Sales - Lecture

SALES – ATTY ZARAH VILLANUEVA CASTROSan Beda College of Law, Mendiola

JOHN C. ICALIA

SALES

I. CONCEPTS; CONTRACT OF SALE (Art. 1458) By the contract of sale, one of the contracting parties obligates himself to

transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent.

A. Characteristics:1. Consensual (Art. 1475) – perfected by mere consent.2. Bilateral (Art. 1458) – imposes obligation on both parties; obligation to

transfer ownership and deliver on the part of the seller and to pay the price on the part of the buyer.

3. Onerous (Art. 1350) – with valuable consideration.4. Commutative (Art. 2010) – each party gives and receives an equivalent.5. Nominate (Art. 1458) – has given a special name or designation in the Civil

Code.6. Principal – can stand on its own and does not depend on other contracts

for its existence and validity.

Essential Requisites/Elements:1. Consent of the contracting parties 2. Subject matter (things and rights) 3. Cause (price)

-------------------------------------------Jurisprudence: G.R. No. L-41847 December 12, 1986LEABRES vs. COURT OF APPEALS

DOCTRINE: An examination of the receipt reveals that the same can neither be regarded as a contract of sale or a promise to sell.

The requisites of a valid contract of sale namely: (1) consent or meeting of the minds of the parties; (2) determinate subject matter; (3) price certain in money or its equivalent; - are lacking in said receipt and therefore the "sale" is not valid nor enforceable.

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B. Distinguished from other contracts:1. Barter (Art. 1468, 1638, 1954)

- In barter, the consideration is the giving of a thing; In sale, it is giving of money as payment. - Both are governed by law on sales.- If consideration consists partly in money and partly by thing, look at manifest intention.

- Depends on the intention of the parties if they consider their transaction as barter or sale.- If the value of thing is equal or less than amount of money, it is sale.- If the value of thing is more than amount of money, it is barter.

2. Donation (Art 725) - Donation is gratuitous while sale is onerous.- Donation is formal contract; sale is consensual.- Donation is governed by law on donation; sale is governed by law on

sales.

3. Contract for a Piece of Work (Art. 1467) - Also known as Massachusetts Rule.- If the contract for delivery of an article which the vendor in the ordinary

course of business manufactures or procures for general market, whether on hand or not, it is a sale.

- If goods are to be manufactured especially for a customer and upon special order and not for the general market, it is a contract for piece of work.

-------------------------------------------Jurisprudence:G.R. No. L-8506 August 31, 1956CO vs. CIR

The important thing to remember is that Celestino Co & Company habitually makes sash, windows and doors, as it has represented in its stationery and advertisements to the public. That it "manufactures" the same is practically admitted by appellant itself. The fact that windows and doors are made by it only when customers place their orders, does not alter the nature of the establishment, for it is obvious that it only accepted such orders as called for the employment of such material-moulding, frames, panels-as it ordinarily manufactured or was in a position habitually to manufacture.

GR No. 71122, 25 March 1988CIR vs. Arnoldus Carpentry Shop

DOCTRINE: Based on Article 1467, what determines whether the contract is one of work or of sale is whether the thing has been manufactured specially for the customer and “upon his special order.” Thus, if the thing is specially done at the order of another, this is a contract for a piece of work. If, on the other hand, the thing is manufactured or procured for the general market in the ordinary course of one’s business, it is a contract of sale. The distinction between a contract of sale and one for work, labor and materials are tested by the inquiry whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the order had not been given.


JOHN C. ICALIA

The one who has ready for the sale to the general public finished furniture is a manufacturer, and the mere fact that he did not have on hand a particular piece or pieces of furniture ordered does not make him a contractor only. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the – general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work.

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4. Agency to sell (Art. 1466) - In agency to sell, agent is not obliged to pay for price but merely obliged

to deliver price received from buyer; in sale, the buyer pays for the price of the object.

- In agency, the principal remains the owner even if object is delivered to agent; in sale, buyer becomes owner of thing.

- In agency, agent assumes no risk/liability as long as within the authority given; In sale, seller warrants.

- In agency, may be revoked unilaterally because fiduciary and even revoked it without ground; in sale, not unilaterally revocable.

- In agency, agent is not allowed to profit; in sale, seller receives profit.- Agency is a personal contract; sale is a real contract (to give),

rescission is not available in agency.

-------------------------------------------Jurisprudence:G.R. No. L-11491, 23 August 1918Quiroga vs. Parsons

RULING: The Court ruled that the contract by and between the plaintiff and the defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or by law.

In order to classify a contract, due attention must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that:

(1) The plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated.

(2) Payment was to be made at the end of sixty days, or before, at the plaintiff’s request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment.

These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the

defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it.

By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. In respect to the defendant’s obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.

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5. Lease - In sale, obligation is to absolutely transfer ownership of thing; in lease,

use of thing is for a specified period only with an obligation to return.- In sale, consideration is price; in lease, consideration is rent.- In sale, seller needs to be the owner of the thing to transfer ownership;

in lease, lessor need not be the owner for ownership does not pass to the lessee.

Contract of Lease with Option to Buy (Art. 1485)- Really a contract of sale but designated as lease in name only.- It is a lease of personal property where rents are considered as payment

on installments.

C. Kinds of Sale1. Absolute – seller does not reserve his title over the thing sold and thus,

upon delivery, ownership passes regardless of WON buyer has paid.2. Conditional – condition/s are imposed by the seller before ownership will

pass.

CONDITION – An event may may give rise or extinguish and obligation as agreed by the contracting parties.

May be a past event if the knowledge there of is unknown yet.

Contract to Sell – ownership is reserved by the seller despite delivery; considered as a special kind of conditional sale; the buyer has the right to compel the seller to execute a final deed of sale.

A preparatory stage before the perfection of Contract of sale.

-------------------------------------------Jurisprudence:G.R. No. L-59266Dignos vs. CA


JOHN C. ICALIA

Held: The Court ruled that there is an absolute contract of sale. That a deed of sale is absolute in nature although denominated as a “Deed of Conditional Sale” where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price , nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period.

G.R. No. 135528, 14 July 2004 Rayos vs. CA

Held: The Court ruled that the parties executed a contract to sell and not a contract of sale.

The petitioners retained ownership without further remedies by the respondents until the payment of the purchase price of the property in full. Such payment is a positive suspensive condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the obligation of the petitioners to convey title from arising, in accordance with Article 1184 of the Civil Code.

The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect. The parties stand as if the conditional obligation had never existed

G.R. NO. 137845 : September 9, 2004Clemeno, Jr. vs. Lobregat

Held: The Court ruled that the contract between the parties was a perfected verbal contract of sale and not a contract to sell over the subject property, with the petitioner as vendor and the respondent as vendee.

Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as to the offer and acceptance thereof on three elements: subject matter, price and terms of payment of the price.

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II. OBJECT OF SALE (Art. 1306)

A. Must be LICIT (Art. 1459) – within the commerce of man. Illicit per se – refers to its nature. Illicit per accidens – made illegal by provisions of law. Illicit contracts are null and void.

B. Must be DETERMINATE (Art. 1460) – not essential at the time of perfection; particularly designated or physically segregated from all others of the same class.

The requisite that a thing must be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new further agreement between the parties.

C. Must be having POTENTIAL EXISTENCE (Art. 1461) – animals not yet born, fruits of trees, rice to be harvested.

D. Hope or expectancy (Art. 1461) Emptio rae speratae - sale of an expected thing; if does not materialize, the

sale is not effective (future thing).o Depends on the existence.

Emptio spei – sale of mere hope; does not matter whether it materializes or not, as long as the hope itself validly existed (present thing).

o Example: Lotto ticket, Raffle ticketo It is the “chance” which the buyer actually buys

Mere hope or expectancy – VALID, as long as it will come into existence. Vain hope or expectancy - VOID.

E. Sale of Existing and future goods Art. 1462. The goods which form the subject of a contract of sale may be

either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods."

There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. (n)

This is an EXECUTORY contract – already perfected but to be performed or complied with by the seller.

F. Sale of Undivided Interest. Art 1463 A sole owner of a thing may sell an undivided interest.

Almendra VS IAC

The owner of a thing may sell his interest in the land but with now specification as to what specific part since the property is still not yet partitioned. Thus, the sale is valid as regard 50% of the property and the rights therein.

III. PRICE (Art. 1350, 1352-53)

A. Certain in money (Art. 1469) Failure to pay the agreed price does not cancel a sale for lack of

consideration, for the consideration is still there, even if paid with counterfeit money.


JOHN C. ICALIA

With reference to another thing certain - tuition fee.

B. Who may determine the price (Art. 1469, 1473-74) Determination of price may be left to the judgment of a third person. If third person is unable or unwilling to fix it, the contract has no effect,

unless the parties later on agree as to the price. Cannot be left to the will of one of the parties.

C. Effect of Gross Inadequacy (Art. 1470) Must be proven as a fact. Does not affect a contract of sale EXCEPT if consent is vitiated. In execution of judicial sale, mere inadequacy will not affect the sale,

except if there is grossly inadequate as to shock the conscience of the Court, it will be set aside.

D. Effect when price is simulated (Art. 1471) If price is simulated, contract is void, unless shown it was really a donation.

Absolutely Simulated – parties do not intend to be bound at all.- Purpose: to defraud creditors.

Relatively Simulated – sale where they actually intended another contract in which normally would be a donation.- Purpose: (1) to minimize tax liabilities; (2) to circumvent the

provisions on legitimes and collation under succession.

JurisprudencePayongayong vs CA

Doctrine: Simulation occurs when an apparent contract is a declaration of fictitious will deliberately made by agreement of the parties in order to produce, for the purpose of deception, the appearance of juridical act which does not exist or is different from which was really executed.

Requirements:1. Outward declaration of will of the parties2. False appearance intended by mutual agreement3. Purpose: deceive third persons

E. Certainty of price of securities, grains, liquids, etc. (Art. 1472) The price is certain when:

- the price fixed is that which the thing sold would have on a definite day, or a particular exchange or market; or

- an amount is fixed above or below the price on such day or in such exchange or market.

F. Effect of failure to determine price (Art. 1474) The contract is inefficacious.

However, if delivered to and appropriated by the buyer, he must pay a reasonable price which depends on different circumstances of each case.

Art. 1474. Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. However, if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

G. Meeting of the minds as to price

-------------------------------------------JurisprudenceG.R. Nos. L-21489 and L-21628, 19 May 1966, 17 SCRA 114Mapalo vs. Mapalo

RULING: The Court ruled that a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears in a contract as paid where in fact never been paid by the purchaser to the vendor.

Starting with fundamentals, under the Civil Code, either the old or the new, for a contract to exist at all, three essential requisites must concur: (1) consent, (2) object, and (3) cause or consideration. The Court of Appeals is right in that the element of consent is present. For consent was admittedly given, albeit obtained by fraud. Accordingly, said consent, although defective, did exist. In such case, the defect in the consent would provide a ground for annulment of a voidable contract, not a reason for nullity ab initio.

The parties are agreed that the second element of object is likewise present namely, the parcel of land subject matter of the same.Not so, however, as to the third element of cause or consideration

G.R. No. 128120, 20 October 2004Sweldish Match vs. CA

RULING: An offer would require, among other things, a clear certainty on both the object and the cause or consideration of the envisioned contract. Consent in a contract of sale should be manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds of the parties as to the price, despite the manner of payment, or even the breach of that manner of payment. It is not the act of payment of price that determines the validity of a contract of sale.

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http://en.wikipedia.org/wiki/Contract_of_sale


JOHN C. ICALIA

IV. FORMATION/PERFECTION OF A CONTRACT OF SALE (Art. 1475) Perfected at the moment there is a meeting of the minds upon the thing

which is the object of the contract and upon the price. Upon that moment, the parties may reciprocally demand performance,

subject to the provisions of the law governing forms of contracts.

FORM:General Rule: A COS may be in any form. Article 1483 provides that a COS may be in writing, partly in writing xxx. This provision is exactly the same as Article 1356 in contracts which provides that contracts may be obligatory in whatever form they may have been entered into provided all the essential requisites are present. But then again even Article 1356 just like Article 1475 would provide for exceptions.

Exceptions: The law may require a particular form for its validity. The Cattle Registration Decree is an example - where the law itself provides for a particular form for the validity of the sale. But the law may require particular form for its enforceability of the sale and that would be 1403 or the statute of frauds. Concretely, the sale of a parcel of land if not in writing is valid but unenforceable. It is not void. Note that the price of the land is irrelevant if immovable.

Example: Before, the sale of a land for P300 is valid and enforceable even if not in writing. But presently, it has to be in writing to be enforceable. The price is still irrelevant.

If the object of the sale is movable, you have to consider not the value of the thing but the price agreed upon. The value may be different from the price. You can sell a thing worth P1,000 for P400 but the law provides for the price. If the price is at least P500 and the sale is not in writing, it will be unenforceable.

A. Option Contract (Art. 1479) A promise to buy and sell a determinate thing for a price certain is

reciprocally demandable.

-------------------------------------------Jurisprudence:G.R. No. 111238, 25 January 1995Adelfa Properties vs. CA

RULING: The Court ruled that the agreement between the parties is a contract to sell, and not an option contract or a contract of sale.

The distinction between the two is important for:

1. In contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price.

2. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.

Article 1478 of the civil code does not require that such a stipulation be expressly made. Consequently, an implied stipulation to that effect is considered valid and, therefore, binding and enforceable between the parties. It should be noted that under the law and jurisprudence, a contract which contains this kind of stipulation is considered a contract to sell.

G.R. No. L-9871, 31 January 1958Atkins, Kroll & Co. vs. Cua Hian Tek

Held: The argument, manifestly assumes that only a unilateral promise arose when the offeree accepted. Such assumption is a mistake, because a bilateral contract to sell and to buy was created upon acceptance.

So much so that Cua Hian Tek could be sued, he had backed out after accepting, by refusing to get the sardines and/or to pay for their price. Indeed, the word "option" is found neither in the offer nor in the acceptance. On the contrary, Cua Hian Tek accepted "the firm offer for the sale" and adds, "the undersigned buyer has immediately filed an application for import license . . ."

It can be taken for granted, as contended by the defendants, that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by letter, and of this acceptance, the offerer had knowledge before said offer was withdrawn. The concurrence of both acts—the offer and the acceptance—could at all events have generated a contract; it was therefore a contract of sale.

SANCHEZ V RIGOS: NOTE: The significance of this ruling is that it shows that the only importance of a consideration for an option is that the option cannot be withdrawn by the grantor during the stipulated period


JOHN C. ICALIASanchez vs. Rigos

Facts: Mrs. Rigos offered to sell her land to Sanchez for a certain price. Rigos gave Sanchez 2 years within which to decide. (Note: The optionee or promisee or offeree is not bound to purchase but he has the option to buy or purchase). In this case, Sanchez has the option. Before the lapse of 2 years, Sanchez told Rigos that he is buying and offered the price agreed upon but Rigos refused claiming that she was not bound by the written option agreement because no option money (consideration) was given by Sanchez. According to Rigos, the option contract is void.

Held: Since Sanchez accepted the offer and decided to buy within the period before the offer was withdrawn, a perfected COS was created even without option money. In this case, there was no option contract because it was merely an option agreement. Therefore, there was merely an offer on the part of Rigos and once the offer was accepted before it was withdrawn, regardless of whether option money was given and in this case no option money was given, a perfected COS was created.

G.R. No. 109125, 2 December 1994Ang Yu Ascuncion vs CA

RULING: An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz:

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.

Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings.

A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a contract is perfected, are not considered binding commitments. Thus, at any time prior to the perfection of the contract, either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal.

Where a period is given to the offeree within which to accept the offer, the following rules generally govern:

(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by communicating that withdrawal to the offeree. The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith."

(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-offeree, the latter may not sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care should be taken of the real nature of the consideration given, for if, in fact, it has been intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can evidence its perfection (Art. 1482, Civil Code).

G.R. No. 126454, 26 November 2004Bible Baptist Church vs. CA

An option contract, to be valid and binding, needs to be supported by a separate consideration. The consideration need not be monetary but could consist of other things or undertakings. However, if the consideration is not monetary, these must be things or undertakings of value, in view of the onerous nature of the contract of option. Furthermore, when a consideration for an option contract is not monetary, said consideration must be clearly specified as such in the option contract or clause.

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B. Mutual Promise to Buy and Sell (Art. 1479)


JOHN C. ICALIA

An accepted unilateral promise to buy and sell a determinate thing for a price certain is promising upon the promisor if the promise is supported by a consideration distinct from the price. “Option Money”

C. Status of Advertisement (Art. 1325-26) Unless it appears otherwise, business advertisements of things for sale

are not definite offers, but mere invitations to make an offer. Advertisements for bidders are simply invitations to make proposals, and

the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.

D. Acceptance by Letter or Telegram (Art. 1319) Acceptance made by letter or telegram does not bind the offerer except

from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made.

E. Perfection of Sale by Auction (Art. 1476) Where goods are put up for sale by auction in lots, each lot is the subject of

a separate contract of sale. A sale by auction is perfected when the auctioneer announces its

perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve.

Q: Can the auctioneer withdraw the goods before the fall of the hammer?A: As a rule, yes because the sale has not been perfected at the moment unless the bidding or auction has been announced to be without reserve.

A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation.- If auction is announced to be “without reserve,” goods cannot be

withdrawn from the sale after the bid is made. Where notice has not been given that a sale by auction is subject to a right

to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or knowingly to take any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer.

- By taking part in the auction and offering bidding, the buyer voluntarily submitted to the terms and conditions of the auction sale announced in the notice.

- Puffing/by-bidding – means employed by owner to increase the price of the bids; illegal.

F. Earnest Money (Art. 1482)

When given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.

-------------------------------------------Jurisprudence:G.R. No. 135929, 20 April 2001Limson vs. CAFacts: Petitioner Lourdes Ong Limson alleged that in July 1978 respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their agent Marcosa Sanchez, offered to sell to petitioner a parcel of land situated in Barrio San Dionisio, Parañaque, Metro Manila; that respondent spouses informed her that they were the owners of the subject property; that on 31 July 1978 she agreed to buy the property at the price of P34.00 per square meter and gave the sum of P20,000.00 to respondent spouses as "earnest money;" that respondent spouses signed a receipt therefor and gave her a 10-day option period to purchase the property; that respondent Lorenzo de Vera then informed her that the subject property was mortgaged to Emilio Ramos and Isidro Ramos; that respondent Lorenzo de Vera asked her to pay the balance of the purchase price to enable him and his wife to settle their obligation with the Ramoses.

Petitioner also averred that she agreed to meet respondent spouses and the Ramoses on 5 August 1978 at the Office of the Registry of deeds of Makati, Metro Manila, to consummate the transaction but due to the failure of respondent Asuncion Santos-de Vera and the Ramoses to appear, no transaction was formalized. In a second meeting scheduled on 11 August 1978 she claimed that she was willing and ready to pay the balance of the purchase price but the transaction again did not materialize as respondent spouses failed to pay the back taxes of subject property. Subsequently, on 23 August 1978 petitioner allegedly gave respondent Lorenzo de Vera three (3) checks in the total amount of P36, 170.00 for the settlement of the back taxes of the property and for the payment of the quitclaims of the three (3) tenants of subject land. The amount was purportedly considered part of purchase price and respondent Lorenzo de Vera signed the receipts therefore.

Petitioner alleged that on 5 September 1978 she was surprised to learn from the agent of respondent spouses that the property was the subject of a negotiation for the sale to respondent Sunvar Realty Development Corporation (SUNVAR). Respondent spouses prayed for actual damages for the unjustified filling of the Cross-Claim, moral damages for the mental anguish and similar injuries they suffered by reason thereof, exemplary damages "to prevent others from emulation the bad example" of respondents SUNVAR and Cuenca, plus attorney’s fees. The Regional Trial Court rendered its decision in favor of petitioner. On appeal, the Court of Appeals completely reversed the decision of the trial court.

Issue: WON there was an earnest money given.

Held: The Court ruled that the consideration of P20,000.00 paid by petitioner to respondent spouses was referred to as "earnest money" was not an earnest money but option money.


JOHN C. ICALIA

A scrutiny of the facts as well as the evidence of the parties overwhelmingly leads to the conclusion that the agreement between the parties was a contract of option and not a contract to sell.

"Earnest money" and "option money" are not the same but distinguished thus: (a) Earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract; (b) Earnest money given only where there is already a sale, while option money applies to a sale not yet perfected; and, (c) When earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy, but may even forfeit it depending on the terms of the option.

There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase price.

G.R. No. 137290, 31 July 2000San Miguel Properties vs. Huang

Facts: Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real properties. Part of its inventory are two parcels of land were offered for sale for P52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In a letter dated March 24, 1994, Atty. Dauz signified her clients’ interest in purchasing the properties for the amount for which they were offered by petitioner, under the following terms: the sum of P500,000.00 would be given as earnest money and the balance would be paid in eight equal monthly installments from May to December, 1994. However, petitioner refused the counter-offer.On March 29, 1994, Atty. Dauz wrote another letter proposing the following terms for the purchase of the properties.

Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In a letter dated March 24, 1994, Atty. Dauz signified her clients’ interest in purchasing the properties for the amount for which they were offered by petitioner, under the following terms: the sum of P500,000.00 would be given as earnest money and the balance would be paid in eight equal monthly installments from May to December, 1994. However, petitioner refused the counter-offer.

On March 29, 1994, Atty. Dauz wrote another letter proposing the following terms for the purchase of the properties.

Isidro A. Sobrecarey, petitioner’s vice-president and operations manager for corporate real estate, indicated his conformity to the offer by affixing his signature to the letter and accepted the "earnest-deposit" of P1 million. Upon request of respondent spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from the properties. On April 25,

1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994 within which to exercise her option to purchase the property, adding that within that period, "[we] hope to finalize [our] agreement on the matter." Her request was granted. On July 7, 1994, petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by petitioner, the latter was returning the amount of P1 million given as "earnest-deposit."

On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the execution within five days of a deed of sale covering the properties. Respondents attempted to return the "earnest-deposit" but petitioner refused on the ground that respondents’ option to purchase had already expired.On August 16, 1994, respondent spouses filed a complaint for specific performance against petitioner before the RTC of Pasig City.Petitioner filed a motion to dismiss the complaint alleging that (1) the alleged "exclusive option" of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable and (2) the complaint did not allege a cause of action because there was no "meeting of the minds" between the parties and, therefore, no perfected contract of sale.

The trial court granted petitioner’s motion and dismissed the action. Respondents filed a motion for reconsideration, but it was denied by the trial court. They then appealed to the Court of Appeals which, on April 8, 1997, rendered a decision reversing the judgment of the trial court.

Held: In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents’ offer of March 29, 1994, their contract had not yet been perfected. This is evident from the following conditions attached by respondents to their letter, to wit:

(1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer;

(2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and

(3) petitioner would secure the necessary approvals while respondents would handle the documentation.

The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As petitioner correctly points out, acceptance of this condition did not give rise to a perfected sale but merely to an option or an accepted unilateral promise on the part of respondents to buy the subject properties within 30 days from the date of acceptance of the offer. Such option giving respondents the exclusive right to buy the properties within the period agreed upon is separate and distinct from the contract of sale which the parties may enter. All that respondents had was just the option to buy the properties which privilege was not, however, exercised by them because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by respondents.


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Furthermore, even the option secured by respondents from petitioner was fatally defective.

Under the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a distinct consideration. Consideration in an option contract may be anything of value, unlike in sale where it must be the price certain in money or its equivalent. There is no showing here of any consideration for the option. Lacking any proof of such consideration, the option is unenforceable.

It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.

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G. Form of Sales (Art. 1403 [2, a,d,e], 1483, 1581, 1874) The following contracts are unenforceable, unless they are ratified:

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within a year from the making thereof;

(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;

e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein.

Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the conduct of the parties.

The form of sale of large cattle shall be governed by special laws. When a 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.

V. PARTIES TO A CONTRACT OF SALE (Art. 1327, 1489)

The following cannot give consent to a contract:(1) Unemancipated minors; (Exception: Necessaries)

(2) Insane or demented persons, and deaf-mutes who do not know how to write.

All persons who are authorized to obligate themselves, may enter into a contract of sale, saving modifications contained in the following articles.

Kind of Incapacity

1) Absolute Incapacity – the party cannot give consent to any and all contracts. (Ex. Civil interdiction, (1) & (2) Above)

2) Relative Incapacity – the party is prohibited from entering sometimes with specific persons and sometimes over specific things. (Ex. Married person, Special Incapacity (See Part V Sub C)

Kind of Capacity

1. Juridical Capacity – it is the fitness to be the subject of legal relations. If a party to a sale has no juridical capacity, the contract is void. Note that all natural living persons have juridical capacity. Even if he is a 1 day old baby, he has juridical capacity. The baby can be the subject of donation. Even if he is conceived, he has provisional personality.

Example: One example of a party to a sale without juridical capacity would be a corporation not registered with the SEC. The contract entered by this corporation is a void contract because one of the parties has no juridical capacity to enter into that contract.

2. Capacity to Act – it is the power to do acts with legal effects. If the incapacity only pertains to capacity to act, the contract would normally be voidable. Without capacity to act or there are restrictions with one’s capacity to act such as minority, insanity, deaf mute and does not know how to write and civil interdiction.

Note: Under R.A. 6809 (December 1989) there is no more creature known as “unemancipated minor”. Before 1989, the age of majority was 21.

A. Sale by a Minor (Art. 1489) Where necessaries are those sold and delivered to a minor or other person

without capacity to act, he must pay a reasonable price therefore.

Necessaries - are those indispensable for sustenance, clothing, dwelling, education, and medical treatment.

Q: What if one of the parties in a COS is a minor and the minor actively misrepresented as to his age?A: The SC said that the minor will be bound to such contract under the principle of estoppel.

B. Sale between Spouses (Art. 1490) General Rule: The husband and the wife cannot sell property to each other Exception:


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1) When a separation of property was agreed upon in the marriage settlements; or

2) When there has been a judicial separation or property under Article 191.

Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage.

CALIMLIM-CANULLAS V. FORTUN: …if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn out to be better than those in legal union."

Contract of sale of married person to third parties The administration and enjoyment of the community property shall belong to

both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse

to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the common properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.

-------------------------------------------Jurisprudence:G.R. No. L-28771, 31 March 1971Matabuena vs. Cervantes

Facts: Felix Matabuena cohabitated with respondent. During this period, Felix Matabuena donated to respondent a parcel of land. Later the two were married. After the death of Felix Matabuena, his sister, Petitioner, sought the nullification of the donation citing Art. 133 of the Civil Code “Every donation between the spouses during the marriage shall be void.” The trial court ruled that this case was not covered by the prohibition because the donation was made at the time the deceased and Respondent were not yet married and were simply cohabitating.

Issue: WON the prohibition applies to donations between live-in partners.

Held: Yes. It is a fundamental principle in statutory construction that what is within the spirit of the law is as much a part of the law as what is written. Since the reason for the ban on donations between spouses during the marriage is to prevent the possibility of undue influence and improper pressure being exerted by one spouse on the other, there is no reason why this prohibition shall not apply also to common-law relationships. The court, however, said that the lack of the donation made by the deceased to Respondent does not necessarily mean that the Petitioner will have exclusive rights to the disputed property because the relationship between Felix and Respondent were legitimated by marriage..

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C. Special Incapacity (Art. 1491) The following persons cannot acquire by purchase, even at a public or

judicial auction, either in person or through the mediation of another:1. A guardian cannot buy the property of the ward. The guardian is

not actually prohibited from entering into any and all contracts. It is just that he cannot be the buyer of a property of his ward.

2. An agent cannot buy without the consent of the principal a property which he was supposed to sell or administer.

3. The executors and administrators of the estate cannot buy a property which is part of the estate.

4. Public officers, judges, their staff, clerk of court, stenographers and lawyers are prohibited from buying those properties which are the subject of litigation during the pendency of the case

Q: What is the status of the contracts under 1491?A: Prof. Tolentino – voidable

Justice Vitug & Prof. Baviera – voidProf. Pineda & Prof. de Leon – the first 3 are voidable and the last 3 are void.

The better answer is void because these persons are prohibited from entering into these contracts. Under Article 1409, if the contract is prohibited, it is void.

Generally: Aliens are prohibited from acquiring by purchase private lands – Take note “acquiring” which means buying not selling. They can sell. Exceptions / when aliens can buy:

a. Former natural born Filipino citizen. Under the Constitution they are allowed to buy small land which they can use for residential purpose.

b. Another way of acquiring is by succession but this is not a sale

ADDITIONAL NOTES:1) It is immaterial that no damage is suffered by the owner. The contract is void as the law

seeks to prevent said persons from being tempted to take advantage of their position. They occupy a position of trust and confidence in relation to the property under their administration or jurisdiction.

2) Agents cannot buy the property of their principal without the consent of the latter. BROKERS, however, do not come within the prohibition, as their authority consists merely in looking for a buyer or seller, and to bring the latter and his principal together to


JOHN C. ICALIAconsummate the transaction. Of course, after the agency is terminated, the agent can buy the property of the principal, which was formerly under his administration.

3) Although executors and administrators cannot buy the property under their administration, an executor may buy the hereditary rights of an heir to the estate under his administration, because the buyer, in such case, cannot get the share of the heir in the estate until after the administration is ended.

4) With regard to the lawyers, the prohibition does not apply to other properties of the client, nor to assignments of the property formerly in litigation when such assignment will take effect only after final judgment (compensation of lawyers payable on a contingent basis, unless unconscionable).

5) Examples of other persons especially disqualified by law are: (1) aliens purchasing private agricultural lands (Art XII, Secs 3 & 7, Consti); (2) an unpaid seller having a right of lien…(Art 133 par 5) (Baviera)

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G.R. No. 158907, 12 February 2007Olaguer vs. Purugganan

Facts: Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of stock of Businessday Corporation (Businessday) with a total par value of P600,000.00. At the time he was employed with the corporation as Executive Vice-President of Businessday, and President of Businessday Information Systems and Services and of Businessday Marketing Corporation, petitioner, together with respondent Raul Locsin (Locsin) and Enrique Joaquin (Joaquin), was active in the political opposition against the Marcos dictatorship. Anticipating the possibility that petitioner would be arrested and detained by the Marcos military, Locsin, Joaquin, and Hector Holifeña had an unwritten agreement that, in the event that petitioner was arrested, they would support the petitioner’s family by the continued payment of his salary. Petitioner also executed a Special Power of Attorney (SPA), on 26 May 1979, appointing as his attorneys-in-fact Locsin, Joaquin and Hofileña for the purpose of selling or transferring petitioner’s shares of stock with Businessday. During the trial, petitioner testified that he agreed to execute the SPA in order to cancel his shares of stock, even before they are sold, for the purpose of concealing that he was a stockholder of Businessday, in the event of a military crackdown against the opposition. The parties acknowledged the SPA before respondent Emilio Purugganan, Jr., who was then the Corporate Secretary of Businessday, and at the same time, a notary public for Quezon City.

On 24 December 1979, petitioner was arrested by the Marcos military by virtue of an Arrest, Search and Seizure Order and detained for allegedly committing arson. During the petitioner’s detention, respondent Locsin ordered fellow respondent Purugganan to cancel the petitioner’s shares in the books of the corporation and to transfer them to respondent Locsin’s name.

Petitioner also agreed to stipulate that from 1980 to 1982, Businessday made regular deposits, each amounting to P10,000.00, to the Metropolitan Bank and Trust Company

accounts of Manuel and Genaro Pantig, petitioner’s in-laws. The deposits were made on every 15th and 30th of the month. Petitioner alleged that these funds consisted of his monthly salary, which Businessday agreed to continue paying after his arrest for the financial support of his family. After receiving a total of P600,000.00, the payments stopped. Thereafter, respondent Locsin and Fernando went to ask petitioner to endorse and deliver the rest of his stock certificates to respondent Locsin, but petitioner refused.

On 16 January 1986, petitioner was finally released from detention. He then discovered that he was no longer registered as stockholder of Businessday in its corporate books. He also learned that Purugganan, as the Corporate Secretary of Businessday, had already recorded the transfer of shares in favor of respondent Locsin, while petitioner was detained. When petitioner demanded that respondents restore to him full ownership of his shares of stock, they refused to do so.

Petitioner filed a Complaint before the trial court against respondents Purugganan and Locsin to declare as illegal the sale of the shares of stock, to restore to the petitioner full ownership of the shares, and payment of damages. The trial court dismissed the Complaint filed by the petitioner. It ruled that the sale of shares between petitioner and respondent Locsin was valid. On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a perfected contract of sale.

Issue: WON there was a perfected sale.

Held: It is, indeed, a familiar and universally recognized doctrine that a person who undertakes to act as agent for another cannot be permitted to deal in the agency matter on his own account and for his own benefit without the consent of his principal, freely given, with full knowledge of every detail known to the agent which might affect the transaction.

The prohibition against agents purchasing property in their hands for sale or management is, however, clearly, not absolute. It does not apply where the principal consents to the sale of the property in the hands of the agent or administrator.

A.M. Nos. 1302, 1391 and 1543, 26 April 1991Valencia vs. Cabinting

Facts: In 1933, petitioner Paulino Valencia and his wife Romana allegedly bought a parcel of land, where they built their residential house from a certain Serapia Raymundo, an heir of Pedro Raymundo, the original owner of the parcel of land. However, they failed to register the sale or secure a transfer certificate of title in their names. Then, a conference was held in the house of Atty. Jovellanos to settle the dispute between Serapia and the Sps. Valencia. As a result, Serapia was willing to relinquish her ownership if the Valencias could show documents evidencing ownership. Paulino presented a deed of sale written in Ilocano. Serapia claimed that the deed covered a different property. Thus, the parties were not able to settle their differences. Assisted by Atty. Cabanting, Serapia filed a complaint against Paulino for the recovery of possession with damages. The Valencias, on the other hand, engaged the services of Atty. Antiniw, who advised them to present a


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notarized deed of sale instead of the document in Ilocano. For the amount of P200 paid by Paulino to Atty. Antiniw, the latter paid a person who would forge the signature of the alleged vendor. The Pangasinan CFI favored Serapia. While the petition was of appeal, Serapia sold 40 sq. m. to Atty. Jovellanos and the remaining was also sold to her counsel, Atty. Cabanting.

Issue: WON Atty. Cabanting purchased the subject property in violation of Art. 1491 of the Civil Code.

Held: The Court ruled in the affirmative. Art. 1491, NCC, prohibiting the sale to counsel concerned, applies only while the litigation is pending. The thing is said to be in litigation not only if it there is some contest or litigation over it in court, but also from the moment that it becomes to the judicial action of the judge.

In the case at bar, while it is true that Atty. Cabanting purchased the lot after finality of judgment, there was still a certiorari proceeding.In certiorari proceedings, the appellate court may either grant or dismiss the petition. Thus, it is not safe to conclude, for purposes under Art. 1491, NCC, that litigation has terminated when the judgment of the trial court become final while certiorari connected therewith is still in progress. Thus, the purchase of the property by Atty. Cabanting in this case constitutes malpractice in violation of Art. 1491 of the Civil Code and the Canons of Professional Ethics.

A.C. No. 6210, 9 December 2004Ramos vs. Ngaseo

Facts: Sometime in 1998, complainant Federico Ramos went to respondent Atty. Patricio Ngaseo's Makati office to engage his services as counsel in a case involving a piece of land in San Carlos, Pangasinan. On September 16, 1999, complainant went to the respondent's office to inquire about the status of the case. Respondent informed him that the decision was adverse to them because a congressman exerted pressure upon the trial judge. Respondent however assured him that they could still appeal the adverse judgment and asked for the additional amount of P3,850.00 and another P2,000.00 on September 26, 2000 as allowance for research made. Although an appeal was filed, complainant however charges the respondent of purposely failing to submit a copy of the summons and copy of the assailed decision. Subsequently, complainant learned that the respondent filed the notice of appeal 3 days after the lapse of the reglementary period.

On January 29, 2003, complainant received a demand-letter from the respondent asking for the delivery of the 1,000 sq. m. piece of land which he allegedly promised as payment for respondent's appearance fee. In the same letter, respondent also threatened to file a case in court if the complainant would not confer with him and settle the matter within 30 days.

Complainant filed a complaint before the IBP charging his former counsel, respondent Atty. Ngaseo, of violation of the Code of Professional Responsibility for demanding the delivery of 1,000 sq. m. parcel of land which was the subject of litigation.

In a report dated July 18, 2003, IBP Commissioner Rebecca Villanueva-Maala found the respondent guilty of grave misconduct and conduct unbecoming of a lawyer in violation of the Code of Professional Responsibility and recommended that he be suspended from the pr;actice of law for 1 year.

Respondent argues that he did not violate Article 1491 of the Civil Code because when he demanded the delivery of the 1,000 sq. m. of land which was offered and promised to him in lieu of the appearance fees, the case has been terminated, when the appellate court ordered the return of the 2-hectare parcel of land to the family of the complainant.

Issue: WON the respondent violated the prohibition under Article 1491 (5) of the Civil Code.

Held: The Court ruled that even assuming arguendo that such demand for delivery is unethical, respondent's act does not fall within the purview of Article 1491.

Under Article 1491(5) of the Civil Code, lawyers are prohibited from acquiring either by purchase or assignment the property or rights involved which are the object of the litigation in which they intervene by virtue of their profession. The prohibition on purchase is all embracing to include not only sales to private individuals but also public or judicial sales. The rationale advanced for the prohibition is that public policy disallows the transactions in view of the fiduciary relationship involved, i.e., the relation of trust and confidence and the peculiar control exercised by these persons. It is founded on public policy because, by virtue of his office, an attorney may easily take advantage of the credulity and ignorance of his client and unduly enrich himself at the expense of his client. However, the said prohibition applies only if the sale or assignment of the property takes place during the pendency of the litigation involving the client's property. Consequently, where the property is acquired after the termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code attaches.

In the instant case, there was no actual acquisition of the property in litigation since the respondent only made a written demand for its delivery which the complainant refused to comply. Mere demand for delivery of the litigated property does not cause the transfer of ownership, hence, not a prohibited transaction within the contemplation of Article 1491.

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VI. OBLIGATIONS OF THE VENDOR (Art. 1495) The vendor is bound to:

Transfer ownership; and Deliver; as well as Warrant the thing which is the object of the sale. Obligation to take care of the thing sold with the diligence of a good

father of a family prior to delivery. From the time of the perfection up to the time of delivery then there

would be obligation to pay for the expenses for the execution and


JOHN C. ICALIAregistration of the sale and obligation to pay the capital gains tax would be on the seller as a rule.

Obligation to deliver the fruits which is related to the obligation to deliver the thing

1) To preserve the object of sale (Art. 1163)- Every person obliged to give something is also obliged to take care of

it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care.

NOTE: The thing sold should be determinate because if generic (1460, 2nd paragraph) then there is nothing to be taken care of. It will become determinate only upon delivery.Exceptions: There are sales transactions wherein the vendor would not have this obligation:

a. Constructive delivery - brevi manu – There would be no obligation on the part of the seller to take care of the thing from the time of perfection because at the time of perfection, the buyer was already in possession of the thing. Maybe he borrowed the thing. Example: he borrowed the car and he decided to buy it – the thing was already in his possession.

OBLIGATION TO PAY EXPENSES / TAXESThese obligations may be the subject of stipulation. By agreement, it would be the buyer

who will pay xxx Normally, dito hindi natutuloy ang sale dahil hindi magkasundo kung sino magbabayad ng tax.

2) Transfer of Ownership and delivery of the object

To transfer ownership; who can transfer ownership?- Only those who have the right to sell (lis dispodenti).

Owner Agent – because of the authority given. Notary public

in pledge Guardian Liquidators Receivers Sheriff – because of the authority of the court.

Q: May a person sell something which does not belong to him? Would the sale be valid? Would the buyer acquire ownership over the thing sold, if seller does not own the thing?A: Yes. Ownership over the thing sold is not an essential requisite for the sale to be valid. But if the seller does not own the thing, he may have a problem on his obligation to transfer ownership. The problem would be whether or not the buyer would acquire ownership over the thing sold if the person who sold the thing is not the owner.

Q: Who would have the right to sell and therefore they can transfer ownership by way of sale?A: First, is the owner. Even if he is not the owner, he may have the right to sell because:

(1) He was given the authority by the owner. Example: Agent

(2) He may be the owner but he may have the authority of the law to sell, known as “Statutory Power to Sell” (Article 1505). Examples: Notary public in pledge, liquidators, guardians and receivers.

(3) Those who have the authority of the court. Example: Sheriff. Note: it is as if they have the authority of law because not even the judge can validly sell something if it is not consistent with the law.

Q: May a buyer acquire ownership over the thing sold if the seller has no right to sell?A: The answer by way of exception is yes. But the general rule here is under 1505 – the buyer acquires no better title than what the seller had. If the seller is neither the owner nor does he have the authority to sell, the buyer acquires no better title than what the seller had. If his right is only as a lessee that is the most that can be transferred to the buyer. If he has no title then no title can be transferred to the buyer.

Exceptions: (When the buyer can acquire a better title than what the seller had. Even if the seller does not have the right to sell, the buyer may acquire ownership over the thing sold because the law so provides and not because the seller was able to transfer ownership to the buyer.)

1. By Estoppel2. Estoppel by Deed3. Estoppel by Record4. Sale by an Apparent Owner5. Negotiable Document of Title6. Purchases from a Merchant’s Store xxx

a. General rule (Art. 1505-1506, 1547) When the seller is neither the owner nor does he have the authority to sell, the

buyer acquires no better title than what the seller had.

b. Exceptions (where a third person may acquire ownership on the thing he bought even though the seller is not the owner nor does he have the authority to sell) The buyer buys them in good faith for value and without notice of the seller’s

defect of title (Art. 1505).

By Equitable Estoppel (estoppels in pais) – a person is precluded from denying that a third person has authority to sell because of the owner’s acts (Art. 1433).1

Estoppel by deed (technical estoppel) – when the seller who was not the owner at the time of the sale and later acquires title thereto, ownership passes by operation of law (Art. 1434).

Q: A and B co-owners of land sold (sale is verbal) to X their land. X subsequently sold the land to Y. Would Y be considered to have acquired ownership over the land?

A: Under 1434 which is considered as “Estoppel by Deed” (technical estoppel) – when the seller who was not the owner at the time of the sale, acquires ownership, automatically,

1 SIY CONG BIEN V. HSBC: Since plaintiff had voluntarily clothed the person who negotiated the quedans with all the

attributes of ownership and upon which the bank relied, it is estopped to deny that the bank had a valid title to the quedans;JALBUENZA V. LIZARRAGA: Bigelow on Estoppel says: ". . . it is now a well established principle that where the true owner of property, for however short a time, holds out another, or, with knowledge of his own right, allows another to appear, as the owner of or as having full power of disposition over the property, the same being in the latter's actual possession, and innocent third parties are thus led into dealing with some [such] apparent owner, they will be protected." (as cited in Hernaez vs. Hernaez)

because of the authority of the law to sell; statutory power to sell.


JOHN C. ICALIAownership passes to the buyer by operation of law. However, Article 1434 requires delivery to the buyer. And under the facts, 1434 would not apply because:

a) There was no showing there was payment b) No showing that there was delivery of the land to X.It cannot be said that by operation of law, Y likewise acquired ownership by way of estoppel by deed.

Estoppel by record – in case of any testimony given in court.

Jurisprudence: Sale by nephew of the owner of the land. Since the nephew could not deliver the land, the buyer sued the nephew for estafa. For the accused to be acquitted, he asked his uncle to testify that he actually had the authority to sell. When the uncle testified in court, the nephew is acquitted. After acquittal, the buyer demanded from the uncle the delivery of the land. The uncle refused, claiming that “sa totoo land, I did not authorized my nephew”.

Q: Case was filed against the uncle, would that action prosper?

A: SC said yes because he cannot be allowed now to claim that his nephew was not authorize to sell after he testified in court that he gave such authority.

This is estoppel by record which is considered a technical estoppel.

Sale by an apparent owner – a person who disposed the thing as if it was owned by him. Factor’s act – an old name for agent; a third person may acquire ownership

because he may rely on the power of attorney as written. Recording laws – may be a root of a valid title; Cattle Registration Decree, Land

Registration, Property Registration Decree (PD 529). By other provision of law enabling the apparent owner of the goods to dispose

of them as if he was really the owner.

Negotiable Document of Title If goods are covered by a negotiable document of title and it was thereafter negotiated. If the buyer bought it in good faith and for value, he will rotected under the law. He will acquire ownership even if the seller did not have the right to sell.

Example: The seller may have acquired title by violence. Binugbog nya yung owner ng goods. Pero kung negotiable document of title yan and properly negotiated, lalo na kung bearer document of title, then the buyer may acquire ownership even if the seller has no right to sell.

Purchases from a merchant’s store, markets, and fairs -There is no right to recover as long as the buyer bought it in good faith from a merchant’s store (Art 1505)2

Purpose of the exception: 1) To protect innocent purchasers who buy at merchant stores,

market or fair2) To facilitate commercial sales in movables3) To give stability to business transactions

Q: F lost her diamond ring in a hold-up. Later on, this ring was an object of a public sale of one pawnshop. Can F recover the ring from the buyer in that public sale?A: Yes, Article 559 provides that even if the buyer is in good faith so long as the true owner is willing to reimburse the buyer of the price paid in that sale.

Note: Again in 1505, there is no right to recover as long as the buyer bought it in good faith from a merchant’s store, there can be no recovery as a matter of right.

ANLABO NU? Sabi nga ni Atty Zarah, sinadaya na malabo mga provisions para may trabaho ang mga lawyers. So Reconcile 559 and 1505. Sabi ng 1505, Valid sale kapag nabili sa public market and in good faith si buyer. Pero may right din na binibigay si 559 sa true owner (naunlawfully nadprive sa kanyang movable property) which is to recover yun. Pero since in nasa possession na yung ng buyer in good faith, marerecover lang yun ni true owner by reimbursing si buyer. So parang bibilhin ulit yun ni true owner.3

3) To deliver the object; how ownership is effected?- Effected by delivery, whether actual of constructive (Art. 1477)- There can be no transfer of ownership without delivery.

Notes:(a) There may be a period agreed upon by the parties within which the buyer would have to

decide. Even if he failed to signify his acceptance by the mere lapse of the period, he is deemed to have accepted (impliedly accepted) hence, ownership passes to him.

2 SUN BROTHERS V. VELASCO: The policy of the law has always been that, where the rights and interests of a vendor come into clash with that of an innocent buyer for value, the latter must be protected. The rule appears to be a wise and necessary rule not only to facilitate commercial sales on movables but to give stability to business transactions. MASICLAT V. CENTENO: The transaction between Ramon Masiclat and his unknown seller took place on Miranda Street and not in the public market and this is . . . conclusive. Hence, Art. 1505 CC, invoked by the petitioners, has no application.3 DE GARCIA V. CA: Respondent Angelina D. Guevara, having been unlawfully deprived of the diamond ring in question, was entitled to recover it from petitioner Consuelo S. de Garcia who was found in possession of the same. The only exception the law allows is when there is acquisition in good faith of the possessor at a public sale, in which case the owner cannot obtain its return without reimbursing the price. (Cruz v. Pahati; Aznar v. Yapdiangco);REBULLIDA V. BUSTAMANTE: It appearing that the ring in question was lost or was stolen from the place where the lawful owner deposited it, the case squarely falls under Art. 464 of the Civil Code, which provides that the “one who has lost personal property or who has been unlawfully deprived of it may recover it from whoever is possessing it.” The mere fact that the possessor, even in good faith, ad purchased the ring from another person would not bar the right of the owner to recover it once the identity and the owner’s deprivation are established.


JOHN C. ICALIA(b) Even before the lapse of the period, he may be considered to have accepted if he did an

act wherein he would be considered to have adopted the transaction then ownership passed to him.Example: Even if he has 10 days within which to decide but on the 2nd day, he sold the car to another. Obviously, he is deemed to have accepted the thing because he did an act which is inconsistent with the ownership of the seller like he donated or destroyed the thing.

(c) If there is no period agreed upon, the law says if he did not signify his acceptance he will be considered to have accepted after the lapse of a reasonable time. Reasonable time will depend on the circumstances of the sale, purpose of the sale, nature of the thing sold. Example: Perishable goods.

“Delivered” – when placed in the control and possession of the vendee; conveyance of ownership without prejudice to the right of vendor to claim payment of the price4

a) Ways of effecting delivery (Arts. 1494-1501) Actual/real (Art. 1497) – the thing is placed in the control and possession of the

buyer.

Constructive/legal

Tradition instrumental (by public instrument) – execution thereof is equivalent to delivery (Art. 1498 (1)).5

- operates as formal/symbolic delivery- authorizes buyer to use such document as proof of ownership- Symbolic delivery may produce the effect of tradition if

vendor have had such control over the thing sold that at the moment of the sale, its material delivery could have been made

- GENERAL RULE: he who purchases through a public instrument should be deemed a “possessor in fact” and this presumption should give way before proof to the contrary

- A person must be in ACTUAL POSSESSION to be able to transfer CONSTRUCTIVE POSSESSION through public instrument

Tradition symbolical (by delivery of the keys or certain symbols representing the thing or where goods are kept) (Art. 1498 (2)).

Tradition longa manu – there is delivery by mere consent or agreement of the parties (Art. 1499).

4 BEAN V. CADWALLER: Actual manual delivery of an article sold is not essential to the passing of the title thereto (art 1450, Civil Code) unless made so by the terms of the contract or by an understanding of the parties. The parties to the contract may agree when and on what conditions the property in the subject of the contract was passed to the prospective owner5 MASALLO V. CESAR: As Matea Crispino admits, however, that she did not have possession of the land when she executed and delivered her deed to plaintiff, the mere execution and delivery of the deed did not constitute a delivery of possession

If at the time of the sale, possession to the goods cannot be transferred to the buyer. There must be a reason why it cannot be transferred at the time of the sale. This is also known as tradition longa manu.

Example 1: The thing was the subject matter of a lease with a 3 rd person until the expiration of the lease, the thing cannot be delivered.

Example 2: The thing was the subject matter of commodatum. As a rule, period of commodatum has to be respected

Tradition brevi manu – the BUYER was already in possession of the thing sold at the time of the perfection of the sale so he will continue to be in possession after the sale; eg. Property subject to lease was bought by the lessee (Art. 1499).

So dati lessee lang sya that is why he was in possession or maybe depositary lang sya or maybe he was the agent at the time prior to the sale.

Tradition constitutum possessorium – the SELLER will continue to be in the possession of the thing after the sale but no longer as an owner but in another capacity like lessee (Art. 1500).

Dito naman, kabaliktaran ng brevi manu, yung ownership malilipat sa buyer pero possession magtutuloy pa din kay seller.Level down kung baga.Si A may house na inioccupy niya, binenta kay B. Si B na may ari. Pero pinalease ni B kay A, so magtutuloy pa din na doon titira si A, kaso nga lang hindi na as owner kundi lessee na lang. Haaayyy ang sad. Hahaha.

Quasi-tradition (Art. 1501) – delivery of rights, credits or incorporeal property, made by:

o Placing titles of ownership in the hands of the buyer; Example: delivery of the certificate of shares of stocks.

o Allowing buyer to make use of the rights.Example: Sale of shares of stocks → the vendee may not always have the right to exercise his rights under the shares of stocks. Concretely, if there is a stockholders’ meeting, the books of the corporation will be closed for 30 days before the meeting. Thus, if the sale occurred when the books are already closed, no one will be recognized except those registered owners. So if you are the buyer of those stocks, you can only use your right with the consent of the vendor.

-------------------------------------------Jurisprudence:G.R. No. L-19545, 18 April 1975Phil. Suburban Development Corp. vs. Auditor General


JOHN C. ICALIA

Facts: On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines approved in principle the acquisition by the People's Homesite and Housing Corporation (PHHC) of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for relocating the. The Board of Directors of the PHHC passed Resolution No. 700 authorizing the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45/sqm. On December 29,1960, after an exchange of communications, Petitioner Philippine Suburban Development Corporation (PSDC), as owner of the unoccupied portion of the Sapang Palay Estate and the PHHC, entered into a contract embodied in a public instrument entitled "Deed of Absolute Sale”.

It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties, the PHHC acquired possession of the property, with the consent of petitioner, to enable the said PHHC to proceed immediately with the construction of roads. The Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79 from the purchase price to be paid by it to the Philippine Suburban Development Corporation. Said amount represented the realty tax due on the property involved for the calendar year 1961.

Petitioner claimed that it ceased to be the owner of the land in question upon the execution of the Deed of Absolute Sale. It is now claimed in this appeal that the Auditor General erred in disallowing the refund of the real estate tax because aside from the presumptive delivery of the property by the execution of the deed of sale , the possession of the property was actually delivered to the vendee prior to the sale, and, therefore, by the transmission of ownership to the vendee, petitioner has ceased to be the owner of the property involved, and, consequently, under no obligation to pay the real property tax for the year 1961.

Issue: WON the vendor (PSDC) placed the vendee (PHHC) in possession and control over the thing sold even before the date of the sale.

Held: The Court ruled that the vendor (PSDC) placed the vendee (PHHC) in possession and control over the thing sold even before the date of the sale. Under the civil law, delivery (tradition) as a mode of transmission of ownership may be actual (real tradition) or constructive (constructive tradition). When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.

In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties. Such would be the case, for instance, when a certain date is fixed for the purchaser to take possession of the property subject of the conveyance, or where, in case of sale by installments, it is stipulated that until the last installment is made, the title to the property should remain with the vendor, or when the vendor reserves the right to use and enjoy the properties until the gathering of the pending crops, 4 or where the vendor has no control over the

thing sold at the moment of the sale, and, therefore, its material delivery could not have been made.

In the case at bar, there is no question that the vendor had actually placed the vendee in possession and control over the thing sold, even before the date of the sale. The condition that petitioner should first register the deed of sale and secure a new title in the name of the vendee before the latter shall pay the balance of the purchase price, did not preclude the transmission of ownership. In the absence of an express stipulation to the contrary, the payment of the purchase price of the good is not a condition, precedent to the transfer of title to the buyer, but title passes by the delivery of the goods.

-------------------------------------------

b) Special rules on: Sale or return (Art. 1502 (1)) – ownership passes to the buyer on delivery but,

he may revest the ownership in the seller by returning or tendering the goods within the time fixed in the contract or within a reasonable time.

As opposed to a Conditional Sale (where title passes upon full payment or satisfaction of condition passing of legal title), in sale on return, title passes on delivery

Q: Ownership passes upon delivery?A: Yes. However, the buyer is given the right to revest the title back to the seller normally within a certain period.

Example: Clauses in subscription magazine which says that you can return within 30 days without payment.

Sale on approval or trial (Art. 1502 (2)) – ownership passes to the buyer when: he signifies his approval to the seller or does any other act adopting the

transaction; or if he retains the goods without giving notice of rejection, if a time has

been fixed for such return, at the expiration of such time or of a reasonable time.

Sale of specific goods with reserved title/conditional sales (Art. 1503 (1)) – the seller may reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. Ownership is reserved by the seller notwithstanding delivery.

Delivery to carrier; shipping terms -General rule: Delivery to carrier is delivery to the buyer.Exception: Contrary intention appears; implied reservation of ownership under Art. 1503 (1), (2), (3).

COD (Collect On Delivery) – the carrier acts for the seller in collecting the purchase price, which the buyer must pay to obtain possession of the goods.


JOHN C. ICALIA

FOB (Free On Board) – when goods are delivered at the point of shipment, delivery to carrier by placing the goods on vessel is delivery to buyer.

CIF (Cost, Insurance, Freight) – When seller pays for services of the carrier, delivery to

carrier is delivery to the buyer. From the moment the vessel is at the port of to the

goods, there is already delivery to the buyer.

These terms may be used only in connection with fixing the price and will not be construed as fixing the place of delivery to the buyer

Best indication of the intention of parties as to the place of delivery is the manner and place of payment agreed upon by the parties Where price is payable upon proof of shipment, then the buyer agrees to accept

delivery at the point of shipment Where the price is payable only upon arrival of the goods at the point of

destination, then that is the place of delivery to the buyer

Seller not the owner (Art. 1505) – the buyer acquires no better title than the seller had.

Seller’s title is voidable (Art. 1506) – the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller’s defect of title.

-----------------------------------------

JURISPRUDENCEEdu vs.Gomez, 129 SCRA 601;

Duran vs. IAC, 138 SCRA 489

-----------------------------------c) When obligation to deliver arises

The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for the payment has been fixed in the contract

-------------------------------------------Jurisprudence:38 Phil. 404, August 1918Addison vs. Felix

Facts: The defendants-appellees spouses Maciana Felix and Balbino Tioco purchased from plaintiff-appellant A.A. Addison four parcels of land to which Felix paid, at the time of the execution of the deed, the sum of P3,000 on account of the purchase price. She likewise bound herself to the remainder in installments, the first of P,2000 on July 15, 1914, the second of P5,000 thirty days after the issuance to her of a certificate of title under the

Land Registration Act, and further, within ten years from the date of such title, P10 for each cocoanut tree in bearing and P5 for each such tree not in bearing that might be growing on said parcels of land on the date of the issuance of title to her, with the condition that the total price should not exceed P85,000. It was further stipulated that Felix was to deliver to the Addison 25% of the value of the products that she might obtain from the four parcels "from the moment she takes possession of them until the Torrens certificate of title be issued in her favor," and that within 1 year from the date of the certificate of title in her favor, Marciana Felix may rescind the contract of purchase and sale.

In January 1915, Addison , filed suit in the CFI of Manila to compel Felix to pay the first installment of P2,000, demandable, in accordance with the terms of the contract of sale. The defendants Felix and her husband Tioco contended that Addison had absolutely failed to deliver the lands that were the subject matter of the sale, notwithstanding the demands they made upon him for this purpose. The evidence adduced shows Addison was able to designate only two of the four parcels, and more than 2/3 of these two were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts he so occupied. The trial court held the contract of sale to be rescinded and ordered Addison to return to Felix the P3,000 paid on account of the price, together with interest thereon at the rate of 10% per annum.

Issue: WON there is delivery made and a transfer of ownership.

Held: The Court ruled that that the mere execution of the instrument was not a fulfillment of the vendor's obligation to deliver the thing sold, and that from such non-fulfillment arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the price.

The thing is considered to be delivered when it is placed "in the hands and possession of the vendee." It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. Symbolic delivery through the execution of a public instrument is sufficient when there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such are opposed by a third person’s will, then the delivery has not been effected.

G.R. No. L-21998, 10 November 1975Pasagui vs. Villablanca

Facts: Petitioner-appellants Calixto Pasagui and Fausta Mosar filed a complaint with the CFI at Tacloban City, alleging that for and in consideration of P2,800.00 they bought from appellees Eustaquia Bocar and Catalina Bocar a parcel of agricultural land situated in


JOHN C. ICALIA

Hamindangon, Pastrana, Leyte; that the corresponding document of sale was executed, notarized on the same date, and recorded in the Registry of Deeds; that during the first week of February, 1963, defendant spouses Ester T. Villablanca and Zosimo Villablanca, "illegally and without any right, whatsoever, took possession of the above property harvesting coconuts from the coconut plantation thereon, thus depriving plaintiffs" of its possession; that despite demands made by the plaintiffs upon the above-mentioned defendants "to surrender to them the above-described property and its possession" the latter failed or refused to return said parcel of land to the former, causing them damage; and that Eustaquia and Catalina Bocar, vendors of the property, are included defendants in the complaint by virtue of the warranty clause contained in the document of sale.

The trial court issued an order dismissing the complaint for lack of jurisdiction, it appearing from the allegations in the complaint that the case is one for forcible entry which belongs to the exclusive jurisdiction of the Justice of the Peace (now Municipal Court) of Pastrana, Leyte.

Issue: WON petitioner was illegally deprived of his possession of the subject land.

Held: The Court ruled that the complaint does not allege that the plaintiffs were in physical possession of the land and have been deprived of that possession through force, intimidation, threat, strategy, or stealth.

It is true that the execution of the deed of absolute sale in a public instrument is equivalent to delivery of the land subject of the sale. This presumptive delivery only holds true when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. It can be negated by the reality that the vendees actually failed to obtain material possession of the land subject of the sale. It appears from the records of the case at bar that plaintiffs-appellants had not acquired physical possession of the land since its purchase on November 12, 1962. As a matter of fact, their purpose in filing the complaint in Civil Case No. 3285 is precisely to "get the possession of the property."

In the case at bar, no such inference could be made as plaintiffs-appellants had not claimed that they were in actual physical possession of the property prior to the entry of the Villablancas. Moreover, it is evident that plaintiffs-appellants are not only seeking to get the possession of the property, but as an alternative cause of action, they seek the return of the price and payment of damages by the vendors "in case of eviction or loss of ownership" of the said property. It is, therefore, not the summary action of forcible entry within the context of the Rules.

G.R. No. L-31789, 29 June 1972Banzon vs. Cruz

Facts: Sometime in 1952, Maximo Sta. Maria obtained crop loans from the Philippine National Bank (hereinafter referred as the bank). Respondent Associated Insurance & Surety Co., Inc. (hereinafter referred to as Associated) acted as surety of Sta. Maria, filing surety bonds in favor of the bank to answer for prompt repayment of the loans. Petitioner Antonio R. Banzon and Emilio Ma. Naval in turn acted as indemnitors of Associated and

were obligated to indemnify and hold harmless Associated from any liability thus acting as surety of the loan. Sta. Maria failed to pay his obligations to the bank, which accordingly demanded payment from Associated as surety. Instead of paying the bank, Associated filed a complaint with the CFI of Manila against debtor Sta. Maria and indemnitors Banzon and Naval. The CFI rendered judgment ordering Sta. Maria, Banzon and Naval "to pay jointly and severally unto plaintiff for the benefit of the Philippine National Bank".

According to the Banzons' petition at bar, sometime in 1965, even before ownership over the two parcels of land belonging to the Banzons could be consolidated in the name of Associated "in clear collusion and confederation with (respondent) Pedro Cardenas, allowed and permitted the latter to execute and levy one of the two parcels of land for a judgment debt of P5,100.00 (of Associated in favor of Cardenas) 8 notwithstanding that the property in question was worth P130,000.00 more or less, and further notwithstanding the fact that said respondent (Associated) knew the property was merely being held in trust by it for the benefit of the Philippine National Bank and therefore, not being the legal owner thereof, it cannot validly dispose of it in any manner." The Cardenas spouses thereafter filed with the CFI of Rizal a case to secure possession from the Banzons of the lot. The CA rendered judgment dismissing the petition because it found the same to be allegedly "merely a device to prevent the execution of a final judgment by the filing of a new suit based upon the same grounds which have already been interposed and passed upon in the case where the final judgment had already been rendered".

Issue: WON the petitioners are entitled to the possession of the property.

Held: The Court ruled that the petitioners are entitled to a writ restoring the status quo ante. A mandatory writ shall therefore issue commanding respondent court to forthwith restore petitioners to their possession of the lot from which they have been removed by enforcement of said respondent court's enjoined order of demolition and writ of possession.

When Associated nevertheless prematurely and contrary to the intent and condition of the basic 1957 judgment levied in execution on the two Caloocan City lots of Banzon the interest it acquired was clearly impressed with a trust character. Such acquisition of Banzon's properties by Associated was effected, if not through fraud on Associated's part, certainly through mistake and there Associated was "by force of law, considered a trustee of implied trust for the benefit of the person from whom the property comes" by virtue of Article 1456 of the Code — since Associated not having paid nor having been compelled to pay the bank had no right in law or equity to so execute the judgment against Banzon as indemnitor. Had there been no fraudulent concealment or suppression of the fact of such non-payment by Associated or a mistaken notion just assumed without factual basis that Associted had paid the bank and was thus entitled to enforce its judgement against Banzon as indemnitor, the writ for execution of the judgment against Banzon's properties would not been issued.

Furthermore, Associated's conduct, upon being sued by the Philippine National Bank directly with the principal debtor Sta. Maria for collection of the debt 23e and sentenced by the Pampanga court of first instance in 1963 (which it did not appeal) to pay the debt in the much lesser amount of only P15,446.44, excluding interests, in not so discharging


JOHN C. ICALIA

its liability notwithstanding that it had already executed its 1957 judgment against Banzon as indemnitor and taken in execution Banzon's two properties, was indeed rank fraud. Associated therefore stands legally bound by force of law to now discharge its implied trust and return Banzon's properties to him as their true and rightful owner.

G.R. No. 80298, 26 April 1990EDCA Publishing & Distributing Corp. vs. Santos

Facts: On October 5, 1981, a person identifying himself as Professor Jose Cruz placed an order by telephone with the petitioner company for 406 books, payable on delivery. EDCA prepared the corresponding invoice and delivered the books as ordered, for which Cruz issued a personal check covering the purchase price of P8,995.65. On October 7, 1981, Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying the seller's ownership from the invoice he showed her, paid him P1,700.00. Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before clearing of his first check, made inquiries with the De la Salle College where he had claimed to be a dean and was informed that there was no such person in its employ. Further verification revealed that Cruz had no more account or deposit with the Philippine Amanah Bank, against which he had drawn the payment check. EDCA then went to the police, which set a trap and arrested Cruz. On the night of the same date, EDCA sought the assistance of the police which forced their way into the store of the private respondents and threatened Leonor Santos with prosecution for buying stolen property.

It is the contention of the petitioner that the private respondents have not established their ownership of the disputed books because they have not even produced a receipt to prove they had bought the stock.

Issue: WON the petitioner was unlawfully deprived of its movable property.

Held: The Court ruled against the petitioner. The argument that the private respondents did not acquire the books in good faith has been dismissed by the lower courts, and the Court agrees. Leonor Santos first ascertained the ownership of the books from the EDCA invoice showing that they had been sold to Cruz, who said he was selling them for a discount because he was in financial need. Private respondents are in the business of buying and selling books and often deal with hard-up sellers who urgently have to part with their books at reduced prices. To Leonor Santos, Cruz must have been only one of the many such sellers she was accustomed to dealing with. It is hardly bad faith for anyone in the business of buying and selling books to buy them at a discount and resell them for a profit.

The petitioner argues that it was, because the impostor acquired no title to the books that he could have validly transferred to the private respondents. Its reason is that as the payment check bounced for lack of funds, there was a failure of consideration that nullified the contract of sale between it and Cruz.

The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration. According to the Civil Code:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.

xxx xxx xxxArt. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.

It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold shall not pass to the buyer until full payment of the purchase only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the purchase price has not yet been paid.

Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another.

Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by the private respondents to the books.

One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to be interpreted in the manner suggested by the petitioner. A person relying on the seller's title who buys a movable property from him would have to surrender it to another person claiming to be the original owner who had not yet been paid the purchase price therefore. The buyer in the second sale would be left holding the bag, so to speak, and would be compelled to return the thing bought by him in good faith without even the right to reimbursement of the amount he had paid for it. It would certainly be unfair now to make the private respondents bear the prejudice sustained by EDCA as a result of its own negligence. We cannot see the justice in transferring EDCA's loss to the Santoses who had acted in good faith, and with proper care, when they bought the books from Cruz. It is clear that its remedy is not against the private respondents but against Tomas de la Peña, who has apparently caused all this trouble. The private respondents have themselves been unduly inconvenienced, and for merely transacting a customary deal not really unusual in their kind of business. It is they and not EDCA who have a right to complain.

G.R. No. L-66944, 13 November 1989Alliance Tobacco Corporation vs. Philippine Virginia Tobacco


JOHN C. ICALIA

Facts: In June 1963, PVTA entered into a merchandising loan agreement with the petitioner in the amount of P25,500.00 for the purchase of flue-cured Virginia tobacco from bona fide Virginia tobacco former-producers. The following month, petitioner shipped to the Farmers’ Virginia Tobacco Redrying (FVTR) 96 bales of tobacco weighing 4,800 kilos covered by Guia No. 1 and 167 bales weighing 8,350 kilos covered by Guia No. 2. After several days, the grading of the plaintiffs tobacco took place but only 89 bales from Guia No. 2 were graded, weighed and accepted. The remaining bales of tobacco in Guia No. 2 and the whole of Guia No. 1 were not graded and weighed because after grading and weighing 89 bales of Guia No. 2, some officers and employees in the premises of defendant FVTR asked money for the separate grading and weighed of the un-graded and un-weighed tobacco bales. Unfortunately, the remaining un-graded and un-weighed 174 bales with a total value of P28,382 were lost while they were in the possession of the FVTR. Having learned of such loss in 1965, petitioner demanded for its value and the application of the same to its merchandising loan with PVTA but both the latter and the FVTR refused to heed said demands.

Consequently, petitioner filed in the then Court of First Instance of La Union a complaint against PVTA and FVTR praying that the two defendants be ordered to pay it P4,443 representing the value of the 89 bales which were weighed, graded and accepted by the defendants, P28,382.00 representing the value of the lost bales of tobacco and/or that the said amount be applied to its loan with PVTA. The CFI ruled that the PVTA should not be held responsible for the lost bales of tobacco because they were not yet properly graded and weighed and the IAC affirmed.

Issue: WON there is delivery of the goods to the vendee which will result in a perfected contract of sale.

Held: The Court ruled that since PVTA had virtual control over the lost tobacco bales, delivery thereof to the FVTR should also be considered effective delivery to the PVTA.

The Civil Code provides that ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. 19 There is delivery when the thing sold is placed in the control and possession of the vendee. 20 Indeed, in tobacco trading, actual delivery plays a pivotal role.

The Court would have found merit in respondent PVTA's contention that the contract of sale could not have been perfected pursuant to Article 1475 of the Civil Code because to determine the price of the tobacco traded, the shipment should first be inspected, graded and weighed, we find said contention misplaced herein. A strict interpretation of the provision of Article 1475 may result in adverse effects to small planters who would not be paid for the lost products of their toil. Such situation was what the ruling in PVTA vs. De los Angeles sought to avoid.

-------------------------------------------

C) Other rules on delivery: Sale of real property by unit of measure or number (Art. 1539-

1541) – obligation to deliver the thing sold includes that of

placing in the control of the vendee all that is mentioned in the contract.

If the sale of real estate should be made with a statement of its area at the rate of a certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee all that may have been stated in the contract if the vendee should demand.

If not possible, the vendee may choose either to reduce the price proportionally or to rescind the contract provided that the lack in the area be not less than 1/10 of that stated.

If there is a greater area of immovable than that stated in the contract, the vendee may accept the area included in the contract and reject the rest.

-------------------------------------------Jurisprudence:G.R. No. L-16394, 17 December 1966Sta. Ana, Jr. vs. Hernandez

Facts: The petitioners herein, spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo, owned a parcel of land. On 28 May 1954, they sold two (2) separate portions of the land for P11,000.00 to the herein respondent Rosa Hernandez. After the sale, the petitioners-spouses caused the preparation of a subdivision plan which was approved by the Director of Lands. Rosa Hernandez, however, unlike the previous vendees, did not conform to the plan and refused to execute an agreement of subdivision and partition for registration with the Register of Deeds of Bulacan and she, likewise, refused to vacate the areas that she had occupied. Instead, she caused the preparation of a different subdivision plan, which was approved by the Director of Lands. Herein petitioners-spouses filed suit against respondent Rosa Hernandez in the CFI of Bulacan claiming that said defendant was occupying an excess of 17,000 square meters in area of what she had bought from them. Defendant Rosa Hernandez, on the other hand, claimed that the alleged excess was part of the areas that she bought.

The CFI ordered Hernandez to vacate the excess portions. On appeal, the CA dismissed petitioner’s complaint and ruled that Hernandez owned the excess portions. It based its decision on the description of the land on the contract as well as to the lump sum price indicated.

Issue: WON the defendant owns the excess portion when the description of the land in the contract was not specific and definite.

Held: The Court ruled that the sale was made by unit of measure at a definite price for each unit.


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The ruling of the Supreme Court of Spain, in construing Article 1471 of the Spanish Civil Code is highly persuasive that as between the absence of a recital of a given price per unit of measurement, and the specification of the total area sold, the former must prevail and determines the applicability of the norms concerning sales for a lump sum.

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Sale of real estate made for a lump sum (Art. 1542) – there shall be no increase or decrease of the price, although there be a greater or lesser areas or number than that stated in the contract.

Same rule shall be applied when 2 or more immovables are sold for a single price

If besides the boundaries, its area or number is designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries even when it exceeds the area or number specified in the contract.

Reduction of the price in proportion to what is lacking in the area or number

Rescission of the contract.

-------------------------------------------.R. No. 108515, 16 October 1995Balantakbo vs. Court of Appeals

Facts: The land in question had been purchased by the Sumaya spouses (predecessor of private respondent Laguna Agro-Industrial Coconut Cooperative, Inc./LAGUNA) from Consuelo Vda. de Balantakbo (mother of petitioner Luis Balantakbo and Sancho Balantakbo), the sale being evidenced by a deed and that some 20 years later, or on March 8, 1975, the seller's heirs, intruded into the land and harvested the coconuts found therein. In their answer, the Balantakbos denied knowledge of the sale and alleged that the land claimed sued for was different from that owned and held by them.

The RTC rendered judgment in favor of the Balantakbos. dismissing LAGUNA's complaint, upholding the former's theory of the case and ruling that what was contemplated in the descriptive words "more or less" immediately following the stated area of 2,000 square meters in the description of the land was construable as referring only to a "slight difference" in said area, 2 not to a difference as large as 4,870 square meters, or more than double the 2,000 square meters actually stated and intended to be sold. The CA, however, declared LAGUNA the owner of the entire land.

Issue: Whether the area described or the actual boundaries of the land prevail in case of conflict.

Held: The Court ruled, citing the case of Dichoso, that in a contract of sale of land in mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient that its extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial.

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Rules in case of double sale (Art. 1544) – If the same thing be sold to different vendees,

ownership shall be transferred to the one who may have first taken possession in good faith if it should be a movable property.

If it is an immovable, to the one who first recorded the sale in the Registry of Property in good faith.

Should there be no inscription, ownership shall pertain to the person who in good faith was first in the possession; and in the absence thereof, one who presents the oldest title in good faith.

-------------------------------------------Jurisprudence:G.R. No. L-20046, 27 March 1968Paylago vs. Jarabe

Facts: The entire lot involved in this suit was originally covered by Homestead Patent issued on June 7, 1920 under Act No. 926 and later under OCT No. 251 of the Registry of Deeds of Mindoro, issued on June 22, 1920 in the name of Anselmo Lacatan. After the death of Anselmo Lacatan, TCT No. T-728 (which cancelled OCT No. 251) was issued in the name his two sons and heirs, Vidal and Florentino Lacatan. Vidal Lacatan died on August 27, 1950. Vidal Lacatan's heirs, namely, Maximo, Tomas and Lucia Lacatan, executed a deed of sale in favor of the spouses Romeo Paylago and Rosario Dimaandal, plaintiffs-petitioners herein, over a portion of the entire lot under TCT No. T-728. When Florentino Lacatan also died, leaving as his heirs his widow and three children, the said children of Florentino Lacatan likewise executed a deed of sale in favor of the same vendees over another portion of the same lot. By virtue of the registration of the two deeds of sale, a new TCT No. T-4208 covering the total area of 6.7908 hectares was issued in favor of plaintiffs-petitioners, the Paylago spouses. A subsequent subdivision survey for the purpose of segregating the two aforementioned portions of land described in the deeds as well as in the new TCT No. T-4208, however, disclosed that a portion of the total area purchased by plaintiffs-petitioners and indicated in the sketch at a point marked was being occupied by defendant-respondent. Hence, the action to recover possession and ownership of the said portion.

Remedies of the vendee for the failure of the vendor to deliver what was stipulated.


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The lower court held that plaintiffs-petitioners were not purchasers in good faith and, accordingly, rendered judgment in favor of defendant-respondent, declaring the latter as owner of the land in question with the right to retain possession of the same. The decision was affirmed in toto by the Court of Appeals.

Issue: Whether the registered buyer or the prior but unregistered purchaser has the better right over the real property.

Held: The Court ruled that as between two purchasers, the one who has registered the sale in his favor, in good faith, has a preferred right over the other who has not registered his title, even if the latter is in the actual possession of the immovable property. Indeed, the foregoing principle finds concrete bases in the pertinent provisions of the New Civil Code, Article 1544, providing that if the same immovable property should have been sold to different vendees, "the ownership shall belong to the person acquiring it who in good faith first recorded it in the registry of property."

There is no question that the sales made in favor of plaintiffs-petitioners were registered while the alleged sale executed in favor of defendant-respondent was not. Applying the foregoing principle of law to the instant case, it is now contended by plaintiffs-petitioners that their certificate of title must prevail over defendant-respondent, and that the courts below correspondingly committed error in deciding the case to the contrary.

But there is more than meets the eye in the case at bar. While plaintiffs-petitioners have a registered title, it cannot be denied that their acquisition and subsequent registration were tainted with the vitiating element of bad faith. It was so found by both the Court of First Instance and the Court of Appeals, and their finding is conclusive upon us.

G.R. No. L-19248, 28 February 1963Hanopol vs. Pilapil(Art. 1544 do not apply to unregistered lands)

Facts: Appellant Hanopol claims ownership of the unregistered land by virtue of a series of purchases effected in 1938 by means of private instruments, executed by the former owners Teodora, Lucia, Generosa, Sinforosa and Isabelo, all surnamed Siapo. Additionally, he invokes in his favor a decision rendered by the CFI of Leyte on a complaint he filed on June 16, 1948, against the same vendors, who, according to his own averments, took possession of the said property in December, 1945 through fraud, threat and intimidation, pretending falsely to be the owners thereof and ejecting the tenants of Hanopol thereon, and since then had continued to possess the land. On the other hand, appellee Pilapil asserts title to the property on the strength of a duly notarized deed of sale executed in his favor by the same owners which deed of sale was registered in the Registry of Deeds of Leyte under the provisions of Act No. 3344.

Issue: WON the right of the first buyer who did not register the sale cannot be prejudiced by the registration of the second sale.

Held: The Court ruled that the proviso in Act No. 3344 does not seem to justify Hanopol’s contention. If his theory is correct, then the second paragraph of Article 1544 of the New Civil Code (formerly Article 1473 of the old Code) would have no application at all except to lands or real estate registered under the Spanish Mortgage Law or the Land Registration Act. Such a theory would thus limit the scope of that codal provision. But even if the Court adopt this latter view, that is, that Article 1544 (formerly Article 1473) only applies to registered land, the Court still do not agree with the appellant that by the mere fact of his having a previous title or deed of sale, he has acquired thereby what is referred to in Act No. 3344 as the "better right" that would be unaffected by the registration of a second deed of sale under the same law. Under such theory, there would never be a case of double sale of the same unregistered property.

G.R. No.109410, 28 August 1996Balatbat vs. Court of Appeals

Facts: Aurelio A. Roque filed a complaint for partition against Corazon Roque, Alberto de los Santos, Feliciano Roque, Severa Roque and Osmundo Roque before the then CFI of Manila where the said court rendered a decision in favor of plaintiff Aurelio A. Roque. Aurelio A. Roque sold his 6/10 share in T.C.T. No. 135671 to spouses Aurora Tuazon-Repuyan and Jose Repuyan as evidenced by "Deed of Absolute Sale" where the latter caused the annotation of her affidavit of adverse claim on the Transfer Certificate of Title No. 135671. On August 20, 1980, Aurelio A. Roque filed a complaint for "Rescission of Contract" against spouses Aurora Tuazon-Repuyan and Jose Repuyan before the CFI of Manila. The complaint is grounded on spouses Repuyan's failure to pay the balance of P45,000.00 of the purchase price.

Meanwhile, a deed of absolute sale was executed on February 4, 1982 between Aurelio S. Roque, Corazon Roque, Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat, married to Alejandro Balatbat. Clara Balatbat filed a motion for the issuance of a writ of possession which was granted by the trial court on September 14, 1982 "subject, however, to valid rights and interest of third persons over the same portion thereof, other than vendor or any other person or persons privy to or claiming any rights or interests under it".

Petitioner Clara Balatbat and her husband, Alejandro Balatbat filed the instant complaint for delivery of the owners duplicate copy of T.C.T. No. 135671 against private respondents Jose Repuyan and Aurora Repuyan. The RTC rendered a decision dismissing the complaint and the CA affirmed the decision appealed from but with modifications.

Issue: WON there is a double sale.

Held: The Court ruled that this is a case of double sale contemplated under Article 1544 of the New Civil Code.

This is an instance of a double sale of an immovable property hence, the ownership shall vests in the person acquiring it who in good faith first recorded it in the Registry of Property. Evidently, private respondents Repuyan's caused the annotation of an adverse


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claim on the title of the subject property denominated as Entry No. 5627/T-135671 on July 21, 1980. The annotation of the adverse claim on TCT No. 135671 in the Registry of Property is sufficient compliance as mandated by law and serves notice to the whole world.

Petitioner filed a notice of lis pendens only on February 2, 1982. Accordingly, private respondents who first caused the annotation of the adverse claim in good faith shall have a better right over herein petitioner. Moreover, the physical possession of herein petitioners by virtue of a writ of possession issued by the trial court on September 20, 1982 is "subject to the valid rights and interest of third persons over the same portion thereof, other than vendor or any other person or persons privy to or claiming any rights to interest under it." As between two purchasers, the one who has registered the sale in his favor, has a preferred right over the other who has not registered his title even if the latter is in actual possession of the immovable property. Further, even in default of the first registrant or first in possession, private respondents have presented the oldest title. Thus, private respondents who acquired the subject property in good faith and for valuable consideration established a superior right as against the petitioner.

Caram vs. LauretG.R. No. L-28740

FACTS: On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by OCT No. 3019 in favor of Claro Laureta, plaintiff, the respondent herein. The deed of absolute sale in favor of the plaintiff was not registered because it was not acknowledged before a notary public or any other authorized officer. Since June 10,1945, the plaintiff Laureta had been and is in continuous, adverse and notorious occupation of said land, without being molested, disturbed or stopped by any of the defendants or their representatives. In fact, Laureta had been paying realty taxes due thereon and had introduced improvements worth not less than P20,000.00 at the time of the filing of the complaint. On May 5, 1947, the same land covered by OCT No. 3019was sold by Marcos Mata to defendant Fermin Z. Caram, Jr., petitioner herein. The deed of sale in favor of Caram was acknowledged before Atty. Abelardo Aportadera. On December 9, 1947, the second sale between Marcos Mata and Fermin Caram, Jr. was registered with the Register of Deeds. On the same date, Transfer Certificate of Title No.140 was issued in favor of Fermin Caram Jr.The defendant Fermin Caram Jr. claimed that he has no knowledge or information about the previous encumbrances, transactions, and alienations in favor of plaintiff until the filing of the complaints.

ISSUE: Whether or not the knowledge petitioner of a prior unregistered sale of a titled property attributable to petitioner and equivalent in law of registration of sale.

HELD: Yes. There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased the property of Mata in bad faith. Applying the principle of agency, Caram as principal, should also be deemed to have acted in bad faith. Since Caram was a registrant in bad faith, the situation is as if there was no registration at all. A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. Laureta was first in possession of the property. He is also a possessor in good faith. It is true that Mata had alleged that the deed of sale in favor of Laureta was

procured by force. Such defect, however, was cured when, after the lapse of four years from the time the intimidation ceased, Marcos Mata lost both his rights to file an action for annulment or to set up nullity of the contract as a defense in an action to enforce the same

Tañedo vs. CA, January 22, 1996

FACTS: Lazaro Tañedo executed a deed of absolute sale in favor of Ricardo Tañedo and Teresita Barrera in which he conveyed a parcel of land which he will inherit. Upon the death of his father he executed an affidavit of conformity to reaffirm the said sale. He also executed another deed of sale in favor of the spouses covering the parcel of land he already inherited. Ricardo registered the last deed of sale in the registry of deeds in their favor.

Ricardo later learned that Lazaro sold the same property to his children through a deed of sale.

ISSUE: WON the Tañedo spouses have a better right over the property against the children of Lazaro Tañedo.

HELD: Since a future inheritance generally cannot be a subject of a contract, the deed of sale and the affidavit of conformity made by Lazaro has no effect. The subject of dispute therefore is the deed of sale made by him in favor of spouses Tañedo and another to his children after he already legally acquired the property.

Thus, although the deed of sale in favor of private respondents was later than the one in favor of petitioners, ownership would vest in the former because of the undisputed fact of registration. On the other hand, petitioners have not registered the sale to them at all.

Petitioners contend that they were in possession of the property and that private respondents never took possession thereof. As between two purchasers, the one who registered the sale in his favor has a preferred right over the other who has not registered his title, even if the latter is in actual possession of the immovable property.

Tanongon vs. Samson382 SCRA 130

FACTS: Felicidad Samson, Casiano A. Osin, Alberto Belbes and Luisito Venus were employees of CAYCO Marine Service, which is engaged in the business of hauling oil, owned and operated by Iluminada Cayco OLIZEN. They filed a complaint against CAYCO and OLIZON for illegal dismissal, underpayment of wages, non-payment of holiday pay,rest day pay and leave pay. The labor arbiter dismissed the complaint for lack of


JOHN C. ICALIA

merit, but was reversed by the NLRC on appeal. CAYCO andOLIZON sought reconsideration of the NLRC’s decision but it was denied. Likewise, on appeal to the SupremeCourt through a petition for certiorari was likewise denied for failure to establish grave abuse of discretion on thepart of NLRC. The decision of the NLRC became final and executory on April 29, 1997. A writ of execution wasissued directing the NLRC sheriff to collect from CAYCO and OLIZON the amount computed by the NLRC Research and Investigation Unit to be awarded to the complainants. A notice of levy/sale on execution of personal property was issued and thereafter, on August 8, 1997 the motor tanker of CAYCO and OLIZEN was seized to be sold at public auction. However, Dorotea TANONGON filed a third-party claim before the labor arbiter alleging that she was the owner of the subject motor tanker for having acquired the same from OLIZEN on July 29, 1997 for a consideration of 1,100,000. The labor arbiter dismissed such claim for lack of merit. It was found that the Deed of Absolute Sale was executed on July 29, after the decision became final and executor on April 29. The sale had been entered into to defraud them. But on appeal to NLRC, such decision was reversed because on two grounds: (1) the power of the NLRC sheriff to execute judgments extended only to properties unquestionably belonging to the judgment debtor. In this case, the ownership of the property was in the name of TANONGAN. Hence, the vessel was questionably the property of CAYCO; (2) Under Article 1387 of the Civil Code, alienations of property in the fraud of creditors would give rise only to rescissible contracts. Thus, a judicial rescission was required to disregard such third-party complaint. The decision of the NLRC was reversed by the Court of Appeals ruling that judicial recission was not necessary. It is evident that such sale was done to defraud, to overcome the enforcement of the Writ of Execution, such sale was simulated or a fictitious transfer, in which no independent judicial action was necessary to invalidate the sale. TANONGAN is not a buyer in good faith for the sale was hastily concluded and the tanker and the necessary documents were immediately delivered to the new owner. Such circumstances should put a reasonable person on guard. Also, such power of the NLRC to enforce its final judgment, order or award and to take such measures under extant laws as may be necessary to ensure compliance with its decision was authorized under the provisions of Article 224 (a & b)

ISSUES:(1) Whether or not Dorotea M. TANONGAN is a buyer in good faith and for value (2) Whether or not the CA acted with grave abuse of discretion amounting to lack or in excess of jurisdictionin deciding against TANONGAN.

RULINGS:

(1) No. Tanongan is a buyer in bad faith. It is evident that the judgment favoring the complainants as affirmed by the Supreme Court and the issuance of the Writ of Execution was done before the sale of the motor tanker on July 29, 1997. The CA correctly ruled that the act of OLIZON was an attempt to evade payment and that TANONGAN obviously got word of the Writ. Despite such knowledge, she still bought the tanker ten days before it was levied. It is also more that coincidental that the purchase price for the tanker was P1.1M and the debt to be awarded amounted to P1,192,422.55. “A purchaser in good faith or an innocent purchaser for value is one who buys property and pays a full and fair price for it at the time of the purchase or before any notice of some other person's claim on or interest in it.14 We emphasize that one cannot close one's eyes to facts that should put a reasonable person on guard and still claim to have acted in good faith. Petitioner

should have inquired whether Olizon had other unsettled obligations and encumbrances that could burden the subject property. 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 its creditors.”

(2) No. The CA is correct. “The CA held, in overruling the NLRC, that the Commission possessed, under Article224 (a and b),16 powers necessary to implement and enforce the latter's final judgments, decisions, orders and awards. The appellate court ruled further that the disputed contract was not merely rescissible; it was simulated or fictitious and, thus, void ab initio. We agree with the Court of Appeals. A third-party claim on a levied property does not automatically prevent execution. Under Rule 39 of the Revised Rules of Court, execution is a remedy afforded by law for the enforcement of a judgment, its object being to obtain satisfaction of the decision on which the writ is issued.17 In executing a money judgment against the property of the obligor, the sheriff shall levy on all properties belonging to the judgment debtor as is amply sufficient to satisfy the decision and the costs; and shall sell the same, paying to the judgment creditor as much of the proceeds as will satisfy the amount of the debt and costs. Sheriffs who levy upon properties other than those of the judgment debtors are acting beyond the limits of their authority. When a third-party claim is filed, the sheriff is not bound to proceed with the levy of the property unless the judgment creditor or the latter's agent posts an indemnity bond against the claim. Where the bond is filed, the remedy of the third-party claimant is to file an independent reivindicatory action against the judgment creditor or the purchaser of the property at public auction. The NLRC should not have automatically lifted the levy and restrained execution, just because a third-party claim had been filed. Further, judicial rescission is not necessary in the case at bar. The NLRC lifted the levy on the subject property, ruling that its sheriff could execute its judgments only on properties "unquestionably belonging to the judgment debtor." It observed that the Certificate of Ownership over the disputed vessel was in the name of the third-party claimant, herein petitioner. Petitioner's claim of ownership over the disputed tanker is not supported by the evidence on record. The Maritime Industry Authority (Marina) administrator wrote the parties in two separate letters, which said that the registration of the disputed vessel under petitioner's name had not been effected, and that the Certificates of Ownership and Vessel Registry covering the motor tanker M/T Petron 7-C had not been released. The reasons were Marina's receipt of the Entry of Judgment issued by the Supreme Court on April 29, 1997, and the Notice of Levy/Sale on Execution of Personal Property covering the subject vessel.22 Under Article 573 of the Code of Commerce, the acquisition of a vessel must appear on a written instrument, which shall not produce any effect with respect to third persons if not inscribed in the Registry of Vessels. Insofar as third persons like herein respondents were concerned, the ownership of the disputed vessel remained with Olizon and CAYCO; thus, the CA correctly held that the NLRC could proceed with the levy and the sale on execution.

Consolidated Rural Bank vs. CA 17 January 2005


JOHN C. ICALIA

FACTS: The Madrid brothers were the registered owners of Lot A situated in Isabela.

Said lot was subdivided into several lots. Rizal Madrid sold part of his share identified lot A-7 to Gamiao and Dayag by virtue of a Deed of Sale, to which his brothers offered no objection as evidenced by their Joint Affidavit .The deed of sale was not registered with the ORD of Isabela. However, Gamiao and Dayag declared the property in their names on a Tax Declaration. Gamiao and Dayag sold the subject southern half of lot to Teodoro dela Cruz, and the northern half to Hernandez. Thereupon, Teodoro dela Cruz and Hernandez took possession of and cultivated the portions of the property respectively sold to them (Later Restituto Hernandez donated the northern half to his daughter. The children of Teodoro dela Cruz continued possession of the southern half after their father’s death.) In a Deed of Sale the Madrid brothers conveyed all their rights and interests over lot A-7 to Marquez which the former confirmed. The deed of sale was registered with the ORD of Isabela. Subsequently, Marquez subdivided lot A-7 into eight (8) lots. On the same date, Marquez and his spouse, Mercedita Mariana, mortgaged 4 lots to the Consolidated Rural Bank, Inc. of Cagayan Valley (hereafter, CRB) to secure a loan. These deeds of real estate mortgage were registered with the ORD. As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the mortgages in its favor and the lots were sold to it as the highest bidder. The Heirs-now respondents filed a case for reconveyance and damages for the southern portion of Lot No. 7036-A (hereafter, the subject property) against Marquez and CRB. The RTC handed down a decision in favor of Marquez. The Heirs interposed an appeal with the CA, which upheld the claim of the Heirs. Hence, the instant CRB petition.

ISSUE: WON Art. 1544 of the Civil Code (double sale) applicable in this case

HELD: NO.

The petition is denied, and the decision as modified is affirmed. Like the lower court, the appellate court resolved the present controversy by applying the rule on double sale provided in Article 1544 of the Civil Code. They, however, arrived at different conclusions. The RTC made CRB and the other defendants win, while the Court of Appeals decided the case in favor of the Heirs.

ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. The provision is not applicable in the present case. It contemplates a case of double or multiple sales by a single vendor. 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. In the case at bar, the subject property was not transferred to several purchasers by a single vendor. In the first deed of sale, the vendors were Gamiao and Dayag whose right to the subject property originated from their acquisition thereof from Rizal Madrid with the conformity of all the other Madrid brothers. On the other hand, the vendors in the other or later deed were the Madrid brothers but at that time they were no longer the owners since they had long before disposed of the property in favor of Gamiao and Dayag.

In a situation where not all the requisites are present which would warrant the application of Art. 1544, the principle of prior tempore, potior jure or simply “he who is first in time is preferred in right, should apply.” The only essential requisite of this rule is priority in time; in other words, the only one who can invoke this is the first vendee. Undisputedly, he is a purchaser in good faith because at the time he bought the real property, there was still no sale to a second vendee. In the instant case, the sale to the Heirs by Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to the sale by the Madrid brothers to Marquez. The Heirs also had possessed the subject property first in time. Thus, applying the principle, the Heirs, without a scintilla of doubt, have a superior right to the subject property. Moreover, it is an established principle that no one can give what one does not have¾nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally.53 In this case, since the Madrid brothers were no longer the owners of the subject property at the time of the sale to Marquez, the latter did not acquire any right to it.

Dela Merced vs. GSIS365 SCRA 1

FACTS: This case involves five registered parcels of land located within the Antonio Subdivision, Pasig City Lots 6, 7, 8, and 10 of Block 2 and Lot 8 of Block 8 (subject properties). These lots were originally owned by, and titled in the name of, Jose C. Zulueta (Zulueta), as evidenced by Transfer Certificate of Title (TCT) No. 26105 which contains several lots other than the subject properties within the Antonio Subdivision.

Later, the Zulueta spouses mortgaged several lots contained in TCT No. 26105 to the GSIS, which eventually foreclosed on the mortgaged properties, including the subject properties. Upon consolidation of GSISs ownership, TCT No. 26105 in Zuluetas name was cancelled, and TCT No. 23554 was issued in GSISs name.

Upon learning of the foreclosure, petitioners predecessor, Francisco Dela Merced (Dela Merced), later on substituted by his heirs, filed a complaint praying for the nullity of the GSIS foreclosure on the subject properties (Lots 6, 7, 8, and 10 of Block 2 and Lot 8 of Block 8) on the ground that he, not the Zuluetas, was the owner of these lots at the time of the foreclosure. Dela Merced also impleaded Victor and Milagros Manlongat, who were claiming Lot 6, Block 2 by virtue of a sale executed by the GSIS in their daughters


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(Elizabeth Manlongat) favor. Dela Merced argued that, due to the nullity of GSISs foreclosure over the subject properties, it had no ownership right that could be transferred to Elizabeth Manlongat.

After a protracted litigation, the SC rendered a Decision in the petitioners favor and nullified GSISs foreclosure of the subject properties because these lots were never part of its mortgage agreement with the Zulueta spouses. Pursuant to the finality of the Decision, petitioners filed a Motion for Execution which GSIS opposed on the basis of Section 39 of the GSIS Act of 1997 (RA 8291 which allegedly exempts GSIS funds and properties from attachment, garnishment, execution, levy and other court processes. A writ of execution was finally issued, however, first by the RTC and then by the CA. The GSIS filed a petition for review before the SC which was denied by the latter.

After the resolution of the issue of GSISs exemption, petitioners encountered more problems with the execution of the Decision. According to the RD of Pasig City, Policarpio Espenesin, he could not cancel the titles of GSIS over Lots 7 and 8 because it no longer had title over these two lots and had already conveyed the same to two other persons. Hence, the RD claimed that the writ of execution must first be modified to include the cancellation of derivative titles of the GSIS title.

ISSUES:

I. Whether the GSIS can still raise the issue of exemption

II. Whether a final and executory judgment against GSIS and Manlongat can be enforced against their successors-in-interest or holders of derivative titles

III. Whether an order to cancel title to a particular property includes an order to provide technical descriptions and segregate it from its mother title

HELD:

(1) The issue of GSISs alleged exemption under RA 8291 had been finally decided against when this Court denied GSISs petition for review. GSISs attempt to resurrect the same issue by interjecting the same in this proceeding is barred by the principle of "law of the case," which states that "determinations of questions of law will generally be held to govern a case throughout all its subsequent stages where such determination has already been made on a prior appeal to a court of last resort."

(2) A notice of lis pendens is an announcement to the whole world that a particular real property is in litigation, serving as a warning that one who acquires an interest over said property does so at his own risk, or that he gambles on the result of the litigation over the said property. It is not disputed that petitioners caused the annotation of lis pendens on TCT No. 23554 of the lots in question. The current holders of the derivative titles to these lots were aware of such annotation when the individual titles were issued to them. Ineluctably, both were bound by the outcome of the litigation.

(3) The order contained in the Decision in G.R. No. 140398 is for the RD to cancel GSISs titles over Lot 10, Block 2 and Lot 8, Block 8, inter alia. Whether these titles are individual or contained in a mother title is of no consequence. The RD has to cause their cancellation. If the cancellation can only be carried out by requiring GSIS or the Bureau of Lands to provide the necessary information, then they can be compelled to do so. Otherwise, the Courts decision would be rendered inefficacious, and GSIS would retain ostensible ownership over the lots by the simple expedience that they are included in a mother title, instead of individual titles. That result is manifestly contrary to the Courts ruling and would subvert the very purpose of bringing this case for a complete resolution.San Lorenzo Development Corp. vs. CA449 SCRA 99

FACTS: Enrique Salvatierra died intestate and without any issue. He was survived by his legitimate brothers: Tomas, Bartolome, Venancio and Macario, and sister Marcela. His estate consisted of three parcels of land.

An Extrajudicial Partition with Confirmation of Sale was executed by and among the surviving legal heirs and descendants of Enrique Salvatierra, which consisted of Lot No. 25, 26 and 27. By virtue of the sale executed by Marcela in favor of Venancio, the latter now owns 2/5 shares of the estate. By virtue of the sale by Bartolome’s heirs Catalina and Ignacia, of his undivided shares to Tomas, now deceased, represented by his widow, Catalina Azarcon, the latter now owns 2/5 shares in the said estate. Anselmo Salvatierra represented his father Macario, who had already died.

Thereafter, Venancio sold the whole of Lot No. 27 and a 149-sq. m. portion of Lot 26 to herein respondent spouses Lino Longalong and Paciencia Mariano. The Longalongs took possession of the said lots. It was discovered in 1982 (through a relocation survey) that the 149 sq. m. portion of Lot No. 26 was outside their fence. It turned out that Anselmo Salvatierra was able to obtain a title, Original Certificate of Title No. 0-4221 in his name, the title covering the whole of Lot. No. 26 which has an area of 749 sq. m.

Private respondents Longalong then filed a case with the RTC for the reconveyance of the said portion of Lot 26.

ISSUES:

1. Whether or not there was a double sale.2. Which prescriptive period for actions for annulment should prevail, Art. 1391 of the New Civil Code which limits the filing of actions to four (4) years or Art. 1144 of the same Code which limits the period of the filing of actions on certain grounds to ten years?

RULING:

Petitioners rely on the theory that this is a case of double sale case of Lot No. 26 to both petitioners and respondents Longalong, et. al. A perusal of the records and evidence, reveals otherwise. Both parties did not dispute the existence and contents of the Extrajudicial Partition with Confirmation of Sale, as both presented them as their


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respective exhibits. The parties may not have realized it, but the deciding factor of this dispute is this very document itself. It is very clear therein that Macario Salvatierra’s share in the estate of the deceased Enrique Salvatierra is only 405 sq. m. out of the 749 sq. m. comprising Lot No. 26. Since Venancio Salvatierra, under this document, is to get a portion of Lot No. 26 in addition to Lot No. 27, then it follows that Venancio is entitled to the remaining 344 sq. m. of Lot No. 26, after deducting the 405 sq. m. share of Macario.

The applicable provision in the case at bar is Art. 1144 of the New Civil. Art. 1391 of the same code, referred to by petitioners is not in point. This article must be read in conjunction with Art. 1390 which refers to voidable contracts. This case at hand involves fraud committed by petitioner Anselmo Salvatierra in registering the whole of Lot No. 26 in his name, with evident bad faith. In effect, an implied trust was created by virtue of Art. 1456.

In this connection, we hold that an action for reconveyance of registered land based on an implied trust may be barred by laches. The prescriptive period for such actions is ten (10) years from the date the right of action accrued. The complaint for reconveyance was filed by the Longalong spouses on November 22, 1985, only five (5) years after the issuance of the O.C.T. No. 0-4221 over Lot No. 26 in the name of Anselmo Salvatierra. Hence prescription has not yet set in.

G.R. No. L-27587, 18 February 1970Carumba vs. Court of Appeals

Facts: In 1955, the spouses Amado Canuto and Nemesia Ibasco, by virtue of a “Deed of Sale of Unregistered Land with Covenants of Warranty” sold a parcel of land located in Camarines Sur, to the spouses Amado Carumba and Benita Canuto, The referred deed of sale was never registered in the Office of the RD of Camarines Sur, and the Notary was not then an authorized notary public in the place. In 1957, a complaint for a sum or money was filed by Balbuena against Amado Canuto and Nemesia Ibasco before the Justice of the Peace Court. A decision was rendered in favor of Balbuena and against the defendants. In 1968, the ex-officio Sheriff issued a “Definite Deed of Sale of the property now in question in favor of Balbuena, which instrument of sale was registered before the Office of the RD.

The CFI, finding that after execution of the document Carumba had taken possession of the land, and planted thereon:

1. declared him to be the owner of the property under a consummated sale;2. held void the execution levy made by the sheriff, pursuant to a judgment

against Carumba’s vendor, Amado Canuto;3. and nullified the sale in favor of the judgment creditor, Balbuena.

The CA, without altering the findings of fact made by the court of origin, declared that there having been a double sale of the land subject of the suit Balbuena’s title was superior to that of his adversary under Article 1544 of the Civil Code of the Philippines

since the execution sale had been properly registered in good faith and the sale to Carumba was not recorded.

Issue: WON the petitioner has a superior title over the land and rule on double sale applies.

Held: The Court ruled that while under the invoked Article 1544 registration in good faith prevails over possession in the event of a double sale by the vendor of the same piece of land to different vendees, said article is of no application to the case at bar, even if Balbuena, the later vendee, was ignorant of the prior sale made by his judgment debtor in favor of petitioner Carumba. The reason is that the purchaser of unregistered land at a sheriff’s execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter’s interest in the property sold as of the time the property was levied upon. This is specifically provided by section 35 of Rule 39 of the Revised Rules of Court, the second paragraph of said section specifically providing that:

Upon the execution and delivery of said (final) deed the purchaser, redemptioner, or his assignee shall be substituted to and acquire all the right, title, interest, and claim of the judgment debtor to the property as of the time of the levy, except as against the judgment debtor in possession, in which case the substitution shall be effective as of the time of the deed … (Emphasis supplied)

While the time of the levy does not clearly appear, it could not have been made prior to 1957, when the decision against the former owners of the land was rendered in favor of Balbuena. But the deed of sale in favor of Canuto had been executed two years before, in 1955, and while only embodied in a private document, the same, coupled with the fact that the buyer (petitioner Carumba) had taken possession of the unregistered land sold, sufficed to vest ownership on the said buyer. When the levy was made by the Sheriff, therefore, the judgment debtor no longer had dominical interest nor any real right over the land that could pass to the purchaser at the execution sale. Hence, the latter must yield the land to petitioner Carumba.

Said rule is different in case of lands covered by Torrens titles, where the prior sale is neither recorded nor known to the execution purchaser prior to the levy; but the land here in question is admittedly not registered under Act No. 496.

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3) To deliver the fruits and accessories (Art. 1537)- In the condition in which they were upon the perfection of the

contract.- All fruits shall pertain to the vendee from the day on which the

contract was perfected.

4) To pay for the expenses of the execution and registration (Art. 1487)- Unless there is a stipulation to the contrary.


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5) Conditions and Warrantiesa) Condition; concept (Art. 1545) – where the obligation of either party to a

contract of sale is subject to any condition which is not performed, such party may:

i) refuse to proceed with the contract; orii) waive performance of the condition.

- If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the non-performance of the condition as a breach of warranty.

- Where the ownership of the thing has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing.

b) Warranty Express (Art. 1546) – any affirmation of fact or any promise by the seller

relating to the thing, the natural tendency is to induce to purchase the thing.

There must be an affirmation of fact; The fact must pertain to the thing either to the quality,

character or title of the thing.

Implied (Art. 1547) – those which are not stipulated but provided by law.

Warranty against eviction/of seller’s title (Art. 1548-1559) – in order for the vendor to be held liable, the following requisites must be complied with:

Existence of a final judgment depriving the vendee of the whole or part of the thing purchased;

Deprivation must be either (i)based on a third person’s prior right over the thing or (ii)based on an act imputable to the vendor;

There should be no valid waiver;The action to hold the vendor liable should be filed within the period prescribed by law

-------------------------------------------Jurisprudence:G.R. No. L-41233, 21 November 1979J.M. Tuason & Co., Inc. vs. CA

Facts: Petitioner executed, in favor of Ricardo de Leon, a contract to sell a lot with the agreed price of P24.60 per square meter. At the execution of the contract, Ricardo de Leon paid the down-payment of P4,190.86 and agreed to pay the balance in the monthly

installment of P498.63 including the agreed annual interest of 10%. Meanwhile, on April 10, 1953, petitioner signed a compromise agreement with the Deudors. On July 19, 1965 with the consent of the petitioner, Ricardo de Leon transferred all his rights to the lot in favor of his parents, herein private respondents Alfonso and Rosario de Leon. On the same date, private respondents paid the outstanding balance of the purchase price. At the time of the execution of the contract to sell, the contracting parties knew that a portion of the lot in question was actually occupied by Ramon Rivera. However, it was their understanding that the latter will be ejected by the petitioner from the premises. Petitioner filed a complaint of ejectment against Ramon Rivera before the CFI and later petitioner Ricardo de Leon and respondents Alfonso and Rosario de Leon as necessary parties and they were evicted from the premises in the question which was affirmed by the CA. Private respondents filed the proper action before the CFI of Manila action against J.M. Tuason & Co., Inc. to enforce the vendor's warranty against eviction or to recover the value of the land plus damages.

The CFI decided the case against herein petitioner J.M. & Co., Inc. which was affirmed by the CA.

Issue: WON the respondents are entitled to the vendor’s warranty eviction.

Held: The Court ruled that without being shown to be vendees in good faith, herein respondents are not entitled to the warranty against eviction nor are they entitled to recover damages (Article 1555 of the Civil Code).

The prior right of Ramon Rivera to purchase the lot in litigation was based more on his prior occupancy to the same since 1949, about which fact respondents De Leon were informed by petitioner at the time of the execution of the contract to sell. The execution of the compromise agreement merely recognized this prior right, under the condition as stipulated in said agreement, that it was possible to do so.

The Court did not have the hesitation to give to petitioner the benefit of the doubt of its having acted in good faith, which is always presumed, without any intention of taking advantage of the other party dealing with it. "Good faith consists in an honest intention to abstain from taking any unconscientious advantage of another. Good faith is an opposite of fraud and of bad faith and its non-existence must be established by competent proof."

Moreover, at the time of the execution of the contract to sell it is an admitted fact that Ricardo de Leon knew that a third party was occupying a part of the lot subject of the sale. Ricardo de Leon ought to have known that he was buying a property with the distinct possibility of not being able to possess and own the land due to the occupancy of another person on the same. So there had to be an understanding between him and the petitioner for the latter to eject the occupant, something which, by the facts then obtaining and the law relevant thereto, would make the ejectment more speculative than certain. Nonetheless, Ricardo de Leon knowingly assumed the risk when he bought the, land, and was even called a vendee in bad faith by the Court of Appeals in doing so, clearly not an innocent purchaser in good faith. If petitioner that it would eject Ramon Rivera, he did so, not knowing that the compromise agreement would stand on the way, as it had thought, in all good faith, that paragraph 7 of the compromise agreement


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excluded the lot in question, having been already sold to Ricardo de Leon before the agreement was executed in court.

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith, as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor.

G.R. No. L-42636, 1 August 1985Escaler vs. CA

Facts: Spouses Africa V. Reynoso and Jose L, Reynoso sold to petitioners several others, a parcel of land which Deed of Sale contained a covenant against eviction. On April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources Development, Inc. filed a case before the CFI of Rizal for the cancellation of the OCT issued in the name of Angelina Reynoso (predecessor-in-interest of private respondents-vendors) on the ground that the property covered by said title is already previously registered under a TCT issued in the name of A. Doronilla Development, Inc. In that case, an order was issued declaring the OCT null and void. Petitioners, spouses Maria de Leon Escaler and Ernesto Escaler and spouses Cecilia J. Roxas and Pedro Roxas, filed a civil case before the CFI of Rizal against their vendors, herein private respondents, spouses Jose L. Reynoso and Africa Reynoso for the recovery of the value of the property sold to them plus damages on the ground that the latter have violated the vendors' "warranty against eviction."

The CFI rendered a judgment ordering the return to the plaintiffs Maria Luisa de Leon Escaler and Ernesto Escaler, Cecilia J. Roxas and Pedro Roxas, the value of the property sold to them at the time of eviction. The CA reversed this decision and ruled that petitioners as vendees had not given private respondents-vendors, formal notice of the eviction case as mandated by Arts. 1558 and 1559 of the New Civil Code.

Issue: WON a vendor’s liability for eviction may be enforced in the case at bar.

Held: The Court ruled that the petition is devoid of merit. Consequently, it must be dismissed.

Article 1548, in relation to Articles 1558. and 1559 of the New Civil Code reads as follows:

Art. 1548, Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased.

The vendor shall answer for the eviction even though nothing has been said in the contract on the subject.

The contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor.

Xxxx

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee. (emphasis supplied)

Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the complaint that the vendor be made as co-defendant

In order that a vendor's liability for eviction may be enforced, the following requisites must concur: — a) there must be a final judgment; b) the purchaser has been deprived of the whole or part of the thing sold; c) said deprivation was by virtue of a right prior to the sale made by the vendor; and d) the vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee.

In the case at bar, the fourth requisite—that of being summoned in the suit for eviction (Case No. 4252) at the instance of the vendee—is not present. All that the petitioners did, per their very admission, was to furnish respondents, by registered mail, with a copy of the opposition they (petitioners filed in the eviction suit. Decidedly, this is not the kind of notice prescribed by the aforequoted Articles 1558 and 1559 of the New Civil Code. The term "unless he is summoned in the suit for eviction at the instance of the vendee" means that the respondents as vendor/s should be made parties to the suit at the instance of petitioners-vendees, either by way of asking that the former be made a co- defendant or by the filing of a third-party complaint against said vendors. Nothing of that sort appeared to have been done by the petitioners in the instant case.

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Warranty against hidden defects (Arts. 1560-61, 1566-81) – refers to such defects as would render the thing unfit for the use intended or would diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not acquire it or have given a lower price for it.

The following requisites must be present in order for the vendor to be held liable:

Defect must exist at the time of the sale; Defect must be hidden; Defect must result in the thing being unfit for the

purpose of the buyer or at least diminish the fitness of the thing.

Instances where no warranty against hidden defects:


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a. “As is, where is” sale – the seller disclaims liability and it is the buyer’s responsibility to get the item where it is located at the time of the sale.

b. Sale of secondhand items

c. Sale of animals in fairs

d. Sale in public auction

-------------------------------------------Jurisprudence:G.R. No. 73913, 31 January 1989Moles vs. IAC

Facts: petitioner needed a linotype printing machine for his printing business, The LM Press at Bacolod City, and applied for an industrial loan with the Development Bank of the Philippines (DBP) for the purchase thereof. An agent of Smith, Bell and Co. who is a friend of petitioner introduced the latter to private respondent, owner of the Diolosa Publishing House in Iloilo City, who had two available machines. Thereafter, petitioner went to Iloilo City to inspect the two machines offered for sale and was informed that the same were secondhand but functional. On his second visit to the Diolosa Publishing House, petitioner decided to buy the linotype machine. The transaction was basically verbal in nature but to facilitate the loan application with the DBP, a pro forma invoice was signed by petitioner with an addendum that payment had not yet been made but that he promised to pay the full amount upon the release of his loan from the aforementioned bank on or before the end of the month. The machine was delivered to petitioner's publishing house where it was installed by an employee of respondent Diolosa. Prior to the release of the loan, a representative from the DBP, Bacolod, supposedly inspected the machine but he merely looked at it to see that it was there where later on received the DBP check for P50,000.00. On November 29, 1977, petitioner wrote private respondent that the machine was not functioning properly as it needed a new distributor bar. In the same letter, petitioner unburdened himself of his grievances and sentiments in this wise. After their requests to check the machine went unheeded, petitioner thus finally decided to indorse the matter to his lawyer. An expert witness found several defects. Having found defects in said machine, the witness informed Sy Brother about his findings, hence the purchase was aborted. In his opinion, major repairs were needed to put the machine back in good running condition.

On 17 May 1978, petitioner Jerry T. Moles commenced a suit against private respondent Mariano M. Diolosa in the aforesaid trial court in Bacolod City, for rescission of contract with damages. Private respondent moved to dismiss on the ground of improper venue. This was opposed by petitioner who averred that there is no formal document evidencing the sale which is substantially verbal in character. In an order dated June 23, 1978, the trial court denied the motion to dismiss, holding that the question of venue could not be

resolved at said stage of the case. The subsequent motion for reconsideration was likewise denied.

Issues: 1. WON there is an implied warranty of its quality or fitness on a secondhand item; 2. WON the hidden defects in the machine is sufficient to warrant a rescission of the contract between the parties.

Held: As to the first issue, the Court ruled that there is no implied warranty as to the condition, adaptation, fitness, or suitability for the purpose for which made, or the quality, of an article sold as and for a secondhand article.

The respondent court cited the ruling in Sison vs. Ago, et al. to the effect that unless goods are sold as to raise an implied warranty, as a general rule there is no implied warranty in the sale of secondhand articles.Said general rule, however, is not without exceptions. Article 1562 of our Civil Code, which was taken from the Uniform Sales Act, provides:

Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows:

1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose;

In the present case, a certification to the effect that the linotype machine bought by petitioner was in A-1 condition was issued by private respondent in favor of the former. This cannot but be considered as an express warranty. However, it is private respondent's submission that the same is not binding on him, not being a part of the contract of sale between them. This contention is bereft of substance.

It must be remembered that the certification was a condition sine qua non for the release of petitioner's loan which was to be used as payment for the purchase price of the machine. Private respondent failed to refute this material fact. Neither does he explain why he made that express warranty on the condition of the machine if he had not intended to be bound by it. In fact, the respondent court, in declaring that petitioner should have availed of the remedy of requiring repairs as provided for in said certification, thereby considered the same as part and parcel of the verbal contract between the parties.

On the basis of the foregoing circumstances, the inescapable conclusion is that private respondent is indeed bound by the express warranty he executed in favor of herein petitioner.

As to the second issue, the Court considered the rule on redhibitory defects contemplated in Article 1561 of the Civil Code. A redhibitory defect must be an

However, there is still

warranty against

eviction.


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imperfection or defect of such nature as to engender a certain degree of importance. An imperfection or defect of little consequence does not come within the category of being redhibitory.

Nutrimix Feeds Corporation vs. CA 25 October 2004

FACTS: Evangelista spouses purchased feeds from Nutrimix. They refused to pay their unsettled debt claiming that thousands of their livestock were poisoned by the Nutrimix feeds. Nutrimix sued them for collection of money. The spouses countered with a suit for damages. Various expert witnesses were presented during the trial.

ISSUE: W/N Nutrimix should be held liable for the death of the livestock

HELD: NO. In alleging that there was a violation of warranty against hidden defects, the spouses assumed the burden of proof. However, this they failed to overcome. Under the law, the defect must exist at the time the sale was made and at the time the product left the hands of the seller, which the spouses failed to prove. The feeds were belatedly tested—3 months after the death of the broilers and hogs. This means that at that time, they may have already been contaminated.

They failed to prove that the feeds delivered to be tested were the same feeds that allegedly poisoned the animals. It is also common practice for them to mix different kinds of feeds. The mere death of the animals does not raise a prima facie case of breach of warranty. In this case, the evidence presented by the spouses are only circumstantial. The remedies of breach of warranty against hidden defects are either withdrawal from the contract or to demand a proportionate reduction of the price plus damages in either case. In this case, though the spouses failed to make out their case, hence they should be liable for their debt.

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Warranty of quality (Arts. 1562-65, 1586, 1599 (5))

a. Warranty of merchantability – it pertains to the fact that it is fit for the general purpose especially if the thing was sold by description or by sample.

b. Warranty of fitness – the thing bought may not actually have any defect and for one million buyers, it would be fit for their purpose. However, it may not be fit for the purpose of one buyer and if all the requisites for this warranty are present, then the buyer may hold the seller liable for breach although there is no hidden defect, as long as not fit for the purpose of the buyer.

Buyer has to inform the seller of the particular purpose for which the thing is to be used;

Seller manifested that the thing would be fit for the purpose and the buyer relied on such representation of the seller.

Rule in case of sale under a patent or trade name (Art. 1563) – there is no warranty as to its fitness for any particular purpose, unless there is stipulation to the contrary.

Effect of usage of trade (Art. 1564) – it may annexed an implied warranty or condition as to the quality or fitness for a particular purpose.

Rule in case of goods sold by sample (Art. 1565) – if the seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample.

Alternative remedies of buyer to enforce the warranties; prescriptive period (Arts. 1567, 1571) – the vendee may elect between:

i.) Withdrawing from the contract;ii.) Demanding a proportionate reduction of the price.iii.) Plus damages in any case between i.) and ii.)

*actions barred after 6 months from the delivery of the property/thing sold.

Loss of the thing sold due to hidden defects (Arts. 1567-69) – in cases provided under Arts. 1561-62, 1564-66, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case.

- If the vendor was aware of the hidden defects, he shall bear the loss, and shall be obliged to return the price and refund the expenses of the contract, with damages. If he was not aware of them, he shall only return the price and the interest thereon, and reimburse the expenses of the contract which the vendee might have paid.

- If the thing sold had hidden defects and lost through a fortuitous event or through vendee’s fault, the latter may demand of the vendor the price which he paid, less the value which the thing had when it was lost. If the vendor acted in bad faith, he shall pay damages.


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Applicability of warranty on judicial sales (Art. 1570) – except that the judgment debtor shall not be liable for damages.

Prescriptive period of action (Art. 1571) – shall be barred after 6 months from the delivery of the thing sold.

Rules on sale of animals (Arts. 1572-81) – if 2 or more animals are sold together,

General rule: the redhibitory defect of one shall only give rise to its redhibition and not of that of the others. He cannot rescind the entire contract pertaining to all animals.

*Redhibitory defect (Art. 1576) – kind of defect that even by examination of expert, it cannot be discovered.

Exception: if he can prove that he would not have bought the others had he known the defect of one, then he can rescind the entire contract.

Presumption that the buyer would not have bought the others had he known of the defect of one – arises when the buyer bought the animals in teams or in pairs.

Sale of animals suffering from contagious diseases – VOID.

VII. DOCUMENTS OF TITLE

A. Concept and function/purpose: A document used in the ordinary course of business in the sale or transfer

of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by endorsement or by delivery, goods represented by such document (Art. 1636).

Evidence of possession or control of goods described therein; Medium of transferring title and possession over the goods described

therein without having to effect actual delivery (Villanueva, 2009 ed.) The custody of a negotiable warehouse receipts issued to the order of the

owner, or to bearer, is a representation of title upon which bona fide purchasers for value are entitled to rely , despite breaches of t rust or violations of agreement on the part of the apparent owner (Siy Cong Bieng v. HSBC, 56 Phil 598).

B. Common forms of documents of title:

1. Dock warrant –

2. Bill of lading – is a document issued by the common carrier acknowledging receipt of goods described therein for transportation to a designated place and delivery to a named consignee.

3. Warehouse receipt –4. Quedan –

C. Classes of documents of title:

1. Negotiable documents of title –

How negotiated?- Negotiated by delivery of the document to another if by the

terms thereof, the goods are deliverable to bearer, or when the bill of lading was endorsed in blank by the person whose order the goods were deliverable.

Who may negotiate? (Art. 1512) –- The owner of the document;- The one to whom possession or custody of the document

has been entrusted by the owner.

Rights of the a person to whom the document has been negotiated (Art. 1513, 1519) –

- He acquires the rights of his vendor- Whatever rights the original cosignee had over the goods.- Also the direct obligation of the carrier as if he were the

shipper.- Can sue the carrier directly in his own name.

Transfer of order document without indorsement (Art. 1515)- If transferred for value by delivery, the transferee acquires a

right against the transferor to compel him to indorse the document unless a contrary intention appears.

- Negotiation shall take effect as of the time when the indorsement is actually made.

Sales - Lecture

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