
sale remains valid and binding. When plaintiff-appellant
Trinidad C. Tagatac delivered the car to Feist by virtue of
said voidable contract of sale, the title to the car passed to
Feist. Of course, the title that Feist acquired was defective
and voidable.
Nevertheless, at the time he sold the car to Felix Sanchez,
his title thereto had not been avoided and he therefore
conferred a good title on the latter, provided he bought the
car in good faith, for value and without notice of the defect
in Feist's title (Article 1506, N.C.C.). There being no proof
on record that Felix Sanchez acted in bad faith, it is safe to
assume that he acted in good faith.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 5
September 19, 2019

NB: 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.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
EDCA PUBLISHING VS SPS. SANTOS
FACTS:
On October 5, 1981, a person identifying himself as Prof. Jose
Cruz ordered 406 books from EDCA Publishing. EDCA
Subsequently prepared the corresponding invoice and
delivered the books as ordered, for which Cruz issued a
personal check covering the purchase price of said books.
Subsequently on October 7, 1981, Cruz sold 120 of the books to
Leonor Santos who, after verifying the seller’s ownership from
the invoice he showed her, paid him P1,700.
Upon verification by EDCA, it was discovered that Cruz was
not employed as professor by De La Salle College and that he
had no more account or deposit with Phil. Amanah Bank, the
bank where he allegedly drawn the payment check. Upon
arrest of Cruz by the police, it was revealed that his real name
was Tomas dela Pena and that there was a further sale of 120
books to Sps. Santos.
EDCA, through the assistance of the police forced their way
into the store of Sps. Santos and threatened Leonor with
prosecution for buying stolen property. The 120 books were
seized and were later turned over to EDCA.
This resulted to Sps. Santos filing a case for recovery of the
books after their demand for the return of the books was
rejected.
ISSUE: W/N EDCA may retrieve the books from Santos. NO
(W/N EDCA has been unlawfully deprived of the books
because the heck issued by Cruz in payment thereof was
dishonored. NO.)
HELD:
EDCA argues that because Cruz, the impostor acquired no title
to the books, the latter could not have validly transferred such
to Sps. Santos. Its reason is that as the payment check
bounced for lack of funds, there was a failure of consideration
that nullified the contract of sale between it and Cruz.
However, upon perusal of the provisions on the Law on Sales,
a contract of sale is consensual and is perfected once
agreement is reached between the parties on the subject
matter and the consideration. As provided in Art. 1478-
Ownership in the thing sold shall not pass to the buyer until
full payment of the purchase only if there is a stipulation to
that effect. Otherwise, the rule is that such ownership shall
6
pass from the vendor to the vendee upon the actual or
constructive delivery of the thing sold even if the purchase
price has not yet been paid.
Non-payment only creates a right to demand payment or to
rescind the contract, or to criminal prosecution in the case
of bouncing checks. But absent the stipulation above noted,
delivery of the thing sold will effectively transfer ownership
to the buyer who can in turn transfer it to another.
Actual delivery of the books having been made, Cruz
acquired ownership over the books which he could then
validly transfer to the private respondents. The fact that he
had not yet paid for them to EDCA was a matter between
him and EDCA and did not impair the title acquired by the
private respondents to the books.
Leonor Santos took care to ascertain first that the books
belonged to Cruz before she agreed to purchase them. The
EDCA invoice Cruz showed her assured her that the books
had been paid for on delivery. By contrast, EDCA was less
than cautious — in fact, too trusting in dealing with the
impostor. Although it had never transacted with him before,
it readily delivered the books he had ordered (by telephone)
and as readily accepted his personal check in payment. It
did not verify his identity although it was easy enough to do
this. It did not wait to clear the check of this unknown
drawer. Worse, it indicated in the sales invoice issued to
him, by the printed terms thereon, that the books had been
paid for on delivery, thereby vesting ownership in the buyer.
Santos did not need to go beyond that invoice to satisfy
herself that the books being offered for sale by Cruz actually
belonged to him; yet she still did. Although the title of Cruz
was presumed under Article 559 by his mere possession of
the books, these being movable property, Leonor Santos
nevertheless demanded more proof before deciding to buy
them.
NB: Law on Property
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 of 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.
ON THE REMEDY:
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 7
September 19, 2019

While we sympathize with the petitioner for its plight, it is subsequently acquires title thereto, we apply Article 1434.
clear that its REMEDY IS NOT AGAINST THE PRIVATE
RESPONDENTS but against Tomas de la Peña, who has
apparently caused all this trouble.
By operation of law, title passes to the buyer.

-------------------------------
The private respondents have themselves been unduly
inconvenienced, and for merely transacting a customary deal
not really unusual in their kind of business. It is they and not
EDCA who have a right to complain.

TSN;

Discussion

The possession of a movable property in good faith is

equivalent to title. In this case, books were actually
delivered to Cruz, therefore, he acquired thereof. The fact
that he had not yet paid for the books for EDCA did not
impair his ownership over the books.

Therefore, when Cruz sold and delivered his books to

Santos, there was a valid transfer of ownership.

Santos was an innocent purchaser in good faith because he

first ascertained that the books belonged to Cruz which was
evidenced by the invoiced issued in favour of Cruz. The sales
invoice showed that the books were sold on delivery.
Thereby, vesting ownership in the buyer.

The sales invoice issued have been paid for by delivery

thereby vesting ownership to the buyer.

So take note of the distinctions between or among these

three instances. Again, as we have mentioned,

1. even if the seller is not the owner at the time of perfection,

the sale is valid.

2. If he is not the owner at the time of delivery, we apply

Article 1505, the buyer does not acquire a better title over
the subject matter unless we apply any of the exceptions
mentioned therein.

3. If the seller is not the owner at the time of delivery but

CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
CHRYSLER VS CA
Facts
OnOctober 2, 1970, Sambok, Bacolod, ordered from petitioner
various automotive products worth P30,909.61, payable in 45
days.
On November 25, 1970, petitioner delivered said products to
its forwarding agent, Allied Brokerage Corporation, for
shipment; that Allied Brokerage loaded the goods on board the
M/S Doña Florentina, a vessel owned and operated by Negros
Navigation Company, for delivery to Sambok, Bacolod. When
petitioner tried to collect from the latter the amount of
P31,037.56, representing the price of the spare parts plus
handling charges, Sambok, Bacolod, refused to pay claiming
that it had not received the merchandise.
Petitioner also demanded the return of the merchandise or
their value from Allied Brokerage and Negros Navigation, but
both denied any liability.
On September 7, 1972, petitioner filed with the Court of First
Instance of Rizal, Branch XX, Pasig, Rizal, a Complaint for
Damages against Allied Brokerage Corporation, Negros
Navigation Company and Sambok, Bacolod.
In its Answer, Sambok, Bacolod, denied having received from
petitioner or from any of its co-defendants, the automotive
products referred to in the Complaint, and professed no
knowledge of having ordered from petitioner said articles.
Issue
Whether or not the act of the private respondent in refusing to
take delivery of the automotive spare parts that it purchased
from the petitioner after having been notified of the shipment
constitutes wrongful neglect resulting in the loss of the cargo
for which it should be liable in damages to the petitioner.
Ruling:
NO.
The matter of misdelivery is not the decisive factor for
relieving Sambok, Bacolod, of liability herein. While it may be
that the Parts Order Form specifically indicated Iloilo as the
destination, as testified to by Ernesto Ordonez, Parts Sales
Representative of petitioner, Sambok, Bacolod, and Sambok,
Iloilo, are actually one.
8
In fact, admittedly, the order for spare parts was made by
the President of Sambok, Pepito Ng, through its marketing
consultant.
Notwithstanding, upon receipt of the Bill of Lading,
Sambok, Bacolod, initiated, but did not pursue, steps to take
delivery as they were advised by Negros Navigation that
because some parts were missing. they would just be
informed as soon as the missing parts were located.
It was only four years later, however, or in 1974, when a
warehouseman of Negros Navigation, Severino Aguarte,
found in their off-shore bodega, parts of the shipment.- in
question, but already deteriorated and valueless.
Under the circumstances, Sambok, Bacolod, cannot be
faulted for not accepting or refusing to accept the shipment
from Negros Navigation four years after shipment. The
evidence is clear that Negros Navigation could not produce
the merchandise nor ascertain its whereabouts at the time
Sambok, Bacolod, was ready to take delivery. Where the
seller delivers to the buyer a quantity of goods less than he
contracted to sell, the buyer may reject them.
From the evidentiary record, Negros Navigation was the
party negligent in failing to deliver the complete shipment
either to Sambok, Bacolod, or to Sambok, Iloilo, but as the
Trial Court found, petitioner failed to comply with the
conditions precedent to the filing of a judicial action.
Thus, in the last analysis, it is petitioner that must shoulder
the resulting loss. The general rule that before, delivery, the
risk of loss is home by the seller who is still the owner,
under theprinciple of "res petit domino", is applicable in
petitioner's case.
In sum, the judgment of respondent Appellate Court, will
have to be sustained not on the basis of misdelivery but on
nondelivery since the merchandise was never placed in the
control and possession of Sambok, Bacolod, the vendee.
SR TSN:
Discussion
So here, there was NO MISDELIVERY BUT RATHER
NON-DELIVERY.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 9
September 19, 2019

WHY? Because the MERCHANDISE WAS NEVER

PLACED IN THE CONTROL AND POSSESSION OF
SAMBOK, THE VENDEE.

WHENTHE GENERAL RULE APPLIES:

Precisely because of the arrangement between the parties

that delivery be made to Sambok Bacolod.

Moreover, very relevant also in this case is that DELIVERY

WAS

MADE ONLY AFTER 4 YEARS. When the

warehouseman of Negros Navigation found the parts of the
shipment already deteriorated and devaluated.

Spareparts where initially delivered but they were advised

that some were missing. The missing parts were located
only 4 years thereafter. Sambok Bacolod therefore cannot be
faulted for not accepting or refusing to accept the shipment
from Negros Navigation 4 years after shipment.

Where the seller delivers to the buyer quantity of

goods less than what was contracted by the parties,
the buyer may reject them. To which, we apply again
the general principle of res perit domino.

The risk of loss is borne by the seller who is still the owner
since there was yet no delivery to transfer ownership in
favor of the buyer Sambok.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
LAWYER’S COOP VS TABORA
FACTS:
On May 3, 1955, Perfecto A. Tabora bought from the Lawyers
Cooperative Publishing Company one complete set of
American Jurisprudence consisting of 48 volumes with 1954
pocket parts, plus one set of American Jurisprudence, General
Index, consisting of 4 volumes, for a total price of P1,675.50
which, in addition to the cost of freight of P6.90, makes a total
of P1,682.40. Tabora made a partial payment of P300.00,
leaving a balance of P1,382.40.
THE BOOKS WERE DULY DELIVERED AND
RECEIPTED FOR BY TABORA ON MAY 15, 1955 in his
law office Ignacio Building, Naga City.
In the midnight of the same date, however, a big fire broke out
in that locality which destroyed and burned all the buildings
standing on one whole block including at the law office and
library of Tabora
As a result, the books bought from the company as
above stated, together with Tabora's important
documents and papers, were burned during the
conflagration. This unfortunate event was immediately
reported by Tabora to the company in a letter he sent on May
20, 1955.
On May 23, the company replied and as a token of goodwill it
sent to Tabora free of charge volumes 75, 76, 77 and 78 of the
Philippine Reports.
As Tabora failed to pay the monthly installments agreed upon
on the balance of the purchase price notwithstanding the long
time that had elapsed, the company demanded payment of the
installments due, and having failed, to pay the same, it
commenced the present action before the Court of First
Instance of Manila for the recovery of the balance of the
obligation.
TABORA’S ANSWER: Force Majeure
Defendant, in his answer, pleaded force majeure as a defense.
He alleged that the books bought from the plaintiff
were burned during the fire that broke out in Naga
City on May 15, 1955, and since the loss was due to
force majeure he cannot be held responsible for the
loss. He prayed that the complaint be dismissed and that he
be awarded moral damages in the amount of P15,000.00.
10
ISSUE
Whether or not appellee Lawyers Cooperative should be the
one to
bear the loss for the loss is always borne by the owner.
RULING
NO.
Appellant bought from appellee one set of American
Jurisprudence, including one set of general index, payable
on installment plan. It was provided in the contract that
"title to and ownership of the books shall remain with the
seller until the purchase price shall have been fully paid.
Loss or damage to the books after delivery to the buyer
shall be borne by the buyer." The total price of the books,
including the cost of freight, amounts to P1,682.40.
Appellant only made a down payment of P300.00 thereby
leaving a balance of P1,382.40.
LAWYER’S COOP’S CONTENTION
Since it was agreed that the title to and the ownership of the
books shall remain with the seller until the purchase price
shall have been fully paid, and the books were burned or
destroyed immediately after the transaction, appellee
should be the one to bear the loss for, as a result, the loss is
always borne by the owner.
Moreover, even assuming that the ownership of the books
were transferred to the buyer after the perfection of the
contract the latter should not answer for the loss since the
same occurred through force majeure. Here, there is no
evidence that appellant has contributed in any way to the
occurrence of the conflagration.
SC: This contention cannot be sustained.
RULE: While as a rule the loss of the object of the contract
of sale is borne by the owner or in case of force majeure the
one under obligation to deliver the object is exempt from
liability, the application of that rule does not here obtain
because the law on the contract entered into on the matter
argues against it.
It is true that in the contract entered into between the
parties the seller agreed that the ownership of the books
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September 19, 2019
shall remain with it until the purchase price shall have been
fully paid, but such stipulation cannot make the seller liable in
case of loss not only because such was agreed merely to secure
the performance by the buyer of his obligation but in the very
contract it was expressly agreed that the "loss or damage to the
books after delivery to the buyer shall be borne by the buyer."
Any such stipulation is sanctioned by Article 1504 of our Civil
Code, which in part provides:
(1) Where delivery of the goods has been made to the buyer
or to a bailee for the buyer, in pursuance of the contract
and the ownership in the goods has been retained by the
seller merely to secure performance by the buyer of his
obligations under the contract, the goods are at the
buyer's risk from the time of such delivery.
ON THE CONTENTION THAT HE SHOULD BE
RELIEVED BECAUSE OF FORCE MAJEURE
Neither can appellant find comfort in the claim that since the
books were destroyed by fire without any fault on his part he
should be relieved from the resultant obligation under the rule
that an obligor should be held exempt from liability when the
loss occurs thru a fortuitous event.
RATIO: This is because this rule only holds true when the
obligation consists in the delivery of a determinate thing and
there is no stipulation holding him liable even in case of
fortuitous event. Here these qualifications are not present. The
obligation does not refer to a determinate thing, but is
pecuniary in nature, and the obligor bound himself to assume
the loss after the delivery of the goods to him.
In other words, the obligor agreed to assume any risk
concerning the goods from the time of their delivery, which is
an exception to the rule provided for in Article 1262 of our
Civil Code.
Appellant likewise contends that the court a quo erred in
sentencing him to pay attorney's fees. This is merely the result
of a misapprehension for what the court a quo ordered
appellant to pay is not 25% of the amount due as attorney's
fees, but as liquidated damages, which is in line with an
express stipulation of the contract. We believe, however, that
the appellant should not be made to pay any damages because
his denial to pay the balance of the account is not due to bad
faith.
SR TSN;
11
Discussion
First thing we have to take note here is the stipulation in the
contract:
Title and ownership of the books shall remain with the seller
until the purchase price have been fully paid. Loss and
damage to the goods after delivery to the buyer shall be
borne by the buyer.
So with that, it's very clear that Tabora will be the one liable
for the loss. The loss is not even the fault of Tabora and of
Lawyer's Coop.
And by virtue of that provision, Tabora will still be liable to
pay the balance of the purchase price even if the loss of the
goods was due
to force majeure.
While as a rule the loss of the object of the contract of sale is
borne by the owner or in case of force majeure the one
under obligation to deliver the object is exempt from
liability, the application of that rule does not here obtain
because of the stipulation by the parties in the contract.
Such stipulation cannot make the seller liable in case of loss
because it was expressly agreed that the loss or damage to
the books after delivery to the buyer shall be borne by the
buyer.
Any stipulation is sanctioned by Article 1504. Take note
class that if walang ganyan na stipulation, we apply the
general rule na owner bears the loss. SO WHO IS THE
OWNER HERE? Tabora.
WHY BECAUSE THERE'S ALREADY DELIVERY.
Now what if wala yung 2nd phrase sa stipulation na “Loss
and damage to the goods after delivery to the buyer shall be
borne by the buyer?” Can we say that seller now bears the
loss? The Supreme Court took note of that. The seller cannot
be made liable not only because it was agreed to secure the
performance of the buyer but because it was also agreed that
loss or damage shall be borne by the buyer after delivery.
Also do take not that the obligation here does not refer to a
determinate thing. What is really the obligation of Tabora
here? To pay the price. The obligation to pay a sum of
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September 19, 2019

money.

Which is a indeterminate thing. Ang nawala is yung subject

matter but the obligation remains. SO WE ONLY APPLY
THE LOSS OF THE THING RULE WHICH WILL
EXTINGUISH THE OBLIGATION, if it refers to an
obligation to deliver a determinate thing.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 13
September 19, 2019

FIRST UNITED VS BAYANIHAN AUTOMOTIVE

Facts: For the two purchases, FUCC partially paid in cash, and the
balance through post-dated checks, as follows:

TOPIC:
BANK/CHECK NO. DATE
This case concerns the applicability of the legal principles of AMOUNT
recoupment and compensation.
Pilipinas Bank 18027379 23 November 1992
₱360,000.00
First United Constructors Corporation (FUCC) and petitioner Pilipinas Bank 18027384 1 December 1992
Blue Star Construction Corporation (Blue Star) were associate ₱375,000.00
construction firms sharing financial resources, equipment and
technical personnel on a case-to-case basis.

UPON PRESENTMENT OF THE CHECKS FOR

From May 27, 1992 to July 8, 1992, they ordered six units of
dump trucks from Bayanihan Automotive (a domestic
corporation engaged in the business of importing and
reconditioning used Japan-made trucks, and of selling the
trucks to interested buyers who were mostly engaged in the
construction business), to wit:
UNIT TO WHOM
DELIVERY DATE OF DELIVERY
PAYMENT, THE RESPONDENT LEARNED THAT
FUCC HAD ORDERED THE PAYMENT STOPPED.
Bayanihan immediately demanded the full settlement of
their obligation from the petitioners, but to no avail.
Instead, FUCC informed BAYANIHAN that they were
withholding payment of the checks due to the
breakdown of one of the dump trucks they had
earlier purchased from respondent, specifically the
second dump truck delivered on May 27, 1992.

Isuzu Dump Truck FUCC 27 May 1992

ACTION FOR COLLECTION commenced
Isuzu Dump Truck FUCC 27 May 1992
Due to the refusal to pay, the respondent commenced this
Isuzu Dump Truck FUCC 10 June 1992
action for collection on April 29, 1993, seeking payment of
Isuzu Dump Truck FUCC 18 June 1992 the unpaid balance in the amount of ₱735,000.00
represented by the two checks.
Isuzu Dump Truck Blue Star 4 July 1992

Isuzu Dump Truck FUCC 8 July 1992

FUCC’s CONTENTION

In their answer, the petitioners averred that they had

The parties established a good business relationship, with the stopped the payment on the two checks worth
respondent extending service and repair work to the units ₱735,000.00:
purchased by the petitioners. The respondent also practiced
liberality towards the petitioners in the latter’s manner of
payment by later on agreeing to payment on terms for
1. because of the respondent’s refusal to repair the second
subsequent purchases.
dump truck; and

2. that they had informed the respondent of the defects in

September 19, 1992 that unit but the respondent had refused to comply with its
warranty, compelling them to incur expenses for the repair
FUCC ordered from BAYANIHAN one unit of Hino Prime and spare parts.
Mover that the BAYANIHAN delivered on the same date.

September 29, 1992
FUCC again ordered from BAYANIHAN one unit of Isuzu
Transit Mixer that was also delivered.
BAYANIHAN’s CONTENTION
FUCC was not legally justified in withholding payment of
the unpaid balance of the purchase price of the Hino Prime
Mover and the Isuzu Transit Mixer due the alleged defects
in second dump truck because the purchase of the two
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September 19, 2019
units was an entirely different transaction from the
sale of the dump trucks, the warranties for which
having long expired.
RTC - found FUCC liable to pay for the unpaid balance of the
purchase price of the Hino Prime Mover and the Isuzu Transit
Mixer.
Held that the petitioners could not avail themselves of
legal compensation because the claims they had set up in the
counterclaim were not liquidated and demandable.
CA
The petitioners appealed, stating that THEY COULD
JUSTIFIABLY STOP THE PAYMENT OF THE
CHECKS IN THE EXERCISE OF THEIR RIGHT OF
RECOUPMENT because of the respondent’s refusal to settle
their claim for breach of warranty as to the purchase of the
second dump truck.
CA’s ruling:
The remedy of recoupment could not be properly
invoked by the petitioners because the transactions
were different;
1. that the expenses incurred for the repair and spare parts of
the second dump truck were not a proper subject of
recoupment because they DID NOT ARISE OUT OF THE
PURCHASE OF THE HINO PRIME MOVER AND THE
ISUZU TRANSIT MIXER; and
2. that the petitioners’ claim could not also be the subject of
legal compensation or set-off, because the debts in a set-off
should be liquidated and demandable.
Issues
Could FUCC validly resort to recoupment?
Ruling:
NO
14
There is no longer any question that the petitioners were
liable to the respondent for the unpaid balance of the
purchase price of the Hino Prime Mover and the Isuzu
Transit Mixer.
WHAT REMAIN TO BE RESOLVED ARE STRICTLY
LEGAL, NAMELY:
1. Whether or not the petitioners validly exercised the right
of recoupment through the withholding of payment of the
unpaid balance of the purchase price of the Hino Prime
Mover and the Isuzu Transit Mixer; and,
2. Whether or not the costs of the repairs and spare parts for
the second dump truck delivered to FUCC on May 27, 1992
could be offset for the petitioners’ obligations to the
respondent.
PETITIONERS COULD NOT VALIDLY RESORT TO
RECOUPMENT AGAINST RESPONDENT
RECOUPMENT (RECONVENCION), defined
The act of rebating or recouping a part of a claim upon
which one is sued by means of a legal or equitable right
resulting from a counterclaim arising out of the same
transaction.7 It is the setting up of a demand arising from
the same transaction as the plaintiff’s claim, to abate or
reduce that claim.
LEGAL BASIS FOR RECOUPMENT
The legal basis for recoupment by the buyer is the first
paragraph of Article 1599 of the Civil Code, viz:
Article 1599. Where there is a breach of warranty by the
seller, the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller,
the breach of warranty by way of recoupment in
diminution or extinction of the price;
(2) Accept or keep the goods and maintain an action against
the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action
against the seller for damages for the breach of warranty;
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September 19, 2019
(4) Rescind the contract of sale and refuse to receive the goods
or if the goods have already been received, return them or
offer to return them to the seller and recover the price or any
part thereof which has been paid.
When the buyer has claimed and been granted a remedy in
anyone of these ways, no other remedy can thereafter be
granted, without prejudice to the provisions of the second
paragraph of article 1191. (Emphasis supplied)
xxxx
IN THIS CASE
It was improper for petitioners to set up their claim for repair
expenses and other spare parts of the dump truck against their
remaining balance on the price of the prime mover and the
transit mixer they owed to respondent.
RECOUPMENT MUST ARISE OUT OF THE
CONTRACT OR TRANSACTION UPON WHICH THE
PLAINTIFF’S CLAIM IS FOUNDED.
To be entitled to recoupment, therefore, the CLAIM MUST
ARISE FROM THE SAME TRANSACTION, i.e., the
purchase of the prime mover and the transit mixer and not to
a previous contract involving the purchase of the dump truck.
That there was a series of purchases made by
petitioners could not be considered as a single
transaction, for the records show that the earlier purchase of
the six dump trucks WAS A SEPARATE AND DISTINCT
TRANSACTION FROM THE SUBSEQUENT
PURCHASE OF THE HINO PRIME MOVER AND THE
ISUZU TRANSIT MIXER. Consequently, the breakdown of
one of the dump trucks did not grant to petitioners the right to
stop and withhold payment of their remaining balance on the
last two purchases.
LEGAL COMPENSATION WAS PERMISSIBLE
Legal compensation takes place when the requirements set
forth in Article 1278 and Article 1279 of the Civil Code are
present, to wit:
Article 1278. Compensation shall take place when two persons,
in their own right, are creditors and debtors of each other."
15
Article 1279. In order that compensation may be proper, it is
necessary:
(1) That each of the obligors be bound principally, and that
he be at the same time a principal creditor of the other;
(2) That both debts consists in a sum of money, or if the
things due are consumable, they be of the same kind, and
also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and
communicated in due time to the debtor.
IN THIS CASE
As to whether petitioners could avail themselves of
compensation, both the RTC and CA ruled that they could
not because the claims of petitioners against respondent
were not liquidated and demandable.
The Court cannot uphold the CA and the RTC.
The RTC already found that petitioners were entitled to the
amount of ₱71,350.00 stated in their counterclaim, and the
CA concurred in the finding, stating thusly:
It is noteworthy that in the letter of December 16, 1992
(Exh. "1") defendants were charging plaintiff only for the
following items of repair:
1. Cost of repair and spare parts - ₱46,800.00
2. Cost of repair and spare parts - 24,550.00
₱71,350.00
Said amounts may be considered to have been spent for
repairs covered by the warranty period of three (3) months.
While the invoices dated September 26, 1992 and
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September 19, 2019

September 18, 1992, this delay in repairs is attributable to the
fact that when defects were brought to the attention of the
plaintiff in the letter of August 14, 1992 (Exh. "8") which was
within the warranty period, the plaintiff did not respond with
the required repairs and actual repairs were undertaken by
defendants.
Hence, the amount of ₱71,350.00 should be set off against
petitioners’ unpaid obligation of ₱735,000.00, leaving a
balance of ₱663,650.00, the amount petitioners still owed
to respondent.
COURTS MODIFIED THE LEGAL INTEREST

Thereafter, the spare parts covered by Exhibits "2-B" and "3-
A" pertain to the engine, which was covered by the warranty.
x x x. Defendants in their letter of August 14, 1992 (Exhb. "8")
DEMANDED CORRECTION OF DEFECTS.
The legal interest rate to be imposed from February 11,
1993, the time of the extrajudicial demand by respondent,
should be 6% per annum in the absence of any stipulation in
writing in accordance with Article 2209 of the Civil Code,
which provides:

Article 2209. If the obligation consists in the payment of a

IN THEIR LETTER OF AUGUST 22, 1992 (EXH. "9")
THEY DEMANDED REPLACEMENT. IN THEIR
LETTER OF AUGUST 27, 1992 (EXH. "10"), THEY
DEMANDED ‘REPLACEMENT/REPAIR’. In September,
1992, they undertook repairs themselves (Exhs. "2-B" and "3-
A") and demanded payment for the expenses in their letter of
December 16, 1992 (Exh. "1"). All other items of expenses
connected with subsequent breakdowns are no longer
chargeable to plaintiff which granted only a 3-month
warranty. x x x10
Considering that preponderant evidence showing that
petitioners had spent the amount of ₱71,350.00 for the
repairs and spare parts of the second dump truck within the
warranty period of three months supported the finding of the
two lower courts, the Court accepts their finding.
sum of money, and the debtor incurs in delay, the indemnity
for damages, there being no stipulation to the contrary, shall
be the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest, which is six per
cent per annum.
DISPOSITIVE PORTION
WHEREFORE, the Court AFFIRMS the decision
promulgated on July 26, 2004 in all respects subject to the
MODIFICATION that petitioners are ordered, jointly and
severally, to pay to respondent the sum of 1 663,650.00,
plus interest of 6% per annum computed from February 11,
1993, the date of the first extrajudicial demand, until fully
paid; and ORDERS the petitioners to pay the costs of suit.

DEBT, when liquidated

A debt is liquidated when its existence and amount are

determined.

Accordingly, an unliquidated claim set up as a counterclaim by

a defendant can be set off against the plaintiff’s claim from the
moment it is liquidated by judgment.

ARTICLE 1290 OF THE CIVIL CODE provides that when

all the requisites mentioned in Article 1279 of the Civil Code
are present, compensation takes effect by operation of law,
and extinguishes both debts to the concurrent amount.

Here, with petitioners’ expenses for the repair of the dump

truck being already established and determined with certainty
by the lower courts, it follows that legal compensation could
take place because all the requirements were present.