Last Minutes Tips | Sales | Finals

Question 1: What is the period for the redemption of property sold with right of repurchase? (from Jurado reviewer, p. 989)

A1: In the absence of any express agreement, the period of redemption shall be four (4) years from the date of the contract.
Should there be an agreement; the period cannot exceed ten (10) years.

Question 2: Angie and Gracie were co-owners of a parcel of land. Last January 31, 2001, when she paid her real estate tax,
Angie discovered that Gracie had sold her share to Emily on November 10, 2000. The following day, Angie offered to redeem
her share from Emily, but the latter replied that Angie’s right to redeem has already prescribed. Is Emily correct or not? (from
Jurado reviewer, p. 997)

A2: NO. Angie can still enforce her right of legal redemption as a co-owner. Art. 1623 of the NCC gives the co-owner 30 days
from written notice of the sale by the vendor to exercise his right of legal redemption. In the present problem, the 30-day period
for the exercise by Angie of her right of redemption had not even begun to run because no notice in writing of the sale appears
to have been given to her by Gracie.

Question 3: (a) What is an equitable mortgage? (b) When is a sale deemed to be an equitable mortgage?

A3: (a) An equitable mortgage is one which although lacking in some formality, or form or words, or other requisites demanded
by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains
nothing impossible or contrary to law.

(b) Under Article 1602 of the Civil Code, the contract of sale with right to repurchase (sale a retro) shall be presumed to be an
equitable mortgage, in any of the following cases:
(1) When the price of under a sale a retro is unusually inadequate;
(2) When the seller remains in possession as lessee or otherwise;
(3) When the period of redemption is extended or renewed under a separate instrument;
(4) When the buyer retains part of the purchase price;
(5) When the seller binds himself or continues to pay the taxes on the thing sold;

Question 4: (a) How may a first vendee’s right of priority be preserved as against a second vendee? (b) How may a second
vendee be able to displace the first vendee?. (from Jurado reviewer, p. 974-975)

A4: (a) the first vendee must register the deed of sale in his favor in the registry of property ahead of any registration in good
faith by the second vendee or any subsequent vendee.

(b) When the second vendee registers the sale in good faith ahead of the first vendee, the first vendee may be displaced. The
second vendee must be in good faith all throughout; in purchasing and in registration.

Note: The first buyer can never be in bad faith as against the second buyer even if he was aware of the subsequent sale. So
that even if the first buyer knew of the subsequent sale to the second buyer and the former registers the property, he is not in
bad faith. (from Atty. Fabella lecture) (also in Jurado reviewer citing the case of Carbonell v. CA)

Question 5: Right of First Refusal – lessor lessee

Ubaldo is the owner of a building which has been leased by Remigio for the past 20 years. Ubaldo has repeatedly assured
Remigio that if he should decide to sell the building, he will give Remigio the right of first refusal. On June 30, 1994, Ubaldo
informed Remigio that he was willing to sell the building for P5 Million. The following day, Remigio sent a letter to Ubaldo
offering to buy the building at P4.5 Million. Ubaldo did not reply. One week later, Remigio received a letter from Santos
informing him that the building has been sold to him by Ubaldo for P5 Million, and that he will not renew Remigio's lease when
it expires. Remigio filed an action against Ubaldo and Santos for cancellation of the sale, and to compel Ubaldo to execute a
deed of absolute sale in his favor, based on his right of first refusal. (Bar question similar to the question in the samplex)
Last Minutes Tips | Sales | Finals

a. Will the action prosper? Explain.

b. If Ubaldo had given Remigio an option to purchase the building instead of a right of first refusal, will your answer be the
same? Explain.

A5:
a. NO, the action to compel Ubaldo to execute the deed of absolute sale will not prosper. According to Ang Yu v. Court of
Appeals (G.R. No. 109125, December 2, 1994), the right of first refusal is not based on contract but is predicated on the
provisions of human relations and, therefore, its violation is predicated on quasi-delict. Secondly, the right of first refusal
implies that the offer of the person in whose favor that right was given must conform with the same terms and conditions
as those given to the offeree. In this case, however, Remigio was offering only P4.5 Million instead of P5 Million.

b. YES, the answer will be the same. The action will not prosper because an option must be supported by a consideration
separate and distinct from the purchase price. In this case there is no separate consideration. Therefore, the option may
be withdrawn by Ubaldo at any time. (Art. 1324)

Question 6: A, B and C are co-owners of an undivided parcel of land. They sold it to D jointly and in the same contract, with a
right to repurchase. “A” tried to repurchase the entire parcel of land, but D refused to accede to A’s demand. Is D’s refusal
justified? (from Jurado reviewer, p. 995)

A6: YES. Art. 1612 of the NCC provides that “If several persons, jointly and in the same contract, should sell an undivided
immovable with a right of repurchase, none of them may exercise this right for more than his respective share.” D cannot
repurchase the entire parcel of land.

Question 7: Will notification of the buyer that a sale has been made be sufficient to comply with the notice requirement in
redemption? Will such notification start the running of the prescriptive period? (reconstructed question based from samplex)

A7: NO. It must be the seller who must notify and not the buyer.

Question 8: (a) What are the kinds of F. O. B. sale? (from Jurado reviewer, p. 964) (b) Who bears the loss if the point of
destination is General Santos but the goods were destroyed due to a fortuitous event before reaching said point of
destination? (reconstructed question based from samplex)

A8: (a) There are two kinds of F. O. B. sales:

(1) F. O. B. Shipping point – upon arrival of the goods at the shipping point, the buyer becomes the owner of the goods
(2) F. O. B. Point of destination – until arrival at the point of destination, the seller is still the owner of the goods

(b) It is the seller/vendor who bears the loss because of the principle of res perit domino. The seller retains ownership until
reaching the point of destination, therefore, the seller shall bear the loss.

Question 9: Is there an instance where a possessor has a better right over a person who registered with the registry of
property? (reconstructed question based from samplex)

A9: YES. The possessor must acquire the property through acquisitive prescription. Generally, the registrant in good faith will
always have better right over possessor in good faith. However, if the registrant is in bad faith or if there is no registration at all,
the rule on possession in good faith should be considered. (answer based from Marx notes, p. 18)

Question 10: (a) Is the verbal sale of an immovable property not yet owned by the vendor valid? (b) What if at the time of
execution of public instrument conveyancing the real property, the vendor does not have in his possession the property nor
has control over it, will the delivery effectively transfer ownership? (reconstructed question based from samplex)
Last Minutes Tips | Sales | Finals

A10: (a) YES. Sale may be entered into orally or written unless there is a form prescribed by law. Also, a person may sell a
property even if he does not own the property yet as long as he can transfer the ownership at the time of delivery.

(b) NO. Generally, execution of a public instrument in sale of real property produces the effect of transfer of ownership.
However, by way of exception, when the subject matter is not within the control of the seller and he does not have the liberty to
dispose of the property, the execution of the public instrument will not effectively transfer the ownership of the property.

Question 11: What are the implied warranties of the person who negotiate a document of title by indorsement or delivery?
(reconstructed question based from samplex)

A11: Art. 1516 of the NCC provides that “A person who for value negotiates or transfers a document of title by indorsement or
delivery, including one who assigns for value a claim secured by a document of title unless a contrary intention appears,
warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
(3) That he has knowledge of no fact which would impair the validity or worth of the document;
(4) That he has a right to transfer the title to the goods; and
(5) That the goods are merchantable or fit for a particular purpose, for which they were purchased.”

Question 12: (a) What is Technical Rescission? (b) What are the requisites of Technical Rescission? (reconstructed question
based from samplex)

A12: (a) Technical rescission is a stipulation whereby the seller is given the right to rescind the sale after giving judicial or
notarial notice to the buyer.

(b) The following are the requisites of technical rescission:

(1) Unequivocal breach;
(2) Failure of the buyer to pay the purchase price;
(3) Buyer is in default for an unreasonable time (based from DC Notes, p. 17)

Question 13: (a) What are the requisites to enforce Warranty Against Eviction? (b) What are the requisites to enforce
Warranty Against Hidden Defects? (reconstructed question based from samplex)

A13: (a) The following are the requisites to enforce warranty against eviction:
(1) the purchaser has been deprived of the whole or part of the thing sold;
(2) the eviction is by final judgment;
(3) the deprivation is based on a right prior the sale or an act imputable to the vendor; and
(4) the vendor must have been notified of the suit for eviction at the instance of the vendee.

(b) The following are the requisites to enforce warranty against hidden defects:
(1) the defect must exist at the time of the sale;
(2) the defect must be hidden;
(3) the defect must render the thing unfit for the use for which it is intended or diminishes its fitness for such use to such
an extent, that had the vendee been aware thereof, he would not have acquired it or would have given a lower price
for it; and
(4) the action to enforce it must be made within the period provided by law.
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Question 14: What is C. I. F. sale? When is ownership transferred in case of C. I. F. sale? (reconstructed question based from
samplex)

A14: C. I. F. stands for costs, insurance, and freight. The price fixed does not cover only the goods but also the expenses of
freight and insurance to be paid by the seller. If the seller is to pay the freight, the title to the property does not pass until the
goods have reached their destination. If the buyer pays the freight, he does so because the goods become his at the point of
shipment. (based from book of De Leon, p. 233)

Question 15: When does constructive delivery such as execution of a public document does not transfer ownership? Is there
an exception to this exception?

A15: Delivery is not effected when there is legal impediment such as the failure of the vendee to take actual possession of the
land sold. There should also be control over the subject matter at the time of execution and the passage of a reasonable time
for the control to remain. (based from book of Villanueva, p. 222) An exception to the exception would be when the buyer
himself is aware that the ownership is not within the control of the seller and still he agreed to the sale of the property.

Question 16: Who bears the loss if the point of destination is General Santos but the goods were destroyed due to a fortuitous
event before reaching said point of destination? (reconstructed question based from samplex)

A16: It is the seller/vendor who bears the loss because of the principle of res perit domino. The seller retains ownership until
reaching the point of destination, therefore, the seller shall bear the loss.

Question 17: Can a seller transfer ownership by constructive delivery even if he does not have possession of the subject
matter of the sale? (reconstructed question based from samplex)

A17: NO. Generally, execution of a public instrument in sale of real property produces the effect of transfer of ownership.
However, by way of exception, when the subject matter is not within the control of the seller and he does not have the liberty to
dispose of the property, the execution of the public instrument will not effectively transfer the ownership of the property.

Question 18: (a) When can there be warranty as to the solvency of the debtor? (from Marx notes, p. 29) (b) What is the
liability of the assignor if the warranty is breached? (reconstructed question based from samplex)

A18: (a) The general rule is that assignment does not make the assignor warrant the solvency of the debtor to the credit
unless:
(1) there is an express stipulation; or
(2) the insolvency of the debtor was prior to the assignment and of common knowledge. (based from book of Pineda, p.
433 and Villanueva, p. 577)

(b) It would depend if the assignor is in good faith or bad faith. If the assignor is in good faith he shall pay the price or
consideration which he received from the assignee, the expenses of the contract, and the other legitimate expenses. If the
assignor is in bad faith, he shall pay the same liabilities of an assignor in good faith but also liability for damages.

Question 19: Can a warranty against hidden defects be waived? What is the effect of good faith or bad faith in such waiver?
(reconstructed question based from samplex)

A19: YES it can be waived. If there has been a stipulation exempting the seller from hidden defects, then: (a) If the seller was
not aware of the hidden defects, the loss of the thing by virtue of such defect will not make the seller liable at all to the buyer;
or (b) If the seller was fully aware of such defect, such waiver is in bad faith, and the seller would still be liable for the warranty.
(based from book of Villanueva, p. 504)
Last Minutes Tips | Sales | Finals

Note: Even if the seller is in good faith, he is not totally absolved from liability but his liability will be limited. (based from Atty.
Fabella’s lecture)

Question 20: “A” sells his 1976 Colt Lancer Sedan to “B,” a compadre, and leaves it to “B” to determine the price. If “B”
refuses to fix a price and simply takes the car, is he still obliged to pay the price? (from Jurado reviewer, p. 935-936)

A20: YES. “B” is still obliged to pay the price. Art. 1473 of the NCC provides that “the fixing of the price can never be left to the
discretion of one of the contracting parties.” Therefore, the act of A in leaving to B the power to determine the price of the car is
illegal. However, Art. 1474 provides that if the thing or any part thereof has been delivered to and appropriated by the buyer, he
must pay a reasonable price therefor.

Other possible questions:

Question 1: Rosy purchased a condominium unit in Makati City from the Housel and Corporation for a price of P10 Million,
payable P3 Million down and the balance with interest thereon at 14% per annum payable in 60 equal monthly installments of
P201,000.00. They executed a Deed of Conditional Sale in which it is stipulated that should the vendee fail to pay three (3)
successive installments, the sale shall be deemed automatically rescinded without the necessary judicial action and all
payments made by the vendee shall be forfeited in favor of the vendor by way of rent for the use and occupancy of the unit
and as liquidated damages. For 50 months, Rosy paid the monthly installments religiously, but on the 51st and 52nd months,
she failed to pay. On the 53rd month, she tried to pay the installments due but the vendor refused to receive the payments
tendered by her. The follow ing month, the vendor sent her a notice that it was rescind ing the Deed of Conditional Sale
pursuant to the stipulation for automatic rescission, and demanded that she vacate the premises. She replied that the contract
cannot be rescinded without judicial demand or notarial act pursuant to Article 1592 of the NCC.

(a) Is Art. 1592, NCC applicable? (b) Can the vendor rescind the contract?

A1: (a) Art. 1592 of the NCC does not apply to a conditional sale. In Valarao v. CA, 304 SCRA 155, the SC held that Art. 1592
applies only to a contract of sale and not to a Deed of Conditional Sale where the seller has reserved title to the property until
full payment of the purchase price. The law applicable is the Maceda Law.

(b) No, the vendor cannot rescind the contract under the circumstances. Under the Maceda Law, which is the law applicable,
the seller on installment may not rescind the contract till after the lapse of the mandatory grace period of 30 days for every one
year of installment payments, and only after 30 days from notice of cancellation or demand for rescission by a notarial act. In
this case, the refusal of the seller to accept payment from the buyer on the 53rd month was not justified because the buyer
was entitled to 60 days grace period and the payment was tendered within that period. Moreover, the notice of rescission
served by the seller on the buyer was not effective because the notice was not by a notarial act. Besides, the seller may still
pay within 30 days from such notarial notice before rescission may be effected. All these requirements for a valid rescission
were not complied with by the seller. Hence, the rescission is invalid.