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Civil LawSUMMER REVIEWER
Adviser:Dean Cynthia del Castillo Head: Joy Ponsaran, Eleanor Mateo; Understudy:Joy Tajan, John Paul Lim;Subject Head: Patricia Marie Regina Roque; Pledgees: Melina Rose G utierrez, Kristine Margret Malang
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CH. 1 CONTRACT OF SALE
CONTRACT OF SALE One of the contracting
parties obligates himself to transfer the ownership ofand to deliver a determinate thing, and the other topay therefore a price certain in money or itsequivalent. A contract of sale may be absolute orconditional.
Contract of Sale Contract to Sell
Absolute Conditional
Real obligation obligation to give
Personal obligation obligation to do
Title passes to thebuyer upon delivery
Ownership is reserved inthe seller and will pass tothe buyer only upon full
payment of the price
Non-payment of theprice is a negative
resolutory condition
Full payment is a positivesuspensive condition, thefailure of which is not abreach but prevents the
obligation of the vendor toconvey title to arise
remedies available:1. specific
performance2. rescission3. damages
remedies available:1. resolution2. damages
I. ELEMENTS OF A CONTRACT OF SALE1. Consent2. Determinate subject matter3. Price certain in money or its equivalent
II. STAGES IN LIFE OF CONTRACT OF SALE1. Negotiation2. Perfection3. Consummation
III. OBLIGATIONS CREATED - 2 sets of realobligations to give
IV. CHARACTERISTICS OF CONTRACT OFSALE:1. Nominate2. Principal3. Consensual4. Bilateral5. Reciprocal6. Onerous7. Commutative8. Title and not a mode
V. DISTINGUISHED FROM OTHERCONTRACTS
Donation SaleGratuitous or onerous Onerous
Formal contract Consensual contract
Governed by law ondonation
Governed by law on sale
Barter Sale
Consideration: giving of athing
Consideration: giving ofmoney as payment
Governed by law on sales: species of the genussales
If consideration consists party in moneyand partly by thing
look at manifest intention;
If intention is not clear:value of thing is more
than amount of money barter
If intention is not clear:value of thing is equal
or less than amount ofmoney sale
Contract for piece ofwork
Sale
Goods are to bemanufactured specially
for a customer and uponspecial order and not for
the general market
Contract for delivery ofan article which the
vendor in the ordinarycourse of businessmanufactures or
procures for generalmarket (whether on hand
or not)
Essence is service Essence is object
Jurisprudence:1. Timing testunder art 1467:
whether the thingtransferred would havenever existed but for the
order2. Habituality test
if manufacturer
engages in activity withneed to employ
extraordinary skills andequipment (Celestino v
CIR)3. Nature of the object
testeach products nature
of execution differs fromthe others; products are
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not ordinary products ofmanufacturer (EEI v CIR)
Agency to Sell Sale
Agent not obliged to pay
for price, merely obligedto deliver price received
from buyer.
Buyer pays for price of
object
Principal remains ownereven if object delivered
to agent
Buyer becomes owner ofthing; in agency
Agent assumes norisk/liability as long as
within the authority given
Seller warrants
May be revokedunilaterally becausefiduciary and even ifrevoked w/o ground
Not unilaterally revocable
Agent not allowed toprofit Seller receives profit
Personal Contract;Rescission is not
available
Real Contract
Dation in Payment Sale
Pre-existing credit No pre-existing credit
Obligations areextinguished
Obligations are created
Debtors consideration:extinguishment of the
debt
Creditors consideration:acquisition of the objectoffered in lieu of the
original credit
Consideration of seller:price
Consideration of buyer:
acquisition of the object
Less freedom indetermining the price
Greater freedom indetermining the price
Payment is received bythe debtor before thecontract is perfected
Buyer still has to pay theprice
Lease Sale
Use of thing is for aspecified period only with
an obligation to return
Obligation to absolutelytransfer ownership of
thingConsideration is rent Consideration is price
Lessor need not beowner
Seller needs to be ownerof thing to transfer
ownership
NOTE: Lease with opt ion to buy: really a contractof sale but designated as lease in name only; it is asale by installments
CH. 2 - PARTIES TO A CONTRACT OF SALE
NOTE: GENERAL RULE - All persons who areauthorized in this Code to obligate themselves mayenter into a contract of sale
I. MINORS, INSANE AND DEMENTEDPERSONS, AND DEAF-MUTES1. Contracts are voidable, subject to annulment
or ratification2. Also includes:
- State of drunkenness- Hypnotic spell- Where necessaries are those sold
and delivered to a minor or otherperson without capacity to act, hemust pay a reasonable pricetherefore
II. SPOUSES -A spouse may, without the consentof the other spouse, enter into sales transactionsin the regular pursuit of their profession, vocation,or trade
Art. 1490. The husband and the wife cannotsell property to each other, except:
(1) When a separation of property wasagreed upon in the marriagesettlements; or
(2) When there has been a judic ialseparation or property under Article191.
NOTE: Prohibition likewise applies to common-lawspouses
III. OTHERS - TRUST RELATIONSHIPS1. Art. 1491 Two groups of parties prohibited
from acquiring by purchase certainproperties:a. Guardian/Agent/Executors and
Administratorsi. Direct or indirectii . May be ratified since only private
wrong is involvedb. Public Officers and employees/Officers of
the Courti. Cannot be ratified since public wrong
is involvedii . Requisites for the prohibition to apply
to attorneys:1. existence of attorney client
relationship;2. property is the subject matter
in litigation;
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3. while in litigation (from filingof complaint to final
judgment)NOTE: Exception to the prohibition against attorneys:contingent fee arrangement where the amount of
legal fees is based on a value of property involved inlitigation
Art. 1492.The prohib itions in the two precedingarticles are applicable to sales in legalredemption, compromises and renunciations .
III. Legal Status of Contract 1. Void (case law) guardian/
executor/public officers / officers of thecourt
2. Voidable (civil code) agent; VALID ifwith consent
CH. 3 - SUBJECT MATTER OF SALE
1. REQUISITES:1. Things
a. Possible - existing, future, andcontingent
i. whether the subject matter isof a type and nature thatexists or could be made toexist to allow the sellerreasonable certainty of beingable to comply with hisobligations
b. Liciti. not outside the commerce of
manii . if illicit, contract is void
c. Determinate or determinablei. determinate: particularly
designated or physicallysegregated from all others ofthe same class
ii . determinable:1. thing is capable of
being madedeterminate
2. without the necessityof a new furthercontract
2. Rights must be transmissible, except:a. future inheritanceb. service
Emptio rei speratae Emptio spei
Sale of an expected thing Sale of a mere hope orexpectancy that the thingwill come to existence;
sale of the hope itself
Sale is subject to thecondition; that the thingwill exist; if it does not,
there is no contract
Sale is effective even ifthe thing does not come
into existence, unless it isa vain hope
Uncertainty is with regardto the quantity and
quality of the thing andnot the existence of the
thing
The uncertainty is withregard to the existence of
the thing
Object is a future thing Object is a present thingwhich is the hope or
expectancy
NOTE: Quantity of subject matter is not essential forperfection; must determine nature and quality ofsubject matter
NOTE: Seller need not be the owner of the subjectmatter at the time of perfection: sufficient that he isthe owner at the time of delivery. exception:foreclosure sale
CH. 4 - PRICE
I. REQUISITES:1. Real
a. when at the perfection of the contractof sale, there is every intention onthe buyer to pay the price, and everyexpectation on the part of the sellerto receive such price as the value of
the subject matter he obligateshimself to deliver
2. In money or its equivalenta. consideration for a valid contract of
sale can be the price and othervaluable consideration; at the veryleast, a true contract of sale musthave price as part of itsconsideration
3. Certain or ascertainablea. certain: expressed and agreed in
terms of specific pesos and/orcentavos
b. ascertainable:i. by third persons
ii . by the courts in caseswhere the third person fixesthe price in bad faith or bymistake
iii. by reference to a definiteday, particular exchange ormarket
iv. by reference to another thingcertain
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v. but never by one party to thecontract
4. Jurisprudence: Manner of payment mustbe agreed upon (Marnelego v. BancoFilipino Savings and Mortgage Bank)
II. EFFECT OF GROSS INADEQUACY OF PRICE
NOTE: Mere inadequacy of the price does not affectthe validity of the sale, except (1) When there isfraud, mistake, or undue influence indicative of adefect in consent is present, (2)When it shows thatthe parties really intended a donation or some otheract or contract.
III. EFFECT WHERE PRICE IS SIMULATED1. The act may be shown to have been in reality
a donation, or some other act or contract2. If not and neither party had any intention
whatsoever that the amount will be paid(absolutely simulated): the sale is void
3. If there is a real price but what is stated in thecontract is not the one intended to be paid(only relatively simulated): the contract ofsale is valid but subject to reformation
Art. 1474.Where the price cannot be determinedin accordance with the preceding articles, or inany other manner, the contract is i nefficacious.However, if the thing or any part thereof has beendelivered to and appropriated by the buyer hemust pay a reasonable price therefore. What is a
reasonable price is a question of fact dependenton the circumstances of each particular case.
CH. 5 - FORMATION OF A CONTRACT OF SALE
I. 3 STAGES IN LIFE OF A CONTRACT OF SALE1. Policitacion/Negotiation Stage - offer is
floated, acceptance is floated but they donot meet; the time when parties indicatetheir interest but no concurrence of offer andacceptance.
2. Perfection- concurrence of all requisites;meeting of the minds.
3. Consummation - parties perform theirrespective undertakings
II. Policitacion1. RULES:
1. offer is floated prior to acceptance,may be withdrawn atwill by offeror
2. offer floated with aperiod
without acceptance,extinguished whenperiod has ended andmaybe withdrawn at willby offeror; right to
withdraw must not bearbitrary otherwise,liable to damage under
Art 19, 20, 21 of CivilCode
3. offer floated w/condition
extinguished byhappening/non-happening of condition
4. offer floated withoutperiod/without condition
continues to be validdepending uponcircumstances of time,place and person
5. offer is floated andthereis counter-offer
original offer isdestroyed, there is anew offer; can not goback to original offer
6. offer is floated no authority of offerorto modify offer
7. offer acceptedabsolutely
proceed to perfectedstage
III. OPTION CONTRACT - a contract grantingan exclusive right in one person, for which hehas paid a separate consideration, to buy acertain object within an agreed period1. no presumption of consideration, needs
to be proven2. characteristics of Option Contract:
a. not the contract of sale by itself,separate and distinc
b. nominatec. principal; but can be attached
to other principal contractsd. onerouse. commutativef. unilateral versus contract of
sale which is bilateral
San Miguel Philippines v Cojuangcoconsideration in an option contract may be anything
of value, unlike in sale where it must be price certainin money
3. how exercised: notice of acceptanceshould be communicated to offerorwithout actual payment as long as thereis delivery of payment in consummationstage
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4. SITUATIONS IN AN OPTIONCONTRACT:a. with separate consideration
i. option contract is valid
ii . offeror can not withdrawoffer until after expiryperiod
iii. ubject to rescission,damages but not tospecific performancebecause this is not anobligation to give
b. without separate considerationi. OLD RULE - offer is still
valid, but option contract isvoid and not subject torescission, damages
ii . NEW RULE: Right of firstrefusal recognized
IV. RIGHT OF FIRST REFUSAL: 1. creates a promise to enter into a contract of
sale and it has no separate consideration,not subject to specific performance becausethere is no contractual relationship here andit is not an obligation to give (not a realcontract)
2. New doctrine: may be subject to specificperformance.
Equatorial realty Devt Inc. v Mayfair Theater, theright of first refusal is only subject to specificperformance insofar as it is attached to a valid writtenprincipal contract (e.g. lease). RFR becomes one ofthe considerations in the contract.]
3. Effect of new doctrine: turned the world ofpolicitacion upside down because while validoption contract is not subject to specificperformance, right of first refusal which doesnot even have a separate consideration maybe subject to specific performance
4. Recognizes recovery of damage based onabuse of rights doctrine
CH. 6 - PERFECTION OF SALE
GENERAL RULE: A contract of sale is perfected atthe moment there is a meeting of the minds upon thething which is the object of the contract and upon theprice; consensual contractException: When the sale is subject to a suspensivecondition
I. REQUIREMENTS:1. When parties are face to face when there
is absolute acceptance of an offer that iscertain
2. When thru correspondence or telegram when the offeror receives or had knowledge
of the acceptance3. When the sale is subject to a suspensivecondition from the moment the condition isfulfilled
NOTES: Qualified acceptance: mere counter-offerwhich needs to be absolutely accepted to give rise toperfected contract of saleBusiness ads are mere invitations to make an offerexcept when it appears to be otherwise
II. RULES GOVERNING AUCTION SALES:1. Sales of separate lots by auction are
separate contracts of sale2. Sale is perfected by the fall of the hammer3. Seller has the right to bid at the auction
provided such right was reserved and noticewas given to that effect
III. EARNEST MONEY1. Money given as part of purchase price2. Acceptance is the proof that contract of sale
exists3. Nothing in law prevents parties from treating
earnest money differently4. Old concept: subject to forfeiture when
BUYER backs out
5. New concept: can not be forfeited part ofpurchase price; must be restored
6. Qualification: if old concept is stipulated VALID
7. Presumption of perfection of contract of saleand such earnest money as part of purchaseprice is disputable
OPTION MONEY EARNEST MONEY
Option Contract Right of First Refusal
Principal contract;stands on its own
Accessory; can notstand on its own
Needs separateconsideration
Does not need separateconsideration
Subject matter andprice must be valid
There must be subjectmatter but price not
important
Not conditional Conditional
Not subject to specific
performance
Subject to specific
performance
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Money givenas distinct
consideration for anoption contract
Part of the purchaseprice
Applies to a sale not
perfected
Given only when
there is already asale
Not required to buy When given, buyer isbound to pay the
balance
Art. 1483. Subject to the provisions of the Statuteof Frauds and of any other applicable statute, acontract of sale may be made in writing, or byword of mouth , or partly in writing and partly byword of mouth, or may be inferred from theconduct of the parties. (n)
FORM OF SALES
I. Form not important in validity of salea. Sale being consensual, may be oral or
written, perfected by mere consent as toprice and subject matter
b. If particular form is required under the statuteof frauds:
i. valid and binding between parties butnot binding to 3
rdpersons
c. Reason: purposes of convenience only andnot for validity and enforceability; cause ofaction is granted to sue and compel otherparty to execute the document
II. When form is important for validity;exception by specific provision of law;
a. Power to sell a piece of land granted to anagent otherwise VOID
b. Sale of large cattle; must also be registeredwith Municipal treasurer otherwise VOID
c. Sale of land by non-Christian if not approvedby Governor VOID
III. When form is important for enforceability(STATUTE OF FRAUDS Article 1403 (2))
a. A sale agreement which by its terms is not tobe performed within a year from the making
thereof;b. An agreement for the sale of goods, chattels
or things in action, at a price not less thanP500.00; and
c. A sale of real property or of an interesttherein.
IV. EXCEPTIONS TO COVERAGE OFSTATUTE IN SALES CONTRACTS:
1. When there is a note or memorandum inwriting and subscribed to by party or his
agent (contains essential terms of thecontract)
2. When there has been partialperformance/execution (seller delivers withintent to transfer title/receives price)
3. When there has been failure to object topresentation of evidence (oral)4. When sales are effected through electronic
commerce
CH. 7 - CONSUMMATION STAGE/PERFORMANCESTAGE
NOTE: Stage where parties both comply with theirobligation. Nature of diligence required: diligence of agood father of the family unless other requirement isstipulatedConsequence: Seller will be guilty of breach if thing islost through his fault
I. Delivery of the Thing - Transfer ownership(tradicion) covers a twin obligations of the sellerwhich are:
1. to transfer the ownership; and2. to deliver a determinate thing
PNB vs. Ling , 69 Phil. 611Delivery of the thing together with the
payment of the price, marks the consummation of thecontract of sale
Norkis Distributor, Inc. vs. CA 195 SCRA 694The act of delivery must be coupled with the
intention of delivering the thing and putting the buyerunder control
Addison vs. Felix, 38 Phil . 404The execution of a public instrument is
equivalent to delivery. But to be effective, it isnecessary that the vendor have such control over thething sold that, at the moment of sale, its materialdelivery could have been made
II. Different kinds of delivery:1. Actual or real- when thing sold is placedin the control and possession of thebuyer
2. Legal or Constructive- can take severalforms and may be any manner signifyingan agreement that the possession istransferred from the vendor to thevendee.
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III. Different forms of Constructive Delivery -Constructive delivery has same legal effectas actual or physical delivery
Ten Forty Realty vs. Cruz, 10 Sept. 2003
Gives rise only to a prima facie presumption ofdelivery which is destroyed when actual delivery isnot effected because of a legal impediment
1. Traditio Longa Manu Delivery of thing by mere agreement; whenSELLER points to the property without needof actually delivering
2. Traditio Brevi Manu Before contract of sale, the would be buyerwas already in possession of the would besubject matter of sale (ex: as lessee)
3. Symbolic deliveryAs to movables ex: delivery of the keysto a car
4. Constitutum possessarium When at the time of the perfection of thecontract of sale, seller had possession of thesubject matter in the concept of owner andpursuant to the contract, seller continues tohold physical possession no longer in theconcept of an owner but as a lessee or anyother form of possession other than in theconcept of owner.
5. Quasi-tradition Delivery of rights, credits or incorporealproperty, made by:
a. Placing titles of ownership in thehands of the buyer
b. Allowing buyer to make use of rights
6. Tradition by operation of law
IV. WHEN EXECUTION OF PUBLICINSTRUMENT DOES NOT PRODUCE THE
EFFECTS OF DELIVERY1. When there is stipulation to contrary,
execution does not produce effect of delivery2. When at the time of execution of instrument,
subject matter was not subject to control ofthe seller
3. Subject matter should be within control ofseller; he should have capacity to deliver atthe time of execution of public instrumentwhen he wants to effect actual delivery
4. Such capacity should subsist for areasonable time after execution of instrument(reasonable time depends on circumstancesof persons, places and things)
V. Delivery of Fruits and Accessions/Accessories - Right to fruits andaccessions/accessories accrue from timesale is perfected but no real right over it untilit is delivered
VI. Delivery Through Carrier - General Rule:Where the seller is authorized or required tosend the goods to the buyer, delivery to thecarrier is delivery to the buyer.Exceptions: a contrary intention appears orimplied reservation of ownership under pars.1,2,3 of Art. 1503
1. FAS FREE ALONG SIDE - Whengoods delivered alongside the ship, there isalready delivery to the buyer (twin effectsdeemed fulfilled)
2. FOB - FREE ON BOARD - Shipment when goods are delivered at ship at point ofshipment; delivery to carrier by placing goodson vessel is delivery to buyer Destination when goods reach the porteven if not disembarked yet from the vessel,there is delivery to the buyer
3. CIF COST, INSURANCE, FREIGHT When buyer pays for services of carrier delivery to carrier is delivery to buyer; carrieris agent of the buyer When buyer pays seller the price frommoment the vessel is at port of destination,there is already delivery to buyer.
SeeArts. 1522, 1539, 1540, 1541, 1542, 1543.
VII. COMPLETENESS OF DELIVERY1. MOVABLES
a. delivery of thing plus accessoriesand accessions in the condition inwhich they were upon the perfectionof the contract including the fruits
b. When the seller delivers to the buyera quantity of goods LESS than hecontracted to sell, buyer has theoption to reject or accept it.a. When accepts with knowledge
that seller is not going to perform
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contract in full, he must pay atprice stipulated
b. When accepts and consumesbefore knowledge that buyerwill not perform contract in full,
liable only for fair value of goodsdeliveredc. When seller delivers to the buyer a
quantity of goods LARGER than hecontracted to sell the buyer has thefollowing options:
i. accept per contract and rejectthe rest
ii . accept the whole pay pricestipulated
iii. eject whole if subject matter isindivisible
d. When the seller delivers to thebuyer the goods he contracted tosell, MIXED with goods of adifferent description not included inthe contract, buyer has 2 options:
i. accept good w/c are inaccordance with contract andreject the rest
ii . reject goods entirely ifindivisible
2. IMMOVABLESa. Sold per unit or number
i. If the sale should be made with
statement of its area, rate atcertain price, deliver all that mayhave been stated in the contractif impossible, remedies of buyer:
ii . If Less in area:- rescission- proportional reduction of
price LACK IN AREASHLD NOT BE LESSTHAN 1/10 OF AREA
AGREED UPONiii. If Greater in area:
- accept per stipulation and
reject the rest- accept whole area pay
at contract rate- Not applicable to judicial
salesiv. Sold for lump sum
- When price per unit notindicated
- If area delivered is eithergreater or lesser price
will not be adjustedaccordingly
VIII. TIME AND PLACE OF DELIVERY1. Follow stipulation in contact, or
2. Follow usage in trade, or3. Sellers place of business or his residence4. Specific goods place where the thing is5. At reasonable hour
IX. EFFECTS OF DELIVERY - General Rule:The ownership of the thing sold shall betransferred to the buyer upon the actual orconstructive delivery thereof.Except when the contrary is stipulated suchin the cases of:1. contract to sell2. sale on acceptance/approval3. sale or return
NOTE: Who Bears Expenses of Delivery? Seller
X. SALE BY DESCRIPTION/SAMPLE1. Sample goods must correspond with
sample shown2. Description goods must correspond
with description or sample3. Effect if there is no compliance:
RESCISSION may be availed of bythe buyer
XI. OBLIGATIONS OF BUYER1. Pay the price
a. Buyer is obligated to pay priceaccording to terms agreed uponregarding time, place and amount
b. If payment of interest is stipulated must pay; if amount of interest notmentioned apply legal rate
c. When buyer defaults constitutesbreach: subject to specificperformance/rescission anddamages; interest to be paid alsofrom default
2. Accept delivery of thing solda. Where to accept: at time and place
stipulated in the contract; if nonespecified at the time and place ofdelivery goods; there is acceptancewhen:
i. He intimates to seller thathe has accepted
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ii . When delivered and doesany act inconsistent withownership of seller
iii. Retains without intimatingto seller that he has
rejected
3. Sale of Goods on installmenta. Goods must be delivered in full,
except when stipulatedb. When not examined by buyer not accepted
until examined or at least had reasonabletime to examine
4. Acceptance of goods in general, absent contraryexpress stipulation, does not discharge sellerfrom liability in case of breach of warranties(unless no notice or failure to give it withinreasonable time)
5. When buyer has a right to refuse goods, noneed to return; shall be considered asdepositary; unless there is stipulation to thecontrary
Art. 1544. If the same thing should have beensold to different vendees, the ownership shall betransferred to the person who may have firsttaken possession thereof in good faith, if itshould be movable property.
Should it be immovable property, the ownershipshall belong to the person acquiring it who ingood faith first recorded it in the Registry ofProperty.
Should there be no inscription, the ownershipshall pertain to the person who in good faith wasfirst in the possession; and, in the absencethereof, to the person who presents the oldesttitle, provided there is good faith. (1473)
DOUBLESALE
General Rule: FIRST IN TIME, PRIORITY IN RIGHTWhen does it apply: when not all requisitesembodied in 1544 concur.
I. REQUISITES FOR DOUBLE SALES TOEXIST: (VOCS)1. Two or more sales transactions must
constitute valid sales;
2. Two or more sales transactions mustpertain to the same object or subjectmatter;
3. Two or more buyers at odds over therightful ownership of the subject matter
must each represent conflicting interests;and4. Two or more buyers must each have
bought from the very same seller.
Consolidated Rural Bank (Cagayan Valley_ vs.CA [Jan. 17, 2005]
If not all the elements are present for Art.1544 to aply, the priniciple of prior tempore, potior
jure or simply he who is first in time is preferred inright should apply. Undisputably, he is a purchaserin good faith because at the time he bought the realproperty, there was still no sale to as a secondvendee.
II. RULES ACCORDING TO 1544:1. MOVABLE
a. Owner is first to posses in good faith
2. IMMOVABLEa. First to register in good faithb. No inscription, first to possess in
good faithc. No inscription and no possession in
good faith Person who presentsoldest title in good faith
d. Good Faith - one who buys propertywithout notice that another personhas a right or interest in suchproperty; one who has paid pricebefore notice that another has claimor interest
III. LIS PENDENS notice that subject matter isin litigation
IV. ADVERSE CLAIM notice that somebody isclaiming better right
V. POSSESSIONBoth actual or constructive
VI. REGISTRATION: any entry made in thebooks of the registry, including bothregistration in its ordinary and strict sense,and cancellation, annotation, and evenmarginal notes. It is the entry made in theregistry which records solemnly andpermanently the right of ownership and otherreal rights.1. registered under Torrens system 1544
applies
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2. not registered under the Torrens system1544 still applies
Jurisprudenceif 2
ndsale is a judicial sale (by way of levy on
execution), buyer merely steps into the shoes of thejudgment debtor. Outside of such situation mustapply to conflicting sales over the same unregisteredparcel of land
If sale 1 occurs when land is not yetregistered and sale 2 is done when land is alreadyregistered apply FIRST IN TIME, PRIORITY INRIGHT
Gabriel v. Mabanta, et al. [2003]Good faith must concur with registration. To
be entitled to priority, the second purchaser must notonly establish prior recording of his deed, but must
have acted in good faith.
CONDITION
1. Effect of Non-Fulfillment of ConditionThe other party may
a. refuse to proceed with the contractb. proceed with the contract, waiving the
performance of the conditionIf the condition is in the nature of a promise that itshould happen, the non-performance of suchcondition may be treated by the other party asbreach of warranty.
2. Effect if buyer has already sold the goods
General Rule: The unpaid sellers right to lien orstoppage in transitu remains even if buyer has soldthe goodsException:
o When the seller has given consent thereto, oro When the buyer is a purchaser in good faith
for value of a negotiable document of title.
NEGOTIABLE DOCUMENTS OF TITLESee Article 1636
1. Not creation of law but by merchants to allowthem to deal with merchandise without havingto physically carry them around
2. Pertains to specific type of movables only :GOODS
a. Documents of title serve two (2)functions:
i. evidence of existence andpossession of goodsdescribed therein
ii. medium by which seller is ableto transfer possession of
goods3.A document of title which states that the goodsreferred to therein will be delivered to thebearer, or to the order of any person named insuch document
4. Negotiable by delivery or indorsement
TYPES1. NEGOTIABLE
a. deliver to bearer (negotiation by meredelivery)
b. deliver to specific person or his order(negotiation by endorsement + delivery)
i. even if face of instrument says NON-NEGOTIABLE, it is stillNEGOTIABLE; limiting words doesnot destroy negotiability
ii . If order instrument and noendorsement was made equivalentto assignment
2. NON-NEGOTIABLE
EFFECTS OF UNAUTHORIZED NEGOTIATIONThe validity of the negotiation of a negotiabledocument is not impaired by the fact that negotiation
was done in breach of duty or that the owner of thedocument was deprived of the same by loss, theft,accident, fraud, mistake if the person to whom thedocument is delivered is in good faith and withoutnotice of the said irregularities.
Important Considerations1. Negotiation gives better right than
assignment2. Assignee takes document with defects of the
assignor3. Obligation of bailee bailee is immediately
bound to the document
Warranties on Negotiation1. the document is genuine2. he has legal right to negotiate or transfer it3. he has knowledge of no fact which would
impair the validity or worth of the document4. he has right to transfer title to goods and
goods are merchantable/fit
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Rules of Levy/Garnishment of Goods Covered byDocuments of Title2. NON NEGOTIABLE:
a. Notification is operative act to transfer
title/possession of goods in favorassigneeb. Before notification can still be
garnished
3. NEGOTIABLE:a. Can not be levied or garnished when
documents are already with purchaser ingood faith, unless:
b. Document is first surrenderedc. Document is pounded by courtd. Negotiation is enjoined
SALE BY NON-OWNER OR BY ONE HAVINGVOIDABLE TITLE
See Arti cles 1475, 1477, 1505, 1506
I. SALE BY NON-OWNER1. PERFECTION STAGE
a. Sale by owner VALIDb. Sale by non-owner VALID;c. Reason why both sales are valid:
ownership is necessary only at timewhen transfer title to goods; atperfection stage, no obligation onpart of seller to transfer ownership
d. Law on estoppel further bolsters it:title passes by operation of law tograntee when person who is notowner of the goods sold delivers it
and later on acquires title theretoe. Since valid, action to annul is
improper; there is already aperfected contract
2. CONSUMMATION STAGEa. Contract of sale is valid because it
has passed perfected stage, despiteseller not being the owner or sellerhaving no authority to sell
b. What is void is the transfer of title/ownership did not pass
c. Effect: buyer acquired no better rightthan transferor
d. Legal effect: CAVEAT EMPTOR
BUYER BEWAREe. Sale of co-owner of whole propertyor definite portion
GENERAL RULE:i. co-owner sells whole property prior
to partition sale of property itself isvoid but valid as to his spiritual share
ii . co-owner sells definite portion topartition sale is void as to other co-owner but valid as to his spiritualshare if the buyer would have stillbought such spiritual share had heknown that the definite portion soldwould not be acquired by him.
NEGOTIATION ASSIGNMENTtransferor/holder acquirestitle to goods
acquires title to goods againsttransferor
II. EXCEPTIONS TO THE RULE ON THE EFFECTOF SALE OF A DEFINITE PORTION OBY A CO-OWNER
bailee has direct obligation acquires right to notify bailee so
1. Subject matter is indivisible in nature or byintent;
2. Sale of a particular portion of a property iswith consent of other co-owners;
3. Co-owner sells 1 of 2 commonly-ownedlands and does not turn over of theproceeds, other co-owner, by law and equity,
has exclusive claim over remaining land.
III. RULES ON LEGAL EFFECTS OF SALE BY ANON-OWNERGENERAL RULE: Sale by non-owner, buyeracquires no better title than seller had.EXCEPTIONS:
1. Owner by his conduct is precludedfrom denying sellers authority(ESTOPPEL)
2. Contrary is provided for in recordinglaws (PD 1529)
3. Sale is made under statutory powerof sale or under order of acourt of competent jurisdiction
4. Sale is made in a merchants store inaccordance with code of commerceand special laws
IV. SALE BY SELLER WITH VOIDABLE TITLE1. PERFECTION STAGE
a. Valid sale buyer acquires title of goods
to holder as if directly dealt that he acquires obligation ofwith him bailee to hold goods for him
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2. CONSUMMATION STAGEa. Valid sale if title has not yet beenavoided, buyer buys goods under followingcondition:
o
in good faitho for valueo without notice of sellers defect of
title
V. TITLE AS TO MOVABLE PROPERTIESGENERAL RULE: Possession is equivalentto titleRequisites: Possession of movable andGood Faith
VII. EXCEPTIONS:1. Owner lost movable owner can recover w/o
reimbursing price2. Owner is unlawfully deprived owner can
recover w/o reimbursing price
VIII, EXCEPTIONS TO THE EXCEPTIONS: movable is bought at public sale ownercan only recover after reimbursing price acquired in good faith and for value fromauction
LOSS, DETERIORATION, FRUITS and OTHERBENEFITS
See Articles 1493 and 1494
Legal consequences from point of perfection are thesame in both legal systems: upon perfection of anunconditional contract of sale involving specific ordeterminate subject matter, the risk of lossdeterioration and the benefits of fruits andimprovements, were fro the account of the buyer.
WHO BEARS RISK OF LOSS/ DETERIORATION/FRUITS:
1. BEFORE PERFECTIONa. Res perit domino
b. Owner is seller so seller bears risk ofloss
2. AT PERFECTIONo Res perit dominoo Contract is merely inefficacious
because loss of the subject matterdoes not affect the validity of thesale
o Seller cannot anymore comply withobligation so buyer cannot anymore becompelled
3. AFTER PERFECTION BUT BEFORE
DELIVERYo Loss confused stateo Paras: BUYERo Tolentino: SELLERo Deterioration and fruits - Buyer
bears loss;
4. AFTER DELIVERYo Res perit dominoo Delivery extinguishes ownership vis-
a-vis the seller and creates a newone in favor of the buyer
REMEDIES OF PARTIES FOR BREACH OFCONTRACT OF SALE
See Art icles 1594-1596. 1484-1486, 1592
SUBJECT MATTER: MOVABLES (IN GENERAL)
Remedies of Unpaid SellerGENERAL RULE: Any man may not take law in hisown hands, must seek remedy through courtsEXCEPTION:
DOCTRINE OF SELF HELP SPECIAL REMEDIES
Requisites:1. Subject matter goods2. Seller is unpaid not completely paid
or received negotiable instrumentunder a condition and condition hasbeen breached by reason of
dishonor3. Physical possession is with seller
The following are the special remedies of unpaidseller
1. possessory lien2. stoppage in transitu3. special right of re-sale
4. special right to rescind
NOTE: Hierarchical Application - only when unpaidseller has exercised possessory lien or stoppage intransitu can the seller proceed with his other specialrights of resale or to rescind.
I. Possessory Lien1. Seller not bound to deliver if buyer has not
paid him the price
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2. Right to retain; cannot be availed when sellerdoes not have custody
3. Exercisable only in following circumstances:a. goods sold without stipulation as to creditb. goods sold on credit but term of credit
has expiredc. buyer becomes insolventd. When part of goods delivered, may still
exercise right on goods undelivered
Instances when possessory li en lost:1. seller delivers goods to carrier for
transmission to buyer without reservingownership in goods or right to possess them
2. buyer or his agent lawfully obtainspossession of goods
3. waiver4. loses lien when he parts with goods (still has
stoppage in transitu)5. notice by seller to buyer not essential
II. Stoppage In Transitu Goods are in transit Requisites when goods are in transit
1. From the time goods are delivered tocarrier for purpose of transmission tobuyer
2. Goods rejected by buyer and carriercontinues to possess them
When goods no longer in transit1. Reached point of destination
2. Before reaching destination, buyer obtainsdelivery of the goods
3. Goods are supposed to have been deliveredto buyer but carrier refused
4. Shown by seller that buyer is insolvent(failure to pay when debts become due )
How is righ t exercised1. Obtain actual possession of goods2. Give notice of claim to carrier / bailee in
possession thereof3. Notice by seller to buyer is not required;
notice to carrier is essential
III. Special Right to Resell the Goods1. goods are perishable2. stipulated the right of resale in case buyer
defaults in payment3. buyer in default for unreasonable time4. notice by seller to buyer not essential
why special? there are things which seller cannotdo in ordinary sale:
1. ownership is with buyer but seller cansell goods
2. title accorded to buyer is destroyedeven without court intervention
IV. Special Right to Rescind1. Expressly stipulated2. Buyer is in default for unreasonable time3. Notice needed to be given by seller to buyer
why special? ownership of goods already withbuyer but seller may still rescind; ownership isdestroyed even without court intervention but inordinary sale, need to go to court to destroy transferof ownership
Remedies of BuyerWhen Seller fails to deliver, buyer may seekSPECIFIC PERFORMANCE WITHOUT GIVINGSELLER OPTION TO RETAIN GOODS ONPAYMENT OF DAMAGES
SALE OF MOVABLES ON INSTALLMENT
Remedies of Unpaid Seller(1484)1. Exact fulfillment should the buyer fail to pay.2. Cancel the sale if buyer fails to pay 2 or more
installments.3. Foreclose on chattel mortgage if buyer fails to
pay 2 or more installments
Incidents:1. If buyer chooses foreclosure, no further
action against buyer to recover any unpaidbalance of the price
2. When is the law applicable? Sale onmovables by installment
o Sale on installment: payment byseveral partial payments in smallamount
4. Rationale of the law : Buyer is lulled intothinking that he could afford because ofsmall amounts per installment andat the same time remedy abuse ofcommercial houses
5. Nature of remedies: alternative and notcumulative
6. Coverage:sale and financing transactionand contracts of lease with option topurchase
7. Action : Judicial and Extrajudicial
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o Specific Performancei. If already chose specific
performance, can no longerchoose other remedies
Except: after choosing, it has
become impossible, rescission maybe pursuedb. Rescission
- When chosen, there iscorrelative obligation torestitute
- But stipulation thatinstallments paid areforfeited are valid if notunconscionable
- Deemed chosen when:o Notice of rescission is
sento Takes possession of
subject matter of saleo Files action for
rescissionBarring effect on recovery ofbalance
3. Foreclosurei. Barring effect on recovery of
balanceii. Extent of barring effect: purchase
priceiii. Exception: mortgagor refuses to
deliver property to effect
foreclosure, recover alsoexpenses incurred in attorneysfees, etc. (Perverse Buyer-Mortgagor)
IMMOVABLES (IN GENERAL)
Remedies of SellerAnticipatory breach
1. Seller has reasonable grounds to fear loss ofimmovable sold and its price, sue forRESCISSION
2. Nonpayment of price, sue for RESCISSION
Remedies of Buyer1. In case of subdivision or condo projects,
suspend payment.2. If real estate developer fails to comply with
obligation according to approved plan:- RESCIND- SUSPEND PAYMENT UNTIL SELLER
COMPLIES
IMMOVABLES (BY INSTALLMENT)Article 1592 Applies only to contract of sale
I. Maceda Law 1. applies to COS and CTS and Financing
2. Coverage: REAL ESTATE defined space vs.CONDO not defined space (w/ commonareas)
3. Excluded:a. Industrialb. Commercialc. Sale to tenants under agrarian laws
Rights Granted to Buyers:
o Buyer paid at least 2 years installment1. Pay without interest the balance within
grace period of 1 month for every year ofinstallment payment
2. Grace to be exercised once every 5years
3. When no payment - cancelled; buyerentitled to 50% of what he has paid + ifafter 5 years of installments, 5% forevery year but not to exceed 90% of totalpayments made
4. Cancellation to be effected 30 days fromnotice and upon payment of cashsurrender value
o Buyer paid less than 2 years installment1. 1
stGrace period is 60 days from date
installment became due2. 2
ndgrace period of 30 days from notice of
cancellation/demand for rescission buyer can still pay within the 30
day period with interest No payment after 30 day period,
can cancel.
Purpose of law - Protect buyers in installmentsagainst oppressive conditions
Notice needed - waiver thereof if oppressive
Appl ies to contracts even before law wasenacted Stipulation to contrary is void
Other rights:o Sell rights to another
o Reinstate contract by updating duringgrace period and before actualcancellation
o Deed of Sale to be done by notarial act
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o To pay in advance any installment or thefull balance of price anytime withoutinterest
o Have full payment annotated in certificateof title
REMEDY OF RESCISSION IN CONTRACTSCOVERING IMMOVABLES
See Articles 1191, 1592
o Nature: Judicialo Extra judicial Rescission
a. allowed if stipulated; burden to sue shiftsto party who does not like rescission
b. court still has final say as to propriety ofrescission
c. Forfeiture of amounts valid being innature of penal clause
o Contract of Sale Rescission is Applicableo Contract to Sell Rescission not Applicable
Nonpayment of purchase price wouldautomatically cancel even without furtheraction for rescission
Except: If subject matter is residentiallots, law on rescission applies whenthere is substantial breach. Maceda lawapplies.
CONDITION and WARRANTIESSee Articles 1545-1547
I. Condition
1. When a contract contains a condition, the nonhappening of which would not constitute a breachbut extinguishes the obligation
2. However, if party to the sales contract haspromised that the condition should happen or beperformed, the non-performance of which may betreated by parties as breach
II. WarrantiesA statement or representation made by the sellercontemporaneously and as a part of the contract ofsale, having reference tot eh character, quality, ortitle of the goods, and by which he promises or
undertakes to insure that certain facts are or shall beas he then represents
Express Warranties ( requisites ):1. it must be an affirmation of fact or any promise by
seller relating to the subject matter of sale2. natural tendency of affirmation or promise is to
induce buyer to purchase subject matter3. buyer purchases the subject matter relying
thereon
4. when breached, seller is liable for damages
Implied WarrantiesDeemed included in all contracts of sale whetherparties are actually aware or not, whether they were
intended or not; by operation of law
1. warranty that seller has a right to sello refers to consummation stage since in
consummation stage, it is whereownership is transferred by tradition
o not applicable to sheriff, auctioneer,mortgagee, pledge
2. warranty against evictiona. implied, unless contrary provision appears in
contractb. when ownership is transferred, buyer shall
enjoy the legal and peaceful possession ofthe thing
c. Requisites of breach of warranty againsteviction:
- buyer is evicted in whole or in partfrom the subject matter of sale
- there is a final judgement- basis of eviction is a right prior to
sale or an act imputable to vendor- seller has been summoned in the
suit for eviction at the instance ofbuyer; or made 3
rdparty defendant
through 3rd
party complaint broughtby buyer
Vendors liability shall consists of (TotalEviction)(VICED)1. Value of the thing at the time of eviction;2. Income or fruits if he has been ordered to deliver
the to the party who won the suit3. Cost of the suit4. Expenses of the contract; and5. Damages and interests if the sale was in bad
faith
Partial Eviction1. to enforce vendors liability for eviction
(VICED); or2. to demand rescission of contract .
a. no appeal needed nor a need forbuyer to resist eviction for right toaccrue; it is enough that theaforementioned requisites arecomplied with
b. warranty cannot be enforced untilaforementioned requisites concur
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c. applies to judicial sale; judgmentdebtor responsible for eviction unlessotherwise decreed in judgment
d. vendor not liable for eviction ifadverse possession had been
commenced before sale butprescriptive period is completed aftertransfer
e. Rights of buyer when deprived ofonly part of the subject matter butwould not have bought such part ifnot in relation for the whole:1. Rescission2. Mutual restitution
3. warranty against encumbrances (non-apparent)o Requisites:
a. immovable sold is encumberedwith nonapparent burden orservitude not mentioned in theagreement
b. nature of nonapparent servitudeor burden is such that it must bepresumed that the buyer wouldnot have acquired it had he beenaware thereof
c. when breach of warranty exist: buyermay ask for rescission of indemnity
d. warranty not applicable when nonapparent burden or servitude isrecorded in the Registry of Property
unless there is express warrantythat the thing is free from allburdens and encumbrances
4. warranty against hidden defectso SELLER does not warrant patent
defect; caveat emptoro Except when hidden
1. subject matter may be movableor immovable
2. nature of hidden defect is suchthat it should render the subjectmatter unfit for the use of which it
was intended or should diminishits fitness
3. had the buyer been aware, hewould not have acquired it orwould have given a lower price
a. when defect is visible or even if not visiblebut buyer is an expert by reason of his tradeor profession, seller is not liable
b. obligation of seller for breach depends onwhether he has knowledge of such defect ornot
c. seller is aware seller should return priceand refund expenses of contract withdamages
d. seller is not aware - seller should returnprice and interest and refund expenses ( no
damages )e. buyer may elect between withdrawing fromcontract or demanding proportionatereduction of price with damages in eithercase
f. applicable to judicial sale except thatjudgment debtor not liable for damages
g. action to prescribe 6 months from delivery ofsubject matter
5. defects on animalsa. even in the case of professional inspection
but hidden defect is of such nature thatexpert knowledge is not sufficient to discoverit - defect shall be considered asREDHIBITORY
b. if vet fails to discover through ignorance orbad faith he is liable for damages
c. sale of animals on teams (2 or more)- when only one is defective, only one is
redhibited and not the others- exception: when it appears buyer would
not have purchased the team without thedefective one
- apply to sale of other thingsd. animals at fair or public auction
- no warranty against hidden defects
e. sale of animals with contagious disease isvoid
f. sale of unfit animals- void if use / service for which they are
acquired has been stated in the contractand they are found to be unfit therefor
o prescription of action:40 days from date ofdelivery to buyer
o if sale is rescinded, animals to be returned insame condition when they were acquired;buyer shall answer for injury / loss due to hisfault- buyer may elect between withdrawing
from sale and demanding proportionatereduction of price with damages in eithercase
Specific Implied Warranties in the Sale of GoodsWarranty as to fitness and quality; requisites:
1. Buyer makes known to seller the particularpurpose for which goods are acquiredand it appears that the buyer relied on thesellers skill or judgment
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2. Goods are bought by description from sellerwho deals in goods of that description
3. in case of sale of specified article under itspatent or trade name, no warranty unlessthere is a stipulation to the contrary
4. measure of damage: difference between valueof goods at time of delivery and value theywould have had if they had answered to thewarranty
Sale of Goods by sampleIf seller is a dealer in goods of that kind, there is animplied warranty that the goods shall be free fromdefect rendering them unmerchantable which wouldnot be apparent on reasonable examination of thesample
Effects of Waivero Waiver in Warranty against eviction -
Parties may increase or diminish impliedwarranty against eviction; but effectdepends on good faith or bad faith on thepart of the seller.
1. Seller in bad faith and there iswaiver against eviction null andvoid
2. buyer without knowledge of aparticular risk, made generalrenunciation of warranty notwaiver but merely limits liabilityof seller in case of eviction (payvalue of subject matter at time of
eviction)3. buyer with knowledge of risk of
eviction assumed itsconsequences and made awaiver vendor not liable(applicable only to waiver ofwarranty against eviction)
4. waiver to a specific case ofeviction - wipes out warranty asto that specific risk but not as toeviction caused by otherreasons.
Waiver against Hidden Defects1. If there has been a stipulation exempting
seller from hidden defects2. If seller not aware of hidden defects loss of
the thing due to such defect will not makeseller liable
3. If seller aware waiver is in bad faith, thusseller still liable
Buyers Option in Case of Breach of Warranty
1. Accept goods and set up breach of warrantyby way of recoupment in diminution orextinction of the price.
2. Accept goods and maintain action againstseller for damages
3. Refuse to accept goods and maintain actionagainst seller for damages4. Rescind contract of sale and refuse to receive
goods/return them when already received.
When rescission by buyer not allowed:1. if the buyer accepted the goods knowing the
breach of warranty WITHOUT protest2. if he fails to notify the seller within a reasonable
time of his election to rescind3. if he fails to return or offer to return the goods in
substantially as good condition as they were in atthe time of the transfer of ownership to him
EXTINGUISHMENTSeeAr ts. 1600 -1623
I. Grounds (same grounds wherebyobligations in general are extinguished)1. payment or performance2. loss of the subject matter3. condonation or remission4. confusion or merger of rights of creditor
and debtor5. compensation6. novation7. annulment
8. rescission9. fulfillment of a resolutory condition10. prescription
II. Conventional redemption1. only extinguishes obligations pertaining
to contract of sale, not extinguishcontract itself; only applies to contract ofsale
2. The right which the vendor reserves tohimself to reacquire the property soldprovided he returns to the vendee:a. the price of the sale,
b. expenses of contract,c. other legitimate payments,d. he necessary and useful expenses
made on the thing solde. and fulfills other stipulations which
may have been agreed upon3. The right is exercised only be seller in
whom right is recognized in the contractor by any person to whom right wastransferred; must be in the same contract
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III. Legal redemption1. Only applies to contracts of sale.2. The right to be subrogated upon the
same terms and conditions stipulated inthe contract, in the place of one who
acquires the thing by (1) purchase OR(2) by dation in payment OR (3) by othertransaction whereby ownership istransmitted by onerous title.
3. Types of Legal Redemption:a. among co-heirs
i. any of the heirs sell hishereditary rights to strangerbefore partition
ii . any of the co-heirs may besubrogated to the rights of thepurchaser by redeeming saidhereditary right: reimburse buyerof the price of the sale
iii. co-heirs has 1 month fromreceipt of notice in writing
b. among co-ownersi. any or all of co-owners sells their
shares to 3rd
personii . any co-owner may exercise right
of redemption by payingreasonable price of property tothe buyer
iii. if 2 or more co-owners desire toexercise right of redemption,they may only do so in proportionto the share they respectively
have in thing owned in commonc. among adjoining owners
i. rural landa. where piece of rural land has
an area not exceeding 1hectare, adjoining owner hasright to redeem unlessgrantee does not own a ruralland
b. if two or more adjacent lotowners desire to exerciseright to redeem, owner ofadjoining lot with smaller
area shall be preferredc. if two or more adjacent lit
owners desire to exerciseright to redeem and bothhave same lot area, one whofirst requested shall begranted
ii. urban landa. when piece of land is small
and cannot be used for anypractical purpose and bought
merely for speculation,owner of adjoining land canredeem
b. 2 or more owners ofadjoining lot desire to
exercise right to redeem,owner whose intended use isbest justified shall bepreferred.
d. sale of credit in litigationi. when a credit or other
incorporeal right in litigation issold, debtor shall have a right toextinguish it by reimbursing theassignee for the price the latterpaid therefor plus judicial costs,interest
ii . debtor may exercise right within30 days from the date assigneedemands payment from him
4. Other Instances When Right of LegalRedemption is Granteda. Redemption of homesteadsb. Public Land Actc. Land acquired under free patent
homestead subject to repurchase bywife, legal heirs within 5 years fromdate of conveyance granted by law,need not be stipulated
5. Redemption in tax salesa. in case of tax delinquency/failure topay tax assessments, property isforeclosed
b. delinquent payer has 1 year from dateof sale to redeem by paying to therevenue District Officer the amount oftax delinquencies, and interest orpurchase price.
6. Redemption by judgment debtor - 1 yearfrom date of registration of certificate ofsale to redeem by paying purchaser atpublic auction with interest
7. Redemption in extrajudicial foreclosure - 1year from date of sale and registration
8. Redemption in judicial foreclosure ofmortgage - no right to redeem is granted todebtor mortgagor except when mortgageeis bank of a banking institution 90 daysafter finality of judgment
9. When Period of Redemption Begins to Run- Right of legal pre-emption of redemption
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shall be exercised within 30 days fromnotice by the seller
10. How exercised - tender of payment is notnecessary; offer to redeem is enough.
a. There is no prescribed form for an
offer to redeem to be properlyeffected. Hence, it can either bethrough a formal tender withconsignation of the redemptionprice within the prescribed period.What is paramount is the availmentof the fixed and definite periodwithin which to exercise the right oflegal redemption.
b. deeds of sale are not to be recordedin Register of Deeds unlessaccompanied by affidavit of sellerthat he has given notice to all
possible redemptioners
NOTE: Written notice under Art. 1623 is mandatoryfor the right of redemption to commence (PSC vs.Sps. Valencia, 19 Aug. 2003). Thus, the GeneralRule is that actual knowledge notwithstanding,written notice is still required Except when actualknowledge is acquired by co-heirs living in same landwith purchaser, or co-owner was middleman in saleto 3
rdparty.
Etcuban vs. CA, et. al. 148 SCRA 507 Art. 1623does not prescribe any distinctive method for notifying
the redemptioner
IV. Option to Purchase - Right to repurchasethe thing sold granted to the vendor in aseparate instrument from the deed of sale
V. Equitable Mortgage
Cachola vs. CA, 208 SCRA 496One which lacks the proper
formalities, form of words, or other requisitesprescribed by law for a mortgage, but shows the
intention of the parties to make the property subjectof the contract as security for a debt and containsnothing impossible contrary to law.
1. A contract with right to repurchase isdeemed to be an equitable mortgage ifthe following requisites concur(IPERTI):a. price of sale with right to repurchase
is unusually inadequateb. seller remains in possession as
lessee or otherwise
c. upon or after expiration of right torepurchase, another instrumentextending the period of redemptionor granting new period is executed
d. buyer retains for himself a part of
the purchase pricee. seller binds himself to pay taxes onthing sold
f. real intention of parties is to securethe payment of a debt orperformance of other obligation
NOTE: In case of doubt in determining whether it isan equitable mortgage or a sale a retro, the sale shallbe construed as an equitable mortgage.
2. What to Look for in Determining Natureof Contract
a. language of the contractb. conduct of parties to reveal real
intent
3. Remedy available to vendor: ask forreformation of contract
4. Rationale behind provision on EquitableMortgage:a. Circumvention of usury lawb. Circumvention of prohibition against
pactum commissorium creditorcannot appropriate the things given
by way of pledge or mortgage;remedy here is foreclosure. The realintention of parties is that thepretended purchase price is moneyloaned and to secure payment of theloan, sale with pacto de retro isdrawn up
5. Period of Redemption a. No period agreed upon 4 years
from date of contractb. Period agreed upon should not
exceed 10 years; if it exceeded, validonly for the first 10 years.
c. When period to redeem has expired
and there has been a previous suiton the nature of the contract sellerstill has 30 days from final judgmenton the basis that contract was a salewith pacto de retro:
d. Rationale: no redemption due toerroneous belief that it is equitablemortgage which can be extinguishedby paying the loan.
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e. This refers to cases involving atransaction where one of the partiescontests or denies that the trueagreement is one of sale with theright to repurchase; not to cases
where the transaction is conclusivelya pacto de retro sale.f. Example: Where a buyer a retro
honestly believed that he enteredmerely into an equitable mortgage,not a pacto de retro transaction, andbecause of such belief he had notredeemed within the proper period.
NOTE: When period has expired and seller allowedthe period of redemption to expire seller is at faultfor not having exercised his rights so should not begranted a new period
Paez vs. MagnoTender of payment is SUFFICIENT to compelredemption, but is not in itself a payment that relievesthe vendor from his liability to pay the redemptionprice
VI. Effect when There is No RedemptionMade1. jurisprudence before the NCC: buyer a
retro automatically acquires fullownership
2. under present art 1607: there must bejudicial order before ownership of realproperty is consolidated in the buyer aretro
VII. How is Redemption Effected1. Seller a retro must first pay the following:
a. the price of the thing soldb. expenses of the contract and other
legitimate payments made by reasonof the sale
c. necessary and useful expensesmade on the thing sold
d. Valid tender of payment is sufficient
e. Mere sending of notice without validtender is insufficient
f. Failure to pay useful andunnecessary expenses entitlesvendee to retain land unless actualreimbursement is made
VIII. In Case of Mult i-Parties1. When an undivided thing is sold because
co- owners cannot agree that it beallotted to one of them vendee a retro
may compel the vendor to redeem thewhole thing
2. When an undivided thing is sold by co-owners / co-heirs, vendors a retro mayonly exercise his right over his respective
share; vendee a retro may demand thatthey must come to an agreement firstand may not be compelled to consent toa partial redemption
3. When rights of co-owners over anundivided thing is sold as regards to theirown share vendee retro cannot compelone to redeem the whole property
4. Should one of the co-heirs/co-ownerssucceed in redeeming the property such vendor a retro shall be consideredas trustee with respect to the share ofthe other co-owners/co-heirs.
IX. Fruits1. what controls is the stipulation between
parties as regards the fruits; if none:a. at time of execution of the sale a
retro there are visible or growingfruits there shall be no pro-ratingat time of redemption if noindemnity was paid by the vendee aretro
b. at time of execution sale a retrothere be no fruits but there are fruitsat time of redemption pro-ratedbetween vendor a retro and vendee
a retro giving the vendee a retro apart corresponding to the time hepossessed the land.
PRE-EMPTION REDEMPTION
1. Arises before sale Arises after sale
2. No rescissionbecause no sale existsyet
There can be rescissionof the original sale
3. The action is directedagainst prospective
seller
Action is directed againstbuyer
ASSIGNMENTSeeArts . 1624 1634
I. ASSIGNMENT: The owner of a credittransfers to another his rights and actions inconsideration of a price certain in money or itsequivalent
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1. transfers the right to collect the full valueof the credit, even if he paid a price lessthan such value
2. transfers all the accessory rights (e.g.guaranty, mortgage, pledge, preference)
3. debtor can set up against the assigneeall the defenses he could have set upagainst the assignor
II. What Makes Assignment Different FromSpecies Sale?
1. Technical term but basically a sale2. Sale of credits and other incorporeal
things
III. Effects of Assignment
1. lack of knowledge or consent of debtornot essential for validity but has legaleffects
2. assignment of rights made w/oknowledge of debtor debtor mayset up against assignee the
compensation w/c would pertain tohim against assignor of allcredits prior to assignment and of laterones until he had knowledge of the
assignment3. debtor has consented to assignment
cannot set up
4. compensation unless assignor wasnotified by debtor that he reserved hisright to the compensation
5. debtor has knowledge but no consent -may still set up compensation ofdebts previous to assignment but notthe subsequent ones.
IV. Transfer of Ownership1. by tradition and not by perfection2. by execution of public instrument
because intangibles cannot bephysically transferred
3. Without necessity of delivering thedocument evidencing the credit.
4. This rule does not apply to negotiabledocuments and documents of titlewhich are governed by special laws.
V. Effect of payment of debtor afterassignment of credit1. Before Notice of the Assignment
a. Payment to the original creditor isvalid and debtor shall be releasedfrom his obligation
2. After Noticea. Payment to the original creditor is
not valid as against the assigneeb. He may be made to pay again bythe assignee
VI. Warranties of the assignor of credit1. NO warranty against hidden defect -
N/A because intangibles has nophysical existence
2. He warrants the existence and legalityof credit - there is warranty exceptwhen expressly sold as a doubtfulaccounta. NO warranty as to the solvency of
debtor unless it is expresslystipulated OR unless theinsolvency was already existingand of public knowledge at thetime of the assignment
b. warranty shall last for 1 year onlyc. one who assigns inheritance right
w/o enumerating rights shall beanswerable for his character asan heir
d. one who sells whole of certainrights for a lump sum, shall beanswerable for legitimacy of thewhole in general but not for each
of the various parts
VII. Breach of Warranty: Liabilities of theassignor of credit for violation of hiswarranties1. Assignor in good faith
a. Liability is limited to pricereceived, expenses of thecontract and other legitimatepayments made by reason of theassessment
2. Assignor in bad faitha. Liable ALSO for (expenses of
contract and other legitimatepayments plus useful andnecessary expenses) damages
VIII. Assignment of Credit or Incorporeal Rightin Lit igation - Requisites:1. There must be a sale or assignment of
credit2. There must be a pending litigation3. The debtor must pay the assignee:
a. price paid by him AND
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b. judicial costs incurred by him ANDc. interest on the price from the date of
payment4. The right must be exercised by the
debtor within 30 days from the date the
assignee demands (judicially or extre-judicially) payment from him
NOTE: Presumption: buyers purpose is speculationand; law would rather benefit the debtor of suchcredits rather than the one who merely speculates forprofit.
NOTE: When credit or incorporeal right in litigation isassigned or sold, debtor has a right to extinguish it byreimbursing the assignee for the price the buyer paidplus interest
IX. Right to redeem by debtor not available inthe following instances (not cons ideredspeculative
1. assignment of credit / incorporeal rightto co-heir or co-owner; the law doesnot favor co-ownership
2. assignment to creditor in payment forhis credita. presumption is that the
assignment is above suspicion;assignment is in the form ofdacion en pago, thus perfectlylegal
3. assignment to possessor of tenementor piece of land which is subjectto the right in litigation assigneda. purpose is to presumably
preserve the tenement
BULK SALES LAW
I. Purpose: Protect creditor of merchantstores.
II. When sale or transfer in bulk? - Any sale,transfer, mortgage, or assignment
1. of goods other than in ordinary courseof business
2. of all or substantially all of business3. of all or substantially all of fixtures and
equipments
III. Should cover only merchants becausecreditors cannot get adequate securitybecause goods are sold ordinarily incourse of business
IV. When sale or transfer NOT covered byBulk Sales Law:1. If the transfer is in the ordinary course of
trade and the regular prosecution of the
business of the vendor2. If it is made by one who produces anddelivers a written waiver of the provisionsof the Bulk Sales Law from its creditors
3. If it is made by an executor,administrator, receiver, assignee ininsolvency, or public officer, acting under
judicial process (Section 8); and4. If it refers to properties exempt from
attachment or execution (ROC, Rule 39,Sec. 12)
V. Protection accorded to creditors by BulkSales Law:1. It requires the vendor, mortgagor,
transferor, or assignor to deliver to thevendee, mortgagee, or to his or its agentor representative a sworn writtenstatement of names and addresses of allcreditors to whom said vendor, etc. mayhave been indebted together with theamount due or to be due (Section 3)
2. It requires the vendor, mortgagor,transferor, or assignor, at least 10 daysbefore the sale, transfer, mortgage,assignment to make a full detailedinventory showing the quantity and the
cost of the price, terms and conditions ofthe sale, etc. (Sec. 5)
VI. Duty of seller to perform the followingwhen transaction is within the coverageof law1. make sworn statement of listing of
creditors2. delivery of sworn statement to buyer3. apply the proceeds pro-rata to claims of
creditors shown in verified statement4. written advance disclosure to creditors
VII. Effects of False Statements in theSchedule of Creditors1. Without knowledge of buyer
a. If the statement is fair upon its faceand the buyer has no knowledge ofits incorrectness and nothing to puthim on inquiry about it, he will beprotected in its purchase
b. The remedy of the creditor is notagainst the goods but to prosecutethe seller criminally
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2. With knowledge or imputedknowledge of buyera. The vendee accepts it at his perilb. The sale is valid only as between
the vendor and the vendee but void
against the creditors3. With names of certain creditorswithout notice are omitted from the lista. The sale is VOID as to such
creditors, whether the omission wasfraudulent or not.
4. With respect to an innocentpurchaser for value from the originalpurchasera. An IPV from the original purchaser
is protectedb. However if the circumstances are
such as to bind the subsequentpurchaser with constructive noticethat the sale to the vendor (originalpurchaser) was fraudulent, theproperty will be liable in his hands tocreditors of the original vendor
VIII. Effects of vio lation of Law on Transfer1. As between parties
a. The Bulk Sales Law does NOT inany way affect the validity of thetransfer as between theintermediate parties thereto
b. A sale not in compliance with theBulk Sales Law is valid against all
persons other than creditors2. As against creditors
a. A purchaser in violation of the lawacquires no right in the propertypurchased as against the creditorsof the seller
b. His status is that of a trustee orreceiver for the benefit of thecreditors of the seller; as such, he isresponsible for the disposition of theproperty
IX. Remedies available to creditors
1. The proper remedy is one against thegoods to subject them to the payment ofthe debt, such as execution,attachment, garnishment, or by aproceeding in equity
2. An ordinary action against thepurchaser to obtain money judgment willNOT lie, unless the purchaser has soldor otherwise disposed of, or dealt withthe property, so as to become
personally liable to the creditors forvalue of it.
X. Effects of Non-Compliance
Failure to On On SellerTransaction
Prepare and deliversworn listing ofcreditors
Fraudulent andvoid
CriminalLiability
Apply proceeds pro-rata to listed creditors
Fraudulent and Criminalvoid Liability
Make advance writtendisclosure oftransactions tocreditors
Not void No CriminaLiability
Register sworn
statement with DTI
Not void No Crimina
LiabilityInclude or omit namesof creditors andcorrect amount due inthe statement
Void CriminalLiability
Sale for noconsideration
Void CriminalLiability
Anti-Dummy Law
I. Penalizes Filipinos who permit aliens touse them as nominees or dummiesto enjoy privileges reserved only forFilipinos.
II. Management, operation as officers,employees or laborers.
III. Includes Control or non-control positions.
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