sales draft

8/21/2019 SALES Draft

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SALES

SALES

Sources of the Law on Sales

Sales are governed by the provisions of the Civil Code:

1. Book !" #itle !" Articles 1$%&'1()*+Sales,-. #itle " Arts. 11%('1$-- +bligationsand Contracts,). /urisprudence

Concept of Contract of Sale

#he contract of sales is an agree0entwhereby one of the parties +called theseller or vendor, obligates hi0self todeliver so0ething to the other +called thebuyer or purchaser or vendee, who" onhis part" binds hi0self to pay therefore a

su0 of 0oney or its euivalent +known asthe price,.

#he transfer of title to property or theagree0ent to transfer title for a pricepaid or pro0ised" not 0ere physicaltransfer of the property" is the essence of sale.

2ature of obligations created in a sale

1. On the part of the seller:a. transfer ownership; andb. deliver possession of the subject

matter2. On the part of the buer

a. to pa the price

!hese obli"ations are real obligations orobli"ations #to "ive$ as contrasted from personal obligations #to do and not to do$ andcan be the proper subject of actions for speci%cperformance. &ersonal obli"ations cannot beenforced throu"h actions for speci%cperformance because of the public polica"ainst involuntar servitude$ althou"h thesame can have the same e'ecuted b anotherat the cost of the obli"or$ and the obli"or(srefusal to compl can be the basis for claims

for dama"es.

3ri0ary purpose of Sale !o transfer ownership ) the buer wants

ownership and not mere deliver

2#ES: *eliver and pament in a contract of

sale are so interrelated and intertwined with

each other that without deliver of the "oods

there is no correspondin" obli"ation to pa.

!he two complement each other. +t is clear

that the two elements cannot be dissociated$

for the contract of purchase and sale is

essentiall a bilateral contract$ as it "ives rise

to reciprocal obli"ations. (Pio Barretto Sons,Inc. vs. Compania Maritima, 62 SCRA 167.

,either is the deliver of the thin" bou"ht nor

the pament of the price necessar for the

perfection of the contract of sale. -ein"

consensual$ it is perfected b mere consent.

4E52#2 A24 ESSE2#AL 6E78S#ES5 A C2#6AC# 5 SALE

C2#6AC# 5 SALE

- the contract of sale$ one of the contractin"parties obli"ates himself to transfer theownership of and to deliver a determinatethin"$ and the other to pa therefor a pricecertain in mone or its euivalent. (Art. 1!"#,$CC

2ote: /ross inadeuac of price does not a0ect acontract of sale$ e'cept as it ma indicate a defect inthe consent$ or that the parties reall intended adonation or some other act or contract (Art. 1!7%

924S 5 SALES

A: As to:

1. $at&re o' te s&b)ect matter*a. Sale of real propert;b. Sale of personal propert

2. +al&e o' te tings ecange-*a. ommutative sale;b. Aleator sale

. /eter te ob)ect is tangible or intangible*a. Sale of propert tan"ible or

corporeal3;

2ote: A tan"ible object is also calledcose in possession

b. Sale of a r i"ht assignment o' a

rigt, or a cre-it or oter intangibles s&c as cop0rigt,tra-emar, or goo- ill3;

2ote: An intan"ible object is a cose inaction.

!. +ali-it0 or -e'ect o' te transaction*a. 4alidb. 5escissible



SALES

c. 4oidabled. 6nenforceablee. 4oid

". 3egalit0 o' te ob)ect*a. Licit objectb. +llicit object

6. Presence or absence o' con-itions*

a. Absoluteb. onditional

7. /olesale or retail*a. 7holesaleb. 5etail

#. Proimate in-&cement 'or te sale*a. Sale b descriptionb. Sale b samplec. Sale b description and sample

4. /en te price is ten-ere-*a. ash saleb. Sale on installment plan

ABSL8#E SALE 7hen no condition isimposed and ownership passes to the vendeeupon deliver of the thin" subject of the sale.

C24#2AL SALE 7hen the salecontemplates a contin"enc$ and in "eneral$where the contract is subject to certainconditions$ usuall in the case of the vendee$the full pament of the a"reed purchase priceand in the case of the vendor$ the ful%llment of certain warranties. (5e 3eon, p. 1"

4eed of sale absolute in nature

A deed of sale is considered absolute in naturewhere there is neither a stipulation in the deedthat title to the propert sold is reserved in theseller until the full pament of the price$ norone "ivin" the vendor the ri"ht to unilaterallresolve the contract the moment the buerfails to pa within a %'ed period.

7: 4istinguish a conditional sale fro0 anabsolute sale

A:

C24#2AL

SALE

ABSL8#E SALE

One where the selleris "ranted the ri"ht

to unilaterallrescind the contractpredicated on theful%llment or non8ful%llment$ as the

case ma be$ of theprescribed condition.

One where the titleto the propert is notreserved to the selleror if the seller is not"ranted the ri"ht torescind the contract

based on theful%llment or non8ful%llment$ as the

case ma be$ of the

prescribed condition.

7: ;hat is the e<ect of the non'perfor0ance of the condition or if thecondition did not take place=

A: 7here the obli"ation of either part to a

contract of sale is subject to an conditionwhich is not performed$ such part ma refuseto proceed with the contract or he ma waiveperformance of the condition. 6nli9e in a non8ful%llment of a warrant which would constitutea breach of the contract$ the non8happenin" of the condition$ althou"h it ma e'tin"uish theobli"ation upon which it is based$ "eneralldoes not amount to a breach of a contract of sale.

7: ;hen is a conditional sale consideredan absolute sale=

A: A deed of sale is absolute in nature althou"hdenominated a conditional sale absent suchstipulations reservin" title to the vendor untilfull pament of the purchase price$ nor anstipulation "ivin" them the ri"ht to unilaterallrescind the contract in case of non8pament.

7: A contract of sale of a lot stipulatesthat the >pay0ent of the fullconsideration based on a survey shall bedue and payable in % years fro0 thee?ecution of a for0al deed of sale>. s thisa conditional contract of sale=

A: ,o$ it is not. !he stipulation is not acondition which a0ects the e<cac of thecontract of sale. +t merel provides the mannerb which the full consideration is to becomputed and the time within which the sameis to be paid. -ut it does not a0ect in anmanner the e0ectivit of the contract (eirs o' San An-res v. Ro-rig&e, 8.R. $o. 1"6!, Ma0 1, 2%%%.

ELE@E2#S 5 A C2#6AC# 5 SALE+A2E,

1. Accidental elements ) dependent onparties= stipulations;E'amples:

a. onditionsb. +nterestc. time > place of pamentd. penalt

2. 2atural elements ) those that areinherent even in absence of contrarprovision.

a. 7arrant a"ainst evictionb. 7arrant a"ainst hidden

defects



SALES

?. Essential elements ) for validit:a. onsent or meetin" of the minds

+,S!A,ES 7@E5E SALE +SA/A+,S! !@E 7+LL O !@E O7,E5:a. E'propriation Art. 1BCC3b. Ordinar e'ecution sale 5ule

?D$ Sec. 1$ 5ules of ourt3

c. Fudicial foreclosure sale 5uleGC$ 5ules of ourt3

d. E'tra8judicial foreclosure saleAct ?1?$ as amended3

!he sale of conju"al propertreuires the consent of both thehusband and the wife. !he absenceof the consent of one renders thesale null and void while thevitiation thereof ma9es it merelvoidable. See Art. 12B of theamil ode in relation to Art. 1?DHof the ,3

b. *eterminate subject matterc. onsideration

E<ect andor conseuence of the absenceof consent of the owner in a contract of sale of said property

6: !he contract of sale is void. One of theessential reuirements of a valid contract of sale is the consent of the owner of thepropert. !he buer acuires no better title tothe "oods than the seller had. @e cannot "ivewhat he does not haveI 9&o- non abet . A

stream cannot rise hi"her than its source.

2ote: !he principle of ,emo dat uod non habetpertains to the e0ect of deliver of the subjectmatter pursuant to a valid contract of sale$ whichis at the consummation sta"e of the contract. +tdoes not pertain to the validit of the contract of sale upon perfection (+illan&eva, 3a on Sales,2%%! e-ition, pg. 1%!.

32S:a3 7hen the owner of the "oods is$ b his

conduct$ precluded from denin" theseller=s authorit to sell. (Art. 1"%"

b313 actors= acts$ recordin" laws$ or an

other provision of law enablin" theapparent owner of the "oods todispose them as if he were the trueowner;

23 Sales made under the order of acourt of competent jurisdiction;

?3 Sales made pursuant to a speciallaw;

! &urchases made in a merchant=sstore or fairs or mar9ets. (Art. 1"%"

E'ample: A$ the seller sold a car owned b -$ to$ the buer. !he contract of sale is valid sinceownership at the time of perfection is notreuired. A was able to deliver the car in theabsence of the 9nowled"e of -. Later$ soldthe car to *. - now comes to ourt to as9 for

annulment of the sale made b to * on theprinciple of nemo -at 9&o- non abet. Since$ A$the %rst seller was not able to transferownership to because he was not the ownerat the time of deliver$ then cannot alsotransfer ownership to * (:sai v. CA3.

7: /ose" as co'owner" sold the entire landin favor of his 0inor daughter" da.Alleging that /ose had fraudulentlyregistered it in his na0e alone" hissisters" sued hi0 for recovery of -) shareof the property. da did not pay for theland. s the sale valid=

A: ,o. Fose did not have the ri"ht to transferownership of the entire propert to petitionersince 2J? thereof belon"ed to his sisters. Also$+da could not have "iven her consent to thecontract$ bein" a minor at the time. onsent of the contractin" parties is amon" the essentialreuisites of a contract$ includin" one of sale$absent which there can be no valid contract.Koreover$ +da admittedl did not pa ancentavo for the propert$ which ma9es the salevoid. Article 1B1 of the ivil ode provides: +f the price is simulated$ the sale is void$ but theact ma be shown to have been in realit adonation$ or some other act or contract

(3abagala v. Santiago, 8.R. $o. 12%", 5ec. !,2%%1.

56@AL#ES 5 A SALE

6: A contract of sale ma be made in writin"$or b word of mouth$ or partl in writin" andpartl b word of mouth$ or ma be inferredfrom the conduct of the parties. (Art. 1!#ontracts shall be obli"ator$ in whatever formthe have been entered into$ provided all theessential reuisites for their validit arepresent.

32S:a) +f the law reuires a document or other

special form$ the contractin" parties macompel each other to observe that form.(Art. 1"7

b 6nder Statute of rauds$ the followin"contracts must be in writin"; otherwise$ theshall be &nen'orceable:1. Sale of personal propert at a price not

less than &HH;



SALES

-. Sale of a real propert or an interesttherein;

). Sale of propert not to be performedwithin a ear from the date thereof;

$. 7hen an applicable statute reuiresthat the contract of sale be in a certainform. (Art. 1!%, par.2

Statute of 5rauds is not essential for theenforceability of a contract of sale:

1. 7hen there is a note or memorandumin writin" and subscribed to b thepart or his a"ent (contains essentialterms o' te contract;

2. 7hen there has been partialperformanceJe'ecution (seller -eliversit te intent to trans'er title<receives price;

). 7hen there has been failure to objectto presentation of evidence ali&n-e asto the e'istence of a contract without

bein" in writin" and which is coveredb the Statute of rauds;

$. 7hen sales are e0ected throu"helectronic commerce. +illan&eva, p.1423

2ote: 5ules on forms$ and of validit andenforceabilit of contracts of sale$ are strictl 9eptwithin the contractual relationship of the seller andbuer pursuant to the characteristic of relativit of ever contract$ and do not necessaril appl to thirdparties whose ri"hts ma be a0ected b the terms of a sale.

BLA#2S 5 #DE B8E6 A24 #DESELLE6

BLA#2S 5 #DE B8E6

1. &ament of the price6: Seller is not bound to deliver unlessthe purchase price is paid

32: A period of pament has been %'ed

2. Accept deliver of thin" sold

2ote: A "race period "ranted the buer in case of failure to pa is a ri"ht not an obli"ation. ,on8

pament would still "enerall reuire judicial ore'trajudicial demand before default can arise.

#DE6 BLA#2S 5 #DE B8E6

1. !o ta9e care of the "oods without theobli"ation to return$ where the "oods aredelivered to the buer and he ri"htfullrefuses to accept;

2ote: !he "oods in the buer=s possession areat the seller=s ris9.

2. !o be liable as a depositar if he voluntarilconstituted himself as such;

?. !o pa interest for the period betweendeliver of the thin" and the pament of

the price in the followin" cases:a. should it have been stipulated;b. should the thin" sold and

delivered produces fruits orincome; or

c. should he be in default$ fromthe time of judicial or e'tra8 judicial demand for thepament of the price.

BLA#2S 5 #DE SELLE6+44#;#3,

1. 4eliver the thin" sold;2. 4eliver fruits > accessionsJaccessories

accruin" from perfection of sale;

?. #ransfer the ownership;B. ;arranties;. #a9e care of the thin"$ pendin"

deliver$ with proper dili"ence;G. 3a for the e'penses of the deed of

sale unless there is a stipulation to thecontrar

bligation of the seller in ter0s of thenature of the subFect 0atter of the sale

7hen the subject matter of the sale is adeterminate thin"$ the seller must deliver thethin" to the buer when compelled b thelatter. 7hen the subject matter is anindeterminate or "eneric thin"$ the seller mabe as9ed that the obli"ation be complied withat his e'pense (Art. 116", $CC

SellerGs obligation in case of delay orpro0ise to deliver the thing to two or0ore persons who do not have the sa0einterest

!he seller shall be responsible for anfortuitous event that ma occur until he hasdelivered the thin" (Art. 116", $CC

CDA6AC#E6S#CS 5 A C2#6AC# 5

SALE

CDA6AC#E6S#CS 5 A C2#6AC# 5SALE

1. onsensual ) a sale is perfected b mereconsent$ manifested b the meetin" of theminds as to the o0er and acceptancethereof on the subject matter$ price andterms of pament.



SALES

Kodalities that a0ect consensualit are:a. suspensive term or conditionb. sales with assumption of mort"a"e$where the assumption of mort"a"e is acondition precedent to the seller(sconsent and therefore$ without

approval of the mort"a"ee$ the sale isnot perfected

2. -ilateral85eciprocal

-ilateral )) both the contractin" parties arebound to ful%ll correlative obli"ationstowards each otherIthe seller to deliverand transfer ownership of the thin" soldand the buer$ to pa the price oreuivalent3 therefor.

5eciprocal ) arise from the same cause$and each part is a debtor and a creditor of the other$ such that the obli"ation of one is

dependent upon the obli"ation of theother; the are to be performedsimultaneousl such that the performanceof one is conditioned upon thesimultaneous ful%llment of the other.

!he le"al e0ect and conseuences of salebein" a bilateral contract composed ofreciprocal obli"ations are:

a. !he power to rescind is implied$ andsuch power need not be stipulated inthe contract in order for the innocentpart to invo9e the remed;

b. ,either part incurs dela if theother part does not compl or is notread to compl$ in a proper manner$with what is incumbent upon him; andc. rom the moment one of the partful%ls his oblation$ the default b theother be"ins$ without the need of priordemand.

Since both parties in a sale are bound btheir respective obli"ations which arereciprocal in nature$ a part cannot simplchoose not to proceed with the sale bo0erin" also the other part not to bebound b his own obli"ation; that each

part has a remed of speci%cperformance; and that rescission orresolution cannot be enforced b thedefaultin" part upon the other part whois read and willin" to proceed with theful%llment of his obli"ation. Almira v. A3

?. 6: ommutative ) the thin" sold isconsidered the euivalent of the price paid

and the price paid is the euivalent of thethin" sold.

32: Aleator ) the consideration is noteuivalent of what has been received li9ethe purchase of a lotto tic9et. +f the tic9etwins$ the priMe is much more than the price

of the tic9et.,ote: !here is no reuirement that theprice to be paid be eual to the e'act valueof the subject matter; all that is reuired isfor the seller to believe that what wasreceived was of commutativeJeuivalentvalue to what he "ave. -uenaventura v.A3

B. &rincipal ) its e'istence does not dependupon the e'istence and validit of anothercontract.

. Onerous ) the thin" sold is conveed inconsideration of the purchase price$ andvice versa.

G. ,ominate ) it has a speci%c name"iven b law. as distin"uished from the B9inds of innominate contracts3

N. Kerel a title$ not a mo-e ) Sale is merela title meanin"$ juridical justi%cation3 thatcreates the obli"ation on the seller to transferownership and deliver possession; it is not amo-e meanin"$ the actual process of acuisition or transfer of ownership over athin"3 that transfers ownership. Ownership of the thin" sold is acuired onl upon its deliverto the buer.

Mo-e is the le"al means b which dominion orownership is created$ transferred or destroede.". succession$ donation$ discover$intellectual creation$ etc.3; title onl constitutesthe le"al basis b which to a0ect dominion orownership; the most that sale does is to createthe obli"ation to transfer ownership; it istradition or deliver$ as a conseuence of sale$that actuall transfer ownership.

SALE S A ##LE A24 2# A @4E

7: 4oes sale by itself transfer ownership=

A: ,o. !he most that sale does is to create the

obli"ation to transfer ownership. +t is onl atitle and not a mode of transferrin" ownership.

7: ;hat then transfers ownership=

A: +t is tradition or deliver$ which is aconseuence of the sale that transfersownership.

7: 4i<erentiate 0ode and title.



SALES

A: Kode is the le"al means b which dominionor ownership is created$ transferred$ ordestroed; title onl constitutes the le"al basisb which to a0ect dominion or ownership.(+illan&eva, p. 1", 2%%4 e-.

C2#6AC# 5 SALE AS 4S#28SDE456@ #DE6 C2#6AC#S

Contract of Sale distinguished fro0 thefollowing:

1. 4onation.SALE 42A#2

Onerous /ratuitousJonerous

onsensual ormal contract

Law on Sales Law on *onation

,O!E: Art. 1!71, CC. 7hen the price of thecontract of sale is simulated$ the sale ma be

void but the act ma be shown to have been inrealit a donation or some other contract.

-. BarterSALE BA6#E6

onsideration is"ivin" of mone as

pament

onsideration is"ivin" of a thin"

+f consideration consists partl in mone >partl b thin")loo9 at manifest intention

+f intention is not

clear$ and the valueof thin" is eual orless than amount of

mone Sale

+f intention is not

clear$ and the value of thin" is more thanamount of mone

-arter

-oth are "overned b law on sales

Statute of raudsapplies if value of the object of thesale is &HH or

more

Statute of rauds isinapplicable

-arter is a contract where one of the parties

binds himself to "ive one thin" in considerationof the other=s promise to "ive another thin".(Art.16#, CC

,ote:

+f the consideration is partl in mone andpartl in thin"Js$ the nature of the contract is tobe determined b the intention of the parties.

P&,: +f the intention is not clear$ it shall beconsidered as a sale if the value of the mone"iven is more than the value of the thin".Otherwise$ it is barter.

). Agency to SellSALE AE2C # SELL

-uer pas forprice of object

A"ent not obli"ed topa for price;

simpl accounts forthe proceeds of the

sale.

-uer becomesowner of thin"

&rincipal remains theowner even if theobject delivered to

a"ent

Seller warrants

A"ent assumes nopersonal liabilit as

lon" as within

authorit "iven

,ot unilaterallrevocable

Ka be revo9edunilaterall even

wJo "round

Seller receivespro%t

A"ent not allowed topro%t

5eal contract &ersonal contract

Can there be a contract creating both asale and an agency relationship=

es.

E?: An auto0obile dealer receives titleto the cars he orders fro0 the0anufacturer and that transaction is asale. But he is an agent to the e?tentthat he is authoriHed to pass on theulti0ate purchaser the li0itedwarranty of the 0anufacturer.

$. 4acion en 3ago

SALE

4AC2 E2 3A

,o pre8e'istin"credit

ontract where propert isalienated to e'tin"uishpre8e'istin" creditJdebt

-uer8sellerrelationship

,ovates creditor8debtorrelationship into seller8

buer



SALES

Obli"ationsare created

Obli"ations aree'tin"uished

Kore freedomin %'in"the price

Less freedom in %'in" theprice

-uer still hasto pa

&ament is received b thedebtor before the contract

is perfected

%. LeaseSALE LEASE

Obli"ation toabsolutel transferownership of thin"

6se of thin" is forspeci%ed period

onl withobli"ation to

returnonsideration is the

priceonsideration is

the rentalSeller needs to be

owner of thin" totransfer ownership.

2ote: Lease with optionto bu ) reall a contractof sale but desi"nated as

lease in name.

Lessor need not beowner

(. Contract for piece'of'work SALE C2#6AC# 56

3ECE'5';69

Kanufacturin" inthe ordinar course

of business

Kanufacturin" uponspecial order of a

customer

or the "eneralmar9et

,ot for the "eneralmar9et$ but speciall

for the customer

ontract is one forsale

ontract is one forwor9$ labor or

materials

5eal Obli"ation )allows an action for

speci%cperformance

&ersonal Obli"ation )does not allow such

action

Statute of raudapplies Statute of raud doesnot appl

2 tests for distinction:

1. abit&alit0 :est 8 manufactureren"a"es in the same activit in theordinar course of business and doesnot emplo e'traordinar s9ills andeuipment to cover sales contract

2. Special =r-er :est 8 the products arenot ordinar products of themanufacturer and the would reuirethe use of e'traordinar s9ills oreuipment$ if to be performed b amanufacturer$ to cover contracts for apiece of wor9

C2#6AC# # SELL

Contract to Sell is a bilateral contractwhereb the prospective seller$ while e'presslreservin" the ownership of the subject propertdespite deliver thereof to the prospectivebuer$ binds himself to sell the said properte'clusivel to the prospective buer uponful%llment of the condition a"reed upon$ that is$full pament of the purchase price (Coronel v.Co&rt o' Appeals, 8.R. $o. 1%"77, =ctober 7,1446.

;hen a contract to sell 0ay be resortedto:

1. 7here subject matter is indeterminate2. Sale of future "oods e'cept future

inheritance?. Stipulation that deed of sale >

correspondin" certi%cate of sale would beissued onl after full pament

7: 4istinguish a contract of sale fro0 acontract to sale

C2#6AC# 5 SALE C2#6AC# # SELL

As regards transfer of ownershipOwnership is

transferred to thebuer upon deliver of

the object to him.

2ote: 4endor has lostand cannot recoverownership until and

unless the contract isresolved or rescinded

Ownership istransferred upon full

pament of thepurchase price.

2ote: &rior to fullpament$ ownership isretained b the seller.

As to numbers of contracts involved

!here is onl onecontract e'ecutedbetween the seller

and the buer.

!here are twocontracts:1. !he contract to sell

2ote: &reparator sale

2. !he deed ofabsolute sale

2ote: !he principalcontract is e'ecutedafter full pament of thepurchase price.

Payment as a condition



SALES

,on8pament of theprice is a resolutorcondition. 4endor

loses ownership overthe propert and

cannot recover it untiland unless the

contract is resolved orrescinded.

ull pament of theprice is a positive

suspensive condition.

2ote: ailure to full pathe price is not a breach

but an event thatprevents the obli"ationof the vendor to conve

title from becomin"e0ective.

Remedies available1. Speci%

ch&erformance

2. 5escission

?. *ama"es

1. 5esolution2. *ama"es

7: ;hat is the di<erence between a

contract to sell and a conditional contractof sale=

C2#6AC# #SELL

C24#2ALC2#6AC# 5

SALE !he prospectiveseller does not aset a"ree orconsent to transferownership of thepropert subject of the contract to selluntil the happenin"of an event$ which

ma be the fullpament of thepurchase price.7hat the sellera"rees or obli"eshimself to do is toful%ll his promise tosell the subjectpropert when theentire amount of the purchase priceis delivered to him.

!he %rst element of consent is present$althou"h it isconditioned uponthe happenin" of acontin"ent eventwhich ma or manot occur.

6pon the ful%llmentof the suspensive

condition which isthe full pament of the purchase price$ownership will notautomaticalltransfer to thebuer althou"h thepropert ma havebeen previousldelivered tohim. !he

+f the suspensivecondition is

ful%lled$ thecontract of sale isthereb perfected$such that if therehad alread beenprevious deliver of the propertsubject of the saleto the buer$ownership theretoautomaticall

prospective sellerstill has to convetitle to theprospective buerb enterin" into acontract of absolute sale.

transfers to thebuer b operationof law without anfurther act havin"to be performed bthe seller.

!here bein" noprevious sale of thepropert$ a thirdperson buin" suchpropert despitethe ful%llment of the suspensivecondition such asthe full pament of the purchase price$cannot be deemeda buer in badfaith. !here is nodouble sale in suchcase. !itle to thepropert willtransfer to thebuer afterre"istrationbecause there is nodefect in theowner8seller=stitle per se$ but thelatter$ of course$ma be sued fordama"es b theintendin" buer.

6pon the ful%llmentof the suspensivecondition$ the salebecomes absoluteand this willde%nitel a0ect theseller=s titlethereto. !hesecond buer of the propert whoma have hadactual orconstructive9nowled"e of suchdefect in theseller=s title$ or atleast was char"edwith the obli"ationto discover suchdefect$ cannot be are"istrant in "oodfaith. Such secondbuer cannotdefeat the %rstbuer=s title. +ncase a title isissued to thesecond buer$ the

%rst buer masee9 reconveanceof the propertsubject of the sale.

(Re0es v. :&paran, 8.R. $o. 1##%6!, >&ne 1,2%11; Coronel v. Co&rt o' Appeals, 8.R. $o.1%"77, =ctober 7, 1446.

7: Daving agreed to sell property whichthey inherited fro0 their father" whichwas then still in their fatherGs na0e" theCoronels e?ecuted a docu0ent entitled>6eceipt of 4own 3ay0ent> in favor of

AlcaraH for the purchase of their houseand lot" with the condition that 6a0onawill 0ake a down pay0ent upone?ecution of the docu0ent. #he Coronelswould then cause the transfer of theproperty in the na0e of 6a0ona and wille?ecute a deed of absolute sale in favorof 6a0ona. 6a0ona paid thedownpay0ent as agreed. s there aperfected contract of sale or a 0erecontract to sell=



SALES

A: !he a"reement could not have been acontract to sell because the sellers hereinmade no epress reservation o' onersip or title to te s&b)ect parcel o' lan-. !he oronelshad alread a"reed to sell the house and lotthe inherited from their father$ completelwillin" to transfer full ownership of the subject

house and lot to the buer if the documentswere then in order. @owever$ the !! was thenstill in the name of their father$ that is whthe caused the issuance of a new !! in theirnames upon receipt of the down pament. Assoon as the new !! is issued in their names$the were committed to immediatel e'ecutethe deed of absolute sale. Onl then will theobli"ation of the buer to pa the remainder of the purchase price arise. !his suspensivecondition was ful%lled. !hus$ the conditionalcontract of sale became obli"ator$ the onlact reuired for the consummation thereof bein" the deliver of the propert b means of the e'ecution of the deed of absolute sale in a

public instrument$ which the uneuivocallcommitted themselves to do as evidenced bthe Q5eceipt of *own &ament.Q (Coronel, et al.v. CA, 8.R. $o. 1%"77, =ct. 7, 1446

7: nstead of e?ecuting a deed of Absolute Sale in favor of 6a0ona" theCoronels sold the property to Catalinaand unilaterally and e?traFudiciallyrescinded the contract with 6a0ona.6a0ona then Iled a co0plaint for speciIcperfor0ance. ;ill 6a0onaGs actionprosper=

A: Res. 6nder Article 11C$ the ri"hts andobli"ations of the parties with respect to theperfected contract of sale became mutualldue and demandable as of the time of ful%llment or occurrence of the suspensivecondition. @ence$ petitioner8sellers act of unilaterall and e'trajudiciall rescindin" thecontract of sale cannot be justi%ed$ there bein"no e'press stipulation authoriMin" the sellers toe'trajudiciall rescind the contract of sale.(Coronel, et al. v. CA, 8.R. $o. 1%"77, =ct. 7,1446

7: 3roFect @overs 6ealty and4evelop0ent Corporation +3@64C, was

indebted to 9eppel Bank for 3-JJ@. #opay the debt" 3@64C conveyed to thebank -% properties. Adao occupies one of the properties conveyed. #he bank de0anded Adao to vacate the propertybut he refused. Dence" an eFect0ent casewas Iled against Adao. n his defense"Adao assailed that he had a Contract toSell entered between 3@64C and Adao.#o prove full pay0ent of the property" he

presented an aKdavit. #he lower courtordered that 9eppel banks should respectthe contract to sell because when thebank acuired the properties by way of dacion en pago" it 0erely stepped intothe shoes of 3@64C. s 9eppel bank bound by the contract to sell between

3@64C and Adao=

A: ,o. Adao=s lone a<davit is self8servin"$ andcannot be considered as substantial evidence.As a "eneral rule$ one who pleads pament hasthe burden of provin" it. Even where thepetitioner alle"ed non8pament$ the "eneralrule is that the burden rests on the respondentto prove pament$ rather than on the petitionerto prove non8pament (?epel Ban Pils. Inc.,v. A-ao, 8.R. $o. 1"#227, =ct. 14, 2%%".

7: 8rsal and Spouses@onesets entered into a Contract toSellM of a house and lot. A downpay0ent

was to be paid by 8rsal and subseuentlythe balance of the price is to be paidevery 0onth until it is fully paid. After (0onths" the 0onthly install0ents werestopped because the spouses did not give8rsal the transfer of certiIcate title.Subseuently" the Spouses @onesets soldthe property to 4r. Canora. #he sa0eproperty was also 0ortgaged by thespouses to a rural bank. ;hen thespouses failed to pay the rural bank" thebank 0oved to foreclose the 0ortgage.4oes 8rsal have vested ownership overthe property=

A: ,o. +n such contract$ the prospective sellere'pressl reserves the transfer of title to theprospective buer$ until the happenin" of anevent$ which in this case is the full pament of the purchase price. +n this case$ the parties notonl titled their contract as ontract to Sell Lotand @ouse but speci%ed in their a"reementthat the vendor shall onl e'ecute a deed of absolute sale on the date of the %nal pamentb the vendee. Since the contract in this case isa contract to sell$ the ownership of thepropert remained with the Konesets evenafter petitioner has paid the down pamentand too9 possession of the propert. +n other

words$ petitioner did not acuire ownershipover the subject propert as she did not pa infull the eual price of the contract to sell (@rsalv. Co&rt o' Appeals, et. al, 8.R. $o. 1!2!11 ,=ct. 1!, 2%%".

7: Caguiat o<ered to buy SpousesDerreraGs lot and subseuently gave thespouses a partial pay0ent. n turn" thespouses gave Caguiat the corresponding



SALES

receipt stating that respondent pro0isedto pay the balance of the purchase priceon or before a I?ed date. CaguiatGscounsel wrote the spouses infor0ingthe0 of his readiness to pay the balanceof the price and reuesting the0 toprepare the Inal deed of sale. Dowever"

the spousesG counsel sent a letter

toCaguiat stating that the wife is leavingfor abroad and that they are cancellingthe transaction. #he spouses allowedCaguiat to recover the partial pay0ent hepaid the0. s the transaction a contract of sale=

A: ,o. +n this case$ the Q5eceipt for &artial&amentQ shows that the true a"reementbetween the parties is a contract to sell.irst $ ownership over the propert was retainedb petitioners and was not to pass torespondent until full pament of the purchase

price. +n e0ect$ petitioners have the ri"ht torescind unilaterall the contract the momentrespondent fails to pa within the %'ed period.Secon-$ the a"reement between the partieswas not embodied in a deed of sale. !heabsence of a formal deed of conveance is astron" indication that the parties did not intendimmediate transfer of ownership$ but onl atransfer after full pament of the purchaseprice. :ir-$ petitioners retained possession of the certi%cate of title of the lot. !his is anadditional indication that the a"reement didnot transfer to respondent$ either b actual orconstructive deliver$ ownership of thepropert (Spo&ses errera v. Cag&iat, 8.R. $o.

1417, eb. 2#, 2%%7

3A6#ES # A C2#6AC# 5 SALE

1. Seller ) one who sells and transfers thethin" and ownership to the buer

2. B&0er ) one who bus the thin" uponpament of the consideration a"reed upon

CA3AC# 5 #DE 3A6#ES

6: An person natural or juridical3 who has

capacit to contract or enter intoobli"ations$ ma enter into a contract ofsale$ whether as part8seller or as part8buer. Art. 1BCD$ 3

P&,: +n cases where the law determines apart to be su0erin" from absolute orrelative +,A&A+!R

32s:

1. Kinors$ insane and demented persons anddeaf8mutes who do not 9now how to write

2. &ersons under a state of drun9enness ordurin" hpnotic spell

?. @usband and wife 8 sale b and betweenspouses

2ote: 5ationale for the prohibition:a3 !o prevent a spouse from defraudin" hiscreditors b transferrin" his properties tothe other spouse

b3 !o avoid a situation where the dominantspouse would undul ta9e advanta"e of the wea9er spouse

c3 !o avoid an indirect violation of theprohibition a"ainst donations betweenspouses under Article 1?? of the ivilode (Me-ina v. Collector o' InternalReven&e, 1 SCRA %2

32 to 32: 1.7here necessaries are sold and delivered to a

minor or other person without capacit to act$

he must pa a reasonable price therefor.2.+n case of sale between spouses:

a. when separation of propert wasa"reed upon in the marria"esettlements; or

b. when there has been a judicialseparation of propert a"reed uponbetween them

T+,*S O +,A&A+!R1. Absolute +ncapacit ) e'ists in cases when

a person cannot le"all bind himself capacit to act3

a.Kinorsb.+nsane or *ementedc.*eaf8mutes who do not 9now how

to writed.ivil +nterdictione.Fudiciall8declared incompetents

under Art.?D$ .

P&,: 7here necessaries are sold anddelivered to the minor or otherincapacitated persons without parent or"uardian3 and he pas a reasonable price$the sale is valid.

,ote: !he contract is valid but the minor

has the ri"ht to recover an e'cess abovethe reasonable price.

+f there is no deliver at the time the casereaches liti"ation$ the sale is not void butvoidable for vice in consent.

$ecessaries* thin"s which are needed forsustenance$ dwellin"$ clothin"$ medicalattendance$ education and transportationaccordin" to %nancial capacit of the



SALES

famil of the incapacitated person-&cation includes schoolin" or trainin"for some profession$ trade or vocation$even beond the a"e of majorit.:ransportation includes in "oin" to andfrom school$ or to and from place of wor9.3

,otes:• A capacitated person cannot %le

an action for annulment usin" asbasis the incapacit of theincapacitated part.

• 7hen the e0ect of the contractconsists in the incapacit of one of the parties$ the incapacitatedperson is not obli"ed to ma9e anrestitution$ e'cept insofar as hehas been bene%tted b the thin"or price received b him. Art.1?DD$ 3

Sale b Kinors:

• *octrine of Estoppel

Sale b insane and other incapacitatedpersons:

• +f entered into durin" lucidintervals$ the sale is valid.

• +f entered into in a state of drun9enness or durin" a hpnoticspell$ the sale is voidable.

2. 5elative +ncapacit ) relative in referenceto other persons or a certain class of

propert1. Spouses (Art. 1!4%, $CC ) e'tends to

common law spouses$ otherwise$ thecondition of those who incurred "uiltwould turn out to be better than thosein le"al union alilim8anulas vs.ortun$ 12D S5A G3

/5: Spouses cannot sell propert toeach other

5ationale:1. to prevent a spouse defraudin" his

creditors b transferrin" his

properties to the other spouse;2. to avoid a situation where the

dominant spouse would undul

ta9e advanta"e of the wea9er

spouse$ thereb e0ectivel

defraudin" the latter; and?. to avoid an indirect violation of the

prohibition a"ainst donations

between spouses under Art. C of

the amil ode.

P&,:a. Separation of propert in

marria"e settlement

b. Fudicial Separation of propertunder Art. 1D1

3ersons who can assail the validity of thetransaction between spouses

1. !he heirs of either of the spouses who

have been prejudiced;2. &rior creditors; and?. !he State when it comes to the

pament of the proper ta'es due onthe transactions

2. Aliens?. !rustee

?. Special *isuali%cationsJ Speci%c+ncapacit As to who cannot bu speci%cproperties3

AE'C3

6ELA#!EL

2CA3AC#A#E4 #

B8

363E6#ES

2!L!E4

S#A#8S5

SALE

6A#5CA#2

A"ents

&ropertentrustedto them

foradministration or

sale32:7hen

principal"ave hisconsent

4oidable

an berati%ed

after theinhibition

hasceased

Reason*the onlwron"that

subsistsis the

private

wron" tothe ward$principalor estate;and can

becondoned

b theprivateparties

themselv

uardian

&ropertof theward

durin"period of "uardians

hip

E'ecutorsand

administrators

&ropertof theestateunder



SALES

administration es

2ote:ontractsentered

b"uardianin behalf of ward

arerescissible if wardsu0ers

lesion bmore

than U of the value

of propert.

Courto<cers

andemploees

&ropertand ri"hts

inliti"ationor leviedupon on

e'ecutionbefore

the courtundertheir

jurisdiction 4oid

annotbe

rati%ed

Reason* +tis notonl aprivatewron"$

but also apublic

wron".(+illan&eva, 3a

on Sales, p. "#

thersspeciall

disuali%edb law

3ubico<cers

andemploees

&ropertof theState

entrustedto them

foradministr

ation

2ote: &rohibitions are applicable to sales in le"alredemption$ compromises and renunciations.

E55EC# 5 SALE 2 !LA#2 5 #DE36DB#2: 13 7ith respect to "uardians$ a"ents$e'ecutorsJadministrators$ the sale shall onl be

voidable because in such cases onl private interestsare a0ected ) defect can be cured b rati%cation;23 with respect to &ublic o<cersJemploees$ justices$ jud"es$ lawers$ cler9s of courts$ and those specialldisuali%ed b law$ the sale shall be null and voidsince public interest bein" involve therein 5e 3eon,Comments an- Cases on Sales an- 3ease, 7 t e-ition, pg 16#3

EE!S O +,A&A+!RTind of +ncapacit &art A0ected E0ectAbsolute -oth &arties 6nenforc

One &art 4oidableSale and deliver

of necessaries tominors or otherincapacitatedpersons

4alid

5elative -etween Spouses 4oidP&,:

Special*isuali%cation

ABSL8#E 2CA3AC#

7: ;ho are those absolutelyincapacitated to enter into a contract ofsale=

A:1. 6nemancipated minors Art. 127, $CC3;2. +nsane or demented persons$ and deaf8

mutes who do not 9now how to write Art.127, $CC3

7: @ay a capacitated person Ile an actionfor annul0ent using as basis the

incapacity of the incapacitated party=

A: ,o. @e is disuali%ed from alle"in" theincapacit of the person whom he contracts Art. 147, $CC3;

7: n a defective contract" where suchdefect consists in the incapacity of aparty" does the incapacitated party havean obligation to 0ake restitution=



SALES

A: 6: !he incapacitated person is not obli"edto ma9e an restitution.

32: insofar as he has been bene%ted bthe thin" or price received b him. Art. 144,$CC3

6ELA#!E 2CA3AC#

7: ;ho are those relatively incapacitatedto enter into a contract of sale=

A:1. Spouses (Art. 1!4%, $CC2. A"ents$ /uardians$ E'ecutors and

Administrators$ &ublic O<cers andEmploees$ ourt O<cers and Emploees$and others speciall disuali%ed b law.(Art. 1!41, $CC

7 : ;hat is the status of the followingcontracts of sale=

A:1. :at entere- into b0 minors*

a. Kerel voidable$ subject to annulmentor rati%cation

b. Action for annulment cannot beinstituted b the person who iscapacitated since he is disuali%edfrom alle"in" the incapacit of theperson with whom he contracts withpartial restitution in so far as the minor

is bene%ted3 where necessaries aresold and delivered to a minor or otherperson without capacit to act$ he mustpa a reasonable price (Art. 1!#4

2. Sale b0 beteen spo&ses (Art. 1!4%*a. Status of prohibited sales between

spouses:6: ,ull and void

32: +n case of sale betweenspouses:

i. 7hen a separation of propert wasa"reed upon in the marria"esettlements; or

ii. 7hen there has been a judicialseparation of propert a"reed uponbetween them

b. ontract of sale with ?rd parties:

6: 6nder the law on sales$ it would seemthat a spouse ma$ without the consent of the other spouse$ enter into sales

transactions in the re"ular or normalpursuit of their profession$ vocation ortrade. (in relation it Art. 7, amil0 Co-e

32: Even when the propert re"imeprevailin" was the conju"al partnership of

"ains$ the Supreme ourt held the sale bthe husband of a conju"al propert withoutthe consent of the wife is void$ not merelvoidable under Art. 12B of the amil odesince the resultin" contract lac9 one of theessential elements of full consent. (8&iangv. CA, 8.R. $o. 12"172, >&ne 26, 144#

?. Beteen Common 3a Spo&ses 8 also null

and void.

+n CalimlimDCan&llas v. ort&n$ the ourtdecided that sale between common lawspouses is null and void because Art. 1BDHprohibits sales between spouses to preventthe e'ercise of undue inVuence b onespouse over the other$ as well as to protectthe institution of marria"e. !he prohibitionapplies to a couple livin" as husband andwife without the bene%t of marria"e$otherwise" the condition of thoseincurred guilt would turn out to bebetter than those in le"al union.(CalimlimDCan&llas v. ort&n, et. al., 8.R.$o. 3D"7!44, >&ne 22, 14#!

-ut when the re"istered propert has beenconveed subseuentl to a third8partbuer in "ood faith and for value$ then

reconveance is no lon"er available tocommon8law spouse8seller$ since under the !orrens sstem ever buer has a ri"ht torel upon the title of his immediate seller(Cr& v. CA, 8.R. $o. 12%122, $ov. 6, 1447

7: ;ho has the right to assail the validityof the transaction between spouses=

A: !he followin" are the onl persons who canuestion the sale between spouses:

B. !he heirs of either of the spouses whohave been prejudiced;

. &rior creditors; and

G. !he State when it comes to thepament of the proper ta'es due onthe transactions

7: ;ho are the persons with relativeincapacity to be the vendee in a contractof sale=

A:



SALES

7: Atty. Leon . @auera acuired hisclientGs property as pay0ent for his legalservices" then sold it and as aconseuence obtained an unreasonablehigh fee for handling his clientGs case. 4idhe validly acuire his clientGs property=

A: ,o. Article 1BD1 3 of the ,ew ivil odeprohibits lawer=s acuisition b assi"nment of the client=s propert which is the subject of theliti"ation handled b the lawer. Also$ underArticle 1BD2$ the prohibition e'tends to sales inle"al redemption. (In Re* S&spension 'rom tePractice o' 3a in te territor0 o' 8&am o' Att0.3eon 8. Ma9&era, B.M. $o. 74, >&l0 %, 2%%!

7: #he stipulation between the lawyerand counsel is as follows" the attorneyGsfees of the Atty. will be N of whateverthe client 0ight recover fro0 his share inthe property subFect of the litigation.M s

the stipulation valid=

A: Res. !he stipulation made is one of acontin"ent fee which is allowed b the &E andthe &5. +t does not violate the prohibition of acuisition of propert subject of the liti"ationb the lawer provided for in the ivil odesince the prohibition applies onl to a sale orassi"nment to the lawer b his client durin"the pendenc of the liti"ation. !he transferactuall ta9es e0ect after the %nalit of the jud"ment and not durin" the pendenc of thecase. As such it is valid stipulation between thelawer and client.

S3ECAL 4S78AL5CA#2S

7: ;ho are those persons speciallydisualiIed by law to enter into contractsof sale=

A: ALE2'8nS1. ALE2s who are disuali%ed to

purchase private a"ricultural lands (Art. EII Secs. 7

2. 8npaid seller havin" a ri"ht of lien orhavin" stopped the "oods in transit&$ isprohibited from buin" the "oods eitherdirectl or indirectl in the resale of thesame at publicJprivate sale which hema ma9e (Art. 1" F"G; Art. 1!76 F!G

. !he <cer holdin" the e'ecution ordeput cannot become a purchaser orbe interested directl or indirectl onan purchase at an e'ecution. (Sec. 21R&le 4, R&les o' Co&rt

B. +n Sale b auction$ seller cannot bidunless notice has been "iven that such

sale is subject to a ri"ht to bid in behalf of the seller (Art. 1!76.

SALE B A 3E62 DA!2 A !4ABLE##LE

E<ect of a sale 0ade by the seller with

voidable title over the obFect

1. &erfection sta"e: valid ) buer acuirestitle of "oods

2. onsummation sta"e: valid ) +f the title hasnot et been avoided at the time of saleand the buer must bu the "oods underthe followin" conditions:

a.+n "ood faithb.or valuec.7ithout notice of seller=s defect of title

E@3# 6ES3E6A#AE

E@3# S3E

Sale of thin" havin"potentiale'istence

Sale of mere hope ore'pectanc

6ncertaint is wJre"ard to uantit

> ualit

6ncertaint is wJre"ard to e'istence

of thin"

ontract deals wJfuture thin"

ontract deals wJpresent thin" )

hope ore'pectanc

Sale is valid onl0 i' the e'pected

thin" will e'ist.

Sale is valid eventhou"h e'pected

thin" does notcome into

e'istence as lon"

as the hope itself validl e'isted. eg.

lotto3

4alid 4oid

2ote: +n case of doubt$ the presumption is in favourof Emptio 5ei Speratae since such is more in 9eepin"up with the commutative character or element of thecontract.

E<ect if a buyer in good faith purchasedfro0 a public sale a personal propertybelonging to another who has lost or hasbeen deprived thereof

!he owner of the personal propert cannotdemand its return without reimbursin" theprice paid b the buer in "ood faith. (Art. ""4

S8B/EC# @A##E6

6euisites of a proper obFect of sale

1. :ings



SALES

a. *eterminate or determinableb. Lawful licit3$ otherwise contract is

voidc. Should not be impossible within

the commerce of men3

2ote: rom the viewpoint of ris9 or loss$ not

until the object has reall been madedeterminate can we sa that the object has beenlost$ because "enus never perishes.

2. Rigts 6: Kust be transmissible.

ample* ri"ht of redemption$ ri"ht of usufruct$ sale of credit$ ri"ht toinheritance alread assi"ned$ etc.

32:a. uture inheritance ) cannot be the

subject of saleb. Service ) cannot be the object of

sale. !he are not determinate thin"s

and no transfer of ownership isavailable but it can be the object of certain contracts such as contract fora piece of wor9. (Pine-a, p. 14, 2%1%e-

Licita. ;ithin the co00erce of 0anb. ;hen right is not

intrans0issible

E?isting" 5uture" Contingent1. E?isting goods owned and

possessed by the seller

-. 5uture goods to be0anufactured" raised or acuiredby the seller

). Contingent acuisition dependsupon a contingent event which0ay or 0ay not happen

4eter0inate or 4eter0inable

4eter0inate #hing

7hen it is particularl desi"nated or phsicallse"re"ated from all others of the same class.(Art. 1!6%, $CC

4eter0inable #hing

7hen the thin" is capable of bein" madedeterminate without the necessit of a new orfurther a"reement between the parties (Art.1!6%, $CC

A thin" is determinate when it is particularldesi"nated or phsicall se"re"ated from allothers of the same class.

!he reuisite that a thin" be determinate issatis%ed if at the time the contract is enteredinto$ the thin" is capable of bein" madedeterminate without the necessit of a new orfurther a"reement between the parties.

7: 6odrigueH Irst purchased a portion of a Lot A consisting of )$% suare 0eterslocated in the 0iddle of Lot B" which hasa total area of &%$ suare 0eters" fro0 /uan. De then purchased another portionof said lot. As shown in the receipt" thelate /uan received 3%JJ.JJ fro06odrigueH as >advance payment for theresidential lot adjoining his previously paid lot on three sides ecepting on thefrontage. /uanGs heirs now contests thevalidity of the subseuent sale" allegingthat the obFect is not deter0inate ordeter0inable. 4ecide.

A: !heir contention is without merit. !here isno dispute that 5odri"ueM purchased a portionof Lot A consistin" of ?B suare meters. !hisportion is located in the middle of -$ which hasa total area of CB suare meters$ and isclearl what was referred to in the receipt asthe Qpreviousl paid lot.Q Since the lotsubseuentl sold to 5odri"ueM is said to adjointhe Qpreviousl paid lotQ on three sides thereof$the subject lot is capable of bein" determinedwithout the need of an new contract. !he factthat the e'act area of these adjoinin"residential lots is subject to the result of asurve does not detract from the fact that the

are determinate or determinable.oncomitantl$ the object of the sale is certainand determinate. eirs o' San An-res v.Ro-rig&e, 8.R. $o. 1"6!, Ma0 1, 2%%%3

2ote: 7here land is sold for a lump sum and not somuch per unit of measure or number$ the boundariesof the land stated in the contract determine thee0ects and scope of the sale$ not the area thereof. !he vendors are obli"ated to deliver all the landincluded within the boundaries$ re"ardless of whether the real area should be "reater or smallerthan that recited in the deed. !his is particularl truewhere the area is described as Qhumi"it 9umulan"$Qthat is$ more or less. Semira v. CA, 8.R. $o. 76%1,Mar. 2, 144!3

7: Lino entered into a contract to sellwith 6a0on" undertaking to convey to thelatter one of the Ive lots he owns"without specifying which lot it was" forthe price of 31 0illion. Later" the partiescould not agree which of Ive lots heowned Lino undertook to sell to 6a0on.;hat is the standing of the contract=



SALES

+-J11 Bar 7uestion,

A: +t is a void contract since the particular lotsold cannot be determined.

7: Can rights be the obFects of sale=

A: Res$ if the are transmissible. (Art. 1!7

3A6#C8LA6 924S

bFects of sale

1. isting 8oo-s ) ownedJ possessed bseller at the time of perfection

2. &t&re 8oo-s ) "oods to bemanufactured$ raised$ acuired b sellerafter perfection of the contract or whoseacuisition b seller depends upon acontin"enc (Art. 1!62

. Sale o' @n-ivi-e- Interest or Sare

a. Sole owner ma sell anundivided interest. Art. 1!63 E'. Afraction or percenta"e of such propert

b. Sale of an undivided share in aspeci%c mass of fun"ible "oods ma9esthe buer a co8owner of the entiremass in proportion to the amount hebou"ht. (Art. 1!6!

c. A co8owner cannot sell morethan his share (Ht&rral-e v. CA

!. Sale o' :ings in 3itigationa. Sale of thin"s under liti"ation is

rescissible if entered into b thedefendant $ without the approval of the

liti"ants or the court (Art. 1#1

2ote: +f the propert involved belon"s to award and the "uardian enters into acontract involvin" such propert withoutcourt approval$ the contract is void$ notmerel rescissible.

b. $o rescission is allowed wherethe thin" is le"all in the possession of a ?rd person who did not acted in badfaith.

. :ings s&b)ect to Resol&tor0 Con-ition.E'. !hin"s acuired under le"al orconventional ri"ht of redemption$ or

subject to reserva troncal. (Art. 1!6"6. In-eterminate &antit0 o' S&b)ect Matter a. !he fact that the uantit is not

determinate shall not be an obstacle tothe e'istence of the contract providedit is possible to determine the same$without need of a new contract (Art.1!4

BLA#2 5 #DE SELLE6

# #6A2S5E6 ;2E6SD3

SALE B A 3E6S2 2# #DE ;2E6 A##DE #@E 5 4EL!E6

/5: Ownership is not acuired b the buer.One cannot "ive what he does not have ,EKO

*A! W6O* ,O, @A-E! Art.1H$ 3

P&,s:1. Seller has the ri"ht to transfer

ownershipa. Seller need not be the owner of

the thin" at the time ofperfection of the contract. +t issu<cient that the seller has theri"ht to transfer ownershipthereof at the time of deliverArt. 1BD3

b. One who sells somethin" hedoes not own et is bound bthe sale when he acuires the

thin" later2. Estoppel: owner is$ b his conduct$

precluded from denin" the seller=sauthorit to sell. Art1B?B3

?. 5e"istered land bou"ht in "ood faitha. /5: -uer need not "o beond

the !orrens titleb. P&,: 7hen he has actual

9nowled"e of facts andcircumstances that would impela reasonabl catious man toma9e further inuir

B. Order of the ourts; Statutor Salea. +n e'ecution sale$ the buer

merel steps into the shoes ofthe jud"ment debtor rule ?D$Sec ??$ 5O3

. 7hen "oods are purchased in amerchant=s store$ air$ or Kar9et Art.1H$ 3

a. !he polic of the law hasalwas been that where theri"hts and interest of thevendor clash with that of aninnocent buer for value$ thelatter must be protected. Sun-rothers ans o. 4s. 4elasco$1DC3

SALE B A 3E6S2 DA!2 A !4ABLE##LE

1. !rue owner ma recover the thin" thefollowin" reuisites concur:

a. Subject matter is movableb. Owner has either lost the thin"

or has been unlawfulldeprived. art D$ 3

2. 5eimbursement is necessar beforeowner can recover when:



SALES

a. -uer acuired in "ood faithb. Acuired at a public auction

Art D$ 3?. 5ecover is lon"er possible when:

a. -uer is in "ood faithb. Acuired it at a merchant=s

store$ fair or mar9et Art. 1HG$

3

Seller need not be the owner duringperfection stage

6: Seller must have the ri"ht to transferownership at the time of deliver orconsummation sta"e. @e need not be theowner at the time of perfection of the contract.

32: oreclosure sale wherein themort"a"or should be the absolute owner.

;hen is ownership transferred fro0 sellerto buyer

6: !he ownership of the thin" sold is acuiredb the vendee from the moment it is deliveredto him in an was speci%ed in articles 1BD to1H1. !his is the case when the sale isabsolute.

32: An other manner si"nifin" ana"reement that the possession is transferredfrom vendor to vendee. !he sale in thise'ception is a conditional one.

7: E/ was subFected to a buy'bustoperation where police oKcers posed to

buy %JJ pesos worth of SM. She was thencharged with a violation of the 4angerous4rugs Act for traKcking drugs. E/ uses asdefense her lack of possession of theobFect of the sale. ;ould her contentionfree her fro0 liability=

A: ,o. !hou"h she was not in possession of theobject of sale$ Article 1BD merel reuires thatthe vendor must have the ri"ht to transferownership of the object sold at the time of deliver. +n the case at bar$ thou"h -eth is notthe owner$ she had the ri"ht to dispose of theprohibited dru". Ownership was thereafteracuired upon her deliver to the men in the

alle after her pament of the price. (People v.8ang&so, 8.R. $o. 11"!%, $ov. 2, 144"

7: Spouses 4e Leon alleged that they arethe owners of a parcel of land which wasinherited by the husband fro0 his father.#hey engaged the services of Atty. /uan totake care of the docu0ents of theproperties of his parents. #he lawyer letthe0 sign volu0inous docu0ents. After

the death of Atty. /uan" so0e docu0entssurfaced and revealed that theirproperties had been conveyed by sale oruitclai0 to the husbandOs brothers andsisters and to Atty. /uan and his sisters"when in truth and in fact" no suchconveyances were ever intended by the0.

Dis signature in the deed was forged. #heland in uestion was subseuently sold toAlcantara by 6odolfo 4e Leon" one of thebrothers. #he spouses de0andedannul0ent of the docu0ent andreconveyance but it was refused.Likewise" Alcantara averred that shebought the land in uestion in good faithand for value. ;as there a right totransfer ownership of the land=

A: ,one. +t is durin" the deliver that the lawreuires the seller to have the ri"ht to transferownership of the thin" sold. +n "eneral$ aperfected contract of sale cannot be

challen"ed on the "round of the seller=s non8ownership of the thin" sold at the time of theperfection of the contract. 6ndisputed is thefact that at the time of the sale$ 5odolfo deLeon was not the owner of the land hedelivered to petitioner. !hus$ theconsummation of the contract and theconseuent transfer of ownership woulddepend on whether he subseuentl acuiredownership of the land. A comparison of the"enuine si"natures of @ermoso de Leon withhis purported si"nature on the *eed of E'trajudicial &artition with Wuitclaim will readilreveal that the latter is a for"er. (AlcantaraD

5a&s v. Spo&ses 5e 3eon, 8.R. $o. 1!47"%, >&ne 16, 2%%

SALE B A 3E6S2 ;D 4ES 2# ;2#DE #D2 SL4

Sale by a person who does not own thething

+n the case of sale of propert$ ownership is notreuired at the time of perfection in order forthe sale to be valid. Ownership is material onlat the time of deliver but onl for the purposeof transferrin" ownership and does not a0ectthe validit of the contract of sale. !his is

because validit is determined not at the timeof performance but at the time of perfection. +f the seller is still not the owner of the thin"subject of the sale at the time of deliver$ thenthe contract of sale does not become void. +t isstill valid. !he remed of the buer is rescissionunder Art. 11D1 and dama"es.

2ote: 7hat the law reuires is that the seller has theri"ht to transfer ownership at the time the thin" soldis delivered. &erfection per se does not transfer



SALES

ownership which occurs upon the constructivedeliver of the thin" sold. A perfected contract of sale cannot be challen"ed on the "round of non8ownership on the part of the seller at the time of itsperfection &i)a-a v. CA, 244 SCRA 64

2ote: uture inheritance cannot be the subject of sale.

Legal e<ect of sale by a non'owner 6: !he buer acuires no better title to the"oods than the seller had; caveat emptor buer beware3.

32s:1. Estoppel ) when the owner of the

"oods is b his conduct precluded fromdenin" the seller=s authorit to sell

2. 7hen the contrar is provided for inrecordin" laws

?. 7hen the sale is made under statutor

power of sale or under the order of acourt of competent jurisdictionB. 7hen the sale is made in a merchant=s

store in accordance with the ode of ommerce and special laws

. 7hen a person who is not the ownersells and delivers a thin"$ andsubseuentl acuired title thereto

G. 7hen the seller has a voidable titlewhich has not been avoided at the timeof the sale

. Sale b co8owner of the whole propertor a de%nite portion thereof

C. Special ri"hts of unpaid seller

nstances when the Civil Code recogniHessale of things not yet owned by the sellerat the ti0e of sale:

1. Sale of a thin" havin" potential e'istence(Art.1!61, $CC

2. Sale of future "oods (Art. 1!62, $CC. ontract for the deliver at a certain price

of an article$ which the seller in theordinar course of business manufacturesJprocures for the "eneral mar9et$ whetherthe same is on hand at the time or not (Art.1!67, $CC

36CE3rice 8 si"ni%es the sum stipulated as theeuivalent of the thin" sold and also everincident ta9en into consideration for the %'in"of the price put to the debit of the buer anda"reed to b him. (+illan&eva, p. "2

2ote: A de%nite a"reement on the manner of pament of the price is an essential element in theformation of a bindin" and enforceable contract of

sale. (Co v. CA, 8.R. $o. 124%#, eb. 4, 144#

6euisitesKust be:

1. 5eal82. +n mone or its euivalent?. ertain or ascertainable at the time of

the perfection of the contract

6eal ) when buer has an intention topa and the seller has an e'pectationto receive the price

a. +f simulated: Sale is void$ butact ma be shown to havebeen a donation or some otheract or contract. Art 1B1$ 3

b. An admission of non8pamentof an centavo in e'chan"e of a propert in a contract of salerenders the sale 4O+*.Laba"ala vs. Santia"o$ 2HH13

c. +f price is false ) when the real

consideration is not the pricestated in the contract:

i. Sale is voidii. 6nless proved to be

founded on anothertrue and lawful priceArt. 1??$ 3

Certainty +t is not necessar that thecertaint of the price be actual ordetermined at the time of thee'ecution of the contract. !he price iscertain in the followin" cases:

1. +f the parties have %'ed or a"reedupon a de%nite amount;

,O!E: !he %'in" of the price cannever be left to the discretion ofone of the contractin" parties.@owever if the price %'ed b one of the parties is accepted b theother$ the sale is perfected.

2. +f it be certain with reference toanother thin" certain

?. +f the determination of the price isleft to the jud"ment of a speci%ed

person or persons even beforesuch determination

B. - reference to certain facts3 asreferred to in Art. 1B2 Art. 1BGD3

#he price of securities" grains"liuids and things consideredcertain:



SALES

1. 7hen the price %'ed is that whichthe thin" would have on a de%niteda$ or in a particular e'chan"e ormar9et

2. 7hen the amount is %'ed above orbelow the price of such da$ or insuch e'chan"e or mar9et$ provided

said amount be certain (Art. 1!72,$CC

E<ect when the price is I?ed bythe third person designated:

/E,E5AL 56LE: &rice %'ed b a thirdperson desi"nated b the parties isbindin" upon them.

EPE&!+O,S:1. 7hen the third person acts in bad

faith or b mista9e2. 7hen the third person disre"ards

the speci%c instructions or the

procedure mar9ed out b theparties

E<ect when the price is not I?edby the third person designated:1. +f the third person refuses or cannot%' the price$ the contract shall becomeine0ective$ unless the partiessubseuentl a"ree upon the price

2. +f the third person is prevented from%'in" the price b the fault of the selleror buer$ the part not in fault maobtain redress a"ainst the part in fault

Ascertainable ) if the terms of thecontract furnish the courts a basis ormeasure for determinin" the amounta"reed upon$ without havin" to referbac9 to either or both parties:

1. Set b third person appointed atperfection Art. 1BGD3

2. Set b the courts Art. 1BGD3?. - reference to a de%nite da$

particular e'chan"e or mar9et Art.1B23

B. - reference to another thin" certain$such as to invoices then in e'istence

and clearl identi%ed b thea"reement; or 9nown factors orstipulated formula

3rice is certain:

1. +f there is a stipulation2. +f it be with reference to another

thin" certain

?. +f the determination of the price isleft to the jud"ment of speci%edpersons3

!. - reference to certain facts3 asreferred to in Art. 1B2 (Art. 1!64

2ote: +f the price is based on estimates$ it is

uncertain.

EuivalentM Letters of Credit

D; 36CE S 4E#E6@2E41. i'ed b a"reement of the parties

/5: i'in" of the price cannot be left tothe discretion of one of the partiesP&,: +f such is accepted b the other$sale is perfected. Art. 1B?3

2. *etermination is left to the jud"ment of

a speci%ed persona. +f unable or unwillin": Sale is

ine<cacious 6nless partiessubseuentl a"ree on theprice

b. +f made in bad faith or bmista9e: ourts ma %' theprice

c. +f ?rd person is prevented from%'in" the price b fault of selleror buer: +nnocent buer maavail of remedies

?. !he price is made in reference toanother thin"$ or when the price %'edis the price of the commodit on ade%nite da$ or in a particulare'chan"e or mar9et$ or when theamount %'ed is above or below theprice on such da$ e'chan"e or mar9et.Art 1B2$ 3

2A4E78AC 5 36CE

Art. 1$*J. ross inadeuacy of price does not aindicate a defect in the consent" or that the paother act or contract.

E<ect of gross inadeuacy of price

6: +t does not a0ect the validit of the sale ifit is %'ed in "ood faith and without fraud

32: Co64S1. +f Consent is vitiated ma be

annulled or presumed to beeuitable mort"a"e3

2. +f the parties intended a 4onationor some other actJ contract



SALES

?. +f the price is so low as to beShoc9in" to the conscience

B. +f in the event of 6esale$ a betterprice can be obtained

/ross inadeuac in price ) if a reasonableman will not a"ree to dispose of his propert.

5ora-o +-a. 5e 5elJn v. 5ellota$ B2 S5A ?D2HHC3.

SALE 2 !L82#A6 BASS

6: @ere inadeuacy of the price doesnot a<ect the validity of the sale whenboth parties are in a position to for0 anindependent Fudg0ent concerning thetransaction"

82LESS fraud" 0istake" or undueinPuence indicative of a defect in consentis present. #he contract 0ay be annulled

for vitiated consent and not due to theinadeuacy of price. +!autista v. "ourt of Appeals" $)( SC6A 1$1 +-JJ$,,

32: ;here the price is too shockinglyand unconscionably low that a 0an in hissenses and not under delusion would notaccept it" the sale 0ay be set aside anddeclared an e#uitable mortgage to securea loan.

32 to 32: ;here the price paid is0uch higher than the assessed value ofthe property and the sale is e<ected by a

father to his daughter in which Ilial love0ust be taken into account" the price isnot to be construed as so inadeuate toshock the courtQs conscience. + $ocson v."AR Alsua%!ett v. "A,

2ote: n deter0ining whether the price isadeuate or not" the price obtaining atthe date of the e?ecution of the contract"not those obtaining a nu0ber of yearslater" should be considered.

SALE 2 2!L82#A6 BASS

A judicial or eecution sale is one 0adeby a court with respect to the property of a debtor for the satisfaction of hisindebtedness.

eneral rule: @ere inadeuacy of price isnot a suKcient ground for thecancellation of an e?ecution of sale if there is no showing that in the event of aresale" a better price can be obtained.

;hen ross nadeuacy of 3rice 0ayAvoid a /udicial Sale:

1. 7hen it is shoc9in" to theconscience of man &ascua vs.Simeon$ 1DCC3

2. !here is showin" that$ in the eventof resale$ a better price can beobtained. u -ie vs. ourt of Appeals$ 1DG3

P&,: +f there is a ri"ht of redemption$ inwhich case the proper remed is toredeem *e leon vs. Salvador$ 1DH3

P&, to P&,: - wa of e'traordinarcircumstances perceived$ when in a judicial sale the ri"ht of redemption hasbeen lost$ where the inadeuac of theprice is p&rel0 socing to teconscience, such that the mind revolts

at it and such that a reasonable manwould neither directl or indirectl beli9el to consent to it$ the same will beset aside. Cometa v. Co&rt o' Appeals,?1 S5A 2DB 2HH133

E'ception to the e'ception: !he validitof the sale is not necessaril a0ectedwhere the law "ives to the owner theri"ht to redeem$ as when the sale ismade at a public auction$ upon thetheor that the lesser the price$ theeasier it is for the owner to a0ect theredemption.

b. &esion of more than 1'( of value of thing maes sale rescissible unlessapproved by court . *Art. 1+-).

c. ross inade#uacy of price may raisethe presumption of e#uitable mortgage.*Art. 1-/2)

;hen 3rice is 5alseM +Arts. 1)%) and1)%$,

7hen the parties intended to be bound but thedeed did not reVect the actual price a"reedupon$ there is onl a relative simulation of the

contract which remains valid and enforceable$but subject to reformation.

7hen price indicated in deed of absolute saleis undervalued consideration pursuant tointention to avoid pament of hi"her capital"ains ta'es$ the price stated is false$ but thesale is still valid and bindin" on the real terms.

2on'3ay0ent of 3rice



SALES

Sale bein" consensual$ failure of buer to pathe price does not ma9e the contract void forlac9 of consideration or simulation$ but resultsin buer=s default$ for which the seller mae'ercise his le"al remedies.

+n a contract of sale$ the non8pament of theprice is a resolutor condition whiche'tin"uishes the transaction that$ for a time$e'isted and dischar"es the obli"ations createdthereunder. !he remed of an unpaid seller in acontract of sale is to see9 eitherspeci%c performance or rescission.

Badge #hat 3rice s Si0ulated" 2ot /ust8npaid:

+t is a bad"e of simulated price$ which renderthe sale void$ when the price$ which appearsthereon as paid$ has in fact never been paid bthe purchaser to the seller.

E<ect when price is si0ulated

1. +f it is shown to have been inrealit a donation or someother act or contract

• !he sale is void but the actor contract ma be valid asa donation

2. +f not

• !he contract is void andine'istent

,O!E: !he principle of in pari -elicto nonorit&r

action$ which denies all recover to the "uiltparties inter se$ where the price is simulated$applies onl where the nullit arises from theille"alit of the consideration or the purpose of the contract.

3rice is false 0 when there is a real price uponwhich the minds of the parties had met$ butnot declared$ and what is stated in thecoverin" deed is not the one intended to bepaid.

E<ect of a 5alse 3rice:

/5: +f the price indicated in the coverin"instrument is 'alse$ the contract of sale is vali-,but the underlin" deed is subject toreformation to indicate the real price uponwhich the minds of the parties have met.

P&,: !he parties ma be held bound b thefalse price indicated in the instrument underestoppel principle$ especiall when the interestof the /overnment or third parties would be

adversel a0ected b the reformation of theinstrument.

2#E: +f the contract is not shown to be adonation or an other act or contracttransferrin" ownership because the parties donot intend to be bound at all$ the ownership of

the thin" is not transferred. !he contract isvoi- and ine'istent. !he action or defense forthe declaration of the ine'istence of a contractdoes not prescribe.

6euisites of Si0ulation:

1. an outward declaration of a willdi0erent from the will of the parties;

2. the false appearance must have beenintended b mutual a"reement; and

?. purpose is to deceive third persons

7: Can the I?ing of the price be left to

the discretion of one of the contractingparties=

A: 6: ,o. !he price cannot be %'edunilaterall b one of the contractin" parties.

32: +f the other part a"reed orconsented. (Art. 1!7, $CC

7: ;hat is the e<ect when the price inunilaterally I?ed by one of thecontracting parties without consent of theother party=

A: !here is no meetin" of the minds. !he saleis ine<cacious (Pine-a, p. "!, 2%1% e-.

7: ;hat is the e<ect if the price issi0ulated=

A: 6: ontract of sale is void.

32: !he act ma be shown to have beenin realit a donation or some other act orcontract.

7: s annul0ent of sale the re0edy in a

si0ulated sale=

A: ,o. +t is a well8entrenched rule that wherethe deed of sale states that the purchase pricehas been paid but in fact has never been paid$the deed of sale is null and void ab initio forlac9 of consideration. Koreover$ Article 1B1 of the ivil ode$ provides that if the price issimulated$ the sale is void$ which applies tothe instant case$ since the price purportedl



SALES

paid as indicated in the contract of sale wassimulated for no pament was actuallmade. Since it was well established that the*eed of Sale is simulated and$ therefore void$petitioners= claim that respondents cause of action is one for annulment of contract$ whichalread prescribed$ is unavailin"$ because onl

voidable contracts ma be annulled. On theother hand$ respondents defense for thedeclaration of the ine'istence of the contractdoes not prescribe. (Catin-ig v. +-a. -eMeneses, Roas v. Co&rt o' Appeals,8.R.$o. 16"#"1 8.R. $o. 16"#"1 , eb. 2,2%11

#i0e to deter0ine the adeuacy orinadeuacy of price

+n determinin" the adeuac or inadeuac of the price$ the price obtainin" at the time of thee'ecution of the contract shall be considered$and not the price obtainin" thereafter (Pine-a,

p. !7, 2%1% e-.

Dow inadeuacy of price is proved

Alle"ation of inadeuac of price must beproved b su<cient evidence. 7ithout bein"substantiated with evidence$ it is a merespeculation. (Pine-a, p. !7, 2%1% e-.

E<ect on the contract of sale in case of abreach in the agreed 0anner of pay0ent

,one. +t is not the act of pament of price thatdetermines the validit of a contract of sale.

&ament of the price has nothin" to do with theperfection of the contract$ as it "oes into theperformance of the contract. ailure to pa theconsideration is di0erent from lac9 of consideration. ailure to pa such results in ari"ht to demand the ful%llment or cancellationof the obli"ation under an e'istin" validcontract. On the other hand$ lac9 of consideration prevents the e'istence of a validcontract. (Sps. Bernar-o B&enavent&ra an-Consolacion >oa9&i v. CA, 8R $o. 12676, $ov.2%, 2%%

;DE2 2 36CE S A6EE4 832 B #DE 3A6#ES

E<ect of failure to deter0ine the price

1. /ere contract is eec&tor0 )ine0ectiveJine<cacious ) failed to bee0ective or to come to e0ect

2. /ere te ting as been -elivere- toan- appropriate- b0 te b&0er ) the buermust pa a reasonable price therefore

2ote: !he %'in" of the price cannot be left to thediscretion of one of the parties. @owever$ if the price%'ed b one of the parties is accepted b the other$the sale is perfected.

E<ect when a thing or a part thereof isdelivered to the buyer although thecontract is ineKcacious and the latterappropriated the sa0e

!he buer must pa the reasonable price forthe thin" received (Art. 1!7!, $CC

6easonable price /enerall the mar9etvalue at the time and place %'ed b thecontract or b law for the deliver of the "oods.

7hat is a reasonable price is a 9&estion o' 'act dependent on the circumstances of eachparticular case. Art 1!7!, CC3

2ote: #he reasonableness of a price 0aybe deter0ined on the basis of aco0panyGs balance sheet showing thebook value or fair 0arket value of itsshares. +Philippine ree Press vs. "A,2//,

3aret value that reasonable su0 whichproperty would co00and on a fair sale bya 0an willing but not obliged to sell to a0an willing but not obliged to buy

Dow reasonable price is deter0ined5easonableness of price is a uestion of fact.

+ts determination is dependent upon thecircumstances of each particular case. !hemar9et value is a "ood standard in determinin"the reasonable price. (Pine-a, p. ""

@arket value

+t is that reasonable sum which a propertwould command in a fair sale b a man willin"but not obli"ed to sell to another who is willin"but not obli"ed to bu.

7: n an action for speciIc perfor0ancewith da0ages" alleged that there was

an agree0ent to purchase the lot of . Asregards the 0anner of pay0ent" however" Gs receipts contradicted the testi0ony of . #he receipts failed to state the totalpurchase price or prove that full pay0entwas 0ade. 5or this reason" it wascontended that there was no 0eeting of their 0inds and there was no perfectedcontract of sale. 4ecide.



SALES

A: !he uestion to be determined should notbe whether there was an a"reed price$ butwhat that a"reed price was. !he sellers couldnot render invalid a perfected contract of saleb merel contradictin" the buer=s obli"ationre"ardin" the price$ and subseuentl raisin"the lac9 of a"reement as to the price. (5avi- v.

:iongson, 8.R. $o. 1%#164, A&g. 2", 1444

7: 4istinguish the failure to pay theconsideration fro0 lack of consideration.

A:

5AL86E # 3A C2S4E6A#2

LAC9 5C2S4E6A#

2 As to validity of contract of saleontract is validbecause it is the

e'istence of the priceand not the act of

pament of price thatdetermines the validit

of a contract of sale.

2ote: &ament of the pricehas nothin" to do with theperfection of the contract$but merel "oes into the

performance of thecontract.

Lac9 of considerationprevents the

e'istence of avalid contract.

As to resultant right ailure to pa the

consideration results ina ri"ht to demand the

ful%llment orcancellation of the

obli"ation under ane'istin" valid contract.

!he contract of sale is null and

void andproduces no

e0ect whatsoever

3#2 @2E !S'A'!S EA62ES#@2E

ption @oney

!he distinct consideration in case of an optioncontract. +t does not form part of the purchaseprice hence$ it cannot be recovered if the buerdid not continue with the sale.

3ay0ent considered option 0oney

&ament is considered option mone when it is"iven as a separate and distinct considerationfrom the purchase price. onsideration in anoption contract ma be anthin" orunderta9in" of value.

2ote: An option is not itself a purchase$ but merelsecures the privile"e to bu. +t is not a sale of propert but a sale of ri"ht to purchase. @e does notsell his land; he does not then a"ree to sell it; but he

does sell somethin"$ i.e.$ the ri"ht or privile"e to buat the election or option of the other part. +tsdistin"uishin" characteristic is that it imposes nobindin" obli"ation on the person holdin" the option$aside from the consideration for the o0er (3imson v.CA, 8.R. $o. 1"424, 2%%1.

Earnest 0oney or arrasM

!his is the mone "iven to the seller b theprospective buer to show that the latter istrul interested in buin" the propert$ and itsaim is to bind the bar"ain. (Pine-a, p. 7"

E<ect of giving an earnest 0oney

+t is statutor rule that whenever earnestmone is "iven in a contract of sale$ it shall beconsidered as part of the price and as proof of the perfection of the contract. +t constitutes anadvance pament and must$ therefore bededucted from the total price. (A-el'a

Properties, Inc. v. CA, 2!% SCRA 26"

2ote: Option mone ma become earnest mone if the parties so a"ree.

E<ect of rescission on earnest 0oneyreceived

7hen the seller see9s to rescind the sale$ he isobli"ed to return the thin" which was theobject of the contract alon" with fruits andinterest. (Art. 1#", $CC

4istinguish option 0oney fro0 earnest0oney.

3#2 @2E EA62ES#@2E

Kone "iven asdistinct

consideration foran option contract

orms part of thepurchase priceArt. 1BC2$ 3

Applies to a salenot et perfected

/iven onl whenthere is alread a

sale&rospective buer is

not reuired tobu.

7hen "iven$ thebuer is bound topa the balance.

+f buer does not

decide to bu$ itcannot berecovered.

+f sale did notmaterialiMe$ it

must be returned.(+illan&eva, p. #7,

Pine-a, p.77-uer or "rantee of

option is stillunsure whether ornot to bu or sell

the propert

-uer manifests hisEA5,ES! desire tobu the propert



SALES

7: Bert o<ers to buy Si0eonOs propertyunder the following ter0s and conditions:31 0illion purchase price" 1J option0oney" the balance payable in cash uponthe clearance of the property of all illegaloccupants. #he option 0oney is pro0ptlypaid and Si0eon clears the property of all

illegal occupants in no ti0e at all.Dowever" when Bert tenders pay0ent of the balance and asks for the deed of absolute sale" Si0eon suddenly has achange of heart" clai0ing that the deal isdisadvantageous to hi0 as he has foundout that the property can fetch threeti0es the agreed purchase price. Bertseeks speciIc perfor0ance but Si0eoncontends that he has 0erely given Bertan option to buy and nothing 0ore ando<ers to return the option 0oney whichBert refuses to accept.

1. ;ill BertOs action for speciIcperfor0ance prosper= E?plain.

-. @ay Si0eon Fustify his refusal toproceed with the sale by the factthat the deal is Inanciallydisadvantageous to hi0= E?plain.+-JJ- Bar 7uestion,

A:1. -erts action for speci%c performance will

prosper because there was a bindin"a"reement of sale$ not just an optioncontract. !he sale was perfected uponacceptance b Simeon of 1HX of thea"reed price. !his amount is in realit anearnest mone because the a"reement

states that the balance was to be paid afterful%llin" the condition. 6nder Art. 1BC2$ itQshall be considered as part of the priceand as proof of the perfection of thecontract.Q (:opacio v. CA, 8.R. $o. 1%26%6, >&l0 , 1442; +illongco Realt0 v.Bormaeco, 8.R. $o. 3D26#72, >&l0 2",147".

-. Simeon cannot justif his refusal toproceed with the sale b the fact that thedeal is %nanciall disadvanta"eous to him.@avin" made a bad bar"ain is not a le"al"round for pullin" out of a bindin" contractof sale$ in the absence of some actionable

wron" b the other part (+ales v. +illa,8.R. $o. 1%%2#, 5ec. 16, 1416$ and nosuch wron" has been committed b -ert.

7: Spouses 3angan owned a lot and a two'door apart0ent. #he wife" Consuelo3angan agreed to sell the properties tospouses 3erreras. Consueloreceived 3-J"JJJ fro0 the respondents asearnest 0oney with a receipt that also

contained the ter0s of agree0ent. Lateron" the parties agreed to increase theprice fro0 3%$J"JJJ to 3%&J"JJJ. Spouses3erreras issued two checks in co0plianceto the new agree0ent a0ounting to3-JJ"JJJ and 3-%J"JJJ. Consuelo"however" refused to accept the

checks. She FustiIed her refusal by sayingthat her children" co'owners of the subFectproperties" did not agree to sell theproperties. Consuelo o<ered to returnthe 3-J"JJJ earnest 0oney to the spousesbuyers but the latter reFected it. Dence"Consuelo Iled a co0plaint forconsignation. Spouses 3erreras insistedon enforcing the agree0ent" hence theyIled an action for speciIcperfor0ance. n ConsueloGs answer" sheclai0ed that the contract beca0eine<ective for lack of the reuisiteconsent fro0 the co'owners" herchildren. 4ecide.

A: !he presence of onsuelo=s consent and$corollaril$ the e'istence of a perfectedcontract between the parties are furtherevidenced b the pament and receiptof &2H$HHH.HH$ an earnest mone b thecontractin" parties= common usa"e. !he lawon sales$ speci%call Article 1BC2 of the ivilode$ provides that enever earnest mone0 is given in a contract o' sale, it sall beconsi-ere- as part o' te price an- proo' o' te per'ection o' te contract. Althou"h thepresumption is not conclusive$ as the partiesma treat the earnest mone di0erentl$ there

is nothin" alle"ed in the present case thatwould "ive rise to a contrar presumption. +ncases where the ourt reached a conclusioncontrar to the presumption declared in Article1BC2$ we found that the mone initiall paidwas "iven to g&arantee tat te b&0er o&l-not bac o&t 'rom te sale$ considerin"that te parties to te sale ave 0et to arriveat a -eJnite agreement as to its terms K tat is, a sit&ation ere te contract as not 0et been per'ecte-. !hese situations do not obtainin the present case$ as neither of the partiesclaimed that the &2H$HHH.HH was "iven merelas "uarantee b the respondents$ as vendees$that the would not bac9 out from the

sale (eirs o' Pangan v. Spo&ses Perreras, 8.R.$o. 1"77!, A&g. 27, 2%%4.

56@A#2 5 C2#6AC# 5 SALE

) stages involved in the for0ation of acontract of sale



SALES

1. ,e"otiationJ&reparationJ&olicitationJonceptionJ/eneration Sta"e ) from the momentof ne"otiation or bar"ainin" up toperfection.

2. &erfection ) the moment there is a meetin"of the minds

?. onsummation or *eath ) from ful%lment

or performance b parties of the terms upto e'tin"uishment thereof.

3olicitation is de%ned as an unacceptedunilateral promise to bu or sell. !his producesno judicial e0ect and creates no le"al bond. !his is a mere o0er$ and has not et beenconverted into a contract. +t covers the periodfrom the time the prospective contractin"parties indicate interest in the contract to thetime the contract is perfected. (+illan&eva, p.6.

3olicitation ncludes:

Le"al matters arisin" prior to the perfection of the sale$ dealin" with concepts of invitation toma9e o0er$ o0er$ acceptance$ ri"ht of %rstrefusal option contract$ suppl a"reement$mutual promises to bu and sell or contracts tosell$ and even a"enc to sell or a"enc to bu.(+illan&eva, p. 1", 2%%4 e-.

<er certain

An o0er is certain onl where there is an o0erto sell or an o0er to bu a subject matter andfor a price havin" all the essential reuisitesmandated b law.

Acceptance of <er

!he acceptance must be absolute and must notualif the terms of the o0erIit must be plain$uneuivocal$ unconditional and withoutvariance of an sort from the proposal.

6ules in the conception stage about theo<er

68LE

<er isPoated

&rior to acceptance$ ma bewithdrawn at will b o0eror but

no authorit to modif it

;ith aperiod

Kust be accepted within theperiod$ otherwise$ e'tin"uishedat the end of period and ma bewithdrawn at will b o0eror but

must not be arbitrar$otherwise$ liable for dama"es

;ith a E'tin"uished b happenin"J non8

condition

happenin" of condition

withoutperiodconditio

n

ontinues to be valid dependin"upon circumstances of time$

place and person

;ith acounter'

o<erOri"inal o0er is e'tin"uished

ption Contract

An option contract is a contract b which theowner of the propert a"rees with anotherperson that he shall have the ri"ht to bu hispropert at a %'ed price within a certain time.+t is bindin" upon the promisor if the promise issupported b a consideration distinct from theprice. An option contract is li9ewise a separateand distinct contract from a contract of sale.

2ature of an option contract

+t is a preparator contract in which one part"rants to another$ for a %'ed period and at adetermined price$ the privile"e to bu or sell$or to decide whether or not to enter into aprincipal contract. +t binds the part who has"iven the option not to enter into the principalcontract with an other person durin" theperiod desi"nated$ and within that period$ toenter into such contract with the one whom theoption was "ranted$ if the latter should decideto use the option. +t is a separate and distinct

contract. 2ote: +f the option is perfected$ it does not result inthe perfection or consummation of the sale. (5ia, p.7

3eriod within which to e?ercise the option

1. 7ithin the term stipulated2. +f there is no stipulation$ the court ma %'

the term

Dow option is e?ercised

A notice of acceptance must be communicated

to o0eror even without actual pament as lon"as pament is delivered in the consummationsta"e.

E<ect of a separate consideration in anoption contract

1. /it separate consi-eration:a. ontract is valid



SALES

b. O0eror cannot withdraw o0er untilafter e'piration of the option

c. +s subject to rescission and dama"esbut not speci%c performance

2. /ito&t separate consi-eration*a. the option contract is not deemed

perfected

b. o0er ma be withdrawn at an timeprior to acceptance

2ote: @owever$ even thou"h the option was notsupported b a consideration$ the moment it wasaccepted$ contract of sale is perfected (Art. 12!.

bligations of the o<eror

13 ,ot to o0er to an third part the sale of the object of the option durin" the optionperiod;

23 ,ot to withdraw the o0er or option durin"the option period;

?3 !o hold the subject matter for sale to the

o0eree in the event that the lattere'ercises his option durin" the optionperiod.

E<ect of acceptance and withdrawal of the o<er

+f the o0er had alread been accepted andsuch acceptance has been communicatedbefore the withdrawal is communicated$ theacceptance creates a perfected contract$ evenif no consideration was as et paid for theoption. +n which case$ if the o0eror does notperform his obli"ations under the perfectedcontract$ he shall be liable for all conseuencesarisin" from the breach thereof based on an of the available remedies such as speci%cperformance$ or rescission with dama"es inboth cases.6ight of Irst refusal

A ri"ht of %rst refusal is a contractual "rant$ notof the sale of a propert$ but of the %rst prioritto bu the propert in the event the owner sellsthe same.

2ote: 7here a time is stated in an o0er for itsacceptance$ the o0er is terminated at the e'pirationof the time "iven for its acceptance (Pine-a, p. 76,2%1% e-.

;hen can the owner o<er the sale of theproperty to a third person=

A: Onl after the "rantee fails to e'ercise itsri"ht under the same terms and within theperiod contemplated can the owner validlo0er to sell the propert to a third person$a"ain under the same terms as o0ered to the"rantee.

7: 24C and 5irestone entered into acontract of lease wherein it is stipulatedthat 5irestone has the right of Irstrefusal to purchase the leased property>should lessor 24C decide to sell thesa0eM. After the ru0or that 24C will

transfer the lot to 383" 5irestoneinstituted an action for speciIcperfor0ance to co0pel 24C to sell theproperty in its favor. 383 0oved tointervene arguing that the @e0orandu0issued by then 3resident Auino orderedthe transfer of the whole 24C co0poundto the overn0ent" which in turn wouldconvey it in favor of 383. Can 5irestonee?ercise its right of Irst refusal=

A: Res. +t is a settled principle in civil law thatwhen a lease contract contains a ri"ht of %rstrefusal$ the lessor is under a le"al dut to thelessee not to sell to anbod at an price until

after he has made an o0er to sell to the latterat a certain price and the lessee has failed toaccept it. !he lessee has a ri"ht that thelessors %rst o0er shall be in his favor (P@P v.CA, 8.R. $o. 1!"1, $ov. 1!, 2%%1.

7: n a -J'year lease contract over abuilding" the lessee is e?pressly granted aright of Irst refusal should the lessordecide to sell both the land and building.Dowever" the lessor sold the property to athird person who knew about the leaseand in fact agreed to respect it.Conseuently" the lessee brings an action

against both the lessor'seller and thebuyer +a, to rescind the sale and +b, toco0pel speciIc perfor0ance of his rightof Irst refusal in the sense that the lessorshould be ordered to e?ecute a deed of absolute sale in favor of the lessee at thesa0e price. #he defendants contend thatthe plainti< can neither seek rescission of the sale nor co0pel speciIc perfor0anceof a >0ere> right of Irst refusal. 4ecidethe case. +1TT& Bar 7uestion,

A: !he action %led b the lessee$ for bothrescission of the o0endin" sale and speci%cperformance of the ri"ht of %rst refusal which

was violated$ should prosper. +f the ri"ht of %rstrefusal was violated and the propert wa soldto a buer who was aware of the e'istence of such ri"ht$ the resultin" contract is rescissibleb the person in whose favour the ri"ht of %rstrefusal was "iven and althou"h no particularprice was stated in the covenant "rantin" theri"ht of %rst refusal$ the same price b whichthe third8part buer bou"ht the propert shallbe deemed to be the price b which the ri"h of



SALES

%rst refusal shall therefore be e'ercisable9&itorial Realt0 5evelopment, Inc. v. Ma0'air :eater, Inc., 26! SCRA !#

2ote: !he o0er of the person in whose favor the ri"htof %rst refusal was "iven must conform with the sameterms and conditions as those "iven to the o0eree.

7: Andres leased his house to ris for aperiod of - years" at the rate of 3-%" JJJ0onthly" payable annually in advance.#he contract stipulated that it 0ay berenewed for another -'year period upon0utual agree0ent of the parties. #hecontract also granted ris the right of Irstrefusal to purchase the property at anyti0e during the lease" if Andres decidesto sell the property at the sa0e price thatthe property is o<ered for sale to a thirdparty. #wenty'three 0onths aftere?ecution of the lease contract" Andres

sold the house to his 0other who is not athird party. ris Iled an action to rescindthe sale and to co0pel Andres to sell theproperty to her at the sa0e price.Alternatively" she asked the court toe?tend the lease for another two years onthe sa0e ter0s. Can ris seek rescissionof the sale of the property toAndresG0other= +-JJ& Bar 7uestion,

A: +ris can see9 rescission because pursuant to9&atorial Realt0 Co. v. Ma0'air :eater rescission is a relief allowed for the protectionof one of the contractin" parties and even thirdpersons from all injur and dama"e the

contract of sale ma cause or the protection of some incompatible and preferred ri"ht.

7: ;ill the alternative prayer fore?tension of the lease prosper= +-JJ& Bar7uestion,

A: ,o$ the e'tension of the lease should beupon the mutual a"reement of the parties.

ption contract distinguished fro0 rightof Irst refusal

An option contract is a preparator contract in

which one part "rants to another$ for a %'edperiod and at a determined price$ the privile"eto bu or sell$ or to decide whether or not toenter into a principal contract.

+n a ri"ht of %rst refusal$ while the object mabe determinate$ the e'ercise of the ri"ht wouldbe dependent not onl on the "rantor=seventual intention to enter into a bindin" juridical relation with another but also on

terms$ includin" the price$ that are et to be%rmed up. (5ia, p. "!

3#2C2#6AC#

6D# 5 56S#6E58SAL

&rincipal contract;

stands on its own

Accessor; cannot

stand on its own,eeds separateconsideration

*oes not needseparate

consideration

Subject matter andprice must be valid

!here must besubject matter butprice not important

,ot conditional onditional !here is no o0er to

sell$ but onl anopportunit for thebuer to enter intoa contract of sale

!here is an o0er tosell

,ot subject to

speci%cperformance

Subject to speci%c

performance

7: s it necessary that the right of Irstrefusal be e0bodied in a writtencontract=

A: Res$ the "rant of such ri"ht must be clearand e'press.

2ote: +t is applicable onl to e'ecutor contracts andnot to contracts which are totall or partiallperformed.

+f a particular form is reuired under the Statute of rauds: sale is valid > bindin" between the partiesbut not to ?rd persons.

7: 3oHHolanic entered a long'ter0contract with the 2ational 3owerCorporation +23C, for the purchase of allPy ash to be produced by the latterGsfuture power plants. n the contract" 23Cgranted 3oHHolanic a right of Irst refusalto purchase the Py ash that 0ay begenerated in the future. ;hen 23CGs twonew power plants started operation" itpublished an invitation to interestedbuyers for the purchase of the Py ash.

3oHHolanic sent letters to 23C re0indingits right of Irst refusal. 23C deferred itspublic bidding with the Irst power plantGsPy ash but it nevertheless continued withthe bidding of the second power plantGsPy ash. 3oHHolanic Iled a co0plaint" butduring the pendency of the case 23Cdecided to likewise dispose the Py ashfro0 the Irst power plant withoutallowing 3oHHolanic to e?ercise its right of



SALES

Irst refusal. Can 3oHHolanic e?ercise itsright of Irst refusal=

A: ,o. !he ri"ht of %rst refusal "ranted infavour of &oMaMolanic is invalid for bein"contrar to public polic as the same violates

the reuirement of competitive public biddin"in the award of "overnment contracts. +n this jurisdiction$ public biddin" is the establishedprocedure in the "rant of "overnmentcontracts. !hus$ respondent=s ri"ht of %rstrefusal cannot ta9e precedence over thedictates of public polic. !he ri"ht of %rstrefusal of respondent bein" invalid$ it followsthat it has no bindin" e0ect. +t does not createan obli"ation on the part of petitioner toac9nowled"e the same. (PSA3M Corp., vs.Poolanic, 8.R. $o. 1#7#4, A&g. 2!, 2%11

6ight of Irst refusal 0ay be waived

Li9e other ri"hts$ the ri"ht of %rst refusal mabe waived or when a part entered into acompromise a"reement. (5ia, p. ""

7: Can a sublessee avail of the right of Irst refusal of the lessee=

A: 6: ,o. !he sublessee is a stran"er to thelessor who is bound to respect the ri"ht of %rstrefusal in favor of the lessee onl.

32: 7hen the contract of lease "rantedthe lessee the ri"ht to assi"n the lease$ theassi"nee would be entitled to e'ercise such

ri"ht as he steps into the shoes of theori"inal assi"nee (+illan&eva, p. 16!, 2%%4e-..

3E65EC#2

3E65EC#E4 C2#6AC# 5 SALE

6: +t is deemed perfected at the momentthere is meetin" of minds upon the thin" whichis the object of the contract and upon the price.(Art.1!7", par.1

2ote: !he acceptance of the o0er must be absolute.

+t must be plain$ uneuivocal$ unconditional andwithout variance of an sort from the proposal.

32: 7hen the sale is subject to asuspensive condition b virtue of law orstipulation.

3erfection 4istinguished fro04e0andability

,ot all contracts of sale become automaticalland immediatel e0ective. +n sales withassumption of mort"a"e$ there is a conditionprecedent to the seller=s consent and withoutthe approval of the mort"a"ee$ the sale is notperfected. (BiLan Steel Corp. v. Co&rt o' Appeals$ ?D1 S5A DH 2HH233

2ES#E2# C2#6AC# AS4S#28SDE4 56@ A !4 C2#6AC#

45o "ontract 6ituation7) Absence of

consent i.e., complete meeting o' min-s

ne"ates the e'istence of a perfected sale.

(irme v. B&al nterprises an- 5ev. Corp. $ B1B

S5A 1DH 2HH?3. !he contract then is null and

void ab initio$ absolutel wantin" in civil

e0ects; hence$ it does not create$ modif$ or

e'tin"uish the juridical relation to which it

refers. (Cabota)e v. P&-&nan$ B?G S5A B2?

2HHB33

48oid "ontract7 ) 7hen there is no meetin"

of the minds on price$ the contract is not

perfected and does not serve as a bindin"

juridical relation between the parties. Manila

Metal Container Corp. v. P$B$ 11 S5A BBB

2HHG3$ and should be more accuratel

denominated as ine'istent$ as it did not pass

the sta"e of "eneration to the point of

perfection. $A v. 8race Baptist C&rc$ B2B

S5A 1B 2HHB33

E55EC# 5 3E65EC#2

rom the moment of the perfection of thecontract of sale$ the parties ma reciprocalldemand performance$ subject to the provisionsof the Statute of rauds. Y Art 1!7", CCZ

5or0 of acceptance

+t ma be e'press or implied. Acceptance mabe evidenced b some act$ or conduct$communicated to the o0eror$ either in a formalor an informal manner$ that clearl manifestthe intention or determination to accept theo0er to bu or sell (+illan&eva, p. 177, 2%%4

e-..

;henwhere acceptance is 0ade

+t is made at the time and place stipulated inthe contract. +f there is no stipulation$ it shallbe made at the time and place of the deliverof the thin". (Art. 1"#2, $CC

#he buyer is dee0ed to have acceptedthe goods:



SALES

1. 7hen he intimates to the seller that he hasaccepted them

2. 7hen the "oods have been delivered andhe does an act inconsistent with theownership of the seller

?. 7hen$ after the lapse of reasonable time$

he retains the "oods without intimatin" tothe seller that he rejected them (Art. 1"#",$CC

6ule on refusal to accept the goods bythe buyer

!he buer is not bound to return the "oods tothe seller and it is su<cient that he noti%es theseller of his refusal in the absence of a contrarstipulation. (Art. 1"#7, $CC

2ote: +f the refusal is without just cause$ the titlepasses to the buer from the moment the "oods areplaced at his disposal. (Art. 1"##, $CC

nspection of goods

6: +f the "oods have not et been previousle'amined$ the buer is not deemed to haveaccepted them unless and until he has hadreasonable to e'amine them (Art. 1"#!, $CC

32S: 1. !he buer had reasonable time to

inspect the "oods but he failed to do so2. Stipulation to the contrar?. .O.*. sales

E<ect andor conseuence of a ualiIedacceptance

+t constitutes merel a counter8o0er whichmust in turn be accepted to "ive rise to a validand bindin" contract (+illan&eva, p. 171, 2%%4e-..

Contract of sale perfected through aletter or a telegra0

+t is perfected onl when the o0eror hasreceived or has 9nowled"e of the acceptancemade b the o0eree. Even if the buer hasaccepted$ the seller ma still withdraw if he

does not 9now et of the buer=s acceptance(Pine-a, p. "4, 2%1% e-..

E<ect of the partiesG failure to appearbefore the notary public who notariHedthe deed

,one. !he non8appearance of the partiesbefore the notar public who notariMed thedeed does not necessaril nullif nor render theparties transaction voi- ab initio. Article 1?C$

, on the necessit of a public document isonl for convenience$ not for validit orenforceabilit. 7here a contract is not in theform prescribed b law$ the parties can merelcompel each other to observe that form$ oncethe contract has been perfected.

2ote: ontracts are obli"ator in whatever form thema have been entered into$ provided all essentialreuisites are present. (Penalosa v. Santos, 8.R. $o.17!4, A&g. 2, 2%%1

7: 4B3 sought to consolidate itsownership with 3aragon 3aper ndustries"nc. @edrano" 3resident and eneral@anager of 3aragon" was instructed tocontact all 0inority stockholders toconvince the0 to sell their shares to 4B3at the price of (% of the par value. Dewas able to contact all e?cept for one whowas in Singapore. @edrano testiIed that

all have agreed to sell their shares to4B3. 3aragon 0ade proposals to 4B3 andthe sale was approved by a 4B3resolution subFect to ter0s andconditions. Dowever" the reuired nu0berof shares contained in the conditions wasnot delivered by @edrano. s the saleperfected=

A: ,o. *-& imposed several conditions to itsacceptance and it is clear that Kedrano indeedtried in "ood faith to compl with theconditions "iven b *-& but unfortunatelfailed to do so. @ence$ there was no birth of aperfected contract of sale between the

parties (5BP v. Me-rano an- PM=, 8.R. $o.167%%!. eb. 7, 2%11.

7: Licup" through a letter" o<ered to buyparcels of land to #he Doly See and3hilippine 6ealty Corporation +36C,. Deenclosed a check for 31JJ"JJJ.JJ toclose the transactionM and accepted theresponsibility of re0oving infor0alsettlers. @sgr. Cirilos" representative of the Doly See and 36C signed theconforme portion of the letter andaccepted the check. A stop'pay0ent

order was issued by Licup and the latterreuested that the titles to the landinstead be given to SSE. @sgr. Ciriloswrote SSE reuesting to re0ove theinfor0al settlers" otherwise" the31JJ"JJJ.JJ would be returned. SSEreplied with an updated proposalM thatthey will co0ply provided that thepurchase price is lowered. #he proposalwas reFected. #he parcel of land was soldto another third person. s there a



SALES

perfected contract of sale between thetwo parties=

A: ,o. 7hen Ks"r. irilos a<'ed his si"natureon that letter$ he e'pressed his conformit tothe terms of Licup=s o0er appearin" onit. !here was meetin" of the minds as to the

object and consideration of the contract. -utwhen Licup ordered a stop8pament on hisdeposit and proposed in his April 2G$ 1DCCletter to Ks"r. irilos that the propert beinstead transferred to SSE$ a subjectivenovation too9 place. !he proposed substitutionof Licup b SSE opened the ne"otiation sta"efor a new contract of sale as between SSE andthe owners (Starbrigt Sales v. Pil. Realt0 Corp., et. al, 8.R. $o. 17746, >an. 1#, 2%12.

7: 3etitioners are the co'owners of undivided shares of two parcels of land.6espondent 3araiso 4evelop0ent

Corporation purchased fro0 the0 theirrespective shares e?cept for two shares.A Contract to Sell was then established"where the petitioner aK?ed theirsignatures thereon. Dowever" thepetitioners decided to withdraw fro0 thesaid agree0ent and along with it thereuest for the rescission of the contractwhich they said they never signed. #heyallege there is inability to understand theconseuences of the contract. ;as thecontract perfected between the parties=

A: t is well8settled that contracts are perfected

b mere consent$ upon the acceptance b theo0eree of the o0er made b the o0eror. romthat moment$ the parties are bound not onl tothe ful%llment of what has been e'presslstipulated but also to all the conseuenceswhich$ accordin" to their nature$ ma be in9eepin" with "ood faith$ usa"e and law. !oproduce a contract$ the acceptance must notualif the terms of the o0er. @owever$ theacceptance ma be e'press or implied. or acontract to arise$ the acceptance must bemade 9nown to the o0eror. Accordin"l$ theacceptance can be withdrawn or revo9edbefore it is made 9nown to the o0eror. +n thecase at bar$ the ontract to Sell was perfected

when the petitioners consented to the sale tothe respondent of their shares in the subjectparcels of land b a<'in" their si"natures onthe said contract. Such si"natures show theiracceptance of what has been stipulated in theontract to Sell and such acceptance wasmade 9nown to respondent corporation whenthe duplicate cop of the ontract to Sell wasreturned to the latter bearin" petitionerssi"natures (Rialino, s&bstit&te- b0 is eirs,

vs. Paraiso 5evelopment Corporation, 8.R. $o.1"7!4, ebr&ar0 ", 2%%7.

3erfected Auction sale

A sale b auction is perfected when theauctioneer announces its perfection b the fall

of the hammer$ or in other customar manner.(Art. 1!76, par.2

SellerGs right to bid in an auction sale

!he seller has the ri"ht to bid provided thatsuch ri"ht was reserved and notice was "ivento that e0ect (Pine-a, p. "

C2S8@@A#2

Consu00ation Stage or 4eath of thecontract

+t ta9es place b the deliver of the thin"to"ether with the pament of the price.

2ote: !he ownership of the thin" is acuired b thebuer in an of the was speci%ed b law or in anmanner a"reed upon b the parties.

7: A and 34S 4evelop0ent Corp.e?ecuted a contract to sell a parcel of land. A died without having co0pletedthe install0ent on the property. Dis heirsthen took over the contract to sell andassu0ed his obligations by paying theselling price of the lot fro0 their own

funds" and co0pleted the pay0ent. #owho0 should the Inal 4eed of AbsoluteSale be e?ecuted by 34S=

A: @avin" stepped into the shoes of thedeceased with respect to the said contract$ andbein" the ones who continued to pa theinstallments from their own funds$ A=s heirsbecame the lawful owners of the said lot inwhose favor the deed of absolute sale shouldhave been e'ecuted b vendor &*S (5ason v.Register o' 5ee-s o' &eon Cit0, 8.R. $o.12%6%% Sept. 22, 144#.

#6A2S5E6 5 ;2E6SD3

;DE2 ;2E6SD3 S 4EE@E4#6A2S5E66E4

!he thin" shall be understood as delivered$when it is placed in the control and possessionof the vendee.



SALES

2ote: !he most that sale do is to create theobli"ation to transfer ownership. +t is onl the titlewhile the mode of transferrin" ownership is deliver.

4EL!E6 C@36SES - BLA#2S:

1. Actual dut to deliver2. !ransfer of Ownership ) throu"h

deliver

4EL!E6

7@A! !O *EL+4E5 1. !he thin" sold2. ruits?. Accessions and

accessories

7@E5E !O*EL+4E5 &LAE3

@+E5A5@R1. &lace Stipulated

2. 6sa"e of trade?. Seller=s place of

businessB. Seller=s residence. +n case of speci%c

"oods$ wherethe can be found

7@E, !O *EL+4E5!+KE3

1. !ime stipulated2. 7ithin a

reasonable time

,ote: *emand ortender of delivershall be made ata reasonable hour

E<ect of delivery

6: !itle Jownership is transferred

32: ontrar is stipulated as in the caseof:1. Pact&m reservatii in -omini )

a"reement that ownership will remain

with seller until full pament of price(Contract to sell2. Sale on acceptanceJapproval?. Sale on returnB. !here is implied reservation of

ownership

2ote: Seller bears e'penses of deliver.

9inds of delivery

1. Act&al ) thin" sold is placed under thecontrol and possession of buerJa"ent;

2. Constr&ctive ) does not confer phsicalpossession of the thin"$ but b constructionof law$ is euivalent to acts of real deliver.

Re9&isites*a. !he seller must have control over the

thin"b. !he buer must be put under controlc. !here must be intention to deliver the

thin" for purposes of ownership

i. :ra-icion S0mbolica ) deliver of certainsmbols representin" the thin"

ii. :ra-icion Instr&mental ) deliver of theinstrument of conveance

iii. :ra-itio 3onga Man& ) *eliver of thin" bmere a"reement; when seller points to thepropert without need of actuall deliverin"

iv. :ra-icion Brevi Man& ) the buer$ bein" alread

in possession of the thin" sold due to someother cause$ merel remains in possessionafter the sale is e0ected$ but now in concept of owner. .g.rom lessee to becomin" an owner

v. Constit&t&m Possessori&m ) the seller remainsin possession of the propert in a di0erentcapacit. .g. rom owner to lessee

Tind of onstructive *eliver !radicion Smbolica *elive

repres

!radicion +nstrumental *eliveconve

!radicion Lon"a Kanu Lon" hand3 *elivea"ree

!radicion -revi Kanu Short @and3 !he posseto soremasale conce

!radicion onstitutum&ossessorium

!he seof thcapac

?. &asiDtra-ition ) deliver of ri"hts$ creditsor incorporeal propert$ made b:a. &lacin" titles of ownership in the hands

of the buer;b. Allowin" buer to ma9e use of ri"hts

B. :ra-ition b0 operation o' la ) E'ecution of a public instrument is euivalent todeliver. -ut to be e0ective$ it is necessarthat the seller have such control over thethin" sold that$ at the moment of sale$ itsmaterial deliver could have been made.



SALES

6: !here is presumption of deliver

32:a. ontrar stipulation;b. 7hen at the time of e'ecution$

subject matter was not subject to

the control of seller;c. Seller has no capacit to deliver at

time of e'ecution;d. Such capacit should subsist for a

reasonable time after e'ecution of instrument.

E<ective delivery

*eliver should be coupled with intention of deliverin" the thin"$ and acceptance on thepart of the buer to "ive le"al e0ect of the act.7ithout such intention$ there is no suchtradition.

ncorporeal property Dow delivered

1. 7hen sale is made throu"h a publicinstrument (Art. 1!4#, $CC

2. - placin" the titles of ownership in thepossession of the buer

?. 7hen buer uses and enjos the ri"htspertainin" to the incorporeal propert withthe consent of the seller (Art. 1"%1, $CC.

7: Lagri0as Boy borrowed 31%"JJJ fro0spouses 6a0os. #hereafter" Boy e?ecuteda 4eed of Absolute Sale with the 6a0osesinvolving a house and lot. #he price

agreed upon was 3)1"JJJ. t was allegedthat BoyGs debt is to be deducted" so thespouses needed only to pay 31("JJJ.Because the 6a0oses were not yetin i00ediate need of the properties"Lagri0as stayed therein. Later on"Lagri0as went to the wife" Erlinda" askingthat they e?ecute a 9asunduan. n the9asunduan" it states that the spouses stillhad a re0aining balance of 31("JJJ andthat interest is to be deducted in favor of the spouses so that would leave a balanceof 3&"%JJ. #he 9asunduan was notariHed"however Erlinda changed her 0ind uponsigning. According to her"

she realiHed that they already paid3)1"JJJ to Lagri0as when the 4eed of Sale was e?ecuted. ;hen the spouses6a0os already needed to occupy theland" Lagri0as refused to vacate. Sheinvoked the 9asunduan. 4ecide.

A: 6nder Article 1B of the ivil ode$ theownership of the thin" sold shall be transferredto the vendee upon the actual

or constructive deliver thereof. +n addition$Article 1BDC of the ivil ode provides thatwhen the sale is made throu"h a publicinstrument$ as in this case$ the e'ecutionthereof shall be euivalent to the deliver of the thin" which is the object of the contract$ if from the deed the contrar does not appear or

cannot clearl be inferred. +n this case$ the*eed of Absolute Sale does not contain anstipulation a"ainst the constructive deliver of the propert to private respondents. +n theabsence of stipulation to the contrar$ theownership of the propert sold passes to thevendee upon the actual or constructivedeliver thereof. !he *eed of Absolute Sale$therefore$ supports private respondents= ri"htof material possession over the subjectpropert (Bo0 v. Co&rt o' Appeals, et. al, 8.R.$o. 12"%##, April 1!, 2%%!.

7: Asset 3rivatiHation +petitioner, enteredinto an absolute deed of sale over certain

0achinery and refrigeration euip0entwith #./. Enterprises +respondent, on anas%is%where%is basis. 6espondent paid thefull a0ount of 3&$"JJJ.JJ as evidencedby a receipt. After two days" respondentde0anded the delivery of the 0achinery.#he subFect properties were located in aco0pound under the possession of Creative Lines" nc. So0e ti0e after"respondent was able to pull out fro0 thepetitionerGs co0pound the subFect by0eans of a gate pass issued by thepetitioner. Dowever" during the hauling of the second lot" only nine ite0s were

pulled out instead of si?teen becauseCreative LinesG e0ployees preventedrespondent fro0 hauling the re0aining0achinery and euip0ent. 6espondentIled a co0plaint for speciIc perfor0anceand da0ages against petitioner andCreative Lines. 3etitioner argued thatupon the e?ecution of the deed of sale ithad co0plied with its obligation to deliverthe obFect of the sale since there was nostipulation to the contrary. t furtherargued that being a sale on an as%is%where%is basis" it was the duty of respondent to take possession of theproperty. s there a constructive delivery

of the subFect properties=

A: ,one. As a "eneral rule$ when the sale ismade throu"h a public instrument$ thee'ecution thereof shall be euivalent to thedeliver of the thin" which is the object of thecontract$ if from the deed the contrar does notappear or cannot clearl be inferred. And withre"ard to movable propert$ its deliver maalso be made b the deliver of the 9es of the



SALES

place or depositor where it is stored or9ept. +n order for the e'ecution of a publicinstrument to e0ect tradition$ the purchasermust be placed in control of the thin" sold.@owever$ the e'ecution of a public instrumentonl "ives rise to a prima 'acie presumption of deliver. Such presumption is destroed when

the deliver is not e0ected because of a le"alimpediment. +t is necessar that the vendorshall have control over the thin" sold that$ atthe moment of sale$ its material deliver couldhave been made. !hus$ a person who does nothave actual possession of the thin" sold cannottransfer constructive possession b thee'ecution and deliver of a publicinstrument. +n this case$ there was noconstructive deliver of the machiner andeuipment upon the e'ecution of the deed of absolute sale or upon the issuance of the "atepass since it was not petitioner but reativeLines which had actual possession of thepropert. !he presumption of constructive

deliver is not applicable as it has to ield tothe realit that the purchaser was not placed inpossession and control of the propert. (Asset Privatiation :r&st v. :.>. nterprises, 8.R. $o.16714", Ma0 #, 2%%4

7: iven that actual possession" controland enFoy0ent is a 0ain attribute of ownership" is sy0bolic delivery by 0eree?ecution of the deed of conveyancesuKcient to convey ownership overproperty=

A: Res$ possession is also transferred alon"

with ownership thereof b virtue of the deed of conveance. !he mere e'ecution of the deed of conveance in a public document is euivalentto the deliver of the propert$ prior phsicaldeliver or possession is not le"all reuired. !he deed operates as a formal or smbolicdeliver of the propert sold and authoriMes thebuer or transferee to use the document asproof of ownership. ,othin" more is reuired(Sps. Sabio v. International Corporate Ban,Inc. et. at . 8.R. $o. 127%4, Sept. !, 2%%13.

7: Spouses Bernal purchased a Feepneyfro0 8nion @otor to be paid ininstall0ents. #hey then e?ecuted a

pro0issory note and a deed of chattel0ortgage in favor of 8nion @otor which inturn assigned the sa0e with /ardine5inance. #o e<ectuate the sale as well asthe assign0ent of the pro0issory noteand chattel 0ortgage" the spouses werereuired to sign docu0ents" one of whichwas a sales invoice. Although the Spouseshave not yet physically possessed thevehicle" 8nion @otorGs agent reuired

the0 to sign the receipt as a condition forthe delivery of the vehicle. t wasdiscovered that the said agent stole thevehicle even prior to its delivery to thespouses. ;as there a transfer of ownership of the subFect vehicle=

A: ,o. !he issuance of a sales invoice does notprove transfer of ownership of the thin" sold tothe buer; an invoice is nothin" more than adetailed statement of the nature$ uantit andcost of the thin" sold and has been considerednot a bill of sale.

!he re"istration certi%cate si"ned b thespouses does not conclusivel prove thatconstructive deliver was made nor thatownership has been transferred to therespondent spouses. Li9e the receipt and theinvoice$ the si"nin" of the said documents wasuali%ed b the fact that it was a reuirementof 6nion Kotor for the sale and %nancin"

contract to be approved. +n all forms of deliver$ it is necessar that the act of deliver$whether constructive or actual$ should becoupled with the intention of deliverin" thethin". !he act$ without the intention$ isinsu<cient. +nasmuch as there was neitherphsical nor constructive deliver of adeterminate thin"$ in this case$ the subjectmotor vehicle3 the thin" sold remained at theseller=s ris9. !he 6nion Kotor should thereforebear the loss of the subject motor vehicle afterits a"ent alle"edl stole the same (@nion Motor Corp. v. CA, 8.R. $o. 1171#7, >&l0 2%, 2%%1.

4elivery through a carrier6: Onl if the seller is authoriMed. *eliver tocarrier is deliver to the buer.

32: 1. A contrar intention appears2. +mplied reservation of ownership under

Art. 1H?$ pars 1$ 2$ ?.

9inds of delivery to carrier

1. AS (ree Along Si-e ) when "oods aredelivered alon"side the ship$ there isalread deliver to the buer

2. =B (ree =n Boar- ) when "oods are

delivered at the point of shipment$ deliverto carrier b placin" the "oods on vessel isdeliver to buer

?. CI (Cost, Ins&rance, reigt )a. 7hen buer pas for services of

carrier$ deliver to carrier is deliver tobuer$ carrier as a"ent of buer;

b. 7hen buer pas seller the price )from the moment the vessel is at the



SALES

port of destination$ there is alreaddeliver to buer

B. C=5 (Collect =n 5eliver0 ) the carrier actsfor the seller in collectin" the purchaseprice$ which the buer must pa to obtainpossession of the "oods.

SellerGs duties after delivery to the carrier

1. !o enter on behalf of the buer into suchcontract reasonable under thecircumstances;

2. !o "ive notice to the buer re"ardin"necessit of insurin" the "oods.

4elivery of obFect 0ust be on:

1. Stipulated time2. +f there is none$ at a reasonable hour.

3lace of delivery

1. !hat a"reed upon2. &lace determined b usa"e of trade?. Seller=s place of businessB. Seller=s residence. +n case of speci%c "oods$ where the can

be found

E<ects of a sale of goods on install0ent

1. /oods must be delivered in full ecept when stipulated

2. 7hen not e'amined b the buer ) it is notaccepted until e'amined or at least hadreasonable time to e'amine

Seller not bound to deliver the thing sold:

1. +f the buer has not paid the price;2. ,o period for pament has been %'ed in

the contract;?. A period for pament has been %'ed in the

contract but the buer has lost the ri"ht toma9e use of the time.

Buyer 0ay suspend pay0ent of the price:

6:1. +f he is disturbed in the possession or

ownership of the thin" bou"ht

2. +f he has well8"rounded fear that hispossession or ownership would bedisturbed b a vindicator action orforeclosure of mort"a"e.

32:1. Seller "ives securit for the return of

the price in a proper case;

2. A stipulation that notwithstandin" ansuch contin"enc$ the buer mustma9e pament;

?. *isturbance or dan"er is caused b theseller;

B. +f the disturbance is a mere act of trespass;

. 6pon full pament of the price.

7: s pay0ent of the purchase priceessential to transfer ownership=

A: 6nless the contract contains a stipulationthat ownership of the thin" sold shall not passto the purchaser until he has full paid theprice$ ownership of the thin" sold shall betransferred to the vendee upon the actual orconstructive deliver thereof (5ia, p. !#.

Acceptance of 4elivery by the Buyer:

1. press ) he intimates to seller that he hasaccepted

2. Implie-a. -uer does not act inconsistent with

ownership of seller after deliverb. 5etains without intimatin" to seller that

he has rejected

E<ect if the buyer refuses to acceptdespite delivery of the obFect of the sale

*eliver is completed. Since deliver of thesubject matter of the sale is an obli"ation onthe part of the seller$ the acceptance thereof

b the buer is not a condition for thecompleteness of the deliver (+illan&eva, p.117

2ote: !hus$ even with such refusal of acceptance$deliver actualJconstructive3$ will produce its le"ale0ects. (e.g. trans'erring te ris o' loss o' tes&b)ect matter to te b&0er o as become teoner tereo' (+illan&eva, p. 117

6nder Art. 1CC$ when the buer=s refusal to acceptthe "oods is without just cause$ the title theretopasses to him from the moment the are placed athis disposal. (+illan&eva, p. 117

;DE2 4EL!E6 4ES 2# #6A2S5E6

##LE

;hen delivery does not transfer title:

1. Sale on !rial$ Approval$ or Satisfaction2. 7hen there is an EP&5ESS 5ESE54A!+O,

a. +f it was stipulated that ownership shallnot pass to the purchaser until he hasfull paid the price Art. 1!7#

?. 7hen there is an +K&L+E* 5ESE54A!+O,



SALES

a. 7hen "oods are shipped$ but the bill of ladin" states that "oods are deliverableto the seller or his a"ent$ or to theorder of the seller or his a"ent

b. 7hen the bill of ladin" is retained bthe seller or his a"ent

c. when the seller of the "oods draws on

the buer for the price and transmitsthe bill of e'chan"e and the bill of ladin" to the buer $ and the latterdoes not honor the bill of e'chan"e breturnin" the bill of ladin" to the seller

B. 7hen sale is not 4AL+*. 7hen the seller is not the owner of the

"oods

32s:a. Estoppel: when the owner is precluded

from denin" the sellers authorit tosell

b. 5e"istered land bou"ht in "ood faith:Ratio* B&0er nee- not go be0on- te

:orrens titlec. Order of ourts in a Statutor Sale-. 7hen the "oods are purchased in a

Kerchant=s store$ air or Kar9et (Art.1"%"

G. 7hen "oods are held b a third part

32: !hird person ac9nowled"es to thebuer that he holds the "oods in behalf of the buer (Art. 1"21, $CC

. On sale or return ) !he ownership passesto buer upon deliver$ but he ma revest

ownership in the seller b returnin" ortenderin" the "oods within the time %'edin the contract or within reasonable time.(Art. 1"%2, $CC

Sale on trial" approval or satisfaction

+t is a contract in the nature of an option topurchase if the "oods prove to be satisfactor$the approval of the buer bein" a conditionprecedent.

;hen ownership is dee0edtransferred

1. 7hen buer si"ni%es approval oracceptance to the seller or does anact adoptin" the transaction

2. +f buer did not si"nif approval oracceptance$ but retains the "oodswithout "ivin" notice of rejection afterthe e'piration of the period %'ed or of reasonable time (Art. 1"%2, $CC

!he title shall continue in the seller until thesale has become absolute either b the:

1. buer(s approval of the "oods$ or b2. his failin" to compl with e'press or

implied conditions of the contract as to"ivin" notice of dissatisfaction or as toreturnin" the "oods$ or

?. b his doin" an other act adoptin" thetransaction such as mort"a"in" thepropert or sellin" it to a third person.

SALE 6 6E#862 !S. SALE 2 #6AL

SALE O5 5E!65, SASubject to a resolutor condition Su*epends entirel on the will of the buer *eOwnership of the "oods passes to the buer ondeliver and subseuent return of the "oodsreverts ownership to the seller

Owsi"

5is9 of loss or injur rests upon the buer 5i

7: ;hat are the rules in case of sale ontrial" approval or satisfaction=

A:#itle ;ho bears the loss

6isk of Loss

6: -orne b seller32:1. -uer is at fault2. -uer a"reed to

bear the loss

As to trial

6: -uer must "ive"oods a trial32: -uer need notdo so if it is evidentthat it cannot perform

the wor9.;hen periodwithin whichbuyer 0ustsignify his

acceptance runs

+t runs onl when allthe parts essential forthe operation of the

object has beendelivered

!alidity of stipulation that a)rd person 0ustsatisfy approvalor satisfaction

4alid$ provided the ?rd

person is in "ood faith

f the sale is0ade to a buyerwho is an e?pert

on the obFectpurchased

/enerall$ it cannotbe considered a sale

on approval

48BLE SALE

4ouble sale

!here is double sale when the same object of the sale is sold to di0erent vendees.

2ote: Re9&isites*



SALES

1. Same subject matter2. Same immediate seller?. !wo or more -ierent buers at odds over

the ri"htful ownership over the subjectmatter and must represent conVictin"interests

B. !wo or more valid sales

6ule on double sale

irst in time$ priorit in ri"ht Prior tempore, potior )&re

2ote: 5ule on *ouble Sale re"ardin"immovables:

6: Appl Art.1BB32: Sale of re"istered lands ) appl !orrens Sstem

7: ;hat are the rules according to Article1%$$ of the Civil Code=

68LES AS # 36E5E6E2CE 5;2E6SD3 2 CASE 5 48BLE SALE+Art. 1%$$" CC,

1. Movable ) Owner who is %rst to possess in"ood faith

2. Immovable Ka. irst to register in "ood faithb. ,o re"istration$ %rst to possess in "ood

faithc. $o registration no possession in

goo- 'ait ) &erson who presentsol-est title in "ood faith

,ote: !he reuirement of the law is two8

fold: ac9&isition in goo- 'ait andregistration in goo- 'ait.

5e"istration ) an entr made in the boo9sof the re"istr$ includin" both re"istrationin its ordinar and strict sense$ andcancellation$ annotation$ and evenmar"inal notes; entr made in the re"istrwhich records solemnl and permanentlthe ri"ht of ownership and other real ri"htshen" vs. /enato$ ?HH S5A 22$ 1DDC3

,ote: &encilled entries on the title are notconsidered re"istration APMBAI v. Co&rt

o' Appeals, 14443.

4octrine on Conditional SalesContractsto Sell and Adverse Clai0s:

!he rules on double sales under Art. 1BB arenot applicable to contract to sell$ because of the circumstances that must concur in order forthe provisions to Art. 1BB on double sales toappl$ namel that there must be a valid salestransactions$ and buers must be at odds over

the ri"htful ownership of the subject matterwho must have bou"ht from the ver sameseller$ are lac9in" in a contract to sell forneither a transfer of ownership nor a salestransaction has been consummated$ and suchcontract is bindin" onl upon the ful%llment ornon8ful%llment of an event. ,evertheless$ the

governing principle of Art. 1BB shouldappl$ mainl the "overnin" principle of prim&stempore,portior )&re %rst in time$ stron"er inri"ht3. U"heng v. enato" )JJ SC6A *--+1TT&,.

!he rules in double sale under Article 1BB$whereb the buer who is able to %rst re"isterthe purchase in "ood faith is in full accordwith Section 1 of &* 12D which provides thatno deed$ mort"a"e$ lease$ or other voluntarinstrument ) e'cept a will purportin" to conveor a0ect re"istered land shall ta9e e0ect as aconveance or bind the land until itsre"istration. !hus$ if the sale is not re"istered$

it is bindin" onl between the seller and thebuer but it does not a0ect innocent thirdpersons. U Abrigo v. 9e 8era" $)- SC6A %$$+-JJ$,.

7hen %rst sale is over unre"istered land andthe second sale is when it is re"istered$ therules on double sale do not appl. U9agupan:rading "o. v. 3acam" 1$ SC6A 1*T+1T(%,.

Article 1BB is inapplicable to unre"isteredland because the purchaser of unre"isteredland at a sheri0=s e'ecution sale onl steps into

the shoes of the jud"ment debtor$ and merelacuires the latter=s interest in the propertsold as of the time the propert was leviedupon$ as e'pressl provided for in then Sec.?$ 5ule ?D of the 5evised 5ules of ourt one'ecution sale Ynow Sec. ??$ 5ule ?D$ 1DD5ules of ivil &rocedure3Z. U"arumba v. "A")1 SC6A %%& +1T*J,.

6nder Act ??BB$ re"istration of instrumentsa0ectin" unre"istered lands is withoutprejudice to a third part with a better ri"ht$which means that mere re"istration does not"ive the buer an ri"ht over the land if theseller was not anmore the owner of the land

havin" previousl sold the same to somebodelse even if the earlier sale was unrecorded. !he rules on double sale under Art. 1BB hasno application to land no re"istered under the !orrens sstem.U Acabal v. Acabal, $%$ SC6A%%% +-JJ%,

7: 4oes prior registration by the secondbuyer of a property subFect of a double



SALES

sale confer ownership or preferred rightin his favor over that of the Irst buyer=

A: &rior re"istration of the disputed propert bthe second buer does not b itself conferownership or a better ri"ht over the propert.Article 1BB reuires that such re"istration

must be coupled with "ood faith.

Tnowled"e "ained b the %rst buer of thesecond sale cannot defeat the %rst buersri"hts e'cept where the second buer re"istersin goo- 'ait the second sale aea- of the %rst$as provided b the ivil ode.

Tnowled"e "ained b the second buer of the%rst sale defeats his ri"hts even if he is %rst tore"ister the second sale$ since such 9nowled"etaints his prior re"istration with bad faith Art.1BB3 (@raca, et. al v. CA, 8.R. $o. 11"1"#,Sept. ", 1447

363E6# 6ES#6A#2 4EC6EE &65@ASE5 +, /OO* A+!@

A purchaser is "ood faith is one who buspropert of another$ without notice that someother person has a ri"ht to$ or interest in$ suchpropert and pays a full and fair price for the same at the time of such purchase$ orbefore he has notice of the claim or interest of some other person in the propert. :anglao v.Par&ngao$ ? S5A 12? 2HH3

Burden of 3roof

!he burden of provin" the status of a purchaserin "ood faith lies upon him who asserts thatstatus. +t is not su<cient to invo9e the ordinarpresumption of "ood faith$ that is$ thateverone is presumed to have acted in "oodfaith$ since the "ood faith that is here essentialis inte"ral with the ver status that must beestablished. :anglao v. Par&ngao$ ? S5A12? 2HH3

nstances of Bad 5aithnot in ood 5aith4illanueva3

a. -ein" +n -usiness on 5ealt ) A mort"a"eewho eventuall ended buin" the propertat the public auction$ cannot claim to be abuer in "ood faith when his business inthe constructin" and sellin" townhousesand e'tendin" credit to the public$includin" real estate loans; for he ischar"ed with "reater dili"ence thatordinar buers or encumbrances for value$because it would be standard in hisbusiness$ as a matter of due dili"ence

reuired of ban9s and %nancin" companies$to ascertain whether the propert bein"o0ered as securit for the debt has alreadbeen sold to another to prevent injur toprior innocent buers. E'presscreditinancin" orp. v. 4elasco$ B? S5A H2HH3.

b. lose 5elationship ) !he sale to one=s dau"hter and sons will"ive rise to the conclusion that the buers$not bein" reall third parties$ 9new of theprevious sales and cannot be considered in"ood faith. !he buers are deemed tohave constructive 9nowled"e b virtue of their relationship to their sellers. &ilapil v.ourt of Appeals$ 2H S5A GG 1DD3.

c. Obli"ation to+nvesti"ate or !o ollow Leads ) Apurchaser who is aware of facts whichshould put a reasonable man upon his

"uard cannot turn a blind ee and laterclaim that he acted in "ood faith$ such as Abuer of a re"istered land would be in badfaith when he purchases without as9in" tosee the owner=s cop of the title andJorwithout visitin" the land where he wouldthen have seen %rst buer occupin" thesame. Santia"o v. A$ 2B S5A ??G1DD3.

- 7hen there areoccupants to the land bein" bou"ht$since it is the common practice in thereal estate industr$ an ocular

inspection of the premises involved isa safe"uard a cautious and prudentpurchaser usuall ta9es. KartineM v.A$ ?C S5A ?C 2HH13.

- An personen"a"ed in business would be warof buin" from a compan that isclosin" shop$ because it ma bedissipatin" its assets to defraudcreditors. Such buer is bound toinuire whether the owners hadunsettled obli"ations encumbrancethat could burden the propert.Samson v. ourt of Appeals$ 2?C

S5A ?D 1DDB3.

d. Land in Adverse&ossession ) -uer who could not havefailed to 9now or discover that the landsold to him was in the adverse possessionof another is a buer in bad faith. @eirs of 5amon *urano$ Sr. v. 6$ ?BB S5A 2?C2HHH3.



SALES

e. E'istence of Lis&endens ) Settled is the rule that one whodeals with propert with a notice of lispendens$ even when at the time of sale theannotation was cancelled but there was apendin" appeal$ cannot invo9e the ri"ht of a purchaser in "ood faith. A purchaser

cannot close his ees to facts which shouldput a reasonable man on "uard and claimthat he acted in the belief that there wasno defect in the title of the seller. &o Lamv. A$ ?1G S5A 21 1DDD3.

EPE&!: 7hen 9nowled"e of lis pendenswas acuired at the time there was orderto have it cancelled. &o Lam v. A$ ?BS5A CG 2HHH3.

6ules in the application for landregistration

1. !he application for land re"istration shallbe in writin" and si"ned b the applicant orthe person dul authoriMed in his behalf. +tshall be sworn in the place where it wassi"ned.

2. +f there is more than one applicant$ theapplication shall be si"ned and sworn to band in behalf of each.

Application 0ust contain:

1. *escription of the land2. itiMenship and civil status of the applicant?. +f married$ the name of the wife or husband

B. +f the marria"e has been le"all dissolved$when and how the marria"e relationterminated

. ull names and addresses of all occupantsof the land and those of the adjoinin"owners$ if 9nown$ and$ if not 9nown$ it shallstate the e'tent of the search made to %ndthem.

5or 2on' residents:

@e shall %le with his application an instrumentin due form appointin" an a"ent orrepresentative residin" in the &hilippines$"ivin" his full name and postal address$ and

shall therein a"ree that the service of an le"alprocess in the proceedin"s under or "rowin"out of the application made upon his a"ent orrepresentative shall be of the same le"al e0ectas if made upon the applicant within the&hilippines.

4uplicate of certiIcate of title reuired

6: ,o voluntar instrument shall bere"istered b the 5e"ister of *eeds$ unless theowners duplicate certi%cate is presented withsuch instrument.

32: +n cases e'pressl provided for in thedecree or upon order of the court$ for causeshown.

E<ect of the production of a duplicatecertiIcate of title

+t shall be conclusive authorit from there"istered owner to the 5e"ister of *eeds toenter a new certi%cate or to ma9e amemorandum of re"istration in accordancewith such instrument$ and the new certi%cateor memorandum shall be bindin" upon there"istered owner and upon all persons claimin"under him$ in favor of ever purchaser forvalue and in "ood faith.

ther pay0ents to be 0ade by the seller

in the registration of property

!he seller should pa capital "ains ta' anddocumentar re"istration fees. !he rate of capital "ains ta' is GX of capital "ains basedon purchase price$ fair mar9et value or Monalvalue$ whichever is hi"her.

7: Spouses ui0ba are the registeredowners of a parcel of land. #he wifeentrusted her copy of the wnerGs4uplicate CertiIcate of #itle to 4e LaCruH as collateral for a loan. Later on" 4e

La CruH received a phone call fro0 thewife" infor0ing her that she had changedher 0ind and will no longer obtain theloan" conseuently asking for her #C#back. Dowever" the certiIcate had beendeposited in a bank. ;hen she inuired atthe bank" they told her that thecertiIcate was not there. #he wifereceived a telegra0 fro0 Abad re0indingher of the 0aturity of her 0ortgage. #hespouses were not aware of any actual0ortgage involving their property untilthe receipt of such telegra0. Dence" the

spouses Iled an adverse clai0. Abad" inhis answer" alleged that spouses ui0ba0ade a connivance with 4e La CruH todefraud hi0. s Abad an innocent holderfor value=



SALES

A: !he main purpose of land re"istration$covered b &* 12D$ is to facilitatetransactions relative to real estate b "ivin"the public the ri"ht to rel upon the face of the !orrens certi%cate of title. !herefore$ as a rule$the purchaser is not reuired to e'plore furtherthan what the erti%cate indicates on its face.

!his rule however applies onl0 to innocentpurchasers for value and in "ood faith; ite'cludes a purchaser who has 9nowled"e of adefect in the title of the vendor$ or of factssu<cient to induce a reasonabl prudent manto inuire into the status of the propert.6nder Section ?2 of &* 12D$ an innocentpurchaser for value is deemed to include aninnocent mort"a"ee for value. - insistin" onthe application of &* 12D in his favor$petitioner be"s the uestion. @e invo9esSections 2 and ? of the law$ whichprotects innocent mort"a"ees for value$ butwhich the 5! has alread determined hewas not. As alread discussed$ such factual

determination b the trial court is conclusive$because he did not uestion it in the properforum. !he lo"ical conseuence$ therefore$ isthe inapplicabilit of the said law to his factualsituation. &reliminaril$ we should stress thatthe remed of appeal b certiorari under 5uleB of the 5ules of ourt contemplates onluestions of law$ not of fact. !herefore$ a partwho %les a 5ule B petition waives theopportunit to inuire into the %ndin"s of factof the lower court. omin" to the present case$the paramount uestion re"ardin" the "oodfaith of petitioner is obviousl one of fact.(Aba- v. Spo&ses 8&imba, 8.R. $o. 1"7%%2,

>&l0 24, 2%%"

3rinciple of prius tempore, potior jure

Tnowled"e b the %rst buer of the second salecannot defeat the %rst buer=s ri"hts e'ceptwhen the second buer %rst re"isters in "oodfaith the second sale. onversel$ 9nowled"e"ained b the second buer of the %rst saledefeats his ri"hts even if he is %rst to re"ister$since such 9nowled"e taints his re"istrationwith bad faith to merit the protection of Art.1BB 2nd par.3$ the second realt buer mustact in "ood faith in re"isterin" his deed of sale(5ia, p. 12".

2ote: 7here one sale is absolute and the other is a pacto -e retro transaction where the period toredeem has not et e'pired$ Art. 1BB will not appl(Pine-a, p. 22.

Caveat e0ptor

+t literall means$ (Let the buer beware=. !herule reuires the purchaser to be aware of the

supposed title of the vendor and one who buswithout chec9in" the vendor=s title ta9es all theris9s and losses conseuent to such failure(Agcaoili, p. 1#!

Applicable in:

1. Sales of animals (Art. 1"7!2. *ouble sales (Art. 1"!!?. +n sheri0=s sales (Art. 1"7%!. !a' sales (Art. 1"!7, last paragrap

2ote: +n the above sales$ there is no warrant of titleor ualit on the part of the seller. !he purchaserwho bus without chec9in" the title of the vendor isassumin" all ris9s of eviction.

+n sheri0=s sales$ the sheri0 does not "uarantee thetitle to real propert and it is not incumbent uponhim to place the buer in possession of such propert(Pine-a sales, p. 27".

Caveat e0ptor principle not applicable in

sales of registered land

!he purchaser of a re"istered land under the !orrens sstem is merel char"ed with notice of the burdens and claims on the propert whichare inscribed on the face of certi%cate of title.(Pine-a sales, p. 27"

Caveat e0ptor principle applicable in Fudicial sales

!he purchaser in a judicial sale acuires nohi"her or better title or ri"ht than that of the jud"ment debtor. +f it happens that the

jud"ment debtor has no ri"ht$ interest$ or lienon and to the propert sold$ the purchaseracuires none (Pine-a sales, p. 2#%.

7: /uliet o<ered to sell her house and lot"together with all the furniture andappliances therein" to 4ehl0a. Beforeagreeing to purchase the property"4ehl0a went to the 6egister of 4eeds toverify /ulietGs title. She discovered thatwhile the property was registered in /ulietGs na0e under the Land 6egistrationAct" as a0ended by the 3roperty6egistration 4ecree" it was 0ortgaged toElaine to secure a debt of 3&J" JJJ.

;anting to buy the property" 4ehl0a told /uliet to redee0 the property fro0 Elaine"and gave her an advance pay0ent to beused for purposes of releasing the0ortgage on the property. ;hen the0ortgage was released" /uliet e?ecuted a4eed of Absolute Sale over the propertywhich was duly registered with the6egistry of 4eeds" and a new #C# wasissued in 4ehl0aGs na0e. 4ehl0a



SALES

i00ediately took possession over thehouse and lot and the 0ovables therein.#hereafter" 4ehl0a went to theAssessorGs Kce to get a new ta?declaration under her na0e. She wassurprised to Ind out that the propertywas already declared for ta? purposes in

the na0e of V Bank which hadforeclosed the 0ortgage on the propertybefore it was sold to her. V Bank wasalso the purchaser in the foreclosure saleof the property. At that ti0e" the propertywas still unregistered but V Bank registered the Sheri<Gs 4eed of Conveyance in the day book of the6egister of 4eeds under Act ))$$ andobtained a ta? declaration in its na0e.;as 4ehl0a a purchaser in good faith=+-JJ& Bar 7uestion,

A: Res$ *ehlma is a purchaser in "ood faith.She learned about the PR[ ta' declaration and

foreclosure sale onl after the sale to her wasre"istered. She relied on the certi%cate of titleof her predecessor8in8interest. 6nder the !orrens Sstem$ a buer of re"istered lands isnot reuired b law to inuire further than whatthe !orrens certi%cate indicates on its face. +f aperson proceeds to but it relin" on the title$that person is considered a buer in "ood faith.

!he priorit in time rule could not be invo9edb PR[ -an9 because the foreclosure sale of the land in favour of the ban9 was recordedunder Act ??BB$ the law "overnin" transactionsa0ectin" unre"istered land$ and thus$ does not

bind the land.

7: ;ho as between 4ehl0a and V Bank has a better right to the house and lot=

A: -etween *ehlma and the ban9$ the formerhas a better ri"ht to the house and lot.

7: ;ho owns the 0ovables inside thehouse=

A: 6nless there is a contrar stipulation in theabsolute deed of sale$ *ehlma owns themovables covered b the *eed of Sale and herownership is perfected b the e'ecution and

deliver of public document of sale. !hedeliver of the absolute deed of sale is asmbolical deliver of the house and lot$includin" the contents of the house. !his is anobli"ation to deliver a speci%c thin"$ whichincludes the deliver of the speci%c thin" itself and all of its accessions and accessories eventhou"h the ma not have been mentionedArt. 11GG$ 3.

6S9 5 LSS

Loss +t is understood that the thin" is lostwhen it:

1. perishes$ or2. "oes out of commerce$ or?. disappears in such a wa that its

e'istence is un9nown or cannot berecovered. (Art. 11#4, 2n- par.

32: +n an obli"ation to deliver a "enericthin"$ the loss or destruction of anthin" of the same 9ind does not e'tin"uish theobli"ation (Art. 126, $CC

Loss at the ti0e of perfection of thecontract of sale

6: 7hen the object of the contract is entirellost$ the contract shall be without e0ect.

32: +n case of partial loss$ the buer ma

choose between withdrawin" from thecontract and demandin" the remainin"part. +f he chooses the latter$ he shall pathe remainin" part=s correspondin" price inproportion to the total sum a"reed upon.(Art. 1!4, $CC

ptions of the buyer in case of total orpartial loss or deterioration of a 0ass of speciIc goods without the knowledge of the seller:

1. @e ma treat the sale as avoided orcancelled

2. @e ma continue with the sale with respectto the available or remainin" "oods. (Art.1!4!, $CC

E<ect suppose the buyer chooses tocontinue with the sale of the re0aininggoods

!he remainin" "oods shall pass in ownership tothe buer but subject to proportionatereduction of the price. -ut this is applicableonl if the "oods are divisible or capable of bein" divided (Pine-a, p. 122, 2%1% e-.. +f indivisible$ the onl option available is theavoidance of the sale.

7: ;ho bears the risk of loss ordeterioration=

BE56E3E65EC#

2

Res perit -omino ) Seller is theowner so seller bears ris9 of loss

A#3E65EC#

Res perit -omino



SALES

2

ontract shall be without ane0ect ) the seller bears the losssince the buer is relieved of his

obli"ation under the contractA5#E6

3E65EC#2 B8#

BE56E4EL!E6

Seller;*eterioration > fruits ) -uer

bears loss (:olentino3

A5#E64EL!E6

-uer becomes the owner sobuer bears ris9 of loss

*eliver e'tin"uish ownershipvisDaDvis the seller > creates anew one in favor of the buer

4C8@E2#S 5 ##LE

4ocu0ent of #itle

A document used in the ordinar course of business in the sale or transfer of "oods $ asproof of the possession or control of the "oods $or authoriMin" or purportin" to authoriMe thepossessor of the document to transfer orreceive$ either b endorsement or b deliver$"oods represented b such document (Art.166.

E?:

A document of title of "oods includes an bill of ladin"$ doc9 warrant$ 9&e-an$ or warehousereceipt or order (+illan&eva, p. %1, 2%%4 e-.

@ost co00on for0s of docu0ents of title

• bill o' la-ing ) contract and

a receipt for the transportof "oods and their deliverto the person namedtherein$ to order or tobearer; usuall involves ?personsIthe carrier$ theshipper$ and the consi"nee;the shipper and theconsi"nee ma be one andthe same person; alsocalled sipping receipt $'orar-erNs receipt $ orreceipt 'or transportation

• -oc arrant ) aninstrument b doc9 ownersto an importer of "oodswarehoused on the doc9 asa reco"nition of theimporter(s title to said"oods upon production of the bill of ladin"

• areo&se receipt ) acontract or receipt for

"oods deposited with awarehouseman containin"the latter(s underta9in" tohold and deliver the said"oods to a speci%edperson$ to order$ or tobearer

• 9&e-an ) warehousereceipt usuall for su"arreceived b awarehouseman

3urpose of the 4ocu0ents of #itle

1. Evidence of possession or control of "oodsdescribed therein

2. Kedium of transferrin" title and possessionover the "oods described therein withouthavin" to e0ect actual deliver (+illan&eva,2%%4 e-.

?. !he custod of a ne"otiable warehousereceipts issued to the order of the owner$or to bearer$ is a representation of titleupon which bona J-e purchasers for valueare entitled to rel $ despite breaches of trust or violations of a"reement on the partof the apparent owner (Si0 Cong Bieng v.SBC, "6 Pil "4#

6ationale behind a docu0ent of title

Kerchants are able to transact with "oods andmerchandise without havin" to phsicall carrthem around$ and that buers should beassured that the ma deal with the evidencethereof with the same e0ect as thou"h the

could feel the merchandise themselves(+illan&eva, p. %, 2%%4 e-.

2egotiable 4ocu0ent of #itle

A document of title which states that the "oodsreferred therein will be delivered to the bearer$or to the order of an person named in suchdocument (Art. 1"%4, $CC.

3ersons who 0ay negotiate a 2egotiable4ocu0ent of #itle

1. Owner2. &erson to whom the possession or custod

of the document has been entrusted bthe ownera. +f bailee underta9es to deliver the

"oods to such personb. +f document is in such form that it ma

be ne"otiated b deliver.

6ights of a person to who0 the docu0enthas been negotiated



SALES

1. the title of the person ne"otiatin" thedocument$ over the "oods covered b thedocument;

2. the title of the person depositor or owner3to whose order b the terms of thedocument the "oods were to be delivered$over such "oods and

?. the direct obli"ation of the baileewarehouseman or carrier3 to holdpossession of the "oods for him$ as if thebailee had contracted directl with him

2on'negotiable docu0ents of title

1. !he are delivered onl to a speci%edperson

2. arrier will not deliver the "oods to anholder of the document or to whom suchdocument ma have been endorsed b theconsi"nee

?. Kust present the deed of sale or donationin his favor

;arranties of seller of docu0ents of title:

1. /enuineness of the *ocument2. Le"al ri"ht to ne"otiate or transfer?. ,o 9nowled"e of fact which would impair

the validit or worth of the documentB. 5i"ht to transfer !itle to the "oods and

merchantabilit or %tness for a particularpurpose$ whenever such warranties wouldhave been implied had the contracttransfer the "oods without a document.

6ights of person to who0 a negotiable

docu0ent of title +not duly negotiated,has been transferred or the transferee of a non'negotiable docu0ent of title

1. the title to the "oods as a"ainst thetransferor;

2. the ri"ht to notif the bailee of the transferthereof; and

?. the ri"ht$ thereafter$ to acuire theobli"ation of the bailee to hold the "oodsfor him

7: ;hat does a person to who0 a non'negotiable instru0ent has beentransferred but not negotiated" acuire as

against the transferor=

A: @e acuires:1. !itle to the "oods$ subject to the terms

of an a"reement with the transferor;2. 5i"ht to notif the bailee who issued

the document of the transfer thereof$and thereb to acuire the directobli"ation of such bailee to holdpossession of the "oods for him

accordin" to the terms of thedocument.

;hen #ransferorGs creditor 0ay defeatthe afore0entioned rights of thetransferee:

&rior to the noti%cation to such bailee b thetransferor or transferee of a non8ne"otiabledocument of title$ the title of the transferee tothe "oods and the ri"ht to acuire theobli"ation of such bailee ma be defeated bthe transferor=s creditor b the lev of anattachment or e'ecution upon the "oods. (Art.1"1!, $CC

7: f the goods are delivered to a baileeby the owner or by a person whose act inconveying the title to the0 to a purchaserin good faith for value and a negotiableinstru0ent was issued for the0" can thesaid goods be attached" garnished orlevied upon=

A: 6: ,o$ the "oods cannot be attached$"arnished or levied upon while the are in thebailee=s possession.

32: 1. 7hen the document is %rst

surrendered; or2. 7hen its ne"otiation is enjoined.

2ote: !he bailee shall in no case be compelledto deliver the actual possession of the "oodsuntil the document is:

1. Surrendered to him; or2. +mpounded b the court.(Art. 1"14, $CC

7: ;hat is the reason behind thisprohibition=

A: !his is to protect the bailee from liabilit asthe document ma have been ne"otiated bthe holder to subseuent transferees for valueand in "ood faith. @e ma be liable fordama"es if he cannot produce and deliver the"oods later (Pine-a, p. 1#1, 2%1% e-.

6ights of a creditor whose debtor is the

owner of a negotiable docu0ent of title@e is entitled to such aid from courts of appropriate jurisdiction b:

1. injunction;2. attachin" such document;?. as re"ards propert which cannot be

readil attached or levied upon bordinar le"al process 8 satisfin" theclaim b means allowed b law oreuit. (Art. 1"2%, $CC



SALES

6E@E4ES 5 A2 823A4 SELLE6

8npaid Seller

!he seller of "oods is deemed to be an unpaidseller either:

1. when the whole of the price has notbeen paid or tendered;

2. when a bill of e'chan"e or otherne"otiable instrument has beenreceived as conditional pament$ andthe condition on which it was receivedhas been bro9en b reason of thedishonor of the instrument$ theinsolvenc of the buer$ or otherwise.

2ote: !he mere deliver of a ne"otiableinstrument does not ipso 'acto e'tin"uishthe obli"ation of the buer to pa becausethe instrument which has been deliveredma be dishonoured. +n which case$ the

seller is still an unpaid seller. (@S v. Be-o0a,1! Pil. 4#

2ote: +t includes an a"ent of the seller to whom thebill of ladin" has been indorsed$ or consi"nor ora"ent who has himself paid$ or is directl responsiblefor the price$ or an other person who is in theposition of a seller (Pine-a, p. 147, 2%1% e-

Seller still considered as unpaid eventhough the title to the goods has passedto the buyer

7henever the seller was onl paid partiall$ heremains an unpaid seller (Pine-a, p. 147, 2%1%e-.

6e0edies of an 8npaid Seller

+. Ordinar1. Action 'or Price

E'ercised when:a. ownership has passed to buer;b. price is paable on a da certainc. "oods cannot readil be resold for

reasonable price and Art. 1DG isinapplicable

2. Action 'or 5amages K +n case of wron"ful ne"lect or refusal b thebuer to accept or pa for the thin"

sold++. Special1. Possessor0 3ien ) Seller not bound to

deliver if buer has not paid him theprice. !his remed presupposes thatthe sale is on credit. +t is e'ercisableonl in followin" circumstances:a. "oods sold without stipulation as to

creditb. "oods sold on credit but term of

credit has e'pired

c. buer becomes insolvent

2ote: 7hen part of "oods delivered$ mastill e'ercise ri"ht on "oods undelivered

8npaid seller as bailee for the buyer !he seller ma e'ercise his ri"ht of liennotwithstandin" that he is in possession of

the "oods as a"ent or bailee for the buer.

2. Stoppage in :ransit&

Re9&isites* 'CSE2#'8a. nsolvent buerb. !he sale of "oods must be on creditc. Seller must Surrender the

ne"otiable document of title$ if and. Seller must bear the E'penses of

deliver of the "oods after thee'ercise of the ri"ht.

e. Seller must either actuall ta9epossession of the "oods sold or"ive 2otice of his claim to thecarrier or other person inpossession

f. /oods must be in #ransit ". 8npaid seller

. Special Rigt to Resell te 8oo-s E'ercised when:

a. /oods are perishable$b. Stipulated the ri"ht of resale in

case of default$ orc. -uer in default for unreasonable

time

!. Special Rigt to Rescin-Re9&isites*a. E'pressl stipulated O5 buer is in

default for unreasonable timeb. ,otice needed to be "iven b seller

to buer

nstances when possessory lien is lost

1. Seller delivers without reservin" ownershipin "oods or ri"ht to possess them

2. -uer or a"ent lawfull obtains possessionof "oods

?. 7aiver

2ote: Seller loses lien when he parts with "oods butstill$ stoppa"e in transitu can be e'ercised3

Basis of right of an unpaid seller

+nherent justice of deprivin" the seller of "oodswith which he has not %nall parted where it isevident that he has not been or will not bepaid the price for them when it is due



SALES

Lien generally not lost by part delivery7hen part of the "oods are delivered$ theunpaid seller has a lien upon the remainder of the proportion of the price which is due onaccount if the "oods so retained. @owever$ if the deliver of the part is intended as smbolicdeliver of the whole$ and$ therefore$ a waiver

of an ri"ht of retention as to the remainder$the lien is lost.

6evival of lien after delivery

1. +f the buer refuses to receive the "oodsafter the have been delivered to a carrier orother bailee on his behalf$ thou"h the sellerhas parted with both the ownership and thepossession$ he ma reclaim the "oods andrevest himself wit it.2. +f the buer returns the "oods in wron"fulrepudiation of the sale$ the lien is revived.

6ight of stoppage in transitu

!he seller ma resume possession of the "oodsat an time while the are in transit$ and hewill then become entitled to the same ri"hts inre"ard to the "oods as he would have had if hehad never parted with the possession. (Art.1"%, $CC

oods are in transit

1. After deliver to a carrier or other baileeand before the buer or his a"ent ta9esdeliver of them; and

2. +f the "oods are rejected b the buer$ andthe carrier or other bailee continues inpossession of them. (Art. 1"1, par. 1

oods dee0ed to be no longer in transit

1. After deliver to the buer or his a"ent2. +f the buerJa"ent obtains possession

of the "oods at a point before thedestination ori"inall %'ed;

?. +f the carrier or the baileeac9nowled"es that he holds the "oods inbehalf of the buerJ his a"ent;

B. +f the carrier or bailee wron"fullrefuses to deliver the "oods to the buer or

his a"ent. (+illan&eva, p. 1#1

Basis of right of stoppage in transitu:

1. injustice of allowin" the buer toacuire ownership and possession of the "oods when he has not paid and$owin" to his insolvenc$ cannot pa theprice which was to "iven in return forthe "oods;

2. principle allowin" rescission andrestitution where there is actual orprospective failure of consideration

,ature of ri"ht of stoppa"e in transit&: notbased on the a"reement of the parties but isconferred b law

Dow stoppage in transit is carried out

!he seller ma:a. !a9e actual possession of the "oodsb. /ive notice of his claim to the carrier or

other bailee who is in possession of the"oods

;ays of e?ercising right of stoppage intransitu1. b ta9in" actual possession of the "oods2. b "ivin" notice of his claim to the carrier orbailee

Such notice must be "iven at such time andunder such circumstances that the principal$ bthe e'ercise of reasonable dili"ence$ macommunicate it to the a"ent to prevent thedeliver to the buer. !here is no form of noticewhich is essential; it is onl necessar that the"oods are su<cientl described foridenti%cation.

E<ect of the e?ercise of this right

!hereafter the seller becomes entitled to thesame ri"hts to the "oods as if he had neverparted with the possession of the "oods

(Pine-a, p. 2%", 2%1% e-

if the seller knew of the insolvency of thebuyer beforehand

!hen he cannot e'ercise the ri"ht to stoppa"ein transit because he is under estoppel. @eassumed the ris9.

6ationale behind the right of stoppage intransitu

!o prevent injustice of allowin" the buer toacuire ownership and possession of the "oodswhen owin" to his insolvenc$ he cannot pa

the price. (Pine-a, p. 2%6, 2%1% e-

Attorn0ent by the bailee

attornment ) a constructive deliver involvin"the transfer of mediate possession while a thirdperson has immediate possession; especiall abailee(s ac9nowled"ment that he or she willhold the "oods on behalf of someone otherthan the bailor



SALES

At the time when a carrier %rst receives "oodsconsi"ned to the buer$ the carrier is a"ent forthe seller for the purpose of carrin" out thetransit between the seller and the buer. +norder to terminate the seller(s ri"ht to stop$ thecarrier must enter into a new relation$ distinct

from the ori"inal contract of carria"e$ to holdthe "oods for the buer as his a"ent not for thepurpose of e'peditin" them to the place of ori"inal destination$ pursuant to that contract$but in a new character for the purpose of custod on the buer(s account.

E<ect of refusal of carrier to attorn ordeliver the goods

A ri"htful refusal b the carrier$ based forinstance$ on the refusal of the buer or hisa"ent to pa the frei"ht will not terminate theri"ht to stop.

E<ect of e?ercising the special right of resale

!he unpaid seller shall not be liable to theori"inal buer upon the sale or for an pro%tmade b such resale$ but ma recover from thebuer dama"es for an loss occasioned b thebreach of the sale. (Art. 1", $CC

8npaid sellerGs right of resale

An unpaid seller can e'ercise the ri"ht to resellonl when he has either a ri"ht of lien or a ri"htto stop the "oods in transit& and under an of

the followin" circumstances:

1. where the "oods are perishable in nature;2. where the ri"ht to resell is e'pressl

reserved in case the buer should ma9e adefault; and

?. where buer delas in pament of the pricefor an unreasonable time

ect o' resale: !he seller is not liable for anpro%t made b such resale; but if he sells forless than the price$ he has a ri"ht to sue for thebalance. As a"ainst the ori"inal buer$ the newbuer acuires a "ood title to the "oods.

$otice o' resale !he seller(s ri"ht to resell the "oods for thebuer(s account ma depend upon the len"thof time the buer has been in default. E'cept incase of perishable "oods$ which ma reuire ane'peditious sale$ and where the ri"ht to resellis reserved$ the failure to "ive notice shall berelevant upon the uestion whether the buerhas been in default for an unreasonable time.

Manner o' resale !he sale must be made in "ood faith accordin"to the established business methods with noattempt to ta9e advanta"e of the vendee. !heseller is onl reuired to e'ercise reasonablecare and jud"ment in ma9in" a resale. @ecannot$ however$ directl or indirectl$ bu the

"oods.

7: s notice to the defaulting buyerreuired in the resale of goods=

A: 6: ,o.

32: 7here the ri"ht to resell is not basedon the perishable nature of the "oods orupon an e'press provision of the sale.

2ote: ,otice of time and place of resale is notessential to the validit of such resale. (Art. 1!,$CC

Special right to rescind

!he unpaid seller shall not be liable to thebuer upon the sale$ but ma recover from thebuer dama"es for an loss occasioned b thebreach of the sale. (Art. 1"!, $CC

An unpaid seller has a ri"ht of rescission onl if he has either a ri"ht of lien or a ri"ht to stopthe "oods in transit& and under either of 2situations:

1. where the ri"ht to rescind is e'presslreserved in case the buer should ma9e adefault; or

2. where the buer delas in pament of theprice for an unreasonable time

E<ect of rescission

!he seller resumes ownership in the "oods.7hile the seller shall not be liable to the buerupon the contract of sale$ the latter$ however$ma be liable to the seller for dama"es for anloss occasioned b the breach of contract.

@anner of rescissionAn election b the seller to rescind ma bemanifested b notice to the buer or b some

other overt act showin" an intention to rescind.ommunication of such election to the buer isnot necessar. -ut the "ivin" or failure to "ivenotice is relevant in determinin" thereasonableness of the time "iven the buer toma9e "ood his obli"ations under contract.

E<ects of sale of goods subFect to lien orstoppage in transit:



SALES

1. 7here "oods are not covered b ne"otiable

document of title$ the purchaser from theori"inal buer can acuire onl such ri"htas the buer then had.

2. 7here "oods are covered b ne"otiabledocument of title$ the seller(s lien cannot

prevail a"ainst the ri"hts of a purchaser forvalue in "ood faith to whom the documenthas been indorsed. 5eason: to protect thepurchaser without notice after the sellerhad stopped the "oods either b virtue of his ri"ht of lien or stoppa"e in transit&3

;hen buyer dee0ed insolvent

One is deemed insolvent when he eitherceased to pa his debts in the ordinar courseof business or cannot pa his debts as thebecome due$ whether insolvenc proceedin"shave been commenced or not. (+illan&eva, p.64, 2%%4 e-.

6ecto Law or nstall0ent Sales Law

ommonl 9nown as the 5ecto Law. +t isembodied in Art. 1BCB of the , whichprovides for the remedies of a seller in thecontracts of sale of personal propert binstallments.

2ote: Art. 1BCB of the , incorporates theprovisions of Act ,o. B122 passed b the &hilippineLe"islature on *ec. D$ 1D?D$ 9nown as theQ+nstallment Sales LawQ or the Q5ecto Law$Q whichthen amended Art. 1BB of the ivil ode of 1CCD.

Applicability of Art. 1$&$ +6ecto Law,

Applies to:1. Sale of personal propert b installments

(Act $o. !1222. contracts purportin" to be leases of

personal propert with option to bu$ whenthe lessor has deprived the lessee of thepossession or enjoment of the thin". (PCI3easing an- inance Inc. v. 8iraeD E Creative Imaging, Inc., 8.R. $o. 1!261#, >&l0 12, 2%%7

4oes not apply to:

1. Sale of personal propert on strai"ht termor partl in cash and part in term. 7herethe balance$ after pament of the initialsum$ should be paid in its totalit at thetime speci%ed$ the transaction is not binstallment.

2. Sale of immovable propert?. 5eal estate mort"a"e

!he creditor is "iven the ri"ht or option toseiMe the chattel and dispose of the same

in accordance with the hattel Kort"a"eLaw Act 1"%#3$ while the mort"a"ee of real propert ma onl be foreclosed inconformit with 5ule GC of the 5ules of ourt for judicial foreclosure3 and Act.?1?$ as amended for e'trajudicialforeclosure3.

B. Action of replevin

An action b the mort"a"ee for recover of possession of personal propert withreplevin as a provisional remed is not anaction for collection much less forforeclosure of chattel mort"a"e. +t is apreliminar step to foreclosure whichshould be conducted in accordance withSec. 1B of Act 1HC.

Alternative re0edies of the unpaid sellerthe 6ecto Law

1. SpeciJc Per'ormance* E'act ful%llment

should the buer fail to pa

6: +f availed of$ the unpaid seller cannotanmore choose other remedies;

32: if after choosin"$ it has becomeimpossible$ rescission ma be pursued

2. Rescission* ancel the sale if buer fails topa 2 or more installments. *eemedchosen when:a. ,otice of rescission is sentb. !a9es possession of subject matter of

sale

c. iles action for rescission. oreclos&re* oreclose on chattel mort"a"eif buer fails to pa 2 or more instalments.@e shall have no further action a"ainst thepurchaser to recover an unpaid balance of the price. An a"reement to the contrarshall be void.

6: Actual foreclosure is necessar0 to barrecover of balance

32: Kort"a"or refuses to deliverpropert to e0ect foreclosure; e'pensesincurred in attornes fees$ etc.

2ote: !he remedies are alternative not cumulative.Availment of one is a bar to the other remedies

6ationale of 6ecto Law

!o remed the abuses committed in connectionwith the foreclosure of chattel mort"a"es andto prevent mort"a"ees from seiMin" themort"a"ed propert$ buin" it at a foreclosuresale for a low price and then brin"in" suit



SALES

a"ainst the mort"a"or for a de%cienc jud"ment (+illan&eva, p. 27#, 2%%4 e-.

7: A" sold and delivered a car to B whichwas to be paid on a 0onthly basis. After aseries of pay0ents" B subseuentlydefaulted. A then Iled an action against B

for speciIc perfor0ance. Dowever" thea0ount collected was not suKcient tocover the a0ount of the car. #he courtthen issued a writ of e?ecution and thesheri< levied the subFect car. B contendsthat this is a violation of the 6ecto lawbecause having elected speciIcperfor0ance" A can no longer foreclosethe subFect car. s this correct=

A: ,o. A evidentl chose the remed of speci%cperformance. !he sheri0 levied upon the carby virtue of an e?ecution and not as anincident of a foreclosure proceeding. !herule is that in installment sales$ if the action

instituted is for speci%c performance and themort"a"ed propert is subseuentl attachedand sold$ the sale thereof does not amount to aforeclosure of the mort"a"e. @ence$ the seller8creditor is entitled to a de%cienc jud"ment(In-&strial inance Corporation v Ramire, 8.R.$o. 3D!#21 Ma0 26, 1477

7: A 0ortgaged a dia0ond ring to @ as asecurity for a loan which was to be paid -years thereafter. Since A failed to pay @"she then foreclosed the 0ortgagedproperty. Dowever" it turned out that theproceeds of the sale were insuKcient"

thus" @ Iled an action for speciIcperfor0ance. A contends that this is aviolation of the 6ecto law since theforeclosure of the chattel barssubseuent recovery. s this correct=

A: ,o. A is not correct in invo9in" the 5ecto lawsince it is onl applicable in case of sale of personal propert throu"h installment. +n the"iven case$ the amount bein" claimed b Awas to be paid 2 ears thereafter as a lumpsum$ not throu"h installments. Koreover$ thetransaction is a loan not a sale.

6ecto Law does not cover a contract to

sell 0ovables

-ecause when the suspensive condition uponwhich the contract is based fails to materialiMe$it would e'tin"uish the contract$ andconseuentl there is no contract to rescind(+illan&eva, p. #1, 2%%4 e-..

3E656@A2CE 5 C2#6AC#

SALE 5 @!ABLES

;DE2 78A2## S LESS #DA2 E3EC#E4 1. !he buer ma reject the "oods delivered

and he shall have no liabilit2. !he buer ma accept the "oods delivered$

but he will pa the contract price$ if he has9nowled"e that the seller is not "oin" todeliver all the "oods contracted for (Art.1"22, $CC

+f$ however$ the buer has used or disposedof the "oods delivered before he 9nowsthat the seller is not "oin" to perform hiscontract in full$ the buer shall not be liablefor more than the fair value to him of the"oods so received

;DE2 78A2## S @6E #DA2E3EC#E4

1. !he buer ma accept onl the "oodswhich were included in the contract andreject the e'cess.

2. !he buer ma accept the entire "oodsdelivered and he shall pa for them at thecontract rate. (Art. 1"22, $CC

oods which are 0i?ed with other goodsof di<erent description not included inthe contract

!he buer ma accept the "oods which are inaccordance with the contract and reject therest. (Art. 1"22, $CC

SubFect 0atter is indivisible

!he buer ma reject the whole of the "oods.(Art. 1"22, $CC

4uty of the seller with regard toaccessions and accessories

!he seller has the dut to preserve the thin"and its accessions and accessories from thetime of the perfection of the contract of sale.(Art. 1"7, $CC

2ote: +n case of loss or deterioration$ the seller is

liable for dama"es or the buer ma see9 rescissionwith dama"es. @owever$ if loss or deterioration isdue to a fortuitous event$ the seller is not liable. (Art.1"#, $CC

4elivery of divisible goods less thanuantity

+f the seller delivers a smaller uantit thanthat contracted$ the buer ma reject the"oods so delivered. !he buer ma$ however$



SALES

accept the "oods in which case he must pa fortheir:

1. price at the contract rate if he 9new that nomore wee to be delivered; or

2. the fair value to him of the "oods$ if he didnot 9now that the seller is "oin" to be

"uilt of breach of contract

fair value to him ) means the bene%t whichthe buer ma have received from the "oods; itis not necessaril the mar9et value; since thedefaultin" seller is the wron"doer$ the buer isnot reuired to pa the contract price if suchprice for the "oods is more than fair value tohim of the "oods

4elivery of divisible goods 0ore thanuantity

7here the seller delivers a uantit lar"er thanthat contracted for$ the buer ma accept the

uantit contracted for and reject the e'cess.@owever$ if he accepts all the "oods delivered$he ma9es himself liable for the price of all of them.

E<ect of indivisibility of subFect 0atter

+f the subject matter of the sale is indivisible$ incase of deliver of a lar"er uantit of "oods orof mi'ed "oods$ the buer ma reject thewhole of the "oods.

Application of usage of trade" specialagree0ent" or course of dealing

&sage o' tra-e ) an practice or method of dealin" havin" such re"ularit of observance ina place$ vocation or trade as to justif ane'pectation that it will be observed withrespect to the transaction in uestion

co&rse o' -ealing ) seuence of previousconduct between the parties to a particulartransaction which is fairl to be re"arded asestablishin" a common basis of understandin"for interpretin" their e'pressions and otherconduct

+n re"ard to fun"ible "oods such as "rains and

oil and other commodities which are dealt inthe same wa$ it is ver common to min"le"oods of di0erent owners and to constitute aco8ownership in a whole mass of a speci%eduantit. A tender of ri"ht in the mass would be"ood deliver.

SALE 5 @@!ABLES

1. Sale of i00ovable by unit of 0easureor nu0ber

6: !he seller must deliver all that ma havebeen stated in the contract.

32: +f impossible to deliver all$ the buerma choose between:1. proportional reduction of the price

2. rescission of the contract$ if the areade%cienc is 1HX or more of total area orif the inferior value of the part of the lande'ceeds 1HX of the price a"reed upon.(Art. 1"4, $CC

,O!E: +f the area turns out to be "reaterthan that stated$ buer ma accept areaincluded and reject the e'cess or acceptall and pa a proportionate increase inprice Art. 1BH3

3rescription period for the action of rescission of contract G months fromthe da of deliver. (Art. 1"!, $CC

-. Sale of real estate 0ade for a lu0psu0

a. @istake in area stated in contracti00aterial !he cause of the contract isthe thin" sold independent and irrespectiveof its number or measure. +n this case$ thelaw presumes that the purchaser had inmind a determinate price for the realestate and that he ascertained its area andualit before the contract was perfected.!eran vs. 4illanueva$ G &hil. G Y1D?2Z

b. ;here area or nu0ber stated togetherwith boundaries +f the vendor cannotdeliver to the vendee all that is includedwithin the boundaries mentioned in thecontract$ the latter has the option toreduce the price in proportion to thede%cienc or to set aside the contract. Art.1B2$ par. 23

ConPict between area stated andboundaries

3ay0ent by the buyer

&rice is paid at the time and place stipulated inthe contract. +t is made to the person in whosefavor the obli"ation has been constituted or hissuccessor in interest$ or an person authoriMedto receive. (+illan&eva, p. 247, 2%%4 e-.

nterest is reuired to be paid

S541. 7hen it is Stipulated



SALES

2. 7hen the object delivered produced5ruits or income

?. 7hen the buer is in 4efault from thetime of demand (+illan&eva, p. 247,2%%4 e-.

6ealty nstall0ent Buyer Act

ommonl 9nown as the D Law. +t isembodied in 5.A. G2 which provides forcertain protection to particular buers of realestate paable on installments. !he lawdeclares as Qpublic polic to protect buers of real estate on installment paments a"ainstonerous and oppressive conditions.

2ote: !he purpose of the law is to protect buers ininstallment a"ainst oppressive conditions.

#ransactionssale covered by the @acedaLaw

!he law involves the sale o' immovables oninstallment (Mace-a 3a, R.A. 6""2.

1. Coverage* 5esidential 5eal Estate(+illan&eva, p. !1

2. cl&-e:a. +ndustrial lotsb. ommercial buildin"s and

commercial lots b implication3c. Sale to tenants under a"rarian laws

2ote: !he list is not e'clusive. (+illan&eva, p. !16,$CC

7: ;hat are the so'called @acedaM and6ectoM laws in connection with sales on

install0ents= ive the 0ost i0portantfeatures on each law. 1TTT Bar 7uestion,

A: !he Kaceda Law 5.A. G23 is applicable tosales of immovable propert on installments. !he most important features are:

1. After havin" paid installments for at leasttwo ears$ the buer is entitled to amandator "race period of one month forever ear of installment pamentsmade$ to pa the unpaid installmentswithout interest.

+f the contract is cancelled$ the sellershall refund to the buer the cashsurrender value euivalent to %ftpercent HX3 of the total pamentsmade$ and after %ve ears of installments$ an additional %ve percentX3 ever ear but not to e'ceed ninetpercent DHX3 of the total pamentsmade.

2. +n case the installments paid were lessthan 2 ears$ the seller shall "ive thebuer a "race period of not less than GHdas. +f the buer fails to pa theinstallments due at the e'piration of the"race period$ the seller ma cancel thecontract after ?H das from receipt b

the buer of the notice of cancellation ordemand for rescission b notarial act.Rillo v. CA, 8.R. $o. 12"!7 >&ne 14,1DD3

!he 5ecto Law Art.1!#!3 refers to sale of movables paable in installments and limitin"the ri"ht of seller$ in case of default b thebuer$ to one of three remedies:1. E'act ful%llment;

2. ancel the sale of two or moreinstallments have not been paid;

?. oreclose the chattel mort"a"e on thethin"s sold$ also in case of default of twoor more installments$ with no further

action a"ainst the purchaser.

ther rights granted to a buyer under the@aceda Law

1. Sell or assi"n ri"hts to another2. 5einstate contract b updatin" within

?H das before and cancellation?. *eed of Sale to be done b notarial actB. &a full installment in advance the

balance of price antime wJo interest. @ave full pament annotated in

certi%cate of title

2ote: Applies to contracts even before the law wasenacted. Stipulation to the contrar is void

7: Bernie bought on install0ent aresidential subdivision lot fro0 4E!LA24.After having faithfully paid theinstall0ents for $& 0onths" Berniediscovered that 4E!LA24 had failed todevelop the subdivision in accordancewith the approved plans andspeciIcations within the ti0e fra0e inthe plan. De thus wrote a letter to4E!LA24 infor0ing it that he wasstopping pay0ent. Conseuently"4E!LA24 cancelled the sale and wrote

Bernie" infor0ing hi0 that his pay0entsare forfeited in its favor.1. ;as the action of 4E!LA24

proper= E?plain.-. 4iscuss the rights of Bernie under

the circu0stances.). Supposing 4E!LA24 had fully

developed the subdivision butBernie failed to pay furtherinstall0ents after $ years due to



SALES

business reverses. 4iscuss therights and obligations of theparties. +-JJ% Bar 7uestion3

A:1. Assumin" that the land is a residential

subdivision project under &.*. ,o. D !he

Subdivision and ondominium -uers&rotective *ecree3$ *E4LA,*s action isnot proper because under Section 2? of said *ecree$ no installment pament shallbe forfeited to the owner or developerwhen the buer$ after due notice$ desistsfrom further pament due to the failure of the owner8developer to develop thesubdivision accordin" to the approvedplans and within the time limit forcomplin" with the same.

2. 6nder the same Section of the *ecree$-ernie ma$ at his option$ be reimbursedthe total amount paid includin"

amortiMation interests but e'cludin"delinuenc interests at the le"al rate. @ema also as9 the @ousin" and Land 6se5e"ulator -oard to appl penal sanctionsa"ainst *E4LA,* consistin" of pament of administrative %ne of not more than&2H.HHH.HH andJor imprisonment for notmore than 2H ears.

?. 6nder 5.A. ,o. G2 Kaceda Law3$*E4LA,* has the ri"ht to cancel thecontract but it has to refund -ernie thecash surrender value of the paments onthe propert euivalent to HX of the total

paments made.

;A66A2#ES

;arranty

A statement or representation made b theseller of "oods$ as part of the contract of sale$havin" reference to the character$ ualit$ ortitle$ of the "oods$ and b which he promises orunderta9es to insure that certain facts are orshall be as he then represents.

2ote: Ka either be e'press or implied.

E<ect of a breach of warranty

-uer ma:1. Re'&se to proceed with the contract; or2. Procee- with the contract and waive

the condition.

2ote: +f the condition is in the nature that it shouldhappen$ the non8performance ma be treated as abreac o' arrant0.

9inds of warranties

1. e'press2. implied

E?press warranties

An a<rmation of fact or an promise b theseller relatin" to the thin" if the naturaltendenc of such a<rmation or promise is toinduce the buer to purchase the same$ and if the buer purchases the thin" relin" thereon.(Art. 1"!6

6euisites of e?press warranties

A61. +t must be an A<rmation of fact or

an promise b the seller relatin"to the subject matter of sale

2. ,atural tendenc is to nduce

buer to purchase subject matter?. -uer purchases the subject matter

6elin" on such a<rmation orpromise thereon

B. Kade before the sale not upondeliver or an other point

Liability of the seller for breach of e?press warranties

!he seller is liable for dama"es (+illan&eva, p.2!4.

0plied warranties

1. +mplied 7arrant of !itleomposed of ? assurancesa. Seller is the owner of the

propertb. Seller has the ri"ht to sell the

thin"c. !he buer will be provided with

the ri"ht to enjo uietpossession of the "oods. Suchthat if he is evicted or ejectedfrom the propert he maenforce his warrant a"ainsteviction.

2. +mplied 7arrant A"ainstEncumbranceJ,on8Apparent Servitudes

?. +mplied 7arrant a"ainst @idden*efects

B. +mplied 7arrant of Wualit and7arrant of Kerchantabilit

;arranties deemed included in allcontracts of sale by operation of law *Art.1(;)

1. /arrant0 tat seller as rigt to sell



SALES

5efers to consummation sta"e. ,otapplicable to sheri0$ auctioneer$mort"a"ee$ pled"ee

2. /arrant0 against eviction

Re9&isites* /3E2Sa. inal /ud"mentb. -uer is Evicted in whole or in part

from the subject matter of salec. -asis of eviction is a ri"ht 3rior to

sale or act imputable to sellerd. Seller has been Summoned in the

suit for eviction at the instance of buer; or made ?rd partdefendant throu"h ?rd partcomplaint brou"ht b buer

e. 2o waiver on the part of the buer

2ote: or eviction ) -ist&rbance in la isreuired and not just trespass in 'act .

?. /arrant0 against enc&mbrancesJnon8apparent servitudes Art. 1GH3

servit&-e or easement 3 )encumbrances imposed upon animmovable for the bene%t of anotherimmovable belon"in" to a di0erentowner

Re9&isites:a. immovable sold is encumbered

with non8apparent burden orservitude not mentioned in thea"reement

b. nature of non8apparent servitude orburden is such that it must bepresumed that the buer would nothave acuired it had he beenaware thereof

32: warrant not applicable whennon8apparent burden or servitude isrecorded in the 5e"istr of &ropert )&nless there is e'pressed warrant thatthe thin" is free from all burdens andencumbrances

!. /arrant0 against i--en 5e'ects Art.

1G13

Re9&isites* DE22ASa. *efect is important or 6erio&s

i. !he thin" sold is un%t for theuse which it is intended

ii. *iminishes its %tness for suchuse or to such an e'tent that the buer wouldnot have acuired it had he been aware thereof

b. *efect is <i--en

c. *efect = ists at the time of thesale

-. -uer "ives 5otice of the defect tothe seller within reasonable time

e. Action 'or rescission or re-&ction o' te price is brou"ht within theproper period

i. G months ) from deliver of thethin" sold

ii. 7ithin BH das ) from thedeliver in case of animals

f. !here must be 5o aiver o' arrant0 on the part of the buer.

;hen i0plied warranty is not applicable

ASA31. As is and where is sale ) means that

the vendor ma9es no warrant as tothe validit or wor9able condition of the"oods$ and that the vendee ta9es themin conditions in which the are found

and from the place where the arelocated; does not e'tend to liens orencumbrances un9nown to the vendeeand could not be disclosed b aphsical e'amination of the "oods sold

2. Sale of second hand articles$ unless theseller made a misrepresentation oracted in bad faith

?. Sale b virtue of authorit in fact or lawB. Sale at public auction for ta'

delinuenc

7: 3etitioner 4e uH0an purchased fro06espondent #oyota Cubao a white #oyota

Di'Lu? -.$ SS double cab 0otor vehicle"1TT( 0odel" for a price of 3%J&"JJJ. Depaid a downpay0ent of 31%-"$JJ" leavinga balance of 3)%%"(JJ. Later on" hede0anded that the engine of the vehiclebe replaced for it had a crack aftertravelling along @arcos Dighway whileraining hard. 3etitioner clai0s thereplace0ent is based on an i0pliedwarranty. n the other hand" respondentanswered that the said da0age was notcovered by a warranty. 4ecide.

A: +n the absence of an e'istin" e'presswarrant on the part of the respondent$ as in

this case$ the alle"ations in petitionerscomplaint for dama"es were clearl anchoredon the enforcement of an implied warranta"ainst hidden defects$ i.e.$ that the en"ine of the vehicle which respondent had sold to himwas not defective. - %lin" this case$ petitionerwants to hold respondent responsible forbreach of implied warrant for havin" sold avehicle with defective en"ine. Such bein" thecase$ petitioner should have e'ercised this



SALES

ri"ht within si' months from the deliver of thethin" sold. Since petitioner %led the complainton April 2H$ 1DDD$ or more than nineteenmonths counted from ,ovember 2D$ 1DD thedate of the deliver of the motor vehicle3$ hiscause of action had become time8barred (5e8&man v. :o0ota C&bao, 8.R. $o. 1!1!#%,

$ovember 24, 2%%6.

E<ects of waiver of an i0plied warranty

1. Seller in bad faith and there is waivera"ainst eviction )voi-

2. 7hen buer without 9nowled"e of aparticular ris9$ made "eneral renunciationof warrant ) is not a aiver b&t merel0 limits liabilit0 of seller in case of eviction

?. 7hen buer with 9nowled"e of ris9 of eviction assumed its conseuences andmade a waiver ) seller not liableapplicable onl to waiver of warranta"ainst eviction3

;A66A2# AA2S# E!C#2

;arranty against eviction

+n a contract of sale$ unless a contrarintention appears$ there is an implied warranton the part of the seller that when theownership is to pass$ and that the buer shallfrom that time have and enjo the le"al andpeaceful possession of the thin" (Art. 1"!7, 1st

paragrap.

Coverage of a warranty against eviction

+t covers eviction b a %nal jud"ment based ona ri"ht prior to the sale or an act imputable tothe vendor$ the vendee is deprived of thewhole or of a part of the thin" purchased.

!he vendor shall answer for the eviction eventhou"h nothin" has been said in the contracton the subject. (Art. 1"!#, $CC

#wo kinds of waiver of warranty againsteviction +Art. 1%%$,

1. Consciente ) the waiver is voluntarilmade b the vendee without

9nowled"e and assumption of the ris9sof eviction

E0ect: liabilit of the vendor in case of eviction onl e'tends to the pamentof the value of the thin" sold

2. ntencionada ) voluntarrenunciation b the vendee of the ri"htto warrant a"ainst eviction with

9nowled"e of the ris9 of eviction andassumption of its conseuences

E0ect: !he vendee is e'empted fromthe obli"ation to answer for eviction$provided he did not act in bad faith.

E<ect of a breach of warranty againsteviction

!he buer shall have the ri"ht to demand theseller:

1. !he return of the value which the thin"sold had at the time of the eviction$ beit "reater or lesser than the price of thesale

2. !he income or fruits$ if he has beenordered to deliver them to the partwho won the suit a"ainst him

?. !he costs of suit which caused theeviction$ and$ in a proper case$ those of

suit brou"ht a"ainst the vendor for thewarrant

B. !he e'penses of contract if buer haspaid them

. !he dama"es and interests andornamental e'penses if sale was madein bad faith.

2ote: 4endor is liable for an hidden defect even if he is not aware. aveat 4enditor3

&urchaser must be aware of the title of the vendor.aveat Emptor3

6ights of buyer in case of partial eviction

1. 5estitution with obli"ation to return thethin" wJo other encumbrances than thosewhich it had when he acuired it3

2. Enforcement of warrant a"ainst eviction(Paras, p. 1" an- Art. 1""6

;A66A2# AA2S# D44E2 4E5EC#

Didden defect

A hidden defect is one which is un9nown orcould not have been 9nown to the buer. (5ia, p. 1!"

2ote: Seller does not warrant patent defect; Caveat emptor buer beware3

6edhibitory defect

+t is a defect in the article sold a"ainst whichdefect the seller is bound to warrant. !he vicemust constitute an imperfection$ a defect in itsnature$ of certain importance; and a minordefect does not "ive rise to redhibition (5e



SALES

3eon, Comments an- Cases on Sales an-3ease, 2%%" e-, p. 1#.

Seller responsible for hidden defects

+f the hidden defects which the thin" sold mahave:

1. 5ender it un%t for the use for which it isintended$ or

2. *iminish its %tness for such use to suchan e'tent that$ had the vendee beenaware thereof$ he would not haveacuired it or would have "iven a lowerprice for it (Art. 1"61.

E?tent the seller warrants against hiddendefects

!he seller is responsible to the vendee for anhidden faults or defects in the thin" sold$ eventhou"h he was not aware thereof.

Seller not answerable for the defects of the thing sold

1. or patent defects or those which arevisible

2. Even for those which are not visible if thebuer is an e'pert who$ b reason of histrade or profession$ should have 9nownthem (Art. 1"613

?. +f the contrar has been stipulated$ and thevendor was not aware of the hidden faultsor defects in the thin" sold (Art. 1"66

E<ect of a breach of warranty against

hidden defects+t would depend on whether the seller had9nowled"e of such defect and whether therehas been a waiver of the warrant.

1. I' te ting so&l- be lost inconse9&ence o' te i--en 'a&lts, an-seller as aare o' tem K he shall:

a. bear the loss$b. return the price andc.refund the e'penses of the contract

with dama"es

2. I' te ting is lost an- seller as not aare o' te i--en 'a&lts ) he shall:

a. return the price and interestb. reimburse the e'penses of the

contract which the buer mi"hthave paid$ but not for dama"es.(+illan&eva, 3a on Sales,2%%! e-, pp. "!#D"!4

6e0edies of the buyer in case of sale of things with hidden defects +Art. 1%(*,

!he vendee ma elect between:1. 7ithdrawin" from the contract$ or2. *emandin" a proportionate reduction

of the price$ with dama"es in eithercase.

;aiver of warranty against hidden

defects when the lessee inspected thepre0ises and pushed through with thecontract

6nder Arts. 1G1 and 1G? of the ivil ode$the lessor is responsible for warrant a"ainsthidden defects$ but he is not answerable forpatent defects or those$ which are visible$ andwhich can be seen upon inspection (>on an-Marissa 5e Hsasi v. Art&ro an- stela Arceo,8.R. $o. 16"#6, $ov. 22, 2%%1.

6edhibitory defect on ani0als

@idden defect in animals of such a nature that

e'pert 9nowled"e is not su<cient to discover iteven in case a professional inspection has beenmade

2o warranty in case of +Art. 1%*$,:1. Animals sold at fairs or public auctions2. Livestoc9 sold as condemned

!oid sale of ani0al

!he sale is voi- i' animal is:1. Su0erin" from conta"ious diseases;-. 6n%t for the use or service for which

the were purchased as indicated in

the contract

4eterinarian liable if he fails to discover ordisclose the hidden defect throu"h i"noranceor bad faith Y Art 1"76Z

Seller liable if animal dies within ? das afterits purchase due to a disease that e'isted atthe time of sale. Y Art 1"7#Z

SpeciIc i0plied warranties in sale of goods +Art. 1%(-,

1. /arrant0 o' 9&alit0 or Jtness K that the"oods are %t for speci%c purpose intended

b the buer

+n order to enforce the implied warrantthat the "oods are reasonabl %t andsuitable to be used for the purpose whichboth parties contemplated$ the followin"must be established:a3 that the buer sustained injur becauseof the product;



SALES

b3 that the injur occurred because theproduct was defective or unreasonablunsafe; and %nallc3 the defect e'isted when the product leftthe hands of the petitioner. 5utrimi eeds "orp. v. "ourt of Appeals" $$1SC6A )%* +-JJ$,.

6: ,o implied warrant

32:a. -uer manifests to the seller the

particular purpose for which the "oodsare reuired; and

b. -uer relies upon the seller=s s9ill or jud"ment

2. /arrant0 o' mercantabilit0 ) !hat"oods are reasonabl %t for the "eneralpurpose for which the are sold.

+n a contract of sale b sample$ there is an

implied warrant that the "oods shall befree from an defect which is not apparenton reasonable e'amination of the sampleand which would render the "oodsunmerchantable. Men-oa v. 5avi-$ BB1S5A 12 2HHB3.

6E@E4ES 2 CASE 5 B6EACD 5;A66A2#

6e0edies of the buyer in case of breachof warranty

1. Accept "oods and set up breach of warrant b wa of recoupment indiminution or e'tinction or the price.5ecoupment3

2. Accept "oods and maintain action a"ainstseller for dama"es ounterclaim fordama"es3

?. Re'&se to accept "oods and maintainaction a"ainst seller for dama"es Actionfor *ama"es3

B. Rescin- contract of sale and refuse toreceive "oodsJreturn them when alreadreceived. 5escission3

BuyerOs ptions in Case of Breach of ;arranty Art. 1DD3

1. Accion redhibitoria % Actionsinstituted b the vendee a"ainst thevendor to avoid a sale on account of some vice or defect in the thin" whichrenders it un%t for the use intended

2. Accion #uanti minoris % Action toprocure return of a part of the purchase

price paid b the vendee to the vendordue to the defect

!he remed a"ainst violation of warranta"ainst hidden defects is either to withdrawfrom the contract accion re-ibitoria3 or todemand a proportionate reduction of the price

accion 9&anti minoris3$ with dama"es in eithercase. 5utrimi eeds "orp. v. "ourt of Appeals" $$1 SC6A )%* +-JJ$,.

;hat is the prescriptive period for either=

G months from date of -eliver0

E'cept: redhibitor actions based onfaultsJdefects of animals$ which is BHdas from date of -eliver0

6e0edies of the buyer in case of breachof warranty not absolute

!he vendees remedies a"ainst a vendor withrespect to the warranties a"ainst hiddendefects of or encumbrances upon the thin"sold are not limited to those prescribed inArticle 1G where the vendee$ in the case of Arts. 1G1$ 1G2$ 1GB$ 1G and 1GG$ maelect either to withdraw from the contract ordemand a proportionate reduction of the price$with dama"es in either case.

!he vendee ma also as9 for the annulment of the contract upon proof of error or fraud$ inwhich case the ordinar rule on obli"ationsshall be applicable. 6nder the law on

obli"ations$ responsibilit arisin" from fraud isdemandable in all obli"ations and an waiverof an action for future fraud is void.5esponsibilit arisin" from ne"li"ence is alsodemandable in an obli"ation$ but such liabilitma be re"ulated b the courts$ accordin" tothe circumstances.

!he vendor could li9ewise be liable for 9&asiD-elict under Article 21G of the ivil ode$ andan action based thereon ma be brou"ht bthe vendee. 7hile it ma be true that the pre8e'istin" contract between the parties ma$ as a"eneral rule$ bar the applicabilit of the law on9&asiD-elict $ the liabilit ma itself be deemed

to arise from 9&asiD-elict $ i.e.$ the acts whichbrea9s the contract ma also be a 9&asiD-elict .(CocaDCola Bottlers Pilippines, Inc. v. CA, 8.R.$o. 11%24", =ct. 1#, 144

nstances when the buyer cannot rescindthe sale in case there is a breach of warranty

1. I' e ne of the breach of warrant



SALES

2. I' e 'ails to ret&rn or o0er to return "oodsto seller in substantiall as "ood conditionas the were at time ownership wastransferred

?. I' e 'ails to noti'0 the seller within areasonable time of his election to rescind

B. I' te goo-s are not in goo- con-ition

anmore due to the buer=s fault

7: oodyear 3hilippines sold a car toAnthony Sy. Later on" Sy sold the car to /ose Lee. ;hen Lee tried to register thecar in his na0e" he failed to have itregistered because it turned out that thecar was stolen before and was onlysubseuently recovered by oodyear.Dowever" 323 did not lift the alert alar0over the said car. 4ue to this" the car wasi0pounded and Lee was sued by 323. #hisproble0 was relayed by Lee to Sy. t ledto Sy Iling a case against oodyear forbreach of warranty. t is SyGs argu0ent

that it is oodyearGs duty to convey thevehicle to Sy free fro0 all liens"encu0brances and legal i0pedi0ents.;as there a breach of warranty byoodyear=

A: ,o. 6pon the e'ecution of the *eed of Sale$petitioner did transfer ownership of and deliverthe vehicle to 5espondent S. !heimpoundment of the vehicle and the failure tore"ister it were clearl acts that were notdeliberatel caused b petitioner$ but thatresulted solel from the failure of the &,& to liftthe latter=s own alarm over the vehicle. @ence$

the former did not breach its obli"ation as avendor to 5espondent S; neither did it violatehis ri"ht for which he could maintain an actionfor the recover of dama"es. (8oo-0ear Pilippines, Inc. v. S0 an- 3ee, 8.R. $o.1"!""!, $ov. 4, 2%%"

C24#2 !S'W'!S ;A66A2#

E<ect of non'fulIll0ent of a condition

I' impose- on te per'ection o' contract )prevents the juridical relation itself fromcomin" into e'istence:e oter part0 ma0*

1. 5efuse to proceed with the contract2. &roceed wJ contract$ waivin" the

performance of the condition

4i<erence between a condition and awarranty

C24#2 ;A66A2# &urports to the &urports to the

e'istence of obli"ationperformance of

obli"ation

M&st be stip&late- toform part of the

obli"ation

$ee- not bestip&late-; ma formpart of obli"ation b

provision of law

Ka attach itself toobli"ation of seller to

deliver possessionand transfer

5elates to the subject

matter itself or toobli"ation of the seller

as to the subjectmatter of the sale

,on8happenin" doesnot amount to a

breach of contract

,on8ful%llmentconstitutes a breach

of contract

B6EACD 5 C2#6AC#

eneral 6e0edies XArt. 11T1" CCY

!he followin" remedies arise from the bilateralnature of the contract of sale:

13 Speci%c performance23 5escission

/eneral rule: 5escission of a contract will notbe permitted for a sli"ht or casual breach$ butonl for such substantial and fundamentalbreach as would defeat the ver object of theparties in ma9in" the a"reement. YSon" o >o. vs. @awaiian8&hilippine o.$ 1D2Z

?3 *ama"es

,either part incurs in dela if the other doesnot compl or is not read to compl in a

proper manner with what is incumbent uponhim YArt 11GD$ Z

3rescriptive periods13 1H ears if based on written contract23 G ears if based on oral contract

6E@E4ES 5 #DE SELLE6

2ote: see 5ecto and Kaceda Law Per'ormance o' Contract 3 pp. 2!%.

6E@E4ES 5 #DE B8E6

6e0edies of the buyer

+. +mmovables in "eneral1. *isturbed in possession or with

reasonable "rounds to fear disturbance) Suspend pament

2. +n case of subdivision or condominiumprojects ) +f real estate developer fails



SALES

to compl with obli"ation accordin" toapproved plan:a. 5escindb. Suspend pament until seller

complies++. Kovables

1. ailure of seller to deliver ) Action for

speci%c performance without "ivin" theseller the option of retainin" the "oodson paments of dama"es

2. -reach of seller=s warrant ) !he buerma$ at his election$ avail of thefollowin" remedies:

a.Accept "oods > set up breach of warrant b wa of recoupment indiminution or e'tinction or theprice. 5ecoupment3

b.Accept "oods > maintain actiona"ainst seller for dama"esounterclaim for *ama"es3

c.5efuse to Accept "oods > maintainaction a"ainst seller for dama"es

Action for *ama"es3d.5escind contract of sale > refuse to

receive "oodsJreturn them whenalread received. 5escission3

?. *isturbed in possession or withreasonable "rounds to fear disturbance) Suspend pament

2ote: 7hen the buer has claimed and been"ranted a remed in an of these was$ no otherremed can thereafter be "ranted$ withoutprejudice to the buer=s ri"ht to rescind$ even if previousl he has chosen speci%c performancewhen ful%llment has become impossible.

(+illan&eva, p. #4 in relation it Art. 1141,$CC

6ights and obligations of buyer in case of rescission

1. to cease to be liable for the price$ hisonl obli"ation bein" to return the"oods;

2. if he has paid the price or an partthereof$ he ma recover it from theseller;

?. to hold the "oods as bailee for theseller should the latter refuse thereturn of the "oods; and

B. to have a lien on the "oods for anportion of the price alread paid whichlien he ma enforce as if he were anunpaid seller

E#28SD@E2# 5 #DE SALE

Causes for e?tinguish0ent of sale

1. common ) causes which are also themeans of e'tin"uishin" all othercontracts li9e pament$ loss of thethin"$ condonation$ etc.

2. special ) causes which are reco"niMedb the law on sales; and

). e'tra8special ) causes which are "iven

special discussion b the ivil odei.e.$ conventional redemption andle"al redemption3

Causes for e?tinguish0ent of sale

A contract of sale is e'tin"uished b:1. Same causes as all other

obli"ations$ namel:a. &ament or performanceb. Loss of the thin" duec. ondonation or remission of the

debtd. onfusion or mer"er of the ri"hts of

creditor and debtor

e. ompensationf. ,ovation". Annulmenth. 5escissioni. ul%llment of resolutor condition j. &rescription

2. onventional 5edemption?. Le"al redemption

5ede0ption

+t is a mode of e'tin"uishment wherein theseller has the ri"ht to redeem or repurchasethe thin" sold upon return of the price paid.

9inds of rede0ption

1. Le"al2. onventional

7: Should the right to redee0 beincorporated in every contract of sale=

A: !he ri"ht of the vendor toredeemJrepurchase must appear in the sameinstrument. @owever$ parties ma stipulate onthe ri"ht of repurchase in a separate documentbut in this case$ it is valid onl between theparties and not a"ainst third persons (Pine-a,

p.

4i<erence between pre'e0ption andrede0ption

36E'E@3#2 6E4E@3#2Arises before sale Arises after sale

5escissioninapplicable

!here can berescission of ori"inal

sale



SALES

Action is directeda"ainst prospective

seller

Action is directeda"ainst buer

C2!E2#2AL 6E4E@3#2

Conventional rede0ption

Seller reserved the ri"ht to repurchase thin"sold coupled with obli"ation to return price of the sale$ e'penses of contract > otherle"itimate paments and the necessar >useful e'penses made on the thin" sold

Conventional rede0ption distinguishedfro0 Legal 6ede0ption

Conventional6ede0ption

Legal 6ede0ption

an onl beconstituted be'press reservation ina contract of sale attime of perfection

5i"ht is "ranted blaw and need not bee'pressl reserved

E'ercise of the ri"hte'tin"uishes theunderlin" contract of sale as thou"h therewas never ancontract at all

E'ercise of such$althou"h ite'tin"uishes theori"inal sale$ in realitconstitutes a new salein substitution of theori"inal sale

+n favor of the seller /ranted to a thirdpart to the sale

3ersons who 0ay e?ercise the right of rede0ption:

1. Seller to the ri"ht is reserved under thecontract

2. An person who has acuired suchri"ht

?. +n case of le"al redemption$ onl thosepersons entitled under the law

3ersons who 0ay e?ercise Conventionalrede0ption:

1. Seller2. @is heirs$ assi"ns or a"ents?. reditor$ if all the properties of the

seller has been e'haustedB. o8owner of an immovable up to the

e'tent of their respective shares if propert is sold to the same person

7: Can any other person e?ercise theright to repurchase=

A: Res. - an person to whom the ri"ht of repurchase ma be transfered$ or in case of le"al redemption$ b the person so entitled blaw. (+illan&eva, p. "17, 2%%4 e-.

2ote: 5i"ht to repurchase must be reserved at thetime of perfection of sale. (Pine-a, p.

6ight to repurchase Dow reserved

- a stipulation to that e0ect in the contract of

sale. -ecause it is not a ri"ht "ranted to thevendor b the vendee$ but is a ri"ht reservedb the vendor.

6eservation 0ade only in contract of sale"not separate instru0ent

Once the instrument of absolute sale ise'ecuted$ and an ri"ht thereafter "ranted thevendor in a separate instrument cannot be ari"ht of repurchase but some other ri"ht li9ethe option to bu in the instant case.(+illan&eva, p. "17, 2%%4 e-.

Contract of sale is void

Since the underlin" contract of sale wasinoperative and conseuentl void$ then theri"ht of repurchase reserved would also bevoid. (+illan&eva, p. "1#, 2%%4 e-.

E78#ABLE @6#AE

Euitable 0ortgage

One which lac9s the proper formalities$ form orwords or other reuisites prescribed b law fora mort"a"e$ but shows the intention of theparties to ma9e the propert subject of thecontract as securit for a debt and containsnothin" impossible or contrar to law

Essential reuisites of euitable0ortgage

1. &arties entered into a contract of sale2. !heir intention was to secure an e'istin"

debt b wa of a mort"a"e.

6ule on the presu0ption of an euitable0ortgage

A sale with conventional redemption isdeemed to be an euitable mort"a"e in an of

the followin" cases: (Art. 16%2 A6'S#A61. &rice of the sale with ri"ht to

repurchase is unusuall nadeuate2. Seller 6emains in possession as lessee

or otherwise?. 6pon or after the e'piration of the ri"ht

to repurchase Another instrumente'tendin" the period of redemption or"rantin" a new period is e'ecuted



SALES

B. &urchaser 6etains for himself a part of the purchase price

. Seller binds himself to pa the #a'eson the thin" sold

G. +n an other case where the realintention of the parties is that thetransaction shall Secure the pament

of a debt or the performance of another obli"ation.

*. Art. 1GH2 shall also appl to a contractpurportin" to be an Absolute sale. (Art.16%!

2ote: +n case of doubt in determinin" whether it iseuitable mort"a"e or sale a retro with ri"ht of repurchase3; it shall be construed as euitablemort"a"e. !he remed is reformation.

An euitable mort"a"e is one which althou"h lac9in"in some formalit$ or form or words$ or otherreuisites demanded b a statute$ neverthelessreveals the intention of the parties to char"e realpropert as securit for a debt$ and contains nothin"

impossible or contrar to law.

6A#2ALE BED24 36!S2 2E78#ABLE @6#AE

1. ircumvention of usur law2. ircumvention of prohibition a"ainst

pactum commissorium ) creditorcannot appropriate the thin"s "iven bwa of pled"e or mort"a"e sinceremed is foreclosure.

7: 4oes inadeuacy of price constituteproof suKcient to declare a contract asone of euitable 0ortgage=

A: Kere inadeuac of the price is notsu<cient. !he price must be "rosslinadeuate$ or purel shoc9in" to theconscience. (5ia, p. 1#6

7: Spouses 6a0os e?ecuted a 4eed f Sale under 3acto 4e 6etro over theirconFugal house and lot in favor of SusanaSarao. #he contract granted the 6a0osspouses the option to repurchase theproperty within si? 0onths plus aninterest of $.% percent a 0onth. t wasfurther agreed that should the spousesfail to pay the 0onthly interest or to

e?ercise the right to repurchase withinthe stipulated period" the conveyancewould be dee0ed an absolute sale. n thesucceeding 0onths" the wife @yrna6a0os tendered to Sarao pay0ent in thefor0 of two 0anagerGs checks" which thelatter refused to accept for beingallegedly insuKcient. @yrna Iled aco0plaint for the rede0ption of theproperty. She deposited with the 6#C two

checks that Sarao refused to accept. sthe contract a 3acto 4e 6etro sale or aneuitable 0ortgage= 4ecide.

A: !he contract shall be presumed to be aneuitable mort"a"e$ in an of the followin"cases: 13 7hen the price of a sale with ri"ht to

repurchase is unusuall inadeuate; 23 7henthe vendor remains in possession as lessee orotherwise; ?3 7hen upon or after thee'piration of the ri"ht to repurchase anotherinstrument e'tendin" the period of redemptionor "rantin" a new period is e'ecuted; B3 7henthe purchaser retains for himself a part of thepurchase price; 3 7hen the vendor bindshimself to pa the ta'es on the thin" sold; G3+n an other case where it ma be fairlinferred that the real intention of the parties isthat the transaction shall secure the pamentof a debt or the performance of an otherobli"ation. (Article 16%2, $e Civil Co-eurthermore$ a contract purportin" to be

a pacto -e retro is construed as an euitablemort"a"e when the terms of the document andthe surroundin" circumstances so reuire. !helaw discoura"es the use of a pacto -eretro, because this scheme is freuentl usedto circumvent a contract 9nown as a pact&mcommissori&m. Furisprudence has consistentldeclared that the presence of even just one of the circumstances set forth in the fore"oin"ivil ode provision su<ces to convert acontract to an euitable mort"a"e. Article 1GH2speci%call states that the euitablepresumption applies to an0 of the cases thereinenumerated. +n the present factual milieu$ the

vendor retained possession of the propertalle"edl sold. &etitioner and her childrencontinued to use it as their residence$ evenafter Fonas 5amos had abandoned them. +nfact$ it remained as her address for the serviceof court orders and copies of 5espondentSarao=s pleadin"s (Ramos v. Sarao, 8.R. $o.1!47"6, eb. 11, 2%%".

7: 6espondent 4iHon 0ortgaged to @ontede 3iedad a parcel of land including thetwo'storey apart0ent built thereon tosecure a loan. 6espondent failed to settlethe loan" drawing @onte de 3iedad toforeclose the 0ortgage" consolidate its

ownership of the property" and register itin its na0e. @onte de 3iedadnevertheless gave respondent until @ay-&" 1T&* to purchase back the property.n the day of the e?piration itself" one of the petitioners on behalf of respondentpaid for the property. @onte de 3iedadthereupon e?ecuted a deed of sale infavor of respondent who" the followingday" e?ecuted a deed of sale in favor of petitioners. Also" respondent and



SALES

petitioners e?ecuted an agree0ent givingrespondent repurchase within three0onths fro0 the date of this agree0ent.5ailure to repurchase shall result torespondent vacating the pre0ises andturn over possession thereof topetitioners. #hree 0onths passed without

respondent repurchasing the property.3etitioners registered the 4eed of Salee?ecuted by @onte de 3iedad in favor of respondent" as well as the 4eed of Sale of the property e?ecuted by respondent infavor of petitioners. 2otwithstanding this"respondent failed to vacate the property.An eFect0ent case was Iled againstrespondent. s the agree0ent a contractof sale or an euitable 0ortgage=

A: +t is a contract of sale. !he presumption of euitable mort"a"e created in Article 1GH2 of the ivil ode is not conclusive. +t ma berebutted b competent and satisfactor proof

of the contrar. +n the case at bar$ ampleevidence supports petitioners= claim that thetransaction between them and respondent wasone of sale with option to repurchase. 7hileafter the sale of the propert respondentremained therein$ her sta was not in theconcept of an owner. ontrar to respondent=sclaim that after the sale of the propert in1DC$ the ta' declarations remained in hername and she continued to pa realt ta'esthereon$ the record shows that the 1DC ta'declarations were in the names of Konte de&iedad and petitioners. (Spo&ses Cristobal, et.al v. 5ion, 8.R. $o. 172771, >an. 1, 2%%#

7: Ceballos was able to borrow fro0@ercado certain su0 of 0oney and assecurity" she e?ecuted a 4eed of 6ealEstate @ortgage over the subFectproperty. #he said 0ortgage was notregistered. Ceballos defaulted.#hereafter" a 4eed of Absolute Sale wase?ecuted by Ceballos and her husbandwhereby the 0ortgaged property wassold to @ercado for the price of 31("%JJ.JJ. Ceballos o<ered to redee0 theproperty fro0 @ercado for the price of 3)J" JJJ.JJ but the latterOs wife refusedsince the sa0e was already transferred in

their na0es by virtue of the 4eed of Absolute Sale. As a conseuence"Ceballos Iled the case contending thatthe Contract should be declared as aneuitable 0ortgage. s the contention of Ceballos correct=

A: ,o. !he instances when a contract$re"ardless of its nomenclature$ ma bepresumed to be an euitable mort"a"e are

enumerated in Art. 1GH2 of the ivil ode.@ere$ none of those circumstances werepresent. !he ori"inal transaction was a loan.eballos failed to pa the loan; conseuentl$the parties entered into another a"reement Ithe assailed$ dul notariMed *eed of AbsoluteSale$ which superseded the loan document.

eballos had the burden of provin" that she didnot intend to sell the propert and thatKercado did not intend to bu it; and that thenew a"reement did not embod the trueintention of the parties. (Ceballos v. Intestatestate o' te 3ate mig-io Merca-o, 8.R. $o.1""#"6, Ma0 2#, 2%%!

7: Eulalia was engaged in the business of buying and selling large cattle. n order tosecure the Inancial capital she advancedfor her e0ployees +biyaheros, shereuired the0 to surrender #C# of theirproperties and to e?ecute thecorresponding 4eeds of Sale in her favor.

4o0eng Bandong was not reuired topost any security but when Eulaliadiscovered that he incurred shortage incattle procure0ent operation" he wasreuired to e?ecute a deed of sale over aparcel of land in favor of Eulalia. She soldthe property to her grandniece /ocelynwho thereafter instituted an action foreFect0ent against the Spouses Bandong.#o assert their right" Spouses BandongIled an action for annul0ent of saleagainst Eulalia and /ocelyn alleging thatthere was no sale intended but onlyeuitable 0ortgage for the purpose of

securing the shortage incurred by4o0eng in the a0ount of 3*J" JJJ.JJwhile e0ployed as 4biyahero7 by Eulalia.;as the deed of sale between 4o0engand Eulalia a contract of sale or aneuitable 0ortgage=

A: +t is an euitable mort"a"e. +n e'ecutin" thesaid deed of sale$ *omen" and Eulalia neverintended the transfer of ownership of thesubject propert but to burden the same withan encumbrance to secure the indebtednessincurred b *omen" on the occasion of hisemploment with Eulalia. !he a"reementbetween *ominador and Eulalia was not

avoided in its entiret so as to prevent it fromproducin" an le"al e0ect at all. +nstead$ thesaid transaction is an euitable mort"a"e$thereb merel alterin" the relationship of theparties from seller and buer$ to mort"a"orand mort"a"ee$ while the subject propert isnot transferred but subjected to a lien in favorof the latter (Sps. Ra0m&n-o, et al. v. Sps.Ban-ong, 8.R. $o. 1712"%, >&l. !, 2%%7.

http://jlp-law.com/blog/spouses-raymundo-et-al-vs-spouses-bandong-gr-no-171250-july-4-2007-digest/

http://jlp-law.com/blog/spouses-raymundo-et-al-vs-spouses-bandong-gr-no-171250-july-4-2007-digest/



SALES

4S#28SDE4 56@ 3#2 # B8

6E4E@3#2 3#2 # B8

orms part of thecontract of sale

&rincipal andpreparator

contract

!he ri"ht must beimbedded in a contract

of sale upon itsperfection

Ka e'ist prior to

or after theperfection of the

sale$ or beimbedded in

another contractupon perfection

*oes not need aseparate consideration

to be valid ande0ective

Separateconsideration is

needed for it to bevalid and e0ective

5edemption periodcannot e'ceed 1H

ears

&eriod for anoption ri"ht mae'ceed 1H ears

,otice is reuired for

its e'erciseaccompanied withtender of

pamentJconsi"nment

Onl notice isreuired

+ts e'ercisee'tin"uishes a e'istin"

contract of sale

+ts e'ercise resultsinto the perfection

of a contract of sale

(+illan&eva, pp. "14D"2%, 2%%4 e-.

7: n @ay 1T" 1T%1" the spouses'sellerse?ecuted a public instru0ent of absolutesale in favor of the buyer for aconsideration which is suKcientlyadeuate. A few days thereafter" the

buyers e?ecuted in favor of the sellers anoption to buy within one year" theproperty subFect of the absolute sale"which option was e?tended for a 0onth.3rior to the e?piration of said one'yearperiod" the buyer sold said property to athird person.

f the spouses'sellers would Ile an actionfor refor0ation of instru0ent where theyseek refor0ation of the absolute sale intoone of euitable 0ortgage" will saidaction prosper=

A: ,o$ it will not prosper. +f a seller has been"ranted merel an option to bu not a ri"ht torepurchase3 within a certain period$ and theprice paid b the buer is adeuate$ the sale isabsolute and cannot be construed norpresumed to be one of euitable mort"a"e$even if the period within which to e'ercise theoption has been e'tended. (+illarica, et. al. v.CA, 8.R. 3D14146, $ov. 24, 146#

2ote: S held that in this case$ there was no sale aretro and that the ri"ht of repurchase is not a ri"ht"ranted the seller b the buer in a separateinstrument. Such ri"ht is reserved b the vendor inthe same instrument of the sale as one of thestipulations in the contract.

Also$ once the instrument of absolute sale is

e'ecuted$ the seller can no lon"er reserve the ri"htof repurchase and an ri"ht thereafter "ranted theseller b the buer cannot be a ri"ht of repurchasebut some other ri"hts$ li9e that of an option to bu.

3E64 5 6E4E@3#2

3eriod of rede0ption

1. ,o period a"reed upon ) B ears from dateof contract

2. 7hen there is a"reement ) should note'ceed 1H ears; b&t if it e'ceeded$ validonl for the %rst 1H ears.

?. 7hen period to redeem has e'pired >

there has been a previous suit on thenature of the contract ) seller still has ?Hdas from %nal jud"ment on the basis thatcontract was a sale with pacto -e retro*

Rationale: no redemption due to erroneousbelief that it is euitable mort"a"e whichcan be e'tin"uished b pain" the loan.

B. 7hen period has e'pired > seller allowedthe period of redemption to e'pire ) selleris at fault for not havin" e'ercised hisri"hts so should not be "ranted a newperiod

2ote: !ender of pament is su<cient but it is not initself a pament that relieves the seller from hisliabilit to pa the redemption price.

3eriod of rede0ption begins to run

1. 5i"ht of le"al pre8emption or redemptionshall be e'ercised itin % -a0s 'romritten notice b0 te b&0er ) deed of salenot to be recorded in 5e"istr of &ropert&nless accompanied b a<davit that buerhas "iven notice to redemptioners

-. 7en tere is act&al nole-ge, no nee-to give ritten notice; period of redemptionbe"ins to run from actual 9nowled"e

E?tension of the ti0e to redee0

&arties ma e'tend the period to redeem aslon" as the total period shall not e'ceed tenears. @owever$ such e'tension can onl be"ranted when the ori"inal period has not ete'pired. Otherwise$ there e'ists onl a promiseto sell on the buer=s part (Pine-a, pp. #1D#2, 2%1% e-..



SALES

EE6CSE 5 #DE 6D# # 6E4EE@

bligations the vendor a retro if hedesires to redee0

!he vendor a retro must pa or reimburse the

vendee a retro the followin":1. &rice of the sale2. E'penses of the contract?. Other le"itimate e'pensesB. ,ecessar and useful e'penses

(Pine-a, pp. 47D4#, 2%1% e-.

;ritten notice 0andatory

Res$ the notice must be in writin" statin" thee'ecution of the sale and its particulars. +t mabe made in a private or public document.(Pine-a, p. !%%

5or0 for an o<er to redee0

!here is no prescribed form for an o0er toredeem to be properl e0ected. @ence$ it caneither be throu"h a formal tender withconsi"nation of the redemption price within theprescribed period. 7hat is paramount is theavailment of the %'ed and de%nite periodwithin which to e'ercise the ri"ht of le"alredemption.

2ote: Art. 1G2? does not prescribe an distinctivemethod for notifin" the redemptioner.

#ender of pay0ent

!ender of pament is not necessar; o0er toredeem is enou"h.

E<ect of failure to redee0

!here must be judicial order before ownershipof real propert is consolidated to the buer aretro.

7: Can the vendor a retro be co0pelled toredee0=

A: ,o. !here is no obli"ation on the part of thevendor a retro to repurchase. @e ma or ma

not e'ercise the ri"ht to repurchase (Pine-a, p.!%2, 2%1% e-.

#rust de son tort

+t is a trust created b the purchase orredemption of propert b one other than theperson lawfull entitled to do so and in fraud of the other.

7: 4o constructive trusts arise only out of fraud or duress=

A: ,o. A constructive trust$ otherwise 9nown asa trust e' male%cio$ a trust e -elicto$ a tr&st -e son tort $ an involuntar trust$ or an impliedtrust$ is a trust b operation of law which arises

contrar to intention and in invitum$ a"ainstone who$ b fraud$ actual or constructive$ bduress or abuse of con%dence$ b commissionof wron"$ or b an form of unconscionableconduct$ arti%ce$ concealment$ or uestionablemeans$ or who in an wa a"ainst euit and"ood conscience$ either has obtained or holdsthe le"al ri"ht to propert which he ou"ht not$in euit and "ood conscience$ hold and enjo.+t has been broadl ruled that a breach of con%dence$ althou"h in business or socialrelations$ renderin" an acuisition or retentionof propert b one person unconscionablea"ainst another$ raises a constructive trust. +tis raised b euit in respect of propert$ which

has been acuired b fraud$ or ere, alto&gac9&ire- originall0 ito&t 'ra&-$ it is a"ainsteuit that it should be retained b the personholdin" it. (Arleg&i v. CA 8.R. $o. 126!7, Mar.6, 2%%2

2ote: QA constructive trust is substantiall anappropriate remed a"ainst unjust enrichment. +t israised b euit in respect of propert$ which hasbeen acuired b fraud$ or ere, alto&g ac9&ire-originall0 ito&t 'ra&-$ it is a"ainst euit that itshould be retained b the person holdin" it.Q 76 Am. >&r. 2-, Sec. 222, p. !!7 cite- in Arleg&i v. CA 8.R.$o. 126!7, Mar. 6, 2%%23

LEAL 6E4E@3#2

Legal rede0ption

Also referred to as retracto le"al$ it is theri"ht to be subro"ated upon the same termsand conditions stipulated in the contract$ in theplace of one who acuires the thin" bpurchase or b dation in pament or b othertransaction whereb ownership is transmittedb onerous title.

Le"al redemption is in the nature of a privile"ecreated b law partl for reasons of publicpolic and partl for the bene%t and

convenience of the redemptioner$ to a0ord hima wa out of what mi"ht be a disa"reeable orYanZ inconvenient association into which he hasbeen thrust. +t is intended to minimiMe co8ownership. ernan-e v. :ar&n$ ?D1 S5A G?2HH23

nstances of legal rede0ption



SALES

1. Sale of a co8owner of his share to astran"er (Art. 162%

2. 7hen a credit or other incorporeal ri"ht inliti"ation is sold (Art. 16!

?. Sale of an heir of his hereditar ri"hts to astran"er (Art. 1%##

!. Sale of adjacent rural lands not e'ceedin"

1 hectare (Art. 1621". Sale of adjacent small urban lands bou"ht

merel for speculation (Art. 1622

ther instances when the right of legalrede0ption is also granted

1. 5edemption of homestead patents Sec.11D$ .A. 1B13

2. 5edemption in ta' sales Sec. 21$ ,+5 of 1DD3

?. 5edemption b jud"ment debtor Secs. 282C$ 5ule ?D$ 5ules of ivil &rocedure3

$. 5edemption in e'trajudicial foreclosureSec. G$ Act ?1?3

. 5edemption in judicial foreclosure of

mort"a"e Sec. B$ 5.A. CD13G. 5edemption in oreclosure b 5ural -an9s

5.A. ,o. 2H3. Le"al 5i"ht to 5edeem under A"rarian

5eform ode

Basis of legal rede0ption

+t is created partl for reason of public policand partl for the bene%t and convenience of the redemptioner to a0ord him a wa out of what mi"ht be a disa"reeable or inconvenientassociation into which he has been in trust. +t is

intended to minimiMe co8ownership. (Pine-a, p.!%7, 2%1% e-.

;hen legal rede0ption period begins torun

!he ri"ht of le"al redemption shall not bee'ercised e'cept within ?H das from thenotice in writin" b the prospective seller$ orseller$ as the case ma be. !he deed of saleshall not be recorded in the 5e"istr of &ropert unless accompanied b an a<davit of the seller that he has "iven written noticethereof to all possible redemptioners. (Art.162, $CC

6are E?ceptions:

7hen the sale to the buer was e0ectedthrou"h the co8owner who acted as the bro9er$and never indicated that he would e'ercise hisri"ht to redeem. 5istrito v. CA$ 1D S5A GHG1DD13.

7hen the buers too9 possession of thepropert immediatel after the e'ecution of thedeed of sale in their favor and lived in themidst of the other co8owners who neveruestioned the same. 'Pilapil v. CA$ 2H S5AGH 1DD3.

#DE S8B4!S2 A24 C24@28@B8E6GS 36#EC#!E 4EC6EE +3.4. T%*,

7: Are sales or dispositions of subdivisionlots or condo0iniu0 units prior to thee<ectivity of the decree e?e0pt fro0co0pliance with the reuire0ents statedtherein=

A: ,o. +t shall be incumbent upon the owner ordeveloper of the subdivision or condominiumproject to complete compliance with his or itsobli"ations as provided in the decree withintwo ears from the date of e0ectivit of the

*ecree$ unless otherwise e'tended b theAuthorit or unless an adeuate performancebond is %led.

2ote: ailure of the owner or developer to complwith the obli"ations under this and the precedin"provisions shall constitute a violation punishableunder Sections ?C and ?D of the *ecree.

saleM or sellM deIned under the 4ecree

Shall include:1. Ever disposition$ or attempt to

dispose$ for a valuable consideration$of a subdivision lot$ includin" the

buildin" and other improvementsthereof$ if an$ in a subdivision projector a condominium unit in acondominium project;

2. contract to sell;?. contract of purchase and sale;B. e'chan"e;. attempt to sell;G. option of sale or purchase;. solicitation of a sale;C. o0er to sell$ directl or b an a"ent$ or

b a circular$ letter$ advertisement orotherwise; and

D. a. privile"e "iven to a member of acooperative$ corporation$ partnership$or an association andJorb. the issuance of a certi%cate orreceipt evidencin" or "ivin" the ri"ht of participation in$ or ri"ht to$ an land inconsideration of pament of themembership fee or dues. *eemedsale3



SALES

buyM and purchaseM deIned under the4ecree

Shall include an contract to bu$ purchase$ orotherwise acuire for a valuable considerationa subdivision lot$ includin" the buildin" andother improvements$ if an$ in a subdivision

project or a condominium unit in acondominium project.

Subdivision proFect

A tract or a parcel of land re"istered under Act,o. BDG which is partitioned primaril forresidential purposes into individual lots with orwithout improvements thereon$ and o0ered tothe public for sale$ in cash or in installmentterms.

2ote: +t shall include all residential$ commercial$industrial and recreational areas as well as openspaces and other communit and public areas in the

project.

Subdivision lot

An of the lots$ whether residential$commercial$ industrial$ or recreational$ in asubdivision project.

Co0ple? subdivision plan

A subdivision plan of a re"istered land whereina street$ passa"ewa or open space isdelineated on the plan.

Condo0iniu0 proFect

!he entire parcel of real propert divided or tobe divided primaril for residential purposesinto condominium units$ includin" all structuresthereon.

Condo0iniu0 unit

A part of the condominium project intended foran tpe of independent use or ownership$includin" one or more rooms or spaces locatedin one or more Voors or part of parts of Voors3in a buildin" or buildin"s and such accessoriesas ma be appended thereto.

#er0s:

1. wner.

5e"istered owner of the land subject of asubdivision or a condominium project.

2. 4eveloper.

&erson who develops or improves thesubdivision project or condominium projectfor and in behalf of the owner thereof.

?. 4ealer.

An person directl en"a"ed as principal in

the business of buin"$ sellin" ore'chan"in" real estate whether on a full8time or part8time basis.

B. Broker.

An person who$ for commission or othercompensation$ underta9es to sell orne"otiate the sale of a real estatebelon"in" to another.

. Sales0an.

&erson re"ularl emploed b a bro9er toperform$ for and in his behalf$ an or all

functions of a real estate bro9er.

7: ;hat 0ust a registered owner of aparcel of land do if he wishes to convertsaid property into a subdivision orcondo0iniu0 proFect=

A: @e shall:1. Submit his subdivision plan to the

Authorit which shall act upon andapprove the same$ upon a %ndin" thatthe plan complies with the SubdivisionStandards and 5e"ulations enforceableat the time the plan is submitted.

2. +f the conversion desired involves acondominium project$ the sameprocedure shall be followed e'ceptthat$ in addition$ the ,@A shall actupon and approve the plan withrespect to the buildin" or buildin"sincluded in the condominium project inaccordance with the ,ational -uildin"ode 5.A. ,o. GB13.

?. !he subdivision plan$ as so approved$shall then be submitted to the *irectorof Lands for approval.

B. +n case of comple' subdivision plans$court approval shall no lon"er bereuired.

. !he condominium plan as li9ewise soapproved$ shall be submitted to the5e"ister of *eeds of the province orcit in which the propert lies and thesame shall be acted upon subject tothe conditions and in accordance withthe procedure prescribed in Section Bof the ondominium Act 5.A. ,o.B2G3.



SALES

7: #he owner or the real estate dealerinterested in the sale of lots or units"respectively" in such subdivision proFector condo0iniu0 proFect shall register theproFect with the Authority by Iling asworn registration state0ent. ;hat shall

be contained in the sworn registrationstate0ent=

A: a3 ,ame of the ownerb3 !he location of the owners principal

business o<ce$ and if the owner is a non8resident ilipino$ the name and address of his a"ent or representative in the&hilippines is authoriMed to receive notice

c3 !he names and addresses of all thedirectors and o<cers of the business %rm$if the owner be a corporation$ association$trust$ or other entit$ and of all thepartners$ if it be a partnership

d3 !he "eneral character of the businessactuall transacted or to be transacted bthe owner

e3 A statement of the capitaliMation of theowner$ includin" the authoriMed andoutstandin" amounts of its capital stoc9and the proportion thereof which is paid8up.

7: 3art of the reuired docu0entaryattach0ents to the application is acertiIcate of title to the property which isfree fro0 all liens and encu0brances.4oes this bar an owner of 0ortgaged

property fro0 engaging in subdivision orcondo0iniu0 proFect while the 0ortgageis in force=

A: ,o. +n case an subdivision lot orcondominium unit is mort"a"ed$ it is su<cientif the instrument of mort"a"e contains astipulation that the mort"a"ee shall release themort"a"e on an subdivision lot orcondominium unit as soon as the full purchaseprice for the same is paid b the buer.

;hen dee0ed to be registered

6pon completion of the publication

reuirement

2ote: !he fact of such re"istration shall beevidenced b a re"istration certi%cate to be issued tothe applicant8owner or dealer.

7: After issuance of the registrationcertiIcate" 0ay the owner or dealeralready sell subdivision lots orcondo0iniu0 units=

A: ,o. @e must %rst obtain a license to sell theproject within two wee9s from the re"istrationof such project.

;hen license to sell is issued

After an e'amination of the re"istration

statement %led b said owner or dealer and allthe pertinent documents attached thereto$ theAuthorit is convinced that the owner or dealeris of "ood repute$ that his business is%nanciall stable$ and that the proposed sale of the subdivision lots or condominium units tothe public would not be fraudulent.

3urpose of the reuire0ent of posting of a perfor0ance bonds before a license tosell 0ay be issued

+t is to "uarantee the construction andmaintenance of the roads$ "utters$ draina"e$sewera"e$ water sstem$ li"htin" sstems$ and

full development of the subdivision project orthe condominium project and the complianceb the owner or dealer with the applicable lawsand rules and re"ulations.

License to sell and perfor0ance bond notreuired in all subdivision andcondo0iniu0 proFects

!he followin" transactions are e'empt fromsaid reuirements:

1. Sale of a subdivision lot resultin" fromthe partition of land amon" co8ownersand co8heirs.

2. Sale or transfer of a subdivision lot bthe ori"inal purchaser thereof and ansubseuent sale of the same lot.

?. Sale of a subdivision lot or acondominium unit b or for the accountof a mort"a"ee in the ordinar courseof business when necessar toliuidate a bona J-e debt.

Suspensionof License to sell

1. 6pon veri%ed complaint b a buer of asubdivision lot or a condominium unit inan interested part$ the Authorit ma$ in

its discretion$ immediatel suspend theowners or dealers license to sell pendin"investi"ation and hearin" of the case.

2. !he ,@A ma mot& proprio suspend thelicense to sell if$ in its opinion$ aninformation in the re"istration statement%led b the owner or dealer is or hasbecome misleadin"$ incorrect$ inadeuateor incomplete or the sale or o0erin" for asale of the subdivision or condominium



SALES

project ma wor9 or tend to wor9 a fraudupon prospective buers.

6evocation of license to sell orregistration of a subdivision orcondo0iniu0 proFect

!he Authorit ma$ mot& proprio or uponveri%ed complaint %led b a buer of asubdivision lot or condominium unit$ revo9e there"istration of an subdivision project orcondominium project and the license to sellan subdivision lot or condominium unit in saidproject b issuin" an order to this e0ect$ withhis %ndin"s in respect thereto$ if upone'amination into the a0airs of the owner ordealer durin" a hearin"$ it shall appear there issatisfactor evidence that the said owner ordealer:

1. is insolvent; or2. has violated an of the provisions of

this *ecree or an applicable rule or

re"ulation of the Authorit$ or anunderta9in" of hisJits performancebond; or

?. has been or is en"a"ed or is about toen"a"e in fraudulent transactions; or

B. has made an misrepresentation in anprospectus$ brochure$ circular or otherliterature about the subdivision projector condominium project that has beendistributed to prospective buers; or

. is of bad business repute; orG. does not conduct his business in

accordance with law or sound businessprinciples.

2ote: 7here the owner or dealer is a partnership orcorporation or an unincorporated association$ it shallbe su<cient cause for cancellation of its re"istrationcerti%cate and its license to sell$ if an member of such partnership or an o<cer or director of suchcorporation or association has been "uilt of an actor omission which would be cause for refusin" orrevo9in" the re"istration of an individual dealer$bro9er or salesman.

4uration of the registration of dealers"brokers and sales0en

On the thirt8%rst da of *ecember of eachear.

@owever$ in the case of salesmen$ theirre"istration shall also cease upon terminationof their emploment with a dealer or bro9er.

2ote: 5enewal of re"istration for the succeedin"ear shall be "ranted upon written applicationtherefore made not less than thirt nor more thansi't das before the %rst da of the ensuin" earand upon pament of the prescribed fee$ without the

necessit of %lin" further statements or information$unless speci%call reuired b the Authorit.

All applications %led beond said period shall betreated as ori"inal applications.

6efusal or revocation of registration asdealers" brokers or sales0en

Such re"istration ma be refused or revo9ed bthe ,@A if$ after reasonable notice and hearin"$it shall determine that such applicant orre"istrant has:

1. violated an provision of this *ecree oran rule or re"ulation made hereunder;or

2. made a material false statement in hisapplication for re"istration; or

?. been "uilt of a fraudulent act inconnection with an sale of asubdivision lot or condominium unit; or

B. demonstrated his unworthiness to

transact the business of dealer$ bro9er$or salesman$ as the case ma be.

2ote: !he suspension or revocation of there"istration of a dealer or bro9er shall carr with it allthe suspension or revocation of the re"istration of allhis salesmen.

7: n 0aking advertise0ents" does theowner or developer 0ake warrantiesrelative to such=

A: Res.1. Advertisements that ma be made

throu"h newspaper$ radio$ television$leaVets$ circulars or an other formabout the subdivision or thecondominium or its operations oractivities must reVect the real facts andmust be presented in such manner thatwill not tend to mislead or deceive thepublic.

2. !he owner or developer shallanswerable and liable for the facilities$improvements$ infrastructures or otherforms of development represented orpromised in brochures$ advertisementsand other sales propa"andadisseminated b the owner or

developer or his a"ents and the sameshall form part of the sales warrantiesenforceable a"ainst said owner ordeveloper$ jointl and severall.

2ote: ailure to compl with these warranties shallalso be punishable in accordance with the penaltiesprovided for in this *ecree.



SALES

7: ;ithin what period 0ust the owner ordeveloper construct and provide thefacilities" i0prove0ents" infrastructuresand other for0s of develop0ent"including water supply and lightingfacilities" which are o<ered and indicatedin the approved subdivision or

condo0iniu0 plans" brochures"prospectus" printed 0atters" letters or inany for0 of advertise0ent=

A: 6: 7ithin one ear from the date of theissuance of the license for the subdivision orcondominium project

32: Such other period of time as ma be%'ed b the Authorit.

7: s registration needed after thee?ecution of a contract to sell relevant tothe sale or conveyance of subdivision lotsand condo0iniu0 units=

A: Res. All contracts to sell$ deeds of sale andother similar instruments relative to the sale orconveance of the subdivision lots andcondominium units$ whether or not thepurchase price is paid in full$ shall bere"istered b the seller in the O<ce of the5e"ister of *eeds of the province or cit wherethe propert is situated.

2 0ortgage without per0ission theowner or developer

!here must be prior written approval of theAuthorit.

;hen is approval is given by theAuthority

7hen it is shown that the proceeds of themort"a"e loan shall be used for thedevelopment of the condominium orsubdivision project and e0ective measureshave been provided to ensure such utiliMation.

Alterations in the approved subdivisionplan

6: ,o owner or developer shall chan"e or

alter the roads$ open spaces$ infrastructures$facilities for public use andJor other form of subdivision development as contained in theapproved subdivision plan andJor representedin its advertisements

32: +f he has obtained the permission of the Authorit and the written conformit orconsent of the dul or"aniMed homeownersassociation$ or in the absence of the latter$

b the majorit of the lot buers in thesubdivision.

7: @ay pay0ent 0ade by a buyer beforfeited in favor of the owner ordeveloper in case the buyer desists fro0further pay0ent due to the failure of the

owner or developer to develop thesubdivision or condo0iniu0 proFectaccording to the approved plan within theti0e li0it provided for such= ;hat is thebuyerGs re0edy in this case=

A: ,o$ such forfeiture is not allowed. Suchbuer ma$ at his option$ be reimbursed thetotal amount paid includin" amortiMationinterests but e'cludin" delinuenc interests$with interest thereon at the le"al rate.

6ight of a defaulting buyer under the4ecree

!he ri"hts of the buer in the event of thisfailure to pa the installments due for reasonsother than the failure of the owner ordeveloper to develop the project shall be"overned b 5epublic Act ,o. G2.

7here the transaction or contract was enteredinto prior to the e0ectivit of 5epublic Act ,o.G2 on Au"ust 2G$ 1D2$ the defaultin" buershall be entitled to the correspondin" refundbased on the installments paid after thee0ectivit of the law in the absence of anprovision in the contract to the contrar.

wner or developerGs obligation in casethe lot bought and fully'paid by the buyeris 0ortgaged

+n the event a mort"a"e over the lot or unit isoutstandin" at the time of the issuance of thetitle to the buer$ the owner or developer shallredeem the mort"a"e or the correspondin"portion thereof within si' months from suchissuance in order that the title over an fullpaid lot or unit ma be secured and deliveredto the buer in accordance herewith.

;aiver of co0pliance with the decreevoid

An condition$ stipulation$ or provision incontract of sale whereb an person waivescompliance with an provision of the *ecree orof an rule or re"ulation issued thereundershall be void.

2on'forfeiture of install0ent pay0entspaid by the buyer



SALES

,o installment pament shall be forfeited infavor of the owner or developer when thebuer$ after due notice to the owner ordeveloper$ desists from further pament due tothe failure of the owner or developer todevelop the subdivision or condominiumproject accordin" to the approved plans and

within the time limit for complin" with thesame. (Sec. 2, P.5. 4"7

6e0edy of the buyer in case of non'co0pliance by the owner or developer of the approved plans within the ti0e li0it

Such buer ma$ at his option$ be reimbursedthe total amount paid includin" amortiMationinterests but e'cludin" delinuenc interests$with interest thereon at the le"al rate. (Sec. 2,P.5. 4"7

2otice not reuired in the de0and of refund

,o. Section 2? of &.*. D does not reuire thata notice be "iven %rst b the buer to the sellerbefore a demand for refund can be made asthe notice and demand can be made in thesame letter or communication (+illan&eva, p.!%#, 2%%4 e-.

6ights of the buyer in case he defaults inhis install0ent pay0ent due to causesother than the failure of the owner ordeveloper to develop the proFect=

7here the transaction or contract was enteredinto prior to the e0ectivit of 5epublic Act ,o.G2$ the defaultin" buer shall be entitled tothe correspondin" refund based on theinstallments paid after the e0ectivit of the lawin the absence of an provision in the contractto the contrar (Sec. 2!, P.5. 4"7

#ake'ver 4evelop0ent

!he ,@A ma ta9e over or cause thedevelopment and completion of the subdivisionor condominium project at the e'penses of theowner or developer$ jointl and severall$ incases where the owner or developer has

refused or failed to develop or complete thedevelopment of the project as provided for inthe *ecree.

2ote: !he Authorit ma$ after such ta9e8over$demand$ collect and receive from the buers theinstallment paments due on the lots$ which shall beutiliMed for the development of the subdivision.

#DE C24@28@ AC# +6A $*-(,

Condo0iniu0

+t is an interest in real propert consistin" of separate interest in a unit in a residential$

industrial or commercial buildin" and anundivided interest in common$ directl orindirectl$ in the land on which it is located andin other common areas of the buildin".

2ote: +t ma include$ in addition$ a separate interestin other portions of such real propert.

6eal right in condo0iniu0

!he real ri"ht in condominium ma beownership or an other interest in real propertreco"niMed b law$ on propert in the ivilode and other pertinent laws.

Condo0iniu0 unit

+t is a part of the condominium projectintended for an tpe of independent use orownership$ includin" one or more rooms orspaces located in one or more Voors or part orparts of Voors3 in a buildin" or buildin"s andsuch accessories as ma be appended thereto.

Condo0iniu0 proFect

+t is the entire parcel of real propert divided orto be divided in condominiums$ includin" allstructures thereon$

Co00on areas

!he entire project e'ceptin" all units separatel"ranted or held or reserved.

to divideM real property

!o divide the ownership thereof or otherinterest therein b convein" one or morecondominiums therein but less than the wholethereof.

6ule as regards acuisition of ownershipover co00on areas

#ransfer or conveance of a unit or apartment$o<ce or store or other space therein shallinclude the transfer or conveance of theundivided interests in the common areas or$ ina proper case$ the membership orshareholdin"s in the condominium corporation



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6estrictions as regards ownership of condo0iniu0 units provided under theCondo0iniu0 Act

1. As regar-s in-ivi-&als*6: ,one.

32: where the common areas in thecondominium project are owned b theowners of separate units as co8ownersthereof$ no condominium unit therein shallbe conveed or transferred to personsother than:1. ilipino citiMens$ or2. orporations at least si't percent of

the capital stoc9 of which belon" toilipino citiMens

32 to the 32: in cases of hereditarsuccession.

2. As regar-s corporations*

7here the common areas in acondominium project are held b acorporation$ no transfer or conveance of aunit shall be valid if the concomitanttransfer of the appurtenant membership orstoc9holdin" in the corporation will causethe alien interest in such corporation toe'ceed the limits imposed b e'istin" laws.

2ote: 6nder 5epublic Act 5.A.3 ,o. B2G$ otherwise9nown as the ondominium Act$ forei"n nationalscan own &hilippine real estate throu"h the purchaseof condominium units or townhouses constitutedunder the ondominium principle with ondominiumerti%cates of !itle. !he law provides that no

condominium unit can be sold without at the sametime sellin" the correspondin" amount of ri"hts$shares or other interests in the condominiummana"ement bod$ the ondominium orporation;and no one can bu shares in a ondominiumorporation without at the same time buin" acondominium unit. +t e'pressl allows forei"ners toacuire condominium units and shares incondominium corporations up to not more than BHXof the total and outstandin" capital stoc9 of ailipino8owned or controlled corporation. 6nder thisset up$ the ownership of the land is le"all separatedfrom the unit itself (&lst v. PR B&il-ers, Inc., 8.R. $o.1"66!, September 2", 2%%#.

ncidents of a condo0iniu0 grant

6nless otherwise e'pressl provided in theenablin" or master deed or the declaration of restrictions$ the incidents of a condominium"rant are as follows:

1. !he boundar of the unit "ranted arethe interior surfaces of the perimeterwalls$ Voors$ ceilin"s$ windows anddoors thereof.

2ote: !he followin" are not part of the unitbearin" walls$ columns$ Voors$ roofs$foundations and other common structuralelements of the buildin":

a. lobbies$ stairwas$ hallwas$ andother areas of common use$

b. elevator euipment and shafts$

central heatin"$c. central refri"eration and central air8

conditionin" euipment$d. reservoirs$ tan9s$ pumps and other

central services and facilities$

e. pipes$ ducts$ Vues$ chutes$ conduits$wires and other utilit installations$wherever located$ e'cept the outlets

thereof when located within theunit.

2. !here shall pass with the unit$ as anappurtenance thereof$ an e'clusiveeasement for the use of the air spaceencompassed b the boundaries of the

unit as it e'ists at an particular timeand as the unit ma lawfull be alteredor reconstructed from time to time.

2ote: Such easement shall be automaticallterminated in an air space upondestruction of the unit as to render ituntenantable.

?. ommon areas are held in common bthe holders of units$ in eual shares$one for each unit$ unless otherwiseprovided.

B. A non8e'clusive easement for in"ress$

e"ress and support throu"h thecommon areas is appurtenant to eachunit and the common areas are subjectto such easements.

. Each condominium owner shall havethe e'clusive ri"ht to paint$ repaint$tile$ wa'$ paper or otherwise re%nishand decorate the inner surfaces of thewalls$ ceilin"s$ Voors$ windows anddoors boundin" his own unit.

G. Each condominium owner shall havethe e'clusive ri"ht to mort"a"e$ pled"eor encumber his condominium and to

have the same appraisedindependentl of the othercondominiums but an obli"ationincurred b such condominium owner ispersonal to him.

. 6: Each condominium owner has alsothe absolute ri"ht to sell or dispose of his condominium.



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32: +f the master deed contains areuirement that the propert be %rsto0ered to the condominium ownerswithin a reasonable period of timebefore the same is o0ered to outsideparties;

Co00on areas be divided through Fudicialpartition

6: ommon areas shall remain undivided$and there shall be no judicial partition thereof.

32: 7here several persons owncondominiums in a condominium project$an action ma be brou"ht b one or moresuch persons for partition thereof b sale of the entire project$ as if the owners of all of the condominiums in such project were co8owners of the entire project in the sameproportion as their interests in the commonareas:

2ote: @owever$ a partition shall be made onlupon a showin" that:1. three ears after dama"e or destruction to

the project which renders material partthereof unit for its use prior thereto$ theproject has not been rebuilt or repairedsubstantiall to its state prior to its dama"eor destruction$ or

2. dama"e or destruction to the project hasrendered one8half or more of the unitstherein untenantable and that condominiumowners holdin" in a""re"ate more thanthirt percent interest in the common areasare opposed to repair or restoration of theproject; or

?. the project has been in e'istence in e'cessof %ft ears$ that it is obsolete anduneconomic$ and that condominium ownersholdin" in a""re"ate more than %ft percentinterest in the common areas are opposedto repair or restoration or remodelin" ormoderniMin" of the project; or

B. the project or a material part thereof hasbeen condemned or e'propriated and thatthe project is no lon"er viable$ or that thecondominium owners holdin" in a""re"atemore than sevent percent interest in thecommon areas are opposed to continuationof the condominium re"ime aftere'propriation or condemnation of a materialportion thereof; or

. the conditions for such partition b sale setforth in the declaration of restrictions$ dulre"istered in accordance with the terms of the Act$ have been met.

6euire0ents before a property beconsidered divided or to be divided intocondo0iniu0s

A: An enablin" or master deed must berecorded in the 5e"ister of *eeds of the

province or cit in which the propert lies anddul annotated in the correspondin" certi%cateof the title of the land$ if the latter has beenpatented or re"istered under either the Land5e"istration or adastral Acts Sec. !, R.A.!7263.

Enabling or 0aster deed contains:

1. *escription of the land on which the buildin"or buildin"s and improvements are or are to belocated;

2. *escription of the buildin" or buildin"s$statin" the number of stories and basements$the number of units and their accessories$ if an;

?. *escription of the common areas andfacilities;

B. A statement of the e'act nature of the

interest acuired or to be acuired b thepurchaser in the separate units and in thecommon areas of the condominium project.7here title to or the appurtenant interests inthe common areas are or are to be held b acondominium corporation$ a statement to thise0ect shall be included;

. Statement of the purposes for which thebuildin" or buildin"s and each of the units areintended or restricted as to use;

G. A certi%cate of the re"istered owner of thepropert$ if he is other than those e'ecutin"

the master deed$ as well as of all re"isteredholders of an lien or encumbrance on thepropert$ that the consent to the re"istrationof the deed;

. !he followin" plans shall be appended to thedeed as inte"ral parts thereof:

a. A surve plan of the land included in theproject$ unless a surve plan of the samepropert had previousl been %led in saido<ce;b. A dia"rammatic Voor plan of the buildin"or buildin"s in the project$ in su<cientdetail to identif each unit$ its relativelocation and appro'imate dimensions;

C. An reasonable restriction not contrar tolaw$ morals or public polic re"ardin" the ri"htof an condominium owner to alienate ordispose of his condominium.

2ote: !he enablin" or master deed ma be amendedor revo9ed upon re"istration of an instrumente'ecuted b the re"istered owner or owners of thepropert and consented to b all re"istered holdersof an lien or encumbrance on the land or buildin" or



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portion thereof. !he term re"istered owner shallinclude the re"istered owners of condominiums inthe project. 6ntil re"istration of a revocation$ theprovisions of 5A. ,o. B2G shall continue to appl tosuch propert Sec. !, R.A. !7263.

ssuance of certiIcate of title where theenabling or 0aster deed provides that

the land included within a condo0iniu0proFect are to be owned in co00on by thecondo0iniu0 owners therein

!he 5e"ister of *eeds ma$ at the reuest of all the condominium owners and uponsurrender of all their Qcondominium ownersQcopies$ cancel the certi%cates of title of thepropert and issue a new one in the name of said condominium owners as pro8indiviso co8owners thereof.

Dow construed ' deeds" declarations orplans for a condo0iniu0 proFect

1. Liberall$ to facilitate the operation of theproject

2. &rovisions shall be presumed to beindependent and severable.

;hen declaration of restrictionsregistered and the e<ect of such

!he owner of a project shall$ prior to theconveance of an condominium therein$re"ister a declaration of restrictions relatin" tosuch project.

Such restrictions shall constitute a lien uponeach condominium in the project$ and shallinsure to and bind all condominium owners inthe project.

2ote: Such liens$ unless otherwise provided$ ma beenforced b an condominium owner in the project orb the mana"ement bod of such project.

4eclaration of restrictions

!he declaration of restrictions shall provide forthe mana"ement of the project b anone of the followin" mana"ement bodies:

1. a condominium corporation$

2. an association of the condominiumowners$

?. a board of "overnors elected bcondominium owners$ or

B. a mana"ement a"ent elected b theowners or b the board named in thedeclaration.

. votin" majorities$G. uorums$. notices$

C. meetin" date$ andD. other rules "overnin" such bod or

bodies.

4eclaration of restrictions 0ay alsoprovide

Such declaration of restrictions$ amon" otherthin"s$ ma also provide:

1. As to an such mana"ement bod;a.or the powers thereof$ includin"

power to enforce the provisions of the declarations of restrictions;

b.or maintenance of insurancepolicies$ insurin" condominiumowners a"ainst loss b %re$casualt$ liabilit$ wor9menscompensation and other insurableris9s$ and for bondin" of themembers of an mana"ementbod;

c.&rovisions for maintenance$ utilit$

"ardenin" and other servicesbene%tin" the common areas$ forthe emploment of personnelnecessar for the operation of thebuildin"$ and le"al$ accountin" andother professional and technicalservices;

d.or purchase of materials$ suppliesand the li9e needed b thecommon areas;

e.or pament of ta'es and specialassessments which would be a lienupon the entire project or commonareas$ and for dischar"e of an lien

or encumbrance levied a"ainst theentire project or the commonareas;

f. or reconstruction of an portion orportions of an dama"e to ordestruction of the project;

".!he manner for dele"ation of itspowers;

h.or entr b its o<cers and a"entsinto an unit when necessar inconnection with the maintenanceor construction for which such bodis responsible;

i. or a power of attorne to themana"ement bod to sell the

entire project for the bene%t of allof the owners thereof whenpartition of the project ma beauthoriMed under Section C of theondominium Act$ which saidpower shall be bindin" upon all of the condominium ownersre"ardless of whether the assumethe obli"ations of the restrictions ornot.



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2. !he manner and procedure foramendin" such restrictions: Provi-e-$ !hat the vote of not less than amajorit in interest of the owners isobtained.

?. or independent audit of the accountsof the mana"ement bod;

B. or reasonable assessments to meetauthoriMed e'penditures$ eachcondominium unit to be assessedseparatel for its share of suche'penses in proportion unlessotherwise provided3 to its ownersfractional interest in an commonareas;

. or the subordination of the lienssecurin" such assessments to otherliens either "enerall or speci%calldescribed;

G. or conditions$ other than thoseprovided for in Sections C and 1? of theAct$ upon which partition of the project

and dissolution of the condominiumcorporation ma be made.

2ote: Such ri"ht to partition or dissolutionma be conditioned upon:a. failure of the condominium owners to

rebuild within a certain period;b. speci%ed inadeuac of insurance

proceeds;c. speci%ed percenta"e of dama"e to the

buildin";d. a decision of an arbitrator; ore. upon an other reasonable condition.

4uty of the 6egister of 4eeds

!he 5e"ister of *eeds shall enter and annotatethe declaration of restrictions upon thecerti%cate of title coverin" the land includedwithin the project$ if the land is patented orre"istered under the Land 5e"istration oradastral Acts.

6estrictions i0posed by the law uponcorporations which is also the0anage0ent body of the condo0iniu0proFect

!he restrictions are as follows:1. !he corporate purposes of such a

corporation shall be limited to the:a. holdin" of the common areas$

either in ownership or an otherinterest in real propert reco"niMedb law$

b. mana"ement of the project$ andc. to such other purposes as ma be

necessar$ incidental or convenientto the accomplishment of saidpurposes.

2. !he articles of incorporation or b8lawsof the corporation shall not contain anprovision contrar to or inconsistentwith the:a. provisions of the Act;b. enablin" or master deed; orc. declaration of restrictions of the

project.

7: @ay the 0anage0ent body acuire andhold" for the beneIt of the condo0iniu0owners" tangible and intangible personalproperty and dispose of the sa0e by saleor otherwise=

A: Res$ unless otherwise provided for b thedeclaration of restrictions.

2ote: !he bene%cial interest in such personalpropert shall be owned b the condominium ownersin the same proportion as their respective interests inthe common areas.

A transfer of a condominium shall transfer to thetransferee ownership of the transferors bene%cialinterest in such personal propert.

Condo0iniu0 corporation

A corporation speciall formed for the purpose$in which the holders of separate interest shallautomaticall be members or shareholders$ tothe e'clusion of others$ in proportion to theappurtenant interest of their respective units inthe common areas.

2ote: As re"ards title to the common areas$

includin" the land$ or the appurtenant interests insuch areas$ these ma be held b a condominiumcorporation.

#er0 of a condo0iniu0 corporation

o8terminous with the duration of thecondominium project$ the provisions of theorporation Law to the contrarnotwithstandin".

@e0bership in a condo0iniu0corporation

Kembership in a condominium corporation$

re"ardless of whether it is a stoc9 or non8stoc9corporation$ shall not be transferableseparatel from the condominium unit of whichit is an appurtenance.

2ote: 7hen a member or stoc9holder ceases to owna unit in the project in which the condominiumcorporation owns or holds the common areas$ heshall automaticall cease to be a member orstoc9holder of the condominium corporation.



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7: @ay a condo0iniu0 corporation sell"e?change" lease or otherwise dispose of the co00on areas owned or held by it inthe condo0iniu0 proFect=

A: 6: *urin" its e'istence$ it cannot do so.

32: +f authoriMed b the a<rmative voteof all the stoc9holders or members.

Appraisal right under the CorporationCode available to stockholders or0e0bers of a condo0iniu0 corporation

6: ,ot available. !he law provides that theb8laws of a condominium corporation shallprovide that a stoc9holder or member shall notbe entitled to demand pament of his shares orinterest in those cases where such ri"ht is"ranted under the orporation Law '''

32: +f said stoc9holder or member

consents to sell his separate interest in theproject to the corporation or to anpurchaser of the corporations choice whoshall also bu from the corporation thedissentin" member or stoc9holdersinterest.

2ote: +n case of disa"reement as to price$ theprocedure set forth in the appropriate provisionof the orporation Law for valuation of sharesshall be followed.

!he corporation shall have two ears withinwhich to pa for the shares or furnish apurchaser of its choice from the time of award.

All e'penses incurred in the liuidation of theinterest of the dissentin" member or stoc9holdershall be borne b him.

E<ect of involuntary dissolution of acondo0iniu0 corporation for any of thecauses provided by law

1. !he common areas owned or held b thecorporation shall$ b wa of liuidation$ betransferred proDin-iviso and in proportionto their interest in the corporation to themembers or stoc9holders thereof$ subjectto the superior ri"hts of the corporation

creditors.

2ote: Such transfer or conveance shall bedeemed to be a full liuidation of the interest of such members or stoc9holders in thecorporation.

2. After such transfer or conveance$ theprovisions of this Act "overnin" undividedco8ownership of$ or undivided interest in$

the common areas in condominiumprojects shall full appl.

;hen voluntary dissolution of acondo0iniu0 corporation allowed

A condominium corporation ma be voluntaril

dissolved onl:1. when the enablin" or the master deed

of the project in which thecondominium corporation owns orholds the common area is revo9ed; and

2. upon a showin" that:a. three ears after dama"e or

destruction to the project in whichthe corporation owns or holds thecommon areas$ which dama"e ordestruction renders a material partthereof un%t for its use priorthereto$ the project has not beenrebuilt or repaired substantiall toits state prior to its dama"e or

destruction; orb. dama"e or destruction to the

project has rendered one8half ormore of the units thereinuntenantable and that more thanthirt percent of the members of the corporation$ if non8stoc9$ or theshareholders representin" morethan thirt percent of the capitalstoc9 entitled to vote$ if a stoc9corporation$ are opposed to therepair or reconstruction of theproject$ or

c. the project has been in e'istence in

e'cess of %ft ears$ that it isobsolete and uneconomical$ andthat more than %ft percent of themembers of the corporation$ if non8stoc9$ or the stoc9holdersrepresentin" more than %ftpercent of the capital stoc9 entitledto vote$ if a stoc9 corporation$ areopposed to the repair or restorationor remodelin" or moderniMin" of the project; or

d. the project or a material partthereof has been condemned ore'propriated and that the project isno lon"er viable$ or that the

members holdin" in a""re"atemore than sevent percent interestin the corporation$ if non8stoc9$ orthe stoc9holders representin" morethan sevent percent of the capitalstoc9 entitled to vote$ if a stoc9corporation$ are opposed to thecontinuation of the condominiumre"ime after e'propriation or



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condemnation of a material portionthereof; or

e. the conditions for such adissolution set forth in thedeclaration of restrictions of theproject in which the corporationowns or holds the common areas$

have been met.

2ote: An action for voluntar dissolution is thatunder 5ule 1HB of the 5ules of ourt.

6ight of 0e0bers or stockholders of acondo0iniu0 corporation dissolve suchcorporation

Res$ b the a<rmative vote of all thestoc9holders or members thereof at a "eneralor special meetin" dul called for thepurpose: Provi-e-$ that all the reuirements of Section G2 of the orporation Law are compliedwith.

Conseuence of voluntary dissolution of acondo0iniu0 corporation

6: !he corporation shall be deemed to hold apower of attorne from all the members orstoc9holders to sell and dispose of theirseparate interests in the project.

32: 6nless otherwise provided for in thedeclaration of restrictions

Liuidation of a condo0iniu0 corporation

Liuidation of the corporation shall be e0ectedb a sale of the entire project as if thecorporation owned the whole thereof$ subjectto the ri"hts of the corporate and of individualcondominium creditors.

7: ;hat should the Court do if" in anaction for partition of a condo0iniu0proFect or for the dissolution of condo0iniu0 corporation on the groundthat the proFect or a 0aterial part thereof has been conde0ned or e?propriated" theCourt Inds that the conditions providedfor in the Condo0iniu0 Act or in thedeclaration of restrictions have not been

0et=

A: !he ourt ma decree a reor"aniMation of the project$ declarin" which portion or portionsof the project shall continue as a condominiumproject$ the owners thereof$ and the respectiveri"hts of said remainin" owners and the justcompensation$ if an$ that a condominiumowner ma be entitled to due to deprivation of his propert.

2ote: 6pon receipt of a cop of the decree$ the5e"ister of *eeds shall enter and annotate the sameon the pertinent certi%cate of title.

Assess0ent of condo0iniu0s for ta?ationpurposes

Each condominium separatel owned shall beseparatel assessed$ for purposes of realpropert ta'ation and other ta' purposes tothe owners thereof and the ta' on each suchcondominium shall constitute a lien solelthereon.

7: ;ho should pay for an assess0entupon any condo0iniu0 0ade inaccordance with a duly registereddeclaration of restrictions=

A: +t is an obli"ation of the owner thereof atthe time the assessment is made.

2otice of assess0ent

!he notice:1. is to be re"istered with the 5e"ister of

*eeds of the cit or province wheresuch condominium project is located.

2. shall state the followin":a. amount of such assessment and

such other char"es thereon as mabe authoriMed b the declaration of restrictions$

b. a description of the condominiumunit a"ainst which same has beenassessed$ and

c. the name of the re"istered ownerthereof.

?. Such notice shall be si"ned b anauthoriMed representative of themana"ement bod or as otherwiseprovided in the declaration of restrictions.

7: ;hat is the e<ect if the 0anage0entbody causes a notice of assess0ent to beregistered with the register of deeds=

A: !he amount of an such assessment plusan other char"es thereon$ such as interest$

costs includin" attornes fees3 and penalties$as such ma be provided for in the declarationof restrictions$ shall be and become a lien uponthe condominium assessed.

2ote: E<ect of pay0ent: 6pon pament of saidassessment and char"es or other satisfactionthereof$ the mana"ement bod shall cause to bere"istered a release of the lien.



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Lien created in case of unpaidassess0ents" etc

6: Such lien shall be superior to all other liensre"istered subseuent to the re"istration of said notice of assessment

32s: 1. real propert ta' liens are superior;2. when declaration of restrictions provide

for the subordination thereof to another liens and encumbrances.

Enforce0ent of the lien

Such liens ma be enforced in the samemanner provided for b law for the judicial ore'tra8judicial foreclosure of mort"a"es of realpropert.

7: Can the 0anage0ent body bid in theforeclosure sale based on the lien forunpaid assess0ents=

A: 6: ,o$ the mana"ement bod shall havepower to bid at foreclosure sale.

32: 6nless otherwise provided for in thedeclaration of restrictions$

2ote: !he condominium owner shall have the sameri"ht of redemption as in cases of judicial or e'tra8 judicial foreclosure of mort"a"es.

sales draft

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