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Law on Sales

I. INTRODUCTION A. Definition of sale Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. (144 a! "he definition in Art 14 # brings about the creation of two sets of obligations$ for the seller, (1! to transfer ownership and (%! deliver possession of the sub&ect matter' for the buyer$ to pay the price. (bligations, as referred to in the Article, are obligations to give' thus it may be the sub&ect of actions for specific performance. (Villanueva) B. )haracteristics of a contract of sale 1. Nominate * it has a peculiar name and form as prescribed in the law %. Consensual * it is founded upon and completed by mere consent of the contracting parties1 (See Article 1475) Art. 1475. "he contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the ob&ect of the contract and upon the price. +rom that moment, the parties may reciprocally demand performance, sub&ect to the provisions of the law governing the form of contracts. (14 ,a! -. Commutative * it is a contract in which each of the contracting parties gives a thing of value and receives an equivalent 4. Bilateral * it is a contract in which both the contracting parties are bound to fulfill the obligations reciprocally towards each other (i.e. the vendor becomes bound to deliver the thing sold and the vendee to pay the price for it! .. Princi al * it can stand on its own' unli/e an accessory contract ). 0inds of a contract of sale 1. A!solute * where the sale is not sub&ect to any condition whatsoever and where title passes to the buyer upon the delivery of the thing sold. %. Con"itional * where the sale contemplates a contingency and in general, where the contract is sub&ect to certain conditions (usually the full payment of the purchase price!. )onditions are attached to the contract' the title will only pass once the conditions have been fulfilled. D. 1ale as distinguished from other contracts 1. sale vs. contract #or a iece o# $or%& . Onerous * as opposed to gratuitous, because the thing is sold in consideration of a price and vice versa

Art. 14'7. A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general mar/et, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general mar/et, it is a contract for a piece of wor/. (n! Art. 171(. By the contract for a piece of wor/ the contractor binds himself to e2ecute a piece of wor/ for the employer, in consideration of a certain price or compensation. "he contractor may either employ only his labor or s/ill, or also furnish the material. (1 ##a! Art. 1714. 3f the contractor agrees to produce the wor/ from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. "his contract shall be governed by the following articles as well as by the pertinent provisions on
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QUIJADA V. CA: Sale being a consensual contract, is perfected by mere consent, which is manifested the moment there is a meeting of the minds as to the offer and acceptance thereof on 3 elements: price, subject matter and terms of payment. Ownership by the seller on the thing sold at the time of perfection of the contract of sale is not an element for its perfection. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered.

CELESTINO V. COLLECTOR: factory which habitually ma!es sash, windows and doors, and sells the goods to the public is a manufacturer. "he fact that the windows and doors are made by it only when customers place their orders and according to such form or combination as suit the fancy of the purchasers does not alter the nature of the establishment# COMMISSIONER V. ENGINEERING: "he test of a contractor is that he renders service in the course of an independent occupation, representing the will of his employer only as to the result of his wor!, and not as to the means by which it is accomplished.

warranty of title and against hidden defects and the payment of price in a contract of sale. (n! Art. 1715. "he contract shall e2ecute the wor/ in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. 1hould the wor/ be not of such quality, the employer may require that the contractor remove the defect or e2ecute another wor/. 3f the contract fails or refuses to comply with this obligation, the employer may have the defect removed or another wor/ e2ecuted, at the contractor4s cost. (n! a! 3n a contract for wor/, labor or materials or for a piece of wor/, the thing transferred is one not in e2istence and which never would have e2isted but for the order of the party desiring to acquire it' while in a contract of sale, the thing transferred is one which would have e2isted and been the sub&ect of sale to some other person, even if the order had not been given. (De Leon) b! "his follows the 5assachusetts 6ule$ a contract for the delivery at a certain price of an article which the vendor, in the ordinary course of his business, manufactures or procures for the general mar/et, whether the same is on hand at the time or not, is a contract of sale. But if the goods are to be manufactured specially for the customer and upon his special order and not for the general mar/et, it is a contract for a piece of wor/. (Baviera) &. sale vs. a)enc* to !u* an" sell( Art. 14''. 3n construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, the essential clauses of the whole instrument shall be considered. (n! (. sale vs. !arter or e+c,an)e Art. 14'8. 3f the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characteri7ed by the manifest intention of the parties. 3f such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration
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e2ceeds the amount of the money or equivalent' otherwise, it is a sale. (144.a!

its

Art. 1'(8. By the contract of barter or e2change one of the parties binds himself to give one thing in consideration of the other4s promise to give another thing. (1 -#a! Art. 1'(-. 3f one of the contracting parties, having received the thing promised him in barter, should prove that it did not belong to the person who gave it, he cannot be compelled to deliver that which he offered in e2change, but he shall be entitled to damages. (1 -8a! Art. 1'4.. (ne who loses by eviction the thing received in barter may recover that which he gave in e2change with a right to damages, or he may only demand an indemnity for damages. 9owever, he can only ma/e use of the right to recover the thing which he has delivered while the same remains in the possession of the other party, and without pre&udice to the rights acquired in good faith in the meantime by a third person. (1 4,a! Art. 1'41. As to all matters not specifically provided for in this "itle, barter shall be governed by the provisions of the preceding "itle relating to sales. (1 41a! 4. sale vs. "acion en a)o

Art. 1&45. Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales. (n! Dacion /n Pa)o :resupposes a pree2isting debt ; e2tinguishes the debt :rice is the value of the thing given 0ale (bligations are created from the perfection of the contract +i2ing of the price is more freely agreed upon (Manresa)

5. sale vs. "onation Art. 7&5. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. <nder Art 14=1, when the price of the contract of sale is simulated, the sale may be void but the act may be shown to have been in reality a donation 2 2 2 (n the other hand, a purported donation may have other considerations placed on the donee, thus it becomes critical to

QUIROGA V. PARSONS: $n the contract in the instant case, what was essential, constituting its cause and subject matter, was that the plaintiff was to furnish the defendant with the beds which the latter might order, at the stipulated price, and that the defendant was to pay this price in the manner agreed upon. "hese are precisely the essential features of a contract of purchase and sale. "here was the obligation on the part of the plaintiff to supply the beds, and, on that of the defendant, to pay their price. "hese features e%clude the legal conception of an agency or older to sell whereby the mandatory or agent receives the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it,

determine what rule applies (law on sales or law on donations! (Villanueva) '. summation1 tests to "etermine t,e nature o# t,e contract 4 Tests 0ale 2 o!3ect1 trans#er o# o$ners,i Piece o# 4or% 2 o!3ect1 service 5mental6 ,*sical la!or7 ?2tra@ ordinary Depends on order 1pecific )lientele >ot covered

Ehere necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. >ecessaries are those referred to in Article %8,. (14 =a! Art. 14-.. "he husband and the wife cannot sell property to each other, e2cept$ (1! Ehen a separation of property was agreed upon in the marriage settlements' or (%! Ehen there has been a &udicial separation or property under Article 181. (14 #a! Art. 14-1. "he following persons cannot acquire by purchase, even at a public or &udicial auction, either in person or through the mediation of another$ (1! "he guardian, the property of the person or persons who may be under his guardianship' (%! Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given' (-! ?2ecutors and administrators, the property of the estate under administration' (4! :ublic officers and employees, the property of the 1tate or of any subdivision thereof, or of any government@owned or controlled corporation, or institution, the administration of which has been intrusted to them' this provision shall apply to &udges and government e2perts who, in any manner whatsoever, ta/e part in the sale' ( ! Fustices, &udges, prosecuting attorneys, cler/s of superior and inferior courts, and other officers and employees connected with the administration of &ustice, the property and rights in litigation or levied upon an e2ecution before the court within whose &urisdiction or territory they e2ercise their respective functions' this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the ob&ect of any litigation in which they may ta/e part by virtue of their profession. (.! Any others specially disqualified by law. (14 8a! Art. 14-&. "he prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations. (n! 1. a!solute inca acit*

1. >ature of business %. ?2istence of thing -. 5ar/et 4. 1tatute of frauds 4 Tests 5!ut t,e ultimate test is1 intention o# t,e arties7 1. 6is/ of Boss %. :ayment -. ?2clusive Dealership 4. 6eturn of unsold goods

(rdinary Does not Aeneral )overed

0ale

A)enc* to 0ell

Borne by seller Buyer

Borne by principal, not agent :rincipal, not agent 6emittance test 5andatory

>one

0ale 1. 3ntention of parties %. Calue of thing vs. Calue of money

Barter

5oney D thing

"hing D 5oney

& Tests 1. Debt %. 1tage of contract

0ale >one :erfection

Dacion /n Pa)o :re@e2isting ?2tinguishment

II. PARTI/0 TO A CONTRACT O8 0A9/ A. )apacity of parties Art. 148-. All persons who are authori7ed in this )ode to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles.

"hose who have the legal capacity to give consent to contracts may validly enter into a contract of sale, unless specifically prohibited by law. 9owever, when necessaries are sold and delivered to a minor or other incapacitated person, the latter must pay a reasonable price therefore. >ecessaries are those indispensable for sustenance, clothing, dwelling, education, and medical treatment. &. relative inca acit* a) married persons (as regards contracts wit parties) t ird

of within five years from the date of the contract implementing such decision. 3n the event that one spouse is incapacitated or otherwise unable to participate in the administration of the con&ugal properties, the other spouse may assume sole powers of administration. "hese powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. 3n the absence of such authority or consent, the disposition or encumbrance shall be void. 9owever, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authori7ation by the court before the offer is withdrawn by either or both offerors. (1. a! !) married persons !etween spouses) (as regards contracts

Art. 7(. ?ither spouse may e2ercise any legitimate profession, occupation, business or activity without the consent of the other. "he latter may ob&ect only on valid, serious, and moral grounds. 3n case of disagreement, the court shall decide whether or not$ (1! "he ob&ection is proper' and (%! Benefit has occurred to the family prior to the ob&ection or thereafter. 3f the benefit accrued prior to the ob&ection, the resulting obligation shall be enforced against the separate property of the spouse who has not obtained consent. "he foregoing provisions shall not pre&udice the rights of creditors who acted in good faith. (11=a! Art. -'. "he administration and en&oyment of the community property shall belong to both spouses &ointly. 3n case of disagreement, the husband4s decision shall prevail, sub&ect to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision. 3n the event that one spouse is incapacitated or otherwise unable to participate in the administration of the common properties, the other spouse may assume sole powers of administration. "hese powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. 3n the absence of such authority or consent, the disposition or encumbrance shall be void. 9owever, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authori7ation by the court before the offer is withdrawn by either or both offerors. (%,.a! Art. 1&4. "he administration and en&oyment of the con&ugal partnership shall belong to both spouses &ointly. 3n case of disagreement, the husband4s decision shall prevail, sub&ect to recourse to the court by the wife for proper remedy, which must be availed

Art. 87. ?very donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, e2cept moderate gifts which the spouses may give each other on the occasion of any family re&oicing. "he prohibition shall also apply to persons living together as husband and wife without a valid marriage. (1--a! Art. 14-.. "he husband and the wife cannot sell property to each other, e2cept$ (1! Ehen a separation of property was agreed upon in the marriage settlements' or (%! Ehen there has been a &udicial separation or property under Article 181. (14 #a! "here is a potential circumvention of the policy of the law if sales between spouses are allowed if there was a &udicial separation of property, since undue influence is not completely erased by the separation of property. "his prohibition also applies to common@law unions4. (Villanueva) c) special dis"uali#ications (see Articles 1481 and 148% in the previous page! 1! 3t is immaterial that no damage is suffered by the owner. "he contract is
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CALIMLIM-CANULLAS V. FORTUN: &if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership. $t was also designed to prevent the e%ercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. "he prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, 'the condition of those who incurred guilt would turn out to be better than those in legal union.'

void as the law see/s to prevent said persons from being tempted to ta/e advantage of their position. "hey occupy a position of trust and confidence in relation to the property under their administration or &urisdiction. %! Agents can not buy the property of their principal& without the consent of the latter. B6(0?61, however, do not come within the prohibition, as their authority consists merely in loo/ing for a buyer or seller, and to bring the latter and his principal together to consummate the transaction. (f course, after the agency is terminated, the agent can buy the property of the principal, which was formerly under his administration. -! Although e2ecutors and administrators can not buy the property under their administration, an e2ecutor may buy the hereditary rights of an heir to the estate under his administration, because the buyer, in such case, can not get the share of the heir in the estate until after the administration is ended. 4! Eith regard to the lawyers, the prohibition does not apply to other properties of the client, nor to assignments of the property formerly in litigation when such assignment will ta/e effect only after final &udgment (compensation of lawyers payable on a contingent basis, unless unconscionable!. ! ?2amples of other persons especially disqualified by law are$ (1! aliens purchasing private agricultural lands (Art G33, 1ecs - ; =, )onsti!' (%! an unpaid seller having a right of lienH(Art 1-- par ! (Baviera) III. 0UB:/CT ;ATT/R A. 6equisites of a valid sub&ect matter 1. must !e e+istin)6 #uture6 or contin)ent Art. 1(48. 3mpossible things or services cannot be the ob&ect of contracts. (1%=%! Art. 14'&. "he goods which form the sub&ect of a contract of sale may be either e2isting goods, owned or possessed by the seller, or goods to be
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manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this "itle called Ifuture goods.I "here may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. (n! Art. 1(47. All things which are not outside the commerce of men, including future things, may be the ob&ect of a contract. All rights which are not intransmissible may also be the ob&ect of contracts. >o contract may be entered into upon future inheritance e2cept in cases e2pressly authori7ed by law. All services which are not contrary to law, morals, good customs, public order or public policy may li/ewise be the ob&ect of a contract. (1%=1a! ?mption rei speratai * 3f the parties ma/e the contract depend upon the e2istence of a thing, so that if the thing does not come into e2istence the contract is considered as not made ad there is no obligation to pay the price, such contract is valid under JArt. 14.1 (%!, ))' it is what the 6oman law designates as emptio rei speratae (purchase of an e2pected thing!. ?mptio spei * 3f the parties intend the contract to e2ist at all events, so that the buyer will have to pay the price even if the thing does not actually came into e2istence . . . it is called emtio spei (purchase of hope or e2pectancyK. "his contract is, however, void under Art. 14.1. ($olentino) Art. 14'1. "hings having a potential e2istence may be the ob&ect of the contract of sale. "he efficacy of the sale of a mere hope or e2pectancy is deemed sub&ect to the condition that the thing will come into e2istence. "he sale of a vain hope or e2pectancy is void. (n! Art. 1(47. All things which are not outside the commerce of men, including future things, may be the ob&ect of a contract. All rights which are not intransmissible may also be the ob&ect of contracts. >o contract may be entered into upon future inheritance e2cept in cases e2pressly authori7ed by law.

RUBIAS V. BATILLER: the purchase by a lawyer of the property in litigation from his client is categorically prohibited by rt. ()*(, paragraph +,- of the .ivil .ode, and that consequently, plaintiff/s purchase of the property in litigation from his client was void and could produce no legal effect

All services which are not contrary to law, morals, good customs, public order or public policy may li/ewise be the ob&ect of a contract. (1%=1a! a! Baw prohibits sale of future inheritance. "he rights to succession are transmitted from the moment of the death of the decedent so one cannot sell or promise to sell what he e2pects to inherit from a living person. But the law allows an heir to sell his interests in an inheritance b! "he ob&ect of the contract of sale must be licit, meaning within the commerce of man, and determinate. Determinate has been e2panded to cover generic things, future things and things in potential e2istence .. c! "hings sub&ect to a resolutory condition may be the ob&ect of the contract of sale.(Article 14. ! &. must !e licit Art. 1(47. All things which are not outside the commerce of men, including future things, may be the ob&ect of a contract. All rights which are not intransmissible may also be the ob&ect of contracts. >o contract may be entered into upon future inheritance e2cept in cases e2pressly authori7ed by law. All services which are not contrary to law, morals, good customs, public order or public policy may li/ewise be the ob&ect of a contract. (1%=1a! Art. 145-. "he thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. (n! Art. 1575. "he sale of animals suffering from contagious diseases shall be void. A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor. (1484a! a! "he sale of narcotics or dangerous drugs e2cept upon prescription, or any wild bird or mammal, or rare wild plants protected by law or of tubli or other poisonous plants or fruits, dynamited fish or other aquatic animals, gunpowder, dynamite, e2plosives or blasting supplies, firearms or ammunitions are prohibited by law therefore are illicit.
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b! :roperties belonging to the 1tate or its political subdivision which are intended for public use or public service or for the development of natural wealth are outside the commerce of man. c! )hurches are also outside the commerce of man. d! But public property when no longer intended for public use or service form part of the patrimonial property of the 1tate and therefore can be leased or sold. (. must !e "eterminate Art. 14'.. A thing is determinate when it is particularly designated or physical segregated from all other of the same class. "he requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. (n! a! Determinate v. determinable=$ a thing is determinate if it can be physically segregated, particularly designated' capable of being made determinate without need of another agreement. 3t is determinable if it is capable of being determined via another agreement. 4. articular %in"s

a) generic t ings Art. 1&4'. Ehen the obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. >either can the debtor deliver a thing of inferior quality. "he purpose of the obligation and other circumstances shall be ta/en into consideration. (11.=a! Art. 14.-. "he following contracts are ine2istent and void from the beginning$ (.! "hose where the intention of the parties relative to the principal ob&ect of the contract cannot be ascertained'

PICHEL V. ALON O: "he subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from September (,, (*01 up to 2anuary (, (*30, which subject matter is a determinate thing. 4nder rt. ()0( of the 5ew .ivil .ode, things having a potential e%istence may be the object of the contract of sale# SIBAL VS. VALDE : pending crops which have potential e%istence may bethe subject matter of sale.

MELLI A V. CIT! OF ILOILO: "he requirement of the law that a sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties

Aeneric things could also become sub&ect matters of a contract of sale provided (1! they have been physically segregated# L particularly designated, and (%! they are capable of substitution !) #uture goods Art. 14'&. "he goods which form the sub&ect of a contract of sale may be either e2isting goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this "itle called Ifuture goods.I "here may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. (n! c) sale o# undivided interest or s are Art. 14'(. "he sole owner of a thing may sell an undivided interest therein. (n! Art. 14'4. 3n the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the mass as the number, weight or measure bought bears to the number, weight or measure of the mass. 3f 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 ma/e good the deficiency from goods d) sale o# t ings in litigation Art. 1(81. "he following contracts are rescissible$ (4! "hose which refer to things under litigation if they have been entered into by the defendant without the /nowledge and approval of the litigants or of competent &udicial authority' Art. 1(85. (%! >either shall rescission ta/e place when the things which are the ob&ect of the contract are legally in the possession of third persons who did not act in bad faith.

1! 1ales of things under litigation entered into by defendants without the /nowledge ; approval of the litigants or of the court are rescissible. %! 9owever, rescission cannot ta/e place when the things are legally in the possession of - rd persons who did not act in bad faith (; without /nowledge of defect! -! 3n an action affecting the title or the right of possession of real property, the plaintiff may record in the office of the 6egistrar of Deeds of the :rovince which the property is situated, a notice of the pendency of the action. 4! +rom the moment of the filing of such notice, -rd persons are charged with notice of the litigation ; ta/e the property sub&ect to the outcome of the litigation. (Baviera and De Leon) e% t ings su!&ect to a resolutor' condition Art. 14'5. "hings sub&ect to a resolutory condition may be the ob&ect of the contract of sale. (n! 5. <uantit* o# su!3ect matterArt. 1(4-. "he ob&ect of every contract must be determinate as to its /ind. "he fact that the quantity is not determinate shall not be an obstacle to the e2istence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. (1%=-!

I=. OB9I>ATION O8 T?/ 0/99/R TO TRAN08/R O4N/R0?IP A. 1ale by a person not the owner Art. 1'('. 3n the preceding articles in this "itle governing the sale of goods, unless the conte2t or sub&ect matter otherwise requires$ (1! IDocument of title to goodsI includes any bill of lading, doc/ warrant, Iquedan,I or warehouse receipt or order for the delivery of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods,
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!U TE" V. GON ALE : "his court has consistently held that there is a perfected sale with regard to the 'thing' whenever the article of sale has been physically segregated from all other articles. $n the case at bar the underta!ing of the defendant was to sell to the plaintiff 066 piculs of sugar of the first and second classes. "here was no delivery under the contract. 5ow, if called upon to designate the article sold, it is clear that the defendant could only say that it was 'sugar.' 7e could only use this generic name for the thing sold. We conclude that the contract in the case at bar was merely an e%ecutory agreement# a promise of sale and not a sale.

SCHUBAC" V. CA: lthough the quantity to be ordered was made determinate only on 8ecember 9*, (*1(, quantity is immaterial in the perfection of a sales contract. What is of importance is the meeting of the minds as to the object and cause, which from the facts disclosed, show that as of 8ecember 9), (*1(, these essential elements had already concurred.

or authori7ing or purporting to authori7e the possessor of the document to transfer or receive, either by endorsement or by delivery, goods represented by such document. IAoodsI includes all chattels personal but not things in action or money of legal tender in the :hilippines. "he term includes growing fruits or crops. I(rderI relating to documents of title means an order by endorsement on the documents. IMuality of goodsI includes their state or condition. I1pecific goodsI means goods identified and agreed upon at the time a contract of sale is made. An antecedent or pre@e2isting claim, whether for money or not, constitutes IvalueI where goods or documents of title are ta/en either in satisfaction thereof or as security therefor. (%! A person is insolvent within the meaning of this "itle who either has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due, whether insolvency proceedings have been commenced or not. (-! Aoods are in a Ideliverable stateI within the meaning of this "itle when they are in such a state that the buyer would, under the contract, be bound to ta/e delivery of them. (n! Art. 55-. "he possession of movable property acquired in good faith is equivalent to a title. >evertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. 3f the possessor of a movable lost or which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. (4.4a! Art. 15.5. 1ub&ect to the provisions of this "itle, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller4s authority to sell. >othing in this "itle, however, shall affect$ (1! "he provisions of any factors4 act, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof'

(%! "he validity of any contract of sale under statutory power of sale or under the order of a court of competent &urisdiction' (-! :urchases made in a merchant4s store, or in fairs, or mar/ets, in accordance with the )ode of )ommerce and special laws. (n! Art. 14(1. "hrough estoppel an admission or representation is rendered conclusive upon the person ma/ing it, and cannot be denied or disproved as against the person relying thereon. (eneral )ule* >o one can transfer a better title than what he has over the property sold. (nly the owner of the goods or one authori7ed by the owner to sell can transfer title thereto to the buyer1,. +,ceptions* 1. /sto el 5Art 15.57

?ven if the person who sold the thing was not the owner, if he should subsequently acquire ownership thereof, his conveyance is deemed valid ; his title passes by operation of law to the buyer11 3f the owner of the goods is precluded by his conduct from denying the sellerNs authority to sell, buyer may acquire a better title, although the seller had neither the title nor the authority to sell the goods. &. Recor"in) 9a$s@ Torrens 0*stem A PD 15&-

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A NAR V. !APDIANGCO: $n the case on hand, the car in question was never delivered to the vendee by the vendor as to complete or consummate the transfer of ownership by virtue of the contract. $t should be recalled that while there was indeed a contract of sale between :icente ;arella and "eodoro Santos, the former, as vendee, too! possession of the subject matter thereof by stealing the same while it was in the custody of the latter/s son. rt. 3(9 above contemplates that the act be coupled with the intent of delivering the thing. 11 SI! CONG BIEN V. HSBC: Since plaintiff had voluntarily clothed the person who negotiated the quedans with all the attributes of ownership and upon which the ban! relied, it is estopped to deny that the ban! had a valid title to the quedans# JALBUEN A V. LI ARRAGA: <igelow on =stoppel says: '. . . it is now a well established principle that where the true owner of property, for however short a time, holds out another, or, with !nowledge of his own right, allows another to appear, as the owner of or as having full power of disposition over the property, the same being in the latter/s actual possession, and innocent third parties are thus led into dealing with some >such? apparent owner, they will be protected.' +as cited in 7ernae@ vs. 7ernae@-

>one in the :hils. But >)) relies on the general principle of law that one deals with an agent at his own ris/. (. Court or"ers "he general principle that the vendor must be the owner or the one authori7ed by the owner to sell the goods in order to pass title over them to the buyer does not apply when the sale ta/es place by virtue of a power granted by law or by a court. "hus a sale by the sheriff, or by other e2ecution or sub&ect of foreclosure, is valid even if the owner did not authori7e or consent to the sale (Baviera). Calidity of sale under statutory power (legal sale * e.g. law authori7ing sale of patrimonial property to a specific person at auction! or of court to sell (&udicial sale e.g. writ of e2ecution levying upon the debtorNs property at auction! 4. Purc,ase at a merc,antBs store6 mar%et or #air1& :urpose of the e2ception$ (1! to protect innocent purchasers who buy at merchant stores, mar/et or fair (%! "o facilitate commercial sales in movables (-! "o give stability to business transactions B. 1ale by one having a voidable title Art. 15.'. Ehere the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller4s defect of title. (n! Art. 55-. "he possession of movable property acquired in good faith is equivalent to a title. >evertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. 3f the possessor of a movable lost or which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. (4.4a!

1. %.

1eller can transfer a valid title to an innocent purchaser for value, unless title was annulled. 1o long as the goods are still in the possession of the 1st buyer, they may still be recovered by the vendor in an action for annulment. But once it has been transferred to an innocent purchaser for value before the contract is annulled, the latter acquired a valid title1-. An antecedent or pre@e2isting claim, E(> for money constitutes OvalueK where goods or document of titloe are ta/en in satisfaction thereof or as security therefore =. PRIC/14

3.

4.

Art 14'-. 1hould such person or persons be unable or unwilling to fi2 it, the contract shall be inefficacious, unless the parties subsequently agree upon the price. 3f the third person or persons acted in bad faith or by mista/e, the courts may fi2 the price. Ehere such third person or persons prevented from fi2ing the price or terms by of the seller or the buyer, the party not in may have such remedies against the party in as are allowed the seller or the buyer, as the may be. (144=a! are fault fault fault case

Art. 147.. Aross inadequacy of price does not affect a contract of sale, e2cept as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (n!

13

12

SUN BROTHERS V. VELASCO: "he policy of the law has always been that, where the rights and interests of a vendor come into clash with that of an innocent buyer for value, the latter must be protected. "he rule appears to be a wise and necessary rule not only to facilitate commercial sales on movables but to give stabilityto business transactions. MASICLAT V. CENTENO: "he transaction between Aamon ;asiclat and his un!nown seller too! place on ;iranda Street and not in the public mar!et and this is . . . conclusive. 7ence, rt. (,6, .., invo!ed by the petitioners, has no application.

DE GARCIA V. CA: Aespondent ngelina 8. Buevara, having been unlawfully deprived of the diamond ring in question, was entitled to recover it from petitioner .onsuelo S. de Barcia who was found in possession of the same. "he only e%ception the law allows is when there is acquisition in good faith of the possessor at a public sale, in which case the owner cannot obtain its return without reimbursing the price. +.ru@ v. Cahati# @nar v. Dapdiangco-# REBULLIDA V. BUSTAMANTE: $t appearing that the ring in question was lost or was stolen from the place where the lawful owner deposited it, the case squarely falls under rt. )0) of the .ivil .ode, which provides that the Eone who has lost personal property or who has been unlawfully deprived of it may recover it from whoever is possessing it.F "he mere fact that the possessor, even in good faith, ad purchased the ring from another person would not bar the right of the owner to recover it once the identity and the ownerGs deprivation are established. 14 INCHAUSTI V. CROM#ELL: Crice is the sum stipulated as the equivalent of the thing sold and also every incident ta!en into consideration for the fi%ing of the price put to the debit of the buyer and agreed to by him

Art. 1471. 3f the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. (n! Art. 147&. "he price of securities, grain, liquids, and other things shall also be considered certain, when the price fi2ed is that which the thing sold would have on a definite day, or in a particular e2change or mar/et, or when an amount is fi2ed above or below the price on such day, or in such e2change or mar/et, provided said amount be certain. (144#! Art. 147(. "he fi2ing of the price can never be left to the discretion of one of the contracting parties. 9owever, if the price fi2ed by one of the parties is accepted by the other, the sale is perfected. (1448a! Art. 1474. Ehere the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. 9owever, if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. Ehat is a reasonable price is a question of fact dependent on the circumstances of each particular case. (n! 1. A contract of sale is null ; void and produces no effect whatsoever if the same is without cause or consideration or that the price which appears to have been paid has in fact never been paid. %. "he e2istence of a contract is permanent ; incurable. -. "he statement of a false cause in contracts shall render them void if it should not be proven that were founded upon another cause which is true ; lawful (14=1, 1- -! 4. 3f the price is simulated, the sale is void but the act may be shown to have been in reality a donation, or some other act or contract (14=1! A. 6equisites of a valid price 1. must !e real Art. 1471. 3f the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. (n! Art. 1(8'. 6escission referred to in >os. 1 and % of Article 1-#1 shall not ta/e place with respect to contracts approved by the courts. (1%8.a! Art. 1(5(. "he statement of a false cause in contracts shall render them void, if it should not be proved that they were founded upon another cause which is true and lawful. (1%=.! Art. 1(54. Although the cause is not stated in the contract, it is presumed that it e2ists and is lawful, unless the debtor proves the contrary. (1%==!

Art. 147.. Aross inadequacy of price does not affect a contract of sale, e2cept as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (n! Art. 1(81. rescissible$ "he following contracts are

(1! "hose which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one@fourth of the value of the things which are the ob&ect thereof' (%! "hose agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number' (-! "hose underta/en in fraud of creditors when the latter cannot in any other manner collect the claims due them' (4! "hose which refer to things under litigation if they have been entered into by the defendant without the /nowledge and approval of the litigants or of competent &udicial authority' ( ! All other contracts specially declared by law to be sub&ect to rescission. (1%81a! 1. +alse :rice * there is a true price but it was not written down or stipulated in the contract. "here was a consideration although it was not found in the contract (6eal consideration not stated!

2. 1imulated

:rice1 * "here was no price paid. "he parties merely said there was a price and OcreatedK their own price (no consideration but stated!

&. must !e in mone* or its e<uivalent Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer
15

MAPALO V. MAPALO: a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor# BAGNAS V. CA: upon the consideration alone that the apparent gross, not to say enormous, disproportion between the stipulated price +in each deed- of C(.66 plus unspecified and unquantilled services and the undisputably valuable real estate allegedly sold H worth at least C(6,,66.66 going only by assessments for ta% purposes which, it is wellI!nown, are noteriously low indicators of actual value H plainly and unquestionably demonstrates that they state a false and fictitious consideration, and no other true and lawful cause having been shown, the .ourt finds both said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio.

10

the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. (144 a! Art. 14'8. 3f the consideration of the contract consists partly in money, and partly in another thing, the transaction shall be characteri7ed by the manifest intention of the parties. 3f such intention does not clearly appear, it shall be considered a barter if the value of the thing given as a part of the consideration e2ceeds the amount of the money or its equivalent' otherwise, it is a sale. (144.a!

Art. 1474. Ehere the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. 9owever, if the thing or any part thereof has been delivered to and appropriated by the buyer he must pay a reasonable price therefor. Ehat is a reasonable price is a question of fact dependent on the circumstances of each particular case. (n! Art. 14'-. 3n order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the determination thereof be left to the &udgment of a special person or persons. 1hould such person or persons be unable or unwilling to fi2 it, the contract shall be inefficacious, unless the parties subsequently agree upon the price. 3f the third person or persons acted in bad faith or by mista/e, the courts may fi2 the price. Ehere such third person or persons are prevented from fi2ing the price or terms by fault of the seller or the buyer, the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be. (144=a! Art. 147.. Aross inadequacy of price does not affect a contract of sale, e2cept as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (n! Art. 1471. 3f the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. (n! Art. 147&. "he price of securities, grain, liquids, and other things shall also be considered certain, when the price fi2ed is that which the thing sold would have on a definite day, or in a particular e2change or mar/et, or when an amount is fi2ed above or below the price on such day, or in such e2change or mar/et, provided said amount be certain. (144#! Art. 147(. "he fi2ing of the left to the discretion of one parties. 9owever, if the price parties is accepted by the perfected. (1448a! price can never be of the contracting fi2ed by one of the other, the sale is

1.

"he price should be in money or its equivalent1. (e.g. letters of credit ; other negotiable instruments!. (therwise, the transaction might be barter or an innominate contract. %.:roperty given to the creditor in satisfaction of a debt in money with the :63)? :A3D 3> ADCA>)? is a sale. DA"3(> 3> :AP5?>" :resupposes a prior e2isting credit ; e2tinguishes the obligation 1AB? (bligations created from perfection of contract

are the the

-. +i2ing of the price is more or less arrived at with ample contractual freedom than the value of the thing given in dation. (. ;ust !e certain or ascertaina!le at time o# er#ection17
16

REPUBLIC V. PHIL. RESOURCES: lthough rt. (),1 of the new .ivil .ode provides that price . . . is always paid in terms of money and the supposed payment being in !ind it is no payment at all,' yet the same article provides that the purchaser may pay 'a price certain in money or its equivalent' which means that payment of the price need not be money. 17 TO!OTA SHA# V. CA: rticle (),1 of the .ivil .ode defines a contract of sale and rt. ()3, specifically provides when it is deemed perfected. "he document +in =%hibit E F, see case-, e%ecuted and signed by the petitioner/s sales representative, is not a contract of sale. 5o obligation on the part of "oyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain appears therein. "he provision on the downpayment of C(66,666 made no specific reference to a sale of a vehicle. $f it was intended for a contract of sale, it could only refer to a sale on installment basis, as the :SC e%ecuted the following day confirmed. <ut nothing was mentioned about the full purchase price and the manner the installments were to be paid. "his .ourt had already ruled that a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. "his is so because the agreement as to the 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. 8efiniteness as to the price is an essential element of a binding agreement to sell personal property.

11

4. ;anner o# Pa*ment must !e a)ree" u on18 5. ?o$ rice is "etermine"

Art. 14'-. 3n order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the determination thereof be left to the &udgment of a special person or persons. 1hould such person or persons be unable or unwilling to fi2 it, the contract shall be inefficacious, unless the parties subsequently agree upon the price. 3f the third person or persons acted in bad faith or by mista/e, the courts may fi2 the price. Ehere such third person or persons are prevented from fi2ing the price or terms by fault of the seller or the buyer, the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be. (144=a!

Art. 147&. "he price of securities, grain, liquids, and other things shall also be considered certain, when the price fi2ed is that which the thing sold would have on a definite day, or in a particular e2change or mar/et, or when an amount is fi2ed above or below the price on such day, or in such e2change or mar/et, provided said amount be certain. (144#! d) !' re#erence to anot er t ing certain e) never !' one part' Art. 147(. "he fi2ing of the left to the discretion of one parties. 9owever, if the price parties is accepted by the perfected. (1448a! '. Ina"e<uac* o# rice&1 price can never be of the contracting fi2ed by one of the other, the sale is

a) !' a t ird person1!) !' t e courts Art. 14'-. (-! 3f the third person or persons acted in bad faith or by mista/e, the courts may fi2 the price. c) !' re#erence to de#inite da'. particular e,c ange mar/et01
18

Art. 1(55. ?2cept in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mista/e or undue influence. (n! Art. 147.. Aross inadequacy of price does not affect a contract of sale, e2cept as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (n! Art. 1(81. rescissible$ "he following contracts are

VELASCO V. CA: $t is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the respondent still had to meet and agree on how and when the downIpayment and the installment payments were to be paid. Such being the situation, it cannot, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. $ndeed, this .ourt has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. "he fact, therefore, that the petitioners delivered to the respondent the sum of C(6,666 as part of the downIpayment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties under rt. ()19 of the new .ivil .ode# NAVARRO V. SUGAR$S PRODUCERS: When the manner of payment of purchase price is discussed after acceptance,, then such acceptance did not produce a binding and enforceable contract of sale. "here was no complete meeting of the minds 19 BARRETTO V. SANTA MARINA : $t is necessary to a perfected sale that the parties agree upon the thing sold and that the price be fi%ed, it being sufficient for the latter purpose that the price be left to the judgment of a specified person. 20 Crice is certain at the point of perfection by reference to another thing certain, such as to certain invoices then in e%istence and clearly identified by the agreement +MCCOLLOUGH V. AENLLE- or !nown factors or stipulated formula +MITSUI V. MANILA-

(1! "hose which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one@fourth of the value of the things which are the ob&ect thereof' (%! "hose agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number' (-! "hose underta/en in fraud of creditors when the latter cannot in any other manner collect the claims due them' (4! "hose which refer to things under litigation if they have been entered into by the defendant without the /nowledge and approval of the litigants or of competent &udicial authority' ( ! All other contracts specially declared by law to be sub&ect to rescission. (1%81a! Art. 1'.&. "he contract shall be presumed to be an equitable mortgage, in any of the following cases$
21

ERENETE V. BE ORE: "hat the consideration in the sale was 'cheap' is not a ground for the infirmity of the sale. $nadequacy of cause in a contract does not of itself invalidate the contract.

12

1! Ehen the price of a sale with right to repurchase is unusually inadequate' (%! Ehen the vendor remains in possession as lessee or otherwise' (-! Ehen upon or after the e2piration of the right to repurchase another instrument e2tending the period of redemption or granting a new period is e2ecuted' (4! Ehen the purchaser retains for himself a part of the purchase price' ( ! Ehen the vendor binds himself to pay the ta2es on the thing sold' (.! 3n any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. 3n any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be sub&ect to the usury laws. (n!

/nowledge. "he contract, in such a case, is presumed to have been entered into in the place where the offer was made. (1%.%a! Art. 1(&5. <nless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to ma/e an offer. (n! Art. 1(&'. Advertisements for bidders are simply invitations to ma/e proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. (n! !) #orm o# acceptance

1.

=I. 8OR;ATION O8 T?/ CONTRACT O8 0A9/ :6?:A6A"(6P 1"AA? 1. o##er Art. 1475. "he contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the ob&ect of the contract and upon the price. +rom that moment, the parties may reciprocally demand performance, sub&ect to the provisions of the law governing the form of contracts. (14 ,a! a) #orm o# o##er00 "he offer must be certain. Business advertisementsLadvertisements for bidders are mere invitations to ma/e an offer, unless otherwise stated. Art. 1(1-. )onsent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. "he offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter@offer. Acceptance made by letter or telegram does not bind the offerer e2cept from the time it came to his
22

"he acceptance must be absolute%-. %."he acceptance must be plain and unconditional. -."o bind the offeror, the offeree must comply with the conditions of the offer. Ehere the acceptance was not in accordance with the terms and conditions of the offer, the offer lapsed even though the offeree later on was willing to accept the terms and conditions of the offer. c) vices vitiating consent Art. 1((.. A contract where consent is given through mista/e, violence, intimidation, undue influence, or fraud is voidable. (1%. a! Art. 1((1. 3n order that mista/e may invalidate consent, it should refer to the substance of the thing which is the ob&ect of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. 5ista/e as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract. A simple mista/e of account shall give rise to its correction. (1%..a! Art. 1((8. "here is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. (1%.8! &. o tion contract&4
23

VILLONCO V. BORMAHECO: $t is true that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance. /So long as it is clear that the meaning of the acceptance is positively and unequivocally to acceptIthe offer, whether such request is granted or not, a contract is formed./F "hus, it was held that the vendor/s change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not amount to a rejection of the offer and the tender of a counterIoffer

A!CO V SERRA: $n an offer to sell, the acceptance must be plain and unconditional to have the effect of converting the offer to sell to a perfect contract. $t will not be so if it involves any new proposal, for in that case it would not mean conformity with the offer, which is what gives rise to the generation of the contract.

13

Art. 147-. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. 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. (14 1a! Art. 1(&4. Ehen 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, e2cept when the option is founded upon a consideration, as something paid or promised. (n! ?lements of a valid option contract 1. %. )(>1?>" 1<BF?)" 5A""?6$ an option right or accepted unilateral offer to buy, or an option right or accepted unilateral offer to sell a determinate ob&ect for a price certain, including the manner of payment thereof :6?1"A"3(>$ a consideration% separate and distinct from the purchase price for the option given 3t must be in writing. J>("? that the prescription of written contracts is 4 years.Q (. ri),t o# #irst re#usal
24
&'

4. !ilateral romise to !u* an" sell (1ee Article 14=8 supra!

1.
%. -. 4.

Both parties are bound by his promise, although nothing has been paid or delivered%=. An e2ecutory contract of sale the promise of one is the consideration for the promise of the other. 3n a bilateral promise, it is necessary that the thing be determinate and the price already fi2ed. 3t gives the right to demand fulfillment of the contract but does not pass title or dominion over the property.

:?6+?)"3(> 1"AA?%# 1. $,en "eviation allo$e" "he rule that Oacceptance must be absoluteK is not really absolute because certain deviations may be made in the acceptance. ?ven with such deviations, the offer will still be converted into a valid and binding contract. &. sale !* auction Art. 147'. 3n the case of a sale by auction$ (1! Ehere goods are put up for sale by auction in lots, each lot is the sub&ect of a separate contract of sale.

3.

DE LA CAVADA V DIA : n option contract is a privilege e%isting in one person, for which he had paid a consideration and which gives him the right to buy certain merchandise or certain specified property, from another person, if he chooses, at any time within the agreed period at a fi%ed price LIMSON V CA: n option is not of itself a purchase, but merely secures the privilege to buy. $t is not a sale of property, but a sale of the right to purchase. $ts distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer. lthough the consideration of C96,666 was referred to as earnest money, such was not an earnest money. Aather, it was an option money. 25 SORIANO V BAUTISTA: n option to buy attached to a real estate mortgage is a valid stipulation, and the mortgagorGs promise to sell is supported by the same consideration as that of the mortgage itself, which is distinct and from that which would support the sale, an additional amount having been agreed upon to ma!e up the entire price of C3,*66 should the option be e%ercised. +5O"=: "he significance of this ruling is that it shows the wide range of EconsiderationF that can validly support an option contract, e.g., the real mortgage itself-# SANCHE V RIGOS: +5O"=: "he significance of this ruling is that it shows that the only importance of a consideration for an option is that the option cannot be withdrawn by the grantor during the stipulated period.26 EQUATORIAL REALT! DEVELOPMENT% INC. V MA!FAIR THEATER: $n the present case, no fi%ed price is stated in the contract of lease of the property in case of sale. "herefore, it cannot be an option contract# it is more a!in to a right of first refusal, in which no separate consideration is required as it is already included in the reciprocal obligations of the parties in the contract of lease. lthough it cannot be legally categori@ed as an option, it is nevertheless a valid and binding stipulation between

the parties. PARA&AQUE "INGS ENTERPRISES V CA : "he basis of the right of first refusal must be the current offer to sell of the seller of offer to purchase of any prospective buyer. Only after could the owner validly offer to sell the property to a third person under the same terms as offered to the grantee 27 DE LA CAVADA V DIA : promise made by one party, if in accordance with the form required by law, may be a good consideration for a promise made by another. $n this case, the defendant promised to convey the land as soon as they become registered. "he plaintiff promised to pay the defendant the price in accordance with the terms of their contract. n option contract is a privilege e%isting in one person for which he had paid a consideration, which gives him the right to buy during the certain period. "he contract of option, being different from the contract, may be entered into by the parties upon the consummation of the option, its consideration is li!ewise entirely different. 28 FULE V CA: .ontracts are perfected by mere consent. Jrom this moment, the parties are bound not only to fulfillment of what has been e%pressly stipulated but also to all consequences which, according to their nature, may be in !eeping with good faith, usage and law. <eing consensual, a contract of sale has the force of law and they are e%pected to abide in good faith by their contractual commitments.

14

(%! A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. <ntil such announcement is made, any bidder may retract his bid' and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve. (-! A right to bid may be reserved e2pressly by or on behalf of the seller, unless otherwise provided by law or by stipulation. (4! Ehere notice has not been given that a sale by auction is sub&ect to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ or induce any person to bid at such sale on his behalf or for the auctioneer, to employ or induce any person to bid at such sale on behalf of the seller or /nowingly to ta/e any bid from the seller or any person employed by him. Any sale contravening this rule may be treated as fraudulent by the buyer. (n! 1. %. -. )ontract is perfected when the auctioneer accepts the bid by the fall of the hammer or gavel or in any other customary manner. 3f auction is announced to be Owithout reserve,K goods cannot be withdrawn from the sale after the bid is made. By ta/ing part in the auction and offering bidding, the buyer voluntarily submitted to the terms and conditions of the auction sale announced in the notice. :uffingLby@bidding * means employed by owner to increase the price of the bids' illegal.

4. lace o# er#ection (1ee Art. 1-18 at page 11) A where the offer was made +(65AB3"3?1 (+ "9? )(>"6A)" 1. >eneral rule1 #orm not im ortant Art. 148(. 1ub&ect to the provisions of the 1tatute of +rauds and of any other applicable statute, a contract of sale may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the conduct of the parties. (n! Art. 1(58. "he following must appear in a public document$ (1! Acts and contracts which have for their ob&ect the creation, transmission, modification or e2tinguishment of real rights over immovable property' sales of real property or of an interest therein a governed by Articles 14,-, >o. %, and 14, ' (%! "he cession, repudiation or renunciation of hereditary rights or of those of the con&ugal partnership of gains' (-! "he power to administer property, or any other power which has for its ob&ect an act appearing or which should appear in a public document, or should pre&udice a third person' (4! "he cession of actions or rights proceeding from an act appearing in a public document. &. /+ce tions a) Statute o# 2rauds Art. 14.(. "he following contracts unenforceable, unless they are ratified$ are

4.

(. earnest mone* 5c#. o tion mone*7 Art. 148&. Ehenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. (14 4a! :ayment of earnest money * considered payment of part of the price' proof of perfection of the contract' may be given as a guarantee that the vendee would not bac/ out. /ARN/0T ;ON/C 59I;0ON =. CA A 233$43$+ 047 :art of the purchase price Aiven only when there is already a sale Ehen given, the !u'er is bound to pay the balance OPTION ;ON/C

Distinct consideration for an option contract Aiven when the sale is not yet perfected Ehen given, the would5 !e !u'er is not bound to pay the balance' he may even forfeit it

(%! "hose that do not comply with the 1tatute of +rauds as set forth in this number. 3n the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent' evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents$ (a! An agreement that by its terms is not to be performed within a year from the ma/ing thereof' (d! An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the

15

evidences, or some of them, of such things in action or pay at the time some part of the purchase money' but when a sale is made by auction and entry is made by the auctioneer in his sales boo/, at the time of the sale, of the amount and /ind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum' (e! An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein' Art. 14.5. )ontracts infringing the 1tatute of +rauds, referred to in >o. % of Article 14,-, are ratified by the failure to ob&ect to the presentation of oral evidence to prove the same, or by the acceptance of benefit under them. :<6:(1? (+ 1"A"<"?$ to prevent fraud and per&ury in the enforcement of obligations depending for their evidence upon the unassisted memory of witnesses. ?G)?:"3(>1 "( 1"A"<"? (+ +6A<D1 a. Ehen there is a note or memorandum thereof in writing, and subscribed by the party charged or his agent b. Ehen there has been partial consummation c. Ehen there has been a failure to ob&ect to the presentation of evidence d. 1ales through electronic commerce !) sale o# realt' t roug an agent Art. 1874. Ehen a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing' otherwise, the sale shall be void. (n! "he agentNs authority to sell should be in writing' otherwise, void%8. c) sale o# large cattle 0ec. 5&-6 Revise" A"ministrative Co"e . >o transfer of large cattle shall be valid unless the same is registered and a certificate of transfer obtained as herein provided' but large cattle under two years of age may be registered and branded gratis for the purpose of effecting a valid transfer are made at the same time. 6egistration is made with the municipal treasurer.
29

d) secondar' evidence 1. Before secondary evidence may be introduced of the terms of the sale, due e2ecution and subsequent loss of the original instrument must be proved. %. Due e,ecution * may be proved by the testimony of the person who e2ecuted it, the person before whom its e2ecution was ac/nowledged, or any person who was present and saw it e2ecuted and delivered, or whom, after its e2ecution and delivery, saw it and recogni7ed the signatures, or by a person to whom the parties to the instrument had previously confessed the e2ecution thereof. e) )A 67-0 55 +lectronic 7ommerce (pertinent provisions provided in#ra! Act

Sec. 7. Legal )ecognition o# +lectronic documents@ ?lectronic documents shall have the legal effect, validity or enforceability as any other document or legal writing, and@ (a! Ehere the law requires a document to be in writing, that requirement is met by an electronic document if the said electronic document maintains its integrity and reliability and can be authenticated so as to be usable for subsequent reference, in that* i. "he electronic document has remained complete and unaltered, apart from the addition of any endorsement and any authori7ed change, or any change which arises in the normal course of communication, storage and display' and ii. "he electronic document is reliable in the light of the purpose for which it was generated and in the light of all relevant circumstances. (b! :aragraph (a! applies whether the requirement therein is in the form of an obligation or whether the law simply provides consequences for the document not being presented or retained in its original from. (c! Ehere the law requires that a document be presented or retained in its original form, that requirement is met by an electronic document if@ i. "here e2ists a reliable assurance as to the integrity of the document

CIT! LITE REALT! V CA: "here was no perfected contract between J.C. 7oldings and .ity Kite. rt. (13) provides that when the sale of the piece of land or any interest therein is through an agent, the authority of the agent shall be in writing# otherwise, the sale shall be void. "he absence of the authority to sell can be determined from the written memorandum issued by J.C. 7oldingGs president, requesting ;etro 8rugGs assistance in finding buyers. Jinal evaluation, appraisal and acceptance can only be made by J.C. 7oldings.

16

from the time when it was first generated in its final from' and ii. "hat document is capable of being displayed to the person to whom it is to be presented$ :rovided, "hat no provision of this Act shall apply to vary any and all requirements of e2isting laws on formalities required in the e2ecution of documents for their validity. +or evidentiary purposes, an electronic document shall be the functional equivalent of a written document under e2isting laws. "his Act does not modify any statutory any statutory rule relating to admissibility of electronic data massages or electronic documents, e2cept the rules relating to authentication and best evidence. Sec. 8. Legal )ecognition o# +lectronic Signatures .@ An electronic signature on the electronic document shall be equivalent to the signature of a person on a written document if the signature is an electronic signature and proved by showing that a prescribed procedure, not alterable by the parties interested in the electronic document, e2isted under which@ (a! A method is used to identify the party sought to be bound and to indicate said party4s access to the electronic document necessary for his consent or approval through the electronic signature' (b! 1aid method is reliable and appropriate for the purpose for which the electronic document was generated or communicated, in the light of all circumstances, including any relevant agreement' (c! 3t is necessary for the party sought to be bound, in or order to proceed further with the transaction to have e2ecuted or provided the electronic signature' and (d! "he other party is authori7ed and enable to verify the electronic signature and to ma/e the decision to proceed with the transaction authenticated by the same. Sec. 11. Aut entication o# +lectronic Data Messages and +lectronic Documents%5 <ntil the 1upreme )ourt by appropriate rules shall have so provided, electronic documents, electronic data messages and electronic signatures, shall be authenticated by demonstrating, substantiating and validating a claimed identity of a user, device, or another entity is an information or communication system, among other ways, as follows' (a! "he electronic signatures shall be authenticated by proof that a letter, character, number or other symbol in electronic form representing the persons named in and attached to or logically

associated with an electronic data message, electronic document, or that the appropriate methodology or security procedures, when applicable, were employed or adopted by such person, with the intention of authenticating or approving in an electronic data message or electronic document' (b! "he electronic data message or electronic document shall be authenticated by proof that an appropriate security procedure, when applicable was adopted and employed for the purpose of verifying the originator of an electronic data message or electronic document, or detecting error or alteration in the communication, content or storage of an electronic document or electronic data message from a specific point, which, using algorithms or codes, identifying words or numbers, encryptions, answers bac/ or ac/nowledgement procedures, or similar security devices. "he 1upreme )ourt may adopt such other authentication procedures, including the use of electronic notari7ation systems as necessary and advisable, as well as the certificate of authentication on printed or hard copies of the electronic documents or electronic data messages by electronic notaries, service providers and other duly recogni7ed or appointed certification authorities. "he person see/ing to introduce an electronic data message or electronic document in any legal proceeding has the burden of proving its authenticity by evidence capable of supporting a finding that the electronic data message or electronic document is what the person claims it on be. 3n the absence of evidence to the contrary, the integrity of the information and communication system in which an electronic data message or electronic document is recorded or stored may be established in any legal proceeding * a.! By evidence that at all material times the information and communication system or other similar device was operating in a manner that did not affect the integrity of the electronic data message or electronic document, and there are no other reasonable grounds to doubt the integrity of the information and communication system, b.! By showing that the electronic data message or electronic document was recorded or stored by a party to the

17

proceedings who is adverse in interest to the party using it' or c.! By showing that the electronic data message or electronic document was recorded or stored in the usual and ordinary course of business by a person who is not a party to the proceedings and who did not act under the control of the party using the record.

(1! Ehen he signifies his approval or acceptance to the seller or does any other act adopting the transaction' (%! 3f he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of re&ection, then if a time has been fi2ed for the return of the goods, on the e2piration of such time, and, if no time has been fi2ed, on the e2piration of a reasonable time. Ehat is a reasonable time is a question of fact. a%a) sale on return i. (wnership passes on delivery but buyer may revest such ownership to the seller by returning or tendering goods within the time fi2ed or within a reasonable time As opposed to a )onditional 1ale (where title passes upon full payment or satisfaction of condition passing of legal title!, in sale on return, title passes on delivery a%!) sale on approval i. "itle passes * in case of goods sent to the buyer on the hope that the latter will find them satisfactory and order that type of goods * when the goods are used or when they were retained beyond a reasonable time a.c! e2ecutory sales i. ii. (wnership of the thing shall not pass until the price is fully paid 1eller may reserve the right of possession or ownership in the goods until certain conditions have been fulfilled

=II. TRAN08/R O8 O4N/R0?IP A. 5anner of transfer Art. 1477. "he ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. (n! Art. 14-'. "he ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 148= to 1 ,1, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. (n! 1. >eneral rule (wnership of thing shall transfer to the vendee upon the A)"<AB or )(>1"6<)"3C? D?B3C?6P of the thing sold-, (6$ any manner signifying an agreement that possession is transferred from vendor to vendee (Art. 148.! a. b. )ontract of sale constitutes a 63A9" to "6A>1+?6 or A)M<313"3(> of (E>?6193: Delivery is the method of accomplishing this right

ii.

&. /+ce tions a) sale on approval. trial. or satis#action Art. 15.&. Ehen goods are delivered to the buyer Ion sale or returnI to give the buyer an option to return the goods instead of paying the price, the ownership passes to the buyer of delivery, but he may revest the ownership in the seller by returning or tendering the goods within the time fi2ed in the contract, or, if no time has been fi2ed, within a reasonable time. (n! Ehen goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the ownership therein passes to the buyer$
30

!) e,press reservation Art. 1478. "he parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. (n! c) implied reservation Art. 15.(. Ehen there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. "he right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.

"UEN IE V. MAC"E ' CHANDLER: the ownership of personal property can not be transferred to the prejudice of third persons e%cept by delivery of the property itself# and that a sale without delivery gives the wouldIbe purchaser no rights in said property e%cept those of a creditor

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(. Din"s o# "eliver* a) real deliver' Art. 14-7. "he thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee. (14.%a! ODeliveredK * when placed in the control and possession of the vendee' conveyance of ownership without pre&udice to the right of vendor to claim payment of the price-1 b! constructive delivery b.a! symbolic Art. 14-8. Ehen the sale is made through a public instrument, the e2ecution thereof shall be equivalent to the delivery of the thing which is the ob&ect of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. Eith regard to movable property, its delivery may also be made by the delivery of the /eys of the place or depository where it is stored or /ept. (14.-a! i! delivery by public instrument-% Ehen sale is made through a public instrument, the ?G?)<"3(> thereof shall be equivalent to delivery 3+ from the deed the contrary does not appear o operates as formalLsymbolic delivery

authori7es buyer to use such document as proof of ownership 1ymbolic delivery may produce the effect of tradition if vendor have had such control over the thing sold that at the moment of the sale, its material delivery could have been made A?>?6AB 6<B?$ he who purchases through a public instrument should be deemed a Opossessor in factK and this presumption should give way before proof to the contrary A person must be in A)"<AB :(11?113(> to be able to transfer )(>1"6<)"3C? :(11?113(> through public instrument o ii! "raditio Bonga 5anu

Art. 14--. "he delivery of movable property may li/ewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his possession for any other reason. (14.-a! "raditio Bonga 5anu * delivery ta/es place when the thing is placed in the sight of the purchaser so that he can ta/e possession of it at pleasure iii! "raditio brevi manu "raditio Brevi 5anu-- * delivery of movable property ta/es place when the vendee had the thing already in his possession before the sale too/ place, not as owner but as lessee, borrower or depositary. iv! "raditio )onstitutum :ossessorium Art. 15... "here may also constitutum possessorium. (n! be tradition

31

BEAN V. CAD#ALLER: ctual manual delivery of an article sold is not essential to the passing of the title thereto +art (),6, .ivil .ode- unless made so by the terms of the contract or by an understanding of the parties. "he parties to the contract may agree when and on what conditions the property in the subject of the contract was passed to the prospective owner 32 FLORENDO V. FO : $t is the material delivery of the property sold which the defendant must ma!e in compliance with the contract, inasmuch as the formal delivery de jure was made, according to the provisions of article ()09, 9nd paragraph, of the same code: When the sale should be made by means of a public instrument, the e%ecution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if in said instrument the contrary does not appear or may be clearly inferred. s the contrary does not appear nor is to be inferred from the public instrument e%ecuted by the defendant, its e%ecution was really a formal or symbolical delivery of the property sold and authori@ed the plaintiff to use the tile of ownership as proof that he was thenceforth the owner of the property# MASALLO V. CESAR: s ;atea .rispino admits, however, that she did not have possession of the land when she e%ecuted and delivered her deed to plaintiff, the mere e%ecution and delivery of the deed did not constitute a delivery of possession SPOUSES VELARDE V. CA: "he general rule, therefore, is that the e%ecution of public instrument has the same legal effects as actual or physical delivery, i.e., it transfers ownership of the subject matter to the buyer, and constitutes valid compliance by the seller of his obligations under the contract of sale.

33

HEIRS OF PEDRO ESCANLAR V. CA : "he September (,, (*31 sale of rights, interests and participation as to (L9 portion pro indiviso of the two subject lots is a contract of sale for the following reasons: Jirst, private respondents as sellers did not reserve unto themselves the ownership of the property until full payment of the unpaid balance of C99,,666.66. Second, there is no stipulation giving the sellers the right to unilaterally rescind the contract the moment the buyer fails to pay within the fi%ed period. 9) Crior to the sale, petitioners were in possession of the subject property as lessees. 4pon sale to them of the rights, interests and participation as to the (L9 portion pro indiviso, they remained in possession, not in concept of lessees anymore but as owners now through symbolic delivery !nown as traditio brevi manu. 4nder rticle ()33 of the .ivil .ode, the ownership of the thing sold is acquired by the vendee upon actual or constructive delivery thereof

19

3n traditio constitutum possessorium, the vendor remains in possession of the property sold, by virtue of a lease agreement with the vendee-4. Cendee became as lessor, the legal possessor while the vendor is in material possession of the property in the name and representation of the vendee. v! delivery to common carrier

Art. 15.(. Ehen there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. "he right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer. Ehere goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to the order of the seller or of his agent, the seller thereby reserves the ownership in the goods. But, if e2cept for the form of the bill of lading, the ownership would have passed to the buyer on shipment of the goods, the seller4s property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract. Ehere goods are shipped, and by the bill of lading the goods are deliverable to order of the buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the possession of the goods as against the buyer. Ehere the seller of goods draws on the buyer for the price and transmits the bill of e2change and bill of lading together to the buyer to secure acceptance or payment of the bill of e2change, the buyer is bound to return the bill of lading if he does not honor the bill of e2change, and if he wrongfully retains the bill of
34

lading he acquires no added right thereby. 3f, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is indorsed in blan/, or to the buyer by the consignee named therein, one who purchases in good faith, for value, the bill of lading, or goods from the buyer will obtain the ownership in the goods, although the bill of e2change has not been honored, provided that such purchaser has received delivery of the bill of lading indorsed by the consignee named therein, or of the goods, without notice of the facts ma/ing the transfer wrongful. (n! Art. 15&(. Ehere, in pursuance of a contract of sale, the seller is authori7ed or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of <nless otherwise agreed, where goods are sent by the seller to the buyer under circumstances in which the seller /nows or ought to /now that it is usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their transit, and, if the seller fails to do so, the goods shall be deemed to be at his ris/ during such transit. (n! >/N/RA9 RU9/1 Delivery of goods to carrier is considered delivery to the buyer, and hence, title passed to the buyer at the point of shipment /EC/PTION1 1eller may reserve title by the form of the bill of lading with intent to remain the owner for all purposes and not merely for the sole purpose of securing payment, or unless contrary intent appears in the contract of sale a. i. Terms6 F#.o.!.G@ Fc.i.#.G@ F#.a.s.G

BAUTISTA V SIOSON : =ven if the vendor sells the property again to another, the second purchaser cannot acquire ownership as he bought the property from a mere tenant. $n a case which frequently occurs, where the vendor, on the same date on which the deed of sale is e%ecuted, by means of a constitutum possessorium agreement converts himself into a tenant or lessee of the property that he sold, and continues in possession thereof as such tenant, the purchaser who acquired the property through delivery or symbolic tradition, with all the consequent effects of a deed of conveyance, is deemed to be in possession thereof by the e%press will of the contracting parties, and therefore, it must be recogni@ed that, through such constitutum possessorium agreement, the purchaser, who by that covenant becomes the lessor, is in lawful possession of the leased property, and that the vendor, by the same covenant, converted himself into the lessee and is in material possession of the leased property in the name and representation of the purchaser, its lawful owner.

f.o.b. @ Ofree on boardK means that the seller bears e2penses of transportation up to the #%o%!% point. ii. c.i.f. @ Ocost, insurance, freightK signifies that the price quoted includes the costs of the goods, insurance, and freight charges on the goods up to the place of destination iii. f.a.s. * Ofree alongsideK means that the seller bears the e2penses of transportation until he delivers the goods alongside a vessel at a named post. "hese terms may be used only in connection with fi2ing the price and will not be construed as fi2ing the place of delivery to the buyer

20

!) sale o# mova!les:; Best indication of the intention of parties as to the place of delivery is the manner and place of payment agreed upon by the parties o Ehere price is payable upon proof of shipment, then the buyer agrees to accept delivery at the point of shipment Ehere the price is payable only upon arrival of the goods at the point of destination, then that is the place of delivery to the buyer vi! effect of form of bill of lading (wnership is retained$ "he seller may consign the goods to himself or to his agent and thus prevent title from passing to the buyer until the latter pays the price 5ere possession is retained$ "he seller may consign the goods to the order of the buyer on the latterNs agent but by retaining the bill of lading, he thereby prevents the buyer from obtaining the goods from the carrier until price is paid Art. 1544 517. 3f the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first ta/en possession thereof in good faith, if it should be movable property. c) sale o# immova!les Art. 1544 5&7. 1hould it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the 6egistry of :roperty. "o be entitled to priority, the second buyer must not only show prior recording of his deed but must have acted in good faith, without /nowledge of the e2istence of another alienation by the vendor to another :(11?11(6 3> A((D +A3"9$ one who is not aware that there e2ists in his title or mode of acquisition any flaw which invalidates it good faith is always presumed' burden of proof is on person alleging bad faith good faith of second buyer must continue until his contract ripens into ownership by tradition or recording as to "orrens title$ it is enough that purchaser e2amines the latest certificate of title issued in the name of his vendor and he need not trace its origin to prior certificates of title

4. Dou!le 0ales Art. 1544. 3f the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first ta/en possession thereof in good faith, if it should be movable property. 1hould it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the 6egistry of :roperty. 1hould there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession' and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (14=-! 3f the same thing should have been sold by the owner to different buyers, the question as to who of the latter acquired ownership depends on the nature of the thing sold. a) (eneral )ule 8 9rior tempore. prior &ure:5

d) Sale !' virtue o# e,ecution or attac ment 1. A?>?6AB 6<B?$ Article 1 44 not applicable to e2ecution sales because the purchaser at such sales is substituted to or acquires whatever rights, title or interests the &udgment debtor may have over the property as of the time of levy. J3t is the duty of the purchaser, before bidding, to ascertain the rights of the &udgment debtor over the property.Q ?G)?:"3(>$ Attachment or e2ecution cannot pre&udice prior unrecorded sales made by the

35

CARBONELL V CA: 2ose Concio sold his lot to .arbonell on 93 2an (*,, and ) days later sold the same property to $nfante. formal deed of sale was e%ecuted in favor of $nfante. .arbonell, upon seeing $nfante building a wall around the lot, registered an adverse claim on the property. "he deed of sale in favor of $nfante was later registered and the latter was thereafter in possession of the lot. Hel() "he second sale was not valid. s there in inscription, prior registration in good faith is preIcondition to a superior title. .arbonell registered her adverse claim four days before the registration of the property by $nfante.

%.

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RIVERA V ONG: Ong .he has a better title to the property +over which he and Aivera had overlapping claims-. 7e was a purchaser of the articles in good faith, acquired possession by virtue of his purchase, and therefore has a better title than the first purchaser.

21

-.

&udgment debtor, and is preferred only over claims contracted subsequent to its recording ?G)?:"3(> "( "9? ?G)?:"3(>$ Above rule does not apply to lands registered under Act 48. which provides that registration of instruments shall be the Ooperative act to convey and affect the landK' hence, prior unrecorded sale cannot pre&udice e2ecution sales i# no t ird5part' claim was presented !e#ore t e e,ecution sale too/ place . J"hird persons are not required to go beyond the register and determine the condition of the property.Q

(d! "a2 sale, attachment and levy, notice of lis pendens, adverse claim and other instruments in the nature of involuntary dealings with respect to unregistered lands, if made in the form sufficient in law, shall li/ewise be admissible to record under this section. (e! +or the services to be rendered by the 6egister of Deeds under this section, he shall collect the same amount of fees prescribed for similar services for the registration of deeds or instruments concerning registered lands.

e) <nregistered land P.D. 15&-6 0ec. 11(. 6ecording of instruments relating to unregistered lands. @ >o deed, conveyance, mortgage, lease, or other voluntary instrument affecting land not registered under the "orrens system shall be valid, e2cept as between the parties thereto, unless such instrument shall have been recorded in the manner herein prescribed in the office of the 6egister of Deeds for the province or city where the land lies. (a! "he 6egister of Deeds for each province or city shall /eep a :rimary ?ntry Boo/ and a 6egistration Boo/. "he :rimary ?ntry Boo/ shall contain, among other particulars, the entry number, the names of the parties, the nature of the document, the date, hour and minute it was presented and received. "he recording of the deed and other instruments relating to unregistered lands shall be effected by any of annotation on the space provided therefor in the 6egistration Boo/, after the same shall have been entered in the :rimary ?ntry Boo/. (b! 3f, on the face of the instrument, it appears that it is sufficient in law, the 6egister of Deeds shall forthwith record the instrument in the manner provided herein. 3n case the 6egister of Deeds refuses its administration to record, said official shall advise the party in interest in writing of the ground or grounds for his refusal, and the latter may appeal the matter to the )ommissioner of Band 6egistration in accordance with the provisions of 1ection 11= of this Decree. 3t shall be understood that any recording made under this section shall be without pre&udice to a third party with a better right. (c! After recording on the 6ecord Boo/, the 6egister of Deeds shall endorse among other things, upon the original of the recorded instruments, the file number and the date as well as the hour and minute when the document was received for recording as shown in the :rimary ?ntry Boo/, returning to the registrant or person in interest the duplicate of the instrument, with appropriate annotation, certifying that he has recorded the instrument after reserving one copy thereof to be furnished the provincial or city assessor as required by e2isting law.

6egistration requirement is understood to be without pre&udice to third party with a better right-= 5ere registration of sale in oneNs favor does not give him any right over the land$ o if the vendor was not the owner of the land o if the vendor has already parted with his ownership before such sale in favor of third party who had previously ta/en possession of the land, even though the prior sale was unrecorded A person having a Obetter rightK would be one who had previously acquired ownership thereof through the modes of acquiring ownership under the )ivil )ode$ tradition as a result of sale, donation, succession and prescription-#

#) 2irst in possession in good #ait 3f neither vendee registered the sale in his favor or registration was done in bad faith, the vendee who was first in possession in good faith acquired ownership of the land-8
37

NAA#AN RURAL BAN" V. CA: $t is a wellI!nown rule in this jurisdiction that persons dealing with registered land have the legal right to rely on the face of the "orrens .ertificate of "itle and to dispense with the need to inquire further, e%cept when the party concerned has actual !nowledge of facts and circumstances that would impel a reasonably cautious man to ma!e such inquiry. 38 HANOPOL V PILAPIL: better right which is unrecorded and which would prevail over a recorded sale is one which was gained independently of the sale, as title by prescription. 39 SANCHE V RAMOS: 8elivery may be actual or constructive. "hus, if the first sale is evidenced in a public instrument, there is delivery of the thing sold, if the contrary does not appear in the deed. QUIMSON V ROSETE: Cossession includes not only material but also symbolic possession which is acquired through the e%ecution of a public instrument. s the land was considered delivered by the e%ecution of the public instrument, the vendor remained in possession by mere tolerance of the first vendee. 7ence, when the land was sold again to defendant, the vendor did not transmit anything to him, and the possession of the latter was a mere detainer. "he first vendee acquired ownership by

22

g) 3ldest title 1. 3f neither of the vendees registered their deeds of sale nor acquired possession of the land sold, the one who can present the oldest title provided there is good faith, has the better right. O(lder titleK means any document showing acquisition of the land in good faith, li/e a deed of sale or a receipt for the price' :ublic document is not included as there is delivery thru a public instrument, unless the contrary can be clearly inferred therefrom =III. RI0D O8 9O00 OR D/T/RIORATION

(1! As avoided' or (%! As valid in all of the e2isting goods or in so much thereof as have not deteriorated, and as binding the buyer to pay the agreed price for the goods in which the ownership will pass, if the sale was divisible. (n! a! 3f at the time the sale is perfected, the thing had been lost entirely, the contract shall be ineffective. "his is because there can be no contract without an ob&ect. "he loss must have occurred before the contract was entered into, without the /nowledge of both parties. (ptions of buyer when there is partial loss and a loss which results in substantial change in character ( Eithdraw from the contract ( Buy the remainder at a proportionate price (. 4,en loss occurs a#ter !e#ore "eliver* er#ection !ut

%. -.

b! c! A. Aeneral rule Art. 1&'(. 3n an obligation to deliver a generic thing, the loss or destruction of anything of the same /ind does not e2tinguish the obligation. (n! An obligation to deliver a generic thing is not e2tinguished by loss because genus never perishes. >("? that the ne2t - situations contemplate loss of specific things 1. 4,en loss occurs !e#ore er#ection

Ehen loss occurred before perfection, it is borne by the seller. "his is because ownership is still with him4,. &. 4,en loss occurs at t,e time o# er#ection

Art. 14-'. "he ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 148= to 1 ,1, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. (n! Art. 15.4. <nless otherwise agreed, the goods remain at the seller4s ris/ until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer4s ris/ whether actual delivery has been made or not, e2cept that$ (1! Ehere delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer4s ris/ from the time of such delivery' (%! Ehere actual delivery has been delayed through the fault of either the buyer or seller the goods are at the ris/ of the party in fault. (n! Art. 14.'. Ehen a contract is enforceable under the 1tatute of +rauds, and a public document is necessary for its registration in the 6egistry of Deeds, the parties may avail themselves of the right under Article 1- =. Art. 118-. Ehen the conditions have been imposed with the intention of suspending the

Art. 14-(. 3f at the time the contract of sale is perfected, the thing which is the ob&ect of the contract has been entirely lost, the contract shall be without any effect. But if the thing should have been lost in part only, the vendee may choose between withdrawing from the contract and demanding the remaining part, paying its price in proportion to the total sum agreed upon. (14.,a! Art. 14-4. Ehere the parties purport a sale of specific goods, and the goods without the /nowledge of the seller have perished in part or have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the sale$

delivery thru the e%ecution of a public instrument. 40 ROMAN V GRIMALT: "he sale was not perfected as the buyer agreed to buy the vessel, provided that the title was in proper form. s the vendor failed to perfect his title, the loss was borne by him

23

efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition$ (1! 3f the thing is lost without the fault of the debtor, the obligation shall be e2tinguished' (%! 3f the thing is lost through the fault of the debtor, he shall be obliged to pay damages' it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its e2istence is un/nown or it cannot be recovered' (-! Ehen the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor' (4! 3f it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case' ( ! 3f the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor' (.! 3f it is improved at the e2pense of the debtor, he shall have no other right than that granted to the usufructuary. (11%%! Art. 15(8. 3n case of loss, deterioration or improvement of the thing before its delivery, the rules in Article 11#8 shall be observed, the vendor being considered the debtor. (n! Ehen loss occurs after perfection but before delivery, the seller bears the ris/ of loss. "he buyer does not bear the ris/ of loss until the goods are delivered, actually or constructively. "his is because the rule is a combination of the common@law rule that the owner bears the ris/ of loss (res perit domino!, and the 6oman law requiring delivery to transfer ownership. B. Ehen ownership is transferred A?>?6AB 6<B?1$ 1. "he ris/ of loss shall be borne by the owner. %. (wnership is transferred upon delivery. ?G)?:"3(>1$ 1. )ontrary stipulation41
41

%. 1ecurity title4% -. Delay through the fault of the buyer or the seller4- * at the ris/ of the party at fault IE. DOCU;/NT0 O8 TIT9/ Document of title * a document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authori7ing or purporting to authori7e the possessor of the document to transfer or receive, either by endorsement or by delivery, goods represented by such document. (Art. 1.-.!44 "he functions of documents of title are (1! ?vidence of the possession or control of the goods described therein (%! 5edium of transferring title and possession over the goods described therein without having to effect actual delivery thereof (Villanueva) Art. 1511. A document of title which is not in such form that it can be negotiated by delivery may be transferred by the holder by delivery to a purchaser or donee. A non@negotiable document cannot be negotiated and the endorsement of such a document gives the transferee no additional right. (n!
for the goods. Second, the vendor has fully performed his contract and the vendee received what he bargained for. "hird, the policy of providing an incentive to care properly for the goods, which is under the control and dominion of the vendee. 42 LA#!ER$S COOP. V TABORA: 8espite the loss of the boo!s in a fire, the ris! of loss would be borne by the buyer although he was not the owner yet. "his is because the stipulation Eownership shall only be transferred upon full paymentF was agreed merely to secure the performance by the buyer of his obligation. ;oreover, in the contract, it was agreed that loss or damage to the boo!s after delivery to the buyer shall be borne by the buyer. While under the rule, an obligor should be e%empt from liability when the loss occurs in a fortuitous event, this cannot be used by the buyer as a defense to e%empt himself from paying. 7is obligation does not pertain to the delivery of the subject matter, but to the payment of the purchase price. "he ability to pay in money or legal tender is never lost through a fortuitous event. 43 NORTH NEGROS SUGAR CO. V CIA. GEN DE TABACOS: $f there was delay in accepting delivery but there was segregation of goods, such that place of delivery was at the sellerGs warehouse, the buyer bears the ris! of loss. "his is because the seller becomes merely a depositary. 44 PHIL. TRUST CO. V NATIONAL BAN" : "he purpose of documents of title is that the seller is allowed by fiction of law to deal with the goods described therein as though he had physically delivered them to the buyer# and the buyer may ta!e the document of title as though he had actually ta!en possession and control over the goods described therein

SUN BROS. APPLIANCES V PERE : "he law allows an agreement which stipulates that +(- where goods are sold and delivered to the buyer, the title is to remain in the seller until full payment, >but? +9- the loss or destruction of the property while in the possession of the buyer before payment, does not relieve him from the obligation to pay the price# in which case, the buyer suffers the loss. "he reasons for its validity are: Jirst, the absolute and unconditional nature of the vendeeGs promise to pay

24

1. Ne)otia!le "ocuments o# title Art. 1 ,=. A document of title in which it is stated that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such document is a negotiable document of title. (n! >egotiable document of title * a document of title in which it is stated that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such document. a) ow negotiated Art. 15.8. A negotiable document of title may be negotiated by delivery$ (1! Ehere by the terms of the document the carrier, warehouseman or other bailee issuing the same underta/es to deliver the goods to the bearer' or (%! Ehere by the terms of the document the carrier, warehouseman or other bailee issuing the same underta/es to deliver the goods to the order of a specified person, and such person or a subsequent endorsee of the document has indorsed it in blan/ or to the bearer. Ehere by the terms of a negotiable document of title the goods are deliverable to bearer or where a negotiable document of title has been indorsed in blan/ or to bearer, any holder may indorse the same to himself or to any specified person, and in such case the document shall thereafter be negotiated only by the endorsement of such endorsee. (n! Art. 15.-. A negotiable document of title may be negotiated by the endorsement of the person to whose order the goods are by the terms of the document deliverable. 1uch endorsement may be in blan/, to bearer or to a specified person. 3f indorsed to a specified person, it may be again negotiated by the endorsement of such person in blan/, to bearer or to another specified person. 1ubsequent negotiations may be made in li/e manner. (n! Art. 151.. 3f a document of title which contains an underta/ing by a carrier, warehouseman or other bailee to deliver the goods to bearer, to a specified person or order of a specified person or which contains words of li/e import, has placed upon it the words Inot negotiable,I Inon@negotiableI or the li/e, such document may nevertheless be negotiated by the holder and is a negotiable document of title within the meaning of this "itle. But nothing in this "itle contained shall be construed as limiting or defining the effect upon the obligations of the carrier, warehouseman, or other bailee issuing a document of title or placing thereon the words Inot negotiable,I Inon@negotiable,I or the li/e. (n!

T/R;0 O8 T?/ DOCU;/NT Aoods are deliverable to bearer ?ndorsed in blan/ by the person to whose order the goods were deliverable Aoods are deliverable to the order of a specified person !) w o ma' negotiate it

?O4 N/>OTIAT/D By delivery of the document to another

By indorsement of such person

Art. 151&. A negotiable document of title may be negotiated$ (1! By the owner therefor' or (%! By any person to whom the possession or custody of the document has been entrusted by the owner, if, by the terms of the document the bailee issuing the document underta/es to deliver the goods to the order of the person to whom the possession or custody of the document has been entrusted, or if at the time of such entrusting the document is in such form that it may be negotiated by delivery. (n! c) rig ts ac"uired !' negotiation Art. 151(. A person to whom a negotiable document of title has been duly negotiated acquires thereby$ (1! 1uch title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser in good faith for value and also such title to the goods as the person to whose order the goods were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith for value' and (%! "he 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. (n! A person to whom negotiated acquires a document has been

1. rights of the vendor %. rights of the original consignee "hus, a buyer of a document of title may acquire a better title than his vendor, since he acquires the rights of the original consignee. d) <naut ori=ed negotiation Art. 1518. "he validity of the negotiation of a negotiable document of title is not impaired by

25

the fact that the negotiation was a breach of duty on the part of the person ma/ing the negotiation, or by the fact that the owner of the document was deprived of the possession of the same by loss, theft, fraud, accident, mista/e, duress, or conversion, if the person to whom the document was negotiated or a person to whom the document was subsequently negotiated paid value therefor in good faith without notice of the breach of duty, or loss, theft, fraud, accident, mista/e, duress or conversion. (n! "here is a conflict between Art. 1 1% and Art. 1 1# since under Art. 1 1%, only the owner of the document or one to whom possession of the document has been entrusted may negotiate it. 9owever, under Art. 1 1#, the validity of the negotiation of a negotiable document of title is not impaired by the fact that the negotiation was a breach of duty on the part of the person ma/ing the negotiation, or by the fact that the owner of the document was deprived of the possession of the same by loss, theft, fraud, accident, mista/e, duress, or conversion. (Baviera) e) implied warranties Art. 151'. A person who for value negotiates or transfers a document of title by endorsement or delivery, including one who assigns for value a claim secured by a document of title unless a contrary intention appears, warrants$ (1! "hat the document is genuine' (%! "hat he has a legal right to negotiate or transfer it' (-! "hat he has /nowledge of no fact which would impair the validity or worth of the document' and (4! "hat he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose, whenever such warranties would have been implied if the contract of the parties had been to transfer without a document of title the goods represented thereby. (n! Art. 1517. "he endorsement of a document of title shall not ma/e the endorser liable for any failure on the part of the bailee who issued the document or previous endorsers thereof to fulfill their respective obligations. (n! A person who negotiates a document of title warrants 1. the genuineness and validity of the document' %. his right to negotiate it' and, -. all the warranties of a vendor of goods. But he does not warrant that

1. the common carrier will fulfill its obligation to the deliver the goods' or %. the previous indorsers will fulfill their obligation. f! creditorNs right against the goods Art. 151-. 3f goods are delivered to a bailee by the owner or by a person whose act in conveying the title to them to a purchaser in good faith for value would bind the owner and a negotiable document of title is issued for them they cannot thereafter, while in possession of such bailee, be attached by garnishment or otherwise or be levied under an e2ecution unless the document be first surrendered to the bailee or its negotiation en&oined. "he bailee shall in no case be compelled to deliver up the actual possession of the goods until the document is surrendered to him or impounded by the court. (n! Art. 15&.. A creditor whose debtor is the owner of a negotiable document of title shall be entitled to such aid from courts of appropriate &urisdiction by in&unction and otherwise in attaching such document or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property which cannot readily be attached or levied upon by ordinary legal process. (n! Aoods in the hands of the carrier covered by a negotiable document cannot be attached or levied upon, <>B?11 1. the document be first surrendered to the carrier' or %. impounded by the court' or -. its negotiation be en&oined. )ationale #or t e rule* A negotiable document of title represents the goods' hence it is not allowable for a carrier to deliver the goods without the surrender of the bill of lading to them, or for the law to allow attachment on the goods. &. NonHne)otia!le "ocuments o# title a) ow trans#erred Art. 1514. A person to whom a document of title has been transferred, but not negotiated, acquires thereby, as against the transferor, the title to the goods, sub&ect to the terms of any agreement with the transferor. 3f the document is non@negotiable, such person also acquires the right to notify the bailee who issued the document of the transfer thereof, and thereby to acquire the direct obligation of such

26

bailee to hold possession of the goods for him according to the terms of the document. :rior to the notification to such bailee by the transferor or transferee of a non@negotiable document of title, the title of the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an attachment of e2ecution upon the goods by a creditor of the transferor, or by a notification to such bailee by the transferor or a subsequent purchaser from the transfer of a subsequent sale of the goods by the transferor. (n! !) rig ts ac"uired !' trans#er o# document o# title Art. 1515. Ehere a negotiable document of title is transferred for value by delivery, and the endorsement of the transferor is essential for negotiation, the transferee acquires a right against the transferor to compel him to endorse the document unless a contrary intention appears. "he negotiation shall ta/e effect as of the time when the endorsement is actually made. (n! "he law ma/es a distinction between OnegotiationK >negotia!le document o# title? and OtransferK >non5 negotia!le document o# title?. "ransfer * the assignment of rights of the consignee of a non@negotiable document of title to another * where an order document of title was sold or assigned, without indorsement "he transferee does not acquire a better title than his transferor >unli/e in a negotia!le document o# title. w ere t e !u'er ma' ac"uire a !etter title?.

paid, or is directly responsible for the price, or any other person who is in the position of a seller. (n! a! <npaid seller * if the whole price has not been paid or tendered, or when the chec/ received as conditional payment was dishonored by non@ payment or insolvency of the buyer. b! seller * includes the agent of the seller to whom the bill of lading was endorsed, or the consignor or agent who had paid the price or is responsible for the price, or any other person who is in the position of a seller. 6?5?D3?1 (+ A> <>:A3D 1?BB?6 Art 1526. 1ub&ect to the provisions of this "itle, notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller of goods, as such, has$ (1! A lien on the goods or right to retain them for the price while he is in possession of them' (%! 3n case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them' (-! A right of resale as limited by this "itle' (4! A right to rescind the sale as li/ewise limited by this "itle. Ehere the ownership in the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies a right of withholding delivery similar to and coe2tensive with his rights of lien and stoppage in transitu where the ownership has passed to the buyer. (n! a! @# owners ip over t e goods ad not 'et passed to t e !u'er* the seller, as owner, could retain the goods or resell them to another, without pre&udice to his liability for damages for any breach of contract committed by him. b! @# owners ip ad passed to t e !u'er !ut t e goods are still in t e possession o# t e seller or are in transit to t e !u'er* the unpaid seller could withhold delivery or stop the goods in transit should the buyer become insolvent. As a consequence of his lien over the goods, the unpaid seller could resell the goods to another or resume ownership over them, without court order, and may still used the buyer for damages 1. 9ien

E. R/;/DI/0 O8 AN UNPAID 0/99/R 5?A>3>A (+ <>:A3D 1?BB?6

Art 15&4. "he seller o# )oo"s is deemed to be an unpaid seller within the meaning of this "itle$ (1! Ehen the whole of the price has not been paid or tendered' (%! Ehen a bill of e2change or other negotiable instrument has been received as conditional payment, and the condition on which it was received has been bro/en by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise. 3n Articles 1 % to 1 - the term IsellerI includes an agent of the seller to whom the bill of lading has been indorsed, or a consignor or agent who has himself

27

Art 1527. 1ub&ect to the provisions of this "itle, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely$ (1! Ehere the goods have been sold without any stipulation as to credit' (%! Ehere the goods have been sold on credit, but the term of credit has e2pired' (-! Ehere the buyer becomes insolvent. "he seller may e2ercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer. (n! Art 1528. Ehere an unpaid seller has made part delivery of the goods, he may e2ercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an intent to waive the lien or right of retention. (n!

intended to operate as symbolical delivery of the whole. "he lien is not lost by the mere fact that the seller had already obtained &udgment for the price. e! )evival o# lien* the unpaid sellerNs lien is revived if the goods are returned by the buyer in wrongful repudiation of the contract. &. 0to a)e in Transitu

Art 1530. 1ub&ect to the provisions of this "itle, when the buyer of goods is or becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu, that is to say, he may resume possession of the goods at any time while they are in transit, and he will then become entitled to the same rights in regard to the goods as he would have had if he had never parted with the possession. (n! Art 1531. Aoods are in transit within the meaning of the preceding article$ (1! +rom the time when they are delivered to a carrier by land, water, or air, or other bailee for the purpose of transmission to the buyer, until the buyer, or his agent in that behalf, ta/es delivery of them from such carrier or other bailee' (%! 3f the goods are re&ected by the buyer, and the carrier or other bailee continues in possession of them, even if the seller has refused to receive them bac/. Aoods are no longer in transit meaning of the preceding article$ within the

Art 1529. "he unpaid seller of goods loses his lien thereon$ (1! Ehen he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the ownership in the goods or the right to the possession thereof' (%! Ehen the buyer or his agent lawfully obtains possession of the goods' (-! By waiver thereof. "he unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained &udgment or decree for the price of the goods. (n! a! "he unpaid sellerNs lien implies that he has a right to retain possession of the goods until payment or tender of the whole price, unless he agreed to sell on credit. b! 3f the unpaid seller agrees to sell on credit, he may refuse to deliver them if the buyer becomes insolvent, or if the term of the credit had e2pired and the price has not been paid. c! Loss o# lien* the unpaid seller losses his lien when$ 1. he delivers the goods to the carrier or other bailee, consigning them to the buyer under a straight or non@negotiable bill of lading, or %. when the goods were delivered to the buyer, or -. when he waived his lien. d! 3t is not lost on the remainder of the goods when only partial delivery was made, unless such was

(1! 3f the buyer, or his agent in that behalf, obtains delivery of the goods before their arrival at the appointed destination' (%! 3f, after the arrival of the goods at the appointed destination, the carrier or other bailee ac/nowledges to the buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or his agent' and it is immaterial that further destination for the goods may have been indicated by the buyer' (-! 3f the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf. 3f the goods are delivered to a ship, freight train, truc/, or airplane chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the possession of the carrier as such or as agent of the buyer.

28

3f part delivery of the goods has been made to the buyer, or his agent in that behalf, the remainder of the goods may be stopped in transitu, unless such part delivery has been under such circumstances as to show an agreement with the buyer to give up possession of the whole of the goods. (n! Art 1532. "he unpaid seller may e2ercise his right of stoppage in transitu either by obtaining actual possession of the goods or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. 1uch notice may be given either to the person in actual possession of the goods or to his principal. 3n the latter case the notice, to be effectual, must be given at such time and under such circumstances that the principal, by the e2ercise of reasonable diligence, may prevent a delivery to the buyer. Ehen notice of stoppage in transitu is given by the seller to the carrier, or other bailee in possession of the goods, he must redeliver the goods to, or according to the directions of, the seller. "he e2penses of such delivery must be borne by the seller. 3f, however, a negotiable document of title representing the goods has been issued by the carrier or other bailee, he shall not obliged to deliver or &ustified in delivering the goods to the seller unless such document is first surrendered for cancellation. (n! Art 1533. Ehere the goods are of perishable nature, or where the seller e2pressly reserves the right of resale in case the buyer should ma/e default, or where the buyer has been in default in the payment of the price for an unreasonable time, an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. 9e shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale, but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. Ehere a resale is made, as authori7ed in this article, the buyer acquires a good title as against the original buyer. 3t is not essential to the validity of resale that notice of an intention to resell the goods be given by the seller to the original buyer. But where the right to resell is not based on the perishable nature of the goods or upon an e2press provision of the contract of sale, the giving or failure to give such notice shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the resale was made. 3t is not essential to the validity of a resale that notice of the time and place of such resale should be given by the seller to the original buyer.

"he seller is bound to e2ercise reasonable care and &udgment in ma/ing a resale, and sub&ect to this requirement may ma/e a resale either by public or private sale. 9e cannot, however, directly or indirectly buy the goods. (n! Art 1534. An unpaid seller having the right of lien or having stopped the goods in transitu, may rescind the transfer of title and resume the ownership in the goods, where he e2pressly reserved the right to do so in case the buyer should ma/e default, or where the buyer has been in default in the payment of the price for an unreasonable time. "he seller shall not thereafter be liable to the buyer upon the contract of sale, but may recover from the buyer damages for any loss occasioned by the breach of the contract. "he transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by notice to the buyer or by some other overt act an intention to rescind. 3t is not necessary that such overt act should be communicated to the buyer, but the giving or failure to give notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the right of rescission was asserted. (n! Art 1535. 1ub&ect to the provisions of this "itle, the unpaid seller4s right of lien or stoppage in transitu is not affected by any sale, or other disposition of the goods which the buyer may have made, unless the seller has assented thereto. 3f, however, a negotiable document of title has been issued for goods, no seller4s lien or right of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom such document has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier, or other bailee who issued such document, of the seller4s claim to a lien or right of stoppage in transitu. (n! a! (ld common law remedy which is an e2tension of the lien for the price and entitles the unpaid seller to resume possession of the goods while they are in transit before the goods come in possession of the vendee if the later is or becomes insolvent. b! Aoods are considered to be in transit from the time they are delivered to a carrier or other bailee by the seller for the purpose of transmission to the buyer, until the buyer or his agent ta/es delivery of them from the carrier. "o

29

terminate the transit by delivery to a middleman, it must be delivery to /eep. not to transport. c! Aoods are still considered to be in transit even if they reached their ultimate destination when the buyer re&ects them and they remain in the possession of the carrier. d! Aoods are no longer in transit if the buyer or his agent obtained delivery of the goods even before they reached their ultimate destination, or when the goods arrived at the ultimate destination but the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent, or when the carrier, upon arrival of the goods at the ultimate destination, enters into a new contract with the buyer or his agent. e! 3f there was partial delivery of the goods to the buyer, the remainder of the goods may be stopped in transitu, unless such part delivery has been made under such circumstances as to show an agreement with the buyer to give up possession of the whole. Ehere the buyer has ta/en some portion of the whole mass which was then susceptible of possession, there is constructive possession of the whole. f! Sale o# goods in transit* the unpaid sellerNs right of lien or stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made unless the seller has assented thereto. 1! Ehere a negotiable document of title has been issued for the goods, no sellerNs lien or right of stoppage in transitu cannot defeat the rights of any purchaser for value in good faith to whom such document has been negotiated. %.! Ehere the document of title is a straight bill of lading, the sellerNs right of stoppage will not be cut off as the transferee acquires no greater or added rights than his transferor. 6ight of 1toppage' 9ow ?2ercised@"he unpaid seller may e2ercise his right by 1. obtaining actual possession of the goods or %. by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Ehen notice of stoppage in transit is given to the carrier, the latte must redeliver the goods to, or according to the directions of, the seller. 3f however, a negotiable document of title representing the goods has been issued by the carrier, the latter shall not be obliged to deliver the goods unless such document is first surrendered for cancellation. (. Resale Art 1533. Ehere the goods are of perishable nature, or where the seller e2pressly reserves the right of resale in case the buyer should ma/e default, or

where the buyer has been in default in the payment of the price for an unreasonable time, an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. 9e shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale, but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. Ehere a resale is made, as authori7ed in this article, the buyer acquires a good title as against the original buyer. 3t is not essential to the validity of resale that notice of an intention to resell the goods be given by the seller to the original buyer. But where the right to resell is not based on the perishable nature of the goods or upon an e2press provision of the contract of sale, the giving or failure to give such notice shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the resale was made. 3t is not essential to the validity of a resale that notice of the time and place of such resale should be given by the seller to the original buyer. "he seller is bound to e2ercise reasonable care and &udgment in ma/ing a resale, and sub&ect to this requirement may ma/e a resale either by public or private sale. 9e cannot, however, directly or indirectly buy the goods. (n! a! Ehen the goods are of perishable nature, or where the seller e2pressly reserves the right of resale in case the buyer should default in payment, or where the buyer has been in default for an unreasonable length of time, the unpaid seller, having a right of lien or having stopped the goods in transitu, may resell the goods and recover from the buyer damages for breach of contract. b! "he resale may be in a public or private sale, but the seller cannot buy them directly or indirectly. "he seller is entitled to any profit he may ma/e out of the resale. c! 3n case he sells them at a loss, he is entitled to recover the difference from the original buyer. 3t is not essential to the validity of a resale that previous notice of an intention to resell or notice of the time and place or resale be given to the original buyer. d! Damages recovera!le* Ehether the action is for damages or to recover loss from a resale, the purpose is to compensate the seller for loss for breach of contract. "hus, if the purchaser fails

30

to ta/e delivery and pay the price, the vendor, without need of first rescinding the contract &udicially, is entitled to resell, and if obliged to sell for less than the contract price, the buyer is liable for the difference. e! Due diligence must be e2ercised to secure the highest price obtainable in the best available mar/et. "he burden of showing it was e2ercised is on the vendor. 4. Rescission45 Art 1534. An unpaid seller having the right of lien or having stopped the goods in transitu, may rescind the transfer of title and resume the ownership in the goods, where he e2pressly reserved the right to do so in case the buyer should ma/e default, or where the buyer has been in default in the payment of the price for an unreasonable time. "he seller shall not thereafter be liable to the buyer upon the contract of sale, but may recover from the buyer damages for any loss occasioned by the breach of the contract. "he transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by notice to the buyer or by some other overt act an intention to rescind. 3t is not necessary that such overt act should be communicated to the buyer, but the giving or failure to give notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the right of rescission was asserted. (n! a! An unpaid seller having the right of lien or having stopped the goods in transitu may rescind the transfer of title and resume ownership in the goods where he e2pressly reserved the right to do so in case the buyer defaults, or where the buyer has been in default in payment of the price for an unreasonable time. $ e trans#er o# title s all not !e eld to ave !een rescinded !' t e unpaid seller until e mani#ests !' notice to t e !u'er or !' some overt act an intention to rescind% After rescinding the transfer of title, the seller may still recover damages from the buyer for breach of contract. As used in Art. 1 -4, the term OrescindK is equivalent to return of the title over the undelivered goods to
45

the seller and the right to recover damages for loss due to breach of contract. EI. P/R8OR;ANC/ O8 T?/ CONTRACT A. D?B3C?6P (+ "9? "93>A 1(BD 1. Place6 time6 an" manner o# "eliver*

Art. 1521. Ehether it is for the buyer to ta/e possession of the goods or of the seller to send them to the buyer is a question depending in each case on the contract, e2press or implied, between the parties. Apart from any such contract, e2press or implied, or usage of trade to the contrary, the place of delivery is the seller4s place of business if he has one, and if not his residence' but in case of a contract of sale of specific goods, which to the /nowledge of the parties when the contract or the sale was made were in some other place, then that place is the place of delivery. Ehere by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fi2ed, the seller is bound to send them within a reasonable time. Ehere the goods at the time of sale are in the possession of a third person, the seller has not fulfilled his obligation to deliver to the buyer unless and until such third person ac/nowledges to the buyer that he holds the goods on the buyer4s behalf. Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. Ehat is a reasonable hour is a question of fact. <nless otherwise agreed, the e2penses of and incidental to putting the goods into a deliverable state must be borne by the seller. (n! Art. 1169. ,,, 3n 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. +rom the moment one of the parties fulfills his obligation, delay by the other begins. (11,,a!

MERCHANTS REFRIGERATING CORP * TITMAN : rescission of the contract would accomplish the following results: +(- termination of the original contract +9- return of the title to the undelivered portion of the goods to the seller +3- release of the buyer from his obligation to ta!e and pay for the balance of the goods +)- the unpaid seller would be free to pursue its remedies on quantum meruit to recover what it had delivered to the buyer +Merchants Refrigerating Co. v Benjamin Titman Corp-

Art. 1524. "he vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for the payment has been fi2ed in the contract. (14..! a! Aenerally, payment and delivery of the thing sold are concurrent acts, in consonance with the rule in reciprocal obligations. Agreement of the

31

parties determines whether it is for the buyer to ta/e possession of the goods or for the seller to send them to the buyer. Absent stipulation to the contrary, the ff. rules shall be observed$ 1. the buyer should ta/e delivery of the goods from the sellerNs place of business if he has one, and if none, his residence. %. 3n case of sale of specific goods which, at the time of the sale, are /nown to the parties to be in A>("9?6 :BA)?, the buyer should ta/e delivery from such place. D?5A>D or "?>D?6 of :AP5?>" shall be made at a reasona!le our. Ehere by agreement, the seller is bound to send the goods to the buyer, he is bound to send them within the time agreed upon, or if no time was fi2ed, within a reasonable time. 6?A1(>ABB? "35? for delivery is determined by the circumstances attending the particular transaction Ehere the goods at t e time o# t e sale are in the possession of a "936D :?61(>, there is >( delivery <>B?11 and <>"3B such their person A)0>(EB?DA?1 to the buyer that the holds the goods on the latterNs behalf. ?G:?>1?1 of placing the goods in a D?B3C?6ABB? 1"A"? shall be borne by the 1?BB?6 unless otherwise stipulated. 3f the sale involves a specific thing, the vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon the perfection of the contract. All of the fruits of the thing shall pertain to the vendee from the time of the perfection of the contract but he does not acquire a real right over it until they are delivered to him. "he vendee has the obligation to pay the e2penses incurred by the vendor in the production, gathering and preservation of the fruits.

"ime is of the essence of the contract whenever the intention of the parties is clear that performance of its terms shall be accomplished e2actly at the stipulated day or implied from the nature of the contract itself, the sub&ect matter or the circumstances under which the contract is made Ehen not bound to deliver Art. 1524. "he vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for the payment has been fi2ed in the contract. (14..! Art. 1536. "he vendor is not bound to deliver the thing sold in case the vendee should lose the right to ma/e use of the terms as provided in Article 118#. (14.=a! Art. 1198. "he debtor shall lose every right to ma/e use of the period$ (1! Ehen after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt' (%! Ehen he does not furnish to the creditor the guaranties or securities which he has promised' (-! Ehen by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory' (4! Ehen the debtor violates any underta/ing, in consideration of which the creditor agreed to the period' ( ! Ehen the debtor attempts to abscond. (11%8a!

-.

4.

..

=.

#.

Ehen time is of essence4.


46

S;$"7 <=KK v ; ""$: $n this case, the seller had done all that could be e%pected when he placed the machinery at the disposal of the buyer on pr (*(*. When the time of delivery is not fi%ed in the contract, +,-e ,s no+ o. +/e essen0e1 delivery could hence be made within a reasonable time. SOK=A v .7=KS=D: 8efendant cannot be compelled to accept delivery as he gave his consent to the contract, on the assurance of the plaintiff that the goods were Eon the wayF when as a matter of fact, they were not yet shipped at the time. "his assertion was an essential element of the contract.

"he vendor is not bound to deliver the thing sold in case the vendee should lose the right to ma/e use of the stipulated term in the following cases$ 1. Ehen the vendee becomes insolvent %. Ehen the vendee does not furnish the guaranties or securities he has promised -. Ehen the guaranties or securities given were impaired through the vendeeNs acts or were lost or destroyed through a fortuitous event, unless he gives new equally satisfactory guaranties or securities
A=C4<K$. : K$""O5: .ourt ruled for plaintiff. $t was shown that the goods were intended for election purposes, and the purchase order provided that the stipulated delivery period shall not be e%ceeded.

32

4. .

Ehen the vendee violates any condition for which he was granted the term Ehen the vendee attempts to abscond

>("?$ Art. 14.= has been replaced by Art. 118# which provides that the vendee shall lose the benefit of the term when, after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security. FInsolvenc*G un"er t,is article cannot !e un"erstoo" in t,e sense o# a 3u"iciall* "eclare" insolvenc* or sus ension o# a*ments6 !ecause t,e "e!tor cannot )ive a securit* or )uarant* in suc, case. "he doctrine therefore in Cisayan Distributors v +lores interpreting insolvency in Art 14.= old )) as something which must be &udicially declared or something which involves suspension of payments, no longer holds. &. 0ale o# >oo"s a. Delivery by installment

Art. 1522. Ehere the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may re&ect them, but if the buyer accepts or retains the goods so delivered, /nowing that the seller is not going to perform the contract in full, he must pay for them at the contract rate. 3f, however, the buyer has used or disposed of the goods delivered before he /nows that the seller is not going to perform his contract in full, the buyer shall not be liable for more than the fair value to him of the goods so received. Ehere the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and re&ect the rest. 3f the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate. Ehere the seller delivers to the buyer the goods he contracted to sell mi2ed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and re&ect the rest. 3n the preceding two paragraphs, if the sub&ect matter is indivisible, the buyer may re&ect the whole of the goods. "he provisions of this article are sub&ect to any usage of trade, special agreement, or course of dealing between the parties. (n! a! A?>?6AB 6<B?$ "he buyer is not bound to accept delivery of a quantity of goods more or less than that agreed upon or to accept goods which are of a description different from that agreed upon. ?G)?:"3(>$ "here is usage of trade, special stipulation or course of dealing to the contrary. 6?5?D3?1$ 1. Ehere the seller delivers a quantity less than that agreed upon, the buyer may re&ect them. 3f the buyer accepts or retains that goods delivered, /nowing the inability of the seller to deliver the rest, the buyer is bound to pay for them at the contract rate. 3f the buyer has used or disposed of the goods before /nowing the inability of the seller to deliver the rest, the buyer shall pay not more than the fair value of the goods. (>("?$ Ofair valueK means the price of the goods in the open mar/et.! %. 3f the quantity delivered is more than that agreed upon, the buyer may re&ect the e2cess, unless the sub&ect matter is indivisi!le, in which case, the buyer may re&ect the whole.

Art% 1583% <nless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by installments. Ehere there is a contract of sale of goods to be delivered by stated installments, which are to be separately paid for, and the seller ma/es defective deliveries in respect of one or more installments, or the buyer neglects or refuses without &ust cause to ta/e delivery of or pay for one more installments, it depends in each case on the terms of the contract and the circumstances of the case, whether the breach of contract is so material as to &ustify the in&ured party in refusing to proceed further and suing for damages for breach of the entire contract, or whether the breach is severable, giving rise to a claim for compensation but not to a right to treat the whole contract as bro/en. (n! a! A?>?6AB 6<B?$ the buyer is not bound to accept delivery of goods by installments. ?G)?:"3(>$ Ehen otherwise stipulated b! 3n case of a contract that calls for the delivery of the goods at stated intervals which are to be paid for separately, the terms of the contract and the circumstances surrounding the case would determine whether prompt payment or delivery is of the essence such that a delay or breach would entitle the aggrieved to treat the entire contract as bro/en (6 to regard each breach as severable. 1?C?6AB3B3"P depends on whether the breach is so material as to &ustify the aggrieved party in refusing to proceed further with the entire contract or so immaterial that the breach is severa!le, giving rise merely to a claim for damages b. Delivery of wrong quantity

33

-.

Ehere the seller delivers the goods mi2ed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract, and re&ect the rest, unless the sub&ect matter is indivisible, in which case, the buyer may re&ect the whole.

or decrease of the price, although there be a greater or less area or number than that stated in the contract. "he same rule shall be applied when two or more immovables as sold for a single price' but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it e2ceeds the area or number specified in the contract' and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lac/ing in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. (14=1! Art. 1543. "he actions arising from Articles 1 -8 and 1 4% shall prescribe in si2 months, counted from the day of delivery. (14=%a!

b! Delivery by the seller of only a part of an entire contract would itself be an indication that he might not intend to fully perform. :6?1<5:"3(>$ Buyer /nows that the seller might intend to not fully perform, if said purchaser accepts a partial delivery on an entire contract, absent any statement to the contrary. ("he law applies peculiarly to installment and divisible contracts.! (. 0ale o# Immova!les Art. 1539. "he obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract, in conformity with the following rules$ 3f the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract' but, should this be not possible, the vendee may choose between a proportional reduction of the price and the rescission of the contract, provided that, in the latter case, the lac/ in the area be not less than one@tenth of that stated. "he same shall be done, even when the area is the same, if any part of the immovable is not of the quality specified in the contract. "he rescission, in this case, shall only ta/e place at the will of the vendee, when the inferior value of the thing sold e2ceeds one@tenth of the price agreed upon. >evertheless, if the vendee would not have bought the immovable had he /nown of its smaller area of inferior quality, he may rescind the sale. (14.8a! Art. 1540. 3f, in the case of the preceding article, there is a greater area or number in the immovable than that stated in the contract, the vendee may accept the area included in the contract and re&ect the rest. 3f he accepts the whole area, he must pay for the same at the contract rate. (14=,a! Art. 1541. "he provisions of the two preceding articles shall apply to &udicial sales. (n! Art. 1542. 3n the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase

a.

Ehere price is at certain rate per unit of measure

"he seller is bound to deliver the entire land sold in accordance with the terms of the contract. A?>?6AB 6<B?$ T,e ven"ee ,as to o tion to "eman" a ro ortionate re"uction o# t,e rice or rescission o# t,e contract1 if price is fi2ed at a certain rate per unit of measure and the area is delivered is less than that stated in the contract, or even if the area is correct but part of the land is not of the quality stated in the contract ?G)?:"3(>$ Ehere the entire land is not of the quality stated in the contract, as in such a case, the consent must have been obtained by mista/e or fraud (contract may then be voidable.! Art. 15(-. see a!ove. b. 1ale for a lump sum4=

Art. 154&. see a!ove.


47

M AA B v B D: Where the price was for a lump sum and the area which was stated in the contract to be *1 hectares, turned out to be only 06 hectares, but the purchaser had previously investigated and inspected the condition of the land, and had ample opportunity to do so, the purchaser cannot later on allege that the vendor made false representation. S$ $5 v 2 K 58O5$: "here was mutual mista!e which was so material as would go into the essence of the contract. Aescission is proper. "he buyer would have not have bought the land had he !nown of the smaller area or inferior quantity.

34

a! 3f the sale of real property is for a lump sum, there shall be no increase or decrease in the price, whether the actual area delivered turned out to be greater or less than that stated in the contract. b! 3f besides mentioning the boundaries, the area should also be stated in the contract, the vendor shall be bound to deliver all that is included within said boundaries and there shall be no increase or decrease in the price whether the area so delivered be greater or less than that stated in the contract.4# c! 3f the vendor fails to deliver all the land included within said boundaries, as where part of the land belongs to a third person, t,e ven"ee s,all ,ave t,e o tion to "eman" a re"uction in t,e rice in ro ortion to t,e "e#icienc* in t,e area state" in t,e contract or a rescission o# t,e contract (Actions prescribe in si2 months from date of delivery.! 4. Ins ections an" Acce tance a. 6ight of inspection

obligation to accept them. 9e may however waive this right by simply refusing to inspect the goods, ta/ing them as they are or by any other similar act. b. 5anifestation of acceptance

Art. 1585. "he buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has re&ected them. (n! a! "he buyer is deemed to have accepted the goods when$ 1. he intimates to the seller that the has accepted them %. the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller -. after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has re&ected them. ?2ercise of acts of ownership over the goods is a manifestation of acceptance, such as ma/ing use of them as owner, ma/ing alterations in the goods or sub&ecting it to the process of manufacture. ?G)?:"3(>$ BuyerNs right to ma/e a test of goods, !ut onl* i# necessar*6 to enable him to determine whether to accept or re&ect the goods. c. Breach of warranty

Art. 1584. Ehere goods are delivered to the buyer, which he has not previously e2amined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of e2amining them for the purpose of ascertaining whether they are in conformity with the contract if there is no stipulation to the contrary. <nless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of e2amining the goods for the purpose of ascertaining whether they are in conformity with the contract. Ehere goods are delivered to a carrier by the seller, in accordance with an order from or agreement with the buyer, upon the terms that the goods shall not be delivered by the carrier to the buyer until he has paid the price, whether such terms are indicated by mar/ing the goods with the words Icollect on delivery,I or otherwise, the buyer is not entitled to e2amine the goods before the payment of the price, in the absence of agreement or usage of trade permitting such e2amination. (n! "he buyer is entitled to e2amine the goods to decide whether he will become the owner, and until the e2amination is completed or waived, he is under >(
48

Art. 1586. 3n the absence of e2press or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract of sale. But, if, after acceptance of the goods, the buyer fails to give notice to the seller of the breach in any promise of warranty within a reasonable time after the buyer /nows, or ought to /now of such breach, the seller shall not be liable therefor. (n! a! "he purpose of the notice of breach of warranty is to :6("?)" the seller against belated damage claims which would prevent the seller from ma/ing an adequate and proper investigation of his alleged liability. b! Acceptance of delivery means an A11?>" to become (E>?6 of the goods on the part of the buyer, but not an assent t at t e goods #ul#ill t e description and terms o# t e contract%

AO<K= v A< S : vendee of land, when sold in gross or with the description 'more or less' with reference to its area, does not thereby ipso facto ta!e all ris! of quantity in the land. "he use of 'more or less' or similar words in designating quantity covers only a reasonable e%cess or deficiency.

35

d.

6efusal to accept

Art. 1587. <nless otherwise agreed, where goods are delivered to the buyer, and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he notifies the seller that he refuses to accept them. 3f he voluntarily constitutes himself a depositary thereof, he shall be liable as such. (n! Art. 1588. 3f there is no stipulation as specified in the first paragraph of article 1 %-, when the buyer4s refusal to accept the goods is without &ust cause, the title thereto passes to him from the moment they are placed at his disposal. (n! Art. 1589. "he vendee shall owe interest for the period between the delivery of the thing and the payment of the price, in the following three cases$ (1! 1hould it have been so stipulated' (%! 1hould the thing sold and delivered produce fruits or income' (-! 1hould he be in default, from the time of &udicial or e2tra&udicial demand for the payment of the price. (1 ,1a!

(1! Ehere delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer4s ris/ from the time of such delivery' (%! Ehere actual delivery has been delayed through the fault of either the buyer or seller the goods are at the ris/ of the party in fault. (n!

B. :AP5?>" (+ :63)? 1. 9ia!ilit* #or interest Art. 158&6 158-. 0ee a!ove. "he buyer shall owe interest on the price from the time the thing is delivered up to the time of payment if there is stipulation requiring interests, or even if there is none, if the thing delivered produces fruits or income, or if the buyer incurs in default from the time of &udicial or e2tra@&udicial demand for payment 1. 1uspension of :ayment

a! <nless otherwise agreed, when the goods are delivered to the buyer and e as a rig t to re#use to accept them, ,e nee" not return t,em . 3t is sufficient that the buyer notifies the seller that he refuses to accept the goods, and thereafter, the former becomes the depository of the re&ected goods. b! 9owever, where title already passed to the buyer and there was a breach of warranty, the buyer may 6?1)3>D the contract by returning or offering to return the goods to the seller and recover the price which had been paid. e. 6efusal to accept

Art. 1590. 1hould the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease, unless the latter gives security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to ma/e the payment. A mere act of trespass shall not authori7e the suspension of the payment of the price. (1 ,%a! a! OdisturbanceK or threat of disturbance * must come through a vindicatory action or foreclosure of mortgage, and not through a mere threat or claim of a third person. b! 3f the third person claims a servitude on the thing sold, the remedy of the buyer is to demand rescission of the contract or payment of the proper indemnity. c! 3n order that the buyer may have a right to suspend payment, it is absolutely necessary that the cause of disturbance or danger !e !ased on a #act arising !e#ore t e sale or i# it arose a#ter

Art. 1582. "he vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract. 3f the time and place should not have been stipulated, the payment must be made at the time and place of the delivery of the thing sold. (1 ,,a!

Art. 1504. <nless otherwise agreed, the goods remain at the seller4s ris/ until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer4s ris/ whether actual delivery has been made or not, e2cept that$

36

t e sale. t e cause is imputa!le to t e vendor or successor in interest%4%. 1ale of 6eal :roperty

is

of damages in either case. 9e may also see/ rescission, even after he has chosen fulfillment, if the latter should become impossible. "he court shall decree the rescission claimed, unless there be &ust cause authori7ing the fi2ing of a period. "his is understood to be without pre&udice to the rights of third persons who have acquired the thing, in accordance with Articles 1-# and 1-## and the 5ortgage Baw. (11%4!

Art. 1592. 3n the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right ta/e place, the vendee may pay, even after the e2piration of the period, as long as no demand for rescission of the contract has been made upon him either &udicially or by a notarial act. After the demand, the court may not grant him a new term. (1 ,4a!

Art. 1560. 3f the immovable sold should be encumbered with any non@apparent burden or servitude, not mentioned in the agreement, of such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof, he may as/ for the rescission of the contract, unless he should prefer the appropriate indemnity. >either right can be e2ercised if the non@apparent burden or servitude is recorded in the 6egistry of :roperty, unless there is an e2press warranty that the thing is free from all burdens and encumbrances. Eithin one year, to be computed from the e2ecution of the deed, the vendee may bring the action for rescission, or sue for damages. (ne year having elapsed, he may only bring an action for damages within an equal period, to be counted from the date on which he discovered the burden or servitude. (14#-a! Art. 1664. "he lessor is not obliged to answer for a mere act of trespass which a third person may cause on the use of the thing leased' but the lessee shall have a direct action against the intruder. "here is a mere act of trespass when the third person claims no right whatever. (1 .,a! a% +##ect o# 4on5pa'ment

3n absolute sales of real property, even i# t ere is a stipulation providing #or ipso &ure rescission , in case of default in payment, the law requires the seller to demand the resolution of the contract from the buyer &udicially or by a notarial act, before such stipulation could be given effect. (therwise, the buyer could still pay the price ?C?> after the e2piration of the period to pay. , !% )%A% ;55:A 9%D% -57 (Secs% 0: and 04)

a! Approved on %. Aug 18=%, the Realt* Installment Bu*er Protection Act declared that it is a public policy to protect buyers of real@ estate on installments, including residential condominiums, apartments, e2cluding industrial lots, commercial buildings and lands sold under 6.A. -#44 as amended, against onerous and oppressive conditions b! R.A. '55&6 sec &6 in sale or financing of real estate on installment payments where the buyer has paid at least two years of installments, provides that in case such buyer defaults in the payment of the succeeding installments, he has a right to pay, without additional interests, the arrears $it,in a )race erio" o# one mont, #or ever* *ear o# installment a*ments ma"e@ c! 3n the same case, if the contract is cancelled, the seller shall refund to the buyer the case surrender value of payments made, equivalent to ,R of total payments and an additional R for every year after five years of the life of the contract and its e2tensions, if any. d! Actual cancellation shall not ta/e place until after -, days from receipt by the buyer of the notice of cancellation or demand for rescission by

Art. 1191. "he power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. "he in&ured party may choose between the fulfillment and the rescission of the obligation, with the payment
49

BARENG * CA: "he vendee had a right to suspend payment from the time he was informed of the coIownerGs claim. <ut such right ceased from the time a compromise was reached between the coIowners whereby the vendor agreed to give to the coI owner twoIthirds of whatever he could collect from the buyer. fter the compromise, when the vendor brought an action against the buyer to collect the balance, said buyer owed interests on the amount from the time of the filing of the complaint.

50

DELA CRU * LEGA PI: "he injured party may choose between fulfillment and rescission of the obligation, with payment of damages in either the rescission claimed unless there is just cause authori@ing the granting of a new period, as in this case.

37

a notarial act, and only upon full payment of the cash surrender value to the buyer. 1 e! Down@payments, deposits or options in the contract shall be included in the computation of the total number of installments made. "he right to pay the arrears within the grace period could only be availed of by the buyer once in every five years of the life of the contract and its e2tensions, if any. f! 3n case of less than two years of installments were paid, the grace period shall be not less than ., days from the date the installment became due. 3f the buyer fails to pay within the grace period, the seller may cancel the contract within -, days from receipt by the buyer of the notice of cancellation or demand for rescission of the contract by a notarial act. g! During the grace period or before the actual cancellation of the contract, the buyer shall have the right to$ 1. sell or assign his rights, to be evidenced in a notarial instrument, to a third person %. update his account -. pay in advance any installment or the full unpaid balance of the price without interest

EII. 4ARRANTI/0 A. ?G:6?11 EA66A>"3?1 a! Earranty A where one party promised that the contingency or some act fi2ed by the contract shall be performed, li/e a promise that the goods are of a certain /ind and character or that certain state of facts would e2ist, the promise constitutes a warranty, and failure of which gives rise to an action for its breach. Breach$ the buyer may 1. accept goods S maintain an action for damages %. accept goods S set up breach of warranty as a recoupment in diminutionL e2tinction of price -. refuse to accept goods and maintain action for damages 4. rescind S refuse to accept goods' or return (or offer to return! goods S recover price paid 1. Distin)uis,e" #rom con"ition

51

ACTIVE REALT! * DARO!A : $n this case, 2es3on(en+ /as al2ea(4 3a,( ,n .o52 678 4ea2s a +o+al o. P9:7%;<=.>< o2 P?=%;9@.>< -o2e +/an +/e 0on+2a0+ 32,0e o. PAA7%=9@.==. lso, the records clearly show that the petitioner failed to comply with the -an(a+o24 +w,n 2eB5,2e-en+s for a valid and effective cancellation under the law,(* i.e., he failed to send a notari@ed notice of cancellation and refund the cash surrender value. VALARAO * CA: "he .ourt held that the rescission of the contract and the forfeiture of the payments already made could not be effected as per the pertinent provision of the aforementioned law. Section 3+a- of ;aceda Kaw provided that a buyer E&who has paid at least two years of installments is entitled to pay, without additional interest the unpaid installment due within the +o+al C2a0e 3e2,o( ea2ne( D4 /,- , which is hereby fi%ed at a rate of one -on+/ C2a0e 3e2,o( .o2 e*e24 4ea2 o. ,ns+all-en+ 3a4-en+s -a(e. 7ence, since the private respondent was entitled to a oneImonth grace period for every year of installments paid, she had a total grace period of three months from 3( 8ecember (**6 OL!MPIA HOUSING * PANASIATIC TRAVEL : 4nfortunately for petitioner, it would be incorrect to apply Layug c IAC to the instant case. Layug is basically an action for annulment of contract, a !indred concept of rescission, whereas the instant case before the .ourt is one for recovery of possession on the thesis of a prior rescission of the contract covering the property. 5ot only is an action for reconveyance conceptually different from an action for rescission but that, also, the effects that flow from an affirmative judgment in either case would be materially dissimilar in various respects. "he judicial resolution of a contract gives rise to mutual restitution which is not necessarily the situation that can arise in an action for reconveyance. dditionally, in an action for rescission +also often termed as resolution-, unli!e in an action for reconveyance predicated on an e%trajudicial rescission +rescission by notarial act-, the .ourt, instead of decreeing rescission, may authori@e for a just cause the fi%ing of a period.

Art 1545. Ehere the obligation of either party to a contract of sale is sub&ect to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. 3f the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. Ehere the ownership in the thing has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted e2pressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. (n! )ondition * an uncertain event or contingency fi2ed by parties, the e2istence or happening of which was necessary to the efficacy of the contract, and failure of which permits the in&ured party to treat the contract as at an end, but creates no right of action. Ehere a condition is not performed, the buyer may refuse to proceed with the contract, or accept the goods and waive performance of the condition. %
52

ROMERO * CA% LIM * CA : distinguished condition imposed on perfection on the contract vs condition imposed on performance of obligation# failure to comply with ( st condition results in failure of contract, while failure to comply with 9nd only gives other party option to either refuse to proceed with the sale or to waive the condition as mandated under rt (,),.

38

Distinctions according to Cillanueva (Baw on 1ales , %,,4! Con"ition Aenerally goes the root of e2istence of obligation 4arrant* Aoes into the performance of such obligation, and in fact may constitute an obligation in itself 5ay form part of obligation by contract or provision of law, without parties having agreed thereto Ehether e2press or implied, relates to sub&ect matter itself or to the obligations of the seller as to the sub&ect matter of the sale

warranty that the goods are merchantable' mere e2pression of an opinion -

3.

into the the

Distin)uis,e" re resentation54

#rom

#alse

B. 35:B3?D EA66A>"3?1 1. Im lie" $arrant* o# title

5ust be stipulated by the parties in order to form part of an obligation 5ay attach itself either to obligation of seller to deliver possession or transfer ownership over sub&ect matter of sale

Art 1547. 3n a contract of sale, unless a contrary intention appears, there is$ (1! An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and en&oy the legal and peaceful possession of the thing' (%! An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or /nown to the buyer. "his Article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable interest. (n! Art 1548. ?viction shall ta/e place whenever by a final &udgment based on a right prior to the
53

&.

Distin)uis,e" #rom o inion6 "ealerBs tal%

Art 154;% Any affirmation of fact or any promise by the seller relating to the thing is an e2press warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchase the thing relying thereon. >o affirmation of the value of the thing, nor any statement purporting to be a statement of the seller4s opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an e2pert and it was relied upon by the buyer. (n! a! Earranty * an affirmation of fact or any promise by seller relating to the thing which has a natural tendency to induce the buyer to purchase the same, relying on such promise of affirmation b! (pinionLdealerNs tal/ * an affirmation of the value of the thing or any statement of the sellerNs opinion shall not be construed as a warranty, unless the seller made such an affirmation as an e2pert and it was relied upon by the buyer "est$ whether the vendor assumes to assert a fact of which the buyer is ignorant, in which case it is a warranty, or whether it is merely an e2pression of an opinion or &udgment on the part of the seller on a matter of which the seller has no special /nowledge and on which the buyer may be e2pected also to have an opinion or e2ercise his &udgment. O3n good conditionK v. O?2cellent qualityK * the first relates to the quantity, /ind or condition of the goods sold, it is an affirmation of fact or promise, and not a mere e2pression of an opinion' the second is not an e2press warranty and the purchaser must rely on the implied

SONGCO * SELLNER: Opinion or dealerGs tal! is no+ warranty. Opinion or dealerGs tal! is the usual or ordinary means used by sellers to get a high price and is understood as affording to buyers no ground for omitting to ma!e inquiries. .aveat emptor. man who relies on such an affirmation does so at his own peril and must ta!e the consequences of his imprudence. What would ma!e a misrepresentation void: +a- false representation is as to matters of fact substantially affecting buyerGs interest, and no+ as to matters of opinion, judgment, probability or e%pectation# +b- the party to the contract who has specialLe%pert !nowledge ta!es advantage of the ignorance of another to impose upon him the false representation. MOLES * IAC: Ordinarily, what does not appear on the face of the written instrument should be regarded as dealer/s or trader/s tal!# conversely, what is specifically represented as true in said document, as in the instant case, cannot be considered as mere dealer/s tal!
54

PHIL. MANUFACTURING *. Go JUCCO: n intention to deceive or mislead the other party to his prejudice is an essential element of fraud. .oncealment of facts does not necessarily amount to false representation, unless there was an active misstatement of fact or a partial statement of fact, such that withholding of that which is not stated ma!es that which is stated absolutely false.
55

39

sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased. "he vendor shall answer for the eviction even though nothing has been said in the contract on the sub&ect. "he contracting parties, however, may increase, diminish, or suppress this legal obligation of the vendor. (14= a! Art 1549. "he vendee need not appeal from the decision in order that the vendor may become liable for eviction. (n! Art 1550. Ehen adverse possession had been commenced before the sale but the prescriptive period is completed after the transfer, the vendor shall not be liable for eviction. (n! Art 1551. 3f the property is sold for nonpayment of ta2es due and not made /nown to the vendee before the sale, the vendor is liable for eviction. (n! Art 1552. "he &udgment debtor is also responsible for eviction in &udicial sales, unless it is otherwise decreed in the &udgment. (n! . Art 1553. Any stipulation e2empting the vendor from the obligation to answer for eviction shall be void, if he acted in bad faith. (14=.! Art 1554. 3f the vendee has renounced the right to warranty in case of eviction, and eviction should ta/e place, the vendor shall only pay the value which the thing sold had at the time of the eviction. 1hould the vendee have made the waiver with /nowledge of the ris/s of eviction and assumed its consequences, the vendor shall not be liable. (14==! Art 1555. Ehen the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the vendee shall have the right to demand of the vendor$ (1! "he return of the value which the thing sold had at the time of the eviction, be it greater or less than the price of the sale' (%! "he income or fruits, if he has been ordered to deliver them to the party who won the suit against him'

(-! "he costs of the suit which caused the eviction, and, in a proper case, those of the suit brought against the vendor for the warranty' (4! "he e2penses of the contract, if the vendee has paid them' ( ! "he damages and interests, and ornamental e2penses, if the sale was made in bad faith. (14=#! Art 1556. 1hould the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole, that he would not have bought it without said part, he may demand the rescission of the contract' but with the obligation to return the thing without other encumbrances that those which it had when he acquired it. 9e may e2ercise this right of action, instead of enforcing the vendor4s liability for eviction. "he same rule shall be observed when two or more things have been &ointly sold for a lump sum, or for a separate price for each of them, if it should clearly appear that the vendee would not have purchased one without the other. (14=8a! Art 1557. "he warranty cannot be enforced until a final &udgment has been rendered, whereby the vendee loses the thing acquired or a part thereof. (14#,!

Art 1558. "he vendor shall not be obliged to ma/e good the proper warranty, unless he is summoned in the suit for eviction at the instance of the vendee. (14#1a! Art 1559. "he defendant vendee shall as/, within the time fi2ed in the 6ules of )ourt for answering the complaint, that the vendor be made a co@defendant. (14#%a! &. Im lie" $arrant* a)ainst encum!rances or "e#ects57 ,i""en

57

MOLES * IAC : &we have to consider the rule on redhibitory defects contemplated in rticle (,0( of the .ivil .ode. redhibitory defect must be an imperfection or defect of such nature as to engender a certain degree of importance. n imperfection or defect of little consequence does not come within the category of being redhibitory. INVESTMENTS AND DEV$T INC. * CA: E$mplied warranty against hidden faults or defects under rt (,)3 of the .ivil .ode cover only those that ma!e the object of the sale unfit for the use for which it was intended at the time of the sale, and that in the sale of agricultural land, the e%isting tenancy relationship pertaining thereto cannot be considered as

56

SANTIAGO LAND * CA: lthough in voluntary sales or transaction, the vendor can be e%pected to defend his title because of his warranty to the vendees: no such obligation is owed by the owner whose land is sold at e%ecution sale.

40

Art 1561. "he vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an e2tent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it' but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an e2pert who, by reason of his trade or profession, should have /nown them. (14#4a!

Art 1567. 3n the cases of Articles 1 .1, 1 .%, 1 .4, 1 . and 1 .., the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case. (14#.a! Art 1568. 3f the thing sold should be lost in consequence of the hidden faults, and the vendor was aware of them, he shall bear the loss, and shall be obliged to return the price and refund the e2penses of the contract, with damages. 3f he was not aware of them, he shall only return the price and interest thereon, and reimburse the e2penses of the contract which the vendee might have paid. (14#=a! Art 1569. 3f the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by a fortuitous event or through the fault of the vendee, the latter may demand of the vendor the price which he paid, less the value which the thing had when it was lost. 3f the vendor acted in bad faith, he shall pay damages to the vendee. (14##a! Art 1570. "he preceding articles of this 1ubsection shall be applicable to &udicial sales, e2cept that the &udgment debtor shall not be liable for damages. (14#8a! Art 1571. Actions arising from the provisions of the preceding ten articles shall be barred after si2 months, from the delivery of the thing sold. (148,! Barranties in sale o# animals Art 1577. "he redhibitory action, based on the faults or defects of animals, must be brought within forty days from the date of their delivery to the vendee. "his action can only be e2ercised with respect to faults and defects which are determined by law or by local customs. (148.a! Art 1578. 3f the animal should die within three days after its purchase, the vendor shall be liable if the disease which cause the death e2isted at the time of the contract. (148=a! Art 1579. 3f the sale be rescinded, the animal shall be returned in the condition in which it was sold and delivered, the vendee being answerable for any in&ury due to his negligence, and not arising from the redhibitory fault or defect. (148#!

Art 1562. 3n a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows$ (1! Ehere the buyer, e2pressly or by implication, ma/es /nown to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller4s s/ill or &udgment (whether he be the grower or manufacturer or not!, there is an implied warranty that the goods shall be reasonably fit for such purpose' (%! Ehere the goods are brought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not!, there is an implied warranty that the goods shall be of merchantable quality. (n! Art 1563. 3n the case of contract of sale of a specified article under its patent or other trade name, there is no warranty as to its fitness for any particular purpose, unless there is a stipulation to the contrary. (n! Art 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be anne2ed by the usage of trade. (n! Art 1565. 3n the case of a contract of sale by sample, if the seller is a dealer in goods of that /ind, there is an implied warranty that the goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable e2amination of the sample. (n! Art 1566. "he vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. "his provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold. (14# !

hidden fault or defect.

41

Art 1580. 3n the sale of animals with redhibitory defects, the vendee shall also en&oy the right mentioned in article 1 .=' but he must ma/e use thereof within the same period which has been fi2ed for the e2ercise of the redhibitory action. (1488! Sale !' sample or description Art 1481. 3n the contract of sale of goods by description or by sample, the contract may be rescinded if the bul/ of the goods delivered do not correspond with the description or the sample, and if the contract be by sample as well as description, it is not sufficient that the bul/ of goods correspond with the sample if they do not also correspond with the description. "he buyer shall have a reasonable opportunity of comparing the bul/ with the description or the sample. (n! Art 1565. 3n the case of a contract of sale by sample, if the seller is a dealer in goods of that /ind, there is an implied warranty that the goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable e2amination of the sample. (n! (. Im lie" $arrant* o# <ualit*

(1! Accept or /eep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or e2tinction of the price' (%! Accept or /eep the goods and maintain an action against the seller for damages for the breach of warranty' (-! 6efuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty' (4! 6escind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid. Ehen the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without pre&udice to the provisions of the second paragraph of Article 1181. Ehere the goods have been delivered to the buyer, he cannot rescind the sale if he /new of the breach of warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or in&ury of the goods is due to the breach or warranty, such deterioration or in&ury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. Ehere the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. 3f the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after an offer to return the goods in e2change for repayment of the price. Ehere the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but sub&ect to a lien to secure payment of any portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1 %..

Art 1562. 3n a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows$ (1! Ehere the buyer, e2pressly or by implication, ma/es /nown to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller4s s/ill or &udgment (whether he be the grower or manufacturer or not!, there is an implied warranty that the goods shall be reasonably fit for such purpose' (%! Ehere the goods are brought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not!, there is an implied warranty that the goods shall be of merchantable quality. (n! Art 1563. 3n the case of contract of sale of a specified article under its patent or other trade name, there is no warranty as to its fitness for any particular purpose, unless there is a stipulation to the contrary. (n! Art 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be anne2ed by the usage of trade. (n! Art. 1599. Ehere there is a breach of warranty by the seller, the buyer may, at his election$

42

( ! 3n the case of breach of warranty of quality, such loss, in the absence of special circumstances showing pro2imate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. (n! 4. A""itional $arranties consumer ro"ucts in sale o#

Art. 68, RA 7394. Additional 9rovisions on Barranties% @ 3n addition to the )ivil )ode provisions on sale with warranties, the following provisions shall govern the sale of consumer products with warranty$ (a! $erms o# e,press warrant'. @ Any seller or manufacturer who gives an e2press warranty shall$ (1! set forth the terms of warranty in clear and readily understandable language and clearly identify himself as the warrantor' (%! identify the party to whom the warranty is e2tended' (-! state the products or parts covered' (4! state what the warrantor will do in the event of a defect, malfunction of failure to conform to the written warranty and at whose e2pense' ( ! state what the consumer must do to avail of the rights which accrue to the warranty' and (.! stipulate the period within which, after notice of defect, malfunction or failure to conform to the warranty, the warrantor will perform any obligation under the warranty. (b! +,press warrant' 5 operative #rom moment o# sale% @ All written warranties or guarantees issued by a manufacturer, producer, or importer shall be operative from the moment of sale. (1! Sales )eport% @ All sales made by distributors of products covered by this Article shall be reported to the manufacturer, producer, or importer of the product sold within thirty (-,! days from date of purchase, unless otherwise agreed upon. "he report shall contain, among others, the date of purchase, model of the product bought, its serial number, name and address of the buyer. "he report made in accordance with this provision shall be equivalent to a warranty registration with the manufacturer, producer, or importer. 1uch registration is sufficient to hold the manufacturer, producer, or importer liable, in appropriate cases, under its warranty. (%! 2ailure to ma/e or send report% @ +ailure of the distributor to ma/e the report or send them the form required by the manufacturer, producer, or importer shall relieve the latter of its liability under the warranty$ 9rovided. owever. "hat the distributor who failed to comply with its obligation to send the sales reports shall be personally liable under the warranty. +or this purpose, the manufacturer shall be obligated to ma/e good the warranty at the e2pense of the distributor. (-! )etail% @ "he retailer shall be subsidiarily liable under the warranty in case of failure of both the

manufacturer and distributor to honor the warranty. 3n such case, the retailer shall shoulder the e2penses and costs necessary to honor the warranty. >othing therein shall prevent the retailer from proceeding against the distributor or manufacturer. (4! +n#orcement o# warrant' or guarantee% @ "he warranty rights can be enforced by presentment of a claim. "o this end, the purchaser needs only to present to the immediate seller either the warranty card of the official receipt along with the product to be serviced or returned to the immediate seller. >o other documentary requirement shall be demanded from the purchaser. 3f the immediate seller is the manufacturer4s factory or showroom, the warranty shall immediately be honored. 3f the product was purchased from a distributor, the distributor shall li/ewise immediately honor the warranty. 3n the case of a retailer other than the distributor, the former shall ta/e responsibility without cost to the buyer of presenting the warranty claim to the distributor in the consumer4s behalf. ( ! )ecord o# purc ases% @ Distributors and retailers covered by this Article shall /eep a record of all purchases covered by a warranty or guarantee for such period of time corresponding to the lifetime of the product4s respective warranties or guarantees. (.! 7ontrar' stipulations* null and void% @ All covenants, stipulations or agreements contrary to the provisions of this Article shall be without legal effect. (c! Designation of warranties. @ A written warranty shall clearly and conspicuously designate such warranty as$ (1! C2ull warrant'C if the written warranty meets the minimum requirements set forth in paragraph (d!' or (%! CLimited warrant'C if the written warranty does not meet such minimum requirements. (d! Minimum standards #or warranties% @ +or the warrantor of a consumer product to meet the minimum standards for warranty, he 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' (%! permit the consumer to elect whether to as/ 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. "he warrantor will not be required to perform the above duties if he can show that the defect, malfunction or failure to conform to a

43

written warranty was caused by damage due to unreasonable use thereof. (e! Duration o# warrant'% @ "he seller and the consumer may stipulate the period within which the e2press warranty shall be enforceable. 3f the implied warranty on merchantability accompanies an e2press warranty, both will be of equal duration. Any other implied warranty shall endure not less than si2ty (.,! days nor more than one (1! year following the sale of new consumer products. (f! Breac o# warranties% * (1! 3n case of breach of e2press warranty, the consumer may elect to have the goods repaired or its purchase price refunded by the warrantor. 3n case the repair of the product in whole or in part is elected, the warranty wor/ must be made to conform to the e2press warranty within thirty (-,! days by either the warrantor or his representative. "he thirty@day period, however, may be e2tended by conditions which are beyond the control of the warrantor or his representative. 3n case the refund of the purchase price is elected, the amount directly attributable to the use of the consumer prior to the discovery of the non@conformity shall be deducted. (%! 3n case of breach of implied warranty, the consumer may retain in the goods and recover damages, or re&ect the goods, cancel and contract and recover from the seller so much of the purchase price as has been paid, including damages.

he wrongfully neglects or refuses to pay for the goods according to the terms of the contract of sale, the seller may maintain an action against him for the price of the goods. Ehere, under a contract of sale, the price is payable on a certain day, irrespective of delivery or of transfer of title and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price although the ownership in the goods has not passed. But it shall be a defense to such an action that the seller at any time before the &udgment in such action has manifested an inability to perform the contract of sale on his part or an intention not to perform it. Although the ownership in the goods has not passed, if they cannot readily be resold for a reasonable price, and if the provisions of article 1 8., fourth paragraph, are not applicable, the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to receive them, may notify the buyer that the goods are thereafter held by the seller as bailee for the buyer. "hereafter the seller may treat the goods as the buyer4s and may maintain an action for the price. (n! 0% Action #or damages

). B<P?6N1 EA66A>"P

EA3C?6

3>

)A1?

(+

B6?A)9

(+

Art 1596. Ehere the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for nonacceptance. "he measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer4s breach of contract. Ehere there is an available mar/et for the goods in question, the measure of damages is, in the absence of special circumstances showing pro2imate damage of a different amount, the difference between the contract price and the mar/et or current price at the time or times when the goods ought to have been accepted, or, if no time was fi2ed for acceptance, then at the time of the refusal to accept. 3f, while labor or e2pense of material amount is necessary on the part of the seller to enable him to fulfill his obligations under the contract of sale, the buyer repudiates the contract or notifies the seller to proceed no further therewith, the buyer shall be liable to the seller for labor performed or e2penses made before receiving notice of the buyer4s repudiation or countermand. "he profit the seller would have made if the contract or the sale had been fully

Art. 1599. ,,, Ehere the goods have been delivered to the buyer, he cannot rescind the sale if he /new of the breach of warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or in&ury of the goods is due to the breach or warranty, such deterioration or in&ury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. ,,,

EII. BR/AC? O8 CONTRACT0 A. 1AB? (+ A((D1 1. Reme"ies o# t,e 0eller 1% Action #or t e price

Art 1595. Ehere, under a contract of sale, the ownership of the goods has passed to the buyer and

44

performed shall damages. (n! :% )escission

be

considered

in

awarding

the

Art 1597. Ehere the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer. (n! &. Reme"ies o# t,e Bu*er 1% Speci#ic per#ormance

fails to return or to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or in&ury of the goods is due to the breach or warranty, such deterioration or in&ury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. Ehere the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. 3f the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after an offer to return the goods in e2change for repayment of the price. Ehere the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but sub&ect to a lien to secure payment of any portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1 %.. ( ! 3n the case of breach of warranty of quality, such loss, in the absence of special circumstances showing pro2imate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. (n! Art 1571. Actions arising from the provisions of the preceding ten articles shall be barred after si2 months, from the delivery of the thing sold. (148,! :% )escission

Art 1598. Ehere the seller has bro/en a contract to deliver specific or ascertained goods, a court may, on the application of the buyer, direct that the contract shall be performed specifically, without giving the seller the option of retaining the goods on payment of damages. "he &udgment or decree may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as the court may deem &ust. (n!

0%

Breac o# warrant'

Art. 1599. Ehere there is a breach of warranty by the seller, the buyer may, at his election$ (1! Accept or /eep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or e2tinction of the price' (%! Accept or /eep the goods and maintain an action against the seller for damages for the breach of warranty' (-! 6efuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty' (4! 6escind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid. Ehen the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without pre&udice to the provisions of the second paragraph of Article 1181. Ehere the goods have been delivered to the buyer, he cannot rescind the sale if he /new of the breach of warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he

Art. 1599. Ehere there is a breach of warranty by the seller, the buyer may, at his election$ (1! Accept or /eep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or e2tinction of the price' (%! Accept or /eep the goods and maintain an action against the seller for damages for the breach of warranty' (-! 6efuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty'

45

(4! 6escind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid. Ehen the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without pre&udice to the provisions of the second paragraph of Article 1181. Ehere the goods have been delivered to the buyer, he cannot rescind the sale if he /new of the breach of warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or in&ury of the goods is due to the breach or warranty, such deterioration or in&ury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. Ehere the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. 3f the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after an offer to return the goods in e2change for repayment of the price. Ehere the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but sub&ect to a lien to secure payment of any portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by Article 1 %.. ( ! 3n the case of breach of warranty of quality, such loss, in the absence of special circumstances showing pro2imate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. (n!

rescission, even after he has chosen fulfillment, if the latter should become impossible. "he court shall decree the rescission claimed, unless there be &ust cause authori7ing the fi2ing of a period. "his is understood to be without pre&udice to the rights of third persons who have acquired the thing, in accordance with Articles 1-# and 1-## and the 5ortgage Baw. (11%4! Art. 1192. 3n case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. 3f it cannot be determined which of the parties first violated the contract, the same shall be deemed e2tinguished, and each shall bear his own damages. (n! Art 1385. 6escission creates the obligation to return the things which were the ob&ect of the contract, together with their fruits, and the price with its interest' consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. >either shall rescission ta/e place when the things which are the ob&ect of the contract are legally in the possession of third persons who did not act in bad faith. 3n this case, indemnity for damages may be demanded from the person causing the loss. (1%8 ! Art 1591. 1hould the vendor have reasonable grounds to fear the loss of immovable property sold and its price, he may immediately sue for the rescission of the sale. 1hould such ground not e2ist, the provisions of Article 1181 shall be observed. (1 ,-!

). 1AB? (+ 5(CABB?1 (> 3>1"ABB5?>"

B. 1AB? (+ 355(CABB?1 A>D "93>A1 ("9?6 "9A> A((D1 Art 1191. "he power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. "he in&ured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. 9e may also see/

Art 1484. 3n a contract of sale of personal property the price of which is payable in installments, the vendor may e2ercise any of the following remedies$
58

LEV! * GERVACIO: .. rt (),) is aimed at sales where the price is payable in several installments. cash payment +in sales with two installments- cannot be considered as a payment in installments, and even if it can be so considered, still the law does not apply, for it requires nonpayment of two or more installments in order that its provisions may be invo!ed. $n this case, only one installment was unpaid.

46

(1! ?2act fulfillment of the obligation, should the vendee fail to pay' (%! )ancel the sale, should the vendee4s failure to pay cover two or more installments' (-! +oreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee4s failure to pay cover two or more installments. 3n this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (14 4@ A@a! 8 Art 1485. "he preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or en&oyment of the thing. (14 4@A@a!

Art 1486. 3n the case referred to in two preceding articles, a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. (n!

Art 1533. Ehere the goods are of perishable nature, or where the seller e2pressly reserves the right of resale in case the buyer should ma/e default, or where the buyer has been in default in the payment of the price for an unreasonable time, an unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods. 9e shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale, but may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. Ehere a resale is made, as authori7ed in this article, the buyer acquires a good title as against the original buyer. 3t is not essential to the validity of resale that notice of an intention to resell the goods be given by the seller to the original buyer. But where the right to resell is not based on the perishable nature of the goods or upon an e2press provision of the contract of sale, the giving or failure to give such notice shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the resale was made. 3t is not essential to the validity of a resale that notice of the time and place of such resale should be given by the seller to the original buyer. "he seller is bound to e2ercise reasonable care and &udgment in ma/ing a resale, and sub&ect to this requirement may ma/e a resale either by public or private sale. 9e cannot, however, directly or indirectly buy the goods. (n! Ehen the seller assigns his credit to another person, the latter may li/ewise avail of the remedies under Art 14#4 (assuming case is one of sale of movables on installment!. 3f the remedy chosen is rescission, a stipulation in the contract that the installments paid shall not be returned to the vendee is valid insofar as the same may not be unconscionable under the circumstances (Cillanueva citing Delta 5otor v. >iu 0im Duan, %1- 1)6A % 8! D. 1AB? (+ 355(CABB?1 (> 3>1"ABB5?>" 1. Antici ator* !reac,

59

TAJANLANGIT * SOUTHERN MOTORS : $t is true that there was a chattel mortgage on the goods sold, but Southern ;otors elected to sue the note e%clusively N +o eEa0+ .5l.,ll-en+ o. +/e oDl,Ca+,on +o 3a4. $t had the right to select among the three remedies established in rt ()1). $n choosing to sue on the note, it was not thereby limited to the proceeds of the sale, on e%ecution, of the mortgaged good. FILINVEST * CA: "he remedies $5 ()1) are al+e2na+,*e and not cumulative. 7ence, the e%ercise of one bars the e%ercise of the others. NONATO * IAC: "he corporation is barred from e%acting payment from 5onato of the balance of the price of the vehicle when it had already repossessed it. CRU * FILIPINAS INVESTMENTS : "he vendor of personal property sold on installment basis is precluded, after foreclosing the chattel mortgage on the thing sold, from having a recourse against the additional security put up by a third party to guarantee the purchaserGs performance of his obligation. NORTHERN MOTORS * SAPINOSO: What rt ()1) +3prohibits is Efurther action against the purchaser to recover any unpaid balance of the price#F and although this .ourt has construed the word EactionF to mean Eany judicial or e%trajudicial proceeding by virtue of which the vendor may lawfully be enabled to e%act recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy,F there is no occasion at this stage to apply the restrictive provision of the said article because there has not yet been a foreclosure sale resulting in a deficiency. "he payment of the sum of C(,9,6 of Sapinoso was a voluntary act on his part and did not result from a Efurther actionF instituted by 5orthern ;otors. When the seller assigns his credit to another BORBON * SERVICE-#IDE SPECIALIST : person, the latter is li!ewise bound by the same law. ccordingly, when the assignee forecloses on the mortgage, there can be no further recovery of the deficiency, and the sellerImortgagee is deemed to have renounced any right thereto.

47

Art 1591. 1hould the vendor have reasonable grounds to fear the loss of immovable property sold and its price, he may immediately sue for the rescission of the sale. 1hould such ground not e2ist, the provisions of Article 1181 shall be observed. (1 ,-!

4.

Rescission on 0ale on NonHResi"ential Realt* on Installment

Art 1191. "he power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. "he in&ured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. 9e may also see/ rescission, even after he has chosen fulfillment, if the latter should become impossible. "he court shall decree the rescission claimed, unless there be &ust cause authori7ing the fi2ing of a period. "his is understood to be without pre&udice to the rights of third persons who have acquired the thing, in accordance with Articles 1-# and 1-## and the 5ortgage Baw. (11%4! Art 1592. 3n the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right ta/e place, the vendee may pay, even after the e2piration of the period, as long as no demand for rescission of the contract has been made upon him either &udicially or by a notarial act. After the demand, the court may not grant him a new term. (1 ,4a!

2.

PD -576 0ection &( I &4'.

PD 957, Sec 23. 4on52or#eiture o# 9a'ments% 8 >o installment payment made by a buyer in a subdivision or condominium pro&ect for a lot or unit he contracted to buy shall be forfeited in favor of the owner or developer 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 pro&ect according to the approved plans and within the time limit for complying with the same. 1uch buyer may, at his option, be reimbursed the total amount paid including amorti7ation interests but e2cluding delinquency interests, with interest thereon at the legal rate. PD 957, Sec 24. 2ailure to pa' installments% 8 "he rights of the buyer in the event of his failure to pay the installments due for reasons other than failure of the owner or developer to develop the pro&ect shall be governed by 6epublic Act >o. . %

3.
60

RA '55& F;ace"a 9a$G1 0ale o# Resi"ential Realt* on Installment'1

CASA FILIPINAS REALT! * OP: C8 *,3 to stem the tide of Efraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to buyers or titles free from liens and encumbrances. Should the notice requirement in Sec 93 be construed as required to be given before a buyer desists from further paying, the intent of the law to protect subdivision lot buyers will tend to be defeated. BRIC"TO#N DEV$T * TIERRA: When a grace period is provided for in the contract of sale, it should be construed as a right, not an obligation of the debtor, and when unconditionally conferred, the grace period is effective without further need of demand either calling for the payment of the obligation or for honoring the right.
61

EI=. /ETIN>UI0?;/NT O8 T?/ 0A9/ Art. 1600. 1ales are e2tinguished by the same causes as all other obligations, by those stated in the preceding articles of this "itle, and by conventional or legal redemption. (1 ,.! Art. 1231. (bligations are e2tinguished$ (1! By payment or performance$ (%! By the loss of the thing due$ (-! By the condonation or remission of the debt' (4! By the confusion or merger of the rights of creditor and debtor' ( ! By compensation' (.! By novation. (ther causes of e2tinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this )ode. (11 .a! A. )(>C?>"3(>AB 6?D?5:"3(>

MCLAUGHLIN * CA: Sec ) of A 0,,9 provides: E$n case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than si%ty days from the date the installment became due. $f the buyer fails to pay the installments due at the e%piration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of the cancellation or the demand for rescission of the contract by a notarial act.F Jlores tendered the managerGs chec! after (3 days, which is well within the 36Iday period. 7owever, Jlores did not follow tender of payment with consignation. Since ;cKaughlin refused to accept the tender of payment, it was incumbent upon Jlores to deposit the amount in court.

48

)onventional redemption A the vendor reserves the right to repurchase the thing sold, with the obligation of returning the price of the sale the e2penses of the contract, the necessary and useful e2penses made on the thing, and other payments made by reason of the sale..% Distinguished from equitable mortgage ?quitable mortgage * one which, although lac/ing in some formality or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as a security for debt, and contains nothing impossible or contrary to law Badges of an equitable mortgage.Art. 1602. "he contract shall be presumed to be an equitable mortgage, in any of the following cases$ (1! Ehen the price of a sale with right to repurchase is unusually inadequate' (%! Ehen the vendor remains in possession as lessee or otherwise' (-! Ehen upon or after the e2piration of the right to repurchase another instrument e2tending the period of redemption or granting a new period is e2ecuted' (4! Ehen the purchaser retains for himself a part of the purchase price' ( ! Ehen the vendor binds himself to pay the ta2es on the thing sold' (.! 3n any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. 3n any of the foregoing case, any money, fruits, or other benefit to be received by the vendees as rent or otherwise shall be considered as interest which shall be sub&ect to the usury laws.

A contract shall be construed as an equitable mortgage when any of the circumstance in Art. 1.,% is present. 6eason for the rule$ "o curtail the practice of creditors in ma/ing their agreement of mortgage appear in the form of a sale with pacto de retro, in order to circumvent the prohibition of pactum commissorium in pledge and mortgage (Art. 2208. "he creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void! >!ecause in ma/ing it appear a pacto de retro sale. t e creditors can do awa' wit #oreclosure proceedings? 6emedy$ reformation of the instrument Jmust be brought within 1, yearsQ 1! 3f the agreement is construed to be an equitable mortgage, any money or other benefit received as Orents,K shall be considered as Ointerest.K %! Ehere the agreement is upheld as a pacto de retro sale, the vendor may still e2ercise the right within -, days from the time the &udgment becomes final. Distinguished from option to buy.4 Right of rede !tio" >ot a separate contract, but merely part of a main contract of sale' cannot e2ist unless reserved at the time of the perfection of the main contract of sale >eed not have separate consideration in order to be valid and effective 5ay not be beyond the 1, year period 6equires tender of payment of amount required by law, including consignment thereof if tender cannot be made effectively :eriod of redemption
64

#!tio" to b$% :rincipal contract and may be created independent of another contract

5ust have a consideration separate and distinct from purchase price 5ay be beyond the 1, year period 5ay be e2ercised by notice

62

VILLARICA * CA: "he right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. TORRES * CA: Jor a sale to be one a retro, it is necessary that the right be reserved in the same contract
63

CLARAVALL * CA: "he urgent necessity for money of apparent vendor, the inadequacy of the consideration for supposed sale, and the e%tension of the period of redemption circumstances which are indicative that the contract is equitable mortgage.

the the are an

ADIARTE * TUMANENG: n agreement to repurchase becomes an option to buy when entered into after the time to redeem stipulated had already e%pired, because then the vendee a retro became the absolute owner of the thing sold, and the subsequent grant of the right to repurchase is a new agreement.

49

Art. 1606. "he right referred to in Article 1.,1, in the absence of an e2press agreement, shall last four years from the date of the contract. 1hould there be an agreement, the period cannot e2ceed ten years. 9owever, the vendor may still e2ercise the right to repurchase within thirty days from the time final &udgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase. (1 ,#a! A?>?6AB 6<B?$ :eriod starts running at the date of the e2ecution of the contract. ?G)?:"3(>$ when there is a suspensive condition. 4% w en no period agreed upon

the redemption price in court is not necessary to preserve the right. 3n the absence of the vendee a retro, the right may be e2ercised by filing a suit against him and consigning the amount in court. "he e2ercise of redemption is not limited only to the total redemption price enumerated in Art 1.1. of the )), since said legal provision is not restrictive nor e2clusive. 3t includes other stipulations which may have been agreed upon (Villanueva citing Solid Domes v% 7A. 075 S7)A 0;7) a% !' w om e,ercised Art. 1610. "he creditors of the vendor cannot ma/e use of the right of redemption against the vendee, until after they have e2hausted the property of the vendor. (1 1%! Art. 1611. 3n a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in the case of article 48#, may compel the vendor to redeem the whole property, if the latter wishes to ma/e use of the right of redemption. (1 1-! Art. 1612. 3f several persons, &ointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may e2ercise this right for more than his respective share. "he same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of the latter may only redeem the part which he may have acquired. (1 14! Art. 1613. 3n the case of the preceding article, the vendee may demand of all the vendors or co@heirs that they come to an agreement upon the purchase of the whole thing sold' and should they fail to do so, the vendee cannot be compelled to consent to a partial redemption. (1 1 ! a! Eho may redeem 1.Cendor %. 9is heirs or assigns -. 9is agent b! "he creditors of the vendor cannot ma/e use of the right of redemption against the vendee, until after they have e2hausted the property of the vendor. b! 3f several persons, &ointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may e2ercise this right for more than his respective

period$ 4 years from the date of the contract 5% w en period agreed upon;5 "he period is binding and it may also be e2tended, as long as it does not e2ceed 1, years. 6eason for limitation$ A pacto de retro is a suspension of title and it is against public interest to permit such uncertainty to continue for a long time. ?2ercise of the right to redeem.. a! A vendor must manifest his right to redeem in writing. "his must be accompanied with an actual or simultaneous tender of payment of the redemption price. )edemption price * includes the amount of the sale, the e2penses of the contract and other legitimate payments made by the vendee by reason of such sale, and the necessary and useful e2penses made on the thing by the vendee. b! 3t is only when the vendee flatly refused that tender of payment is not necessary. )onsignation of
65

TA!AO * DULA!: lthough the stipulation as to the period may be unclear or void, a period of redemption was agreed upon. "hus, it is the (6Iyear period that applies, not the )Iyear period. BALU!OT * VENEGAS: "he object of the sale cannot be repurchased during the first (6 years. "he stipulation is void and against public policy. BANDONG * A5s+2,a : "he provisions of the contract, whereby the parties undertoo! by e%press agreement to secure to the vendors a right to repurchase in the month of ;arch of any year after the date of the contract, were valid and binding upon the parties for a period of ten years from the date of the contract but wholly without force and effect thereafter.
66

GARGOLLO * DUERO: "he vendor a retro is not given the option to require the vendee a retro to remove the useful improvement, but must pay for the useful improvements introduced by the vendee a retro# otherwise, the latter may retain possession of the thing until reimbursement is made.

50

share. "he same rule shall apply if the person who sold an immovable alone has left several heirs. c! Ehen the co@owners of an indivisible immovable, in order to end the co@ownership, sold their interests absolutely to the same person who previously bought the share of a co@owner sub&ect to a right of redemption, the latter can be compelled to redeem the whole property. b. from whom to redeem Art. 1615. 3f the vendee should leave several heirs, the action for redemption cannot be brought against each of them e2cept for his own share, whether the thing be undivided, or it has been partitioned among them. But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against him for the whole. (1 1=! Art. 1608. "he vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have been made of the right to repurchase, without pre&udice to the provisions of the 5ortgage Baw and the Band 6egistration Baw with respect to third persons. (1 1,! +rom whom to redeem 1. Cendee a retro %. 9is heirs or assigns -. 9is agent c. effect of redemption Art. 1617. 3f at the time of the e2ecution of the sale there should be on the land, visible or growing fruits, there shall be no reimbursement for or prorating of those e2isting at the time of redemption, if no indemnity was paid by the purchaser when the sale was e2ecuted. 1hould there have been no fruits at the time of the sale and some e2ist at the time of redemption, they shall be prorated between the redemptioner and the vendee, giving the latter the part corresponding to the time he possessed the land in the last year, counted from the anniversary of the date of the sale. (1 18a! Art. 1618. "he vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but he shall respect the leases which the latter may have e2ecuted in good faith, and in accordance with the custom of the place where the land is situated. (1 %,!

a! "he vendor can e&ect a lessee only after the e2piration of the period of lease or of the period for redemption. b! "he vendor a retro is entitled to the return of the thing with damages for the use and occupation if the same. d. effect of non@redemption Art. 1607. 3n case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the provisions of article 1.1. shall not be recorded in the 6egistry of :roperty without a &udicial order, after the vendor has been duly heard. (n!

Art. 1606. & & & 9owever, the vendor may still e2ercise the right to repurchase within thirty days from the time final &udgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase..= a! "he ownership of the vendee becomes absolute and irrevocable by operation of law. b! "he vendee is not entitled to recover damages by virtue of non@redemption, notwithstanding a stipulation in the contract for payment of damages. B. B?AAB 6?D?5:"3(> Begal redemption * right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title. Ehen period of legal redemption begins Art. 1623. "he right of legal pre@emption or redemption shall not be e2ercised e2cept within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. "he deed of sale shall not be recorded in the 6egistry of :roperty, unless
67

ABILLA * GABONSENG: "he applicability of rticle (060 rests on the bona fide intent of the vendor a retro, i.e., respondent in this case. $f he honestly believed that the transaction was an equitable mortgage, the said article applies and he can still repurchase the property within thirty days from finality of the judgment declaring the transaction as a sale with pacto de retro. Carenthetically, it matters not what the vendee intended the transaction to be.

51

accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners. "he right of redemption of co@owners e2cludes that of ad&oining owners. (1 %4a!.# Baches seems to be a special e2ception to notice rule under Art 1.%-. (Cillanueva citing Alon7o v. 3A)! 1. Re"em tion amon) coHo$ners Art. 1620. A co@owner of a thing may e2ercise the right of redemption in case the shares of all the other co@owners or of any of them, are sold to a third person. 3f the price of the alienation is grossly e2cessive, the redemptioner shall pay only a reasonable one. 1hould two or more co@owners desire to e2ercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common. (1 %%a! a! Ehen the right may be e2ercised$ when a share of a co@owner is sold to a third person, who is a stranger. b! "hrust of the law$ to reduce the number of co@ owners until the community is done away with. c! Ehen the right is not available 1! Ehere the share of the co@owner is sold to another co@owner %! Ehere the share of a co@owner was merely mortgaged d! 1hould two or more co@owners desire to e2ercise the right, they may only do so in proportion to the share they may respectively have in the thing owned in common. &. Re"em tion amon) a"3oinin) o$ners "he law distinguishes between rural and urban lands. "he distinction is based on the character of the community or vicinity in which it is found.
01(

"his is to encourage the ma2imum development and utili7ation of lands. a% )ural lands Art. 1621. "he owners of ad&oining lands shall also have the right of redemption when a piece of rural land, the area of which does not e2ceed one hectare, is alienated, unless the grantee does not own any rural land. "his right is not applicable to ad&acent lands which are separated by broo/s, drains, ravines, roads and other apparent servitudes for the benefit of other estates. 3f two or more ad&oining owners desire to e2ercise the right of redemption at the same time, the owner of the ad&oining land of smaller area shall be preferred' and should both lands have the same area, the one who first requested the redemption. (1 %-a! a! Ehen the right may be e2ercised$ when a piece of rural land not e2ceeding 1 ha., is alienated Junless the grantee does not own any rural landQ b! "hrust of the law 1. to prevent the rural land not e2ceeding 1 ha. from passing into the hands of a person other than the ad&acent owners who can ma/e use of the alienated property for the development of their own lands %. to consolidate scattered small agricultural lands under one ownership c! Ehen the right is not available o Ad&acent lands which are separated by broo/s, drains, ravines, roads and other apparent servitudes for the benefit of other estates >!ecause owners cannot !e said to !e ad&oining owners an'more? d! 3f two or more ad&oining owners desire to e2ercise the right of redemption at the same time, the owner of the ad&oining land of smaller area shall be preferred' and should both lands have the same area, the one who first requested the redemption. !% <r!an lands;Art. 1622. Ehenever a piece of urban land which is so small and so situated that a ma&or
69

HERMOSO * CA : $t was error for the respondent court to rule that the right of the petitioner to redeem the alienated share had long proscribed. "his finding fails to ta!e into account that the period of legal redemption is not a prescriptive period. $t is a condition precedent to the e%ercise of the right of redemption. $t is a period set by law to restrict the right of the person e%ercising the right of legal redemption. I+ ,s no+ one o. 32es02,3+,on. While the law requires that the notice must be in writing, it does not state any particular form thereof, so long as the reasons for a written notice are present. "he records of the case show that the sale of the brothersG share was deliberately hidden from the petitioners. Jor sometime after the sale, the petitioners were ignorant about its e%ecution. When they somehow heard rumors about it, they had to ta!e one step after another to find out if the information was true.

ORTEGA * ORCINE "he term EurbanF in rt. (099 does not necessarily refer to the nature of the land itself but to the character of the community or vicinity in which it is found.

52

portion thereof cannot be used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to be re@sold, the owner of any ad&oining land has a right of pre@ emption at a reasonable price. 3f the re@sale has been perfected, the owner of the ad&oining land shall have a right of redemption, also at a reasonable price. Ehen two or more owners of ad&oining lands wish to e2ercise the right of pre@emption or redemption, the owner whose intended use of the land in question appears best &ustified shall be preferred. (n! a! Ehen the right may be e2ercised$ when a piece of urban land which is so small and so situated that a ma&or portion thereof cannot be used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to be resold b! "hrust of the law$ to discourage speculation in real estate and aggravate the housing problem. c! Ehen the right is not available$ Ehen the urban land is transferred under an Oe2changeK of properties >!ecause t ere is no resale?71 d! Ehen two or more owners of ad&oining lands wish to e2ercise the right of pre@emption or redemption, the owner whose intended use of the land in question appears best &ustified shall be preferred. Assignment of a chose in action Art. 1634. Ehen a credit or other incorporeal right in litigation is sold, the debtor shall have a right to e2tinguish it by reimbursing the assignee for the price the latter paid therefor, the &udicial costs incurred by him, and the interest on the price from the day on which the same was paid. A credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the same is answered. "he debtor may e2ercise his right within thirty days from the date the assignee demands payment from him. (1 - ! a! Ehen the right may be e2ercised$ when a credit or other incorporeal right in litigation is sold. b! "hrust of the law$ to discourage speculation in lawsuits which would ma/e the courts an instrument for profit.

c! Ehen the right is not available >!ecause t e assignee as a valid interest in t e rig t or propert' assigned? 1. Ehen the assignment of a credit was made before any litigation %! Assignments made to a co@heir or co@ owner of the credit, to a creditor in payment of his credit, to the possessor of a tenement or land which is sub&ect to the assigned credit. (Art% 1;:5) 6edemption of homestead 'A 141. Sec. 119. ?very conveyance of land acquired under a free patent or homestead, when proper, shall be sub&ect to repurchase by the applicant, his widow or legal heirs within years from the date of conveyance. a! Eho may redeem 1. the applicant %. his widow -. legal heirs b! :eriod of redemption$ within date of conveyance 6edemption in ta2 sales ()R' of 1997. Sec. 215. 2or#eiture to (overnment #or Bant o# Bidder% * 3n case there is no bidder for real property e2posed for sale as herein above provided or if the highest bid is for an amount insufficient to pay the ta2es, penalties and costs, the 3nternal 6evenue (fficer conducting the sale shall declare the property forfeited to the Aovernment in satisfaction of the claim in question and within two (%! days thereafter, shall ma/e a return of his proceedings and the forfeiture which shall be spread upon the records of his office. 3t shall be the duty of the 6egister of Deeds concerned, upon registration with his office of any such declaration of forfeiture, to transfer the title of the property forfeited to the Aovernment without the necessity of an order from a competent court. Eithin one (1! year from the date of such forfeiture, the ta2payer, or any one for him may redeem said property by paying to the )ommissioner or the latter4s 6evenue )ollection (fficer the full amount of the ta2es and penalties, together with interest thereon and the costs of sale, but if the property be not thus redeemed, the forfeiture shall become absolute. Eho may redeem 1. the delinquent ta2payer years from the

70

SEN PO E" MAR"ETING *. MARTINE : rticle (099 is not applicable to a lessee trying to buy the land he is leasing.

53

%. anyone for him :eriod of redemption$ within 1 year from the date of sale 6edemption by a &udgment debtor R$+es of 'i,i+ Proced$re. R$+e 39. Sec. 27. B o ma' redeem real propert' so sold% 6eal property sold as provided in the last preceding section, or any part thereof sold separately, may be redeemed in the manner hereinafter provided, by the following persons$ (a! "he &udgment obligor, or his successor in interest in the whole or any part of the property' (b! A creditor having a lien by virtue of an attachment, &udgment or mortgage on the property sold, or on some part thereof, subsequent to the lien under which the property was sold. 1uch redeeming creditor is termed a redemptioner. a! Eho may redeem 1. the &udgment obligor %. his successors@in@interest -. creditor having a lien attachment

has been sold for the full or partial payment of his obligation shall have the right within one year after the sale of the real estate, to redeem the property by paying the amount due under the mortgage deed, with interest thereon at rate specified in the mortgage, and all the costs and e2penses incurred by the ban/ or institution from the sale and custody of said property less the income derived therefrom. 9owever, the purchaser at the auction sale concerned whether in a &udicial or e2tra@&udicial foreclosure shall have the right to enter upon and ta/e possession of such property immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. Any petition in court to en&oin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given due course only upon the filing by the petitioner of a bond in an amount fi2ed by the court conditioned that he will pay all the damages which the ban/ may suffer by the en&oining or the restraint of the foreclosure proceeding. >otwithstanding Act -1- , &uridical persons whose property is being sold pursuant to an e2tra&udicial foreclosure, shall have the right to redeem the property in accordance with this provision until, but not after, the registration of the certificate of foreclosure sale with the applicable 6egister of Deeds which in no case shall be more than three (-! months after foreclosure, whichever is earlier. (wners of property that has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their redemption rights until their e2piration. A?>?6AB 6<B?$ >o right to redeem is granted to the debtor@mortgagor when there has been &udicial foreclosure of real estate mortgage. ?G)?:"3(>$ Ehen the mortgagee is a ban/ or a ban/ing institution. Begal right to redeem under the Agrarian 6eform )ode

by

virtue

of

an

:eriod of redemption$ within 1 year from the date of registration of the certificate of sale 6edemption in e2tra&udicial foreclosure of mortgages Act (o. 3135. Sec. 6. 3n e2tra&udicial foreclosure of mortgage, the debtor, his successors@in@interest, any &udicial or &udgment creditor of said debtor, or any &unior encumbrancer may redeem the property within 1 year from the date of the sale. >$ is provision is ta/en #rom Baviera onl'8 not sure i# t is is t e e,act wording o# t e law%? a! Eho may redeem 1. the debtor %. his successors@ in@interest -. &udicial creditorL&udgment creditor of debtor 4. any person having a lien on the property

the

:eriod of redemption$ within 1 year from the date of the sale 6edemption in &udicial foreclosure of mortgages RA 8791 ($ e (eneral Ban/ing o# Law o# 0111) . Sec. 47. 2oreclosure o# )eal +state Mortgage . @ 3n the event of foreclosure, whether &udicially or e2tra@ &udicially, of any mortgage on real estate which is security for any loan or other credit accommodation granted, the mortgagor or debtor whose real property

RA 3844. Sec. 12. LesseeEs )ig t o# )edemption%@3n case the landholding is sold to a third person without the /nowledge of the agricultural lessee, the latter shall have the right to redeem the same at a reasonable price and consideration' :rovided, "hat the entire landholding sold must be redeemed$ :rovided, further, "hat where there are two or more agricultural lessees, each shall be entitled to said right of redemption only to the e2tent of the area actually cultivated by him. "he right of redemption under this 1ection may be e2ercised within two years from the registration of the sale. and shall have priority over any other right of legal redemption.

54

a! Eho may redeem$ the lessee who has no /nowledge of the sale to a third person b! :eriod of redemption$ within % years from the registration the sale c! )onditions for redemption* the entire landholding sold must be redeemed d! where there are two or more agricultural lessees, each shall be entitled to said right of redemption only to the e2tent of the area actually cultivated by him E=. BU9D 0A9/0 9A471 A'- (#. 3952. An act to re)ulate t,e sale6 trans#er6 mort)a)e or assi)nment o# )oo"s6 $ares6 merc,an"ise6 rovisions or materials6 in !ul%6 an" rescri!in) enalties #or t,e violation o# t,e rovisions t,ereo#. Sec 1. "his Act shall be /nown as C$ e Bul/ Sales Law%C Sec. 2. Sale and trans#er in !ul/% T Any sale, transfer, mortgage or assignment of a stoc/ of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor, mortgagor, transferor, or assignor, or sale, transfer, mortgage or assignment of all, or substantially all, of the business or trade theretofore conducted by the vendor, mortgagor, transferor, or assignor, or of all, or substantially all, of the fi2tures and equipment used in and about the business of the vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale and transfer in bul/, in contemplation of this Act$ :rovided, however, "hat if such vendor, mortgagor, transferor or assignor, produces and delivers a written waiver of the provisions of this Act from his creditors as shown by verified statements, then, and in that case, the provisions of this section shall not apply. Sec. 3. Statement o# creditors% T 3t shall be the duty of every person who shall sell, mortgage, transfer, or assign any stoc/ of goods, wares, merchandise, provisions or materials in bul/, for cash or on credit, before receiving from the vendee, mortgagee, or his, or its agent or representative any part of the purchase price thereof, or any promissory note, memorandum, or other evidence therefor, to deliver to such vendee, mortgagee, or agent, or if the vendee, mortgagee, or agent be a corporation, then to the president, vice@president, treasurer, secretary or manager of said corporation, or, if such vendee or
71

mortgagee be a partnership firm, then to a member thereof, a written statement, sworn to substantially as hereinafter provided, of the names and addresses of all creditors to whom said vendor or mortgagor may be indebted, together with the amount of indebtedness due or owing, or to become due or owing by said vendor or mortgagor to each of said creditors, which statement shall be verified by an oath to the following effect$ :93B3::3>? 31BA>D1 :6(C3>)? (6 )3"P (+ UUUUUUUUUUUUUUUUUV Before me, the undersigned authority, personally appeared UUUUUUUUUUUUUUUUUU (vendor, mortgagor, agent or representative, as the case may be!, bearing cedula >o. UUUUUUUUUUUU issued at UUUUUUUUUUU on the day of UUUUUUUUUUUUU who, by me being first duly sworn, upon his oath, deposes and states that the foregoing statement contains the names of all of the creditors of UUUUUUUUUUUUUUUU (vendor, or mortgagor! together with their addresses, and that the amount set opposite each of said respective names, is the amount now due and owing, and which shall become due and owing by UUUUUUUUUUUUU (vendor or mortgagor! to such creditors, and that there are no creditors holding claims due or which shall become due, for or on account of goods, wares, merchandise, provisions or materials purchased upon credit or on account of money borrowed, to carry on the business of which said goods, wares, merchandise, provisions or materials are a part, other than as set forth in said statement. UUUUUUUUUUUUUUUUUUUUUU 1ubscribed and sworn to before me this UUUUUUUUUU day of UUUUUUUUU, 18UUUU, at UUUUUUUUUUUUU. Sec. 4. 2raudulent and void sale. trans#er or mortgage% T Ehenever any person shall sell, mortgage, transfer, or assign any stoc/ of goods, wares, merchandise, provisions or materials, in bul/, for cash or on credit, and shall receive any part of the purchase price, or any promissory note, or other evidence of indebtedness for said purchase price or advance upon mortgage, without having first delivered to the vendee or mortgagee or to his or its agent or representative, the sworn statement provided for in section three hereof, and without applying the purchase or mortgage money of the said property to the pro rata payment of the bona fide claim or claims of the creditors of the vendor or mortgagor, as shown upon such sworn statement, he shall be deemed to have violated this Act, and any such sale, transfer or mortgage shall be fraudulent and void. Sec. 5. @nventor'% T 3t shall be the duty of every vendor, transferor, mortgagor, or

LI#ANAG * MENGHRAJ: "he constitutional right to dispose freely of oneGs property is not absolute. "he creditor should be protected in his rights against the debtor. "he State, in the e%ercise of its police power, see!s to protect such creditor against insolvent and fraudulent vendors

55

assignor, at least ten days before the sale, transfer or e2ecution of a mortgage upon any stoc/ of goods, wares, merchandise, provisions or materials, in bul/, to ma/e a full detailed inventory thereof and to preserve the same showing the quantity and, so far as is possible with the e2ercise of reasonable diligence, the cost price to the vendor, transferor, mortgagor or assignor of each article to be included in the sale, transfer or mortgage, and notify every creditor whose name and address is set forth in the verified statement of the vendor, transferor, mortgagor, or assignor, at least ten days before transferring possession thereof, personally or by registered mail, of the price, terms conditions of the sale, transfer, mortgage, or assignment. Sec. 6. Any vendor, transferor, mortgagor or assignor of any stoc/ of goods, wares, merchandise, provisions or materials, in bul/, or any person acting for, or on behalf of any such vendor, transferor, mortgagor, or assignor, who shall /nowingly or willfully ma/e, or deliver or cause to be made or delivered, a statement, as provided for in section three hereof, which shall not include the names of all such creditors, with the correct amount due and to become due to each of them, or shall contain any false or untrue statement, shall be deemed to have violated the provisions of this Act. Sec. 7. 3t shall be unlawful for any person, firm or corporation, as owner of any stoc/ of goods, wares, merchandise, provisions or materials, in bul/, to transfer title to the same without consideration or for a nominal consideration only. Sec. 8. >othing in this Act contained shall apply to e2ecutors, administrators, receivers, assignees in insolvency, or public officers, acting under &udicial process. Sec. 9. "he sworn statement containing the names and addresses of all creditors of the vendor or mortgagor provided for in section three of this Act, shall be registered in the Bureau of )ommerce. +or the registration of each such sworn statement a fee of five pesos shall be charged to the vendor or mortgagor of the stoc/ of goods, wares, merchandise, provisions or materials, in bul/. Sec. 10. "he provisions of this Act shall be administered by the Director of the Bureau of )ommerce and 3ndustry, who is hereby empowered, with the approval of the Department 9ead, to prescribe and adopt from time to time such rules and regulations as may be deemed necessary for the proper and efficient enforcement of the provisions of this Act. Sec. 11. Any person violating any provision of this Act shall, upon conviction thereof, be punished by imprisonment not less than si2 months, nor more than five years, or fined in sum not e2ceeding five

thousand pesos, or both such imprisonment and fine, in the discretion of the court. Sec. 12. "his Act shall ta/e effect on its approval. A. RA (-5& Sec. 2. Any sale, transfer, mortgage or assignment of a stoc/ of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor, mortgagor, transferor, or assignor, or any sale, transfer, mortgage or assignment of all, or substantially all, of the business or trade theretofore conducted by the vendor, mortgagor, transferor, or assignor, or of all, or substantially all, of the fi2tures and equipment used in and about the business of the vendor, mortgagor, transferor or assignor, shall be deemed to be a sale and transfer in bul/, in contemplation of this Act$ :rovided, however, that if such vendor, mortgagor, transferor or assignor produces and delivers a written waiver of the provisions of this Act from his creditors as shown by verified statements, then, and in that case, the provisions of this section shall not apply. a! "hrust of the law$ to protect persons who e2tended credit to merchants, relying on the fact that their stoc/ of merchandise was not to be sold in bul/, but /ept up and replenished from time to time (with the e2tension of credit comes the presupposition of continuance in the business of merchandising! "ypes of transactions covered=% 1. any sale, transfer, mortgage or assignment of a stoc/ of goods, wares, merchandise, provisions or materials otherwise than in the ordinary course of trade and the regular prosecution of the business %. any sale, transfer, mortgage or assignment of all, or substantially all, of the business or trade theretofore conducted by the vendor, etc. any sale, transfer, mortgage or assignment of all, or substantially all, of the fi2tures and equipment used in and about the business of the vendor, etc.

-.

72

PEOPLE * #ONG: "he object of the sale in this case is not covered by the provision alleged to have been infringed. WongGs business was a foundry shop that manufactures iron wor!s and processes or casts metals;erchandise N something that is sold everday and is constantly going out of the store and being replaced by other goods.

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1toc/ * common use when applied to goods in a mercantile house refers to those which are /ept for sale B. )(5:B3A>)? 6?M<36?5?>" a! delivery of the list of creditors to the vendee or mortgagee before receiving the consideration b! application of the consideration to the pro@rata payment of the claims of creditors appearing in the list c! preparation of a full, detailed inventory of the goods sold or mortgaged d! notification to creditors at least 1, days before delivery ). ?++?)"1 (+ >(>@)(5:B3A>)? a! 3f the purchase or mortgage money is not applied pro5rata to the payment of the bona fide claims of the creditors of the vendorLmortgagor, the sale, transfer, or mortgage shall be fraudulent and void. b! "he law penali7es any intentional omission of the names of the creditors in the required list, with the correct amount due or to become due, or any false or untrue statement therein. "he law also penali7es any transfer of title in bul/, without consideration or for a nominal consideration only :?>AB"P1 . months * years imprisonment' fine of W : ,,,,' or both' penalty imposable to the debtor E=I. R/TAI9 TRAD/ 9IB/RA9IJATION ACT RA 8762. An act li!eraliKin) t,e retail tra"e !usiness6 re ealin) #or t,e ur ose RA 118.6 as amen"e"6 an" #or ot,er ur oses. Sec. 1. $itle% @ "his Act shall be /nown as the C)etail $rade Li!erali=ation Act o# 0111%C Sec. 2. Declaration o# 9olic'% 5 3t is the policy of the 1tate to promote consumer welfare in attracting, promoting and welcoming productive investments that will bring down prices for the +ilipino consumer, create more &obs, promote tourism, assist small manufacturers, stimulate economic growth and enable :hilippine goods and services to become globally competitive through the liberali7ation of the retail trade sector. :ursuant to this policy, the :hilippine retail industry is hereby liberali7ed to encourage +ilipino and foreign investors to forge an efficient and competitive retail trade sector in the interest of empowering the +ilipino consumer through lower prices, higher quality if goods, better services and wider choices.

Sec. 3. De#inition% 5 As used in this Act$ (1! C)etail $radeC shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption, but the restriction of this law shall not apply to the following$ (a! 1ales by a manufacturer, processor, laborer, or wor/er, to the general public the products manufactured, processed or produced by him if his capital does not e2ceed (ne 9undred "housand :esos (:1,,,,,,.,,!' (b! 1ales by a farmer or agriculturist selling the products of his farm' (c! 1ales in restaurant operations by a hotel owner or inn@/eeper irrespective of the amount of capital$ 9rovided, that the restaurant is incidental to the hotel business' and (d! 1ales which are limited only to products manufactured, processed or assembled by a manufacturer through a single outlet, irrespective of capitali7ation. (%! CDig 5end or lu,ur' goodsC shall refer to goods which are not necessary for life maintenance and whose demand is generated in large part by the highest income groups. Bu2ury goods shall include, but are not limited to, products such as$ &ewelry, branded or designer clothing and footwear, wearing apparel, leisure and sporting goods, electronics and other personal effects. Sec. 4. $reatment o# 4atural5Born 7iti=en B o Das Lost Dis 9 ilippine 7iti=ens ip% 5 A natural@ born citi7en of the :hilippines who has lost his :hilippine citi7enship but who resides in the :hilippines shall be granted the same rights as +ilipino citi7ens for purposes of this Act. Sec. 5. 2oreign +"uit' 9articipation% 5 +oreign@ owned partnerships, associations and corporations formed and organi7ed under the laws of the :hilippines may, upon registration with the 1ecurities and ?2change )ommission (1?)! and the Department of "rade and 3ndustry (D"3! or in case of foreign@owned single proprietorships, with the D"3, engage or invest in the retail trade business, sub&ect to the following categories$ 7ategor' A @ ?nterprises with paid@up capital of the equivalent in :hilippine :esos of less than "wo 5illion +ive 9undred "housand <1 Dollars (<1X%, ,,,,,,.,,! shall be reserved e2clusively for +ilipino citi7ens and corporations wholly@ owned by +ilipino citi7ens.

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7ategor' B @ ?nterprises with a minimum paid@up capital of the equivalent in :hilippine :esos of "wo 5illion +ive 9undred "housand <1 Dollars (<1X%, ,,,,,,.,,! may be wholly owned by foreigners e2cept for the first two (%! years after the effectivity of this Act wherein foreign participation shall be limited to not more than (.,R! of total equity. 7ategor' 7 @ ?nterprises with a paid@up capital of the equivalent in :hilippine :esos of 1even 5illion +ive 9undred "housand <1 Dollars (<1X=, ,,,,,,.,,! or more maybe wholly owned by foreigners$ 9rovided. owever. that in no case shall the investments for establishing a store in )ategories B and ) be less than the equivalent in :hilippine :esos of ?ight 9undred "hirty "housand <1 Dollars (<1X#-,,,,,.,,!. 7ategor' D @ ?nterprises speciali7ing in high@end or lu2ury products with a paid up capital of the equivalent in :hilippine :esos of "wo 9undred +ifty "housand <1 Dollars (<1X% ,,,,,.,,! per store may be wholly@owned by foreigners. "he foreign investor shall be required to maintain in the :hilippines, the full amount of the prescribed minimum capital. <nless the foreign investor has notified the 1?) and the D"3 of its intention to repatriate its capital and cease operations in the :hilippines. "he actual use in :hilippine operations of the inwardly remitted minimum capital requirements shall be monitored by the 1?). +ailure retail stores shall secure a certification from the Bang/o 1entral ng :ilipinas (B1:! and the D"3, which will verify or confirm inward remittance of the minimum required capital investment. Sec. 6. 2oreign @nvestors Ac"uiring S ares o# Stoc/ o# Local )etailers% 5 +oreign 3nvestors acquiring shares from e2isting retail stores whether or not publicly listed whose net worth is in e2cess of the peso equivalent of "wo 5illion +ive 9undred "housand <1 Dollars (<1X%, ,,,,,,.,,! may purchase only up to a minimum of si2ty percent (.,R! of the equity thereof within the first two (%! years from the effectivity of this Act and thereafter, they may acquire the remaining percentage consistent with the allowable foreign participation as herein provided. Sec. 7. 9u!lic 3##ering o# S ares o# Stoc/% 5 All retail trade enterprises under )ategories B and ) in which foreign ownership e2ceeds eighty percent (#,R! of equity shall offer a minimum of thirty percent (-,R! of their equity to the public through any stoc/ e2change in the :hilippines within eight (#! years from their start of operations. Sec. 8. Fuali#ications o# 2oreign )etailers% 5 >o foreign retailer shall be allowed to engage in retail

trade in the :hilippines unless all the following qualifications are met$ (a! A minimum of "wo 9undred 5illion <1 Dollars (<1X%,,,,,,,,,,.,,! net worth in its parent corporation for )ategories B and ), and +ifty 5illion <1 Dollars (<1X ,,,,,,,,,.,,! net worth in its parent corporation for )ategory D' (b! +ive ( ! retailing branches or franchises in operation anywhere around the world unless such retailers has at least one (1! store capitali7ed at a minimum of "wenty@+ive 5illion <1 Dollars (<1X% ,,,,,,,,.,,!' (c! +ive ( !@year trac/ record in retailing' and (d! (nly nationals from, or &udicial entities formed or incorporated in, countries which allow the entry of +ilipino retailers, shall be allowed to engage in retail trade in the :hilippines. "he D"3 is hereby authori7ed to pre@qualify all foreign retailers, sub&ect to the provisions of this Act, before they are allowed to conduct business in the :hilippines. "he D"3 shall /eep a record of qualified foreign retailers who may, upon compliance with law, establish retail stores in the :hilippines. 3t shall ensure that the parent retail trading company of the foreign investor complies with the qualifications on capitali7ation and trac/ record prescribed in this section. "he 3nter@Agency )ommittee on "ariff and 6elated 5atters of the >ational ?conomic Development Authority (>?DA! Board shall formulate and regularly update a list of foreign retailers of high@end or lu2ury goods and render an annual report on the same to )ongress. Sec. 9. 9romotional o# Locall' Manu#actured 9roducts% 5 +or ten (1,! years after the effectivity of this Act, at least thirty percent (-,R! of the aggregate cost of the stoc/ inventory of foreign retailers falling under )ategories B and ) and ten percent (1,R! for )ategory D, shall be made in the :hilippines. Sec. 10. 9ro i!ited Activities o# Fuali#ied 2oreign )etailers% 5 Mualified foreign retailers shall not be allowed to engage in certain retailing activities outside their accredited stores through the use of mobile or rolling stores or carts, the use of sales representatives, door@to@door selling, restaurants and sari@sari stores and such other similar retailing activities$ 9rovided. that a detailed list of prohibited activities shall hereafter be formulated by the D"3. Sec. 11. @mplementing Agenc'A )ules and )egulations% 5 "he monitoring and regulation of

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foreign sole proprietorships, partnerships, associations or corporations allowed to engage in retail trade shall be the responsibility of the D"3. "his shall include resolution of conflicts. "he D"3, in coordination with the 1?), the >?DA and the B1:, shall formulate and issue the implementing rules and regulations necessary to implement this Act within ninety (8,! days after its approval. Sec. 12. 9enalt' 7lause% 5 Any person who shall be found guilty of violation of any provision of this Act shall be punished by imprisonment of not less than si2 (.! years and one (1! day but not more than eight (#! years, and a fine of not less than (ne 5illion :esos (:1,,,,,,,,.,,! but not more than "wenty 5illion :esos (:%,,,,,,,,,.,,!. 3n the case of associations, partnerships or corporations, the penalty shall be imposed upon its partners, president, directors, managers and other officers responsible for the violation. 3f the offender is not a citi7en of the :hilippines, he shall be deported immediately after service of sentence. 3f the +ilipino offender is a public officer or employee, he shall, in addition to the penalty prescribed herein, suffer dismissal and permanent disqualification from public office. Sec. 13. )epealing 7lause% 5 6epublic Act >o. 11#,, as amended, is hereby repealed. 6epublic Act >o. -,1#, as amended, and all other laws, e2ecutive orders, rules and regulations or parts thereof inconsistent with this Act are repealed or modified accordingly. Sec. 14. Separa!ilit' 7lause% 5 3f any provision of this Act shall be held unconstitutional, the other provisions not otherwise affected thereby shall remain in force and effect. Sec. 15. +##ectivit'% 5 "his Act shall ta/e effect fifteen (1 ! days after its approval and publication in at least two (%! newspapers of general circulation in the :hilippines. A. 1)(:? A>D D?+3>3"3(> (+ 6?"A3B "6AD?=-

%. -.

sales by a farmer or agriculturist of the products of his farm sales limited only to products manufactured, processed or assembled by the manufacturer in a single outlet irrespective of capitali7ation

a! OAeneral publicK $ activities of seller must be such that the target clientele are not only a particular person or group of persons. b! 1?) (pinion >o. 11, series of %,,-$ ?ngaging in the selling of merchandise as an incident to the primary purpose of a corporation does not constitute retail trade (e.g., operation of pharmacy by a hospital! within the purview of the Act (Villanueva! B. 63A9"1 (+ +3B3:3>(1 +(65?6 >A"<6AB@B(6>

>atural@born +ilipinos who have lost their citi7enship !ut w o reside in t e 9 ilippines shall be given the same rights as +ilipino citi7ens with respect to this law. ). )A"?A(63?1 (+ 6?"A3B ?>"?6:631?1 (1ec. ! "6AD?

D. 9(E AB3?>1 5AP 3>C?1" 3> 6?"A3B "6AD? 3> "9? :93B3::3>?1 (1ec. #! ?. +. 6<B?1 (> +(6?3A> 6?"A3B?61 3> "9? :93B3::3>?1 :?>AB"P )BA<1? (1ec. 1%!

'A 108 (Anti5Dumm' Act). An act to unis, acts o# evasion o# t,e la$s on t,e nationaliKation o# certain ri),ts6 #ranc,ises or rivile)es. Sec. 1. 9enalt' T 3n all cases in which any constitutional or legal provisions requires :hilippine or any other specific citi7enship as a requisite for the e2ercise or en&oyment of a right, franchise or privilege, any citi7en of the :hilippines or of any other specific country who allows his name or citi7enship to be used for the purpose of evading such provision, and any alien or foreigner profiting thereby, shall be punished by imprisonment for not less than five nor more than fifteen years, and by a fine of not less than the value of the right franchise or privilege, which is en&oyed or acquired in violation of the provisions hereof but in no case less than : ,,,. "he fact that the citi7en of the :hilippines or of any specific country charged with a violation of this Act had, at the time of the acquisition of his holdings in the corporations or associations

6etail "rade * any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption ?G)?:"$ 1. sales by a manufacturer, processor, laborer or wor/er of products made by him if his capital is less than or equal to 1,,,,,, pesos
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"ING * HERNAE : "here is no distinction between control and nonIcontrol positions with respect to employment of aliens. "he Aetail "rade Kaw read in connection with the ntiI8ummy ct see!s a complete ban on aliens.

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referred to in section two of this Act, no real or personal property, credit or other assets the value of which shall at least be equivalent to said holdings, shall be evidence of a violation of this Act.1 Sec. 2. Simulation o# minimum capital stoc/ T 3n all cases in which a constitutional or legal provision requires that, in order that a corporation or association may e2ercise or en&oy a right, franchise or privilege, not less than a certain per centum of its capital must be owned by citi7ens of the :hilippines or of any other specific country, it shall be unlawful to falsely simulate the e2istence of such minimum stoc/ or capital as owned by such citi7ens, for the purpose of evading said provision. "he president or managers and directors or trustees of corporations or associations convicted of a violation of this section shall be punished by imprisonment of not less than five nor more than fifteen years, and by a fine not less than the value of the right, franchise or privilege, en&oyed or acquired in violation of the provisions hereof but in no case less than : ,,,.% Sec. 2*A. <nlaw#ul use. +,ploitation or en&o'ment T Any person, corporation, or association which, having in its name or under its control, a right, franchise, privilege, property or business, the e2ercise or en&oyment of which is e2pressly reserved by the )onstitution or the laws to citi7ens of the :hilippines or of any other specific country, or to corporations or associations at least si2ty per centum of the capital of which is owned by such citi7ens, permits or allows the use, e2ploitation or en&oyment thereof by a person, corporation or association not possessing the requisites prescribed by a the )onstitution or the laws of the :hilippines' or leases, or in any other way, transfers or conveys said right, franchise, privilege, property or business to a person, corporation or association not otherwise qualified under the )onstitution, or the provisions of the e2isting laws' or in any manner permits or allows any person, not possessing the qualifications required by the )onstitution, or e2isting laws to acquire, use, e2ploit or en&oy a right, franchise, privilege, property or business, the e2ercise and en&oyment of which are e2pressly reserved by the )onstitution or e2isting laws to citi7ens of the :hilippines or of any other specific country, to intervene in the management, operation, administration or control thereof, whether as an officer, employee or laborer therein with or without remuneration e2cept technical personnel whose employment may be specifically authori7ed by the 1ecretary of Fustice, and any person who /nowingly aids, assists or abets in the planning consummation or perpetration of any of the acts herein above enumerated shall be punished by imprisonment for not less than five nor more than fifteen years and by a fine of not less than the value of the right, franchise or privilege en&oyed or acquired in violation of the provisions hereof but in no case less than five thousand pesos$ :rovided, however,

"hat the president, managers or persons in charge of corporations, associations or partnerships violating the provisions of this section shall be criminally liable in lieu thereof$ :rovided, further, "hat any person, corporation or association shall, in addition to the penalty imposed herein, forfeit such right, franchise, privilege, and the property or business en&oyed or acquired in violation of the provisions of this Act$ And provided, finally, "hat the election of aliens as members of the board of directors or governing body of corporations or associations engaging in partially nationali7ed activities shall be allowed in proportion to their allowable participation or share in the capital of such entities.Sec. 2*.. Any violation of the provisions of this Act by the spouse of any public official, if both live together, shall be cause for the dismissal of such public official. 4 Sec. 2*'. "he e2ercise, possession or control by a +ilipino citi7en having a common@law relationship with an alien of a right, privilege, property or business, the e2ercise or en&oyment of which is e2pressly reserved by the )onstitution or the laws to citi7ens of the :hilippines, shall constitute a prima facie evidence of violation of the provisions of 1ection %@A hereof. Sec. 3. Any corporation or association violating any of the provisions of this Act shall, upon proper court proceedings, be dissolved. Sec. 3*A. )eward to in#ormer% T 3n case of conviction under the provisions of this Act, twenty@five per centum of any fine imposed shall accrue to the benefit of the informer who furnishes to the Aovernment original information leading to said conviction and who shall be ascertained and named in the &udgment of the court. 3f the informer is a dummy, who shall voluntarily ta/e the initiative of reporting to the proper authorities any violation of the provisions of this Act and assist in the prosecution, resulting in the conviction of any person or corporation profiting thereby or involved therein, he shall be entitled to the reward hereof in the sum equivalent to twenty@five per centum of the fine actually paid to or received by the Aovernment, and shall be e2empted from the penal liabilities provided for in this Act. . Sec. 4. "his Act shall ta/e effect upon its approval. Approved, (ctober -,, 18-..

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