Professional Documents
Culture Documents
1. Elements of Sale
Elements of sale: (a) consent or meeting of the minds; (b) determinate subject matter;
and (c) price certain in money or its equivalent. xNavarra v. Planters Dev. Bank, 527 SCRA
4
562 (2007).
5
Absence of any essential elements negates a sale xDizon v. CA, 302 SCRA 288 (1999),
even when earnest money has been paid. Manila Metal Container Corp. v. PNB, 511 SCRA
444 (2006).
Sale being a consensual contract, its essential elements must be proven xVillanueva v.
CA, 267 SCRA 89 (1997); but once proven, a sales validity is not affected by a previously
executed fictitious deed of sale xPealosa v. Santos, 363 SCRA 545 (2001); and the burden
is on the other party to prove otherwise. xHeirs of Ernesto Biona v. CA, 362 SCRA 29 (2001).
1
The Outline presents the manner by which the LAW ON SALES will be taken-up in class. The x's and those
footnoted in the Outline represent cases or topics which need no extended discussions, either because the
essence of the rulings are already summarized in the Outline or they contain similar rulings or doctrines as other
cases to be discussed. Unless otherwise indicated, the numbered articles refer to articles of the Civil Code of the
Philippines.
2
Ownership is the independent and general power of a person over a thing for purposes recognized by law and within
the limits established thereby. According to Art. 428 of the Civil Code, this means that: The owner has the right to enjoy and
dispose of a thing, without other limitations than those established by law. x x x Aside from the jus utendi and the jus
abutendi inherent in the right to enjoy the thing, the right to dispose, or the jus disponendi, is the power of the owner to
alienate, encumber, transform and even destroy the thing owned. Flancia v. Court of Appeals, 457 SCRA 224 (2005).
3
Alfredo v. Borras, 404 SCRA 145 (2003); Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Roberts v.
Papio, 515 SCRA 346 (2007).
4
Jovan Land, Inc. v. CA, 268 SCRA 160 (1997); Quijada v. CA, 299 SCRA 695 (1998); Co v. CA, 312 SCRA 528 (1999);
San Andres v. Rodriguez, 332 SCRA 769 (2000); Roble v. Arbasa, 362 SCRA 69 (2001); Polytechnic University v. CA, 368
SCRA 691 (2001); Katipunan v. Katipunan, 375 SCRA 199 (2002); Londres v. CA, 394 SCRA 133 (2002); Manongsong v.
Estimo, 404 SCRA 683 (2003); Jimenez, Jr. v. Jordana, 444 SCRA 250 (2004); San Lorenzo Dev. Corp. v. CA, 449 SCRA
99 (2005); Yason v. Arciaga, 449 SCRA 458 (2005); Roberts v. Papio, 515 SCRA 346 (2007); Navarra v. Planters Dev.
Bank, 527 SCRA 562 (2007); Republic v. Florendo, 549 SCRA 527 (2008).
5
Roberts v. Papio, 515 SCRA 346 (2007).
6
Limketkai Sons Milling, Inc. v. Court of Appeals, 250 SCRA 523 (1995); Jovan Land, Inc. v. CA, 268 SCRA 160 (1997);
Bugatti v. Court of Appeals, 343 SCRA 335 (2000); Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006); Manila
Metal Container Corp. v. PNB, 511 SCRA 444 (2006); Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007); Province of
Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
7
Bowe v. CA, 220 SCRA 158 (1993); Romero v. CA, 250 SCRA 223 (1995); Lao v. CA, 275 SCRA 237 (1997); Cavite
Development Bank v. Lim, 324 SCRA 346 (2000).
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Upon its perfection, the parties may reciprocally demand performance. xHeirs of
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Venancio Bejenting v. Baez, 502 SCRA 531 (2006); subject only to the provisions of
the law governing the form of contracts. xCruz v. Fernando, 477 SCRA 173 (2005).
It remains valid even if parties have not affixed their signatures to its written form
xGabelo v. CA, 316 SCRA 386 (1999), or the manner of payment is breached.
xPilipinas Shell Petroleum Corp v. Gobonseng, 496 SCRA 305 (2006).
The binding effect of sale is based on the principle that the obligations arising
therefrom have the force of law between the parties. xVeterans Federation of the
Philippines v. Court of Appeals, 345 SCRA 348 (2000).
Perfection Distinguished from Demandability Not all contracts of sale become
automatically and immediately effective. In sales with assumption of mortgage, there is a
condition precedent to the sellers consent and without the approval of the mortgagee, the
sale is not perfected. xBian Steel Corp. v. Court of Appeals, 391 SCRA 90 (2002).
No Contract Situation versus Void Contract Absence of consent (i.e.,
complete meeting of minds) negates the existence of a perfected sale. xFirme v. Bukal
Enterprises and Dev. Corp., 414 SCRA 190 (2003). The contract then is null and void ab
initio, absolutely wanting in civil effects; hence, it does not create, modify, or extinguish the
juridical relation to which it refers. xCabotaje v. Pudunan, 436 SCRA 423 (2004).
When there is no meeting of the minds on price, the contract is not perfected and
does not serve as a binding juridical relation between the parties. xManila Metal Container
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Corp. v. PNB, 511 SCRA 444 (2006), and should be more accurately denominated as
inexistent, as it did not pass the stage of generation to the point of perfection. xNHA v.
Grace Baptist Church, 424 SCRA 147 (2004).
8
Romero v. CA, 250 SCRA 223 (1995); Balatbat v. CA, 261 SCRA 128 (1996); Coronel v. CA, 263 SCRA 15 (1996); City
of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999); Agasen v. CA, 325 SCRA 504 (2000); Laforteza v. Machuca, 333
SCRA 643 (2000); Londres v. Court of Appeals, 394 SCRA 133 (2002); Alcantara-Daus v. de Leon, 404 SCRA 74 (2003);
Buenaventura v. Court of Appeals, 416 SCRA 263 (2003); San Lorenzo Dev. Corp. v. CA, 449 SCRA 99 (2005); Yason v.
Arciaga, 449 SCRA 458 (2005); Ainza v. Padua, 462 SCRA 614 (2005); Roberts v. Papio, 515 SCRA 346 (2007); MCC
Industrial Sales Corp. v. Ssangyong Corp., 536 SCRA 408 (2007); Castillo v. Reyes. 539 SCRA 193 (2007) .
9
Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
10
Roberts v. Papio, 515 SCRA 346 (2007).
11
Ong v. Court of Appeals, 310 SCRA 1 (1999); Mortel v. KASSCO, 348 SCRA 391 (2000); Agro Conglomerates, Inc. v.
CA, 348 SCRA 450 (2000); Velarde v. Court of Appeals, 361 SCRA 56 (2001); Carrascoso, Jr. v. Court of Appeals, 477
SCRA 666 (2005).
12
Vda. De Quirino v. Palarca, 29 SCRA 1 (1969)
13
Acap v. CA, 251 SCRA 30 (1995).
14
Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001); Alcantara-Daus v. de Leon, 404 SCRA 74
(2003); Heirs of Jesus M. Mascuana v. Court of Appeals, 461 SCRA 186 (2005).
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BUT SEE: xTitong v. CA, 287 SCRA 102 (1998), which defined a sale as a contract
transferring dominion and other real rights in the thing sold.
15
Romero v. CA, 250 SCRA 223 (1995); Lao v. Court of Appeals, 275 SCRA 237 (1997); Orden v. Aurea, 562 SCRA 660
(2008); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008)..
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Commissioner of Internal Revenue v. Arnoldus Carpentry Shop, 159 SCRA 199 (1988); Del Monte Philippines, Inc. v.
Aragones, 461 SCRA 139 (2005).
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5. Dacion En Pago (Arts. 1245 and 1934)
Governed by the law on sales, dation in payment is a transaction that takes place when
property is alienated to the creditor in full satisfaction of a debt in moneyit involves the
delivery and transmission of ownership of a thing as an accepted equivalent of the
performance of the obligation. xYuson v. Vitan, 496 SCRA 540 (2007).
In its modern concept, what actually takes place in dacion en pago is an objective
novation of the obligation where the thing offered as an accepted equivalent of the
performance of an obligation is considered as the object of the contract of sale, while the debt
is considered as the purchase price. xAquintey v. Tibong 511 SCRA 414 (2006).
Elements 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. Lo v. KJS Eco-Formwork System Phil., Inc., 413 SCRA 182
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(2003).
There is no dation in payment where there is no transfer of ownership in the creditors
favor, as when the possession of the thing is merely given to the creditor by way of security.
Fort Bonifacio Dev. Corp. v. Yllas Lending Corp., 567 SCRA 454 (2008).
For dacion to arise, there must be actual delivery of the property to the creditor by way of
extinguishment of the pre-existing debt. xPhilippine Lawin Bus Co. v. CA, 374 SCRA 332
18
(2002). BUT SEE OBITER: xSSS v. Court of Appeals, 553 SCRA 677 (2008).
There 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. xPNB v. Pineda, 197 SCRA 1 (1991).
A creditor, especially a bank, which enters into dacion en pago, should know and must
accept the legal consequence thereof, that the pre-existing obligation is totally extinguished.
xEstanislao v. East West Banking Corp., 544 SCRA 369 (2008).
2. Minors, Insane and Demented Persons, Deaf-Mutes (Arts. 1327, 1397 and 1399)
A 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. [?] xLabagala v. Santiago, 371 SCRA 360 (2001).
b. xEmancipation (Arts. 399 and 1397; Inutile: Majority age now at 18 years, Arts. 234 and
236, Family Code, amended by R.A. 6809).
c. Protection of the Senile and Elderly (Art. 24) and Illiterates (Art. 1332)
Under Art. 1332, when one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake 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. [?] xVda. De Ape v. Court of Appeals, 456 SCRA 193 (2005).
While 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
property rights, then he is undeniably incapacitated, and the sale he entered into is void [?].
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Paragas v. Heirs of Dominador Balacano, 468 SCRA 717 (2005).
b. Between Spouses (Arts. 133, 1490, 1492; Sec. 87, Family Code)
Sales between spouses who are not governed by a complete separation of property
regime are void, not just voidable. xMedina v. Collector, 1 SCRA 302 (1960).
Sale by husband of conjugal land to his concubine is null and void for being contrary to
morals and public policy and subversive of the stability of the family, a basic social
institution which public policy cherishes and protects. Calimlim-Canullas v. Fortun, 129
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SCRA 675 (1984).
Since under Art. 1490, 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. Matabuena v. Cervantes, 38 SCRA 284 (1971).
Nevertheless, when property resold to a third-party buyer in good faith and for value,
reconveyance is no longer available. xCruz v. CA, 281 SCRA 491 (1997).
The in pari delicto doctrine would apply to the spouses-parties under Art. 1490, since
only the heirs and the creditors can question the sales nullity. xModina v. Court of Appeals,
317 SCRA 696 (1999).
b. Attorneys.
Prohibition applies only while litigation is pending. xDirector of Lands v. Ababa, 88
SCRA 513 (1979); even when the litigation is not adversarial in nature Rubias v.
Batiller, 51 SCRA 120 (1973); or when it is a certiorari proceeding that may have no merit
xValencia v. Cabanting, 196 SCRA 302 (1991).
Prohibition applies only to a sale to a lawyer of record, and does not cover assignment
of the property given in judgment made by a client to an attorney, who has not taken part in
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the case. xMunicipal Council of Iloilo v. Evangelista, 55 Phil. 290 (1930); nor to a lawyer
who acquired property prior to the time he intervened as counsel in the suit involving such
property. xDel Rosario v. Millado, 26 SCRA 700 (1969).
Prohibition does not apply: (a) to sale of a land acquired by a client to satisfy a
judgment in his favor, to his attorney as long as the property was not the subject of the
litigation. xDaroy v. Abecia, 298 SCRA 172 (1998); 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
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only after judgment has been rendered. Fabillo v. IAC, 195 SCRA 28 (1991).
c. Judges
20
Cirelos v. Hernandez, 490 SCRA 625 (2006); Bautista v. Silva, 502 SCRA 334 (2006).
21
Ching v. Goynako, Jr., 506 SCRA 735 (2006).
22
Uy Sui Pin v. Cantollas, 70 Phil. 55 (1940); Medina v. Collector, 1 SCRA 302 (1961).
23
Gregorio Araneta, Inc. v. Tuason de Paterno, 49 O.G. 45 (1952).
24
Recto v. Harden, 100 Phil. 427 (1956); Vda. de Laig v. CA, 86 SCRA 641 (1978).
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A judge should restrain himself from participating in the sale of propertiesit is
incumbent upon him to advise the parties to discontinue the transaction if it is contrary to
law. Britanico v. Espinosa, 486 SCRA 523 (2006).
A judge who buys property in litigation before his court after the judgment becomes
final does not violate Art. 1491, but he can be administratively disciplined for violation of
the Code of Judicial Ethics. xMacariola v. Asuncion, 114 SCRA 77 (1982).
Even when the main cause is a collection of a sum of money, the properties levied are
still subject to the prohibition. xGan Tingco v. Pabinguit, 35 Phil. 81 (1916).
25
Londres v. CA, 394 SCRA 133 (2002).
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4. Quantity of Subject Matter Not Essential for Perfection? (Art. 1349)
Sale of grains is perfected even when the exact quantity or quality is not known, so
long as the source of the subject is certain. NGA v. IAC, 171 SCRA 131 (1989).
Where 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. Johannes Schuback &
Sons Phil. Trading Corp. v. CA, 227 SCRA 719 (1993).
5. Sellers Obligation to Transfer Title to Buyer (Art. 1459, 1462, and 1505)
a. Seller's Ownership Need Not Exist at Perfection:
Sale of copra for future delivery does not make seller liable for estafa for failing to
deliver because the contract is still valid and the obligation was civil and not criminal.
xEsguerra v. People, 108 Phil. 1078 (1960).
A perfected contract of sale cannot be challenged on the ground of the sellers 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.
xAlcantara-Daus v. de Leon, 404 SCRA 74 (2003).
It is essential that seller is owner of the property he is selling. The principal
obligation of a seller is to transfer the ownership of the property sold (Art. 1458). This
law stems from the principle that nobody can dispose of that which does not belong to
him. NEMO DAT QUOD NON HABET. xNoel v. CA, 240 SCRA 78 (1995).
That the sellers are no longer owners of the goods at perfection does not appear to
be one of the void contracts enumerated in Art. 1409 of Civil Code, and under Art. 1402
the Civil Code itself recognizes a sale where the goods are to be acquired 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 Art. 1409(5): Those which contemplate an impossible
service. Nool v. CA, 276 SCRA 149 (1997).
b. Subsequent Acquisition of Title by Non-Owner Seller (Art. 1434) validates the sale
and title passes to the seller by operation of law.
c. Acquisition by the Buyer May Even Depend on Contingency (Art. 1462).
X6. Illegality of Subject Matter (Arts. 1409, 1458, 1461, 1462, and 1575)
a. Special Laws: narcotics (R.A. 6425); wild bird or mammal (Act 2590, Sec. 7); rare wild
plants (Act 3983); poisonous plants or fruits (R.A. 1288); dynamited fish (R.A 428);
gunpowder and explosives (Act 2255); firearms and ammunitions (P.D. 9); sale of realty
by non-Christians (Sec. 145, Revised Adm. Code, R.A 4252)
b. Following Sales of Land Void:
By Non-Christian if not approved by Provincial Governor per Sec. 145 of Revised
Administrative Code. xTac-an v. CA, 129 SCRA 319 (1984).
Friar land without consent of Secretary of Agriculture required under Act No. 1120. xAlonso v.
Cebu Country Club, Inc., 375 SCRA 390 (2002); Liao v. CA, 323 SCRA 430 (2000).
Made in violation of land reform laws declaring tenant-tillers as the full owners of the lands they
tilled. xSiacor v. Gigantana, 380 SCRA 306 (2002).
Reclaimed lands are of the public domain and cannot, without congressional fiat, be sold,
public or private. Fisheries Dev. Authority v. Court of Appeals, 534 SCRA 490 (2007).
(3) Effects When Price Simulated The 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
26
the purpose of the contract. xModina v. Court of Appeals, 317 SCRA 696 (1999).
c. Non-Payment of Price
Sale being consensual, failure of buyer to pay the price does not make the contract
void for lack of consideration or simulation, but results in buyers default, for which the
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seller may exercise his legal remedies. xBalatbat v. CA, 261 SCRA 128 (1996).
In 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. [?] The remedy of an unpaid seller in a contract of sale is to seek
either specific performance or rescission. xHeirs of Pedro Escanlar v. Court of Appeals,
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281 SCRA 176 (1997).
Badge That Price Is Simulated, Not Just Unpaid: It 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. xVda. de Catindig. v. Heirs of Catalina
29
Roque, 74 SCRA 83 (1976).
26
Yu Bun Guan v. Ong, , 367 SCRA 559 (2001); Gonzales v. Trinidad, 67 Phil. 682 (1939)
27
Pealosa v. Santos, 363 SCRA 545 (2001); Soliva v. The Intestate Estate of Marcelo M. Villalba, 417 SCRA 277
(2003); Province of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
28
Villaflor v. Court of Appeals, 280 SCRA 297 (1997).
29
Ocejo v. Florex, 40 Phil. 921 (1920); Ladanga v. CA, 131 SCRA 361 (1984); Rongavilla v. Court of Appeals, 294 SCRA
289 (1998); Labagala v. Santiago, 371 SCRA 360 (2001); Cruz v. Bancom Finance Corp., 379 SCRA 490 (2002); Montecillo
v. Reynes, 385 SCRA 244 (2002); Republic v. Southside Homeowners Asso., 502 SCRA 587 (2006); Quimpo, Sr. v Abad
Vda de Beltran, 545 SCRA 174 (2008).
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Assumption of mortgage constituted on the property sold. xDoles v. Angeles, 492 SCRA 607
30
(2006).
b. Price Never Set By One or Both Parties (Arts. 1473, 1182), unless the price is
separately accepted by the other party.
BUT: If Buyer Appropriates the Object, He Must Pay Reasonable Price. (Art. 1474)
There can be no concept of appropriation when it comes to land? Where
a church organization has been allowed possession and introduce improvements on
the land as part of its application to purchase with the NHA, and thereafter it refused
the formal resolution of the NHA Board setting the price and insisted on paying the
lower price allegedly given by the NHA Field Office, 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 market value of the property. xNHA v. Grace Baptist Church, 424
SCRA 147 (2004).
5. Inadequacy of Price Does Not Affect Ordinary Sale (Arts. 1355 and 1470)
Mere inadequacy of the price does not affect the validity of the sale when both parties are
in a position to form an independent judgment concerning the transaction, unless fraud,
mistake, or undue influence indicative of a defect in consent is present. The contract may be
annulled for vitiated consent and not due to the inadequacy of price. xBautista v. Court of
33
Appeals, 436 SCRA 141 (2004).
30
The deed of sale with assumption of mortgage is a registrable instrument and must be registered with the Register of
Deeds in order to bind third parties. Rodriguez v. Court of Appeals, 495 SCRA 490 (2006).
31
Boston Bank of the Philippines v. Manalo, 482 SCRA 108 (2006).
32
Velasco v. CA, 51 SCRA 439 (1973); Co v. Court of Appeals, 286 SCRA 76 (1998); San Miguel Properties Philippines
v. Huang, 336 SCRA 737 (2000); Montecillo v. Reynes, 385 SCRA 244 (2002); Edrada v. Ramos, 468 SCRA 597 (2005);
Cruz v. Fernando, 477 SCRA 173 (2005); Marnelego v. Banco Filipino Savings and Mortgage Bank, 480 SCRA 399 (2006);
Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006); Platinum Plans Phil., Inc. v. Cucueco, 488 SCRA 156 (2006);
Manila Metal Container Corp. v. PNB, 511 SCRA 444 (2006).
33
Ereeta v. Bezore, 54 SCRA 13 (1973).
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Absent any evidence of the fair market 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. xAcabal v. Acabal, 454
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SCRA 897 (2005).
a. Gross Inadequacy of Price May Avoid Judicial Sale:
(i) Only when it is shocking to the conscience of man. xPascua v. Simeon, 161 SCRA 1
(1988); and
(ii) There is showing that, in the event of a resale, a better price can be obtained. xCu Bie v.
35
Court of Appeals, 15 SCRA 307 (1965).
UNLESS: There is right of redemption, in which case the proper remedy is to redeem. xDe
36
Leon v. Salvador, 36 SCRA 567 (1970).
BUT: By way of extraordinary circumstances perceived, when in a judicial 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 likely to consent to it, the same will be se
aside. xCometa v. Court of Appeals, 351 SCRA 294 (2001).
There is gross inadequacy in price if a reasonable man will not agree to dispose of his
property. Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008).
When judicial 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. xSeven Brothers Shipping Corp. v. Court of
Appeals, 246 SCRA 33 (1995).
b. Lesion of more than 1/4 of value of thing makes sale rescissible unless approved by
court (Art. 1386).
c. Gross inadequacy of price may raise the presumption of equitable mortgage (Art.
1602).
1. Option Contract
An 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. It 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. It 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 Appeals, 302
38
SCRA 718 (1999).
34
Avila v. Barabat, 485 SCRA 8 (2006).
35
Tayengco v. Court of Appeals, 15 SCRA 306 (1965); Republic v. NLRC, 244 SCRA 564 (1995).
36
Vda. de Gordon v. Court of Appeals, 109 SCRA 388 (1981).
37
Navarra v. Planters Dev. Bank, 527 SCRA 562 (2007).
38
Laforteza v. Machuca, 333 SCRA 643 (2000); Buot v. CA, 357 SCRA 846 (2001); Tayag v. Lacson, 426 SCRA 282
(2004); Abalos v. Macatangay, Jr., 439 SCRA 649 (2004); Vasquez v. Ayala Corp., 443 SCRA 231 (2004).
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An option imposes no binding obligation on the person holding the option aside from the
consideration for the offer. Until accepted, it is not treated as a sale. Tayag v. Lacson, 426
39
SCRA 282 (2004).
Tenants, not being the registered owners, cannot grant an option on the land, much less
any exclusive right to buy the property under the Latin saying nem dat quod non habet.
xTayag v. Lacson, 426 SCRA 282 (2004).
c. There Must Be Acceptance of Option Offer. Vazquez v. CA, 199 SCRA 102 (1991).
39
Adelfa Properties, Inc. v. CA, 240 SCRA 565 (1995); Kilosbayan, Inc. v. Morato, 246 SCRA 540 (1995); San Miguel
Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000); Limson v. CA, 357 SCRA 209 (2001).
40
JMA House, Inc. v. Sta. Monica Industrial and Dev. Corp., 500 SCRA 526 (2006).
41
De la Cavada v. Diaz, 37 Phil. 982 (1918); xSan Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000)
42
Affirming Atkins, Kroll & Co., Inc. v. Cua, 102 Phil. 948 (1958); overturning Southwestern Sugar Molasses Co. v.
Atlantic Gulf & Pacific Co., 97 Phil. 249 (1955).
43
Limson v. Court of Appeals, 357 SCRA 209 (2001).
44
Rosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001); Conculada v. CA, 367 SCRA 164 (2001); Polytechnic
University v. CA, 368 SCRA 691 (2001); Riviera Filipina, Inv. v. Court of Appeals, 380 SCRA 245 (2002); Lucrative Realty
and Dev. Corp. v. Bernabe, Jr., 392 SCRA 679 (2002); Villegas v. Court of Appeals, 499 SCRA 276 (2006).
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A 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. The 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.
45
Riviera Filipina, Inv. v. Court of Appeals, 380 SCRA 245 (2002).
A right of first refusal in a lease in favor of the lessee cannot be availed of by the
sublessee. xSadhwani v. Court of Appeals, 281 SCRA 75 (1997).
4. Mutual Promises to Buy and Sell (Art. 1479): True Contract to Sell
Mutual 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.
xBorromeo v. Franco, 5 Phil. 49 (1905).
Even in this case the certainty of the price must also exist, otherwise, there is no valid
and enforceable contract to sell. xTan Tiah v. Yu Jose, 67 Phil. 739 (1939).
An 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
46
thing which is the object of the contract and upon the price. But 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 undertakings. Macion v. Guiani, 225
47
SCRA 102 (1993).
The cause of action under a mutual promise to buy and sell is 10 years. xVillamor v.
Court of Appeals, 202 SCRA 607 (1991).
45
Polytechnic University v. CA, 368 SCRA 691 (2001); Villegas v. CA, 499 SCRA 276 (2006).
46
El Banco Nacional Filipino v. Ah Sing, 69 Phil. 611 (1940); Manuel v. Rodriguez, 109 Phil. 1 (1960).
47
Borromeo v. Franco, 5 Phil. 49 (1905); Villamor v. CA, 202 SCRA 607 (1991); Coronel v. CA, 263 SCRA 15 (1996).
48
Valdez v. Court of Appeals, 439 SCRA 55 (2004); Blas v. Angeles-Hutalla, 439 SCRA 273 (2004); Ainza v. Padua, 462
SCRA 614 (2005); Cruz v. Fernando, 477 SCRA 173 (2005).
49
Moreno, Jr. v. Private Management Office, 507 SCRA 63 (2006).
50
Beaumont v. Prieto, 41 Phil. 670 (1916); Zayco v. Serra, 44 Phil. 326 (1923).
- 13 -
3. Sale by Auction (Arts. 1476, 1403(2)(d), 1326)
The terms and conditions provided by the owner of property to be sold at auction are
binding upon all bidders, whether they knew of such conditions or not. xLeoquinco v.
Postal Savings Bank, 47 Phil. 772 (1925).
A 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.
xProvince of Cebu v. Heirs of Rufina Morales, 546 SCRA 315 (2008).
5. Difference Between Earnest Money and Option Money. Oesmer v. Paraiso Dev.
Corp., 514 SCRA 228 (2007).
6. Sale Deemed Perfected Where Offer Was Made. (Art. 1319)
51
Limjoco v. CA, 37 SCRA 663 (1971); Villonco v. Bormaheco, 65 SCRA 352 (1975); Spouses Doromal, Sr. v. CA, 66
SCRA 575 (1975); PNB v. CA, 262 SCRA 464 (1996); San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737
(2000); Platinum Plans Phil. Inc. v. Cucueco, 488 SCRA 156 (2006).
52
San Miguel Properties Philippines, Inc. v. Huang, 336 SCRA 737 (2000).
53
F. Irureta Goyena v. Tambunting, 1 Phil. 490 (1902).
54
Heirs of Biona v. CA, 362 SCRA 29 (2001).
55
Yason v. Arciaga, 449 SCRA 458 (2005); Union Bank v. Ong, 491 SCRA 581 (2006); Tapuroc v. Loquellano Vda. De
Mende, 512 SCRA 97 (2007); Alfaro v. Court of Appeals, 519 SCRA 270 (2007); Santos v. Lumbao, 519 SCRA 408 (2007);
Pedrano v. Heirs of Benedicto Pedrano, 539 SCRA 401 (2007); Olivares v. Sarmiento, 554 SCRA 384 (2008).
- 14 -
an instrument that was never intended by the parties to have any binding legal effect. xSalonga
56
v. Concepcion, 470 SCRA 291 (2005).
Buyers immediate taking of possession of subject property corroborates the truthfulness and
authenticity of the deed of sale. xAlcos v. IAC, 162 SCRA 823 (1988). Conversely, the sellers
continued possession of the property makes dubious the contract of sale between them.
57
xSantos v. Santos, 366 SCRA 395 (2001).
Any substantial difference between the terms of the Contract to Sell and the concomitant Deed
of Absolute Sale (such as difference in subject matter, and difference in price and/or the terms
thereof), does not make the transaction between the seller and the buyer void, for it is truism
that the execution of the Deed of Absolute Sale effectively rendered the previous Contract to
Sell ineffective and cancelled [through the process of novation]. xLumbres v. Talbrad, Jr., 516
SCRA 575 (2007).
b. For Enforceability Between the Parties: STATUTE OF FRAUDS (Arts. 1403 and 1405)
The term Statute of Frauds 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 perjury 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
61
charged.
Presupposes Valid Contract of Sale The application of the Statute of Frauds
presupposes the existence of a perfected contract. When the records show that there
was no perfected contract of sale, there is no basis for the application of the Statute of
62
Frauds. xFirme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).
(1) Coverage:
(i) Sale of Real Property A 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.
56
Nazareno v. CA, 343 SCRA 637 (2000); Santos v. Heirs of Jose P. Mariano, 344 SCRA 284 (2000)
57
Domingo v. CA, 367 SCRA 368 (2001).
58
Universal Robina Sugar Milling Corp. v. Heirs of Angel Teves, 389 SCRA 316 (2002).
59
Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995); Agasen v. CA, 325 SCRA 504 (2000).
60
Talusan v. Tayag, 356 SCRA 263 (2001); Santos v. Manalili, 476 SCRA 679 (2005).
61
Shoemaker v. La Tondea, 68 Phil. 24 (1939).
62
xRosencor Development Corp. v. Inquing, 354 SCRA 119 (2001).
- 15 -
No other evidence can be received except the documentary evidence referred to.
63
xGorospe v. Ilayat, 29 Phil. 21 (1914).
(ii) Agency to Sell or to Buy As contrasted from sale, an agency to sell does not
belong to any of the three categories of contracts covered by Arts. 1357 and
1358 and not one enumerated under the Statutes of Frauds in Art. 1403. xLim v.
64
Court of Appeals, 254 SCRA 170 (1996).
(iii) Rights of First Refusal A right of first refusal is not covered by the statute of
frauds. Furthermore, Art. 1403(2)(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. xRosencor Dev. Corp. v. Inquing, 354 SCRA 119 (2001).
(iv) Equitable Mortgage 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. xCuyugan
65
v. Santos, 34 Phil. 100 (1916).
(v) Right to Repurchase The 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. xMactan Cebu
International Airport Authority v. Court of Appeals, 263 SCRA 736 (1996).
(2) Memorandum (Yuviengco v. Dacuycuy, 104 SCRA 668 [1981]; Limketkai Sons
Milling, Inc. v. CA, 250 SCRA 523 [1995]; BUT SEE 255 SCRA 6).
For the memorandum to take the sale out of the coverage of the Statute of Frauds,
it must contain all the essential terms of the contract of sale. xTorcuator v. Bernabe,
66
459 SCRA 439 (2005), even when scattered into various correspondences which can
67
be brought together xCity of Cebu v. Heirs of Candido Rubi, 306 SCRA 408 (1999).
EXCEPTION: Electronic Documents under the E-COMMERCE ACT (R.A. 8792)
(3) Partial Execution (Art. 1405) Ortega v. Leonardo, 103 Phil. 870 (1958); Claudel
v. Court of Appeals, 199 SCRA 113 (1991).
Delivery of the deed to buyers agent, with no intention to part with the title until the
purchase price is paid, does not take the case out of the Statute of Frauds. xBaretto v.
Manila Railroad Co., 46 Phil. 964 (1924).
The Statute of Frauds does not apply to contracts either partially or totally
performed. In addition, a contract that violates the Statute of Frauds 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. Alfredo v. Borras, 404 SCRA
68
145 (2003).
(4) Waiver (Art. 1405) Cross-examination on the contract is deemed a waiver of the
69
defense of the Statute. xLimketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995).
63
Alba Vda. De Rax v. Court of Appeals, 314 SCRA 36 (1999).
64
Torcuator v. Bernabe, 459 SCRA 439 (2005).
65
Rosales v. Suba, 408 SCRA 664 (2003).
66
Paredes v. Espino, 22 SCRA 1000 (1968).
67
Berg v. Magdalena Estate, Inc., 92 Phil. 110 (1952); Limketkai Sons Milling, Inc. v. CA, 250 SCRA 523 (1995); First
Philippine Intl Bank v. CA, 252 SCRA 259 (1996).
68
Vda. de Jomoc v. CA, 200 SCRA 74 (1991); Soliva v. The Intestate Estate of Marcelo M. Villalba, 417 SCRA 277
(2003); Ainza v. Padua, 462 SCRA 614 (2005); De la Cena v. Briones, 508 SCRA 62 (2006).
69
Lacanilao v. CA, 262 SCRA 486 (1996).
- 16 -
A receipt which is merely an acknowledgment 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. xLeabres v. CA, 146 SCRA 158
70
(1986).
In 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. Aquino, 444 SCRA 61 (2003).
Receipts proves payment which takes the sale out of the Statute of Frauds.
Toyota Shaw, Inc. v. Court of Appeals, 244 SCRA 320 (1995).
c. For Validity: Sale of Realty Through Agent, Authority Must Be in Writing (Art. 1874)
When 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:
Agent is the son of the owner. xDelos Reyes v. CA, 313 SCRA 632 (1999)
There is partial payment of the price received by the supposed agent. xDizon v. CA, 396
71
SCRA 154 (2003).
In the case of a corporate owner of realty. xCity-Lite Realty Corp. v. CA, 325 SCRA 385
72
(2000).
When the Contract to Sell was signed by the co-owners themselves as witnesses, the
written authority for their agent mandated under Article 1874 of the Civil Code is no longer
required. xOesmer v. Paraiso Dev. Corp., 514 SCRA 228, 237 (2007).
c. Sale of Large Cattle (Art. 15851; Sec. 529, Revised Adm. Code)
Simulation of contract and gross inadequacy of price are distinct legal concepts, with different
effects the concept of a simulated sale is incompatible with inadequacy of price. When 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. xBravo-Guerrero v. Bravo, 465 SCRA 244
(2005).
70
Limson v. CA, 357 SCRA 209 (2001).
71
Firme v. Bukal Enterprises and Dev. Corp., 414 SCRA 190 (2003).
72
Pineda v. CA, 376 SCRA 222 (2002).
73
Rosario v. CA, 310 SCRA 464 (1999); Loyola v. CA, 326 SCRA 285 (2000); Yu Bun Guan v. Ong, 367 SCRA 559
(2001); Payongayong v. CA, 430 SCRA 210 (2004).
74
Solidstate Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197 (2008).
- 17 -
because illegal motive predetermined purpose of the contract. xOlegario v. CA, 238 SCRA
75
96 (1994).
Where the parties to a contract of sale agreed to a consideration, but the amount
reflected in the final Deed 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. Although illegal, the motives neither determine nor take the place of the
consideration. xHeirs of Spouses Balite v. Lim, 446 SCRA 54 (2004).
Then restoration of what has been given is in order, since the relationship between parties in any
contract even if subsequently voided must always be characterized and punctuated by good faith
and fair dealing. xDe los Reyes v. CA, 313 SCRA 632 (1999); xHeirs of Ignacia Aguilar-Reyes v.
Mijares, 410 SCRA 97 (2003).
Alien who purchases land in the name of his Filipina lover, has no standing to seek 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. xFrenzel v. Catito, 406
SCRA 55 (2003).
(i) As to Movables (Arts. 1498-1499, 1513-1514; Dy, Jr. v. CA, 198 SCRA 826).
Where it is stipulated that deliveries must be made to the buyer or his duly
authorized representative named in the contracts, the seller is under obligation to deliver
in accordance with such instructions.. xLagon v. Hooven Comalco Industries, Inc., 349
SCRA 363 (2001).
Execution by supposed buyers of a chattel mortgage over subject 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. xUnion Motor Corp. v. CA, 361 SCRA 506
(2001).
77
Kuenzle & Streiff v. Watson & Co., 13 Phil. 26 (1909); Ocejo, Perez & Co. v. Int'l Banking Corp., 37 Phil. 631 (1918).
78
Ocampo v. Court of Appeals, 233 SCRA 551 (1994).
79
Tating v. Marcella, 519 SCRA 79 (2007)
80
Equatorial Realty Dev. Inc. v. Mayfair Theater, Inc., 370 SCRA 56 (2001); xEngreso v. De La Cruz, 401 SCRA 217
(2003); Ten Forty Realty and Dev. Corp. v. Cruz, 410 SCRA 484 (2003); Copuyoc v. De Solas, 504 SCRA 176 (2006).
- 19 -
Neither issuance of an invoice, which is not a document of title xP.T. Cerna Corp. v.
81
CA, 221 SCRA 19 (1993), nor of the registration certificate of vehicle xUnion Motor
82
Corp. v. CA, 361 SCRA 506 (2001), would constitute constructive delivery.
e. Constitutum Possessorium (Art. 1500) A provision in the deed of sale granting to seller
a right to lease the subject matter of the sale is valid: the possession is deemed to be
constituted in the vendee by virtue of this mode of tradition. xAmigo v. Teves, 96 Phil. 252
(1954).
f. Traditio Brevi Manu Prior to the sale, petitioners were in possession of the subject
property as lessees. Upon sale to them of the rights, interests and participation as to the
portion pro indiviso, they remained in possession, not in the concept of lessees anymore but
as owners now through symbolic delivery known as traditio brevi manu. xHeirs of Pedro
Escanlar v. CA, 281 SCRA 176 (1997).
4. Transfer Ownership to Vendee Upon Delivery (Arts. 1477, 1478, and 1496)
a. When Buyer Refuses to Accept (Art. 1588)
b. In Case of Express or Implied Reservation (Arts. 1478 and 1503)
81
Norkis Distributors v. CA, 193 SCRA 694 (1991).
82
Abuan v. Garcia, 14 SCRA 759 (1965); Santos v. Santos, 366 SCRA 395 (2001).
83
Florendo v. Foz, 20 Phil. 388 (1911); Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159 (1950);
Phil. Suburban Dev. v. Auditor, 63 SCRA 397 (1975).
- 20 -
7. Expenses of Execution and Registration (Art. 1487), and of Putting Goods in
Deliverable Estate (Art. 1521).
Unless otherwise stipulated: (a) under Art. 1487 the expenses for the registration of the
sale should be shouldered by the vendor xVive Eagle Land, Inc. v. Court of Appeals, 444
SCRA 445 (2004); and (b) duty to withhold taxes due on the sale is imposed on seller.
xEquitable Realty Development Inc. v. Mayfair Theater, Inc., 332 SCRA 139 (2000).
Buyer has more interest in having the capital gains tax paid immediately since this is a
pre-requisite to the issuance of a new Torrens title in his name. Nevertheless, as far as the
government is concerned, the capital gains tax remains a liability of the seller since it is a tax
on the sellers gain from the sale of the real estate. Payment of the capital gains tax,
however, is not a pre-requisite to the transfer of ownership to the buyer. The transfer of
ownership takes effect upon the signing and notarization of the deed of absolute sale.
xChua v. Court of Appeals, 401 SCRA 54 (2003).
A judgment on a contract of sale that decrees sellers 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 notarizing a deed of sale and in
obtaining new certificate of title. xJose Clavano, Inc. v. HLRB, 378 SCRA 172 (2002).
d. Buyer's Right to Inspect Before Acceptance (Arts. 1481 and 1584) Except when
carrier delivers COD.
2. In Case of Immovables
b. Where Sold for a Lump Sum [A cuerpo cierto or por precio alzado] (Art. 1542)
In a contract of sale of land in a mass, the specific boundaries stated in the contract
must control over any statement with respect to the area contained within its boundaries.
Salinas v. Faustino, 566 SCRA 18 (2008).
In 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
(34 versus 10 hectares) will not authorize the buyer to rescind the contract because the
seller has complied with delivering the subject matter agreed upon. xTeran v. Villanueva,
56 Phil. 677 (1932); this is the rule when evidence shows that the parties never gave
importance to the area of the land in fixing the price (97 versus 60 hectares). xAzarraga v.
Gay, 52 Phil. 599 (1928).
EXCEPT: A buyer of land, when sold in gross or with the description more or less or
similar words in designating quantity covers only a reasonable excess of
deficiency. In the case at bar an area of 644 square meters more is not
reasonable excess or deficiency, to be deemed included in the deed of sale.
xRoble v. Arbasa, 362 SCRA 69 (2001);Rudolf Lietz, Inc. v. Court of
85
Appeals, 478 SCRA 451 (2005).
EXCEPTION TO EXCEPTION: When buyer, who has been occupying the land for two years
as lessee, actually is deemed to take risk on the actual size of the property
bought at lump sum. xGarcia v. Velasco, 72 Phil. 248 (1941).
84
Goyena v. Tambunting, 1 Phil. 490 (1902); Santa Ana v. Hernandez, 18 SCRA 973 (1966).
85
Asiain v. Jalandoni, 45 Phil 296 (1923); Balantakbo v. Court of Appeals, 249 SCRA 323 (1995); Esguerra v. Trinidad,
518 SCRA 186 (2007).
- 22 -
Act No. 3344, as against the second buyer who bought the same property when it was
already registered under the Torrens system, because:
of the well-known rule in this jurisdiction that persons dealing with registered land have
the legal right to rely on the fact of the Torrens Certificate of Title and to dispense with
the need to inquire further, except when the party concerned has actual knowledge of
facts and circumstances that would impel a reasonably cautious man to make such
inquiry; and
the Torrens system rule that formal registration proceedings undertaken on the property
and the subsequent issuance of a title over the land had under the Torrens system had
the legal effect of cleansing title on the property of all liens and claims which were not
annotated therein.
86
Naawan Community Rural Bank, Inc. v. Court of Appeals, 395 SCRA 43 (2003).
BUT SEE: Naval v. Court of Appeals, 483 SCRA 102 (2006).
86
Reiterated in Abrigo v. De Vera, 432 SCRA 544 (2005); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).
87
Tanglao v. Parungao, 535 SCRA 123 (2007).
88
Espiritu v. Valerio, 9 SCRA 761 (1963); Remalante v. Tibe, 158 SCRA 138 (1988); Delfin v. Valdez, 502 SCRA 24
(2006).
89
Torrecampo v. Alindogan, Sr., 517 SCRA 84 (2007).
- 23 -
Article 1544 applies where the same thing is sold to different vendees by the same
vendor. It 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. Rodaje, 530 SCRA
90
432, 438 (2007).
For Article 1544 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. It cannot
be invoked where the two different contracts of sale are made by two different persons,
one of them not being the owner of the property sold. And 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 Rural Bank
91
(Cagayan Valley), Inc. v. Court of Appeals, 448 SCRA 347 (2005), citing
VILLANUEVA, PHILIPPINE LAW ON SALES 100 (1995).
c. Knowledge of First Buyer of the Second Sale Does Not Amount to Registration in
Favor of the Second Buyer
Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's
rights except where the second buyer registers in good faith the second sale ahead of the
first. Such knowledge 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. But in
converso, knowledge gained by the second buyer of the first sale defeats his rights even
if he is first to register the second sale, since such knowledge taints his prior registration
with bad faith. This is the priced exacted by Article 1544 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 acquisition until the title is transferred to him by
registration or failing registration, by delivery of possession. xUraca v. CA, 278 SCRA
94
702 (1997).
In a situation where a party has actual knowledge of the claimants actual, open and
notorious possession of a disputed property at the time of registration, the actual notice
90
Ong v. Olasiman, 485 SCRA 464 (2006).
91
Gallardo v. Gallardo, 46 O.G. No. 11 p. 5568; Sigaya v. Mayuga, 467 SCRA 341, 357 (2005).
92
Ulep v. Court of Appeals, 472 SCRA 241 (2005).
93
Blanco v. Rivera, 488 SCRA 148 (2006); Gabriel v. Mabanta, 399 SCRA 573 (2003); De la Cena v. Briones, 508 SCRA
62 (2006); Tanglao v. Parungao, 535 SCRA 123 (2007); Bernardez v. Court of Appeals, 533 SCRA 451 (2007).
94
Cruz v. Cabana, 129 SCRA 656 (1984); Gatmaitan v. CA, 200 SCRA 37 (1991); Vda. de Jomoc v. CA, 200 SCRA 74
(1991); Bucad v. CA, 216 SCRA 423 (1992); Berico v. CA, 225 SCRA 469 (1993); Bautista v. CA, 322 SCRA 294 (2000);
Bautista v. CA, 322 SCRA 294 (2000); Ulep v. Court of Appeals, 472 SCRA 241 (2005); Escueta v. Lim, 512 SCRA 411
(2007); Lumbres v. Tablada, Jr., 516 SCRA 575 (2007); Fudot v. Cattleya Land, Inc., 533 SCRA 350 (2007); Tanglao v.
Parungao, 535 SCRA 123 (2007).
- 24 -
and knowledge are equivalent to registration, because to hold otherwise would be to
tolerate fraud and the Torrens system cannot be used to shield fraud while certificates
of title are indefeasible, unassailable and binding against the whole world, they merely
confirm or record title already existing and vested. Consolidated Rural Bank (Cagayan
Valley), Inc. v. Court of Appeals, 448 SCRA 347 (2005).
95
Liao v. CA, 323 SCRA 430 (2000); Talusan v. Tayag, 356 SCRA 263 (2001); Dauz v. Exchavez, 533 SCRA 637
(2007).
96
Sanchez v. Ramos, 40 Phil. 614 (1919); Quimson v. Rosete, 87 Phil. 159 (1950); Navera v. CA, 184 SCRA 584 (1990).
97
Agricultural and Home Extension Dev. v. CA., 213 SCRA 536 (1992); Veloso v. CA, 260 SCRA 593 (1996); Balatbat v.
CA, 261 SCRA 128 (1996); Mathay v. CA, 295 SCRA 556 (1998); Diaz-Duarte v. Ong, 298 SCRA 388 (1998); Liao v. CA,
323 SCRA 430 (2000); Tanongon v. Samson, 382 SCRA 130 (2002); xUniversal Robina Sugar Milling Corp. v. Heirs of
Angel Teves, 389 SCRA 316 (2002); Aguirre v. Court of Appeals, 421 SCRA 310 (2004); Galvez v. Court of Appeals, 485
SCRA 346 (2006); Chua v. Soriano, 521 SCRA 68 (2007); Raymundo v. Bandong, 526 SCRA 514 (2007).
98
Tsai v. CA, 366 SCRA 324 (2001); Aguirre v. CA, 421 SCRA 310 (2004); Raymundo v. Bandong, 526 SCRA 514
(2007).
- 25 -
been sold to another to prevent injury to prior innocent buyers. xExpresscredit
99
Financing Corp. v. Velasco, 473 SCRA 570 (2005).
A banking institution is expected to exercise due diligence before entering into a
mortgage contract, and the ascertainment of the statute or condition of a proper
offered to it as security for a loan must be a standard and indispensable part of its
operations; and it cannot simply rely upon reviewing the title to the property offered
100
for mortgage. Tio v. Abayata, 556 SCRA 175 (2008).
(2) Close Relationship The sale to ones daughter and sons will give rise to the
conclusion that the buyers, not being really third parties, knew of the previous
sales and cannot be considered in good faith. The buyers are deemed to have
constructive knowledge by virtue of their relationship to their sellers. xPilapil v.
Court of Appeals, 250 SCRA 566 (1995).
(3) Gross Inadequacy of Price Mere inadequacy of price is not ipso facto a bade of
lack of good faithto be so, the price must be grossly inadequate or shocing to the
conscience such that the mind revolts agains it and such that a reasonable man
would neither directly or indirectly be likely to consent to it. Tio v. Abayata, 556
SCRA 175 (2008).
(4) Obligation to Investigate or To Follow Leads A 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
A buyer of a registered land would be in bad faith when he purchases without asking to
see the owners copy of the title and/or without visiting the land where he would then
101
have seen first buyer occupying the same. xSantiago v. CA, 247 SCRA 336 (1995).
When 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
102
cautious and prudent purchaser usually takes. xMartinez v. CA, 358 SCRA 38 (2001).
Any 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. Court of Appeals, 238 SCRA 397 (1994).
(5) Land in Adverse Possession Buyer who could not have failed to know or
discover that the land sold to him was in the adverse possession of another is a
103
buyer in bad faith. xHeirs of Ramon Durano, Sr. v. Uy, 344 SCRA 238 (2000).
(6) Existence of Lis Pendens 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 invoke the right of a purchaser
in good faith. A 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. xPo Lam v. CA, 316 SCRA 721 (1999).
EXCEPT: When knowledge of lis pendens was acquired at the time there was order
to have it cancelled. xPo Lam v. CA, 347 SCRA 86 (2000).
6. When Subject of Sale Is Unregistered Land Naawan Community Rural Bank v. CA,
395 SCRA 43 (2003).
The rules in double sale under Article 1544, whereby the buyer who is able to first
register the purchase in good faith is in full accord with Section 51 of PD 1529 which
provides that no deed, mortgage, lease, or other voluntary instrument except a will
purporting to convey or affect registered land shall take effect as a conveyance or bind the
land until its registration. Thus, if the sale is not registered, it is binding only between the
seller and the buyer but it does not affect innocent third persons. Abrigo v. De Vera, 432
SCRA 544 (2004).
When first sale is over unregistered land and the second sale is when it is registered,
the rules on double sale do not apply. Dagupan Trading Co. v. Macam, 14 SCRA 179
(1965).
Article 1544 is inapplicable to unregistered land because the purchaser of unregistered
land at a sheriffs execution sale only steps into the shoes of the judgment debtor, and
99
Lloyds Enterprises and Credit Corp. v. Dolleton, 555 SCRA 142 (2008).
100
Bank of Commerce v. San Pablo, Jr., 522 SCRA 713 (2007).
101
R.R. Paredes v. Calilung, 517 SCRA 369 (2007); Chua v. Soriano, 521 SCRA 68 (2007).
102
Mathay v. CA, 295 SCRA 556 (1998); Republic v. De Guzman, 326 SCRA 267 (2000); Heirs of Ramon Durano, Sr. v.
Uy, 344 SCRA 238 (2000); Heirs of Celestial v. Heirs of Celestial, 408 SCRA 291 (2003); Erasusta, Jr. v. Court of Appeals,
495 SCRA 319 (2006); De la Cena v. Briones, 508 SCRA 62 (2006); Tanglao v. Parungao, 535 SCRA 123, 132 (2007).
103
Modina v. CA, 317 SCRA 696, 706 (1999); Republic v. De Guzman, 326 SCRA 267 (2000); Martinez v. CA, 358
SCRA 38 (2001); Heirs of Trinidad de Leon Vda. De Roxas v. Court of Appeals, 422 SCRA 101 (2004); Occena v.
Esponilla, 431 SCRA 116 (2004); PNB v. Heirs of Estanislao Militar, 494 SCRA 308 (2006); Raymundo v. Bandong, 526
SCRA 514 (2007); Tanglao v. Parungao, 535 SCRA 123 (2007); Tio v. Abayata, 556 SCRA 175 (2008).
- 26 -
merely acquires the latters interest in the property sold as of the time the property was
levied upon, as expressly provided for in then Sec. 35, Rule 39 of the Revised Rules of
Court on execution sale [now Sec. 33, Rule 39, 1997 Rules of Civil Procedure)]. Carumba
v. CA, 31 SCRA 558 (1970).
Under Act 3344, registration of instruments affecting unregistered lands is without
prejudice 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.
The rules on double sale under Art. 1544 has no application to land no registered under the
104
Torrens system.Acabal v. Acabal, 454 SCRA 555 (2005).
D. OBLIGATIONS OF BUYER
1. Pay the Price (Art. 1582)
When seller cannot show title to the subject matter, then he cannot compel the buyer
to pay the price. xHeirs of Severina San Miguel v. CA, 364 SCRA 523 (2001).
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 SCRA 439 (2005).
Unless 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
Article 1240 which provides that Payment shall be made to the person in whose favor the
obligation has been constituted, or his successor in interest, or any person authorized to
receive it. xMontecillo v. Reynes, 385 SCRA 244 (2002).
104
Hanopol v. Pilapil, 7 SCRA 452 (1963); Radiowealth Finance Co. v. Palileo, 197 SCRA 245 (1991); Spouses Honorio
Santiago v. CA, 247 SCRA 336 (1995); Bayoca v. Nogales, 340 SCRA 154 (2000); Fidel v. Court of Appeals, 559 SCRA
186 (2008); Daclag v. Macahilig, 560 SCRA 137 (2008).
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4. Non-negotiable Documents of Title
a. How Transferred or Assigned (Art. 1514)
b. Effects of Transfer (Art. 1514).
105
Azcona v. Reyes, 59 Phil. 446 (1934); Coronel v. Ona, 33 Phil. 456 (1916).
106
Estoque v. Pajimula, 24 SCRA 59 (1968); Aguirre v. CA, 421 SCRA 310 (2004); Acabal v. Acabal, 454 SCRA 555
(2005); Barcenas v. Tomas, 454 SCRA 593 (2005).
107
Almendra v. IAC, 204 SCRA 142 (1991); Fernandez v. Fernandez, 363 SCRA 811 (2001); xAguirre v. CA, 421 SCRA
310 (2004); Santos v. Lumbao, 519 SCRA 408 (2007); Republic v. Heirs of Francisca Dignos-Sorono, 549 SCRA 58 (2008).
108
Heirs of Romana Ingjug-Tiro v. Casals, 363 SCRA 435 (2001); Aguirre v. Court of Appeals, 421 SCRA 310 (2004).
- 28 -
An 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. xInsurance
Services and Commercial Traders, Inc. v. CA, 341 SCRA 572 (2000).
A person who deals with registered land through someone who is not the registered
owner is expected to look beyond the certificate of title and examine all the factual
circumstances thereof in order to determine if the vendor has the capacity to transfer any
interest in the land. Sy v. Capistrano, Jr., 560 SCRA 103 (2008).
Where 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. Every 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. xHeirs of Spouses Benito Gavino. v. Court of Appeals, 291 SCRA 495 (1998).
c. Statutory Power Order of Courts
When a defeated party refuses to execute the absolute deed of sale in accordance
with the judgment, 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 like effect as is done by the party. xManila Remnant Co., Inc. v. CA, 231 SCRA 281
(1994)
d. Sale in Merchants Stores, Fairs or Markets (Arts. 85 and 86, Code of Commerce)
City of Manila v. Bugsuk, 101 Phil. 859 (1957); Sun Bros. & Co. v. Velasco, 54
O.G. 5143 (1958).
3. Sale by One Having Voidable Title (Art. 1506, as an exception to Art. 559)
Whenever 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,
Article 1506 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 unlawfully deprived of the
subject matter under Art. 559. Tagatac v. Jimenez, 53 O.G. 3792 (1957); EDCA
Publishing v. Santos, 184 SCRA 614 (1990).
Thus, 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. Aznar v. Yapdiangco,
13 SCRA 486 (1965).
In all other cases of unlawful deprivation done through estafa, the original owner
recovers even from the buyer in good faith. Cruz v. Pahati, 98 Phil. 788 (1956). [CLV:
Decision showed that second buyer, or current possessor could not claim good
faith because of erasures in the covering documents presented by his seller]
Owner of diamond ring may recover possession of the same from pawnshop where the
owners agent had pledged it without authority to do so; Article 559 applies and the
defense that the pawnshop acquired possession without notice of any defect of the
109
pledgor-agent is unavailing. Dizon v. Suntay, 47 SCRA 160 (1972). [CLV: In those
cases possessor is a merchant and only has a pledge in his favor].
109
Valera v. Matute, 9 Phil. 479 (1908); Arenas v. Raymundo, 19 Phi. 47 (1911).
- 29 -
(3) Loss by Fortuitous Event (Arts. 1480, 1163, 1164, 1165, 1504, 1538, and 1189;
READ Comments of PARAS, TOLENTINO, PADILLA, and BAVIERA).
(4) Deterioration (Arts. 1480, 1163-65, and 1262; Arts. 1189 and 1538)
(5) Fruits or Improvements from time of perfection pertain to buyer (Arts. 1480,
1537-1538).
110
d. After Delivery (Art. 1504) Lawyer's Coop v. Tabora, 13 SCRA 762 (1965).
A. ON PART OF SELLER
110
Song Fo & Co. v. Oria, 33 Phil. 3 (1915); Lawyer's Coop v. Narciso, 55 O.G. 3313).
111
De la Cruz v. Asian Consumer, 214 SCRA 103 (1992); Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634
(1996).
112
Southern Motors v. Moscoso, 2 SCRA 168 (1961); Industrial Finance Corp. v. Ramirez, 77 SCRA 152 (1977); Rosario
v. PCI Leasing and Finance, Inc., 474 SCRA 500 (2005).
- 30 -
Surrender of mortgaged property is not necessarily equivalent to rescission. xVda.
de Quiambao v. Manila Motors Co., Inc., 3 SCRA 444 (1961).
Mutual restitution prevents recovering on the balance of the purchase price.
Nonato v. IAC, 140 SCRA 255 (1985); but stipulation on non-return of payments is
valid provided not unconscionable. xDelta Motor Sales Corp. v. Niu Kim Duan, 213
SCRA 259 (1992).
f. Remedy of Foreclosure
Barring effect would cover a third-party mortgage, when it was the chattel mortgage
that was first foreclosed. Ridad v. Filipinas Investment, 120 SCRA 246 (1983).
When the seller assigns his credit to another person, the latter is likewise bound by
113
the same law. Zayas v. Luneta Motors, 117 SCRA 726 (1982).
(i) Barring Effects of Foreclosure Filing of the action of replevin in order to
foreclose on the chattel mortgage does not produce the barring effect under the
Recto Law; 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. The voluntary payment of the installment by the
buyer-mortgagor is valid and not recoverable in spite the restrictive provisions of Art.
114
1484(3). Northern Motors v. Sapinoso, 33 SCRA 356 (1970).
Foreclosure on the chattel mortgage prevents further action on the supporting
real estate mortgage, whether the chattel mortgage is first foreclosed Cruz v.
115
Filipinas Investment & Finance Corp., 23 SCRA 791 (1968); and vice versa
when the real estate mortgage is first foreclosed. Borbon II v. Servicewide
Specialists, Inc., 258 SCRA 634 (1996).
All amounts barred from recovery. Macondray & Co. v. Eustaquio, 64 Phil.
446 (1937).
(ii) Rule on Perverse Buyer. Filipinas Investment & Finance Corp. v. Ridad, 30
SCRA 564 (1969).
4. IN CASE OF IMMOVABLES:
a . Anticipatory Breach (Art. 1591) Legarda v. Saldaa, 55 SCRA 324 (1974).
b. Sales of Subdivision Lots and Condominium Units (Secs. 23 and 24, P.D. 957)
P.D.957 was issued in the wake of numerous reports that many real estate
subdivision owners, developers, operators and/or 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. It was designed to stem the tide of
fraudulent manipulations perpetrated by unscrupulous subdivision and condominium
sellers free from liens and encumbrances. xCasa Filipinas Realty Corp. v. Office of the
President, 241 SCRA 165 (1995).
Section 20 of P.D. 957 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
113
Borbon II v. Servicewide Specialists, Inc., 258 SCRA 634 (1996).
114
Manila Motor Co. v. Fernandez, 99 Phil. 782 (1956); Magna Financial Services Group, Inc. v. Colarina, 477 SCRA 245
(2005).
115
Pascual v. Universal Motors Corp., 61 SCRA 121 (1974).
116
Vda. de Jose v. Barrueco, 67 Phil. 191 (1939); U.S. Commercial v. Halili, 93 Phil. 271 (1953); H.E. Heacock v. Bantal
Manufacturing, 66 Phil. 245 (1938); Manila Gas Corp. v. Calupita, 66 Phil. 747 (1938); Filinvest Credit Corp. v. CA, 178
SCRA 188 (1989).
- 31 -
payment, and any sums of money already paid shall not be forfeited. xTamayo v.
Huang, 480 SCRA 156 (2006).
In case the developer of a subdivision or condominium fails in its obligation under
Section 20, Section 23 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
may suspend payment of the installments until such time that the owner or developer
has fulfilled its obligations. xTamayo v. Huang, 480 SCRA 156 (2006);
buyer required only to give due notice to the owner or developer of the buyers intention
to suspend payment. xZamora Realty and Dev. Corp. v. Office of the President, 506
SCRA 591 (2006);
Sec. 23 does not require that a notice be given first by the buyer to the seller before a
demand for refund can be made as the notice and demand can be made in the same
letter or communication. xCasa Filipinas Realty Corp v. Office of the President, 241
SCRA 165 (1995); and
Option granted by law is with buyer and not the developer/seller. xRelucio v. Brillante-
Garfin, 187 SCRA 405 (1990).
Buyer under P.D. 957 would include one who acquires for a valuable
consideration a condominium unit by way of assignment by the condominium project
owner in payment of its indebtedness for contractors fee. xAMA Computer College,
Inc. v. Factora, 378 SCRA 121 (2002).
Buyers of condominium units would be justified in suspending payments, when the
developer-seller fails to give them a copy of the Contract to Sell despite repeated
demands. xGold Loop Properties, Inc. v. CA, 350 SCRA 371 (2001).
Nothing in P.D. 957 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. Co Chien v. Sta. Lucia Realty, 513 SCRA 570 (2007).
a. Role of Maceda Law Maceda Laws declared policy is to protect buyers of real estate
on installment basis against onerous and oppressive conditions, and seeks 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. xActive
117
Realty & Dev. Corp. Daroya, 382 SCRA 152 (2002).
Maceda Law recognizes in conditional sales of all kinds of real estate sellers 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
118
force. xPagtulunan v. Dela Cruz Vda. De Manzano, 533 SCRA 242 (2008).
b. Transactions Covered
The formal requirements of rescission under the Maceda Law apply even to
contracts entered into prior to its effectivity. xSiska Dev. Corp. v. Office of the President,
119
231 SCRA 674 (1994). BUT SEE xPeoples Industrial and Commercial Corp. v. CA, 281
SCRA 206 (1997).
Maceda Law finds no application to a contract to sell where the suspensive condition
has not been fulfilled, because said Law presuppose the existence of a valid and
effective contract to sell a condominium. [?] xMortel v. KASSCO, Inc., 348 SCRA 391,
120
398 (2000).
117
OIympia Housing Inc. v. Panasiatic Travel Corp., 395 SCRA 298 (2003); Jestra Dev. and Management Corp. v.
Pacifico, 513 SCRA 413 (2007).
118
Leao v. Court of Appeals, 369 SCRA 36 (2001); Cordero v. F.S. Management & Dev. Corp., 506 SCRA 451 (2006).
119
Eugenio v. Executive Secretary Franklin M. Drilon, 252 SCRA 106 (1996); PNB v. Office of the President, 252 SCRA
620 (1996).
120
Boston Bank of the Phil. v. Manalo, 482 SCRA 108 (2006).
- 32 -
Maceda Law makes no distinctions between option and sale which under P.D.
957 also includes an 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. xRealty Exchange Venture Corp. v. Sendino, 233 SCRA 665 (1994).
Maceda Law has no application to protect the developer or one who succeeds the
developer. xLagandaon v. Court of Appeals, 290 SCRA 463 (1998).
d. How Cancellation of Contract Can Be Effected The cancellation of the contract under
the Maceda Law must follow the following steps:
First, the seller should extend the buyer a grace period of at least sixty (60) 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 (30) days
from the buyers receipt thereof; a mere notice or letter, short of a notarial act, would
121
not suffice. McLaughlin v. CA, 144 SCRA 693 (1986).
Third, for contracts covering more than two years of payments, there must be return
to the buyer of the cash surrender value. xVilldara, Jr. v. Zabala, 545 SCRA 325
122
(2008).
The additional formality of a demand on [the sellers] 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 annulment of contract, which is a kindred
concept of rescission by notarial act. xLayug v. IAC, 167 SCRA 627 (1988).
A decision rendered in an ejectment case operated as the required notice of
cancellation under the Maceda Law; 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.
xLeao v. Court of Appeals, 369 SCRA 36 (2001).
A formal letter demand upon buyer to vacate the premises is not the same as the
notice of cancellation or demand for rescission by a notarial act required by R.A. No.
6552. Evidently, the case of unlawful detainer filed by petitioner does not exempt him
from complying with the said requirement. xPagtulunan v. Dela Cruz Vda. De Manzano,
533 SCRA 242 (2008).
121
Luzon Brokerage v. Maritime Bldg., 86 SCRA 305 (1978); Luzon Brokerage v. Maritime Bldg., 43 SCRA 93 (1972);
Fabrigas v. San Francisco del Monte, 475 SCRA 247 (2005).
122
Active Realty & Dev. Corp. v. Daroya, 382 SCRA 152 (2002); Olympia Housing v. Panasiatic Travel Corp., 395 SCRA
298 (2003); Jestra Dev. and Management Corp. v. Pacifico, 513 SCRA 413 (2007).
123
Caridad Estates, Inc. v. Santero, 71 Phil. 114 (1940); Albea v. Inquimboy, 86 Phil. 477 (1950); Manuel v. Rodriguez,
109 Phil. 1 (1960); Joseph & Sons Enterprises, Inc. v. CA, 143 SCRA 663 (1986) Gimenez v. CA, 195 SCRA 205 (1991);
Jacinto v. Kaparaz, 209 SCRA 246 (1992); Odyssey Park, Inc. v. Court of Appeals, 280 SCRA 253 (1997); Rillo v. Court of
Appeals, 274 SCRA 461 (1997); Platinum Plans Phil., Inc. v. Cucueco, 488 SCRA 156 (2006).
124
Escueta v. Pando, 76 Phil. 256 (1946).
- 33 -
B. ON PART OF BUYER
1. In case of Movables (Arts. 1598-1599)
2. In case of Immovables (Arts. 1191; Secs. 23 and 24, P.D. 957)
3. Suspension of Payment (Art. 1590)
The pendency of suit over the subject matter of the sale justifies the buyer in
suspending payment of the balance of the purchase price by reason of aforesaid vindicatory
action filed against it. The 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 kind of guaranty
contemplated under Article 1590 wherein the buyer is bound to make payment if the seller
should give a security for the return of the price. xAdelfa Properties, Inc. v. Court of
Appeals, 240 SCRA 565 (1995).
125
Iringan v. Court of Appeals, 366 SCRA 41 (2001).
126
Almira v. Court of Appeals, 399 SCRA 351 (2003).
127
Ocampo v. CA, 233 SCRA 551 (1994); Co v. CA, 312 SCRA 528 (1999).
128
Central Philippine University v. CA, 246 SCRA 511 (1995); Romeo v. CA, 250 SCRA 223 (1995); Cheng v. Genato,
300 SCRA 722 (1998); Uy v. CA, 314 SCRA 63 (1999).
- 34 -
mutual restitution which is not necessarily the situation that arise in an action for
reconveyance. In an action for rescission, unlike in an action for reconveyance predicated
on an extrajudicial rescission (rescission by notarial act), the court, instead of decreeing
rescission, may authorize for a just cause the fixing of a period. xOlympia Housing v.
Panasiatic Travel Corp., 395 SCRA 298 (2003).
129
Ocejo, Perez & Co. v. International Banking Corp. 37 Phil. 631 (1918); Republic v. Hospital de San Juan de Dios, 84
Phil. 820 (1949); De la Rama Steamship Co. v. Tan, G.R. No. 8784, May 21, 1956; 99 Phil. 1034 (unrep.) (1956); Heirs of
Jesus M. Mascuana v. Court of Appeals, 461 SCRA 186 (2005).
130
Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 95 (1972); Luzon Brokerage v. Maritime Bldg., 86
SCRA 305 (1978).
131
Velarde v. Court of Appeals, 361 SCRA 56 (2001).
132
The Manila Racing Club v. The Manila Jockey Club, 69 Phil. 55 (1939).
133
Sta. Lucia Realty & Dev., Inc. V. Uyecio, 562 SCRA 226 (2008); Ver Reyes v. Salvador, Sr., 564 SCRA 456 (2008).
134
Lim v. CA, 182 SCRA 564 (1990); Buot v. CA, 357 SCRA 846 (2001); Abesamis v. CA, 361 SCRA 328 (2001);
Tuazon v. Garilao, 362 SCRA 654 (2001); Leao v. CA, 369 SCRA 36 (2001); Universal Robina Sugar Milling Corp. v. Heirs
of Angel Teves, 389 SCRA 316 (2002); Almira v. Court of Appeals, 399 SCRA 351 (2003); Chua v. Court of Appeals, 401
SCRA 54 (2002); Flancia v. Court of Appeals, 457 SCRA 224 (2005); Vidad, Sr. v. Tayamen, 531 SCRA 147 (2007); Hulst
v. PR Builders, Inc., 532 SCRA 74 (2007); Heirs of Antonio F. Bernabe v. Court of Appeals, 559 SCRA 53 (2008); Orden v.
Aurea, 562 SCRA 660 (2008).
- 35 -
135
price. Coronel v. CA, 263 SCRA 15, 27 (1996). BUT SEE: PNB v. CA, 262 SCRA
464 (1996).
To be sure, a contract of sale may either be absolute or conditional. One form of
conditional sales is what is now popularly termed as a Contract 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. For a contract, like 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. xGomez v. Court of
136
Appeals, 340 SCRA 720, 728 (2000).
A contract to sell is akin to a conditional sale, in which the efficacy or obligatory force of
the vendors obligation to transfer title is subordinated to the happening of a future and
uncertain event, so that if the suspensive condition does not take place, the parties would
stand as if the conditional obligation never existed. Orden v. Aurea, 562 SCRA 660 (2008).
135
Platinum Plans Phil., Inc. v. Cucueco, 488 SCRA 156 (2006).
136
Demafelis v. Court of Appeals, 538 SCRA 305 (2007).
137
Heirs of Spouses Sandejas v. Lina, 351 SCRA 183 (2001); Zamora Realty and Dev. Corp v. Office of the President,
506 SCRA 591 (2006).
138
Topacio v. CA, 211 SCRA 219 (1992); Laforteza v. Machuca, 333 SCRA 643 (2000); Almira v. Court of Appeals, 399
SCRA351 (2003).
139
Roque v. Lapuz, 96 SCRA 741 (1980); Angeles v. Calanz, 135 SCRA 323 (1985);Alfonso v. CA, 186 SCRA 400
(1990)
140
xSan Andres v. Rodriguez, 332 SCRA 769 (2000); Vda. De Mistica v. Naguiat, 418 SCRA 73 (2003); Blas v. Angeles-
Hutalla, 439 SCRA 273 (2004); Villadar, Jr. V. Zabala, 545 SCRA 325 (2008); Ver Reyes v. Salvador, Sr., 564 SCRA 456
(2008).
141
Bowe v. Court of Appeals, 220 SCRA 158 (1993); xRayos v. Court of Appeals, 434 SCRA 365 (2004); Solidstate
Multi-Products Corp. v. Catienza-Villaverde, 559 SCRA 197 (2008).
- 36 -
The concept of substantial breach is irrelevant to a contract of sale. xLuzon Brokerage
142
Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 93 (1972).
In 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. The transfer of ownership and title would occur after full
143
payment of the price. xLeao v. CA, 369 SCRA 36 (2001).
142
Siska Dev. Corp. v. Office of the President, 231 SCRA 674 (1994); Sta. Lucia Realty & Dev., Inc. v. Uyecio, 562 SCRA
226 (2008).
143
Manuel v. Rodriguez, 109 Phil. 1 (1960); Laforteza v. Machuca, 333 SCRA 643 (2000); Villamaria, Jr. v. Court of
Appeals, 487 SCRA 571 (2006).
144
Jison v. CA, 164 SCRA 339 (1988); Lim v. CA, 182 SCRA 564 (1990); Cheng v. Genato, 300 SCRA 722 (1998).
145
Torralba v. De los Angeles, 96 SCRA 69 (1980).
146
Romero v. Court of Appeals, 250 SCRA 223 (1995); Adalin v. CA, 280 SCRA 536 (1997); Republic v. Florendo, 549
SCRA 527 (2008).
147
Bian Steel Corp. v. Court of Appeals, 391 SCRA 90 (2002).
- 37 -
There has arisen here a confusion in the concepts of validity and the efficacy of a
contract. Under Art. 1318 of Civil Code, the essential requisites of a contract are: consent of
the contracting parties; object certain which is the subject matter of the contract and cause
of the obligation which is established. Absent one of the above, no contract can arise.
Conversely, where all are present, the result is a valid contract. However, some parties
introduce various kinds of restrictions or modalities, the lack of which will not, however,
affect the validity of the contract. Thus, a provision this Contract of Sale of rights, interests
and participations shall become effective only upon the approval by the Honorable Court,
in the event of non-approval by the courts, affect only the effectivity and not the validity of
the contract of sale. Heirs of Pedro Escanlar v. Court of Appeals, 281 SCRA 176
(1997).
148
Oro Land Realty Dev. Corp. v. Claunan, 516 SCRA 681 (2007)
149
Canizares Tiana v. Torrejos, 21 Phil. 127 (1911); J.M. Tuazon v. CA, 94 SCRA 413 (1979).
- 38 -
g. Additional Warranties for Consumer Products (Arts. 68, Consumer Act, R.A. 7394).
6. Effects of Waivers
The phrase as is, where is basis pertains solely to the physical condition of the thing
sold, not to its legal situation. In the case at bar, the US tax liabilities constitute a potential lien
which applies to the subjects matters legal situation, not to its physical aspect. Thus, the
buyer has no obligation to shoulder the same. xNDC v. Madrigal Wan Hui Lines Corp., 412
SCRA 375 (2003).
150
Investments & Development, Inc. v. CA, 162 SCRA 636 [1988]).
- 39 -
The 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
quanti minoris), with damages in either case. Nutrimix Feeds Corp. v. Court of Appeals,
441 SCRA 357 (2004).
B. CONVENTIONAL REDEMPTION
1. Definition (Art. 1601)
Right to repurchase must be constituted as part of a valid sale at perfection. xVillarica v.
151
CA, 26 SCRA 189 (1968).
An 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. Roberts v. Papio, 515 SCRA
152
346 (2007).
In sales denominated as pacto de retro, the price agreed upon should not generally be
considered as the just value of the thing sold, absent other corroborative evidencethere is
no requirement in sales that the price be equal to the exact value of the thing subject matter
of the sale. xDorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008).
2. Redemption Period
The 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. The 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. Misterio v. Cebu State College of Science and Technology,
461 SCRA 122 (2005).
151
Claravall v. CA, 190 SCRA 439 (1990); Torres v. CA, 216 SCRA 287 (1992); Roberts v. Papio, 515 SCRA 346 (2007).
152
Ramos v. Icasiano, 51 Phil (1927).
153
Reyes v. Hamada, 14 SCRA 215 (1965); Solid Homes, Inc. v. CA, 275 SCRA 267 (1997); Misterio v. Cebu State
College of Science and Technology, 461 SCRA 122 (2005); Cadungog v. Yap, 469 SCRA 561 (2005); Ramos v. Dizon, 498
SCRA 17 (2006); Lumayag v. Heirs of Jacinto Nemeo, 526 SCRA 51 (2007).
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article itself provides and other stipulations which may have been agreed upon. xSolid
Homes v. Court of Appeals, 275 SCRA 267 (1997).
154
Lao v. Court of Appeals, 275 SCRA 237 (1997).
155
Salonga v. Concepcion, 470 SCRA 291 (2005).
156
Ceballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004); Alvaro v. Ternida, 479 SCRA 288
(2006); Cirelos v. Hernandez, 490 SCRA 624 (2006); Lumayag v. Heirs of Jacinto Nemeo, 526 SCRA 51 (2007); Olivares
v. Sarmiento, 554 SCRA 384 (2008); Tio v. Abayata, 556 SCRA 175 (2008).
157
Matanguihan v. CA, 275 SCRA 380 (1997); Martinez v. CA, 358 SCRA 38 (2001); Hilado v. Heirs of Rafael Medlla,
37 SCRA 257 (2002); Ceballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004); San Pedro v. Lee,
430 SCRA 338 (2005); Go v. Bacaron, 472 SCRA 229 (2005), citing VILLANUEVA, CESAR L. PHILIPPINE LAW ON SALES, (1998
ed.), p. 271; Romulo v. Layug, Jr., 501 SCRA262 (2006); Roberts v. Papio, 515 SCRA 346 (2007); Raymundo v. Bandong,
526 SCRA 514 (2007); Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008).
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leading to the deed, and generally, all pertinent facts having a tendency to fix and determine
the real nature of their design and understanding. Necessitous men are not always free, in
that to answer a pressing emergency, they will submit to any term that the crafty may
158
impose on them. Banga v. Bello, 471 SCRA 653 (2005).
That 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. xMariano
159
v. Court of Appeals, 220 SCRA 716 (1993).
160
a. Badges of Equitable Mortgage (Art. 1602 )
A contract of sale actually intended to secure the payment of an obligation is presumed
161
an equitable mortgage. xRomulo v. Layug, Jr., 501 SCRA262 (2006).
The presence of only one circumstance defined in Art. 1602 is sufficient for a contract of
sale a retro to be presumed an equitable mortgage. xHilado v. Medalla 377 SCRA 257
162
(2002).
The presumption in Article 1602 jibes with the rule that the law favors the least
transmission of property rights. xEnriquez, Sr. v. Heirs of Spouses Nieves and Alfredo
Baldonado, 498 SCRA 365 (2006); but it is not conclusive, for it may be rebutted by
competent and satisfactory proof to the contrary. xSantiago v. Dizon, 543 SCRA 402 (2008).
The provisions of Art. 1602 on the presumption of equitable mortgage applies also to a
163
contract purporting to be an absolute sale. xTuazon v. CA, 341 SCRA 707 (2000).
A contract purporting to be an absolute sale is presumed to be an equitable mortgage:
164
(a) when the price of the sale is unusually inadequate; (b) when the vendor remains in
165
possession as lessee or otherwise; (c) when after the expiration of the right of
repurchase, it is extended by the buyer. xHilado v. Heirs of Rafael Medalla, 37 SCRA 257
166
(2002); (d) when the purported seller continues to collect rentals from the lessees of the
property sold. Ramos v. Dizon, 498 SCRA 17 (2006)
When the vendor is in urgent need of money when he executes the sale, the alleged
sale with pacto de retro will be construed as an equitable mortgage. Bautista v. Unangst,
557 SCRA 256 (2008).
Inadequacy of purchase price is considered so far short of the real value of the
property as to startle a correct mind. xSantiago v. Dizon, 543 SCRA 402 (2008); or that the
mind revolts at it as such that a reasonable man would neither directly or indirectly be likely
to consent to it. xVda de Alvarez v. CA, 231 SCRA 309 (1994).
To presume a contract is an equitable mortgaged based on gross inadequacy of
price, it must be clearly shown from the evidence presented that the consideration
was in fact grossly inadequate at the time the sale was executed. Mere inadequacy
of price is not sufficient to create the presumption. xOlivares v. Sarmiento, 554
SCRA 384 (2008).
Mere tolerated possession is not enough to prove that the transaction was an equitable
mortgage. xRedondo v. Jimenez, 536 SCRA 639 (2007).
Payment 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
167
and right claim over the land. xGo v. Bacaron, 472 SCRA 229 (2005).
However 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
158
Austria v. Gonzales, Jr., 420 SCRA 414 (2004); Raymundo v. Bandong, 526 SCRA 514 (2007).
159
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Cuyugan v. Santos, 34 Phil. 100 (1916); Matanguihan v. CA, 275
SCRA 380 (1997); Hilado v. Heirs of Rafael Medlla, 37 SCRA 257 (2002); Madrigal v. Court of Appeals, 456 SCRA 659
(2005); Legaspi v. Ong, 459 SCRA 122 (2005); Banga v. Bello, 471 SCRA 653 (2005); Dio v. Jardines, 481 SCRA 226
(2006); Ayson, Jr. V. Paragas, 557 SCRA 50 (2008).
160
Lim v. Calaguas, 45 O.G. No. 8, p. 3394 (1948); Balatero v. IAC, 154 SCRA 530 (1987); Mariano v. CA, 220 SCRA
716 (1993); Lobres v. CA, 351 SCRA 716 (2001).
161
Ayson, Jr. V. Paragas, 557 SCRA 50 (2008); Bautista v. Unangst, 557 SCRA 256 (2008).
162
Claravall v. CA, 190 SCRA 439, 448 (1990); Uy v. CA, 230 SCRA 664 (1994); Lobres v. CA, 351 SCRA 716 (2001);
Alvaro v. Ternida, 479 SCRA 288 (2006); Dio v. Jardines, 481 SCRA 226 (2006); Raymundo v. Bandong, 526 SCRA 514
(2007); Aleligay v. Laserna, 537 SCRA 699 (2007); Dorado Vda. De Delfin v. Dellota, 542 SCRA 397 (2008); Bautista v.
Unangst, 557 SCRA 256 (2008).
163
Zamora v.CA, 260 SCRA 10 (1996).
164
Romulo v. Layug, Jr., 501 SCRA262 (2006).
165
Romulo v. Layug, Jr., 501 SCRA262 (2006); Bautista v. Unangst, 557 SCRA 256 (2008).
166
Cruz v. Court of Appeals, 412 SCRA 614 (2003).
167
Lumayag v. Heirs of Jacinto Nemeo, 526 SCRA 51 (2007).
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sale, would not support the allegation of equitable mortgage. xCirelos v. Hernandez, 490
168
SCRA 624 (2006).
Although 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 vendor to qualify the
arrangement as an equitable mortgage, especially when it was shown that the vendor
169
retained part of the purchase price. xLegaspi v. Ong, 459 SCRA 122 (2005).
Under Article 1602, delay in transferring title is not one of the instances enumerated by
lawinstances in which an equitable mortgage can be presumed. Nor 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.
xCeballos v. Intestate Estate of the Late Emigdio Mercado, 430 SCRA 323 (2004).
The fact that the price in a pacto de retro sale is not the true value of the property does
not justify 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
170
facility to redeem the property . xIgnacio v. CA, 246 SCRA 242 (1995).
Article 1602 being remedial in nature, may be applied retroactively in cases prior to the
effectivity of the Civil Code. xOlea v. CA, 247 SCRA 274 (1995).
C. LEGAL REDEMPTION
1. Definition (Art. 1619)
Legal 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 [an] inconvenient association into which he has
been thrust. It is intended to minimize co-ownership. xFernandez v. Tarun, 391 SCRA 653
175
(2002).
174
Vda. de Macoy v. CA, 206 SCRA 244 (1992).
175
Basa v. Aguilar, 117 SCRA 128 (1982).
176
De Guzman v. CA, 148 SCRA 75 (1987); Adille v. CA, 157 SCRA 455 (1988).
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e. Sale of Credit in Litigation (Art. 1634) 30 days from notice of demand to pay.
a. Rare Exceptions:
When the sale to the buyer was effected through the co-owner who acted as the
broker, and never indicated that he would exercise his right to redeem. xDistrito v. CA, 197
SCRA 606 (1991).
When the buyers took 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. xPilapil v. CA, 250 SCRA 560 (1995).
177
Garcia v. Calaliman, 17 SCRA 201 (1989); Mariano v. Court of Appeals, 222 SCRA 736 (1993).
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Right to repurchase is granted by law and need not be provided for in the deed of sale.
xBerin v. Court of Appeals, 194 SCRA 508 (1991).
Under the free patent or homestead provisions of the Public Land Act a period of
five (5) years from the date of conveyance is provided, to be reckoned from the date of
the sale and not from the date of registration in the office of the Register of Deeds. xLee
178
Chuy Realty Corp. v. CA, 250 SCRA 596 (1995).
c. Redemption by Judgment Debtor (Secs. 27-28, Rule 39, Rules of Civil Procedure)
Written notice must be given to the judgment debtor before the sale of the property on
execution, to give him the opportunity to prevent the sale by paying the judgment debt
sought to be enforced and the costs which have been incurred. xTorres v. Cabling, 275
SCRA 329 (1997).
Where there is a third-party claim, sheriff should demand from the judgment creditor
who becomes the highest bidder, payment in cash of his bid instead of merely crediting the
amount to the partial satisfaction of the judgment debt. xTorres v. Cabling, 275 SCRA 329
(1997).
Under Sec. 28, Rule 39 of the 1997 Rules of Civil Procedure, the period of redemption
shall be at any time within one (1) year from the date of registration of the certificate of
sale, so that the period is now to be understood as composed of 365 days, unlike the 360
days under the old provisions of the Rules of Court. xYsmael v. CA, 318 SCRA 215 (1999).
178
Mata v. Court of Appeals, 318 SCRA 416 (1999).
179
Vaca v. CA, 234 SCRA 146 (1994).
180
Heirs of Felicidad Canque v. CA, 275 SCRA 741 (1997).
181
Springsun Management Systems Corp. v. Camerino, 449 SCRA 65 (2005).
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4. Effects of Assignment
a. Assignment of Credit
An assignment of credit is an agreement by virtue of which the owner of a credit, known
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, known
as the assignee, who acquires the power to enforce it to the same extent as the assignor
183
could enforce it against the debtor. xAquintey v. Tibong, 511 SCRA 414 (2006).
As a consequence, the third party steps into the shoes of the original creditor as
subrogee of the latter. Although constituting a novation, such assignment does not
extinguish the obligation under the credit assigned, even when the assignment is effected
without his consent. xSouth City Homes, Inc. V. BA Finance Corp., 371 SCRA 603 (2001).
b. Issues re Debtor (Art. 1626)
In an assignment of credit, the consent of the debtor is not essential for its perfection,
his knowledge thereof or lack of it affecting only the efficaciousness or inefficaciousness of
any payment he might make. xProject Builders, Inc. v. Court of Appeals, 358 SCRA 626
(2001).
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. Otherwise, all
creditors would be prevented from assigning their credits because of the possibility of the
debtors refusal to given consent. What 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.
184
xNIDC v. De los Angeles, 40 SCRA 489 (1971).
d. Tradition in Assignment
Notarization converts an Assignment of Credit, a private document, into a public
document, thus, complying with the mandate of Article 1625 of the Civil Code and making it
enforceable even as against third persons. xLedonio v. Capitol Dev. Corp., 526 SCRA 379
(2007).
185
Ledonio v. Capitol Dev. Corp., 526 SCRA 379 (2007).
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4. Effects of Non-Compliance
a. If purchase money or mortgage proceeds are not applied pro-rata to payment of the
bona fide claims of the creditors, the sale is deemed fraudulent and void. (Sec. 4)
b. Non-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 subject the seller or
mortgagor to penal sanctions. (Sec. 4)
c. Bulk transfer without consideration or for nominal consideration punishable. (Sec. 7)
d. Failure 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. 11)
A sale in bulk done without complying with the terms of the Law, makes the transaction
fraudulent and void, but does not change the basic relationship between the seller,
assignor/encumbrancer and his creditor. The portion of a judgment 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. xPeople v. Mapoy, 73 Phil. 678 (1942).
d. Meaning of Consumption (DOJ Opinion No. 325, series of 1945; IRR of Law).
The Law 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 Law.
186
Balmaceda v. Union Carbide Philippines, Inc. 124 SCRA 893 (1983).
186
Marsman & Co., Inc. v. First Coconut Central Co., Inc., 162 SCRA 206 (1988); B.F. Goodrich Philippines, Inc. v.
Reyes, Sr., 121 SCRA 363 (1983).
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d. Exempted Areas
e. Rights Granted to Former Natural-Born Filipinos
6. Penalty Provisions
7. Applicability of the Anti-Dummy Act (Comm. Act. 108, as amended by P.D. 715)
a. Law penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy
privileges reserved for Filipinos or Filipino 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.
b. Section 2-A of the Law prohibits aliens from intervening in the management, operation,
administration or control of nationalized business, whether as officers, employees or
laborers, with or without remuneration. Aliens may not take part in technical aspects,
provided no Filipino can do such technical work, and with express authority from the
President of the Philippines.
c. Later, Pres. Decree 715 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 nationalized
activities in proportion to their allowable participation or share in the capital of such
entities.
The amendment was meant to settle the uncertainty created in the obiter opinion in
Luzon Stevedoring Corp. v. Anti-Dummy Board, 46 SCRA 474 (1972), which rejected
the argument of a public utility corporation that had no-American aliens in its employ,
that the Anti-Dummy Law covered only employment in wholly nationalized businesses
and not in those that are only partly nationalized.
The Filipino 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 take part in management of the
retail business would be a violation of the law. xTalan v. People, 169 SCRA 586 (1989).
oOo