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Chapter 5  Seller may require payment to be made at any time

OBLIGATIONS OF THE VENDEE after delivery.


 Buyer here has the duty to pay the price
Art. 1582. The vendee is bound to accept delivery immediately upon demand (Ocejo v. Int. Bank, 37
and to pay the price of the thing sold at the time Phil. 631).
and place stipulated in the contract.
Effect of Deviations from the Contract
If the time and place should not have been If the seller is forced to deviate from the provision of the
stipulated, the payments must be made at the contract, but the purchaser consents or agrees to such
time and place of the delivery of the thing sold. deviations, the purchaser should still pay the price.
(Engel v. Velasco & Co., 47 Phil. 15).
Principal Obligations of the Buyers
The buyers must: Art. 1583. Unless otherwise agreed, the buyer of
(a) accept delivery goods is not bound to accept delivery thereof by
(b) pay the price installments.

 Tender of payment ought to be made in legal tender Where there is a contract of sale of goods to be
(not a check), unless another mode is accepted by delivered by stated installments, which are to be
the creditor (Soco v. Judge Militante GR 58961, Jan. separately paid for, and the seller makes defective
28, 1983). deliveries in respect of one or more installments,
or the buyer neglects or refuses without just
Bar cause to take delivery of or pay for one or more
On Jan. 5, A sold and delivered his truck, together with installments, it depends to each case on the terms
the corresponding certificate of public convenience to B of the contract and the circumstances of the case,
for the sum of P600,000, payable within 60 days. Two whether the breach of contract is so material as to
weeks after the sale, and while the certificate of public justify the injured party in refusing to proceed
convenience was still in the name of A, it (the further and suing for damages for breach of the
certificate) was revoked by the Public Service entire contract, or whether the breach is
Commission thru no fault of A. Upon the expiration of severable, giving rise to a claim for compensation
the 60-day period, A demanded payment of the price but not to a right to treat the whole contract as
from B. B refused to pay, alleging that the contract of broken.
sale was VOID for the reason that the certificate of
public convenience which was the main consideration of Generally, No Delivery by Installments
the sale no longer existed. Is the contention of B  Reason: performance must generally be complete.
tenable? Reasons.  Exception to Rule: express provisions.

ANS.: Under the circumstances, the contention of B is Rule in Case of Installment Deliveries
NOT tenable. The second paragraph states the rules for delivery by
installments, and distinguishes whether the breach is
(a) Firstly, it cannot be correctly contended that the sale severable or not.
is void, since the consideration actually existed at the
time of the perfection of the sale. The subsequent Antipolo Realty Corp. v. National Housing
revocation of the certificate thru no fault of A is Authority
immaterial. GR 50444, Aug. 31, 1987

(b) Secondly, what B should have done immediately FACTS: For failure of the Realty Company to develop the
after the sale was to take steps to have the Public subdivision project, the buyer paid only the averages
Service Commission transfer the certificate to his name. pertaining to the period up to and including the month
(Serrano v. Miave, et al., L-14678, Mar. 31, 1965). of Aug., 1972 and stopped all monthly payments falling
due thereafter. In Oct. 1976, the Realty Company
(c) Thirdly, while the Public Service Law requires that advised the buyer that the improvements had already
the sale or assignment of a certificate of public been completed and requested resumption of
convenience, together with the property used in the payments. In another letter, the Realty Company
operation of the same, should be approved by the Public demanded immediate payment of the P16,000
Service Commission –– for the protection of the public, representing installments which it said accrued during
still as between A and B, the contract is efficacious as the period while the improvements were being
all the essential requisites of the contract were present completed. The buyer refused to pay the 1972-1976
at the time of the perfection thereof. installments, but agreed to pay the post 1976
installments.
[NOTE: Unless the deed of conveyance is executed, the
buyer as a rule is not required to pay the price. (Lafont ISSUE: What happens to the installment payments
v. Pascasio, 5 Phil. 391).] which would have accrued and fallen due during the
period of suspension had no default on the part of the
Effect of Delivery When No Time Has Been Fixed realty company intervened?
for Payment of the Price
HELD: The original period of payment in the Contract to When Buyer Has Right to Examine
Sell must be deemed extended by a period of time equal Generally, the buyer is entitled to examine the goods
to the period of suspension (i.e., by 4 yrs., two [2] prior to delivery. And this is true even if the goods are
months) during which extended time (tacked on to the shipped F.O.B. (free on board). (See Decezo v.
original contract period) the buyer must continue to pay Chandler, 206 N.Y.S.).
the monthly installment payments until the entire
original contract price shall have been paid. Grageda v. IAC
GR 67929, Oct. 27, 1987
To permit the Antipolo Realty to collect the disputed
amount in a lump sum after it had defaulted in its FACTS: On Mar. 26, 1975, Dino ordered from Francisco
obligations to its lot buyers would defeat the purpose of 500 sets of pyrex trays. Prior to Apr. 27, 1975, Francisco
the authorization (under Sec. 23, PD 957) to lot buyers delivered some of the items but Dino outrightly rejected
to suspend installment payments. Such must be the them. After making the proper corrections, Francisco
case, otherwise, there is no sense in suspending made subsequent deliveries on Apr. 27, Apr. 30, May 1,
payments. Upon the other hand, to condone the entire May 3, May 12, and May 27, 1975. Dino’s caretaker duly
amount that would have become due would be received the deliveries. On several occasions, Francisco
excessively a harsh penalty upon the seller and would demanded payment for the total value of the deliveries
result in the unjust enrichment of the buyer at the but Dino asked for extension of time within which to
expense of the seller. The suspension of installment pay. On Jun. 20, 1975, Dino sent a letter to Francisco,
payments was attributable to the realty company, not telling Francisco that he rejects the items delivered.
to the buyer. The tacking of the period of suspension to Because of this, Francisco sued Dino for payment.
the end of the original period prevents default on the
part of the lot buyer. HELD: The delay in the advice or notice of rejection—
almost two months after receipt — was rather too late.
Under Sec. 23, PD 957, “no installment payment made Art. 1584 accords the buyer the right to a reasonable
by a buyer in a subdivision or condominium project for opportunity to examine the goods to ascertain whether
the lot or unit he contracted to buy shall be forfeited in they are in conformity with the contract. Such
favor of the owner or developer when the buyer, after opportunity to examine, however, should be availed of
due notice to the owner or developer, desists from within a reasonable time in order that the seller may not
further payment due to the failure of the owner or be subjected to undue delay or prejudice in the payment
developer to develop the subdivision or condominium of his raw materials, workers and other damages which
project according to the approved plans and within the may be incurred due to the deterioration of his products.
time limit for complying with the same. Such buyer may,
at his option, be reimbursed the total amount paid The buyer is deemed to have accepted the goods when,
including amortization and interests but excluding after the lapse of a reasonable time he retains them
delinquency interest, with interest thereon at the legal without intimating to the seller that he has rejected
rate.’’ them.

Art. 1584. Where goods are delivered to the buyer, When Buyer Has No Right to Examine
which he has not previously examined, he is not (a) when there is a stipulation to this effect. (Art.
deemed to have accepted them unless and until he 1584, par. 1).
has had a reasonable opportunity of examining (b) when the goods are delivered C.O.D. — unless
them for the purpose of ascertaining whether they there is an agreement or a usage of trade
are in conformity with the contract if there is no PERMITTING such examination. (Art. 1584, par.
stipulation to the contrary. 2).

Unless otherwise agreed, when the seller tenders Art. 1585. The buyer is deemed to have accepted
delivery of goods to the buyer, he is bound, on the goods when he intimates to the seller that he
request, to afford the buyer a reasonable has accepted them, or when the goods have been
opportunity of examining the goods for the delivered to him, and he does any act in relation
purpose of ascertaining whether they are in to them which is inconsistent with the ownership
conformity with the contract. of the seller, or when, after the lapse of a
reasonable time, he retains the goods without
Where goods are delivered to a carrier by the intimating to the seller that he has rejected them.
seller, in accordance with an order from or
agreement with the buyer, upon the terms that When There is Acceptance of the Goods
the goods shall not be delivered by the carrier to The Article gives three ways of accepting the goods:
the buyer until he has paid the price, whether such (a) express acceptance
terms are indicated by marking the goods with the (b) when buyer does an act which only an owner can do
words “collect on delivery,” or otherwise, the (c) failure to return after reasonable lapse of time
buyer is not entitled to examine the goods before
the payment of the price, in the absence of Kerr & Co. v. De la Rama
agreement or usage of trade permitting such 11 Phil. 453
examination.
FACTS: Buyer accepted goods despite delay. Buyer also (3) Should he be in default, from the time of
promised later on to pay. Subsequently, buyer asked for judicial or extrajudicial demand for the payment
damages on account of the delay. of the price.

HELD: Buyer is estopped because of the acceptance When Buyer Has to Pay for Interest on the Price
without reservation at the time of acceptance. This Article answers the question: “In what cases is the
buyer liable for interest on the price?”
Art. 1586. In the absence of express or implied
agreement of the parties, acceptance of the goods [NOTE: If the buyer fails to give the money after the
by the buyer shall not discharge the seller from contract is notarized, although he had previously
liability in damages or other legal remedy for promised to do so, there is default with liability for legal
breach of any promise or warranty in the contract interest. (De la Cruz v. Legaspi, L-8024, Nov. 29,
of sale. But, if, after acceptance of the goods, the 1955).]
buyer fails to give notice to the seller of the breach
in any promise of warranty within a reasonable The Three Cases Contemplated
time after the buyer knows, or ought to know of (a) In No. (1), no demand is needed.
such breach, the seller shall not be liable therefor. (b) In No. (2), the reason for the law is that the
fruits or income is sufficient to warrant the
Even if Buyer Accepts, Seller Can Still Be Liable payment of interest.
(a) Reason for the last sentence. To prevent (c) In No. (3), “default” is mora, called “in delay”
afterthoughts or belated claims. under the provisions of the Civil Code.
(b) The buyer is allowed to set up the breach of the
warranty or promise as a set-off or counterclaim Rule for Monetary Obligations
for the price. (William v. Perrota, 95 Conn. 629). In a monetary obligation (like the obligation to pay the
purchase price) in the absence of stipulation, legal
Art. 1587. Unless otherwise agreed, where goods interest takes the place of damages. This is so even if
are delivered to the buyer, and he refuses to the damages are actually more or less. The possibility
accept them, having the right to do, he is not of gain because of an investment should be discounted;
bound to return them to the seller, but it is instead of a gain, there might be a loss. Therefore, the
sufficient if he notffies the seller that he refuses law has compromised on legal interest. (Quiros v. Tan
to accept them. If he voluntarily constitutes Guinlay, 6 Phil. 675).
himself a depositary thereof, he shall be liable as
such. Art. 1590. Should the vendee be disturbed in the
possession or ownership of the thing acquired, or
Effect if Buyer Justifiably Refuses to Accept the should he have reasonable grounds to fear such
Delivery disturbance, by a vindicatory action or a
(a) buyer has no duty to return the goods to the foreclosure of mortgage, he may suspend the
seller payment of the price until the vendor has caused
(b) mere notification to seller of refusal will suffice the disturbance or danger to cease, unless the
(c) but buyer may make himself a voluntary latter gives security for the return of the price in
depositary –– in which case he must safely take a proper case, or it has been stipulated that,
care of them in the mean time notwithstanding any such contingency, the
vendee shall be bound to make the payment. A
Art. 1588. If there is no stipulation as specified in mere act of trespass shall not authorize the
the first paragraph of article 1523, when the suspension of the payment of the price.
buyer’s refusal to accept the goods is without just
cause, the title thereto passes to him from the When Buyer May Suspend the Payment of the
moment they are placed at his disposal. Price
The buyer may SUSPEND the payment of the price if:
Effect if Buyer Unjustifiably Refuses to Accept the (a) There is a well-grounded fear (fundado temor).
Delivery (b) The fear is because of:
Generally, the buyer becomes the owner. Exception — 1) a vindicatory action or action to recover, or
when there is a contrary stipulation or when the seller 2) a foreclosure of mortgage.
reserves the ownership as a sort of security for the
payment of the price. (See Arts. 1523 and 1503, Civil [NOTE: (a) The fear must not be the result of any other
Code). ground, like the vendor’s insanity. (b) A mere act of
trespass is made by one claiming no legal right
Art. 1589. The vendee shall owe interest for the whatsoever. Here, the buyer is not authorized to
period between the delivery of the thing and the suspend the payment of the price.]
payment of the price, in the following three cases:
(1) Should it have been so stipulated; Problem
(2) Should the thing sold and delivered produce S sold and delivered to B a parcel of land for P2 million
fruits or income; payable within 30 days from the date of the contract.
Soon after the sale, X claims ownership over the land
by virtue of a prescriptive title. May B suspend the “The power to rescind obligations is implied in reciprocal
payment of price? Why? ones, in case one of the obligors should not comply with
what is incumbent upon him.
If, in order to avoid trouble, B pays off X to settle the
latter’s claim to the land, may B recover the amount The injured party may choose between the fulfillment
paid as against S upon S’s warranty in case of eviction? and the rescission of the obligation, with the payment
Reason. of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should
ANS.: Yes, B may suspend the payment of the price become impossible.
because of a reasonable fear that an accion
reivindicatoria will be brought against him. It is not “The court shall decree the rescission claimed, unless
necessary that the vindicatory action has already been there be just cause authorizing the fi xing of a period.
brought: reasonable fear thereof is sufficient. (10
Manresa 274-276, 280-281). Should B and X come to “This is understood to be without prejudice to the rights
an amicable settlement, B cannot recover from S of third persons who have acquired the thing, in
because there really was no eviction. B was indeed not accordance with articles 1385 and 1388 and the
deprived of the thing purchased. (Art. 1548, Civil Code). Mortgage Law.”

Bareng v. Court of Appeals, et al. Art. 1592. In the sale of immovable property, even
L-12973, Apr. 25, 1960 though it may have been stipulated that upon
failure to pay the price at the time agreed upon
FACTS: Bareng bought cinematographic equipment the rescission of the contract shall of right take
from a certain Alegria for P15,000. He paid P11,400 place, the vendee may pay even after the
down, and executed a promissory note for the balance. expiration of the period, as long as no demand for
On the date of maturity, he refused to pay the balance, rescission of the contract has been made upon him
alleging that a certain Ruiz had informed him that he either judicially or by a notarial act. After the
(Ruiz) was a co-owner of Alegria of the properties demand, the court may not grant him a new term.
purchased, and that he was not in conformity with the
sale. Suit was brought by Alegria for the recovery of the Rescission of Sale of Real Property
balance. While the suit was pending, Alegria caused the (a) This is only applicable to a sale of real property, not
disturbance over the ownership to cease by to a contract TO SELL real property or to a promise TO
compromising with Ruiz for the latter’s share. SELL real property, where title remains with the vendor
until fulfillment of a positive suspensive condition, such
Issue: Aside from paying the balance, does Bareng have as the full payment of the price. (Manuel v. Rodriguez,
to pay any legal interest thereon? If so, from what time? L-13436, Jul. 27, 1960). In the contract TO SELL, where
ownership is retained by the seller and is not to pass
HELD: Bareng is liable for interest, not from the time of until the full payment of the price, such payment is a
demand — for he was justified in suspending payment positive suspensive condition, the failure of which is not
from the time he learned of Ruiz’s adverse claims –– but a breach, casual or serious but an event that prevents
from the time Alegria had “caused the disturbance or the obligation of the vendor to convey title from
danger to cease” by entering into compromise with Ruiz. acquiring binding force. To argue that in case of failure
The compromise Bareng knew about –– for he was a to pay there is only a casual breach is to proceed from
party in the case. the false assumption that the contract is one of absolute
sale, where non-payment a mere resolutory condition.
Art. 1591. Should the vendor have reasonable (Ibid.).
grounds to fear the loss of immovable property
sold and its price, he may immediately sue for the (b) This article applies whether or not there is a
rescission of the sale. stipulation for automatic rescission. The law says “even
though.”
Should such ground not exist, the provisions of
Article 1191 shall be observed. (c) The demand may be:
1) judicial
When Seller May Immediately Sue for the 2) extrajudicial (this must however be by notarial
Rescission of the Sale act).
The seller must have reasonable grounds to fear:
(a) LOSS of the immovable property sold, and (d) The demand is not for the payment of the price, but
(b) LOSS of the price. for the RESCISSION of the contract. (10 Manresa 288).
If the demand for such rescission comes only AFTER the
So, if the buyer is squandering his money, but the offer to pay the balance (accompanied by a postal
immovable property remains untouched, this article money order for the amount due), the automatic
cannot apply. rescission cannot of course legally take place. (Maximo,
et al. v. Fabian, et al., L-8015, Dec. 23, 1955).
Rule if Neither Ground Exists
If neither ground exists, Art. 1191 applies. Art. 1191
provides:
(e) The demand is not for the payment of the price BUT establish an obligation to be liberal to the second buyer.
for the RESCISSION of the contract. (Manresa, Vol. 10, Mere tolerance or liberality to the first buyer does not
p. 288). necessarily mean a waiver thereof. Secondly, the
forfeiture here would be predicated on the second
Example of this Article buyer’s default, not on the first buyer’s. For with respect
On Jul. 1, A sold B a piece of land, payment and delivery to the first buyer, the consent to the assignment
to be made on Jul. 15. It was stipulated that should necessarilyvwaives any right to forfeiture accruing
payment not be made on Jul. 15, the contract would before such assignment. (Jocson v. Capital Subdivision,
automatically be rescinded. On Jul. 20, can B still pay? L-6573, Feb. 28, 1955).]

ANS.: Yes, as long as there has been no judicial or Legarda Hermanos and Jose Legarda v.
notarial demand for the rescission of the contract. But Felipe Saldaña and Court of Appeals
if, for example on Jul. 18, A had made a notarial demand L-26578, Jan. 28, 1974
for such a rescission then B will not be allowed to pay
anymore, and the court may not grant him a new term. FACTS: Saldaña bought two lots from the Legarda
Hermanos Subdivision on the installment plan (120
The Demand Needed installments).
Be it noted that the demand is not for the payment of
the price inasmuch as the seller precisely desires to After paying for 95 installments (for each lot) he
rescind the contract. To say that it should be the stopped payment, but five years later, wanted to
demand for the price would lead to the anomalous resume payment.
paradoxical result of requiring payment from the buyer
for the very purpose of preventing him from paying. It The Subdivision Company informed him that the
is, therefore, a demand for rescission; the term having contracts had been cancelled and the payments
expired, the seller does not want to continue with the forfeited conformably with the terms of the contract.
contract. (Villareal v. Tan King, 43 Phil. 251, citing 10 Saldaña was able to prove, however, that considering
Manresa 288). the total amount he had paid, the same already covered
the full purchase price of one lot. Can Saldaña get one
Rule in Contracts to Sell lot?
As already stated, Art. 1592 does NOT apply to a
promise to sell (Mella v. Vismanos, 45 O.G. 2099) nor HELD: Yes. The giving by the Company of one lot to
to a contract TO SELL. (Jocson v. Capitol Subdivision, Saldana, and the cancellation of the contract pertaining
Inc., et al., L-6573, Feb. 28, 1955 and Manuel v. to the other lot, does not deny substantial justice to the
Rodriguez, Sr., L-13435, Jul. 27, 1960). Thus, in the subdivision.
case of Jocson, the legality of the following clauses in a
contract TO SELL was SUSTAINED — “That it is hereby Besides, in a sense there was substantial performance.
agreed and understood that in the event the BUYER (See also Art. 1234, Civil Code).
should fail to pay any of the installments as and when
the same falls due, the SELLER shall have the right at Roque v. Lapuz
her option to consider this contract cancelled and L-32811, Mar. 31, 1980
rescinded and that all the amount therefor paid by the
BUYER unto the SELLER shall be considered as rental for Art. 1592 of the Civil Code, which speaks of the
the use of said property up to the date of such default, rescission of contracts of sale of real property, does not
and said BUYER shall have no right of action against the apply to contracts to sell real property on installments.
SELLER for the recovery of any portion of the amount
thus paid; that in the event this contract be declared Joseph and Sons Enterprises, Inc. v. CA
rescinded upon default of the BUYER in the payment of GR 46765, Aug. 29, 1986
any installment as and when it falls due, said SELLER
shall have the right not only to sell and dispose of the Art. 1592 of the Civil Code, which permits the vendee to
property covered by this sale, that is to say, the above pay, even after the expiration of the period, as long as
described buildings, as well as the leasehold rights on no demand for rescission of the contract has been made
the property upon which the buildings are constructed, upon him either judicially or by notarial act does not
but said SELLER shall have the right furthermore, to apply to a contract to sell or a deed of conditional sale.
take possession of said property upon notice of such
cancellation.” Leberman Realty Corp. & Aran Realty &
Development Corp. v. Joseph Typingco and CA
[NOTE: Incidentally, if the installment buyer were to GR 126647, Jul. 29, 1998
delay payment for several installments, and later sell
the property to another buyer with the consent of the FACTS: Petitioners cancelled the contract before the
Subdivision, can the Subdivision still make use of the period to pay arrived.
forfeiture clause even as against the new buyer, if said
new buyer should also fail to pay the installments? ISSUE: Was private respondent guilty of failure to pay
the price of the land within the period agreed upon?
HELD: Yes. First, there was no express waiver. Mere
tolerance or liberality to the first buyer does not
HELD: No. Petitioners’ argument that respondent failed
to exercise his option to buy within the period provided
in the contract, and which period expired/lapsed during
the pendency of the case, is plainly absurd. For how
could private respondent have exercised the option
granted him under the “Option to
Buyer” clause when the contract itself was
rejected/cancelled by the petitioners even before the
arrival of the period for the exercise of said option?

The invocation by petitioners of Art. 1592 is misplaced.


The provision contemplates of a situation where the
buyer who failed to pay the price at the time agreed
upon, may still pay, even after the expiration of the
period, as long as no demand for rescission has been
made upon him either judicially or by a notarial act.

Effect of Stipulation Allowing the Taking of


Possession

Incidentally, a stipulation in a contract to sell realty


entitling one party to take possession of the land and
building if the other party violates the contract does NOT
exproprio vigore (by its own force) confer upon the
former the right to take possession thereof if objected
to, without judicial intervention and determination.
(Nera v. Vacante, et al., L-16725, Nov. 29, 1961).

Art. 1593. With respect to movable property, the


rescission of the sale shall of right take place in
the interest of the vendor, if the vendee, upon the
expiration of the period fixed for the delivery of
the thing, should not have appeared to receive it,
or having appeared he should not have tendered
the price at the time, unless a longer period has
been stipulated for its payment.

Rescission of Sale of Personal Property


(a) This article should apply only if the object sold
has not been delivered to the buyer.
(b) If there has already been delivery, other
articles, like Art. 1191 would be applicable. In
this case automatic rescission is not allowed. An
affirmative action is necessary (Guevarra v.
Pascual, 12 Phil. 311), the action being one to
rescind judicially, if the buyer refuses to come
to amicable settlement. (Escueta v. Pando, 42
O.G., No. 11, p. 2759).

Example of the Article


The seller and the buyer agreed that payment and
delivery would be made on Jul. 15, at the buyer’s house.
If the buyer does not appear on said day, or having
appeared, he should not have tendered the price at the
same time, then the sale can be considered as
automatically rescinded.

Right, Not Obligation, to Rescind


If in a contract the seller is authorized to rescind the
sale in case of breach, this does not necessarily mean
that he is obliged to do so. (Ramirez v. Court of Appeals
& Muller Nease, L-6536, Jan. 25, 1956, 52 O.G. 779).