Sie sind auf Seite 1von 56

Evernote Export

Arts. 1582 - 1593 (Obligations of the Vendee)


I. To Accept Delivery
Art. 1582.
The vendee is bound to accept delivery and to pay the price of the thing sold at the
time and place stipulated in the contract.
If the time and place should not have been stipulated, the payment must be made at
the time and place of the delivery of the thing sold.

     Simultaneity of Acts; Exception


at the time of place
the vendor should deliver the thing
the vendee should pay the price
exception:
stipulation

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.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

     Rejection of the Whole Delivery When Justified


the breach must be material to warrant refusal of the other party to proceed with
the sale.

     When there is Estoppel


when the buyer accepts a partial delivery or when there is delay, he cannot later
on question the partial delivery or seek damages for the delay.

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.

     Signs or Evidence of Acceptance By The Buyer of Goods Delivered to Him


the buyer is deemed to have accepted the goods:
when he communicates with the seller expressly manifesting his acceptance
thereof;
When he performs an act in relation to the goods inconsistent with  the
ownership of the seller
example:
continuous possession and use of the goods;
reselling the goods to others
mortgaging
offering them for sale
when, after the lapse of a reasonable time following the delivery, he retains
the goods without complaining to the seller or without intimating that he has
rejected them.

A. Requirements of Previous Examination by the Buyer


Art. 1584.
Where goods are delivered to the buyer, which he has not previously examined,
he is not deemed to have accepted them unless and until he has had a reasonable
opportunity of examining them for the purpose of ascertaining whether they are

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

in conformity with the contract if there is no stipulation to the contrary.


Unless otherwise agreed, when the seller tenders delivery of goods to the buyer,
he is bound, on request, to afford the buyer a reasonable opportunity of
examining the goods for the purpose of ascertaining whether they are in
conformity with the contract.
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.

     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

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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

     c. Effect of Acceptance of the Buyer


Art. 1586.
In the absence of express or implied agreement of the parties, acceptance of
the goods by the buyer shall not discharge the seller from liability in damages
or other legal remedy for breach of any promise or warranty in the contract
of sale.
But, if, after acceptance of the goods, the buyer fails to give notice to the
seller of the breach in any promise of warranty within a reasonable time after
the buyer knows, or ought to know of such breach, the seller shall not be
liable therefor.

          Set Off or Counterclaim


if there are defects in the goods delivered, and of which the seller has been duly
notified of, the buyer may set up the breach of the promise or warranty as a set
off or counterclaim against the price being charged by the seller.

B. Rule for Unjustified Refusal of the Buyer to Accept


Unjustified Refusal of the Buyer to Accept
Art. 1588.
If there is no stipulation as specified in the first paragraph of article
1523, when the buyer's refusal to accept the goods is without just
cause, the title thereto passes to him from the moment they are placed
at his disposal.
Art. 1523.
Where, in pursuance of a contract of sale, the seller is authorized or
required to send the goods to the buyer, delivery of the goods to a
carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of the goods to the
buyer, except in the case provided for in Article 1503, first, second and
third paragraphs, or unless a contrary intent appears.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

C. Rule if the Buyer Justifiably Refused to Accept


The buyer justifiably refusing to accept need not return the thing but
only has to notify the seller.
Art. 1587.
Unless otherwise agreed, where goods are delivered to the buyer, and
he refuses to accept them, having the right so to do, he is not bound to
return them to the seller, but it is sufficient if he notifies the seller that
he refuses to accept them.
If he voluntarily constitutes himself a depositary thereof, he shall be
liable as such.

          Risk of Loss of Goods


under the first option, the risk of loss is on the seller.
having been told about the non-acceptance of the goods by the buyer, the
seller has the duty to immediately take the goods back.
the goods are now placed at his disposal.
under the second option, the risk of loss is on the buyer.
for choosing to assume the role of a depositary, he shall be liable for the loss
of the goods.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

II. Payment of Price and Interest


a. Time and Place
Art. 1582.
The vendee is bound to accept delivery and to pay the price of the thing sold
at the time and place stipulated in the contract.
If the time and place should not have been stipulated, the payment must be
made at the time and place of the delivery of the thing sold.
Rule:
According to stipulation (unless the buyer loses the benefit of the period).
At the time and place of delivery, if there is no contrary stipulation
(simultaneity).

b. Suspension of payment by the buyer after delivery


Art. 1590.
Should the vendee be disturbed in the possession or ownership of the thing
acquired, or should he have reasonable grounds to fear such disturbance, by
a vindicatory action or a foreclosure of mortgage, he may suspend the
payment of the price until the vendor has caused the disturbance or danger
to cease, unless the latter gives security for the return of the price in a
proper case, or it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment. A mere act of
trespass shall not authorize the suspension of the payment of the price.
Grounds:
1) Actual disturbance of possession or ownership; or
2) Reasonable ground to fear a disturbance caused by:
i) Vindicatory action;
ii) Foreclosure of mortgage (which grounds are exclusive)
There is no right to suspend payment if:
1) The stipulation provides for payment despite risk of disturbance; or
2) The vendor caused the disturbance to cease; or
3) The vendor gives security for the return of the price; or
4) The disturbance is my mere act of trespass.

          Is it required that the action for reivindicatoria or foreclosure of mortgage


had actually been filed?
it is not required.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

          Mere Act of Trespass


the mere act of trespass committed by a third person on the property subject of
the sale will not justify suspension of payment just like an act of trespass in a
leased property where the lessor is not liable. (Art. 1664)
there is a mere act of trespass when the third person claims no right
whatever on the property. (Art. 1664)
Except:
if the trespass is in law which takes place when a third person, by judicial or
extra-judicial acts, questions the right of the buyer and/or the seller, and
claims possession or ownership.

          Does the vendee needs to consign the price?


no, the vendee need not resort to consignation of the price in court.
he does not incur any delay as long as he anchors his suspension of payment on
any of the grounds stated in the law or any other good grounds.

c. Payment of Interest on the Price


Art. 1589.
The vendee shall owe interest for the period between the delivery of the
thing and the payment of the price, in the following three cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial
demand for the payment of the price.

          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.

d. Legal Guaranties for Payment of the Price

     a. Suspension of delivery (retention) by the seller

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

In cash sales, if the payment is not tendered


Art. 1524.
The vendor shall not be bound to deliver the thing sold, if the
vendee has not paid him the price, or if no period for the payment
has been fixed in the contract.
In sales on credit, if the buyer loses the benefit of the term under or
the buyer is insolvent
Art. 1527.
Subject to the provisions of this Title, the unpaid seller of goods
who is in possession of them is entitled to retain possession of them
until payment or tender of the price in the following cases, namely:
(1) Where the goods have been sold without any stipulation as
to credit;
(2) Where the goods have been sold on credit, but the term of
credit has expired;
(3) Where the buyer becomes insolvent.
Art. 1536.
The vendor is not bound to deliver the thing sold in case the
vendee should lose the right to make use of the terms as provided
in Article 1198.
Art. 1198.
The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he
becomes insolvent, unless he gives a guaranty or security for
the debt;
(2) When he does not furnish to the creditor the guaranties or
securities which he has promised;
(3) When by his own acts he has impaired said guaranties or
securities after their establishment, and when through a
fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory;
(4) When the debtor violates any undertaking, in consideration
of which the creditor agreed to the period;
(5) When the debtor attempts to abscond.

     b. Seller’s lien on the goods in his possession


Art. 1526.
Subject to the provisions of this Title, notwithstanding that the ownership in
the goods may have passed to the buyer, the unpaid seller of goods, as such,
has:

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

(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.

     d. Resale of goods (without bringing an action)


Art. 1533.
Where the goods are of perishable nature, or where the seller expressly
reserves the right of resale 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, an unpaid seller having a right of lien or having stopped
the goods in transitu may resell the goods. He shall not thereafter be liable to
the original buyer upon the contract of sale or for any profit made by such
resale, but may recover from the buyer damages for any loss occasioned by
the breach of the contract of sale.
Where a resale is made, as authorized in this article, the buyer acquires a
good title as against the original buyer.
It is not essential to the validity of resale that notice of an intention to resell
the goods be given by the seller to the original buyer. But where the right to
resell is not based on the perishable nature of the goods or upon an express
provision of the contract of sale, the giving or failure to give such notice shall
be relevant in any issue involving the question whether the buyer had been
in default for an unreasonable time before the resale was made.
It is not essential to the validity of a resale that notice of the time and place
of such resale should be given by the seller to the original buyer.
The seller is bound to exercise reasonable care and judgment in making a
resale, and subject to this requirement may make a resale either by public or
private sale. He cannot, however, directly or indirectly buy the goods.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

     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.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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
same time, unless a longer period has been stipulated for its
payment.
Rule:
a) The vendee, upon the expiration of the period fixed for the
delivery of the thing purchased, refused to receive it without
justifiable cause
b) The vendee failed to pay the price unless granted a longer
period within which to pay
Applicability:
this article is not applicable if the thing purchased had already
been delivered to the vendee.
if there is delivery already, Art. 1191 will apply.
an affirmative action is necessary to effect rescission.

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.

In case of real property


Art. 1592. (pacto comisorio)
In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay,
even after the expiration of the period, as long as no demand for

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

               Is Notice of Cancellation required where the contract provides for


automatic rescission?
Yes.
Although judicial action for cancellation is not necessary where the
contract provides for automatic rescission without judicial intervention, it
is necessary that there be a written notice sent to the defaulting buyer
informing him of the vendor's decision to rescind.
The vendor cannot recover ownership of the thing sold until and unless
the contract itself is resolved and set aside.
A party who fails to invoke judicially or by notarial act the resolution of a
contract of sale would be prevented from blocking the consummation of
the same in light of the precept that mere failure to fulfill the contract
does not operate ipso fact as rescission.
Requisites:
if through a letter
must be duly notarized
it must be established that it was received by the vendee

               Can the right to rescind be waived?


Yes.
It may be waived expressly or impliedly.
There is an implied waiver when the vendor has granted the vendee
many extensions of time within which to pay without calling attention to
the proviso on automatic rescission.
Similarly, the unqualified acceptance by the vendor of payment made
after the maturity date constitutes waiver.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

               Does the failure to pay the price revert ownership to seller?


No.
the bilateral contract of sale must first be rescinded

               Is the court allowed to grant a new period?


No.
Under the general rule in Art. 1191 par. 3, the court has the discretion
to fix the period when there is a just cause.
Under Art. 1592, which could be considered as an exception to the
general rule, the court is not allowed to grant a new period.
However:
the use of "may" means it is permissive, thus in the interest of justice
and equity, the court may grant an extension of time.

Arts. 1594 - 1599 (Action for Breach of Contract of Sale of Goods)


I. Action for the Price
     a. Action for the Price
Art. 1595.
Where, under a contract of sale, 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 of sale, the seller may maintain an
action against him for the price of the goods.
Where, under a contract of sale, 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, the seller may maintain an action for
the price although the ownership in the goods has not passed. But it shall be
a defense to such an action that the seller at any time before the judgment
in such action has manifested an inability to perform the contract of sale on
his part or an intention not to perform it.
Although the ownership in the goods has not passed, if they cannot readily
be resold for a reasonable price, and if the provisions of article 1596, fourth
paragraph, are not applicable, the seller may offer to deliver the goods to the
buyer, and, if the buyer refuses to receive them, may notify the buyer that
the goods are thereafter held by the seller as bailee for the buyer. Thereafter
the seller may treat the goods as the buyer's and may maintain an action for
the price.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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

II. Action for Damages for Non-Acceptance of the Goods


     a. Action for Damages for Non-Acceptance of the Goods
Art. 1596.
Where the buyer wrongfully neglects or refuses to accept and pay for the
goods, the seller may maintain an action against him for damages for
nonacceptance.
The measure of damages is the estimated loss directly and naturally
resulting in the ordinary course of events from the buyer's breach of
contract.
Where there is an available market for the goods in question, the
measure of damages is, in the absence of special circumstances showing
proximate damage of a different amount, the difference between the
contract price and the market or current price at the time or times when
the goods ought to have been accepted, or, if no time was fixed for

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

acceptance, then at the time of the refusal to accept.


If, while labor or expense of material amount is necessary on the part of
the seller to enable him to fulfill his obligations under the contract of
sale, the buyer repudiates the contract or notifies the seller to proceed
no further therewith, the buyer shall be liable to the seller for labor
performed or expenses made before receiving notice of the buyer's
repudiation or countermand. The profit the seller would have made if
the contract or the sale had been fully performed shall be considered in
awarding the damages.
Grounds:
When the buyer wrongfully neglects or refuses to accept and pay for the
goods.

     b. Measure of Damages


a. General Rule
estimated loss directly and naturally resulting in the ordinary course of events
from the buyer's breach of contract.
the difference between the price stipulated at the time of the making the
contract and the price in the market on the day delivery should be
made.
b. When there is an available market
in the absence of special circumstances showing proximate damage of a
different amount:
the difference between the contract price and the market or current
price (unrealized profits or lucro cesante):
at the time or times when the goods ought to have been accepted;
or
if no time was fixed for acceptance, then at the time of the refusal
to accept.
Note:
the seller must prove that the current price is lesser than the agreed
price.
if there is not available market for the goods, by implication, the seller is
entitled to the full amount of damage which he sustained by reason of
the breach of the contract by the buyer.
c. When Repudiation is made or notified before the seller completes
preparations for fulfillment
labor performed;
expesnes for materials used before receiving the notice of repudiation or
stoppage; and
for unrealized profits.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

III. Action for Total Rescission by the Seller


     a. Action for Total Rescission
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.
Requisites:
a. The goods were not delivered.
b. The buyer either –
1) Repudiates; or
2) Manifests inability to perform; or
3) Commits breach of contract
c. The seller gives notice of his election to rescind.
Applicability:
this article applies only when the goods have not been delivered yet to the
buyer.
if there was delivery already, the seller may recover the value of what
he has delivered. (Art. 1595)
only substantial breach may be considered and this will depend upon the
attending circumstances.
rescission is not allowed if the breach involves only slight or casual
matter and does not defeat the object of the parties in making the
agreement.
the law subordinate's the seller's right to rescind to the rights of third
persons to whom bad faith is not imputable.
if the buyer has already repudiated the contract of sale, etc. as provided in
Art. 1597, there is no more sense on the part of the seller to rescind the
contract by notifying the buyer of his intention to rescind.
the seller can readily file a case for specific performance with damages
or a case for pure damages alone against he buyer based on breach of
contract.
Notice to Rescind:
the seller may totally rescind the contract of sale by giving notice to the
buyer of the former's decision to rescind the contract.
failure to make notice, the contract will survive.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

IV. Buyer's Action for Seller's Specific Performance


     a. Action for Specific Performance
Art. 1598.
Where the seller has broken a contract to deliver specific or ascertained
goods, a court may, on the application of the buyer, direct that the contract
shall be performed specifically, without giving the seller the option of
retaining the goods on payment of damages. The judgment or decree may
be unconditional, or upon such terms and conditions as to damages,
payment of the price and otherwise, as the court may deem just.
Grounds:
the seller fails to deliver to the buyer specific or ascertained goods.
Specific performance:
upon application of the buyer, the court may compel the seller to deliver the
specific goods subject of the contract of sale.
The seller has no option to retain the goods by paying damages.
Unless the buyer agrees.
The judgment may be absolute or conditional as the court deems fit.

V. Buyer's Actions for Breach of Warranty


Art. 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.
(5) In the case of breach of warranty of quality, such loss, in the absence of
special circumstances showing proximate damage of a greater amount, is the
difference between the value of the goods at the time of delivery to the buyer and
the value they would have had if they had answered to the warranty.
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.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

     b. Nature of the options


The remedies are alternative, but the buyer may ask for rescission after asking for
specific performance, if the latter is impossible. (1191, par. 2)
Where one remedy has been chose already, he cannot, at the same time, pursue
the other remedies.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

     c. When the buyer can not rescind


a. If he knows of the breach of warranty when he accepted the goods without
protest;
b. If he fails to notify the seller within a reasonable time of the election to
rescind; or
c. If he fails to return or offer to return the goods to the seller in substantially
good condition as they were at the time the ownership was transferred to him.
Unless the deterioration was due to the breach of warranty.

     d. Effects of buyer's election to rescind


a. He shall cease to be liable for the price, but he has the obligation to return the
goods;
b. He can recover the price he has paid to the seller:
1) Concurrently with the return; or
2) Immediately after the tender.
c. If the seller refuses to receive the goods form the buyer, the latter has the
right to hold the goods as bailee for the former.
In which case, the buyer:
1) Has a lien over the goods until he shall have been fully paid for the
price or porition of the price he had paid; and
2) Has a right of stoppage in transitu and resale, as the seller has under
Article 1526.
If the goods have not been delivered, the buyer may refuse to accept them

     e. Liability in case of breach of warranty of quality


The difference between the value of the goods at the time of delivery to the buyer
and the value they would have had if they had answered to the warranty.
Unless special circumstances show proximate damage of a greater amount.

Art. 1600 (Extinguishment of Sale)


I. Causes of Extinguishment
Art. 1600.
Sales are extinguished by the same causes as all other obligations, by those stated in
the preceding articles of this Title, and by conventional or legal redemption.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

     a. General Causes (Art. 1231)


Payment or Performance
Loss of the thing due
Condonation or Remission
Confusion or Merger
Compensation
Novation
Annulment
Rescission
Fulfillment of the Resolutory Condition
Prescription

     b. Special Causes


Redemption
Conventional
Legal

II. Application of Art. 1600


     a. Applicability
The Article applies both to consummated contracts and those merely perfected
contracts of sale since there is not distinction made in the law.

Arts. 1601 - 1618 (Conventional Redemption)


I. Concept
     a. Definition
Art. 1601.
Conventional redemption shall take place when the vendor reserves the right
to repurchase the thing sold, with the obligation to comply with the
provisions of Article 1616 and other stipulations which may have been agreed
upon.
Applicability:
The Article applies only if there is a stipulation in the contract of sale granting
the seller the right to redeem the thing he has sold.
It is not a natural or essential element of the contract of sale. It is merely

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

     Is this a reciprocal obligation?


Yes.
It is reciprocal when the right to redeem is exercised.
The vendor shall return the price and in addition shall comply with the
requirements of Art. 1616.
The vendee shall return the property.

     Is the option to repurchase an obligation?


strictly speaking, an option to repurchase is not an obligation but a mere power or
privilege that a person may reserve for himself, albeit the option may carry with it
the obligation of paying the value or cost of the thing it involves.
the vendor who has the option cannot therefore be compelled to make the
repurchase.

     When does this began to exist?


it begins to exist at the time of the perfection of the contract.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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)

     What kind of contract is executed to reconvey the property?


a contract of conveyance shall be executed by the vendee a retro in conveying the
property to the vendor a retro in the latter's exercise of his right to repurchase.

     Should the right to redeem be incorporated in every contract of sale?


the right of the vendor to redeem or repurchase must appear in the same
instrument and not in a separate one.
HOWEVER:
the parties may stipulate on the right of repurchase in a separate document
but in this case, it is valid only between the parties and it cannot be set-up
against intervening third persons.

     Should it be necessary that the formal offer to redeem the land be


accompanied by a bona fide tender of redemption price or consign the price in
court within the period of redemption?
No.
this is only essential to preserve the right of redemption for future
enforcement beyond such period of redemption and within the period
prescribed for the action by the statue of limitations.

     Is inadequacy of price a ground for rescission?


No.
in a sale with pacto de retro, the inadequacy of the price, cannot be
considered a ground for rescinding the contract.

     Difference between Conventional Redemption from Right of Redemption in


Execution

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

Conventional redemption is governed by Article 1601.


Right of Redemption in execution is governed by Rule 39, Sections 29 and 30 of
the Rules Court.
Section 29. Effect of redemption by judgment obligor, and a
certificate to be delivered and recorded thereupon; to whom
payments on redemption made.
If the judgment obligor redeems he must make the same payments as
are required to effect a redemption by a redemptioner, whereupon, no
further redemption shall be allowed and he is restored to his estate. The
person to whom the redemption payment is made must execute and
deliver to him a certificate of redemption acknowledged before a notary
public or other officer authorized to take acknowledgments of
conveyances of real property. Such certificate must be filed and
recorded in the registry of deeds of the place in which the property is
situated and the registrar of deeds must note the record thereof on the
margin of the record of the certificate of sale. The payments mentioned
in this and the last preceding sections may be made to the purchaser or
redemptioner, or for him to the officer who made the sale. (31a)
Section 30. Proof required of redemptioner.
A redemptioner must produce to the officer, or person from whom he
seeks to redeem, and serve with his notice to the officer a copy of the
judgment or final order under which he claims the right to redeem,
certified by the clerk of the court wherein the judgment or final order is
entered, or, if he redeems upon a mortgage or other lien, a
memorandum of the record thereof, certified by the registrar of deeds,
or an original or certified copy of any assignment necessary to establish
his claim; and an affidavit executed by him or his agent, showing the
amount then actually due on the lien. (32a)

     Sale with Pacto De Retro Distinguished from Absolute Sale

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

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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)

II. Conventional Redemption Includes Transactions Presumed to be Equitable


Mortgages
     a. Equitable Mortgage defined
one which lacks the proper formalities, form of words, or other requisites
prescribed by law for a mortgage, but however shows the intention of the
contracting parties to make the property subject of the contract as security for a
debt and contains nothing impossible or contrary to law.

     b. Transactions presumed to be equitable mortgages

               a. Contracts of sale with right to repurchase


Art. 1602.
The contract shall be presumed to be an equitable mortgage, in any of
the following cases:
(1) When the price of a sale with right to repurchase is unusually
inadequate;
the inadequacy of the price must be so gross and
unconsionable that the mind revolts at tit and such that a
reasonable man would netheir directly nor indirectly be likely to
consent to.
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or granting

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

a new period is executed;


Requisites:
the contract of sale is coupled with a right of repurchase
the period for redemption has already lapsed
after the lapse of the original period, another instrument
is executed extending the period of redemption or
granting a new period for the redemption.
(4) When the purchaser retains for himself a part of the purchase
price;
(5) When the vendor binds himself to pay the taxes on the thing
sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws.

               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.

               c. Rule when a transaction purporting to be a contract of sale with


right to repurchase is of doubtful interpretation
Art. 1603.
In case of doubt, a contract purporting to be a sale with right to
repurchase shall be construed as an equitable mortgage.
Construction in Case of Doubt:
if the language and terms of a contract of sale with repurchase are clear
and unequivocal, then the contract must be construed in accordance
with its literal sense.
Examples:
A stipulation that in case of failure of the vendor-a-retro as lessee to pay
rentals, the lease shall automatically terminate and the right of
ownership of the vendee shall become absolute – is valid, not contrary
to law nor oppressive. It is a clause common to “pacto de retro” and has
received court sanction.
Although “pactum commissorium” (a stipulation for automatic vesting of

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

          Is Parol Evidence admissible?


Yes.
Parole evidence is admissible to ascertain the true intention of the parties.
Under the wise, just and equitable presumption of Art. 1602, a document
which appears on its face to be a sale (absolute or with pacto de retro) may
be proven by the vendor or vendor-a-retro to be one of a loan with
mortgage, and in this case, parol evidence becomes competent and
admissible to prove that the instrument was in truth and in fact given merely
as a security for the payment of a loan.

          Is Art. 1602 retroactive?


Yes.
Art. 1602 being remedial in nature may be applied retroactively to cases prior
to the effectivity of the New Civil Code.

     c. Effect when the transaction is deemed an equitable mortgage

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

III. Period of Repurchase or Redemption


Art. 1606.
The right referred to in Article 1601, in the absence of an express agreement, shall last
four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from
the time final judgment was rendered in a civil action on the basis that the contract
was a true sale with right to repurchase.

     a. When no period is agreed upon


Four years from the date of the contract.
However:
it can be subject to certain exceptions.
example:
if the parties agreed to subject the efficacy of the contract to a
certain suspensive condition, the period shall be counted from the
fulfillment of the condition because this is the time when the sale
shall be considered consummated.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

     b. When a period is agreed upon


Within the period stipulated, which cannot exceed 10 years.
If the period exceeds 10 years, the excess shall be void.

     c. When period may be extended


The period may be extended to 30 days after final judgment was rendered in a
civil case claiming that the contract was a true sale with right to repurchase
(1606, par. 3)
a. Pendency of litigation suspends the period of redemption
b. The thirty day extension is applicable even should the case be filed after
the expiration of the redemption period, if the parties dispute its nature as a
pacto-de-retro sale with the allegation that it does not express their true
agreement.
Applicability:
cases where one of the parties contests or denies that the true agreement is
one of sale with right to repurchase.
it cannot apply where the sale is expressly one with right to repurchase.

     d. Rulings of the court


a. The legal period of 4 years may be extended by stipulation, provided that the
new period stipulated does not exceed 10 years.
b. A stipulation that the vendor cannot redeem the property until after 3 years
should be construed to allow redemption within 4 years, after the lapse of the 3
years, counted from such lapse.
c. An agreement granting the vendor the right to repurchase “when he as
established a certain business” is not a period. In such a case the vendor may
redeem within 4 years.
d. Where there is an agreed period, the period in excess of 10 years is void.
e. A stipulation granting the vendors the right to redeem “at any time the vendors
have the money” should be construed to allow redemption within 10 years.
f. The stipulated period of redemption is suspended by the filing of an action
brought in good faith relating to the validity of a sale with pacto-de-retro (it being
claimed to be an equitable mortgage) and again commences to run only after
decision declaring it to be a sale has become final.
g. Where the courts are functioning regularly, the redemption term is not
suspended or extended by war.

     What if the property was sold for tax delinquency?

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

     What if there is an agreement not to redeem?


The period during which vendor can not redeem when added to the period of
permitted redemption must not total more than 10 years.

     Is consignation necessary?


The consignation of the full purchase price and the other expenses required in
Art. 1616 is not necessary to preserve the right of the vendor a retro to redeem
the property sold.
But it is necessary in order to actually effect the redemption of the property if
there was a refusal on the part of the vendee a retro to resell the property.
Effect of proper consignation:
the vendee a retro ceases to be the owner of the property from the time
of the consignation.

     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?

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

IV. Who may Redeem or Exercise the Right of Redemption


     a. The vendor in whose favor the right is reserved
The following are included:
a. When vendors are co-owners selling jointly and in the same
contract an undivided immovable.
Right of each co-owner.
To redeem only his share
Art. 1612.
If several persons, jointly and in the same contract,
should sell an undivided immovable with a right of
repurchase, none of them may exercise this right for more
than his respective share.
The same rule shall apply if the person who sold an
immovable alone has left several heirs, in which case each
of the latter may only redeem the part which he may have
acquired.
Rights of the vendee
He may compel all the co-owners to redeem the whole. (Art. 1613)
He may also compel a vendor of a part to redeem the whole
property, should the letter desires to redeem the part he sold. (Art.
1611)
Art. 1613.
In the case of the preceding article, the vendee may
demand of all the vendors or co-heirs that they come to
an agreement upon the purchase of the whole thing sold;
and should they fail to do so, the vendee cannot be
compelled to consent to a partial redemption.
Art. 1611.
In a sale with a right to repurchase, the vendee of a part
of an undivided immovable who acquires the whole
thereof in the case of article 498, may compel the vendor

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

to redeem the whole property, if the latter wishes to make


use of the right of redemption.
Note:
In Art. 1613
the vendee a retro can refuse any attempt of partial
redemption on the part of co-owner or co-heirs if the
latter failed to agree on the repurchase of the whole
property.
if despite demand, the co-owners or co-heirs failed to
redeem on time, the ownership will be consolidated unto
the vendee a retro.
In Art. 1611
if the vendor refuses to repurchase the whole property,
the remedy is to sell the property and then divide the
proceeds proportionately.
b. When a co-owner sells his share of an undivided immovable
separately
Rights of the vendor – co-owner
He may only redeem his share.
He can not be compelled to redeem the whole.
Art. 1614.
Each one of the co-owners of an undivided immovable
who may have sold his share separately, may
independently exercise the right of repurchase as regards
his own share, and the vendee cannot compel him to
redeem the whole property.

          What if the co-owner redeems the whole property?


this does not make him the sole owner of the property.
the co-ownership will continue with his original co-owners.
even if he has registered the sale, the co-ownership will continue.
registration is not a mode of acquiring ownership.

          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.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

     b. Heirs of the vendor


Right of each heir
Each can redeem only the part which he may have acquired. (Art. 1612)
Right of the vendee
He may compel all the heirs to redeem the whole. (Art. 1613)

     c. Creditors of the vendor


The creditors must have already exhausted the properties of the vendor.
Art. 1610.
The creditors of the vendor cannot make use of the right of redemption
against the vendee, until after they have exhausted the property of the
vendor.
Applicability:
this applies to all creditors of the vendor whether they are preferred or not,
provided their preference is not based upon the real right prior to the sale
with pacto de retro.
Non-applicability:
this does not apply to mortgages which had been recorded prior to the sale.
this does not apply to creditors in antichresis governed by Art. 2132.

V. From Whom or Against Whom may Redemption be Made


     a. The vendee

     b. The heirs of the vendee


Art. 1615.
If the vendee should leave several heirs, the action for redemption cannot be
brought against each of them except for his own share, whether the thing be
undivided, or it has been partitioned among them.
But if the inheritance has been divided, and the thing sold has been awarded
to one of the heirs, the action for redemption may be instituted against him
for the whole.
Rule:
If there is more than one heir:
Against each of the heirs for his respective share whether the thing be
undivided, or it has been partitioned among them.
Exception:
When the thing sold is awarded to only one heir.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

     c. Every possessor whose right is derived from the vendee


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.
However:
Without prejudice to the provisions of the Mortgage Law and Act No. 496
(Land Registration Act) with respect to third persons.

VI. Obligations of the Vendor-a-Retro


     a. Obligations of the Vendor-a-Retro
Art. 1616.
The vendor cannot avail himself of the right of repurchase without returning
to the vendee the price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments
made by reason of the sale;
(2) The necessary and useful expenses made on the thing sold.
General Rule:
The vendor’s obligations are:
a. To return the price of the sale; 
b. To return the expenses of the contract and any other legitimate
payments made by reason of the sale; and
c. To reimburse the necessary and useful expenses made on the thing
sold, after their amount is determined.
Effect of the vendor’s failure to comply with his obligation:
General rule:
Ownership is consolidated in the vendee.
 Exception:
When the subject matter consists of real property, it is without
prejudice to the provisions of the Mortgage Law and Act No. 496
(Land Registration Act) with respect to third persons. (Art. 1608)
Requisites:
Consolidation of ownership must be by virtue of a judicial
order, after hearing the vendor. (Art. 1607)

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

VII. Obligations of the Vendee-a-Retro


     a. Obligations of the Vendee-a-Retro
Art. 1618.
The vendor who recovers the thing sold shall receive it free from all charges
or mortgages constituted by the vendee, but he shall respect the leases
which the latter may have executed in good faith, and in accordance with the
custom of the place where the land is situated.
General Rule:
To return the thing sold free from all charges and mortgages constituted by
the vendee.
Exception:
Lease contracts in good faith and according to custom, which must be
respected.

VIII. Rights of the Vendee-a-Retro


     a. To compel the vendor of a part of an undivided immovable to redeem the
whole property upon the vendee acquiring the entire immovable in partition
proceedings.
Art. 1611.
In a sale with a right to repurchase, the vendee of a part of an undivided
immovable who acquires the whole thereof in the case of article 498, may
compel the vendor to redeem the whole property, if the latter wishes to
make use of the right of redemption.

     b. To be subrogated to the vendor’s rights and actions.


Art. 1609.
The vendee is subrogated to the vendor's rights and actions.
Thus:
Pending the repurchase of the property, the vendee a retro may alienate,
mortgage or encumber the same, but such alienation or encumbrance is as
revocable as is his right.

IX. Rules on Pro-Rating of Fruits Existing at the Time of Redemption


Art. 1617.
If at the time of the execution of the sale there should be on the land, visible or

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

growing fruits, there shall be no reimbursement for or prorating of those existing at


the time of redemption, if no indemnity was paid by the purchaser when the sale was
executed.
Should there have been no fruits at the time of the sale and some exist at the time of
redemption, they shall be prorated between the redemptioner and the vendee, giving
the latter the part corresponding to the time he possessed the land in the last year,
counted from the anniversary of the date of the sale.

     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.

     b. If no visible fruits existed at the time of the sale


Fruits must be pro-rated.
Share of the vendee:
That portion corresponding to the time he possessed the land in the last year
counted from the anniversary of the date of the sale.

     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.

     Kind of fruits contemplated:


the article covers only natural and industrial fruits.
it cannot cover civil fruits because such fruits accrue daily and belong the vendee
in good faith in the proportion. (Art. 544, last par.)

Arts. 1619 - 1623 (Legal Redemption)


I. Concept

     a. Legal redemption defined


Art. 1619.
Legal redemption is the right to be subrogated, upon the same terms and

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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)

     b. Applicable alienation


Legal redemption can be exercised only against the vendee or transferee who
acuired the property in any of the following transactions:
Purchase;
Dation in payment (Dacion en pago); or
a special form of payment, whereby the property of the debtor is
alienated to the creditor in satisfaction of the former's debt in money.
governed by law on sales. (Art. 1245)
Any other transaction whereby ownership is transmitted by onerous title.

     c. Distinguished from Pre-emption


Pre-emption
exercised BEFORE the sale or re-sale against the would-be vendor.
no rescission because no sale as yet exists.
the action is directed against the prospective seller.
Redemption
exercised AFTER the sale has been perfected against the vendee.
the recognition of the right of redemption will result in the rescission of the
sale.
the action is directed against the buyer.

     d. Applicability of the rules


The enumeration of the applicable alienation is limitive.
Examples:
Art. 1088
Art. 1620
Art. 1621
Art. 1622

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

II. Instances of Legal Redemption

     a. Redemption by Co-owners


Art. 1620.
A co-owner of a thing may exercise the right of redemption in case the
shares of all the other co-owners or of any of them, are sold to a third
person. If the price of the alienation is grossly excessive, the redemptioner
shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption,
they may only do so in proportion to the share they may respectively have in
the thing owned in common.
Purpose:
the privilege conferred upon the co-owner to redeem is intended
to facilitate the termination of ownership in common, which may be an
obstacle to the development of property  of industry and of wealth, and to
consolidate the dominion in a sole owner.
Requisites:

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

(1) there must be a subsisting co-ownership.


(2) the sale made of an undivided share in the property owned in common
must be in favor of a third person.
(3) the sale must be executed before there has been a partition.
judicially or extrajudicially
However:
if a sale made before the project of partition had been approved,
which project was subsequently approved by the court, such
approval retroacts to the date of the project of partition. (De Jesus
vs. Daza)
(4) the right of redemption must be exercised by one or more co-owners
within a period of THIRTY DAYS to be counted from the time that he or they
were NOTIFIED in writing by the vendee or by the co-owner vendor; and
(5) the vendee must be REIMBURSED for the price of the sale.
Who may exercise redemption:
Co-owner
However:
Should two or more co-owners desire to exercise the right of
redemption, they may only do so in proportion to the share they may
respectively have in the thing owned in common.
Obligation of the redemptioner:
exercise within a period of thirty days from notice.
reimburse the vendee for the price of the sale.
Note: the redemptioner cannot impose upon the vendee the obligation
to accept payment by installments.
If price is unreasonable:
the law allows the redemptioner to pay only a reasonable price.
However:
to uphod the redemptioner's right to redeem, he must tender
payment and consign the price, independently of the size of
the redemptioner's share in the property owned in common.
(Conejero vs. CA)
If there is understatement of price in the deed of sale:
where only P30,000.00 was the price stated in the deed of sale of
the interest of a co-owner in a piece of land "to minimze the
payment of ther registration fees, stamps and sales tax," the co-
owner exercising the right of legal redemption should pay only
P30,000.00 although much more had been paid by the buyer.
(Doromal vs. CA)
Legal redemption by co-heirs:
the right of legal redemption is granted not solely and exclusively to the
original owners but also to thoise who subsequently acquire their respective

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

shares while the community subsist.

     b. Redemption by Adjoining Owners


Instances:
Rural Land
Art. 1621.
The owners of adjoining lands shall also have the right of
redemption when a piece of rural land, the area of which does not
exceed one hectare, is alienated, unless the grantee does not own
any rural land.
This right is not applicable to adjacent lands which are
separated by brooks, drains, ravines, roads and other apparent
servitudes for the benefit of other estates.
If two or more adjoining owners desire to exercise the right of
redemption at the same time, the owner of the adjoining land
of smaller area shall be preferred; and should both lands have
the same area, the one who first requested the redemption.
(1523a)
Definition:
a rural land refers to a land adapted and used for agricultural or
pastoral purposes.
it is one which, regardless of sire, is principally used for the purpose
of obtaining products from the soil as opposed to urban lands which
are principally for the purpose of residence. (Fabia vs. IAC)
Requisites:
(1) the adjacent lands involved must be rural lands;
this is because the intention of the law is to protect and
promote agriculture, by the union of small agricultural lands
nad those adjacent thereto under one owner for the better
exploitation of the two lands.
(2) the rural land alienated and to redeemed must not exceed on
hectare (10,000 square meters) in area;
the purpose is to prevent the creation of big land estates.
(3) the alienation must be made in favor of a third person, not in
favor of another adjacent owner;
(4) the two lands involved must not be separated by brooks, drains,
ravines, roads and other servitudes for the benefit of other estates;
if the two lands involved are separated by the aforementioned,
the properties are not to be considered adjacent or contiguous.
(5) the vendee or grantee must already be an owner of a rural land.
if he does not own any, redemption is not allowed.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

III. Procedure in Redemption


Art. 1623.
The right of legal pre-emption or redemption shall not be exercised except within thirty
days from the notice in writing by the prospective vendor, or by the vendor, as the
case may be. The deed of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written notice thereof to
all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.

     a. When to Exercise the Redemption

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

within 30 days from the notice in writing by the vendor.


the period does not run by actual knowledge of the sale.
it cannot be an oral notice or by the registration of the sale.
However:
Exceptional cases:
mere furnishing of a copy of the deed of sale to the co-owners is
equivalent to giving written notice. (Badillo vs. Ferrer)
co-owner's receipt of the summons constitutes actual knowledge on the
basis of which the right of redemption may be exercised without need of
sending notice. (Fransisco vs, Boiser)
when the redemptioners and purchaser live on the same lot (604 sq.m.).
(Alonzo vs. IAC)
Nature:
the period is not a prescriptive period but rather a condition precedent to the
exercise of the right.
the period is extinctive such that if the right was not exercised, it could not
be exercised anymore, even if the action was brought within
the ordinary prescriptive period. (Sempio vs. Del Rosario)
the period is non-extendible.
if no offer is made within the said period, no action will be allowed to
enforce the right of redemption.
Form of Notice:
the notice must be in writing stating the execution of the sale and its
particulars.
the notice should mention the price, terms and conditions of the sale or
proposal to be made, to enable a co-owner or co-heir to exercise the right.
the law does not require any particular form of notice.
it may be effected in a private or public document.

     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.

     c. Special Rules


Legal Redemption requires no previous notice of intention to redeem.
Tender of the price is not a condition precedent to redemption.

IV. Other Cases of Legal Redemption

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

     a. Period of Redemption in Auction Sale of Homestead to Satisfy Money


Judgment

     b. Period of Redemption in Auction Sale of Homestead

Arts. 1624 - 1635 (Assignment of Credits and Other Incorporeal Rights)


I. Concept
Art. 1624.
An assignment of creditors and other incorporeal rights shall be perfected in
accordance with the provisions of Article 1475. 

     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.

     Distinctions Between Contract of Sale and Assignment of Credits

Assignment of
Basis Contract of Sale
Credits

Credit, incorporeal rights


Object Property
or rights of action

Manner
It need not be
of It must be through a
through a public
Delivery public instrument
instrument
of Object

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

Similiarity: an assignment of credit is perfected in the


same way and manner as sale. (Art. 1624 and Art. 1475)
Art. 1475.
The contract of sale is perfected at the moment
there is a meeting of minds upon the thing which
is the object of the contract and upon the price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of
the law governing the form of contracts.

     Distinctions Between Dation in Payment and Assignment of Credits

Dation in
Basis Assignment of Credits
Payment

It is an
alienation

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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)

Determinate Credits, incorporeal rights or rights


Object
property. of action.

Obligation
Effect is Obligation is not extinguished.
extinguished.

II. Essential Requisites and Formalities


Art. 1625.
An assignment of a credit, right or action shall produce no effect as against third
person, unless it appears in a public instrument, or the instrument is recorded in the
Registry of Property in case the assignment involves real property.

     Efficaciousness of Assignment of Credits


Between the parties, the assignment is efficacious even if it appears only in a
private document unless by the nature of the object of the assignment, a specific
form is required by law for its validity. (Art. 1356)
However, to affect third persons, the assignment must appear in a public
instrument.

     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.

     Consent of the debtor not required

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

consent of the debtor is not necessary to make an assignment of credit effective;


However NOTICE is important:
the assignment is not fully effective against the debtor until he is
notified thereof or has actual knowledge of the assignment; i.e. the
debtor until then is not bound to pay the assignee.
formal notice is not essential.
Rationale:
the reason is that his duty to pay does not depend upon his consent to the
assignment.
otherwise, all creditors would be prevented from assigning their credits
because of the possibility of the debtor's refusal to give consent.

               Is inscription of Chattel Mortgage in the Registry of Property a


constructive notice?
Yes.
Under the New Civil Code, an assignment of a chattel mortgage must be
registered to affect third persons.

     Forms of Assignment of Credits shall be Dependent Upon the Character of the


Assignment
The character which the assignment may assume determine its requisites and
effects, its regulation, and the capacity of the parties to execute it, its regulation,
and the capacity of the parties to execute it; and, in every case, the obligations
between assignor and assignee will depend upon the juridical relation which is the
basis of the assignment.
It assumes the nature of sale when the assignment is onerous, that is, when
there is a price paid therefor as consideration.
It assumes the nature of donation when the assignment is gratuitous.
As such, the law ond donation applies as to its perfection and other
incidents.
Art. 1475 as referred to in Art. 1624 cannot apply but Arts. 748 and 749.
Art. 748.
The donation of a movable may be made orally or in writing.
An oral donation requires the simultaneous delivery of the
thing or of the document representing the right donated.
If the value of the personal property donated exceeds five
thousand pesos, the donation and the acceptance shall be
made in writing, otherwise, the donation shall be void. (632a)
Art. 749.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

In order that the donation of an immovable may be valid, it


must be made in a public document, specifying therein the
property donated and the value of the charges which the
donee must satisfy.

     Determination not based on the name


Whether or not a transfer of a particular right or interest is an assignment or
some other transactions depends, not on the name by which it calls itself, but on
the legal effect of its provisions.
This rule applies in determining whether a particular transaction is an assignment
or a sale. (PNB vs. CA)

     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.

III. Effects of a Valid Assignment

     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.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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

     c. Warranty by the assignor


Art. 1628.
The vendor in good faith shall be responsible for the existence and legality of the
credit at the time of the sale, unless it should have been sold as doubtful; but not for
the solvency of the debtor, unless it has been so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge.
Even in these cases he shall only be liable for the price received and for the expenses
specified in No. 1 of Article 1616.
The vendor in bad faith shall always be answerable for the payment of all expenses,
and for damages.

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)

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

(3) the solvency of the debtor, if expressly stipulated, or if the


insolvency of the debtor was prior to the sale and of common
knowledge.
The assignor in good faith does not answer for the solvency of the
debtor unless-
- Expressly stipulated; or
- The insolvency of the debtor was known to him personally; or
- The insolvency of the debtor was prior to the sale and of common
knowledge (1628)
Where the solvency of the debtor is warranted by the assignor, the
duration of the liability is:
If the parties have stipulated on the terms of the duration of the assignor's
liability, then that term shall be observed.
If no stipulation:
One year from the date of the assignment of the credit if the period of
payment of the credit has already expired;
One year after maturity of the credit, if the period of payment has not
yet expired.
Recovery of the warranty
In good faith
pay the:
(a) consideration or price which he received from the assignee;
(b) expenses of the contract; and
(c) other legitimate expenses occasioned by the assignment.
In bad faith (knowledge of the non-existence, illegality or invalidity
of the credit, insolvency of the debtor)
pay:
(a) the same liabilities of the assignor in good faith; and.
(b) liability for damages suffered by the assignee

     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

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

in a better position that that of the previous creditor, for he himself


when he had the credit could not be sure if he can collect it.
Clear is the maxim, a stream cannot rise higher than its origin.

IV. Special Assignments


     a. Sale of Inheritance
          Art. 1630.
One who sells an inheritance without enumerating the things of which it is
composed, shall only be answerable for his character as an heir.
 
          Art. 1632.
Should the vendor have profited by some of the fruits or received anything from
the inheritance sold, he shall pay the vendee thereof, if the contrary has not been
stipulated.

          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

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

     b. Sale of Rights, Rents or Products for a Lump Sum


          Art. 1631.
One who sells for a lump sum the whole of certain rights, rents, or products, shall
comply by answering for the legitimacy of the whole in general; but he shall not
be obliged to warrant each of the various parts of which it may be composed,
except in the case of eviction from the whole or the part of greater value.

          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.

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

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.

     c. Sale and Redemption of Litigious Credits


          Art. 1634.
When a credit or other incorporeal right in litigation is sold, the debtor shall have
a right to extinguish it by reimbursing the assignee for the price the latter paid
therefor, the judicial costs incurred by him, and the interest on the price from the
day on which the same was paid.
A credit or other incorporeal right shall be considered in litigation from the time
the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date the assignee
demands payment from him. (1535)
          Art. 1635.
From the provisions of the preceding article shall be excepted the assignments or
sales made:
(1) To a co-heir or co-owner of the right assigned;
(2) To a creditor in payment of his credit;
(3) To the possessor of a tenement or piece of land which is subject to the
right in litigation assigned.

          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

Finals Sales.html[05/10/2016 9:19:08 PM]


Evernote Export

(3) judicial costs incurred by the assignee.


          Prescriptive Period
The right must be exercised within 30 days from the date the assignee demands
payment.
The demand may be oral or formal as the law makes no distinction.
          Exception:
The right to redeem is not applicable to an assignment made:
To a co-heir or co-owner of the right assigned;
reason: this is to avoid continuation of co-ownership.
To a creditor in payment of his credit; and
reason: the transaction is really one of "dation in payment," a mode of
extinguishing obligation which must not be subordinated to any
contingency.
To the possessor of a tenement or piece of land which is subject to
the right in litigation assigned.
reason: the possession of the possessor is subject to the outcome of the
pending case.

     Does the assignee need to be substituted to the creditor in the case?


No.
It does not constitute fraud and does not affect the jurisdiction of the court.
The debtor remains liable.

Finals Sales.html[05/10/2016 9:19:08 PM]

Das könnte Ihnen auch gefallen