Sales Case Doctrines Midterms

SALES CASE DOCTRINES 1ST HW (ART 1458-1478) ***1. DIgnos vs CA i.

ii.

iii. iv. v.

A deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale” WHERE THERE IS NO PROVISION THAT TITLE IS RESERVED TO THE VENDOR OR UNILATERALLY GIVING THE VENDOR THE RIGHT TO RESCIND CONTRACT. all the elements of a valid contract of sale under Article 1458 of the Civil Code, are present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. Art 1477- ownership is transferred by delivery of the thing sold. There was ACTUAL DELIVERY in the case at bar. a slight delay on the part of one party in the performance of his obligation is not a sufficient ground for the rescission of the agreement.

*** 2. Artates vs Urbi i. The execution sale was null and void pursuant to Section 118 of the Public Land Law (CA 141). ii. As thus prescribed by law, for a period of five years from the date of the government grant, lands acquired by free or homestead patent shall not only be incapable of being encumbered or alienated except in favor of the government itself or any of its institutions, but also, they shall not be liable to the satisfaction of any debt contracted within the said period. iii. Purchaser will not acquire absolute ownership through a sheriff’s provisional certificate. *** 3. Heirs of Zambales vs CA i. The sale of a homestead lot within the five-year prohibitory period provided in Section 118 of the Public Land Law(CA 141) is illegal and void. ii. As the contract is sold from the beginning, for being expressly prohibited by law (Article 1409, ibid.) the action for the declaration of its inexistence does not prescribe. iii. ACTION FOR REVERSION NOT DISCOUNTED. — The homestead in question should be returned to the Zambaleses, petitioners herein, who are, in turn, bound to restore to

the Corporation the sum of P8,923.70 as the price thereof. This is without prejudice to the corresponding action on the part of the State for reversion of the property and its improvements, if any, under Section 124 of the Public Land Act. ***4. Quiroga vs Parsons Hardware i. SALES; INTERPRETATION OF CONTRACT. — For the classification of contracts, due regard must be paid to their essential clauses. In the contract in the instant case, what was essential, constituting its cause and subject matter, was that the plaintiff was to furnish the defendant with the beds which the latter might order, at the stipulated price, and that the defendant was to pay this price in the manner agreed upon. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on that of the defendant, to pay their price. These features exclude the legal conception of an agency or order(?) to sell whereby the mandatary or agent receives the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it, Held: That this contract is one of purchase and sale, and not of commercial agency. ***5. Concrete Aggregates vs. CTA and CIR i. Case is related to Art. 1467. 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, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work. ii. Issue: whether petitioner is a contractor subject to the 3% contractor's tax under Section 191 of the 1968 National Internal Revenue Code or a manufacturer subject to the 7% sales tax under Section 186 of the same Code iii. Held: Section 194(x), now Section 187(x), of the Tax Code provides that a 'Manufacturer' includes every person who by physical or chemical process alters the exterior texture or form or inner substance of any raw material or manufactured or partially manufactured product in such manner as to prepare

it for a special use or uses to which it could not have been put in its original condition xxx Petitioner is a manufacturer as defined by Section 194(x), now Section 187(x), of the Tax Code; it has an aggregate plant at Montalban, Rizal, which processes rock aggregates mined by it from private lands; it operates a concrete batching plant at Longos, Quezon City. ***6. People’s homesite vs CA and Mendoza . CIVIL LAW; OBLIGATIONS AND CONTRACTS, NON-PERFECTION OF CONTRACT OF SALE; CONDITIONAL OR CONTINGENT AWARD PROPERLY WITHDRAWN; CASE AT BAR. — There was no perfected sale of Lot 4. It was conditionally or contingently awarded to the Mendozas subject to the approval by the city council of the proposed consolidation subdivision plan and the approval of the award by the valuation committee and higher authorities. The city council did not approve the subdivision plan. The Mendozas were advised in 1961 of the disapproval. In 1964, when the plan with the area of Lot 4 reduced to 2,608.7 square meters was approved, the Mendozas should have manifested in writing their acceptance of the award for the purchase of Lot 4 just to show that they were still interested in its purchase although the area was reduced and to obviate any doubt on the matter. They did not do so. The People's Homesite and Housing corporation (PHHC) board of directors acted within its rights in withdrawing the tentative award. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the law governing the form of contracts." (Art. 1475, Civil Code). "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." (Art. 1181, Civil Code). Under the facts of the 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. ***7. Toyota Shaw vs CA i. 1. CIVIL LAW; SPECIAL CONTRACTS; SALES; CONTRACT OF SALE; ELEMENT OF DEFINITENESS OF PRICE FOR PERFECTION THEREOF; NOT PRESENT IN CASE AT BAR. —

Article 1458 of the Civil Code defines a contract of sale and Article 1475 specifically provides when it is deemed perfected. It is not a contract of sale. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain appears therein. The provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis, as the VSP executed the following day confirmed. But nothing was mentioned about the full purchase price and the manner the installments were to be paid. This Court had already ruled that a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell personal property. 2. ID.; ID.; ID.; ID.; ELEMENT OF MEETING OF MINDS; NOT ESTABLISHED IN CASE AT BAR. ***8. Addison vs. Felix 1. VENDOR AND PURCHASER; DELIVERY; EXECUTION OF PUBLIC INSTRUMENT. — It is the duty of the vendor to deliver the thing sold. Symbolic delivery by the execution of a public Instrument is equivalent to actual delivery only when the thing sold is subject to the control of the vendor. 2. ID.; ID.; RESCISSION. — If the vendor fails to deliver the thing sold the vendee may elect to rescind the contract. ***9. Sampaguita pictures vs Jalwindor Manufacturers Inc. i. Ownership is not transferred by perfection of the contract but by delivery, either actual or constructive. This is true even if the purchase has been made on credit, as in the case at bar. Payment of the purchase price is not essential to the transfer of ownership as long as the property sold has been delivered. ii. Ownership is acquired from the moment the thing sold was delivered to vendee, as when it is placed in his control and possession (Art 1477)

***10. Ten Forty Realty and Dev’t Corp vs Cruz i. CIVIL LAW; SPECIAL CONTRACTUAL; SALES, BUYER ACQUIRES THE THING UPON ITS DELIVERY; PETITIONER DID NOT GAIN CONTROL AND POSSESSION OF PROPERTY IN CASE AT BAR.— In a contract of sale, the buyer acquires the thing sold only upon its delivery "in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee." With respect to incorporeal property, Article 1498 lays down the general rule: the execution of a public instrument shall be equivalent to the delivery of the thing that is the object of the contract if, from the deed, the contrary does not appear or cannot be clearly inferred. However, ownership is transferred not by contract but by tradition or delivery. Nowhere in the Civil Code is it provided that the execution of a Deed of Sale is a conclusive presumption of delivery of possession of a piece of real estate. This Court has held that the execution of a public instrument gives rise only to a prima facie presumption of delivery. Such presumption is destroyed when the delivery is not effected because of a legal impediment. . . In the case at bar it is undisputed that petitioner did not occupy the property from the time it was allegedly sold to it on December 5, 1996 or at any time thereafter. 2ND HW (ART 1479-1483 AND 1504) ***1. Southwestern Sugar and Molasses Co. v. Atlantic Gulf & Pacific Co. CONTRACTS; OFFER AND ACCEPTANCE; RULE ON WITHDRAWAL OF OFFER. — While it is true that under article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offer or gives to the offeree a certain period to accept, "the offer may be withdrawn at any time before acceptance" except when the option is founded upon consideration this general rule must be interpreted as modified by the provision of article 1479 which applies to "a promise to buy and sell" specifically. This rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price, which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration.

***2. Atkins, Kroll & Co., Inc. v. Cua Hian Tek 1. OBLIGATION AND CONTRACTS; SALES; OFFER TO SELL A DETERMINATE THING FOR A PRICE CERTAIN; ACCEPTANCE OF OFFER; EFFECT OF; LIABILITY OF THE OFFEROR AND OFFEREE. — The acceptance of an offer to sell a determinate thing for a price certain creates a bilateral contract to sell and to buy(?). The offeree, upon acceptance, ipso facto assumes the obligations of a purchaser. On the other hand, the offeror would be liable for damages if he fails to deliver the thing he had offered for sale. 2. ID.; ID.; ID.; ID.; OPTION WITHOUT CONSIDERATION. — If an option is given without (consideration?), it is mere offer of contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitute a binding contract of sale, even though the option was not supported by a sufficient consideration. ***3. Sanchez vs Rigos 1. CIVIL LAW; CONTRACTS; CONTRACT TO BUY AND SELL; OPTION WITHOUT CONSIDERATION; CASE AT BAR. — Where both parties indicated in the instrument in the caption, as an "Option to Purchase," and under the provisions thereof, the defendant "agreed, promised and committed" herself to sell the land therein described to the plaintiff for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration "distinct from the price" stipulated for the sale of the land, it is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. 2. ID.; ID.; ID.; ID.; ARTICLES 1354 AND 1479, NEW CIVIL CODE; APPLICABILITY. — It should be noted that: Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." 3. ID.; ID.; REQUISITE OF A UNILATERAL PROMISE IN ORDER TO BIND PROMISOR; BURDEN OF PROOF REST UPON PROMISEE. — In order that a unilateral promise may be "binding" upon the promisor, Article 1479 requires the concurrence of a condition namely, that the promise be "supported by a consideration distinct from the price." Accordingly, the promisee can not compel the promisor to comply with the promise, unless the former

establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration. 4. ID.; ID.; WHERE A UNILATERAL PROMISE TO SELL GENERATED TO A BILATERAL CONTRACT OF PURCHASE AND SALE; ARTICLES 1324 AND 1479, NCC., NO DISTINCTION. — This Court itself, in the case of Atkins, Kroll & Co., Inc. vs. Cua Hian Tek (102 Phil., 948), decided later than Southwestern Sugar & Molasses Co. vs. Atlantic & Pacific Co., 97 Phil., 249, saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance. In other words, since there may be no valid contract without a cause or consideration promisor is not bound by his promise and may, accordingly withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. ***4. Natino vs IAC 2. CIVIL LAW; CONTRACTS; SALE; OPTION OR PROMISE, UNSUPPORTED BY CONSIDERATION DISTINCT FROM PURCHASE PRICE NOT BINDING UPON PROMISOR. — The Bank was not bound by the promise made by Mrs. Brodeth not only because it was not approved or ratified by the Board of Directors but also because, and more decisively, it was a promise unsupported by a consideration distinct from the re-purchase price. The second paragraph of Article 1479 of the Civil Code expressly provides: . . ."An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the PROMISSOR if the promise is supported by a consideration distinct from the price." Thus in Rural Bank of Parañaque Inc. vs. Remolado, et al., a commitment by the 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 distinct from the price and, therefore, not binding upon the PROMISSOR. Pursuant to Southwestern Sugar and Molasses Co. vs. Atlantic Gulf and Pacific Company, it was void.

***5. Serra vs. Court of Appeals, and RCBC 2. ID.; ID.; PROMISE TO BUY AND SELL A DETERMINATE THING FOR A PRICE; DISTINGUISHED FROM ACCEPTED UNILATERAL PROMISE TO BUY OR SELL A DETERMINATE THING FOR A PRICE. — A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. (Article 1479, New Civil Code) The first is a mutual promise and each has the right to demand from the other the fulfillment of the obligation. While the second is merely an offer of one to another, which if accepted, would create an obligation to the offeror to make good his promise, provided the acceptance is supported by a consideration distinct from the price. Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at anytime before acceptance by communicating such withdrawal, except when the option is founded upon consideration, as something paid or promised. On the other hand, Article 1479 of the Code provides that an accepted unilateral promise to buy and sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy, because upon acceptance by the creditor of the offer to sell by the debtor, there is already a meeting of the minds of the parties as to the thing which is determinate and the price which is certain. In which case, the parties may then reciprocally demand performance. Jurisprudence has taught us that an optional contract is a privilege existing only in one party — the buyer. For a separate consideration paid, he is given the right to decide to purchase or not, a certain merchandise or property, at any time within the agreed period, at a fixed price. This being his prerogative, he may not be compelled to exercise the option to buy before the time expires. ***6. Roman vs Grimalt 3. ID.; PARTIES; PROPOSAL, CONSENT; CONSIDERATION. — When there is no proof that parties have agreed as to the thing should be the subject of the contract and that one has accepted the terms propose by the other, it can not be said that the contracting parties have given their mutual consent as to the consideration of the contract.

3RD HW (ART 1484-1491) 4. ID.; SALE. — Where no valid contract of sale exists it create no mutual rights or obligations by between the alleged purchaser and seller, nor any label relation legal relation binding upon them. ***7. Equatorial Realty vs Mayfair 1996 1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; OPTION CONTRACT; PARAGRAPH 8 OF THE LEASE CONTRACT GRANTS TO MAYFAIR THE RIGHT OF FIRST REFUSAL, NOT AN OPTION. We agree with the respondent Court of Appeals that the aforecited contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option contract. It is a contract of a right of first refusal. 2. ID.; ID.; SINCE PETITIONER IS A BUYER IN BAD FAITH, THE SALE TO IT OF THE PROPERTY IN QUESTION IS RESCISSIBLE. 3. ID.; ID.; THE RIGHT OF FIRST REFUSAL SHOULD BE ENFORCED ACCORDING TO THE LAW ON CONTRACTS INSTEAD OF THE CODAL PROVISIONS ON HUMAN RELATIONS. ***8. Norkis Distributors Inc. vs. Court of Appeals, and Nepales ISSUE: Whether or not, there was delivery of the motorcycle. HELD: The purpose of the execution of the sales invoice and the registration of the vehicle was not to transfer to Nepales the ownership over the motorcycle, but only to comply with the requirements of the DBP for processing Nepale's motorcycle loan. Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the buyer," is applicable to this case, for there was neither an actual nor constructive delivery of the thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still the owner and possessor of the motorcycle when it was wrecked. This is in accordance with the well-known doctrine of res perit domino.

***1. Southern Motors Inc. vs. Moscoso 1. SALE ON INSTALLMENTS; ACTION FILED IS FOR SPECIFIC PERFORMANCE; MORTGAGED PROPERTY ATTACHED; SALE OF MORTGAGED PROPERTY NOT TANTAMOUNT TO FORECLOSURE OF MORTGAGED; DEFICIENCY JUDGMENT. — In sales on installments, where the action instituted is for specific performance and the mortgaged property is subsequently attached and sold, the sale thereof does not amount to a foreclosure of the mortgaged; hence, the seller-creditor is entitled to deficiency judgment. ***2. Pascual vs. Universal Motors Corp ISSUE: Whether or not, the vendor has the right to recover any deficiency from the purchaser after the foreclosure of the chattel mortgage and not a recourse to the additional security put up by a third party to guarantee the purchaser's performance of his obligation. HELD: If the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she has paid from the debtor vendee. Ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned. ***3. Filinvest Credit Corp vs. CA 3. ID.; SPECIAL CONTRACTS; SALES; REMEDIES OF SELLER OF MOVABLES PAYABLE IN INSTALLMENTS WHERE BUYER FAILS TO PAY TWO OR MORE INSTALLMENTS; REMEDIES ARE ALTERNATIVE NOT CUMULATIVE. — Under Article 1484 of the New Civil Code, the seller of movables in installments, in case the buyer fails to pay two or more installments, may elect to pursue either of the following remedies: (1) exact fulfillment by the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage on the purchased property if one was constituted thereon. It is now settled that the said remedies are alternative and not cumulative and therefore, the exercise of one bars the exercise of the others.

4. ID.; ID.; ID.; CONTRACT OF LEASE WITH OPTION TO BUY, RESORTED TO AS A MEANS OF CIRCUMVENT ARTICLE 1484 OF NEW CIVIL CODE. — Indubitably, the device — contract of lease with option to buy — is at times resorted to as a means to circumvent Article 1484, particularly paragraph (3) thereof. Through the set-up, the vendor, by retaining ownership over the property in the guise of being the lessor, retains, likewise, the right to repossess the same, without going through the process of foreclosure, in the event the vendee-lessee defaults in the payment of the installments. There arises therefore no need to constitute a chattel mortgage over the movable sold. More important, the vendor, after repossessing the property and, in effect, canceling the contract of sale, gets to keep all the installmentscum-rentals already paid. 6. ID.; SPECIAL CONTRACTS; SALES; WARRANTY; EXPRESS WAIVER OF WARRANTIES ABSOLVED SELLER FROM ANY LIABILITY ARISING FROM ANY DEFECT OR DEFICIENCY OF MACHINERY; CASE AT BAR.

right the vendor elects he cannot avail of the other, these remedies being alternative, not cumulative. (Industrial Finance Corp. vs. Tobias, Ibid; Cruz vs. Filipinas Investment and Finance Corp., 23 SCRA 791). 2. ID.; ID.; ID.; ID.; ID.; ELECTION TO FORECLOSE THE MORTGAGE ON DEFAULT PRECLUDES ACTION FOR RECOVERY OF UNPAID BALANCE; PURPOSE OF THE LAW. — If the vendor avails himself of the right to foreclose his mortgage, the law prohibits him from further bringing an action against the vendee for the purpose of recovering whatever balance of the debt secured not satisfied by the foreclosure sale. (Luneta Motor Co. vs. Dimagiba, Supra; Northern Motors, Inc. vs. Sapinoso, 33 SCRA 356). The precise purpose of the law is to prevent mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment, otherwise, the mortgagor-buyer would find himself without the property and still owing practically the full amount of his original indebtedness. (Bachrach Motor Co. vs. Millan, 61 Phil. 409; Macondray & Co. vs. Benito, 62 Phil. 137; Zayas vs. Luneta Motor Co., L-30583, October 23, 1982).

***4. Layug vs IAC 4. ID.; ID.; ID.; SALES OF REAL ESTATE ON INSTALLMENT. — REPUBLIC ACT 6552 governs sales of real estate on installments. It recognizes the vendor's right to cancel such contracts upon failure of the vendee to comply with the terms of the sale, but at the same time gives the buyer, subject to conditions provided by law, a one month grace period for every year of installment payment made and if the contract is cancelled, a refund of cash surrender value. ***5. Ridad vs. Filipinas Investments 1. CIVIL LAW; CONTRACTS; SALE OF PERSONAL PROPERTY ON INSTALLMENT BASIS; REMEDIES OF THE VENDOR SHOULD THE VENDEE DEFAULT; ALTERNATIVE NOT CUMULATIVE. — Under Article 1484 of the Civil Code, the vendor of personal property, the purchase of which is payable in installments, has the right, should the vendee default in the payment of two or more of the agreed installments, to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. (Luneta Motor Co. vs. Dimagiba, 3 SCRA 884; Radiowealth, Inc. vs. Lavin, 7 SCRA 804; Industrial Finance Corporation vs. Tobias, 78 SCRA 28). Whichever

3. ID.; ID.; ID.; ID.; ID.; ID.; RULING IN LEVY HERMANOS, INC. vs. PACIFIC COMMERCIAL CO., ET AL. APPLICABLE TO CASE AT BAR. — Where the appellant corporation elected to foreclose its mortgage upon default by the appellee in the payment of the agreed installments and having chosen to foreclose the chattel mortgage, bought the purchased vehicles at public auction as the highest bidder, it submitted itself to the consequences of Article 1484 of the Civil Code and the lower court rightly declared the nullity of the chattel mortgage in question in so far as the taxicab franchise and the used Chevrolet car of plaintiffs are concerned, under the authority of the ruling in the case of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., 71 Phil. 587, the facts of which are similar to those in the case at bar. 4. ID.; ID.; ID.; ID.; ID.; ID.; PROHIBITION OF RECOURSE AGAINST ADDITIONAL SECURITY; WHETHER PUT UP BY A THIRD PARTY OR BY THE VENDEES THEMSELVES. — The vendor of personal property sold on the installment basis is precluded, after foreclosing the chattel mortgage on the thing sold, from having a recourse against the additional security put up by a third party to guarantee the purchaser's performance of his obligation. (Cruz vs. Filipinas Investment & Finance Corporation, 23 SCRA 791; Pascual vs. Universal Motors Corporation,

61 SCRA 121) If the vendor under such circumstance is prohibited from having a recourse against the additional security for reasons therein stated, there is no ground why such vendor should not likewise be precluded from further extrajudicially foreclosing the additional security put up by the vendees themselves, as in the instant case, it being tantamount to a further action (cf. Cruz vs. Filipinas Investment & Finance Corporation, supra) that would violate Article 1484 of the Civil Code, for there is actually no difference between an additional security put up by the vendee himself and such security put up by a third party insofar as how the burden would ultimately fall on the vendee himself is concerned. 5. ID.; ID.; ID.; ID.; SALE OF MORTGAGED PROPERTY IN AN ACTION FOR SPECIFIC PERFORMANCE; DIFFERENTIATED FROM FORECLOSURE OF CHATTEL MORTGAGE IN CASE AT BAR. — In sales on installments, where the action instituted is for specific performance and the mortgaged property is subsequently attached and sold, the sale thereof does not amount to a foreclosure of the mortgage, hence, the seller-creditor is entitled to a deficiency judgment. (Southern Motors, Inc. vs. Moscoso, 2 SCRA 168). In that case, the vendor has availed of the first remedy provided by Article 1484 of the Civil Code, i.e., to exact fulfillment of the obligation; whereas in the present case, the remedy availed of was foreclosure of the chattel mortgage. ***6. SPS Dela Cruz vs. Asian Consumer and Industrial Finance Corp 1. CIVIL LAW; SPECIAL CONTRACTS; SALE; REMEDIES OF UNPAID SELLER OF PERSONAL PROPERTY PAYABLE IN INSTALLMENT; RULE. — The instant case is covered by the so-called "Recto Law", now Art. 1484 of the New Civil Code, which provides: "In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) 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." In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are alternative and not cumulative; the exercise of one would preclude the other remedies. Consequently, should the vendee-mortgagor default in the payment of two

or more of the agreed installments, the vendor-mortgagee has the option to avail of any of these three (3) remedies: either to exact fulfillment of the obligation, to cancel the sale, or to foreclose the mortgage on the purchased chattel, if one was constituted. (Pacific Commercial Co. vs. De la Rama, 72 Phil. 380 (1941); Manila Motor, Inc. vs. Fernandez, 99 Phil. 782 (1956); Radiowealth vs. Lavin, L-18563, April 27, 1963, 7 SCRA 804). 2. ID.; ID.; ID.; ID.; EFFECT OF FAILURE OF VENDOR TO FORECLOSE THE MORTGAGED PROPERTY. — It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not pursue the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted. As we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. (G.R. No. 50449, January 1982, 111 SCRA 421) — "Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein appellee, can only operate to extinguish appellant's liability if the appellee had actually caused the foreclosure sale of the mortgaged property when it recovered possession thereof (Northern Motors, Inc. v. Sapinoso, 33 SCRA 356 [1970]; Universal Motors Corp. v. Dy Hian Tat, 28 SCRA 161 [1969]; Manila Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]). It is worth noting that it is the fact of foreclosure and actual sale of the mortgaged chattel that bar recovery by the vendor of any balance of the purchaser's outstanding obligation not satisfied by the sale (New Civil Code, par. 3, Article 1484). As held by this Court, if the vendor desisted, on his own initiative, from consummating the auction sale, such desistance was a timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific performance" (Industrial Finance Corp. v. Tobias, 78 SCRA 28 [1977]; Radiowealth, Inc. v. Lavin, L-18563, April 27, 1963, 7 SCRA 804; Pacific Commercial Co. v. dela Rama, 72 Phil. 380 [1941]). Consequently, in the case before Us, there being no actual foreclosure of the mortgaged property, ASIAN is correct in resorting to an ordinary action for collection of the unpaid balance of the purchase price. 3. ID.; ID.; ID.; ID.; ID.; POSSESSION OF MORTGAGED PROPERTY SHOULD BE RETURNED TO MORTGAGEE-VENDEE UPON PAYMENT OF UNPAID BALANCE; CASE AT BAR. ***7. Agustin vs CA 2. CIVIL LAW; CIVIL CODE; ARTICLE 1484(3) THEREOF; RECOVERABLE EXPENSES ABOVE VALUE RECEIVED FROM FORECLOSURE SALE; CASE AT BENCH. — At any rate, even if we

were to brush aside the "law of the case" doctrine we find the award for repossession expenses still proper. In Filipinas Investment & Finance Corporation v. Ridad, the Court recognized an exception to the rule stated under Article 1484(3) upon which petitioner relies. "Recoverable expenses would, in our view, include expenses properly incurred in effecting seizure of the chattel and reasonable attorney's fees in prosecuting the action for replevin." ***8. Fiestan vs CA

Court of Appeals, the matter was then elevated to this Court by petitioner grounded on estoppel. HELD: The invocation of estoppel is unavailing. Respondent-owner Lourdes G. Suntay has in her favor the protection accorded by Art. 559 of the Civil Code which provides that: "The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price therefore.”

par. (2) of Article 1491 and par. (7) of Article 1409 of the Civil Code which prohibits agents from acquiring by purchase, the property whose administration or sale may have been entrusted to them unless the consent of the principal has been given DOES NOT apply in a case where the sale of the property in dispute was made under a special power attached to the real estate mortgage pursuant to Act No. 3135

***2. EDCA Publishing and Distributing Corp vs Santos

Between a specific statute and general statute, the former must prevail since it evinces the legislative intent more clearly than a general statute does. The Civil Code is of general character while Act No. 3135 is a special enactment and therefore the latter must prevail. Under Act No. 3135, as amended, a mortgagee- creditor is allowed to participate in the bidding and purchase under the same conditions as any other bidder.

HELD: NO. In its extended memorandum, EDCA cites numerous cases holding that the owner who has been unlawfully deprived of personal property is entitled to its recovery except only where the property was purchased at a public sale, in which event its return is subject to reimbursement of the purchase price. The petitioner is begging the question. It is putting the cart before the horse. Unlike in the cases invoked, it has yet to be established in the case at bar that EDCA has been unlawfully deprived of the books.

4th HW (ART 1493-1506) ***1. Dizon vs Suntay 47 scra 160 1. CIVIL LAW; PROPERTY; OWNERSHIP AND POSSESSION; RIGHT OF OWNER OF IMMOVABLE PROPERTY UN-LAWFULLY DEPRIVED THEREOF; CASE AT BAR. — A diamond ring valued at P5,500.00 was delivered by respondent Lourdes C. Suntay to a certain Clarita R. Sison for sale on commission. After the lapse of a considerable time without the latter having returned the ring nor its purchase price, demands were made upon her by the owner upon which a pawnshop ticket, the receipt of the pledge with petitioner Dominador Dizon's pawnshop, ,was delivered. Since what was done was violative of the terms of the agency, there was an attempt to recover possession by an action for recovery and by the provisional remedy of replevin. The dispossessed owner having prevailed, both in the lower and in the

ISSUE: Whether or not the petitioner may seize the books from private respondent because it has been unlawfully deprived of the books due to the dishonored check issued by the impostor.

Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by the private respondents to the books. It would certainly be unfair now to make the private respondents bear the prejudice sustained by EDCA as a result of its own negligence. We cannot see the justice in transferring EDCA's loss to the Santoses who had acted in good faith, and with proper care, when they bought the books from Cruz.

***3. Layug vs IAC 167 scra 627 4. ID.; ID.; ID.; SALES OF REAL ESTATE ON INSTALLMENT. — REPUBLIC ACT 6552 governs sales of real estate on installments. It recognizes the vendor's right to cancel such contracts upon failure of the vendee to comply with the terms of the sale, but at the same time gives the buyer, subject to conditions provided by law, a one month grace period for every year of installment payment made and if the contract is cancelled, a refund of cash surrender value.

eviction at the instance of the vendee. In the absence of these requisites, a breach of the warranty against eviction under Article 1547 cannot be declared. 3. ID.; ID.; ID.; SOLUTIO INDEBITI; CONSTRUED; NOT APPLICABLE IN CASE AT BAR.

Differentiate:

***4. Power Commercial and Industrial Corp vs CA 1. CIVIL LAW; CONTRACT; SALE; TYPES OF DELIVERY, CONSTRUED. — The Civil Code provides that delivery can either be (1) actual (Article 1497) or (2) constructive (Articles 1498-1501). Symbolic delivery (Article 1498), as a species of constructive delivery, effects the transfer of ownership through the execution of a public document. Its efficacy can, however, be prevented if the vendor does not possess control over the thing sold, in which case this legal fiction must yield to reality. The Court has consistently held that: [Addison vs. Felix, 38 Phil. 404,408 (1918); Vda de Sarmiento vs Lesaca, 108 Phil. 900, 902-903 (1960); and Danguilan vs Intermediate Appellate Court, 168 SCRA 22, 32, November 28, 1988.) ". . . (I)n 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 . . . 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." ETaSDc 2. ID.; ID.; ID.; BREACH OF WARRANTY AGAINST EVICTION; WHEN PRESENT. — A breach of warranty against eviction requires the concurrence of the following circumstances: (1) The purchaser has been deprived of the whole or part of the thing sold; (2) This eviction is by a final judgment; (3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and (4) The vendor has been summoned and made co-defendant in the suit for

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