LAW ON SALES

DEAN CESAR L. VILLANUEVA

FORM OF K OF SALE Gen. Rule: No form required for its validity. EXCEPTIONS (wherein non-compliance w/ its form would make the K of sale void): 1. Sale of real property by an agent agent must have SPA 2. Sale of large cattle must be in writing & registered w/ the municipal treasurer 3. Sale of land by non-Christians must be approved by the Provincial Governor 4. As to 3rd parties, the K of sale must be in a public instrument in order that it would be valid & binding to them (Art. 1358) But the right to compel the other party to have the K embodied in a public instrument (Art. 1357) pertains only to immediate parties and not to 3 rd parties. 5. Statute of Frauds (unenforceable only; parol evidence not allowed) Sales to be enforced > 1 yr (personal property <P500) Sales of personal property P500 Sale of real property or an interest therein What is required in these cases in order to take it out of the SOF? a) When theres a note or memorandum All of them, when put together, must contain all the essential terms of the K of sale. It must be subscribed by the party charged to whom the sale is sought to be enforced. It must be in writing. b) When there has been partial consummation Ex: when a receipt for the payment has been shown. In this case, parol evidence is admissible even if the note (receipt) does not contain all the essential elements of a K of sale. Because the mere partial execution of the K already takes it out of the SOF, so theres no need to prove it by notes or memos anymore. = possession, making improvements w/ knowledge of S, rendition of services, payment of taxes, relinquishment or compromise of rights; =a tender of payment + any of these acts A mere tender w/o acceptance is not partial performance, because in order to be such, there must be participation by all parties. Thats why for tender to constitute partial performance, it must be accompanied by other acts. Pertains to the SM or the price, as long as you do something w/ respect to the SM or the price, there is partial performance. The partial performance must be related to the K of sale, a conclusive proof. Ex: A sells the land to B if B pays P5M & shaves his head. The mere fact that B shaved his head is partial performance because its not conclusive proof, its not related to the K of sale. c) Electronic documents & other evidence under the E-commerce law (like videos) d) Waiver by failure to object to the presentation of oral evidence when documentary evidence is required by the SOF, OR, acceptance of benefits under the K (Art. 1405) Why is oral evidence not allowed? Because in the normal course of things, the parties would put the transaction in writing, therefore, if it is not in writing, it probably did not exist. The SOF presupposes a valid K in order for it to apply. N/A to the right to repurchase because such can be proved by parol evidence, & the K of sale embodying it is the note/memo required by the SOF. Performance or Consummation (Ch. 6) Title automatically passes to the B at the time of delivery. EXCEPTIONS: 1. When there is an express stipulation that the title shall not pass until payment of the price. If there is only an implied reservation (Art. 1503): Bill of lading is in the name of S, but only for the purpose of securing payment by B, B bears the risk of loss;

LAW ON SALES

DEAN CESAR L. VILLANUEVA

Bill of lading is in the name of B, but possession is retained by S, ownership is still transferred to B. EXCEPTION: subsequent B in GF and for value who either received the bill of lading or the goods themselves acquires ownership over the goods. S transmits to the B the bill of lading and a bill of exchange only for the purpose of B accepting the BE, B acquires no added right if he retains the bill of lading. 2. On sale or return, ownership passes to the B on delivery, but he may revest ownership to the S by returning or tendering the goods w/in the prescribed period in the K or, if no stipulated time, w/in a reasonable time. 3. On sale on acceptance, delivery does not transfer ownership. It is only transferred when the B makes his acceptance to the goods known to the S, or, if the B retains the goods and does not return them w/in the prescribed period or w/in a reasonable time. For a sale to be considered a sale or return or a sale on acceptance there must be an express agreement in writing to that effect. It cannot be proved by parol evidence. The B has a right to the fruits of the thing from the time the obligation to deliver it arises; however, he shall acquire no real right over it until the same has been delivered to him. Requisites of a valid delivery/tradition (in order that delivery would produce its effects): 1. The S must have had the intention to deliver; 2. The delivery must have been pursuant to a valid K of sale; 3. The S was the owner of the SM at the time of delivery; 4. The thing must be placed in the control and possession of the B. General Rule in constructive delivery: The execution of a public instrument = delivery. EXCEPTIONS: 1. When there is a stipulation in the instrument to the contrary made by the parties (NOT = a stipulation made by a mortgagee that title shall not transfer to B until the satisfaction of the mortgage debt, because such mortgagees consent is not necessary to transfer title over the property subj to the mort Dy, Jr. vs. CA); 2. When at the time of the execution of the public instrument, the SM was not subject to the control of the S; When there is an impediment whatsoever that prevents the thing sold from passing into the tenancy of the B (ex: existence of tenants on the land at the time of the sale); EXCEPTION: If there was an express agreement of imposing upon the B the obligation to take the necessary steps to obtain the material possession of the thing sold (ex: the B was fully aware of the existence of the squatters at the time of the sale AND undertook the job of evicting them) 3. When the control or ability of the S to transfer physical possession and enjoyment, although existing at the time of the sale, did not subsist for a reasonable length of time after the execution of the instrument (such that the B was still not able to take possession and control of the SM). How to deliver incorporeal property? a) Thru a public instrument; b) By the placing of the titles of ownership in the possession of the B; c) The use by the B of the rights of the S w/ the latters consent. General Rule in Delivery thru carrier: Delivery to carrier is delivery to B. EXCEPTION: When theres a stipulation to the contrary. 1. FAS sales = delivered to B once the goods are placed alongside the vessel 2. FOB shipping point = delivered to B at the place of shipping 3. FOB destination = delivered to B at the place where the goods are destined to reach 4. CIF sales = same rules as FOB sales These shipping arrangements are mere presumptions, they still would give way to any stipulation or proof to the contrary. Look at other stipulations or indication to the transfer of the risk of loss before applying the presumptive effects of the above arrangements. Completeness of Delivery in Art. 1522 of the CC: 1. S delivers < goods contracted = B may reject, or accept & pay at the K rate; 2. However, if the B has already used/disposed of the goods delivered before he knew that the S was not going to be able to deliver in full = B should pay only the fair value of the goods received. 3. S delivers > goods contracted = B may accept the goods contracted and reject the rest UNLESS the SM was indivisible in w/c case reject all, or accept all and pay at the K rate.

LAW ON SALES

DEAN CESAR L. VILLANUEVA

4. S delivers goods contracted mixed w/ goods of a diff. description = B may accept the goods contracted and reject the rest UNLESS the SM was indivisible in w/c case reject all. If the goods sold are fungible, and theres no provision for measurement and price per measure, the whole mass is the SM of the sale w/c is a determinate object, in w/c case, delivery of the whole mass, whether less than or more than the agreed amount, is = complete delivery. (Just like the rule in lump sum sales) Sale by description or sample: B does not acquire ownership upon delivery until B has accepted the goods and made it known to S. The B cannot refuse to pay the balance on account that it cannot be used for the purpose intended UNLESS such purpose was made known to the S upon the sale. IN CASE OF IMMOVABLES 1. Sold Per Unit of Number if S does not deliver all, B may choose between proportional reduction of the price, and, rescission of the K if the lack in area is at least 1/10. EXCEPTION: even when the lack in area is less than 1/10, B can still rescind if he would not have bought the immovable had he known that the whole would not be delivered to him. This rule does not apply to judicial sales. 2. Sold for a Lump Sum Price there shall be no increase or decrease of the price although there be a greater or lesser area or number than that stated in the K. EXCEPTION: when the excess/deficiency is unreasonable. EXCEPTION: when deficiency is unreasonable but B expressly assumed the risk on the actual area of the land bought. This rule applies to the sale of 2 or more immovables for a single price. If the price per unit of measure is not provided for in the K, the rules of lump sum sale shall prevail in the sale of real property.

DOUBLE SALES These rules apply to absolute sales, conditional sales even before the happening of the condition, and K to sell, but in the latter K, only FITPIR applies. Global Rules on Double Sales: 1. 1st to register in GF under the Torrens system (applies only to B in GF and for value); 2. Public sale under ROC; 3. Art. 1544; 4. FITPIR. RULE # 1 Registration in GF under this rule applies only to those already registered under the Torrens system. This means 1 st one who registers the transaction and gets a CT in his name. Notice of lis pendens and notice of adverse claim are = registration. RULE # 2 This rule applies if the 1st and 2nd sales are over the same unregistered land (not reg. under the torrens system), AND the 2nd sale is a judicial sale. In this case, the B2 only gets whatever rights the S had. So since the S had already sold it to B1, then S had no more right over the land when it was sold judicially to B2. So, B2 would also have no right over it. The ROC imposes a condition on the B that his rights are only those that the judgment debtor has. RULE # 3 1st Regisration / Possession / Oldest title in GF. Reg. in GF under this rule applies only to conflicting sales over the same unregistered parcel of land. This means 1st one who registers the land under the Torrens system. Requisites in order for this rule to apply: VECS 1. 2 or more valid, or at least voidable, sales; 2. Pertaining to exactly the same SM; 3. The different Bs represent conflicting interests; 4. They mustve bought from the very same S. If not all these 4 requisites are present, apply FITPIR.

LAW ON SALES

DEAN CESAR L. VILLANUEVA

These rules are really addressed to the B2. It requires of him a positive act ( actual registration) in order for there to be registration in his favor (meaning, mere knowledge of B1 of the sale to B2 is not = registration in B2s favor, unlike in the reverse situation). The GF of the B1 remains and subsists throughout despite his subsequent acquisition of knowledge of the 2nd or subsequent sale. Whereas, the B2 who may have entered into the K of sale in GF, would become a B in BF by his subsequent acquisition of knowledge of the 1 st sale. The B2 is required to have continuing GF and innocence or lack of knowledge of the 1 st sale until his K ripens into full ownership thru prior registration. Registration? any entry made in the books of the registry, like registration, cancellation, annotation, and even marginal notes. Registration of extrajudicial partition w/c merely mentions the sale is not = registration under art. 1544. So is a declaration of purchase for tax purposes. Possession under this art. contemplates actual as well as symbolic possession. So the issuance of a public instrument to the B is = possession. RULE # 4 This rule applies only when all other rules above are inapplicable. GF is immaterial and irrelevant under this rule. The only question here is who was first? Illus: B1 & B2 bought the same land. B2 registered the sale in GF. Art. 1544 does not apply. Who will prevail? - B1 will prevail. - Firstly, because B2s GF is immaterial. - Secondly, because, since FITPIR is the one being applied, then it necessarily means that 1544 doesnt apply, therefore, B2s reg. in GF is immaterial. The only fact to consider is, who was first? If one is a K of sale (absolute or conditional) and the other is a K to sell, apply FITPIR. How will this apply? - This applies to K to sell if it was the 1st transaction & the 2nd sale was executed at a time when the suspensive condition (full payment of price) in the K to sell was already fulfilled, AND, none of the 3 cases in Art. 1544 has been done by either B1 or B2. Good faith must be coupled w/ the payment of a full & fair price. If the 1st transaction is a K to sell, and the 2nd one is a sale, the B2 cannot be deemed a B in BF and the prospective B1 cannot seek the relief of reconveyance of the property. There is no double sale in such case. In w/c case, the B in the K of sale is always preferred. A stipulation in a deed of sale wherein the B assumes the risk of loss in the event that the title turns out to be vested in another person is = Bad Faith (BF). OBLIGATIONS OF THE B 1. To pay the purchase price Non-payment of the consideration or price does not prove simulation; at most, it gives the S the right to either sue for collection (SP) or to rescind the K. HOWEVER, when the S cannot show title to the SM of the sale, the non-payment of the B is justified and the S cannot compel the B to pay. This is because the S was the 1 st one who breached because he wasnt able to transfer title to B. 2. To accept the delivery of the thing at the time and place stipulated in the K. B is deemed to have accepted when: a) He intimates to the S that he has accepted; b) He does an act inconsistent to S ownership (after delivery to him of the goods); c) He retains the goods w/o intimating to S that he rejects them. B is not bound to accept delivery in installments. EXCEPT when it is otherwise agreed. He is not deemed to have accepted unless and until he has had a reasonable opportunity to examine the goods. In COD sales, the B must pay 1st before he can examine the goods, before he can be deemed to have accepted them. Acceptance does not discharge S of his warranties, EXCEPT: a) When theres a contrary stipulation; b) B fails to give S notice of the breach w/in a reasonable time after he has knowledge of it. B is not bound to return the goods if he refuses them, it is sufficient if he notifies S of such refusal, he will then be constituted as a depositary of the goods for S.

LAW ON SALES

DEAN CESAR L. VILLANUEVA

SALE BY NON-OWNER OR ONE HAVING VOIDABLE TITLE The consummation stage of a K of sale necessarily presupposes that the perfection stage has happened; but the perfection stage does not necessarily result into the consummation stage. If the K of sale is valid at perfection, it remains valid & consummation cannot change it. The concepts of breach & rescission presuppose the existence of a valid sale since these 2 arise at the consummation stage. Therefore, they cannot change the nature of a validly perfected sale. A valid K of sale exists to bind both S & B even if at the time of perfection the S was not the owner of the SM. It is at the consummation stage where the principle of nemo dat quod non habet applies. General Rule when S is not the owner at the time of consummation : The B acquires no better title to the goods than the S had (art. 1505). The perfected K of sale is not void, however, the consummation stage w/c is tradition (transfer of ownership) was null & void since nemo dat quod non habet. The proper remedy in case the S still does not own the SM at the time of delivery is rescission. Because it is a breach on his part, w/c is the failure to transfer ownership to the B. Declaration of nullity of the K of sale is NOT a remedy for this presupposes that there was no validly perfected K (void K of sale). To repeat, the delivery by a non-owner S does not make a valid K of sale void. EXCEPTIONS TO GENERAL RULE: (JETMUV 559, 1434) 1.Owner, by his conduct, is estopped 2.Judicial sales 3.Torrens system chain of title theory IPVs are protected Mortgagees in GF are also protected 4.Sale of goods in merchant stores Merchant store? A permanent place where goods are stored or are on display therein, AND, the firm is actually & regularly engaged in buying & selling. NOT = sidewalk stall because it is not permanent. 5.Sale by S w/ voidable title (art. 1506) Buyer vs. True owner S must have voidable & not void title; Title must not yet be avoided at consummation; B is in GF & for value; B is w/o notice of defect in S title. N/A if the true owner was unlawfully deprived by the S, because then S would have not a mere voidable title but a void one. In such case apply art. 559. Applicable to estafa cases wherein the S title is voidable due to the fraud employed against the true owner. N/A to K to sell. 6.Art. 559 of CC Possessor vs. True owner Possession in GF & for value = title. EXCEPTION: when true owner has lost or was unlawfully deprived of the thing, he can recover the thing from B. EXCEPTION: when B bought in GF & at a public sale, S cannot recover w/o first reimbursing B. Unlawful deprivation? The original owner must not have participated in the deprivation (like in robbery or theft). N/A when the S has a voidable title because in that case, the true owner participated in the deprivation, only that his consent was vitiated by fraud. In w/c case, apply 1506, wherein true owner can still recover by annulling S title prior to consummation of S sale to B. N/A in estafa cases because in there, there was participation by the true owner only that his consent was vitiated by fraud.

LAW ON SALES

DEAN CESAR L. VILLANUEVA

N/A to K to sell. 7.Unpaid S of goods 8.Art. 1434 When a S sells & delivers something he doesnt own, & later he acquires title thereto, such title passes by operation of law to the B. SALE BY A CO-OWNER Entire property owned in common = the sale of the property itself is void, but valid as to the S spiritual share. Definite portion = not valid as to the definite portion itself but valid as to S spiritual share. EXCEPTIONS: 1. When the SM is indivisible in nature or by intent wherein the B would not have entered into the transaction except to acquire such definite portion. In this case the sale is void even as to the spiritual share of the co-owner-seller. Why? Because there is no meeting of the minds, the S was selling his spiritual share while the B was buying a definite portion. 2. When the co-owners impliedly consent to the sale by not objecting to it when they knew that the other was selling a definite portion. = partial partition The co-owners are estopped. There is a valid sale of the definite portion sold. 3. Co-owner sells 1 of 2 lands co-owned and does not turn over the proceeds to the other, the other land not sold would belong to the latter. The sale of the 1 st land is valid. 4. Art. 1434 where the co-owner subsequently acquires title. Co-heirs sold the entire lot owned in common while their father was still alive, then subsequently the father died = sale was valid. Sale by co-owner of a definite portion of land co-owned w/ another, then the former subsequently acquires title over the whole land = sale was valid. 5. Torrens system if the title does not mention that the property is co-owned, sale of definite portion is valid. ART. 1484 & RECTO LAW RL applies only to installment sales of personal property wherein a CM was constituted on the SM and B defaulted in at least 2 or more installments. RL is actually only the 3rd remedy because the 1st 2 are provided by the CC. It is applicable to financing transactions provided: a) The financing transaction was derived from a sale in installments; & b) The mortgage has been assigned by the S to the financing institution. Remedies: 1. Exact fulfillment should the B fail to pay 1 installment. The mere fact that the S secured possession of the property subject of the sale does not necessarily mean that the S resorted to #2 or #3. When deemed chosen? When an action for collection of a sum of money is filed. 2. Rescission should B fail to pay 2 or more installments. With obligation to make restitution, UNLESS there is a stipulation that amounts paid shall not be returned to the B (valid insofar as not unconscionable). When is this deemed chosen? - When S has clearly indicated to end the K such as when he sends a notarial notice of rescission; - When S takes possession of the SM w/ the intent of rescinding (not when B was the one who returned the SM voluntarily to S); - When S files an action for rescission. 3. Foreclose the CM, if one has been constituted, should B fail to pay 2 or more installments. Its barring effect happens only upon foreclosure and actual sale at a public auction. So an action for a writ of replevin is not = foreclosure since there has been no sale yet.

LAW ON SALES

DEAN CESAR L. VILLANUEVA

No recovery of deficiency or unpaid balance. This applies to other securities given by the B to S to secure payment of the purchase price such as a guaranty or a mortgage. This applies to judicial as well as extrajudicial proceedings. Illus: S sold to B a diamond ring payable in 12 installments and B constituted a CM on it. B also gave S a REM on his land as additional security. B defaults in 2 installments. If S goes after the CM 1st, he can no longer go after the REM in case there is a deficiency. The foreclosure of the principal security also extinguishes the accessory security. If S goes after the REM 1st, he cannot go after the CM anymore since he lost this remedy by waiver or non-choice. However, he can still acquire it thru other means, like by suing for SP and then having the ring attached & levied upon. Unpaid balance? = deficiency judgment (purchase price + attys fees + expenses of collection + costs) EXCEPTION: S may still recover attys fees (only) incurred in filing a suit, if such were due to the unjustified refusal of the B to surrender the chattel so that it may be foreclosed. These remedies are alternative, not cumulative or simultaneous. EXCEPTION: where what was chosen was #1, but the same has become impossible, the S may still choose rescission pursuant to Art. 1191. But in the law on sales, this exception will never come around because the obligation of the B to pay, being a generic obligation, never becomes impossible since genus never perishes. Under remedies 2&3, there can be no recovery of any deficiency judgment. This is N/A to K to sell because the non-payment of the purchase price in this case is not = breach. Applicable to lease w/ option to purchase, the rentals being considered as the installment payments. What is the effect of the seller-lessors taking back of possession and enjoyment of the movable leased? It amounts to a foreclosure that bars all other actions of whatever nature as well as the recovery of any deficiency, and not rescission. However, if the main purpose for seeking recovery of personal property under a writ of replevin is merely to secure a SP, then there would be no barring effect on recovery of deficiency. Not every deprivation of possession would result in producing the barring effect of foreclosure.

ART. 1592 & MACEDA LAW Art. 1592 applies to sales of immovable property (commercial, business & industrial immovables, NOT residential), even if theres no stipulation on automatic rescission. Art. 1592: Even though theres an automatic rescission clause in the deed upon default of the B, the B may still pay even after default as long as no judicial or notarial demand for rescission has been made upon him by the S. After the demand, the court may not grant him a new term. ML applies in this case: 1. Sale in installments 2. Of residential real estate and condo units (not commercial or industrial or sale to tenants under agrarian reform laws) ML applies to K to sell (notice of cancellation) just as it does in K of sale (demand for rescission). ML applies to financing transactions even though the sale was not one in installments and even though there was no assignment made to the financing institution. Application of ML I. B has paid at least 2 yrs of installments: a) B has a grace period of 1 month for every 1 yr of installment payments w/in w/c to pay w/o additional interest; This can only be exercised once in every 5 yrs. If theres a provision for auto rescission or for penalty/interest under the K, B would not be bound by it for, w/ respect to the former, this gives him a grace period, and w/ respect to the latter, this says that he does not have to pay any interest.

LAW ON SALES
b)

DEAN CESAR L. VILLANUEVA

If the K is cancelled by S, he shall refund to B the CSV of the payments already made = 50%, & after 5 yrs of installments + 5% every year but not to exceed 90%. The actual cancellation shall take place after 30d from receipt by B of the notarial demand for rescission AND full payment of CSV. Such notice may only be given after the expiration of the grace period. If theres notice but no full payment of CSV, 30d period will not start to run & the K remains valid & subsisting. HOWEVER, if the immovable had already been sold to an IPV, the S would be liable to either refund to the B the actual market value + 12% interest, OR, to deliver a substitute lot, at the option of B. This 30d period is actually a 2nd grace period for the B wherein the B can still pay. Its only difference w/ the grace period above is that in here, the B is bound to pay interests & penalties. Is it possible that after the expiration of the 1 st grace period, a judicial rescission can be had? NO, the court will dismiss your case, because the ML provides that a notarial notice be given, and the court cant grant a judicial rescission because upon the giving of such notice, the B still has a 2nd grace period. So only after such period will the notarial notice take effect, in w/c case a judicial rescission would be useless or a mere surplusage. Theres no judicial rescission under the ML. II. B has paid less than 2 yrs of installments: B has a grace period of only 60 days from the date the installment became due. After that, S may cancel by giving notice of cancellation (if K to sell) or demand for rescission by giving a notarial notice (if K of sale). The cancellation or rescission takes effect after 30 days from receipt by B of such notice. B is not entitled to CSV if S cancels or rescinds. ML is N/A to: a) Highest bidder in foreclosure sales; b) The developer or its successor. Why? Because the Ml protects only the buyers of real estate on installment payments. These 2 are not the buyers to the original installment sales. RESCISSION The power to rescind is given to the injured party, the one who did not commit the breach; the non-defaulting party. Creditors do not have such material interest as to allow them to sue for rescission (under art. 1191 not 1384) of a K of sale theirs is only a personal right to receive payment for the loan, not a real right over the SM. Breach must be substantial. If there has been substantial performance in GF, there can be no substantial breach, so whatever breach there was would be disregarded & there can be no rescission. The obligor may recover as though there has been a strict & complete fulfillment. (Art. 1234) Effect of rescission: mutual restitution. EXCEPTION: when theres an express stipulation providing for forfeiture of payments, w/c is valid insofar as not unconscionable under the circumstances (Art.1486). Can be carried out only when the one who demands can return whatever he may be obliged to restore. Consummation does not destroy the K of sale, and the relationship of seller-buyer remains between the parties even after consummation. Consequently, there can be rescission even after consummation if S breaches his warranties. As a general rule, payments should be applied first to the interest before the principal. HOWEVER, in K of sale in installments w/ interest, if the S doesnt inform the B where the installment payment was applied, it is considered applied to the principal first before the interest. Because if the rule were otherwise, then the S could just rescind the K right away in a sneaky manner by saying that the purchase price has not yet been paid because he applied the payments to the interest first. W/c rescission should be applied?

LAW ON SALES

DEAN CESAR L. VILLANUEVA

If it is a sale on installments of residential real estate and residential condominiums = apply Maceda Law It is immaterial if it is a K of sale or a K to sell, ML applies to both. If this applies, stipulations for automatic or unilateral rescission after default are void because the ML gives the B a statutory grace period. Is it possible that after the expiration of the 1 st grace period, a judicial rescission can be had? NO, the court will dismiss your case, because the ML provides that a notarial notice be given, and the court cant grant a judicial rescission because upon the giving of such notice, the B still has a 2nd grace period. So only after such period will the notarial notice take effect, in w/c case a judicial rescission would be useless or a mere surplusage. Theres no judicial demand for rescission here, notarial demand only. Otherwise, for all other sales = apply 1191 & 1592 Determine 1st whether the K is one of sale or a K to sell. If K to sell, these provisions are not applicable. General rule: Rescission can be had only judicially. EXCEPTION: When theres an express stipulation for automatic rescission or for the right to unilaterally rescind. If the SM is an immovable, even if theres a right to unilaterally rescind, B can still pay for as long as theres no judicial or notarial demand by S yet. Effect of stipulation for auto rescission? 1. Judicial intervention after unilateral rescission is only for purposes of determining WON the rescission was proper. 2. Transfers the initiative of instituting suit to the defaulter or party who breached. 1191: A principal action retaliatory in character w/c is based on substantial breach of a party. 1191: mere written notice is sufficient (sale of personal property); 1592: notarial or judicial demand. Therefore, in case of sale of immovables, there must be notarial or judicial demand, otherwise, there is no rescission, the B can still pay. In cases of unilateral rescission, the party rescinding is required to send notice of the rescission to the other party. This applies to K to sell, the party canceling should also send notice to the other. Lack of a formal deed of conveyance is a very strong indication that the parties did not intend the immediate transfer of ownership & title, but only a transfer after full payment of the price. In a conditional K of sale, in case of non-fulfillment, the party not obliged to fulfill the condition may either waive the condition & push thru w/ the sale, or, stick to the condition & not push thru w/ the sale. In K to sell, in case of non-fulfillment, such party has no choice, the K of sale never comes into existence.

EXTINGUISHMENT OF SALE Obligations arising from the K of sale are extinguished by the same grounds by w/c obligations in general are extinguished. HOWEVER, only the obligations of the parties that were performed are extinguished, but the contract itself is not. CONVENTIONAL REDEMPTION Does not prevent the consummation of the sale. Must be reserved by the vendor in the same instrument of sale as one of the stipulations in the K. Once the instrument of absolute sale is executed, the S can no longer reserve the right to repurchase, and any right thereafter granted the S by the B in a separate instrument cannot be a right of repurchase but some other like an option to buy. Presupposes a valid K of sale & a performance under it (delivery of SM & transfer of ownership or payment). May be proved by parol evidence since it is necessarily embodied in the K of sale, w/c constitutes the written memo/note evidencing it w/c takes it out of the SOF.

LAW ON SALES

DEAN CESAR L. VILLANUEVA

In here, there must be tender & consignation, unlike in an option K wherein a tender would be sufficient to preserver the right to exercise the option. Option to Purchase Independent of a K of sale Must have a consideration separate & distinct from the price in order to be valid Period of option K may be beyond 10 yrs Mere notice of its exercise to the offeror

Right to Redeem Part of the main K of sale Does not need separate consideration for validity Maximum period for exercise of right = 10 yrs How to exercise? Tender of payment + Consignation

Period of redemption? When no period is agreed upon = 4 yrs from date of K When agreed upon = must not exceed 10 yrs from the execution of the K; Any agreement prohibiting the right to exercise it w/in 10 yrs is void. For as long as a period is agreed upon, even if the stipulation as to the period may be unclear or void, it is still the 10-yr period w/c applies. Pendency of an action brought in GF & relating to the validity of a sale a retro tolls the running of the period of redemption. Non-payment of the price by itself would not serve to suspend the period of redemption. Effect of sale? The B has a right to the immediate possession of the property sold UNLESS otherwise agreed upon. Title & ownership are immediately transferred to the B subject to the resolutory condition of repurchase by the S. How is redemption effected? By returning to the B: 1. Price of the sale 2. Expenses of the K 3. Necessary & useful expenses made on the thing sold The S may bring an action against every possessor whose right is derived from the B, even if the 2nd K makes no mention of the right to repurchase, w/o prejudice however, to the Mortgage Law & Property Reg. Decree. The consolidation of ownership vests in the B after the redemption period w/o the S having exercised his right. HOWEVER, in the case of real property, in order to record such consolidation of ownership, a judicial order is necessary. Proceeding for consolidation? If the court declares the K to be a pacto de retro sale, the S is still given 30 days from finality of judgment w/in w/c to repurchase the property. But this applies only if the petitioner-seller, in instituting the action, really believed that the K was not a pacto de retro sale but an EM, it matters not what the B intended the transaction to be. (To prevent S from abusing his right to redeem) If the court declares it to be an EM = S can still redeem even after the lapse of the period of repurchase for as long as the B has not yet foreclosed (since it is declared not a pacto de retro sale). Why? Because otherwise we would be allowing the B to effect a pactum commisorium wherein title automatically vests in him upon default w/o the need to foreclose. These rules would apply only if the K was purported to be a pacto de retro sale but was actually an EM. Therefore, if the option to buy was not in the deed of sale but was given afterwards, then these rules would not apply since that transaction is not a pacto de retro sale. The ordinary rules of the K would apply. EQUITABLE MORTGAGE

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DEAN CESAR L. VILLANUEVA

When presumed to be an EM? URERTI under Art. 1602 (The presence of only one of these presumes the K to be an EM.) 1. Price of sale w/ right to repurchase is unusually inadequate 2. S remains in possession as lessee or otherwise 3. When the period of redemption is extended in another instrument 4. When the B retains for himself a part of the purchase price 5. When the S binds himself to pay the taxes on the thing sold 6. In any other case where it may be fairly inferred that the real intention of the parties is that the transaction is an EM. In case of doubt, a K purporting to be a K of sale w/ pacto de retro shall be construed as an EM. These presumptions (URERTI) also apply to a K of absolute sale provided that the parties intention in entering into the K is to secure an existing debt. Parol evidence is admissible. Effects if K is adjudged EM & not pacto de retro sale? Consolidation of ownership in B is of no consequence. Bs possession over the property would not ripen into ownership since it was not in the concept of an owner. S can still redeem for as long as the B has not yet foreclosed. Dacion en pago w/ a right to repurchase is not = pactum commissorium because theres no automatic appropriation. LEGAL REDEMPTION Intended to minimize co-ownership. Kinds: 1. Among co-heirs Sale to a stranger before partition Redeem w/in 1 month from receipt of notice in writing of the sale by the selling co-heir Applies only to sale of hereditary right 2. Among co-owners This right excludes that of the right of adjoining owners Applies when co-owner sells to a stranger (when a new participant is added to the coownership) If 2 or more co-owners desire to redeem, they may do so in proportion to the share they have in the co-owned property 3. Adjoining owners of a) Rural land Sale of land w/c does not exceed 1 hectare Not applicable to adjacent lands separated by servitudes If 2 or more adjoining owners want to redeem, the one w/ the land w/ a smaller area shall be preferred. If equal in area, the one who 1 st requested the redemption. To encourage the maximum development & utilization of agricultural lands. b) Urban land Sale of a small piece of land w/c was bought by the S for mere speculation, to be sold when the price goes up. Applies only when there is a resale by the speculative S. N/A when transferred under an exchange of properties. Urban? Depends on the character of the community or vicinity where the land is found. To discourage speculation in real estate and the consequent aggravation of the housing problems in centers of population. 4. Sale of credit in litigation When the legal redemption begins to run? W/in 30 days from the notice in writing of the prospective S, or S, as the case may be. A notice given by the B does not start the running of the 30-day period. Must be given by the S.

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LAW ON SALES

DEAN CESAR L. VILLANUEVA

No particular form is necessary, the furnishing of the copies of the deed of sale to the coowner is sufficient. Written notice is indispensable, actual knowledge of the sale acquired in some other manner by the redemptioner notwithstanding. EXCEPTIONS: 1. Filing of suit for ejectment or collection of rentals against a co-owner commences the running of the redemption period. 2. Laches wherein the redemptioners already had actual knowledge of the sale to a stranger but in spite of that they still did not exercise the right of redemption until the lapse of an unreasonable period 3. Where it is the co-owner himself who acted as a middleman or intermediary to effect the sale to a 3rd party. ASSIGNMENT Object: intangible property A genus of sale, therefore, all the jurisprudential doctrines on sales apply here, EXCEPT when there are specific laws applicable to assignments. General Rule: Consensual, perfected by mere consent or meeting of the minds. It is also an onerous transfer. That is why the term assignment should not be used in donations because the latter requires compliance w/ solemnities of donation (not by mere consent), and because donations are gratuitous. EXCEPTIONS: To bind 3rd persons, it must be in a public instrument, OR recorded in the Registry of Property (for real property). In assignments of DOT, to bind 3rd persons and the bailee, it must be in a public instrument AND notice of the assignment must be given to the bailee. Assignment falls under the SOF when it is still in the executory stage. The character that it may assume determines its requisites and effects, its regulation, and the capacity of the parties to execute it; and, in every case, the obligations between assignor and assignee will depend upon the juridical relation w/c is the basis of the assignment. A consideration is not always a requisite. Title is transferred but actual possession need not be delivered. 3 kinds of constructive delivery: 1. Execution of a public instrument 2. Delivery of evidence of title (delivery of certificates of sh of stock, delivery of PN) 3. Exercise of the rights and privileges attached to the intangible w/ the consent of the assignor #s 2&3 doesnt bind 3rd parties. The debtors consent is not necessary in order that assignment may fully produce legal effects. The purpose of notice is only to inform the dr that from the date of assignment, payment should be made to the assignee and not to the original cr. However, if made w/o the drs consent or against his will, dr may set up defense of compensation. Theres only 1 implied warranty: that at the time of the assignment, the intangible is valid and existing. EXCEPT when theres an express stipulation to the contrary. The solvency of the debtor is warranted only if: Expressly stipulated; OR The drs insolvency was prior to the assignment AND of common knowledge. But even if drs solvency is warranted, it would last only for 1 yr and no longer (if period for credit has already expired, 1 yr from time of assignment; if not yet expired, 1 yr after maturity). ASSIGNMENT OF CREDIT IN LITIGATION There is a legal right to redeem on the part of the debtor by reimbursing the assignee for the price the latter paid therefore, the judicial cost incurred, and interest. Drs right to redeem must be exercised w/in 30 days from demand by assignee of payment. When deemed to be in litigation? From the time the complaint has been answered.

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DEAN CESAR L. VILLANUEVA

EXCEPTIONS to drs right to redeem (all these show that the assignment was not for purposes of speculation): 1. assignment to a co-heir or co-owner (for consolidation of ownership) 2. assignment to a creditor in payment for his credit (cr was only trying to get paid) 3. assignment to the possessor of a tenement or piece of land w/c is subject to the right in the litigation assigned (the assignee is merely trying to consolidate ownership over the immovable)

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