THE LAW ON

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A
L
E
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 CONTRACT OF SALE

One of the contracting parties obligates himself to transfer the

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

A contract of sale may be absolute or conditional. (Art. 1458)

ESSENTIAL REQUISITES
1. consent
2. subject matter
3. price
 CHARACTERISTICS OF CONTRACT OF SALE
1. Nominate - law gave it a name 5. Commutative – equal value
2. Principal - can stand on its own; is exchanged for equal value
unlike accessory contract
3. Bilateral - imposes obligation on
both parties 6. Consensual – meeting of
a. obligation of seller – transfer minds makes a perfect
ownership & deliver
contract of sale but needs
b. obligation of buyer – pay for price
delivery to consummate the
4. Onerous – with valuable
perfection of the contract of
consideration sale.
STAGES OF A CONTRACT OF SALE
1. Preparation – negotiation is in progress
2. perfection – meeting of minds; birth of the contract
3. consummation / termination – object is delivered and the price is
paid; death of the contract.
 GENERAL CLASSIFICATION OF CONTRACT OF SALE
A. Absolute Sale– no condition attached
B. Conditional Sale – the sale is subject to a contingent event. Ex. Sale
with a right to repurchase; sale of things having potential existence;
sale of future harvest of a designated parcel of land or sale of a
residential house “except the furnitures inside”.
 DONATION SALE

 gratuitous  onerous
 formal contract  Consensual
 governed by law on  governed by law on
donation sales
 Contract for a Piece of Work

Article 1467:

Ø contract for delivery of an article which the vendor in the ordinary course
of business manufactures or procures for general market – SALE

Ø goods are to be manufactured specially for a customer and upon special

order and not for the general market – CONTRACT FOR A PIECE OF
WORK.
 BARTER SALE
 the consideration is the giving  The consideration is the giving
of a thing; of money
 governed by law on sales; both  governed by law on sales; both
are species of the genus sales are species of the genus sales
if consideration consists partly in money & partly by thing –
look at manifest intention;
if intention is not clear (1468 ):
a. value of thing is equal or less than amount of money – sale
b. value of thing is more than amount of money – barter
SALE CONTRACT TO SELL
§ agent not obliged to pay for price,
§ buyer pays for the price of the
but merely obliged to deliver price
object; received from buyer;
§ buyer becomes owner of a thing; § principal remains the owner even
object is delivered to him if the object is delivered to the
agent;
§ seller warrants;
§ agent assumes no risk/liability as
§ not unilaterally revocable; long as he acted within the
§ seller receives profit; authority given;
§ sale is a real contract ( to give ) § may be revoked unilaterally;
§ agent not allowed to profit;
§ Agency is a personal contract;
rescission is not available in agency
 Quiroga v. Parsons Hardware, 38 Phil 501, August 23, 1918

FACTS: A contract was entered into by the plaintiff-Quiroga and defendant-

Parson with the exclusiveright to sell Quiroga beds in the Visayan islands
subject to conditions. The plaintiff averred that thedefendant violated the
following obligations: 1. not to sell the beds at higher prices than those of
theinvoices 2. to have an open establishment in Iloilo 3. itself to conduct the
agency 4. to keep the beds onpublic exhibition 5. to pay for the advertisement
expenses for the same 6. to order the beds by the dozen and in no other
manner. Except for (6), none of the obligations imputed by Quiroga are
expressed in the contract. He alleged that Parsons was his agent for the sale of
his beds in Iloilo, and that the said obligations are implied in a contract of
commercial sale.
ISSUE: Whether or not the contract entered into by the parties is a contract of agency?

RULING: Parson was a purchaser-buyer, and not an agent. The terms and conditions of the parties have
the essential features of a contract of purchase and sale. There was the obligation on the part of Quiroga to
supply the beds, and, on the part of Parsons, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it,and
does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it.In the case at bar, Parsons, on receiving the
beds, was necessarily obliged to pay their price within the term fixed (60 days), without any other
consideration and regardless as to whether he had or had not sold the beds.Not a single one of the clauses
in the contract necessarily conveys the idea of an agency. The words commission on sales used in clause
(A) of Article 1 mean nothing else than a mere discount on the invoice price. The word agency, also used
in Articles 2 and 3, only expresses that the Parsons was the only one that could sell the Quiroga beds in
the Visayan Islands. As to the remaining clauses, the least that can be said is that they are not
incompatible with the contract of purchase and sale.
SALE LEASE
 obligation to absolutely  use of thing is for
transfer ownership of specified period only
thing; with obligation to return
 consideration is price;  consideration is rent
 seller needs to be the  lessor need not be the
owner of a thing to owner
transfer ownership;
 Parties to a Contract of Sale

 GENERAL RULE: All parties with capacity to

contract can enter into a valid contract of sale
 1. Natural Persons
 2. Juridical Persons
corporation
partnership
associations
Cooperatives
 Exception to the General Rule
1. Minors 2. SALE BY & BETWEEN
 status of contract: SPOUSES
voidable only, therefor Reason:
ratifiable i. prevent defraudation of
 remedy is action for creditors
annulment (with partial ii. avoid situation where
restitution in so far as the dominant spouse take
minor is benefited) advantage
iii. avoid circumvention on
prohibition of donation
between spouses
 Dacion en pago

 dacion: contract where property is alienated to

satisfy/extinguish obligation to pay debt
 in dacion : novates creditor-debtor relationship
into seller-buyer relationship
 in dacion: delivery is required ( real contract )
 Exception to the General Rule
3. OTHERS PER SPECIFIC Exception
PROVISIONS OF LAW i. separation of property agreed
a. Guardian as regards to the (marriage settlement)
property of ward during the period ii. judicial separation of property
of guardianship c. Common Law Spouses
b. Agent as regards to the property (Paramours)
of principal Status of contract: VOID
c. Executor/administrator as
regards to the estate of the deceased
d. Public officers as regards to the
property of the estate
e. Officer of court & employee – as
regards to the property in litigation
 FORNILDA, ET AL., V. RTC BRANCH 164, TANAY, RIZAL , JOAQUIN C. ANTONIA & ATTY. SERGIO AMONOY

 “A lawyer is prohibited from acquiring either by purchase or assignment the property or rights involved which are
the object of the litigation in which they intervene by virtue of their profession.”
 Facts:
 The controverted parcels were part of the estate of the late Julio M. Catolos subject of intestate estate proceedings,
wherein Atty. Amonoy acted as counsel for some of Catolos’ heirs. The properties were adjudicated to Alfonso
Fornilda and Asuncion M. Pasamba in the Project of Partition approved by the Court in 1965. Eight days after its
approval, the properties were mortgaged by Fornilda and Pasamba to Atty. Amonoy to secure payment of the
latter's attorney's fees in the amount of P27,600.00. However, since the mortgage indebtedness was not paid, Atty.
Amonoy instituted an action for judicial foreclosure of mortgage. The mortgage was subsequently ordered
foreclosed and auction sale followed where Atty. Amonoy was the sole bidder . When Fornilda and Pasamba died,
their heirs filed a complaint for the annulment of the judgment in the foreclosure case before the Court of First
Instance (CFI) on the ground that the mortgage and the Sheriff’s sales were null and void as contrary to Article 1491
par. 5 of the Civil Code, which prohibits attorneys from purchasing, even at a public or judicial auction, properties
and rights in litigation. CFI dismissed the complaint . Affirmed by the Court of Appeals (CA) . Hence, this petition
was filed.
 FORNILDA, ET AL., V. RTC BRANCH 164, TANAY, RIZAL , JOAQUIN C. ANTONIA &
ATTY. SERGIO AMONOY
 ISSUE: Whether or not the mortgage constituted on the Controverted Parcels in favor of Respondent
 Amonoy comes within the scope of the prohibition in Article 1491 of the Civil Code.

 Ruling:
 Yes. Art. 1491 states that The following persons cannot acquire by purchase even at a public or judicial or auction,
either in person or through the mediation of another: xxx (5) Justices, judges, prosecuting Attorneys, ... the property
and rights in litigation or levied upon on execution before the court within whose jurisdiction or territory they exercise
their respective functions; this prohibition includes the act of acquitting by assignment and shall apply to lawyers with
respect to the property and rights which may be the object of any litigation in which they may take part by virtue of
their profession. Atty. Amonoy avers that at the time of the execution of the mortgage, the subject properties were
no longer "properties in litigation" since the Project of Partition covering said properties was approved by the lower
Court . This argument must fail for the reason that while the Project of Partition was approved, it was only after all
charges against the estate had been paid, that the estate was declared closed and terminated. In fact, by his own
admission, he had acted as counsel from 1959 until 1968.
 FORNILDA, ET AL., V. RTC BRANCH 164, TANAY, RIZAL , JOAQUIN C. ANTONIA &
ATTY. SERGIO AMONOY

 Thus, at the time of the execution of the mortgage contract, the Controverted Parcels were
still in litigation and a fiduciary relationship of lawyer and client, which Article 1491[5]
precisely seeks to protect, still existed between the parties. To state that mortgages are not
included within the prohibition is to open the door to an indirect circumvention of that
statutory injunction, acquisition of the property being merely postponed till eventual
foreclosure. Respondent asserts further that Article 1491[5] does not apply to judgment
creditors of which, he claims, he was one. Under ordinary circumstances, the argument of
respondent could be considered plausible. Unfortunately, however, as heretofore explained,
the mortgage was executed in violation of Article 1491[5] so that this Article has a direct
bearing on this case and respondent cannot escape its provision. Having violated the
same, he cannot be considered in the general run of a judgment creditor
 Rubias v. Batiller, 51 SCRA 120, May 29, 1973
 FACTS
 Lawyer Domingo Rubias filed a lawsuit on August 31, 1964, seeking to reclaim ownership and control
of a section of a lot in Barotac Viejo, Iloilo, which he had purchased from his father-in-law Francisco
Militante in 1956. Isaias Batiller, who was living on the property, invaded the areas of the lot twice
illegally: in 1945 and 1959. Rubias also requested compensation for losses and legal costs. In contrast,
Batiller asserts in his response that he and his predecessors-in-interest have always been in actual,
open, and continuous possession under claim and ownership of the disputed portions of the property
since the beginning of time. Batiller asserts that the accusations have caused him to incur moral losses
of P2,000 and P500 in legal costs.

 Issue:

 What is the status of the sale?

Ruling

 Plaintiff’s lack of a cause of action was undeniably proved by the agreed facts and record exhibits,
which supported the complaint’s complete dismissal.
 Because Francisco Militante, the plaintiff’s father-in-law, sold the property to him for P2,000.00 in
1956, when Militante’s application to register it had already been denied by the Iloilo land registration
court and was still being appealed in the Court of Appeals, the plaintiff was able to establish his claim
to ownership of the property.
 There was therefore no right or title to the land that could be transferred or sold as a result of
Militante’s alleged sale to the plaintiff in 1956. Therefore, it was obvious that the plaintiff’s case
against the defendant requesting to be proclaimed the sole owner of the land and to be granted control
of it again while paying damages lacked any factual or legal support.
 Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six
paragraphs certain persons,by reason of the relation of trust or their peculiar control over the property,
from acquiring such property in their trust or control either directly or indirectly; even at a public or
judicial auction; as follows: (1) guardians; (2) agents; (3) administrators; (4)public officers and
employees; judicial officers and employees, prosecuting attorneys, andlawyers; and (6) others
especially disqualified by law.
 Subject Matter of Sale

Must be : 1. Existing, Future & Contingent

2. Licit
3. Determinate or determinable

EXISTING, FUTURE, CONTINGENT

- Refers to subject matter that are existing and not existing
but capable of existence.
if this is present, status of contract is VALID
SALE OF THINGS HAVING POTENTIAL
SALE OF HOPE (Emptio Spei)
EXISTENCE (Emptio Rei Speratae)

§ Sale of future things;  sale of a present thing,

that is the hope or
§ A resolutory condition expectancy;
that thing will come  It is not certain that the
into existence thing will exist much less
its quantity and quality;
aleatory in character, but
still valid.
SELLER MUST BE THE OWNER
– Vendor need not be owner of thing at the time of the
perfection of the contract of sale, but should be the
owner at the time of delivery.
PRICE – signifies the sum stipulated as equivalent of the thing
sold

Price is valid, if :
1. real
2. in the form of money or its equivalent
3. certain or ascertainable at the time of the perfection of the
contract.
 OPTION CONTRACT

An option is a contract granting a privilege to buy and

sell within an agreed time and at a determined price. It
is a separate and distinct contract which the parties
may enter upon consummation of the option. It must
be supported by a consideration distinct from the price.
(Art. 1479, par. 2)
 NICOLAS SANCHEZ v. SEVERINA RIGOS
G.R. No. L-25494, June 14, 1972, J. Concepcion

 Where the option contract is not supported by a consideration distinct from the price, the promisor is not bound by the
same and may, accordingly, withdraw it. Nonetheless, if the party decides to exercise his option before a withdrawal, then a
binding contract of sale results, even though the option was not supported by a sufficient consideration.

 Facts:

 Nicolas Sanchez and Severina Rigos executed an instrument entitled "Option to Purchase," whereby Rigos "agreed,
promised and committed to sell" to Sanchez a parcel of land with the understanding that said option shall be
deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the property" within two years.
Sanchez made several tenders of payment within said period, but all were rejected by Rigos. So, he commenced the
present action for specific performance. He maintains that by virtue of the option under consideration, Rigos agreed
and committed to sell the land, and may be compelled therefore. On the other hand, Rigos argued that that the
contract between them is a unilateral promise to sell, and the same being unsupported by any valuable
consideration is null and void.
 NICOLAS SANCHEZ v. SEVERINA RIGOS
G.R. No. L-25494, June 14, 1972, J. Concepcion

Issue:
Whether an accepted unilateral promise to sell without consideration distinct from the price may be enforced
pending withdrawal.

Ruling:

YES. An accepted unilateral promise to sell or an option contract, which although not binding as a contract in
itself for lack of a separate consideration, nevertheless generates a bilateral contract of purchase and sale upon
acceptance of the offer to sell. In other words, since there may be no valid contract without a cause or
consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. However, pending
withdrawal, the promisor’s accepted promise to sell or the option contract partakes, however, of the nature of an
offer to sell. This offer to sell, if accepted and the buyer decides to exercise his option pending withdrawal, results
in a perfected contract of sale. In this case, Sanchez accepted the offer to sell before Rigos was able to withdraw his
offer. Thus, upon acceptance, i.e., the tender of payment, by Sanchez, a bilateral contract of sale was perfected.
 RIGHT OF FIRST REFUSAL

 A right of first refusal is a contractual right giving its

holder the option to transact with the other
contracting party before others can. The ROFR
assures the holder that they will not lose their rights
to an asset if others express interest.
 OPTION CONTRACT RIGHT OF FIRST
REFUSAL
§ Principal contract; stands on its own  Accessory; can not stand on its own
§ Needs separate consideration  Does not need separate consideration
§ Subject matter & price must be valid  There must be subject matter but price
§ Not conditional not important
§ Not subject to specific performance  Conditional
 Subject to specific performance
 EARNEST MONEY

 ART. 1482. Whenever 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.
Earnest money is something of value given by the
buyer to the seller to show that the buyer is really in
earnest, and to bind the bargain.
 Form
General Rule: Form is not important in the validity of sale; Sale being consensual,
may be oral or written, perfected by mere consent as to price & subject matter.
ETR:
1. If particular form is required under the statute of frauds:
 a. valid & binding between parties
 b. not binding to 3rd persons only
 Reason: purposes of convenience only & not for validity & enforceability; cause
 of action is granted to sue & compel other party to execute the document
2. When form is important for validity
ex. a. power to sell a piece of land granted to an agent
b. sale of large cattle; must also be registered with Municipal treasurer
c. sale of land by ICCs/IPs .
 3. When form is important for enforceability (STATUTE OF FRAUDS)
 a. sale to be performed 1 year after
 b. Agreement to sell things with value of 500 and up
 c. Sale of real property or interest therein
 Exception:
 i. When there is a note or memorandum in writing & subscribe by party or his
 agent (contains essential terms of the contract)
 ii. When there has been partial performance/execution (seller delivers with
 intent to transfer title/receives price)
 iii. when there has been failure to object to presentation of evidence (oral)
 (constitute waiver)
Obligation of the Seller Kinds of delivery

a. to deliver the thing

a. actual or real delivery - when the goods are placed in the control and possession of
the vendee.
b. constructive delivery

b. to transfer the ownership 1. legal formalities - execution of public instrument

2. symbolic delivery - delivery of the key where the
things are kept or stored, or symbol or token of

c. to warrant the thing sold delivery.

3. traditio longa manu - by mere pointing of the object
4. tradition brevi manu - no need to deliver because the buyer is already in

d. to take good care of the possession.

5. constitutum possessorium - no need to deliver because the seller will

thing pending delivery continue in possesssion.

6. quasi-tradition - the object is intangible or incorporeal thing. The
placing of the title of ownership in the name of the vendee with the consent of the

(Article 1163, New Civil vendor is equivalent to delivery.

Code)
c. Any agreement that possession is transfered from the vendor to the vendee.
DELIVERY OF FRUITS & ACCESSIONS/ ACCESSORIES
Right to fruits & accessions/accessories accrue from time sale is perfected but no real right over it until it is delivered.

DELIVERY THROUGH CARRIER

1. C/C - Cash and carry
2. COD - Cash on Delivery
3. FOB - Free on Board
a. point of shipment
b. point of destination
4. Free alongside the vessel
5. Sale or return
6. Sale onTrial, Satisfaction and Approval
7. CIF - Cost, Insurance, Freight
 TIME & PLACE OF DELIVERY
 1. follow stipulation in contact, or
 2. follow usage of trade, or
 3. seller’s place of business or his residence
 4. specific goods – place where the thing is
 5. at reasonable hour

 EFFECTS OF DELIVERY: Title to thing is transferred/ownership is transferred

 Except: contrary is stipulated as in the case of:
 1. contract to sell
 2. sale on acceptance/approval
 3. sale or return
 4. there is implied reservation of ownership
 Ownership of the thing sold

As a rule, nobody can dispose that which does not belong to him, and that the
buyer acquires no better title to the goods than the seller had, except:
1. When the seller is authorized by the owner under the principle of agency.
2. Whent ht eowner is precluded from denying the authority of the seller.
3. Sales made under statutory power of sale, such as sale made by guardian;
4. Sales made by order of the court, such as those conducted by the Sheriff;
5. Sales made in a merchant’s store, or in fairs or in markets;
6. Sales under recording law, or any other provision of law enabling the
apparent owner of goods to dispose them as if he were the true owner.
 Instances when vendor is not obliged to deliver the thing sold

1. If the vendee has not paid him the price;

2. If no period for the payment has been fixed
in the contract;
3. Even if there is no period fixed for the payment of
the price - if vendee should lose the right to make use
of the period or terms as provided for in Article 1198.
 JOSE B. AZNAR v. RAFAEL YAPDIANGCO and TEODORO SANTOS, G.R. No. L-18536,
March 31, 1965,
 Contracts only constitute titles or rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same.
 Facts:
 Teodoro Santos agreed to sell his car to Vicente Marella on the condition that the price would be
paid only after the car had been registered in Marella’s name. The deed of sale was then executed
and the car was registered in Marella’s name. However, Marella, instead of paying, asked for an
extension and instructed his nephew, L. De Dios, to go to the house of Marella’s sister to get the
money. L. De Dios and Ireneo, Teodoro went to the said house using the subject car. When they
arrived, Ireneo was made to wait inside the house. After some time, Ireneo went out and
discovered that the car and L. De Dios were gone.

 On that same day, Marella was able to sell the car to petitioner Jose Aznar. While the subject car
was in the possession of Aznar, agents of the Philippine Constabulary seized the same based on
the report that the same was stolen from Santos. Thus, Aznar filed a complaint for replevin
against Captain Rafael Yapdiangco, the head of the Philippine Constabulary unit which seized the
subject car. The lower court ruled in favor of Santos and held that although Aznar acquired the
car in good faith and for a valuable consideration from Marella, Santos was still entitled to its
recovery under Article 559 of the Civil Code.
 JOSE B. AZNAR v. RAFAEL YAPDIANGCO and TEODORO SANTOS, G.R. No. L-18536,
March 31, 1965,
 Issue: Whether or not Jose Aznar is entitled to the subject car.
 Ruling:
 NO. Under Article 1506 of the Civil Code, it is essential that the seller should have a voidable title at
least. It is very clearly inapplicable where, as in this case, the seller had no title at all. Vicente Marella
did not have any title to the property under litigation because the same was never delivered to him.
He sought ownership or acquisition of it by virtue of the contract. Vicente Marella could have acquired
ownership or title to the subject matter thereof only by the delivery or tradition of the car to him.
Under Article 712 of the Civil Code, ownership is not transferred by contract merely but by tradition
or delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same.

 In 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. While there was indeed a
contract of sale between Vicente Marella and Teodoro Santos, the former, as vendee, took possession
of the subject matter thereof by stealing the same while it was in the custody of the latter's son. The
lower court was correct in applying Article 559 of the Civil Code to the case at bar, for under it, the
rule is to the effect that if the owner has lost a thing, or if he has been unlawfully deprived of it, he has
a right to recover it, not only from the finder, thief or robber, but also from third persons who may
have acquired it in good faith from such finder, thief or robber
 Rights of an Unpaid Seller

1. A lien in the goods or right to retain them for the

price while he is possession of them;
2. In case of insolvency of buyer, a right of stoppage of
goods in transit after he has parted with possession;
3. A right of resale;
4. A right to rescind the sale;
5. A right to enforce payment.
 Requisites of Seller’s Possessory Lien

1. seller is unpaid;
2. goods are in the possession of seller;
3. goods are sold without any stipulation as to credit
or the term of credit has expired; or the buyer becomes
insolvent.
Vendors who are not liable for breach of warranty

1. Sheriff;
2. Auctioner;
3. Mortgagee;
4. Pledgee;
5. Other person professing to sell by virtue of an
authority in fact or in law.
 Obligations of the Vendee

1. To accept delivery of the thing sold

2. To pay the price of the sale;
3. Other obligations stated in the contract.

Pactum commisorium - An agreement that the sale

shall be void upon the vendee’s failure to pay the price
at the time stipulated, and the vendor shall retain any
part of the price paid.
 Kinds of Redemption

1. Conventional Redemption (retracto conventional or pacto de retro) - is one whereby the

parties by their voluntary will or agreement, who seek to serve their interest stipulates that
the vendor shall have the right to acquire by complying with the provision of Art. 1616, to
wit:
a. to return to the vendee the price paid;
b. the expenses or payment by reason of the sale;
c. necessary and useful expenses made on the thing sold.

2. Legal Redemption- the right to be subrogated, upon the same terms and conditions
stipulated in the conract 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 (Art.
1619)
 Equitable Mortgage

It is one although lacking in some formality, form of words, or

other requisites demanded by statutes nevertheless reveals the
intention of the parties to charge a real estate as security for a debt,
and contains nothing impossible or contrary to law.

This was formulated by the Code Commission to minimize the evils

of usury by money lenders who have used the contract of sale with
pacto de retro as a device to attain their purpose, lays down this
rebuttable presumption that it is an equitable mortgage.
Contract presumed as an Equitable Mortgage (Art. 1602)

1. When the price of a slae with right to repurchase is unusually inadequate;

2. When the vendor remains in possession as lessee or otherwise;
3. When upon or after the expiration of the right to repurchase another
instrument extending th period of redemption or granting a new period is
executed;
4. When the purchaser retains for himself a part of the purchase price;
5. When the vendor binds himself to pay the taxes on the thing sold;
6. In any other case where it may be fairly inferrect that the real intention of
hte parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.
Mortgage Pacto de Retro

-ownership is not transferred to the -ownership is transferred to the buyer

mortgagee
-possession of the object is not transferred -possession of the object is transferred to
to the mortgagee the vendee
-mortgagee becomes the owner of the -buyer becomes the absolute owner upon
property if it is foreclosed and the expiration of the term for redemption if
mortgagee buys the property at public the seller will not redeem.
auction
-an accessory contract - a principal contract.
 Obligation of the seller if he wants to redeem

 1. price of the sale

 2. expenses of the contract
 3. other legitimate payments made by reason of the
sale
 4. necessary expenses made on the thing sold
 5. useful expenses on the thing sold.
Redemption Pre-emption

-right after the sale -right before the sale

-gives right of rescission -gives no right of
of the original sale rescission because there
-directed against the is no sale
buyer -directed against
prospective buyer
 DOUBLE SALE
 GENERAL RULE: FIRST IN TIME, PRIORITY IN RIGHT
 When does it apply: when not all requisites embodied in Art. 1544 concur

 Requisites;
 1. exactly same subject matter
 2. exactly same immediate seller
 3. they buyers represent conflicting interest
 4. both sales are valid

 RULES ACCORDING TO Article 1544:
 1. MOVABLE owner is first to posses in good faith

 2. IMMOVABLE
 a) First to register in good faith
 b) No inscription, first to possess in good faith
 c) No inscription & no possession in good faith – Person who presents oldest title in good faith
 GOOD FAITH
 1. one who buys property without notice that another
person has a right or interest in such property
 2. one who has paid price before notice that another has
claim or interest
 lis pendens – notice that subject matter is in litigation
 adverse claim – notice that somebody is claiming
better right
 DURAN & GASPAR v. Intermediate Appellate Court & TIANGCO
G.R. No. L-64159, September 10, 1985,

A fraudulent or forged document of sale may become the root of a valid title if the certificate of title has
already been transferred from the name of the true owner to the name of the forger or the name indicated
by the forger.
Facts:
Circe Duran claims to be the owner of the two parcels of land subject of this case. It was
alleged that a deed of sale was made in favor of her mother, Fe Duran, who subsequently
mortgaged the same to Erlinda Marcelo-Tiangco. The said lots were sold to Erlinda in the
foreclosure sale conducted. Circe asserts that her signature in the deed was a forgery. The CA
rendered judgment modifying the decision of the trial court. It dismissed the petition ruling
that the signature of Circe is genuine because there is the presumption of regularity in the
case of a public document. But even if the signatures were a forgery, and the sale would be
regarded as void, still the Deed of Mortgage is valid, with respect to the mortgagees. Insofar as
innocent third persons are concerned the owner was already Fe Duran inasmuch as she had
already become the registered owner.
 DURAN & GASPAR v. Intermediate Appellate Court & TIANGCO
G.R. No. L-64159, September 10, 1985,
Issue: Whether or not Erlinda was a buyer in good faith and for value.
Ruling:
YES. Good faith consists in the possessor's belief that the person from whom he received the thing was the
owner of the same and could convey his title. While it is always presumed in the absence of proof to the
contrary, good faith requires a well-founded belief that the person from whom title was received was
himself the owner of the land, with the right to convey it. There is good faith where there is an honest
intention to abstain from taking any unconscientious advantage from another. In the case at bar, private
respondents, in good faith relied on the certificate of title in the name of Fe Duran. Even on the supposition
that the sale was void, the general rule that the direct result of a previous illegal contract cannot be valid (on
the theory that the spring cannot rise higher than its source) cannot apply here for the Court is confronted
with the functionings of the Torrens System of Registration. The doctrine to follow is simple enough: a
fraudulent or forged document of sale may become the root of a valid title if the certificate of title has
already been transferred from the name of the true owner to the name of the forger or the name indicated
by the forger. Every person dealing with registered land may safely rely on the correctness of the certificate
of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the
condition of the property.
 Documents of Title
- not creations of law but by merchants to allow them to deal with merchandise
without having to physically carry them around; pertains to specific type of movable
only, which is goods in particular.
 2 FUNCTIONS of Documents of Title
 1. evidence of existence & possession of goods described therein
 2. medium by which seller is able to transfer possession of goods
 2 FORMS
 1. negotiable
 a. deliver to bearer (negotiation by mere delivery)
 b. deliver to specific person or his order (negotiation by endorsement + delivery)
 even if the face of instrument says NON-NEGOTIABLE it is still
NEGOTIABLE.
 If it is an order instrument & no endorsement was made – equivalent to assignment
 RULES OF LEVY/GARNISHMENT OF GOODS COVERED BY DOCUMENTS OF
TITLE
 1. Non negotiable
 Notification is operative act to transfer title/possession of goods in favor assignee
 Before notification – can be garnished but not when there is notification already
 2. Negotiable
 Can not be levied or garnished when it is already with the purchaser in good faith,
unless:
 a. Document is first surrendered
 b. Document is impounded by court
 c. Negotiation is enjoined
 Who bears risk of loss/deterioration/fruits
 1. Before perfection
 Res perit domino. The Owner is the seller so the seller bears the risk of loss.
 2. At Perfection
 Res perit domino. Contract is merely inefficacious because the loss of the
subject matter does not affect the validity of the sale. The Seller cannot anymore
comply with the obligation so the buyer cannot be compelled.
 3. After Perfection but before delivery
 2 views:
 Paras: BUYER
 Tolentino: SELLER
 4. After delivery
 Res perit domino. The Owner is the buyer so the buyer bears risk of loss.
 Delivery extinguish ownership vis-a-vis the seller & creates a new one in favor
of the buyer.
 Sale of Movables on Installment
 REMEDIES OF UNPAID SELLER (1484)
 1. Exact fulfillment should the buyer fail to pay
 2. Cancel the sale if buyer fails to pay 2 or more
installments
 3. Foreclose on chattel mortgage if buyer fails to pay 2 or
more installments
 If buyer chooses foreclosure, no further action against
buyer may be done to recover any unpaid balance of the
price.

 Maceda Law

 The Realty Installment Buyer Act, also known as the

Maceda Law, aims to protect buyers of real estate on
installment payments from common adverse conditions
when purchasing properties. A sale transac t i o n i s
considered installment when at least two installments are
due in the future at the time of sale perfection. Because the
law only applies to residential real estate transactions,
industrial lots, commercial buildings, and real estate sold to
tenants under agrarian laws are not covered.
 Maceda Law
 RIGHTS GRANTED TO BUYERS:
 1. Buyer paid at least 2 years installment
 a. Pay without interest the balance within grace period of 1 month for every year
 of installment payment
 Grace to be exercised once every 5 years
 b. When no payment - cancelled; buyer entitled to 50% of what he has paid +
 5% for every year exceeding 90% of payments made
 Cancellation to be effected 30 days from notice & upon payment of cash
 surrender value

 2. Buyer paid lees than 2 years installment

 a. Grace period is 60 days
 b. Cancellation if failure to pay within 60 days grace
 c. 30 days notice before final cancellation
 buyer can still pay within the 30 days period
 with interest
 Purpose of law : Protect buyers in installment against oppressive
conditions
 Notice needed – waiver thereof id oppressive
 Apply to contracts even before law was enacted
 Stipulation to contrary is void
 Other rights:
 a. Sell rights to another
 b. Reinstate contract by updating within 30 days before cancellation
 c. Deed of Sale to be done by notarial act
 d. To pay full installment in advance the balance of price anytime without
interest
 e. Have full payment annotated in certificate of title
 BULK SALES LAW
 Protect creditor of merchant stored
 3 types of transactions:
 1. Sale of goods other than in the ordinary course of business
 2. Sale of business
 3. Sale of fixtures & equipments
 Should cover only merchants because creditors cannot get adequate security because goods
are sold ordinarily in the course of business.
 Not covered:
 1. with waiver of creditor of seller
 2. receiver, assignee in insolvency proceeding
 Duty of seller to perform the following when transaction is within the coverage
of the law
 1. make sworn statement of listing of creditors
 2. delivery of sworn statement to buyer
 3. apply the proceeds pro-rata to the claims of creditors shown in verified statement
 4. written advance disclosure to creditors
 ANTI-DUMMY LAW

 There are various laws and regulations restricting the maximum amount of
foreign equity in corporations engaged in nationalized or partially
nationalized economic activities in the Philippines. The sources of these
restrictions are the 1987 Constitution, the Foreign Investments Act of 1991,
and the Foreign Investment Negative Lists.
 The Anti-Dummy Law (Commonwealth Act No. 108) seeks to penalize
persons and corporations which circumvent these foreign equity
restrictions. The offender can be: (i) any citizen of the Philippines, or (ii)
any citizen of any other specific country. The proscribed offense includes
the act of using the “name” or “citizenship” of a Filipino citizen to be used
for the purpose of evading the foreign ownership limitations.