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SUGGESTED ANSWER:
The contract between A and B is a sale not
Assignment of Credit vs. Subrogation (1993) an agency to sell because the price is
Peter Co, a trader from Manila, has dealt payable by B upon 60 days from delivery
business with Allied Commodities in even if B is unable to resell it. If B were an
Hongkong for five years. All through the agent, he is not bound to pay the price if he
years, Peter Co accumulated an is unable to resell it.
indebtedness of P500,000.00 with Allied As a buyer, ownership passed to B upon
Commodities. Upon demand by its agent in delivery and, under Art. 1504 of the Civil
Manila, Peter Co paid Allied Commodities by Code, the thing perishes for the owner.
check the amount owed. Upon deposit in the Hence, B must still pay the price.
payee's account in Manila, the check was
dishonored for insufficiency of funds. For Contract of Sale; Marital Community Property;
and in consideration of P1.00, Allied Formalities (2006)
Commodities assigned the credit to Hadji Spouses Biong and Linda wanted to sell
Butu who brought suit against Peter Co in their house. They
the RTC of Manila for recovery of the found a prospective buyer, Ray. Linda
amount owed. Peter Co moved to dismiss negotiated with Ray for the sale of the
the complaint against him on the ground property. They agreed on a fair price of P2
that Hadji Butu was not a real party in Million. Ray sent Linda a letter confirming
interest and, therefore, without legal his intention to buy the property. Later,
capacity to sue and that he had not agreed another couple, Bernie and Elena, offered a
to a subrogation of creditor. Will Peter Co's similar house at a lower price of P 1.5
defense of absence of Million. But Ray insisted on buying the
agreement to a subrogation of creditor house of Biong and Linda for sentimental
prosper? reasons. Ray prepared a deed of sale to be
signed by the couple and a manager's check
SUGGESTED ANSWER: for P2 Million. After receiving the P2
No, Co's defense will not prosper. This is not Million, Biong signed the deed of sale.
a case of However, Linda was not able to sign it
subrogation, but an assignment of credit. because she was abroad. On her return, she
ASSIGNMENT OF CREDIT is the process of refused to sign the document saying she
transferring the right of the changed her mind. Linda filed suit for
assignor to the assignee. The assignment nullification of the deed of sale and for
may be done either gratuitously or moral and exemplary damages against Ray.
onerously, in which case, the assignment has Will the suit prosper? Explain. (2.5%)
an effect similar to that of a sale (Nyco Sales ALTERNATIVE ANSWER:
Corp.v.BA Finance Corp. G.R No.71694. No, the suit will not prosper. The contract of
Aug.16, 1991 200 SCRA 637). As a result of sale was perfected when Linda and Ray
the assignment, the plaintiff acquired all the agreed on the object of the
rights of sale and the price [Art. 1475, New Civil
the assignor including the right to sue in his Code]. The consent of Linda has already
own name as the legal assignee. In been given, as shown by her agreement to
assignment, the debtor's consent is not the price of the sale. There is therefore
essential for the validity of the assignment consent on her part as the consent need not
(Art. 1624; 1475. CC; Rodriguez v. CA, et al, be given in any specific form. Hence, her
G. R No. 84220, consent may be given by implication,
March 25. 1992 207 SCRA 553). especially since she was aware of, and
ALTERNATIVE ANSWER: participated in the sale of the property
No, the defense of Peter Co will not prosper. (Pelayo v. CA, G.R. No. 141323, June 8,
Hadji Butu 2005). Her action for moral and exemplary
validly acquired his right by an assignment damages will also not prosper because the
of credit under case does not fall under any of those
Article 1624 of the Civil Code. However, the mentioned in Art. 2219 and 2232 of the Civil
provisions on the contract of sale (Article Code.
ALTERNATIVE ANSWER:
1475 Civil Code) will apply, and the
The suit will prosper. Sale of community
transaction is covered by the Statute of
property requires
Frauds. (Art. 1403 par. (2) Civil Code)
written consent of both spouses. The failure
or refusal of
Conditional Sale vs. Absolute Sale (1997)
Linda to affix her signature on the deed of
Distinguish between a conditional sale, on
sale, coupled with her express declaration of
the one hand, and an absolute sale, on the
opposing the sale negates any valid consent
other hand.
on her part. The consent of Biong by himself
SUGGESTED ANSWER: is insufficient to effect a valid sale of
A CONDITIONAL SALE is one where the community property (Art. 96, Family Code;
vendor is Abalos v. Macatangay, G.R. No. 155043,
granted the right to unilaterally rescind the September 30, 2004).
contract predicated on the fulfillment or
non-fulfillment, as the case may be, of the Does Ray have any cause of action
prescribed condition. An ABSOLUTE SALE against Biong and Linda? Can he also
is one where the title to the property is not recover damages from the spouses?
reserved to the vendor or if the vendor is Explain. (2.5%)
not granted the right to rescind the contract Considering that the contract has already
based on the fulfillment or nonfulfillment, as been perfected and taken out of the
the case may be, of the prescribed operation of the statute of frauds, Ray can
condition. compel Linda and Biong to observe the form
required by law in order for the property to
Contract of Sale vs. Agency to Sell (1999) be registered in the name of Ray which can
A granted B the exclusive right to sell his be filed together with the action for the
brand of Maong recovery of house [Art. 1357 New Civil
pants in Isabela, the price for his Code]. In the alternative, he can recover the
merchandise payable within 60 days from amount of Two million pesos
delivery, and promising B a commission of (P2,000,000.00) that he paid. Otherwise, it
20% on all sales. After the delivery of the would result in solutio indebiti or unjust
merchandise to B but before he could sell enrichment.
any of them, Bs store in Isabela was Ray can recover moral damages on the
completely burned without his fault, ground that the action filed by Linda is
together with all of A's pants. Must B pay A clearly an unfounded civil suit which falls
for his lost pants? Why? (5%) under malicious prosecution {Ponce v.
Legaspi, G.R. No. 79184, May 6,1992).
Contract to Sell (2001) Double Sales (2001)
Arturo gave Richard a receipt which states: On June 15, 1995, Jesus sold a parcel of
Receipt Received from Richard as down registered land to
payment for my Jaime. On June 30, 1995, he sold the same
1995 Toyota Corolla with plate No. XYZ-1 land to Jose. Who has a better right if: a) the
23.............. first sale is registered ahead of the second
P50.000.00 sale, with knowledge of the latter. Why?
Balance payable: 12/30/01........ P50 000.00 (3%) b) the second sale is registered ahead
September 15, 2001. of the first sale, with knowledge of the
(Sgd.) Arturo latter? Why? (5%)
Does this receipt evidence a contract to sell? SUGGESTED ANSWER:
Why? (5%) (a) The first buyer has the better right if his
SUGGESTED ANSWER: sale was first to be registered, even though
It is a contract of sale because the seller did the first buyer knew of the second sale. The
not reserve fact that he knew of the second sale at the
ownership until he was fully paid. time of his registration does not make him
as acting in bad faith because the sale to
Contract to Sell vs. Contract of Sale (1997) him was ahead in time, hence, has a priority
State the basic difference (only in their legal in right. What creates bad faith in the case
effects) Between a contract to sell, on the of double sale of land is knowledge of a
one hand, and a contract of sale, on the previous sale.
other.
b) The first buyer is still to be preferred,
SUGGESTED ANSWER where the second sale is registered ahead of
In a CONTRACT OF SALE, ownership is the first sale but with knowledge of the
transferred to the buyer upon delivery of the latter. This is because the second buyer, who
object to him while in a at the time he registered his sale knew that
CONTRACT TO SELL, ownership is retained the property had already been sold to
by the seller until the purchase price is fully someone else, acted in bad faith. (Article
paid. In a contract to sell, delivery of the 1544, C.C.)
object does not confer ownership upon the
buyer. In a contract of sale, there is only one Double Sales (2004)
contract JV, owner of a parcel of land, sold it to PP.
executed between the seller and the buyer, But the deed of sale was not registered. One
while in a contract to sell, there are two year later, JV sold the parcel again to RR,
contracts, first the contract to sell (which is who succeeded to register the deed and to
a conditional or preparatory sale) and a obtain a transfer certificate of title over the
second, the final deed of sale or the property in his own name. Who has a better
principal contract which is executed after right over the parcel of land, RR or PP?
full payment of the purchase price. Why? Explain the legal basis for your
answer. (5%)
Contract to Sell; Acceptance; Right of First Refusal SUGGESTED ANSWER:
(1991) It depends on whether or not RR is an
A is the lessee of an apartment owned by Y. innocent purchaser
A allowed his for value. Under the Torrens System, a deed
married but employed daughter B, whose or instrument
husband works in Kuwait, to occupy it. The operated only as a contract between the
relationship between Y and A parties and as
soured. Since he has no reason at all to eject evidence of authority to the Register of
A, Y, in Deeds to make the
connivance with the City Engineer, secured registration. It is the registration of the deed
from the latter an order for the demolition of or the
the building. A immediately filed an action in instrument that is the operative act that
the Regional Trial Court to annul the order conveys or affects
and to enjoin its enforcement. Y and A were the land. (Sec. 51, P.D. No. 1529).
able to forge a compromise agreement In cases of double sale of titled land, it is a
under which A agreed to a twenty percent well-settled rule
(20%) increase in the monthly rentals. They that the buyer who first registers the sale in
further agreed that the lease will expire two good faith
(2) years later and that in the event that Y acquires a better right to the land. (Art.
would sell the property, either A or his 1544, Civil Code).
daughter B shall have the right of first Persons dealing with property covered by
refusal. The Compromise Agreement was Torrens title are
approved by the court. Six (6) months before not required to go beyond what appears on
the expiration of the lease, A died. Y sold the its face.
property to the Visorro Realty Corp. without (Orquiola v. CA 386, SCRA 301, [2002];
notifying B. B then filed an action to rescind Domingo v. Races 401 SCRA 197, [2003]).
the sale in favor of the corporation and to Thus, absent any showing that RR knew
compel Y to sell the property to her since about, or ought to have known the prior sale
under the Compromise Agreement, she was of the land to PP or that he acted in bad
given the right of first refusal which, she faith, and being first to register the sale, RR
maintains is a stipulation pour atrui under acquired a good and a clean title to the
Article 1311 of the Civil Code. Is she property as against PP.
correct?
Equitable Mortgage
SUGGESTED ANSWER: (O19n9 210) D ecember 1970, Juliet, a widow,
B is not correct. Her action cannot prosper. borrowed from Romeo P4,000.00 and, as
Article 1311 security therefore, she executed a deed of
requires that the third person intended to be mortgage over one of her two (2) registered
benefited must communicate his acceptance lots which has a market value of P15,000.00.
to the obligor before the revocation. There is The document and the certificate of title of
no showing that B manifested her the property were delivered to Romeo.
acceptance to Y at any time before the death On 2 June 1971, Juliet obtained an additional
of A and before the sale. Hence, B cannot sum of P3,000 from Romeo. On this date,
enforce any right under the alleged however, Romeo caused the preparation of a
stipulation pour atrui. deed of absolute sale of the above property,
to which Juliet affixed her signature without
first reading the document. The
consideration indicated is P7,000.00. She
thought that this document was similar to
the first she signed. When she reached
a deed of absolute sale. On the following
home, her son X, after reading the duplicate
day, 3 June 1971, Juliet, accompanied by X,
copy of the deed, informed her that what she
went back to Romeo and demanded the
signed was not a mortgage but
reformation it, Romeo prepared and signed
Equitable Mortgage vs. Sale (2005)
a document wherein, as vendee in the deed
On July 14, 2004, Pedro executed in favor of
of sale above mentioned, he obligated and
Juan a Deed of Absolute Sale over a parcel
bound himself to resell the land to Juliet or
of land covered by TCT No 6245. It appears
her heirs and successors for the same
in the Deed of Sale that Pedro received from
consideration as reflected in the deed of sale
Juan P120,000.00 as purchase price.
(P7,000) within a period of two (2) years, or
However, Pedro
until 3 June 1973. It is further stated therein
retained the owner's duplicate of said title.
that should the Vendor (Juliet) fail to
Thereafter, Juan, as lessor, and Pedro, as
exercise her right to redeem within the said
lessee, executed a contract of lease over the
period, the conveyance shall be deemed
property for a period of one (1) year with a
absolute and irrevocable. Romeo did not
monthly rental of Pl,000.00. Pedro, as
take possession of the property. He did not
lessee, was also obligated to pay the realty
pay the taxes thereon. Juliet died in January taxes on the property during the period of
I973 without having repurchased the lease. Subsequently, Pedro filed a complaint
property. Her only surviving heir, her son X, against Juan for the reformation of the Deed
failed to repurchase the property on or of Absolute Sale, alleging that the
before 3 June 1973. In 1975, Romeo sold the transaction covered by the deed was an
property to Y for P50,000.00. Upon learning equitable mortgage. In his verified answer
of the sale, X filed an action for the to the complaint, Juan alleged that the
nullification of the sale and for the recovery property was sold to him under the Deed of
of the property on the ground that the so- Absolute Sale, and interposed counterclaims
called deed of absolute sale executed by his to recover possession of the property and to
mother was merely an equitable mortgage, compel Pedro to turn over to him the
taking into account the inadequacy of the owner's duplicate of title. Resolve the case
price and the failure of Romeo to take with reasons. (6%)
possession of the property and to pay the SUGGESTED ANSWER:
taxes thereon. Romeo and Y maintain that The complaint of Pedro against Juan should
there was a valid absolute sale and that the be dismissed.
document signed by the former on 3 June The instances when a contract regardless
1973 was merely a promise to sell. of its
nomenclature may be presumed to be an
a) If you were the Judge, would you uphold equitable
the theory of mortgage are enumerated in Article 1602 of
X? the Civil Code: "Art. 1602. The contract shall
b) If you decide in favor of Romeo and Y, be presumed to be an equitable mortgage, in
would you any of the following cases:
uphold the validity of the promise to sell? 1 When the price of a sale with right to
repurchase is
SUGGESTED ANSWER: unusually inadequate:
a). I will not uphold the theory of X for the 2 When the vendor remains in possession as
nullification of lessee or
the sale and for the recovery of the property otherwise;
on the ground that the so-called sale was 3 When upon or after the expiration of the
only an equitable mortgage. An equitable right to
mortgage may arise only if, in truth, the sale repurchase another instrument extending
was one with the right of repurchase. The the period of redemption
facts of the case state that the right to or granting a new period is executed;
repurchase was granted after the absolute 4 When the purchaser retains for himself a
deed of sale was executed. Following the part of the
rule in Cruzo vs. Carriaga (174 SCRA 330), a purchase price;
deed of repurchase executed independently 5 When the vendor binds himself to pay the
of the deed of sale where the two taxes on the
stipulations are found in thing sold;
two instruments instead of one document, 6 In any other case where it may be fairly
the right of inferred that the
repurchase would amount only to one option real intention of the parties is that the
granted by the buyer to the seller. Since the transaction shall secure the payment of a
contract cannot be upheld as a contract of debt or the performance of any other
sale with the right to repurchase, Art. 1602 obligation.
of the Civil Code on equitable mortgage will "In any of the foregoing cases, any money,
not apply. The rule could have been different fruits, or other
if both deeds were executed on the same benefit to be received by the vendee as rent
occasion or date, in which case, under the or otherwise
ruling in spouses Claravall v. CA (190 SCRA shall be considered as interest which shall
439), the contract may still be sustained as be subject to the
an equitable mortgage, given the usury laws."
circumstances expressed in Art. 1602. The Article 1604 states that "the provisions of
reserved right to repurchase is then deemed article 1602 shall
an original intention. also apply to a contract purporting to be an
absolute sale."
b). If I were to decide in favor of Romeo and For Articles 1602 and 1604 to apply, two
Y, I would not uphold the validity of the requisites must
promise to sell, so as to enforce it by an concur: 1) the parties entered into a
action for specific performance. The promise contract denominated as
to sell would only amount to a mere offer a contract of sale; and 2) their intention was
and, therefore, it is not enforceable unless it to secure an
was sought to be exercised before a existing debt by way of mortgage. (Heirs of
withdrawal or denial thereof. Balite v. Lim,
Even assuming the facts given at the end of G.R. No. 152168, December 10, 2004)
the case, there In the given case, although Pedro retained
would have been no separate consideration possession of the property as lessee after
for such promise to sell. The contract would the execution of the Deed of Sale, there is
at most amount to an option which again no showing that the intention of the parties
may not be the basis for an action for was to secure an existing debt by way of
specific performance. mortgage. Hence, the complaint of Pedro
should be dismiss