APPENDIX B

TOPICAL INDEX
(The Topical Index presents in outline form the manner by which the Law on Sales is discussed in the book, and serves as a syllabus for classroom discussions . The xs in the outline represent cases which need no extended discussions either because the essence of their rulings are already summari ed in the outline or they contain similar rulings as other cases to be discussed! "nless otherwise indicated, the numbered articles refer to articles of the #ivil #ode of the $hilippines%

I. THE NATURE OF SALE

A. DEFINITION OF SALE (Art. 1458)
Sale is a contract by which one of the contracting parties obligates himself to transfer the ownership1 and to deliver possession, of a determinate thing, and the other to pay therefor a price certain in money or its equivalent. x#ru v! &ernando, 477 SCR !7" #$%%&'.2 1. Eleme t! "# S$le (lements of sale) #a' consent or meeting of the minds* #b' determinate sub+ect matter* and #c' price certain in money or its equivalent. x'avarra v! $lanters (ev! )ank, &$7 SCR &,$ #$%%7'.% bsence of any essential elements negates a sale x(i on v! #*, "%$ SCR $-#!...',4 even when earnest money has been paid. +anila +etal #ontainer #orp! v! $') , &!! SCR 444 #$%%,'. Sale being a consensual contract, its essential elements must be proven x,illanueva v! #*, $,7 SCR -. #!..7'* but once proven, a sale/s validity is not affected by a previously executed fictitious deed of sale x$e-alosa v! Santos, "," SCR &4& #$%%!'* and the burden is on the other party to prove otherwise. x .eirs of /rnesto )iona v! #*, ",$ SCR $. #$%%!'. 2. St$&e! "# C" tr$'t "# S$le Policitacion covers period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected. Perfection ta0es place upon the concurrence of the essential elements, which are the meeting of the minds of the parties as to the ob+ect of the contract and upon the price. Consummation begins when the parties

! 1wnership is the independent and general power of a person over a thing for purposes recogni2ed by law and within the limits established thereby. ccording to rt. 4$- of the Civil Code, this means that) 3he owner has the right to en+oy and dispose of a thing, without other limitations than those established by law. x x x side from the 0us utendi and the 0us abutendi inherent in the right to en+oy the thing, the right to dispose, or the 0us disponendi, is the power of the owner to alienate, e '(m)er, transform and even destroy the thing owned. &lancia v! #ourt of *ppeals, 4&7 SCR $$4 #$%%&'. $ *lfredo v! )orras, 4%4 SCR !4& #$%%"'* +anila +etal #ontainer #orp! v! $'), &!! SCR 444 #$%%,'* 1oberts v! $apio, &!& SCR "4, #$%%7'. " 2ovan Land, Inc! v! #*, $,- SCR !,% #!..7'* 3ui0ada v! #*, $.. SCR ,.& #!..-'* #o v! #*, "!$ SCR &$#!...'* San *ndres v! 1odrigue , ""$ SCR 7,. #$%%%'* 1oble v! *rbasa, ",$ SCR ,. #$%%!'* $olytechnic "niversity v! #*, ",- SCR ,.! #$%%!'* 4atipunan v! 4atipunan, "7& SCR !.. #$%%$'* Londres v! #*, ".4 SCR !"" #$%%$'* +anongsong v! /stimo, 4%4 SCR ,-" #$%%"'* 2imene , 2r! v! 2ordana, 444 SCR $&% #$%%4'* San Loren o (ev! #orp! v! #*, 44. SCR .. #$%%&'* 5ason v! *rciaga, 44. SCR 4&- #$%%&'* 1oberts v! $apio, &!& SCR "4, #$%%7'* 'avarra v! $lanters (ev! )ank, &$7 SCR &,$ #$%%7'* 1epublic v! &lorendo, &4. SCR &$7 #$%%-'. 4 1oberts v! $apio, &!& SCR "4, #$%%7'.

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perform their respective underta0ings, culminating in the extinguishment thereof. x San +iguel $roperties $hilippines, Inc! v! .uang, "", SCR 7"7 #$%%%'.& %. S$le Cre$te! Re$l O)l*&$t*" ! +T" ,*-e. # rt. !!,&' 4. E!!e t*$l C/$r$'ter*!t*'! "# S$le0 $. N"m* $te $ 1 Pr* '*2$l contract of sale is what the law defines it to be, ta0ing into consideration its essential elements, and not what the contracting parties call it. xSantos v! #ourt of *ppeals, ""7 SCR ,7 #$%%%'., ). C" !e !($l # rt. !47&' contract of sale is not a real, but a consensual contract, and becomes valid and binding upon the meeting of the minds of the parties as to the ob+ect and the price 7, that) 4pon its perfection, the parties may reciprocally demand performance. x .eirs of ,enancio )e0enting v! )a-e , &%$ SCR &"! #$%%,'*- sub+ect only to the provisions of the law governing the form of contracts. x#ru v! &ernando, 477 SCR !7" #$%%&'. 5t remains valid even if parties have not affixed their signatures to its written form x6abelo v! #*, "!, SCR "-, #!...', or the manner of payment is breached. x$ilipinas Shell $etroleum #orp v! 6obonseng , 4., SCR "%& #$%%,'. 3he binding effect of sale is based on the principle that the obligations arising therefrom have the force of law between the parties. x ,eterans &ederation of the $hilippines v! #ourt of *ppeals, "4& SCR "4- #$%%%'. Perfection Distinguished from Demandability 6 7ot all contracts of sale become automatically and immediately effective. 5n sales with assumption of mortgage, there is a condition precedent to the seller/s consent and without the approval of the mortgagee, the sale is not perfected. x)i-an Steel #orp! v! #ourt of *ppeals , ".! SCR .% #$%%$'. No Contract Situation versus Void Contract 6 bsence of consent # i!e!, complete meeting of minds% negates the existence of a perfected sale. x&irme v! )ukal /nterprises and (ev! #orp!, 4!4 SCR !.% #$%%"'. 3he contract then is null and void ab initio, absolutely wanting in civil effects* hence, it does not create, modify, or extinguish the +uridical relation to which it refers. x#abota0e v! $udunan, 4", SCR 4$" #$%%4'. 8hen there is no meeting of the minds on price, the contract 9is not perfected: and does not serve as a binding +uridical relation between the parties. x +anila +etal #ontainer #orp! v! $'), &!! SCR 444 #$%%,',. and should be more accurately denominated as inexistent, as it did not pass the stage of generation to the point of perfection. x'.* v! 6race )aptist #hurch, 4$4 SCR !47 #$%%4'.
& Limketkai Sons +illing, Inc! v! #ourt of *ppeals , $&% SCR &$" #!..&'* 2ovan Land, Inc! v! #*, $,- SCR !,% #!..7'* )ugatti v! #ourt of *ppeals, "4" SCR ""& #$%%%'* +oreno, 2r! v! $rivate +anagement 7ffice, &%7 SCR ," #$%%,'* +anila +etal #ontainer #orp! v! $'), &!! SCR 444 #$%%,'* 'avarra v! $lanters (ev! )ank, &$7 SCR &,$ #$%%7'* $rovince of #ebu v! .eirs of 1ufina +orales, &4, SCR "!& #$%%-'. , )owe v! #*, $$% SCR !&- #!.."'* 1omero v! #*, $&% SCR $$" #!..&'* Lao v! #*, $7& SCR $"7 #!..7'* #avite (evelopment )ank v! Lim, "$4 SCR "4, #$%%%'. 7 1omero v! #*, $&% SCR $$" #!..&'* )alatbat v! #*, $,! SCR !$- #!..,'* #oronel v! #*, $," SCR !& #!..,'* #ity of #ebu v! .eirs of #andido 1ubi, "%, SCR 4%- #!...'* *gasen v! #*, "$& SCR &%4 #$%%%'* Laforte a v! +achuca, """ SCR ,4" #$%%%'* Londres v! #ourt of *ppeals, ".4 SCR !"" #$%%$'* *lcantara8(aus v! de Leon, 4%4 SCR 74 #$%%"'* )uenaventura v! #ourt of *ppeals, 4!, SCR $," #$%%"'* San Loren o (ev! #orp! v! #*, 44. SCR .. #$%%&'* 5ason v! *rciaga, 44. SCR 4&- #$%%&'* *in a v! $adua, 4,$ SCR ,!4 #$%%&'* 1oberts v! $apio, &!& SCR "4, #$%%7'* +## Industrial Sales #orp! v! Ssangyong #orp!, &", SCR 4%- #$%%7'* #astillo v! 1eyes. &". SCR !." #$%%7' . $rovince of #ebu v! .eirs of 1ufina +orales, &4, SCR "!& #$%%-'. . 1oberts v! $apio, &!& SCR "4, #$%%7'.

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'. B*l$ter$l $ 1 Re'*2r"'$l # rts. !!,. and !!.!' contract of sale gives rise to 9reciprocal obligations:, which arise from the same cause with each party being a debtor and creditor of the other, such that the obligation of one is dependent upon the obligation of the other* and they are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other. x#ortes v! #ourt of *ppeals, 4.4 SCR &7% #$%%,'.!% 3he power to rescind is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him, and without need of prior demand. x*lmocera v! 7ng, &4, SCR !,4 #$%%-'.!! 1. O er"(! #3Gaite v. Fonacier 2 SCRA 8%4 516718'. e. C"mm(t$t*-e #!"# S$$% Art!. 1%55 $ 1 1494' 5n a contract of sale, there is no requirement that the price be equal to the exact value of the sub+ect matter of sale* all that is required is that the parties believed that they will receive good value in exchange for what they will give. 3!uenaventura v. C&: 417 SCRA 27% (244%). #. S$le I! T*tle $ 1 N"t ;"1e Sale is not a mode, but merely a title. mode is the legal means by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership. Sale by itself does not transfer or affect ownership* the most that sale does is to create the obligation to transfer ownership. 5t is tradition or delivery, as a consequence of sale, that actually transfers ownership. xSan Loren o (ev! #orp! v! #*, 44. SCR .. #$%%&',12 citing ;5<< 74(; , =>5<5==57( < 8 17 S <(S, !..& ed., at p. &. Seller/s ownership of the thing sold is not an element of perfection* what the law requires is that seller has the right to transfer ownership at the time the of delivery. x3ui0ada v! #*, $.. SCR ,.& #!..-'.!" !"# S$$0 xTitong v! #*, $-7 SCR !%$ #!..-', which defined a 9sale: as 9 a contract transferring dominion and other real rights in the thing sold! :

B. SALE DISTIN,UISHED FRO; SI;ILAR CONTRACTS

contract is what the law defines it to be, ta0ing into consideration its essential elements, and the title given to it by the parties is not as much significant as its substance. !4 3he transfer of ownership in exchange for a price paid or promised is the very essence of a contract of sale. xSantos v! #ourt of *ppeals, ""7 SCR ,7 #$%%%'. 5n determining the real character of sale, courts loo0 at the intent of the parties, their true aim and purpose in entering into the contract, as well as 9by their conduct, words, actions and deeds prior to, during and immediately after executing the agreement,: and not at the nomenclature used to describe it, xLao v! #ourt of *ppeals, $7& SCR $"7 #!..7'. 1. D" $t*" # rts. 7$& and !47!'

4nli0e a donation, sale is a disposition for valuable consideration with no diminution of the estate but merely substitution of values, with the property sold replaced by the equivalent
!%

7ng v! #ourt of *ppeals, "!% SCR ! #!...'* +ortel v! 4*SS#7, "4- SCR ".! #$%%%'* *gro #onglomerates, Inc! v! #*, "4- SCR 4&% #$%%%'* ,elarde v! #ourt of *ppeals, ",! SCR &, #$%%!'* #arrascoso, 2r! v! #ourt of *ppeals, 477 SCR ,,, #$%%&'. !! ,da! (e 3uirino v! $alarca, $. SCR ! #!.,.' !$ *cap v! #*, $&! SCR "% #!..&'. !" /9uatorial 1ealty (ev! Inc! v! +ayfair Theater, Inc! , "7% SCR &, #$%%!'* *lcantara8(aus v! de Leon, 4%4 SCR 74 #$%%"'* .eirs of 2esus +! +ascu-ana v! #ourt of *ppeals, 4,! SCR !-, #$%%&'. !4 1omero v! #*, $&% SCR $$" #!..&'.

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monetary consideration* unli0e donation, a valid sale cannot have the legal effect of depriving the compulsory heirs of their legitimes. x+anongsong v! /stimo, 4%4 SCR ,-" #$%%"'. 3he rules on double sales under rt. !&44 find no relevance to contracts of donation. x.emedes v! #ourt of *ppeals, "!, SCR "47 #!...'. 2. B$rter # rts. !4,-, !,"- to !,4!' %. C" tr$'t #"r P*e'e<"#<="r> # rts. !4,7, !7!" to !7!&' #he Cru'% 95neluctably, whether the contract be one of sale or one for a piece of wor0, a transfer of ownership is involved and a party necessarily wal0s away with an ob+ect.: x#ommissioner of Internal 1evenue v! #* , $7! SCR ,%& #!..7', citing ;5<< 74(; , < 8 17 S <(S, pp. 7?. #!..&'. 5n both provisions on warranty of title against hidden defects applies. x(i-o v! #*, "&. SCR .! #$%%!'. 8hen a person stipulates for the future sale of articles which he is habitually ma0ing, and which at the time are not made or finished, it is essentially a contract of sale and not a contract for labor xInchausti : #o! v! #romwell , $% =hil. "4& #!.!!'* even when he executes production thereof only after an order is placed by customers. Celestino ( Co. v. Collector: 66 P/*l. 841 (1657). 5f the thing is specially done only upon the specific order of another, this is a contract for a piece of wor0* if the thing is manufactured or procured for the general mar0et in the ordinary course of business, it is a contract of sale. Commissioner of )nternal *evenue v. $ngineering $+ui,ment ( Su,,ly Co.: 74 SCRA 564 (1695).!& 3o 3olentino, the distinction depends on the intention of parties ) if parties intended that at some future date an ob+ect has to be delivered, without considering the wor0 or labor of the party bound to deliver, the contract is one of sale* but if one of the parties accepts the underta0ing on the basis of some plan, ta0ing into account the wor0 he will employ personally or through another, the contract is for a piece of wor0. x /ngineering : +achinery #orp! v! #*, $&$ SCR !&, #!..,'. 4. A&e '? t" Sell # rt. !4,,' ssumption by 9agent: of the ris0 pertaining to the cost or price of the sub+ect matter ma0es the relationship that of buyer?seller, for the agent does not assume ris0 with respect to the price or the property sub+ect of the relationship. x 4er : #o!, Ltd! v! Lingad , "- SCR &$4 #!.7!'. Consequently) #a' the contractual relationship is not inherently revocable. -uiroga v. Parsons: %8 P/*l. 541 (1618) * or #b' the purported agent does not have to account for the profit margin earned from acquiring the property for the purported principal. Puyat v. &rco &musement Co.: 92 P/*l. 442 (1641). 1ne factor that most clearly distinguishes agency from other legal concepts, including sale, is control* one person 6 the agent 6 agrees to act under the control or direction of another 6 the principal. x,ictorias +illing #o!, Inc! v! #*, """ SCR ,," #$%%%'. Commercial bro0er, commission merchant or indentor is a middleman acting in his own name, and acts as agent for both seller and buyer to effect a sale between them. lthough he is neither seller nor buyer to the contract effected he may voluntarily assume warranties of seller. xSchmid and 7berly, Inc! v! 12L +artine , !,, SCR 4." #!.--'. 5. Dacion $n Pago # rts. !$4& and !."4' 6overned by the law on sales , dation in payment is a transaction that ta0es place when property is alienated to the creditor in full satisfaction of a debt in money@it involves the delivery and transmission of ownership of a thing as an accepted equivalent of the performance of the obligation. x5uson v! ,itan, 4., SCR &4% #$%%7'.
#ommissioner of Internal 1evenue v! *rnoldus #arpentry Shop , !&. SCR v! *ragones, 4,! SCR !". #$%%&'.
!&

!.. #!.--'* (el +onte $hilippines, Inc!

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5n its modern concept, what actually ta0es place in dacion en pago is an ob+ective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the ob+ect of the contract of sale, while the debt is considered as the purchase price. x*9uintey v! Tibong &!! SCR 4!4 #$%%,'. (lements of dation in payment) #a' performance of the prestation in lieu of payment #animo solvendi' which may consist in the delivery of a corporeal thing or a real right or a credit against the third person* #b' some difference between the prestation due and that which is given in substitution # aliud pro alio'* and #c' agreement between the creditor and debtor that the obligation is immediately extinguished by reason of the performance of a presentation different from that due. .o v. /0S $co1Form2or3 System Phil. )nc. : 41% SCRA 182 (244%).!, Aor dacion to arise, there must be actual delivery of the property to the creditor by way of extinguishment of the pre?existing debt. x$hilippine Lawin )us #o! v! #*, "74 SCR ""$ #$%%$'.!7 !"# S$$ 4!)#$*% xSSS v! #ourt of *ppeals, &&" SCR ,77 #$%%-'. 3here is no dation when there is no such transfer of ownership in favor of the creditor, as when the possession is only by way of security. x$') v! $ineda, !.7 SCR ! #!..!'. creditor, especially a ban0, which enters into dacion en pago, should 0now and must accept the legal consequence thereof, that the pre?existing obligation is totally extinguished. x/stanislao v! /ast ;est )anking #orp!, &44 SCR ",. #$%%-'. 7. Le$!e # rts. !4-4 and !4-&' 8hen rentals in a 9lease: are clearly meant to be installment payments to a sale contract, despite the nomenclature given by the parties, it is a sale by installments and governed by the Recto <aw. x&ilinvest #redit #orp! v! #*, !7- SCR !-- #!.-.'.

II. PARTIES TO A CONTRACT OF SALE (Art!. 1486<1462)

1. ,e er$l R(le0 (very person having legal capacity to obligate himself, may validly enter into a contract of sale, whether as seller or as buyer. # rt. !4-.' 2. ;* "r!: I !$ e $ 1 Deme te1 Per!" !: De$#<;(te! # rts. !"$7, !".7 and !"..' minor cannot be deemed to have given her consent to a contract of sale* consent is among the essential requisites of a contract, including one of sale, absent of which there can be no valid contract. 5@8 xLabagala v! Santiago, "7! SCR ",% #$%%!'. $. Ne'e!!$r*e! # rts. !4-. and $.%' ). 'Em$ '*2$t*" # rts. ".. and !".7* )nutile0 Ba+ority age now at !- years, and $",, Aamily Code, amended by R. . ,-%.'. rts. $"4

'. Pr"te't*" "# t/e Se *le $ 1 El1erl? # rt. $4' $ 1 Ill*ter$te! # rt. !""$' 4nder rt. !""$, when one of the parties is unable to read, or if the contract is in a language not understood by him, and mista0e or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former* otherwise, sale is void. 5@8 x,da! (e *pe v! #ourt of *ppeals, 4&, SCR !." #$%%&'. 8hile a person is not incompetent to contract merely because of advanced years or by reason of physical infirmities, when such age or infirmities have impaired the mental faculties so as to prevent the person from properly, intelligently or firmly protecting his

*9uintey v! Tibong &!! SCR 4!4 #$%%,'. &ilinvest #redit #orp! v! $hilippine *cetylene #o!, Inc! !!! SCR ".% SCR "-% #$%%$'.
!7

!,

4$! #!.-$'* ,da! de 2ayme v! #ourt of *ppeals ,

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property rights, then he is undeniably incapacitated, and the sale he entered into is void 5@8. Paragas v. 5eirs of Dominador !alacano : 478 SCRA 919 (2445).!%. S$le! B? $ 1 BetAee S2"(!e!0 $. C" tr$'t! A*t/ T/*r1 P$rt*e! # rts. 7", .,, and !$4, Aamily Code' 4nder rt. !$4 of Aamily Code, sale by husband of a con+ugal property without the wife/s consent is void, not merely voidable, since the resulting contract lac0s one of the essential elements of full 9consent:. x6uiang v! #*, $.! SCR "7$ #!..-'.!. wife affixing her signature to a Ceed of Sale as a witness is deemed to have given her consent. x$elayo v! $ere , 4&. SCR 47& #$%%&'. s an exception, husband may dispose of con+ugal property without wife/s consent if such sale is necessary to answer for con+ugal liabilities mentioned in rticles !,! and !,$. x*balos v! +acatangay, 2r!, 4". SCR ,4 #$%%4'. ). BetAee S2"(!e! # rts. !"", !4.%, !4.$* Sec. -7, Aamily Code' Sales between spouses who are not governed by a complete separation of property regime are void, not +ust voidable. x+edina v! #ollector, ! SCR "%$ #!.,%'. Sale by husband of con+ugal land to his concubine is null and void for being contrary to morals and public policy and 9subversive of the stability of the family, a basic social institution which public policy cherishes and protects.: Calimlim1Canullas v. Fortun 126 SCRA 795 (1684).$% Since under rt. !4.%, the spouses cannot validly sell property to one another, then policy consideration and the dictates of morality require that the prohibition should apply also to common?law relationships. cf! +atabuena v! #ervantes, "- SCR $-4 #!.7!'. 7evertheless, when property resold to a third?party buyer in good faith and for value, reconveyance is no longer available. x#ru v! #*, $-! SCR 4.! #!..7'. 3he in pari delicto doctrine would apply to the spouses?parties under rt. !4.%, since only the heirs and the creditors can question the sale/s nullity. x +odina v! #ourt of *ppeals, "!7 SCR ,., #!...'. 4. Ot/er! Rel$t*-el? D*!B($l*#*e1 # rts. !4.! and !4.$' Contracts entered into in violation of rts. !4.% and !4.$ are not merely voidable, but are null and void. *ubias v. !atiller: 51 SCRA 124 (169%).$! $. ,($r1*$ !: A&e t! $ 1 A1m* *!tr$t"r! 7o more need to comply with x1odri9ue v! +actal, ,% =hil. !" #!."4' which required showing that a third party bought as conduitDnominee of the buyer disqualified under rt. !4.!* rather, the presumption now is that such disqualified party obtained the property in violation of said article. Phili,,ine #rust Co. v. *oldan: 66 P/*l. %62 (1657). =rohibition against agents does not apply if the principal consents to the sale of the property in the hands of the agent. x(ista0o v! #*, "". SCR &$ #$%%%'. >ereditary rights are not included in the prohibition insofar as administrator or executor of the estate of the deceased. x'aval v! /nri9ue , " =hil. ,,. #!.%4'. ). Att"r e?!.

!!.

(omingo v! #ourt of *ppeals, ",7 SCR ",- #$%%!'. #irelos v! .ernande , 4.% SCR ,$& #$%%,'* )autista v! Silva, &%$ SCR ""4 #$%%,'. $% #hing v! 6oynako, 2r!, &%, SCR 7"& #$%%,'. $! "y Sui $in v! #antollas, 7% =hil. && #!.4%'* +edina v! #ollector, ! SCR "%$ #!.,!'!

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=rohibition applies only while litigation is pending. x(irector of Lands v! *baba, -SCR &!" #!.7.'* even when the litigation is not adversarial in nature *ubias v. !atiller: 51 SCRA 124 (169%)* or when it is a certiorari proceeding that may have no merit x,alencia v! #abanting, !., SCR "%$ #!..!'. =rohibition applies only to a sale to a lawyer of record, and does not cover assignment of the property given in +udgment made by a client to an attorney, who has not ta0en part in the case. x +unicipal #ouncil of Iloilo v! /vangelista , && =hil. $.% #!."%'*$$ nor to a lawyer who acquired property prior to the time he intervened as counsel in the suit involving such property. x(el 1osario v! +illado, $, SCR 7%% #!.,.'. =rohibition does not apply) #a' to sale of a land acquired by a client to satisfy a +udgment in his favor, to his attorney as long as the property was not the sub+ect of the litigation. x(aroy v! *becia, $.- SCR !7$ #!..-'* or #b' to a contingency fee arrangement which grants the lawyer of record proprietary rights to the property in litigation since the payment of said fee is not made during the pendency of litigation but only after +udgment has been rendered. 3Fabillo v. )&C: 165 SCRA 28 (1661).$" '. C(1&e! +udge should restrain himself from participating in the sale of properties@it is incumbent upon him to advise the parties to discontinue the transaction if it is contrary to law. )ritanico v! /spinosa, 4-, SCR &$" #$%%,'. +udge who buys property in litigation before his court after the 0udgment becomes final does not violate rt. !4.!, but he can be administratively disciplined for violation of the Code of Eudicial (thics. x+acariola v! *suncion, !!4 SCR 77 #!.-$'. (ven when the main cause is a collection of a sum of money, the properties levied are still sub+ect to the prohibition. x6an Tingco v! $abinguit, "& =hil. -! #!.!,'.

III. SUBCECT ;ATTER OF SALE (Art!. 1456 t" 1475)

93ransfer of title or an agreement to transfer it for a price paid or promised to be paid is the essence of sale.: x#ommissioner of Internal 1evenue v! #* and *teneo de +anila "niversity, $7! SCR ,%& #!..7'. 3he Civil Code provisions defining sales is a 9catch?all: provision which effectively brings within it grasp a whole gamut of transfers whereby ownership of a thing is ceded for a consideration. F$olytechnic "niversity v! #*, ",- SCR ,.! #$%%!'. 8here under an agreement, a party renounces and transfers whatever rights, interests, or claims she has over a parcel of land in favor of another party in consideration of the latter/s payment of therein loan, the agreement is essentially a sale, and the rule on delivery effected through a public instrument apply. x#aoibes, 2r! v! #aoibes8$anto0a, 4., SCR $7" #$%%,'. 1. ;(!t Be ED*!t* &: F(t(re "r C" t* &e t # rts. !"47, !"4-, and !4,$' $. $m,tio *ei S,eratae # rts. !4,! and !"47' =ending crops which have potential existence may be valid ob+ect of sale. xSibal v! ,alde , &% =hil. &!$ #!.$7'* and such transaction cannot be considered to effectively be sale of the land or any part thereof. x$ichel v! *lon o, !!! SCR "4! #!.-!'. ). $m,tio S,ei # rt. !4,!' '. S()Ee't t" Re!"l(t"r? C" 1*t*" # rt. !4,&'

2. ;(!t Be L*'*t # rts. !"47, !4&. and !&7&'

$$ $"

6regorio *raneta, Inc! v! Tuason de $aterno, 4. 1.G. 4& #!.&$'. 1ecto v! .arden, !%% =hil. 4$7 #!.&,'* ,da! de Laig v! #*, -, SCR ,4! #!.7-'.

8
4nder rt. !"47, a sale involving future inheritance is void and cannot be the source of any right nor create any obligation. xTa-edo v! #ourt of *ppeals, $&$ SCR -% #!..,'. rticle !"47 does not cover waiver of hereditary rights which is not equivalent to sale, since waiver is a mode of extinction of ownership in favor of the other persons who are co?heirs. x*cap v! #ourt of *ppeals, $&! SCR "% #!..&'. mortgagor is not prevented from selling the property, since it is merely encumbrance and effect a loss of his principal attribute as owner to dispose of the property. <aw even considers void a stipulation forbidding the owner from alienating mortgaged immovable. x$ineda v! #*, 4%. SCR 4"- #$%%"'. %. ;(!t Be Determ* $te "r At Le$!t +Determ* $)le. # rt. !4,%' 8hen the deed of sale describes a lot ad+acent to the land seen, agreed upon and delivered to the buyer, such land is the one upon which the minds have met, and not that erroneously described in the deed. &tilano v. &tilano: 28 SCRA 2%1 (1676).! $. ,e er*' t/* &! m$? )e ")Ee't "# !$le # rts. !$4, and !4%.H,I' Sub+ect matter is determinable when by a formula or description agreed upon at perfection there is a way by which the courts can delineate independent of the will of the parties. 6elli7a v. City of )loilo: 2% SCRA 499 (1678). 8here the lot sold is said to ad+oin the 9previously paid lot: on three sides thereof, the sub+ect lot is capable of being determined without the need of any new contract, even when the exact area of the ad+oining residential lot is sub+ect to the result of a survey. xSan *ndres v! 1odrigue , ""$ SCR 7,. #$%%%'. Ceterminable sub+ect matter of sale are not sub+ect to ris0 of loss until they are physically segregated or particularly designated. 8u #e3 ( Co. v. Gon7ales: 26 P/*l. %84 (1615). ). U 1*-*1e1 I tere!t # rt. !4,"' "r U 1*-*1e1 S/$re * $ ;$!! "# F( &*)le ,""1! # rt. !4,4' 6 Bay result it co?ownership. 4. F($ t*t? "# S()Ee't ;$tter N"t E!!e t*$l #"r Per#e't*" @ # rt. !"4.' Sale of grains is perfected even when the exact quantity or quality is not 0nown, so long as the source of the sub+ect is certain. NG& v. )&C: 191 SCRA 1%1 (1686). 8here seller quoted to buyer the items offered for sale, by item number, part number, description and unit price, and the buyer had sent in reply a purchase order without indicating the quantity being order, there was already a perfected contract of sale, even when required letter of credit had not been opened by the buyer. 0ohannes Schubac3 ( Sons Phil. #rading Cor,. v. C&: 229 SCRA 916 (166%). 5. SellerG! O)l*&$t*" t" Tr$ !#er T*tle t" B(?er # rt. !4&., !4,$, and !&%&' $. SellerH! OA er!/*2 Nee1 N"t ED*!t $t Per#e't*" 0 Sale of copra for future delivery does not ma0e seller liable for estafa for failing to deliver because the contract is still valid and the obligation was civil and not criminal. x/sguerra v! $eople, !%- =hil. !%7- #!.,%'. perfected contract of sale cannot be challenged on the ground of the seller/s non?ownership of the thing sold at the time of the perfection of the contract* it is at delivery that the law requires the seller to have the right to transfer ownership of the thing sold. x*lcantara8(aus v! de Leon, 4%4 SCR 74 #$%%"'.

Londres v! #*, ".4 SCR !"" #$%%$'.

9
5t is essential that seller is owner of the property he is selling. 3he principal obligation of a seller is 9to transfer the ownership of: the property sold # rt. !4&-'. 3his law stems from the principle that nobody can dispose of that which does not belong to him. '/+7 (*T 3"7( '7' .*)/T. x'oel v! #*, $4% SCR 7- #!..&'. 3hat the sellers are no longer owners of the goods at perfection does not appear to be one of the void contracts enumerated in rt. !4%. of Civil Code, and under rt. !4%$ the Civil Code itself recogni2es a sale where the goods are to be 9acquired x x x by the seller after the perfection of the contract of sale: clearly implying that a sale is possible even if the seller was not the owner at the time of sale, provided he acquires title to the property later on* nevertheless such contract may be deemed to be inoperative and may thus fall, by analogy, under rt. !4%.#&') 93hose which contemplate an impossible service.: Nool v. C& 297 SCRA 146 (1669). ). S()!eB(e t A'B(*!*t*" "# T*tle )? N" <OA er Seller # rt. !4"4' 6 validates the sale and title passes to the seller by operation of law. '. A'B(*!*t*" )? t/e B(?er ;$? E-e De2e 1 " C" t* &e '? # rt. !4,$'.
97.

Ille&$l*t? "# S()Ee't ;$tter # rts. !4%., !4&-, !4,!, !4,$, and !&7&' $. S2e'*$l L$A!) narcotics #R. . ,4$&'* wild bird or mammal # ct $&.%, Sec. 7'* rare wild plants # ct ".-"'* poisonous plants or fruits #R. . !$--'* dynamited fish #R. 4$-'* gunpowder and explosives # ct $$&&'* firearms and ammunitions #=.C. .'* sale of realty by non?Christians #Sec. !4&, Revised dm. Code, R. 4$&$' ). F"ll"A* & S$le! "# L$ 1 I"*10
Jy 7on?Christian if not approved by =rovincial Governor per Sec. !4& of Revised dministrative Code. xTac8an v! #*, !$. SCR "!. #!.-4'. Ariar land without consent of Secretary of griculture required under ct 7o. !!$%. x*lonso v! #ebu #ountry #lub, Inc!, "7& SCR ".% #$%%$'* Liao v! #*, "$" SCR 4"% #$%%%'. Bade in violation of land reform laws declaring tenant?tillers as the full owners of the lands they tilled. xSiacor v! 6igantana, "-% SCR "%, #$%%$'. Reclaimed lands are of the public domain and cannot, without congressional fiat, be sold, public or private. &isheries (ev! *uthority v! #ourt of *ppeals, &"4 SCR 4.% #$%%7'.

II. PRICE AND OTHER CONSIDERATION (Art!. 1476<1494)

9=rice: signifies the sum stipulated as the equivalent of the thing sold and also every incident ta0en into consideration for the fixing of the price put to the debit of the buyer and agreed to by him. xInchausti : #o! v! #romwell, $% =hil. "4& #!.!!'. Seller cannot unilaterally increase the price previously agreed upon with the buyer, even when due to increased construction costs. x6SIS v! #ourt of *ppeals, $$- SCR !-" #!.."'. Juyer who opted to purchase the land on installment basis with imposed interest, cannot later unilaterally disavow the obligation created by the stipulation in the contract which sets the interest at $4K per annum) 93he rationale behind having to pay a higher sum on the installment is to compensate the vendor for waiting a number of years before receiving the total amount due. 3he amount of the stated contract price paid in full today is worth much more that a series of small payments totaling the same amount. x x x 3o assert that mere prompt payment of the monthly installments should obviate imposition of the stipulated interest is to ignore an economic fact and negate one of the most important principles on which commerce operates.: x)ortikey v! *&$ 1S)S, 477 SCR &!! #$%%&'. 1. Pr*'e ;(!t Be Re$l # rt. !47!' $. =/e Pr*'e +S*m(l$te1.

10
(1) 6a,alo v. 6a,alo: 19 SCRA 114 (1677): versus% 8hen two aged ladies, not versed in (nglish, sign a Ceed of Sale on representation by buyer that it was merely to evidence their lending of money, the situation constitutes more than +ust fraud and vitiation of consent to give rise to a voidable contract, since there was in fact no intention to enter into a sale, there was no consent at all, and more importantly, there was no consideration or price agreed upon, which ma0es the contract void ab initio. *ongavilla v. Court of &,,eals 264 SCRA 286 (1668). (2) 6ate v. C& 264 SCRA 47% (1668): versus% 8hen Ceed of Sale was executed to facilitate transfer of property to buyer to enable him to construct a commercial building and to sell the property to the children, such arrangement being merely a subterfuge on the part of buyer, the agreement cannot also be ta0en as a consideration and sale is void. 8u !un Guan v. 4ng: %79 SCRA 556 (2441). (%) $ffects :hen Price Simulated 6 3he principle of in pari delicto nonoritur action, which denies all recovery to the guilty parties inter se, where the price is simulated* the doctrine applies only where the nullity arises from the illegality of the consideration or the purpose of the contract. x +odina v! #ourt of *ppeals, "!7 SCR ,., #!...'.2 ). =/e Pr*'e *! +F$l!e. # rts. !"&" and !"&4' 8hen the parties intended to be bound but the deed did not reflect the actual price agreed upon, there is only a relative simulation of the contract which remains valid and enforceable, but sub+ect to reformation. x+acapgal v! 1emorin, 4&- SCR ,&$ #$%%&'. 8hen price indicated in deed of absolute sale is undervalued consideration pursuant to intention to avoid payment of higher capital gains taxes, the price stated is false, but the sale is still valid and binding on the real terms. x .eirs of Spouses )alite v! Lim, 44, SCR &4 #$%%4'. '. N" <P$?me t "# Pr*'e Sale being consensual, failure of buyer to pay the price does not ma0e the contract void for lac0 of consideration or simulation, but results in buyer/s default, for which the seller may exercise his legal remedies. x)alatbat v! #*, $,! SCR !$- #!..,'." 95n a contract of sale, the non?payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder. 5@8 3he remedy of an unpaid seller in a contract of sale is to see0 either specific performance or rescission.: x .eirs of $edro /scanlar v! #ourt of *ppeals, $-! SCR !7, #!..7'.4 !adge #hat Price )s Simulated Not 0ust "n,aid% 5t is a badge of simulated price, which render the sale void, when the price, which appears thereon as paid, has in fact never been paid by the purchaser to the seller. x,da! de #atindig! v! .eirs of #atalina 1o9ue, 74 SCR -" #!.7,'.& 2. ;(!t Be * ;" e? "r It! EB(*-$le t # rts. !4&- and !4,-' =rice must be 9valuable consideration: as mandated by Civil <aw, instead of 9any price: mandated in common law. 4ng v. 4ng: 1%6 SCRA 1%% (1685)J !agnas v. C&: 197 SCRA 156 (1686)* *e,ublic v. Phil. *esources Dev.: 142 P/*l. 674 (1658).
5u )un 6uan v! 7ng, , ",7 SCR &&. #$%%!'* 6on ales v! Trinidad, ,7 =hil. ,-$ #!.".' $e-alosa v! Santos, "," SCR &4& #$%%!'* Soliva v! The Intestate /state of +arcelo +! ,illalba , 4!7 SCR $77 #$%%"'* $rovince of #ebu v! .eirs of 1ufina +orales, &4, SCR "!& #$%%-'. 4 ,illaflor v! #ourt of *ppeals, $-% SCR $.7 #!..7'. & 7ce0o v! &lorex, 4% =hil. .$! #!.$%'* Ladanga v! #*, !"! SCR ",! #!.-4'* 1ongavilla v! #ourt of *ppeals, $.4 SCR $-. #!..-'* Labagala v! Santiago, "7! SCR ",% #$%%!'* #ru v! )ancom &inance #orp!, "7. SCR 4.% #$%%$'* +ontecillo v! 1eynes, "-& SCR $44 #$%%$'* 1epublic v! Southside .omeowners *sso!, &%$ SCR &-7 #$%%,'* 3uimpo, Sr! v *bad ,da de )eltran, &4& SCR !74 #$%%-'.
" $

11
Consideration for sale can ta0e different forms, such as the prestation or promise of a thing or service by another, thus)
8hen deed provides that the consideration was the expected profits from the subdivision pro+ect. xTorres v! #ourt of *ppeals, "$% SCR 4$- #!...'. Cancellation of liabilities on the property in favor of the seller. x$olytechnic "niversity v! #ourt of *ppeals, ",- SCR ,.! #$%%!'. ssumption of mortgage constituted on the property sold. x (oles v! *ngeles, 4.$ SCR ,%7 #$%%,%.,

%. ;(!t Be Cert$* "r A!'ert$* $)le $t Per#e't*" $. H"A Pr*'e Determ* e1 t" )e A!'ert$* $)le

# rt. !4,.'

(*) Set )? t/*r1 2er!" $22"* te1 $t 2er#e't*" (**) Set )? t/e '"(rt! # rt. !4,.'

# rt. !4,.'

(***) B? re#ere 'e t" $ 1e#* *te 1$?: 2$rt*'(l$r eD'/$ &e "r m$r>et # rt. !47$' (*-) B? re#ere 'e t" $ "t/er t/* & 'ert$* : such as to invoices then in existence and clearly identified by the agreement x+c#ullough v! *enlle, " =hil. $-& #!.%4'* or 0nown factors or stipulated formula #x+itsui v! +anila, ". =hil. ,$4 #!.!.'. =rice is ascertainable if the terms of the contract furnishes the courts a basis or measure for determining the amount agreed upon, without having to refer bac0 to either or both parties. x,illanueva v! #ourt of *ppeals, $,7 SCR -. #!..7'.7 8here the sale involves an asset under a privati2ation scheme which attaches a peculiar meaning or signification to the term 9indicative price: as merely constituting a ball?par0 figure, then the price is not certain. x+oreno, 2r! v! $rivate +anagement 7ffice, &%7 SCR ," #$%%,'. Consideration is generally agreed upon as whole even if it consists of several parts, and even if it is contained in one or more instruments* otherwise there would be no price certain, and the contract of sale not perfected. x*rimas v! *rimas, && 1.G. -,-$. ). Pr*'e Ne-er Set B? O e "r B"t/ P$rt*e! # rts. !47", !!-$', unless the ,rice is se,arately acce,ted by the other ,arty. '. E##e't! "# U $!'ert$* $)*l*t?0 Sale is inefficacious.. BUT0 I# B(?er A22r"2r*$te! t/e O)Ee't: He ;(!t P$? Re$!" $)le Pr*'e . # rt. !474' #here can be no conce,t of a,,ro,riation 2hen it comes to land; 6 8here a church organi2ation has been allowed possession and introduce improvements on the land as part of its application to purchase with the 7> , and thereafter it refused the formal resolution of the 7> Joard setting the price and insisted on paying the lower price allegedly given by the 7> Aield 1ffice, there can be no binding contract of sale upon which an action for specific performance can prosper, not even on fixing the price equal to the fair mar0et value of the property. x'.* v! 6race )aptist #hurch, 4$4 SCR !47 #$%%4'. 4. ;$ er "# P$?me t "# Pr*'e ESSENTIAL

definite agreement on the manner of payment of price is an essential element in the formation of a binding and enforceable contract sale* without it the sale is void and an action for specific performance must fail. Navarra v. Planters Dev. !an3: 529 SCRA 572 (2449).3he deed of sale with assumption of mortgage is a registrable instrument Ceeds in order to bind third parties. 1odrigue v! #ourt of *ppeals, 4.& SCR 7 )oston )ank of the $hilippines v! +analo, 4-$ SCR !%- #$%%,'. ,elasco v! #*, &! SCR 4". #!.7"'* #o v! #ourt of *ppeals, $-, $hilippines v! .uang, "", SCR 7"7 #$%%%'* +ontecillo v! 1eynes, "-& SCR
,

and must be registered with the Register of 4.% #$%%,'. SCR 7, #!..-'* San +iguel $roperties $44 #$%%$'* /drada v! 1amos, 4,- SCR

12
8hen the manner of payment of the price is discussed after 9acceptance,: then such 9acceptance: did not produce a binding and enforceable contract of sale. x'avarro v! Sugar $roducer<s #orp., ! SCR !!-% #!.,!'. 8here there is no other basis for the payment of the subsequent amorti2ations in a Ceed of Conditional Sale, the reasonable conclusion one can reach is that the subsequent payments shall be made in the same amount as the first payment. 5@8 x()$ v! #ourt of *ppeals, "44 SCR 4.$ #$%%%'. 5. I $1eB($'? "# Pr*'e D"e! N"t A##e't Or1* $r? S$le # rts. !"&& and !47%' Bere inadequacy of the price does not affect the validity of the sale when both parties are in a position to form an independent +udgment concerning the transaction, unless fraud, mista0e, or undue influence indicative of a defect in consent is present. 3he contract may be annulled for vitiated consent and not due to the inadequacy of price. x )autista v! #ourt of *ppeals, 4", SCR !4! #$%%4'.. bsent any evidence of the fair mar0et value of a land as of the time of its sale, it cannot be concluded that the price at which it was sold was inadequate. x *cabal v! *cabal, 4&4 SCR -.7 #$%%&'.!% $. ,r"!! I $1eB($'? "# Pr*'e ;$? A-"*1 0udicial Sale% (*) 1nly when it is shoc0ing to the conscience of man. x$ascua v! Simeon, !,! SCR ! #!.--'* and (**) 3here is showing that, in the event of a resale, a better price can be obtained. x #u )ie v! #ourt of *ppeals, !& SCR "%7 #!.,&'.!!

UNLESS% 3here is right of redemption, in which case the proper remedy is to redeem .
x(e Leon v! Salvador, ", SCR &,7 #!.7%'.!$ B(t0 Jy way of extraordinary circumstances perceived, when in a +udicial sale the right of redemption has been lost, where the inadequacy of the price is purely shocking to the conscience, such that the mind revolts at it and such that a reasonable man would neither directly or indirectly be li0ely to consent to it, the same will be se aside. x#ometa v! #ourt of *ppeals, "&! SCR $.4 #$%%!'. 3here is 9gross inadequacy in price: if a reasonable man will not agree to dispose of his property. (orado ,da! (e (elfin v! (ellota, &4$ SCR ".7 #$%%-'. 8hen +udicial sale is voided without fault of purchaser, the latter is entitled return of price with simple interest, together with all sums paid out by him in improvements introduced on the property, taxes, and other expenses. x Seven )rothers Shipping #orp! v! #ourt of *ppeals, $4, SCR "" #!..&'. ). Le!*" "# m"re t/$ 1K4 "# -$l(e "# t/* & m$>e! !$le re!'*!!*)le ( le!! $22r"-e1 )? '"(rt . # rt. !"-,'. '. ,r"!! * $1eB($'? "# 2r*'e m$? r$*!e t/e 2re!(m2t*" !,%$'. "# eB(*t$)le m"rt&$&e. # rt.

I. FOR;ATION OF CONTRACT OF SALE (Art!. 1495<1488)

A. P4.)C)#&C)4N STA,E # rt. !47.'
&.7 #$%%&'* #ru v! &ernando, 477 SCR !7" #$%%&'* +arnelego v! )anco &ilipino Savings and +ortgage )ank , 4-% SCR ".. #$%%,'* )oston )ank of the $hil! v! +analo , 4-$ SCR !%- #$%%,'* $latinum $lans $hil!, Inc! v! #ucueco , 4-SCR !&, #$%%,'* +anila +etal #ontainer #orp! v! $'), &!! SCR 444 #$%%,'. . /re-eta v! )e ore, &4 SCR !" #!.7"'. !% *vila v! )arabat, 4-& SCR - #$%%,'. !! Tayengco v! #ourt of *ppeals, !& SCR "%, #!.,&'* 1epublic v! 'L1#, $44 SCR &,4 #!..&'. !$ ,da! de 6ordon v! #ourt of *ppeals, !%. SCR "-- #!.-!'.

13
$olicitation stage covers the doctrine of 9freedom of contract: which signifies or implies the right to choose with whom to contract. property owner is free to offer his property for sale to any interested person, and is not duty bound to sell the same to the occupant thereof, absent any prior agreement vesting the occupants the right of first priority to buy. x6abelo v! #ourt of *ppeals, "!, SCR "-, #!...'. negotiation is formally initiated by an offer, which, however, must be certain. t any time prior to the perfection of the contract, either negotiating party may stop the negotiation. t this stage, the offer may be withdrawn* the withdrawal is effective immediately after its manifestation. 3o convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer* it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. 36anila 6etal Container Cor,. v. PN!: 511 SCRA 444 (2447).!" n unaccepted unilateral promise #offer to buy or to sell' prior to acceptance, does not give rise to any obligation or right. x1aro9ue v! +ar9ue , "7 1.G. !.!!. 8here the offer is given with a stated time for its acceptance, the offer is terminated at the expiration of that time. x,illegas v! #ourt of *ppeals, 4.. SCR $7, #$%%,'. 1. O2t*" C" tr$'t n option is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. 5t binds the party who has given the option, not to enter into the principal contract with any other person during the period designated, and, within that period, to enter into such contract with the one to whom the option was granted, if the latter should decide to use the option. 5t is a separate agreement distinct from the contract of sale which the parties may enter into upon the consummation of the option. Carceller v. Court of &,,eals %42 SCRA 918 (1666).!4 n option imposes no binding obligation on the person holding the option aside from the consideration for the offer. 4ntil accepted, it is not treated as a sale. #ayag v. .acson: 427 SCRA 282 (2444).!& 3enants, not being the registered owners, cannot grant an option on the land, much less any 9exclusive right: to buy the property under the <atin saying 9 nem dat 9uod non habet.: xTayag v! Lacson, 4$, SCR $-$ #$%%4'. $. ;e$ * & "# +Se2$r$te C" !*1er$t*" . # rts. !47. and !"$4' unilateral promise to sell, in order to be binding upon the promissor, must be for a price certain and supported by a consideration separate from such price. xSalame v! #ourt of *ppeals, $". SCR "&, #!..&'.!, 3he 9separate consideration: in an option may be anything of value, unli0e in sale where it must be the price certain in money or its equivalent. 3Villamor v. Court of &,,eals 242 SCRA 749 (1661),!7 such when the option is attached to a real estate mortgage xSoriano v! )autista, , SCR .4, #!.,$'. lthough no consideration is expressly mentioned in an option contract, it is presumed that it exists and may be proved, and once proven, the option is binding. x+ontinola v! #o0uangco, 7- =hil. 4-! #!.47'.

'avarra v! $lanters (ev! )ank, &$7 SCR &,$ #$%%7'. Laforte a v! +achuca, """ SCR ,4" #$%%%'* )uot v! #*, "&7 SCR -4, #$%%!'* Tayag v! Lacson, 4$, SCR $-$ #$%%4'* *balos v! +acatangay, 2r!, 4". SCR ,4. #$%%4'* ,as9ue v! *yala #orp!, 44" SCR $"! #$%%4'. !& *delfa $roperties, Inc! v! #*, $4% SCR &,& #!..&'* 4ilosbayan, Inc! v! +orato, $4, SCR &4% #!..&'* San +iguel $roperties $hilippines, Inc! v! .uang, "", SCR 7"7 #$%%%'* Limson v! #*, "&7 SCR $%. #$%%!'. !, 2+* .ouse, Inc! v! Sta! +onica Industrial and (ev! #orp!, &%% SCR &$, #$%%,'. !7 (e la #avada v! (ia , "7 =hil. .-$ #!.!-'* xSan +iguel $roperties $hilippines, Inc! v! .uang, "", SCR 7"7 #$%%%'
!4

!"

14
). N" Se2$r$te C" !*1er$t*" 0 I"*1 $! O2t*" : I$l*1 $! $ Cert$* O##er Sanche7 v. *igos: 45 SCRA %78 (1692).!!"# .&#$.8% x5ao 4a Sin Trading v! #* , $%. SCR 7," #!..!'* x+ontilla v! #*, !,! SCR -&& #!.--'* x'atino v! I*#, !.7 SCR "$" #!..!'* and x(iamante v! #*, $%, SCR &$ #!..$'. '. T/ere ;(!t Be A''e2t$ 'e "# O2t*" O##er. Va7+ue7 v. C&: 166 SCRA 142 (1661). 1. Pr"2er EDer'*!e "# O2t*" C" tr$'t. Nietes v. C&: 47 SCRA 754 (1692). n option attached to a lease when not exercised within the option period is extinguished and cannot be deemed to have been included in the implied renewal #tacita reconduccion' of the lease. x(i on v! #*, "%$ SCR $-- #!...'. =roper exercise of an option gives rise to the reciprocal obligations of sale x .eirs of Luis )acus v! #ourt of *ppeals, "7! SCR $.& #$%%!',!. which must be enforced with ten #!%' years as provided under rt. !!44. x(i on v! #ourt of *ppeals, "%$ SCR $-#!...'. 3here must be 9virtual: exercise of option with the option period. 3Carceller v. Court of &,,eals: %42 SCRA 918 (1666). 2. R*&/t "# F*r!t Re#(!$l right of first refusal cannot be the sub+ect of specific performance, but breach would allow a recovery of damages. x6uerrero v! 5-igo, ., =hil. "7 #!.&4'. Rights of first refusal only constitute 9innovative +uridical relations:, but do not rise to the level of contractual commitment since with the absence of agreement on price certain, they are not sub+ect to contractual enforcement. &ng 8u &suncion v. Court of &,,eals : 2%8 SCRA 742 (1664). Right of first refusal contained in a lease, when breached by promissor allows enforcement by the promisee by way of rescission of the sale entered into with the third party, pursuant to rts. !"-!#"' and !"-& of Civil Code. x 6u man, )ocaling : #o! v! )onnevie, $%, SCR ,,- #!..$'* $+uatorial *ealty Dev. )nc. v. 6ayfair #heater )nc. : 274 SCRA 48% (1667)*$% Parana+ue /ings $nter,rises )nc. v. C& 278 SCRA 929: 941 (1669). 5n a right of first refusal, while the ob+ect might be made determinate, the exercise of the right would be dependent not only on the grantor/s eventual intention to enter into a binding +uridical relation with another but also on terms, including the price, that are yet to be firmed up. . . . the 9offer: may be withdrawn anytime by communicating the withdrawal to the other party. Vas+ue7 v. &yala Cor,.: 44% SCRA 2%1 (2444). right of first refusal clause simply means that should the lessor decide to sell the leased property during the term of the lease, such sale should first be offered to the lessee* and the series of negotiations that transpire between the lessor and the lessee on the basis of such preference is deemed a compliance of such clause even when no final purchase agreement is perfected between the parties . 3he lessor was then at liberty to offer the sale to a third party who paid a higher price, and there is no violation of the right of the lessee. *iviera Fili,ina )nv. v. Court of &,,eals: %84 SCRA 245 (2442).$!

!-

&ffirming *tkins, 4roll : #o!, Inc! v! #ua, !%$ =hil. .4- #!.&-'* overturning Southwestern Sugar +olasses #o! v! *tlantic 6ulf : $acific #o!, .7 =hil. $4. #!.&&'. !. Limson v! #ourt of *ppeals, "&7 SCR $%. #$%%!'. $% 1osencor (ev! #orp! v! In9uing , "&4 SCR !!. #$%%!'* #onculada v! #*, ",7 SCR !,4 #$%%!'* $olytechnic "niversity v! #*, ",- SCR ,.! #$%%!'* 1iviera &ilipina, Inv! v! #ourt of *ppeals , "-% SCR $4& #$%%$'* Lucrative 1ealty and (ev! #orp! v! )ernabe, 2r!, ".$ SCR ,7. #$%%$'* ,illegas v! #ourt of *ppeals, 4.. SCR $7, #$%%,'. $! $olytechnic "niversity v! #*, ",- SCR ,.! #$%%!'* ,illegas v! #*, 4.. SCR $7, #$%%,'.

15
right of first refusal in a lease in favor of the lessee cannot be availed of by the sublessee. xSadhwani v! #ourt of *ppeals, $-! SCR 7& #!..7'. 4. ;(t($l Pr"m*!e! t" B(? $ 1 Sell # rt. !47.') 9#rue Contract to Sell: Butual promises to buy and sell a certain thing for a certain price gives each of the contracting parties a right to demand from the other the fulfillment of the obligation. x)orromeo v! &ranco, & =hil. 4. #!.%&'. (ven in this case the certainty of the price must also exist, otherwise, there is no valid and enforceable contract to sell. xTan Tiah v! 5u 2ose, ,7 =hil. 7". #!.".'. n accepted bilateral promise to buy and sell is in a sense similar to, but not exactly the same, as a perfected contract of sale because there is already a meeting of minds upon the thing which is the ob+ect of the contract and upon the price. $$ Jut a contract of sale is consummated only upon delivery and payment, whereas in a bilateral promise to buy and sell gives the contracting parties rights in personam, such that each has the right to demand from the other the fulfillment of their respective underta0ings. 36acion v. Guiani 225 SCRA 142 (166%).$" 3he cause of action under a mutual promise to buy and sell is !% years. x,illamor v! #ourt of *ppeals, $%$ SCR ,%7 #!..!'.

B. PERFECTION STA,E # rts. !47&, !"!., !"$& and !"$,'

Sale is perfected at the moment there is a meeting of minds upon the thing which is the ob+ect of the contract and upon the price. Arom that moment, the parties may reciprocally demand performance sub+ect to the law governing the form of contracts. x +arnelego v! )anco &ilipino Savings and +ortgage )ank, 4-% SCR ".. #$%%,'.$4 Butual consent being a state of mind, its existence may only be inferred from the confluence of two acts of the parties) an offer certain as to the ob+ect of the contract and its consideration, and an acceptance of the offer which is absolute in that it refers to the exact ob+ect and consideration embodied in said offer. x,illanueva v! $'), &!% SCR $7& #$%%,'.$& 5f a material element of a contemplated contract is left for future negotiations, the same is too indefinite to be enforceable. Aor a contract to be enforceable, its terms must be certain and explicit, not vague or indefinite. x)oston )ank of the $hil! v! +analo , 4-$ SCR !%- #$%%,'. So long as there is any uncertainty or indefiniteness, or future negotiations or consideration yet to be had between the parties, there is no contract at all. x+oreno, 2r! v! $rivate +anagement 7ffice, &%7 SCR ," #$%%,'. 1. A)!"l(te A''e2t$ 'e "# $ Cert$* O##er # rt. !47&' qualified acceptance or one that involves a new proposal constitutes a counter?offer and a re+ection of the original offer. 3he acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of minds. 6anila 6etal Container Cor,. v. PN!: 511 SCRA 444 (2447).$, =lacing the word 97oted: and signing such note at the bottom of the written offer cannot be considered an acceptance that would give rise to a valid contract of sale. x()$ v! 7ng, 4,% SCR !7% #$%%&'.

/l )anco 'acional &ilipino v! *h Sing, ,. =hil. ,!! #!.4%'* +anuel v! 1odrigue , !%. =hil. ! #!.,%'. )orromeo v! &ranco, & =hil. 4. #!.%&'* ,illamor v! #*, $%$ SCR ,%7 #!..!'* #oronel v! #*, $," SCR !& #!..,'. $4 ,alde v! #ourt of *ppeals, 4". SCR && #$%%4'* )las v! *ngeles8.utalla, 4". SCR $7" #$%%4'* *in a v! $adua, 4,$ SCR ,!4 #$%%&'* #ru v! &ernando, 477 SCR !7" #$%%&'. $& +oreno, 2r! v! $rivate +anagement 7ffice, &%7 SCR ," #$%%,'. $, )eaumont v! $rieto, 4! =hil. ,7% #!.!,'* =ayco v. Serra, 44 =hil. "$, #!.$"'.
$"

$$

16
)f sale sub<ect to sus,ensive condition% 7o perfected sale of a lot where the award thereof was expressly made sub+ect to approval by the higher authorities and there eventually was no acceptance manifested by the supposed awardee. x$eople<s .omesite : .ousing #orp! v! #*, !"" SCR 777 #!.-4'. 2. =/e +De-*$t*" . All"Ae10 Villonco v. !ormaheco: 75 SCRA %52 (1695). %. S$le )? A('t*" # rts. !47,, !4%"#$'#d', !"$,'

3he terms and conditions provided by the owner of property to be sold at auction are binding upon all bidders, whether they 0new of such conditions or not. xLeo9uinco v! $ostal Savings )ank, 47 =hil. 77$ #!.$&'. auction sale is perfected by the fall of the hammer or in other customary manner and it does not matter that another was allowed to match the bid of the highest bidder. x$rovince of #ebu v! .eirs of 1ufina +orales, &4, SCR "!& #$%%-'. 4. E$r e!t ;" e? # rt. !4-$' (arnest money given by the buyer shall be considered as part of the price and as proof of the perfection of the contract. 5t constitutes an advance payment to be deducted from the total price. x/scueta v! Lim, &!$ SCR 4!! #$%%7'. bsent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale. F6anila 6etal Container Cor,. v. PN!: 511 SCRA 444 (2447). $7 rticle !4-$ does not apply when earnest money given in a contract to sell xSerrano v! #aguiat, &!7 SCR &7 #$%%7', especially where by stipulation the buyer has the right to wal0 away from the transaction, with no obligation to pay the balance, although he will forfeit the earnest money. x#hua v! #ourt of *ppeals, 4%! SCR &4 #$%%"'.$8hen there is no provision for forfeiture of earnest money in the event the sale fails to materiali2e, then with the rescission it becomes incumbent upon seller to return the earnest money as legal consequence of mutual restitution. x6oldenrod, Inc! v! #ourt of *ppeals, $.. SCR !4! #!..-'. 5. D*##ere 'e BetAee E$r e!t ;" e? $ 1 O2t*" ;" e?. 34esmer v. Paraiso Dev. Cor,. 514 SCRA 228 (2449).

7. S$le Deeme1 Per#e'te1 =/ere O##er =$! ;$1e . # rt. !"!.'

C. FOR;AL REFUIRE;ENTS OF SALES # rts. !"&7, !"&-, !4%, and !4-"'

1. F"rm N"t Im2"rt$ t #"r I$l*1*t? "# S$le Sale of land under private instrument is valid. x6allar v! .usain, $% SCR #!.,7'.$. !-,

rticles !"&7 and !"&-, in relation to rt. !4%"#$', require that the sale of real property must be in writing for it to be enforceable, it need not be notari2ed for there is nothing in those provisions which require that it must be executed in a public document to be valid. x+artine v! #*, "&- SCR "- #$%%!'*"% but both its due execution and its authenticity must be proven, pursuant to Sec. $%, Rule !"$ of the Rules of Court. xTigno v! *9uino, 444 SCR ,! #$%%"'.

Lim0oco v! #*, "7 SCR ,," #!.7!'* ;illonco v! )ormaheco, ,& SCR "&$ #!.7&'* Spouses (oromal, Sr! v! #*, ,, SCR &7& #!.7&'* $') v! #*, $,$ SCR 4,4 #!..,'* San +iguel $roperties $hilippines, Inc! v! .uang, "", SCR 7"7 #$%%%'* $latinum $lans $hil! Inc! v! #ucueco, 4-- SCR !&, #$%%,'. $San +iguel $roperties $hilippines, Inc! v! .uang, "", SCR 7"7 #$%%%'. $. &! Irureta 6oyena v! Tambunting, ! =hil. 4.% #!.%$'. "% .eirs of )iona v! #*, ",$ SCR $. #$%%!'.

$7

17
$. Ot/er R(l* &! " Dee1! "# S$le0
Seller may agree to a deed of absolute sale before full payment of the purchase price. x $an $acific Industrial Sales #o!, Inc! v! #*, 4-$ SCR !,4 #$%%,'. ssuming that the buyers failed to pay the full price stated in the Ceed of Sale, such partial failure would not render the sale void. )ravo86uerrero v! )ravo, 4,& SCR $44 #$%%&'.

3hat marital consent was executed prior to the Ceed of bsolute Sale does not indicate that it is a phoney. $an $acific Industrial Sales #o!, Inc! v! #*, 4-$ SCR !,4 #$%%,'. Ceed of Sale when ac0nowledged before a notary public, en+oys the presumption of regularity and due execution. 3o overthrow that presumption, sufficient, clear and convincing evidence is required, otherwise the document should be upheld. x )ravo86uerrero v! )ravo, 4,& SCR $44 #$%%&'."!

7otari2ation of Ceeds of Sale by one who was not a notary public does not affect the validity thereof* said documents were merely converted into private documents. x1!&! 'avarro : #o! Inc! v! ,ailoces, ",! SCR !". #$%%!'. 7otari2ation of a deed of sale does not guarantee its validity nor is it conclusive of the true agreement of the parties thereto, because it is not the function of the notary public to validate an instrument that was never intended by the parties to have any binding legal effect. xSalonga v! #oncepcion, 47% SCR $.! #$%%&'."$ Juyer/s immediate ta0ing of possession of sub+ect property corroborates the truthfulness and authenticity of the deed of sale. x*lcos v! I*#, !,$ SCR -$" #!.--'. Conversely, the seller/s continued possession of the property ma0es dubious the contract of sale between them. xSantos v! Santos, ",, SCR ".& #$%%!'."" ny substantial difference between the terms of the Contract to Sell and the concomitant Ceed of bsolute Sale #such as difference in sub+ect matter, and difference in price andDor the terms thereof', does not ma0e the transaction between the seller and the buyer void, for it is truism that the execution of the Ceed of bsolute Sale effectively rendered the previous Contract to Sell ineffective and cancelled Hthrough the process of novationI. xLumbres v! Talbrad, 2r!, &!, SCR &7& #$%%7'.

). I$l(e "# B(!* e!! F"rm! t" Pr"-e S$le0 Jusiness forms, e!g!, order slip, delivery charge invoice and the li0e, which are issued by the seller in the ordinary course of the business are not always fully accomplished to contain all the necessary information describing in detail the whole business transaction@more often than not they are accomplished perfunctorily without proper regard to any legal repercussion for such neglect such that despite their being often incomplete, said business forms are commonly recogni2ed in ordinary commercial transactions as valid between the parties and at the very least they serve as an ac0nowledgment that a business transaction has in fact transpired. x (onato #! #ru Trading #orp! v! #*, "47 SCR !" #$%%%'. 3hese documents are not mere scraps of paper bereft of probative value but vital pieces of evidence of commercial transactions. 3hey are written memorials of the details of the consummation of contracts. x Lagon v! .ooven #omalco Industries, Inc!, "4. SCR "," #$%%!'. 2. =HEN FOR; I;PORTANT IN SALE $. T" B* 1 T/*r1 P$rt*e! rticle !"&- which requires the embodiment of certain contracts in a public instrument is only for convenience, and registration of the instrument only adversely affects third parties. Aormal requirements are, therefore, for the benefit of third parties* and non?compliance therewith does not adversely affect the validity of the contract nor
5ason v! *rciaga, 44. SCR 4&- #$%%&'* "nion )ank v! 7ng, 4.! SCR &-! #$%%,'* Tapuroc v! Lo9uellano ,da! (e +ende, &!$ SCR .7 #$%%7'* *lfaro v! #ourt of *ppeals , &!. SCR $7% #$%%7'* Santos v! Lumbao, &!. SCR 4%#$%%7'* $edrano v! .eirs of )enedicto $edrano, &". SCR 4%! #$%%7'. "$ 'a areno v! #*, "4" SCR ,"7 #$%%%'* Santos v! .eirs of 2ose $! +ariano, "44 SCR $-4 #$%%%'
"" "!

(omingo v! #*, ",7 SCR ",- #$%%!'.

18
the contractual rights and obligations of the parties thereunder. SCRA 768 (1668)*"4 3Dalion v. C&: 182 SCRA 892 (1664)."& 3Fule v. C&: 287

7on?registration of a contract of sale does not affect its validity and binding effect as between the contracting parties themselves. x"niversal 1obina Sugar +illing #orp! v! .eirs of *ngel Teves, "-. SCR "!, #$%%$'. 8hile sale of land appearing in a private deed is binding between the parties, it cannot be considered binding on third persons, if it is not embodied in a public instrument and recorded in the Registry of Ceeds. Secuya v. Vda. De Selma %27 SCRA 244 (2444).", ). F"r E #"r'e$)*l*t? BetAee t/e P$rt*e!0 STATUTE OF FRAUDS # rts. !4%" and !4%&' 3he term 9Statute of Arauds: is descriptive of the statutes which require certain classes of contracts, such as agreements for the sale of real property, to be in writing, the purpose being to prevent fraud and per+ury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged."7 Presu,,oses Valid Contract of Sale 6 93he application of the Statute of Arauds presupposes the existence of a perfected contract.: 8hen the records show that there was no perfected contract of sale, there is no basis for the application of the Statute of Arauds. x&irme v! )ukal /nterprises and (ev! #orp!, 4!4 SCR !.% #$%%"'.%8 (1) C"-er$&e0 (*) Sale of *eal Pro,erty 6 sale of realty cannot be proven by means of witnesses, but must necessarily be evidenced by a written instrument, duly subscribed by the party charged, or by secondary evidence of the contents of such document. 7o other evidence can be received except the documentary evidence referred to. x6orospe v! Ilayat, $. =hil. $! #!.!4'.". (**) &gency to Sell or to !uy 6 s contrasted from sale, an agency to sell does not belong to any of the three categories of contracts covered by rts. !"&7 and !"&- and not one enumerated under the Statutes of Arauds in rt. !4%". x Lim v! #ourt of *ppeals, $&4 SCR !7% #!..,'.4% (***) *ights of First *efusal 6 9right of first refusal: is not covered by the statute of frauds. Aurthermore, rt. !4%"#$'#e' of Civil Code presupposes the existence of a perfected, albeit unwritten, contract of sale* a right of first refusal, such as the one involved in the instant case, is not by any means a perfected contract of sale of real property. x1osencor (ev! #orp! v! In9uing, "&4 SCR !!. #$%%!'. (*-) $+uitable 6ortgage 6 Statute does not stand in the way of treating an absolute deed as a mortgage, when such was the parties/ intention, although the agreement for redemption or defeasance is proved by parol evidence. x#uyugan v! Santos, "4 =hil. !%% #!.!,'.4! (-) *ight to *e,urchase 6 3he deed of sale and the verbal agreement allowing the right of repurchase should be considered as an integral whole* the deed of sale is itself the note or memorandum evidencing the contract. x +actan #ebu International *irport *uthority v! #ourt of *ppeals, $," SCR 7", #!..,'.
"niversal 1obina Sugar +illing #orp! v! .eirs of *ngel Teves, "-. SCR "!, #$%%$'. Limketkai Sons +illing, Inc! v! #*, $&% SCR &$" #!..&'* *gasen v! #*, "$& SCR &%4 #$%%%'. ", Talusan v! Tayag, "&, SCR $," #$%%!'* Santos v! +analili, 47, SCR ,7. #$%%&'. "7 Shoemaker v! La Tonde-a, ,- =hil. $4 #!.".'. "x1osencor (evelopment #orp! v! In9uing, "&4 SCR !!. #$%%!'. ". *lba ,da! (e 1ax v! #ourt of *ppeals, "!4 SCR ", #!...'. 4% Torcuator v! )ernabe, 4&. SCR 4". #$%%&'. 4! 1osales v! Suba, 4%- SCR ,,4 #$%%"'.
"& "4

19
(2) ;em"r$ 1(m # 8uviengco v. Dacuycuy: 144 SCRA 778 516818J .im3et3ai Sons 6illing )nc. v. C&: 254 SCRA 52% 516658* !"# S$$ 255 SCRA 7'. Aor the memorandum to ta0e the sale out of the coverage of the Statute of Arauds, it must contain 9all the essential terms of the contract: of sale. xTorcuator v! )ernabe, 4&. SCR 4". #$%%&', 4$ even when scattered into various correspondences which can be brought together x#ity of #ebu v! .eirs of #andido 1ubi, "%, SCR 4%- #!...'.4" EXCEPTION0 Ele'tr" *' D"'(me t! ( 1er t/e E<CO;;ERCE ACT (R.A. 8962) (%) P$rt*$l EDe'(t*" # rt. !4%&' 4rtega v. .eonardo: 14% P/*l. 894 (1658)J Claudel v. Court of &,,eals: 166 SCRA 11% (1661).

Celivery of the deed to buyer/s agent, with no intention to part with the title until the purchase price is paid, does not ta0e the case out of the Statute of Arauds. x)aretto v! +anila 1ailroad #o!, 4, =hil. .,4 #!.$4'. 3he Statute of Arauds does not apply to contracts either partially or totally performed. 5n addition, a contract that violates the Statute of Arauds is ratified by the acceptance of benefits under the contract, such as the acceptance of the purchase price and using the proceeds to pay outstanding loans. &lfredo v. !orras 444 SCRA 145 (244%).44 (4) =$*-er 6 # rt. !4%&' Cross?examination on the contract is deemed a waiver of the defense of the Statute. xLimketkai Sons +illing, Inc! v! #*, $&% SCR &$" #!..&'.4& (5) R(l* &! " Re'e*2t! $ 1 Ot/er D"'(me t$r? E-*1e 'e "# S$le Since a contract of sale is perfected by mere consent, then when the dealer of motor vehicles accepts a deposit of =&%,%%%% and pulls out a unit from the assembler for that purpose, it was in breach of contract when it sold the car subsequently to another buyer. x>entrex *utomotive, Inc! v! #ourt of *ppeals , $.! SCR ,, #!..-'. Sales invoices are not evidence of payment of the price, but evidence of the receipt of the goods* since the best evidence to prove payment is the official receipt. /l 7ro /ngravers #orp! v! #ourt of *ppeals, &4, SCR 4$ #$%%-'. receipt which is merely an ac0nowledgment of the sum received, without any indication therein of the total purchase price of the land or of the monthly installments to be paid, cannot be the basis of valid sale. x Leabres v! #*, !4, SCR !&- #!.-,'.4, 5n itself, the absence of receipts, or any proof of consideration, would not be conclusive of the inexistence of a sale since consideration is always presumed. xTigno v! *9uino, 444 SCR ,! #$%%"'. Receipts proves payment which ta0es the sale out of the Statute of Arauds. #oyota Sha2 )nc. v. Court of &,,eals 244 SCRA %24 (1665). '. F"r I$l*1*t?0 S$le "# Re$lt? T/r"(&/ A&e t: A(t/"r*t? ;(!t Be * =r*t* & # rt. !-74'

$aredes v! /spino, $$ SCR !%%% #!.,-'. )erg v! +agdalena /state, Inc!, .$ =hil. !!% #!.&$'* Limketkai Sons +illing, Inc! v! #* , $&% SCR &$" #!..&'* &irst $hilippine Intl )ank v! #*, $&$ SCR $&. #!..,'. 44 ,da! de 2omoc v! #*, $%% SCR 74 #!..!'* Soliva v! The Intestate /state of +arcelo +! ,illalba , 4!7 SCR $77 #$%%"'* *in a v! $adua, 4,$ SCR ,!4 #$%%&'* (e la #ena v! )riones, &%- SCR ,$ #$%%,'. 4& Lacanilao v! #*, $,$ SCR 4-, #!..,'. 4, Limson v! #*, "&7 SCR $%. #$%%!'.
4"

4$

20
8hen sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing* otherwise, the sale shall be void, even when)
gent is the son of the owner. x(elos 1eyes v! #*, "!" SCR ,"$ #!...' SCR !&4 #$%%"'.47 5n the case of a corporate owner of realty. x#ity8Lite 1ealty #orp! v! #*, "$& SCR "-& #$%%%'.4-

3here is partial payment of the price received by the supposed agent. x(i on v! #*, ".,

8hen the Contract to Sell was signed by the co?owners themselves as witnesses, the written authority for their agent mandated under rticle !-74 of the Civil Code is no longer required. x7esmer v! $araiso (ev! #orp!, &!4 SCR $$-, $"7 #$%%7'. '. S$le "# L$r&e C$ttle # rt. !&-&!* Sec. &$., Revised dm. Code'
9D.

SI;ULATED SALES
Characteristic of simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the parties/ +uridical situation, or that the parties have no intention to be bound by the contract. 3he requisites are) #a' an outward declaration of will different from the will of the parties* #b' false appearance must have been intended by mutual agreement* and #c' purpose is to deceive third persons. x +anila )anking #orp! v! Silverio, 4,, SCR 4"- #$%%&'.4. 1. B$1&e! $ 1 N" <)$1&e! "# S*m(l$t*" 0
7on?payment of the stipulated consideration, absence of any attempt by the buyers to assert their alleged rights over the sub+ect property. x,illaflor v! #*, $-% SCR $.7 #!..7'. Aailure of alleged buyers to collect rentals from alleged seller. x Santiago v! #*, $7- SCR .#!..7'* but not when there appears a legitimate lessor?lessee relationship between the vendee and the vendor. x"nion )ank v! 7ng, 4.! SCR &-! #$%%,'. lthough the agreement did not provide for the absolute transfer ownership of the land to buyer, that did not amount to simulation, since delivery of certificate of ownership and execution of deed of absolute sale were expressly stipulated as suspensive conditions, which gave rise to the corresponding obligation on part of buyer to pay the last installments. x,illaflor v! #*, $-% SCR $.7 #!..7'.

Jare assertions that the signature appearing on the Ceeds of Sale is not that of her husband is not enough to allege simulation, since forgery is not presumed* it must be proven by clear, positive and convincing evidence. x1!&! 'avarro : #o! v! ,ailoces, ",! SCR !". #$%%!'. Simulation of contract and gross inadequacy of price are distinct legal concepts, with different effects 6 the concept of a simulated sale is incompatible with inadequacy of price. 8hen the parties to an alleged contract do not really intend to be bound by it, the contract is simulated and void. Gross inadequacy of price by itself will not result in a void contract, and it does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract. x )ravo86uerrero v! )ravo, 4,& SCR $44 #$%%&'.

2. =/e ;"t*-e N(ll*#*e! t/e S$le

5n sale, consideration is, as a rule, different from the motive of parties, and when the primary motive is illegal, such as when the sale was executed over a land to illegally frustrate a personLs right to inheritance and to avoid payment of estate tax, the sale is void because illegal motive predetermined purpose of the contract. x 7legario v! #*, $"SCR ., #!..4'.&%
&irme v! )ukal /nterprises and (ev! #orp!, 4!4 SCR !.% #$%%"'. $ineda v! #*, "7, SCR $$$ #$%%$'. 4. 1osario v! #*, "!% SCR 4,4 #!...'* Loyola v! #*, "$, SCR SCR &&. #$%%!'* $ayongayong v! #*, 4"% SCR $!% #$%%4'.
4&% 47

$-& #$%%%'*

5u )un 6uan v! 7ng, ",7

"y v! #*, "!4 SCR ,., -! #!...'.

21
8here the parties to a contract of sale agreed to a consideration, but the amount reflected in the final Ceed of Sale was lower, their motivation being to pay lower taxes on the transaction, the contract of sale remains valid and enforceable upon the terms of the real consideration. lthough illegal, the motives neither determine nor ta0e the place of the consideration. x.eirs of Spouses )alite v! Lim, 44, SCR &4 #$%%4'. %. Reme1*e! All"Ae1 =/e S$le S*m(l$te1 8hen a contract of sale is void, the right to set up its nullity or non?existence is available to third persons whose interests are directly affected thereby. <i0ewise, the remedy of accion pauliana is available when the sub+ect matter is a conveyance, otherwise valid, underta0en in fraud of creditors. x+anila )anking #orp! v! Silverio, 4,, SCR 4"#$%%&'. 3he rescissory action to set aside contracts in fraud of creditors is accion pauliana, essentially a subsidiary remedy accorded under rticle !"-" which the party suffering damage can avail of only when he has no other legal means to obtain reparation for the same. 5n such action, it must be shown that both contracting parties have acted maliciously so as to pre+udice the creditors who were prevented from collecting their claims. Rescission if generally unavailing should a third person, acting in good faith, is in lawful possession of the property since he is protect by law against a suit for rescission by the registration of the transfer to him in the registry. x"nion )ank v! 7ng, 4.! SCR &-! #$%%,'. 4. E##e't =/e S$le De'l$re1 I"*10
3he action for the declaration of the contract/s nullity is imprescriptible@an action for reconveyance of property on a void contract of sale does not prescribe. &il8/state 6olf and (ev!, Inc! v! 'avarro, &$, SCR &! #$%%7'. =ossessor is entitled to 0eep the fruits during the period for which the buyer held the property in good faith. x()$ v! #*, "!, SCR ,&% #!...'. 3hen restoration of what has been given is in order, since the relationship between parties in any contract even if subsequently voided must always be characteri2ed and punctuated by good faith and fair dealing. x(e los 1eyes v! #*, "!" SCR ,"$ #!...'* x.eirs of Ignacia *guilar8 1eyes v! +i0ares, 4!% SCR .7 #$%%"'.

lien who purchases land in the name of his Ailipina lover, has no standing to see0 legal remedies to either recover the property or the purchase price paid, since the transaction is void ab initio for being in violation of the constitutional prohibition. x&ren el v! #atito, 4%, SCR && #$%%"'.

II. CONSU;;ATION (Art!. 146%<1547) AND PERFOR;ANCE OF CONTRACT (Art!. 15%7<1544: 1582<1564)
A. OBLI,ATIONS OF SELLER
1. Pre!er-e S()Ee't ;$tter # rt. !!,"' 2. Del*-er A*t/ Fr(*t! $ 1 A''e!!"r*e! # rts. !!,4, !!,,, !4.&, !&"7'

%. DELIIER THE SUBCECT ;ATTER # rt. !477'

$. Le&$l Prem*!e! #"r D"'tr* e! " Tr$1*t*" 8hen the sale is void or fictitious, no valid title over the sub+ect matter can be conveyed to the buyer even with delivery. 'emo potest nisi 9uod de 0ure potest 6 'o man can do anything except what he can do lawfully . xTraders 1oyal )ank v! #*, $,. SCR !& #!..7'.

22
8hen seller had no ownership over the sub+ect matter at the time of delivery, no valid title can pass in favor of the buyer. 'emo dat 9uod non habet 6 'o man can give that which he does not have. xTsai v! #*, ",, SCR "$4 #$%%!'.&! lthough tax declaration is not evidence of title, nevertheless when at the time of delivery there is no proof that the seller had ownership and as in fact the tax declaration to the sub+ect property was in the name of another person, then there was no transfer of ownership by delivery. x .eirs of Severina San +iguel v! #ourt of *ppeals, ",4 SCR &$" #$%%!'. ). ,e er$l D"'tr* e! " Tr$1*t*" : =/et/er A't($l "r C" !tr('t*-e0 5t may be stipulated that ownership in the thing shall not pass to buyer until he has fully paid price # rt. !47-'. 5n the absence of such stipulation to the contrary, tradition produces its natural effects in law, most important of which being conveyance of ownership, without pre+udice to right of the seller to claim payment of the price. x &roilan v! $an 7riental Shipping #o!, !$ SCR $7, #!.,4'.&$ Celivery contemplates 9the absolute giving up of the control and custody of the property on the part of the vendor, and the assumption of the same by the vendee. 'on nudis pactis sed traditione dominia rerum transferantur . nd there is said to be delivery if and when the thing sold 9is placed in the control and possession of the vendee.: x/9uatorial 1ealty (ev! Inc! v! +ayfair Theater, Inc! , "7% SCR &, #$%%!'. Since delivery of sub+ect matter of sale is an obligation on the part of the seller, the acceptance thereof by the buyer is not a condition for the completeness of delivery. xLa &uer a v! #*, $" SCR !$!7 #!.,-'. 5n the absence of an express stipulation to the contrary, payment of purchase price of the goods is not a condition precedent to the transfer of title to the buyer, but title passes by the delivery of the goods. x $hil! Suburban (ev! #orp! v! *uditor 6eneral, ," SCR ".7 #!.7&'.&" Aailure of the buyer to ma0e good the price does not, in law, cause the ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to rt. !!.!. x)alatbat v! #*, $,! SCR !$- #!..,'. '. P/?!*'$l Del*-er? # rt. !4.7' 5t is not necessary that seller himself delivers title to the buyer because the thing sold is understood as delivered when it is placed in control and possession of buyer. 3hus, when sellers themselves introduced the tenant to the buyer as the new owners of the land, and from that time on the buyer acted as landlord thereof, there was delivery that transferred title to the buyer. x*lfredo v! )orras, 4%4 SCR !4& #$%%"'. 1. C" !tr('t*-e Del*-er?0 EXECUTION OF A PUBLIC INSTRU;ENT # rt. !4.-' 8here deed of sale or any agreement analogous to a deed of sale, is made through a public instrument, its execution is equivalent to the delivery of the property. #aoibes, 2r! v! #aoibes8$anto0a, 4., SCR $7" #$%%,'.&4 4nder rt. !4.-, the mere execution of the deed of conveyance in a public instrument is equivalent to the delivery of the property, and that prior physical delivery or possession is not legally required, since ownership and possession are two entirely different legal concepts. 7otwithstanding the presence of illegal occupants on the sub+ect property, transfer of ownership by symbolic delivery under rt. !4.- can still be
&! &$

Tangalin v! #ourt of *ppeals, "7! SCR 4. #$%%!' 4uen le : Streiff v! ;atson : #o!, !" =hil. $, #!.%.'* 7ce0o, $ere : #o! v! Int<l )anking #orp!, "7 =hil. ,"! #!.!-'. &" 7campo v! #ourt of *ppeals, $"" SCR &&! #!..4'. &4 Tating v! +arcella, &!. SCR 7. #$%%7'

23
effected through the execution of the deed of conveyance. x Sabio v! International #orporate )ank, ",4 SCR "-& #$%%!'. 3here is nothing in rticle !4.- that provides that execution of a deed of sale is a conclusive presumption of delivery of possession* presumptive delivery can be negated by the failure of the vendee to ta0e actual possession of the land or the continued en+oyment of possession by the vendor. Santos v. Santos %77 SCRA %65 (2441).&& (*) A! t" ;"-$)le! # rts. !4.-?!4.., !&!"?!&!4* Dy 0r. v. C&: 168 SCRA 827'. 8here it is stipulated that deliveries must be made to the buyer or his duly authori2ed representative named in the contracts, the seller is under obligation to deliver in accordance with such instructions.. x Lagon v! .ooven #omalco Industries, Inc!, "4. SCR "," #$%%!'. (xecution by supposed buyers of a chattel mortgage over sub+ect vehicle in favor of the financing company does not mean that ownership had been transferred to them, for delivery must be on the part of the seller. x "nion +otor #orp! v! #*, ",! SCR &%, #$%%!'. 7either issuance of an invoice, which is not a document of title x$!T! #erna #orp! v! #*, $$! SCR !. #!.."',&, nor of the registration certificate of vehicle x"nion +otor #orp! v! #*, ",! SCR &%, #$%%!',&7 would constitute constructive delivery. (**) A! t" Imm"-$)le! # rt. !4.-' 5ssuance of an ac0nowledgment receipt of partial payment, when it is not a public instrument does not convey title. xSan Loren o (ev! #orp! v! #ourt of *ppeals, 44. SCR .. #$%%&'. 5n case of immovables, when sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the ob+ect of the contract, if from the deed the contrary does not appear or cannot clearly be inferred x+unicipality of ,ictorias v! #*, !4. SCR "! #!.-7'* &- and that prior physical delivery or possession is not legally required since execution of the deed is deemed equivalent to delivery. x+anuel 1! (ulay /nterprises, Inc! v! #ourt of *ppeals , $$& SCR ,7- #!.."', Pr"-*1e1 T/$t0 #a' 3he thing sold is sub+ect to the control of the seller &ddison v. Feli': %8 P/*l. 444 (1618)* and #b' Such control should remain within a reasonable period after the execution of the instrument Danguilan v. )&C: 178 SCRA 22 (1688)J Pasagui v. Villablanca: 78 SCRA 18 (1695). EXCEPT0 8hen buyer assumes the ris0s of ownership and possession. Po2er Commercial and )ndustrial Cor,. v. C& 294 SCRA 569 (1669). (xecution of Ceed of Conditional Sale with provision that final deed of sale to be executed upon full payment does not transfer ownership of the sub+ect matter. x&ortune Tobacco #orp! v! 'L1#, $%% SCR 7,, #!..!'. (1) *egistration of #itle is Se,arate 6ode from $'ecution of Public )nstrument 6 3he recording of the sale with the proper Registry of Ceeds and the transfer of the certificate of title in the name of the buyer are necessary only to bind third parties to the transfer of ownership. s between the seller and the buyer, the
/9uatorial 1ealty (ev! Inc! v! +ayfair Theater, Inc! , "7% SCR &, #$%%!'* x/ngreso v! (e La #ru , 4%! SCR $!7 #$%%"'* Ten &orty 1ealty and (ev! #orp! v! #ru , 4!% SCR 4-4 #$%%"'* #opuyoc v! (e Solas, &%4 SCR !7, #$%%,'. &, 'orkis (istributors v! #*, !." SCR ,.4 #!..!'. &7 *buan v! 6arcia, !4 SCR 7&. #!.,&'* Santos v! Santos, ",, SCR ".& #$%%!'. &&lorendo v! &o , $% =hil. "-- #!.!!'* Sanche v! 1amos, 4% =hil. ,!4 #!.!.'* 3uimson v! 1osete, -7 =hil. !&. #!.&%'* $hil! Suburban (ev! v! *uditor, ," SCR ".7 #!.7&'.
55

24
transfer of ownership ta0es effect upon the execution of a public instrument conveying the real estate. Chua v. Court of &,,eals 441 SCRA 54 (244%). !"# S$$% 4nder rt. !4.&, seller is obliged to transfer title over the property and deliver the same to the vendee. Vive $agle .and )nc. v. Court of &,,eals: 444 SCRA 445 (2444). (2) Customary Ste,s in Selling )mmovables 6 9Customarily, in the absence of a contrary agreement, the submission by an individual seller to the buyer of the following papers would complete a sale of real estate) #!' owner/s duplicate copy of the 3orrens title* #$' signed deed of absolute sale* #"' tax declaration* and #4' latest realty tax receipt. 3hey buyer can retain the amount for the capital gains tax and pay it upon authority of the seller, or the seller can pay the tax, depending on the agreement of the parties.: Chua v. Court of &,,eals 441 SCRA 54 (244%). (***) A! t" I '"r2"re$l Pr"2ert? # rts. !4.- and !&%!'. e. Constitutum Possessorium # rt. !&%%' 6 provision in the deed of sale granting to seller a right to lease the sub+ect matter of the sale is valid) the possession is deemed to be constituted in the vendee by virtue of this mode of tradition.: x *migo v! Teves, ., =hil. $&$ #!.&4'. #. #raditio !revi 6anu 6 =rior to the sale, petitioners were in possession of the sub+ect property as lessees. 4pon sale to them of the rights, interests and participation as to the M portion pro indiviso, they remained in possession, not in the concept of lessees anymore but as owners now through symbolic delivery 0nown as traditio brevi manu. x.eirs of $edro /scanlar v! #*, $-! SCR !7, #!..7'. 4. Tr$ !#er OA er!/*2 t" Ie 1ee U2" Del*-er? # rts. !477, !47-, and !4.,' $. =/e B(?er Re#(!e! t" A''e2t # rt. !&--' ). I C$!e "# ED2re!! "r Im2l*e1 Re!er-$t*" 5. T$>* &<O(t I !(r$ 'e C"-er$&e # rt. !&$"' 7. T*me $ 1 Pl$'e "# Del*-er? # rt. !&$!'. 9. ED2e !e! "# EDe'(t*" $ 1 Re&*!tr$t*" Del*-er$)le E!t$te # rt. !&$!'. # rt. !4-7', $ 1 "# P(tt* & ,""1! * # rts. !47- and !&%"'

4nless otherwise stipulated) #a' under rt. !4-7 the expenses for the registration of the sale should be shouldered by the vendor x ,ive /agle Land, Inc! v! #ourt of *ppeals , 444 SCR 44& #$%%4'* and #b' duty to withhold taxes due on the sale is imposed on seller. x/9uitable 1ealty (evelopment Inc! v! +ayfair Theater, Inc! , ""$ SCR !". #$%%%'. Juyer has more interest in having the capital gains tax paid immediately since this is a pre?requisite to the issuance of a new 3orrens title in his name. 7evertheless, as far as the government is concerned, the capital gains tax remains a liability of the seller since it is a tax on the seller/s gain from the sale of the real estate. $ayment of the capital gains tax, however, is not a pre8re9uisite to the transfer of ownership to the buyer! 3he transfer of ownership ta0es effect upon the signing and notari2ation of the deed of absolute sale.: x#hua v! #ourt of *ppeals, 4%! SCR &4 #$%%"'. +udgment on a contract of sale that decrees seller/s obligations to execute and deliver the deed of absolute sale and the certificate of title, does not necessarily include within its terms the obligation to pay for the expenses in notari2ing a deed of sale and in obtaining new certificate of title. x2ose #lavano, Inc! v! .L1), "7- SCR !7$ #$%%$'.

25
B. SPECIAL RULES ON CO;PLETENESS OF DELIIERL
1. I C$!e "# ;"-$)le! # rt. !&$$ and !&"7, !4-%' 8hen the contract does not provide for the measuring or weighing of a sold specific mass, and the price agreed upon was not based on such measurement, then 9HtIhe sub+ect matter of the sale is, therefore, a determinate ob+ect, the mass, and not the actual number of units or tons contained therein, so that all that is required of seller was to deliver in good faith to his buyer all of those found in the mass, notwithstanding that the quantity delivered is less than the amount estimated in the contract.: x 6aite v! &onacier, $ SCR -"! #!.,!'. $. R(le! " Del*-er? t" C$rr*er # rt. !&$"' (*) FAS S$le! 6 93he seller pays all charges and is sub+ect to ris0 until the goods are placed alongside the vessel:. x *! Soriano 5 #ia! v! #ollector, .7 =hil. &%& #!.&&'. (**) FOB S$le! 6 5n mercantile contracts of merican origin, 9A.1.J.: stand for the words 9Aree on Joard,: i!e., that the seller shall bear all expenses until the goods are delivered according as to whether the goods are to be delivered 9A.1.J.: at the point of shipment or at the point of destination determines the time when property passes. !ehn 6eyer ( Co. v. 8angco : %8 P/*l. 742: 747 (1618)! (***) CIF S$le! General Foods v. N&C4C4: 144 P/*l. %%9 (1657). 9C.5.A.: found in Jritish contracts stand for costs, insurance, and freight* they signify that the price fixed covers not only the costs of the goods, but the expense of freight and insurance to be paid by the seller. 3!ehn 6eyer ( Co. v. 8angco: %8 P/*l. 742: 747 (1618)! 4nder an arrangement 9c.i.f. =acific Coast: #destination', 9the vendor is to pay not only the cost of the goods, but also the freight and insurance expenses, and, as it was +udicially interpreted, this is ta0en to indicate that the delivery is to be made at the port of destination.: 3Pacific Vegetable 4il Cor,. v. Sing7on : S(2reme C"(rt A1-$ 'e De'*!*" !: 26 A2r*l 1655. ). S$le " A22r"-$l: Tr*$l "r S$t*!#$'t*" # rt. !&%$'

5n a 9sale or return,: the ownership passes to the buyer on delivery pursuant to a perfected contract of sale* and the subsequent return of the goods reverts ownership bac0 to the seller. 5n such case, tradition as a mode of acquiring ownership must be in conse9uence of a contract. x,allarta v! #ourt of *ppeals, !&% SCR "", #!.-7'. 5n a 9sale on approval: #also called 9sale on acceptance, 9sale on trial: or 9sale on satisfaction:', the delivery of the ob+ect does not transfer ownership to the buyer since the delivery was not for purposes of transferring ownership, since the prestation to effect a meeting of the minds to give rise to a valid contract is incumbent on the buiyer. x,allarta v! #ourt of *ppeals, !&% SCR "", #!.-7'. Aor a sale to be a 9sale or return: or a 9sale on approval,: there must be a clear agreement to either of such effect, otherwise, the provisions of rt. !&%$ of Civil Code governing such sales cannot be invo0ed by either party to the contract. xIndustrial Textile +anufacturing #o! v! L$2 /nterprises, Inc! , $!7 SCR "$$ #!.."'. '. S$le )? De!'r*2t*" $ 1K"r S$m2le # rt. !4-!' 3here is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of the bul0, which is not present and there is no opportunity to inspect or examine the same* and the parties treated the sample as the standard of quality and that they contracted with reference to the sample with the understanding that the

26
product to be delivered would correspondent with the sample. x +endo a v! (avid, 44! SCR !7$ #%%4' (ven in sales by description andDor sample, buyer will not be released from his obligation to accept and pay for the goods by deviations on the part of the seller from the exact terms of the contract, if buyer had acquiesced to such deviations after due notice thereof. x/ngel v! +ariano ,elasco : #o!, 47 =hil. !!& #!.$4'. 8hen the machine delivered is in accordance with the description stated in the sales contract, the buyer cannot refuse to pay the balance of the purchase price and the cost of installation if it proves that the machine cannot be used satisfactorily for the purposes for which he bought it when such purpose was not made 0nown to the seller. x$acific #ommercial #o! v! /rmita +arket : #old Stores, &, =hil. ,!7 #!."$'. 1. B(?erH! R*&/t t" I !2e't Be#"re A''e2t$ 'e # rts. !4-! and !&-4' ED'e2t A/e '$rr*er 1el*-er! COD. 2. I C$!e "# Imm"-$)le! $. =/ere S"l1 Per U *t "r N(m)er # rts. !&". and !&4%' 5n a unit price sale, the statement of the area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. 5f the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that is stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. 5f the vendor delivers more than the area stated in the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate. 3*udolf .iet7 )nc. v. Court of &,,eals: 498 SCRA 451 (2445).&. ). =/ere S"l1 #"r $ L(m2 S(m 5+& cuer,o cierto "r ,or ,recio al7ado8 # rt. !&4$' 5n a lump sum sale, when the land delivered to the buyer is exactly as that described in the deed and covered within the boundaries designated, the difference in actual area #"4 versus !% hectares' will not authori2e the buyer to rescind the contract because the seller has complied with delivering the sub+ect matter agreed upon. x Teran v! ,illanueva, &, =hil. ,77 #!."$'* this is the rule when evidence shows that the parties never gave importance to the area of the land in fixing the price #.7 versus ,% hectares'. x* arraga v! 6ay, &$ =hil. &.. #!.$-'. EXCEPT0 buyer of land, when sold in gross or with the description 9more or less: or similar words in designating quantity covers only a reasonable excess of deficiency. 5n the case at bar an area of 9,44 square meters more: is not reasonable excess or deficiency, to be deemed included in the deed of sale. x1oble v! *rbasa, ",$ SCR ,. #$%%!'* *udolf .iet7 )nc. v. Court of &,,eals: 498 SCRA 451 (2445).,% EXCEPTION0 8hen buyer, who has been occupying the land for two years as lessee, actually is deemed to ta0e ris0 on the actual si2e of the property bought at lump sum. x6arcia v! ,elasco, 7$ =hil. $4- #!.4!'.

EXCEPT

TO

C. DOUBLE SALES # rts. !&44 and !!,&'

1. Pr*"r*t? "# T"rre ! S?!tem "# Re&*!tr$t*" 6 3he rules on double sales under rt. !&44 do not overcome the rules provided under the =roperty Registration Cecree #=.C. !4&.', such as)

6oyena v! Tambunting, ! =hil. 4.% #!.%$'* Santa *na v! .ernande , !- SCR .7" #!.,,'. *siain v! 2alandoni, 4& =hil $., #!.$"'* )alantakbo v! #ourt of *ppeals, $4. SCR "$" #!..&'* /sguerra v! Trinidad, &!- SCR !-, #$%%7'.
,%

&.

27
($) 8hen two different titles are issued over the same registered land, the buyer who claims under a title that was first issued shall be preferred. x Liao v! #ourt of *ppeals, "$" SCR 4"% #$%%%'* ()) 5nvo0ing the rules on double sales and 9priority in time: under rt. !&44 would be misplaced by a first buyer who bought the land not within the 3orrens system but under ct 7o. ""44, as against the second buyer who bought the same property when it was already registered under the 3orrens system, because)
of the 9well?0nown rule in this +urisdiction that persons dealing with registered land have the legal right to rely on the fact of the 3orrens Certificate of 3itle and to dispense with the need to inquire further, except when the party concerned has actual 0nowledge of facts and circumstances that would impel a reasonably cautious man to ma0e such inquiry*: and

the 3orrens system rule that formal registration proceedings underta0en on the
property and the subsequent issuance of a title over the land had under the 3orrens system had the legal effect of cleansing title on the property of all liens and claims which were not annotated therein.

3Naa2an Community *ural !an3 )nc. v. Court of &,,eals : %65 SCRA 4% (244%).,! !"# S$$0 3Naval v. Court of &,,eals: 48% SCRA 142 (2447). 2. Te!t! A22l*'$)le ( 1er Art*'le 15440 #aveat emptor requires the buyer to be aware of the supposed title of the seller and he who buys without chec0ing the sellerLs title ta0es all the ris0s and losses consequent to such failure. x#aram, 2r! v! Laureta, !%" SCR 7 #!.-!'. 3he provision on double sale presumes title or ownership to pass to first buyer, exception being) #a' when the second buyer, in good faith, registers the sale ahead of the first buyer, and #b' should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. 4nless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the pre+udice of the first buyer.: x#oronel v! #*, $," SCR !& #!..,'. 5n spite of the three levels of tests provided under rt. !&44, the Court seems to recogni2e only registration in good faith by the second buyer and does not characteri2e the meaning of the last two test of possession and oldest title. Carillo v. Court of &,,eals: 54% SCRA 77 (2447). $. ;AIN RULE0 P*)4* #$6P4*$ P*)4* 0"*$. Carbonell v. C&: 76 SCRA 66 (1697).,$ %. ReB(*!*te! #"r D"()le S$le0 $. T/ere ;(!t Be TA" D*##ere t I$l*1 S$le!% rticle !&44 do not apply where) 3here is only one valid sale, while the other sale over the same property is void. &udot v! #attleya Land, Inc!, &"" SCR "&% #$%%7'*," or 8here one of the contract is a contract to sell. San .oren7o Dev. Cor,. v. Court of &,,eals: 446 SCRA 66 (2445).,4

(1) D"'tr* e " C" 1*t*" $l S$le!KC" tr$'t! t" Sell $ 1 A1-er!e Cl$*m!0 6endo7a v. /ala2 42 P/*l. 2%7 (1621)J &dalin v. C&: 284 SCRA 5%7 (1669). 3he rules on double sales under rt. !&44 are not applicable to contract to sell, because of the circumstances that must concur in order for the provisions to rt.
1eiterated in *brigo v! (e ,era, 4"$ SCR &44 #$%%&'. Tanglao v! $arungao, &"& SCR !$" #$%%7'. ," /spiritu v! ,alerio, . SCR 7,! #!.,"'* 1emalante v! Tibe, !&- SCR #$%%,'. ,4 Torrecampo v! *lindogan, Sr!, &!7 SCR -4 #$%%7'.
,$ ,!

!"- #!.--'* (elfin v! ,alde , &%$ SCR

$4

28
!&44 on double sales to apply, namely that there must be a valid sales transactions, and buyers must be at odds over the rightful ownership of the sub+ect matter who must have bought from the very same seller, are lac0ing in a contract to sell for neither a transfer of ownership nor a sales transaction has been consummated, and such contract is binding only upon the fulfillment or non?fulfillment of an event. 7evertheless, the &"-er * & 2r* '*2le of rt. !&44 should apply, mainly the governing principle of primus tempore,portior 0ure #first in time, stronger in right'. Cheng v. Genato: %44 SCRA 922 (1668). ). ED$'t S$me S()Ee't ;$tter rticle !&44 applies where the same thing is sold to different buyers by the same seller. x7ng v! 7alsiman, 4-& SCR 4,4 #$%%,'* and therefore does not apply where there was a sale to one party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the rights to repurchase the same land. x(ischoso v! 1oxas, & SCR 7-! #!.,$'. '. ED$'t S$me Seller #"r B"t/ S$le! rticle !&44 applies where the same thing is sold to different vendees by the same vendor! 5t does not apply where the same thing is sold to different vendees by different vendors.or even to the same buyer but by different sellers. Salera v! 1oda0e, &"% SCR 4"$, 4"- #$%%7'.,& Aor rticle !&44 to apply, it is necessary that the conveyance must have been made by a party who has an existing right in the thing and the power to dispose of it. 5t cannot be invo0ed where the two different contracts of sale are made by two different persons, one of them not being the owner of the property sold. nd even if the sale was made by the same person, if the second sale was made when such person was no longer the owner of the property, because it had been acquired by the first purchaser in full dominion, the second purchaser cannot acquire any right. Consolidated *ural !an3 =Cagayan Valley> )nc. v. Court of &,,eals : 448 SCRA %49 (2445),,, citing C.;5<< 74(; , =>5<5==57( < 8 17 S <(S !%% #!..&'. %. Re&*!tr$t*" * ,""1 F$*t/ $! F*r!t Pr*"r*t? $. ;e$ * & "# +Re&*!tr$t*" . 3he annotation of adverse claim can qualify as the registration mandated under the rules on double sale. Carbonnel v. Court of &,,eals: 76 SCRA 66 (1697). Registration means any entry made in the boo0s of the registry, including both registration in its ordinary and strict sense, and cancellation, $ "t$t*" : $ 1 e-e m$r&* $l "te!. 5t is the entry made in the registry which records solemnly and permanently the right of ownership and other real rights. x#heng v! 6enato, "%% SCR 7$$ #!..-'.,7 Ceclaration of purchase for taxation purposes does not comply with the required registration, and the fact alone does not even itself constitute evidence of ownership. x)ayoca v! 'ogales, "4% SCR !&4 #$%%%'. Registration of the (xtra?+udicial =artition which merely mentions the sale is not the registration covered under rt. !&44 and cannot prevail over the registration of the pacto de retro sale. x,da! de *lcantara v! #*, $&$ SCR 4&7 #!..,'. 93here can be no constructive notice to the second buyer through registration under ct ""44 if the property is registered under the 3orrens system.: x*modia ,da! (e +elencion v! #ourt of *ppeals, &"4 SCR ,$, -$ #$%%7'.
,& ,,

7ng v! 7lasiman, 4-& SCR 4,4 #$%%,'. 6allardo v! 6allardo, 4, 1.G. 7o. !! p. &&,-* Sigaya v! +ayuga, 4,7 SCR "4!, "&7 #$%%&'. ,7 "lep v! #ourt of *ppeals, 47$ SCR $4! #$%%&'.

29
). Re&*!tr$t*" ;(!t AlA$?! Be * ,""1 F$*t/ 6 5n cases of double sales of immovables, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith or that he was first to register, but whether or not said second buyer registers such second sale in good faith, that is, without 0nowledge of any defect in the title of the property sold. x +artine v! #*, "&- SCR "- #$%%!'*,- this is so because the defense of indefeasibility of a 3orrens title does not extend to a transferee who ta0es the certificate of title in bad faith. x7cce-a v! /sponilla, 4"! SCR !!, #$%%4'. '. M "Ale1&e "# F*r!t B(?er "# t/e Se'" 1 S$le D"e! N"t Am"( t t" Re&*!tr$t*" * #$-"r "# t/e Se'" 1 B(?er Nnowledge gained by the first buyer of the second sale cannot defeat the first buyerLs rights except where the second buyer registers in good faith the second sale ahead of the first. Such 0nowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. Jut in converso, 0nowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such 0nowledge taints his prior registration with bad faith. 3his is the priced exacted by rticle !&44 for the second buyer being able to displace the first buyer* that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i!e!, in ignorance of the first sale and of the first buyer<s right% ?from the time of ac9uisition until the title is transferred to him by registration or failing registration, by delivery of possession!: x"raca v! #*, $7- SCR 7%$ #!..7'.,. 5n a situation where a party has actual 0nowledge of the claimant/s actual, open and notorious possession of a disputed property at the time of registration, the actual notice and 0nowledge are equivalent to registration, because to hold otherwise would be to tolerate fraud and the 3orrens system cannot be used to shield fraud 6 while certificates of title are indefeasible, unassailable and binding against the whole world, they merely confirm or record title already existing and vested. Consolidated *ural !an3 =Cagayan Valley> )nc. v. Court of &,,eals: 448 SCRA %49 (2445). 1. Re&*!tr$t*" * ,""1 F$*t/ AlA$?! Pre<em2t! P"!!e!!*" * ,""1 F$*t/ 6 Jetween two purchasers, the one who registered the sale in his favor has a preferred right over the other who has not registered his title, even if the latter is in actual possession of the immovable property. xTa-edo v! #*, $&$ SCR -% #!..,'.7% 3he registration of a sale after the annotation of the notice of lis pendens does not obliterate the effects of delivery and possession in good faith. 3he rules on constructive notice upon registration provided for under Section &$ of the =roperty Registration Cecree #=.C. 7o. !&$.' operate only from the time of the registration of the notice of lis pendens which in this case was effected only after the time the sale in favor of the second buyer had long been consummated by delivery of the sub+ect matter. San .oren7o Dev. Cor,. v. Court of &,,eals: 446 SCRA 66 (2445). 4. P"!!e!!*" Re#er! B"t/ t" ;$ter*$l $ 1 S?m)"l*' P"!!e!!*" . 5n the absence of inscription under double sales, the law gives preferential right to the buyer who in good faith is first in possession, under the following +urisprudential parameters) #a' =ossession mentioned in rticle !&44 includes not only material but also symbolic possession* #b' possessors in good faith are those who are not aware of any
,)lanco v! 1ivera, 4-- SCR !4- #$%%,'* 6abriel v! +abanta, ".. SCR &7" #$%%"'* (e la #ena v! )riones, &%SCR ,$ #$%%,'* Tanglao v! $arungao, &"& SCR !$" #$%%7'* )ernarde v! #ourt of *ppeals, &"" SCR 4&! #$%%7'. ,. #ru v! #abana, !$. SCR ,&, #!.-4'* 6atmaitan v! #*, $%% SCR "7 #!..!'* ,da! de 2omoc v! #*, $%% SCR 74 #!..!'* )ucad v! #*, $!, SCR 4$" #!..$'* )erico v! #*, $$& SCR 4,. #!.."'* )autista v! #*, "$$ SCR $.4 #$%%%'* )autista v! #*, "$$ SCR $.4 #$%%%'* "lep v! #ourt of *ppeals, 47$ SCR $4! #$%%&'* /scueta v! Lim, &!$ SCR 4!! #$%%7'* Lumbres v! Tablada, 2r!, &!, SCR &7& #$%%7'* &udot v! #attleya Land, Inc!, &"" SCR "&% #$%%7'* Tanglao v! $arungao, &"& SCR !$" #$%%7'. 7% Liao v! #*, "$" SCR 4"% #$%%%'* Talusan v! Tayag, "&, SCR $," #$%%!'* (au v! /xchave , &"" SCR ,"7 #$%%7'.

30
flaw in their title or mode of acquisition* #c' Juyers of real property that is in the possession of persons other than the seller must be wary 6 they must investigate the rights of the possessors* and #d' good faith is always presumed, upon those who allege bad faith on the part of the possessors rests the burden of proof. x Ten &orty 1ealty and (ev! #orp! v! #ru , 4!% SCR 4-4 #$%%"'.7! 5. =/" *! P(r'/$!er * ,""1 F$*t/@ $. ;(!t H$-e P$*1 Pr*'e * F(ll 6 purchaser is good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property and ,ays a full and fair ,rice for the same at the time of such ,urchase , or before he has notice of the claim or interest of some other person in the property. Tanglao v! $arungao, &"& SCR !$" #$%%7'7$ 4nder rticle !&44, mere registration is not enough to acquire a new title. Good faith must concur. Clearly, when the buyer has not yet fully paid the purchase price, and as long as seller remains unpaid, the buyer cannot feign good faith. x $ortic v! #ristobal, &4, SCR &77 #$%%&'. ). B(r1e "# Pr""# 6 3he burden of proving the status of a purchaser in good faith lies upon him who asserts that status. 5t is not sufficient to invo0e the ordinary presumption of good faith, that is, that everyone is presumed to have acted in good faith, since the good faith that is here essential is integral with the very status that must be established. xTanglao v! $arungao, &"& SCR !$" #$%%7'.7" !"# S$$% 5t is anxiomatic that good faith is always presumed in the absence of any direct evidence of bad faith. xSantiago v! #*, $47 SCR "", #!..&'. '. I !t$ 'e! =/e N" ,""1 F$*t/0 (1) !eing )n !usiness on *ealty 6 mortgagee who eventually ended buying the property at the public auction, cnnot claim to be a buyer in good faith when his business in the constructing and selling townhouses and extending credit to the public, including real estate loans* for he is charged with greater diligence that ordinary buyers or encumbrances for value, because it would be standard in his business, as a matter of due diligence required of ban0s and financing companies, to ascertain whether the property being offered as security for the debt has already been sold to another to prevent in+ury to prior innocent buyers. x/xpresscredit &inancing #orp! v! ,elasco, 47" SCR &7% #$%%&'. (2) Close *elationshi, 6 3he sale to one/s daughter and sons will give rise to the conclusion that the buyers, not being really third parties, 0new of the previous sales and cannot be considered in good faith. 3he buyers 9are deemed to have constructive 0nowledge by virtue of their relationship: to their sellers. x $ilapil v! #ourt of *ppeals, $&% SCR &,, #!..&'. (%) 4bligation to )nvestigate or #o Follo2 .eads 6 purchaser who is aware of facts which should put a reasonable man upon his guard cannot turn a blind eye and later claim that he acted in good faith, such as
buyer of a registered land would be in bad faith when he purchases without as0ing to see the owner/s copy of the title andDor without visiting the land where he would then have seen first buyer occupying the same. xSantiago v! #*, $47 SCR "", #!..&'.74

Sanche v! 1amos, 4% =hil. ,!4 #!.!.'* 3uimson v! 1osete, -7 =hil. !&. #!.&%'* 'avera v! #*, !-4 SCR &-4 #!..%'. 7$ *gricultural and .ome /xtension (ev! v! #*!, $!" SCR &", #!..$'* ,eloso v! #*, $,% SCR &." #!..,'* )alatbat v! #*, $,! SCR !$- #!..,'* +athay v! #*, $.& SCR &&, #!..-'* (ia 8(uarte v! 7ng, $.- SCR "-- #!..-'* Liao v! #*, "$" SCR 4"% #$%%%'* Tanongon v! Samson, "-$ SCR !"% #$%%$'* x "niversal 1obina Sugar +illing #orp! v! .eirs of *ngel Teves, "-. SCR "!, #$%%$'* *guirre v! #ourt of *ppeals, 4$! SCR "!% #$%%4'* 6alve v! #ourt of *ppeals , 4-& SCR "4, #$%%,'* #hua v! Soriano, &$! SCR ,- #$%%7'* 1aymundo v! )andong, &$, SCR &!4 #$%%7'. 7" Tsai v! #*, ",, SCR "$4 #$%%!'* *guirre v! #*, 4$! SCR "!% #$%%4'@ 1aymundo v! )andong, &$, SCR &!4 #$%%7'. 74 1!1! $aredes v! #alilung, &!7 SCR ",. #$%%7'* #hua v! Soriano, &$! SCR ,- #$%%7'.

7!

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8hen there are occupants to the land being bought, since it is the common practice in
the real estate industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent purchaser usually ta0es. x+artine v! #*, "&- SCR "#$%%!'.7& ny person engaged in business would be wary of buying from a company that is closing shop, because it may be dissipating its assets to defraud creditors. Such buyer is bound to inquire whether the owners had unsettled obligations encumbrance that could burden the property. xSamson v! #ourt of *ppeals, $"- SCR ".7 #!..4'.

(4) .and in &dverse Possession 6 Juyer who could not have failed to 0now or discover that the land sold to him was in the adverse possession of another is a buyer in bad faith. x.eirs of 1amon (urano, Sr! v! "y, "44 SCR $"- #$%%%'.7, (5) $'istence of .is Pendens 6 Settled is the rule that one who deals with property with a notice of lis pendens, even when at the time of sale the annotation was cancelled but there was a pending appeal, cannot invo0e the right of a purchaser in good faith. purchaser cannot close his eyes to facts which should put a reasonable man on guard and claim that he acted in the belief that there was no defect in the title of the seller. x$o Lam v! #*, "!, SCR 7$! #!...'. EXCEPT0 8hen 0nowledge of lis pendens was acquired at the time there was order to have it cancelled. x$o Lam v! #*, "47 SCR -, #$%%%'. 7. =/e S()Ee't "# S$le I! U re&*!tere1 L$ 1 Naa2an Community *ural !an3 v. C& : %65 SCRA 4% (244%). 3he rules in double sale under rticle !&44, whereby the buyer who is able to first register the purchase in good faith 9is in full accord with Section &! of =C !&$. which provides that no deed, mortgage, lease, or other voluntary instrument 6 except a will purporting to convey or affect registered land shall ta0e effect as a conveyance or bind the land until its registration. 3hus, if the sale is not registered, it is binding only between the seller and the buyer but it does not affect innocent third persons. &brigo v. De Vera: 4%2 SCRA 544 (2444). 8hen first sale is over unregistered land and the second sale is when it is registered, the rules on double sale do not apply. Dagu,an #rading Co. v. 6acam: 14 SCRA 196 (1675). rticle !&44 is inapplicable to unregistered land because 9the purchaser of unregistered land at a sheriff/s execution sale only steps into the shoes of the +udgment debtor, and merely acquires the latter/s interest in the property sold as of the time the property was levied upon,: as expressly provided for in then Sec. "&, Rule ". of the Revised Rules of Court on execution sale Hnow Sec. "", Rule "., !..7 Rules of Civil =rocedure'I. Carumba v. C&: %1 SCRA 558 (1694). 4nder ct ""44, registration of instruments affecting unregistered lands is 9without pre+udice to a third party with a better right,: which means that mere registration does not give the buyer any right over the land if the seller was not anymore the owner of the land having previously sold the same to somebody else even if the earlier sale was unrecorded. 3he rules on double sale under rt. !&44 has no application to land no registered under the 3orrens system. &cabal v. &cabal 454 SCRA 555 (2445).77
+athay v! #*, $.& SCR &&, #!..-'* 1epublic v! (e 6u man, "$, SCR $,7 #$%%%'* .eirs of 1amon (urano, Sr! v! "y, "44 SCR $"- #$%%%'* .eirs of #elestial v! .eirs of #elestial, 4%- SCR $.! #$%%"'* /rasusta, 2r! v! #ourt of *ppeals, 4.& SCR "!. #$%%,'* (e la #ena v! )riones, &%- SCR ,$ #$%%,'* Tanglao v! $arungao, &"& SCR !$", !"$ #$%%7'. 7, +odina v! #*, "!7 SCR ,.,, 7%, #!...'* 1epublic v! (e 6u man, "$, SCR $,7 #$%%%'* +artine v! #*, "&SCR "- #$%%!'* .eirs of Trinidad de Leon ,da! (e 1oxas v! #ourt of *ppeals , 4$$ SCR !%! #$%%4'* 7cce-na v! /sponilla, 4"! SCR !!, #$%%4'* 1aymundo v! )andong, &$, SCR &!4 #$%%7'* Tanglao v! $arungao, &"& SCR !$" #$%%7'. 77 .anopol v! $ilapil, 7 SCR 4&$ #!.,"'* 1adiowealth &inance #o! v! $alileo , !.7 SCR $4& #!..!'* Spouses .onorio Santiago v! #*, $47 SCR "", #!..&'* )ayoca v! 'ogales, "4% SCR !&4 #$%%%'.
7&

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D. OBLI,ATIONS OF BULER
1. P$? t/e Pr*'e # rt. !&-$' 8hen seller cannot show title to the sub+ect matter, then he cannot compel the buyer to pay the price. x.eirs of Severina San +iguel v! #*, ",4 SCR &$" #$%%!'. Mere sending of a letter by the buyer expressing the intention to pay without the accompanying payment is not considered a valid tender of payment and consignation of the amount due are essential in order to extinguish the obligation to pay and oblige the seller to convey title. xTorcuator v. Bernabe, 459 S !" 4#9 $%&&5'. 4nless the parties to a sale have agreed to the payment of the purchase price to any other party, then its payment to be effective must be made to the seller in accordance with rticle !$4% which provides that 9=ayment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authori2ed to receive it.: x+ontecillo v! 1eynes, "-& SCR $44 #$%%$'. 2. A''e2t Del*-er? # rts. !&-$?!&-&'

III. DOCU;ENTS OF TITLE (Art!. 1549<1524)

1. De#* *t*" (Art. 17%7) 2. P(r2"!e "# D"'(me t! "# T*tle 3hrough a document of title, seller is allowed by fiction of law to deal with the goods described therein as though he had physically delivered them to the buyer* and buyer may ta0e the document as though he had actually ta0en possession and control over the goods described therein. x$hilippine Trust #o! v! 'ational )ank, 4$ =hil. 4!" #!.$!'. 8arehouse receipt represents the goods, but the intrusting of the receipt is more than the mere delivery of the goods* it is a representation that the one to whom the possession of the receipt has been so entrusted has the title to the goods. x Siy #ong )ieng v! .ongkong : Shanghai )ank, &, =hil. &.- #!."$'. %. Ne&"t*$)le D"'(me t! "# T*tle $. H"A Ne&"t*$te1 # rts. !&%-?!&%.' ). =/" C$ Ne&"t*$te # rt. !&!$' '. E##e't! "# Ne&"t*$t*" # rt. !&!"' 3he endorsement and delivery of a negotiable 9uedan operates as the transfer of possession and ownership of the property referred to therein, and had the effect of divorcing the property covered therein from the estate of the insolvent prior to the filing of the petition for insolvency. x $hilippine Trust #o! v! 'ational )ank , 4$ =hil. 4!" #!.$!'. 1. U $(t/"r*Ne1 Ne&"t*$t*" # rt. !&!-' s between the owner of a negotiable document of title who endorsed it in blan0 and entrusted it to a friend, and the holder of such negotiable document of title to whom it was negotiated and who received it in good faith and for value, the latter is preferred, under the principle that as between two innocent persons, he who made the loss possible should bear the loss. xSiy Long )ieng v! .ongkong and Shanghai )anking #orp!, &, =hil. &.- #!."$'. 4. N" < e&"t*$)le D"'(me t! "# T*tle $. H"A Tr$ !#erre1 "r A!!*& e1 # rt. !&!4'

33
). E##e't! "# Tr$ !#er (Art. !&!4'. 5. =$rr$ t*e! "# Seller "# D"'(me t! "# T*tle # rt. !&!,' 7. R(le! "# Le-?K,$r *!/me t "# ,""1! # rts. !&!4, !&!., !&$%'.

IIII. SALE BL NON<O=NER OR BL ONE HAIIN, IOIDABLE TITLE0 .)F$ 4F & C4N#*&C# 4F S&.$
1. E##e't "# S$le =/ere Seller N"t OA er $t T*me "# Del*-er? # rt. !&%&* 3Paulmitan v. Court of &,,eals: 215 SCRA 877 516628'. 5n sale, it is essential that the seller is the owner of the property he is selling. 3he principal obligation of a seller is 9to transfer the ownership of: the property sold # rt. !4&-'. 3his law stems from the principle that nobody can dispose of that which does not belong to him) '/+7 (*T 3"7( '7' .*)/T. x'oel v! #*, $4% SCR 7- #!..&'.7lthough a situation #where the sellers were no longer owners' does not appear to be one of the void contracts enumerated in rt. !4%. of Civil Code, and under rt. !4%$ Civil Code itself recogni2es a sale where the goods are to be 9acquired x x x by the seller after the perfection of the contract of sale: clearly implying that a sale is possible even if the seller was not the owner at the time of sale, provided he acquires title to the property later on, but when delivery of ownership is no longer possible, the sale should be considered void, and consequently, the right to repurchase provided therein would also be void x'ool v! #*, $7, SCR !4. #!..7'. 5f one buys the land of another, to which the seller is supposed to have a good title, and in consequence of facts un0nown ali0e to both parties, the seller has in fact no title at all, equity will cancel the sale and cause the purchase money to be restored to the buyer, putting both parties in status 9uo. x()$ v! #*, $4. SCR ""! #!..&'. $. S$le! )? C"<OA er! # rt. 4."' 5n a contract of sale of co?owned property, what the vendee obtains by virtue of such a sale are the same rights as the vendor had as co?owner #i.e., his spiritual share', and the vendee merely steps into the shoes of the vendor as co?owner. x$anganiban v! 7amil, &4$ SCR !,, #$%%-'*7. except when the intention of the purchase was clearly the property itself and not +ust the spiritual share. 6indanao v. 8a,: 1% SCRA 164 (1675). n agreement that purports a specific portion of an un?partitioned co?owned property is not void* it shall effectively transfer the seller/s ideal share in the co? ownership. .eirs of the Late Spouses *urelio and /speran a )alite v! Lim , 44, SCR &4 #$%%4'.-% 5n which case, the proper action is not for nullification of sale, or for the recovery of possession of the property owned in common from the other co?owners, but for division or partition of the entire property. x Tomas #laudio +emorial #ollege, Inc! v! #ourt of *ppeals, "!, SCR &%$ #!...'.-! co?owner who sells one of the two lands owned in common with another co? owner, and does not turn?over one?half of the proceeds of the sale to the other co?
* cona v! 1eyes, &. =hil. 44, #!."4'* #oronel v! 7na, "" =hil. 4&, #!.!,'. /sto9ue v! $a0imula, $4 SCR &. #!.,-'* *guirre v! #*, 4$! SCR "!% #$%%4'* *cabal v! *cabal, 4&4 SCR &&& #$%%&'* )arcenas v! Tomas, 4&4 SCR &." #$%%&'. -% *lmendra v! I*#, $%4 SCR !4$ #!..!'* &ernande v! &ernande , "," SCR -!! #$%%!'* x*guirre v! #*, 4$! SCR "!% #$%%4'* Santos v! Lumbao, &!. SCR 4%- #$%%7'* 1epublic v! .eirs of &rancisca (ignos8Sorono , &4. SCR &- #$%%-'. -! .eirs of 1omana Ing0ug8Tiro v! #asals, "," SCR 4"& #$%%!'* *guirre v! #ourt of *ppeals, 4$! SCR "!% #$%%4'.
79 7-

34
owner, the latter may by law and equity lay exclusive claim to the remaining parcel of land. xImperial v! #ourt of *ppeals, $&. SCR ,& #!..,'. 2. ED'e2t*" !0 =/e OA er!/*2 Tr$ !#er! )? A't "# t/e N" <OA er $. E!t"22el " Tr(e OA er # rt. !4"4' !ucton v. Gabar: 55 SCRA 466 (1694). ). Re'"r1* & L$A!J T"rre ! S?!tem #=res. Cecree !&$.'. 3he defense of indefeasibility of 3orrens title where the disputed buildings and equipment are located is unavailing, since such defense is available to sale of lands and not to sale of properties situated therein. x Tsai v! #*, ",, SCR "$4 #$%%!'. n innocent purchaser for value is one who purchases a titled land by virtue of a deed executed by the registered owner himself not by a forged deed. x Insurance Services and #ommercial Traders, Inc! v! #*, "4! SCR &7$ #$%%%'.

8here innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the cancellation of the certificate, since the effect of such outright cancellation will be to impair public confidence in the certificate of title. (very person dealing with the registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property. x .eirs of Spouses )enito 6avino! v! #ourt of *ppeals, $.! SCR 4.& #!..-'. '. St$t(t"r? P"Aer Or1er "# C"(rt! 8hen a defeated party refuses to execute the absolute deed of sale in accordance with the +udgment, the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done shall have the li0e effect as is done by the party. x +anila 1emnant #o!, Inc! v! #*, $"! SCR $-! #!..4' 1. S$le * ;er'/$ t! St"re!: F$*r! "r ;$r>et! # rts. -& and -,, Code of Commerce' City of 6anila v. !ugsu3: 141 P/*l. 856 (1659)J Sun !ros. ( Co. v. Velasco : 54 O.,. 514% (1658). %. S$le )? O e H$-* & I"*1$)le T*tle # rt. !&%,, as an exception to rt. &&.' 8henever there is an underlying contract of sale which grants to the culprit?buyer a voidable title, even when this is accompanied by the criminal act of estafa or swindling, rticle !&%, would grant to the buyer in good faith a better title as against the original owner even though the latter may be classified to have been 9unlawfully deprived: of the sub+ect matter under rt. &&.. #agatac v. 0imene7: 5% O.,. %962 (1659)J $DC& Publishing v. Santos: 184 SCRA 714 (1664). 3hus, when owner did not voluntarily deliver possession of the car, and in effect it was stolen from him, then one who buys the car even in good faith from the thief will lose the car to the owner who is deemed to have been unlawfully deprived. &7nar v. 8a,diangco: 1% SCRA 487 (1675). 5n all other cases of unlawful deprivation done through estafa, the original owner recovers even from the buyer in good faith. Cru7 v. Pahati: 68 P/*l. 988 (1657). 5CLI0 De'*!*" !/"Ae1 t/$t !e'" 1 )(?er: "r '(rre t 2"!!e!!"r '"(l1 "t 'l$*m &""1 #$*t/ )e'$(!e "# er$!(re! * t/e '"-er* & 1"'(me t! 2re!e te1 )? /*! !eller8 1wner of diamond ring may recover possession of the same from pawnshop where the owner/s agent had pledged it without authority to do so* rticle &&. applies and the

35
defense that the pawnshop acquired possession without notice of any defect of the pledgor?agent is unavailing. Di7on v. Suntay: 49 SCRA 174 (1692) .-$ 5CLI0 I t/"!e '$!e! 2"!!e!!"r *! $ mer'/$ t $ 1 " l? /$! $ 2le1&e * /*! #$-"r8.

IX. LOSS: DETERIORATION: FRUITS AND OTHER BENEFITS

1. N" A22l*'$t*" =/e S()Ee't ;$tter *! Determ* $)le # rt. !$,"' 2. E##e't "# L"!!KDeter*"r$t*" "# T/* & S"l10 $. Be#"re Per#e't*" #3*oman v. Grimalt: 7 P/*l. 67 516478'. # rts. !4." and !4.4'. ). At T*me "# Per#e't*"

'. A#ter Per#e't*" B(t Be#"re Del*-er? # rts. !!,4, !!-., and !$,$'. (1) General *uleA Jefore delivery, ris0 of loss is borne by seller under the rule of res perit domino! x#hrysler $hil! v! #ourt of *ppeals, !"" SCR &,7 #!.-4'. 5n the case of a motor vehicle, where there was neither physical or constructive delivery of a determinate thing, the thing sold remained at the seller/s ris0. x"nion +otor #orp v! #ourt of *ppeals, ",! SCR &%, #$%%!'. (2) .oss by Fault of a Party # rts. !4-%, !&%4, !&"-' (%) .oss by Fortuitous $vent # rts. !4-%, !!,", !!,4, !!,&, !&%4, !&"-, and !!-.* R( C Comments of = R S, 31<(73571, = C5<< , and J ;5(R '. (4) Deterioration # rts. !4-%, !!,"?,&, and !$,$* rts. !!-. and !&"-' (5) Fr(*t! "r Im2r"-eme t! from time of perfection pertain to buyer # rts. !4-%, !&"7?!&"-'. 1. A#ter Del*-er? # rt. !&%4' .a2yer?s Coo, v. #abora: 1% SCRA 972 (1675).-"

X. RE;EDIES FOR BREACH OF CONTRACT OF SALE (Art!. 1564<1566)

A. ON PART OF SELLER
1. I C$!e "# ;"-$)le! ## rts. !&.", !&.& to !&.7' 4nder rticle !&.7, when the buyer of scrap iron fails to put up the letter of credit in favor of the seller as the condition of the sale, the seller had a right to terminate the contract, and non?compliance with the condition meant that the seller/s obligation to sell never did arise. x,isayan Sawmill #o! v! #ourt of *ppeals, $!. SCR "7- #!.."'. 2. U 2$*1 Seller "# ,""1! # rts. !&$4?!&"&' $. De#* *t*" "# +U 2$*1 Seller. # rt. !&$&' ). R*&/t! "# U 2$*1 Seller0 P"!!e!!"r? l*e # rts. !&$,?!&$., !&%", !&"&' St"22$&e in transitu # rts. !&"%?!&"$, !&"&, !,",H$I' R*&/t "# Re!$le # rt. !&""' R*&/t t" Re!'* 1 # rt. !&"4'

-$ -"

,alera v! +atute, . =hil. 47. #!.%-'* *renas v! 1aymundo, !. =hi. 47 #!.!!'. Song &o : #o! v! 7ria, "" =hil. " #!.!&'* Lawyer<s #oop v! 'arciso, && 1.G. ""!"'.

36
(ven before the formal statutory adoption of the remedies of an unpaid seller, the Supreme Court had already recogni2ed the right of a seller, when the contract of sale is still executory in stage, to resell the movables sub+ect matter of the sale, when the buyer fails to pay the purchase price. x.anlon v! .ausserman, 4% =hil. 7., #!.$%'. Seller in possession of the goods may sell them at buyerLs ris0. x 4atigbak v! #ourt of *ppeals, 4 SCR $4" #!.,$'.

%. RECTO LA=0 SALES OF ;OIABLES ON INSTALL;ENTS # rts. !4-4, !4-&, !4-,'

3he Recto <aw prevents mortgagee from sei2ing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency +udgment. 3he almost invariable result was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. x+agna &inancial Services 6roup, Inc! v! #olarina, 477 SCR $4& #$%%&'. $. +I !t$llme t S$le. requires at least stipulated two #$' payments in the future, whether or not there is a downpayment. 3.evy v. Gervacio: 76 P/*l. 52 (16%6). ). C" tr$'t! t" Sell ;"-$)le! N"t C"-ere1 . x,isayan Sawmill #ompany, Inc! v! #ourt of *ppeals, $!. SCR "7- #!.."'. '. Reme1*e! A-$*l$)le t" U 2$*1 Seller N"t C(m(l$t*-e B(t Alter $t*-e $ 1 ED'l(!*-e. Delta 6otor Sales Cor,. v. Niu /im Duan: 21% SCRA 256 (1662).-4 See0ing a writ of replevin consistent with any of the three remedies. x "niversal +otors #orp! v! (y .ian Tat, $- SCR !,! #!.,.'. 1. Reme1? "# S2e'*#*' Per#"rm$ 'e 3he fact that the seller obtained a writ of execution against the property mortgaged, but pursuant to an action for specific performance with a plea for a writ of replevin, does not amount to a foreclosure of the chattel mortgage covered by the Recto <aw. #a<anglangit v. Southern 6otors: 141 P/*l. 747 (1659).-& e. N$t(re "# Reme1? "# Re!'*!!*" Surrender of mortgaged property is not necessarily equivalent to rescission. x ,da! de 3uiambao v! +anila +otors #o!, Inc!, " SCR 444 #!.,!'. Butual restitution prevents recovering on the balance of the purchase price. Nonato v. )&C: 144 SCRA 255 (1685)J but stipulation on non?return of payments is valid provided not unconscionable. x(elta +otor Sales #orp! v! 'iu 4im (uan, $!" SCR $&. #!..$'. #. Reme1? "# F"re'l"!(re Jarring effect would cover a third?party mortgage, when it was the chattel mortgage that was first foreclosed. 3*idad v. Fili,inas )nvestment: 124 SCRA 247 (168%). 8hen the seller assigns his credit to another person, the latter is li0ewise bound by the same law. 3@ayas v. .uneta 6otors: 119 SCRA 927 (1682).87 (*) +B$rr* &. E##e't! "# F"re'l"!(re 6 Ailing of the action of replevin in order to foreclose on the chattel mortgage does not produce the barring effect under the Recto <aw* for it is the fact of foreclosure and actual sale of the mortgaged chattel that bar further recovery by the seller of any balance on the buyers outstanding obligation not satisfied by the sale . 3he voluntary payment of the installment by the
(e la #ru v! *sian #onsumer, $!4 SCR !%" #!..$'* )orbon II v! Servicewide Specialists, Inc!, $&- SCR ,"4 #!..,'. -& Southern +otors v! +oscoso, $ SCR !,- #!.,!'* Industrial &inance #orp! v! 1amire , 77 SCR !&$ #!.77'* 1osario v! $#I Leasing and &inance, Inc!, 474 SCR &%% #$%%&'. -, )orbon II v! Servicewide Specialists, Inc!, $&- SCR ,"4 #!..,'.
-4

37
buyer?mortgagor is valid and not recoverable in spite the restrictive provisions of rt. !4-4#"'. Northern 6otors v. Sa,inoso: %% SCRA %57 (1694). -7 Aoreclosure on the chattel mortgage prevents further action on the supporting real estate mortgage, whether the chattel mortgage is first foreclosed Cru7 v. Fili,inas )nvestment ( Finance Cor,.: 2% SCRA 961 (1678)*-- and vice versa when the real estate mortgage is first foreclosed. !orbon )) v. Service2ide S,ecialists )nc.: 258 SCRA 7%4 (1667). ll amounts barred from recovery. 6acondray ( Co. v. $usta+uio: 74 P/*l. 447 (16%9). (**) *ule on Perverse !uyer. Fili,inas )nvestment ( Finance Cor,. v. *idad: %4 SCRA 574 (1676). &. P(r2"rte1 Le$!e A*t/ O2t*" t" B(? 3he Court too0 +udicial notice of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the ob+ect of the sale from passing to the vendee until and unless the price is fully paid. x/lisco Tool +anufacturing #orp! v! #*, "%7 SCR 7"! #!...'.-. 8here a lease agreement over equipment is without an express option to purchase, but nevertheless when a final demand is given prior to suit, the demand letter indicates clearly it was within the option of the lessee to fully pay the balance of the unpaid rentals and would be able to 0eep the equipment, then the real contract between the parties was a sale of movable on installment disguised as a lease agreement. PC) .easing and Finance )nc. v. Giraffe19 Creative )maging )nc. : 529 SCRA 445 (2449).

4. IN CASE OF I;;OIABLES0
$ . A t*'*2$t"r? Bre$'/ # rt. !&.!' .egarda v. SaldaAa: 55 SCRA %24 (1694). ). S$le! "# S()1*-*!*" L"t! $ 1 C" 1"m* *(m U *t! #Secs. $" and $4, =.C. .&7' =.C..&7 9was issued in the wa0e of numerous reports that many real estate subdivision owners, developers, operators andDor sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems and other basic requirements or the health and safety of home and lot buyers. 5t was designed to stem the tide of fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers free from liens and encumbrances.: x #asa &ilipinas 1ealty #orp! v! 7ffice of the $resident, $4! SCR !,& #!..&'. Section $% of =.C. .&7 directs every owner and developer of real property to provide the necessary facilities, improvements, infrastructure and other forms of development, failure to carry out which is sufficient cause for the buyer to suspend payment, and any sums of money already paid shall not be forfeited. x Tamayo v! .uang, 4-% SCR !&, #$%%,'. 5n case the developer of a subdivision or condominium fails in its obligation under Section $%, Section $" gives the buyer)
the option to demand reimbursement of the total amount paid, or to wait for further development of the subdivision, and when the buyer opts for the latter alternative, he

-7 +anila +otor #o! v! &ernande , .. =hil. 7-$ #!.&,'* +agna &inancial Services 6roup, Inc! v! #olarina, 477 SCR $4& #$%%&'. -$ascual v! "niversal +otors #orp!, ,! SCR !$! #!.74'. -. ,da! de 2ose v! )arrueco , ,7 =hil. !.! #!.".'* "!S! #ommercial v! .alili, ." =hil. $7! #!.&"'* .!/! .eacock v! )antal +anufacturing, ,, =hil. $4& #!."-'* +anila 6as #orp! v! #alupita , ,, =hil. 747 #!."-'* &ilinvest #redit #orp! v! #*, !7- SCR !-- #!.-.'.

38
may suspend payment of the installments until such time that the owner or developer has fulfilled its obligations. xTamayo v! .uang, 4-% SCR !&, #$%%,'* buyer required only to give due notice to the owner or developer of the buyer/s intention to suspend payment. x=amora 1ealty and (ev! #orp! v! 7ffice of the $resident, &%, SCR &.! #$%%,'* demand for refund can be made as the notice and demand can be made in the same letter or communication. x#asa &ilipinas 1ealty #orp v! 7ffice of the $resident , $4! SCR !,& #!..&'* and 1ption granted by law is with buyer and not the developerDseller. x 1elucio v! )rillante8 6arfin, !-7 SCR 4%& #!..%'.

Sec. $" does not require that a notice be given first by the buyer to the seller before a

9Juyer: under =.C. .&7 would include one who acquires for a valuable consideration a condominium unit by way of assignment by the condominium pro+ect owner in payment of its indebtedness for contractor/s fee. x*+* #omputer #ollege, Inc! v! &actora, "7- SCR !$! #$%%$'. Juyers of condominium units would be +ustified in suspending payments, when the developer?seller fails to give them a copy of the Contract to Sell despite repeated demands. x6old Loop $roperties, Inc! v! #*, "&% SCR "7! #$%%!'. 7othing in =.C. .&7 provides for the nullification of a contract to sell in the event the seller, at the time the contract was entered into, did not possess a certificate of registration and license to sell. #o #hien v! Sta! Lucia 1ealty, &!" SCR &7% #$%%7'.

5. ;ACEDA LA=0 SALES OF RESIDENTIAL REALTL ON INSTALL;ENTS #R. . ,&&$'.

93he contract for the purchase of a piece of land on installment basis is not only lawful* it is also of widespread usage or custom in our economic system. . . . 5f HbuyerI eventually found the interest stipulation in the contract financially disadvantageous to him, he cannot now turn to this Court for succor without impairing the constitutional right to the obligation of contracts. 3his Court will not relieve petitioner of the necessary consequences of his free and voluntary, and otherwise lawful, act. . .: x )ortikey v! *&$ 1etirement and Separation )enefits System, 477 SCR &!! #$%%&'. $. +R"le. "# ;$'e1$ L$A 6 Baceda <aw/s declared policy is to protect buyers of real estate on installment basis against onerous and oppressive conditions, and see0s to address the acute housing shortage problem in our country that has prompted thousands of middle and lower class buyers of houses, lots and condominium units to enter into all sorts of contracts with private housing developers involving installment schemes. x*ctive 1ealty : (ev! #orp! (aroya, "-$ SCR !&$ #$%%$'..% Baceda <aw recogni2es in conditional sales of all 0inds of real estate seller/s right to cancel the contract upon non?payment of an installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. x$agtulunan v! (ela #ru ,da! (e +an ano, &"" SCR $4$ #$%%-'..! ). Tr$ !$'t*" ! C"-ere1 3he formal requirements of rescission under the Baceda <aw apply even to contracts entered into prior to its effectivity. xSiska (ev! #orp! v! 7ffice of the $resident, $"! SCR ,74 #!..4'..$ !"# S$$ x$eoples Industrial and #ommercial #orp! v! #*, $-! SCR $%, #!..7'.

7Iympia .ousing Inc! v! $anasiatic Travel #orp! , ".& SCR $.- #$%%"'* 2estra (ev! and +anagement #orp! v! $acifico, &!" SCR 4!" #$%%7'. .! Lea-o v! #ourt of *ppeals, ",. SCR ", #$%%!'* #ordero v! &!S! +anagement : (ev! #orp!, &%, SCR 4&! #$%%,'. .$ /ugenio v! /xecutive Secretary &ranklin +! (rilon , $&$ SCR !%, #!..,'* $') v! 7ffice of the $resident, $&$ SCR ,$% #!..,'.

.%

39
Baceda <aw finds no application to a contract to sell where the suspensive condition has not been fulfilled, because said <aw presuppose the existence of a valid and effective contract to sell a condominium. 5@8 x+ortel v! 4*SS#7, Inc!, "4- SCR ".!, ".- #$%%%'.." Baceda <aw ma0es no distinctions between 9option: and 9sale: which under =.C. .&7 also includes 9an exchange or attempt to sell, an option of sale or purchase, a solicitation of a sale or an offer to sell directly,: and the all?embracing definition virtually includes all transactions concerning land and housing acquisition, including reservation agreements. x1ealty /xchange ,enture #orp! v! Sendino, $"" SCR ,,& #!..4'. Baceda <aw has no application to protect the developer or one who succeeds the developer. xLagandaon v! #ourt of *ppeals, $.% SCR 4," #!..-'. '. H"A t" Determ* e Le$r! "# I !t$llme t!0 0estra Dev. and 6anagement Cor,. v. Pacifico: 51% SCRA 41% (2449). 1. H"A C$ 'ell$t*" "# C" tr$'t C$ Be E##e'te1 6 3he cancellation of the contract under the Baceda <aw mandatorily must follow the following steps) &irst, the seller should extend the buyer a grace period of at least sixty #,%' days from the due date of the installments. Second, at the end of the grace period, the seller shall furnish the buyer with a notarial notice of cancellation or demand for rescission, effective thirty #"%' days from the buyer/s receipt thereof* a mere notice or letter, short of a notarial act, would not suffice. 36c.aughlin v. C&: 144 SCRA 76% (1687)..4 Third, for contracts covering more than two years of payments, there must be return to the buyer of the cash surrender value. x,illdara, 2r! v! =abala, &4& SCR "$& #$%%-'..& 3he additional formality of a demand on Hthe seller/sI part for rescission by notarial act would appear, in the premises, to be merely circuitous and consequently superfluous: since the seller therein filed an action for $ (lme t "# '" tr$'t, which is a 0indred concept of rescission by notarial act. xLayug v! I*#, !,7 SCR ,$7 #!.--'. decision rendered in an e+ectment case operated as the required notice of cancellation under the Baceda <aw* but as the buyer was not given the cash surrender value of the payments she made, there was still no actual cancellation of the contract. xLea-o v! #ourt of *ppeals, ",. SCR ", #$%%!'. formal letter demand upon buyer to vacate the premises is not the same as the notice of cancellation or demand for rescission )? $ "t$r*$l $'t required by R. . 7o. ,&&$. (vidently, the case of unlawful detainer filed by petitioner does not exempt him from complying with the said requirement. x$agtulunan v! (ela #ru ,da! (e +an ano , &"" SCR $4$ #$%%-'.

7. RESCISSION ON SALES OF NON<RESIDENTIAL I;;OIABLES ON INSTALL;ENTS # rts.

!!.! and !&.$' rticles !!.! and !&.$ on rescission cannot apply to a contract to sell since 9there can be no rescission of an obligation that is still non?existent, the suspensive condition not having happened.: x,alarao v! #*, "%4 SCR !&& #!...'..,
."

)oston )ank of the $hil! v! +analo, 4-$ SCR !%- #$%%,'. .4 Lu on )rokerage v! +aritime )ldg! , -, SCR "%& #!.7-'* Lu on )rokerage v! +aritime )ldg!, 4" SCR ." #!.7$'* &abrigas v! San &rancisco del +onte, 47& SCR $47 #$%%&'. .& *ctive 1ealty : (ev! #orp! v! (aroya, "-$ SCR !&$ #$%%$'* 7lympia .ousing v! $anasiatic Travel #orp!, ".& SCR $.- #$%%"'* 2estra (ev! and +anagement #orp! v! $acifico, &!" SCR 4!" #$%%7'. ., #aridad /states, Inc! v! Santero, 7! =hil. !!4 #!.4%'* *lbea v! In9uimboy, -, =hil. 477 #!.&%'* +anuel v! 1odrigue , !%. =hil. ! #!.,%'* 2oseph : Sons /nterprises, Inc! v! #*, !4" SCR ,," #!.-,' 6imene v! #*, !.& SCR $%& #!..!'* 2acinto v! 4apara , $%. SCR $4, #!..$'* 7dyssey $ark, Inc! v! #ourt of *ppeals, $-% SCR $&" #!..7'* 1illo v! #ourt

40
rticle !&.$ allows the buyer of an immovable to pay as long as no demand for rescission has been made* and the consignation of the balance of the purchase price before the trial court operates as full payment. x$rovince of #ebu v! .eirs of 1ufina +orales, &4, SCR "!& #$%%-'. utomatic rescission clauses are not valid nor can be given legal effect under rticles !!.! and !&.$ . xIringan v! #ourt of *ppeals, ",, SCR 4! #$%%!'..7 5ndeed, rescission requires under the law a positive act of choice on the party of the non?defaulting party. x7lympia .ousing v! $anasiatic Travel #orp!, ".& SCR $.- #$%%"'. ;endor cannot recover ownership of the thing sold until and unless the contract itself is resolved and set aside* a party who fails to invo0e +udicially or by notarial act the resolution of a contract of sale would be prevented from bloc0ing the consummation of the same in light of the precept that mere failure to fulfill the contract does not operate ipso facto as rescission. $latinum $lans $hil!, Inc! v! #ucueco, 4-- SCR !&, #$%%,'.

B. ON PART OF BULER
1. I '$!e "# ;"-$)le! # rts. !&.-?!&..' 2. I '$!e "# Imm"-$)le! # rts. !!.!* Secs. $" and $4, =.C. .&7' %. S(!2e !*" "# P$?me t # rt. !&.%' 3he pendency of suit over the sub+ect matter of the sale +ustifies the buyer in suspending payment of the balance of the purchase price by reason of aforesaid vindicatory action filed against it. 3he assurance made by the seller that the buyer did not have to worry about the case because it was pure and simple harassment is not the 0ind of guaranty contemplated under rticle !&.% wherein the buyer is bound to ma0e payment if the seller should give a security for the return of the price. x *delfa $roperties, Inc! v! #ourt of *ppeals, $4% SCR &,& #!..&'.

XI. RE;EDL OF RESCISSION IN SALES CONTRACTS COIERIN, I;;OIABLES0 C4N#*&C# 4F S&.$ versus C4N#*&C# #4 S$..
A. NATURE OF RE;EDL OF RESCISSION (*$S4."#)4N) # rts. !!.!, !47., !&.$'
1. D*!t* &(*!/* & #r"m Ot/er Reme1? "# Re!'*!!*" #"niversal &ood #orp! v! #* , "" SCR $$ H!.7%I'. !ut see contra Suria v! I*#, !&! SCR ,,! H!.-7I'. 8hile rt. !!.! uses the term 9rescission,: the original term which was used in the old Civil Code was 9resolution.: Resolution is a principal action which is based on breach of a party, while rescission under rt. !"-" is a subsidiary action limited to cases of rescission for lesion under rt. !"-!. x 7ng v! #ourt of *ppeals, "!% SCR ! #!...'..2. B$!*! "# Reme1? "# Re!'*!!*" (Re!"l(t*" ) Rescission under rt. !!.! is predicated on a breach of faith by the other party who violates the reciprocity between them, and the breach contemplated is the obligor/s failure to comply with an existing obligation. 8hen the obligee may see0 rescission and, in the absence of any +ust cause for the court to determine the period of compliance, the court shall decree the rescission. x,elarde v! #ourt of *ppeals, ",! SCR &, #$%%!'... 3o rescind is to declare a contract void at its inception and to put an end to it as though it never was. 5t is not merely to terminate it and release the parties from further
of *ppeals, $74 SCR 4,! #!..7'* $latinum $lans $hil!, Inc! v! #ucueco, 4-- SCR !&, #$%%,'. 97 /scueta v! $ando, 7, =hil. $&, #!.4,'. .Iringan v! #ourt of *ppeals, ",, SCR 4! #$%%!'. .. *lmira v! #ourt of *ppeals, ".. SCR "&! #$%%"'.

41
obligations to each other, but to abrogate it from the beginning and restore the parties to their relative positions as if no contract has been made. x ,elarde v! #ourt of *ppeals, ",! SCR &, #$%%!'.!%% 8hen a party as0s for the resolution or cancellation of a contract it is implied that he recogni2es it existence 6 a non?existent contract cannot be cancelled. x $an $acific Industrial Sales #o!, Inc! v! #ourt of *ppeals, 4-$ SCR !,4 #$%%,'. 7on?payment of the purchase price is a resolutory condition for which the remedy is either rescission or specific performance under rticle !!.!. 3his is true for reciprocal obligations where the obligation is a resolutory condition of the other. 1n the other hand, the buyer is entitled to retain the purchase price or a part thereof if the seller fails to perform any essential obligation of the contract. Such right is premised on the general principles of reciprocal obligation. x6il v! #ourt of *ppeals, 4!! SCR !- #$%%"'.!%! Consignation by the buyer of the purchase price of the property, there having been no previous receipt of a notarial demand for rescission, is sufficient to defeat the right of the seller to demand for a rescission of the deed of absolute sale. x6il v! #ourt of *ppeals, 4!! SCR !- #$%%"'. Creditors do not have such material interest as to allow them to sue for rescission of a sale 6 theirs is only a personal right to receive payment for the loan, not a real right over the property sub+ect of the deed of sale. x*dorable v! #*, "!. SCR $%% #!...'. &ction for *escission Not Similar to &n &ction for *econveyance 6 5n the sale of real property, the seller is not precluded from going to the court to demand +udicial rescission in lieu of a notarial act of rescission. Jut such action is different from an action for reconveyance of possession on the thesis of a prior rescission of the contract covering the property. 3he effects that flow from an affirmative +udgment in either case would be materially dissimilar in various respects) +udicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that arise in an action for reconveyance. 5n an action for rescission, unli0e in an action for reconveyance predicated on an extra+udicial rescission #rescission by notarial act', the court, instead of decreeing rescission, may authori2e for a +ust cause the fixing of a period. x 7lympia .ousing v! $anasiatic Travel #orp!, ".& SCR $.- #$%%"'. %. P"Aer t" Re!'* 1 ,e er$ll? C(1*'*$l * N$t(re seller cannot unilaterally and extra+udicially rescind a contract of sale where there is no express stipulation authori2ing it. 4nilateral rescission will not be +udicially favored or allowed if the breach is not substantial and fundamental to the fulfillment of the obligation. x)enito v! Sa9uitan81ui , ".4 SCR $&% #$%%$'.!%$ 7onetheless, the law does not prohibit the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention. x&roilan v! $an 7riental Shipping #o!, !$ SCR $7, #!.,4'.!%" 4. ;(t($l Re!t*t(t*" $ 1 F"r#e*t(re # rt. !"-&' 8hen sale is annulled, parties are governed by rt. !".- whereunder they shall restore to each other the things which have been the sub+ect matter of the contract, with their fruits, and price with interest. xInes v! #ourt of *ppeals, $47 SCR "!$ #!..&'.!%4

7campo v! #*, $"" SCR &&! #!..4'* #o v! #*, "!$ SCR &$- #!...'. #entral $hilippine "niversity v! #*, $4, SCR &!! #!..&'* 1omeo v! #*, $&% SCR $$" #!..&'* #heng v! 6enato, "%% SCR 7$$ #!..-'* "y v! #*, "!4 SCR ," #!...'. !%$ 7ce0o, $ere : #o! v! International )anking #orp! "7 =hil. ,"! #!.!-'* 1epublic v! .ospital de San 2uan de (ios, -4 =hil. -$% #!.4.'* (e la 1ama Steamship #o! v! Tan, G.R. 7o. -7-4, Bay $!, !.&,* .. =hil. !%"4 #unrep.' #!.&,'* .eirs of 2esus +! +ascu-ana v! #ourt of *ppeals, 4,! SCR !-, #$%%&'. !%" Lu on )rokerage #o!, Inc! v! +aritime )uilding #o!, Inc!, 4" SCR .& #!.7$'* Lu on )rokerage v! +aritime )ldg!, -, SCR "%& #!.7-'.
!%! !%4

!%%

,elarde v! #ourt of *ppeals, ",! SCR &, #$%%!'.

42
3he seller/s right in a contract to sell with reserved title to extra+udicially cancel the sale upon failure of the buyer to pay the stipulated installments and retain the sums and installments already received has long been recogni2ed by the well?established doctrine of ". years standing. x$angilinan v! #*, $7. SCR &.% #!..7'.!%& =ursuant to rt. !!--, in a contract to sell, even if the buyers did not mista0enly ma0e partial payments, inasmuch as the suspensive condition was not fulfilled, it is only fair and +ust that the buyers be allowed to recover what they had paid in expectancy that the condition would happen* otherwise, there would be un+ust enrichment on the part of the seller. x)uot v! #ourt of *ppeals, "&7 SCR -4, #$%%!'.

B. DISTINCTIONS BET=EEN CONTRACT OF SALE AND CONTRACT TO SELL

1. CONTRACT
OF

SALE versus CONTRACT

TO

SELL # rt. !4&-' &delfa Pro,erties )nc. v. C&: 244 SCRA 595 (1665).

5n a contract of sale, title to the property passes to buyer upon the delivery of the thing sold* in a contract to sell, ownership is, by agreement, reserved in the seller and is not to pass to buyer until full payment of purchase price. 1therwise stated, in a contract of sale, seller loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded, whereas in a contract to sell, title is retained by the seller until full payment of the price. 5n the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. x#astillo v! 1eyes, &". SCR !." #$%%7'.!%, $. R$t*" $le "# C" tr$'t! t" Sell contract to sell is commonly entered into so as to protect the seller against a buyer who intends to buy the property in installments by withholding ownership over the property until the buyer effects full payment therefor. 5t cannot be inferred in a situation where both parties understood the price to be paid in cash. x #ity of #ebu v! .eirs of #andido 1ubi, "%, SCR 4%- #!...'. ). I! $ C" tr$'t t" Sell $ +S$le. ( 1er Art*'le 1458@ 9contract to sell: as 9a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the sub+ect property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.: Coronel v. C&: 27% SCRA 15: 29 (1667).!%7 !"# S$$% PN! v. C& 272 SCRA 474 (1667). 3o be sure, a contract of sale may either be absolute or conditional. 1ne form of conditional sales is what is now popularly termed as a 9Contract to Sell,: where ownership or title is retained until the fulfillment of a positive suspensive condition normally the payment of the purchase price in the manner agreed upon. Aor a contract, li0e a contract to sell, involves a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. x6ome v! #ourt of *ppeals, "4% SCR 7$%, 7$- #$%%%'.!%'. Im2"rt$ 'e "# +L"'$t* &. t/e C" 1*t*" t" P$? Pr*'e * F(ll
The +anila 1acing #lub v! The +anila 2ockey #lub, ,. =hil. && #!.".'. Lim v! #*, !-$ SCR &,4 #!..%'* )uot v! #*, "&7 SCR -4, #$%%!'* *besamis v! #*, ",! SCR "$- #$%%!'* Tua on v! 6arilao, ",$ SCR ,&4 #$%%!'* Lea-o v! #*, ",. SCR ", #$%%!'* "niversal 1obina Sugar +illing #orp! v! .eirs of *ngel Teves, "-. SCR "!, #$%%$'* *lmira v! #ourt of *ppeals, ".. SCR "&! #$%%"'* #hua v! #ourt of *ppeals, 4%! SCR &4 #$%%$'* &lancia v! #ourt of *ppeals, 4&7 SCR $$4 #$%%&'* ,idad, Sr! v! Tayamen, &"! SCR !47 #$%%7'* .ulst v! $1 )uilders, Inc!, &"$ SCR 74 #$%%7'. !%7 $latinum $lans $hil!, Inc! v! #ucueco, 4-- SCR !&, #$%%,'. !%(emafelis v! #ourt of *ppeals, &"- SCR "%& #$%%7'.
!%, !%&

43
5n a contract of sale, the non?payment of the price is a resolutory condition which extinguishes the transaction that, for a time existed, and discharges the obligations created thereunder. x)las v! *ngeles8.utalla, 4". SCR $7" #$%%4'. 8hereas, in a contract to sell, the payment of the purchase price is a positive suspensive condition. 3he vendor/s obligation to convey the title does not become effective in case of failure to pay. x)uot v! #ourt of *ppeals, "&7 SCR -4, #$%%!'.!%. 8hen the obligation of buyer to pay the full amount of the purchase price was made sub+ect to the condition that the seller first delivery the clean title over the parcel bough within twenty #$%' months from the signing of the contract, such condition is imposed merely on the performance of the obligation, as distinguished from a condition imposed on the perfection of the contract. 3he non?happening of the condition merely granted the buyer the right to rescind the contract or even to waive it and enforce performance on the part of the seller, all in consonance with rt. !&4& of Civil Code which provides that 98here the obligation of either party to a contract of sale is sub+ect to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition.: !abasa v. Court of &,,eals 264 SCRA 5%2 (1668). 1. Ne'e!!$r? St*2(l$t*" ! * $ C" tr$'t t" Sell0 contract is one of sale, absent any stipulation therein #a' reserving title over the property to the vendee until full payment of the purchase price, !!% $ 1 #b' giving the vendor the right to unilaterally rescind the contract in case of non?payment. !!! Valde7 v. Court of &,,eals: 4%6 SCRA 55 (2444).!!$ !"# S$$% Dignos v. Court of &,,eals: 158 SCRA %95 (1688). 3he reservation of title may not be found in express provision of the contract, but may also be determined from proven acts of the parties. x Sala ar v! #*, $&- SCR "$& #!..,'. 3he absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price,!!" and the seller retained possession of the certificate of tile and all other documents relative to the sale until there was full payment of the purchase price. x#hua v! #ourt of *ppeals, 4%! SCR &4 #$%%"'. n agreement in which ownership is reserved in the vendor and is not to pass to the vendee until full payment of the purchase price is 0nown as a contract to sell. 3he absence of full payment suspends the vendors/ obligation to convey title, even if the sale has already been registered. Registration does not vest, but merely serves as evidence of, title to a particular property. 1ur land registration laws do not give title holders any better ownership than what they actually had prior to registration. x$ortic v! #ristobal, 4&, SCR &77 #$%%&'. e. I!!(e "# S()!t$ t*$l Bre$'/ # rts. !!.! and !$"4' 3he concept of substantial breach is irrelevant to a contract of sale. )rokerage #o!, Inc! v! +aritime )uilding #o!, Inc!, 4" SCR ." #!.7$'.!!4 xLu on

!%. .eirs of Spouses Sande0as v! Lina, "&! SCR !-" #$%%!'* =amora 1ealty and (ev! #orp v! 7ffice of the $resident, &%, SCR &.! #$%%,'. !!% Topacio v! #*, $!! SCR $!. #!..$'* Laforte a v! +achuca, """ SCR ,4" #$%%%'* *lmira v! #ourt of *ppeals, ".. SCR "&! #$%%"'. !!! 1o9ue v! Lapu , ., SCR 74! #!.-%'* *ngeles v! #alan , !"& SCR "$" #!.-&'**lfonso v! #*, !-, SCR 4%% #!..%' !!$ xSan *ndres v! 1odrigue , ""$ SCR 7,. #$%%%'* ,da! (e +istica v! 'aguiat, 4!- SCR 7" #$%%"'* )las v! *ngeles8.utalla, 4". SCR $7" #$%%4'* ,illadar, 2r! ,! =abala, &4& SCR "$& #$%%-'. !!" )owe v! #ourt of *ppeals, $$% SCR !&- #!.."'* x1ayos v! #ourt of *ppeals, 4"4 SCR ",& #$%%4'. !!4 Siska (ev! #orp! v! 7ffice of the $resident, $"! SCR ,74 #!..4'.

44
5n a contract to sell real property on installments, the full payment of the purchase price is a positive condition, the failure of which is not considered a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring any obligatory force. 3he transfer of ownership and title would occur after full payment of the price. xLea-o v! #*, ",. SCR ", #$%%!'.!!& 2. ;* *m(m ReB(*reme t #"r C$ 'ell$t*" "# C" tr$'t t" Sell 3he act of a party in treating a contract as cancelled should be made 0nown to the other party because this act is sub+ect to scrutiny and review of the courts in case the alleged defaulter bring the matter for +udicial determination. 3"niversity of the Phili,,ines v. De los &ngeles %5 SCRA 14% (1694)J 3Palay )nc. v. Clave: 124 SCRA 7%8 (168%).!!, contract to sell imposes reciprocal obligations and so cannot be terminated unilaterally by either party. Eudicial rescission is required under rticle !!.!. >owever, this rule is not absolute. 8e have held that in proper cases, a party may ta0e it upon itself to consider the contract rescinded and act accordingly albeit sub+ect to +udicial confirmation, which may or may not be given. .im v. Court of &,,eals: 182 SCRA 574 (1664). !"# S$$0 5n a contract to sell, upon failure of buyer to comply with its obligation, there was no need to +udicially rescind the contract to sell. Aailure by one of the parties to abide by the conditions in a contract to sell resulted in the rescission of the contract. &FP 6utual !enefit &ssn. )nc. v. C&: %74 SCRA 978 (2441).!!7 grace period is a right, not an obligation of the debtor, and when unconditionally conferred, the grace period is effective without further need of demand either calling for the payment of the obligation or for honoring the right. x)ricktown (ev! #orp! v! *mor Tierra (ev!!, $". SCR !$, #!..&'. %. EB(*t? Re!"l(t*" ! " C" tr$'t! T" Sell lthough buyer clearly defaulted in his installment payments in a contract to sell covering two parcels of land, the Supreme Court nevertheless awarded ownership over one of the two #$' lots +ointly purchased by the buyer, on the basis that the total amount of installments paid, although not enough to cover the purchase price of the two lots were enough to cover fully the purchase price of one lot, ruling there was substantial performance insofar as one of the lots concerned as to prevent rescission thereto. xLegarda .ermanos v! Salda-a, && SCR "$4, #!.74'. 8here buyer had religiously been paying monthly installments for - years, but even after default he was willing and had offered to pay all the arrears, the Court granted additional period of ,% days from receipt of +udgment for buyer to ma0e all installments payments in arrears plus interests, although demand for rescission had already been made. x2!+! Tua on #o!, Inc! v! 2avier, "! SCR -$. #!.7%'.

XII. CONDITIONS AND =ARRANTIES

1. C" 1*t*" ! # rt. !&4&' Aailure to comply with condition imposed upon perfection of the contract results in failure of a contract, while the failure to comply with a condition imposed on the performance of an obligation only gives the other party the option either to refuse to proceed with sale or waive the condition. .aforte7a v. 6achuca %%% SCRA 74% (2444).!!!!& +anuel v! 1odrigue , !%. =hil. ! #!.,%'* Laforte a v! +achuca, """ SCR ,4" #$%%%'* ,illamaria, 2r! v! #ourt of *ppeals, 4-7 SCR &7! #$%%,'. !!, 2ison v! #*, !,4 SCR "". #!.--'* Lim v! #*, !-$ SCR &,4 #!..%'* #heng v! 6enato, "%% SCR 7$$ #!..-'. !!7 Torralba v! (e los *ngeles, ., SCR ,. #!.-%'.

45
5n a 9Sale with ssumption of Bortgage,: the assumption of mortgage is a condition to the seller/s consent so that without approval by the mortgagee, no sale is perfected. 5n such case, the seller remains the owner and mortgagor of the property and retains the right to redeem the foreclosed property. x1amos v! #*, $7. SCR !!- #!..7'.!!. 3here has arisen here a confusion in the concepts of validity and the efficacy of a contract. 4nder rt. !"!- of Civil Code, the essential requisites of a contract are) consent of the contracting parties* ob+ect certain which is the sub+ect matter of the contract and cause of the obligation which is established. bsent one of the above, no contract can arise. Conversely, where all are present, the result is a valid contract. >owever, some parties introduce various 0inds of restrictions or modalities, the lac0 of which will not, however, affect the validity of the contract. 3hus, a provision 9this Contract of Sale of rights, interests and participations shall become effective only upon the approval by the >onorable Court,: in the event of non?approval by the courts, affect only the effectivity and not the validity of the contract of sale. 35eirs of Pedro $scanlar v. Court of &,,eals 281 SCRA 197 (1669). 2. C" 1*t*" ! versus =$rr$ t*e!. Po2er Commercial and )ndustrial Cor,. v. Court of &,,eals: 294 SCRA 569 (1669). %. ED2re!! =$rr$ t*e! # rt. !&4,' warranty is an affirmation of fact or any promise made by a vendor in relation to the thing sold. 3he decisive test is whether the vendor assumes to assert a fact of which the vendee is ignorant. x6oodyear $hilippines, Inc! v! Sy, 474 SCR 4$7 #$%%&'. 3he principle of caveat emptor only requires the purchaser to exercise care and attention ordinarily exercised by prudent men in li0e business affairs, and only applies to defects which are open and patent to the service of one exercising such care. 5t can only be applied where it is shown or conceded that the parties to the contract stand on equal footing and have equal 0nowledge or equal means of 0nowledge and there is no relation of trust or confidence between them. 5t does not apply to a representation that amounts to a warranty by the seller and the situation requires the buyer to rely upon such promise or affirmation. Guinha2a v. Peo,le: 478 SCRA 298 (2445).!$% 93he law allows considerable latitude to seller/s statements, or dealer/s tal0* and experience teaches that it is exceedingly ris0y to accept it at its face value. ssertions concerning the property which is the sub+ect of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price and are always understood as affording to buyers no ground for omitting to ma0e inquiries. man who relies upon such an affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his property does so as his peril, and must ta0e the consequences of his own imprudence.: xSongco v! Sellner, "7 =hil. $&4 #!.!7'. Jreach of an express warranty ma0es the seller liable for damages. 3he following requisites must be established in order that there be an express warranty in sale) #!' the express warranty must be an affirmation of fact or any promise by the seller relating to the sub+ect matter of the sale* #$' the natural tendency of such affirmation or promise is to induce the buyer to purchase the thing* and #"' the buyer purchases the thing relying on such affirmation or promise thereon. x#arrascoso, 2r! v! #*, 477 SCR ,,, #$%%&'. 4. Im2l*e1 =$rr$ t*e! # rt. !&47' $. Seller H$! R*&/t t" Sell ). =$rr$ t? A&$* !t E-*'t*" # rts. !&4-?!&,%'

!!1omero v! #ourt of *ppeals, $&% SCR $$" #!..&'* *dalin v! #*, $-% SCR &", #!..7'* 1epublic v! &lorendo, &4. SCR &$7 #$%%-'. !!. )i-an Steel #orp! v! #ourt of *ppeals, ".! SCR .% #$%%$'. !$% 7ro Land 1ealty (ev! #orp! v! #launan, &!, SCR ,-! #$%%7'

46
Seller must be summoned in the suit for eviction at the instance of the buyer # rt. !&&-', and be made a co?defendant # rt. !&&.'* or made a third?party defendant. /scaler v! #*, !"- SCR ! #!.-&'.!$! No :arranty &gainst $viction :hen $'ecution Sale 6 5n voluntary sales, vendor can be expected to defend his title because of his warranty to the vendees but no such obligation is owed by the owner whose land is sold at execution sale. xSantiago Land (ev! #orp! v! #*, $7, SCR ,74 #!..7'. !"# S$$% Art. 1552. '. =$rr$ t? A&$* !t N" <A22$re t Ser-*t(1e! # rts. !&,%' 1. =$rr$ t? A&$* !t H*11e De#e't! # rts. !&,!?!&-%' 3he stipulation in a lease with option to purchase #treated as a sale of movable on installments' that the buyer?lessee 9absolutely releases the lessor from any liability whatsoever as to any and all matters in relation to warranty in accordance with the provisions hereinafter stipulated,: was held as an express waiver of warranty against hidden defect in favor of the seller?lessor which 9absolved the Hseller?lessorI from any liability arising from any defect or deficiency of the machinery they bought.: x &ilinvest #redit #orp! v! #ourt of *ppeals, !7- SCR !-- #!.-.'. hidden defect is one which is un0nown or could not have been 0nown to the buyer. 4nder the law, the requisites to recover on account of hidden defects are as follows) #a' 3he defect must be hidden* #b' 3he defect must exist at the time the sale was made* #c' 3he defect must ordinarily have been excluded from the contract* #d' 3he defect, must be important #render the thing unfit or considerably decreases fitness'* #e' 3he action must be instituted within the statute of limitations. Nutrimi' Feeds Cor,. v. Court of &,,eals: 441 SCRA %59 (2444).!$$ Seller/s agent can by agreement be liable for the warranty against hidden defects. xSchmid and 7berly, Inc! v! 12L +artine , !,, SCR 4." #!.--'. e. =$rr$ t? $! t" F*t e!! "r F($l*t? "# ,""1! 5n order to enforce the implied warranty that the goods are reasonably fit and suitable to be used for the purpose which both parties contemplated, the following must be established) #a' that the buyer sustained in+ury because of the product* #b' that the in+ury occurred because the product was defective or unreasonably unsafe* and finally #c' the defect existed when the product left the hands of the petitioner. Nutrimi' Feeds Cor,. v. Court of &,,eals: 441 SCRA %59 (2444). manufacturer or seller of a product cannot be held liable for any damage allegedly caused by the product in the absence of any proof that the product in question is defective, which was present upon the delivery or manufacture of the product* or when the product left the seller/s or manufacturer/s control* or when the product was sold to the purchaser* or the product must have reached the user or consumer without substantial change in the condition it was sold. Nutrimi' Feeds Cor,. v. Court of &,,eals: 441 SCRA %59 (2444). #. S$le "# ,""1! )? S$m2le 3here is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of the bul0, which is not present and there is no opportunity to inspect or examine the same. 3o constitute a sale by sample, it must appear that the parties treated the sample as the standard of quality and that they contracted with reference to the sample with the understanding that the product to be delivered would correspondent with the sample. 5n a contract of sale by sample, there is an implied warranty that the goods shall be free from any defect which is not apparent on
#ani ares Tiana v! Torre0os, $! =hil. !$7 #!.!!'* 2!+! Tua on v! #*, .4 SCR 4!" #!.7.'. Investments : (evelopment, Inc! v! #*, !,$ SCR ,", H!.--I'.
!$!

!$$

47
reasonable examination of the sample and which would render the goods unmerchantable. x+endo a v! (avid, 44! SCR !7$ #$%%4'. &. A11*t*" $l =$rr$ t*e! #"r C" !(mer Pr"1('t! # rts. ,-, Consumer ct, R. . 7".4'. 5. E##e't! "# =$rr$ t*e! 7. E##e't! "# =$*-er! 3he phrase 9as is, where is: basis pertains solely to the physical condition of the thing sold, not to its legal situation. 5n the case at bar, the 4S tax liabilities constitute a potential lien which applies to the sub+ect/s matter/s legal situation, not to its physical aspect. 3hus, the buyer has no obligation to shoulder the same. x'(# v! +adrigal ;an .ui Lines Corp., 4!$ SCR "7& #$%%"'. 9. B(?erH! O2t*" ! * C$!e "# Bre$'/ "# =$rr$ t? # rt. !&..'. 3he remedy against violation of warranty against hidden defects is either to withdraw from the contract #accion redhibitoria' or to demand a proportionate reduction of the price #accion 9uanti minoris', with damages in either case. 3Nutrimi' Feeds Cor,. v. Court of &,,eals: 441 SCRA %59 (2444).

XIII. EXTIN,UISH;ENT OF SALE

A. IN ,ENERAL # rts. !$"!, !,%%'. B. CONIENTIONAL REDE;PTION 1. De#* *t*" # rt. !,%!' Right to repurchase must be constituted as part of a valid sale at perfection. x,illarica v! #*, $, SCR !-. #!.,-'.!$" n agreement to repurchase becomes a promise to sell when made after the sale because when the sale is made without such agreement the purchases acquires the things sold absolutely* and, if he afterwards grants the vendor the right to repurchase, it is a new contract entered into by the purchases as absolute owner. *oberts v. Pa,io: 515 SCRA %47 (2449).!$4 5n sales denominated as pacto de retro, the price agreed upon should not generally be considered as the +ust value of the thing sold, absent other corroborative evidence@ there is no requirement in sales that the price be equal to the exact value of the thing sub+ect matter of the sale. x(orado ,da! (e (elfin v! (ellota, &4$ SCR ".7 #$%%-'. 2. Re1em2t*" Per*"1 3he period to repurchase is not suspended merely because there is a divergence of opinion between the parties as to the precise meaning of the phrase providing for the condition upon which the right to repurchase is triggered. 3he existence of seller a retros right to repurchase the proper is not dependent upon the prior final interpretation by the court of the said phrase. 6isterio v. Cebu State College of Science and #echnology: 471 SCRA 122 (2445). %. S*t($t*" Pr*"r t" Re1em2t*" 5n a sale a retro, buyer has a right to the immediate possession of the property sold, unless otherwise agreed upon, since title and ownership of the property sold are immediately vested in the buyer a retro, sub+ect only to the resolutory condition of
#laravall v! #*, !.% SCR 4". #!..%'* Torres v! #*, $!, SCR #$%%7'. !$4 1amos v! Icasiano, &! =hil #!.$7'.
!$"

$-7 #!..$'* 1oberts v! $apio, &!& SCR

"4,

48
repurchase by the seller a retro within the stipulated period. (erecho, 4," SCR ,$7 #$%%&'.!$& 4. =/" C$ Re1eem # rts. !,!! to !,!4' 5. H"A Re1em2t*" E##e'te1 # rt. !,!,' 5n order to exercise the right to redeem, only tender of payment is sufficient xLegaspi v! #*, !4$ SCR -$ !.-,'* consignation is not required after tender is refused x+ariano v! #*, $$$ SCR 7", #!.."'. Jut when tender not possible, consignation should be made x #atangcatang v! Legayada, -4 SCR &! #!.7-'. 8ell?settled is the rule that a formal offer to redeem must be accompanied by a valid tender of the redemption price and the filing of a +udicial action, plus the consignation of the redemption price within the period of redemption, is equivalent to a formal offer to redeem. x,illegas v! #ourt of *ppeals, 4.. SCR $7, #$%%,'. formal offer to redeem, accompanied by a bona fide tender of redemption price, is not essential where the right to redeem is exercised through a +udicial action within the redemption period and simultaneously depositing the redemption price. x Lee #huy 1ealty #orp! v! #*, $&% SCR &., #!..&'. 7. Re1em2t*" Pr*'e # rt. !,!,' stipulation in a sale a retro requiring as part of the redemption price interest for the cost of money, is not in contravention with rt. !,!,, since the provision is not restrictive nor exclusive, and does not bar additional amounts that the parties may agree upon, since the article itself provides 9and other stipulations which may have been agreed upon.: xSolid .omes v! #ourt of *ppeals, $7& SCR $,7 #!..7'. 9. Fr(*t! # rt. !,!7' rticle !,!7 on the disposition of fruits of property redeemed applies only when the parties failed to provide a sharing arrangement thereof* otherwise, the parties contractual stipulations prevail. x*lmeda v! (aluro, 7. SCR "$7 #!.77'. 8. E##e't =/e N" Re1em2t*" ;$1e0 C" !"l*1$t*" # rt. !,%7' x,da! de 1igonan v!

rticle !,%7 abolished automatic consolidation of ownership in the vendee a retro upon expiration of the redemption period by requiring the vendee to institute an action for consolidation where the vendor a retro may be duly heard. 5f the vendee succeeds in proving that the transaction was indeed a pacto de retro, the vendor is still given a period of thirty days from the finality of the +udgment within which to repurchase the property. xSolid .omes v! #ourt of *ppeals, $7& SCR $,7 #!..7'. 1nce the vendor fails to redeem the property within the stipulated period, irrevocable title shall be vested in the vendee by operation of law. x,da! de 1igonan v! (erecho, 4," SCR ,$7 #$%%&'. 4nder a sale a retro, the failure of the buyer to consolidate his title under rt. !,%7 does not impair such title and ownership because the method prescribed thereunder is merely for the purpose of registering and consolidating titles to the property. 5n fact, the failure on the part of a seller a retro to exercise the redemption right within the period agreed upon or provided for by law, vests upon the buyer a retro absolute title and ownership over the property sold by operation of law. Consequently, after the effect of consolidation, the mortgage or re?sale by the seller a retro of the same property would not transfer title and ownership to the mortgagee or buyer, as the case may be, under
!$& 1eyes v! .amada, !4 SCR $!& #!.,&'* Solid .omes, Inc! v! #*, $7& SCR $,7 #!..7'* +isterio v! #ebu State #ollege of Science and Technology, 4,! SCR !$$ #$%%&'* #adungog v! 5ap, 4,. SCR &,! #$%%&'* 1amos v! (i on, 4.- SCR !7 #$%%,'* Lumayag v! .eirs of 2acinto 'eme-o, &$, SCR &! #$%%7'.

49
the <atin maxim '/+7 (*T 3"7( '7' .*)/T. x#adungog v! 5ap, 4,. SCR #$%%&'. 6. EFUITABLE ;ORT,A,E # rts. !,%$?!,%4' 5f the terms of the pacto de retro sale were unfavorable to the vendor, courts have no business extricating her from that bad bargain@courts are not guardians of persons who are legally competent. (orado ,da! (e (elfin v! (ellota, &4$ SCR ".7 #$%%-'. 3he law on equitable mortgage favors the least transmission of rights and interest over a property in controversy, since the law see0s to prevent circumvention of the law on usury and the prohibition against pactum commissorium provisions. dditionally, it is aimed to end un+ust or oppressive transactions or violations in connection with a sale or property. 3he wisdom of these provisions cannot be doubted, considering many cases of unlettered persons or even those with average intelligence invariably finding themselves in no position whatsoever to bargain fairly with their creditors. x Spouses +ise-a v! 1ongavilla, "%" SCR 74. #!...'.!$, Jesides, it is a fact that in time of grave financial distress which render persons hard?pressed to meet even their basic needs or answer an emergency, such persons would have no choice but to sign a deed of absolute sale of property or a sale thereof with pacto de retro if only to obtain a much?needed loan from unscrupulous money lenders. x+atanguihan v! #ourt of *ppeals, $7& SCR "-% #!..7'.!$7 n equitable mortgage is defined as one which although lac0ing in some formality or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. x1aymundo v! )andong, &$, SCR &!4 #$%%7'.!$3he essential requisites of an equitable mortgage are) #a' 3he parties entered into a contract denominated as a contract of sale* and #b' 3heir intention was to secure an existing debt by way of a mortgage. x+olina v! #ourt of *ppeals, ".- SCR .7 #$%%"'.!$. 3he decisive factor in evaluating whether an agreement is an equitable mortgage is the intention of the parties, as shown not necessarily by the terminology used in the contract but by all the surrounding circumstances, such as the relative situation of the parties at that time, the attitude, acts, conduct, declarations of the parties, the negotiations between them leading to the deed, and generally, all pertinent facts having a tendency to fix and determine the real nature of their design and understanding. 7ecessitous men are not always free, in that to answer a pressing emergency, they will submit to any term that the crafty may impose on them. )anga v! )ello, 47! SCR ,&" #$%%&'.!"% 3hat is why parol evidence is competent and admissible in support of the allegations that an instrument in writing, purporting on its face to transfer the absolute title to property, or to transfer the title with a right to repurchase under specified conditions reserved to the seller, was in truth and in fact given merely as security for the repayment of a loan. x+ariano v! #ourt of *ppeals, $$% SCR 7!, #!.."'.!"!
!$, !$7

&,!

Lao v! #ourt of *ppeals, $7& SCR $"7 #!..7'. Salonga v! #oncepcion, 47% SCR $.! #$%%&'. !$#eballos v! Intestate /state of the Late /migdio +ercado , 4"% SCR "$" #$%%4'* *lvaro v! Ternida, 47. SCR $-#$%%,'* #irelos v! .ernande , 4.% SCR ,$4 #$%%,'* Lumayag v! .eirs of 2acinto 'eme-o, &$, SCR &! #$%%7'. (%9 +atanguihan v! #*, $7& SCR "-% #!..7'* +artine v! #*, "&- SCR "- #$%%!'* .ilado v! .eirs of 1afael +edlla, "7 SCR $&7 #$%%$'* #eballos v! Intestate /state of the Late /migdio +ercado , 4"% SCR "$" #$%%4'* San $edro v! Lee, 4"% SCR ""- #$%%&'* 6o v! )acaron, 47$ SCR $$. #$%%&', citing ;5<< 74(; , C(S R <. =>5<5==57( < 8 17 S <(S , #!..- ed.', p. $7!* 1omulo v! Layug, 2r!, &%! SCR $,$ #$%%,'* 1oberts v! $apio, &!& SCR "4, #$%%7'* 1aymundo v! )andong, &$, SCR &!4 #$%%7'* (orado ,da! (e (elfin v! (ellota, &4$ SCR ".7 #$%%-'. !"% *ustria v! 6on ales, 2r!, 4$% SCR 4!4 #$%%4'* 1aymundo v! )andong, &$, SCR &!4 #$%%7'.

50
$. B$1&e! "# EB(*t$)le ;"rt&$&e # rt. !,%$!"$' contract of sale actually intended to secure the payment of an obligation is presumed an equitable mortgage. x1omulo v! Layug, 2r!, &%! SCR $,$ #$%%,'. 3he presence of only one circumstance defined in rt. !,%$ is sufficient for a contract of sale a retro to be presumed an equitable mortgage. x .ilado v! +edalla "77 SCR $&7 #$%%$'.!"" 3he presumption in rticle !,%$ +ibes with the rule that the law favors the least transmission of property rights. x/nri9ue , Sr! v! .eirs of Spouses 'ieves and *lfredo )aldonado, 4.- SCR ",& #$%%,'* but it is not conclusive, for it may be rebutted by competent and satisfactory proof to the contrary. xSantiago v! (i on, &4" SCR 4%$ #$%%-'. 3he provisions of rt. !,%$ on the presumption of equitable mortgage applies also to a contract purporting to be an absolute sale. x Tua on v! #*, "4! SCR 7%7 #$%%%'.!"4 contract purporting to be an absolute sale is presumed to be an equitable mortgage) #a' when the price of the sale is unusually inadequate* !"& #b' when the vendor remains in possession as lessee or otherwise* !", #c' when after the expiration of the right of repurchase, it is extended by the buyer. x .ilado v! .eirs of 1afael +edlla, "7 SCR $&7 #$%%$'*!"7 #d' when the purported seller continues to collect rentals from the lessees of the property sold. 1amos v! (i on, 4.- SCR !7 #$%%,' 95nadequacy of purchase price: is considered so far short of the real value of the property as to startle a correct mind. xSantiago v! (i on, &4" SCR 4%$ #$%%-'* or that the mind revolts at it as such that a reasonable man would neither directly or indirectly be li0ely to consent to it. x,da de *lvare v! #*, $"! SCR "%. #!..4'. Bere tolerated possession is not enough to prove that the transaction was an equitable mortgage. x1edondo v! 2imene , &", SCR ,". #$%%7'. =ayment of real estate taxes is a usual burden attached to ownership, and when such payment is coupled with continuous possession of the property, it constitutes evidence of great weight that a person under whose name the realty taxes were declared has a valid and right claim over the land. x6o v! )acaron, 47$ SCR $$. #$%%&'.!">owever mere allegations without proof to support inadequacy of price, or when continued possession by the seller is supported by a valid arrangement consistent with the sale, would not support the allegation of equitable mortgage. x#irelos v! .ernande , 4.% SCR ,$4 #$%%,'.!". lthough under the agreement the seller shall remain in possession of the property for only one year, such stipulation does not detract from the fact that possession of the property, an indicium of ownership, was retained by the alleged
!"! Lim v! #alaguas, 4& 1.G. 7o. -, p. "".4 #!.4-'* #uyugan v! Santos, "4 =hil. !%% #!.!,'* +atanguihan v! #*, $7& SCR "-% #!..7'* .ilado v! .eirs of 1afael +edlla, "7 SCR $&7 #$%%$'* +adrigal v! #ourt of *ppeals, 4&, SCR ,&. #$%%&'* Legaspi v! 7ng, 4&. SCR !$$ #$%%&'* )anga v! )ello, 47! SCR ,&" #$%%&'* (i-o v! 2ardines, 4-! SCR $$, #$%%,'. !"$ Lim v! #alaguas, 4& 1.G. 7o. -, p. "".4 #!.4-'* )alatero v! I*#, !&4 SCR &"% #!.-7'* +ariano v! #*, $$% SCR 7!, #!.."'* Lobres v! #*, "&! SCR 7!, #$%%!'. !"" #laravall v! #*, !.% SCR 4"., 44- #!..%'* "y v! #*, $"% SCR ,,4 #!..4'* Lobres v! #*, "&! SCR 7!, #$%%!'* *lvaro v! Ternida, 47. SCR $-- #$%%,'* (i-o v! 2ardines, 4-! SCR $$, #$%%,'* 1aymundo v! )andong, &$, SCR &!4 #$%%7'* *leligay v! Laserna, &"7 SCR ,.. #$%%7'* (orado ,da! (e (elfin v! (ellota, &4$ SCR ".7 #$%%-'. !"4 =amora v!#*, $,% SCR !% #!..,'. !"& 1omulo v! Layug, 2r!, &%! SCR $,$ #$%%,'. !", 1omulo v! Layug, 2r!, &%! SCR $,$ #$%%,'. !"7 #ru v! #ourt of *ppeals, 4!$ SCR ,!4 #$%%"'. !"Lumayag v! .eirs of 2acinto 'eme-o, &$, SCR &! #$%%7'. !".

*ustria v! 6on ales, 2r!, 4$% SCR 4!4 #$%%4'.

51
vendor to qualify the arrangement as an equitable mortgage, especially when it was shown that the vendor retained part of the purchase price. xLegaspi v! 7ng, 4&. SCR !$$ #$%%&'.!4% 4nder rticle !,%$, delay in transferring title is not one of the instances enumerated by law@instances in which an equitable mortgage can be presumed. 7or does the fact that the original transaction on the land was to support a loan, which when it was not paid on due date was negotiated into a sale, without evidence that the subsequent deed of sale does not express the true intentions of the parties, give rise to a presumption of equitable mortgage. x#eballos v! Intestate /state of the Late /migdio +ercado, 4"% SCR "$" #$%%4'. 3he fact that the price in a pacto de retro sale is not the true value of the property does not +ustify the conclusion that the contract is one of equitable mortgage* in fact a pacto de retro sale, the practice is to fix a relatively reduced price to afford the seller a retro every facility to redeem the property . xIgnacio v! #*, $4, SCR $4$ #!..&'.!4! rticle !,%$ being remedial in nature, may be applied retroactively in cases prior to the effectivity of the Civil Code. x7lea v! #*, $47 SCR $74 #!..&'. ). Reme1*e! All"Ae1 #"r EB(*t$)le ;"rt&$&e # rt. !,%$, !,%&'. 5n the case of an equitable mortgage, although rt. !,%& which allows for the remedy of reformation, nothing therein precludes an aggrieved party from pursuing other remedies to effectively protect his interest and recover his property, such as an action for declaration of nullity of the deed of sale and specific performance. xTolentino v! #ourt of *ppeals, "-, SCR ", #$%%$'. 5n an equitable mortgage situation, the consolidation of ownership in the person of the mortgagee in equity upon failure of the mortgagor in equity to pay the obligation, would amount to a pactum commissorium! 3he only proper remedy is to cause the foreclosure of the mortgage in equity. x)riones8,as9ue v! #ourt of *ppeals, 4&% SCR ,44 #$%%&'* or to determine if the principal obligation secured by the equitable mortgage has been paid or settled. x)anga v! )ello, 47! SCR ,&" #$%%&'. '. Pactum Commissorium # rt. $%--' stipulation which is a pactum commisorium enables the mortgagee to acquire ownership of the mortgaged properties without need of any foreclosure proceedings @it is a nullity being contrary to the provisions of rticle $%-- of the Civil Code. xLumayag v! .eirs of 2acinto 'eme-o, &$, SCR "!& #$%%7'.!4$ 5t does not apply when the security for a debt is also money in the form of time deposit. x#onsing v! #*, !77 SCR !4 #!.-.'. 3he provision in a B1 D (acion en $ago with a Right to Repurchase that in the event the borrower fails to comply with the new terms of restructuring the loan, the agreement shall automatically operate to be an instrument of d acion en pago without need of executing any new document does not constitute pactum commissorium! Solid 5omes )nc. v. Court of &,,eals: 295 SCRA 279 (1669). !"# S$$% 3he stipulation in the promissory note providing that upon failure of the ma0ers to pay interests, ownership of the property would automatically be transferred to the payee, and the covering deed of sale would be registered is in substance a pactum commissorium in violation of rt. $%--, and consequently, the resultant sale is void and the registration and obtaining of new title in the name of
!4%

7ronce v! #*, $.- SCR !"" #!..-'.

!4!

(e 7campo v! Lim, "- =hil. &7. #!.!-'* &eliciano v! Lim0uco, 4! =hil.!47 #!.$%'* )elonio v! +ovella, !%& =hil. 7&, #!.&.'. !4$ 6uerrero v! 5-igo, ., =hil. "7 #!.&4'@ +ontevirgin v! #*, !!$ SCR ,4! #!.-$'* ,da! de =ulueta v! 7ctaviano, !$! SCR "!4 #!.-"'.

52
the buyer would have be declared void also. &. Francisco *ealty v. Court of &,,eals 268 SCRA %46 (1668).!4" e. F* $l C/$ 'e t" Re1eem * +;*!t$>e EB(*t$)le ;"rt&$&e. # rt. !,%,' 3he "% day period under rt. !,%, does not apply if the courts should find the sale to be absolute. x$angilinan v! 1amos, !-! SCR "&. #!..%'.!44 Sellers in a sale +udicially declared as pacto de retro may not exercise the right to repurchase within the "%?day period provided under rt. !,%,, although they have ta0en the position that the same was an equitable mortgage, if it is shown that there was no honest belief thereof since) #a' none of the circumstances under rt. !,%$ were shown to exist to warrant a conclusion that the transaction was an equitable mortgage* and #b' that if they truly believed the sale to be an equitable mortgage, as a sign of good faith, they should have consigned with the trial court the amount representing their alleged loan, on or before the expiration of the right to repurchase. &billa v. Gobonseng: %94 SCRA 51 (2442).!4& C. LE,AL REDE;PTION 1. De#* *t*" # rt. !,!.' <egal redemption is in the nature of a privilege created by law partly for reasons of public policy and partly for the benefit and convenience of the redemptioner, to afford him a way out of what might be a disagreeable or HanI inconvenient association into which he has been thrust. 5t is intended to minimi2e co?ownership. x &ernande v! Tarun, ".! SCR ,&" #$%%$'.!4, 2. Le&$l Re1em2t*" R*&/t! ( 1er t/e C*-*l C"1e $. Am" & C"</e*r! # rt. !%--' Redemption right pertain to disposition of right to inherit, and not when there is a sale of a particular property of the estate. x$lan v! I*#, !"& SCR $7% #!.-&'. 8hen the heirs have partitioned the estate among themselves and each have occupied and treated definite portions thereof as their own, co?ownership has ceased even though the property is still under one title, and the sale by one of the heirs of his definite portion cannot trigger the right of redemption in favor of the other heirs. x,da! (e *pe v! #ourt of *ppeals, 4&, SCR !." #$%%&'. 3he heirs who actually participated in the execution of the extra+udicial settlement, which included the sale to a third person of their pro indiviso shares in the property, are bound by the same* while the co?heirs who did not participate are given the right to redeem their shares pursuant to rticle !%--. x#ua v! ,argas, &%, SCR "74 #$%%,'. ). Am" & C"<"A er! # rt. !,$%' 3he right of redemption may be exercised by a co?owner only when part of the community property is sold to a stranger, now when sold to another co?owner because a new participant is not added to the co?ownership. x&ernande v! Tarun, ".! SCR ,&" #$%%$'. 8hen the seller a retro dies, the right to redeem cannot be exercised by a co?heir alone, since the right to redeem belonged in common to all the heirs. x(e 6u man v! #ourt of *ppeals, !4- SCR 7& #!.-7'.

Legaspi v! 7ng, 4&. SCR !$$ #$%%&'. Tapas v! #ourt of *ppeals, ,. SCR "." #!.7,'. !4& ,da! de +acoy v! #*, $%, SCR $44 #!..$'. !4, )asa v! *guilar, !!7 SCR !$- #!.-$'.
!44

!4"

53
Aor the right of redemption to be exercised, co?ownership must exist at the time of the conveyance is made by a co?owner and the redemption is demanded by the other co?owner or co?owners. x*vila v! )arabat, 4-& SCR - #$%%,'. Redemption by co?owner redounds to the benefit of all other co?owners. x +ariano v! #ourt of *ppeals, $$$ SCR 7", #!.."'. '. D*!t* &(*!/* & BetAee R*&/t "# Re1em2t*" "# C"</e*r! $ 1 C"<"A er! 6 rticle !,$% includes the doctrine that a redemption by a co?owner of the property owned in common, even when he uses his own fund, within the period prescribed by law inures to the benefit of all the other co?owners. x*nnie Tan v! #ourt of *ppeals , !7$ SCR ,,% #!.-.'.!47 1. Am" & A1E"* * & OA er! # rts. !,$! and!,$$' Requisite to show property previously bought on 9speculation: dropped. x Legaspi v! #*, ,. SCR ",% #!.7,'. Right of redemption covers only 9resale: and does not cover exchanges or barter of properties x(e Santos v! #ity of +anila , 4& SCR 4%. #!.7$'* and cannot arise unless both ad+acent lands are rural lands. x$rimary Structures #orp! v! ,alencia , 4%. SCR "7! #$%%"'. 8hen there is no issue that when the ad+oining lands involved are both rural lands, then the right of redemption can be exercised and the only exemption provided is when the buyer can show that he did not own any other rural land. Jut the burden of proof to provide for the exception lies with the buyer. x$rimary Structures #orp! v! ,alencia, 4%. SCR "7!, "74 #$%%"'. e. S$le "# Cre1*t * L*t*&$t*" # rt. !,"4' 6 "% days from notice of demand to pay. 2. =/e Per*"1 "# Le&$l Re1em2t*" Be&* ! # rt. !,$"' 3he interpretation of rt. !,$" where there is a need for notice in writing, should always tilt in favor of the redemptioner and against the buyer, since the purpose is to reduce the number of participants until the community is terminated, being a hindrance to the development and better administration of the property. 95t is a one?way street,: in favor of the redemptioner since he can compel the buyer to sell to him but he cannot be compelled by the vendee to buy. x.ermoso v! #ourt of *ppeals, "%% SCR &!, #!..-'. 3he "%?day period does not begin to run in the absence of written notification coming from the seller. x#ua v! ,argas, &%, SCR "74 #$%%,'*!4- and it must be a written notice of a perfected sale. xSpouses (oromal v! #ourt of *ppeals, ,, SCR &7& #!.7&'. 3he written notice of sale is mandatory, notwithstanding actual 0nowledge of a co? owner, in order to remove all uncertainties about the sale, its terms and conditions, as well as its efficacy and status. x,erdad v! #ourt of *ppeals, $&, SCR &." #!..,'.. 7otice to minors may validly be served upon parents even when the latter have not been +udicially appointed as guardians since the same is beneficial to the children. x)adillo v! &errer, !&$ SCR 4%7 #!.-7'. 7either the registration of the sale x#abrera v! ,illanueva, !,% SCR ,$7 #!.--', nor the annotation of an adverse claim x,da! (e *pe v! #ourt of *ppeals, 4&, SCR !." #$%%&', nor notice being given by the city treasurer x,erdad v! #ourt of *ppeals, $&, SCR &." #!..,', comply with the written notice required under rt. !,$" to begin the tolling of the "%?day period of redemption. 3he notice required under rticle !,$" is deemed to have been complied with when the other co?owner has signed the Ceed of (xtra+udicial =artition and (xchange of
(e 6u man v! #*, !4- SCR 7& #!.-7'* *dille v! #*, !&7 SCR 4&& #!.--'. 6arcia v! #alaliman, !7 SCR $%! #!.-.'* +ariano v! #ourt of *ppeals, $$$ SCR 7", #!.."'.
!47

!4-

54
Shares which embodies the disposition of part of the property owned in common. x&ernande v! Tarun, ".! SCR ,&" #$%%$'. 3he existence of a clause in the deed of sale to the effect that the vendor has complied with the provisions of rticle !,$", cannot be ta0en to 9being the written affirmation under oath, as well as the evidence, that the required written notice to petitioner under rticle !,$" has been meet, for the person entitled to the right is not a party to the deed of sale. x$rimary Structures #orp! v! ,alencia, 4%. SCR "7! #$%%"'.
Francisco v. !oiser: %%2 SCRA %45 (2444), summari2ed the case?law on !,$", and with definitiveness declared)

rt.

Aor the "%?day redemption period to begin to run, notice must be given by the seller* and that notice given by the buyer or even by the Register of Ceeds is not sufficient. 3his expressly affirms the original ruling in )utte v! +anuel "y and Sons, 5nc., 4 SCR &$, #!.,$', as affirmed in xSalatandol v! 1etes, !,$ SCR &,- #!.--'. 3his expressly overruled the ruling in x/tcuban v! #*, !4- SCR &%7 #!.-7', which allowed the giving of notice by the buyer to be effective under rticle !,$"* 8hen notice is given by the proper party #i.e., the seller', no particular form of written notice is prescribed under rticle !,$", so that the furnishing of the copies of the deeds of sale to the co?owner would be sufficient, as held previously in x (istrito v! #*, !.7 SCR ,%, #!..!'* #one0ero v! #*, !, SCR 77& #!.,,'* x)adillo v! &errer, !&$ SCR 4%7 #!.-7', but only on the form of giving notice but not on the ruling of who is the proper party to give notice*

ffirmed ruling in x*lon o v! I*#, !&% SCR $&. #!.-7', that the filing of the suit for e+ectment or collection of rentals against a co?owner actually dispenses with the need for a written notice, and must be construed as commencing the running of the period to exercise the right of redemption, since the filing of the suit amounted to actual 0nowledge of the sale from which the "%?day period of redemption commences to run.

$. R$re ED'e2t*" !) 8hen the sale to the buyer was effected through the co?owner who acted as the bro0er, and never indicated that he would exercise his right to redeem. x(istrito v! #*, !.7 SCR ,%, #!..!'. 8hen the buyers too0 possession of the property immediately after the execution of the deed of sale in their favor and lived in the midst of the other co? owners who never questioned the same. x$ilapil v! #*, $&% SCR &,% #!..&'. 4. OTHER LE,AL REDE;PTION RI,HTS $. Re1em2t*" * P$te t! #Sec. !!., C. . !4!' Right to repurchase is granted by law and need not be provided for in the deed of sale. x)erin v! #ourt of *ppeals, !.4 SCR &%- #!..!'. 4nder the free patent or homestead provisions of the =ublic <and ct a period of five #&' years from the date of conveyance is provided, to be rec0oned from the date of the sale and not from the date of registration in the office of the Register of Ceeds. xLee #huy 1ealty #orp! v! #*, $&% SCR &., #!..&'.!4. ). Re1em2t*" * T$D S$le! #Sec. $!&, 75RC of !..7' '. Re1em2t*" )? C(1&me t De)t"r #Secs. $7?$-, Rule "., Rules of Civil =rocedure' 8ritten notice must be given to the +udgment debtor before the sale of the property on execution, to give him the opportunity to prevent the sale by paying the +udgment debt sought to be enforced and the costs which have been incurred. x Torres v! #abling, $7& SCR "$. #!..7'.
!4.

+ata v! #ourt of *ppeals, "!- SCR 4!, #!...'.

55
8here there is a third?party claim, sheriff should demand from the +udgment creditor who becomes the highest bidder, payment in cash of his bid instead of merely crediting the amount to the partial satisfaction of the +udgment debt. x Torres v! #abling, $7& SCR "$. #!..7'. 4nder Sec. $-, Rule ". of the !..7 Rules of Civil =rocedure, the period of redemption shall be 9at any time within one #!' year from the date of registration of the certificate of sale,: so that the period is now to be understood as composed of ",& days, unli0e the ",% days under the old provisions of the Rules of Court. x 5smael v! #*, "!- SCR $!& #!...'. 1. Re1em2t*" * EDtr$E(1*'*$l F"re'l"!(re #Sec. ,, ct "!"&' 3he redemption of extra?+udicially foreclosed properties is exercised within one #!' year from the date of the auction sale as provided for in ct "!"&. x Lee #huy 1ealty #orp! v! #*, $&% SCR &., #!..&'. 3he execution of a dacion en pago by sellers effectively waives the redemption period normally given a mortgagor. x&irst 6lobal 1ealty and (ev! #orp! v! San *gustin, "77 SCR "4! #$%%$'. e. Re1em2t*" * E(1*'*$l #"re'l"!(re "# m"rt&$&e #Sec. 47, R. . -7.!' stipulation to render the right to redeem defeasible by an option to buy on the part of the creditor. 3Soriano v. !autista: 7 SCRA 647 (1672). 7o right to redeem from a +udicial foreclosure sale, except those granted by ban0s or ban0ing institutions. x6SIS v! #&I, !7& SCR !. #!.-.'. 3he one?year redemption period in the case of foreclosure is not interrupted by the filing of an action assailing the validity of the mortgage, so that at the expiration thereof, the mortgagee who acquires the property at the foreclosure sale can proceed to have title consolidated in his name and a writ of possession issued in his favor. x "nion )ank v! #*s, "&. SCR 4-% #$%%!'.!&% fter ban0 has foreclosed the property as highest bidder in the auction sale, the accepted offer of spouses?borrowers to 9repurchase: the property was actually a new option contract, and the condition that the spouses?borrowers will pay monthly interest during the one?year option period is considered to be the separate consideration to hold the option contract valid. x(i0amco v! #ourt of *ppeals, 44% SCR !.% #$%%4'. #. Re1em2t*" * F"re'l"!(re )? R(r$l B$ >! #R. . 7o. 7$%' 5f the land is mortgaged to a rural ban0, mortgagor may redeem within two #$' years from the date of foreclosure or from the registration of the sheriffLs certificate of sale at such foreclosure if the property is not covered or is covered, respectively, by 3orrens title. 5f the mortgagor fails to exercise such right, he or his heirs may still repurchase within five #&' years from expiration of the two #$' year redemption period pursuant to Sec. !!. of the =ublic <and ct #C. . !4!'. x 1ural )ank of (avao #ity v! #*, $!7 SCR &&4 #!.."'.!&! &. Le&$l R*&/t t" Re1eem ( 1er A&r$r*$ Re#"rm C"1e 4nder Section !$ of R. . "-44, as amended, in the event that the landholding is sold to a third person without the 0nowledge of the agricultural lessee, the latter is granted by law the right to redeem it within !-% days from notice in writing and at a reasonable price and consideration. x3ui-o v! #*, $.! SCR $4. #!..-'.!&$

,aca v! #*, $"4 SCR !4, #!..4'. .eirs of &elicidad #an9ue v! #*, $7& SCR 74! #!..7'. !&$ Springsun +anagement Systems #orp! v! #amerino, 44. SCR ,& #$%%&'.
!&!

!&%

56 XII. ASSI,N;ENT (Art!. 1724<17%5)

1. De#* *t*" $ 1 N$t(re "# A!!*& me t ssignment is the process of transferring the right of assignor to assignee who would then have the right to proceed against the debtor. 3he assignment may be done gratuitously or onerously, in the latter case, the assignment has an effect similar to that of a sale. xLicaros v! 6atmaitan, ",$ SCR &4- #$%%!'.!&" 5n its most general and comprehensive sense, an assignment is 9a transfer or ma0ing over to another of the whole of any property, real or personal, in possession or in action, or of any estate or right therein. 5t includes transfers of all 0inds of property, and is peculiarly applicable to intangible personal property and, accordingly, it is ordinarily employed to describe the transfer of non?negotiable choses in action and of rights in or connected with property as distinguished from the particular item or property.: x$') v! #ourt of *ppeals, $7$ SCR $.! #!..7'. 2. Per#e't*" )? ;ere C" !e t # rt. !,$4' %. B(t ;(!t Be * P()l*' I !tr(me t t" A##e't T/*r1 P$rt*e! # rt. !,$&'. 4. E##e't! "# A!!*& me t $. A!!*& me t "# Cre1*t n assignment of credit is an agreement by virtue of which the owner of a credit, 0nown as the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the consent of the debtor, transfers his credit and accessory rights to another, 0nown as the assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it against the debtor. x*9uintey v! Tibong, &!! SCR 4!4 #$%%,'.!&4 s a consequence, the third party steps into the shoes of the original creditor as subrogee of the latter. lthough constituting a novation, such assignment does not extinguish the obligation under the credit assigned, even when the assignment is effected without his consent. xSouth #ity .omes, Inc! ,! )* &inance #orp!, "7! SCR ,%" #$%%!'. ). I!!(e! re De)t"r # rt. !,$,' 5n an assignment of credit, the consent of the debtor is not essential for its perfection, his 0nowledge thereof or lac0 of it affecting only the efficaciousness or inefficaciousness of any payment he might ma0e. x $ro0ect )uilders, Inc! v! #ourt of *ppeals, "&- SCR ,$, #$%%!'. Consent of debtor is not necessary in order that assignment may fully produce legal effects, and the duty to pay does not depend on the consent of the debtor. 1therwise, all creditors would be prevented from assigning their credits because of the possibility of the debtors/ refusal to given consent. 8hat the law requires in an assignment of credit is mere notice to debtor, and the purpose of the notice is only to inform the debtor that from the date of the assignment, payment should be made to the assignee and not to the original creditor. x'I(# v! (e los *ngeles, 4% SCR 4-. #!.7!'.155 '. A''e!!"r*e! $ 1 A''e!!*" ! # rt. !,$7' ssignment of a credit includes all the accessory rights, such as guaranty, mortgage, pledge or preference. x "nited $lanters Sugar +illing #o!, Inc! ("$S"+#7% v! #ourt of *ppeals, &$7 SCR "", #$%%7'.
!&" 'yco Sales #orp! v! )* &inance #orp!, $%% SCR ,"7 #!..!'* 1odrigue v! #*, $%7 SCR &&" #!..$'* $ro0ect )uilders, Inc! v! #ourt of *ppeals, "&- SCR ,$, #$%%!'. (54 Lo v! 42S /co8&ormwork System $hil!, Inc!, 4!" SCR !-$ #$%%"'. !&& Sison : Sison v! 5ap Tico, "7 =hil. &-7 #!.!-'* # : # #ommercial #orp! v! $'), !7& SCR ! #!.-.'* $ro0ect )uilders, Inc! v! #ourt of *ppeals , "&- SCR ,$, #$%%!'* .*9uintey v! Tibong, &!! SCR 4!4 #$%%,'* Ledonio v! #apitol (evelopment #orp!, &$, SCR "7. #$%%7'.

57
1. Tr$1*t*" * A!!*& me t 7otari2ation converts an ssignment of Credit, a private document, into a public document, thus, complying with the mandate of rticle !,$& of the Civil Code and ma0ing it enforceable even as against third persons. x Ledonio v! #apitol (ev! #orp!, &$, SCR "7. #$%%7'. 5. =$rr$ t*e! "# A!!*& "r # rt. !,$-' ssignor warrants only the existence or legality of the credit but not the solvency of the debtor. Nyco Sales Cor,. v. !& Finance: 244 SCRA 7%9 (1661). EXCEPTIONS0 ($) 5f this is expressly warranted. ()) 5f insolvency is 0nown by the assignor prior to assignment. (') 5f insolvency is prior to assignment is common 0nowledge. 8hen dacion en pago ta0es the form of an assignment of credit, it produces the effects of a dation in payment, which may extinguishes the obligation* however, by virtue of the warranty in rt. !,$-, which ma0es the vendor liable for the existence and legality of the credit at the time of sale, when it is shown that the assigned credit no longer existed at the time of dation, then it behooves the assignor to ma0e good its warranty and pay the obligation. xLo v! 42S /co8&ormwork System $hil!, Inc!, 4!" SCR !-$ #$%%"'. 7. R*&/t "# Re2(r'/$!e " A!!*& me t "# Cre1*t ( 1er L*t*&$t*" # rts. !,"4 and!,"&' 9. S()r"&$t*" versus A!!*& me t "# Cre1*t # rt.!"%!' Subrogation extinguishes the obligation and gives rise to a new one* assignment refers to the same right which passes from one person to another. 3he nullity of an old obligation may be cured by subrogation, such that a new obligation will be perfectly valid* but the nullity of an obligation is not remedied by the assignment of the creditor/s right to another. 5n an assignment of credit, the consent of the debtor is not necessary in order that the assignment may fully produce legal effects* whereas, conventional subrogation requires an agreement among the three parties concerned 6 original creditor, debtor, and new creditor. 5t is a new contractual relation based on the mutual agreement among all the necessary parties. .icaros v. Gatmaitan: %72 SCRA 548 (2441).157 8. A!!*& me t "# C"2?r*&/t #Sec. !-%, 5ntellectual =roperty Code' 6. A!!*& me t $! $ EB(*t$)le ;"rt&$&e 8hen an assignor executes a Ceed of ssignment covering her leasehold rights in order to secure the payment of promissory notes covering the loan she obtained from the ban0, such assignment is equivalent to an equitable mortgage, and the non?payment of the loan cannot authori2e the assignee to register the assigned leasehold rights in its name as it would be a violation of rt. $%-- against pactum commissorium! 3he proper remedy of the assignee is to proceed to foreclose on the leasehold right assigned as security for the loan. x()$ v! #ourt of *ppeals, $-4 SCR !4 #!..-'.

XI. BULM SALES LA= (ACT NO. %652)

1. S'"2e # Chin v. "y: 44 O.,. 4 S(22. 52' 3he Jul0 Sales <aw must be construed strictly. 3hus, the disposal by the owner of a foundry shop of all his iron bars and others does not fall under the law, because the contents of a foundry shop are not wares and merchandise. 3he <aw only covers sales in bul0 of fixtures and equipment used in the mercantile business, which involves the buying and selling of merchandise. x$eople v! ;ong, HC I &% 1.G. 4-,7 #!.&4'.
!&,

Ledonio v! #apitol (ev! #orp!, &$, SCR "7. #$%%7'.

58
3he <aw applies to merchants who are in the business of selling goods and wares and similar merchandise, and cannot cover the sale of assets by a manufacturer since the nature of his business does not parta0e of merchandise. D!P v. #he 5onorable 0udge of the *#C of 6anila: 87 O.,. N". 7 11%9 (45 Fe)r($r? 1664). 2. C"-er$&e "# +B(l> S$le. 6 Sale, transfer, mortgage or assignment of) ($) Goods, wares, merchandise, provisions or material other than in the ordinary course of business* ()) (') ll, or substantially all of all or substantially all of the fixtures and equipment used in and about the business. ll, or substantially all of the business or trade theretofore conducted by the vendor, mortgagor, transferor, or assignor*

%. C"m2l*$ 'e ReB(*reme t! U 1er t/e L$A $. 3he merchant must give the buyer a certified schedule of his debts) names of creditors, amounts owing to each and the nature of the debt. ). =urchase price paid must be applied to these debts. '. 3en #!%' days before the sale, the seller must ta0e an inventory of his stoc0 and advise all his creditors of the same. EXCEPTION0 8hen the seller obtains a written waiver from all creditors. 4. E##e't! "# N" <C"m2l*$ 'e $. 5f purchase money or mortgage proceeds are not applied pro8rata to payment of the bona fide claims of the creditors, the sale is deemed fraudulent and void. #Sec. 4' ). 7on?giving of the list of creditors or intentional omission of the names of some of the creditors, and placing of wrong data required by law, would sub+ect the seller or mortgagor to penal sanctions. #Sec. 4' '. Jul0 transfer without consideration or for nominal consideration punishable. #Sec. 7' 1. Aailure to comply with other provisions of the law the non?application of the consideration proportionately to the creditors, the preparation of the inventory, and the notification to creditors, are also made punishable. #Sec. !!' sale in bul0 done without complying with the terms of the <aw, ma0es the transaction fraudulent and void, but does not change the basic relationship between the seller, assignorDencumbrancer and his creditor. 3he portion of a +udgment providing for subsidiary liability is invalid, since the proper remedy of the creditor is to collect on the credit against the defendant, and if they cannot pay to attach on the property fraudulently mortgage since the same still pertain to the debtors?defendants. x$eople v! +apoy, 7" =hil. ,7- #!.4$'.

XII. RETAIL TRADE LIBERALIOATION ACT OF 2444 AND RELATED PROIISIONS OF THE ANTI<DU;;L LA=
1. P()l*' P"l*'? ( 1er RTLA 24440 * reversal of paradigm@ focus from the protecting the retailers to promoting the interests of consumers! 2. S'"2e $ 1 De#* *t*" "# +Ret$*l Tr$1e. $. Im2"rt$ 'e "# Ret$*le Tr$1e # /ing v. 5ernae7: 4 SCRA 962' ). Eleme t!0 (1) Seller habitually engaged in selling* (2) Selling direct to the general public* and

59
(%) 1b+ect of the sale is limited to merchandise, commodities or goods for consumption. '. ;e$ * & "# +H$)*t($ll? Sell* &. (ngaging in the sale of merchandise as an incident to the primary purpose of a corporation He!g!, operation of a pharmacy by a hospital* sale of cellphones by a telecommunication companyI does not constitute 9retail trade: within the purview of the Retail 3rade 7ationali2ation <aw, as this is ta0en from the provision thereof excluding form the term 9retail business: the operation of a restaurant by a hotel?owner or ?0eeper since the same does not constitute the act of habitually selling direct to the general public merchandise, commodities or goods for consumption. S(C 1pinion 7o. !!, series of $%%$, !" 7ovember $%%$. 1. ;e$ * & "# +C" !(m2t*" . #C1E 1pinion 7o. "$&, series of !.4&* 5RR of <aw'. 3he <aw limits its application to the sale of items sold for domestic or household, or properly called consumer goods* whereas, when the same items are sold to commercial users, they would constitute non?consumer goods and not covered by the <aw. !almaceda v. "nion Carbide Phili,,ines )nc. 124 SCRA 86% (168%).!&7 e. ;e$ * & "# +,e er$l P()l*'. #C1E 1pinion 7o. $&", series of !.&4'. (ven when the same of consumer goods is limited only to the officers of the the company, the same would still constitute retail trade covered by the <aw. Goodyear #ire v. *eyes Sr.: 12% SCRA 29% (168%). 8here the glass company manufactures glass products only on specific orders, it does not sell directly to consumers but manufacturers its products only for the particular clients, it cannot be said that it is a merchandiser. D!P v. 5onorable 0udge of the *#C of 6anila: 87 O.,. N". 7 11%9 (45 Fe)r($r? 1664). %. C$te&"r*e! "# Ret$*l Tr$1e E ter2r*!e! $. C$te&"r? A P ED'l(!*-e t" F*l*2* " '*t*Ne ! $ 1 144Q F*l*2* " e t*t*e! ). C$te&"r*e! B $ 1 C '. C$te&"r? D P L(D(r? Item! 1. EDem2te1 Are$! e. R*&/t! ,r$ te1 t" F"rmer N$t(r$l<B"r F*l*2* "! 4. F"re*& I -e!tme t "r E &$&e * Ret$*l Tr$1e * t/e P/*l*22* e! $. ReB(*reme t! #"r F"re*& I -e!t"r! ). ,r$ 1#$t/er R(le " 144Q F*l*2* " OA er!/*2 "# C"r2"r$te E t*t?0 S(C 1pinions, dated $% Barch !.7$ and $$ pril !.-"* C35 1pinion to 3anada, 3eehan0ee O Carreon <aw 1ffice, dated " ugust !.&.. '. P()l*' O##er* &! "# S/$re! "# St"'> 5. F"re*& Ret$*ler! * t/e P/*l*22* e! $. Pre<B($l*#*'$t*" reB(*reme t! ). R(le! " Br$ '/e!KSt"re! '. Pr"m"t*" "# L"'$ll?<;$ (#$'t(re1 Pr"1('t! 1. Pr"/*)*te1 A't*-*t*e! "# F"re*& Ret$*ler!
!&7

+arsman : #o!, Inc! v! &irst #oconut #entral #o!, Inc!, !,$ SCR $%, #!.--'* )!&! 6oodrich $hilippines, Inc! v! 1eyes, Sr!, !$! SCR "," #!.-"'.

60
e. B* 1* & E##e't "# L*'e !e t" E &$&e * Ret$*l " Pr*-$te P$rt*e! 8hen a license to engage in coc0tail lounge and restaurant is issued to a Ailipino citi2en, it is conclusive evidence of the latterLs ownership of the retail business as far as private parties are concerned. x(ando v! &raser, $$7 SCR !$, #!.."'. 7. Pe $lt? Pr"-*!*" ! 9. A22l*'$)*l*t? "# t/e A t*<D(mm? A't #Comm. ct. !%-, as amended by =.C. 7!&' $. <aw penali2es Ailipinos who permit aliens to use them as nominees or dummies to en+oy privileges reserved for Ailipinos or Ailipino corporations. Criminal sanctions are imposed on the president, manager, board member or persons in charge of the violating entity and causing the latter to forfeit its privileges, rights and franchises. ). Section $? of the <aw prohibits aliens from intervening in the management, operation, administration or control of nationali2ed business, whether as officers, employees or laborers, with or without remuneration. liens may not ta0e part in technical aspects, provided no Ailipino can do such technical wor0, and with express authority from the =resident of the =hilippines. '. <ater, =res. Cecree 7!& was enacted amending the law by the addition of a proviso expressly allowing the election of aliens as members of the boards of directors or the governing bodies of corporations or associations engaged in partially nationali2ed activities in proportion to their allowable participation or share in the capital of such entities. 3he amendment was meant to settle the uncertainty created in the obiter opinion in Lu on Stevedoring #orp! v! *nti8(ummy )oard, 4, SCR 474 #!.7$', which re+ected the argument of a public utility corporation that had no? merican aliens in its employ, that the nti?Cummy <aw covered only employment in wholly nationali2ed businesses and not in those that are only partly nationali2ed. 3he Ailipino common?law wife of a Chinese national is not barred from engaging in the retail business provided she uses capital exclusively derived from her paraphernal properties* allowing her common?law Chinese husband to ta0e part in management of the retail business would be a violation of the law. xTalan v! $eople, !,. SCR &-, #!.-.'.

R"O"R
UPDATED0 15 OCTOBER 2448: 52% SCRA