Professional Documents
Culture Documents
2021 SALES Syllabus-RAR Revised
2021 SALES Syllabus-RAR Revised
2021 SALES Syllabus-RAR Revised
LAW ON SALES
FIRST SEMESTER, SY 2021-2022
COURSE SYLLABUS1
MODULE 1:
ESSENCE AND OBJECT OF THE
CONTRACT OF SALE
[WEEK 1: AUGUST 12]
1. Elements of Sale: (a) Consent: meeting of minds on, (b) Subject Matter, and (c) Consideration:
price certain in money or its equivalent. Coronel v. Court of Appeals, 263 SCRA 15 (1996).4
Absence of any of the essential elements negates the existence of a perfected contract of sale,
Dizon v. Court of Appeals, 302 SCRA 288 (1999);5 even when earnest money or downpayment has
been paid. Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).6
Ø Perfected Sale Creates Real Obligations “To give” (Art. 1165)
2. Stages of the Contract of Sale: (a) Policitacion or Negotiation Stage, starts from the time the
prospective contracting parties indicate interest in the contract to the time the contract is perfected;
(b) Perfection, takes place upon the concurrence of the essential elements of the sale; and (c)
Consummation, commences when the parties perform their respective undertakings under the
1
The SYLLABUS presents the manner by which the course “Law on Sales” will be taken-up in class. The cases which have a check
mark and in bold are the ones that will be taken-up for graded class recitation. THE PROFESSOR RESERVES THE OPTION OF
AMENDING THE READING LIST AND ASSIGNMENTS AS EXIGENCIES WARRANT.
2
Ownership is the independent and general power of a person over a thing for purposes recognized by law and within the limits
established thereby, which includes the right to enjoy and dispose of a thing, without other limitations than those established by law.
Aside from the jus utendi and the jus abutendi inherent in the right to enjoy the thing, the right to dispose, or the jus disponendi, is the
power of the owner to alienate, encumber, transform and even destroy the thing owned. Flancia v. Court of Appeals (“CA”), 457 SCRA
224 (2005).
3
Alfredo v. Borras, 404 SCRA 145 (2003); Cruz v. Fernando, 477 SCRA 173 (2005); Manila Metal Container Corp. v. PNB, 511
SCRA 444 (2006); Roberts v. Papio, 515 SCRA 346 (2007); Hyatt Elevators and Escalators Corp. v. Cathedral Heights Building Complex
Assn., 636 SCRA 401 (2010).
4
Jovan Land v. CA, 268 SCRA 160 (1997); Quijada v. CA, 299 SCRA 695 (1998); Co v. CA, 312 SCRA 528 (1999); San Andres v.
Rodriguez, 332 SCRA 769 (2000); Roble v. Arbasa, 362 SCRA 69 (2001); Polytechnic University v. CA, 368 SCRA 691 (2001);
Katipunan v. Katipunan, 375 SCRA 199 (2002); Londres v. CA, 394 SCRA 133 (2002); Manongsong v. Estimo, 404 SCRA 683 (2003);
Jimenez, Jr. v. Jordana, 444 SCRA 250 (2004); San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458
(2005); Roberts v. Papio, 515 SCRA 346 (2007); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Republic v. Florendo, 549
SCRA 527 (2008); GSIS v. Lopez, 592 SCRA 456 (2009); Baladad v. Rublico, 595 SCRA 125 (2009); Del Prado v. Caballero, 614
SCRA 102 (2010); Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010); Hyatt Elevators and Escalators Corp. v. Cathedral
Heights Building Complex Assn., 636 SCRA 401 (2010); David v. Misamis Occidental II Electric Coop., 676 SCRA 367 (2012); Dantis
v. Maghinang, Jr., 695 SCRA 599 (2013); First Optima Realty Corp. v. Securitron Security Services, 748 SCRA 534 (2015); Beltran v.
Cangayda, Jr., 887 SCRA 582 (2018); Agustin v. De Vera, 900 SCRA 203 (2019).
5
Roberts v. Papio, 515 SCRA 346 (2007); XYST Corp. v. DMC Urban Properties Dev., 594 SCRA 598 (2009); Hyatt Elevators and
Escalators Corp. v. Cathedral Heights Building Complex Assn., 636 SCRA 401 (2010).
6
Del Prado v. Caballero, 614 SCRA 102 (2010); Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010); David v. Misamis
Occidental II Electric Coop., 676 SCRA 367 (2012); Dantis v. Maghinang, Jr., 695 SCRA 599 (2013).
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contract of sale, culminating in the extinguishment of the contract of sale. GSIS v. Lopez, 592
SCRA 456 (2009).7
7
Limketkai Sons Milling v. CA, 250 SCRA 523 (1995); Jovan Land v. CA, 268 SCRA 160 (1997); San Miguel Properties v. Huang,
336 SCRA 737 (2000); Bugatti v. CA, 343 SCRA 335 (2000); Moreno, Jr. v. PMO, 507 SCRA 63 (2006); Manila Metal Container Corp.
v. PNB, 511 SCRA 444 (2006); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Province of Cebu v. Heirs of Rufina Morales,
546 SCRA 315 (2008); XYST Corp. v. DMC Urban Properties Dev., 594 SCRA 598 (2009); First Optima Realty Corp. v. Securitron
Security Services, 748 SCRA 534 (2015).
8
Bowe v. CA, 220 SCRA 158 (1993); Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Cavite Dev’t Bank
v. Lim, 324 SCRA 346 (2000).
9
Romero v. CA, 250 SCRA 223 (1995); Balatbat v. CA, 261 SCRA 128 (1996); Coronel v. CA, 263 SCRA 15 (1996); City of Cebu
v. Heirs of Candido Rubi, 306 SCRA 408 (1999); Agasen v. CA, 325 SCRA 504 (2000); Laforteza v. Machuca, 333 SCRA 643 (2000);
Londres v. CA, 394 SCRA 133 (2002); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Buenaventura v. CA, 416 SCRA 263 (2003);
San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Ainza v. Padua, 462 SCRA 614 (2005);
Roberts v. Papio, 515 SCRA 346 (2007); MCC Industrial Sales Corp. v. Ssangyong Corp., 536 SCRA 408 (2007); Castillo v. Reyes.
539 SCRA 193 (2007); XYST Corp. v. DMC Urban Properties Dev., 594 SCRA 598 (2009); Del Prado v. Caballero, 614 SCRA 102
(2010); Heirs of Fausto C. Ignacio v. Home Bankers Savings, 689 SCRA 173 (2013); Dantis v. Maghinang, Jr., 695 SCRA 599 (2013);
Lam v. Kodak Phil., 778 SCRA 96 (2016).
10
Baladad v. Rublico, 595 SCRA 125 (2009).
11
Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
12
Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Roberts v. Papio, 515 SCRA 346 (2007).
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MODULE 2:
ESSENTIAL ELEMENTS OF THE
CONTRACT OF SALE
—
MODULE 2.1
CONSENT: PARTIES TO A CONTRACT OF SALE
[WEEK 2: AUGUST 19]
c. Bilateral and Reciprocal (Arts. 1169 and 1191) – A contract of sale gives rise to “reciprocal
obligations”, which arise from the same cause with each party being a debtor and creditor of the
other, such that the obligation of one is dependent upon the obligation of the other; and they are
to be performed simultaneously, so that the performance of one is conditioned upon the
simultaneous fulfillment of the other. Cortes v. Court of Appeals, 494 SCRA 570 (2006).13
A perfected contract of sale is bilateral since it carries the correlative duty of the seller to
deliver the property and the obligation of the buyer to pay the price. Congregation of the
Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008).
When rescission of a contract of sale is sought under Article 1191 of the Civil Code, it need
not be judicially invoked because the power to resolve is implied in reciprocal obligations. The
resolution immediately produces legal and court intervention becomes necessary when the
party who allegedly failed to comply with his or her obligation disputes the resolution of the
contract. üLam v. Kodak Philippines, 778 SCRA 96 (2016). 14
Reciprocal obligations are those which arise from the same cause, and in which each party
is a debtor and creditor of the other, such that the obligation of one is dependent upon the
obligation of the other. They are to be performed simultaneously, so that the performance of
one is conditioned upon the simultaneous fulfillment of the other. In reciprocal obligations,
neither party incurs in delay if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon them. From the moment one of the parties fulfills their
obligation, delay by the other begins. In this case, it is clear that the parties agreed to
undertake reciprocal obligations as provided in the Sales and Purchase Agreement. VHB
Biopro has the obligation to deliver the urea within 45 days after CONFED opens the letter of
credit. The first half of the total shipment value will be paid by CONFED to VHB Biopro after
submission of all documents, while the other half will be paid upon completion of the delivery
by VHB Biopro and final acceptance of CONFED of the delivery. However, despite VHB
Biopro's receipt of a copy of the Domestic Letter of Credit on January 18, 2008, it failed to
comply with its undertaking to deliver the agreed urea fertilizers. This failure on the part of VHB
Biopro justified CONFED's claim against the Performance Bond. üBongcayao v.
Confederation of Sugar Producers Cooperatives, G.R. No. 225438, (2021).
d. Onerous and Commutative (Arts. 1355 and 1470) – The resolution of issues pertaining to
periods and conditions in a contract admitted by both parties to be a sale must be based on its
onerous and commutative nature. üGaite v. Fonacier, 2 SCRA 830 (1961).
In a sale, there is no requirement that the price be equal to the exact value of the subject
matter of sale; all that is required is that the parties believed that they will receive good value in
exchange for what they will give. üBuenaventura v. Court of Appeals, 416 SCRA 263 (2003).
e. Sale Is Title and Not Mode – A mode is the legal means by which dominion or ownership is
created, transferred or destroyed, but title is only the legal basis by which to affect dominion or
ownership. Sale by itself does not transfer or affect ownership; the most that sale does is to
create the obligation to transfer ownership. It is tradition (delivery as a consequence of sale) that
actually transfers ownership. San Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99
(2005),15 citing VILLANUEVA, PHILIPPINE LAW ON SALES, 1995 ed., at p. 5.
Ownership by seller of the thing sold is not an element of perfection; what the law requires
is seller has the right to transfer ownership at the time of delivery. Quijada v. Court of Appeals,
299 SCRA 695 (1998).16
13
Ong v. CA, 310 SCRA 1 (1999); Mortel v. KASSCO, 348 SCRA 391 (2000); Agro Conglomerates v. CA, 348 SCRA 450 (2000);
Velarde v. CA, 361 SCRA 56 (2001); Carrascoso, Jr. v. CA, 477 SCRA 666 (2005); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53
(2008); Antonino v. Register of Deeds of Makati, 674 SCRA 227 (2012).
14
Vda. De Quirino v. Palarca, 29 SCRA 1 (1969); Almocera v. Ong, 546 SCRA 164 (2008); Cabrera v. Ysaac, 740 SCRA 612 (2014).
15
Acap v. CA, 251 SCRA 30 (1995).
16
Equatorial Realty Dev. v. Mayfair Theater, 370 SCRA 56 (2001); Alcantara-Daus v. De Leon, 404 SCRA 74 (2003); Heirs of Jesus
M. Mascuñana v. CA, 461 SCRA 186 (2005).
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BUT SEE: Titong v. Court of Appeals, 287 SCRA 102 (1998), which defined a “sale” as “a contract
transferring dominion and other real rights in the thing sold.”
Assumption by “agent” of the risk pertaining to the cost or price of the subject matter makes the
relationship that of buyer-seller, for the agent does not assume risk with respect to the price or the
property subject of the relationship. Ker & Co. v. Lingad, 38 SCRA 524 (1971). CONSEQUENTLY:
• Contractual relation is not revocable. üQuiroga v. Parsons, 38 Phil. 501 (1918);
• Purported agent does not have to account for the profit margin earned from acquiring the
property for the principal. üPuyat v. Arco Amusement Co., 72 Phil. 402 (1941).
One factor that most clearly distinguishes agency from other legal concepts, including sale, is
control; one person – the agent – agrees to act under the control or direction of another – the principal.
Victorias Milling Co. v. Court of Appeals, 333 SCRA 663 (2000).
Commercial broker, commission merchant or indentor is a middleman acting in his own name, and
acts as agent for both seller and buyer to effect a sale between them. Although he is neither seller nor
buyer to the contract effected he may voluntarily assume warranties of seller. Schmid and Oberly v. RJL
Martinez, 166 SCRA 493 (1988).
17
Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Orden v. Aurea, 562 SCRA 660 (2008); Ver Reyes v.
Salvador, Sr., 564 SCRA 456 (2008)..
18
CIR v. Arnoldus Carpentry Shop, 159 SCRA 199 (1988); Del Monte Phil. v. Aragones, 461 SCRA 139 (2005).
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and (c) agreement between the creditor and debtor that the obligation is immediately extinguished by
reason of the performance of a presentation different from that due. üLo v. KJS Eco-Formwork
System Phil., 413 SCRA 182 (2003).19 CONSEQUENTLY:
• In its modern concept, what takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the performance of an
obligation is considered as the object of the contract of sale, while the debt is considered as
the purchase price. Aquintey v. Tibong 511 SCRA 414 (2006).20
• In a true dacion en pago, assignment of the property extinguishes the monetary debt.
Estanislao v. East West Banking Corp., 544 SCRA 369 (2008).21
BUT: Dacion extinguishes the obligation to the extent of the value of the thing delivered, either
as agreed upon by the parties or as may be proved, unless the parties by agreement consider
the thing as equivalent to the obligation, in which case the obligation is totally extinguished.
Tan Shuy v. Maulawin, 665 SCRA 604 (2012).
• There must be actual delivery of the property to the creditor by way of extinguishment of the
pre-existing debt, Phil. Lawin Bus Co. v. Court of Appeals, 374 SCRA 332 (2002).22
BUT SEE: In order to determine whether or not there was indeed a perfected, or even
consummated, dation in payment, it is necessary to review and assess the evidence and
events that transpired and see whether these correspond to the three stages of a contract of
sale. This is so since, as previously mentioned, dación en pago agreements are governed,
among others, by the law on sales. Desiderio Dalisay Investments, Inc. v. SSS, 860 SCRA
554 (2018). Also, SSS v. AG&P Co. of Manila, 553 SCRA 677 (2008).
• There is no dacion en pago where there is no transfer of ownership in creditor’s favor, as
when possession of the thing is merely given to the creditor by way of security. Fort Bonifacio
Dev. Corp. v. Yllas Lending Corp., 567 SCRA 454 (2008).23
• Assignment of the collaterals to the lender to release the borrower from the loan to the extent
of the value of the things assigned cannot be a dacion en pago which requires a complete
extinguishment of the debt. Villaluz v. Land Bank of the Phils., 814 SCRA 466 (2017).
Dacion en pago is governed by the Law of Sales, and is therefore subject to the same rules on
express and implied warranties pertaining to contracts of sale. The implied warranty in case of eviction
is waivable and cannot be invoked if the buyer knew of the risks or danger of eviction and assumed its
consequences. Luzon Dev. Bank v. Enriquez, 639 SCRA 332 (2011).
1. GENERAL RULE: Every person having juridical capacity to contract, may validly enter into a
contract of sale, whether as seller or as buyer. (Art. 1489)
2. Minors, Insane and Demented Persons, Deaf-Mutes (Arts. 1327, 1397 and 1399)
A minor cannot be deemed to have given her consent to a sale; consent is among the essential
requisites of a contract of sale, absent of which there can be no valid contract [?]. Labagala v.
Santiago, 371 SCRA 360 (2001).
a. “Necessaries” (Arts. 1489 and 290; Art. 194, Family Code)
b. Protection of the Senile and Elderly (Art. 24), Illiterates (Art. 1332)
While a person is not incompetent to contract merely because of advanced years or by
reason of physical infirmities, when such age or infirmities have impaired the mental faculties so
as to prevent the person from properly, intelligently or firmly protecting his property rights, then
he is undeniably incapacitated, and the sale he entered into is void[?]. üParagas v. Heirs of
Dominador Balacano, 468 SCRA 717 (2005).24
19
Aquintey v. Tibong 511 SCRA 414 (2006); Rockville Excel International Exim Corp. v. Culla, 602 SCRA 124 (2009).
20
Vda. de Jayme v. CA, 390 SCRA 380 (2002); Dao Heng Bank v. Laigo, 571 SCRA 434 (2008); Technogas Phil. Mfg. Corp. v.
PNB, 551 SCRA 183 (2008); Ocampo v. LBP, 591 SCRA 562 (2009); D.B.T. Mar-Bay Construction v. Panes, 594 SCRA 578 (2009).
21
Ong v. Roban Lending Corp., 557 SCRA 516 (2008).
22
Filinvest Credit Corp. v. Philippine Acetylene Co., 111 SCRA 421 (1982); Vda. de Jayme v. CA, 390 SCRA 380 (2002); Ong v.
Roban Lending Corp., 557 SCRA 516 (2008); Pen v. Julian, 778 SCRA 56 (2016).
23
PNB v. Pineda, 197 SCRA 1 (1991).
24
Domingo v. CA, 367 SCRA 368 (2001); Vda. De Ape v. CA, 456 SCRA 193 (2005).
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v. Court of Appeals, 291 SCRA 372 (1998).25 EXCEPT: Husband may dispose of conjugal
property without wife’s consent when necessary to answer for conjugal liabilities mentioned in
Articles 161 and 162. Abalos v. Macatangay, Jr., 439 SCRA 64 (2004).
A wife affixing her signature to a Deed of Sale as a witness is deemed to have given her
consent. Pelayo v. Perez, 459 SCRA 475 (2005).
b. Sales Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code)
Sales between spouses who are not governed by a complete separation of property regime
are void, not just voidable. Medina v. Collector, 1 SCRA 302 (1960).
Since the spouses cannot validly sell property to one another under Art. 1490, then policy
consideration and the dictates of morality require that the prohibition should apply also to
common-law relationships. üMatabuena v. Cervantes, 38 SCRA 284 (1971).
Sale by husband of conjugal land to his concubine is void for being “subversive of the
stability of the family, a basic social institution which public policy cherishes and protects.”
Calimlim-Canullas v. Fortun, 129 SCRA 675 (1984).26
In pari delicto doctrine would not apply to the spouses under Art. 1490, since only the heirs
and the creditors can question the sale’s nullity, Modina v. Court of Appeals, 317 SCRA 696
(1999); nevertheless, when the property is re-sold to a third-party buyer in good faith and for
value, reconveyance is no longer available. Cruz v. CA, 281 SCRA 491 (1997).
25
Cirelos v. Hernandez, 490 SCRA 625 (2006); Bautista v. Silva, 502 SCRA 334 (2006).
26
Ching v. Goynako, Jr., 506 SCRA 735 (2006).
27
Uy Sui Pin v. Cantollas, 70 Phil. 55 (1940); Medina v. Collector, 1 SCRA 302 (1961).
28
Gregorio Araneta, Inc. v. Tuason de Paterno, 49 O.G. 45 (1952).
29
Recto v. Harden, 100 Phil. 427 (1956); Vda. de Laig v. CA, 86 SCRA 641 (1978).
30
Britanico v. Espinosa, 486 SCRA 523 (2006).
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MODULE 2.2
SUBJECT MATTER OF SALE
[WEEK 3: AUGUST 26]
1. Subject Matter Must Be “Existing, Future or Contingent” (Arts. 1347, 1348, and 1462)
a. Emptio Rei Speratae (Arts. 1347 and 1461) – Pending crops which have potential existence
may be valid object of sale, Sibal v. Valdez, 50 Phil. 512 (1927)31; and transaction cannot be
considered to be sale of the land or any part thereof, Pichel v. Alonzo, 111 SCRA 341 (1981).
Sale of copra for future delivery does not make non-delivering seller liable for estafa since
sale is valid and obligation was civil and not criminal. Esguerra v. People, 108 Phil. 1078 (1960).
b. Emptio Spei (Art. 1461)
c. Subject to a Resolutory Condition (Art. 1465)
31
Dela Viña v. Buenaventura, 71 Phil. 421 (1941).
32
Typingco v. Lim, 604 SCRA 396 (2009); Philippine National Bank v. Dee, 717 SCRA 14 (2014).
33
Londres v. CA, 394 SCRA 133 (2002).
34
But see: Ong Jang Chuan v. Wise & Co., 33 Phil. 339 (1916).
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As the quoted portion of the Kasunduan gave reference to the area, the locality located,
and vicinity with reference of old trees, there is no doubt that the object of the sale is
determinable. Carabeo v. Dingco, 647 SCRA 200 (2011).
c. Undivided Interest (Art. 1463), Undivided Share in a Mass of Fungible Goods (Art. 1464)
– May Result In Co-ownership
5. Seller’s Obligation to Transfer Title to Buyer (Art. 1459, 1462, and 1505)
a. Seller Need Not Be the Owner at the Time of Perfection – A perfected sale cannot be
challenged on the ground of seller’s non-ownership of the thing sold at the time of the perfection;
it is at delivery that the law requires seller to have the ownership of the thing sold. Alcantara-
Daus v. de Leon, 404 SCRA 74 (2003).35
BUT SEE: It is essential that seller is owner of the property he is selling. The principal obligation
of a seller is “to transfer the ownership of” the property sold (Art. 1458). This law stems from the
principle that nobody can dispose of that which does not belong to him. NEMO DAT QUOD
NON HABET. üNoel v. Court of Appeals, 240 SCRA 78 (1995).36
THEN SEE: Although it appears that seller is not owner of the goods at perfection is one of the
void contracts enumerated in Articles 1409 and 1402 recognizes a sale where the goods are to
be “acquired by the seller after the perfection of the contract of sale,” clearly implying that a sale
is possible even if seller was not the owner at time of sale, nevertheless such contract may be
deemed to be inoperative and falls, by analogy, under Art. 1409(5): “Those which contemplate
an impossible service.” üNool v. Court of Appeals, 276 SCRA 149 (1997).37
X6. Illegality of Subject Matter (Arts. 1409, 1458, 1461, 1462, and 1575)
a. Special Laws: narcotics (R.A. 6425); wild bird or mammal (Act 2590); rare wild plants (Act
3983); poisonous plants/fruits (R.A. 1288); dynamited fish (R.A 428); gunpowder and explosives
(Act 2255); firearms and ammunitions (P.D. 9); sale of realty by non-Christians (Sec. 145,
Revised Adm. Code, R.A. 4252)
b. Following Sales of Land Void:
• By Non-Christian if not approved by Provincial Governor per Sec. 145 of Revised
Administrative Code. Tac-an v. Court of Appeals, 129 SCRA 319 (1984).
• Friar land without consent of Secretary of Agriculture required under Act No. 1120. Alonso
v. Cebu Country Club, 375 SCRA 390 (2002); Liao v. Court of Appeals, 323 SCRA 430
(2000).
• Made in violation of land reform laws declaring tenant-tillers as the full owners of the lands
they tilled. Siacor v. Gigantana, 380 SCRA 306 (2002).
• Reclaimed lands are of the public domain and cannot, without congressional fiat, be sold,
public or private. Fisheries Dev. Authority v. Court of Appeals, 534 SCRA 490 (2007).
• Alien who purchases land in the name of his Filipina lover, has no standing to recover the
property or the purchase price paid, since the transaction is void ab initio for being in violation
of the constitutional prohibition. Frenzel v. Catito, 406 SCRA 55 (2003).
35
Heirs of Arturo Reyes v. Socco-Beltran, 572 SCRA 211 (2008).
36
Azcona v. Reyes, 59 Phil. 446 (1934); Coronel v. Ona, 33 Phil. 456 (1916); Francisco v. Chemical Bulk Carriers, 657 SCRA 355
(2011).
37
Cabrera v. Ysaac, 740 SCRA 612 (2014).
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MODULE 2.3
PRICE AND OTHER CONSIDERATION
[WEEK 4: SEPTEMBER 2]
c. Effect of Non-Payment of Price – Sale being consensual, failure of buyer to pay the price does
not make the contract void for lack of consideration or simulation, but results in buyer’s default,
for which seller may exercise his legal remedies. Balatbat v. Court of Appeals, 261 SCRA 128
(1996).39
“In a contract of sale, the non-payment of the price is a resolutory condition which
extinguishes the transaction that, for a time, existed and discharges the obligations created
thereunder[?]. The remedy of an unpaid seller in a contract of sale is to seek either specific
performance or rescission.” Heirs of Pedro Escanlar v. CA, 281 SCRA 176 (1997).40
Price Simulated, Not Just Unpaid: It is a badge of simulated price, which render the sale
void, when price is expressly stipulated to have been paid, but in fact never been paid by the
buyer to the seller. Vda. de Catindig. v. Heirs of Catalina Roque, 74 SCRA 83 (1976).41
38
Gonzales v. Trinidad, 67 Phil. 682 (1939)
39
Peñalosa v. Santos, 363 SCRA 545 (2001); Soliva v. Intestate Estate of Marcelo M. Villalba, 417 SCRA 277 (2003); Province of
Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
40
Villaflor v. CA, 280 SCRA 297 (1997).
41
Ocejo v. Flores, 40 Phil. 921 (1920); Ladanga v. CA, 131 SCRA 361 (1984); Rongavilla v. CA, 294 SCRA 289 (1998); Labagala
v. Santiago, 371 SCRA 360 (2001); Cruz v. Bancom Finance Corp., 379 SCRA 490 (2002); Montecillo v. Reynes, 385 SCRA 244 (2002);
Republic v. Southside Homeowners Asso., 502 SCRA 587 (2006); Quimpo, Sr. v Abad Vda de Beltran, 545 SCRA 174 (2008); Solidstate
Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197 (2008); Clemente v. CA, 772 SCRA 339 (2015).
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2. Price Must Be in “Money or Its Equivalent” (Arts. 1458 and 1468)
Price must be “valuable consideration” under by Civil Law, instead of “any price” mandated in
Common Law. üOng v. Ong, 139 SCRA 133 (1985); üBagnas v. CA, 176 SCRA 159 (1989).
Consideration for a valid contract of sale need not be “money or its equivalent,” Republic v. Phil.
Resources Dev., 102 Phil. 960 (1958); and can take different forms, such as expected profits from the
subdivision project, Torres v. Court of Appeals, 320 SCRA 428 (1999); cancellation of liabilities on the
property in favor of the seller, Polytechnic University v. Court of Appeals, 368 SCRA 691 (2001); or
assumption of mortgage on property sold. Doles v. Angeles, 492 SCRA 607 (2006).42
b. Price Cannot Be Set By Either Party After Alleged Perfection, Unless Such Price Is
Separately Accepted by the Other Party. (Arts. 1473, 1182)
When the deed of conveyance does not state the price, and the parties agreed to set the
price in another document, there cannot be any perfected contract of sale for lack of the
essential element of price. Fuison v. Heirs of Loreño Terry, 836 SCRA 90 (2017).
42
The deed of sale with assumption of mortgage is a registrable instrument and must be registered with the Register of Deeds in
order to bind third parties. Rodriguez v. CA, 495 SCRA 490 (2006).
43
Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006).
44
Velasco v. CA, 51 SCRA 439 (1973); Co v. CA, 286 SCRA 76 (1998); San Miguel Properties v. Huang, 336 SCRA 737 (2000);
Montecillo v. Reynes, 385 SCRA 244 (2002); Edrada v. Ramos, 468 SCRA 597 (2005); Cruz v. Fernando, 477 SCRA 173 (2005);
Marnelego v. Banco Filipino Savings Bank, 480 SCRA 399 (2006); Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006); Platinum
Plans Phil. v. Cucueco, 488 SCRA 156 (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Dantis v. Maghinang, Jr.,
695 SCRA 599 (2013).
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a. Simple Inadequacy of Price Does Not Affect Ordinary Sales – Mere inadequacy of the price
does not affect the validity of the sale when both parties are in a position to form an independent
judgment concerning the transaction, unless fraud, mistake, or undue influence indicative of a
defect in consent is present. The contract may be annulled for vitiated consent and not due to
the inadequacy of price. Bautista v. Court of Appeals, 436 SCRA 141 (2004).45
b. “Gross Inadequacy of Price” May:
(1) Raise the Presumption of Equitable Mortgage in an Ordinary Sale (Art. 1602)
(2) Render Voidable a Judicial Sale: (i) Only when it is shocking to the conscience of man.
Pascua v. Simeon, 161 SCRA 1 (1988); and (ii) There is showing that, in the event of a
resale, a better price can be obtained. Cu Bie v. Court of Appeals, 15 SCRA 307 (1965).46
UNLESS: There is right of redemption, in which case the proper remedy is to redeem. De
Leon v. Salvador, 36 SCRA 567 (1970).47
HOWEVER: By way of extraordinary circumstances perceived, when in a judicial sale the
right of redemption has been lost, where the inadequacy of the price is purely shocking to
the conscience, such that the mind revolts at it and such that a reasonable man would
neither directly or indirectly be likely to consent to it, the same will be se aside. Cometa v.
Court of Appeals, 351 SCRA 294 (2001).
(3) Render Rescissible a Sale by Fiduciary, where Beneficiary suffers lesion of more
than 1/4 of value of thing sold, unless approved by the courts (Arts. 1381and1386)
There can be no legal conclusion of inadequacy of price in the absence of any evidence of
the fair market value of a land at the time of sale. Acabal v. Acabal, 454 SCRA 897 (2005).48
“Gross inadequacy in price” is such that a reasonable man will not agree to dispose of his
property. Dorado Vda. de Delfin v. Dellota, 542 SCRA 397 (2008).
When judicial sale is voided without fault of purchaser, latter is entitled return of price with
simple interest, together with all sums paid out in improvements introduced on the property,
taxes, and other expenses. Seven Brothers Shipping Corp. v. CA, 246 SCRA 33 (1995).
MODULE 3:
FORMATION OF THE CONTRACT OF SALE
—
MODULE 3.1
POLICITACION STAGE
[WEEK 5: SEPTEMBER 09]
45
Ereñeta v. Bezore, 54 SCRA 13 (1973); Bacungan v. CA, 574 SCRA 642 (2008).
46
Tayengco v. CA, 15 SCRA 306 (1965); Republic v. NLRC, 244 SCRA 564 (1995).
47
Vda. de Gordon v. CA, 109 SCRA 388 (1981).
48
Avila v. Barabat, 485 SCRA 8 (2006).
49
Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); San Miguel Properties Phil. v. Huang, 336 SCRA 737 (2000); First Optima
Realty Corp. v. Securitron Security Services, 748 SCRA 534 (2015)
- 12 -
When the offeree negotiates for a much lower price, it constitutes a counter-offer and is therefor
not an acceptance of the offer of offeror. Tuazon v. Del Rosario-Suarez, 637 SCRA 728 (2010).
1. OPTION CONTRACT
An option is a preparatory contract in which one party grants to the other, for a fixed period and
under specified conditions, the power to decide, whether or not to enter into a principal contract. It binds
the party who has given the option, not to enter into the principal contract with any other person during
the period designated, and, within that period, to enter into such contract with the one to whom the
option was granted, if the latter should decide to use the option. It is a separate agreement distinct from
the contract of sale which the parties may enter into upon the consummation of the option. Carceller v.
Court of Appeals, 302 SCRA 718 (1999).50
An option imposes no binding obligation on the person holding the option aside from the
consideration for the offer. Until accepted (exercised), it is not treated as a sale. üTayag v. Lacson,
426 SCRA 282 (2004).51
a. Option With “Separate Consideration” (Arts. 1479 and 1324) – A unilateral promise to sell,
in order to be binding upon the promissor, must be for a price certain and supported by a
consideration separate from such price. Salame v. Court of Appeals, 239 SCRA 356 (1995).52
Although the option mentions no consideration it may be proved, and once proven, option
is binding. Montinola v. Cojuangco, 78 Phil. 481 (1947).
“Separate consideration” in an option may be anything of value, unlike in sale where it must
be the price certain in money or its equivalent. üVillamor v. Court of Appeals, 202 SCRA 607
(1991),53 such when the option is attached to real estate mortgage. Soriano v. Bautista, 6 SCRA
946 (1962).
The consideration for an option contract does not need to be monetary and may be anything
of value; however, when the consideration is not monetary, the consideration must be clearly
specified as such in the option contract or clause. When the written agreement itself does not
state the consideration for the option contract, offeree bears the burden of proving the existence
of a separate consideration for the option. üPNOC v. Keppel Phils. Holdings, Inc., 798 SCRA
65 (2016).
Where an offer is supported by a separate consideration, a valid option contract exists, i.e.,
there is a contracted offer which the offeror cannot withdraw from without incurring liability in
damages. üPNOC v. Keppel Phils. Holdings, Inc., 798 SCRA 65 (2016), citing VILLANUEVA,
C., LAW ON SALES, p. 154 (2004 ed.).
b. Option WITHOUT Separate Consideration: Void as Option, Valid as a Certain Offer – “He
who draws and shoots the gun first wins.” üSanchez v. Rigos, 45 SCRA 368 (1972).54
BUT SEE: Nothing Arises From an Option Without Separate Consideration. Yao Ka Sin
Trading v. Court of Appeals, 209 SCRA 763 (1991).55
Even if the option without separate consideration constitute a certain offer, still it must still
be exercised within the option period and the acceptance must still be absolute. Tuazon v. Del
Rosario-Suarez, 637 SCRA 728 (2010).
c. The “Double Acceptance Rule” – An option to rise to the level of a contract, there must be
formal acceptance of the option offer. üVazquez v. Court of Appeals, 199 SCRA 102 (1991).
d. Exercise of Option Contract – The optionee-offeree may validly and effectively exercise his
right by merely advising the optioner-offeror of his decision to buy and expressing his readiness
to pay the stipulated price as soon as the seller is able to execute the proper deed of sale;
optionee-offeree’s decision to exercise his option to buy need not be couple with actual payment
of the price. üNietes v. Court of Appeals, 46 SCRA 654 (1972).
An option attached to a lease when not exercised within the option period is extinguished
and cannot be deemed to have been included in the implied renewal of the lease (tacita
reconduccion). xDizon v. Court of Appeals, 302 SCRA 288 (1999). BUT SEE: There may be
“virtual” exercise of option with the option period. üCarceller v. Court of Appeals, 302 SCRA
718 (1999).
Proper exercise of an option gives rise to the reciprocal obligations of sale Heirs of Luis
Bacus v. Court of Appeals, 371 SCRA 295 (2001),56 which must be enforced with ten (10) years
as provided under Art. 1144. Dizon v. Court of Appeals, 302 SCRA 288 (1999).
50
Laforteza v. Machuca, 333 SCRA 643 (2000); Buot v. CA, 357 SCRA 846 (2001); Abalos v. Macatangay, Jr., 439 SCRA 649
(2004); Vasquez v. Ayala Corp., 443 SCRA 231 (2004); Eulogio v. Apeles, 576 SCRA 561 (2009); Polytechnic University of the Phil. v.
Golden Horizon Realty Corp., 615 SCRA 478 (2010).
51
Adelfa Properties v. CA, 240 SCRA 565 (1995); Kilosbayan v. Morato, 246 SCRA 540 (1995); San Miguel Properties Phil. v.
Huang, 336 SCRA 737 (2000); Limson v. CA, 357 SCRA 209 (2001).
52
JMA House v. Sta. Monica Industrial and Dev. Corp., 500 SCRA 526 (2006).
53
De la Cavada v. Diaz, 37 Phil. 982 (1918); San Miguel Properties Phil. v. Huang, 336 SCRA 737 (2000).
54
Affirmed in Vasquez v. CA, 199 SCRA 102 (1991).
55
Montilla v. CA, 161 SCRA 855 (1988); Natino v. IAC, 197 SCRA 323 (1991); Diamante v. CA, 206 SCRA 52 (1992).
56
Limson v. CA, 357 SCRA 209 (2001).
- 13 -
2. RIGHT OF FIRST REFUSAL
A right of first refusal cannot be the subject of specific performance, but breach on the part of the
promissor would allow a recovery of damages. Guerrero v. Yñigo, 96 Phil. 37 (1954).
Rights of first refusal only constitute “innovative juridical relations”, but do not rise to the level of
contractual commitment since with the absence of agreement on price certain, they are not subject to
contractual enforcement. üAng Yu Asuncion v. Court of Appeals, 238 SCRA 602 (1994).
Right of first refusal contained in a Contract of Lease, when breached by promissor allows
enforcement by the promisee by way of rescission of the sale entered into with the third party, pursuant
to Arts. 1381(3) and 1385 of Civil Code. Guzman, Bocaling & Co. v. Bonnevie, 206 SCRA 668 (1992),
üEquatorial Realty Dev. v. Mayfair Theater, 264 SCRA 483 (1996);57 üParañaque Kings
Enterprises v. Court of Appeals, 268 SCRA 727 (1997).
BUT: A right of first refusal constituted separately during the term of the contract of lease, may be
valid and binding, but not against a purchaser for value and in good faith. üRosencor Dev. Corp. v.
Inquing, 354 SCRA 119 (2001).
A right of first refusal in a lease in favor of the lessee cannot be availed of by the sublessee.
Sadhwani v. Court of Appeals, 281 SCRA 75 (1997).
In a right of first refusal, while the object might be made determinate, the exercise of the right would
be dependent not only on the grantor’s eventual intention to enter into a binding juridical relation with
another but also on terms, including the price, that are yet to be firmed up … the “offer” may be
withdrawn anytime by communicating the withdrawal to the other party (?). üVasquez v. Ayala Corp.,
443 SCRA 231 (2004).
A right of first refusal simply means that should lessor decide to sell the leased property during the
term of the lease, such sale should first be offered to the lessee; and the series of negotiations that
transpire between lessor and lessee on the basis of such preference is a compliance even when no
final purchase agreement is perfected between the parties. The lessor was then at liberty to offer the
sale to a third party who paid a higher price, and there is no violation of the right of the lessee. Riviera
Filipina, Inc. v. Court of Appeals, 380 SCRA 245 (2002).58
Right of first refusal clause does not apply to this situation where the owner to eject the tenant on
the ground that the former needs the premises for residential purposes. Estanislao v. Gudito, 693 SCRA
330 (2013).
3. MUTUAL PROMISES TO BUY AND SELL (Art. 1479): “TRUE CONTRACT TO SELL”
Mutual promises to buy and sell a certain thing for a certain price gives the parties a right to demand
from the other the fulfillment of the obligation, Borromeo v. Franco, 5 Phil. 49 (1905); even in this case
the certainty of the price must also exist, otherwise, there is no valid and enforceable contract to sell.
Tan Tiah v. Yu Jose, 67 Phil. 739 (1939).
Accepted bilateral promises to buy and sell is in a sense similar to, but not exactly the same, as a
perfected contract of sale because there is already a meeting of minds upon the thing which is the object
of the contract and upon the price.59 But a contract of sale is consummated only upon delivery and
payment, whereas in a bilateral promise to buy and sell gives the contracting parties rights in personam,
such that each has the right to demand from the other the fulfillment of their respective undertakings.
üMacion v. Guiani, 225 SCRA 102 (1993).60
Cause of action under a mutual promise to buy and sell is 10 years. Villamor v. Court of Appeals,
202 SCRA 607 (1991).
MODULE 3.2
PERFECTION STAGE
[WEEK 6: SEPTEMBER 16]
VI. PERFECTION STAGE OF SALE (Arts. 1475, 1319, 1325 and 1326)
Sale is perfected at the moment there is a meeting of minds upon the thing which is the object of
the contract and upon the price. From that moment, the parties may reciprocally demand performance
subject to the law governing the form of contracts. Marnelego v. Banco Filipino Savings and Mortgage
Bank, 480 SCRA 399 (2006).61
Consent being a state of mind may only be inferred from the confluence of two acts of the parties:
an offer certain as to the object of the contract and its consideration, and an acceptance of the offer
57
Rosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001); Conculada v. CA, 367 SCRA 164 (2001); Polytechnic University v. CA,
368 SCRA 691 (2001); Riviera Filipina, Inc. v. CA, 380 SCRA 245 (2002); Lucrative Realty and Dev. Corp. v. Bernabe, Jr., 392 SCRA
679 (2002); Villegas v. CA, 499 SCRA 276 (2006); Polytechnic University of the Phil. v. Golden Horizon Realty Corp., 615 SCRA 478
(2010).
58
Polytechnic University v. CA, 368 SCRA 691 (2001); Villegas v. CA, 499 SCRA 276 (2006); Polytechnic University of the Phil. v.
Golden Horizon Realty Corp., 615 SCRA 478 (2010).
59
El Banco Nacional Filipino v. Ah Sing, 69 Phil. 611 (1940); Manuel v. Rodriguez, 109 Phil. 1 (1960).
60
Borromeo v. Franco, 5 Phil. 49 (1905); Villamor v. CA, 202 SCRA 607 (1991); Coronel v. CA, 263 SCRA 15 (1996).
61
Valdez v. CA, 439 SCRA 55 (2004); Blas v. Angeles-Hutalla, 439 SCRA 273 (2004); Ainza v. Padua, 462 SCRA 614 (2005); Cruz
v. Fernando, 477 SCRA 173 (2005).
- 14 -
which is absolute in that it refers to the exact object and consideration embodied in said offer. Villanueva
v. PNB, 510 SCRA 275 (2006).62
If a material element of a contemplated contract is left for future negotiations, the same is too
indefinite to be enforceable. For a contract to be enforceable, its terms must be certain and explicit, not
vague or indefinite. Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006).63
62
Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).
63
Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).
64
Beaumont v. Prieto, 41 Phil. 670 (1916); Zayco v. Serra, 44 Phil. 326 (1923); Limketkai Sons Milling, v. CA, 255 SCRA 626 (1996);
XYST Corp. v. DMC Urban Properties Dev., 594 SCRA 598 (2009); Tuazon v. Del Rosario-Suarez, 637 SCRA 728 (2010).
65
Limketkai Sons Milling v. CA, 250 SCRA 523 (1995), but reversed in 255 SCRA 626 (1996).
66
Escueta v. Lim, 512 SCRA 411 (2007).
67
San Miguel Properties v. Huang, 336 SCRA 737 (2000).
68
Limjoco v. CA, 37 SCRA 663 (1971); Villonco v. Bormaheco, 65 SCRA 352 (1975); Spouses Doromal, Sr. v. CA, 66 SCRA 575
(1975); PNB v. CA, 262 SCRA 464 (1996); San Miguel Properties v. Huang, 336 SCRA 737 (2000); Platinum Plans Phil. v. Cucueco,
488 SCRA 156 (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); GSIS v. Lopez, 592 SCRA 456 (2009); XYST
- 15 -
5. Differences Between Earnest Money and Option Money: üOesmer v. Paraiso Dev. Corp.,
514 SCRA 228 (2007).
6. Sale Deemed Perfected at the Place Where Offer Was Made (Art. 1319)
MODULE 3.3
FORMAL REQUIREMENTS FOR
CONTRACTS OF SALE
[WEEK 7: SEPTEMBER 23]
VII. FORMAL REQUIREMENTS FOR CONTRACTS OF SALE (Arts. 1357, 1358(1), 1406
and 1483)
1. Sale Being Consensual Contract, Form Not Important for Its Validity
Sale of land under private instrument is enforceable. Gallar v. Husain, 20 SCRA 186 (1967).69
Articles 1357 and 1358, in relation to Art. 1403(2), do not require that the conveyance of land to be
in a public instrument in order to validate the act or contract, but only to ensure its efficacy. Estate of
Pedro C. Gonzales v. Heirs of Marcos Perez, 605 SCRA 47 (2009).70
The legal consequence of the sale not being in a public instrument is that both its due execution
and its authenticity must be proven, pursuant to Sec. 20, Rule 132 of the Rules of Court. Tigno v. Aquino,
444 SCRA 61 (2003).
Corp. DMC Urban Properties Dev., 594 SCRA 598 (2009); First Optima Realty Corp. v. Securitron Security Services, 748 SCRA 534
(2015).
69
F. Irureta Goyena v. Tambunting, 1 Phil. 490 (1902).
70
Martinez v. CA, 358 SCRA 38 (2001); Heirs of Biona v. CA, 362 SCRA 29 (2001); Estate of Pedro C. Gonzales v. Heirs of Marcos
Perez, 605 SCRA 47 (2009).
71
Yason v. Arciaga, 449 SCRA 458 (2005); Union Bank v. Ong, 491 SCRA 581 (2006); Tapuroc v. Loquellano Vda. De Mende, 512
SCRA 97 (2007); Alfaro v. CA, 519 SCRA 270 (2007); Santos v. Lumbao, 519 SCRA 408 (2007); Pedrano v. Heirs of Benedicto Pedrano,
539 SCRA 401 (2007); Olivares v. Sarmiento, 554 SCRA 384 (2008).
72
Nazareno v. CA, 343 SCRA 637 (2000); Santos v. Heirs of Jose P. Mariano, 344 SCRA 284 (2000)
73
Domingo v. CA, 367 SCRA 368 (2001).
74
Limketkai Sons Milling v. CA, 250 SCRA 523 (1995); Fule v. CA, 286 SCRA 698 (1998); Agasen v. CA, 325 SCRA 504 (2000);
Universal Robina Sugar Milling v. Heirs of Angel Teves, 389 SCRA 316 (2002); Estreller v. Ysmael, 581 SCRA 247 (2009); San Miguel
Properties, Inc. v. BF Homes, Inc., 765 SCRA 131 (2015).
- 16 -
While sale of land appearing in a private deed is binding between the parties, it cannot be
considered binding on third persons, if it is not embodied in a public instrument and recorded in
the Registry of Deeds. Santos v. Manalili, 476 SCRA 679 (2005).75
b. For Enforceability Between the Parties: STATUTE OF FRAUDS (Arts. 1403 and 1405)
The term “Statute of Frauds” is descriptive of the statutes which require certain enumerated
contracts and transactions, such as agreements for the sale of real property, to be in writing and
signed by the party to be charged, the purpose being to prevent fraud and perjury in the
enforcement of obligations depending for their evidence on the unassisted memory of
witnesses. Shoemaker v. La Tondeña, 68 Phil. 24 (1939).
Application of the Statute of Frauds presupposes the existence of a perfected contract;
otherwise, there is no basis to apply the Statute. Firme v. Bukal Enterprises and Dev. Corp., 414
SCRA 190 (2003).76
(1) Coverage:
(i) Sale of Real Property – Cannot be proven by means of witnesses, but must
necessarily be evidenced by a written instrument, duly subscribed by party charged,
or by secondary evidence of the contents of such document. Gorospe v. Ilayat, 29
Phil. 21 (1914).77
(ii) Agency to Sell or to Buy – As contrasted from sale, agency to sell does not belong to
any of the categories of contracts covered by Arts. 1357 and 1358 and not one
enumerated under the Statutes of Frauds in Art. 1403. Lim v. Court of Appeals, 254
SCRA 170 (1996).78
(iii) Rights of First Refusal – Are not covered since Art. 1403(2)(e) presupposes the
existence of a perfected, albeit unwritten, contract of sale; a right of first refusal, is
not by any means a perfected sale. Rosencor Dev. Corp. v. Inquing, 354 SCRA 119
(2001).
(iv) Right to Repurchase – Deed and verbal agreement allowing the right of repurchase
should be considered as an integral whole; the deed of sale is itself the note or
memorandum evidencing the contract. Mactan Cebu Int’l Airport Authority v. Court of
Appeals, 263 SCRA 736 (1996).
(v) Equitable Mortgage – Statute does not stand in the way of treating an absolute deed
as a mortgage, when such was the parties’ intention, although the agreement for
redemption or defeasance is proved by parol evidence. Cuyugan v. Santos, 34 Phil.
100 (1916).79
(2) Requisite of “Memorandum” – For the memorandum to take the sale out of the coverage
of the Statute of Frauds, it must contain “all the essential terms of the contract” of sale.
üYuviengco v. Dacuycuy, 104 SCRA 668 (1981);80 even when scattered into various
correspondences which can be brought together, City of Cebu v. Heirs of Candido Rubi,
306 SCRA 408 (1999).81
EXCEPTION: Electronic Documents under E-COMMERCE ACT (R.A. 8792)
(3) Waiver (Art. 1405) – Cross-examination on the contract is deemed a waiver of the defense
of the Statute. Abrenica v. Gonda, 34 Phil. 739 (1916).82
(4) Partial Execution (Art. 1405) üOrtega v. Leonardo, 103 Phil. 870 (1958); üClaudel v.
Court of Appeals, 199 SCRA 113 (1991).
Statute of Frauds does not apply to contracts either partially or totally performed. In addition,
a contract that violates the Statute of Frauds is ratified by the acceptance of benefits under the
contract, such as the acceptance of the purchase price and using the proceeds to pay
outstanding loans. Alfredo v. Borras, 404 SCRA 145 (2003).83
Delivery of the deed to buyer’s agent, with no intention to part with the title until the purchase
price is paid, does not take the case out of the Statute of Frauds. Baretto v. Manila Railroad
Co., 46 Phil. 964 (1924).
Probative Value of Commercial Documents: Business forms, e.g., order slip, delivery
invoice, issued in the ordinary course of business are not always fully accomplished to contain
all the necessary information describing in detail the whole business transaction; despite their
being incomplete, they are commonly recognized in ordinary commercial transactions as valid
75
Limketkai Sons Milling v. CA, 255 SCRA 6 (1996); 261 SCRA 464 (1996); Talusan v. Tayag, 356 SCRA 263 (2001).
76
Rosencor Dev’t Corp. v. Inquing, 354 SCRA 119 (2001).
77
Alba Vda. De Ray v. CA, 314 SCRA 36 (1999).
78
Torcuator v. Bernabe, 459 SCRA 439 (2005).
79
Rosales v. Suba, 408 SCRA 664 (2003); Ayson, Jr. v. Paragas, 557 SCRA 50 (2008).
80
Paredes v. Espino, 22 SCRA 1000 (1968); Torcuator v. Bernabe, 459 SCRA 439 (2005).
81
Berg v. Magdalena Estate, 92 Phil. 110 (1952); Limketkai Sons Milling v. CA, 250 SCRA 523 (1995); First Philippine Int’l Bank v.
CA, 252 SCRA 259 (1996).
82
Talosig v. Vda. De Nieba, 43 SCRA 472 (1972); Limketkai Sons Milling v. CA, 250 SCRA 523 (1995); Lacanilao v. CA, 262 SCRA
486 (1996).
83
Vda. de Jomoc v. CA, 200 SCRA 74 (1991); Soliva v. Estate of Marcelo M. Villalba, 417 SCRA 277 (2003); Ainza v. Padua, 462
SCRA 614 (2005); De la Cena v. Briones, 508 SCRA 62 (2006); Yaneza v. CA, 572 SCRA 413 (2008); Duarte v. Duran, 657 SCRA 607
(2011).
- 17 -
between the parties and serve as an acknowledgment that a business transaction has in fact
transpired. Donato C. Cruz Trading Corp. v. Court of Appeals, 347 SCRA 13 (2000).84
A sales invoice is a commercial document (i.e., those used by merchants or businessmen
to promote or facilitate trade or credit transactions) which is not a mere scrap of paper bereft of
probative value, but vital piece of evidence of commercial transactions, written memorials of the
details of the consummation of contracts. Seaoil Petroleum Corp. v. Autocorp Group, 569 SCRA
387 (2008); it constitutes evidence of the receipt of the goods; since the best evidence to prove
payment is the official receipt. El Oro Engravers Corp. v. Court of Appeals, 546 SCRA 42 (2008).
In itself, the absence of receipts, or any proof of consideration, would not be conclusive of
the inexistence of a sale since consideration is always presumed. Tigno v. Aquino, 444 SCRA
61 (2003); but a receipt proves payment which takes the sale out of the Statute of Frauds.
üToyota Shaw v. Court of Appeals, 244 SCRA 320 (1995).85
CONTRA: A receipt which is merely an acknowledgment of the sum received, without any
indication therein of the total purchase price of the land or of the monthly installments to be paid,
cannot be the basis of valid sale. Leabres v. Court of Appeals, 146 SCRA 158 (1986).86
Deeds of Absolute Sale although not notarized are enforceable. First, the Deeds are
already in writing and signed by the parties, and only lack notarization, a formality which SMPI
could compel BF Homes to comply with. As private documents, the Deeds are still binding
between the parties and the conveyance of the 130 Italia II lots by BF Homes to SMPI by virtue
of said Deeds is valid. And second, the Deeds were already ratified as BF Homes had accepted
the benefits from said contracts when it received full payment from SMPI of the purchase price
for the 130 Italia II lots. The Deeds were also substantially performed considering that BF Homes
had previously delivered to SMPI the TCTs for 110 out of the 130 lots, only refusing to deliver
the TCTs for the remaining 20 lots. üSan Miguel Properties, Inc. v. BF Homes, Inc., 765
SCRA 131 (2015).
An oral sale of real property is not void and even enforceable and binding between the
parties if it had been totally or partially executed. Possession of the property, making
improvements therein and paying its real property taxes may serve as indicators that an oral
sale of a piece of land had been performed or executed. üHeirs of Soledad Alido v. Campano,
911 SCRA 148 (2019).
c. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art. 1874) –
When sale of a piece of land or any interest therein is through an agent, the authority of the
latter shall be in writing; otherwise, the sale shall be void,87 even when:
• Agent is owner’s son. Delos Reyes v. Court of Appeals, 313 SCRA 632 (1999).
• When partial price received by agent. Dizon v. Court of Appeals, 396 SCRA 154 (2003).88
• Seller is a corporation. City-Lite Realty Corp. v. Court of Appeals, 325 SCRA 385 (2000).89
When the Contract to Sell was signed by the co-owners themselves as witnesses, the
written authority for their agent mandated under Article 1874 of the Civil Code is no longer
required. Oesmer v. Paraiso Dev. Corp., 514 SCRA 228, 237 (2007).
Article 1874 should be interpreted to mean that the sale is unenforceable to the principal,
who may otherwise ratify it. Pahud v. Court of Appeals, 597 SCRA13 (2009).90
d. Sale of Large Cattle (Art. 1581; Sec. 529, Revised Adm. Code)
X D. SIMULATED SALES
Characteristic of simulation is that the apparent contract is not really desired or intended to produce
legal effect or in any way alter the parties’ juridical situation, or that the parties have no intention to be
bound by the contract. The requisites are: (a) an outward declaration of will different from the will of the
parties; (b) false appearance must have been intended by mutual agreement; and (c) purpose is to
deceive third persons. Manila Banking Corp. v. Silverio, 466 SCRA 438 (2005).91
1. Badges of Simulation:
• Non-payment of the stipulated consideration, absence of any attempt by the buyers to assert
their alleged rights over the subject property. Villaflor v. Court of Appeals, 280 SCRA 297
(1997).92
• Failure of alleged buyers to collect rentals from alleged seller. Santiago v. Court of Appeals, 278
SCRA 98 (1997); but not when there appears a legitimate lessor-lessee relationship between
the vendee and the vendor. Union Bank v. Ong, 491 SCRA 581 (2006).
84
Lagon v. Hooven Comalco Industries, 349 SCRA 363 (2001).
85
Xentrex Automotive v. CA, 291 SCRA 66 (1998).
86
Limson v. CA, 357 SCRA 209 (2001).
87
Alcantara v. Nido, 618 SCRA 333 (2010); Camper Realty Corp. v. Pajo-Reyes, 632 SCRA 400 (2010).
88
Firme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).
89
Pineda v. CA, 376 SCRA 222 (2002).
90
Escueta v. Lim, 512 SCRA 411 (2007).
91
Rosario v. CA, 310 SCRA 464 (1999); Loyola v. CA, 326 SCRA 285 (2000); Yu Bun Guan v. Ong, 367 SCRA 559 (2001); Payongayong v.
CA, 430 SCRA 210 (2004).
92
Solidstate Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197 (2008).
- 18 -
• Although agreement did not provide for absolute transfer ownership of the land to buyer, that
did not amount to simulation, since delivery of TCT and execution of deed of absolute sale were
expressly stipulated as suspensive conditions, which gave rise to the corresponding obligation
on part of buyer to pay the last installments. Villaflor v. Court of Appeals, 280 SCRA 297 (1997).
• When signature on a deed of sale is a forgery, Fidel v. Court of Appeals, 559 SCRA 186 (2008);
but bare assertions that the signature appearing on the Deeds of Sale is not enough to allege
simulation, since forgery is not presumed; it must be proven by clear, positive and convincing
evidence. R.F. Navarro & Co. v. Vailoces, 361 SCRA 139 (2001).
• Simulation of contract and gross inadequacy of price are distinct legal concepts, with different
effects – the concept of a simulated sale is incompatible with inadequacy of price. When the
contracting parties do not really intend to be bound by it, the contract is simulated and void.
Gross inadequacy of price by itself will not result in a void contract, and it does not even affect
the validity of a contract of sale, unless it signifies a defect in the consent or that the parties
actually intended a donation or some other contract. Bravo-Guerrero v. Bravo, 465 SCRA 244
(2005).
MODULE 4
CONSUMMATION/PERFORMANCE OF
THE CONTRACT OF SALE
—
MODULE 4.1
OBLIGATIONS OF THE PARTIES TO THE
CONTRACT OF SALE
[WEEK 8: SEPTEMBER 30]
93
Uy v. CA, 314 SCRA 69, 81 (1999).
- 19 -
Mere sending of a letter by the buyer expressing the intention to pay without the accompanying
payment is not considered a valid tender of payment and consignation of the amount due are essential
in order to extinguish the obligation to pay and oblige the seller to convey title. Torcuator v. Bernabe,
459 SCRA 439 (2005).
Unless the parties agreed otherwise, payment of the price must be made to the seller in accordance
with Article 1240 which provides that “Payment shall be made to the person in whose favor the obligation
has been constituted, or his successor in interest, or any person authorized to receive it.” Montecillo v.
Reynes, 385 SCRA 244 (2002).
A letter of credit is an engagement by a bank or other person made at the request of a customer
that the issuer will honor drafts or other demands for payment upon compliance with the conditions
specified in the credit. Through a letter of credit, the bank merely substitutes its own promise to pay
for the promise to pay of one of its customers who in return promises to pay the bank the amount of
funds mentioned in the letter of credit plus credit or commitment fees mutually agreed upon. Once the
issuing bank shall have paid the beneficiary after the latter's compliance with the terms of the letter of
credit, the issuing bank is entitled to reimbursement for the amount it paid under the letter of credit. In
other words, if the customer of the bank is the buyer in a contract of sale or sales agreement, as in the
case at bench, the bank guarantees to the seller-beneficiary that the buyer's payment of the goods will
be received in accordance with the agreement Once the bank pays the seller-beneficiary, it is entitled
to reimbursement from its customer, the buyer. Clearly, the letter of credit is an assurance to the seller
that he/she will be paid the agreed amount at a certain period of time. üBongcayao v. Confederation
of Sugar Producers Cooperatives, G.R. No. 225438, (2021).
94
Rufloe v. Burgos, 577 SCRA 264, 272-273 (2009).
95
Tangalin v. CA, 371 SCRA 49 (2001); Heirs of Arturo Reyes v. Socco-Beltran, 572 SCRA 211 (2008); Francisco v. Chemical Bulk
Carriers, 657 SCRA 355 (20
- 20 -
“Delivery” refers to the concurrent transfer of two things: (1) possession and (2)
ownership. If the vendee is placed in actual possession of the property, but by agreement
of the parties ownership of the same is retained by the vendor until the vendee has fully
paid the price, the mere transfer of the possession of the property subject of the sale is
not the “delivery” contemplated in the Law on Sales or as used in Art. 1543 of the Civil
Code. Cebu Winland Dev. Corp. v. Ong Siao Hua, 588 SCRA 120 (2009).
In this case, after the execution of the contract of sale, possession of the subject
matter was given to the buyer without any express or implied reservation of
ownership. Consequently, in the absence of stipulation to the contrary, the ownership
of the thing sold passes to the vendee upon actual or constructive delivery thereof.
The obligation to pay real property taxes on the subject matter thereby rested upon
the shoulder of the buyer. Agustin v. De Vera, 900 SCRA 203 (2019).
(2) Relationship to the Price – It may be stipulated that ownership in the thing shall not pass
to buyer until he has fully paid price (Art. 1478). CONSEQUENTLY:
• Absence of an express stipulation to the contrary, payment of price of the goods is not
a condition precedent to the transfer of title to the buyer, but title passes by the delivery
of the goods. Phil. Suburban Dev. Corp. v. Auditor General, 63 SCRA 397 (1975).96
• Failure of buyer to make good the price does not cause the ownership to re-vest to the
seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Art.
1191. Balatbat v. Court of Appeals, 261 SCRA 128 (1996).
(3) Tradition Per Se Transfers Ownership to the Buyer (Arts. 1477, 1478, and 1496) –
Absence of a stipulation to the contrary, tradition produces its natural legal effects, most
important of which being conveyance of ownership, without prejudice to right of seller to
claim payment of price. Froilan v. Pan Oriental Shipping, 12 SCRA 276 (1964).97
In a contract of sale, title to the property sold passes to buyer upon delivery of thing
sold; seller loses ownership by delivery and cannot recover it until and unless contract is
resolved or rescinded by court process. David v. Misamis Occidental II Electric
Cooperative, 676 SCRA 367 (2012).
c. ACTUAL OR PHYSICAL DELIVERY (Art. 1497) – Article 1477 recognizes that the “ownership of
the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof;”
related to this is Art. 1497 which provides that “[t]he thing sold shall be understood as delivered
when it is placed in the control and possession of the vendee.” Santiago v. Villamor, 686 SCRA
313 (2012).
It is not necessary that seller himself physically delivers title to the buyer because the thing
sold is understood as delivered when it is placed in control and possession of buyer. Thus, when
sellers themselves introduced the tenant to the buyer as the new owners of the land, and from
that time on the buyer acted as landlord thereof, there was delivery that transferred title to the
buyer. Alfredo v. Borras, 404 SCRA 145 (2003).
d. CONSTRUCTIVE DELIVERY: EXECUTION OF A PUBLIC INSTRUMENT (Art. 1498) – Where deed of sale
is made through a public instrument, its execution is equivalent to the delivery of the property.
Caoibes, Jr. v. Caoibes-Pantoja, 496 SCRA 273 (2006).98
Under Art. 1498, the mere execution of the deed of conveyance in a public instrument is
equivalent to the delivery of the property, and that prior physical delivery or possession is not
legally required, since ownership and possession are two entirely different legal concepts.
Notwithstanding the presence of illegal occupants on the subject property, transfer of ownership
by symbolic delivery under Art. 1498 can still be effected through the execution of the deed of
conveyance. Sabio v. Int’l Corporate Bank, 364 SCRA 385 (2001).
BUT SEE: There is nothing in Art. 1498 that provides that execution of a deed of sale is a
conclusive presumption of delivery of possession; presumptive delivery can be negated by the
failure of buyer to take actual possession of the land or the continued enjoyment of possession
by the vendor. üSantos v. Santos, 366 SCRA 395 (2001).99
As a general rule, when sale is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of sale, if from the deed the
contrary does not appear or cannot clearly be inferred. In order the execution of a public
instrument to effect tradition, the purchaser must be placed in control of the thing sold. A person
who does not have actual possession of the thing sold cannot transfer constructive possession
by the execution and delivery of a public instrument. Asset Privatization Trust v. T.J. Enterprises,
587 SCRA 481 (2009).
Under Article 1497, the thing sold shall be understood as delivered, when it is placed in the
control and possession of the vendee, while Article 1498 sates that “when the sale is made
96
Ocampo v. CA, 233 SCRA 551 (1994).
97
Kuenzle & Streiff v. Watson & Co., 13 Phil. 26 (1909); Ocejo, Perez & Co. v. Int'l Banking Corp., 37 Phil. 631 (1918).
98
Tating v. Marcella, 519 SCRA 79 (2007); De Leon v. Ong, 611 SCRA 381 (2010); Villamar v. Mangaoil, 669 SCRA 2012 (2012);
Santiago v. Villamor, 686 SCRA 313 (2012).
99
Equatorial Realty Dev. v. Mayfair Theater, 370 SCRA 56 (2001); Engreso v. De La Cruz, 401 SCRA 217 (2003); Ten Forty Realty
and Dev. Corp. v. Cruz, 410 SCRA 484 (2003); Copuyoc v. De Solas, 504 SCRA 176 (2006); Cebu Winland Dev. Corp. v. Ong Siao
Hua, 588 SCRA 120 (2009); Beatingo v. Gasis, 642 SCRA 539 (2011).
- 21 -
through a public instrument, the execution thereof shall be equivalent to the delivery of the thing
which is the object of the contract, if from the deed the contrary does not appear or cannot be
clearly inferred.” In the present case, there was constructive delivery with the execution of the
notarized Deed of Sale since no evidence was adduced to overcome the presumption under
Article 1498. üHeirs of Bayog-Ang v. Quinones, 886 SCRa 294 (2018).
A contract to sell, or a conditional contract of sale where the suspensive condition has not
happened, even when found in a public document, cannot be treated as constituting constructive
delivery, especially when from the face of the instrument it is shown that the seller “was not yet
the owner of the property and was only expecting to inherit it.” Heirs of Arturo Reyes v. Socco-
Beltran, 572 SCRA 211 (2008).100
Neither the issuance of: an acknowledgment receipt of partial payment, San Lorenzo Dev.
Corp. v. Court of Appeals, 449 SCRA 99 (2005), an invoice, which is not a document of title P.T.
Cerna Corp. v. Court of Appeals, 221 SCRA 19 (1993),101 nor of the registration certificate of
vehicle Union Motor Corp. v. Court of Appeals, 361 SCRA 506 (2001),102 would constitute
constructive delivery of the subject matter of sale—none of them are public instruments of
conveyance.
(1) As to Movables (Arts. 1498-1499, 1513-1514) – Effects of delivery on ownership can be
segregated from the delivery of possession. üDy, Jr. v. Court of Appeals, 198 SCRA 826
(1991).
Where it is stipulated that deliveries must be made to the buyer or his duly authorized
representative named in the contracts, seller is an obligation to deliver in accordance with
such instructions. Lagon v. Hooven Comalco Industries, 349 SCRA 363 (2001).
(2) As to Immovables (Art. 1498) – When sale is made through a public instrument, execution
thereof shall be equivalent to delivery of the thing object of the sale, if from the deed the
contrary does not appear or cannot clearly be inferred. Municipality of Victorias v. Court of
Appeals, 149 SCRA 31 (1987);103 prior physical delivery or possession is not legally
required since execution of the deed is deemed equivalent to delivery. Dy, Jr. v. Court of
Appeals, 198 SCRA 826 (1991); PROVIDED:
(a) Thing Sold Subject to Control of Seller, for a person who does not have actual
possession or control of the thing sold cannot transfer constructive possession by
the execution and delivery of a public instrument. üAddison v. Felix, 38 Phil. 404
(1918).104
– and –
(b) Such Control Remains for a Reasonable Period after Execution of the
Instrument, üDanguilan v. IAC, 168 SCRA 22 (1988);
EXCEPT: When Buyer Assumes Risks of Ownership and Possession. üPower
Commercial and Industrial Corp. v. Court of Appeals, 274 SCRA 597
(1997).105
Registration of Title Is Separate Mode from Execution of Public Instrument –
Recording of the sale with the Registry of Deeds and transfer of the TCT in the name of
buyer are necessary only to bind third parties. As between seller and buyer, transfer of
ownership takes effect upon the execution of a public instrument conveying the real
estate. “Customarily, in the absence of a contrary agreement, the submission by an
individual seller to the buyer of the following papers would complete a sale of real estate:
(1) owner’s duplicate copy of the Torrens title; (2) signed deed of absolute sale; (3) tax
declaration; and (4) latest realty tax receipt. They buyer can retain the amount for the
capital gains tax and pay it upon authority of the seller, or the seller can pay the tax,
depending on the agreement of the parties.” üChua v. Court of Appeals, 401 SCRA 54
(2003).
BUT SEE: Under Art. 1495, seller is obliged to transfer title over the property and deliver
the same to the vendee. üVive Eagle Land, v. Court of Appeals, 444 SCRA 445 (2004).
Delivery of notarized deed of sale and the owner’s duplicate copy of the OCT to the
buyer is tantamount to constructive delivery of the object of the sale. Kings Properties
Corp. v. Galido, 606 SCRA 137 (2009).
(3) As to Incorporeal Property (Arts. 1498 and 1501) – In the sale of shares of stock,
delivery of a stock certificate is one of the essential requisites for the transfer of ownership
of the stocks purchased. Seller’s failure to delivery the stock certificates representing the
shares of stock amounted to a substantial breach which gave rise to a right to rescind the
sale. Raquel-Santos v. Court of Appeals, 592 SCRA 169 (2009).
100
Fortune Tobacco Corp. v. NLRC, 200 SCRA 766 (1991).
101
Norkis Distributors v. CA, 193 SCRA 694 (1991).
102
Abuan v. Garcia, 14 SCRA 759 (1965); Santos v. Santos, 366 SCRA 395 (2001).
103
Florendo v. Foz, 20 Phil. 388 (1911); Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159 (1950); Phil.
Suburban Dev. v. Auditor, 63 SCRA 397 (1975); Kings Properties Corp. v. Galido, 606 SCRA 137 (2009); Monasterio-Pe v. Tong, 646
SCRA 161 (2011).
104
Asset Privatization Trust v. TY.J. Enterprises, 587 SCRA 481 (2009); Villamar v. Mangaoil, 669 SCRA 426 (2012).
105
Villamar v. Mangaoil, 669 SCRA 426 (2012).
- 22 -
e. Constitutum Possessorium (Art. 1500) – A provision in the deed of sale granting to seller a
right to lease the subject matter of the sale is valid: possession is deemed to be constituted in
the vendee by virtue of this mode of tradition.” Amigo v. Teves, 96 Phil. 252 (1954).
f. Traditio Brevi Manu – Prior to the sale, petitioners were in possession of the property as
lessees; upon the sale, they remained in possession, not as lessees anymore but as owners
now through symbolic delivery known as traditio brevi manu. Heirs of Pedro Escanlar v. Court
of Appeals, 281 SCRA 176 (1997).
4. Obligation to Take-Out Insurance Coverage (Art. 1523)
5. Time and Place of Delivery (Art. 1521)
6. Expenses of Execution and Registration (Art. 1487); and of Putting
Goods in Deliverable State (Art. 1521)
Unless otherwise stipulated: (a) under Art. 1487 the expenses for the registration of the sale should
be shouldered by the seller. üVive Eagle Land, v. Court of Appeals, 444 SCRA 445 (2004); and (b)
duty to withhold taxes due on the sale is imposed on seller. Equitable Realty Dev’t v. Mayfair Theater,
332 SCRA 139 (2000).
Although buyer has more interest in having the capital gains tax paid immediately as a pre-requisite
to the issuance of a new Torrens title in his name, nonetheless, as far as the government is concerned
the capital gains tax remains seller’s liability since it is a tax on the seller’s gain on sale of the real estate.
Payment of the capital gains tax, however, is not a pre-requisite to the transfer of ownership to the buyer
since the delivery takes effect upon the signing and notarization of the deed of absolute sale. üChua
v. Court of Appeals, 401 SCRA 54 (2003).
A judgment that decrees seller’s obligations to execute and deliver the deed of absolute sale and
the certificate of title does not necessarily include within its terms the obligation to pay for the expenses
in notarizing a deed of sale and in obtaining new certificate of title. Jose Clavano, Inc. v. HLRB, 378
SCRA 172 (2002).
(3) CIF Sales. üGeneral Foods v. NACOCO, 100 Phil. 337 (1956).
“C.I.F.” found in British contracts stand for costs, insurance, and freight; they signify
that the price fixed covers not only the costs of the goods, but the expense of freight and
insurance to be paid by the seller. üBehn Meyer & Co. v. Yangco, 38 Phil. 602, 606
(1918).
Under an arrangement “c.i.f. U.S. Pacific Coast”, “the vendor is to pay not only the cost
of the goods, but also the freight and insurance expenses, and, as it was judicially
interpreted, this is taken to indicate that the delivery is to be made at the port of destination.”
üPacific Vegetable Oil Corp. v. Singzon, Supreme Court Advance Decisions, 29 April
1955.
106
Chua Ngo v. Universal Trading Co., 87 Phil. 331 (1950).
- 23 -
rise to a valid contract is incumbent on the buyer. Vallarta v. Court of Appeals A, 150 SCRA 336
(1987).
For a sale to be a “sale or return” or a “sale on approval,” there must be a clear agreement
to either of such effect, otherwise, the provisions of Art. 1502 of Civil Code governing such sales
cannot be invoked by either party to the contract. Industrial Textile Manufacturing Co. v. LPJ
Enterprises, 217 SCRA 322 (1993).
107
Goyena v. Tambunting, 1 Phil. 490 (1902); Santa Ana v. Hernandez, 18 SCRA 973 (1966).
108
Asiain v. Jalandoni, 45 Phil 296 (1923); Balantakbo v. CA, 249 SCRA 323 (1995); Rudolf Lietz, Inc. v. CA, 478 SCRA 451 (2005);
Esguerra v. Trinidad, 518 SCRA 186 (2007); Del Prado v. Caballero, 614 SCRA 102 (2010); Arcaina v. Ingram, 817 SCRA 606 (2017).
- 24 -
are declared, the area covered within the boundaries prevails over the stated area in the deed
of sale. In case of conflict between the area and boundaries, it is the latter which should prevail.
Under Article 1542, what is controlling is the entire land included within the boundaries,
regardless of whether the real area should be greater or smaller than that recited in the deed of
sale. üSpouses Orozco v. Lozano, Sr., 900 SCRA 55 (2019).
—oOo—
– MIDTERM EXAMINATIONS –
[WEEKS 9-10: 04-13 OCTOBER]
—oOo—
MODULE 4.2
DOUBLE SALES
[WEEK 11: OCTOBER 21]
1. Primacy of Torrens System of Registration – The rules on double sales under Art. 1544 do not
overcome the rules provided under the Property Registration Decree (P.D. 1459), such as:
a. When two different titles are issued over the same registered land, the buyer who claims under
a title that was first issued shall be preferred. Liao v. CA, 323 SCRA 430 (2000).
b. Invoking the rules on double sales and doctrine “first in time, stronger in rights” under Art. 1544
would be misplaced by a first buyer who bought the land not within the Torrens system but under
Act No. 3344, as against the second buyer who bought the same property when it was already
registered under the Torrens system, because:
(i) Of the “well-known rule in this jurisdiction that persons dealing with registered land have
the legal right to rely on the fact of the Torrens Certificate of Title and to dispense with the
need to inquire further, except when the party concerned has actual knowledge of facts
and circumstances that would impel a reasonably cautious man to make such inquiry;”
and
(ii) The Torrens system rule that formal registration proceedings undertaken on the property
and the subsequent issuance of a title over the land had under the Torrens system had
the legal effect of cleansing title on the property of all liens and claims not annotated
therein. üNaawan Community Rural Bank v. Court of Appeals, 395 SCRA 43
(2003).109
BUT SEE: Subsequent registration of the land under the Torrens System cannot be used to
prevent reconveyance when it is shown that the registration was done in bad faith. üNaval v.
Court of Appeals, 483 SCRA 102 (2006).
109
Abrigo v. De Vera, 432 SCRA 544 (2005); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).
110
Tanglao v. Parungao, 535 SCRA 123 (2007); Calma v. Santos, 590 SCRA 359 (2009).
111
Pudadera v. Magallanes, 633 SCRA 332 (2010).
- 25 -
In double sales, first buyer always has priority rights over subsequent buyers of the same
property. First buyer’s good faith remains all throughout despite his subsequent acquisition of
knowledge of the subsequent sale. Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
When the thing sold twice is an immovable, the one who acquires it and first records in the
Registry of Property, both made in good faith, shall be deemed the owner. Verily, the act of
registration must be coupled with good faith – that is, the registrant must have no knowledge of
the defect or lack of title of his vendor or must not have been aware of facts which would have
put him upon such inquiry and investigation as might be necessary to acquaint him with the
defects in the title of his vendor. Rosaroso v. Soria, 699 SCRA 232 (2013).112
3. Requisites for Double Sale Rule to Apply: üCheng v. Genato, 300 SCRA 722 (1998).113
a. There Must Be Two Different Valid Sales: Article 1544 does not apply where:
• There is only one valid sale, while the other sale over the same property is void. Fudot v.
Cattleya Land, 533 SCRA 350 (2007);114 or
• Where one is, or both contracts are, contracts to sell. üSan Lorenzo Dev. Corp. v. Court
of Appeals, 449 SCRA 99 (2005).115
When the seller sold the same properties first to the respondent and then to Viloria on
separate occasions, the second sale was not void for the sole reason that seller has previously
sold the property. This case involves a double sale as the disputed properties were sold validly
on two separate occasions by the same seller to the two different buyers in good faith. De
Leon v. Ong, 611 SCRA 381, 388 (2010).
Rules on double sales apply even if one of the sales is an auction sale proceeding from a
foreclosure of the real estate mortgage constituted by the owner on the property. Gopiao v.
Metrobank, 731 SCRA 131 (2014).116
(1) Doctrine on Conditional Sales/Contracts to Sell and Adverse Claims
Under Art. 1544, between the buyer under a first unconsummated conditional sale which
required the seller to eject the existing lessees on the property sold, and the subsequent
buyers of the same property (who were the lessees who refused to vacate the premises), the
first buyer must prevail since the second buyers took possession of the property in bad faith
knowing of the first sale. üAdalin v. Court of Appeals, 280 SCRA 536 (1997).117
Rules on double sales under Art. 1544 are not applicable to contracts to sell, because of
the circumstances that must concur in order for the provisions to Art. 1544 on double sales to
apply, namely that there must be a valid sales transactions, and buyers must be at odds over
the rightful ownership of the subject matter who must have bought from the very same seller,
are lacking in a contract to sell for neither a transfer of ownership nor a sales transaction has
been consummated, and such contract is binding only upon the fulfillment or non-fulfillment of
an event. Nevertheless, the governing principle of Art. 1544 should apply, mainly the
governing principle of primus tempore, portior jure (first in time, stronger in right). üCheng v.
Genato, 300 SCRA 722 (1998); also Coronel v. Court of Appeals, 263 SCRA 15 (1996).
b. Exact Same Subject Matter – Art. 1544 applies where the same thing is sold to different
buyers by the same seller. Ong v. Oalsiman, 485 SCRA 464 (2006); and does not apply where
there was a sale to one party of the land itself while the other contract was a mere promise to
sell the land or at most an actual assignment of the rights to repurchase the same land.
Dischoso v. Roxas, 5 SCRA 781 (1962).
c. Exact Same Seller for Both Sales – Art. 1544 applies where the same thing is sold to different
vendees by the same vendor. It does not apply where the same thing is sold to different
vendees by different vendors, or even to the same buyer but by different sellers. Salera v.
Rodaje, 530 SCRA 432, 438 (2007);118 or by several successive vendors. Mactan-Cebu Int’l
Airport Authority v. Tirol, 588 SCRA 635 (2009).119
For Article 1544 to apply, it is necessary that the conveyance must have been made by a
party who has an existing right in the thing and the power to dispose of it. It cannot be invoked
where the two different contracts of sale are made by two different persons, one of them not
being the owner of the property sold. And even if the sale was made by the same person, if
the second sale was made when such person was no longer the owner of the property,
because it had been acquired by the first purchaser in full dominion, the second purchaser
cannot acquire any right. üConsolidated Rural Bank v. Court of Appeals, 448 SCRA 347
(2005),120 citing VILLANUEVA, PHILIPPINE LAW ON SALES 100 (1995).
112
Pudadera v. Magllanes, 633 SCRA 332 (2010); Calma v. Santos, 590 SCRA 359 (2009).
113
Mactan-Cebu International Airport Authority v. Tirol, 588 SCRA 635 (2009); Cano Vda. De Viray v. Usi, 686 SCRA 211 (2012);
Roque v. Aguado, 720 SCRA 780 (2014); Skunac Corp. v. Sylianteng, 723 SCRA 625 (2014).
114
Espiritu v. Valerio, 9 SCRA 761 (1963); Remalante v. Tibe, 158 SCRA 138 (1988); Delfin v. Valdez, 502 SCRA 24 (2006).
115
Torrecampo v. Alindogan, Sr., 517 SCRA 84 (2007); Rodriguez v. Sioson, 798 SCRA 526 (2016).
116
Expresscredit Financing Corp. v. Spouses Velasco, 473 SCRA 570 (2005).
117
Mendoza v. Kalaw, 42 Phil. 236 (1921); Ruiz v. CA, 362 SCRA 40 (2001) and Valdevieso v. Damalerio, 451 SCRA 664 (2005).
118
Ong v. Olasiman, 485 SCRA 464 (2006).
119
Roque v. Aguado, 720 SCRA 780 (2014); Skunac Corp. v. Sylianteng, 723 SCRA 625 (2014); Badilla v. Bragat, 757 SCRA 131
(2015).
120
Gallardo v. Gallardo, 46 O.G. No. 11 p. 5568; Sigaya v. Mayuga, 467 SCRA 341, 357 (2005).
- 26 -
BUT SEE: This ruling is compelled by the involvement in this case of not just one instance of
double sales but a series of such sales made by two different vendors. First, it is admitted that
Pastrano sold the property to Ledesma in 1968; then, Pastrano sold it again to Bragat in 1984
and 1987. But Ledesma, too, sold part of the property to the Spouses Badilla in 1970 and then
the entire lot to the Spouses Bragat in 1978. In such a situation of multiple sales, Art. 1544
relates that ownership shall belong to the person acquiring the property who, in good faith, first
recorded such acquisition; but when neither buyer registered in good faith with the register of
deeds, the one who took prior possession of the properties shall be the lawful owner thereof.
Such prior possessors, at least with respect to the 152-sq.-m. portion, are indisputably the
Spouses Badilla. üBadilla v. Bragat, 757 SCRA 131 (2015).
This present case involves the conflicting claims over a parcel of land between a buyer who
claims title by virtue of a deed of sale executed in her favor by the original owner of the land,
but never had it titled in her name, and the heirs of the vendor who adjudicated unto
themselves the same land and had it titled in their names as part of the extrajudicial settlement
of their grandfather's estate.| For Article 1544 to apply, it is required that the same thing must
have been sold to different vendees. It contemplates a case of double or multiple sales by a
single vendor. More specifically, it covers a situation where a single vendor sold one and the
same immovable property to two or more buyers. [Consolidated Rural Bank (Cagayan Valley),
Inc. v. Court of Appeals, 489 Phil. 320, 331, citing C. VILLANUEVA, PHILIPPINE LAW ON
SALES 100 (1995).] What is undisputed from the facts of this case is that while respondents
anchor their claim on the subject lot through the Deed of Absolute Sale executed between
Bayog-Ang and Florence, petitioners claim the same as part of their inheritance as heirs of
Bayog-Ang. Thus, there is no double sale in the present case because the "second
transaction," as the RTC would describe it, is not a sale. Therefore, the proper question that
should have been addressed was whether Florence was able to prove by preponderance of
evidence that she already acquired ownership of the subject lot from Bayog-Ang, as this will
determine whether the subject lot remained part of Bayog-Ang's estate which passed to his
heirs by succession at the moment of his death. |üHeirs of Bayog-Ang v. Quinones, 886
SCRA 294 (2018).
c. Knowledge of First Buyer of the Second Sale Does Not Amount to Registration in Favor
of the Second Buyer –
Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s rights
except where the second buyer registers in good faith the second sale ahead of the first. Such
knowledge of the first buyer does not bar her from availing of her rights under the law, among
them, to register first her purchase as against the second buyer. In converso, knowledge gained
by the second buyer of the first sale defeats his rights even if he is first to register the second
sale, since such knowledge taints his prior registration with bad faith. This is the priced exacted
by Art.1544 for the second buyer being able to displace the first buyer; that before the second
buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e.,
in ignorance of the first sale and of the first buyer's right) –from the time of acquisition until the
121
Ulep v. CA, 472 SCRA 241 (2005).
122
Amodia Vda. De Melencion v. CA, 534 SCRA 62, 82 (2007), thereby overturning obiter in Santiago v. CA, 247 SCRA 336 (1995).
123
Blanco v. Rivera, 488 SCRA 148 (2006); Gabriel v. Mabanta, 399 SCRA 573 (2003); De la Cena v. Briones, 508 SCRA 62 (2006);
Tanglao v. Parungao, 535 SCRA 123 (2007); Bernardez v. CA, 533 SCRA 451 (2007); Orduña v. Fuentebella, 622 SCRA 146 (2010);
Estate of Margarita D. Cabacungan v. Laigo, 655 SCRA 366 (2011).
- 27 -
title is transferred to him by registration or failing registration, by delivery of possession. üUraca
v. Court of Appeals, 278 SCRA 702 (1997).124
In a situation where a party has actual knowledge of the claimant’s actual, open and
notorious possession of a disputed property at the time of registration, the actual notice and
knowledge are equivalent to registration, because to hold otherwise would be to tolerate fraud
and the Torrens system cannot be used to shield fraud – while certificates of title are
indefeasible, unassailable and binding against the whole world, they merely confirm or record
title already existing and vested. üConsolidated Rural Bank v. CA, 448 SCRA 347 (2005).
d. Who is Purchaser in Good Faith?
(1) Must Have Paid Price in Full – A purchaser in good faith is one who buys property
without notice that some other person has a right to, or interest in, such property, and
pays a full and fair price for the same at the time of such purchase, or before he
has notice of claim or interest of some other person in the property. Locsin v. Hizon,
735 SCRA 547 (2014).125
When buyer has not yet fully paid purchase price, and as long as seller remains
unpaid, buyer cannot feign good faith. Portic v. Cristobal, 546 SCRA 577 (2005).126
Not being purchasers in good faith, buyers having registered the sale, will not, as
against the petitioners, carry the day for any of them under Article 1544 prescribing rules
on preference in case of double sales of immovable properties. Orduña v. Fuentebella,
622 SCRA 146 (2010).
BUT SEE: In the determination of whether or not the buyer is in good faith, the point in time
to be considered is the moment when the parties actually entered into the contract of sale.
Estate of Lino Olaquer v. Ongjoco, 563 SCRA 373 (2008).
(2) Burden of Proof – The burden of proving the status of a purchaser in good faith lies upon
him who asserts that status. It is not sufficient to invoke the ordinary presumption that
everyone is presumed to have acted in good faith, since the good faith that is here
essential is integral with the very status that must be established. Tanglao v. Parungao,
535 SCRA 123 (2007).127
BUT SEE: It is axiomatic that good faith is always presumed in the absence of any direct
evidence of bad faith. Santiago v. Court of Appeals, 247 SCRA 336 (1995).128
(3) Instances When No Good Faith – One who buys from one who is not the registered
owner is expected to examine not only the certificate of title but all factual circumstances
necessary for one to determine if there are any flaws in the title of the transferor, or in the
capacity to transfer the land. It is a well-settled rule that a purchaser cannot close his eyes
to facts which should put a reasonable man upon his guard, and then claim that he acted
in good faith under the belief that there was no defect in the title of the vendor. Heirs of
Nicolas S. Cabigas v. Limbaco, 654 SCRA 643 (2011).
(a) Being in Realty Business – A mortgagee who eventually ended buying the property
at the public auction, cannot claim to be a buyer in good faith when his business in
the constructing and selling townhouses and extending credit to the public, including
real estate loans; for he is charged with greater diligence that ordinary buyers or
encumbrances for value, because it would be standard in his business, as a matter
of due diligence required of banks and financing companies, to ascertain whether the
property being offered as security for the debt has already been sold to another to
prevent injury to prior innocent buyers. Expresscredit Financing Corp. v. Velasco,
473 SCRA 570 (2005).129
A bank is expected to exercise due diligence before entering into a mortgage
contract, and the ascertainment of the condition of a proper offered to it as security
for a loan must be a standard and indispensable part of operations; and it cannot
124
Cruz v. Cabana, 129 SCRA 656 (1984); Gatmaitan v. CA, 200 SCRA 37 (1991); Vda. de Jomoc v. CA, 200 SCRA 74 (1991);
Bucad v. CA, 216 SCRA 423 (1992); Berico v. CA, 225 SCRA 469 (1993); Bautista v. CA, 322 SCRA 294 (2000); Bautista v. CA, 322
SCRA 294 (2000); Ulep v. CA, 472 SCRA 241 (2005); Escueta v. Lim, 512 SCRA 411 (2007); Lumbres v. Tablada, Jr., 516 SCRA 575
(2007); Fudot v. Cattleya Land, 533 SCRA 350 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007); Spring Homes Subd. Co. V.
Tablada, Jr., 815 SCRA 114 (2017).
125
Agricultural and Home Extension Dev. v. CA., 213 SCRA 536 (1992); Veloso v. CA, 260 SCRA 593 (1996); Balatbat v. CA, 261
SCRA 128 (1996); Mathay v. CA, 295 SCRA 556 (1998); Diaz-Duarte v. Ong, 298 SCRA 388 (1998); Liao v. CA, 323 SCRA 430 (2000);
Tanongon v. Samson, 382 SCRA 130 (2002); Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002);
Aguirre v. CA, 421 SCRA 310 (2004); Galvez v. CA, 485 SCRA 346 (2006); Chua v. Soriano, 521 SCRA 68 (2007); Raymundo v.
Bandong, 526 SCRA 514 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007); Kings Properties Corp. v. Galido, 606 SCRA 137 (2009);
De Leon v. Ong, 611 SCRA 381 (2010); The Heirs of Romana Saves v. The Heirs of Escolastico Saves, 632 SCRA 236 (2010); De
Leon v. Ong, 611 SCRA 381 (2010); Yared v. Tiongco, 660 SCRA545 (2011); PCSO v. New Dagupan Metro Gas Corp., 676 SCRA
156 (2012); Santiago v. Villamor, 686 SCRA 313 (2012); Angeles v. Domingo, 692 SCRA 277 (2013); Nobleza v. Nuega, 752 SCRA
602 (2015); EEG Dev. Corp. v. Heirs of Victor C. De Castro, 906 SCRA 185 (2019); Spouses Monico Suyam and Carmen Basuyao v.
Heirs of Feliciano Julaton @ Ponciano, 905 SCRA 45 (2019).
126
Uy v. Fule, 727 SCRA 456 (2014); Peralta v. Heirs of Bernardina Abalon, 727 SCRA 477 (2014); Locsin v. Hizon, 735 SCRA 547
(2014).
127
Tsai v. CA, 366 SCRA 324 (2001); Aguirre v. CA, 421 SCRA 310 (2004); Raymundo v. Bandong, 526 SCRA 514 (2007); Eagle
Realty Corp. v. Republic, 557 SCRA 77 (2008); Rufloe v. Burgos, 577 SCRA 264 (2009)Pudadera v. Magallanes, 633 SCRA 332 (2010),
Nobleza v. Nuega, 752 SCRA 602 (2015); Bitte v. Jonas, 777 SCRA 489 (2015).
128
Ten Forty Realty and Dev. Corp. v. Cruz, 410 SCRA 484 (2003).
129
Adriano v. Pangilinan, 373 SCRA 544 (2002); Lloyd’s Enterprises and Credit Corp. v. Dolleton, 555 SCRA 142 (2008); Eagle
Realty Corp v. Republic, 557 SCRA 77 (2008); Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
- 28 -
simply rely upon reviewing the title to the property offered for mortgage. Tio v.
Abayata, 556 SCRA 175 (2008).130
(b) Close Relationship – The sale to one’s daughter and sons will give rise to the
conclusion that the buyers, not being really third parties, knew of the previous sales
and cannot be considered in good faith. The buyers “are deemed to have constructive
knowledge by virtue of their relationship” to their sellers. Pilapil v. Court of Appeals,
250 SCRA 566 (1995).
(c) Gross Inadequacy of Price – Mere inadequacy of price is not ipso facto a badge of
bad faith—to be so, the price must be shocking to the conscience such that the mind
revolts against it and such that a reasonable man would neither directly or indirectly
be likely to consent to it. Tio v. Abayata, 556 SCRA 175 (2008).
(d) Obligation to Investigate or to Follow Leads – A purchaser who is aware of facts
which should put a reasonable man upon his guard cannot turn a blind eye and later
claim that he acted in good faith,131 such as —
• Buyer of a registered land would be in bad faith when he purchases without asking
to see the owner’s copy of the title and/or without visiting the land where he would
then have seen first buyer occupying the same. Santiago v. Court of Appeals, 247
SCRA 336 (1995).132
• When there are occupants to the land being bought, since it is the common
practice in the real estate industry, an ocular inspection of the premises involved
is a safeguard a cautious and prudent purchaser usually takes. Martinez v. Court
of Appeals, 358 SCRA 38 (2001).133
• Any person engaged in business would be wary of buying from a company that is
closing shop, because it may be dissipating its assets to defraud creditors. Such
buyer is bound to inquire whether the owners had unsettled obligations
encumbrance that could burden the property. Samson v. Court of Appeals, 238
SCRA 397 (1994).134
• Property was transferred with undue haste, “plus the fact that the subject property
is a vast tract of land in a prime location, should have, at the very least, triggered
petitioner’s curiosity.” Eagle Realty Corp v. Republic, 557 SCRA 77, 94 (2008).
(e) Land in Adverse Possession – Where land sold is in the possession of a person
other than vendor, purchaser must go beyond the TCT and make inquiries
concerning the actual possessor. Without such inquiry, the buyer cannot be said to
be in good faith and cannot have any right over the property. Tio v. Abayata, 556
SCRA 175 (2008).135
Buyer who could not have failed to know or discover that the land sold to him
was in the adverse possession of another is a buyer in bad faith. Heirs of Ramon
Durano, Sr. v. Uy, 344 SCRA 238 (2000).136
(f) Existence of Lis Pendens or Adverse Claim – Registration of an adverse claim places
any subsequent buyer of the registered land in bad faith. Kings Properties Corp. v.
Galido, 606 SCRA 137 (2009).137
One who deals with property with a notice of lis pendens, even when at the
time of sale the annotation was cancelled but there was a pending appeal, cannot
invoke the right of a purchaser in good faith. A purchaser cannot close his eyes to
facts which should put a reasonable man on guard and claim that he acted in the
belief that there was no defect in the title of the seller. Po Lam v. Court of Appeals,
316 SCRA 721 (1999).
CONTRA: When knowledge of lis pendens was acquired at the time there was
order to have it cancelled, Po Lam v. Court of Appeals, 347 SCRA 86 (2000).138 A
buyer cannot be in bad faith when it was shown that at the time of purchase the notice
of lis pendens was already being ordered cancelled and the cancellation of the notice
terminated the effects of such notice. Pudadera v. Magallanes, 633 SCRA 332
(2010).
130
Agag v. Alpha Financing Corp., 407 SCRA 602 (2003); Bank of Commerce v. San Pablo, Jr., 522 SCRA 713 (2007); Lloyd’s
Enterprises and Credit Corp. v. Dolleton, 555 SCRA 142 (2008);Ty v. Queen’s Row Subdivision, 607 SCRA 324 (2009).
131
Filinvest Dev. Corp. v. Golden Haven Memorial Part, 634 SCRA 372 (2010); Yared v. Tiongco, 660 SCRA545 (2011).
132
R.R. Paredes v. Calilung, 517 SCRA 369 (2007); Chua v. Soriano, 521 SCRA 68 (2007).
133
Mathay v. CA, 295 SCRA 556 (1998); Republic v. De Guzman, 326 SCRA 267 (2000); Heirs of Ramon Durano, Sr. v. Uy, 344
SCRA 238 (2000); Heirs of Celestial v. Heirs of Celestial, 408 SCRA 291 (2003); Erasusta, Jr. v. CA, 495 SCRA 319 (2006); De la Cena
v. Briones, 508 SCRA 62 (2006); Tanglao v. Parungao, 535 SCRA 123, 132 (2007).
134
Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
135
Games and Garments Developers v. Allied Banking Corp., 762 SCRA 447 (2015).
136
Modina v. CA, 317 SCRA 696, 706 (1999); Republic v. De Guzman, 326 SCRA 267 (2000); Martinez v. CA, 358 SCRA 38 (2001);
Heirs of Trinidad de Leon Vda. De Roxas v. CA, 422 SCRA 101 (2004); Occeñna v. Esponilla, 431 SCRA 116 (2004); PNB v. Heirs of
Estanislao Militar, 494 SCRA 308 (2006); Raymundo v. Bandong, 526 SCRA 514 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007);
Tio v. Abayata, 556 SCRA 175 (2008); Orduña v. Fuentebella, 622 SCRA 146 (2010); Deanon v. Mag-abo, 622 SCRA 180 (2010); The
Heirs of Romana Saves v. The Heirs of Escolastico Saves, 632 SCRA 236 (2010); Rosaroso v. Soria, 699 SCRA 232 (2013).
137
Tan v. Benolirao, 604 SCRA 36 (2009).
138
Pudadera v. Magallanes, 633 SCRA 332 (2010).
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(g) Annotation of Lien in Settlement of Estate – An annotation on CTC issued pursuant
to the distribution and partition of a decedent’s real properties is a warning to third
persons on the possible interest of excluded heirs or unpaid creditors in these
properties—where a buyer purchases the real property despite the annotation, he
must be ready for the possibility that the title be subject to the rights of excluded
parties. Tan v. Benolirao, 604 SCRA 36 (2009).
(h) Banks Are Vested with Public Interest and Obligation to Exercise Extraordinary
Diligence – One of the protections afforded by P.D. 957 to buyers is the right to have
her contract to sell registered with the Register of Deeds to bind on third parties.
Nonetheless, despite such non-registration, the mortgagee bank cannot be
considered, under the circumstances, an innocent purchaser for value of the lot when
it accepted the latter (together with other assigned properties) as payment for the
mortgagor developer’s obligation—the bank was well aware that the assigned
properties were subdivision lots and therefore within the purview of P.D. 957. Luzon
Dev. Bank v. Enriquez, 639 SCRA 332 (2011).
When financial institutions exercise extraordinary diligence in determining the
validity of the certificates of title to property being sold or mortgaged to them and still
fail to find any defect or encumbrance upon the subject properties after said inquiry,
such financial institutions should be protected like any other innocent purchaser for
value if they paid a full and fair price at the time of the purchase or before having
notice of some other person’s claim on or interest in the property. Ty v. Queen’s Row
Subdivision, 607 SCRA 324 (2009).
(i) When Dealing with Non-Registered Owner of the Land – While one who buys from
the registered owner does not need to look behind the certificate of title, one who
buys from one who is not the registered owner is expected to examine not only the
certificate of title but all factual circumstances necessary for him to determine if there
are any flaws in the title of the transferor, or in his capacity to transfer the land. R.R.
Paredes v. Caliling, 517 SCRA 369 (2007).139
e. Registration in Good Faith Always Pre-empts Possession in Good Faith – Between two
purchasers, the one who registered the sale in his favor has a preferred right over the other
who has not registered his title, even if the latter is in actual possession of the immovable
property. Tañedo v. Court of Appeals, 252 SCRA 80 (1996).140
The registration of a sale after annotation of lis pendens does not obliterate the effects of
delivery and possession in good faith. The rules on constructive notice upon registration
provided for under Sec. 52 of the Property Registration Decree (P.D. No. 1529) operate only
from the time of the registration of the notice of lis pendens which in this case was effected
only after the time the sale in favor of the second buyer had long been consummated by
delivery of the subject matter. üSan Lorenzo Dev. Corp. v. Court of Appeals, 449 SCRA 99
(2005).
6. What of “Buyer Who Presents Oldest Title in Good Faith” as Third Priority?
139
Chua v. Soriano, 521 SCRA 68 (2007); Bliss Dev. Corp./HGC v. Diaz, 765 SCRA 453 (2015).
140
Liao v. CA, 323 SCRA 430 (2000); Talusan v. Tayag, 356 SCRA 263 (2001); Dauz v. Exchavez, 533 SCRA 637 (2007).
141
Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159 (1950); Navera v. CA, 184 SCRA 584 (1990).
142
Hanopol v. Pilapil, 7 SCRA 452 (1963); Radiowealth Finance Co. v. Palileo, 197 SCRA 245 (1991); Spouses Honorio Santiago
v. CA, 247 SCRA 336 (1995); Bayoca v. Nogales, 340 SCRA 154 (2000); Amodia Vda. De Melencion v. CA, 534 SCRA 62, 82 (2007);
Fidel v. CA, 559 SCRA 186 (2008); Daclag v. Macahilig, 560 SCRA 137 (2008);.
- 30 -
of P.D. 1529 which provides that no deed, mortgage, lease, or other voluntary instrument shall take
effect as a conveyance or bind the land until its registration. Thus, if the sale is not registered, it is
binding only between seller and buyer, but it does not affect innocent third persons. üAbrigo v. De
Vera, 432 SCRA 544 (2004).143
MODULE 4.3
SALE BY NON-OWNER OR ONE HAVING VOIDABLE TITLE
[WEEK 12: OCTOBER 28]
143
Sabitsana, Jr. v. Muertegui, 703 SCRA 145 (2013)
144
Estoque v. Pajimula, 24 SCRA 59 (1968); Aguirre v. CA, 421 SCRA 310 (2004); Acabal v. Acabal, 454 SCRA 555 (2005);
Barcenas v. Tomas, 454 SCRA 593 (2005); Panganiban v. Oamil, 542 SCRA 166 (2008); Vda. de Figuracion v. Figuracion-Gerilla, 690
SCRA 495 (2013); Heirs of Dela Rosa v. Batongbacal, 731 SCRA 263 (2014); Heirs of Gregotion Lopez v. DBP, 741 SCRA 153 (2014);
Torres, Jr. v. Lapinid, 742 SCRA 646 (2014).
145
Almendra v. IAC, 204 SCRA 142 (1991); Fernandez v. Fernandez, 363 SCRA 811 (2001); Aguirre v. CA, 421 SCRA 310 (2004);
Santos v. Lumbao, 519 SCRA 408 (2007); Republic v. Heirs of Francisca Dignos-Sorono, 549 SCRA 58 (2008); Torres, Jr. v. Lapinid,
742 SCRA 646 (2014).
146
Heirs of Romana Ingjug-Tiro v. Casals, 363 SCRA 435 (2001); Aguirre v. CA, 421 SCRA 310 (2004).
- 31 -
with the registered land may safely rely on the correctness of the certificate of title issued
therefor. Heirs of Spouses Benito Gavino. v. Court of Appeals, 291 SCRA 495 (1998).
An innocent purchaser for value is one who purchases a titled land by virtue of a deed
executed by the registered owner himself not by a forged deed. Insurance Services and
Commercial Traders v. Court of Appeals, 341 SCRA 572 (2000).
The defense of indefeasibility of Torrens title where the disputed buildings and equipment
are located is unavailing, since such defense is available to sale of lands and not to sale of
properties situated therein. Tsai v. Court of Appeals, 366 SCRA 324 (2001).
A person who deals with registered land through someone who is not the registered owner
is expected to look beyond the certificate of title and examine all the factual circumstances
thereof in order to determine if the vendor has the capacity to transfer any interest in the land.
Sy v. Capistrano, Jr., 560 SCRA 103 (2008).
To reiterate, the Court shall not ascribe good faith to those who failed to prove diligence in
protecting their rights. Teofilo had knowledge of dubious circumstances that should have
prompted him to acquaint himself further of any possible defects in Edgardo's and Arthur's title.
Teofilo proudly claimed that he viewed TCT No. T-36127, and was in possession of the
predecessor titles and important documents relating to the subject property. Clearly, he was
very much aware of the questionable circumstances. Hence, he is not entitled to the protection
accorded to purchasers in good faith. As such, he may not validly claim title to the subject
property. üHipolito v. Ponce, G.R. No. 201539 (Notice) (2021)
d. Exercise by the Courts of Statutory Power to Make Sale Effective
When a defeated party refuses to execute the absolute deed of sale in accordance with the
judgment, the court may direct the act to be done at the cost of the disobedient party by some
other person appointed by the court and the act when so done shall have the like effect as is done
by the party. Manila Remnant Co. v. Court of Appeals, 231 SCRA 281 (1994).
e. Sales in Merchants Stores, Fairs or Markets (Arts. 85 and 86, Code of Commerce)
A merchant store requires a fixed establishment where the merchant not only stores his
merchandise, but where he conducts the ordinary court of business. üCity of Manila v.
Bugsuk, 101 Phil. 859 (1957).147
The owner of the goods who has been unlawfully deprived of it may recover it even from a
purchaser in good faith. Thus, the purchaser of property which has been stolen from the owner
has been held to acquire no title to it even though he purchased for value and in good faith.
Francisco v. Chemical Bulk Carriers, 657 SCRA 355 (2011).
3. SALE BY SELLER HAVING VOIDABLE TITLE (Art. 1506, as an exception to Art. 559)
Whenever there is an underlying sale which grants to the culprit-buyer a voidable title, even when
this is accompanied by the criminal act of estafa or swindling, Art. 1506 would grant to the buyer in good
faith a better title as against the original owner even though the latter may be classified to have been
“unlawfully deprived” of the subject matter under Art. 559. üTagatac v. Jimenez, 53 O.G. 3792 (1957);
√EDCA Publishing v. Santos, 184 SCRA 614 (1990).
When owner did not voluntarily deliver possession of the car, and in effect it was stolen from him,
then one who buys the car even in good faith from the thief will lose the car to the owner who is deemed
to have been unlawfully deprived. üAznar v. Yapdiangco, 13 SCRA 486 (1965).
In all other cases of unlawful deprivation done through estafa, the original owner recovers even
from the buyer in good faith. üCruz v. Pahati, 98 Phil. 788 (1956). [Decision showed that second
buyer, or current possessor could not claim good faith because of erasures in the covering
documents presented by his seller]
Owner of diamond ring may recover it from pawnshop where owner’s agent had pledged it without
authority to do so; Art. 559 applies and the defense that the pawnshop acquired possession without
notice of any defect of the pledgor-agent is unavailing. üDizon v. Suntay, 47 SCRA 160 (1972).148
[Possessor is a merchant and only has a pledge in his favor]
However, a merchant who bought in good faith and for value a stolen item cannot be protected
under the rule provided in Article 1506. Valera v. Matute, 9 Phil. 479 (1908).
147
Sun Bros. & Co. v. Velasco, 54 O.G. 5143 (1958).
148
Arenas v. Raymundo, 19 Phi. 47 (1911).
- 32 -
MODULE 4.4
RULES ON THE LOSS, DETERIORATION, FRUITS ON THE
SUBJECT MATTER OF SALE
[WEEK 13: NOVEMBER 04]
c. After Perfection But Before Delivery (Arts. 1164, 1189, and 1262).
(1) General Rule: Before delivery, risk of loss is borne by seller under the rule of res perit
domino. Chrysler Phil. v. Court of Appeals, 133 SCRA 567 (1984).
In sale of motor vehicle, where there was neither physical nor constructive delivery,
the thing sold remained at the seller’s risk. Union Motor Corp v. Court of Appeals, 361
SCRA 506 (2001).
(2) Loss by Fault of a Party (Arts. 1480, 1504, 1538)
(3) Loss by Fortuitous Event (Arts. 1480, 1163, 1164, 1165, 1504, 1538, and 1189).
(4) Deterioration (Arts. 1480, 1163-65, and 1262; Arts. 1189 and 1538)
(5) Fruits or Improvements from time of perfection pertain to buyer (Arts. 1480, 1537-1538)
d. After Delivery (Art. 1504); üLawyer’s Coop v. Tabora, 13 SCRA 762 (1965).149
MODULE 5
REMEDIES FOR BREACH OF
CONTRACT OF SALE
[WEEK 14: NOVEMBER 11]
149
Song Fo & Co. v. Oria, 33 Phil. 3 (1915); Lawyer's Cooperative v. Narciso, 55 O.G. 3313.
- 33 -
Under Art. 1597, where buyer of scrap iron fails to put up the LC in favor of the seller as the condition
of the sale, seller may terminate the contract—non-compliance with condition meant that seller’s
obligation to sell never arose. Visayan Sawmill Co. v. Court of Appeals, 219 SCRA 378 (1993).
150
De la Cruz v. Asian Consumer, 214 SCRA 103 (1992); Borbon II v. Servicewide Specialists, 258 SCRA 634 (1996).
151
Southern Motors v. Moscoso, 2 SCRA 168 (1961); Industrial Finance Corp. v. Ramirez, 77 SCRA 152 (1977); Rosario v. PCI
Leasing and Finance, 474 SCRA 500 (2005).
152
Borbon II v. Servicewide Specialists, 258 SCRA 634 (1996).
- 34 -
by the buyer-mortgagor is valid and not recoverable in spite the restrictive provisions of Art.
1484(3). üNorthern Motors v. Sapinoso, 33 SCRA 356 (1970). 153
Foreclosure on chattel mortgage prevents further action on the supporting real estate
mortgage, whether the chattel mortgage is first foreclosed √Cruz v. Filipinas Investment
& Finance Corp., 23 SCRA 791 (1968);154 and vice versa when the real estate mortgage
is first foreclosed. üBorbon II v. Servicewide Specialists, 258 SCRA 634 (1996).
(2) Rule on “Perverse Buyer”: üFilipinas Investment. v. Ridad, 30 SCRA 564 (1969).
g. Purported Lease with Option to Buy
Judicial notice has been taken of the practice of vendors of personal property of
denominating a contract of sale on installment as one of lease to prevent the ownership of the
object of the sale from passing to the vendee until and unless the price is fully paid. Elisco Tool
Manufacturing Corp. v. Court of Appeals, 307 SCRA 731 (1999).155
Where a lease agreement over equipment is without an express option to purchase, but
nevertheless when a final demand is given prior to suit, the demand letter indicates clearly it
was within the option of the lessee to fully pay the balance of the unpaid rentals and would be
able to keep the equipment, then the real contract between the parties was a sale of movable
on installment disguised as a lease agreement. üPCI Leasing and Finance v. Giraffe-X
Creative Imaging, 527 SCRA 405 (2007).
4. IN CASE OF IMMOVABLES:
a. Anticipatory Breach (Art. 1591). üLegarda v. Saldaña, 55 SCRA 324 (1974).
b. Sales of Subdivision Lots and Condominium Units (P.D. 957) – P.D.957 was issued in the
wake of numerous reports that many real estate subdivision owners, developers, operators
and/or sellers have reneged on their representations and obligations to provide and maintain
properly subdivision roads, drainage, sewerage, water systems, lighting systems and other
basic requirements or the health and safety of home and lot buyers. Casa Filipinas Realty Corp.
v. Office of the President, 241 SCRA 165 (1995).
It is the intent of P.D. 957 to protect the buyer against unscrupulous developers, operators
and/or sellers who reneged on their obligations. Thus, in order to achieve this purpose, equity
and justice dictate that the injured party should be afforded full recompensed and as such, be
allowed to recover the prevailing market value of the undelivered lot which had ben fully paid
for. Gotesco Properties v. Fajardo, 692 SCRA 319 (2013).
Retroactive application of P.D. No. 957 to transactions entered into prior to its enactment
in 1976 is already settled. Eugenio v. Exec. Sec. Drilon, 252 SCRA 106 (1996); Rotario v.
Alcantara, 736 SCRA 584 (2014).
(1) “Buyer” under P.D. 957 includes one who acquires for a valuable consideration a
condominium unit by way of assignment by project owner in payment of its indebtedness
for contractor’s fee. AMA Computer College v. Factora, 378 SCRA 121 (2002).
(2) Section 20 of P.D. 957 directs every developer of real property to provide the necessary
facilities, improvements, infrastructure and other forms of development, failure to carry out
which is sufficient cause for the buyer to suspend payment, and any sums of money already
paid shall not be forfeited. Tamayo v. Huang, 480 SCRA 156 (2006).
In case the developer fails in its obligation under Section 20, the Sec. 23 provides:
• Buyer has the option to demand reimbursement of the total amount paid, or to wait for
further development of the subdivision; if buyer opts for the latter, he may suspend
payment of the installments until such time that the owner or developer has fulfilled its
obligations. Tamayo v. Huang, 480 SCRA 156 (2006).
• Option granted by law is with buyer and not the developer/seller. Relucio v. Brillante-
Garfin, 187 SCRA 405 (1990).
• In exercising the option, buyer required only to give due notice to owner/developer of
buyer’s intention to suspend payment. Zamora Realty v. OP, 506 SCRA 591 (2006);
• It is not required that a notice be given first by buyer to seller before a demand for refund
can be made as the notice and demand can be made in the same letter or
communication. Casa Filipinas Realty Corp v. OP, 241 SCRA 165 (1995);
• Even with a mortgage over the lot, seller still bound to redeem said mortgage without
any cost to buyer apart from the balance of the purchase price and registration fees—
subdivision developers have are obliged to deliver the corresponding clean certificates
of title of the subdivision lots where the purchase price of which have been paid in full
by the buyers. Cantemprate v. CRS Realty Dev. Corp., 587 SCRA 492 (2009).
153
Manila Motor Co. v. Fernandez, 99 Phil. 782 (1956); Magna Financial Services Group, v. Colarina, 477 SCRA 245 (2005).
154
Pascual v. Universal Motors Corp., 61 SCRA 121 (1974).
155
Vda. de Jose v. Barrueco, 67 Phil. 191 (1939); U.S. Commercial v. Halili, 93 Phil. 271 (1953); H.E. Heacock v. Bantal
Manufacturing, 66 Phil. 245 (1938); Manila Gas Corp. v. Calupita, 66 Phil. 747 (1938); Filinvest Credit Corp. v. CA, 178 SCRA 188
(1989).
- 35 -
• Buyers would be justified in suspending payments, when developer-seller fails to give a
copy of the Contract to Sell despite repeated demands, Gold Loop Properties v. Court
of Appeals, 350 SCRA 371 (2001); or when they failed to provide for the amenities
mandated under their development plan, Fedman Dev. Corp. v. Agcaoili, 656 SCRA 354
(2011).
• When Reservation Agreement provides that buyer is entitled to a Contract to Sell only
upon payment of at least 30% of price, non-happening yet of that condition does not
render seller in default as to warrant buyer the right to rescind sale and demand refund.
G.G. Sportwear Mfg. Corp. v. World Class Properties, 614 SCRA 75 (2010).
• Buyer’s cause of action against the developer for failure to develop ripens only when the
developer fails to complete the project on the lapse of the completion period stated on
the sale contract or the developer’s Licenses to Sell. Any premature demand prior to the
indicated completion date would be premature. G.G. Sportwear Mfg. Corp. v. World
Class Properties, 614 SCRA 75 (2010).
(3) Right of Buyer to Register Contract to Sell under P.D. 957 to bind third parties, THUS:
• Nothing in P.D. 957 provides for the nullification of a contract to sell if seller, at the time
perfection, did not possess a certificate of registration or a license to sell, sale being a
consensual contract. Co Chien v. Sta. Lucia Realty, 513 SCRA 570 (2007).156
• Buyer’s dissatisfaction under a Contract of Sale as to the completion date of the project
does not constitute substantial breach to allow rescission and ask for refund. G.G.
Sportwear Mfg. Corp. v. World Class Properties, 614 SCRA 75 (2010).
• Despite non-registration of Contracts to Sell, foreclosing mortgagee-bank cannot be
considered an innocent purchaser for value of the subdivision lots which it accepted as
payment for mortgagor’s obligation—bank was well aware that the assigned properties
were subdivision lots and therefore within the purview of P.D. 957. Luzon Dev. Bank v.
Enriquez, 639 SCRA 332 (2011).
(4) Sec. 25 of P.D. 957 imposes on the subdivision owner/developer the obligation to the
transfer of the corresponding certificate of title to the buyer upon full payment. Gotesco
Properties v. Fajardo, 692 SCRA 319 (2013).
Since the lots are involved in litigation and there is a notice of lis pendens at the back
of the titles involved, the subdivision developer have to be given a reasonable period of
time to work on the adverse claims and deliver clean titles to the buyer, and should the
former fail to deliver clean titles at the end of the period, it ought to reimburse the buyers
not only for the purchase price of the subdivision lots sold to them but also the incremental
value arising from the appreciation of the lots. Cantemprate v. CRS Realty Dev. Corp., 587
SCRA 492 (2009).
(5) Developer’s lack of Certificate of Registration or License to Sell merely subjects it to
administrative sanctions, but do not render the sales entered into on the project null and
void. G.G. Sportswear Mfg. Corp. v. World Class Properties, 614 SCRA 75 (2010).
In a similar way, herein respondent should not be allowed to summarily divest
petitioners of their possession of Unit 205. The protection afforded to a subdivision lot
buyer under PD No. 957 should not be defeated, particularly by someone who is not a
mortgagee in good faith. In this case, respondent knew that the mortgaged properties
form part of a condominium project, which are within the purview of PD No. 957. It was
aware that the loaned amounts were to be used for the development of NSJBI's various
projects. This is clear from Sec. 6.2 of the Loan Agreement where respondent consented
to the sale of the condominiums subject to the condition that the net proceeds from the
sale be exclusively used in the recoupment of the loan, viz.:
Section 6.2. That during the lifetime of this mortgage, the BORROWER-
MORTGAGOR shall not alienate, sell, dispose of, mortgage, or in any
manner, encumber the mortgaged properties, or any portion thereof
without the prior written consent of the LENDER-
MORTGAGEE. However, the BORROWER-MORTGAGOR may
continue to sell the 366 housing units, the 102 condominium units
and its right on the 240 condominium units subject to the condition
that the net proceeds from the sales should be exclusively used in
recoupment of the loan. Should the BORROWER-MORTGAGOR
violate this provision, it agrees and obligates itself to pay the LENDER-
MORTGAGEE liquidated damages in an amount equivalent to 10% of the
total loss, which amount shall automatically be added to the principal of
the loan covered by the Mortgage, without the need of executing another
contract and the LENDER-MORTGAGEE may declare the entire amount
due and demandable. (Emphasis ours)
Under the circumstances, respondent knew the possibility and assumed the risk that
some of the condominium units would eventually be sold to individual buyers. Hence, it
cannot now claim that it was unaware of the individual buyers' rights, nor should it be
156
Cantemplate v. CRS Realty Dev. Corp., 587 SCRA 492 (2009); Moldex Realty v. Saberon, 695 SCRA 34331 (2013).
- 36 -
allowed to bypass the same, through a summary application for a writ of possession
without according them the opportunity to be heard. The RTC thus correctly allowed
petitioners and the other condominium unit buyers to intervene, and be excluded from the
issuance of the writ of possession. Respondent's supposed superior right over occupied
condominium units should instead be determined in a full-blown proceeding where all the
parties' claims are ventilated and scrutinized by the courts. üSpouses Rosario v.
Government Service Insurance System, G.R. No. 200991(2021)
b. Transactions Covered – The formal requirements of rescission under the Maceda Law apply
even to contracts entered into prior to its effectivity. Siska Dev. Corp. v. Office of the President,
231 SCRA 674 (1994).159
BUT SEE: People’s Industrial and Commercial Corp. v. CA, 281 SCRA 206 (1997).
Maceda Law makes no distinctions between “option” and “sale” which under P.D. 957 also
includes “an exchange or attempt to sell, an option of sale or purchase, a solicitation of a sale
or an offer to sell directly,” and the all-embracing definition virtually includes all transactions
concerning land and housing acquisition, including reservation agreements. Realty Exchange
Venture Corp. v. Sendino, 233 SCRA 665 (1994).
Maceda Law has no application to protect the developer or one who succeeds the
developer. Lagandaon v. Court of Appeals, 290 SCRA 463 (1998).
Maceda Law finds no application to a contract to sell where the suspensive condition has
not been fulfilled, because said Law presuppose the existence of a valid and effective contract
to sell a condominium [?]. Mortel v. KASSCO Inc., 348 SCRA 391, 398 (2000).160
Since Maceda Law governs sales of real estate on installments, Communities Cagayan,
Inc. v. Nanol, 685 SCRA 453 (2012), it has no application to the sale of large tracts of land
(69,028 square meters) which do not constitute residential real estate within the contemplation
of the Maceda Law. Garcia v. Court of Appeals, 619 SCRA 280 (2010).
Maceda Law does not cover a loan extended by the employer to enable its employee to
finance the purchase of a house and lot. The law protects only a buyer acquiring the property
by installment, not a borrower whose rights are governed by the terms of the loan from the
employer Spouses Sebastian v. BPI Family Bank, 739 SCRA 9 (2014).
c. Formula for Years of Installments: üOrbe v. Filinvest Land, Inc., 839 SCRA 72 (2017).161
d. How Cancellation of Contract Can Be Effected: The cancellation of the contract under the
Maceda Law must follow the following steps:
• First, seller should extend the buyer a grace period of at least 60 days from the due date of
the installments.
157
OIympia Housing v. Panasiatic Travel, 395 SCRA 298 (2003); Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA 413
(2007).
158
Leaño v. CA, 369 SCRA 36 (2001); Cordero v. F.S. Management & Dev. Corp., 506 SCRA 451 (2006); Manuel Uy & Sons v.
Valbueco, 705 SCRA 537 (2013).
159
Eugenio v. E.S. Franklin M. Drilon, 252 SCRA 106 (1996); PNB v. Office of the President, 252 SCRA 620 (1996).
160
Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006).
161
Reversing formula in Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA 413 (2007), and confirming formula used in
Marina Properties Corp. v. CA, 294 SCRA 273 (1998).
- 37 -
• Second, at end of grace period, seller shall furnish buyer with a notarial notice of
cancellation or demand for rescission, effective 30 days from buyer’s receipt thereof; a mere
notice or letter, would not suffice. üMcLaughlin v. Court of Appeals, 144 SCRA 693
(1986);162 neither a notarial demand to pay suffice to cancel, üDanan v. Serrano, 799
SCRA 39 (2016).
• Third, for contracts covering more than two years of payments, there must be return to the
buyer of the cash surrender value. Villdara, Jr. v. Zabala, 545 SCRA 325 (2008).163
• Until and unless seller complies with these mandatory requirements, contract to sell
remains valid and subsisting. Communities Cagayan v. Nanol, 685 SCRA 453 (2012).
Additional formality of a demand on [the seller’s] part for rescission by notarial act would
appear, in the premises, to be merely circuitous and consequently superfluous” since the seller
therein filed an action for annulment of contract, which is a kindred concept of rescission by
notarial act. Layug v. IAC, 167 SCRA 627 (1988).
Decision rendered in an ejectment case operates as the required notice of cancellation
under the Maceda Law; but as buyer was not given the cash surrender value, there was still no
actual cancellation of the contract. Leaño v. Court of Appeals, 369 SCRA 36 (2001).
Formal letter demand upon buyer to vacate the premises is not the same as the notice of
cancellation or demand for rescission by a notarial act required by R.A. No. 6552. Evidently,
the case of unlawful detainer filed by petitioner does not exempt him from complying with the
said requirement. Pagtulunan v. Dela Cruz Vda. De Manzano, 533 SCRA 242 (2008).
Where buyers under a contract to sell offers to pay the last installment a year and a half
after the stipulated date, that was beyond the sixty-day grace period under Section 4 of the
Maceda Law. The buyers cannot use the second sentence of Section 4 of the Maceda Law
against the sellers’ alleged failure to give an effective notice of cancellation or demand for
rescission because the sellers merely sent the notice to the address supplied by the buyers in
the Contract to Sell. üGarcia v. Court of Appeals, 619 SCRA 280 (2010).
Under the Maceda Law, the right of the buyer to refund accrues only when he has paid at
least two years of installments. Manuel Uy & Sons v. Valbueco, Inc., 705 SCRA 537 (2013).
162
Luzon Brokerage v. Maritime Bldg., 43 SCRA 93 (1972) & 86 SCRA 305 (1978); Fabrigas v. San Francisco del Monte, 475 SCRA
247 (2005).
163
Active Realty & Dev. Corp. v. Daroya, 382 SCRA 152 (2002); Olympia Housing v. Panasiatic Travel Corp., 395 SCRA 298 (2003);
Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA 413 (2007).
164
Caridad Estates v. Santero, 71 Phil. 114 (1940); Albea v. Inquimboy, 86 Phil. 477 (1950); Manuel v. Rodriguez, 109 Phil. 1 (1960);
Joseph & Sons Enterprises v. CA, 143 SCRA 663 (1986) Gimenez v. CA, 195 SCRA 205 (1991); Jacinto v. Kaparaz, 209 SCRA 246
(1992); Odyssey Park v. CA, 280 SCRA 253 (1997); Rillo v. CA, 274 SCRA 461 (1997); Platinum Plans Phil. v. Cucueco, 488 SCRA
156 (2006); Tan v. Benolirao, 604 SCRA 36 (2009); Garcia v. CA, 619 SCRA 280 (2010).
165
Escueta v. Pando, 76 Phil. 256 (1946).
- 38 -
either judicially or by a notarial act; and (3) In either (1) or (2), to recover damages for the breach of the
contract. Nunez v. Moises-Palma, 899 SCRA 122 (2019).
MODULE 6
EXTINGUISHMENT OF SALE
[WEEK 15: NOVEMBER 18]
166
Claravall v. CA, 190 SCRA 439 (1990); Torres v. CA, 216 SCRA 287 (1992); Roberts v. Papio, 515 SCRA 346 (2007).
167
Ramos v. Icasiano, 51 Phil (1927).
- 39 -
right of redemption be exercisable more than 10 years from the date of the execution of the
sale. üCebu State College of Science and Technology, 759 SCRA 1 (2015).
a. Does the Filing of a Case Toll the Running of the Redemption Period?
Pendency of an action brought in good faith and relating to the validity of a sale with pacto
de retro tolls or suspends the term for the right of redemption: “Neither was it error on the part
of the court to hold that the pendency of the action tolled the term for the right to redemption;
that is an old and well established rule.” üOng Chua v. Carr, 53 Phil. 975 (1928).
The redemption period is not suspended merely because there is a divergence of opinion
between the parties as to the precise meaning of the phrase providing for the condition upon
which the right to repurchase is triggered. The existence of seller a retro’s right to repurchase
the proper is not dependent upon the prior final interpretation by the court of the said phrase.
üMisterio v. Cebu State College of Science and Technology, 461 SCRA 122 (2005).
7. Fruits (Art. 1617) – Article 1617 on the disposition of fruits of property redeemed applies only
when the parties failed to provide a sharing arrangement thereof; otherwise, the parties contractual
stipulations prevail. Almeda v. Daluro, 79 SCRA 327 (1977).
8. Effect When No Redemption Made (Art. 1607): CONSOLIDATION OF TITLE IN THE BUYER
Article 1607 abolished automatic consolidation of ownership in the vendee a retro upon expiration
of the redemption period by requiring buyer to institute an action for consolidation where seller a retro
may be duly heard. If buyer succeeds in proving that the transaction was indeed a pacto de retro, the
vendor is still given a period of 30 days from the finality of the judgment within which to repurchase the
property. Solid Homes v. Court of Appeals, 275 SCRA 267 (1997).
Once vendor fails to redeem the property within the stipulated period, irrevocable title shall be
vested in the vendee by operation of law. Vda. de Rigonan v. Derecho, 463 SCRA 627 (2005).
168
Reyes v. Hamada, 14 SCRA 215 (1965); Solid Homes v. CA, 275 SCRA 267 (1997); Misterio v. Cebu State College of Science
and Technology, 461 SCRA 122 (2005); Cadungog v. Yap, 469 SCRA 561 (2005); Ramos v. Dizon, 498 SCRA 17 (2006); Lumayag v.
Heirs of Jacinto Nemeño, 526 SCRA 51 (2007).
169
170
Villegas v. CA, 499 SCRA 276 (2006).
- 40 -
Under a sale a retro, failure of buyer to consolidate title under Art. 1607 does not impair such title
and ownership because the method prescribed thereunder is merely for purpose of registering and
consolidating titles to the property. In fact, failure of a seller a retro to exercise the redemption right
within the period agreed upon or provided for by law, vests upon the buyer a retro absolute title and
ownership over the property sold by operation of law. Consequently, after the effect of consolidation,
the mortgage or re-sale by the seller a retro of the same property would not transfer title and ownership
to the mortgagee or buyer, as the case may be, under the Latin maxim NEMO DAT QUOD NON HABET.
Cadungog v. Yap, 469 SCRA 561 (2005).
171
Salonga v. Concepcion, 470 SCRA 291 (2005).
172
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Cuyugan v. Santos, 34 Phil. 100 (1916); Matanguihan v. CA, 275 SCRA 380
(1997); Hilado v. Heirs of Rafael Medlla, 37 SCRA 257 (2002); Madrigal v. CA, 456 SCRA 659 (2005); Legaspi v. Ong, 459 SCRA 122
(2005); Banga v. Bello, 471 SCRA 653 (2005); Diño v. Jardines, 481 SCRA 226 (2006); Ayson, Jr. v. Paragas, 557 SCRA 50 (2008).
173
Heirs of Jose Reyes, Jr. v. Reyes, 626 SCRA 758 (2010).
174
Lao v. CA, 275 SCRA 237 (1997).
175
Ceballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004); Alvaro v. Ternida, 479 SCRA 288 (2006);
Cirelos v. Hernandez, 490 SCRA 624 (2006); Lumayag v. Heirs of Jacinto Nemeño, 526 SCRA 51 (2007); Olivares v. Sarmiento, 554
SCRA 384 (2008); Tio v. Abayata, 556 SCRA 175 (2008); Deheza-Inamarga v. Alano, 574 SCRA 651 (2008); Rockville Excel Int’l Exim
Corp. v. Culla, 602 SCRA 124 (2009); Kings Properties Corp. v. Galido, 606 SCRA 137 (2009); Muñoz, Jr. v. Ramirez, 629 SCRA 38
(2010); Martires v. Chua, 694 SCRA 38 (2013); Heirs of Soliva v. Soliva, 757 SCRA 26 (2015); Repuela v. Estate of Spouses Bacus,
813 SCRA 563 (2018).
176
Padilla v. Linsangan, 19 Phil. 65 (1911); Aquino v. Deala, 63 Phil. 582 (1936); Ramos v. CA 180 SCRA 635 (1989).
177
Austria v. Gonzales, Jr., 420 SCRA 414 (2004); Raymundo v. Bandong, 526 SCRA 514 (2007).
178
Matanguihan v. CA, 275 SCRA 380 (1997); Martinez v. CA, 358 SCRA 38 (2001); Hilado v. Heirs of Rafael Medlla, 37 SCRA
257 (2002); Ceballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004); San Pedro v. Lee, 430 SCRA 338 (2005);
Go v. Bacaron, 472 SCRA 229 (2005); Romulo v. Layug, Jr., 501 SCRA262 (2006); Roberts v. Papio, 515 SCRA 346 (2007); Raymundo
v. Bandong, 526 SCRA 514 (2007); Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008); Muñoz, Jr. V. Ramirez, 629 SCRA 38
(2010); Heirs of Soliva v. Soliva, 757 SCRA 26 (2015).
- 41 -
a. Badges of Equitable Mortgage under Art. 1602179 – A sale a retro actually intended to secure
the payment of an obligation is presumed an equitable mortgage. Romulo v. Layug, Jr., 501
SCRA262 (2006);180 such presumption of equitable mortgage applies also to a contract
purporting to be an absolute sale. Tuazon v. Court of Appeals, 341 SCRA 707 (2000).181
The presence of only one Art. 1602 circumstance is sufficient for a contract of sale a retro
to be presumed an equitable mortgage. Hilado v. Medalla 377 SCRA 257 (2002).182
When doubt exists as to the true nature of the transaction purporting to be a sale, courts
must construe it as an equitable mortgage, as the latter involves a lesser transmission of rights
and interest over the property. Solitarios v. Jaque, 740 SCRA 226 (2014).
The presumption in Art. 1602 jibes with the rule that the law favors the least transmission
of property rights. Enriquez, Sr. v. Heirs of Spouses Baldonado, 498 SCRA 365 (2006); but it is
not conclusive, for it may be rebutted by competent and satisfactory proof to the contrary.
Santiago v. Dizon, 543 SCRA 402 (2008).
A contract purporting to be an absolute sale is presumed to be an equitable mortgage: (a)
when the price of the sale is unusually inadequate;183 (b) when the vendor remains in possession
as lessee or otherwise;184 (c) when after the expiration of the right of repurchase, it is extended
by the buyer. Hilado v. Heirs of Rafael Medalla, 37 SCRA 257 (2002);185 (d) when the purported
seller continues to collect rentals from the lessees of the property sold. Ramos v. Dizon, 498
SCRA 17 (2006); (e) when the purported seller was in desperate financial situation when he
executed the purported sale. Bautista v. Unangst, 557 SCRA 256 (2008); or under threat of
being sued criminally. Ayson, Jr. V. Paragas, 557 SCRA 50 (2008).
Payment of real estate taxes is a usual burden attached to ownership, and when such
payment is coupled with continuous possession of the property, it constitutes evidence of great
weight that a person under whose name the realty taxes were declared has a valid and right
claim over the land. Go v. Bacaron, 472 SCRA 229 (2005).186
The fact that the price in a pacto de retro sale is not the true value of the property does not
justify the conclusion that the contract is one of equitable mortgage; in fact a pacto de retro sale,
the practice is to fix a relatively reduced price to afford the seller a retro every facility to redeem
the property. Ignacio v. Court of Appeals, 246 SCRA 242 (1995).187
To presume a contract is an equitable mortgaged based on gross inadequacy of price, it
must be clearly shown from the evidence presented that the consideration was in fact grossly
inadequate at the time the sale was executed. Mere inadequacy of price is not sufficient to
create the presumption. Olivares v. Sarmiento, 554 SCRA 384 (2008).188
“Inadequacy of purchase price” is considered so far short of the real value of the property
as to startle a correct mind. Santiago v. Dizon, 543 SCRA 402 (2008); or that the mind revolts
at it as such that a reasonable man would neither directly or indirectly be likely to consent to it.
Vda de Alvarez v. Court of Appeals, 231 SCRA 309 (1994); it must be grossly inadequate or
shocking to the conscience. Tio v. Abayata, 556 SCRA 175 (2008).
Although under the agreement the seller shall remain in possession of the property for only
one year, such stipulation does not detract from the fact that possession of the property, an
indicium of ownership, was retained by the alleged vendor to qualify the arrangement as an
equitable mortgage, especially when it was shown that the vendor retained part of the purchase
price. Legaspi v. Ong, 459 SCRA 122 (2005).189
Mere tolerated possession is not enough to prove that the transaction was an equitable
mortgage. Redondo v. Jimenez, 536 SCRA 639 (2007).190
Mere allegations without proof to support inadequacy of price, or when continued
possession by seller is supported by a valid arrangement consistent with the sale, would not
support the allegation of equitable mortgage. Cirelos v. Hernandez, 490 SCRA 624 (2006).191
Under Art. 1602, delay in transferring title is not one of the instances enumerated by law—
instances in which an equitable mortgage can be presumed. Nor does the fact that the original
transaction on the land was to support a loan, which when it was not paid on due date was
negotiated into a sale, without evidence that the subsequent deed of sale does not express the
179
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Balatero v. IAC, 154 SCRA 530 (1987); Mariano v. CA, 220 SCRA 716 (1993);
Lobres v. CA, 351 SCRA 716 (2001).
180
Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256 (2008).
181
Zamora v.CA, 260 SCRA 10 (1996).
182
Claravall v. CA, 190 SCRA 439, 448 (1990); Uy v. CA, 230 SCRA 664 (1994); Lobres v. CA, 351 SCRA 716 (2001); Alvaro v.
Ternida, 479 SCRA 288 (2006); Diño v. Jardines, 481 SCRA 226 (2006); Raymundo v. Bandong, 526 SCRA 514 (2007); Aleligay v.
Laserna, 537 SCRA 699 (2007); Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008); Bautista v. Unangst, 557 SCRA 256 (2008);
Rockville Excell International Exim Corp. V. Culla, 602 SCRA 124 (2009); Heirs of Jose Reyes, Jr. v. Reyes, 626 SCRA 758 (2010);
Heirs of Soliva v. Soliva, 757 SCRA 26 (2015).
183
Romulo v. Layug, Jr., 501 SCRA262 (2006).
184
Romulo v. Layug, Jr., 501 SCRA262 (2006); Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256
(2008); Rockville Excell International Exim Corp. v. Culla, 602 SCRA 124 (2009).
185
Cruz v. CA, 412 SCRA 614 (2003).
186
Lumayag v. Heirs of Jacinto Nemeño, 526 SCRA 51 (2007).
187
De Ocampo v. Lim, 38 Phil. 579 (1918); Feliciano v. Limjuco, 41 Phil.147 (1920); Belonio v. Movella, 105 Phil. 756 (1959).
188
Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
189
Oronce v. CA, 298 SCRA 133 (1998).
190
Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
191
Austria v. Gonzales, Jr., 420 SCRA 414 (2004).
- 42 -
true intentions of the parties, give rise to a presumption of equitable mortgage. Ceballos v.
Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004).
Where the ownership of the land is supposedly transferred to the buyer who provides for
the funds to redeem the property from the bank but nonetheless allows the seller to later on buy
back the properties, is in the nature of an equitable mortgage governed by Articles 1602 and
1604 of the Civil Code. Bacungan v. Court of Appeals, 574 SCRA 642 (2008).
An equitable mortgage is a voidable contract. It may be annulled within four (4) years from
the time the cause of action accrues. Ayson, Jr. v. Paragas, 557 SCRA 50 (2008).
b. Remedies Allowed in an Equitable Mortgage Situation (Arts. 1454, 1602, 1605) – In the
case of an equitable mortgage, although Art. 1605 which allows for the remedy of reformation,
nothing therein precludes an aggrieved party from pursuing other remedies to effectively protect
his interest and recover his property, such as an action for declaration of nullity of the deed of
sale and specific performance. Tolentino v. Court of Appeals, 386 SCRA 36 (2002).
In equitable mortgage, consolidation of ownership in the mortgagee upon failure of the
mortgagor in equity to pay the obligation, would amount to a pactum commissorium. The only
proper remedy is to cause the foreclosure of the mortgage in equity. Briones-Vasquez v. Court
of Appeals, 450 SCRA 644 (2005); or to determine if the principal obligation secured by the
equitable mortgage has been paid or settled. Banga v. Bello, 471 SCRA 653 (2005).
d. Final Chance to Redeem in “Mistaken Equitable Mortgage” (Art. 1606): 30-day period under
Art. 1606 does not apply if courts find the sale to be absolute. Pangilinan v. Ramos, 181 SCRA
359 (1990).195
Sellers in a sale judicially declared as pacto de retro may not exercise right to repurchase
within 30-day period under Art. 1606, although they have taken the position that the same was
an equitable mortgage, if it is shown that there was no honest belief thereof since none of the
circumstances under Art. 1602 were shown to exist. If they truly believed the sale to be an
equitable mortgage, as a sign of good faith, they should have consigned with the amount
representing their alleged loan, on or before the expiration of the right to repurchase. üAbilla
v. Gobonseng, 374 SCRA 51 (2002).196
192
Guerrero v. Yñigo, 96 Phil. 37 (1954); Montevirgin v. CA, 112 SCRA 641 (1982); Vda. de Zulueta v. Octaviano, 121 SCRA 314
(1983); Ong v. Roban Lending Corp., 557 SCRA 516 (2008); Heirs of Jose Reyes, Jr. V. Reyes, 626 SCRA 758 (2010); Martires v.
Chua, 694 SCRA 38 (2013).
193
Philnico Industrial Corp. v. PMO, 733 SCRA 703 (2014).
194
Legaspi v. Ong, 459 SCRA 122 (2005); Home Guaranty Corp. v. La Savoie Dev. Corp., 748 SCRA 312 (2015).
195
Tapas v. CA, 69 SCRA 393 (1976).
196
Vda. de Macoy v. CA, 206 SCRA 244 (1992).
- 43 -
C. LEGAL REDEMPTION
1. Definition (Art. 1619) – Legal redemption is in the nature of a privilege created by law for reasons
of public policy and for the benefit and convenience of the redemptioner, to afford him a way out of
what might be a disagreeable or an inconvenient association into which he has been thrust. It is
intended to minimize co-ownership. Fernandez v. Tarun, 391 SCRA 653 (2002).197
e. Sale of Credit in Litigation (Art. 1634) – 30 Days from Notice of Demand to Pay.
197
Basa v. Aguilar, 117 SCRA 128 (1982).
- 44 -
For debtor to be entitled to extinguish his credit by reimbursing the assignee under Art.
1634, the following requisites must concur: (a) there must be a credit or other incorporeal right;
(b) the credit or other incorporeal right must be in litigation; (c) credit or other incorporeal right
must be sold to an assignee pending litigation; (d) assignee must have demanded payment from
the debtor; (e) debtor must reimburse the assignee for the price paid, judicial costs incurred and
interest on the price form the day on which the same was paid; and (f) reimbursement must be
done within 30 days from the date of the assignee’s demand. Situs Dev. Corp. v. Asiatrust Bank,
677 SCRA 495 (2012).
198
Hernaez v. Hernaez, 32 Phil. 214 (1915); Castillo v. Samonte, 106 Phil. 1024 (1960).
199
Garcia v. Calaliman, 17 SCRA 201 (1989); Mariano v. CA, 222 SCRA 736 (1993).
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When the co-owner admits that he actually knew of the sale by the other co-owners for
more than 7 years; he is guilty of laches; and more so he seeks to exercise the right of
redemption long after the property has ceased to be co-owned pro-indiviso. üAguilar v.
Aguilar, 478 SCRA 187 (2005).
Where the co-owners had actual (not constructive) notice of the sale at the time thereof
and/or afterwards, a written notice of a fact already known to them would be superfluous. The
statute does not demand what is unnecessary. üSi v. CA, 342 SCRA 653 (2000).
c. Redemption by Judgment Debtor (Secs. 27-28, Rule 39, Rules of Civil Procedure)
Written notice must be given to judgment debtor before sale of the property on execution,
to give him the opportunity to prevent the sale by paying the judgment debt sought to be enforced
and the costs which have been incurred. Torres v. Cabling, 275 SCRA 329 (1997).
Where there is a third-party claim, sheriff should demand from the judgment creditor who
becomes the highest bidder, payment in cash of his bid instead of merely crediting the amount
to the partial satisfaction of the judgment debt. Torres v. Cabling, 275 SCRA 329 (1997).
Under Sec. 28, Rule 39 of the 1997 Rules of Civil Procedure, the period of redemption shall
be “at any time within one (1) year from the date of registration of the certificate of sale,” so that
the period is now to be understood as composed of 365 days, unlike the 360 days under the old
provisions of the Rules of Court. Ysmael v. CA, 318 SCRA 215 (1999).
200
Mata v. CA, 318 SCRA 416 (1999).
201
Vaca v. CA, 234 SCRA 146 (1994).
202
Heirs of Felicidad Canque v. CA, 275 SCRA 741 (1997).
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right to redeem it within 180 days from notice in writing and at a reasonable price and
consideration. Quiño v. Court of Appeals, 291 SCRA 249 (1998).203
MODULE 7
SPECIAL TOPICS AND SPECIAL LAWS RELATING
TO SALE
[WEEKS 16 AND 17: NOVEMBER 25 AND DECEMBER 2]
2. Conditions versus Warranties. üPower Commercial and Industrial Corp. v. CA, 274 SCRA
597 (1997).
203
Springsun Management Systems Corp. v. Camerino, 449 SCRA 65 (2005).
204
Romero v. CA, 250 SCRA 223 (1995); Adalin v. CA, 280 SCRA 536 (1997); Republic v. Florendo, 549 SCRA 527 (2008).
205
Biñan Steel Corp. v. CA, 391 SCRA 90 (2002).
206
Oro Land Realty Dev. Corp. v. Calunan, 516 SCRA 681 (2007)
- 47 -
to the subject matter of the sale; (2) natural tendency of such affirmation or promise is to induce the
buyer to purchase the thing; and (3) buyer purchases the thing relying on such affirmation or promise
thereon. Carrascoso, Jr. v. Court of Appeals, 477 SCRA 666 (2005).
207
Canizares Tiana v. Torrejos, 21 Phil. 127 (1911); J.M. Tuazon v. CA, 94 SCRA 413 (1979).
208
Investments & Dev’t, Inc. v. CA, 162 SCRA 636 (1988); RCBC Savings Bank v. Odrada, 806 SCRa 646 (2016).
- 48 -
product left the hands of the petitioner. üNutrimix Feeds Corp. v. Court of Appeals, 441
SCRA 357 (2004).
A manufacturer or seller of a product cannot be held liable for any damage allegedly
caused by the product in the absence of any proof that the product in question is defective,
which was present upon the delivery or manufacture of the product; or when the product left the
seller’s or manufacturer’s control; or when the product was sold to the purchaser; or the product
must have reached the user or consumer without substantial change in the condition it was sold.
üNutrimix Feeds Corp. v. Court of Appeals, 441 SCRA 357 (2004).
f. Sale of Goods by Sample (Art. 1565)
There is a sale by sample when a small quantity is exhibited by the seller as a fair specimen
of the bulk, which is not present and there is no opportunity to inspect or examine the same. To
constitute a sale by sample, it must appear that the parties treated the sample as the standard
of quality and that they contracted with reference to the sample with the understanding that the
product to be delivered would correspondent with the sample. In a contract of sale by sample,
there is an implied warranty that the goods shall be free from any defect which is not apparent
on reasonable examination of the sample and which would render the goods not merchantable.
Mendoza v. David, 441 SCRA 172 (2004).
g. Additional Warranties for Consumer Products (Arts. 68, Consumer Act, R.A. 7394).
6. Effects of Waivers
The phrase “as is, where is” basis pertains solely to the physical condition of the thing sold, not to
its legal situation. THUS:
• The US tax liabilities constitute a potential lien which applies to the subject’s matter’s legal
situation, not to its physical aspect; thus, the buyer has no obligation to shoulder the same.
NDC v. Madrigal Wan Hui Lines Corp., 412 SCRA 375 (2003).
• “As Is, Where Is” basis merely describes the actual state and location of the subject matter
sold, but does not relieve the seller of his primary obligation and implied warranty to deliver
the object to the buyer. APT v. T.J. Enterprises, 587 SCRA 481 (2009).
209
Nyco Sales Corp. v. BA Finance Corp., 200 SCRA 637 (1991); Rodriguez v. CA, 207 SCRA 553 (1992); Project Builders v. CA,
358 SCRA 626 (2001).
210
Lo v. KJS Eco-Formwork System Phil., 413 SCRA 182 (2003); Spouses Chin Kong Wong Choi v. UCPB, 753 SCRA 153 (2015).
211
Sison & Sison v. Yap Tico, 37 Phil. 587 (1918); C&C Commercial Corp. v. PNB, 175 SCRA 1 (1989); Project Builders v. CA, 358
SCRA 626 (2001); Aquintey v. Tibong, 511 SCRA 414 (2006); Ledonio v. Capitol Dev’t Corp., 526 SCRA 379 (2007).
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4. Warranties of Assignor (Art. 1628)
Assignor warrants only the existence or legality of the credit but not the solvency of the debtor.
üNyco Sales Corp. v. BA Finance, 200 SCRA 637 (1991).
EXCEPTIONS: (a) If this is expressly warranted;
(b) If insolvency is known by the assignor prior to assignment;
(c) If insolvency is prior to assignment is common knowledge.
When dacion en pago takes the form of an assignment of credit, it may extinguish the obligation;
however, by virtue of the warranty in Art. 1628, which makes the vendor liable for the existence and
legality of the credit at the time of sale, when it is shown that the assigned credit no longer existed at
the time of dacion, then it behooves the assignor to make good its warranty and pay the obligation. Lo
v. KJS Eco-Formwork System Phil., 413 SCRA 182 (2003).
5. Right of Repurchase on Assignment of Credit under Litigation (Arts. 1634 and 1635)
Rescission under Art. 1191 is predicated on a breach of faith by the other party who violates the
reciprocity between them—breach contemplated is obligor’s failure to comply with an existing obligation.
When obligee seeks rescission, in the absence of any just cause for courts to determine the period of
compliance, they shall decree the rescission. Velarde v. Court of Appeals, 361 SCRA 56 (2001).216
Non-payment of price is a resolutory condition for which the remedy is either rescission or specific
performance under Art. 1191. This is true for reciprocal obligations where the obligation is a resolutory
condition of the other. On the other hand, buyer is entitled to retain the purchase price if the seller fails
212
Ledonio v. Capitol Dev. Corp., 526 SCRA 379 (2007).
213
Congregation of the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008);
Congregation of the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008).
214
Iringan v. CA, 366 SCRA 41 (2001).
215
Ocampo v. CA, 233 SCRA 551 (1994); Co v. CA, 312 SCRA 528 (1999); Orden v. Aurea, 562 SCRA 660 (2008).
216
Almira v. CA, 399 SCRA 351 (2003).
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to perform any essential obligation of the contract. Such right is premised on the general principles of
reciprocal obligation. Gil v. Court of Appeals, 411 SCRA 18 (2003).217
Consignation by the buyer of the purchase price of the property, there having been no previous
receipt of a notarial demand for rescission, is sufficient to defeat the right of the seller to demand for a
rescission of the deed of absolute sale. Gil v. Court of Appeals, 411 SCRA 18 (2003).
When a party asks for the resolution or cancellation of a contract it is implied that he recognizes it
existence – a non-existent contract cannot be cancelled. Pan Pacific Industrial Sales Co. v. Court of
Appeals, 482 SCRA 164 (2006).
Action for Rescission Not Similar to Action for Reconveyance: In sale of real property, seller is not
precluded from going to the court to demand judicial rescission in lieu of a notarial act of rescission. But
such action is different from an action for reconveyance of possession on the thesis of a prior rescission
of the contract covering the property. The effects that flow from an affirmative judgment in either case
would be materially dissimilar in that: (a) judicial resolution gives rise to mutual restitution which is not
necessarily the situation in an action for reconveyance; (b) unlike in an action for reconveyance
predicated on an extrajudicial rescission (rescission by notarial act), in an action for rescission, the court
may authorize for a just cause the fixing of a period. Olympia Housing v. Panasiatic Travel Corp., 395
SCRA 298 (2003).
In Gotesco Properties, Inc. v. Sps. Fajardo, the Court held that rescission under Article 1385 in
relation to Article 1191 of the New Civil Code does not merely terminate the contract and release the
parties from further obligations to each other, but abrogates the contract from its inception and
restores the parties to their original positions as if no contract has been made. Following Gotesco,
the trial court aptly ordered petitioner and respondent to be restored to their original positions as if
the sales contract was not executed, thus petitioner was required to pay respondent P1,516,000.00
or the equivalent of 50% down payment and P46,430.00 freight charges paid, while respondent was
required to return the Teckwin 2500 printer with XAAR 128 printer head to petitioner. üTektwin
Marketing Corporation v. Bermon Marketing Communications Corporation, G.R. No. 253359
(Notice) (2021).
HOWEVER: Seller’s right in a contract to sell with reserved title to extrajudicially cancel the sale upon
failure of the buyer to pay the stipulated installments and retain the sums and installments already
received has long been recognized by the well-established doctrine of 39 years standing. Pangilinan v.
Court of Appeals, 279 SCRA 590 (1997).221
Pursuant to Art. 1188, in a contract to sell, even if buyers did not mistakenly make partial payments,
inasmuch as the suspensive condition was not fulfilled, it is only fair and just that buyers be allowed to
recover what they had paid in expectancy that the condition would happen; otherwise, there would be
unjust enrichment on part of seller. Buot v. Court of Appeals, 357 SCRA 846 (2001).
217
Central Philippine University v. CA, 246 SCRA 511 (1995); Romeo v. CA, 250 SCRA 223 (1995); Cheng v. Genato, 300 SCRA
722 (1998); Uy v. CA, 314 SCRA 63 (1999).
218
Ocejo, Perez & Co. v. International Banking Corp. 37 Phil. 631 (1918); Republic v. Hospital de San Juan de Dios, 84 Phil. 820
(1949); De la Rama Steamship Co. v. Tan, G.R. No. 8784, May 21, 1956; 99 Phil. 1034 (unrep.) (1956); Heirs of Jesus M. Mascuñana
v. CA, 461 SCRA 186 (2005).
219
Luzon Brokerage Co., v. Maritime Building Co., 43 SCRA 95 (1972); 86 SCRA 305 (1978); Pangilinan v. CA, 279 SCRA 590
(1997); Calilap-Asmeron v. DBP, 661 SCRA 54 (2011).
220
Velarde v. CA, 361 SCRA 56 (2001); Orden v. Aurea, 562 SCRA 660 (2008).
221
Manila Racing Club v. Manila Jockey Club, 69 Phil. 55 (1939).
- 52 -
the obligation of the vendor to convey title from becoming effective. √Adelfa Properties v. Court of
Appeals, 240 SCRA 575 (1995).222
According to some authorities on the law of sales, the existing school of thought "holds that what
determines whether a sale contract is a 'contract to sell' is that there must exist an agreement, whether
express or implied, at the time of perfection of the sale contract, that the obligation of the seller to
transfer ownership to the buyer pursuant to a sale (even when physical possession may have been
effected) is conditioned upon the full payment by the buyer of the purchase price." Further, "[t]he
prevailing doctrine therefore is that absent any stipulation in the deed or in the meeting of [the] minds
reserving title (meaning, ownership) over the property to the seller until full payment of the purchase
price and giving the seller the right to unilaterally rescind the contract i[n] case of non-payment, makes
the contract one of sale rather than a contract to sell." Agustin v. De Vera, 900 SCRA 203 (2019), citing
Villanueva, Cesar L., Law on Sales, pp. 449, 2009 ed.
a. Does Contract to Sell Fall under the Definition of “Sale” in Article 1458? – A “Contract to
Sell” as “a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself
to sell the said property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, that is, full payment of the purchase price.” üCoronel v. CA, 263 SCRA 15, 27
(1996).223 BUT SEE: üPNB v. Court of Appeals, 262 SCRA 464 (1996).
To be sure, a contract of sale may either be absolute or conditional. One form of conditional
sales is what is now popularly termed as a “Contract to Sell,” where ownership or title is retained
until the fulfillment of a positive suspensive condition normally the payment of the purchase price
in the manner agreed upon. For a contract, like a contract to sell, involves a meeting of minds
between two persons whereby one binds himself, with respect to the other, to give something
or to render some service. Gomez v. Court of Appeals, 340 SCRA 720, 728 (2000).224
A Contract to Sell is akin to a conditional sale, in which the efficacy or obligatory force of
the seller’s obligation to transfer title is subordinated to the happening of a future and uncertain
event, so that if the suspensive condition does not take place, the parties would stand as if the
conditional obligation never existed. Orden v. Aurea, 562 SCRA 660 (2008).225
A Contract to Sell is perfected at the moment there is a meeting of minds upon the object
of the contract and upon the price. It undergoes also the three stages of a contract: negotiation,
perfection and consummation. Robern Dev. Corp. v. People’s Landless Assn., 693 SCRA 24
(2013).
A contract of sale is defined under Article 1458 of the Civil Code. A contract to sell, on the
other hand, is defined by Article 1479 of the Civil Code: [A] bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject property despite
delivery thereof to the prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price. Akang v. Municipality of Isulan, Sultan Kudarat Province, 699
SCRA 745 (2013).
Even a contract to sell constitutes the law between the parties who executes it.
Consequently, from the time the contract is perfect, all parties privy to it are bound not only to
the fulfillment of what has been expressly stipulated but likewise to all consequences which,
according to their nature, may be in keeping with good faith, usage and law. Concededly, it is
undisputed that the abovementioned contract is in the nature of a “Contract to Sell”. As such,
the obligation of the seller to sell becomes demandable only upon the occurrence of the
suspensive condition. In the present case, the suspensive condition is the payment in full of the
purchase price by the buyers prior to the expiration of the 90-day period stipulated in their CTS,
which the latter failed to do so. Felix Plazo Urban Poorer Settlers Community Assn. Inc. v. Lipat,
Sr., 821 SCRA 12 (2017).
b. What Is the Difference in Legal Effect Between a “Contract to Sell” and a Conditional
Contract of Sale? – While conditionality inheres in a contract to sell, the same should not be
confused with a conditional contract of sale. In a contract to sell, the fulfillment of the suspensive
condition will not automatically transfer ownership to the buyer although the property may have
been previously delivered to him. The prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale. On the other hand, in a conditional contract
of sale, the fulfillment of the suspensive condition renders the sale absolute and the previous
delivery of the property has the effect of automatically transferring the seller’s ownership or title
to the property to the buyer. Ventura v. Heirs of Spouses Endaya, 706 SCRA 631 (2013).
222
Lim v. CA, 182 SCRA 564 (1990); Buot v. CA, 357 SCRA 846 (2001); Abesamis v. CA, 361 SCRA 328 (2001); Tuazon v. Garilao,
362 SCRA 654 (2001); Leaño v. CA, 369 SCRA 36 (2001); Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA
316 (2002); Almira v. CA, 399 SCRA 351 (2003); Chua v. CA, 401 SCRA 54 (2002); Flancia v. CA, 457 SCRA 224 (2005); Vidad, Sr.
v. Tayamen, 531 SCRA 147 (2007); Hulst v. PR Builders, 532 SCRA 74 (2007); Castillo v. Reyes, 539 SCRA 193 (2007); Heirs of
Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Sta. Lucia Realty & Dev., v. Uyecio, 562 SCRA 226 (2008); Orden v. Aurea, 562 SCRA
660 (2008); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008); Tan v. Benolirao, 604 SCRA36 (2009); Bank of P.I. v. SMP, Inc., 609
SCRA 134 (2009); De Leon v. Ong, 611 SCRA 381 (2010); Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010).
223
Platinum Plans Phil. v. Cucueco, 488 SCRA 156 (2006); Valenzuela v. Kalayaan Dev. and Industrial Corp., 590 SCRA 380
(2009);Tan v. Benolirao, 604 SCRA 36 (2009);
224
Demafelis v. CA, 538 SCRA 305 (2007); Rodriguez v. Sioson, 798 SCRA 526 (2016); Danan v. Spouses Serrano, 799 SCRA 39
(2016);
225
De Leon v. De Leon, 593 SCRA 768 (2009).
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In contracts of sale, seller loses ownership over the property and cannot recover it until and
unless the contract is resolved or rescinded; in a contract to sell, title is retained by seller until
full payment of the price. Montecalvo v. Heirs of Eugenia Primero, 624 SCRA 575 (2010).
In a contract to sell, the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer
ownership of the property subject of the contract to sell until the happening of an event, which
for present purposes we shall take as the full payment of the purchase price. Republic v. Marawi-
Marantao General Hospital, 686 SCRA 546 (2012).
A contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to the latter upon his
fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or
compliance with the other obligations stated in the contract to sell. Given its contingent nature,
the failure of the prospective buyer to make full payment and/or abide by his commitments stated
in the contract to sell prevents the obligation of the prospective seller to execute the
corresponding deed of sale to effect the transfer of ownership to the buyer form arising. Ventura
v. Heirs of Spouses Endaya, 706 SCRA 631 (2013).226
c. Importance of “Locating” the Condition Placed on the Obligation to Pay Price in Full – In
a contract of sale, the non-payment of the price is a resolutory condition which etinguishes the
transaction that, for a time existed, and discharges the obligations created thereunder. xBlas v.
Angeles-Hutalla, 439 SCRA 273 (2004).227
Whereas, in a contract to sell, the payment of the price is a positive suspensive condition,
and seller’s obligation to convey title does not become effective in case of failure to pay. Buot v.
Court of Appeals, 357 SCRA 846 (2001).228
When buyer’s obligation to pay the purchase price was made subject to the condition that
seller first delivers clean title over the parcel bough within 20 months from the signing of the
contract, such condition is imposed merely on the performance of the obligation, as
distinguished from a condition imposed on the perfection of the contract. The non-happening of
the condition merely granted the buyer the right to rescind the contract or even to waive it and
enforce performance on the part of the seller, all in consonance with Art. 1545 of Civil Code
which provides that “Where the obligation of either party to a contract of sale is subject to any
condition which is not performed, such party may refuse to proceed with the contract or he may
waive performance of the condition.” √Babasa v. CA, 290 SCRA 532 (1998).
Rationale for Contracts to Sell: A contract to sell is commonly entered into so as to protect
the seller against a buyer who intends to buy the property in installments by withholding
ownership over the property until the buyer effects full payment therefor. It cannot be inferred in
a situation where both parties understood the price to be paid in cash. City of Cebu v. Heirs of
Candido Rubi, 306 SCRA 408 (1999).229
Remedy of Rescission Does Not Apply to Contracts to Sell: The remedy of rescission under
Article 1191 of the Civil Code cannot apply to mere contracts to sell—in a contract to sell, the
payment of the purchase price is a positive suspensive condition, and failure to pay the price
agreed upon is not a mere breach, casual or serious, but a situation that prevents the obligation
of the vendor to convey title from acquiring an obligatory force. Tan v. Benolirao, 604 SCRA 36
(2009).230
In a contract to sell, payment of the price is a positive suspensive condition, failure of which
is not a breach of contract warranting rescission under Article 1191 of the Civil Code but rather
just an event that prevents the supposes seller from being bound to convey title to the supposed
buyer. Bonrostro v. Luna, 702 SCRA 1 (2013).
In a contract to sell, the seller’s obligation to deliver the corresponding certificates of title is
simultaneous and reciprocal to the buyer’s full payment of the purchase price. Gotesco
Properties v. Fajardo, 692 SCRA 319 (2013).
When it is shown that a contract of conditional sale is really a contract to sell, the full
payment of the purchase price is the positive suspensive condition, the failure of which is not a
breach of contract, but simply an event that prevent the obligation of the vendor to convey title
from acquiring binding force. In this case, although possession of the land was given to the
buyers with reservation of ownership with the sellers, it was incumbent upon buyers to have
completed the full payment of the purchase price, and the failure of the seller to come back
should have prompted them to consign the purchase price with the courts. üNabus v Pacson,
605 SCRA 334 (2009).
226
Luzon Dev. Bank v. Enriquez, 639 SCRA 332 (2011); Associated Marine Officers and Seamen’s Union PTGWO-ITF v. Decena,
683 SCRA 308 (2012); Tumibay v. Lopez, 697 SCRA 21 (2013).
227
Valenzuela v. Kalayaan Dev’t and Ind’l Corp., 590 SCRA 380 (2009); Traders Royal Bank v. Cuison Lumber Co., 588 SCRA 690
(2009).
228
Heirs of Spouses Sandejas v. Lina, 351 SCRA 183 (2001); Zamora Realty and Dev. Corp v. Office of the President, 506 SCRA
591 (2006); Nabus v. Pacson, 605 SCRA 334 (2009); Union Bank v. Maunlad Homes, 678 SCRA 539 (2012).
229
Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010); Tumibay v. Lopez, 697 SCRA 21 (2013).
230
Traders Royal Bank v. Cuison Lumber Co., 588 SCRA 690 (2009); Nabus v. Pacson, 605 SCRA 334 (2009); Diego v. Diego, 691
SCRA 361 (2013).
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d. Essential Stipulations to Constitute a Contract to Sell – A contract is one of sale, absent any
stipulation therein (a) reserving title over the property to the vendee until full payment of the
purchase price,231 and (b) giving the vendor the right to unilaterally rescind the contract in case
of non-payment.232 üValdez v. Court of Appeals, 439 SCRA 55 (2004); üDe Leon v. Ong,
611 SCRA 381 (2010);233 üVillamil v. Spouses Erquiza, 867 SCRA 120 (2018); BUT SEE:
üDignos v. Court of Appeals, 158 SCRA 375 (1988). CONSEQUENTLY:
• It was enough to characterize the Deed of Condition Sale as a “contract to sell” alone by the
reservation of ownership. Heirs of Antonio F. Bernabe v. Court of Appeals, 559 SCRA 53
(2008).
• Reservation of title may not be found in express provision of the contract, but may also be
determined from proven acts of the parties. Salazar v. Court of Appeals, 258 SCRA 325
(1996).
• Absence of a formal deed of conveyance [or a stipulation to execute the deed of sale only
full payment of the purchase price] is a strong indication that parties did not intend immediate
transfer of ownership, but only a transfer after full payment of purchase price,234 especially
where seller retained possession of the certificate of tile and all other documents relative to
the sale until there was full payment of the price. Chua v. Court of Appeals, 401 SCRA 54
(2003).
• An agreement in which ownership is reserved in the seller and is not to pass to the buyer
until full payment of the purchase price is known as a contract to sell. The absence of full
payment suspends the seller’s obligation to convey title, even if the sale has already been
registered. Registration does not vest, but merely serves as evidence of, title to a particular
property. Portic v. Cristobal, 456 SCRA 577 (2005).235
• It is not the title of the contract, but its express terms or stipulations that determine the kind
of contract entered into by the parties. Where seller promises to execute a deed of absolute
sale upon the completion by buyer of the payment of the price, which shows that seller
reserved title to the property until full payment of the purchase price, the contract is only a
contract to sell. Nabus v. Pacson, 605 SCRA 334 (2009).236
• The stipulation that the loss or destruction of the products during transit is on the account of
Clothespak, as buyer of the products, is of no moment. This does not alter the nature of the
contract as a contract to sell. The free-on-board stipulation on the contract can coexist with
the contract to sell. Otherwise stated, the provisions or stipulation in the contract—for the
reservation of the ownership of a thing until full payment of the purchase price and for the
loss or destruction of the thing would be on account of the buyer—are valid and can exist in
conjunction with the other. Bank of P.I. v. SMP, Inc., 609 SCRA 134 (2009).
• Having an ironclad dependence on the existence of a deed of absolute sale to determine the
existence of a contract of sale is unwarranted, considering that a contract of sale is
a consensual contract, which means that the sale is perfected by mere consent. Therefore,
while a stipulation or promise to the effect that a seller shall execute a deed of sale upon the
completion of payment of the purchase price by the buyer may be considered a factor or a
sign that a contract might possibly be a contract to sell, such stipulation in itself, taken in
isolation, is by no means determinative and conclusive as to the contract being a contract to
sell. Still controlling are (1) the lack of any stipulation in the sale contract reserving the title
of the property on the vendors and (2) the lack of any stipulation giving the sellers the right
to unilaterally rescind the contract upon non-payment of the balance thereof within a fixed
period. The absence of such stipulations in a sale contract makes the said contract a contract
of sale. Hence, the Contract to Purchase and Sale entered into by Gregorio and Hipolito is
a contract of sale. Agustin v. De Vera, 900 SCRA 203 (2019).
e. Substantial Breach (Arts. 1191 and 1234) – Concept of substantial breach is irrelevant in
contracts to sell. Luzon Brokerage Co. v. Maritime Building Co., 43 SCRA 93 (1972).237
In a contract to sell real property on installments, the full payment of the purchase price is
a positive condition, the failure of which is not considered a breach, casual or serious, but simply
an event that prevented the obligation of the vendor to convey title from acquiring any obligatory
force. The transfer of ownership and title would occur after full payment of the price. Leaño v.
Court of Appeals, 369 SCRA 36 (2001).238
231
Topacio v. CA, 211 SCRA 219 (1992); Laforteza v. Machuca, 333 SCRA 643 (2000); Almira v. CA, 399 SCRA351 (2003); Manuel
Uy & Sons v. Valbueco, Inc., 705 SCRA 537 (2013); Reyes v. Tuparan, 650 SCRA 238 (2011).
232
Roque v. Lapuz, 96 SCRA 741 (1980); Angeles v. Calanz, 135 SCRA 323 (1985); Alfonso v. CA, 186 SCRA 400 (1990)
233
San Andres v. Rodriguez, 332 SCRA 769 (2000); Vda. De Mistica v. Naguiat, 418 SCRA 73 (2003); Blas v. Angeles-Hutalla, 439
SCRA 273 (2004); Villadar, Jr. V. Zabala, 545 SCRA 325 (2008); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Ver Reyes
v. Salvador, Sr., 564 SCRA 456 (2008).
234
Bowe v. CA, 220 SCRA 158 (1993); Rayos v. CA, 434 SCRA 365 (2004); Solidstate Multi-Products Corp. v. Catienza-Villaverde,
559 SCRA 197 (2008); Tan v. Benolirao, 604 SCRA 36 (2009); Nabus v. Pacson, 605 SCRA 334 (2009).
235
Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Bank of P.I. v. SMP, Inc., 609 SCRA 134 (2009).
236
Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Solidstate Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197
(2008)Tan v. Benolirao, 604 SCRA 36 (2009); Nabus v. Pacson, 605 SCRA 334 (2009); Union Bank v. Maunlad Homes, 678 SCRA
539 (2012); Diego v. Diego, 691 SCRA 361 (2013).
237
Siska Dev. Corp. v. Office of the President, 231 SCRA 674 (1994); Sta. Lucia Realty & Dev. v. Uyecio, 562 SCRA 226 (2008).
238
Manuel v. Rodriguez, 109 Phil. 1 (1960); Laforteza v. Machuca, 333 SCRA 643 (2000); Villamaria, Jr. v. CA, 487 SCRA 571
(2006); Valenzuela v. Kalayaan Dev. and Industrial Corp. 590 SCRA 380 (2009); Traders Royal Bank v. Cuison Lumber Co., Inc., 588
SCRA 690 (2009); Nabus v. Pacson, 605 SCRA 334 (2009).
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Jurisprudence abounds with rulings that the remedies of rescission under Article 1191 and
1592 are not available in contracts to sell. In a contract to sell, there can be no rescission of
resolution of an obligation that is still non-existent due to the non-happening of the suspensive
condition. Royal Plains View, Inc. v. Mejia, 885 SCRA 291 (2018).
239
Jison v. CA, 164 SCRA 339 (1988); Lim v. CA, 182 SCRA 564 (1990); Lim v. CA, 182 SCRA 564 (1990); Cheng v. Genato, 300
SCRA 722 (1998); Toledo v. CA, 765 SCRA 104 (2015).
240
Torralba v. Delos Angeles, 96 SCRA 69 (1980).
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3. Compliance Requirements Under the Law
a. Ten (10) days before the intended sale in bulk, the seller must take an inventory of his stock
and advise all his creditors of the same.
b. At the time of sale, merchant must give the buyer a certified schedule of his debts: names of
creditors, amounts owing to each and the nature of the debt.
b. Purchase price paid must be applied proportionately to these debts.
4. Effects of Non-Compliance
a. If purchase money or mortgage proceeds are not applied pro-rata to payment of the bona fide
claims of the creditors, the sale is deemed fraudulent and void. (Sec. 4)
b. Non-giving of the list of creditors or intentional omission of the names of some of the creditors,
and placing of wrong data required by law, would subject the seller or mortgagor to penal
sanctions. (Sec. 4)
c. Bulk transfer without or for nominal consideration punishable. (Sec. 7)
d. Failure to comply with other provisions of the law the non-application of the consideration
proportionately to the creditors, the preparation of the inventory, and the notification to creditors,
are also made punishable. (Sec. 11)
A bulk sale done without complying with the Law, makes the transaction fraudulent and
void, but does not change the relationship between seller/assignor /encumbrancer and his
creditor. Hence, a judgment providing for subsidiary liability is invalid—proper remedy is to
collect on the credit against the defendants, and if they cannot pay, to attach on the property
fraudulently mortgage since it still pertain to the debtors-defendants. People v. Mapoy, 73 Phil.
678 (1942).
241
Marsman & Co. v. First Coconut Central Co., 162 SCRA 206 (1988); B.F. Goodrich Phil. v. Reyes, Sr., 121 SCRA 363 (1983).
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b. CATEGORY B: ≥ US$2.5 Million, but <US$7.5 Million; Store investment not <US$30,000.00;
Net Worth of US$200 Million
c. CATEGORIES C: ≥ US$7.5 Million; Store investment not <US$830,000.00; Net Worth of
US$200 Million
d. CATEGORY D – Luxury Items: Store investment of not <US$250,000.00; Net Worth of US$
50 Million
e. EXEMPTED AREAS
f. Rights Granted to Former Natural-Born Filipinos
—oOo—
— FINAL EXAMINATIONS —
(WEEKS 18 AND 19: 06 TO 16 DECEMBER 2021)
— END OF COURSE —