Beruflich Dokumente
Kultur Dokumente
1
The Outline presents the manner by which the Law on Sales will be taken-up in class. The x's and those footnoted in
the Outline represent cases or topics which need no extended discussions, either because the essence of the rulings
are already summarized in the Outline or they contain similar rulings or doctrines as other cases to be discussed.
Unless otherwise indicated, the numbered articles refer to articles of the Civil Code.
2
Ownership is the independent and general power of a person over a thing for purposes recognized by law and within the limits
established thereby, which includes the right to enjoy and dispose of a thing, without other limitations than those established by law. . . .
Aside from the jus utendi and the jus abutendi inherent in the right to enjoy the thing, the right to dispose, or the jus disponendi, is the
power of the owner to alienate, encumber, transform and even destroy the thing owned. Flancia v. CA, 457 SCRA 224 (2005).
3
Alfredo v. Borras, 404 SCRA 145 (2003); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Roberts v. Papio, 515 SCRA
346 (2007); Hyatt Elevators and Escalators Corp. v. Cathedral Heights Building Complex Assn., 636 SCRA 401 (2010).
4
Jovan Land, Inc. v. CA, 268 SCRA 160 (1997); Quijada v. CA, 299 SCRA 695 (1998); Co v. CA, 312 SCRA 528 (1999); San Andres v.
Rodriguez, 332 SCRA 769 (2000); Roble v. Arbasa, 362 SCRA 69 (2001); Polytechnic University v. CA, 368 SCRA 691 (2001);
Katipunan v. Katipunan, 375 SCRA 199 (2002); Londres v. CA, 394 SCRA 133 (2002); Manongsong v. Estimo, 404 SCRA 683 (2003);
Jimenez, Jr. v. Jordana, 444 SCRA 250 (2004); San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458
(2005); Roberts v. Papio, 515 SCRA 346 (2007); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Republic v. Florendo, 549
SCRA 527 (2008); GSIS v. Lopez, 592 SCRA 456 (2009); Baladad v. Rublico, 595 SCRA 125 (2009); Del Prado v. Caballero, 614 SCRA
102 (2010); Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010); Hyatt Elevators and Escalators Corp. v. Cathedral
Heights Building Complex Assn., 636 SCRA 401 (2010).
5
Roberts v. Papio, 515 SCRA 346 (2007); XYST Corp. v. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009).
6
Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995); Jovan Land, Inc. v. CA, 268 SCRA 160 (1997); Bugatti v. CA, 343 SCRA
335 (2000); Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444
(2006); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008);
GSIS v. Lopez, 592 SCRA 456 (2009); XYST Corp. v. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009).
7
Bowe v. CA, 220 SCRA 158 (1993); Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Cavite Devt Bank v.
Lim, 324 SCRA 346 (2000).
8
Romero v. CA, 250 SCRA 223 (1995); Balatbat v. CA, 261 SCRA 128 (1996); Coronel v. CA, 263 SCRA 15 (1996); City of Cebu v.
Heirs of Candido Rubi, 306 SCRA 408 (1999); Agasen v. CA, 325 SCRA 504 (2000); Laforteza v. Machuca, 333 SCRA 643 (2000);
-2 Upon its perfection, the parties may reciprocally demand performance. xHeirs of Venancio Bejenting
9
v. Baez, 502 SCRA 531 (2006); subject only to the provisions of the law governing the form of
contracts. xCruz v. Fernando, 477 SCRA 173 (2005).
It remains valid even if parties have not affixed their signatures to its written form, xGabelo v. CA,
316 SCRA 386 (1999), or the manner of payment is breached. xPilipinas Shell Petroleum Corp v.
Gobonseng, 496 SCRA 305 (2006).
In an Extrajudicial Settlement of Estate with Absolute Sale, it would be immaterial that the buyers
signature does not appear thereon since the contract of sale is consensual and perfected by mere
consent. xBaladad v. Rublico, 595 SCRA 125 (2009).
Failure of the subdivision developer to obtain a license to sell does not render the sales void
especially that the parties have impliedly admitted that there was already a meeting of the minds as
to the subject of the sale and price. Cantemprate v. CRS Realty Dev. Corp. 587 SCRA 492 (2009).
The binding effect of sale is based on the principle that the obligations arising therefrom have the
force of law between the parties. xVeterans Federation of the Philippines v. CA, 345 SCRA 348
(2000).
Perfection Distinguished from Demandability Not all contracts of sale become automatically
and immediately effective. In sales with assumption of mortgage, there is a condition precedent to the
sellers consent and without the approval of the mortgagee, the sale is not perfected. xBian Steel
Corp. v. CA, 391 SCRA 90 (2002).
No Contract Situation versus Void Contract Absence of consent (i.e., complete meeting
of minds) negates the existence of a perfected sale. xFirme v. Bukal Enterprises and Dev. Corp., 414
SCRA 190 (2003). The contract then is null and void ab initio, absolutely wanting in civil effects;
hence, it does not create, modify, or extinguish the juridical relation to which it refers. xCabotaje v.
Pudunan, 436 SCRA 423 (2004).
When there is no meeting of the minds on price, the contract is not perfected and does not
serve as a binding juridical relation between the parties. xManila Metal Container Corp. v. PNB, 511
10
SCRA 444 (2006), and should be more accurately denominated as inexistent, as it did not pass the
stage of generation to the point of perfection. xNHA v. Grace Baptist Church, 424 SCRA 147 (2004).
c. Bilateral and Reciprocal (Arts. 1169 and 1191)
A contract of sale gives rise to reciprocal obligations, which arise from the same cause with
each party being a debtor and creditor of the other, such that the obligation of one is dependent upon
the obligation of the other; and they are to be performed simultaneously, so that the performance of
one is conditioned upon the simultaneous fulfillment of the other. Cortes v. CA, 494 SCRA 570
(2006).11
A perfected contract of sale is bilateral because it carries the correlative duty of the seller to
deliver the property and the obligation of the buyer to pay the agreed price. Congregation of the
Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008).
The power to rescind is implied in reciprocal ones in case one of the obligors should not comply
with what is incumbent upon him, and without need of prior demand. Almocera v. Ong, 546 SCRA
164 (2008).12
d. Onerous and Commutative (Gaite v. Fonacier, 2 SCRA 830 [1961]; BUT
1470)
SEE:
In a contract of sale, there is no requirement that the price be equal to the exact value of the
subject matter of sale; all that is required is that the parties believed that they will receive good value
in exchange for what they will give. Buenaventura v. CA, 416 SCRA 263 (2003).
e. Sale Is Title and Not Mode
Sale is not a mode, but merely a title. A mode is the legal means by which dominion or ownership
is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or
ownership. Sale by itself does not transfer or affect ownership; the most that sale does is to create
the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually
transfers ownership. xSan Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005),13 citing VILLANUEVA,
PHILIPPINE LAW ON SALES, 1995 ed., at p. 5.
Londres v. CA, 394 SCRA 133 (2002); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Buenaventura v. CA, 416 SCRA 263 (2003);
San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Ainza v. Padua, 462 SCRA 614 (2005);
Roberts v. Papio, 515 SCRA 346 (2007); MCC Industrial Sales Corp. v. Ssangyong Corp., 536 SCRA 408 (2007); Castillo v. Reyes. 539
SCRA 193 (2007); XYST Corp. v. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009); Del Prado v. Caballero, 614 SCRA 102
(2010); Duarte v. Duran, 657 SCRA 607 (2011).
9
Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
10
Roberts v. Papio, 515 SCRA 346 (2007).
11
Ong v. CA, 310 SCRA 1 (1999); Mortel v. KASSCO, 348 SCRA 391 (2000); Agro Conglomerates, Inc. v. CA, 348 SCRA 450 (2000);
Velarde v. CA, 361 SCRA 56 (2001); Carrascoso, Jr. v. CA, 477 SCRA 666 (2005); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53
(2008); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008).
12
Vda. De Quirino v. Palarca, 29 SCRA 1 (1969)
13
Acap v. CA, 251 SCRA 30 (1995).
-3Sellers ownership of the thing sold is not an element of perfection; what the law requires is that
seller has the right to transfer ownership at the time of delivery. xQuijada v. CA, 299 SCRA 695
(1998).14
BUT SEE: xTitong v. CA, 287 SCRA 102 (1998), which defined a sale as a contract transferring
dominion and other real rights in the thing sold.
14
Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003); Heirs of
Jesus M. Mascuana v. CA, 461 SCRA 186 (2005).
15
Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Orden v. Aurea, 562 SCRA 660 (2008); Ver Reyes v.
Salvador, Sr., 564 SCRA 456 (2008)..
16
Commissioner of Internal Revenue v. Arnoldus Carpentry Shop, 159 SCRA 199 (1988); Del Monte Philippines, Inc. v. Aragones, 461
SCRA 139 (2005).
-4buyer to the contract effected he may voluntarily assume warranties of seller. xSchmid and Oberly, Inc.
v. RJL Martinez, 166 SCRA 493 (1988).
5. Dacion En Pago (Arts. 1245 and 1934)
Governed by the law on sales, dation in payment is a transaction that takes place when property is
alienated to the creditor in full satisfaction of a debt in money it involves the delivery and transmission
of ownership of a thing as an accepted equivalent of the performance of the obligation. Yuson v. Vitan,
496 SCRA 540 (2007).
In its modern concept, what actually takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the performance of an obligation is
considered as the object of the contract of sale, while the debt is considered as the purchase price.
xAquintey v. Tibong 511 SCRA 414 (2006).17
Elements of dation in payment: (a) performance of the prestation in lieu of payment (animo
solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third
person; (b) some difference between the prestation due and that which is given in substitution (aliud pro
alio); and (c) agreement between the creditor and debtor that the obligation is immediately extinguished
by reason of the performance of a presentation different from that due. Lo v. KJS Eco-Formwork
System Phil., Inc., 413 SCRA 182 (2003).18
There is no dation in payment where there is no transfer of ownership in the creditors favor, as
when the possession of the thing is merely given to the creditor by way of security. Fort Bonifacio Dev.
Corp. v. Yllas Lending Corp., 567 SCRA 454 (2008); as when the possession is only by way of security.
xPNB v. Pineda, 197 SCRA 1 (1991); there must be actual delivery of the property to the creditor by
way of extinguishment of the pre-existing debt. Philippine Lawin Bus Co. v. CA, 374 SCRA 332
(2002).19 BUT SEE OBITER: SSS v. CA, 553 SCRA 677 (2008).
In a true dacion en pago, the assignment of the property extinguishes the monetary debt. Ong v.
Roban Lending Corp., 557 SCRA 516 (2008).
A creditor, especially a bank, which enters into dacion en pago, should know and must accept the
legal consequence thereof, that the pre-existing obligation is totally extinguished. xEstanislao v. East
West Banking Corp., 544 SCRA 369 (2008).
A property subject to a real estate mortgage, which has not been foreclosed, may validly be the
subject of dacion en pago, for a mortgage does not take away the property rights of the mortgagor;
however, the creditor who becomes the buyer of the property is subject to the real estate mortgage lien.
xTypingco v. Lim, 604 SCRA 396 (2009).
A dacion en pago is governed by the law of sales, and contracts of sale come with warranties,
either express (if explicitly stipulated by the parties) or implied (under Article 1547 et seq. of the
Civil Code). The implied warranty in case of eviction is waivable and cannot be invoked if the buyer
knew of the risks or danger of eviction and assumed its consequences. Luzon Dev. Bank v.
Enriquez, 639 SCRA 332 (2011).
6. Lease (Arts. 1484 and 1485)
When rentals in a lease are clearly meant to be installment payments to a sale contract, despite
the nomenclature given by the parties, it is a sale by installments and governed by the Recto Law.
xFilinvest Credit Corp. v. CA, 178 SCRA 188 (1989).
Dao Heng Bank, Inc. (now BDO) v. Laigo, 571 SCRA 434 (2008); Technogas Philippines Mfg. Corp. v. PNB, 551 SCRA 183 (2008);
Ocampo v. Land Bank of the Philippines, 591 SCRA 562 (2009); D.B.T. Mar-Bay Construction, Inc. v. Panes, 594 SCRA 578 (2009).
18
Aquintey v. Tibong 511 SCRA 414 (2006); Rockville Excel International Exim Corp. v. Culla, 602 SCRA 124 (2009).
19
Filinvest Credit Corp. v. Philippine Acetylene Co., Inc. 111 SCRA 421 (1982); Vda. de Jayme v. CA, 390 SCRA 380 (2002); Ong v.
Roban Lending Corp., 557 SCRA 516 (2008).
-5While a person is not incompetent to contract merely because of advanced years or by reason of
physical infirmities, when such age or infirmities have impaired the mental faculties so as to prevent
the person from properly, intelligently or firmly protecting his property rights, then he is undeniably
incapacitated, and the sale he entered into is void. [?]. Paragas v. Heirs of Dominador Balacano,
468 SCRA 717 (2005). 20
3. Sales By and Between Spouses:
a. Contracts with Third Parties (Arts. 73, 96, and 124, Family Code)
Under Art. 124 of Family Code, sale by husband of a conjugal property without the wifes consent
is void and not merely voidable, since the resulting contract lacks one of the essential elements of full
consent. xGuiang v. CA, 291 SCRA 372 (1998).21
A wife affixing her signature to a Deed of Sale as a witness is deemed to have given her consent.
xPelayo v. Perez, 459 SCRA 475 (2005).
As an exception, husband may dispose of conjugal property without wifes consent if such sale is
necessary to answer for conjugal liabilities mentioned in Articles 161 and 162. xAbalos v. Macatangay,
Jr., 439 SCRA 64 (2004).
b. Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code)
Sales between spouses who are not governed by a complete separation of property regime are
void, not just voidable. xMedina v. Collector, 1 SCRA 302 (1960).
Since the spouses cannot validly sell property to one another under Art. 1490, then policy
consideration and the dictates of morality require that the prohibition should apply also to common-law
relationships. cf. Matabuena v. Cervantes, 38 SCRA 284 (1971).
Sale by husband of conjugal land to his concubine is null and void for being contrary to morals and
public policy and subversive of the stability of the family, a basic social institution which public policy
cherishes and protects. Calimlim-Canullas v. Fortun, 129 SCRA 675 (1984).22
Nevertheless, when property resold to a third-party buyer in good faith and for value,
reconveyance is no longer available. xCruz v. CA, 281 SCRA 491 (1997).
The in pari delicto doctrine would not apply to the spouses-parties under Art. 1490, since only the
heirs and the creditors can question the sales nullity. xModina v. CA, 317 SCRA 696 (1999).
4. Others Relatively Disqualified (Arts. 1491 and 1492)
Contracts entered into in violation of Arts. 1491 and 1492 are not merely voidable, but are null and
void. Rubias v. Batiller, 51 SCRA 120 (1973).23
a. Guardians, Agents and Administrators
Hereditary rights are not included in the prohibition insofar as administrator or executor of the
estate of the deceased. xNaval v. Enriquez, 3 Phil. 669 (1904).
No more need to comply with xRodriquez v. Mactal, 60 Phil. 13 (1934) which required showing
that a third party bought as conduit/nominee of the buyer disqualified under Art. 1491; rather, the
presumption now is that such disqualified party obtained the property in violation of said article.
Philippine Trust Co. v. Roldan, 99 Phil. 392 (1956).
Prohibition against agents does not apply if the principal consents to the sale of the property in
the hands of the agent. xDistajo v. CA, 339 SCRA 52 (2000).
b. Attorneys
(1) Prohibition against attorneys purchasing the properties of their clients in litigation applies:
Only while litigation is pending. xDirector of Lands v. Ababa, 88 SCRA 513 (1979);
Even though litigation is not adversarial in nature Rubias v. Batiller, 51 SCRA 120 (1973); or when it is a
certiorari proceeding that may has no merit xValencia v. Cabanting, 196 SCRA 302 (1991).
Only to a lawyer of record, and does not cover assignment of the property given in judgment made by a
client to an attorney, who has not taken part in the case. Municipal Council of Iloilo v. Evangelista, 55 Phil.
290 (1930);24
Not applicable to a lawyer who acquired property prior to the time he intervened as counsel in the suit
involving such property. Del Rosario v. Millado, 26 SCRA 700 (1969).
-6(b) Contingency fee arrangement granting the lawyer proprietary rights to the property in
litigation since the payment of said fee is not made during the pendency of litigation but only
after judgment has been rendered. [?] Fabillo v. IAC, 195 SCRA 28 (1991). 25
c. Judges
A judge should restrain himself from participating in the sale of propertiesit is incumbent upon
him to advise the parties to discontinue the transaction if it is contrary to law. Britanico v. Espinosa,
486 SCRA 523 (2006).
A judge who buys property in litigation before his court after the judgment becomes final does not
violate Art. 1491, but he can be administratively disciplined for violation of the Code of Judicial Ethics.
xMacariola v. Asuncion, 114 SCRA 77 (1982).
Even when the main cause is a collection of a sum of money, the properties levied are still
subject to the prohibition. xGan Tingco v. Pabinguit, 35 Phil. 81 (1916).
25
26
Recto v. Harden, 100 Phil. 427 (1956); Vda. de Laig v. CA, 86 SCRA 641 (1978).
Londres v. CA, 394 SCRA 133 (2002).
-7As the above-quoted portion of the kasunduan shows [giving reference to the area, the
locality located, and vicinity with reference of old trees], there is no doubt that the object of the
sale is determinate. xCarabeo v. Dingco, 647 SCRA 200 (2011).
Determinable subject matter of sale are not subject to risk of loss until they are physically
segregated or particularly designated. Yu Tek & Co. v. Gonzales, 29 Phil. 384 (1915).
b. Undivided Interest (Art. 1463) or Undivided Share in a Mass of Fungible Goods (Art. 1464)
May result it co-ownership.
4. Quantity of Goods as Subject Matter Not Essential for Perfection [?] (Art. 1349)
Sale of grains is perfected even when the exact quantity or quality is not known, so long as the
source of the subject is certain. NGA v. IAC, 171 SCRA 131 (1989).
Where seller quoted to buyer the items offered for sale, by item number, part number, description
and unit price, and the buyer had sent in reply a purchase order without indicating the quantity being
order, there was already a perfected contract of sale, even when required letter of credit had not
been opened by the buyer. Johannes Schuback & Sons Phil. Trading Corp. v. CA, 227 SCRA
719 (1993).
5. Sellers Obligation to Transfer Title to Buyer (Art. 1459, 1462, and 1505)
a. Sellers Ownership Need Not Exist at Perfection:
Sale of copra for future delivery does not make seller liable for estafa for failing to deliver
because the contract is still valid and the obligation was civil and not criminal. xEsguerra v.
People, 108 Phil. 1078 (1960).
A perfected sale cannot be challenged on the ground of the sellers non-ownership of the thing
sold at the time of the perfection; it is at delivery that the law requires the seller to have the
ownership of the thing sold. xAlcantara-Daus v. de Leon, 404 SCRA 74 (2003).27
It is essential that seller is owner of the property he is selling. The principal obligation of a
seller is to transfer the ownership of the property sold (Art. 1458). This law stems from the
principle that nobody can dispose of that which does not belong to him. NEMO DAT QUOD NON
HABET. Noel v. CA, 240 SCRA 78 (1995).
That the sellers are no longer owners of the goods at perfection does not appear to be one of
the void contracts enumerated in Art. 1409 of Civil Code; and Art. 1402 thereof recognizes a sale
where the goods are to be acquired . . . by the seller after the perfection of the contract of sale,
clearly implying that a sale is possible even if the seller was not the owner at the time of sale,
provided he acquires title to the property later on; nevertheless such contract may be deemed to
be inoperative and may thus fall, by analogy, under Art. 1409(5): Those which contemplate an
impossible service. Nool v. CA, 276 SCRA 149 (1997).
b. Subsequent Acquisition of Title by Non-Owner Seller (Art. 1434) Title passes to the seller
by operation of law.
c. Acquisition by the Buyer May Even Depend on Contingency (Art. 1462)
X6.
Illegality of Subject Matter (Arts. 1409, 1458, 1461, 1462, and 1575)
a. Special Laws: narcotics (R.A. 6425); wild bird or mammal (Act 2590, Sec. 7); rare wild plants (Act
3983); poisonous plants or fruits (R.A. 1288); dynamited fish (R.A 428); gunpowder and explosives
(Act 2255); firearms and ammunitions (P.D. 9); sale of realty by non-Christians (Sec. 145, Revised
Adm. Code, R.A. 4252)
b. Following Sales of Land Void:
By Non-Christian if not approved by Provincial Governor per Sec. 145 of Revised Administrative Code.
xTac-an v. CA, 129 SCRA 319 (1984).
Friar land without consent of Secretary of Agriculture required under Act No. 1120. xAlonso v. Cebu
Country Club, Inc., 375 SCRA 390 (2002); Liao v. CA, 323 SCRA 430 (2000).
Made in violation of land reform laws declaring tenant-tillers as the full owners of the lands they tilled.
xSiacor v. Gigantana, 380 SCRA 306 (2002).
Reclaimed lands are of the public domain and cannot, without congressional fiat, be sold, public or private.
Fisheries Dev. Authority v. CA, 534 SCRA 490 (2007).
-8Seller cannot unilaterally increase the price previously agreed upon with the buyer, even when due to
increased construction costs. GSIS v. CA, 228 SCRA 183 (1993).
Buyer who opted to purchase the land on installment basis with imposed interest, cannot unilaterally
disavow the obligation created by the stipulation in the contract which sets the interest at 24% p.a. The
rationale behind having to pay a higher sum on the installment is to compensate the vendor for waiting a
number of years before receiving the total amount due. The amount of the stated contract price paid in
full today is worth much more than a series of small payments totaling the same amount. x x x To assert
that mere prompt payment of the monthly installments should obviate imposition of the stipulated interest
is to ignore an economic fact and negate one of the most important principles on which commerce
operates. Bortikey v. AFP RSBS, 477 SCRA 511 (2005).
1. Price Must Be Real (Art. 1471)
a. When Price Simulated
(1) Mapalo v. Mapalo, 17 SCRA 114 (1966), versus: When two aged ladies, not versed in English,
sign a Deed of Sale on representation by buyer that it was merely to evidence their lending of
money, the situation constitutes more than just fraud and vitiation of consent to give rise to a
voidable contract, since there was in fact no intention to enter into a sale, there was no consent
at all, and more importantly, there was no consideration or price agreed upon, which makes the
contract void ab initio. Rongavilla v. CA, 294 SCRA 289 (1998).
(2) Mate v. CA, 290 SCRA 463 (1998), versus: When Deed of Sale was executed to facilitate
transfer of property to buyer to enable him to construct a commercial building and to sell the
property to the children, such arrangement being merely a subterfuge on the part of buyer, the
agreement cannot also be taken as a consideration and sale is void. Yu Bun Guan v. Ong, 367
SCRA 559 (2001).
(3) Effects When Price Simulated The principle of in pari delicto nonoritur action, which denies all
recovery to the guilty parties inter se, where the price is simulated; the doctrine applies only
where the nullity arises from the illegality of the consideration or the purpose of the contract.
Modina v. CA, 317 SCRA 696 (1999).28
b. When Price is False (Arts. 1353 and 1354)
When the parties intended to be bound but the deed did not reflect the actual price agreed
upon, there is only a relative simulation of the contract which remains valid and enforceable, but
subject to reformation. xMacapgal v. Remorin, 458 SCRA 652 (2005).
When price indicated in deed of absolute sale is undervalued consideration pursuant to
intention to avoid payment of higher capital gains taxes, the price stated is false, but the sale is still
valid and binding on the real terms. xHeirs of Spouses Balite v. Lim, 446 SCRA 54 (2004).
c. Non-Payment of Price
Sale being consensual, failure of buyer to pay the price does not make the contract void for lack
of consideration or simulation, but results in buyers default, for which the seller may exercise his
legal remedies. xBalatbat v. CA, 261 SCRA 128 (1996).29
In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes
the transaction that, for a time, existed and discharges the obligations created thereunder. [?] The
remedy of an unpaid seller in a contract of sale is to seek either specific performance or rescission.
xHeirs of Pedro Escanlar v. CA, 281 SCRA 176 (1997).30
Badge That Price Is Simulated, Not Just Unpaid: It is a badge of simulated price, which
render the sale void, when the price, which is stipulated thereon to have been paid, has in fact
never been paid by the purchaser to the seller. xVda. de Catindig. v. Heirs of Catalina Roque, 74
SCRA 83 (1976).31
2. Must Be in Money or Its Equivalent (Arts. 1458 and 1468)
Price must be valuable consideration as mandated by Civil Law, instead of any price
mandated in common law. Ong v. Ong, 139 SCRA 133 (1985); Bagnas v. CA, 176 SCRA 159
(1989); Republic v. Phil. Resources Dev., 102 Phil. 960 (1958).
Consideration for sale can take different forms, such as the prestation or promise of a thing or
service by another, thus:
When deed provides that the consideration was the expected profits from the subdivision project.
xTorres v. CA, 320 SCRA 428 (1999).
28
Yu Bun Guan v. Ong, , 367 SCRA 559 (2001); Gonzales v. Trinidad, 67 Phil. 682 (1939)
Pealosa v. Santos, 363 SCRA 545 (2001); Soliva v. The Intestate Estate of Marcelo M. Villalba, 417 SCRA 277 (2003); Province of
Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
30
Villaflor v. CA, 280 SCRA 297 (1997).
31
Ocejo v. Flores, 40 Phil. 921 (1920); Ladanga v. CA, 131 SCRA 361 (1984); Rongavilla v. CA, 294 SCRA 289 (1998); Labagala v.
Santiago, 371 SCRA 360 (2001); Cruz v. Bancom Finance Corp., 379 SCRA 490 (2002); Montecillo v. Reynes, 385 SCRA 244 (2002);
Republic v. Southside Homeowners Asso., 502 SCRA 587 (2006); Quimpo, Sr. v Abad Vda de Beltran, 545 SCRA 174 (2008); Solidstate
Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197 (2008).
29
-9 Cancellation of liabilities on the property in favor of the seller. xPolytechnic University v. CA, 368 SCRA
691 (2001).
Assumption of mortgage constituted on the property sold. xDoles v. Angeles, 492 SCRA 607 (2006).32
Even when there was no meeting on the minds of the price, this Court rules that to deny
petitioners claim would unjustly enrich respondent who had benefited from the repairs of their
four elevators. xHyatt Elevators and Escalators Corp. v. Cathedral Heights Building Complex
Assn., 636 SCRA 401 (2010).
4. Manner of Payment of Price ESSENTIAL (Art. 1179)
A definite agreement on the manner of payment of price is an essential element in the formation of a
binding and enforceable contract sale; without it the sale is void and an action for specific performance
must fail. Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007).34
When the manner of payment of the price is discussed after acceptance, then such acceptance
did not produce a binding and enforceable contract of sale. xNavarro v. Sugar Producer's Corp., 1 SCRA
1180 (1961).
Where there is no other basis for the payment of the subsequent amortizations in a Deed of
Conditional Sale, the reasonable conclusion one can reach is that the subsequent payments shall be
made in the same amount as the first payment. [?] xDBP v. CA, 344 SCRA 492 (2000).
5. Inadequacy of Price Does Not Affect Ordinary Sale (Arts. 1355 and 1470)
Mere inadequacy of the price does not affect the validity of the sale when both parties are in a
position to form an independent judgment concerning the transaction, unless fraud, mistake, or undue
influence indicative of a defect in consent is present. The contract may be annulled for vitiated consent
and not due to the inadequacy of price. xBautista v. CA, 436 SCRA 141 (2004).35
32
The deed of sale with assumption of mortgage is a registrable instrument and must be registered with the Register of Deeds in order
to bind third parties. Rodriguez v. CA, 495 SCRA 490 (2006).
33
Boston Bank of the Philippines v. Manalo, 482 SCRA 108 (2006).
34
Velasco v. CA, 51 SCRA 439 (1973); Co v. CA, 286 SCRA 76 (1998); San Miguel Properties Philippines v. Huang, 336 SCRA 737
(2000); Montecillo v. Reynes, 385 SCRA 244 (2002); Edrada v. Ramos, 468 SCRA 597 (2005); Cruz v. Fernando, 477 SCRA 173
(2005); Marnelego v. Banco Filipino Savings and Mortgage Bank, 480 SCRA 399 (2006); Boston Bank of the Phil. v. Manalo, 482 SCRA
108 (2006); Platinum Plans Phil., Inc. v. Cucueco, 488 SCRA 156 (2006); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).
35
Ereeta v. Bezore, 54 SCRA 13 (1973); Bacungan v. CA, 574 SCRA 642 (2008); Bacungan v. CA, 574 SCRA 642 (2008).
- 10 Absent any evidence of the fair market value of a land as of the time of sale, it cannot be concluded
that the price was inadequate. xAcabal v. Acabal, 454 SCRA 897 (2005).36
a. Gross Inadequacy of Price May Avoid Judicial Sale:
(i) Only when it is shocking to the conscience of man. xPascua v. Simeon, 161 SCRA 1 (1988);
and
(ii) There is showing that, in the event of a resale, a better price can be obtained. xCu Bie v. CA,
15 SCRA 307 (1965).37
UNLESS: There is right of redemption, in which case the proper remedy is to redeem. xDe Leon v.
Salvador, 36 SCRA 567 (1970).38
BUT:
Gross inadequacy of price by itself will not result in a void contract; it does not even affect the
validity of a contract of sale; unless it signifies a defect in the consent (i.e., there has been fraud,
mistake or undue influence) or that the parties actually intended a donation or some other contract.
Bacungan v. CA, 574 SCRA 642 (2008).
There is gross inadequacy in price if it is such that a reasonable man will not agree to dispose of
his property. xDorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008).
When judicial sale is voided without fault of purchaser, the latter is entitled return of price with
simple interest, together with all sums paid out by him in improvements introduced on the property,
taxes, and other expenses. xSeven Brothers Shipping Corp. v. CA, 246 SCRA 33 (1995).
b. Lesion of more than 1/4 of value of thing makes sale rescissible unless approved by court
(Art. 1386)
c. Gross inadequacy of price may raise the presumption of equitable mortgage (Art. 1602)
When the offeree negotiates for a much lower price, it constitutes a counter-offer and is
therefor not an acceptance of the offer of offeror. xTuazon v. Del Rosario-Suarez, 637 SCRA 728
(2010).
1. OPTION CONTRACT
An option is a preparatory contract in which one party grants to the other, for a fixed period and
under specified conditions, the power to decide, whether or not to enter into a principal contract. It
binds the party who has given the option, not to enter into the principal contract with any other person
36
- 11 during the period designated, and, within that period, to enter into such contract with the one to whom
the option was granted, if the latter should decide to use the option. It is a separate agreement distinct
from the contract of sale which the parties may enter into upon the consummation of the option.
Carceller v. CA, 302 SCRA 718 (1999).40
An option imposes no binding obligation on the person holding the option aside from the
consideration for the offer. Until accepted, it is not treated as a sale. Tayag v. Lacson, 426 SCRA
282 (2004).41
Tenants, not being the registered owners, cannot grant an option on the land, much less any
exclusive right to buy the property under the Latin saying nem dat quod non habet. xTayag v.
Lacson, 426 SCRA 282 (2004).
a. Meaning of Separate Consideration (Arts. 1479 and 1324)
A unilateral promise to sell, in order to be binding upon the promissor, must be for a price
certain and supported by a consideration separate from such price. xSalame v. CA, 239 SCRA 356
(1995).42
The separate consideration in an option may be anything of value, unlike in sale where it must
be the price certain in money or its equivalent. Villamor v. CA, 202 SCRA 607 (1991),43 such
when the option is attached to a real estate mortgage xSoriano v. Bautista, 6 SCRA 946 (1962).
Although no consideration is expressly mentioned in an option contract, it is presumed that it
exists and may be proved, and once proven, the option is binding. xMontinola v. Cojuangco, 78
Phil. 481 (1947).
b. No Separate Consideration: Void as Option, Valid as a Certain Offer
Sanchez v. Rigos, 45 SCRA 368 (1972).44
BUT LATELY: xYao Ka Sin Trading v. CA, 209 SCRA 763 (1991); xMontilla v. CA, 161 SCRA 855
(1988); xNatino v. IAC, 197 SCRA 323 (1991); and xDiamante v. CA, 206 SCRA 52
(1992).
If the option is without any consideration, the offeror may withdraw his offer by
communicating such withdrawal to the offeree at any time before acceptance. If it is founded
upon a consideration, the offeror cannot withdraw his offer before the lapse of the period
agreed upon. Tuazon v. Del Rosario-Suarez, 637 SCRA 728 (2010).
c. There Must Be Acceptance of Option Offer. Vazquez v. CA, 199 SCRA 102 (1991).
d. Proper Exercise of Option Contract. Nietes v. CA, 46 SCRA 654 (1972).
An option attached to a lease when not exercised within the option period is extinguished and
cannot be deemed to have been included in the implied renewal (tacita reconduccion) of the lease.
xDizon v. CA, 302 SCRA 288 (1999).
Proper exercise of an option gives rise to the reciprocal obligations of sale xHeirs of Luis Bacus
v. CA, 371 SCRA 295 (2001),45 which must be enforced with ten (10) years as provided under Art.
1144. xDizon v. CA, 302 SCRA 288 (1999).
There must be virtual exercise of option with the option period. Carceller v. Court of
Appeals, 302 SCRA 718 (1999).
2. RIGHT OF FIRST REFUSAL
A right of first refusal cannot be the subject of specific performance, but breach would allow a
recovery of damages. xGuerrero v. Yigo, 96 Phil. 37 (1954).
Rights of first refusal only constitute innovative juridical relations, but do not rise to the level of
contractual commitment since with the absence of agreement on price certain, they are not subject to
contractual enforcement. Ang Yu Asuncion v. CA, 238 SCRA 602 (1994).
Right of first refusal contained in a lease, when breached by promissor allows enforcement by the
promisee by way of rescission of the sale entered into with the third party, pursuant to Arts. 1381(3)
and 1385 of Civil Code. xGuzman, Bocaling & Co. v. Bonnevie, 206 SCRA 668 (1992); Equatorial
Realty Dev., Inc. v. Mayfair Theater, Inc., 264 SCRA 483 (1996);46 Paranaque Kings Enterprises,
Inc. v. CA, 268 SCRA 727, 741 (1997).
40
Laforteza v. Machuca, 333 SCRA 643 (2000); Buot v. CA, 357 SCRA 846 (2001); Abalos v. Macatangay, Jr., 439 SCRA 649
(2004); Vasquez v. Ayala Corp., 443 SCRA 231 (2004); Eulogio v. Apeles, 576 SCRA 561 (2009); Polytechnic University of the
Philippines v. Golden Horizon Realty Corp., 615 SCRA 478 (2010).
41
Adelfa Properties, Inc. v. CA, 240 SCRA 565 (1995); Kilosbayan, Inc. v. Morato, 246 SCRA 540 (1995); San Miguel Properties
Philippines, Inc. v. Huang, 336 SCRA 737 (2000); Limson v. CA, 357 SCRA 209 (2001).
42
JMA House, Inc. v. Sta. Monica Industrial and Dev. Corp., 500 SCRA 526 (2006).
43
De la Cavada v. Diaz, 37 Phil. 982 (1918); San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000)
44
Affirming Atkins, Kroll & Co., Inc. v. Cua, 102 Phil. 948 (1958); Overturning Southwestern Sugar Molasses Co. v. Atlantic Gulf &
Pacific Co., 97 Phil. 249 (1955).
45
Limson v. CA, 357 SCRA 209 (2001).
46
Rosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001); Conculada v. CA, 367 SCRA 164 (2001); Polytechnic University v. CA, 368
SCRA 691 (2001); Riviera Filipina, Inv. v. CA, 380 SCRA 245 (2002); Lucrative Realty and Dev. Corp. v. Bernabe, Jr., 392 SCRA 679
- 12 In a right of first refusal, while the object might be made determinate, the exercise of the right
would be dependent not only on the grantors eventual intention to enter into a binding juridical relation
with another but also on terms, including the price, that are yet to be firmed up. . . the offer may be
withdrawn anytime by communicating the withdrawal to the other party. Vasquez v. Ayala Corp.,
443 SCRA 231 (2004).
A right of first refusal clause simply means that should the lessor decide to sell the leased property
during the term of the lease, such sale should first be offered to the lessee; and the series of
negotiations that transpire between the lessor and the lessee on the basis of such preference is
deemed a compliance of such clause even when no final purchase agreement is perfected between
the parties. The lessor was then at liberty to offer the sale to a third party who paid a higher price, and
there is no violation of the right of the lessee. Riviera Filipina, Inv. v. CA, 380 SCRA 245 (2002).47
When a lease contract contains a right of first refusal, the lessor has the legal duty to the lessee
not to sell the leased property to anyone at any price until after the lessor made an offer to sell the
property to the lessee and the lessee has failed to accept it. Only after the lessee has failed to
exercise his right of first priority could the lessor sell the property to other buyers under the same terms
and conditions offered to the lessee, or under terms and conditions more favorable to the lessor.
Polytechnic University of the Philippines v. Golden Horizon Realty Corp., 615 SCRA 478 (2010).
A right of first refusal is a contractual grant, not of the sale of a property, but of the first priority to
buy the property in the event the owner sells the same. As distinguished from an option contract, in a
right of first refusal, whole the object might be made determinate, the exercise of the right of first
refusal would be dependent not only on the owners eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that are yet to be firmed up. Polytechnic
University of the Philippines v. Golden Horizon Realty Corp., 615 SCRA 478 (2010).
A right of first refusal in a lease in favor of the lessee cannot be availed of by the sublessee.
xSadhwani v. CA, 281 SCRA 75 (1997).
4. MUTUAL PROMISES TO BUY AND SELL (Art. 1479): TRUE CONTRACT TO SELL
Mutual promises to buy and sell a certain thing for a certain price gives each of the contracting
parties a right to demand from the other the fulfillment of the obligation. xBorromeo v. Franco, 5 Phil.
49 (1905).
Even in this case the certainty of the price must also exist, otherwise, there is no valid and
enforceable contract to sell. xTan Tiah v. Yu Jose, 67 Phil. 739 (1939).
An accepted bilateral promise to buy and sell is in a sense similar to, but not exactly the same, as
a perfected contract of sale because there is already a meeting of minds upon the thing which is the
object of the contract and upon the price.48 But a contract of sale is consummated only upon delivery
and payment, whereas in a bilateral promise to buy and sell gives the contracting parties rights in
personam, such that each has the right to demand from the other the fulfillment of their respective
undertakings. Macion v. Guiani, 225 SCRA 102 (1993).49
The cause of action under a mutual promise to buy and sell is 10 years. xVillamor v. CA, 202
SCRA 607 (1991).
(2002); Villegas v. CA, 499 SCRA 276 (2006); Polytechnic University of the Philippines v. Golden Horizon Realty Corp., 615 SCRA 478
(2010).
47
Polytechnic University v. CA, 368 SCRA 691 (2001); Villegas v. CA, 499 SCRA 276 (2006).
48
El Banco Nacional Filipino v. Ah Sing, 69 Phil. 611 (1940); Manuel v. Rodriguez, 109 Phil. 1 (1960).
49
Borromeo v. Franco, 5 Phil. 49 (1905); Villamor v. CA, 202 SCRA 607 (1991); Coronel v. CA, 263 SCRA 15 (1996).
50
Valdez v. CA, 439 SCRA 55 (2004); Blas v. Angeles-Hutalla, 439 SCRA 273 (2004); Ainza v. Padua, 462 SCRA 614 (2005); Cruz v.
Fernando, 477 SCRA 173 (2005).
51
Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).
- 13 otherwise, the same constitutes a counter-offer and has the effect of rejecting the offer. XYST Corp. v.
DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009).
1. Absolute Acceptance of a Certain Offer (Art. 1475)
Under Article 1319, the acceptance of an offer must therefore be unqualified and absolute. In other
words, it must be identical in all respects with that of the offer so as to produce consent or meeting of
the minds. This was not the case herein considering that petitioners acceptance of the offer was
qualified, which amounts to a rejection of the original offer. Limketkai Sons Milling, Inc. v. CA, 255
SCRA 626 (1996).
A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a
rejection of the original offer. The acceptance must be identical in all respects with that of the offer so
as to produce consent or meeting of minds. Manila Metal Container Corp. v. PNB, 511 SCRA 444
(2006).52
Placing the word Noted and signing such note at the bottom of the written offer cannot be
considered an acceptance that would give rise to a valid contract of sale. xDBP v. Ong, 460 SCRA 170
(2005).
If sale subject to suspensive condition: No perfected sale of a lot where the award thereof was
expressly made subject to approval by the higher authorities and there eventually was no acceptance
manifested by the supposed awardee. xPeople's Homesite & Housing Corp. v. CA, 133 SCRA 777
(1984).
2. When Deviation Allowed:
It is true that an acceptance may contain a request for certain changes in the terms of the offer
and yet be a binding acceptance, so long as it is clear that the meaning of the acceptance is
positively and unequivocally to accept the offer, whether such request is granted or not, a contract is
formed. The vendors change in a phrase of the offer to purchase, which change does not essentially
change the terms of the offer, does not amount to a rejection of the offer and the tender or a counteroffer. Villonco v. Bormaheco, 65 SCRA 352 (1975).53
3. Sale by Auction (Arts. 1476, 1403(2)(d), 1326)
The terms and conditions provided by the owner of property to be sold at auction are binding
upon all bidders, whether they knew of such conditions or not. xLeoquinco v. Postal Savings Bank,
47 Phil. 772 (1925).
An auction sale is perfected by the fall of the hammer or in other customary manner and it does
not matter that another was allowed to match the bid of the highest bidder. xProvince of Cebu v.
Heirs of Rufina Morales, 546 SCRA 315 (2008).
4. Earnest Money (Art. 1482)
Earnest money given by the buyer shall be considered as part of the price and as proof of the
perfection of the contract. It constitutes an advance payment to be deducted from the total price.
xEscueta v. Lim, 512 SCRA 411 (2007).
Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of
earnest money cannot establish the existence of a perfected contract of sale. Manila Metal
Container Corp. v. PNB, 511 SCRA 444 (2006). 54
Article 1482 does not apply when earnest money given in a contract to sell xSerrano v. Caguiat,
517 SCRA 57 (2007), especially where by stipulation the buyer has the right to walk away from the
transaction, with no obligation to pay the balance, although he will forfeit the earnest money. xChua v.
CA, 401 SCRA 54 (2003).55
Whenever earnest money is given in a contract of sale, it shall be considered as part of the price
and as proof of the perfection of the contract. But when there is no contract of sale because the parties
never went pass the negotiation stage, or more accurately, have not reached the perfection stage with
the present of the three essential elements of the contract of sale, the concept of earnest money is
certainly inapplicable. The earnest money forms part of the consideration only if the sale is
consummated upon full payment of the purchase price. Hence, there must first be a perfected contract
of sale before we can speak of earnest money. xGSIS v. Lopez, 592 SCRA 456 (2009).56
When there is no provision for forfeiture of earnest money in the event the sale fails to materialize,
then with the rescission it becomes incumbent upon seller to return the earnest money as legal
consequence of mutual restitution. xGoldenrod, Inc. v. CA, 299 SCRA 141 (1998).
52
Beaumont v. Prieto, 41 Phil. 670 (1916); Zayco v. Serra, 44 Phil. 326 (1923); Tuazon v. Del Rosario-Suarez, 637 SCRA 728 (2010).
Reiterated in Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995), but reversed in 255 SCRA
Limjoco v. CA, 37 SCRA 663 (1971); Villonco v. Bormaheco, 65 SCRA 352 (1975); Spouses Doromal, Sr. v. CA, 66 SCRA 575
(1975); PNB v. CA, 262 SCRA 464 (1996); San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000); Platinum Plans Phil.
Inc. v. Cucueco, 488 SCRA 156 (2006).
55
San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000).
56
XYST Corp. DMC Urban Properties Dev., Inc., 594 SCRA 598 (2009).
53
54
- 14 5. Difference Between Earnest Money and Option Money. Oesmer v. Paraiso Dev. Corp., 514
SCRA 228 (2007).
6. Sale Deemed Perfected Where Offer Was Made. (Art. 1319)
57
62
Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002).
Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995); Agasen v. CA, 325 SCRA 504 (2000).
64
Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002).
65
Talusan v. Tayag, 356 SCRA 263 (2001); Santos v. Manalili, 476 SCRA 679 (2005).
66
Rosencor Devt Corp. v. Inquing, 354 SCRA 119 (2001).
67
Alba Vda. De Ray v. CA, 314 SCRA 36 (1999).
68
Torcuator v. Bernabe, 459 SCRA 439 (2005).
69
Rosales v. Suba, 408 SCRA 664 (2003); Ayson, Jr. v. Paragas, 557 SCRA 50 (2008).
63
- 16 For the memorandum to take the sale out of the coverage of the Statute of Frauds, it must
contain all the essential terms of the contract of sale. xTorcuator v. Bernabe, 459 SCRA 439
(2005),70 even when scattered into various correspondences which can be brought together
xCity of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999).71
EXCEPTION: Electronic Documents under the E-COMMERCE ACT (R.A. 8792)
(3) Partial Execution (Art. 1405) Ortega v. Leonardo, 103 Phil. 870 (1958); Claudel v. CA, 199
SCRA 113 (1991).
Delivery of the deed to buyers agent, with no intention to part with the title until the purchase
price is paid, does not take the case out of the Statute of Frauds. xBaretto v. Manila Railroad
Co., 46 Phil. 964 (1924).
The Statute of Frauds does not apply to contracts either partially or totally performed. In
addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefits
under the contract, such as the acceptance of the purchase price and using the proceeds to pay
outstanding loans. Alfredo v. Borras, 404 SCRA 145 (2003).72
(4) Waiver (Art. 1405) Cross-examination on the contract is deemed a waiver of the defense of
the Statute. xAbrenica v. Gonda, 34 Phil. 739 (1916); Talosig v. Vda. De Nieba, 43 SCRA 472
(1972).73
When the purported buyers exhibits failed to establish the perfection of the contract of sale,
oral testimony cannot take their place without violating the parol evidence rule. It was therefore
irregular for the trial court to have admitted in evidence testimony to prove the existence of a
contract of sale of a real property between the parties, despite the persistent objection made by
the purported sellers counsel as early as the first scheduled hearing, even when crossexamination was made on the basis of the witnesses affidavit-form testimony. Limketkai
Sons Milling, Inc. v. CA, 255 SCRA 6 (1996); 261 SCRA 464 (1996).
(5) Rulings on Receipts and Other Documentary Evidence of Sale
Since a contract of sale is perfected by mere consent, then when the dealer of motor
vehicles accepts a deposit of P50,0000 and pulls out a unit from the assembler for that purpose,
it was in breach of contract when it sold the car subsequently to another buyer. xXentrex
Automotive, Inc. v. CA, 291 SCRA 66 (1998).
A sales invoice is a commercial document-commercial documents or papers are those used
by merchants or businessmen to promote or facilitate trade or credit transactionsthey are not
mere scraps of paper bereft of probative value, but vital pieces of evidence of commercial
transactions, written memorials of the details of the consummation of contracts. Seaiol
Petroleum Corp. v. Autocorp Group, 569 SCRA 387 (2008).
Sales invoices are not evidence of payment of the price, but evidence of the receipt of the
goods; since the best evidence to prove payment is the official receipt. El Oro Engravers Corp.
v. CA, 546 SCRA 42 (2008).
A receipt which is merely an acknowledgment of the sum received, without any indication
therein of the total purchase price of the land or of the monthly installments to be paid, cannot
be the basis of valid sale. xLeabres v. CA, 146 SCRA 158 (1986).74
In itself, the absence of receipts, or any proof of consideration, would not be conclusive of
the inexistence of a sale since consideration is always presumed. xTigno v. Aquino, 444 SCRA
61 (2003).
Receipts proves payment which takes the sale out of the Statute of Frauds. Toyota Shaw,
Inc. v. CA, 244 SCRA 320 (1995).
c. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art. 1874)
When sale of a piece of land or any interest therein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void,75 even when:
Agent is the son of the owner. xDelos Reyes v. CA, 313 SCRA 632 (1999)
There is partial payment of the price received by the supposed agent. xDizon v. CA, 396 SCRA 154
(2003).76
In the case of a corporate owner of realty. xCity-Lite Realty Corp. v. CA, 325 SCRA 385 (2000).77
70
- 17 When Contract to Sell was signed by the co-owners themselves as witnesses, the written
authority for their agent mandated under Article 1874 of the Civil Code is no longer required. xOesmer
v. Paraiso Dev. Corp., 514 SCRA 228, 237 (2007).
d. Sale of Large Cattle (Art. 15851; Sec. 529, Revised Adm. Code)
XD.
SIMULATED SALES
Characteristic of simulation is that the apparent contract is not really desired or intended to produce
legal effect or in any way alter the parties juridical situation, or that the parties have no intention to be
bound by the contract. The requisites are: (a) an outward declaration of will different from the will of the
parties; (b) false appearance must have been intended by mutual agreement; and (c) purpose is to
deceive third persons. xManila Banking Corp. v. Silverio, 466 SCRA 438 (2005).78
1. Badges and Non-badges of Simulation:
Non-payment of the stipulated consideration, absence of any attempt by the buyers to assert their alleged
79
rights over the subject property. xVillaflor v. CA, 280 SCRA 297 (1997).
Failure of alleged buyers to collect rentals from alleged seller. xSantiago v. CA, 278 SCRA 98 (1997); but not
when there appears a legitimate lessor-lessee relationship between the vendee and the vendor. xUnion Bank
v. Ong, 491 SCRA 581 (2006).
Although the agreement did not provide for the absolute transfer ownership of the land to buyer, that did not
amount to simulation, since delivery of certificate of ownership and execution of deed of absolute sale were
expressly stipulated as suspensive conditions, which gave rise to the corresponding obligation on part of
buyer to pay the last installments. xVillaflor v. CA, 280 SCRA 297 (1997).
80
When signature on a deed of sale is a forgery. Fidel v. CA, 559 SCRA 186 (2008). But bare assertions that
the signature appearing on the Deeds of Sale is not that of her husband is not enough to allege simulation,
since forgery is not presumed; it must be proven by clear, positive and convincing evidence. xR.F. Navarro &
Co. v. Vailoces, 361 SCRA 139 (2001).
Simulation of contract and gross inadequacy of price are distinct legal concepts, with different effects the
concept of a simulated sale is incompatible with inadequacy of price. When the parties to an alleged contract
do not really intend to be bound by it, the contract is simulated and void. Gross inadequacy of price by itself
will not result in a void contract, and it does not even affect the validity of a contract of sale, unless it signifies
a defect in the consent or that the parties actually intended a donation or some other contract. xBravoGuerrero v. Bravo, 465 SCRA 244 (2005).
Then restoration of what has been given is in order, since the relationship between parties in any contract
even if subsequently voided must always be characterized and punctuated by good faith and fair dealing.
xDe los Reyes v. CA, 313 SCRA 632 (1999); xHeirs of Ignacia Aguilar-Reyes v. Mijares, 410 SCRA 97
(2003).
Alien who purchases land in the name of his Filipina lover, has no standing to seek legal remedies
to either recover the property or the purchase price paid, since the transaction is void ab initio for being
in violation of the constitutional prohibition. xFrenzel v. Catito, 406 SCRA 55 (2003).
A. OBLIGATIONS OF SELLER
1. Preserve Subject Matter (Art. 1163)
2. Deliver with Fruits and Accessories (Arts. 1164, 1166, 1495, 1537)
Tangalin v. CA, 371 SCRA 49 (2001); Heirs of Arturo Reyes v. Socco-Beltran, 572 SCRA 211 (2008); Francisco v. Chemical Bulk
Carriers, Inc., 657 SCRA 355 (2011).
83
Kuenzle & Streiff v. Watson & Co., 13 Phil. 26 (1909); Ocejo, Perez & Co. v. Int'l Banking Corp., 37 Phil. 631 (1918).
- 19 in the control and possession of the vendee. Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc.,
370 SCRA 56 (2001).
Delivery as used in Sales refers to the concurrent transfer of two things: (1) possession and
(2) ownership. If the vendee is placed in actual possession of the property, but by agreement of
the parties ownership of the same is retained by the vendor until the vendee has fully paid the
price, the mere transfer of the possession of the property subject of the sale is not the delivery
contemplated in the Law on Sales or as used in Article 1543 of the Civil Code. Cebu Winland Dev.
Corp. v. Ong Siao Hua, 588 SCRA 120 (2009).
Since delivery of subject matter of sale is an obligation on the part of the seller, the
acceptance thereof by the buyer is not a condition for the completeness of delivery. xLa Fuerza v.
CA, 23 SCRA 1217 (1968).
In the absence of an express stipulation to the contrary, payment of purchase price of the
goods is not a condition precedent to the transfer of title to the buyer, but title passes by the
delivery of the goods. xPhil. Suburban Dev. Corp. v. Auditor General, 63 SCRA 397 (1975).84
Failure of the buyer to make good the price does not, in law, cause the ownership to revest to
the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Art. 1191.
xBalatbat v. CA, 261 SCRA 128 (1996).
A contract to sell, or a condition contract of sale where the suspensive condition has not
happened, even when found in a public document, cannot be treated as constituting constructive
delivery, especially when from the face of the instrument it is shown that the seller was not yet the
owner of the property and was only expecting to inherit it. xHeirs of Arturo Reyes v. SoccoBeltran, 572 SCRA 211, 221 (2008).
c. Physical Delivery (Art. 1497)
It is not necessary that seller himself delivers title to the buyer because the thing sold is
understood as delivered when it is placed in control and possession of buyer. Thus, when sellers
themselves introduced the tenant to the buyer as the new owners of the land, and from that time
on the buyer acted as landlord thereof, there was delivery that transferred title to the buyer.
xAlfredo v. Borras, 404 SCRA 145 (2003).
d. Constructive Delivery: EXECUTION OF A PUBLIC I NSTRUMENT (Art. 1498)
Where deed of sale or any agreement analogous to a deed of sale, is made through a public
instrument, its execution is equivalent to the delivery of the property. Caoibes, Jr. v. CaoibesPantoja, 496 SCRA 273 (2006).85
Under Art. 1498, the mere execution of the deed of conveyance in a public instrument is
equivalent to the delivery of the property, and that prior physical delivery or possession is not
legally required, since ownership and possession are two entirely different legal concepts.
Notwithstanding the presence of illegal occupants on the subject property, transfer of ownership by
symbolic delivery under Art. 1498 can still be effected through the execution of the deed of
conveyance. xSabio v. International Corporate Bank, 364 SCRA 385 (2001).
As a general rule, when the sale is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed
the contrary does not appear or cannot clearly be inferred. In order the execution of a public
instrument to effect tradition, the purchaser must be placed in control of the thing sold. A person
who does not have actual possession of the thing sold cannot transfer constructive possession by
the execution and delivery of a public instrument. Asset Privatization Trust v. T.J. Enterprises, 587
SCRA 481 (2009).
There is nothing in Article 1498 that provides that execution of a deed of sale is a conclusive
presumption of delivery of possession; presumptive delivery can be negated by the failure of the
vendee to take actual possession of the land or the continued enjoyment of possession by the
vendor. Santos v. Santos, 366 SCRA 395 (2001).86
The presumptive delivery by the execution of a public instrument can be negated by the failure
of the vendee to take actual possession of the land sold. Cebu Winland Dev. Corp. v. Ong Siao
Hua, 588 SCRA 120 (2009).87
(i) As to Movables (Arts. 1498-1499, 1513-1514; Dy, Jr. v. CA, 198 SCRA 826)
Where it is stipulated that deliveries must be made to the buyer or his duly authorized
representative named in the contracts, the seller is under obligation to deliver in accordance with
such instructions.. xLagon v. Hooven Comalco Industries, Inc., 349 SCRA 363 (2001).
84
- 20 Execution by supposed buyers of a chattel mortgage over subject vehicle in favor of the
financing company does not mean that ownership had been transferred to them, for delivery must
be on the part of the seller. xUnion Motor Corp. v. CA, 361 SCRA 506 (2001).
Neither issuance of an invoice, which is not a document of title xP.T. Cerna Corp. v. CA, 221
SCRA 19 (1993),88 nor of the registration certificate of vehicle xUnion Motor Corp. v. CA, 361
SCRA 506 (2001),89 would constitute constructive delivery.
(ii) As to Immovables (Art. 1498)
Issuance of an acknowledgment receipt of partial payment, when it is not a public instrument
does not convey title. xSan Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005).
In case of immovables, when sale is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed
the contrary does not appear or cannot clearly be inferred. xMunicipality of Victorias v. CA, 149
SCRA 31 (1987);90 and that prior physical delivery or possession is not legally required since
execution of the deed is deemed equivalent to delivery. xManuel R. Dulay Enterprises, Inc. v. CA,
225 SCRA 678 (1993), Provided That:
(a) The thing sold is subject to the control of the seller Addison v. Felix, 38 Phil. 404
(1918); and
(b) Such control should remain within a reasonable period after the execution of the
instrument Danguilan v. IAC, 168 SCRA 22 (1988); Pasagui v. Villablanca, 68
SCRA 18 (1975).
EXCEPT: When buyer assumes the risks of ownership and possession. Power Commercial and
Industrial Corp. v. CA, 274 SCRA 597 (1997).
Execution of Deed of Conditional Sale with provision that final deed of sale to be executed
upon full payment does not transfer ownership of the subject matter. xFortune Tobacco Corp. v.
NLRC, 200 SCRA 766 (1991).
(1) Registration of Title Is Separate Mode from Execution of Public Instrument The
recording of the sale with the proper Registry of Deeds and the transfer of the certificate of
title in the name of the buyer are necessary only to bind third parties to the transfer of
ownership. As between the seller and the buyer, the transfer of ownership takes effect upon
the execution of a public instrument conveying the real estate. Chua v. CA, 401 SCRA 54
(2003).
BUT SEE: Under Art. 1495, seller is obliged to transfer title over the property and deliver the
same to the vendee. Vive Eagle Land, Inc. v. CA, 444 SCRA 445 (2004).
(2) Customary Steps in Selling Immovables Customarily, in the absence of a contrary
agreement, the submission by an individual seller to the buyer of the following papers would
complete a sale of real estate: (1) owners duplicate copy of the Torrens title; (2) signed deed
of absolute sale; (3) tax declaration; and (4) latest realty tax receipt. They buyer can retain
the amount for the capital gains tax and pay it upon authority of the seller, or the seller can
pay the tax, depending on the agreement of the parties. Chua v. CA, 401 SCRA 54 (2003).
The execution of the notarized deed of sale and the delivery of the owners duplicate
copy of the original certificate of title to the buyer is tantamount to constructive delivery of the
object of the sale. Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
(iii) As to Incorporeal Property (Arts. 1498 and 1501).
In the sale of shares of stock, physical delivery of a stock certificate is one of the essential
requisites for the transfer of ownership of the stocks purchased. Filinvests failure to delivery the
stock certificates representing the shares of stock purchased by TEMI and Garcia amounted to a
substantial breach of their contract which gave rise to a right to rescind the sale. Raquel-Santos
v. CA, 592 SCRA 169 (2009).
e. Constitutum Possessorium (Art. 1500) A provision in the deed of sale granting to seller a right to
lease the subject matter of the sale is valid: the possession is deemed to be constituted in the vendee
by virtue of this mode of tradition. xAmigo v. Teves, 96 Phil. 252 (1954).
f. Traditio Brevi Manu Prior to the sale, petitioners were in possession of the subject property as
lessees. Upon sale to them of the rights, interests and participation as to the portion pro indiviso,
they remained in possession, not in the concept of lessees anymore but as owners now through
symbolic delivery known as traditio brevi manu. xHeirs of Pedro Escanlar v. CA, 281 SCRA 176
(1997).
88
- 21 4. Transfer Ownership to Vendee Upon Delivery (Arts. 1477, 1478, and 1496)
a. When Buyer Refuses to Accept (Art. 1588)
b. In Case of Express or Implied Reservation (Arts. 1478 and 1503)
5. Taking-Out Insurance Coverage (Art. 1523)
6. Time and Place of Delivery (Art. 1521)
7. Expenses of Execution and Registration (Art. 1487), and of Putting Goods in Deliverable Estate
(Art. 1521)
Unless otherwise stipulated: (a) under Art. 1487 the expenses for the registration of the sale should
be shouldered by the vendor xVive Eagle Land, Inc. v. CA, 444 SCRA 445 (2004); and (b) duty to
withhold taxes due on the sale is imposed on seller. xEquitable Realty Devt Inc. v. Mayfair Theater,
Inc., 332 SCRA 139 (2000).
Buyer has more interest in having the capital gains tax paid immediately since this is a pre-requisite
to the issuance of a new Torrens title in his name. Nevertheless, as far as the government is
concerned, the capital gains tax remains a liability of the seller since it is a tax on the sellers gain from
the sale of the real estate. Payment of the capital gains tax, however, is not a pre-requisite to the
transfer of ownership to the buyer. The transfer of ownership takes effect upon the signing and
notarization of the deed of absolute sale. xChua v. CA, 401 SCRA 54 (2003).
A judgment on a contract of sale that decrees sellers obligations to execute and deliver the deed
of absolute sale and the certificate of title, does not necessarily include within its terms the obligation to
pay for the expenses in notarizing a deed of sale and in obtaining new certificate of title. xJose
Clavano, Inc. v. HLRB, 378 SCRA 172 (2002).
91
- 22 For a sale to be a sale or return or a sale on approval, there must be a clear agreement to
either of such effect, otherwise, the provisions of Art. 1502 of Civil Code governing such sales
cannot be invoked by either party to the contract. xIndustrial Textile Manufacturing Co. v. LPJ
Enterprises, Inc., 217 SCRA 322 (1993).
c. Sale by Description and/or Sample (Art. 1481)
There is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of
the bulk, which is not present and there is no opportunity to inspect or examine the same; and the
parties treated the sample as the standard of quality and that they contracted with reference to the
sample with the understanding that the product to be delivered would correspondent with the
sample. xMendoza v. David, 441 SCRA 172 (004)
Even in sales by description and/or sample, buyer will not be released from his obligation to
accept and pay for the goods by deviations on the part of the seller from the exact terms of the
contract, if buyer had acquiesced to such deviations after due notice thereof. xEngel v. Mariano
Velasco & Co., 47 Phil. 115 (1924).
When the machine delivered is in accordance with the description stated in the sales contract,
the buyer cannot refuse to pay the balance of the purchase price and the cost of installation if it
proves that the machine cannot be used satisfactorily for the purposes for which he bought it when
such purpose was not made known to the seller. xPacific Commercial Co. v. Ermita Market & Cold
Stores, 56 Phil. 617 (1932).
d. Buyer's Right to Inspect Before Acceptance (Arts. 1481 and 1584) Except when carrier
delivers COD.
2. In Case of Immovables
a. Where Sold Per Unit or Number (Arts. 1539 and 1540)
In a unit price sale, the statement of the area of immovable is not conclusive and the price may
be reduced or increased depending on the area actually delivered. If the vendor delivers less than the
area agreed upon, the vendee may oblige the vendor to deliver all that is stated in the contract or
demand for the proportionate reduction of the purchase price if delivery is not possible. If the vendor
delivers more than the area stated in the contract, the vendee has the option to accept only the
amount agreed upon or to accept the whole area, provided he pays for the additional area at the
contract rate. Rudolf Lietz, Inc. v. CA, 478 SCRA 451 (2005).92
b. Where Sold for a Lump Sum [A cuerpo cierto or por precio alzado] (Art. 1542)
In a contract of sale of land in a mass, the specific boundaries stated in the contract must control
over any statement with respect to the area contained within its boundaries. Salinas v. Faustino, 566
SCRA 18 (2008).
In a lump sum sale, when the land delivered to the buyer is exactly as that described in the deed
and covered within the boundaries designated, the difference in actual area (34 versus 10 hectares)
will not authorize the buyer to rescind the contract because the seller has complied with delivering the
subject matter agreed upon. xTeran v. Villanueva, 56 Phil. 677 (1932); this is the rule when evidence
shows that the parties never gave importance to the area of the land in fixing the price (97 versus 60
hectares). xAzarraga v. Gay, 52 Phil. 599 (1928).
Where the parties agreed on a sale at a rate of a certain price per unit of measure and not one
for a lump sum, it is Article 1539 and not Article 1542 which is the applicable lawthe buyer is
entitled to the relief afforded to him under Article 1529, that is, either a proportional reduction of the
price or the rescission of the contract. xCebu Winland Dev. Corp. v. Ong Siao Hua, 588 SCRA 120
(2009).
EXCEPT: A buyer of land, when sold in gross or with the description more or less or similar words in
designating quantity covers only a reasonable excess of deficiency. In the case at bar an
area of 644 square meters more is not reasonable excess or deficiency, to be deemed
included in the deed of sale. xRoble v. Arbasa, 362 SCRA 69 (2001);Rudolf Lietz, Inc. v.
CA, 478 SCRA 451 (2005).93
EXCEPTION TO EXCEPTION: When buyer, who has been occupying the land for two years as lessee,
actually is deemed to take risk on the actual size of the property bought at lump sum.
xGarcia v. Velasco, 72 Phil. 248 (1941).
Goyena v. Tambunting, 1 Phil. 490 (1902); Santa Ana v. Hernandez, 18 SCRA 973 (1966).
Asiain v. Jalandoni, 45 Phil 296 (1923); Balantakbo v. CA, 249 SCRA 323 (1995); Esguerra v. Trinidad, 518 SCRA 186 (2007); Del
Prado v. Caballero, 614 SCRA 102 (2010).
94
Pudadera v. Magallanes, 633 SCRA 332 (2010).
93
- 23 (a) When two different titles are issued over the same registered land, the buyer who claims under a
title that was first issued shall be preferred. xLiao v. CA, 323 SCRA 430 (2000);
(b) Invoking the rules on double sales and priority in time under Art. 1544 would be misplaced by a
first buyer who bought the land not within the Torrens system but under Act No. 3344, as against
the second buyer who bought the same property when it was already registered under the
Torrens system, because:
of the well-known rule in this jurisdiction that persons dealing with registered land have the legal
right to rely on the fact of the Torrens Certificate of Title and to dispense with the need to inquire
further, except when the party concerned has actual knowledge of facts and circumstances that
would impel a reasonably cautious man to make such inquiry; and
the Torrens system rule that formal registration proceedings undertaken on the property and the
subsequent issuance of a title over the land had under the Torrens system had the legal effect of
cleansing title on the property of all liens and claims which were not annotated therein .
UNDER
3. Requisites for Double Sale: Cheng v. Genato, 300 SCRA 722 (1998).97
a. There Must Be Two Different Valid Sales: Article 1544 does not apply where:
There is only one valid sale, while the other sale over the same property is void. Fudot v.
Cattleya Land, Inc., 533 SCRA 350 (2007);98 or
Where one of the contract is a contract to sell. San Lorenzo Dev. Corp. v. CA, 449 SCRA 99
(2005).99
When the seller sold the same properties to two buyers, first to the respondent and then to
Viloria on two separate occasions, the second sale was not void for the sole reason that petitioner
had previously sold the same properties to respondent. This case involves a double sale as the
disputed properties were sold validly on two separate occasions by the same seller to the two
different buyers in good faith. De Leon v. Ong, 611 SCRA 381, 388 (2010).
(1) Doctrine on Conditional Sales/Contracts to Sell and Adverse Claims: Mendoza v. Kalaw,
42 Phil. 236 (1921); Adalin v. CA, 280 SCRA 536 (1997).
The rules on double sales under Art. 1544 are not applicable to contract to sell, because of the
circumstances that must concur in order for the provisions to Art. 1544 on double sales to apply,
namely that there must be a valid sales transactions, and buyers must be at odds over the rightful
ownership of the subject matter who must have bought from the very same seller, are lacking in a
contract to sell for neither a transfer of ownership nor a sales transaction has been consummated,
and such contract is binding only upon the fulfillment or non-fulfillment of an event. Nevertheless,
the governing principle of Art. 1544 should apply, mainly the governing principle of primus
tempore,portior jure (first in time, stronger in right). Cheng v. Genato, 300 SCRA 722 (1998).
b. Exact Same Subject Matter
Article 1544 applies where the same thing is sold to different buyers by the same seller. xOng
v. Oalsiman, 485 SCRA 464 (2006); and therefore does not apply where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at most an
95
Reiterated in Abrigo v. De Vera, 432 SCRA 544 (2005); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).
Tanglao v. Parungao, 535 SCRA 123 (2007); Calma v. Santos, 590 SCRA 359 (2009).
97
Reiterated in Mactan-Cebu International Airport Authority v. Tirol, 588 SCRA 635 (2009).
98
Espiritu v. Valerio, 9 SCRA 761 (1963); Remalante v. Tibe, 158 SCRA 138 (1988); Delfin v. Valdez, 502 SCRA 24 (2006).
99
Torrecampo v. Alindogan, Sr., 517 SCRA 84 (2007).
96
- 24 actual assignment of the rights to repurchase the same land. xDischoso v. Roxas, 5 SCRA 781
(1962).
c. Exact Same Seller for Both Sales
Article 1544 applies where the same thing is sold to different vendees by the same vendor. It
does not apply where the same thing is sold to different vendees by different vendors.or even to
the same buyer but by different sellers. Salera v. Rodaje, 530 SCRA 432, 438 (2007).100
Article 1544 on double sales has no application in cases where the sales involved were
initiated not by just one vendor but by several successive vendors. Mactan-Cebu International
Airport Authority v. Tirol, 588 SCRA 635 (2009).
For Article 1544 to apply, it is necessary that the conveyance must have been made by a party
who has an existing right in the thing and the power to dispose of it. It cannot be invoked where
the two different contracts of sale are made by two different persons, one of them not being the
owner of the property sold. And even if the sale was made by the same person, if the second sale
was made when such person was no longer the owner of the property, because it had been
acquired by the first purchaser in full dominion, the second purchaser cannot acquire any right.
Consolidated Rural Bank (Cagayan Valley), Inc. v. CA, 448 SCRA 347 (2005),101 citing
VILLANUEVA, PHILIPPINE LAW ON SALES 100 (1995).
3. Registration in Good Faith as First Priority
a. Meaning of Registration
The annotation of adverse claim can qualify as the registration mandated under the rules on
double sale. Carbonnel v. CA, 69 SCRA 99 (1976).
Registration means any entry made in the books of the registry, including both registration in its
ordinary and strict sense, and cancellation, annotation, and even marginal notes. It is the entry
made in the registry which records solemnly and permanently the right of ownership and other real
rights. xCheng v. Genato, 300 SCRA 722 (1998).102
Declaration of purchase for taxation purposes does not comply with the required registration,
and the fact alone does not even itself constitute evidence of ownership. xBayoca v. Nogales, 340
SCRA 154 (2000).
Registration of the Extra-judicial Partition which merely mentions the sale is not the registration
covered under Art. 1544 and cannot prevail over the registration of the pacto de retro sale. xVda. de
Alcantara v. CA, 252 SCRA 457 (1996).
There can be no constructive notice to the second buyer through registration under Act 3344 if
the property is registered under the Torrens system. xAmodia Vda. De Melencion v. CA, 534 SCRA
62, 82 (2007), thereby overturning obiter in Santiago v. CA, 247 SCRA 336 (1995).
b. Registration Must Always Be in Good Faith In cases of double sales of immovables, what finds
relevance and materiality is not whether or not the second buyer was a buyer in good faith or that
he was first to register, but whether or not said second buyer registers such second sale in good
faith, that is, without knowledge of any defect in the title of the property sold. xMartinez v. CA, 358
SCRA 38 (2001);103 this is so because the defense of indefeasibility of a Torrens title does not
extend to a transferee who takes the certificate of title in bad faith. xOccea v. Esponilla, 431 SCRA
116 (2004).
c. Knowledge of First Buyer of the Second Sale Does Not Amount to Registration in Favor of
the Second Buyer
Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights
except where the second buyer registers in good faith the second sale ahead of the first. Such
knowledge of the first buyer does not bar her from availing of her rights under the law, among them,
to register first her purchase as against the second buyer. But in converso, knowledge gained by
the second buyer of the first sale defeats his rights even if he is first to register the second sale,
since such knowledge taints his prior registration with bad faith. This is the priced exacted by Article
1544 for the second buyer being able to displace the first buyer; that before the second buyer can
obtain priority over the first, he must show that he acted in good faith throughout (i.e., in ignorance
of the first sale and of the first buyer's right) from the time of acquisition until the title is transferred
to him by registration or failing registration, by delivery of possession. xUraca v. CA, 278 SCRA
702 (1997).104
100
- 25 In a situation where a party has actual knowledge of the claimants actual, open and notorious
possession of a disputed property at the time of registration, the actual notice and knowledge are
equivalent to registration, because to hold otherwise would be to tolerate fraud and the Torrens
system cannot be used to shield fraud while certificates of title are indefeasible, unassailable and
binding against the whole world, they merely confirm or record title already existing and vested.
Consolidated Rural Bank (Cagayan Valley), Inc. v. CA, 448 SCRA 347 (2005).
In double sales, the first buyer always has priority rights over subsequent buyers of the same
property. The good faith of the first buyer remains all throughout despite his subsequent acquisition
of knowledge of the subsequent sale. Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
d. Registration in Good Faith Always Pre-empts Possession in Good Faith Between two
purchasers, the one who registered the sale in his favor has a preferred right over the other who
has not registered his title, even if the latter is in actual possession of the immovable property.
xTaedo v. CA, 252 SCRA 80 (1996).105
The registration of a sale after the annotation of the notice of lis pendens does not obliterate the
effects of delivery and possession in good faith. The rules on constructive notice upon registration
provided for under Section 52 of the Property Registration Decree (P.D. No. 1529) operate only
from the time of the registration of the notice of lis pendens which in this case was effected only
after the time the sale in favor of the second buyer had long been consummated by delivery of the
subject matter. San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005).
4. Possession Refers Both to Material and Symbolic Possession
In the absence of inscription under double sales, the law gives preferential right to the buyer who
in good faith is first in possession, under the following jurisprudential parameters: (a) Possession
mentioned in Article 1544 includes not only material but also symbolic possession; (b) possessors in
good faith are those who are not aware of any flaw in their title or mode of acquisition; (c) Buyers of
real property that is in the possession of persons other than the seller must be wary they must
investigate the rights of the possessors; and (d) good faith is always presumed, upon those who allege
bad faith on the part of the possessors rests the burden of proof. xTen Forty Realty and Dev. Corp. v.
Cruz, 410 SCRA 484 (2003).106
5. Who is Purchaser in Good Faith?
In the determination of whether or not a buyer is in good faith, the point in time to be considered is
the moment when the parties actually entered into the contract of sale. Estate of Lino Olaguer v.
Ongjoco, 563 SCRA 373 (2008).
a. Must Have Paid Price in Full A purchaser is good faith is one who buys property without notice
that some other person has a right to, or interest in, such property and pays a full and fair price
for the same at the time of such purchase, or before he has notice of the claim or interest of
some other person in the property. Tanglao v. Parungao, 535 SCRA 123 (2007)107
Under Article 1544, mere registration is not enough to acquire a new title. Good faith must
concur. Clearly, when the buyer has not yet fully paid the purchase price, and as long as seller
remains unpaid, the buyer cannot feign good faith. xPortic v. Cristobal, 546 SCRA 577 (2005).
BUT SEE: In the determination of whether or not the buyer is in good faith, the point in time to be
considered is the moment when the parties actually entered into the contract of sale. Estate of Lino
Olaquer v. Ongjoco, 563 SCRA 373 (2008).
b. Burden of Proof The burden of proving the status of a purchaser in good faith lies upon him
who asserts that status. It is not sufficient to invoke the ordinary presumption of good faith, that is,
that everyone is presumed to have acted in good faith, since the good faith that is here essential is
integral with the very status that must be established. xTanglao v. Parungao, 535 SCRA 123
(2007).108
As a general rule, the question of whether or not a person is a purchaser in good faith is a
factual matter that will not be delved into by this Court, since only questions of law may be raised
in petitions for review. Tio v. Abayata, 556 SCRA 175 (2008).
BUT SEE: It is anxiomatic that good faith is always presumed in the absence of any direct
evidence of bad faith. xSantiago v. CA, 247 SCRA 336 (1995).
105
Liao v. CA, 323 SCRA 430 (2000); Talusan v. Tayag, 356 SCRA 263 (2001); Dauz v. Exchavez, 533 SCRA 637 (2007).
Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159 (1950); Navera v. CA, 184 SCRA 584 (1990).
Agricultural and Home Extension Dev. v. CA., 213 SCRA 536 (1992); Veloso v. CA, 260 SCRA 593 (1996); Balatbat v. CA, 261
SCRA 128 (1996); Mathay v. CA, 295 SCRA 556 (1998); Diaz-Duarte v. Ong, 298 SCRA 388 (1998); Liao v. CA, 323 SCRA 430 (2000);
Tanongon v. Samson, 382 SCRA 130 (2002); Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002);
Aguirre v. CA, 421 SCRA 310 (2004); Galvez v. CA, 485 SCRA 346 (2006); Chua v. Soriano, 521 SCRA 68 (2007); Raymundo v.
Bandong, 526 SCRA 514 (2007); De Leon v. Ong, 611 SCRA 381 (2010); Kings Properties Corp. v. Galido, 606 SCRA 137 (2009); The
Heirs of Romana Saves v. The Heirs of Escolastico Saves, 632 SCRA 236 (2010).
108
Tsai v. CA, 366 SCRA 324 (2001); Aguirre v. CA, 421 SCRA 310 (2004); Raymundo v. Bandong, 526 SCRA 514 (2007); Eagle
Realty Corp. V. Republic, 557 SCRA 77 (2008); Pudadera v. Magallanes, 633 SCRA 332 (2010).
106
107
A buyer of a registered land would be in bad faith when he purchases without asking to see the
owners copy of the title and/or without visiting the land where he would then have seen first buyer
occupying the same. xSantiago v. CA, 247 SCRA 336 (1995).111
When there are occupants to the land being bought, since it is the common practice in the real
estate industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent
purchaser usually takes. xMartinez v. CA, 358 SCRA 38 (2001).112
Any person engaged in business would be wary of buying from a company that is closing shop,
because it may be dissipating its assets to defraud creditors. Such buyer is bound to inquire whether
the owners had unsettled obligations encumbrance that could burden the property. xSamson v. CA,
238 SCRA 397 (1994).113
The property was titled and transferred with undue haste within a short period of time, plus the fact
that the subject property is a vast tract of land in a prime location, should have, at the very least,
triggered petitioners curiosity. Eagle Realty Corp v. Republic, 557 SCRA 77, 94 (2008).
(5) Land in Adverse Possession Buyer who could not have failed to know or discover that the
land sold to him was in the adverse possession of another is a buyer in bad faith. xHeirs of
Ramon Durano, Sr. v. Uy, 344 SCRA 238 (2000).114
(6) Existence of Lis Pendens or Adverse Claim Registration of an adverse claim places any
subsequent buyer of the registered land in bad faith. Kings Properties Corp. v. Galido, 606
SCRA 137 (2009).
Settled is the rule that one who deals with property with a notice of lis pendens, even
when at the time of sale the annotation was cancelled but there was a pending appeal,
cannot invoke the right of a purchaser in good faith. A purchaser cannot close his eyes to
facts which should put a reasonable man on guard and claim that he acted in the belief that
there was no defect in the title of the seller. xPo Lam v. CA, 316 SCRA 721 (1999).
EXCEPT: When knowledge of lis pendens was acquired at the time there was order to have it
cancelled. xPo Lam v. CA, 347 SCRA 86 (2000).115
109
Adriano v. Pangilinan, 373 SCRA 544 (2002); Lloyds Enterprises and Credit Corp. v. Dolleton, 555 SCRA 142 (2008); Eagle Realty
Corp v. Republic, 557 SCRA 77 (2008); Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
110
Agag v. Alpha Financing Corp., 407 SCRA 602 (2003); Bank of Commerce v. San Pablo, Jr., 522 SCRA 713 (2007); Lloyds
Enterprises and Credit Corp. v. Dolleton, 555 SCRA 142 (2008);Ty v. Queens Row Subdivision, Inc., 607 SCRA 324 (2009).
111
R.R. Paredes v. Calilung, 517 SCRA 369 (2007); Chua v. Soriano, 521 SCRA 68 (2007).
112
Mathay v. CA, 295 SCRA 556 (1998); Republic v. De Guzman, 326 SCRA 267 (2000); Heirs of Ramon Durano, Sr. v. Uy, 344 SCRA
238 (2000); Heirs of Celestial v. Heirs of Celestial, 408 SCRA 291 (2003); Erasusta, Jr. v. CA, 495 SCRA 319 (2006); De la Cena v.
Briones, 508 SCRA 62 (2006); Tanglao v. Parungao, 535 SCRA 123, 132 (2007).
113
Eagle Realty Corp v. Republic, 557 SCRA 77 (2008).
114
Modina v. CA, 317 SCRA 696, 706 (1999); Republic v. De Guzman, 326 SCRA 267 (2000); Martinez v. CA, 358 SCRA 38 (2001);
Heirs of Trinidad de Leon Vda. De Roxas v. CA, 422 SCRA 101 (2004); Occena v. Esponilla, 431 SCRA 116 (2004); PNB v. Heirs of
Estanislao Militar, 494 SCRA 308 (2006); Raymundo v. Bandong, 526 SCRA 514 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007);
Tio v. Abayata, 556 SCRA 175 (2008); Ordua v. Fuentebella, 622 SCRA 146 (2010); Deanon v. Mag-abo, 622 SCRA 180 (2010); The
Heirs of Romana Saves v. The Heirs of Escolastico Saves, 632 SCRA 236 (2010).
D. OBLIGATIONS OF BUYER
1. Pay the Price (Art. 1582)
When seller cannot show title to the subject matter, then he cannot compel the buyer to pay the
price. xHeirs of Severina San Miguel v. CA, 364 SCRA 523 (2001).
Mere sending of a letter by the buyer expressing the intention to pay without the accompanying
payment is not considered a valid tender of payment and consignation of the amount due are
essential in order to extinguish the obligation to pay and oblige the seller to convey title. xTorcuator v.
Bernabe, 459 SCRA 439 (2005).
Unless the parties to a sale have agreed to the payment of the purchase price to any other party,
then its payment to be effective must be made to the seller in accordance with Article 1240 which
provides that Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it. xMontecillo v.
Reynes, 385 SCRA 244 (2002).
2. Accept Delivery (Arts. 1582-1585)
115
Azcona v. Reyes, 59 Phil. 446 (1934); Coronel v. Ona, 33 Phil. 456 (1916).
- 29 steps into the shoes of the vendor as co-owner. xPanganiban v. Oamil, 542 SCRA 166 (2008);118
except when the intention of the purchase was clearly the property itself and not just the spiritual
share. Mindanao v. Yap, 13 SCRA 190 (1965).
An agreement that purports a specific portion of an un-partitioned co-owned property is not void;
it shall effectively transfer the sellers ideal share in the co-ownership. Heirs of the Late Spouses
Aurelio and Esperanza Balite v. Lim, 446 SCRA 54 (2004).119
In which case, the proper action is not for nullification of sale, or for the recovery of possession
of the property owned in common from the other co-owners, but for division or partition of the entire
property. xTomas Claudio Memorial College, Inc. v. CA, 316 SCRA 502 (1999).120
A co-owner who sells one of the two lands owned in common with another co-owner, and does
not turn-over one-half of the proceeds of the sale to the other co-owner, the latter may by law and
equity lay exclusive claim to the remaining parcel of land. xImperial v. CA, 259 SCRA 65 (1996).
2. Exceptions: When Ownership Transfers by Act of the Non-Owner
a. Estoppel on True Owner (Art. 1434) Bucton v. Gabar, 55 SCRA 499 (1974).
The owner of the goods who has been unlawfully deprived of it may recover it even from a
purchaser in good faith. Thus, the purchaser of property which has been stolen from the owner has
been held to acquire no title to it even though he purchased for value and in good faith. Exception is
when the true owner is estopped. xFrancisco v. Chemical Bulk Carriers, Inc., 657 SCRA 355
(2011).
b. Recording Laws; Torrens System (Pres. Decree 1529).
The defense of indefeasibility of Torrens title where the disputed buildings and equipment are
located is unavailing, since such defense is available to sale of lands and not to sale of properties
situated therein. xTsai v. CA, 366 SCRA 324 (2001).
An innocent purchaser for value is one who purchases a titled land by virtue of a deed executed
by the registered owner himself not by a forged deed. xInsurance Services and Commercial
Traders, Inc. v. CA, 341 SCRA 572 (2000).
A person who deals with registered land through someone who is not the registered owner is
expected to look beyond the certificate of title and examine all the factual circumstances thereof in
order to determine if the vendor has the capacity to transfer any interest in the land. Sy v.
Capistrano, Jr., 560 SCRA 103 (2008).
Where innocent third persons, relying on the correctness of the certificate of title thus issued,
acquire rights over the property, the court cannot disregard such rights and order the cancellation of
the certificate, since the effect of such outright cancellation will be to impair public confidence in the
certificate of title. Every person dealing with the registered land may safely rely on the correctness
of the certificate of title issued therefor and the law will in no way oblige him to go behind the
certificate to determine the condition of the property. xHeirs of Spouses Benito Gavino. v. CA, 291
SCRA 495 (1998).
An innocent purchaser for value is one who buys the property of another without notice that
some other person has a right to or interest in it, and who pays a full and fair price at the time of the
purchase or before receiving any notice of another persons claim. The burden of proving the status
of a purchaser in good faith and for value lies upon one who asserts that status. This onus probandi
cannot be discharged by mere invocation of the ordinary presumption of good faith. Rufloe v.
Burgos, 577 SCRA 264, 272-273 (2009).
c. Statutory Power Order of Courts
When a defeated party refuses to execute the absolute deed of sale in accordance with the
judgment, the court may direct the act to be done at the cost of the disobedient party by some other
person appointed by the court and the act when so done shall have the like effect as is done by the
party. xManila Remnant Co., Inc. v. CA, 231 SCRA 281 (1994)
d. Sale in Merchants Stores, Fairs or Markets (Arts. 85 and 86, Code of Commerce) City of
Manila v. Bugsuk, 101 Phil. 859 (1957); Sun Bros. & Co. v. Velasco, 54 O.G. 5143 (1958).
3. Sale by One Having Voidable Title (Art. 1506, as an exception to Art. 559)
Whenever there is an underlying sale which grants to the culprit-buyer a voidable title, even when
this is accompanied by the criminal act of estafa or swindling, Art. 1506 would grant to the buyer in
good faith a better title as against the original owner even though the latter may be classified to have
been unlawfully deprived of the subject matter under Art. 559. Tagatac v. Jimenez, 53 O.G. 3792
(1957); EDCA Publishing v. Santos, 184 SCRA 614 (1990).
118
Estoque v. Pajimula, 24 SCRA 59 (1968); Aguirre v. CA, 421 SCRA 310 (2004); Acabal v. Acabal, 454 SCRA 555 (2005); Barcenas
v. Tomas, 454 SCRA 593 (2005).
119
Almendra v. IAC, 204 SCRA 142 (1991); Fernandez v. Fernandez, 363 SCRA 811 (2001); Aguirre v. CA, 421 SCRA 310 (2004);
Santos v. Lumbao, 519 SCRA 408 (2007); Republic v. Heirs of Francisca Dignos-Sorono, 549 SCRA 58 (2008).
120
Heirs of Romana Ingjug-Tiro v. Casals, 363 SCRA 435 (2001); Aguirre v. CA, 421 SCRA 310 (2004).
- 30 When owner did not voluntarily deliver possession of the car, and in effect it was stolen from him,
then one who buys the car even in good faith from the thief will lose the car to the owner who is
deemed to have been unlawfully deprived. Aznar v. Yapdiangco, 13 SCRA 486 (1965).
In all other cases of unlawful deprivation done through estafa, the original owner recovers even
from the buyer in good faith. Cruz v. Pahati, 98 Phil. 788 (1956). [CLV: Decision showed that
second buyer, or current possessor could not claim good faith because of erasures in the
covering documents presented by his seller]
Owner of diamond ring may recover possession of the same from pawnshop where the owners
agent had pledged it without authority to do so; Article 559 applies and the defense that the
pawnshop acquired possession without notice of any defect of the pledgor-agent is unavailing.
Dizon v. Suntay, 47 SCRA 160 (1972).121 [In those cases possessor is a merchant and only
has a pledge in his favor].
- 31 Seller in possession of the goods may sell them at buyer's risk. xKatigbak v. CA, 4 SCRA 243
(1962).
Foreclosure on the chattel mortgage prevents further action on the supporting real estate
mortgage, whether the chattel mortgage is first foreclosed Cruz v. Filipinas Investment &
Finance Corp., 23 SCRA 791 (1968);127 and vice versa when the real estate mortgage is first
foreclosed. Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).
All amounts barred from recovery. Macondray & Co. v. Eustaquio, 64 Phil. 446 (1937).
(ii) Rule on Perverse Buyer. Filipinas Investment & Finance Corp. v. Ridad, 30 SCRA 564
(1969).
g. Purported Lease with Option to Buy
The Court took judicial notice of the practice of vendors of personal property of denominating
a contract of sale on installment as one of lease to prevent the ownership of the object of the sale
123
De la Cruz v. Asian Consumer, 214 SCRA 103 (1992); Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).
Southern Motors v. Moscoso, 2 SCRA 168 (1961); Industrial Finance Corp. v. Ramirez, 77 SCRA 152 (1977); Rosario v. PCI
Leasing and Finance, Inc., 474 SCRA 500 (2005).
125
Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).
126
Manila Motor Co. v. Fernandez, 99 Phil. 782 (1956); Magna Financial Services Group, Inc. v. Colarina, 477 SCRA 245 (2005).
127
Pascual v. Universal Motors Corp., 61 SCRA 121 (1974).
124
- 32 from passing to the vendee until and unless the price is fully paid. xElisco Tool Manufacturing
Corp. v. CA, 307 SCRA 731 (1999).128
Where a lease agreement over equipment is without an express option to purchase, but
nevertheless when a final demand is given prior to suit, the demand letter indicates clearly it was
within the option of the lessee to fully pay the balance of the unpaid rentals and would be able to
keep the equipment, then the real contract between the parties was a sale of movable on
installment disguised as a lease agreement. PCI Leasing and Finance, Inc. v. Giraffe-X
Creative Imaging, Inc., 527 SCRA 405 (2007).
4. IN CASE OF IMMOVABLES:
a . Anticipatory Breach (Art. 1591) Legarda v. Saldaa, 55 SCRA 324 (1974).
b. Sales of Subdivision Lots and Condominium Units (Secs. 23 and 24, P.D. 957)
P.D.957 was issued in the wake of numerous reports that many real estate subdivision
owners, developers, operators and/or sellers have reneged on their representations and
obligations to provide and maintain properly subdivision roads, drainage, sewerage, water
systems, lighting systems and other basic requirements or the health and safety of home and lot
buyers. It was designed to stem the tide of fraudulent manipulations perpetrated by unscrupulous
subdivision and condominium sellers free from liens and encumbrances. xCasa Filipinas Realty
Corp. v. Office of the President, 241 SCRA 165 (1995).
Section 20 of P.D. 957 directs every owner and developer of real property to provide the
necessary facilities, improvements, infrastructure and other forms of development, failure to carry
out which is sufficient cause for the buyer to suspend payment, and any sums of money already
paid shall not be forfeited. xTamayo v. Huang, 480 SCRA 156 (2006).
In case the developer of a subdivision or condominium fails in its obligation under Section
20, Section 23 gives the buyer:
the option to demand reimbursement of the total amount paid, or to wait for further development of
the subdivision, and when the buyer opts for the latter alternative, he may suspend payment of the
installments until such time that the owner or developer has fulfilled its obligations. xTamayo v.
Huang, 480 SCRA 156 (2006);
buyer required only to give due notice to the owner or developer of the buyers intention to suspend
payment. xZamora Realty and Dev. Corp. v. Office of the President, 506 SCRA 591 (2006);
Sec. 23 does not require that a notice be given first by the buyer to the seller before a demand for
refund can be made as the notice and demand can be made in the same letter or communication.
xCasa Filipinas Realty Corp v. Office of the President, 241 SCRA 165 (1995);
Option granted by law is with buyer and not the developer/seller. xRelucio v. Brillante-Garfin, 187
SCRA 405 (1990).
Buyer under P.D. 957 would include one who acquires for a valuable consideration a
condominium unit by way of assignment by the condominium project owner in payment of its
indebtedness for contractors fee. xAMA Computer College, Inc. v. Factora, 378 SCRA 121
(2002).
Buyers of condominium units would be justified in suspending payments, when the
developer-seller fails to give them a copy of the Contract to Sell despite repeated demands.
xGold Loop Properties, Inc. v. CA, 350 SCRA 371 (2001); or when they failed to provide for the
amenities mandated under their development plan. Fedman Dev. Corp. v. Agcaoili, 656 SCRA
354 (2011). However, when the Reservation Agreement provides that the buyer shall be entitled
to a Contract to Sell only upon its payment of at least 30% of the total contract price, the nonhappening yet of that condition does not render the seller in default as to warrant the buyer the
right to rescind the sale and demand a refund. G.G. Sportwear Mfg. Corp. v. World Class
Properties, Inc., 614 SCRA 75 (2010).
Nothing in P.D. 957 provides for the nullification of a contract to sell in the event the seller, at
the time the contract was entered into, did not possess a certificate of registration or a license to
sell, sale being a consensual contract. Co Chien v. Sta. Lucia Realty, 513 SCRA 570 (2007).129
The dissatisfaction of the buyer under a Contract of Sale as to the completion date of the
project does not itself constitute substantial breach as to authorize the buyer to rescind the
contract and ask for refund of the amounts paid to the seller. G.G. Sportwear Mfg. Corp. v.
World Class Properties, Inc., 614 SCRA 75 (2010).
Under P.D. No. 957, a buyer cause of action against the developer for failure to develop
ripens only when the developer fails to complete the project on the lapse of the completion period
stated on the sale contract or the developers Licenses to Sell. Any premature demand prior to
128
Vda. de Jose v. Barrueco, 67 Phil. 191 (1939); U.S. Commercial v. Halili, 93 Phil. 271 (1953); H.E. Heacock v. Bantal
Manufacturing, 66 Phil. 245 (1938); Manila Gas Corp. v. Calupita, 66 Phil. 747 (1938); Filinvest Credit Corp. v. CA, 178 SCRA 188
(1989).
129
Cantemplate v. CRS Realty Dev. Corp., 587 SCRA 492 (2009).
- 33 the indicated completion date would be premature. G.G. Sportwear Mfg. Corp. v. World Class
Properties, Inc., 614 SCRA 75 (2010).
The lack of Certificate of Registration or the License to Sell of the developer-seller merely
subjects the developer to administrative sanctions, but do not render the contracts to sell entered
into on the project null and void. G.G. Sportwear Mfg. Corp. v. World Class Properties, Inc., 614
SCRA 75 (2010).
Since the lots are involved in litigation and there is a notice of lis pendens at the back of the
titles involved, the subdivision developer have to be given a reasonable period of time to work on
the adverse claims and deliver clean titles to the buyer, and should the former fail to deliver clean
titles at the end of the period, it ought to reimburse the buyers not only for the purchase price of
the subdivision lots sold to them but also the incremental value arising from the appreciation of
the lots. Cantemprate v. CRS Realty Dev. Corp., 587 SCRA 492 (2009).
130
OIympia Housing Inc. v. Panasiatic Travel Corp., 395 SCRA 298 (2003); Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA
413 (2007).
131
Leao v. CA, 369 SCRA 36 (2001); Cordero v. F.S. Management & Dev. Corp., 506 SCRA 451 (2006).
132
Eugenio v. Executive Secretary Franklin M. Drilon, 252 SCRA 106 (1996); PNB v. Office of the President, 252 SCRA 620 (1996).
133
Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006).
- 34 thereof; a mere notice or letter, short of a notarial act, would not suffice. McLaughlin v. CA,
144 SCRA 693 (1986). 134
Third, for contracts covering more than two years of payments, there must be return to the
buyer of the cash surrender value. xVilldara, Jr. v. Zabala, 545 SCRA 325 (2008).135
The additional formality of a demand on [the sellers] part for rescission by notarial act would
appear, in the premises, to be merely circuitous and consequently superfluous since the seller
therein filed an action for annulment of contract, which is a kindred concept of rescission by
notarial act. xLayug v. IAC, 167 SCRA 627 (1988).
A decision rendered in an ejectment case operated as the required notice of cancellation under
the Maceda Law; but as the buyer was not given the cash surrender value of the payments she
made, there was still no actual cancellation of the contract. xLeao v. CA, 369 SCRA 36 (2001).
A formal letter demand upon buyer to vacate the premises is not the same as the notice of
cancellation or demand for rescission by a notarial act required by R.A. No. 6552. Evidently, the
case of unlawful detainer filed by petitioner does not exempt him from complying with the said
requirement. xPagtulunan v. Dela Cruz Vda. De Manzano, 533 SCRA 242 (2008).
Where the buyers under a contract to sell offers to pay the last installment a year and a half
after the stipulated date, that was beyond the sixty-day grace period under Section 4 of the
Maceda Law. The buyers cannot use the second sentence of Section 4 of the Maceda Law
against the sellers alleged failure to give an effective notice of cancellation or demand for
rescission because the sellers merely sent the notice to the address supplied by the buyers in the
Contract to Sell. Garcia v. CA, 619 SCRA 280 (2010).
B. ON PART OF BUYER
1. In case of Movables (Arts. 1598-1599)
2. In case of Immovables (Arts. 1191; Secs. 23 and 24, P.D. 957)
3. Suspension of Payment (Art. 1590)
The pendency of suit over the subject matter of the sale justifies the buyer in suspending payment
of the balance of the purchase price by reason of aforesaid vindicatory action filed against it. The
assurance made by the seller that the buyer did not have to worry about the case because it was pure
and simple harassment is not the kind of guaranty contemplated under Article 1590 wherein the buyer
is bound to make payment if the seller should give a security for the return of the price. xAdelfa
Properties, Inc. v. CA, 240 SCRA 565 (1995).
134
Luzon Brokerage v. Maritime Bldg., 86 SCRA 305 (1978); Luzon Brokerage v. Maritime Bldg., 43 SCRA 93 (1972); Fabrigas v. San
Francisco del Monte, 475 SCRA 247 (2005).
135
Active Realty & Dev. Corp. v. Daroya, 382 SCRA 152 (2002); Olympia Housing v. Panasiatic Travel Corp., 395 SCRA 298 (2003);
Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA 413 (2007).
136
Caridad Estates, Inc. v. Santero, 71 Phil. 114 (1940); Albea v. Inquimboy, 86 Phil. 477 (1950); Manuel v. Rodriguez, 109 Phil. 1
(1960); Joseph & Sons Enterprises, Inc. v. CA, 143 SCRA 663 (1986) Gimenez v. CA, 195 SCRA 205 (1991); Jacinto v. Kaparaz, 209
SCRA 246 (1992); Odyssey Park, Inc. v. CA, 280 SCRA 253 (1997); Rillo v. CA, 274 SCRA 461 (1997); Platinum Plans Phil., Inc. v.
Cucueco, 488 SCRA 156 (2006); Tan v. Benolirao, 604 SCRA 36 (2009); Garcia v. CA, 619 SCRA 280 (2010).
137
Escueta v. Pando, 76 Phil. 256 (1946).
138
Reiterated in Congregation of the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008); Heirs of Antonio F. Bernabe v. CA,
559 SCRA 53 (2008); Congregation of the Religious of the Virgin Mary v. Orola, 553 SCRA 578 (2008).
139
Iringan v. CA, 366 SCRA 41 (2001).
140
Almira v. CA, 399 SCRA 351 (2003).
141
Ocampo v. CA, 233 SCRA 551 (1994); Co v. CA, 312 SCRA 528 (1999).
142
Central Philippine University v. CA, 246 SCRA 511 (1995); Romeo v. CA, 250 SCRA 223 (1995); Cheng v. Genato, 300 SCRA 722
(1998); Uy v. CA, 314 SCRA 63 (1999).
143
Ocejo, Perez & Co. v. International Banking Corp. 37 Phil. 631 (1918); Republic v. Hospital de San Juan de Dios, 84 Phil. 820
(1949); De la Rama Steamship Co. v. Tan, G.R. No. 8784, May 21, 1956; 99 Phil. 1034 (unrep.) (1956); Heirs of Jesus M. Mascuana v.
CA, 461 SCRA 186 (2005).
- 36 Nonetheless, the law does not prohibit the parties from entering into agreement that violation of
the terms of the contract would cause cancellation thereof, even without court intervention. xFroilan
v. Pan Oriental Shipping Co., 12 SCRA 276 (1964).144
4. Mutual Restitution and Forfeiture (Art. 1385)
When sale is annulled, parties are governed by Art. 1398 whereunder they shall restore to each
other the things which have been the subject matter of the contract, with their fruits, and price with
interest. xInes v. CA, 247 SCRA 312 (1995).145
The sellers right in a contract to sell with reserved title to extrajudicially cancel the sale upon
failure of the buyer to pay the stipulated installments and retain the sums and installments already
received has long been recognized by the well-established doctrine of 39 years standing.
xPangilinan v. CA, 279 SCRA 590 (1997).146
Pursuant to Art. 1188, in a contract to sell, even if the buyers did not mistakenly make partial
payments, inasmuch as the suspensive condition was not fulfilled, it is only fair and just that the
buyers be allowed to recover what they had paid in expectancy that the condition would happen;
otherwise, there would be unjust enrichment on the part of the seller. xBuot v. CA, 357 SCRA 846
(2001).
OF
TO
In a contract of sale, title to the property passes to buyer upon the delivery of the thing sold; in a
contract to sell, ownership is, by agreement, reserved in the seller and is not to pass to buyer until full
payment of purchase price. Otherwise stated, in a contract of sale, seller loses ownership over the
property and cannot recover it until and unless the contract is resolved or rescinded, whereas in a
contract to sell, title is retained by the seller until full payment of the price. In the latter contract, payment
of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents
the obligation of the vendor to convey title from becoming effective. xCastillo v. Reyes, 539 SCRA 193
(2007).148
a. Rationale of Contracts to Sell
A contract to sell is commonly entered into so as to protect the seller against a buyer who intends
to buy the property in installments by withholding ownership over the property until the buyer effects
full payment therefor. It cannot be inferred in a situation where both parties understood the price to
be paid in cash. xCity of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999).149
b. Is a Contract to Sell a Sale under Article 1458?
A contract to sell as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price. Coronel v. CA, 263 SCRA 15,
27 (1996).150 BUT SEE: PNB v. CA, 262 SCRA 464 (1996).
To be sure, a contract of sale may either be absolute or conditional. One form of conditional
sales is what is now popularly termed as a Contract to Sell, where ownership or title is retained until
the fulfillment of a positive suspensive condition normally the payment of the purchase price in the
manner agreed upon. For a contract, like a contract to sell, involves a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something or to render some
service. xGomez v. CA, 340 SCRA 720, 728 (2000).151
A contract to sell is akin to a conditional sale, in which the efficacy or obligatory force of the
vendors obligation to transfer title is subordinated to the happening of a future and uncertain event,
so that if the suspensive condition does not take place, the parties would stand as if the conditional
obligation never existed. Orden v. Aurea, 562 SCRA 660 (2008).152
144
Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 95 (1972); Luzon Brokerage v. Maritime Bldg., 86 SCRA 305
(1978).
145
Velarde v. CA, 361 SCRA 56 (2001); Orden v. Aurea, 562 SCRA 660 (2008).
146
The Manila Racing Club v. The Manila Jockey Club, 69 Phil. 55 (1939).
147
Sta. Lucia Realty & Dev., Inc. V. Uyecio, 562 SCRA 226 (2008); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).
148
Lim v. CA, 182 SCRA 564 (1990); Buot v. CA, 357 SCRA 846 (2001); Abesamis v. CA, 361 SCRA 328 (2001); Tuazon v. Garilao,
362 SCRA 654 (2001); Leao v. CA, 369 SCRA 36 (2001); Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316
(2002); Almira v. CA, 399 SCRA 351 (2003); Chua v. CA, 401 SCRA 54 (2002); Flancia v. CA, 457 SCRA 224 (2005); Vidad, Sr. v.
Tayamen, 531 SCRA 147 (2007); Hulst v. PR Builders, Inc., 532 SCRA 74 (2007); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53
(2008); Orden v. Aurea, 562 SCRA 660 (2008); Tan v. Benolirao, 604 SCRA36 (2009); Bank of P.I. v. SMP, Inc., 609 SCRA 134 (2009);
De Leon v. Ong, 611 SCRA 381 (2010); Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010).
149
Montecalvo v. Heirs of Eugenia T. Primero, 624 SCRA 575 (2010).
150
Platinum Plans Phil., Inc. v. Cucueco, 488 SCRA 156 (2006); Valenzuela v. Kalayaan Dev. and Industrial Corp., 590 SCRA 380
(2009);Tan v. Benolirao, 604 SCRA 36 (2009);
151
Demafelis v. CA, 538 SCRA 305 (2007).
152
De Leon v. De Leon, 593 SCRA 768 (2009).
153
Valenzuela v. Kalayaan Devt and Industrial Corp., 590 SCRA 380 (2009); Traders Royal Bank v. Cuison Lumber Co., Inc., 588
SCRA 690 (2009).
154
Heirs of Spouses Sandejas v. Lina, 351 SCRA 183 (2001); Zamora Realty and Dev. Corp v. Office of the President, 506 SCRA 591
(2006).
155
Traders Royal Bank v. Cuison Lumber Co., Inc., 588 SCRA 690 (2009); Nabus v. Pacson, 605 SCRA 334 (2009).
156
Topacio v. CA, 211 SCRA 219 (1992); Laforteza v. Machuca, 333 SCRA 643 (2000); Almira v. CA, 399 SCRA351 (2003).
157
Roque v. Lapuz, 96 SCRA 741 (1980); Angeles v. Calanz, 135 SCRA 323 (1985);Alfonso v. CA, 186 SCRA 400 (1990)
158
San Andres v. Rodriguez, 332 SCRA 769 (2000); Vda. De Mistica v. Naguiat, 418 SCRA 73 (2003); Blas v. Angeles-Hutalla, 439
SCRA 273 (2004); Villadar, Jr. V. Zabala, 545 SCRA 325 (2008); Heirs of Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Ver Reyes v.
Salvador, Sr., 564 SCRA 456 (2008).
159
Bowe v. CA, 220 SCRA 158 (1993); Rayos v. CA, 434 SCRA 365 (2004); Solidstate Multi-Products Corp. v. Catienza-Villaverde, 559
SCRA 197 (2008); Tan v. Benolirao, 604 SCRA 36 (2009); Nabus v. Pacson, 605 SCRA 334 (2009).
160
Antonio F. Bernabe v. CA, 559 SCRA 53 (2008); Bank of P.I. v. SMP, Inc., 609 SCRA 134 (2009).
161
Siska Dev. Corp. v. Office of the President, 231 SCRA 674 (1994); Sta. Lucia Realty & Dev., Inc. v. Uyecio, 562 SCRA 226 (2008).
162
Manuel v. Rodriguez, 109 Phil. 1 (1960); Laforteza v. Machuca, 333 SCRA 643 (2000); Villamaria, Jr. v. CA, 487 SCRA 571 (2006).
Jison v. CA, 164 SCRA 339 (1988); Lim v. CA, 182 SCRA 564 (1990); Cheng v. Genato, 300 SCRA 722 (1998).
Torralba v. De los Angeles, 96 SCRA 69 (1980).
Romero v. CA, 250 SCRA 223 (1995); Adalin v. CA, 280 SCRA 536 (1997); Republic v. Florendo, 549 SCRA 527 (2008).
166
Bian Steel Corp. v. CA, 391 SCRA 90 (2002).
164
165
- 39 2. Conditions versus Warranties. Power Commercial and Industrial Corp. v. CA, 274 SCRA 597
(1997).
3. Express Warranties (Art. 1546)
A warranty is a statement or representation made by the seller of goods, contemporaneously and as
part of the contract of sale, having reference to the character, quality or title of the goods, and by which
he promises or undertakes to insure that certain facts are or shall be as he then represents them Ang v.
CA, 567 SCRA 53 (2008).
A warranty is an affirmation of fact or any promise made by a vendor in relation to the thing sold.
The decisive test is whether the vendor assumes to assert a fact of which the vendee is ignorant.
xGoodyear Philippines, Inc. v. Sy, 474 SCRA 427 (2005).
The principle of caveat emptor only requires the purchaser to exercise care and attention ordinarily
exercised by prudent men in like business affairs, and only applies to defects which are open and patent
to the service of one exercising such care. It can only be applied where it is shown or conceded that the
parties to the contract stand on equal footing and have equal knowledge or equal means of knowledge
and there is no relation of trust or confidence between them. It does not apply to a representation that
amounts to a warranty by the seller and the situation requires the buyer to rely upon such promise or
affirmation. Guinhawa v. People, 468 SCRA 278 (2005).167
The law allows considerable latitude to sellers statements, or dealers talk; and experience
teaches that it is exceedingly risky to accept it at its face value. Assertions concerning the property
which is the subject of a contract of sale, or in regard to its qualities and characteristics, are the usual
and ordinary means used by sellers to obtain a high price and are always understood as affording to
buyers no ground for omitting to make inquiries. A man who relies upon such an affirmation made by a
person whose interest might so readily prompt him to exaggerate the value of his property does so as
his peril, and must take the consequences of his own imprudence. xSongco v. Sellner, 37 Phil. 254
(1917).
Breach of an express warranty makes the seller liable for damages. The following requisites must
be established in order that there be an express warranty in sale: (1) the express warranty must be an
affirmation of fact or any promise by the seller relating to the subject matter of the sale; (2) the natural
tendency of such affirmation or promise is to induce the buyer to purchase the thing; and (3) the buyer
purchases the thing relying on such affirmation or promise thereon. xCarrascoso, Jr. v. CA, 477 SCRA
666 (2005).
4. Implied Warranties (Art. 1547)
a. Seller Has Right to Sell
b. Warranty Against Eviction (Arts. 1548-1560)
Seller must be summoned in the suit for eviction at the instance of the buyer (Art. 1558), and be
made a co-defendant (Art. 1559); or made a third-party defendant. Escaler v. CA, 138 SCRA 1
(1985).168
No Warranty Against Eviction When Execution Sale In voluntary sales, vendor can be
expected to defend his title because of his warranty to the vendees but no such obligation is owed by
the owner whose land is sold at execution sale. xSantiago Land Dev. Corp. v. CA, 276 SCRA 674
(1997). BUT SEE: Art. 1552.
The seller, in declaring that he owned and had clean title to the vehicle, gave an implied warranty
of title, and in pledging that he will defend the same from all claims or any claim whatsoever [and]
will save the vendee from any suit by the government of the Republic of the Philippines, he gave a
warranty against eviction, and the prescriptive period to file a breach thereof is six months after the
delivery of the vehicle. Ang v. CA, 567 SCRA 53 (2008).
c. Warranty Against Non-Apparent Servitudes (Arts. 1560)
d. Warranty Against Hidden Defects (Arts. 1561-1580)
The stipulation in a lease with option to purchase (treated as a sale of movable on installments)
that the buyer-lessee absolutely releases the lessor from any liability whatsoever as to any and all
matters in relation to warranty in accordance with the provisions hereinafter stipulated, was held as
an express waiver of warranty against hidden defect in favor of the seller-lessor which absolved the
[seller-lessor] from any liability arising from any defect or deficiency of the machinery they bought.
xFilinvest Credit Corp. v. CA, 178 SCRA 188 (1989).
A hidden defect is one which is unknown or could not have been known to the buyer. Under the
law, the requisites to recover on account of hidden defects are as follows: (a) The defect must be
hidden; (b) The defect must exist at the time the sale was made; (c) The defect must ordinarily have
been excluded from the contract; (d) The defect, must be important (render the thing unfit or
167
168
Oro Land Realty Dev. Corp. v. Claunan, 516 SCRA 681 (2007)
Canizares Tiana v. Torrejos, 21 Phil. 127 (1911); J.M. Tuazon v. CA, 94 SCRA 413 (1979).
- 40 considerably decreases fitness); (e) The action must be instituted within the statute of limitations.
Nutrimix Feeds Corp. v. CA, 441 SCRA 357 (2004).169
Sellers agent can by agreement be liable for the warranty against hidden defects. xSchmid and
Oberly, Inc. v. RJL Martinez, 166 SCRA 493 (1988).
e. Warranty as to Fitness or Quality of Goods
In order to enforce the implied warranty that the goods are reasonably fit and suitable to be used
for the purpose which both parties contemplated, the following must be established: (a) that the buyer
sustained injury because of the product; (b) that the injury occurred because the product was
defective or unreasonably unsafe; and finally (c) the defect existed when the product left the hands of
the petitioner. Nutrimix Feeds Corp. v. CA, 441 SCRA 357 (2004).
A manufacturer or seller of a product cannot be held liable for any damage allegedly caused by
the product in the absence of any proof that the product in question is defective, which was present
upon the delivery or manufacture of the product; or when the product left the sellers or
manufacturers control; or when the product was sold to the purchaser; or the product must have
reached the user or consumer without substantial change in the condition it was sold. Nutrimix
Feeds Corp. v. CA, 441 SCRA 357 (2004).
f. Sale of Goods by Sample
There is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of
the bulk, which is not present and there is no opportunity to inspect or examine the same. To
constitute a sale by sample, it must appear that the parties treated the sample as the standard of
quality and that they contracted with reference to the sample with the understanding that the product
to be delivered would correspondent with the sample. In a contract of sale by sample, there is an
implied warranty that the goods shall be free from any defect which is not apparent on reasonable
examination of the sample and which would render the goods unmerchantable. xMendoza v. David,
441 SCRA 172 (2004).
g. Additional Warranties for Consumer Products (Arts. 68, Consumer Act, R.A. 7394).
5. Effects and Prescription of Warranties
A breach in the warranties of the seller entitles the buyer to a proportionate reduction of the
purchase price. PNB v. Mega Prime Realty and Holding Corp., 567 SCRA 633 (2008).
The prescriptive period for instituting actions based on a breach of express warranty is that
specified in the contract, and in the absence of such period, the general rule on rescission of contract,
which is four years, while for actions based on breach of implied warranty, the prescriptive period is six
months from the date of the delivery of the thing sold. Ang v. CA, 567 SCRA 53 (2008).
6. Effects of Waivers
The phrase as is, where is basis pertains solely to the physical condition of the thing sold, not to its
legal situation. In the case at bar, the US tax liabilities constitute a potential lien which applies to the
subjects matters legal situation, not to its physical aspect. Thus, the buyer has no obligation to
shoulder the same. xNDC v. Madrigal Wan Hui Lines Corp., 412 SCRA 375 (2003).
7. Buyers Options in Case of Breach of Warranty (Art. 1599)
The remedy against violation of warranty against hidden defects is either to withdraw from the
contract (accion redhibitoria) or to demand a proportionate reduction of the price (accion quanti minoris),
with damages in either case. Nutrimix Feeds Corp. v. CA, 441 SCRA 357 (2004).
169
170
171
- 41 In sales denominated as pacto de retro, the price agreed upon should not generally be considered
as the just value of the thing sold, absent other corroborative evidencethere is no requirement in
sales that the price be equal to the exact value of the thing subject matter of the sale. xDorado Vda.
De Delfin v. Dellota, 542 SCRA 397 (2008).
Sales with rights of repurchase, as defined by the Civil Code, are not favored. We will not construe
instruments to be sales with a right to repurchase, with the stringent and onerous effects which follow,
unless the terms of the document and the surrounding circumstances require it. Whenever, under the
terms of the writing, any other construction can fairly and reasonably be made, such construction will
be adopted and the contract will be construed as a mere loan unless the court can see that, if enforced
according to its terms, it is not an unconscionable one. Bautista v. Unangst, 557 SCRA 256 (2008).
[citing Ramos v. CA 180 SCRA 635 (1989), which in turn cites Padilla v. Linsangan, 19 Phil. 65 (1911)
and Aquino v. Deala, 63 Phil. 582 (1936).
2. Redemption Period
The period to repurchase is not suspended merely because there is a divergence of opinion
between the parties as to the precise meaning of the phrase providing for the condition upon which the
right to repurchase is triggered. The existence of seller a retros right to repurchase the proper is not
dependent upon the prior final interpretation by the court of the said phrase. Misterio v. Cebu State
College of Science and Technology, 461 SCRA 122 (2005).
3. Situation Prior to Redemption
In a sale a retro, buyer has a right to the immediate possession of the property sold, unless
otherwise agreed upon, since title and ownership of the property sold are immediately vested in the
buyer a retro, subject only to the resolutory condition of repurchase by the seller a retro within the
stipulated period. xVda. de Rigonan v. Derecho, 463 SCRA 627 (2005).172
4. Who Can Redeem (Arts. 1611 to 1614)
5. How Redemption Effected (Art. 1616)
In order to exercise the right to redeem, only tender of payment is sufficient xLegaspi v. CA, 142
SCRA 82 1986); consignation is not required after tender is refused xMariano v. CA, 222 SCRA 736
(1993).
But when tender not possible, consignation should be made xCatangcatang v. Legayada, 84
SCRA 51 (1978).
Well-settled is the rule that a formal offer to redeem must be accompanied by a valid tender of the
redemption price and the filing of a judicial action, plus the consignation of the redemption price within
the period of redemption, is equivalent to a formal offer to redeem. xVillegas v. CA, 499 SCRA 276
(2006).
A formal offer to redeem, accompanied by a bona fide tender of redemption price, is not essential
where the right to redeem is exercised through a judicial action within the redemption period and
simultaneously depositing the redemption price. xLee Chuy Realty Corp. v. CA, 250 SCRA 596 (1995).
6. Redemption Price (Art. 1616)
A stipulation in a sale a retro requiring as part of the redemption price interest for the cost of
money, is not in contravention with Art. 1616, since the provision is not restrictive nor exclusive, and
does not bar additional amounts that the parties may agree upon, since the article itself provides and
other stipulations which may have been agreed upon. xSolid Homes v. CA, 275 SCRA 267 (1997).
7. Fruits (Art. 1617)
Article 1617 on the disposition of fruits of property redeemed applies only when the parties failed
to provide a sharing arrangement thereof; otherwise, the parties contractual stipulations prevail.
xAlmeda v. Daluro, 79 SCRA 327 (1977).
Article 448 of the Civil Code on the rights of a builder in good faith is inapplicable in cases
involving contracts of sale with right of repurchaseit is inapplicable when the owner of the land is the
builder, sower, or planter. Where the true owner himself is the builder of the works on his own land, the
issue of good faith or bad faith is entirely irrelevant. The right to repurchase may be exercised only by
the vendor in whom the right is recognized by contract or by any person to whom the right may have
been transferred. In a sale with right of repurchase, the applicable provisions are Articles 1606 and
1616 of the Civil Code, and not Article 448. Narvaez v. Alciso, 594 SCRA 60 (2009).
8. Effect When No Redemption Made: Consolidation (Art. 1607)
Article 1607 abolished automatic consolidation of ownership in the vendee a retro upon expiration
of the redemption period by requiring the vendee to institute an action for consolidation where the
172
Reyes v. Hamada, 14 SCRA 215 (1965); Solid Homes, Inc. v. CA, 275 SCRA 267 (1997); Misterio v. Cebu State College of Science
and Technology, 461 SCRA 122 (2005); Cadungog v. Yap, 469 SCRA 561 (2005); Ramos v. Dizon, 498 SCRA 17 (2006); Lumayag v.
Heirs of Jacinto Nemeo, 526 SCRA 51 (2007).
- 42 vendor a retro may be duly heard. If the vendee succeeds in proving that the transaction was indeed a
pacto de retro, the vendor is still given a period of thirty days from the finality of the judgment within
which to repurchase the property. xSolid Homes v. CA, 275 SCRA 267 (1997).
Once the vendor fails to redeem the property within the stipulated period, irrevocable title shall be
vested in the vendee by operation of law. xVda. de Rigonan v. Derecho, 463 SCRA 627 (2005).
Under a sale a retro, the failure of the buyer to consolidate his title under Art. 1607 does not impair
such title and ownership because the method prescribed thereunder is merely for the purpose of
registering and consolidating titles to the property. In fact, the failure on the part of a seller a retro to
exercise the redemption right within the period agreed upon or provided for by law, vests upon the
buyer a retro absolute title and ownership over the property sold by operation of law. Consequently,
after the effect of consolidation, the mortgage or re-sale by the seller a retro of the same property
would not transfer title and ownership to the mortgagee or buyer, as the case may be, under the Latin
maxim NEMO DAT QUOD NON HABET. xCadungog v. Yap, 469 SCRA 561 (2005).
9. EQUITABLE MORTGAGE (Arts. 1602-1604)
This kind of arrangement, where the ownership of the land is supposedly transferred to the buyer
who provides for the funds to redeem the property from the bank but nonetheless allows the seller to
later on buy back the properties, is in the nature of an equitable mortgage governed by Articles 1602
and 1604 of the Civil Code. Bacungan v. CA, 574 SCRA 642 (2008).
If the terms of the pacto de retro sale were unfavorable to the vendor, courts have no business
extricating her from that bad bargaincourts are not guardians of persons who are legally competent.
Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008).
The law on equitable mortgage favors the least transmission of rights and interest over a property
in controversy, since the law seeks to prevent circumvention of the law on usury and the prohibition
against pactum commissorium provisions. Additionally, it is aimed to end unjust or oppressive
transactions or violations in connection with a sale or property. The wisdom of these provisions cannot
be doubted, considering many cases of unlettered persons or even those with average intelligence
invariably finding themselves in no position whatsoever to bargain fairly with their creditors. xSpouses
Misea v. Rongavilla, 303 SCRA 749 (1999).173
Besides, it is a fact that in time of grave financial distress which render persons hard-pressed to
meet even their basic needs or answer an emergency, such persons would have no choice but to sign
a deed of absolute sale of property or a sale thereof with pacto de retro if only to obtain a muchneeded loan from unscrupulous money lenders. xMatanguihan v. CA, 275 SCRA 380 (1997).174
An equitable mortgage is defined as one which although lacking in some formality or form or
words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to
charge real property as security for a debt, and contains nothing impossible or contrary to law.
xRaymundo v. Bandong, 526 SCRA 514 (2007).175
The provisions of the Civil Code governing equitable mortgage disguised as sale contracts are
primarily designed to curtail the evils brought about by contracts of sale with right to repurchase,
particularly the circumvention of the usury law and pactum commissorium. Heirs of Jose Reyes, Jr. v.
Reyes, 626 SCRA 758 (2010).
The essential requisites of an equitable mortgage are: (a) The parties entered into a contract
denominated as a contract of sale; and (b) Their intention was to secure an existing debt by way of a
mortgage. xMolina v. CA, 398 SCRA 97 (2003).176
The decisive factor in evaluating whether an agreement is an equitable mortgage is the intention of
the parties, as shown not necessarily by the terminology used in the contract but by all the surrounding
circumstances, such as the relative situation of the parties at that time, the attitude, acts, conduct,
declarations of the parties, the negotiations between them leading to the deed, and generally, all
pertinent facts having a tendency to fix and determine the real nature of their design and
understanding. Necessitous men are not always free, in that to answer a pressing emergency, they will
submit to any term that the crafty may impose on them. Banga v. Bello, 471 SCRA 653 (2005).177
That is why parol evidence is competent and admissible in support of the allegations that an
instrument in writing, purporting on its face to transfer the absolute title to property, or to transfer the
173
- 43 title with a right to repurchase under specified conditions reserved to the seller, was in truth and in fact
given merely as security for the repayment of a loan. xMariano v. CA, 220 SCRA 716 (1993).178
a. Badges of Equitable Mortgage (Art. 1602179)
A contract of sale actually intended to secure the payment of an obligation is presumed an
equitable mortgage. xRomulo v. Layug, Jr., 501 SCRA262 (2006).180
The presence of only one circumstance defined in Art. 1602 is sufficient for a contract of sale a
retro to be presumed an equitable mortgage. xHilado v. Medalla 377 SCRA 257 (2002).181
The presumption in Article 1602 jibes with the rule that the law favors the least transmission of
property rights. xEnriquez, Sr. v. Heirs of Spouses Nieves and Alfredo Baldonado, 498 SCRA 365
(2006); but it is not conclusive, for it may be rebutted by competent and satisfactory proof to the
contrary. xSantiago v. Dizon, 543 SCRA 402 (2008).
The provisions of Article 1602 on the presumption of equitable mortgage applies also to a contract
purporting to be an absolute sale. xTuazon v. CA, 341 SCRA 707 (2000).182
A contract purporting to be an absolute sale is presumed to be an equitable mortgage: (a) when
the price of the sale is unusually inadequate;183 (b) when the vendor remains in possession as lessee
or otherwise; 184 (c) when after the expiration of the right of repurchase, it is extended by the buyer.
xHilado v. Heirs of Rafael Medalla, 37 SCRA 257 (2002);185 (d) when the purported seller continues to
collect rentals from the lessees of the property sold. Ramos v. Dizon, 498 SCRA 17 (2006); (e) when
the purported seller was in desperate financial situation when he executed the purported sale. Bautista
v. Unangst, 557 SCRA 256 (2008); or under threat of being sued criminally. Ayson, Jr. V. Paragas,
557 SCRA 50 (2008).
Inadequacy of purchase price is considered so far short of the real value of the property as to
startle a correct mind. xSantiago v. Dizon, 543 SCRA 402 (2008); or that the mind revolts at it as such
that a reasonable man would neither directly or indirectly be likely to consent to it. xVda de Alvarez v.
CA, 231 SCRA 309 (1994); it must be grossly inadequate or shocking to the conscience. Tio v.
Abayata, 556 SCRA 175 (2008).
To presume a contract is an equitable mortgaged based on gross inadequacy of price, it must be
clearly shown from the evidence presented that the consideration was in fact grossly inadequate at the
time the sale was executed. Mere inadequacy of price is not sufficient to create the presumption.
xOlivares v. Sarmiento, 554 SCRA 384 (2008).186
Mere tolerated possession is not enough to prove that the transaction was an equitable mortgage.
xRedondo v. Jimenez, 536 SCRA 639 (2007).
Payment of real estate taxes is a usual burden attached to ownership, and when such payment is
coupled with continuous possession of the property, it constitutes evidence of great weight that a
person under whose name the realty taxes were declared has a valid and right claim over the land.
xGo v. Bacaron, 472 SCRA 229 (2005).187
However mere allegations without proof to support inadequacy of price, or when continued
possession by the seller is supported by a valid arrangement consistent with the sale, would not
support the allegation of equitable mortgage. xCirelos v. Hernandez, 490 SCRA 624 (2006).188
Although under the agreement the seller shall remain in possession of the property for only one
year, such stipulation does not detract from the fact that possession of the property, an indicium of
ownership, was retained by the alleged vendor to qualify the arrangement as an equitable mortgage,
especially when it was shown that the vendor retained part of the purchase price. xLegaspi v. Ong,
459 SCRA 122 (2005).189
Under Article 1602, delay in transferring title is not one of the instances enumerated by law
instances in which an equitable mortgage can be presumed. Nor does the fact that the original
transaction on the land was to support a loan, which when it was not paid on due date was negotiated
into a sale, without evidence that the subsequent deed of sale does not express the true intentions of
178
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Cuyugan v. Santos, 34 Phil. 100 (1916); Matanguihan v. CA, 275 SCRA 380 (1997);
Hilado v. Heirs of Rafael Medlla, 37 SCRA 257 (2002); Madrigal v. CA, 456 SCRA 659 (2005); Legaspi v. Ong, 459 SCRA 122 (2005);
Banga v. Bello, 471 SCRA 653 (2005); Dio v. Jardines, 481 SCRA 226 (2006); Ayson, Jr. V. Paragas, 557 SCRA 50 (2008).
179
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Balatero v. IAC, 154 SCRA 530 (1987); Mariano v. CA, 220 SCRA 716 (1993);
Lobres v. CA, 351 SCRA 716 (2001).
180
Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256 (2008).
181
Claravall v. CA, 190 SCRA 439, 448 (1990); Uy v. CA, 230 SCRA 664 (1994); Lobres v. CA, 351 SCRA 716 (2001); Alvaro v.
Ternida, 479 SCRA 288 (2006); Dio v. Jardines, 481 SCRA 226 (2006); Raymundo v. Bandong, 526 SCRA 514 (2007); Aleligay v.
Laserna, 537 SCRA 699 (2007); Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008); Bautista v. Unangst, 557 SCRA 256 (2008);
Rockville Excell International Exim Corp. V. Culla, 602 SCRA 124 (2009); Heirs of Jose Reyes, Jr. v. Reyes, 626 SCRA 758 (2010).
182
Zamora v.CA, 260 SCRA 10 (1996).
183
Romulo v. Layug, Jr., 501 SCRA262 (2006).
184
Romulo v. Layug, Jr., 501 SCRA262 (2006); Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256
(2008); Rockville Excell International Exim Corp. v. Culla, 602 SCRA 124 (2009).
185
Cruz v. CA, 412 SCRA 614 (2003).
186
Kings Properties Corp. v. Galido, 606 SCRA 137 (2009).
187
Lumayag v. Heirs of Jacinto Nemeo, 526 SCRA 51 (2007).
188
Austria v. Gonzales, Jr., 420 SCRA 414 (2004).
189
Oronce v. CA, 298 SCRA 133 (1998).
- 44 the parties, give rise to a presumption of equitable mortgage. xCeballos v. Intestate Estate of the Late
Emigdio Mercado, 430 SCRA 323 (2004).
The fact that the price in a pacto de retro sale is not the true value of the property does not justify
the conclusion that the contract is one of equitable mortgage; in fact a pacto de retro sale, the practice
is to fix a relatively reduced price to afford the seller a retro every facility to redeem the property.
xIgnacio v. CA, 246 SCRA 242 (1995).190
Article 1602 being remedial in nature, may be applied retroactively in cases prior to the effectivity
of the Civil Code. xOlea v. CA, 247 SCRA 274 (1995).
b. Remedies Allowed for Equitable Mortgage (Arts. 1454, 1602, 1605)
In the case of an equitable mortgage, although Art. 1605 which allows for the remedy of
reformation, nothing therein precludes an aggrieved party from pursuing other remedies to effectively
protect his interest and recover his property, such as an action for declaration of nullity of the deed of
sale and specific performance. xTolentino v. CA, 386 SCRA 36 (2002).
In an equitable mortgage situation, the consolidation of ownership in the person of the mortgagee
in equity upon failure of the mortgagor in equity to pay the obligation, would amount to a pactum
commissorium. The only proper remedy is to cause the foreclosure of the mortgage in equity.
xBriones-Vasquez v. CA, 450 SCRA 644 (2005); or to determine if the principal obligation secured by
the equitable mortgage has been paid or settled. xBanga v. Bello, 471 SCRA 653 (2005).
c. Pactum Commissorium (Art. 2088)
A stipulation which is a pactum commisorium enables the mortgagee to acquire ownership of the
mortgaged properties without need of any foreclosure proceedingsit is a nullity being contrary to the
provisions of Article 2088 of the Civil Code. xLumayag v. Heirs of Jacinto Nemeo, 526 SCRA 315
(2007).191
The elements of pactum commissorium, which enable the mortgagee to acquire ownership of the
mortgaged property without the need of any foreclosure proceedings, are: (1) there should be a
property mortgaged by way of security for the payment of the principal obligation, and (2) there should
be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of nonpayment of the principal obligation within the stipulated period. Ong v. Roban Lending Corp., 557
SCRA 516 (2008).
It does not apply when the security for a debt is also money in the form of time deposit. xConsing
v. CA, 177 SCRA 14 (1989).
The provision in a MOA/Dacion en Pago with a Right to Repurchase that in the event the borrower
fails to comply with the new terms of restructuring the loan, the agreement shall automatically operate
to be an instrument of dacion en pago without need of executing any new document does not
constitute pactum commissorium. Solid Homes, Inc. v. CA, 275 SCRA 267 (1997); the questioned
contracts were freely and voluntarily executed by petitioners and respondent is of no moment, pactum
commissorium being void for being prohibited by law. Ong v. Roban Lending Corp., 557 SCRA 516
(2008).
BUT SEE: The stipulation in the promissory note providing that upon failure of the makers to pay
interests, ownership of the property would automatically be transferred to the payee, and the covering
deed of sale would be registered is in substance a pactum commissorium in violation of Art. 2088, and
consequently, the resultant sale is void and the registration and obtaining of new title in the name of
the buyer would have be declared void also. A. Francisco Realty v. CA, 298 SCRA 349 (1998).192
d. Final Chance to Redeem in Mistaken Equitable Mortgage (Art. 1606)
The 30 day period under Art. 1606 does not apply if the courts should find the sale to be absolute.
Pangilinan v. Ramos, 181 SCRA 359 (1990).193
Sellers in a sale judicially declared as pacto de retro may not exercise the right to repurchase
within the 30-day period provided under Art. 1606, although they have taken the position that the same
was an equitable mortgage, if it is shown that there was no honest belief thereof since: (a) none of the
circumstances under Art. 1602 were shown to exist to warrant a conclusion that the transaction was an
equitable mortgage; and (b) that if they truly believed the sale to be an equitable mortgage, as a sign
of good faith, they should have consigned with the trial court the amount representing their alleged
loan, on or before the expiration of the right to repurchase. Abilla v. Gobonseng, 374 SCRA 51
(2002).194
An equitable mortgage is a voidable contract. It may be annulled within four (4) years from the time
the cause of action accrues. Ayson, Jr. v. Paragas, 557 SCRA 50 (2008). [CLV: Thereafter, it may be
enforced against the provision on pactum commissorium?]
190
De Ocampo v. Lim, 38 Phil. 579 (1918); Feliciano v. Limjuco, 41 Phil.147 (1920); Belonio v. Movella, 105 Phil. 756 (1959).
Guerrero v. Yigo, 96 Phil. 37 (1954); Montevirgin v. CA, 112 SCRA 641 (1982); Vda. de Zulueta v. Octaviano, 121 SCRA 314
(1983); Ong v. Roban Lending Corp., 557 SCRA 516 (2008); Heirs of Jose Reyes, Jr. V. Reyes, 626 SCRA 758 (2010).
192
Legaspi v. Ong, 459 SCRA 122 (2005).
193
Tapas v. CA, 69 SCRA 393 (1976).
194
Vda. de Macoy v. CA, 206 SCRA 244 (1992).
191
- 45 C. LEGAL REDEMPTION
1. Definition (Art. 1619)
Legal redemption is in the nature of a privilege created by law partly for reasons of public policy
and partly for the benefit and convenience of the redemptioner, to afford him a way out of what might
be a disagreeable or [an] inconvenient association into which he has been thrust. It is intended to
minimize co-ownership. xFernandez v. Tarun, 391 SCRA 653 (2002).195
2. Legal Redemption Rights under the Civil Code
a. Among Co-Heirs (Art. 1088)
Redemption right pertain to disposition of right to inherit, and not when there is a sale of a
particular property of the estate. xPlan v. IAC, 135 SCRA 270 (1985).
When the heirs have partitioned the estate among themselves and each have occupied and
treated definite portions thereof as their own, co-ownership has ceased even though the property is
still under one title, and the sale by one of the heirs of his definite portion cannot trigger the right of
redemption in favor of the other heirs. xVda. De Ape v. CA, 456 SCRA 193 (2005).
The heirs who actually participated in the execution of the extrajudicial settlement, which included
the sale to a third person of their pro indiviso shares in the property, are bound by the same; while
the co-heirs who did not participate are given the right to redeem their shares pursuant to Article
1088. xCua v. Vargas, 506 SCRA 374 (2006).
b. Among Co-Owners (Art. 1620)
The right of redemption may be exercised by a co-owner only when part of the community
property is sold to a stranger, now when sold to another co-owner because a new participant is not
added to the co-ownership. xFernandez v. Tarun, 391 SCRA 653 (2002).
When the seller a retro dies, the right to redeem cannot be exercised by a co-heir alone, since
the right to redeem belonged in common to all the heirs. xDe Guzman v. CA, 148 SCRA 75 (1987).
For the right of redemption to be exercised, co-ownership must exist at the time of the
conveyance is made by a co-owner and the redemption is demanded by the other co-owner or coowners. xAvila v. Barabat, 485 SCRA 8 (2006).
Redemption by co-owner redounds to the benefit of all other co-owners. xMariano v. CA, 222
SCRA 736 (1993); and the 30-day period for the commencement of the right to exercise the legal
redemption right, even when such right has been recognized to exist in a final and executory court
decision, does not begin from the entry of judgment, but from the written notice served by the seller
to the party entitled to exercise such redemption right. Guillen v. CA, 589 SCRA 399 (2009).
The requisites for the exercise of legal redemption are as follows: (1) there must be coownership; (2) one of the co-owners sold his right to a stranger; (3) the sale was made before the
partition of the co-owned property; (4) the right of redemption must be exercised by one or more coowners within a period of thirty days to be counted from the time he or they were notified in writing by
the co-owner vendor; and (5) the vendee must be reimbursed the price of the sale. Calma v. Santos,
590 SCRA 359 (2009).
c. Distinguishing Between Right of Redemption of Co-heirs and Co-owners
Article 1620 includes the doctrine that a redemption by a co-owner of the property owned in
common, even when he uses his own fund, within the period prescribed by law inures to the benefit
of all the other co-owners. xAnnie Tan v. CA, 172 SCRA 660 (1989).196
d. Among Adjoining Owners (Arts. 1621 and 1622)
Requisite to show property previously bought on speculation dropped. xLegaspi v. CA, 69
SCRA 360 (1976).
Right of redemption covers only resale and does not cover exchanges or barter of properties
xDe Santos v. City of Manila, 45 SCRA 409 (1972); and cannot arise unless both adjacent lands are
rural lands. xPrimary Structures Corp. v. Valencia, 409 SCRA 371 (2003).
When there is no issue that when the adjoining lands involved are both rural lands, then the right
of redemption can be exercised and the only exemption provided is when the buyer can show that he
did not own any other rural land. But the burden of proof to provide for the exception lies with the
buyer. xPrimary Structures Corp. v. Valencia, 409 SCRA 371, 374 (2003).
e. Sale of Credit in Litigation (Art. 1634) 30 days from notice of demand to pay.
195
196
Affirmed ruling in xAlonzo v. IAC, 150 SCRA 259 (1987), that the filing of the suit for ejectment or collection
of rentals against a co-owner actually dispenses with the need for a written notice, and must be construed
as commencing the running of the period to exercise the right of redemption, since the filing of the suit
amounted to actual knowledge of the sale from which the 30-day period of redemption commences to run.
a. Rare Exceptions:
When the sale to the buyer was effected through the co-owner who acted as the broker, and
never indicated that he would exercise his right to redeem. xDistrito v. CA, 197 SCRA 606 (1991).
When the buyers took possession of the property immediately after the execution of the deed of
sale in their favor and lived in the midst of the other co-owners who never questioned the same.
xPilapil v. CA, 250 SCRA 560 (1995).
4. OTHER LEGAL REDEMPTION RIGHTS
a. Redemption in Patents (Sec. 119, C.A. 141)
Right to repurchase is granted by law and need not be provided for in the deed of sale. xBerin v.
CA, 194 SCRA 508 (1991).
197
198
Citing Hernaez v. Hernaez, 32 Phil. 214 (1915); Castillo v. Samonte, 106 Phil. 1024 (1960).
Garcia v. Calaliman, 17 SCRA 201 (1989); Mariano v. CA, 222 SCRA 736 (1993).
- 47 Under the free patent or homestead provisions of the Public Land Act a period of five (5) years
from the date of conveyance is provided, to be reckoned from the date of the sale and not from the
date of registration in the office of the Register of Deeds. xLee Chuy Realty Corp. v. CA, 250 SCRA
596 (1995).199
b. Redemption in Tax Sales (Sec. 215, NIRC of 1997)
c. Redemption by Judgment Debtor (Secs. 27-28, Rule 39, Rules of Civil Procedure)
Written notice must be given to the judgment debtor before the sale of the property on execution,
to give him the opportunity to prevent the sale by paying the judgment debt sought to be enforced and
the costs which have been incurred. xTorres v. Cabling, 275 SCRA 329 (1997).
Where there is a third-party claim, sheriff should demand from the judgment creditor who becomes
the highest bidder, payment in cash of his bid instead of merely crediting the amount to the partial
satisfaction of the judgment debt. xTorres v. Cabling, 275 SCRA 329 (1997).
Under Sec. 28, Rule 39 of the 1997 Rules of Civil Procedure, the period of redemption shall be at
any time within one (1) year from the date of registration of the certificate of sale, so that the period is
now to be understood as composed of 365 days, unlike the 360 days under the old provisions of the
Rules of Court. xYsmael v. CA, 318 SCRA 215 (1999).
d. Redemption in Extrajudicial Foreclosure (Sec. 6, Act 3135)
The redemption of extra-judicially foreclosed properties is exercised within one (1) year from the
date of the auction sale as provided for in Act 3135. xLee Chuy Realty Corp. v. CA, 250 SCRA 596
(1995).
The execution of a dacion en pago by sellers effectively waives the redemption period normally
given a mortgagor. xFirst Global Realty and Dev. Corp. v. San Agustin, 377 SCRA 341 (2002).
e. Redemption in judicial foreclosure of mortgage (Sec. 47, R.A. 8791)
A stipulation to render the right to redeem defeasible by an option to buy on the part of the
creditor. Soriano v. Bautista, 6 SCRA 946 (1962).
No right to redeem from a judicial foreclosure sale, except those granted by banks or banking
institutions. xGSIS v. CFI, 175 SCRA 19 (1989).
The one-year redemption period in the case of foreclosure is not interrupted by the filing of an
action assailing the validity of the mortgage, so that at the expiration thereof, the mortgagee who
acquires the property at the foreclosure sale can proceed to have title consolidated in his name and a
writ of possession issued in his favor. xUnion Bank v. CAs, 359 SCRA 480 (2001).200
After bank has foreclosed the property as highest bidder in the auction sale, the accepted offer of
spouses-borrowers to repurchase the property was actually a new option contract, and the condition
that the spouses-borrowers will pay monthly interest during the one-year option period is considered to
be the separate consideration to hold the option contract valid. xDijamco v. CA, 440 SCRA 190 (2004).
f. Redemption in Foreclosure by Rural Banks (R.A. No. 720)
If the land is mortgaged to a rural bank, mortgagor may redeem within two (2) years from the date
of foreclosure or from the registration of the sheriff's certificate of sale at such foreclosure if the
property is not covered or is covered, respectively, by Torrens title. If the mortgagor fails to exercise
such right, he or his heirs may still repurchase within five (5) years from expiration of the two (2) year
redemption period pursuant to Sec. 119 of the Public Land Act (C.A. 141). xRural Bank of Davao City
v. CA, 217 SCRA 554 (1993).201
g. Legal Right to Redeem under Agrarian Reform Code
Under Section 12 of R.A. 3844, as amended, in the event that the landholding is sold to a third
person without the knowledge of the agricultural lessee, the latter is granted by law the right to redeem
it within 180 days from notice in writing and at a reasonable price and consideration. xQuio v. CA,
291 SCRA 249 (1998).202
XIV.
199
- 48 the latter case, the assignment has an effect similar to that of a sale. xLicaros v. Gatmaitan, 362 SCRA
548 (2001).203
In its most general and comprehensive sense, an assignment is a transfer or making over to
another of the whole of any property, real or personal, in possession or in action, or of any estate or
right therein. It includes transfers of all kinds of property, and is peculiarly applicable to intangible
personal property and, accordingly, it is ordinarily employed to describe the transfer of non-negotiable
choses in action and of rights in or connected with property as distinguished from the particular item or
property. xPNB v. CA, 272 SCRA 291 (1997).
2. Perfection by Mere Consent (Art. 1624)
3. But Must Be in Public Instrument to Affect Third Parties (Art. 1625)
4. Effects of Assignment
a. Assignment of Credit
An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the
consent of the debtor, transfers his credit and accessory rights to another, known as the assignee,
who acquires the power to enforce it to the same extent as the assignor could enforce it against the
debtor. xAquintey v. Tibong, 511 SCRA 414 (2006).204
As a consequence, the third party steps into the shoes of the original creditor as subrogee of the
latter. Although constituting a novation, such assignment does not extinguish the obligation under the
credit assigned, even when the assignment is effected without his consent. xSouth City Homes, Inc. V.
BA Finance Corp., 371 SCRA 603 (2001).
b. Issues re Debtor (Art. 1626)
In an assignment of credit, the consent of the debtor is not essential for its perfection, his
knowledge thereof or lack of it affecting only the efficaciousness or inefficaciousness of any payment
he might make. xProject Builders, Inc. v. CA, 358 SCRA 626 (2001).
Consent of debtor is not necessary in order that assignment may fully produce legal effects, and
the duty to pay does not depend on the consent of the debtor. Otherwise, all creditors would be
prevented from assigning their credits because of the possibility of the debtors refusal to given
consent. What the law requires in an assignment of credit is mere notice to debtor, and the purpose of
the notice is only to inform the debtor that from the date of the assignment, payment should be made
to the assignee and not to the original creditor. xNIDC v. De los Angeles, 40 SCRA 489 (1971).205
c. Accessories and Accessions (Art. 1627)
Assignment of a credit includes all the accessory rights, such as guaranty, mortgage, pledge or
preference. xUnited Planters Sugar Milling Co., Inc. (UPSUMCO) v. CA, 527 SCRA 336 (2007).
d. Tradition in Assignment
Notarization converts a private document Assignment of Credit into a public document, thus
complying with the mandate of Article 1625 of the Civil Code and making it enforceable even as
against third persons. xLedonio v. Capitol Dev. Corp., 526 SCRA 379 (2007).
5. Warranties of Assignor (Art. 1628)
Assignor warrants only the existence or legality of the credit but not the solvency of the debtor.
Nyco Sales Corp. v. BA Finance, 200 SCRA 637 (1991).
EXCEPTIONS: (a) If this is expressly warranted.
(b) If insolvency is known by the assignor prior to assignment.
(c) If insolvency is prior to assignment is common knowledge.
When dacion en pago takes the form of an assignment of credit, it produces the effects of a dation
in payment, which may extinguishes the obligation; however, by virtue of the warranty in Art. 1628,
which makes the vendor liable for the existence and legality of the credit at the time of sale, when it is
shown that the assigned credit no longer existed at the time of dation, then it behooves the assignor to
make good its warranty and pay the obligation. xLo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA
182 (2003).
6. Right of Repurchase on Assignment of Credit under Litigation (Arts. 1634 and1635)
203
Nyco Sales Corp. v. BA Finance Corp., 200 SCRA 637 (1991); Rodriguez v. CA, 207 SCRA 553 (1992); Project Builders, Inc. v. CA,
358 SCRA 626 (2001).
204
Lo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182 (2003).
205
Sison & Sison v. Yap Tico, 37 Phil. 587 (1918); C & C Commercial Corp. v. PNB, 175 SCRA 1 (1989); Project Builders, Inc. v. CA,
358 SCRA 626 (2001); .Aquintey v. Tibong, 511 SCRA 414 (2006); Ledonio v. Capitol Devt Corp., 526 SCRA 379 (2007).
XV.
- 50 his creditor. The portion of a judgment providing for subsidiary liability is invalid, since the proper
remedy of the creditor is to collect on the credit against the defendant, and if they cannot pay, to attach
on the property fraudulently mortgage since the same still pertain to the debtors-defendants. xPeople
v. Mapoy, 73 Phil. 678 (1942).
XVI.
OF 2000 AND
RELATED PROVISIONS OF THE ANTI-DUMMY LAW
1. Public Policy under RTLA 2000: A reversal of paradigm; focus from the protecting the
retailers to promoting the interests of consumers.
The control and regulation of trade in the interest of the public welfare is of course an exercise of
the police power of the State. To the extent that the Retail Trade Liberalization Act (R.A. 8762),
lessens the restraint on the foreigners right to property or to engage in an ordinarily lawful business, it
cannot be said that the law amounts to a denial of the Filipinos right to property and to due process of
law. Espina v. Zamora, 631 SCRA 17 (2010).
2. Scope and Definition of Retail Trade
a. Importance of Retail Trade (King v. Hernaez, 4 SCRA 792 [1960])
b. Elements: (1) Seller habitually engaged in selling;
(2) Selling direct to the general public; and
(3) Object of the sale is limited to merchandise, commodities or goods for
consumption.
c. Meaning of Habitually Selling
Engaging in the sale of merchandise as an incident to the primary purpose of a corporation [e.g.,
operation of a pharmacy by a hospital; sale of cellphones by a telecommunication company] does not
constitute retail trade within the purview of RTNL, as this is taken from the provision thereof
excluding form the term retail business the operation of a restaurant by a hotel-owner or -keeper
since the same does not constitute the act of habitually selling direct to the general public
merchandise, commodities or goods for consumption. SEC Opinion No. 11, series of 2002, 13
November 2002.
d. Meaning of Consumption (DOJ Opinion No. 325, series of 1945; IRR of Law).
The Law limits its application to the sale of items sold for domestic or household, or properly
called consumer goods; whereas, when the same items are sold to commercial users, they would
constitute non-consumer goods and not covered by the Law. Balmaceda v. Union Carbide
Philippines, Inc. 124 SCRA 893 (1983).207
e. Meaning of General Public (DOJ Opinion No. 253, series of 1954).
Even when the same of consumer goods is limited only to the officers of the company, the same
would still constitute retail trade covered by the Law. Goodyear Tire v. Reyes, Sr., 123 SCRA 273
(1983).
Where the glass company manufactures glass products only on specific orders, it does not sell
directly to consumers but manufacturers its products only for the particular clients, it cannot be said
that it is a merchandiser. DBP v. Honorable Judge of the RTC of Manila, 86 O.G. No. 6 1137 (05
February 1990).
3. Categories of Retail Trade Enterprises
a. Category A Exclusive to Filipino citizens and 100% Filipino entities
b. Categories B and C
c. Category D Luxury Items
d. Exempted Areas
e. Rights Granted to Former Natural-Born Filipinos
4. Foreign Investment or Engagement in Retail Trade in the Philippines
a. Requirements for Foreign Investors
207
Marsman & Co., Inc. v. First Coconut Central Co., Inc., 162 SCRA 206 (1988); B.F. Goodrich Philippines, Inc. v. Reyes, Sr., 121
SCRA 363 (1983).
- 51 b. Grandfather Rule on 100% Filipino Ownership of Corporate Entity: SEC Opinions, dated 20
March 1972 and 22 April 1983; DTI Opinion to Tanada, Teehankee & Carreon Law Office, dated
3 August 1959.
c. Public Offerings of Shares of Stock
5. Foreign Retailers in the Philippines
a. Pre-qualification requirements
b. Rules on Branches/Stores
c. Promotion of Locally-Manufactured Products
d. Prohibited Activities of Foreign Retailers
e. Binding Effect of License to Engage in Retail on Private Parties
When a license to engage in cocktail lounge and restaurant is issued to a Filipino married to s
foreigner, it is conclusive evidence of the latter's ownership of the retail business as far as private
parties are concerned. xDando v. Fraser, 227 SCRA 126 (1993).
6. Penalty Provision
7. Applicability of the Anti-Dummy Act (Comm. Act. 108, as amended by P.D. 715)
a. Law penalizes Filipinos who permit aliens to use them as nominees/dummies to enjoy privileges
reserved for Filipinos. Criminal sanctions are imposed on the president, manager, board member
or persons in charge of the violating entity and causing the latter to forfeit its privileges, rights and
franchises.
b. Section 2-A of the Law prohibits aliens from intervening in the management, operation,
administration or control of nationalized business, whether as officers, employees or laborers, with
or without remuneration. Aliens may not take part in technical aspects, provided no Filipino can
do such technical work, and with express authority from the Philippine President.
c. Later, Pres. Decree 715 amended the Law by adding of a proviso expressly allowing the election
of aliens as members of the boards of directors of corporations or associations engaged in
partially nationalized activities in proportion to their allowable participation or share in the capital of
such entities.
The amendment was meant to settle the uncertainty created in the obiter opinion in Luzon
Stevedoring Corp. v. Anti-Dummy Board, 46 SCRA 474 (1972), which rejected the argument that
the Anti-Dummy Law covered only employment in wholly nationalized businesses and not in those
that are only partly nationalized.
The Filipino common-law wife of a Chinese national is not barred from engaging in the retail
business provided she uses capital exclusively derived from her paraphernal properties; allowing
her common-law Chinese husband to take part in management of the retail business would be a
violation of the law. xTalan v. People, 169 SCRA 586 (1989).
oOo
UPDATED: 28 M AY 2012; 658 SCRA