I.

Double Sales

Double Sales; defined

-When the same object of the sale is sold to different vendees.
-Governed by Article 1544 of the Civil Code.

Art. 1544 of the Civil Code

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.

Double Sales; Requisites

-2 or more sales transactions must constitute valid sales transactions;
-2 or more sales transactions must pertain to exactly the same subject matter;
-2 or more buyers at odds over the rightful ownership of the subject matter must
each represent conflicting interests; and
-2 or more buyers at odds over the rightful ownership of the subject matter must
have bought from the very same seller.

Double Sale; preference

1. Movable– Owner who is first to possess
2. Immovable
a. First to register in good faith
b. If no registration– first to possess in good faith
c. If no registration & no possession in good faith– person who presents oldest
title in good faith

II. Breach of Contract of Sale

Who is Liable in Breach of Contracts?

Those who are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor in the performance of their obligations, are liable
for damages. [Article 1170].

The vendor has the obligation to:

1. Transfer ownership of the thing sold
2. Deliver the thing including accessions and accessories
3. Warrant the thing against eviction and hidden defects
4. Take care of the thing pending delivery
5. Pay for the expenses, unless otherwise stipulated

The vendee has the obligation to:

1. Accept the delivery
2. Pay the price
3. To take care of the goods, where the goods are delivered to the buyer and he
rightfully refuses to accept (NCC, Art. 1587)
4. To be liable as a depositary if he voluntarily constituted himself as such (NCC,
Art. 1587)
5. To pay interest for the period between delivery of the thing and the payment
of the price

Remedies from the nature of the contract of sale

• Specific performance
• Rescission
• Damages
 Remedies of Unpaid Seller
a. Possessory Lien- Seller not bound to deliver object of the contract of sale if
buyer has not paid him the price.
b. Stoppage in Transitu- It is a right which the seller of goods on credit has to
recall them or retake them while they are in the possession of a carrier or
other middleman who received them for delivery to the buyer, on discovery
of insolvency of the buyer.
c. Special right of resale- Unpaid seller may exercise this right if he has a right
of lien or he has stopped the goods in transitu in the following authorized
causes:
-Goods are perishable;
-Stipulated the right of resale in case of default, or
-Buyer in default for unreasonable time.

d. Special right to rescind- Unpaid seller may exercise having the right of lien or
he has stopped the goods in transitu may rescind the transfer of title and
resume ownership in the following cases: --Seller expressly reserved right to
rescind in case of buyer’s default;
-Buyer’s default for an unreasonable length of time

Remedies of Buyer
1. If seller fails to deliver the- Action for specific performance; Rescission.
2. Breach of seller’s warranty– buyer may avail of the following remedies:
i. Accept goods & set breach of warranty by recoupment in diminution of
price;
ii. Accept goods & maintain action on damages;
iii. Rescind contract of sale & maintain action on damages.
3. Disturbed in possession or with reasonable grounds to disturbance– Suspend
payment.

III. Warranty

Warranties deemed included in all contracts of sale by operation of law (NCC, Art.
1547)
• Warranty that seller has right to sell
• Warranty against eviction
• Warranty against non-apparent burden or servitude
• Warranty against hidden defect

Art. 1547, NCC

In a contract of sale, unless a contrary intention appears, there is an implied
warranty on the part of the seller that he has the 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.

The Seller shall be liable for warranty only when

1. The nature of the hidden defect is such that it should render the subject
matter unfit for the use for which intended; or
2. Should diminish its fitness for such use to such extent that had the buyer
been aware thereof, he would not have acquired it or would have given a
lower price for it.

Remedy of Rescission in a Contract of Sale

1. Art. 1591. Should the vendor have reasonable grounds to fear the loss of
immovable property sold and its price, he may immediately sue for the
rescission of the sale. Should such ground not exist, the provisions of Article
1191 shall be observed.
2. Art. 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the
 rescission of the contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by a notarial act. After
the demand, the court may not grant him a new term.
3. Art. 1593. With respect to movable property, the rescission of the sale shall
of right take place in the interest of the vendor, if the vendee, upon the
expiration of the period fixed for the delivery of the thing, should not have
appeared to receive it, or, having appeared, he should not have tendered the
price at the same time, unless a longer period has been stipulated for its
payment.

IV. RECTO LAW

Recto Law (Sale of Personal Property in Installment)

This covers contracts of sale of personal property by installment (Act No. 4122).
It is also applied to contracts purporting to be leases of personal property with
option to buy, when the lessor has deprived the lessee of the possession or
enjoyment of the thing (PCI Leasing and Finance Inc. v. Giraffe- X Creative
Imaging, Inc. G.R. No. 142618, July 12, 2007)

Note: Recto law applies only to sale payable in installments and not to sale
where there is an initial payment and the balance is payable in the future,
because such is a straight sale, not a sale by installments.

Alternative remedies of the Seller:

• Specific performance– Exact fulfillment should the buyer fail to pay. If availed,
the unpaid seller cannot anymore choose other remedies.
• Rescission– Cancel the sale if buyer fails to pay 2 or more installments.
• Foreclosure on chattel mortgage if buyer fails to pay 2 or more installments.
He shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary shall be void.

V. MACEDA LAW

Maceda Law (Sale of Real Property in Installment)

This covers all transactions or contracts involving the sale or financing of real
estate on installment payments, including residential condominium apartments.

Purpose of the Law

To protect property owners from unfavorable terms that may occur from sale
transactions funded by an installment agreement by describing the rights of the
buyers regarding refund entitlement and grace periods.

Sale of Real Property excluded in Maceda Law

• Industrial Lots
• Commercial Buildings
• Sales to tenants under R.A. No. 3844, as amended by R.A. No. 6389.

Maceda Law; Features

1. After paying installment for at least 2 years, buyer is entitled to a mandatory
grace period of 1 month for every year of installment to pay unpaid installment
without interest
2. In case installments paid were less than 2 years, seller shall give buyer a
grace period of not less than 60 days.
3. If buyer fails to pay at expiration of grace period, seller may cancel contract
after 30 days from notice of cancellation through Notarial Notice of Cancellation.
(Rillo v. CA, G.R. No. 125347, June 19, 1997).
4. After the lapse of the grace period, seller may cancel the contract provided he
pays the buyer the CASH SURRENDER VALUE which is equivalent to 50% of all
payments, and after five years of installment an additional 5% for every year but
not to exceed 90% of total payments made.
 5. The cancellation of the contract takes effect 30 days from service of notarial
notice of cancellation and upon payment of the cash surrender value.

Note: Stipulation in any contract which is contrary to the provisions of Maceda

Law shall be declared null and void. [Sec. 7, Maceda Law]

VI. Extinguishment of Sale

In General, sales are extinguished by the same causes as all other obligations:
1. Payment/performance
2. Prescription
3. Loss of thing due
4. Condonation/remission
5. Confusion/merger
6. Compensation
7. Rescission
8. Annulment
9. Novation
10. Fulfillment of the Resolutory condition
11. Redemption (Conventional or Legal)

VII. Conventional Redemption

Conventional Redemption
Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of
article 1616 and other stipulations which may have been agreed upon. (Art
1601, NCC)

Requisites for a Vendor to Avail the Right of Repurchase

Vendor must return to the vendee:
a. The price of the sale
b. The expenses of the contract, and any other legitimate payments made by
reason of the sale;
c. The necessary and useful expenses made on the thing sold. [Article 1616]

Period of redemption
• When there is a period agreed upon: not to exceed 10 years
• No period agreed upon: 4 years.
• Period to redeem expired (+there is a suit on the nature of the contract: 30 Days
from final judgment (Art 1606)

VIII. Legal Redemption

‘Legal Redemption’ defined

It is the right to be subrogated, upon the same terms and conditions stipulated in
the contract, in the place of one who acquires a thing by purchase or dation in
payment, or by any other transaction whereby ownership is transmitted by onerous
title.

INSTANCES OF LEGAL REDEMPTION

1. Sale of a co-owner of his share to a stranger (NCC, Art. 1620;
2. When a credit or other incorporeal right in litigation is sold (NCC, Art. 1634)
3. Sale of an heir of his hereditary rights to a stranger (NCC, Art. 1088)
4. Sale of adjacent rural lands not exceeding 1 hectare (NCC, Art. 1621)
5. Sale of adjacent small urban lands bought merely for speculation (NCC, Art.
1622)

NOTICE REQUIREMENT
-Art. 1623. The right of legal pre-emption or redemption shall not be exercised
except within thirty days from the notice in writing by the prospective vendor, or by
the vendor, as the case may be. The deed of sale shall not be recorded in the
Registry of Property, unless accompanied by an affidavit of the vendor that he has
given written notice thereof to all possible redemptioners.
-The mere fact that the redemptioner is already aware of the existence of the sale
will not excuse the written notice. (Barcellano v. Banas et. al. G.R. No. 165287,
September 14, 2011)

IX. Equitable Mortgage

Equitable Mortgage’ defined

One which, although lacking in some formality, or form, or words, or other requisites
demanded by a statute, reveals the intention of the parties to charge real property
as security for a debt, and contains nothing impossible or contrary to law.

Requisites for Presumption of Equitable Mortgage to Arise

a. The parties entered into a contract denominated as a contract of sale.
b. The intention of the parties was to secure an existing debt by way of
mortgage.

Cases Wherein The Contract Shall Be Presumed To Be An Equitable Mortgage

1. When the price of a sale with right to repurchase is unusually inadequate;
2. When the vendor remains in possession as lessee or otherwise;
3. When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
4. When the purchaser retains for himself a part of the purchase price;
5. When the vendor binds himself to pay the taxes on the thing sold;
6. In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation. [Article 1602]

X. Pacto De Retro Sales

Pacto De Retro Sale; Features

• The title and ownership of the property sold is immediately vested in the vendee a
retro, subject to the restrictive condition of repurchase by the vendor a retro within
the period provided.
• The payment of the repurchase price does not merely render the document null
and void but there is the obligation on the part of the vendee to sell back the
property.
• A sale with pacto de retro transfers the legal title to the vendee and this, in the
absence of an agreement to the contrary, carries with it the right of possession.

Pactro de Retro vs. Equitable Mortgage

In pacto de retro– ownership is immediately transferred to the vendee, subject only
to the right of the vendor to repurchase within a stipulated period.
In equitable mortgage– although lacking in the required formality of mortgage
reveals the intention to burden a property as security for a debt. Non payment gives
right to the creditor to foreclose.

Pactum Commissorium
A stipulation for automatic vesting of title over the security in the creditor in case of
debtor’s default. This is void. The proper remedy is foreclosure of the mortgage. If
there is no foreclosure, the debtors retain ownership (Vasquez v. CA, G.R. No.
144882, February 5, 2005)