CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
AZNAR VS YAPDIANGCO
Facts: sometime in May, 1959, Teodoro Santos advertised in
two metropolitan papers the sale of his FORD FAIRLANE
500.
In the afternoon of May 28, 1959, a certain L. De Dios,
claiming to be a nephew of Vicente Marella, went to the Santos
residence to answer the ad. However, Teodoro Santos was out
during this call and only the latter's son, Irineo Santos,
received and talked with De Dios.
The latter told the young Santos that he had come in behalf of
his uncle, Vicente Marella, who was interested to buy the
advertised car.
On being informed of the above, Teodoro Santos instructed his
son to see the said Vicente Marella the following day at his
given address: 1642 Crisostomo Street, Sampaloc, Manila. And
so, in the morning of May 29, 1959, Irineo Santos went to the
above address. At this meeting, Marella agreed to buy the car
for P14,700.00 on the understanding that the price would be
paid only after the car had been registered in his name.
Irineo Santos then fetched his father who, together with L. De
Dios, went to the office of a certain Atty. Jose Padolina where
the deed of the sale for the car was executed in Marella's favor.
The parties to the contract thereafter proceeded to the Motor
Vehicles Office in Quezon City where the registration of the car
in Marella's name was effected. Up to this stage of the
transaction, the purchased price had not been paid.
Teodoro gave the registration papers and a copy of the deed of
sale to his son, Irineo, and instructed him not to part with
them until Marella shall have given the full payment for the
car.
Irineo Santos and L. De Dios then proceeded to 1642
Crisostomo Street, Sampaloc, Manila where the former
demanded the payment from Vicente Marella. Marella said
that the amount he had on hand then was short by some
P2,000.00 and begged off to be allowed to secure the shortage
from a sister supposedly living somewhere on Azcarraga Street,
also in Manila.
Thereafter, he ordered L. De Dios to go to the said sister and
suggested that Irineo Santos go with him. At the same time, he
requested the registration papers and the deed of sale from
Irineo Santos on the pretext that he would like to show them
to his lawyer. Trusting the good faith of Marella, Irineo
handed over the same to the latter and thereupon, in the
company of L. De Dios and another unidentified person,
proceeded to the alleged house of Marella's sister.
At a place on Azcarraga, Irineo Santos and L. De Dios alighted
from the car and entered a house while their unidentified
companion remained in the car. Once inside, L. De Dios asked
Irineo Santos to wait at the sala while he went inside a room.
That was the last that Irineo saw of him.
For, after a considerable length of time waiting in vain for De
Dios to return, Irineo went down to discover that neither the
car nor their unidentified companion was there anymore.
Going back to the house, he inquired from a woman he saw for
L. De Dios and he was told that no such name lived or was
even known therein. Whereupon, Irineo Santos rushed to 1642
Crisostomo to see Marella. He found the house closed and
Marella gone.
1
Vicente Marella was able to sell the car in question to the
plaintiff-appellant herein, Jose B. Aznar, for P15,000.00.
While the car in question was thus in the possession of Jose
B. Aznar and while he was attending to its registration in his
name, agents of the Philippine Constabulary seized and
confiscated the same in consequence of the report to them
by Teodoro Santos that the said car was unlawfully taken
from him.
Issue:
Between Teodoro Santos and the plaintiff-appellant, Jose B.
Aznar, who has a better right to the possession of the
disputed automobile?
Ruling: Teodoro Santos
AZNAR’S CONTENTION
Aznar accepts that the car in question originally belonged to
and was owned by the intervenor-appellee, Teodoro Santos,
and that the latter was unlawfully deprived of the same by
Vicente Marella.
However, the appellant contends that upon the facts of this
case, the applicable provision of the Civil Code is Article
1506 and not Article 559 as was held by the decision under
review. Article 1506 provides:
ART. 1506. Where the seller of goods has a voidable title
thereto, but his, title has not been voided at the time of the
sale, the buyer acquires a good title to the goods, provided
he buys them in good faith, for value, and without notice of
the seller's defect of title.
The contention is clearly unmeritorious. UNDER THE
AFOREQUOTED PROVISION, IT IS ESSENTIAL
THAT THE SELLER SHOULD HAVE A VOIDABLE
TITLE AT LEAST. It is very clearly inapplicable where, as
in this case, the seller had no title at all.
VICENTE MARELLA DID NOT HAVE ANY TITLE
TO THE PROPERTY UNDER LITIGATION
BECAUSE THE SAME WAS NEVER DELIVERED TO
HIM. He sought ownership or acquisition of it by virtue of
the contract. Vicente Marella could have acquired
ownership or title to the subject matter thereof only by the
delivery or tradition of the car to him.
Under Article 712 of the Civil Code, "OWNERSHIP AND
OTHER REAL RIGHTS OVER PROPERTY ARE
ACQUIRED AND TRANSMITTED BY LAW, BY
DONATION, BY TESTATE AND INTESTATE
SUCCESSION, AND IN CONSEQUENCE OF
CERTAIN CONTRACTS, BY TRADITION."
As interpreted by this Court in a host of cases, by this
provision, ownership is not transferred by contract merely
but by tradition or delivery. Contracts only constitute titles
or rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same
In the case on hand, the car in question was never delivered
to the vendee by the vendor as to complete or consummate
the transfer of ownership by virtue of the contract. It should
be recalled that while there was indeed a contract of sale
between Vicente Marella and Teodoro Santos, the former, as
vendee, took possession of the subject matter thereof by
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 2
September 19, 2019

stealing the same while it was in the custody of the latter's son.

There is no adequate evidence on record as to whether Irineo

Santos voluntarily delivered the key to the car to the
unidentified person who went with him and L. De Dios to the
place on Azcarraga where a sister of Marella allegedly lived.
But even if Irineo Santos did, it was not the delivery
contemplated by Article 712 of the Civil Code. For then, it
would be indisputable that he turned it over to the
unidentified companion only so that he may drive Irineo
Santos and De Dios to the said place on Azcarraga and not to
vest the title to the said vehicle to him as agent of Vicente
Marella. Article 712 above contemplates that the act be
coupled with the intent of delivering the thing.

The lower court was correct in applying Article 559 of the Civil
Code to the case at bar, for under it, the rule is to the effect
that if the owner has lost a thing, or if he has been unlawfully
deprived of it, he has a right to recover it, not only from the
finder, thief or robber, but also from third persons who may
have acquired it in good faith from such finder, thief or robber.

The said article establishes two exceptions to the general rule

of irrevindicability, to wit, when the owner
(1) has lost the thing, or
(2) has been unlawfully deprived thereof.

In these cases, the possessor cannot retain the thing as against

the owner, who may recover it without paying any indemnity
except when the possessor acquired it in a public sale.

Finally, the plaintiff-appellant here contends that inasmuch as

it was the intervenor-appellee who had caused the fraud to be
perpetrated by his misplaced confidence on Vicente Marella,
he, the intervenor-appellee, should be made to suffer the
consequences arising therefrom, following the equitable
principle to that effect.

Suffice it to say in this regard that the right of the owner to

recover personal property acquired in good faith by another, is
based on his being dispossessed without his consent. The
common law principle that where one of two innocent persons
must suffer by a fraud perpetrated by another, the law
imposes the loss upon the party who, by his misplaced
confidence, has enabled the fraud to be committed, cannot be
applied in a case which is covered by an express provision of
the new Civil Code, specifically Article 559. Between a
common law principle and a statutory provision, the latter
must prevail in this jurisdiction.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 3
September 19, 2019

TAGACTAC VS JIMENEZ
Facts:
Trinidad Tagatac bought a car for $4,500 in the US, and seven
months later, she brought the car to the Philippines. When her
friend Joseph Lee came to see her, he was with one Warner
Feist who posed as a wealthy man. Seeing that Tagatac seemed
to believe him, he offered to buy her car for P15,000, and
Tagatac was amenable to the idea.
The deed of sale was made, Feist paid by means of a postdated
check, and the car was delivered to Feist. When Tagatac tried
to encash the check, PNB refused to honor it and told her that
Feist had no account in said bank. Tagatac notified the law
enforcement agencies of the estafa committed on her by Feist,
but he was not apprehended and the car disappeared.
Meanwhile, Feist managed to have the private deed of sale
notarized, so he succeeded in having the car’s registration
certificate [RC] transferred in his name. He sold the car to
Sanchez, who was able to transfer the RC to his name. He
offered to sell the car to defendant Liberato Jimenez, who
bought the car for P10,000 after investigating in the Motor
Vehicles Office.
Jimenez delivered the car to the California Car Exchange so
that it may be displayed for sale. Masalonga offered to sell the
car for Jimenez, so the car was transferred to the former, but
when Masalonga failed to sell it right away, he transferred it to
Villanueva so he could sell it for Jimenez. Tagatac discovered
that the car was in California Car Exchange’s possession, so
she demanded from the manager for the delivery of the car,
but the latter refused. The RC was retransferred to Jimenez.
Her legal basis for the restitution of thing is RPC 104-51 .
Now the question is WON she has beenunlawfully deprived
of her car. It seems like though, but it does not fall under the
scope of NCC 599. 2In this case, there is a valid
transmission of ownership from true owner [Tagatac] to the
swindler [Feist], considering that they had a contract of sale.
As long as no action is taken by the entitled party
[annulment / ratification], the contract of sale remains valid
and binding. Feist acquired defective and voidable title, but
when he sold it to Sanchez, he conferred a good title on the
latter. Jimenez bought the car from Sanchez in good faith,
for value, and without notice of any defect in Sanchez’ title,
so he acquired a good title to the car.
Good title means an indefeasible title to the car, even as
against original owner Tagatac. As between two innocent
parties, the one whose acts made possible the injury must
shoulder the consequences thereof.
————————-
1 Civil liability of person who is criminally liable includes
restitution of thing even though it is with a third person who
acquired it legally
2 Although possession of movable property acquired in good
faith is equivalent to a title, one who has lost any movable or
has been unlawfully deprived thereof may recover it from
the person who possesses it.

Tagatac filed a suit for the recovery of the car’s possession, and
the sheriff, pursuant to a warrant of seizure that Tagatac
obtained, seized and impounded the car, but it was delivered
back to Jimenez upon his filing of a counter-bond. The lower
court held that Jimenez had the right of ownership and
possession over the car.

Issue: Can Tagactac recover the said property?

Ruling: NO

JIMENEZ IS A PURCHASER IN GOOD FAITH;

TAGATAC NOT ENTITLED TO POSSESSION

PRESUMPTION
The disputable presumption that a person found in possession
of a thing taken in the doing of a recent wrongful act is the
taker and the doer of the whole act does NOT apply in this
case because the car was NOT STOLEN from Tagatac, and
Jimenez came into possession of the car two months after
Feist swindled Tagatac.

In addition, when Jimenez acquired the car, he had no

knowledge of any flaw in the title of the person from whom he
acquired it. It was only later that he became fully aware that
there were some questions regarding the car, when he filed a
petition to dissolve Tagatac’s search warrant which had as its
subject the car in question.

TAGACTAC’S CONTENTION
Re: Tagatac’s allegation that the lower court ignored the
judgment convicting Feist of estafa, and that it erred in not
declaring that restitution of the swindled property must follow,
SHE IS WRONG! The lower court noted that Feist was
accused of estafa because of the check and NOT because of the
delivery of the car.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 4
September 19, 2019

TAGATAC VS JIMENEZ . . . The fraud and deceit practiced by Warner L. Feist

FACTS:
Trinidad Tagatac bought a car for $4,500 in the US. After 7
months, she brought the car to the Philippines.
Warner Feist, who pretended to be a wealthy man, offered to
buy Trinidad’s car for P15,000, and Tagatac was amenable to
the idea. Hnece, a deed of sale was exceuted.
Feist paid by means of a postdated check, and the car was
delivered to Feist. However, PNB refused to honor the checks
and told her that Feist had no account in said bank.
Tagatac notified the law enforcement agencies of the estafa
committed by Feist, but the latter was not apprehended and
the car disappeared.
Meanwhile, Feist managed succeeded in having the car’s
registration certificate (RC) transferred in his name. He sold
the car to Sanchez, who was able to transfer the registration
certificate to his name.
Sanchez then offered to sell the car to defendant Liberato
Jimenez, who bought the car for P10,000 after investigating in
the Motor Vehicles Office.
Tagatac discovered that the car was in California Car
Exchange’s (place where Jimenez displayed the car for sale),
so she demanded from the manager for the delivery of the car,
but the latter refused.
Tagatac filed a suit for the recovery of the car’s possession, and
the sheriff, pursuant to a warrant of seizure that Tagatac
obtained, seized and impounded the car, but it was delivered
back to Jimenez upon his filing of a counter-bond.
earmarks this sale as a voidable contract (Article 1390).
Being a voidable contract, it is susceptible of either
ratification or annulment. (If the contract is ratified, the
action to annul it is extinguished -Article 1392) and the
contract is cleansed from all its defects (Article 1396); if the
contract is annulled, the contracting parties are restored to
their respective situations before the contract and mutual
restitution follows as a consequence (Article 1398).
Being a voidable contract, it remains valid and binding until
annulled.
However, as long as no action is taken by the party entitled,
either that of annulment or of ratification, the contract of
sale remains valid and binding. When plaintiff-appellant
Trinidad C. Tagatac delivered the car to Feist by virtue of
said voidable contract of sale, the title to the car passed to
Feist. Of course, the title that Feist acquired was defective
and voidable.
Nevertheless, at the time he sold the car to Felix Sanchez,
his title thereto had not been avoided and he therefore
conferred a good title on the latter, provided he bought the
car in good faith, for value and without notice of the defect
in Feist's title (Article 1506, N.C.C.). There being no proof
on record that Felix Sanchez acted in bad faith, it is safe to
assume that he acted in good faith.
NB: ART. 1506. Where the seller of goods has a voidable
title thereto, but his title has not been avoided at the time of
the sale, the buyer acquires a good title to the goods
provided he buys them in good faith, for value, and without
notice of the seller’s defect of title.

The lower court held that Jimenez had the right of ownership
and possession over the car.

ISSUE: W/N Jimenez was a purchaser in good faith and thus

entitled to the ownership and possession of the car. YES

HELD:
It must be noted that Tagatac was not unlawfully
deprived of his car
In this case, there is a valid transmission of ownership from
true owner [Tagatac] to the swindler [Feist], considering that
they had a contract of sale (note: but such sale is voidable for
the fraud and deceit by Feist).
The disputable presumption that a person found in possession
of a thing taken in the doing of a recent wrongful act is the
taker and the doer of the whole act does NOT apply in this
case because the car was not stolen from Tagatac, and Jimenez
came into possession of the car two months after Feist
swindled Tagatac.

Jimenez was a purchaser in good faith for he was

not aware of any flaw invalidating the title from the
seller of the car
In addition, when Jimenez acquired the car, he had no
knowledge of any flaw in the title of the person from whom he
acquired it. It was only later that he became fully aware that
there were some questions regarding the car, when he filed a
petition to dissolve Tagatac’s search warrant which had as its
subject the car in question.
The contract between Feist and Tagactac was a
voidable contract, it can be annulled or ratified
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
EDCA PUBLISHING VS SPS. SANTOS
FACTS:
On October 5, 1981, a person identifying himself as Prof. Jose
Cruz ordered 406 books from EDCA Publishing. EDCA
Subsequently prepared the corresponding invoice and
delivered the books as ordered, for which Cruz issued a
personal check covering the purchase price of said books.
Subsequently on October 7, 1981, Cruz sold 120 of the books to
Leonor Santos who, after verifying the seller’s ownership from
the invoice he showed her, paid him P1,700.
Upon verification by EDCA, it was discovered that Cruz was
not employed as professor by De La Salle College and that he
had no more account or deposit with Phil. Amanah Bank, the
bank where he allegedly drawn the payment check. Upon
arrest of Cruz by the police, it was revealed that his real name
was Tomas dela Pena and that there was a further sale of 120
books to Sps. Santos.
EDCA, through the assistance of the police forced their way
into the store of Sps. Santos and threatened Leonor with
prosecution for buying stolen property. The 120 books were
seized and were later turned over to EDCA.
This resulted to Sps. Santos filing a case for recovery of the
books after their demand for the return of the books was
rejected.
ISSUE: W/N EDCA may retrieve the books from Santos. NO
(W/N EDCA has been unlawfully deprived of the books
because the heck issued by Cruz in payment thereof was
dishonored. NO.)
HELD:
EDCA argues that because Cruz, the impostor acquired no title
to the books, the latter could not have validly transferred such
to Sps. Santos. Its reason is that as the payment check
bounced for lack of funds, there was a failure of consideration
that nullified the contract of sale between it and Cruz.
However, upon perusal of the provisions on the Law on Sales,
a contract of sale is consensual and is perfected once
agreement is reached between the parties on the subject
matter and the consideration. As provided in Art. 1478-
Ownership in the thing sold shall not pass to the buyer until
full payment of the purchase only if there is a stipulation to
that effect. Otherwise, the rule is that such ownership shall
pass from the vendor to the vendee upon the actual or
constructive delivery of the thing sold even if the purchase
price has not yet been paid.
Non-payment only creates a right to demand payment or to
rescind the contract, or to criminal prosecution in the case of
bouncing checks. But absent the stipulation above noted,
delivery of the thing sold will effectively transfer ownership to
the buyer who can in turn transfer it to another.
Actual delivery of the books having been made, Cruz acquired
ownership over the books which he could then validly transfer
to the private respondents. The fact that he had not yet paid
for them to EDCA was a matter between him and EDCA and
did not impair the title acquired by the private respondents to
the books.
Leonor Santos took care to ascertain first that the books
belonged to Cruz before she agreed to purchase them. The
EDCA invoice Cruz showed her assured her that the books had
5
been paid for on delivery. By contrast, EDCA was less than
cautious — in fact, too trusting in dealing with the impostor.
Although it had never transacted with him before, it readily
delivered the books he had ordered (by telephone) and as
readily accepted his personal check in payment. It did not
verify his identity although it was easy enough to do this. It
did not wait to clear the check of this unknown drawer.
Worse, it indicated in the sales invoice issued to him, by the
printed terms thereon, that the books had been paid for on
delivery, thereby vesting ownership in the buyer.
Santos did not need to go beyond that invoice to satisfy
herself that the books being offered for sale by Cruz actually
belonged to him; yet she still did. Although the title of Cruz
was presumed under Article 559 by his mere possession of
the books, these being movable property, Leonor Santos
nevertheless demanded more proof before deciding to buy
them.
NB: Law on Property
Art. 559. The possession of movable property acquired in
good faith is equivalent to a title. Nevertheless, one who has
lost any movable or has been unlawfully deprived thereof,
may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has
been unlawfully deprived has acquired it in good faith at a
public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
ON THE REMEDY:
While we sympathize with the petitioner for its plight, it is
clear that its REMEDY IS NOT AGAINST THE
PRIVATE RESPONDENTS but against Tomas de la Peña,
who has apparently caused all this trouble.
The private respondents have themselves been unduly
inconvenienced, and for merely transacting a customary
deal not really unusual in their kind of business. It is they
and not EDCA who have a right to complain.
TSN;
Discussion
The possession of a movable property in good faith is
equivalent to title. In this case, books were actually
delivered to Cruz, therefore, he acquired thereof. The fact
that he had not yet paid for the books for EDCA did not
impair his ownership over the books.
Therefore, when Cruz sold and delivered his books to
Santos, there was a valid transfer of ownership.
Santos was an innocent purchaser in good faith because he
first ascertained that the books belonged to Cruz which was
evidenced by the invoiced issued in favour of Cruz. The sales
invoice showed that the books were sold on delivery.
Thereby, vesting ownership in the buyer.
The sales invoice issued have been paid for by delivery
thereby vesting ownership to the buyer.
So take note of the distinctions between or among these
three instances. Again, as we have mentioned,
1. even if the seller is not the owner at the time of perfection,
the sale is valid.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 6
September 19, 2019

2. If he is not the owner at the time of delivery, we apply

Article 1505, the buyer does not acquire a better title over
the subject matter unless we apply any of the exceptions
mentioned therein.

3. If the seller is not the owner at the time of delivery but

subsequently acquires title thereto, we apply Article 1434.

By operation of law, title passes to the buyer.

-------------------------------
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
CHRYSLER VS CA
Facts
OnOctober 2, 1970, Sambok, Bacolod, ordered from petitioner
various automotive products worth P30,909.61, payable in 45
days.
On November 25, 1970, petitioner delivered said products to
its forwarding agent, Allied Brokerage Corporation, for
shipment; that Allied Brokerage loaded the goods on board the
M/S Doña Florentina, a vessel owned and operated by Negros
Navigation Company, for delivery to Sambok, Bacolod. When
petitioner tried to collect from the latter the amount of
P31,037.56, representing the price of the spare parts plus
handling charges, Sambok, Bacolod, refused to pay claiming
that it had not received the merchandise.
Petitioner also demanded the return of the merchandise or
their value from Allied Brokerage and Negros Navigation, but
both denied any liability.
On September 7, 1972, petitioner filed with the Court of First
Instance of Rizal, Branch XX, Pasig, Rizal, a Complaint for
Damages against Allied Brokerage Corporation, Negros
Navigation Company and Sambok, Bacolod.
In its Answer, Sambok, Bacolod, denied having received from
petitioner or from any of its co-defendants, the automotive
products referred to in the Complaint, and professed no
knowledge of having ordered from petitioner said articles.
Issue
Whether or not the act of the private respondent in refusing to
take delivery of the automotive spare parts that it purchased
from the petitioner after having been notified of the shipment
constitutes wrongful neglect resulting in the loss of the cargo
for which it should be liable in damages to the petitioner.
Ruling:
NO.
The matter of misdelivery is not the decisive factor for
relieving Sambok, Bacolod, of liability herein. While it may be
that the Parts Order Form specifically indicated Iloilo as the
destination, as testified to by Ernesto Ordonez, Parts Sales
Representative of petitioner, Sambok, Bacolod, and Sambok,
Iloilo, are actually one.
In fact, admittedly, the order for spare parts was made by the
President of Sambok, Pepito Ng, through its marketing
consultant.
Notwithstanding, upon receipt of the Bill of Lading, Sambok,
Bacolod, initiated, but did not pursue, steps to take delivery as
they were advised by Negros Navigation that because some
parts were missing. they would just be informed as soon as the
missing parts were located.
It was only four years later, however, or in 1974, when a
warehouseman of Negros Navigation, Severino Aguarte, found
in their off-shore bodega, parts of the shipment.- in question,
but already deteriorated and valueless.
Under the circumstances, Sambok, Bacolod, cannot be faulted
for not accepting or refusing to accept the shipment from
Negros Navigation four years after shipment. The evidence is
clear that Negros Navigation could not produce the
merchandise nor ascertain its whereabouts at the time
Sambok, Bacolod, was ready to take delivery. Where the seller
7
delivers to the buyer a quantity of goods less than he
contracted to sell, the buyer may reject them.
From the evidentiary record, Negros Navigation was the
party negligent in failing to deliver the complete shipment
either to Sambok, Bacolod, or to Sambok, Iloilo, but as the
Trial Court found, petitioner failed to comply with the
conditions precedent to the filing of a judicial action.
Thus, in the last analysis, it is petitioner that must shoulder
the resulting loss. The general rule that before, delivery, the
risk of loss is home by the seller who is still the owner,
under theprinciple of "res petit domino", is applicable in
petitioner's case.
In sum, the judgment of respondent Appellate Court, will
have to be sustained not on the basis of misdelivery but on
nondelivery since the merchandise was never placed in the
control and possession of Sambok, Bacolod, the vendee.
SR TSN:
Discussion
So here, there was NO MISDELIVERY BUT RATHER
NON-DELIVERY.
WHY? Because the MERCHANDISE WAS NEVER
PLACED IN THE CONTROL AND POSSESSION OF
SAMBOK, THE VENDEE.
WHENTHE GENERAL RULE APPLIES:
Precisely because of the arrangement between the parties
that delivery be made to Sambok Bacolod.
Moreover, very relevant also in this case is that DELIVERY
WAS
MADE ONLY AFTER 4 YEARS. When the
warehouseman of Negros Navigation found the parts of the
shipment already deteriorated and devaluated.
Spareparts where initially delivered but they were advised
that some were missing. The missing parts were located
only 4 years thereafter. Sambok Bacolod therefore cannot be
faulted for not accepting or refusing to accept the shipment
from Negros Navigation 4 years after shipment.
Where the seller delivers to the buyer quantity of
goods less than what was contracted by the parties,
the buyer may reject them. To which, we apply again
the general principle of res perit domino.
The risk of loss is borne by the seller who is still the owner
since there was yet no delivery to transfer ownership in
favor of the buyer Sambok.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
LAWYER’S COOP VS TABORA
FACTS:
On May 3, 1955, Perfecto A. Tabora bought from the Lawyers
Cooperative Publishing Company one complete set of
American Jurisprudence consisting of 48 volumes with 1954
pocket parts, plus one set of American Jurisprudence, General
Index, consisting of 4 volumes, for a total price of P1,675.50
which, in addition to the cost of freight of P6.90, makes a total
of P1,682.40. Tabora made a partial payment of P300.00,
leaving a balance of P1,382.40.
THE BOOKS WERE DULY DELIVERED AND
RECEIPTED FOR BY TABORA ON MAY 15, 1955 in his
law office Ignacio Building, Naga City.
In the midnight of the same date, however, a big fire broke out
in that locality which destroyed and burned all the buildings
standing on one whole block including at the law office and
library of Tabora
As a result, the books bought from the company as
above stated, together with Tabora's important
documents and papers, were burned during the
conflagration. This unfortunate event was immediately
reported by Tabora to the company in a letter he sent on May
20, 1955.
On May 23, the company replied and as a token of goodwill it
sent to Tabora free of charge volumes 75, 76, 77 and 78 of the
Philippine Reports.
As Tabora failed to pay the monthly installments agreed upon
on the balance of the purchase price notwithstanding the long
time that had elapsed, the company demanded payment of the
installments due, and having failed, to pay the same, it
commenced the present action before the Court of First
Instance of Manila for the recovery of the balance of the
obligation.
TABORA’S ANSWER: Force Majeure
Defendant, in his answer, pleaded force majeure as a defense.
He alleged that the books bought from the plaintiff
were burned during the fire that broke out in Naga
City on May 15, 1955, and since the loss was due to
force majeure he cannot be held responsible for the
loss. He prayed that the complaint be dismissed and that he
be awarded moral damages in the amount of P15,000.00.
ISSUE
Whether or not appellee Lawyers Cooperative should be the
one to
bear the loss for the loss is always borne by the owner.
RULING
NO.
Appellant bought from appellee one set of American
Jurisprudence, including one set of general index, payable on
installment plan. It was provided in the contract that "title to
and ownership of the books shall remain with the seller until
the purchase price shall have been fully paid. Loss or damage
to the books after delivery to the buyer shall be borne by the
buyer." The total price of the books, including the cost of
freight, amounts to P1,682.40.
Appellant only made a down payment of P300.00 thereby
leaving a balance of P1,382.40.
8
LAWYER’S COOP’S CONTENTION
Since it was agreed that the title to and the ownership of the
books shall remain with the seller until the purchase price
shall have been fully paid, and the books were burned or
destroyed immediately after the transaction, appellee
should be the one to bear the loss for, as a result, the loss is
always borne by the owner.
Moreover, even assuming that the ownership of the books
were transferred to the buyer after the perfection of the
contract the latter should not answer for the loss since the
same occurred through force majeure. Here, there is no
evidence that appellant has contributed in any way to the
occurrence of the conflagration.
SC: This contention cannot be sustained.
RULE: While as a rule the loss of the object of the contract
of sale is borne by the owner or in case of force majeure the
one under obligation to deliver the object is exempt from
liability, the application of that rule does not here obtain
because the law on the contract entered into on the matter
argues against it.
It is true that in the contract entered into between the
parties the seller agreed that the ownership of the books
shall remain with it until the purchase price shall have been
fully paid, but such stipulation cannot make the seller liable
in case of loss not only because such was agreed merely to
secure the performance by the buyer of his obligation but in
the very contract it was expressly agreed that the "loss or
damage to the books after delivery to the buyer shall be
borne by the buyer." Any such stipulation is sanctioned by
Article 1504 of our Civil Code, which in part provides:
(1) Where delivery of the goods has been made to the
buyer or to a bailee for the buyer, in pursuance of the
contract and the ownership in the goods has been
retained by the seller merely to secure performance by
the buyer of his obligations under the contract, the
goods are at the buyer's risk from the time of such
delivery.
ON THE CONTENTION THAT HE SHOULD BE
RELIEVED BECAUSE OF FORCE MAJEURE
Neither can appellant find comfort in the claim that since
the books were destroyed by fire without any fault on his
part he should be relieved from the resultant obligation
under the rule that an obligor should be held exempt from
liability when the loss occurs thru a fortuitous event.
RATIO: This is because this rule only holds true when the
obligation consists in the delivery of a determinate thing
and there is no stipulation holding him liable even in case of
fortuitous event. Here these qualifications are not present.
The obligation does not refer to a determinate thing, but is
pecuniary in nature, and the obligor bound himself to
assume the loss after the delivery of the goods to him.
In other words, the obligor agreed to assume any risk
concerning the goods from the time of their delivery, which
is an exception to the rule provided for in Article 1262 of our
Civil Code.
Appellant likewise contends that the court a quo erred in
sentencing him to pay attorney's fees. This is merely the
result of a misapprehension for what the court a quo
ordered appellant to pay is not 25% of the amount due as
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 9
September 19, 2019

attorney's fees, but as liquidated damages, which is in line

with an express stipulation of the contract. We believe,
however, that the appellant should not be made to pay any
damages because his denial to pay the balance of the account
is not due to bad faith.

SR TSN;
Discussion
First thing we have to take note here is the stipulation in the
contract:

Title and ownership of the books shall remain with the seller
until the purchase price have been fully paid. Loss and
damage to the goods after delivery to the buyer shall be
borne by the buyer.

So with that, it's very clear that Tabora will be the one liable
for the loss. The loss is not even the fault of Tabora and of
Lawyer's Coop.

And by virtue of that provision, Tabora will still be liable to

pay the balance of the purchase price even if the loss of the
goods was due
to force majeure.

While as a rule the loss of the object of the contract of sale is

borne by the owner or in case of force majeure the one
under obligation to deliver the object is exempt from
liability, the application of that rule does not here obtain
because of the stipulation by the parties in the contract.

Such stipulation cannot make the seller liable in case of loss

because it was expressly agreed that the loss or damage to
the books after delivery to the buyer shall be borne by the
buyer.

Any stipulation is sanctioned by Article 1504. Take note

class that if walang ganyan na stipulation, we apply the
general rule na owner bears the loss. SO WHO IS THE
OWNER HERE? Tabora.

WHY BECAUSE THERE'S ALREADY DELIVERY.

Now what if wala yung 2nd phrase sa stipulation na “Loss
and damage to the goods after delivery to the buyer shall be
borne by the buyer?” Can we say that seller now bears the
loss? The Supreme Court took note of that. The seller cannot
be made liable not only because it was agreed to secure the
performance of the buyer but because it was also agreed that
loss or damage shall be borne by the buyer after delivery.

Also do take not that the obligation here does not refer to a
determinate thing. What is really the obligation of Tabora
here? To pay the price. The obligation to pay a sum of
money.

Which is a indeterminate thing. Ang nawala is yung subject

matter but the obligation remains. SO WE ONLY APPLY
THE LOSS OF THE THING RULE WHICH WILL
EXTINGUISH THE OBLIGATION, if it refers to an
obligation to deliver a determinate thing.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 10
September 19, 2019

FIRST UNITED VS BAYANIHAN AUTOMOTIVE

Facts:
TOPIC:
This case concerns the applicability of the legal principles of
recoupment and compensation.
First United Constructors Corporation (FUCC) and petitioner
Blue Star Construction Corporation (Blue Star) were associate
construction firms sharing financial resources, equipment and
technical personnel on a case-to-case basis.
FUCC’s CONTENTION
In their answer, the petitioners averred that they had
stopped the payment on the two checks worth ₱735,000.00:
1. because of the respondent’s refusal to repair the second
dump truck; and
2. that they had informed the respondent of the defects in
that unit but the respondent had refused to comply with its
warranty, compelling them to incur expenses for the repair
and spare parts.

From May 27, 1992 to July 8, 1992, they ordered six units of BAYANIHAN’s CONTENTION
dump trucks from Bayanihan Automotive (a domestic FUCC was not legally justified in withholding payment of
corporation engaged in the business of importing and the unpaid balance of the purchase price of the Hino Prime
reconditioning used Japan-made trucks, and of selling the Mover and the Isuzu Transit Mixer due the alleged defects
trucks to interested buyers who were mostly engaged in the in second dump truck because the purchase of the two
construction business), to wit: units was an entirely different transaction from the
sale of the dump trucks, the warranties for which
UNIT TO WHOM having long expired.
DELIVERY DATE OF DELIVERY
Isuzu Dump Truck FUCC 27 May 1992 RTC - found FUCC liable to pay for the unpaid balance of
Isuzu Dump Truck FUCC 27 May 1992 the purchase price of the Hino Prime Mover and the Isuzu
Isuzu Dump Truck FUCC 10 June 1992 Transit Mixer.
Isuzu Dump Truck FUCC 18 June 1992
Isuzu Dump Truck Blue Star 4 July 1992 Held that the petitioners could not avail themselves of
Isuzu Dump Truck FUCC 8 July 1992 legal compensation because the claims they had set up in
the counterclaim were not liquidated and demandable.
The parties established a good business relationship, with the
respondent extending service and repair work to the units CA
purchased by the petitioners. The respondent also practiced The petitioners appealed, stating that THEY COULD
liberality towards the petitioners in the latter’s manner of JUSTIFIABLY STOP THE PAYMENT OF THE
payment by later on agreeing to payment on terms for CHECKS IN THE EXERCISE OF THEIR RIGHT OF
subsequent purchases. RECOUPMENT because of the respondent’s refusal to
settle their claim for breach of warranty as to the purchase
September 19, 1992 of the second dump truck.
FUCC ordered from BAYANIHAN one unit of Hino Prime
Mover that the BAYANIHAN delivered on the same date. CA’s ruling:
The remedy of recoupment could not be properly
September 29, 1992 invoked by the petitioners because the transactions
FUCC again ordered from BAYANIHAN one unit of Isuzu were different;
Transit Mixer that was also delivered.
1. that the expenses incurred for the repair and spare parts
For the two purchases, FUCC partially paid in cash, and the of the second dump truck were not a proper subject of
balance through post-dated checks, as follows: recoupment because they DID NOT ARISE OUT OF THE
PURCHASE OF THE HINO PRIME MOVER AND THE
BANK/CHECK NO. DATE ISUZU TRANSIT MIXER; and
AMOUNT
Pilipinas Bank 18027379 23 November 1992 2. that the petitioners’ claim could not also be the subject of
₱360,000.00 legal compensation or set-off, because the debts in a set-off
Pilipinas Bank 18027384 1 December 1992 should be liquidated and demandable.
₱375,000.00
Issues
UPON PRESENTMENT OF THE CHECKS FOR
PAYMENT, THE RESPONDENT LEARNED THAT Could FUCC validly resort to recoupment?
FUCC HAD ORDERED THE PAYMENT STOPPED.
Bayanihan immediately demanded the full settlement of their Ruling:
obligation from the petitioners, but to no avail.
NO
Instead, FUCC informed BAYANIHAN that they were
withholding payment of the checks due to the breakdown There is no longer any question that the petitioners were
of one of the dump trucks they had earlier purchased liable to the respondent for the unpaid balance of the
from respondent, specifically the second dump truck purchase price of the Hino Prime Mover and the Isuzu
delivered on May 27, 1992. Transit Mixer.

ACTION FOR COLLECTION commenced WHAT REMAIN TO BE RESOLVED ARE STRICTLY

Due to the refusal to pay, the respondent commenced this LEGAL, NAMELY:
action for collection on April 29, 1993, seeking payment of the 1. Whether or not the petitioners validly exercised the right
unpaid balance in the amount of ₱735,000.00 represented by of recoupment through the withholding of payment of the
the two checks.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay
September 19, 2019
unpaid balance of the purchase price of the Hino Prime Mover
and the Isuzu Transit Mixer; and,
2. Whether or not the costs of the repairs and spare parts for
the second dump truck delivered to FUCC on May 27, 1992
could be offset for the petitioners’ obligations to the
respondent.
PETITIONERS COULD NOT VALIDLY RESORT TO
RECOUPMENT AGAINST RESPONDENT
RECOUPMENT (RECONVENCION), defined
The act of rebating or recouping a part of a claim upon which
one is sued by means of a legal or equitable right resulting
from a counterclaim arising out of the same transaction.7 It is
the setting up of a demand arising from the same transaction
as the plaintiff’s claim, to abate or reduce that claim.
LEGAL BASIS FOR RECOUPMENT
The legal basis for recoupment by the buyer is the first
paragraph of Article 1599 of the Civil Code, viz:
Article 1599. Where there is a breach of warranty by the seller,
the buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the
breach of warranty by way of recoupment in diminution or
extinction of the price;
(2) Accept or keep the goods and maintain an action against
the seller for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against
the seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods
or if the goods have already been received, return them or
offer to return them to the seller and recover the price or any
part thereof which has been paid.
When the buyer has claimed and been granted a remedy in
anyone of these ways, no other remedy can thereafter be
granted, without prejudice to the provisions of the second
paragraph of article 1191. (Emphasis supplied)
xxxx
IN THIS CASE
It was improper for petitioners to set up their claim for repair
expenses and other spare parts of the dump truck against their
remaining balance on the price of the prime mover and the
transit mixer they owed to respondent.
RECOUPMENT MUST ARISE OUT OF THE
CONTRACT OR TRANSACTION UPON WHICH THE
PLAINTIFF’S CLAIM IS FOUNDED.
To be entitled to recoupment, therefore, the CLAIM MUST
ARISE FROM THE SAME TRANSACTION, i.e., the
purchase of the prime mover and the transit mixer and not to
a previous contract involving the purchase of the dump truck.
That there was a series of purchases made by
petitioners could not be considered as a single
transaction, for the records show that the earlier purchase of
the six dump trucks WAS A SEPARATE AND DISTINCT
TRANSACTION FROM THE SUBSEQUENT
PURCHASE OF THE HINO PRIME MOVER AND THE
ISUZU TRANSIT MIXER. Consequently, the breakdown of
one of the dump trucks did not grant to petitioners the right to
11
stop and withhold payment of their remaining balance on
the last two purchases.
LEGAL COMPENSATION WAS PERMISSIBLE
Legal compensation takes place when the requirements set
forth in Article 1278 and Article 1279 of the Civil Code are
present, to wit:
Article 1278. Compensation shall take place when two
persons, in their own right, are creditors and debtors of each
other."
Article 1279. In order that compensation may be proper, it is
necessary:
(1) That each of the obligors be bound principally, and that
he be at the same time a principal creditor of the other;
(2) That both debts consists in a sum of money, or if the
things due are consumable, they be of the same kind, and
also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and
communicated in due time to the debtor.
IN THIS CASE
As to whether petitioners could avail themselves of
compensation, both the RTC and CA ruled that they could
not because the claims of petitioners against respondent
were not liquidated and demandable.
The Court cannot uphold the CA and the RTC.
The RTC already found that petitioners were entitled to the
amount of ₱71,350.00 stated in their counterclaim, and the
CA concurred in the finding, stating thusly:
It is noteworthy that in the letter of December 16, 1992 (Exh.
"1") defendants were charging plaintiff only for the
following items of repair:
1. Cost of repair and spare parts - ₱46,800.00
2. Cost of repair and spare parts - 24,550.00
₱71,350.00
Said amounts may be considered to have been spent for
repairs covered by the warranty period of three (3) months.
While the invoices dated September 26, 1992 and
September 18, 1992, this delay in repairs is attributable to
the fact that when defects were brought to the attention of
the plaintiff in the letter of August 14, 1992 (Exh. "8") which
was within the warranty period, the plaintiff did not
respond with the required repairs and actual repairs were
undertaken by defendants.
Thereafter, the spare parts covered by Exhibits "2-B" and
"3-A" pertain to the engine, which was covered by the
warranty.
x x x. Defendants in their letter of August 14, 1992 (Exhb.
"8") DEMANDED CORRECTION OF DEFECTS.
CASE DIGESTS | SALES| CATTLEYA To First United | Phoebe Buffay 12
September 19, 2019

IN THEIR LETTER OF AUGUST 22, 1992 (EXH. "9")

THEY DEMANDED REPLACEMENT. IN THEIR
LETTER OF AUGUST 27, 1992 (EXH. "10"), THEY
DEMANDED ‘REPLACEMENT/REPAIR’. In September,
1992, they undertook repairs themselves (Exhs. "2-B" and
"3-A") and demanded payment for the expenses in their letter
of December 16, 1992 (Exh. "1"). All other items of expenses
connected with subsequent breakdowns are no longer
chargeable to plaintiff which granted only a 3-month warranty.
x x x10

Considering that preponderant evidence showing that

petitioners had spent the amount of ₱71,350.00 for the repairs
and spare parts of the second dump truck within the warranty
period of three months supported the finding of the two lower
courts, the Court accepts their finding.

DEBT, when liquidated

A debt is liquidated when its existence and amount are
determined.

Accordingly, an unliquidated claim set up as a counterclaim by

a defendant can be set off against the plaintiff’s claim from the
moment it is liquidated by judgment.

ARTICLE 1290 OF THE CIVIL CODE provides that when

all the requisites mentioned in Article 1279 of the Civil Code
are present, compensation takes effect by operation of law,
and extinguishes both debts to the concurrent amount.

Here, with petitioners’ expenses for the repair of the dump

truck being already established and determined with certainty
by the lower courts, it follows that legal compensation could
take place because all the requirements were present.

Hence, the amount of ₱71,350.00 should be set off against

petitioners’ unpaid obligation of ₱735,000.00, leaving a
balance of ₱663,650.00, the amount petitioners still owed to
respondent.

COURTS MODIFIED THE LEGAL INTEREST

The legal interest rate to be imposed from February 11, 1993,
the time of the extrajudicial demand by respondent, should be
6% per annum in the absence of any stipulation in writing in
accordance with Article 2209 of the Civil Code, which
provides:

Article 2209. If the obligation consists in the payment of a

sum of money, and the debtor incurs in delay, the indemnity
for damages, there being no stipulation to the contrary, shall
be the payment of the interest agreed upon, and in the absence
of stipulation, the legal interest, which is six per cent per
annum.

DISPOSITIVE PORTION
WHEREFORE, the Court AFFIRMS the decision promulgated
on July 26, 2004 in all respects subject to the
MODIFICATION that petitioners are ordered, jointly and
severally, to pay to respondent the sum of 1 663,650.00, plus
interest of 6% per annum computed from February 11, 1993,
the date of the first extrajudicial demand, until fully paid; and
ORDERS the petitioners to pay the costs of suit.