Вы находитесь на странице: 1из 63

LAW ON SALES | Atty.

Jazzie Sarona-Lozare, CPA st


Ateneo de Davao University College of Law | 1 Sem (2016-2017)

LAW ON SALES delivered.


Atty. Jazzie Sarona-Lozare, CPA o It is a well-settled principle in law that no one can give what
Ateneo de Davao University College of Law one does not have (nemo dat quod non habet). Accordingly,
1st Semester (School Year 2016-2017) one can sell only what one owns or is authorized to sell, and
the buyer can acquire no more than what the seller can
(Sources: Law on Sales Book by Villanueva, 2016 Lectures of Atty. transfer legally. (Gonzales vs. Heirs of Cruz)
Jazzie Sarona-Lozare, Civil Code of the Philippines, www.lawphil.net, o When a person who is not the owner of a thing sells or
www.sc.judiciary.gov.ph) alienates and delivers it, and later the seller or grantor
acquires title thereto, such title passes by operation of law to
Transcribed by 2-SANCHEZ ROMAN: the buyer or grantee. (Estoque vs. Pajimula)
1. BALGOA, Patricia Nicole o The declaration of nullity of a contract which is void ab initio
2. CANDOLITA, Therese Ann operates to restore things to the state and condition in which
3. CHIU, Ronald they were found before the execution thereof. (DPB vs. CA)
4. DAYANGHIRANG IV, Emilio o A contract of sale is perfected at the moment there is a
5. DULAY, Francis Roel meeting of minds upon the thing which is the object of the
6. ESTILLORE, Lizette Kaye contract and upon the price. It is, therefore, not required
that, at the perfection stage, the seller be the owner of the
7. MASANGUID, Remmon Lloyd
thing sold or even that such subject matter of the sale exists
8. PUBLICO, Stephanie at that point in time. Thus, under Art. 1434 of the Civil Code,
9. SABRIDO, Julian Rey when a person sells or alienates a thing which, at that time,
10. SINGANON, Alexa Marie was not his, but later acquires title thereto, such title passes
11. TITO, Carra Trisha by operation of law to the buyer or grantee. This is the same
principle behind the sale of "future goods" under Art. 1462 of
the Civil Code. However, under Art. 1459, at the time of
3rd EXAM COVERAGE delivery or consummation stage of the sale, it is required that
the seller be the owner of the thing sold. Otherwise, he will
not be able to comply with his obligation to transfer
SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE ownership to the buyer. It is at the consummation stage
where the principle of nemo dat quod non habet applies.
(Cavite Development Bank vs. Spouses Syrus Lim)
WHEN SELLER IS NOT OWNER OF THE SUBJECT MATTER
c) Sale by Co-Owner of the Whole Property or Definite Portion
Thereof
a) At Perfection Article 493. Each co-owner shall have the full ownership of his
o Perfection of a sale merely creates the obligation on the part part and of the fruits and benefits pertaining thereto, and he may
of the seller to transfer ownership, but by itself perfection therefore alienate, assign or mortgage it, and even substitute
does not transfer ownership. another person in its enjoyment, except when personal rights are
involved. But the effect of the alienation or the mortgage, with
Article 1459. The thing must be licit and the vendor must respect to the co-owners, shall be limited to the portion which may
have a right to transfer the ownership thereof at the time it is be allotted to him in the division upon the termination of the co-
delivered. ownership.

Article 1477. The ownership of the thing sold shall be o In co-ownership, none of the co-owners may claim any right,
transferred to the vendee upon the actual or constructive title or interest to a particular portion of the thing owned in
delivery thereof. common.
o General Rule: When a co-owner sells a particular potion of
b) At Consummation the property owned in common, the early rule that the sale is
Article 1505. Subject to the provisions of this Title, void as it attempts to sell a particular portion of the property,
where goods are sold by a person who is not the owner but is valid as to the spiritual share of the co-owner-seller.
thereof, and who does not sell them under authority or with
the consent of the owner, the buyer acquires no better title to d) Exceptions to Rule on Effect of Sale of Definite Portion by Co-
the goods than the seller had, unless the owner of the goods Owner
is by his conduct precluded from denying the seller's authority o It does not apply to a situation where the subject matter is
to sell. indivisible in nature or by intent.
o When a sale of a particular portion of the thing owned in
o The article does not say that the sale of good by a non-owner common is with the consent of the other co-owners.
renders the contract void. o A co-owner who sells one of the two lands owned in common
o It describes the consequences when delivery under a sale is with another co-owner, and does not turn-over one-half of
effected when the seller is not the owner of the thing the proceeds of the sale to the other co-owner, the latter by

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
1 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

law and equity may lay exclusive claim to the remaining seller's defect of title.
parcel of land. (Imperial vs. CA)
o Effect of the ipso jure transfer of ownership under Article There is a voidable title when a contract was entered into
1434 of the Civil Code. When co-heirs sell and deliver the where one of the parties is incapacitated. The requisites
entire lot owned in common with their father who was still mentioned in this sale should be present not only at the time
alive at that time, and subsequently the father dies, then the of the perfection of the contract but also upon delivery. For
buyer becomes the owner of the entire property bought Example: A, who was a minor, sold his property to B. B now
pursuant to the provisions of Article 1434 which upholds the has a voidable title over said property. Now, B sells it to C,
validity of a sale by one who previously did not have, but who without notice of the defect in title. Even if there has already
subsequently acquired, title to the property sold. (Pisuena vs. been a sale and agreement between B and C. The subject
Heirs of Petra Unating) property may still be transferred back to A if there has been
o Binding effect of registration under the Torrens System. no delivery made yet from B to C.
Although a co-owner may validly sell only her co-ownership
interests, and that the sale of the entire property or of a Article 559. The possession of movable property
particular portion thereof is void, nevertheless, when Torres acquired in good faith is equivalent to a title. Nevertheless,
title to the conjugal property indicates that the wife is the one who has lost any movable or has been unlawfully
only owner thereof being described as a widow, then one deprived thereof, may recover it from the person in possession
who buys such property from the wife in good faith and for of the same.
value, will acquire valid title thereto against the heirs of the
decease spouse: The rationale for this rule is that "a person Special rights of an unpaid seller of goods to resell under
dealing with registered land is not required to go behind the Articles 1526 and 1533 of the Civil Code.
register to determine the condition of the property. He is only
charged with notice of the burdens on the property which are 1) When Real Owner Estopped
noted on the face of the register or the certificate of title. To Ex. Article 1434. When a person who is not the
require him to do more is to defeat one of the primary owner of a thing sells or alienates and delivers it, and later
objects of the Torrens system." (Cruz vs. Leis) the seller or grantor acquires title thereto, such title passes by
operation of law to the buyer or grantee.

2) Recording Laws
EXCEPTIONS TO RULES ON LEGAL EFFECTS OF SALE BY A NON-
o Except on the effect of registration of chattel mortgage and its
OWNER
subsequent foreclosure and sale at public auction, and the
jurisprudential rules that have come to govern the hierarchy
Article 1505. Subject to the provisions of this Title, where goods of claims on shares of stock of corporation, there are at
are sold by a person who is not the owner thereof, and who does not present no other recording laws pertaining to movables that
sell them under authority or with the consent of the owner, the buyer provide the same principle as registration as the operative
acquires no better title to the goods than the seller had, unless the act principle applicable to registered land under The
owner of the goods is by his conduct precluded from denying the seller's Property Registration Decree.
authority to sell.
Nothing in this Title, however, shall affect: 3) Statutory Power; Court of Sale
1. The provisions of any factors' act, recording laws, or any other o Judgments of courts divesting the registered owner of title
provision of law enabling the apparent owner of goods to and vesting them in the other party are valid although the
dispose of them as if he were the true owner thereof; courts may not be the owner of the land.
2. The validity of any contract of sale under statutory power of o Also, the sale by a sheriff of land levied upon at public auction
sale or under the order of a court of competent jurisdiction; would validly transfer ownership to the highest bidder,
3. Purchases made in a merchant's store, or in fairs, or markets, although the sheriff in executing the certificate of sale has no
in accordance with the Code of Commerce and special laws. ownership over said property.
o The sale is valid even if the seller is not the owner thereof. 4) Sale at Merchant Store
However, the buyer will not have a better right than the seller o Under paragraph (3) of Article 1505 of the Civil
if the delivery by the seller even if he is not the owner Code, a person who buys a thing at a merchants store after
thereof. There can be no transfer of ownership even if there the same has been put on display thereat, acquires a valid
has been delivery by the seller or does not have the authority title to the thing although his predecessors in interest did not
thereof. Ownership is only necessary upon delivery. have any right of ownership over it. This is a case of an
imperfect or void title ripening into a valid one, as a result of
Other Exceptions: some intervening causes. The policy of the law has always
Article 1506. Where the seller of goods has a voidable title been that where the rights and interests of a vendor come
thereto, but his title has not been avoided at the time of the into clash with that of an innocent buyer for value, the latter
sale, the buyer acquires a good title to the goods, provided he must be protected protecting innocent third parties who
buys them in good faith, for value, and without notice of the have made purchases of merchants stores in good faith and

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
2 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

for value appears to be a wise and necessary rule not only to General Rule:
facilitate commercial sales on movables but to give stability to Article 559. The possession of movable property acquired in
business transactions. This rule is necessary in a country such good faith is equivalent to a title. Nevertheless, one who has lost
as ours where free enterprise prevails, for a buyer cannot be any movable or has been unlawfully deprived thereof, may recover
reasonably expected to look behind the title of every article it from the person in possession of the same.
when he buys at a store. The doctrine of caveat emptor is If the possessor of a movable lost or which the owner has
now rarely applied, and if it is ever mentioned it is more of an been unlawfully deprived, has acquired it in good faith at a public
exception rather than the general rule. (Sun Brothers & Co. vs. sale, the owner cannot obtain its return without reimbursing the
Velasco) price paid therefor.
o A merchant store is any place where goods are kept for sale;
or were good are deposited and sold by one engaged in Exceptions:
buying and selling them. Placing of an order for goods and By cross-reference to Article 1505, even if the owner of a
the making of payment thereto at a principal office does not movable has lost it or has been unlawfully deprived thereof,
transform said office into a store, for it is a necessary element and even if he offers to reimburse the buyer, he cannot
that there must also be goods or wares stored therein or on recover the movable from the buyer who bought it at a
display, and provided also that the firm or person maintaining merchant store; and
that office is actually engaged in the business of buying and By cross-reference to Article 1506, even if the owner of a
selling. (Manila vs. Bugsuk Lumber Co.) movable has lot it or has been unlawfully deprived thereof, if
the possessor in good faith acquired title from a seller who at
5) Sale by a Seller Who Has Voidable Title on the Subject the time of delivery had a voidable title thereto, then the
Matter Sold original owner cannot recover the movable.
Article 1506. Where the seller of goods has a
voidable title thereto, but his title has not been avoided at the
time of the sale, the buyer acquires a good title to the goods, Tagatac vs. Jimenez
provided he buys them in good faith, for value, and without Facts:
notice of the seller's defect of title. Trinidad Tagatac bought a car for $4,500 in the US. After 7
o This article talks of title or ownership to the property which months, she brought the car to the Philippines.
covers the consummation stage. Perfection stage of sale Warner Feist, who pretended to be a wealthy man, offered
involves the obligation to transfer ownership, but does not to buy Trinidads car for P15,000, and Tagatac was amenable to the
cover nor convey ownership itself. idea. Hnece, a deed of sale was exceuted.
o If the sellers voidable title thereto is avoided after the Feist paid by means of a postdated check, and the car was
perfection of the sale but before delivery, the buyer does not delivered to Feist. However, PNB refused to honor the checks and told
obtain good title to the property. her that Feist had no account in said bank.
o The language of the deed of sale may show bad faith on the Tagatac notified the law enforcement agencies of the estafa
part of the buyer. In the deed, instead of the buyer insisting committed by Feist, but the latter was not apprehended and the car
that the seller guarantee its title to the land and recognize the disappeared.
right of the buyer to proceed against the seller if the title to Meanwhile, Feist managed succeeded in having the cars
the land turns out to be defective as when the land belongs to registration certificate (RC) transferred in his name. He sold the car to
another person, and instead the reverse is found in the deed Sanchez, who was able to transfer the registration certificate to his
of sale providing that any losses which the buyer may incur in name.
the event the title turns out to be vested in another person Sanchez then offered to sell the car to defendant Liberato
are to be borne by the buyer alone, show that the buyer did Jimenez, who bought the car for P10,000 after investigating in the
not purchase the subject matter in good faith without notice Motor Vehicles Office.
of any defect in the title of the seller. (Limketkai Sons Milling, Tagatac discovered that the car was in California Car
Inc. vs. CA) Exchanges (place where Jimenez displayed the car for sale), so she
demanded from the manager for the delivery of the car, but the latter
6) Applicable Rules to Immovables refused.
General Rule: Tagatac filed a suit for the recovery of the cars possession,
When the seller of a parcel of land has only voidable and the sheriff, pursuant to a warrant of seizure that Tagatac obtained,
or void title to the property, then the buyer, even though in seized and impounded the car, but it was delivered back to Jimenez
good faith and for value, and in spite of actual or constructive upon his filing of a counter-bond.
delivery, takes only the same title to the land which his seller The lower court held that Jimenez had the right of
had. ownership and possession over the car.
Exception:
The registration in good faith as the operative act Issue:
doctrine embodied in Section 113 of the Property Registration WON Jimenez was a purchaser in good faith and thus
Degree. entitled to the ownership and possession of the car. YES

7) Title as to Movable Properties

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
3 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

Held: of sale was prepared and Irineo was instructed by his father not to
It must be noted that Tagactac was not unlawfully deprived part with the deed and the car without receiving the purchase price
of his car. from Marella.
In this case, there is a valid transmission of ownership from Upon arriving at the house of Vicente Marella, he said that
true owner [Tagatac] to the swindler [Feist], considering that they had his money was short and that he had to borrow from his sister.
a contract of sale (note: but such sale is voidable for the fraud and Marella then instructed de Dios and Irineo to go the
deceit by Feist). supposed house of the sister to obtain the money with an unidentified
The disputable presumption that a person found in person.
possession of a thing taken in the doing of a recent wrongful act is the He also asked Irineo to leave the deed to have his lawyer see
taker and the doer of the whole act does NOT apply in this case it. Relying on the good faith of Marella, Irineo did as requested.
because the car was not stolen from Tagatac, and Jimenez came into Upon arriving at the house of Marellas supposed to be
possession of the car two months after Feist swindled Tagatac. sister, de Dios and the unidentified person then disappeared together
Jimenez was a purchaser in good faith for he was not aware with the car. Santos reported the incident to the authorities.
of any flaw invalidating the title from the seller of the car Thereafter, Marella was able to sell the land to Aznar. While
In addition, when Jimenez acquired the car, he had no in possession of the car, police authorities confiscated the same from
knowledge of any flaw in the title of the person from whom he him.
acquired it. It was only later that he became fully aware that there Aznar filed an action for replevin (to recover the car).
were some questions regarding the car, when he filed a petition to Claiming ownership of the vehicle, he prayed for its delivery to him.
dissolve Tagatacs search warrant which had as its subject the car in In the course of the litigation, however, Teodoro Santos
question. moved and was allowed to intervene by the lower court.
The contract between Feist and Tagactac was a voidable Lower court ruled in favor of Teodoro Santos saying that he
contract, it can be annulled or ratified has been unlawfully deprived of his car and he retains ownership of
. . . The fraud and deceit practiced by Warner L. Feist the same.
earmarks this sale as a voidable contract (Article 1390
N.C.C.). Being a voidable contract, it is susceptible of either Issue
ratification or annulment. Between Teodoro Santos and the plaintiff-appellant, Jose B.
If the contract is ratified, the action to annul it is Aznar, who has a better right to the possession of the disputed
extinguished (Article 1392, N.C.C.) and the contract is cleansed from automobile?
all its defects (Article 1396, N.C.C.); if the contract is annulled, the
contracting parties are restored to their respective situations before Ruling
the contract and mutual restitution follows as a consequence (Article Teodoro Santos.
1398, N.C.C.). Under Article 1506, it is essential that the seller should have
Being a voidable contract, it remains valid and binding until a voidable title at least. It is very clearly inapplicable where, as in this
annulled case, the seller had no title at all.
However, as long as no action is taken by the party entitled, Vicente Marella did not have any title to the property under
either that of annulment or of ratification, the contract of sale remains litigation because the same was never delivered to him. He sought
valid and binding. When plaintiff-appellant Trinidad C. Tagatac ownership or acquisition of it by virtue of the contract. Vicente
delivered the car to Feist by virtue of said voidable contract of sale, Marella could have acquired ownership or title to the subject matter
the title to the car passed to Feist. Of course, the title that Feist thereof only by the delivery or tradition of the car to him.
acquired was defective and voidable. Under Article 712 of the Civil Code, "ownership and other
Nevertheless, at the time he sold the car to Felix Sanchez, real rights over property are acquired and transmitted by law, by
his title thereto had not been avoided and he therefore conferred a donation, by testate and intestate succession, and in consequence of
good title on the latter, provided he bought the car in good faith, for certain contracts, by tradition." As interpreted by this Court in a host
value and without notice of the defect in Feist's title (Article 1506, of cases, by this provision, ownership is not transferred by contract
N.C.C.). There being no proof on record that Felix Sanchez acted in bad merely but by tradition or delivery. Contracts only constitute titles or
faith, it is safe to assume that he acted in good faith. rights to the transfer or acquisition of ownership, while delivery or
tradition is the mode of accomplishing the same
In the case on hand, the car in question was never delivered
Aznar vs. Yapdiangco
to the vendee by the vendor as to complete or consummate the
Facts
transfer of ownership by virtue of the contract. It should be recalled
Theodoro Santos advertised in the newspapers the
that while there was indeed a contract of sale between Vicente
sale of his Ford Fairlane 500.
Marella and Teodoro Santos, the former, as vendee, took possession
After the advertisement, a certain de Dios, claiming to be
of the subject matter thereof by stealing the same while it was in the
the nephew of Vicente Marella, went to the residence of Santos and
custody of the latter's son.
expressed his uncles intent to purchase the car.
There is no adequate evidence on record as to whether
Since Santos wasn't around, it was Irineo (son of Theodoro)
Irineo Santos voluntarily delivered the key to the car to the
who talked with de Dios. On being informed, Santos advised his son to
unidentified person who went with him and L. De Dios to the place on
see Marella, which the son did.
Azcarraga where a sister of Marella allegedly lived. But even if Irineo
Marella expressed his intention to purchase the car. A deed

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
4 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

Santos did, it was not the delivery contemplated by Article 712 of the purchased by Cruz.
Civil Code. For then, it would be indisputable that he turned it over to W/N Petitioner title was transferred to respondents
the unidentified companion only so that he may drive Irineo Santos Held:
and De Dios to the said place on Azcarraga and not to vest the title to (1) Yes. Respondents acquired the books in good faith.
the said vehicle to him as agent of Vicente Marella. Article 712 above Leonor Santos first ascertained the ownership of the books from the
contemplates that the act be coupled with the intent of delivering the EDCA invoice showing that they had been sold to Cruz, who said he
thing. was selling them for a discount because he was in financial need. To
The lower court was correct in applying Article 559 of the Leonor Santos, Cruz must have been only one of the many such sellers
Civil Code to the case at bar, for under it, the rule is to the effect that she was accustomed to dealing with. It is hardly bad faith for any one
if the owner has lost a thing, or if he has been unlawfully deprived of in the business of buying and selling books to buy them at a discount
it, he has a right to recover it, not only from the finder, thief or robber, and resell them for a profit.
but also from third persons who may have acquired it in good faith (2) Yes. The petitioner argues that it was, because the
from such finder, thief or robber. The said article establishes two impostor acquired no title to the books that he could have validly
exceptions to the general rule of irrevindicability, to wit, when the transferred to the private respondents. Its reason is that as the
owner (1) has lost the thing, or (2) has been unlawfully deprived payment check bounced for lack of funds, there was a failure of
thereof. In these cases, the possessor cannot retain the thing as consideration that nullified the contract of sale between it and Cruz.
against the owner, who may recover it without paying any indemnity, The contract of sale is consensual and is perfected once
except when the possessor acquired it in a public sale. agreement is reached between the parties on the subject matter and
Finally, the plaintiff-appellant here contends that inasmuch the consideration.
as it was the intervenor-appellee who had caused the fraud to be Art. 1475. The contract of sale is perfected at the moment
perpetrated by his misplaced confidence on Vicente Marella, he, the there is a meeting of minds upon the thing which is the object of the
intervenor-appellee, should be made to suffer the consequences contract and upon the price.
arising therefrom, following the equitable principle to that effect. From that moment, the parties may reciprocally demand
Suffice it to say in this regard that the right of the owner to recover performance, subject to the provisions of the law governing the form
personal property acquired in good faith by another, is based on his of contracts.
being dispossessed without his consent. The common law principle Art. 1477. The ownership of the thing sold shall be
that where one of two innocent persons must suffer by a fraud transferred to the vendee upon the actual or constructive delivery
perpetrated by another, the law imposes the loss upon the party who, thereof.
by his misplaced confidence, has enabled the fraud to be committed, Art. 1478. The parties may stipulate that ownership in the
cannot be applied in a case which is covered by an express provision thing shall not pass to the purchaser until he has fully paid the price.
of the new Civil Code, specifically Article 559. Between a common law It is clear from the above provisions, particularly the last one
principle and a statutory provision, the latter must prevail in this quoted, that ownership in the thing sold shall not pass to the buyer
jurisdiction. (Cruz v. Pahati, supra) until full payment of the purchase only if there is a stipulation to that
effect. Otherwise, the rule is that such ownership shall pass from the
vendor to the vendee upon the actual or constructive delivery of the
thing sold even if the purchase price has not yet been paid.
EDCA vs. Santos
Non-payment only creates a right to demand payment or to
Facts
rescind the contract, or to criminal prosecution in the case of
A person identifying himself as Professor Cruz placed an
bouncing checks. But absent the stipulation above noted, delivery of
order by telephone with the petitioner for 406 books, payable on
the thing sold will effectively transfer ownership to the buyer who can
delivery. Upon delivery, Cruz issued a check covering the purchase
in turn transfer it to another.
price of P8,995.65. On October 7, 1981, Cruz sold 120 of the books to
Actual delivery of the books having been made, Cruz
private respondent Leonor Santos who, after verifying the seller's
acquired ownership over the books which he could then validly
ownership from the invoice he showed her, paid him P1,700.00.
transfer to the private respondents. The fact that he had not yet paid
EDCA made inquiries with the De la Salle College where he
for them to EDCA was a matter between him and EDCA and did not
had claimed to be a dean and was informed that there was no such
impair the title acquired by the private respondents to the books.
person in its employ. EDCA then went to the police, which set a trap
One may well imagine the adverse consequences if the
and arrested Cruz. Investigation disclosed his sale of 120 of the books
phrase "unlawfully deprived" were to be interpreted in the manner
he had ordered from EDCA to the private respondents.
suggested by the petitioner. A person relying on the seller's title who
It is the contention of the petitioner that the private
buys a movable property from him would have to surrender it to
respondents have not established their ownership of the disputed
another person claiming to be the original owner who had not yet
books because they have not even produced a receipt to prove they
been paid the purchase price therefor. The buyer in the second sale
had bought the stock. Petitioner further argues that it was, because
would be left holding the bag, so to speak, and would be compelled to
the impostor acquired no title to the books that he could have validly
return the thing bought by him in good faith without even the right to
transferred to the private respondents. Its reason is that as the
reimbursement of the amount he had paid for it.
payment check bounced for lack of funds, there was a failure of
It bears repeating that in the case before us, Leonor Santos
consideration that nullified the contract of sale between it and Cruz.
took care to ascertain first that the books belonged to Cruz before she
Issue:
agreed to purchase them. The EDCA invoice Cruz showed her assured
W/N respondents had the better right over the books

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
5 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

her that the books had been paid for on delivery. By contrast, EDCA could be liable for any such deterioration. If there are fruits or additions
was less than cautious in fact, too trusting in dealing with the to the property through the effort, work or expense of the debtor, then
impostor. Although it had never transacted with him before, it readily the creditor can employ the right of usufruct over the property. So
delivered the books he had ordered (by telephone) and as readily that's what you have discussed under 1189. That's not far from what we
accepted his personal check in payment. It did not verify his identity had in a contract of sale.
although it was easy enough to do this. It did not wait to clear the
check of this unknown drawer. Worse, it indicated in the sales invoice BEFORE PERFECTION
issued to him, by the printed terms thereon, that the books had been
paid for on delivery, thereby vesting ownership in the buyer. Before the perfection of a sale, the rules on loss,
While we sympathize with the petitioner for its plight, it is deterioration, fruits and improvement of the purported subject matter
clear that its remedy is not against the private respondents but against are the same: such loss, deterioration, fruits and improvements shall
Tomas de la Pea, who has apparently caused all this trouble. The pertain to the purported SELLER, since he owns the thing.
private respondents have themselves been unduly inconvenienced, Notwithstanding the extent of the negotiations that have taken place,
and for merely transacting a customary deal not really unusual in their prior to perfection, the purported subject matter bears no legal or even
kind of business. It is they and not EDCA who have a right to complain. equitable relationship to the purported buyer, and therefore no
assumption or risk or loss or deterioration can be ascribed to the latter.
Discussion
The possession of a movable property in good faith is AT THE TIME OF PERFECTION
equivalent to title. In this case, books were actually delivered to Cruz,
therefore, he acquired thereof. The fact that he had not yet paid for the
Article 1493. If at the time the contract of sale is perfected,
books for EDCA did not impair his ownership over the books. Therefore,
the thing which is the object of the contract has been entirely lost, the
when Cruz sold and delivered his books to Santos, there was a valid
contract shall be without any effect.
transfer of ownership. Santos was an innocent purchaser in good faith
But if the thing should have been lost in part only, the VENDEE
because he first ascertained that the books belonged to Cruz which was
(BUYER) may choose between
evidenced by the invoiced issued in favour of Cruz. The sales invoice
(a) withdrawing from the contract and
showed that the books were sold on delivery. Thereby, vesting
(b) demanding the remaining part, paying its price in proportion to the
ownership in the buyer.
total sum agreed upon.
The sales invoice issued have been paid for by delivery
thereby vesting ownership to the buyer.
Article 1494. Where the parties purport a sale of specific
So take note of the disctinctions between or among these
goods, and the goods without the knowledge of the seller have perished
three instances. Again, as we have mentioned,
in part or have wholly or in a material part so deteriorated in quality as
1. even if the seller is not the owner at the time of perfection,
to be substantially changed in character, the BUYER may at his option
the sale is valid.
treat the sale as either avoided; or as valid in all of the existing goods or
2. If he is not the owner at the time of delivery, we apply Article
in so much thereof as have not deteriorated, and as binding the buyer
1505, the buyer does not acquire a better title over the
to pay the agreed price for the goods in which the ownership will pass,
subject matter unless we apply any of the exceptions
if the sale was divisible.
mentioned therein.
3. If the seller is not the owner at the time of delivery but
So here, you have Articles 1493 and 1494 as your guide in
subsequently acquires title thereto, we apply Article 1434. By
applying the previous provisions under your Obligations and
operation of law, title passes to the buyer.
Contracts.
----------------------------------
If the loss happened at the time of perfection, so wala pa
itong delivery, the general rule is res perit domino, seller
bears the loss.
But under Article 1493, what happens to the contract? The
LOSS, DETERIORATION, FRUITS AND OTHER BENEFITS
contract shall be without any effect. That means the contract
is inefficacious. Why? Because loss of the subject matter does
not affect the validity of the sale. It just so happens that it
We now proceed to loss, deterioration, fruits and other
cannot take effect because the thing was lost without the
benefits.
fault of the parties at the time of perfection.
Actually we apply the same provisions that you have already
Like for example, you entered into a contract of sale of a
discussed in your Obligations and Contracts under Article 1189.
vessel or ship. You didn't know that at the time you entered
As a general rule, with regard to who bears the loss, we apply
into the conract, nasira na pala ang ship or nasunog in the
the principle res perit domino or owner bears the loss.
middle of the sea. So at that instance, it is inefficacious
With regard to deterioration, who will suffer the deterioration
because the seller cannot anymore comply with the
if it is without the fault of the debtor, then the creditor will suffer. This
obligation and therefor the buyer cannot be compelled to
is also a disadvantage becausefor any benefit without the effort of the
perform his obligation to pay the price.
debtor under 1189, the creditor will get the benefit. But of course, if
the deterioration was due to the fault of the debtor, then the debtor If the subject matter is lost at the point of perfection, and the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
6 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

seller bears the loss and the buyer is relieved of his obligation the obligation shall be extinguished;
under the contract, then the implication is that after 2) If the thing is lost through the fault of the debtor, he
perfection, the buyer then bears the risk of loss and shall be obliged to pay damages; it is understood
deterioration even without prior delivery to him. that the thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its
AFTER PERFECTION BUT BEFORE DELIVERY existence is unknown or it cannot be recovered;

DETERIORATION, FRUITS AND IMPROVEMENTS


What if loss happened after the perfection of the sale but
Article 1538. In case of loss, deterioration or improvement of
before delivery? The seller bears the loss because again, there is no
the thing before its delivery, the rules in article 1189 shall be observed,
transfer yet of ownership. But with regard to deterioration and the
the vendor being considered the debtor
fruits, the buyer will have to bear the loss.
Article 1189. When the conditions have been imposed with
LOSS OF SUBJECT MATTER
the intention of suspending the efficacy of an obligation to give, the
following rules shall be observed in case of deterioration of the thing
General Rule:
during the pendency of the condition:
Article 1477. The ownership of the thing sold shall be
1. When the thing deteriorates without the fault of the debtor,
transferred to the VENDEE (BUYER) upon the actual or constructive
the impairment is to be borne by the creditor;
delivery thereof.
2. If it deteriorates through the fault of the debtor, the creditor
may choose between the rescission of the obligation and its
Exception:
fulfillment, with indemnity for damages in either case;
The risk of loss is borne by the SELER under the rule of res
perit domino. 3. If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor;
Article 1504. Unless otherwise agreed, the goods remain at 4. If it is improved at the expense of the debtor, he shall have no
the seller's risk until the ownership therein is transferred to the buyer, other right than that granted to the usufructuary.
but when the ownership therein is transferred to the buyer the goods
are at the buyer's risk whether actual delivery has been made or not. Article 1480. Any injury to or benefit from the thing sold, after
the contract has been perfected, from the moment of the perfection of
Article 1480. Any injury to or benefit from the thing sold, after the contract to the time of delivery, shall be governed by articles 1163
the contract has been perfected, from the moment of the perfection of to 1165, and 1262.
the contract to the time of delivery, shall be governed by articles 1163 This rule shall apply to the sale of fungible things, made
to 1165, and 1262. independently and for a single price, or without consideration of their
weight, number, or measure.
Article 1163. Every person obliged to give Should fungible things be sold for a price fixed according to
something is also obliged to take care of it with the proper weight, number, or measure, the risk shall not be imputed to the vendee
diligence of a good father of a family, unless the law or the until they have been weighed, counted, or measured and delivered,
stipulation of the parties requires another standard of care. unless the latter has incurred in delay.

Article 1165. When what is to be delivered is a Article 1537. The vendor is bound to deliver the thing sold and
determinate thing, the creditor, in addition to the right its accessions and accessories in the condition in which they were upon
granted him by article 1170, may compel the debtor to make the perfection of the contract.
the delivery All the fruits shall pertain to the vendee from the day on
which the contract was perfected.
Article 1262. An obligation which consists in the
delivery of a determinate thing shall be extinguished if it AFTER DELIVERY
should be lost or destroyed without the fault of the debtor,
and before he has incurred in delay. If the loss happened after perfection and after delivery, we go
back to res perit domino. Delivery extinguishes ownership of the owner
Article 1538. In case of loss, deterioration or improvement of and creates a new one in favor of the buyer.
the thing before its delivery, the rules in article 1189 shall be observed,
the vendor being considered the debtor. Article 1504. Unless otherwise agreed, the goods remain at
the seller's risk until the ownership therein is transferred to the buyer,
Article 1189. When the conditions have been imposed but when the ownership therein is transferred to the buyer the goods
with the intention of suspending the efficacy of an obligation are at the buyer's risk whether actual delivery has been made or not,
to give, the following rules shall be observed in case of the EXCEPT that:
improvement, loss or deterioration of the thing during the (1) Where delivery of the goods has been made to the buyer or to
pendency of the condition: a bailee for the buyer, in pursuance of the contract and the
1) If the thing is lost without the fault of the debtor, ownership in the goods has been retained by the seller merely

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
7 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

to secure performance by the buyer of his obligations under to its forwarding agent, Allied Brokerage Corporation, for shipment;
the contract, the goods are at the buyer's risk from the time that Allied Brokerage loaded the goods on board the M/S Doa
of such delivery; Florentina, a vessel owned and operated by Negros Navigation
(2) Where actual delivery has been delayed through the fault of Company, for delivery to Sambok, Bacolod. When petitioner tried to
either the buyer or seller the goods are at the risk of the party collect from the latter the amount of P31,037.56, representing the
in fault. price of the spare parts plus handling charges, Sambok, Bacolod,
refused to pay claiming that it had not received the merchandise
STRUCTURING PROPER DOCTRINE ON LOSS, DETERIORATION, FRUITS Petitioner also demanded the return of the merchandise or
AND IMPROVEMENTS their value from Allied Brokerage and Negros Navigation, but both
denied any liability.
Prior to Perfection On September 7, 1972, petitioner filed with the Court of
Both title and beneficial interests pertain to the SELLER and First Instance of Rizal, Branch XX, Pasig, Rizal, a Complaint for
therefore he must bear the rish of loss, deterioration, and Damages against Allied Brokerage Corporation, Negros Navigation
benefits from the fruits and improvements. Company and Sambok, Bacolod.
The buyer has no risk or participation in any of those aspects In its Answer, Sambok, Bacolod, denied having received from
since neither title nor beneficial interest over the subject petitioner or from any of its co-defendants, the automotive products
matter pertains to him, as in fact there is no legal relationship referred to in the Complaint, and professed no knowledge of having
that exists at that point between him and the seller on the ordered from petitioner said articles.
subject matter of the would-be sale, even assuming
negotiation was in the process. Issue
Whether or not the act of the private respondent in refusing to take
After Delivery delivery of the automotive spare parts that it purchased from the
The BUYER bears both the risk of loss and deterioration, as petitioner after having been notified of the shipment constitutes
well as benefits from the fruits and improvements of the wrongful neglect resulting in the loss of the cargo for which it should
subject matter of sale. be liable in damages to the petitioner.
Neither title nor beneficial interests pertain to the seller and
Ruling
therefore he ceases to have any legal relation to the subject
NO.
matter and should not be affected by anything that may
The matter of misdelivery is not the decisive factor for
happen to the subject matter without his fault.
relieving Sambok, Bacolod, of liability herein. While it may be that the
Parts Order Form specifically indicated Iloilo as the destination, as
After Perfection and Before Delivery
testified to by Ernesto Ordonez, Parts Sales Representative of
The title and beneficial interests actually do not pertain to the
petitioner, Sambok, Bacolod, and Sambok, Iloilo, are actually one. In
same person.
fact, admittedly, the order for spare parts was made by the President
The title remains with the SELLER but beneficial interest
of Sambok, Pepito Ng, through its marketing consultant.
actually pertain to the BUYER.
Notwithstanding, upon receipt of the Bill of Lading, Sambok, Bacolod,
1. Article 1163. Every person obliged to give something is also
initiated, but did not pursue, steps to take delivery as they were
obliged to take care of it with the proper diligence of a good
advised by Negros Navigation that because some parts were missing.
father of a family, unless the law or the stipulation of the
they would just be informed as soon as the missing parts were
parties requires another standard of care.
located.
2. Article 1164. The creditor has a right to the fruits of the thing
It was only four years later, however, or in 1974, when a
from the time the obligation to deliver it arises. However, he
warehouseman of Negros Navigation, Severino Aguarte, found in their
shall acquire no real right over it until the same has been
off-shore bodega, parts of the shipment.- in question, but already
delivered to him.
deteriorated and valueless.
3. Article 1165 and 1170. When what is to be delivered is a
Under the circumstances, Sambok, Bacolod, cannot be
determinate thing, the obligor who incurs fraud, negligence,
faulted for not accepting or refusing to accept the shipment from
or delay, or contravene the tenor of their agreement, are
Negros Navigation four years after shipment. The evidence is clear
liable for damages.
that Negros Navigation could not produce the merchandise nor
4. Article 1166. The obligation to give a determinate thing
ascertain its whereabouts at the time Sambok, Bacolod, was ready to
includes that of delivering all its accessions and accessories,
take delivery. Where the seller delivers to the buyer a quantity of
even though they may not have been mentioned.
goods less than he contracted to sell, the buyer may reject them.
From the evidentiary record, Negros Navigation was the
party negligent in failing to deliver the complete shipment either to
Chrysler vs. CA and Sambok Motors Bacolod Sambok, Bacolod, or to Sambok, Iloilo, but as the Trial Court found,
Facts petitioner failed to comply with the conditions precedent to the filing
OnOctober 2, 1970, Sambok, Bacolod, ordered from of a judicial action. Thus, in the last analysis, it is petitioner that must
petitioner various automotive products worth P30,909.61, payable in shoulder the resulting loss. The general rule that before, delivery, the
45 days risk of loss is home by the seller who is still the owner, under the
On November 25, 1970, petitioner delivered said products

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
8 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

principle of "res petit domino", is applicable in petitioner's case. defense. He alleged that the books bought from the plaintiff were
In sum, the judgment of respondent Appellate Court, will burned during the fire that broke out in Naga City on May 15, 1955,
have to be sustained not on the basis of misdelivery but on non- and since the loss was due to force majeure he cannot be held
delivery since the merchandise was never placed in the control and responsible for the loss.
possession of Sambok, Bacolod, the vendee.
Issue
Discussion Whether or not appellee Lawyers Cooperative should be the one to
So here, there was no misdelivery but rather non-delivery. bear the loss for the loss is always borne by the owner.
Why? Because the merchandise was never placed in the control and
possession of Sambok, the vendee. Ruling
Kelan mag apply ang general rule here that delivery to the NO.
carrier is delivery to the buyer? Precisely because of the arrangement While as a rule the loss of the object of the contract of sale
between the parties that delivery be made to Sambok Bacolod. is borne by the owner or in case of force majeure the one under
Moreover, very relevant also in this case is that delivery was obligation to deliver the object is exempt from liability, the application
made only after 4 years. When the warehouseman of Negros of that rule does not here obtain because the law on the contract
Navigation found the parts of the shipment already deteriorated and entered into on the matter argues against it. It is true that in the
devaluated. Spareparts where initially delivered but they were advised contract entered into between the parties the seller agreed that the
that some were missing. The missing parts were located only 4 years ownership of the books shall remain with it until the purchase price
thereafter. Sambok Bacolod therefore cannot be faulted for not shall have been fully paid, but such stipulation cannot make the seller
accepting or refusing to accept the shipment from Negros Navigation 4 liable in case of loss not only because such was agreed merely to
years after shipment. secure the performance by the buyer of his obligation but in the very
Where the seller delivers to the buyer quantity of goods less contract it was expressly agreed that the "loss or damage to the books
than what was contracted by the parties, the buyer may reject them. To after delivery to the buyer shall be borne by the buyer." Any such
which, we apply again the general principle of res perit domino. The risk stipulation is sanctioned by Article 1504 of our Civil Code, which in
of loss is borne by the seller who is still the owner since there was yet part provides:
no delivery to transfer ownership in favor of the buyer Sambok. (1) Where delivery of the goods has been made to the buyer
---------------------------------- or to a bailee for the buyer, in pursuance of the contract and
the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his
Lawyers Coop vs. Tabora
obligations under the contract, the goods are at the buyer's
Facts
risk from the time of such delivery.
On May 3, 1955, Perfecto A. Tabora bought from the
Neither can appellant find comfort in the claim that since
Lawyers Cooperative Publishing Company 1 complete set of American
the books were destroyed by fire without any fault on his part he
Jurisprudence consisting of 48 volumes with 1954 pocket parts, plus 1
should be relieved from the resultant obligation under the rule that an
set of American Jurisprudence, General Index, consisting of 4 volumes,
obligor should be held exempt from liability when the loss occurs thru
for a total price of P1,675.50 which, in addition to the cost of freight
a fortuitous event. This is because this rule only holds true when the
of P6.90, makes a total of P1,682.40. Tabora made a partial payment
obligation consists in the delivery of a determinate thing and there is
of P300.00, leaving a balance of P1,382.40. The books were duly
no stipulation holding him liable even in case of fortuitous event. Here
delivered and receipted for by Tabora on May 15, 1955 in his law
these qualifications are not present. The obligation does not refer to a
office Ignacio Building, Naga City.
determinate thing, but is pecuniary in nature, and the obligor bound
In the midnight of the same date, however, a big fire broke
himself to assume the loss after the delivery of the goods to him. In
out in that locality which destroyed and burned all the buildings
other words, the obligor agreed to assume any risk concerning the
standing on one whole block including at the law office and library of
goods from the time of their delivery, which is an exception to the rule
Tabora As a result, the books bought from the company as above
provided for in Article 1262 of our Civil Code.
stated, together with Tabora's important documents and papers, were
burned during the conflagration. This unfortunate event was
immediately reported by Tabora to the company in a letter he sent on Discussion
May 20, 1955. On May 23, the company replied and as a token of First thing we have to take note here is the stipulation in the
goodwill it sent to Tabora free of charge volumes 75, 76, 77 and 78 of contract:
the Philippine Reports. Title and ownership of the books shall remain with
As Tabora failed to pay he monthly installments agreed upon the seller until the purchase price have been fully paid. Loss
on the balance of the purchase price notwithstanding the long time and damage to the goods after delivery to the buyer shall be
that had elapsed, the company demanded payment of the borne by the buyer.
installments due, and having failed, to pay the same, it commenced So with that, it's very clear that Tabora will be the one liable
the present action before the Court of First Instance of Manila for the for the loss. The loss is not even the fault of Tabora and of Lawyer's
recovery of the balance of the obligation. Plaintiff also prayed that Coop. And by virtue of that provision, Tabora will still be liable to pay
defendant be ordered to pay 25% of the amount due as liquidated the balance of the purchase price even if the loss of the goods was due
damages, and the cost of action. to force majeure.
Defendant, in his answer, pleaded force majeure as a While as a rule the loss of the object of the contract of sale is

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
9 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

borne by the owner or in case of force majeure the one under he wrongfully neglects or refuses to pay for the goods
obligation to deliver the object is exempt from liability, the application according to the terms of the contract of sale, the seller may
of that rule does not here obtain because of the stipulation by the maintain an action against him for the price of the goods.
parties in the contract. Such stipulation cannot make the seller liable in
case of loss because it was expressly agreed that the loss or damage to When Price Payable on Certain Day
the books after delivery to the buyer shall be borne by the buyer. Any Article 1595, par. 2. Where, under a contract of
stipulation is sanctioned by Article 1504. sale, the price is payable on a certain day, irrespective of
Take note class that if walang ganyan na stipulation, we apply delivery or of transfer of title and the buyer wrongfully
the general rule na owner bears the loss. So who is the owner here? neglects or refuses to pay such price, the seller may maintain
Tabora. Why? Because there's already delivery. an action for the price although the ownership in the goods
Now what if wala yung 2nd phrase sa stipulation na Loss and has not passed. But it shall be a defense to such an action
damage to the goods after delivery to the buyer shall be borne by the that the seller at any time before the judgment in such action
buyer? Can we say that seller now bears the loss? The Supreme Court has manifested an inability to perform the contract of sale on
took note of that. The seller cannot be made liable not only because it his part or an intention not to perform it.
was agreed to secure the performance of the buyer but because it was
also agreed that loss or damage shall be borne by the buyer after This is in relation to the nature of a contract of sale
delivery. as a reciprocal contract. The seller cannot demand
Also do take not that the obligation here does not refer to a from the buyer to pay the price if the seller himself
determinate thing. What is really the obligation of Tabora here? To pay is unable to deliver the subject matter of the
the price. The obligation to pay a sum of money. Which is a contract of sale.
indeterminate thing. Ang nawala is yung subject matter but the
obligation remains. So we only apply the loss of the thing rule which No Transfer of Ownership to Buyer
will extinguish the obligation, if it refers to an obligation to deliver a Article 1595, par. 3. Although the ownership in the
determinate thing. goods has not passed, if they cannot readily be resold for a
---------------------------------- reasonable price, and if the provisions of article 1596, fourth
paragraph, are not applicable, the seller may offer to deliver
the goods to the buyer, and, if the buyer refuses to receive
REMEDIES IN CASE OF BREACH them, may notify the buyer that the goods are thereafter held
by the seller as bailee for the buyer. Thereafter the seller may
treat the goods as the buyer's and may maintain an action for
Article 1594. Actions for breach of the contract of sale of the price.
goods shall be governed particularly by the provisions of this Chapter,
and as to matters not specifically provided for herein, by other b) When Buyer Wrongfully Neglects/Refuse to Accept Goods
applicable provisions of this Title. (n) Article 1596. Where the buyer wrongfully neglects
or refuses to accept and pay for the goods, the seller may
In this chapter, very specific siya. It applies to goods lang. maintain an action against him for damages for
nonacceptance.
a) The measure of damages is the estimated loss directly
A) ORDINARY REMEDIES OF SELLER
and naturally resulting in the ordinary course of events
from the buyer's breach of contract.
1) MOVABLES IN GENERAL b) Where there is an available market for the goods in
Article 1593. With respect to movable property, the rescission question, the measure of damages is, in the absence of
of the sale shall of right take place in the interest of the vendor, if the special circumstances showing proximate damage of a
vendee, upon the expiration of the period fixed for the delivery of the different amount, the difference between the contract
thing, should not have appeared to receive it, or, having appeared, he price and the market or current price at the time or times
should not have tendered the price at the same time, unless a longer when the goods ought to have been accepted, or, if no
period has been stipulated for its payment. time was fixed for acceptance, then at the time of the
refusal to accept.
In this provision, with regards to movable property, the c) If, while labor or expense of material amount is
requirement to demand for rescission is not needed to necessary on the part of the seller to enable him to fulfill
rescind the sale as long as the elements provided in this his obligations under the contract of sale, the buyer
article are present. repudiates the contract or notifies the seller to proceed
no further therewith, the buyer shall be liable to the
2) SALE OF GOODS seller for labor performed or expenses made before
a) Non-Payment of Price by Buyer receiving notice of the buyer's repudiation or
countermand.
Ownership Transferred to Buyer d) The profit the seller would have made if the contract or
Article 1595, par. 1. Where, under a contract of the sale had been fully performed shall be considered in
sale, the ownership of the goods has passed to the buyer and awarding the damages.

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
10 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

This article tells us of the remedy available to the buyer in The purpose of the documents of title is used as an
case of breach of the buyer. evidence of control and possession of the goods
describes. It is a medium of transferring possession,
B) SPECIAL REMEDIES OF UNPAID SELLER OF GOODS control and even title of the goods described in
such document without having to undertake actual
delivery. (Ex. Warehouse Receipt, Bill of Warrants,
DEFINITION OF UNPAID SELLER
Bill of Lading, Quedan) In negotiable documents of
Article 1525. The seller of goods is deemed to be an unpaid
title, it may either be a bearer document or an
seller within the meaning of this Title:
order document. It is a bearer document, it may be
(1) When the whole of the price has not been paid or tendered;
negotiated by mere delivery because the one who is
(2) When a bill of exchange or other negotiable instrument has been
in possession of the document may claim the goods
received as conditional payment, and the condition on which it was
in the warehouse. An order document of title
received has been broken by reason of the dishonor of the instrument,
requires an indorsement of the document, which
the insolvency of the buyer, or otherwise.
you have to fix your signature and deliver it to the
proper party. If the goods referred in the title are
RIGHTS OF UNPAID SELLER
not stated that it will be delivered to the bearer or
1) Possessory Lien
to order of any person, then it is non-negotiable.
Article 1524. The vendor shall not be bound to deliver the
thing sold, if the vendee has not paid him the price, or if no period for
Article 1518. The validity of the negotiation of a
the payment has been fixed in the contract.
negotiable document of title is not impaired by the fact that
the negotiation was a breach of duty on the part of the
Article 1526. Subject to the provisions of this Title,
person making the negotiation, or by the fact that the owner
notwithstanding that the ownership in the goods may have passed to
of the document was deprived of the possession of the same
the buyer, the unpaid seller of goods, as such, has:
by loss, theft, fraud, accident, mistake, duress, or conversion,
(1) A lien on the goods or right to retain them for the price
if the person to whom the document was negotiated or a
while he is in possession of them;
person to whom the document was subsequently negotiated
Where the ownership in the goods has not passed to the
paid value therefor in good faith without notice of the breach
buyer, the unpaid seller has, in addition to his other remedies a right of
of duty, or loss, theft, fraud, accident, mistake, duress or
withholding delivery similar to and coextensive with his rights of lien
conversion.
and stoppage in transitu where the ownership has passed to the buyer.
Take note that what is required here is that you must be a
Article 1527. Subject to the provisions of this Title, the unpaid
buyer in good faith in order that the negotiation would
seller of goods who is in possession of them is entitled to retain
remain valid. The transferee now has a better title than the
possession of them until payment or tender of the price in the following
transferor.
cases, namely:
Negotiation gives a better right than assignment because an
1) Where the goods have been sold without any stipulation as to
assignee merely steps into the shoes of the assignor.
credit;
2) Where the goods have been sold on credit, but the term of credit
Article 1516. A person who for value negotiates or
has expired;
transfers a document of title by indorsement or delivery,
3) Where the buyer becomes insolvent.
including one who assigns for value a claim secured by a
document of title unless a contrary intention appears,
Note: Possessory Lien cannot be availed of by the seller if he
warrants:
does not have physical possession of the goods.
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
1. When Negotiable Document of Title Issued
(3) That he has knowledge of no fact which would impair the
Article 1535. Subject to the provisions of this Title,
validity or worth of the document; and
the unpaid seller's right of lien or stoppage in transitu is not
(4) That he has a right to transfer the title to the goods and
affected by any sale, or other disposition of the goods which
that the goods are merchantable or fit for a particular
the buyer may have made, unless the seller has assented
purpose, whenever such warranties would have been implied
thereto.
if the contract of the parties had been to transfer without a
If, however, a negotiable document of title has been
document of title the goods represented thereby.
issued for goods, no seller's lien or right of stoppage in
transitu shall defeat the right of any purchaser for value in
Article 1516 states the warranties over the negotiation or
good faith to whom such document has been negotiated,
transfers of document of title.
whether such negotiation be prior or subsequent to the
notification to the carrier, or other bailee who issued such In Article 1523, we have talked about delivery. It states that
document, of the seller's claim to a lien or right of stoppage in delivery to the carrier constitutes delivery to the buyer.
transitu. Unless, a different arrangement were agreed upon both
parties.

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
11 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

2. When Part Delivery Effected c) When Goods are Deemed In Transit


Article 1528. Where an unpaid seller has made part Article 1531. Goods are in transit within the
delivery of the goods, he may exercise his right of lien on the meaning of the preceding article:
remainder, unless such part delivery has been made under 1 From the time when they are delivered to a carrier by
such circumstances as to show an intent to waive the lien or land, water, or air, or other bailee for the purpose of
right of retention. transmission to the buyer, until the buyer, or his agent in
that behalf, takes delivery of them from such carrier or
3. Instances When Possessory Lien Lost other bailee;
Article 1529. The unpaid seller of goods loses his 2 If the goods are rejected by the buyer, and the carrier or
lien thereon: other bailee continues in possession of them, even if the
1. When he delivers the goods to a carrier or other seller has refused to receive them back.
bailee for the purpose of transmission to the buyer
without reserving the ownership in the goods or the d) When Goods are Deemed No Longer in Transit
right to the possession thereof; Article 1531. Goods are no longer in transit within
2. When the buyer or his agent lawfully obtains the meaning of the preceding article:
possession of the goods; If the buyer, or his agent in that behalf, obtains delivery
3. By waiver thereof. of the goods before their arrival at the appointed
The unpaid seller of goods, having a lien thereon, destination;
does not lose his lien by reason only that he has obtained If, after the arrival of the goods at the appointed
judgment or decree for the price of the goods. destination, the carrier or other bailee acknowledges to
the buyer or his agent that he holds the goods on his
2) Stoppage in Transitu behalf and continues in possession of them as bailee for
Article 1526. Subject to the provisions of this Title, the buyer or his agent; and it is immaterial that further
notwithstanding that the ownership in the goods may have passed to destination for the goods may have been indicated by
the buyer, the unpaid seller of goods, as such, has: the buyer;
(2) In case of the insolvency of the buyer, a right of If the carrier or other bailee wrongfully refuses to deliver
stopping the goods in transitu after he has parted with the possession the goods to the buyer or his agent in that behalf.
of them; If the goods are delivered to a ship, freight train, truck,
or airplane chartered by the buyer, it is a question depending
Article 1530. Subject to the provisions of this Title, when the on the circumstances of the particular case, whether they are
buyer of goods is or becomes insolvent, the unpaid seller who has in the possession of the carrier as such or as agent of the
parted with the possession of the goods has the right of stopping them buyer.
in transitu, that is to say, he may resume possession of the goods at any
time while they are in transit, and he will then become entitled to the e) When Part Delivery Already Made
same rights in regard to the goods as he would have had if he had Article 1531. If part delivery of the goods has been
never parted with the possession. made to the buyer, or his agent in that behalf, the remainder
of the goods may be stopped in transitu, unless such part
Article 1535, par. 1. Subject to the provisions of this Title, the delivery has been under such circumstances as to show an
unpaid seller's right of lien or stoppage in transitu is not affected by any agreement with the buyer to give up possession of the whole
sale, or other disposition of the goods which the buyer may have made, of the goods.
unless the seller has assented thereto.
f) How Right is Exercised
a) When Negotiable Document of Title Issued Article 1532. The unpaid seller may exercise his
Article 1535, par. 2. If, however, a negotiable right of stoppage in transitu either by
document of title has been issued for goods, no seller's lien or 1. obtaining actual possession of the goods or
right of stoppage in transitu shall defeat the right of any 2. by giving notice of his claim to the carrier or other bailee
purchaser for value in good faith to whom such document has in whose possession the goods are. Such notice may be
been negotiated, whether such negotiation be prior or given either to the person in actual possession of the
subsequent to the notification to the carrier, or other bailee goods or to his principal. In the latter case the notice, to
who issued such document, of the seller's claim to a lien or be effectual, must be given at such time and under such
right of stoppage in transitu. circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the
b) When Buyer is Deemed Insolvent buyer.
Article 1636 (2). A person is insolvent within the When notice of stoppage in transitu is given by the
meaning of this Title who either has ceased to pay his debts in seller to the carrier, or other bailee in possession of the goods,
the ordinary course of business or cannot pay his debts as he must redeliver the goods to, or according to the directions
they become due, whether insolvency proceedings have been of, the seller. The expenses of such delivery must be borne by
commenced or not. the seller.

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
12 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

circumstances or requisites to consider before one can avail of the


g) When Goods Covered by Negotiable Document of Title special remedies of an unpaid seller.
Article 1532. If, however, a negotiable document of
title representing the goods has been issued by the carrier or
other bailee, he shall not be obliged to deliver or justified in 3) Special Right of Resale
delivering the goods to the seller unless such document is first Article 1526. Subject to the provisions of this Title,
surrendered for cancellation. notwithstanding that the ownership in the goods may have passed to
o It is only when the unpaid seller has exercised either his right the buyer, the unpaid seller of goods, as such, has:
of possessory lien or his right of stoppage in transit that he (3) A right of resale as limited by this Title;
can then proceed with his other special rights of resale or to
rescind. a) When Right Exercisable
Article 1533.
Whats the difference between Stoppage in Tansitu and Possessory 1. Where the goods are of perishable nature, or
Lien? 2. where the seller expressly reserves the right of
Stoppage in Transitu Possessory Lien resale in case the buyer should make default, or
Goods are no longer in sellers Good are still in the possession 3. where the buyer has been in default in the payment
possession of the seller of the price for an unreasonable time,
Instance: Buyer is already insolvent Instances: 4. an unpaid seller having a right of lien or having
(1) Where the goods stopped the goods in transitu may resell the goods.
have been sold without
any stipulation as to Note: This special right of resale can be resorted to by the unpaid
credit; seller only after he has exercised either possessory lien or
(2) Where the goods stoppage in transitu.
have been sold on credit,
but the term of credit has b) Effect of Having Exercised Right of Resale
expired; Article 1533. He shall not thereafter be liable to the
(3) Where the buyer original buyer upon the contract of sale or for any profit made
becomes insolvent. by such resale, but may recover from the buyer damages for
Requisites: Requisites: any loss occasioned by the breach of the contract of sale.
(a) Insolvent buyer (1) Any of the instances
above c) Transfer of Ownership
(b) Seller must Surrender
Article 1533, par. 2. Where a resale is made, as
the negotiable document of (2) Seller is in possession
authorized in this article, the buyer acquires a good title as
title, if any of the goods
against the original buyer.
(c) Seller must bear the notwithstanding that he is
Expenses of delivery of the in possession of the goods
d) Notice to Defaulting Buyer
goods after the exercise of as agent or bailee for the
Article 1533, par. 3. It is not essential to the validity
the right. buyer
of resale that notice of an intention to resell the goods be
(d) Seller must either
given by the seller to the original buyer. But where the right to
actually take possession of
resell is not based on the perishable nature of the goods or
the goods sold or give Notice
upon an express provision of the contract of sale, the giving or
of his claim to the carrier or
failure to give such notice shall be relevant in any issue
other person in possession
involving the question whether the buyer had been in default
(e) Goods must be in Transit
for an unreasonable time before the resale was made.
(f) Unpaid seller
Article 1533, par. 4. It is not essential to the validity
What happens if the buyer sells the goods while in transit? of a resale that notice of the time and place of such resale
The sale is valid if all the essential elements of sale are should be given by the seller to the original buyer.
present. Remember that ownership of the thing sold is not
required at the perfection of the sale. e) Standard of Care and Disqualification in Resale
The sellers right to stoppage in transitu is not affected. Article 1533, par. 5. The seller is bound to exercise
If, however, a negotiable document of title has been issued for reasonable care and judgment in making a resale, and subject
goods, no sellers lien or right of stoppage in transitu shall defeat to this requirement may make a resale either by public or
the right of any innocent purchaser for value private sale. He cannot, however, directly or indirectly buy the
goods.
Note: These remedies are not alternative in nature. In fact, we can say
that we apply hierarchy here. It is because this special right to rescind f) What makes the special right of resale and special right to
and special right to resale can only be availed of if either of these two rescind special?
(possessory lien or stoppage in transitu) are present. There are special Resale - The seller can do things which are not available in

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
13 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

other ordinary contracts of sale. Notice that it is possible the right of rescission was asserted.
ownership has already been delivered to the buyer.
Nevertheless, the seller is given the right to resell the goods Note: Is it necessary to notify the buyer that the seller is
subject to the contract. This remedy is available regardless of exercising his special right to rescind? No. It becomes
transfer of ownership. Remember, ownership can be necessary if the ground for the exercise of the special right to
transferred through constructive delivery. rescind is that the buyer is in default for an unreasonable
Rescind The sell can rescind the contract as well as the title amount of time. (See Article 1534, par. 2)
of the buyer. Title accorded to the buyer is rescinded even
without court intervention.
C) REMEDIES OF BUYER
4) Special Right to Rescind
Article 1526. Subject to the provisions of this Title, 1) Suspension of payments in Anticipation of Breach
notwithstanding that the ownership in the goods may have passed to Article 1590. Should the vendee be disturbed in the possession
the buyer, the unpaid seller of goods, as such, has: or ownership of the thing acquired, or should he have reasonable
(4) A right to rescind the sale as likewise limited by this Title. grounds to fear such disturbance, by a vindicatory action or a
foreclosure of mortgage, he may suspend the payment of the price until
Note: This special right to rescind is not similar to the right of the vendor has caused the disturbance or danger to cease, unless the
rescission in obligations and contracts. latter gives security for the return of the price in a proper case, or it has
been stipulated that, notwithstanding any such contingency, the vendee
a) When Right May Be Exercised shall be bound to make the payment. A mere act of trespass shall not
Article 1534. An unpaid seller having the right of lien or authorize the suspension of the payment of the price.
having stopped the goods in transitu, may rescind the transfer of title
and resume the ownership in the goods, a) Remedy of Buyer for Pending Suit
1. where he expressly reserved the right to do so in case the The pendency of suit over the subject matter of the
buyer should make default, or sale justifies the buyer in suspending payment of the balance
2. where the buyer has been in default in the payment of the of the purchase price by reason of aforesaid vindicatory
price for an unreasonable time. action filed against it. The assurance made by the seller that
the buyer did not have to worry about the case because it was
Note: pure and simple harassment is not the kind of guaranty
Notice that perishable in nature is not present. In special contemplated under the exceptive clause in Article 1590
right of resale, the mere fact that goods are perishable in wherein the buyer is bound to make payment even with the
nature and all the other requisites are present, it can be existence of a vindicatory action if the seller should give a
availed of. In special right to rescind, it is not required that the security for the return of the price. (Adelfa Properties vs. CA)
goods are perishable in nature.
2) Specific Performance with Damages for Failure of Seller to Deliver
Is it possible that this remedy can be availed of even if the
Article 1598. Where the seller has broken a contract to deliver
goods are perishable in nature? Yes. If the buyer is in default
specific or ascertained goods, a court may, on the application of the
for an unreasonable length of time or that it is expressly
buyer, direct that the contract shall be performed specifically, without
stipulated.
giving the seller the option of retaining the goods on payment of
damages.
b) Effect of Exercise of Such Right
The judgment or decree may be unconditional, or upon such
Article 1534. The seller shall not thereafter be liable to the
terms and conditions as to damages, payment of the price and
buyer upon the contract of sale, but may recover from the buyer
otherwise, as the court may deem just
damages for any loss occasioned by the breach of the contract.
3) PD 957 The Subdivision and Condominium Buyers' Protective
Note: What is the effect of the exercise of the special right to Decree
rescind? Section 23. Non-Forfeiture of Payments. No installment
(1) The seller assumes ownership; payment made by a buyer in a subdivision or condominium project for
(2) The seller shall not be liable to the buyer; and the lot or unit he contracted to buy shall be forfeited in favor of the
(3) The seller can recover damages. (See Article 1534, par. 1) owner or developer when the buyer, after due notice to the owner or
developer, desists from further payment due to the failure of the owner
c) Transfer of Title or developer to develop the subdivision or condominium project
Article 1534, par. 2. The transfer of title shall not be held to according to the approved plans and within the time limit for complying
have been rescinded by an unpaid seller until he has manifested by with the same. Such buyer may, at his option, be reimbursed the total
notice to the buyer or by some other overt act an intention to rescind. It amount paid including amortization interests but excluding delinquency
is not necessary that such overt act should be communicated to the interests, with interest thereon at the legal rate.
buyer, but the giving or failure to give notice to the buyer of the
intention to rescind shall be relevant in any issue involving the question 4) In Case of Breach of Warranty
whether the buyer had been in default for an unreasonable time before Article 1599. Where there is a breach of warranty by the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
14 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

seller, the buyer may, at his election:


1) Accept or keep the goods and set up against the seller, the When is Sale on Installments?
breach of warranty by way of recoupment in diminution or
extinction of the price; Levy vs. Gervacio
2) Accept or keep the goods and maintain an action against the Facts:
seller for damages for the breach of warranty; Levy Hermanos, Inc. (Levy for brevity) sold to Lazaro Blas Gervacio, a
3) Refuse to accept the goods, and maintain an action against Packard car. The latter, after making the initial payment, executed a
the seller for damages for the breach of warranty; promissory note for the balance of P2,400, payable on or before June
4) Rescind the contract of sale and refuse to receive the goods or 15, 1937, with interest at 12% per annum; to secure the payment of
if the goods have already been received, return them or offer the note, he mortgaged said car to Levy Gervacio failed to pay the
to return them to the seller and recover the price or any part note it its maturity. Levy foreclosed the mortgage and the car was sold
thereof which has been paid. at public auction, at which plaintiff was the highest bidder for P1,800.
When the buyer has claimed and been granted a remedy in anyone It brought an action to collect the balance P1,600 and interest (note
of these ways, no other remedy can thereafter be granted, without that P2,400 was the amount due from Gervacio).
prejudice to the provisions of the second paragraph of article 1191.
Issue:
D) RECTO LAW (PD 957): SALE OF MOVABLE ON INSTALLMENTS Whether or not the cash payment made by Gervacio should be
considered as an installment in order to bring the contract sued upon
1) Coverage of Law within the ambit of Article 1454-A of the old Civil Code
Article 1484. In a contract of sale of personal property the
price of which is payable in installments, the vendor may exercise any of Held:
the following remedies: No. Article 1454-A of the Civil Code reads as follows:
1. Exact fulfillment of the obligation, should the vendee fail to In a contract for the sale of personal property payable in
pay; installments shall confer upon the vendor the right to cancel the sale
2. Cancel the sale, should the vendee's failure to pay cover two or foreclose the mortgage if one has been given on the property,
or more installments; without reimbursement to the purchaser of the installments already
3. Foreclose the chattel mortgage on the thing sold, if one has paid, if there be an agreement to this effect.
been constituted, should the vendee's failure to pay cover two However, if the vendor has chosen to foreclose the mortgage
or more installments. In this case, he shall have no further he shall have no further action against the purchaser for the recovery
action against the purchaser to recover any unpaid balance of of any unpaid balance owing by the same and any agreement to the
the price. Any agreement to the contrary shall be void. (1454- contrary shall be null and void.
A-a) In order to apply the provisions of article 1454-A of the old
Civil Code it must appear that there was a contract for the sale of
When do we apply Article 1484? personal property payable in installments and that there has been a
(1) in contracts of sale failure to pay two or more installments. The contract in this case,
(2) of personal property while a sale of personal property, is not, however, one on installments,
(3) on installments. but on straight term, in which the balance, after payment of the initial
sum, should be paid in its totality at the time specified in the
What are the options when the buyer fails to pay promissory note. The transaction is not is not, therefore, the one
the installments in sale of personal property? contemplated in Article 1454-A and accordingly the mortgagee is not
1. Exact fulfillment; or bound by the prohibition therein contained as to the right to the
2. Cancel the sale (rescission) if the buyer fails to pay 2 or recovery of the unpaid balance.
more installments; or
3. Foreclose the chattel mortgage, if any has been Discussion
executed, with the limitation that the buyer fails to pay Can we apply the Recto Law? No. The sale in this case is not a
at least 2 installments. In this case, the seller cannot sue sale on installments but on straight term.
for any unpaid balance. What was the remedy sought here by the seller?
Foreclosure.
Rationale of Recto Law Can we apply the provision on Article 1484? No. For Article
The passage of the Recto Law was meant to remedy 1484 to apply in case of foreclosure, there must be failure to pay 2 or
the abuses committed in connection with the foreclosure of more installments. In this case, only one installment is yet to be paid.
chattel mortgages and to prevent mortagagees from seizing When do we consider a sale not on installments? The
the mortgaged property, buying it at foreclosure sale for a low contract, in the instant case, while a sale of personal property, is not,
price and then bringing suit against the mortgagor for a however, one on installments, but on straight term, in which the
deficiency judgment. The invariable result of such a balance, after payment of the initial sum, should be paid in its totality
procedure was that the mortgagor found himself minus the at the time specified in the promissory note.
property and still owing practically the full amount of his What remedy can be availed here? Rescission under 1593:
original indebtedness. ARTICLE 1593. With respect to movable property, the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
15 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

rescission of the sale shall of right take place in the interest of the it comes to the remedies of rescission and foreclosure on
vendor, if the vendee, upon the expiration of the period fixed for the
delivery of the thing, should not have appeared to receive it, or, having Tajanlangit vs. Southern Motors
appeared, he should not have tendered the price at the same time, FACTS:
unless a longer period has been stipulated for its payment. (1505) Tajanlangit bought 2 tractors and a thresher from Southern
Whether or not Gervacio is liable for the balance? Yes. The Motors. They executed a promissory note in payment thereof; it
transaction is not, therefore, the one contemplated in Act No. 4122 contained an acceleration clause. Tajanlang it failed to pay any of the
(now Article 1484) and accordingly the mortgagee is not bound by the stipulated installments. Thus, Southern Motors sued him on the PN.
prohibition therein contained as to the right to the recovery of the The sheriff levied upon the properties of Tajanlangit (same
unpaid balance. machineries) and sold them at a public auction to satisfy the debt.
---------------------------------- Southern Motors now prayed for execution. Tajanlangit sought to
annul the writ of execution claiming that since Southern Motors
Kinds of Sale Covered by Article 1484 repossessed the machineries (mortgaged), he was therefore relieved
1) Loans and Financing Transactions from liability on the balance of the purchase price.
The provisions of the Recto Law are applicable to
financing transactions derived or arising from sales of ISSUE:
movables on installments, even if the underlying contract at W/N Tajanlangit is relieved from his obligation topay
issue is a loan because the promissory note had been
assigned or negotiated by the original seller. HELD:
In all other cases, where the financing transaction is NO. While it is true that the foreclosure on the chattel
derived from a sale, the provisions of the Recto Law do not mortgage on the thing sold bars further action for the recovery of the
apply. balance of the purchase price, this does not apply in this case since
Southern did not foreclose on the mortgage but instead sued based
2) Contracts of lease with option to purchase. on the PNs exclusively. That being the case, it is not limited to the
Article 1485. The preceding article shall be applied proceeds of the sale on execution of the mortgaged goods and may
to contracts purporting to be leases of personal property with claim the balance from Tajanlangit.
option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing.
Discussion
What was the complaint? What did the spouses issue here? A:
Article 1486. In the cases referred to in the two
A promissory note.
preceding articles, a stipulation that the installments or rents
Isnt it the action here was based on the promissory note?
paid shall not be returned to the vendee or lessee shall be
They were suing for payment based on the promissory note in relation
valid insofar as the same may not be unconscionable under
to the sale. That is why the action is not cancellation but exact
the circumstances. (n)
fulfillment.
The balance is evidenced by that promissory note that they
3) Contracts to Sell Movables Not Covered
have executed. What is the effect if the actual remedy availed of here is
When the contract governing the sale of movables is
exact fulfillment and not foreclosure?
a contract to sell, then the rules on rescission and substantial
Foreclosure of mortgage this remedy would be available
breach are not applicable, since when the suspensive
only when there is chattel mortgage executed, which is present in the
condition upon which the contract is based fails to
instant case. But the seller here did not choose to foreclose the
materialize, it would extinguish the contract, and
mortgage but rather sued the spouses for the promissory note issued in
consequently there is no contract to rescind. Nevertheless,
relation to the sale. In other words, that was exact fulfillment.
the provisions of Article 1597 would apply which would grant
It is true that there was a chattel mortgage on the goods sold.
the seller the right to rescind the contract by giving notice
But the Southern Motors elected to sue on the note exclusively, i.e. to
of his election so to do to the buyer.
exact fulfillment of the obligation to pay. It had a right to select among
the three remedies established in Article 1484. In choosing to sue on
2) Remedies Provided Under Article 1484
the note, it was not thereby limited to the proceeds of the sale, on
1) Nature of Remedies under Article 1484
execution, of the mortgaged good.
The remedies under Article 1484 have been
----------------------------------
recognized as alternative, not cumulative, in that the exercise
of one would bar the exercise of others.
3) Remedy of Specific Performance
The remedies cannot also be pursued
General Rule: When the seller has chosen specific
simultaneously, as when a complaint is filed to exact
performance, he can no longer seek for rescission nor foreclosure of the
fulfillment of the obligation, to seize the property purchased
chattel mortgage constituted on the thing sold.
and to foreclose the mortgage executed thereof.
Exception: Even if the seller had chosen specific performance
but the same has become impossible, he may still choose rescission
2) Two Groups of Barring Effects of Remedies
pursuant to the provisions of Article 1191 of the Civil Code, which
Vertical choice of remedies
provides that the non-defaulting party to a reciprocal obligation may
Horizontal on the non-recovery of an unpaid balance when

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
16 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

also seek rescission, even after he has chosen fulfillment, if the latter defendants and the Delta Motors collectors personally went to the
should become impossible. former to effect collections but they failed to do so. Because of the
The seller is deemed to have chosen specific performance to unjustified refusal of the defendants to pay their outstanding account
foreclose the resort to the other two remedies under Article 1484 when and their wrongful detention of the properties in question, Delta
he files an action in court for recovery. Motors tried to recover the said properties extra-judicially but it
A judgment in an action for specific performance may be failed to do so. The matter was later referred by Delta Motors to its
executed on all personal and real properties of the buyer which are not legal counsel for legal action.
exempt from execution and which are sufficient to satisfy such In its verified complaint dated 28 January 1977, Delta
judgment, which would include the subject matter of the sale upon Motors prayed for the issuance of a writ of replevin, which the Court
which payment is being sought. granted in its Order dated 28 February 1977, after Delta Motors
posted the requisite bond. On 11 April 1977, Delta Motors, by virtue
4) Remedy of Rescission of the writ, succeeded in retrieving the properties in question. The
General Rule: trial court promulgated its decision on 11 October 1977 ordering the
When a seller chooses the remedy of rescission, then defendants to pay Delta Motors the amount of P6,188.29 with a 14%
generally he is under obligation to make restitution, which would per annum interest which was due on the 3 Daikin air-conditioners
include the return of any amount of the purchase price that the buyer the defendants purchased from Delta Motors under a Deed of
may have paid. Conditional Sale, after the same was declared rescinded by the trial
court. They were likewise ordered to pay Delta Motors P1,000.00 for
Exception: and as attorneys fees.
Article 1486. A stipulation that the installments or rents paid
shall not be returned to the vendee or lessee shall be valid insofar as the ISSUE:
same may not be unconscionable under the circumstances. WON the lower court erred in its decision to order the
defendants to pay the unpaid balance despite the fact that Delta
When Rescission is Deemed Chosen motors already retrieved the subject properties.
The seller is deemed to have chosen the remedy of
rescission, and can no longer avail of the other 2 remedies HELD:
under Article 1484, when he has clearly indicated to end the The court held that remedies available to vendor in a sale of
contract, such as when he sends a notice of rescission, or personal property payable in installments The vendor in a sale of
takes possession of the subject matter of the sale, or when he personal property payable in installments may exercise one of three
files an action for rescission. remedies, namely, (1) exact the fulfillment of the obligation, should
the vendee fail to pay; (2) cancel the sale upon the vendees failure to
Barring Effect of Rescission pay two or more installments; (3) foreclose the chattel mortgage, if
The present version of the Recto Law under Article one has been constituted on the property sold, upon the vendees
1484 only provides for a barring on recovery of balance only failure to pay two or more installments. The third option or remedy,
when it comes to the remedy of foreclosure. however, is subject to the limitation that the vendor cannot recover
Although no barring effect is expressly provided for any unpaid balance of the price and any agreement to the contrary is
the remedy of rescission under the present language of void (Art. 1484).
Article 1484 of the Civil Code, the same is implicit from the Moreover, the 3 remedies are alternative and NOT
nature of the remedy of rescission, which requires mutual cumulative. If the creditor chooses one remedy, he cannot avail
restitution. Under Article 1385 of the Civil Code, even a non- himself of the other two.
defaulting party cannot seek rescission unless he is in a Thus in the case at bar, Air-conditioning units repossessed,
position to return what he has received under the contract. bars action to exact payment for balance of the price Delta Motors
had taken possession of the 3 air-conditioners, through a writ of
Delta Motor Sales vs. Niu Kim Duan replevin when defendants refused to extra-judicially surrender the
Facts: same. The case Delta Motors filed was to seek a judicial declaration
On 5 July 1975, Niu Kim Duan and Chan Fue Eng that it had validly rescinded the Deed of Conditional Sale. Delta
(defendants) purchased from Delta Motor Sales Corporation 3 units Motors thus chose the second remedy of Article 1484 in seeking
of DAIKIN air-conditioner all valued at P19,350.00. The deed of sale enforcement of its contract with defendants. Having done so, it is
stipulates that the defendants shall pay a down payment of P774.00 barred from exacting payment from defendants of the balance of the
and the balance of P18,576.00 shall be paid by them in 24 price of the three air-conditioning units which it had already
installments ; that the title to the properties purchased shall remain repossessed. It cannot have its cake and eat it too.
with Delta Motors until the purchase price thereof is fully paid; that if
any two installments are not paid by the defendants on their due Discussion
dates, the whole of the principal sum remaining unpaid shall become Isnt it that there is a stipulation that any payment shall be
due, with interest deemed forfeited? Is it valid in case of cancellation or rescission of the
However, after paying the amount of P6,966.00, the sale? Yes. It is valid as long as there is a stipulation and it is not
defendants failed to pay at least 2 monthly installments. s of 6 excessive or unconscionable. (See Article. 1486). Installments paid shall
January 1977, the remaining unpaid obligation of the defendants be deemed rent for the goods. In this case, P6,966.00 is a reasonable
amounted to P12,920.08. Statements of accounts were sent to the rent of the air-conditioner for 22 months.

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
17 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

What is the nature of the sale here? Contract to sell. It should able to proceed with foreclosure, then the seller, even after
be noted that the RECTO LAW is also applicable in contracts to sell. actual foreclosure, should be allowed to recover expenses
---------------------------------- and attorneys fees incurred in trying to obtain possession of
the chattel.
5) Foreclosure of Chattel Mortgage Constituted on Subject Property Where the mortgagor plainly refuses to deliver the
When Remedy of Foreclosure Deemed Chosen chattel subject of the mortgage upon his failure to pay two or
An action to foreclosure seeks the same objective as more installments, or if he conceals the chattel to place it
an action for specific performance: to recover from the buyer beyond the reach of the mortgagee, the necessary expenses
the price agreed upon in the sale. incurred in the prosecution by the mortgagee of the action
The point by which the seller is deemed to have for replevin so that he can regain possession of the chattel
chosen the remedy of foreclosure is only at the time of actual should be borne by the mortgagor. (Agustin vs. CA)
sale of the subject property at public auction pursuant to the A mere demand to surrender the object which is not
foreclosure proceedings commenced. heeded by the mortgagor will nto amount to a foreclosure,
but the repossession thereof by the vendor-mortgagee would
Barring Effect of Foreclosure have the effect of foreclosure. (Borbon II vs. Servicewide
It is the foreclosure and actual sale at public auction Specialist)
of the mortgaged chattel that shall bar further recovery by
the seller of any balance on the purchasers outstanding 6) Lease with Option to Purchase
obligation not satisfied by the sale; prior to that point in time, Article 1485. The preceding article shall be applied to
the seller has every right to receive payments on the unpaid contracts purporting to be leases of personal property with option to
balance of the price from the buyer. buy, when the lessor has deprived the lessee of the possession or
enjoyment of the thing.
Barring Effect on Other Securities Given for Payment of Price
When the assignee forecloses on the chattel Article 1486. In the case referred to in the two preceding
mortgage, there can be no further recovery of the deficiency, articles, a stipulation that the installments or rents paid shall not be
and the seller-mortgagee is deemed to have renounced any returned to the vendee or lessee shall be valid insofar as the same may
right thereto. A contrario, in the event that the seller- not be unconscionable under the circumstances.
mortgagee first seeks the enforcement of the additional
mortgages, guarantees or other security arrangement, he Barring Effect
must then be held to have lost by waiver or non-choice his Article 1485 carries the concept of rescission or foreclosure:
lien on the chattel mortgage of the personal property sold by 1. If the taking back of possession or enjoyment of the leased
and mortgaged back to him, although similar to an action for movable is treated as a RESCISSION, then the barring effect of
specific performance, he may still levy on it. The implication rescission is applicable, which means that even after taking
is that the remedy of foreclosing the chattel mortgage is no back possession or enjoyment, and forfeiting all rentals
longer available, but the barring effect as to prevent recovery previously paid, the lessor-seller will be able to collect
of deficiency judgment does not come into play since the damages as may be warranted by the circumstances.
Court confirmed that the seller may still levy on it. (Borbon 2. If the taking back of possession or enjoyment of the leased
II vs. Servicewide Specialists) movable is equivalent to FORECLOSURE, then although the
seller-lessor may forfeit in his favor all rentals previously paid,
Extent of Barring Effect if such has been stipulated, he can no longer collect any
The words any unpaid balance should be further amounts against the buyer-lessee, whether in the
interpreted as having reference to the deficiency judgment to form of damages, attorneys fees, or even unpaid but accrued
which the mortgagee may be entitled where, after the rentals, and not even the expenses incurred in repairing the
mortgaged chattel is sold at public auction, the proceeds movable.
obtained therefrom are insufficient to cver the full amount of
the secured obligation which in the c ase at bar as shown by Elisco Tool vs. CA
the note and by the mortgage deed, include interest on the FACTS:
principal, attorneys fees, expenses of collection, and the Private respondent Rolando Lantan was employed at the
costs. Were it the intention of the Legislature to limit its Elisco Tool Mfg. Corp. On Jan. 1980, he entered into a car plan with
meaning to the unpaid balance of the prinicipal, it would have the company, which constitutes a lease with option to buy for a period
so stated. (Macondray vs. Eustaquio). Thus, the extent of the of 5 years. The agreement provides that Lantan shall pay a monthly
barring effect of foreclosure was then all-encompassing and rental of P 1010.65 to be deducted from his salary or a total of P60,
did not limit itself to the balance of the purchase price. 639.00 at the end of 5 years. The agreement provides that at the 60th
month of payment he may exercise his option to buy and all monthly
Perverse Buyer-Mortgagor rentals shall be applied to the payment of the full purchase price of
By way of exception to the complete barring effect the car. In 1981 Elisco Tool ceased operations, and Rolando Lantan was
on the remedy of foreclosure, Filipinas Investment vs. Ridad laid off. Nonetheless, as of December 4, 1984, private respondent was
held that when a defaulting buyer-mortgagor refuses to able to make payments for the car in the total amount of P61, 070.94.
surrender the chattel to the seller to allow the latter to be

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
18 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

On 1986 Elisco filed a complaint for replevin plus sum of seeking recovery of the personal property under a writ of replevin was
money against Rolando Lantan for the latters alleged failure to pay merely to ensure enforcement of the remedy of specifi c performance
the monthly rentals as of May 1986. Elisco prayed for the following: under Article 1484(1), there would be no barring effect by reason of the
1. The payment of Lantan of the sum of the monthly rentals due as of enforcement of the writ. Therefore, not every deprivation of possession
May 1986 plus legal interest; would result in producing the barring effect under Article 1485 of the
2. The issuance of writ of replevin to gain possession of the car; and Civil Code.
3. On the alternative, should the delivery of the car not be possible, Okay so we are already done with the Recto Law, under Art
that Lantan be ordered to pay the actual value of the car in the 1484. And in relation thereto we also have Art 1385 and 1386. Under
amount of 60,000 plus the accrued monthly rentals thereof with the Recto Law, we have there the 3 alternative remedies, applicable to
interest until fully paid. Both the trial court and the CA decided in the contracts of sale of personal property in installments.
favor of Lantan, declaring the latter the lawful owner of the car and ----------------------------------
sentencing Elisco to pay for actual damages caused to the private
respondents, thus this petition. E) REMEDIES IN CASES OF IMMOVABLES

ISSUE: 1) Remedies of Seller


WON the lease with option to buy is in reality an installment a) Anticipatory Breach
sale so as to apply the Recto Law under Art. 1484. Article 1591. Should the vendor have reasonable
WON Elisco is entitled to any of the remedies under Art. grounds to fear the loss of immovable property sold and its
1484. price, he may immediately sue for the rescission of the sale.
Should such ground not exist, the provisions of article 1191
HELD: shall be observed.
1. Yes. The agreement between Elisco and the Lantans is in
reality an installment sale of personal property. However, the
We have discussed that under the said article,
remedies under Article 1484 are alternative, not cumulative.
where there is anticipatory breach, if the seller has
2. No. There was already full payment. In the case at bar,
reasonable grounds to fear the loss of the
although the agreement provides for the payment of monthly rentals,
immovable property sold and its price, he may
it also provides the option to purchase upon the payment of the 60th
immediately sue for the rescission of the sale.
monthly rental and that all monthly rentals shall be applied to the
payment of the full purchase price of the car. Clearly the transaction is
b) Failure of Buyer to Pay Price
a lease in name only and so Articles 1484 and 1485 apply.
It is noteworthy that the remedies provided for in Art. 1484 Rescission under Article 1191
are alternative, not cumulative. The exercise of one bars the exercise Art. 1191. The power to rescind obligations is
of the others. It was held that in choosing to deprive the defendant of implied in reciprocal ones, in case one of the obligors should
possession of the leased vehicles, the plaintiff waived its right to bring not comply with what is incumbent upon him.
an action to recover unpaid rentals on the said vehicles. The injured party may choose between the
Furthermore, both the trial court and the CA correctly ruled that fulfillment and the rescission of the obligation, with the
Elisco is not entitled to any of the remedies under Art. 1484 as there payment of damages in either case. He may also seek
has already been full payment. rescission, even after he has chosen fulfillment, if the latter
The agreement does not provide for the payment of interest should become impossible.
on unpaid monthly "rentals" or installments. The 2% surcharge is not The court shall decree the rescission claimed, unless
provided for in the agreement. Consequently, the total amount of P there be just cause authorizing the fixing of a period.
61, 070.94 already paid is more than sufficient to cover the full This is understood to be without prejudice to the
purchase price of the car which only amounts to P 60, 639. rights of third persons who have acquired the thing, in
accordance with Articles 1385 and 1388 and the Mortgage
Law. (1124)
Discussion
Is Recto Law applicable? Yes Art 1485 Rescission under Article 1592
What was the remedy availed of? Specific performance Article 1592. In the sale of immovable property,
This is a contract of lease. But still Art 1484 is applicable even though it may have been stipulated that upon failure to
pursuant to 1485. Replevin is only for the purpose of ensuring specific pay the price at the time agreed upon the rescission of the
performance. contract shall of right take place, the vendee may pay, even
Court held that under a purported contract of lease with after the expiration of the period, as long as no demand for
option to purchase which is covered under Articles 1484 and 1485, the rescission of the contract has been made upon him either
condition that the lessor has deprived the lessee of possession or judicially or by a notarial act. After the demand, the court
enjoyment of the thing for the purpose of applying Article 1485 which may not grant him a new term.
would be fulfi lled by the fi ling by the lessor of a complaint for replevin
to recover possession of movable property and its enforcement by the
Take note in this article that in the sale of immovable
sheriff, and barred all action to recover any amount from the lessee.
property, it should not be sale on instalment. If it is a sale
However, the Court also held that if the main purpose for
on instalment, then we apply a different law. This is not

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
19 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

also applicable in a contract to sell. Even if there is a before a demand for refund can be made as the
stipulation of automatic rescission, the vendee may still notice and demand can be made in the same letter
pay as long as there is no demand for rescission either or communication.
judicially or a notarial act.
Remember, 1592, the requirement for rescission, 2. Retroactive Application of PD 957
demand for a notarial act or a judicial act but it is solely PD 957 did not expressly provide for
applicable to a contract of sale and not to a contract to retroactivity in its entirety, but such can be plainly
sell. inferred from the unmistakable intent of the law.

2) Remedies of Buyer 3. Right to Grace Period Stipulated


1) Suspension of Payment When a grace period is provided for in the
Article 1590. Should the vendee be disturbed in the contract of sale, it should be construed as a right,
possession or ownership of the thing acquired, or should he not an obligation of the debtor, and when
have reasonable grounds to fear such disturbance, by a unconditionally conferred, the grace period is
vindicatory action or a foreclosure of mortgage, he may effective without further need of demand either
suspend the payment of the price until the vendor has caused calling for the payment of the obligation or for
the disturbance or danger to cease, unless the latter gives honoring the right.
security for the return of the price in a proper case, or it has
been stipulated that, notwithstanding any such contingency, F) MACEDA LAW (RA 6552): SALE OF REAL ESTATE ON
the vendee shall be bound to make the payment. A mere act INSTALLMENTS
of trespass shall not authorize the suspension of the payment
of the price
Now if we have the Recto Law, for sale of personal properties
in installment, then we also have the Maceda Law for sale of real estate
Now in case of real properties, remedies available properties in installment.
to the buyer, we have also discussed under the Under sec 2 of RA 6552 thereof you have the purpose: for
Condominium Act, the buyer may suspend payment public policy, to protect the buyers of real estate in installment
if the real estate developer fails to comply with the payments against onerous and oppressive conditions. So it is known as
obligations according to the approved plan, or the The Sale Of Real Estate On Installment or also known as the Realty
buyer may even demand for rescission. Installment Buyer Act.

2) In Case of Subdivision or Condominium Projects REPUBLIC ACT NO. 6552


Section 23, PD 957. Non-Forfeiture of Payments. AN ACT TO PROVIDE PROTECTION TO BUYER OF REAL ESTATE ON
No installment payment made by a buyer in a subdivision or INSTALLMENT PAYMENTS
condominium project for the lot or unit he contracted to buy
shall be forfeited in favor of the owner or developer when the Be it enacted by the Senate and House of Representatives of the
buyer, after due notice to the owner or developer, desists from Philippines in Congress assembled:
further payment due to the failure of the owner or developer
to develop the subdivision or condominium project according SECTION 1. This Act shall be known as the Realty
to the approved plans and within the time limit for complying Installment Buyer Protection Act.
with the same. Such buyer may, at his option, be reimbursed
the total amount paid including amortization interests but SECTION 2. It is hereby declared a public policy to protect
excluding delinquency interests, with interest thereon at the buyers of real estate on installment payments against onerous and
legal rate. oppressive conditions.

Section 24, PD 957. Failure to pay installments. SECTION 3. In all transactions or contracts, involving the
The rights of the buyer in the event of this failure to pay the sale or financing of real estate on installment payments, including
installments due for reasons other than the failure of the residential condominium apartments but excluding industrial lots,
owner or developer to develop the project shall be governed commercial buildings and sales to tenants under Republic Act
by Republic Act No. 6552. Numbered Thirty-Eight hundred forty-four as amended by Republic
Where the transaction or contract was entered into Act Sixty-three hundred eighty-nine, where the buyer has paid at
prior to the effectivity of Republic Act No. 6552 on August 26, least two years of installments, the buyer is entitled to the following
1972, the defaulting buyer shall be entitled to the rights in case he defaults in the payment of succeeding installments:
corresponding refund based on the installments paid after the To pay, without additional interest, the unpaid installments due
effectivity of the law in the absence of any provision in the within the total grace period for every one year of installment
contract to the contrary. payments made; provided, That this right shall be exercised by
the Buyer only once in every five years of the life of the contract
1. Notice Required under Section 23 of PD 957 and its extensions, if any.
Section 23 of PD 957 does not require that If the contract is cancelled, the seller shall refund to the buyer
a notice be given first by the buyer to the seller

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
20 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

the cash surrender value of the payments on the property primary residential real estate.
equivalent to fifty percent of the total payments made and, - Covers not only sale on installments of real estate but
after five years of installments, an additional five per cent every also financing of such acquisitions.
year but not to exceed ninety per cent of the total payments - It expressly covers all transactions or contracts involving
made; provided, that the actual cancellation or the demand for the sale or financing of real estate on installment
rescission of the contract by a notarial act and upon full payments, including residential condominium
payment of the cash surrender value to the buyer. apartments. (Section 3, RA 6552)
Down payments, deposits or options on the contract shall - Includes in its provisions both contract of sale and
be included in the computation of the total number of installment contract to sell with the use by the law of the twin terms
payments made. of notice of cancellation or the demand for rescission
of the contract.
SECTION 4. In case where less than two years of
installments were paid the seller shall give the buyers a grace period b) Transactions Excluded from Coverage
of not less than sixty days from the date the installment become due. 1) Sales covering industrial lots,
If the buyer fails to pay the installments due at the expiration of the 2) Sales covering commercial buildings (and commercial
grace period, the seller may cancel the contract after thirty days from lots by implication), and
receipt by the buyer of the notice of cancellation or the demand for 3) Sales to tenants under agrarian reform laws (RA 3844, as
rescission of the contract by a notarial act. amended by RA 6389).
The enumeration is not exclusive. An example would be the
SECTION 5. Under Section 3 and 4, the buyer shall have the sale on installment of commercial or office condominium
right to sell his rights or assign the same to another person or to units.
reinstate the contract by updating the account during the grace
period and before actual cancellation of the contract. The deed of 1. Maceda Law Cannot be Invoked by Highest Bidder
sale or assignment shall be done by notarial act. in Foreclosure Proceedings
Such person or entity, although binding
SECTION 6. The buyer shall have the right to pay in advance itself to the terms of the contracts of sale, is not the
any installments or the full unpaid balance of the purchase price any real party to the original installment sales, and
time without interest and to have such full payment of the purchase more importantly, does not have any rights
price annotated in the certificate of title covering the property. promoted under the Maceda Law which contains
provisions for the benefits of real estate buyers on
SECTION 7. Any stipulation in any contract hereafter installments. (Lagandao vs. CA)
entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall
be null and void. c) Rights Granted
(i) At Least 2 Years Installments Paid
SECTION 8. If any provisions of this Act is held invalid or o To pay, without additional interest, the unpaid installments
unconstitutional no other provision shall be affected thereby. due within the total grace period for every 1 year of
installment payments made; provided, That this right shall be
SECTION 9. This Act shall take effect upon its approval. exercised by the Buyer only once in every 5 years of the life of
Approved August 26, 1972. the contract and its extensions, if any.
o If the contract is cancelled, the seller shall refund to the buyer
the cash surrender value of the payments on the property
1) Role of Maceda Law equivalent to 50% of the total payments made and, after 5
The law declares as a public policy to protect buyers of real years of installments, an additional 5% every year but not to
estate on installment payments against onerous and oppressive exceed 90% of the total payments made; provided, that the
conditions. (Section 2, RA 6552) actual cancellation or the demand for rescission of the
contract by a notarial act and upon full payment of the cash
2) Retroactive Application of law surrender value to the buyer.
In Siska Dev. Corp. vs. Office of the President, the Court extended Down payments, deposits or options on the contract
the formal requirements of rescission under the Maceda Law to apply shall be included in the computation of the total number of
even to contracts entered into prior to the effectivity of the Maceda installment payments made. (Section 3, RA 6552)
Law.
However, in Peoples Industrial vs. CA, the Court held that RA 6552 (ii) Less than 2 Years Installments paid
does not expressly provide for its retroactive application and, therefore, In case where less than 2 years of
it could not have encompassed the cancellation of the contracts to sell installments were paid the seller shall give the
pursuant to an automatic cancellation clause which had become buyers a grace period of not less than 60 days from
operational long before the approval of the law. the date the installment become due. If the buyer
fails to pay the installments due at the expiration of
a) Transactions Covered the grace period, the seller may cancel the contract
- Does not cover all sales of realty on installments but after 30 days from receipt by the buyer of the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
21 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

notice of cancellation or the demand for rescission 'contracts are canceled.' (Lagandaon vs. CA)
of the contract by a notarial act. (Section 4, RA
6552) 3) Cancellation of Judicial Sale
Where a judicial sale is voided is without fault of the
(iii) Compensation Rule on Amortization Payments purchaser, the latter is entitled to reimbursement of the purchase
When the buyer fails to pay any monthly money paid by him. A judicial sale can only be set aside upon the
amortization, he is under Article 1169 already in return to the buyer of the purchase price with simple interest, together
default and liable for the damages stipulated in the with all sums paid out by him in improvements introduced on the
contract. Nevertheless, the Court held that the property, taxes, and other expenses by him. (Seven Brothers Shipping
default committed by the buyer in respect of the vs. CA)
obligation could be compensated by the interest
and surcharges imposed upon the buyer under the Valarao vs. CA
contract. (Leano vs. CA) FACTS:
Spouses Valarao, thru their son, Carlos, sold to Arellano a
(iv) Formula to Compute the Installment Mode parcel of land situated in Diliman, Quezon City for the sum of 3.225 M
The proper formula to apply in determining how embodied under a Deed of Conditional Sale.
many installments have been made is to include any It was further stipulated upon that should Arellano fail to
payment made as downpayment or reservation fee pay three (3) successive monthly installments or any one year-end
as part of the installments made, and then to divide lump sum payment within the period stipulated, the sale shall be
them by the stipulated mode of payment (monthly, considered automatically rescinded without the necessity of judicial
quarterly, semi-annual or annual). action and all payments made by Arellano shall be forfeited in favor of
the spouses by way of rental for the use and occupancy of the
d) Interpretation of Grace Period and Modes of Cancellation property and as liquidated damages. All improvements introduced by
The case of McLaughin vs. CA provides for two grace Arellano to the property shall belong to the spouses without any right
periods: of reimbursement.
1) 1st Grace Period Arellano alleged that as of September 1990 he was already
o expressly provided by the law, which is a minimum of 60 able to pay the sum of 2.028 M although she admitted that she failed
days. to pay for the installments due in October and November 1990.
o availment of the right to update the installment Arellano tried to pay but was turned down by the spouses thru their
payments is without interest and penalties, even when maid. Arellano avers that the same maid was the on who received
these are stipulated in the contract. payments tendered by her. It appears that the maid refused to receive
2) 2nd Grace Period the payment allegedly on orders of her employees who were not at
o the period before rescission or cancellation actually takes home. This prompted Arellano to seek the help of barangay officials.
place. Efforts to settle before the barangay was unavailing, as the spouses
o the buyer would be liable for and would have to include in never appeared in meetings.
his payments the stipulated interests and penalties Arellano sought judicial action by filing a petition for
incurred. consignation on January 4, 1991.
Spouses Valarao, thru counsel, sent Arellano a letter dated 4
e) Other Rights Granted to Buyer January 1991 notifying her that they were enforcing the provision on
The buyer shall have the right to pay in advance any automatic rescission as a consequence of which the Deed of
installments or the full unpaid balance of the purchase price Conditional Sale was deemed null and void, and xxx all payments
any time without interest and to have such full payment of made, as well as the improvements introduced on the property, were
the purchase price annotated in the certificate of title thereby forfeited. The letter also made a formal demand on Arellano
covering the property. (Section 6, RA 6552) to vacate the property should she not heed the demand of the
spouses to sign a contract of lease for her continued stay in the
f) Effect of Contrary Stipulations property.
Any stipulation in any contract hereafter entered The RTC ruled against Arellano but the Court of Appeals
into contrary to the provisions of Sections 3, 4, 5 and 6, shall reversed the decision of the trial court hence this petition.
be null and void. (Section 7, RA 6552)
ISSUE:
g) Maceda Law Cannot Be Availed of by Developer 1. WON the automatic forfeiture clause is enforceable.
The Maceda law has no application to protect the 2. WON RA 6552 is applicable.
develop or one who succeeds the developer, since the policy
of that law, as embodied in its title, is 'to provide protection HELD:
to buyers on real estate on installment payments.' against 1. Yes. As a general rule, a contract is the law between the
onerous and oppressive conditions. (Lagandaon vs. CA) parties. Thus, "from the moment the contract is perfected, the parties
Section 3(b) of the same law does not grant the are bound not only to the fulfillment of what has been expressly
developer any legal ground to cancel the contracts to sell; stipulated but also to all consequences which, according to their
rather, it prescribes the responsibiity of the seller in case the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
22 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

nature, may be in keeping with good faith, usage and law." Also, "the here? They filed an action to enforce the automatic rescission, so what
stipulations of the contract being the law between the parties, courts was the ruling of SC?
have no alternative but to enforce them as they were agreed [upon] So is the Maceda Law applicable? What is the effect of the
and written, there being no law or public policy against the stipulated application? Yes.
forfeiture of payments already made." However, it must be shown Can we not apply article 1592? No. Contract here is a contract
that Arellano failed to perform her obligation, thereby giving spouses to sell, 1592 only applies to contracts of sale.
the right to demand the enforcement of the contract. So notice here we have the Maceda Law applicable to
We concede the validity of the automatic forfeiture clause, contracts of sale of real properties in installment. But likewise the
which deems any previous payments forfeited and the contract contract in this case is denominated as a deed of conditional sale but
automatically rescinded upon the failure of the vendee to pay three the same was regarded as a contract to sell based on their agreement.
successive monthly installments or any one-yearend lump sum So what can we deduce from that? That the Maceda Law is likewise
payment. However, the spouses failed to prove the conditions that applicable to contracts to sell of real property in installment, not just to
would warrant the implementation of this clause. contracts of sale.
Based on the facts of the case, the spouses were not So you distinguish this with regard to the application of 1592
justified in refusing the tender of payment made by Arellano. Had the because 1592 applies only a contract of sale.
spouses accepted the payment, she would have paid all three monthly Now since the Maceda Law is applicable, it was held that the
installments. In other words, there was no deliberate failure on private respondent was entitled to a one-month grace period for every
Arellanos part to meet her responsibility to pay. year of installment paid, which means that she had a total grace period
of three months, so therefore they could still pay, not withstanding the
2. Yes. Sec. 3, RA 6552 provides: automatic rescission provision in their contract.
Sec. 3. In all transactions or contracts involving the sale or Now do also take note as to the sales that are covered under
financing of real estate on installment payments, including residential the Maceda Law. So under sec 3 thereof, sale or financing of real estate
condominium apartments but excluding industrial lots, commercial on installment payments, including residential condominium
buildings and sales to tenants under Republic Act. Numbered Thirty- apartments but excluding industrial lots, commercial buildings and sales
eight hundred Forty-four as amended by Republic Act Numbered to tenants.
Sixty-three hundred eighty-nine, where the buyer has paid at least Now section 3 governs the instance wherein the buyer has
two years of installments, the buyer is entitled to the following rights paid at least two years of installment, while section 4 provides for
in case he defaults in the payment of succeeding installments: instances wherein the buyer has paid for less than 2 years of
(a) To pay, without additional interest, the unpaid installment.
installments due within the total grace period earned by him, which is Under Section 3, where the buyer has paid at least two years
hereby fixed at the rate of one month grace period for every year of of installments, the buyer is entitled to the following rights in case he
installment payments made: Provided, That this right shall be defaults in the payment of succeeding installments:
exercised by the buyer only once in every five years of the life of the To pay, without additional interest, the unpaid installments
contract and its extensions, if any. due within the total grace period earned by him which is hereby fixed at
(b) If the contract is cancelled, the seller shall refund to the the rate of one month grace period for every one year of installment
buyer the cash surrender value on the payments on the property payments made: Provided, That this right shall be exercised by the
equivalent to fifty percent of the total payments made and, after five buyer only once in every five years of the life of the contract and its
years of installments, an additional five percent every year but not to extensions, if any. so this was the provision that was applied in
exceed ninety percent of the total payments made: Provided, That the Valarao.
actual cancellation of the contract shall take place after thirty days If the contract is canceled, the seller shall refund to the buyer
from receipt by the buyer of the notice of cancellation or the demand the cash surrender value of the payments on the property equivalent to
for rescission of the contract by a notarial act and upon full payment fifty per cent of the total payments made, and, after five years of
of the cash surrender value to the buyer. installments, an additional five per cent every year but not to exceed
Down payments, deposits or options on the contract shall be ninety per cent of the total payments made: Provided, That the actual
included in the computation of the total number of installments cancellation of the contract shall take place after thirty days from
made. receipt by the buyer of the notice of cancellation or the demand for
Therefore, Arellano is entitled to a one-month grace period rescission of the contract by a notarial act and upon full payment of the
for every year of installment paid, which means that she had a total cash surrender value to the buyer.
grace period of three months from December 31, 1990. Indeed, to ----------------------------------
rule in favor of the spouses would result in patent injustice and unjust
enrichment. Garcia vs. CA
FACTS:
Discussion On May 28, 1993, plaintiffs spouses Faustino and Josefina
Was there an action here for consignation? What happens in Garcia and spouses Meliton and Helen Galvez (herein appellees) and
consignation? Whats the purpose? Effect? Extinguish obligation as a defendant Emerlita dela Cruz (herein appellant) entered into a
special form of payment, so if with the tender of payment, which was Contract to Sell wherein the latter agreed to sell to the former, for
refused and considered valid, the remedy available was to consign so P3,170,220.00, five (5) parcels of land. At the time of the execution of
that the obligation will be extinguished. But what did the petitioner do the said contract, three of the subject lots, were registered in the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
23 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

name of one Angel Abelida from whom defendant allegedly acquired The applicable provision of law in instant case is Article 1191
said properties by virtue of a Deed of Absolute Sale dated March 31, of the New Civil Code which provides as follows:
1989. Art. 1191. The power to rescind obligations is
As agreed upon, plaintiffs shall make a down payment of implied in reciprocal ones, in case one of the obligors should
P500,000.00 upon signing of the contract. The balance of not comply with what is incumbent upon him.
P2,670,220.00 shall be paid in three installments. The injured party may choose between the
On its due date, December 31, 1993, plaintiffs failed to pay fulfillment and the rescission of the obligation, with the
the last installment in the amount of One P1,670,220.00. Sometime in payment of damages in either case. He may also seek
July 1995, plaintiffs offered to pay the unpaid balance, which had rescission, even after he has chosen fulfillment, if the latter
already been delayed by one and a half year, which defendant refused should become impossible.
to accept. On September 23, 1995, defendant sold the same parcels of The Court shall decree the rescission claimed,
land to intervenor Diogenes G. Bartolome for P7,793,000.00. unless there be just cause authorizing the fixing of a period.
Plaintiffs filed before the RTC a complaint for specific
performance to compel defendant to accept plaintiffs payment and, Discussion
thereafter, execute the necessary document of transfer. So what is the nature of the contract here? Contract to sell
In their complaint, plaintiffs alleged that they discovered the Can we apply the Maceda Law? No.
infirmity of the Deed of Absolute Sale covering those 3 lots, between Why? - The subject lands do not comprise residential real
their former owner Angel Abelida and defendant, the same being estate within the contemplation of the Maceda Law.
spurious because the signature of Angel Abelida and his wife were So was there breach on the part of Dela Cruz when she sold
falsified. Due to their apprehension regarding the authenticity of the the property to another person? No.
document, they withheld payment of the last installment. They Is 1191 applicable to contracts of sell? No. Rescission not
tendered payment of the unpaid balance sometime in July 1995, after available in Contracts to sell. Here, no right to demand the execution of
Angel Abelida ratified the sale made in favor of defendant, but the deed of absolute sale since the buyers have failed to pay within the
defendant refused to accept their payment for no jusitifiable reason. period provided. So ownership was never transferred so therefore they
In her answer, defendant denied the allegation that the could validly disagree without any breach of the obligation.
Deed of Absolute Sale was spurious and argued that plaintiffs failed to So here we have a contract to sell but the Maceda Law is not
pay in full the agreed purchase price on its due date despite repeated applicable because again, under sec 3, it only applies to sale or
demands; that the Contract to Sell contains a proviso that failure of financing of real estate on installment payments, including residential
plaintiffs to pay the purchase price in full shall cause the rescission of condominium apartments but excluding industrial lots, commercial
the contract and forfeiture of 1/2 of the total amount paid to buildings and sales to tenants. The subject lands do not comprise
defendant; that a notarized letter stating the indended rescission of residential real estate within the contemplation of the Maceda Law.
the contract to sell and forfeiture of payments was sent to plaintiffs at Moreover, even if we apply the Maceda Law to the present case,
their last known address but it was returned with a notation petitioners offer of payment to Dela Cruz was made a year and a half
"insufficient address." after the stipulated date. This is beyond the sixty-day grace period
under Section 4 of the Maceda Law.
ISSUE: However, also take note here, there was no notice to rescind.
Whether or not Maceda Law is applicable in this case. ----------------------------------

HELD:
Pagtalunan vs. Vda. De Manzano
No. Not applicable. It is clear from the above-quoted
provisions that the parties intended their agreement to be a Contract
FACTS:
to Sell: Dela Cruz retains ownership of the subject lands and does not
On July 19, 1974, Patricio Pagtalunan (Patricio), petitioners
have the obligation to execute a Deed of Absolute Sale until
stepfather and predecessor-in-interest, entered into a Contract to Sell
petitioners payment of the full purchase price.
with respondent Rufina dela Cruz Vda. De Manzano, whereby the
The Maceda Law applies to contracts of sale of real estate
former agreed to sell, and the latter to buy, a house and lot which
on installment payments, including residential condominium
formed half of a parcel of land for a consideration of P17,800. The
apartments but excluding industrial lots, commercial buildings and
parties agreed that it shall be paid in the following manner: P1,500 as
sales to tenants. The subject lands, comprising five (5) parcels and
downpayment upon execution of the Contract to Sell, and the balance
aggregating 69,028 square meters, do not comprise residential real
to be paid in equal monthly installments of P150 on or before the last
estate within the contemplation of the Maceda Law. Moreover, even if
day of each month until fully paid.
we apply the Maceda Law to the present case, petitioners offer of
It was also stipulated in the contract that respondent could
payment to Dela Cruz was made a year and a half after the stipulated
immediately occupy the house and lot; that in case of default in the
date. This is beyond the sixty-day grace period under Section 4 of the
payment of any of the installments for 90 days after its due date, the
Maceda Law. Petitioners still cannot use the second sentence of
contract would be automatically rescinded without need of judicial
Section 4 of the Maceda Law against Dela Cruz for Dela Cruzs alleged
declaration, and that all payments made and all improvements done
failure to give an effective notice of cancellation or demand for
on the premises by respondent would be considered as rentals for the
rescission because Dela Cruz merely sent the notice to the address
use and occupation of the property or payment for damages suffered,
supplied by petitioners in the Contract to Sell.
and respondent was obliged to peacefully vacate the premises and

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
24 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

deliver the possession thereof to the vendor. cancellation or demand for rescission by a notarial act required by R.A
Petitioner claimed that respondent paid only P12,950. She No. 6552. Petitioner cannot rely on Layug v. Intermediate Appellate
allegedly stopped paying after December 1979 without any Court to support his contention that the demand letter was sufficient
justification or explanation. Petitioner asserted that when respondent compliance since the seller therein filed an action for annulment of
ceased paying her installments, her status of buyer was automatically contract, which is a kindred concept of rescission by notarial act.
transformed to that of a lessee. Therefore, she continued to possess Evidently, the case of unlawful detainer filed by petitioner does not
the property by mere tolerance of Patricio and, subsequently, of exempt him from complying with the said requirement.
petitioner. In addition, Sec. 3 (b) of R.A. No. 6552 requires refund of the
Respondent did not deny that she still owed Patricio P5,650, cash surrender value of the payments on the property to the buyer
but claimed that she did not resume paying her monthly installment before cancellation of the contract. The provision does not provide a
because of the unlawful acts committed by Patricio, as well as the different requirement for contracts to sell which allow possession of
filing of the ejectment case against her. the property by the buyer upon execution of the contract like the
Patricio and his wife died on September 17, 1992 and on instant case.
October 17, 1994, respectively. Petitioner became their sole Hence, petitioner cannot insist on compliance with the
successor-in-interest pursuant to a waiver by the other heirs. On requirement by assuming that the cash surrender value payable to the
March 5, 1997, respondent received a letter from petitioners counsel buyer had been applied to rentals of the property after respondent
dated February 24, 1997 demanding that she vacate the premises failed to pay the installments due.
within five days on the ground that her possession had become There being no valid cancellation of the Contract to Sell, the
unlawful. Respondent ignored the demand. The Punong CA correctly recognized respondents right to continue occupying the
Barangayfailed to settle the dispute amicably. property subject of the Contract to Sell and affirmed the dismissal of
On April 8, 1997, petitioner filed a Complaint for unlawful the unlawful detainer case by the RTC.
detainer against respondent. SC DISPOSITION: Considering that the Contract to Sell was
not cancelled by the vendor, the Court agrees with the CA that it is
ISSUE: only right and just to allow respondent to pay her arrears and settle
Whether or not the cancellation of the contract complied the balance of the purchase price.
with what is required under the Maceda law.
Discussion
HELD: Do we have a contract to sell or contract of sale? - Contract to
No. R.A. No. 6552, otherwise known as the "Realty sell.
Installment Buyer Protection Act," recognizes in conditional sales of all Is the Maceda Law applicable? Yes.
kinds of real estate (industrial, commercial, residential) the right of the Effect? It cancels the Contract to sell.
seller to cancel the contract upon non-payment of an installment by Automatic? No.
the buyer, which is simply an event that prevents the obligation of the What is the requirement under Maceda Law for cancellation
vendor to convey title from acquiring binding force. The Court agrees of contracts where the same is applicable? Twin requirements: notice
with petitioner that the cancellation of the Contract to Sell may be of cancellation or demand for rescission by a notarial act; and refund of
done outside the court particularly when the buyer agrees to such the cash surrender value of the payments on the property to the buyer
cancellation. before cancellation of the contract. So in here, no valid cancellation.
However, the cancellation of the contract by the seller must Applying the Maceda Law, for the cancellation of the contract,
be in accordance with Sec. 3 (b) of R.A. No. 6552, which requires a the requirements are: the notarial act of rescission and refund of the
notarial act of rescission and the refund to the buyer of the full cash surrender value of the payments on the property. Actual
payment of the cash surrender value of the payments on the property. cancellation of the contract shall take place after thirty days from
Actual cancellation of the contract takes place after 30 days from receipt by the buyer of the notice of cancellation or the demand for
receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the
rescission of the contract by a notarial act and upon full payment of cash surrender value to the buyer.
the cash surrender value to the buyer. In this case, there was no demand in compliance with the
Based on the records of the case, the Contract to Sell was Maceda Law. The letter purported to be a demand is not the one
not validly cancelled or rescinded under Sec. 3 (b) of R.A. No. 6552. contemplated under the Maceda Law. It is not the same as the notice of
First, Patricio, the vendor in the Contract to Sell, died on cancellation because what was provided herein is, in-indicate lang "long
September 17, 1992 without canceling the Contract to Sell. ceased to have any right to possess the premises x x x due to [her]
Second, petitioner also failed to cancel the Contract to Sell in failure to pay without justifiable cause the installment payments x x x."
accordance with law. Now assuming it could be considered as a demand required
Petitioner contends that that his demand letter dated under the Maceda Law, there was still no refund of the cash surrender
February 24, 1997 should be considered as the notice of cancellation value. So again, even if it is a Contract to Sell, the Maceda Law is
or demand for rescission by notarial act. applicable. So no cancellation took place here, continue to occupy but
The Court, however, finds that the letter dated February 24, bound to payment of arrears.
1997, which was written by petitioners counsel, merely made formal Take note of the distinction here, as to the 2 remedies. The
demand upon respondent to vacate the premises in question. first thing that we should take note of is, again, if the Maceda Law is
Clearly, the demand letter is not the same as the notice of applicable. And if it is applicable, whether the buyer has paid at least 2

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
25 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

annual installments or less than 2 annual installments. resort to substituted service of summons. According to the CA, the
In Sec 4, less than 2 installments, option 1: grace period of not Return of Summons does not specifically show or indicate in detail the
less than sixty days is given. actual exertion of efforts or any positive step taken by the officer or
Or if no payment is made within the grace period, the sale process server in attempting to serve the summons personally to the
may be cancelled within 30 days from receipt of cancellation or notice defendant.
of cancellation. The Court notes that aside from the allegation that she did
If there has been payment for 2 or more annual installments, not receive any summons, Chandumals motion to set aside order of
the buyer may pay without interest, within the grace period. However default and to admit attached answer failed to positively assert the
the grace period can only be exercised once every 5 years. And take trial court lack of jurisdiction. In fact, what was set forth therein was
note, the grace period is 1 month for every one year of installment the substantial claim that PDB failed to comply with the requirements
payments made. of R.A. No. 6552 on payment of cash surrender value, which already
However, if the contracts need to be cancelled, aside from the delves into the merits of PDBs cause of action. In addition,
notice, there must be the refund of the cash surrender value, five per Chandumal even appealed the RTC decision to the CA, an act which
cent every year but not to exceed ninety per cent of the total payments demonstrates her recognition of the trial courts jurisdiction to render
made. said judgment.
So let us say the total installment that was already paid by the R.A. No. 6552 recognizes the right of the seller to cancel the
buyer is 400k for 4 years. How much is the cash surrender value? 200k. contract but any such cancellation must be done in conformity with
Now what if the total installment made is 600k and payment has the requirements therein prescribed. In addition to the notarial act of
already been for 6 annual installment. How much is the cash surrender rescission, the seller is required to refund to the buyer the cash
value? So for the first 5 years, 50%. Plus 5% for every year. So kung 6 surrender value of the payments on the property. The actual
years, 55% ng 600k. Hanggang maabot sya but only up to 90% of the cancellation of the contract can only be deemed to take place upon
installment made. Like for example long term talaga yung contract. the expiry of a thirty (30)-day period following the receipt by the
---------------------------------- buyer of the notice of cancellation or demand for rescission by a
notarial act and the full payment of the cash surrender value.
Planters vs. Chandumal
FACTS: Discussion
BF Homes and Julie Chandumal entered into a contract to Was there a notarial demand? No.
sell a parcel of land located in Las Pinas. Later, BF Homes sold to PDB How about the allegation of Planters here that they tried to
all its rights over the contract. give the cash surrender value but they cannot find Chandumal
Chandumal paid her monthly amortizations until she anymore? Such is not enough.
defaulted in her payments. So, PDB sent a notice to Chandumal with a So let us say there is a valid demand for rescission, would it
demand to vacate the land within 30days, otherwise all of her rights not be unfair to the seller, na hindi na nya makita si buyer so di na nya
will be extinguished and the contract will be terminated and deemed mabigay yung cash surrender value, so hindi na sya maka rescind?
rescinded. In spite of the demand, Chandumal failed to settle her Assuming that it was true that Chandumal was located out of the
account. country for a period of time? What is the proper step that Planters
PDB filed an action for judicial confirmation of notarial should have done para macomply nila yung requirement under Maceda
rescission and delivery of possession but still Chandumal refused to do Law? Consignation. This is another instance when the debtor cannot
so. Summons were then issued and served by deputy sheriff Galing pay the creditor because Chandumal here, with respect to the cash
but its was unavailing as she was always out of her house on the dates surrender value, he is the creditor. If he cannot be located anymore
the summons were served. then consignation is a valid course of action for the seller to take
RTC then issued an order granting the motion of PDB. otherwise it would be prejudicial to the seller na maghintay sila forever
Chandumal filed an urgent motion to set aside order of default and to for the rescission of the contract.
admit attached answer. Chandumal said that she did not receive the Again, twin requirements: Twin requirements: notice of
summons and was not notified of the same and her failure to file an cancellation or demand for rescission by a notarial act; and refund of
answer within the reglementary period was due to fraud. RTC denied the cash surrender value of the payments on the property to the buyer
Chandumals motion to set aside the order of default. before cancellation of the contract. And the actual cancellation of the
Chandumal appealed to the CA. CA nullified the RTCs contract to take place after thirty days from receipt by the buyer of the
decision. notice of cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to the
ISSUE: buyer.
(1) Whether there was valid substituted service of summons? In this case there was failure to give the full payment of the
(2) Whether Chandumal voluntarily submitted to the jurisdiction of cash surrender value. The fact that Chandumal was unavailable for such
the RTC? purpose is not sufficient, because again the proper action was for the
(3) Whether there was proper rescission by notarial act of the contract bank to consign the amount. The allegation that Chandumal made
to sell? herself unavailable for payment is not an excuse as the twin
requirements for a valid and effective cancellation under the law, i.e.,
HELD: notice of cancellation or demand for rescission by a notarial act and the
Correctly ruled that the sheriffs return failed to justify a full payment of the cash surrender value, is MANDATORY. There was no

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
26 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

valid rescission of the contract to sell by notarial act undertaken by PDB respondent court correctly applied Republic Act No. 6552. Known as
and the RTC should not have given judicial confirmation over the same. the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all
---------------------------------- kinds of real estate (industrial, commercial, residential) the right of the
seller to cancel the contract upon non-payment of an installment by
Optimum vs. Spouses Jovellanos the buyer, which is simply an event that prevents the obligation of the
FACTS: vendor to convey title from acquiring binding force. It also provides
On April 26, 2005, Sps. Jovellanos entered into a Contract to the right of the buyer on installments in case he defaults in the
Sell6 with Palmera Homes, Inc. (Palmera Homes) for the purchase of a payment of succeeding installments, viz.:
residential house and lot situated in Block 3, Lot 14, Villa Alegria (1) Where he has paid at least two years of
Subdivision, Caloocan City (subject property) for a total consideration installments,
of P1,015,000.00. Pursuant to the contract, Sps. Jovellanos took (a) To pay, without additional interest, the unpaid
possession of the subject property upon a down payment of installments due within the total grace period earned by
P91,500.00, undertaking to pay the remaining balance of the contract him, which is hereby fixed at the rate of one month grace
price in equal monthly installments of P13,107.00 for a period of 10 period for every one year of installment payments made:
years starting June 12, 2005. Provided, That this right shall be exercised by the
On August 22, 2006, Palmera Homes assigned all its rights, buyer only once in every five years of the life of the contract
title and interest in the Contract to Sell in favor of petitioner Optimum and its extensions, if any.
Development Bank (Optimum) through a Deed of Assignment of even (b) If the contract is cancelled, the seller shall refund to the
date. buyer the cash surrender value of the payments on the
On April 10, 2006, Optimum issued a Notice of Delinquency property equivalent to fifty per cent of the total payments
and Cancellation of Contract to Sell for Sps. Jovellanoss failure to pay made and, after five years of installments, an additional five
their monthly installments despite several written and verbal notices. per cent every year but not to exceed ninety per cent of the
In a final Demand Letter dated May 25, 2006, Optimum total payments made:
required Sps. Jovellanos to vacate and deliver possession of the Provided, That the actual cancellation of the
subject property within seven (7) days which, however, remained contract shall take place after cancellation or the demand
unheeded. Hence, Optimum filed, on November 3, 2006, a complaint for rescission of the contract by a notarial act and upon full
for unlawful detainer before the MeTC, docketed as Civil Case No. 06- payment of the cash surrender value to the buyer.
28830. Despite having been served with summons, together with a Down payments, deposits or options on the
copy of the complaint, Sps. Jovellanos failed to file their answer within contract shall be included in the computation of the total
the prescribed reglementary period, thus prompting Optimum to number of installments made.
move for the rendition of judgment. (2) Where he has paid less than two years in
Thereafter, Sps. Jovellanos filed their opposition with motion installments, Sec. 4. x x x the seller shall give the buyer a
to admit answer, questioning the jurisdiction of the court, among grace period of not less than sixty days from the date the
others. Further, they filed a Motion to Reopen and Set the Case for installment became due. If the buyer fails to pay the
Preliminary Conference, which the MeTC denied. installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt
ISSUE: by the buyer of the notice of cancellation or the demand for
W/N there was a valid and effective cancellation of the rescission of the contract by a notarial act. (Emphasis and
Contract to Sell in accordance with Section 4 of RA 6552 underscoring supplied)
Pertinently, since Sps. Jovellanos failed to pay their
RULING: stipulated monthly installments as found by the MeTC, the Court
YES. Verily, in a contract to sell, the prospective seller binds examines Optimums compliance with Section 4 of RA 6552, as above-
himself to sell the property subject of the agreement exclusively to quoted and highlighted, which is the provision applicable to buyers
the prospective buyer upon fulfillment of the condition agreed upon who have paid less than two (2) years-worth of installments.
which is the full payment of the purchase price but reserving to Essentially, the said provision provides for three (3) requisites before
himself the ownership of the subject property despite delivery thereof the seller may actually cancel the subject contract: first, the seller
to the prospective buyer.The full payment of the purchase price in a shall give the buyer a 60-day grace period to be reckoned from the
contract to sell is a suspensive condition, the non-fulfillment of which date the installment became due; second, the seller must give the
prevents the prospective sellers obligation to convey title from buyer a notice of cancellation/demand for rescission by notarial act if
becoming effective, as in this case. the buyer fails to pay the installments due at the expiration of the said
Further, it is significant to note that given that the Contract grace period; and third, the seller may actually cancel the contract
to Sell in this case is one which has for its object real property to be only after thirty (30) days from the buyers receipt of the said notice of
sold on an installment basis, the said contract is especially governed cancellation/demand for rescission by notarial act.
by and thus, must be examined under the provisions of RA 6552, In the present case, the 60-day grace period automatically
or the Realty Installment Buyer Protection Act, which provides for operated in favor of the buyers, Sps. Jovellanos, and took effect from
the rights of the buyer in case of his default in the payment of the time that the maturity dates of the installment payments lapsed.
succeeding instalments. With the said grace period having expired bereft of any installment
Given the nature of the contract of the parties, the payment on the part of Sps. Jovellanos, Optimum then issued a

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
27 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

notarized Notice of Delinquency and Cancellation of Contract on April Jovellanos to vacate the subject property only on May 25, 2006. So
10, 2006. Finally, in proceeding with the actual cancellation of the there was a valid cancellation, Sps. Jovellanos had already lost their
contract to sell, Optimum gave Sps. Jovellanos an additional thirty (30) right to retain possession of the subject property as a consequence of
days within which to settle their arrears and reinstate the contract, or such cancellation, their refusal to vacate and turn over possession to
sell or assign their rights to another. Optimum makes out a valid case for unlawful detainer as properly
It was only after the expiration of the thirty day (30) period adjudged by the MeTC.
did Optimum treat the contract to sell as effectively cancelled
making as it did a final demand upon Sps. Jovellanos to vacate the Noynay vs. Citihomes
subject property only on May 25, 2006. Thus, based on the foregoing, FACTS:
the Court finds that there was a valid and effective cancellation of the On Dec. 29, 2004, Citihomes and Spouses Noynay executed
Contract to Sell in accordance with Section 4 of RA 6552 and since Sps. a contract to sell covering the sale of a house and lot. Under the terms
Jovellanos had already lost their right to retain possession of the of the contract, the price of the property was fixed at P915,895, with a
subject property as a consequence of such cancellation, their refusal downpayment of P183,179, and the remaining balance to be paid in
to vacate and turn over possession to Optimum makes out a valid case 120 equal monthly installments with an annual interest rate of 21%.
for unlawful detainer as properly adjudged by the MeTC. Subsequently, Citihomes executed the Deed of Assignment
of Claims and Accountsin favor of UCPB. Under the said agreement,
Discussion UCPB purchased from Citihomes various accounts, including the
How is the Maceda Law related to the issue of jurisdiction? Is account of Spouses Noynay, for a consideration of P100,000,000.00.
the Maceda Law applicable here? Yes. The authority granted to the In turn, Citihomes assigned its rights, titles, interests, and
MeTC to preliminarily resolve the issue of ownership to determine the participation in various contracts to sell with its buyers to UCPB. In
issue of possession ultimately allows it to interpret and enforce the February 2007, Spouses Noynay allegedly started to default in their
contract or agreement between the plaintiff and the defendant. To payments. Months later, Citihomes decided to declare Spouses
deny the MeTC jurisdiction over a complaint merely because the issue Noynay delinquent and to cancel the contract considering that nine
of possession requires the interpretation of a contract will effectively months of agreed amortizations were left unpaid.
rule out unlawful detainer as a remedy. The notarized Notice of Delinquency and Cancellation of the
How is sec 4 different from sec 3? Contract to Sell was received by Spouses Noynay. They were given 30
In this case was there a valid rescission? Yes. It was only days within which to pay the arrears and failure to do so would
after the expiration of the thirty-day (30) period did Optimum treat the authorize Citihomes to consider the contract as cancelled. Citihomes
contract to sell as effectively cancelled making as it did a final demand sent its final demand letter asking Spouses Noynay to vacate the
upon Sps. Jovellanos to vacate the subject property only on May 25, premises due to their continued failure to pay the arrears. Spouses
2006. Noynay insist that by virtue of the assignment of rights which
Effect of rescission? Loss their right to possess, therefore, Citihomes executed in favor of UCPB, Citihomes did not have a cause
the unlawful detainer was proper and within the jurisdiction of the of action against them because it no longer had an interest over the
MeTC. subject property.
Take note when to apply section 3 and 4 and also notice the The monthly installments amounting to three years were
difference. already paid, by reason of which, Section 3(b) of the Maceda Law
Sec 4 is only applicable when the buyer failed to pay less than should apply. This means that for the cancellation to be effective, the
2 annual installments. And in sec 4, when can there be rescission? The cash surrender value should have been paid first to them by
seller shall give the buyer a grace period of not less than sixty days from Citihomes. Citihomes counters that it has the right to ask for the
the date the installment became due. If the buyer fails to pay the eviction of the petitioners in its capacity as the registered owner
installments due at the expiration of the grace period, the seller may despite the assignment of rights it made to UCPB.
cancel the contract after thirty days from receipt by the buyer of the It believes that because Spouses Noynay failed to pay at
notice of cancellation or the demand for rescission of the contract by a least 2 years of installments, the cancellation became effective upon
notarial act. the expiration of the 30-day period following the receipt of the notice
Notice, walang refund for cash surrender value. of delinquency and cancellation notice and without the need for the
In the present case, the 60-day grace period automatically payment of the cash surrender value.
operated in favor of the buyers, Sps. Jovellanos, and took effect from
the time that the maturity dates of the installment payments lapsed. ISSUE:
With the said grace period having expired bereft of any installment W/N the the cancellation of the contract to sell was valid.
payment on the part of Sps. Jovellanos, Optimum then issued a
notarized Notice of Delinquency and Cancellation of Contract on April RULING:
10, 2006. No. The Contract to Sell dated December 29, 2004 is
Finally, in proceeding with the actual cancellation of the enlightening on the matter. The amount of P183,179, representing full
contract to sell, Optimum gave Sps. Jovellanos an additional thirty (30) down payment shall be paid upon signing of the contract. Citihomes
days within which to settle their arrears and reinstate the contract, or claimed that the period of the payment of the amortizations started
sell or assign their rights to another. It was only after the expiration of from May 31, 2005. As can be gleaned from the contract to sell,
the thirty day (30) period did Optimum treat the contract to sell as however, it appears that the payment of the down payment started
effectively cancelled making as it did a final demand upon Sps. from the signing thereof on December 29, 2004.

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
28 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

Moreover, based on the Statement of Account, dated March May attach itself either to Whether express or implied, relates
18, 2009, Spouses Noynay started defaulting from January 8, 2008. the obligations of the seller to the subject matter itself or to the
This shows that prior to that date, amortizations covering the 3-year or of the buyer. obligations of the seller as to the
period, which started with the down payment, had been paid. This is subject matter of the sale.
consistent with the admission of Citihomes during the preliminary Non-happening thereof, Non-fulfillment thereof constitutes a
conference. By its admission that Spouses Noynay had been paying although it may extinguish breach of the contract.
the amortizations for 3 years, there is no reason to doubt Spouses the obligation upon which it
Noynay's compliance with the minimum requirement of two years is based, generally does not
payment of amortization, entitling them to the payment of the cash amount to a breach of the
surrender value provided for by law and by the contract to sell. contract of sale.
To reiterate, Section 3(b) of the Maceda Law requires that
for an actual cancellation to take place, the notice of cancellation by
notarial act and the full payment of the cash surrender value must be Gonzales vs. Lim
first received by the buyer. Clearly, no payment of the cash surrender Ruling
value was made to Spouses Noynay. Necessarily, no cancellation of the Applying article 1545, when the obligations of either party in a
contract to selI could be considered as validly effected. contract of sale subject to a condition which is not performed, such
party may refuse to proceed with the contract or he may waive
performance of the condition. If the other party has promised that
the condition should have been performed, such party may also treat
CONDITIONS AND WARRANTIES non-performance of condition as a breach of warranty.
In this case, respondents were deemed to have waived the
fulfillment of the condition. They negotiated directly with Tanglao for
Do not confuse condition with warranty. As you very well a new lease contract without the required official communication.
know, a condition refers to a future and uncertain event which may or That was the condition in the agreement. Although they had a right
may not happen upon which depends the rising or the extinguishment to the partys compliance with the condition or compel his
of an obligation, depending on whether we have a suspensive or a performance, they opted otherwise and directly negotiated with
resolutory condition. In relation to condition, we have Article 1545 Tanglao. The assertion that they were merely forced to deal with
referring to conditional sales wherein if the contract of sale is subject to Tanglao because they have been threatened has no merit. At that
a condition, such condition may be made by the parties.: time they entered into a contract, respondents already knew that
one of the Motowns lease contracts had been terminated with
Tanglao
A) CONDITIONS

Catungal Vs. Rodriguez


Article 1545. Where the obligation of either party to a
FACTS:
contract of sale is subject to any condition which is not performed, such
Agapita Catungal owned a parcel of land in Barrio Talamban,
party may
Cebu City. On April 232, 1990, Agapita, with the consent of her
1. refuse to proceed with the contract or
husband (Atty. Jose Catungal), entered a Contract to Sell with
2. he may waive performance of the condition.
respondent Angel Rodriguez. This Contract to Sell was further
upgraded into a Conditional Deed of Sale where it was stipulated that
Condition Imposed Condition Imposed on the Performance of the sum of P25 million will be payable as follows:
on the Perfection the Contract a. P500, 000 down payment upon signing of the agreement;
of the Contract b.The balance of P24, 500, 000 will be payable in five separate
The failure to The failure to comply with this only gives the checks:
comply with this other party the option to either refuse to First check shall be for P4, 500, 000 while the remaining balance
results in the failure proceed with the sale or to waive the to be paid in four checks in the amount of P5 million each will be
of the contract. condition (Article 1545) and that the choice is payable only after Rodriguez (Vendee) has successfully negotiated,
not with the obligor but with the injured secured, and provided a Road Right of Way. If however the Road
party. Right of Way could not be negotiated, Rodriguez shall notify the
Catungals for them to reassess and solve the problem by taking other
Distinction between Condition and Warranty options and should the situation ultimately prove futile, he shall take
Condition Warranty steps to rescind or cancel the herein Conditional Deed of Sale.
Generally goes into the root Goes into the performance of such It was also stipulated that the access road or Road Right of
of the existence of the obligation, and in fact may constitute Way leading to the lot shall be the responsibility of the VENDEE to
obligation. an obligation in itself. secure and any or all cost relative to the acquisition thereof shall be
Must be stipulated by the May form part of the obligation or borne solely by the VENDEE. He shall, however, be accorded with
parties in order to form part contract by provision of law, without enough time necessary for the success of his endeavor, granting him
of an obligation. the parties having expressly agreed a free hand in negotiating for the passage.
thereto. Spouses Catungal requested an advance of P5 million on the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
29 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

purchase price for personal reasons. However, Rodriguez refused on period of thirty (30) days from the finality of this Decision to
the ground that the amount was not due under the terms of their negotiate a road right of way. In the event no road right of way is
agreement. Further, he learned that the Catungals were offering the secured by respondent at the end of said period, the parties shall
property for sale to third parties who are willing to pay a higher reassess and discuss other options as stipulated in paragraph 1(b) of
amount of money for a Road Right of Way than what Rodriguez has the Conditional Deed of Sale and, for this purpose, they are given a
initially negotiated. In other words, instead of assisting Rodriguez in period of thirty (30) days to agree on a course of action. Should the
successfully negotiating, the Catungals allegedly maliciously defeated discussions of the parties prove futile after the said thirty (30)-day
his efforts so to justify the rescission. Rodriguez then received letters period, immediately upon the expiration of said period for
signed by Atty. Jose Catungal demanding him to make up his mind discussion, Rodriguez may (a) exercise his option to rescind the
about buying the land or exercising his option to buy because they contract, subject to the return of his down payment, in accordance
needed money to pay personal obligations or else the Catungals with the provisions of paragraphs 1(b) and 5 of the Conditional Deed
warned that they would consider the contract cancelled. of Sale or (b) waive the road right of way and pay the balance of the
RTC ruled in favor of Rodriguez finding that his obligation to deducted purchase price as determined in the RTC Decision dated
pay the balance arises only after successfully negotiating a Road May 30, 1992.
Right of Way. CA affirmed the RTCs decision but the defendants filed
a motion for reconsideration and raised for the first time the Discussion
contention that the court erred in not finding their stipulations null What makes it a conditional sale and not just a contract to
for violating the principle of mutuality of contracts. sell? What is the condition? The condition is imposed on the
performance of the obligation wherein the vendors imposed that for
ISSUE: the sale to take place, he must first secure a road right of way.
Whether or not the stipulations of their Conditional Deed of Will it affect the validity of the sale? No. its already on the
Sale constitute a potestative condition (one that is subject to the will performance stage of the contract.
of one of the parties either the debtor or creditor). Is the condition here deemed potestative? No.
What do you mean by potestative condtion? A potestative
HELD: condition is one where the fulfillment of the condition depends upon
NO. the condition in their Conditional Deed of Sale stating that the sole will of one of the parties.
respondent shall pay the balance of the purchase price when he has Whats the effect of a potestative condition? It will render the
successfully negotiated and secured a road right of way, is not a condition void when it depends on the sole will of the debtor.
condition on the perfection of the contract nor on the validity of the Here, it was a conditional deed of sale conditioned on the
entire contract or its compliance as contemplated in Article 1308. It is payment of a certain price but the payment of the purchase price was
a condition imposed only on respondent's obligation to pay the originally made contingent on the successful negotiation of a road right
remainder of the purchase price. In our view and applying Article of way. So the condition was not merely dependent on the full purchase
1182, such a condition is not purely potestative as petitioners price which should have made it just a contract to sell. In this case, it
contend. It is not dependent on the sole will of the debtor but also was clear that it was a conditional deed of sale.
on the will of third persons who own the adjacent land and from SC made a distinction as to the condition imposed upon the
whom the road right of way shall be negotiated. Ina manner of perfection of the contract and merely upon the performance. Take
speaking, such a condition is likewise dependent on chance as there note, if the condition is imposed upon the perfection of the contract,
is no guarantee that respondent and the third party-landowners failure to comply with such results to the failure of the contract. Failure
would come to an agreement regarding the road right of way. This to comply with the condition on the performance merely gives the
type of mixed condition is expressly allowed under Article 1182 of other party the option to either refuse to proceed with the sale or to
the Civil Code. waive the condition. This remedies are the ones mentioned in 1545.
IN RELATION TO ARTICLE 1197 The Catungals also argued SC also discussed that the condition imposed only on
that Rodriguez has been given enough time to negotiate for the Road respondents obligation to pay the purchase price, but such condition is
Right of Way. However, no stipulation regarding specific time can be not purely potestative. It is not dependent on the sole will of the
found in their agreement. SC said that Even assuming arguendo that debtor, but mostly on the will of third persons. It is also dependent on
the Catungals were correct that the respondent's obligation to chance, because there is no warranty that the respondents and the
negotiate a road right of way was one with an uncertain period, their third party would come to an agreement regarding the road right of
rescission of the Conditional Deed of Sale would still be unwarranted. way. So we have here a mixed condition. Rodriguezs option to rescind
What the Catungals should have done was to first file an action in is not merely potestative, but rather subject to the same mixed
court to fix the period within which Rodriguez should accomplish the condition as the obligation to pay the balance in the event the
successful negotiation of the road right of way pursuant to the above condition is fulfilled, Rodriguez must pay the balance. If not fulfilled,
quoted provision. Thus, the Catungals' demand for Rodriguez to Rodriguez has the choice not to proceed or with the condition and still
make an additional payment of P5 million was premature and pay the purchase price. It is still warranted ,so Rodriguez is given the 30-
Rodriguez's failure to accede to such demand did not justify the day period until the finality of the decision to negotiate the road right
rescission of the contract. of way. SC ruled that in the event that no right of way is secured by
WHEREFORE, the Decision dated August 8, 2000 and the Rodriguez, parties should reassess and discuss other options as
Resolution dated January 30, 2001 of the Court of Appeals are provided in the conditional deed of sale. Should the discussions prove
AFFIRMED with the following MODIFICATION: futile, Rodriguez may exercise his option to rescind or waive the road
If still warranted, respondent Angel S. Rodriguez is given a right of way. So the condition here is the road right of way and such was

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
30 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

a valid condition between the parties. trucks of Navarro after discovering that there were still unpaid taxes.
---------------------------------- The BIR and BOC ordered Navarro to pay the proper
assessments or her trucks would be impounded.
Take note that the condition that is mentioned in 1545 and Navarro went to Claros to ask the receipts evidencing payment
the cases that we have discussed are different from warranty. of BIR tax and customs duties however her demands were ignored.
Warranty, again, is one of the obligations on the part of the
seller. Warranty is a collateral undertaking in a contract of sale of either ISSUE:
party, expressed or implied, that if the property sold does not possess Who should pay the taxes and customs duties which the
certain incidents or qualities, the first user may either consider the administrative regulations sought to enforce?
same void or claim damages or breach of warranty. When we talk
about condition, the existence of the obligation must be stipulated. HELD:
When we talk abput a warranty, we refer to a perfected obligation even Harrison is liable for payment of revenue taxes and customs
without the parties agreeing thereto. Remember, in the elements, you duties.
have implied warranties. Implied warranties exist in a contract even if It is true that the ownership o the trucks shifted to private
the parties did not stipulate as to its existence. When we talk about respondent after the sale. But petitioner must remember that prior
condition, the parties must have agreed upon or stipulated it in their to its consummation it expressly intimated to her that it has already
agreement. Under condition, the condition is attached to the obligation paid taxes and customs duties Such representation shall be
of the seller to deliver or transfer ownership. As to warranties, what is considered as a seller's express warranty under Article 1546 of the
attached? It is the subject matter itself or the obligation of the seller. Civil Code which covers any affirmation of fact or any promise by the
seller which induces the buyer to purchase the thing and actually
B) WARRANTIES purchases it relying on such affirmation or promise. It includes all
warranties which are derived from express language, whether
1) Express Warranties language is in the form of a promise or representation. Presumably,
1) Requites in order that there be an Express Warranty in a Contract therefore, private respondent would not have purchased the trucks
of Sale: were it not for petitioner's assertion and assurance that all taxes
a) It must be an affirmation of fact or any promise by were already settled.
the seller relating to the subject matter of the sale;
b) the natural tendency of such affirmation or promise Discussion
is to induce the buyer to purchase the thing, and Was there a breach of warranty? Yes.
c) the buyer purchases the thing relying on such Was it considered as an express warranty? Yes. It was
affirmation or promise thereon (Article 1546). considered as an express warranty because it is noteworthy to
2) A warranty is an affirmation of fact or any promise made by a remember that prior to the sale there was an express inclination by
seller in relation to the thing sold, and that the decisive test is Renato that all the BIR taxes and customs duties on the motor vehicles
whether the seller assumes to assert a fact of which the buyer is were already paid and settled. SC held that such representation shall be
ignorant of. (Goodyear vs. Sy) considered as a sellers express warranty under Article 1546 of the Civil
No affirmation of the value of the thing, nor any Code which covers any affirmation or promise or fact by the seller
statement purporting to be a statement of the seller's which induces the buyer to purchase the thing and actually purchases it
opinion only, shall be construed as a warranty, unless the relying on such affirmation or promise. In the case at bar, SC held,
seller made such affirmation or statement as an expert presumably, Navarro would not have purchased the 2 elf trucks were it
and it was relied upon by the buyer. (Article 1546). not for the representation of Renato that the BIR taxes and customs
A mere expression of an opinion does not signify duties of the motor vehicles have already been paid.
fraud, unless made by an expert and the other party has Under the law, what is the remedy of the buyer in case of
relied on the former's special knowledge. (Article 1341) breach of express warranty? Under the law, the remedy of the buyer
3) A man who relies upon such an affirmation made by a person would be that the buyer would be allowed to keep the goods, and also
whose interest might so readily prompt him to exaggerate the be able to maintain an action for damages against the seller. In the case
value of his property does so at his peril, and must take the at bar, this is exactly what Navarro did. She opted to keep the 2 elf
consequences of his own imprudence (Azarraga vs. Gay). trucks for her business and filed an action for damages in the form of
complaint for sum of money.
Harrison Motors vs. Navarro Again, take note of what are the requirements or requisites
FACTS: for a warranty to be considered as an express warranty.
Harrison Motors, through its president, Claros, sold two trucks In the case of Harrison, there was an express affirmation on
to Navarro. Prior to the sale, Claros represented to Navarro that all the part of the seller that the taxes and custom duties have been paid.
the BIR taxes and customs duties for the parts used on the two trucks Private respondent would not have purchased the trucks were it not for
had been paid for. the petitioners assertion and assurance that all taxes on its parts were
Subsequently, the BIR and the LTO and the BOC entered in a already settled. Clearly it was an express warranty. Under Art. 1599 of
Memorandum of Agreement which provided that for purposes of the Civil Code, once an express warranty is breached the buyer can
registering vehicles, a Certificate of Payment should first be obtained accept or keep the goods and maintain an action against the seller for
from the BIR. Government agents seized and detained the two damages.
----------------------------------

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
31 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

the said machine was not in good condition as experts advised and it
Art. 1599. Where there is a breach of warranty by the seller, was worth lesser than the purchase price. After several telephone
the buyer may, at his election: calls regarding the defects in the machine, private respondent sent
(1) Accept or keep the goods and set up against the seller, the breach of two technicians to make necessary repairs but they failed to put the
warranty by way of recoupment in diminution or extinction of the price; machine in running condition and since then the petitioner wan
(2) Accept or keep the goods and maintain an action against the seller unable to use the machine anymore.
for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the ISSUE/S:
seller for damages for the breach of warranty; 1. Whether there is an implied warranty of its quality or fitness.
(4) Rescind the contract of sale and refuse to receive the goods or if the 2. Whether the hidden defects in the machine is sufficient to
goods have already been received, return them or offer to return them warrant a rescission of the contract between the parties.
to the seller and recover the price or any part thereof which has been
paid. HELD:
When the buyer has claimed and been granted a remedy in 1. It is generally held that in the sale of a designated and specific
anyone of these ways, no other remedy can thereafter be granted, article sold as secondhand, there is no implied warranty as to its
without prejudice to the provisions of the second paragraph of Article quality or fitness for the purpose intended, at least where it is
1191. subject to inspection at the time of the sale. On the other hand,
Where the goods have been delivered to the buyer, he cannot there is also authority to the effect that in a sale of secondhand
rescind the sale if he knew of the breach of warranty when he accepted articles there may be, under some circumstances, an implied
the goods without protest, or if he fails to notify the seller within a warranty of fitness for the ordinary purpose of the article sold or for
reasonable time of the election to rescind, or if he fails to return or to the particular purpose of the buyer.
offer to return the goods to the seller in substantially as good condition Said general rule, however, is not without exceptions. Article
as they were in at the time the ownership was transferred to the buyer. 1562 of our Civil Code, which was taken from the Uniform Sales Act,
But if deterioration or injury of the goods is due to the breach or provides:
warranty, such deterioration or injury shall not prevent the buyer from "Art. 1562. In a sale of goods, there is an implied warranty or
returning or offering to return the goods to the seller and rescinding the condition as to the quality or fitness of the goods, asfollows:
sale. (1) Where the buyer, expressly or by implication, makes known to
Where the buyer is entitled to rescind the sale and elects to do the seller the particular purpose for which the goods are acquired,
so, he shall cease to be liable for the price upon returning or offering to and it appears that the buyer relies on the seller's skill or judgment
return the goods. If the price or any part thereof has already been paid, (whether he be the grower or manufacturer or not), there is an
the seller shall be liable to repay so much thereof as has been paid, implied warranty that the goods shall be reasonably fit for such
concurrently with the return of the goods, or immediately after an offer purpose;"
to return the goods in exchange for repayment of the price. 2. We have to consider the rule on redhibitorydefects contemplated
Where the buyer is entitled to rescind the sale and elects to do in Article 1562. A redhibitory defect must be an imperfection
so, if the seller refuses to accept an offer of the buyer to return the or defect of such nature as to engender a certain degree of
goods, the buyer shall thereafter be deemed to hold the goods as bailee importance. An imperfection or defect of little consequence does
for the seller, but subject to a lien to secure payment of any portion of not come within the category of being redhibitory.
the price which has been paid, and with the remedies for the
enforcement of such lien allowed to an unpaid seller by Article 1526. As already narrated, an expert witness for the petitioner
(5) In the case of breach of warranty of quality, such loss, in the absence categorically established that the machine required major repairs
of special circumstances showing proximate damage of a greater before it could be used. This, plus the fact that petitioner never
amount, is the difference between the value of the goods at the time of made appropriate use of the machine from the time of purchase
delivery to the buyer and the value they would have had if they had until an action was filed, attest to the major defects in said machine,
answered to the warranty. (n) by reason of which the rescission of the contract of sale is sought.
The factual finding, therefore, of the trial court that the machine is
Moles vs. IAC not reasonably fit for the particular purpose for which it was
FACTS: intended must be upheld, there being ample evidence to sustain the
Moles bought from Mariano Diolosa owner of Diolosa same.
Publishing House a linotype printing machine(secondhand machine). At a belated stage of this appeal, private respondent came up
Moles promised Diolosa that will pay the full amount after the loan for the first time with the contention that the action for rescission is
from DBP worth P50,000.00 will be released. Private respondent on barred by prescription. While it is true that Article 1571 of the Civil
return issued a certification wherein he warranted that the machine Code provides for a prescriptive period of six months for
was in A-1 condition, together with other express warranties. a redhibitory action, a cursory reading of the ten preceding articles to
After the release of the of the money from DBP, Petitioner which it refers will reveal that said rule may be applied only in case of
required the Respondent to accomplish some of the requirements. implied warranties. The present case involves one with an express
On which the dependant complied the requirements on the same warranty.
day. Consequently, the general rule on rescission of contract, which
Subsequently, petitioner wrote private respondent that the is four years shall apply. Considering that the original case for
machine was not functioning properly. The petitioner found out that rescission was filed only one year after the delivery of the subject

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
32 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

machine, the same is well within the prescriptive period. This is rule on rescission, which is four years. The action has not prescribed as
aside from the doctrinal rule that the defense of prescription is well.
waived and cannot be considered on appeal if not raised in the trial ----------------------------------
court, and this case does not have the features for an exception to
said rule. 2) Implied Warranties
Implied warranties exist in contracts of sale even in the
Discussion absence of stipulation between the parties.
Whats the purpose of the certification? The purpose of the Implied warranties are those which by law constitute part of
certification was for the DBP to release the loan. Such certification must every contract of sale, whether or not the parties were aware
be given to DBP so DBP will release the loan in favor of Moles to buy of them, and whether or not the parties intended them.
said machine. However, these implied warranties may be modified or
The subject matter in this case is a second hand article. Is suppressed by agreement of the parties.
there an implied warranty with regard to second hand articles? As a Although only a seller is bound by the implied warranties of
general rule, there is no implied warranty on secondhand articles. law, nevertheless, by express contractual stipulation, an agent
However, SC here ruled that under 1562, in a sale of goods where there of the seller may bind himself to such warranties. (Schmid vs.
is an implied warranty or condition as to the quality or fitness of the RJL)
goods, the exception here is that: where the buyer, expressly or by What are the implied warranties in relation to contracts of
implication, makes known to the seller the particular purpose for which sale?
the goods are required and it appears that the buyer relies on the 1. The warranty of the seller that he has the right to
sellers view or judgment. sell
In other words, it is not an implied warranty anymore. It now 2. The warranty against eviction
becomes an express warranty. Thus, there is no implied warranty in 3. The warranty against non-apparent servitudes
secondhand articles, but there can be express warranties. 4. The warranty against hidden defects
What was the affirmation or representation as to the express 5. The warranty as to fitness or quality
warranty here? SC held that the issuance of Certificate of A-1 condition
issued by private respondent is the evidence that there was an express a) Warranty That Seller has Right to Sell
warranty. The certification was a condition sine qua non for the release Article 1547. In a contract of sale, unless a contrary
of petitioners loan which has to be used as payment for the purchase intention appears, there is:
price. Since private respondent did not refute such allegation he ____ 1. An implied warranty on the part of the seller that he
for such contract of sale. has a right to sell the thing at the time when the
Aside from the fact that private respondent is not considered ownership is to pass, and that the buyer shall from
as a dealer, what was the other basis of the court in ruling that it was that time have and enjoy the legal and peaceful
not a dealers talk or sales talk? Ordinarily, what does not appear on the possession of the thing;
face of the written instrument should be regarded as dealers or 2. An implied warranty that the thing shall be free
traders talk. Thus, what is specifically stipulated on said document in from any hidden faults or defects, or any charge or
the case cannot be considered as mere dealers talk. encumbrance not declared or known to the buyer.
Take note that what was sold here was a secondhand item. It This article shall not, however, be held to render
is generally held that in the sale of a designated and specific article sold liable a sheriff, auctioneer, mortgagee, pledgee, or other
as secondhand, there is no implied warranty as to its quality or fitness person professing to sell by virtue of authority in fact or law,
for the purpose intended, at least where it is subject to inspection at for the sale of a thing in which a third person has a legal or
the time of the sale. On the other hand, there is also authority to the equitable interest.
effect that in a sale of a secondhand articles there may be, under some
circumstances, an implied warranty of fitness for the ordinary purpose Note:
of the article sold or for the particular purpose of the buyer. Under the first paragraph, an implied warranty on
However, the issue in this case is not of implied warranty but the part of the seller that he has a right to sell the thing at the
of the existence of an express warranty because here, there was a time when the ownership is to pass. As we already discussed,
certification that the machines sold and delivered were in A-1 ownership is not required at the time of perfection. However,
condition. if at the time the thing is to be delivered the seller cannot do
A certification to the effect that the linotype machine bought so because he has no title over the property, there may be
by petitioner was in A-1 condition was issued by Diolosa in favor of breach of this warranty.
Moles. This can only be considered as an express warranty. Also under the first paragraph, we have the
With that, there is an express warranty, it cannot be warranty against eviction, which is the warranty that the
considered as mere dealers or traders talk which does not appear on buyer shall from that time have and enjoy the legal and
the face of the contract. Because when you say dealers or traders talk, peaceful possession of the thing. This is also further discussed
again, it does not appear on the face of the written instrument, unlike in Art. 1548.
in this case, where there is a certification.
Moreover, it is emphasized that rescission is available as a b) Warranty Against Eviction
remedy. Considering that what we have here is an express warranty, the Article 1548. Eviction shall take place whenever by a
six-month prescriptive period is not applicable, but rather the general final judgment based on a right prior to the sale or an act

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
33 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

imputable to the vendor, the vendee is deprived of the whole eviction. Since it is stated in the contract, it is an express warranty but
or of a part of the thing purchased. nevertheless a warranty against eviction. It is not a condition that was
The vendor shall answer for the eviction even not met. Now, here, petitioner was aware of the presence of the
though nothing has been said in the contract on the subject. tenants at the time it entered into the sales transaction.
The contracting parties, however, may increase, Symbolic delivery took place. Its efficacy can, however, be
diminish, or suppress this legal obligation of the vendor. prevented if the vendor does not possess control over the thing sold, in
which case this legal fiction must yield to reality.
When There is Breach of Warranty Against Eviction: However, in this case, the SC held that no breach of warranty
- The sellers implied warranty against eviction only against eviction took place because not all the requisites are present.
applies when the following conditions are present: A breach of this warranty requires the concurrence of the
(1) purchaser has been deprived of, or evicted from, the following circumstances:
whole or part of the thing sold; The purchaser has been deprived of the whole or part of
(2) eviction is by a final judgment; the thing sold;
(3) basis thereof is by virtue of a right prior to the sale This eviction is by a final judgment;
made by the seller; and The basis thereof is by virtue of a right prior to the sale
(4) seller has been summoned and made co-defendant in made by the vendor; and
the suit for eviction at the instance of the buyer. The vendor has been summoned and made co-defendant
in the suit for eviction at the instance of the vendee.
Power Commercial vs. CA In the absence of these requisites, a breach of the warranty
Facts: Power Commercial and Industrial Corporation entered into a against eviction under Article 1547 cannot be declared.
contract of sale with the Quiambao spouses. It agreed to assume the Petitioner argues that it has not yet ejected the occupants of
mortgages thereon. A Deed of Absolute Sale with Assumption of said lot, and not that it has been evicted therefrom. The presence of
Mortgage was executed. lessees does not constitute an encumbrance of the land, nor does it
Subsequently, Power Commercial failed to settle the deprive petitioner of its control thereof.
mortgage debt contracted by the spouses, thus it could not undertake However, petitioner's deprivation of ownership and control
the proper action to evict the lessees on the lot. Power Commercial finally occurred when it failed and/or discontinued paying the
Corp thereafter sought to rescind the contract of sale alleging that it amortizations on the mortgage, causing the lot to be foreclosed and
failed to take actual and physical possession of the lot. sold at public auction. But this deprivation is due to petitioner's fault,
and not to any act attributable to the vendor-spouses.
Issue: W/N there was a breach of warranty against eviction ----------------------------------

Ruling: NO. First, such condition that the Quiambao spouses would So again take note of the distinctions between condition and
have to evict the lessees was not stipulated in the contract. Thus, it warranty, and the requisites for one to be held liable for
cannot be considered a condition imposed upon its perfection. In fact, breach of warranty against eviction.
Power Commercial was well aware of the presence of the tenants Other articles that mention the requirements for breach of
therein. It was also given control over the said lot and it endeavored warranty, you have Art. 1549.
to terminate the occupation of its actual tenants. Also, since it was
Power Commercial that knowingly undertook the risk of evicting the Art. 1549. The vendee need not appeal from the decision in
lessees, it cannot now claim that there was a breach of warranty on order that the vendor may become liable for eviction. (n)
the part of the vendor.
You relate this with Art. 1557. What is only required is a final
Discussion judgment that has been rendered.
Here, the SC emphasized that the failure to eject the lessees
cannot be considered a breach of a condition. First, the failure was not Article 1557. The warranty cannot be enforced until a final
stipulated as a condition. Remember the difference between condition judgment has been rendered, whereby the vendee loses the thing
and warrantythe condition must be expressly agreed upon by the acquired or a part thereof.
parties. Second, in this case, the effects and consequences were not
specified either. Even if nasa lower court lang and it already became final then
What is specified here in the contract or the deed of sale is as wala gi-appeal, and all the other requisites are present, there
follows: will still be breach of warranty against eviction.
We hereby also warrant that we are the lawful and
absolute owners of the above described property, free from Eviction in Part:
any lien and/or encumbrance, and we hereby agree and Article 1556. Should the vendee lose, by reason of the
warrant to defend its title and peaceful possession thereof in eviction, a part of the thing sold of such importance, in relation to the
favor of the said Power Commercial and Industrial whole, that he would not have bought it without said part, he may
Development Corporation, its successors and assigns, against demand the rescission of the contract; but with the obligation to return
any claims whatsoever of any and all third persons; the thing without other encumbrances that those which it had when he
As stated, the provision pertains to the usual warranty against acquired it.
He may exercise this right of action, instead of enforcing the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
34 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

vendor's liability for eviction. vendee shall have the right to demand of the vendor:
The same rule shall be observed when two or more things (1) The return of the value which the thing sold had at the
have been jointly sold for a lump sum, or for a separate price for each of time of the eviction, be it greater or less than the price of the
them, if it should clearly appear that the vendee would not have sale;
purchased one without the other. (2) The income or fruits, if he has been ordered to deliver
them to the party who won the suit against him;
So under Art. 1556, the buyer can either (1) enforce the (3) The costs of the suit which caused the eviction, and, in a
remedy or demand those mentioned in Art. 1555, or (2) seek proper case, those of the suit brought against the vendor for
the rescission of the contract with the obligation to return the the warranty;
thing without encumbrances other than those which it had (4) The expenses of the contract, if the vendee has paid them;
when it was acquired. If inseparable, then those mentioned in (5) The damages and interests, and ornamental expenses, if
Art. 1555 may be demanded only to such extent. the sale was made in bad faith.

Art. 1558. The vendor shall not be obliged to make good the So all of these are demandable from the vendor if there was
proper warranty, unless he is summoned in the suit for eviction at the no waiver.
instance of the vendee. (1481a) Also, even if there was only partial eviction, there could still
be a breach of warranty against eviction.
So very important here is the requirement that the vendor be
summoned in the suit for eviction. Waiver of Warranty and Effects Thereof
Article 1548. Eviction shall take place whenever by a final
Particular Causes Given by Law: judgment based on a right prior to the sale or an act imputable to the
Article 1550. When adverse possession had been commenced vendor, the vendee is deprived of the whole or of a part of the thing
before the sale but the prescriptive period is completed after the purchased.
transfer, the vendor shall not be liable for eviction. The vendor shall answer for the eviction even though nothing
has been said in the contract on the subject.
So what do you mean by possession here? Acquisitive The contracting parties, however, may increase, diminish, or
possession as you have already discussed in Property and suppress this legal obligation of the vendor.
Land Titles as well. Thirty years in bad faith and ten years in
good faith. Article 1553. Any stipulation exempting the vendor from the
Now here, if the prescription was already completed before obligation to answer for eviction shall be void, if he acted in bad faith.
the contract of sale, if the buyer knew beforehand of the
acquisitive prescription by the third person and nevertheless Article 1554. If the vendee has renounced the right to
proceeded to purchase the property, he is deemed to have warranty in case of eviction, and eviction should take place, the vendor
waived his right to enforce the warranty against eviction. shall only pay the value which the thing sold had at the time of the
eviction. Should the vendee have made the waiver with knowledge of
However, if the prescriptive period is completed after the
the risks of eviction and assumed its consequences, the vendor shall not
perfection of the sale or transfer of ownership, the seller will
be liable.
not be liable for eviction. Why? Because the buyer should
have interrupted the prescriptive period. The exception is if
Art. 1554 emphasizes that there could be waiver of the
the time left for interruption is too short for the buyer to be
warranty. On the other hand, under Art. 1553, if the seller is
given full opportunity to perform acts of interruption. To
in bad faith, he shall nevertheless be liable for eviction even if
which, the seller can be held liable for breach of warranty.
there is waiver on the part of the buyer. So please take note
of that.
Article 1551. If the property is sold for nonpayment of taxes
due and not made known to the vendee before the sale, the vendor is
liable for eviction. Escaler vs. CA

Applicability to Judicial Sales Facts: Spouses Reynoso sold to petitioner-spouses Escaler a parcel of
Article 1552. The judgment debtor is also responsible for land with an area of 239, 479 sq. m. The Deed of Sale contained a
eviction in judicial sales, unless it is otherwise decreed in the judgment. covenant against eviction. Subsequently, the Register of Deeds of Rizal
and A. Doronilla Resources Development, Inc. filed a case for
In execution sales, the rule of caveat emptor applies. The cancellation of title issued in the name of Spouses Reynosos
sheriff does not warrant the title to the property sold by him, predecessor-in-interest on the ground that the property covered by
and it is not incumbent on him to place the purchaser in said title is already previously registered in the name of A. Doronilla
possession of the property. (Allure Manufacturing vs. CA) Development, Inc. As a result, the title was cancelled for being null
and void.
Amounts for Which Seller is Liable in Case of Eviction Petitioner-spouses Escaler filed a case against their vendors,
Article 1555. When the warranty has been agreed upon or herein private respondent-spouses Reynoso, for the recovery of the
nothing has been stipulated on this point, in case eviction occurs, the value of the property sold to them plus damages on the ground that

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
35 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

the latter have violated the vendors' "warranty against eviction." (1) should they render it unfit for the use for which it is
They alleged that the Order which cancelled the title of intended, or
Angelina C. Reynoso and all subsequent Transfer Certificates of Title (2) should they diminish its fitness for such use to such an
derived and/or emanating therefrom and which includes the titles of extent that, had the vendee been aware thereof, he would not
petitioners, is now final, and by reason thereof petitioners lost their have acquired it or would have given a lower price for it;
right over the property sold; and that the respondents were but said vendor shall not be answerable for patent defects or
summoned and/or given their day in court at the instance of the those which may be visible, or for those which are not visible
petitioners. if the vendee is an expert who, by reason of his trade or
profession, should have known them.
Issue: WON private respondent-spouses Reynoso may be held liable
as vendors for breach of warranty against eviction Article 1566. The vendor is responsible to the
vendee for any hidden faults or defects in the thing sold, even
Ruling: NO. though he was not aware thereof.
In order that a vendor's liability for eviction may be This provision shall not apply if the contrary has
enforced, the following requisites must concura) there must be a been stipulated, and the vendor was not aware of the hidden
final judgment; b) the purchaser has been deprived of the whole or faults or defects in the thing sold.
part of the thing sold; c) said deprivation was by virtue of a right prior
to the sale made by the vendor; and d) the vendor has been The warranty applies to both movable and immovable subject
summoned and made co-defendant in the suit for eviction at the matters.
instance of the vendee. So in case there is a breach of warranty under Article 1561,
In the case at bar, the fourth requisitethat of being breach of warranty against hidden defects, we also have
summoned in the suit for eviction (Case No. 4252) at the instance of either of these remedies which are not that different from
the vendeeis not present. All that the petitioners did, per their very that provided under Article 1599.
admission, was to furnish respondents, by registered mail, with a copy Now, also remember that one of the requisites for a breach of
of the opposition they (petitioners) filed in the eviction suit. warranty against hidden defects is that aside from it is hidden
Decidedly, this is not the kind of notice prescribed by the aforequoted and it is serious, the defect must exist at the time of sale.
Articles 1558 and 1559 of the New Civil Code. The term "unless he is
summoned in the suit for eviction at the instance of the vendee" Requisites for Breach of Warranty
means that the respondents as vendor/s should be made parties to The requisites to recover on account of hidden
the suit at the instance of petitioners-vendees, either by way of asking defects are as follows (Nutrimix Feeds vs. CA):
that the former be made a co-defendant or by the filing of a third- (1) Defect must be hidden;
party complaint against said vendors. Nothing of that sort appeared to (2) Defect must exist at the time the sale was made;
have been done by the petitioners in the instant case. (3) Defect must ordinarily have been excluded from the
contract;
(4) Defect, must be important (render the thing unfit or
c) Warranty Against Non-Apparent Servitudes considerably decreases fitness);
Article 1560. If the immovable sold should be (5) Action must be instituted within the statute of limitations.
encumbered with any non-apparent burden or servitude, not
mentioned in the agreement, of such a nature that it must be Remedies of Buyer and Obligation of Seller for Breach of
presumed that the vendee would not have acquired it had he Warranty
been aware thereof, he may ask for the rescission of the A choice of remedies is available to the BUYER only
contract, unless he should prefer the appropriate indemnity. when the thing has not been lost:
Neither right can be exercised if the non-apparent burden or
servitude is recorded in the Registry of Property, unless there Article 1567. In the cases of articles 1561, 1562,
is an express warranty that the thing is free from all burdens 1564, 1565 and 1566, the vendee may elect between
and encumbrances. (1) Withdrawing from the contract (accion redhibitoria) and
Within one year, to be computed from the execution (2) Demanding a proportionate reduction of the price (accion
of the deed, the vendee may bring the action for rescission, or quanti minoris),
sue for damages. with damages in either case.
One year having elapsed, he may only bring an
action for damages within an equal period, to be counted So yung rescission is actually similar to withdrawing from the
from the date on which he discovered the burden or contract. That is referred to as Accion Redhibitoria. And
servitude. proportionate reduction is referred to as Accion Quanti
Minoris.
d) Warranty Against Hidden Defects
Article 1561. The vendor shall be responsible for If the subject matter of sale is actually lost, the extent of the
warranty against the hidden defects which the thing sold may obligations of the SELLER for breach of warranty against
have, hidden defects depends upon the cause of the lost,
knowledge of the hidden defect by the seller, and whether

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
36 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

there has been a waiver of the warranty: Article 1571. Actions arising from the provisions of
the preceding ten articles shall be barred after six (6) months,
Article 1568. If the thing sold should be lost in from the delivery of the thing sold.
consequence of the hidden faults, and
(a) the vendor was aware of them, he shall bear the loss, and So this is six (6) months from the date of the delivery and not
shall be obliged to return the price and refund the expenses of from the perfection of the contract.
the contract, with damages. Do take note that under Article 1562, it emphasizes the
(b) If he was not aware of them, he shall only return the price implied warranty as to fitness or quality. It is:
and interest thereon, and reimburse the expenses of the 1. implied warranty as to fitness if the warranty is as
contract which the vendee might have paid. regards to the special purpose of the goods and you
have;
Article 1569. If the thing sold had any hidden fault 2. implied warranty of merchantability if it refers to
at the time of the sale, and should thereafter be lost by a the general purpose of the products or goods.
fortuitous event or through the fault of the vendee,
(a) the latter may demand of the vendor the price which he e) Redhibitory Defects of Animals
paid, less the value which the thing had when it was lost. Article 1576. If the hidden defect of animals, even in case
(b) If the vendor acted in bad faith, he shall pay damages to a professional inspection has been made, should be of such a
the vendee. nature that expert knowledge is not sufficient to discover it,
the defect shall be considered as redhibitory.
So in this article, what are the remedies available to the But if the veterinarian, through ignorance or bad faith
vendee if the thing sold should be lost: should fail to discover or disclose it, he shall be liable for
1. Withdraw from the contract with damages; or damages.
2. Demand the proportionate reduction of the price
with damages (Article 1567); or Sale of Team
3. Demand from the seller the return of the price or Article 1572. If two or more animals are sold
refund of the expenses with damages if the thing together, whether for a lump sum or for a separate price for
sold should be lost by virtue of the hidden faults each of them, the redhibitory defect of one shall only give rise
and the seller was aware of the hidden faults; or to its redhibition, and not that of the others; unless it should
4. Demand from the seller the return of the price, plus appear that the vendee would not have purchased the sound
interest, and reimbursement of the expenses the animal or animals without the defective one.
buyer might have paid if the thing sold should be The latter case shall be presumed when a team,
lost in consequence of the hidden faults and the yoke pair, or set is bought, even if a separate price has been
seller was NOT aware of the hidden defects; or fixed for each one of the animals composing the same.
5. Demand the price paid less the value which the
thing had when it was lost if the thing sold had General Rule: Redhibitory defect of one animal which is
hidden fault and thereafter it was lost by fortuitous purchased with other animals will not affect the others
event through the fault of the vendee; or purchased.
6. Demand the price paid less the value of the thing at Exception: Unless it should appear that the vendee would not
the time of loss plus damages if the thing sold had have purchased the sound animal or animals without the
any hidden fault at the time of sale and thereafter defective one.
lost by fortuitous event or through the fault of the Example, Love Birds. Pair man siguro talaga yan sila noh?
buyer and the seller acted in bad faith. Sabi nga nila pag mamatay yung isa mamatay na rin yung
isa, pano kaya nila malaman? Ma-feel lang niya? Ay
Waiver of Warranty namatay na yung isa, mamatay na rin ako, so hindi sya
Article 1566. The vendor is responsible to the magkain? (hahaha) Anyway, for example you purchased love
vendee for any hidden faults or defects in the thing sold, even birds then one of them has a hidden defect, may sakit, what
though he was not aware thereof. is the breach there? As to the two (2) birds. Pero kung binili
This provision shall not apply if the contrary has mo lang sya dalawa, you can purchase one without the other,
been stipulated, and the vendor was not aware of the hidden we apply the general rule that the redhibitory defect of one
faults or defects in the thing sold. shall only give rise to its redhibition and does not affect the
other.
Applicability to Judicial Sales
Article 1570. The preceding articles of this Article 1573. The provisions of the preceding article
Subsection (on warranty against hidden defects) shall be with respect to the sale of animals shall in like manner be
applicable to judicial sales, except that the judgment debtor applicable to the sale of other things.
shall not be liable for damages.
Again, if you purchased products or goods which you would
Prescriptive Period not purchase without the defective one, the breach will affect

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
37 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

the two (2) products that were purchased. Remedies of Buyer


Article 1580. In the sale of animals with redhibitory
Other Rules on Sale of Animals defects, the vendee shall also enjoy the right mentioned in
Article 1574. There is no warranty against hidden article 1567; but he must make use thereof within the same
defects of animals sold at fairs or at public auctions, or of live period which has been fixed for the exercise of the redhibitory
stock sold as condemned. action.

Article 1575. The sale of animals suffering from Okay, so same. Accion Redhibitoria or Accion Quanti Minoris.
contagious diseases shall be void. But again noh, he must file this action within forty (40) days
A contract of sale of animals shall also be void if the from the date of delivery.
use or service for which they are acquired has been stated in
the contract, and they are found to be unfit therefor. Nutrimix Feeds vs. CA
Facts:
Okay, very clear noh, under the law. Suffering from Spouses Evangelista are engaged in the business of poultry and hog-
contagious diseases e.g. bird flu, etc. Those animals suffering raising. They purchased from Nutrimix feeds for their business.
from these diseases, their sale is void. Not merely voidable A few months later, some of the checks that they used for payment
but also void. bounced. Hence, Nutrimix demanded for payment but the spouses
The same with the second paragraph, the animal was sold failed to heed to such demand.
and the use or service for which they are acquired has been This prompted Nutrimix to file a case for collection of sum of money.
stated in the contract, and they are found to be unfit. This is While Spouses Evangelista did not deny that they had incurred such
also declared void. What is the effect if it is a void contract? It balance, they justified their refusal to pay alleging that the feeds that
cannot be ratified. And it has no prescriptive period. Nutrimix delivered were mixed with poison which caused the untimely
death of about 18,000 of their chickens and hundreds of their hogs .
Prescriptive Period So they said that there was a breach of warranty against hidden
Article 1577. The redhibitory action, based on the defects.
faults or defects of animals, must be brought within forty days Nutrimix countered by saying that Spouses Evangelista may have
from the date of their delivery to the vendee. caused the mixing of poison to evade their liability.
This action can only be exercised with respect to
faults and defects which are determined by law or by local Issue:
customs. W/N there was a breach of warranty against hidden defects
Article 1578. If the animal should die within three
days after its purchase, the vendor shall be liable if the Ruling:
disease which cause the death existed at the time of the No. To prove warranty against hidden defects, complainant has the
contract. burden of proving that indeed there were hidden defects. The
requisites are:
Okay, when it comes to animals, it is forty (40) days from First, the defect should be hidden;
delivery. Others, six (6) months from delivery. Very easy to Second, the defect should have been existing at the time of sale;
remember yang 40 days, Noahs Ark, 40 days . Third, the defect must be ordinarily be excluded from the contract;
Fourth, the defect must be important such that it renders unfit or
Obligation of Buyer to Return considerably decreases the fitness the value of the thing;
Article 1579. If the sale be rescinded, the animal Fifth, The action must be filed within the prescribed period.
shall be returned in the condition in which it was sold and In this case, the Spouses Evangelista failed to prove the 2 nd requisite.
delivered, the vendee being answerable for any injury due to They did not immediately notify Nutrimix Corporation that there were
his negligence, and not arising from the redhibitory fault or some hidden defects. Likewise, it was only three (3) months from the
defect. death of the chicken and hogs that they decided to have the feeds
checked by experts.
Okay, so this still imposes an obligation on the vendee. If the For the failure of Spouses Evangelista to prove that there were hidden
animal purchased had a redhibitory defect, he still has the defects at the time of the sale, Nutrimix cannot be held liable for
obligation to take care of it until he will be able to return the breach of warranty against hidden defects.
animal back to the seller.
He cannot say Ay may sakit ito, bahala na, di ko na pakainin. Discussion
Magkasakit ba ang animals pag mabasa ng ulan? Pero tayo Okay, take note of the requisites for the seller to be held liable for
pag mabasa ng ulan, pasok pa rin agad . warranty against hidden defects:
So meron syang obligation to take care of the thing (or animal 1. The defect should be hidden;
Maam?), ordinary diligence of a good father of a family. 2. The defect must exist at the time of sale;
Otherwise, his negligence would mitigate the liability on the 3. The defect must be ordinarily be excluded from the contract;
part of the seller who is liable for breach of warranty. 4. The defect must be serious or important, rendering the thing
unfit or considerably decreases the fitness;

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
38 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

5. The action must be instituted within the Statute of


Limitations. (2) identify the party to whom the warranty is extended;
Here, upon the sale of feeds, theres an implied warranty that it
would be fit for the purpose for which it is contemplated in relation to (3) state the products or parts covered;
the fact that there were (allegedly) hidden defects on such feeds. But, it
must be established that the defect existed when the products came to (4) state what the warrantor will do in the event of a defect,
the hands of the petitioners. However, in this case, there was no malfunction of failure to conform to the written warranty and at
evidence that the defect existed at the time of the sale or at the time of whose expense;
the delivery of the goods. In a span of three (3) months, the feeds could
have been contaminated and subject to many conditions beyond the (5) state what the consumer must do to avail of the rights which
control of the petitioners. Tracing the defect to the petitioners, there accrue to the warranty; and
should be evidence that there was no tampering of the animal feeds.
The nature of the animal feeds makes it necessarily difficult for the (6) stipulate the period within which, after notice of defect,
respondent to prove that the defect was existing when the product left malfunction or failure to conform to the warranty, the warrantor will
the premises of the petitioner or when the products were delivered. perform any obligation under the warranty.
So again, take note of the requisites for the seller to be liable for (b) Express warranty - operative from moment of sale. - All written
warranty against hidden defects. warranties or guarantees issued by a manufacturer, producer, or
importer shall be operative from the moment of sale.
So far, questions regarding these implied warranties in a
contract of sale? (1) Sales Report. - All sales made by distributors of products covered
Q: Maam, for example, feeds for animals. Tapos may fungus by this Article shall be reported to the manufacturer, producer, or
na Maam so it poisoned the animals. importer of the product sold within thirty (30) days from date of
Maam Interrupts: So kung fungus, di sya hidden defect kase purchase, unless otherwise agreed upon. The report shall contain,
makita man siguro? among others, the date of purchase, model of the product bought,
Q: For example lang Maam hindi. Ay contamination nalang its serial number, name and address of the buyer. The report made in
Maam, the product is contaminated. Who shall be liable Maam? And accordance with this provision shall be equivalent to a warranty
can he allege good faith? registration with the manufacturer, producer, or importer. Such
A: The seller, kung sino ang nagbenta sayo. You cannot allege registration is sufficient to hold the manufacturer, producer, or
good faith. Ang remedy lang nya is to go after the distributor or importer liable, in appropriate cases, under its warranty.
producer. But as to the customer, kung kanino nya binili, sya habulin
nya. (2) Failure to make or send report. - Failure of the distributor to make
the report or send them the form required by the manufacturer,
In relation to that, you also have there noh, we have the producer, or importer shall relieve the latter of its liability under the
Consumer Act of the Philippines. In relation to warranties. If you take a warranty: Provided, however, That the distributor who failed to
look at the Consumer Act of the Philippines, Republic Act 7394, its comply with its obligation to send the sales reports shall be
quite long but I just want to point out Chapter 3 thereof - Consumer personally liable under the warranty. For this purpose, the
Products and Service Warranties. manufacturer shall be obligated to make good the warranty at the
expense of the distributor.
*Reproduced for your Study Convenience
CHAPTER III (3) Retail. - The retailer shall be subsidiarily liable under the warranty
CONSUMER PRODUCT AND SERVICE WARRANTIES in case of failure of both the manufacturer and distributor to honor
the warranty. In such case, the retailer shall shoulder the expenses
Art. 66. Implementing Agency. - The Department of Trade and and costs necessary to honor the warranty. Nothing therein shall
Industry, shall strictly enforce the provision of this Chapter and its prevent the retailer from proceeding against the distributor or
implementing rules and regulations. manufacturer.

Art. 67. Applicable Law on Warranties. - The provisions of the Civil (4) Enforcement of warranty or guarantee. - The warranty rights can
Code on conditions and warranties shall govern all contracts of sale be enforced by presentment of a claim. To this end, the purchaser
with conditions and warranties. needs only to present to the immediate seller either the warranty
card of the official receipt along with the product to be serviced or
Art. 68. Additional Provisions on Warranties. - In addition to the Civil returned to the immediate seller. No other documentary
Code provisions on sale with warranties, the following provisions requirement shall be demanded from the purchaser. If the
shall govern the sale of consumer products with warranty: immediate seller is the manufacturer's factory or showroom, the
warranty shall immediately be honored. If the product was
(a) Terms of express warranty. - Any seller or manufacturer who gives purchased from a distributor, the distributor shall likewise
an express warranty shall: immediately honor the warranty. In the case of a retailer other than
(1) set forth the terms of warranty in clear and readily the distributor, the former shall take responsibility without cost to
understandable language and clearly identify himself as the the buyer of presenting the warranty claim to the distributor in the
warrantor; consumer's behalf.

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
39 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

Art. 69. Warranties in Supply of Services. - (a) In every contract for


(5) Record of purchases. - Distributors and retailers covered by this the supply of services to a consumer made by a seller in the course
Article shall keep a record of all purchases covered by a warranty or of a business, there is an implied warranty that the service will be
guarantee for such period of time corresponding to the lifetime of rendered with due care and skill and that any material supplied in
the product's respective warranties or guarantees. connection with such services will be reasonably fit for the purpose
for which it is supplied.
(6) Contrary stipulations: null and void. - All covenants, stipulations
or agreements contrary to the provisions of this Article shall be (b) Where a seller supplies consumer services in the course of a
without legal effect. business and the consumer, expressly or by implication, makes
known to the seller the particular purpose for which the services are
(c) Designation of warranties. - A written warranty shall clearly and required, there is an implied warranty that the services supplied
conspicuously designate such warranty as: under the contract and any material supplied in connection
(1) "Full warranty" if the written warranty meets the minimum therewith will be reasonably fit for that purpose or are of such a
requirements set forth in paragraph (d); or nature or quality that they might reasonably be expected to achieve
that result, unless the circumstances show that the consumer does
(2) "Limited warranty" if the written warranty does not meet such not rely or that it is unreasonable for him to rely, on the seller's skill
minimum requirements. or judgment.
(d) Minimum standards for warranties. - For the warrantor of a
consumer product to meet the minimum standards for warranty, he Art. 70. Professional Services. - The provision of this Act on warranty
shall: shall not apply to professional services of certified public
(1) remedy such consumer product within a reasonable time and accountants, architects, engineers, lawyers, veterinarians,
without charge in case of a defect, malfunction or failure to conform optometrists, pharmacists, nurses, nutritionists, dietitians, physical
to such written warranty; therapists, salesmen, medical and dental practitioners and other
professionals engaged in their respective professional endeavors.
(2) permit the consumer to elect whether to ask for a refund or
replacement without charge of such product or part, as the case may Art. 71. Guaranty of Service Firms. - Service firms shall guarantee
be, where after reasonable number of attempts to remedy the workmanship and replacement of spare parts for a period not less
defect or malfunction, the product continues to have the defect or to than ninety (90) days which shall be indicated in the pertinent
malfunction. invoices.
The warrantor will not be required to perform the above duties if he
can show that the defect, malfunction or failure to conform to a Art. 72. Prohibited Acts. - The following acts are prohibited:
written warranty was caused by damage due to unreasonable use (a) refusal without any valid legal cause by the local manufacturer or
thereof. any person obligated under the warranty or guarantee to honor a
warranty or guarantee issued;
(e) Duration of warranty. - The seller and the consumer may
stipulate the period within which the express warranty shall be (b) unreasonable delay by the local manufacturer or any person
enforceable. If the implied warranty on merchantability accompanies obligated under the warranty or guarantee in honoring the warranty;
an express warranty, both will be of equal duration.
Any other implied warranty shall endure not less than sixty (60) days
nor more than one (1) year following the sale of new consumer (c) removal by any person of a product's warranty card for the
products. purpose of evading said warranty obligation;

(f) Breach of warranties. - (1) In case of breach of express warranty, (d) any false representation in an advertisement as to the existence
the consumer may elect to have the goods repaired or its purchase of a warranty or guarantee.
price refunded by the warrantor. In case the repair of the product in Art. 73. Penalties. - (a) Any person who shall violate the provisions of
whole or in part is elected, the warranty work must be made to Article 67 shall be subject to fine of not less than Five hundred pesos
conform to the express warranty within thirty (30) days by either the (P500.00) but not more than Five thousand pesos (P5,000.00) or an
warrantor or his representative. The thirty-day period, however, may imprisonment of not less than three (3) months but not more than
be extended by conditions which are beyond the control of the two (2) years or both upon the discretion of the court. A second
warrantor or his representative. In case the refund of the purchase conviction under this paragraph shall also carry with it the penalty or
price is elected, the amount directly attributable to the use of the revocation of his business permit and license.
consumer prior to the discovery of the non-conformity shall be
deducted. (b) Any person, natural or juridical, committing any of the illegal acts
provided for in Chapter III, except with respect to Article 67, shall be
(2) In case of breach of implied warranty, the consumer may retain in liable for a fine of not less than One thousand pesos (P1,000.00) but
the goods and recover damages, or reject the goods, cancel and not more than Fifty thousand pesos (P50,000.00) or imprisonment
contract and recover from the seller so much of the purchase price for a period of at least one (1) year but not more than five (5) years,
as has been paid, including damages. or both, at the discretion of the court.
The imposition of any of the penalties herein provided is without

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
40 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

prejudice to any liability incurred under the warranty or guarantee. The defect existed when the product left the hands of
the seller. (Nutrimix Feeds vs. CA)
Article 66, DTI shall enforce these provisions and theres reference
to the provisions in the Civil Code under Article 67. b) Measure of Damage in Case of Breach of Warranty on
What we have in this Consumer Act is only additional provisions Quality
on warranties. Article 1599(5). In the case of breach of warranty of
Theres also a mention there of express warranty under Article 68. quality, such loss, in the absence of special circumstances
(Maam reads Article 68, See Table ) showing proximate damage of a greater amount, is the
Also emphasized here noh, the minimum standards for difference between the value of the goods at the time of
warranties. The remedy must be claimed within a reasonable time and delivery to the buyer and the value they would have had if they
without charge. had answered to the warranty.
Do not confuse this with the rule na bawal ang No return, no
exchange sa mga tindahan, that is true but only with regard to 2) Sale of Goods by Sample and/or by Description
defective products. Because if you already purchased goods tapos you Article 1565. In the case of a contract of sale by sample, if
say Ay parang di man pala ako bagay, di mo yan sya pwede the seller is a dealer in goods of that kind, there is an implied
mabalik.Unless noh, na willing sila.But di yan sya mahulog sa No warranty that the goods shall be free from any defect rendering
return, no exchange na policy. them unmerchantable which would not be apparent on reasonable
Ang bawal ang No return, no exchange na policy, with regard to examination of the sample.
hidden defects. In the absence of an express provision, you cannot
resort to the provisions of the Consumer Act which prohibits No 3) Buyers Option in Case of Breach of Warranty
return, no exchange policy. This is the rule in the Philippines. (Maam Article 1599. Where there is a breach of warranty by the
talks about her Lolos Christmas Tree ) seller, the buyer may, at his election:
Again the Consumer Act of the Philippines is only in addition to Accept or keep the goods and set up against the seller, the breach
our Civil Code provisions. of warranty by way of recoupment in diminution or extinction of
the price;
Accept or keep the goods and maintain an action against the seller
C) IMPLIED WARRANTIES IN SALE OF GOODS for damages for the breach of warranty;
Refuse to accept the goods, and maintain an action against the
1) Warranty as to Fitness or Quality seller for damages for the breach of warranty;
Article 1562. In a sale of goods, there is an implied Rescind the contract of sale and refuse to receive the goods or if
warranty or condition as to the quality or fitness of the goods, as the goods have already been received, return them or offer to
follows: return them to the seller and recover the price or any part thereof
1. Where the buyer, expressly or by implication, makes which has been paid.
known to the seller the particular purpose for which the When the buyer has claimed and been granted a remedy
goods are acquired, and it appears that the buyer relies in anyone of these ways, no other remedy can thereafter be
on the seller's skill or judgment (whether he be the granted, without prejudice to the provisions of the second
grower or manufacturer or not), there is an implied paragraph of article 1191 (buyers right to rescind, even if
warranty that the goods shall be reasonably fit for such previously he has chosen specific performance when fulfillment has
purpose; become impossible).
2. Where the goods are brought by description from a
seller who deals in goods of that description (whether he 4) Waiver of Remedies by Buyer
be the grower or manufacturer or not), there is an Article 1599. Where the goods have been delivered to the
implied warranty that the goods shall be of buyer, he cannot rescind the sale if he knew of the breach of
merchantable quality. warranty when he accepted the goods without protest, or if he fails
to notify the seller within a reasonable time of the election to
Article 1564. An implied warranty or condition as to the rescind, or if he fails to return or to offer to return the goods to the
quality or fitness for a particular purpose may be annexed by the seller in substantially as good condition as they were in at the time
usage of trade. the ownership was transferred to the buyer. But if deterioration or
injury of the goods is due to the breach or warranty, such
Article 1563. In the case of contract of sale of a specified deterioration or injury shall not prevent the buyer from returning or
article under its patent or other trade name, there is no warranty as offering to return the goods to the seller and rescinding the sale.
to its fitness for any particular purpose, unless there is a stipulation
to the contrary. 5) Obligation of Buyer on the Price
Article 1599. Where the buyer is entitled to rescind the
a) Requisites for Breach of Warranty to Apply sale and elects to do so, he shall cease to be liable for the price
upon returning or offering to return the goods. If the price or any
That the buyer sustained injury because of the product;
part thereof has already been paid, the seller shall be liable to
That the injury occurred because the product was
repay so much thereof as has been paid, concurrently with the
defective or unreasonably unsafe; and
return of the goods, or immediately after an offer to return the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
41 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

goods in exchange for repayment of the price. sixty (60) days nor more than one (1) year following the sale of new
consumer products.
6) Refusal of Seller to Accept Return of Goods
Article 1599. Where the buyer is entitled to rescind the 4) Breach of Warranties
sale and elects to do so, if the seller refuses to accept an offer of the Article 68(f) Breach of warranties.
buyer to return the goods, the buyer shall thereafter be deemed to 1) In case of breach of express warranty, the consumer
hold the goods as bailee for the seller, but subject to a lien to secure may elect to have the goods repaired or its purchase price refunded
the payment of any portion of the price which has been paid, and by the warrantor. In case the repair of the product in whole or in
with the remedies for the enforcement of such lien allowed to an part is elected, the warranty work must be made to conform to the
unpaid seller by article 1526. express warranty within thirty (30) days by either the warrantor or
his representative. The thirty-day period, however, may be extended
D) ADDITIONAL TERMS OF WARRANTIES FOR CONSUMER GOODS by conditions which are beyond the control of the warrantor or his
representative. In case the refund of the purchase price is elected,
the amount directly attributable to the use of the consumer prior to
Article 4(q), RA 7394 (Consumer Act of the Philippines).
the discovery of the non-conformity shall be deducted.
"Consumer products and services" means goods, services and credits,
2) In case of breach of implied warranty, the consumer
debts or obligations which are primarily for personal, family, household
may retain in the goods and recover damages, or reject the goods,
or agricultural purposes, which shall include but not limited to food,
cancel and contract and recover from the seller so much of the
drugs, cosmetics, and devices.
purchase price as has been paid, including damages.
Article 68. Additional Provisions on Warranties.
5) Contrary Stipulations
(a) Terms of express warranty. Any seller or manufacturer who gives
All covenants, stipulations or agreements contrary to the
an express warranty shall:
provisions of Article 68 are specifically declared null and void, and
1) set forth the terms of warranty in clear and readily
without legal effect.
understandable language and clearly identify himself as the warrantor;
2) identify the party to whom the warranty is extended;
3) state the products or parts covered; Supercars vs. Flores
4) state what the warrantor will do in the event of a defect, Facts:
malfunction of failure to conform to the written warranty and at whose In the case at bar, Flores bought a vehicle from Supercars. A chattel
expense; mortgage was executed in line with such.
5) state what the consumer must do to avail of the rights However, after using the vehicle for a few days, the same started
which accrue to the warranty; and malfunctioning. He returned the car and it was repaired. However, the
6) stipulate the period within which, after notice of defect, defects resurfaced. So, he demanded from the seller the rescission of
malfunction or failure to conform to the warranty, the warrantor will the contract and the refund of the payments he made.
perform any obligation under the warranty. When the seller failed to heed such demands, Flores stopped paying
the premiums in RCBC. When RCBC demanded for payment, Flores
1) Subsidiary Liability of Retailer said that he already rescinded the contract and that returned the said
Article 68(b)(3) Retail. The retailer shall be subsidiarily vehicle to Supercars.
liable under the warranty in case of failure of both the RCBC then executed the car and sold it at public auction. The car was
manufacturer and distributor to honor the warranty. In such case, sold to one Lim.
the retailer shall shoulder the expenses and costs necessary to
honor the warranty. Nothing therein shall prevent the retailer from Issue:
proceeding against the distributor or manufacturer. W/N Flores has the right to rescind the contract of sale and claim
damages
2) Enforcement of Warranty
Article 68(b)(4) Enforcement of warranty or guarantee. Ruling: Yes.
The warranty rights can be enforced by presentment of a claim. To
this end, the purchaser needs only to present to the immediate Discussion
seller either the warranty card of the official receipt along with the Whats the basis of the action for rescission or for the
product to be serviced or returned to the immediate seller. No other recovery of the car? The basis for the action for rescission is
documentary requirement shall be demanded from the purchaser. the breach of warranty for hidden defects, Maam.
Was there any issue as to the existence of these hidden defects? How
3) Duration of Warranty was it established that there was a breach of this warranty?
Article 68(e) Duration of warranty. The seller and the A2: Flores already had the car repaired several times but the results
consumer may stipulate the period within which the express were unsatisfactory. He also wrote several letters to Supercars
warranty shall be enforceable. If the implied warranty on regarding the defects which the latter accepted. Thus, producing legal
merchantability accompanies an express warranty, both will be of effects.
equal duration. Article 1599 of the Civil Code is instructive Maam. This partly
Any other implied warranty shall endure not less than provides that where there is a breach of warranty by the seller, the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
42 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

buyer may, at his election rescind the contract of sale and refuse to
receive the goods or if the goods have already been received, return This is redemption with a repurchase. It is a very important
them or offer to return them to the seller and recover the price or any thing to consider that such right must reserve in the same
part thereof which has been paid. Contact of Sale and to which the Statute of Frauds is applicable.
And when the buyer has availed of any of the four (4) remedies The redemption feature of sale does not prevent its full
under Article 1599, it is to the exclusion of the other remedies provided consummation
thereunder. The right of repurchase may be exercised only by
Article 1191 cannot be availed of because in the case at bar, the o By the seller in whom the right is recognized by a
car has already been transferred to a buyer in good faith. contract, or
Okay, thank you. So here there was a breach of warranty of o By any person to whom the right may have been
hidden defects. Rescission is proper when one of the parties committed transferred, or
a substantial breach in its provisions. However, for rescission to take o By the person so entitled by law in case of legal
place, the one who demands must be able to return what he is obliged redemption.
to restore. Because the effect of rescission is mutual restitution. In this
case, the vehicle malfunctioned despite repeated repairs by petitioners.
Torres vs. CA
So obviously, the vehicle had hidden defects. It was well within
Facts
respondents right to recover damages from petitioner who committed
The ILLUSCUPIDESES are the owners of two (2)
a breach of warranty, rescind the sale and refuse to receive the goods
adjoining parcels of lands located in the Tapuac District, Dagupan
or if the goods have already been received, return them or offer to
City. The said properties were mortgaged to the (GSIS).
return them to the seller and recover the price or any part thereof
which has been paid. In this case, the 30% down payment plus the 1965, the Illuscupideses contracted OLORES for the
premium paid by respondent to Supercars. construction of a nine (9) door apartment on the
parcels of land for the sum of P79,400.00.
Another door was added, increasing the cost of the
construction to P97,000.00.
EXTINGUISHMENT OF SALE Illuscupideses could only pay Olores P54,390.51, thus
compelling the latter to sue them for the balance.
1969, judgment was rendered in favor of OLORES for
GROUNDS the unpaid balance with interests and costs.
Article 1231. Obligations are extinguished: ILLUSCUPIDESES received a notice from the GSIS that it
(1) By payment or performance; was going to foreclosure the mortgage for their failure to pay the
(2) By the loss of the thing due; loan when the same became due. To stave off the foreclosure,
(3) By the condonation or remission of the debt; the ILLUSCUPIDESES sold the properties to VIVENCIO TORRES
(4) By the confusion or merger of the rights of creditor and debtor; and SOCORRO TORRES, as evidenced by the Deed of Sale dated
(5) By compensation; October 19, 1973 for P130,000.00, of which the vendees paid the
(6) By novation. vendors P10,000.00, P6,000.00 and P3,000.00. The vendees
Other causes of extinguishment of obligations, such as likewise paid P51,498.97 to the GSIS. The aforesaid payments
annulment, rescission, fulfillment of a resolutory condition, and were in accordance to the schedule found in the promissory note
prescription, are governed elsewhere in this Code. executed by the parties on October 19, 1973.
The parties also executed on the same day an
Article 1600. Sales are extinguished by the same causes as all agreement whereby the Torreses would "RESELL, RETRANSFER,
other obligations, by those stated in the preceding articles of this Title, and RECONVEY" to the Illuscupideses "that certain building,
and by conventional or legal redemption. more particularly designated as a ten-door concrete apartment."
OLORES found out about the transaction and, fearing
CONVENTIONAL REDEMPTION that he would not be able to collect from the Illuscupideses, in
case the Court of Appeals would uphold the decision of the trial
1) Definition court in his favor, filed a new case for rescission of the sale
Conventional redemption shall take place when the seller against the Illuscupideses and the Torreses. The Illuscupideses
reserved for himself the right to repurchase the thing sold, with the filed a counter-claim against Olores, and a cross-claim against
obligation to: the Torreses, alleging that the Deed of Sale was a pacto de
a) Return the price of the sale, retro sale.
b) The expenses of the contract, CA upheld the decision in the collection case for the
c) Any other legitimate payments made by reason of the sale, unpaid balance of the construction costs in favor of Olores.
and When said judgment became final and executory. Olores tried to
d) The necessary and useful expenses made on the thing sold. execute the same but was unable to do so.
Rescission case was DISMISSED.
Article 1609. The vendee is subrogated to the vendor's rights OLORES and the ILLUSCUPIDES then appealed to the
and actions. Court of Appeals.

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
43 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

CA AFFIRMED the dismissal of the complaint of Olores, same instrument as one of the stipulations of the contract. Once the sale
the cross-claim and counter-claim of Illuscupides, and the was already executed, the vendor can no longer reserve the same right.
counter-claim Torres. Any right granted thereafter in a separate instrument cannot be
With regard to the appeal of the considered a right to repurchase.
Illuscupideses, the Court of Appeals did not agree with When you execute an absolute sale, the seller does not have
their contention that the sale of the properties to the the right to repurchase. What is being emphasized in a pacto de retro sale
Torreses was actually a pacto de retro sale, since the is that the right must be expressly reserved. In the absence of that
terms of the Deed of Sale did not provide for the stipulation, the seller cannot raise the right and repurchase the property.
redemption of the property by the vendors. However, it Moreover, it must be in writing. Hence, the statute of fraud is applicable.
was discovered that the land and the apartment were WHAT HAPPENS IN A CONVENTIONAL REDEMPTION WITH A
sold separately, and only the land appears to have been PACTO DE RETRO SALE? The vendor reserves to himself the right to
fully paid. And since the Agreement provided that the reacquire the property. There is a deed of sale which only extinguishes
apartment should be resold to the Illuscupideses, the the obligation pertaining to the contract of sale and not to sell.
Torreses should reconvey the apartment to the If you remember your suspensive and resolutory conditions,
Illuscupideses. this is one of the instances wherein there is resolutory condition involved
The Illuscupideses filed a motion asking that the Court where the seller exercises his right to repurchase because the contract of
of Appeals rule upon the apartment rentals collected by sale will now be extinguished by the happening of the resolutory
Torreses, since it had ruled that the apartment be reconveyed to condition.
them. DENIED. ----------------------------------

Issue 2) Proper Reservation of Right to Repurchase


WHETHER OR NOT THE DEED OF SALE OF IS A PACTO DE RETRO The right to repurchase is not a right granted to the vendor by
SALE. the vendee in a subsequent instrument, but is a right
reserved by the vendor in the same instrument of sale as one
Ruling of the stipulations of the contract. (Villarica vs. CA)
THE DEED OF SALE AS AN ABSOLUTE SALE. The valid existence of a stipulated right of repurchase is
ILLUSCUPIDESES: the appellate court should have taken premised upon the fact that the underlying contract of sale is
into account the circumstances surrounding the execution of the valid and there has been performance, upon which the right
deed, particularly the fact that an Agreement to resell the to repurchase can be exercised later on. (Nool vs. CA)
apartment was executed on the very same day as the deed of
sale. NO MERIT. 3) Right of Repurchase May be Proved by Parol Evidence
Even if this Court were to agree with the Illuscupideses General Rule: Since a right to repurchase is merely a feature
that parole evidence may be allowed to add to the terms of the of the contract of sale, it is governed also by the Statute of Frauds.
deed of sale, this Court has held in the case of Villarica, et Exception: However, when the contract of sale has been
al. vs. Court of Appeals, et al., that reduced in writing, parol evidence may be adduced to prove the
[t]he right of repurchase is not a right granted the vendor by agreement granting the seller a right to repurchase the property sold,
the vendee in a subsequent instrument, but is a right since the deed of sale and the verbal agreement allowing the right of
reserved by the vendor in the same instrument of sale as repurchase should be considered as an integral whole, then the deed of
one of the stipulations of the contract. Once the instrument sale relied upon by the seller is in itself the note or memorandum
of absolute sale is executed, the vendor can no longer evidencing the contract, which would take the case outside the
reserve the right to repurchase, and any right thereafter provisions of the Statute of Frauds.
granted the vendor by the vendee in a separate instrument
cannot be a right to repurchase but some other right like an 4) Distinguished from Option to Purchase
option to buy in the instant case.
Right of Redemption Option to Purchase
Discussion Not a separate contract, but Generally a principal, albeit
THERE WAS AN AGREEMENT TO RECONVEY/RESELL. WAS THAT merely part of a main contract preparatory, contract and may be
A VALID CONTRACT? Yes, it is valid. of sale, and in fact cannot exist created independent of another
HOW DOES IT DIFFER NOW WITH A PACTO DE RETRO SALE? unless reserved at the time of contract.
WHAT WAS THE OBJECT IN THE AGREEMENT TO RESELL? The building the perfection of the main
only. contract of sale.
We have here two contracts executed on the same day. On the Must be imbedded in a contract May exist prior to or after the
first contract, the Illuscupideses sold the properties to Torres. There was a of sale upon the latters perfection of the sale, or be
Deed of Sale. On the same day, they executed another contract to resell, perfection. imbedded in another contract,
retransfer and reconvey the building. Here, the land is a separate real- like a lease, upon that contracts
estate from the building. perfection.
The SC also emphasized the sale with a right to repurchase with Does not need a separate Must have a consideration
pacto de retro sale. The former is a right reserved by the vendor on the consideration in order to be separate and distinct from the
valid and effective. purchase price in order to be

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
44 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

valid. will rule that there is a true pacto de retro sale. Can the right
The redemption period cannot The period for an option right to repurchase still be exercised by the vendor? YES. But the
exceed 10 years. may exceed 10 years. redemption period is 30 days from the decision was rendered.
Requires notice to be Requires only a notice of such Ofcourse, if the court rules that there was an equitable
accompanied by a tender of exercise be given to the optioner. mortgage, then the right of redemption cannot be exercised.
payment, including
consignment when tender of 6) Possession of Subject Matter During Period of Redemption
payment cannot be made Pending the repurchase of the property the vendee a retro
effectively on the buyer. may alienate, mortgage or encumber the same, but such
Extinguishes an existing Results into the perfection of a alienation or encumbrance is as revocable as his right.
contract of sale. contract of sale. If the vendor a retro repurchases the property, the right of the
vendee a retro is resolved, because he has to return the
5) Period of Redemption property free from all damages and encumbrances imposed by
him.
When No Period Agreed Upon The vendor a retro may also register his right to repurchase
Article 1606, par. 1. The right referred to in article 1601, in the under the Land Registration Act and may be enforced against
absence of an express agreement, shall last four (4) years from the date any person deriving title from the vendee a retro.
of the contract.
7) How Redemption Effected
When Period Agreed Upon Article 1616. The vendor cannot avail himself of the right of
Article 1606, par. 2. Should there be an agreement, the repurchase without returning to the vendee
period cannot exceed ten (10) years. The price of the sale;
The expenses of the contract, and any other legitimate
Pendency of Action Tolls Redemption Period payments made by reason of the sale;
1) The pendency of an action brought in good faith and relating to The necessary and useful expenses made on the thing sold.
the validity of a sale a retro tolls the running of the period of
redemption. (Ong Chua vs. Carr) Article 1608. The vendor may bring his action against every
2) The pendency of a litigation pertaining to the right of redemption possessor whose right is derived from the vendee, even if in the second
does not toll the period because such period is not suspended contract no mention should have been made of the right to repurchase,
merely and solely because there is a divergence of opinion without prejudice to the provisions of the Mortgage Law and the Land
between the parties as to the precise meaning of the phrase Registration Law with respect to third persons.
providing for the condition upon which the right to repurchase is
triggered. (Misterio vs. Cebu) a) How Redemption Exercised
In order to exercise the right to redeem, only tender of
Non-Payment of Price does Not Affect Running on Redemption payment is sufficient. (Legaspi vs. CA)
Period Mere sending of letters by the seller expressing his desire to
The sale was consummated upon the execution of the repurchase the property without accompanying tender of the
document and the delivery of the subject matter thereof to the vendee. redemption price does not comply with the requirement of
It was a perfectly valid agreement, and the non-payment of the balance the law. (Vda. De Zulueta vs. Octavio)
of the purchase price could not have the effect of suspending the When tender of payment cannot be validly made, because
efficacy of the provisions thereof. (Catangcatang vs. Legayada) the buyer cannot be located, it becomes imperative for the
seller a retro then to file a suit for consignation with the
So before you apply 1606, there must already be an courts of the redemption price, and failing to do so within the
expressed agreement that a right of repurchase is granted to redemption period, his right of redemption shall lapse.
the seller. If there is no right to repurchase in say the Deed of (Catangcatang vs. Legayda)
Sale, then you cannot apply Article 1605. Now if the parties
stipulated that the seller is hereby given the right to b) In Multi-Parties Cases
repurchase the property within four years from the Article 1612. If several persons, jointly and in the
constitution of the sale. Is that valid? Yes. Within five years? same contract, should sell an undivided immovable with a
Valid. Within 10 year? Valid. Within 12 years? No, but this is right of repurchase, none of them may exercise this right for
valid only up to 10 years. Hindi na mag-apply for remaining more than his respective share.
two years. It cannot exceed 10 years. The same rule shall apply if the person who sold an
Now what if ang nakalagay lang that the seller has the right to immovable alone has left several heirs, in which case each of
repurchase the property period. So you apply the first the latter may only redeem the part which he may have
paragraph- four years from the contract. So dalawa lang yan, acquired.
four or ten year. But if there is a pending case. In other words,
there is an on-going dispute whether it is a real pacto de retro So you have here co-ownwers of an undivided properties. In
sale of an equitable mortgage and it turns out that the Court the same one contract of sale, they sold their respective
shares with a right to repurchase. If any of them would

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
45 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

exercise their right of repurchase, it is only to the extent of the right to repurchase within thirty days from the time final judgment
their respective shares. was rendered in a civil action on the basis that the contract was a true
sale with right to repurchase.
Article 1613. In the case of the preceding article, the
vendee may demand of all the vendors or co-heirs that they - General Rule: When the period of redemption has expired, then
come to an agreement upon the repurchase of the whole ipso jure the right to redeem has been extinguished.
thing sold; and should they fail to do so, the vendee cannot be
compelled to consent to a partial redemption. - Exception: Even when the right to redeem has expired, and there
has been a previous suit on the nature of the contract, the seller
may still exercise the right to repurchase within 30 days from the
What if you have an immovable property but the sale with a
time final judgment was rendered in a civil action on the basis that
right to repurchase by the co-owner are executed in the
the contract was a true sale with right to repurchase.
different contracts separately. So we apply 1614.
10) Fruits
Article 1614. Each one of the co-owners of an
Article 1617. If at the time of the execution of the sale there
undivided immovable who may have sold his share separately,
should be on the land, visible or growing fruits, there shall be no
may independently exercise the right of repurchase as regards
reimbursement for or prorating of those existing at the time of
his own share, and the vendee cannot compel him to redeem
redemption, if no indemnity was paid by the purchaser when the sale
the whole property.
was executed.
Should there have been no fruits at the time of the sale and
They sold their shares here separately and independently. So
some exist at the time of redemption, they shall be prorated between
here, they can independently exercise their right to
the redemptioner and the vendee, giving the latter the part
repurchase and this time, the vendee cannot compel the
corresponding to the time he possessed the land in the last year,
vendors to redeem the whole property.
counted from the anniversary of the date of the sale.
Article 1610. The creditors of the vendor cannot
o Article 1617 on fruits applies only when the parties have not
make use of the right of redemption against the vendee, until
provided for their sharing agreement with respect to the
after they have exhausted the property of the vendor.
fruits existing at the time of redemption.
o What if the subject property has fruits, would that be part of
Remember, in a deed of sale with a right of repurchase, there
the reimbursements by the vendor in case he decides to
is a true contract of sale and the ownership of the property is
redeem the property? So here, there is no reimbursement
transferred to the vendee. What about the creditors if they
those existing at the time of the redemption. Also take note
have a knowledge on the right to repurchase of the vendor?
of the pro-rata reimbursements.
So here and debtor ay yung vendor. Can the creditors redeem
the property in behalf of the vendor? They can only do so if
Article 1618. The vendor who recovers the thing sold shall
they have exhausted all the properties of the vendor/debtor.
receive it free from all charges or mortgages constituted by the vendee,
Kung meron pang ibang properties, they can not exercise the
but he shall respect the leases which the latter may have executed in
right of repurchase against the buyer.
good faith, and in accordance with the custom of the place where the
land is situated. (1520)
8) When Redemption Not Made
Article 1607. In case of real property, the consolidation of
Here, to bind the mortgagee, the right to repurchase must be
ownership in the vendee by virtue of the failure of the vendor to
registered. If not, the mortgagor will have the better right.
comply with the provisions of article 1616 shall not be recorded in
the Registry of Property without a judicial order, after the vendor
11) Equitable Mortgage
has been duly heard.
Definition
o An equitable mortgage is one which although lacking in some
The proceeding for consolidation of title is an ordinary civil
formality, or form or words, or other requisites demanded by
action where a complaint or petition must be filed.
a statute, nevertheless reveals the intention of the parties to
If such action for consolidation of ownership is denied charge real property as security for a debt, and contains
because the contract is found to be an equitable mortgage, nothing impossible or contrary to law. (Matanguihan vs. CA)
another action can be filed to collect on the indebtedness or o The essential requisites of an equitable mortgage are as
to foreclose the mortgage. follows:
If the buyer succeeds in proving that the transaction was That the parties entered into a contract denominated as
indeed a pacto de retro, the vendor is still given a period of 30 a contract of sale; and
days from the finality of the judgment within which to That the intention was to secure existing debt by the way
repurchase the property. of a mortgage.
1) When the 2 above-enumerated conditions are not proven, the
9) Grant of 30-day Redemption Right in Case of Litigation existence of any of the circumstances enumerated in Article 1602
Article 1606, par. 3. However, the vendor may still exercise cannot become the basis to treat the transaction as an equitable

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
46 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

mortgage. (San Pedro vs. Lee) duplicate copy of OCT No. 535 to respondent.
2) A contract should be construed as a mortgage or a loan instead of PET: alleges that when Maria Eniceo died in June 1975,
a pacto de retro sale when its terms are ambiguous or the Rufina Eniceo and the heirs of Maria Eniceo, who continued to
circumstances surrounding its execution or its performance are occupy the Antipolo property as owners, thought that the owners
incompatible or inconsistent with a sale. (Lapat vs. Rosario) duplicate copy of OCT No. 535 was lost.
3) The intention of the parties to an agreement is shown not 5 April 1988, the Eniceo heirs registered with the
necessarily by the terminology used therein but by all the Registry of Deeds a Notice of Loss dated 2 April 1988. The Eniceo
surrounding circumstances having a tendency to fix and determine heirs also filed a petition for the issuance of a new owners
the real nature of their design and understanding. (Molina vs. CA) duplicate copy.
RTC: certified true copy of OCT No. 535 contained no
Pactum Commissorium annotation in favor of any person, corporation or entity; ordered
Article 2088. The creditor cannot appropriate the the Registry of Deeds to issue a second owners copy of OCT No.
things given by way of pledge or mortgage, or dispose of 535 in favor of the Eniceo heirs and declared the original owners
them. Any stipulation to the contrary is null and void. copy of OCT NO. 535 cancelled and considered of no further
value.
Pactum commisorium is a stipulation for automatic vesting of ROD issued a second owners copy in favor of the Eniceo
title over the security in the creditor in case of the debtors heirs.
fault. PET states that as early as 1991, respondent knew of the
When a purported sale a retro is found to be an equitable RTC decision in LRC Case No. 584-A because respondent filed a
mortgage, the proper remedy in case the borrower refuses to criminal case against Rufina Eniceo and Leonila Bolina for giving
pay the price is to foreclose on the mortgage, and there can false testimony upon a material fact during the trial of LRC Case
be no loss of the purported sellers right to redeem since this No. 584-A.
would constitute the process as a pactum commissorium. In
that sometime in February 1995, Bolinas came to the
such a case, the return of the redemption price would
office of (Tronio), petitioners general manager, and
actually be equivalent to the payment of the principal loan,
offered to sell the Antipolo property. During an on-site
which would have the legal effect of extinguishing the
inspection, Tronio saw a house and ascertained that the
equitable mortgage as an ancillary security contract.
occupants were Bolinas relatives. Tronio also went to
the Registry of Deeds to verify the records on file.
Kings Properties vs. Galido Tronio ascertained that OCT No. 535 was clean and had
Facts no lien and encumbrances. After the necessary
18 April 1966, the HEIRS OF DOMINGO ENICEO, namely verification, petitioner decided to buy the Antipolo
Rufina Eniceo and Maria Eniceo, were awarded with Homestead property.
Patent No. 112947 consisting of four parcels of land (Antipolo 14 Mar 1995, RESP caused the annotation of his adverse
property). claim in OCT No. 535.
The issuance of the homestead patent was subject to 20 Mar 1995, the ENICEO HEIRS executed a deed of absolute sale
the following conditions: in favor of PET covering lots 3 and 4 of the Antipolo property
subject to the provisions of sections 118, 121, 122 and for P 500,000.
124 of Commonwealth Act No. 141, which provide that 5 April 1995, executed another deed of sale covering
except in favor of the Government or any of its lots 1 and 5 of the Antipolo property for P1,000,000.
branches, units or institutions, the land hereby acquired 17 August 1995, (DENR Secretary) approved the deed of
shall be inalienable and shall not be subject to sale between the Eniceo heirs and respondent.
incumbrance for a period of five (5) years next following RES filed a civil complaint against the Eniceo heirs and
the date of this patent, and shall not be liable for the petitioner; prayed for the cancellation of the certificates of title
satisfaction of any debt contracted prior to the issued in favor of petitioner, and the registration of the deed of
expiration of that period; that it shall not be alienated, sale and issuance of a new transfer certificate of title in favor of
transferred or conveyed after five (5) years and before respondent. DISMISSED.
twenty-five (25) years next following the issuance of
title, without the approval of the Secretary of Issue
Agriculture and Natural Resources; that it shall not be WHETHER THE ADVERSE CLAIM OF RESPONDENT OVER
incumbered, alienated, or transferred to any person, THE ANTIPOLO PROPERTY SHOULD BE BARRED BY LACHES;
corporation, association, or partnership not qualified to WHETHER THE DEED OF SALE DELIVERED TO RESPONDENT
acquire public lands under the said Act and its SHOULD BE PRESUMED AN EQUITABLE MORTGAGE PURSUANT TO
amendments; ARTICLE 1602(2) AND 1604 OF THE CIVIL CODE.
10 Sept 1973, a deed of sale covering the Antipolo
property was executed between RUFINA ENICEO and MARIA Ruling
ENICEO as vendors and respondent as vendee. Rufina Eniceo and THE CONTRACT BETWEEN THE ENICEO HEIRS AND
Maria Eniceo sold the Antipolo property to respondent RESPONDENT EXECUTED ON 10 SEPTEMBER 1973 WAS A
for P 250,000. A certain Carmen Aldana delivered the owners PERFECTED CONTRACT OF SALE. A contract is perfected once

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
47 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

there is consent of the contracting parties on the object certain which shows clearly and beyond doubt that they intended the
and on the cause of the obligation.In the present case, the object contract to be a mortgage and not a pacto de retro sale. Proof by
of the sale is the Antipolo property and the price certain parol evidence should be presented in court. Parol evidence is
is P250,000. admissible to support the allegation that an instrument in
THE CONTRACT OF SALE HAS ALSO BEEN writing, purporting on its face to transfer the absolute title to
CONSUMMATED because the vendors and vendee have property, was in truth and in fact given merely as security for the
performed their respective obligations under the contract. In a payment of a loan. The presumption of equitable mortgage under
contract of sale, the seller obligates himself to transfer the Article 1602 of the Civil Code is not conclusive. It may be rebutted
ownership of the determinate thing sold, and to deliver the same by competent and satisfactory proof of the contrary.
to the buyer, who obligates himself to pay a price certain to the PET: An equitable mortgage can be presumed because
seller. The execution of the notarized deed of sale and the the Eniceo heirs remained in possession of the Antipolo property.
delivery of the owners duplicate copy of OCT No. 535 to Apart from the fact that the Eniceo heirs remained in
respondent is tantamount to a constructive delivery of the object possession of the Antipolo property, petitioner has failed to
of the sale. substantiate its claim that the contract of sale was intended to
PET: the deed of sale is a forgery. The Eniceo heirs also secure an existing debt by way of mortgage . In fact, mere
claimed in their answer that the deed of sale is fake and spurious. tolerated possession is not enough to prove that the transaction
Forgery can never be presumed. The party alleging was an equitable mortgage.
forgery is mandated to prove it with clear and convincing PET has not shown any proof that the Eniceo heirs were
evidence. Whoever alleges forgery has the burden of proving it. indebted to respondent. On the contrary, the deed of sale
In this case, petitioner and the Eniceo heirs failed to discharge executed in favor of respondent was drafted clearly to convey
this burden. that the Eniceo heirs sold and transferred the Antipolo property
PET: the belated approval by the DENR Secretary, made to respondent. The deed of sale even inserted a provision about
within 25 years from the issuance of the homestead, to nullify the defrayment of registration expenses to effect the transfer of title
sale of the Antipolo property should be fatal. to respondent.
The sale of the Antipolo property cannot be annulled on This defense of equitable mortgage is available only to
the ground that the DENR Secretary gave his approval after 21 petitioners predecessors-in-interest who should have
years from the date the deed of sale in favor of respondent was demanded, but did not, for the reformation of the deed of sale.
executed. Eniceo heirs never presented the defense of equitable mortgage
No alienation, transfer, or conveyance of any homestead before the trial court. They claimed that the alleged deed of sale
after five years and before twenty-five years after the issuance of dated 10 Sept 1973 between Rufina Eniceo and Maria Eniceo was
title shall be valid without the approval of the Secretary of fake and spurious. The Eniceo heirs contended that even
Agriculture and Natural Resources, which approval shall not be assuming there was a contract, no consideration was involved. It
denied except on constitutional and legal grounds. was only in the Appellees Brief filed before the CA that the
Spouses Alfredo v. Spouses Borras : The failure to secure Eniceo heirs claimed as an alternative defense that the deed
the approval of the Secretary does not ipso factomake a sale should be presumed as an equitable mortgage.
void. The absence of approval by the Secretary does not a sale ALTHOUGH PETITIONER RAISED THE DEFENSE OF
made after the expiration of the 5-year period, for in such event EQUITABLE MORTGAGE IN THE LOWER COURT, HE CANNOT CLAIM
the requirement of Section 118 of the Public Land Act becomes THAT THE DEED WAS AN EQUITABLE MORTGAGE BECAUSE
merely directory or a formality. The approval may be secured PETITIONER WAS NOT A PRIVY TO THE DEED OF SALE DATED 10
later, producing the effect of ratifying and adopting the SEPTEMBER 1973. PETITIONER MERELY STEPPED INTO THE SHOES
transaction as if the sale had been previously authorized . OF THE ENICEO HEIRS. PETITIONER, WHO MERELY ACQUIRED ALL
PET: the deed of sale in favor of respondent is an THE RIGHTS OF ITS PREDECESSORS, CANNOT ESPOUSE A THEORY
equitable mortgage because the Eniceo heirs remained in THAT IS CONTRARY TO THE THEORY OF THE CASE CLAIMED BY THE
possession of the Antipolo property despite the execution of the ENICEO HEIRS.
deed of sale. The Court notes that the Eniceo heirs have not appealed
An EQUITABLE MORTGAGE is one which although the CAs decision, hence, as to the Eniceo heirs, the CAs decision
lacking in some formality, or form or words, or other requisites that the contract was a sale and not an equitable mortgage is
demanded by a statute, nevertheless reveals the intention of the now final. Since petitioner merely assumed the rights of the
parties to charge real property as security for a debt, and Eniceo heirs, petitioner is now estopped from questioning the
contains nothing impossible or contrary to law. The essential deed of sale.
requisites of an equitable mortgage are:
1) The parties entered into a contract denominated as a Petitioner is not a buyer in good faith
contract of sale; and PETITIONER PURCHASED THE ANTIPOLO PROPERTY ONLY
2) Their intention was to secure existing debt by way of a ON 20 MARCH 1995 AND 5 APRIL 1995 AS SHOWN BY THE DATES
mortgage. IN THE DEEDS OF SALE. ON THE SAME DATES, THE REGISTRY OF
Lim v. Calaguas : In order for the presumption of DEEDS ISSUED NEW TCTS IN FAVOR OF PETITIONER WITH THE
equitable mortgage to apply, there must be: (1) something in the ANNOTATED ADVERSE CLAIM. THE ADVERSE CLAIM REGISTERED
language of the contract; or (2) in the conduct of the parties PRIOR TO THE SECOND SALE CHARGED PETITIONER WITH

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
48 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

CONSTRUCTIVE NOTICE OF THE DEFECT IN THE TITLE OF ENICEO (5) When the vendor binds himself to pay the taxes on the
HEIRS. THEREFORE, PETITIONER CANNOT BE DEEMED AS A thing sold;
PURCHASER IN GOOD FAITH WHEN THEY BOUGHT AND (6) In any other case where it may be fairly inferred that the
REGISTERED THE ANTIPOLO PROPERTY. real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any other
obligation.
Discussion
In any of the foregoing cases, any money, fruits, or
WAS THE CONTRACT A SALE OR EQUITABLE MORTGAGE? THE
other benefit to be received by the vendee as rent or
CONTRACT BETWEEN THE ENICEO HEIRS AND RESPONDENT EXECUTED
otherwise shall be considered as interest which shall be
ON 10 SEPTEMBER 1973 WAS A PERFECTED CONTRACT OF SALE. A
subject to the usury laws.
contract is perfected once there is consent of the contracting parties on
- The existence of any one of the conditions, not a
the object certain and on the cause of the obligation.In the present case,
concurrence, nor an overwhelming number of such
the object of the sale is the Antipolo property and the price certain is
circumstances, suffices to give rise to the presumption
P250,000.
that the contract is an equitable mortgage.
THE CONTRACT OF SALE HAS ALSO BEEN CONSUMMATED
- Nonetheless, it should be noted that the presumption of
because the vendors and vendee have performed their respective
equitable mortgage is not conclusive it may be
obligations under the contract.
rebutted by competent and satisfactory proof to the
HOW DID THE ISSUE OF EQUITABLE MORTGAGE ARISE?It was
contrary.
the petitioner, in this case, who alleged that the deed of sale in favor of
- In order for the presumption of equitable mortgage to
respondent was an equitable mortgage because the Eniceo heirs
apply, there must be:
remained in possession of the Antipolo property despite the execution of
the deed of sale.
1. something in the language of the contract; or
---------------------------------- 2. in the conduct of the parties which shows clearly and beyond
doubt that they intended the contract to be a mortgage and
Rationale Behind the Provisions on Equitable not a pacto de retro sale. (Lim vs. Calaguas)
Mortgages
1) Articles 1602, 1603 and 1604 were designed to prevent Applicability to Deeds of Absolute Sale
circumvention of the laws on usury and the prohibition Article 1604. The provisions of article 1602 shall
against the creditor appropriating the mortgaged also apply to a contract purporting to be an absolute sale.
property. Courts have taken judicial notice of the well-known 1. For the provision to apply, 2 requisites must be present:
fact that contracts of sale with right of repurchase have been (1) That the parties entered into a contract
frequently used to conceal the true nature of a contract, that denominated as a contract of sale; and
is a loan secured by a mortgage. The wisdom of the (2) That their intention was to secure an existing debt
provisions cannot be ignored nor doubted considering that in by way of mortgage. (Tuazon vs. CA)
many cases unlettered persons or even those of average
intelligence invariably find themselves in no position Proof by Parole Evidence; Best Evidence Rule
whatsoever to bargain with the creditor. Besides, it is a fact There is no conclusive test to determine whether a
that in times of grave financial distress which render persons deed absolute on its face is really a simple loan
hard-pressed to meet even their basic needs or answer an accommodation secured by a mortgage.
emergency, such persons would have no choice but to sign a To determine whether a deed absolute in form is a
deed of absolute sale of property or a sale thereof with pacto mortgage in reality, the court is not limited to the written
de retro if only to obtain a much-needed loan from memorials of the transaction.
unscrupulous money lenders. (Matanguihan vs. CA) This is so because the decisive factor in evaluating
2) Since Article 1602 is remedial in nature, it was applied such agreement is the intention of the parties, as shown not
retroactively in cases prior to the effectivity of the New Civil necessarily by the terminology used in the contract but by all
Code. the surrounding circumstances, such as the relative situations
of the parties at that time; the attitudes, acts, conduct, and
When Presumed Equitable Mortgage declarations of the parties; the negotiations between them
Article 1602. The contract shall be presumed to be leading to the deed; and generally, all pertinent facts having a
an equitable mortgage, in any of the following cases: tendency to fix and determine the real nature of their design
(1) When the price of a sale with right to repurchase is and understanding.
unusually inadequate; As such, documentary and parol evidence may be
(2) When the vendor remains in possession as lessee or submitted and admitted to prove the intention of the parties.
otherwise; (Austria vs. Gonzales, Jr.)
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period of Effects When Sale Adjudged to be an Equitable
redemption or granting a new period is executed; Mortgage
(4) When the purchaser retains for himself a part of the Any money, fruits, or other benefit to be received by
purchase price; the vendee as rent or otherwise shall be considered as

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
49 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

interest which shall be subject to the usury laws. (Article and for value for she personally inquired from the Register of
1602) Deeds of the presence of any liens and encumbrances on the TCT
The apparent vendor may ask for the reformation of the of the subject property and found that the same was completely
instrument. (Article 1605) free therefrom. While she admitted that she had previous notice
For the court to decree that vendor-debtor to pay his that Dominador and a certain Lourdes Santos were in possession
outstanding loan to the vendee-creditor. (Banga vs. Bello) of the subject property, Jocelyn claimed that the said possessors
Where the trial court did not pass upon the mortgagors claim that already acknowledged her ownership thereof and even asked for
he had paid his mortgage obligation, a remand of the case to time to vacate. In the end, though, they refused to leave the
the trial court is in order, only for the purpose of determining premises.
whether the mortgage obligation had indeed been settled,
and if not, how much should the mortgagor pay to settle the Issues
same. (Banga vs. Bello) WHETHER OR NOT THE DEED OF SALE BETWEEN
DOMINADOR AND EULALIA IS VALID AND BINDING. No
Spouses Raymundo vs. Spouses Bandong WHETHER OR NOT JOCELYN IS A BUYER IN GOOD FAITH. No
Facts
Eulalia was engaged in the business of buying and Ruling
selling large cattle from different provinces within An equitable mortgage is one that - although lacking in
the Philippines. For this purpose, she employed biyaheros whose some formality, forms and words, or other requisites demanded
primary task involved the procuring of large cattle with the by a statute - nevertheless reveals the intention of the parties to
financial capital provided by Eulalia and delivering the procured charge a real property as security for a debt and contains
cattle to her for further disposal. In order to secure the financial nothing impossible or contrary to law.
capital she advanced for the biyaheros, Eulalia required them to The instances when a contract - regardless of its
surrender the Transfer Certificates of Title of their properties and nomenclature - may be presumed to be an equitable mortgage
to execute the corresponding Deeds of Sale in her favor. are enumerated in the Civil Code (1602).
Eulaliano longer required Dominador to post any For Articles 1602 and 1604 to apply, two requisites must
security in the performance of his duties. concur: one, the parties entered into a contract denominated as
Eulalia found that Dominador incurred shortage in his a contract of sale; and two, their intention was to secure an
cattle procurement operation in the amount existing debt by way of an equitable mortgage.
of P 70K. Dominador and his wife Rosalia then executed a Deed of There is no question
Sale in favor of Eulalia , covering a parcel of land. On the that Dominador and Eulalia entered into a contract of sale as
strength of the aforesaid deed, the subject property was evidenced by the document denominated as Deed of Sale signed
registered in the names of Eulalia and her husband. The subject by them.
property was thereafter sold by the In determining whether a deed absolute in form is a
Spouses Raymundo to Eulalias grandniece and herein co- mortgage, the court is not limited to the written memorials of
petitioner, Jocelyn Buenaobra. the transaction. The decisive factor in evaluating such
After the TCT of the subject property was transferred agreement is the intention of the parties, as shown not
to their names, the Spouses Buenaobra instituted an action necessarily by the terminology used in the contract but by all
for ejectment against the Spouses Bandong, seeking the eviction, the surrounding circumstances, such as the relative situation of
which the Spouses Bandong opposed on the ground that they are the parties at that time, the attitude acts, conduct, declarations
the rightful owners and possessors thereof. of the parties, the negotiations between them leading to the
Spouses Bandong instituted an action for annulment of deed, and generally, all pertinent facts having a tendency to fix
sale against Eulalia and Jocelyn on the ground that their consent and determine the real nature of their design and
to the sale of the subject property was vitiated by Eulalia after understanding.
they were served by Jocelyns counsel with the demand to In executing the said Deed of
vacate. The Spouses Bandong alleged that there was no sale Sale, Dominador and Eulalia never intended the transfer of
intended but only equitable mortgage for the purpose of ownership of the subject property but to burden the same with
securing the shortage incurred by Dominador in the amount an encumbrance to secure the indebtedness incurred
of P 70,000 while employed as biyahero by Eulalia. by Dominador on the occasion of his employment with Eulalia.
Eulalia countered that Dominador received from her a By Eulalias own admission, it was her customary
significant sum of money, either as cash advances for the business practice to require her biyaheros to deliver to her the
purpose of procuring large cattle or as personal loan, and when titles to their real properties and to execute in her favor the
he could no longer pay his obligations, the corresponding deeds of sale over the said properties as security
Spouses Bandong voluntarily ceded the subject property to her for the money she provided for their cattle procurement task,
by executing the corresponding deed of sale in her favor. Indeed, and since Dominador worked for Eulaliasbusiness for years, he
the Spouses Bandong personally appeared before the Notary was allowed to advance the money without any
Public and manifested that the deed was their own voluntary act security. Significantly, it was only after he incurred a shortage
and deed. that the sale contract was executed.
Jocelyn maintained that she was a buyer in good faith We are not inclined to believe the contention of the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
50 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

petitioners that Dominador ceded his property to Eulalia as sign the corresponding deeds of sale over said properties in her
payment for his obligation for it is contrary to human experience favor, as security. This alone should have put Jocelyn on guard
that a person would easily part with his property after sustaining for any possible abuses that Eulalia may commit with the titles
a debt. Rather, he would first look for means to settle his and the deeds of sale in her possession.
obligation, and the selling of a property on which the house that The glaring lack of good faith of Jocelyn is more
shelters him and his family stands, would be his last resort. The apparent in her own admission that she was aware
only reasonable conclusion that may be derived that Dominador and a certain Lourdes were in possession of the
from Dominadors act of executing a Deed of Sale in favor subject property.
of Eulalia is that the latter required him to do so in order to
ensure that he will subsequently pay his obligation to her. Discussion
The explicit provision of Article 1602 that any of those WHAT IS AN EQUITABLE MORTGAGE? An equitable mortgage is
circumstances would suffice to construe a contract of sale to be one that - although lacking in some formality, forms and words, or other
one of equitable mortgage is in consonance with the rule that requisites demanded by a statute - nevertheless reveals the intention of
the law favors the least transmission of property rights . To the parties to charge a real property as security for a debt and contains
stress, the existence of any one of the conditions under Article nothing impossible or contrary to law.
1602, not a concurrence, or an overwhelming number of such WHAT IS THE APPLICABLE INSTANCE AS PROVIDED BY ARTICLE
circumstances, suffices to give rise to the presumption that the 1602? When the vendor remains in possession as lessee or otherwise as
contract is an equitable mortgage. Dominador and his wife remained in possession of the property.
While we agree in the petitioners insistence that ----------------------------------
inadequacy of the price is not sufficient to nullify the contract of
sale, their persistence is, however, misplaced. It is worthy to
Heirs of Reyes vs. Reyes
note that the factual circumstances attendant in the case at bar
Facts
call not for the application of the legal and jurisprudential
ANTONIO REYES and his wife, LEONCIA MAG-ISA REYES,
principles on annulment of contract per se, but more aptly, of
were owners of a parcel of residential land with an area of 442
the provisions of Articles 1602 and 1604 of the Civil Code on the
square meters, more or less, located in Pulilan, Bulacan. On that
construction of the contract of sale as an equitable mortgage.
land they constructed their dwelling. The couple had four
The agreement between Dominador and Eulalia was
children, namely: (Jose, Sr.), (Teofilo), (Jose, Jr.) and (Potenciana).
not avoided in its entirety so as to prevent it from producing any
Antonio Reyes died intestate, and was survived by Leoncia and
legal effect at all. Instead, we construe that said transaction is an
their three sons, Potenciana having predeceased her father.
equitable mortgage, thereby merely altering the relationship of
Potenciana also died intestate, survived by her children, namely:
the parties from seller and buyer, to mortgagor and mortgagee,
Gloria, Maria, and Alfredo. Jose, Jr., and his family resided in the
while the subject property is not transferred but subjected to a
house of the parents, but Teofilo constructed on the property his
lien in favor of the latter.
own house, where he and his family resided.
Granting that the purchase price is adequate, the fact
On July 9, 1955, LEONCIA and her three sons executed a
that respondents remain in possession of the subject property
deed denominated Kasulatan ng Biling Mabibiling Muli, whereby
after its supposed sale is sufficient to support our finding that
they sold the land and its existing improvements to the SPOUSES
the contract is one of equitable mortgage and not of sale. To
FRANCIA for P500.00, subject to the vendors right to repurchase
reiterate, the existence of any one of the conditions under
for the same amount sa oras na sila'y makinabang. Potencianas
Article 1602, not a concurrence, or an overwhelming number of
heirs did not assent to that deed. Nonetheless, Teofilo and Jose,
such circumstances, suffices to give rise to the presumption
Jr. and their respective families remained in possession of the
that the contract is an equitable mortgage .
property and paid the realty taxes thereon.
Having threshed the issue that there was no sale in
Leoncia and her children did not repay the amount
favor of Eulalia but an equitable mortgage leads us to an
of P 500.00.
inevitable conclusion that she has no right to subsequently
SPOUSES FRANCIA both died intestate (i.e., Monica
transfer ownership of the subject property, in consonance with
Ajoco on September 16, 1963, and Benedicto Francia on January
the principle that nobody can dispose of what he does not
13, 1964).
have. One of the exceptions to this rule, however, can be found
ALEJANDRO, the son of Jose, Sr., first partially paid to
in Article 1506 of the Civil Code, wherein the seller
the Spouses Francia the amount of P265.00 for the obligation of
has voidable title to a property but his title has not yet been
Leoncia, his uncles and his father. Alejandro later paid the
nullified at the time of the sale, and the subsequent buyer of the
balance of P235.00. Thus, on Aug 11, 1970, the heirs of Spouses
property was in good faith.
Francia executed a deed entitled Pagsasa-ayos ng Pag-aari at
We are not convinced by the petitioners incessant
Pagsasalin, whereby they transferred and conveyed to Alejandro
assertion that Jocelyn is an innocent purchaser for value. To
all their rights and interests in the property for P500.00.
begin with, she is a grandniece of Eulalia and resides in the same
locality where the latter lives and conducts her principal Aug 21, 1970, executed a Kasulatan ng Pagmeme-
business. It is therefore impossible for her not to acquire ari, wherein he declared that he had acquired all the
knowledge of her grand aunts business practice of requiring rights and interests of the heirs of the Spouses Francia,
her biyaheros to surrender the titles to their properties and to including the ownership of the property, after the
vendors had failed to repurchase within the given

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
51 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

period. On the basis of the Kasulatan ng Pagmeme- 1st Issue


ari, Tax Declaration No. 3703 covering the WHETHER RESP WERE ALREADY BARRED FROM
property [7] was canceled by Tax Declaration No. CLAIMING THAT THE TRANSACTION ENTERED INTO BY THEIR
8715, effective 1971, issued to Alejandro. From then on, PREDECESSORS-IN-INTEREST WAS AN EQUITABLE MORTGAGE
he had paid the realty taxes for the property. AND NOT A PACTO DE RETRO SALE;
Oct 17, 1970, Alejandro, (Leoncia), and (Jose, Sr.)
executed a Magkakalakip na Salaysay by which Alejandro Ruling
acknowledged the right of Leoncia, Jose, Jr., and Jose, Sr. to THE AGREEMENT WAS AN EQUITABLE MORTGAGE. The
repurchase the property at any time for the same amount CA correctly concluded that the true agreement of the
of P 500.00. parties vis--vis the Kasulatan ng Biling Mabibiling Muli was an
Oct 22, 1970, Leoncia died intestate. She was survived equitable mortgage, not a pacto de retro sale. There was no
by Jose, Sr., Teofilo, Jose, Jr. and the heirs of Potenciana. Even dispute that the purported vendors had continued in the
after Leonicas death, Teofilo and Jose, Jr., with their respective possession of the property even after the execution of the
families, continued to reside in the property. agreement; and that the property had remained declared for
Tax Declaration 1228, under the name of Alejandro, was taxation purposes under Leoncias name, with the realty taxes
issued effective 1980. All of Leoncias sons eventually died due being paid by Leoncia, despite the execution of the
intestate, survived by their respective heirs. agreement. Such established circumstances are among the
Sep 2, 1993, Alejandro also died intestate. Surviving him badges of an equitable mortgage enumerated in Article 1602,
were his wife, Amanda Reyes, and their children, namely: paragraphs 2 and 5 of the Civil Code, to wit:
Consolacion Reyes, Eugenia Reyes-Elvambuena, Luciana Reyes- Art. 1602. The contract shall be presumed to be an
Mendoza, Pedrito S. Reyes, Merlinda Reyes-Famodulan, Eduardo equitable mortgage, in any of the following cases:
Reyes and June S. Reyes (respondents herein). (2) When the vendor remains in possession as lessee or
RESP AMANDA REYES asked the heirs of Teofilo and otherwise;
Jose, Jr., to vacate the property because she and her children (5) When the vendor binds himself to pay the taxes on
already needed it. After the PETs refused to comply, she filed a the thing sold;
complaint in the barangay, seeking their eviction from the The existence of any one of the conditions enumerated
property. When no amicable settlement was reached, the under Article 1602 of the Civil Code, not a concurrence of all or
Barangay Lupon issued a certification to file action to of a majority thereof, suffices to give rise to the presumption
the respondents on September 26, 1994. that the contract is an equitable mortgage. Consequently, the
PET Nenita R. de la Cruz and her brother Romeo Reyes contract between the vendors and vendees (SPS Francia) was an
also constructed their respective houses on the property. equitable mortgage.
RESP initiated this suit for quieting of title and
reconveyance. They alleged that their predecessor Alejandro had 2nd Issue
acquired ownership of the property by virtue of ARE THE PETITIONERS NOW BARRED FROM CLAIMING
the deed Pagsasa-ayos ng Pag-aari at Pagsasalin executed on THAT THE TRANSACTION UNDER THE KASULATAN NG BILING
Aug 11, 1970 by the heirs of the Spouses Francia; that on the MABIBILING MULI WAS AN EQUITABLE MORTGAGE BY THEIR
basis of such deed of assignment, Alejandro had consolidated his FAILURE TO REDEEM THE PROPERTY FOR A LONG PERIOD OF
ownership of the property via his Kasulatan ng Pagmeme- TIME?
ari; and that under the Magkasanib na Salaysay, Alejandro had Considering that sa oras na silay makinabang, the
granted to Leoncia, his father Jose, Sr., and his uncles, period of redemption stated in the Kasulatan ng Biling
Teofilo and Jose, Jr. the right to repurchase the property, but Mabibiling Muli, signified that no definite period had been
they had failed to do so. stated, the period to redeem should be ten years from the
PETs averred that the Kasulatan ng Biling Mabibiling execution of the contract, pursuant to Articles 1142 and 1144 of
Muli was an equitable mortgage, not a pacto de retro sale; the Civil Code. Thus, the full redemption price should have been
that the mortgagors had retained ownership of the property; paid by July 9, 1955; and upon the expiration of said 10-year
that the heirs of the Spouses Francia could not have validly sold period, mortgagees Spouses Francia or their heirs should
the property to Alejandro through the Pagsasaayos ng Pag-aari have foreclosed the mortgage, but they did not do so. Instead,
at Pagsasalin; that Alejandros right was only to they accepted Alejandros payments, until the debt was fully
seek reimbursement of the P 500.00 he had paid from the co- satisfied by August 11, 1970.
owners; and that Alejandro could not have also validly The acceptance of the payments even beyond the 10-
consolidated ownership through the Kasulatan ng Pagmeme- year period of redemption estopped the mortgagees heirs from
ari, because a consolidation of ownership could only be insisting that the period to redeem the property had already
effected via a court order. expired. Their actions impliedly recognized the continued
interposed a counterclaim for the declaration of the existence of the equitable mortgage. The conduct of the original
transaction as an equitable mortgage, and of their parties as well as of their successors-in-interest manifested that
property as owned in common by all the heirs of the parties to the Kasulatan ng Biling Mabibiling Muli really
Leoncia, Teofilo, Jose, Jr. and Jose, Sr. intended their transaction to be an equitable mortgage, not
a pacto de retro sale.

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
52 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

The acceptance of partial payments was absolutely mortgages disguised as sale contracts, like the one herein, are
incompatible with the idea of irrevocability of the title of primarily designed to curtail the evils brought about by
ownership of the purchaser upon the expiration of the term contracts of sale with right to repurchas e, particularly the
stipulated in the original contract for the exercise of the right of circumvention of the usury law and pactum
redemption. Thereby, the conduct of the parties manifested that commissorium. Courts have taken judicial notice of the well-
they had intended the contract to be a mortgage, not a pacto de known fact that contracts of sale with right to repurchase have
retro sale. been frequently resorted to in order to conceal the true nature
WHEN ALEJANDRO REDEEMED THE PROPERTY of a contract, that is, a loan secured by a mortgage. It is a reality
ON AUGUST 11, 1970, HE DID NOT THEREBY BECOME A CO- that grave financial distress renders persons hard-pressed to
OWNER THEREOF, BECAUSE HIS FATHER JOSE, SR. WAS THEN meet even their basic needs or to respond to an emergency,
STILL ALIVE. Alejandro merely became the assignee of the leaving no choice to them but to sign deeds of absolute sale of
mortgage, and theproperty continued to be co-owned by Leoncia property or deeds of sale with pacto de retro if only to obtain the
and her sons Jose, Sr., Jose Jr., and Teofilo. As an assignee of the much-needed loan from unscrupulous money lenders. This
mortgage and the mortgage credit, Alejandro acquired only the reality precisely explains why the pertinent provision of the Civil
rights of his assignors, nothing more. He himself confirmed so in Codeincludes a peculiar rule concerning the period of
the Magkasanib na Salaysay, whereby he acknowledged the co- redemption, to wit:
owners right to redeem the property from him at any time ( sa Art. 1602. The contract shall be presumed to be an
ano mang oras) for the same redemption price of P 500.00. equitable mortgage, in any of the following cases:
Alejandros confirmation in the Magkasanib na (3)When upon or after the expiration of the right to
Salaysay of the co-owners right to redeem was made despite 15 repurchase another instrument extending the period of
years having meanwhile elapsed from the execution of the redemption or granting a new period is executed;
original Kasulatan ng Biling Mabibiling Muli (July 9, 1955) until The law allows a new period of redemption to be agreed
the execution of the Magkasanib na Salaysay (August 21, 1970). upon or granted even after the expiration of the equitable
NEITHER DID THE PET FAILURE TO INITIATE AN ACTION mortgagors right to repurchase, and treats such extension as one
FOR REFORMATION WITHIN TEN YEARS FROM THE EXECUTION of the indicators that the true agreement between the parties is
OF THE KASULATAN NG BILING MABIBILING MULI BAR THEM an equitable mortgage, not a sale with right to repurchase. It was
FROM INSISTING ON THEIR RIGHTS IN THE PROPERTY. The indubitable, therefore, that the Magkasanib na
records show that the parties in the Kasulatan ng Biling Salaysay effectively afforded to Leoncia, Teofilo, Jose, Sr. and
Mabibiling Muli had abided by their true agreement under the Jose, Jr. a fresh period within which to pay to Alejandro the
deed, to the extent that they and their successors-in-interest still redemption price of P 500.00.
deemed the agreement as an equitable mortgage despite the
lapse of 15 years from the execution of the purported pacto de
Heirs of the Late Spouses Balite vs. Lim
retro sale. Hence, an action for reformation of the Kasulatan ng
Doctrine
Biling Mabibiling Muli was unnecessary, if not superfluous,
A deed of sale that allegedly states a price lower than the
considering that the reason underlying the requirement for an
true consideration is nonetheless binding between the parties
action for reformation of instrument has been to ensure that the
and their successors in interest. Furthermore, a deed of sale in
parties to a contract abide by their true intended agreement.
which the parties clearly intended to transfer ownership of the
The Kasulatan ng Pagmeme-ari executed by Alejandro
property cannot be presumed to be an equitable mortgage under
on August 21, 1970 was ineffectual to predicate the exclusion of
Article 1602 of the Civil Code. Finally, an agreement that
the petitioners and their predecessors in interest from insisting
purports to sell in metes and bounds a specific portion of an
on their claim to the property. Alejandros being an assignee of
unpartitioned co-owned property is not void; it shall effectively
the mortgage did not authorize him or his heirs to appropriate
transfer the sellers ideal share in the co-ownership.
the mortgaged property for himself without violating the
prohibition against pactum commissorium contained in Article
Facts
2088 of the Civil Code, to the effect that [t]he creditor cannot
The SPS BALITE were the owners of a parcel of land.
appropriate the things given by way of pledge or mortgage, or
When Aurelio died intestate [in 1985, his wife], Esperanza Balite,
dispose of them[;] [a]ny stipulation to the contrary is null and
and their children, PET Antonio Balite, Flor Balite-Zamar,
void.
Visitacion Balite-Difuntorum, Pedro Balite, Pablo Balite, Gaspar
The respondents, as Alejandros heirs, were entirely
Balite, Cristeta (Tita) Balite and Aurelio Balite, Jr.,
bound by his previous acts as their predecessors-in-interest.
inherited the subject property and became co-owners thereof,
Thus, Alejandros acknowledgment of the effectivity of the
with Esperanza inheriting an undivided share of 9,751 sqm.
equitable mortgage agreement precluded the respondents from
ESPERANZA became ill and was in dire need of money
claiming that the property had been sold to him with right to
for her hospital expenses. She, through her daughter, Cristeta,
repurchase.
offered to sell to RODRIGO LIM, her undivided share for the
price of P1M. Esperanza and Rodrigo agreed that, under
3rd Issue the Deed of Absolute Sale , to be executed by Esperanza over the
WHAT WAS THE EFFECT OF THE MAGKASANIB NA property, it will be made to appear that the purchase price of the
SALAYSAY? The provisions of the Civil Code governing equitable property would be P150,000.00, although the actual price agreed

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
53 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

upon by them for the property was P1M. 13, 1997, the court issued an Order to the RD to cancel OCT No.
April 16, 1996, ESPERANZA executed a Deed of Absolute 10824 and to issue a certificate of title over Lot 243 under the
Sale in favor of Rodrigo N. Lim over a portion of the property. name of Rodrigo.
They also executed, on the same day, a Joint Affidavit under PET filed a complaint against Rodrigo for Annulment of
which they declared that the real price of the property was P1M , Sale, Quieting of Title, Injunction and Damages .
payable to Esperanza, by installments. had a Notice of Lis Pendens , dated June 23, 1997,
Only Esperanza and two of her children, namely, annotated, on June 27, 1997, at the dorsal portion of
Antonio and Cristeta, knew about the said transaction. Geodetic OCT No. 10824.
Engineer Bonifacio G. Tasic conducted a subdivision survey of the RD cancelled, on July 10, 1997, OCT No. 10824 and
property and prepared a Sketch Plan showing a portion of the issued [TCT] No. 6683 to and under the name of Rodrigo over Lot
property, identified as Lot 243 with an area of 10,000 sqm, under 243. The Notice of Lis Pendens was carried over in TCT No. 6683.
the name Rodrigo N. Lim. secured a loan from RCBC in the amount of P 2M and
The Sketch Plan was signed by Rodrigo and Esperanza. executed a REM over the subject property as security
Thereafter, Rodrigo took actual possession of the property and therefor.
introduced improvements thereon. He remitted to Esperanza and
Cristeta sums of money in partial payments of the property for Issue
which he signed Receipts . WHETHER THE DEED OF ABSOLUTE SALE IS VALID.
Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. learned of
the sale, and on Aug 21, 1996, they wrote a letter to the ROD, Ruling
saying that they were not informed of the sale of a portion of the Validity of the Sale
said property by their mother nor did they give their consent PET: Deed of Absolute Sale is null and void, because the
thereto, and requested the [RD] to: undervalued consideration indicated therein was intended for an
hold in abeyance any processal or approval of any unlawful purpose -- to avoid the payment of higher capital gains
application for registration of title of ownership in the taxes on the transaction. According to them, the appellate courts
name of the buyer of said lot, which has not yet been reliance on Article 1353 of the Civil Code was erroneous. The
partitioned judicially or extrajudicially, until the issue of Joint Affidavit is not proof of a true and lawful cause, but an
the legality/validity of the above sale has been cleared. integral part of a scheme to evade paying lawful taxes and
Aug 24, 1996, ANTONIO received from Rodrigo, the registration fees to the government.
amount of P 30K in partial payment of the property and signed RELATIVE SIMULATION. The parties intended to be
a Receipt for the said amount, declaring therein that the bound by the Contract, even if it did not reflect the actual
remaining balance of P350,000.00 shall personally and directly purchase price of the property. That the parties intended the
be released to my mother, Esperanza Balite, only . However, agreement to produce legal effect is revealed by the letter of
Rodrigo drew and issued RCBC Check No. 309171, dated Aug 26, Esperanza Balite to respondent dated October 23, 1996 and
1996, payable to the order of Antonio Balite in the amount petitioners admission that there was a partial payment
of P 30K in partial payment of the property. of P 320,000 made on the basis of the Deed of Absolute Sale.
Oct 1, 1996, ESPERANZA executed a Special Power of There was an intention to transfer the ownership of over 10,000
Attorney appointing her son, Antonio, to collect and receive, square meters of the property. Clear from the letter is the fact
from Rodrigo, the balance of the purchase price of the property that the objections of her children prompted Esperanza to
and to sign the appropriate documents therefor. unilaterally withdraw from the transaction.
Oct 23, 1996, signed a letter addressed to Rodrigo Since the Deed of Absolute Sale was merely relatively
informing the latter that her children did not agree to simulated, it remains valid and enforceable. However, the parties
the sale of the property to him and that she was shall be bound by their real agreement for a consideration
withdrawing all her commitments until the validity of of P 1M as reflected in their Joint Affidavit.
the sale is finally resolved. Petitioners cannot be permitted to unmake the Contract
Oct 31, 1996, Esperanza died intestate and was survived voluntarily entered into by their predecessor, even if the stated
by her aforenamed children. consideration was included therein for an unlawful purpose. The
RODRIGO caused to be published, on Nov 14, 21 and 28, binding force of a contract must be recognized as far as it is
1996, the aforesaid Deed of Absolute Sale . Earlier, on November legally possible to do so. However, the government has the right
21, 1996, Antonio received the amount of P10K from Rodrigo for to collect the proper taxes based on the correct purchase price.
the payment of the estate tax due from the estate of Esperanza. Being onerous, the Contract had for its cause or
Also, the capital gains tax, in the amount of P14,506.25, based on consideration the price of P 1M. Both this consideration as well
the purchase price of P 150,000.00 appearing on the Deed of as the subject matter of the contract -- Esperanzas share in the
Absolute Sale, was paid to the BIR which issued a Certification of property covered by OCT No. 10824 -- are lawful. The motives of
said payments, on March 5, 1997, authorizing the registration of the contracting parties for lowering the price of the sale -- in the
the Deed of Absolute Sale. [RD] refused to issue a title over the present case, the reduction of capital gains tax liability -- should
property to and under the name of Rodrigo unless and until the not be confused with the consideration. Although illegal, the
owners duplicate of OCT No. 10824 was presented to [it]. motives neither determine nor take the place of the
Rodrigo filed a Petition for Mandamus against the RD. On June consideration.

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
54 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

P1M as reflected in their Joint Affidavit.


Deed of Sale not an Equitable Mortgage Again, emphasis on the two requisites. For Articles 1602 and
PET: even assuming that the deed of sale is valid it 1604 to apply, two requisites must concur: one, the parties entered into a
should only be deemed an equitable mortgage pursuant to contract denominated as a contract of sale; and, two, their intention was
Articles 1602 and 1604 of the Civil Code, because the price was to secure an existing debt by way of mortgage.
clearly inadequate. They add that the presence of only one of the And here, there was merely a relative simulated contract.
circumstances enumerated under Article 1602 would be sufficient ----------------------------------
to consider the Contract an equitable mortgage. We disagree.
For Articles 1602 and 1604 to apply, two requisites must LEGAL REDEMPTION
concur: one, the parties entered into a contract denominated as
a contract of sale ; and, two, their intention was to secure an The other time type of redemption is the legal redemption.
existing debt by way of mortgage . What is the difference? Obviously, in conventional redemption, there
THERE WAS AN ABSOLUTE SALE. Indeed, the existence must be an agreement of the parties. In legal redemption, even if the
of any of the circumstances enumerated in Article 1602, not a parties do not agree, there is a right of redemption. So you have the
concurrence or an overwhelming number thereof, suffices to give definition under Article 1619.
rise to the presumption that a contract purporting to be an
absolute sale is actually an equitable mortgage. In the present 1) Definition
case, however, the Contract does not merely purport to be an Article 1619. Legal redemption is the right to be subrogated,
absolute sale. The records and the documentary evidence upon the same terms and conditions stipulated in the contract, in the
introduced by the parties indubitably show that the Contract is, place of one who acquires a thing by purchase or dation in payment, or
indeed, one of absolute sale. There is no clear and convincing by any other transaction whereby ownership is transmitted by onerous
evidence that the parties agreed upon a mortgage of the subject title.
property.
The voluntary, written and unconditional acceptance of Rationale:
contractual commitments negates the theory of equitable Legal redemption is in the nature of a privilege created by law
mortgage. There is nothing doubtful about the terms of, or the partly for reasons of public policy and partly for the benefit and
circumstances surrounding, the Deed of Sale that would call for convenience of the redemptioner, to afford him a way out of what
the application of Article 1602. The Joint Affidavit indisputably might be a disagreeable or inconvenient association into which he has
confirmed that the transaction between the parties was a sale. been thrust. It is intended to minimized co-ownership. The law grants a
PET never raised as an issue before the trial court the co-owner the exercise of the said right of redemption when the shares
fact that the document did not express the true intent and of the other owners are sold to "a third person." A third person, within
agreement of the contracting parties. They raised mere the meaning of this Article, is anyone who is not a co-owner. (Basa vs.
suppositions on the inadequacy of the price, in support of their Aguilar)
argument that the Contract should be considered as an equitable
mortgage. 2) Salient Distinctions Between Conventional and Legal Rights of
We find no basis to conclude that the purchase price of Redemption
the property was grossly inadequate. Petitioners did not present
any witness to testify as to the market values of real estate in the Conventional Legal
subjects locale. They made their claim on the basis alone of Strictly speaking, a right a A legal right of redemption does not
the P 2M loan that respondent had been able to obtain from the retro can only be have to be expressly reserved (it is as
RCBC. This move did not sufficiently show the alleged constituted by express right granted by law), and covers sales
inadequacy of the purchase price. A mortgage is a mere security reservation in a contract of and other onerous transfers of title.
for a loan. There was no showing that the property was the only sale at time of perfection.
security relied upon by the bank; or that the borrowers had no Right a retro is in favor of A legal right of redemption is given to
credit worthiness, other than the property offered as collateral. the seller. a third-party to the sale.
The exercise of the right a The exercise of the legal right of
Discussion retro extinguishes the redemption, although it extinguishes
WHY WAS THERE AN ALLEGATION OF AN EQUITABLE underlying contract of sale the original sale, actually constitutes a
MORTGAGE? For the part of the petitioners, even assuming that the deed as though there was never new sale in substitution of the original
of sale is valid it should only be deemed an equitable mortgage pursuant any contract at all. sale.
to Articles 1602 and 1604 of the Civil Code, because the price was clearly
inadequate. They add that the presence of only one of the circumstances 3) Legal Redemption under Civil Code
enumerated under Article 1602 would be sufficient to consider the
Contract an equitable mortgage. a) Among Co-Heirs
WHAT WAS REALLY THE PRICE? The Contract had for its cause or Article 1088. Should any of the heirs sell his hereditary rights
consideration the price of P1M. Since the Deed of Absolute Sale was to a stranger before the partition, any or all of the co-heirs may be
merely relatively simulated, it remains valid and enforceable. However, subrogated to the rights of the purchaser by reimbursing him for the
the parties shall be bound by their real agreement for a consideration of price of the sale, provided they do so within the period of one month

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
55 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

from the time they were notified in writing of the sale by the vendor. owner and the redemption is demanded by the other co-
owner or co-owners. (Avila vs. Barabat)
There is no right of legal redemption available to the co-heirs
when the sale covers a particular property of the estate, since d) Distinguishing Between the Rights of Redemption of Co-heirs and
the legal right of redemption applies only to the sale by an Co-Owners
heir of his hereditary right. (Plan vs. IAC)
The heirs who participated in the execution of the Co-Heir Co-Owner
extrajudicial settlement which included the sale to a third An heir may validly redeem for The Court has construed Article
person of their pro indiviso shares in the property are bound himself alone the hereditary 1620 to include the doctrine that a
by the same, which the co-heirs who did not participate rights sold by another co-heir redemption by a co-owner of the
would have the right to redeem their shares pursuant to (Article 1088). property owned in common, even
Article 1088 of the Civil Code. (Cua vs. Vargas) when he uses his own fund, within
the period prescribed by law,
b) Among Co-Owners inures to the benefit of all the
Article 1620. A co-owner of a thing may exercise the right of other co-owners.
redemption in case the shares of all the other co-owners or of any of If the sale is the hereditary When the sale consists of an
them, are sold to a third person. If the price of the alienation is grossly right itself, fully or in part, in interest in some particular
excessive, the redemptioner shall pay only a reasonable one. the abstract sense, without property or properties of the
Should two or more co-owners desire to exercise the right of specifying any particular inheritance, the right of
redemption, they may only do so in proportion to the share they may object, the right recognized in redemption that arises in favor of
respectively have in the thing owned in common. Article 1088 exists. the other co-heirs is that
recognized in Article 1620.
Let us say you have A and B who are co-owners of this When the subject matter sold When the subject matter sold was
property. So when can we apply 1620? If B sells his was a particular property of a particular property of the estate
undivided interest in this property to C plus the same was the estate and not hereditary and not hereditary rights, the
made with 3rd person before partition and redemption must rights, the redemption by a co- redemption by a co-owner/co-heir
be made within the period provided by law, A can redeem the heir of hereditary rights sold is redounded to the benefit of all
property from C. So that is Aricle 1620, redemption available only for his own account. other co-owners.
to a co-owner of the property.
In second paragraph, what if we have 2 or more co-owners e) Among Adjoining Owners of Rural Lands
who wants to purchase the property. So let us say you have Article 1621. The owners of adjoining lands shall also have
here the owners, A, B, and C. And C will now sell his share to the right of redemption when a piece of rural land, the area of which
X. A and B will be given the right to dedeem the property but does not exceed one hectare, is alienated, unless the grantee does not
between them, who will be preferred? Wala. It will be in own any rural land.
proportion to their shares. This right of redemption is not This right is not applicable to adjacent lands which are
available if C will share his share to B. Ang requirement diti is separated by brooks, drains, ravines, roads and other apparent
that the sale has to be in favor of a third person because the servitudes for the benefit of other estates.
law is not in favor co-ownership. Mas gusto ng law na isa lang If two or more adjoining owners desire to exercise the right of
ang may-ari. redemption at the same time, the owner of the adjoining land of
smaller area shall be preferred; and should both lands have the same
Article 1623, par. 2. The right of redemption of co-owners area, the one who first requested the redemption.
excludes that of adjoining owners.
What would happen here? Let us say A, B and C adjoining
Under this provision, in the absence of the notice required, owners of rural lands. If B would sell his property to X, A and
yung 30-day period hindi magtakbo. Mere verbal notice is not C is given the right by the law to redeem the same if their
sufficient. Dapat may written notice. area does not exceed 1 hectares. So both A and C is given the
right. But who will be prefereed? The one with smaller area
c) Effect of De Facto Partition Among Co-Heirs and Co-Owners will be preferred. If they have the same area, then the one
Although an inherited property is succeeded to by the who first requested of the redemption.
heirs as co-owners thereof, if in fact they have partitioned Also take note whwn we talk about adjoining lands, dapat
it among themselves and each have occupied and treated magkatabi talaga. So does not include lands separated by
definite portions thereof as their own, co-ownership has roads and other apparent servitudes.
ceased even though the property is covered under one
title, and the sale by one of the heirs of his definite f) Among Adjoining Owners of Urban Land
portion cannot trigger the right of redemption in favor of Article 1622. Whenever a piece of urban land which is so
the other heirs. (Vda. De Ape vs. CA) small and so situated that a major portion thereof cannot be used for
The right of redemption to be exercised, co-ownership any practical purpose within a reasonable time, having been bought
must exist at the time of the conveyance is made by a co- merely for speculation, is about to be re-sold, the owner of any

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
56 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

adjoining land has a right of pre-emption at a reasonable price. A judgment debtor, or his successor-in-interests, or a creditor
If the re-sale has been perfected, the owner of the adjoining having a lien by attachment, judgment or mortgage on the property
land shall have a right of redemption, also at a reasonable price. sold at public auction shall have 1 year from date of resignation of the
When two or more owners of adjoining lands wish to exercise certificate of sale, and not just 12 months after the sale as provided
the right of pre-emption or redemption, the owner whose intended use previously under the old Rules of Court, to redeem the property by
of the land in question appears best justified shall be preferred. paying the purchaser at the public auction the amount of his purchase,
with interest up to the time of redemption, together with amount of
This time you have an urban land. Notice here that unlike any assessments or taxes which the purchaser may have paid thereon
Articles 1620 and 1621, under 1622, a right of pre-emption is after purchase, with interest thereon. (Sections 27 and 28, Rule 39 of
also given. If you have two or more owners who wish to the Rules of Court)
exercise the right, the owner whose intended use is best
justified shall be preferred. Co-owners will also be preferred d) Redemption in Extrajudicial Foreclosure
over adjoining owners. In all cases in which an extrajudicial foreclosure sale has been
made under a special power, the debtor, his successors-in-interests or
g) Sale of Credit in Litigation any judicial creditor or judgment creditor of said debtor, or any person
Article 1634. When a credit or other incorporeal right in having lien on the property subsequent to the mortgage or deed of
litigation is sold, the debtor shall have a right to extinguish it by trust under which the property has been sold, may redeem the same
reimbursing the assignee for the price the latter paid therefor, the within 1 year from and after the date of the sale and registration
judicial costs incurred by him, and the interest on the price from the day thereof. (Section 6, Act No. 3135)
on which the same was paid.
A credit or other incorporeal right shall be considered in e) Redemption in Judicial Foreclosure
litigation from the time the complaint concerning the same is No right to redeem is granted to the debtor-mortgagor when
answered. there has been a judicial foreclosure of a real estate mortgage, except
The debtor may exercise his right within thirty days from the when the mortgagee is a bank or a banking institution. (GSIS vs. CFI of
date the assignee demands payment from him. Iloilo Branch III)

h) When Legal Redemption Period Begins to Run f) Foreclosures by Banking Institutions


Article 1623. The right of legal pre-emption or redemption In the event of foreclosure, whether judicially or extra-
shall not be exercised except within thirty days from the notice in judicially, of any mortgage on real estate which is security for any loan
writing by the prospective vendor, or by the vendor, as the case may be. or other credit accommodation granted, the mortgagor or debtor
The deed of sale shall not be recorded in the Registry of Property, unless whose real property has been sold for the full or partial payment of his
accompanied by an affidavit of the vendor that he has given written obligation shall have the right within one year after the sale of the real
notice thereof to all possible redemptioners. estate, to redeem the property by paying the amount due under the
mortgage deed, with interest thereon at rate specified in the mortgage,
Under this provision, in the absence of the notice required, and all the costs and expenses incurred by the bank or institution from
yung 30-day period hindi magtakbo. Mere verbal notice is not the sale and custody of said property less the income derived
sufficient. Dapat may written notice. therefrom. However, the purchaser at the auction sale concerned
whether in a judicial or extra-judicial foreclosure shall have the right to
4) Other Instances when Right of Legal Redemption is Granted enter upon and take possession of such property immediately after the
date of the confirmation of the auction sale and administer the same in
a) Redemption of Homesteads accordance with law. Any petition in court to enjoin or restrain the
Every conveyance of land acquired under the free patent conduct of foreclosure proceedings instituted pursuant to this provision
homestead provisions, when proper, shall be subject to repurchase by shall be given due course only upon the filing by the petitioner of a
the applicant, his widow, or legal heirs, within a period of 5 years from bond in an amount fixed by the court conditioned that he will pay all
the date of the conveyance (Sec. 119, Public land Act). the damages which the bank may suffer by the enjoining or the
The seller cannot avail himself of the right to repurchase restraint of the foreclosure proceeding. Notwithstanding Act 3135,
without returning to the buyer the price of the sale (Article 1616). A juridical persons whose property is being sold pursuant to an
mere notice of intent to redeem is not sufficient. extrajudicial foreclosure, shall have the right to redeem the property in
accordance with this provision until, but not after, the registration of
b) Redemption in Tax Sales the certificate of foreclosure sale with the applicable Register of Deeds
In case of delinquency sale of property of a taxpayer for which in no case shall be more than three (3) months after foreclosure,
failure to pay tax assessments, within 1 year from the date of sale, the whichever is earlier. Owners of property that has been sold in a
delinquent taxpayer, or anyone for him, shall have the right of foreclosure sale prior to the effectivity of this Act shall retain their
redeeming property by paying to the Revenue District Officer the redemption rights until their expiration. (Section 47, RA 8791)
amount of the public taxes, penalties, and interest thereon from the
date of delinquency to the date of sale, together with interests on the g) Period of Redemption When Rural Bank Forecloses
purchase price (Section 214, National Internal Revenue Code of 1997). If the land, previously received under patent, is mortgaged to
a rural ban under RA 720, the mortgagor may redeem the property
c) Redemption by Judgment Debtor within 2 years from the date of foreclosure or from the registration of

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
57 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

the sheriffs certificate of sale at such foreclosure if the property is not security and protection, a male person who looked familiar to them
covered or is covered, respectively, by Torrens title. took the subject vehicle out of the compound.
If the mortgagor fails to exercise such right, he or his heirs On November 20, 1996, Sps. Mamaril filed a complaint for
may still repurchase the property within 5 years from expiration of the damages before the Regional Trial Court (RTC) of Manila, Branch 39,
2 year redemption period pursuant to Section 119 of the Public Land against BSP, AIB, Pea and Gaddi. In support thereof, Sps. Mamaril
Act, where the subject matter was obtained through a homestead averred that the loss of the subject vehicle was due to the gross
patent. negligence of the above-named security guards on-duty who allowed
the subject vehicle to be driven out by a stranger despite their
h) Legal Right to Redeem Under Agrarian Reform Code agreement that only authorized drivers duly endorsed by the owners
In the event that the landholding is sold to a third person could do so. Pea and Gaddi even admitted their negligence during
without the knowledge of the agricultural lessee, the latter is granted the ensuing investigation. Notwithstanding, BSP and AIB did not heed
by law the right to redeem it within 180 days from notice in writing and Sps. Mamaril's demands for a conference to settle the matter. They
at a reasonable price and consideration. (Section 1, RA 3844). therefore prayed that Pea and Gaddi, together with AIB and BSP, be
held liable for: (a) the value of the subject vehicle and its accessories
in the aggregate amount of P300,000.00; (b) P275.00 representing
daily loss of income/boundary reckoned from the day the vehicle was
ASSIGNMENT lost; (c) exemplary damages; (d) moral damages; (e) attorney's fees;
and (f) cost of suit.
In its Answer, BSP denied any liability contending that not
NATURE OF ASSIGNMENT IN THE SCHEME OF THINGS only did Sps. Mamaril directly deal with AIB with respect to the
Article 1624. An assignment of creditors and other manner by which the parked vehicles would be handled, but the
incorporeal rights shall be perfected in accordance with the provisions parking ticket8 itself expressly stated that the "Management shall not
of article 1475. be responsible for loss of vehicle or any of its accessories or article left
therein." It also claimed that Sps. Mamaril erroneously relied on the
WHAT MAKES ASSIGNMENT DIFFERENT? Guard Service Contract. Apart from not being parties thereto, its
In its most general and comprehensive sense, an assignment provisions cover only the protection of BSP's properties, its officers,
is "a transfer or making over to another of the whole of any property, and employees.
real or personal, in possession or in action, or of any estate or right In addition to the foregoing defenses, AIB alleged that it has
therein. It includes transfers of all kinds of property, and is peculiarly observed due diligence in the selection, training and supervision of its
applicable to intangible personal property and, accordingly, it is security guards while Pea and Gaddi claimed that the person who
ordinarily employed to describe the transfer of non-negotiable choses drove out the lost vehicle from the BSP compound represented
in action and of rights in or connected with property as distinguished himself as the owners' authorized driver and had with him a key to the
from the particular item or property." (PNB vs. CA) subject vehicle. Thus, they contended that Sps. Mamaril have no
cause of action against them.
ASSIGNMENT AS AN EQUITABLE MORTGAGE
Like species sale used as a device to secure an obligation, Issue
assignment of intangibles is also resorted to as a means to secure loans. Whether or not BSP should be held liable for the loss of their
In both cases, the principles pertaining to equitable mortgages will vehicle based on the Guard Service Contract and the parking ticket it
apply. issued

Ruling
The petition lacks merit.
LEASE Article 20 of the Civil Code provides that every person, who,
contrary to law, willfully or negligently causes damage to another,
shall indemnify the latter for the same. Similarly, Article 2176 of the
Spouses Mamaril vs. BSP (Boy Scouts of the Philippines) Civil Code states:
Art. 2176. Whoever by act or omission causes
Facts damage to another, there being fault or negligence, is
Spouses Benjamin C. Mamaril and Sonia P. Mamaril (Sps. obliged to pay for the damage done. Such fault or
Mamaril) are jeepney operators since 1971. They would park their six negligence, if there is no preexisting contractual relation
(6) passenger jeepneys every night at the Boy Scout of the Philippines' between the parties, is called a quasi-delict and is governed
(BSP) compound located at 181 Concepcion Street, Malate, Manila for by the provisions of this Chapter.
a fee of P300.00 per month for each unit. On May 26, 1995 at 8 In this case, it is undisputed that the proximate cause of the
o'clock in the evening, all these vehicles were parked inside the BSP loss of Sps. Mamaril's vehicle was the negligent act of security guards
compound. The following morning, however, one of the vehicles with Pea and Gaddi in allowing an unidentified person to drive out the
Plate No. DCG 392 was missing and was never recovered. According to subject vehicle. Proximate cause has been defined as that cause,
the security guards Cesario Pea (Pea) and Vicente Gaddi (Gaddi) of which, in natural and continuous sequence, unbroken by any efficient
AIB Security Agency, Inc. (AIB) with whom BSP had contracted for its intervening cause, produces the injury or loss, and without which the

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
58 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

result would not have occurred. space in the lot, locks the car and takes the key with him, the
Neither will the vicarious liability of an employer under possession and control of the car, necessary elements in bailment, do
Article 2180 of the Civil Code apply in this case. It is uncontested that not pass to the parking lot operator, hence, the contractual
Pea and Gaddi were assigned as security guards by AIB to BSP relationship between the parties is one of lease.
pursuant to the Guard Service Contract. Clearly, therefore, no In the instant case, the owners parked their six (6) passenger
employer-employee relationship existed between BSP and the jeepneys inside the BSP compound for a monthly fee of P300.00 for
security guards assigned in its premises. Consequently, the latter's each unit and took the keys home with them. Hence, a lessor-lessee
negligence cannot be imputed against BSP but should be attributed to relationship indubitably existed between them and BSP.
AIB, the true employer of Pea and Gaddi. On this score, Article 1654 of the Civil Code provides that
Nor can it be said that a principal-agent relationship existed "the lessor (BSP) is obliged: (1) to deliver the thing which is the object
between BSP and the security guards Pea and Gaddi as to make the of the contract in such a condition as to render it fit for the use
former liable for the latter's complained act. Article 1868 of the Civil intended; (2) to make on the same during the lease all the necessary
Code states that "by the contract of agency, a person binds himself to repairs in order to keep it suitable for the use to which it has been
render some service or to do something in representation or on behalf devoted, unless there is a stipulation to the contrary; and (3) to
of another, with the consent or authority of the latter." The basis for maintain the lessee in the peaceful and adequate enjoyment of the
agency therefore is representation, which element is absent in the lease for the entire duration of the contract." In relation thereto,
instant case. Records show that BSP merely hired the services of AIB, Article 1664 of the same Code states that "the lessor is not obliged to
which, in turn, assigned security guards, solely for the protection of its answer for a mere act of trespass which a third person may cause on
properties and premises. Nowhere can it be inferred in the Guard the use of the thing leased; but the lessee shall have a direct action
Service Contract that AIB was appointed as an agent of BSP. Instead, against the intruder." Here, BSP was not remiss in its obligation to
what the parties intended was a pure principal-client relationship provide Sps. Mamaril a suitable parking space for their jeepneys as it
whereby for a consideration, AIB rendered its security services to BSP. even hired security guards to secure the premises; hence, it should
Notwithstanding, however, Sps. Mamaril insist that BSP not be held liable for the loss suffered by Sps. Mamaril.
should be held liable for their loss on the basis of the Guard Service It bears to reiterate that the subject loss was caused by the
Contract that the latter entered into with AIB and their parking negligence of the security guards in allowing a stranger to drive out
agreement with BSP. plaintiffs-appellants' vehicle despite the latter's instructions that only
In order that a third person benefited by the second their authorized drivers may do so. Moreover, the agreement with
paragraph of Article 1311, referred to as a stipulation pour autrui, may respect to the ingress and egress of Sps. Mamaril's vehicles were
demand its fulfillment, the following requisites must concur: (1) There coordinated only with AIB and its security guards, without the
is a stipulation in favor of a third person; (2) The stipulation is a part, knowledge and consent of BSP. Accordingly, the mishandling of the
not the whole, of the contract; (3) The contracting parties clearly and parked vehicles that resulted in herein complained loss should be
deliberately conferred a favor to the third person - the favor is not recovered only from the tort feasors (Pea and Gaddi) and their
merely incidental; (4) The favor is unconditional and uncompensated; employer, AIB; and not against the lessor, BSP.
(5) The third person communicated his or her acceptance of the favor Anent Sps. Mamaril's claim that the exculpatory clause:
before its revocation; and (6) The contracting parties do not represent, "Management shall not be responsible for loss of vehicle or any of its
or are not authorized, by the third party. However, none of the accessories or article left therein" contained in the BSP issued parking
foregoing elements obtains in this case. ticket was void for being a contract of adhesion and against public
It is undisputed that Sps. Mamaril are not parties to the policy, suffice it to state that contracts of adhesion are not void per se.
Guard Service Contract. Neither did the subject agreement contain It is binding as any other ordinary contract and a party who enters into
any stipulation pour autrui. And even if there was, Sps. Mamaril did it is free to reject the stipulations in its entirety. If the terms thereof
not convey any acceptance thereof. Thus, under the principle of are accepted without objection, as in this case, where plaintiffs-
relativity of contracts, they cannot validly claim any rights or favor appellants have been leasing BSP's parking space for more or less 20
under the said agreement. years, then the contract serves as the law between them. Besides, the
Defendant-appellant sought the services of defendant AIB parking fee of P300.00 per month or P10.00 a day for each unit is too
Security Agency for the purpose of the security and protection of its minimal an amount to even create an inference that BSP undertook to
properties, as well as that of its officers and employees, so much so be an insurer of the safety of plaintiffs-appellants' vehicles.
that in case of loss of [sic] damage suffered by it as a result of any act
or negligence of the guards, the security agency would then be held Discussion:
responsible therefor. There is absolutely nothing in the said contract As to the obligations enumerated in Article 1654, all of these
that would indicate any obligation and/or liability on the part of the were performed by BSP. BSP was not remiss in its obligation to provide
parties therein in favor of third persons such as herein plaintiffs- Sps. Mamaril a suitable parking space for their jeepneys as it even
appellees. hired security guards to secure the premises; hence, it should not be
Moreover, the Court concurs with the finding of the CA that held liable for the loss suffered by Sps. Mamaril. Is there a contract of
the contract between the parties herein was one of lease as defined agency between the BSP and the guards? None. The basis for agency
under Article 1643 of the Civil Code. It has been held that the act of therefore is representation, which element is absent in this case. BSP
parking a vehicle in a garage, upon payment of a fixed amount, is a merely hired the services of AIB solely for the protection of its
lease. Even in a majority of American cases, it has been ruled that properties and premises. It bears to reiterate that the subject loss was
where a customer simply pays a fee, parks his car in any available caused by the negligence of the security guards in allowing a stranger to

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
59 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

drive out plaintiffs-appellants' vehicle despite the latter's instructions 1. Demand delivery of the thing leased;
that only their authorized drivers may do so. Moreover, the agreement 2. To be in peaceful and adequate enjoyment of the thing leased for the
with respect to the ingress and egress of Sps. Mamaril's vehicles were duration of the contract;
coordinated only with AIB and its security guards, without the 3. To sub-lease the property unless there is a contrary stipulation;
knowledge and consent of BSP. Accordingly, the mishandling of the 4. If the thing leased was partially destroyed due to a fortuitous event,
parked vehicles that resulted in herein complained loss should be to choose between proportional reduction of rent or rescission of the
recovered only from the tort feasors (Pea and Gaddi) and their contract of lease;
employer, AIB; and not against the lessor, BSP. 5. To suspend payment in case lessor fails to make necessary repairs or
Anent Sps. Mamaril's claim that the exculpatory clause: to maintain peaceful and adequate enjoyment;
"Management shall not be responsible for loss of vehicle or any of its 6. To terminate lease if it bring imminent and serious danger to the life
accessories or article left therein" contained in the BSP issued parking or health of the lessee or it becomes uninhabitable;
ticket was void for being a contract of adhesion and against public 7. To also ask for proportional reduction for urgent repairs made by
policy, suffice it to state that contracts of adhesion are not void per se. lessor wherein the repairs last for more than 40 days
It is binding as any other ordinary contract and a party who enters into
it is free to reject the stipulations in its entirety. If the terms thereof are OBLIGATIONS OF THE LESSEE:
accepted without objection, as in this case, where plaintiffs-appellants Art. 1657. The lessee is obliged:
have been leasing BSP's parking space for more or less 20 years, then (1) To pay the price of the lease according to the terms stipulated;
the contract serves as the law between them. Besides, the parking fee (2) To use the thing leased as a diligent father of a family, devoting it to
of P300.00 per month or P10.00 a day for each unit is too minimal an the use stipulated; and in the absence of stipulation, to that which may
amount to even create an inference that BSP undertook to be an be inferred from the nature of the thing leased, according to the custom
insurer of the safety of plaintiffs-appellants' vehicles. of the place;
---------------------------------- (3) To pay expenses for the deed of lease. (1555) If theres breach as to
these pre-obligations on the part of the lessee, the lessor can ask for
Take note that those persons disqualified to enter into a rescission plus damages or damages only.
contract of sale enumerated in Article 1490 and Article 1491 are also
disqualified to enter into a contract of lease. Other obligations of the lessee:
1. To notify the owner for urgent repairs;
Art. 1490. The husband and the wife cannot sell property to 2. To tolerate the work for urgent repairs;
each other, except: 3. To notify the lessor of every usurpation or untoward act of third
(1) When a separation of property was agreed upon in the marriage persons;
settlements; or 4. To return the thing leased at the end of the lease;
(2) When there has been a judicial separation or property under Article 5. Liable for loss or deterioration due to his own fault/negligence, or
191. (1458a) due to the fault of the members of his household or his own guests and
visitors;
Art. 1491. The following persons cannot acquire by purchase,
even at a public or judicial auction, either in person or through the In case the lessee fails to pay or comply with the conditions
mediation of another: of the contract, the lessor is entitled to the twin remedies of:
(1) The guardian, the property of the person or persons who may be 1. Rescission
under his guardianship; 2. Judicial Ejectment (Unlawful Detainer)
(2) Agents, the property whose administration or sale may have been
entrusted to them, unless the consent of the principal has been given; Take note, you cannot take the law into your own hands. You
(3) Executors and administrators, the property of the estate under must resort to the law. You must first demand the lessee to vacate then
administration; demand to pay the unpaid rent. If ayaw pa rin, file a case of unlawful
(4) Public officers and employees, the property of the State or of any detainer.
subdivision thereof, or of any government-owned or controlled
corporation, or institution, the administration of which has been When and where to pay?
intrusted to them; this provision shall apply to judges and government Art. 1679. If nothing has been stipulated concerning the
experts who, in any manner whatsoever, take part in the sale; place and the time for the payment of the lease, the provisions or
(5) Justices, judges, prosecuting attorneys, clerks of superior and Article 1251 shall be observed as regards the place; and with respect to
inferior courts, and other officers and employees connected with the the time, the custom of the place shall be followed.
administration of justice, the property and rights in litigation or levied
upon an execution before the court within whose jurisdiction or territory Art. 1251. Payment shall be made in the place designated in
they exercise their respective functions; this prohibition includes the act the obligation. There being no express stipulation and if the
of acquiring by assignment and shall apply to lawyers, with respect to undertaking is to deliver a determinate thing, the payment shall be
the property and rights which may be the object of any litigation in made wherever the thing might be at the moment the obligation was
which they may take part by virtue of their profession. constituted. In any other case the place of payment shall be the
(6) Any others specially disqualified by law. domicile of the debtor. If the debtor changes his domicile in bad faith or
after he has incurred in delay, the additional expenses shall be borne by
RIGHTS OF THE LESSEE: him. These provisions are without prejudice to venue under the Rules of

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
60 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

Court. for the lease of a portion of the land. The lease contract was for a
period of one (1) year. After the expiration of the lease contract, the
Can you assign your right as a lessee? petitioner continued occupying the subject premises without paying
1649. The lessee cannot assign the lease without the consent the rent. The respondent then sent a letter to the petitioner
of the lessor, unless there is a stipulation to the contrary. (n) demanding that she vacate the subject premises and pay
compensation for its use and occupancy. The petitioner, however,
General Rule: Cannot assign refused to heed these demands. In her answer, the petitioner alleged
Exception: Contrary stipulation in the contract Sublease, that the respondent had no right to collect rentals because the subject
premises are located inside the property of the Philippine National
Differentiate this to the right of the lessee to sublease. Railways (PNR). She also added that the respondent had no certificate
Art. 1650. When in the contract of lease of things there is no of title over the subject premises. The petitioner further claimed that
express prohibition, the lessee may sublet the thing leased, in whole or her signature in the contract of lease was obtained through the
in part, without prejudice to his responsibility for the performance of respondents misrepresentation. She likewise maintained that she is
the contract toward the lessor. So thats why if you are the lessor, make now the owner of the subject premises as she had been in possession
sure that in the contract, may stipulation na hindi pwedeng i-sublease since 1944.
otherwise walang violation ang leasee if mag-sublease siya.
ISSUE: Who has a better right over the property?
OBLIGATIONS OF THE SUB-LESEEE
Art. 1651. Without prejudice to his obligation toward the RULING: Manotok has a better right of possession over the
sublessor, the sublessee is bound to the lessor for all acts which refer to subject premises. The only issue to be resolved in an unlawful
the use and preservation of the thing leased in the manner stipulated detainer case is physical or material possession of the property
between the lessor and the lessee. (1551) Take note that the sublessee involved, independent of any claim of ownership by any of the parties
shall be subsidiarily liable to the lessor for any rent due to the lessee. involved. Thus, when the relationship of lessor and lessee is
established in an unlawful detainer case, any attempt of the parties to
EXPIRATION OF THE LEASE inject the question of ownership into the case is futile, except insofar
It would cease upon the date fixed by the parties without as it might throw light on the right of possession. In the present case,
need of demand. If the lessee continues possession despite expiration it is undisputed that the petitioner and the respondent entered into a
of the contract over the lessors objection, then he will be considered as contract of lease.
a possessor in bad faith. This would be relevant in case for example The petitioner did not deny that she signed the lease
yung mga improvements dba, possessor in BF or GR in your Property. contract (although she maintained that her signature was obtained
through the respondents misrepresentations). It bears emphasis that
RENEWAL the respondent did not give the petitioner a notice to vacate upon the
Option to renew stipulations shall be valid between the expiration of the lease contract in December 1997 (the notice to
parties, even if they have stipulated that it will be exercised by the vacate was sent only on August 5, 1998), and the latter continued
lessee or one of the parties. There also instances where it is upon the enjoying the subject premises for more than 15 days, without
discretion of the lessor or lessee as the case may be. Where the objection from the respondent. By the inaction of the respondent as
renewal of the original lease is subject to the terms and conditions as lessor, there can be no inference that it intended to discontinue the
may be agreed upon by the parties, then the renewal is not automatic. lease contract. An implied new lease was therefore created pursuant
This more common in contracts of lease, it can be renewed subject to to Article 1670 of the Civil Code. All the requisites for an implied new
the terms and conditions as may be agreed upon by the parties. What if lease or tacit reconduccion are present.
nag-expire na yung lease but the lessor did not take any action, the As to the rent, Article 1687 of the Civil Code on implied new
lessee continued possession, then we have what we called implied new lease provides:
lease, also known as Tacita Reconduccion. Article 1687. If the period for the lease has not
An implied new lease or tacita reconduccion will set in when been fixed, it is understood to be from year to year, if the
the following requisites are found to exist: rent agreed upon is annual; from month to month, if it is
a) the term of the original contract of lease has expired; monthly; from week to week, if the rent is weekly; and from
b) the lessor has not given the lessee a notice to vacate; and day to day, if the rent is to be paid daily.
c) the lessee continued enjoying (possession) the thing leased Since the rent was paid on a monthly basis, the period of
for fifteen days with the acquiescence of the lessor. lease is considered to be from month to month, in accordance with
d)Notice to the contrary by either party should not have been Article 1687 of the Civil Code. [A] lease from month to month is
previously given; considered to be one with a definite period which expires at the end
e)No express contract has been entered into after the old of each month upon a demand to vacate by the lessor. When the
contract has ended respondent sent a notice to vacate to the petitioner on August 5,
1998, the tacita reconduccion was aborted, and the contract is
Samelo vs. Manotok deemed to have expired at the end of that month. [A] notice to vacate
FACTS: constitutes an express act on the part of the lessor that it no longer
Manotok Services, Inc. alleged that it is the administrator of a consents to the continued occupation by the lessee of its property.
parcel of land and that it entered into a contract with the petitioner After such notice, the lessees right to continue in possession ceases

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
61 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

and her possession becomes one of detainer. nag-increase nang P8,000.00, ayaw na magbayad so pwede na paalisin.
What do we mean by year-to-year? Example: Agreement is Jan-Dec 31
for 1 million for 1 year. So mag-renew yan, implied new lease, 1 year
Dizon vs. CA din. Pag-end nung 1 year, pwede na siya magsabi nang sige, 1.2 million
FACTS: na for the next year. But as long as it is implied, kunin ninyo yung mode
This is about a contract of lease between Overland Express Lines, of payment, not yung contract period. Pag month-to-month,
Inc. and Regina Dizon, et.al. In this case, they entered into a contract pagkatapos ng isang month, pwede ka nang magdagdag. Okay? So
of lease with option to buy involving a land in Quezon City. The term essentially, just take note of that with regard to implied new lease.
of the lease was for 1 year commencing from May 16, 1974 up to May ----------------------------------
15, 1975. During that period, Overland was given an option to
purchase for the amount of P3,000.00 per square meter. However
Zosima vs. Salimbagat
after that expiration of 1 year, Overland continued to stay on the land
even after the lapse of 15 days. It was only on June 1976 when there
Facts: Zosima, a domestic corporation, has been the
was an increase in the rent for P8,000.00 that Overland failed to pay.
registered owner of an office building situated at 2414 Legarda Street,
Thus, an action was filed by Dizon et.al. for ejectment. However,
Sampaloc, Manila. Sometime in April 1993, Zosima entered into a
Overland argued that they cannot be evicted from the premises
contract with Salimbagat for the lease of the office building. The lease
because they have already tendered an amount of P300,000.00 to the
was on a yearly basis with the initial monthly rate of P 8,000.00 that is
alleged agent of the Dizons, namely Alice Dizon.
subject to an annual increase. In 1999, the monthly rental fee
reached P 14,621.00. In March 2000, no monthly fee was paid
ISSUE/S:
because the contract of lease was allegedly not renewed.
1.W/N Dizon has the right to evict Overland. YES
On June 20, 2003, Zosima, through counsel, sent a formal
2. W/N the option still exists. NO
letter of demand to Salimbagat, requiring her to pay her arrears within
fifteen (15) days from receipt of the demand letter and to vacate the
RULING:
property. Despite the receipt of the demand letter, Salimbagat refused
1ST ISSUE The Supreme Court that yes, Dizon has the right
to vacate the property and to pay her alleged rental obligations.
to evict Overland. In this case, Overland, even after the lapse of the
On November 5, 2003, Zosima filed a case for unlawful
lease period continued to stay on the premises. There was no explicit
detainer against Salimbagat. Zosima alleged that from April 2000 to
renewal of the contract. However, by the very reason that they were
October 2003, Salimbagat had accumulated arrears in her rental
allowed to stay even after 15 days, there came about an implied new
payments amounting to P 628,703.00.
lease. In an implied new lease, the Supreme Court said that since they
On March 26, 2004, Salimbagat filed her answer alleging
were paying in a monthly basis, it is implied that the new contract will
that she was not occupying the property of Zosima. Salimbagat
also expire on a month-to-month basis. Hence, in 1976, when
alleged that although she was occupying a property using the same
Overland failed to pay the P8,000.00 increase in the rent, Dizon
address denominated as "2414 Legarda Street, Sampaloc, Manila," it
already had the right to evict Overland.
was not the same office building that Zosima owned, but a warehouse
2nd ISSUE The Supreme Court ruled that the option does
on a dried estero located at the back of the office building. Salimbagat
not exist anymore. First of all, during the one year period, Overland
argued that the office building which belonged to Zosima was
did not exercise the said option. Second, granting arguendo that the
demolished to pave the way for the construction of the Light Rail
option still exists, Overland cannot exercise it anymore because of the
Transit (LRT) Line II Project. She further alleged that she bought the
fact that when there is an implied new lease, the only thing that
warehouse for P 300,000.00 as evidenced by a Deed of Conditional
would be renewed are those terms that are germane to the property
Sale, and she had declared the property for taxation purposes.
i.e the payment of the rent. This would not apply to special
Zosimas contention that although the lease contract had
agreements i.e the option to purchase. When an implied new lease
already expired, the principle of implied new lease or tacita
came to existence, the stipulation as to the option to buy was not
reconduccion existed by operation of law between the periods of April
carried over.
2000 and June 2003 is not correct. An implied new lease will set in if
it is shown that: (a) the term of the original contract of lease has
Discussion expired; (b) the lessor has not given the lessee a notice to vacate; and
Were not talking about the period of the contract. What (c) the lessee continued enjoying the thing leased for 15 days with the
were talking about is the rent, the mode of rental payment. Notice that acquiescence of the lessor. This acquiescence may be inferred from
in both cases, the contract was good for 1 year. But what was the rent the failure of the lessor to serve notice to vacate upon the lessee.This
imposed for the implied new lease? Month to month. Why? Were principle is provided for under Article 1670 of the Civil Code:
looking at the agreement. The agreement was P3,000.00/month, Article 1670. If at the end of the contract the
P6,000.00/month from January-December 31. Pag-end sa Dec 31, i- lessee should continue enjoying the thing leased for fifteen
renew not for another year but on a month-to-month basis because of days with the acquiescence of the lessor, and unless a notice
their agreement as to the payment na month-to-month. to the contrary by either party has previously been given, it
Now, in the case of Dizon, since month-to-month, maabot na is understood that there is an implied new lease, not for the
sa point na pwede niya nang i-increase for the next period. When were period of the original contract, but for the time established
talking about implied new lease, after the expiration of the period, yun in Articles 1682 and 1687. The other terms of the original
na nga maging month-to-month siya and then pwede na magsingil ang contract shall be revived. [emphasis and underscoring ours]
lessor for a different lease payment. Like what happened in the case,

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
62 of 63
LAW ON SALES | Atty. Jazzie Sarona-Lozare, CPA st
Ateneo de Davao University College of Law | 1 Sem (2016-2017)

The cited Article 1687, on the other hand, provides: Under Section 5 of the Rent Control Act of 2009, the law
Article 1687. If the period for the lease has not covers only certain residential units:
been fixed, it is understood to be from year to year, if the (g) when the total monthly rent does not exceed P10,000 in the
rent agreed upon is annual; from month to month, if it is National Capital Region and other highly urbanized cities; and
monthly; from week to week, if the rent is weekly; and from (b) when the total monthly rent does not exceed P5,000 in all
day to day, if the rent is to be paid daily. However, even other areas. Monthly rent in this case does not include utilities
though a monthly rent is paid, and no period for the lease and other charges.
has been set, the courts may fix a longer term for the lease
after the lessee has occupied the premises for over one year. Residential units which fall under R.A. No. 9653s coverage
If the rent is weekly, the courts may likewise determine a have limits on annual rent increases. Under Section 4 of the law, the
longer period after the lessee has been in possession for monthly rent shall not be increased by more than seven (7%) percent
over six months. In case of daily rent, the courts may also fix annually for the same lessee.
a longer period after the lessee has stayed in the place for Example: If a condominium unit located in Paranaque City,
over one month. [emphasis ours] which is within the National Capital Region, charges a rent which does
Thus, after the expiration of the contract of lease, the not exceed P10,000, the lessor may not increase the rent by more than
implied new lease should have only been in a monthly basis. In this 7% annually. However, if the monthly rent exceeds P10,000, the lessor
regard, we find it significant that it was only on June 20, 2003, or three may increase the rent by ten (10%) percent annually. Also, the law
(3) years after the last payment of the monthly rentals, that Zosima provides that the lessor cannot demand more than one month advance
filed the complaint for unlawful detainer against Salimbagat. It does and two months deposit.
not help that Zosima failed to adduce any additional evidence to rebut Also, as in the civil code, the rent control law provides that
the allegation that by April 2000, no office building stood to be leased assignment without the written consent of the lessor is prohibited.
because it had been demolished to pave way for the construction of Here, subleasing without the written consent is prohibited, unlike in the
the LRT Line II Project. civil code wherein it is allowed as long as there is no stipulation to the
We further note that Salimbagat was able to produce tax contrary.
declarations and a copy of the Deed of Conditional Sale as proof of her Also, assignment is considered as void.
right to possess the warehouse located on a dried estero and
adjoining the demolished building she used to lease. While tax
receipts and declarations are not incontrovertible proof of ownership, --- End of 3rd Exam Coverage ---
they constitute, at least, proof that the holder has a claim of title over
the property. In practical terms under the circumstances of this case,
we see it absurd for Salimbagat to be occupying a property and paying
monthly rentals on it when she owns and occupies the property just
behind it.

Also take note:


Art. 1682. The lease of a piece of rural land, when its duration
has not been fixed, is understood to have been for all the time
necessary for the gathering of the fruits which the whole estate leased
may yield in one year, or which it may yield once, although two or more
years have to elapse for the purpose.

Art. 1687. If the period for the lease has not been fixed, it is
understood to be from year to year, if the rent agreed upon is annual;
from month to month, if it is monthly; from week to week, if the rent is
weekly; and from day to day, if the rent is to be paid daily. However,
even though a monthly rent is paid, and no period for the lease has
been set, the courts may fix a longer term for the lease after the lessee
has occupied the premises for over one year. If the rent is weekly, the
courts may likewise determine a longer period after the lessee has been
in possession for over six months. In case of daily rent, the courts may
also fix a longer period after the lessee has stayed in the place for over
one month.

RENT CONTROL ACT OF 2009


Take note of Rent Control Law (RA 9341), effectivity of which
has been extended by the Housing and Urban Development
Coordinating Council (HUDCC) until 31 December 2015. It covers
residential units.

2-SR 2016 | BALGOA | CANDOLITA | CHIU | DAYANGHIRANG IV | DULAY | ESTILLORE | MASANGUID | PUBLICO | SABRIDO | SINGANON | TITO
63 of 63

Похожие интересы