Professional Documents
Culture Documents
Case:
1504 par. 1 Applied (Gaisano v. Insurance Company)
The Gaisano Superstore Complex in Cagayan de Oro City was consumed by fire,
including stocks of ready-made clothing materials sold and delivered by Intercapitol
Marketing Corp. (IMC) and Levi Strauss (Phils), Inc. (LSPI).
IMC and LSPI filed claims under their respective fire insurance policies, and made
several demands for payment for the clothing materials.
GCI contends that it cannot be held liable because the property covered by the
insurance policies were destroyed due to fortuitous event, and despite delivery, IMC
and LSPI assumed the risk of loss when they cured fire insurance policies over the
goods
o the sales invoices state that "it is further agreed that merely for purpose of
securing the payment of purchase price, the above-described merchandise
remains the property of the vendor until the purchase price is fully paid", IMC
and LSPI retained ownership of the delivered goods and must bear the loss
HELD: What were insured against were the accounts of IMC and LSPI with GCI
which remained unpaid 45 days after the loss through the fire, and not the loss or
destruction of the goods delivered.
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is
transferred to the buyer the goods are at the buyer's risk whether actual delivery has
been made or not, except that:
o (1) Where delivery of the goods has been made to the buyer or to a bailee for
the buyer, in pursuance of the contract and the ownership in the goods has
been retained by the seller merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer's risk from the time
of such delivery
After delivery
Buyer bears the loss (Res perit domino)
CHAPTER 4
Traditional/delivery
can only be made with respect to corporeal things.
In the case of incorporeal things, delivery is effected:
o by the execution of a public instrument
o when that mode of delivery is not applicable, by
placing of the titles of ownership in the possession of
the vendee
o by allowing the vendee to use his rights as new
owner with the consent of the vendor
Cases
When Execution of public document not equivalent to delivery (Asset Privatization
Trust v. TJ Enterprises)
Petitioner Asset Privitization Trust (APT) had acquired from the Development Bank of the
Philippines (DBP) assets consisting of machinery and refrigeration equipment which were
then stored at Golden City compound, Pasay City
The compound was then leased to and in the physical possession of Creative Lines, Inc.
These assets were being sold on an as-is-where-is basis.
Petitioner and respondent entered into an absolute sale over certain machinery and
refrigeration equipment.
Respondent paid the full amount and demanded the delivery of the machinery it had
purchased.
o During the hauling of Lot No.2 consisting of 16 items, only 9 items were pulled out
by respondent.
This prompted the respondent to file a complaint for specific performance and damages
against petitioner and Creative Lines.
During the pendency of the case, respondent was able to pull out the remaining
machinery and equipment.
o However, upon inspection it was discovered that the machinery and equipment were
damaged and had missing parts.
APT argued that there has already been constructive delivery by virtue of the deed of
sale executed and being a sale of as-is-where-is basis, it was the duty of TJ Enterprises
to take care of the property.
RTC ruled that there was no constructive delivery at the time of the sale, APT did not
have control over the machinery and equipment. Thus, it could not transfer ownership.
CA affirmed the decision of the trial court.
Issue: Whether or not the presence of the disclaimer or warranty in the deed of
absolute sale absolves it from all warranties
Ruling:
APTs contention is without merit
As a general rule, when the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or cannot clearly be inferred.
And with regard to movable property, its delivery may also be made by the delivery of
the keys of the place or depository where it is stored or kept
Rule in Sale of Registered Land, Sec. 51. PD 1529 (Heirs of Mascunana v. CA)*
Facts:
Gertrudis Wuthrich and her 6 siblings were the co-owners of a parcel of land and
Gertrudis and two other co-owners sold each of their one-seventh (1/7) shares to
Jesus Mascuana.
The latter then sold a portion of his 140-square-meter undivided share of the property
to Diosdado Sumilhig and later sold an additional 160-square-meter portion to
Sumilhig.
However, the parties agreed to revoke the said deed of sale and, in lieu, executed a
Deed of Absolute Sale, in which Estabillo deeded to Mascuana a portion of his
property abutting that of Sumilhig on the southeast
In the said deed, Mascuana sold an undivided 469-square-meter portion of the
property for P4,690.00, with P3,690.00 as downpayment.
o That the balance P1,000.00 shall be paid as soon as they are surveyed in
the name of the VENDEE and all papers pertinent and necessary to the
issuance of a separate Certificate of Title in the name of the VENDEE shall
have been prepared
Mascuana and Estabillo executed a Deed of Exchange and Absolute Sale of Real
Estate.
Sumilhig executed a Deed of Sale of Real Property in favor of Corazon Layumas.
The spouses Layumas then had the property subdivided into two and took
possession of the property and allowed a chapel to be constructed.
Spouses Layumas allowed Aquilino Barte to stay on a portion of the property to ward
off squatters.
Unknown to the spouses Layumas, a title was issued in the name of Jesus
Mascuana.
Issue: Was the Sale Made by Mascunana in favor of Diosdado sumilhig a contract to sell or
contract of sale?
Ruling:
While it is true that Jesus Mascuana executed the deed of absolute sale over the
property on August 12, 1961 in favor of Diosdado Sumilhig for P4,690.00, and that it
was only on July 6, 1962 that TCT No. 967 was issued in his name as one of the coowners of Lot No. 124, Diosdado Sumilhig and the respondents nevertheless
acquired ownership over the property.
The deed of sale executed by Jesus Mascuana in favor of Diosdado Sumilhig on
August 12, 1961 was a perfected contract of sale over the property. A perfected
contract of sale cannot be challenged on the ground of the non-transfer of ownership
of the property sold at that time of the perfection of the contract, since it is
consummated upon delivery of the property to the vendee.
o It is through tradition or delivery that the buyer acquires ownership of the
property sold.
As provided in Article 1458 of the New Civil Code, when the sale is made through a
public instrument, the execution thereof is equivalent to the delivery of the thing
which is the object of the contract, unless the contrary appears or can be inferred.
The record of the sale with the Register of Deeds and the issuance of the certificate
of title in the name of the buyer over the property merely bind third parties to the sale.
o As between the seller and the buyer, the transfer of ownership takes effect
upon the execution of a public instrument covering the real property.
Long before the petitioners secured a Torrens title over the property, the respondents
had been in actual possession of the property and had designated Barte as their
overseer.
To TRANSFER OWNERSHIP
GENERAL RULE: The ownership of the thing sold is acquired by the vendee from the
moment the thing is delivered to him. (Art. 1496)
EXCEPTIONS: WHEN DELIVERY DOES NOT TRANSFER TITLE
a. Delivery on approval, trial or satisfaction
Sale on approval or on trial or satisfaction ownership of the goods remains
with the seller despite delivery but shall be transferred to the buyer in the
following cases:
o When he signifies his approval or acceptance
o When he does an act adopting the transaction
o When he retains the goods without giving notice of rejection within the
time fixed or within a reasonable time, and such time has expired. (Art.
1502)
b. In case of express reservation of the title in the seller
Paragraph 1 of Article 1503 provides:
o Where there is a contract of sale of specific goods, the seller may, by
the terms of the contract, reserve the right of possession or
ownership in the goods until certain conditions have been fulfilled.
The right of possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to a carrier
or other bailee for the purpose of transmission to the buyer.
c. Implied reservation of the title (1503 par 2,3,4)
a. If under the bill of lading the goods are deliverable to the seller or agent or
their order. (Reason, the buyer cannot get the goods.)
o But, if except for the form of the bill of lading, the ownership would
have passed to the buyer on shipment of the goods, the seller's
property in the goods shall be deemed to be only for the purpose of
securing performance by the buyer of his obligations under the
contract.
b. If bill of lading, although stating that the goods are to be delivered to buyer or
his agent, is KEPT by the seller or his agent. (the buyer also cannot get the
goods)
c. Where the seller of goods draws on the buyer for the price and transmits the
bill of exchange and bill of lading together to the buyer to secure acceptance
or payment of the bill of exchange, the buyer is bound to return the bill of
lading if he does not honor the bill of exchange, and if he wrongfully retains
the bill of lading he acquires no added right thereby. But of course innocent
third parties (innocent holders and purchasers for value) should not be
adversely affected.
o If, however, the bill of lading provides that the goods are deliverable
to the buyer or to the order of the buyer, or is indorsed in blank, or to
the buyer by the consignee named therein, one who purchases in
good faith, for value, the bill of lading, or goods from the buyer will
obtain the ownership in the goods, although the bill of exchange has
not been honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the consignee named
therein, or of the goods, without notice of the facts making the
transfer wrongful.
Example: S sold B a laptop. The laptop was shipped on board a carrier. The
bill of lading stated that the laptop is deliverable to the order of B. The bill of
lading was sent to B, accompanied by a bill of exchange which B was
supposed to honor. If B does not honor the bill of exchange, but wrongfully
retains the bill of lading, ownership remains with the seller. If B sells the bill of
lading to X, X can obtain ownership of the goods if he is an innocent
purchaser.
Note: Bill of lading A document evidencing a contract for the carriage and
delivery of the listed goods.
Bill of exchange A written instrument providing proof of an obligation to
pay money.
Case
Determination of place of consummation of contract for purposes of imposing sales
tax (Butuan Sawmill v. CTA)
During the period of January 31, 1951 to June 8, 1953, Butuan Sawmill Inc. sold logs
to Japanese firms at prices FOB Vessel Magallanes, Agusan.
The FOB prices included costs of loading, wharfage stevedoring and other costs in
the Philippines.
The freight was paid by the Japanese buyers and the payments of the logs were
effected by means of letters of credit in favor of petitioner and payable through the
Philippine National Bank or any other bank named by it.
Upon investigation by the Bureau of Internal Revenue, it was ascertained that no
sales tax was filed by petitioner and neither did it pay the corresponding tax on sales.
Petitioner contends that the disputed sales were consummated in Japan, and,
therefore, not subject to the taxing jurisdiction of our Government.
The lower court upheld the legality and correctness of the amended assessment of
the sales tax and surcharge, ruling that the sales in question were domestic or local
sales, and therefore subject to sales tax under the provisions of the Tax Code.
ISSUE: Who shall bear the expenses of delivery?
RULING:
SC ruled that the export sales have been consummated in the Philippines and were,
accordingly, subject to sales tax therein.
o Expenses of and incidental to putting the goods into a deliverable state must
be borne by the seller unless otherwise agreed by the parties.
That the specification in the bill of lading to the effect that goods are deliverable to the
order of the seller or his agent does not necessarily negate the passing of title to the
goods upon delivery to the carrier is clear from the 2nd paragraph of Article 1503 of
the Civil Code.
REVESTING OF TITLE THAT HAS PASSED TO THE BUYER
1. Stoppage in transitu
This right involves the right of the unpaid seller to resume possession of the goods at
any time while they are in transit, and he will then become entitled to the goods as he
would have had if he had never parted with the possession. (Art. 1530)
2. Delivery to the buyer on sale or return
Sales or return the ownership of the goods is transferred to the buyer on delivery,
but the buyer has the option to revest their ownership on the seller by returning them
within the time fixed in the contract, or if no time has been fixed, within a reasonable
time. (Art. 1502)
3. In case of danger of loss of the thing and the price
Non negotiable
A non negotiable document of title is one in which its is stated that the goods are to
be delivered to a specified person. (e.g. Deliver the goods to EDUARD)
the effort of herein plaintiff, but also upon the will of 3rd persons (the US
Government)
In cases like this, obligor will be deemed to have sufficiently performed his part of the
obligation, if he has done all that was in his power, even if the condition has not been
fulfilled in reality.
When the time of delivery is not fixed in the contract, time is regarded unessential.
o In such case, delivery must be made within a reasonable time
Here, it is shown that plaintiff did all within its power to have the machinery arrive at
Manila as soon as possible, and immediately upon its arrival, notified the purchaser
of the fact and offered to deliver it to him. We hold that said machinery was brought
within a reasonable time
If there is no stipulation, delivery must be made within a reasonable time from the
execution of the contract. (1521)
Delivery; when time is of the essence (Lorenzo Shipping Corp v. BJ Marthel
International)
In determining whether time is of the essence in a contract, the ultimate criterion is
the actual or apparent intention of the parties and before time may be so regarded by
a court, there must be a sufficient manifestation, either in the contract itself or the
surrounding circumstances of that intention. The law implies, however, that if no time
is fixed, delivery shall be made within a reasonable time, in the absence of anything
to show that an immediate delivery intended.
PLACE
Place stipulated
If there is no stipulation, place fixed by usage or trade
In the absence of both, the sellers place of business if he has one; if non, the sellers
place of residence. However, in the case of sale of specific goods, which to the
knowledge of the parties when the contract was made were in some other place, that
place shall be the place of delivery. (1521)
DELIVERY TO THE CARRIER
Rule
Case:
At what point the articles were considered delivered to the buyer (Behn, Meyer and Co
v. Yangco)
Determination of the place of delivery resolves itself into a question of fact.
If the contract be silent as to the person or mode by which the goods are to be sent,
delivery by the vendor to a common carrier, in the usual and ordinary course of
business, transfers the property to the vendee.
A specification in a contact relative to the payment of freight can be taken to indicate
the intention of the parties in regard to the place of delivery.
If the buyer is to pay the freight, it is reasonable to suppose that he does so because
the goods become his at the point of shipment.
On the other hand, if the seller is to pay the freight, the inference is equally so strong
that the duty of the seller is to have the goods transported to their ultimate destination
and that title to property does not pass until the goods have reached their destination.
The letters "c.i.f." found in British contracts stand for cost, insurance, and freight.
o They signify that the price fixed covers not only the cost of the goods, but the
expense of freight and insurance to be paid by the seller.
The contract, in addition to the letters "c.i.f.," has the word following, "Manila."
Under such a contract, an Australian case is authority for the proposition that no
inference is permissible that a seller was bound to deliver at the point of destination.
In mercantile contracts of American origin the letters "F.O.B." standing for the words
"Free on Board," are frequently used. The meaning is that the seller shall bear all
expenses until the goods are delivered where they are to be "F.O.B." 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.
EXPENSES OF DELIVERY ARE BORNE BY THE SELLER (1247) (1521 last par.)
Unless it is otherwise stipulated, the extrajudicial expenses required by the payment
shall be for the account of the debtor. With regard to judicial costs, the Rules of Court
shall govern (1247)
The seller bears the expenses of and incidental to putting the goods into a
deliverable state, unless otherwise stipulated. (1521)
Case:
Cebu Winland Development Corp v. Ong Siao Hua
FACTS:
Cebu Winland Development Corporation is the owner and developer of a
condominium project called the Cebu Winland Tower Condominium. Ong Siao Hua is
a buyer of two condominium units and four parking slots from petitioner.
Respondent bought two condominium units as well as four parking slots. The area
per condominium unit as indicated in petitioners price list is 155 square meters and
the price per square meter is P22,378.95. The price for the parking lot is P240,000
each. Respondent, therefore, paid P2,298,655.08 as down payment and issued 24
postdated checks in the amount of P223,430.70 per check for the balance of the
purchase price in the total amount of P5,362,385.
On October 10, 1996, possession of the subject properties was turned over to
respondent. The deeds of absolute sale have yet to be signed by Ong Siao Hua.
In the deed of absolute sale of Units, respondent was distressed to find that the
stated floor area is only 127 square meters contrary to the area indicated in the price
list which was 155 square meters. Respondent caused a verification survey of the
said condominium units and discovered that the actual area is only 110 square
meters per unit. Respondent demanded from petitioner to refund the amount of
P2,014,105.50 representing excess payments for the difference in the area.
However, petitioner refused to refund the said amount to respondent. On August 7,
1998, respondent filed a complaint before House and Land Regulatory Board
(HLURB) to refund the amount representing excess payments for the difference in
the area.
HLURB Arbiter dismissed the complaint. It ruled that Cebu Winland is not guilty of
misrepresentation and the action of Ong Siao Hua has already prescribed pursuant
to Art. 1543 of the Civil Code. The subject properties have been delivered on October
10, 1996 and respondent filed his complaint only on August 7, 1998.
Aggrieved, Ong Siao Hua appealed to the Board of HLURB. It affirmed the decision
of the Arbiter with modifications. It ruled that the contract is subject to rescission
based on Arts. 1330 and 1331 of the Civil Code. It said that there was a mistake in
the object of sale.
Not satisfied with the decision of the Board, petitioner appealed to the Office of the
President. It rendered a decision that the action of the respondent has already
prescribed.
Ong Siao Hua appealed before the Court of Appeals. It rendered a decision that the
action of respondent has not prescribed.
Hence, Cebu Winland Corporation made an appeal before the Supreme Court.
ISSUE:
1.
10
2.
3.
4.
RULING:
On the issue of delivery
SC ruled that there has been no complete delivery yet.
Delivery as used in the Law on sales refers to the concurrent transfer of 2 things:
possession and ownership. This is the rationale behind the jurisprudential doctrine that
presumptive delivery via execution of a public instrument is negated by the reality that the
vendee actually failed to obtain material possession of the land subject of the sale. In the
same vein, if the vendee is placed in actual possession of the property, but by agreement of
the parties ownership of the same is retained by the vendor until the vendee has fully paid the
price, the mere transfer of the possession of the property subject of the sale is not the
delivery contemplated in the Law on Sales or as used in Article 1543 of the Civil Code.
In the case at bar, it appears that respondent was already placed in possession of the subject
properties. However, it is crystal clear that the deeds of absolute sale were still to be
executed by the parties upon payment of the last installment. This fact shows that ownership
of the said properties was withheld by petitioner. Following case law, it is evident that the
parties did not intend to immediately transfer ownership of the subject properties until full
payment and the execution of the deeds of absolute sale. Consequently, there is no
delivery to speak of in this case since what was transferred was possession only and not
ownership of the subject properties.
On the issue of prescription
SC ruled that the action of the respondent has not yet prescribed.
Under Article 1543, the actions arising from Articles 1539 and 1542 shall prescribe in
six months, counted from the date of delivery.
In the case at bar, it has already been ruled that there has been no delivery yet.
There has been no transfer of ownership of the subject properties since the deeds of
absolute sale have not yet been executed by the parties. What has been transferred
was possession only and not of the subject properties.
Complaint for the refund of the amount of P2,014,105.50 representing the proportional
reduction of the price paid to petitioner.
Rules applicable in sale sold per unit or number and lump sum.
Sold per unit
vendor shall be obliged to deliver to the vendee all that may been stated in contract.
IF NOT POSSIBLE, the vendee has two options:
proportional reduction of the price or
rescission of the contract.
Lump sum
no increase or decrease of the price, although there be a greater or lesser area or
number than that stated in the contract.
Where it is sold for a lump sum or a single price (1542)
Area to be delivered. The vendor is bound to deliver all that it is included within the
boundaries stated in the contract although there be greater or less area or number
than that stated in the contract.
The price to be paid by vendee. He shall pay the lump sum stipulated with no
increase or decrease in the price although there be greater or less area or number
than that stated in the contract.
Buyers remedies if the vendor does not deliver the area within the boundaries stated
in the contract
o Proportionate reduction in price OR
o Rescind the contract
Cases
Distinction between 1539 (unit price contract) and 1542 (lump sum contract) (Rudolf
Lietz Inc v CA)
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a
certain sum for a unit of measure or number, there shall be no increase or decrease
of the price, although there be a greater or lesser area or number than that stated in
the contract.
o The same rule shall be applied when two or more immovables are sold for a
single price;
o but if, besides mentioning the boundaries, which is indispensable in every
conveyance of real estate, its area or number should be designated in the
contract, the vendor shall be bound to deliver all that is included within said
boundaries, even when it exceeds the area or number specified in the
contract; and, should he not be able to do so, he shall suffer a reduction in
the price, in proportion to what is lacking in the area or number, unless the
contract is rescinded because the vendee does not accede to the failure to
deliver what has been stipulated.
Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit
area.
11
Pursuant to Article 1542, Civil Code of the Philippines, in the sale of real estate,
made for a lump sum and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price although there be a
greater or lesser area or number than that stated in the contract. Thus, the obligation
of the vendor is to deliver everything within the boundaries, inasmuch as it is the
entirety thereof that distinguishes the determinate object. However, this rule admits of
an exception. A vendee of land, when sold in gross or with the description "more or
less" with reference to its area, does not thereby ipso facto take all risk of quantity in
the land. The use of "more or less" or similar words in designating quantity covers
only a reasonable excess or deficiency
Prescription of Action (1543) (Cebu Windland Development Corp. vs Ong Siano Hua)
The actions arising from Articles 1539 and 1542 shall prescribe in six months,
counted from the day of delivery. (1472a)
Movables (Rules on delivery of Goods) 1522
Where there is defeciency in quantity or quality
Reject the goods
Accept the goods
But if the buyer accepts or retains the goods so delivered, knowing that the
seller is not going to perform the contract in full, he must pay for them at the
contract rate. If, however, the buyer has used or disposed of the goods
delivered before he knows that the seller is not going to perform his contract
in full, the buyer shall not be liable for more than the fair value to him of the
goods so received.
Where there is an excess
Accept the goods agreed upon and reject the rest
Accept the whole of the goods delivered and pay for them at the contract rate
Reject the whole of the goods if they are indivisible
Where goods are mixed in others
Accept the goods agreed upon and reject the rest if the sale is divisible
Reject the whole of the goods, if the sale is indivisible
Delivery in installments
Cant compel delivery unless the delivery is agreed to be by installments
Delivery is to include fruits
Unless otherwise stipulated
When seller is excused from delivering (1527)
12
Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith. (1473)
13
The property in question is land, an immovable, and following the above-quoted law,
ownership shall belong to the buyer who in good faith registers it first in the registry of
property. Thus, although the deed of sale in favor of private respondents was later
than the one in favor of petitioners, ownership would vest in the former because of
the undisputed fact of registration. On the other hand, petitioners have not registered
the sale to them at all.
This means that after the sale of a realty by means of a public instrument, the
vendor, who resells it to another, does not transmit anything to the second vendee
and if the latter, by virtue of this second sale, takes material possession of the thing,
he does it as mere detainer, and it would be unjust to protect this detention against
the rights to the thing lawfully acquired by the first vendee.
In the absence of both registration and possession, ownership shall belong to the one
who presents the oldest title, if in good faith (Cruz v. CA)
As the Court stated in Carbonell vs. Court of Appeals "it is essential that the buyer of
realty must act in good faith in registering his deed of sale to merit the protection of
the second paragraph of Article 1544."
"(T)he governing principle here is prius tempore, potior jure (first in time, stronger in
right).
Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's
rights except only as provided by the Civil Code and that is where the second buyer
first registers in good faith the second sale ahead of the first.
Such knowledge of the first buyer does not bar her from availing of her rights under
the law, among them, to register first her purchase as against the second buyer.
But in converso knowledge gained by the second buyer of the first sale defeats his
rights even if he is first to register the second sale, since such knowledge taints his
prior registration with bad faith.
This is the price exacted by Article 1544 of the Civil Code for the second buyer being
able to displace the first buyer; that before the second buyer can obtain priority over
the first, he must show that he acted in good faith throughout (i.e. in ignorance of the
first sale and of the first buyer's rights) from the time of acquisition until the title is
transferred to him by registration or failing registration, by delivery of possession.
The second buyer must show continuing good faith and innocence or lack of
knowledge of the first sale until his contract ripens into full ownership through prior
registration as provided by law."
14
GOOD FAITH in the buyer
What GF consists
Cui v, Henson
A purchaser in good faith is one who buys property of another, without notice that
some other person has a right to, or interest in, such property and pays a full and fair
price for the same, at the time of such purchase, or before he has notice of the claim
or interest of some other person in the property. Good faith consists in an honest
intention to abstain from taking any unconscientious advantage of another. Good faith
is an opposite of fraud and of bad faith, and its non existence must be established by
competent proof.
Leung Yee v. Frank Strong Mach
It is "the honesty of intention," "the honest lawful intent," which constitutes good faith
implies a "freedom from knowledge and circumstances which ought to put a person
on inquiry," and so it is that proof of such knowledge overcomes the presumption of
good faith in which the courts always indulge in the absence of proof to the contrary.
"Good faith, or the want of it, is not a visible, tangible fact that can be seen or
touched, but rather a state or condition of mind which can only be judged of by actual
or fancied tokens or signs."
One who purchases real estate with knowledge of a defect or lack of title in his
vendor cannot claim that he has acquired title thereto in good faith as against the true
owner of the land or of an interest therein; and the same rule must be applied to one
who has 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.
It cannot be invoked where the two dierent contracts of sale are made by two
dierent persons, one of them not being the owner of the property sold.
And even if the sale was made by the same person, if the second sale was made
when such person was no longer the owner of the property, because it had been
acquired by the rst purchaser in full dominion, the second purchaser cannot acquire
any right.
Warranties:
Concept
A warranty is a statement or representation made by the seller of goods,
contemporaneously and as part of the contract of sale, having reference to the
character, quality or title of the goods, and by which he promises or undertakes to
insure that certain facts are or shall be as he then represents them.
15
Warranties by the seller may be express or implied. Art. 1546 of the Civil Code
defines express warranty as follows:
o "Art. 1546. Any affirmation of fact or any promise by the seller relating
to the thing is an express warranty if the natural tendency of such
affirmation or promise is to induce the buyer to purchase the same, and
if the buyer purchases the thing relying thereon. No affirmation of the
value of the thing, nor any statement purporting to be a statement of the
sellers opinion only, shall be construed as a warranty, unless the seller made
such affirmation or statement as an expert and it was relied upon by the
buyer.
o On the other hand, an implied warranty is that which the law derives by
application or inference from the nature of the transaction or the relative
situation or circumstances of the parties, irrespective of any intention of the
seller to create it. Among the implied warranty provisions of the Civil Code
are: as to the sellers title (Art. 1548), against hidden defects and
encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562), and
against eviction (Art. 1548).
"The prescriptive period for instituting actions based on a breach of express
warranty is that specified in the contract, and in the absence of such period, the
general rule on rescission of contract, which is four years (Article 1389, Civil
Code)."
Kinds
An implied warranty that the thing shall be free from any hidden faults or
defects, or any charge or encumbrance not declared or known to the buyer.
(Warranty against hidden defects)
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Deprivation in law
Deprivation in fact
the waiver shall be void (1553) and vendor shall be liable for the following:
o The return of the value which the thing sold had at the time of the eviction, be
it greater or less than the price of the sale;
o The income or fruits, if he has been ordered to deliver them to the party who
won the suit against him;
o The costs of the suit which caused the eviction, and, in a proper case, those
of the suit brought against the vendor for the warranty;
o The expenses of the contract, if the vendee has paid them;
o The damages and interests, and ornamental expenses, if the sale was made
in bad faith. (1555)
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Article
1560
Warranty
against
hidden
encumbrance
for
immovables
(easement/servitude)
Warranty Against Hidden encumbrances (1560)
If the immovable sold should be encumbered with any non-apparent burden or
servitude, not mentioned in the agreement, of such nature that it must be presumed
that the vendee would not have acquired it had he been aware thereof, he may ask
for the rescission of the contract, unless he should prefer the appropriate indemnity.
o Neither right can be exercised if the non-apparent burden or servitude is
recorded in the Registry of Property, unless there is an express warranty that
the thing is free from all burdens and encumbrances.
Requisities for vendors liability
The easement must be non apparent
It must not have been mentioned in the agreement
It must be of such nature that it must be presumed that the vendee would not have
acquired the immovable had he been aware thereof.
Vendees remedies should it be encumbered with any non apparent easement or
servitude
Within one year from the execution of the deed of sale, the vendee may ask for:
o Rescission, OR
o Damages
After one year
o Damages, within a period of one year from the discovery fo the easement or
servitude.
When not liable
Easement is apparent
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EXCEPTION: The vendor shall not be liable if there is a stipulation exempting him
from such defects and he was not aware thereof. (1566)
19
o
o
ignorance or bad faith should fail to discover or disclose it, he shall be liable for
damages. (1576)
Presumption of Redhibitory Vice (1578)
If the animal should die within three days after its purchase, the vendor shall be liable
if the disease which cause the death existed at the time of the contract
Remedies of vendee in case of sale of animal with redhibitory defects (effects of
Warranty)
GENERAL RULE: If two or more animals are sold together, whether for lump sum or for a
separate price for each of them, the redhibitory defect of one shall only give rise to its
redhibition. Accordinly, the vendee may only ask for:
The rescission of the sale of the defective animal (accion redhibitoria) OR
Ask for proportionate reduction (accion quanti minoris) (1562, 1567, 1580)
EXCEPTION: The redhibitory defect of one shall give rise to the redhibition of all the animals
sold, including the sound ones, if the vendee would not have bought the sound animals
without the defective one. This intention by the vendee is presumed when a team, yoke, pair,
or set is bought, even if a separate price has been fixed for each one of the animals
composing the same. (1572) Accordingly, the vendee may ask for the rescissionof the whole
contract.
NOTE: The above rule and exception apply in like manner to the sale of other things. (1573)
When must redhibitory action be filed
Art. 1577. The redhibitory action, based on the faults or defects of animals, must be
brought within forty days from the date of their delivery to the vendee.
This action can only be exercised with respect to faults and defects which are
determined by law or by local customs. (1496a)
When sale of animals is VOID
The animals are suffering from contagious diseases
The animals are found to be until for the use or service for which they were acquired
as stated in the contract (1575)
Vendors liability in case the animal sold dies of diseases
The vendor shall be liable for the death of the animal sold, whether the defect is
redhibitory or not, if the following requirements are present:
o It existed at the time of sale
o Is the cause of death of the animal, AND
o The animal dies within three (3) days from the time of purchase (1578)
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21
So she went to Chinabank and offered to pay the portion of the loan corresponding to
the area she was occupying (PD 957- Condominium Act) but her offer was rejected
by Chinabank. Arguelles defaulted in the payment of the loan, since her contract with
the Arguelles was not annotated or registered on the title of the property thus the title
of the property was clean.
Thus, Chinabank was allowed to foreclose but she has already paid 1.4m, but before
the foreclosure when she learned that the property was mortgaged to Chinabank she
wrote to Arguelles that she was suspending payment because of the mortgage
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Case
Rate of interest if payable as indemnity for delay in the performance of an obligation
Cristina Garments v. CA
RULE: Christina Garments Inc vs. CA- rate of interest for delay for the performance of an
obligation legal rate is 6 percent
FACTS:
February 1979 - April 1979: Crismina Garments, Inc. contracted the services
of D'Wilmar Garments, for the sewing of 20,762 pieces of assorted girls denims
for P76,410
At first, the Crismina was told that the sewing of some of the pants were defective so
it offered to take them back but then she was told it was good already and asked her
to return for her check.
Crismina failed to pay and told her that 6,164 pairs were defective and asked for
actual damages of P49,925.51
RTC: favored D'Wilmar P76,140 at 12% per annum, P5,000 attorney's fees and cost
of suit
CA: affirmed but delete the attorney's fees
ISSUE: W/N they should impose 12% interest for an obligation which is not a loan in
the absence of stipulation
HELD: NO. Appealed Decision is MODIFIED. The rate of interest shall be 6%/annum,
computed from the time of the filing of the Complaint in the trial court until the finality of the
judgment. If the adjudged principal and the interest (or any part thereof) remain unpaid
thereafter, the interest rate shall be 12% per annum computed from the time the judgment
becomes final and executory until it is fully satisfied.
Article 1589 on the Civil Code
o [t]he vendee [herein petitioner] shall owe interest for the period between the
delivery of the thing and the payment of the price . . . should he be in default
from the time of judicial or extrajudicial demand for the payment of the price.
Article 2209 of the Civil Code
o If the obligation consists in the payment of money and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary,
shall be the payment of the interest agreed upon, and in the absence of
stipulation, the legal interest, which is 6%/annum
Usury Law
o rate of interest for the loan or forbearance of any money, goods or credits
and the rate allowed in judgments, in the absence of express contract as to
such rate of interest, shall be twelve per cent (12%) per annum
award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof
o When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing
interest due shall itself earn legal interest from the time it is judicially
demanded
In the absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the
Civil Code
o When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with
reasonable certainty
where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any
case, be . . . the amount finally adjudged.
o When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1
or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to
forbearance of credit
amount due in this case arose from a contract for a piece of work, not from a loan or
forbearance of money, the legal interest of six percent (6%) per annum should be
applied.
o Furthermore, since the amount of the demand could be established with
certainty when the Complaint was filed, the six percent (6%) interest should
be computed from the filing of the said Complaint.
o But after the judgment becomes final and exuecutory until the obligation is
satisfied, the interest should be reckoned at twelve percent (%12) per year
23
If the buyer has the obligation to pay the price, what are the legal guarantees available
to the seller for the payment of the price or suspend delivery?
If cash sale- if payment if not rendered by the buyer at the time of delivery
Credit (buyer will pay the price at a later date, even after delivery)- if there is no delivery
yet and the buyer loses the right to make use of the period then seller can withhold delivery
In case of sale of goods, if the buyer fails to accept delivery at the stipulated time
without just cause or fails to tender the price if no period was stipulated at the contract
of sale?
- The law states that the contract shall of right be rescinded or the rescission shall take
place
Article 1198: The debtor shall lose the right to make use of the period in the following
instances:
1. Become insolvent
2. He absconds
3. Fails to furnish a security
4. The security is lost and he doesnt furnish another security
If the contract is embodied in the document and there is a stipulation that if the buyer
fails to pay the price at stipulated date the contract shall be automatically rescinded
and when that date arrives the buyer fails to pay the price despite demands from the
seller, is the contract automatically rescinded?
As an Unpaid Seller:
1. Exercise Possessory Lien
2. Stoppage in Transitu
3. Right to Resell
4. Right to Rescind
But, what if the contract is for sale of real properties and there is a stipulation that if
the buyer does not pay the price a stipulated date the contract shall be automatically
rescinded?
No, there is no automatic rescission in contract of real property. In fact, under the law
the buyer is still allowed to pay the price in spite that stipulation unless there is a
judicial demand for rescission of the contract or notarial demand for the rescission of
the contract. This is actually similar to your Maceda Law, but this law only refers to
property in installment (RECTO- older law; found in the CC; personal property)
Judicial demand for rescission - Try the case in court for rescission of the contract
24