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Art. 1583.
Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by
installments.
Where there is a contract of sale of goods to be delivered by stated installments, which
are to be separately paid for, and the seller makes defective deliveries in respect of
one or more instalments, or the buyer neglects or refuses without just cause to take
delivery of or pay for one more instalments, it depends in each case on the terms of
the contract and the circumstances of the case, whether the breach of contract is so
material as to justify the injured party in refusing to proceed further and suing for
damages for breach of the entire contract, or whether the breach is severable, giving
rise to a claim for compensation but not to a right to treat the whole contract as
broken.
Applicability
only divisible things
Partial Rescission
if some of what has been delivered had been found to be defective, the buyer
may reject this portion and accept those which he received with satisfaction.
Art. 1585.
The buyer is deemed to have accepted the goods when he intimates to the seller that
he has accepted them, or when the goods have been delivered to him, and he does
any act in relation to them which is inconsistent with the ownership of the seller, or
when, after the lapse of a reasonable time, he retains the goods without intimating to
the seller that he has rejected them.
a. The seller must allow the buyer to examine, if the buyer so demands.
Buyer's Right to Examine Goods; Effects
Delivery without previous examination
where the goods are delivered without previous examination by the
buyer, the latter is not deemed to have accepted the same, unless he
has had a reasonable opportunity of examining them for the purpose of
finding out whether they conform with specifications agreed upon in the
contract.
Tender of delivery by the seller
if the seller tenders delivery of the goods, he should give the buyer, if so
requested by the latter, the opportunity of examining the goods to
determine whether they conform with the contract. The right to examine
may, however, be waived by the buyer.
Exercised Within Reasonable Time
the right to examine must be exercised within reasonable time
a delay of two (2) months is not reasonable. (Gageda vs. IAC)
b. Except:
Art. 1584, par. 2.
Where goods are delivered to a carrier by the seller, in accordance with an
order from or agreement with the buyer, upon the terms that the goods shall
not be delivered by the carrier to the buyer until he has paid the price,
whether such terms are indicated by marking the goods with the words
"collect on delivery," or otherwise, the buyer is not entitled to examine the
goods before the payment of the price, in the absence of agreement or
usage of trade permitting such examination.
Right of Examination When not Allowed to Buyer
If there is an express stipulation that the buyer shall not examine the goods.
When the goods are delivered "collect on delivery," the buyer cannot
examine the goods unless he pays first the price.
Exception:
If there is a contrary agreement
The examination is permitted by the usage of trade at the place of
delivery
Unless otherwise authorized by the buyer, the seller must make such
contract with the carrier on behalf of the buyer as may be reasonable,
having regard to the nature of the goods and the other circumstances of
the case. If the seller omit so to do, and the goods are lost or damaged
in course of transit, the buyer may decline to treat the delivery to the
carrier as a delivery to himself, or may hold the seller responsible in
damages.
Unless otherwise agreed, where goods are sent by the seller to the
buyer under circumstances in which the seller knows or ought to know
that it is usual to insure, the seller must give such notice to the buyer as
may enable him to insure them during their transit, and, if the seller fails
to do so, the goods shall be deemed to be at his risk during such transit.
Art. 1503.
When there is a contract of sale of specific goods, the seller may, by the
terms of the contract, reserve the right of possession or ownership in
the goods until certain conditions have been fulfilled. The right of
possession or ownership may be thus reserved notwithstanding the
delivery of the goods to the buyer or to a carrier or other bailee for the
purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are
deliverable to the seller or his agent, or to the order of the seller or of
his agent, the seller thereby reserves the ownership in the goods. But, if
except for the form of the bill of lading, the ownership would have
passed to the buyer on shipment of the goods, the seller's property in
the goods shall be deemed to be only for the purpose of securing
performance by the buyer of his obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are
deliverable to order of the buyer or of his agent, but possession of the
bill of lading is retained by the seller or his agent, the seller thereby
reserves a right to the possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price and
transmits the bill of exchange and bill of lading together to the buyer to
secure acceptance or payment of the bill of exchange, the buyer is
bound to return the bill of lading if he does not honor the bill of
exchange, and if he wrongfully retains the bill of lading he acquires no
added right thereby. If, however, the bill of lading provides that the
goods are deliverable to the buyer or to the order of the buyer, or is
indorsed in blank, or to the buyer by the consignee named therein, one
who purchases in good faith, for value, the bill of lading, or goods from
the buyer will obtain the ownership in the goods, although the bill of
exchange has not been honored, provided that such purchaser has
received delivery of the bill of lading indorsed by the consignee named
therein, or of the goods, without notice of the facts making the transfer
wrongful.
Exception:
even if the refusal is without a valid cause, the ownership shall not pass to
the buyer if:
there is a contrary agreement; or
the seller reserves the ownership as security for the payment of the
price. (Art. 1503 and Art. 1523)
Remedy:
the vendor may elect to:
enforce compliance;
rescind the contract; or
consign.
Art. 1256.
If the creditor to whom tender of payment has been made
refuses without just cause to accept it, the debtor shall be
released from responsibility by the consignation of the thing or
sum due.
Is there any conflict between Art. 1589 (paragraph 2 and 3) and Art.
1956?
Art. 1956
No interest shall be due unless it has been expressly stipulated in writing.
To make the two articles both effective, Art. 1956 should be interpreted to apply
only to loans of money and not in sale of things or goods.
In loans, interest is the price agreed upon for the use of money.
(1) A lien on the goods or right to retain them for the price while he is
in possession of them;
(2) In case of the insolvency of the buyer, a right of stopping the goods
in transitu after he has parted with the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this Title.
c. Stoppage in transitu, if the buyer is insolvent and the price is unpaid
Art. 1530.
Subject to the provisions of this Title, when the buyer of goods is or becomes
insolvent, the unpaid seller who has parted with the possession of the goods
has the right of stopping them in transitu, that is to say, he may resume
possession of the goods at any time while they are in transit, and he will then
become entitled to the same rights in regard to the goods as he would have
had if he had never parted with the possession.
e. Rescission
In case of goods (corporeal movables)
Extrajudicial Rescission
When Notice is Required
Stoppage in Transitu
Art. 1534.
An unpaid seller having the right of lien or having stopped
the goods in transitu, may rescind the transfer of title and
resume the ownership in the goods, where he expressly
reserved the right to do so in case the buyer should make
default, or where the buyer has been in default in the
payment of the price for an unreasonable time. The seller
shall not thereafter be liable to the buyer upon the
contract of sale, but may recover from the buyer damages
for any loss occasioned by the breach of the contract.
The transfer of title shall not be held to have been
rescinded by an unpaid seller until he has manifested by
notice to the buyer or by some other overt act an
intention to rescind. It is not necessary that such overt act
should be communicated to the buyer, but the giving or
failure to give notice to the buyer of the intention to
rescind shall be relevant in any issue involving the
question whether the buyer had been in default for an
unreasonable time before the right of rescission was
asserted.
Grounds:
the right to rescind on default of the buyer has been
expressly reserved;
the buyer has been in default for an unreasonable length
of time.
When goods have not been delivered
Art. 1597.
Where the goods have not been delivered to the buyer,
and the buyer has repudiated the contract of sale, or has
manifested his inability to perform his obligations
thereunder, or has committed a breach thereof, the seller
may totally rescind the contract of sale by giving notice of
his election so to do to the buyer.
When Notice is not Required
Art. 1593.
Judicial Rescission
Art. 1191.
The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent
upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles
1385 and 1388 and the Mortgage Law.
rescission of the contract has been made upon him either judicially or by
a notarial act. After the demand, the court may not grant him a new
term.
Applicability:
this applies only to a conditional sale of real property where title passes
to the vendee upon the delivery of the thing sold which is usually
effected through the execution of a public document.
this rescission is not a demand for payment of the price but for the
rescission of the contract.
Exceptions:
i) The rule does not apply where title was reserved by the seller
ii) In case of danger of loss of the immovable property and price, after
delivery, the seller may sue immediately for rescission even if the price
is not yet due.
Art. 1591.
Should the vendor have reasonable grounds to fear the loss of
immovable property sold and its price, he may immediately sue
for the rescission of the sale.
Should such ground not exist, the provisions of Article 1191
shall be observed.
Requisite:
reasonable grounds to fear the loss of the immovable property
and its price.
Example:
If the vendee appears to be insolvent and cannot pay the
price, and at the same time he uses hi rights in such a manner
that the thing might be lost, such as when he destroys the
building, or cuts down the forest or woodlands, he may bring
his action for resolution under 1591. (V Tolentino p. 138-139,
c.1999)
iii) This does not apply to a contract to sell or promise to sell, where
title remains with the vendor until fulfillment to a positive suspensive
condition, such as full payment of the price.
The failure of which is not a breach, casual or serious but an event
that prevents the obligation of the vendor to convey title from
acquiring binding force.
In this case, Art. 1191 is applicable.
iv) Contracts covered by the Maceda Law or RA 6552 applies only to a
perfected contract to sell and not to a contract with no blinding and
enforceable effect.
for a perfected contract of sale or contract to sell to exist in law,
there must be an agreement of the parties, not only on the price of
the property sold, but also on the manner the price is to be paid by
the vendee.
an automatic cancellation clause contrary to RA No. 6552
under RA 6552, actual cancellation takes place after 30 days from
receipt by the buyer of the contract by notarial act and upon full
payment of the cash surrender value to the buyer.
Cancellation Process:
(1) the seller should extend the buyer a grace period of at
least 60 days from the due date of the installment;
(2) at the end of the grace period, the seller shall furnish the
buyer with a notice of cancellation or demand for rescission
through a notarial act, effective 30 days from the
buyer's receipt thereof.
Grounds:
When the ownership of the goods has passed to the buyer and he
wrongfully neglects or refuses to pay for the goods according to the
terms of the contract.
in addition, the buyer is liable for damages for such negligence or
unjustified refusal to pay the price. (Art. 1170)
When the price is payable on a certain day, irrespective of delivery
or of transfer of title and the buyer wrongfully neglects or refuses
to pay such price.
in addition, the buyer is liable for damages for such negligence or
unjustified refusal to pay the price. (Art. 1170)
Defense:
the buyer may, however, put up a valid defense.
he may establish the fact that the seller has at anytime before
judgment, manifested his:
inability to perform his part of the contract; or
of his intention not to comply with the contract.
When the goods cannot readily be resold for a reasonable price and
the buyer refuses to receive the goods when offered for delivery
with notification that the seller is holding them as bailee for the
buyer.
the seller must be ready to deliver the goods.
except:
when Art. 1596, 4th paragraph is applicable
Where the goods have been delivered to the buyer, he cannot rescind the sale if he
knew of the breach of warranty when he accepted the goods without protest, or if he
fails to notify the seller within a reasonable time of the election to rescind, or if he fails
to return or to offer to return the goods to the seller in substantially as good condition
as they were in at the time the ownership was transferred to the buyer. But if
deterioration or injury of the goods is due to the breach or warranty, such
deterioration or injury shall not prevent the buyer from returning or offering to return
the goods to the seller and rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be
liable for the price upon returning or offering to return the goods. If the price or any
part thereof has already been paid, the seller shall be liable to repay so much thereof
as has been paid, concurrently with the return of the goods, or immediately after an
offer to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses
to accept an offer of the buyer to return the goods, the buyer shall thereafter be
deemed to hold the goods as bailee for the seller, but subject to a lien to secure
payment of any portion of the price which has been paid, and with the remedies for
the enforcement of such lien allowed to an unpaid seller by Article 1526.
a. Buyer's choices
Recoupment
To accept the goods and set up against the seller the reduction or extinction
of the purchase price.
Action for Damages
To accept the goods but with damages; or
To refuse to accept the goods for the breach of the warranty but also with
damages
Rescission
To rescind the sale, and as a consequence, there will be restoration on both
sides.
the seller returns the price he received and the buyer returns the goods
her received.
the contract will be rescinded in its entirety.
an accidental element.
Subject Matter:
there being no distinction made in the Article, it is applicable to both real and
personal property.
b. Nature
An accidental element;
it is a right created by the parties in the contract of sale.
its nullity does not affect the sale itself because such sale can be entered into
without it.
however, the right to repurchase presupposes a valid contract of sale
between the same contracting parties.
An express condition;
A potestative resolutory condition;
potestative as its exercise depends upon the sole will of the vendor.
resolutory condition because when it is fulfilled, the ownership of the vendee
over the thing is extinguished.
A real right when properly registered because it affects third persons;
which may be sold or assigned and enforced against a third person claiming
under the purchaser.
HOWEVER:
if stipulated upon after the sale had been consummated, it becomes a mere
promise to sell subject to different rights and consequences.
an agreement to repurchase becomes a promise to sell when made after
the sale, because when the sale is made without such an agreement,
the purchaser acquires the thing absolutely, and if he afterwards grants
the vendor the right to repurchase, it is a new contract entered into by
the purchaser, as absolute owner already of the object. (Ramos vs.
Icasiano)
Sale With
Mortgage
Pacto De Retro
If the vendor
If the mortgagor
does not
fails to pay his
repurchase
mortgage
within the time
obligations on
agreed upon,
time, the former
ownership over
does not lose his
the property is
interest in the
consolidated in
property.
the vendee.
The mortgagee
There is no
must foreclose if
obligation on the
he wants to
part of the
secure a perfect
vendee to
title on the
foreclosed.
property.
Mortgagor may
redeem before
the foreclosure sale
or even after,
Vendor has no within one year
more right to from registration
redeem the of the sale in
property after case of extra-
the maturity judicial
date of the right foreclosure,
to redeem. redemption may
be made before
confirmation of
the sale by the
court.
Vendee may
alienate the
Mortgagee
property subject to
cannot alienate
a resolutory
the property.
condition of
repurchased.
Mortgagee
cannot become
automatically
the owner of the
Vendee becomes
property in case
automatically the
of failure of
owner of the
mortgagor to
property in case
pay his
of vendor's
obligation.
failure to
Foreclosure sale
redeem.
is need where
the mortgagee
may bid in the
public sale.
Mortgagee is not
Vendee is entitled to
entitled to be reimbursement
reimbursed for for
necessary and improvements
useful expenses. he made.
(Art. 1616) (Gardonez vs.
CA)
b. Contracts of absolute sale in the cases mentioned in Art. 1602 (Art.
1604)
Art. 1604.
The provisions of Article 1602 shall also apply to a contract purporting to
be an absolute sale.
title over the security in the creditor in case of debtor’s default) is void,
such a clause in a contract is conclusive proof that it is a mortgage and
not a sale with pacto de retro.
Requisites:
(1) the parties entered into a contract denominated as a contract of sale
(2) their intention was to secure an existing debt by way of an equitable
mortgage.
the decisive factor in evaluating whether a deed absolute in form is a
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. (Raymundo vs.
Bandong; Salonga vs. Concepcion)
Applicability:
presence of only of the conditions in Art. 1602 is sufficient to create presumption
of equitable mortgage.
The repurchase price paid by the apparent vendor is considered the principal of
the loan. The vendee has the right to recover the amount loaned.
Title remains in the vendor or if the title has already been transferred to the
vendee, the same must be revested into the vendor by a deed of reconveyance
executed by the vendee after the vendor's compliance with his obligations under
Art. 1616.
Any money, fruits or other benefits received thereafter by the apparent vendee,
are considered as interests on said loan which shall be subject to the usury laws.
(Art. 1602, last par.)
If the vendor does not redeem on time, the remedy of the buyer is to foreclose
the mortgage and to sell the property at public auction. Consequently, it is not
proper for the court to declare the mortgagee as the owner of the property upon
failure of the mortgagor to fulfill his obligations within the required period, for that
will result in pactum commissorium prohibited by Art. 2088.
The apparent vendor may ask for the reformation of the instrument. (Art. 1605)
Art. 1605.
In the cases referred to in Articles 1602 and 1604, the apparent vendor
may ask for the reformation of the instrument.
The period of redemption of registered lands for tax delinquency shall be counted
from the day the sale was registered in the office of the Register of Deeds and not
from the date of the auction or tax sale.
Can the consolidation of ownership in favor of the vendee when the vendor
fails to redeem be readily registered in the Registry of Deeds?
No.
Art. 1607.
In case of real property, the consolidation of ownership in the vendee by
virtue of the failure of the vendor to comply with the provisions of article
1616 shall not be recorded in the Registry of Property without a judicial
order, after the vendor has been duly heard.
Procedure:
an ordinary civil action is to be filed with the appropriate court where
the property is located.
the vendor a retro must be impleaded as a party defendant.
mere motion is enough.
Note:
ownership is already consolidated by operation of law, this article is
merely for registration purposes.
In the preceding situation, can the vendor file the case against the
possessor?
Yes.
Art. 1608.
The vendor may bring his action against every possessor whose right is
derived from the vendee, even if in the second contract no mention
should have been made of the right to repurchase, without prejudice to
the provisions of the Mortgage Law and the Land Registration Law with
respect to third persons.
What if the co-owner sells the entire property to a third person without
the consent of the other co-owners?
the sale is not null and void.
only the rights of the selling co-owner are transferred to the buyer.
the remedy of the co-owner is partition.
a. If there are visible fruits at the time of the execution of the sale
No reimbursement or pro-rating is required.
Exception:
If indemnity for fruits was paid by the vendee when the sale was execute.
Applicability:
this article is not applicable if the parties have any sharing
agreement regarding the fruits existing at the redemption time because if there is
any, such agreement will control.
conditions stipulated in the contract, in the place of one who acquires a thing
by purchase or dation in payment, or by any other transaction whereby
ownership is transmitted by onerous title.
Nature:
Legal redemption is subrogation.
The right of legal redemption is a pure creature of the law, regulated by law,
and works only one way - inf favor of the redemptioner. Not having parted
with anything, the legal redemptioner can compel the purchaser to sell but
the former (redemptioner) cannot be compelled to buy. (Villasor vs. Medel)
Art. 1634
Other instances:
redemption by the judgment obligor or redemptioner in execution sale
within one year from registration of the sale. (Sec. 28, Rule 39, 1997
Revised Rules of Civil Procedure)
redemption by the owner of real property sold at public auction for
payment of delinquent taxes to be exercised within one year from the
date of the sale. (Sec. 261, RA No. 7160)
redemption by a homesteader of his homestead sold under the Public
Land Act to be exercised within five years. (Sec. 119, CA No. 141)
redemption by an agricultural lessee of a landholding sold by the
landowner to be exercised within 180 days from notice in writing served
by the vendee on all persons affected. (Sec. 12, RA No. 3844)
redemption in extrajudicial foreclosure of mortgage to be exercised
within one year from registration of the sale. (Sec. 6, Act No. 3135)
redemption in real mortgages in favor of banks. (Sec. 30, RA No. 1300)
No legal redemption:
Donation;
Barter;
Mortgage;
Lease.
Urban Land
Art. 1622.
Whenever a piece of urban land which is so small and so situated
that a major portion thereof cannot be used for any practical
purpose within a reasonable time, having been bought merely for
speculation, is about to be re-sold, the owner of any adjoining land
has a right of pre-emption at a reasonable price.
If the re-sale has been perfected, the owner of the adjoining land
shall have a right of redemption, also at a reasonable price.
When two or more owners of adjoining lands wish to exercise the
right of pre-emption or redemption, the owner whose intended use
of the land in question appears best justified shall be preferred.
Definition:
urban land
the term "urban" as used in this article, does not necessarily
refer to the nature of the land itself sought to be redeemed nor
to the purpose to which it is somehow devoted, but to the
character of the community or vicinity in which it is found.
in this sense, even if the land is somehow dedicated to
agriculture, it is till urban in contemplation of this article, if it is
located within the center of population or the more
less populated portion of a city or town. (Ortega vs. Orcine)
speculation
to enter into a business transaction or venture form which the
profits or return are conjectural because the undertaking is
outside the ordinary course of business, to purchase or sell
with the expectation of profiting by anticipated, but conjectural
fluctuations in price. often in a somewhat depreciative sense,
to engage in a hazardous business transaction for the chance
of an unusually large profit; as to speculate in coffee, in sugar,
or in bank stock.
it means buying or selling with expectation of profiting by a
rise or fall in price. Also, engaging in hazardous business
transactions, or investing in risky securities or
commodities, with he hope of an unusually large profit.
(Ortega vs. Orcine)
Rights of the owners of adjacent lands:
Pre-emption
is the right of an adjacent owner to purchase the property
before it is sold to a third person.
it is exercised against the would-be vendor before the
projected sale to a third person is consummated.
Redemption
is the right of an adjacent owner to redeem the property after
the sale had been perfected and consummated.
Requisites:
(1) both adjoining tenements are urban
(2) such land was bought for speculation
(3) the pice of urban land is so small that it cannot be used for any
practical purpose within reasonable time
(4) there is alienation
(5) he tenements are adjacent
Who may exercise the right
Co-owners (Art. 1623)
Adjoining owners (Art. 1622)
If two or more adjacent owners desire to redeem:
the law prefers the one whose intended use for the
property appears to be the best justified, and not whether
the land was bought for speculation. (De Santos vs. City
of Manila)
Distinction:
Rural lands:
are used for agricultural, fishing, or timber exploitation;
are generally located in the country or provinces.
Urban lands:
are for purposes of dwelling, commerce or industry.
are generally located in the cities or urbanized municipalities.
Obligation of the redemptioner:
To pay a reasonable price
To notify the prospective vendor and vendee of his desire to redeem.
b. Requisites for the Registration of the Sale in the Registry of Property
it must be accompanied by an affidavit of the vendor that he has given written
notice to all possible redemptioneers.
Concept
This is an agreement whereby credits, rights or actions pertaining to a person
(called assignor) are transferred by him to another (called assignee) either
onerously or gratuitously who acquires the power to enforce the same against the
debtors.
A contract unilateral or bilateral, onerous or lucrative, commutative or aleatory,
whereby a person transmits to another his right or rights against a third party,
whether or not an equivalent for the transmission is received from the
transferee.” (Sanchez Roman)
While the NCC treats of assignment of credits as a variety of sales, the fact is that
the assignment may be effected in a variety of ways; by sale, by barter, by
donation or even by testament. The assignment is a transfer entirely different
from the transaction originating it.
Assignment of
Basis Contract of Sale
Credits
Manner
It need not be
of It must be through a
through a public
Delivery public instrument
instrument
of Object
Subject
The whole world A definite third person
Obligated
Transfer of
ownership need
not be upon
Ownershio is transferred
delivery of the
Ownership upon delivery of the
thing. The parties
When documents evidencing
may agree that
Transferred the credit or incorporeal
ownership be
rights.
transferred only
after full payment.
(Art. 1478)
It is not always a
requisite. Action may be
It is always a
maintained by the
Consideration
requisite. (PNB vs.
assignee based on his
CA)
title even if there is no
consideration.
Dation in
Basis Assignment of Credits
Payment
It is an
alienation
of property
of a debtor The alienation of credits or rights,
Nature in need not be in satisfaction of the
satisfaction debto's debt.
of a debt in
money.
(Art. 1245)
Obligation
Effect is Obligation is not extinguished.
extinguished.
Nature
an assignment of credits and other incorporeal rights has all the elements of a
contract of sale, to wit:
(1) consent which is the agreement of the parties in the assignment;
(2) object which is the credit, right, action assigned; and
(3) consideration which is the price paid for the assignment, or liberality of
the assignor if the assignment is gratuitous.
Other instances
Assignment of real rights upon immovable property, done by way of donation,
requires a public instrument.
Assignment by way of legacy requires a probated will.
Assignment of choses in action by sale or onerous contract, if involving P500 or
more, is unenforceable inter partes, and comes under the Statute of Frauds (a
written memo is required)
Assignment of a negotiable instrument requires indorsement or delivery.
a. It transfers title to the assigned credit to the assignee, even if the debtor is
unaware thereof.
The assignment includes all accessory rights, such as guaranty, pledge, mortgage
or preference.
Art. 1627.
The assignment of a credit includes all the accessory rights, such as a
guaranty, mortgage, pledge or preference.
b. The assignee takes the credit subject to all defenses acquired by the
debtor before notice or knowledge of the assignment.
The debtor who, before having knowledge of the assignment, pays his creditor
shall be released from the obligation
Art. 1626.
The debtor who, before having knowledge of the assignment, pays his
creditor shall be released from the obligation.
The debtor may set up compensation of credits acquired after assignment but
before notice thereof unless the debtor agreed to the assignment.
Any compromise or release of the assigned claim made by the assignor before
notice, will be valid against the assignee and discharge the debtor.
Is recording a sufficient notice? Yes, provided the recording is required (not merely
permitted) by law
Art. 1629.
In case the assignor in good faith should have made himself responsible for the
solvency of the debtor, and the contracting parties should not have agreed upon the
duration of the liability, it shall last for one year only, from the time of the assignment
if the period had already expired.
If the credit should be payable within a term or period which has not yet expired, the
liability shall cease one year after the maturity.
Comment:
What the Assignor of the Credit Warrants
The assignor in good faith shall be responsible for:
(1) the existence of the credit at the time of the assignment;
(2) the legality of the credit unless he sold the thing as "doubtful"; and
meaning, he is not sure of the validity of his acquisition of the thing
sold which fact he has disclosed to the assignee.
doubtfulness of the credit assigned must expressly appear; it is not
presumed. (Manresa)
Is the assignor responsible for the credit if assignee failed to collect?
No.
Locsin vs. Canonizado
Art. 1628 does not obligate the assignor to assure to the assignee the
collection of the credit, but only to answer for the existence of the
validity of the same.
To make the assignor responsible in case the assignee does
not succeed in collecting is to make him assume an obligation of unjust
gravity, because it can happen that the latter may not receive the
payment of the same due to his own fault.
It is in any case illogical, because it is equivalent to placing the assignee
Art. 1633.
The vendee shall, on his part, reimburse the vendor for all that the latter may
have paid for the debts of and charges on the estate and satisfy the credits he
may have against the same, unless there is an agreement to the contrary.
Applicability:
the article refers to sale of hereditary rights and not of specific properties on the
inheritance.
the sale is done before the partition of the estate.
Warranty:
the heir merely warrants the fact of his heirship in the estate of the decedent.
if it turns out that he is not an heir, then he is liable for the breach of his
warranty and open to claims for damages and swindling, if there is deceit.
the heir does not warrant the properties and rights which comprises the
inheritance he is selling.
the assignee assumes the risk if the estate is not enough to pay the
obligations of the deceased.
in which case, the sale therefore takes the nature of an aleatory contract.
Rationale:
the sale is subject to the final outcome of the administration proceedings of
the estate and it may happen that after the liquidation of the estate, nothing
substantial is left of the inheritance.
Liability:
Vendor:
If without enumeration of the items composing it, the vendor only answers
for his character as heir.
The vendor shall reimburse the vendee for the fruits obtained or anything
received from the inheritance sold if the contrary is not stipulated.
Vendee:
The vendee shall reimburse the vendor for:
All that vendor paid on account of the estate debts; and
Credits that the vendor had against the estate.
Applicability:
the subject matter of the sale consists in the totality of certain rights, rents, or
products.
Warranty:
The vendor warrants the legitimacy of the totality of certain rights, rents, or
products but not the various parts of which the whole is composed of.
Exception:
If the vendee is evicted from the whole or the part of the greater value of the
credits.
Illustration:
Facts:
A is the owner of a building which is rented to tenants with yearly rentals
amounting to P5,000,000.00
A sold to B his rental rights over the property for a lump sum of
P4,000,000.00
Later, C a creditor of A garnished parts of the rentals.
General Rule:
If the amount garnished does not cover the whole or consists only of the
small portion (less than one-half), the seller incurs no liability for the eviction.
Exception:
If the amount garnished is the entire amount or is more than one-half
(P2,000,000.00) of the whole, thus representing the greater value, A is liable
for the eviction of B.
Concept of Litigious
credit is considered in litigation from the time the complaint concerning the same
is answered.
Requisites
the agreement between the creditor and a third person:
(1) must be a sale of credit or right in litigation; and
(2) the credit or right is the subject of a pending litigation at the time of the
sale.
the debtor reimburses the assignee:
(1) the price paid for the credit or right;
(2) interest on the said price form the time the day it was paid; and