15462086 sales general principles dean clv[1]

8/8/2019 15462086 Sales General Principles Dean CLV[1]

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By:

CCESARESAR L.L.VVILLANUEVAILLANUEVA, B.S.C., C.P.A., LL.B., LL.M., FAICD, D.J.S.

AATENEOTENEO DEDE MMANILAANILA LLAWAW SSCHOOLCHOOL

Rockwell Center, Makati CityRockwell Center, Makati City

LLAWAW on Son SALESALESRREVIEWEVIEW


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DDEFINITIONEFINITION (Art. 1458)

PPARTIESARTIES OOBLIGATIONSBLIGATIONS

SSELLERELLER

BBUYERUYER

(1)(1)TOTO TTRANSFERRANSFEROOWNERSHIPWNERSHIP

(2)(2)TOTO DDELIVERELIVERPPOSSESIONOSSESION

(3)(3)TOTO PPAYAY

SSUBJECTUBJECTMMATTERATTER

PPRICERICE

GGENERALENERAL PPRINCIPLESRINCIPLES

CONSENT

Meeting of MindsReal Obligation

Real Obligations

SSALEALE

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EESSENTIALSSENTIAL CCHARACTERISTICS OFHARACTERISTICS OF SSALEALE::

NNOMINATEOMINATE

PPRINCIPALRINCIPAL

CCONSENSUALONSENSUAL

BBILATERAL/ILATERAL/

RRECIPROCALECIPROCAL

OONEROUSNEROUS

CCOMMUTATIVEOMMUTATIVE

vsvs..

TTITLEITLE

vsvs..

vsvs..

vsvs..

vsvs..

vsvs..

vsvs..

InnominateInnominate

SolemnSolemn RealReal

UnilateralUnilateral

vsvs..

GratuitiousGratuitious

ModeMode

AccessoryAccessory

AleatoryAleatory

vsvs..

PrefaratoryPrefaratory

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SSALESALES versusversus DDONATIONONATION

CCONSENSUALONSENSUAL SSOLEMNOLEMN

OONEROUS/NEROUS/CCOMMUTATIVEOMMUTATIVE GGRATUITOUSRATUITOUS

EESSENCESSENCE:: BBOTHOTH IINVOLVE THENVOLVE THE TTRANSFER OFRANSFER OF

OOWNERSHIP/WNERSHIP/PPOSSESSION OFOSSESSION OF

SSUBJECTUBJECT MMATTERATTER

((i.e.,i.e., 44thth Requisite ofRequisite of

Form for validity)Form for validity)

((i.e.,i.e., Pure LiberalityPure Liberality

as consideration)as consideration)

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SSALESALES versusversus BBARTERARTER::

BBARTER ISARTER IS SSALEALE,, BUT WITH THEBUT WITH THE PPRICERICE BEING REPLACEDBEING REPLACED

WITH ANWITH AN OOBLIGATION TOBLIGATION TO TTRANSFERRANSFER

OOWNERSHIP/WNERSHIP/PPOSSESSION OF ANOTHEROSSESSION OF ANOTHER

SSUBJECTUBJECT

MMATTERATTER

TTHEREFOREHEREFORE:: BBARTER GOVERNED BYARTER GOVERNED BY LLAW ONAW ON SSALESALES

BBUTUT: N: NOTOTCOVEREDCOVEREDBYBY SSTATUTE OFTATUTE OF FFRAUDSRAUDS

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SSALESALES versusversus DDACION ENACION ENPPAGOAGO:: DDACIONACION ISIS PPROCESS OFROCESS OF EEXTINGUISHMENT OFXTINGUISHMENT OF PPRE-RE-

EEXISTINGXISTING OOBLIGATIONBLIGATION ((CCONTRACTS)ONTRACTS)

EESSENTIALLYSSENTIALLY:: DDACIONACION GGOVERNEDOVERNEDBYBY LLAW ONAW ON SSALESALES

DDACIONACION NOVATESNOVATES THE ORIGINAL CONTRACTUALTHE ORIGINAL CONTRACTUAL

RELATIONS INTO A FULLY EXECUTEDRELATIONS INTO A FULLY EXECUTED SSALEALE

(a) There must be delivery of subject matter in lieu of an(a) There must be delivery of subject matter in lieu of an

pre-existing obligation;pre-existing obligation;

(b) There must be difference between prestation due and(b) There must be difference between prestation due and

what is give in substitute;what is give in substitute;

(c)(c) There must be a clear meeting of minds that theThere must be a clear meeting of minds that the

pre-existing obligation is extinguished by reason ofpre-existing obligation is extinguished by reason of

the prestation substituted.the prestation substituted.

Lo v KJS Eco. Formwork System Phil.,Lo v KJS Eco. Formwork System Phil.,

Inc.,Inc., 413 SCRA 182 (2003)413 SCRA 182 (2003)

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SSALESALES vsvs.. CCONTRACT FORONTRACT FOR PPIECE-OF-IECE-OF-WWORKORK::

Ineluctably, whether the contract be one of sale or one

for a Piece of Work, a transfer of ownership is involved

and a party necessarily walks away with an object.

Commission of Internal Revenue v. Court of Appeals, 271 SCRA 605 (1997)

K for Piece-of-Work: ServiceService is the Subject Matter

Although there is the primary obligation to

pay fee (or price), the main motivation is the

reputation, skill, mastery of contractor.

Engineering & Machinery Corp. v. Court of Appeals, 252 SCRA 156(1996)

BUT: THERE CAN BE NO CONTRACT FOR PIECE-OF-WORK FORPAST SERVICE RESULTING IN THE CREATION OF THE OBJECT

(ALWAYS A SALE)7


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SSALESALES vsvs.. AAGENCY TOGENCY TO SSELLELL//BBUYUY

AAGENCYGENCYRREPRESENTATIVEEPRESENTATIVE

FFIDUCIARYIDUCIARY Essentially revocableEssentially revocable Fruits and of principalFruits and of principal

AAGENTGENT

NNOT PERSONNALY LIABLE FOR THEOT PERSONNALY LIABLE FOR THEOOBLIGATION CREATED BY THEBLIGATION CREATED BY THE SSALEALE

CCONTRACTONTRACT

NNOT OBLIGED TO PAY THEOT OBLIGED TO PAY THE PPRICERICE

DDOES NOT ASSUME THE RISKS OFOES NOT ASSUME THE RISKS OF

OOWNERSHIP TO THEWNERSHIP TO THE

OOBJECT OFBJECT OF

SSALEALE

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SSALESALES vsvs.. AAGENCY TOGENCY TO SSELL/ELL/BBUYUY ContdContd

TTHEREFOREHEREFORE::AAGENTGENT is deemed to be Seller/Buyeris deemed to be Seller/Buyer

when contracted to assume Risks andwhen contracted to assume Risks and

Obligations contrary to his representative/Obligations contrary to his representative/

fiduciary role:fiduciary role:

(a)(a) HHE ASSUMESE ASSUMES OOBLIGATION TO PAY THEBLIGATION TO PAY THE PPRICERICE

(b)(b) SSUBJECTUBJECT MMATTERATTER

RRISKS OFISKS OF LLOSSOSS

IINSURABLENSURABLE IINTERESTNTEREST

MMAINTENANCEAINTENANCE

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SSALEALE versusversus LLEASEEASE::

LLEASE ESSENTIALLY INVOLVES THEEASE ESSENTIALLY INVOLVES THE

TTEMPORARYEMPORARY EENJOYMENT OFNJOYMENT OF PPOSSESSIONOSSESSION OFOFTHETHE SSUBJECTUBJECT MMATTERATTER

TTREATED ASREATED AS SS ALE O ALE ON

IINSTALLMENTSNSTALLMENTS WHENWHEN LLEASEEASE

SSTRUCTURED IN SUCH A WAY ASTRUCTURED IN SUCH A WAY ASTO AVOIDTO AVOID AAPPLICATION OF THEPPLICATION OF THE

RRECTOECTO LLAWAW

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FFEWEW IINSTANCESNSTANCES::


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PPARTIES TO AARTIES TO A SSALEALE(The Essential Element of CONSENT)(The Essential Element of CONSENT)

GGENERALENERAL

RRULEULE::

All Parties Having Capacity to Contract All Parties Having Capacity to ContractCan Be Valid Parties To a SaleCan Be Valid Parties To a SaleEXCEPTIONS:

(a)(a) Minors, Demented, Deaf-Mutes Sale is VoidableMinors, Demented, Deaf-Mutes Sale is Voidable

- Purchase of Necessaries- Purchase of Necessaries- Emancipation- Emancipation

(b)(b) SpousesSpouses (Art. 1490)(Art. 1490)

- Sales to Third Parties- Sales to Third Parties Sale by One Spouse Void Sale by One Spouse Void

- Sales to Each Other- Sales to Each Other Void Void

ExceptExcept:: When marriage governed by CompleteWhen marriage governed by CompleteSeparation of Property RegimeSeparation of Property Regime

By Pre-nuptialsBy Pre-nuptials

By Judicial decreeBy Judicial decree11


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OOTHERTHER RRELATIVEELATIVE DDISQUALIFICATIONSISQUALIFICATIONS (Art. 1491)(Art. 1491)

GuardianGuardian WardsWards

AgentAgent PrincipalPrincipalExceptExcept:: When granted express powerWhen granted express power

to buy principals propertyto buy principals property

Administrator/Administrator/

ExecutorExecutor Estate under administrationEstate under administration

Public OfficersPublic OfficersGovernment property underGovernment property under

their jurisdictiontheir jurisdiction

Judges/Justices/Judges/Justices/

Court OfficersCourt OfficersProperty falling in their jurisdictionProperty falling in their jurisdiction

LawyersLawyers Clients property in litigationClients property in litigation

ExceptExcept:: Contingency fee arrangementContingency fee arrangement

BUT NOTBUT NOT:: Purchase of Inheritance RightsPurchase of Inheritance Rights

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SSUBJECTUBJECT MMATTERATTER(O(OBLIGATIONBLIGATION to Transfer Ownership and Deliver Possession)to Transfer Ownership and Deliver Possession)

11.. PPOSSIBLEOSSIBLE TTHINGHING

22.. LLICITICIT

33.. DDETERMINATEETERMINATEDDETERMINABLEETERMINABLE

vsvs..

vsvs..

vsvs..

Impossible thingsImpossible things

IllicitIllicit

Non-DeterminableNon-Determinable

GGENERICSENERICS

RRATIONALEATIONALE:: Transfer of Ownership/Possession of theTransfer of Ownership/Possession of theSubject Matter is the ESSENCE of SALESubject Matter is the ESSENCE of SALE

Obligation should therefore not be illusoryObligation should therefore not be illusory

To comply with the Obligatory ForceTo comply with the Obligatory Force

principle in Contract Lawprinciple in Contract Law13


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PPRICE &RICE & OOTHERTHERCCONSIDERATIONONSIDERATION(The Obligation to Pay)(The Obligation to Pay)

1.1. RREALEAL/T/TRUERUE vsvs.. FFALSEALSE(Reformation)(Reformation)

vsvs.. SSIMULATEDIMULATED(Void)(Void)

2.2. Money or its EquivalentMoney or its Equivalent vs.vs. PPUREURE vs.vs. NNOMINALOMINAL VVALUABLEALUABLE CCONSIDERATIONONSIDERATION LLIBERALITYIBERALITY CCONSIDERATIONONSIDERATION

44. M. MANNER OF PAYMENTANNER OF PAYMENT

vsvs.. UUNASCERTAINABLENASCERTAINABLEAASCERTAINABLESCERTAINABLE

3.3. CCERTAINERTAIN

RRATIONALEATIONALE:: Must comply with Obligatory Force principle inMust comply with Obligatory Force principle inContract LawContract Law

Must meetMust meet

OnerousOnerous

andand

CommutativeCommutative

characteristics of SALEcharacteristics of SALE14

UUNASCERTAINABLENASCERTAINABLEvs.vs.


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SSTAGES INTAGES IN LLIFE OFIFE OF SSALEALE

NNEGOTIATIONEGOTIATION

Covers the period from the time the prospective contractingCovers the period from the time the prospective contractingparties indicate interest in the contract up to the time immediateparties indicate interest in the contract up to the time immediatebefore the contract is perfected.before the contract is perfected.

PPERFECTIONERFECTION

Takes place upon the concurrence of the essential elementsTakes place upon the concurrence of the essential elementsof the Sale which are:of the Sale which are:

the meeting of the minds of the partiesthe meeting of the minds of the partiesas to the object of the contractas to the object of the contractupon the price.upon the price.

CCONSUMMATIONONSUMMATIONIt begins when the parties perform their respectiveIt begins when the parties perform their respective

undertaking under the perfected contract of sale, culminating inundertaking under the perfected contract of sale, culminating inthe extinguishments thereof.the extinguishments thereof.

Jovan Land, Inc. v. CA, 268 SCRA 160 (1997)

San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000)15


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PPOLICITACIONOLICITACION SSTAGETAGE Invitations to make OffersInvitations to make Offers (Proposals)(Proposals)

OOFFERSFFERS

AACCEPTANCESCCEPTANCES

AAGENCY TOGENCY TO SSELLELL//TOTO BBUYUY

OOPTIONPTION CCONTRACTSONTRACTS

RRIGHTS OFIGHTS OF FFIRSTIRST RREFUSALEFUSAL

AAGREEMENTS TOGREEMENTS TO EENTER INTONTER INTO SSERIES OFERIES OF SSALESALES

MMUTUALUTUAL PPROMISESROMISES TTOO BBUY ANDUY AND SSELLELL(Contracts to Sell of the First Type)(Contracts to Sell of the First Type)

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RULES ON OFFERS:

Offer is at the complete will of Offeror, who may destroy

it at will prior to acceptance

Will disappear or lapse upon the happening of the

condition or period placed upon it

When floated unconditionally, will be extinguished

through thepassage of reasonable time Cannot be accepted partially or even substantially

Counter-offer extinguishes original Offer

5. Legal effect of acceptance is taken only from point of

view of Offeror Offeror may still extinguish Offer at any time before he has

knowledge of Acceptance

Only a certain Offer when met by an Absolute Acceptance

will give rise to a valid SALE.17


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CERTAINOFFER

(a)CONTAINS A CLEAR PROMISE TO SELL/TO BUY

(b)COVERS A SUBJECT MATTER THAT IS: Possible thing Licit Determinate or Determinable

(c) COVERS A PRICE OR CONSIDERATION Real

Valuable Certain or Ascertainable With Manner of Payment/Performance

agreed upon

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ABSOLUTE ACCEPTANCE

(a) NO CONDITION OR AMENDMENT OF THETERMS OF THE OFFER

(b) MAY CLARIFY

(c) BUT NEVER TOUCH ON THETERMS/COVERAGE OF SUBJECT MATTER

AND TERMS/COVERAGE OF PRICE

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OOPTIONPTION CCONTRACTONTRACT::

AACCEPTANCECCEPTANCE of Oof OFFERFFERto give on Option to Buy/to Sellto give on Option to Buy/to Sell

CCONSIDERATIONONSIDERATION:: Anything separate and distinct fromAnything separate and distinct fromPricePrice

SSUBJECTUBJECT MMATTERATTER:: Option or Privilege to Sell/ Purchase:Option or Privilege to Sell/ Purchase:

AANN OOBJECTBJECT:: AT AAT A PPRICERICE::-PossiblePossible -- RealReal- LicitLicit -- ValuableValuable- Determinate/Determinate/ -- Certain/Certain/

Determinable AscertainableDeterminable Ascertainable

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IfIf no separate considerationno separate consideration, Option Contract, Option Contract

void, but may constitutevoid, but may constitute certaincertain Offer which canOffer which canbe withdrawn by Offeror, but if accepted beforebe withdrawn by Offeror, but if accepted before

withdrawal would give rise to a valid Salewithdrawal would give rise to a valid Sale

((Sanchez v. RigosSanchez v. Rigos doctrine)doctrine)

If withdrawal of option/offer whimsical orIf withdrawal of option/offer whimsical or

arbitrary, could give rise to damage claim underarbitrary, could give rise to damage claim under

Art. 19 of Civil CodeArt. 19 of Civil Code

3.3. When there isWhen there is separate considerationseparate consideration, an, anOption Contract deemed perfectedOption Contract deemed perfected::

Ang Yu Asuncion v. Court of AppealsAng Yu Asuncion v. Court of Appeals238 SCRA 602 (1994)238 SCRA 602 (1994)

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(a)(a) If exercised within option period, gives riseIf exercised within option period, gives riseto Sale, which can be enforced by specificto Sale, which can be enforced by specific

performanceperformance


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(b)(b) Would be a breach of the Option Contract, forWould be a breach of the Option Contract, forOfferor to withdraw the offer during the agreedOfferor to withdraw the offer during the agreedperiod, but withdrawal destroys neverthelessperiod, but withdrawal destroys neverthelessthe Optionthe Option

Ang Yu Asuncion v. Court of AppealsAng Yu Asuncion v. Court of Appeals contdcontd

22

Optionee-Offeree may not sue for specificOptionee-Offeree may not sue for specific

performance on the Sale since it has failedperformance on the Sale since it has failedto reach its own perfection stageto reach its own perfection stage

Optioner-Offeror, however, renders himselfOptioner-Offeror, however, renders himself

liable for damages for breach of optionliable for damages for breach of option

(c)(c) But if, however, Optioner-Offeror withdrawsBut if, however, Optioner-Offeror withdrawsOffer even during option period before itsOffer even during option period before its

acceptance (acceptance (i.e.,i.e., exercise):exercise):


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RRIGHT OFIGHT OF FFIRSTIRST RREFUSALEFUSAL

OOFFEROR BOUNDS HIMSELF TO FIRSTFFEROR BOUNDS HIMSELF TO FIRST

OFFEROFFER SSUBJECTUBJECT MMATTER TOATTER TO OOFFEREEFFEREE

FORFOR SSALEALE

IIN THEN THE EEVENTVENT OOFFERORFFEROR EEVERVER DDECIDESECIDESTOTO SSELLELL IITT

SSUBJECTUBJECT MMATTERATTER

Possible thingPossible thing

LicitLicit

Determinate/DeterminableDeterminate/Determinable

PPRICERICE:: THAT WILLTHAT WILL TTHEN (HHEN (HAPPENINGAPPENINGOFOF CCONDITIONONDITION) BE) BE

AAGREED UPONGREED UPON2323

EESSENCESSENCE::

CCONDITIONONDITION::

D R F R


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DDOCTRINES ONOCTRINES ON RRIGHTS OFIGHTS OF FFIRSTIRST RREFUSALEFUSAL

Ang Yu Asuncion v. Court of Appeals Ang Yu Asuncion v. Court of Appeals

Generally, RFRs would be none contracts, foGenerally, RFRs would be none contracts, for

lack of cause or consideration, or failure to agreelack of cause or consideration, or failure to agree

the valid Price for the expectant contractthe valid Price for the expectant contract

Merely Merely innovative juridical relationinnovative juridical relationRFRRFR

CannotCannot be enforced by specific performancebe enforced by specific performance

Not being a Contract, it lacks essence oNot being a Contract, it lacks essence oconsensuality, obligatory force or mutualityconsensuality, obligatory force or mutuality

Breach allows recovery of damage based on Art. 19Breach allows recovery of damage based on Art. 19

principle of principle of Abuse of rightAbuse of right

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Equatorial Realty Dev., Inc. v. Mayfair Theater Equatorial Realty Dev., Inc. v. Mayfair Theater

264 SCRA 483 (1996)264 SCRA 483 (1996)

DDOCTRINES ONOCTRINES ON RFRRFRcontdcontd

When RFR attached to a valid principal contractWhen RFR attached to a valid principal contract

((e.g.e.g. Lease), its enforcement takes its vitality fromLease), its enforcement takes its vitality from

the obligatory force of the principal contractthe obligatory force of the principal contract

Such RFR, when breached may be enforced, at theSuch RFR, when breached may be enforced, at the

Price at which Subject Matter sold to Third PartyPrice at which Subject Matter sold to Third Party

The Third-Party Buyers purchase may beThe Third-Party Buyers purchase may berescinded underrescinded under accion paulianaaccion pauliana,, i.e.,i.e., entered intoentered into

in breach and in fraud of Optionees contractualin breach and in fraud of Optionees contractual

rightright

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Paraaque Kings Enterprises v. CAParaaque Kings Enterprises v. CA268 SCRA 727 (1997)268 SCRA 727 (1997)

DDOCTRINES ONOCTRINES ON RFRRFRcontdcontd

RFR is complied with by first offering the SubjectRFR is complied with by first offering the Subject

Matter to the Optionee and negotiating for a SaleMatter to the Optionee and negotiating for a Sale

There is no obligation to reach a sale,There is no obligation to reach a sale,

obligation is to negotiate in good faithobligation is to negotiate in good faith

Only when negotiations do not ripen into a Sale,Only when negotiations do not ripen into a Sale,

can Subject Matter be offered to Third-Partycan Subject Matter be offered to Third-Party

Buyer,Buyer, but at same price and terms asked of thebut at same price and terms asked of the

OptioneeOptionee

Otherwise, must re-offer under new terms toOtherwise, must re-offer under new terms to

OptioneeOptionee

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AAGREEMENTS TOGREEMENTS TO EENTER INTONTER INTO FFUTUREUTURE SSALEALE

OROR SSERIES OFERIES OF SSALESALES::

- National Grains AuthorityNational Grains Authority v.v. IAC,IAC, 171 SCRA 131 (1989)171 SCRA 131 (1989)

- Johannes Schuback v. Court of Appeals,Johannes Schuback v. Court of Appeals, 227 SCRA 719 (1993)227 SCRA 719 (1993)

(1)(1) DDISTRIBUTION/ISTRIBUTION/ SSUPPLYUPPLY AAGREEMENTGREEMENT

27

EESSENCESSENCE::

An Agreement to enter into a seriesAn Agreement to enter into a seriesof Contracts of Saleof Contracts of Sale

Obligations to do To enter into aObligations to do To enter into a

Contract of SaleContract of Sale

(2)(2) MMUTUALUTUAL PPROMISESROMISESTOTO BBUYUYANDANDTOTO SSELLELL (C(CONTRACTS TOONTRACTS TO SSELL)ELL)

MM PP BB SS


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MMUTUALUTUAL PPROMISES TOROMISES TO BBUY ANDUY AND SSELLELL(C(CONTRACTS TOONTRACTS TO SSELL)ELL)

AAGREEMENTSGREEMENTSTOTOEENTERNTERINTOINTOCCONTRACTONTRACTOFOFSSALEALEUPONUPON HHAPPENINGAPPENINGOF THEOF THE CCONDITIONSONDITIONS

Essentially, contains Obligations to do:Essentially, contains Obligations to do: toto

enter into a Saleenter into a Sale

22. C. CONDITIONALONDITIONAL CCONTRACT OFONTRACT OF SSALEALE WHERE THEWHERE THE

BBILATERALILATERAL OOBLIGATIONS TOBLIGATIONS TO BBUY ANDUY AND SSELL HAVEELL HAVE

BEENBEEN

AAGREEDGREED

UUPONPON, BUT, BUT

SSUBJECT TOUBJECT TO

SSUSPENSIVEUSPENSIVE

CCONDITIONONDITION

Condition usually is the full payment of theCondition usually is the full payment of the

priceprice

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PPERFECTIONERFECTION SSTAGETAGE

PPERFECTION HAPPENS WHEN A ERFECTION HAPPENS WHEN A CCERTAINERTAINOOFFER HAS BEEN MET BY AN FFER HAS BEEN MET BY AN AABSOLUTEBSOLUTEAACCEPTANCECCEPTANCE

TTHE ONLY POINT IN TIMEHE ONLY POINT IN TIME TTOO DDETERMINE THEETERMINE THEVVALIDITYALIDITY OROR IINVALIDITY OF ANVALIDITY OF A CCONTRACT OFONTRACT OF SSALEALE

EESTABLISHES THESTABLISHES THE CCONTRACTUALONTRACTUAL PPRINCIPLES OF:RINCIPLES OF: CONSENSUALITYCONSENSUALITY

MUTUALITY OR OBLIGATORY FORCEMUTUALITY OR OBLIGATORY FORCE RELATIVITYRELATIVITY

29

Birth sets the essence of the SaleBirth sets the essence of the Sale


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FFORM OFORM OF SSALEALE

GGENERALLYENERALLY:: None, because Sale isNone, because Sale is consensualconsensualcontractcontract

FFOROR EENFORCEABILITYNFORCEABILITY:: SSTATUTE OFTATUTE OFFFRAUDSRAUDS

1.1. Sale which by its terms is not to beSale which by its terms is not to beperformed within one (1) year.performed within one (1) year.

2.2. Sale of Movables, at least P500Sale of Movables, at least P500

33. Sale of Immovables, at any price. Sale of Immovables, at any price

Must be in writing signed by the partyMust be in writing signed by the party

sought to be boundsought to be bound

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FFORM OFORM OF SSALEALE contdcontd Memo must contain Description of:Memo must contain Description of:

(a)(a) SSUBJECTUBJECT MMATTERATTER

Possible thingPossible thing

LicitLicit

Determinate/Determinate/

DeterminableDeterminable

(b)(b) PPRICERICE

realreal

valuablevaluable

certain/ascertainablecertain/ascertainable

manner of payment providedmanner of payment provided

OORR PPARTIALLYARTIALLYEEXECUTEDXECUTED (Estoppel)(Estoppel) OORR WWAIVER OFAIVER OFAADDUCEMENT OFDDUCEMENT OFOORALRAL EEVIDENCEVIDENCE ATAT

TRIALTRIAL31

(c)(c)SSIGNED BY THE PARTY SOUGHT TO BE CHARGEDIGNED BY THE PARTY SOUGHT TO BE CHARGEDExceptionException: Electronic Document: Electronic Document

F S


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FORM OF SALE contd

What Constitutes Partial Execution?What Constitutes Partial Execution?

(a)(a) Performance MustPerformance Must

Touch UponTouch Upon

Subject MatterSubject Matter

PricePrice

Cannot Cover OtherCannot Cover Other

ConsiderationConsideration

(b)(b) Must Involve/Compromise Party Sought toMust Involve/Compromise Party Sought to

be Chargedbe Charged

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F V C S


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FFORMS THATORMS THAT VVOIDOID CCONTRACT OFONTRACT OF SSALE:ALE:

11.. SSALE OFALE OF RREALTY THROUGHEALTY THROUGH AAGENT:GENT:

AAGENTS AUTHORITY MUST BE INGENTS AUTHORITY MUST BE IN WWRITINGRITING

SSALEALE VVOIDOID:: - EEVEN IFVEN IF DDEED OFEED OF SSALE INALE INWRITING and/or NOTARIZEDWRITING and/or NOTARIZED

- EEVEN IF THERE HAS BEENVEN IF THERE HAS BEEN

PPARTIAL/ARTIAL/ FFULLULL PPAYMENTAYMENT- EEVEN IF THERE HAS BEENVEN IF THERE HAS BEEN

DELIVERY OFDELIVERY OF SSUBJECTUBJECT MMATTERATTER

- EEVEN IF SALE REGISTEREDVEN IF SALE REGISTERED

3333

OOTHERWISETHERWISE::


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SSALES OFALES OF IIMMOVABLESMMOVABLES

PPRIVATERIVATE DDOCUMENTOCUMENT NNEEDED TO BEEEDED TO BE EENFORCEABLENFORCEABLE

BBETWEENETWEEN PPARTIESARTIES

EEXCEPTXCEPT:: PPARTIALARTIAL EEXECUTION/XECUTION/WWAIVERAIVER

2.2. MMUSTUST BBEE IIN AN A PPUBLICUBLIC IINSTRUMENTNSTRUMENT

-TTOO BBIND THEIND THE PPUBLICUBLIC

-TTOO BBEE RREGISTRABLE WITHEGISTRABLE WITH RREGISTRY OFEGISTRY OF DDEEDSEEDS

33.. FFOROR RREALEAL EESTATESTATE,, MMUSTUST BBEE RREGISTERED TOEGISTERED TO BBEE VVALIDALID

ANDAND BBINDINGINDING AAGAINST THEGAINST THE WWORDORD

34

- Authority of Agent must be in writingAuthority of Agent must be in writing VOID VOID

- Bound by actual possession situation, otherwiseBound by actual possession situation, otherwisenot in good faithnot in good faith


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CCONSUMMATIONONSUMMATION SSTAGETAGE

EEFFECTS OFFFECTS OF CCONDITIONSONDITIONS

EEXPRESSXPRESS WWARRANTIESARRANTIES

IIMPLIEDMPLIED WWARRANTIESARRANTIES

(3)(3) RREMEDIESEMEDIES

(1) PERFORMANCE DELIVERY OF

SUBJECT MATTER

PAYMENT OF PRICE

(5)(5) EEXTINGUISHMENTXTINGUISHMENT

CCONVENTIONALONVENTIONALRREDEMPTIONEDEMPTION(SALE A(SALE A RETRO)RETRO)

EEQUITABLEQUITABLEMMORTGAGESORTGAGES

LLEGALEGALRREDEMPTIONEDEMPTION

(2)(2) RRISK OFISK OF LLOSSOSS

(4)(4) CCONDITIONS ANDONDITIONS AND

WWARRANTIESARRANTIES

SSPECIFIC PERFORMANCEPECIFIC PERFORMANCE

RRESCISSIONESCISSION

DDOUBLEOUBLE SSALESALES RRULEULE SSUBDIVISION LOTS &UBDIVISION LOTS & CCONDO UNITSONDO UNITS RRULESULES

RRECTOECTO LLAWAW

MMACEDAACEDALLAWAW

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OOBLIGATIONS OFBLIGATIONS OF SSELLERELLER

1.1. TTOO PPRESERVERESERVE THETHE TTHINGHING WITHWITH DDILIGENCE OF AILIGENCE OF A

GGOODOOD FFATHER OF AATHER OF A FFAMILYAMILY

2.2. TTOO DELIVERDELIVER THETHE SUBJECT MATTERSUBJECT MATTER

3.3. To DTo DELIVERELIVER FFRUITSRUITS, A, ACCESSORIESCCESSORIESANDAND

AACCESSIONSCCESSIONS

44. To C. To COMPLYOMPLYWITHWITH WWARRANTIESARRANTIES

OOBLIGATIONS OFBLIGATIONS OF BBUYERUYER

1.1. TTOO PPAY THEAY THE PRICEPRICE

2.2. TTOO AACCEPTCCEPT DDELIVERY OFELIVERY OF SSUBJECTUBJECT MMATTERATTER

3636

D S M


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DDELIVERY OFELIVERY OF SSUBJECTUBJECT MMATTERATTER

TTRADITIONRADITIONAS THEAS THE MMODEODETOTO TTRANSFERRANSFER OOWNERSHIPWNERSHIP

- Actual or Physical DeliveryActual or Physical Delivery

- Constructive DeliveryConstructive Delivery

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MMAGICAGICOFOFTTRADITIONRADITION

Fulfillment of the PrimaryFulfillment of the Primary

Obligation of the SellerObligation of the Seller

Transfer Ownership/Transfer Ownership/

Possession to the BuyerPossession to the Buyer

D C D


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EEXECUTION OFXECUTION OFPPUBLICUBLICIINSTRUMENTNSTRUMENT

- No Contrary Stipulation/ IntentionNo Contrary Stipulation/ Intention

- Seller Must Have ControlSeller Must Have Control

- Passage of Reasonable TimePassage of Reasonable Time

EEXCEPTIONXCEPTION:: WWHENHEN BBUYERUYER TTAKES THEAKES THE RRISKISK

DDOCTRINES ONOCTRINES ON CCONSTRUCTIVEONSTRUCTIVE DDELIVERYELIVERY

Produces the Same Produces the Same MagicMagic of ofActual DeliveryActual Delivery


39/110

RR S O DDO SS S UU AA 15441544


40/110

RRULES ONULES ON DDOUBLEOUBLE SSALESALES UUNDERNDER AART.RT. 15441544

11.. FFOROR MMOVABLESOVABLES:: First to Possess, in good faithFirst to Possess, in good faith

Oldest Title, in good faithOldest Title, in good faith

ThenThen: : First in time, priority in rightsFirst in time, priority in rights

22.. FFOROR IIMMOVABLESMMOVABLES::

First to Register, in good faithFirst to Register, in good faith

First to Possess, in good faithFirst to Possess, in good faith

Oldest Title, in good faithOldest Title, in good faith

ThenThen: : First in time, priority in rightsFirst in time, priority in rights

40

R A 1544 A


41/110

RREQUISITES FOREQUISITES FOR AART.RT. 15441544 TOTO AAPPLYPPLYCheng v. Genato,Cheng v. Genato,300 SCRA 722 (1998300 SCRA 722 (1998))

(a)(a) The two (or more) sales transactions mustThe two (or more) sales transactions mustconstituteconstitute validvalid Sales;Sales;

(b)(b) The two (or more) sales transactions must pertainThe two (or more) sales transactions must pertain

toto exactly the sameexactly the same Subject Matter;Subject Matter;

(c)(c) The two (or more) Buyers at odds over the rightfulThe two (or more) Buyers at odds over the rightfulownership of the Subject Matter must eachownership of the Subject Matter must each

represent conflicting interests; andrepresent conflicting interests; and

(d)(d) The two (or more) Buyers at odds over the rightfulThe two (or more) Buyers at odds over the rightful

ownership of the Subject Matter mustownership of the Subject Matter must each haveeach havebought frombought from the very samethe very same SellerSeller

Consolidated Rural Bank (Cagayan ValleyConsolidated Rural Bank (Cagayan Valley),), Inc. v. CA,Inc. v. CA, 448448

SCRA 347 (2005)SCRA 347 (2005)41


42/110

EEFFECTS OFFFECTS OF AART.RT. 15441544RREQUISITESEQUISITES

Not applicable where one of theNot applicable where one of the

Sales is VoidSales is Void

Not applicable to Contracts to SellNot applicable to Contracts to Sell

Not applicable if first sale is theNot applicable if first sale is the

Subject Matter and the second saleSubject Matter and the second sale

is the redemption right to theis the redemption right to theSubject MatterSubject Matter

42

DDOCTRINES ON AART 15441544 DDOUBLE SSALES RRULES


43/110

DDOCTRINES ONOCTRINES ON AART.RT. 15441544DDOUBLEOUBLE SSALESALES RRULESULES

(a)(a) Rules under Art. 1544 are addressed to theRules under Art. 1544 are addressed to the

Second Buyer, who is mandated to doSecond Buyer, who is mandated to dopositive things if he hopes to win at allpositive things if he hopes to win at all

Carbonell v. CACarbonell v. CA, 69 SCRA 99 (1976), 69 SCRA 99 (1976)Uraca v. CA,Uraca v. CA, 278 SCRA 702 (1997)278 SCRA 702 (1997)

Consolidated Rural Bank (Cagayan Valley), Inc. v. CAConsolidated Rural Bank (Cagayan Valley), Inc. v. CA,,

448 SCRA 347 (2005)448 SCRA 347 (2005)

First Buyer wins by being first (first inFirst Buyer wins by being first (first intime) and does not need the benefitstime) and does not need the benefits

of Art. 1544of Art. 1544

43

DDOCTRINES ONOCTRINES ON AARTRT 15441544 d


44/110

DDOCTRINES ONOCTRINES ON AART.RT. 15441544 contdcontd

(b)(b) First Buyer wins by virtue of greaterFirst Buyer wins by virtue of greater

doctrine of doctrine of first in time, priority in rightsfirst in time, priority in rights(c)(c) Second Buyer must register his purchaseSecond Buyer must register his purchase

while in good faith if he hopes to win:while in good faith if he hopes to win:

(d)(d) First Buyer, who is always in good faith,First Buyer, who is always in good faith,when he registers ahead, wins becamewhen he registers ahead, wins became

second buyer in hopelesssecond buyer in hopeless

(e) Even if Second Buyer was first to possess(e) Even if Second Buyer was first to possessin good faith, the subsequent registrationin good faith, the subsequent registration

by First Buyer prevailsby First Buyer prevails

Taedo v. CA,Taedo v. CA, 252 SCRA 80 (1996252 SCRA 80 (1996))

4444

DDOCTRINES ONOCTRINES ON AARTRT 15441544 d


45/110

(f)(f) Knowledge of the First Buyer of theKnowledge of the First Buyer of the

second sale does not adversely affectsecond sale does not adversely affect

First Buyer, nor does it constituteFirst Buyer, nor does it constitute

registration in favor of the Second Buyerregistration in favor of the Second Buyer

(g)(g) However, knowledge of the Second BuyerHowever, knowledge of the Second Buyer

of the first sale, would place him not onlyof the first sale, would place him not only

in bad faith, but would constitutein bad faith, but would constitute

registration in favor of the First Buyerregistration in favor of the First Buyer

Cruz v. Cabana,Cruz v. Cabana, 129 SCRA 656 (1984)129 SCRA 656 (1984)

45


DDOCTRINES ONOCTRINES ON AARTRT 15441544 dd


46/110

(h)(h) It seems that Second Buyer must haveIt seems that Second Buyer must havepaid in full the Price to gain the benefipaid in full the Price to gain the benefit

under Art. 1544, as the Court defines theunder Art. 1544, as the Court defines the

meaning of good faith to includemeaning of good faith to include

having paid full valuehaving paid full value

Heirs of Aguilar-Reyes v. Spouses Mijares,Heirs of Aguilar-Reyes v. Spouses Mijares, 410 SCRA 97 (2003)410 SCRA 97 (2003)

Tanongon v. SamsonTanongon v. Samson, 382 SCRA 130 (2002), 382 SCRA 130 (2002)

Balatbat v. CABalatbat v. CA, 261 SCRA 128 (1996), 261 SCRA 128 (1996)

Agricultural and Home Extension Dev. v. CAAgricultural and Home Extension Dev. v. CA , 213 SCRA 536 (1992), 213 SCRA 536 (1992)

4646


GG RR DD SS RR EE


47/110

GGLOBALLOBAL RRULES ONULES ON DDOUBLEOUBLE SSALE FORALE FOR RREALEAL EESTATESTATE

I.I. First to Register, in Good Faith and for Value, hisFirst to Register, in Good Faith and for Value, his

Purchase of Land registered under the TorrensPurchase of Land registered under the TorrensSystem wins, for registration is the OperativeSystem wins, for registration is the Operative

Act (Does not matter whether he is First orAct (Does not matter whether he is First or

Second Buyer)Second Buyer)

II.II. For Unregistered Land, as between aFor Unregistered Land, as between a

conventional prior purchase, and a secondconventional prior purchase, and a second

purchase at public auction, the firstpurchase at public auction, the first

Conventional Buyer wins, since the Buyer atConventional Buyer wins, since the Buyer atpublic sale is bound by the provisions of thepublic sale is bound by the provisions of the

Rules of Court that says he only takes whateverRules of Court that says he only takes whatever

is the remaining title of the judgment debtor.is the remaining title of the judgment debtor.

47

GGLOBALLOBAL RRULES ONULES ON DDOUBLEOUBLE SSALEALE dtd


48/110

The Rules of Double Sale under Art. 1544 shallThe Rules of Double Sale under Art. 1544 shall

apply, only when the requisites underapply, only when the requisites under Cheng v.Cheng v.GenatoGenato are present, as follows:are present, as follows:

1.1. First to Register in good faithFirst to Register in good faith

But this can only apply to unregisteredBut this can only apply to unregisteredland, because Rule I applies to registeredland, because Rule I applies to registered

land.land.

2.2. First to Possess in good faith, orFirst to Possess in good faith, or

3.3. Oldest Title, in good faithOldest Title, in good faith

First in time, priority in rightsFirst in time, priority in rightsapplies lastapplies last

48

GGLOBALLOBAL RRULES ONULES ON DDOUBLEOUBLE SSALEALE contdcontd

SSALE ANDALE AND DDELIVERY BYELIVERY BY NNON OWNERON OWNER


49/110

SSALE ANDALE AND DDELIVERY BYELIVERY BY NNON-OWNERON-OWNER

GGENERALENERAL RRULEULE:: Nemo Dat Quod Non HabetNemo Dat Quod Non Habet

SSPECIALPECIAL RRULES:ULES:

Sale and Delivery, with subsequentSale and Delivery, with subsequentacquisition of title by owner (Art. 1434),acquisition of title by owner (Art. 1434), ipsoipso

jurejure transfers title to Buyertransfers title to Buyer

Sale by Co-OwnerSale by Co-Owner

-- particular portionparticular portion- whole property- whole property

5.5. Estoppel on the Part of the True Owner (Art. 1426)Estoppel on the Part of the True Owner (Art. 1426)

49

SSALE ANDALE AND DDELIVERY BYELIVERY BY NNON OWNERON OWNER tdtd


50/110

Chain of Title TheoryChain of Title Theory under the Torrens under the TorrensSystemSystem

Sales by Court AuthoritySales by Court Authority

Sales in Merchant StoresSales in Merchant Stores

Sales by One Having Voidable Title PriorSales by One Having Voidable Title Priorto Annulmentto Annulment

Sale under Documents of TitleSale under Documents of Title

SSALE ANDALE AND DDELIVERY BYELIVERY BY NNON-OWNERON-OWNER contdcontd

50

RRULES FORULES FOR DDETERIORATIONETERIORATIO

N FFRUITSRUITS


51/110

RRULES FORULES FOR DDETERIORATION,ETERIORATION, FFRUITSRUITS

ANDAND IIMPROVEMENTSMPROVEMENTS

RRULES HAVE NO APPLICATION IS SUBJECTULES HAVE NO APPLICATION IS SUBJECTMATTER IS MERELY DETERMINABLE (Art. 1263)MATTER IS MERELY DETERMINABLE (Art. 1263)

RROMANOMAN LLAWAW DDOCTRINEOCTRINE:: Buyer bears theBuyer bears theconsequences oconsequences of

Deterioration, butDeterioration, but

benefits from the Fruitsbenefits from the Fruitsand Im rovementsand Improvements

Arts. 1480, 1163-1262Arts. 1480, 1163-1262

Arts. 1189, 1537 and 1538Arts. 1189, 1537 and 1538

5151

RR SS MM LL


52/110

RRULES WHENULES WHEN SSUBJECTUBJECT MMATTERATTER LLOSTOST::

11.. BBEFOREEFORE PPERFECTIONERFECTION:: Res Perit DominoRes Perit DominoRoman v. GrimaltRoman v. Grimalt, 6 Phil. 96 (1906), 6 Phil. 96 (1906)

22. A. ATT TTIME OFIME OF PPERFECTIONERFECTION: Seller: Seller (Arts. 1493 and 1494)(Arts. 1493 and 1494)

Sale is rendered inefficaciousSale is rendered inefficacious

5252

SSUBJECT MATTER LOSTUBJECT MATTER LOST tdtd


53/110

General RuleGeneral Rule:: For Goods, risk borne by SellerFor Goods, risk borne by SellerunderunderRes perit dominoRes perit domino rulerule

Chrysler Phil. v. CA,Chrysler Phil. v. CA, 133 SCRA 567 (1984)133 SCRA 567 (1984)Union Motor Corp v. CAUnion Motor Corp v. CA, 361 SCRA 506 (2001), 361 SCRA 506 (2001)

Loss by Fault of a PartyLoss by Fault of a Party (Arts. 1480, 1504, 1538)(Arts. 1480, 1504, 1538)

LLOSSOSSBYBY FFORTUITOUSORTUITOUS EEVENTVENT:: Two Schools ofTwo Schools ofThoughtThought

Arts. 1480, 1163, 1164, 1165Arts. 1480, 1163, 1164, 1165

Arts. 1504, 1538, and 1189Arts. 1504, 1538, and 1189

SSUBJECT MATTER LOST:UBJECT MATTER LOST: contdcontd

53

33. A. AFTERFTER PPERFECTIONERFECTIONBUTBUT BBEFOREEFORE DDELIVERYELIVERY

Arts. 1164, 1189, and 1262Arts. 1164, 1189, and 1262((

SS


54/110

SSUBJECT MATTER LOST:UBJECT MATTER LOST: contdcontd

44. A. AFTERFTER DDELIVERYELIVERY: B: BUYER BEARS RISKUYER BEARS RISK,, UNDERUNDERRes Perit DominoRes Perit Domino

Art. 1504Art. 1504Song Fo & Co. v. OriaSong Fo & Co. v. Oria, 33 Phil. 3 (1915), 33 Phil. 3 (1915)

Lawyer's Coop v. TaboraLawyer's Coop v. Tabora, 13 SCRA 762 (1965), 13 SCRA 762 (1965)

Lawyer's Coop v. NarcisoLawyer's Coop v. Narciso, 55 O.G. 3313), 55 O.G. 3313)

EEXCEPTXCEPT:: When retention of Possession byWhen retention of Possession bySeller for purpose of securingSeller for purpose of securing

payment of the Purchase Pricepayment of the Purchase Price

5454

RR CC SS


55/110

RREMEDIES FOREMEDIES FOR CCONTRACTS OFONTRACTS OF SSALEALE

1.1. RREMEDIES OF EMEDIES OF UUNPAIDNPAID SSELLER OFELLER OFGGOODSOODS

Possessory lienPossessory lien (Arts. 1526-1529, 1503, 1535)(Arts. 1526-1529, 1503, 1535)

StoppageStoppage in transituin transitu (Arts. 1530-1532, 1535, 1636[2])(Arts. 1530-1532, 1535, 1636[2])

Special Right of ResaleSpecial Right of Resale (Art. 1533)(Art. 1533)

Special Right to RescindSpecial Right to Rescind (Art. 1534)(Art. 1534)

5555

RR C OECTO LLAW SS M I


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2.2. RRECTOECTO LLAW:AW: SSALES OFALES OFMMOVABLES ONOVABLES ON IINSTALLMENTSNSTALLMENTS

(a)(a)Meaning of Installment SaleMeaning of Installment Sale Levy v. GervacioLevy v. Gervacio, 69 Phil. 52 (1939), 69 Phil. 52 (1939)

(b)(b)Contracts to Sell Movables Not CoveredContracts to Sell Movables Not CoveredVisayan Sawmill Co.,Visayan Sawmill Co.,Inc. v. CAInc. v. CA, 219 SCRA 378 (1993), 219 SCRA 378 (1993)

(c)(c)Nature of Remedies of Unpaid SellerNature of Remedies of Unpaid Seller

Remedies under Art. 1484 are not cumulative, butRemedies under Art. 1484 are not cumulative, butalternative and exclusive.alternative and exclusive.

Borbon II v. Servicewide Specialists, Inc.,Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996)258 SCRA 634 (1996)

Seeking a writ of replevin consistent with all threeSeeking a writ of replevin consistent with all three

remediesremediesUniversal Motors Corp. v. Dy Hian Tat,Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 (1969)28 SCRA 161 (1969)

5656

RRECTOECTO LLAWAW d


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(d)(d) RREMEDY OFEMEDY OF SSPECIFICPECIFIC PPERFORMANCEERFORMANCE: No bar to full: No bar to full

recoveryrecoveryTajanglangit v. Southern MotorsTajanglangit v. Southern Motors, 101 Phil. 606 (1957), 101 Phil. 606 (1957)

RRECTOECTO LLAW:AW:contdcontd

Even when it is mortgaged property that is Even when it is mortgaged property that issold on execution.sold on execution.

Southern Motors v. Moscoso,Southern Motors v. Moscoso, 2 SCRA 168 (1961)2 SCRA 168 (1961)

Even with replevin and recovery of the Even with replevin and recovery of the subject property, the action may still be for subject property, the action may still be for

specific performance.specific performance.

Industrial Finance Corp. v. Ramirez,Industrial Finance Corp. v. Ramirez, 77 SCRA 152 (1977)77 SCRA 152 (1977)

5757

RRECTOECTO LLAWAW dd


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(e)(e)NNATURE OFATURE OF

RREMEDYEMEDY OFOF

RRESCISSIONESCISSION

RRECTOECTO LLAW:AW:contdcontd

Inherent Barring Effect of RescissionInherent Barring Effect of Rescission

Surrender of mortgaged property notSurrender of mortgaged property not

equivalent to rescission.equivalent to rescission.Vda. de Quiambao v. Manila Motors Co., Inc.,Vda. de Quiambao v. Manila Motors Co., Inc.,

3 SCRA 444 (1961)3 SCRA 444 (1961)

Stipulation on non-return of paymentsStipulation on non-return of payments

is valid provided not unconscionable.is valid provided not unconscionable.

Delta Motor Sales Corp. v. Niu Kim DuanDelta Motor Sales Corp. v. Niu Kim Duan,,

213 SCRA 259 (1992)213 SCRA 259 (1992)

58

RRECTOECTO LLAWAW:: contdcontd


59/110

(f)(f)RREMEDY OFEMEDY OF FFORECLOSUREORECLOSURE


(i)(i)Third Party MortgageThird Party MortgageRidad v. Filipinas InvestmentRidad v. Filipinas Investment, 120 SCRA 246 (1983), 120 SCRA 246 (1983)

(ii)(ii)

Assignor-Assignee; Financing TransactionsAssignor-Assignee; Financing Transactions

Zayas v. Luneta MotorsZayas v. Luneta Motors, 117 SCRA 726 (1982), 117 SCRA 726 (1982)

When seller assigns his credit to another,When seller assigns his credit to another,

the assignee is likewise bound by the terms ofthe assignee is likewise bound by the terms of

the Recto Law.the Recto Law.

Borbon II v. Servicewide Specialists, Inc.,Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).258 SCRA 634 (1996).

5959



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(iii)(iii)H-V Barring Effects of ForeclosureH-V Barring Effects of Foreclosure

Foreclosure on the chattel mortgageForeclosure on the chattel mortgage

prevents further action on the supporting prevents further action on the supporting

real estate mortgage.real estate mortgage.Cruz v. Filipinas Investment & Finance Corp.,Cruz v. Filipinas Investment & Finance Corp.,23 SCRA 791 (1968)23 SCRA 791 (1968)

Borbon II v. Servicewide Specialists, Inc.,Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996)258 SCRA 634 (1996)

RRECTOECTO LLAWAW:: contdcont d

(iv)(iv) Amounts Barred from RecoveryAmounts Barred from RecoveryMacondray & Co. v. Eustaquio,Macondray & Co. v. Eustaquio, 64 Phil. 446 (1937)64 Phil. 446 (1937)

(v)(v) Perverse BuyerPerverse BuyerFilipinas Investment & Finance Corp. v. Ridad,Filipinas Investment & Finance Corp. v. Ridad, 30 SCRA 564 (1969)30 SCRA 564 (1969)

6060

RRECTOECTO LLAWAW dtd


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(g)(g)PPURPORTEDURPORTED LLEASE WITHEASE WITH OOPTION TOPTION TO BBUY:UY:

Contracts purporting to be leases of personal propertyContracts purporting to be leases of personal propertywith option to buy, when the lessor has deprived the lesseewith option to buy, when the lessor has deprived the lessee

of the possession or enjoyment of the thingof the possession or enjoyment of the thing..(Art. 1485)(Art. 1485)


When purported Lessor takes possession ofWhen purported Lessor takes possession ofsubject movable, it is treated legally as a foreclosursubject movable, it is treated legally as a foreclosureand the barring effects applicable to foreclosurand the barring effects applicable to foreclosureremedy, not rescission, are given application.remedy, not rescission, are given application.

Vda. de Jose v. Barrueco,Vda. de Jose v. Barrueco, 67 Phil. 191 (1939)67 Phil. 191 (1939)

Filinvest Credit Corp. v. CA,Filinvest Credit Corp. v. CA, 178 SCRA 188 (1989)178 SCRA 188 (1989)

U.S. Commercial v. Halili,U.S. Commercial v. Halili, 93 Phil. 271 (1953)93 Phil. 271 (1953)

H.E. Heacock v. Bantal Manufacturing,H.E. Heacock v. Bantal Manufacturing, 66 Phil. 245 (1938)66 Phil. 245 (1938)

Manila Gas Corp. v. Calupita,Manila Gas Corp. v. Calupita, 66 Phil. 747 (19 38)66 Phil. 747 (19 38)

Vda. de Jose v. Barrueco,Vda. de Jose v. Barrueco, 67 Phil. 191 (1939)67 Phil. 191 (1939)

6161

33 MACEDAACEDA LAWAW:: SSALES OFALES OF RRESIDENTIALESIDENTIAL RREALTEALT


62/110

3.3. MACEDAACEDA LAWAW:: SSALES OFALES OFRRESIDENTIALESIDENTIAL RREALTEALTONONIINSTALLMENTSNSTALLMENTS((RR..AA.. 65526552)

(a)(a) Role of Maceda LawRole of Maceda LawLagandaon v. CALagandaon v. CA, 290 SCRA 463 (1998), 290 SCRA 463 (1998)

BBUTUTSSEEEE:: Peoples Indl and Comm. Corp. v. CA,Peoples Indl and Comm. Corp. v. CA, 281 SCRA 206 (1997)281 SCRA 206 (1997)

(b)(b) Transactions CoveredTransactions Covered

The formal requirements of rescissionThe formal requirements of rescission

under the Maceda Law apply even to contractsunder the Maceda Law apply even to contracts

entered into prior to its effectivity.entered into prior to its effectivity.

Siska Dev. Corp. v. Office of the PresidentSiska Dev. Corp. v. Office of the President, 231 SCRA 674 (1994), 231 SCRA 674 (1994)

62

MMACEDAACEDA LLAWAW dd


63/110

The Maceda Law makes no distinctionsThe Maceda Law makes no distinctionsbetween option and sale which under P.D.between option and sale which under P.D.

957 also includes an exchange or attempt to sell,957 also includes an exchange or attempt to sell,an option of sale or purchase, a solicitation of aan option of sale or purchase, a solicitation of a

sale or an offer to sell directly.sale or an offer to sell directly.

Realty Exchange Venture Corp. v. SendinoRealty Exchange Venture Corp. v. Sendino, 233 SCRA 665 (1994), 233 SCRA 665 (1994)

MMACEDAACEDA LLAWAW contdcontd

6363

CuriouslyCuriously:: No application to Contract to SellNo application to Contract to Sell

because said law presupposes thebecause said law presupposes theexistence of a valid and effectiveexistence of a valid and effectivecontract to sell a condominium.contract to sell a condominium.

Mortel v. KASSCO, Inc.,Mortel v. KASSCO, Inc., 348 SCRA 391, 398 (2000)348 SCRA 391, 398 (2000)



64/110

MMACEDAACEDA LLAWAW cont dcont d

Pursuant to Art. 1253 of Civil Code, in a contrac Pursuant to Art. 1253 of Civil Code, in a contract

involving installments with interest chargeable against theinvolving installments with interest chargeable against theremaining balance of the obligation, it is the duty of theremaining balance of the obligation, it is the duty of the

creditor-seller to inform the debtor-buyer of the interest thacreditor-seller to inform the debtor-buyer of the interest that

falls due and that is applying the installment payments to falls due and that is applying the installment payments to

cover said interest. Otherwise, the creditor cannot apply thecover said interest. Otherwise, the creditor cannot apply the

payments to the interest and then hold the debtor in default fopayments to the interest and then hold the debtor in default for

non-payment of installments on the principal.non-payment of installments on the principal.

Rapanut v. CA,Rapanut v. CA, 246 SCRA 323 (1995)246 SCRA 323 (1995)

(c)(c)How Cancellation of Contract Can Be Effected:How Cancellation of Contract Can Be Effected:

Active Realty & Dev. Corp. v. Daroya,Active Realty & Dev. Corp. v. Daroya, 382 SCRA 152 (2002)382 SCRA 152 (2002)

64

MMACEDAACEDA LLAWAW dtd


65/110


(a)(a) To sell/assign his rights to another personTo sell/assign his rights to another person

(b)(b) To reinstate contract by updating accountTo reinstate contract by updating accountduring grace period, before actualduring grace period, before actual

cancellation of contractcancellation of contract

(c)(c) To pay in advance installments or in fullTo pay in advance installments or in full

unpaid balance of Price any time withoutunpaid balance of Price any time without

interest and have same annotated in titleinterest and have same annotated in title

Any stipulation in any contract enteredAny stipulation in any contract entered

into contrary to the provisions of the Law,into contrary to the provisions of the Law,

shall be null and void.shall be null and void. (Art. 7)(Art. 7)

6565

OOTHERTHER RRIGHTSIGHTS GGRANTED TORANTED TO BBUYERUYER

44 OOTHERTHER RREMEDIES ONEMEDIES ON SSALE OFALE OF RREALEAL EESTATESTATE


66/110

4.4. OOTHERTHER RREMEDIES ONEMEDIES ON SSALE OFALE OF RREALEAL EESTATESTATE

(a)(a) AANTICIPATORYNTICIPATORY BBREACH (ART. 1591)REACH (ART. 1591)

(b)(b) RRESCISSION ONESCISSION ON SSALE ONALE ON NNON-ON-

RRESIDENTIALESIDENTIAL RREALTY ONEALTY ON

IINSTALLMENTS (Arts. 1191 and 1592)NSTALLMENTS (Arts. 1191 and 1592)

(c)(c)SSEC. 23 AND 24,EC. 23 AND 24, PPRES.RES. DDECREE 957ECREE 957

6666

CCONTRACTS TOONTRACTS TO SSELLELL


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CCONTRACTS TOONTRACTS TO SSELLELLVersusVersus

CCONDITIONALONDITIONALCCONTRACTS OFONTRACTS OF SSALEALE

Art. 1458 Defines a Sale to covered bothArt. 1458 Defines a Sale to covered both

Absolute and ConditionalAbsolute and Conditional

Both Contracts are usually bound by sameBoth Contracts are usually bound by same

condition: Full payment of the Pricecondition: Full payment of the Price

Both Contracts are consensual, onerous,Both Contracts are consensual, onerous,

commutative, and cover bilateralcommutative, and cover bilateral

obligationsobligations

67

KK TO SSELL KK OF SSALE


68/110

KK TOTO SSELLELL VS.VS.KKOFOF SSALEALE contdcontd

Power to Rescind is inherently JudicialPower to Rescind is inherently Judicial

Non-fulfillment of ConditionNon-fulfillment of Condition ipso jureipso jure

destroys contractdestroys contract

Substantial Breach Relevant to Contract oSubstantial Breach Relevant to Contract ofSale, Irrelevant to Contracts to SellSale, Irrelevant to Contracts to Sell

Rescission requires a positive actRescission requires a positive act

68

KK TOTO SSELLELL KK OFOF SSALEALE dtd


69/110


1.1. In Contract to Sell Ownership if Reserved byIn Contract to Sell Ownership if Reserved by

Seller, while in a Contract to Sell ownershipSeller, while in a Contract to Sell ownershiptransfers to Buyer upon delivery.transfers to Buyer upon delivery.

Ergo:Ergo: K to Sell must have expressK to Sell must have express

reservation of ownershipreservation of ownership

To execute a formal Deed of SaleTo execute a formal Deed of Sale

Only receipt of payment evidences saleOnly receipt of payment evidences sale

Seller retained original titlesSeller retained original titles

69

KK SS KK SS


70/110


2. Rescission of Contract to Sell is a matter2. Rescission of Contract to Sell is a matterof right upon non-happening of theof right upon non-happening of the

conditioncondition

Ergo:Ergo: K to Sell must have expressK to Sell must have expressright to rescind the contractright to rescind the contract

upon default of the Buyerupon default of the Buyer

A written notice of cancellation must be servedA written notice of cancellation must be servedupon Buyer even when Contract to Sellupon Buyer even when Contract to Sell

UP v. Delos AngelesUP v. Delos Angeles, 35 SCRA 103 (1970), 35 SCRA 103 (1970)

7070

CCONDITIONSONDITIONS versusversus WWARRANTIESARRANTIES


71/110

CCONDITIONSONDITIONS versusversus WWARRANTIESARRANTIES

Power Commercial and Industrial Corp. v. CAPower Commercial and Industrial Corp. v. CA274 SCRA 597 (1997)274 SCRA 597 (1997)

(a)(a) Condition goes into root of existence of obligation,Condition goes into root of existence of obligation,

whereas warranty goes into performance of suchwhereas warranty goes into performance of such

obligation, and in fact may constitute an obligationobligation, and in fact may constitute an obligation

itselfitself;;

(b)(b) Condition must be expressly stipulated by parties,Condition must be expressly stipulated by parties,

while warranty may form part of the obligation orwhile warranty may form part of the obligation or

contract by provision of law, without previouscontract by provision of law, without previous

agreementagreement; and; and(c)(c) Condition may attach itself either to the ObligationsCondition may attach itself either to the Obligations

of Seller, while warranty, express or implied, relatesof Seller, while warranty, express or implied, relates

to the Subject Matter itself or to the obligations ofto the Subject Matter itself or to the obligations of

Seller as to Subject Matter of the saleSeller as to Subject Matter of the sale..

7171

CCONDITIONS ANDONDITIONS AND WWARRANTIESARRANTIES contdcontd


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CCONDITIONS ANDONDITIONS AND WWARRANTIESARRANTIES cont dcont d

In a Sale with Assumption of Mortgage, the In a Sale with Assumption of Mortgage, theassumption of mortgage is a condition to the sellers consentassumption of mortgage is a condition to the sellers consent

so that without approval by the mortgagee, no sale is so that without approval by the mortgagee, no sale is perfected. In such case, the seller remains the owner and perfected. In such case, the seller remains the owner and

mortgagor of the property and retains the right to redeem themortgagor of the property and retains the right to redeem the

foreclosed property.foreclosed property.

Ramos v. CARamos v. CA, 279 SCRA 118 (1997), 279 SCRA 118 (1997)

Failure to comply with condition imposed upon perfectionFailure to comply with condition imposed upon perfection

of the contract results in failure of a contract, while theof the contract results in failure of a contract, while theailure to comply with a condition imposed on theailure to comply with a condition imposed on the

erformance of an obligation only gives the other party theerformance of an obligation only gives the other party the

option either to refuse to proceed with sale or waive theoption either to refuse to proceed with sale or waive the

conditioncondition..

Laforteza v. Machuca,Laforteza v. Machuca, 333 SCRA 643 (2000)333 SCRA 643 (2000)

7272



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AA.. EEXPRESSXPRESS WWARRANTIESARRANTIES (Art. 1546)(Art. 1546)

The law allows considerable latitude to sellersThe law allows considerable latitude to sellers statements, or dealers talk; and experience teaches statements, or dealers talk; and experience teaches

that it is exceedingly risky to accept it at its face value.that it is exceedingly risky to accept it at its face value.

Ramos v. CARamos v. CA, 279 SCRA 118 (1997), 279 SCRA 118 (1997)

(a) Must be an(a) Must be an affirmation of factaffirmation of factororany promiseany promise by theby the

seller relating to Subject Matter of the sale;seller relating to Subject Matter of the sale;

(b) The(b) The natural tendencynatural tendencyof such affirmation or promiseof such affirmation or promise

isis to induce Buyer to purchaseto induce Buyer to purchase the thing; andthe thing; and

(c) Buyer purchases the thing relying on such(c) Buyer purchases the thing relying on such

affirmation or promise thereon.affirmation or promise thereon.

7373



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BB.. IIMPLIEDMPLIED WWARRANTIESARRANTIES (Art. 1547)(Art. 1547)

11. S. SELLERELLER HHASAS RRIGHT TOIGHT TO SSELLELL

22.. WWARRANTYARRANTY AAGAINSTGAINST EEVICTIONVICTION

Seller must be summoned in the suit for eviction atSeller must be summoned in the suit for eviction at

the instance of the buyer (Art. 1558), and be made a co-the instance of the buyer (Art. 1558), and be made a co-

defendant (Art. 1559); or made a third-party defendant.defendant (Art. 1559); or made a third-party defendant.

Escaler v. CA,Escaler v. CA, 138 SCRA 1 (1985)138 SCRA 1 (1985)

Canizares Tiana v. TorrejosCanizares Tiana v. Torrejos, 21 Phil. 127 (1911), 21 Phil. 127 (1911)

J.M. Tuazon v. CAJ.M. Tuazon v. CA, 94 SCRA 413 (1979), 94 SCRA 413 (1979)

CONDITIONS AND WARRANTIES cont d

74



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33.. WWARRANTYARRANTY AAGAINSTGAINST NNON-ON-AAPPARENTPPARENT

SSERVITUDESERVITUDES


44.. WWARRANTYARRANTY AAGAINSTGAINST HHIDDENIDDEN DDEFECTSEFECTS

The stipulation in a contract of lease with option toThe stipulation in a contract of lease with option tourchase (which it treated as a sale of movable onurchase (which it treated as a sale of movable on

installments) that the buyer-lessee "absolutely releasenstallments) that the buyer-lessee "absolutely releasesthe lessor from any liability whatsoever as to any anthe lessor from any liability whatsoever as to any an

all matters in relation to warranty in accordance withall matters in relation to warranty in accordance withthe provisions hereinafter stipulated," was held as anthe provisions hereinafter stipulated," was held as anexpress waiver of warranty against hidden defect.express waiver of warranty against hidden defect.

Filinvest Credit Corp. v. CA,Filinvest Credit Corp. v. CA, 178 SCRA 188 (1989)178 SCRA 188 (1989)

75



76/110

A hidden defect is one which is unknown or could notA hidden defect is one which is unknown or could nothave been known to the buyer. Under the law, the requisiteshave been known to the buyer. Under the law, the requisites

to recover on account of hidden defects are as follows:to recover on account of hidden defects are as follows:

a.a. Defect must be hidden;Defect must be hidden;

b.b. Must exist at the time the sale was made;Must exist at the time the sale was made;

c.c. Must ordinarily have been excluded from the contract;Must ordinarily have been excluded from the contract;

d.d. Defect, must be important (render the thing unfit orDefect, must be important (render the thing unfit orconsiderably decreases fitness);considerably decreases fitness);

e.e. Action must be instituted within statute of limitations.Action must be instituted within statute of limitations.

Investments & Dev., Inc. v. CA,Investments & Dev., Inc. v. CA, 162 SCRA 636 [1988]162 SCRA 636 [1988]7676

Nutrimix Feeds Corp. v. CANutrimix Feeds Corp. v. CA

441 SCRA 357 (2004)441 SCRA 357 (2004)

The remedy against violation of warranty against hiddenThe remedy against violation of warranty against hidden

defects is either to withdraw from the contract (defects is either to withdraw from the contract (accionaccion

redhibitoriaredhibitoria) or to demand a proportionate reduction of the) or to demand a proportionate reduction of the

price (price (accion quanti minorisaccion quanti minoris), with damages in either case.), with damages in either case.



77/110

66.. IIMPLIEDMPLIED WWARRANTIES IN THEARRANTIES IN THE SSALE OFALE OF GGOODSOODS

a.a.Warranty as to Fitness or QualityWarranty as to Fitness or Quality

b.b.

Sale of Goods by SampleSale of Goods by Sample

77. A. ADDITIONALDDITIONAL WWARRANTIES FORARRANTIES FOR CCONSUMERONSUMER PPRODUCTSRODUCTS(Arts. 68, Consumer Act of the Philippines, R.A. 7394).(Arts. 68, Consumer Act of the Philippines, R.A. 7394).

5.5. RREDHIBITORYEDHIBITORY DDEFECTSEFECTSOFOF AANIMALSNIMALS

a. Sale of a Teama. Sale of a Team

b. Animals Sold at Fairs or Public Auctionb. Animals Sold at Fairs or Public Auction

c. Sale of Animals with Contagious Diseasesc. Sale of Animals with Contagious Diseases

d. Sale of Unfit Animalsd. Sale of Unfit Animals

77



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C.C.

EEFFECTS OFFFECTS OF

WWARRANTIESARRANTIES

D.D. EEFFECTS OFFFECTS OF WWAIVERSAIVERS

GG

. B. BUYER'SUYER'S

OOPTIONS INPTIONS IN

CCASE OFASE OF

BBREACHREACH

OOFF

WWARRANTYARRANTY

78

EEXTINGUISHMENT OFXTINGUISHMENT OF SSALEALE


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EEXTINGUISHMENT OFXTINGUISHMENT OF SSALEALE

SSALEALEEEXTINGUISHED BYXTINGUISHED BYSSAMEAMEMMODESODESAAPPLICABLE TOPPLICABLE TOAALLLL CCONTRACTSONTRACTS

Arts. 1231, 1600Arts. 1231, 1600

RREDEMPTION IS A MODE OFEDEMPTION IS A MODE OFEXTINGUISHMENT UNIQUE TOEXTINGUISHMENT UNIQUE TO SSALES:ALES:

CCONVENTIONALONVENTIONAL RREDEMPTION:EDEMPTION: SSALEALEWITHWITHRRIGHT TOIGHT TORREPURCHASEEPURCHASE

LLEGALEGAL RREDEMPTIONEDEMPTION

79

CCONVENTIONALONVENTIONAL RREDEMPTIONEDEMPTION


80/110

NNATURE OFATURE OF RRIGHT TOIGHT TO RREPURCHASE:EPURCHASE:

CCONVENTIONALONVENTIONAL RREDEMPTIONEDEMPTION((SSALE WITH AALE WITH ARRIGHT TOIGHT TORREPURCHASEEPURCHASE))

Reserved by Seller at the point ofReserved by Seller at the point of

Perfection.Perfection. Art. 1601Art. 1601Villarica v. CAVillarica v. CA, 26 SCRA 189 (1968), 26 SCRA 189 (1968)

Even though found in a separateEven though found in a separateinstrumentinstrument

Torres v. CATorres v. CA, 216 SCRA 287 (1992), 216 SCRA 287 (1992)

Claravall v. CA,Claravall v. CA, 190 SCRA 439 (1990)190 SCRA 439 (1990)

80

CCONVENTIONALONVENTIONAL RREDEMPTIONEDEMPTION contdcontd


81/110

IIts Validity is Tied to the Validity of the Contractts Validity is Tied to the Validity of the Contractof Sale to which appended.of Sale to which appended.

Nool v. Court of AppealsNool v. Court of Appeals, 276 SCRA 149 (1997), 276 SCRA 149 (1997)

When Sale Covered by Deed, RightWhen Sale Covered by Deed, Right a retroa retro maymay

be proved by parol evidence.be proved by parol evidence.Mactan Cebu Intl Airport Authority v. Court of AppealsMactan Cebu Intl Airport Authority v. Court of Appeals ,,

263 SCRA 736 (1996)263 SCRA 736 (1996)

81

RRIGHT AIGHT A RRETROETRO versusversus OOPTIONPTION CCONTRACTONTRACT


82/110

RRIGHT AIGHT A RRETROETRO versusversusOOPTIONPTION CCONTRACTONTRACT

(A)(A) Not separate contract, butNot separate contract, but

must be part of mainmust be part of mainContract of SaleContract of Sale

(A) Generally principal contract,(A) Generally principal contract,

but may be appended inbut may be appended inanother contract validanother contract valid

(B) Right to Redeem does(B) Right to Redeem does

not need separatenot need separate

considerationconsideration

(B)(B) Option requires consider-ationOption requires consider-ationseparate and distinct of theseparate and distinct of the

Price in order to be validPrice in order to be valid

(C)(C)Period of Option may bePeriod of Option may be

beyond 10 yearsbeyond 10 years

(C)(C) Maximum Period forMaximum Period forexercise of Right ofexercise of Right of

redemption cannotredemption cannot

exceed 10 yearsexceed 10 years

(D)(D) Option may be exercisedOption may be exercisedby mere notice to Offerorby mere notice to Offeror

(D)(D) Right of repurchase requiresRight of repurchase requiresin addition the tender of thein addition the tender of the

amount mandated, includingamount mandated, including

consignation when tenderconsignation when tender

not possiblenot possible

82

SSALIENTALIENT MMATTERS ONATTERS ON


83/110

SSALIENTALIENT MMATTERS ONATTERS ON

RRIGHT OFIGHT OF RREDEMPTIONEDEMPTION

(a)(a)PPERIOD OFERIOD OF RREDEMPTION:EDEMPTION:

When no Period agreed upon: 4 yearsWhen no Period agreed upon: 4 years

When Period agreed upon: cannotWhen Period agreed upon: cannot

exceed 10 yearsexceed 10 years

When Period of Non-RedemptionWhen Period of Non-Redemption

StipulatedStipulatedAnchuel v. IAC,Anchuel v. IAC, 147 SCRA 434 (1987)147 SCRA 434 (1987)

Tayao v. DulayTayao v. Dulay, 13 SCRA 758 (1965), 13 SCRA 758 (1965)

83


84/110

SSALIENTALIENT MMATTERSATTERS contdcontd


85/110

Only tender of payment is sufficient.Only tender of payment is sufficient.Legaspi v. CALegaspi v. CA, 142 SCRA 82 (1986), 142 SCRA 82 (1986)

Consignation is not required after tender isConsignation is not required after tender is

refused.refused.Mariano v. CA,Mariano v. CA, 222 SCRA 736 (1993)222 SCRA 736 (1993)

But when tender not possible, consignationBut when tender not possible, consignationshould be made.should be made.

Catangcatang v. LegayadaCatangcatang v. Legayada, 84 SCRA 51, 84 SCRA 51 (1978)(1978)

(b(b))HHOWOW RREDEMPTIONEDEMPTION EEFFECTED:FFECTED:

8585



86/110

Simply by Filing Judicial ActionSimply by Filing Judicial Action

Lee Chuy Realty Corp. v. CALee Chuy Realty Corp. v. CA, 250 SCRA 596 (1995), 250 SCRA 596 (1995)

Seller returning to Buyer:Seller returning to Buyer:

Price of the salePrice of the sale Expenses of contract, and any otherExpenses of contract, and any other

legitimate payments made by reason of thelegitimate payments made by reason of the

salesale

Necessary and useful expenses made onNecessary and useful expenses made on

the thing soldthe thing sold

ART. 1616ART. 1616

SSALIENTALIENT MMATTERSATTERS cont dcont d

86



87/110

SSALIENTALIENT MMATTERSATTERS cont dcont d

When Redemption Not Made, Buyer a retroWhen Redemption Not Made, Buyer a retro

automatically acquires full ownership.automatically acquires full ownership.Oviedo v. Garcia,Oviedo v. Garcia, 40 SCRA 17 (1971)40 SCRA 17 (1971)

HHOWEVER:OWEVER: In real property, consolidation shallIn real property, consolidation shallnot be recorded in the Registry ofnot be recorded in the Registry of

Property without a judicial orderProperty without a judicial order, after, after

the seller has been duly heard.the seller has been duly heard.

Article 1607Article 1607

87

If Seller proves the transaction a sale a retro, heIf Seller proves the transaction a sale a retro, heis given a period of 30 days from finality ofis given a period of 30 days from finality of

judgment to repurchase.judgment to repurchase.

Solid Homes v. CA,Solid Homes v. CA, 275 SCRA 267 (1997).275 SCRA 267 (1997).

EEQUITABLE

QUITABLE MMORTGAGEORTGAGE


88/110

EEQUITABLEQUITABLE MMORTGAGEORTGAGE

DDEFINITION ANDEFINITION AND EELEMENTSLEMENTS

The contract entered into isThe contract entered into is

denominated as a Sale (absolute ordenominated as a Sale (absolute oraa

retroretro); and); and

(b) Real intention was to secure an(b) Real intention was to secure an

existing debt by way mortgageexisting debt by way mortgage

Molina v. CAMolina v. CA, 398 SCRA 97 (2003), 398 SCRA 97 (2003)

88

EEQUITABLEQUITABLE MMORTGAGEORTGAGE contdcontd


89/110

RRATIONALE OFATIONALE OF

EEQUITABLEQUITABLE

MMORTGAGEORTGAGE

PPRINCIPLERINCIPLE

Prevent circumvention of law on usury and Prevent circumvention of law on usury and

rule against pactum commissorium, i.e. againstrule against pactum commissorium, i.e. againsta creditor appropriating the mortgage property.a creditor appropriating the mortgage property.

To end unjust or oppressive transactions orTo end unjust or oppressive transactions or

violations in connection with a sale or property.violations in connection with a sale or property.Spouses Misea v. RongavillaSpouses Misea v. Rongavilla, 303 SCRA 749 (1999)., 303 SCRA 749 (1999).Matanguihan v. CAMatanguihan v. CA, 275 SCRA 380 (1997), 275 SCRA 380 (1997)

Lao v. CALao v. CA, 275 SCRA 237 (1997), 275 SCRA 237 (1997)

8989

RRULINGS ONULINGS ON EEQUITABLEQUITABLE MMORTGAGEORTGAGE


90/110

9090

Badges of Equitable Mortgage in Art. 1602Badges of Equitable Mortgage in Art. 1602

Apply both to sale a retro and to a contract Apply both to sale a retro and to a contract

purporting to be an absolute sale.purporting to be an absolute sale.

Tuazon v. CA,Tuazon v. CA, 341 SCRA 707 (2000)341 SCRA 707 (2000)

Zamora v.CAZamora v.CA

, 260 SCRA 10 (1996), 260 SCRA 10 (1996)

Parol evidence is competent and admissible Parol evidence is competent and admissible

in support of allegation of equitable mortgagein support of allegation of equitable mortgagearrangement.arrangement.

Mariano v. CAMariano v. CA, 220 SCRA 716 (1993), 220 SCRA 716 (1993)


91/110

Pactum Commissorium Pactum Commissorium principle does notprinciple does not

apply:apply:

9191

(a)(a) When security for a debt is also money in form oWhen security for a debt is also money in form otime deposittime deposit

Consing v. CA,Consing v. CA, 177 SCRA 14 (1989)177 SCRA 14 (1989)

(b) To an agreement between Lender and Borrower(b) To an agreement between Lender and Borrowerwhich provides that in the event Borrower fails towhich provides that in the event Borrower fails to

comply with the new terms of payment, the agreemencomply with the new terms of payment, the agreement

shall automatically operate to be an instrument o shall automatically operate to be an instrument o

dacion en pago without need of executing anydacion en pago without need of executing anydocument to such an effect.document to such an effect.

Solid Homes, Inc. v. CASolid Homes, Inc. v. CA, 275 SCRA 267 (1997), 275 SCRA 267 (1997)

RULINGS ON EM contd


92/110

CCONTRA:ONTRA: P/NP/N stipulation that upon makers failurestipulation that upon makers failure

to pay interests, ownership of propertyto pay interests, ownership of propertywould automatically be transferred towould automatically be transferred to

Payee and the covering deed of salePayee and the covering deed of sale

would be registered, is in substance awould be registered, is in substance a

pactum commissoriumpactum commissorium in violation of Art.in violation of Art.

2088.2088.

A. Francisco Realty v. CAA. Francisco Realty v. CA, 298 SCRA 349 (1998), 298 SCRA 349 (1998)

A pactum commisorium sale is void, registrationA pactum commisorium sale is void, registrationand obtaining of new title by apparent buyer wouldand obtaining of new title by apparent buyer wouldalso be void.also be void.

A. Francisco Realty v. CAA. Francisco Realty v. CA, 298 SCRA 349 (1998), 298 SCRA 349 (1998)

92

RREMEDIESEMEDIES UUNDERNDER EEQUITABLEQUITABLE MMORTGAGEORTGAGE


93/110

SSITUATIONSITUATIONS

Apparent seller can seek reformation o Apparent seller can seek reformation o

instrument (Art. 1605).instrument (Art. 1605).

An action for consolidation of ownership (inAn action for consolidation of ownership (in

case presented as sale a retro) would be void, ancase presented as sale a retro) would be void, an

roper remedy of mortgagee-buyer is to filroper remedy of mortgagee-buyer is to file

appropriate foreclosure of the mortgage inappropriate foreclosure of the mortgage inequity.equity.

Briones-Vasquez vs. CABriones-Vasquez vs. CA, 450 SCRA 644 (2005)., 450 SCRA 644 (2005).

9393

RREMEDIESEMEDIES ININ EMEM contdcontd


94/110

Additional 30-day Period of Redemption is Additional 30-day Period of Redemption is

allowed under Art. 1606, in event courts shouldallowed under Art. 1606, in event courts should

find the sale was not equitable mortgage, find the sale was not equitable mortgage,

provided:provided:

(a)(a) Honest belief that it was equitable mortgage supporte Honest belief that it was equitable mortgage supporteby convincing evidence, such as badges under Art. 1602,by convincing evidence, such as badges under Art. 1602,

or consignation during trial of the amount of the allegeor consignation during trial of the amount of the allege

loanloan

Abilla v. Gobonseng,Abilla v. Gobonseng, 374 SCRA 51 (2002)374 SCRA 51 (2002)

Vda. de Macoy v. CAVda. de Macoy v. CA, 206 SCRA 244 (1992), 206 SCRA 244 (1992)

94


95/110

LLEGALEGAL RREDEMPTIONEDEMPTIONcontdcontd


96/110

Written notice must coverWritten notice must coverperfectedperfectedsalesale

Art. 1623Art. 1623

Spouses Doromal v. CASpouses Doromal v. CA, 66 SCRA 575 (1975), 66 SCRA 575 (1975)

Notice must be given by seller; and that notice givenNotice must be given by seller; and that notice given

by buyer or even by the Register of Deeds are notby buyer or even by the Register of Deeds are not

sufficientsufficient..Francisco v. Boiser, 332 SCRA 305 (2000)Francisco v. Boiser, 332 SCRA 305 (2000)

Butte v. Manuel Uy and Sons, Inc., 4 SCRA 526 (1962)Butte v. Manuel Uy and Sons, Inc., 4 SCRA 526 (1962)

Salatandol v. Retes, 162 SCRA 568 (1988)Salatandol v. Retes, 162 SCRA 568 (1988)

PPERIOD OFERIOD OF LLEGALEGAL RREDEMPTIONEDEMPTION BBEGINSEGINS::

3030 DAYS FROMDAYS FROM WWRITTENRITTEN NNOTICEOTICE

9696

LLEGALEGAL RREDEMPTIONEDEMPTION contdcontd


97/110

Seller furnishing of the copies of deeds of sale toSeller furnishing of the copies of deeds of sale to

co-owner would be sufficient.co-owner would be sufficient.Distrito v. CADistrito v. CA, 197 SCRA 606 (1991), 197 SCRA 606 (1991)

Conejero v. CAConejero v. CA, 16 SCRA 775 (1966), 16 SCRA 775 (1966)

Badillo v. FerrerBadillo v. Ferrer, 152 SCRA 407 (1987), 152 SCRA 407 (1987)

Notice to minors may validly be served upon Notice to minors may validly be served upon

parents even when not judicially appointed since parents even when not judicially appointed since

beneficial to the children.beneficial to the children.

Badillo v. Ferrer,Badillo v. Ferrer, 152 SCRA 407 (1987).152 SCRA 407 (1987).

LEGAL REDEMPTION cont d

9797

LLEGALEGAL RREDEMPTIONEDEMPTIONcontdcontd


98/110

Deemed complied when co-owners signe Deemed complied when co-owners signe

Deed of Extrajudicial Partition embodyineed of Extrajudicial Partition embodying

disposition of part of the property owned indisposition of part of the property owned in

common.common.

Fernandez v. Tarun,Fernandez v. Tarun, 391 SCRA 653 (2002)391 SCRA 653 (2002)

Filing of ejectment suit or collection of rentalsFiling of ejectment suit or collection of rentals

against a co-owner dispenses with need foragainst a co-owner dispenses with need for

written notice.written notice.

Alonzo v. IACAlonzo v. IAC, 150 SCRA 259 (1987), 150 SCRA 259 (1987)

L G R O co t d

98

IINSTANCES OFNSTANCES OF LLEGALEGAL RREDEMPTIONEDEMPTION


99/110

(a)(a) Among Co-heirsAmong Co-heirs (Art. 1088)(Art. 1088)

A co-heir cannot exercise the right of redemption A co-heir cannot exercise the right of redemptionalone.alone.

De Guzman v. CADe Guzman v. CA, 148 SCRA 75 (1987), 148 SCRA 75 (1987)

No legal redemption for sale of the property of the No legal redemption for sale of the property of the

estate.estate.Plan v. IACPlan v. IAC, 135 SCRA 270 (1985), 135 SCRA 270 (1985)

Written notice to other co-owners deemed inutile byWritten notice to other co-owners deemed inutile by

act that ebuyers took possession of property in full vieact that ebuyers took possession of property in full vie

of other co-owners.of other co-owners.Pilapil v. CAPilapil v. CA, 250 SCRA 560 (1995), 250 SCRA 560 (1995)

Notice given by city treasurer will not suffice.Notice given by city treasurer will not suffice.Verdad v. CAVerdad v. CA, 256 SCRA 593 (1996), 256 SCRA 593 (1996)

9999

IINSTANCES OFNSTANCES OF LLEGALEGAL RREDEMPTIONEDEMPTION contdcontd


100/110

(b)(b) Among Co-ownersAmong Co-owners (Art. 1620)(Art. 1620)

Right of legal redemption arises only when shareRight of legal redemption arises only when sharesof other owners are sold to a third person, and noof other owners are sold to a third person, and noto another co-ownerto another co-owner

Fernandez v. TarunFernandez v. Tarun, 391 SCRA 653 (2002), 391 SCRA 653 (2002)

Registration of the sale does not estop a co-owneRegistration of the sale does not estop a co-ownerCabrera v. Villanueva,Cabrera v. Villanueva, 160 SCRA 627 (1988)160 SCRA 627 (1988)

Notice required to be given to co-owners must beNotice required to be given to co-owners must bein writing; and redemption by co-owner redounds ton writing; and redemption by co-owner redounds to

the benefit of all other co-owners.the benefit of all other co-owners.Mariano v. CA,Mariano v. CA, 222 SCRA 736 (1993)222 SCRA 736 (1993)

100100



101/110

No written notice required to co-owner who No written notice required to co-owner whoacted as active intermediary in theacted as active intermediary in theconsummation of the sale.consummation of the sale.

Distrito v. CA,Distrito v. CA, 197 SCRA 606 (1991)197 SCRA 606 (1991)

Redemption by co-owner, even when he usesRedemption by co-owner, even when he uses

his own fund, inures to the benefit of all thehis own fund, inures to the benefit of all the

other co-owners.other co-owners.

Annie Tan v. CA, 172 SCRA 660 (1989)Annie Tan v. CA, 172 SCRA 660 (1989)

101



102/110

Redemption covers only resale and does not Redemption covers only resale and does not

cover exchanges or barter of propertiescover exchanges or barter of properties

De Santos v. City of ManilaDe Santos v. City of Manila, 45 SCRA 409 (1972), 45 SCRA 409 (1972)

Requisite of speculation dropped.Requisite of speculation dropped.

Legaspi v. CALegaspi v. CA, 69 SCRA 360 (1976), 69 SCRA 360 (1976)

Does not apply if one adjacent lot is not also Does not apply if one adjacent lot is not alsorural landrural land

Primary Structures Corp. v. ValenciaPrimary Structures Corp. v. Valencia, 409 SCRA 371 (2003), 409 SCRA 371 (2003)

(c)(c) Among Adjoining OwnersAmong Adjoining Owners (Art. 1621-1622)(Art. 1621-1622)

102102



103/110

(d)(d) Sale of Credit in LitigationSale of Credit in Litigation (Art. 1634)(Art. 1634) - 30 days- 30 days

(e)(e) Redemption of HomesteadsRedemption of Homesteads (Sec. 119, C.A. 141)(Sec. 119, C.A. 141)

The right to repurchase is granted by laThe right to repurchase is granted by la

and need not be provided for in the deed of sale.and need not be provided for in the deed of sale.

Berin v. CABerin v. CA, 194 SCRA 508 (1991)., 194 SCRA 508 (1991).

103

IINSTANCES OFNSTANCES OF LLEGALEGAL RRE