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Appendix B Topical Index (The Topical Index presents in outline form the manner by which the Law on Sales

is discussed in the book, and serves as a syllabus for classroom discussions. T he xs in the outline represent cases which need no extended discussions either be cause the essence of their rulings are already summarized in the outline or they contain similar rulings as other cases to be discussed. Unless otherwise indica ted, the numbered articles refer to articles of the Civil Code of the Philippine s) I. The Nature of Sale A. Definition of Sale (Art. 1458) Sale is a contract by which one of the contracting parties obligates himself to transfer the ownership and to deliver possession, of a determinate thing, and th e other to pay therefor a price certain in money or its equivalent. xCruz v. Fer nando, 477 SCRA 173 (2005). 1. Elements of Sale Elements of sale: (a) consent or meeting of the minds; (b) determinate subject m atter; and (c) price certain in money or its equivalent. xNavarra v. Planters De v. Bank, 527 SCRA 562 (2007). Absence of any essential elements negates a sale xDizon v. CA, 302 SCRA 288 (199 9), even when earnest money has been paid. Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006). Sale being a consensual contract, its essential elements must be proven xVillanu eva v. CA, 267 SCRA 89 (1997); but once proven, a sales validity is not affected by a previously executed fictitious deed of sale xPealosa v. Santos, 363 SCRA 545 (2001); and the burden is on the other party to prove otherwise. xHeirs of Erne sto Biona v. CA, 362 SCRA 29 (2001). 2. Stages of Contract of Sale Policitacion covers period from the time the prospective contracting parties ind icate interest in the contract to the time the contract is perfected. Perfection takes place upon the concurrence of the essential elements, which are the meeti ng of the minds of the parties as to the object of the contract and upon the pri ce. Consummation begins when the parties perform their respective undertakings, culminating in the extinguishment thereof. xSan Miguel Properties Philippines, I nc. v. Huang, 336 SCRA 737 (2000). 3. Sale Creates Real Obligations To Give (Art. 1165) 4. Essential Characteristics of Sale: a. Nominate and Principal A contract of sale is what the law defines it to be, taking into consideration i ts essential elements, and not what the contracting parties call it. xSantos v. Court of Appeals, 337 SCRA 67 (2000). b. Consensual (Art. 1475) A contract of sale is not a real, but a consensual contract, and becomes valid a nd binding upon the meeting of the minds of the parties as to the object and the price, that: Upon its perfection, the parties may reciprocally demand performance. xHeirs of Venancio Bejenting v. Baez, 502 SCRA 531 (2006); subject only to the provisions o f the law governing the form of contracts. xCruz v. Fernando, 477 SCRA 173 (2005 ). It remains valid even if parties have not affixed their signatures to its writte n form xGabelo v. CA, 316 SCRA 386 (1999), or the manner of payment is breached. xPilipinas Shell Petroleum Corp v. Gobonseng, 496 SCRA 305 (2006). The binding effect of sale is based on the principle that the obligations arisin g therefrom have the force of law between the parties. xVeterans Federation of t he Philippines v. Court of Appeals, 345 SCRA 348 (2000). Perfection Distinguished from Demandability Not all contracts of sale become aut omatically and immediately effective. In sales with assumption of mortgage, ther e is a condition precedent to the sellers consent and without the approval of the mortgagee, the sale is not perfected. xBian Steel Corp. v. Court of Appeals, 391

SCRA 90 (2002). No Contract Situation versus Void Contract Absence of consent (i.e., complete meetin g of minds) negates the existence of a perfected sale. xFirme v. Bukal Enterpris es and Dev. Corp., 414 SCRA 190 (2003). The contract then is null and void ab in itio, absolutely wanting in civil effects; hence, it does not create, modify, or extinguish the juridical relation to which it refers. xCabotaje v. Pudunan, 436 SCRA 423 (2004). When there is no meeting of the minds on price, the contract is not perfected and does not serve as a binding juridical relation between the parties. xManila Meta l Container Corp. v. PNB, 511 SCRA 444 (2006), and should be more accurately den ominated as inexistent, as it did not pass the stage of generation to the point of perfection. xNHA v. Grace Baptist Church, 424 SCRA 147 (2004). c. Bilateral and Reciprocal (Arts. 1169 and 1191) A contract of sale gives rise to reciprocal obligations, which arise from the same cause with each party being a debtor and creditor of the other, such that the o bligation of one is dependent upon the obligation of the other; and they are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other. xCortes v. Court of Appeals, 494 SCRA 570 (2006). The power to rescind is implied in reciprocal ones in case one of the obligors s hould not comply with what is incumbent upon him, and without need of prior dema nd. xAlmocera v. Ong, 546 SCRA 164 (2008). d. Onerous (Gaite v. Fonacier, 2 SCRA 830 [1961]). e. Commutative (But see: Arts. 1355 and 1470) In a contract of sale, there is no requirement that the price be equal to the ex act value of the subject matter of sale; all that is required is that the partie s believed that they will receive good value in exchange for what they will give . Buenaventura v. CA, 416 SCRA 263 (2003). f. Sale Is Title and Not Mode Sale is not a mode, but merely a title. A mode is the legal means by which domin ion or ownership is created, transferred or destroyed, but title is only the leg al basis by which to affect dominion or ownership. Sale by itself does not trans fer or affect ownership; the most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership. xSan Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005), citing Villanueva, Philippine Law on Sales, 1995 ed., at p. 5. Sellers ownership of the thing sold is not an element of perfection; what the law requires is that seller has the right to transfer ownership at the time the of delivery. xQuijada v. CA, 299 SCRA 695 (1998). But See: xTitong v. CA, 287 SCRA 102 (1998), which defined a sale as a contract tra nsferring dominion and other real rights in the thing sold. B. Sale Distinguished from Similar Contracts A contract is what the law defines it to be, taking into consideration its essen tial elements, and the title given to it by the parties is not as much significa nt as its substance. The transfer of ownership in exchange for a price paid or p romised is the very essence of a contract of sale. xSantos v. Court of Appeals, 337 SCRA 67 (2000). In determining the real character of sale, courts look at the intent of the part ies, their true aim and purpose in entering into the contract, as well as by thei r conduct, words, actions and deeds prior to, during and immediately after execu ting the agreement, and not at the nomenclature used to describe it, xLao v. Co urt of Appeals, 275 SCRA 237 (1997). 1. Donation (Arts. 725 and 1471) Unlike a donation, sale is a disposition for valuable consideration with no dim inution of the estate but merely substitution of values, with the property sold replaced by the equivalent monetary consideration; unlike donation, a valid sale cannot have the legal effect of depriving the compulsory heirs of their legitim es. xManongsong v. Estimo, 404 SCRA 683 (2003). The rules on double sales under Art. 1544 find no relevance to contracts of dona tion. xHemedes v. Court of Appeals, 316 SCRA 347 (1999).

2. Barter (Arts. 1468, 1638 to 1641) 3. Contract for Piece-of-Work (Arts. 1467, 1713 to 1715) The Crux: Ineluctably, whether the contract be one of sale or one for a piece of work, a transfer of ownership is involved and a party necessarily walks away wit h an object. xCommissioner of Internal Revenue v. CA, 271 SCRA 605 (1997), citing Villanueva, Law on Sales, pp. 7-9 (1995). In both provisions on warranty of tit le against hidden defects applies. xDio v. CA, 359 SCRA 91 (2001). When a person stipulates for the future sale of articles which he is habitually making, and which at the time are not made or finished, it is essentially a cont ract of sale and not a contract for labor xInchausti & Co. v. Cromwell, 20 Phil. 345 (1911); even when he executes production thereof only after an order is pla ced by customers. Celestino & Co. v. Collector, 99 Phil. 841 (1956). If the thing is specially done only upon the specific order of another, this is a contract for a piece of work; if the thing is manufactured or procured for the general market in the ordinary course of business, it is a contract of sale. Com missioner of Internal Revenue v. Engineering Equipment & Supply Co., 64 SCRA 590 (1975). To Tolentino, the distinction depends on the intention of parties: if parties in tended that at some future date an object has to be delivered, without consideri ng the work or labor of the party bound to deliver, the contract is one of sale; but if one of the parties accepts the undertaking on the basis of some plan, ta king into account the work he will employ personally or through another, the con tract is for a piece of work. xEngineering & Machinery Corp. v. CA, 252 SCRA 156 (1996). 4. Agency to Sell (Art. 1466) Assumption by agent of the risk pertaining to the cost or price of the subject mat ter makes the relationship that of buyer-seller, for the agent does not assume r isk with respect to the price or the property subject of the relationship. xKer & Co., Ltd. v. Lingad, 38 SCRA 524 (1971). Consequently: (a) the contractual rel ationship is not inherently revocable. Quiroga v. Parsons, 38 Phil. 501 (1918); o r (b) the purported agent does not have to account for the profit margin earned from acquiring the property for the purported principal. Puyat v. Arco Amusement Co., 72 Phil. 402 (1941). One factor that most clearly distinguishes agency from other legal concepts, inc luding sale, is control; one person the agent agrees to act under the control or direction of another the principal. xVictorias Milling Co., Inc. v. CA, 333 SC RA 663 (2000). Commercial broker, commission merchant or indentor is a middleman acting in his own name, and acts as agent for both seller and buyer to effect a sale between t hem. Although he is neither seller nor buyer to the contract effected he may vol untarily assume warranties of seller. xSchmid and Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988). 5. Dacion En Pago (Arts. 1245 and 1934) Governed by the law on sales, dation in payment is a transaction that takes plac e when property is alienated to the creditor in full satisfaction of a debt in m oneyit involves the delivery and transmission of ownership of a thing as an accep ted equivalent of the performance of the obligation. xYuson v. Vitan, 496 SCRA 5 40 (2007). In its modern concept, what actually takes place in dacion en pago is an objecti ve novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. xAquintey v. Tibong 511 SCRA 414 (2006). Elements of dation in payment: (a) performance of the prestation in lieu of paym ent (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person; (b) some difference between t he prestation due and that which is given in substitution (aliud pro alio); and (c) agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a presentation different from that due. Lo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182 (2003).

For dacion to arise, there must be actual delivery of the property to the credit or by way of extinguishment of the pre-existing debt. xPhilippine Lawin Bus Co. v. CA, 374 SCRA 332 (2002). But See Obiter: xSSS v. Court of Appeals, 553 SCRA 6 77 (2008). There is no dation when there is no such transfer of ownership in favor of the c reditor, as when the possession is only by way of security. xPNB v. Pineda, 197 SCRA 1 (1991). A creditor, especially a bank, which enters into dacion en pago, should know and must accept the legal consequence thereof, that the pre-existing obligation is totally extinguished. xEstanislao v. East West Banking Corp., 544 SCRA 369 (2008 ). 6. Lease (Arts. 1484 and 1485) When rentals in a lease are clearly meant to be installment payments to a sale con tract, despite the nomenclature given by the parties, it is a sale by installmen ts and governed by the Recto Law. xFilinvest Credit Corp. v. CA, 178 SCRA 188 ( 1989). II. PARTIES TO A CONTRACT OF SALE (Arts. 1489-1492) 1. General Rule: Every person having legal capacity to obligate himself, may va lidly enter into a contract of sale, whether as seller or as buyer. (Art. 1489) 2. Minors, Insane and Demented Persons, Deaf-Mutes (Arts. 1327, 1397 and 1399) A minor cannot be deemed to have given her consent to a contract of sale; consen t is among the essential requisites of a contract, including one of sale, absent of which there can be no valid contract. [?] xLabagala v. Santiago, 371 SCRA 36 0 (2001). a. Necessaries (Arts. 1489 and 290) b. xEmancipation (Arts. 399 and 1397; Inutile: Majority age now at 18 years, A rts. 234 and 236, Family Code, amended by R.A. 6809). c. Protection of the Senile and Elderly (Art. 24) and Illiterates (Art. 1332) Under Art. 1332, when one of the parties is unable to read, or if the contract i s in a language not understood by him, and mistake or fraud is alleged, the pers on enforcing the contract must show that the terms thereof have been fully expla ined to the former; otherwise, sale is void. [?] xVda. De Ape v. Court of Appea ls, 456 SCRA 193 (2005). While a person is not incompetent to contract merely because of advanced years o r by reason of physical infirmities, when such age or infirmities have impaired the mental faculties so as to prevent the person from properly, intelligently or firmly protecting his property rights, then he is undeniably incapacitated, and the sale he entered into is void [?]. Paragas v. Heirs of Dominador Balacano, 46 8 SCRA 717 (2005). 3. Sales By and Between Spouses: a. Contracts with Third Parties (Arts. 73, 96, and 124, Family Code) Under Art. 124 of Family Code, sale by husband of a conjugal property without th e wifes consent is void, not merely voidable, since the resulting contract lacks one of the essential elements of full consent. xGuiang v. CA, 291 SCRA 372 (1998). A wife affixing her signature to a Deed of Sale as a witness is deemed to have g iven her consent. xPelayo v. Perez, 459 SCRA 475 (2005). As an exception, husband may dispose of conjugal property without wifes consent i f such sale is necessary to answer for conjugal liabilities mentioned in Article s 161 and 162. xAbalos v. Macatangay, Jr., 439 SCRA 64 (2004). b. Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code) Sales between spouses who are not governed by a complete separation of property regime are void, not just voidable. xMedina v. Collector, 1 SCRA 302 (1960). Sale by husband of conjugal land to his concubine is null and void for being con trary to morals and public policy and subversive of the stability of the family, a basic social institution which public policy cherishes and protects. Calimlim-Ca nullas v. Fortun, 129 SCRA 675 (1984). Since under Art. 1490, the spouses cannot validly sell property to one another, then policy consideration and the dictates of morality require that the prohibit ion should apply also to common-law relationships. cf. Matabuena v. Cervantes, 3

8 SCRA 284 (1971). Nevertheless, when property resold to a third-party buyer in good faith and for value, reconveyance is no longer available. xCruz v. CA, 281 SCRA 491 (1997). The in pari delicto doctrine would apply to the spouses-parties under Art. 1490, since only the heirs and the creditors can question the sales nullity. xModina v . Court of Appeals, 317 SCRA 696 (1999). 4. Others Relatively Disqualified (Arts. 1491 and 1492) Contracts entered into in violation of Arts. 1490 and 1492 are not merely voidab le, but are null and void. Rubias v. Batiller, 51 SCRA 120 (1973). a. Guardians, Agents and Administrators No more need to comply with xRodriquez v. Mactal, 60 Phil. 13 (1934) which requi red showing that a third party bought as conduit/nominee of the buyer disqualifi ed under Art. 1491; rather, the presumption now is that such disqualified party obtained the property in violation of said article. Philippine Trust Co. v. Rold an, 99 Phil. 392 (1956). Prohibition against agents does not apply if the principal consents to the sale of the property in the hands of the agent. xDistajo v. CA, 339 SCRA 52 (2000). Hereditary rights are not included in the prohibition insofar as administrator o r executor of the estate of the deceased. xNaval v. Enriquez, 3 Phil. 669 (1904) . b. Attorneys. Prohibition applies only while litigation is pending. xDirector of Lands v. Abab a, 88 SCRA 513 (1979); even when the litigation is not adversarial in nature Rub ias v. Batiller, 51 SCRA 120 (1973); or when it is a certiorari proceeding that may have no merit xValencia v. Cabanting, 196 SCRA 302 (1991). Prohibition applies only to a sale to a lawyer of record, and does not cover ass ignment of the property given in judgment made by a client to an attorney, who h as not taken part in the case. xMunicipal Council of Iloilo v. Evangelista, 55 P hil. 290 (1930); nor to a lawyer who acquired property prior to the time he inte rvened as counsel in the suit involving such property. xDel Rosario v. Millado, 26 SCRA 700 (1969). Prohibition does not apply: (a) to sale of a land acquired by a client to satisf y a judgment in his favor, to his attorney as long as the property was not the s ubject of the litigation. xDaroy v. Abecia, 298 SCRA 172 (1998); or (b) to a con tingency fee arrangement which grants the lawyer of record proprietary rights to the property in litigation since the payment of said fee is not made during the pendency of litigation but only after judgment has been rendered. Fabillo v. IAC , 195 SCRA 28 (1991). c. Judges A judge should restrain himself from participating in the sale of propertiesit is incumbent upon him to advise the parties to discontinue the transaction if it i s contrary to law. Britanico v. Espinosa, 486 SCRA 523 (2006). A judge who buys property in litigation before his court after the judgment beco mes final does not violate Art. 1491, but he can be administratively disciplined for violation of the Code of Judicial Ethics. xMacariola v. Asuncion, 114 SCRA 77 (1982). Even when the main cause is a collection of a sum of money, the properties levie d are still subject to the prohibition. xGan Tingco v. Pabinguit, 35 Phil. 81 (1 916). III. SUBJECT MATTER OF SALE (Arts. 1459 to 1465) Transfer of title or an agreement to transfer it for a price paid or promised to be paid is the essence of sale. xCommissioner of Internal Revenue v. CA and Ate neo de Manila University, 271 SCRA 605 (1997). The Civil Code provisions defining sales is a catch-all provision which effectivel y brings within it grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration. Polytechnic University v. CA, 368 SCRA 691 (2001). Where under an agreement, a party renounces and transfers whatever rights, inter ests, or claims she has over a parcel of land in favor of another party in consi deration of the latters payment of therein loan, the agreement is essentially a s ale, and the rule on delivery effected through a public instrument apply. xCaoib

es, Jr. v. Caoibes-Pantoja, 496 SCRA 273 (2006). 1. Must Be Existing, Future or Contingent (Arts. 1347, 1348, and 1462) a. Emptio Rei Speratae (Arts. 1461 and 1347) Pending crops which have potential existence may be valid object of sale. xSibal v. Valdez, 50 Phil. 512 (1927); and such transaction cannot be considered to ef fectively be sale of the land or any part thereof. xPichel v. Alonzo, 111 SCRA 3 41 (1981). b. Emptio Spei (Art. 1461) c. Subject to Resolutory Condition (Art. 1465) 2. Must Be Licit (Arts. 1347, 1459 and 1575) Under Art. 1347, a sale involving future inheritance is void and cannot be the s ource of any right nor create any obligation. xTaedo v. Court of Appeals, 252 SCR A 80 (1996). Article 1347 does not cover waiver of hereditary rights which is not equivalent to sale, since waiver is a mode of extinction of ownership in favor of the other persons who are co-heirs. xAcap v. Court of Appeals, 251 SCRA 30 (1995). A mortgagor is not prevented from selling the property, since it is merely encum brance and effect a loss of his principal attribute as owner to dispose of the p roperty. Law even considers void a stipulation forbidding the owner from alienat ing mortgaged immovable. xPineda v. CA, 409 SCRA 438 (2003). 3. Must Be Determinate or At Least Determinable (Art. 1460) When the deed of sale describes a lot adjacent to the land seen, agreed upon and delivered to the buyer, such land is the one upon which the minds have met, and not that erroneously described in the deed. Atilano v. Atilano, 28 SCRA 231 (196 9). a. Generic things may be object of sale (Arts. 1246 and 1409[6]) Subject matter is determinable when by a formula or description agreed upon at p erfection there is a way by which the courts can delineate independent of the wi ll of the parties. Melliza v. City of Iloilo, 23 SCRA 477 (1968). Where the lot sold is said to adjoin the previously paid lot on three sides thereo f, the subject lot is capable of being determined without the need of any new co ntract, even when the exact area of the adjoining residential lot is subject to the result of a survey. xSan Andres v. Rodriguez, 332 SCRA 769 (2000). Determinable subject matter of sale are not subject to risk of loss until they a re physically segregated or particularly designated. Yu Tek & Co. v. Gonzales, 29 Phil. 384 (1915). b. Undivided Interest (Art. 1463) or Undivided Share in a Mass of Fungible Goods (Art. 1464) May result it co-ownership. 4. Quantity of Subject Matter Not Essential for Perfection? (Art. 1349) Sale of grains is perfected even when the exact quantity or quality is not known , so long as the source of the subject is certain. NGA v. IAC, 171 SCRA 131 (1989 ). Where seller quoted to buyer the items offered for sale, by item number, part nu mber, description and unit price, and the buyer had sent in reply a purchase ord er without indicating the quantity being order, there was already a perfected co ntract of sale, even when required letter of credit had not been opened by the b uyer. Johannes Schuback & Sons Phil. Trading Corp. v. CA, 227 SCRA 719 (1993). 5. Sellers Obligation to Transfer Title to Buyer (Art. 1459, 1462, and 1505) a. Seller s Ownership Need Not Exist at Perfection: Sale of copra for future delivery does not make seller liable for estafa for fai ling to deliver because the contract is still valid and the obligation was civil and not criminal. xEsguerra v. People, 108 Phil. 1078 (1960). A perfected contract of sale cannot be challenged on the ground of the sellers no n-ownership of the thing sold at the time of the perfection of the contract; it is at delivery that the law requires the seller to have the right to transfer ow nership of the thing sold. xAlcantara-Daus v. de Leon, 404 SCRA 74 (2003). It is essential that seller is owner of the property he is selling. The principa l obligation of a seller is to transfer the ownership of the property sold (Art. 1 458). This law stems from the principle that nobody can dispose of that which do

es not belong to him. NEMO DAT QUOD NON HABET. xNoel v. CA, 240 SCRA 78 (1995). That the sellers are no longer owners of the goods at perfection does notp appea r to be one of the void contracts enumerated in Art. 1409 of Civil Code, and und er Art. 1402 the Civil Code itself recognizes a sale where the goods are to be ac quired x x x by the seller after the perfection of the contract of sale clearly i mplying that a sale is possible even if the seller was not the owner at the time of sale, provided he acquires title to the property later on; nevertheless such contract may be deemed to be inoperative and may thus fall, by analogy, under A rt. 1409(5): Those which contemplate an impossible service. Nool v. CA, 276 SCRA 14 9 (1997). b. Subsequent Acquisition of Title by Non-Owner Seller (Art. 1434) validates the sale and title passes to the seller by operation of law. c. Acquisition by the Buyer May Even Depend on Contingency (Art. 1462). x6. Illegality of Subject Matter (Arts. 1409, 1458, 1461, 1462, and 1575) a. Special Laws: narcotics (R.A. 6425); wild bird or mammal (Act 2590, Sec. 7); rare wild plants (Act 3983); poisonous plants or fruits (R.A. 1288); dynamited f ish (R.A 428); gunpowder and explosives (Act 2255); firearms and ammunitions (P. D. 9); sale of realty by non-Christians (Sec. 145, Revised Adm. Code, R.A 4252) b. Following Sales of Land Void: By Non-Christian if not approved by Provincial Governor per Sec. 145 of Revised Administrative Code. xTac-an v. CA, 129 SCRA 319 (1984). Friar land without consent of Secretary of Agriculture required under Act No. 11 20. xAlonso v. Cebu Country Club, Inc., 375 SCRA 390 (2002); Liao v. CA, 323 SC RA 430 (2000). Made in violation of land reform laws declaring tenant-tillers as the full owner s of the lands they tilled. xSiacor v. Gigantana, 380 SCRA 306 (2002). Reclaimed lands are of the public domain and cannot, without congressional fiat, be sold, public or private. Fisheries Dev. Authority v. Court of Appeals, 534 S CRA 490 (2007). IV. PRICE AND OTHER CONSIDERATION (Arts. 1469-1474) Price signifies the sum stipulated as the equivalent of the thing sold and also ev ery incident taken into consideration for the fixing of the price put to the deb it of the buyer and agreed to by him. xInchausti & Co. v. Cromwell, 20 Phil. 34 5 (1911). Seller cannot unilaterally increase the price previously agreed upon with the bu yer, even when due to increased construction costs. xGSIS v. Court of Appeals, 2 28 SCRA 183 (1993). Buyer who opted to purchase the land on installment basis with imposed interest, cannot later unilaterally disavow the obligation created by the stipulation in the contract which sets the interest at 24% per annum: The rationale behind havin g to pay a higher sum on the installment is to compensate the vendor for waiting a number of years before receiving the total amount due. The amount of the stat ed contract price paid in full today is worth much more that a series of small p ayments totaling the same amount. x x x To assert that mere prompt payment of t he monthly installments should obviate imposition of the stipulated interest is to ignore an economic fact and negate one of the most important principles on wh ich commerce operates. xBortikey v. AFP RSBS, 477 SCRA 511 (2005). 1. Price Must Be Real (Art. 1471) a. When Price Simulated (1) Mapalo v. Mapalo, 17 SCRA 114 (1966), versus: When two aged ladies, not verse d in English, sign a Deed of Sale on representation by buyer that it was merely to evidence their lending of money, the situation constitutes more than just fra ud and vitiation of consent to give rise to a voidable contract, since there was in fact no intention to enter into a sale, there was no consent at all, and mor e importantly, there was no consideration or price agreed upon, which makes the contract void ab initio. Rongavilla v. Court of Appeals, 294 SCRA 289 (1998). (2) Mate v. CA, 290 SCRA 463 (1998), versus: When Deed of Sale was executed to fa cilitate transfer of property to buyer to enable him to construct a commercial b uilding and to sell the property to the children, such arrangement being merely a subterfuge on the part of buyer, the agreement cannot also be taken as a consi

deration and sale is void. Yu Bun Guan v. Ong, 367 SCRA 559 (2001). (3) Effects When Price Simulated The principle of in pari delicto nonoritur acti on, which denies all recovery to the guilty parties inter se, where the price is simulated; the doctrine applies only where the nullity arises from the illegali ty of the consideration or the purpose of the contract. xModina v. Court of App eals, 317 SCRA 696 (1999). b. When Price is False (Arts. 1353 and 1354) When the parties intended to be bound but the deed did not reflect the actual pr ice agreed upon, there is only a relative simulation of the contract which remai ns valid and enforceable, but subject to reformation. xMacapgal v. Remorin, 458 SCRA 652 (2005). When price indicated in deed of absolute sale is undervalued consideration pursu ant to intention to avoid payment of higher capital gains taxes, the price state d is false, but the sale is still valid and binding on the real terms. xHeirs of Spouses Balite v. Lim, 446 SCRA 54 (2004). c. Non-Payment of Price Sale being consensual, failure of buyer to pay the price does not make the contr act void for lack of consideration or simulation, but results in buyers default, for which the seller may exercise his legal remedies. xBalatbat v. CA, 261 SCRA 128 (1996). In a contract of sale, the non-payment of the price is a resolutory condition whi ch extinguishes the transaction that, for a time, existed and discharges the obl igations created thereunder. [?] The remedy of an unpaid seller in a contract of sale is to seek either specific performance or rescission. xHeirs of Pedro Escan lar v. Court of Appeals, 281 SCRA 176 (1997). Badge That Price Is Simulated, Not Just Unpaid: It is a badge of simulated price , which render the sale void, when the price, which appears thereon as paid, has in fact never been paid by the purchaser to the seller. xVda. de Catindig. v. Heirs of Catalina Roque, 74 SCRA 83 (1976). 2. Must Be in Money or Its Equivalent (Arts. 1458 and 1468) Price must be valuable consideration as mandated by Civil Law, instead of any price mandated in common law. Ong v. Ong, 139 SCRA 133 (1985); Bagnas v. CA, 176 SCRA 15 9 (1989); Republic v. Phil. Resources Dev., 102 Phil. 960 (1958). Consideration for sale can take different forms, such as the prestation or promi se of a thing or service by another, thus: When deed provides that the consideration was the expected profits from the subd ivision project. xTorres v. Court of Appeals, 320 SCRA 428 (1999). Cancellation of liabilities on the property in favor of the seller. xPolytechnic University v. Court of Appeals, 368 SCRA 691 (2001). Assumption of mortgage constituted on the property sold. xDoles v. Angeles, 492 SCRA 607 (20060. 3. Must Be Certain or Ascertainable at Perfection (Art. 1469) a. How Price Determined to be Ascertainable (i) Set by third person appointed at perfection (Art. 1469) (ii) Set by the courts (Art. 1469) (iii) By reference to a definite day, particular exchange or market (Art. 1472 ) (iv) By reference to another thing certain, such as to invoices then in existenc e and clearly identified by the agreement xMcCullough v. Aenlle, 3 Phil. 285 (19 04); or known factors or stipulated formula (xMitsui v. Manila, 39 Phil. 624 (19 19). Price is ascertainable if the terms of the contract furnishes the courts a basis or measure for determining the amount agreed upon, without having to refer back to either or both parties. xVillanueva v. Court of Appeals, 267 SCRA 89 (1997). Where the sale involves an asset under a privatization scheme which attaches a p eculiar meaning or signification to the term indicative price as merely constituti ng a ball-park figure, then the price is not certain. xMoreno, Jr. v. Private Ma nagement Office, 507 SCRA 63 (2006). Consideration is generally agreed upon as whole even if it consists of several p arts, and even if it is contained in one or more instruments; otherwise there wo

uld be no price certain, and the contract of sale not perfected. xArimas v. Ari mas, 55 O.G. 8682. b. Price Never Set By One or Both Parties (Arts. 1473, 1182), unless the price i s separately accepted by the other party. c. Effects of Unascertainability: Sale is inefficacious.. But: If Buyer Appropriates the Object, He Must Pay Reasonable Price. (Art. 1474) There can be no concept of appropriation when it comes to land? Where a church anization has been allowed possession and introduce improvements on the land as part of its application to purchase with the NHA, and thereafter it refused the formal resolution of the NHA Board setting the price and insisted on paying the lower price allegedly given by the NHA Field Office, there can be no binding con tract of sale upon which an action for specific performance can prosper, not eve n on fixing the price equal to the fair market value of the property. xNHA v. Gr ace Baptist Church, 424 SCRA 147 (2004). 4. Manner of Payment of Price ESSENTIAL A definite agreement on the manner of payment of price is an essential element i n the formation of a binding and enforceable contract sale; without it the sale is void and an action for specific performance must fail. Navarra v. Planters Dev . Bank, 527 SCRA 562 (2007). When the manner of payment of the price is discussed after acceptance, then such ceptance did not produce a binding and enforceable contract of sale. xNavarro v. Sugar Producer s Corp., 1 SCRA 1180 (1961). Where there is no other basis for the payment of the subsequent amortizations in a Deed of Conditional Sale, the reasonable conclusion one can reach is that the subsequent payments shall be made in the same amount as the first payment. [?] xDBP v. Court of Appeals, 344 SCRA 492 (2000). 5. Inadequacy of Price Does Not Affect Ordinary Sale (Arts. 1355 and 1470) Mere inadequacy of the price does not affect the validity of the sale when both parties are in a position to form an independent judgment concerning the transac tion, unless fraud, mistake, or undue influence indicative of a defect in consen t is present. The contract may be annulled for vitiated consent and not due to t he inadequacy of price. xBautista v. Court of Appeals, 436 SCRA 141 (2004). Absent any evidence of the fair market value of a land as of the time of its sal e, it cannot be concluded that the price at which it was sold was inadequate. x Acabal v. Acabal, 454 SCRA 897 (2005). a. Gross Inadequacy of Price May Avoid Judicial Sale: (i) Only when it is shocking to the conscience of man. xPascua v. Simeon, 161 S CRA 1 (1988); and (ii) There is showing that, in the event of a resale, a better price can be obta ined. xCu Bie v. Court of Appeals, 15 SCRA 307 (1965). Unless: There is right of redemption, in which case the proper remedy is to rede em. xDe Leon v. Salvador, 36 SCRA 567 (1970). But: By way of extraordinary circumstances perceived, when in a judicial sale t he right of redemption has been lost, where the inadequacy of the price is purel y shocking to the conscience, such that the mind revolts at it and such that a r easonable man would neither directly or indirectly be likely to consent to it, t he same will be se aside. xCometa v. Court of Appeals, 351 SCRA 294 (2001). There is gross inadequacy in price if a reasonable man will not agree to dispose f his property. Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008). When judicial sale is voided without fault of purchaser, the latter is entitled return of price with simple interest, together with all sums paid out by him in improvements introduced on the property, taxes, and other expenses. xSeven Broth ers Shipping Corp. v. Court of Appeals, 246 SCRA 33 (1995). b. Lesion of more than 1/4 of value of thing makes sale rescissible unless appr oved by court . (Art. 1386). c. Gross inadequacy of price may raise the presumption of equitable mortgage. (A rt. 1602). V. FORMATION OF CONTRACT OF SALE (Arts. 1475-1488) A. Policitacion Stage (Art. 1479) Policitation stage covers the doctrine of freedom of contract which signifies or



mplies the right to choose with whom to contract. A property owner is free to of fer his property for sale to any interested person, and is not duty bound to sel l the same to the occupant thereof, absent any prior agreement vesting the occup ants the right of first priority to buy. xGabelo v. Court of Appeals, 316 SCRA 3 86 (1999). A negotiation is formally initiated by an offer, which, however, must be certain . At any time prior to the perfection of the contract, either negotiating party may stop the negotiation. At this stage, the offer may be withdrawn; the withdra wal is effective immediately after its manifestation. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of th e offer; it must be plain, unequivocal, unconditional and without variance of an y sort from the proposal. Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006 ). An unaccepted unilateral promise (offer to buy or to sell) prior to acceptance, does not give rise to any obligation or right. xRaroque v. Marquez, 37 O.G. 191 1. Where the offer is given with a stated time for its acceptance, the offer is ter minated at the expiration of that time. xVillegas v. Court of Appeals, 499 SCRA 276 (2006). 1. Option Contract An option is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or n ot to enter into a principal contract. It binds the party who has given the opti on, not to enter into the principal contract with any other person during the pe riod designated, and, within that period, to enter into such contract with the o ne to whom the option was granted, if the latter should decide to use the option . It is a separate agreement distinct from the contract of sale which the partie s may enter into upon the consummation of the option. Carceller v. Court of Appea ls, 302 SCRA 718 (1999). An option imposes no binding obligation on the person holding the option aside f rom the consideration for the offer. Until accepted, it is not treated as a sale . Tayag v. Lacson, 426 SCRA 282 (2004). Tenants, not being the registered owners, cannot grant an option on the land, mu ch less any exclusive right to buy the property under the Latin saying nem dat quod non habet. xTayag v. Lacson, 426 SCRA 282 (2004). a. Meaning of Separate Consideration (Arts. 1479 and 1324) A unilateral promise to sell, in order to be binding upon the promissor, must be for a price certain and supported by a consideration separate from such price. xSalame v. Court of Appeals, 239 SCRA 356 (1995). The separate consideration in an option may be anything of value, unlike in sale w here it must be the price certain in money or its equivalent. Villamor v. Court o f Appeals, 202 SCRA 607 (1991), such when the option is attached to a real estat e mortgage xSoriano v. Bautista, 6 SCRA 946 (1962). Although no consideration is expressly mentioned in an option contract, it is pr esumed that it exists and may be proved, and once proven, the option is binding. xMontinola v. Cojuangco, 78 Phil. 481 (1947). b. No Separate Consideration: Void as Option, Valid as a Certain Offer Sanchez v . Rigos, 45 SCRA 368 (1972). But Lately: xYao Ka Sin Trading v. CA, 209 SCRA 763 (1991); xMontilla v. CA, 16 1 SCRA 855 (1988); xNatino v. IAC, 197 SCRA 323 (1991); and xDiamante v. CA, 206 SCRA 52 (1992). c. There Must Be Acceptance of Option Offer. Vazquez v. CA, 199 SCRA 102 (1991). d. Proper Exercise of Option Contract. Nietes v. CA, 46 SCRA 654 (1972). An option attached to a lease when not exercised within the option period is ext inguished and cannot be deemed to have been included in the implied renewal (tac ita reconduccion) of the lease. xDizon v. CA, 302 SCRA 288 (1999). Proper exercise of an option gives rise to the reciprocal obligations of sale xH eirs of Luis Bacus v. Court of Appeals, 371 SCRA 295 (2001), which must be enfo rced with ten (10) years as provided under Art. 1144. xDizon v. Court of Appeals

, 302 SCRA 288 (1999). There must be virtual exercise of option with the option period. Carceller v. Court of Appeals, 302 SCRA 718 (1999). 2. Right of First Refusal A right of first refusal cannot be the subject of specific performance, but brea ch would allow a recovery of damages. xGuerrero v. Yigo, 96 Phil. 37 (1954). Rights of first refusal only constitute innovative juridical relations, but do not rise to the level of contractual commitment since with the absence of agreement on price certain, they are not subject to contractual enforcement. Ang Yu Asunci on v. Court of Appeals, 238 SCRA 602 (1994). Right of first refusal contained in a lease, when breached by promissor allows e nforcement by the promisee by way of rescission of the sale entered into with th e third party, pursuant to Arts. 1381(3) and 1385 of Civil Code. xGuzman, Bocali ng & Co. v. Bonnevie, 206 SCRA 668 (1992); Equatorial Realty Dev., Inc. v. Mayfai r Theater, Inc., 264 SCRA 483 (1996); Paranaque Kings Enterprises, Inc. v. CA, 26 8 SCRA 727, 741 (1997). In a right of first refusal, while the object might be made determinate, the exe rcise of the right would be dependent not only on the grantors eventual intention to enter into a binding juridical relation with another but also on terms, incl uding the price, that are yet to be firmed up. . . . the offer may be withdrawn an ytime by communicating the withdrawal to the other party. Vasquez v. Ayala Corp., 443 SCRA 231 (2004). A right of first refusal clause simply means that should the lessor decide to se ll the leased property during the term of the lease, such sale should first be o ffered to the lessee; and the series of negotiations that transpire between the lessor and the lessee on the basis of such preference is deemed a compliance of such clause even when no final purchase agreement is perfected between the parti es. The lessor was then at liberty to offer the sale to a third party who paid a higher price, and there is no violation of the right of the lessee. Riviera Fili pina, Inv. v. Court of Appeals, 380 SCRA 245 (2002). A right of first refusal in a lease in favor of the lessee cannot be availed of by the sublessee. xSadhwani v. Court of Appeals, 281 SCRA 75 (1997). 4. Mutual Promises to Buy and Sell (Art. 1479): True Contract to Sell Mutual promises to buy and sell a certain thing for a certain price gives each o f the contracting parties a right to demand from the other the fulfillment of th e obligation. xBorromeo v. Franco, 5 Phil. 49 (1905). Even in this case the certainty of the price must also exist, otherwise, there i s no valid and enforceable contract to sell. xTan Tiah v. Yu Jose, 67 Phil. 739 (1939). An accepted bilateral promise to buy and sell is in a sense similar to, but not exactly the same, as a perfected contract of sale because there is already a mee ting of minds upon the thing which is the object of the contract and upon the pr ice. But a contract of sale is consummated only upon delivery and payment, where as in a bilateral promise to buy and sell gives the contracting parties rights i n personam, such that each has the right to demand from the other the fulfillmen t of their respective undertakings. Macion v. Guiani, 225 SCRA 102 (1993). The cause of action under a mutual promise to buy and sell is 10 years. xVillamo r v. Court of Appeals, 202 SCRA 607 (1991). B. Perfection Stage (Arts. 1475, 1319, 1325 and 1326) Sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance subject to the law governing the form of co ntracts. xMarnelego v. Banco Filipino Savings and Mortgage Bank, 480 SCRA 399 (2 006). Mutual consent being a state of mind, its existence may only be inferred from th e confluence of two acts of the parties: an offer certain as to the object of th e contract and its consideration, and an acceptance of the offer which is absolu te in that it refers to the exact object and consideration embodied in said offe r. xVillanueva v. PNB, 510 SCRA 275 (2006). If a material element of a contemplated contract is left for future negotiations

, the same is too indefinite to be enforceable. For a contract to be enforceable , its terms must be certain and explicit, not vague or indefinite. xBoston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006). So long as there is any uncertainty or indefiniteness, or future negotiations or consideration yet to be had between the parties, there is no contract at all. x Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006). 1. Absolute Acceptance of a Certain Offer (Art. 1475) A qualified acceptance or one that involves a new proposal constitutes a counter -offer and a rejection of the original offer. The acceptance must be identical i n all respects with that of the offer so as to produce consent or meeting of min ds. Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006). Placing the word Noted and signing such note at the bottom of the written offer ca nnot be considered an acceptance that would give rise to a valid contract of sal e. xDBP v. Ong, 460 SCRA 170 (2005). If sale subject to suspensive condition: No perfected sale of a lot where the aw ard thereof was expressly made subject to approval by the higher authorities and there eventually was no acceptance manifested by the supposed awardee. xPeople s Homesite & Housing Corp. v. CA, 133 SCRA 777 (1984). 2. When Deviation Allowed: Villonco v. Bormaheco, 65 SCRA 352 (1975). 3. Sale by Auction (Arts. 1476, 1403(2)(d), 1326) The terms and conditions provided by the owner of property to be sold at auction are binding upon all bidders, whether they knew of such conditions or not. xLe oquinco v. Postal Savings Bank, 47 Phil. 772 (1925). A auction sale is perfected by the fall of the hammer or in other customary mann er and it does not matter that another was allowed to match the bid of the highe st bidder. xProvince of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008). 4. Earnest Money (Art. 1482) Earnest money given by the buyer shall be considered as part of the price and as proof of the perfection of the contract. It constitutes an advance payment to b e deducted from the total price. xEscueta v. Lim, 512 SCRA 411 (2007). Absent proof of the concurrence of all the essential elements of a contract of s ale, the giving of earnest money cannot establish the existence of a perfected c ontract of sale. Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006). Article 1482 does not apply when earnest money given in a contract to sell xSerr ano v. Caguiat, 517 SCRA 57 (2007), especially where by stipulation the buyer ha s the right to walk away from the transaction, with no obligation to pay the bal ance, although he will forfeit the earnest money. xChua v. Court of Appeals, 401 SCRA 54 (2003). When there is no provision for forfeiture of earnest money in the event the sale fails to materialize, then with the rescission it becomes incumbent upon seller to return the earnest money as legal consequence of mutual restitution. xGolden rod, Inc. v. Court of Appeals, 299 SCRA 141 (1998). 5. Difference Between Earnest Money and Option Money. Oesmer v. Paraiso Dev. Co rp., 514 SCRA 228 (2007). 6. Sale Deemed Perfected Where Offer Was Made. (Art. 1319) C. Formal Requirements of Sales (Arts. 1357, 1358, 1406 and 1483) 1. Form Not Important for Validity of Sale Sale of land under private instrument is valid. xGallar v. Husain, 20 SCRA 186 ( 1967). Articles 1357 and 1358, in relation to Art. 1403(2), require that the sale of re al property must be in writing for it to be enforceable, it need not be notarize d for there is nothing in those provisions which require that it must be execute d in a public document to be valid. xMartinez v. CA, 358 SCRA 38 (2001); but bot h its due execution and its authenticity must be proven, pursuant to Sec. 20, R ule 132 of the Rules of Court. xTigno v. Aquino, 444 SCRA 61 (2003). a. Other Rulings on Deeds of Sale: Seller may agree to a deed of absolute sale before full payment of the purchase price. xPan Pacific Industrial Sales Co., Inc. v. CA, 482 SCRA 164 (2006). Assuming that the buyers failed to pay the full price stated in the Deed of Sale , such partial failure would not render the sale void. Bravo-Guerrero v. Bravo,

465 SCRA 244 (2005). That marital consent was executed prior to the Deed of Absolute Sale does not in dicate that it is a phoney. Pan Pacific Industrial Sales Co., Inc. v. CA, 482 SC RA 164 (2006). A Deed of Sale when acknowledged before a notary public, enjoys the presumption of regularity and due execution. To overthrow that presumption, sufficient, clea r and convincing evidence is required, otherwise the document should be upheld. xBravo-Guerrero v. Bravo, 465 SCRA 244 (2005). Notarization of Deeds of Sale by one who was not a notary public does not affect the validity thereof; said documents were merely converted into private documen ts. xR.F. Navarro & Co. Inc. v. Vailoces, 361 SCRA 139 (2001). Notarization of a deed of sale does not guarantee its validity nor is it conclus ive of the true agreement of the parties thereto, because it is not the function of the notary public to validate an instrument that was never intended by the p arties to have any binding legal effect. xSalonga v. Concepcion, 470 SCRA 291 (2 005). Buyers immediate taking of possession of subject property corroborates the truthf ulness and authenticity of the deed of sale. xAlcos v. IAC, 162 SCRA 823 (1988). Conversely, the sellers continued possession of the property makes dubious the c ontract of sale between them. xSantos v. Santos, 366 SCRA 395 (2001). Any substantial difference between the terms of the Contract to Sell and the con comitant Deed of Absolute Sale (such as difference in subject matter, and differ ence in price and/or the terms thereof), does not make the transaction between t he seller and the buyer void, for it is truism that the execution of the Deed of Absolute Sale effectively rendered the previous Contract to Sell ineffective an d cancelled [through the process of novation]. xLumbres v. Talbrad, Jr., 516 SCR A 575 (2007). b. Value of Business Forms to Prove Sale: Business forms, e.g., order slip, delivery charge invoice and the like, which ar e issued by the seller in the ordinary course of the business are not always ful ly accomplished to contain all the necessary information describing in detail th e whole business transactionmore often than not they are accomplished perfunctori ly without proper regard to any legal repercussion for such neglect such that de spite their being often incomplete, said business forms are commonly recognized in ordinary commercial transactions as valid between the parties and at the very least they serve as an acknowledgment that a business transaction has in fact t ranspired. xDonato C. Cruz Trading Corp. v. CA, 347 SCRA 13 (2000). These documents are not mere scraps of paper bereft of probative value but vital pieces of evidence of commercial transactions. They are written memorials of th e details of the consummation of contracts. xLagon v. Hooven Comalco Industries, Inc., 349 SCRA 363 (2001). 2. When Form Important in Sale a. To Bind Third Parties Article 1358 which requires the embodiment of certain contracts in a public inst rument is only for convenience, and registration of the instrument only adversel y affects third parties. Formal requirements are, therefore, for the benefit of third parties; and non-compliance therewith does not adversely affect the validi ty of the contract nor the contractual rights and obligations of the parties the reunder. Fule v. CA, 286 SCRA 698 (1998); Dalion v. CA, 182 SCRA 872 (1990). Non-registration of a contract of sale does not affect its validity and binding effect as between the contracting parties themselves. xUniversal Robina Sugar Mi lling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002). While sale of land appearing in a private deed is binding between the parties, i t cannot be considered binding on third persons, if it is not embodied in a publ ic instrument and recorded in the Registry of Deeds. Secuya v. Vda. De Selma, 32 6 SCRA 244 (2000). b. For Enforceability Between the Parties: Statute of Frauds (Arts. 1403 and 14 05) The term Statute of Frauds is descriptive of the statutes which require certain cl asses of contracts, such as agreements for the sale of real property, to be in w

riting, the purpose being to prevent fraud and perjury in the enforcement of obl igations depending for their evidence on the unassisted memory of witnesses by r equiring certain enumerated contracts and transactions to be evidenced by a writ ing signed by the party to be charged. Presupposes Valid Contract of Sale The application of the Statute of Frauds presu pposes the existence of a perfected contract. When the records show that there wa s no perfected contract of sale, there is no basis for the application of the St atute of Frauds. xFirme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003) . (1) Coverage: (i) Sale of Real Property A sale of realty cannot be proven by means of witnesse s, but must necessarily be evidenced by a written instrument, duly subscribed by the party charged, or by secondary evidence of the contents of such document. N o other evidence can be received except the documentary evidence referred to. xG orospe v. Ilayat, 29 Phil. 21 (1914). (ii) Agency to Sell or to Buy As contrasted from sale, an agency to sell does no t belong to any of the three categories of contracts covered by Arts. 1357 and 1 358 and not one enumerated under the Statutes of Frauds in Art. 1403. xLim v. C ourt of Appeals, 254 SCRA 170 (1996). (iii) Rights of First Refusal A right of first refusal is not covered by the statu te of frauds. Furthermore, Art. 1403(2)(e) of Civil Code presupposes the existen ce of a perfected, albeit unwritten, contract of sale; a right of first refusal, such as the one involved in the instant case, is not by any means a perfected c ontract of sale of real property. xRosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001). (iv) Equitable Mortgage Statute does not stand in the way of treating an absolut e deed as a mortgage, when such was the parties intention, although the agreement for redemption or defeasance is proved by parol evidence. xCuyugan v. Santos, 34 Phil. 100 (1916). (v) Right to Repurchase The deed of sale and the verbal agreement allowing the r ight of repurchase should be considered as an integral whole; the deed of sale i s itself the note or memorandum evidencing the contract. xMactan Cebu Internatio nal Airport Authority v. Court of Appeals, 263 SCRA 736 (1996). (2) Memorandum (Yuviengco v. Dacuyc, 104 SCRA 668 [1981]; Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 [1995]; But see 255 SCRA 6). For the memorandum to take the sale out of the coverage of the Statute of Frauds , it must contain all the essential terms of the contract of sale. xTorcuator v. B ernabe, 459 SCRA 439 (2005), even when scattered into various correspondences wh ich can be brought together xCity of Cebu v. Heirs of Candido Rubi, 306 SCRA 40 8 (1999). Exception: Electronic Documents under the E-Commerce Act (R.A. 8792) (3) Partial Execution (Art. 1405) Ortega v. Leonardo, 103 Phil. 870 (1958); Claude l v. Court of Appeals, 199 SCRA 113 (1991). Delivery of the deed to buyers agent, with no intention to part with the title un til the purchase price is paid, does not take the case out of the Statute of Fra uds. xBaretto v. Manila Railroad Co., 46 Phil. 964 (1924). The Statute of Frauds does not apply to contracts either partially or totally pe rformed. In addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefits under the contract, such as the acceptance of the purchase price and using the proceeds to pay outstanding loans. Alfredo v. Borra s, 404 SCRA 145 (2003). (4) Waiver (Art. 1405) Cross-examination on the contract is deemed a waiver of t he defense of the Statute. xLimketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (19 95). (5) Rulings on Receipts and Other Documentary Evidence of Sale Since a contract of sale is perfected by mere consent, then when the dealer of m otor vehicles accepts a deposit of P50,0000 and pulls out a unit from the assemb ler for that purpose, it was in breach of contract when it sold the car subseque ntly to another buyer. xXentrex Automotive, Inc. v. Court of Appeals, 291 SCRA 6 6 (1998).

Sales invoices are not evidence of payment of the price, but evidence of the rec eipt of the goods; since the best evidence to prove payment is the official rece ipt. El Oro Engravers Corp. v. Court of Appeals, 546 SCRA 42 (2008). A receipt which is merely an acknowledgment of the sum received, without any ind ication therein of the total purchase price of the land or of the monthly instal lments to be paid, cannot be the basis of valid sale. xLeabres v. CA, 146 SCRA 1 58 (1986). In itself, the absence of receipts, or any proof of consideration, would not be conclusive of the inexistence of a sale since consideration is always presumed. xTigno v. Aquino, 444 SCRA 61 (2003). Receipts proves payment which takes the sale out of the Statute of Frauds. Toyota Shaw, Inc. v. Court of Appeals, 244 SCRA 320 (1995). c. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art . 1874) When sale of a piece of land or any interest therein is through an agent, the au thority of the latter shall be in writing; otherwise, the sale shall be void, ev en when: Agent is the son of the owner. xDelos Reyes v. CA, 313 SCRA 632 (1999) There is partial payment of the price received by the supposed agent. xDizon v. CA, 396 SCRA 154 (2003). In the case of a corporate owner of realty. xCity-Lite Realty Corp. v. CA, 325 SCRA 385 (2000). When the Contract to Sell was signed by the co-owners themselves as witnesses, t he written authority for their agent mandated under Article 1874 of the Civil Co de is no longer required. xOesmer v. Paraiso Dev. Corp., 514 SCRA 228, 237 (2007 ). c. Sale of Large Cattle (Art. 15851; Sec. 529, Revised Adm. Code) xD. Simulated Sales Characteristic of simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the parties juridical si tuation, or that the parties have no intention to be bound by the contract. The requisites are: (a) an outward declaration of will different from the will of th e parties; (b) false appearance must have been intended by mutual agreement; and (c) purpose is to deceive third persons. xManila Banking Corp. v. Silverio, 466 SCRA 438 (2005). 1. Badges and Non-badges of Simulation: Non-payment of the stipulated consideration, absence of any attempt by the buyer s to assert their alleged rights over the subject property. xVillaflor v. CA, 28 0 SCRA 297 (1997). Failure of alleged buyers to collect rentals from alleged seller. xSantiago v. C A, 278 SCRA 98 (1997); but not when there appears a legitimate lessor-lessee rel ationship between the vendee and the vendor. xUnion Bank v. Ong, 491 SCRA 581 (2 006). Although the agreement did not provide for the absolute transfer ownership of th e land to buyer, that did not amount to simulation, since delivery of certificat e of ownership and execution of deed of absolute sale were expressly stipulated as suspensive conditions, which gave rise to the corresponding obligation on par t of buyer to pay the last installments. xVillaflor v. CA, 280 SCRA 297 (1997). Bare assertions that the signature appearing on the Deeds of Sale is not that of her husband is not enough to allege simulation, since forgery is not presumed; it must be proven by clear, positive and convincing evidence. xR.F. Navarro & Co . v. Vailoces, 361 SCRA 139 (2001). Simulation of contract and gross inadequacy of price are distinct legal concepts , with different effects the concept of a simulated sale is incompatible with in adequacy of price. When the parties to an alleged contract do not really intend to be bound by it, the contract is simulated and void. Gross inadequacy of price by itself will not result in a void contract, and it does not even affect the v alidity of a contract of sale, unless it signifies a defect in the consent or th at the parties actually intended a donation or some other contract. xBravo-Guerr

ero v. Bravo, 465 SCRA 244 (2005). 2. When Motive Nullifies the Sale In sale, consideration is, as a rule, different from the motive of parties, and when the primary motive is illegal, such as when the sale was executed over a la nd to illegally frustrate a person s right to inheritance and to avoid payment o f estate tax, the sale is void because illegal motive predetermined purpose of t he contract. xOlegario v. CA, 238 SCRA 96 (1994). Where the parties to a contract of sale agreed to a consideration, but the amoun t reflected in the final Deed of Sale was lower, their motivation being to pay l ower taxes on the transaction, the contract of sale remains valid and enforceabl e upon the terms of the real consideration. Although illegal, the motives neithe r determine nor take the place of the consideration. xHeirs of Spouses Balite v. Lim, 446 SCRA 54 (2004). 3. Remedies Allowed When Sale Simulated When a contract of sale is void, the right to set up its nullity or non-existenc e is available to third persons whose interests are directly affected thereby. L ikewise, the remedy of accion pauliana is available when the subject matter is a conveyance, otherwise valid, undertaken in fraud of creditors. xManila Banking Corp. v. Silverio, 466 SCRA 438 (2005). The rescissory action to set aside contracts in fraud of creditors is accion pau liana, essentially a subsidiary remedy accorded under Article 1383 which the par ty suffering damage can avail of only when he has no other legal means to obtain reparation for the same. In such action, it must be shown that both contracting parties have acted maliciously so as to prejudice the creditors who were preven ted from collecting their claims. Rescission if generally unavailing should a th ird person, acting in good faith, is in lawful possession of the property since he is protect by law against a suit for rescission by the registration of the tr ansfer to him in the registry. xUnion Bank v. Ong, 491 SCRA 581 (2006). 4. Effect When Sale Declared Void: The action for the declaration of the contracts nullity is imprescriptiblean actio n for reconveyance of property on a void contract of sale does not prescribe. Fi l-Estate Golf and Dev., Inc. v. Navarro, 526 SCRA 51 (2007). Possessor is entitled to keep the fruits during the period for which the buyer h eld the property in good faith. xDBP v. CA, 316 SCRA 650 (1999). Then restoration of what has been given is in order, since the relationship betw een parties in any contract even if subsequently voided must always be character ized and punctuated by good faith and fair dealing. xDe los Reyes v. CA, 313 SC RA 632 (1999); xHeirs of Ignacia Aguilar-Reyes v. Mijares, 410 SCRA 97 (2003). Alien who purchases land in the name of his Filipina lover, has no standing to s eek legal remedies to either recover the property or the purchase price paid, si nce the transaction is void ab initio for being in violation of the constitution al prohibition. xFrenzel v. Catito, 406 SCRA 55 (2003). VI. CONSUMMATION (Arts. 1493-1506) and PERFORMANCE OF CONTRACT (Arts. 1536-1544, 1582-1590) A. Obligations of Seller 1. Preserve Subject Matter (Art. 1163) 2. Deliver with Fruits and Accessories (Arts. 1164, 1166, 1495, 1537) 3. Deliver the Subject Matter (Art. 1477) a. Legal Premises for Doctrines on Tradition When the sale is void or fictitious, no valid title over the subject matter can be conveyed to the buyer even with delivery. Nemo potest nisi quod de jure potes t No man can do anything except what he can do lawfully. xTraders Royal Bank v. CA, 269 SCRA 15 (1997). When seller had no ownership over the subject matter at the time of delivery, no valid title can pass in favor of the buyer. Nemo dat quod non habet No man can give that which he does not have. xTsai v. CA, 366 SCRA 324 (2001). Although tax declaration is not evidence of title, nevertheless when at the time of delivery there is no proof that the seller had ownership and as in fact the tax declaration to the subject property was in the name of another person, then there was no transfer of ownership by delivery. xHeirs of Severina San Miguel v

. Court of Appeals, 364 SCRA 523 (2001). b. General Doctrines on Tradition, Whether Actual or Constructive: It may be stipulated that ownership in the thing shall not pass to buyer until h e has fully paid price (Art. 1478). In the absence of such stipulation to the contrary, tradition produces its natur al effects in law, most important of which being conveyance of ownership, withou t prejudice to right of the seller to claim payment of the price. xFroilan v. Pa n Oriental Shipping Co., 12 SCRA 276 (1964). Delivery contemplates the absolute giving up of the control and custody of the pr operty on the part of the vendor, and the assumption of the same by the vendee. Non nudis pactis sed traditione dominia rerum transferantur. And there is said t o be delivery if and when the thing sold is placed in the control and possession of the vendee. xEquatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 5 6 (2001). Since delivery of subject matter of sale is an obligation on the part of the sel ler, the acceptance thereof by the buyer is not a condition for the completeness of delivery. xLa Fuerza v. CA, 23 SCRA 1217 (1968). In the absence of an express stipulation to the contrary, payment of purchase pr ice of the goods is not a condition precedent to the transfer of title to the bu yer, but title passes by the delivery of the goods. xPhil. Suburban Dev. Corp. v . Auditor General, 63 SCRA 397 (1975). Failure of the buyer to make good the price does not, in law, cause the ownershi p to revest to the seller unless the bilateral contract of sale is first rescind ed or resolved pursuant to Art. 1191. xBalatbat v. CA, 261 SCRA 128 (1996). c. Physical Delivery (Art. 1497) It is not necessary that seller himself delivers title to the buyer because the thing sold is understood as delivered when it is placed in control and possessio n of buyer. Thus, when sellers themselves introduced the tenant to the buyer as the new owners of the land, and from that time on the buyer acted as landlord th ereof, there was delivery that transferred title to the buyer. xAlfredo v. Borr as, 404 SCRA 145 (2003). d. Constructive Delivery: Execution of a Public Instrument (Art. 1498) Where deed of sale or any agreement analogous to a deed of sale, is made through a public instrument, its execution is equivalent to the delivery of the propert y. Caoibes, Jr. v. Caoibes-Pantoja, 496 SCRA 273 (2006). Under Art. 1498, the mere execution of the deed of conveyance in a public instru ment is equivalent to the delivery of the property, and that prior physical deli very or possession is not legally required, since ownership and possession are t wo entirely different legal concepts. Notwithstanding the presence of illegal oc cupants on the subject property, transfer of ownership by symbolic delivery unde r Art. 1498 can still be effected through the execution of the deed of conveyanc e. xSabio v. International Corporate Bank, 364 SCRA 385 (2001). There is nothing in Article 1498 that provides that execution of a deed of sale is a conclusive presumption of delivery of possession; presumptive delivery can be negated by the failure of the vendee to take actual possession of the land or the continued enjoyment of possession by the vendor. Santos v. Santos, 366 SCRA 395 (2001). (i) As to Movables (Arts. 1498-1499, 1513-1514; Dy, Jr. v. CA, 198 SCRA 826). Where it is stipulated that deliveries must be made to the buyer or his duly aut horized representative named in the contracts, the seller is under obligation to deliver in accordance with such instructions.. xLagon v. Hooven Comalco Industr ies, Inc., 349 SCRA 363 (2001). Execution by supposed buyers of a chattel mortgage over subject vehicle in favor of the financing company does not mean that ownership had been transferred to t hem, for delivery must be on the part of the seller. xUnion Motor Corp. v. CA, 3 61 SCRA 506 (2001). Neither issuance of an invoice, which is not a document of title xP.T. Cerna Cor p. v. CA, 221 SCRA 19 (1993), nor of the registration certificate of vehicle xUn ion Motor Corp. v. CA, 361 SCRA 506 (2001), would constitute constructive delive ry.

(ii) As to Immovables (Art. 1498) Issuance of an acknowledgment receipt of partial payment, when it is not a publi c instrument does not convey title. xSan Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99 (2005). In case of immovables, when sale is made through a public instrument, the execut ion thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearl y be inferred xMunicipality of Victorias v. CA, 149 SCRA 31 (1987); and that pri or physical delivery or possession is not legally required since execution of th e deed is deemed equivalent to delivery. xManuel R. Dulay Enterprises, Inc. v. C ourt of Appeals, 225 SCRA 678 (1993), Provided That: (a) The thing sold is subject to the control of the seller Addison v. Felix, 38 P hil. 404 (1918); and (b) Such control should remain within a reasonable period after the execution of the instrument Danguilan v. IAC, 168 SCRA 22 (1988); Pasagui v. Villablanca, 68 S CRA 18 (1975). Except: When buyer assumes the risks of ownership and possession. Power Commercia l and Industrial Corp. v. CA, 274 SCRA 597 (1997). Execution of Deed of Conditional Sale with provision that final deed of sale t o be executed upon full payment does not transfer ownership of the subject matte r. xFortune Tobacco Corp. v. NLRC, 200 SCRA 766 (1991). (1) Registration of Title is Separate Mode from Execution of Public Instrument T he recording of the sale with the proper Registry of Deeds and the transfer of t he certificate of title in the name of the buyer are necessary only to bind thir d parties to the transfer of ownership. As between the seller and the buyer, the transfer of ownership takes effect upon the execution of a public instrument co nveying the real estate. Chua v. Court of Appeals, 401 SCRA 54 (2003). But See: Under Art. 1495, seller is obliged to transfer title over the property and deliver the same to the vendee. Vive Eagle Land, Inc. v. Court of Appeals, 44 4 SCRA 445 (2004). (2) Customary Steps in Selling Immovables Customarily, in the absence of a contra ry agreement, the submission by an individual seller to the buyer of the followi ng papers would complete a sale of real estate: (1) owners duplicate copy of the Torrens title; (2) signed deed of absolute sale; (3) tax declaration; and (4) la test realty tax receipt. They buyer can retain the amount for the capital gains tax and pay it upon authority of the seller, or the seller can pay the tax, depe nding on the agreement of the parties. Chua v. Court of Appeals, 401 SCRA 54 (2003 ). (iii) As to Incorporeal Property (Arts. 1498 and 1501). e. Constitutum Possessorium (Art. 1500) A provision in the deed of sale grantin g to seller a right to lease the subject matter of the sale is valid: the posses sion is deemed to be constituted in the vendee by virtue of this mode of traditi on. xAmigo v. Teves, 96 Phil. 252 (1954). f. Traditio Brevi Manu Prior to the sale, petitioners were in possession of the subject property as lessees. Upon sale to them of the rights, interests and part icipation as to the portion pro indiviso, they remained in possession, not in th e concept of lessees anymore but as owners now through symbolic delivery known a s traditio brevi manu. xHeirs of Pedro Escanlar v. CA, 281 SCRA 176 (1997). 4. Transfer Ownership to Vendee Upon Delivery (Arts. 1477, 1478, and 1496) a. When Buyer Refuses to Accept (Art. 1588) b. In Case of Express or Implied Reservation (Arts. 1478 and 1503) 5. Taking-Out Insurance Coverage (Art. 1523) 6. Time and Place of Delivery (Art. 1521). 7. Expenses of Execution and Registration (Art. 1487), and of Putting Goods in D eliverable Estate (Art. 1521). Unless otherwise stipulated: (a) under Art. 1487 the expenses for the registrati on of the sale should be shouldered by the vendor xVive Eagle Land, Inc. v. Cour t of Appeals, 444 SCRA 445 (2004); and (b) duty to withhold taxes due on the sal e is imposed on seller. xEquitable Realty Development Inc. v. Mayfair Theater, I nc., 332 SCRA 139 (2000).

Buyer has more interest in having the capital gains tax paid immediately since t his is a pre-requisite to the issuance of a new Torrens title in his name. Never theless, as far as the government is concerned, the capital gains tax remains a liability of the seller since it is a tax on the sellers gain from the sale of th e real estate. Payment of the capital gains tax, however, is not a pre-requisite to the transfer of ownership to the buyer. The transfer of ownership takes effe ct upon the signing and notarization of the deed of absolute sale. xChua v. Cour t of Appeals, 401 SCRA 54 (2003). A judgment on a contract of sale that decrees sellers obligations to execute and deliver the deed of absolute sale and the certificate of title, does not necessa rily include within its terms the obligation to pay for the expenses in notarizi ng a deed of sale and in obtaining new certificate of title. xJose Clavano, Inc. v. HLRB, 378 SCRA 172 (2002). B. Special Rules on Completeness of Delivery 1. In Case of Movables (Art. 1522 and 1537, 1480) When the contract does not provide for the measuring or weighing of a sold speci fic mass, and the price agreed upon was not based on such measurement, then [t]he subject matter of the sale is, therefore, a determinate object, the mass, and n ot the actual number of units or tons contained therein, so that all that is req uired of seller was to deliver in good faith to his buyer all of those found in the mass, notwithstanding that the quantity delivered is less than the amount es timated in the contract. xGaite v. Fonacier, 2 SCRA 831 (1961). a. Rules on Delivery to Carrier (Art. 1523) (i) FAS Sales The seller pays all charges and is subject to risk until the goods are placed alongside the vessel. xA. Soriano Y Cia. v. Collector, 97 Phil. 505 ( 1955). (ii) FOB Sales In mercantile contracts of American origin, F.O.B. stand for the wo rds Free on Board, i.e., that the seller shall bear all expenses until the goods a re delivered according as to whether the goods are to be delivered F.O.B. at the p oint of shipment or at the point of destination determines the time when propert y passes. Behn Meyer & Co. v. Yangco, 38 Phil. 602, 606 (1918). (iii) CIF Sales General Foods v. NACOCO, 100 Phil. 337 (1956). C.I.F. found in British contracts stand for costs, insurance, and freight; they si gnify that the price fixed covers not only the costs of the goods, but the expen se of freight and insurance to be paid by the seller. Behn Meyer & Co. v. Yangco , 38 Phil. 602, 606 (1918). Under an arrangement c.i.f. Pacific Coast (destination), the vendor is to pay not o nly the cost of the goods, but also the freight and insurance expenses, and, as it was judicially interpreted, this is taken to indicate that the delivery is to be made at the port of destination. Pacific Vegetable Oil Corp. v. Singzon, Supre me Court Advance Decisions, 29 April 1955. b. Sale on Approval, Trial or Satisfaction (Art. 1502) In a sale or return, the ownership passes to the buyer on delivery pursuant to a p erfected contract of sale; and the subsequent return of the goods reverts owners hip back to the seller. In such case, tradition as a mode of acquiring ownership must be in consequence of a contract. xVallarta v. Court of Appeals, 150 SCRA 336 (1987). In a sale on approval (also called sale on acceptance, sale on trial or sale on satisf action), the delivery of the object does not transfer ownership to the buyer sinc e the delivery was not for purposes of transferring ownership, since the prestat ion to effect a meeting of the minds to give rise to a valid contract is incumbe nt on the buiyer. xVallarta v. Court of Appeals, 150 SCRA 336 (1987). For a sale to be a sale or return or a sale on approval, there must be a clear agree ment to either of such effect, otherwise, the provisions of Art. 1502 of Civil C ode governing such sales cannot be invoked by either party to the contract. xInd ustrial Textile Manufacturing Co. v. LPJ Enterprises, Inc., 217 SCRA 322 (1993). c. Sale by Description and/or Sample (Art. 1481) There is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of the bulk, which is not present and there is no opportunity to i nspect or examine the same; and the parties treated the sample as the standard o

f quality and that they contracted with reference to the sample with the underst anding that the product to be delivered would correspondent with the sample. xMe ndoza v. David, 441 SCRA 172 (004) Even in sales by description and/or sample, buyer will not be released from his obligation to accept and pay for the goods by deviations on the part of the sell er from the exact terms of the contract, if buyer had acquiesced to such deviati ons after due notice thereof. xEngel v. Mariano Velasco & Co., 47 Phil. 115 (19 24). When the machine delivered is in accordance with the description stated in the s ales contract, the buyer cannot refuse to pay the balance of the purchase price and the cost of installation if it proves that the machine cannot be used satisf actorily for the purposes for which he bought it when such purpose was not made known to the seller. xPacific Commercial Co. v. Ermita Market & Cold Stores, 56 Phil. 617 (1932). d. Buyer s Right to Inspect Before Acceptance (Arts. 1481 and 1584) Except when carrier delivers COD. 2. In Case of Immovables a. Where Sold Per Unit or Number (Arts. 1539 and 1540) In a unit price sale, the statement of the area of immovable is not conclusive a nd the price may be reduced or increased depending on the area actually delivere d. If the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that is stated in the contract or demand for the propo rtionate reduction of the purchase price if delivery is not possible. If the ven dor delivers more than the area stated in the contract, the vendee has the optio n to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate. Rudolf Lietz, Inc. v. Court o f Appeals, 478 SCRA 451 (2005). b. Where Sold for a Lump Sum [A cuerpo cierto or por precio alzado] (Art. 1542) In a lump sum sale, when the land delivered to the buyer is exactly as that desc ribed in the deed and covered within the boundaries designated, the difference i n actual area (34 versus 10 hectares) will not authorize the buyer to rescind th e contract because the seller has complied with delivering the subject matter ag reed upon. xTeran v. Villanueva, 56 Phil. 677 (1932); this is the rule when evi dence shows that the parties never gave importance to the area of the land in fi xing the price (97 versus 60 hectares). xAzarraga v. Gay, 52 Phil. 599 (1928). Except: A buyer of land, when sold in gross or with the description more or less o r similar words in designating quantity covers only a reasonable excess of defic iency. In the case at bar an area of 644 square meters more is not reasonable exce ss or deficiency, to be deemed included in the deed of sale. xRoble v. Arbasa, 362 SCRA 69 (2001);Rudolf Lietz, Inc. v. Court of Appeals, 478 SCRA 451 (2005). Except to Exception: When buyer, who has been occupying the land for two years a s lessee, actually is deemed to take risk on the actual size of the property bou ght at lump sum. xGarcia v. Velasco, 72 Phil. 248 (1941). C. Double Sales (Arts. 1544 and 1165) 1. Priority of Torrens System of Registration The rules on double sales under Ar t. 1544 do not overcome the rules provided under the Property Registration Decre e (P.D. 1459), such as: (a) When two different titles are issued over the same registered land, the buye r who claims under a title that was first issued shall be preferred. xLiao v. Co urt of Appeals, 323 SCRA 430 (2000); (b) Invoking the rules on double sales and priority in time under Art. 1544 would be misplaced by a first buyer who bought the land not within the Torrens system but under Act No. 3344, as against the second buyer who bought the same property when it was already registered under the Torrens system, because: of the well-known rule in this jurisdiction that persons dealing with registered land have the legal right to rely on the fact of the Torrens Certificate of Titl e and to dispense with the need to inquire further, except when the party concer ned has actual knowledge of facts and circumstances that would impel a reasonabl y cautious man to make such inquiry; and the Torrens system rule that formal registration proceedings undertaken on the p

roperty and the subsequent issuance of a title over the land had under the Torre ns system had the legal effect of cleansing title on the property of all liens a nd claims which were not annotated therein. Naawan Community Rural Bank, Inc. v. Court of Appeals, 395 SCRA 43 (2003). But See: Naval v. Court of Appeals, 483 SCRA 102 (2006). 2. Tests Applicable under Article 1544: Caveat emptor requires the buyer to be aware of the supposed title of the seller and he who buys without checking the seller s title takes all the risks and los ses consequent to such failure. xCaram, Jr. v. Laureta, 103 SCRA 7 (1981). The provision on double sale presumes title or ownership to pass to first buyer, exception being: (a) when the second buyer, in good faith, registers the sale a head of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the pr operty ahead of the first buyer. Unless, the second buyer satisfies these requir ements, title or ownership will not transfer to him to the prejudice of the firs t buyer. xCoronel v. CA, 263 SCRA 15 (1996). In spite of the three levels of tests provided under Art. 1544, the Court seems to recognize only registration in good faith by the second buyer and does not ch aracterize the meaning of the last two test of possession and oldest title. Caril lo v. Court of Appeals, 503 SCRA 66 (2006). a. Main Rule: Prior Tempore, Prior Jure. Carbonell v. CA, 69 SCRA 99 (1976). 3. Requisites for Double Sale: a. There Must Be Two Different Valid Sales: Article 1544 do not apply where: There is only one valid sale, while the other sale over the same property is voi d. Fudot v. Cattleya Land, Inc., 533 SCRA 350 (2007); or Where one of the contract is a contract to sell. San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99 (2005). (1) Doctrine on Conditional Sales/Contracts to Sell and Adverse Claims: Mendoza v . Kalaw, 42 Phil. 236 (1921); Adalin v. CA, 280 SCRA 536 (1997). The rules on double sales under Art. 1544 are not applicable to contract to sell , because of the circumstances that must concur in order for the provisions to A rt. 1544 on double sales to apply, namely that there must be a valid sales trans actions, and buyers must be at odds over the rightful ownership of the subject m atter who must have bought from the very same seller, are lacking in a contract to sell for neither a transfer of ownership nor a sales transaction has been con summated, and such contract is binding only upon the fulfillment or non-fulfillm ent of an event. Nevertheless, the governing principle of Art. 1544 should apply , mainly the governing principle of primus tempore,portior jure (first in time, stronger in right). Cheng v. Genato, 300 SCRA 722 (1998). b. Exact Same Subject Matter Article 1544 applies where the same thing is sold to different buyers by the sam e seller. xOng v. Oalsiman, 485 SCRA 464 (2006); and therefore does not apply wh ere there was a sale to one party of the land itself while the other contract wa s a mere promise to sell the land or at most an actual assignment of the rights to repurchase the same land. xDischoso v. Roxas, 5 SCRA 781 (1962). c. Exact Same Seller for Both Sales Article 1544 applies where the same thing is sold to different vendees by the sa me vendor. It does not apply where the same thing is sold to different vendees b y different vendors.or even to the same buyer but by different sellers. Salera v . Rodaje, 530 SCRA 432, 438 (2007). For Article 1544 to apply, it is necessary that the conveyance must have been ma de by a party who has an existing right in the thing and the power to dispose of it. It cannot be invoked where the two different contracts of sale are made by two different persons, one of them not being the owner of the property sold. And even if the sale was made by the same person, if the second sale was made when such person was no longer the owner of the property, because it had been acquire d by the first purchaser in full dominion, the second purchaser cannot acquire a ny right. Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals, 448 SCRA 347 (2005), citing C.Villanueva, Philippine Law on Sales 100 (1995). 3. Registration in Good Faith as First Priority

a. Meaning of Registration The annotation of adverse claim can qualify as the registration mandated under t he rules on double sale. Carbonnel v. Court of Appeals, 69 SCRA 99 (1976). Registration means any entry made in the books of the registry, including both r egistration in its ordinary and strict sense, and cancellation, annotation, and even marginal notes. It is the entry made in the registry which records solemnly and permanently the right of ownership and other real rights. xCheng v. Genato, 300 SCRA 722 (1998). Declaration of purchase for taxation purposes does not comply with the required registration, and the fact alone does not even itself constitute evidence of own ership. xBayoca v. Nogales, 340 SCRA 154 (2000). Registration of the Extra-judicial Partition which merely mentions the sale is n ot the registration covered under Art. 1544 and cannot prevail over the registra tion of the pacto de retro sale. xVda. de Alcantara v. CA, 252 SCRA 457 (1996). There can be no constructive notice to the second buyer through registration unde r Act 3344 if the property is registered under the Torrens system. xAmodia Vda. D e Melencion v. Court of Appeals, 534 SCRA 62, 82 (2007). b. Registration Must Always Be in Good Faith In cases of double sales of immovab les, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith or that he was first to register, but whether or not said second buyer registers such second sale in good faith, that is, without kno wledge of any defect in the title of the property sold. xMartinez v. CA, 358 SCR A 38 (2001); this is so because the defense of indefeasibility of a Torrens titl e does not extend to a transferee who takes the certificate of title in bad fait h. xOccea v. Esponilla, 431 SCRA 116 (2004). c. Knowledge of First Buyer of the Second Sale Does Not Amount to Registration i n favor of the Second Buyer Knowledge gained by the first buyer of the second sale cannot defeat the first b uyer s rights except where the second buyer registers in good faith the second s ale ahead of the first. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge gained by the second bu yer of the first sale defeats his rights even if he is first to register the sec ond sale, since such knowledge taints his prior registration with bad faith. Thi s is the priced exacted by Article 1544 for the second buyer being able to displ ace the first buyer; that before the second buyer can obtain priority over the f irst, he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyer s right) from the time of acquisition unti l the title is transferred to him by registration or failing registration, by de livery of possession. xUraca v. CA, 278 SCRA 702 (1997). In a situation where a party has actual knowledge of the claimants actual, open a nd notorious possession of a disputed property at the time of registration, the actual notice and knowledge are equivalent to registration, because to hold othe rwise would be to tolerate fraud and the Torrens system cannot be used to shield fraud while certificates of title are indefeasible, unassailable and binding ag ainst the whole world, they merely confirm or record title already existing and vested. Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals, 448 S CRA 347 (2005). d. Registration in Good Faith Always Pre-empts Possession in Good Faith Between two purchasers, the one who registered the sale in his favor has a preferred rig ht over the other who has not registered his title, even if the latter is in act ual possession of the immovable property. xTaedo v. CA, 252 SCRA 80 (1996). The registration of a sale after the annotation of the notice of lis pendens doe s not obliterate the effects of delivery and possession in good faith. The rules on constructive notice upon registration provided for under Section 52 of the P roperty Registration Decree (P.D. No. 1529) operate only from the time of the re gistration of the notice of lis pendens which in this case was effected only aft er the time the sale in favor of the second buyer had long been consummated by d elivery of the subject matter. San Lorenzo Dev. Corp. v. Court of Appeals, 449 SC RA 99 (2005).

4. Possession Refers Both to Material and Symbolic Possession. In the absence of inscription under double sales, the law gives preferential rig ht to the buyer who in good faith is first in possession, under the following ju risprudential parameters: (a) Possession mentioned in Article 1544 includes not only material but also symbolic possession; (b) possessors in good faith are tho se who are not aware of any flaw in their title or mode of acquisition; (c) Buye rs of real property that is in the possession of persons other than the seller m ust be wary they must investigate the rights of the possessors; and (d) good fai th is always presumed, upon those who allege bad faith on the part of the posses sors rests the burden of proof. xTen Forty Realty and Dev. Corp. v. Cruz, 410 SC RA 484 (2003). 5. Who is Purchaser in Good Faith? a. Must Have Paid Price in Full A purchaser is good faith is one who buys proper ty of another, without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same at the time of su ch purchase, or before he has notice of the claim or interest of some other pers on in the property. Tanglao v. Parungao, 535 SCRA 123 (2007) Under Article 1544, mere registration is not enough to acquire a new title. Good faith must concur. Clearly, when the buyer has not yet fully paid the purchase price, and as long as seller remains unpaid, the buyer cannot feign good faith. xPortic v. Cristobal, 546 SCRA 577 (2005). b. Burden of Proof The burden of proving the status of a purchaser in good faith lies upon him who asserts that status. It is not sufficient to invoke the ordin ary presumption of good faith, that is, that everyone is presumed to have acted in good faith, since the good faith that is here essential is integral with the very status that must be established. xTanglao v. Parungao, 535 SCRA 123 (2007) . But See: It is anxiomatic that good faith is always presumed in the absence of a ny direct evidence of bad faith. xSantiago v. CA, 247 SCRA 336 (1995). c. Instances When No Good Faith: (1) Being In Business on Realty A mortgagee who eventually ended buying the prop erty at the public auction, cnnot claim to be a buyer in good faith when his bus iness in the constructing and selling townhouses and extending credit to the pub lic, including real estate loans; for he is charged with greater diligence that ordinary buyers or encumbrances for value, because it would be standard in his b usiness, as a matter of due diligence required of banks and financing companies, to ascertain whether the property being offered as security for the debt has al ready been sold to another to prevent injury to prior innocent buyers. xExpress credit Financing Corp. v. Velasco, 473 SCRA 570 (2005). (2) Close Relationship The sale to ones daughter and sons will give rise to the c onclusion that the buyers, not being really third parties, knew of the previous sales and cannot be considered in good faith. The buyers are deemed to have const ructive knowledge by virtue of their relationship to their sellers. xPilapil v. Court of Appeals, 250 SCRA 566 (1995). (3) Obligation to Investigate or To Follow Leads A purchaser who is aware of fac ts which should put a reasonable man upon his guard cannot turn a blind eye and later claim that he acted in good faith, such as A buyer of a registered land would be in bad faith when he purchases without ask ing to see the owners copy of the title and/or without visiting the land where he would then have seen first buyer occupying the same. xSantiago v. CA, 247 SCRA 336 (1995). When there are occupants to the land being bought, since it is the common practi ce in the real estate industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent purchaser usually takes. xMartinez v. CA, 35 8 SCRA 38 (2001). Any person engaged in business would be wary of buying from a company that is cl osing shop, because it may be dissipating its assets to defraud creditors. Such buyer is bound to inquire whether the owners had unsettled obligations encumbran ce that could burden the property. xSamson v. Court of Appeals, 238 SCRA 397 (19 94).

(4) Land in Adverse Possession Buyer who could not have failed to know or discov er that the land sold to him was in the adverse possession of another is a buyer in bad faith. xHeirs of Ramon Durano, Sr. v. Uy, 344 SCRA 238 (2000). (5) Existence of Lis Pendens Settled is the rule that one who deals with propert y with a notice of lis pendens, even when at the time of sale the annotation was cancelled but there was a pending appeal, cannot invoke the right of a purchase r in good faith. A purchaser cannot close his eyes to facts which should put a r easonable man on guard and claim that he acted in the belief that there was no d efect in the title of the seller. xPo Lam v. CA, 316 SCRA 721 (1999). Except: When knowledge of lis pendens was acquired at the time there was order t o have it cancelled. xPo Lam v. CA, 347 SCRA 86 (2000). 6. When Subject of Sale Is Unregistered Land Naawan Community Rural Bank v. CA, 395 SCRA 43 (2003). The rules in double sale under Article 1544, whereby the buyer who is able to fi rst register the purchase in good faith is in full accord with Section 51 of PD 1 529 which provides that no deed, mortgage, lease, or other voluntary instrument except a will purporting to convey or affect registered land shall take effect a s a conveyance or bind the land until its registration. Thus, if the sale is not registered, it is binding only between the seller and the buyer but it does not affect innocent third persons. Abrigo v. De Vera, 432 SCRA 544 (2004). When first sale is over unregistered land and the second sale is when it is regi stered, the rules on double sale do not apply. Dagupan Trading Co. v. Macam, 14 S CRA 179 (1965). Article 1544 is inapplicable to unregistered land because the purchaser of unregi stered land at a sheriffs execution sale only steps into the shoes of the judgmen t debtor, and merely acquires the latters interest in the property sold as of the time the property was levied upon, as expressly provided for in then Sec. 35, Ru le 39 of the Revised Rules of Court on execution sale [now Sec. 33, Rule 39, 199 7 Rules of Civil Procedure)]. Carumba v. CA, 31 SCRA 558 (1970). Under Act 3344, registration of instruments affecting unregistered lands is witho ut prejudice to a third party with a better right, which means that mere registra tion does not give the buyer any right over the land if the seller was not anymo re the owner of the land having previously sold the same to somebody else even i f the earlier sale was unrecorded. The rules on double sale under Art. 1544 has no application to land no registered under the Torrens system.Acabal v. Acabal, 4 54 SCRA 555 (2005). D. Obligations of Buyer 1. Pay the Price (Art. 1582) When seller cannot show title to the subject matter, then he cannot compel the b uyer to pay the price. xHeirs of Severina San Miguel v. CA, 364 SCRA 523 (2001) . Mere sending of a letter by the buyer expressing the intention to pay without th e accompanying payment is not considered a valid tender of payment and consignat ion of the amount due are essential in order to extinguish the obligation to pay and oblige the seller to convey title. xTorcuator v. Bernabe, 459 SCRA 439 (200 5). Unless the parties to a sale have agreed to the payment of the purchase price to any other party, then its payment to be effective must be made to the seller in accordance with Article 1240 which provides that Payment shall be made to the pe rson in whose favor the obligation has been constituted, or his successor in int erest, or any person authorized to receive it. xMontecillo v. Reynes, 385 SCRA 24 4 (2002). 2. Accept Delivery (Arts. 1582-1585) VII. DOCUMENTS OF TITLE (Arts. 1507-1520) 1. Definition (Art. 1636) 2. Purpose of Documents of Title Through a document of title, seller is allowed by fiction of law to deal with th e goods described therein as though he had physically delivered them to the buye r; and buyer may take the document as though he had actually taken possession an d control over the goods described therein. xPhilippine Trust Co. v. National Ba

nk, 42 Phil. 413 (1921). Warehouse receipt represents the goods, but the intrusting of the receipt is mor e than the mere delivery of the goods; it is a representation that the one to wh om the possession of the receipt has been so entrusted has the title to the good s. xSiy Cong Bieng v. Hongkong & Shanghai Bank, 56 Phil. 598 (1932). 3. Negotiable Documents of Title a. How Negotiated (Arts. 1508-1509) b. Who Can Negotiate (Art. 1512) c. Effects of Negotiation (Art. 1513) The endorsement and delivery of a negotiable quedan operates as the transfer of possession and ownership of the property referred to therein, and had the effect of divorcing the property covered therein from the estate of the insolvent prio r to the filing of the petition for insolvency. xPhilippine Trust Co. v. Nationa l Bank, 42 Phil. 413 (1921). d. Unauthorized Negotiation (Art. 1518) As between the owner of a negotiable document of title who endorsed it in blank and entrusted it to a friend, and the holder of such negotiable document of titl e to whom it was negotiated and who received it in good faith and for value, the latter is preferred, under the principle that as between two innocent persons, he who made the loss possible should bear the loss. xSiy Long Bieng v. Hongkong and Shanghai Banking Corp., 56 Phil. 598 (1932). 4. Non-negotiable Documents of Title a. How Transferred or Assigned (Art. 1514) b. Effects of Transfer (Art. 1514). 5. Warranties of Seller of Documents of Title (Art. 1516) 6. Rules of Levy/Garnishment of Goods (Arts. 1514, 1519, 1520). VIII. SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE: LIFE OF A CONTRACT OF S ALE 1. Effect of Sale Where Seller Not Owner at Time of Delivery (Art. 1505; Paulmita n v. Court of Appeals, 215 SCRA 866 [1992]). In sale, it is essential that the seller is the owner of the property he is sell ing. The principal obligation of a seller is to transfer the ownership of the prop erty sold (Art. 1458). This law stems from the principle that nobody can dispose of that which does not belong to him: NEMO DAT QUOD NON HABET. xNoel v. CA, 24 0 SCRA 78 (1995). Although a situation (where the sellers were no longer owners) does not appear t o be one of the void contracts enumerated in Art. 1409 of Civil Code, and under Art. 1402 Civil Code itself recognizes a sale where the goods are to be acquired x x x by the seller after the perfection of the contract of sale clearly implying that a sale is possible even if the seller was not the owner at the time of sal e, provided he acquires title to the property later on, but when delivery of own ership is no longer possible, the sale should be considered void, and consequent ly, the right to repurchase provided therein would also be void xNool v. CA, 27 6 SCRA 149 (1997). If one buys the land of another, to which the seller is supposed to have a good title, and in consequence of facts unknown alike to both parties, the seller has in fact no title at all, equity will cancel the sale and cause the purchase mon ey to be restored to the buyer, putting both parties in status quo. xDBP v. CA, 249 SCRA 331 (1995). a. Sales by Co-Owners (Art. 493) In a contract of sale of co-owned property, what the vendee obtains by virtue of such a sale are the same rights as the vendor had as co-owner (i.e., his spirit ual share), and the vendee merely steps into the shoes of the vendor as co-owner . xPanganiban v. Oamil, 542 SCRA 166 (2008); except when the intention of the pu rchase was clearly the property itself and not just the spiritual share. Mindanao v. Yap, 13 SCRA 190 (1965). An agreement that purports a specific portion of an un-partitioned co-owned prop erty is not void; it shall effectively transfer the sellers ideal share in the co -ownership. Heirs of the Late Spouses Aurelio and Esperanza Balite v. Lim, 446 S CRA 54 (2004).

In which case, the proper action is not for nullification of sale, or for the re covery of possession of the property owned in common from the other co-owners, b ut for division or partition of the entire property. xTomas Claudio Memorial Col lege, Inc. v. Court of Appeals, 316 SCRA 502 (1999). A co-owner who sells one of the two lands owned in common with another co-owner, and does not turn-over one-half of the proceeds of the sale to the other co-own er, the latter may by law and equity lay exclusive claim to the remaining parcel of land. xImperial v. Court of Appeals, 259 SCRA 65 (1996). 2. Exceptions: When Ownership Transfers by Act of the Non-Owner a. Estoppel on True Owner (Art. 1434) Bucton v. Gabar, 55 SCRA 499 (1974). b. Recording Laws; Torrens System (Pres. Decree 1529). The defense of indefeasibility of Torrens title where the disputed buildings and equipment are located is unavailing, since such defense is available to sale of lands and not to sale of properties situated therein. xTsai v. CA, 366 SCRA 32 4 (2001). An innocent purchaser for value is one who purchases a titled land by virtue of a deed executed by the registered owner himself not by a forged deed. xInsurance Services and Commercial Traders, Inc. v. CA, 341 SCRA 572 (2000).

Where innocent third persons, relying on the correctness of the certificate of t itle thus issued, acquire rights over the property, the court cannot disregard s uch rights and order the cancellation of the certificate, since the effect of su ch outright cancellation will be to impair public confidence in the certificate of title. Every person dealing with the registered land may safely rely on the c orrectness of the certificate of title issued therefor and the law will in no wa y oblige him to go behind the certificate to determine the condition of the prop erty. xHeirs of Spouses Benito Gavino. v. Court of Appeals, 291 SCRA 495 (1998). c. Statutory Power Order of Courts When a defeated party refuses to execute the absolute deed of sale in accordance with the judgment, the court may direct the act to be done at the cost of the d isobedient party by some other person appointed by the court and the act when so done shall have the like effect as is done by the party. xManila Remnant Co., Inc. v. CA, 231 SCRA 281 (1994) d. Sale in Merchants Stores, Fairs or Markets (Arts. 85 and 86, Code of Commerce ) City of Manila v. Bugsuk, 101 Phil. 859 (1957); Sun Bros. & Co. v. Velasco, 54 O .G. 5143 (1958). 3. Sale by One Having Voidable Title (Art. 1506, as an exception to Art. 559) Whenever there is an underlying contract of sale which grants to the culprit-buy er a voidable title, even when this is accompanied by the criminal act of estafa or swindling, Article 1506 would grant to the buyer in good faith a better titl e as against the original owner even though the latter may be classified to have been unlawfully deprived of the subject matter under Art. 559. Tagatac v. Jimenez, 53 O.G. 3792 (1957); EDCA Publishing v. Santos, 184 SCRA 614 (1990). Thus, when owner did not voluntarily deliver possession of the car, and in effec t it was stolen from him, then one who buys the car even in good faith from the thief will lose the car to the owner who is deemed to have been unlawfully depri ved. Aznar v. Yapdiangco, 13 SCRA 486 (1965). In all other cases of unlawful deprivation done through estafa, the original own er recovers even from the buyer in good faith. Cruz v. Pahati, 98 Phil. 788 (195 6). [CLV: Decision showed that second buyer, or current possessor could not clai m good faith because of erasures in the covering documents presented by his sell er] Owner of diamond ring may recover possession of the same from pawnshop where the owners agent had pledged it without authority to do so; Article 559 applies and the defense that the pawnshop acquired possession without notice of any defect o f the pledgor-agent is unavailing. Dizon v. Suntay, 47 SCRA 160 (1972). [CLV: In those cases possessor is a merchant and only has a pledge in his favor]. IX. LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS

1. No Application When Subject Matter is Determinable (Art. 1263) 2. Effect of Loss/Deterioration of Thing Sold: a. Before Perfection (Roman v. Grimalt, 6 Phil. 96 [1906]). b. At Time of Perfection (Arts. 1493 and 1494). c. After Perfection But Before Delivery (Arts. 1164, 1189, and 1262). (1) General Rule: Before delivery, risk of loss is borne by seller under the rul e of res perit domino. xChrysler Phil. v. Court of Appeals, 133 SCRA 567 (1984) . In the case of a motor vehicle, where there was neither physical or constructive delivery of a determinate thing, the thing sold remained at the sellers risk. x Union Motor Corp v. Court of Appeals, 361 SCRA 506 (2001). (2) Loss by Fault of a Party (Arts. 1480, 1504, 1538) (3) Loss by Fortuitous Event (Arts. 1480, 1163, 1164, 1165, 1504, 1538, and 1189 ; READ Comments of Paras, Tolentino, Padilla, and Baviera). (4) Deterioration (Arts. 1480, 1163-65, and 1262; Arts. 1189 and 1538) (5) Fruits or Improvements from time of perfection pertain to buyer (Arts. 1480, 1537-1538). d. After Delivery (Art. 1504) Lawyer s Coop v. Tabora, 13 SCRA 762 (1965). X. REMEDIES FOR BREACH OF CONTRACT OF SALE (Arts. 1594-1599) A. ON PART OF SELLER 1. In Case of Movables ((Arts. 1593, 1595 to 1597) Under Article 1597, when the buyer of scrap iron fails to put up the letter of c redit in favor of the seller as the condition of the sale, the seller had a righ t to terminate the contract, and non-compliance with the condition meant that th e sellers obligation to sell never did arise. xVisayan Sawmill Co. v. Court of Ap peals, 219 SCRA 378 (1993). 2. Unpaid Seller of Goods (Arts. 1524-1535) a. Definition of Unpaid Seller (Art. 1525) b. Rights of Unpaid Seller: Possessory lien (Arts. 1526-1529, 1503, 1535) Stoppage in transitu (Arts. 1530-1532, 1535, 1636[2]) Right of Resale (Art. 1533) Right to Rescind (Art. 1534) Even before the formal statutory adoption of the remedies of an unpaid seller, t he Supreme Court had already recognized the right of a seller, when the contract of sale is still executory in stage, to resell the movables subject matter of t he sale, when the buyer fails to pay the purchase price. xHanlon v. Hausserman, 40 Phil. 796 (1920). Seller in possession of the goods may sell them at buyer s risk. xKatigbak v. C ourt of Appeals, 4 SCRA 243 (1962). 3. RECTO LAW: Sales of Movables on Installments (Arts. 1484, 1485, 1486) The Recto Law prevents mortgagee from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortg agor for a deficiency judgment. The almost invariable result was that the mortga gor found himself minus the property and still owing practically the full amount of his original indebtedness. xMagna Financial Services Group, Inc. v. Colarina , 477 SCRA 245 (2005). a. Installment Sale requires at least stipulated two (2) payments in the future, whether or not there is a downpayment. Levy v. Gervacio, 69 Phil. 52 (1939). b. Contracts to Sell Movables Not Covered. xVisayan Sawmill Company, Inc. v. Cou rt of Appeals, 219 SCRA 378 (1993). c. Remedies Available to Unpaid Seller Not Cumulative But Alternative and Exclu sive. Delta Motor Sales Corp. v. Niu Kim Duan, 213 SCRA 259 (1992). Seeking a writ of replevin consistent with any of the three remedies. xUniversal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 (1969). d. Remedy of Specific Performance The fact that the seller obtained a writ of execution against the property mortg aged, but pursuant to an action for specific performance with a plea for a writ of replevin, does not amount to a foreclosure of the chattel mortgage covered by the Recto Law. Tajanglangit v. Southern Motors, 101 Phil. 606 (1957).

e. Nature of Remedy of Rescission Surrender of mortgaged property is not necessarily equivalent to rescission. xVd a. de Quiambao v. Manila Motors Co., Inc., 3 SCRA 444 (1961). Mutual restitution prevents recovering on the balance of the purchase price. Nona to v. IAC, 140 SCRA 255 (1985); but stipulation on non-return of payments is val id provided not unconscionable. xDelta Motor Sales Corp. v. Niu Kim Duan, 213 SC RA 259 (1992). f. Remedy of Foreclosure Barring effect would cover a third-party mortgage, when it was the chattel mortg age that was first foreclosed. Ridad v. Filipinas Investment, 120 SCRA 246 (1983) . When the seller assigns his credit to another person, the latter is likewise bou nd by the same law. Zayas v. Luneta Motors, 117 SCRA 726 (1982). (i) Barring Effects of Foreclosure Filing of the action of replevin in order to fo reclose on the chattel mortgage does not produce the barring effect under the Re cto Law; for it is the fact of foreclosure and actual sale of the mortgaged chat tel that bar further recovery by the seller of any balance on the buyers outstand ing obligation not satisfied by the sale. The voluntary payment of the installme nt by the buyer-mortgagor is valid and not recoverable in spite the restrictive provisions of Art. 1484(3). Northern Motors v. Sapinoso, 33 SCRA 356 (1970). Foreclosure on the chattel mortgage prevents further action on the supporting re al estate mortgage, whether the chattel mortgage is first foreclosed Cruz v. Fili pinas Investment & Finance Corp., 23 SCRA 791 (1968); and vice versa when the re al estate mortgage is first foreclosed. Borbon II v. Servicewide Specialists, Inc ., 258 SCRA 634 (1996). All amounts barred from recovery. Macondray & Co. v. Eustaquio, 64 Phil. 446 (19 37). (ii) Rule on Perverse Buyer. Filipinas Investment & Finance Corp. v. Ridad, 30 SCR A 564 (1969). g. Purported Lease with Option to Buy The Court took judicial notice of the practice of vendors of personal property o f denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. xElisco Tool Manufacturing Corp. v. CA, 307 SCRA 731 ( 1999). Where a lease agreement over equipment is without an express option to purchase, but nevertheless when a final demand is given prior to suit, the demand letter indicates clearly it was within the option of the lessee to fully pay the balanc e of the unpaid rentals and would be able to keep the equipment, then the real c ontract between the parties was a sale of movable on installment disguised as a lease agreement. PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc ., 527 SCRA 405 (2007). 4. In Case of Immovables: a . Anticipatory Breach (Art. 1591) Legarda v. Saldaa, 55 SCRA 324 (1974). b. Sales of Subdivision Lots and Condominium Units (Secs. 23 and 24, P.D. 957) P.D.957 was issued in the wake of numerous reports that many real estate subdivis ion owners, developers, operators and/or sellers have reneged on their represent ations and obligations to provide and maintain properly subdivision roads, drain age, sewerage, water systems, lighting systems and other basic requirements or t he health and safety of home and lot buyers. It was designed to stem the tide of fraudulent manipulations perpetrated by unscrupulous subdivision and condominiu m sellers free from liens and encumbrances. xCasa Filipinas Realty Corp. v. Offic e of the President, 241 SCRA 165 (1995). Section 20 of P.D. 957 directs every owner and developer of real property to pro vide the necessary facilities, improvements, infrastructure and other forms of d evelopment, failure to carry out which is sufficient cause for the buyer to susp end payment, and any sums of money already paid shall not be forfeited. xTamayo v. Huang, 480 SCRA 156 (2006). In case the developer of a subdivision or condominium fails in its obligation u nder Section 20, Section 23 gives the buyer:

the option to demand reimbursement of the total amount paid, or to wait for furt her development of the subdivision, and when the buyer opts for the latter alter native, he may suspend payment of the installments until such time that the owne r or developer has fulfilled its obligations. xTamayo v. Huang, 480 SCRA 156 (20 06); buyer required only to give due notice to the owner or developer of the buyers in tention to suspend payment. xZamora Realty and Dev. Corp. v. Office of the Presi dent, 506 SCRA 591 (2006); Sec. 23 does not require that a notice be given first by the buyer to the seller before a demand for refund can be made as the notice and demand can be made in the same letter or communication. xCasa Filipinas Realty Corp v. Office of the P resident, 241 SCRA 165 (1995); and Option granted by law is with buyer and not the developer/seller. xRelucio v. Br illante-Garfin, 187 SCRA 405 (1990). Buyer under P.D. 957 would include one who acquires for a valuable consideration a condominium unit by way of assignment by the condominium project owner in paym ent of its indebtedness for contractors fee. xAMA Computer College, Inc. v. Facto ra, 378 SCRA 121 (2002). Buyers of condominium units would be justified in suspending payments, when the developer-seller fails to give them a copy of the Contract to Sell despite repea ted demands. xGold Loop Properties, Inc. v. CA, 350 SCRA 371 (2001). Nothing in P.D. 957 provides for the nullification of a contract to sell in the event the seller, at the time the contract was entered into, did not possess a c ertificate of registration and license to sell. Co Chien v. Sta. Lucia Realty, 5 13 SCRA 570 (2007). 5. MACEDA LAW: Sales of Residential Realty on Installments (R.A. 6552). The contract for the purchase of a piece of land on installment basis is not only lawful; it is also of widespread usage or custom in our economic system. . . . If [buyer] eventually found the interest stipulation in the contract financially disadvantageous to him, he cannot now turn to this Court for succor without imp airing the constitutional right to the obligation of contracts. This Court will not relieve petitioner of the necessary consequences of his free and voluntary, and otherwise lawful, act. . . xBortikey v. AFP Retirement and Separation Benefit s System, 477 SCRA 511 (2005). a. Role of Maceda Law Maceda Laws declared policy is to protect buyers of real esta te on installment basis against onerous and oppressive conditions, and seeks to address the acute housing shortage problem in our country that has prompted thou sands of middle and lower class buyers of houses, lots and condominium units to enter into all sorts of contracts with private housing developers involving inst allment schemes. xActive Realty & Dev. Corp. Daroya, 382 SCRA 152 (2002). Maceda Law recognizes in conditional sales of all kinds of real estate sellers ri ght to cancel the contract upon non-payment of an installment by the buyer, whic h is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. xPagtulunan v. Dela Cruz Vda. De Manzano, 533 SCRA 242 (2008). b. Transactions Covered The formal requirements of rescission under the Maceda Law apply even to contrac ts entered into prior to its effectivity. xSiska Dev. Corp. v. Office of the Pre sident, 231 SCRA 674 (1994). But See xPeoples Industrial and Commercial Corp. v. CA, 281 SCRA 206 (1997). Maceda Law finds no application to a contract to sell where the suspensive condi tion has not been fulfilled, because said Law presuppose the existence of a vali d and effective contract to sell a condominium. [?] xMortel v. KASSCO, Inc., 348 SCRA 391, 398 (2000). Maceda Law makes no distinctions between option and sale which under P.D. 957 also i ncludes an exchange or attempt to sell, an option of sale or purchase, a solicita tion of a sale or an offer to sell directly, and the all-embracing definition vir tually includes all transactions concerning land and housing acquisition, includ ing reservation agreements. xRealty Exchange Venture Corp. v. Sendino, 233 SCRA 665 (1994).

Maceda Law has no application to protect the developer or one who succeeds the d eveloper. xLagandaon v. Court of Appeals, 290 SCRA 463 (1998). c. How to Determine Years of Installments: Jestra Dev. and Management Corp. v. Pa cifico, 513 SCRA 413 (2007). d. How Cancellation of Contract Can Be Effected The cancellation of the contract under the Maceda Law mandatorily must follow the following steps: First, the seller should extend the buyer a grace period of at least sixty (60) days from the due date of the installments. Second, at the end of the grace period, the seller shall furnish the buyer with a notarial notice of cancellation or demand for rescission, effective thirty (30 ) days from the buyers receipt thereof; a mere notice or letter, short of a notar ial act, would not suffice. McLaughlin v. CA, 144 SCRA 693 (1986). Third, for contracts covering more than two years of payments, there must be ret urn to the buyer of the cash surrender value. xVilldara, Jr. v. Zabala, 545 SCRA 325 (2008). The additional formality of a demand on [the sellers] part for rescission by nota rial act would appear, in the premises, to be merely circuitous and consequently superfluous since the seller therein filed an action for annulment of contract, which is a kindred concept of rescission by notarial act. xLayug v. IAC, 167 SC RA 627 (1988). A decision rendered in an ejectment case operated as the required notice of canc ellation under the Maceda Law; but as the buyer was not given the cash surrender value of the payments she made, there was still no actual cancellation of the c ontract. xLeao v. Court of Appeals, 369 SCRA 36 (2001). A formal letter demand upon buyer to vacate the premises is not the same as the notice of cancellation or demand for rescission by a notarial act required by R. A. No. 6552. Evidently, the case of unlawful detainer filed by petitioner does n ot exempt him from complying with the said requirement. xPagtulunan v. Dela Cruz Vda. De Manzano, 533 SCRA 242 (2008). 6. Rescission on Sales of Non-Residential Immovables on Installments (Arts. 1191 and 1592) Articles 1191 and 1592 on rescission cannot apply to a contract to sell since the re can be no rescission of an obligation that is still non-existent, the suspens ive condition not having happened. xValarao v. CA, 304 SCRA 155 (1999). Article 1592 allows the buyer of an immovable to pay as long as no demand for re scission has been made; and the consignation of the balance of the purchase pric e before the trial court operates as full payment. xProvince of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008). Automatic rescission clauses are not valid nor can be given legal effect under A rticles 1191 and 1592 . xIringan v. Court of Appeals, 366 SCRA 41 (2001). Indeed , rescission requires under the law a positive act of choice on the party of the non-defaulting party. xOlympia Housing v. Panasiatic Travel Corp., 395 SCRA 29 8 (2003). Vendor cannot recover ownership of the thing sold until and unless the contract itself is resolved and set aside; a party who fails to invoke judicially or by n otarial act the resolution of a contract of sale would be prevented from blockin g the consummation of the same in light of the precept that mere failure to fulf ill the contract does not operate ipso facto as rescission. Platinum Plans Phil. , Inc. v. Cucueco, 488 SCRA 156 (2006). B. ON PART OF BUYER 1. In case of Movables (Arts. 1598-1599) 2. In case of Immovables (Arts. 1191; Secs. 23 and 24, P.D. 957) 3. Suspension of Payment (Art. 1590) The pendency of suit over the subject matter of the sale justifies the buyer in suspending payment of the balance of the purchase price by reason of aforesaid v indicatory action filed against it. The assurance made by the seller that the bu yer did not have to worry about the case because it was pure and simple harassme nt is not the kind of guaranty contemplated under Article 1590 wherein the buyer is bound to make payment if the seller should give a security for the return of the price. xAdelfa Properties, Inc. v. Court of Appeals, 240 SCRA 565 (1995).

XI. REMEDY OF RESCISSION IN SALES CONTRACTS COVERING IMMOVABLES: CONTRACT OF SAL E versus CONTRACT TO SELL A. Nature of Remedy of Rescission (Resolution) (Arts. 1191, 1479, 1592) 1. Distinguishing from Other Remedy of Rescission (Universal Food Corp. v. CA, 3 3 SCRA 22 [1970]). But see contra Suria v. IAC, 151 SCRA 661 [1987]). While Art. 1191 uses the term rescission, the original term which was used in the old Civil Code was resolution. Resolution is a principal action which is based on breach of a party, while rescission under Art. 1383 is a subsidiary action limit ed to cases of rescission for lesion under Art. 1381. xOng v. Court of Appeals, 310 SCRA 1 (1999). 2. Basis of Remedy of Rescission (Resolution) Rescission under Art. 1191 is predicated on a breach of faith by the other party who violates the reciprocity between them, and the breach contemplated is the o bligors failure to comply with an existing obligation. When the obligee may seek rescission and, in the absence of any just cause for the court to determine the period of compliance, the court shall decree the rescission. xVelarde v. Court o f Appeals, 361 SCRA 56 (2001). To rescind is to declare a contract void at its inception and to put an end to i t as though it never was. It is not merely to terminate it and release the parti es from further obligations to each other, but to abrogate it from the beginning and restore the parties to their relative positions as if no contract has been made. xVelarde v. Court of Appeals, 361 SCRA 56 (2001). When a party asks for the resolution or cancellation of a contract it is implied that he recognizes it existence a non-existent contract cannot be cancelled. xP an Pacific Industrial Sales Co., Inc. v. Court of Appeals, 482 SCRA 164 (2006). Non-payment of the purchase price is a resolutory condition for which the remedy is either rescission or specific performance under Article 1191. This is true f or reciprocal obligations where the obligation is a resolutory condition of the other. On the other hand, the buyer is entitled to retain the purchase price or a part thereof if the seller fails to perform any essential obligation of the co ntract. Such right is premised on the general principles of reciprocal obligatio n. xGil v. Court of Appeals, 411 SCRA 18 (2003). Consignation by the buyer of the purchase price of the property, there having be en no previous receipt of a notarial demand for rescission, is sufficient to def eat the right of the seller to demand for a rescission of the deed of absolute s ale. xGil v. Court of Appeals, 411 SCRA 18 (2003). Creditors do not have such material interest as to allow them to sue for resciss ion of a sale theirs is only a personal right to receive payment for the loan, n ot a real right over the property subject of the deed of sale. xAdorable v. CA, 319 SCRA 200 (1999). Action for Rescission Not Similar to An Action for Reconveyance In the sale of r eal property, the seller is not precluded from going to the court to demand judi cial rescission in lieu of a notarial act of rescission. But such action is diff erent from an action for reconveyance of possession on the thesis of a prior res cission of the contract covering the property. The effects that flow from an aff irmative judgment in either case would be materially dissimilar in various respe cts: judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that arise in an action for reconveyance. In an a ction for rescission, unlike in an action for reconveyance predicated on an extr ajudicial rescission (rescission by notarial act), the court, instead of decreei ng rescission, may authorize for a just cause the fixing of a period. xOlympia H ousing v. Panasiatic Travel Corp., 395 SCRA 298 (2003). 3. Power to Rescind Generally Judicial in Nature A seller cannot unilaterally and extrajudicially rescind a contract of sale wher e there is no express stipulation authorizing it. Unilateral rescission will not be judicially favored or allowed if the breach is not substantial and fundament al to the fulfillment of the obligation. xBenito v. Saquitan-Ruiz, 394 SCRA 250 (2002). Nonetheless, the law does not prohibit the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, ev

en without court intervention. xFroilan v. Pan Oriental Shipping Co., 12 SCRA 27 6 (1964). 4. Mutual Restitution and Forfeiture (Art. 1385) When sale is annulled, parties are governed by Art. 1398 whereunder they shall r estore to each other the things which have been the subject matter of the contra ct, with their fruits, and price with interest. xInes v. Court of Appeals, 247 SCRA 312 (1995). The sellers right in a contract to sell with reserved title to extrajudicially ca ncel the sale upon failure of the buyer to pay the stipulated installments and r etain the sums and installments already received has long been recognized by the well-established doctrine of 39 years standing. xPangilinan v. CA, 279 SCRA 590 (1997). Pursuant to Art. 1188, in a contract to sell, even if the buyers did not mistake nly make partial payments, inasmuch as the suspensive condition was not fulfille d, it is only fair and just that the buyers be allowed to recover what they had paid in expectancy that the condition would happen; otherwise, there would be un just enrichment on the part of the seller. xBuot v. Court of Appeals, 357 SCRA 8 46 (2001). B. Distinctions Between Contract of Sale and Contract to Sell 1. Contract of Sale versus Contract to Sell (Art. 1458) Adelfa Properties, Inc. v. CA, 240 SCRA 575 (1995). In a contract of sale, title to the property passes to buyer upon the delivery o f the thing sold; in a contract to sell, ownership is, by agreement, reserved in the seller and is not to pass to buyer until full payment of purchase price. Ot herwise stated, in a contract of sale, seller loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded, wh ereas in a contract to sell, title is retained by the seller until full payment of the price. In the latter contract, payment of the price is a positive suspens ive condition, failure of which is not a breach but an event that prevents the o bligation of the vendor to convey title from becoming effective. xCastillo v. R eyes, 539 SCRA 193 (2007). a. Rationale of Contracts to Sell A contract to sell is commonly entered into so as to protect the seller against a buyer who intends to buy the property in installments by withholding ownership over the property until the buyer effects full payment therefor. It cannot be i nferred in a situation where both parties understood the price to be paid in cas h. xCity of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999). b. Is a Contract to Sell a Sale under Article 1458? A contract to sell as a bilateral contract whereby the prospective seller, while ex pressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively t o the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. Coronel v. CA, 263 SCRA 15, 27 (1996). But see : PNB v. CA, 262 SCRA 464 (1996). To be sure, a contract of sale may either be absolute or conditional. One form o f conditional sales is what is now popularly termed as a Contract to Sell, where o wnership or title is retained until the fulfillment of a positive suspensive con dition normally the payment of the purchase price in the manner agreed upon. For a contract, like a contract to sell, involves a meeting of minds between two pe rsons whereby one binds himself, with respect to the other, to give something or to render some service. xGomez v. Court of Appeals, 340 SCRA 720, 728 (2000). c. Importance of Locating the Condition to Pay Price in Full In a contract of sale, the non-payment of the price is a resolutory condition wh ich extinguishes the transaction that, for a time existed, and discharges the ob ligations created thereunder. xBlas v. Angeles-Hutalla, 439 SCRA 273 (2004). Whe reas, in a contract to sell, the payment of the purchase price is a positive sus pensive condition. The vendors obligation to convey the title does not become eff ective in case of failure to pay. xBuot v. Court of Appeals, 357 SCRA 846 (2001) . When the obligation of buyer to pay the full amount of the purchase price was ma

de subject to the condition that the seller first delivery the clean title over the parcel bough within twenty (20) months from the signing of the contract, suc h condition is imposed merely on the performance of the obligation, as distingui shed from a condition imposed on the perfection of the contract. The non-happeni ng of the condition merely granted the buyer the right to rescind the contract o r even to waive it and enforce performance on the part of the seller, all in con sonance with Art. 1545 of Civil Code which provides that Where the obligation of either party to a contract of sale is subject to any condition which is not perf ormed, such party may refuse to proceed with the contract or he may waive perfor mance of the condition. Babasa v. Court of Appeals, 290 SCRA 532 (1998). d. Necessary Stipulations in a Contract to Sell: A contract is one of sale, absent any stipulation therein (a) reserving title ov er the property to the vendee until full payment of the purchase price, and (b) giving the vendor the right to unilaterally rescind the contract in case of nonpayment. Valdez v. Court of Appeals, 439 SCRA 55 (2004). But see: Dignos v. Court of Appeals, 158 SCRA 375 (1988). The reservation of title may not be found in express provision of the contract, but may also be determined from proven acts of the parties. xSalazar v. CA, 258 SCRA 325 (1996). The absence of a formal deed of conveyance is a strong indication that the parti es did not intend immediate transfer of ownership, but only a transfer after ful l payment of the purchase price, and the seller retained possession of the certi ficate of tile and all other documents relative to the sale until there was full payment of the purchase price. xChua v. Court of Appeals, 401 SCRA 54 (2003). An agreement in which ownership is reserved in the vendor and is not to pass to the vendee until full payment of the purchase price is known as a contract to se ll. The absence of full payment suspends the vendors obligation to convey title, even if the sale has already been registered. Registration does not vest, but me rely serves as evidence of, title to a particular property. Our land registratio n laws do not give title holders any better ownership than what they actually ha d prior to registration. xPortic v. Cristobal, 456 SCRA 577 (2005). e. Issue of Substantial Breach (Arts. 1191 and 1234) The concept of substantial breach is irrelevant to a contract of sale. xLuzon B rokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 93 (1972). In a contract to sell real property on installments, the full payment of the pur chase price is a positive condition, the failure of which is not considered a br each, casual or serious, but simply an event that prevented the obligation of th e vendor to convey title from acquiring any obligatory force. The transfer of ow nership and title would occur after full payment of the price. xLeao v. CA, 369 S CRA 36 (2001). 2. Minimum Requirement for Cancellation of Contract to Sell The act of a party in treating a contract as cancelled should be made known to t he other party because this act is subject to scrutiny and review of the courts in case the alleged defaulter bring the matter for judicial determination. Univer sity of the Philippines v. De los Angeles, 35 SCRA 103 (1970); Palay Inc. v. Clav e, 124 SCRA 638 (1983). A contract to sell imposes reciprocal obligations and so cannot be terminated un ilaterally by either party. Judicial rescission is required under Article 1191. However, this rule is not absolute. We have held that in proper cases, a party may take it upon itself to consider the contract rescinded and act accordingly a lbeit subject to judicial confirmation, which may or may not be given. Lim v. Co urt of Appeals, 182 SCRA 564 (1990). But See: In a contract to sell, upon failu re of buyer to comply with its obligation, there was no need to judicially resci nd the contract to sell. Failure by one of the parties to abide by the condition s in a contract to sell resulted in the rescission of the contract. AFP Mutual Be nefit Assn., Inc. v. CA, 364 SCRA 768 (2001). A grace period is a right, not an obligation of the debtor, and when uncondition ally conferred, the grace period is effective without further need of demand eit her calling for the payment of the obligation or for honoring the right. xBrickt own Dev. Corp. v. Amor Tierra Dev.., 239 SCRA 126 (1995).

3. Equity Resolutions on Contracts To Sell Although buyer clearly defaulted in his installment payments in a contract to se ll covering two parcels of land, the Supreme Court nevertheless awarded ownershi p over one of the two (2) lots jointly purchased by the buyer, on the basis that the total amount of installments paid, although not enough to cover the purchas e price of the two lots were enough to cover fully the purchase price of one lot , ruling there was substantial performance insofar as one of the lots concerned as to prevent rescission thereto. xLegarda Hermanos v. Saldaa, 55 SCRA 3246 (197 4). Where buyer had religiously been paying monthly installments for 8 years, but ev en after default he was willing and had offered to pay all the arrears, the Cour t granted additional period of 60 days from receipt of judgment for buyer to mak e all installments payments in arrears plus interests, although demand for resci ssion had already been made. xJ.M. Tuazon Co., Inc. v. Javier, 31 SCRA 829 (1970 ). XII. CONDITIONS AND WARRANTIES 1. Conditions (Art. 1545) Failure to comply with condition imposed upon perfection of the contract results in failure of a contract, while the failure to comply with a condition imposed on the performance of an obligation only gives the other party the option either to refuse to proceed with sale or waive the condition. Laforteza v. Machuca, 333 SCRA 643 (2000). In a Sale with Assumption of Mortgage, the assumption of mortgage is a condition t o the sellers consent so that without approval by the mortgagee, no sale is perfe cted. In such case, the seller remains the owner and mortgagor of the property a nd retains the right to redeem the foreclosed property. xRamos v. CA, 279 SCRA 1 18 (1997). There has arisen here a confusion in the concepts of validity and the efficacy o f a contract. Under Art. 1318 of Civil Code, the essential requisites of a contr act are: consent of the contracting parties; object certain which is the subject matter of the contract and cause of the obligation which is established. Absent one of the above, no contract can arise. Conversely, where all are present, the result is a valid contract. However, some parties introduce various kinds of re strictions or modalities, the lack of which will not, however, affect the validi ty of the contract. Thus, a provision this Contract of Sale of rights, interests and participations shall become effective only upon the approval by the Honorab le Court, in the event of non-approval by the courts, affect only the effectivity and not the validity of the contract of sale. Heirs of Pedro Escanlar v. Court o f Appeals, 281 SCRA 176 (1997). 2. Conditions versus Warranties. Power Commercial and Industrial Corp. v. Court o f Appeals, 274 SCRA 597 (1997). 3. Express Warranties (Art. 1546) A warranty is an affirmation of fact or any promise made by a vendor in relation to the thing sold. The decisive test is whether the vendor assumes to assert a fact of which the vendee is ignorant. xGoodyear Philippines, Inc. v. Sy, 474 SCR A 427 (2005). The principle of caveat emptor only requires the purchaser to exercise care and attention ordinarily exercised by prudent men in like business affairs, and only applies to defects which are open and patent to the service of one exercising s uch care. It can only be applied where it is shown or conceded that the parties to the contract stand on equal footing and have equal knowledge or equal means o f knowledge and there is no relation of trust or confidence between them. It doe s not apply to a representation that amounts to a warranty by the seller and the situation requires the buyer to rely upon such promise or affirmation. Guinhawa v. People, 468 SCRA 278 (2005). The law allows considerable latitude to sellers statements, or dealers talk; and e xperience teaches that it is exceedingly risky to accept it at its face value. A ssertions concerning the property which is the subject of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary mean s used by sellers to obtain a high price and are always understood as affording

to buyers no ground for omitting to make inquiries. A man who relies upon such a n affirmation made by a person whose interest might so readily prompt him to exa ggerate the value of his property does so as his peril, and must take the conseq uences of his own imprudence. xSongco v. Sellner, 37 Phil. 254 (1917). Breach of an express warranty makes the seller liable for damages. The following requisites must be established in order that there be an express warranty in sa le: (1) the express warranty must be an affirmation of fact or any promise by th e seller relating to the subject matter of the sale; (2) the natural tendency of such affirmation or promise is to induce the buyer to purchase the thing; and ( 3) the buyer purchases the thing relying on such affirmation or promise thereon. xCarrascoso, Jr. v. CA, 477 SCRA 666 (2005). 4. Implied Warranties (Art. 1547) a. Seller Has Right to Sell b. Warranty Against Eviction (Arts. 1548-1560) Seller must be summoned in the suit for eviction at the instance of the buyer (A rt. 1558), and be made a co-defendant (Art. 1559); or made a third-party defenda nt. Escaler v. CA, 138 SCRA 1 (1985). No Warranty Against Eviction When Execution Sale In voluntary sales, vendor can be expected to defend his title because of his warranty to the vendees but no su ch obligation is owed by the owner whose land is sold at execution sale. xSantia go Land Dev. Corp. v. CA, 276 SCRA 674 (1997). But see: Art. 1552. c. Warranty Against Non-Apparent Servitudes (Arts. 1560) d. Warranty Against Hidden Defects (Arts. 1561-1580) The stipulation in a lease with option to purchase (treated as a sale of movable on installments) that the buyer-lessee absolutely releases the lessor from any l iability whatsoever as to any and all matters in relation to warranty in accorda nce with the provisions hereinafter stipulated, was held as an express waiver of warranty against hidden defect in favor of the seller-lessor which absolved the [ seller-lessor] from any liability arising from any defect or deficiency of the m achinery they bought. xFilinvest Credit Corp. v. Court of Appeals, 178 SCRA 188 ( 1989). A hidden defect is one which is unknown or could not have been known to the buye r. Under the law, the requisites to recover on account of hidden defects are as follows: (a) The defect must be hidden; (b) The defect must exist at the time th e sale was made; (c) The defect must ordinarily have been excluded from the cont ract; (d) The defect, must be important (render the thing unfit or considerably decreases fitness); (e) The action must be instituted within the statute of limi tations. Nutrimix Feeds Corp. v. Court of Appeals, 441 SCRA 357 (2004). Sellers agent can by agreement be liable for the warranty against hidden defects. xSchmid and Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988). e. Warranty as to Fitness or Quality of Goods In order to enforce the implied warranty that the goods are reasonably fit and s uitable to be used for the purpose which both parties contemplated, the followin g must be established: (a) that the buyer sustained injury because of the produc t; (b) that the injury occurred because the product was defective or unreasonabl y unsafe; and finally (c) the defect existed when the product left the hands of the petitioner. Nutrimix Feeds Corp. v. Court of Appeals, 441 SCRA 357 (2004). A manufacturer or seller of a product cannot be held liable for any damage alle gedly caused by the product in the absence of any proof that the product in ques tion is defective, which was present upon the delivery or manufacture of the pro duct; or when the product left the sellers or manufacturers control; or when the p roduct was sold to the purchaser; or the product must have reached the user or c onsumer without substantial change in the condition it was sold. Nutrimix Feeds C orp. v. Court of Appeals, 441 SCRA 357 (2004). f. Sale of Goods by Sample There is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of the bulk, which is not present and there is no opportunity to i nspect or examine the same. To constitute a sale by sample, it must appear that the parties treated the sample as the standard of quality and that they contract ed with reference to the sample with the understanding that the product to be de

livered would correspondent with the sample. In a contract of sale by sample, th ere is an implied warranty that the goods shall be free from any defect which is not apparent on reasonable examination of the sample and which would render the goods unmerchantable. xMendoza v. David, 441 SCRA 172 (2004). g. Additional Warranties for Consumer Products (Arts. 68, Consumer Act, R.A. 739 4). 5. Effects of Warranties 6. Effects of Waivers The phrase as is, where is basis pertains solely to the physical condition of the thing sold, not to its legal situation. In the case at bar, the US tax liabiliti es constitute a potential lien which applies to the subjects matters legal situati on, not to its physical aspect. Thus, the buyer has no obligation to shoulder th e same. xNDC v. Madrigal Wan Hui Lines Corp., 412 SCRA 375 (2003). 7. Buyer s Options in Case of Breach of Warranty (Art. 1599). The remedy against violation of warranty against hidden defects is either to wit hdraw from the contract (accion redhibitoria) or to demand a proportionate reduc tion of the price (accion quanti minoris), with damages in either case. Nutrimix Feeds Corp. v. Court of Appeals, 441 SCRA 357 (2004). XIII. EXTINGUISHMENT OF SALE A. In General (Arts. 1231, 1600). B. Conventional Redemption 1. Definition (Art. 1601) Right to repurchase must be constituted as part of a valid sale at perfection. x Villarica v. CA, 26 SCRA 189 (1968). An agreement to repurchase becomes a promise to sell when made after the sale be cause when the sale is made without such agreement the purchases acquires the th ings sold absolutely; and, if he afterwards grants the vendor the right to repur chase, it is a new contract entered into by the purchases as absolute owner. Robe rts v. Papio, 515 SCRA 346 (2007). In sales denominated as pacto de retro, the price agreed upon should not general ly be considered as the just value of the thing sold, absent other corroborative evidencethere is no requirement in sales that the price be equal to the exact va lue of the thing subject matter of the sale. xDorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008). 2. Redemption Period The period to repurchase is not suspended merely because there is a divergence o f opinion between the parties as to the precise meaning of the phrase providing for the condition upon which the right to repurchase is triggered. The existence of seller a retros right to repurchase the proper is not dependent upon the prio r final interpretation by the court of the said phrase. Misterio v. Cebu State Co llege of Science and Technology, 461 SCRA 122 (2005). 3. Situation Prior to Redemption In a sale a retro, buyer has a right to the immediate possession of the property sold, unless otherwise agreed upon, since title and ownership of the property s old are immediately vested in the buyer a retro, subject only to the resolutory condition of repurchase by the seller a retro within the stipulated period. xVd a. de Rigonan v. Derecho, 463 SCRA 627 (2005). 4. Who Can Redeem (Arts. 1611 to 1614) 5. How Redemption Effected (Art. 1616) In order to exercise the right to redeem, only tender of payment is sufficient x Legaspi v. CA, 142 SCRA 82 1986); consignation is not required after tender is r efused xMariano v. CA, 222 SCRA 736 (1993). But when tender not possible, consignation should be made xCatangcatang v. Legay ada, 84 SCRA 51 (1978). Well-settled is the rule that a formal offer to redeem must be accompanied by a valid tender of the redemption price and the filing of a judicial action, plus t he consignation of the redemption price within the period of redemption, is equi valent to a formal offer to redeem. xVillegas v. Court of Appeals, 499 SCRA 276 (2006). A formal offer to redeem, accompanied by a bona fide tender of redemption price,

is not essential where the right to redeem is exercised through a judicial acti on within the redemption period and simultaneously depositing the redemption pri ce. xLee Chuy Realty Corp. v. CA, 250 SCRA 596 (1995). 6. Redemption Price (Art. 1616) A stipulation in a sale a retro requiring as part of the redemption price intere st for the cost of money, is not in contravention with Art. 1616, since the prov ision is not restrictive nor exclusive, and does not bar additional amounts that the parties may agree upon, since the article itself provides and other stipulat ions which may have been agreed upon. xSolid Homes v. Court of Appeals, 275 SCRA 267 (1997). 7. Fruits (Art. 1617) Article 1617 on the disposition of fruits of property redeemed applies only when the parties failed to provide a sharing arrangement thereof; otherwise, the par ties contractual stipulations prevail. xAlmeda v. Daluro, 79 SCRA 327 (1977). 8. Effect When No Redemption Made: Consolidation (Art. 1607) Article 1607 abolished automatic consolidation of ownership in the vendee a retr o upon expiration of the redemption period by requiring the vendee to institute an action for consolidation where the vendor a retro may be duly heard. If the v endee succeeds in proving that the transaction was indeed a pacto de retro, the vendor is still given a period of thirty days from the finality of the judgment within which to repurchase the property. xSolid Homes v. Court of Appeals, 275 S CRA 267 (1997). Once the vendor fails to redeem the property within the stipulated period, irrev ocable title shall be vested in the vendee by operation of law. xVda. de Rigonan v. Derecho, 463 SCRA 627 (2005). Under a sale a retro, the failure of the buyer to consolidate his title under Ar t. 1607 does not impair such title and ownership because the method prescribed t hereunder is merely for the purpose of registering and consolidating titles to t he property. In fact, the failure on the part of a seller a retro to exercise th e redemption right within the period agreed upon or provided for by law, vests u pon the buyer a retro absolute title and ownership over the property sold by ope ration of law. Consequently, after the effect of consolidation, the mortgage or re-sale by the seller a retro of the same property would not transfer title and ownership to the mortgagee or buyer, as the case may be, under the Latin maxim N EMO DAT QUOD NON HABET. xCadungog v. Yap, 469 SCRA 561 (2005). 9. Equitable Mortgage (Arts. 1602-1604) If the terms of the pacto de retro sale were unfavorable to the vendor, courts h ave no business extricating her from that bad bargaincourts are not guardians of persons who are legally competent. Dorado Vda. De Delfin v. Dellota, 542 SCRA 39 7 (2008). The law on equitable mortgage favors the least transmission of rights and intere st over a property in controversy, since the law seeks to prevent circumvention of the law on usury and the prohibition against pactum commissorium provisions. Additionally, it is aimed to end unjust or oppressive transactions or violations in connection with a sale or property. The wisdom of these provisions cannot be doubted, considering many cases of unlettered persons or even those with averag e intelligence invariably finding themselves in no position whatsoever to bargai n fairly with their creditors. xSpouses Misea v. Rongavilla, 303 SCRA 749 (1999). Besides, it is a fact that in time of grave financial distress which render pers ons hard-pressed to meet even their basic needs or answer an emergency, such per sons would have no choice but to sign a deed of absolute sale of property or a s ale thereof with pacto de retro if only to obtain a much-needed loan from unscru pulous money lenders. xMatanguihan v. Court of Appeals, 275 SCRA 380 (1997). An equitable mortgage is defined as one which although lacking in some formality or form or words, or other requisites demanded by a statute, nevertheless revea ls the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. xRaymundo v. Bandong, 526 SC RA 514 (2007). The essential requisites of an equitable mortgage are: (a) The parties entered i nto a contract denominated as a contract of sale; and (b) Their intention was to

secure an existing debt by way of a mortgage. xMolina v. Court of Appeals, 398 SCRA 97 (2003). The decisive factor in evaluating whether an agreement is an equitable mortgage is the intention of the parties, as shown not necessarily by the terminology use d in the contract but by all the surrounding circumstances, such as the relative situation of the parties at that time, the attitude, acts, conduct, declaration s of the parties, the negotiations between them leading to the deed, and general ly, all pertinent facts having a tendency to fix and determine the real nature o f their design and understanding. Necessitous men are not always free, in that t o answer a pressing emergency, they will submit to any term that the crafty may impose on them. Banga v. Bello, 471 SCRA 653 (2005). That is why parol evidence is competent and admissible in support of the allegat ions that an instrument in writing, purporting on its face to transfer the absol ute title to property, or to transfer the title with a right to repurchase under specified conditions reserved to the seller, was in truth and in fact given mer ely as security for the repayment of a loan. xMariano v. Court of Appeals, 220 S CRA 716 (1993). a. Badges of Equitable Mortgage (Art. 1602) A contract of sale actually intended to secure the payment of an obligation is p resumed an equitable mortgage. xRomulo v. Layug, Jr., 501 SCRA262 (2006). The presence of only one circumstance defined in Art. 1602 is sufficient for a c ontract of sale a retro to be presumed an equitable mortgage. xHilado v. Medalla 377 SCRA 257 (2002). The presumption in Article 1602 jibes with the rule that the law favors the leas t transmission of property rights. xEnriquez, Sr. v. Heirs of Spouses Nieves and Alfredo Baldonado, 498 SCRA 365 (2006); but it is not conclusive, for it may be rebutted by competent and satisfactory proof to the contrary. xSantiago v. Dizo n, 543 SCRA 402 (2008). The provisions of Art. 1602 on the presumption of equitable mortgage applies als o to a contract purporting to be an absolute sale. xTuazon v. CA, 341 SCRA 707 ( 2000). A contract purporting to be an absolute sale is presumed to be an equitable mort gage: (a) when the price of the sale is unusually inadequate; (b) when the vendo r remains in possession as lessee or otherwise; (c) when after the expiration of the right of repurchase, it is extended by the buyer. xHilado v. Heirs of Rafa el Medlla, 37 SCRA 257 (2002); (d) when the purported seller continues to collec t rentals from the lessees of the property sold. Ramos v. Dizon, 498 SCRA 17 (20 06) Inadequacy of purchase price is considered so far short of the real value of the p roperty as to startle a correct mind. xSantiago v. Dizon, 543 SCRA 402 (2008); o r that the mind revolts at it as such that a reasonable man would neither direc tly or indirectly be likely to consent to it. xVda de Alvarez v. CA, 231 SCRA 3 09 (1994). Mere tolerated possession is not enough to prove that the transaction was an equ itable mortgage. xRedondo v. Jimenez, 536 SCRA 639 (2007). Payment of real estate taxes is a usual burden attached to ownership, and when s uch payment is coupled with continuous possession of the property, it constitute s evidence of great weight that a person under whose name the realty taxes were declared has a valid and right claim over the land. xGo v. Bacaron, 472 SCRA 229 (2005). However mere allegations without proof to support inadequacy of price, or when c ontinued possession by the seller is supported by a valid arrangement consistent with the sale, would not support the allegation of equitable mortgage. xCirelos v. Hernandez, 490 SCRA 624 (2006). Although under the agreement the seller shall remain in possession of the proper ty for only one year, such stipulation does not detract from the fact that posse ssion of the property, an indicium of ownership, was retained by the alleged ven dor to qualify the arrangement as an equitable mortgage, especially when it was shown that the vendor retained part of the purchase price. xLegaspi v. Ong, 459 SCRA 122 (2005).

Under Article 1602, delay in transferring title is not one of the instances enum erated by lawinstances in which an equitable mortgage can be presumed. Nor does t he fact that the original transaction on the land was to support a loan, which w hen it was not paid on due date was negotiated into a sale, without evidence tha t the subsequent deed of sale does not express the true intentions of the partie s, give rise to a presumption of equitable mortgage. xCeballos v. Intestate Esta te of the Late Emigdio Mercado, 430 SCRA 323 (2004). The fact that the price in a pacto de retro sale is not the true value of the pr operty does not justify the conclusion that the contract is one of equitable mor tgage; in fact a pacto de retro sale, the practice is to fix a relatively reduce d price to afford the seller a retro every facility to redeem the property . xIg nacio v. CA, 246 SCRA 242 (1995). Article 1602 being remedial in nature, may be applied retroactively in cases pri or to the effectivity of the Civil Code. xOlea v. CA, 247 SCRA 274 (1995). b. Remedies Allowed for Equitable Mortgage (Art. 1602, 1605). In the case of an equitable mortgage, although Art. 1605 which allows for the re medy of reformation, nothing therein precludes an aggrieved party from pursuing other remedies to effectively protect his interest and recover his property, suc h as an action for declaration of nullity of the deed of sale and specific perfo rmance. xTolentino v. Court of Appeals, 386 SCRA 36 (2002). In an equitable mortgage situation, the consolidation of ownership in the person of the mortgagee in equity upon failure of the mortgagor in equity to pay the o bligation, would amount to a pactum commissorium. The only proper remedy is to c ause the foreclosure of the mortgage in equity. xBriones-Vasquez v. Court of App eals, 450 SCRA 644 (2005); or to determine if the principal obligation secured b y the equitable mortgage has been paid or settled. xBanga v. Bello, 471 SCRA 653 (2005). c. Pactum Commissorium (Art. 2088) A stipulation which is a pactum commisorium enables the mortgagee to acquire own ership of the mortgaged properties without need of any foreclosure proceedingsit is a nullity being contrary to the provisions of Article 2088 of the Civil Code. xLumayag v. Heirs of Jacinto Nemeo, 526 SCRA 315 (2007). It does not apply when the security for a debt is also money in the form of time deposit. xConsing v. CA, 177 SCRA 14 (1989). The provision in a MOA/Dacion en Pago with a Right to Repurchase that in the ev ent the borrower fails to comply with the new terms of restructuring the loan, t he agreement shall automatically operate to be an instrument of dacion en pago w ithout need of executing any new document does not constitute pactum commissoriu m. Solid Homes, Inc. v. Court of Appeals, 275 SCRA 267 (1997). But See: The stipulation in the promissory note providing that upon failure of t he makers to pay interests, ownership of the property would automatically be tra nsferred to the payee, and the covering deed of sale would be registered is in s ubstance a pactum commissorium in violation of Art. 2088, and consequently, the resultant sale is void and the registration and obtaining of new title in the na me of the buyer would have be declared void also. A. Francisco Realty v. Court of Appeals, 298 SCRA 349 (1998). e. Final Chance to Redeem in Mistaken Equitable Mortgage (Art. 1606) The 30 day period under Art. 1606 does not apply if the courts should find the s ale to be absolute. xPangilinan v. Ramos, 181 SCRA 359 (1990). Sellers in a sale judicially declared as pacto de retro may not exercise the rig ht to repurchase within the 30-day period provided under Art. 1606, although the y have taken the position that the same was an equitable mortgage, if it is show n that there was no honest belief thereof since: (a) none of the circumstances u nder Art. 1602 were shown to exist to warrant a conclusion that the transaction was an equitable mortgage; and (b) that if they truly believed the sale to be an equitable mortgage, as a sign of good faith, they should have consigned with th e trial court the amount representing their alleged loan, on or before the expir ation of the right to repurchase. Abilla v. Gobonseng, 374 SCRA 51 (2002). C. Legal Redemption 1. Definition (Art. 1619)

Legal redemption is in the nature of a privilege created by law partly for reaso ns of public policy and partly for the benefit and convenience of the redemption er, to afford him a way out of what might be a disagreeable or [an] inconvenient association into which he has been thrust. It is intended to minimize co-owners hip. xFernandez v. Tarun, 391 SCRA 653 (2002). 2. Legal Redemption Rights under the Civil Code a. Among Co-heirs (Art. 1088) Redemption right pertain to disposition of right to inherit, and not when there is a sale of a particular property of the estate. xPlan v. IAC, 135 SCRA 270 (1 985). When the heirs have partitioned the estate among themselves and each have occupi ed and treated definite portions thereof as their own, co-ownership has ceased e ven though the property is still under one title, and the sale by one of the hei rs of his definite portion cannot trigger the right of redemption in favor of th e other heirs. xVda. De Ape v. Court of Appeals, 456 SCRA 193 (2005). The heirs who actually participated in the execution of the extrajudicial settle ment, which included the sale to a third person of their pro indiviso shares in the property, are bound by the same; while the co-heirs who did not participate are given the right to redeem their shares pursuant to Article 1088. xCua v. Var gas, 506 SCRA 374 (2006). b. Among Co-owners (Art. 1620) The right of redemption may be exercised by a co-owner only when part of the com munity property is sold to a stranger, now when sold to another co-owner because a new participant is not added to the co-ownership. xFernandez v. Tarun, 391 S CRA 653 (2002). When the seller a retro dies, the right to redeem cannot be exercised by a co-he ir alone, since the right to redeem belonged in common to all the heirs. xDe Guz man v. Court of Appeals, 148 SCRA 75 (1987). For the right of redemption to be exercised, co-ownership must exist at the time of the conveyance is made by a co-owner and the redemption is demanded by the o ther co-owner or co-owners. xAvila v. Barabat, 485 SCRA 8 (2006). Redemption by co-owner redounds to the benefit of all other co-owners. xMariano v. Court of Appeals, 222 SCRA 736 (1993). c. Distinguishing Between Right of Redemption of Co-heirs and Co-owners Article 1620 includes the doctrine that a redemption by a co-owner of the proper ty owned in common, even when he uses his own fund, within the period prescribed by law inures to the benefit of all the other co-owners. xAnnie Tan v. Court of Appeals, 172 SCRA 660 (1989). d. Among Adjoining Owners (Arts. 1621 and1622) Requisite to show property previously bought on speculation dropped. xLegaspi v. C A, 69 SCRA 360 (1976). Right of redemption covers only resale and does not cover exchanges or barter of p roperties xDe Santos v. City of Manila, 45 SCRA 409 (1972); and cannot arise unl ess both adjacent lands are rural lands. xPrimary Structures Corp. v. Valencia, 409 SCRA 371 (2003). When there is no issue that when the adjoining lands involved are both rural lan ds, then the right of redemption can be exercised and the only exemption provide d is when the buyer can show that he did not own any other rural land. But the b urden of proof to provide for the exception lies with the buyer. xPrimary Struc tures Corp. v. Valencia, 409 SCRA 371, 374 (2003). e. Sale of Credit in Litigation (Art. 1634) 30 days from notice of demand to pa y. 2. When Period of Legal Redemption Begins (Art. 1623) The interpretation of Art. 1623 where there is a need for notice in writing, sho uld always tilt in favor of the redemptioner and against the buyer, since the pu rpose is to reduce the number of participants until the community is terminated, being a hindrance to the development and better administration of the property. It is a one-way street, in favor of the redemptioner since he can compel the buye r to sell to him but he cannot be compelled by the vendee to buy. xHermoso v. C ourt of Appeals, 300 SCRA 516 (1998).

The 30-day period does not begin to run in the absence of written notification c oming from the seller. xCua v. Vargas, 506 SCRA 374 (2006); and it must be a wri tten notice of a perfected sale. xSpouses Doromal v. Court of Appeals, 66 SCRA 5 75 (1975). The written notice of sale is mandatory, notwithstanding actual knowledge of a c o-owner, in order to remove all uncertainties about the sale, its terms and cond itions, as well as its efficacy and status. xVerdad v. Court of Appeals, 256 SC RA 593 (1996).. Notice to minors may validly be served upon parents even when the latter have no t been judicially appointed as guardians since the same is beneficial to the chi ldren. xBadillo v. Ferrer, 152 SCRA 407 (1987). Neither the registration of the sale xCabrera v. Villanueva, 160 SCRA 627 (1988) , nor the annotation of an adverse claim xVda. De Ape v. Court of Appeals, 456 S CRA 193 (2005), nor notice being given by the city treasurer xVerdad v. Court of Appeals, 256 SCRA 593 (1996), comply with the written notice required under Art . 1623 to begin the tolling of the 30-day period of redemption. The notice required under Article 1623 is deemed to have been complied with when the other co-owner has signed the Deed of Extrajudicial Partition and Exchange of Shares which embodies the disposition of part of the property owned in common . xFernandez v. Tarun, 391 SCRA 653 (2002). The existence of a clause in the deed of sale to the effect that the vendor has complied with the provisions of Article 1623, cannot be taken to being the writte n affirmation under oath, as well as the evidence, that the required written not ice to petitioner under Article 1623 has been meet, for the person entitled to t he right is not a party to the deed of sale. xPrimary Structures Corp. v. Valen cia, 409 SCRA 371 (2003). Francisco v. Boiser, 332 SCRA 305 (2000), summarized the case-law on Art. 1623, a nd with definitiveness declared: For the 30-day redemption period to begin to run, notice must be given by the se ller; and that notice given by the buyer or even by the Register of Deeds is not sufficient. This expressly affirms the original ruling in Butte v. Manuel Uy an d Sons, Inc., 4 SCRA 526 (1962), as affirmed in xSalatandol v. Retes, 162 SCRA 5 68 (1988). This expressly overruled the ruling in xEtcuban v. CA, 148 SCRA 507 ( 1987), which allowed the giving of notice by the buyer to be effective under Art icle 1623; When notice is given by the proper party (i.e., the seller), no particular form of written notice is prescribed under Article 1623, so that the furnishing of th e copies of the deeds of sale to the co-owner would be sufficient, as held previ ously in xDistrito v. CA, 197 SCRA 606 (1991); Conejero v. CA, 16 SCRA 775 (1966 ); xBadillo v. Ferrer, 152 SCRA 407 (1987), but only on the form of giving notic e but not on the ruling of who is the proper party to give notice; Affirmed ruling in xAlonzo v. IAC, 150 SCRA 259 (1987), that the filing of the s uit for ejectment or collection of rentals against a co-owner actually dispenses with the need for a written notice, and must be construed as commencing the run ning of the period to exercise the right of redemption, since the filing of the suit amounted to actual knowledge of the sale from which the 30-day period of re demption commences to run. a. Rare Exceptions: When the sale to the buyer was effected through the co-owner who acted as the br oker, and never indicated that he would exercise his right to redeem. xDistrito v. CA, 197 SCRA 606 (1991). When the buyers took possession of the property immediately after the execution of the deed of sale in their favor and lived in the midst of the other co-owners who never questioned the same. xPilapil v. CA, 250 SCRA 560 (1995). 4. Other Legal Redemption Rights a. Redemption in Patents (Sec. 119, C.A. 141) Right to repurchase is granted by law and need not be provided for in the deed o f sale. xBerin v. Court of Appeals, 194 SCRA 508 (1991). Under the free patent or homestead provisions of the Public Land Act a period of five (5) years from the date of conveyance is provided, to be reckoned from the

date of the sale and not from the date of registration in the office of the Reg ister of Deeds. xLee Chuy Realty Corp. v. CA, 250 SCRA 596 (1995). b. Redemption in Tax Sales (Sec. 215, NIRC of 1997) c. Redemption by Judgment Debtor (Secs. 27-28, Rule 39, Rules of Civil Procedure ) Written notice must be given to the judgment debtor before the sale of the prope rty on execution, to give him the opportunity to prevent the sale by paying the judgment debt sought to be enforced and the costs which have been incurred. xTo rres v. Cabling, 275 SCRA 329 (1997). Where there is a third-party claim, sheriff should demand from the judgment cred itor who becomes the highest bidder, payment in cash of his bid instead of merel y crediting the amount to the partial satisfaction of the judgment debt. xTorre s v. Cabling, 275 SCRA 329 (1997). Under Sec. 28, Rule 39 of the 1997 Rules of Civil Procedure, the period of redem ption shall be at any time within one (1) year from the date of registration of t he certificate of sale, so that the period is now to be understood as composed of 365 days, unlike the 360 days under the old provisions of the Rules of Court. xYsmael v. CA, 318 SCRA 215 (1999). d. Redemption in Extrajudicial Foreclosure (Sec. 6, Act 3135) The redemption of extra-judicially foreclosed properties is exercised within one (1) year from the date of the auction sale as provided for in Act 3135. xLee Ch uy Realty Corp. v. CA, 250 SCRA 596 (1995). The execution of a dacion en pago by sellers effectively waives the redemption p eriod normally given a mortgagor. xFirst Global Realty and Dev. Corp. v. San Agu stin, 377 SCRA 341 (2002). e. Redemption in judicial foreclosure of mortgage (Sec. 47, R.A. 8791) A stipulation to render the right to redeem defeasible by an option to buy on th e part of the creditor. Soriano v. Bautista, 6 SCRA 946 (1962). No right to redeem from a judicial foreclosure sale, except those granted by ban ks or banking institutions. xGSIS v. CFI, 175 SCRA 19 (1989). The one-year redemption period in the case of foreclosure is not interrupted by the filing of an action assailing the validity of the mortgage, so that at the e xpiration thereof, the mortgagee who acquires the property at the foreclosure sa le can proceed to have title consolidated in his name and a writ of possession i ssued in his favor. xUnion Bank v. CAs, 359 SCRA 480 (2001). After bank has foreclosed the property as highest bidder in the auction sale, th e accepted offer of spouses-borrowers to repurchase the property was actually a ne w option contract, and the condition that the spouses-borrowers will pay monthly interest during the one-year option period is considered to be the separate con sideration to hold the option contract valid. xDijamco v. Court of Appeals, 440 SCRA 190 (2004). f. Redemption in Foreclosure by Rural Banks (R.A. No. 720) If the land is mortgaged to a rural bank, mortgagor may redeem within two (2) ye ars from the date of foreclosure or from the registration of the sheriff s certi ficate of sale at such foreclosure if the property is not covered or is covered, respectively, by Torrens title. If the mortgagor fails to exercise such right, he or his heirs may still repurchase within five (5) years from expiration of th e two (2) year redemption period pursuant to Sec. 119 of the Public Land Act (C. A. 141). xRural Bank of Davao City v. CA, 217 SCRA 554 (1993). g. Legal Right to Redeem under Agrarian Reform Code Under Section 12 of R.A. 3844, as amended, in the event that the landholding is sold to a third person without the knowledge of the agricultural lessee, the lat ter is granted by law the right to redeem it within 180 days from notice in writ ing and at a reasonable price and consideration. xQuio v. CA, 291 SCRA 249 (1998 ). XIV. ASSIGNMENT (Arts. 1624-1635) 1. Definition and Nature of Assignment Assignment is the process of transferring the right of assignor to assignee who would then have the right to proceed against the debtor. The assignment may be d one gratuitously or onerously, in the latter case, the assignment has an effect

similar to that of a sale. xLicaros v. Gatmaitan, 362 SCRA 548 (2001). In its most general and comprehensive sense, an assignment is a transfer or makin g over to another of the whole of any property, real or personal, in possession or in action, or of any estate or right therein. It includes transfers of all ki nds of property, and is peculiarly applicable to intangible personal property an d, accordingly, it is ordinarily employed to describe the transfer of non-negoti able choses in action and of rights in or connected with property as distinguish ed from the particular item or property. xPNB v. Court of Appeals, 272 SCRA 291 ( 1997). 2. Perfection by Mere Consent (Art. 1624) 3. But Must Be in Public Instrument to Affect Third Parties (Art. 1625). 4. Effects of Assignment a. Assignment of Credit An assignment of credit is an agreement by virtue of which the owner of a credit , known as the assignor, by a legal cause, such as sale, dacion en pago, exchang e or donation, and without the consent of the debtor, transfers his credit and a ccessory rights to another, known as the assignee, who acquires the power to enf orce it to the same extent as the assignor could enforce it against the debtor. xAquintey v. Tibong, 511 SCRA 414 (2006). As a consequence, the third party steps into the shoes of the original creditor as subrogee of the latter. Although constituting a novation, such assignment doe s not extinguish the obligation under the credit assigned, even when the assignm ent is effected without his consent. xSouth City Homes, Inc. V. BA Finance Corp. , 371 SCRA 603 (2001). b. Issues re Debtor (Art. 1626) In an assignment of credit, the consent of the debtor is not essential for its p erfection, his knowledge thereof or lack of it affecting only the efficaciousnes s or inefficaciousness of any payment he might make. xProject Builders, Inc. v. Court of Appeals, 358 SCRA 626 (2001). Consent of debtor is not necessary in order that assignment may fully produce le gal effects, and the duty to pay does not depend on the consent of the debtor. O therwise, all creditors would be prevented from assigning their credits because of the possibility of the debtors refusal to given consent. What the law requires in an assignment of credit is mere notice to debtor, and the purpose of the not ice is only to inform the debtor that from the date of the assignment, payment s hould be made to the assignee and not to the original creditor. xNIDC v. De los Angeles, 40 SCRA 489 (1971). c. Accessories and Accessions (Art. 1627) Assignment of a credit includes all the accessory rights, such as guaranty, mort gage, pledge or preference. xUnited Planters Sugar Milling Co., Inc. (UPSUMCO) v. Court of Appeals, 527 SCRA 336 (2007). d. Tradition in Assignment Notarization converts an Assignment of Credit, a private document, into a public document, thus, complying with the mandate of Article 1625 of the Civil Code an d making it enforceable even as against third persons. xLedonio v. Capitol Dev. Corp., 526 SCRA 379 (2007). 5. Warranties of Assignor (Art. 1628) Assignor warrants only the existence or legality of the credit but not the solve ncy of the debtor. Nyco Sales Corp. v. BA Finance, 200 SCRA 637 (1991). Exceptions: (a) If this is expressly warranted. (b) If insolvency is known by the assignor prior to assignment. (c) If insolvency is prior to assignment is common knowledge. When dacion en pago takes the form of an assignment of credit, it produces the e ffects of a dation in payment, which may extinguishes the obligation; however, b y virtue of the warranty in Art. 1628, which makes the vendor liable for the exi stence and legality of the credit at the time of sale, when it is shown that the assigned credit no longer existed at the time of dation, then it behooves the a ssignor to make good its warranty and pay the obligation. xLo v. KJS Eco-Formwor k System Phil., Inc., 413 SCRA 182 (2003). 6. Right of Repurchase on Assignment of Credit under Litigation (Arts. 1634 and1

635) 7. Subrogation versus Assignment of Credit (Art.1301) Subrogation extinguishes the obligation and gives rise to a new one; assignment refers to the same right which passes from one person to another. The nullity of an old obligation may be cured by subrogation, such that a new obligation will be perfectly valid; but the nullity of an obligation is not remedied by the assi gnment of the creditors right to another. In an assignment of credit, the consent of the debtor is not necessary in order that the assignment may fully produce l egal effects; whereas, conventional subrogation requires an agreement among the three parties concerned original creditor, debtor, and new creditor. It is a new contractual relation based on the mutual agreement among all the necessary part ies. Licaros v. Gatmaitan, 362 SCRA 548 (2001). 8. Assignment of Copyright (Sec. 180, Intellectual Property Code) 9. Assignment as an Equitable Mortgage When an assignor executes a Deed of Assignment covering her leasehold rights in order to secure the payment of promissory notes covering the loan she obtained f rom the bank, such assignment is equivalent to an equitable mortgage, and the no n-payment of the loan cannot authorize the assignee to register the assigned lea sehold rights in its name as it would be a violation of Art. 2088 against pactum commissorium. The proper remedy of the assignee is to proceed to foreclose on t he leasehold right assigned as security for the loan. xDBP v. Court of Appeals, 284 SCRA 14 (1998). XV. BULK SALES LAW (Act No. 3952) 1. Scope (Chin v. Uy, 40 O.G. 4 Supp. 52) The Bulk Sales Law must be construed strictly. Thus, the disposal by the owner o f a foundry shop of all his iron bars and others does not fall under the law, be cause the contents of a foundry shop are not wares and merchandise. The Law onl y covers sales in bulk of fixtures and equipment used in the mercantile business , which involves the buying and selling of merchandise. xPeople v. Wong, [CA] 50 O.G. 4867 (1954). The Law applies to merchants who are in the business of selling goods and wares and similar merchandise, and cannot cover the sale of assets by a manufacturer s ince the nature of his business does not partake of merchandise. DBP v. The Honor able Judge of the RTC of Manila, 86 O.G. No. 6 1137 (05 February 1990). 2. Coverage of Bulk Sale Sale, transfer, mortgage or assignment of: (a) Goods, wares, merchandise, provisions or material other than in the ordinary course of business; (b) All, or substantially all of all or substantially all of the fixtures and eq uipment used in and about the business. (c) All, or substantially all of the business or trade theretofore conducted by the vendor, mortgagor, transferor, or assignor; 3. Compliance Requirements Under the Law a. The merchant must give the buyer a certified schedule of his debts: names of creditors, amounts owing to each and the nature of the debt. b. Purchase price paid must be applied to these debts. c. Ten (10) days before the sale, the seller must take an inventory of his stock and advise all his creditors of the same. Exception: When the seller obtains a written waiver from all creditors. 4. Effects of Non-Compliance a. If purchase money or mortgage proceeds are not applied pro-rata to payment of the bona fide claims of the creditors, the sale is deemed fraudulent and void. (Sec. 4) b. Non-giving of the list of creditors or intentional omission of the names of s ome of the creditors, and placing of wrong data required by law, would subject t he seller or mortgagor to penal sanctions. (Sec. 4) c. Bulk transfer without consideration or for nominal consideration punishable. (Sec. 7) d. Failure to comply with other provisions of the law the non-application of the consideration proportionately to the creditors, the preparation of the inventor y, and the notification to creditors, are also made punishable. (Sec. 11)

A sale in bulk done without complying with the terms of the Law, makes the trans action fraudulent and void, but does not change the basic relationship between t he seller, assignor/encumbrancer and his creditor. The portion of a judgment pro viding for subsidiary liability is invalid, since the proper remedy of the credi tor is to collect on the credit against the defendant, and if they cannot pay to attach on the property fraudulently mortgage since the same still pertain to th e debtors-defendants. xPeople v. Mapoy, 73 Phil. 678 (1942). XVI. RETAIL TRADE LIBERALIZATION ACT OF 2000 AND RELATED PROVISIONS OF THE ANTIDUMMY LAW 1. Public Policy under RTLA 2000: A reversal of paradigm; focus from the protect ing the retailers to promoting the interests of consumers. 2. Scope and Definition of Retail Trade a. Importance of Retaile Trade (King v. Hernaez, 4 SCRA 792) b. Elements: (1) Seller habitually engaged in selling; (2) Selling direct to the general public; and (3) Object of the sale is limited to merchandise, commodities or goods for cons umption. c. Meaning of Habitually Selling Engaging in the sale of merchandise as an incident to the primary purpose of a c orporation [e.g., operation of a pharmacy by a hospital; sale of cellphones by a telecommunication company] does not constitute retail trade within the purview of the Retail Trade Nationalization Law, as this is taken from the provision there of excluding form the term retail business the operation of a restaurant by a hote l-owner or -keeper since the same does not constitute the act of habitually sell ing direct to the general public merchandise, commodities or goods for consumpti on. SEC Opinion No. 11, series of 2002, 13 November 2002. d. Meaning of Consumption (DOJ Opinion No. 325, series of 1945; IRR of Law). The Law limits its application to the sale of items sold for domestic or househo ld, or properly called consumer goods; whereas, when the same items are sold to commercial users, they would constitute non-consumer goods and not covered by th e Law. Balmaceda v. Union Carbide Philippines, Inc. 124 SCRA 893 (1983). e. Meaning of General Public (DOJ Opinion No. 253, series of 1954). Even when the same of consumer goods is limited only to the officers of the the company, the same would still constitute retail trade covered by the Law. Goodyea r Tire v. Reyes, Sr., 123 SCRA 273 (1983). Where the glass company manufactures glass products only on specific orders, it does not sell directly to consumers but manufacturers its products only for the particular clients, it cannot be said that it is a merchandiser. DBP v. Honorabl e Judge of the RTC of Manila, 86 O.G. No. 6 1137 (05 February 1990). 3. Categories of Retail Trade Enterprises a. Category A Exclusive to Filipino citizens and 100% Filipino entities b. Categories B and C c. Category D Luxury Items d. Exempted Areas e. Rights Granted to Former Natural-Born Filipinos 4. Foreign Investment or Engage in Retail Trade in the Philippines a. Requirements for Foreign Investors b. Grandfather Rule on 100% Filipino Ownership of Corporate Entity: SEC Opinions , dated 20 March 1972 and 22 April 1983; DTI Opinion to Tanada, Teehankee & Carr eon Law Office, dated 3 August 1959. c. Public Offerings of Shares of Stock 5. Foreign Retailers in the Philippines a. Pre-qualification requirements b. Rules on Branches/Stores c. Promotion of Locally-Manufactured Products d. Prohibited Activities of Foreign Retailers e. Binding Effect of License to Engage in Retail on Private Parties When a license to engage in cocktail lounge and restaurant is issued to a Filipi no citizen, it is conclusive evidence of the latter s ownership of the retail bu siness as far as private parties are concerned. xDando v. Fraser, 227 SCRA 126

(1993). 6. Penalty Provisions 7. Applicability of the Anti-Dummy Act (Comm. Act. 108, as amended by P.D. 715) a. Law penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved for Filipinos or Filipino corporations. Criminal sa nctions are imposed on the president, manager, board member or persons in charge of the violating entity and causing the latter to forfeit its privileges, right s and franchises. b. Section 2-A of the Law prohibits aliens from intervening in the management, o peration, administration or control of nationalized business, whether as officer s, employees or laborers, with or without remuneration. Aliens may not take par t in technical aspects, provided no Filipino can do such technical work, and wit h express authority from the President of the Philippines. c. Later, Pres. Decree 715 was enacted amending the law by the addition of a pro viso expressly allowing the election of aliens as members of the boards of direc tors or the governing bodies of corporations or associations engaged in partiall y nationalized activities in proportion to their allowable participation or shar e in the capital of such entities. The amendment was meant to settle the uncertainty created in the obiter opinion in Luzon Stevedoring Corp. v. Anti-Dummy Board, 46 SCRA 474 (1972), which reject ed the argument of a public utility corporation that had no-American aliens in i ts employ, that the Anti-Dummy Law covered only employment in wholly nationalize d businesses and not in those that are only partly nationalized. The Filipino common-law wife of a Chinese national is not barred from engaging i n the retail business provided she uses capital exclusively derived from her par aphernal properties; allowing her common-law Chinese husband to take part in man agement of the retail business would be a violation of the law. xTalan v. Peopl e, 169 SCRA 586 (1989). oOo Updated: 15 October 2008, 523 SCRA

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