Sales Reviewer

CHAPTER 3EFFECTS OF THE CONTRACT WHEN THE THING SOLD HAS BEEN LOST Distinction of different principles Under ROMAN LAW principle, From the moment of perfection of the contract of sale the risk is borne by the buyer but ownership is transferred to the buyer upon delivery. (RISK transferred upon PERFECTION, but OWNERSHIP upon DELIVERY) Under COMMON LAW, Res perit domino, the owner bears the risk of loss, so who ever is the owner bears the loss, but ownership is transferred upon perfection of the contract. Under CIVIL CODE, We follow res perit domino owner bears the risk of loss (COMMON), BUT ownership is transferred from the moment of delivery (ROMAN).

Effect of Loss of the Thing SoldBefore Perfection Seller bears the loss (RES PERIT DOMINO)At the time of perfection Total Loss (1493) the contract is inoperative at the time of the perfection of the contract, void because no subject matter Partial Loss (1494) option is with the buyer whether to proceed with the contract Deterioration (1494) Equivalent to LOSS, TOTAL LOSS.

After perfection and before delivery By the fault of one party (1480, 1538) If the obligation consist of the delivery of a determinate thing the SELLER shall bear the loss if he was in: Delay assumes the loss promises the same thing to two or more persons By fortuitous event (1480, 1504, 1538) there are two theories: as per 1262 which states the obligation which consist in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor(seller) and before he has incurred in delay Which would mean THE BUYER BEARS the risk of loss. So in case of loss due to Fortuitous event the sellers obligation to deliver is extinguished but the buyer is still obliged to pay the price. Interpretation of PARAS and PADILLA. Consistent with OBLICON. BUT as per Judges interpretation, this situation will create a unilateral contract which would be unfair to the buyer. Paying the money without ever acquiring ownership over the property. TOLENTINO says that if it is due to fortuitous event, obligation of the seller is extinguished likewise the obligation too of the buyer should be extinguished since sale is a bilateral contract (if the seller cannot perform then it is unjust to require the buyer to perform). This is more equitable and Res Perit Domino applies But there are instances that property is already transferred to the buyer although ownership is retained by the seller ONLY FOR THE PURPOSE of insuring the payment of the purchase price. But the property is already delivered to the buyer. Again the purpose of RESERVING OWNERSHIP is to secure payment of the purchase price. Now if the thing is lost, the court has ruled that the loss is borne by the buyer. (GAISANO CASE)Case: 1504 par. 1 Applied (Gaisano v. Insurance Company) The Gaisano Superstore Complex in Cagayan de Oro City was consumed by fire, including stocks of ready-made clothing materials sold and delivered by Intercapitol Marketing Corp. (IMC) and Levi Strauss (Phils), Inc. (LSPI). IMC and LSPI filed claims under their respective fire insurance policies, and made several demands for payment for the clothing materials. GCI contends that it cannot be held liable because the property covered by the insurance policies were destroyed due to fortuitous event, and despite delivery, IMC and LSPI assumed the risk of loss when they cured fire insurance policies over the goods the sales invoices state that "it is further agreed that merely for purpose of securing the payment of purchase price, the above-described merchandise remains the property of the vendor until the purchase price is fully paid", IMC and LSPI retained ownership of the delivered goods and must bear the loss

HELD:What were insured against were the accounts of IMC and LSPI with GCI which remained unpaid 45 days after the loss through the fire, and not the loss or destruction of the goods delivered. ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not,except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such deliveryAfter delivery Buyer bears the loss (Res perit domino)

CHAPTER 4OBLIGATIONS OF THE VENDORGENERAL OBLIGATION

To PRESERVE the thing to take care of the thing sold with the diligence of a good father of a family unless the law or the stipulation requires another standard of care. (Art. 1163). In case of loss, deterioration or improvement of the thing BEFORE delivery, the rules under Art. 1189 shall be observed, the vendor being considered the debtor. (Art. 1538)

To DELIVER the thing sold The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon the perfection of the contract. All the fruits shall pertain to the vendee from the day on which the contract is PERFECTED. (Art. 1537) As a RULE, the creditor has the right to the fruits of the thing from the time the obligation to deliver arises (Art. 1164), But in a contract of sale, the fruits shall pertain to the buyer from the day the contract was perfected. (Art. 1537) The parties may, however, stipulate that the fruits of the thing sold shall pertain to the buyer at some future time such as when the obligation is one with a period.

Form (Manner) of Delivery Physical or Real or Actual (Art. 1497) The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee. This involves the physical delivery of the thing and is usually done by the passing of a movable thing from hand to hand Note: Delivery without the intention to transfer ownership on the part of the seller will not transfer ownership. i.e. The parties may stipulate that ownership in the thing shall not pass to the purchase until he has fully paid the price (Art. 1478)

Constructive or Legal Delivery By traditio symbolica (Art. 1498) Symbolic delivery by the execution of a public instrument is equivalent to actual delivery only when the thing is subject to the control of the vendor. Hence, the vendor who executes said public instrument fails in his obligation to deliver it if the vendee cannot enjoy its possession because of the opposition or resistance of a third person (eg, squatter) who is in actual possession (Addison vs Felix Tioco 38 Phil 404) The parties make use of a token symbol to represent the thing delivered, i.e. with regard to movable property the delivery of the key where the thing sold is stored or kept is equivalent to the delivery of the thing.

By traditio longa manu(Art. 1499) Traditio longa manu takes place by the mere consent or agreement of the contracting parties as when the vendor merely points to the thing sold which shall thereafter be at the control and disposal of the vendee. It should be noted that delivery by mere consent or agreement of the contracting parties is qualified by the phrase if the thing sold cannot be transferred to the possession of the vendee at the time of the sale.

traditio brevi manu Happens when the vendor has already the possession of the thing sold by virtue of another title (which is not ownership) and continues to hold the possession thereof under a title of ownership, i.e. as when the lessor sells the thing leased to the lessee. Instead of the vendee turning over the thing to the vendor so that the latter may, in turn, deliver it back to him, all these are considered done by fiction of law.

By quasi-traditio or quasi-delivery (Art. 1501) delivery of incorporeal things or rights

Traditional/delivery can only be made with respect to corporeal things. In the case of incorporeal things, delivery is effected: by the execution of a public instrument when that mode of delivery is not applicable, by placing of the titles of ownership in the possession of the vendee by allowing the vendee to use his rights as new owner with the consent of the vendor

De constituto (constitutum possessorium) (Art. 1500) This mode of delivery is the opposite of traditio brevi manu. It takes place when the vendor continues in possession of the property sold not as owner but in some other capacity, as for example, when the vendor stays as a tenant on the vendee. In this case, instead of the vendor delivering the thing to the vendee so that the latter may, in turn, deliver it back to the vendor, the law considers that all these have taken place through the constitutum possessorium agreement.

CasesWhen Execution of public document not equivalent to delivery (Asset Privatization Trust v. TJ Enterprises) Petitioner Asset Privitization Trust (APT) had acquired from the Development Bank of the Philippines (DBP) assets consisting of machinery and refrigeration equipment which were then stored at Golden City compound, Pasay City The compound was then leased to and in the physical possession of Creative Lines, Inc. These assets were being sold on an as-is-where-is basis. Petitioner and respondent entered into an absolute sale over certain machinery and refrigeration equipment. Respondent paid the full amount and demanded the delivery of the machinery it had purchased. During the hauling of Lot No.2 consisting of 16 items, only 9 items were pulled out by respondent. This prompted the respondent to file a complaint for specific performance and damages against petitioner and Creative Lines. During the pendency of the case, respondent was able to pull out the remaining machinery and equipment. However, upon inspection it was discovered that the machinery and equipment were damaged and had missing parts. APT argued that there has already been constructive delivery by virtue of the deed of sale executed and being a sale of as-is-where-is basis, it was the duty of TJ Enterprises to take care of the property. RTC ruled that there was no constructive delivery at the time of the sale, APT did not have control over the machinery and equipment. Thus, it could not transfer ownership. CA affirmed the decision of the trial court.

Issue: Whether or not the presence of the disclaimer or warranty in the deed of absolute sale absolves it from all warranties

Ruling: APTs contention is without merit As a general rule, when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. And with regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept In order for the execution of a public instrument to effect tradition, the purchaser must be placed in control of the thing sold. However, the execution of a public instrument only gives rise to a prima facie presumption of delivery. Such presumption is destroyed when the delivery is not effected because of a legal impediment. It is necessary that the vendor shall have control over the thing sold that, at the moment of sale, its material delivery could have been made. Thus, a person who does not have actual possession of the thing sold cannot transfer constructive possession by the execution and delivery of a public instrument. In this case, there was no constructive delivery of the machinery and equipment upon the execution of the deed of absolute sale or upon the issuance of the gate pass since it was not petitioner but Creative Lines which had actual possession of the property. The presumption of constructive delivery is not applicable as it has to yield to the reality that the purchaser was not placed in possession and control of the property.

Rule in Sale of Registered Land, Sec. 51. PD 1529 (Heirs of Mascunana v. CA)*Facts: Gertrudis Wuthrich and her 6 siblings were the co-owners of a parcel of land and Gertrudis and two other co-owners sold each of their one-seventh (1/7) shares to Jesus Mascuana. The latter then sold a portion of his 140-square-meter undivided share of the property to Diosdado Sumilhig and later sold an additional 160-square-meter portion to Sumilhig. However, the parties agreed to revoke the said deed of sale and, in lieu, executed a Deed of Absolute Sale, in which Estabillo deeded to Mascuana a portion of his property abutting that of Sumilhig on the southeast In the said deed, Mascuana sold an undivided 469-square-meter portion of the property for P4,690.00, with P3,690.00 as downpayment. That the balance P1,000.00 shall be paid as soon as they are surveyed in the name of the VENDEE and all papers pertinent and necessary to the issuance of a separate Certificate of Title in the name of the VENDEE shall have been prepared Mascuana and Estabillo executed a Deed of Exchange and Absolute Sale of Real Estate. Sumilhig executed a Deed of Sale of Real Property in favor of Corazon Layumas. The spouses Layumas then had the property subdivided into two and took possession of the property and allowed a chapel to be constructed. Spouses Layumas allowed Aquilino Barte to stay on a portion of the property to ward off squatters. Unknown to the spouses Layumas, a title was issued in the name of Jesus Mascuana. The heirs of Mascuana filed a Complaint for recovery of possession B and damages with a writ of preliminary injunction, alleging that they owned the subject lot by virtue of successional rights from their deceased father. Barte raised the following special defenses: (a) the petitioners were estopped from asserting ownership over the lot in question because they did not object when he occupied the said portion of the lot; (b) neither did the petitioners protest when a church was built on the property, or when residential houses were constructed thereon; (c) the petitioners still asked Barte and the other occupants whether they had notified Rodolfo Layumas of the constructions on the property; and (d) the heirs of Mascuana, through the lawyer of Mrs. Renee M. Tedrew, even wrote a letter expressing her willingness to buy the subject property. The trial court and the CA rendered judgment in favor of Barte and the spouses Layumas. Petitioners filed the instant petition for review on certiorari with this Court.

Issue: Was the Sale Made by Mascunana in favor of Diosdado sumilhig a contract to sell or contract of sale?

Ruling: While it is true that Jesus Mascuana executed the deed of absolute sale over the property on August 12, 1961 in favor of Diosdado Sumilhig for P4,690.00, and that it was only on July 6, 1962 that TCT No. 967 was issued in his name as one of the co-owners of Lot No. 124, Diosdado Sumilhig and the respondents nevertheless acquired ownership over the property. The deed of sale executed by Jesus Mascuana in favor of Diosdado Sumilhig on August 12, 1961 was a perfected contract of sale over the property. A perfected contract of sale cannot be challenged on the ground of the non-transfer of ownership of the property sold at that time of the perfection of the contract, since it is consummated upon delivery of the property to the vendee. It is through tradition or delivery that the buyer acquires ownership of the property sold. As provided in Article 1458 of the New Civil Code, when the sale is made through a public instrument, the execution thereof is equivalent to the delivery of the thing which is the object of the contract, unless the contrary appears or can be inferred. The record of the sale with the Register of Deeds and the issuance of the certificate of title in the name of the buyer over the property merely bind third parties to the sale. As between the seller and the buyer, the transfer of ownership takes effect upon the execution of a public instrument covering the real property. Long before the petitioners secured a Torrens title over the property, the respondents had been in actual possession of the property and had designated Barte as their overseer.

To TRANSFER OWNERSHIP

GENERAL RULE: The ownership of the thing sold is acquired by the vendee from the moment the thing is delivered to him. (Art. 1496) EXCEPTIONS: When delivery does not transfer titlea. Delivery on approval, trial or satisfaction Sale on approval or on trial or satisfaction ownership of the goods remains with the seller despite delivery but shall be transferred to the buyer in the following cases: When he signifies his approval or acceptance When he does an act adopting the transaction When he retains the goods without giving notice of rejection within the time fixed or within a reasonable time, and such time has expired. (Art. 1502)

b. In case of express reservation of the title in the seller Paragraph 1 of Article 1503 provides: Where there is a contract of sale of specific goods, the seller may, by the terms of the contract, reserve the right of possession or ownership in the goods until certain conditions have been fulfilled. The right of possession or ownership may be thus reserved notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.

c. Implied reservation of the title (1503 par 2,3,4)a. If under the bill of lading the goods are deliverable to the seller or agent or their order. (Reason, the buyer cannot get the goods.) But, if except for the form of the bill of lading, the ownership would have passed to the buyer on shipment of the goods, the seller's property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract.

b. If bill of lading, although stating that the goods are to be delivered to buyer or his agent, is KEPT by the seller or his agent. (the buyer also cannot get the goods)

c. Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added right thereby. But of course innocent third parties (innocent holders and purchasers for value) should not be adversely affected. If, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is indorsed in blank, or to the buyer by the consignee named therein, one who purchases in good faith, for value, the bill of lading, or goods from the buyer will obtain the ownership in the goods, although the bill of exchange has not been honored, provided that such purchaser has received delivery of the bill of lading indorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful.

Example: S sold B a laptop. The laptop was shipped on board a carrier. The bill of lading stated that the laptop is deliverable to the order of B. The bill of lading was sent to B, accompanied by a bill of exchange which B was supposed to honor. If B does not honor the bill of exchange, but wrongfully retains the bill of lading, ownership remains with the seller. If B sells the bill of lading to X, X can obtain ownership of the goods if he is an innocent purchaser.

Note: Bill of lading A document evidencing a contract for the carriage and delivery of the listed goods. Bill of exchange A written instrument providing proof of an obligation to pay money.

d. Sale to two different persons by the same seller (1544) Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

e. When the seller is not the owner (1505) When goods are sold by a person who is not the owner thereof, the buyer acquires no better title than the seller had, except in the following cases: Made under the authority or with the consent of the owner Owner is precluded by his conduct from denying the sellers authority to sell Made under the provisions of any factors acts, recording laws or any other provisions of law enabling the apparent owner to dispose of the goods as if he were the true owner thereof. (1505) Made under statutory power of sale or under the order of court (1505) Made in a merchants store, or in fairs, or markets. (1505)

CaseDetermination of place of consummation of contract for purposes of imposing sales tax (Butuan Sawmill v. CTA) During the period of January 31, 1951 to June 8, 1953, Butuan Sawmill Inc. sold logs to Japanese firms at prices FOB Vessel Magallanes, Agusan. The FOB prices included costs of loading, wharfage stevedoring and other costs in the Philippines. The freight was paid by the Japanese buyers and the payments of the logs were effected by means of letters of credit in favor of petitioner and payable through the Philippine National Bank or any other bank named by it. Upon investigation by the Bureau of Internal Revenue, it was ascertained that no sales tax was filed by petitioner and neither did it pay the corresponding tax on sales. Petitioner contends that the disputed sales were consummated in Japan, and, therefore, not subject to the taxing jurisdiction of our Government. The lower court upheld the legality and correctness of the amended assessment of the sales tax and surcharge, ruling that the sales in question were domestic or local sales, and therefore subject to sales tax under the provisions of the Tax Code.

ISSUE: Who shall bear the expenses of delivery?

RULING: SC ruled that the export sales have been consummated in the Philippines and were, accordingly, subject to sales tax therein. Expenses of and incidental to putting the goods into a deliverable state must be borne by the seller unless otherwise agreed by the parties. That the specification in the bill of lading to the effect that goods are deliverable to the order of the seller or his agent does not necessarily negate the passing of title to the goods upon delivery to the carrier is clear from the 2nd paragraph of Article 1503 of the Civil Code.

REVEsting of title that has passed to the buyer1. Stoppage in transituThis right involves the right of the unpaid seller to resume possession of the goods at any time while they are in transit, and he will then become entitled to the goods as he would have had if he had never parted with the possession. (Art. 1530)

2. Delivery to the buyer on sale or returnSales or return the ownership of the goods is transferred to the buyer on delivery, but the buyer has the option to revest their ownership on the seller by returning them within the time fixed in the contract, or if no time has been fixed, within a reasonable time. (Art. 1502)

3. In case of danger of loss of the thing and the price

DOCUMENTS OF TITLE TO THE GOODSDEFINITION (Art 1636) "Document of title to goods" includes any bill of lading, dock warrant, "quedan," or warehouse receipt or order for the delivery of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by endorsement or by delivery, goods represented by such document.

KINDS (Negotiable and Non-negotiable)NegotiableDefinition A negotiable document of title is one in which it is stated that the goods will be delivered to bearer, or to the order of any person named in such document. (1507)

Negotiation

Ways By Delivery (1508 par. 1) If by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the bearer.(deliverable to bearer) Effect of special indorsement of a document of title which states that the goods are deliverable to bearer: The document of title becomes an order document of title. Consequently, it may be further negotiated by the indorsee only by indorsement completed by delivery. If by the terms of the document of title, the carrier, warehouseman, or other bailee issuing it undertakes to deliver the goods to the order of a specified person and such person or a subsequent indorsee of the document has indorsed it in blank or to bearer

By Indorsement plus delivery (1508 par 2) If by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the order of a speci ed person and such person or a subsequent indorsee of the document has indorsed it in blank or to the bearer. (deliverable to the order of a certain person) Such indorsement may take any of the following forms: Blank indoresment It does not specify the name of the indorsee and can be negotiated further by mere delivery. To bearer where the indorsement states that the goods are deliverable to bearer. It can be further negotiated by delivery. Special indorsement where the name of the indorsee is specified. It can only be negotiated further by indorsement and delivery.

Validity of negotiation (1518) The validity of the negotiation, if the person to whom the document is negotiated or a person to whom the document is subsequently negotiated was a purchaser for value in good faith and without notice, is not impaired by the following: That the negotiation was made in breach of duty of the person negotiating That the owner of the document was deprived of the possession of the same by loss, theft, fraud, accident, mistake, duress or conversion.

Who may negotiate (1512) By the owner thereof By the person to whom the possession or custody of the document has been entrusted by the owner in the following cases: If by the terms of the document, the bailee issuing the document, undertakes to deliver the goods to the person to whom the possession or custody of the document has been entrusted. If, at the time of such entrusting the document, it is in such form that it may be negotiated by delivery.

Warranties of the person negotiating (1516) A person who for value negotiates or transfers a document of title by indorsement or delivery, inlcuding one who assigns for value a claim secured by a document of title unless a contrary intention appears warrants the following: The the document is genuine That he has the legal right to negotiate or transfer it That he has knowledge of no fact which would impair the validity or worth of the document That he has a right to transfer the title to the goods and that the goods are merchantable or fit for a particular purpose, whenever such warranties would have been impaired if the contract of the parties had been to transfer without a document of title the goods represented thereby. ( These refer to the warranty against eviction and warranty against hidden defects )

Non negotiable A non negotiable document of title is one in which its is stated that the goods are to be delivered to a specified person. (e.g. Deliver the goods to EDUARD)

Rights of the transferee of a document of titleUnder a non negotiable document of title Right of the transferre The title to the goods as against the transferror, subject to the terms of any agreement with the transferor. The right to notify the bailee (warehouseman or carrier) of the transfer to him of the document of title and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the document Effect of lack of notification The title of the transferee to the goods and right to acquire the obligation of the bailee may be defeated by the following: The levy of an attachment or execution upon the goods by the creditor of the transferor A notification to such bailee by the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor

Under a negotiable document of title A person to whom a negotiable document of title has been duly negotiated acquires thereby: Such title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser in good faith for value and also such title to the goods as the person to whose order the goods were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith for value; The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the terms of the document as fully as if such bailee had contracted directly with him. The right to compel the transferor to indorse the document unless a contrary intention appears (1515)

Levy, or garnishment of goods covered by a document of titleWhen covered by a negotiable document of title GENERAL RULE: The goods covered by a negotiable document of title cannot be attached or levied upon except: When the document is surrendered to the bailee; or The negotiation of the document is enjoined.

Remedy of the creditor of a debtor-owner of goods The creditor can ask the courts for an order attaching the document of title or enjoining the delivery of the goods to the debtor owner. (1520)

Rights of the Baillee The bailee cannot be compelled to surrender the goods, except: When the document is surrendered to him; or The document is impounded by the court

When covered by a non-negotiable document of title (The goods may be levied upon) The goods covered by a non-negotiable document of title may be attached or levied upon in execution although the document is not surrendered to the bailee before prior notification of the transferee to the baillee

TIME AND PLACE OF DELIVERYTIME Time stipulated

CasesTimeliness of delivery in light of the stipulations in the contract (Smith, Bell and Co v. Sotelo Matti) Smith Bell and Matti entered into a contract where Smith Bell would deliver the steel tanks from New York to Manila within 90 days, but the tanks arrived later than expected. Matti refused to accept due to delay

ISSUE: WON Smith Bell was able to comply with its obligation in due time

Ruling: It cannot be said that a definite date was fixed for the delivery of the goods. The period was subject to contingencies, and there were the phrases as soon as possible and this is not guaranteed Contracts were entered into during the world war. The term which the parties attempted to fix is so uncertain that one cannot tell just whether those articles could be brought to Manila or not. The obligation must be regarded as conditional. The delivery was subject to a condition the fulfillment of which depended not only upon the effort of herein plaintiff, but also upon the will of 3rd persons (the US Government) In cases like this, obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality. When the time of delivery is not fixed in the contract, time is regarded unessential. In such case, delivery must be made within a reasonable time Here, it is shown that plaintiff did all within its power to have the machinery arrive at Manila as soon as possible, and immediately upon its arrival, notified the purchaser of the fact and offered to deliver it to him. We hold that said machinery was brought within a reasonable time If there is no stipulation, delivery must be made within a reasonable time from the execution of the contract. (1521)Delivery; when time is of the essence (Lorenzo Shipping Corp v. BJ Marthel International) In determining whether time is of the essence in a contract, the ultimate criterion is the actual or apparent intention of the parties and before time may be so regarded by a court, there must be a sufficient manifestation, either in the contract itself or the surrounding circumstances of that intention. The law implies, however, that if no time is fixed, delivery shall be made within a reasonable time, in the absence of anything to show that an immediate delivery intended.

PLACE Place stipulated If there is no stipulation, place fixed by usage or trade In the absence of both, the sellers place of business if he has one; if non, the sellers place of residence. However, in the case of sale of specific goods, which to the knowledge of the parties when the contract was made were in some other place, that place shall be the place of delivery. (1521)

DELIVERY TO THE CARRIERRuleCase: At what point the articles were considered delivered to the buyer (Behn, Meyer and Co v. Yangco) Determination of the place of delivery resolves itself into a question of fact. If the contract be silent as to the person or mode by which the goods are to be sent, delivery by the vendor to a common carrier, in the usual and ordinary course of business, transfers the property to the vendee. A specification in a contact relative to the payment of freight can be taken to indicate the intention of the parties in regard to the place of delivery. If the buyer is to pay the freight, it is reasonable to suppose that he does so because the goods become his at the point of shipment. On the other hand, if the seller is to pay the freight, the inference is equally so strong that the duty of the seller is to have the goods transported to their ultimate destination and that title to property does not pass until the goods have reached their destination. The letters "c.i.f." found in British contracts stand for cost, insurance, and freight. They signify that the price fixed covers not only the cost of the goods, but the expense of freight and insurance to be paid by the seller. The contract, in addition to the letters "c.i.f.," has the word following, "Manila." Under such a contract, an Australian case is authority for the proposition that no inference is permissible that a seller was bound to deliver at the point of destination. In mercantile contracts of American origin the letters "F.O.B." standing for the words "Free on Board," are frequently used. The meaning is that the seller shall bear all expenses until the goods are delivered where they are to be "F.O.B." According as to whether the goods are to be delivered "F.O.B." at the point of shipment or at the point of destination determines the time when property passes.

EXPENSES OF DELIVERY ARE BORNE BY THE SELLER (1247) (1521 last par.) Unless it is otherwise stipulated, the extrajudicial expenses required by the payment shall be for the account of the debtor. With regard to judicial costs, the Rules of Court shall govern (1247) The seller bears the expenses of and incidental to putting the goods into a deliverable state, unless otherwise stipulated. (1521)

RIGHTS OF THE UNPAID SELLERDEFINITION An unpaid seller is one who has not been paid or tendered the whole of the price has received a bill of exchange or other negotiable instrument as conditionla payment and the condition under which it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise. (1525)

RIGHTS OF THE UNPAID SELLER Possessory lien, or lien on the goods or right to retain them while he is in possessionof the (1526)When Lien exists This right is available to the seller and notwithstanding the he may be in possession of the goods as agent or bailee for the buyer in the following instances: (Requisites) When the goods have been sold without any stipulation as to credit Where the goods have been sold on credit, but the credit term has expired Where the buyer is insolvent (1527) Lien where there is partial delivery he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show and intent to waive or right of retention. (1528)

When lien is lost The unpaid seller losses his lien on the goods in the following cases: 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. When the buyer or his agent lawfully obtains possession of the goods By waiver thereof (1529) The unpaid seller having lien on the goods does not lose his lien by reason only that he has obtained judgment or decree for the price of the goods. (1529)

Right of stoppage in transituWhen available (Requisites) The buyer is insolvent (1526 par 2 and 1530) The goods are in transit (1530) Unpaid seller has parted with the possession of the goodsEffect of partial delivery (1528) Where an unpaid seller has made part delivery of the goods he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an intent to waive the lien or right of retention The partial delivery may have been made under such circumstances as to show an intent to waive: (a) the lien; (b) or right of retention

How Stoppage in transit is exercised (1532) By obtaining actual possession OR By giving notice of his claim to the carrier or other bailee in whose possession the goods are The notice maybe given either to the person in actual possesion of the goods or to his principal. If given to the principal, the notice to be effectual, must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence may prevent delivery to the buyer. When notice of stoppage in transit is given to the carrier or other bailee for the buyer, he must redeliver the goods to, or according to the instructions of the seller, with the seller bearing the expenses of the delivery. However, if a negotiable document of title representing the goods has been issued, the carrier or other bailee shall not be obliged or justified in delivering the goods to the seller unless such document is first surrendered to him. (1532)

Effects of the exercise of this right The goods are no longer in transit Carrier shall be liable as depositary or other bailee Carrier must deliver the goods to, or according to the instructions of the seller

Right of RESALEWhen available (Requisites) An unpaid seller having a right of lien or having stopped the goods in transitu may resell the goods on the ground of any of the following: Goods are of a perishable nature Seller has expressly reserved the right to resell in case of default The buyer has been in default for an unreasonable time (1533)

Notice of resale to the buyer Notice need not be given to the original buyer of the intention to resell the goods for the validity of the resale. However, if the basis of the resale is not the perishable nature of the goods or upon an express provision in a contract of sale, the giving or failure to give notice shall be relevant in any issue involving the question whether the buyer has been in default for an unreasonable time before the resale was made. It is not likewise essential to the validity of the resale that notice of the time and place of such resale should be given by the seller to the original buyer. (1533) Notice of the ground is relevant for the seller to recover loss

How resale is made The seller is bound to exercise reasonable care and judgment in making a resale, and subject to this requirement may make a resale either by public or private sale. He cannot, however, directly or indirectly buy the goods. (n) (1533)

Effects of resale The seller shall not thereafter be liable to the original buyer upon the contract of sale or for any profit made by such resale Seller may recover from the buyer damages for any loss occasioned by the breach of the contract of sale. Where a resale is made, the buyer acquires a good title as against the original buyer.

Right to rescind the sale (1526)How rescission is made (Rule on Notice of intention to rescind) By giving notice to the buyer of the intention to rescind By doing an overt act manifesting the intention to rescind Importance of notice when rescission is made by doing an overt act It is not necessary that such overt act should be communicated to the buyer, but the giving or failure to give notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the buyer had been in default for an unreasonable time before the right of rescission was asserted. (1534)

Effects of rescission The seller shall not thereafter be liable to the buyer upon the contract of sale may recover from the buyer damages for any loss occasioned by the breach of the contract. The seller resumes the ownership of the goods

Effect of sale or other disposition of the goods by the original buyer on the right of the unpaid sellerGeneral rule The sellers possessory lien or right of stoppage in transitu is not affected by any sale or disposition of the goods made by the buyer.Exceptions When the seller has assented to the sale of the buyer When a negotiable document of title representing the goods has been negotiated to a purchaser for value in good faith (1535)

ARTICLE 1536 1543 Completeness of DeliveryA. Real estateWhere it is sold per unit or number The vendor shall deliver those that are mentioned in the contract of sale. However, if the actual area is more or less than the area specified in the contract, or if a part of the immovable is not of the quality specified therein, the following rules shall be observed If the actual area is less than the stated in the contract. (1539) The buyer may: Ask for the reduction of the price if the lack in area is less than 1/10 of that stated in the contract, unless the vendee would have not bought the thing had he known of its smaller area, in which case, he may opt to rescind the sale Rescind the sale if the lack in the area is not less than 1/10 of that stated If the actual area is more than that stated in the contract (1540) The buyer may: Accept the area stated in the contract and reject the rest Accept the whole area and pay for them at the contract rate If the areas is the same but a part of the immovable is not of the quality specified in the contract (1539) Ask for the reduction of the price if the lack in area is less than 1/10 of that stated in the contract, unless the vendee would have not bought the thing had he known of its inferior quality, in which case, he may opt to rescind the sale Rescind the sale if the inferior value of the thing exceeds 1/10 of the price agreed

Case:Cebu Winland Development Corp v. Ong Siao HuaFACTS: Cebu Winland Development Corporation is the owner and developer of a condominium project called the Cebu Winland Tower Condominium. Ong Siao Hua is a buyer of two condominium units and four parking slots from petitioner. Respondent bought two condominium units as well as four parking slots. The area per condominium unit as indicated in petitioners price list is 155 square meters and the price per square meter is P22,378.95. The price for the parking lot is P240,000 each. Respondent, therefore, paid P2,298,655.08 as down payment and issued 24 postdated checks in the amount of P223,430.70 per check for the balance of the purchase price in the total amount of P5,362,385. On October 10, 1996, possession of the subject properties was turned over to respondent. The deeds of absolute sale have yet to be signed by Ong Siao Hua. In the deed of absolute sale of Units, respondent was distressed to find that the stated floor area is only 127 square meters contrary to the area indicated in the price list which was 155 square meters. Respondent caused a verification survey of the said condominium units and discovered that the actual area is only 110 square meters per unit. Respondent demanded from petitioner to refund the amount of P2,014,105.50 representing excess payments for the difference in the area. However, petitioner refused to refund the said amount to respondent. On August 7, 1998, respondent filed a complaint before House and Land Regulatory Board (HLURB) to refund the amount representing excess payments for the difference in the area. HLURB Arbiter dismissed the complaint. It ruled that Cebu Winland is not guilty of misrepresentation and the action of Ong Siao Hua has already prescribed pursuant to Art. 1543 of the Civil Code. The subject properties have been delivered on October 10, 1996 and respondent filed his complaint only on August 7, 1998. Aggrieved, Ong Siao Hua appealed to the Board of HLURB. It affirmed the decision of the Arbiter with modifications. It ruled that the contract is subject to rescission based on Arts. 1330 and 1331 of the Civil Code. It said that there was a mistake in the object of sale.

Not satisfied with the decision of the Board, petitioner appealed to the Office of the President. It rendered a decision that the action of the respondent has already prescribed. Ong Siao Hua appealed before the Court of Appeals. It rendered a decision that the action of respondent has not prescribed. Hence, Cebu Winland Corporation made an appeal before the Supreme Court.

ISSUE:

1. Whether or not there has been complete delivery; 2. Whether or not Ong Sia Huas action has already prescribed;3. Whether the sale is sold per unit or lump sum. 4. Applicable rules in the sale sold per unit or lump sum.

RULING:On the issue of delivery SC ruled that there has been no complete delivery yet. Delivery as used in the Law on sales refers to the concurrent transfer of 2 things: possession and ownership. This is the rationale behind the jurisprudential doctrine that presumptive delivery via execution of a public instrument is negated by the reality that the vendee actually failed to obtain material possession of the land subject of the sale. In the same vein, if the vendee is placed in actual possession of the property, but by agreement of the parties ownership of the same is retained by the vendor until the vendee has fully paid the price, the mere transfer of the possession of the property subject of the sale is not the delivery contemplated in the Law on Sales or as used in Article 1543 of the Civil Code.

In the case at bar, it appears that respondent was already placed in possession of the subject properties. However, it is crystal clear that the deeds of absolute sale were still to be executed by the parties upon payment of the last installment. This fact shows that ownership of the said properties was withheld by petitioner. Following case law, it is evident that the parties did not intend to immediately transfer ownership of the subject properties until full payment and the execution of the deeds of absolute sale. Consequently, there is no delivery to speak of in this case since what was transferred was possession only and not ownership of the subject properties.

On the issue of prescription SC ruled that the action of the respondent has not yet prescribed. Under Article 1543, the actions arising from Articles 1539 and 1542 shall prescribe in six months, counted from the date of delivery.

In the case at bar, it has already been ruled that there has been no delivery yet. There has been no transfer of ownership of the subject properties since the deeds of absolute sale have not yet been executed by the parties. What has been transferred was possession only and not of the subject properties.

Is the sale sold per unit or lump sum?The sale entered into is a sale sold per unit.

In the case at bar, it is undisputed by the parties that the purchase price of the subject properties was computed based on the price list prepared by petitioner, or P22,378.95 per square meter. Clearly, the parties agreed on a sale at a rate of a certain price per unit of measure and not one for a lump sum. Hence, it is Article 1539 and not Article 1542 which is the applicable law. Accordingly, respondent is entitled to the relief afforded to him under Article 1539, that is, either a proportional reduction of the price or the rescission of the contract, at his option. Respondent chose the former remedy since he prayed in his Complaint for the refund of the amount of P2,014,105.50 representing the proportional reduction of the price paid to petitioner.

Rules applicable in sale sold per unit or number and lump sum. Sold per unit vendor shall be obliged to deliver to the vendee all that may been stated in contract. IF NOT POSSIBLE, the vendee has two options: proportional reduction of the price or rescission of the contract.

Lump sum no increase or decrease of the price, although there be a greater or lesser area or number than that stated in the contract.

Where it is sold for a lump sum or a single price (1542) Area to be delivered. The vendor is bound to deliver all that it is included within the boundaries stated in the contract although there be greater or less area or number than that stated in the contract. The price to be paid by vendee. He shall pay the lump sum stipulated with no increase or decrease in the price although there be greater or less area or number than that stated in the contract. Buyers remedies if the vendor does not deliver the area within the boundaries stated in the contract Proportionate reduction in price OR Rescind the contractCasesDistinction between 1539 (unit price contract) and 1542 (lump sum contract) (Rudolf Lietz Inc v CA) Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or lesser area or number than that stated in the contract. The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit area. In a unit price contract, the statement of area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate. In some instances, a sale of an immovable may be made for a lump sum and not at a rate per unit. The parties agree on a stated purchase price for an immovable the area of which may be declared based on an estimate or where both the area and boundaries are stated. In the case where the area of the immovable is stated in the contract based on an estimate, the actual area delivered may not measure up exactly with the area stated in the contract. A ccording to Article 1542 of the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price although there be a greater or lesser area or number than that stated in the contract. However, the discrepancy must not be substantial. A vendee of land, when sold in gross or with the description more or less with reference to its area, does not thereby ipso facto take all risk of quantity in the land. The use of more or less or similar words in designating quantity covers only a reasonable excess or deficiency Where both the area and the boundaries of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. In cases of conflict between areas and boundaries, it is the latter which should prevail. What really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object.

Sale Indicated by boundaries (Roble v. Arbasa) Pursuant to Article 1542, Civil Code of the Philippines, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price although there be a greater or lesser area or number than that stated in the contract. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object. However, this rule admits of an exception. A vendee of land, when sold in gross or with the description "more or less" with reference to its area, does not thereby ipso facto take all risk of quantity in the land. The use of "more or less" or similar words in designating quantity covers only a reasonable excess or deficiency

Prescription of Action (1543) (Cebu Windland Development Corp. vs Ong Siano Hua) The actions arising from Articles 1539 and 1542 shall prescribe in six months, counted from the day of delivery. (1472a)

Movables (Rules on delivery of Goods) 1522Where there is defeciency in quantity or quality Reject the goods Accept the goods But if the buyer accepts or retains the goods so delivered, knowing that the seller is not going to perform the contract in full, he must pay for them at the contract rate. If, however, the buyer has used or disposed of the goods delivered before he knows that the seller is not going to perform his contract in full, the buyer shall not be liable for more than the fair value to him of the goods so received.

Where there is an excess Accept the goods agreed upon and reject the rest Accept the whole of the goods delivered and pay for them at the contract rate Reject the whole of the goods if they are indivisible

Where goods are mixed in others Accept the goods agreed upon and reject the rest if the sale is divisible Reject the whole of the goods, if the sale is indivisible

Delivery in installments Cant compel delivery unless the delivery is agreed to be by installments

Delivery is to include fruits Unless otherwise stipulated

When seller is excused from delivering (1527) The unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely: Where the goods have been sold without any stipulation as to credit; Where the goods have been sold on credit, but the term of credit has expired; Where the buyer becomes insolvent. The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer

In cash sales (1524) The vendor shall not be bound to deliver the thing sold, if the vendee has not paid him the price, or if no period for the payment has been fixed in the contract.

In sales on credit (1536) The vendor is not bound to deliver the thing sold in case the vendee should lose the right to make use of the terms as provided in Article 1198. (1198 is when one loses the right to make use of the period, recall OBLICON) just remember IFIDVAS I insolvency F fails to furnish the guaranties or securities I Impairs the guarantees or securities by his own acts or D Disappears through event furtuitous event V Violates the undertaking in consideration of which the creditor agreed to the period A ATTEMPTS to abscond S Stipulation

ARTICLE 1544 DOUBLE SALE If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (1473)

Sales to two different personsRules as to Immovables the ownership shall belong to the person who is: (successive) registrant in good faith possessor in good faith person with the oldest title in good faith

Cases:Ownership of immovable subject of a double sale (Gabriel v. Mabanta) The requirement under the law is two-fold: acquisition in good faith and registration in good faith. The prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property. Article 1544 requires that such registration must be coupled with good faith. Jurisprudence teaches us that the governing principle is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyers right except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge gained by the second buyer of the first sale defeats his right even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer, that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyers right) from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession.

To the one who registers the sale in good faith (Tanedo v. CA) Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. The property in question is land, an immovable, and following the above-quoted law, ownership shall belong to the buyer who in good faith registers it first in the registry of property. Thus, although the deed of sale in favor of private respondents was later than the one in favor of petitioners, ownership would vest in the former because of the undisputed fact of registration. On the other hand, petitioners have not registered the sale to them at all.

To the first in possession in good faith (Sanchez v. Ramos) Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. Possession is acquired by the material occupancy of the thing or right possessed, or by the fact that the latter is subjected to the action of our will, or by the appropriate acts and legal formalities established for acquiring possession (art. 438, Civil Code.). By a simple reasoning, it appears that, because the law does not mention to which of these kinds of possession the article refers, it must be understood that it refers to all of these kinds, material possession or symbolic possession. The execution of a public instrument is equivalent to the delivery of the realty sold (art. 1462, Civil Code) and its possession by the vendee (art. 438). Under these conditions the sale is considered consummated and completely transfers to the vendee all of the vendor's rights of ownership including his real right over the thing. The vendee by virtue of this sale has acquired everything and nothing, absolutely nothing, is left to the vendor. From this moment the vendor is a stranger to the thing sold like any other who has never been its owner. As the thing is considered delivered, the vendor has no longer the obligation of even delivering it. If he continues taking material possession of it, it is simply on account of vendee's tolerance and, in this sense, his possession is vendor's possession. And if the latter should have to ask him for the delivery of this material possession; it would not be by virtue of the sale, because this has been already consummated and has produced all its effects, but by virtue of the vendee's ownership, in the same way as said vendee could require of another person although same were not the vendor. This means that after the sale of a realty by means of a public instrument, the vendor, who resells it to another, does not transmit anything to the second vendee and if the latter, by virtue of this second sale, takes material possession of the thing, he does it as mere detainer, and it would be unjust to protect this detention against the rights to the thing lawfully acquired by the first vendee.

In the absence of both registration and possession, ownership shall belong to the one who presents the oldest title, if in good faith (Cruz v. CA)

As the Court stated in Carbonell vs. Court of Appeals "it is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection of the second paragraph of Article 1544." "(T)he governing principle here is prius tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights except only as provided by the Civil Code and that is where the second buyer first registers in good faith the second sale ahead of the first. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer; that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyer's rights) from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law."

Rule as to movables (1544) Ownership shall be transferred to the person who first took possession of the property in good faith. The possession referred to here may either be actual or constructive.

GOOD FAITH in the buyerWhat GF consistsCui v, Henson A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other person in the property. Good faith consists in an honest intention to abstain from taking any unconscientious advantage of another. Good faith is an opposite of fraud and of bad faith, and its non existence must be established by competent proof.

Leung Yee v. Frank Strong Mach It is "the honesty of intention," "the honest lawful intent," which constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith in which the courts always indulge in the absence of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied tokens or signs." One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.

When rules do not apply (Consolidated Rural Bank v. CA) The provision is not applicable in the present case. It contemplates a case of double or multiple sales by a single vendor. More specically, it covers a situation where a single vendor sold one and the same immovable property to two or more buyers. According to a noted civil law author, it is necessary that the conveyance must have been made by a party who has an existing right in the thing and the power to dispose of it. It cannot be invoked where the two dierent contracts of sale are made by two dierent persons, one of them not being the owner of the property sold. And even if the sale was made by the same person, if the second sale was made when such person was no longer the owner of the property, because it had been acquired by the rst purchaser in full dominion, the second purchaser cannot acquire any right.

Section 3 CONDITIONS and WARRANTIES

Article 1545: Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. Where the ownership in the thing has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the same as described and as warranted expressly or by implication in the contract of sale as a condition of the obligation of the buyer to perform his promise to accept and pay for the thing. (n)

Conditions (precedent). (See 1179 et seq.) Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract OR If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty. he may waive performance of the condition.

Warranties:Concept A warranty is a statement or representation made by the seller of goods, contemporaneously and as part of the contract of sale, having reference to the character, quality or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents them. Warranties by the seller may be express or implied. Art. 1546 of the Civil Code defines express warranty as follows: "Art. 1546. Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the sellers opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer. On the other hand, an implied warranty is that which the law derives by application or inference from the nature of the transaction or the relative situation or circumstances of the parties, irrespective of any intention of the seller to create it. Among the implied warranty provisions of the Civil Code are: as to the sellers title (Art. 1548), against hidden defects and encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562), and against eviction (Art. 1548). "The prescriptive period for instituting actions based on a breach of express warranty is that specified in the contract, and in the absence of such period, the general rule on rescission of contract, which is four years (Article 1389, Civil Code)."

Kinds Express Warranties (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.

Implied Warranties (1547) In a contract of sale, unless a contrary intention appears, there is: 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; (Warranty against eviction) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or known to the buyer. (Warranty against hidden defects)

Statement of Sellers Opinion (1546 and 1341) This shall not be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer.

CasesExpress representation of payment of taxes and customs duties (Harrison Motors Corp v. Navarro) petitioner must remember that prior to its consummation it expressly intimated to her that it had already paid the taxes and customs duties. Such representation shall be considered as a seller's express warranty under Art. 1546 of the Civil Code which covers any affirmation of fact or any promise by the seller which induces the buyer to purchase the thing and actually purchases it relying on such affirmation or promise. It includes all warranties which are derived from express language, whether the language is in the form of a promise or representation.

Interpretation of warranty that the land is free from all liens and encumbrances (Investment and Devt v. CA)"The warranty made by Gatpayat in favor of the IDI as contained in the 'Deed of Absolute Sale' duly executed states that the property was 'free from all liens and encumbrances.' In Civil law and as used and understood in ordinary legal parlance, a lien and/or encumbrance is synonymous to 'gravamen, 'carga,' 'hypoteca' or 'privilegium' and does not cover tenancy. In other words, unless so specically stated, tenancy cannot be considered a lien or encumbrance. In the absence of such a showing, and inasmuch as Gatpayat did not warrant the existence of tenancy, he cannot be held liable for violation of his warranty. the petitioner cannot claim reimbursement from its seller, respondent Gatpayat, on the basis of an implied warranty against hidden faults or defects under Article 1547, subparagraph (2) inasmuch as the term "hidden faults or defects" pertains only to those that make the object of the sale unt for the use for which it was intended at the time of the sale. In the case at bar, since the object of the sale by Gatpayat to the petitioner is an agricultural land, the existing tenancy relationship with respect to the land cannot be a "hidden fault or defect." It is not a lien or encumbrance that the vendor warranted did not exist at the time of the sale. It is a relationship which any buyer of agricultural land should reasonably expect to be present and which it is its duty to specically look into and provide for.

Effect of non-fulfillment of express representation (Soler v. Chelsey) no right to compel the defendant to comply with his obligation to pay the plaintiff the sum claimed He who contracts and assumes an obligation is presumed to know the circumstances under which said obligation can be complied with

Prescriptive Period (Villostas v. CA) Article 1571 of the Civil Code provides for a prescriptive period of six months for a redhibitory action, a cursory reading of the ten preceding articles to which it refers will reveal that said rule may be applied only in case of implied warranties. The present case involves one with an express warranty, the general rule on rescission of contract, which is four years shall apply

Subsection I Warranty in case of EvictionConcept Eviction is the deprivation of the vendee of the whole or a part of the thing sold by virtue of a final judgment based on a right prior to the sale of an act imputable to the vendor.

Requisites There must be a final judgment depriving the vendee of the whole or part of the thing sold. (1548) The vendee need not appeal from the decision in order that the vendor may become liable for eviction. (1549) The deprivation is based on a right to the sale or an act to the vendor (1548) Vendor must have been notified of the suit for eviction at the instance of the vendee (1558)

Kinds of deprivation or trespass Deprivation in law Deprivation in fact

Effect of warranty/Vendors Liability in case of eviction/Waiver of warranty There is stipulation exempting the vendor from the obligation to answer for eviction

Vendor/seller acted in BF the waiver shall be void (1553) and vendor shall be liable for the following: 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; The income or fruits, if he has been ordered to deliver them to the party who won the suit against him; 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; The expenses of the contract, if the vendee has paid them; The damages and interests, and ornamental expenses, if the sale was made in bad faith. (1555)

Vendor/seller acted in good faith If vendee made the waiver without knowledge of the risks of eviction (waiver consciente), he shall pay only the value of the thing sold at the time of eviction If vendee made the waiver, with knowledge of the risks of eviction and assumed the consequences (waiver intencionada), the vendor shall not be liable.

Where no warranty has been agreed upon or there was no stipulation Vendor acted in bad faith vendors liability will be the same as enumerated above Vendor acted in good faith vendors liability will be only as to nos. 1 to 4Partial eviction to Loss of an important part (1556) Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to the whole, that he would not have bought it without said part, he may demand: the rescission of the contract; but with the obligation to return the thing without other encumbrances that those which it had when he acquired it; or Enforcement of the vendor's liability for eviction. The same rule shall be observed when two or more things have been jointly sold for a lump sum, or for a separate price for each of them, if it should clearly appear that the vendee would not have purchased one without the other.

CaseEffect of sale of property excluded from the chattel mortgage (de la Riva v. Ah Kee) That a mortgage creditor, who purchases real properties at an extrajudicial foreclosure sale thereof by virtue of a chattel mortgage constituted in his favor, which mortgage has been declared null and void with respect to said properties, acquires no right thereto by virtue of said purchase; neither does the subsequent purchaser of said properties acquire any right to the real properties which were excluded from the chattel mortgage, and upon being evicted therefrom by virtue of a judgment declaring that the vendor had no right the properties which had been excluded from the chattel mortgage constituted in the latter's favor and which said vendor purchased in the foreclosure sale thereof, said subsequent purchaser is entitled to be indemnified for the value thereof at the time of the eviction.

Warranty in auction sale The judgment debtor is also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment It has been held universally that in case of failure of title, a purchaser in good faith at a judicial sale is entitled to recover the purchase money from the ofcer if the funds are still in his hands or from the judgment debtor

Waiver of Warranty against eviction by the buyer (vendee) If seller was in good faith the exemption is valid, but without prejudice to Art. 1554. If seller was in good faith the stipulation is VOID Must be express

Kinds of WaiverConsciente Waiver made without knowledge of risk of eviction

Intencionada Waiver made with knowledge of risk of eviction

Cases of Intentional WaiverAndaya v. Manansal spouses Andaya and Cabrito had waived the warranty against eviction because at the time that they purchased the land in question, they knew of the danger of eviction. the property was already the subject of a pending litigation between petitioners and one Eustaquia Llanes, who claimed its title and possession by virtue of an earlier sale from the original owner. It was by final judgment in this litigation that petitioners were evicted from the land. Not having appealed from the decision of the court below, petitioners are bound by these findings, the implication of which is that they not only renounced or waived the warranty against eviction, but that they knew of the danger of eviction and assumed its consequences.

What Seller must give in case of eviction (VICED) Value - 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; Income - The income or fruits, if he has been ordered to deliver them to the party who won the suit against him; Costs - 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; Expenses - The expenses of the contract, if the vendee has paid them; Damages - The damages and interests, and ornamental expenses, if the sale was made in bad faith.

Article 1560 Warranty against hidden encumbrance for immovables (easement/servitude)Warranty Against Hidden encumbrances (1560) If the immovable sold should be encumbered with any non-apparent burden or servitude, not mentioned in the agreement, of such nature that it must be presumed that the vendee would not have acquired it had he been aware thereof, he may ask for the rescission of the contract, unless he should prefer the appropriate indemnity. Neither right can be exercised if the non-apparent burden or servitude is recorded in the Registry of Property, unless there is an express warranty that the thing is free from all burdens and encumbrances.

Requisities for vendors liability The easement must be non apparent It must not have been mentioned in the agreement It must be of such nature that it must be presumed that the vendee would not have acquired the immovable had he been aware thereof.

Vendees remedies should it be encumbered with any non apparent easement or servitude Within one year from the execution of the deed of sale, the vendee may ask for: Rescission, OR Damages After one year Damages, within a period of one year from the discovery fo the easement or servitude.

When not liable Easement is apparent Non apparent encumbrance is recorded in the Registry of Property unless there is an express warranty that the thing is free from all burdens and encumbrances Vendee had knowledge at the time of the sale of the existence of the easement or servitude, though it was non apparent, such as when it was mentioned in the agreement.

Subsection 2 - WARRANTY AGAINST HIDDEN DEFECTSOF OR ENCUMBRANCE UPON THE THING SOLD

Article 1561 1571Warranty against Redhibitory (hidden, physical) vices (of movables) The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unt for the use for which it is intended, or should they diminish its tness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but 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 his trade or profession, should have known them.

Requisites the defect must exist at the time of sale (1561) the defect must be hidden (1561) the vendor, however, shall not be liable for defects that are not visible if the vendee is an expert who, by reason for his trade or profession, should have known them (1561) the defect must render the thing unfit for the use for which it is intended or diminishes its fitness for such use to such an extent, that had the vendee been aware thereof, he would not have aacquired it or would have given a lower price for it (1561) the action to enforce it must be made within the period provided by lawCASE: Applicability of warranty sale to sale of second hand article (Moles v. IAC) As a general rule, there is NO implied warranty in the sale of secondhand articles. Said general rule, however, is not without exceptions. Article 1562 of our Civil Code provides: Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows: (1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are acquired, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose

Knowledge of the vendor GENERAL RULE: The vendor shall be liable to the vendee for any hidden defects in the thing sold, even though he was not aware thereof. EXCEPTION: The vendor shall not be liable if there is a stipulation exempting him from such defects and he was not aware thereof. (1566)

Effects of warranty against defects or vices:Choices of the vendee (1567) Remedies of the vendee in case of breach (under 1561, 1562, 1564, 1565, 1566) Withdrawing from the contract or recission (accion redhibitoria) Demanding a proportionate reduction in the price (accion quanti minoris)CASE: Effect of sale of car with hidden defects (Supercars Mgmt and Devt Corp v. Flores) The vehicle, after it was delivered to respondent, malfunctioned despite repeated repairs by petitioner. Obviously, the vehicle has hidden defects. A hidden defect is one which is unknown or could not have been known to the vendee. The findings of both the RTC and Court of Appeals that petitioner committed a breach of warranty against hidden defects are fully supported by the records. The Appellate Court correctly ruled: "The evidence clearly shows that Flores [now respondent] was justified in opting to rescind the sale given the hidden defects of the vehicle, allowance for the repair of which he patiently extended, but which repair did not turn out to be satisfactory. For when by three letters, Flores declared his rescission of the sale, which rescission was not impugned or opposed by appellants as in fact they accepted the return of the vehicle on February 9, 1989, such extra-judicial rescission produced legal effect. It is well within respondent's right to recover damages from petitioner who committed a breach of warranty against hidden defects. Article 1599 of the Civil Code partly provides: "Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his election: (4) Rescind the contract of sale and refuse to receive the goods, or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid. When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without prejudice to the provisions of the second paragraph of Article 1191

If the thing is lost due to hidden defects (1568) The vendor was aware of the defect, he shall be obliged: To return the price To refund the expenses of the contract; and To pay damages

If the vendor was not aware of the defect, he shall be obliged: To return the price To pay the interest thereon; and To refund the expenses of the contract

If the thing is lost by fortuitous event or by the fault of the buyer The vendor was aware of the defect, he shall be obliged: To return the price paid less the value of the thing at the time of the loss; and To pay damages (1569)

The vendor was not aware of the defect To return the price paid less the value of the thing at the time of the loss (1569)

Period to bring action for breach of warranty The action to withdraw from the contract (accion redhibitoria) or reduction of the price with damages (accion quanti minoris) (1561 to 1567), and all other actions to enforce the sellers liability for hidden defects when the thing is lost (1568 and 1569) and in judicial sales (1570), is six (6) months from the delivery of the thing sold. (1571)

Case:Effect of action to recover purchase price filed after 6 months (Guzman v. Toyota Cubao) Under Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months from the delivery of the thing sold. In the absence of an existing express warranty on the part of the respondent, as in this case, the allegations in petitioners complaint for damages were clearly anchored on the enforcement of an implied warranty against hidden defects, i.e., that the engine of the vehicle which respondent had sold to him was not defective. By filing this case, petitioner wants to hold respondent responsible for breach of implied warranty for having sold a vehicle with defective engine. Such being the case, petitioner should have exercised this right within six months from the delivery of the thing sold (his cause of action had become time-barred)

Article 1572 1581Warranty against hidden vices of animals (redhibitory vices)When no warranty exists (1574, 1575, 1576,) There is no warranty against hidden defects of animals sold at fairs or at public auctions, or of livestock sold as condemned (1574) The sale of animals suffering from contagious diseases shall be void. A contract of sale of animals shall also be void if the use or service for which they are acquired has been stated in the contract, and they are found to be unt therefor (1575) If the hidden defect of animals, even in case a professional inspection has been made, should be of such a nature that expert knowledge is not suf cient to discover it, the defect shall b