ADMU Sales Reviewer

7/27/2019 ADMU Sales Reviewer

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CH. 1 CONTRACT OF SALE

CONTRACT OF SALE One of the contracting

parties obligates himself to transfer the ownership ofand to deliver a determinate thing, and the other to

pay therefore a price certain in money or its

equivalent. A contract of sale may be absolute orconditional.

Contract of Sale Contract to Sell

Absolute Conditional

Real obligation obligation to give.

Personal obligation obligation to do

Title passes to thebuyer upondelivery

Ownership is reserved inthe seller and will pass tobuyer only upon fullpayment of the price

Non-payment ofthe price is anegative resolutorycondition

Full payment is a positivesuspensive condition, thefailure of which is not abreach but prevents theobligation of the vendor toconvey title to arise.

remediesavailable:

remedies available:

1 Specificperformance

1. resolution

2 rescission 2. damages

3 damages

I. ELEMENTS OF A CONTRACT OF SALE

1. Consent2. Determinate subject matter

3. Price certain in money or its equivalent

II. STAGES IN LIFE OF CONTRACT OF SALE

1. Negotiation2. Perfection3. Consummation

III. OBLIGATIONS CREATED - 2 sets of real

obligations to give

IV. CHARACTERISTICS OF CONTRACT OFSALE:1. Nominate2. Principal3. Consensual4. Bilateral

5. Reciprocal6. Onerous7. Commutative8. Title and not a mode


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V. DISTINGUISHED FROM

OTHER CONTRACTS

Donation Sale

Gratuitous or onerous Onerous

Formal contract Consensual contract

Governed by law ondonation

Governed by law onsale

Barter SaleConsideration: giving of a Consideration: giving of

thing money as paymentGoverned by law on sales: species of the

genus salesIf consideration consists party in

money and partly by thing

look at manifest intention;If intention is not clear: If intenti o n is not clear:

value of thing is more value of thing is equalthan amount of money or less than amount of

barter money sale

Contract for piece of Salework

Goods are to be Contract for delivery ofmanufactured specially an article which thefor a customer and upon vendor in the ordinaryspecial order and not for course of business

the general market manufactures orprocures for general

market (wheth er on handor not)

Essence is service Essence is objectJurisprudence:1. Timing testunder art 1467:

whether the thingtransferred would havenever existed but for the

order2. Habituality test

if manufacturerengages in activity with

need to employextraordinary skills andequipment (Celestino v

CIR)3. Nature of the object

testeach products nature

of execution differs fromthe others; products are


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Agency to Sell SaleAgent not obliged to pay Buyer pays for price offor price, merely obliged objectto deliver price received

from buyer.Principal remains owner Buyer becomes owner ofeven if object delivere d thing; in agency

to agentAgent assumes no Seller warrants

risk/liability as long aswithin the authority given

May be revoked Not unilaterally revocableunilaterally becausefiduciary and even ifrevoked w/o ground

Agent not allow ed to Seller receives profitprofit

Personal Contract; Real ContractRescission is not

available

Dation in Payment Sale

Pre-existing credit No pre-existing creditObligations are Obligations are created

extinguishedDebtors consideration: Consideration of seller:extinguishment of the price

debt Consideration of buyer:Creditors consideration: acquisition of the objectacquisition of the object

offered in lieu of theoriginal credit

Less freedom in Greater freedom indetermining the price determining the price

Payment is received by Buyer still has to pay the

the debtor before the pricecontrac t is perfected

Lease SaleUse of thing is for a Obligation to absolutely

specified period only with transfer ownership ofan obligation to return thingConsider ation is rent

needConsider ation is price

Lessor need not be Seller needs to be ownerowner of thing to transfer

ownership

NOTE: Lease with option to buy: really a contract

of sale but designated as lease in name only; it is asale by installments

CH. 2 - PARTIES TO A CONTRACT OF SALE

NOTE: GENERAL RULE - All persons who are

authorized in this Code to obligate themselves may

enter into a contract of sale

I. MINORS, INSANE AND DEMENTED

PERSONS, AND DEAF-MUTES

1. Contracts are voidable, subject toannulment or ratification

2. Also includes:

- State of drunkenness- Hypnotic spell- Where necessaries are those

sold and delivered to a minor orother person without capacity to

act, he must pay a reasonableprice therefore

II. SPOUSES - A spouse may, without the consent

of the other spouse, enter into sales transactions

in the regular pursuit of their profession,

vocation, or trade

Art. 1490. The husband and the wifecannotsell prop erty to each other, except:

(1) When a separation of pro perty

was agreed u pon in the m arr iage

settlements; or

(2) When there has been a jud ici al

separation or prop erty under

A rt icle 191.

NOTE: Prohibition likewise applies to common-law

spouses

III. OTHERS - TRUST RELATIONSHIPS

1. Art. 1491 Two groups of parties prohibitedfrom acquiring by purchase certain

properties: a. Guardian/Agent/Executors and

Administratorsi. Direct or indirectii. May be ratified since only private

wrong is involvedb. Public Officers and employees/Officers

of the Courti. Cannot be ratified since public wrong

is involved

ii. Requisites for the prohibition to

apply to attorneys:1. existence of attorney

client relationship;2. property is the subject matter

in litigation;


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3. while in litigation (from filingof complaint to final

judgment)NOTE: Exception to the prohibition against attorneys:contingent fee arrangement where the amount of

legal fees is based on a value of property involved in

litigation

Art. 1492. The proh ibi t ions i n the two preceding

articles are app li cable to sales i n legal

redemptio n, com prom ises and renun ciat ions.

III. Legal Status of Contract

1. Void (case law) guardian/executor/public officers / officers of thecourt

2. Voidable (civil code) agent; VALID if

with consent

CH. 3 - SUBJECT MATTER OF SALE

1. REQUISITES:

1. Thingsa. Possible - existing, future, and

contingent

i. whether the subject matter isof a type and nature thatexists or could be made to

exist to allow the sellerreasonable certainty of beingable to comply with his

obligationsb. Licit

i. not outside the commerce of

man

ii. if illicit, contract is voidc. Determinate or determinable

i. determinate: particularlydesignated or physicallysegregated from all others of

the same classii. determinable:

1. thing is capable of

being madedeterminate

2.without the necessityTIFF(Uncompressed) decompressor

Ofanew. furthercontract

2. Rights must be transmissible, except: a. future inheritanceb. service

Emptio rei speratae Emptio speiSale of an expected thing Sale of a mere hope or

expectancy that the thingwill come to existenc e;

sale of the hope itsel fSale i s subject to the Sale is effec tive even if

condition; that the thing the thing does not comewill exist; if it does not, into existence, unless it is

there is no contract a vain hopeUncertainty is with regard The uncertainty is with

to the quantity and regard to the existence ofquality of the thing and the thing

not the existence of thething

Object is a future thing Object is a present thingwhich is the hope or

expectan cy

NOTE: Quantity of subject matter is not essential

forperfection; must determine nature and quality of

subject matter

NOTE: Seller need not be the owner of the

subjectmatter at the time of perfection: sufficient

that he is the owner at the time of delivery.

exception: foreclosure sale

CH. 4 - PRICE

I. REQUISITES:

1. Reala. when at the perfection of the contract

of sale, there is every intention onthe buyer to pay the price, and every

expectation on the part of the sellerto receive such price as the value ofthe subject matter he obligates

himself to deliver

2. In money or its equivalenta. consideration for a valid contract

of sale can be the price and othervaluable consideration; at the veryleast, a true contract of sale must

have price as part of itsconsideration

3. Certain or ascertainable

a. certain: expressed and agreed interms of specific pesos and/orcentavos

b. ascertainable:i. by third persons

ii. by the courts in cases

where the third person fixesthe price in bad faith or bymistake

iii. by reference to a definiteday, particular exchange ormarket

iv. by reference to another thing

certain


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v. but never by one party to the

contract

4. Jurisprudence: Manner of payment must

be agreed upon (Marnelego v. Banco

Filipino Savings and Mortgage Bank)

II. EFFECT OF GROSS INADEQUACY OF PRICE

NOTE: Mere inadequacy of the price does not affect

the validity of the sale, except (1) When there isfraud, mistake, or undue influence indicative of a

defect in consent is present, (2)When it shows that

the parties really intended a donation or some other

act or contract.

III. EFFECT WHERE PRICE IS SIMULATED

1. The act may be shown to have been in realitya donation, or some other act or contract

2. If not and neither party had any intention

whatsoever that the amount will be paid(absolutely simulated): the sale is void

3. If there is a real price but what is stated in the

contract is not the one intended to be paid(only relatively simulated): the contract ofsale is valid but subject to reformation

Art. 1474. Wh ere the price canno t be determin edin accordance w ith the preceding art icles, or in

any other m anner, the contract i s inefficaciou s.

However, if the thing or any part thereof has b een

delivered to and appro pr iated by the buyer he

must pay a reason able pri ce therefore. What is a

reason able pri ce is a qu estion of fact depend ent

on the circum stances of each part icular case.

CH. 5 - FORMATION OF A CONTRACT OF SALE

I. 3 STAGES IN LIFE OF A CONTRACT OF SALE

1. Policitacion/Negotiation Stage - offer isfloated, acceptance is floated but they do

not meet; the time when parties indicatetheir interest but no concurrence of offer andacceptance.

2. Perfection - concurrence of allrequisites;meeting of the minds.

3. Consummation parties perform theirrespective undertakings

II. Policitacion

1. RULES:1. offer is floated prior to acceptance,

may be withdrawn atwill by offeror

2. offer floated with a without acceptance,period extinguished when

period has ended andmaybe withdrawn at willby offeror; right to

withdraw must not bearbitrary otherwise,liable to damage underArt 19, 20, 21 of CivilCode

3. offer floated w/ extinguished bycondition happening/non-

happening of condition4. offer floated without continues to be validperiod/without condition depending upon

circumstances of time,place and person

5. offer is floated and original offer isthere destroyed, there is ais counter-offer new offer; can not go

back to original offer6. offer is floated no authority of offeror

to modify offer7. offer accepted proceed to perfectedabsolutely stage

III. OPTION CONTRACT - a contract granting

an exclusive right in one person, for whichhe has paid a separate consideration, to buy

a certain object within an agreed period

1. no presumption of consideration,needs to be proven

2. characteristics of Option Contract:a. not the contract of sale by itself,

separate and distincb. nominatec. principal; but can be attached

to other principal contractsd. onerouse. commutative

f. unilateral versus contract of

sale which is bilateral

San Miguel Philippines v Cojuangco

consideration in an option contract may be anything

of value, unlike in sale where it must be price certain

in money

3. how exercised: notice of acceptance

should be communicated to offeror

without actual payment as long as

there is delivery of payment in

consummation stage


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4. SITUATIONS IN AN OPTION

CONTRACT:

a. with separate considerationi. option contract is validii. offeror can not withdraw

offer until after expiry

periodiii. ubject to rescission,

damages but not to

specific performancebecause this is not anobligation to give

b. without separate considerationi. OLD RULE - offer is still

valid, but option contract is

void and not subject torescission, damages

ii. NEW RULE: Right of first

refusal recognized

Option Contract Right of First RefusalPrincipal contract; Accessory; can notstands on its own stand on its own

Needs separate Does not need separateconsideration consideration

Subject matter and There must be subjectprice must be valid matter but price not

importantNot conditional Conditional

Not subject to specific Subject to specificperformance performance

IV. RIGHT OF FIRST REFUSAL:1. creates a promise to enter into a contract of

sale and it has no separate consideration,not subject to specific performancebecause there is no contractual relationship

here and it is not an obligation to give (not areal contract)

2. New doctrine: may be subject to specific

performance.

Equatorial realty Devt Inc. v Mayfair Theater, the

right of first refusal is only subject to specific performance insofar as i t is attached

to

aa valid written

principal contract (e.g. lease)RFR

becomes one of the

considerations in the contract.]

3. Effect of new doctrine: turned the world of

policitacion upside down because while valid

option contract is not subject to specific

performance, right of first refusal which doesnot even have a separate consideration may

be subject to specific performance

4. Recognizes recovery of damage based

on abuse of rights doctrine

CH. 6 - PERFECTION OF SALE

GENERAL RULE: A contract of sale is perfected at

the moment there is a meeting of the minds uponthe thing which is the object of the contract and upon

the price; consensual contractException: When the sale is subject to a suspensive

condition

I. REQUIREMENTS:

1. When parties are face to face whenthere is absolute acceptance of an offer thatis certain

2. When thru correspondence or telegramwhen the offeror receives or had knowledgeof the acceptance

3. When the sale is subject to a suspensive

condition from the moment the conditionisfulfilled

NOTES: Qualified acceptance: mere counter-offerwhich needs to be absolutely accepted to give rise

to perfected contract of saleBusiness ads are mere invitations to make an

offer except when it appears to be otherwise

II. RULES GOVERNING AUCTION SALES:

1. Sales of separate lots by auction are

separate contracts of sale2. Sale is perfected by the fall of the hammer3. Seller has the right to bid at the auction

provided such right was reserved and notice

was given to that effect

III. EARNEST MONEY

1. Money given as part of purchase price2. Acceptance is the proof that contract of sale

exists3. Nothing in law prevents parties from treating

earnest money differently

4. Old concept: subject to forfeiture whenBUYER backs out

5. New concept: can not be forfeited partof purchase price; must be restored

6. Qualification: if old concept is stipulated

VALID7. Presumption of perfection of contract of sale

and such earnest money as part of purchase

price is disputable


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Money given Part of the purchase as distinct price

consideration for anoption contract

Applies to a sale not Given only whenperfected there is already a

saleNot required to buy When given, buyer is

bound to pay thebalance

Art. 1483.Subj ect to the provi sions of the Statute

of Frauds and o f any oth er app li cable statute, a

contract o f sale may be made in writ ing, or by

word of mouth, or part ly in wr i t ing and par tly by

word of mou th, or may be infer red from the

cond uct of the part ies. (n)

FORM OF SALES

I. Form not important in validity of sale

a. Sale being consensual, may be oral orwritten, perfected by mere consent as toprice and subject matter

b. If particular form is required under the statuteof frauds:

i. valid and binding between parties

but not binding to 3rd

persons

c. Reason: purposes of convenience only and

not for validity and enforceability; cause ofaction is granted to sue and compel other

party to execute the document

II. When form is important for validity;exception by specific provision of law;

a. Power to sell a piece of land granted to an

agent otherwise VOIDb. Sale of large cattle; must also be registered

with Municipal treasurer otherwise VOID

c. Sale of land by non-Christian if not approvedby Governor VOID

III. When form is important for enforceability

(STATUTE OF FRAUDS Article 1403 (2))a. A sale agreement which by its terms is not to

be performed within a year from the makingthereof;

b.An agreement forthesale

of

goods,

chattels or

things in action, at a price not less than

P500.00; andc. A sale of real property or of an interest

therein.

IV. EXCEPTIONS TO COVERAGE OF STATUTE IN SALES CONTRACTS:

1. When there is a note or memorandum in

writing and subscribed to by party or his

agent (contains essential terms of

the contract)2. When there has been partial

performance/execution (seller deliverswith intent to transfer title/receives price)

3. When there has been failure to object

to presentation of evidence (oral)4. When sales are effected through

electronic commerce

CH. 7 - CONSUMMATION STAGE/PERFORMANCESTAGE

NOTE: Stage where parties both comply with theirobligation. Nature of diligence required: diligence of a

good father of the family unless other requirement is

stipulatedConsequence: Seller will be guilty of breach if thing is

lost through his fault

I. Delivery of the Thing - Transfer ownership

(tradicion) covers a twin obligations of the sellerwhich are:

1. to transfer the ownership; and2. to deliver a determinate thing

PNB vs. Ling, 69 Phil. 611Delivery of the thing together with the

payment of the price, marks the consummation of the

contract of sale

Norkis Distributor, Inc. vs. CA 195 SCRA 694The act of delivery must be coupled with the

intention of delivering the thing and putting the buyer

under control

Addison vs. Fe lix , 38 Phil. 404The execution of a public instrument is

equivalent to delivery. But to be effective, it isnecessary that the vendor have such control over the

thing sold that, at the moment of sale, its materialdelivery could have been made

II. Different kinds of delivery:

1. Actual or real- when thing sold is placed

in the control and possession of thebuyer

2. Legal or Constructive- can take severalforms and may be any manner signifyingan agreement that the possession is

transferred from the vendor to the

vendee.

OPTION MONEY EARNEST MONEY


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III. Different forms of Constructive Delivery -

Constructive delivery has same legal

effect as actual or physical delivery

Ten Forty Realty vs. Cruz, 10 Sept. 2003Gives rise only to a prima facie presumption of

delivery which is destroyed when actual delivery is

not effected because of a legal impediment

1. Traditio Longa Manu

Delivery of thing by mere agreement; when

SELLER points to the property without needof actually delivering

2. Traditio Brevi Manu

Before contract of sale, the would be buyer

was already in possession of the would be

subject matter of sale (ex: as lessee)

3. Symbolic delivery

As to movables ex: delivery of the keys

to a car

4. Constitutum possessarium

When at the time of the perfection of the

contract of sale, seller had possession of thesubject matter in the concept of owner and

pursuant to the contract, seller continues tohold physical possession no longer in the

concept of an owner but as a lessee or anyother form of possession other than in the

concept of owner.

5. Quasi-tradition

Delivery of rights, credits or incorporeal

property, made by:a. Placing titles of ownership in the

hands of the buyerb. Allowing buyer to make use of rights

6. Tradition by operation of law

IV. WHEN EXECUTIONOF PUBLICINSTRUMENT DOES NOT PRODUCE THE

uickime andaEFFECTS OF DELIVERY

1.When contrary,ere iss pu a on oexecution does not produce effect of delivery

2. When at the time of execution of instrument,subject matter was not subject to control ofthe seller

3. Subject matter should be within control ofseller; he should have capacity to deliver at

the time of execution of public instrument

when he wants to effect actual delivery

4. Such capacity should subsist for a

reasonable time after execution of instrument

(reasonable time depends on circumstances

of persons, places and things)

V. Delivery of Fruits and Accessions/

Accessories - Right to fruits and

accessions/accessories accrue from time

sale is perfected but no real right over ituntil it is delivered

VI. Delivery Through Carrier - General Rule:Where the seller is authorized or required tosend the goods to the buyer, delivery to the carrier is delivery to the buyer. Exceptions: a contrary intention appears orimplied reservation of ownership under pars.1,2,3 of Art. 1503

1. FAS FREE ALONG SIDE - Whengoods delivered alongside the ship, there is

already delivery to the buyer (twin effects deemed fulfilled)

2. FOB - FREE ON BOARD - Shipment when goods are delivered at ship at point ofshipment; delivery to carrier by placing goods on vessel is delivery to buyer

Destination when goods reach the porteven if not disembarked yet from the vessel, there is delivery to the buyer

3. CIF COST, INSURANCE, FREIGHT When buyer pays for services of carrier

delivery to carrier is delivery to buyer; carrieris agent of the buyer When buyer pays seller the price frommoment the vessel is at port of destination,there is already delivery to buyer.

SeeArts. 1522, 1539, 1540, 1541, 1542, 1543.

VII. COMPLETENESS OF DELIVERY1. MOVABLES

a. delivery of thing plus accessoriesand accessions in the condition in

which they were upon the perfection

of the contract including the fruitsb. When the seller delivers to the buyer

a quantity of goods LESS than hecontracted to sell, buyer has theoption to reject or accept it.

a. When accepts with knowledge

that seller is not going to perform


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contract in full, he must pay at will not be adjustedprice stipulated accordingly

b. When accepts and consumes before knowledge that buyer VIII . TIME AND PLACE OF DELIVERY

will not perform contract in full, 1. Follow stipulation in contact, orliable only for fair value of goods 2. Follow usage in trade, ordelivered 3. Sellers place of business or his residenc e

c. When seller delivers to the buyer a 4. Specific goods place where the thing isquantity of goods LARGER than he 5.At reasonable hourcontracted to sell the buyer has the

following options:i. accept per contract and reject IX. EFFECTS OF DELIVERY - General Rule:

the rest The ownership of the thing sold shall beii. accept the whole pay price transferred to the buyer upon the actual or

stipulated constructive delivery thereof.iii. eject whole if subject matter is Except when the contrary is stipulated such

indivisible in the cases of:d. When the seller delivers to the 1. contract to sell

buyer the goods he contracted to 2. sale on acceptance/approvalsell, MIXED with goods of a 3. sale or return

different description not included inNOTE: Who Bears Expenses of Delivery? Sellerthe contract, buyer has 2 options:

i. accept good w/c are inaccordance with contract and X. SALE BY DESCRIPTION/SAMPLEreject the rest 1. Sample goods must correspond with

ii. reject goods entirely if sample shownindivisible 2. Description goods must correspond

with description or sample3. Effect if there is no compliance :

2. IMMOVABLES RESCISSION may be availed of bya. Sold per unit or number the buyer

i. If the sale should be made withstatement of its area, rate at XI. OBLIGATIONS OF BUYERcertain price, deliver all that may 1. Pay the pricehave been stated in the contract a. Buyer is obligated to pay price

if impossible, remedies of buyer: according to terms agreed uponii. If Less in area: regarding time, place and amount- rescission b. If payment of interest is stipulated- proportional reduction of must pay; if amount of interest not

price LACK IN AREA mentioned apply legal rateSHLD NOT BE LESS c. When buyer defaults constitutesTHAN 1/10 OF AREA breach: subject to specificAGREED UPON performance/rescission and

iii. If Greater in area: damages; interest to be paid also- accept per stipulation and from default

reject the rest

area pay 2. Accept delivery of thing sold- .at contract rate a. Where to accept: at time and place

-

Not applicable to

judicial

stipulated in the contract; if nonesales specified at the time and place o

iv. Sold for lump sum delivery goods; there is acceptance- When price per unit not when:

indicated i. He intimates to seller that- If area delivered is either he has accepted

greater or lesser price


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ii. When delivered and does

any act inconsistent with

ownership of selleriii. Retains without intimating

to seller that he has

rejected

3. Sale of Goods on installment

a. Goods must be delivered in full,except when stipulated

b. When not examined by buyer not accepted

until examined or at least had reasonabletime to examine

4. Acceptance of goods in general, absent contrary

express stipulation, does not discharge sellerfrom liability in case of breach of warranties

(unless no notice or failure to give it within

reasonable time)

5. When buyer has a right to refuse goods, no

need to return; shall be considered as

depositary; unless there is stipulation to thecontrary

Art. 1544. If the same thing should have beensold

to dif ferent vendees, the ownership shall be

transferred to the person who may have first

taken possession thereof in good faith, if it

should be m ovable property.

Should i t be im m ovable proper ty, the ownership

shall belong to the person acquir ing it who in

good faith f irst recorded it in the Registry of

Property.

Should there be no inscr ipt ion, the ownership

shall p ertain to the person w ho i n go od faith was

first in the possession; and, in the absence

thereof, to the person who presents the oldest

tit le, provi ded th ere is go od faith. (1473)

DOUBLE SALEGeneral Rule : FIRST IN TIME, PRIORITY IN RIGHT

When does it apply: when not all requisites

embodied in 1544 concur.

I. REQUISITES FOR DOUBLE SALES TO

EXIST: (VOCS)

1. Two or more sales transactions must

constitute valid sales;

2. Two or more sales transactions must

pertain to the same object or subject

matter;

3. Two or more buyers at odds over therightful ownership of the subject mattermust each represent conflicting interests;

and4. Two or more buyers must each have

bought from the very same seller.

Consolidated Rural Bank (Cagayan Valley_ vs. CA[Jan. 17, 2005]

If not all the elements are present for Art.

1544 to aply, the priniciple of prior tempore, potiorjure or simply he who is first in time is preferred in

right should apply. Undisputably, he is a purchaser ingood faith because at the time he bought the real

property, there was still no sale to as a secondvendee.

II. RULES ACCORDING TO 1544:

1. MOVABLE

a. Owner is first to posses in good faith

2. IMMOVABLE

a. First to register in good faithb. No inscription, first to possess in

good faith

c. No inscription and no possession ingood faith Person who presentsoldest title in good faith

d. Good Faith - one who buys propertywithout notice that another person

has a right or interest in suchproperty; one who has paid price

before notice that another has claimor interest

III. LIS PENDENS notice that subject matter isin

litigation

IV. ADVERSE CLAIM notice that somebody is

claiming better right

V. POSSESSION Both actual or constructive

VI. REGISTRATION: any entry made in thebooksof the registry, including both registration in itsordinary and strict sense, and cancellation,

annotation, and even marginal notes. It is theentry made in the registry which records

solemnly and permanently the right ofownership and other real rights. 1. registered under Torrens system 1544

applies


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2. not registered under the Torrens system

1544 still applies

Jurisprudence

if 2nd

sale is a judicial sale (by way of levy on

execution), buyer merely steps into the shoes of thejudgment debtor. Outside of such situation mustapply to conflicting sales over the same unregistered

parcel of landIf sale 1 occurs when land is not yetregistered and sale 2 is done when land is already

registered apply FIRST IN TIME, PRIORITY INRIGHT

Gabriel v. Mabanta, et al. [2003]Good faith must concur with registration. To

be entitled to priority, the second purchaser must not

only establish prior recording of his deed, but must

have acted in good faith.

CONDITION

1. Effect of Non-Fulfillment of ConditionThe other party may

a. refuse to proceed with the contractb. proceed with the contract, waiving the

performance of the conditionIf the condition is in the nature of a promise that it

should happen, the non-performance of such

condition may be treated by the other party asbreach of warranty.

2. Effect if buyer has already sold the goods

General Rule: The unpaid sellers right to lien or

stoppage in transitu remains even if buyer has sold

the goodsException:

o When the seller has given consent thereto, oro When the buyer is a purchaser in good faith

for value of a negotiable document of title.

NEGOTIABLE DOCUMENTS OF TITLESee Article 1636

1. Not creation of lawbutby

merchantsto allow them to deal

w ith merchandise w ithout having to physically carry

them around2. Pertains to specific type of movables only :

GOODSa. Documents of tit le serve two (2)

functions:

i. evidence of exis tence andpossession of goods described

thereinii. medium by which seller is able

to transfer possession of goods

3. A document of title which states that the goodsreferred to therein will be delivered to thebearer, or to the order of any person named in

such document4. Negotiable by delivery or indorsement

TYPES1. NEGOTIABLE

a. deliver to bearer (negotiation by meredelivery)

b. deliver to specific person or his order(negotiation by endorsement + delivery)

i. even if face of instrument says NON-

NEGOTIABLE, it is stillNEGOTIABLE; limiting words doesnot destroy negotiability

ii. If order instrument and noendorsement was made equivalentto assignment

2. NON-NEGOTIABLE

EFFECTS OF UNAUTHORIZED NEGOTIATIONThe validity of the negotiation of a negotiable

document is not impaired by the fact that negotiationwas done in breach of duty or that the owner of the

document was deprived of the same by loss, theft,accident, fraud, mistake if the person to whom the

document is delivered is in good faith and withoutnotice of the said irregularities.

Important Considerations1. Negotiation gives better right than

assignment2. Assignee takes document with defects of the

assignor3. Obligation of bailee bailee is immediately

bound to the document

Warranties on Negotiation1. the document is genuine

2. he has legal right to negotiate or transfer it

3. he has knowledge of no fact which wouldimpair the validity or worth of the document

4. he has right to transfer title to goods and

goods are merchantable/fit


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Rules of Levy/Garnishment of Goods Covered by

Documents of Title 2. NON NEGOTIABLE:

a. Notification is operative act to transfertitle/possession of goods in favor

assigneeb. Before notification can still be

garnished

3. NEGOTIABLE:

a. Can not be levied or garnished whendocuments are already with purchaser in

good faith, unless:b. Document is first surrenderedc. Document is pounded by court

d. Negotiation is enjoined

NEGOTIATION ASSIGNMENT

transferor/holder acquires acquires title to goods againsttitle to goods transferor

bailee has direct obligation acquires right to notify bailee soto holder as if directly dealt that he acquires obligation ofw ith him bailee to hold goods for him

SALE BY NON-OWNER OR BY ONE HAVINGVOIDABLE TITLE

See Articles 1475, 1477, 1505, 1506

I. SALE BY NON-OWNER1. PERFECTION STAGE

a. Sale by owner VALID

b. Sale by non-owner VALID;c. Reason why both sales are valid:

ownership is necessary only at timewhen transfer t itle to goods; atperfection stage, no obligation onpart of seller to transfer ownership

d. Law on estoppel further bolsters it:title passes by operation of law tograntee when person who is notowner of the goods sold delivers it and later on acquires title thereto

e. annul isSince valid, action .toimproper; there is already a

perfected contract

2. CONSUMMATION STAGE

a. Contract of sale is valid because it

has passed perfected stage, despiteseller not being the owner or seller

having no authority to sell

b. What is void is the transfer of title/

ownership did not pass

c. Effect: buyer acquired no better right

than transferord. Legal effect: CAVEAT EMPTOR

BUYER BEWAREe. Sale of co-owner of whole property

or definite portionGENERAL RULE:

i. co-owner sells whole property priorto partition sale of property itself isvoid but valid as to his spiritual share

ii. co-owner sells definite portion to

partition sale is void as to other co-owner but valid as to his spiritual

share if the buyer would have stillbought such spiritual share had he

known that the definite portion soldwould not be acquired by him.

II. EXCEPTIONS TO THE RULE ON THE EFFECTOF SALE OF A DEFINITE PORTION OBY A CO-

OWNER

1. Subject matter is indivisible in nature orby intent;

2. Sale of a particular portion of a property is

with consent of other co-owners;3. Co-owner sells 1 of 2 commonly-owned lands

and does not turn over of the proceeds,other co-owner, by law and equity, has

exclusive claim over remaining land.

III. RULES ON LEGAL EFFECTS OF SALE BY A

NON-OWNERGENERAL RULE: Sale by non-owner, buyeracquires no better title than seller had. EXCEPTIONS:

1. Owner by his conduct is precludedfrom denying sellers authority(ESTOPPEL)

2. Contrary is provided for in recordinglaws (PD 1529)

3. Sale is made under statutory power

of sale or under order of a court ofcompetent jurisdiction

4. Sale is made in a merchants store in

accordance with code of commerce

and special laws

IV. SALE BY SELLER WITH VOIDABLE TITLE1. PERFECTION STAGE

a. Valid sale buyer acquires title of goods


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2. CONSUMMATION STAGE

a. Valid sale if title has not yet been

avoided, buyer buys goods under followingcondition:

o in good faith

o for value

o without notice of sellers defect of title

V. TITLE AS TO MOVABLE PROPERTIESGENERAL RULE: Possession is equivalent

to title

Requisites: Possession of movable and Good

Faith

VII. EXCEPTIONS:1. Owner lost movable owner can recover w/o

reimbursing price

2. Owner is unlawfully deprived owner can

recover w/o reimbursing price

VIII, EXCEPTIONS TO THE EXCEPTIONS: movable is bought at public sale ownercan only recover after reimbursing price

acquired in good faith and for value from

auction

LOSS, DETERIORATION, FRUITS and OTHERBENEFITS

See Articles 1493 and 1494

Legal consequences from point of perfection are the

same in both legal systems: upon perfection of an

unconditional contract of sale involving specific ordeterminate subject matter, the risk of lossdeterioration and the benefits of fruits and

improvements, were fro the account of the buyer.

WHO BEARS RISK OF LOSS/ DETERIORATION/

FRUITS:1. BEFORE PERFECTION

a. Res perit dominob. Owner is seller so seller bears risk of

loss

2. AT PERFECTIONo Res perit dominoo Contract is merely inefficacious

because loss of the subject matterdoes not affect the validity of the

sale

o Seller cannot anymore comply with

obligation so buyer cannot anymore be

compelled

3. AFTER PERFECTION BUT BEFORE

DELIVERY

o Loss confused state

o Paras: BUYERo Tolentino: SELLERo Deterioration and fruits - Buyer bears

loss;

4. AFTER DELIVERYo Res perit dominoo Delivery extinguishes ownership vis-

a-vis the seller and creates a new

one in favor of the buyer

REMEDIES OF PARTIES FOR BREACH OFCONTRACT OF SALE

See Articles 1594-1596. 1484-1486, 1592

SUBJECT MATTER: MOVABLES (IN GENERAL)

Remedies of Unpaid SellerGENERAL RULE: Any man may not take law in hisown hands, must seek remedy through courts EXCEPTION:

DOCTRINE OF SELF HELP SPECIAL REMEDIES

Requisites:

1. Subject matter goods2. Seller is unpaid not completely paid

or received negotiable instrument

under a condition and condition hasbeen breached by reason of

dishonor3. Physical possession is with seller

The following are the special remedies of unpaid

seller1. possessory lien2. stoppage in transitu

3. special right of re-sale4. special right to rescind

NOTE: Hierarchical Application - only when unpaid

seller has exercised possessory lien or stoppage in

transitu can the seller proceed with his other special

rights of resale or to rescind.

I. Possessory Lien

1. Seller not bound to deliver if buyer has not

paid him the price


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Page 141 of 297

2. Right to retain; cannot be availed when seller

does not have custody

3. Exercisable only in following circumstances:

a. goods sold without stipulation as to creditb. goods sold on credit but term of credit

has expiredc. buyer becomes insolvent

d. When part of goods delivered, may still

exercise right on goods undelivered

Instances when possessory lien lost:1. seller delivers goods to carrier for

transmission to buyer without reserving

ownership in goods or right to possess them2. buyer or his agent lawfully obtains

possession of goods3. waiver4. loses lien when he parts with goods (still has

stoppage in transitu)

5. notice by seller to buyer not essential

II. Stoppage In Transitu Goods are in transit Requisites when goods are in transit

1. From the time goods are delivered to

carrier for purpose of transmission tobuyer

2. Goods rejected by buyer and carrier

continues to possess them

When goods no longer in transit1. Reached point of destination2. Before reaching destination, buyer obtains

delivery of the goods

3. Goods are supposed to have been deliveredto buyer but carrier refused4. Shown by seller that buyer is insolvent

(failure to pay when debts become due )

How is right exercised1. Obtain actual possession of goods2. Give notice of claim to carrier / bailee in

possession thereof

3. Notice by seller to buyer is not required;notice to carrier is essential

III. Special Right to Resell the Goods

1. goods are perishable2. stipulated the right of resale in case

buyer defaults in payment3. buyer in default for unreasonable time4. notice by seller to buyer not essential

why special? there are things which seller cannot do

in ordinary sale:

1. ownership is with buyer but seller can sell

goods

2. title accorded to buyer is destroyed

even without court intervention

IV. Special Right to Rescind1. Expressly stipulated

2. Buyer is in default for unreasonable time3. Notice needed to be given by seller to buyer

why special? ownership of goods already with

buyer but seller may still rescind; ownership is

destroyed even without court intervention but in

ordinary sale, need to go to court to destroy transfer

of ownership

Remedies of BuyerWhen Seller fails to deliver, buyer may seek

SPECIFIC PERFORMANCE WITHOUT GIVINGSELLER OPTION TO RETAIN GOODS ON

PAYMENT OF DAMAGES

SALE OF MOVABLES ON INSTALLMENT

Remedies of Unpaid Seller (1484)1. Exact fulfillment should the buyer fail to pay.2. Cancel the sale if buyer fails to pay 2 or more

installments.

3. Foreclose on chattel mortgage if buyer fails to

pay 2 or more installments

Incidents:1. If buyer chooses foreclosure, no further

action against buyer to recover any unpaidbalance of the price

2. When is the law applicable? Sale onmovables by installment

o Sale on installment:payment byseveral partial payments in small

amount4. Rationale of the law: Buyer is lulled into

thinking that he could afford because ofsmall amounts per installment andat the same time remedy abuse ofcommercial houses

5. Nature of remedies: alternative and not

cumulative6. Coverage: sale and financing transaction

and contracts of lease with option to

purchase


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7. Action : Judicial and Extrajudicial

o Specific Performancei. If already chose specific

performance, can no longer

choose other remediesExcept: after choosing, it has

become impossible, rescission maybe pursuedb. Rescission

- When chosen, there is

correlative obligation torestitute

- But stipulation that

installments paid areforfeited are valid if notunconscionable

- Deemed chosen when:o Notice of rescission is

sento Takes possession of

subject matter of saleo Files action for

rescissionBarring effect on recovery of

balance

3. Foreclosure

i. Barring effect on recovery of

balanceii. Extent of barring effect: purchase

price

iii. Exception: mortgagor refuses todeliver property to effect

foreclosure, recover alsoexpenses incurred in attorneys

fees, etc. (Perverse Buyer-Mortgagor)

IMMOVABLES (IN GENERAL)

Remedies of Seller

Anticipatory breach1. Seller has reasonable grounds to fear loss of

immovable sold and its price, sue forRESCISSION2. Nonpayment of price, sue for RESCISSION

QuickTime and a TIFF(Uncompressed) decompressor

are needed to see this picture.Remedies of Buyer

1. In case of subdivision or condo projects,suspend payment.

2. If real estate developer fails to comply with

obligation according to approved plan:

- RESCIND- SUSPEND PAYMENT UNTIL SELLER

COMPLIES


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IMMOVABLES (BY INSTALLMENT)Article 1592 Applies only to contract of sale

I. Maceda Law

1. applies to COS and CTS and Financing

2. Coverage: REAL ESTATE defined space vs.CONDO not defined space (w/ common

areas)3. Excluded:

a. Industrialb. Commercial

c. Sale to tenants under agrarian laws

Rights Granted to Buyers:

o Buyer paid at least 2 years installment1. Pay without interest the balance within

grace period of 1 month for every year of

installment payment2. Grace to be exercised once every 5

years3. When no payment - cancelled; buyer

entitled to 50% of what he has paid + ifafter 5 years of installments, 5% for every

year but not to exceed 90% of totalpayments made

4. Cancellation to be effected 30 days from

notice and upon payment of cash

surrender value

o Buyer paid less than 2 years installment

1. 1st

Grace period is 60 days from dateinstallment became due

2. 2nd

grace period of 30 days from noticeof cancellation/demand for rescission

buyer can still pay within the 30day period

with interest No payment after 30 day period,

can cancel.

Purpose of law - Protect buyers in installments

against oppressive conditions

Notice needed - waiver thereof if oppressive

Applies to contracts even before law was

enacted Stipulation to contrary is void

Other rights:o Sell rights to another

o Reinstate contract by updating during

grace period and before actualcancellation

o Deed of Sale to be done by notarial act


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o To pay in advance any installment or thefull balance of price anytime withoutinterest

o Have full payment annotated in certificateof title

REMEDY OF RESCISSION IN CONTRACTSCOVERING IMMOVABLES

See Articles 1191, 1592

o Nature: Judicialo Extra judicial Rescission

a. allowed if stipulated; burden to sue shifts

to party who does not like resciss ionb. court still has final say as to propriety of

rescission

c. Forfeiture of amounts valid being innature of penal clause

o Contract of Sale Rescission is Applicableo Contract to Sell Rescission not Applicable

Nonpayment of purchase price wouldautomatically cancel even without further

action for rescission Except: If subject matter is residential

lots, law on rescission applies when there

is substantial breach. Maceda lawapplies.

CONDITION and WARRANTIESSee Articles 1545-1547

I. Condition1. When a contract contains a condition, the non

happening of which would not constitute abreach but extinguishes the obligation

2. However, if party to the sales contract haspromised that the condition should happen or be

performed, the non-performance of which may betreated by parties as breach

II. WarrantiesA statement or representation made by the sellercontemporaneously and as a part of the contract of

sale, having reference tot eh character, quality, or titleof the goods, and by which he promises orundertakes to insure that certain facts are or shall beas he then represents

.

Express Warranties ( requisites ):1. it must be an affirmation of fact or any promise by

seller relating to the subject matter of sale2. natural tendency of affirmation or promise is to

induce buyer to purchase subject matter3. buyer purchases the subject matter relying

thereon

4. when breached, seller is liable for damages

Implied WarrantiesDeemed included in all contracts of sale whetherparties are actually aware or not, whether they were

intended or not; by operation of law

1. warranty that seller has a right to sello refers to consummation stage since in

consummation stage, it is whereownership is transferred by tradition

o not applicable to sheriff, auctioneer,mortgagee, pledge

2. warranty against eviction

a. implied, unless contrary provision appears incontract

b. when ownership is transferred, buyer shallenjoy the legal and peaceful possession ofthe thing

c. Requisites of breach of warranty againsteviction:

- buyer is evicted in whole or in partfrom the subject matter of sale

- there is a final judgement- basis of eviction is a right prior to

sale or an act imputable to vendor- seller has been summoned in the

suit for eviction at the instance of

buyer; or made 3rd

party defendant

through 3rd

party complaint brought

by buyer

Vendors liability shall consists of (TotalEviction)(VICED)1. Value of the thing at the time of eviction;

2. Income or fruits if he has been ordered to deliverthe to the party who won the suit

3. Cost of the suit

4. Expenses of the contract; and5. Damages and interests if the sale was in bad

faith

Partial Eviction1. to enforce vendors liability for eviction

(VICED); or2. to demand rescission of contract.

a. no appeal needed nor a need for

buyer to resist eviction for right toaccrue; it is enough that the

aforementioned requisites are

complied withb. warranty cannot be enforced until

aforementioned requisites concur


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c. applies to judicial sale; judgment

debtor responsible for eviction unlessotherwise decreed in judgment

d. vendor not liable for eviction ifadverse possession had been

commenced before sale butprescriptive period is completed aftertransfer

e. Rights of buyer when deprived ofonly part of the subject matter but

would not have bought such part ifnot in relation for the whole:1. Rescission2. Mutual restitution

3. warranty against encumbrances (non-

apparent)

o Requisites:

a. immovable sold is encumberedwith nonapparent burden or

servitude not mentioned in theagreement

b. nature of nonapparent servitude

or burden is such that it must bepresumed that the buyer would nothave acquired it had he been aware

thereofc. when breach of warranty exist: buyer

may ask for rescission of indemnity

d. warranty not applicable when nonapparent burden or servitude isrecorded in the Registry of Property

unless there is express warrantythat the thing is free from all

burdens and encumbrances

4. warranty against hidden defectso SELLER does not warrant patent

defect; caveat emptoro Exceptwhen hidden

1. subject matter may be movable

or immovable2. nature of hidden defect is such

that it should render the subject

matter unfit for the use of which itw as intended or should diminish itsfitness

.3. had the buyer been aware, he

would not have acquired it or

would have given a lower price

a. when defect is visible or even if not visible butbuyer is an expert by reason of his trade or

profession, seller is not liableb. obligation of seller for breach depends on

whether he has knowledge of such defect ornot

c. seller is aware seller should return price

and refund expenses of contract withdamages

d. seller is not aware - seller should return price

and interest and refund expenses ( nodamages )

e. buyer may elect between withdrawing from

contract or demanding proportionatereduction of price with damages in eithercase

f. applicable to judicial sale except thatjudgment debtor not liable for damages

g. action to prescribe 6 months from delivery of

subject matter

5. defects on animals

a. even in the case of professional inspection

but hidden defect is of such nature thatexpert knowledge is not sufficient to discoverit - defect shall be considered as

REDHIBITORYb. if vet fails to discover through ignorance or

bad faith he is liable for damages

c. sale of animals on teams (2 or more)- when only one is defective, only one is

redhibited and not the others

- exception: when it appears buyer wouldnot have purchased the team without thedefective one

- apply to sale of other thingsd. animals at fair or public auction

- no warranty against hidden defects

e. sale of animals with contagious disease isvoid

f. sale of unfit animals

- void if use / service for which they are

acquired has been stated in the contractand they are found to be unfit thereforo prescription of action:40 days from date of

delivery to buyer

o if sale is rescinded, animals to be returned in

same condition when they were acquired;buyer shall answer for injury / loss due to hisfault- buyer may elect between withdrawing

from sale and demanding proportionatereduction of price with damages in either

case

Specific Implied Warranties in the Sale of GoodsWarranty as to fitness and quality; requisites:

1. Buyer makes known to seller the particularpurpose for which goods are acquiredand it appears that the buyer relied on the

sellers skill or judgment


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2. Goods are bought by description from sellerwho deals in goods of that description

3. in case of sale of specified article under itspatent or trade name, no warranty unless there

is a stipulation to the contrary4. measure of damage: difference between value

of goods at time of delivery and value theywould have had if they had answered to the

warranty

Sale of Goods by sampleIf seller is a dealer in goods of that kind, there is an

implied warranty that the goods shall be free fromdefect rendering them unmerchantable which would

not be apparent on reasonable examination of thesample

Effects of Waiver

o Waiver in Warranty against eviction -Parties may increase or diminish impliedwarranty against eviction; but effectdepends on good faith or bad faith on the

part of the seller.1. Seller in bad faith and there is

waiver against eviction null andvoid

2. buyer without knowledge of aparticular risk, made generalrenunciation of warranty not

waiver but merely limits liability ofseller in case of eviction (payvalue of subject matter at time of

eviction)3. buyer with knowledge of risk of

eviction assumed its

consequences and made awaiver vendor not liable(applicable only to waiver ofwarranty against eviction)

4. waiver to a specific case ofeviction - wipes out warranty as

to that specific risk but not as to

eviction caused by otherreasons.

Waiver against Hidden Defects

1. If there has beena stipulationr exemptingseller from hidden defects

2. If seller not aware of hidden defects loss ofthe thing due to such defect will not makeseller liable

3. If seller aware waiver is in bad faith, thus

seller still liable

Buyers Option in Case of Breach of Warranty

1. Accept goods and set up breach of warranty

by way of recoupment in diminution or

extinction of the price.

2. Accept goods and maintain action againstseller for damages

3. Refuse to accept goods and maintain actionagainst seller for damages

4. Rescind contract of sale and refuse to receive

goods/return them when already received.

When rescission by buyer not allowed:1. if the buyer accepted the goods knowing the

breach of warranty WITHOUT protest

2. if he fails to notify the seller within a reasonabletime of his election to rescind

3. if he fails to return or offer to return the goods in

substantially as good condition as they were in at

the time of the transfer of ownership to him

EXTINGUISHMENTSeeArts. 1600 -1623

I. Grounds (same grounds wherebyobligations in general are extinguished)

1. payment or performance2. loss of the subject matter

3. condonation or remission4. confusion or merger of rights of creditor

and debtor

5. compensation6. novation7. annulment

8. rescission9. fulfillment of a resolutory condition10. prescription

II. Conventional redemption

1. only extinguishes obligations pertaining

to contract of sale, not extinguishcontract itself; only applies to contract ofsale

2. The right which the vendor reserves tohimself to reacquire the property soldprovided he returns to the vendee:

a. the price of the sale,b. expenses of contract,c. other legitimate payments,

d. he necessary and useful expensesmade on the thing sold

e. and fulfills other stipulations whichmay have been agreed upon

3. The right is exercised only be seller inwhom right is recognized in the contract

or by any person to whom right was

transferred; must be in the same contract


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III. Legal redemption

1. Only applies to contracts of sale.2. The right to be subrogated upon the

same terms and conditions stipulated in

the contract, in the place of one whoacquires the thing by (1) purchase OR(2) by dation in payment OR (3) by other

transaction whereby ownership istransmitted by onerous title.

3. Types of Legal Redemption:

a. among co-heirsi. any of the heirs sell his

hereditary rights to stranger

before partitionii. any of the co-heirs may be

subrogated to the rights of the

purchaser by redeeming saidhereditary right: reimburse buyerof the price of the sale

iii. co-heirs has 1 month fromreceipt of notice in writing

b. among co-owners

i. any or all of co-owners sells theirshares to 3

rdperson

ii. any co-owner may exercise rightof redemption by paying

reasonable price of property tothe buyer

iii. if 2 or more co-owners desire to

exercise right of redemption, theymay only do so in proportion tothe share they respectively have

in thing owned in commonc. among adjoining owners

i. rural land

a. where piece of rural land hasan area not exceeding 1hectare, adjoining owner has

right to redeem unlessgrantee does not own a ruralland

b. if two or more adjacent lotowners desire to exerciseright to redeem, owner of

adjoining lot with smallerarea shall be preferredif two or more adjacent lit. owners desire to exerciseright to redeem and both

have same lot area, one whofirst requested shall begranted

ii. urban landa. when piece of land is small

and cannot be used for any

practical purpose and bought

merely for speculation,

owner of adjoining land can

redeemb. 2 or more owners of

adjoining lot desire toexercise right to redeem,

owner whose intended use isbest justified shall bepreferred.

d. sale of credit in litigationi. when a credit or other

incorporeal right in litigation issold, debtor shall have a right to

extinguish it by reimbursing theassignee for the price the latterpaid therefor plus judicial costs,

interestii. debtor may exercise right within

30 days from the date assignee

demands payment from him

4. Other Instances When Right of Legal

Redemption is Granted

a. Redemption of homesteadsb. Public Land Act

c. Land acquired under free patenthomestead subject to repurchase by

wife, legal heirs within 5 years from

date of conveyance granted by law,need not be stipulated

5. Redemption in tax sales

a. in case of tax delinquency/failure topay tax assessments, property is

foreclosed

b. delinquent payer has 1 year from dateof sale to redeem by paying to therevenue District Officer the amount of

tax delinquencies, and interest orpurchase price.

6. Redemption by judgment debtor - 1 year

from date of registration of certificate of

sale to redeem by paying purchaser at

public auction with interest

7. Redemption in extrajudicial foreclosure - 1

year from date of sale and registration

8. Redemption in judicial foreclosure ofmortgage - no right to redeem is granted

to debtor mortgagor except when

mortgagee is bank of a banking institution

90 days after finality of judgment

9. When Period of Redemption Begins to Run -

Right of legal pre-emption of redemption


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shall be exercised within 30 days from

notice by the seller

10. How exercised - tender of payment is not

necessary; offer to redeem is enough.

a. There is no prescribed form for anoffer to redeem to be properlyeffected. Hence, it can either be

through a formal tender with

consignation of the redemptionprice within the prescribed period.What is paramount is the availment

of the fixed and definite periodwithin which to exercise the right oflegal redemption.

b. deeds of sale are not to be recorded

in Register of Deeds unlessaccompanied by affidavit of seller

that he has given notice to allpossible redemptioners

NOTE: Written notice under Art. 1623 is mandatory

for the right of redemption to commence (PSC vs.Sps. Valencia, 19 Aug. 2003). Thus, the GeneralRule is that actual knowledge notwithstanding,

written notice is still required Except when actualknowledge is acquired by co-heirs living in same landwith purchaser, or co-owner was middleman in sale

to 3rd

party.

Etcuban vs. CA, et. al. 148 SCRA 507 Art. 1623

does not prescribe any distinctive method for

notifying the redemptioner

IV. Option to Purchase - Right to repurchasethe thing sold granted to the vendor in aseparate instrument from the deed of sale

V. Equitable Mortgage

Cachola vs. CA, 208 SCRA 496One which lacks the proper

formalities, form of words, or other requisitesprescribed by law for a mortgage, but shows the intention of the parties to make the property subjectof t he contract as security

)fora

rdebt and contains

nothing impossible contrary to law.

1. A contract with right to repurchase isdeemed to be an equitable mortgage ifthe following requisites concur(IPERTI):

a. price of sale with right to repurchaseis unusually inadequate

b. seller remains in possession as

lessee or otherwise

c. upon or after expiration of right to

repurchase, another instrument

extending the period of redemptionor granting new period is executed

d. buyer retains for himself a part ofthe purchase price

e. seller binds himself to pay taxes onthing sold

f. real intention of parties is to secure

the payment of a debt orperformance of other obligation

NOTE: In case of doubt in determining whether it is

an equitable mortgage or a sale a retro, the sale

shall be construed as an equitable mortgage.

2. What to Look for in Determining

Nature of Contract

a. language of the contract

b. conduct of parties to reveal real

intent

3. Remedy available to vendor: ask for

reformation of contract

4. Rationale behind provision on

Equitable Mortgage:

a. Circumvention of usury law

b. Circumvention of prohibition againstpactum commissorium creditorcannot appropriate the things given

by way of pledge or mortgage;remedy here is foreclosure. The realintention of parties is that the

pretended purchase price is money

loaned and to secure payment of theloan, sale withpacto de retro is

drawn up5. Period of Redemption

a. No period agreed upon 4

years from date of contractb. Period agreed upon should not

exceed 10 years; if it exceeded, validonly for the first 10 years.

c. When period to redeem has expiredand there has been a previous suiton the nature of the contract seller

still has 30 days from final judgment

on the basis that contract was a salewithpacto de retro:

d. Rationale: no redemption due toerroneous belief that it is equitable

mortgage which can be

extinguished by paying the loan.


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e. This refers to cases involving a

transaction where one of the partiescontests or denies that the true

agreement is one of sale with theright to repurchase; not to cases

where the transaction is conclusivelyapacto de retro sale.

f. Example: Where a buyer a retrohonestly believed that he entered

merely into an equitable mortgage,not apacto de retro transaction, and

because of such belief he had notredeemed within the proper period.

NOTE: When period has expired and seller allowed

the period of redemption to expire seller is at fault

for not having exercised his rights so should not be

granted a new period

Paez vs. MagnoTender of payment is SUFFICIENT to compel

redemption, but is not in itself a payment that relieves

the vendor from his liability to pay the redemption

price

VI. Effect when There is No RedemptionMade1. jurisprudence before the NCC: buyer a

retro automatically acquires fullownership

2. under present art 1607: there must bejudicial order before ownership of realproperty is consolidated in the buyer a

retro

VII. How is Redemption Effected1. Seller a retro must first pay the following:

a. the price of the thing soldb. expenses of the contract and other

legitimate payments made by reasonof the sale

c. necessary and useful expenses

made on the thing soldd. Valid tender of payment is sufficiente. Mere sendingof notice w ithout valid

tender is insufficient .f. Failure to pay useful and

unnecessary expenses entitles

vendee to retain land unless actualreimbursement is made

VIII. In Case of Multi-Parties1. When an undivided thing is sold because

co- owners cannot agree that it be

allotted to one of them vendee a retro

may compel the vendor to redeem

the whole thing2. When an undivided thing is sold by co-

owners / co-heirs, vendors a retro may

only exercise his right over his respectiveshare; vendee a retro may demand thatthey must come to an agreement first andmay not be compelled to consent to a

partial redemption3. When rights of co-owners over an

undivided thing is sold as regards to theirown share vendee retro cannot compelone to redeem the whole property

4. Should one of the co-heirs/co-ownerssucceed in redeeming the property

such vendor a retro shall be considered

as trustee with respect to the share of theother co-owners/co-heirs.

IX. Fruits1. what controls is the stipulation between

parties as regards the fruits; if none:

a. at time of execution of the sale a

retro there are visible or growingfruits there shall be no pro-ratingat time of redemption if no

indemnity was paid by the vendee aretro

b. at time of execution sale a retro

there be no fruits but there are fruitsat time of redemption pro-rated

between vendor a retro and vendeea retro giving the vendee a retro a

part corresponding to the time hepossessed the land.

PRE-EMPTION REDEMPTION

1.Arises before sale Arises after sale

2.No rescission There can be resciss ionbecause no sale exists of the original saleyet

3.The action is directed Action is directed against against prospective buyer

seller

ASSIGNMENT

SeeArts . 1624 1634

I. ASSIGNMENT: The owner of a credit

transfers to another his rights and actions in

consideration of a price certain in money or its

equivalent


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1. transfers the right to collect the full value

of the credit, even if he paid a price less

than such value2. transfers all the accessory rights (e.g.

guaranty, mortgage, pledge, preference)3. debtor can set up against the assignee

all the defenses he could have set up

against the assignor

II. What Makes Assignment Different From

Species Sale?

1. Technical term but basically a sale

2. Sale of credits and other incorporeal

things

III. Effects of Assignment

1. lack of knowledge or consent of debtornot essential for validity but has legal

effects

2. assignment of rights made w/oknowledge of debtor debtor mayset up against assignee the

compensation w/c would pertain tohim against assignor of allcredits prior to assignment and of laterones until he had knowledge of the

assignment3. debtor has consented to assignment

cannot set up4. compensation unless assignor was

notified by debtor that he reserved hisright to the compensation

5. debtor has knowledge but no consent -

may still set up compensation ofdebts previous to assignment but notthe subsequent ones.

IV. Transfer of Ownership1. by tradition and not by perfection2. by execution of public instrument

because intangibles cannot bephysically transferred

3. Without necessity of delivering the

4.

.

s ru e oes no appy o nego a edocuments and documents of titlewhich are governed by special laws.

V. Effect of payment of debtor afterassignment of credit

1. Before Notice of the Assignment

a. Payment to the original creditor is

valid and debtor shall be released

from his obligation

2. After Noticea. Payment to the original creditor is

not valid as against the assignee

b. He may be made to pay again by

the assignee

VI. Warranties of the assignor of credit1. NO warranty against hidden defect -

N/A because intangibles has nophysical existence

2. He warrants the existence and legalityof credit - there is warranty exceptwhen expressly sold as a doubtful

accounta. NO warranty as to the solvency of

debtor unless it is expressly

stipulated OR unless theinsolvency was already existingand of public knowledge at the

time of the assignmentb. warranty shall last for 1 year onlyc. one who assigns inheritance right

w/o enumerating rights shall beanswerable for his character asan heir

d. one who sells whole of certainrights for a lump sum, shall be

answerable for legitimacy of thewhole in general but not for each

of the various parts

VII. Breach of Warranty: Liabilities of the

assignor of credit for violation of hiswarranties1. Assignor in good faith

a. Liability is limited to pricereceived, expenses of thecontract and other legitimatepayments made by reason of theassessment

2. Assignor in bad faitha. Liable ALSO for (expenses ofcontract and other legitimatepayments plus useful and

necessary expenses) damages

VIII. Assignment of Credit or Incorporeal Rightin Litigation - Requisites:1. There must be a sale or assignment of

credit2. There must be a pending litigation3. The debtor must pay the assignee:

a. price paid by him AND


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b. judicial costs incurred by him AND

c. interest on the price from the date ofpayment

4. The right must be exercised by the

debtor within 30 days from the date the

assignee demands (judicially or extre-judicially) payment from him

NOTE: Presumption: buyers purpose is speculation

and; law would rather benefit the debtor of such

credits rather than the one who merely speculates for

profit.

NOTE: When credit or incorporeal right in litigation is

assigned or sold, debtor has a right to extinguish it by

reimbursing the assignee for the price the buyer paid

plus interest

IX. Right to redeem by debtor not available in the following instances (not consideredspeculative

1. assignment of credit / incorporeal rightto co-heir or co-owner; the law does

not favor co-ownership2. assignment to creditor in payment for

his credita. presumption is that the

assignment is above suspicion;

assignment is in the form ofdacion en pago, thus perfectlylegal

3. assignment to possessor of tenementor piece of land which is subjectto the right in litigation assigneda. purpose is to presumably

preserve the tenement

BULK SALES LAW

I. Purpose: Protect creditor of merchant

stores.

II. When sale or transfer in bulk? - Any sale,

transfer, mortgage, or assignment1. of goods otherthan inordinary courseof business2. of all or substantially all of business3. of all or substantially all of fixtures and

equipments

III. Should cover only merchants because

creditors cannot get adequate security

because goods are sold ordinarily in

course of business

IV. When sale or transfer NOT covered byBulk Sales Law:1. If the transfer is in the ordinary course of

trade and the regular prosecution of the

business of the vendor2. If it is made by one who produces and

delivers a written waiver of the provisions

of the Bulk Sales Law from its creditors3. If it is made by an executor,

administrator, receiver, assignee ininsolvency, or public officer, acting underjudicial process (Section 8); and

4. If it refers to properties exempt from

attachment or execution (ROC, Rule 39,

Sec. 12)

V. Protection accorded to creditors by Bulk

Sales Law:

1. It requires the vendor, mortgagor,

transferor, or assignor to deliver to thevendee, mortgagee, or to his or its agentor representat ive a sworn written

statement of names and addresses of allcreditors to whom said vendor, etc. mayhave been indebted together with the

amount due or to be due (Section 3)2. It requires the vendor, mortgagor,

transferor, or assignor, at least 10 days

before the sale, transfer, mortgage,assignment to make a full detailed

inventory showing the quantity and thecost of the price, terms and conditions of

the sale, etc. (Sec. 5)

VI. Duty of seller to perform the following

when transaction is within the coverage oflaw1. make sworn statement of listing of

creditors2. delivery of sworn statement to buyer

3. apply the proceeds pro-rata to claims ofcreditors shown in verified statement

4. written advance disclosure to creditors

VII. Effects of False Statements in theSchedule of Creditors1. Without knowledge of buyer

a. If the statement is fair upon its faceand the buyer has no knowledge of

its incorrectness and nothing to puthim on inquiry about it, he will beprotected in its purchase

b. The remedy of the creditor is notagainst the goods but to prosecute

the seller criminally


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2. With knowledge or imputed

knowledge of buyer

a. The vendee accepts it at his perilb. The sale is valid only as between

the vendor and the vendee but voidagainst the creditors

3. With names of certain creditorswithout notice are omitted from the lista. The sale is VOID as to such

creditors, whether the omission was

fraudulent or not.4. With respect to an innocent

purchaser for value from the original

purchasera. An IPV from the original purchaser

is protected

b. However if the circumstances aresuch as to bind the subsequent

purchaser with constructive noticethat the sale to the vendor (originalpurchaser) was fraudulent, the

property will be liable in his hands to

creditors of the original vendor

VIII. Effects of violation of Law on Transfer1. As between parties

a. The Bulk Sales Law does NOT inany way affect the validity of the

transfer as between theintermediate parties thereto

b. A sale not in compliance with the

Bulk Sales Law is valid against allpersons other than creditors

2. As against creditorsa. A purchaser in violation of the law

acquires no right in the propertypurchased as against the creditorsof the seller

b. His status is that of a trustee orreceiver for the benefit of the

creditors of the seller; as such, he isresponsible for the disposition of the

property

IX. Remedies available to creditors1. The proper remedy is one against the

the debt, such as execution,attachment, garnishment, or by aproceeding in equity

2. An ordinary action against thepurchaser to obtain money judgment willNOT lie, unless the purchaser has soldor otherwise disposed of, or dealt withthe property, so as to become

personally liable to the creditors for

value of it.

X. Effects of Non-Compliance

Failure to On On SellerTransaction

Prepare and deliver Fraudulent and Criminalsworn listing of void LiabilitycreditorsApply proceeds pro- Fraudulent and Criminal

rata to listed creditors void LiabilityMake advance written Not void No Criminadisclosure of Liabilitytransactions tocreditorsRegister sworn Not void No Criminastatement with DTI LiabilityInclude or omit names Void Criminalof creditors and Liabilitycorrect amount due inthe statementSale for no Void Criminalconsideration Liability

Anti-Dummy Law

I. Penalizes Filipinos who permit aliens touse them as nominees or dummiesto enjoy privileges reserved only fo Filipinos.

II. Management, operation as officers,

employees or laborers.III. Includes Control or non-control positions

Goods to subject to them to the

payment of