SALES

CIVIL LAW

Sales
TABLE OF CONTENTS
I. II. III. IV. V. VI. VII. VIII. IX. X. XI. Contract of Sale Elements of a Valid Sale Transfer of Ownership Risk of Loss Document of Title Obligations of Seller and Buyer Remedies of Seller and Buyer Double Sale Extinguishment of Sale Assignment Special Laws 169 172 175 176 176 178 182 189 190 192 193

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SALES SALES (Title VI, Book 4, Arts 1458- 1637, Civil Code) I. CONTRACT OF SALE
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CIVIL LAW
normally the full payment of the purchase price. Breach of the condition prevents the obligation to convey title from acquiring obligatory force. (Ang Yu Asuncion v. CA, 1994)

A contract of sale only constitutes a TITLE or right to the transfer of ownership, but is NOT the MODE of transferring ownership. (Aznar v. Yapdiangco, 1965) A. ESSENTIAL REQUISITES: (Art. 1318) 1. Consent- meeting of offer and acceptance on the thing and the price 2. Object- determinate thing 3. Cause - for the seller: payment of price - for the buyer: transfer of ownership and delivery of thing B. STAGES: 1. Negotiation - from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected 2. Perfection upon the concurrence of the essential elements of the sale, which is the meeting of the minds of the parties as to the object of the contract and upon the price 3. Consummation - begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof (Ang Yu Asuncion v. CA, 1994) C. CHARACTERISTICS: 1. Nominate 2. Consensual- perfected by mere consent 3. Real obligation (to give) a determinate thing is created 4. Bilateral- with reciprocal obligations 5. Onerous- with exchange of equivalent values 6. Principal 7. Commutative- fulfillment predetermined in advance D. KINDS: (Art. 1458(2)) 1. ABSOLUTE sale 2. CONDITIONAL sale (Contract to sell) o Ownership of the thing sold is retained until the fulfillment of a positive suspensive condition,

In some cases, the SC makes finer distinctions between a conditional sale and a contract to sell in that: o In a contract to sell- the fulfillment of the suspensive condition, which is the full payment of the purchase price, will not automatically transfer ownership to the buyer although the property may have been previously delivered to him; o In a conditional sale- the fulfillment of the suspensive condition renders the sale absolute and affects the sellers title thereto such that if there was previous delivery of the property, the sellers ownership or title to the property is automatically transferred to the buyer (see Ursal v. CA, 2005) E. FORM (Art. 1483) GEN. RULE: NO form required may be o Written o Oral o Partly written, partly oral o Inferred from the conduct of the parties Why: because sale is consensual (Art. 1475) EXCEPTIONS: 1. Under Statute of Frauds (contract or some memorandum thereof must be written and subscribed; otherwise, contract unenforceable UNLESS ratified by failure to object to oral evidence OR acceptance of benefits under the contract) (Art1403(2)): a. Sale not to be performed within 1 year b. Sale of personal property at a price of P500 up. c. Sale of real property or an interest therein The Statute of Frauds applies only to executory contracts, NOT to contracts either partially or totally performed. (Iigo v. Estate of Maloto, 1967) 2. Transmission of real rights over immovable property (must appear in public document to bind third parties) (Art.1358(1)) 3. When certain form required by other law a. Transfer of large cattle must be registered with the municipal treasurer to be valid (Sec. 529,
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Art. 1458. By the contract of sale, one of the parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. A contract of sale may be absolute or conditional. 100% UP LAW UP BAROPS

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Revised Administrative Code of 1917) b. In sale of land through agent, the authority of the agent must be written; otherwise, sale is void (Art.1874) F. REMEDIES: 1. Specific Performance + damages (Arts. 1191 and 1165(1)) 2. Rescission + damages (Art. 1191) 3. Damages (Art. 1170) G. VIS-A-VIS: 1. Bilateral promise to buy and sell (Art. 1479(1)2) o LIKE sale: there must be a - determinate thing to be sold - price certain to be paid UNLIKE sale: the promise to buy is the consideration for the promise to sell and vice versa (de la Cavada v. Diaz, 1918)

CIVIL LAW
Money advanced but eventually utilized as rental payments is NOT a separate consideration for an option to buy in a lease contract; hence, the option is not binding. 2. The consideration may be in money OR in kind (things or undertakings) 3. If the consideration is not monetary, a. these must be things or undertakings of value, in view of the onerous nature of the contract of option; b. said consideration must be clearly specified as such in the option contract or clause. - example: an undertaking on the part of the optionee (lessee) to sell the improvements made on the property if the option to buy is not exercised Arts. 13244 and 1479(2), as interpreted by the Supreme Court5: - IF the option is supported by consideration distinct from the price: it is both a binding contract of option and an offer of a contract of sale. IF the option is NOT supported by consideration distinct from the price: it is NOT binding as a contract of option, but is a mere offer of a contract of sale. IF the offer is accepted (i.e., option is exercised) BEFORE withdrawal, a contract of sale is perfected, hence the remedy of specific performance lies. (Soriano v. Bautista, 1962; Sanchez v. Rigos, 1972) IF the offer is withdrawn BEFORE acceptance, specific performance does not lie because no contract of sale was perfected.(Ang Yu Asuncion v. CA, 1994)

Manresa: has the same effect as a contract of sale since parties can reciprocally demand fulfillment 2. Option to buy or to sell (accepted unilateral promise to buy or to sell) (1479(2)3) o o Example: if the financial condition of the mortgagees will permit, they may purchase said land absolutely on any date within the 2 year term of this mortgage at the agreed price of P3,900. (Soriano v. Bautista, 1962) LIKE sale: there must be a - determinate thing to be sold - price certain to be paid UNLIKE sale: it is unilateral- it gives a right to buy or to sell, but imposes no obligation on the part of the option-holder, aside from the consideration for the offer It must be supported by a consideration distinct from the price. RULES re SEPARATE CONSIDERATION: (Bible Baptist Church v. CA, 2004) 1. An option contract must be supported by a separate consideration.
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Remedies in Case of Breach Option with Withdrawal Damages for distinct of offer breach of consideration BEFORE option acceptance contract AFTER Specific acceptance performance of offer of sales contract Option w/o Withdrawal Damages
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A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
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An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. 100% UP LAW UP

When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised. 5 Sanchez v. Rigos (1972); Ang Yu Asuncion v. CA (1994) ; Limson v. CA (2001). 2008 Page 170 of 325

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Distinct consideration of offer BEFORE acceptance ONLY IF there is an abuse of right under Art. 19, CC (no damages for breach of option contract) Specific Performance of sales contract

CIVIL LAW
subject of an action for specific performance (Tanay Recreation Center and Development Corp. v. Fausto, 2005)8 H. DISTINGUISHED FROM OTHER ACTS/CONTRACTS 1. Contract for a piece of work (Art.1467) CONTRACT FOR A PIECE OF WORK Goods manufactured Goods or procured in the manufactured ordinary course of specially for the business (WON on customer upon his hand) special order For the general Not for the market general market Essence is the object Essence is skill Tests under jurisprudence: 1. Habituality test: WON the job requires the use of extraordinary or additional equipment, or involves services not generally performed (Celestino v. CIR, 1956) 2. WON the thing is one which would have never existed but for the order of the party desiring to acquire it, or one which would have existed and have been the subject of sale to some other person even f the order had not been given (CIR v. Eng.&Supply, 1975) SALE 2. Agency to Sell (Art.1467) O Look at essential clauses- subject matter SALE Buyer pays price (WON he sells the thing to a 3rd person)

AFTER acceptance of offer

3. Right of first refusal o Example: That should the LESSOR decide to sell the leased premises, the LESSEE shall have the priority right to purchase the same. (Tanay Recreation Center and Development Corp. v. Fausto, 2005) LIKE sale: there must be a determinate thing to be sold UNLIKE sale: - price and other terms yet to be agreed upon (Ang Yu Asuncion v. CA, 1994) - it is unilateral UNLIKE option: - The grantee has no right to buy or sell, only a right to the first offer should the grantor decide to sell (Polytechnic University of the Philippines v. CA, 2001)6 - Separate consideration NOT required7 - rescission and specific performance available in case of breach

cause

and

Prevailing doctrine: A sale made in violation of a right of first refusal is valid but rescissible under Art 1381(3),CC, and may be the
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Buyer becomes the owner Buyer can make profit if he resells

The basis of the right of first refusal must be the current offer to sell of the seller or offer to buy of any prospective buyer. Only after the optionee fails to exercise its right of first priority under the same terms and within the period contemplated, could the owner validly offer to sell the property to a third person, again under the same terms as offered to the optionee. (Paraaque Kings Enterprises, Inc. v. CA, 1997)
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AGENCY TO SELL Agent does not pay price, but only delivers to the principal the price he obtains from the sale to a third person Agent does not become the owner Agent cannot make secret profit in selling

When contained in a lease contract, the right of first refusal is an integral and indivisible part of the contract of lease and is inseparable from the whole contract. The consideration for the lease includes the consideration for the right of first refusal and is built into the reciprocal obligations of the parties. (Equatorial Realty Development, Inc. v. Mayfair Theater Inc., 1996)

3. Barter SALE BARTER Price in money or Consideration is its equivalent another thing If the consideration is partly in money and partly in another thing: 1. look at manifest intention of the
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Equatorial, reverting to the doctrine in Guzman, reversed Ang Yu Asuncion where it was held that the remedy in case of a sale violative of a right of first refusal is limited to damages. 2008 Page 171 of 325

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parties to characterize the transaction; 2. if no manifest intention: o barter: if value of thing > amt of money or its equivalent o sale: if value of thing < amt of money or its equivalent 4. Dation (Art. 1245) SALE No pre-existing debt Creates obligation DATION w/ pre-existing debt Extinguishes obligation (mode of payment)

CIVIL LAW
avenues and parks, according to the Arellano development plan of the Municipality (Melliza v. City of Iloilo, 1968) A thing is LICIT if it is NOT: (Art. 1409) 1. Contrary to law, morals, good customs, public order, or public policy; - e.g. dangerous drugs; land acquired by homestead or free patent- within 5 years from issuance of patent or grant, except if sale in favor of the Gov.t or any of its units, braches or institutions (CA 141) 2. Outside the commerce of men; e.g. property of public dominion such as a river (Martinez v. CA, 1974) A thing is o ACTUAL when it is existing, o POSSIBLE when it is has a potential existence. - sale of future goods (goods to be manufactured, raised, or acquired by the seller after the perfection of sale): VALID - sale of a mere hope or expectancy: subject to the CONDITION that the thing will come into existence - sale of a vain hope or expectancy: VOID Future inheritance cannot be the object of sale (Art.1347(2)) but heir may sell his hereditary rights (Art.1088) Rules in case of loss at perfection (Baviera: loss occurred before the contract was entered into without the knowledge of both parties) (Arts. 1493-1495): Total loss Partial loss OR material deterioration in whole or in part contract without any effect (no object) Buyer may: 1. Withdraw from contract OR 2. Demand remaining part and pay proportional price

5. Lease of things SALE Ownership transferred 6. Donation SALE onerous DONATION gratuitous LEASE OF THING Ownership not transferred

Other contracts governed by the law of sales: 1. Dation (Art.1245) - a mode of payment where property is alienated to the creditor in satisfaction of a debt in money 2. Barter (Art. 1641) - a contract where one of the parties binds himself to give one thing in consideration of the others promise to give another thing (Art.1638) - governed by title on sales in matters not specifically provided for in title on barter 3. Innominate contracts most analogous to sale (Art. 1307)

II. ELEMENTS OF A VALID SALE

A. THING sold must be: 1. Determinate (Art.1458) 2. Licit (1459) 3. Actual or Possible (Arts. 1461 & 1462) A thing 1. 2. 3. is DETERMINATE when it is: Particularly designated; Physically segregated; or Capable of being made determinate without the necessity of a new or further agreement between the parties. (Art. 1460) Example: specific mention of some lots plus the phrase lots needed for the city hall site,
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The following may be objects of sale: 1. Undivided interest in a thing (Art.1463) 2. Things under litigation; BUT if without the knowledge and approval of the litigants or of the court, sale rescissible (Art.1381(4)) 3. Things subject to a resolutory condition (Art. 1465) - e.g. things acquired under a legal or conventional right of redemption B. PRICE must be: 1. Certain (Art. 1458) 2. In money or its equivalent (Art. 1458) 3. Real (Art 1471) 4. True (Art. 1353)
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Price is CERTAIN when it is: 1. Fixed by agreement of the parties (Art. 1473) 2. Certain with reference to another thing certain (Art. 1469) - e.g. 10% below invoice price 3. The price which the thing sold would have on a definite day, or a particular exchange or market, or a certain amount above or below such price (Art. 1472) 4. To be fixed by a third person (Art. 1469) - If 3rd person unable or unwilling to fix price: sale inefficacious UNLESS the parties subsequently agree upon the price - If 3rd person acts in BF or by mistake: courts may fix price - If 3rd person prevented from fixing price by fault of the buyer or seller: party not in fault may avail of remedies against the other o If price CANNOT be determined: - sale INEFFICACIOUS - BUT if the thing or part thereof has been delivered to and appropriated by the buyer, he must pay a reasonable price therefor (Art.1474)

CIVIL LAW
GROSS INADEQUACY of price does not affect a contract of sale, except that: 1. It may indicate a defect in the consent such as fraud, mistake, or undue influence (Arts.1470 & 1355) 2. It may indicate that the parties intended a donation or some other act or contract (Art1470) e.g. when the price of a sale with right to repurchase is unusually inadequate, it is presumed to be an equitable mortgage (Art1602(1)) 3. Sale is rescissible if: a. the sale is entered into by a guardian or by a representative of an absentee; b. the ward or absentee represented suffers lesion by more than of the value of the thing sold; AND c. the sale is not approved by the court (Arts.1381(1)(2) & 1386) 4. In an ordinary sale, for reason of equity, a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks ones conscience as to justify the courts to interfere; BUT such does not follow when the law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that the lesser the price, the easier it is for the owner to effect redemption. (Hulst v. PR Builders, Inc. , 2007) C. CONSENT perfects a contract of sale. Consent: meeting of offer and acceptance on the 1. thing sold 2. price - Manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price (Toyota Shaw v. CA, 1995) o The buyer and the seller must have CAPACITY to enter into a contract of sale. Absolute Incapacity: (MIDDD-HI-C) 1. Minors 2. Insane Except: during lucid interval (Art.1328) 3. Demented persons 4. Deaf-mutes who do not know how to write (Art. 1327) 5. Persons suffering civil interdiction (Art.34, RPC) 6. Drunk person 7. Hypnotized person (Art.1328) 8. Those judicially declared Incompetent a) prodigals b) hospitalized lepers

Price must be in o MONEY or o its EQUIVALENT - e.g. letter of credit (Baviera) Price must be REAL, not simulated. o Price is real when there is an intention (on the part of the buyer) to pay and an expectation on the part of the seller) to receive it. o If price is simulated: - sale is vOID - BUT the act may be shown to have been really a donation or some other act or contract (Art.1471) Price must be TRUE, not false. o The price is false when the real consideration is not the same as that stated in the contract (Mapalo v. Mapalo, 1966) o If false price stated - sale void unless proved to be founded on another true and lawful price (Art. 1353) - SC says the contract is not void but is a relatively simulated contract; hence, the parties are bound by their real agreement. (Balite v. Lim, 2004)

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SALES
c) persons not being of unsound mind, but by reason of age, disease, weak mind, and other similar causes, cannot, without outside aid, take care of themselves and manage their property, becoming thereby an easy prey for deceit and exploitation (Sec.2, Rule 92,ROC) o Status of sale: - Where 1 party incapacitated: VOIDABLE (Art.1390(1)) - Where both parties incapacitates: UNENFORCEABLE (Art.1403(3)) BUT when necessaries (those indispensable for sustenance, clothing, dwelling, medical attendance, education, transportation) are sold and delivered to incapacitated person, he must pay a reasonable price therefor. (Art.1489) o

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BUT sale to guardians, agents, executors/administrators can be ratified by the execution of a new contract, making the sale valid from the time the new contract is executed, unlike sale to public or judicial officers and employees and lawyers which cannot be so ratified because it is contrary to public policy (Rubias v. Batiller, 1973)

Relative Incapacity to buy (HW-PAGE-JLO) 1. Husband/Wife - What: property of spouse - Except: when property regime is separation of property (marriage settlement or judicial order) - Prohibition applies to common-law spouses (Matabuena v. Cervantes, 1971) 2. Guardian - What: property of ward 3. Agent - What: property of principal - Except: principal consents 4. Executor/Administrator - What: property of estate administered - Does NOT apply to sale of hereditary right bec. it is not administered by the executor/administrator (Naval v Enriquez, 1904) 5. Public officers and employees - What: property of State, GOCC, institution administered - Applies to judges and govt. experts who, in any manner, take part in the sale 6. Judicial officers and employees (justices, judges, prosecuting attorneys, court clerks, other officers and employees connected with the administration of justice) - What: property or rights in litigation or levied upon an execution before the court within their territorial jurisdiction 7. Lawyers - What: property and rights object of any litigation handled by them (Art. 1491) 8. Others specially disqualified by law - e.g. aliens, wrt private land in the Philippines (Art.12, sec.7, Constitution) o Status of sale: VOID (Art. 1409(7))
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The OFFER must be CERTAIN (Art. 1319) as to the object and the price (Villanueva v. PNB, 2006). o Offer a.k.a. imperfect promise or policitacion (Litonjua v. L&R Corp., 2000) o The ff. are not definite offers but mere invitations to make an offer, unless the contrary appears: 1. Business advertisements of things for sale (Art.1325) 2. Advertisements for bidders (Art.1326) The ACCEPTANCE must be ABSOLUTE. (Art. 1319) o Qualified acceptance= counter-offer Consent must not be VITIATED, otherwise sale is VOIDABLE. (Arts. 1330 &1390(2)) o Vices of consent: 1. Fraud 2. Mistake 3. Violence 4. Intimidation 5. Undue influence Payment of EARNEST MONEY is considered as proof of the perfection of sale. (Art. 1482) o BUT mere payment of earnest money is not sufficient proof of a perfected sale when some essential element (e.g. agreement on terms of payment) is admittedly lacking (Velasco v. CA, 1973) EARNEST MONEY v. OPTION MONEY (Limson v. CA, 2001) given as a distinct part of purchase consideration for an option price contract given only when applies to a sale not yet there is already perfected a sale when given, the would-be- when given, the buyer is not required to buyer is bound buy, but may even forfeit it to pay the depending on the terms of balance the option

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SALES III. TRANSFER OF OWNERSHIP

A perfected contract of sale per se does NOT transfer ownership over the thing sold. For ownership to transfer, there must be: 1. Right to transfer ownership at the time of delivery (Art.1459) a. owner (Art. 428) b. authorized by owner 2. Delivery (Art. 1496) 3. Intention to transfer ownership (Norkis Distributors Inc. v. CA, 1991) 4. If delivery is symbolic, control of the seller over the thing sold that its material delivery could have been made. (Vda. de Sarmiento v. Lesaca, 1960)

CIVIL LAW
BUYER in GOOD FAITH is one who buys property from another - without notice that some other person has a right to or interest in it, AND - who pays a full and fair price therefor at the time of the purchase or before receiving such notice. When the seller voluntarily delivers the thing sold to the buyer but is swindled, - the seller is not unlawfully deprived of the thing under Art. 559; the buyer who practiced fraud acquires a voidable title which, if not avoided at the time of sale, confers a good title on a subsequent buyer in good faith and for value - a good title means an indefeasible title even as against the original owner. (Tagatac v. Jimenez, 1957; Edca v. Santos, 1990)

A. RIGHT TO TRANSFER OWNERSHIP 1. When the seller has NO TITLE Gen. Rule: One cannot give what one does not have (Nemo dat quod non habet) o Art. 559: When the owner has lost or has been unlawfully deprived of a movable, he may recover it even from a buyer in good faith (Aznar v. Yapdiangco, 1965) - limitation: if buyer in good faith acquired it in a public sale, the owner must reimburse the price paid therefor Exceptions: a. Estoppel: when the owner is by his conduct precluded from denying the sellers authority to sell (Art. 1505) b. Sale under court order (Art. 1505) o But in execution sale, the buyer merely steps into the shoes of the judgment debtor (Rule 39, sec. 33, ROC) c. When goods are purchased in a - merchant store, - fair, or - market (Art. 1505) d. Registered land bought in good faith - Gen rule: buyer need not go beyond the Torrens title - Exception: when he has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make further inquiry No factors acts or recording laws (referred to in Art1505(1)) in the Philippines (Baviera) 2. When the seller has a voidable title which has not been avoided at the time of the sale, a buyer in good faith acquires a good title to the goods. (Art.1506)
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B. DELIVERY o Ownership over the thing sold is transferred by DELIVERY or tradition (Aznar v. Yapdiangco, 1965) Sale without delivery gives the buyer no rights over the property except those of a creditor (Kuenzle & Streiff v. Macke & Chandler, 1909) Delivery may be actual or constructive

1. Actual delivery o placing the thing sold in the control and possession of the buyer (Art.1497) 2. Constructive Delivery (Arts. 1498-1501) Kind 1. Symbolic How Made o By execution of public instrumen t evidencin g sale except: if contrary appears or can be clearly inferred o delivery of keys where stored/ke pt By mere agreement of the buyer Applies to real or personal property; incorporeal property

personal property

2. Traditio longa manu

personal property

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Kind How Made and seller if possession cannot be transferred at the time of the sale By mere agreement of the buyer and seller if the buyer already had possession for any other reason Seller remains in possession of the property in a different capacity e.g. as lessee Placing of the titles of ownership in the possession of the buyer or allowing the buyer to use his rights When a non- owner who sells a thing later acquires title thereto delivery to a carrier for transmission to the buyer Applies to -

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reasonable time, if no time has been fixed. (Art.1502 (2)) cf. Sale on return where o ownership passes to the buyer upon delivery o BUT he may revest ownership in the seller by returning the goods within the time fixed or a reasonable time, if no time has been fixed. (Art. 1502 (1))

3. Traditio brevi manu

personal property

4. Traditio constitutum possessorium

real or personal property

5. Quasi- tradition

incorporeal property

D. CONTROL o The efficacy of symbolic delivery can be prevented if the seller does not possess control over the thing sold, in which case this legal fiction must yield to reality. o The key word is control, NOT possession. The presence of lessees or illegal occupants who do not have claims of ownership does not prevent symbolic delivery (Power Commercial and Industrial Corp. v. CA, 1997; Sabio v. The International Corporate Bank, Inc., 2001)

IV. RISK OF LOSS

Transfer of ownership is relevant in determining who bears the risk of loss. real or personal property A. GEN RULE: owner bears the risk of loss (res perit domino:the thing is lost to the owner) B. EXCEPTIONS: (Art.1504) 1. Stipulation to the contrary 2. Security title: goods delivered and ownership retained by the seller merely to secure payment- buyer bears the risk from the time of delivery 3. Delay in actual delivery through the fault of the seller or buyer- party in fault bears the risk

6. Tradition by operation of law (Art.1434) 7. Delivery to a carrier9

goods

C. INTENTION TO TRANSFER OWNERSHIP Ownership is not transferred despite delivery in the following cases: 1. Ownership is reserved, as o In conditional sale o When under the bill of lading, the goods are deliverable to the seller or his agent, or to the order of the seller or his agent (Art.1503(2)) 2. Sale on approval (trial or satisfaction), where ownership transfers only when the buyer o signifies his approval or acceptance to the buyer or does any other act adopting the transaction; OR o retains the goods without giving notice of rejection within the time fixed or a
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V. DOCUMENT OF TITLE
Document of title is a document o used as proof of possession or control of the goods sold, or o authorizing or purporting to authorize the possessor of the document to transfer or receive goods represented by such document (Art.1636(1)) Examples: - bill of lading - quedan - warehouse receipt It may be negotiable (bearer or order) or non- negotiable.
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Discussed in detail under obligation of the seller to deliver. 100% UP LAW UP

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o Words like not negotiable or non- negotiable do not affect negotiability 1. Rights under negotiation title to the goods of the one who negotiated and of the original consignee (Art.1513(1)) direct obligation of the bailee issuing the document to hold possession of the goods for him according to the terms of the document as fully as if such bailee had contracted directly with him (Art.1513(2)) freedom from the defenses of: - breach of duty - loss - theft - accident - mistake - conversion, if the buyer of the document paid value therefor in good faith and without notice (Art.1518)

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Rights under transfer 1. title to the goods as against the transferor, subject to any agreement with the latter 2. right to notify the bailee issuing the document of the transfer thereof, and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him accdg to the terms of the document prior to the notification of the bailee, the title and right of the transferee may be defeated by - levy of attachment of execution upon the goods by the transferors creditor, or - a notification to such bailee by the transferor or a subsequent buyer of a subsequent sale of the goods by the transferor (Art. 1519) 3. If the document is negotiable, right to compel the transferee to indorse it, unless a contrary intention appears o negotiation takes effect from actual indorsement (Art. 1515) o

When document of title is negotiable: o It may be negotiated - if bearer, by delivery - if order, by indorsement indorsement of a non-negotiable document gives the transferee no additional right (Art.1511) o Goods in the possession of the bailee cannot be attached or levied under an execution unless the document - be first surrendered or - its negotiation enjoined o Bailee cannot be compelled to deliver up the actual possession of the goods until the document is - surrendered to him or - impounded by the court (Art.1519) - IMPLIED WARRANTIES of indorser or transferor (unless a contrary intention appears): 1. Genuineness of document 2. Legal right to negotiate or transfer 3. No knowledge of fact which would impair the validity or worth of the document 4. Right to transfer the title to the goods and merchantability or fitness for a particular purpose, whenever such warranties would have been implied had the contract been transfer the goods without a document (Art.1516) o The indorser does NOT warrant the fulfillment by the bailee issuing the document or previous indorsers of their respective obligations (Art.1517)

2.

3.

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SALES VI. RECIPROCAL OBLIGATIONS OF THE SELLER AND THE BUYER

A. OBLIGATIONS OF THE SELLER: (WPD) 1. Preserve (take care of) the thing sold until delivery (Art. 1480 in rel. to Art.1163) 2. Deliver o Thing sold (Art. 1495) o Fruits (Arts. 1164 &1537) o Accessions and accessories (Arts.1166 &1537) If the thing is improved by nature: improvement inures to the benefit of the buyer If the thing is improved at the sellers expense: seller only entitled to the right of a usufructuary- not entitled to indemnity but may remove the improvement if it can be done without damage tot the thing sold. (Art. 1538 in rel. to Arts. 1198 & 579) 3. Warrant the thing sold (Art.1495)

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a. he becomes insolvent UNLESS he gives a guaranty or security for the debt; b. he does not does not furnish the seller the guaranties or securities he promised; c. he impairs the guaranties or securities or they disappear fortuitously UNLESS he immediately gives new ones equally satisfactory; d. he violates any undertaking, in consideration of which the seller agreed to the period; e. he attempts to abscond. (Art.1536 in rel. to Art.1198) o Rules wrt delivery of goods (tangibles) 1. Whether it is for the buyer to take possession of the goods or for the seller to send them depends on the contract between the parties. 2. place of delivery: sellers place of business or residence if no place of business exceptions: a. contract (express or implied) or usage of trade to the contrary b. sale of specific goods which parties knew to be in some other place at the time of sale- that place is the place of delivery 3. Where the seller is bound to send the goods but no time for sending is fixed, he must send them w/in a reasonable time. What constitutes a reasonable time is determined by the circumstances of the particular transaction, such as: - the character of the goods, - the purpose for which they are intended, - the ability of the seller to produce the goods if they are manufactured, - the facilities available for transportation and the distance the goods must be carried, and - the usual course of business in the particular trade (Smith Bell & Co., Ltd. V. Matti, 1922) 4. Where the goods at the time of sale are possessed by a 3rd person, no delivery unless and until such 3rd person acknowledges to the buyer that he holds the goods on the buyers behalf. 5. Demand or tender of delivery must be made at a reasonable hour, otherwise it may be treated as ineffectual. 6. Expenses of and incidental to putting the goods in a deliverable state (state that the buyer would be bound to take delivery) must be borne by the seller, UNLESS otherwise agreed. (Art.1521)
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1. Preservation o Standard of care: diligence of a good father of a family - UNLESS another standard of care required is required by law or stipulation Liability for fortuitous event: 1. By Law a. Guilty of delay b. Promised to deliver the same thing to 2 or more persons who do not have the same interest 2. By Stipulation 3. Nature of obligation requires assumption of risk

2. Delivery o o Recall: kinds of delivery Unless otherwise agreed, when symbolic delivery has been made, the seller is not obliged to remove tenants to place the buyer in actual possession of the property as he has already complied with his obligation to transfer ownership of and deliver the thing sold. (Power Commercial and Industrial Corp. v. CA, 1997; Sabio v. The International Corporate Bank, Inc., 2001) The seller is NOT bound to deliver if: 1. the buyer has not paid him the price or no period for payment has been fixed in the contract (Art.1524); 2. the buyer loses the right to make use of the term, as when:
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7. Where the seller is authorized or required to send the goods, delivery to a carrier for transmission to the buyer is deemed delivery to the buyer Exceptions: a. contrary stipulation b. contrary intent - A specification in the contract relative to the payment of freight may indicate the intention of the parties as to the place of delivery (i.e., the owner pays for the freight); however the terms F.O.B., c.i.f., and F.a.S. merely make rules of presumption which yield to proof of contrary intention. - the best indication of the intention of the parties as to the place of delivery is the manner and place of payment of the price. F.O.B. (free on board) Seller bears the expenses of transportation up to the f.o.b. point c.i.f (cost, insurance, freight) Price quoted includes the costs of the goods, insurance, and freight charges on the goods up to the place of destination F.a.s (free alongside) Seller bears the expenses of transportation until he delivers the goods alongside a vessel at a named port

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with the contract OR may waive performance of the condition. - Example of condition on performance of obligation: obligation of the buyer to pay the balance of the purchase price made subject to the condition that the seller first deliver the reconstituted title of the house and lot (Laforteza v. Machuca, 2000) If seller has promised that the condition should happen or be performed, the buyer may treat the nonperformance of the condition as a breach of warranty. (Art.1545)

c. under bill of lading, goods deliverable to the seller or his agent or to the order of the seller of his agent (seller reserves ownership in the goods) - cf. under bill of lading, goods deliverable to the order of the buyer or his agent, but the seller or his agent retains possession of the BoL- only right of possession reserved (Art.1523 in rel. to Art. 1503) o The expenses for the execution and registration of the sale shall be borne by the seller, unless there is a contrary stipulation. (Art.1487)

3. Warranty o may be express or implied o cf. condition on performance of obligation: - if condition not performed, party whose obligation is subject to the condition may refuse to proceed

Express Warranty (APIR) There is an EXPRESS warranty when: 1. The seller makes an affirmation of fact or any promise relating to the thing sold; 2. The natural tendency of such affirmation or promise is to induce the buyer to buy; AND 3. The buyer buys the thing relying thereon. Affirmation of the value of the thing or statement of the sellers opinion only is NOT a warranty unless: o The seller made it as an expert; AND o It was relied upon by the buyer. (Art.1546) Cf. Dealers talk (usual exaggerations of trade) o Ordinarily, what does not appear on the face of the written instrument should be regarded as dealer's or trader's talk; conversely, what is specifically represented as true in said document cannot be considered as mere dealer's talk. (Moles v. IAC, 1989) o The refusal of the seller to warrant his estimate should have admonished the purchaser that that estimate was put forth as a mere opinion; and we will not now hold the seller to a liability equal to that which would have been created by a warranty, if one had been given. A man who relies upon an affirmation made by a person whose interest might so readily prompt him to exaggerate the value of his property does so at his peril, and must take the consequences of his own imprudence. (Songco v. Sellner, 1917) Examples of express warranty: o certification that the machine sold was in A-1 condition (Moles v. IAC, 1989) o express intimation that all taxes and duties had already been paid (Harrison Motors Corporation v. Navarro, 2000) An express warranty can be made by and also be binding on the seller even in the
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sale of a secondhand article. (Moles v. IAC, 1989) Cf. fraud: in fraud, there must be an intention to deceive or mislead the other party to his prejudice (Philippine Manufacturing Co. v. Go Jucco, 1926) Implied Warranty IMPLIED warranties (unless a contrary intention appears)10: (Art.1547) 1. Implied Warranty of Title 2. Implied Warranty against Encumbrance 3. Implied warranty against Hidden Defects Implied Warranty of Title o Sellers right to sell at the time the ownership is to pass and the buyers peaceful and legal possession of the thing from that time o Does NOT apply to a sheriff, auctioneer, mortgagee, pledge, or other person professing to sell by virtue of authority in fact or law. o Requisites for breach of warranty against eviction: a. Buyer is deprived of the whole or a part of the thing sold; b. Eviction is by final judgment c. Final judgment based on A right prior to the sale OR An act imputable to the vendor d. Seller is summoned and made co- defendant in the suit for eviction at the instance of the buyer. (Arts. 1548, 1558, Power Commercial and Industrial Corp. v. CA, 1997) Implied Warranty against Encumbrance o Requisites for breach: a. thing sold is an immovable b. burden or servitude encumbering the thing sold is non-apparent not mentioned in the agreement of such nature that it must be presumed that the buyer would not have bought it had he been aware thereof not recorded in the Registry of Property UNLESS there is an express warranty that the thing is free from all burdens and encumbrances (Art.1560) Implied warranty against Hidden Defects o Requisites for breach: a. The defect renders the thing sold unfit for the use for which it was intended OR diminishes its fitness for such use to such an extent that had the buyer been aware thereof,
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he would not have bought it or would have paid a lower price; b. The defect is not patent or visible; c. The buyer is not an expert who, by reason of his trade or profession, should have known the defect d. The seller is aware of the hidden fault or defect, OR even he is not aware thereof if there is no stipulation to the contrary (Arts.1561 &1566) Implied warranty as to Merchantable Quality and Fitness of Goods a. Merchantable Quality: 1) Where the goods are brought by description from a seller who deals in goods of that description (Art.1562(2)) 2) In a sale by sample, if the seller is a dealer in goods of that kind and the defect is not apparent on reasonable examination of the sample (Art.1566) b. Fitness for a particular purpose: Where the buyer expressly or impliedly makes known to the seller the particular purpose for which the goods are acquired AND it appears that the buyer relies on the sellers skill or judgment (Art.1562(1)) Implied warranty against Redhibitory Defect in the Sale of Animals Redhibitory defect- a hidden defect of animals of such nature that expert knowledge is not sufficient to discover it, even in case a professional inspection has been made No warranty in case of: a. animals sold at fairs or public auctions b. livestock sold as condemned The following sales are void: a. sale of animals suffering from contagious diseases b. sale of animals unfit for the purpose for which they are acquired as stated in the contract Veterinarian liable if he fails to discover or disclose the hidden defect through ignorance or bad faith Seller liable if animal dies within 3 days after its purchase due to a disease that existed at the time of sale.

OTHER warranties 1. Warranty in sale of CONSUMER GOODS o Consumer goods- goods primarily for personal, family, household or agricultural purposes, which shall include but not
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limited to food, drugs, cosmetics, and devices (Sec.4(q), RA 749311) Kinds of express warranty: 1. Full warranty- if the written warranty meets the minimum standards 2. Limited warranty- if the written warranty does not meet the minimum standards (Sec.6(c), RA7394) Minimum standard for warranties that the warrantor shall: 1. remedy such consumer product within a reasonable time and without charge in case of a defect, malfunction or failure to conform to such written warranty; 2. permit the consumer to elect whether to ask for a refund or replacement without charge of such product or part, as the case may be, where after reasonable number of attempts to remedy the defect or malfunction, the product continues to have the defect or to malfunction BUT the warrantor will not be required to perform the above duties if he can show that the defect, malfunction or failure to conform to a written warranty was caused by damage due to unreasonable use thereof. (Sec.68(d), RA 7394)

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to the seller that he has rejected them. (Art.1585) Rights of the buyer (UNLESS otherwise agreed): 1. Not bound to accept delivery of goods by installments (Art. 1583) 2. Reasonable opportunity to examine the goods upon delivery to ascertain WON they are in conformity with the contract before accepting the same BUT when the seller delivers the goods to a carrier upon the terms that the same shall not be delivered to the buyer until he has paid the price, the buyer has no right to examine the goods before payment unless there is an agreement or usage of trade permitting such examination. (Art.1584) 3. Acceptance of the goods shall not discharge the seller from liability for breach of any promise or warranty BUT the buyer must give the seller notice of the breach of promise or warranty within a reasonable time after the buyer knows or ought to know of such breach, otherwise the seller shall not be liable therefor. (Art.1586) o The buyer must notify the seller of the breach of warranty at any time BEFORE the latter has filed the suit for the collection of the unpaid price since the purpose of the rule requiring notice is to prevent the buyer from interposing belated claims for damages as an offset to a suit begun by the seller for the purchase price (de Guzman v. Triangle Ace Corp., 2001) 4. Reject delivery of a wrong quantity of goods or of goods of a different description not included in the contract which are mixed with the goods sold. (Art.1522) 5. If he refuses to accept the goods, having the right to do so, he is not bound to return them to the seller; it being sufficient that he notifies the seller of his refusal to accept. If he voluntarily constitutes himself a depositary of the goods, he shall be liable as such. (Art.1587) Effect of refusal to accept goods without just cause: title to the goods passes to the buyer from the moment they are placed at his disposal, except if ownership has been reserved by the seller (Art.1588)

2. Warranty in sale of SUBDIVISION LOT or CONDOMINIUM UNIT o The owner or developer shall be answerable and liable for the facilities, improvements, infrastructures or other forms of development represented or promised in brochures, advertisements and other sales propaganda disseminated by the owner or developer or his agents and the same shall form part of the sales warranties enforceable against said owner or developer, jointly and severally. (Sec.19, PD 95712) B. OBLIGATIONS OF THE BUYER 1. Accept delivery of the thing sold 2. Pay the price of the thing sold (Art.1582)

1. Acceptance o Modes of accepting goods: (AIR) 1. Buyer intimates to the seller that he has accepted the goods. 2. Goods delivered to the buyer and he does any act in relation to them which is inconsistent with the ownership of the seller. 3. After the lapse of a reasonable time, the buyer retains the goods without intimating

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2. Payment o 3 cases where the buyer is liable for interest for the period between delivery and payment: (STD) 1. It is stipulated; 2. Thing sold produces fruits or income;

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3. Buyer is in default (interest accrues from the time of judicial or extrajudicial demand for the payment of the price) Rights of the buyer: 1. Suspend payment When: a) he is disturbed in the possession or ownership of the thing acquired or has reasonable grounds to fear such disturbance, b) by a vindicatory action or a foreclosure of mortgage Until when: until the seller has caused the disturbance or danger to cease Exceptions: b) When the seller gives security for the return of the price in a proper case c) When it has been stipulated that, notwithstanding any such contingency, the buyer shall be bound to pay A mere act of trespass shall not authorize the suspension of the payment. (Art.1590) 2. In the sale of immovable property, to pay even after the expiration of the period agreed upon, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act, even though it may have been stipulated that rescission shall of right take place upon failure to pay the price at the time agreed upon. (Art.1592)

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B. PARTICULAR REMEDIES OF THE BUYER 1. Breach of Obligation to Preserve Loss (Arts.1538 & 1189) Without fault of seller Through fault of seller OR through fortuitous event if seller liable even for fortuitous events o No breach (obligation extinguished) Damages

A thing is lost when it: 1. perishes; 2. goes out of commerce; or 3. disappears in such a way that its existence is unknown or it cannot be recovered

Deterioration (Arts.1538 & 1189) Without fault of seller Through the fault of seller No breach (impairment borne by buyer) 1. Rescission + damages OR 2. SP + damages

2. Breach of Obligation to Deliver Delivery of wrong quantity

VII. REMEDIES IN CASE OF BREACH13

A. GENERAL REMEDIES (Art.1191) 1. Specific performance 2. Rescission 3. Damages The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement (Song Fo & Co. v. Hawaiian-Philippine Co., 1925) In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. (Art.1169 last par.) Prescriptive periods: - 10 years if based on written contract - 6 years if based on oral contract
Includes both extrajudicial and judicial remedies. UP

Goods (Art.1522) Less 1. Reject OR 2. Accept and pay - at contract rate: if he accepts knowing that the seller is not going to perform in full; or - fair value: if he used the goods delivered before knowing that the seller is not going to perform in full More 1. Reject the excess or the whole if indivisible OR 2. Accept the whole and pay at contract rate o In the sale of an undivided share of a specific mass of fungible goods, if the mass contains less than the number, weight, or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, UNLESS a contrary intent appears. (Art.1464)

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Real estate (Arts.1539-1543) per unit of less (in 1. measure area or proportional quality) reduction of price OR 2. rescission, if - lack in area or inferior quality at least 1/10 of area stated or price; OR - the buyer would not have bought had he known of smaller area or inferior quality prescriptive pd: 6 mos. from delivery 1. Reject the excess OR 2. Accept the whole and pay at contract rate.

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Real estate (Arts.1539-1543) prescriptive pd: 6 mos. from delivery 3. Breach of Warranty Express Warranty o Prescriptive period: 1. Period specified in the express warranty; OR 2. If no period specified, 4 years, following the general rule on rescission of contract (Engineering & Machinery Corp. v. CA, 1996) o Remedies in case of sale of goods: 1. Accept goods + demand diminution or extinction of price 2. Accept goods + action for damages 3. Refuse to accept goods + action for damages 4. Rescind (refuse to accept OR return or offer to return) + recover price paid Rescission NOT available IF buyer: - knew of the breach of warranty when he accepted the goods without protest; - fails to notify seller of the election to rescind w/in a reasonable time; - fails to return or to offer to return the goods to the seller in substantially as good condition as they were in when delivered, unless the deterioration is due to the breach of warranty Measure of damages in case of breach of warranty of quality (in the absence of special circumstances showing proximate damage of a greater amt): difference between the value of goods at the time of delivery and the value they would have had if they had answered to the warranty. Effects of rescission: 1. Buyer no longer liable for price and entitled to return of any part thereof paid, concurrently with or immediately after an offer to return the goods. 2. If seller refuses to accept offer to return goods, buyer deemed bailee for the seller and has right of lien to secure payment of any part of price paid. Implied Warranty Against Eviction (Arts.1555&1556) Total eviction Enforce liability for eviction (demand VICED from seller) o Value of thing sold at the time of eviction o Income or fruits, IF he has been ordered to deliver them to the party who won the eviction suit
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Lump sum/ sale of 2 or more immovables for a single price

Everything No remedy w/in o Where boundaries, both the even if less area and or more the than stated boundaries area of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. (Rudolf Lietz, Inc. v. CA, 2005) NOT 1. everything proportional w/in reduction in boundaries price OR 2. rescission

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o Costs of - eviction suit and - in a proper case, suit against seller for the warranty Expenses of the contract, IF the buyer has paid them Damages and interests, and ornamental expenses, IF the sale was made in BF Enforce liability for eviction (VICED) OR Rescind, IF he would not have bought the thing sold without the part lost (but he must return the thing without other encumbrances than those which it had when he acquired it)

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proportionate reduction of the price (accion quanti minoris)+damages Thing Due to o If seller aware of lost hidden defect- may demand: fault - return of price - refund of expenses of contract - damages o If seller not aware of defect- may demand price and expenses but not damages Due to Demand: fortuitous o Price paid minus event or value of thing when to fault of it was lost buyer o Damages IF the seller acted in BF o Prescriptive period: 6 mos. from delivery Implied Warranty Against Redhibitory Defect of Animals 1. Withdraw from contract (accion redhibitoria) + damages; OR 2. Demand a proportionate reduction of the price (accion quanti minoris)+damages o If sale rescinded, buyer must return animal in the condition in which it was sold and delivered (liable for injury due to his negligence and not arising from the redhibitory fault or defect) o Prescriptive period: 40 days from delivery Warranty in Sale of Consumer Goods (Sec. 68 (e)(f), RA 7394) Express warranty 1. Demand repair w/in 30 days (extendible for causes beyond the control of the warrantor; OR 2. Demand refund of price minus amount directly attributable to the use of the consumer prior to the discovery of the non- conformity Implied 1. Retain the goods and warranty recover damages; OR 2. Reject the goods, cancel contract and recover from the seller so much of the purchase price as has been paid, including damages. o Duration of warranty if implied warranty accompanies express warranty: - If the implied warranty on merchantability accompanies an express warranty, both will be of equal duration. - Any other implied warranty shall endure not less than sixty (60)
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o RULES: (Arts.1549-1554) 1. Buyer need not appeal from the decision to hold seller liable for eviction. 2. When adverse possession commenced before sale but prescriptive pd. completed after transfer- seller not liable 3. If property sold for nonpayment of taxes due and not made known to the buyer before sale- seller liable 4. Judgment debtor also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment 5. If there is waiver of warranty: a. if seller acted in BF- seller liable for eviction (waiver void) b. if buyer made waiver without knowledge of the risks of eviction- seller liable only for the value of the thing sold at the time of eviction c. if buyer made waiver with knowledge of the risks of eviction and assumed its consequences- seller not liabl Implied Warranty Against Encumbrances (Art.1560) 1. Rescission- w/in 1 yr. from execution of deed of sale; OR 2. Damages- w/in 1 yr from execution of deed of sale or from discovery of burden or servitude Implied Warranty Against Hidden Defects (Arts.1567-1571) Thing not lost 1. Withdraw from contract (accion redhibitoria) + damages; OR 2. Demand a
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days nor more than one (1) year following the sale of new consumer products. C. PARTICULAR REMEDIES OF THE SELLER NON-ACCEPTANCE OF GOODS 1. Action for damages for nonacceptance, where the buyer wrongfully neglects or refuses to accept and pay for the goods (Art.1596) Measure of damages: - estimated loss directly and naturally resulting in the ordinary course of events from the buyers breach - where there is an available market for the goods (in the absence of special circumstances): difference between the contract price and the market price at the time the goods ought to have been accepted or if no time fixed, at the time of refusal to accept - labor performed and expenses made by the seller before receiving notice of the buyers repudiation or countermand - profit the seller would have made if sale had been fully performed 2. Rescission by giving notice of election to rescind to the buyer (Arts.1597&1593) NONPAYMENT In sale of movables: 1. Self-help remedies of unpaid seller of goods 2. Action for the price of goods 3. Alternative remedies under the Recto Law (Arts. 1484 & 1485) Self-help remedies of an unpaid seller of goods (Arts.1525-1535) o unpaid seller when: 1. the whole of the price has not been paid or tendered 2. a bill of exchange or other negotiable instrument received as conditional payment has been dishonored seller includes: - sellers agent to whom the BOE has been endorsed - a consignor or agent who has himself paid, or is directly responsible for the price - any other person who is in the position of a seller o Self-help remedies: 1. Lien- right to retain the goods while he is in possession of them 2. Stoppage in transitu- right to resume possession of the goods at
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any time while they are in transit as if he never parted with the possession 3. Resale 4. Rescission rescind transfer of title and resume ownership in the goods Right of LIEN o Available when: 1. Goods sold w/o any stipulation as to credit; 2. Goods sold on credit, but the term of credit has expired; or 3. Buyer becomes insolvent14 o Lost when: 1. Seller delivers goods to carrier or other bailee for transmission to the buyer w/o reserving ownership or right to possession; 2. Buyer or his agent lawfully obtains possession of the goods 3. Seller waives it o NOT lost by reason only that the buyer has obtained judgment for the price of the goods o In case of part delivery: may exercise right of lien as to remainder UNLESS part delivery made with intent to waive the lien o NOT affected by any sale or other disposition of goods which the buyer may have made UNLESS the seller has consented thereto BUT if negotiable doc of title has been issued, right of a holder in due course NOT defeated, whether the negotiation be prior or subsequent to the notification of the carrier or other bailee of the sellers claim to a lien. Right of STOPPAGE IN TRANSITU o Available when the buyer of the goods is or becomes insolvent o Goods are in transit: 1. From the time they are delivered to a carrier or other bailee for transmission to the buyer until buyer or his agent takes delivery; 2. If buyer rejects the goods and the carrier or bailee continues in possession, even if the seller has refused to receive them back o Goods no longer in transit if: 1. Buyer or his agent obtains delivery of the goods before their arrival at the appointed destination; 2. After the arrival of the goods at the appointed destination, carrier or bailee acknowledges to the buyer or his
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Insolvency under Title on Sales refers to insolvency in fact- when a person has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due, WON insolvency proceedings have been commenced (Art.1636(2))

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agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or his agent (immaterial if buyer indicates further destination for the goods; 3. The carrier or baileewrongfully refuses to deliver the goods to the buyer or his agent Exercised by: 1. Obtaining actual possession of the goods; OR 2. Notifying carrier or bailee of his claim If carrier or bailee has issued a negotiable document of title, it must first be surrendered for cancellation before the goods are redelivered to the seller In case of part delivery: may exercise right of stoppage in transitu as to remainder UNLESS circumstances of part delivery show an agreement with the buyer to give up possession of the whole of the goods. NOT affected by any sale or other disposition of goods which the buyer may have made UNLESS the seller has consented thereto BUT if negotiable doc of title has been issued, right of a holder in due course NOT defeated, whether the negotiation be prior or subsequent to the notification of the carrier or other bailee of the sellers claim to a right of stoppage in transitu

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2. The seller may recover damages from the original buyer for any loss occasioned by the breach of the contract of sale. 3. The buyer in the resale acquires a good title as against the original buyer. Right to RESCIND o Available to unpaid seller who: 1. has a right of lien; OR 2. has stopped the goods in transitu o Available when: 1. Seller expressly reserved the right to rescind in case the buyer defaults; or 2. Buyer defaults in payment for an unreasonable time. o Rescission made by manifesting an intention to rescind by: 1. notice to the buyer; OR 2. some other overt act which need not be communicated to the buyer o BUT giving or failure to give notice of intention to rescind is relevant in determining WON the buyer had been in default for an unreasonable time before the rescission. Action for the price of goods o Available when: 1. Ownership has passed to buyer and buyer wrongfully neglects or refuses to pay; 2. Price payable on a certain day irrespective of delivery and buyer wrongfully neglects or refuses to pay; or 3. Buyer notifies seller of his repudiation of the contract after the seller has completed the manufacture of the goods or had procured the goods to be delivered, and the goods cannot readily be resold for a reasonable price. (Art.1595) Under the Recto Law (Arts.1484 & 1485) o Applies in cases of: 1. sale of movables in installment 2. lease of personal property - with option to buy - when the lessor has deprived the lessee of the possession or enjoyment of the thing When the seller assigns his credit to another person, the assignee is likewise bound by the same law. (Borbon II v. Servicewide Specialists, Inc., 1996) Stipulation that the installments or rents paid shall not be returned to the buyer or lessee VALID insofar as the same may not be unconscionable (Art. 1486)

Right of RESALE o Available to unpaid seller who: 1. has a right of lien; OR 2. has stopped the goods in transitu o Available when: 1. Goods are of a perishable nature; 2. Seller expressly reserves the right of resale in case the buyer defaults; or 3. Buyer defaults in payment for an unreasonable time o For the resale to be valid, the seller need NOT notify the original buyer of: 1. the intention to resell 2. the time and place of the resale o BUT giving or failure to give notice of intention to resell is relevant in determining WON the buyer had been in default for an unreasonable time before the resale was made. o The seller must exercise reasonable care and judgment in making a resale o The resale may be by public or private sale. o The seller CANNOT buy the goods, directly or indirectly. o Effects of resale: 1. The seller is NOT liable anymore to the original buyer: - upon the contract of sale; OR - for any profit made by the resale

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Sale of movables in installment The Recto law does NOT apply to a straight term sale in which the balance, after payment of the initial sum, should be paid in full at the time specified, because the law attempts to protect improvident buyers from the great temptation of buying beyond their means. In a straight term sale, the partial payments are not so small as to place buyers off their guard and delude them to a miscalculation of their ability to pay. (Levy Hermanos, Inc. v. Gervacio, 1939) Lease of personal property with option to buy The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 is fulfilled when the lessor files a complaint for replevin to recover possession of the movable property. By virtue of the writ of seizure, the lessee is deprived of the use of the property. (Elisco Tool Manufacturing Corp., v. CA, 1999) The Recto law does not apply to a financial leasing agreement which, by definition under RA 855615, does not give the lessee an option to buy. (Sing, Jr. v. FEB Leasing and Finance Corp., 2007) BUT when a contract purporting to be a financial leasing agreement is in reality a contract of lease with option to buy, the Recto law applies. When the lessor, in its demand letter, gives the defaulting lessee the option of either returning the movable property or keeping it by paying the outstanding balance, the lessee is in effect given an option to buy, even if the lease agreement does not contain a purchase option clause.(PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc., 2007) The Recto law does not apply to a creditor-mortgagee in a loan secured by a chattel mortgage on the property purchased with the proceeds of the loan, absent proof that: - the agreement was in fact a consumer loan agreement (i.e., the mortgagee in fact bought the property from the original seller and in turn, sold it to the mortgagor) (Superlines Transportation Company, Inc. v. Lavides, 2003); or - the seller assigned to the creditor the right to collect the balance of the purchase price from the buyer. (Rosario v. PCI Leasing and Finance, Inc., 2005) o Alternative remedies under the Recto law: 1. Specific performance
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2. Cancellation of sale, IF the buyer fails to pay 2 or more installments 3. Foreclosure of chattel mortgage on the thing sold, if one has been constituted, IF the buyer fails to pay 2 or more installments. o Nature of the remedies: ALTERNATIVE, NOT CUMULATIVE- the exercise of one bars the exercise of the others (Cruz v. Filipinas Investment & Finance Corp., 1968)16

SPECIFIC PERFORMANCE o When the seller-mortgagee first seeks to enforce additional mortgages, guarantees or other security arrangements, he loses his lien on the chattel mortgage of the personal property he sold, although he may still levy on it. (Borbon II v. Servicewide Specialists, Inc., 1996) When there is a chattel mortgage on the thing sold but the seller elects to sue on a promissory note to exact fulfillment of the obligation to pay, the seller is not limited to the proceeds, on execution, of the mortgaged property, as there is no foreclosure of chattel mortgage nor a foreclosure sale of the thing sold in such a case. Hence, other properties of the buyer may be levied upon in case of deficiency. (Tajanlangit v. Southern Motors, Inc., 1957)

CANCELLATION OF SALE o o Available when the buyer fails to pay 2 or more installments When the seller cancels the sale by repossessing the property sold, it is barred from exacting payment of the balance of the price thereof. (Nonato v. IAC, 1985)

FORECLOSURE OF CHATTEL MORTGAGE o o Available when the buyer fails to pay 2 or more installments Foreclosure may be judicial or extrajudicial- that is, by ordinary action or by foreclosure under power of sale contained in the mortgage. (Magna Financial Services Group, Inc. v. Colarina, 2005) Effect of foreclosure: seller shall have no further action to recover any unpaid balance of the price; any contrary agreement VOID. Purpose of the law is to remedy the abuses committed in foreclosure of

Financing Company Act of 1998

QUOTABLE QUOTE: SC always says, It cannot have its cake and eat it too.

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chattel mortgages. It prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. (Bachrach Motor Co., Inc. v. Millan, 1935) It is the fact of foreclosure and actual sale of the mortgaged chattel that would bar the seller from recovering any unpaid balance; hence, after filing an action for replevin but before the foreclosure sale, the seller may accept payments voluntarily tendered by the buyer who admits a subsisting indebtedness. (Northern Motors, Inc. v. Sapinoso, 1970) The further action referred to may be judicial or extrajudicial; hence, it includes extrajudicial foreclosure of a real estate mortgage given as additional security. (Cruz v. Filipinas Investment & Finance Corp., 1968) After foreclosure of the chattel mortgage, the seller cannot proceed against additional security put up by the buyer himself (Ridad v. Filipinas Investment and Finance Corp., 1983) or even by a third person, because the buyer would still be the one ultimately burdened- the guarantor can recover from him what it had paid. (Cruz v. Filipinas Investment & Finance Corp., 1968) Where the buyer-mortgagor unjustifiably refused to surrender the chattel subject of the mortgage upon failure of 2 or more installments, or if he concealed the chattel to place it beyond the reach of the seller- mortgagee, that thereby constrained the latter to seek court relief, the expenses incurred for the prosecution of the case, such as attorneys fees, could rightly be awarded (Borbon II v. Servicewide Specialists, Inc., 1996) In sale of immovables 1. Rescission for anticipatory breach (Art.1591) 2. Specific Performance + damages under Art.1191 3. Rescission + damages under Art.1191 Subject to the provisions of: - Art.1592 in case of an absolute sale (Odyssey Park, Inc. v. CA, 1997); OR - RA 655217 in case of a sale in installment
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Rescission for anticipatory breach o Available when the seller has reasonable grounds to fear the loss of immovable property sold and its price Rescission o Available even after the seller has chosen specific performance IF the latter becomes impossible o Instead of decreeing rescission, the court may authorize the fixing of a period for a just cause. o In case of an absolute sale, the seller must make a demand for rescission either - judicially OR - by a notarial act (Art. 1592) A judicial or notarial act is necessary before a valid rescission can take place, whether or not automatic rescission has been stipulated. (Iringan v. CA, 2001) Effect of lack of demand: buyer can still pay Effect of demand: the court may not grant the buyer a new term The ff. have been considered by the SC as constituting a judicial demand for rescission: 1. Cross-claim (Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 1972); 2. Action for Judicial Confirmation of Rescission and Damages (Iringan v. CA, 2001) 3. Defense in the sellers Answer to the buyers Action for Specific Performance (Ramel v. Aquino, 2006) o In installment sale of realty, RA 6552 imposes additional requirements for a valid rescission RA 6552 does not apply to: 1. industrial lots 2. commercial buildings 3. sale to tenants under RA 384418 Requirements for a valid rescission if buyer has paid at least 2 years of installments: (Sec.3) 1. Grace period- 1 mo/1 yr of installment payments made; BUT buyer may avail of it only once in every 5 yrs. 2. Refund of cash surrender value (CSV): 50% of total amt paid + 5% for every yr after the first 5 years of installments, BUT not > 90% of total amt paid 3. Notice of cancellation or demand for rescission by notarial act, effective 30 days from the buyers receipt thereof and upon full payment of the CSV

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Requirements for a valid rescission if buyer has paid less than 2 yrs of installments: (Sec.4) 1. Grace period of at least 60 days 2. Notice of cancellation or demand for rescission by notarial act, effective 30 days from the buyers receipt thereof Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made. (Sec.3) The seller can go to court to demand judicial rescission in lieu of a notarial act of rescission. (Olympia Housing, Inc. v. Panasiatic Travel Corp, 2003) The requirement of a notarial act of rescission is dispensed with when the seller files an action for annulment of contract, which is a kindred concept of rescission (Layug v. IAC, 1988); but NOT when he files - an action for reconveyance (Ramos v. Heruela, 2005; Olympia Housing, Inc. v. Panasiatic Travel Corp., 2003); OR - an action for unlawful detainer (Pagtalunan v. Vda. De Manzano, 2007) Automatic cancellation clause is void under Section 7 of R.A. 6552 (Fabrigas v. San Francisco Del Monte, Inc., 2005)

CIVIL LAW
bought the real property, there was still no sale to a second vendee.(Consolidated Rural Bank (Cagayan Valley), Inc. v. CA, 2005) Art. 1544 does NOT apply to the sale of unregistered land at an execution sale because a buyer of unregistered land at a execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter's interest in the property sold as of the time the property was levied upon. (Carumba v. CA, 1970)

B. RULES OF PRIORITY UNDER ART.1544 IN CASE OF MOVABLES: - Possession in good faith IN CASE OF IMMOVABLES: 1. Registration in good faith 2. If no prescription, possession in good faith 3. If no registration or possession, oldest title acquired in good faith. o Good faith- lack of knowledge of any defect in the title over the property sold (Vda de Melencion v. CA, 2007) Knowledge gained by the first buyer of the second sale cannot defeat the first buyers rights except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. (Uraca v. CA, 1997) Registration- any entry made in the books of the registry, including both registration in its ordinary and strict sense and cancellation, annotation, and even marginal notes. (Cheng v. Genato, 1998) If the land is registered under the Land Registration Act (and therefore has a Torrens Title), and it is sold and the sale is registered not under the Land Registration Act but under Act 3344, as amended, such sale is not considered registered under Art. 1544 of the Civil Code; neither does such registration operate as constructive notice to the second buyer.(Vda de Melencion v. CA, 2007) Possession includes not only material(actual) possession, but also symbolic possession, which is acquired by
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VIII. DOUBLE SALE

(Art.1544) A. REQUISITES: (Cheng v. Genato, 1998) 1. 2 or more valid sales; 2. same subject matter; 3. 2 or more buyers with conflicting interests at odds over the rightful ownership of the thing sold; 4. same seller O No double sale when one of the two contracts is a mere contract to sell. (San Lorenzo Development Corp. v. CA, 2005; Coronel v. CA, 1996) O No double sale where there is only one valid sale, the other sale being forged. (Fudot v. Cattleya Land, Inc., 2007) O No double sale when the two different contracts of sale are made by two different persons, one of them not being the owner of the property sold.(Salera v. Rodaje, 2007) O When not all requisites for the application of Art. 1544 are present, the principle of prior tempore, potior jure (he who is first in time is preferred in right) should apply. The only essential requisite of this rule is priority in time; in other words, the only one who can invoke this is the first vendee. Undisputedly, he is a purchaser in good faith because at the time he
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the execution of a public instrument (Sanchez v. Ramos, 1919) o Older title- any document showing acquisition of the land in good faith, like a receipt for the price. (Baviera) o

CIVIL LAW
Enforceable against: 1. Buyer (or his agent/heirs/assigns) If the land is registered, the right to redeem must be annotated in the title in order to prejudice a subsequent buyer from the buyer a retro. A buyer of a part of an undivided immovable who acquires the whole thereof may compel the seller to redeem the whole property. If the buyer leaves several heirs, action to redeem may be brought against each heir only for his own share, WON the thing has been partitioned, UNLESS in the partition, one heir was awarded with the thing sold, in which case he may be sued for redemption of the whole thing Redemption exercised by: 1. Returning the ff. to the buyer: (PEN) a. Price of the sale; b. Expenses of the contract and other legitimate payments made by reason of the sale; c. Necessary and useful expenses made on the thing sold 2. Complying with any other stipulation agreed upon, if any. The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment for the full amount of the repurchase price. (BPI Family Savings Bank, Inc. v. Veloso, 2004) Tender of payment is enough (i.e., consignation is not necessary), if made on time, as a basis for action against the buyer to compel him to resell. But that tender does not in itself relieve the buyer from his obligation to pay the price when redemption is allowed by the court. (Paez v. Magno, 1949) Effects of redemption: 1. The seller shall receive the thing free from all charges or mortgages constituted by the buyer BUT he shall respect leases executed by the buyer in good faith and in accordance with local custom. 2. If there are growing fruits at the time of sale and at the time of redemption: no reimbursement or prorating if the buyer did not pay indemnity at the time of sale 3. If there were no growing fruits at the time of sale, but some exist at the time of redemption: fruits prorated (buyer entitled to part corresponding to time he possessed the land in the last year, counted from the anniversary of the date of sale) Effect of non-redemption: Ownership consolidated in the buyer BUT the
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IX. EXTINGUISHMENT OF SALE

A. CAUSES: (Arts.1600 &1231) (P-PLAN-CCC-RRR) 1. Payment/performance 2. Presription 3. Loss of thing due 4. Annulment 5. Novation 6. Condonation/remission 7. Confusion/merger 8. Compensation 9. Rescission 10. Resolutory condition fulfilled 11. Redemption a. Legal b. Conventional B. CONVENTIONAL REDEMPTION (Arts.1601-1618) o Available when the seller reserves the right to repurchase the thing sold in the same instrument of sale as one of the stipulations of the contract (Villarica v CA, 1968) An agreement to repurchase becomes a promise to sell when made after the sale, because when the sale is made without such an agreement, the purchaser acquires the thing sold absolutely, and if he afterwards grants the vendor the right to repurchase, it is a new contract entered into by the purchaser, as absolute owner already of the object. (Ramos v. Icasiano, 1927) o Period for redemption: - pd. stipulated, but NOT > 10 yrs; OR - 4 yrs from date of contract, if no pd. stipulated o Available to: 1. Seller (or his agent/heirs/assigns) 2. Creditors of seller, AFTER they have exhausted the sellers property If co-owners, jointly and in the same contract, sell an undivided immovable, each may redeem only his respective share If a sole owner sells an immovable and leaves several heirs, each heir may redeem only his share. In these 2 cases, the buyer a retro may demand all the sellers a retro or heirs to buy redeem the whole thing and he cannot be compelled to agree to a partial redemption.
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consolidation shall not be recorded in the Registry of property w/o a judicial order, after the vendor has been duly heard. If the court declares the contract as an equitable mortgage, the right of action to foreclose the mortgage or to collect the indebtedness arises from the judgment, even if it is not alternatively prayed for. (Heirs of Arches v. Diaz, 1973) CONTRACT OF SALE (with right to repurchase or absolute) vis--vis EQUITABLE MORTGAGE o An equitable mortgage is defined as one which, although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. (Molina v. CA, 2003) o Contract of sale (whether with right of purchase or purported as absolute) is presumed to be an equitable mortgage in ANY of the ff. cases: (5P-R) 1. Price unusually inadequate; 2. Possession retained by the seller as lessee or otherwise; 3. Period of redemption extended (or granted anew) upon or after the expiration of the right to repurchase; 4. Part of the purchase price retained by the seller; 5. Payment of taxes on the thing sold borne by the seller; 6. Any other case where it may be fairly inferred that the real intention of the parties is for the transaction to secure a debt or other obligation. o For the presumption of an equitable mortgage to arise under Art. 1602, two (2) requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale, and (b) that their intention was to secure an existing debt by way of a mortgage. (Molina v. CA, 2003) o In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. o Remedy of apparent vendor if equitable mortgage is the real intention: REFORMATION If decreed to be an equitable mortgage- any money, fruits or other benefit to be received by the buyer as rent or otherwise considered as interest. If decreed as a true sale with right to purchase- seller may redeem w/in 30 days from finality of judgment, even if the period for redemption has expired. C. LEGAL REDEMPTION (Arts. 1619-1623) o Legal redemption
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- - - the right to be subrogated, upon the same terms and conditions, in the place of one who acquires a thing by onerous title (such as sale or dation)

Instances of legal redemption and periods for their exercise Period 30 days from notice - in writing - by the seller - of the actual execution and delivery of the deed of sale *Actual knowledge of the sale immaterial (Doromal v CA, 1975) 30 days from the date the assignee demands payment from debtor 5 yrs. from date of conveyance

To whom granted Co-owner (Art.1620, CC) Adjoining owner of rural land (Art.1621,CC) Adjoining owner of urban land (Art.1622,CC)

Debtor in case a credit or incorporeal right in litigation is sold (Art.1634) Applicant or his widow or legal heirs in case of sale of homestead (Sec.119, Public Land Act) Taxpayer in case of tax sale (Sec. 215, NIRC) Judgment debtor, successorin- interest, or creditor with subsequent lien, in case of execution sale (Rule 39, Sec.27, ROC) Debtor-mortgagor, successors-in- interest, judicial/judgment creditor, any person having a lien on the property, in case of extrajudicial foreclosure of mortgage (Act No. 3135. Sec. 6. ) debtor-mortgagor in case of judicial foreclosure of real estate mortgage IF the mortgagee is a
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1 year from date of forfeiture

1 year from the date of registration of the certificate of sale

1 year from the date of the sale

90 days from finality of judgment

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To whom granted bank or a banking institution. (The General Banking Law of 2000) Agricultural lessee w/o knowledge of sale of landholding (Agrarian Land Reform Code, Sec.12) o Period o

CIVIL LAW
NOT available when the assignment in favor of: 1. co-heir/co-owner of right assigned 2. creditor in payment of his credit 3. possessor of a tenement or piece of land which is subject to the right assigned How exercised: reimburse the assignee for the: - Price paid - Judicial expenses incurred - Interest on the price from date of payment

2 years from the registration of the sale

How exercised: by either a formal offer to redeem or the filing of an action in court together with the consignation of the redemption price within the reglementary period. (Lee Chuy Realty Corp., v. CA, 1995)

X. ASSIGNMENT
o Assignment: a sale of credits and other incorporeal rights Requirement to bind third persons: - if involving credit, right, or action: must appear in public instrument; - if involving right over real property: must be recorded in Registry of property Debtor who pays his creditor before having knowledge of the assignment is released from the obligation. Assignment of credit includes all accessory rights, such as: - Guaranty; - Mortgages; - Pledge - Preference Warranties in assignment of credit: 1. Seller warrants existence and legality of the credit at the time of the sale, UNLESS it should have been sold as doubtful; 2. Seller does NOT warrant solvency of the debtor, UNLESS: - expressly stipulated or - the insolvency was prior to the sale AND of common knowledge If seller warrants debtors solvency but duration of liability not stipulated: duration is 1 year from - time of assignment, if the period for payment had already expired, or - maturity, if period has not yet expired Liability of assignor of credit in case of breach of warranty: - if in GF: price received + expenses of contract - if in BF: price received + all expenses + damages Other warranties:

Redemption by co-owner o Available when the shares of any or all of the other co-owners are sold to a 3rd person (anyone not a co-owner) o If price grossly excessive, the redemptioner shall pay only a reasonable one. o If 2 or more co-owners want to redeem: they may do so in proportion to their respective shares o The right of redemption of co-owners excludes that of adjoining owners. Redemption by adjoining owner of rural land o Available when the area of rural land is 1 hectare or less, unless the grantee does not own any rural land. o NOT available when the adjoining lands are separated by brooks, drains, ravines, roads, and other permanent servitudes for the benefit of other estates o Priority if 2 or more adjoining owners want to redeem: 1. owner of smaller adjoining land;or 2. if with same area, owner who first requested redemption Redemption by adjoining owner of urban land o Granted in addition to right of pre-emption o Available when the urban land: 1. is so small and so situated that a major portion of it cannot be used for any practical purpose w/in a reasonable time; 2. was bought merely for speculation; and 3. was resold. o Priority if 2 or more adjoining owners want to redeem: owner whose intended use of the land appears to be best justified Redemption of credit or incorporeal right o Available when it is sold while in litigation (from the time the complaint is answered)

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1. If inheritance sold w/o enumerating the things composing it, seller only warrants his character as an heir 2. If certain rights, rents, or products sold for lump sum, seller warrants only the legitimacy of the whole in general and not each part composing it, EXCEPT in case of eviction from the whole or the part of greater value

CIVIL LAW
PURPOSE OF THE LAW: to regulate the sale of subdivision lots and condominiums and impose penalties on fraudulent practices and manipulations committed in connection therewith (Whereas clause) SCOPE OF APPLICATION: Sale of subdivision lot (inc. the building or other improvements) or condominium unit, which includes: - a contract to sell, - a contract of purchase and sale, - an exchange, - an attempt to sell, - an option of sale or purchase, - a solicitation of a sale, or - an offer to sell, directly or by an agent, or by a circular, letter, advertisement or otherwise. REGULATION BY THE NATIONAL HOUSING AUTHORITY 1. Approval of plan for subdivision or condominium project and registration of approved plan. (Sec.4) 2. License to sell (subdivision lots or condominium units) and performance bond, except in the ff. cases: a. Sale of a subdivision lot resulting from the partition of land among co-owners and co-heirs. b. Sale or transfer of a subdivision lot by the original buyer thereof and any subsequent sale of the same lot. c. Sale of a subdivision lot or a condominium unit by or for the account of a mortgagee - in the ordinary course of business - when necessary to liquidate a bona fide debt. (Secs.4-7) 4. Power to suspend license to sell (Sec.8) 5. Power to revoke registration certificate and license to sell after notice and hearing (Sec.9) 6. Registers of subdivision lots and condominium units where all NHA orders affecting the condition or status thereof shall be entered (Sec.10) 7. Registration of dealers, brokers, and salesmen (Sec.11) 8. Revocation of registration of dealers, brokers, and salesmen after notice and hearing (sec12) 9. Prior written approval for any mortgage on the unit or lot to be made by the owner or developer (sec.18) 10. Permission for alteration of approved subdivision plan (Sec.22) 11. Visitorial powers (Sec34) 12. Take-over development at the expenses of the owner or developer, jointly and severally, in cases where the owner or developer has refused or failed to develop or complete the development of the project as provided for in this Decree. o NHA may, after such take-over, demand, collect and receive from the buyers the installment payments due
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XI. SOME SPECIAL LAWS

A. RA 6552 TITLE: Realty Installment Buyer Act PURPOSE OF THE LAW: to protect buyers of real estate on installment payments against onerous and oppressive conditions (Sec.2) SCOPE OF APPLICATION: (Sec.3) o Applies to: sale or financing of real estate on installment payments, including residential condominium apartments o Does NOT apply to: 1. industrial lots; 2. commercial buildings; and 3. sales to tenants under the Agrarian Land Reform Code RIGHTS/BENEFITS GRANTED TO BUYERS 1. Additional requirements for rescission in case of default in payment:19 a. grace period b. notice of cancellation or demand for rescission by notarial act c. payment of CSV, if at least 2 yrs of installments paid (Secs.3&4) 2. During the grace period and before actual cancellation of the contract: a. right to assign by a notarial act his rights to another person, or b. right to reinstate the contract by updating the account. (Sec.5) 3. Right to pay in advance - any installment or the full unpaid balance of the purchase price - any time - without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. (Sec.6) o Any contrary stipulation NULL & VOID. (Sec.7) B. PD 957 TITLE: The Subdivision and Condominium Buyers Protective Decree

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on the lots, which shall be utilized for the development of the subdivision. (Sec.35) RIGHTS/BENEFITS GRANTED TO BUYERS 1. If the owner or developer mortgaged the lot or unit to secure a loan: - buyer must be notified before the release of the loan - buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereto (Sec.18) 2. Warranties enforceable - against the owner or developer, jointly and severally, - for the facilities, improvements, infrastructures or other forms of development represented or promised in brochures, advertisements and other sales propaganda disseminated by the owner or developer or his agents (Sec.19) o The owner or developer must complete the construction within 1 year from the date of the issuance of the license for the subdivision or condominium project or such other period of time as may be fixed by the NHA (Sec.20) 3. Consent by the homeowners association or majority of the lot buyers required for any alteration of the approved subdivision plan (Sec.22) 4. Non-forfeiture of installment payments when the buyer, - after due notice to the owner or developer, - desists from further payment - due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. o Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. (Sec.23) 5. Rights under RA 6552 if the buyer defaults in payment for reasons other than the failure of the owner or developer to develop the project (Sec.24) 6. Issuance of title upon full payment of the lot or unit o No fee, except those required for the registration of the deed of sale in the Registry of Deeds, shall be collected for the issuance of such title.
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In the event a mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem the mortgage or the corresponding portion thereof within six months from such issuance. (Sec.25) 7. Payment of real estate tax and assessment on a lot or unit by the owner or developer without recourse to the buyer for as long as the title has not passed the buyer o BUT if the buyer has actually taken possession of and occupied the lot or unit, he shall be liable to the owner or developer for such tax and assessment effective the year following such taking of possession and occupancy. (Sec.26) 8. Freedom from any collection of charges by the owner or developer for an alleged community benefit. o Fees to finance services for common comfort, security and sanitation may be collected only by a properly organized homeowners association and only with the consent of a majority of the lot or unit buyers actually residing in the subdivision or condominium project. (Sec.27) 9. Right of way to public road must be secured by the owner or developer of a subdivision without access to any existing public road or street (Sec.29) 10. Organization of Homeowners Association to be initiated by the owner or developer for the purpose of promoting and protecting the mutual interest of the buyers and assisting in their community development. (Sec.30) o o Any waiver of compliance with any provision of PD957 VOID (Sec.33) Sanctions in case of violation: 1. Administrative fine: up to P10K 2. Criminal liability: fine up to P20K and/or imprisonment up to 10 yrs.

C. ACT NO. 3952 TITLE: The Bulk Sales Law PURPOSE OF THE LAW: To protect persons who extended credit to merchants, relying on the fact that their stock of merchandise was not to be sold in bulk, but kept up and replenished from time to time. Credit was extended, presupposing continuance in the business of merchandising (Baviera, citing US case) SCOPE OF APPLICATION o Applies to: a sale and transfer in bulk, which includes any sale, transfer, mortgage or assignment of:
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1. a stock of goods, wares, merchandise, provisions or materials NOT in the ordinary course of trade and the regular prosecution of the business of the seller, transferor, mortgagor, or assignor 2. all, or substantially all, of the business or trade theretofore conducted by the seller, transferor, mortgagor, or assignor 3. all, or substantially all, of the fixtures and equipment used in and about the business of the seller, transferor, mortgagor, or assignor Does not apply : 1. If the vendor, transferor, mortgagor or assignor, produces and delivers a written waiver of the provisions of the Act from his creditors as shown by verified statements (Sec.2) 2. To executors, administrators, receivers, assignees in insolvency, or public officers, acting under judicial process. (Sec.8)

CIVIL LAW
Notice to creditors o Contents: price, terms, and conditions of the sale, transfer, mortgage or assignment o When made: at least 10 days before transferring possession o How made: personally or by registered mail Consideration - must not be nominal EFFECT OF NON-COMPLIANCE: o Criminal liability: 6 mos.-5yrs imprisonment, or fine of P5K or less, or both. In addition, if the purchase or mortgage money is not applied pro-rata to the bona fide claims of listed creditors, the sale, transfer or mortgage shall be FRAUDULENT and VOID.

REQUIREMENTS: (SPIN-C) 1. Sworn statement of list of creditors 2. Pro-rata application of the purchase or mortgage money to the payment of listed creditors 3. Inventory of the goods, wares, merchandise, provisions or materials 4. Notice to listed creditors 5. Consideration for the sale, transfer, mortgage or assignment Sworn statement of list of creditors o Contents: 1. names and addresses of all creditors of seller or mortgagor 2. amount of indebtedness due or owing, or to become due or owing to each o When delivered: before receiving any part of the purchase price, or any promissory note, memorandum, or other evidence of indebtedness therefor o To who delivered: - to such buyer, mortgagee, or agent; or - if the buyer, mortgagee, or agent be a corporation: to the president, vice- president, treasurer, secretary or manager of said corporation; or - if such vendee or mortgagee be a partnership firm: to a member thereof Inventory o Contents: 1. quantity 2. cost price of each article, so far as possible o When made: at least 10 days before sale or mortgage

Q 2007 BAR Seeking to streamline its operations and to bail out its losing ventures, the stockholders of X Corporation unanimously adopted a proposal to sell substantially all of the machineries and equipment used in and about its manufacturing business and to sink the proceeds of the sale for the expansion of its cargo transport services. (a) Would the transaction be covered by the provisions of the Bulk Sales Law? (b) How would X Corporation effect a valid sale?

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