REPUBLIC ACT No. 6552 AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS. (Rep. Act No.

6552) Section 1. This Act shall be known as the "Realty Installment Buyer Act." Section 2. It is hereby declared a public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions. Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments: (a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. (b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made.lawphi1 Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at expiration of the grace period, the seller may cancel contract after thirty days from receipt by the buyer of notice of cancellation or the demand for rescission of contract by a notarial act. the the the the

price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void. Section 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be affected thereby.lawphi1 Section 9. This Act shall take effect upon its approval. Approved: August 26, 1972. SUBJECT MATTER OF SALE What may be objects of sale? 1. Existing Goods owned/ possessed by seller at the time of perfection 2. Future Goods goods to be manufactured, raised, acquired by seller after perfection of the contract or whose acquisition by seller depends upon a contingency (Art. 1462) Note: Sale of future goods is valid only as an executory contract to be fulfilled by the acquisition & delivery of goods specified. 3. Sale of Undivided Interest or Share a. Sole owner may sell an undivided interest. (Art. 1463) Ex. A fraction or percentage of such property b. Sale of an undivided share in a specific mass of fungible goods makes the buyer a co-owner of the entire mass in proportion to the amount he bought. (Art. 1464) c. A co-owner cannot sell more than his share (Yturralde v. CA) 4. Sale of Things in Litigation a. Sale of things under litigation is rescissible if entered into by the defendant , without the approval of the litigants or the court (Art. 1381) b. No rescission is allowed where the thing is legally in the possession of a 3rd person who did not acted in bad faith. 5. Things subject to Resolutory Condition. Ex. Things acquired under legal or conventional right of redemption, or subject to reserva troncal. (Art. 1465) 6. Indeterminate Quantity of Subject Matter The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract provided it is possible to determine the same, without need of a new contract. (Art. 1349) PARTIES TO A CONTRACT OF SALE

Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act. Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase

What is the status of the following contracts of sale? 1. That entered into by minors: a. Merely voidable, subject to annulment or ratification b. Action for annulment cannot be instituted by the person who is capacitated since he is disqualified from alleging the incapacity of the person with whom he contracts (with partial restitution in so far as the minor is benefited) where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price (Art. 1489) 2. Sale by & between spouses (Art. 1490): a. Status of prohibited sales between spouses: General Rule: Null and void Exception: In case of sale between spouses: i. When a separation of property was agreed upon in the marriage settlements; or ii. When there has been a judicial separation of property agreed upon between them Reasons: A. Prevent defrauding creditors B. Avoid situation where dominant spouse takes advantage over the weaker spouse C. Avoid circumvention on prohibition of donation between spouses b. Contract of sale with 3rd parties: General Rule: Under the law on sales, it would seem that a spouse may, without the consent of the other spouse, enter into sales transactions in the regular or normal pursuit of their profession, vocation or trade. (in relation with Art. 73, Family Code) Exception: Even when the property regime prevailing was the conjugal partnership of gains, the Supreme Court held the sale by the husband of a conjugal property without the consent of the wife is void, not merely voidable under Art. 124 of the Family Code since the resulting contract lack one of the essential elements of full consent. (Guiang v. CA, G.R. No. 125172, June 26, 1998) 3. Between Common Law Spouses -also null and void. In Calimlim-Canullas v. Fortun, the Court decided that sale between common law spouses is null and void because Art. 1490 prohibits sales between spouses to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage. The prohibition applies to a couple living as husband and wife without the benefit of marriage, otherwise, the condition of those incurred guilt would turn out to be better than those in legal union. (Calimlim-Canullas v. Fortun, et. al., G.R. No. L-57499, June 22, 1984) But when the registered property has been conveyed subsequently to a third-party buyer in good faith and for value, then reconveyance is no longer available to common-law spouse- seller, since under the Torrens system every buyer has a right to rely

upon the title of his immediate seller. (Cruz v. CA, G.R. No. 120122, Nov. 6, 1997) CONTRACT TO SELL In Sps. Torrecampo v. Alindogan, Sr., et al., G.R. No. 156405, February 28, 2007, the parties entered into a Contract to Buy and Sell and that the balance shall be paid upon the issuance of the title. The question is whether, the contract is a contract of sale of contract to sell. Held: It is a contract to sell. The SC had one again had the occasion to distinguish the two contracts and said that, in a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. (Salazar v. CA, G.R. No. 118203, July 5, 1996, 258 SCRA 317). Indeed, the true agreement between the parties is a contract to sell. Not only did the parties denominate their contract as Contract to Buy and Sell, but also specified therein that the balance of the purchase price is to be paid upon the issuance of a certificate of title indicates that ownership of the subject property did not pass to the buyers. In Ursal v. Court of Appeals, et al., G.R. No. 142411, October 14, 2005, 473 SCRA 52; Chua v. CA, 401 SCRA 54 (2003), it was held, thus: Indeed, in contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition, that is, the full payment of the purchase price by the buyer. It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Prior to the existence of the contract of sale, the seller is not obligated to transfer the ownership to the buyer, even if there is a contract to sell between them. Perfection Of A Contract To Sell In Oesmer, Jr., et al. v. Paraiso Dev. Corp., G.R. No. 157493, February 5, 2007, a contract to sell was entered into by the owners of a real property. They affixed their signatures but contested its validity later contending that their co-owner had no written authority to sell the property, hence, they contended that the contract to sell was not valid. Is the contention correct? Why? Held: No. it is true that the co-owners did not authorize the other co-owner to sell. The law itself explicitly requires a written authority before an agent can sell an immovable. The conferment of such an authority should be in writing, in as clear and precise terms

as possible. It is worth noting that petitioners signatures are found in the Contract to Sell. The Contract is absolutely silent on the establishment of any principal-agent relationship as the sale of the subject parcels of land. Thus, the Contract to Sell, although signed on the margin by the other co-owners is not sufficient to confer authority on the other to act as their agent in selling their shares in the properties in question. Despite the co-owners lack of written authority from the five petitioners to sell their shares in the subject parcels of land, the supposed Contract to Sell remains valid and binding upon the latter. All the co-owners signed the document. Therefore, a written authority is no longer necessary in order to sell their shares in the subject parcels of land because, by affixing their signatures on the Contract to Sell, they were not selling their shares through an agent but, rather, they were selling the same directly and in their own right. It is well-settled that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror. From that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. To produce a contract, the acceptance must not qualify the terms of the offer. However, the acceptance may be express or implied. For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror. (Jardine Davies, Inc. v. CA, 389 Phil. 204). In the case at bar, the Contract to Sell was perfected when the co-owners consented to the sale to the buyer of their shares in the subject parcels of land by affixing their signatures on the said contract. Such signatures show their acceptance of what has been stipulated in the Contract to Sell and such acceptance was made known to buyer when the duplicate copy of the Contract to Sell was returned to the latter bearing petitioners signatures. Contract To Sell Is Not Rescissible In Cordero, et al. v. F.S. Management & Dev. Corp., G.R. No. 167213, October 31, 2006, the contract states that title will be transferred by the owner to the buyer upon complete payment of the purchase price. For failure to pay, an action for rescission was filed. Is the action proper? Explain. Held: No. Under a contract to sell, the seller retains title to the thing to be sod until the purchaser fully pays the agreed purchase price. The full payment is a positive suspensive condition, the non-fulfillment of which is not a breach of contract but merely an event that prevents the seller from conveying title to the purchaser. The non-payment of the purchase price renders the contract to sell ineffective and without force and effect. (Ayala Life Assurance, Inc. v. Ray Burton Dev. Corp., G.R. No. 163075, January 23, 2006, 479 SCRA 462). Since the obligation of seller did not arise because of the failure of buyer to fully pay the purchase price, Article

1191 of the Civil Code would have no application, where rescission is not available. Rayos v. Court of Appeals, G.R. No. 135528, July 14, 2004, 434 SCRA 365 explained the rule thus: Construing the contracts together, it is evidence that the parties executed a contract to sell and not a contract of sale. The petitioner retained ownership without further remedies by the respondents until the payment of the purchase price of the property in full. Such payment is a positive suspensive condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the obligations of the petitioner to convey title from arising, in accordance with Article 1184 of the Civil Code. x x x The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect. The parties stand as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant. There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened. The subject contract to sell clearly states that title will be transferred by the owner (petitioners) to the buyer (respondent) upon complete payment of the agreed purchase price. Since respondent failed to fully pay the purchase price, petitioners obligation to convey title to the properties did not arise. While rescission does not apply in this case, the seller may nevertheless cancel the contract to sell, their obligation not having arisen. This brings us to Republic Ac No. 6552 (THE REALTY INSTALLMENT BUYER PROTECTION ACT). In Ramos v. Heruela, G.R. No. 145330, October 14, 2005, 473 SCRA 79, it was ruled: Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale. In contracts to sell, RA 6552 applies. In Rillo v. Court of Appeals, the Court declared: x x x Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments x x x. (G.R. No. 125347, June 19, 1992, 274 SCRA 467). The properties subject of the contract having been intended for commercial, and not for residential, purposes, petitioners are entitled to retain the payments already made by the buyer. RA 6552 expressly recognizes the vendors right to cancel contracts to sell on installment basis industrial and commercial properties with full retention of previous payments. But even assuming that the properties were not intended for commercial or industrial purpose, since respondent paid less than two years of installments, it is not entitled to any refund. OPTION MONEY

What is the effect of failure to determine the price? 1. Where contract is executory ineffective 2. Where the thing has been delivered to and appropriated by the buyer the buyer must pay a reasonable price therefore Note: The fixing of the price cannot be left to the discretion of one of the parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected. What is an option money? The distinct consideration in case of an option contract. It does not form part of the purchase price hence, it cannot be recovered if the buyer did not continue with the sale. When is payment considered option money? Payment is considered option money when it is given as a separate and distinct consideration from the purchase price. Consideration in an option contract may be anything or undertaking of value. EARNEST MONEY What is an earnest money or arras? This is the money given to the seller by the prospective buyer to show that the latter is truly interested in buying the property, and its aim is to bind the bargain. (Pineda, p. 75) What is the effect of giving an earnest money? It forms part of the purchase price which may be deducted from the total price. It also serves as a proof of the perfection of the contract of sale. The rule is no more than a disputable presumption and prevails only in the absence of contrary or rebuttable evidence. (PNB v CA, 262 SCRA 464, 1996) Note: Option money may become earnest money if the parties so agree. When is payment considered an earnest money? When the payment constitutes as part of the purchase price. Hence, in case when the sale did not happen, it must be returned to the prospective buyer. Manner Of Payment Is Essential In The Validity Of Sale Before a valid and binding contract of sale can exist, the manner of payment of the purchase price must first be established, as such stands as essential to the validity of the sale. After all, such agreement on the terms of payment is integral to the element of a price certain, such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. (Sps. Edrada vs. Sps. Ramos, G.R. No. 154413, August 31, 2005 citing Swedish Match, AB vs. CA, G.R. No. 128120, October 20, 2004, 441 SCRA 1). In Boston Bank of the Phils. vs. Manalo, et al., G.R. No. 158149, February 9, 2006, it was once again said that for a perfected contract of sale or contract to sell to exist in law,

there must be an agreement of the parties, not only on the price of the property sold, but also on the manner the price is to be paid by the vendee. A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale. It is not enough for the parties to agree on the price of the property. The parties must also agree on the manner of payment of the price of the property to give rise to a binding and enforceable contract of sale or contract to sell. This is so because the agreement as to the manner of payment goes into the price, such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. (Boston Bank of the Phils. vs. Manalo, et al., G.R. No. 158149, February 9, 2006). INSTALLMENT SALES LAW What is the Installment Sales Law? Commonly known as the Recto Law. It is embodied in Art. 1484 of the NCC which provides for the remedies of a seller in the contracts of sale of personal property by installments. Note: Art. 1484 of the NCC incorporates the provisions of Act No. 4122 passed by the Philippine Legislature on Dec. 9, 1939, known as the "Installment Sales Law" or the "Recto Law," which then amended Art. 1454 of the Civil Code of 1889. To what does the Recto Law apply? This law covers contracts of sale of personal property by installments (Act No. 4122). It is also applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. (PCI Leasing and Finance Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No. 142618, July 12, 2007) What are the alternative remedies in case of sale of personal property in installments? 1. Specific Performance: Exact fulfillment should the buyer fail to pay General Rule: If availed of, the unpaid seller cannot anymore choose other remedies; Exception: if after choosing, it has become impossible, rescission may be pursued 2. Rescission: Cancel the sale if buyer fails to pay 2 or more installments Deemed chosen when: a. Notice of rescission is sent b. Takes possession of subject matter of sale

c. Files action for rescission 3. Foreclosure: Foreclose on chattel mortgage if buyer fails to pay 2 or more installments General Rule: Actual foreclosure is necessary to bar recovery of balance - Extent of barring effect: purchase price Exception: Mortgagor refuses to deliver property to effect foreclosure; expenses incurred in attorneys fees, etc. REALTY INSTALLMENT BUYER ACT What is the Realty Installment Buyer Act? Commonly known as the Maceda Law. It is embodied in R.A. 6552 which provides for certain protection to particular buyers of real estate payable on installments. The law declares as "public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions. Note: The purpose of the law is to protect buyers in installment against oppressive conditions. What are the transactions/sale covered by the Maceda Law? The law involves the sale of immovables on installment (Maceda Law, R.A. 6552). 1. Coverage: Residential Real Estate (Villanueva, p. 431) 2. Exclude: a. Industrial lots b. Commercial buildings (and commercial lots by implication) c. Sale to tenants under agrarian laws What are the rights granted to buyers? 1. Buyer paid at least 2 years installment a. Pay without interest the balance within grace period of 1 month for every year of installment payment. Grace period to be exercised once every 5 years. b. When no payment cancelled; buyer entitled to 50% of what he has paid + 5% for every year but not exceeding 90% of payments made Note: Cancellation to be effected 30 days from notice & upon payment of cash surrender value. 2. Buyer paid less than 2 years installment a. Grace period is not less than 60 days from due date b. Cancellation if failure to pay w/in 60 days grace c. 30 days notice before final cancellation Note: buyer can still pay w/in the 30 days period with interest.

EQUITABLE MORTGAGE What is an equitable mortgage? One which lacks the proper formalities, form or words or other requisites prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of the contract as security for a debt and contains nothing impossible or contrary to law What are the essential requisites of equitable mortgage? 1. Parties entered into a contract of sale 2. Their intention was to secure an existing debt by way of a mortgage. What is the rule on the presumption of an equitable mortgage? A sale with conventional redemption is deemed to be an equitable mortgage in any of the following cases: (Art. 1602) 1. Price of the sale with right to repurchase is unusually Inadequate 2. Seller Remains in possession as lessee or otherwise 3. Upon or after the expiration of the right to repurchase Another instrument extending the period of redemption or granting a new period is executed 4. Purchaser Retains for himself a part of the purchase price 5. Seller binds himself to pay the Taxes on the thing sold 6. In any other case where the real intention of the parties is that the transaction shall Secure the payment of a debt or the performance of any other obligation. 7. Art. 1602 shall also apply to a contract purporting to be an Absolute sale. (Art. 1604) Note: In case of doubt in determining whether it is equitable mortgage or sale a retro (with right of repurchase); it shall be construed as equitable mortgage. Remedy is reformation. An equitable mortgage is one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. CONVENTIONAL REDEMPTION What is conventional redemption? Seller reserved the right to repurchase thing sold coupled with obligation to return price of the sale, expenses of contract & other legitimate payments and the necessary & useful expenses made on the thing sold Note: Right to repurchase must be reserved at the time of perfection of sale. (Pineda, p. 333)

LEGAL REDEMPTION What is legal redemption? It is the right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires the thing by purchase or by dation in payment or by other transaction whereby ownership is transmitted by onerous title. What are the instances of legal redemption? 1. Sale of a co-owner of his share to a stranger (Art. 1620) 2. When a credit or other incorporeal right in litigation is sold (Art. 1634) 3. Sale of an heir of his hereditary rights to a stranger (Art. 1088) 4. Sale of adjacent rural lands not exceeding 1 hectare (Art. 1621) 5. Sale of adjacent small urban lands bought merely for speculation (Art. 1622)

Warranties deemed included in all contracts of sale by operation of law. (Art. 1547) 1. Warranty that seller has right to sell refers to consummation stage. Not applicable to sheriff, auctioneer, mortgagee, pledge 2. Warranty against eviction Requisites: a. Buyer is Evicted in whole or in part from the subject matter of sale b. Final Judgment c. Basis of eviction is a right Prior to sale or act imputable to seller d. Seller has been Summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant through 3rd party complaint brought by buyer e. No waiver on the part of the buyer Note: For eviction disturbance in law is required and not just trespass in fact. 3. Warranty Requisites: against encumbrances (non-apparent)

What is the period of redemption? 1. No period agreed upon 4 years from date of contract 2. When there is agreement should not exceed 10 years; but if it exceeded, valid only for the first 10 years. 3. When period to redeem has expired & there has been a previous suit on the nature of the contract seller still has 30 days from final judgment on the basis that contract was a sale with pacto de retro: Rationale: no redemption due to erroneous belief that it is equitable mortgage which can be extinguished by paying the loan. 4. When period has expired & seller allowed the period of redemption to expire seller is at fault for not having exercised his rights so should not be granted a new period Note: Tender of payment is sufficient but it is not in itself a payment that relieves the seller from his liability to pay the redemption price. When does period of redemption begin to run? 1. Right of legal pre-emption or redemption shall be exercised within 30 days from written notice by the buyer deed of sale not to be recorded in Registry of Property unless accompanied by affidavit that buyer has given notice to redemptioners 2. When there is actual knowledge, no need to give written notice; period of redemption begins to run from actual knowledge IMPLIED WARRANTIES What are implied warranties?

a. immovable sold is encumbered with non- apparent burden or servitude not mentioned in the agreement b. nature of non-apparent servitude or burden is such that it must be presumed that the buyer would not have acquired it had he been aware thereof Exception: warranty not applicable when non-apparent burden or servitude is recorded in the Registry of Property unless there is expressed warranty that the thing is free from all burdens & encumbrances 4. Warranty against Hidden Defects Requisites: a. Defect is important or Serious i. The thing sold is unfit for the use which it is intended ii. Diminishes its fitness for such use or to such an extent that the buyer would not have acquired it had he been aware thereof b. Defect is Hidden c. Defect Exists at the time of the sale d. Buyer gives Notice of the defect to the seller within reasonable time e. Action for rescission or reduction of the price is brought within the proper period i. 6 months from delivery of the thing sold ii. Within 40 days from the delivery in case of animals f. There must be No waiver of warranty on the part of the buyer.

When is implied warranty not applicable? 1. As is and where is sale 2. Sale of second hand articles 3. Sale by virtue of authority in fact or law 4. Sale at public auction for tax delinquency What are the effects of waiver of an implied warranty? 1. Seller in bad faith & there is waiver against eviction void 2. When buyer w/o knowledge of a particular risk, made general renunciation of warranty is not a waiver but merely limits liability of seller in case of eviction 3. When buyer with knowledge of risk of eviction assumed its consequences & made a waiver seller not liable (applicable only to waiver of warranty against eviction) REMEDIES OF AN UNPAID SELLER What are the remedies of an Unpaid Seller? I. Ordinary 1. Action for Price Exercised when: a. ownership has passed to buyer; b. price is payable on a day certain c. goods cannot readily be resold for reasonable price and Art. 1596 is inapplicable 2. Action for Damages In case of wrongful neglect or refusal by the buyer to accept or pay for the thing sold II. Special 1. Possessory Lien Seller not bound to deliver if buyer has not paid him the price. It is exercisable only in following circumstances: a. goods sold without stipulation as to credit b. goods sold on credit but term of credit has expired c. buyer becomes insolvent Note: When part of goods delivered, may still exercise right on goods undelivered 2. Stoppage in Transitu Requisites: a. Insolvent buyer b. Seller must Surrender the negotiable document of title, if any c. Seller must bear the Expenses of delivery of the goods after the exercise of the right. d. Seller must either actually take possession of the goods sold or give Notice of his claim to the carrier or other person in possession e. Goods must be in Transit

f. Unpaid seller 3. Special Right to Resell the Goods Exercised when: a. Goods are perishable, b. Stipulated the right of resale in case of default, or c. Buyer in default for unreasonable time 4. Special Right to Rescind Requisites: a. Expressly stipulated OR buyer is in default for unreasonable time b. Notice needed to be given by seller to buyer Note: Ownership of goods already with buyer but seller may still rescind; ownership is destroyed even without court intervention but in ordinary sale, need to go to court. Pacto De Retro Sale The essence of a pacto de retro sale is that title and ownership of the property sold is immediately vested in the vendee a retro, subject to the restrictive condition of repurchase by the vendor a retro within the period provided in Article 1606 of the New Civil Code, to wit: The failure of the vendee a retro to repurchase the property vests upon the latter by operation of law the absolute title and ownership over the property sold. (Cruz vs. Leis, G.R. No. 125233, March 9, 2000; 327 SCRA 570). Rules On Double Sale Of Immovables In double sale of an immovable, the rules of preference are as follows: (a) the first registrant in good faith;

(b) should there be no entry, the first in possession in good faith; and (c) in the absence thereof, the buyer who presents the oldest title in good faith. (Martinez vs. CA, 358 SCRA 38 (2001); Art. 1544, NCC). Prior registration of the subject property does not by itself confer ownership or a better right over the property. Article 1544 requires that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyers rights) from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. (Uraca vs. CA, 344 Phil 253; Consolidated Rural Bank (Cagayan Valley) Inc. vs. CA, et al, G.R. No. 132161, January 17, 2005). One who purchases real property which is in actual possession of others should, at least, make some inquiry concerning the rights of those in possession. The actual possession by people other than the vendor should, at least, put the purchaser upon inquiry. He can scarcely, in the absence of such inquiry, be regarded as a bona fide purchaser as against such possessions. (Rep. vs. CA, 102 SCRA 331; Conspecto vs. Fuerto, 31 Phil. 144). The rule of

caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendors title takes all the risks and losses consequent to such failure. (Caram vs. Laureta, 103 SCRA 16 [1981]; Consolidated Rural Bank (Cagayan Valley) Inc. vs. CA, et al, G.R. No. 132161, January 17, 2005; see also Sps. Mathay vs. Court of Appeals, 356 Phil. 870 [1998]). Registration of the second buyer under Act 3344, providing for the registration of all instruments on land neither covered by the Spanish Mortgage Law nor the Torrens System (Act 496), cannot improve the standing of a party since Act 3344 itself expresses that registration thereunder would not prejudice prior rights in good faith (see Carumba vs. Court of Appeals, 31 SCRA 558). Registration, however, by the first buyer under Act 3344 can have the effect of constructive notice to the second buyer that can defeat his right as such buyer in good faith (see Arts. 708-709, Civil Code; see also Revilla vs. Galindez, 107 Phil. 480; Taguba vs. Peralta, 132 SCRA 700). Art. 1544 has been held to be inapplicable to execution sales of unregistered land, since the purchaser merely steps into the shoes of the debtor and acquires the latters interest as of the time the property is sold. (Carumba vs. Court of Appeals, 31 SCRA 558; see also Fabian vs. Smith, Bell & Co., 8 Phil. 496), (Remalante vs. Tibe, 158 SCRA 138; Sps. Noel & Julie Abrigo vs. De Vera, G. R. No. 154409, June 21, 2004). Reason for prohibition against recovery of unpaid balance in installment sale of movables It is intended to prevent any abuses committed by mortgagees from signing the mortgaged property, buying it at foreclosure sale for a low price and then bringing a suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure is that, the mortgagor is found minus the property and still owing practically the full amount of his original indebtedness. (Magna Financial Services Group, Inc. vs. Colorina, G.R. No. 158635, December 9, 2005). Recovery Of Unpaid Balance In Foreclosure Under the law, in a sale on installment of a movable, if the vendor has availed himself of the right to foreclose the chattel mortgage, he shall have no further action against the purchaser to recover the unpaid balance of the purchase price. Any agreement to the contrary is void. In other words, in all proceedings for the foreclosure of the chattel mortgage executed over the chattel which has been sold on installment, the mortgage is limited to the property included in the mortgage. The scheme adopted by the seller of asking for foreclosure and the payment of the unpaid balance is a flagrant circumvention of the prohibition of the law. By praying for the foreclosure of the mortgage over the thing, it renounced whatever claim it may have under the promissory note. (Magna Financial Services Group, Inc. vs. Elias Colorina, G.R. No. 158635, December 9, 2005).