Dubidap Notes Sales and Lease1819

RECIT NOTES
SALES AND LEASE

2C 2018-2019
ATTY. MANUEL P. CASIŇO
SALES 1 AUG 2018
TOPICS DISCUSSED
1. Concepts, Tests/Requisites and Importance of the distinction b/w:

a) Contract of Sale (CoS) v Contract of a Piece of Work
i. Commissioner v Engineering and Supply Company
b) CoS v Contract of Agency to Sell
i. Quiroga v Parsons
ii. Kerr v Lingad
iii. Lim v People
2. Elements of the Contract of Sale
a) Essential elements
i. Consent
1. Elements
a) Paredes v Espino
ii. Subject Matter
1. Elements
3. Sale by Auction
4. Option Contract
5. Auto Contract
6. Parties disqualified to a Contract of Sale
a) Absolute Incapacity
i. Mercado v Espiritu
b) Relative Incapacity
i. Sale b/w husband and wife
c) Specific Incapacity
i. Those specified by provision of law
7. Offer and Acceptance
a) Elements of Offer
i. Sanchez v Rigos
b) Cognition Theory
c) When offer becomes ineffective (What is the reason behind the law)
i. Death
ii. Civil Interdiction
iii. Insanity
iv. Insolvency
8 August 2018
Topics discussed:
1. Option Money and Earnest Money

- Sanchez vs Rigos
2. Offer and Acceptance
a) Absolute Incapacity
b) Relative Incapacity
i. Art 1490 and Art 1491
1. Who are executors and administrators
2. Hust vs PR Builders
c) Specific Incapacity
3. Object of Contract of Sale
a) Requisites of a valid object (Reason behind the law)
i. Possible thing
1. Nool vs CA
|| 2C | 2018- 2019 | SALES AND LEASE| ATTY. MANUEL CASINO|| DUBIDAP NOTES||
2. Emptio rei sperate
Emptio Spei
ii. Licit
1. Conchita vs CA
iii. Determinate or at least determinable
Assignment for Thursday, 9 August 2018: Until Article 1505 which must
be read in relation to Art 559.
Article 1484 and Article 1485 and RA 6652 (Maceda Law) will be discussed
when we reach remedies of aggrieved seller in a contract of sale.
SALES 9 AUGUST 2018
Topics discussed
Cause or Consideration
a) Requisites
b) RP v Philippine Resources Development Corporation
c) Money or its equivalent
- not a negotiable instrument because it is not a substitute for
money
d) Contract of Sale v Barter
i. Right to legal redemption not applicable to barter
ii. Barter covered by Statute of Frauds
iii. Reason behind why there is a need for us to characterize
the intention of the parties
e) Legal redemption (discussed in passing)
f) When is price certain?
g) Certainty as to a particular fact (1472)
Reminders:
A. LONG QUIZ on Wednesday, 15 August 2018 covered ALL DISCUSSED

B. Handwritten case digests of ALL assigned cases in the syllabus to be
passed at the END OF THE SEMESTER.
C. COVERAGE NEXT MEETING:
a) Until Art. 1524
b) Article 1505 which must be read in relation to Art 559.
c) Article 1484 and Article 1485 and RA 6652 (Maceda Law) will be
discussed when we reach remedies of aggrieved seller in a contract
of sale.
SALES 22 August 2018
Topics discussed:
1. Absolute v Conditional Sale

a) In Conditional Sale, once the condition is fulfilled, there is
no more a need to perform any further positive acts because the
sale is transformed into an Absolute one
b) What is the necessity to determine whether a sale is one of a
condition or absolute?
i. Remedies available
ii. Application of Double Sales (1544)
c) People’s Homesite v CA
2. Contract to Sell v Conditional Sale
a) Coronel v CA
3. Obligations of the vendor
a) Deliver
i. Definition of Delivery
ii. Requisites
1. Identity
2. Integrity
3. Intention
4. Buyer / Seller must be the proper party or an authorized
agent
5. Capacity of the seller
iii. When is it deemed effected?
iv. Modes
1. Actual/Physical
2. Constructive
a) Execution of Public Instrument
i. Romero v CA
b) Traditio Symbolica
c) Longa Manu
d) Brevi Manu
e) Constitutum Possessorium
f) Delivery through Carrier
g) Delivery of Incorporeal Property (will be discussed
when we reach 1624 and 1625
3. Necessity to determine what mode is effected?
v. NO QUASI TRADITION
vi. Necessity to determine the exact moment when ownership is
passed
1. To identify who has the burden of risk (NOT LIABILITY)
a) Thing perishes with the owner
Coverage next meeting 23 August 2018, Thursday
1. 1521
2. 1523 in relation with 1503
3. 1505 in relation with 559
4. 1544 (Double Sale)
5. Effects of the Contract when the Thing Sold has been lost
a) 1480, 1493, 1494, 1504, 1179, 1262, 1269
6. Goods covered by a negotiable document of title
7. Warranties
P.S. Rights of the Unpaid Seller will be discussed when we reach Remedies
P.P.S. Since hindi ko talaga nagets yung instructions ni Atty. Casiño

about sa format ng digest, ako nalang magpoprovide ahehe
Case Title
GR. No., Date
Facts:
Issue(s):
Held:
Hand written case digests of ALL the assigned cases in the syllabus written
in a yellow paper. 267 yung count ko last time hahaha kaya limit nalang
siguro natin sa 1 page each case digest
1.5” left 1”right
Will be submitted by the END OF THE SEMESTER.
SALES 23 AUGUST 2018
Coverage next meeting, Wednesday, 29 Aug 2018
1. Until 1560
2. Do not read yet: Rights of the Aggrieved Party to a Contract of Sale
1525-1535, 1538-1543
3. All provisions on Loss of the thing sold
a) Memorize: 1189 in relation to 1538
4. 1403 in relation to 1504
5. 1593 & 1594 in relation to 1174
6. 1262-1269
7. Cases on 1505 and 1544 and MEMORIZE RULINGS
SUBMISSION OF DIGEST: 1 WEEK BEFORE FINALS
SALES 5 SEPTEMBER 2018
TOPICS DISCUSSED
1. 1544 - Double Sales

a) Registrant in good faith
b) Carbonel v CA
c) 1544 not applicable with unregistered lands
d) Effect of the knowledge of the first buyer in good faith who
registered their sale AFTER his knowledge of the second sale
e) Payment of price is not required (legal basis: 1544
f) Is there a double sale between 1 conditional and 1 absolute sale?
g) Coronel v CA
2. Sale of voidable title
3. Document of title
a) Kinds
b) Classification
i. When is it negotiable? (1507)
ii. When is it not negotiable?
c) How negotiated
i. 1508 & 150
4. Negotiable document of title v Negotiable Instrument
5. 1505 in relation to 559
6. 1518
7. 1513
8. Can a negotiable document of title be transferred?
9. Effects of indorsement of NON-NEGOTIABLE document of title?
a) Indorsee acquires no right, being a mere transferee
10. Rights of a mere transferee (1514)
11. Reason behind 1511: prevent the commission of acts of ingratitude
12. Reason behind 1517 is 1513(2)
Reminders:
QUIZ tomorrow, Thursday, 6 September 2018

Coverage: 1156 to 1560 excluding the Remedies of an Aggrieved Party
Prepare at least 5 sheets of yellow paper
Objective type
Coverage tomorrow, Thursday 6 September 2018
1. Until 1560
2. Do not read yet: Rights of the Aggrieved Party to a Contract of Sale
1525-1535, 1538-1543
SALES, Wednesday, 17 OCTOBER 2018
Topics discussed:
1. What is a condition?
a) People’s Homesite v CA
b) Romero v CA
c) Lim v CA
d) Babasa v CA
2. Express Warranty v Causal Fraud
3. Condition v Express Warranty
4. Express Warranty v Implied Warranty
a) Expressed warranty can only be enforced before the perfection of
a contract.
b) It can however be made after, IF THERE IS A SEPARATE AND DISTINCT
CONSIDERATION.
c) It is not necessary that the express warranty be in writing as
long as it is made BEFORE THE PERFECTION OF A CONTRACT.
5. Implied Warranties
a) Why are these warranties need not be expressly agreed upon?
i. Because they are attached to the obligation of the vendor
ii. Attributes of ownership
b) Definition
c) Examples
6. Eviction
a) Judicial process whereby the vendee is deprived of the part or
whole of the property
b) Must not be a trespass in fact
7. Warranty against eviction
a) Definition
b) Requisites
c) When is judgment considered final in warranty against eviction
cases?
i. Finality for purposes of an appeal - when facts are already
established
1. Introduction of evidence
2. Formal offer of evidence
3. Issues are identified
ii. Finality for purposes of execution - no more further acts done
by the court or the parties, only the awaiting of final judgment
d) Is mere notice enough to warrant the vendor liable against
eviction?
i. Yes because notice is made by posting in conspicuous places
and by publication.
e) Reason behind last paragraph of Art. 1547
Coverage next meeting, Thursday, 18 October 2018:

1. Obligations of a Vendee
Read in advance: Recto Law and Maceda Law
SALES AND LEASE
FINALS REVIEWER
ATTY. MANUEL CASIÑO
CONDITIONS AND WARRANTIES (Art. 1545-1547)
OCTOBER 17, 2018
Recall! What is the effect of the non-fulfillment of condition in a

conditional cos? The non-perfection of contract. People’s Homesite Case.
If the perfection of the contract is subject to the approval of higher
authorities, and the the approval was not obtained, there is no perfected
contract.
MIDTERM Q: Where there is a mortgaged property and the mortgagor sells

the same to the vendee with the assumption of mortgage obligation without
the creditors consent, if the creditor does not consent to the same, there
is no perfected contract of sale.
What is a Condition?
- A condition is a future and uncertain event or a past event unknown
to the parties, which may either result in acquisition of rights or
extinguishment or loss of those already acquired.
People’s Homesite v. CA
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.
Romero v. CA
Nature and Form— A perfected contract of sale may either be absolute or

conditional depending on whether the agreement is devoid of, or subject
to, any condition imposed on the passing of title of the thing to be
conveyed or on the obligation of a party thereto. When ownership is
retained until the fulfillment of a positive condition the breach of the
condition will simply prevent the duty to convey title from acquiring
an obligatory force. If the condition is imposed on an obligation of a
party which is not complied with, the other party may either refuse to
proceed or waive said condition (Art. 1545, Civil Code). Where, of course,
the condition is imposed upon the perfection of the contract itself, the
failure of such condition would prevent the juridical relation itself
from coming into existence.
Character thereof; Determined by the substance, not by the title given

by the parties. — In determining the real character of the contract, the
title given to it by the parties is not as much significant as its substance.
For example, a deed of sale, although denominated as a deed of conditional
sale, may be treated as absolute in nature, if title to the property sold
is not reserved in the vendor or if the vendor is not granted the right
to unilaterally rescind the contract predicated on the fulfillment or
non-fulfillment, as the case may be, of the prescribed condition.
Term "Condition" in the context of a perfected contract of sale; — The

term "condition" in the context of a perfected contract of sale pertains,
in reality, to the compliance by one party of an undertaking the
fulfillment of which would beckon, in turn, the demandability of the
reciprocal prestation of the other party. The reciprocal obligations
referred to would normally be, in the case of vendee, the payment of the
agreed purchase price and, in the case of the vendor, the fulfillment
of certain express warranties (which, in the case at bench is the timely
eviction of the squatters on the property).
When perfected. — A sale is at once perfected when a person (the seller)

obligates himself, for a price certain, to deliver and to transfer
ownership of a specified thing or right to another (the buyer) over which
the latter agrees.
Conditional Sale; Fulfillment of condition; Operative act setting into

motion vendee's obligation. — From the moment the contract is perfected,
the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage and law. Under the
agreement, private respondent is obligated to evict the squatters on the
property. The ejectment of the squatters is a condition the operative
act of which sets into motion the period of compliance by petitioner of
his own obligation, i.e., to pay the balance of the purchase price.
Right of a vendee in case of non-fulfillment of condition. — Private

respondent's failure "to remove the squatters from the property" within
the stipulated period gives petitioner the right to either refuse to
proceed with the agreement or waive that condition in consonance with
Article 1545 of the Civil Code. This option clearly belongs to petitioner
and not to private respondent. In contracts of sale particularly, Article
1545 of the Civil Code, aforementioned, allows the obligee to choose
between proceeding with the agreement or waiving the performance of the
condition. It is this provision which is the pertinent rule in the case
at bench. Here, evidently, petitioner has waived the performance of the
condition imposed on private respondent to free the property from
squatters.
Condition in case at bar; Not potestative. — We share the opinion of the

appellate court that the undertaking required of private respondent does
not constitute a "potestative condition dependent solely on his will"
that might, otherwise, be void in accordance with Article 1182 of the
Civil Code but a "mixed" condition "dependent not on the will of the vendor
alone but also of third persons like the squatters and government agencies
and personnel concerned." We must hasten to add, however, that where the
so-called "potestative condition" is imposed not on the birth of the
obligation but on its fulfillment, only the condition is avoided, leaving
unaffected the obligation itself.
Action for Rescission; not warranted in case at bar. — Private respondent's
action for rescission is not warranted. She is not the injured party.
The right of resolution of a party to an obligation under Article 1191
of the Civil Code is predicated on a breach of faith by the other party
that violates the reciprocity between them. It is private respondent who
has failed in her obligation under the contract. Petitioner did not breach
the agreement. He has agreed, in fact, to shoulder the expenses of the
execution of the judgment in the ejectment case and to make arrangements
with the sheriff to effect such execution. In his letter of 23 June 1989,
counsel for petitioner has tendered payment and demanded forthwith the
execution of the deed of absolute sale. Parenthetically, this offer to
pay, having been made prior to the demand for rescission, assuming for
the sake of argument that such a demand is proper under Article 1592 of
the Civil Code, would likewise suffice to defeat private respondent's
prerogative to rescind thereunder.
Lim v CA
Contract of Sale; When perfected; Effects; — The agreement shows a

perfected contract of sale. Under Art. 1475 of the Civil Code, there is
a perfected contract of sale if there is a meeting of the minds on the
subject and the price. A sale is a consensual contract requiring only
the consent of the parties on these two points. In this case, the parties
agreed on the subject, the 1,013.6 square meter lot, and on the purchase
price of P4,000,000.00. No particular form is required for the validity
of their contract and, therefore, upon its perfection, the parties can
reciprocally demand performance of their respective obligations. Indeed,
the earnest money given is proof of the perfection of the contract. As
Art. 1482 of the Civil Code states, "Whenever earnest money is given in
a contract of sale, it shall be considered as part of the price and as
proof of the perfection of the contract." This perfected contract imposed
reciprocal obligations on the parties. Petitioner's obligation was to
pay the balance of the price, while private respondent's obligation was
to deliver the property to petitioners upon payment of the price. It is
true that private respondent undertook to eject the squatters before
delivery of the property within a certain period and that for her failure
to carry out her obligation she could be ordered to refund the P200,000.00
earnest money. But whether she would be obliged to do so depends on
petitioners who can waive the condition and opt to proceed with the sale
instead.
Failure to comply with a Condition on the performance of an obligation;

Effects thereof; — Private respondent Luna contends that as the condition
of ejecting the squatters was not met, she no longer has an obligation
to proceed with the sale of her lot. This contention is erroneous. Private
respondent fails to distinguish between a condition imposed on the
perfection of the contract and a condition imposed on the performance
of an obligation. Failure to comply with the first condition results in
the failure of a contract, while failure to comply with the second
condition only gives the other party the option either to refuse to proceed
with the sale or to waive the condition. . . . . In this case, there is
already a perfected contract. The condition was imposed only on the
performance of the obligation. Hence, petitioners have the right to choose
whether to demand the return of P200,000.00 which they have paid as earnest
money or to proceed with the sale. They have chosen to proceed with the
sale and private respondent cannot refuse to do so.
Babasa v CA
Condition imposed on the perfection of a contract, distinguished from

Condition imposed merely in the performance of an obligation. — We do
not agree with petitioners that their contract with TABANGAO lost its
efficacy when the 20-month period stipulated therein expired without
petitioners being able to deliver clean certificates of title such that
TABANGAO may no longer demand performance of their obligation. In Romero
v. Court of Appeals and Lim v. Court of Appeals (263 SCRA 569, 577 [1996])
the Court distinguished between a condition imposed on the perfection
of a contact and a condition imposed merely on the performance of an
obligation. While failure to comply with the first condition results in
the failure of a contract, failure to comply with the second merely gives
the other party the option to either refuse to proceed with the sale or
to waive the condition.
A party who fails to comply to his obligation in a duly perfected contract

has no right to unilaterally rescind the same; — A perfected contract
of absolute sale exists between the BABASAS and TABANGAO when they agreed
on the sale of a determinate subject matter, i.e., Lots No. 17827-A,
17827-B and 17827-C, and the price certain therefor without any condition
or reservation of title on the part of the BABASAS. However, the obligation
of TABANGAO as vendee to pay the full amount of the purchase price was
made subject to the condition that petitioners first deliver the clean
titles over the lots within twenty (20) months from the signing of the
contract. If petitioners succeed in delivering the titles within the
stipulated 20-month period, they would get P1,821,920.00 representing
the entire balance of the purchase price retained by TABANGAO. Otherwise,
the deed of sale itself provides that — . . . upon the expiration of the
20-month period from the signing of the contract the Vendee is hereby
authorized to settle out of the balance retained by the Vendee all legally
valid and existing obligations on the properties . . . and whatever balance
remaining after said settlement shall be paid to the Vendor. Clearly then,
the BABASAS' act of unilaterally rescinding their contract with TABANGAO
is unwarranted. Even without the abovequoted stipulation in the deed,
the failure of petitioners to deliver clean titles within twenty (20)
months from the signing of the contract merely gives TABANGAO the option
to either refuse to proceed with the sale or to waive the condition in
consonance with Art. 1545 of the New Civil Code. Besides, it would be
the height of inequity to allow the BABASAS to rescind their contract
of sale with TABANGAO by invoking as a ground therefor their own failure
to deliver the titles over the lots within the stipulated period.
1545. CONDITIONS
The first paragraph of 1545 contemplates a perfected COS. The application
of this article presupposes that there is a perfected contract between
the parties and that one of them fails in the performance of an obligation
under the contract.
What kind of condition is referred in 1545?

A condition that is imposed upon one of the contracting parties, to which
the obligation or right of the contracts depends. *not a condition to
which the perfection of contract shall depend.
HYPO: A offered for sale parcel of land to B covered by TCT 1234, which
at the time of offer was occupied by squatters. The offer was made on
Jan 1 2018, for the price of 5M. B accepted offer subject to condition
that A must first evict the squatters from the premises in order for it
to pay 5M within 3 months. 3 month period expired, A failed to to evict
the squatters.
What are the rights and remedies of B?

A’s failure to comply with the condition does not result in the failure
of the contract; it only gives B the option to refuse to proceed with
the agreement or waive that condition.
Can A refuse to proceed with the contract on the ground of the
non-fulfillment of the condition?
No. The option above clearly belongs to B only as A is not the injured
party (the right of a party to rescind an obligation under 1191 is
predicated on the non-compliance by the other party with what is incumbent
upon him that violates the reciprocity between them).
Effect of non-fulfillment of condition:

A contract of sale may be absolute or conditional (1458).
1. If the obligation of either party is subject to any condition and such
condition is not fulfilled, such party may either:
a) refuse to proceed with the contract; or
b) proceed with the contract, waiving the performance of the
condition.
2. If the condition is in the nature of a promise that it should happen,

the non-performance of such condition may be treated by the other party
as a breach of warranty. (1546)
1546. WARRANTIES
Definition
Is a statement or representation made by the seller of the goods -
contemporaneously and as part of the contract of sale - that has reference
to the character, quality or title of the goods; and is issued to promise
or undertake to insure that certain facts are or shall be as the seller
represents them.
- Warranties may be express or implied. Implied warranties are natural
elements of a contract of sale.
Kinds of Warranties: The Seller is liable for his:

(1) Express Warranties (1546)
(2) Implied Warranties of Title (1547)
(3) Absence of Hidden Defects (ibid)
(4) Fitness or Merchantable quality (1562)
(5) Description (1481, 1562)
(6) Sample (1481,1565)
HYPO: On July 1, A went to B and showed him what purports to be a 99.9%

gold bar when in fact it was a mere gold plated aluminum bar. He offered
for sale for 5M. Upon A’s express statement, B thinking it was indeed
a gold bar, accepted and conveyed to A. Thereafter, A delivered the rolex.
B paid. B later found out that the bar was not 99.9% gold bar.
Can B hold A liable for breach express warranty?

No breach of warranty.
What kind of fraud was employed?

CAUSAL FRAUD/DOLO CAUSANTE - fraud employed at the time of the execution
of a contract in order to secure consent. Fraud without which, consent
would not have been given. It renders the contract voidable.
What is the Remedy of Buyer?

Action for Annulment because consent was vitiated by fraud.
HYPO: A and B entered into a contract of sale of ROLEX watch for 500k.
In the contract, A bound himself to deliver to B on July 1 and B to pay
the price. A delivered to B a fake rolex watch.
In this case what kind of fraud was committed by A?
Fraud in the performance of the obligation. The fraud had no effect on
the contract since it was employed after perfection. The party employing
it shall be liable for damages (1170).
What is the proper action of B?

Action for Rescission can be made under 1191. Why? There was no express
representation at all but just the same A is guilty of fraud in the
performance of the obligation under 1171 in relation to 1170, further
in relation to 1191. Breach was substantial as to warrant the rescission
of the contract of sale.
If fraud is employed by one of the contracting parties inducing him to

enter into a contract, a mistake of his mind occurs.
What is the difference between Express Warranty and Dolo Causante?

In express warranty, the natural tendency of which is to induce the buyer
into purchasing the thing offered. Under 1338, there is fraud when through
insidious words
As to time of making the warranty:

For there to be an express warranty that is enforceable, is it necessary
that the same be made at the time of the perfection of the contract? Yes.
Is it necessary for the express warranty to be enforceable that it be
made at the time of perfection of contract? What if it was made thereafter
by the vendor? IF THERE IS SEPARATE CONSIDERATION FOR THAT WARRANTY MADE
AFTER THE PERFECTION OF THE CONTRACT. Otherwise, the warranty
unenforceable.
An express warranty can only be enforced if the same is made at the time
of the perfection of the contract and not thereafter because the natural
tendency of express warranty is to induce the other party. But there may
be an instance where the representation expressly is made by the vendor
after the perfection of the contract and that warranty can be enforced
if and only if there is a consideration for that, paid or promised by
the buyer, which is separate and distinct from the price. If there is
no consideration at all, there is no express warranty if the same is made
after the perfection of the contract.
“No affirmation of the VALUE..under 1546”: When it comes to the VALUE

of the thing, any affirmation made by the vendor is merely his opinion
and does not bind him unless the seller made such affirmation or statement
as an expert and it was relied upon by the buyer. Then and only then there
is an Express warranty as to the VALUE of the thing sold.
As to form of warrant: Express warranties for it to be enforceable, need

not be in writing. No formal requirement is required by law. It may be
express or oral. For as long as it was made at the time of perfection
of COS. However if there is an instrument evidencing the sale, and the
EW orally made by the seller is not contained in the same instrument,
then warranty which was expressed cannot be enforced by the presentation
of PAROLE EVIDENCE – once the contract is reduced in writing, the contract
is presumed to contain all the stipulations agreed by the parties previous
to the execution of the document and no external evidence may be admitted
to prove this agreement without violating the parole evidence rule. Except
perhaps when reformation of instruments as a matter of right and remedy
can be had.
Recall: In reformation of instruments, there are two rules. 1) Parole

Evidence and 2) Best evidence.
Express Warranty v Causal Fraud
Express Warranty
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 purchase the thing relying thereon. No affirmation of the
value of the thing, nor any statement purporting to be a statement of
the seller's 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.
Causal Fraud
Art. 1338. There is fraud when, through insidious words or machinations
of one of the contracting parties, the other is induced to enter into
a contract which, without them, he would not have agreed to
Causal Fraud or Dolo Causante = Fraud in the perfection of the Contract.
Warranty v Condition
Warranty Condition
Purports to performance Purports to existence of
of obligation obligation
Need not be stipulated; Obligation must be
may form part of stipulated to form part of
obligation by provision the obligation
of law
Relates to the subject May attach to obligation of
matter itself or to seller to deliver
obligation of the seller possession and transfer
as to the subject matter ownership
of the sale
Kinds of Warranties
1. Express (Art. 1546)
2. Implied (Art. 1547)
Requisites of an Express Warranty

1. It must be an affirmation of fact or any promise by seller relating
to the subject matter of sale;
2. Natural tendency of affirmation or promise is to induce buyer to
purchase subject matter
3. Buyer purchases the subject matter relying thereon.
TAKE NOTE: When breached, seller is liable for damages.
TAKE NOTE: Expressed warranty can only be enforced BEFORE the perfection
of a contract. It can however be made AFTER, IF THERE IS A SEPARATE AND
DISTINCT CONSIDERATION. It is not necessary that the express warranty
be in writing as long as it is made BEFORE THE PERFECTION OF A CONTRACT.
1547. IMPLIED WARRANTIES

An implied warranty is that which the law derives by implication 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.
What are the warranties?
1. Implied by law;
2. Kinds:
a) Implied warranty as to seller’s title. 1548;
b) Implied warranty against hidden defects or unknown encumbrance
1561;
c) Implied warranty as to fitness or merchantable quality 1562.
3. Right to transfer title at the time of delivery.
Why need not be expressly agreed upon by the parties in a contract of

sale? In the same vein that the right of rescission is implied, the same
need not be expressly agreed upon.
Because 1458, the essence of COS is the transmission of ownership by
onerous title. Therefore, these warranties need not be expressly agreed
upon. These are ATTACHED to the obligation of the vendor to deliver the
thing as to vest the vendee ownership thereof. If after delivery, vendee
is evicted, the thing sold cannot be used by the vendee, rending it unfit
for the purpose agreed upon, then that means to say that the buyer cannot
exercise ALL THE ATTRIBUTES OF OWNERSHIP. The right to USE, you cannot
exercise that right if the thing delivered is suffering from any defect
rendering it unfit. That is the reason behind the law.
Art. 1547. In a contract of sale, unless a contrary intention appears,

there is:
(1) An implied warranty on the part of the seller that he has a right
to sell the thing at the time when the ownership is to pass, and that
the buyer shall from that time have and enjoy the legal and peaceful
possession of the thing;
(2) 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.
This Article shall not, however, be held to render liable a sheriff,

auctioneer, mortgagee, pledgee, or other person professing to sell by
virtue of authority in fact or law, for the sale of a thing in which a
third person has a legal or equitable interest.
Warranty that seller has a right to sell

- refers to consummation stage, since in consummation stage, it is where
ownership is transferred by tradition.
- not applicable to sherrif, auctioneer, mortgagee, pledgee, or other
person professing to sell by virtue of authority in fact or law, for the
sale of a thing in which a third person has a legal or equitable interest
(Art. 1547)
Warranty against eviction

- implied, unless contrary provision appears in the contract.
- when ownership is transferred, buyer shall enjoy the legal and peaceful
possession of the thing
Why are implied warranties need not be expressly agreed upon by the
parties?
Because they are attached to the obligation of the vendor and the
attributes of ownership.
Examples of Implied Warranties of Seller

1. Warranty Against Eviction
2. Warranty Against Hidden Defects
WARRANTY AGAINST EVICTION
What is Eviction?
- Judicial process whereby the vendee is deprived of the part or whole
of the property. It must not be a trespass in fact.
Warranty Against Eviction

- This warranty is a natural element of a contract of sale. The warranty
may be eliminated by stipulation so long as the stipulation was agreed
upon in good faith. Any stipulation exempting the vendor from the
obligation to answer for eviction shall be void, if he acted in bad faith.
- The vendor guarantees the vendee’s peaceful possession of the thing
sold and must generally defend against attacks of third persons, based
on a defect in the rights of the vendor, on the vendee’s ownership and
possession of the thing sold. WARRANTY AS TO TITLE.
Requisites for warranty against eviction
HYPO: On Jan 1 2018, A, by means of P.I. sold and delivered a registered

parcel of land B for 5M. To which B paid. March 1, A offered for sale
to C for 6M. C accepted and conveyed. In the contract, C bound himself
to pay 6M to A immediately upon perfection of the contract; and that A
be obliged to deliver the land to C on before July 1. Mar 1, B registered
the land to RD. July 1 arrived, C demanded from A delivery of the land.
A could no longer deliver the land as it is in possession and dominion
of B.
Can C hold A liable for breach of warranty against eviction?

No. C cannot hold A liable for breach of warranty against eviction because
C was not DEPRIVED of the property. First requisite is absent. (see
explanation below)
1st requisite: Vendee is deprived in whole or in part of the thing purchase;

-the law presupposes that there has been a delivery because you cannot
be deprived of anything you did not have in the first place! </3
In this case there was no deliver to C! How can he be deprived of ownership

or possession of the property as to warrant any action against A?! WALA!
Because there was no delivery in the first place. That being the case,
there is no deprivation of property. WALANG EVICTION. C cannot hold A
liable for breach of warranty for eviction but C can hold A liable for
breach of contract.
Under 1191, C has all the right to rescission plus damages. Walang eviction
bes kase nga walang delivery.
xxx
2nd requisite: He is so deprived by virtue of a final judgement rendered

by court of competent jurisdiction (1557);
-In order to be enforced, the eviction must take place by virtue of a
decision by Final Judgment.
-It should not be trespass in fact (1590). There is a mere act of trespass
when the trespasser claims no right whatever. The vendor is not liable
therefor. In such case, the vendee has a direct action against the
trespasser (not the vendor) in the same way as the lessee has such right
(1664)
-When is a decision considered final for purposes of enforcing warranty

of eviction?
Unlike in special proceedings like Change of Name, Adoption, etc, each
and every order, interlocutory or not, is appealable. In ordinary civil
cases, an interlocutory cannot be appealed. The remedy is to go to SC
by Petition for Certiorari under Rule 65 (gadalej).
2 Kinds of Finality:
1) Finality for purposes of Appeal
-1) when the facts have been established by evidence, 2) Court
identify the issues, 3) Application of the laws, 4) Decision
rendered. >> This decision is final for purposes of appeal…
2) Finality For purposes of Execution-
-…and if no appeal is perfected or if appeal is perfected but the
same judgment is affirmed by the SC, it becomes final and executory
when there is no more furthers acts to be done by the courts and
the parties except to have the Judgment executed. >>THAT IS THE
KIND OF JUDGEMENT required by law for purposes of enforcing the
warranty against eviction.
3rd requisite: The judgment is based on a right prior to the sale or an

act imputable to the vendor;
4TH requisite: The vendor must be summoned in the suit for eviction and
made a co-defendant at the instances of the vendee (1558);
FACTS: A sold a land to B for 5M by means of public instrument. A delivered

the land to B, to which B took possession of said land. Thereafter A sold
to C, by public instrument, the same land. Assuming that C is in good
faith, registered the land before the RD. (Under 1544, C is the rightful
owner of the property.) Subsequently, B was informed of the registration
of the sale by C. B went to RD and registered an “adverse claim annotated
at the back of the title”. In order to cancel the adverse claim and to
remove any doubt on C’s title, C filed a case against B for quieting of
title. Let us assume that A had a summon and made a third party thereto.
The court rendered judgment in favor of C on Aug 1 2017, and the same
was duly received by B and A. B did not appeal within 15 days. B was ousted
and deprived of his ownership and possession of the land.
B: Bayaran mo ko under 1555 for breach!
A: Teka, kupal ka walang breach di ka naman nag appeal!
Is A correct?
No, A is not correct. The law expressly provides that the vendee need
not appeal from the decision in order that the vendor may be liable for
eviction. (1549) B may maintain an action against A for breach of warranty
against eviction, notwithstanding the absence of appeal. Provided that
the judgment was made final and executory for purposes of eviction (see
explanation above).
What the reason behind 1549? Why appeal by Vendee not needed? (wait for
it..)
How can the Vendor be made summoned? By filing a third party complaint
with leave of court.
Why is the vendor required to be summoned? At the end of the day, it is
the vendor who is answerable for the breach of warranty against eviction.
That being the case, Vendor is entitled to DUE PROCESS! He has his right
to be heard. So with that, once the vendor is made a party defendant
to the case, it is no longer the obligation of the vendee to appeal from
the adverse decision. It is now incumbent upon the vendor to defend his
vendee from any disturbances to protect the title of his vendee.
To summarize, if B was sued by C in an action to quiet title, in order

to bring A (seller) to the picture, A must file a third party complaint.
(Note: It is not enough that B furnishes A a copy of the complaint. The
mere furnishing of a copy of the complaint by the vendee to the vendor
is not sufficient.)
Summons at the instance of the vendee must be issued by the court in order
for the court to acquire jurisdiction of the person of the vendor. Once
the vendor is made a party to the case, either as intervenor or party
defendant or co-plaintiff, the vendee who was ousted need not appeal
from the decision because it is incumbent upon the vendor to protect the
rights and title of the vendee with respect to his property. This is the
reason why B need not appeal as it is incumbent upon A to protect rights
of B.
May there be an instance where a notice be enough in order for the warranty
against eviction to be enforced? YES. (see explanation below)
HYPO: A occupied a disposable land covered by (note that unregistered

land) TDR 1234 since 1970. On Jan 1, 2012, A by means of a P.I., sold
the same property to B for 6M. On Jan 1 2013, A sold the same to C for
7M. C immediately entered the premises by OCEN possession. On June 1,
2013, C filed for the first time the registration of the land under PD
1529. Assume B is the owner. Having received the notice of registration
made by C, B went to A “huy tangina ka ito copy ng petition ni C seeking
to register the land that was sold and delivered to me by means of p.i.
putting the property under the torrens system”. Eventually, C was allowed
to present proof. Thereafter, a decree by court was issued, COT in favor
of C despite B’s opposition. Judgment became final and executory.
Can B go against A for the warranty against eviction?

YES. Although the law requires that the vendor be summoned, in this case,
the requirement was dispensed with. This is an instance where a notice
is enough. Note that, A was never summoned. A was never made a party to
the case. So bakit pwde?
In land registration proceedings, what are the jurisdictional

requirements?
It being an ACTION IN REM, the jurisdictional requirement of NOTICES and
PUBLICATION should be complied with. When B gave A the notice of the
pendency of registration as well as the opposition made by B thereto,
THERE BEING NO SPECIFIC DEFENDANT IN A PETITION FOR REGISTRATION, A as
interested party must appear to give his opposition of the registration.
With B furnishing A a copy of the petition and B’s opposition thereto,

that should have impelled A to enter into the picture and file for a MOTION
FOR INTERVENTION and participate in the proceedings in order to protect
the title to and possession of his vendee B. IT WOULD HAVE BEEN IMPOSSIBLE
TO MAKE A PARTY THERETO KASE NGA IN REM ITO BES!!!
Note that in original registration proceeding, not only is there a quieting

of title, there is a complete cleansing of title, because upon the issuance
of the COT, the land would still be considered in the name of C free from
any liens or encumberances (yan nakalagay sa COT). His right to the
property is imprescriptible, it cannot be lost by prescription.
Sa land registration proceedings, you are merely putting the land under
the operation of Torrens system of land registration. The court does not
give you ownership of the property, but merely an acknowledgement of the
fact that petitioner is the owner of the property upon proof of OCEN adverse
possession etc.
HYPO: Mar 3 2018, A by means of P.I. sold and delivered B a parcel of

land (unlike the scenario above, registered ito). The same was sold by
A to C for 6M. With C acting in GF, thereafter registered the land to
RD. (1544 says C is the rightful owner, but there is a doubt to the title).
Unsatisfied, C filed a case against B for quieting of title. (It is an
action quasi in rem!) Upon receipt of complaint, B filed an answer and
went to A. B gave A copies of the answers and complaint. After trial,
B was deprived of the property notwithstanding the fact that he was the
first vendee. Judgment become final and executory.
Can B proceed against A for breach of Warranty against eviction?

No. Because he was never made a party to the case. A was deprived of his
right to due process! B cannot maintain an action against A. Note that
the registration was a quasi in rem proceeding.
**In an action quasi in rem, an individual is named as defendant. However,

unlike suits in rem, a quasi in rem judgment is conclusive only between
the parties. A quasi in rem proceeding is one brought against persons
seeking to subject the property of such persons to the discharge of the
claims assailed.
5TH requisite: There is no waiver on the part of the vendee.
PAHABOL!
1547 LAST PARAGRAPH

Facts: A loaned from B the amount of 3M due on Jan 1 2017. Obligation
was instituted on Jan 1 2015. To secure payment of the obligation, A
constituted a REM in favor of B over his property covered by TCT 1234.
Jan 1 2017 arrived, B demanded A payment of the loan and by way of notarial
act the payment of A’s obligation in the amount to 3M. A refused to pay.
On June 1 2017, B demanded again, A refused. B foreclosed the mortgage.
In a public sale or foreclosure sale, with X being the highest bidder
for 2M, the same was awarded to X. Upon delivery of land to X who was
in possession of the property for 6months, here comes C filing an action
against X for quieting of title because he has a right to the property
prior to the foreclosure sale. C obtained a favorable judgement. X had
A and B impleaded as in party defendants. X was evicted.
Can X proceed against B for breach of warranty against eviction? No.

(see explanation below)
Facts: A obtained a cash loan from VILLARICA pawnshop in the amount of

3M due and payable on Jan 1 2018. In order to secure the obligation,
sinangla ni A ang car nya. On Jan 1 2018, Villarica demanded payment.
Mar 1 2018, Villarica demanded again. A refused to pay. A public sale
was conducted. The sale was awarded to C for 2.5M. Supposed upon the
delivery, C found out that the car was suffering a hidden defect rendering
it unfit for the purpose of which it is intended.
Can C hold Villarica pawnshop liable for breach of warranty against hidden
defects?
NO. No warranty of title is implied in a sale by one not professing to
be the owner. Accordingly, the rule on implied warranty does not apply
to a sherriff, auctioneer, mortgagee, pledgee, or other person who sells
by virtue of authority in fact or law (1570 last par.). In other words,
they are not liable to a person with a legal or equitable interest in
the thing sold (1547 par 2). They do not warrant the title of the person
who is supposed to own the thing sold (1552).
WARRANTIES AGAINST EVICTION

Article 1548 - 1560
24 October 2018
Art. 1548.
Eviction shall take place whenever by a final judgment based on a right
prior to the sale or an act imputable to the vendor, the vendee is deprived
of the whole or of a part of the thing purchased.
The vendor shall answer for the eviction even though nothing has been
said in the contract on the subject.
The contracting parties, however, may increase, diminish, or suppress
this legal obligation of this vendor.
Two Kinds of Waiver by the Vendee:

1. Consciente - voluntarily made by the vendee without the knowledge and
assumption of the risks of eviction (vendor shall only pay the value which
the thing sold had at the time of the eviction)
2. Intentionada - made by the vendee with the knowledge of the risks of
eviction and assumption of its consequences (vendor shall not be liable).
Take note:
Both waivers, require the intention of the vendee to waive the warranty
against eviction.
In case of eviction and there is waiver consciente, what are the rights
of the vendee? (Art. 1554)
Art. 1554.
If the vendee has renounced the right to warranty in case of eviction,
and eviction should take place, the vendor shall only pay the value which
the thing sold had at the time of the eviction. Should the vendee have
made the waiver with knowledge of the risks of eviction and assumed its
consequences, the vendor shall not be liable.
In consciente, may there be instance where the vendee may recover from
the vendor?
Yes. In case of bad faith. (Art. 1555) If there is bad faith on the part
of the vendor, the waiver is void. In this case, it is as if there is
no waiver at all. And if there is total eviction, the vendee can recover
from the vendor.
Art. 1555.
When the warranty has been agreed upon or nothing has been stipulated
on this point, in case eviction occurs, the vendee shall have the right
to demand of the vendor:
(1) 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;
(2) The income or fruits, if he has been ordered to deliver them to the
party who won the suit against him;
(3) 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;
Cost of suit - any thing that is due to the court, on account of the filing
the suit, on account of defending the suit. It includes: (1) filing fees;
(2) docket fees; (3) research fees; (4) judicial research fees
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale was
made in bad faith.
HYPO: 1 Jan 2017, A and B entered into a contract of sale of a real property
involving a registered parcel of land covered by TCT No. 1 that adjoins
a cliff for 5M and was evidenced by a public instrument. B entered into
the property in this case upon the execution of the contract in a public
instrument. In order to preserve the property and in order to prevent
erosion, B constructed a wall spending 500K. On 1 Aug 2017, A, by means
of a public instrument and for 3M, sold the property to C, who took the
property in good faith and for value without the knowledge of the previous
sale. C, thereafter went to RD and register the second sale in his favor.
Under 1544, C is the rightful owner being the first registrant in good
faith. Suppose C, filed a case against A & B for the recovery and quieting
of title of the land. C was able to obtain a favorable judgment and declared
to be the true and lawful owner and possessor of the land. The judgment
became final and executory. Then, there is total eviction.
Can B maintain a case of breach of warranty against eviction against A?

Yes. Under 1555, A, being the vendor, is bound to pay B for the five items
subject to certain conditions and circumstances.
How about the amount spent by B for preserving the land (500K), from whom
can he recover the same?
From A
What is the nature of the improvement introduced by B to the property?

Necessary improvement.
If that is so, does A stand to benefit from the improvement?

No because A is not the eventual owner and possessor of the property.
Take note: Art. 546-548
A possessor in good faith and bad faith is entitled to be refunded of

necessary expenses spent by him for the preservation of thing. But only
possessor in good faith may retain the thing until he has been reimbursed.
Useful expenses: Only possessor in good faith can be reimbursed for the
expenses with right of retention.
What does interest include?

It includes interests on a and all of the items in 1555 except the value
of the thing. Because if and when the vendee is not ordered to return
the fruits or income, he will keep the same and that will compensate the
liability of the vendor to pay interest.
Take note:
In case of total eviction, the vendor is liable to pay the value of the
thing at the time of eviction.
Take Note: Delivery by a public instrument, if the contrary does not appear
or cannot be clearly inferred. Upon the execution of the public instrument,
delivery has been deemed to have made by the vendor.
Take Note: The warranty against eviction in the absence of an express

stipulation is ALWAYS implied. The parties need not expressly admit
thereon because it is a natural element of a contract of sale.
In case of total eviction, rescission cannot be had as a matter right

or remedy?
Yes. In rescission, whether on account of substantial breach under 1191
or rescission of rescissible contracts, upon the rescission of these
contracts, there is always a duty to return to each other the things they
may have received on account of the contract that was rescinded. There
must be mutual restitution and that is legally and physically impossible
in cases of total eviction. In case of total eviction, the only remedy
available to the aggrieved vendee is to impose the sale and file a case
against the vendor breach of warranty against eviction and thus recover
all the items in 1555, in the absence of a waiver.
May there be an instance where, in total eviction, the vendee may avail
himself of remedy of the rescission of the sale?
Yes.
HYPO: A is the owner of two unregistered adjoining parcels of land. Lot

1 covered by tax dec 1 and Lot 2 covered by tax dec 2. 1 Jan 2018, in
a public instrument, A sold the property to B for 5M. B was not registered
the land. 1 Jan 2016, A sold Lot 1 to C for 6M. 21 Jan 2017, A sold to
C Lot 2 for 7M. Who owns the lot.
Ans: Even if C in good faith registers Lot 1 in his favor, B will still
be the preferred buyer because the registration of C even in good faith
cannot prejudice the superior and preferred right of B
Take Note:
1544 will not apply in multiple sale of unregistered lands because of
sec 113 PD 1529. Rescission cannot apply to the HYPO: above because lots
1 & 2 are sold separately to the same vendee. (1556)
HYPO: A filed an action to quiet the title against C. C was totally evicted
from Lot 1. Can C avail rescission as a matter of right and remedy?
No. When two properties are jointly sold whether for a lump sum or a
separate price, and the vendee is ousted in one of the property to the
extent that he would not have bought the other one, rescission can be
had. (1556)
HYPO: 1 Jan 2018, by virtue of a public instrument, A sold and delivered

to B Lot 1. B was not able to registered the land. Few years after, A
in one and the same instrument executed on 1 Jan 2017, sold lots 1 & 2
to c for 7M.
Regardless of the mode of the payment of the price for as long as there
are 2 properties sold under one and the same act or transaction or
instrument, it is already considered joint.
Take note:
If the properties are sold separately, we do not apply 1556, we apply
the provisions of civ code on the enforcement of the implied warranties
against eviction. In the absence of any waiver, the aggrieved vendee may
recover from the vendor Nos 1-5 of 1555.
Tolentino: In order to preclude the vendee from enforcing the warranty

against eviction in case prescription has been completed after the sale,
equity and the law requires that the vendee must be given a reasonable
opportunity to interrupt the acquisitive prescription.
What are the rights of an aggrieved vendee when an immovable is sold and
encumbered by a non apparent burden or servitude? (1560)
Rescission of the contract, unless vendee should prefer the appropriate
indemnity.
When is 1560 not applicable? When may the vendee not avail the remedy
of rescission plus damages or recover damages only?
1. When the servitude is apparent

2. Even when the servitude is non apparent but the same is mentioned in
the contract
3. When the servitude is non apparent but is registered with Register
of Deeds
Take note:
Registration is tantamount to knowledge.
The vendee cannot avail it, if the servitude is non apparent and not
mentioned in the contract, but is registered with Register of Deeds. In
which case, he cannot enforce the warranty by asking for the rescission
of the contract of sale plus damages or damages only.
What is servitude?
It is an encumbrance imposed upon an immovable for the benefit of another
immovable belonging to a different owner.
Is a lease, mortgage an encumbrance?

Yes.
HYPO: Is there a servitude in the illustration?
No. Because both lots belong to A.
Examples of non-apparent easements or servitude:

1. Easements imposed in waters
2. Party wall (Accdg. to Atty. Mackey)
Right of way is always an apparent easement even if it is continuous or

discontinuous.
Prescriptive Period
When do you reckon the 1 year period for purposes of maintaining an action
against the vendor for breach of warranty against any encumbrance of non
apparent servitude? (1560)
From the execution of the deed, the vendee may bring the action for
rescission or sue for damages.
HYPO: A and B entered into a contract of sale of a registered parcel of

land a lot belonging to X for 5M due and payable on 1 Aug 2018. A bound
himself to deliver and to transfer the physical possession and ownership
of the land upon full payment of price on or before 1 Aug 2018. 1 Aug
2018 arrived, B demanded from A the delivery of the land as well as to
accept the payment. A accepted and delivered it to B. Unknown to B, there
is a non apparent servitude imposed upon the property. 30 Sep 2018, B
filed against A for rescission plus damages for violation of warranty
under 1560. A on his answer, alleged that rescission plus damages can
only be availed during the period of 1 year from the execution of contract
and alleging that the action already prescribed and the contract was
instituted on 1 Jan 2016.
1. Is A correct?
2. Would it be possible for B to maintain an action for rescission plus
damages for breach of warranty against B on 1 Aug 2018?
3. Would it be possible for B to demand A to deliver the land before 1
Aug 2018?
4. Would it be possible to B to compel A to accept the tender of payment?
Answer:
1. Yes (1560)
2. No. 1 year period has elapsed. But he may file an action for damages.
(1560)
3. No, because his obligation to deliver the land and transfer the physical
possession and ownership of land is subject to a suspensive condition
which is the payment of the price. If the condition is not yet fulfilled,
there is no obligation to speak of. If there is no obligation to speak
of, there is nothing to rescind in the first place.
4. No.
Take note:
1. If the discovery of the non apparent servitude is made before the
expiration of 1 year period, action for rescission and damages can
still be availed.
2. If the 1 year period from the time of the execution of the contract
has already expired, the right to recover damages can only be exercised
within 1 year from he discovery of the non apparent servitude, after
the 1 year period for the rescission of the contract has already
expired.
3. The law refers to absolute sales not conditional sales.
4. The execution of a contract evidencing an absolute sale is not in itself
constituting of delivery or transmission of ownership unless of course
there is delivery by mere execution of public instrument. When the
contrary does not appear or cannot be determined further from the
recitals of the public instrument. The mere perfection of a contract
whether it is an absolute sale or a conditional sale does not really
in itself vest ownership with the vendee. Delivery must be had in favor
of the vendee.
Art. 1191
HYPO: 1 Jan 2017, A and B entered into a contract of sale involving a
real property covered by tct no 1 for 5M. A bound himself to deliver the
land and transfer the ownership of the land upon full payment of price
on 1 June 2017. 1 June 2017 arrived, A demanded from B the payment of
the price but B refused to pay. Same demand was made on 1 July 2017 until
1 Sept 2017, but B still failed to pay the price.
Can A rescind the contract?

No. Because there is nothing to rescind. The obligation of A to B is totally
dependent upon a suspensive condition which in this case, it is not yet
fulfilled.
Heirs of Sofia Quirong v DBP:

The remedy of "rescission" is not confined to the rescissible contracts
enumerated under Article 1381. Article 1191 of the Civil Code gives the
injured party in reciprocal obligations, such as what contracts are about,
the option to choose between fulfillment and "rescission."
"Rescission" is a subsidiary action based on injury to the plaintiff’s

economic interests as described in Articles 1380 and 1381. "Resolution,"
the action referred to in Article 1191, on the other hand, is based on
the defendant’s reach of faith, a violation of the reciprocity between
the parties. As an action based on the binding force of a written contract,
therefore, rescission (resolution) under Article 1191 prescribes in 10
years. Ten years is the period of prescription of actions based on a written
contract under Article 1144.
Article 1191 gives the injured party an option to choose between, first,
fulfillment of the contract and, second, its rescission. An action to
enforce a written contract (fulfillment) is definitely an "action upon
a written contract," which prescribes in 10 years (Article 1144). It will
not be logical to make the remedy of fulfillment prescribe in 10 years
while the alternative remedy of rescission (or resolution) is made to
prescribe after only four years as provided in Article 1389 when the injury
from which the two kinds of actions derive is the same.
In case of partial eviction, is it considered as rescissible as to warrant

the application of 1389?
No. The validity a contract is determined only at the time of perfection
(meeting of the minds of the parties) not at the time of its consummation
(execution of the obligation). A rescissible contract is defective at
the time of its perfection not at the time of its consummation.
Take note:
1. If there is a partial eviction and there is an express warranty and
there is a period agreed upon, that period agreed upon is the
prescriptive period that must be observed by the parties. In the
absence of the period, it must be 10 years if the contract is in writing
not 4 years under 1389.
2. Rescission of rescissble contracts, as a subsidiary remedy, can only
be had if there is no other remedy available to the aggrieved party.
They must first exhaust all remedies available before resorting to
rescission.
3. Accion pauliana is NOT an available remedy to an aggrieved vendee in
case of partial eviction.
WARRANTIES AGAINST HIDDEN DEFECTS

Article 1561-1581
Hidden Defect
- Not known or could not have been known to the vendee; hidden to
the eyes and cannot be discovered by ordinary careful inspection
Requisites
1. Defect is hidden
2. The defect is serious or important such that –
(i) The hidden defect should render the subject matter UNFIT for
the use for which it is intended
(ii) The hidden defect should DIMINISH the thing’s FITNESS such
that the buyer would not have acquired it or would have given
a lower price for it had he been aware of it
3. The defect must exist at the time of the sale
4. Vendee must give notice of the defect to the vendor within a
reasonable time
5. The action must be brought within a reasonable period
6. There must be no waiver of warranty
What if the defect came into existence AFTER the perfection of the contract
of sale, can the buyer enforce the warranty against hidden defects against
the buyer?
No, the law requires that the defect must exist during and before the
contract of sale’s perfection and not thereafter. If the defect came after
the perfection of the sale, there can be no warranty against hidden
defects.
HYPO: On Jan 1, 2018, A and B entered into a contract of sale of a particular
Rolex watch for P500,000. In the contract, A bound himself to deliver
the watch to B on Aug 1, 2018 and B to pay the price upon the perfection
of the contract which he did. On June 1, 2018, unknown to A, the watch
suffered hidden defects, rendering it unfit for its particular use and
purpose. On Aug 1, 2018, A delivered the watch to B and upon a careful
examination of the watch, B discovered that the watch was suffering from
a hidden defect, rendering it unfit for its purpose.
Can B hold A liable for the breach of warranty against hidden defects
and thereafter rescind the contract?
No, there is no breach because the defect must exist at the time of the
sale or even before the sale, specifically at the time the offer was made.
Why is that?
Because in the absence of negligence, either direct or contributory on
the part of A and the defect came into existence by virtue of a fortuitous
event, A can avail of the benefits of Art 1174, save when expressly provided
by law, by express stipulation of the parties or when the nature of the
obligation requires the assumption of risk, no person may be held liable
for any unforeseen event. You can also find that in Art 1189 on obligations
subject to a suspensive condition.
Art 1189 is also what we call an obligation subject to a suspensive period

pending the arrival of the period. If the thing deteriorates by nature,
the impairment shall be borne by the creditor. If the thing deteriorates
through the fault of the debtor, rescission can be had.
May there be an instance where the buyer cannot enforce the warranty
against hidden defects against the seller even if the same is hidden and
the defect is substantial?
HYPO: A on Jan 1, 2018, entered into a contract of sale with B for a watch,
unknown to A, the watch was already suffering from a hidden defect. A
offered for sale his watch to B for P500,000. B accepted the same and
B is an expert in watches. Upon delivery, B discovered the hidden defect.
Can B enforce the warrant against A?

No. Art 1561 …said vendor shall not be answerable for patent defects or
those which may be visible, or for those which are not visible if the
vendee is an expert who, by reason of this trade or profession, should
have known them.
Can the implied warranty against hidden defect be enforced by a second

hand buyer in sales of second hand items?
No for implied warranties, Moles v IAC. If express warranty, will be liable
Is there a difference between warranty against hidden defects and warranty

as to the fitness of the goods for a particular purpose?
Even if the defect is unknown to the vendee but the same is not of such
medium that would render the thing unfit for its particular purpose, there
is no warranty against hidden defect. Same thing is true in warrant to
the fitness of the thing sold for a particular purpose
HYPO: A is a dealer, B a restaurant owner. B went to A on Jan 1, 2018

asked A for 100 sacks of rice fit for the business of B worth P500,000.
B paid the price and demanded the delivery of the rice. A delivered NFA
rice (low quality rice). Can B sue A as to the fitness of the rice for
a particular purpose?
Yes. You have 6 months to file for a redhibitory action or for the breach
of contract under Art 1191 for the contravention of the tenor of the
obligation
In the delivery of an indeterminate thing, can the vendor compel the buyer
to accept a thing of lower quality? A thing of superior quality?
No.
What if there is a stipulation as to the quality of a thing in an obligation

and the vendor failed to delivery the thing of that quality?
If I were B, I would sue A for rescission of the contract, not by redhibitory
action. Because under Art 1191, the period to file the action is for 10
years if the contract is in writing. 6 years, under Art 1145, if not in
writing
Case of Coca-Bottlers Phils. Inc v CA

This is a quasi-delict under Art 2176, 4 years to file action for rescission
Take note:
Sale of goods by sample and description, the warranty responds to the
description. As to the merchantable quality, there is also an implied
warrant
In sale of goods under patent or Trademark, is there an implied warranty

as to the merchantable quality?
Yes
As to its fitness for a particular purpose?

Unless there is an express stipulation there is no warranty
Reason behind the law

Because of the publication of the use for the patent or trademark for
its particular purpose. In case of a sale of particular goods under its
patent or trademark, there is an implied warranty as to its merchantability
but not as to its fitness for a particular purpose unless the contrary
is agreed upon.
If a thing suffers from a hidden defect and the same is lost, what are
the rules?
Art 1568
Can there be an instance where the seller is liable even if the thing
sold is lost through the fault of the vendee?
Yes, if the thing sold is suffering from a hidden defect and the same
is lost through a fortuitous even or even through the fault of the vendee,
the warranty against hidden defects can be enforced.
HYPO: A borrowed from B money amounting to P5 000 000, due and payable
on June 1, 2017. June 1, 2017 arrived, B demanded from A the payment of
the latter’s obligation but A refused to pay. Several demands were served
to A. B file a motion for a writ of execution to make the properties of
A satisfy the debt. The sheriff sold A’c car in a public auction to X.
At the time of the sale the car was already suffering from a hidden defect,
making it unfit fir the purpose for which the car was sold. Such fact
is known to A. The car was delivered to X, after a careful examination,
X discovered the defect. What are the rights of X?
A can be made liable by X
Can X make A liable for damages?
No. Art 1177, because he did not directly participate in the sale of the
car, he is not liable for damages.
OBLIGATIONS OF THE VENDEE

Articles 1582-1593
Where should vendee pay the price?

Art 1582
HYPO:
1st case:
A is a resident of Davao, B resident of Batangas. On Jan 1, 2018 A and
B entered into a contract of sale of 100 sacks of Jasmine rice for P5m.
Under the contract, A bound himself to ship the goods to B in Manila on
Jan 1, 2018 and B to pay the price on Aug 1, 2018. Where should B pay
the price?
2nd case:
Jan 1, 2018, A and B entered into a contract of sale of a particular parcel
of land in Manila. Where should B pay the price?
3rd case:
Jan 1, 2018, A and B entered into a contract of sale of a particular car,
which at that time is within the premises of SBU. The price is P5m. Under
the contract, A bound himself to deliver the car to B upon the perfection
of the contract and B to pay the price on Aug 1, 2018. Where should B
pay the price?
Ans
1st case
The place of delivery is manila and place of payment is Batangas. Art
1521
2nd case
The place of payment is Batangas City. Art 1521 applies. There being no
stipulation as to the place of delivery since the object is a specific
thing, place is where the thing is located at the time of the perfection
of the contract
3rd Case
The car is located in SBU, that does not mean that mean that B has to
go to SBU and pay the price because the obligation is subject to a
suspensive period. We separate the obligation. A’s obligation is a pure
one, delivery has already been made. Kailan magbabayad? Aug 1, 2018. There
is no place for payment agreed upon expressly or impliedly. Place of
payment is the domicile of B because B’s obligation consists of a delivery
of a generic thing.
Take Note
In the absence of any stipulation as to the place of payment, the place
of payment is the place of delivery and that presupposes that both
obligations must be done simultaneously. If both obligations are not
subject to the same terms and conditions, then you have to apply Art 1521
with respect to the buyer’s obligation to pay the price. For purposes
of determining when the obligations under a contract of sale are to be
performed, they must be treated separately and independently, although
they are correlative to each other.
Right to examination and inspection

Art 1584. Self explanatory
When should vendor demand from the vendee not only the price but also
the interest?
Art 1589
In order for the interest to accrue, does the law require the same to
be in writing?
For contracts of loans yes Art 1956. For contracts of sale, oral agreement
is enough
When may vendor demand the interest?
Follow up HYPO: Jan 1, 2018, A and B entered into a contract of sale of

a particular carabao for P5m. Under the contract A bound himself to deliver
the specific carabao on Oct 15, 2018 and B to pay the price upon the
perfection of the contract. On Jan 1, 2018, B paid the price as promised.
July 1, 18, the carabao gave birth. Is B entitled to the offspring?
B is not entitled to the offspring because the obligation of A to deliver
has not yet arisen
Suppose before delivery on Oct 16, 2018 (so delay) Carabao gave birth,
who owns the offspring?
B owns the offspring
Take Note:
Gen rule: vendee has right to the fruits under 1164, only if what to be
delivered is a determinate thing and that the obligation to deliver arises.
What if B paid the price before the obligation of A to deliver and the
carabao gave birth after the payment and before the delivery of the
caraboao, can A demand for the interest?
No, A cant demand for the payment of interest. Art 1589. Vendee owes
interest for the period between the delivery and payment of price. Delivery
must precede payment of price. Delivery must first be made
REMEDIES OF THE SELLER

Article 1591-1593, 1597, 1525-1535
6 November 2018
If the thing sold is an immovable property

1. Automatic Rescission (1591)
a) Requisites
i. ABSOLUTE sale, and delivery of the property
ii. Vendee has not paid the price
iii. There is a reasonable ground to fear loss of BOTH property
and price
Take note:
If the requisite C is not fulfilled, use judicial rescission under Art.
1191 instead, and connect with Art. 1169 (Delay) and/or Art. 1170 (fraud,
negligence, intimidation, contravention of the tenor of the obligation)
HYPO: On January 1, Property X was sold by A in favor of B, who promised

to pay P5 million on June 1, with a surety. Upon reaching June 1, A demanded
payment, B refused; November came and despite repeated demand, B refused.
Is Art. 1591 applicable in this case?
NO. There is a Surety, who is a secondary creditor. There is no fear of
loss of price since if B wasn’t able to pay, A will be secondarily liable.
Same thing with Guarantor, who is subsidiary liable.
Take note:
It is necessary that loss of both price and property is feared. Under
the first case, Art. 1591 is not applicable. A may sue for specific
performance, or judicial rescission
Why is it required to be ABSOLUTE sale?
Because if the sale is conditional, and the obligation is contingent on
such condition, and such condition is not fulfilled, the obligation does
not arise; as such, the proper remedy of the seller is not rescission,
but rather, unlawful detainer or forcible entry, as the case may be.
2. Rescission under Art. 1592

There MUST BE A STIPULATION THAT upon failure of payment of price, the
vendor has the right of rescission. This is the view of Tolentino, and
Atty. Casiño subscribes to his view. If there is no stipulation, rescission
cannot be granted under Art. 1592.
If there is a stipulation, and a judicial demand (in the form of a

complaint), or a notarial act (acknowledgement of a notary public in the
presence of 2 credible witnesses), and it was duly received by the vendee,
the Court generally has no right to grant a new term if payment is to
be made, absent any reasonable ground that promotes justice.
If judicial demand or notarial act was done, payment of price cannot stop
the rescission.
Read Suria v. IAC. This case was harshly discussed by Tolentino
HYPO: On January 1, Property X was sold by A in favor of B. A and B agreed

that the property by under a real estate mortgage in favor of A, with
the agreement that B will pay on June 1, and that mortgagees retains the
right to foreclose. Upon repeated demands, B refused to pay the price.
In this case, Rescission cannot be had since there are other remedies
available. It must be noted that under Art. 1383, rescission is a
subsidiary action and cannot be instituted except when the party suffering
has no other legal remedy. Since another remedy is available, which is
to foreclose the property.
According to Atty. Casiño, what happened is a novation, so A’s remedy
is specific performance of payment in a simple loan, or to foreclose the
property, bawal rescission.
The stipulation is necessary, according to Tolentino, because upon

non-payment of the vendee, he incurs a SUBSTANTIAL BREACH due to the
stipulation, and upon serving of a judicial demand or a notarial act,
the vendee losses the right to pay for the property afterwards.
If there is no stipulation, the requirement of rescission that there must

be a substantial breach is not satisfied.
Additionally, the award of interest is included as damages in favor of

the vendor, not fruits.
If the property is movable, Art. 1593 operates
It is important for Art. 1593 that there is NO DELIVERY by the vendor
HYPO: On January 1, A sold a car to B, and delivered the same to B, payment

is to be made at June 1, which B did not pay. Can A rescind the obligation
and take the car back?
No, because A had already delivered the car, and as such, only judicial
rescission can be availed of. If there was no delivery yet, A may rescind
the contract without judicial intervention.
HYPO: On January 1, A sold a car to B, with the agreement that payment

will be made at December 1. On November 5, A wanted to deliver the car,
but B refused to accept the car. Since A wanted to deliver, and was denied,
he wanted to rescind the contract. Is A’s action valid?
No, rescission cannot be had due to law presupposing that obligation is
reciprocal. Connect Art. 1593 with Art. 1169 last paragraph; that neither
party occurs delay if both parties are not ready.
For Non – acceptance, Title needs to pass to the vendee. Additionally,

action for damages are such: Art. 1595, 1956, and when the buyer unjustly
refuses to accept the delivery
Technical Rescission under Art. 1597
Requisites:
1. No delivery of goods;
2. Buyer has repudiated the sale;
3. Buye has manifested inability to perform the sale;
4. Buyer has committed a breach
Contrat 1597, 1593, and 1533 (stopping in transit)
Who is an Unpaid Seller under 1525:
When the whole of the price has not been paid or tendered;
When a bill of exchange or other negotiable instrument has been received
as conditional payment, and the condition on which it was received has
been broken by reason of the dishonor of the instrument, the insolvency
of the buyer, or otherwise.
Under the second paragraph, if payment is made by the vendee through a

manager’s check, it is deemed as a valid payment because it will constitute
as a novation, in which the debtor has been substituted (bank instead
of vendee), and the subject matter has been changed (dation en pago –
check in lieu of legal tender)
Applying Art. 1249 - The delivery of promissory notes payable to order,

or bills of exchange or other mercantile documents shall produce the effect
of payment only when they have been cashed, or when through the fault
of the creditor they have been impaired.
HYPO: On January 1, A sold a car to B, who, as payment, gave a manager’s

check to A. On July 15, A tried to encash said check, but was denied by
the bank due to check being stale. Is A an unpaid seller?
No, since the Manager’s check has been given, and it is through the fault
of the creditor that payment has been impaired. A has no cause of action
against B anymore, but he has cause of action against the bank
HYPO: Same facts, except personal check.

A is an unpaid seller. A has cause of action against B, and he has not
received payment yet. No substitution.
Special Extra Judicial Remedies of the Unpaid Seller

 Demand payment
 Retain Possession of the goods – possessory lien under Art. 1527
 Stop the goods in transit – Art. 1530
 Resell the goods – Art. 1533
 Rescind transfer of title to the goods – Art 1534
POSSESSORY LIEN (Art. 1527) – unpaid seller retains right to possess until
payment in case:
 Goods have been sold without any stipulation as to credit
 Goods have been sold on credit, but term has expired
 Buyer becomes insolvent
Vendor losses possessory lien:

(1) When he delivers the goods to a carrier or other bailee for the
purpose of transmission to the buyer without reserving the
ownership in the goods or the right to the possession thereof;
^basically Art. 1503 and Art. 1523 – RESERVATION OF THE VENDOR OVER
OWNERSHIP. IMPORTANTE ITO.
(2) When the buyer or his agent lawfully obtains possession of the
goods;
(3) By waiver thereof.
Important to note here is that unpaid seller has a lien in case he
has not been paid. He has a right of possession until fully paid, as
provided in Art. 2241 – 2244 – Concurrence and Preferences of Credit
STOPPAGE OF GOODS IN TRANSIT (Art. 1530) – the important requisite here

is that the vendee is or will become insolvent
Goods are in transit:
(1) From the time when they are delivered to a carrier by land,
water, or air, or other bailee for the purpose of transmission
to the buyer, until the buyer, or his agent in that behalf, takes
delivery of them from such carrier or other bailee;
^THE GOODS MUST BE IN POSSESSION OF THE CARRIER WITHOUT
RESERVATION OF OWNERSHIP. KAILANGAN PA RIN NI BUYER NG BILL OF
EXCHANGE PARA MAKUHA YUNG MGA GAMIT MULA SA BAILEE/CARRIER.
(2) If the goods are rejected by the buyer, and the carrier or other
bailee continues in possession of them, even if the seller has
refused to receive them back.
Goods are no longer in transit within the meaning of the preceding

article:
(1) If the buyer, or his agent in that behalf, obtains delivery
of the goods before their arrival at the appointed destination;
^KUNYARI PIRATA YUNG VENDEE TAPOS KINUHA NYA YUNG GOODS MULA
SA SHIP. HINDI NA IN TRANSIT YUN, NASA POSSESSION NA SYA NG VENDEE
(2) If, after the arrival of the goods at the appointed destination,
the carrier or other bailee acknowledges to the buyer or his
agent that he holds the goods on his behalf and continues in
possession of them as bailee for the buyer or his agent; and
it is immaterial that further destination for the goods may have
been indicated by the buyer;
^KAPAG HAWAK NI BAILEE YUNG GOODS FOR THE VENDEE
(3) If the carrier or other bailee wrongfully refuses to deliver
the goods to the buyer or his agent in that behalf.
^CARRIER OR BAILEE CANNOT EXTEND BEYOND TIME ALLOWED, KASI
EXTINGUISHED NA OBLIGATION NI CARRIER. POSSIBLE NA MAY CRIMINAL
LIABILITY SI CARRIER DITO NA CONVERSION.
RESELL THE GOODS (Art. 1533) – Memorize this –
Applicable only when:

 Vendor has possessory lien
 Vendor has stopped goods in transit
3 circumstances that resale may be done:
 Goods are perishable in nature
 Right to resale expressly reserved in case the buyer should default
 Buyer delays in the payment of the price for an UNREASONABLE time
 Scenario: A sold in favor of B 1000 Kilograms of galunggong for
the price of 5 million pesos. B paid the price immediately and A
accepted the price. For reasons only known to B, B refused to accept
the galunggong shipment on due date. Can A resell the galunggong?
o Answer: No. B already paid the price. The rightful remedy
of B is consignation or damages.
 Scenario: A sold in favor of B a shipment of IPhone for the price

of 5 million pesos, with the stipulation that A will have the right
to resell in case B defaults on payment. On the due date of payment,
B was not able to pay the price. Can A resell the IPhones?
o Answer: No. There is no default when there is no demand, except
in scenario given in 1169
 Scenario: A sold in favor of B a shipment of IPhone for the price

of 5 million pesos, payment is due and demandable on January 1,
2018. On October 1, 2018, B still has not paid the price. Upon due
notice of the desire to resell, can A resell the IPhones?
o Answer: Yes. As long as the delay in payment of the price
is unreasonable, the right to resell is autom`atically given
to the vendor, after due notice to the vendee.
o Only in Scenario 3 is notice to resell required. Hindi
kailangan sa perishable, saka default ang notice to resell.
This is to afford the vendee in scenario 3 to pay the price.
 Also, reseller cannot buy the property he is reselling.
o Reason for this is that he may fulfill the deficiencies in
the resale from the buyer.
 Kunyari, original contract, 1 million for the iphone.
Naresell ni vendor sa ibang tao yung iphone for 500k.
Pwede pa rin habulin ni vendor yung 500k mula sa
original vendee. Kapag binenta ni vendor sa sarili nya,
pwede nya ibenta ng 50k lang, tapos habulin nya 950k
mula kay vendee. Unjust yan!
RIGHT TO RESCIND (Art. 1534) – applicable in these cases (no judicial

intervention necessary):
 Seller has possessory lien
 Stopped the goods in transit
Damages lang pwede dito:

 Expressly reserved
 Buyer has been in default for unreasonable amount of time
MAKE UP CLASS NOTES:
The remedy of rescission may be had under a separate set of rules and
laws — rescission under 1594,1593, 1595 and 1596 as well as 1597. 1597
is applicable under different sets of circumstances, 1596 also under
different sets of circumstances. 1593 and 1597. There may be where an
- may be recovered by the unpaid seller in which case provisions of
1525-1535 will not apply because they do not cover a - for damages. The
recovery thereof must be done in accordance with certain specific
provisions of the Civil Code
Possessory lien. Ano ba ibig sabihin ng lien? it’s a right. if a seller

is unpaid as defined by the law, for as long as he has in his possession
the goods sold. He can withhold delivery of the thing
HYPO: A and B enter into a contract of sale of 100 sacks of Jasmin rice
for 1M payable on Dec 31, 2018. Is A an unpaid seller, suppose this morning
Nov 6, 2018, B demanded from A delivery of the sacks of rice and A withhold
the delivery of the rice by insisting that he is an unpaid seller because
the whole of the price has not yet been tendered or paid. Magkaiba ang
tender of payment and payment kaya sinasabi ng batas price has not yet
been tendered or paid. Is A an unpaid seller as to entitle him to withhold
the delivery of the rice?
The answer is NO. He is not an unpaid seller, why?
Can A validly demand payment of price this morning?

The answer is no because this obligation is subject to a suspensive period
and only upon the arrival thereof. May A demand validly from B the payment
of 1M? A therefore is not an unpaid seller. He cannot withhold the delivery
of the rice, he cannot maintain possession of the rice. He must deliver
the rice to B upon demand.
Why, what are the effects of the perfection of a contract of sale?
When is there possessory lien? Under the first instance you have to read
carefully - Art 1523 on delivery to a carrier pursuant to a contract as
well as Art 1503 as to when ownership is deemed reserved.
HYPO: Aug 1, 2018, A resident of Davao and B resident of Manila entered

into a contract of sale of 1K sacks of corn for 5M. In the contract, B
authorized A to ship the goods to B via __ and that’s what he did. Thus
on Aug 8 2018, pursuant to the contract, A contracted the services of
a common carrier. Upon receipt of corn by the common carrier, it issued
a bill of lading by the terms thereof, the goods are deliverable to A.
B pays A 5M in personal check? but upon presentment thereof the day after
it bounces. Can A exercise possessory lien being an unpaid seller? Yes.
Delivery to carrier is delivery to buyer subject to 1st-3rd paragraph
of Art 1503. The bill of lading states that the 1k sacks of corn are
deliverable to A or order. Upon delivery of corn to common carrier, did
A lose ownership? No—because there is a reservation of ownership until
payment of the price.
HYPO: A and B entered into a contract of sale of 1k sacks of Jasmin rice

for 5M. B stole the rice from A, A thereafter demanded from B the payment
of the price. Personal check but the same bounced. Did A lose possessory
lien over the property? No daw (may nag recit and di masyado rinig
explanation niya pero 559 yun basis)
HYPO: A and B entered into a contract of sale of 1000 units of Nokia 3310
for 5M. In the contract, A bound himself to deliver to the units to B
immediately upon perfection of contract on July 1 2018 and B to pay price
on Sep 30 2018. Aug 1 2018, B went to A and delivered 1000 units of Nokia
3310 for defects because according to B the same was defective. Nov 1,
2018, B became insolvent. Suppose B demanded from A the delivery of 1000
units of Nokia 3310, can A be compelled to do so by B? Yes. Can A retain
the goods as an unpaid seller?
The answer is no because A possesses 1000 units of Nokia 3310 not as a

seller but as a repairman, he cannot retain possession of the same on
account that he is an unpaid seller. He may retain possession thereof
on account of the fact that he is an unpaid repairman, pwede yan, but
not as an unpaid seller. If B tenders the payment of the cause of repairs,
A is by law bound to deliver repaired 1000 units to B
The fact that an action for the payment of price was commenced by unpaid
seller, does not preclude from exercising right to retain the goods until
paid. While it may be true that in other 3 circumstances, the seller has
lost the possession of the thing, the right to retain the goods or
possessory lien is lost but not the right to file an action for the payment
of the price. refer to Art 2241-2247
Stoppage of goods while they are in transit, take note of the requisites.
The mere failure or refusal to pay on the part of the vendee does not
warrant the exercise of the unpaid seller’s right to stop the goods while
in transit, because the law requires that the vendee must be insolvent
or must become insolvent after the sale but before delivery and the goods
are in transit.
When are the goods in transit?

Number 1 - after delivery to a carrier or other bailee and before the
buyer or his agent takes delivery of them.
Does that mean that there is no reservation of ownership on the part of

the seller?
Does the law presuppose that there is no reservation of ownership by the

seller such that the delivery of the goods to the common carrier will
necessarily put ownership over the goods in the hands of the vendee?
HYPO: A and B entered into contract of sale of 1k sacks of Jasmin rice

for 5M. Under the contract, A was authorized to deliver goods via common
carrier and B to pay 5M on Dec 31. A pursuant to the contract entered
into a contract with common carrier. Upon receipt of rice, common carrier
issued bill of lading deliverable to A. While common carrier was in transit,
B became insolvent. What remedies can be exercised by A to protect
interests?
ANS: Stoppage of goods while they are in transit? That is not a remedy
available to A, why? because possessory lien, by delivering goods to
carrier for purpose of shipping the same to the buyer at some destination
point, the seller did not thereby lose possession let alone ownership
of the goods because you have your Art 1503.
Take note:
In order for unpaid seller to stop goods in transit, not only must the
buyer be insolvent, it is required that the goods are in possession of
a common carrier for the purpose of shipment to the buyer without the
vendor reserving the ownership. If there is reservation of ownership,
delivery to carrier is not delivery to buyer and the vendor does not lose
ownership nor possession.
Transpo: when considered in flight?

If the goods are rejected by the buyer - and sinasabi ng batas, goods
are still in transit. What if the goods stored by common carrier in a
warehouse owned by some other person. Upon arrival of ship captain unloaded
the goods and the same were brought to warehouse for storage, are the
goods still in transit? for as long as the carrier or the bailee is in
possession of them, regardless of its location, the goods are still in
transit.
When are the goods no longer in transit? Art 1531
1. After delivery to the buyer
HYPO: A resident of Davao and B resident of Manila. A and B entered into

contract of sale of 1k sacks of Jasmin rice for 5M. Under the contract,
A was authorized to ship goods through common carrier. Deliver on Oct
15, payment on Nov 15. Midway into voyage from Davao to Manila, B and
his men forcibly took the goods from the captain, captain surrendered
rice to B. B became insolvent.
Can A exercise the right to stop the goods in transit?
No. Buyer or his agent obtains delivery when it is in his possession either
lawfully or unlawfully. The buyer already has in his possession the goods,
no matter how he obtained. (O Mr Ballena nandyan ka pala :p hahahaha)
Q: If there was misdelivery by the captain to B, are the goods still in

transit?
No more because the same is already in the possession of the buyer.
When it comes to transfer of ownership, there are so many modes from

1497-1521, can there be delivery just the same even if the thing/s sold
is/are in the possession of a third person?
Yes, for as long as third person acknowledges that he now holds possession
of the goods on behalf of the buyer, then there was already delivery.
In that case, if the captain of the ship/common carrier tells the buyer
that he is now holding the goods on behalf of the buyer, the goods are
no longer in transit. Notwithstanding the insolvency of the buyer, the
seller can no longer exercise the right to stop the goods in transit.
If the carrier or the bailee wrongfully refuses to deliver the goods to

the buyer, the goods are no longer in transit. Notwithstanding the fact
that there is no acknowledgement on the part of the carrier or bailee
that he holds the goods for the buyer. Notwithstanding the fact that the
goods are still in possession of the bailee/carrier, the goods are no
longer in transit. Stoppage in transitu can no longer be exercised. What
is the reason behind the law? the common carrier or bailee is not allowed
to extend the period within which the right of stoppage in transitu may
be exercised by his unjust refusal to deliver the goods to the buyer
Effects
The goods are no longer in transit, of course. The contract of common
carriage is already extinguish and the common carrier is no longer bound
to exercise extraordinary diligence in the care and custody of the goods
as a common carrier. Pero pag ikaw ang bailee o depositary, ang sabi ng
batas extraordinary diligence.
If there is a stoppage in transitu and inspite that the common carrier

delivers the goods to the insolvent vendee, the common carrier is liable
and there is a criminal penalty for that aside from damages
Resale.
There are also three instances when the right of resale may be exercised
by the unpaid seller. If the goods are perishable in nature. If there
is a stipulation to the contrary to the effect that the unpaid vendor
may sell the goods sold in case of default and in case of default for
unreasonable period of time on the part of the vendee. When are the goods
perishable? When they are susceptible to deterioration.
HYPO: Oct 25, 2018, A and B entered into contract of sale of 1k kilos
of galunggong for 5M. In the contract, A bound himself to deliver the
goods to B on Nov 5, 2018 and for B to pay immediately upon perfection
of contract which B did. A on Nov 5, 2018, tendered the delivery of 1k
kilos of galunggong to B. B refused to accept. B is guilty of delay. Can
A resell the goods?
No. From 1525-1535 this pertain to specific provisions of the civil code
that gives certain rights to the unpaid seller. These are extrajudicial
remedies available to the unpaid seller only. If already paid, cannot
resell goods. A is NOT an unpaid seller. What are the remedies available
to A? 1256 tender of payment consignation along with that, the right to
recover damages in case of non acceptance of the goods sold by the buyer.
HYPO: A and B entered into contract of sale of 1k iphone X for 5M. There
is a stipulation in the contract that if there is any delay, A may resell
the goods. In the contract, B bound himself to pay the price on Oct 5,
2018, A bound himself to deliver the goods to B on Nov 10, 2018. Nov 5
arrived, B did not pay A. Can A resell the goods on Nov 10, 2018? (o ikaw
umubo ka haha)
No, wala pang default. Pag sinabing default ng batas, there must be legal
delay on the part of the vendee. Not only ordinary delay. Mere failure
to pay does not constitute delay in the absence of any demand and that
will not warrant the exercise of the right of resale. Delay for an
unreasonable period of time maski walang express stipulation for as long
as the vendee has already constituted legal delay under 1169, resale can
be had. Notice of the intention to resell is not necessary to be given
to the vendee in case there is express stipulation that if default, can
resell by seller. In case unpaid seller, resale can be had even if there
is no notice to the vendee. Notice to the vendee just like in rescission
is only necessary when the sale is founded on things upon default on the
part of the vendee for an unreasonable period of time.
In case of resale, seller cannot buy or purchase the goods that he is

reselling. What is the reason behind the law? e *** magkano, 500k - Can
A get the deficiency from B? The answer is yes, and that is the reason
behind the law. He may make the price at a very very low rate. Resale
and the price obtained is lower, can unpaid seller recover deficiency
suppose the goods were resold to X for 3M. Deficiency os 2M, can A recover
from B? Yes, that is what the law provides. Ngayon if we were to allow
A the unpaid seller to buy property being resold by him for only 500k
then A can recover deficiency from B. that is not allowed
Special Right to Rescind transfer of ownership.

If the seller constituted himself to be bailee of the buyer, ibig sabihin
the thing sold is now, or the ownership of the thing sold is now with
vendee but possession thereof is still with unpaid seller, he can rescind
the transfer of ownership. In case where is express provision that
rescission can be had, as a matter of right and remedy if and when the
vendee is guilty of delay or when the vendee is guilty of delay for an
unreasonable period of time. Notice to rescind is enough. The Right to
Rescind may only be exercised if the unpaid seller still has in his
possession the thing/s sold. You do not rescind the contract, you only
rescind the transfer of title. Rather than going to court and have the
contract cancelled.
Under the law, the right of resale and rescission can only be exercised
if and only if the goods are in the possession of the vendor or that the
vendor has already exercised the right to stoppage in transitu.
If the goods sold are already in the possession of the vendee, the unpaid
seller can only recover the goods by way of judicial action of rescission
and damages.
RECTO and MACEDA LAW

Nov 7, 2018
RECTO LAW (1484-1486)

-buyers of PERSONAL property are further protected by the Recto Law.
Initially known as the installment Sales Law. Its main purpose is to
prevent potential abuses by the seller in the event that the buyer is
unable to make further installments for a property.
What are the remedies of the VENDOR in a sale of personal property payable
in installments?
1) Exact fulfillment of the obligation, should the vendee fail to pay;
or
2) Cancel the sale, should the vendee’s failure to pay cover two or
more installments; or
3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee shall have failed to pay 2 or more
installments. In this case, vendor cannot recover unpaid balance
of the price.
*not cumulative and not simultaneous!
When is NOT applicable?

 Sale of personal property not payable in installments
- where the balance after payment of the initial sum should be
paid in its totality at the time specified, is not an installment
contemplated by 1484.
 Sale or Mortgage of real estate
-mortgage on real property may only be foreclosed under Rules of
Court or Act 3135
 Contracts to sell!!
When is a sale a straight sale and installment basis? Where the balance,
after payment of the initial sum, should be paid in its totality at the
time specified, the transaction is not by installment as contemplated
by 1484. (Levy Hermanos, Inc v Gervacio). 1484 DOES NOT APPLY TO A SALE
OF PERSONAL PROPERTY ON STRAIGHT TERM OR PARTLY IN CASH AND PARTLY IN
TERM.
HYPO: On Jan 1 2018, A and B entered into a contract of sale of a car

worth 1.2M. Payable as follows: 600K to be paid immediately upon perfection
of contract. The remaining balance of 600K payable on March 1 2018. To
secure payment of the price, B constituted a Chattel Mortgage (CM) on
the car delivered to A. B was not able to pay A 600K after the perfection
of the contract. On Mar 31, A demanded the payment of the entire purchase
price, B failed to pay. A foreclosed the mortgage. The car was then sold
in a public sale to X for 700K, leaving 500K deficiency.
Can A recover the 500k deficiency from B? YES, A can recover the deficiency
of 500K from B. There is down payment in this case. May down payment dito
kasi nga, B will pay 600K “immediately upon the perfection of the contract”.
(Even though B failed to pay the down payment upon the perfection of the
contract, can it be argued then that it is deemed to be an installment
payment? NO. It is still a straight sale.)
Thus, if there is a deficiency after the foreclosure of the chattel
mortgage constituted on the thing sold, recovery can be had because this
is not covered by Art 1484. It is covered by provisions on Loans and
Mortgages laws.
HYPO: On Jan 1 2018, A and B entered into a contract of sale of a car

worth 1.2M. Pursuant to the contract, A delivered the car to B. B bound
himself to pay A the purchase price of 600K on Jan 31 2018 and the remaining
on 600K on Mar 31. On Jan 31, A demanded from B the payment of 600K, B
refused to pay. Mar 31, A demanded from B, this time the entire amount;
B refused to pay. A foreclosed the mortgage. The car was then sold in
a public foreclosure sale to X for 700K. Leaving a 500K deficiency.
Can A recover deficiency from B? NO, A cannot recover the deficiency of

500K from B. This is a sale on installment basis where the purchase price
is payable in installments. The installments becoming due and demandable
AFTER the perfection of the contract.
What are the requisites under 1484?
1. ABSOLUTE SALE
-ownership MUST pass from vendor to vendee. Why? For purposes of
the third remedy. Otherwise, it cannot constitute a valid chattel
mortgage on the movable sold.
-a thing may be PLEDGED or MORTGAGED ONLY BY THE OWNER thereof,
not by any other persons in the absence of authority. Otherwise,
it is VOID.
2. SALE MUST INVOLVE A PERSONAL PROPERTY
3. PURCHASE PRICE PAYABLE IN INSTALLMENTS
-Note that this is only for the purposes of 2nd and 3rd Remedy
HYPO: Jan 1 2018, A offered for sale to B, a car worth 1.2M. Upon receipt
of the offer, B asked that he be given until Jan 31 to pay the purchase
price. A delivered the car to B. B is given until Jan 31 to pay A the
price. On Jan 5, B went to BPI to obtain a loan amounting to 1.2M, to
which BPI granted. The agreement between B and BPI shall be made in 12
equal monthly installments starting from Jan 31. To secure the payment,
B constituted a CM on the car in favor of BPI. On Jan 31, BPI demanded
of the installments, B failed to pay 4 consecutive installments. BPI
foreclosed the mortgage, and sold in public sale to X worth 700K leaving
a deficiency of 500K.
Can BPI recover from B the deficiency? YES. Because the first requisite
is lacking. There is no sale between B and BPI. They have only a simple
loan with mortgage. Thus, 1484 not applicable in this case, BPI may recover
from B.
HYPO: On Jan 1 2018, A (seller) and B (buyer), entered in a COS of a Car

worth 1.2M, payable in 12 equal monthly installments. Starting from Jan
31 2018 until fully paid. To secure the payment of the price, B constituted
CM on the car. On Jan 15, for 700K, A assigned the credit to X without
the knowledge and consent of B. On Jan 31, Feb 28, X demanded from B the
payment of first and second installment and B failed to pay. X foreclosed
the CM, and was sold to C in a public sale for 700K.
Was the assignment made by A in favor of X valid? Valid. In substitution

of the debtor, the creditor’s consent is necessary (1293). In Subrogation,
transfer of ownership of the credit by the creditor to another can be
done with our without consent of Debtor.
Can X recover the deficiency from B? No, X cannot recover the deficiency
from B. The assignment by the vendor of his rights to the sale of personal
property on installment basis covered by Art 1484 does not change the
transaction between the parties – the vendor and the vendee. It remains
the same. Hence, the assignee can have no better rights than the assignor.
X cannot recover the deficiency from B because of 1311 on relativity of

contracts on “assigns”. Once assignment is made, X steps in the shoes
of the assignor. All the rights acquired by X from A, cannot be greater
than the rights of A before the assignment was made. Since A is covered
by 1484, and his rights and remedies are limited, specially (3), the same
rule applies to X, he being the assignee.
HYPO: A, a manufacturer of air conditioning units. On Jan 1 2018, in the

amount of 1.2M payable in 12 equal monthly installments starting from
Jan 1 until full payment, A bound himself to build and manufacture an
air condition unit strictly in accordance with B’s specification and the
same to be installed in B’s bldg. On Jan 15, 2018, A built and installed
in B’s bldg. To secure payment of the price, B constituted a CM on the
AC units. On Jan 31,Feb 28, Mar 31, June 31, A demanded, B failed to pay.
A thereafter foreclosed the CM. Aircondition unit was sold to X for 700K
leaving 500K deficiency.
Can A recover the 500k from B? YES. Under 1467, a contract for a piece
of work is when the goods are to be manufactured specially for the customer
and upon his special order, and not for the general market. In this case,
this a Contract for a piece of work. Therefore, 1484 will not apply. The
recovery of the deficiency can be had.
Recall! What is the test in determining a contract of sale or piece of

work? The thing would not have come to its existence were it not for the
special order of the buyer! Otherwise it is a sale.
HYPO: A bound himself to transfer possession and ownership of car to B

worth 1.2M. B bound himself to deliver to A every month 5kilos of tilapia
from Jan 31 2018 until full payment. B constituted a CM on the car. After
demand, B failed to pay 2 installments. The mortgage foreclosed, sold
to X for 700K.
Can A recover the deficiency from B? Yes. There is no contract of sale,

but one of Barter under 1468. Under 1641, barter shall be governed by
the provisions of the Title of Sales. Why is 1484 not applicable in this
case? If barter was included in 1484, the legislators would have made
so. 1484 therefore only applies to sales and not any other contracts where
consideration is payable in installments.
2nd remedy: Cancel the sale, should the vendee’s failure to pay cover two
or more installments.
When you say cancel, it is a resolutory action, putting an end to the
contract. Once rescission or cancellation is chosen, the aggrieved party
must have to prove that there was substantial breach on the part of the
other party (1191).
HYPO: On Jan 1, A and B entered into an absolute contract of sale for

a car worth 1.2M in installments. CM on the car. Jan, Feb, Mar, April
no payment from B. There was no judicial or extrajudicial demand in this
case.
Is B in delay notwithstanding no demand made as to warrant the exercise

of remedies of cancellation? YES. 1169, exception no. 1, thus there is
no need of demand. B is already in legal delay. Upon the failure of vendee
to pay two or more installments, it entitles vendor to cancel the sale
and/or foreclose the mortgage because the law expressly so provides that
demand is not necessary! (1484 says “failure to pay” not default in the
payment of the price!) Thus, 1484 remedies are available to A despite
the absence of demand by A.
A went to court to ask for the rescission of contract (note not an action
for the price), will it prosper? Is B in delay as to warrant the exercise
of the remedy of cancellation? Yes, the action for rescission will prosper.
B is already in legal delay despite the absence of demand for payment
by A (1169 exception 1). A can therefore cancel the contract.
Additional information on rescission of contract:

The power to rescind is implied in reciprocal obligations. In case one
of the parties fails to comply to what is incumbent upon him, the aggrieved
creditor may choose between Rescission or Exact fulfillment of the
obligation with damages in both cases (1191). Art 1234 in relation to
1291, if there is no substantial breach, there can be no rescission. The
court can even drag the debtor a longer period to comply with the obligation.
And if there was already a substantial compliance of the obligation in
good faith, under 1234 debtor can recover as if there was full compliance
of the obligation- minus damages suffered by the creditor. So if there
was already substantial compliance in good faith, rescission can no longer
be had.
HYPO: On Jan 1, A and B, COS, car, 1.2M, 12months payment. To secure the
payment of the price, B constituted CM on the car. Jan 31, Feb 28, March
31, April 30 (B is guilty of default in the payment). However on May 31,
B went to A and paid 100K; A accepted from B to which A issued receipt
“I, A, today, May 31 2018, acknowledge the receipt of 100K from B, signed.”
The following day, June 1, A had the CM foreclosed.
Was the foreclosure proper? Yes. There was a proper foreclosure. 1176
does not apply. Why? There is no presumption that previous installments
has been paid. The receipt in this case merely acknowledges the receipt
of 100K from B on May 31. It would have been different if A stated “I,
A, hereby acknowledge the receipt of 100K from B representing the
installment for review today on May 31”, ito may presumption of payment
of prior installments! Thus, 1484 applies, A may foreclose the mortgage.
Barring effect as to the unpaid balance under 2nd remedy.

HYPO: A and B, COS, Car, 1.2M, 12months installment. CM on the Car. 5
monthly installments failure of B to pay, despite demands. A
extra-judicially cancelled the sale upon notice to B.
Can A recover from B the unpaid balance? After cancellation, can A recover
unpaid balance?
If the vendor chooses rescission or cancellation of the contract upon

vendee’s failure to pay 2 or more installments, the latter can demand
only the return of the payments already made unless there is a stipulation
about forfeiture and the stipulation is not unconscionable under the
circumstances (1486). The return of the payment already made flows from
the cancellation of the contract.
While not expressly stated in 1484(2), the cancellation of the contract

bars the vendor from recovering any unpaid balance of the rice. Thus,
it has been stated that if the vendor exercised the option to cancel the
contract, the vendor is barred from exacting payment of the balance of
the purchase price (BY SPECIFIC PERFORMANCE). CAKE PRINCIPLE: “it cannot
have its cake and eat it to.” (De Leon)
Recall! What is the effect of Rescission? Generally, to rescind a contract

is not merely to terminate it, but to abrogate and undo it from the
beginning, that is, not merely to release the parties from further
obligations to each other in respect to the subject of the contract, but
to annul the contract and RESTORE THE PARTIES to their original positions
which they would have occupied as if no such contract had ever been made.
To rescind is to declare a contract void and to abrogate it from its
inception.
Rescission creates the obligation to return the object of the contract.

It requires MUTUAL RESTITUTION of the benefits each party may have received
as a result of the contract
HYPO: A and B, COS, CAR, 1.2M, 12mos installments from Jan 31 to full
payment. B constituted Real Estate Mortgage on one of his lands plus a
CM on the car to secure payment. B failed to make payment. A foreclosed
the REM, sold to X for 700K, leaving a deficiency of 500K.
Can A recover the deficiency from B? Yes.
Can A recover the deficiency by foreclosing the CM on the car? No
In Borbon II v Servicewide Specialist, Inc, the court held that in the

event the seller-mortgagee first seeks the enforcement of the additional
mortgages, guarantees or other security arrangement, he must then be held
to have lost by waiver or non-choice his lien on the chattel mortgage
of the personal property sold by and mortgaged back to him, although,
similar to an action for specific performance, he may still levy on it.
Meaning, the remedy of foreclosing the chattel mortgage is no longer
available, but the barring effect as to prevent recovery of deficiency
judgment does not come into play since the court confirmed that the seller
“may still levy on it”.
“Foreclosure” foreclosure by the usual methods including sale of the thing

at a PUBLIC AUCTION.
HYPO: On Jan 1 2018, A and B entered into a COS, car, 1.2M payable in
12 months installments. To secure the payment of the price, B constituted
a CM on the car. B failed to pay 6 consecutive monthly installments. A
went to court and filed a case against B for the payment of the price
(Specific performance). On July 1, A obtained a favorable judgment, final
and executory. A Writ of execution was had. The sheriff sold the car
in a public sale in to X worth 700K, leaving a deficiency of 500K.
Can A recover the deficiency of 500k from B? Yes. In this case, the remedy
opted by the seller was EXACT FULFILLMENT, the sale was one to be a judicial
foreclosure sale. Where the seller seeks to recover the entire price by
foreclosing the property, judicially.
Although the filing of an action for foreclosure should be the point in

which the seller is deemed to have chosen such remedy, and at which time
he can no longer resort to either the remedies of Specific performance
or rescission, the court held that the point by which the seller is deemed
to have chosen the remedy of foreclosure is only at the time of actual
sale of the subject property at a public auction pursuant to the
foreclosure proceedings commenced.
The fact that there has been a sale, does not mean that chattel mortgage
has been foreclosed. In this case, the remedy executed by B was the exact
fulfillment of the obligation to pay.
When is the remedy of foreclosure exercised? Movable property sold in

a public sale. The mere recovery of a thing does not imply that there
is already foreclosure. There must be an ACTUAL SALE AT A PUBLIC SALE.
Note: PUBLIC EXECUTION SALE pursuant to RULES OF COURT 39 (?)
HYPO: On Jan 1 2018, A and B entered into a COS, car, 1.2M, payable in
12 months installments. CM on the car. B failed to pay 6 monthly
installments. That prompted A to demand the return of the car. B did not
surrender the car. A filed an action for judicial foreclosure of the CM.
Car was sold to X for 700K.
Obviously A can no longer recover the deficiency from B under 1484. Can
A nevertheless recover interest, attorney’s fees, damages, etc from B?
Yes. In this case, B was a perverse buyer.
By way of exception to the complete barring effect on the remedy of

foreclosure, Filipinas Investment & Finance Corp v Ridad, held that when
a defaulting buyer-mortgagor refuses to surrender the chattel to the
seller to allow the latter to be able to proceed with the foreclosure,
then the seller, even after actual foreclosure, should be allowed to
recover expenses and attorney’s fees incurred in trying to obtain
possession of the chattel.
Note: If there is already delay, Under 1170, 1179 damages takes the form
of “interest”. How about attorney’s fees, nominal, etc? It depends whether
there was a perverse buyer.
HYPO: On Jan 1 2018, A and B entered into a COS, car, 1.2M, payable in
12 equal monthly installments. CM on the car in favor of A by B. D a guarantor.
B defaulted in 4 consecutive installments. CM foreclosed.
Can A recover the deficiency from D, a guarantor? No. Why? After payment
by guarantor to A, he may go against B for reimbursements. Thus, despite
clear wordings of 1484 that the seller cannot proceed to recover from
the purchaser for the deficiency. The fact remains that he guaranteed
B’s obligation, so with that D is protected by 1484. A cannot recover
from the guarantor, surety, bond, even if there is another mortgages he
cannot proceed to foreclose the other mortgages. Why? Because there is
a barring effect. That once foreclosure has been chosen by the vendor,
recovery of the deficiency can no longer be had by the unpaid vendor.
MACEDA LAW, R.A. 6552

 governs ALL TRANSACTIONS OR CONTRACTS involving the sale or
financing of REAL ESTATE on INSTALLMENT payments, INCLUDING:
residential condominium units; EXCLUDINGS: Sale on installments
of industrial lots, commercial building and sales to tenants under
the Code of Agrarian Reforms.
 applies to contract to sell or conditional sales, or absolute sales
of “residential immovable properties”, provided that the terms on
payment of the price require at least 2 years installments;
 Purpose of law: to protect buyers of real estate on installments
against onerous and oppressive conditions (Sec 2) like “failure
to pay is a forfeiture of all installments made”.
What are the Rights of the BUYER under 6552?
1. RIGHT TO A GRACE PERIOD and CASH SURRENDER VALUE;
a) If at least 2 years paid:

a. Grace period: 1 month for every one year of installments paid.
i. However, this right shall only be exercised by him only
once in every 5 years of the life of the contract and
its extension, if any;
b. If contract is cancelled, buyer is entitled to Cash surrender
value equivalent to 50% of the total payments made;
i. Note: After 5 years of installments an additional 5%
every year but not to exceed 90% of the total payments
made.
b) If less than 2 years paid:
a. Grace period not less than 60 days from the date the
installment became due.
i. If buyer failed to pay at the expiration of the grace
period, the seller may cancel the contract after 30
days from receipt of buyer of the notice of
cancellation or the demand for rescission of the
contract by a NOTARIAL ACT.
b. The buyer is NOT entitled to the CSV.
2. RIGHT OF THE BUYER TO SELL HIS RIGHT or ASSIGN the same before actual
cancellation of the contract (Sec 5);
3. RIGHT TO PAY IN ADVANCE any unpaid installment anytime without interest

and to have such full payment of the purchase price annotated in the COT
covering the property (Sec 6) .
What are the Rights of Seller under 6552?
1. EXTRAJUDICIAL CANCELLATION OF THE CONTRACT.
a) Where the buyer had paid at least 2 years installments.

a. Requirements:
i. Grace period (1 month for every one year of
installments paid);
ii. (1) Notarized notice of cancellation to the buyer and
(2) To refund to the buyer the CSV;
NOTE: This TWIN MANDATORY requirements must be
complied with, otherwise the contract to sell remains
valid and subsisting. Thus, the buyer still has the
right to continue to occupy the property if not
complied.
b) Where the buyer had paid less than two years installments.
a. Requirements:
i. Grace period (at least 60 days from due date of the
installment);
ii. Notice of Cancellation or Demand for Rescission by
NOTARIAL ACT (effective 30 days from the buyer’s
receipt).
Note: “notice of cancellation or the demand for rescission of the contract

by NOTARIAL ACT”; thus, Demand Letters will NOT suffice.
-However, the Seller is not precluded from going to court to demand
JUDICIAL RESCISSION in lieu of the notarial act of rescission. In this
regard, an action for reconveyance and unlawful detainer does not exempt
the vendor to comply with the requirement of notice of cancellation or
demand for rescission of the contract by Notarial act.
-In another case, the vendor’s motion for execution or the court’s
decision to an ejectment case operated as the notice of cancellation
required by Sec 3B.
Note: Down payments, deposits or options on the contract shall be included

in the computation of the total number of installment payments made.
QUESTIONS BY ATTY C:
1) Does the Maceda Law apply to sales on installment basis of condominium
units? Yes, if it is for residential purposes.
2) What if condo is for business or commercial purposes, is 6552 applicable?
NO. It applies only to contracts to sell, conditional sales, or absolute
sale of RESIDENTIAL IMMOVABLE PROPERTY. It does not apply to sales
on installments basis on agricultural lands, sales on installment
basis of real property devoted for commercial or industrial purposes,
nor to Land tenancy agreement.
3) What is the purpose of Maceda Law? (See above notes)
4) If a buyer was able to pay at least 2 years? Is he entitled to a grace
period? Yes. (See above notes)
5) In case of cancellation or rescission, what is the right of the buyer?
The return of the CASH SURRENDER VALUE equivalent to 50% (if buyer
paid atleast 2 years)
6) What if the buyer was able to pay at least 5years of installments,
what are his rights? plus additional 5% every year but not to exceed
90% of the total payments made;
7) What is a grace period? Period after debtor has incurred in delay
within which he must pay his obligation without any liability to pay
INTEREST OR DAMAGES on account of delay.
8) If the Vendee failed to pay installments for NOT more than 2 years,
what are his rights? Under Maceda Law, regardless the number of years
or installments paid, he can ASSIGN HIS RIGHTS. That assignment of
rights under contract to sell, conditional sale, absolute sale where
the price is payable in installments of a residential real property,
HE CAN ASSIGN his rights arising from the said contracts. Provided
that Seller is NOTIFIED thereof. In short, BUYER/VENDEE must serve
upon a notice to the DEVELOPER and the SELLER or financing institution.
The DEVELOPER OR FINANCING COMPANY’S CONSENT IS NECESSARY in
assignment of rights by the vendee, otherwise such assignment does
not take into effect. WHY? Because the assignment in effect is a
substitution of the debtor, as far as the payment of the price is
concerned. CREDITORS CONSENT ALWAYS NECESSARY.
9) If the Vendee failed to pay installments for NOT more than 2 years,
is he entitled to CSV? No.
10) There are 2 grace periods: 1 month for every year in case of payment
of installments for more than 2 years and 60 days in case buyer was
able to pay the installments for less than 2 years. The rescission
or cancellation of a contract by notarial act takes effect after 30
days dba? What if vendee was able to pay before the 30 day period of
the notice of cancellation? In McLaughlin vs CA, the purchaser tendered
payment after receiving what the SC considered the vendor’s notice
of cancellation (in the form of a motion for execution). The buyer
preventer the cancellation of the contract by tendering or making
payment during the 30-day period from receipt of notice of cancellation.
“The buyer may still reinstate the contract by updating the account
during the grace period ad before the actual cancellation”
ARTICLE 1602
ASSIGNMENT OF CREDITS AND OTHER INCORPOREAL RIGHTS
9 November 2018
Take note:
Art. 1602 is merely illustrative and not exclusive
Purpose: To protect the buyer who is about to part with the ownership
of his property
Requisites:
1. Meeting of the minds as to object and cause
2. Written contract- whether public or private if it does not manifest
the intention of the parties, reformation can be had
Take note:
Repurchase price is much lower to allow vendor to repurchase with ease
Inadequacy must be determine at the time of the sale and not thereafter
HYPO: A, owner of a parcel of land near Cavitex on Jan 1, 2010 A and B

entered into a contract of sale of the land with a reserving the right
to repurchase the property for the same price for the period of 10 yrs
from the execution of the contract. March 1, 2010 A filed an action for
the repurchase of the property, the price of 3M being gross inadequate.
Is he correct?
NO. Price is determined at the perfection of the contract (in this case
2010) and not thereafter. Because the value of real property increases
as time passes by.
Take note:
When vendor remains in possession of the property, which is in contrary
to law (accdg to some commentators) to the right of the vendee to gain
possession of the property.
Constitutum possesorium- if vendor a retro retains the property as a lessee

is this an equitable mortgage?
When the period to repurchase is extended, the implication is that the

vendee a retro is more interested in recovering the amount than the
property. When vendee retains part of the purchase price, if you were
the vendor would you part with the ownership of the property? (price of
property is 1m then vendee gives you 500k only )-of course no.- Equitable
mortagage
When the vendor pays real estate taxes, the vendor retains ownership
because real estate taxes are imposed on the priviledge of owning a real
property. (ang magbabayad may-ari)
1589 on the liability of the vendee to pay interest on the price

- If the vendor binds himself to pay interest on the repurchase price
then there is no basis for the presumption that the contract is an equitable
mortgage. BUT if the repurchase price earns interest there arises a
presumption that the contract of pacto a retro is equitable mortagage.
Only monetary obligations earns interest. A repurchase price is not a

monetary obligation but a consideration for the property.
If vendor a retro binds himself to take insurance property- contrary to
essence of contract of sale. It presupposed that he would want to protect
the property. (binenta mo pa, tapos ikaw pa mag-iinsure)
When the vendee did not register the sale in his favor, there arises a
presumption that the contract is one of mortgage not contract of sale
on pacto a retro- Why? Vendee a retro is more interested in recovering
the amount. (pag nirehistro mo yan sayo na yan thats enforceable against
the whole world) if you are not interested why would you register it?
There is an urgent need- contract of sale on pacto a retro may be treated

as an equitable mortgage but if the mind of the party who is in urgent
need of the money already been subdued, the provision of civil code on
voidable obligation may apply.
Article 2088 - pacto commissorium in case of pledge and mortgage and the
pledgor and mortgagor does not pay its obligation on time the morgagee
or pledgee cannot appropriate the thing for himself.
Reason: Debtor-mortgagor must be given the full amount of his property.
HYPO: If A loaned to B and to secure the loan he executed a real estate

mortgage on his lot, the value of which is 7m. When the time for A to
perform his obligation/maturity date B demanded from A the payment for
the obligation, A defaulted. If we do not have art 2088, B is allowed
to have the property immediately upon Aʼs default. Now, in order for B
to get purchase price, he must foreclose the property and from the proceeds
of the sale, the obligation is to be satisfied. The debtor-mortgagor must
have the full value of the property. Suppose at public forclosure sale,
the land was sold to X for 9m to whom will the 9m purchase price pertain?
5M + damages, goes to B, the remainder goes to A.
PAROL EVIDENCE
Parol evidence- if there is already a written instrument that presupposes

that all the stipulation are contained in that contract. Which is
sufficient as evidence.
Exception:
Contract is void
When contract does not contain the intention of the parties in which case
reformation may lie so that external evidence may be had to prove the
real intention
Take note:
Legal redemption- does not apply to barter, donation even though its
onerous
HYPO: A, owner of agricultural land adjoining his land is another

agricultural land belonging to B. Jan 1, 2018 A and X entered into a
contract whereby A bound himself to transfer his agri land less than 1H
in exchange for Xʼs promise to deliver to a a parcel of land in Baguio
city. Can B rescind this contract by legal redemption?
NO. Whatever is given against who by right of legal redemption is exercise
must also be given the exact same thing. So hindi pwede sa barter.
HYPO: A, owner of agri land the area of which is less than 1H B is the
owner of the adjoining agri land. A gave X the land. Can B redeem the
property to X? NO.
Right of co-owners.
HYPO: A parcel of land co-owned by A,B,C. If A sells his aliquot part

in the property to X may B and C recover the property, or at least the
share of A? If A sold his share to B, can C redeem?
A co-owner may redeem the aliquot interest of another co-owner because

Art 1388. The hereditary rights - co-heirs may redeem their share.
X died and left a land to ABC, A sold a watch belonging to the estate,
may B and C redeem?
NOT by legal redemption but by recovery.
Take note:
If a heir is disinherited, upon the death of the testator he does not
became a co-owner of the estate.
1358. Heir may also repudiate
A child who dies ahead of his parent will not entitle the latter to
inheritance to protect the formerʼs heirs.
Adopting child.
If one of the heirs sells his right to an adopted child. Can there be
LD?
HYPO: A, B, C, are the heirs of X, C has an adopted son, C died. If A

sells his hereditary rights to X can B repurchase by way of LD?
YES. Adoption does not extend xxx. For as long as there is a sale,
redemption can be had as a matter of right.
Rural land.
HYPO: A, owner of agri land, the area of which is less than 1h, B owns
adjoining lot, if a sells the property to X by 5m, B has the right to
redeem the land by paying X 5M and other incidental expenses to promote
agriculture
HYPO: A is the owner of a vast parcel of land 10H, adjoining are 5 agri
lands belonging to B, covered by separate cert of title area of each lot
is less than 1h, suppose B in one and the same contract sold and delivered
the property to X for 10m can a redeem?
YES. For as long as the property sold is an agri land and the area of
which is less than 1h, LD can be had by the owner of the adjoining agri
land.
Take note:
For purposes of LD by adjoining owner of land, what must be considered
is the area of the land being sold. (yan lang ang titignan)
Exercise of pre-emption/redemption:
Pre-emption- 30 days to preempt the sale. 30 days from notice of sale
by the vendor. absolute, written.
HYPO: A, owner of agri land, less than 1h B owner of adjacent agri land
Oct 1, 2018, A, sold to X for 5M. B has the right to redeem. Suppose B
was present at the execution of the contract of sale. X demanded the
surrender of property and rendered the 5m, can B be formally notified
of the sale?
NO(kasama na nga sya sa bentahan)
Take note:
30 days run even on incapacitated person, absence of guardian,minor
ASSIGNMENT OF CREDIT
Consensual. Once the contract of sale is perfected, the right of being

assigned is already transferred in the dominion of the transferee. If
the transaction is covered by nego law, there must be delivery to make
the holder of the credit a holder in due course.
Transfer may be onerous or gratuitous, if gratuitous and the amt of credit

is more than 5m for it to be valid it must be in a private instrument.
which must also be accepted in a private instrument.
Accessory follows the principal.

HYPO: A assigned B the amt of 5m secured by a real estate mortgage on
a land belonging to A. The mortgage was registered. Can B assigned the
credit to C? C demanded to A the payment of the latter’s obli, A paid
and C foreclosed the mortgage. Can C foreclose the mortgage?
YES. Accessory follows the principal.
If there is a guaranty and there is default and there is exhaustion of
debtorʼs properties can creditors proceed to guarantoes?
YES. Same with surety, credit etc.
HYPO: A,B,C, became indebted to X for 9M evidence by a promi note, X

thereafter assigned the credit to Y. Y demanded from A,B,C the payment
of 9m. How much can X avail from aBC?
Incorporeal rights
The right to vote can be assigned?
Yes in its incorporeal sense. Shares of stock, etc. There must be delivery
if covered by a negotiable instrument or those that comply with Sec 1
of Nego law. Otherwise, once a contract is perfected no need for delivery.
3rd persons - include the debtor himself.
HYPO: B assigned credit to C for 4m. In good faith, A paid B 5m, B accepted.
Is Aʼs subrogation already extinguished?
YES. since payment was made in good faith. C may go against B for breach
of warranty.
HYPO: A owns B 5m due on Spet 1, 2018, the obli was set on June 1, 2018.
May 1, 2018, B indebted to X for the amt of 7m. B in a private instrument
assigned the credit to C for 4m. X demanded the payment, B refused to
pay. Whereupon X went to RTC for an action to recover the 7m. X found
out that B has a credit against A. Can X have the credit of B attached
to satisfy debt? Even to the prejudice of C?
YES. X can attach the credit. Because the assignment was only made by
a private instrument. If the instrument is public, it can no longer be
attached by the creditors. If the debtor pays the original creditor the
assignor, the same is not binding on the assignee. The assignee can go
after the debtor for the payment of the latterʼs obligation. What if Aʼs
obli is secured by a real estate mortgage? For the assignment to be valid
and binding upon 3rd person including the debtor himself, not only must
the assignment be in a public instrument it must also be recorded in RD.
Otherwise not binding to 3rd person.
1285. Effects of assignment of debt that are already compensated xxx
HYPO: Jan 1, 2018, A borrowed money from B 5m, evidence by a promi note
binding himself to pay on or before June 1, 2018. Feb 2, 2018 B became
indebted to A for the amount of 6m. Due on aug 1, 2018. June 5, 2018,
B assigned credit to C. Suppose C went to A to get the payment of the
loan. Can C compel A to pay him 5m?
YES. A cannot deprive compensation. A consented to the assignment, even
if the delivery is without his knowledge. When A executed a loan that
complies with nego law that means that a is giving B the power to transfer
credit to other person. Even if without Aʼs consent that does not reduce
the fact that a consented to he transfer of credit via nego instrument.
What does the assignee impliedly warrant?

1. existence of the credit- credit is still effective; not affected by
latches.
2. Legality of credit-rescible or not, does not violate law,etc.
Take note: If credit is a subj of a compromise, there is no implied

warranty.
When is a debtor insolvent? Already insolvent at time of assignment and

its of commin knowledge.
If there is an express warranty as to the insolvency of a debtor until

what time is that warranty effective? 1yr
HYPO: A owns B 5m, due on June 1, 2018. Suppose on Sept 1 B, assigned

the credit to C with B expressly warranting the insolvency of B without
mention of period As until when A may remain solvent. Within until what
time the insolvency of the debtor effective? 1yr from the time of
assignment bcos the time of the credit already expired after the
assignment.
What if B made the warranty on March 1 and there is an express warranty
as to insolvency of A. No period. 1
YR from the expiration of the credit not from the assignment. (LALABAS
SA EXAM)
Distinction between the obligation and the price of the assignment.
HYPO: A owe B 5m due on June 1. April 1, B negotiated the note with delivery
to C for 4m, how much can C collect from A?
5M. When B negotiated the note to C he was transferring his right to the
credit amounting to 5m. This is the price for the assignment.
Legal Redemption. GENERAL RULE:

HYPO: A on Jan 1, borrowed money from B binding himself to pay on March
1. The obli is secured by a real estate mortgage on a land of A. B, in
a public instrument, assigned the credit to C for 3m. Can A extinguish
his credit by paying 3m?
No. C has the right to redeem the 5m because the credit is not yet in
litigation.
HYPO: Suppose on March 1, B demanded from a the payment of 5m, A refused.

Is A on default? May 1, B went to RTC to filed a complainant against A.
The credit is now in litigation. B in a public instrument during the
pendency of the case, transfered the credit to C for 3m. Can a extinguish
the obli by paying C 3m plus cost of litigation?
YES.
EXCEPTION TO THE GENERAL RULE:
HYPO: A owed B due on March 1, Feb 2, B died leaving XYZ as his compulsory
heirs. XYZ on march 1 demanded from a the payment of obligation. a refused.
March 1, XYZ filed a case for payment of the price, a filed answer in
due time. During the pendency of the case, X sold his right to Y. Can
a redeem?
NO. Because there is no stipulation.
HYPO: A owe B 5m due on March 1. Secured by a real estate mortgage. B

bought property from X a parcel of land for 5m. The contract was executed
on Feb 1. In the contract X bound himself to deliver the land immediately
upon perfection, in the same contract binds himself to pay the price.
In payment of the price to X, B assigned the credit to X. During the pendency
of thee litigation. Can a redeem?
No. There is no stipulation. The credit was assigned to X in payment of
his obligation.
HYPO: A owns 5m, secured by a real estate mortgage due on March 1. Suppose
on feb 2, A sold the mortgage prop to X. Is the same valid? YES.
1311 and 1312

Contracts creating real rights over immovable property are always subject
to Land Registration act.
HYPO: A owes B 5m due on March 1. March 1 arrived B demanded payment,

A refused. B filed a case for the payment of the 5m. During pendency,
B sold his credit to X for 3m. Can a redeem and extinguish his obligation
by rendering 3m plus interest.
NO. 3rd exception- When the thing in litigation is transferred to the
possessor of the tenement or the property subject of litigation.
LEASE
13 November 2018
Definition: A consensual, bilateral, onerous, and commutative contract

by virtue of which one person binds himself to grant temporarily the use
of the thing or to render some service to another who undertakes to pay
some rent.
KINDS (Art. 1642):
Lease of things (whether real or personal) – one whereby a person (lessor)

binds himself to give to another (lessee) use or enjoyment of a thing
for a price certain, and for a period which may be definite or indefinite
(Art. 1643).
Lease of work – one whereby one of the parties binds himself to produce
a RESULT of work and labor and the other party to pay a remuneration (Art.
1644; See Art. 1467 and Arts 1713-1731; See also Art. 1467).
Lease of Service – one whereby one of parties binds himself to render

some service, that is, his own activity or labor, not its result, and
the other party binds himself to pay some remuneration (Art. 1644; governed
by the Labor Code).
Essential Characteristics:
1. It is Consensual;
2. It is Bilateral;
3. It is Onerous (there must be rent or price certain);
4. It is Commutative;
5. It is Nominate;
6. It is Principal;
7. It is Temporary;
8. Its essential purpose is to allow enjoyment or use of a thing; and
9. Its price (rent) is fixed in relation to the period of use or enjoyment;
Take note:
Persons disqualified to purchase under Arts. 1490 and 1491 are also
disqualified to be lessees (Art. 1646)
FOREIGNERS can lease real property in the Philippines because Art. 1491
refers only to those persons disqualified to purchase because of their
special relations with the property.
HYPO: ?
Q: Is the fixing of rent by X in violation of his authority? Why do I
say that X acted in excess of his authority?
A: Any contract entered into in the name of another person who has given
no authority or in excess of his authority is unenforceable. Because the
authority given by E to X is for him to lease the property for at least
30,000 pesos. If the agent goes beyond that then he is not in excess of
his authority. If he goes beyond or above the P30,000 then it is still
enforceable.
Take note:
If a contract of lease involving an immovable property of house and lot
is to be recorded with the register of deeds regardless of the duration
thereof. It is made by the agent or by any person acting on behalf of
the owner of the leased premises, the latter must comprise a sale. In
the absence thereof, the contract is unenforceable or void.
Under the Family Code, Articles 124 and 96, a lease of an immovable property
must be consented to by both spouses. If the husband alone has been granted
the sole administration of the conjugal estate, he cannot dispose of the
property belonging to the conjugal estate neither can he encumber the
same without the consent of the other spouse or authority from the court.
Otherwise, such transaction would be void.
If there is a separate property, if the husband has an exclusive property,

the wife cannot lease the same to any person without the husband’s
authority and vice versa. Otherwise the contract would be unenforceable.
The father with respect to the property of the ward, the guardian with
respect to the property of the ward, a legal representative with respect
to the property of the absentee.
HYPO: If say for example, G is the grandfather of A, who is a minor, who

owns a particular parcel of land. Can F the father lease the property
on behalf of A without any written consent? G donated the land to A. A
though a minor can be a donee. Can F lease the property without any written
consent or authority from the court?
Ans: It depends on the duration of the lease. The father is not the guardian
of the minor child as well as of his property if the lease is only for
a period of 6 months or any period less than 1 year. That is what you
call act of administration. If the lease is more than one year, that is
already an act of dominion therefore, the express consent of the court
is needed. If the lease is for less than one year but the sale is to be
recorded in the register of deeds, it is an act of ownership. Therefore,
written authority from the court must first be obtained by F in order
for him to be able to lease the property.
Take note of the word manager and what it includes: administrator of estate
or conjugal property, co-owner with respect to the lease of the thing,
holder.
Take note:
Once a lease is entered into, he is obliged to get the consent of the
lessee in case of prejudicial contracts. He cannot just enter into any
contract because as lessor, he has the obligation to guarantee peaceful
enjoyment of the property for the lessee.
Read the provisions of Articles 124 and 96 of the Family Code. Word
administration does not include encumbrance and disposition of the
property.
HYPO: H and W got married 2015. Prior to the celebration of their marriage,
they did not enter into a pre-nuptial agreement. By default, their regime
is absolute community. H and W were able to acquire a parcel of land.
Without the knowledge and consent of W, H leased the property to A for
20,000 pesos for a period of 6 months. Is the lease valid, void or
unenforceable?
Ans: It is perfectly valid because this is not an act of dominion. This

is an act of administration. If the lease is to be recorded with the
register of deeds, it becomes an act of ownership. Therefore, the lease
will be void under Article 124 and 96 of Family Code.
Lease for 99 years is valid. In excess of that period, it is void.
If no term is fixed, there are several cases ruled on by the Supreme Court.
If lease has indefinite term, violates mutuality of contract. Period of
lease will depend on the term. If annually, monthly, weekly or daily as
provided for under the NCC. 1687, 1682 if crop.
If the lease term is for the duration of the marriage or upon the death
of one of the parties, it is a contract of lease for an indefinite period.
The lease term is for as long as the marriage of A and B subsists.
It is a lease subject to a suspensive period. Marriage is deemed to be
dissolved upon death. If the marriage is dissolved, the lessee should
be ousted from the property.
1484.
HYPO: A and B entered into a contract of lease of a particular parcel

of land for P50,000 for 10 years from Jan. 1, 2018. Suppose on 9/1/18
B dies leaving X as his sole heir, does X upon the death of B acquire
all the lease rights of his father?
Ans: Yes. X can inherit the lease rights of B. X can continue the possession
of the property for the remaining period of the lease. 1178 of Civil Code.
Take note:
One of the cases assigned. (Domiche?) Because of unjust circumstances,
instead of the court using the provisions of 1687, the court used the
provisions of 1197. Old man, no children, no relatives, only neighbors.
The lease was extended. The lease is subject to a period.
If and when in a contract of lease, the lessee binds himself to pay the
rent previously entered into and the lessee forgets to pay the rent, the
lessee may continue possession of the property for as long as he pays
the just rent. It is not a lease for an indefinite period. It is a lease
for an indefinite period depending on the manner of the payment of the
rent. (1687)
Different grounds for terminating a contract of lease.

a. Expiration of the period
b. Assignment of lease
Take note:
In case lease is to be terminated or is sought to be terminated by the
lessor on account of the expiration of the lease, demand is no longer
necessary in order for the lessee to vacate the premises. Demand is only
necessary if there is breach of obligation or when the lessee fails to
pay the rent. Not only does it include the demand to fulfill the obligation
and the demand to pay the rent but also the right to demand that the lessee
vacate the premises.
Assignment must always be with the consent of the lessor. In the absence
of any stipulation or consent from the lessor, any assignment by lessee
is not effective. The lessor can in fact ask for the ejectment of the
lessee or the assignee.
REASON BEHIND THE LAW: lessor is creditor and lessee is the debtor. Refer
to oblicon. Debtor cannot assign obligation without consent of the
Creditor.
HYPO: A and B entered into a contract of lease of a parcel of land for

50,000 and for a period of 10 years. A lessor B lessee. Without the consent
and knowledge of A, B allowed his son, X to enter into the premises, use
and enjoy the property with B retaining the obligation to pay. Can A eject
B on the basis of his acts of letting his son enter his property for his
exclusive use?
Ans: In this case, there is no transmission of lease, not even an assignment
or sublease. Therefore, no violation of obligation.
What do you mean by assignment of lease?
For example, with the knowledge and consent of A, B assigned the lease
to X for P10,000,000. Assignment is when X will now pay for the lease
of B and X will now be the lessee of A. All the rights and obligations
will be transferred to X by the assignor as opposed to sublease. There
are two contracts in sublease: lessor and lessee, lessee and sublessee.
In case of assignment, the lessor can rescind the contract between him
and the lessee.
HYPO: A and B entered into a contract of lease for a particular parcel

of land for 50,000 for a period of 10 years from January 1, 2018. A lessor
B lessee. There is a lease contract between A and B. In the absence of
any express provision, the lessee can sublease the property leased so
B subleased the property to X for P60,000. There are two cases at bar.
A and B, B and X. Due to X’s negligence, the house was partially destroyed.
Who can sue X for damages?
 A can sue X on account of quasi delict.
 B can sue X on account of culpa-contractual
 1173 in relation to 1170 – culpa contractual

of land for P50,000 per month for 10 years from January 1, 2018. No express
prohibition in the contract of lease. B subleased the property to X. April
A demanded from B payment of rent. B paid A. On May, A demanded again
form B the rent. B failed on May, June, July, August. A went to court
and filed an unlawful detainer case against B. After the case, B was ordered
by the court by final judgment to vacate the premises immediately. With
that, can X continue possession of the property as a sublessee?
Ans: No. The duration of the sublease must no exceed the duration of the
lease. If the lessee is ousted from the leased premises, there arises
the right to oust the sublessee.

of land for P50,000 for 10years from 1/1/18. There was no express
prohibition so B entered into a contract of sublease with C for P60,000.
C bound himself to pay 1 year in advance. April, May, June and July, B
failed to pay the rent. Can A go to C and ask C to pay the unpaid rent?
Ans: No because the obligation of the sublessee is only subsidiary. The

sublessee is entitled to the use of the property for the exhaustion of
the use of the properties. Rents in advance are not to be treated as
payment.
Obligations of the lessor:

Art. 1654. The lessor is obliged:
(1) To deliver the thing which is the object of the contract in such a
condition as to render it fit for the use intended;
(2) To make on the same during the lease all the necessary repairs in
order to keep it suitable for the use to which it has been devoted, unless
there is a stipulation to the contrary;
(3) To maintain the lessee in the peaceful and adequate enjoyment of the
lease for the entire duration of the contract.
First obligation
Delivery of the thing (lessee must have the ability to enjoy and use the
property. If none, there is no delivery. Lessee may file an action for
specific performance or rescission with damages in either case under
article 1191. If the thing is occupied by third persons who do not want
to vacate the premises at the time it is to be delivered, there is also
no delivery. The lessee has no direct action against the occupant.)
HYPO: A entered into a contract of lease with B involving a particular

parcel of land for P50,000 per month for ten years. B demanded from A
the delivery of the thing. A delivered the land to B. Upon inspection
of B, he found out that the land is occupied by X who did not want to
vacate the property. Can B maintain an action against X?
Ans: No. Because B was not dispossessed. At the time of delivery to B,
X was already in possession of the land. Depending on the nature of the
entry, A may file for forcible entry or unlawful detainer or accion
publiciana, whichever applicable.
Second Obligation
Since the lessor is the owner of the thing, therefore it is incumbent
upon him to preserve the thing and included in that is obligation to take
necessary defense if and when the same is leased. Ordinary defense is
incumbent upon the lessee.
Q: May there be an instance where the lessor is not obliged to make or

do necessary defense?
A: Yes. If in the lease, the lessee bound himself to deliver the very
same thing as it was when he received the property at the time of the
perfection of the contract of lease. With that, it is now incumbent upon
the lessee to do or to make the necessary defense and not the lessor.
HYPO: Suppose A and B entered into a contract of lease of a particular

parcel of land for fifty years for P50,000 per month subject to an
escalation clause that P50,000 per month shall be increased by 10% every
year. In the contract, A allowed B to construct a building thereon. What
If the building was severely damaged by a typhoon? Who has the right to
invoke the necessary defense? The lessor or lessee?
Ans: It is the lessee. Take note that the object of the lease is land.
Refer to property law Article 415.
Q: If the thing leased is in need of urgent repairs, and after litigation,

the lessor refuses to do or make the necessary repairs. What are the rights
of the aggrieved lessee?
1. He may rescind the contract of lease or ask another person to do
the necessary repairs and he may ask for compensation to the costs
by the rents as they fall due. But if and when the lessee in that
particular circumstance opted to make the necessary and urgent repairs,
he may not ask payment thereof.
2. Art. 1658. The lessee may suspend the payment of the rent in case
the lessor fails to make the necessary repairs or to maintain the lessee
in peaceful and adequate enjoyment of the property leased.

house and lot for P50,000 for ten years. October 1, 2018, X broke into
the house and stole jewelry belonging to B. Will A be liable?
Ans: No. The lessor in the absence of any stipulation does not warrant
the security of the lessee. Article 1664 provides that the lessor is not
obliged to answer for a mere act of trespass which a third person may
cause on the use of the thing leased; but the lessee shall have a direct
action against the intruder.
Take note: There is a mere act of trespass when the third person claims
no right whatever.
house and lot for P50,000 for ten years. Unfortunately, the owner of the
adjoining property is fond of videoke karaoke. Naingayan si lessee.
Ans: In this case, the lessor has the obligation to maintain peaceful
possession and enjoyment of the property by the lessee. B cannot rescind
the contract. Check provisions of property on nuisance.
Art. 1662. If during the lease it should become necessary to make some
urgent repairs upon the thing leased, which cannot be deferred until the
termination of the lease, the lessee is obliged to tolerate the work,
although it may be very annoying to him, and although during the same,
he may be deprived of a part of the premises.
If the repairs last more than forty days the rent shall be reduced in
proportion to the time – including the first forty days – and the part
of the property of which the lessee has been deprived.
When the work is of such a nature that the portion which the lessee and
his family need for their dwelling becomes uninhabitable, he may rescind
the contract if the main purpose of the lease is to provide a dwelling
place for the lessee.
Take note:
Loss or destruction, may be partial or total. Cause may be fortuitous
event or any act on the part of the lessee or lessor. If the cause of
total destruction is due to fortuitous event, the lessor is not liable
for damages.
HYPO: A and B entered into a contract of lease of a particular house and

lot. Since A is the owner of the house and lot, A has an insurable interest
on the property if the same is lost on fortuitous event. Because of
fortuitous event, the property was destroyed. A was able to collect from
the insurance. Can B ask for the reconstruction of the house on account
of the insurance policy collected by A?
Ans: No. Upon the destruction of the thing leased, the lease is terminated.
B cannot insist in possessing the land because for purposes of lease of
house and lot, the lease is pertaining principally to the house.
HYPO: A and B entered into a contract of lease of a particular land for

P50,000 for ten years form date of contract. B was allowed by A to construct
a building thereon so B constructed. There was an earthquake and the
building was destroyed. Can B continue to possess the leased land?
Ans: Yes. Because the object of the contract is the land.
Q: Can there be a rescission as a matter of right on the part of the lessee?

Yes, in case of partial destruction.
Take note:
Liability for damages. The party at fault shall be liable for damages.
Q: Obligation to build necessary repairs? Can the same be enforced by

the lessee in case the thing lease is partially destroyed?
A: The lessee is presumed to be at fault in case of loss or destruction
of the property.
Q: If there is a war and the thing leased is totally destroyed, is there

such presumption?
A: No.
OBLIGATIONS OF THE LESSEE:
1. To pay the rent (Art. 1657);

2. To use thing leased as a diligent father of a family devoting it to
the use stipulated; or in the absence thereof to that inferred from the
nature of the thing leased according to the custom of the place (Art.
1657);
3. To pay the expenses for the deed of lease (Art. 1657);
4. To be liable for any deterioration or loss of the thing leased caused
by him, members of his household, guests and visitors. (Art. 1668)
5. To notify the lessor of usurpation or untoward acts (1st Par., Art.
1663);
6. To notify the lessor of the need of all repairs in No. 2 of Art. 1654
(2nd Par., Art. 1663)
7. To order the urgent repairs at the expense of the lessor to avoid
imminent danger IF the lessor fails to to so (4th Par., Art. 1663);
8. To tolerate urgent repairs even if annoying to him (1st Par., Art.
1662) UNLESS he chooses rescission (3rd Par. 1662).
9. To return the thing leased upon the termination of the lease just as
he received it, save what has been lost or impaired by the lapse of time
or from an inevitable cause (Art. 1665)
Payment of rent
a. Where the lessor has refused to accept the rent being paid by the lessee,
the latter should make a monthly tender of payment and notice of
consignation for the monthly rentals (Soco vs. Militante, 123 SCRA
160; See also Arts. 1256 -1261).
b. If, in the contract of lease, the lessee is allowed to build on the

land leased and such building shall pertain to the lessor at the
termination of the lease implies no condition with reference to the
lessor’s right to collect rent because of some some circumstances which
the lessee from deriving profits from the building by which he would
pay the rent (Velasco vs. Lao Tam, 23 Phil. 495).
c. The lessee who fails to pay the rent is liable to pay interest thereon
at the rate of 6% per annum (CB Circular No. 799, Series of 2013; Parada
vs. Jo-Juayco, 4 Phil. 710)
d. If there is no stipulation as to the place of payment of the rent,

Art. 1251 applies; with respect to to time, the custom of the place
shall be followed (Art. 1679; Gomez vs. Ng, 76 Phil. 555)
Take note:
These obligations may be shouldered by the lessor depending on the
stipulation. In case lessee fails to pay the rent, lessor can eject the
lessee from premises.

of land for P50,000 per month. Part of the agreement is that B have to
construct a building on the property and the same to pertain to A upon
the termination of the lease. B constructed the building. With that, is
B relieved from his obligation to pay the rent?
Ans: No. B still has the duty to pay the rent. If the termination of the
lease is based on non payment of rent on the part of the lessee, in order
to effectively oust the lessee from the premises, the lessor must not
only demand for payment of rent. It must also be accompanied by notice.
Take note:
If the demand says that lessee should pay rent to three months, otherwise,
the lessor may be constrained to file a case for ejectment against lessee
is not sufficient notice. They are not alternative. The lessee should
not be given an option to pay the rent or be ejected, then it is not
sufficient notice. The demand must contain the demand to pay and vacate.
Use of the thing leased in accordance with the lease agreement.

HYPO: If at the time of perfection of lease, the lessor and the lessee
agreed that the house and lot object of the lease is to be used by the
lessee for the operation of a drug den and a massage parlor.
Ans: Lease is VOID because of 1489. Purpose of lease must be agreed upon
even if void.
HYPO: If A and B entered into a contract of lease of a particular parcel

of land for P50,000 per month then during subsistence of lease, lessee
operates a drug den.
Ans: The lease remains to be valid but can be rescinded by the lessor
on the ground that the lessee has devoted the property for an immoral
activity.
Take note:
If leased premises is destroyed by lessee or any member of his household,
he shall be liable to the lessor on account of culpa contractual.

of land. B had a househelper in the person of X. X got angry with B and
burned the property. Can A hold B liable for damages?
Ans: Yes because the law so provides. B as the lessor in the contract
has the obligation to preserve the property leased and observe due
diligence in its preservation. Unless the law provides another standard
of care. Due diligence in the selection of employees cannot absolve B
from the liability because he is guilty of culpa contractual.
Take note:
If the lessor and the lessee stipulated in the contract that the thing
be used for an illegal or illicit purpose, the contract of lease is VOID
(See. Art. 1409 (1).
If the lessee devotes the thing for an illegal or illicit purpose, the
lessor may RESCIND the contract. (3 Llerena 246)
To notify the lessor in case of acts of usurpation.

The reason behind the law is that the lessee is the closest to proximity.
To notify the lessor of the need for necessary repairs stems from the
fact that the lessee is the one using and enjoying the thing leased.
In case of necessary or urgent repairs and notice of the need for repair
has been given to the lessee and the lessor fails to make necessary repairs,
the lessee may make the repairs on account of lessor by way of compensation
but not to suspend the payment of the rent.
REMEDIES OF THE AGGRIEVED PARTY TO A CONTRACT OF LEASES
If lessee fails to pay the rent for as long as there is substantial breach
of obligation, rescission can be had as a matter of right and remedy.
The only thing the lessor needs to do is to notify the lessee and demand
that he pays the unpaid rent and he vacate the property. The case is now
an action for unlawful detainer and not for rescission. He may opt not
to rescind the contract but only ask for damages and contract still in
force.
REMEDIES OF THE LESSEE
1. Action for specific performance (Enforcement of the contract)

If lessor fails to deliver the thing, the lessee may go to court and ask
the court to direct the lessor to deliver the thing leased for the
rescission of the contract on account of substantial breach and he may
ask for damages.
2. Proportional reduction of the rent or rescission in case of partial

destruction of the thing leased caused by fortuitous event (Art. 1655).
Take note:
This provision refers to destruction, total or partial, and NOT to
deteriorations or damages, which must be repaired by the lessor under
Art. 1654 (2).
3. Terminate the lease in case of dangerous condition of the thing leased

for habitation (Art. 1660)
If the thing leased is in such a condition that it already poses danger
to life and limb, the lessee can terminate the lease immediately even
if before or at the time of the perfection of the lease, the lessee had
knowledge of such a condition.
Reason: Public safety always goes first.
4. Suspend payment of rent in case lessor fails to make necessary repairs

or fails to grant peaceful possession of the thing leased as well the
lessor introduced some improvements that alters the form of the object
of the lease in this case rescission can be had or he can suspend payment.
In case actual eviction takes place by final judgment, then and only then
may the lessee suspend the rent. During the pendency of the action, he
cannot suspend payment of rent.
5. Termination of lease/ expiration/ lessor becomes usufructuary of the

thing leased.
When the lease is for a definite period, it expires on the day of expiration
without need of waiting any demand.
If at the time of expiration of lease, before the lapse of day, lessor

notifies lessee that he now increases the rent. Within that period of
time, the lessee must either accept the increase rent and continue with
the lease or vacate the premises. If he continues possession of the thing
leased after the expiration of the term after communication of the increase
in rent, he is already a possessor in bad faith.
Q: If there is a stipulation in the lease that the lease shall be renewed

for a similar term, is there a need for lessor to consent the renewal
of the lease? Is there a difference between the extension of the lease
and the renewal of the lease?
A: In both cases, the lessor needs to consent but the difference between
the two is that in extension of lease, there is no change in the terms
of the contract but in renewal of lease, there may be some changes in
the terms of the contract.
TERMINATION OF LEASE
RENT CONTROL ACT
BULK SALES LAW
14 NOVEMBER 2018
Termination of Lease:
1. Expiration of period
2. Total loss of thing
3. Will of purchaser of the thing leased
4. Rescission of the contract
5. Expiration of usufructuary rights
In Pacto de Retro Sale, can the Vendee a retro oust the leasee of the
vendor a retro?
 If registered in the registry of deeds. No, he must respect the
lease contract entered between the parties.
 If not registered in the registered, no pa rin. That is not what
the law (1311 and 1312) provides. For as long as the sale is with
a right to repurchase, the vendee a retro must have to respect the
lease until after the expiration of the period within which the
vendor a retro may exercise his right to repurchase and he does
not do so. Then and only then can the vendee a retro oust the leasee.
In the case of a sale pacto de retro, if the leasee paid the original
vendor instead of the vendee, can the vendee eject the leasee?
 Yes, the vendee may file a case for unlawful detainer. The vendee
a retro, for all purposes recognized by law, is the rightful OWNER
of the property. The vendor a retro does not have any right over
the leased property.
USEFUL/NECESARRY/ORNAMENTAL EXPENSES
HYPO: Contract of lease entered into by A as the lessor, with B as the
leasee. The contract starts at January 1, 2016, and the lease period is
2 years. On January 6, 2018, B introduced 1M worth of useful improvements
in the leased property. Subsequently, A ousted B due to expiration of
the lease. B demanded reimbursement of the 1M useful expense. May B
recover?
Read Florentino vs. Supervalue:
https://www.scribd.com/document/259542314/Florentino-v-Supervalue-pd
f
 The answer is NO, B may not recover even if the improvements are
useful, since he improved the property after the expiration of the
lease; therefore, he is a builder in bad faith (apply 448 and 546
dito). Therefore, he may not recover. Demand is not necessary to
eject/oust the leasee due to the expiration of the contract. Hindi
rin ma-apply ang implied new lease kasi hindi pa umabot ng 15 days.
Scenario # 2, same facts, but instead of useful expense, it is necessary
expenses that leasee incurred (for example, repair of the roof).
 The answer in this case would be yes, leasee is entitled to
reimbursement, regardless if he is in good or bad faith.
Rights of the leasee
Necessary Expense Recover expenses (not sure
kung applicable dito, pero
may right of possession until
reimbursed ang leasee kapag
good faith?)
Useful Expense Option:
1. Reimbursed by one-half of
the value of said
improvements at the time
of the termination of the
lease should the lessor
choose to appropriate
them; or
2. Remove the improvements
should lessor refuse to
reimburse although the
principal may suffer
damage
Ornamental Expense Not entitled to
reimbursement, but leasee
may take the ornamental
object, provided that
principal does not suffer
damage
Duration of New lease:

Art 1687 –
 If payment of lease price is daily – the lease is: daily basis;
One month minimum
 If payment of lease price is weekly– the lease is: week to week
basis; 6 months minimum
 If payment of lease price is monthly – the lease is: month to month
basis; One year minimum
 If payment of lease price is annual – the lease is: year to year
basis
HYPO: There exists a lease between A as lessor and B as lessee. No period
given, but rental is monthly. A then decided to oust B. Can B ask the
court to extend a longer period?
 Answer: It depends. For 1687 to apply, it is necessary that the
second paragraph must be present:
However, even though a monthly rent is paid, and no period for the
lease has been set, the courts may fix a longer term for the lease
after the lessee has occupied the premises for over one year. If
the rent is weekly, the courts may likewise determine a longer period
after the lessee has been in possession for over six months. In
case of daily rent, the courts may also fix a longer period after
the lessee has stayed in the place for over one month.
 In case B has already be been in possession for over one year, then
the courts may fix a longer term, if not, then 1687 will not apply.
The power of the courts to establish a grace period

is potestative or discretionary, depending on the particular
circumstances of the case. Thus, a longer term may be granted where
equities come into play, and may be denied where none appears, always
with due deference to the parties freedom to contract
 See: Malayan Realty vs Uy
http://sc.judiciary.gov.ph/jurisprudence/2006/november2006/163
763.htm
Scenario 2:
A leased a property to B with B having the right of first refusal.
Subsequently, the lease term expired, and implied new lease operates due
to 15 day lapse. A then sold the property to C; may B ask for the rescission
of the sale of A to C since A did not ask B first?
 Read Dizon vs. Magsaysay:
https://www.lawphil.net/judjuris/juri1974/may1974/gr_l_23399_1
974.html
No, the right of first refusal does not extend when there is an
implied new lease:
“The other terms of the original contract" which are revived
in the implied new lease under Article 1670 are only those
terms which are germane to the lessee's right of continued
enjoyment of the property leased.
Right of first refusal is not required for the continued enjoyment,
therefore, is not revived.
RENT CONTROL ACT:

Applicable in:
 Residential Units only
o If in NCR: P1 - P 10,000.00
o If outside NCR: P1- P 5,000.00
 Limitation of increase in rent:
o Four percent (4%) annually for those paying a monthly rent/
ranging from Php1.0 to Php3,999 per month; and
o Seven percent (7%) for those paying a monthly rent of Php4,000
up to PhplO,OOO for as long as the unit is occupied by the
same lessee.
Take note:
Not applicable in industrial and commercial areas
Grounds for Judicial Ejectment:
1. Assignment of lease or subleasing of residential units in whole or
in part, including the acceptance of boarders or bedspacers, without
the written consent of the owner/lessor;
Take Note:
even if the contract of lease is not in writing, even if the period of
the lease if for more than one year, and the same has already been executed
______ (27:10) totally or partially, it is already beyond the coverage
of the Statute of Frauds, it is now a fully enforceable contract.
Q:What if the consent was given after the assignment, what if the written
consent was given after the sublease, what if the written consent was
given after the lessee accepted boarders and bed spacers?
A: On that ground alone, the lessor cannot eject the sublease from the
property.Prior consent and subsequent consent. Subsequent consent means
ratification
2. Arrears in payment of rent for a total of three (3) months
3. Legitimate need of the owner/ lessor to reposses his share or her

property for his or her own use or for the use of any immediate member
of his family as a residential unit, provided, that:
a. The lease for a definite period has expired
b. The lessor has given the lessee formal notice three (3) months
in advance of the lessor’s intention to repossess the property
c. The owner/lessor is prohibited from the leasing the residential
unit or allowing its used by a third party for a period of at
least one (1) year from the time of repossession.
Q: Immediate Family?
A: (For purpose of repossessing the leased premises) Limited to his or
her spouse, direct descendants or ascendants by consanguinity or affinity
of land for P5,000.00 per month. The leased property is located somewhere
in Makati whilst A has another property, a house and lot devoted for
dwelling purposes in Quezon City.
Q: Can A successfully oust B from the leased property on the ground that
he is in need of another dwelling place? Under the circumstance that the
traffic situation of going to and from Quezon City to your Office is in
Taguig City?
A: Under that circumstance, the court can take cognizance over that
4. Need of the lessor to make necessary repairs of the leased premises
which is the subject of an existing order of condemnation by
appropriate authorities concerned in order to make the said premises
safe and habitable
Q: Conditions before the lessor can oust under the lessee on the ground
of necessary repairs and on the ground of legal need to repossess
A: NEED FOR REPAIRS
a. The lease for a definite period has expired
b. The lessor has given the lessee formal notice three (3) months in
advance of the lessor’s intention to repossess the property
c. The owner/lessor is prohibited from the leasing the residential unit
or allowing its used by a third party for a period of at least one
(1) year from the time of repossession
A: NEED TO REPOSSES/DWELLING
a. After said repair, the lessee ejected shall have the first preference
to lease the same premises;
b. The new rent shall be reasonably commensurate with expenses incurred
for the repair of the said residential unit
c. That if the residential unit is condemned or completely demolished,
the lease of the new building will no longer subject to the
aforementioned first preference rule.
5. Expiration of the period of the lease contract
Q: Section 12 of Rent Control Act explicitly provides that the provisions
of Art 1673 on the expiration of the lease as a ground for terminating
the lease is suspended. What does the law mean by that?
A: The effect of the suspension [of Art. 1673] on Art. 1687 is only that
the lessor cannot eject the tenant by reason alone of the expiration of
the period of lease as provided in said Art. 1687. Otherwise, Art. 1687
itself has not been suspended. Hence, it can be used to determine the
period of a lease agreement.
*Section 12, Rent Control Act: Application of the Civil Code and Rules
of Court of the Philippines – Except when the lease is for a definite
period, the provision of paragraph (1) of Article 1673 of the Civil Code
of the Philippines, insofar as they refer to residential units covered
by this Act, shall be suspended during the effectivity of this Act, but
other provisions of the Civil Code and the Rules of Court on lease contracts,
insofar as they are not in conflict with the provisions of this Act shall
apply.
HYPO: A leased a property to B, which is payable monthly for P5, 000.00.
The lease was already subsisting for 3 years, but has expired on October
31, 2018. On October 5, 2018, A wanted to judicially eject B due to him
needing to use the certain property for his own use, and gave 3 months’
notice for B to vacate the property. On January 31, 2019, A filed a case
for Ejectment against B. B Counters that since RA 9653 section 12 suspends
Art. 1673, 1687 in effect is also suspended, therefore, the expiration
of B’s month to month contract cannot be the basis of ejectment. Is B
correct?
Read: Dula vs. Maravilla:
http://sc.judiciary.gov.ph/jurisprudence/2005/may2005/134267.htm
A: No, B is not correct, and he may be ejected. RA 9653 merely suspends
Art. 1673, because Section 12 of RA 9653 does not apply on leases with
a definite period, which in this case, is monthly.
A lease on a month-to-month basis is, under Art. 1687, a lease with a

definite period, upon the expiration of which upon demand made by the
lessor on the lessee to vacate, the ejectment of the lessee may be ordered.
The effect of the suspension [of Art. 1673] on Art. 1687 is only that
the lessor cannot eject the tenant by reason alone of the expiration of
the period of lease as provided in said Art. 1687
In effect, the Lessor may eject the Leasee upon expiry of the implied
new lease; applying 1687, the lease is on a monthly basis, therefore,
the lessor may eject the leasee every month when the lease expires.
Take note:
Ang sinabi ng SC noon, it may be true that Art 1673 (1) is suspended during
the effectivity of the law but it does not mean that the provision of
Art 1687 is also suspended. Since the contract is for a definite period,
Sec 12, RCA WILL NOT APPLY.
If the lease is for a definite period, it is not covered by Sec 12 and
that contract of lease is under the provisions of Article 1673 for purposes
of terminating the lease upon the expiration of the period.
If it’s on a month-to-month basis, Art. 1673 will not apply because it
is suspended, but the lessor may eject the lessee upon expiration of the
extended term depending on the manner of payment of the rent.
ART. 1687 - If the period for the lease has not been fixed, it is understood
to be from year to year, if the rent agreed upon is annual; from month
to month, if it is monthly; from week to week, if the rent is weekly;
and from day to day, if the rent is to be paid daily.
The Rent Control Act does not cover lease of property, the lessor being
the squatter. The lease must be valid and the lessor must have the right
to possess the thing and transfer the possession thereof to the lessee
in a contract of lease.
BULK SALES LAW

Note: when the term “mortgage” is used, it implies a transmission of
ownership. Bulk sales law was made back when Philippines was under American
occupancy, and mortgage in America connotes a transfer of ownership.
Basically, mortgage almost equivalent ng pledge.
Kailangan sa bulk sales, may notice to creditors, inventory of goods sent
to all parties, and list of creditors given to buyer.
The bulk sales is valid between the parties, but void as per the creditors
when the requisites are not met. Effect kasi ng bulk sales, the creditors
may garnish, sell, or take property of the goods sold in bulk from the
buyer, without the need for judicial proceeding of rescission.
Bulk sales are:
Any sale, transfer, mortgage, or assignment:
a. Of a stock of goods, wares, merchandise, provisions, or materials
otherwise than in the ordinary course of trade and the regular prosecution
of business; or
b. Of all or substantially all, of the business or trade; or
c. Of all or substantially all, of the fixtures and equipment USED in
the business of the vendor, mortgagor, transferor or assignor.
It is believed that only the unsecured creditors are included. Mortgagees,
pledgees, creditors whose claims are secured by guaranty or surety are
deemed not included as their rights are amply protected by other laws.
Creditors whose claims came into existence AFTER the sale (in bulk) are
NOT entitled to the benefits of the Bulk Sales Law.
HYPO:
Creditor A – due and demandable January 1, 2018 – P1 million
Creditor B – due and demandable February 1, 2018 – P2 million
Creditor C – due and demandable March 1, 2018 – P3 million
X sold all the equipment of his business to S for P 1 million on February
15, 2018, with S’ knowledge of the creditors. May the creditors garnish
or take the property sold to S?
Answer: Yes for A and B.
If S has no knowledge?
Answer: No, since S is an innocent purchaser for value, Bulk sales law
is not applicable, the creditor’s remedy is to criminally prosecute X.

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RECIT NOTES

SALES AND LEASE

1. Concepts, Tests/Requisites and Importance of the distinction b/w:

1. Option Money and Earnest Money

SALES 9 AUGUST 2018

A. LONG QUIZ on Wednesday, 15 August 2018 covered ALL DISCUSSED

SALES 22 August 2018

1. Absolute v Conditional Sale

Coverage next meeting 23 August 2018, Thursday

P.P.S. Since hindi ko talaga nagets yung instructions ni Atty. Casiño

SALES 23 AUGUST 2018

Coverage next meeting, Wednesday, 29 Aug 2018

SUBMISSION OF DIGEST: 1 WEEK BEFORE FINALS

SALES 5 SEPTEMBER 2018

1. 1544 - Double Sales

QUIZ tomorrow, Thursday, 6 September 2018

Coverage tomorrow, Thursday 6 September 2018

SALES, Wednesday, 17 OCTOBER 2018

Coverage next meeting, Thursday, 18 October 2018:

Read in advance: Recto Law and Maceda Law

Recall! What is the effect of the non-fulfillment of condition in a

MIDTERM Q: Where there is a mortgaged property and the mortgagor sells

There was no perfected sale of Lot 4. It was conditionally or contingently

Nature and Form— A perfected contract of sale may either be absolute or

Character thereof; Determined by the substance, not by the title given

Term "Condition" in the context of a perfected contract of sale; — The

When perfected. — A sale is at once perfected when a person (the seller)

Conditional Sale; Fulfillment of condition; Operative act setting into

Right of a vendee in case of non-fulfillment of condition. — Private

Condition in case at bar; Not potestative. — We share the opinion of the

Contract of Sale; When perfected; Effects; — The agreement shows a

Failure to comply with a Condition on the performance of an obligation;

Condition imposed on the perfection of a contract, distinguished from

A party who fails to comply to his obligation in a duly perfected contract

What kind of condition is referred in 1545?

What are the rights and remedies of B?

Effect of non-fulfillment of condition:

2. If the condition is in the nature of a promise that it should happen,

Kinds of Warranties: The Seller is liable for his:

HYPO: On July 1, A went to B and showed him what purports to be a 99.9%

Can B hold A liable for breach express warranty?

What kind of fraud was employed?

What is the Remedy of Buyer?

In this case what kind of fraud was committed by A?

What is the proper action of B?

If fraud is employed by one of the contracting parties inducing him to

What is the difference between Express Warranty and Dolo Causante?

As to time of making the warranty:

“No affirmation of the VALUE..under 1546”: When it comes to the VALUE

As to form of warrant: Express warranties for it to be enforceable, need

Recall: In reformation of instruments, there are two rules. 1) Parole

Causal Fraud or Dolo Causante = Fraud in the perfection of the Contract.

Requisites of an Express Warranty

TAKE NOTE: When breached, seller is liable for damages.

1547. IMPLIED WARRANTIES

Why need not be expressly agreed upon by the parties in a contract of

Art. 1547. In a contract of sale, unless a contrary intention appears,

This Article shall not, however, be held to render liable a sheriff,

Warranty that seller has a right to sell