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Act|ons for 8reach of Contract of Sa|e of Goods

Art|c|e 1S94.
Act|ons for breach of the contract of sa|e of goods sha|| be governed
part|cu|ar|y by the prov|s|ons of th|s Chapter, and as to matters not
spec|f|ca||y prov|ded for here|n, by other app||cab|e prov|s|ons of th|s
1|t|e. (n)

Art|c|e 1S9S.
Where, under a contract of sa|e, the ownersh|p of the goods has
passed to the buyer and he wrongfu||y neg|ects or refuses to pay for
the goods accord|ng to the terms of the contract of sa|e, the se||er may
ma|nta|n an act|on aga|nst h|m for the pr|ce of the goods.

Where, under a contract of sa|e, the pr|ce |s payab|e on a certa|n day,
|rrespect|ve of de||very or of transfer of t|t|e and the buyer wrongfu||y
neg|ects or refuses to pay such pr|ce, the se||er may ma|nta|n an act|on
for the pr|ce a|though the ownersh|p |n the goods has not passed. 8ut
|t sha|| be a defense to such an act|on that the se||er at any t|me before
the [udgment |n such act|on has man|fested an |nab|||ty to perform the
contract of sa|e on h|s part or an |ntent|on not to perform |t.

A|though the ownersh|p |n the goods has not passed, |f they cannot
read||y be reso|d for a reasonab|e pr|ce, and |f the prov|s|ons of art|c|e
1S96, fourth paragraph, are not app||cab|e, the se||er may offer to
de||ver the goods to the buyer, and, |f the buyer refuses to rece|ve
them, may not|fy the buyer that the goods are thereafter he|d by the
se||er as ba||ee for the buyer. 1hereafter the se||er may treat the goods
as the buyer's and may ma|nta|n an act|on for the pr|ce. (n)

Art|c|e 1S96.
Where the buyer wrongfu||y neg|ects or refuses to accept and pay for
the goods, the se||er may ma|nta|n an act|on aga|nst h|m for damages
for nonacceptance.

1he measure of damages |s the est|mated |oss d|rect|y and natura||y
resu|t|ng |n the ord|nary course of events from the buyer's breach of

Where there |s an ava||ab|e market for the goods |n quest|on, the
measure of damages |s, |n the absence of spec|a| c|rcumstances
show|ng prox|mate damage of a d|fferent amount, the d|fference
between the contract pr|ce and the market or current pr|ce at the t|me
or t|mes when the goods ought to have been accepted, or, |f no t|me
was f|xed for acceptance, then at the t|me of the refusa| to accept.

If, wh||e |abor or expense of mater|a| amount |s necessary on the part
of the se||er to enab|e h|m to fu|f||| h|s ob||gat|ons under the contract
of sa|e, the buyer repud|ates the contract or not|f|es the se||er to
proceed no further therew|th, the buyer sha|| be ||ab|e to the se||er for
|abor performed or expenses made before rece|v|ng not|ce of the
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buyer's repud|at|on or countermand. 1he prof|t the se||er wou|d have
made |f the contract or the sa|e had been fu||y performed sha|| be
cons|dered |n award|ng the damages. (n)

Art|c|e 1S97.
Where the goods have not been de||vered to the buyer, and the buyer
has repud|ated the contract of sa|e, or has man|fested h|s |nab|||ty to
perform h|s ob||gat|ons thereunder, or has comm|tted a breach
thereof, the se||er may tota||y resc|nd the contract of sa|e by g|v|ng
not|ce of h|s e|ect|on so to do to the buyer. (n)

Art|c|e 1S98.
Where the se||er has broken a contract to de||ver spec|f|c or
ascerta|ned goods, a court may, on the app||cat|on of the buyer, d|rect
that the contract sha|| be performed spec|f|ca||y, w|thout g|v|ng the
se||er the opt|on of reta|n|ng the goods on payment of damages. 1he
[udgment or decree may be uncond|t|ona|, or upon such terms and
cond|t|ons as to damages, payment of the pr|ce and otherw|se, as the
court may deem [ust. (n)

Art|c|e 1S99.
Where there |s a breach of warranty by the se||er, the buyer may, at
h|s e|ect|on:

(1) Accept or keep the goods and set up aga|nst the se||er, the breach
of warranty by way of recoupment |n d|m|nut|on or ext|nct|on of the

(2) Accept or keep the goods and ma|nta|n an act|on aga|nst the se||er
for damages for the breach of warranty,

(3) kefuse to accept the goods, and ma|nta|n an act|on aga|nst the
se||er for damages for the breach of warranty,

(4) kesc|nd the contract of sa|e and refuse to rece|ve the goods or |f
the goods have a|ready been rece|ved, return them or offer to return
them to the se||er and recover the pr|ce or any part thereof wh|ch has
been pa|d.

When the buyer has c|a|med and been granted a remedy |n anyone of
these ways, no other remedy can thereafter be granted, w|thout
pre[ud|ce to the prov|s|ons of the second paragraph of art|c|e 1191.

Where the goods have been de||vered to the buyer, he cannot resc|nd
the sa|e |f he knew of the breach of warranty when he accepted the
goods w|thout protest, or |f he fa||s to not|fy the se||er w|th|n a
reasonab|e t|me of the e|ect|on to resc|nd, or |f he fa||s to return or to
offer to return the goods to the se||er |n substant|a||y as good
cond|t|on as they were |n at the t|me the ownersh|p was transferred to
the buyer. 8ut |f deter|orat|on or |n[ury of the goods |s due to the
breach or warranty, such deter|orat|on or |n[ury sha|| not prevent the
buyer from return|ng or offer|ng to return the goods to the se||er and
resc|nd|ng the sa|e.

Where the buyer |s ent|t|ed to resc|nd the sa|e and e|ects to do so, he
sha|| cease to be ||ab|e for the pr|ce upon return|ng or offer|ng to
return the goods. If the pr|ce or any part thereof has a|ready been
pa|d, the se||er sha|| be ||ab|e to repay so much thereof as has been
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pa|d, concurrent|y w|th the return of the goods, or |mmed|ate|y after
an offer to return the goods |n exchange for repayment of the pr|ce.

Where the buyer |s ent|t|ed to resc|nd the sa|e and e|ects to do so, |f
the se||er refuses to accept an offer of the buyer to return the goods,
the buyer sha|| thereafter be deemed to ho|d the goods as ba||ee for
the se||er, but sub[ect to a ||en to secure the payment of any port|on of
the pr|ce wh|ch has been pa|d, and w|th the remed|es for the
enforcement of such ||en a||owed to an unpa|d se||er by art|c|e 1S26.

(S) In the case of breach of warranty of qua||ty, such |oss, |n the
absence of spec|a| c|rcumstances show|ng prox|mate damage of a
greater amount, |s the d|fference between the va|ue of the goods at
the t|me of de||very to the buyer and the va|ue they wou|d have had |f
they had answered to the warranty. (n)

ln Lhe realm of performance, Lhe maln rule ln Sales was !"#$"%
$'(%)* (leL Lhe buyer beware), whlch requlred Lhe buyer Lo be
aware of Lhe supposed LlLle of Lhe seller Lo Lhe sub[ecL maLLer,
and LhaL a buyer who buys wlLhouL checklng Lhe seller's LlLle
Lakes all Lhe rlsks and losses consequenL Lo such fallure.
Genera| ku|e: 1oday, Lhe docLrlne of caveaL empLor ls used Lo
deLermlne wheLher Lhe buyer, ln Laklng dellvery of Lhe sub[ecL
maLLer of Lhe sale, can be consldered a buyer ln good falLh, or
Lo deLermlne wheLher Lhe buyer assumed Lhe rlsks and
conLlngencles aLLached Lo Lhe sub[ecL maLLer of Lhe sale.
o Lxcept|on: 1he prlnclpal embodled ln our 1orrens
sysLem presenL an excepLlon Lo Lhe caveaL empLor rule,
slnce under such sysLem a buyer need only rely upon
Lhe LlLle of a reglsLered land and has no obllgaLlon Lo
look beyond such LlLle.

I. Cn art Cf 1he Se||er

A. In Case Cf Movab|es (Art|c|es 1S93, 1S9S to 1S97)

1. Movab|es In Genera|

Art|c|e 1S93.
W|th respect to movab|e property, the resc|ss|on of the sa|e sha|| of
r|ght take p|ace |n the |nterest of the vendor, |f the vendee, upon the
exp|rat|on of the per|od f|xed for the de||very of the th|ng, shou|d not
have appeared to rece|ve |t, or, hav|ng appeared, he shou|d not have
tendered the pr|ce at the same t|me, un|ess a |onger per|od has been
st|pu|ated for |ts payment. (1S0S)

2. Non-ayment Cf r|ce 8y 1he 8uyer (Art|c|e 1S9S)
ArLlcle 1393(1) ! Cwnershlp Lransferred Lo buyer
ArLlcle 1393(2) ! no Lransfer of ownershlp Lo buyer
ArLlcle 1393(3) ! When prlce payable on cerLaln day

3. When 8uyer Wrongfu||y Neg|ects Cr kefuses 1o Accept Goods
(Art|c|e 1S96 and 1S97)
under ArLlcle 1397, when Lhe buyer of scrap lron falls Lo puL up
Lhe leLLer of credlL ln favor of Lhe seller as Lhe condlLlon of Lhe
sale, Lhe seller had a rlghL Lo LermlnaLe Lhe conLracL, and non-
compllance wlLh Lhe condlLlon meanL LhaL Lhe seller's obllgaLlon
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Lo sell never dld arlse. !"#$%&%' )%*+#,, -./ 0/ -.123 .4
5667%,$8 9:; )-<5 =>? @:;;=A/

8. Unpa|d Se||er Cf Goods (Art|c|es 1S24-1S3S)

Art|c|e 1S24.
1he vendor sha|| not be bound to de||ver the th|ng so|d, |f the vendee
has not pa|d h|m the pr|ce, or |f no per|od for the payment has been
f|xed |n the contract. (1466)

Art|c|e 1S2S.
1he se||er of goods |s deemed to be an unpa|d se||er w|th|n the
mean|ng of th|s 1|t|e:

(1) When the who|e of the pr|ce has not been pa|d or tendered,

(2) When a b||| of exchange or other negot|ab|e |nstrument has been
rece|ved as cond|t|ona| payment, and the cond|t|on on wh|ch |t was
rece|ved has been broken by reason of the d|shonor of the |nstrument,
the |nso|vency of the buyer, or otherw|se.

In art|c|es 1S2S to 1S3S the term "se||er" |nc|udes an agent of the
se||er to whom the b||| of |ad|ng has been |ndorsed, or a cons|gnor or
agent who has h|mse|f pa|d, or |s d|rect|y respons|b|e for the pr|ce, or
any other person who |s |n the pos|t|on of a se||er. (n)

Art|c|e 1S26.
Sub[ect to the prov|s|ons of th|s 1|t|e, notw|thstand|ng that the
ownersh|p |n the goods may have passed to the buyer, the unpa|d
se||er of goods, as such, has:

(1) A ||en on the goods or r|ght to reta|n them for the pr|ce wh||e he |s
|n possess|on of them,

(2) In case of the |nso|vency of the buyer, a r|ght of stopp|ng the goods
|n trans|tu after he has parted w|th the possess|on of them,

(3) A r|ght of resa|e as ||m|ted by th|s 1|t|e,

(4) A r|ght to resc|nd the sa|e as ||kew|se ||m|ted by th|s 1|t|e.

Where the ownersh|p |n the goods has not passed to the buyer, the
unpa|d se||er has, |n add|t|on to h|s other remed|es a r|ght of
w|thho|d|ng de||very s|m||ar to and coextens|ve w|th h|s r|ghts of ||en
and stoppage |n trans|tu where the ownersh|p has passed to the
buyer. (n)

Art|c|e 1S27.
Sub[ect to the prov|s|ons of th|s 1|t|e, the unpa|d se||er of goods who |s
|n possess|on of them |s ent|t|ed to reta|n possess|on of them unt||
payment or tender of the pr|ce |n the fo||ow|ng cases, name|y:

(1) Where the goods have been so|d w|thout any st|pu|at|on as to

(2) Where the goods have been so|d on cred|t, but the term of cred|t
has exp|red,

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(3) Where the buyer becomes |nso|vent.

1he se||er may exerc|se h|s r|ght of ||en notw|thstand|ng that he |s |n
possess|on of the goods as agent or ba||ee for the buyer. (n)

Art|c|e 1S28.
Where an unpa|d se||er has made part de||very of the goods, he may
exerc|se h|s r|ght of ||en on the rema|nder, un|ess such part de||very
has been made under such c|rcumstances as to show an |ntent to
wa|ve the ||en or r|ght of retent|on. (n)

Art|c|e 1S29.
1he unpa|d se||er of goods |oses h|s ||en thereon:

(1) When he de||vers the goods to a carr|er or other ba||ee for the
purpose of transm|ss|on to the buyer w|thout reserv|ng the ownersh|p
|n the goods or the r|ght to the possess|on thereof,

(2) When the buyer or h|s agent |awfu||y obta|ns possess|on of the
goods, (3) 8y wa|ver thereof.

1he unpa|d se||er of goods, hav|ng a ||en thereon, does not |ose h|s ||en
by reason on|y that he has obta|ned [udgment or decree for the pr|ce
of the goods. (n)

Art|c|e 1S30.
Sub[ect to the prov|s|ons of th|s 1|t|e, when the buyer of goods |s or
becomes |nso|vent, the unpa|d se||er who has parted w|th the
possess|on of the goods has the r|ght of stopp|ng them |n trans|tu, that
|s to say, he may resume possess|on of the goods at any t|me wh||e
they are |n trans|t, and he w||| then become ent|t|ed to the same r|ghts
|n regard to the goods as he wou|d have had |f he had never parted
w|th the possess|on. (n)

Art|c|e 1S31.
Goods are |n trans|t w|th|n the mean|ng of the preced|ng art|c|e:

(1) Irom the t|me when they are de||vered to a carr|er by |and, water,
or a|r, or other ba||ee for the purpose of transm|ss|on to the buyer,
unt|| the buyer, or h|s agent |n that beha|f, takes de||very of them from
such carr|er or other ba||ee,

(2) If the goods are re[ected by the buyer, and the carr|er or other
ba||ee cont|nues |n possess|on of them, even |f the se||er has refused
to rece|ve them back.

Goods are no |onger |n trans|t w|th|n the mean|ng of the preced|ng

(1) If the buyer, or h|s agent |n that beha|f, obta|ns de||very of the
goods before the|r arr|va| at the appo|nted dest|nat|on,

(2) If, after the arr|va| of the goods at the appo|nted dest|nat|on, the
carr|er or other ba||ee acknow|edges to the buyer or h|s agent that he
ho|ds the goods on h|s beha|f and cont|nues |n possess|on of them as
ba||ee for the buyer or h|s agent, and |t |s |mmater|a| that further
dest|nat|on for the goods may have been |nd|cated by the buyer,

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(3) If the carr|er or other ba||ee wrongfu||y refuses to de||ver the goods
to the buyer or h|s agent |n that beha|f. If the goods are de||vered to a
sh|p, fre|ght tra|n, truck, or a|rp|ane chartered by the buyer, |t |s a
quest|on depend|ng on the c|rcumstances of the part|cu|ar case,
whether they are |n the possess|on of the carr|er as such or as agent of
the buyer.

If part de||very of the goods has been made to the buyer, or h|s agent
|n that beha|f, the rema|nder of the goods may be stopped |n trans|tu,
un|ess such part de||very has been under such c|rcumstances as to
show an agreement w|th the buyer to g|ve up possess|on of the who|e
of the goods. (n)

Art|c|e 1S32.
1he unpa|d se||er may exerc|se h|s r|ght of stoppage |n trans|tu e|ther
by obta|n|ng actua| possess|on of the goods or by g|v|ng not|ce of h|s
c|a|m to the carr|er or other ba||ee |n whose possess|on the goods are.
Such not|ce may be g|ven e|ther to the person |n actua| possess|on of
the goods or to h|s pr|nc|pa|. In the |atter case the not|ce, to be
effectua|, must be g|ven at such t|me and under such c|rcumstances
that the pr|nc|pa|, by the exerc|se of reasonab|e d|||gence, may prevent
a de||very to the buyer.

When not|ce of stoppage |n trans|tu |s g|ven by the se||er to the
carr|er, or other ba||ee |n possess|on of the goods, he must rede||ver
the goods to, or accord|ng to the d|rect|ons of, the se||er. 1he expenses
of such de||very must be borne by the se||er. If, however, a negot|ab|e
document of t|t|e represent|ng the goods has been |ssued by the
carr|er or other ba||ee, he sha|| not be ob||ged to de||ver or [ust|f|ed |n
de||ver|ng the goods to the se||er un|ess such document |s f|rst
surrendered for cance||at|on. (n)

Art|c|e 1S33.
Where the goods are of per|shab|e nature, or where the se||er
express|y reserves the r|ght of resa|e |n case the buyer shou|d make
defau|t, or where the buyer has been |n defau|t |n the payment of the
pr|ce for an unreasonab|e t|me, an unpa|d se||er hav|ng a r|ght of ||en
or hav|ng stopped the goods |n trans|tu may rese|| the goods. ne sha||
not thereafter be ||ab|e to the or|g|na| buyer upon the contract of sa|e
or for any prof|t made by such resa|e, but may recover from the buyer
damages for any |oss occas|oned by the breach of the contract of sa|e.

Where a resa|e |s made, as author|zed |n th|s art|c|e, the buyer
acqu|res a good t|t|e as aga|nst the or|g|na| buyer.

It |s not essent|a| to the va||d|ty of resa|e that not|ce of an |ntent|on to
rese|| the goods be g|ven by the se||er to the or|g|na| buyer. 8ut where
the r|ght to rese|| |s not based on the per|shab|e nature of the goods or
upon an express prov|s|on of the contract of sa|e, the g|v|ng or fa||ure
to g|ve such not|ce sha|| be re|evant |n any |ssue |nvo|v|ng the quest|on
whether the buyer had been |n defau|t for an unreasonab|e t|me
before the resa|e was made.

It |s not essent|a| to the va||d|ty of a resa|e that not|ce of the t|me and
p|ace of such resa|e shou|d be g|ven by the se||er to the or|g|na| buyer.

1he se||er |s bound to exerc|se reasonab|e care and [udgment |n
mak|ng a resa|e, and sub[ect to th|s requ|rement may make a resa|e
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e|ther by pub||c or pr|vate sa|e. ne cannot, however, d|rect|y or
|nd|rect|y buy the goods. (n)

Art|c|e 1S34.
An unpa|d se||er hav|ng the r|ght of ||en or hav|ng stopped the goods |n
trans|tu, may resc|nd the transfer of t|t|e and resume the ownersh|p |n
the goods, where he express|y reserved the r|ght to do so |n case the
buyer shou|d make defau|t, or where the buyer has been |n defau|t |n
the payment of the pr|ce for an unreasonab|e t|me. 1he se||er sha|| not
thereafter be ||ab|e to the buyer upon the contract of sa|e, but may
recover from the buyer damages for any |oss occas|oned by the breach
of the contract.

1he transfer of t|t|e sha|| not be he|d to have been resc|nded by an
unpa|d se||er unt|| he has man|fested by not|ce to the buyer or by
some other overt act an |ntent|on to resc|nd. It |s not necessary that
such overt act shou|d be commun|cated to the buyer, but the g|v|ng or
fa||ure to g|ve not|ce to the buyer of the |ntent|on to resc|nd sha|| be
re|evant |n any |ssue |nvo|v|ng the quest|on whether the buyer had
been |n defau|t for an unreasonab|e t|me before the r|ght of resc|ss|on
was asserted. (n)

Art|c|e 1S3S.
Sub[ect to the prov|s|ons of th|s 1|t|e, the unpa|d se||er's r|ght of ||en or
stoppage |n trans|tu |s not affected by any sa|e, or other d|spos|t|on of
the goods wh|ch the buyer may have made, un|ess the se||er has
assented thereto.

If, however, a negot|ab|e document of t|t|e has been |ssued for goods,
no se||er's ||en or r|ght of stoppage |n trans|tu sha|| defeat the r|ght of
any purchaser for va|ue |n good fa|th to whom such document has
been negot|ated, whether such negot|at|on be pr|or or subsequent to
the not|f|cat|on to the carr|er, or other ba||ee who |ssued such
document, of the se||er's c|a|m to a ||en or r|ght of stoppage |n
trans|tu. (n)

1he remedles of an unpald seller are slmllar Lo Lhe docLrlne of
self-help ln ArLlcle 429.
lor an unpald seller, Lhe mlnlmum requlremenL ls LhaL Lhe
goods are ln Lhe possesslon of Lhe seller so as Lo prevenL an
acLual physlcal Lussle wlLh Lhe buyer ln Lhe exerclse of such

1. Def|n|t|on Cf "Unpa|d Se||er" (Art|c|e 1S2S)

2. k|ghts Cf Unpa|d Se||er: (Art|c|e 1S26)
1hese remedles have a hlerarchlchal appllcaLlon.
1he lasL Lwo are called speclal" because Lhey are rlghLs
accorded only Lo Lhe unpald seller, and are of a dlfferenL naLure
from Lhe rlghL of resclsslon ln ArLlcle 1191.
4 Speclal 8emedles Avallable 1o 1he unpald Seller: (1)
ossessory llen, (2) SLoppage ln LranslLu, (3) Speclal rlghL Lo
resell goods, and (4) Speclal rlghL Lo resclnd.

3. ossessory L|en (Art|c|es 1S26-1S29, 1S03, 1S3S)

Art|c|e 1S03.
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When there |s a contract of sa|e of spec|f|c goods, the se||er may, by
the terms of the contract, reserve the r|ght of possess|on or ownersh|p
|n the goods unt|| certa|n cond|t|ons have been fu|f|||ed. 1he r|ght of
possess|on or ownersh|p may be thus reserved notw|thstand|ng the
de||very of the goods to the buyer or to a carr|er or other ba||ee for the
purpose of transm|ss|on to the buyer.

Where goods are sh|pped, and by the b||| of |ad|ng the goods are
de||verab|e to the se||er or h|s agent, or to the order of the se||er or of
h|s agent, the se||er thereby reserves the ownersh|p |n the goods. 8ut,
|f except for the form of the b||| of |ad|ng, the ownersh|p wou|d have
passed to the buyer on sh|pment of the goods, the se||er's property |n
the goods sha|| be deemed to be on|y for the purpose of secur|ng
performance by the buyer of h|s ob||gat|ons under the contract.

Where goods are sh|pped, and by the b||| of |ad|ng the goods are
de||verab|e to order of the buyer or of h|s agent, but possess|on of the
b||| of |ad|ng |s reta|ned by the se||er or h|s agent, the se||er thereby
reserves a r|ght to the possess|on of the goods as aga|nst the buyer.

Where the se||er of goods draws on the buyer for the pr|ce and
transm|ts the b||| of exchange and b||| of |ad|ng together to the buyer
to secure acceptance or payment of the b||| of exchange, the buyer |s
bound to return the b||| of |ad|ng |f he does not honor the b||| of
exchange, and |f he wrongfu||y reta|ns the b||| of |ad|ng he acqu|res no
added r|ght thereby. If, however, the b||| of |ad|ng prov|des that the
goods are de||verab|e to the buyer or to the order of the buyer, or |s
|ndorsed |n b|ank, or to the buyer by the cons|gnee named there|n,
one who purchases |n good fa|th, for va|ue, the b||| of |ad|ng, or goods
from the buyer w||| obta|n the ownersh|p |n the goods, a|though the
b||| of exchange has not been honored, prov|ded that such purchaser
has rece|ved de||very of the b||| of |ad|ng |ndorsed by the cons|gnee
named there|n, or of the goods, w|thout not|ce of the facts mak|ng the
transfer wrongfu|. (n)

lf Lhe ownershlp of Lhe goods has passed Lo Lhe buyer, Lhe
unpald seller sLlll has a llen on Lhe goods or rlghL Lo reLaln Lhem
for Lhe prlce whlle he ls ln possesslon.
lf ownershlp has noL passed Lo Lhe buyer, Lhe unpald seller has a
rlghL of wlLhholdlng dellvery.
When possessory llen may be exerclsed ! ArLlcle 1327
When negoLlable uocumenL Cf 1lLle Pas 8een lssued ! no
seller's llen shall defeaL Lhe rlghLs of an lnnocenL purchaser for
value Lo whom such documenL has been negoLlaLed.
When arLlal uellvery ls Made ! ArLlcle 1328
lnsLances When ossessory Llen ls LosL ! ArLlcle 1329
o 1he unpald seller losses hls possessory llen when he
parLs wlLh physlcal possesslon of Lhe goods. ln Lhls case,
he sLlll has Lhe remedy of sLoppage ln LranslLu, buL only
when Lhe buyer ls lnsolvenL.

4. Stoppage #' 32%'$#31 (Art|c|es 1S30-1S32, 1S3S, 1636[2])

Art|c|e 1636.
In the preced|ng art|c|es |n th|s 1|t|e govern|ng the sa|e of goods,
un|ess the context or sub[ect matter otherw|se requ|res:

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(1) "Document of t|t|e to goods" |nc|udes any b||| of |ad|ng, dock
warrant, "quedan," or warehouse rece|pt or order for the de||very of
goods, or any other document used |n the ord|nary course of bus|ness
|n the sa|e or transfer of goods, as proof of the possess|on or contro| of
the goods, or author|z|ng or purport|ng to author|ze the possessor of
the document to transfer or rece|ve, e|ther by |ndorsement or by
de||very, goods represented by such document.

"Goods" |nc|udes a|| chatte|s persona| but not th|ngs |n act|on or
money of |ega| tender |n the h|||pp|nes. 1he term |nc|udes grow|ng
fru|ts or crops.

"Crder" re|at|ng to documents of t|t|e means an order by |ndorsement
on the documents.

"ua||ty of goods" |nc|udes the|r state or cond|t|on.

"Spec|f|c goods" means goods |dent|f|ed and agreed upon at the t|me a
contract of sa|e |s made.

An antecedent or pre-ex|st|ng c|a|m, whether for money or not,
const|tutes "va|ue" where goods or documents of t|t|e are taken e|ther
|n sat|sfact|on thereof or as secur|ty therefor.

(2) A person |s |nso|vent w|th|n the mean|ng of th|s 1|t|e who e|ther
has ceased to pay h|s debts |n the ord|nary course of bus|ness or
cannot pay h|s debts as they become due, whether |nso|vency
proceed|ngs have been commenced or not.

(3) Goods are |n a "de||verab|e state" w|th|n the mean|ng of th|s 1|t|e
when they are |n such a state that the buyer wou|d, under the
contract, be bound to take de||very of them. (n)

When A negoLlable uocumenL Cf 1lLle ls lssued ! ArLlcle 1333
When 8uyer ls ueemed lnsolvenL"
o A buyer ls deemed lnsolvenL when he elLher has
ceased Lo pay hls debLs ln Lhe ordlnary course of
buslness or cannoL pay hls debLs as Lhey become due."
! ArLlcle 1636(2)
o lnsolvency proceedlngs need noL be commenced.
o 8uyer musL be lnsolvenL for sLoppage ln LranslLu Lo
When Coods Are ueemed ln 1ranslL" Cr noL, And When arL
uellvery Already Made ! ArLlcle 1331
o ArLlcle 1331 presupposes LhaL Lhe carrler Lhrough hlm
dellvery ls made ls nC1 an agenL of Lhe buyer. uellvery
Lo such carrler ls noL dellvery Lo Lhe buyer.
Pow SLoppage ln 1ranslLu May 8e Lxerclsed, And When Coods
Covered 8y A negoLlable uocumenL Cf 1lLle ! ArLlcle 1332

S. k|ght Cf kesa|e (Art|c|e 1S33)
Lven before Lhe formal sLaLuLory adopLlon of Lhe remedles of an
unpald seller, Lhe Supreme CourL had already recognlzed Lhe
rlghL of a seller, +,$- %,$ !)-%*"!% ). /"0$ 1/ /%100 $2$!3%)*4 1-
/%"5$6 Lo resell Lhe movables sub[ecL maLLer of Lhe sale, when
Lhe buyer falls Lo pay Lhe purchase prlce. !B%',.' 0/
B%1$$72+%'8 CD EF#,/ >;G @:;9DA/
When 1he 8lghL ls Lxerclsable
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
a. 1he unpald seller has prevlously excerclsed possessory
llen or sLoppage ln LranslL
b. 1he goods are of perlshable naLure
c. Seller has expressly reserved such rlghL
d. 8uyer has been ln defaulL for an unreasonable lengLh of
noLe: 1he buyer need noL resclnd Lhe flrsL conLracL [udlclally
before reselllng Lhe Lhlng. lf he ls obllged Lo sell lL for less Lhan
Lhe conLracL prlce, Lhe non-paylng buyer ls llable for Lhe
dlfference. H%3#IJ%K 0/ -.123 .4 5667%,$8 C )-<5 9C= @:;G9A/
1he seller ls noL obllged Lo glve Lhe orlglnal owner Lhe proflLs
(l.e. dlfference of conLracL prlce and sale prlce), lf any. (ArLlcle
LffecL Cf Pavlng Lxerclsed 8lghL Cf 8esale
o 1he seller shall noL LhereafLer be llable Lo Lhe orlglnal
buyer upon Lhe conLracL of sale or for any proflL made
by such resale, buL may recover from Lhe buyer
damages for any loss occasloned by Lhe breach of Lhe
conLracL of sale."
1ransfer Cf Cwnershlp
o Speclal rlghL Lo resell can be exerclsed even lf Lhe seller
had already Lransferred ownershlp Lo Lhe orlglnal buyer.
o Powever, because of ArLlcle 1333, Lhe second buyer wlll
sLlll be able Lo geL a good LlLle agalnsL Lhe orlglnal buyer.
o 1hls ls a speclal feaLure of Lhls rlghL Lo resell. 1he seller
can sLlll vesL ownershlp ln Lhe second buyer even lf aL
Lhe Llme of Lhe second sale, he dld noL have ownershlp
" Crdlnarlly, Lhe desLrucLlon or Laklng away of
ownershlp ln one person and placlng lL ln
anoLher person ln such manner can only be
done Lhrough courL acLlon.
" 8uL ln Lhls case of an unpald seller, he can effecL
Lransfer of ownershlp even wlLhouL [udlclal
noLlce Lo uefaulLlng 8uyer ! ArLlcle 1333(3) and (4)
SLandard of Care And ulsquallflcaLlon ln 8esale ! ArLlcle

6. k|ght 1o kesc|nd (Art|c|e 1S34)
When 1he 8lghL May 8e Lxerclsed (8Lu)
o unpald seller has exerclsed hls possessory llen or
sLoppage ln LranslLu
o Seller expressly reserved Lhe rlghL Lo resclnd ln case of
o 8uyer has been ln defaulL for an unreasonable lengLh of
LffecL Cf Lxerclse Cf Such 8lghL ! LasL senLence of ArLlcle
1ransfer Cf 1lLle !ArLlcle 1334(2)
Seller ln possesslon of Lhe goods may sell Lhem aL buyer's rlsk.
!H%3#IJ%K 0/ -.123 .4 5667%,$8 C )-<5 9C= @:;G9A/

1. Ant|c|patory 8reach (Art|c|e 1S91)

Art|c|e 1S91.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Shou|d the vendor have reasonab|e grounds to fear the |oss of
|mmovab|e property so|d and |ts pr|ce, he may |mmed|ate|y sue for the
resc|ss|on of the sa|e.

Shou|d such ground not ex|st, the prov|s|ons of art|c|e 1191 sha|| be
observed. (1S03)

2. Ia||ure Cf 8uyer 1o ay r|ce (Art|c|e 1S92)
1he CourL has Lended Lo lnLerpreL Art|c|e 1S92 llberally ln favor
of Lhe buyer Lo glve hlm every opporLunlLy Lo comply wlLh hls
obllgaLlon and proceed Lo Lake Lhe sub[ecL lmmovable.
Art|c|e 1S92 only covers conLracLs of sale. ConLracLs Lo sell are
noL covered.
1he CourL has also resorLed Lo equlLable resoluLlons ln Lhe
appllcaLlon of Art|c|e 1S92. Such was Lhe case ln L7I%2M%
!"#$%&'( *+ ,%-.%/%0 11 ,234 567 89:;7<+

!"#$%&$ ("%)$*+, -. /$0&$1$

Iacts: Saldana boughL Lwo loLs from Legarda for 1,300 each, payable ln
10 years, dlvlded lnLo 120 equal monLhly lnsLallmenLs wlLh 10 lnLeresL
per annum. Saldana pald for 8 conLlnuous years abouL 93 monLhly
lnsLallmenLs LoLal 3, 382 (1.8k lnLeresL, 1.6k applled Lo prlnclpal),
Lhen he sLopped paymenL. 1rlal CourL upheld cancellaLlon of conLracL Lo
sell, CourL of Appeals reversed saylng LhaL Saldana suspended paymenL
because Lhe loLs were under waLer/ no lmprovemenLs he so lL could noL
be dellvered Lo hlm.

Issue: WheLher or noL Lhe clalm of Permanos Legarda be upheld, as he
clalms LhaL Lhe paymenL should be consldered as renL and LhaL Lhe sale
should be cancelled.

ne|d: nC. 1he LoLal amounL pald as prlnclpal amounLed Lo 1,682.23
more Lhan Lhe amounL of one loL. 1herefore, lL ls [usL and falr ln
accordance wlLh law and equlLy Lo conslder one loL as fully pald. 1here
was already subsLanLlal performance. under ArLlcle 1234, lf Lhe
obllgaLlon has been subsLanLlally performed ln good falLh, Lhe obllgor
may recover as Lhough Lhere had been a sLrlcL and compleLe fulflllmenL,
less damages suffered by Lhe obllgee.


3. Sa|es of Subd|v|s|on Lots and Condom|n|um Un|ts (Sect|on 23
and 24, .D. 9S7)

Sect|on 23. Non-Iorfe|ture of ayments.
No |nsta||ment payment made by a buyer |n a subd|v|s|on or
condom|n|um pro[ect for the |ot or un|t he contracted to buy sha|| be
forfe|ted |n favor of the owner or deve|oper when the buyer, after due
not|ce to the owner or deve|oper, des|sts from further payment due to
the fa||ure of the owner or deve|oper to deve|op the subd|v|s|on or
condom|n|um pro[ect accord|ng to the approved p|ans and w|th|n the
t|me ||m|t for comp|y|ng w|th the same. Such buyer may, at h|s opt|on,
be re|mbursed the tota| amount pa|d |nc|ud|ng amort|zat|on |nterests
but exc|ud|ng de||nquency |nterests, w|th |nterest thereon at the |ega|

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Sect|on 24. Ia||ure to pay |nsta||ments.
1he r|ghts of the buyer |n the event of th|s fa||ure to pay the
|nsta||ments due for reasons other than the fa||ure of the owner or
deve|oper to deve|op the pro[ect sha|| be governed by kepub||c Act
No. 6SS2.

.u.937 was lssued ln Lhe wake of numerous reporLs LhaL many
real esLaLe subdlvlslon owners, developers, operaLors and/or
sellers have reneged on Lhelr represenLaLlons and obllgaLlons Lo
provlde and malnLaln properly subdlvlslon roads, dralnage,
sewerage, waLer sysLems, llghLlng sysLems and oLher baslc
requlremenLs or Lhe healLh and safeLy of home and loL buyers. lL
was deslgned Lo sLem Lhe Llde of fraudulenL manlpulaLlons
perpeLraLed by unscrupulous subdlvlslon and condomlnlum
sellers free from llens and encumbrances." !-%$% N#,#6#'%$
<7%,3& -.26/ 0/ O44#P7 .4 3F7 E27$#M7'38 9C: )-<5 :GQ @:;;QA/
SecLlon 20 of .u. 937 dlrecLs every owner and developer of real
properLy Lo provlde Lhe necessary faclllLles, lmprovemenLs,
lnfrasLrucLure and oLher forms of developmenL, fallure Lo carry
ouL whlch ls sufflclenL cause for Lhe buyer Lo suspend paymenL,
and any sums of money already pald shall noL be forfelLed.
!R%+%&. 0/ B1%'I8 C?D )-<5 :QG @9DDGA/
ln case Lhe developer of a subdlvlslon or condomlnlum falls ln
lLs obllgaLlon under SecLlon 20, SecLlon 23 glves Lhe buyer:
o 1he opLlon Lo demand relmbursemenL of Lhe LoLal
amounL pald, or Lo walL for furLher developmenL of Lhe
subdlvlslon, and when Lhe buyer opLs for Lhe laLLer
alLernaLlve, he may suspend paymenL of Lhe
lnsLallmenLs unLll such Llme LhaL Lhe owner or
developer has fulfllled lLs obllgaLlons. xR%+%&. 0/
B1%'I8 C?D )-<5 :QG @9DDGAS
o 8uyer requlred only Lo glve due noLlce Lo Lhe owner or
developer of Lhe buyer's lnLenLlon Lo suspend paymenL.
!T%+.2% <7%,3& %'M U70/ -.26/ 0/ O44#P7 .4 3F7
E27$#M7'38 QDG )-<5 Q;: @9DDGAS
o SecLlon 23 does noL requlre LhaL a noLlce be glven flrsL
by Lhe buyer Lo Lhe seller before a demand for refund
can be made as Lhe noLlce and demand can be made ln
Lhe same leLLer or communlcaLlon. !-%$% N#,#6#'%$
<7%,3& -.26 0/ O44#P7 .4 3F7 E27$#M7'38 9C: )-<5 :GQ
@:;;QAS and
o CpLlon granLed by law ls wlLh buyer and noL Lhe
developer/seller. !<7,1P#. 0/ V2#,,%'37WX%24#'8 :?> )-<5
CDQ @:;;DA/
8uyer" under .u. 937 would lnclude one who acqulres for a
valuable conslderaLlon a condomlnlum unlL by way of
asslgnmenL by Lhe condomlnlum pro[ecL owner ln paymenL of
lLs lndebLedness for conLracLor's fee. !5Y5 -.+61372 -.,,7I78
Z'P/ 0/ N%P3.2%8 =>? )-<5 :9: @9DD9A/
8uyers of condomlnlum unlLs would be [usLlfled ln suspendlng
paymenLs, when Lhe developer-seller falls Lo glve Lhem a copy
of Lhe ConLracL Lo Sell desplLe repeaLed demands/ !X.,M L..6
E2.6723#7$8 Z'P/ 0/ -58 =QD )-<5 =>: @9DD:A/ Powever, when Lhe
8eservaLlon AgreemenL provldes LhaL Lhe buyer shall be enLlLled
Lo a ConLracL Lo Sell only upon lLs paymenL of aL leasL 30 of Lhe
LoLal conLracL prlce, Lhe non-happenlng yeL of LhaL condlLlon
does noL render Lhe seller ln defaulL as Lo warranL Lhe buyer Lhe
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
rlghL Lo resclnd Lhe sale and demand a refund. X/X/ )6.23*7%2
Y4I/ -.26/ 0/ [.2,M -,%$$ E2.6723#7$8 Z'P/8 G:C )-<5 >Q @9D:DA/
o 1he dlssaLlsfacLlon of Lhe buyer under a ConLracL of Sale
as Lo Lhe compleLlon daLe of Lhe pro[ecL does noL lLself
consLlLuLe subsLanLlal breach as Lo auLhorlze Lhe buyer
Lo resclnd Lhe conLracL and ask for refund of Lhe
amounLs pald Lo Lhe seller. X/X/ )6.23*7%2 Y4I/ -.26/
0/ [.2,M -,%$$ E2.6723#7$8 Z'P/8 G:C )-<5 >Q @9D:DA/
1he buyer has Lhe rlghL Lo compel Lhe seller Lo compleLe Lhe
roads and oLher faclllLles on Lhe subdlvlsloln, even lf lL wasn'L
sLlpulaLed ln Lhe sale. 1he seller cannoL shlfL Lo Lhe buyer Lhe
burden of provldlng for access Lo and from Lhe subdlvlslon. L#+
0/ U7,.$ )%'3.$8 ? )-<5 >;? @:;G=AS -.'$#'I 0/ -.123 .4
5667%,$8 :>> )-<5 :C @:;?;A
o lf Lhe seller defaulLs, Lhe buyer should be enLlLled Lo a
proporLlonaLe reducLlon ln Lhe purchase prlce.
o under .u. no. 937, a buyer cause of acLlon agalnsL Lhe
developer for fallure Lo develop rlpens only when Lhe
developer falls Lo compleLe Lhe pro[ecL on Lhe lapse of
Lhe compleLlon perlod sLaLed on Lhe sale conLracL or Lhe
developer's Llcenses Lo Sell. Any premaLure demand
prlor Lo Lhe lndlcaLed compleLlon daLe would be
premaLure. X/X/ )6.23*7%2 Y4I/ -.26/ 0/ [.2,M -,%$$
E2.6723#7$8 Z'P/8 G:C )-<5 >Q @9D:DA/
Slnce Lhe loLs are lnvolved ln llLlgaLlon and Lhere ls a noLlce of 01/
($-7$-/ aL Lhe back of Lhe LlLles lnvolved, Lhe subdlvlslon
developer have Lo be glven a reasonable perlod of Llme Lo work
on Lhe adverse clalms and dellver clean LlLles Lo Lhe buyer, and
should Lhe former fall Lo dellver clean LlLles aL Lhe end of Lhe
perlod, lL oughL Lo relmburse Lhe buyers noL only for Lhe
purchase prlce of Lhe subdlvlslon loLs sold Lo Lhem buL also Lhe
lncremenLal value arlslng from Lhe appreclaLlon of Lhe loLs.
-%'37+62%37 0/ -<) <7%,3& U70/ -.26/8 Q?> )-<5 C;9 @9DD;A/
Not|ce kequ|red Under Sect|on 23 Cf .D. 9S7
o noLhlng ln .u. 937 provldes for Lhe nulllflcaLlon of a
conLracL Lo sell ln Lhe evenL Lhe seller, aL Lhe Llme Lhe
conLracL was enLered lnLo, dld noL possess a cerLlflcaLe
of reglsLraLlon or a llcense Lo sell, sale belng a
consensual conLracL. -. -F#7' 0/ )3%/ L1P#% <7%,3&8 Q:=
)-<5 Q>D @9DD>A/

o 1he lack of CerLlflcaLe of 8eglsLraLlon or Lhe Llcense Lo
Sell of Lhe developer-seller merely sub[ecLs Lhe
developer Lo admlnlsLraLlve sancLlons, buL do noL
render Lhe conLracLs Lo sell enLered lnLo on Lhe pro[ecL
null and vold. X/X/ )6.23*7%2 Y4I/ -.26/ 0/ [.2,M -,%$$
E2.6723#7$8 Z'P/8 G:C )-<5 >Q @9D:DA/
ketroact|ve App||cat|on Cf .D. 9S7
o .D. 9S7 may be applled reLroacLlvely slnce lL ls Lhe
lnLenL of Lhe law as shown from lLs preamble. lL ls an
lnsLrumenL of soclal [usLlce. \1I7'#. 0/ U2#,.'8 9Q9 )-<5
:DG @:;;GA/

4. k|ght 1o Grace er|od St|pu|ated
When a grace perlod ls provlded for ln Lhe conLracL of sale, lL
should be consLrued as a rlghL, noL an obllgaLlon of Lhe debLor,
and when uncondlLlonally conferred, Lhe grace perlod ls

8"-%$'(0"%$ #9 8:; :$"0%4 <$#9 8)*(9, 387 SC8A 492 (2009).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
effecLlve wlLhouL furLher need of demand elLher calllng for Lhe
paymenL of Lhe obllgaLlon or for honorlng Lhe rlghL. V2#PK3.*'
U70/ -.26/ 0/ 5+.2 R#722% U70/ -.26/8 9=; )-<5 :9G @:;;CA/

D. kesc|ss|on on Sa|es of Non-kes|dent|a| Immovab|es on Insta||ments
(Art|c|es 1191 and 1S92)

Art|c|e 1191.
1he power to resc|nd ob||gat|ons |s |mp||ed |n rec|proca| ones, |n case
one of the ob||gors shou|d not comp|y w|th what |s |ncumbent upon

1he |n[ured party may choose between the fu|f|||ment and the
resc|ss|on of the ob||gat|on, w|th the payment of damages |n e|ther
case. ne may a|so seek resc|ss|on, even after he has chosen fu|f|||ment,
|f the |atter shou|d become |mposs|b|e.

1he court sha|| decree the resc|ss|on c|a|med, un|ess there be [ust
cause author|z|ng the f|x|ng of a per|od.

1h|s |s understood to be w|thout pre[ud|ce to the r|ghts of th|rd
persons who have acqu|red the th|ng, |n accordance w|th art|c|es 138S
and 1388 and the Mortgage Law. (1124)

Art|c|e 1S92.
In the sa|e of |mmovab|e property, even though |t may have been
st|pu|ated that upon fa||ure to pay the pr|ce at the t|me agreed upon
the resc|ss|on of the contract sha|| of r|ght take p|ace, the vendee may
pay, even after the exp|rat|on of the per|od, as |ong as no demand for
resc|ss|on of the contract has been made upon h|m e|ther [ud|c|a||y or
by a notar|a| act. After the demand, the court may not grant h|m a
new term. (1S04a)

ArLlcles 1191 and 1392 on resclsslon cannoL apply Lo a conLracL
Lo sell slnce Lhere can be no resclsslon of an obllgaLlon LhaL ls
sLlll non-exlsLenL, Lhe suspenslve condlLlon noL havlng
happened." !"%,%2%. 0/ -58 =DC )-<5 :QQ @:;;;A/

ArLlcle 1392 allows Lhe buyer of an lmmovable Lo pay as long as
no demand for resclsslon has been made, and Lhe conslgnaLlon
of Lhe balance of Lhe purchase prlce before Lhe Lrlal courL
operaLes as full paymenL/ !E2.0#'P7 .4 -7J1 0/ B7#2$ .4 <14#'%
Y.2%,7$8 QCG )-<5 =:Q @9DD?A/
AuLomaLlc resclsslon clauses are noL valld nor can be glven legal
effecL under ArLlcles 1191 and 1392. !Z2#'I%' 0/ -.123 .4
5667%,$8 =GG )-<5 C: @9DD:A/
lndeed, resclsslon requlres under
Lhe law a poslLlve acL of cholce on Lhe parLy of Lhe non-
defaulLlng parLy. !O,&+6#% B.1$#'I 0/ E%'%$#%3#P R2%07, -.26/8
=;Q )-<5 9;? @9DD=A/
vendor cannoL recover ownershlp of Lhe Lhlng sold unLll and
unless Lhe conLracL lLself ls resolved and seL aslde, a parLy who
falls Lo lnvoke [udlclally or by noLarlal acL Lhe resoluLlon of a

8"*17"7 =/%"%$/6 >-!9 #9 ;"-%$*), 71 hll. 114 (1940), ?0@$" #9 >-A31'@)46 86
hll. 477 (1930), B"-3$0 #9 :)7*153$C, 109 hll. 1 (1960), D)/$(, E ;)-/
=-%$*(*1/$/6 >-!9 #9 8?, 143 SC8A 663 (1986) F1'$-$C #9 8?, 193 SC8A 203
(1991), D"!1-%) #9 G"("*"C, 209 SC8A 246 (1992), H74//$4 I"*J6 >-!9 #9 8)3*% ).
?(($"0/6 280 SC8A 233 (1997), :100) #9 8)3*% ). ?(($"0/6 274 SC8A 461 (1997),
I0"%1-3' I0"-/ I,1096 >-!9 #9 83!3$!), 488 SC8A 136 (2006), K"- #9 L$-)01*"), 604
SC8A 36 (2009), F"*!1" #9 8)3*% ). ?(($"0/, 619 SC8A 280 (2010).
=/!3$%" #9 I"-7), 76 hll. 236 (1946).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
conLracL of sale would be prevenLed from blocklng Lhe
consummaLlon of Lhe same ln llghL of Lhe precepL LhaL mere
fallure Lo fulflll Lhe conLracL does noL operaLe 1(/) ."!%) as
resclsslon. E,%3#'1+ E,%'$ EF#,/8 Z'P/ 0/ -1P17P.8 C?? )-<5 :QG

II. CN Ak1 CI 8ULk

A. In case of Movab|es (Art|c|es 1S98-1S99)
lallure of Seller Lo uellver ! ArLlcle 1398
8reach of Se||er's Warranty: ArLlcle 1399 provldes Lhe followlng
remedles Lo Lhe buyer ln case Lhe seller breaches hls warranLy:
1. AccepL or keep Lhe goods and seL up agalnsL Lhe seller Lhe
breach of warranLy by way of recoupmenL ln dlmlnuLlon or
exLlncLlon of Lhe prlce
2. AccepL or keep Lhe goods and malnLaln an acLlon for damages
agalnsL Lhe seller
3. 8efuse Lo accepL Lhe goods and malnLaln an acLlon for damages
4. 8esclnd Lhe sale and refuse Lo recelve Lhe goods or lf Lhe goods
have already been recelved, reLurn Lhem or offer Lo reLurn Lhem
Lo Lhe seller and recover Lhe prlce pald.
o 1hese remedles are alLernaLlve. Powever, Lhe buyer sLlll
has a rlghL Lo resclnd lf he has chosen speclflc
performance buL lL has become lmposslble. 1hls ls
based on ArLlcle 1191(2).
Suspens|on of ayments |n Ant|c|pat|on of 8reach ! 1he
pendency of sulL over Lhe sub[ecL maLLer of Lhe sale [usLlfles Lhe
buyer ln suspendlng paymenL of Lhe balance of Lhe purchase
prlce by reason of aforesald vlndlcaLory acLlon flled agalnsL lL.

8. In case of Immovab|es (Art|c|es 1191, Sect|ons. 23 and 24, .D. 9S7)

C. Suspens|on of ayment (Art|c|e 1S90)

Art|c|e 1S90.
Shou|d the vendee be d|sturbed |n the possess|on or ownersh|p of the
th|ng acqu|red, or shou|d he have reasonab|e grounds to fear such
d|sturbance, by a v|nd|catory act|on or a forec|osure of mortgage, he
may suspend the payment of the pr|ce unt|| the vendor has caused the
d|sturbance or danger to cease, un|ess the |atter g|ves secur|ty for the
return of the pr|ce |n a proper case, or |t has been st|pu|ated that,
notw|thstand|ng any such cont|ngency, the vendee sha|| be bound to
make the payment. A mere act of trespass sha|| not author|ze the
suspens|on of the payment of the pr|ce. (1S02a)

1he pendency of sulL over Lhe sub[ecL maLLer of Lhe sale [usLlfles
Lhe buyer ln suspendlng paymenL of Lhe balance of Lhe purchase
prlce by reason of aforesald vlndlcaLory acLlon flled agalnsL lL.
1he assurance made by Lhe seller LhaL Lhe buyer dld noL have Lo
worry abouL Lhe case because lL was pure and slmple
harassmenL ls noL Lhe klnd of guaranLy conLemplaLed under
ArLlcle 1390 whereln Lhe buyer ls bound Lo make paymenL lf Lhe
seller should glve a securlLy for Lhe reLurn of Lhe prlce. !5M7,4%
E2.6723#7$8 Z'P/ 0/ -.123 .4 5667%,$8 9CD )-<5 QGQ @:;;QA/

III. kLC1C LAW: Sa|es Cf Movab|es Cn Insta||ments (Art|c|es 1484,
148S, 1486)

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Art|c|e 1484.
In a contract of sa|e of persona| property the pr|ce of wh|ch |s payab|e
|n |nsta||ments, the vendor may exerc|se any of the fo||ow|ng

(1) Lxact fu|f|||ment of the ob||gat|on, shou|d the vendee fa|| to pay,

(2) Cance| the sa|e, shou|d the vendee's fa||ure to pay cover two or
more |nsta||ments,

(3) Iorec|ose the chatte| mortgage on the th|ng so|d, |f one has been
const|tuted, shou|d the vendee's fa||ure to pay cover two or more
|nsta||ments. In th|s case, he sha|| have no further act|on aga|nst the
purchaser to recover any unpa|d ba|ance of the pr|ce. Any agreement
to the contrary sha|| be vo|d. (14S4-A-a)

Art|c|e 148S.
1he preced|ng art|c|e sha|| be app||ed to contracts purport|ng to be
|eases of persona| property w|th opt|on to buy, when the |essor has
depr|ved the |essee of the possess|on or en[oyment of the th|ng.

Art|c|e 1486.
In the case referred to |n the two preced|ng art|c|es, a st|pu|at|on that
the |nsta||ments or rents pa|d sha|| not be returned to the vendee or
|essee sha|| be va||d |nsofar as the same may not be unconsc|onab|e
under the c|rcumstances. (n)

A. kat|ona|e of kecto Law
lL was orlglnally passed ln 1939 and was evenLually lncorporaLed
ln Lhe Clvll Code as ArLlcle 1484.
1he purpose ls Lo prevenL Lhe abuses of morLgagees who
foreclose on Lhe chaLLel morLgage, buy Lhe properLy aL a low
prlce, and Lhen sulng Lhe morLgagor for deflclency.
1he 8ecLo Law prevenLs morLgagee from selzlng Lhe morLgaged
properLy, buylng lL aL foreclosure sale for a low prlce and Lhen
brlnglng Lhe sulL agalnsL Lhe morLgagor for a deflclency
[udgmenL. 1he almosL lnvarlable resulL was LhaL Lhe morLgagor
found hlmself mlnus Lhe properLy and sLlll owlng pracLlcally Lhe
full amounL of hls orlglnal lndebLedness. !Y%I'% N#'%'P#%,
)720#P7$ X2.168 Z'P/ 0/ -.,%2#'%8 C>> )-<5 9CQ @9DDQA/

8. Coverage Cf 1he Law:
1. "Insta||ment Sa|e" requlres aL leasL sLlpulaLed Lwo (2)
paymenLs ln Lhe fuLure, wheLher or noL Lhere ls a
downpaymenL. L70& 0/ X720%P#., G; EF#,/ Q9 @:;=;A/

L70& B72+%'.$ 0/ X720%P#.

Iacts: Levy Permanos, lnc., sold Lo Lazaro 8las Cervaclo, who afLer
downpaymenL, execuLed a promlssory noLe for Lhe balance of 2,400,
payable on or before !une 13, 1937, and morLgaged Lhe car as securlLy
for balance. Cervaclo falled Lo pay. 1he morLgage was foreclosed and
sold aL 800. Permanos lnsLlLuLed a clvll acLlon for Lhe balance.

Issue: WheLher or noL Levy Permanos can recover Lhe balance.

ne|d: ?LS. ArLlcle 1484 applles. 1he suggesLlon LhaL Lhe cash paymenL
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
made ln Lhls case should be consldered as an lnsLallmenL ln order Lo
brlng Lhe conLracL sued upon under Lhe operaLlon of Lhe law, ls
unLenable. A cash paymenL cannoL be consldered as a paymenL by
lnsLallmenL, and even lf lL can be so consldered, sLlll Lhe law does noL
apply, for lL requlres non-paymenL of Lwo or more lnsLallmenLs ln order
LhaL lLs provlslons may be lnvoked. Pere, only one lnsLallmenL was
unpald. AlLhough lL ls a sale of personal properLy, lL ls noL payable ln
lnsLallmenLs. lL ls payable ln a sLralghL Lerm ln whlch Lhe balance should
be pald ln lLs LoLallLy aL maLurlLy daLe of Lhe n, Lherefore Lhe
prohlblLlon does noL apply.


llnanclng LransacLlons derlved or arlslng from sales of movables
on lnsLallmenLs are covered.
o Where Lhe flnanclng LransacLlon ls noL born from a sale
buL a morLgage, lL ls noL covered by Lhe 8ecLo Law
E5Y\-5 [..M R27%3+7'3 E,%'38 Z'P/ 0/ -.123 .4
5667%,$8 =:D )-<5 9?:8 9?; @:;;;A
o ln Lhls case, Lhe seller asslgned hls credlL Lo Lhe
flnanclng company. 1he flnanclng company ls Lhus
bound by ArLlcle 1484. T%&%$ 0/ L1'73% Y.3.2
-.+6%'&8 ::> )-<5 >9G @:;?9A
2. Contracts 1o Se|| Movab|es Not Covered/ !"#$%&%' )%*+#,,
-.+6%'&8 Z'P/ 0/ -.123 .4 5667%,$8 9:; )-<5 =>? @:;;=A/

C. kemed|es Ava||ab|e 1o Unpa|d Se||er Not Cumu|at|ve 8ut A|ternat|ve
And Lxc|us|ve. U7,3% Y.3.2 )%,7$ -.26/ 0/ ]#1 H#+ U1%', 9:= )-<5 9Q;

U7,3% Y.3.2 )%,7$ -.26/ 0/ ]#1 H#+ U1%'

Iacts: nlu klm uuan purchased from uelLa MoLors 3 alr condlLlonlng
unlLs. nlu pald Lhe downpaymenL, Lhe balance payable ln 24
lnsLallmenLs. 1lLle Lo Lhe properLy remalned wlLh uelLa unLll Lhe
paymenL of Lhe full purchase prlce. under Lhe agreemenL, fallure Lo pay
2 monLhly lnsLallmenLs makes Lhe obllgaLlon enLlrely due and
demandable. 1he unlLs were dellvered, nlu falled Lo pay. 1hus, uelLa
flled a complalnL for 8eplevln and applled Lhe lnsLallmenLs pald by nlu
as renLals, nlu conLends LhaL Lhe conLracLual sLlpulaLlons are

Issue: WheLher or noL Lhe remedy uelLa avalled of was unconsclonable

ne|d: nC. A sLlpulaLlon ln Lhe conLracL LreaLlng lnsLallmenLs as renLals ln
case of fallure Lo pay ls vALlu-so long as Lhey are noL unconsclonable.
1he provlslon ln Lhls case ls reasonable. An unpald seller has 3
alLernaLlve (noL cumulaLlve) remedles: (1) exacL fulflllmenL of Lhe
obllgaLlon, (2) cancel Lhe sale for defaulL ln 2 lnsLallmenLs, and (3)
foreclose Lhe chaLLel morLgage (lf any) buL Lhe seller cannoL anymore
clalm Lhe unpald balance of Lhe prlce. uelLa chose Lhe 2nd remedy.
Pavlng done so, lL ls now barred from clalmlng Lhe balance of Lhe
purchase prlce.

<$ 0" 8*3C #9 ?/1"- 8)-/3'$*, 214 SC8A 103 (1992), L)*@)- >> #9 ;$*#1!$+17$
;($!1"01/%/6 >-!9, 238 SC8A 634 (1996).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01


1. Vert|ca| 8arr|ng Lffect ! 1hese are alLernaLlve and excluslve,
and Lhe exerclse of one would bar Lhe exerclse of Lhe oLhers.
o Powever, seeklng a wrlL of replevln conslsLenL wlLh any
of Lhe Lhree remedles. !^'#072$%, Y.3.2$ -.26/ 0/ U&
B#%' R%38 9? )-<5 :G: @:;G;A/
2. nor|zonta| 8arr|ng Lffect ! 8ecovery of unpald balance ls also
barred when Lhe remedy of elLher resclsslon or foreclosure ls
o ln lnsLallmenL sales, lf Lhe acLlon lnsLlLuLed ls for speclflc
performance and Lhe morLgaged properLy ls
subsequenLly aLLached and sold, Lhe sale does noL
amounL Lo a foreclosure of Lhe morLgage, has been
upheld ln subsequenL declslons and seems now well-
esLabllshed/ Z'M1$32#%, N#'%'P7 -.26/ 0/ <%+#27_8 >>
)-<5 :Q9 @:;>>A/

D. kemedy of Spec|f|c erformance
1hls remedy ls alLernaLlve. Powever, lL can be argued LhaL lf Lhe
obllgaLlon Lo pay becomes lmposslble, Lhe seller may sLlll seek
resclsslon based on Art|c|e 1191.
o CLv: however says LhaL Lhe generlc obllgaLlon Lo pay
can'L become lmposslble.
1he seller ls deemed Lo have chosen speclflc performance when
he flles an acLlon ln courL for recovery. Sendlng of demand
leLLer Lo Lhe buyer ls noL enough and should noL be consldered
has havlng barred Lhe resorL Lo elLher Lhe remedles of resclsslon
or foreclosure.
When [udgmenL ls rendered ln favor of Lhe seller, Lhe buyer
becomes a [udgmenL debLor. Pls obllgaLlon can be execuLed on
all personal and real properLles of Lhe buyer whlch are noL
exempL from execuLlon.
1he facL LhaL Lhe seller obLalned a wrlL of execuLlon agalnsL Lhe
properLy morLgaged, buL pursuanL Lo an acLlon for speclflc
performance wlLh a plea for a wrlL of replevln, does noL amounL
Lo a foreclosure of Lhe chaLLel morLgage covered by Lhe 8ecLo
Law. R%`%'I,%'I#3 0/ ).13F72' Y.3.2$8 :D: EF#,/ GDG @:;Q>A9

R%`%'I,%'I#3 0/ ).13F72' Y.3.2$

Iacts: Spouses 1a[anlanglL boughL 2 LracLors and 1 1hresher from
SouLhern MoLors on lnsLallmenL basls by lssulng a romlssory noLe Lo
LhaL effecL. 1hey Lhen defaulLed on Lhe lnsLallmenL paymenLs. 1he courL
enLered [udgmenL for Lhe LoLal sum of Lhe purchased machlnerles
(23,373) plus lnLeresL and collecLlon cosLs. 1he sherlff Lhen levled on
Lhe machlnerles and sold Lhem on aucLlon for 10k Lo Lhe hlghesL
bldder, whlch was also SouLhern MoLors. Slnce Lhe [udgmenL called for
so much more, SouLhern MoLors obLalned an allas wrlL of execuLlon so
LhaL Lhe sherlff could levy aLLachmenL on Lhe oLher real properLles of
Lhe 1a[anlanglLs.

Issue: WheLher or noL SouLhern MoLors had already foreclosed on Lhe

;)3%,$*- B)%)*/ #9 B)/!)/), 2 SC8A 168 (1961), >-73/%*1"0 M1-"-!$ 8)*(9 #9
:"'1*$C, 77 SC8A 132 (1977), :)/"*1) #9 I8> N$"/1-5 "-7 M1-"-!$6 >-!9, 474 SC8A
300 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
chaLLel morLgage and Lhus have no more furLher acLlon agalnsL Lhem.

ne|d: nC. 1here was no foreclosure sale slnce SouLhern MoLors elecLed
1484(1) and sued on Lhe noLe excluslvely. SouLhern MoLors had Lhe
cholce whaL remedy ln ArLlcle 1484 Lo use. nelLher was Lhere
cancellaLlon of Lhe sale whlch was also afflrmed by Lhe sherlff. 1here
was an execuLlon agalnsL on Lhe properLy morLgaged noL a
cancellaLlon/foreclosure on Lhe sale. 1he facL LhaL Lhe seller obLalned a
wrlL of execuLlon agalnsL Lhe properLy morLgaged, buL pursuanL Lo an
acLlon for speclflc performance wlLh a plea for a wrlL of replevln, does
noL amounL Lo a foreclosure of Lhe chaLLel morLgage covered by Lhe
8ecLo Law.


L. kemedy Cf kesc|ss|on
1. Nature of kemedy of kesc|ss|on
8esclsslon obllges boLh parLles Lo make resLlLuLlon.
o MuLual resLlLuLlon prevenLs recoverlng on Lhe balance
of Lhe purchase prlce. ].'%3. 0/ Z'372+7M#%37
5667,,%37 -.1238 :CD )-<5 9QQ @:;?QAS buL sLlpulaLlon
on non-reLurn of paymenLs ls valld provlded noL
unconsclonable. !U7,3% Y.3.2 )%,7$ -.26/ 0/ ]#1 H#+
U1%'8 9:= )-<5 9Q; @:;;9A/

].'%3. 0/ Z'372+7M#%37 5667,,%37 -.123

Iacts: 8esLlLuLo and LsLer nonaLo purchased a volkswagen Sakbayan
from Lhe eople's Car, lnc., on lnsLallmenL basls. 1he defendanLs
execuLed a promlssory noLe and a chaLLel morLgage ln favor of eople's
Car, lnc. lL Lhen asslgned lLs rlghLs and lnLeresLs over Lhe noLe and
morLgage ln favor of lnvesLor's llnance CorporaLlon (llC). lor fallure of
defendanLs Lo pay Lwo or more lnsLallmenLs, desplLe demands, Lhe car
was repossessed by llC. uesplLe repossesslon, llC demanded LhaL
nonaLos pay Lhe balance of Lhe prlce of Lhe car.

Issue: WheLher a vendor who had cancelled Lhe sale of a moLor vehlcle
for fallure of Lhe buyer Lo pay Lwo or more of Lhe sLlpulaLed
lnsLallmenLs, may also demand paymenL of Lhe balance of Lhe purchase

ne|d: nC. 1he appllcable law ln Lhe case aL bar ls ArLlcle 1484. 1hese
remedles have been recognlzed as alLernaLlve, noL cumulaLlve, LhaL Lhe
exerclse of one would bar Lhe exerclse of Lhe oLhers. 1he acLs
performed by Lhe corporaLlon are wholly conslsLenL wlLh Lhe concluslon
LhaL lL had opLed Lo cancel Lhe conLracL of sale of Lhe vehlcle. lL ls Lhus
barred from exacLlng paymenL of Lhe balance of Lhe prlce of Lhe vehlcle.
lL cannoL have lLs cake and eaL lL Loo.


o A sLlpulaLlon whlch provldes for Lhe forfelLure of Lhe
amounLs pald by Lhe buyer when Lhe conLracL ls
resclnded ls noL conLrary Lo law. Such forfelLed amounLs
are llke Lhe damages whlch can also be recovered ln

2. When kesc|ss|on Deemed Chosen:
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Genera| ku|e: 8esclsslon ls chosen when Lhere ls a clear
lndlcaLlon by Lhe seller LhaL he wanLs Lo end Lhe conLracL.
o Sends a noLlce of resclsslon Lo Lhe buyer
o 1akes possesslon of Lhe sub[ecL maLLer of Lhe sale
o llles an acLlon for resclsslon
When Lhe seller's asslgnee, a flnanclng company, ls able Lo Lake
back possesslon of Lhe moLor vehlcle wlLh a condlLlon LhaL Lhe
car can be redeemed by Lhe buyers wlLhln 13 days, such
possesslon ls clearly wlLh Lhe lnLenL Lo cancel Lhe conLracL.
].'%3. 0/ Z'372+7M#%37 5667,,%37 -.1238 :CD )-<5 9QQ @:;?QA
1he reLaklng of possesslon of Lhe properLy musL be coupled
wlLh an unequlvocal deslre on Lhe parL of Lhe seller Lo resclnd.
As such, surrender of morLgaged properLy ls noL necessarlly
equlvalenL Lo resclsslon. !"M%/ M7 a1#%+J%. 0/ Y%'#,% Y.3.2$
-./8 Z'P/8 = )-<5 CCC @:;G:A/

3. 8arr|ng Lffect Cf kesc|ss|on:
Lven lf noL expllclLly sLaLed ln Lhe law, resclsslon sLlll bars Lhe
seller from recoverlng deflclency or unpald balance, ln Lhe same
way LhaL foreclosure on chaLLel morLgage does.
o Powever, Lhe seller may recover damages.

I. kemedy of Iorec|osure
1. When kemedy Cf Iorec|osure Is Deemed Chosen: 1he seller ls
deemed Lo have chosen Lo foreclose only aL Lhe Llme of acLual
sale of Lhe sub[ecL properLy aL publlc aucLlon. Y%'#,% R2%M#'I b
)166,& -./ 0/ <7&7$8 G9 EF#,/ CG: @:;=QAS Y%'#,% Y.3.2 -./8 Z'P/
0/ N72'%'M7_8 ;; EF#,/ >?9 @:;QGA/
o 1he flllng for and lssuance of a wrlL of replevln (and Lhe
subsequenL recovery of possesslon) does noL mean LhaL
Lhe seller wlll foreclose on Lhe morLgage. ^'#072$%,
Y.3.2$ -.26/ 0/ )& B#%' R%38 9? )-<5 :G: @:;G;A
o llllng of a wrlL of replevln ls usually a prellmlnary sLep Lo
foreclose so LhaL Lhe seller wlll be able Lo regaln
o lf Lhe seller flles an acLlon denomlnaLed as replevln
wlLh damages" whlch seeks Lo recover possesslon and
ln Lhe alLernaLlve, Lo recover Lhe unpald balance of Lhe
prlce, he ls sLlll noL consldered as havlng chosen
foreclosure as a remedy. Z'M1$32#%, N#'%'P7 -.26/ 0/
<%+#27_8 >> )-<5 :Q9 @:;>>A
8arrlng effecL would cover a Lhlrd-parLy morLgage, when lL was
Lhe chaLLel morLgage LhaL was flrsL foreclosed. <#M%M 0/ N#,#6#'%$
Z'07$3+7'3 b N#'%'P7 -.26/, :9D )-<5 9CG @:;?=A9
When Lhe seller asslgns hls credlL Lo anoLher person, Lhe laLLer
ls llkewlse bound by Lhe same law. T%&%$ 0/ L1'73% Y.3.2$8 ::>
)-<5 >9G @:;?9A/

T%&%$ 0/ L1'73% Y.3.2 -.+6%'&

Iacts: !"#$#$%&"' )*#'%+$% ,-.-/0 1'2 +*'34-/"5 %& $&/#-667"&# 8-/$/ -
!"#"$ &'()*+' ,$"! -.*/0" -1#'$2$).'. )1 3/4/5/1 6' 7$" 3)#58 6'/+'$ ",
8espondenL LuneLa MoLor Company. Car was dellvered Lo Zayas who
execuLed a promlssory noLe on Lhe balance and ln addlLlon a chaLLel
morLgage on Lhe car ln favor of LuneLa. Zayas was unable Lo pay furLher

L)*@)- >> #9 ;$*#1!$+17$ ;($!1"01/%/6 >-!9, 238 SC8A 634 (1996).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
prompLlng LuneLa Lo exLra-[udlclally foreclose chaLLel morLgage, car sold
aL publlc aucLlon wlLh LuneLa as hlghesL bldder. LuneLa flled clvll case for
recovery of balance of 1,331.74 plus lnLeresL. Pe denled appllcablllLy of
ArLlcle 1484 because conLracL was only a mere loan and noL sale on

Issue: WheLher or noL ArLlcle 1484 would apply Lo a person or enLlLy
whlch flnanced purchase on lnsLallmenLs of a moLor vehlcle where Lhe
seller subsequenLly asslgns loan documenLs Lo Lhe flnanclng person or

ne|d: !"#$ "&'()* +(& (, (-.,/ *0 12,./( 3*/*4 5*67(,8 (,9 /:(/ /:.
!"#$%&%!'$%() &#(+ !!"# %&'"(#) *+ ,'%&-* ,.!#)/)('#' 0'123(!!#4 (.
evldence) on mon!"#$ &'(!)##*+'!( !!"# %& '!&!( )*+,"-+*# ,.!, ,.*
!"#$ &'( )! *'+", "* -.!$#'/ 0(1'2" '(()3!$4 )#( !!"#$%& ("&-!-vls Lhe
sale Lo LuneLa MoLor Company, Lhe naLure of Lhe LransacLlon dldn'L
change and as an asslgnee, LuneLa had no beLLer rlghLs Lhan asslgnor
Lscano under Lhe same LransacLlon. 1ransacLlon would sLlll be a sale of
personal properLy ln lnsLallmenLs covered by ArLlcle 1484, Lo rule
oLherwlse would pave Lhe way for subverLlng Lhe pollcy underlylng ArL
1484 on Lhe foreclosure of chaLLel morLgages.


2. "8arr|ng" Lffects Cf Iorec|osure:
lL ls Lhe foreclosure and acLual sale aL publlc aucLlon whlch bars
furLher recovery by Lhe seller.
llllng of Lhe acLlon of replevln ln order Lo foreclose on Lhe
chaLLel morLgage does noL produce Lhe barrlng effecL under Lhe
8ecLo Law, .)* 1% 1/ %,$ ."!% ). .)*$!0)/3*$ "-7 "!%3"0 /"0$ ). %,$
')*%5"5$7 !,"%%$0 %,"% @"* .3*%,$* *$!)#$*4 @4 %,$ /$00$* ). "-4
@"0"-!$ )- %,$ @34$*O/ )3%/%"-71-5 )@015"%1)- -)% /"%1/.1$7 @4
%,$ /"0$. 1he volunLary paymenL of Lhe lnsLallmenL by Lhe buyer-
morLgagor ls valld and noL recoverable ln splLe Lhe resLrlcLlve
provlslons of ArLlcle 1484(3). ].23F72' Y.3.2$ 0/ )%6#'.$., ==
)-<5 =QG @:;>DA9

].23F72' Y.3.2$8 Z'P/ 0/ )%6#'.$.

Iacts: 8espondenL Caslano Saplnoso purchased from peLlLloner
norLhern MoLors an Cpel kadeLL car for 12,171 maklng a
downpaymenL and execuLlng a promlssory noLe for Lhe balance of
10,340 payable ln lnsLallmenLs. 1o secure Lhe paymenL of Lhe noLe,
Saplnoso execuLed ln favor of norLhern MoLors a chaLLel morLgage on
Lhe car, Lhe morLgage provlded among oLhers LhaL upon Saplnoso's
defaulL ln paymenL of any parL of Lhe prlnclpal or lnLeresL, norLhern
MoLors may elecL any of Lhe ff. remedles (a) sale of Lhe car by norLhern
(b) cancellaLlon of Lhe sale Lo Saplnoso (c) exLra[udlclal foreclosure (d)
ordlnary clvll acLlon for fulflllmenL of Lhe morLgage conLracL,
addlLlonally, whlchever remedy ls chosen, Saplnoso walves hls rlghL Lo
relmbursemenL of any and all amounLs on Lhe prlnclpal and lnLeresL
already pald. Saplnoso falled Lo pay Lhe flrsL 3 lnsLallmenLs due from
AugusL-november 1963, he made paymenLs Lhough on november and
uecember and on Aprll Lhe nexL year buL falled Lo make subsequenL
paymenLs. norLhern MoLors flled a complalnL sLaLlng LhaL lL was avalllng
of Lhe opLlon of exLra[udlcally forecloslng Lhe morLgage and prayed LhaL

B"-10" B)%)* 8)9 #9 M$*-"-7$C, 99 hll. 782 (1936), B"5-" M1-"-!1"0 ;$*#1!$/
F*)3(6 >-!9 #9 8)0"*1-", 477 SC8A 243 (2003).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
(a) a wrlL of replevln be lssued upon lLs flllng of a bond (b) lL be declared
Lo have Lhe rlghLful possesslon of Lhe car (c) ln defaulL of dellvery,
Saplnoso be ordered Lo pay Lhe balance wlLh lnLeresL. SubsequenL Lo
Lhe commencemenL of Lhe acLlon buL before flllng of hls answer,
Saplnoso made 2 paymenLs amounLlng Lo 1,230 on Lhe promlssory
noLe, ln Lhe meanLlme, a wrlL of replevln was lssued and Lhe car was
Lurned over Lo norLhern MoLors. Saplnoso clalmed LhaL he wlLhheld
paymenLs because Lhe car was defecLlve and norLhern MoLors falled Lo
flx lL desplLe hls repeaLed demands.

Issue: WheLher or noL as under ArLlcle 1484 of Lhe Clvll Code, plalnLlff
norLhern MoLors ls barred from recoverlng unpald balance of Lhe debL
havlng elecLed Lo foreclose on Lhe chaLLel morLgage.

ne|d: nC. ln lssulng Lhe wrlL of replevln and upholdlng afLer Lrlal Lhe
rlghL Lo possesslon of Lhe car by norLhern MoLors, Lhe courL below
correcLly consldered Lhe acLlon as one of replevln Lo secure possesslon
of Lhe car as prellmlnary sLep Lo a foreclosure sale. 1he courL below
however erred ln concludlng LhaL Lhe legal effecL of Lhe acLlon was Lo
bar norLhern MoLors from accepLlng furLher paymenLs on Lhe
promlssory noLe. lL ls Lhe facL of foreclosure and acLual sale of Lhe
morLgaged chaLLel LhaL bars furLher recovery by Lhe vendor of any
balance on Lhe vendee's ouLsLandlng obllgaLlon noL saLlsfled by Lhe sale.
ln Lhe presenL case, Lhere ls no occaslon Lo apply Lhe resLrlcLlve
provlslon of ArLlcle 1484 as Lhere has noL yeL been a foreclosure sale
resulLlng ln a deflclency. A morLgage credlLor before Lhe acLual
foreclosure sale ls noL precluded from recoverlng Lhe unpald balance
alLhough he has flled for replevln for Lhe purpose of exLra[udlclal
foreclosure. Also, a morLgage credlLor who has elecLed Lo foreclose buL
subsequenLly deslsLs from proceedlng wlLh Lhe aucLlon sale wlLhouL
galnlng any advanLage and wlLhouL causlng any dlsadvanLage Lo Lhe
morLgagor ls noL barred from sulng on Lhe unpald accounL. And as
appllcable here, a morLgage credlLor ls noL barred from accepLlng before
a foreclosure sale paymenLs volunLarlly Lendered by Lhe debLor-
morLgagor who admlLs lndebLedness.


3. 8arr|ng Lffect Cn Cther Secur|t|es G|ven Ior ayment Cf r|ce
loreclosure on Lhe chaLLel morLgage prevenLs furLher acLlon on
Lhe supporLlng real esLaLe morLgage, wheLher Lhe chaLLel
morLgage ls flrsL foreclosed -21_ 0/ N#,#6#'%$ Z'07$3+7'3 b
N#'%'P7 -.26/, 9= )-<5 >;: @:;G?AP

-21_ 0/ N#,#6#'%$ Z'07$3+7'3 b N#'%'P7 -.26/

Iacts: 8uperLo Cruz boughL a bus from lar LasL MoLor Corp whlch was
payable on lnsLallmenLs of 1,487.20/monLh for 30 monLhs wlLh 12
lnLeresL. Cruz execuLed a promlssory noLe ln Lhe sum of Lhe purchase
prlce. 1o secure Lhe paypenL of Lhe promlssory noLe, Cruz execuLed a
chaLLel morLgage on Lhe bus. Slnce no downpaymenL was made, lar
LasL requlred Cruz Lo execuLe anoLher securlLy and for Lhe a 8LM was
execuLed on Lhe land and bulldlng of Mrs. 8eyes whlch aL LhaL Llme was
morLgaged Lo u8. lar LasL Lhen asslgned all lLs rlghLs and lndorsed Lhe
promlssory noLe Lo llllplnas lnvesLmenL and llnanclng Corp. Cruz
defaulLed ln paymenL of Lhe promlssory noLe wlLh only 300 belng ever

I"/!3"0 #9 Q-1#$*/"0 B)%)*/ 8)*(9, 61 SC8A 121 (1974).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
pald. llllplnas had Lhe chaLLel morLgage foreclosed and lL was Lhe
hlghesL bldder aL Lhe foreclosure sale. Powever, Lhe proceeds were noL
sufflclenL Lo cover Lhe balance so lL pald Lhe lndebLedness of Mrs. 8eyes
and requesLed LhaL lL be sold aL foreclosure sale as well. 1hus Cruz and
Mrs. 8eyes flled an acLlon wlLh Lhe Cll Lo have Lhe 8LM consLlLuLed on
her land cancelled. 1he Cll ruled ln favor of Cruz and 8eyes flndlng LhaL
Lhe exLra[udlclal foreclosure barred furLher acLlon for recovery Lhus Lhe
case aL bar.

Issue: WheLher or noL recovery from an addlLlonal securlLy ls lncluded ln
Lhe prohlblLlon Lhus allowlng llllplnas Lo recover Lhe balance.

ne|d: ?LS. ArLlcle 1484 applles. lL has Lhus Lhe exerclse of one bars Lhe
exerclse of Lhe oLhers. 1hls ls so Lo prevenL he abuses commlLLed ln
connecLlon wlLh foreclosure morLgages whereln Lhe morLgagees would
selze Lhe morLgaged properLy and buylng Lhem aL a very low prlce aL Lhe
sale and Lhen brlnglng sulL for collecLlon of Lhe unpald balance resulLlng
ln Lhe morLgagor sLlll llable Lo pay hls orlglnal debL plus loslng Lhe
properLy. 1o allow llllplnas Lo recover Lhru Lhe addlLlonal securlLy would
resulL ln a clrcumvenLlon of Lhe law. Should Lhe guaranLor be compelled
Lo pay Lhe balance Lhen Lhe guaranLor would be enLlLled Lo recover from
Lhe debLor-vendee. ln Lhe end, lL would sLlll be Lhe debLor-vendee who
would bear Lhe paymenL of Lhe purchase prlce. Also, Lhe word acLlon"
ln ArLlcle 1484 covers all Lypes of legal demand of one's rlghL wheLher
[udlclal or exLra[udlclal Lhus Lhe barrlng effecL applles Lo an exLra[udlclal

AnLonlo, PlpollLo, lmperlal & Zaragosa. (2012). Salse CLv Case ulgesLs.
8eLrleved from hLLp://www.scrlbd.com/doc/104486360/Sales-CLv-Case-


And #1!$ #$*/" when Lhe real esLaLe morLgage ls flrsL foreclosed.
V.2J.' ZZ 0/ )720#P7*#M7 )67P#%,#$3$8 Z'P/, 9Q? )-<5 G=C @:;;GA9

V.2J.' ZZ 0/ )720#P7*#M7 )67P#%,#$3$8 Z'P/

Iacts: (8&8) [olnLly and severally slgned a promlssory noLe ln favor
angaslnan AuLo MarL, lnc. for 122,836.00 Lo be payable ln
lnsLallmenLs wlLhouL need of noLlce or demand wlLh a ChaLLel MorLgage
on 1 8rand new 1984 lsuzu kCu 20 Crew Cab. 1he rlghLs of angaslnan
AuLo MarL, lnc. was laLer asslgned Lo llllnvesL CredlL CorporaLlon, wlLh
noLlce Lo Lhe defendanLs. 8ecause Lhe defendanLs dld noL pay Lhelr
monLhly lnsLallmenLs, llllnvesL demanded from Lhe defendanLs Lhe
paymenL of Lhelr lnsLallmenLs due on !anuary 29, 1983 by Lelegram.
llllnvesL CredlL CorporaLlon LhereafLer asslgned all lLs rlghLs, lnLeresL
and LlLle over Lhe romlssory noLe and Lhe chaLLel morLgage Lo
Servlcewlde SpeclallsLs, lnc. (SSl). 1he plalnLlff aLLempLed Lo collecL by
sendlng a demand leLLer Lo Lhe defendanLs for Lhem Lo pay Lhelr enLlre
obllgaLlon. 1he defendanLs clalm LhaL whaL Lhey lnLended Lo buy
from angaslnan AuLo MarL was a [eepney Lype lsuzu k. C. Cab.
uefendanLs furLher clalm LhaL Lhey are noL ln defaulL of Lhelr obllgaLlon
because Lhe angaslnan AuLo MarL was flrsL gullLy of noL fulfllllng lLs
obllgaLlon ln Lhe conLracL. 1he defendanLs clalm LhaL nelLher parLy
lncurs delay lf Lhe oLher does noL comply wlLh hls obllgaLlon

Issue: WheLher or noL Lhe awards made by Lhe courL a quo of llquldaLed
damages and aLLorney's fees Lo prlvaLe respondenL approprlaLe.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

ne|d: ALLorney's fees ! ?LS. LlquldaLed uamages ! nC. When Lhe
seller asslgns hls credlL Lo anoLher person, Lhe laLLer ls llkewlse bound
by Lhe same law. Accordlngly, when Lhe asslgnee forecloses on Lhe
morLgage, Lhere can be no furLher recovery of Lhe deflclency, and Lhe
seller-morLgagee ls deemed Lo have renounced any rlghL Lo Lhe unpald
balance. 1hus Lhere musL be no paymenL of llquldaLed damages,
however granL of aLLorney's fees were allowed.


o 1he CourL held LhaL lf Lhe Lhlrd-parLy morLgagor ls
forced Lo pay, Lhen he as Lhe guaranLor wlll be allowed
Lo recover from Lhe prlnclpal debLor. 1hls would be an
lndlrecL subverslon of ArLlcle 1484.
o 1he acLlon belng barred also lncludes exLra[udlclal
proceedlngs, noL [usL [udlclal proceedlngs.
1he seller ls llkewlse precluded from furLher exLra[udlclally
forecloslng on any addlLlonal securlLy whlch Lhe buyer hlmself
has consLlLuLed. <#M%M 0/ N#,#6#'%$ Z'07$3+7'3 %'M N#'%'P7
-.26/8 :9D )-<5 9CG @:;?=A

<#M%M 0/ N#,#6#'%$ Z'07$3+7'3 b N#'%'P7 -.26/

Iacts: lalnLlffs 8ldad boughL 2 brand new lord Consul sedans. 1hey
execuLed a promlssory noLe and a chaLLel morLgage on Lhe Lwo cars
Anu anoLher car Anu plalnLlff's Laxl operaLlon franchlse or cerLlflcaLe of
publlc convenlence. 1he vendor asslgned lLs rlghLs, LlLle and lnLeresL Lo
Lhe promlssory noLe and chaLLel morLgage Lo llllplnas lnvesLmenL and
llnance Corp. 1he buyers defaulLed on Lhelr paymenL. lllC foreclosed
exLra-[udlclally on Lhe chaLLel morLgage and Lhey were Lhe hlghesL
bldder. AnoLher aucLlon sale was held aL a laLer daLe for Lhe remalnlng
properLles, lncludlng Lhe Laxl franchlse. lllC was agaln Lhe hlghesL
bldder. lL subsequenLly sold and conveyed Lhe Laxl franchlse Lo !ose
SebasLlan who flled wlLh Lhe SC for approval of Lhe sale. lalnLlff Lhen
flled an acLlon for annulmenL of conLracL and Lhe subsequenL sales wlLh
Lhe Cll of 8lzal.

Issue: WheLher or noL Lhe foreclosure on Lhe chaLLel morLgage was

ne|d: nC. ArLlcle 1484 of Lhe Clvll Code applles. 1hese remedles are
alLernaLlve, noL cumulaLlve. ln Lhls case, Lhe morLgagee chose Lo
foreclose on Lhe chaLLel morLgage on Lhe 2 new lord vehlcles. 8ecause
Lhey chose Lhls opLlon, Lhey may noL anymore have any furLher acLlon
Lo recover Lhe unpald balance pursuanL Lo ArLlcle 1484(3). 1hey are Lhus
precluded from havlng a recourse agalnsL Lhe addlLlonal securlLy puL up
by a guaranLor.


4. Lxtent Cf 1he 8arr|ng Lffect:
All amounLs barred from recovery. Y%P.'M2%& b -./ 0/
\1$3%c1#., GC EF#,/ CCG @:;=>A9

Y%P.'M2%& b -./8 Z'P/ 0/ \1$3%c1#.

Iacts: Macondray sold a ue SoLo car Sedan from LusLaqulo for 393,
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
and for whlch he execuLed a promlssory noLe where he underLook Lo
pay Lhe car ln 12 monLhly lnsLallmenLs, 12 lnLeresL per annum. Pe
morLgaged same car Lo guaranLee hls noLe, he pald Lhe flrsL lnsLallmenL
buL falled Lo pay any of Lhe remalnlng. So plalnLlff broughL an acLlon Lo
obLaln possesslon of Lhe car Anu recover Lhe balance owlng hlm
(lnLeresL, aLLorney's fees, expenses and cosLs).

Issue: WheLher or noL Macondray may sLlll clalm Lhe lnLeresLs and
aLLorney's fees sLlpulaLed

ne|d: nC. 1he 8ecLo law prevenLs Lhe morLgagee from selzlng Lhe
morLgaged properLy, buylng lL aL foreclosure sale and Lhen brlnglng a
sulL agalnsL Lhe morLgagor for a deflclency [udgmenL. 1hls ls Lo close Lhe
door Lo abuses already commlLLed ln connecLlon wlLh Lhe foreclosure of
Lhe chaLLel morLgages when sales were payable ln lnsLallmenLs.
"All amounLs barred from recovery."
"Any unpald balance" refers Lo Lhe deflclency [udgmenL lncludlng
lnLeresL on prlnclpal, aLLorney's fees, expenses of collecLlon, and Lhe


1he orlglnal wordlng of Lhe 8ecLo Law conLalned any unpald
balance" lnsLead of any unpald balance of Lhe prlce." 1he CourL
has lnLerpreLed any unpald balance" Lo lnclude even lnLeresL
on Lhe prlnclpal, aLLorney's fees, expenses of collecLlon, and
oLher cosLs. Y%P.'M%& b -./8 Z'P/ 0/ \1$3%c#./ @GC EF#,/ CCGA
o Lven lf Lhls case ls a 1937 case, lL remalns good law,
desplLe Lhe change ln wordlng ln whaL ls now ArLlcle
1484 of Lhe Clvll Code. 1hls docLrlne was relLeraLed ln
Lhe 1969 case of llllplnas lnvesLmenL & llnance Corp. v.
8ldad, lnfra.

S. ku|e Cn "erverse 8uyer":
Genera| ku|e: 1he LusLaqulo docLrlne bars all amounLs from
recovery ln case Lhe seller-morLgagee forecloses on Lhe chaLLel
o Lxcept|on: When Lhe buyer-morLgagor refuses Lo
surrender Lhe chaLLel Lo allow Lhe seller Lo be able Lo
proceed wlLh foreclosure, Lhe seller ls allowed Lo
recover expenses and aLLorney's fees lncurred ln Lrylng
Lo obLaln possesslon of Lhe chaLLel. N#,#6#'%$ Z'07$3+7'3
b N#'%'P7 -.26/ 0/ <#M%M, =D )-<5 QGC @:;G;A9

N#,#6#'%$ Z'07$3+7'3 b N#'%'P7 -.26/ 0/ <#M%M

Iacts: 1he 8ldad Spouses purchased a lord Consul Sedan from Supreme
Sales and uev'L. Corp. Supreme Sales was Lhe asslgnor-ln-lnLeresL of
llLllnAS lnvesLmenL and llnance. 1he car was worLh 13,371 of whlch
1,160 was pald upon dellvery, and Lhe remalnlng balance Lo be pald ln
24 monLhly lnsLallmenLs. A promlssory noLe and chaLLel morLgage were
execuLed by Lhe 8ldad's Lo ensure fulflllmenL of Lhelr obllgaLlon. 1he
8ldad Spouses falled Lo pay Lhe lasL 3 lnsLallmenLs, whlch prompLed
llllplnas Lo flle a replevln sulL ln Lhe clLy courL of Manlla, or ln Lhe
alLernaLlve, Lo recover Lhe unpald balance lf dellvery could noL be
effecLed. 1he complalnL of llllplnas sLaLed LhaL Lhere was an
un[usLlflable fallure and refusal of Lhe 8ldad Spouses Lo surrender Lhe
car for foreclosure. 1he sherlff was able Lo selze Lhe car and sell lL ln a
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
publlc aucLlon. 1he 8ldad Spouses were declared ln defaulL durlng Lhese
proceedlngs due Lo Lhelr alleged non-recelpL of summons, and Lhe order
of defaulL lncluded an order Lo pay llllplnas 300 for aLLorney's fees and
163 for expenses lncurred ln selzlng Lhe car. 1helr moLlon Lo seL aslde
Lhe order of defaulL was denled by Lhe clLy courL of Manlla, Lhus Lhe
8ldad's appealed Lo Lhe Cll Manlla. 1he Cll sald LhaL Lhe only lssue Lo be
resolved was wlLh regard Lo Lhe aLLy's fees and Lhe expenses lncurred
due Lo Lhe selzure of Lhe car. lL ruled LhaL llllplnas was enLlLled Lo
recover boLh amounLs, for Lhe selzure of Lhe car, and Lhe lowered Lhe
aLLys fees of 300.

Issue: WheLher or noL under ArLlcle 1484 (Lhe 8ecLo Law) lllplnas ls
enLlLled Lo Lhe award for aLLorneys fees and expenses lncurred due Lo
Lhe selzure of Lhe car.

ne|d: ?LS, buL wlLh cerLaln quallflcaLlons. AlLhough Lhe purpose of Lhe
8ecLo law ls Lo proLecL Lhe buyers on lnsLallmenL who were vlcLlmlzed
by sellers who succeeded ln un[usLly enrlchlng Lhemselves aL Lhe
expense of Lhe buyers, Lhe morLgagee (seller) ls also enLlLled proLecLlon
agalnsL L8vL8SL MC81CACC8S. erverse morLgagors are Lhose where
afLer falllng Lo pay 2 or more lnsLallmenLs, refuse Lo dellver chaLLel Lo
Lhe morLgagee or conceals lL ln a place ouLslde Lhe reach of Lhe
morLgagor. Slnce Lhe morLgagee would enforce hls rlghLs Lhrough Lhe
means and wlLhln Lhe llmlLs dellneaLed by law, Lhe nexL sLep ls Lo flle an
acLlon for replevln Lo recover lmmedlaLe possesslon of Lhe chaLLel. ln
Lhls case, Lhe necessary expenses should be borne by Lhe morLgagor.


I. urported Lease W|th Cpt|on 1o 8uy
Some sellers opL Lo maklng conLracLs ln Lhe form of leases wlLh
an opLlon Lo buy for a small conslderaLlon aL Lhe end of Lhe
Lerm. 1hese conLracLs musL be regarded as lnsLallmenL sales,
wlLh Lhe renL paymenLs as Lhe lnsLallmenLs pald. "M%/ U7 d.$7 0/
V%2217P.8 G> EF#,/ :;: @:;=;A
o 1he CourL Look [udlclal noLlce of Lhe pracLlce of vendors
of personal properLy of denomlnaLlng a conLracL of sale
on lnsLallmenL as one of lease Lo prevenL Lhe ownershlp
of Lhe ob[ecL of Lhe sale from passlng Lo Lhe vendee
unLll and unless Lhe prlce ls fully pald. !\,#$P. R..,
Y%'14%P312#'I -.26/ 0/ -58 =D> )-<5 >=: @:;;;A/

Where a lease agreemenL over equlpmenL ls wlLhouL an express
opLlon Lo purchase, buL neverLheless when a flnal demand ls
glven prlor Lo sulL, Lhe demand leLLer lndlcaLes clearly lL was
wlLhln Lhe opLlon of Lhe lessee Lo fully pay Lhe balance of Lhe
unpald renLals and would be able Lo keep Lhe equlpmenL, Lhen
Lhe real conLracL beLween Lhe parLles was a sale of movable on
lnsLallmenL dlsgulsed as a lease agreemenL. E-Z L7%$#'I %'M
N#'%'P78 Z'P/ 0/ X#2%447We -27%3#07 Z+%I#'I8 Z'P/, Q9> )-<5 CDQ

E-Z L7%$#'I b N#'%'P78 Z'P/ 0/ X#2%447We -27%3#07 Z+%I#'I8 Z'P/

Iacts: Cl Leaslng and Clraffe enLered lnLo a Lease AgreemenL whereby

R7"9 7$ D)/$ #9 L"**3$!), 67 hll. 191 (1939), Q9;9 8)''$*!1"0 #9 S"0101, 93 hll.
271 (1933), S9=9 S$"!)!J #9 L"-%"0 B"-3."!%3*1-5, 66 hll. 243 (1938), B"-10"
F"/ 8)*(9 #9 8"03(1%", 66 hll. 747 (1938), M101-#$/% 8*$71% 8)*(9 #9 8?, 178 SC8A
188 (1989).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Cl Leaslng leased several machlnerles for a renL of 116, 878.
21/monLh for 36 monLhs and 181, 362/monLh for 36 monLhs for a LoLal
of 10, 736, 647.36. Clraffe pald Lhe amounL of 3, 120, 000 as guaranLy
deposlL. Powever , afLer 1 year , Clraffe defaulLed ln lLs monLhly-renLal
paymenL obllgaLlons. AfLer a 3-monLh defaulL, Cl demanded a formal
pay-or- surrender-equlpmenL Lype buL Lhe demand wenL unheeded Lhus
Cl lnsLlLuLed Lhe lnsLanL case and prayed for Lhe lssuance for Lhe wrlL
of replevln. 1he Lrlal courL lssued a wrlL of replevln. Clraffe flled a
moLlon Lo dlsmlss argulng LhaL Cl was barred from pursulng any oLher
clalm slnce Lhe selzure of Lhe 2 leased equlpmenLs because Lhe conLracL
was ln reallLy a lease wlLh opLlon Lo buy. 1he 81C granLed Lhe moLlon Lo
dlsmlss rullng LhaL lL was akln Lo a conLracL covered by arL. 1483 hence
can no longer pursue lLs clalm. Pence Lhe case aL bar.

Issue: WheLher or noL Lhe conLracL was covered by ArLlcle 1483 and
1484 hence barred Cl from recoverlng

ne|d: ?LS. 1he 8ecLo Law applles because Lhe conLracL ls acLually a lease
wlLh opLlon Lo buy. lL was noL a sLralghL lease because Lhe peLlLloner
sLands Lo make 13M++ ln a year's Llme ouL of an lnvesLmenL of 8.1M.
1he lnLenLlon of Lhe parLles musL be looked lnLo. Also, Lhe demand
leLLer was fashloned ln Lhe alLernaLlve: paymenL of Lhe unpald full
balance C8 Lhe surrender of Lhe flnanced asseL, suggesLlng LhaL Clraffe
can keep Lhe equlpmenL lf lL exerclses lLs opLlon Lo acqulre Lhe same.
1hls reflecLs a slLuaLlon where a flnanclng company conceals up Lo Lhe
lasL momenL lLs lnLenLlon Lo sell Lhe properLy ln an aLLempL Lo
clrcumvenL Lhe 8ecLo law. Sellers ln Lhls case have resorLed Lo Lhe
devlce of maklng conLracLs ln Lhe form of leases elLher wlLh opLlons Lo
Lhe buyer Lo purchase for a small conslderaLlon aL Lhe end of Lerm,
provlded Lhe so- called renL has been duly pald, or wlLh sLlpulaLlons LhaL
lf Lhe renL LhroughouL Lhe Lerm ls pald, LlLle shall Lhereupon vesL ln Lhe
lessee. lL ls obvlous LhaL such LransacLlons are leases only ln name. ln
chooslng replevln, Cl now walved lLs rlghL Lo brlng an acLlon Lo recover
unpald renLals on Lhe leased lLems. 8emedles under ArLlcle 1484 are
alLernaLlve, noL cumulaLlve.


1. What Is 1he 8arr|ng Lffect Cn Such Contracts?
key quesLlon: When Lhe lessor reLakes possesslon of Lhe ob[ecL
upon non-paymenL, ls Lhls consldered as a foreclosure or a
o CLv clLes a loL of cases whlch show LhaL Lhe CourL hasn'L
really made a deflnlLlve answer Lo Lhls quesLlon.
Powever, CLv says LhaL Lhe CourL seems Lo LreaL lnsLallmenL
sales of movables whlch are sLrucLured as lease wlLh opLlon Lo
purchase as equlvalenL Lo a chaLLel morLgage execuLed on Lhe
Lhlng lLself.
1herefore, when Lhe purporLed lessor Lakes possesslon of Lhe
sub[ecL maLLer, lL ls LreaLed legally as a foreclosure. 1hus, Lhe
barrlng effecL of foreclosure applles.

IV. MACLDA LAW: Sa|es of kes|dent|a| kea|ty on Insta||ments (k.A. No.
kepub||c Act No. 6SS2 ls known as Lhe 8ealLy lnsLallmenL
8uyer roLecLlon AcL."
o So long as Lhe parLles' sLlpulaLlon do noL conLradlcL Lhe
Maceda Law, Lhen Lhelr sLlpulaLlons would be valld.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
" Lxample: AcceleraLlon Clause
1he conLracL for Lhe purchase of a plece of land on lnsLallmenL
basls ls noL only lawful, lL ls also of wldespread usage or cusLom
ln our economlc sysLem. . . . lf [buyer] evenLually found Lhe
lnLeresL sLlpulaLlon ln Lhe conLracL flnanclally dlsadvanLageous
Lo hlm, he cannoL now Lurn Lo Lhls CourL for succor wlLhouL
lmpalrlng Lhe consLlLuLlonal rlghL Lo Lhe obllgaLlon of conLracLs.
1hls CourL wlll noL relleve peLlLloner of Lhe necessary
consequences of hls free and volunLary, and oLherwlse lawful,
acL." V.23#K7& 0/ 5NE <73#27+7'3 %'M )76%2%3#.' V7'74#3$
)&$37+8 C>> )-<5 Q:: @9DDQA/

A. "ko|e" of Maceda Law
lL declared a publlc pollcy Lo proLecL buyers of real esLaLe on
lnsLallmenL paymenLs agalnsL onerous and oppresslve
condlLlons. (Sect|on 2, k.A. No. 6SS2)
1he courLs have used Lhe Maceda Law as a pollcy sLaLemenL of
Lhe SLaLe ln proLecLlng Lhe lnLeresLs of buyers of resldenLlal real
esLaLe on lnsLallmenLs.
o Maceda Law's declared pollcy ls Lo proLecL buyers of
real esLaLe on lnsLallmenL basls agalnsL onerous and
oppresslve condlLlons, and seeks Lo address Lhe acuLe
houslng shorLage problem ln our counLry LhaL has
prompLed Lhousands of mlddle and lower class buyers
of houses, loLs and condomlnlum unlLs Lo enLer lnLo all
sorLs of conLracLs wlLh prlvaLe houslng developers
lnvolvlng lnsLallmenL schemes. 5P3#07 <7%,3& b U70/
-.26/ U%2.&%8 =?9 )-<5 :Q9 @9DD9A/

Maceda Law recognlzes ln condlLlonal sales of all klnds of real
esLaLe seller's rlghL Lo cancel Lhe conLracL upon non-paymenL of
an lnsLallmenL by Lhe buyer, whlch ls slmply an evenL LhaL
prevenLs Lhe obllgaLlon of Lhe vendor Lo convey LlLle from
acqulrlng blndlng force. E%I31,1'%' 0/ U7,% -21_ "M%/ U7
Y%'_%'.8 Q== )-<5 9C9 @9DD?A/

AL Llmes, Lhe CourL has also applled Lhe Maceda Law
reLroacLlvely. )#$K% U70/ -.26/ 0/ O44#P7 .4 3F7 E27$#M7'38 9=:
)-<5 G>C @:;;CA/

o 8U1 SLL: !E7.6,7f$ Z'M1$32#%, %'M -.++72P#%, -.26/ 0/
-58 9?: )-<5 9DG @:;;>A/
o 1he law lLself does noL expressly provlde for reLroacLlve

8. 1ransact|ons Covered
lL covers prlmarlly resldenLlal real esLaLe boughL on lnsLallmenL.
o 1he sale of large LracLs of land (69,028 square meLers)
do noL consLlLuLe resldenLlal real esLaLe wlLhln Lhe
conLemplaLlon of Lhe Maceda Law. !X%2P#% 0/ -.123 .4
5667%,$8 G:; )-<5 9?D @9D:DA/
lL also covers Lhe flnanclng of real esLaLe on lnsLallmenL.

H>4'(1" S)3/1-5 >-!9 #9 I"-"/1"%1! K*"#$0 8)*(9, 393 SC8A 298 (2003), D$/%*"
<$#9 "-7 B"-"5$'$-% 8)*(9 #9 I"!1.1!), 313 SC8A 413 (2007).
N$"T) #9 8)3*% ). ?(($"0/, 369 SC8A 36 (2001), 8)*7$*) #9 M9;9 B"-"5$'$-% E
<$#9 8)*(9, 306 SC8A 431 (2006).
=35$-1) #9 =2$!3%1#$ ;$!*$%"*4 M*"-J01- B9 <*10)-, 232 SC8A 106 (1996), IUL #9
H..1!$ ). %,$ I*$/17$-%, 232 SC8A 620 (1996).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
1he Maceda Law also covers conLracLs Lo sell. 1hls ls evldenced
by Lhe use of Lhe word cancellaLlon" ln Lhe law lLself.
o Maceda Law flnds no appllcaLlon Lo a conLracL Lo sell
where Lhe suspenslve condlLlon has noL been fulfllled,
because sald Law presuppose Lhe exlsLence of a valld
and effecLlve conLracL Lo sell a condomlnlum. [?]
!Y.237, 0/ H5))-O8 Z'P/8 =C? )-<5 =;:8 =;? @9DDDA/

Maceda Law makes no dlsLlncLlons beLween opLlon" and sale"
whlch under .u. 937 also lncludes an exchange or aLLempL Lo
sell, an opLlon of sale or purchase, a sollclLaLlon of a sale or an
offer Lo sell dlrecLly," and Lhe all-embraclng deflnlLlon vlrLually
lncludes all LransacLlons concernlng land and houslng
acqulslLlon, lncludlng reservaLlon agreemenLs. !<7%,3&
\!PF%'I7 "7'3127 -.26/ 0/ )7'M#'.8 9== )-<5 GGQ @:;;CA/
1he Maceda Law uses Lhe same deflnlLlon of sale on
lnsLallmenL" as Lhe 8ecLo Law.
lncludes subdlvlslons, condomlnlums and Lhose under .D. 9S7

C. 1ransact|ons Lxc|uded Irom Coverage
1he followlng LransacLlons are excluded from coverage of Lhe
Maceda Law: (CourL of Appeals)
a. Sales coverlng lndusLrlal loLs
b. Sales coverlng commerclal bulldlngs and loLs
c. Sales Lo LenanLs under agrarlan reform laws
noLe: 1hls enumeraLlon ls noL excluslve slnce oLher
LransacLlons lnvolvlng lmmovable - alLhough noL wlLhln Lhe

L)/%)- L"-J ). %,$ I,109 #9 B"-"0), 482 SC8A 108 (2006).
llsL - are Lo be consldered as excluded because Lhey are noL
wlLhln Lhe clearly expressed coverage.
1he Maceda Law CannoL be lnvoked by Lhe PlghesL 8ldder ln
loreclosure roceedlngs
o Such person ls noL Lhe real parLy Lo Lhe orlglnal
lnsLallmenL sales.
o Pe does noL have any rlghLs promoLed under Lhe
Maceda Law.
Maceda Law has no appllcaLlon Lo proLecL Lhe developer or one
who succeeds Lhe developer. !L%I%'M%.' 0/ -.123 .4 5667%,$8
9;D )-<5 CG= @:;;?A/

D. Lxerc|se Cf 1he Grace er|od (Sect|on 3)
When Lhe buyer has pald aL leasL 2 years of lnsLallmenL (See
formula Lo compuLe lnsLallmenL mode)

Sect|on 3.
In a|| transact|ons or contracts |nvo|v|ng the sa|e or f|nanc|ng of rea|
estate on |nsta||ment payments, |nc|ud|ng res|dent|a| condom|n|um
apartments but exc|ud|ng |ndustr|a| |ots, commerc|a| bu||d|ngs and
sa|es to tenants under kA 3844, as amended by kA 6389, where the
buyer has pa|d at |east two years of |nsta||ments, the buyer |s ent|t|ed
to the fo||ow|ng r|ghts |n case he defau|ts |n the payment of
succeed|ng |nsta||ments:

(a) 1o pay, w|thout add|t|ona| |nterest, the unpa|d |nsta||ments due
w|th|n the tota| grace per|od earned by h|m wh|ch |s hereby f|xed at
the rate of one (1) month grace per|od for every one (1) year of
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
|nsta||ment payments made: rov|ded, 1hat th|s r|ght sha|| be
exerc|sed by the buyer on|y once |n every f|ve (S) years of the ||fe of
the contract and |ts extens|ons, |f any.

(b) If the contract |s cance||ed, the se||er sha|| refund to the buyer the
cash surrender va|ue of the payments on the property equ|va|ent to
f|fty per cent (S0) of the tota| payments made, and, after f|ve (S)
years of |nsta||ments, an add|t|ona| f|ve per cent (S) every year but
not to exceed n|nety per cent (90) of the tota| payments made:
rov|ded, 1hat the actua| cance||at|on of the contract sha|| take p|ace
after th|rty (30) days from rece|pt by the buyer of the not|ce of
cance||at|on or the demand for resc|ss|on of the contract by a notar|a|
act and upon fu|| payment of the cash surrender va|ue to the buyer.

Down payments, depos|ts or opt|ons on the contract sha|| be |nc|uded
|n the computat|on of the tota| number of |nsta||ment payments

Sect|on 4.
In case where |ess than two (2) years of |nsta||ments were pa|d, the
se||er sha|| g|ve the buyer a grace per|od of not |ess than s|xty (60) days
from the date the |nsta||ment became due.

If the buyer fa||s to pay the |nsta||ments due at the exp|rat|on of the
grace per|od, the se||er may cance| the contract after th|rty (30) days
from rece|pt by the buyer of the not|ce of cance||at|on or the demand
for resc|ss|on of the contract by a notar|a| act.

1he rlghL Lo make sure of Lhe grace perlod can be exerclsed by
Lhe buyer only once every flve (3) years of Lhe llfe of Lhe
conLracL and lLs exLenslons, lf any.
lL ls only Lhls grace perlod LhaL cannoL be used when Lhe buyer
defaulLed prlor Lo Lhe 3 years. Powever, Lhe seller musL sLlll
comply wlLh all Lhe requlremenLs for resclsslon.
o Lxample: uebLor defaulLed ln Lhe second year, Lhen
made good wlLh all hls paymenLs. Cn Lhe flfLh year, he
defaulLed agaln. uebLor ls noL enLlLled Lo Lhe grace
perlod, buL ls sLlll enLlLled Lo noLlce by noLarlal acL.
When Lhe buyer has pald less Lhan 2 years of lnsLallmenLs !
SecLlon 4

L. now 1o Determ|ne ears Cf Insta||ments:
1he proper formula Lo apply ln deLermlnlng how many
lnsLallmenLs have been made ls Lo lnclude any paymenL made as
downpaymenL or reservaLlon fee as parL of Lhe lnsLallmenLs
made, and Lhen dlvlde Lhem by Lhe sLlpulaLed mode of
paymenL, l.e., wheLher lL ls monLhly, quarLerly, seml-annual or
annual. d7$32% U70/ %'M Y%'%I7+7'3 -.26/ 0/ E%P#4#P.8 Q:=
)-<5 C:= @9DD>A

d7$32% U70/ YI3/ -.26 0/ E%P#4#P.

Iacts: uanlel aclflco slgned a 8eservaLlon appllcaLlon wlLh lll-LsLaLe
MarkeLlng Assn for Lhe purchase of a house nad loL and pald Lhe
reservaLlon fee. 1he 8eservaLlon appllcaLlon conLalned Lhe amounLs Lo
be pald ln lnsLallmenLs wlLh lnLeresLs. unable Lo comply wlLh Lhe
schedule of paymenLs, aclflco requesLed !esLra Lo allow hlm Lo make
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
perlodlc paymenLs whlch Lhe laLLer granLed. 1hey laLer on execuLed a
conLracL Lo sell when Lhe remalnlng balance was only 260k. aclflco
requesLed Lwlce for a resLrucLurlng of hls unseLLled obllgaLlon whlch
!esLra granLed sub[ecL Lo cerLaln condlLlons of addlLlonal penalLles eL al.
As compllance Lo Lhe condlLlon, aclflco lssued 12 posL- daLed checks
however he ls unable Lo pay so he requesLed LhaL he be allowed Lo
dlspose Lhe properLy Lo recover hls lnLeresL and he could recover Lhe 12
posL daLed checks, whlch was Lhls Llme was denled by !esLra. !esLra Lhen
senL a noLarlal noLlce of cancellaLlon LhaL Lhey are glvlng hlm unLll a
cerLaln daLe Lo pay or else Lhe conLracL wlll be auLomaLlcally cancelled.
aclflco Lhen flled a complalnL before Lhe PLu88 clalmlng LhaL desplLe
hls full paymenL of Lhe downpaymenL, !esLra falled Lo dellver Lo hlm Lhe
properLy and lnsLead sold lL Lo anoLher buyer. P8Lu88 ArblLer declded
ln aclflco's favor flndlng !esLra llable.

Issue: WheLher or noL aclflco has pald aL leasL 2 years of lnsLallmenLs.

ne|d: nC. 1he proper formula Lo apply ln deLermlnlng how many
lnsLallmenLs have been made ls Lo lnclude any paymenL made as down
paymenL C8 reservaLlon fee as parL of Lhe lnsLallmenLs made, and Lhen
Lo dlvlde Lhe sLlpulaLed mode of paymenL (l.e. monLhly, quarLerly,
annually, seml-annually).
Slnce afLer applylng Lhls formula, aclflco
falled Lo pay aL leasL 2 years of lnsLallmenLs, he ls noL enLlLled Lo a
refund of Lhe cash surrender value of hls paymenLs. SecLlon 4 ls
appllcable. 1he cancellaLlon ls a 2-sLep process: (1) 1he seller should
exLend Lhe buyer a grace perlod of aL leasL 60 days from Lhe due daLe of
Lhe lnsLallmenL, (2) AL Lhe end of Lhe grace perlod, Lhe seller shall

p.419. Sales 8ook.
furnlsh Lhe buyer wlLh a noLlce of cancellaLlon or demand for resclsslon
Lhrough a noLarlal acL, effecLlve 30 days from Lhe buyer's recelpL
Lhereof. uesplLe Lhe noLlce of dlshonor, aclflco Look no acLlon and 60
days had lapsed.


ALLy. SanLlago: lL's Lhe over-all amounL you have pald vls-a-vls
Lhe amounL due. 1hls ls noL necessarlly 2-years of monLhly

I. now Cance||at|on Cf Contract Can 8e Lffected - 1he cancellaLlon of
Lhe conLracL under Lhe Maceda Law musL follow Lhe followlng sLeps:
1. M1*/%, Lhe seller should exLend Lhe buyer a grace perlod of aL
leasL slxLy (60) days from Lhe due daLe of Lhe lnsLallmenLs.
2. ;$!)-7, aL Lhe end of Lhe grace perlod, Lhe seller shall furnlsh
Lhe buyer wlLh a noLarlal noLlce of cancellaLlon or demand for
resclsslon, effecLlve LhlrLy (30) days from Lhe buyer's recelpL
Lhereof, a mere noLlce or leLLer, shorL of a noLarlal acL, would
noL sufflce. YPL%1IF,#' 0/ -5, :CC )-<5 G;= @:;?GA9

3. K,1*7, for conLracLs coverlng more Lhan Lwo years of paymenLs,
Lhere musL be reLurn Lo Lhe buyer of Lhe cash surrender value.
!"#,,M%2%8 d2/ 0/ T%J%,%8 QCQ )-<5 =9Q @9DD?A/

N3C)- L*)J$*"5$ #9 B"*1%1'$ L0759, 86 SC8A 303 (1978), N3C)- L*)J$*"5$ #9
B"*1%1'$ L0759, 43 SC8A 93 (1972), M"@*15"/ #9 ;"- M*"-!1/!) 7$0 B)-%$, 473
SC8A 247 (2003).
?!%1#$ :$"0%4 E <$#9 8)*(9 #9 <"*)4", 382 SC8A 132 (2002), H04'(1" S)3/1-5
#9 I"-"/1"%1! K*"#$0 8)*(96 393 SC8A 298 (2003), D$/%*" <$#9 "-7 B"-"5$'$-%
8)*(9 #9 I"!1.1!), 313 SC8A 413 (2007).
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
YPL%1IF,#' 0/ -.123 .4 5667%,$

Iacts: A conLracL of condlLlonal sale payable ln lnsLallmenLs was enLered
lnLo by McLaughlln and llores. uue Lo Lhe laLLer's fallure Lo pay Lhe
balance, a complalnL for resclsslon was flled ln courL. arLles submlLLed
a Compromlse AgreemenL whlch had a sLlpulaLlon LhaL ln case of fallure
Lo comply, McLaughlln ls enLlLled Lo a wrlL of execuLlon resclndlng Lhe
ueed of CondlLlonal Sale of 8eal roperLy and llores walves hls rlghL Lo
appeal. Also, ln case of resclsslon all paymenLs made by llores wlll be
forfelLed ln favor of llores. Cn CcLober 13, 1980, peLlLloner wroLe Lo
llores demandlng paymenL of Lhe balance on or before CcLober 31.

Cn november 7, peLlLloner flled a moLlon for wrlL of execuLlon alleglng
LhaL llores falled Lo pay Lhe lnsLallmenL due on !une 1980 and also
falled Lo pay Lhe monLhly renLals from LhaL daLe. She prayed LhaL Lhe
deed of condlLlonal sale be resclnded wlLh forfelLure of all paymenLs
and paymenL of Lhe monLhly renLals and evlcLlon of llores. 1he Lrlal
courL granLed Lhe moLlon.

Cn november 17, llores flled a moLlon for reconslderaLlon Lenderlng aL
Lhe same Llme a cerLlfled manager's check payable Lo peLlLloner and
coverlng Lhe enLlre obllgaLlon lncludlng Lhe uecember 1980 lnsLallmenL.
1he Lrlal courL denled Lhe moLlon.

Cn appeal, Lhe CA ruled ln favor of llores holdlng LhaL Lhe delay ln
paymenL was noL a vlolaLlon of an essenLlal condlLlon whlch would
warranL a resclsslon slnce Cn november 17 or [usL 17 days from Lhe
CcLober 31 deadllne seL by peLlLloner, llores Lendered Lhe cerLlfled
manager's check and LhaL lL was lnequlLable for llores Lo forfelL all Lhe
paymenLs made (101,330).

Issue: WheLher or noL lL ls lnequlLable Lo cancel Lhe conLracL and Lo
have Lhe amounL pald by llores be forfelLed Lo peLlLloner parLlcularly
afLer llores had Lendered Lhe cerLlfled manager's check ln full paymenL
of Lhe obllgaLlon.

ne|d: ?LS. 1here ls already subsLanLlal compllance by llores wlLh Lhe
compromlse agreemenL. More lmporLanLly, Lhe Maceda law recognlzes
Lhe vendor's rlghL Lo cancel Lhe conLracL Lo sell upon Lhe breach and
nonpaymenL of Lhe sLlpulaLed lnsLallmenLs buL requlres a grace perlod
afLer aL leasL 2 years of regular lnsLallmenL paymenLs.

8uL ln cases where less Lhan 2 years of lnsLallmenLs were pald, Lhe seller
shall glve Lhe buyer a grace perlod of noL less Lhan 60 days from Lhe
daLe Lhe lnsLallmenL became due. lf Lhe buyer falls Lo pay Lhe
lnsLallmenLs due aL Lhe explraLlon of Lhe grace perlod, Lhe seller may
cancel Lhe conLracL afLer 30 days from Lhe recelpL by Lhe buyer of Lhe
noLlce of Lhe cancellaLlon or Lhe demand for resclsslon of Lhe conLracL
by a noLarlal acL. Assumlng LhaL under Lhe Lerms of agreemenL Lhe
uecember 31 lnsLallmenL was due when on CcLober 13 peLlLloner
demanded paymenL of Lhe balance on or before CcLober 31, peLlLloner
could cancel Lhe conLracL afLer 30 days from Lhe recelpL by llores of Lhe
noLlce of cancellaLlon. Conslderlng peLlLloner's moLlon for execuLlon
flled on november 7 as a noLlce of cancellaLlon, peLlLloner could cancel
Lhe conLracL afLer 30 days from Lhe recelpL by llores of sald moLlon.

llores' Lender of paymenL LogeLher wlLh hls moLlon for reconslderaLlon
on november 17 was well wlLhln Lhe 30 day perlod granLed by law. 1he
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01
Lender made by llores of a cerLlfled bank manager's check was a valld
Lender of paymenL. lL covered Lhe full amounL of Lhe obllgaLlon.
Powever, alLhough he had made a valld Lender of paymenL whlch
preserved hls rlghLs as a vendee, he dld noL follow lL wlLh conslgnaLlon
or deposlL of Lhe sum due wlLh Lhe courL. Pence he remalns llable for
Lhe paymenL of hls obllgaLlon because of hls fallure Lo deposlL Lhe


1he addlLlonal formallLy of a demand on [Lhe seller's] parL for
resclsslon by noLarlal acL would appear, ln Lhe premlses, Lo be
merely clrculLous and consequenLly superfluous" slnce Lhe seller
Lhereln flled an acLlon for annu|ment of contract, whlch ls a
klndred concepL of resclsslon by noLarlal acL. !L%&1I 0/
Z'372+7M#%37 5667,,%37 -.1238 :G> )-<5 G9> @:;??A/
A declslon rendered ln an e[ecLmenL case operaLed as Lhe
requlred noLlce of cancellaLlon under Lhe Maceda Law, buL as
Lhe buyer was noL glven Lhe cash surrender value of Lhe
paymenLs she made, Lhere was sLlll no acLual cancellaLlon of Lhe
conLracL. !L7%g. 0/ -.123 .4 5667%,$8 =G; )-<5 =G @9DD:A/
A formal leLLer demand upon buyer Lo vacaLe Lhe premlses ls
noL Lhe same as Lhe noLlce of cancellaLlon or demand for
resclsslon by a notar|a| act requlred by 8.A. no. 6332. LvldenLly,
Lhe case of unlawful deLalner flled by peLlLloner does noL
exempL hlm from complylng wlLh Lhe sald requlremenL.
!E%I31,1'%' 0/ U7,% -21_ "M%/ U7 Y%'_%'.8 Q== )-<5 9C9
Where Lhe buyers under a conLracL Lo sell offers Lo pay Lhe lasL
lnsLallmenL a year and a half afLer Lhe sLlpulaLed daLe, LhaL was
beyond Lhe slxLy-day grace perlod under SecLlon 4 of Lhe
Maceda Law. 1he buyers cannoL use Lhe second senLence of
SecLlon 4 of Lhe Maceda Law agalnsL Lhe sellers' alleged fallure
Lo glve an effecLlve noLlce of cancellaLlon or demand for
resclsslon because Lhe sellers merely senL Lhe noLlce Lo Lhe
address supplled by Lhe buyers ln Lhe ConLracL Lo Sell. X%2P#% 0/
-.123 .4 5667%,$, G:; )-<5 9?D @9D:DA/

X%2P#% 0/ -.123 .4 5667%,$

Iacts: A conLracL Lo sell was enLered lnLo beLween seller uela Cruz and
Lhe Spouses Carcla and Spouses Calvez, downpaymenL was made, and
Lhe resL was payable ln 3 lnsLallmenLs. 1he lasL lnsLallmenL was noL pald.
ln Lhe conLracL lL sald LhaL fallure Lo comply wlLh Lhe Lerms of paymenL
would cause resclsslon, and possesslon shall be reLalned unLll a deed of
absoluLe sale ls execuLed by Lhe buyers. ueed of AbsoluLe Sale shall be
execuLed upon full paymenL.

Issue: WheLher or noL Lhe Maceda Law applles.

ne|d: nC. Maceda law lnappllcable slnce Lhe sald law applles Lo
conLracLs of real esLaLe on lnsLallmenL paymenLs, example:
condomlnlum. Sub[ecL lands are noL resldenLlal real esLaLe wlLhln Lhe
conLemplaLlon of Lhe Maceda Law. Lven lf lL dld apply, offer of paymenL
was made beyond Lhe 60-day grace perlod

!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

G. Interpretat|on of Grace er|od and Mode of Cance||at|on
1. 1he ru||ng |n YPL%1IF,#' 0/ -.123 .4 5667%,$8 :CC )-<5 G;=
@:;?GA prov|des for 2 doctr|nes app||cab|e to the Maceda Law:
a. AlLhough Lhe law seem Lo requlre resclsslon and
cancellaLlon Lo be boLh by noLarlal acL, B!N"35,01-
would hold LhaL noLarlal acL as merely appllcable Lo
resclsslon where as noLlce of cancellaLlon" need noL be
by noLarlal acL.
b. B!N"35,01- would hold LhaL even afLer Lhe explraLlon of
Lhe grace perlod provlded by Lhe Law, Lhe buyer sLlll can
prevenL resclsslon or cancellaLlon of Lhe conLracL, wlLhln
Lhe 30-day perlod when resclsslon and cancellaLlon ls Lo
Lake effecL.
o 1hls ls Lhe 30-day grace perlod beLween Lhe explraLlon
of Lhe sLaLuLory grace perlod and Lhe acLual cancellaLlon
of Lhe conLracL. under Lhls perlod, lnLeresL musL already
be pald. Any cancellaLlon wlLhln Lhls 30-day perlod ls

2. 1he ru||ng |n YPL%1IF,#' 0/ -.123 .4 5667%,$8 :CC )-<5 G;=
@:;?GA prov|des for 2 grace per|ods:
a. 1he 60-day perlod provlded by law before a noLlce of
cancellaLlon ls served Lo Lhe buyer
|. SLaLuLory Crace erlod ! avallmenL of Lhe rlghL
Lo updaLe lnsLallmenL paymenLs ls wlLhouL
lnLeresL and penalLles, even when such are
sLlpulaLed ln Lhe parLles' conLracL.
b. 1he before resclsslon or cancellaLlon acLually Lakes
|. erlod prlor Lo Lhe effecLlvlLy of resclsslon or
cancellaLlon, !urlsprudenLlal grace perlod ! Lhe
buyer would be llable for and would have Lo
lnclude ln hls paymenLs Lhe sLlpulaLed lnLeresLs
and penalLles lncurred.
AcLual cancellaLlon occurs 30 days afLer Lhe noLlce of
cancellaLlon or demand for resclsslon ls recelved by Lhe buyer.
o Powever, lf Lhe seller does noL refund Lhe buyer
pursuanL Lo SecLlon 3(b) of Lhe Maceda Law, resclsslon
or cancellaLlon wlll noL Lake place desplLe Lhe effecLlvlLy
of Lhe noLlce of cancellaLlon. !"#$% '( )%*+, %- .//"#012
=G; )-<5 =G @9DD:A

3. kequ|rements Ior A Va||d And Lffect|ve Cance||at|on Under
1he Maceda Law
a. noLarlal acL of resclsslon (noLlce).
b. 1he seller musL refund Lo Lhe buyer Lhe cash surrender
value of Lhe paymenLs on Lhe properLy.

n. Cther k|ghts Granted to 8uyer (Sect|on S and 6)

Sect|on S.
Under Sect|on 3 and 4, the buyer sha|| have the r|ght to se|| h|s r|ghts
or ass|gn the same to another person or to re|nstate the contract by
updat|ng the account dur|ng the grace per|od and before actua|
cance||at|on of the contract. 1he deed of sa|e or ass|gnment sha|| be
done by notar|a| act.
!"#$! &$'($)$& *+,-./+,-01 "2234 &"3 5"6#6 !"72("86

762$! 93 &":;$##$ "77$ 8<2($&&$= *<5>"2$>? @"3 +-A +,-01

When Lhe debLor has made currenL hls paymenL ! Lhe conLracL
cannoL be resclnded.
AsslgnmenL or Selllng ! so long as Lhe conLracL has noL been
cancelled, Lhe debLor may sell or asslgn hls rlghLs. 1he
subsequenL buyer or asslgnee may Lhen Lake over Lhe

Sect|on 6.
1he buyer sha|| have the r|ght to pay |n advance any |nsta||ment or the
fu|| unpa|d ba|ance of the purchase pr|ce any t|me w|thout |nterest
and to have such fu|| payment of the purchase pr|ce annotated |n the
cert|f|cate of t|t|e cover|ng the property.

o Sect|on 6 render nugaLory all provlslons ln loan agreemenLs
coverlng Lhe flnanclng of resldenLlal real esLaLe and
condomlnlum unlLs whereby any paymenL ahead of Lhe
schedule amorLlzaLlon was meL wlLh a penalLy clause.

I. Lffect Cf Contrary St|pu|at|on

Sect|on 7.
Any st|pu|at|on |n any contract hereafter entered |nto contrary to the
prov|s|ons of Sect|ons 3, 4, S and 6, sha|| be nu|| and vo|d.

I. Maceda Law Cannot 8e Ava||ed Cf 8y Deve|oper
o 1he Maceda Law ls almed aL proLecLlng Lhe buyers of real esLaLe
on lnsLallmenL paymenLs. Cne who buys Lhe developmenL from
Lhe developer and Lhen becomes hls successor-ln-lnLeresL ls noL
covered by Lhe law. L%I%'M%. 0/ -.123 .4 5667%,$8 9;D )-<5
==D @:;;?A

V. Cance||at|on of Iud|c|a| Sa|e
Where a [udlclal sale ls volded wlLhouL faulL of Lhe purchaser,
Lhe laLLer ls enLlLled Lo relmbursemenL of Lhe purchase money
pald by hlm. A [udlclal sale can only be seL aslde upon Lhe reLurn
Lo Lhe buyer of Lhe purchase prlce wlLh slmple lnLeresL, LogeLher
wlLh all sums pald ouL by hlm ln lmprovemenLs lnLroduced on
Lhe properLy, Laxes, and oLher expenses by hlm. )707' V2.3F72$
)F#66#'I -.26/ 0/ -.123 .4 5667%,$8 9CG )-<5 == @:;;QA/