You are on page 1of 24

ATENEO CENTRAL BAR OPERATIONS 2007

Civil Law
SUMMER REVIEWER

CH. 1 – CONTRACT OF SALE


V. DISTINGUISHED FROM OTHER
CONTRACT OF SALE – One of the contracting CONTRACTS
parties obligates himself to transfer the ownership of Donation Sale
and to deliver a determinate thing, and the other to Gratuitous or onerous Onerous
pay therefore a price certain in money or its Formal contract Consensual contract
equivalent. A contract of sale may be absolute or Governed by law on Governed by law on sale
conditional. donation

Contract of Sale Contract to Sell Barter Sale


Absolute Conditional Consideration: giving of a Consideration: giving of
Real obligation – Personal obligation – thing money as payment
obligation to give obligation to do Governed by law on sales: species of the genus
Title passes to the Ownership is reserved in sales
buyer upon delivery the seller and will pass to If consideration consists party in money
the buyer only upon full and partly by thing –
payment of the price look at manifest intention;
Non-payment of the Full payment is a positive If intention is not clear: If intention is not clear:
price is a negative suspensive condition, the value of thing is more value of thing is equal
resolutory condition failure of which is not a than amount of money – or less than amount of
breach but prevents the barter money – sale
obligation of the vendor to
convey title to arise Contract for piece of Sale
remedies available: remedies available: work
1. specific 1. resolution Goods are to be Contract for delivery of
performance 2. damages manufactured specially an article which the
2. rescission for a customer and upon vendor in the ordinary
3. damages special order and not for course of business
the general market manufactures or
I. ELEMENTS OF A CONTRACT OF SALE procures for general
1. Consent market (whether on hand
2. Determinate subject matter or not)
3. Price certain in money or its equivalent Essence is service Essence is object
Jurisprudence:
II. STAGES IN LIFE OF CONTRACT OF SALE 1. Timing test
1. Negotiation under art 1467:
2. Perfection whether the thing
3. Consummation transferred would have
never existed but for the
III. OBLIGATIONS CREATED - 2 sets of real order
obligations to give 2. Habituality test
QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
if manufacturer
IV. CHARACTERISTICS OF CONTRACT OF engages in activity with
SALE: need to employ
1. Nominate extraordinary skills and
2. Principal equipment (Celestino v
3. Consensual CIR)
4. Bilateral 3. Nature of the object
5. Reciprocal test
6. Onerous each product’s nature
7. Commutative of execution differs from
8. Title and not a mode the others; products are

—Adviser: Dean Cynthia del Castillo Head: Joy Ponsaran, Eleanor Mateo; Understudy: Joy Tajan, John Paul Lim;
Subject Head: Patricia Marie Regina Roque; Pledgees: Melina Rose Gutierrez, Kristine Margret Malang—
Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

not ordinary products of


manufacturer (EEI v CIR) NOTE: GENERAL RULE - All persons who are
authorized in this Code to obligate themselves may
Agency to Sell Sale enter into a contract of sale
Agent not obliged to pay Buyer pays for price of
for price, merely obliged object I. MINORS, INSANE AND DEMENTED
to deliver price received PERSONS, AND DEAF-MUTES
from buyer. 1. Contracts are voidable, subject to annulment
Principal remains owner Buyer becomes owner of or ratification
even if object delivered thing; in agency 2. Also includes:
to agent - State of drunkenness
Agent assumes no Seller warrants - Hypnotic spell
risk/liability as long as - Where necessaries are those sold
within the authority given and delivered to a minor or other
May be revoked Not unilaterally revocable person without capacity to act, he
unilaterally because must pay a reasonable price
fiduciary and even if therefore
revoked w/o ground
Agent not allowed to Seller receives profit II. SPOUSES - A spouse may, without the consent
profit of the other spouse, enter into sales transactions
Personal Contract; Real Contract in the regular pursuit of their profession, vocation,
Rescission is not or trade
available
Art. 1490. The husband and the wife cannot
Dation in Payment Sale sell property to each other, except:
Pre-existing credit No pre-existing credit (1) When a separation of property was
Obligations are Obligations are created agreed upon in the marriage
extinguished settlements; or
Debtor’s consideration: Consideration of seller: (2) When there has been a judicial
extinguishment of the price separation or property under Article
debt Consideration of buyer: 191.
Creditor’s consideration: acquisition of the object
acquisition of the object NOTE: Prohibition likewise applies to common-law
offered in lieu of the spouses
original credit
Less freedom in Greater freedom in III. OTHERS - TRUST RELATIONSHIPS
determining the price determining the price 1. Art. 1491 Two groups of parties prohibited
Payment is received by Buyer still has to pay the from acquiring by purchase certain
the debtor before the price properties:
contract is perfected a. Guardian/Agent/Executors and
Administrators
Lease Sale i. Direct or indirect
Use of thing is for a Obligation to absolutely ii. May be ratified since only private
specified period only with transfer ownership of wrong is involved
an obligation to return thing b. Public Officers and employees/Officers of
Consideration is rent
QuickTime™ and a
Consideration
TIFF (Uncompressed) decompressor is price the Court
Lessor need not be
are needed to see this picture.
Seller needs to be owner i. Cannot be ratified since public wrong
owner of thing to transfer is involved
ownership ii. Requisites for the prohibition to apply
to attorneys:
NOTE: Lease with option to buy: really a contract 1. existence of attorney client
relationship;
of sale but designated as lease in name only; it is a
sale by installments 2. property is the subject matter
in litigation;
CH. 2 - PARTIES TO A CONTRACT OF SALE

Page 131 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

3. while in litigation (from filing sale of the hope itself


of complaint to final Sale is subject to the Sale is effective even if
judgment) condition; that the thing the thing does not come
NOTE: Exception to the prohibition against attorneys: will exist; if it does not, into existence, unless it is
contingent fee arrangement where the amount of there is no contract a vain hope
legal fees is based on a value of property involved in Uncertainty is with regard The uncertainty is with
litigation to the quantity and regard to the existence of
quality of the thing and the thing
Art. 1492. The prohibitions in the two preceding not the existence of the
articles are applicable to sales in legal thing
redemption, compromises and renunciations. Object is a future thing Object is a present thing
which is the hope or
III. Legal Status of Contract expectancy
1. Void (case law) – guardian/
executor/public officers / officers of the NOTE: Quantity of subject matter is not essential for
court perfection; must determine nature and quality of
2. Voidable (civil code) – agent; VALID if subject matter
with consent
NOTE: Seller need not be the owner of the subject
CH. 3 - SUBJECT MATTER OF SALE matter at the time of perfection: sufficient that he is
the owner at the time of delivery. exception:
1. REQUISITES: foreclosure sale
1. Things
a. “Possible” - existing, future, and CH. 4 - PRICE
contingent
i. whether the subject matter is I. REQUISITES:
of a type and nature that 1. Real
exists or could be made to a. when at the perfection of the contract
exist to allow the seller of sale, there is every intention on
reasonable certainty of being the buyer to pay the price, and every
able to comply with his expectation on the part of the seller
obligations to receive such price as the value of
b. Licit the subject matter he obligates
i. not outside the commerce of himself to deliver
man 2. In money or its equivalent
ii. if illicit, contract is void a. consideration for a valid contract of
c. Determinate or determinable sale can be the price and other
i. determinate: particularly valuable consideration; at the very
designated or physically least, a true contract of sale must
segregated from all others of have price as part of its
the same class consideration
ii. determinable: 3. Certain or ascertainable
1. thing is capable of a. certain: expressed and agreed in
being made terms of specific pesos and/or
determinate centavos
2. without
QuickTime™ and a the necessity b. ascertainable:
TIFF (Uncompressed) decompressor
are needed to seof apicture.
e this new further i. by third persons
contract ii. by the courts – in cases
2. Rights – must be transmissible, except: where the third person fixes
a. future inheritance the price in bad faith or by
b. service mistake
iii. by reference to a definite
Emptio rei speratae Emptio spei day, particular exchange or
Sale of an expected thing Sale of a mere hope or market
expectancy that the thing iv. by reference to another thing
will come to existence; certain

Page 132 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

v. but never by one party to the 2. offer floated with a without acceptance,
contract period extinguished when
4. Jurisprudence: Manner of payment must period has ended and
be agreed upon (Marnelego v. Banco maybe withdrawn at will
Filipino Savings and Mortgage Bank) by offeror; right to
withdraw must not be
II. EFFECT OF GROSS INADEQUACY OF PRICE arbitrary otherwise,
liable to damage under
NOTE: Mere inadequacy of the price does not affect Art 19, 20, 21 of Civil
the validity of the sale, except (1) When there is Code
fraud, mistake, or undue influence indicative of a 3. offer floated w/ extinguished by
defect in consent is present, (2)When it shows that condition happening/non-
the parties really intended a donation or some other happening of condition
act or contract. 4. offer floated without continues to be valid
period/without condition depending upon
III. EFFECT WHERE PRICE IS SIMULATED circumstances of time,
1. The act may be shown to have been in reality place and person
a donation, or some other act or contract 5. offer is floated and original offer is
2. If not and neither party had any intention there destroyed, there is a
whatsoever that the amount will be paid is counter-offer new offer; can not go
(absolutely simulated): the sale is void back to original offer
3. If there is a real price but what is stated in the 6. offer is floated no authority of offeror
contract is not the one intended to be paid to modify offer
(only relatively simulated): the contract of 7. offer accepted proceed to perfected
sale is valid but subject to reformation absolutely stage

Art. 1474. Where the price cannot be determined III. OPTION CONTRACT - a contract granting
in accordance with the preceding articles, or in an exclusive right in one person, for which he
any other manner, the contract is inefficacious. has paid a separate consideration, to buy a
However, if the thing or any part thereof has been certain object within an agreed period
delivered to and appropriated by the buyer he 1. no presumption of consideration, needs
must pay a reasonable price therefore. What is a to be proven
reasonable price is a question of fact dependent 2. characteristics of Option Contract:
on the circumstances of each particular case. a. not the contract of sale by itself,
separate and distinc
CH. 5 - FORMATION OF A CONTRACT OF SALE b. nominate
c. principal; but can be attached
I. 3 STAGES IN LIFE OF A CONTRACT OF SALE to other principal contracts
1. Policitacion/Negotiation Stage - offer is d. onerous
floated, acceptance is floated but they do e. commutative
not meet; the time when parties indicate f. unilateral – versus contract of
their interest but no concurrence of offer and sale which is bilateral
acceptance.
2. Perfection - concurrence of all requisites; San Miguel Philippines v Cojuangco
meeting of the minds. consideration in an option contract may be anything
3. Consummation - parties QuickTime™ perform
and a their of value, unlike in sale where it must be price certain
TIFF (Uncompressed) decompressor
respective undertakings
are needed to see this picture. in money

II. Policitacion 3. how exercised: notice of acceptance


1. RULES: should be communicated to offeror
1. offer is floated prior to acceptance, without actual payment as long as there
may be withdrawn at is delivery of payment in consummation
will by offeror stage

Page 133 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

4. Recognizes recovery of damage based on


4. SITUATIONS IN AN OPTION abuse of rights doctrine
CONTRACT:
a. with separate consideration CH. 6 - PERFECTION OF SALE
i. option contract is valid
ii. offeror can not withdraw GENERAL RULE: A contract of sale is perfected at
offer until after expiry the moment there is a meeting of the minds upon the
period thing which is the object of the contract and upon the
iii. ubject to rescission, price; consensual contract
damages but not to Exception: When the sale is subject to a suspensive
specific performance condition
because this is not an
obligation to give I. REQUIREMENTS:
b. without separate consideration 1. When parties are face to face – when there
i. OLD RULE - offer is still is absolute acceptance of an offer that is
valid, but option contract is certain
void and not subject to 2. When thru correspondence or telegram –
rescission, damages when the offeror receives or had knowledge
ii. NEW RULE: Right of first of the acceptance
refusal recognized 3. When the sale is subject to a suspensive
condition – from the moment the condition is
Option Contract Right of First Refusal fulfilled
Principal contract; Accessory; can not
stands on its own stand on its own NOTES: Qualified acceptance: mere counter-offer
Needs separate Does not need separate which needs to be absolutely accepted to give rise to
consideration consideration perfected contract of sale
Subject matter and There must be subject Business ads are mere invitations to make an offer
price must be valid matter but price not except when it appears to be otherwise
important
Not conditional Conditional II. RULES GOVERNING AUCTION SALES:
Not subject to specific Subject to specific 1. Sales of separate lots by auction are
performance performance separate contracts of sale
2. Sale is perfected by the fall of the hammer
IV. RIGHT OF FIRST REFUSAL: 3. Seller has the right to bid at the auction
1. creates a promise to enter into a contract of provided such right was reserved and notice
sale and it has no separate consideration, was given to that effect
not subject to specific performance because
there is no contractual relationship here and III. EARNEST MONEY
it is not an obligation to give (not a real 1. Money given as part of purchase price
contract) 2. Acceptance is the proof that contract of sale
2. New doctrine: may be subject to specific exists
performance. 3. Nothing in law prevents parties from treating
earnest money differently
Equatorial realty Dev’t Inc. v Mayfair Theater, the 4. Old concept: subject to forfeiture when
right of first refusal is only subject to specific BUYER backs out
performance insofar as 5. New concept: can not be forfeited – part of
TIFFit(Uncompressed)
is attached to a valid written
QuickTime™ and a
decompressor
are needed to see this picture.
principal contract (e.g. lease). RFR becomes one of purchase price; must be restored
the considerations in the contract.] 6. Qualification: if old concept is stipulated –
VALID
7. Presumption of perfection of contract of sale
3. Effect of new doctrine: turned the world of
and such earnest money as part of purchase
policitacion upside down because while valid
price is disputable
option contract is not subject to specific
performance, right of first refusal which does
OPTION MONEY EARNEST MONEY
not even have a separate consideration may
be subject to specific performance

Page 134 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

Money given Part of the purchase agent (contains essential terms of the
as distinct price contract)
consideration for an 2. When there has been partial
option contract performance/execution (seller delivers with
Applies to a sale not Given only when intent to transfer title/receives price)
perfected there is already a 3. When there has been failure to object to
sale presentation of evidence (oral)
Not required to buy When given, buyer is 4. When sales are effected through electronic
bound to pay the commerce
balance
CH. 7 - CONSUMMATION STAGE/PERFORMANCE
Art. 1483. Subject to the provisions of the Statute STAGE
of Frauds and of any other applicable statute, a
contract of sale may be made in writing, or by NOTE: Stage where parties both comply with their
word of mouth, or partly in writing and partly by obligation. Nature of diligence required: diligence of a
word of mouth, or may be inferred from the good father of the family unless other requirement is
conduct of the parties. (n) stipulated
Consequence: Seller will be guilty of breach if thing is
lost through his fault
FORM OF SALES

I. Form not important in validity of sale


a. Sale being consensual, may be oral or I. Delivery of the Thing - Transfer ownership
(tradicion) covers a twin obligations of the seller
written, perfected by mere consent as to
price and subject matter which are:
b. If particular form is required under the statute 1. to transfer the ownership; and
2. to deliver a determinate thing
of frauds:
i. valid and binding between parties but
not binding to 3rd persons PNB vs. Ling, 69 Phil. 611
c. Reason: purposes of convenience only and Delivery of the thing together with the
not for validity and enforceability; cause of payment of the price, marks the consummation of the
action is granted to sue and compel other contract of sale
party to execute the document
Norkis Distributor, Inc. vs. CA 195 SCRA 694
II. When form is important for validity; The act of delivery must be coupled with the
exception by specific provision of law; intention of delivering the thing and putting the buyer
a. Power to sell a piece of land granted to an under control
agent – otherwise VOID
b. Sale of large cattle; must also be registered Addison vs. Felix, 38 Phil. 404
with Municipal treasurer – otherwise VOID The execution of a public instrument is
c. Sale of land by non-Christian if not approved equivalent to delivery. But to be effective, it is
by Governor– VOID necessary that the vendor have such control over the
III. When form is important for enforceability thing sold that, at the moment of sale, its material
(STATUTE OF FRAUDS Article 1403 (2)) delivery could have been made
a. A sale agreement which by its terms is not to
be performed within a year from the making II. Different kinds of delivery:
thereof; QuickTime™ and a
TIFF (Uncompressed) decompressor 1. Actual or real- when thing sold is placed
b. An agreement for the sale
are needed ofpicture.
to see this goods, chattels in the control and possession of the
or things in action, at a price not less than buyer
P500.00; and 2. Legal or Constructive- can take several
c. A sale of real property or of an interest forms and may be any manner signifying
therein. an agreement that the possession is
transferred from the vendor to the
IV. EXCEPTIONS TO COVERAGE OF vendee.
STATUTE IN SALES CONTRACTS:
1. When there is a note or memorandum in
writing and subscribed to by party or his

Page 135 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

III. Different forms of Constructive Delivery - 4. Such capacity should subsist for a
Constructive delivery has same legal effect reasonable time after execution of instrument
as actual or physical delivery (reasonable time depends on circumstances
of persons, places and things)
Ten Forty Realty vs. Cruz, 10 Sept. 2003
Gives rise only to a prima facie presumption of
delivery which is destroyed when actual delivery is V. Delivery of Fruits and Accessions/
not effected because of a legal impediment Accessories - Right to fruits and
accessions/accessories accrue from time
1. Traditio Longa Manu sale is perfected but no real right over it until
− Delivery of thing by mere agreement; when it is delivered
SELLER points to the property without need
of actually delivering VI. Delivery Through Carrier - General Rule:
Where the seller is authorized or required to
2. Traditio Brevi Manu send the goods to the buyer, delivery to the
− Before contract of sale, the would be buyer carrier is delivery to the buyer.
was already in possession of the would be Exceptions: a contrary intention appears or
subject matter of sale (ex: as lessee) implied reservation of ownership under pars.
1,2,3 of Art. 1503
3. Symbolic delivery
− As to movables – ex: delivery of the keys 1. FAS – FREE ALONG SIDE - When
to a car goods delivered alongside the ship, there is
already delivery to the buyer (twin effects
4. Constitutum possessarium deemed fulfilled)
− When at the time of the perfection of the
contract of sale, seller had possession of the 2. FOB - FREE ON BOARD - Shipment –
subject matter in the concept of owner and when goods are delivered at ship at point of
pursuant to the contract, seller continues to shipment; delivery to carrier by placing goods
hold physical possession no longer in the on vessel is delivery to buyer
concept of an owner but as a lessee or any − Destination – when goods reach the port
other form of possession other than in the even if not disembarked yet from the vessel,
concept of owner. there is delivery to the buyer

5. Quasi-tradition 3. CIF – COST, INSURANCE, FREIGHT


− Delivery of rights, credits or incorporeal − When buyer pays for services of carrier –
property, made by: delivery to carrier is delivery to buyer; carrier
a. Placing titles of ownership in the is agent of the buyer
hands of the buyer − When buyer pays seller the price – from
b. Allowing buyer to make use of rights moment the vessel is at port of destination,
there is already delivery to buyer.
6. Tradition by operation of law
See Arts. 1522, 1539, 1540, 1541, 1542, 1543.

IV. WHEN EXECUTION OF PUBLIC VII. COMPLETENESS OF DELIVERY


INSTRUMENT DOES NOT PRODUCE THE 1. MOVABLES
EFFECTS OF DELIVERY QuickTime™ and a a. delivery of thing plus accessories
TIFF (Uncompressed) decompressor
1. When there are isneeded
stipulation
to see this picture. to contrary, and accessions in the condition in
execution does not produce effect of delivery which they were upon the perfection
2. When at the time of execution of instrument, of the contract including the fruits
subject matter was not subject to control of b. When the seller delivers to the buyer
the seller a quantity of goods LESS than he
3. Subject matter should be within control of contracted to sell, buyer has the
seller; he should have capacity to deliver at option to reject or accept it.
the time of execution of public instrument a. When accepts with knowledge
when he wants to effect actual delivery that seller is not going to perform

Page 136 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

contract in full, he must pay at will not be adjusted


price stipulated accordingly
b. When accepts and consumes
before knowledge that buyer VIII. TIME AND PLACE OF DELIVERY
will not perform contract in full, 1. Follow stipulation in contact, or
liable only for fair value of goods 2. Follow usage in trade, or
delivered 3. Seller’s place of business or his residence
c. When seller delivers to the buyer a 4. Specific goods – place where the thing is
quantity of goods LARGER than he 5. At reasonable hour
contracted to sell the buyer has the
following options:
i. accept per contract and reject IX. EFFECTS OF DELIVERY - General Rule:
the rest The ownership of the thing sold shall be
ii. accept the whole – pay price transferred to the buyer upon the actual or
stipulated constructive delivery thereof.
iii. eject whole if subject matter is Except when the contrary is stipulated such
indivisible in the cases of:
d. When the seller delivers to the 1. contract to sell
buyer the goods he contracted to 2. sale on acceptance/approval
sell, MIXED with goods of a 3. sale or return
different description not included in
the contract, buyer has 2 options: NOTE: Who Bears Expenses of Delivery? Seller
i. accept good w/c are in
accordance with contract and X. SALE BY DESCRIPTION/SAMPLE
reject the rest 1. Sample – goods must correspond with
ii. reject goods entirely – if sample shown
indivisible 2. Description – goods must correspond
with description or sample
3. Effect if there is no compliance:
2. IMMOVABLES RESCISSION may be availed of by
a. Sold per unit or number the buyer
i. If the sale should be made with
statement of its area, rate at XI. OBLIGATIONS OF BUYER
certain price, deliver all that may 1. Pay the price
have been stated in the contract a. Buyer is obligated to pay price
if impossible, remedies of buyer: according to terms agreed upon
ii. If Less in area: regarding time, place and amount
- rescission b. If payment of interest is stipulated –
- proportional reduction of must pay; if amount of interest not
price – LACK IN AREA mentioned – apply legal rate
SHLD NOT BE LESS c. When buyer defaults – constitutes
THAN 1/10 OF AREA breach: subject to specific
AGREED UPON performance/rescission and
iii. If Greater in area: damages; interest to be paid also
- accept per stipulation and from default
reject the rest
QuickTime™ and a
TIFF-(Uncompressed)
accept whole area – pay
decompressor 2. Accept delivery of thing sold
are needed to see this picture.
at contract rate a. Where to accept: at time and place
- Not applicable to judicial stipulated in the contract; if none
sales specified – at the time and place of
iv. Sold for lump sum delivery goods; there is acceptance
- When price per unit not when:
indicated i. He intimates to seller that
- If area delivered is either he has accepted
greater or lesser – price

Page 137 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

ii. When delivered and does 2. Two or more sales transactions must
any act inconsistent with pertain to the same object or subject
ownership of seller matter;
iii. Retains without intimating 3. Two or more buyers at odds over the
to seller that he has rightful ownership of the subject matter
rejected must each represent conflicting interests;
and
3. Sale of Goods on installment 4. Two or more buyers must each have
a. Goods must be delivered in full, bought from the very same seller.
except when stipulated
b. When not examined by buyer – not accepted Consolidated Rural Bank (Cagayan Valley_ vs.
until examined or at least had reasonable CA [Jan. 17, 2005]
time to examine If not all the elements are present for Art.
1544 to aply, the priniciple of prior tempore, potior
4. Acceptance of goods in general, absent contrary jure or simply “he who is first in time is preferred in
express stipulation, does not discharge seller right” should apply. Undisputably, he is a purchaser
from liability in case of breach of warranties in good faith because at the time he bought the real
(unless no notice or failure to give it within property, there was still no sale to as a second
reasonable time) vendee.

5. When buyer has a right to refuse goods, no II. RULES ACCORDING TO 1544:
need to return; shall be considered as 1. MOVABLE
depositary; unless there is stipulation to the a. Owner is first to posses in good faith
contrary
2. IMMOVABLE
a. First to register in good faith
Art. 1544. If the same thing should have been b. No inscription, first to possess in
sold to different vendees, the ownership shall be good faith
transferred to the person who may have first c. No inscription and no possession in
taken possession thereof in good faith, if it good faith – Person who presents
should be movable property. oldest title in good faith
d. Good Faith - one who buys property
Should it be immovable property, the ownership without notice that another person
shall belong to the person acquiring it who in has a right or interest in such
good faith first recorded it in the Registry of property; one who has paid price
Property. before notice that another has claim
or interest
Should there be no inscription, the ownership
III. LIS PENDENS – notice that subject matter is
shall pertain to the person who in good faith was
in litigation
first in the possession; and, in the absence
thereof, to the person who presents the oldest
IV. ADVERSE CLAIM – notice that somebody is
title, provided there is good faith. (1473)
claiming better right

V. POSSESSION  Both actual or constructive


DOUBLEQuickTime™
SALE and a
TIFF (Uncompressed) decompressor
are needed to see this picture. VI. REGISTRATION: any entry made in the
General Rule: FIRST IN TIME, PRIORITY IN RIGHT books of the registry, including both
When does it apply: when not all requisites registration in its ordinary and strict sense,
embodied in 1544 concur. and cancellation, annotation, and even
marginal notes. It is the entry made in the
I. REQUISITES FOR DOUBLE SALES TO registry which records solemnly and
EXIST: (VOCS) permanently the right of ownership and other
1. Two or more sales transactions must real rights.
constitute valid sales; 1. registered under Torrens system 1544
applies

Page 138 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

2. not registered under the Torrens system i. evidence of existence and


1544 still applies possession of goods
described therein
Jurisprudence ii. medium by which seller is able
if 2nd sale is a judicial sale (by way of levy on to transfer possession of
execution), buyer merely steps into the shoes of the goods
judgment debtor. Outside of such situation – must 3. A document of title which states that the goods
apply to conflicting sales over the same unregistered referred to therein will be delivered to the
parcel of land bearer, or to the order of any person named in
If sale 1 occurs when land is not yet such document
registered and sale 2 is done when land is already 4. Negotiable by delivery or indorsement
registered – apply FIRST IN TIME, PRIORITY IN
RIGHT TYPES
1. NEGOTIABLE
Gabriel v. Mabanta, et al. [2003] a. deliver to bearer (negotiation by mere
Good faith must concur with registration. To delivery)
be entitled to priority, the second purchaser must not b. deliver to specific person or his order
only establish prior recording of his deed, but must (negotiation by endorsement + delivery)
have acted in good faith. i. even if face of instrument says NON-
NEGOTIABLE, it is still
NEGOTIABLE; limiting words does
CONDITION
not destroy negotiability
ii. If order instrument and no
1. Effect of Non-Fulfillment of Condition
endorsement was made – equivalent
The other party may
to assignment
a. refuse to proceed with the contract
b. proceed with the contract, waiving the
2. NON-NEGOTIABLE
performance of the condition
If the condition is in the nature of a promise that it
should happen, the non-performance of such
EFFECTS OF UNAUTHORIZED NEGOTIATION
condition may be treated by the other party as
The validity of the negotiation of a negotiable
breach of warranty.
document is not impaired by the fact that negotiation
was done in breach of duty or that the owner of the
2. Effect if buyer has already sold the goods
document was deprived of the same by loss, theft,
accident, fraud, mistake if the person to whom the
General Rule: The unpaid seller’s right to lien or
document is delivered is in good faith and without
stoppage in transitu remains even if buyer has sold
notice of the said irregularities.
the goods
Exception:
o When the seller has given consent thereto, or
Important Considerations
o When the buyer is a purchaser in good faith
1. Negotiation gives better right than
for value of a negotiable document of title.
assignment
2. Assignee takes document with defects of the
assignor
NEGOTIABLE DOCUMENTS OF TITLE
3. Obligation of bailee – bailee is immediately
See Article 1636
QuickTime™ and a
bound to the document
TIFF (Uncompressed) decompressor
1. Not creation of law but by merchants to allow
are needed to see this picture.
Warranties on Negotiation
them to deal with merchandise without having
1. the document is genuine
to physically carry them around
2. he has legal right to negotiate or transfer it
2. Pertains to specific type of movables only :
3. he has knowledge of no fact which would
GOODS
impair the validity or worth of the document
a. Documents of title serve two (2)
4. he has right to transfer title to goods and
functions:
goods are merchantable/fit

Page 139 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

b. What is void is the transfer of title/


Rules of Levy/Garnishment of Goods Covered by ownership did not pass
Documents of Title c. Effect: buyer acquired no better right
2. NON NEGOTIABLE: than transferor
a. Notification is operative act to transfer d. Legal effect: CAVEAT EMPTOR –
title/possession of goods in favor BUYER BEWARE
assignee e. Sale of co-owner of whole property
b. Before notification – can still be or definite portion
garnished GENERAL RULE:
i. co-owner sells whole property prior
3. NEGOTIABLE: to partition – sale of property itself is
a. Can not be levied or garnished when void but valid as to his spiritual share
documents are already with purchaser in ii. co-owner sells definite portion to
good faith, unless: partition – sale is void as to other co-
b. Document is first surrendered owner but valid as to his spiritual
c. Document is pounded by court share if the buyer would have still
d. Negotiation is enjoined bought such spiritual share had he
known that the definite portion sold
NEGOTIATION ASSIGNMENT would not be acquired by him.
transferor/holder acquires acquires title to goods against
title to goods transferor

bailee has direct obligation acquires right to notify bailee so II. EXCEPTIONS TO THE RULE ON THE EFFECT
to holder as if directly dealt that he acquires obligation of OF SALE OF A DEFINITE PORTION OBY A CO-
with him bailee to hold goods for him OWNER
1. Subject matter is indivisible in nature or by
intent;
2. Sale of a particular portion of a property is
SALE BY NON-OWNER OR BY ONE HAVING with consent of other co-owners;
VOIDABLE TITLE 3. Co-owner sells 1 of 2 commonly-owned
See Articles 1475, 1477, 1505, 1506 lands and does not turn over ½ of the
proceeds, other co-owner, by law and equity,
I. SALE BY NON-OWNER has exclusive claim over remaining land.
1. PERFECTION STAGE
a. Sale by owner – VALID
b. Sale by non-owner – VALID; III. RULES ON LEGAL EFFECTS OF SALE BY A
c. Reason why both sales are valid: NON-OWNER
ownership is necessary only at time GENERAL RULE: Sale by non-owner, buyer
when transfer title to goods; at acquires no better title than seller had.
perfection stage, no obligation on EXCEPTIONS:
part of seller to transfer ownership 1. Owner by his conduct is precluded
d. Law on estoppel further bolsters it: from denying seller’s authority
title passes by operation of law to (ESTOPPEL)
grantee when person who is not 2. Contrary is provided for in recording
owner of the goods sold delivers it laws (PD 1529)
and later onQuickTime™
acquires and title
a thereto 3. Sale is made under statutory power
e. SinceTIFFarevalid, action
this picture.to
(Uncompressed) decompressor
needed to see annul is of sale or under order of a
improper; there is already a court of competent jurisdiction
perfected contract 4. Sale is made in a merchant’s store in
accordance with code of commerce
2. CONSUMMATION STAGE and special laws
a. Contract of sale is valid because it
has passed perfected stage, despite
seller not being the owner or seller IV. SALE BY SELLER WITH VOIDABLE TITLE
having no authority to sell 1. PERFECTION STAGE
a. Valid sale – buyer acquires title of goods

Page 140 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

o Seller cannot anymore comply with


2. CONSUMMATION STAGE obligation so buyer cannot anymore be
a. Valid sale – if title has not yet been compelled
avoided, buyer buys goods under following
condition: 3. AFTER PERFECTION BUT BEFORE
o in good faith DELIVERY
o for value o Loss – confused state
o without notice of seller’s defect of o Paras: BUYER
title o Tolentino: SELLER
o Deterioration and fruits - Buyer
V. TITLE AS TO MOVABLE PROPERTIES bears loss;
GENERAL RULE: Possession is equivalent
to title 4. AFTER DELIVERY
Requisites: Possession of movable and o Res perit domino
Good Faith o Delivery extinguishes ownership vis-
a-vis the seller and creates a new
VII. EXCEPTIONS: one in favor of the buyer
1. Owner lost movable – owner can recover w/o
reimbursing price
2. Owner is unlawfully deprived – owner can REMEDIES OF PARTIES FOR BREACH OF
recover w/o reimbursing price CONTRACT OF SALE
See Articles 1594-1596. 1484-1486, 1592
VIII, EXCEPTIONS TO THE EXCEPTIONS:
− movable is bought at public sale – owner SUBJECT MATTER: MOVABLES (IN GENERAL)
can only recover after reimbursing price
− acquired in good faith and for value from Remedies of Unpaid Seller
auction GENERAL RULE: Any man may not take law in his
own hands, must seek remedy through courts
EXCEPTION:
LOSS, DETERIORATION, FRUITS and OTHER − DOCTRINE OF SELF HELP
BENEFITS − SPECIAL REMEDIES
See Articles 1493 and 1494 Requisites:
1. Subject matter – goods
Legal consequences from point of perfection are the 2. Seller is unpaid – not completely paid
same in both legal systems: upon perfection of an or received negotiable instrument
unconditional contract of sale involving specific or under a condition and condition has
determinate subject matter, the risk of loss been breached by reason of
deterioration and the benefits of fruits and dishonor
improvements, were fro the account of the buyer. 3. Physical possession is with seller

The following are the special remedies of unpaid


WHO BEARS RISK OF LOSS/ DETERIORATION/ seller
FRUITS: 1. possessory lien
1. BEFORE PERFECTION 2. stoppage in transitu
a. Res perit domino 3. special right of re-sale
b. Owner is seller so seller bears risk of
QuickTime™ and a 4. special right to rescind
loss TIFFare(Uncompressed) decompressor
needed to see this picture.

NOTE: Hierarchical Application - only when unpaid


2. AT PERFECTION seller has exercised possessory lien or stoppage in
o Res perit domino transitu can the seller proceed with his other special
o Contract is merely inefficacious rights of resale or to rescind.
because loss of the subject matter
does not affect the validity of the I. Possessory Lien
sale 1. Seller not bound to deliver if buyer has not
paid him the price

Page 141 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

2. Right to retain; cannot be availed when seller why special? there are things which seller cannot
does not have custody do in ordinary sale:
3. Exercisable only in following circumstances:
a. goods sold without stipulation as to credit 1. ownership is with buyer but seller can
b. goods sold on credit but term of credit sell goods
has expired 2. title accorded to buyer is destroyed
c. buyer becomes insolvent even without court intervention
d. When part of goods delivered, may still
exercise right on goods undelivered
IV. Special Right to Rescind
Instances when possessory lien lost: 1. Expressly stipulated
1. seller delivers goods to carrier for 2. Buyer is in default for unreasonable time
transmission to buyer without reserving 3. Notice needed to be given by seller to buyer
ownership in goods or right to possess them
2. buyer or his agent lawfully obtains why special? – ownership of goods already with
possession of goods buyer but seller may still rescind; ownership is
3. waiver destroyed even without court intervention but in
4. loses lien when he parts with goods (still has ordinary sale, need to go to court to destroy transfer
stoppage in transitu) of ownership
5. notice by seller to buyer not essential
Remedies of Buyer
II. Stoppage In Transitu When Seller fails to deliver, buyer may seek
− Goods are in transit SPECIFIC PERFORMANCE WITHOUT GIVING
− Requisites when goods are in transit SELLER OPTION TO RETAIN GOODS ON
1. From the time goods are delivered to PAYMENT OF DAMAGES
carrier for purpose of transmission to
buyer
2. Goods rejected by buyer and carrier SALE OF MOVABLES ON INSTALLMENT
continues to possess them
Remedies of Unpaid Seller (1484)
When goods no longer in transit 1. Exact fulfillment should the buyer fail to pay.
1. Reached point of destination 2. Cancel the sale if buyer fails to pay 2 or more
2. Before reaching destination, buyer obtains installments.
delivery of the goods 3. Foreclose on chattel mortgage if buyer fails to
3. Goods are supposed to have been delivered pay 2 or more installments
to buyer but carrier refused
4. Shown by seller that buyer is insolvent Incidents:
(failure to pay when debts become due ) 1. If buyer chooses foreclosure, no further
action against buyer to recover any unpaid
balance of the price
How is right exercised 2. When is the law applicable? Sale on
1. Obtain actual possession of goods movables by installment
2. Give notice of claim to carrier / bailee in o Sale on installment: payment by
possession thereof several partial payments in small
3. Notice by seller to buyer is not required; amount
notice to carrier is essential
QuickTime™ and a
4. Rationale of the law: Buyer is lulled into
TIFF (Uncompressed) decompressor
are needed to see this picture.
thinking that he could afford because of
small amounts per installment and
III. Special Right to Resell the Goods at the same time remedy abuse of
1. goods are perishable commercial houses
2. stipulated the right of resale in case buyer 5. Nature of remedies: alternative and not
defaults in payment cumulative
3. buyer in default for unreasonable time 6. Coverage: sale and financing transaction
4. notice by seller to buyer not essential and contracts of lease with option to
purchase
7. Action : Judicial and Extrajudicial

Page 142 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

o Specific Performance IMMOVABLES (BY INSTALLMENT)


i. If already chose specific Article 1592 – Applies only to contract of sale
performance, can no longer
choose other remedies I. Maceda Law
Except: after choosing, it has 1. applies to COS and CTS and Financing
become impossible, rescission may 2. Coverage: REAL ESTATE – defined space vs.
be pursued CONDO – not defined space (w/ common
b. Rescission areas)
- When chosen, there is 3. Excluded:
correlative obligation to a. Industrial
restitute b. Commercial
- But stipulation that c. Sale to tenants under agrarian laws
installments paid are
forfeited are valid if not Rights Granted to Buyers:
unconscionable
- Deemed chosen when: o Buyer paid at least 2 years installment
o Notice of rescission is 1. Pay without interest the balance within
sent grace period of 1 month for every year of
o Takes possession of installment payment
subject matter of sale 2. Grace to be exercised once every 5
o Files action for years
rescission 3. When no payment - cancelled; buyer
Barring effect on recovery of entitled to 50% of what he has paid + if
balance after 5 years of installments, 5% for
every year but not to exceed 90% of total
3. Foreclosure payments made
i. Barring effect on recovery of 4. Cancellation to be effected 30 days from
balance notice and upon payment of cash
ii. Extent of barring effect: purchase surrender value
price
iii. Exception: mortgagor refuses to o Buyer paid less than 2 years installment
deliver property to effect 1. 1st Grace period is 60 days from date
foreclosure, recover also installment became due
expenses incurred in attorneys 2. 2nd grace period of 30 days from notice of
fees, etc. (Perverse Buyer- cancellation/demand for rescission
Mortgagor) ƒ buyer can still pay within the 30
day period
ƒ with interest
IMMOVABLES (IN GENERAL) ƒ No payment after 30 day period,
can cancel.
Remedies of Seller
Anticipatory breach Purpose of law - Protect buyers in installments
1. Seller has reasonable grounds to fear loss of against oppressive conditions
immovable sold and its price, sue for
RESCISSION Notice needed - waiver thereof if oppressive
2. Non–payment of price, sue for RESCISSION
QuickTime™ and a
TIFF (Uncompressed) decompressor Applies to contracts even before law was
are needed to see this picture.
Remedies of Buyer enacted
1. In case of subdivision or condo projects, − Stipulation to contrary is void
suspend payment.
2. If real estate developer fails to comply with Other rights:
obligation according to approved plan: o Sell rights to another
- RESCIND o Reinstate contract by updating during
- SUSPEND PAYMENT UNTIL SELLER grace period and before actual
COMPLIES cancellation
o Deed of Sale to be done by notarial act

Page 143 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

o To pay in advance any installment or the 4. when breached, seller is liable for damages
full balance of price anytime without
interest Implied Warranties
o Have full payment annotated in certificate Deemed included in all contracts of sale whether
of title parties are actually aware or not, whether they were
intended or not; by operation of law
REMEDY OF RESCISSION IN CONTRACTS
COVERING IMMOVABLES 1. warranty that seller has a right to sell
See Articles 1191, 1592 o refers to consummation stage since in
consummation stage, it is where
o Nature: Judicial ownership is transferred by tradition
o Extra judicial Rescission o not applicable to sheriff, auctioneer,
a. allowed if stipulated; burden to sue shifts mortgagee, pledge
to party who does not like rescission
b. court still has final say as to propriety of 2. warranty against eviction
rescission a. implied, unless contrary provision appears in
c. Forfeiture of amounts valid being in contract
nature of penal clause b. when ownership is transferred, buyer shall
o Contract of Sale – Rescission is Applicable enjoy the legal and peaceful possession of
o Contract to Sell – Rescission not Applicable the thing
ƒ Non–payment of purchase price would c. Requisites of breach of warranty against
automatically cancel even without further eviction:
action for rescission - buyer is evicted in whole or in part
ƒ Except: If subject matter is residential from the subject matter of sale
lots, law on rescission applies when - there is a final judgement
there is substantial breach. Maceda law - basis of eviction is a right prior to
applies. sale or an act imputable to vendor
- seller has been summoned in the
CONDITION and WARRANTIES suit for eviction at the instance of
See Articles 1545-1547 buyer; or made 3rd party defendant
through 3rd party complaint brought
I. Condition by buyer
1. When a contract contains a condition, the non
happening of which would not constitute a breach Vendor’s liability shall consists of (Total
but extinguishes the obligation Eviction)(VICED)
2. However, if party to the sales contract has 1. Value of the thing at the time of eviction;
promised that the condition should happen or be 2. Income or fruits if he has been ordered to deliver
performed, the non-performance of which may be the to the party who won the suit
treated by parties as breach 3. Cost of the suit
4. Expenses of the contract; and
II. Warranties 5. Damages and interests if the sale was in bad
A statement or representation made by the seller faith
contemporaneously and as a part of the contract of
sale, having reference tot eh character, quality, or Partial Eviction
title of the goods, and by which he promises or 1. to enforce vendor’s liability for eviction
undertakes to insure that certain facts are or shall be
QuickTime™ and a
(VICED); or
as he then representsTIFFare(Uncompressed) decompressor
needed to see this picture.
2. to demand rescission of contract.

a. no appeal needed nor a need for


Express Warranties ( requisites ): buyer to resist eviction for right to
1. it must be an affirmation of fact or any promise by accrue; it is enough that the
seller relating to the subject matter of sale aforementioned requisites are
2. natural tendency of affirmation or promise is to complied with
induce buyer to purchase subject matter b. warranty cannot be enforced until
3. buyer purchases the subject matter relying aforementioned requisites concur
thereon

Page 144 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

c. applies to judicial sale; judgment c. seller is aware – seller should return price
debtor responsible for eviction unless and refund expenses of contract with
otherwise decreed in judgment damages
d. vendor not liable for eviction if d. seller is not aware - seller should return
adverse possession had been price and interest and refund expenses ( no
commenced before sale but damages )
prescriptive period is completed after e. buyer may elect between withdrawing from
transfer contract or demanding proportionate
e. Rights of buyer when deprived of reduction of price with damages in either
only part of the subject matter but case
would not have bought such part if f. applicable to judicial sale except that
not in relation for the whole: judgment debtor not liable for damages
1. Rescission g. action to prescribe 6 months from delivery of
2. Mutual restitution subject matter

3. warranty against encumbrances (non- 5. defects on animals


apparent) a. even in the case of professional inspection
o Requisites: but hidden defect is of such nature that
a. immovable sold is encumbered expert knowledge is not sufficient to discover
with non–apparent burden or it - defect shall be considered as
servitude not mentioned in the REDHIBITORY
agreement b. if vet fails to discover through ignorance or
b. nature of non–apparent servitude bad faith he is liable for damages
or burden is such that it must be c. sale of animals on teams (2 or more)
presumed that the buyer would - when only one is defective, only one is
not have acquired it had he been redhibited and not the others
aware thereof - exception: when it appears buyer would
c. when breach of warranty exist: buyer not have purchased the team without the
may ask for rescission of indemnity defective one
d. warranty not applicable when non– - apply to sale of other things
apparent burden or servitude is d. animals at fair or public auction
recorded in the Registry of Property - no warranty against hidden defects
– unless there is express warranty e. sale of animals with contagious disease is
that the thing is free from all void
burdens and encumbrances f. sale of unfit animals
- void if use / service for which they are
4. warranty against hidden defects acquired has been stated in the contract
o SELLER does not warrant patent and they are found to be unfit therefor
defect; caveat emptor o prescription of action:40 days from date of
o Except when hidden delivery to buyer
1. subject matter may be movable o if sale is rescinded, animals to be returned in
or immovable same condition when they were acquired;
2. nature of hidden defect is such buyer shall answer for injury / loss due to his
that it should render the subject fault
matter unfit for the use of which it - buyer may elect between withdrawing
was intended or should diminish
QuickTime™ and a
from sale and demanding proportionate
its fitness
TIFF (Uncompressed) decompressor
are needed to see this picture.
reduction of price with damages in either
3. had the buyer been aware, he case
would not have acquired it or
would have given a lower price
a. when defect is visible or even if not visible Specific Implied Warranties in the Sale of Goods
but buyer is an expert by reason of his trade Warranty as to fitness and quality; requisites:
or profession, seller is not liable 1. Buyer makes known to seller the particular
b. obligation of seller for breach depends on purpose for which goods are acquired
whether he has knowledge of such defect or and it appears that the buyer relied on the
not seller’s skill or judgment

Page 145 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

2. Goods are bought by description from seller 1. Accept goods and set up breach of warranty
who deals in goods of that description by way of recoupment in diminution or
3. in case of sale of specified article under its extinction of the price.
patent or trade name, no warranty unless 2. Accept goods and maintain action against
there is a stipulation to the contrary seller for damages
4. measure of damage: difference between value 3. Refuse to accept goods and maintain action
of goods at time of delivery and value they against seller for damages
would have had if they had answered to the 4. Rescind contract of sale and refuse to receive
warranty goods/return them when already received.

Sale of Goods by sample When rescission by buyer not allowed:


If seller is a dealer in goods of that kind, there is an 1. if the buyer accepted the goods knowing the
implied warranty that the goods shall be free from breach of warranty WITHOUT protest
defect rendering them unmerchantable which would 2. if he fails to notify the seller within a reasonable
not be apparent on reasonable examination of the time of his election to rescind
sample 3. if he fails to return or offer to return the goods in
substantially as good condition as they were in at
− Effects of Waiver the time of the transfer of ownership to him
o Waiver in Warranty against eviction -
Parties may increase or diminish implied EXTINGUISHMENT
warranty against eviction; but effect See Arts. 1600 -1623
depends on good faith or bad faith on the
part of the seller. I. Grounds (same grounds whereby
1. Seller in bad faith and there is obligations in general are extinguished)
waiver against eviction – null and 1. payment or performance
void 2. loss of the subject matter
2. buyer without knowledge of a 3. condonation or remission
particular risk, made general 4. confusion or merger of rights of creditor
renunciation of warranty – not and debtor
waiver but merely limits liability 5. compensation
of seller in case of eviction (pay 6. novation
value of subject matter at time of 7. annulment
eviction) 8. rescission
3. buyer with knowledge of risk of 9. fulfillment of a resolutory condition
eviction assumed its 10. prescription
consequences and made a
waiver – vendor not liable II. Conventional redemption
(applicable only to waiver of 1. only extinguishes obligations pertaining
warranty against eviction) to contract of sale, not extinguish
4. waiver to a specific case of contract itself; only applies to contract of
eviction - wipes out warranty as sale
to that specific risk but not as to 2. The right which the vendor reserves to
eviction caused by other himself to reacquire the property sold
reasons. provided he returns to the vendee:
a. the price of the sale,
Waiver against Hidden Defects QuickTime™ and a
b. expenses of contract,
1. If there has TIFF been a stipulation
(Uncompressed) decompressor exempting
are needed to see this picture.
c. other legitimate payments,
seller from hidden defects d. he necessary and useful expenses
2. If seller not aware of hidden defects – loss of made on the thing sold
the thing due to such defect will not make e. and fulfills other stipulations which
seller liable may have been agreed upon
3. If seller aware – waiver is in bad faith, thus 3. The right is exercised only be seller in
seller still liable whom right is recognized in the contract
or by any person to whom right was
Buyer’s Option in Case of Breach of Warranty transferred; must be in the same contract

Page 146 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

III. Legal redemption merely for speculation,


1. Only applies to contracts of sale. owner of adjoining land can
2. The right to be subrogated upon the redeem
same terms and conditions stipulated in b. 2 or more owners of
the contract, in the place of one who adjoining lot desire to
acquires the thing by (1) purchase OR exercise right to redeem,
(2) by dation in payment OR (3) by other owner whose intended use is
transaction whereby ownership is best justified shall be
transmitted by onerous title. preferred.
3. Types of Legal Redemption: d. sale of credit in litigation
a. among co-heirs i. when a credit or other
i. any of the heirs sell his incorporeal right in litigation is
hereditary rights to stranger sold, debtor shall have a right to
before partition extinguish it by reimbursing the
ii. any of the co-heirs may be assignee for the price the latter
subrogated to the rights of the paid therefor plus judicial costs,
purchaser by redeeming said interest
hereditary right: reimburse buyer ii. debtor may exercise right within
of the price of the sale 30 days from the date assignee
iii. co-heirs has 1 month from demands payment from him
receipt of notice in writing
b. among co-owners
4. Other Instances When Right of Legal
i. any or all of co-owners sells their
Redemption is Granted
shares to 3rd person
a. Redemption of homesteads
ii. any co-owner may exercise right
b. Public Land Act
of redemption by paying
c. Land acquired under free patent
reasonable price of property to
homestead subject to repurchase by
the buyer
wife, legal heirs within 5 years from
iii. if 2 or more co-owners desire to
date of conveyance granted by law,
exercise right of redemption,
need not be stipulated
they may only do so in proportion
to the share they respectively
5. Redemption in tax sales
have in thing owned in common
a. in case of tax delinquency/failure to
c. among adjoining owners
pay tax assessments, property is
i. rural land
foreclosed
a. where piece of rural land has
b. delinquent payer has 1 year from date
an area not exceeding 1
of sale to redeem by paying to the
hectare, adjoining owner has
revenue District Officer the amount of
right to redeem unless
tax delinquencies, and interest or
grantee does not own a rural
purchase price.
land
b. if two or more adjacent lot
6. Redemption by judgment debtor - 1 year
owners desire to exercise
from date of registration of certificate of
right to redeem, owner of
sale to redeem by paying purchaser at
adjoining lot with smaller
public auction with interest
areaQuickTime™
shall be and a
preferred
c.TIFFarif(Uncompressed)
two or more adjacent lit
decompressor
e needed to see this picture. 7. Redemption in extrajudicial foreclosure - 1
owners desire to exercise year from date of sale and registration
right to redeem and both
have same lot area, one who 8. Redemption in judicial foreclosure of
mortgage - no right to redeem is granted to
first requested shall be
granted debtor mortgagor except when mortgagee
is bank of a banking institution 90 days
ii. urban land
after finality of judgment
a. when piece of land is small
and cannot be used for any 9. When Period of Redemption Begins to Run
practical purpose and bought - Right of legal pre-emption of redemption

Page 147 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

shall be exercised within 30 days from c. upon or after expiration of right to


notice by the seller repurchase, another instrument
extending the period of redemption
10. How exercised - tender of payment is not
or granting new period is executed
necessary; offer to redeem is enough.
d. buyer retains for himself a part of
a. There is no prescribed form for an
the purchase price
offer to redeem to be properly
e. seller binds himself to pay taxes on
effected. Hence, it can either be
thing sold
through a formal tender with
f. real intention of parties is to secure
consignation of the redemption
the payment of a debt or
price within the prescribed period.
performance of other obligation
What is paramount is the availment
of the fixed and definite period
NOTE: In case of doubt – in determining whether it is
within which to exercise the right of
an equitable mortgage or a sale a retro, the sale shall
legal redemption.
be construed as an equitable mortgage.
b. deeds of sale are not to be recorded
in Register of Deeds unless
accompanied by affidavit of seller 2. What to Look for in Determining Nature
that he has given notice to all of Contract
possible redemptioners a. language of the contract
b. conduct of parties – to reveal real
NOTE: Written notice under Art. 1623 is mandatory intent
for the right of redemption to commence (PSC vs.
Sps. Valencia, 19 Aug. 2003). Thus, the General 3. Remedy available to vendor: ask for
Rule is that actual knowledge notwithstanding, reformation of contract
written notice is still required Except when actual
knowledge is acquired by co-heirs living in same land 4. Rationale behind provision on Equitable
with purchaser, or co-owner was middleman in sale Mortgage:
to 3rd party. a. Circumvention of usury law
b. Circumvention of prohibition against
pactum commissorium – creditor
Etcuban vs. CA, et. al. 148 SCRA 507 – Art. 1623 cannot appropriate the things given
does not prescribe any distinctive method for notifying by way of pledge or mortgage;
the redemptioner remedy here is foreclosure. The real
intention of parties is that the
IV. Option to Purchase - Right to repurchase pretended purchase price is money
the thing sold granted to the vendor in a loaned and to secure payment of the
separate instrument from the deed of sale loan, sale with pacto de retro is
drawn up
V. Equitable Mortgage 5. Period of Redemption
a. No period agreed upon – 4 years
from date of contract
Cachola vs. CA, 208 SCRA 496
One which lacks the proper b. Period agreed upon – should not
exceed 10 years; if it exceeded, valid
formalities, form of words, or other requisites
prescribed by law for a mortgage, but shows the only for the first 10 years.
intention of the parties to make the property subject c. When period to redeem has expired
QuickTime™ and a and there has been a previous suit
of the contract as security for
TIFF (Uncompressed)a debt and contains
decompressor
are needed to see this picture.
on the nature of the contract – seller
nothing impossible contrary to law.
still has 30 days from final judgment
on the basis that contract was a sale
1. A contract with right to repurchase is with pacto de retro:
deemed to be an equitable mortgage if
d. Rationale: no redemption due to
the following requisites concur (IPERTI): erroneous belief that it is equitable
a. price of sale with right to repurchase mortgage which can be extinguished
is unusually inadequate
by paying the loan.
b. seller remains in possession as
lessee or otherwise

Page 148 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

e. This refers to cases involving a may compel the vendor to redeem the
transaction where one of the parties whole thing
contests or denies that the true 2. When an undivided thing is sold by co-
agreement is one of sale with the owners / co-heirs, vendors a retro may
right to repurchase; not to cases only exercise his right over his respective
where the transaction is conclusively share; vendee a retro may demand that
a pacto de retro sale. they must come to an agreement first
f. Example: Where a buyer a retro and may not be compelled to consent to
honestly believed that he entered a partial redemption
merely into an equitable mortgage, 3. When rights of co-owners over an
not a pacto de retro transaction, and undivided thing is sold as regards to their
because of such belief he had not own share – vendee retro cannot compel
redeemed within the proper period. one to redeem the whole property
4. Should one of the co-heirs/co-owners
NOTE: When period has expired and seller allowed succeed in redeeming the property –
the period of redemption to expire – seller is at fault such vendor a retro shall be considered
for not having exercised his rights so should not be as trustee with respect to the share of
granted a new period the other co-owners/co-heirs.

Paez vs. Magno IX. Fruits


Tender of payment is SUFFICIENT to compel 1. what controls is the stipulation between
redemption, but is not in itself a payment that relieves parties as regards the fruits; if none:
the vendor from his liability to pay the redemption a. at time of execution of the sale a
price retro there are visible or growing
fruits – there shall be no pro-rating
at time of redemption if no
VI. Effect when There is No Redemption indemnity was paid by the vendee a
Made retro
1. jurisprudence before the NCC: buyer a b. at time of execution sale a retro
retro automatically acquires full there be no fruits but there are fruits
ownership at time of redemption – pro-rated
2. under present art 1607: there must be between vendor a retro and vendee
judicial order before ownership of real a retro giving the vendee a retro a
property is consolidated in the buyer a part corresponding to the time he
retro possessed the land.

VII. How is Redemption Effected PRE-EMPTION REDEMPTION


1. Seller a retro must first pay the following:
a. the price of the thing sold 1. Arises before sale Arises after sale
b. expenses of the contract and other
2. No rescission There can be rescission
legitimate payments made by reason because no sale exists of the original sale
of the sale yet
c. necessary and useful expenses
made on the thing sold 3. The action is directed Action is directed against
d. Valid tender of payment is sufficient against prospective buyer
e. Mere sending of notice
QuickTime™ and a without valid seller
TIFF (Uncompressed) decompressor
tender is insufficient
are needed to see this picture.

f. Failure to pay useful and


unnecessary expenses entitles ASSIGNMENT
vendee to retain land unless actual See Arts . 1624 – 1634
reimbursement is made
I. ASSIGNMENT: The owner of a credit
VIII. In Case of Multi-Parties transfers to another his rights and actions in
1. When an undivided thing is sold because consideration of a price certain in money or its
co- owners cannot agree that it be equivalent
allotted to one of them – vendee a retro

Page 149 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

1. transfers the right to collect the full value a. Payment to the original creditor is
of the credit, even if he paid a price less valid and debtor shall be released
than such value from his obligation
2. transfers all the accessory rights (e.g. 2. After Notice
guaranty, mortgage, pledge, preference) a. Payment to the original creditor is
3. debtor can set up against the assignee not valid as against the assignee
all the defenses he could have set up b. He may be made to pay again by
against the assignor the assignee

VI. Warranties of the assignor of credit


II. What Makes Assignment Different From
1. NO warranty against hidden defect -
Species Sale?
N/A because intangibles has no
physical existence
2. He warrants the existence and legality
1. Technical term but basically a sale of credit - there is warranty except
2. Sale of credits and other incorporeal when expressly sold as a doubtful
things account
a. NO warranty as to the solvency of
III. Effects of Assignment debtor unless it is expressly
1. lack of knowledge or consent of debtor stipulated OR unless the
not essential for validity but has legal insolvency was already existing
effects
and of public knowledge at the
2. assignment of rights made w/o time of the assignment
knowledge of debtor – debtor may b. warranty shall last for 1 year only
set up against assignee the
c. one who assigns inheritance right
compensation w/c would pertain to w/o enumerating rights shall be
him against assignor of all answerable for his character as
credits prior to assignment and of later
an heir
ones until he had knowledge of the d. one who sells whole of certain
assignment rights for a lump sum, shall be
3. debtor has consented to assignment –
answerable for legitimacy of the
cannot set up whole in general but not for each
4. compensation unless assignor was of the various parts
notified by debtor that he reserved his
right to the compensation
VII. Breach of Warranty: Liabilities of the
5. debtor has knowledge but no consent -
assignor of credit for violation of his
may still set up compensation of
warranties
debts previous to assignment but not 1. Assignor in good faith
the subsequent ones.
a. Liability is limited to price
received, expenses of the
IV. Transfer of Ownership contract and other legitimate
1. by tradition and not by perfection
payments made by reason of the
2. by execution of public instrument assessment
because intangibles cannot be 2. Assignor in bad faith
physically transferred
a. Liable ALSO for (expenses of
3. Without necessity of delivering the contract and other legitimate
document evidencing
TIFF (Uncompressed) the credit.
QuickTime™ and a
decompressor payments plus useful and
4. This rule does not apply to negotiable
are needed to see this picture.
necessary expenses) damages
documents and documents of title
which are governed by special laws.
VIII. Assignment of Credit or Incorporeal Right
in Litigation - Requisites:
V. Effect of payment of debtor after 1. There must be a sale or assignment of
assignment of credit credit
1. Before Notice of the Assignment
2. There must be a pending litigation
3. The debtor must pay the assignee:
a. price paid by him AND

Page 150 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

b. judicial costs incurred by him AND


c. interest on the price from the date of IV. When sale or transfer NOT covered by
payment Bulk Sales Law:
4. The right must be exercised by the 1. If the transfer is in the ordinary course of
debtor within 30 days from the date the trade and the regular prosecution of the
assignee demands (judicially or extre- business of the vendor
judicially) payment from him 2. If it is made by one who produces and
delivers a written waiver of the provisions
NOTE: Presumption: buyer’s purpose is speculation of the Bulk Sales Law from its creditors
and; law would rather benefit the debtor of such 3. If it is made by an executor,
credits rather than the one who merely speculates for administrator, receiver, assignee in
profit. insolvency, or public officer, acting under
judicial process (Section 8); and
NOTE: When credit or incorporeal right in litigation is 4. If it refers to properties exempt from
assigned or sold, debtor has a right to extinguish it by attachment or execution (ROC, Rule 39,
reimbursing the assignee for the price the buyer paid Sec. 12)
plus interest
V. Protection accorded to creditors by Bulk
IX. Right to redeem by debtor not available in Sales Law:
the following instances (not considered 1. It requires the vendor, mortgagor,
speculative transferor, or assignor to deliver to the
vendee, mortgagee, or to his or its agent
1. assignment of credit / incorporeal right
or representative a sworn written
to co-heir or co-owner; the law does
statement of names and addresses of all
not favor co-ownership
creditors to whom said vendor, etc. may
2. assignment to creditor in payment for
have been indebted together with the
his credit
amount due or to be due (Section 3)
a. presumption is that the
2. It requires the vendor, mortgagor,
assignment is above suspicion;
transferor, or assignor, at least 10 days
assignment is in the form of
before the sale, transfer, mortgage,
dacion en pago, thus perfectly
assignment to make a full detailed
legal
inventory showing the quantity and the
3. assignment to possessor of tenement
cost of the price, terms and conditions of
or piece of land which is subject
the sale, etc. (Sec. 5)
to the right in litigation assigned
a. purpose is to presumably
VI. Duty of seller to perform the following
preserve the tenement
when transaction is within the coverage
of law
1. make sworn statement of listing of
BULK SALES LAW
creditors
2. delivery of sworn statement to buyer
I. Purpose: Protect creditor of merchant
3. apply the proceeds pro-rata to claims of
stores.
creditors shown in verified statement
4. written advance disclosure to creditors
II. When sale or transfer in bulk? - Any sale,
transfer, mortgage, or assignment
VII. Effects of False Statements in the
1. of goodsTIFFother than inandordinary
QuickTime™ a
(Uncompressed) decompressor
course
Schedule of Creditors
of business
are needed to see this picture.
1. Without knowledge of buyer
2. of all or substantially all of business
a. If the statement is fair upon its face
3. of all or substantially all of fixtures and
and the buyer has no knowledge of
equipments
its incorrectness and nothing to put
him on inquiry about it, he will be
III. Should cover only merchants because
protected in its purchase
creditors cannot get adequate security
b. The remedy of the creditor is not
because goods are sold ordinarily in
against the goods but to prosecute
course of business
the seller criminally

Page 151 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

2. With knowledge or imputed personally liable to the creditors for


knowledge of buyer value of it.
a. The vendee accepts it at his peril
b. The sale is valid only as between
the vendor and the vendee but void X. Effects of Non-Compliance
against the creditors
3. With names of certain creditors Failure to On On Seller
without notice are omitted from the list Transaction
a. The sale is VOID as to such Prepare and deliver Fraudulent and Criminal
creditors, whether the omission was sworn listing of void Liability
fraudulent or not. creditors
4. With respect to an innocent Apply proceeds pro- Fraudulent and Criminal
purchaser for value from the original rata to listed creditors void Liability
purchaser Make advance written Not void No Criminal
a. An IPV from the original purchaser disclosure of Liability
is protected transactions to
b. However if the circumstances are creditors
such as to bind the subsequent Register sworn Not void No Criminal
purchaser with constructive notice statement with DTI Liability
that the sale to the vendor (original Include or omit names Void Criminal
purchaser) was fraudulent, the of creditors and Liability
property will be liable in his hands to correct amount due in
creditors of the original vendor the statement
Sale for no Void Criminal
VIII. Effects of violation of Law on Transfer consideration Liability
1. As between parties
a. The Bulk Sales Law does NOT in
any way affect the validity of the
transfer as between the
intermediate parties thereto
b. A sale not in compliance with the
Bulk Sales Law is valid against all
persons other than creditors
2. As against creditors
a. A purchaser in violation of the law
acquires no right in the property
purchased as against the creditors
of the seller
b. His status is that of a trustee or
receiver for the benefit of the
creditors of the seller; as such, he is
responsible for the disposition of the
property

IX. Remedies available to creditors


1. The proper remedy is one against the
QuickTime™ and a
goods toTIFF
subject them
(Uncompressed) to the payment of
decompressor
are needed to see this picture. Anti-Dummy Law
the debt, such as execution,
attachment, garnishment, or by a I. Penalizes Filipinos who permit aliens to
proceeding in equity use them as nominees or dummies
2. An ordinary action against the to enjoy privileges reserved only for
purchaser to obtain money judgment will Filipinos.
NOT lie, unless the purchaser has sold II. Management, operation as officers,
or otherwise disposed of, or dealt with employees or laborers.
the property, so as to become III. Includes Control or non-control positions.

Page 152 of 297


Civil Law Summer Reviewer
ATENEO CENTRAL BAR OPERATIONS 2007

QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.

Page 153 of 297