CONTRACT OF SALE

ATTY. RABUYA: Okay. The essence of the contract, the contract is an exchange of a thing. Of
course, it will include wights when we talk about a thing. Things or rights in exchange for the
payment of a price which must be certain in money or its equivalent. That is a contract of sale.
Generally, sale is contractual. Sale is by agreement. But, you have encountered instances
where a buyer can be forced to buy and a seller can be forced to sell. In Property, in Accession,
under Art 448, if both the landowner and the builder or the planter acted in good faith, one of the
available options granted to the owner in Accession industrial is to compel the builder or the
planter the purchase price. That is a case of forced sale. The buyer can be compelled to buy.
And in foreclosure sales, in the foreclosure of the property offered as collateral, we can have
again a case of forced sale where the seller can be force to sell.
In order for a contract to be one of sale, the consideration must be a payment of price which
must be certain in money or the equivalent of money. So, if the consideration is the delivery of a
property, the contract is not sale. Instead, it will become a contract of barter. The contract of
Barter is an exchange of a thing for another thing. Now, in situation where the consideration is
partly in money and partly in another thing, how do we classify the contract? Is it sale or barter?
Two tests. Dalwang test and iaaply natin. The first test is what is the intention of the parties? If
the intention of the parties is manifest, it is clear, then it is the intention of the parties that will
prevail. If they intend their contract to be one of sale, so be it, or if it is intended to be barter, so
be it. Second test. If the intention is not clear, anong sunod nating titignan? Anong mas Malaki.
If the amount, if the money given is more than the value of the property given, then the contract
is sale, otherwise, the contract is barter.
In a contract of sale, it is not necessary that the thing sold, the subject matter, must already be
existing at the time of the perfection of the contract of sale. It is possible in a COS that the thing
sold is not yet actually in existence but it is still to be made, to be manufactured by the one who
committed to deliver the thing. So, in those situations where the thing is to be made, the thing is
not yet existing at the time of the perfection of the contract of sale, we will have to distinguish
the contract of sale from a contract of piece of work. So, yung mga situation na gagawin pa
lang, ipagagawa mo pa lang, the thing is not yet in existence. When is a contract one of sale
and when is a contract one for piece of work? Before that ng apala, balik tayo sa barter and
sale. What is the importance of distinguishing one of contract and one of barter? How do we
distinguish one from the other one? I wanna know the first test is the intention of the parties.
Yeah. Got it. What is important to the parties important to the parties? Not simply the delivery of
the thing agreed upon no, without regard to the manner by which that thing is to be made and
without regard not to the scale that that will be employed by the one who committed to deliver
that thing that is simply a contract of sale. Okay? Kung hindi importante yung skills, hindi
importante yung paraan kung paano gagawin. On the other hand, if what is important, if in the
agreement, it is clear that what is important is the skills to be employed by the one who have
committed to deliver that thing or if the thing is to be made in accordance with a plan submitted,
forwarded by the one who is expecting the delivery of that thing, that, that contract is actually a
contract per piece of work. Okay. Kung pupunta ka sa isang magalign na mananahi, ikakasal
ka, kung bibili ka lang ng kahit anong gagawin nya without regard to any plan, without regard to
the skills to be employed, that is a contract of sale but kung pag uusapan nyo, kukunin mo sya
because of his skills and he will be making that thing in accordance with the plan that you have
agreed upon, yung pinag usapan nyong disenyo, anong itsura, that is not a sale. That is a
contract for piece of work. Okay. That will be our first test. Ano ang importante based on the
agreement?
Now, if that is not clear, if that is not clear, pupunta tayo sa another test. If the one who
committed to deliver that thing is never the less engaged in the business of producing that thing
even if that thing is not yet in existence at that time of perfection, but nevertheless, it will exist
definitely in the future because the one who committed to deliver that thing is nevertheless
engaged in the business of making that thin, the contract is one of sale. On the other hand, if
the one who committed to deliver that thing is, you know, not ordinarily engaged in the business,
not making that thing and he will only be making that thing because of a special order of another
person, that will be a contract or a piece of work. A contract per piece of work is one of the two
kinds of contract of lease. You know, the contract is actually a contract of lease over a service.
There are two kinds of contract of lease depending on the subject matter. One is if the subject
matter is things, lease of things and the other one is when the subject matter is service,
rendition of Service. So that is lease of service and a contract or piece of work is actually a
contract of lease where the subject matter is rendition of a service, but so as not to, uh— for
clarification purposes, we do not normally call it a contract of lease kasis pag sinabi nating
contract of lease, more or less, we are referring to contract of lease over things.
Important distinctions between a contract of sale and a contract for a piece of work.
As to the obligation created. In a contract of sale, the obligation that is created is a real
obligation. That is an obligation to give whereas in a contract for a piece of work, the obligation
created is to do, that is rendition of a service. So, consequence jan as to the remedy that will be
applicable to the creditor in case of breach. In a contract of sale, the one who committed to
deliver that thing can be compelled to make the delivery whereas in a contract for piece of work,
that cannot be done because the obligation is actually to do and not to give and not to deliver.
Okay. So, the possible remedy in, in case of breach of a contract for a piece of work is simply to
ask another person to execute the act and charge the cost to the debtor if it is possible for the
act to be executed by someone else but if the act is personal only to the debtor because of the
personal qualification of the debtor was that primary consideration in entering into that contract,
of course, the only available remedy is recovery of damages. Yan yung tinatawag nating
contracts intuitu personae where the obligation is personal only to the debtor because the
personal qualifications of the debtor were taken into consideration in creating the contract. And
of course, the contract of sale is covered by the statute of frauds while a contract or a piece of
work is not covered by the statute of frauds.
Finally, let us distinguish the contract of sale from a mere agency to sell.
What distinguishes the contract of agency from a contract is the exercise of the power of
control. If after delivery, the one who effected the delivery is still exercising control over the thing
that he delivered over the person to whom he made the delivery. If he is exercising that control,
that is not a contract of sale, that is merely a contract of agency to sell. Yun ang
pinakaimportanteng titignan lang natin, yung pactor control because that is the essence of
agency, that the principal is exercising a degree of control over the agent. If that exists, that is
not a contract of sale but a mere agency to sell. In the absence of which, kung wala ng pakialam
yung nagdeliver after the delivery, that is simply a contract of sale and not an agency.
Important consequences of the distinction.
It is a mere agency to sell and not a contract of sale, the delivery will not produce the effect of
transferring ownership and the one who receive, the agent who received the thing upon delivery
does not have the obligation to pay the price because the obligation of the agent is simply to sell
the thing on behalf of the principal and if it's successful, its obligation is to turn over the
proceeds of the same and if he's not successful in selling it, his obligation is simply to return the
thing that was commissioned to him. That his agency to sell. On the other hand, if that is a
contract sale, upon delivery, generally, there is transfer of ownership and it will create an
obligation on the part of the one who received the thing to pay the price. In agency to sell,
importanteng provision, 1874 of the Civil Code. If the agency to sell relates to the sale of a
parcel of land or any interest in a parcel of land, the law requires that the authority of the agent
must be in writing. Otherwise, the sale is void. It is the sale that is declared void, the sale to be
entered into by the agent, not just the agency, but the sale itself is void. And that provision will
be applicable not only in situations where there was authority given, but the authority was not in
writing. That provision will likewise be applicable to situations where there was really no
authority given to the one who sold the parcel of land on behalf of the owner as ruled by the
Supreme court in the case of Delos Reyes v. Court of Appeals. Recall that case where there
was a prodigal son who got tired of the city life. After he got tired of the city light, he went to the
province where his father has land holdings and the first thing that he did upon his arrival in the
province is to terminate the services of the caretaker of the land and the son, assumed the
administration of the land of his father but being true to his name of being prodigal, he was not
contented with mere administration. He sold the land of his father but without any authority from
the father, but in that case, the land was sold by the son not in the name of the son. The land
was sold by the son in the name of the father. Sabi ng Supreme court in that case, Delos Reyes
v. CA, the sale that was made by the son is void applying Article 1874. Okay? So as I have said,
applicable 1874 not only when there was an authority given, given but verbal, but it will likewise
apply to situations where there was no authority that was given
There are two kinds of contracts of sale in our Civil Code. One is absolute and the other one is
conditional sale. How do we distinguish one from the other? Simple lang naman. If there is no
condition that was imposed upon which the ownership is to pass upon compliance with that
condition. Kung walang ganong condition that was imposed in order for the ownership to pass,
the sale is absolute. On the other hand, if the transfer of ownership is subjected to the fulfillment
of a certain condition, yun yung tinatawag nating conditional sale, ganon lang naman kasimple.
But a conditional sale must be distinguished from a contract to sell because a contract to sell is
likewise conditionally.
In our laws, in our law and jurisprudence, a contract to sell is not a contract of sale. It is not a
contract sale and it is different now from a conditional sale. Anong pinagkaiba? In both, a
condition is imposed upon the transfer of ownership, in both. However, in a contract to sell, that
condition is always the full payment of the purchase price. Yun ang laging condition in a contract
to sell, but in a contract of sale, the condition maybe, it can be the full payment of the purchase
price, or it can be some other condition, pwedeng iba. So, magkakaroon tayo ng problema in
distinguishing between the two if the condition is the full payment of the purchase price.
Now, if the condition is the full payment of the purchase price, when is it a contract to sell?
When is it a conditional sale? Ang titignan natin, as explained by the Court, the contract is
conditional sale if upon full payment of the purchase price, ownership is automatically vested
upon the buyer. If there is automatic transmission of ownership, that is a conditional sale. On
the other hand, if notwithstanding the fulfillment of the condition which is the full payment of the
purchase price, there is not automatic transfer of ownership because the seller is still required
by the contract to execute a deed of sale that is a mere contract to sell. Yun ang hahanapin nyo
kapag meron jang provision that upon the full payment of the purchase price, the seller is still
required to execute a deed of absolute sale. That is a mere contract to sell, meaning, in a
contract to sell, even if the purchase price is already paid in full, wala pa rin tayong contract of
sale. That is still not yet a contract of sale. It will only become a sale once the deed of absolute
sale is executed. Importantent konspeto because may mga legal consequences, such as one, in
cases of double sale. If one of the contracts is a contract to sell, even if the purchase price was
already paid in full but wala pang execution of the deed of sale, that is still a contract to sell not
a contract of sale So wala tayong case of double sale, if only one of the two contracts is a
contract of sale. Okay. So we will not be talking of preference kasi yung isa is not yet a sale. So
we will not be— hindi nantin kailangan mamili. Likewise, in applying the provisions of Article
1191, recisision of reciprocal obligation.
If the contract is a contract to sell and the purchase price is not paid in full, if it is a contract to
sell and the purchase price is not paid in full, hindi applicable ang provision 1191 for the
purpose of rescinding the obligation. Bakit? Because the obligation of the seller does not exist
as yet, because it is conditional. It is subject to the full payment of the purchase price and if that
condition is not fulfilled, it is simply an event that prevents the obligation from coming into
existence. So clearly, 1191 is not applicable because in 1191, it presupposes that the obligation
is already existing. Eh ang tanong, paano kung walang ano, in situations, in contracts na hindi
malinaw na sinabi that upon payment of the purchase price there will be automatic transmission
of ownership at awla ding sinabi sa contract that the seller is still required to execute a deed of
absolute sale? Marami tayong mga ganong kaso na yung pagkakadraft ng agreement that the
purchase price will be paid in several installments and there is a reservation of ownership pero
agreement, hindi maliwanag na upon full payment, automatic transmission of ownership or the
seller is still required to execute a deed of absolute sale. Ang tanong, paano dinesisyonan ng
SC yan? Kung mapapansin nyo, sa mga situasyong yan ang desisyon ng SC is that if there is a
reservation of ownership subject to the condition of the full payment of the purchase price at
hindi malinaw king may automatic transmission at hindi rin malinaw that the seller is still
obligated to executed a deed of sale, the Supreme court is treating the transaction as a mere
contract to sell and not a conditional sale.
Now, let us talk of, um, is sale a mode of transmitting ownership? No. In our Civil law system,
contract, perfection of a contract is not a mode of transmitting ownership. Contract only creates
a title. It is not in itself a mode of transmission. General rule, isa lang naman. In the Civil Code,
isa lang naman ang contract is alarm, which in itself is a mode of transmitting ownership and
that is donation. Other than donation, all other contracts are not modes of transmission. Instead,
they will only create a title which is preparatory to delivery. In matters of contracts, it is delivery
that serves as the mode of transmission of ownership and that is through in a contract of sale.
Importanteng konsepto rin that a contract of sale only creates an obligation to transfer
ownership, but in itself, it does not produce no such transmission of ownership. So ang ibig
sabihin, notwithstanding the perfection of the contract of sale, it is still possible for the seller to
remain as the owner if there is no delivery yet that was effected and it is by reason of that na
pwede tayo magkaroon ng cases of double sale, in those situations where the seller is still the
owner, notwithstanding the perfection of a first sale. Since he is still the owner, he still have the
right to transmit ownership, he can engage in a double sale. One of the requirements of double
sale, there must be same vendor, same seller. Ang ibis sabihin ng same seller, at the time of
the second sale, he must still be the owner. He must still have the right to transmit ownership.
Otherwise, if at the time of the second sale, the seller is no longer the owner because ownership
was already transferred to the first buyer, hindi tayo magkakaroon ng case of double sale
because that will not create a problem of preference. It will not create a problem. Bakit? as to
the second sale that was made by someone who is no longer the owner, kahit sya ang previous
owner, we will simply be applying as to the second sale that, that you cannot give what you do
not have kaya that is not a problem of double sale. Pwede tayo magkaroon ng problem ng
double sale if at the time of the second sale, the seller is still the owner because he has not
effected that delivery to the first buyer.
From the point of view of perfection, the contract of sale is a consensual contract. It is perfected
by mere delivery. In a contract of sale, delivery is not a requirement for perfection. It is
consensual. Instead, upon perfection, the delivery is only an obligation that will be created once
the contract is perfected. Kaya in a contract of sale, the delivery of the thing sold once the
contract is perfected, that can be compelled because that is an obligation. You cannot do that in
real contracts. In real contracts where delivery is not an obligation, but a requirement for
perfection, you cannot compel the delivery. For example, an example of a real contract is a
contract of mutuum, simple loan. A contract of simple loan can only be perfected upon the
delivery of the money that was borrowed, for example. But ang sabi ng batas, a promise to
deliver something by way of mutuum, simple loan, if that premise was accepted, it is, in itself, a
contract although that is not yet the contract of mutuum. That is a preparatory contract, that is a
consensual contract, which is different from a contract of mutuum. Example, sabi mo sa
kaibigan mo, Pare, pautang nga ng 10,000. Tapos sumagot yung pare mo, Sige, Pare, bukas
pautangin kita. Dalhin ko yung pera. The parties already have a contract and that contract is
consensual, but that contract is not the contract of mutuum because mutuum is a real contract.
But ang sabi ng batas that in itself is a contract and that contract is consensual and if that
contract is breached, ang tanong, what is the remedy? You cannot compel the delivery of the
money because that is a real contract mutuum where the delivery is a requirement for
perfection. So, you cannot compel the creation of a contract because in mutuum, the delivery of
the money is not an obligation but it is that which will create the contract. Balik tayo sa sale, On
the other hand, in sale, it is merely consensual and upon perfection, the delivery is an obligation
that will be created by the contract once it is perfected. Kaya mag kaiba. Kaya in sale, it is an
obligation to give, the obligation is to deliver, you can compel the delivery because that is an
obligation.
Since the contract of sale is merely consensual, tatlo lang ang essential requisites niyan.
Consent, object and the cause. What is the object of a contract of sale? The object of the
contract of sale is the same. Whether for the buyer or for the seller, the object of the contract is
the thing sold. Whether you are the buyer, you are the seller, ang object of the contract is the
same for both. It is the thing sold. Let us talk of the cause or consideration. With respect to the
consideration, magkaiba. On the part of the seller, the cost of the contract is the delivery of the
purchase price to him. But as to the buyer, the cost of the contract is the delivery of the thing
sold to him. So, as to the buyer, pareho yung object of the contract at yung cause. Now, let us
talk of the price. In a contract of sale, the price must always be certain in money or it's
equivalent and in a contract of sale, in order for the price to be considered existing, agreed
upon, it is necessary that the parties must have agreed not only on the amount of the price, but
also on the manner of the payment of the price. So, dalawa ang components ng price that must
be agreed upon. One is the amount of the price and the other one is the manner of the payment
of the price. Both must be agreed upon. If the parties agreed upon only on the amount, but they
cannot agree on the manner of the payment of the price, the contract of sale is not yet perfected
because the parties have failed to agree on the price. So, let us remember that the manner of
the payment of the price goes into the price. It is one of the components of the price aside from
the amount.
Now, let us talk of the object, subject matter. Of course, you know that the object must be licit.
Pag usapan natin. Is it a requirement that the object, the thing sold must already be existing?
No, In our law on sale, it is not a requirement that the thing sold must already be in existence.
Ano ang requirement? Ang requirement para maging valid ang subject matter, ang requirement
ay it must have a potential or possibility of existence. So, so long as the subject matter has a
potential or possibility of coming into existence, it can be a valid subject matter of a contract of
sale. Ang hindi pwede ay yung imposibng mag exist. So, in a contract of sale, that can be sale
of future goods, goods which, which are not yet manufactured but it's still to be manufactured. In
a contract of sale, we can have a sale of natural fruits or industrial fruits that are not yet existing
but there is a potential of those fruits come into existence. It is in relation to that principle na
pumapasok yung roman concept No. Concept of MTO re and just be
and noble concept ng emptio rae speretae and emptio spae. Mga lumang konsepto na pero
balikan lang natin. Ano ba yung konsepto ng emptio rae speretae sa roman law? It is simply a
sale of future property. That is a sale of a future property, but that future property has a potential
of coming into existence kaya that sale is valid, but that sale is conditional. It is subject to the
condition that the thing must come into existence in the future. If it will not exist in the future,
then the contract becomes ineffective. That is emptio rae speretae. The point is, that is a sale of
future property. On the other hand, ang emptio spae, it's a sale of present property. What you
are selling is a mere hope and a sale of hope is generally recognized as valid. What is not
allowed is a sale of vain hope, yung wala ng pag asa. Pero yung may pag asa pa, pwede ibenta
yan. Ordinarily, mababa ang price ng sale of hope. Balika ko dun sa sale of future property. So,
we can have a sale of future goods where the thing sold is committed to be delivered at some
future time, but para maging valid yung transaction, there must be really an intention to deliver
the future goods at some future time. There must be that intention to make the delivery,
intention to make the delivery at some future time and instead what is to be delivered is simply,
simply the difference between the current value of that future goods compared with it's value in
the future o ang idedeliver mo lang is the excess or the loss comparing the two values. That is
actually gambling. he did deliver Bula is the access or the loss. That is not a sale of future
property, but gambling, which is not allowed. Punta tayo sa importanteng tanong. Does our law
require the seller to be the owner at the time of the perfection of the contract? Both in our laws,
kung titignan nyo ang Civil Code, binanggit lang ang ownership at the time of delivery, that at
the time of the delivery, the seller must have the right not to transmit ownership. So, it was
required only at the time of delivery. Hind nirequire ng batas that the seller must have the right
to transmit ownership at the time of perfection. Bakit? Kasi sale is not a mode of transmission of
ownership that upon perfection, magkakaroon kaaga ng transmission of ownership. Hindi
ganon. Sale will only create an obligation not to transmit ownership kaya di nirerequire ng batas
na that right must already be existing at the point of perfection. Kaya sabi rin ng jurisprudence
natin, ownership is not also a requirement for the perfection of the contract of sale. In other
words, stated otherwise, non-ownership of the things sold does not prevent that contract from
being perfected. Instead, in our laws, in our law and jurisprudence, ownership is not a
requirement for perfection, but once the contract of sale is perfected, it will only create an
obligation to transfer ownership. So, clearly, the transmission of ownership is only an obligation
that will be created once the contact of sale is perfected. That is an obligation of the seller in a
contract of sale, not a requirement for perfection. It is not a requirement for perfection that the
seller be the owner at the point of perfection. Susunod na tanong, will that affect the validity of
the contract? Is the fact that the seller is not the owner of the thing sold, will that make the
contract void? Ang mahirap lang, I'm sure you are aware that there were decisions of the
Supreme court where the contract is declared void because the seller was not the owner. Yung
mga ganong kaso, probably, you may have encountered those cases. The case of Sagura vs.
Segura, for example. Okay. So, it is as if the Supreme court is telling us that a sale that was
made by a non-owner is a void contact of sale, but kung susundin natin yung sinabing yun ng
SC, magkakaroon ng inconsistencies in our principles on sales. Ownership is not a requirement
for perfection. That is clear both in our law and in our jurisprudence. So, if ownership is not a
requirement for perfection, the contract of sale can be perfected even if the seller is not the
owner. Ang susunod na tanong, if our law and jurisprudence is allowing perfection even if the
seller is not the owner, is that sale void at the point of perfection? No. it is allowed. If the law and
jurisprudence is allowing it, edi sana kung void yan, sinabing hindi na pwede, the sale is void,
but hindi yun ang jurisprudence. Ang jurisprudence ay ang ownership is not a requirement for
perfection. Ang hindi naisip sa Segura case ay, at what point do we determine the validity of the
contract? Ayon ang tanong. Can we determine the budget of the contract at that time of
delivery, which is already the consummation stage? No, the perfection, the validity of the
contract is always determined at the point of perfection It is at the point of perfection that we say
that the contract is valid or that the contract is void. Bakit? Kasi ang konsepto natin ng void
contract is invalid from the very beginning, void ab initio, that is void at the beginning. Nakarinig
na ba kayo ng void contract at the middle? Void during the consummation stage. Walang
ganon. A contract is void from inception, from perfection. So yun nang konsepto natin ng void
contract. So, if ownership is not a requirement for perfection, then the contract is valid at the
point of perfection, yun ang magiging consequences non. Can it become void during the
consummation stage because at the time of the supposed delivery, the seller is still not the
owner of the thing that he sold? Will that affect the validity of the contract? No. The validity of
the contract is determined at the point of perfection. If the seller is still not the owner at the time
of, at the time of the performance of his obligation to deliver and to transmit ownership, that will
not make the contract invalid, instead, that is simply a failure on the part of the seller to perform
his obligation to deliver and to transmit ownership. So, that is simply a breach of contract on the
part of that seller. So, let me now examine those cases where the Supreme court declared the
contract void because the seller was not the owner. Kung papansinin nyo, ang mga sitwasyon
sa mga kasong yun was that the selller, even if he was not the owner, he was able to make the
delivery. Yung yung mga sitwasyon do. Segura. None owner, the seller was not the owner, but
he was able to make the delivery. Ang tanong, did the buyer become the owner of the thing that
was delivered to him? Ang sinabi ng SC, no, because the sale is void because the seller was
not the owner. So, therefore the buyer did not become the owner. Pwede naming di ganon ang
desisyon ng SC. Pwedeng ang desisyon ay ganito. The sale is valid because the sale, because
in a contract of sale, ownership is not a requirement for perfection and it, it is at the point of
perfection where the contract is, where the validity of the contract is to be determined. If that is
allowed at the point of perpetual, then it is a valid contract. And instead, yun ang tama because
in a contract of sale that delivery and the transmission of ownership are only obligations that will
be created once the contract is perfected. And if those obligations will not be fulfilled by the
seller, the contract does not become void. That is simply a breach of contract.
What about those situations where the seller, even if he was not the owner, he was able to
make the delivery? Did the buyer become the owner? No. in a contract of sale, hindi nating
pwede pag hiwalayin ang delivery at yun transmission ownership. In a contract of sale,
magkapatid yan. They are intertwined. The delivery is for the purpose of transferring ownership.
Magkaintertwine yan. So even if you are able to make the delivery, but you are not the owner,
you were not able to make the delivery in reality, legally speaking because in a contract of sale,
the delivery is not simply for the purpose of transferring possession. That delivery is precisely
for the purpose of effecting transmission of ownership. Yun yung pinag uusapan nating delivery
in a contract of sale. So even if the seller was able to make the delivery, but if that is not for the
purpose of transferring ownership because the seller is not the owner, he cannot transmit
ownership, sasabihin lang natin dun sa buyer, the buyer does not become the owner because
you cannot give what you do not have. The Supreme Court could have simply decided those
cases by saying that the buyer, even if there was delivery of the thing sold to the buyer, the
buyer did not become the owner because the one who made the delivery was not the owner.
You cannot give what you do not have. A basic principle in our Civil Law. Pabaorita nga yan ng
mga ngo-ngo. You cannot give what you do not have. So, in Segura v Segura, as to the buyer,
the buyer did not become the owner applying simply the principle of, uh, you cannot give what
you do not have. As to the seller, the seller was in breach of his obligations under the contract of
sale and one of the remedies of the buyer is to rescind the contract plus the damages.
Now, special case decided by the then Associate Justice who later on became Chief Justice,
Artemio Panganiban, the case of Nool v. CA. In the case of Nool, the thing sold was a
foreclosed property, real estate property, that was the subject matter of a real estate mortgage
contract, but the mortgage was foreclosed and in that case, the mortgagor was not able to
redeem during the period of redemption, Alam naman natin ang epekto non. If the mortgagor
failed to redeem within the period of redemption, ownership is automated automatically
transferred to the purchaser at the auction sale. Meaning, the mortgagor is no longer the owner.
Ang situation sa Nool, after the expiration of the period of redemption, and then the mortgagor
failed to redeem the foreclosed property, nevertheless, he sold that property to a buyer. And in
that sale, there is a provision for a right of repurchase. Yun yung sale nila. And of course, since
the property was already foreclosed at tapos na nag redemption period nya, he was not able to
deliver the property, the thing sold and he was not able to deliver the documents nung
hinahanapan na sya. So, nag imbistiga yung buyer that investigating buyer kung bakit hindi
maideliver because it was already foreclosed by the bank and the bank is now the owner. So
the buyer dealt with the bank, the buyer purchased the property from the bank. Okay. So the
buyer became the owner of that property. After the buyer became the owner of that property,
the first seller, he now wanted to exercise his right of repurchase. Yan ang problema sa kaso ng
Nool. Is the first seller entitled to the exercise of right of repurchase? Sabi ng SC, he is not
entitled to a right of repurchase because the sale is void. Una, nag simula ang SC sa pagsasabi
ng although ownership is not a requirement for perfection, however, in a contract of sale,
ownership is a requirement at the time of delivery. If at the time of the delivery, the seller does
not become the owner, the contract will become void. The contract will become void during the
consummation stage if at the time of the delivery he is still not the owner, the contract will
become void because it will be analogous, it will be analogous to a void contract under Article
1409 paragraph five. Since the contract is void, the seller is not entitled to a right to a right of
repurchase. That was the decision of the court. Nung sinabi nyang ownership is not a
requirement for perfection, set by jurisprudence na yan. Hindi controversial. So, dapat kasunod
non, the sale is valid, but meron syang, however, if at the time of delivery, hindi ka pa din owner,
magiging void yung kontrata. Doon naging para dispalinghago yung desisyon because the
contract becomes void, not at the point of perfection, but during the consummation stage.
Pangalawa, yung reason applying by analogy 1409 paragraph five. Silipin nyo yung paragraph
5, that is a void contract because it contemplates of rendition of impossible service. So, in
paragraph 5 na yan, that is applicable to obligation to do which is not applicable in the obligation
of the seller in a contract of sale because the obligation of the seller is to give, that is a real
obligation. Pangatlo, there is no need to declare the contract void in the case of Nool in order to
prevent the seller from exercising a right of repurchase. Logic lang yan. That is an exercise of a
right of repurchase which in the first place presupposes that the property was purchased from
the seller. Repurchase yan e. In the case of Nool. was the property purchase from the seller
who wanted to exercise a right of repurchase? No. The buyer was able to purchase the property
from the bank, not from the seller who wants to exercise the right of repurchase and since the
property was not purchased from him, he's not entitled not to a right of repurchase kasi ang right
na yan, it presupposes, that right will only exist if that property was purchased from you. Dapat
ganon na lang dinesisyunan. Napaka simple. There is no need to declare the contract void and
secondly, in that contract, the buyer, the buyer is entitled to rescind the contract of sale because
the seller failed to deliver that thing sold and to transparent ownership and upon rescission of
the contract, the contract is abrogated from the beginning. It cannot produce any effect. It
cannot be the basis of a right of repurchase. Dapat ganon. Kaya hindi n asana tayo napunta sa
declaration of nullity dun sa consummation stage.So, kung itatama natin yan, magiging
consistent tayo sa principles since ownership is not a requirement for perfection, the contract is
perfected even if the seller is not the owner and since the transaction is allowed, that is a valid
sale even if the seller is not the owner, but the contract will create an obligation on the part of
the seller, number one, to deliver the property and to transmit ownership. If he will not be able to
perform those obligations, the contract will not become void because those are merely
obligations. The obligation does not become impossible kasi those are obligations to give. Hindi
applicable yung impossibility of the prestation. Instead, if those obligations will not be
performed, magkakaroon lang tayo ng breach of the seller’s obligation, but the contract is still
valid. As to the buyer, if the buyer received, if the buyer, if there was delivery to the buyer, but
the one who made the delivery is not the owner, we will simply be applying the principle that the
buyer does not become the owner because you cannot give what you do not have. May
exception ba yang you cannot give what you do not have? May exception ba yan? Yes. Ano
ang exception? Even if the seller is not the owner, but if the buyer is entitled to invoke the
principle of buyer in good faith, but the principle of buyer in good faith presupposes that the
property is already registered in the name of the seller even if the seller is not the owner and
that is the buyer can simply rely on the title of the seller, such that even if later on the seller will
turn out to be not the owner, the buyer can invoke good faith. That is our only exception to the
principle of Nemo dat quod non habet.
Let us go to the price. As to the price, it must be certain or it can be made certain in comparison
to some other circumstance or event. Ganon din naman, babalikan ko nga pala yung object.
The object can either be determinate. Pwedeng determinate, specific na yung binenta or kahit
hindi specific, kasi we have a sale of generic thing. Kung hindi specific, kung hindi determinate,
it is determinable. Yun ang requirement as to the object. Pwedeng determinate, specific na sya
or pwedeng hindi specific so long as it is determinable. So, we can have a valid sale of generic
thing, because that is determinable. Example, you will be selling 5 cows. That is a valid sale
because the object, even if not determinate, is determinable. Ang hindi pwede is if the subject
matter is not determinable. Example, I will be selling to you an animal. Anong binenta ko? An
animan. Anong klaseng animal? Pwedeng ako, pwedeng ikaw, anong klase ba? Ayon, hindi
determinable. Hindi sinabi kung ano ba yan. Cow bay an, carabao, horse? Hindi pwedeng
ganon. Sale of a book, not determinable. Ang requirement lang, either determinate or
determinable.
Let us go to price. The price must be certain in money kaya in a contract of sale, the obligation
of the buyer is always an obligation to pay in money. That is the obligation of the buyer, to pay
in money. That is an obligation to pay a sum of money kaya applicable sa buyer ang provision
ng 1249 that in order for the tender of the purchase price to be a valid tender of payment, it
must be in legal tender. Bakit? because that is an obligation to pay a sum of money. The price
must be true. It must be. It must not be fictitious. Titignan lang natin, ano, para malaman lang
natin kung ang price ay totoo o hindi, ang tanong lang naman jan, did the parties intend to be
bound by the contract? If they intend to be bound by the contractor, that is a true sale and the
price that they agreed upon is a true price even if that price will not be paid, the failure to pay
the price will not affect the validity of the contract. Kung hindi sya absolutely simulated because
the parties intended to be bound by the contract, yung mapagkakasunduan nilang price is true,
even if that will not be paid, that is simply failure to pay the consideration, which does not affect
the validity of a contract and in fact, one of the remedies of the seller is simply to collect the
price. On the other hand, if the parties do not have the intention of being bound by the contract,
the contract is absolutely simulated or fictitious and the price that will be stated in the contract,
kahit pa sabihin nila na that price was paid, but in reality, it was not really paid because the
contract is fictitious, that is a void contract. Yun ang sinasabi nating the price is a falsity, if the
parties do not intend to be bound by the contract, that is absence or lack of consideration, which
will make the contract void because it is absolutely simulated. Ordinarily, yung gross
inadequacy of the price does not make the contract void. It does not make the contract void.
Linawin na natin. Kahit merong gross inadequacy, we cannot say that the contract is void. Ang
possibility that can be an indication of existence up vitiation of consent. Yun ang hahanapin
natin, Pwede ang contract maging voidable, but not void. So, yung gross inadequacy of the
price, definitely, the contract is not void, but it is possible that the contract is voidable because
yung gross inadequacy of the price can be an indication of vitiation of consent. Baka naman
mababa kasi may nakatutok na baril habang pinipirmahan. Yung mga ganon, ano? So yun vices
of consent must be proven. If not proven, the contract is valid.
Let us discuss the concept of double sale, 1544.
In order for a case of double sale to exist, remember the four requisites. First requisite, there
must be two or more valid sales. Both sales must be valid. If one is void and the other one, only
one is valid, there is no double sale. There is no problem of preference. Example, in a sale of a
parcel of land in the Philippines. If the first sale is made in favor of a foreigner and a second sale
is made in favor of a Filipino citizen, wala tayong double sale because only one of the two
transactions is valid. In relation to that requirement, it is also necessary that both contracts must
be contracts of sale. If one of the two contracts is a contract to sell, there is no double sale
because a contract to sell is not yet a contract of sale. It is not yet a sale. So, walang question of
preference.
Second requirement, same subject matter. The thing sold must be the same.
Third requirement. There must be two or more different buyers who do not share the same
interest. Two or more buyers who do not share the same interests.
And lastly, same vendor. The seller must be the same person otherwise, if the seller are two
different persons, wala tayong double sale because one of them does not have the right to
transmit ownership. So, there is no problem of preference. As to the sale that was made by a
non-owner, we will simply be applying the principle that you cannot give what you do not have
and kapag sinabi nating same seller, it presupposes that at the time of the second sale, the
seller is still the owner because if the seller is no longer the owner at the time of the second
sale, as to the second sale that he made when he was no longer the owner, we will simply be
applying the principle of you cannot give what you do not have. So, walang question of
preference.
If all of those requisites will be present, then we will be applying the rules in Article 1544,
depending on the subject matter, whether the thins sold is a real property or a personal
property. If it is a personal property, simple lang naman. The first to take possession in good
faith, if it is a real property, the first to register the sale in good faith. In the absence of
registration, the first to take possession again in good faith and last, in the absence of
registration and possession, the one who can present the oldest title. In applying 1544, there is
a preference in favor of the first buyer. However, the first buyer can be displaced by the second
buyer if the second buyer will be able to comply with the requirements of Article 1544. So, yung
requirement of good faith in 1544 is addressed to the second buyer because the first buyer is
always in good faith there being no previous sale prior to him. It is the second buyer who is
required by law to act in good faith in order to displace the first buyer. So papaano yan?
Sample. Since the second buyer is required to act in good faith if prior to registering the second
sale, the second buyer will learn of the existence of the first sale that will prevent him from
registering the second sale in good faith. So, he will not be able to displace the purchase buyer.
Kung babaliktarin naman natin yan, if it is the first buyer who will be registering the prior sale but
prior to registration of the first sale, he will acquire knowledge of the second sale, that will not
prevent him from registering the sale in good faith, because he's always in good faith. Article
1544 presupposes that we are dealing with registered property. So applicable lang yan, in
relation to real property, applicable registration in good faith. if the property is registered under
the Torrens system. If the property is not registered under the Torrens system, the registration is
always without prejudice to a prior right that was acquired by someone else kaya hindi mag
aapply ang provision ng 1544.
Let us talk of sale of personal property payable to installments, Article 1484.
Notwithstanding the repeal of the concept of chattel mortgage and pledge under the Personal
Property Security Act, we can still apply, by analogy, the provision of 1484 in relation to the
property, in relation to the Personal Property Security Act. So, meaning, so long as there is no a
personal property securing the sale, securing the sale, purchase by way of installment sales, the
provision of 1484, paragraph 3 will still be applicable. But in order for paragraph 3 not to apply,
kasi what is important in paragraph 3 of 2484, there is a prohibition against the recovery of the
deficiency after foreclosure. The law prevents the recovery of the unpaid balance of the
purchase price but para mag apply yang prohibition na yan, according to the Supreme Court, it
is necessary that the relationship between the parties must be that of no seller and buyer,
vendor and vendee. The transaction must be a contract of sale secured by a personal property.
Dapat ganon. If the transaction is not one of sale, example, bumili ka ng sasakyan from Honda.
To pay off Honda, you borrowed form a bank and out of the proceeds of the loan, you paid off.
You paid Honda the full purchase price. So tapos na ang Honda. Wala na sya sa picture. Your
contract is with a bank and the contract that you executed with the bank is a contract of loan
secured by a personal property over the vehicle that you purchase. Sabi ng SC, 1484,
paragraph 3 does not apply because the relationship between the parties is not vendor and
vendee. Para mag apply ang 1484, the contract must be sale with an accessory contract of
personal property as security. Hindi mag aapply yan if the transaction, if the relationship is
creditor and debtor if the principal contract is that of loan, secured only by personal property as
collateral. That is the case of Equitable Savings Bank.
In 1484, there are three available remedies to the unpaid seller and those remedies are
alternative. Yung unang remedy is to exact fulfillmen and that remedy will be available
immediately to the seller even if there is only a single default in the payment of the installments.
Exacting of payment is simply a recovery of the purchase price. So, that will be in the form of an
action for collection of the price. So, the mere filing of the civil action for the collection will
already bar that two other remedies. Pangalawang remedy, recission. But recission will only be
available to the seller in case of at least two defaults, two defaults on the payment of the
installments. In recission, the parties will go back to their status prior to the contract. So,
rescission will create an obligation to mutually return what they received from the contract. So,
ordinarily, in recission, the seller is not allowed to retain the payments that were already made.
In order for the seller to be allowed to retain the payments that were already made, there must
be a provision in the contract providing for forfeiture of the payments that were already made.
Kung walang ganon, we will be applying the consequences of recission, mutual restitution yan.
Pangatlo, foreclosure of the personal property offered as security. Under the third remedy, there
is a prohibition against the recovery of the unpaid balance of the purchase price. But para mag
apply ang prohibition nay an, there must be foreclosure sale. Dapat natuloy yung foreclosure
sale of the personal property.
What is included in the term unpaid balance of the purchase price? Everything, kasama ang
unpaid principle, kasama ang interest, kasama ang surcharges and penalties, kasama
attorney's fees and expenses of litigation at ang sabi pa ng SC, if aside from the personal
property security, meron pang real estate mortgage. Pag una mong finoreclose ang personal
property then the prohibition in 1484, paragraph 3 will attach and that will prevent you from
foreclosing the real estate mortgage, that will be included in the term unpaid balance of the
purchase price.
Let us go to sale of real property by way of installment sales. Merong counterpart ang 1484, the
Maceda Law.
the Maceda law is applicable in any sale of real property payable to installments, but kapag
sinabi nating payable through installments, there must be several installments. Hndi natin
masasabing installment sales yan kung merong down payment and the bulk will be paid later
on. That is not installment sales. Ang installment sales there will have to be several installments.
The Maceda law does not apply. Ano lang ang hindi kasama sa Maceda Law? One, sale of
industrial lots. Two, sale of commercial buildings and three, sell to tenants. Other than those
three, the Maceda Law will apply to sale of real property on installment sales
What is important under the Maceda law are the mandatory provisions of the Maceda Law. The
parties are not allowed to agree to the contrary. Mandatory ang provisions. Under the Maceda
Law, there are certain rights granted to the buyer in case of default. Ano yung mga rights nay
un? Depending on the year, the number of years that they had been paying the installments.
Ang titignan natin ang cut off, two years. If the buyer was able to pay for less than two years of
installment payments, ang right nya lang is to avail of a grace period. Yun lang. Grace period
lang, meaning during the grace period, the seller cannot as yet cancel the contract. The seller
can only cancel the contract after the grace period. What is the grace period? If the buyer was
able to pay for less than two years, the grace period is 60 days, minimum of 60 days because
the seller can grant additional number of days. During the grace period, the buyer is allowed to
update the payments without the obligation to pay interest and penalties. That is the beauty of
the Maceda law. But after the expiration of the grace period, the seller can now cancel the
contract but the cancellation must be by way of a notarial act. That is a notice of cancellation or
demand for recission by way of notarial act. When will the cancellation become effective? 30
days from receipt of notice of cancellation. On the other hand, if the buyer was able to pay for at
least two years, dalawa ang right nya. One is to avail of a grace period and after that, if he was
not able to update, he is entitled also to a payment of the corresponding cash surrender value.
How long is the grace period this time? The grace period is one month, one month for every
year of payment. One month for every year payment. So, ang minimum, kasi he was able to pay
at least two months. So minimum 60 days din. A month consists of 30 days x2, 60 days din.
Minimum. But kung naka 3 years sya, another 30 days and so on and so forth. It is only after the
expiration of the grace period that the seller may be allowed to cancel the contract. But there
are two requirements, twin requirements in order for the cancellation to be valid. Ano yung twin
requirements? Number one, the cancellation must be by way of a notarial act. Pangalawa, there
must be a payment of the corresponding cash surrender value. The cash surrender value is
simply a return of a portion of those total payments made. Icoconsider natin total payments
made, hindi lang yung total installment payments. Total payments. How much is the cash
surrender value? At least 50% of the total payments. So, Kasama ang down payment. Kasama
yung mga reservation fees, and last the installment payment, at least 50% of that. However, if
the buyer was able to pay for more than five years. After five years, he will acquire an additional
5% for every year after five years. So, on the sixth year, additional 5%. So magiging 55. In the
seventh year, additional five. So, 10 plus 50, 60 na yun, and so on and so forth but not to
exceed 90% of the total payments. Mandatory requirements yan in the absence of payment of
the cash surrender value, the cancellation is not valid. So, the contract is still subsisting.
Briefly let us go to the warranties. There are three warranties, implied warranties, in a contract
of sale, ibig sabihin kahit di pag usapan. Those warranties are the natural elements of the
contract of sale. They will exist even if the parties will not expressly provide for them, but the
parties can agree to suppress them. That is the concept of a natural element. And the implied
warranties are the natural elements of a contract of sale.
Ano yung implied warranties? Una, warranty on ownership. Pangalawa, warranty against
eviction. Pangatlo, warranty against hidden defects. In warranty against eviction, when is the
seller liable for damages for breach of warranty against eviction? There are four requisites that
must be complied para maging liable si seller. Una, of course, the buyer must be deprived of
possession. There must be eviction. The buyer must be deprived of possession either entirely or
partly of the thing sold. Yan ang tinatawag nating eviction. Pangalawang requirement, the
eviction must be by way of a final judgment. Pangatlong requirement, the basis of the eviction is
a right that was existing prior to the sale. Mas nauna yung basis nung eviction. At panghuli, the
seller must be included in the action for eviction, of course, at the instance of the buyer. Dapat
the seller must be summoned, kasama sya sa action. Punta naman tayo sa hidden defects. May
alternative remedies si seller in case of breach of warranty of hidden defects. Ang remedy nya
alternative. Either, one, to rescind the contract, but hindi natin tinatawag yun na action for
recission. There is a special name for an action for recission by reason of hidden defects. Ang
tawag natin, redhibitory action or action redhibitoria but that is simply an action for rescission
that will require mutual restitution. The buyer will be returning the thing sold and the seller will be
returning the purchase price plus legal interest on the purchase price. That is an action
redhibitioria, action for rescission lang yan but may special name. The other alternative remedy
is not to rescind the contract but to continue with the contract but the buyer will be asking for a
proportionate reduction of the price that is equivalent to the defect. Ang tawag natin sa action na
yun ay aesta motoria o quanti minoris. Dalawang situasyon yan. Kung bayad na ang purchase
price in full, the action is in the form of recovery of a portion of the price equivalent to the defect.
Kapag hindi pa bayad yung purchase price, the action is simply for reduction of the price.
Ano yung tinatawag natin recoupment in sale. When we talk of recoupment in sale, that is
simply compensation, off-setting. Ano ang i-ooff-set natin? Yung conflicting claims of the seller,
the seller has a claim for the payment of the price tapos si Buyer merom syang counterclaim for
breach of warranty. So in an action for collection of the price, pwedeng mag interpose ng
counterclaim si Buyer for the liability of the seller for damages by reason of breach of warranty.
And if the court will find both claims to be meritorious, the court can order the off-setting of the
claim vis-a-vis the counterclaim and that is what we refer to as recoupment in a contract of sale.
Requirement in order for recoupment in a contract of sale to apply? Same transaction. Yun lang
ang tatandaan natin. Same transaction, meaning yung claim ni seller for the payment of the
purchase price at yung claim ni buyer for breach of warranty, they must arise from the same
transaction. Otherwise, kung maraming sale that took place between them at yung claim for
damages for breach of warranty, it's not, not the subject matter of the action for collection of the
price. Magkaiba. Recoupment will not be applicable. Dapat same transaction.
Let us talk about conventional redemption, also known as pacto de retro sale. Sale with a right
of repurchase. Sa Civil Code ang tawag jan ay conventional redemption. So, pag naencounter
nyo yung term na conventional redemption, that is simply the right of repurchase arising in a
sale with a right of repurchase. Yung right of repurchase in a pacto de retro sale is, that is what
we refer to as conventional redemption. Kailan magiging pacto de retro sale yan? Dapat para
maging pacto de retro sale, the grant of the right of repurchase must be simultaneous with the
sale. Simultaneous with the sale. It need not be in the same instrument as that of sale. It can be
embodied in a separate instrument, but it must be granted simultaneously. Same, same
transaction, but not necessarily in the same instrument. Pwed ebang yung sale is in writing but
you grant of right of repurchase was granted verbally? Yes, pwede, so long as simultaneously
granted. Eh ang tanong, hindi ba covered ng statute of frauds yung grant of right of repurchase?
No. What is covered by the statute of frauds is the sale. Kaya nga sabi ng Supreme Court, if the
sale is already in writing, the requirement of the statute of frauds is already complied and the
right of repurchase may be granted verbally so long as it was made simultaneously. That can be
proven, the grant, the verbal grant of right of repurchase simultaneous with the sale can be
proven by parole testimony. So hindi pwedeng tapos na yung sale, it has long been entered into
and after several days, after two days or after a day, the seller will be granted a right of
repurchase. That is not a pacto de retro sale because the grant of the right of repurchase was
not simultaneous with the sale. Instead, the transaction was straight sale but the seller is merely
granted an option to buy back. Hindi pacto de retro.
Now, in a pacto de retro sale, what is the period of repurchase? The parties can agree upon the
period, but that period agreed upon cannot extend, cannot be more than 10 years. Maximum
period that may be agreed upon, 10 years. In the absence of agreement as to the period, they
have agreed on a right of repurchase, but they failed to agree on the period. The period is four
years. Kung walang agreement, four years. However, if later on, the seller will file an action in
court questioning the transaction, the nature of the transaction not as a true pacto de retro sale,
but the seller will be claiming that the transaction is actually equitable mortgage but the ruling of
the court is that the transaction is indeed pacto de retro, once the judgment of the court
becomes final, the seller will still have a period of 30 days from the finality of the judgment,
within which to exercise a right of redemption, a right of repurchase. Kasi kapag nangyare yan,
maaring yung period agreed upon o yung four-year period in the absence of the agreement,
maaring mag expire na yun kaya binibigyan pa rin sya ng 30 day period from finality of the
judgement within which to exercise the right of repurchase. But that 30-day period will only be
applicable if the action was filed by the seller in good faith thinking that the transaction is indeed
an equitable mortgage in good faith. Hindi naman pwedeng in bad faith yan, alam naman nya
talaga na pacto de retro sale yung transaction, but in order to gain a longer period of
repurchase, mag fifile sya ng action tas idridribble yung action para makapag ipon sya ng
pambayad ng repurchase price, hindi applicable yang 30 day period na yan if the action was not
filed in good faith.
Let us talk of the importance of equitable mortgage. In transactions such as pacto de retro sale,
pwedeng gamitin yang pacto de retro sale as a scheme to circumvent the prohibition against
pactum commissorium. Ang totoong transaction is not a sale but a loan with a property, with
real property as collateral. Yun yung totoong transaction, but para maiwasan yung requirement
of foreclosure, palalabasin nil ana yung transaction is pacto de retro sale. Actually, yung period
of repurchase is the period for the payment of the obligation, such that if the obligation is not
paid within the period of repurchase, the sale will become absolute. The sale will be
implemented. So, naiwasan yung foreclosure. Eh aalam ng mambabatas yan. Na foresee na ng
gumagawa ng batas na pwedeng gamitin yan as scheme to circumvent the prohibition against
prohibitum commissorium. Kaya sabi ng batas, 1602, even if the transaction was made to
appear as a pacto de retro sale, but if any of the instances enumerated in 1602 will be
applicable, kahit isa lang don, it is sufficient if it is only one of those circumstances be present,
the transduction will be presumed to be equitable mortgage and the burden of proof will be
shifted upon the vendee to prove that it was really pacto de retro sale.
Daanan natin briefly ang 1602. Ano-ano ang mga circumstances na yun? Number one, if after
the transaction is pacto de retro, but the price is unusually inadequate. Kapag pacto de retro
sale yan and the sale is unusually inadequate, the law is presuming that transaction to be
merely equitable mortgage. Pangalawa, pacto de retro sale but after the sale, the seller remains
in possession. Presumption, mortgage lang. Kasi ang totoong sale, the buyer is interested in
recovering possession, in obtaining possession. Pangatlo, pacto de retro sale but after the sale,
it is still the seller who is paying the taxes on the property. Mukhang hindi totoong sale kasi in a
true sale, lumalabas kaagad si seller from obligiations. Pang apat, after the expiration of the
period of repurchase, the period is extended or another period is granted by the buyer.
Mukhang hindi totoong pacto de retro because if that is pacto dde retro sale, the buyer is
ordinarily interested in his ownership becoming absolute kaya pinepressume ng batas na
equitable mortgage. Pang lima, pacto de retro sale but the buyer is allowed not to retain a
portion of the price which is abnormal, not normal. In a true sale, si seller, kukunin kaagad yung
entire purchase price. He will not allow a situation where a portion of the price will be retained
by the buyer. And lastly, in any situation where it appears that the property is merely a security.
Anong consequence if the presumption of equitable mortgage will not be rebutted?
Consequence, the transfer of ownership. The transfer of ownership in favor of the buyer is void
because that is a violation of the prohibition against pactum commissorium.
So, the obligation still remains, the obligation still remains. So, therefore, the debtor can still pay,
meron pa ring opportunities si debtor to pay off the obligation. On the part of the creditor, the
creditor is required to foreclose the mortgage. He is not allowed no to automatically appropriate
the collateral because that is pactum commissorium.