Rabajante-Notes-sales.pdf

SALES AND LEASE REVIEWER (by Diory Rabajante) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------SALES * CONTRACT OF SALE, defined (Art. 1458, CC) 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 in money or its equivalent. * SOURCES OF RIGHTS / OBLIGATIONS (Art. 1156) 1. Law 2. Contracts 3. Quasi – Contracts 4. Acts or omissions punished by law; and 5. Quasi – delicts A contract of sale is a contract and is, therefore, a source of obligations. It has the force of law between the contracting parties, which should be complied with in good faith. (Art. 1159) * CHARACTERISTICS OF A CONTRACT OF SALE

1.

Nominate - law gave it a name, i.e . “SALE”

2.

Principal - can stand on its own, unlike an accessory contract

3.

Bilateral - imposes obligation on both parties

a. b.

obligation of seller – transfer ownership & deliver obligation of buyer – pay price

Consequence of being bilateral: power to rescind is implied in bilateral contracts (Art. 1191)

4.

Onerous – imposes valuable consideration Consequence: all doubts in construing contract to be resolved in greater reciprocity of interest

5.

Commutative – a thing of value is exchanged for equal value Subjective Test: as long as parties believe in all honesty that he is receiving equal value then it complies with the test & would not be deemed a donation; but must not be absurd. • Inadequacy of price or aleatory character not sufficient ground to cancel contract of sale; • sale may be annulled based on vice of consent regarding inadequacy but not on inadequacy per se

6.

Consensual – a contract of sale is perfected by mere consent.

7.

Title & not a mode – title gives rise to an obligation to transfer; it is not a mode w/c actually transfers ownership. On its own, sale is not a mode which transfers ownership. It creates an obligation to transfer ownership. It is the delivery that transfers ownership.

* CONTRACT OF ABSOLUTE SALE VS. CONTRACT OF CONDITIONAL SALE A contract of sale may be absolute or conditional. (Art. 1458) True Test: A contract of sale gives rise to two obligations: for the seller, to transfer the ownership of and deliver a determinate thing; for the buyer, the payment of the price. If the condition is imposed on the seller’s obligation to transfer the ownership of and deliver the thing, there is a conditional sale. Note that the essence of sale is the acquisition of ownership. However, if the condition is imposed on the buyer’s obligation to pay the price, the sale is still absolute. Payment of the purchase price is part of the consummation stage (not perfection stage) of the contract of sale. Perfection of the contract of sale is not affected by the fact that payment is subject to conditions, it being the case that a contract of sale is perfected by mere consent. HYPOTHETICAL QUESTIONS: 1.

A and B entered into a contract of sale whereby A obliges himself to transfer the ownership of and deliver a certain piano to B for P5,000. A and B further agreed that the piano will be delivered to B immediately after the execution of the contract, and that B is given ten days to pay the price. The ownership is, however, reserved to A until the full payment of the purchase price. Was the contract of sale entered into by A and B absolute?

SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------No. The contract of sale between A and B was conditional because there was a condition imposed on A’s obligation to transfer the ownership of the piano. B’s ownership of piano is automatically transferred to the buyer by operation of law upon fulfillment of a suspensive condition which is the payment of the purchase price. 2.

A and B entered into a contract of sale whereby A obliges himself to transfer the ownership of and deliver a certain piano to B for P5,000. They further agreed that payment of the price by B is subject to the condition that B will receive money from C. Is the contract of sale entered into by A and B absolute? Yes. The condition is imposed only on the payment of the price.

Jurisprudential Doctrines: People's There was no perfected sale of a lot when it was conditionally or contingently awarded Homesite & subject to the approval by the city council of the proposed consolidation subdivision plan and Housing Corp. vs the approval of the award by the valuation committee and higher authorities. When the plan CA was approved, the Mendozas should have manifested in writing their acceptance of the award for the purchase of the lot just to show that they were still interested in its purchase, although the area was reduced. Yet, they did not do so. Article 1475 of the NCC provides that “the contract of sale is perfected at the moment there is a meeting of the minds..." Under the facts of this case, there was no meeting of minds on the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square meter. As to the conditional nature of the sale, Article 1181 of the NCC states that “in conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. Dignos vs CA A deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period. In this case, there is no such stipulation reserving the title of the property on the vendors nor does it give them the right to unilaterally rescind the contract upon non-payment of the balance thereof within a fixed period. Furthermore, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are present. * CONTRACT OF SALE VS. CONTRACT TO SELL CONDITIONAL CONTRACT OF SALE Failure to pay is a resolutory condition which puts an end to the transaction Title passes to the vendee after compliance with his obligation After delivery, ownership is loss, unless it is rescinded First element (consent) is present albeit conditioned upon the happening of contingent event which may or may not occur, in effect, contract of sale is automatically perfected without further act having to be performed by the seller With respect to sale to third person: Upon fulfillment of suspensive condition, sale becomes absolute which affects seller’s title 3P becomes buyer in bad faith if possesses contrastive or actual knowledge of defect in seller’s title Second buyer cannot defeat the first buyer’s title

CONTRACT TO SELL Failure to pay is a positive suspensive condition Ownership is retained by the seller Delivery does not affect loss of ownership Ownership not automatically transferred to the buyer (even if there has been previous delivery to him) upon fulfillment of suspensive condition (i.e. full payment of purchase price). Seller still has to convey title to prospective buyer by entering into a contract of absolute sale. With respect to sale to third person: No double sale (bec no previous sale of property despite fulfillment of suspensive condition) 3P not a buyer in bad faith Prospective buyer cannot seek relief of reconveyance of property, but only sue under Art 19 (unjustified disregard of right)

* CONTRACT OF SALE VS. CONTRACT FOR A PIECE OF WORK Article 1713: By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill or also furnish the material.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Article 1467: CONTRACT OF SALE 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 market, whether the same is on hand at the time or not CONTRACT FOR A PIECE OF WORK if the goods are to be manufactured specially for the customer AND upon his special order, and not for the general market. Here, service is the Subject Matter BUT: THERE CAN BE NO CONTRACT FOR PIECE-OF-WORK FOR PAST SERVICE RESULTING IN THE CREATION OF THE OBJECT (ALWAYS A SALE)

JURISPRUDENTIAL DOCTRINES: Celestino Co. vs Collector

Commissioner vs Engineering and Supply Company

When a factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally performed by it, it thereby contracts for a piece of work. - In the case at bar, the orders exhibited were not shown to be special. They were merely orders for work — nothing is shown to call them special requiring extraordinary service of the factory. The factory sold materials ordinarily manufactured by it — sash, panels, mouldings — to Teodoro & Co., although in such form or combination as suited the fancy of the purchaser. Such new form does not divest the the factory of its character as manufacturer. Neither does it take the transaction out of the category of sales under Article 1467 above quoted, because although the Factory does not, in the ordinary course of its business, manufacture and keep on stock doors of the kind sold to Teodoro, it could stock and/or probably had in stock the sash, mouldings and panels it used therefor (some of them at least). The distinction between a contract of sale and one for work, labor and materials is tested by the inquiry whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and has been the subject of sale to some other persons even if the order had not been given. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to anyone, and no change or modification of it is made at defendant's request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the defendants order for it. The word "contractor" has come to be used with special reference to a person who, in the pursuit of the independent business, undertakes to do a specific job or piece of work for other persons, using his own means and methods without submitting himself to control as to the petty details.

IMPORTANCE OF DISTINCTION •

Difference in the rules governing both contracts (e.g. tax rates and other charges are lower for contractors) and application of SoF

•

Inchausti v Cromwell - SC adopted Massachusetts rule that the test whether the thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it, or a thing which would have existed and been subject of sale to some other person, even if the order had not been given.

•

True test of a Contractor – he renders service in the course of an independent occupation, representing the will of his employer only as to the result of his work, and not as to the means by which it is accomplished (Luzon Stevedoring Co v Trinidad and La Carlota Sugar Central v Trinidad).

•

More examples of CONTRACT OF SALE: o future sale of articles which he is habitually making although at the time not made or finished article ordered is exactly such as plaintiff makes and keeps on hand for sale to anyone and no change or modification of it is made at defendant’s request although made after and in consequence of, defendant’s order for it * CONTRACT OF SALE VS. CONTRACT OF AGENCY TO SELL

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Article 1868: By a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. Article 1466: In construing a contract containing provisions characteristic of both the contract of sale and of the contract of agency to sell, essential clauses of the whole instrument shall be considered.

SALE Buyer pays the price Buyer acquires ownership over the object of the contract Seller warrants Essence of sale: transfer of title or agreement to transfer it for the price paid or promised

CONTRACT OF AGENCY TO SELL Agent does not pay Agent does not acquire ownership Agent does not warrant, unless he agrees Essence of agency: delivery to the agent of the goods not as the agent’s property but of the principal who remains the owner and has the right to control the sales by the agent, fix the price and terms, demand and receive the proceeds of the sales less the agent’s commission

JURISPRUDENTIAL DOCTRINES: Quiroga vs Parsons Hardware Co.

Kerr vs Lingad

Where the price of the objects is paid within the terms fixed without any other consideration and regardless as to whether the objects are sold, the contract is one of sale. (In order to classify a contract, due regard must be given to its essential clauses. A contract is what the law defines it to be, and not what it is called by the contracting parties.) - In the case at bar, it shows that the cause and subject matter which are to furnish the defendant with beds and in turn, pay for the stipulated price, are precisely the essential features of contract of purchase and sale. There was an obligation on the part of the plaintiff to supply beds and on defendant’s part, to pay the price which in turn, excludes the legal conception of an agency. - In an agency, there is an order to sell whereby the agent receives a thing to sell it and he is not required to pay its price but is required to turn over to the principal the price he obtains for the sale. If he does not succeed in selling it, he will have to return the thing. This is not the case of the matter in the case at bar. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. Hence, the contract by and between the parties is one of purchase and sale. The transfer of title or agreement to transfer it for a price paid is the essence of sale. If such transfer puts the transferee in the position of an owner and makes him liable for the agreed price, the transaction is a sale. On the other hand, the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of his principal, who remains the owner and has the right to control sales, fix the price and terms, demand and receive the proceeeds less the agent's commission upon sales made. - In the case at bar, the relationship between the petitioner and US Rubber International is one of brokerage or agency because of the following contractual stipulations: *that petitioner can dispose of the products of the Company only to certain persons or entities and within stipulated limits, unless excepted by the contract or by the Rubber Company (Par. 2); *that it merely receives, accepts and/or holds upon consignment the products, which remain properties of the latter company (Par. 8); *that every effort shall be made by petitioner to promote in every way the sale of the products (Par. 3); *that sales made by petitioner are subject to approval by the company (Par. 12); *that on dates determined by the rubber company, petitioner shall render a detailed report showing sales during the month (Par. 14); *that the rubber company shall invoice the sales as of the dates of inventory and sales report (Par. 14); *that the rubber company agrees to keep the consigned goods fully insured under insurance policies payable to it in case of loss (Par. 15); *that upon request of the rubber company at any time, petitioner shall render an inventory of the existing stock which may be checked by an authorized representative of the former (Par. 15); and *that upon termination or cancellation of the Agreement, all goods held on consignment shall be held by petitioner for the account of the rubber company until their disposition is provided for by the latter (Par. 19).

* CONTRACT OF SALE VS. DACION EN PAGO Article 1245: 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.

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SALES AND LEASE REVIEWER by Diory Rabajante -------------------------------------------------------------------------------------------------------------------------------------------------------------

•

There is a novation of the contract of loan into a contract of sale when creditor agrees to accept a thing in payment of the debt.

•

If thing given in payment turns out to belong to another, creditor’s remedy governed by law on sales not on loan.

SALE No pre-existing credit Gives rise to obligations Cause or consideration is the price from the viewpoint of the seller; or the obtaining of the object, from the viewpoint Greater freedom in the determination of the price Giving of the price may generally end the obligation of the buyer

DACION EN PAGO Pre-existing credit Extinguishes obligations Cause or consideration from the viewpoint of the person offering the dation in payment is the extinguishment of his debt; from the viewpoint of the creditor is the acquisition of the object offered in lieu of the original credit Less freedom in determining the price Giving of the object in lieu of the credit may extinguish completely or partially the credit (depending on the agreement)

* CONTRACT OF SALE VS. BARTER Article 1638: By a contract of barter or exchange, one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing.

Article 1468: if the consideration of the contract consists partly in money and partly in another thing, the transaction shall be characterized by the manifest intention of the parties. If such intention does not clearly appear, it shall be considered a: BARTER: if value of the thing given as part of the consideration > amount of the money or its equivalent

•

Because the true cause of the contract for the other party is the thing transferred and not the money. SALE: if

 

value of thing < amount of money or its equivalent value of thing = value of money

“Manifest intention” – judged by the parties contemporaneous and subsequent acts “Exceeds the amount of money” – CC does not provide to what extent the value of the thing given as a consideration should exceed the amount of money given for the contract to be considered as a barter * CONTRACT OF SALE VS. LEASE Article 1643: In the lease of things, one of the parties binds himself to give to another, the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than 99 years shall be valid. Article 1484: Vendor’s alternative remedies in a contract of sale of personal property price of which is payable in installments: 1. 2. 3.

Exact fulfillment of obligation in case of failure to pay (specific performance) Cancel sale in case of failure to pay two or more installments Foreclose the chattel mortgage

Article 1485: Art 1484 is also applicable to contracts purporting to be leases of personal property with option to buy, when lessor has deprived lessee of the possession or enjoyment of thing. •

So-called rents must be regarded as payment of prince in installments since due payment of the agreed amount results in the transfer of title to the lessee

JURISPRUDENTIAL DOCTRINES:

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Jose v. Barrueco, 67 Phil 747 (1939)

– The total rents being equal to the value of the thing leased, the SC considered the transaction as one of sale.

* PARTIES TO A CONTRACT OF SALE (DISQUALIFICATIONS) Article 1489: All persons authorized in this Code to obligate themselves, may enter into contract of sale, saving the modifications contained in the following articles. Where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in Art 290 (now Art 194 of FC)



Cf Art 1399,CC: obligation of incapacitated person who entered into contract to restitute that which he has benefited from

Article 234, Family Code: Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commencies at the age of 18 years (RA 6809). Article 44: The following are juridical persons:

(1) The State and its political subdivision (2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality beings as soon as they have been constituted according to law (3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member.

Article 46: Juridical persons may acquire and possess property of all kinds, as well as incur obligations and bring civil or criminal actions, in conformity with the laws and regulations of their organization. Article 36(6), Corporation Code: Every corporation incorporated under this Code has the power and capacity: 6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks to subscribers and to sell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation if it be a non-stock corporation;

a.

Absolute Incapacity

Article 1327: The following cannot give consent to a contract:

(1) Unemancipated minors (2) Insane or demented persons and (3) Deaf-mutes who do not know how to write Article 1328: Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable.

Article 1390: The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties:

(1) One of the parties is incapable of giving consent (want of capacity) (2) Consent is vitiated by mistake, violence, intimidation, undue influence or fraud (vitiated

consent) These contracts are binding, unless they are annulled by a proper court action. They are susceptible of ratification.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Article 1393: Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. Article 1397: The action for annulment of the contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence or undue influence or employed fraud or caused mistake base their action upon these flaws of the contract. Article 1399: When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the price or thing received by him. Article 1489: (refer above) Article 194, Family Code: Support comprises everything indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation in keeping with the financial capacity of the family. The education of the person to be supported referred to in the preceding paragraph shall include his schooling or training for some profession, trade or vocation, even beyond the age of majority. Transportation shall include expenses in going to and from school, or to and from place of work. “Necessaries”: indispensable for support according to the social position of the family. b.

Relative Incapacity

Articles 1490: Husband and wife cannot sell property to each other, except

1. 2.

When separation of property was agreed upon in marriage settlements When there has been judicial separation of property under Art 191

REASON FOR THE RULE

• • •

Prevent commission of fraud or prejudice to third persons Prevent one from unduly influencing the other Avoid indirect donations

Article 1492: The prohibitions in the two preceding articles are applicable to sales in:

1. 2. 3.

Legal redemption Compromises Renunciations

Article 73, Family Code: Either spouse may exercise any legitimate profession, occupation, business or activity without the consent of the other. The latter may object only on a valid, serious and moral grounds. In case of disagreement, the court shall decided, WON:

1. 2.

Objection is proper

Benefit has accrued to the family prior to the objection (resulting obligation shall be enforced against the separate property of the spouse who has not obtained consent) or thereafter. Foregoing provisions shall not prejudice the rights of creditors who acted in good faith.

Article 96, Family Code: The administration and enjoyment of the community property shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject 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.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------In 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. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, 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 authorization by the court before the offer is withdrawn by either or both offerors. Prohibition can be taken advantage of only by persons who bear such a relationship to the spouses making the transfer or to the property itself that such transfer interferes with their rights or interest.

c.

Specific Incapacity

Article 1491: The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: [GAEP-JS]

(1) The guardian, the property of the person or persons who may be under his guardianship; o

(2) o o

(3) o (4)

o

(5)

o o o o o

o o

(6)

Actual collusion is hard to prove between purchaser and guardian, but such fact can be deduced from the very short time between the two sales and the relationship between them. Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; Incapacity to buy rests on the fact that greed might get the better of the sentiments of loyalty and disinterestedness which should animate an administrator or agent. A broker does not come within the prohibition because he is a mere go-between or middleman between the seller and the buyer, bringing them together to make the contract themselves. Executors and administrators, the property of the estate under administration; But an executor can buy the hereditary rights of an heir to the estate under his administration (Naval v Enriquez) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been entrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; Intended not only to move remove any occasion for fraud but also to surround them with the prestige necessary to carry out their functions by freeing them from all suspicion which although unfounded, tends to discredit the institution by putting into question the honor of said functionaries. Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise 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 object of any litigation in which they may take part by virtue of their profession. Law intends to avoid improper interference by a judge in a thing levied upon or sold by his order (Gan Tingco v Pabinquit). Incapacity of SC or CA Justice extends to properties or rights in litigation in their territorial jurisdiction. CFI Judge can buy properties in litigation pending outside his territorial jurisdiction. Prohibition likewise extends to properties levied upon an execution before the court within whose territorial jurisdiction they exercise their respective functions. As to lawyers: curtail any undue influence of the lawyer on his client on account of their confidential association. Violation of this prohibition also constitutes a breach of professional ethics. No prohibition if client assigns to the lawyer after the judgment has been rendered and became final. Contingent fee of lawyer maybe annotated as an adverse claim on property awarded to client. Any others specially disqualified by law.

•

Such contracts made in violation of this provision are void for public policy. They cannot be ratified neither can the right to set up the defense of illegality be waived.

•

REASON FOR THE RULE:

1. 2.

The persons occupy fiduciary relationship with the owner of properties mentioned Prevent them from being tempted to take advantage of their position

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Mercado and Mercado vs The courts have laid down the rule that the sale of real property made by minors who have Espiritu already passed the ages of puberty and adolescence and are near the adult age when they pretend to have already reached their majority, while in fact they have not, is valid, and they cannot be permitted afterwards to excuse themselves from compliance with the obligaiton assumed by them or to seek their annulment. This doctrine is entirely in accord with the provisions of the Rules of Court (Rule 131, Sec. 1) and the principle of estoppel. Sia Suan vs Alcantara The ruling in Mercado case is affirmed. To bind a minor who represents himself to be of legal age, it is not necessary for his vendee to actually part with cash, as long as the contract is supported by a valid consideration. Since appellee's conveyance to the appellants was admittedly for and in virtue of a pre-existing indebtedness (unquestionably a valid consideration), it should produce its full force and effect in the absence of any other vice that may legally invalidate the same. It is not here claimed that the deed of sale is null and void on any ground other than the appellee's minority. Appellee's contract has become fully efficacious as a contract executed by parties with full legal capacity. The circumstance that, about one month after the date of the conveyance, the appellee informed the appellants of his minority, is of no moment, because appellee's previous misrepresentation had already estopped him from disavowing the contract. Said belated information merely leads to the inference that the appellants in fact did not know that the appellee was a minor on the date of the contract, and somewhat emphasizes appellee's had faith, when it is borne in mind that no sooner had he given said information than he ratified his deed of sale upon receiving from the appellants the sum of P500. Uy Sui Pin vs Cantollas The sale from Uy Siu Pin to his wife Chua Hue is null and void not only because the former had no right to dispose of the land in controversy in view of the existence of the contract but because such sale comes within the prohibition of article 1458 of the Civil Code. Maharlika Pub. Co. vs It is a policy of the law that public officers who hold positions of trust may not bid directly or Tagle indirectly to acquire prop properties foreclosed by their offices and sold at public auction. Article XIII, Section 1 of our Constitution states that: Public office is a public trust. Public officers and employees shall serve with the highest degree of responsibility, integrity, loyalty and efficiency, and shall remain accountable to the people. A Division Chief of the GSIS is not an ordinary employee without influence or authority. The mere fact that he exercises ample authority with respect to a particular activity, i.e., retirement, shows that his influence cannot be lightly regarded. The point is that he is a public officer and his wife acts for and in his name in any transaction with the GSIS. If he is allowed to participate in the public bidding of properties foreclosed or confiscated by the GSIS, there will always be the suspicion among other bidders and the general public that the insider official had access to information and connections with his fellow GSIS officials as to allow him to eventually acquire the property. It is precisely the need to forestall such suspicions and to restore confidence in the public service that the Civil Code now declares such transactions to be void from the beginning and not merely voidable. The reasons are grounded on public order and public policy. Assuming the transaction to be fair and not tainted with irregularity, it is still looked upon with disfavor because it places the officer in a position which might become antagonistic to his public duty. Bautista vs Montilla Rubias vs Batiller The purchase by a lawyer of the property in litigation from his client is categorically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code, and that consequently, plaintiff's purchase of the property in litigation from his client (assuming that his client could sell the same since his client's claim to the property was defeated and rejected) was void and could produce no legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code which provides that contracts "expressly prohibited or declared void by law are inexistent” and that "these contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived." Fornilda vs RTC The fact that the property in question was first mortgaged by the client to his lawyer and only subsequently acquired by the latter in a foreclosure sale long after the termination of the case will not remove it from the scope of the prohibition for at the time the mortgage was executed the relationship of lawyer and client still existed, the very relation of trust and confidence sought to be protected by the prohibition, when a lawyer occupies a vantage position to press upon or dictate terms to a harassed client. To rule otherwise would be to countenance indirectly what cannot be done directly. Director of Lands vs Article 1491 prohibits only the sale or assignment between the lawyer and his client, of Abada property which is the subject of litigation.The prohibition in said article applies only to a sale or assignment to the lawyer by his client of the property which is the subject of litigation. In other words, for the prohibition to operate, the sale of the property must take place during the pendency of the litigation involving the property. A contract for a contingent fee is not covered by Article 1491 because the tranfer or assignment of the property in litigation takes effect only after the finality of a favorable judgment. In the instant case, the attorney's fees of Atty. Fernandez, consisting of one-half (1/2) of whatever Maximo Abarquez might recover from his share in the lots in question, is contingent upon the success of the appeal. Hence, the payment of the attorney's fees, that is, the transfer or assignment of one-half (1/2) of the property in litigation will take place only if

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------the appeal prospers. Therefore, the tranfer actually takes effect after the finality of a favorable judgment rendered on appeal and not during the pendency of the litigation involving the property in question. Consequently, the contract for a contingent fee is not covered by Article 1491. Krivenko vs Register of Aliens are disqualified to purchase agricultural lands (1987 Consitution, Art. XII, Secs. 3 and Deeds 7). Our lands form part of our heritage thus we should preserve them. We need to nationalize them otherwise foreigners might end up owning them which would make a mockery out of our independence. They can lease lands if they wish or if they really want to own land, they can always acquire Filipino citizenship. Sarsosa vda. de Barsobia Where a land is sold to an alien who later sold it to a naturalized Filipino, the sale to the vs Cuenco latter cannot be impugned. In such case, there would be no no more public policy to be served in allowing the FIlipino seller of his heirs to recover the land as the same is already owned by a qualified person. Herrera vs Luy Kim Guan Where a land is sold to an alien who later sold it to a Filipino, the sale to the latter cannot be impugned. In such case, there would be no no more public policy to be served in allowing the FIlipino seller of his heirs to recover the land as the same is already owned by a qualified person. Vicente Godinez vs Fong Prescription may never be invoked to defend that which the Constitution prohibits. However, Pak Luen where a land is sold to an alien who later sold it to a Filipino, the sale to the latter cannot be impugned. In such case, there would be no no more public policy to be served in allowing the FIlipino seller of his heirs to recover the land as the same is already owned by a qualified person Jacobus Bernard Hulst vs Under Republic Act (R.A.) No. 4726, otherwise known as the Condominium Act, foreign PR Builders, Inc. nationals can own Philippine real estate through the purchase of condominium units or townhouses constituted under the Condominium principle with Condominium Certificates of Title. It expressly allows foreigners to acquire condominium units and shares in condominium corporations up to not more than 40% of the total and outstanding capital stock of a Filipinoowned or controlled corporation. Under this set up, the ownership of the land is legally separated from the unit itself. The land is owned by a Condominium Corporation and the unit owner is simply a member in this Condominium Corporation. As long as 60% of the members of this Condominium Corporation are Filipino, the remaining members can be foreigners. * ELEMENTS OF A CONTRACT OF SALE * CONSENT -See Perfection Stage A contract of sale is perfected by mere consent. (Art. 1475) Consent = meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. (Art. 1319) ELEMENTS OF CONSENT: 1. Subjects / Contracting parties 2. Concurrence of offer and acceptance (Arts. 1319 - 1326)

3. 4.

Legal Capacity of the Contracting parties (Arts. 1327 – 1329) The consent must be intelligent, free and spontaneous (Arts. 1330 – 1336)

* SUBJECT MATTER ELEMENTS OF SUBJECT MATTER 1. It must be existing, future, or subject to resolutory condition. (It must be at least a “possible” subject matter) 2. It must be licit. 3. It must be determinate or determinable. POSSIBLE THING EMPTIO SPEI – sale of a mere hope or expectancy (e.g. sale of a sweepstake ticket for P100 where the buyer purchases the ticket with the hope that upon the draw the ticket would win him a million pesos. The object of sale here is not the prize, but rather the ticket or the chance to win) EMPTIO REI SPERATAE – sale of a thing with potential existence, subject to a suspensive condition that the thing will come into existence. If the subject matter does not come into existence, the contract is deemed extinguished as soon as the time expires or if it has become indubitable that the event will not take place. (e.g. sale of pending crops) LICIT – A thing is licit and may be the object of a contract when it is not outside the commerce of men, and all rights which are not intransmissible.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Examples of void sale due to being illicit: - Sale of animals suffering from contagious diseases (Art. 1575)

-

Sale of animals if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor (Art. 1575) Sale of future inheritance. (Art. 1347)

DETERMINATE OR AT LEAST DETERMINABLE (Art. 1460) A thing is determinate when it is particularly designated or physically segregated from all others of the same class. A thing is determinable (and this satisfies the requirement that the thing be determinate as per Art. 1458) when the following concur: (a) If at the time the contract is entered into, the thing is capable of being made determinate; and (b) Without the necessity of a new or further agreement between the parties. Martin vs Reyes

Melizza vs City of Iloilo

National Grains Authority vs IAC

Pichel vs Alonzo

Domingo Realty vs CA

Property or goods which at the time of the sale are not owned by the seller but which thereafter are to be acquired by him, cannot be the subject of an executed sale but may be the subject of a contract for the future sale and delivery thereof, even though the acquisition of the goods depends upon a contingency which may or may not happen. In such case, the vendor assumes the risk of acquiring the title and making the conveyance, or responding in damages for the vendee's loss of his bargain. The 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 (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of the lots plus the statement that the lots object of the sale are the ones needed for city hall site; avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties. Appellant however fails to consider that the area needed under that plan for city hall site was then already known; it could be determined which, and how much of the portions of land contiguous to those specifically named, were needed for the construction of the city hall site. The object of the contract, being the palay grains produced in Soriano's farmland and the NFA was to pay the same depending upon its quality. The fact that the exact number of cavans of palay to be delivered has not been determined does not affect the perfection of the contract. Article 1349 of the New Civil Code provides: ". . .. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties." In this case, there was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans. A valid sale may be made of "the wine a vine is expected to produce; or the grain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon a sheep; or what may be taken at the next cast of a fisherman's net; or the goodwill of a trade, or the like. The thing sold, however, must be specific and identified. They must be also owned by the vendor at the time. The object of a contract, in order to be considered as "certain," need not specify such object with absolute certainty. It is enough that the object is determinable in order for it to be considered as "certain." -In the instant case, the title over the subject property contains a technical description that provides the metes and bounds of the property of petitioners. Such technical description is the final determinant of the extent of the property of petitioners. Thus, the area of petitioners’ property is determinable based on the technical descriptions contained in the TCTs.

*Art. 1459 provides that the seller must have the right to transfer the ownership at the time the thing is delivered. Hence, it is not required that the seller is the owner of the thing at the moment of the perfection of the contract of sale. GEN. RULE: The owner need not be the owner of the thing at the time of perfection. EXCEPTION: Conchita Nool vs CA and Cavite Development Bank vs Lim Cavite Development In the case at bar, a contract of sale was perfected. The sum of P30,000.00, Bank, et al vs Cyrus although denominated in the offer to purchase as "option money," is actually in the Lim, et al. nature of earnest money or down payment when considered with the other terms of the offer. Contracts are not defined by the parties thereto but by principles of law. In determining the nature of a contract, the courts are not bound by the name or title given to it by the contracting parties. - However, a legal obstacle has rendered it impossible in the case at bar, to perform its obligation. The sale to Lim of the property mortgaged by Rodolfo is deemed a nullity for CDB never acquired a valid title to the property because the foreclosure

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------sale, in which CDB has been awarded the property is also a nullity since the mortgagor is not the real owner of the said property. Conchita Nool vs CA Article 1505 of the Civil Code provides that "where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with 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 seller's authority to sell." Here, there is no allegation at all that petitioners were authorized by DBP to sell the property to the private respondents. Jurisprudence, on the other hand, teaches us that "a person can sell only what he owns or is authorized to sell; the buyer can as a consequence acquire no more than what the seller can legally transfer." As petitioners "sold" nothing, it follows that they can also "repurchase" nothing. In this light, the contract of repurchase is also inoperative — and by the same analogy, void.

HYPOTHETICAL QUESTIONS: 1.

A brought B to the place where A’s property is located. A told B that the size of his land is as big as far as B’s eyes can see. A offered to sell this land to B for P500k. B accepted the offer. Is there a perfected contract? Yes. The subject matter is determinable or capable of being made determinate without the need for a new or further agreement between A and B.

2.

In 1911, the sale of alcoholic drinks to members of the non-Christian tribes is prohibited. During that time, A sold B (a member of the non-Christian tribe) an alcoholic drink. In 1912, Congress passed a law decriminalizing the sale of alcoholic drinks to members of non-Christian tribes. Is the sale between A and B valid? No. The contract of sale is still void for being illegal. The validity of the contract is determined as of the time it is perfected.

3.

A sold B a very old lottery ticket (dated 1965). Is the sale valid? It is void as it is a sale of vain hope. However, if the lottery ticket is a collector’s item, there is a valid sale.

* PRICE Why should the price be certain? What is the meaning of “or its equivalent”? This means that there is certainty as to the price but what is given as payment is an object (e.g. P50k worth of Maggi noodles) Simulated price vs Simulated contract?

•

Article 1249 is applicable only to negotiable instruments issued by a person other than the debtor. (?) {See Diory’s codal for comments} ELEMENTS OF PRICE 1. Real (not simulated) 2. Certain or Ascertainable 3. In money or its equivalent 4. Manner of payment must be agreed upon HYPOTHETICAL QUESTIONS: 1.

A offered to sell his parcel of land to B. B accepted the offer. However, there is no agreement as to the price. A appointed C to fix the price. C fixed the price at P500k. Is there a perfected contract? No, there is none. There must be an agreement as to the price.

2. * STAGES IN THE LIFE OF A CONTRACT OF SALE * NEGOTIATION STAGE (OPTION CONTRACT, RIGHT OF FIRST REFUSAL) What is an option contract? Option Contract vs Contract of Sale? Is an option contract necessary to have a perfected contract of sale? Can there be an option contract without a consideration? Option Contract vs Right of First Refusal?

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Option Contract vs Earnest Money? HYPOTHETICAL QUESTIONS: 1.

On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July 2009). B said he will give the consideration on 30 August 2009. Rule the case.

2.

On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July 2009). On 2 July 2009, B accepted the offer. Rule the case.

3.

On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July 2009). On 2 June 2009, B accepted the offer. Rule the case.

4.

On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July 2009). On 2 June 2009, B accepted the offer. However, on 3 June 2009, A said that he is no longer interested in selling the land. Rule the case.

5.

On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July 2009). On 2 June 2009, A wanted to withdraw the offer, but he was unable to communicate the withdrawal to B. B accepted the offer on 3 June 2009. Rule the case.

6.

On 1 June 2009, A offered to sell a parcel of land to B for P500k. B was given a period to accept the offer (up to 1 July 2009). They further agreed that should B give P5k, A will not withdraw the offer prior to the expiration of the period given to B. On 2 June 2009, B offered to A the P5k consideration. A, however, said that he would not accept the P5k as he is willing to enter into an option contract with B even without the payment of P5k. Rule the case. Jurisprudential Doctrines: Southwestern Sugar and Molasses Co. vs Atlantic Gulf & Pacific Co. (1955) Atkins Kroll & Co. vs Cua Hien Tek (1958)

Navarro vs Sugar Producers, Inc. (1961)

Sanchez vs Rigos (1972)

Rural Bank of Paranaque vs CA (1985)

Natino vs IAC (1991)

When an option is not supported by a separate consideration, it is void and can be withdrawn notwithstanding the acceptance made previously by the offeree. Upon accepting the offer, a bilateral promise to sell and to buy ensues; the buyer assumes ipso facto the obligations of a purchaser, and not merely the right subsequently to buy or not to buy. The concurrence of both acts – the offer and the acceptance – generates a binding contract of sale. A consideration in an option to buy is essential for a perfection of a contract. In the case at bar, the sale lacks the most essential elementthe manner of payment of the purchase price, therefore there was no complete meeting of the minds of the parties necessary for the perfection of a contract of sale. Consequently, defendant was justified in withdrawing its offer to sell the molasses in question. If acceptance is made before withdrawal, it constitutes a binding contract of sale allthough the option is given without consideration. Before acceptance, the offer may be withdrawn as a matter of right. Be that as it may, the offerer cannot revoke, before the period has expired, in an arbitrary manner the offer without being liable for damages which the offeree may suffer under Article 19 f the Civil Code. This view has the advantage of avoiding a conflict between Article 1324 and Article 1479, in line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation should be favored as will reconcile or hamonize said provisions and avoid a conflict between the same. The decision in Soutwestern case considers Article 1479 as an exception to Article 1324, and exceptions are not favored unless the intention to the contrary is clear, and it is not so insofar as said two articles are concerned. (The doctrine laid down in the Atkins case is reaffirmed, and, insofar as inconsistent therewith, the view adhered to in Southwestern case should be deemed abandoned or modified.) The commitment by a bank to resell a property within a specified period, although accepted by the party in whose favor it was made, was considered an option not supported by a consideration. Lacking such consideration, the option was held void pursuant to Southwestern Sugar and Molasses Co. case. Citing Rural Bank of Paranaque, Inc. case, the Supreme Court held that the promise made by the President of a bank to allow the

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SALES AND LEASE REVIEWER by Diory Rabajante -------------------------------------------------------------------------------------------------------------------------------------------------------------

Ang Yu Asuncion vs CA (1994)

Nietes vs CA (1972)

petitioners to buy (or to re-sell them) the foreclosed property (not redeemed since the offer took place after the expiration of the redemption period) at any time they have money is not binding on the bank because it was a promise unsupported by a consideration distinct from the re-purchase price. Rules where a period is given to the offeree within which to accept: 1. If the period itself is not founded upon or supported by a separate consideration, the offerer is still free and has the right to withdraw the offer before its acceptance, or if an acceptance has been made, before the offeror’s coming to know of such fact, by communicating that withdrawal to the offeree. (this is in accordance with Sanchez doctrine) 2. The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the Civil Code. 3. If the period has a separate consideration, a contract of option is deemed perfected, and it would be a breach of that contract to withdraw the offer during the agreed period. 4. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror wwithdraws the offer before its acceptance (exercise of option) by the optioneeofferee, the latter may not sue for specific performance on the proposed contract (object of the option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. 5. In these cases, care should bo taken of the real nature of the consideration given, for if in fact, it has been intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar instance would be an earnest money in contract of sale that can evidence its perfection. Notice of the exercise of the option need not be coupled with actual payment of the price, so long as this is delivered to the owner of the property upon performance of his part of the agreement.

* PERFECTION STAGE (OFFER AND ACCEPTANCE) A contract of sale is perfected by mere consent. (Art. 1475) Consent = meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. (Art. 1319) ELEMENTS OF CONSENT: 5. Subjects / Contracting parties 6. Concurrence of offer and acceptance (Arts. 1319 - 1326)

7. 8.

Legal Capacity of the Contracting parties (Arts. 1327 – 1329) The consent must be intelligent, free and spontaneous (Arts. 1330 – 1336)

ELEMENTS OF OFFER: 1. Complete 2. Definite as to the certainty of price and identity of the object 3. Intentional Mirror Image theory – The person making the offer may fix time, place, and manner of acceptance, all of which must be complied with. (Art. 1321) Cognition theory – the offer is deemed accepted when the acceptance has come to the knowledge of the offeror. *Form of offer

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Article 1319: Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain, and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

Article 1325: Unless it appears otherwise, business advertisements are of things for sale are not definite offers, but mere invitation to make an offer.

Article 1326: Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidders unless the contrary appears.

* Form of acceptance Article 1319: Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain, and the acceptance absolute. A qualified acceptance constitutes a counter-offer. Acceptance must be plain and unconditional. Any condition necessarily involves a new proposal, which must be accepted by the other party to give rise to a binding agreement. Acceptance must be in accordance with the terms and conditions of the offer to effectively bind the offeror. *The object need not be owned by the seller at the time of perfection. It is sufficient that the seller has the right to transfer the ownership of the object at the time of delivery. EXCEPTION to this rule: CDB vs Lim and Nool vs CA Cavite Development Bank, et al vs Cyrus Lim, et al.

Conchita Nool vs CA

In the case at bar, a contract of sale was perfected. The sum of P30,000.00, although denominated in the offer to purchase as "option money," is actually in the nature of earnest money or down payment when considered with the other terms of the offer. Contracts are not defined by the parties thereto but by principles of law. In determining the nature of a contract, the courts are not bound by the name or title given to it by the contracting parties. - However, a legal obstacle has rendered it impossible in the case at bar, to perform its obligation. The sale to Lim of the property mortgaged by Rodolfo is deemed a nullity for CDB never acquired a valid title to the property because the foreclosure sale, in which CDB has been awarded the property is also a nullity since the mortgagor is not the real owner of the said property. Article 1505 of the Civil Code provides that "where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with 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 seller's authority to sell." Here, there is no allegation at all that petitioners were authorized by DBP to sell the property to the private respondents. Jurisprudence, on the other hand, teaches us that "a person can sell only what he owns or is authorized to sell; the buyer can as a consequence acquire no more than what the seller can legally transfer." As petitioners "sold" nothing, it follows that they can also "repurchase" nothing. In this light, the contract of repurchase is also inoperative — and by the same analogy, void.

HYPOTHETICAL QUESTIONS: 1.

A offered to transfer the ownership of and deliver a piano to B for P5k. B accepted the offer. However, before delivery by A and payment by B, A sold the piano to C. Rule the case.

2.

A offered to sell a bag of shabu to B for P500k. B accepted the offer. Is there a perfected contract of sale?

3.

A (15 years old) bought a kilo of rice from B for P35. Is the sale perfected?

4.

A owns Lot 1. B, a stranger to A, sold Lot 1 to C. Is the sale between B and C perfected?

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------5.

A wanted to sell his only car for P500k. He advertised this in a newspaper. B read the advertisement, and thereafter went to A to purchase the car. A, however, told B that he is no longer interested in selling the car. Can B compel A to sell the car?

6.

B offered to sell a parcel of land to A, and told the latter that the acceptance should be made only on the 3rd day after the offer was communicated. Furthermore, B said that the acceptance of the offer should be sent through fax. A was very much interested to buy the land, so he sent B an e-mail message on the 3rd day after the offer was communicated, informing B that he is accepting the offer. Was there a perfected contract of sale?

*CONSUMMATION STAGE EXTINGUISHMENT OF OBLIGATIONS Obligations are extinguished: 1. by payment or performance 2. by loss of the thing due 3. by condonation or remission 4. by confusion or merger of the rights of creditor and debtor 5. by compensation 6. by novation Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code. *For purposes of extinguishing an obligation, payment and performance of the obligation are the same. (Arts. 1232 and 1233) * Question: In a contract of sale, is delivery of the property the only means to transfer ownership? See Article 1434 (Estoppel: the seller is not the owner of the thing) EFFECT OF ESTOPPEL Hypothetical Question: A owns Lot 1. B, a stranger to A, sold Lot 1 to C. Thereafter, B was able to purchase Lot 1 from A. Who has the better right to Lot 1? (Stated differently, who owns Lot 1?) (Art. 1434) When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee. * FORMATION OF CONTRACTS * Article 1483: Subject to the provisions of the Statute of Frauds and of any other applicable statute, a contract of sale may be made:

1. 2. 3. 4.

In writing Word of mouth Partly in writing and partly by word of mouth May be inferred from the conduct of parties

*If notary public is not authorized – deed of sale of land is still valid because public instrument is not even essential for the validity of the sale (Sorfano v Latono) *The only purpose of the Statute of Frauds is to prove the existence of contracts. It cannot be made to apply to contracts which are not executory. * Can there be a reformation of an oral contract of sale? An oral contract of sale cannot be reformed. * Electronic Commerce Act Section 7, Republic Act No. 8792, Electronic Commerce Act: Legal Recognition of Electronic Documents. – Electronic documents shall have the legal effect, validity or enforceability as any other document or legal writing, and (a) Where 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) The electronic document has remained complete and unaltered, apart from the addition of any endorsement and any authorized change, or any change which arises in the normal course of communication, storage and display; and

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------(ii) The electronic document is reliable in the light of the purpose for which it was generated and in the light of all the relevant circumstances. (b) Paragraph (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 form. (c) Where the law requires that a document be presented or retained in its original form, that requirement is met by an electronic document if (i) There exists a reliable assurance as to the integrity of the document from the time when it was first generated in its final form; and (ii) That document is capable of being displayed to the person to whom it is to be presented: Provided, That no provision of this Act shall apply to vary any and all requirements of existing laws on formalities required in the execution of documents for their validity. For evidentiary purposes, an electronic document shall be the functional equivalent of a written document under existing laws. This Act does not modify any statutory rule relating to the admissibility of electronic data messages or electronic documents, except the rules relating to authentication and best evidence. Section 8, Republic Act No. 8792, Electronic Commerce Act Legal Recognition of Electronic Signatures. - An electronic signature on the electronic document shall be equivalent to the signature of a person on a written document if that signature is proved by showing that a prescribed procedure, not alterable by the parties interested in the electronic document, existed under which (a) A method is used to identify the party sought to be bound and to indicate said party’s access to the electronic document necessary for his consent or approval through the electronic signature; (b) Said method is reliable and appropriate for the purpose for which the electronic document was generated or communicated, in the light of all the circumstances, including any relevant agreement; (c) It is necessary for the party sought to be bound, in order to proceed further with the transaction, to have executed or provided the electronic signature; and (d) The other party is authorized and enabled to verify the electronic signature and to make the decision to proceed with the transaction authenticated by the same.

Section 11, Republic Act No. 8792, Electronic Commerce Act Authentication of Electronic Data Messages and Electronic Documents. - Until the Supreme Court 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 in an information or communication system, among other ways, as follows: (a) The electronic signature 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 a person and executed or adopted by such person, with the intention of authenticating or approving an electronic data message or electronic document; (b) The electronic data message and 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 and/or electronic document, or in detecting error or alteration in the communication, content or storage of an electronic document or electronic data message from a specific point, which, using algorithm or codes, identifying words or numbers, encryptions, answers back or acknowledgment procedures, or similar security devices. The Supreme Court may adopt such other authentication procedures, including the use of electronic notarization systems as necessary and advisable, as well as the certificate of authentication on printed or hard copies of the electronic document or electronic data messages by electronic notaries, service providers and other duly recognized or appointed certification authorities. The person seeking to introduce an electronic data message and 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 and electronic document is what the person claims it to be. In 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 and/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 and/or electronic document was recorded or stored by a party to the proceedings who is adverse in interest to the party using it; or

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------(c) By showing that the electronic data message and/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.

HYPOTHETICAL QUESTIONS: 1.

A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. Is the contract valid? The contract is valid but unenforceable. See Art. 1403 (2) (e). 1.1 May the contracting parties compel each other to observe the form? Yes. See Arts. 1357 and 1406.

2.

A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. B already paid 500k but A refused to deliver the land arguing that the contract they entered into is unenforceable. A’s argument is untenable. The Statute of Frauds is applicable only to executory contracts.

3.

A owns a parcel of land. B is an agent of A. B sold A’s land to C. What is the status of the contract? The contract is void, absent any written document giving B the authority to sell A’s land. See Regina Dizon vs CA. Regina Dizon vs CA

Article 1874 of the Civil Code is explicit that: "When 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."

4.

A owes B P500k. To defraud B, A sold his only property to C, who was in good faith. What are the remedies available to B? See Article 1177.

5.

A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. There is no written note or memorandum to prove the contract but the offer and acceptance were made through e-mail. Is the contract valid and enforceable? Yes. The Electronic Commerce Act (RA 8792) is applicable. 5.1. If the offer and acceptance were made through SMS, is the contract still valid and enforceable? I think so.

6.

A entered into a contract of sale with B where the former engages to sell a parcel of land for P500k. When the suit was brought to the court to assail the enforceability of the contract, one party (A), failed to object to the presentation of evidence aliunde made by B. Is the contract valid? Yes. See Article 1405.

7.

A entered into a contract of sale with B where the former engages to sell a parcel of land for $500k. B was mistaken to believe that the price is P500k. Is there a perfected contract? If in the affirmative, is the sale valid? Can the contract be reformed?

* LEGALITY OF SALE Article 1409: the following contracts are inexistent and void from the beginning

(1) Whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy (2) Those which are absolutely simulated or fictitious (3) Those whose cause or object did not exist at the time of the transaction (4) Those whose object is outside the commerce of men (5) Those which contemplate an impossible service (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained (7) Those whose expressly prohibited or declared void by the law These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

Article 1411: when the nullity proceeds from the illegality of the cause or object of the contract and the act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against each other and both shall be prosecuted.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Moreover, the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract. This rule shall be applicable when only one of the parties is guilty; but the innocent one may claim what he has given and shall not be bound to comply with his promise.

IN PARI DELICTO RULE (for illegal cause or object)

1.

2.

BOTH are in pari delicto  No action against each other  BOTH will be prosecuted  RPC provision relative to the disposal of effects/instruments of a crime shall apply ONLY ONE is guilty  INNOCENT PARTY may claim what he has given  INNOCENT PARTY not bound to comply with his promise

Article 1416: When the agreement is not illegal per se but is merely prohibited, and the prohibition is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered. Article XII, Section 2, 1987 Constitution: All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish- workers in rivers, lakes, bays, and lagoons. The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources. The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution. Article XII, Section 3, 1987 Constitution: Lands of the public domain are classified into agricultural, forest or timber, mineral lands and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof, by purchase, homestead, or grant. Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or leased and the conditions therefor. Article XII, Section 7, 1987 Constitution : Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. Article XII, Section 8, 1987 Constitution: Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.

* OBLIGATIONS OF A VENDOR 1. Deliver the thing and transfer its ownership to the vendee 2. Preservation of the thing (Article 1163)

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------3. Deliver the fruits and accessories (Arts. 1164, 1166, 1495, 1537) 4. Make Warranties 5. Taking-out Insurance Coverage (Art. 1523) *DELIVERY - the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. - See Arts. 1477, 1496, 1497 - The vendor must have the right to transfer the ownership of the thing at the time it is delivered (Art 1459) Reason for this rule: NEMO DAT QUOD NON HABET (He who does not own the thing cannot dispose of the same) Philippine Suburban Development Corp. vs Auditor General Balatbat vs CA

* REQUISITES OF DELIVERY (3 I’s) 1. Identity 2. Integrity Consing vs CA

3.

The Court held that in the absence of an express stipulation to the contrary, the payment of the purchase price of the goods is not a condition precedent to the transfer of title to the buyer, but title passes by the delivery. Devoid of any stipulation that "ownership in the thing shall not pass to the purchaser until he has fully paid the price", ownership in thing shall pass from the vendor to the vendee upon actual or constructive delivery of the thing sold even if the purchase price has not yet been fully paid. The failure of the buyer has not yet been fully paid. The failure of the buyer to make good the price does not, in law, cause the ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil Code. Non-payment only creates a right to demand the fulfillment of the obligation or to rescind the contract.

SC recognized the right of a buyer in a subdivision land to compel the seller to complete the roads and other facilities of the subdivision, even when nothing to that effect is stipulated in the contract of sale. A seller’s duty is to deliver the thing sold in a condition suitable for its enjoyment by the buyer for the purposes contemplated… and a proper access to a residence is essential to its enjoyment. The seller cannot shift to the buyer the burden of providing for an access to and from the subdivision, and when the seller has so defaulted in such obligation, the buyer should be entitled to a proportionate reduction in her purchase price of the two lots.

Intention Abuan vs Garcia

Quijada vs CA

The critical factor in all different modes of effecting delivery, which gives legal effect to the act, is the actual intention of the seller to deliver, and its acceptance by the buyer. Without that intention, there is no tradition In all forms of delivery, it is necessary that the act of delivery, whether constructive or actual, should be coupled with the intention of delivering the thing. The act, without the intention, is insufficient. The critical factor in the different modes of effecting delivery which gives legal effect to the act, is the actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition. The Supreme Court recognized that the sale of a land previously donated by the seller to a local government unit under a resolutory condition, was a valid sale even though at the time of sale, ownership in the property was still with the local government. However, when the resolutory condition did occur which effectively reverted ownership back to the seller, under Article 1434 the seller’s title passes by operation of law to the buyer. The Court expressly recognized that the rule under Article 1434 of the Civil Code applies not only to sale of goods, but also to other kinds of property, including real property.

HYPOTHETICAL QUESTIONS: 1.

A and B entered into a contract of sale whereby A engages to sell his watch at P1k to B. Because B was so excited to have the watch, he stole the same from A. Three days later, he sold the same to C. Was there already a delivery of the watch to B? There was no delivery. Delivery must be intentional.

2.

A and B are friends. They entered into an agreement whereby A would deliver and transfer the ownership of a gold bar to B in exchange of P500k. Instead of delivering a gold bar, A delivered a silver bar. Rule the case.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------A’s obligation to B as to the delivery of the gold bar still subsists as there was no delivery of the subject matter yet. In order to effect the delivery, the very object of the contract of sale (gold bar) must be delivered (this pertains to the identity). * SALE OF GOODS BY DESCRIPTION OR BY SAMPLE By SAMPLE –sale where a small quantity of a commodity is exhibited by the seller as a fair specimen of the bulk, which is not present and as to which there is no opportunity to inspect or examine; goods must correspond with sample shown By DESCRIPTION – sale where a seller sells a thing as being of a certain kind, and the buyer merely relies on the seller’s representations or representations; goods must correspond with description Where the goods delivered do not correspond with the description or sample or, as in the case of sale by description and sample, the goods do not correspond with either the description or sample – the remedy is RESCISSION. * 2 KINDS OF DELIVERY 1. ACTUAL – when the thing sold is placed in the control and possession of the vendee 2. CONSTRUCTIVE a. Execution of public instrument (Article 1497) Exception: i. when there is stipulation to contrary, execution does not produce effect of delivery ii. when at the time of execution of instrument, subject matter was not subject to control of the seller. ii.i subject matter should be within control of seller; he should have capacity to deliver at the time of execution of public instrument when he wants to effect actual delivery Addison vs Felix and Tioco The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is placed “in the hands and possession of the vendee.” (Civ. Code, art. 1462.) It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality — the delivery has not been effected. ii.ii such capacity should subsist for a reasonable time after execution of instrument (reasonable time depends on circumstances of persons, places & things) Vda. De Sarmiento vs Lesaca

Although it is postulated that the execution of a public document is equivalent to delivery, this legal fiction only holds true when there is no impediment that may prevent the passing of the property from the hands of the vendor into those of the vendee. Since tradition is an obligation on the part of the seller, then the burden must continue to lie with the seller to grant the buyer reasonable period to take possession of the subject matter.

Effect when these 2 requisites do not concur: no constructive delivery; no compliance on part of SELLER to deliver

b.

Traditio constitutum possessorium – at the time of perfection, the seller held possession of the subject matter in the concept of owner, and pursuant to the contract, the seller continues to hold physical possession thereof as lessee or other form of possession other than the concept of owner. (Art. 1500)

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SALES AND LEASE REVIEWER by Diory Rabajante -------------------------------------------------------------------------------------------------------------------------------------------------------------

c. d. e. f. g. h.

Traditio brevi manu – opposite of constitutum possessorium; Before contract of sale, the would be buyer was already in possession of the would be subject matter of sale (ex: as lessee) (Art. 1499) Traditio longa manu –Delivery of thing by mere agreement; when SELLER points to the property without need of actually delivering (Art. 1499) Symbolic delivery – with regard to movable delivery, delivery may be effected by the delivery of the keys of the place or depository where it is stored or kept. (Art. 1498) Delivery through carrier (will be discussed later) Delivery by negotiable document of title (will be discussed later) Delivery of incorporeal property (will be discussed later)

HYPOTHETICAL QUESTIONS:

1.

A entered into a contract of pledge with B where A is about to give his car to B in exchange of P500k loan. The document is duly notarized. Is the delivery of the car to B equivalent to transfer of ownership? No. The transfer of ownership through delivery is applicable only to a contract of sale.

2.

A and B entered into a contract whereby A engages to deliver his car to B, and B to pay a price therefor in the amount of P50k. They executed a public instrument. Was there a delivery of the car? Yes. The rule is applicable to both immovable and movable properties.

3.

A sold B a parcel of land. They executed a public instrument. However, B lost his copy of the instrument. Was there a delivery of the land? Yes. Mere execution of the public instrument constitutes delivery.

4.

A sold B a parcel of land at P500k. There is no written agreement, but B took possession of the land after their agreement. When B died, his heir, C, took possession of the land. A contended that he is still the owner of the land as there was no delivery of the land to B, and that the contract was unenforceable pursuant to the statute of frauds. Rule the case. A’s contention is untenable. Being the heir of B, C is now the owner of the land. The statute of frauds is not applicable because this is not an executory contract. Likewise, there is no need to execute a public instrument to effect delivery as there was already an actual delivery of the land when B took possession of the land.

Presumption of Good Faith Tablante vs Aquino

The placing of the titles of ownership in the possession of the vendee or the use which he may make of his right with the consent of the vendor shall be considered as a delivery. Any person who is aware that there is in his title or in the manner of acquiring it any flaw invalidating the same shall be considered a possessor in good faith. Good faith is always presumed, and any person alleging bad faith on the part of the possessor is obliged to prove it.

Possession of the Thing / Physical Presence in the Property bought Gonzales vs Haberer The execution of the public instrument, without actual delivery of the thing, transfers the ownership from the vendor to the vendee, who may thereafter exercise the rights of an owner over the same. In the instant case, vendor Roque delivered the owner's certificate of title to herein private respondent. It is not necessary that vendee be physically present at every square inch of the land bought by him, possession of the public instrument of the land is sufficient to accord him the rights of ownership. Execution Sale and Notice of Sale in Mortgage Foreclosure Sale Flores vs Lim A purchaser of real property at an ordinary execution sale is not entitled to possession at an ordinary execution rents and profits until after the period of redemption has expired and the legal title to the land had become vested in him. Gonzales vs The effective conveyance of the land is accomplished by the deed which is issued Calimbas only after the period of redemption has expired. - The certificate of sale issued to the purchaser at an auction sale is intended to be a mere memorandum of the purchase. It does not transfer the property but merely identifies the purchaser and the property, states the price and the date when the right of redemption expires. The effective conveyance is made by the deed of absolute sale executed after the expiration of the period of redemption. Tambunting vs CA failure to advertise a mortgage foreclosure sale in compliance with statutory requirements constitutes a jurisdictional defect invalidating the sale and that a substantial error or omission in a notice of sale will render the notice insufficient and vitiate the sale.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Non-payment of Purchase Price EDCA Publishing vs Santos

Other cases Bean vs Cadwaller

Sps. Pingol vs CA

Bucton vs Gabar

Non-payment of the purchase price by the impostor, although amounting to fraud, did not amount to unlawful deprivation under Article 559, but merely may be considered vitiation of consent as to make the contract voidable; but that so long as the contract has not been annulled, it remained valid, and the subsequent sale and delivery by the impostor of the books to Santos effectively transferred ownership to Santos.

Actual manual delivery of an article sold is not essential to the passing of the title thereto (art 1450, Civil Code) unless made so by the terms of the contract or by an understanding of the parties. The 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. In the present case the parties agreed that the delivery of the logs should be made alongside a vessel of the defendant. That was done by the plaintiff. The vessel of the defendant was sent to the point of delivery and the said defendant attempted to load on said vessel the logs delivered along its side by the plaintiff. It is a rule well established that a mere contract for the sale of goods, where nothing remains to be done by the seller before making delivery, transfers the right of property, although the price has not been paid, nor the thing sold actually delivered to the purchaser. The distinction between a contract of sale and a contract to sell is important for in a contract of sale, the title passes to the vendee upon the delivery of the thing sold, whereas in a contract to sell, by agreement, ownership is reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded, whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition, failure of which is not a breach but an event that prevented the obligation of the vendor to convey title from becoming effective. By the delivery of the possession of the land, the sale was consummated and title was transferred to the appellee, that the action is actually not for specific performance, since all it seeks is to quiet title, to remove the cloud cast upon appellee's ownership as a result of appellant's refusal to recognize the sale made by his predecessor, and that as plaintiff-appellee is in possession of the land, the action is imprescriptible.

DELIVERY THROUGH CARRIER * Is there an instance where the goods are delivered to a third person and yet delivery to the buyer is effected? YES, in case of delivery to carrier. General Rule: When the seller is authorized or required to send goods to the buyer (in pursuance of a contract), delivery to carrier (whether named by the buyer or not) is delivery to buyer. Exceptions: 1. FAS (Free Along Side) -the seller pays all charges and is subject to risk until the goods are placed alongside the vessel. 2. FOB (Free on Board) - the seller shall bear all expenses until the goods are delivered according as to whether the goods are to be delivered “F.O.B.” at the point of shipment or at the point of destination determines the time when property passes. 3. CIF (Cost, Insurance, Freight) - under an arrangement “C.I.F. Pacific Coast (destination), the vendor is to pay not only the coast of the goods, but also the freight and insurance expenses, and, as it was judicially interpreted, this is taken to indicate that the delivery is to be made at the port of destination. 4. Article 1503, first, second and third paragraphs (where the ownership is retained by the seller) (a) Where goods are shipped and by the bill of lading the goods are deliverable to the seller or his agent, or to the order of seller or agent (b) Where goods are shipped and by the bill of lading the goods are deliverable to the order of the buyer or his agent but the possession of the bill of lading is retained by the seller or his agent (c) Where the seller of goods draws on the buyer for the price and transmits the bill of lading and bill of exchange to the buyer to secure acceptance or payment of the bill of exchange, and the buyer does not honor the bill of exchange [Here, the drawer is the seller and the drawee is the buyer. If the buyer does not honor the bill of exchange, he shall return the bill of lading. If he retains the same, he acquires no added right thereby.]

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------* Without the bill of lading, or that the bill of lading is not deliverable to bearer or to the buyer or his order, the buyer does not acquire the direct obligation of the bailee to hold the goods for him. DELIVERY THROUGH NEGOTIABLE DOCUMENTS OF TITLE Document of Title, defined Document of title to goods includes any bill of lading, dock warrant, quedan 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, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by indorsement or by delivery, goods represented by such document. (Article 1636) Negotiable Document of Title, defined 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 (Art. 1507) Siy Cong Bieng vs Hongkong & Shanghai bank

Warehouse receipt represents the goods, but the intrusting of the receipt is more than the mere delivery of the goods; it is a representation that the one to whom the possession of the receipt has been so entrusted has the title to the goods.

Bill of Lading – a document that serves as evidence of receipt of goods for shipment issued by a common carrier Warehouse Receipt – a document of title which is issued by a warehouseman Quedan – a warehouse receipt that covers sugar Dock warrant – a warrant given by dock-owners to the owner of merchandise imported and warehoused on the dock upon the faith of the bills of lading, as a recognition of his title to the goods How Negotiated (Arts. 1508-1509) Who can Negotiate (Art. 1512) Effects of Negotiation (Art. 1513) Unauthorized Negotiation (Art. 1518) As between the owner of a negotiable document of title who indorsed it in blank and entrusted it to a friend, and the holder of such negotiable document of title to whom it was negotiated in good faith and for value, the latter is preferred, under the principle that as between two innocent persons, he who made the loss possible should bear the loss. Non-Negotiable Documents of Title How transferred or assigned (Art. 1514) Effects of transfer (Art. 1514) Negotiable Instrument vs Negotiable Document of Title NEGOTIABLE INSTRUMENT NEGOTIABLE DOCUMENT OF TITLE Operates as a substitute for money (to facilitate goods) - operates as proof of the possession or control of the goods, or - authorizing or purporting to authorize the possessor of the document to transfer or receive, either by indorsement or by delivery, goods represented by such document. Governed by the Negotiable Instruments Law Governed by the Civil Code, and in some cases, by the Warehouse Receipt Law and Code of Commerce A bearer instrument is always a bearer instrument The special indorsement of a bearer instrument has even if a special indorsement is made the effect of converting the bearer instrument into an order instrument If words “non-negotiable” or the like are placed on the document which contains that it should be delivered to the bearer, such document may nevertheless be negotiated by the holder HYPOTHETICAL QUESTIONS: 1.

A executed and gave B a negotiable document of title payable to the order of B. B negotiated the same through indorsement and delivery to C. C, in turn, negotiated it to D, and D to E. Meanwhile, X, A’s creditor was able to obtain a favorable judgment allowing for the attachment of the document of title in question. May X attach the document of title to satisfy A’s indebtedness?

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------2.

A executed and gave B a negotiable document of title. B forged the document and indorsed the same to C. Who has the title, A or C?

RESERVATION OF OWNERSHIP DESPITE DELIVERY 1. When there is an express reservation (Art. 1478) 2. Sale on Acceptance - Ownership passes to the buyer only when: (a) He signifies his approval or acceptance to the seller or does any act adopting the transaction; or (b) he does not signify his approval or acceptance but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.

3.

[In “Sale or Return” ownership passes to the buyer on delivery but he may revest the ownership in the seller by returning the goods within the time fixed in the contract, or if there is no time fixed, within a reasonable time] Article 1503, first, second and third paragraphs (a) Where goods are shipped and by the bill of lading the goods are deliverable to the seller or his agent, or to the order of seller or agent (b) Where goods are shipped and by the bill of lading the goods are deliverable to the order of the buyer or his agent but the possession of the bill of lading is retained by the seller or his agent (c) Where the seller of goods draws on the buyer for the price and transmits the bill of lading and bill of exchange to the buyer to secure acceptance or payment of the bill of exchange, and the buyer does not honor the bill of exchange [Here, the drawer is the seller and the drawee is the buyer. If the buyer does not honor the bill of exchange, he shall return the bill of lading. If he retains the same, he acquires no added right thereby.]

COMPLETENESS OF DELIVERY * MOVABLES (Article 1522) Where, in relation to what is contracted to sell, the quantity of goods delivered is – 

LESS - Buyer has 2 options: (a) Reject the goods (b) Accept them [When the acceptance is with knowledge that the seller is not going to perform the contract = buyer shall pay at contract rate; When knowledge is after the acceptance and consummation or disposal of the goods = buyer is not liable for more than the fair value to him of the goods delivered]



LARGER - Buyer has 3 options: (a) Accept per contract and reject the rest (b) Accept the whole and pat at contract rate (c) If indivisible, reject the whole



MIXED WITH GOODS OF DIFFERENT DESCRIPTION - Buyer has 2 options: (a) Accept the goods which are in accordance with the contract and reject the rest (b) If indivisible, reject the goods entirely

* IMMOVABLES (Article 1522)



SOLD PER UNIT OR NUMBER (Art. 1539 - 1540) - With statement of area at the rate of a certain price for a unit or measure or number - If the vendee should demand, the vendor shall deliver ALL that may have been stated in the contract. - If what is delivered is:  LESS IN AREA / OF INFERIOR/DIFFERENT QUALITY = (a) Rescission if lack in area is not less than 1/10 (or 1/10 +) of area agreed upon (b) Proportional reduction of price 

GREATER IN AREA (a) Accept per stipulation and reject the rest (b) Accept the whole and pay at contract rate [Articles 1539 and 1540 are not applicable to judicial sales (Art. 1541)

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SALES AND LEASE REVIEWER by Diory Rabajante -------------------------------------------------------------------------------------------------------------------------------------------------------------



SOLD FOR LUMP SUM (Art. 1542) - a cuerpo cierto / por precio alzado - Where price per unit is not indicated  GREATER / LESSER -No adjustment of price

TIME AND PLACE OF DELIVERY (Art. 1521 in relation to Art. 1251) TIME = at a reasonable hour (question of fact) PLACE 1. Stipulation of the parties; or 2. Seller’s place of business if he has one; or 3. Seller’s residence; or 4. In case of sale of specific goods, in the place where the thing is. [Q] Who bears the expenses of delivery? SALE BY NON-OWNER OF GOODS (Art. 1505 in relation to Art. 559) - As aforementioned, the seller need not have the title to the goods at the time of perfection of the contract. However, he must have the title at the time of delivery. - GENERAL RULE: In a sale by the non-owner, the buyer acquires no better title to the goods than the seller had (he merely steps into the shoes of the seller) EXCEPTIONS (in which case the true owner cannot recover the thing): 1. Estoppel or when the owner is precluded, by his own conduct, from denying the seller’s authority to sell (apply Art. 1438 by analogy) 2. PD 1529 (Recording Laws; Torrens Title - even when the sale is void, the general rule that the direct result of a previous void contract cannot be valid is inapplicable when it will directly contravene the Torrens system of registration. The Court cannot disregard such rights and order the cancellation of the certificate, since the effect of such outright cancellation will be to impair public confidence in the certificate of title. 3. Statutory power of sale or under the order of a court of competent jurisdiction 4. Sale in merchant’s store, or in fairs, or markets (Arts. 85 – 86, Code of Commerce) - to allow recovery would retard commerce Application of Article 559 Art. 559 provides for the right of recovery of the real owner of the movable property - If the real/previous owner of a movable property has lost it or is unlawfully deprived of it, he may recover it from the person who possesses the same without reimbursement, notwithstanding the good faith of the latter. - If, however, the person who possesses the movable property has acquired the same in good faith at a public sale, the owner has to reimburse him in order to recover the property. Public Sale is defined as one where there has been a public notice of sale in which anyone is allowed to bid for the object he desires to buy. The exceptions to right to recover and exceptions to the rule that the buyer in a sale by non-owner does not acquire a better title to the property than the seller had are just the same. Art. 1505 in relation to rules on Co-ownership a. co-owner sells whole property prior to partition – sale of property itself is void but valid as to his spiritual share

b.

co-owner sells definite portion to partition – sale is void as to other co-owner but valid as to his spiritual share if the buyer would have still bought such spiritual share had he known that the definite portion sold would not be acquired by him. - Exceptions to (b): i. Subject matter is indivisible ii. Sale of definite portion is with consent of other co-owners iii. co-owner sells 1 of 2 commonly-owned lands & does not turn over ½ of the proceeds, other co-owner, by law & equity, has exclusive claim over remaining land. SALE WITH A VOIDABLE TITLE

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------As aforementioned, the seller need not have the title to the goods at the time of perfection of the contract. However, he must have the title at the time of delivery. If title has not been avoided, buyer acquires good title if he acquires them (a) in good faith; (b) for value; and (c) without notice of the seller’s defect of title HYPOTHETICAL QUESTIONS (1505 and 1506): 1.

A owns a Rolex watch. B stole A’s watch, and sold the same to C. C does not know that the watch was stolen and he bought the same from B for value. May A recover the watch from C? Yes. He may recovery it without the need of reimbursing C. See Art. 559.

2.

A owns a Rolex watch. B stole A’s watch, and sold the same to C. C knows that the watch was stolen and he bought the same from B for value. May A recover the watch from C? Yes. The requirement that the possessor or the purchaser of the movable thing must be in good faith does not pertain to the right of the owner to recover the property but to the doctrine of irrevindicability (that the possession of movable property is equivalent to title). If A has the right to recover even if C is in good faith, it is but logical to give A the right to recover the property from a possessor in bad faith. Likewise, it may be said that B may be held criminally liable for violating the Anti-Fencing Law.

3.

Given the same facts as Question #2 only that B sold the watch at a public sale, where C, the highest bidder, was the one who was able to purchase the price. C, however, knows that the watch was stolen. If A has the right to recover as stated in #2, should he reimburse C in recovering the watch? No. Art. 559 implies that a possessor in bad faith (in this case, C) has no right to be reimbursed. But A may still recover the property.

4.

A owns a Rolex watch. B stole A’s watch, and pawned the same to Villarica Pawnshop. For failure to pay the loan, VIllarica Pawnshop sold the watch at a public auction. C was the one who bought the watch. Rule the case. A may recover the watch from C. He must, however, reimburse C as C obtained the watch from a public sale.

5.

A owns a Rolex watch. B stole A’s watch, and sold the same to C, a merchant’s store. D, who does not know that the watch was stolen, bought the same from C. May A recover the watch from D? No. In this case, Article 1505 is applicable. To allow A to recover would retard commerce.

6.

A owns a Rolex watch. B stole A’s watch, and sold the same to C, a merchant’s store. D, in bad faith, purchased the watch from C. May A recover the watch from D? No. Article 1505 does not require that the purchaser or buyer in a sale by non-owner must be in good faith.

7.

A owns a Rolex watch. B stole A’s watch, and sold the same to C, a seller of “bagoong.” D saw the watch from the bagoong-seller while he was buying a “bagoong.” Without knowing that the watch was stolen, he offered to buy the same from C. C accepted the offer. Thereafter, D bought the watch from C for P5k. May A recover the watch from D? Yes. The sale is not made in a merchant’s store, or in fairs, or markets.

8.

If D (referring to Question #6) purchased the same from a fish stall in a public market, may A still recover?

9.

A owns a Rolex watch. B stole A’s watch, and sold the same to C. C sold the same at E-bay. D, in good faith, bought the watch. May A recover the watch from D? Yes. He must, however, reimburse D as a sale in E-bay may be considered a public sale.

10. A entered into a contract of sale with B where A engages to deliver 100 sacks of corn for P100k. Before delivery, A became insane. A delivered the sacks of corn to B while A is insane. May the guardian of A recover the goods delivered to B? No. The delivery was void pursuant to Article 1239, which provides that “payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid.” However, Article 1427 provides that in payment by incapacitated such as this one, there shall be no right to recover the goods from the oblige who has spent them or consumed them in good faith. * LOSS OF THE THING DUE WHO BEARS RISK OF LOSS/DETERIORATION/FRUITS Before perfection • Res perit domino

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•

Seller still owns the thing because there is no delivery or transfer of ownership yet; hence, seller bears the risk of loss At Perfection • Res perit domino • Contract is merely inefficacious because loss of the subject matter does not affect the validity of the sale • Seller cannot anymore comply with obligation so buyer cannot anymore be compelled After Perfection but before delivery a. Loss – confused state 2 views: Justices Paras & Vitug / Padilla (as well as Atty. Casino) : BUYER bears the risk of loss [Res perit creditori] - Art. 1504, which embodies res perit domino, only covers goods. - The obligation of the obligor (seller, in a contract of sale) is extinguished in applying Art. 1262. - the obligation to pay on the part of the buyer is not extinguished (as he is not the obligor) Tolentino / Jurado / Baviera / Villanueva : SELLER bears the risk of loss [Res perit domino] - in reciprocal obligations, the extinguishment of the obligation due to loss of the thing affects both debtor and creditor; the entire juridical relation is extinguished.

b.

Deterioration & fruits - Buyer bears loss (Article 1189)

After delivery • Res perit domino

•

The buyer is the owner; hence, buyer bears risk of loss

JURISPRUDENTIAL DOCTRINES: Roman vs Grimalt Jose De Leon vs Asuncion Soriano

Union Motor Corp. vs CA Lawyer’s Cooperative Publishing Company vs Tabora

Yu Tek Co vs Gonzales

Bunge Corp. vs Camenforte

The facts clearly show that not contract of sale had been perfected between the parties, and therefore the loss of the vessel must be borne by its owner and not by a party who only intended to purchase it. Except as to quality and quantity, the first of which is itself generic, the contract sets no bounds or limits to the palay to be paid, nor was there even any stipulation that the cereal was to be the produce of any particular land. Any palay of the quality stipulated regardless of origin on however acquired (lawfully) would be obligatory on the part of the obligee to receive and would discharge the obligation. It seems therefore plain that the alleged failure of crops through alleged fortuitous cause did not excuse performance. The general rule is that after perfection but before delivery, the risk of loss is borne by the seller under the rule of res perit domino. The ownership of the books purchased on installment were retained by the seller, although they have already been delivered to the buyer, under the condition that ownership thereof will be transferred to the buyer upon his full payment of the purchase price, it was held that despite the loss of the books in a fire, the risk of loss would be borne by the buyer although he was not the owner yet, not only because such was agreed merely to secure the performance by the buyer of his obligation, but also because in the very contract itself, it was agreed that loss or damage to the books after delivery to the buyer shall be borne by the buyer. Gonzales (seller), who received payment, delivered no part of sugar promised. When a suit was brought against him for failure to deliver, he interposed the defense of force majeure (there was a storm). SC held that he was still liable because no specific lot of sugar was segregated and specifically designated to make the subject matter of the contract determinate or specific; sugar being generic, there was no risk of it being lost. It appearing that the obligation of appellants is to deliver copra in a generic sense, this obligation cannot be deemed extinguished by the destruction or disappearance of the copra they had already stored in Samar. Their obligation subsists as long as that commodity is available. A generic obligation is not extinguished by the loss of a thing belonging to a particular genus. Genus nunquam pereat.

* DOUBLE SALES General Rule: FIRST IN TIME, PRIORITY IN RIGHT (PRIMUS TEMPORE, POTIOR JURE) Application of the general rule: when not all requisites embodied in Art. 1544 concur SPECIAL RULE: ART. 1544 * REQUISITES

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------1. 2. 3. 4. * RULES ACCORDING

exactly same subject matter exactly same immediate seller buyers represent conflicting interest both sales are valid TO

ART. 1544:

1. MOVABLE • the owner is the one who is first to posses in good faith 2. IMMOVABLE • First to register in good faith • No inscription, first to possess in good faith • No inscription & no possession in good faith – Person who presents oldest title in good faith GOOD FAITH - he who asserts the status of a purchaser if good faith and for value has the burden of proving such assertion. (legal presumption of good faith cannot be invoked) - one who buys property without notice that another person has a right or interest in such property - 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

POSSESSION • Both actual or constructive REGISTRATION - any entry made in the books in the registry, including both registration in its ordinary and strict sense, and cancellation, annotation, and even marginal notes. It is the entry made in the registry which records solemnly and permanently the right of ownership and other real rights. 1. registered under Torrens system

• 2.

Art. 1544 applies

not registered under the Torrens system

• •

Art. 1544 does not apply

Under Act No. 344, registration of documents affecting unregistered land is “without prejudice to a third party with a better right.” The mere registration of a sale in one’s favor does not give him any right over the land if the vendor was not anymore the owner of the land, having previously sold the same to somebody else, even if the earlier sale was unrecorded.

3.

if sale 1 occurs when land is not yet registered & sale 2 is done when land is already registered – apply FIRST IN TIME, PRIORITY IN RIGHT

4.

Registration by the first buyer under Act 3344 can have the effect of constructive notice to the second buyer that can defeat his right as such buyer.

HYPOTHETICAL QUESTIONS:

1.

A, the owner of Lot 1, applied for registration of his title to the said lot. During the pendency of the application, he sold Lot 1 to B. However, after the certificate of title was granted to him, he sold the lot to C, to whom a transfer certificate of title was issued. Who owns the land, B or C? C. To grant B the ownership over the said lot would directly contravene the Torrens system of registration. The Court cannot order the cancellation of the certificate, since the effect of such outright cancellation will be to impair public confidence in the certificate of title. Person dealing with registered land have the legal right to rely on the fact of the Torrens certificate of title and to dispense with the need to inquire further except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonable cautious man to make such inquiry. (Naawan Community Rural Bank vs CA)

2.

A sold 100 sacks of corn to B through the execution of a public instrument. A day after, A sold the same goods to C, in which case C was given the bill of lading to the goods. Who owns the sacks of corn? It would seem that B is the owner because the execution of a public instrument operates as a transfer of the ownership of the goods to him. However, C’s possession of the bill of lading gives him the right to the direct obligation of the bailee to hold the goods in trust for him and give the goods to him upon his presentment of the bill of lading. (?)

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3.

A sold a parcel of land to B through an oral contract of sale. When A died, his heir, X (who does not know of the sale between A and B) sold the same land to C, who bought the land in good faith and for value. The sale of the land was through the execution of public instrument. Who owns the land, B or C? C. The requisite that there be one immediate seller has been complied with, notwithstanding that it is X who made the second sale, because as A’s heir, X merely steps into the shoes of A. The decedent and his heir has only 1 personality, as the heir’s ownership and possession of a property is merely a continuation of the ownership and possession of the decedent. The public instrument executed by A and C gives C the oldest title to the property.

4.

A, the owner of Lot 1, applied for registration of his title to the said lot. During the pendency of the application, he sold Lot 1 to B, who immediately took possession of the land. However, after the certificate of title was granted to A, a levy was made upon the land in favor of C. Who owns the land, B or C? (Compare with #1) B. Section 35, Rule 39 of the Rules of Court (on execution sale) shall govern. The judgment creditor merely steps into the shoes of the judgment debtor. Since the land was previously sold to the first buyer, the second buyer at the execution sale actually bought nothing since the judgment debtor no longer had rights to the property previously sold. (Dagupan Trading Co. vs Macam)

5.

A, sold his unregistered land to B. Thereafter, he sold the same land to C where a public instrument was executed. The sale was duly registered. Who owns the land? B. Art. 1544 does not apply to sale of unregistered land. Under Act No. 3344 (now PD 1529), registration of documents affecting unregistered land is “without prejudice to a third party with a better right.”

* WARRANTIES Condition vs Warranty CONDITION Purports to existence of obligation Condition must be stipulated to form part of the obligation May attach itself to obligation of seller to deliver possession & transfer ownership

WARRANTY Purports to performance of obligation Need not be stipulated; may form part of obligation by provision of law Relates to the subject matter itself or to obligation of the seller as to the subject matter of the sale

Warranty vs Promise (See Art. 2545) Effect of Non-fulfillment of condition (Art. 1546) Kinds of Warranty 1. Express Art. 1546

2.

Implied Art. 1547

EXPRESS WARRANTY - definition - Requisites: 1. it must be an affirmation of fact or any promise by seller relating to the subject matter of sale 2. natural tendency of affirmation or promise is to induce buyer to purchase subject matter 3. buyer purchases the subject matter relying thereon • when breached, seller is liable for damages - Relate the following provisions: Arts. 1340, 1341 and 1343(usual exaggerations in trade; mere expression of opinion; misrepresentation made in good faith) Arts. 1338 and 1344 (Causal and Incidental Fraud / Dolo Causante and Dolo Causante) IMPLIED WARRANTIES [There are 2 general classifications of implied warranty: (1) warranty against eviction; and (2) warranty against hidden defects.] * warranty that seller has a right to sell • refers to consummation stage since in consummation stage, it is where ownership is transferred by tradition • not applicable to sheriff, auctioneer, mortgagee, pledgee * warranty against eviction • implied, unless contrary provision appears in contract • when ownership is transferred, buyer shall enjoy the legal and peaceful possession of the thing

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------REQUISITES OF BREACH OF WARRANTY AGAINST EVICTION: 1. buyer is evicted in whole or in part from the subject matter of sale 2. there is a final judgement 3. basis of eviction is a right prior to sale or an act imputable to vendor 4. seller has been summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant through 3rd party complaint brought by buyer

•

no appeal needed nor a need for buyer to resist eviction for right to accrue; it is enough that the aforementioned requisites are complied with • warranty cannot be enforced until aforementioned requisites concur

• •

applies to judicial sale; judgment debtor responsible for eviction unless otherwise decreed in judgment

vendor not liable for eviction if adverse possession had been commenced before sale but prescriptive period is completed after transfer LIABILITY OF SELLER: (eviction w/c caused buyer to lose whole subject matter) 1. value of thing at time of eviction ( be it greater/lesser than price of sale ) 2. value of income of fruits 3. costs of suit which caused the eviction 4. expenses of contract if buyer paid for them 5. damages & interests and ornamental expenses if sale was made in bad faith RIGHTS OF BUYER WHEN DEPRIVED WHOLE: 1. rescission 2. mutual restitution

OF ONLY PART OF THE SUBJECT MATTER BUT WOULD NOT HAVE BOUGHT SUCH PART IF NOT IN RELATION FOR THE

HYPOTHETICAL QUESTIONS: 1.

A found a ring which he sold to B, honestly believing and representing to B that it was a diamond ring. In truth, the ring was ordinary glass. Is there a breach of warranty? No breach of warranty. A merely expressed an opinion. (Arts. 1341 on mere expression of opinion; and Art. 1343 on misrepresentation made in good faith)

2.

Advertisement: “the cigarette that will give you utmost smoking pleasure.” Is this a warranty? No. Consequently, breach of the same is not breach of warranty. (Arts. 1340 on usual exaggerations on trade)

3.

A sold to B a parcel of land which is claimed by C, who has been in possession of the property in the concept of owner publicly and continuously for 30 years. Rule the case. C is deemed to have acquired ownership over the land by prescription without need of title or good faith (apply Art. 1137). Hence, A shall be liable to be in case of eviction. (Art. 1550)

4.

Same facts as #3, only that C was in adverse possession of the land for only 25 years at the time of sale, and the prescriptive period is completed after the sale. S shall not be liable to B in case of eviction as B could have brought action against C during the remaining 5 year period to recover the property. (Art. 1550)

5.

B purchased land from A after having been informed of prior right of another to purchase the same based on prior occupancy. Is B entitled to the vendor’s warranty against eviction and damages under Art. 1555? No. He had knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. (J.M Tuazon vs CA)

* WARRANTY AGAINST NON-APPARENT BURDEN OR SERVITUDES (ART. 1560) -REQUISITES: a. immovable sold is encumbered with non–apparent burden or servitude not mentioned in the agreement b. nature of non–apparent servitude or burden is such that it must be presumed that the buyer would not have acquired it had he been aware thereof • When breach of warranty exist, buyer may ask for: (a) rescission; or (b) indemnity

•

warranty not applicable when: [ARAK]

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------(a) servitude is apparent (b) non – apparent burden or servitude is recorded in the Registry of Property (EXCEPT when there is express warranty that the thing is free from all burdens & encumbrances) (c) the servitude is mentioned in the agreement (d) vendee had knowledge of servitude * PRESCRIPTION (Rescission): 1 year. - after 1 year, only action for damages may be brought. * WARRANTY AGAINST HIDDEN DEFECTS: (Art. 1561) - When liability attaches, REQUISITES: [Art. 1561] – [HIS-NRW] (a) the defect is hidden HIDDEN – not known or could not have been known to the vendee; hidden to the eyes and cannot be discovered by ordinary careful inspection. (b) the defect is serious or important such that – (b.1) the hidden defect should render the subject matter UNFIT for the use for which it is intended; or (b.2) the hidden defect should DIMINISH the thing’s FITNESS such that the BUYER WOULD NOT HAVE ACQUIRED IT OR WOULD HAVE GIVEN A LOWER PRICE FOR IT HAD HE BEEN AWARE OF IT. (c) the defect must exist at the time of sale (d) vendee must give notice of the defect to the vendor within a reasonable time (e) the action must be brought within a reasonable period (f) there must be no waiver of warranty - Vendor is not liable for: (a) patent defects; or (b) those that are not visible but should have been known by an expert by reason of his profession. - KNOWLEDGE OF VENDOR, NOT IMPORTANT (CAVEAT VENDITOR or SELLER BEWARE): [1566, NCC] GENERAL RULE: Seller or vendor is liable even though he is not aware of the hidden defect. EXCEPTION: there is a stipulation to the contrary and the seller is not aware of it. Rationale behind Caveat Venditor: a sound price warrants a sound article - OBLIGATION of seller for breach of warranty: * IF THERE WAS NO WAIVER OF WARRANTY: [Art. 1568] - the thing is lost in consequence of hidden defects. When vendor is AWARE of the hidden defects: (a) Bear the loss (b) Return the price (c) Refund the expenses of the contract (d) Pay damages When vendor is NOT AWARE of the hidden defects: (a) Bear the loss (b) Return the price and interest (c) Reimburse expenses of the contract * IF THERE WAS A WAIVER OF THE WARRANTY: [Art. 1566, par. 2] When vendor is AWARE of the hidden defects: - waiver is in bad faith; as a corollary, seller is still liable When vendor is NOT AWARE of the hidden defects: - not liable * IF THE DEFECTIVE THING IS LOST BY FORTUITOUS EVENT OR FAULT OF VENDEE: [Art. 1569, 2nd par.] -the thing must be defective at the time of sale - BUYER may DEMAND for: Price paid minus value of the thing at the time it was lost -the aforesaid formula represents the damage suffered and the benefits incurred by the buyer - REMEDY OF BUYER in case of breach of warranty against hidden defect: [Art. 1567] - buyer may choose any of the following: (a) ACCION REDHIBITORIA (Redhibitory Action) - withdrawing from the contract - avoidance of the sale due to vice in the thing sold (b) ACCION QUANTI MINORIS - proportionate reduction of price - APPLICABILITY TO JUDICIAL SALES (Art. 1570) – however, judgment debtor is not liable for damages for the reason that he is merely compelled to sell his property.

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- PRESCRIPTIVE PERIOD: [Art. 1571] - SIX MONTHS from delivery COMPARATIVE TABLE OF PRESCRIPTIVE PERIODS RELATING TO WARRANTIES and OTHER ACTIONS in case of breach CONTRACT OF SALE with CONTRACT OF SALE with OTHER CONTRACT WARRANTY under RA EXPRESS WARRANTY IMPLIED WARRANTY (in case of breach of 7394 contract itself)

(a)

Follow stipulation in the contract (b) If there is no stipulation, apply other provisions of the Civil Code, i.e. In case of RESCISSION of contract, apply Art. 1389 (general rule on rescission): 4 years In case of any other action concerning the written contract of sale, apply Art. 1144 (general rule on prescription): 10 years

(a)

In case of Warranty against non-apparent burden: 1 year (Action for Rescission) (Art. 1560) (b) In case of Warranty against hidden defect: 6 months from delivery (Both Accion Redhibitoria and Accion Quanti Minoris) (Art. 1571) (c) In case of Warranty against redhibitory defect on animals: 40 days from delivery (Art.1577) (d) In case the disease which caused the death of the animal existed at the time of contract: 3 days after purchase (Art. 1578)

(a)

In case of RESCISSION, apply Art. 1389 (general rule on rescission): 4 years (b) In case of any other action concerning the written contract of sale, apply Art. 1144 (general rule on prescription): 10 years

(a)

with IMPLIED WARRANTY AND EXPRESS WARRANTY: of equal duration

(b)

with IMPLIED WARRANTY only (no warranty card, etc.): not less than 60 days nor more than 1 year following the sale of new consumer products

* WARRANTY AGAINST REDHIBITORY DEFECTS ON ANIMALS: - When considered redhibitory defect; REQUISITE (Arts. 1576 and 1578) [EVA] (a) expert knowledge is not sufficient to discover it [1576, 1st par., NCC]; or (b) The veterinarian failed to discover or disclose it through ignorance or bad faith [1576, 2nd par., NCC]; or (c) the animal dies within three days: [Art. 1578] - Instance where THERE IS NO WARRANTY: [Art. 1574] - here, caveat emptor governs. -sale of animals at public auction or fairs or of livestock as condemned (animals are not bought because of their quality or capacity for work) - Sale of 2 OR MORE ANIMALS: [Art. 1572] GENERAL RULE: the defect of one will only give rise to its redhibition EXCEPTION: when the buyer would not buy them if one is defective (or would not buy one without the other) *The exception is PRESUMED when what is bought is a TEAM, YOKE, PAIR or SET (even if separate price has been fixed for each one of the animals composing the same). - REMEDY in case of sale of animals with redhibitory defects: [Arts. 1580 and 1577] (a) Accion Redhibitoria (b) Accion Quanti Minoris - When SALE OF ANIMALS IS CONSIDERED VOID: [Art. 1575] (a) sale of animals with CONTAGIOUS DISEASES (b) Sale of UNFIT animals, i.e. the use or service for which the animals are acquired has been stated and they are found to be unfit therefor.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------- LIABILITY OF BUYER IN CASE SALE OF ANIMAL IS RESCINDED - animal shall be returned in the condition in which it was sold and delivered, the vendee being answerable for any injury due to his negligence, and not arising from the redhibitory fault or defect. * IMPLIED WARRANTIES ON SALE OF GOODS / IMPLIED WARRANTY OF QUALITY: QUALITY – state or condition (as to promote high standard in business) - When implied warranty exists; REQUISITES: [Art. 1562, NCC] (a) Buyer makes known to the seller the particular purpose (expressly or by implication) for which goods are acquired and the buyer relied on seller’s skills or judgment. (There is here WARRANTY FOR FITNESS FOR A PARTICULAR PURPOSE) (b) Sale by Description. (There is here WARRANTY THAT THE THING IS OF MERCHANTABLE QUALITY) - warranty that goods are reasonably fit for general purpose - MERCHANTABLE QUALITY – requires identity with what is described or what is tendered (synonyms: saleable, average quality) * Art. 1481 provides for rescission in case where the bulk of the goods delivered do not correspond with the sample or description. QUESTION / INQUIRY: If the vendee does not inform seller of the purpose, is there still warranty? ANSWER: Yes, in the following cases: Long and continuous contract Numerous contract involving same parties and same subject matter entered into on a regular basis - Annexed by usage of trade (Art. 1564) - SALE OF SPECIFIED ARTICLE UNDER PATENT OR TRADE NAME (Art. 1563) - there is NO WARRANTY AS TO FITNESS FOR PARTICULAR PURPOSE (the buyer relied on his own judgment) - SALE OF GOODS BY SAMPLE: [Art. 1565, NCC]. - There is a WARRANTY THAT THE THING IS OF MERCHANTABLE QUALITY (the same with sale by description) - Buyer’s REMEDIES in Case of Breach of Warranties in Sale of Goods: [1599, NCC] (a) accept or keep the goods and set up breach of warranty by way of recoupment in diminution or extinction of price (b) accept or keep and set up action for damages (c) refuse to accept and set up action for damages (d) rescind the contract * IMPLIED WARRANTIES FOR CONSUMER GOODS: (RA 7394) CONSUMER PRODUCTS – primarily for personal, family, household or agricultural purposes (e.g. food, drugs, cosmetics and devices) - Retailer is subsidiarily liable - DURATION of WARRANTY: - with IMPLIED WARRANTY AND EXPRESS WARRANTY: - of equal duration - with IMPLIED WARRANTY only (no warranty card, etc.): - not less than 60 days nor more than 1 year following the sale of new consumer products - REMEDY in case of breach: - in case of EXPRESS WARRANTY: (a) repair of goods (prescription: 30 days, but may be extended) (b) refund of purchase price - in case of IMPLIED WARRANTY: (a) retain the goods and recover damages (b) reject the goods, cancel the contract, and recover damages. JURISPRUDENTIAL DOCTRINES: Albert Bryan vs Thomas The evidence shows that where this kind of lumber is used and is thoroughly Handkins and J. seasoned, with proper care and treatment, the life of a boat will be from ten to Biaglowski twelve years, but where palosapis lumber used is green and is painted and covered with coal tar, its life is very short, and it is very apparent that the

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Gochanco vs Dean

Mccullough vs Aenle

Chang Yong Tek vs Santos

Martinez vs CA

lumber used here was green and that even at the time of the sale the vessel had but little actual value. The defendants knew or should have known of the quality of the lumber used in the construction of the vessel. The plaintiff did not, and its actual condition could not be determined without a physical inspection. In other words, the defects in the lumber and material used in the construction of the vessel were hidden and concealed and unknown to the plaintiff until the official inspection. It was not proven that the declaration made by the defendant in the contract of exchange was made fraudulently. It does not appear in the record that the defendant deliberately violated the truth in stating his belief that there were such a number of coconut trees on said lands. Furthermore, it was shown that the plaintiff viewed the lands and himself estimated that there were there more than six thousand coconut trees. There is no evidence to show that any representations as to the quality of the tobacco were made to the plaintiff by the defendant prior to the contract of August 27, nor that there was any agreement prior to that time as to an exhibition of samples nor that the plaintiff prior to that time made any examination or inquiry as to the quality of the tobacco. The fact is that the plaintiff in order to get the building had to buy the factory and everything that went with it. He saw himself obliged to take all the tobacco which the defendant had, no matter what its quality was. The plaintiff bound himself by the contract of August 27 to take all the tobacco which the defendant then had and pay therefor the prices that the company had paid. He could relieve himself from this obligation only by showing either that the tobacco in the inventory was not owned by the defendant on August 27 or that the prices stated therein were not the prices which the defendant paid for it. He undertook to do neither of these things, and his action must fail. The fact that an article is of one grade or quality instead of another does not constitute a hidden defect within the meaning of that article. Note that the sole purpose of the inventory was to ascertain what the total purchase price was. If it correctly gave the number of bales and the price paid therefor by the appellant, according to the invoices, it was a sufficient compliance with the contract. The fact that the tobacco was described as of one class instead of another would be unimportant. The appellee did not purchase by class or quality, but by quantity. In the case at bar, The ONLY defense presented by the defendant was that the tobacco delivered by the plaintiff was not of good quality. The defendant admits that she had sold the tobacco in question. The record does not disclose when the defendant sold the tobacco in question. In the absence of an express warranty, a vendor or merchandise only warrants: First. The legal and peaceable possession of the thing sold; and Second. That there are no hidden faults or defects therein. (Art. 1474, Old Civil Code.) It not being proven that the plaintiff made any warranty or any misrepresentations with reference to the quality of the tobacco in question, and it having been proven that the defendant had an opportunity to and did examine the tobacco in question at the time of purchase and not having made any objection whatever until after a lapse of more than three years and not then until after an action had been brought, and making no objection whatever as to the price agreed upon, nor as to the quantity of the tobacco delivered, in our opinion she should be held liable for the payment of the amount agreed upon. (defendant is therefore liable for the balance of the purchase price). There is no weight in the appellants' argument that, being a purchaser for value and in good faith of Lot No. 2, the nullification of its registration would be contrary to the law and to the applicable decisions of the Supreme Court as it would destroy the stability of the title which is the core of the system of registration. Appellants cannot be deemed purchasers for value and in good faith by virtue of the deed of absolute conveyance which they executed. Before purchasing a parcel of land, it cannot be contended that the appellants who were the vendees did not know exactly the condition of the land that they were buying and the obstacles or restrictions thereon that may be put up by the government in connection with their project of converting Lot No. 2 in question into a fishpond. Nevertheless, they willfully and voluntarily assumed the risks attendant to the sale of said lot. One who buys something with knowledge of defect or lack of title in his vendor cannot claim that he acquired it in good faith (Leung Lee v. Strong Machinery Co., et al., 37 Phil. 664). The ruling that a purchaser of a registered property cannot go beyond the record

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Jerry Moles vs IAC

Engineering & Machinery Corp vs CA and Almeda

Carlos De Guzman vs Toyota Cubao

to make inquiries as to the legality of the title of the registered owner, but may rely on the registry to determine if there is no lien or encumbrances over the same, cannot be availed of as against the law and the accepted principle that rivers are parts of the public domain for public use and not capable of private appropriation or acquisition by prescription. When an article is sold as a secondhand item, a question arises as to whether there is an implied warranty of its quality or fitness. It is generally held that in the sale of a designated and specific article sold as secondhand, there is no implied warranty as to its quality or fitness for the purpose intended, at least where it is subject to inspection at the time of the sale. On the other hand, there is also authority to the effect that in a sale of a secondhand articles there may be, under some circumstances, an implied warranty of fitness for the ordinary purpose of the article sold or for the particular purpose of the buyer. Article 1562 of our Civil Code: Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows: (1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose; In the case at bar, a certification to the effect that the linotype machine bought by petitioner was in A-1 condition was issued by private respondent in favor of the former. This cannot but be considered as an express warranty. It must be remembered that the certification was a condition sine qua non for the release of petitioner's loan which was to be used as payment for the purchase price of the machine. Private respondent failed to refute this material fact. Neither does he explain why he made that express warranty on the condition of the machine if he had not intended to be bound by it. In fact, the respondent court, in declaring that petitioner should have availed of the remedy of requiring repairs as provided for in said certification, thereby considered the same as part and parcel of the verbal contract between the parties. We disagree with respondent court that private respondents express warranty as to the A-1 condition of the machine was merely dealer's talk. Private respondent was not a dealer of printing or linotype machines to whom could be ascribed the supposed resort to the usual exaggerations of trade in said items. His certification as to the condition of the machine was not made to induce petitioner to purchase it but to confirm in writing for purposes of the financing aspect of the transaction his representations thereon. Ordinarily, what does not appear on the face of the written instrument should be regarded as dealer's or trader's talk; 25 conversely, what is specifically represented as true in said document, as in the instant case, cannot be considered as mere dealer's talk. The contract in question is one for a piece of work. It is not petitioner's line of business to manufacture air-conditioning systems to be sold "off-the-shelf." Its business and particular field of expertise is the fabrication and installation of such systems as ordered by customers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agreed upon with the customers. a close scrutiny of the complaint filed in the trial court reveals that the original action is not really for enforcement of the warranties against hidden defects, but one for breach of the contract itself. It alleged17 that the petitioner, "in the installation of the air conditioning system did not comply with the specifications provided" in the written agreement between the parties. Having concluded that the original complaint is one for damages arising from breach of a written contract - and not a suit to enforce warranties against hidden defects - we here - with declare that the governing law is Article 1715. However, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said provision states, inter alia, that actions "upon a written contract" prescribe in ten (10) years. Since the governing contract was executed on September 10, 1962 and the complaint was filed on May 8, 1971, it is clear that the action has not prescribed. Since no warranty card or agreement was attached to the complaint, the contract of sale of the subject pick-up carried an implied warranty that it was free from any hidden faults or defects, or any charge or encumbrance not declared or known to the buyer. The prescriptive period thereof is six (6)

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SALES AND LEASE REVIEWER by Diory Rabajante -------------------------------------------------------------------------------------------------------------------------------------------------------------

Jaime Ang vs CA and Soledad

Coca-Cola Bottlers, Inc. vs CA

Natividad Villostas vs CA, et al.

months under the Civil Code (Art. 1571). Under RA No. 7394, the provisions of the Civil Code on conditions and warranties shall govern all contracts of sale with condition and warranties (Art. 67). The duration of the implied warranty (not accompanied by an express warranty) shall endure not less than sixty days nor more than one (1) year following the sale of new consumer products (Art. 68, par. [e]). The two (2) year prescriptive period under Art. 169 cannot prevail over Art. 68 because the latter is the specific provision on the matter. Since petitioner filed the complaint on April 20, 1999, or more than nineteen months counted from November 29, 1997 (the date of the delivery of the motor vehicle), his cause of action had become time-barred. Consequently, even if the complaint is made to fall under the Republic Act No. 7394, the same should still be dismissed since the prescriptive period for implied warranty thereunder, which is one year, had likewise lapsed. (Relative to plaintiff’s argument that the claim for moral and exemplary damages and attorney’s fees is based on quasi-delict or breach of contract, such are merely ancillary to the main cause of action which is based on warranty against hidden defects. Without the latter, the former cannot stand alone.) Soledad gave an implied warranty of title in declaring that he owned and had clean title to the vehicle. In pledging that he "will defend the same from all claims or any claim whatsoever [and] will save the vendee from any suit by the government of the Republic of the Philippines," Soledad gave a warranty against eviction. Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a breach thereof is six months after the delivery of the vehicle, following Art. 1571. But even if the date of filing of the action is reckoned from the date petitioner instituted his first complaint for damages on November 9, 1993, and not on July 15, 1996 when he filed the complaint subject of the present petition, the action just the same had prescribed, it having been filed 16 months after July 28, 1992, the date of delivery of the vehicle. The vendee's remedies against a vendor with respect to the warranties against hidden defects of or encumbrances upon the thing sold are not limited to those prescribed in Article 1567 of the Civil Code. The vendor could likewise be liable for quasi-delict under Article 2176 of the Civil Code, and an action based thereon may be brought by the vendee. While it may be true that the preexisting contract between the parties may, as a general rule, bar the applicability of the law on quasi-delict, the liability may itself be deemed to arise from quasi-delict, i.e., the acts which breaks the contract may also be a quasi-delict. Otherwise put, liability for quasi-delict may still exist despite the presence of contractual relations. As regards the contention that the action for rescission is barred by prescription under Art. 1571 of the Civil Code, the same is bereft of merit. It must be pointed out that at the time the Electrolux Aqua Guard water purifier was delivered and installed at petitioner Villostas' residence a Warranty Certificate was issued by private respondent Electrolux. The foregoing is clearly an express warranty regarding the efficiency of the water purifier. On this regard the court said that while it is true that Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action, a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties. The present case involves one with an express warranty. Consequently, the general rule on rescission of contract, which is four years (Article 1389, Civil Code) shall apply. Inasmuch as the instant case involves an express warranty, the filing of petitioner's amended answer on September 30, 1988 is well within the four-year prescriptive period for rescission of contract from September 13, 1986, which was the delivery date of the unit.

HYPOTHETICAL QUESTIONS: 1.

A mortgaged his unregistered parcel of land to X. Thereafter A sold the land to B, without informing the latter that the land was mortgaged. The mortgage was foreclosed. X was the one who was able to buy the land in question. By virtue of the same, B was evicted from the land. Is A liable for warranty against hidden defect? No. A is liable for warranty against eviction, i.e. warranty against non-apparent burden or servitude.

2.

A sold Brand X pork and beans to B. When B opened the can, he found out that the pork and beans does not have pork. Is there a violation of any warranty?

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------3.

On 11 June 2009, A and B entered into a contract of sale whereby A engages to deliver a particular car on or before 8 July 2009. The car incurred a hidden defect after the perfection of the contract but before delivery. When must the defect exist, 11 June 2009 or 8 July 2009? The defect must exist “at the time of sale”

4.

A sold a car with hidden defect to B, who does not have a knowledge of the defect. B sold the car to C. Does A have an implied warranty in favor of C? Yes. See Moles vs IAC.

* OBLIGATIONS OF THE VENDEE (Art. 1582) The vendee must: (a) Accept delivery (b) Pay the price - RULES ON ACCEPTANCE AND PAYMENT: (a) Both must be performed at the time and place stipulated (b) When there is no stipulation as to time and place of payment, payment must be made at the time and place of delivery. (c) Apply Article 1524 (in relation to Article 1169, last paragraph), where payment and delivery are simultaneous - apply Arts. 1251 and 1521 (Time and Place of Delivery) TIME = at a reasonable hour (question of fact) PLACE 5. Stipulation of the parties; or 6. Seller’s place of business if he has one; or 7. Seller’s residence; or 8. In case of sale of definite or specific goods, in the place where the thing is. HYPOTHETICAL QUESTIONS: 1.

A and B entered into a contract of sale where it is stipulated that B, the buyer, is bound to pay 15 days after the perfection of the contract. May B demand the delivery of the thing from A even before the arrival of the day he is bound to pay? Yes. A’s obligation, not being dependent on a condition or a period, is pure. His obligation is thus demandable at once, even at the time the contract is perfected (Art. 1179)

2.

A and B entered into a contract of sale of a parcel of land. A delivered the parcel of land to B upon perfection. B, on the other hand, is bound to pay on October 9. A became incapacitated on October 8. On October 9, B went to A to pay. Is payment of B to A valid? As a rule, payment to the incapacitated is void. However, if the incapacitated has kept the thing delivered or if payment has been beneficial to him, the payment is valid (Article 1241).

3.

(?) A sold sacks of corn to B for P500k. They agreed that A will deliver on 1 June 2009, and B will pay on 31 July 2009. A lives in Davao, while B lives in Manila. On 1 June 2009, A delivered the sacks of corn. B, on the other hand, did not pay the price on 31 July 2009. A went to Manila and spent P6k for airfare and P5k for hotel accommodation in order to get the payment of the purchase price from B. B tendered P500k, but A refused to accept. A contends that B should also pay P11k which the former spent for airfare and hotel accommodation. Is A’s contention correct? Yes. It is the duty of the debtor to correct payment. Applying Art. 1582 in relation to Art. 1521, B is bound to pay at the place of delivery, in the absence of stipulation as to the place of payment. The place of delivery, when there is no stipulation as to where the same is to be made, is the seller’s place of business or residence. Hence, B is bound to go to Davao to pay A.

4.

Hypo on place of payment

5.

Place of delivery

- COMPANY BOUGHT-OUT - if involves not considerable amount – mere continuance of business - if involves considerable amount such that the company is bought out to stop its operations – there is no assumption of obligations

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SALES AND LEASE REVIEWER by Diory Rabajante -------------------------------------------------------------------------------------------------------------------------------------------------------------

(Art. 1583): VENDOR IS NOT BOUND TO ACCEPT PARTIAL DELIVERY - relate Article 1233: There is no payment until the thing is completely delivered - relate Article 12348: One cannot be compelled to receive partial payment; one has no right to make partial payment * SEPARATE PRICE FOR EACH INSTALLMENT - BREACH AFFECTS THE WHOLE CONTRACT (Injured party may sue for breach of entire contract) - when seller makes defective or incomplete deliveries; or - buyer wrongfully neglects or refuses to accept delivery; or - buyer fails to pay any installment - BREACH IS SEVERABLE - only claim for compensation for particular breach may be allowed (Art. 1584): BUYER’S RIGHT TO EXAMINE GOODS ACCEPTANCE – assent to become owner of the specific goods when delivery of them is offered to the buyer EXAMINATION – is a condition precedent to transfer ownership * Art. 1584 refers to ACTUAL DELIVERY * RULES: (a) Examination before delivery should be made by request. Vendor is not bound to offer the thing for examination before delivery without the request of the vendee. (b) When the thing is delivered, the thing is not considered accepted if the vendee has not examined it or has no reasonable opportunity to examine it… (c) In case of COD (collect on delivery) – buyer is not entitled to examine until payment is made, EXCEPT when there is an agreement or that the usage of trade permits the same * In COD, goods are not to be delivered by the carrier to the buyer unless the latter pays. (Art. 1585): MODES OF MANIFESTING ACCEPTANCE 1. EXPRESS ACCEPTANCE – the buyer intimates to the seller that he accepts the thing 2. IMPLIED ACCEPTANCE – may be either of the following: a. Buyer does an act inconsistent with the seller’s ownership; or b. Buyer’s retention of goods without intimating rejection after the lapse of reasonable time. *NOTE: Delivery and Acceptance are separate acts. (Art. 1586): ACCEPTANCE IS NOT A BAR TO ACTION FOR DAMAGES. However, notice must be given to the seller within a reasonable time. (Art. 1587): WHERE BUYER’S REFUSAL TO ACCEPT IS JUSTIFIED Buyer is not bound to return the goods; but he must notify seller (It is the seller who is required to recover the goods from the buyer) The risk of loss is still with the seller Buyer is not liable as DEPOSITARY unless he voluntarily constitutes himself as such QUESTION / INQUIRY: Is the buyer bound to take care of the goods? (whether Art. 1163 is applicable in this case) (Art. 1588): REFUSAL OF THE BUYER WITHOUT JUST CAUSE Title passes to the buyer the moment it is placed at his disposal (Art. 1589): INTEREST (for the period between delivery and payment): Contemplates a situation where DELIVERY AND PAYMENT ARE NOT SIMULTANEOUS

- Vendee is bound to pay interest in any of the following instances: [IFV (Inday’s Funniest Videos)] (a) Interest is stipulated (b) (c)

- may be oral - interest which must be in writing refers only to loan (Art. 1956) Fruits or income are received by vendee from the thing sold -even if a term has been fixed for the payment of price Vendee is guilty of Default (see Art. 1169) [Under Art. 1169, the debtor incurs in delay from the time of judicial or extra-judicial demand. However, demand is not necessary to constitute delay in the following cases: [LTD] 1. The law or obligation expressly so provides;

2. 3.

Time is of the essence; or Demand would be useless as when the obligor has rendered it beyond his power to perform.]

(Art. 1590): RIGHT OF VENDEE TO SUSPEND PAYMENT

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SALES AND LEASE REVIEWER by Diory Rabajante -------------------------------------------------------------------------------------------------------------------------------------------------------------

Contemplates a situation where the CONTRACT IS NOT YET CONSUMMATED GENERAL RULE: Applicable in 2 cases: (a) Where the vendee is disturbed in possession or ownership of the thing bought; or (b) Vendee has reasonable ground to fear that his possession or ownership would be disturbed (by a vindicatory action or a foreclosure mortgage) * In both instances, the vendee may retain only the price that has not been paid to the vendor. He is not entitled to recover what has already been paid.

-

EXCEPTIONS TO SUSPENSION OF PAYMENT (where vendee has no right to suspend payment): [SSCTP]

(a) S: vendor gives security for the return of the price (b) S: stipulation that vendee must make payment notwithstanding such contingency (c) C: cessation of disturbance or danger (d) T: disturbance is a mere act of trespass (e) P: vendee has paid the price in full -

When the disturbance is caused by non-apparent servitude, the remedy is rescission not suspension of payment. HYPOTHETICAL QUESTIONS: 1. A sold a parcel of land to B. Thereafter, C filed a suit against A and B for quieting of title. During pendency, may B suspend payment? Yes. B has reasonable fear ground to fear that his possession or ownership would be disturbed by a vindicatory action. 2. (?) Same facts as #1 but C only claims for a part of the land. May there e suspension of payment? Yes, B may still suspend payment for the entire amount.

(Art. 1591): RIGHT OF VENDOR TO RESCIND SALE OF IMMOVABLE PROPERTY / ANTICIPATORY BREACH REQUISITES: (a) There is delivery of immovable property (b) Vendee has not paid the price (c) Vendor has reasonable ground to fear the: a. LOSS of PROPERTY; AND b. LOSS of PRICE

-

When there is no such reasonable ground, Art. 1191 shall be observed (when the vendee does not comply with what is incumbent upon him).

(Art. 1592): WHERE AUTOMATIC RESCISSION OF SALE OF IMMOVABLE PROPERTY IS STIPULATED - According to Villanueva and Pineda, the phrase “even though” means that this provision is also applicable in a case where there is no stipulation in the contract as to automatic rescission. Atty. Casiňo does not agree with them (this time, he agrees with De Leon) Vendor is given am option to rescind UPON JUDICIAL OR NOTARIAL DEMAND - However, when there is no judicial or notarial demand, vendee may still pay. Offer to pay is sufficient to defeat vendor’s prerogative. Vendor’s right to rescind is not absolute. o Art. 1191, par. 3 provides that the court may grant vendee a new term -

o However, if there is already a demand, the court may no longer fix a term. Breach must be substantial as would defeat the very object of parties. NOT APPLICABLE TO: o Sale on installment of real estate (Caridad Estates vs Santero) o Mere promise to sell real estate / Conditional sale o Cases under RA 6552 (RA 6552 recognizes the vendor’s right to cancel unqualifiedly in case of industrial lots, commercial buildings, etc. with a refund of certain percentages of payments made on account of cancelled contract. *In other words, the vendee in such cases may no longer pay the price after the expiration of the time agreed upon although no demand has yet been made upon him by suit or notarial act.

(Art. 1593): WHERE AUTOMATIC RESCISSION OF SALE OF MOVABLE PROPERTY IS STIPULATED Vendor can rescind the contract as a matter of right if the vendee does not: (a) Accept; or (b) Pay unless credit period for payment is stipulated

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SALES AND LEASE REVIEWER by Diory Rabajante -------------------------------------------------------------------------------------------------------------------------------------------------------------

Reason for the rule: Personal property are not capable of maintaining stable price in the market. Hence, any delay is prejudicial to the vendor.

*REMEDIES OF PARTIES IN CASE OF BREACH OF CONTRACT OF SALE A. Sale of Personal Property 1. Sale of personal property on installments: Requisites (Art. 1484) (a) contract of sale (b) personal property (c) payable in installments (d) in case of 2nd and 3rd remedies, there has been a failure to pay two or more installments Alternative remedies of the vendor: [Art. 1484, NCC] (a) exact fulfillment of the obligation should the vendee fail to pay (b) cancel the sale should the vendee’s failure to pay cover two or more installments (c) foreclose the chattel mortgage on the thing sold (if one has been constituted), should the vendee’s failure to pay cover two or more installments. [In 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.] Delta Motors Sales Corp. v. Niu Kim Duan, 213 SCRA259 Elisco Tool Manufacturing Corp. v. CA, 307 SCRA 731

The remedies under Art. 1484 have been recognized as alternative, not cumulative, in that the exercise of one would bar the exercise of the others. The Court has long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid.

What constitutes sale on installment: Levy Hermanos, Inc. v. When there is only one payment to be paid in the future, there is no basis to Gervacio, 69 Phil. 52 apply the Recto law, since under the language of then Article 1454-A, the buyer needs to have defaulted in the payment of two or more installments to allow the seller to rescind or foreclose on the chattel mortgage. Specific Performance: GENERAL RULE: when the seller has chosen specific performance, he can no longer seek for rescission nor foreclosure of the chattel mortgage constituted on the thing sold. EXCEPTION [Art. 1191]: Even if the seller had chosen specific performance, if the same has become impossible, the seller may still choose rescission see Chieng v. Sps. Santos, G.R. No. 169647, Aug. 31, 2007 Rescission *When rescission is deemed chosen: When the seller has clearly indicated to end the contract such as when – (a) he sends a notice of rescission, or (b) he takes possession of the subject matter of the sale, or (c) he files an action for rescission. *Forfeiture of installment or rentals paid: GENERAL RULES [Art. 1385]: Rescission creates the obligation to return the things which were the object of the contract, together with the fruits, and the price with interests. It can be carried out only when he who demands rescission can return whatever he may be obliged to restore. EXCEPTION [Art. 1486]: 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. * Effect of rescission: Nonato v. IAC

When the seller’s assignee, a financing company, is able to take back possession of the motor vehicle with a condition that the vehicle could be redeemed by the buyers within 15 days, then such taking of possession is

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Delta Motor Sales Corp. v. Niu Kim Duan,

clearly with the intent to cancel the contract. A stipulation in a 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. The Court took pains to show that the treatment of the forfeited installments as rental is more than justified by the retention and use of the air-conditioning units by the buyer for 22 months.

Foreclosure of chattel mortgage When remedy is deemed chosen: At the time of actual sale of the subject property at public auction pursuant to the foreclosure proceedings commenced. Rule: Manila Motor Co. vs Fernandez Vda de Quiambao vs Manila Motor Inc

Northern Motors vs Sapinoso

Universal Motors vs Dy Hian Tat

The remedies under Article 1484 are alternative, not cumulative, in that the exercise of one would bar the exercise of the others. Only the taking back of the property coupled with an unequivocal desire on its part to rescind its contract or for the purpose of appropriating the same, would suffice to bar the seller form proceeding with specific performance. In this case, it was not the seller who demanded a return of the subject motor vehicle, but rather it was the buyer who voluntarily returned the same to postpone the satisfaction of the enforcement of the judgment debt obtained by the seller on the unpaid balance of the purchase price. If prior to the actual sale of the subject property at public auction, the seller had received further payments from the buyer, the seller is not obliged to refund said payments after foreclosure to the buyer. The filing by the seller of an action for the issuance of a writ of replevin, and the actual recovery of possession of the subject property, would not amount to foreclosure, even with the attachment of the mortgage contract itself, since no actual foreclosure pursuant to the relevant provisions of the Rules of Court have been pursued. The mere fact that the seller has secured possession of the truck in question does not necessarily mean that it will foreclose its mortgage. Indeed, there is no showing at all that the seller is causing the sale thereof at public auction or is even preparing to do so. It is quite possible that the seller wanted merely to be sure that the truck is not lost or rendered valueless, preparatory to having it levied upon under a writ of attachment.

Effect of foreclosure of the chattel mortgage: No further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary is void. [Art. 1484(3)] [Note: unpaid balance here pertains to purchase price] EXCEPTION: Filipinas Investment & Finance When a defaulting buyer-mortgagor refuses to surrender the chattel to the Corp, v. Ridad seller to allow the latter to be able to proceed with foreclosure, then the seller, even after foreclosure, should be allowed to recover expenses and attorney’s fees incurred in trying to obtain possession of the chattel. Barring Effect of Other Securities Given for Payment of Price Cruz v. Filipinas Investment & - The “further action” being barred under Art. 1484 is not limited to judicial Finance Corp proceedings, but should include extrajudicial proceedings by virtue of which the seller may be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy. - A seller is precluded from having a recourse against the additional security put up by a third party insofar as the burden would ultimately fall on the buyer himself is concerned (e.g. the guarantor will later on proceed against the buyer). To rule otherwise would be a circumvention of Art. 1484. Assignor-Assignee; Financing Transaction When the seller assigns his credit to another person, the latter is likewise bound by the same law. (Borbon II vs Servicewide Specialists) Assignment with recourse basis Filipinas Investment & Art. 1484 (3) does not bar one to whom the vendor has assigned on with a recourse Finance Corp. vs Vitug basis his credit against the vendee from recovering from the vendor the assigned credit in full although the vendor may have no right of recovery against the vendee for the deficiency.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------QUESTION/INQUIRY: What if it is the buyer who assigned or alienated the property to another person (whether the other person is bound by the same law)? Applicability of Recto Law: [Art. 1485]: Art. 1484 applies also to contracts purporting to be leases of personal property with option to buy (when the lessor has deprived the lessee of the possession or enjoyment of the thing) PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No. 142618, July 12, 2007; BA Finance Corp. v. CA, 228 SCRA 530; Vda. de Jose v. Barrueco, 67 Phil. 191] HYPOTHETICAL QUESTIONS: 1. A lease of personalty with option to buy was entered into by A and B. For failure to pay rentals, the lessor (A) took possession of the thing sold. May A still collect the unpaid rentals? No. Lessor is estopped from further action to recover the unpaid rentals which are deemed waived. The remedies are alternative. The exercise of one would bar the exercise of the other. 2. The vendor elected to foreclose the chattel mortgage on the car sold. He filed an action for replevin. Before the vendee filed his answer, he paid two installments amounting to P1,250. May the vendor retain the amount paid to him? Yes. The said amount could be retained by the vendor since it was paid before the actual foreclosure of the chattel mortgage. See Northern Motors, Inc vs Sapinoso. 3. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand, bound to pay half of the price at the time of perfection and the other half 15 days thereafter. There was no payment made by B. (a) Is Art. 1484 applicable? No. This is a sale on straight term. See Levy Hermanos, Inc. v. Gervacio. (b) May A foreclose the chattel mortgage if one has been constituted? Yes, under the Chattel Mortgage Law. (c) May A cancel the contract? Yes, under Art. 1191. (d) May A recover the balance after foreclosing the chattel mortgage? Yes. There is no barring effect because Art. 1484 is not applicable. 4. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand, bound to pay P100k on ten equal monthly installments. B failed to pay the 4th, 5th and 6th installments (on 4th, 5th, and 6th months). On the 7th month, B went to A and paid P10k. A accepted the payment and issued a receipt. May A avail of the remedies stated in Art. 1484? No. The receipt of a later installment of a debt without reservation as to prior installments shall raise the presumption that such installments have been paid. (Art. 1176, par. 2) 5. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand, bound to pay P100k on ten equal monthly installments. B failed to pay the 4th, 5th and 6th installments (on 4th, 5th, and 6th months). May A rescind the contract? No. There is no demand. In order for Art. 1484 to apply, the vendee must be in default. Applying Art. 1169, vendee is not in default when there is no judicial or extra-judicial demand. 6. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand, bound to pay P100k on ten equal monthly installments. B failed to pay 1 installment. May A rescind the contract? No. The non-payment must pertain to two or more installments. 7. [(?) ESCALATION CLAUSE] A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand, bound to pay P100k on ten equal monthly installments. There is a stipulation in the contract that failure to pay one of the installments, shall automatically make all of the installments due and demandable. B failed to pay 1 installment. Assuming that there is a demand to pay on the part of A as to the unpaid installment, may A rescind the contract? 8. [(?) FACTS UNCLEAR] A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand, bound to pay P100k on ten equal monthly installments. A chattel mortgage was constituted to secure B’s payment of the price. Meanwhile, a real estate mortgage is also constituted on the property in favor of C. B failed to pay the 4th, 5th and 6th installments (on 4th, 5th, and 6th months). If A would choose foreclosure of the chattel mortgage, may he proceed a gainst C as to the payment of the balance? 9. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand, bound to pay P100k on ten equal monthly installments. C guaranteed B’s payment of the price. B failed to pay the 4th, 5th and 6th installments (on 4th, 5th, and 6th months). May A proceed against B, the guarantor, for the payment of the unpaid balance? No. Check Ridad case. A seller is precluded from having a recourse against the additional security put up by a third party insofar as the burden would ultimately fall on the buyer himself is concerned (e.g. the guarantor will later on proceed against the buyer). To rule otherwise would be a circumvention of Art. 1484 (Cruz v. Filipinas Investment & Finance Corp). Furthermore, a guarantor is only subsidiarily liable, unlike a surety who is primarily and solidarily liable with the principal.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------10. Same facts as #9 only that A did not choose foreclosure. C, the guarantor, paid the price of the car in behalf of B. Rule the case. There is here a legal subrogation where even without the knowledge of B, the debtor, C, a person interested in the fulfillment of the obligation, pays (Art. 1302) 11. A and B entered into a contract of sale where A bound himself to deliver upon perfection a particular car. B, on the other hand, bound himself to pay P100k on ten equal monthly installments. B paid the 1st installment but before the 2nd installment was due, B became insolvent. May A avail of the remedies stated in Art. 1484 even without a demand? Yes. B lost his right to a period, he having become insolvent who gave no guaranty or security for the payment of the price (Art. 1198).

B. Sale of Immovable Property (1) Remedies of Vendor/Seller: 1. Anticipatory Breach: (Art. 1591): RIGHT OF VENDOR TO RESCIND SALE OF IMMOVABLE PROPERTY / ANTICIPATORY BREACH REQUISITES: (a) There is delivery of immovable property (b) Vendee has not paid the price (c) Vendor has reasonable ground to fear the: a. LOSS of PROPERTY; AND b. LOSS of PRICE When there is no such reasonable ground, Art. 1191 shall be observed (when the vendee does not comply with what is incumbent upon him). 2. AUTOMATIC RESCISSION: [1592, NCC; Laforteza vs. Machuca, 333 SCRA 643] (Art. 1592): WHERE AUTOMATIC RESCISSION OF SALE OF IMMOVABLE PROPERTY IS STIPULATED According to Villanueva and Pineda, the phrase “even though” means that this provision is also applicable in a case where there is no stipulation in the contract as to automatic rescission. Atty. Casiňo does not agree with them (this time, he agrees with De Leon) Vendor is given an option to rescind UPON JUDICIAL OR NOTARIAL DEMAND

-

-

However, when there is no judicial or notarial demand, vendee may still pay. Offer to pay is sufficient to defeat vendor’s prerogative. Vendor’s right to rescind is not absolute. o Art. 1191, par. 3 provides that the court may grant vendee a new term

o However, if there is already a demand, the court may no longer fix a term. Breach must be substantial as would defeat the very object of parties. NOT APPLICABLE TO: o Sale on installment of real estate (Caridad Estates vs Santero) o Mere promise to sell real estate / Conditional sale o Cases under RA 6552 (RA 6552 recognizes the vendor’s right to cancel unqualifiedly in case of industrial lots, commercial buildings, etc. with a refund of certain percentages of payments made on account of cancelled contract.

*In other words, the vendee in such cases may no longer pay the price after the expiration of the time agreed upon although no demand has yet been made upon him by suit or notarial act. *Article 1592, not applicable to Contract to Sell: [Pangilinan vs. CA, 279 SCRA 590 (1997); Alfonso vs. CA, 186 SCRA 400 (1990); Valarao vs. CA, 304 SCRA 155 (1999); People’s Industrial and Commercial Corp. vs. CA, 281 SCRA 206 (1997)]. (2) Remedies of Buyer 1. Right to Suspend Payment: (Art. 1590): RIGHT OF VENDEE TO SUSPEND PAYMENT Contemplates a situation where the CONTRACT IS NOT YET CONSUMMATED GENERAL RULE: Applicable in 2 cases: (c) Where the vendee is disturbed in possession or ownership of the thing bought; or (d) Vendee has reasonable fear ground to fear that his possession or ownership would be disturbed (by a vindicatory action or a foreclosure mortgage)

44

SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------* In both instances, the vendee may retain only the price that has not been paid to the vendor. He is not entitled to recover what has already been paid.

-

EXCEPTIONS TO SUSPENSION OF PAYMENT (where vendee has no right to suspend payment): [SSCTP]

(f) S: vendor gives security for the return of the price (g) S: stipulation that vendee must make payment notwithstanding such contingency (h) C: cessation of disturbance or danger (i) T: disturbance is a mere act of trespass (j) P: vendee has paid the price in full -

When the disturbance is caused by non-apparent servitude, the remedy is rescission not suspension of payment.

*Rule applicable in cases not involving subdivision or condominium projects *Rule applicable in cases involving sale of subdivision lots or condominium units Ground for suspension of payment: No installment payments made by the buyer in a subdivision or condominium project for the lot or unit he contracts 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 the develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. [Sec. 23, PD 957] [1.2.2] Alternative remedies of the buyer: [Sec. 23, PD 957] Relucio v. Brillante-Garfin, 187 SCRA 405; Casa Filipina Realty Corp. v. Office of the Pres., 241 SCRA 165]. 2. Right to Grace Period: Bricktown Development Corp. v. Amor Tierra Development Corp.

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.

C. The Maceda Law (RA 6552) Purpose of law : Protect buyers in installments against oppressive conditions 1. Applicability: Transactions Covered: Transaction or contracts involving the sale of financing of real estate on installment payments, including residential condominium apartments. - Covers: 1. contract of sale 2. contract to sell 3. financing transactions Excluded: 1. industrial 2. commercial 3. sale to tenants under agrarian laws [Sec. 3, RA 6552]. Applicability: [Sec. 2, RA 6552]. Applies even to contract to sell: [Villanueva, Sales, 432; Rillo v. CA, 274 SCRA 461; Leano v. CA, 369 SCRA 674]. 2. Rights Granted to Buyer Under Maceda Law: If the buyer has paid at least two years of installments:

45

SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------(a) The buyer must pay, without additional interest, the unpaid installments due within the total grace period earned by him. There shall be 1 month grace period for every 1 year of installment payments made. [NOTE: This is to be exercised only once in every 5 years or the life of the contract and its extensions. (b) Actual cancellation can only take place after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and upon full payment of the cash surrender value to buyer. [NOTE: The seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to 50% of the total payments made, After 5 years of the installments, there shall be an additional 5% every year but not to exceed 90% of the total payments made. (c) The buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. (d) The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. If the buyer has paid less than two years installments: (a) the seller shall give the buyer a grace period of not less than 60 days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of contract by notarial act. (b) c and d above [NOTE: downpayments, deposits or options on the contract shall be included in the computation of the total number of installment payments made.] 3. Requisites for valid cancellation of contract covered by Maceda Law: Requisites: Actual cancellation can only take place after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and upon full payment of the cash surrender value to buyer. [NOTE: The seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to 50% of the total payments made, After 5 years of the installments, there shall be an additional 5% every year but not to exceed 90% of the total payments made. [Sec. 3, RA 6552; Siska Development Corp. vs. Office of the President of the Philippines, 231 SCRA 674 and Marina Properties Corp. vs. CA, 294 SCRA 272 (1998)] Effect of failure to comply: [Active Realty & Development Corp. vs. Daroya, 382 SCRA 152; Olympia Housing v. Panasiatic Travel Corp., G.R. No. 140468, Jan. 16, 2003; Layug vs. Court of Appeals, 369 SCRA 36] Effect of contrary stipulation [Sec. 7, RA 6552]. HYPOTHETICAL QUESTIONS: 1.

(?) A and B entered into a contract of sale whereby A bound himself to deliver a parcel of land through a public document on 1 July 2010, and B bound himself to pay on 31 December 2010. On 31 July 2010, however, B became insolvent. Can A sue for rescission? Yes. B loses his right to a period because of his insolvency pursuant to Article 1198.

2.

(?) A and B entered into a contract of sale whereby A bound himself to deliver a parcel of land through a public document on 1 July 2010, and B bound himself to pay on 31 December 2010. On 31 July 2010, however, B absconded. Can A sue for rescission? Yes. B loses his right to a period pursuant to Article 1198

3.

A and B entered into a contract of sale whereby A bound himself to deliver a parcel of land through a public document on 1 July 2010, and B bound himself to pay on 31 December 2010. B did not pay A on 31 December 2010. What is/are the remedy/ies of A? A may choose between fulfillment and rescission of the obligation with payment of damages in either case on the ground that B does not comply with what is incumbent upon him (Article 1191). Should there be a reasonable ground to fear the loss of property sold and its price, A may immediately sue for rescission of the sale (Article 1591)

4.

(?) (Soria/Suria?) A and B entered into a contract of sale whereby A bound himself to deliver a parcel of land through a public document on 1 July 2010, and B bound himself to pay on 31 December 2010. A real estate mortgage was constituted on the property, having A as the mortgagee. B did not pay A on 31 December 2010. May A maintain rescind the sale? No. Upon the constitution of Real estate mortgage, the contract has been changed into one of payment of a loan.

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------D. Sale of Goods Remedies of Unpaid Seller: [Art. 1526] – Notwithstanding that the ownership in the goods may have passed to the buyer: (a) Possessory lien (b) Stoppage in transitu (c) Right of resale (can only be exercised when the two prior remedies have been exercised) (d) Rescission (can only be exercised when the two prior remedies have been exercised) Who is considered an unpaid seller? [Art. 1525] (a) when the whole of the price has not been paid or tendered to the seller; or (b) when a bill of exchange or other negotiable instrument has been received (as conditional payment), and the condition on which the instrument was received was broken by reason of the dishonor of the instrument, insolvency of buyer, or otherwise. * Lien on goods or right of retention: When right of lien exists: [Art.1527] [WEI] (a) goods have been sold without any stipulation as to credit

(b) goods have been sold on credit, but the term of credit has expired (c) buyer becomes insolvent (as he had already lost his right to a period pursuant to Art. 1198) When unpaid seller loses his lien: [Art.1529] [CLW] (a) he delivers to a carrier or other bailee -for the purpose of transmission to the buyer - without reserving the ownership in the goods or the right of possession thereof (b) buyer or his agent lawfully obtains possession of the goods

(c)

waiver

Part delivery of goods had been made [Art. 1528] – lien on the remainder Effect of sale of goods by buyer: [Art.1535] Seller’s right of lien or stoppage in transitu is not affected. EXCEPTION: (a) Seller assented thereto When a negotiable document of title has been issued for goods (reiteration of Art. 1532 and in consonance with Art. 1518) * Stoppage In Transitu: When can it be invoked: [Arts. 1526, 1530 and 1532] - seller has parted with the possession of the goods - REQUISITES: (a) unpaid seller (b) insolvent buyer (c) goods are in transit (d) The exercise of stoppage in transitu is either by: (i) obtaining actual possession of the goods (ii) giving notice of his claim to the carrier or other bailee in whose possession of the goods are. (1532) Notice may be given either to the person in actual possession of the goods or to his principal. When notice is given to the carrier or other bailee in possession of the goods, he must redeliver the goods according to the directions of the seller [NOTE: Expenses must be borne by the seller] EXCEPTION: a negotiable document of title representing the goods has been issued (in which case the carrier or bailee is not obliged to redeliver the goods unless the seller surrendered the document for cancellation) When are the goods considered “in transit” (Art. 1531) 1. After delivery to a carrier or other bailee and before the buyer or his agent takes delivery of them; and 2. Goods are rejected by the buyer and the carrier or other bailee continues in possession of them (even if the seller refused to receive them back) When are the goods considered no longer in transit (Art. 1531) 1. After delivery to buyer or his agent 2. Buyer or his agent obtains delivery of the goods (before their arrival at the appointed destination)

47

SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------3. 4.

After the arrival at the appointed destination, the carrier or bailee acknowledge to the buyer or his agent that he is holding the goods in his behalf and continues in possession of them as bailee for buyer or his agent Carrier or bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf

Effect of sale of goods by buyer: [Art.1535] Seller’s right of lien or stoppage in transitu is not affected. EXCEPTION: (b) Seller assented thereto (c) When a negotiable document of title has been issued for goods (reiteration of Art. 1532 and in consonance with Art. 1518)

* Resale of the Goods REQUISITES: [Art. 1533] (1) first two remedies have been exercised - unpaid seller has right of lien or has stopped goods in transitu (2) under any of the following conditions: (a) goods are perishable (b) seller expressly reserves the right of resale in case buyer defaulted (c) buyer has been in default in payment for an unreasonable time Seller is not liable to original buyer for profit made by virtue of resale Seller may recover from buyer damages for loss due to breach of contract of sale Buyer acquires good title as against original buyer

* Rescission of sale: [A] Special right to rescind [Art.1534] - seller has parted with possession of the goods - seller may recover from the buyer damages for any loss due to breach of contract - there must be NOTICE or some other OVERT ACT of intention to rescind [Overt act need not be communicated BUT the giving of notice is relevant in case of default for an unreasonable time. REQUISITES: (1) first two remedies have been exercised - unpaid seller has right of lien or has stopped goods in transitu (2) under any of the following conditions: (a) seller expressly reserves the right of resale in case buyer defaulted (b) buyer has been in default in payment for an unreasonable time [B] Technical Rescission [Art. 1597] - There is no delivery of goods yet - seller may totally rescind by giving notice of his election to do so to the buyer (1) Buyer has repudiated the contract of sale; (2) Buyer has manifested his inability to perform obligations; or (3) Buyer committed a breach HYPOTHETICAL QUESTIONS: 1.

2.

3.

A entered into a contract of sale with B whereby B bound himself to pay P500k for the 100 sack of corn, which is to be delivered by A. A gave B a bill of lading, deliverable to B or order. Subsequently, B became insolvent. May A exercise to right of stoppage in transitu? Yes. A and B entered into a contract of sale of 100 sacks of corn. A is bound to send the goods to B through his ship, which is being operated by C. Assuming that A became an unpaid seller, may he exercise the right of stoppage in transitu while the goods are in the possession of C? No. A is still in the possession of the goods. C’s possession is merely that of a holder, as he was acting as A’s employee. Because A has not yet parted with the possession of the goods, his remedy is to exercise his lien of the goods. a

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Actions in case of breach of contract of sale of goods [A] REMEDIES OF SELLER 1. Action for the price / Specific performance (Art. 1595) (a) when the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract (b) when price is payable on certain day, irrespective of delivery or transfer of title, and the buyer wrongfully neglects or refuses to pay [BUT: it is a defense to such action that seller has manifested an inability or lack of interest to perform his obligation before judgment] (c) if goods cannot readily be resold for a reasonable price, although transfer of ownership has not passed – seller may offer to deliver the goods to the buyer; if buyer refuses to receive, seller may notify the buyer that he holds the goods as bailee for the buyer. Thereafter, the seller may treat the goods as buyer’s and may maintain an action for the price. 2. Action for Damages (Art. 1596) When buyer wrongfully neglects or refuses to ACCEPT and PAY for the goods MEASURE OF DAMAGES = estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s breach MEASURE OF DAMAGES (WHEN THERE IS AVAILABLE MARKET) = difference between the contract price and the market or current price at the time the goods ought to have been accepted, or at the time of refusal to accept when there is no time fixed 3. Rescission (Art. 1597) - There is no delivery of goods yet - seller may totally rescind by giving notice of his election to do so to the buyer (1) Buyer has repudiated the contract of sale; (2) Buyer has manifested his inability to perform obligations; or (3) Buyer committed a breach [B] REMEDIES OF BUYER

1. 2.

Specific performance, without giving the seller the option of retaining the goods on payment of damages. [Judgment may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as the court may deem just] (Art. 1598) In case of seller’s breach of warranty (Art. 1599) (a) Recoupment – accept the goods and set up the seller’s breach to reduce or extinguish the price (b) Accept the goods and maintain an action for damages for breach of warranty (c) Refuse to accept and maintain an action for damages for breach of warranty (d) Rescission – rescind the contract; refuse to receive the goods; or if goods have already been received, return them and recover what was paid or any part of it concurrently with return or immediately after it. These remedies are alternative, without prejudice to paragraph 2 of Art. 1191 (that a party may still seek rescission after choosing specific performance if the latter is impossible) Buyer cannot rescind if he knew of the breach and accepted the goods without protest, or fails within reasonable time to notify the seller of his election to rescind, or fails to return or offer to return the goods in substantially as good condition as it was If seller refuses to accept an offer to return the goods and the buyer elected rescission, buyer shall be deemed to hold the goods as bailee for the seller subject to lien to secure payment of any portion of the price which has been paid. LOSS (in case of breach of warranty of quality) = difference between value of the goods at the time of delivery and value they would have had if they had answered to the warranty

Provisions on Rescission 1191 (Judicial Rescisison based on substantial breach) – at the instance of aggrieved party 1381 (rescission based on lesion) - at the instance of aggrieved party 1591 (for Anticipatory breach) - at the instance of vendor 1592 (Automatic rescission when there is stipulation - immovable) - at the instance of vendor 1593 (Automatic rescission when there is stipulation – movable) - at the instance of vendor 1534 (Special right to rescind) - at the instance of vendor 1597 (Technical Rescission) - at the instance of vendor 1599(4) (where there is breach of warranty on the part of seller) – at the instance of vendee Rescission in case of breach of a party or lesion RESCISSION (RESOLUTION) 1191 legal basis is substantial breach principal remedy, retaliatory vs. unjust party mutual restitution

RESCISSION – 1381 legal basis is lesion (rescissible contract) subsidiary remedy – cannot be instituted except when other remedies exhausted mutual restitution

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Rescission at the instance of vendor - immovable 1591 Rescission based on Anticipatory breach

1592 Rescission based on stipulation regarding automatic rescission - Vendor is given an option to rescind UPON JUDICIAL OR NOTARIAL DEMAND - However, when there is no judicial or notarial demand, vendee may still pay. Offer to pay is sufficient to defeat vendor’s prerogative. - Vendor’s right to rescind is not absolute. o Art. 1191, par. 3 provides that the court may grant vendee a new term However, if there is already a demand, the court may no longer fix a term.

(b) There is delivery of immovable property (c) Vendee has not paid the price (d) Vendor has reasonable ground to fear the: a. LOSS of PROPERTY; AND b. LOSS of PRICE

Principal/subsidiary (?)

Rescission at the instance of vendor – movable / goods 1534 Special right to rescind Seller has already parted with possession of the goods… (1) Seller expressly reserved the right to do so in case the buyer should make default; or (2) The buyer has been in default in the payment of the price for an unreasonable time. Principal/subsidiary (?)

1597 Technical Rescission There is no delivery of goods yet… (1) Buyer has repudiated the contract of sale; (2) Buyer has manifested his inability to perform obligations; or (3) Buyer committed a breach

Rescission at the instance of vendor - movable 1593 Movable Property Automatic rescission of sale of movable is stipulated Principal/subsidiary (?)

1534 / 1597 Movable Property / goods (See requisites)

Comparative Table of Remedies in case of breach REMEDIES VENDOR/SELLER 1191 1170 (IMMOVABLE) 1. Rescission under 1591 2. Rescission under 1592 3. Re provisions on Maceda Law (MOVABLE / GOODS) 1) Action for the price / Specific performance (1595) 2) Action for Damages 3) Rescission under 1597 4) Rescission under 1593 (there is stipulation)

VENDEE/BUYER 1191 1170 (IMMOVABLE) 1. Suspension of payment under 1591 2. Right to grace period under Maceda Law (MOVABLE / GOODS) 1. (1598) 2. In case of breach of warranty of seller (1599) 3. Remedies of Unpaid Seller (1526)

* EXTINGUISHMENT OF SALE Sales are extinguished by the same causes as all other obligations (Art. 1600), such as: 1. Payment or performance of obligation 2. Loss of the thing due 3. Condonation or remission of debt 4. Confusion or merger of rights 5. Compensation 6. Novation 7. Rescission 8. Annulment

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------Sales are also extinguished by CONVENTIONAL OR LEGAL REDEMPTION. *Conventional Redemption * A right of repurchase is an alienable right and within the commerce of man. It may be sold, attached and levied upon. HYPOTHETICAL QUESTIONS: 1. A land was sold in 1971 for P50k. Later, the vendor claims sale to be an equitable mortgage because of unusual inadequacy of the price. Is he correct? No. Price is not inadequate because of circumstance and time the thing was sold. In 1971, P50k is already a big amount. Inadequacy of price is determined at the time of sale. 2. (?) A third person acquires right of repurchase of vendor, which was attached and sold at a public auction where the former became the highest bidder. May vendor still exercise right of repurchase? 3. (?)(?)(?) A owes B P100k. B filed an action to collect and judgment is rendered in his favor. The subject parcel of land was awarded to B. May A be compelled to immediately deliver the land? No, there is one year right of repurchase. 4. A and B entered into a contract of sale with right of repurchase. They agreed that the right of repurchase is fixed at P600k. Is the stipulation valid? Yes. Conventional redemption is subject to such “other stipulations which may have agreed upon.” (Art. 1601) (Solid Homes vs CA) 5. A and B entered into a pacto de retro sale. B, the vendee a retro, sold the subject property to C through an absolute sale. May A exercise the right of repurchase as against C? Yes. The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract, there is no mention as to the right to repurchase (Art. 1608) 6. A and B entered into a pacto de retro sale. B, the vendee a retro, leased the subject property to C. May A evict C? No. A is bound to respect the lease (Art. 1618) 7. B entered into a pacto de retro sale with C. A is a creditor of B. May A proceed directly against C (or levy upon the subject property which is in the possession of C) for the satisfaction of B’s debt? No. The creditors of the vendor cannot make use of the right of redemption against the vendee until after they have exhausted the property of the vendor. (Art. 1610 in connection with Art. 1177) [Noted: exceptions to this rule are: (a) a mortgage which is recorded prior to sale and (b) mortgage that was foreclosed] 8. A, B, and C are co-owners of an undivided immovable. A sold his share to D, which made D a new co-owner. Partition of the property took place. Subsequently, B and C sold their part of the property to D. Rule the case. A must redeem the whole property if he wishes to redeem (Art. 1611) 9. A, B, and C are co-owners of an undivided immovable. They jointly entered into a contract of pacto de retro sale of the immovable property to D. Rule the case. None may exercise right to repurchase more than his share. (Art. 1612) 10. X owns a parcel of land. When he died, he left the said land to A, B and C. A, B, and C jointly entered into a contract of pacto de retro sale of the immovable property to D. Rule the case. None may exercise right to repurchase more than his share. (Art. 1612) 11. In #s 8, 9 and 10, May the vendee demand from vendors to agree to purchase the whole? Yes. If the vendors cannot agree, the vendee cannot be compelled to consent to partial redemption. (Art. 1613) 12. A, B, and C are co-owners of an undivided immovable. They entered into separate contracts of pacto de retro sale of their shares in favor of one vendee, D. Rule the case. May D compel either of A, B and C to redeem the whole? No, they cannot be compelled, but each of them may independently exercise the right of repurchase as regards his share. (Art. 1614) 13. A entered into a pacto de retro sale of an undivided immovable with B. B, the vendee, died leaving C, D, and E as his heirs. May A compel one of the heirs to redeem the whole prop? If the property has already been partitioned, would the answer be the same? Whether the property is undivided or partitioned, the heirs cannot be compelled to redeem the whole property, except when after partition, the whole property has been awarded to one of the heirs, in which case, he may be compelled to redeem the whole. 14. Suria case (Art. 1616)

15. A entered into a pacto de retro sale of a parcel of land with B. The property is to be redeemed within 3 years from sale.

The land was sold to B at P500k. B further paid P50k for the growing and visible fruits on the land. On the 3rd year after sale, A sought to redeem the property – (a) If A will exercise redemption, he must pay P550k as price for sale. (b) If B did not pay, he is not entitled to reimbursement for crops existing at the time of redemption. (c) If no crops at the time of sale and some exist at redemption, B is entitled to crops during the last year, i.e. 2nd year.

(d) If there were crops at the time of sale and B paid them, B must receive reimbursement or is entitled to fruits for the

last year because having paid them, the effect is the same as if there were no crops on the land when it was sold. (Art. 1617) 16. A entered into a pacto de retro sale with B. B, the vendee a retro, mortgaged the property to C. Should B redeem the mortgage prior to A’s exercise of his right of repurchase? Yes. The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee. (Art. 1618)

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------* Legal Redemption •

Legal redemption is not applicable to: (enumeration is not exclusive) (a) barter, (b) donation (c) transmission of things by hereditary title, (d) mortgage, (e) lease

•

Article 1492 provides that the prohibitions as laid down in Arts. 1490 and 1491 are also applicable to legal redemption.

HYPOTHETICAL QUESTIONS 1. A, B and C are co-owners of a parcel of land. A donated his share to X. May B or C exercise legal redemption as against X? No. The transmission of ownership is not by onerous title See Article 1619. 2. A, B and C are co-owners of a parcel of land. A, through a will, awarded his share to X. May B or C exercise legal redemption as against X? No. The transmission of ownership is not by onerous title See Article 1619. 3. A owns a land adjoining B’s, C’s, and D’s lands, all of which are of 10,000 sq. m. (1 hectare). Supposing B, C, and D separately sold their lands to X who owns a rural land, may A redeem all of the lands sold to X? Yes. All the requisites are satisfied. 4. A owns a rural land adjoining B’s, C’s, and D’s rural lands, all of which are of 10,000 sq. m. (1 hectare). Supposing B, C, and D, in a single contract, sold their lands to X who owns a rural land, may A redeem all of the lands sold to X? Yes. All the requisites are satisfied. It is not necessary that the sales are made in separate contracts. There are still 4 parcels of land, each not exceeding 1 hectare. 5. A owns a rural land adjoining B’s, C’s, and D’s rural lands, all of which are of 10,000 sq. m. (1 hectare). Supposing B sold his land to C, whose land is adjoining B’s and A’s land, may A exercise the right of redemption? No. Look into the purpose of the law. 6. A owns a rural land adjoining B’s, C’s, and D’s rural lands. B sold his land to X for P500k but the property is only valued at P300k – (a) May A exercise the right of repurchase? Yes (b) How much should A pay? P500k. Art. 1620 (on grossly excessive price) applies only to co-owners (c) If A, B, C and D are co-owners, how much should A pay? P300k, for Art. 1620 would be the applicable provision. (d) What if B and X freely agreed that subject is to be sold for P500k, may A compel X to resell the land to him for P300k only? Yes. 7. A, B, and C are brothers and co-owners of a parcel of land. C died, leaving X as his sole heir. B sold his share to X. May A redeem the share sold by B to X? NO. X is not a stranger to a contract. He is a co-owner. 8. Same facts as # 7, only that X is C’s wife. May A redeem the share sold by B to X? NO. X is not a stranger to a contract. He is a co-owner. 9. S 10. 11.

* Assignment of Credit

LEASE

(OUTLINE – borrowed from Atty. Rabuya of Arellano Law) 1. Nature of contract of lease:[Chua Tee Dee v. Court of Appeals, G.R. No. 135721, 27 May 2004, 429 SCRA 418, 434, citing Lim Si v. Lim, 98 Phil. 868, 870 (1956); Bugatti v. Court of Appeals, 397 Phil. 376, 395 (2000), citing Vitug, Compendium of Civil Law and Jurisprudence, 1993 edition, 653-654]. [1.1] Consent is necessary: [1.1.1] General rule: [Pagurayan v. Reyes, G.R. No. 154577, July 23, 2008]. [1.3.2] Exception: [Art. 448, NCC]. [1.4] Requirement of Formality: [Art. 1403(2)(e), NCC; Fernandez v. CA (166 SCRA 577] [1.5] Lessor need not be the owner: [Ballesteros v. Abion, 482 SCRA 23 2. Kinds of lease: [1642, NCC]

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SALES AND LEASE REVIEWER by Diory Rabajante ------------------------------------------------------------------------------------------------------------------------------------------------------------3. Term of lease in lease of things: [1643; 1403(2)(e), NCC]. [3.1] What can be the object of lease? [1645, NCC] 4. Lease of lands (be it rural or urban): [4.1] Who are prohibited from becoming party: [1646 and 1647, NCC]; 5. Rights and obligations of the lessee: [5.1] Assignment of lease contract: [1649, NCC] [5.2] Authority to sublease: [1650-1652, NCC] 6. Obligations of the lessor to lessee: [6.1] 3 Principal obligations of lessor to lessee: [1654, NCC] [6.1.1] Effect of breach: [1658 and1659, NCC] [6.1.2] What kind of trespass is contemplated? [G.Q. Garments, Inc, v. Miranda, 495 SCRA 741] [6.1.3.3] Remedy of lessee in case of trespass in fact: [G.Q. Garments, Inc. v. Miranda, supra.]. 7. Obligation of the lesse: [1657, NCC; Collage Assurance Plan v. Belfranlt Development, Inc., 538 SCRA 27]. 8. Termination of lease: [8.1] If for determinate period: [1669, NCC; Josefa v. San Buenaventura, 484 SCRA 49]. [8.2] Implied new lease (tacita reconduccion): [1670, NCC] [8.3] If period of leased is not fixed: [1687, NCC; Tisa v. CA, G.R. No. 148562, Nov. 25, 2004]

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