Sales

1
4th

LAW ON SALES
YEAR REVIEW CLASS

CONTRACT OF SALE – One of the contracting parties
obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor
a price certain money or its equivalent. A contract of sale
may be absolute or conditional. Art. 1458)
ESSENTIAL REQUISITES:
1. consent or meeting of the minds
2. determinate subject matter
3. price certain
CHARACTERISTICS OF CONTRACT OF SALE:
1. Nominate - law gave it a name
2. Principal - can stand on its own; unlike accessory
contract
3. Bilateral - imposes obligation on both parties
4. Onerous – with valuable consideration
5. Commutative – equal value is exchanged for equal
value
6. Consensual – meeting of minds makes a perfect
contract of sale
7. Title & not a mode – gives rise to an obligation to
transfer
STAGES IN LIFE OF CONTRACT OF SALE:
First: Preparation/Conception/Generation - period of
negotiation and bargaining, ending at the moment of
agreement of the parties
Second: Perfection / Birth - moment when the parties
come to agree on the terms of the contract
Third: Consummation/Performance/Termination fulfillment or the performance of the terms agreed upon in
the contract
CONTRACT OF SALE DISTINGUISHED
FROM OTHER CONTRACTS
Donation
Sale
Barter
Sales
Contract for piece of work
Sale
Dacion en pago
Sale
Agency to sell
Sale
PARTIES TO A CONTRACT OF SALE
GR: All parties with capacity to contract can enter into a
valid contract of sale
EXCEPTION :
1. Minors
2. SALE BY & BETWEEN SPOUSES

Exception
i. separation of property agreed
(marriage settlement)
ii. judicial separation of property

Common Law Spouses (Paramours)
3. OTHERS PER SPECIFIC PROVISIONS OF LAW
a. Guardian with regards to property of ward during period
of guardianship
b. Agent with regards to property of principal
c. Executor/administrator with regards to the estate of the
deceased
d. Public officers with regards to the property of the estate
e. Officer of court & employee – with regards to property
in litigation
ATTORNEYS
REQUISITES:
1. Lawyer-client relationship exists
2. Subject matter – property in litigation (all types)
3. Duration – while in litigation (from filing of complaint to
final judgment); may be future litigation
Exception: CONTINGENT FEE ARRANGEMENT
a. Amount of legal fees is based on a value of property
b. Property itself is involved
SUBJECT MATTER OF SALE
TO BE A VALID & BINDING SUBJECT MATTER, THE
FOLLOWING MUST CONCUR:
1. Existing, Future & Contingent

2. Licit
3. Determinate or determinable
EXISTING, FUTURE, CONTINGENT

Refers to subject matter that are existing
& not existing but capable of existence
Emptio Rei Speratae
Emptio Spei
SM has potential existence
--SM is mere
hope or
expectancy
Deals with a future thing
--Deals with
present thing, that is, hope or expectancy
If SM will not exist, contract
--If hope does not
come true
is not effective
sale produces
effect
LICIT & VENDOR MUST HAVE A RIGHT TO TRANSFER
SUBJECT MATTER
1. LICIT – must be within the commerce of men
VOID SUBJECT MATTER:
a. Contrary to law
b. Simulated/fictitious
c. Did not exist at a time of transaction
d. Outside commerce of men
e. Impossible service
f. Intention can not be ascertained
g. By provision of law
2. SELLER MUST BE OWNER
DETERMINATE & DETERMINABLE
1. Specific - Determinate
2. Generic - Determinable
3. Undivided interest (BUYER becomes co-owner)
4. Undivided share in mass of fungible goods (BUYER
becomes co-owner)
PRICE
CHARACTERISTICS OF VALID PRICE
1. Must be real
2. Must be in money or its equivalent
3. Must be certain or ascertainable at the time of the
perfection of the contract
4. Manner of payment provided for
REAL
1. When price stated is one intended by parties
2. Valuable
Note: Gross inadequacy of price in ordinary sale does not
render contract void unless it is shocking to conscience of
man.
Except:
a. Judicial sale except when there is a right of redemption
b. Rescissible contracts due to lesion
c. Sales with right to repurchase (raises presumption of
equitable mortgage)
CERTAIN OR ASCERTAINABLE
1. Sufficient that it is fixed with reference to another thing
certain

That thing will have on a definite day, or
in a particular exchange or market, or
when an amount is fixed above or below
the price on such day, or in such
exchange or market provided said
amount be certain
2. Determination be left to judgment of specified person/s

If contract states that price is to be
determined by 3rd party, contract is
already perfected (there is just a
suspensive condition – actual fixing of
price)
Note:

When price can not be determined in
accordance with any of the preceding
rules, contract of sale in INEFFICACIOUS

However, when SM delivered, BUYER
must pay reasonable rice therefore –
court can fix price
MANNER OF PAYMENT MUST BE AGREED UPON

2





Deemed to be an essential requisite
because it is part of the presentation of
the contract
Integral part of concept of price
If there is failure to meet minds as
regards term of payment: CASH BASIS

FORMATION OF CONTRACT OF SALE
3 STAGES IN LIFE OF A CONTRACT OF SALE
First: Negotiation / Preparatory / Conception / Generation
Second: Perfection / Birth
Third: Consummation / Death / Termination
Contracts in the First Stage:
1. POLITIACION

Unaccepted unilateral promise to sell

Offer is floated but not absolute

Acceptance is likewise floated but
conditional

Violation does not give rise to any relief
2. OPTION CONTRACT

Unilateral offer to buy or sell with a
period but founded upon a separate
consideration distinct from the price

offeror can not withdrawn offer until after
expiry period
3. RIGHT OF FIRST REFUSAL

creates a promise to enter into a contract
of sale and it has no separate
consideration

Implies that the offer of the person in
whose favor that right was given must
conform with the same terms and
conditions as those given to the offeree

not founded upon contract but on a
quasi-delictual relationship covered by
the principles of human relations and
unjust enrichment
Contract of Sale
Contract to
Sell
- Title passes to the
Vendor reserves owner- buyer upon delivery
ship and will not pass of SM
until full payment of price
- Non-payment is a
payment is a positive resolutory condition
negative resolutory
condition
- Vendor loses control
remains in the vendor
and can recover only
can eject vendee for non compliance
if contract is rescinded
condition

Full

Title
and he
with suspensive

PERFECTION: OFFER & ACCEPTANCE
Sale is a consensual contract
Sale is perfected by meeting of minds regarding
subject matter & price
Meeting of Minds:
1. Offer – certain
2. Acceptance – absolute

Qualified acceptance – merely a counter-offer
which needs to be absolutely accepted to give
rise to perfected contract of sale

Business ads are mere invitations to make an
offer except when it appears to be otherwise

Acceptance by letter/telegram – binds only at
time it came to knowledge of SELLER; prior
thereto – offer may still be withdrawn

If sale is subject to suspensive condition, no
perfected contract of sale yet

In sales at auction, perfected when auctioneer
announces its perfection by the fall of the



hammer or in other customary manner may
impose terms under bidder may retract his bid;
Earnest Money
Option Money
Part of the purchase P
separate

---

Distinct and
from

the purchase P
Presupposes a perfected
Contract of Sale
Contract

---

No perfected

of Sale
Buyer is bound to pay
the balance after
earnest money is paid
--Buyer should
pay the entire purchase price
Bert offers to buy Simeon’s property under the following
terms and conditions: P1 million purchase price, 10%
option money, the balance payable in cash upon the
clearance of the property of all illegal occupants. The
option money is promptly paid and Simeon clears the
property of illegal occupants in no time at all. However,
when Bert tenders payment of the balance and ask
Simeon for the deed for absolute sale, Simeon suddenly
has a change of heart, claiming that the deal is
disadvantageous to him as he has found out that the
property can fetch three time the agreed purchase price.
Bert seeks specific performance but Simeon contends that
he has merely given Bert an option to buy and nothing
more, and offers to return the option money which Bert
refuses to accept.
A. Explain the nature of an option contract. (2%)
B. Will Bert’s action for specific performance prosper?
Explain. (4%)
C. May Simeon justify his refusal to proceed with the sale
by the fact that the deal is financially disadvantageous to
him? Explain. (4%)
Ubaldo is the owner of a building which has been leased
by Remigio for the past 20 years. Ubaldo has repeatedly
assured Remigio that if he should decide to sell the
building, he will give Remigio the right of first refusal. On
June 30, 1994, Ubaldo informed Remigio that he was
willing to sell the building for P5 Million. The following day,
Remigio sent a letter to Ubaldo offering to buy the
building at P4.5 Million. Ubaldo did not reply. One week
later, Remigio received a letter from Santos informing him
that the building has been sold to him by Ubaldo for P5
Million, and that he will not renew Remigio's lease when it
expires. Remigio filed an action against Ubaldo and Santos
for cancellation of the sale, and to compel Ubaldo to
execute a deed of absolute sale in his favor, based on his
right of first refusal.
a) Will the action prosper? Explain.
b) If Ubaldo had given Remigio an option to purchase the
building instead of a right of first refusal, will your answer
be the same? Explain.
In a 20-year lease contract over a building, the lessee is
expressly granted a right of first refusal should the lessor
decide to sell both the land and building. However, the
lessor sold the property to a third person who knew about
the lease and in fact agreed to respect it. Consequently,
the lessee brings an action against both the lessor-seller
and the buyer (a) to rescind the sale and (b) to compel
specific performance of his right of first refusal in the
sense that the lessor should be ordered to execute a deed
of absolute sale in favor of the lessee at the same price.
The defendants contend that the plaintiff can
neither seek rescission of the sale nor compel specific
performance of a "mere" right of first refusal. Decide the
case. [5%]
FORM OF SALES
1. Form not important in validity of sale

Sale is perfected by mere consent

Under the statute of frauds, form is only
required for convenience only & not for
validity & enforceability

3
2. When form is important for validity; exception by
specific provision of law;

Art 748
Donation of
movable

Art 749
Donation of
immovable

Art 1874
Sale of piece of land
through an agent

Art 2134
Contract of antichresis;
amount of principal
and
of the interest

Art 1771
Partnership; immovable
property or real
rights are contributed

Art 1773
Partnership; inventory of
immovable property
contributed

Art 1956
Interest for using
someone else’s money

Art 2140
Chattel mortgage
3. When form is important for enforceability (STATUTE OF
FRAUDS)
a. Sale to be performed 1 year after
b. Agreement to sell things with value of 500 and up
c. Sale of real property or interest therein
Exception:
i. When there is a note or memorandum in writing &
subscribe by party or his agent (contains essential terms
of the contract)
ii. When there has been partial performance/execution
(seller delivers with intent to transfer title/receives price)
iii. When there has been failure to object to presentation
of evidence (oral)
CONSUMMATION / PERFORMANCE
DELIVERY OF THE THING
Transfer ownership (tradicion) – twin obligation:
1. transfer title(ownership)
2. delivery of the thing
Different kinds of delivery:
1. Actual - when thing sold is placed in the control &
possession of the buyer
2. Constructive
DIFFERENT FORMS OF CONSTRUCTIVE DELIVERY:
1. Traditio Longa Manu - when SELLER points to the
property without need of actually delivering
2. Traditio Brevi Manu - before contract of sale, the would
be buyer was already in possession of the would be
subject matter of sale
3. Symbolic delivery – ex: delivery of the keys to a car
4. Constitutum possessarium - at the time of perfection of
contract, seller continues to hold possession merely as a
holder
5. Execution- subject matter should be within control of
seller; he should have capacity to deliver at the time of
execution of public instrument when he wants to effect
actual delivery :
Exception:
a. when there is stipulation to contrary, execution does
not produce effect of delivery
b. when at the time of execution of instrument, subject
matter was not subject to control of the seller
Note: Transfer of ownership could still be effected even
when thing is mortgaged.
6. Negotiable documents of title & non negotiable
instruments

transferee acquires title of transferor

when delivered without negotiation, it is
a mere assignment
7. Intangibles/ incorporeal property

through public instrument

execution is equivalent to delivery if from
the deed, contrary does not appear
DELIVERY THROUGH CARRIER - delivery of goods to the
carrier is deemed delivery of goods to the buyer
1. FAS – FREE ALONG SIDE

Seller pays all charges and is subject to
all risks until goods are placed alongside
vessel
2. FOB-FREE ON BOARD
a. Shipment – when goods are delivered at ship at point of
shipment; delivery to carrier by placing goods on vessel is
delivery to buyer
b. Destination – when goods reach the port even if not
disembarked yet from the vessel, there is delivery to the
buyer
3. CIF – COST, INSURANCE, FREIGHT
a. when buyers pays for services of carrier – delivery to
carrier is delivery to buyer; carrier is agent of the buyer
b. when buyer pays seller the price – from moment the
vessel is at port of destination, there is already delivery to
buyer.
COMPLETENESS OF DELIVERY
1. MOVABLES – delivery of thing plus accessories &
accessions in the condition in which they were upon the
perfection of the contract including the fruits
a. LESS – buyer has 2 options:
i. reject
ii. accept
(1) when accepted with knowledge that seller is not going
to perform contract in full, he must pay at price stipulated
(2) when accepted & consumed before knowledge that
buyer will both perform contract in full, liable only for fair
value of goods delivered
b. LARGER – buyer has 2 options;
i. accepts per contract & reject the rest
ii. accept the whole – pay price stipulated
iii. reject whole if subject matter is indivisible
c. MIXED WITH GOODS OF DIFFERENT
DESCRIPTION – buyer has 2 options:
i. accepts good w/c are in accordance with contract &
reject the rest
ii. reject goods entirely – if indivisible
2. IMMOVABLES
a. sold per unit or number

with statement of its area, rate
at certain price

deliver all that may heave been
stated in the contract

if impossible, remedies of buyer:
LESS IN AREA
i. rescission
ii. proportional reduction of price – LACK IN AREA SHLD
NOT BE LESS THAN 1/10 OF AREA AGREED UPON
GREATER IN AREA
i. accept per stipulation & reject the rest
ii. accept whole area – pay at contract rate
Note: Not applicable to judicial sales
b. sold for lump sum

When price per unit not
indicated

Is area delivered is either greater
or lesser – price will not be
adjusted accordingly
EFFECTS OF DELIVERY: Title to thing is
transferred/ownership is transferred


Except: contrary is stipulated as in the case of:
1. contract to sell
2. sale on acceptance/approval
3. sale or return
4. there is implied reservation of ownership
OBLIGATION OF BUYER
1. Pay the price

pay price according to terms agreed
upon

pay stipulated interest

In case of default – constitutes breach:
subject to specific performance/rescission
& damages
2. Accept delivery of thing sold

4
Where to accept: at time & place
stipulated in the contract; if none
specified – at the time & place of delivery

Goods; there is acceptance when:
a. He intimates to seller that he has accepted
b. When delivered & does any act inconsistent with
ownership of seller
c. Retains without intimating to seller that he has rejected
Sale of Goods on installment:
a. Goods must be delivered in full, except when stipulated
b. When not examined by buyer – not accepted until
examined or at least had reasonable time to examine
DOUBLE SALE : FIRST IN TIME, PRIORITY IN RIGHT
Requisites;
1. exactly same subject matter
2. exactly same immediate seller
3. they buyers represent conflicting interest
4. both sales are valid
RULES:
1. MOVABLE

owner is the first to have taken
possession in good faith
2. IMMOVABLE

One who first register in good faith

If there’s no inscription, first one to
possess in good faith

If there are no inscription & no
possession in good faith – Person who
presents oldest title in good faith
On June 15, 1995, Jesus sold a parcel of registered land to
Jaime. On June 30, 1995, he sold the same land to Jose.
Who has a better right if:


a) the first sale is registered ahead of the second sale,
with knowledge of the latter. Why? (3%)
b) the second sale is registered ahead of the first sale,
with knowledge of the latter? Why? (5%)
JV, owner of a parcel of land, sold it to PP. But the deed of
sale was not registered. One year later, JV sold the parcel
again to RR, who succeeded to register the deed and to
obtain a transfer certificate of title over the property in his
own name.
Who has a better right over the parcel of land, RR or PP?
Why? Explain the legal basis for your answer. (5%)
SALE BY NON-OWNER OR BY
ONE HAVING VOIDABLE TITLE
1. Sale by Non-owner

Void; Buyer acquires no better title to the
goods than the seller had

Exceptions:

Estoppel

Recording laws

Statutory power Order of
Court

Sale in Merchant stores,
fairs or markets
2. Sale by one having Voidable Title

Valid sale – if title has not yet been
avoided buyer buys goods under
following condition:
a. in good faith
b. for value
c. without notice of
seller’s defect of title
GOOD FAITH
1. one who buys property without notice that another
person has a right or interest in such property
2. one who has paid price before notice that another has
claim or interest
DOCUMENTS OF TITLE
Definition: 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.(Art. 1636)
Purpose:

evidence of existence & possession of goods
described therein

medium by which seller is able to transfer
possession of goods
Negotiable documents of title (Art. 1507)
- A document of title in which it is stated that the goods
referred to therein will be delivered to the bearer, or to
the order of any person named in such document
Non-negotiable documents of title (Art. 1514)

A person to whom a document of title has been
transferred, but not negotiated, acquires:

As against the transferor, the title to the
goods, subject to the terms of any
agreement with the transferor.

The right to notify the bailee who issued
the document of the transfer thereof, 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.
WARRANTIES ON NEGOTIATION
1. the document is genuine
2. he has legal right to negotiate or transfer it
3. he has knowledge of no fact which would impair the
validity or worth of the document
4. he has right to transfer title to goods and goods are
merchantable/fit
RULES OF LEVY/GARNISHMENT OF GOODS
1. Non negotiable

Notification is operative act to transfer
title/possession of goods in favor
assignee

Before notification – can be garnished but
not when there is notification already
2. Negotiable

Can not be levied or garnished when
docs already with purchaser in good
faith, unless:
a. Document is first surrendered
b. Document is pounded by court
c. Negotiation is enjoined
LOSS, DETERIORATION, FRUITS & OTHER BENEFITS
WHO BEARS RISK OF LOSS/DETERIORATION/FRUITS
1. Before perfection

Res perit domino; Owner is seller so
seller bears risk of loss

Total loss – contract will be
without effect

Partial loss – buyer may choose
between withdrawing from
contract or demanding
remaining part and pay pro-rata
2. At Perfection

Res perit domino

Contract is merely inefficacious because
loss of the subject matter does not affect
the validity of the sale

Seller cannot anymore comply with
obligation so buyer cannot anymore be
compelled
3. After Perfection but before delivery

borne by the seller under the rule on res perit
domino
4. After delivery

Res perit domino does not apply

Owner is buyer so buyer bears risk of loss

Delivery extinguish ownership vis-a-vis
the seller & creates a new one in favor of
the buyer
D sold a second-hand car to E for P150,000.00 The
agreement between D and E was that half of the purchase
price, or P75,000.00, shall be paid upon delivery of the car
to E and the balance of P75,000.00 shall be paid in five
equal monthly installments of P15,000.00 each. The car
was delivered to E, and E paid the amount of P75.000.00
to D. Less than one month thereafter, the car was stolen


5
from E's garage with no fault on E's part and was never
recovered.
Is E legally bound to pay the said unpaid balance of
P75.000.00? Explain your answer.
REMEDIES OF PARTIES FOR BREACH OF CONTRACT
OF SALE
REMEDIES OF UNPAID SELLER: Movables
Requisites:
1. Subject matter – goods
2. Seller is unpaid –

not completely paid or

received negotiable instrument under a
condition & condition has been breached
by reason of dishonor
3. Physical possession is with seller
Special Remedies:
1. possessory lien
2. stoppage in transitu
3. special right of re-sale
4. special right to rescind
Note: Can only be exercised when 2 prior rights have
been exercised
POSSESSORY LIEN

Seller not bound to deliver if buyer has not paid
him the price

Right to retain; cannot be availed when seller
does not have custody

When to exercise:
a. goods sold without stipulation as to credit
b. goods sold on credit but term of credit has expired
c. buyer becomes insolvent

When part of goods delivered, may still exercise
right on goods undelivered

Instances when possessory lien lost:
a. seller delivers goods to carrier for transmission to buyer
without reserving ownership in goods or right to possess
them
b. buyer or agent lawfully obtains possession of goods
c. waiver
STOPPAGE IN TRANSITU
Requisites:
1. Goods are in transit

From the time goods are delivered to
carrier for purpose of transmission to
buyer

Goods rejected by buyer & carrier
continues to possess them

When goods are considered no
longer in transit :

Reached point of
destination

Before reaching
destination, buyer met
seller along the way

Goods are supposed to
have been delivered to
buyer but carrier refused
2. Shown by seller that buyer is insolvent

How is right exercised:
a. Obtain actual possession of goods
b. Give notice of claim to carrier / bailee in possession
thereof

Notice by seller to buyer is not required;
notice to carrier is essential
SPECIAL RIGHT TO RESELL THE GOODS
Requisites:
1. goods are perishable
2. stipulated the right of resale in case buyer defaults in
payment
3. buyer in default for unreasonable time
N.B. Notice by seller to buyer not essential
SPECIAL RIGHT TO RESCIND
Requisites:
1. Expressly stipulated

2. Buyer is in default for unreasonable time
N.B. Notice needed to be given by seller to buyer
REMEDIES OF BUYER

When Seller fails to deliver

buyer may seek SPECIFIC PERFORMANCE
WITHOUT GIVING SELLER OPTION TO
RETAIN GOODS ON PAYMENT OF
DAMAGES

When there is a breach of Seller’s Warranties

Accept the goods and sue seller for
recoupment

Accept the goods and sue for damages

Do not accept goods and sue for
damages

Rescind the contract of sale, refuse to
receive the goods or if already received
goods, offer to return and recover price
Note: Remedies are mutually exclusive
SALE OF MOVABLES ON INSTALLMENT
REMEDIES OF UNPAID SELLER (1484) - RECTO LAW
1. Exact fulfillment should the buyer fail to pay

SPECIFIC PERFORMANCE

If already chose specific
performance, cannot anymore
choose other remedies

Except: after choosing, it has
become impossible, rescission
may be pursued
2. Cancel the sale if buyer fails to pay 2 or more
installments

RESCISSION

There is a correlative obligation
to restitute

But stipulation that installments
paid are forfeited are valid if not
unconscionable

Barring effect on recovery of
balance
3. Foreclose on chattel mortgage if buyer fails to pay 2 or
more installments

FORECLOSURE

Cannot recover balance

Exception: mortgagor refuses to
deliver property to effect
foreclosure; expenses incurred in
attorneys fees, etc.
For all remedies:

Nature of remedies: alternative & not cumulative

Coverage: sale & financing transaction &
contracts of lease with option to purchase

Action : Judicial & Extrajudicial
IMMOVABLES (IN GENERAL)
REMEDIES OF SELLER
1. Anticipatory breach

Seller has reasonable grounds to fear loss
of immovable sold & its price – sue for
RESCISSION
2. Non – payment of price

RESCISSION
Rescission under Art. 1592

Involves 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
along 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 new term
Rescission under Art. 1592

Does not apply to contract to sell

6
What is needed is demand for rescission and not
demand for payment

Rescission under Art. 1191 is subordinated to Art.
1592 when it involves sale of immovable property

If rescission is through a letter, the same must be
notarized
REMEDIES OF BUYER
1. Disturbed in possession or with reasonable grounds to
fear disturbance

SUSPEND PAYMENT
2. In case of subdivision or condo projects

If real estate developer fails to comply
with obligation according to approved
plan:
a) RESCIND
b) SUSPEND PAYMENT UNTIL SELLER
COMPLIES
MACEDA LAW
Coverage: REAL ESTATE

Residential real estate

Sales on installments

Financing of real estate on installment
payments

Residential condominium apartments
Excluded:
1. industrial
2. commercial
3. sale to tenants under agrarian laws
Purpose: Protect buyers in installment against oppressive
conditions
RIGHTS GRANTED TO BUYERS:
1. Buyer paid at least 2 years installment
a. Pay without interest the balance within grace
period of 1 month for every year of installment payment

Grace to be exercised once every 5 years
b. When no payment - cancelled; buyer entitled to
50% of what
he has paid + 5% for every year
exceeding 90% of
payments made

Cancellation to be effected 30 days from
notice (by notarial act) & upon payment
of cash surrender value
2. Buyer paid less than 2 years installment
a. Grace period is 60 days
b. Cancellation if failure to pay within 60 days
grace
c. 30 days notice before final cancellation

buyer can still pay within the 30 days
period

with interest
What else to remember:

Notice needed – waiver thereof id oppressive

Apply to contracts even before law was
enacted

Stipulation to contrary is void

Other rights:
a. Sell rights to another
b. Reinstate contract by updating within 30 days before
cancellation
c. Deed of Sale to be done by notarial act
d. To pay full installment in advance the balance of price
anytime without interest
e. Have full payment annotated in certificate of title
What are the so-called "Maceda" and "Recto" laws in
connection with sales on installments? Give the most
important features of each law. (5%)
X sold a parcel of land to Y on 01 January 2002, payment
and delivery to be made on 01 February 2002. It was
stipulated that if payment were not to be made by Y on
01February 2002, the sale between the parties would
automatically be rescinded. Y failed to pay on 01 February
2002, but offered to pay three days later, which payment
X refused to accept, claiming that their contract of sale
had already been rescinded. Is X’s contention correct?
Why? 5%
Priscilla purchased a condominium unit in Makati City from
the Citiland Corporation for a price of P10 Million, payable
P3 Million down and the balance with interest thereon at


14% per annum payable in sixty (60) equal monthly
installments of P198,333.33. They executed a Deed of
conditional Sale in which it is stipulated that should the
vendee fail to pay three (3) successive installments, the
sale shall be deemed automatically rescinded without the
necessity of judicial action and all payments made by the
vendee shall be forfeited in favor of the vendor by way of
rental for the use and occupancy of the unit and as
liquidated damages. For 46 months, Priscilla paid the
monthly installments religiously, but on the 47th and 48th
months, she failed to pay. On the 49 th month, she tried to
pay the installments due but the vendor refused to
receive the payments tendered by her. The following
month, the vendor sent her a notice that it was rescinding
the Deed of Conditional Sale pursuant to the stipulation
for automatic rescission, and demanded that she vacate
the premises. She replied that the contract cannot be
rescinded without judicial demand or notarial act pursuant
to Article 1592 of the Civil Code.
a) Is Article 1592 applicable? (3%)
b) Can the vendor rescind the contract? (2%)

LT applied with BPI to purchase a house and lot in
Quezon City, one of its acquired assets. The
amount offered was Pl,000,000.00 payable, as
follows: P200,000.00 down payment, the balance
of P800,000.00 payable within 90 days from June
1, 1985. BPI accepted the offer, whereupon LT
drew a check for P200,000.00 in favor of BPI
which the latter thereafter deposited in its
account. On September 5, 1985, LT wrote BPI
requesting extension until October 10, 1985
within which to pay the balance, to which BPI
agreed. On October 5, 1985, due to the expected
delay in the remittance of the needed amount by
his financier from the United States, LT wrote BPI
requesting a last extension until October 30,
1985, within which to pay the balance. BPI denied
LTs request because another had offered to buy
the same property for P1,500,000.00. BPI
cancelled its agreement with LT and offered to
return to him the amount of P200,000.00 that LT
had paid to it. On October 20, 1985, upon receipt
of the amount of P800,000.00 from his US
financier, LT offered to pay the amount by
tendering a cashier's check therefor but which BPI
refused to accept. LT then filed a complaint
against BPI in the RTC for specific performance
and deposited in court the amount of
P800,000.00. Is BPI legally correct in canceling its
contract with LT?
CONDITION & WARRANTIES
A. CONDITION

The non-happening of which would not constitute
a breach

The non-performance of which may be treated by
parties as breach if party to the sales contract
has promised that the condition should happen or
be performed
B. EXPRESS WARRANTIES ( REQUISITES )
1. it must be an affirmation of fact or any promise
by seller relating to the subject matter of sale
2. natural tendency of affirmation or promise is to
induce buyer to purchase subject matter
3. buyer purchases the subject matter relying
thereon
C. IMPLIED WARRANTIES

Deemed included in all contracts of sale

Knowledge by parties of its
existence is immaterial

Exists by operation of law

Includes

Warranty that seller has a right
to sell

Warranty against eviction

Warranty against encumbrances

Warranty against hidden defects

Defect on animals

7
1. Warranty that seller has a right to sell

Applies in consummation stage

Excludes application to sheriff,
auctioneer, mortgagee, pledgee
2. Warranty against eviction

buyer shall enjoy the legal and peaceful
possession of the thing upon transfer of ownersip

Requisites:
1. buyer is evicted in whole or in part from
the subject matter of sale
2. there is a final judgment
3. basis of eviction is a right prior to sale or
an act imputable to vendor
4. seller has been summoned in the suit for
eviction at the instance of buyer; or
made 3rd party defendant through 3rd
party complaint brought by buyer
LIABILITY OF SELLER:

eviction w/c caused buyer to lose whole
subject matter

value of thing at time of eviction

value of income of fruits

cost of suit which caused the eviction

expenses of contract if buyer paid for
them

damages & interests and ornamental
expenses if sale was made in bad faith
RIGHTS OF BUYER

Deprived not of the whole subject matter
but would not have brought the suit if not
in relation to the whole
1. rescission
2. mutual restitution
3. WARRANTY AGAINST ENCUMBRANCES
Requisites: (non-apparent)
1. immovable sold is encumbered with non
– apparent burden or servitude not
mentioned in the agreement
2. nature of non – apparent servitude or
burden is such that it must be presumed
that the buyer would not have acquired it
had he been aware thereof

when breach of warranty exist: buyer may ask for
rescission or indemnity

warranty not applicable when non – apparent
burden or servitude is recorded in the Registry of
Property – unless there is expressed warranty that
the thing is free from all burdens & encumbrances
4. WARRANTY AGAINST HIDDEN DEFECTS

SELLER does not warrant patent defect;
caveat emptor

Except when hidden
1. subject matter may be movable
or immovable
2. nature of hidden defect is such
that it should render the subject
matter unfit for the use of which
it was intended or should
diminish its fitness
3. had the buyer been aware, he
would not have acquired it or
would have given a lower price

when defect is visible or even if visible if
the buyer is an expert by reason of his
trade or profession, seller is not liable

obligation of seller for breach depends on
whether he has knowledge of such defect or not
1. seller is aware – seller should return price
& refund expenses of contract with
damages
2. seller is not aware - seller should return
price and interest & refund expenses ( no
damages )
3. buyer may elect between withdrawing
from contract or demanding
proportionate reduction of price with
damages in either case

action to prescribe 6 months from delivery of
subject matter
5. DEFECTS ON ANIMALS

even in the case of professional inspection but
hidden defect is of such nature that expert
knowledge is not sufficient - defect shall be
considered as REDHIBITORY

if vet fails to discover through ignorance or bad
faith he is liable for damages
a. sale of animals on teams ( 2 or more )

when only one is
defective, only one is
redhibited & not the
others

Exc: when it appears
that purchase of team
will not be done without
the defective one
b. sale of animals at fair or public auction

no warranty against hidden defects
c. sale of animals with contagious disease is void
d. sale of unit of animal

void if use / service for which they are
acquired has been stated in the contract
and they are found to be unfit thereof

prescription of action: 40 days from date
of delivery to buyer

if sale is rescinded, animals to be
returned in same condition when they are
acquired; buyer shall answer for injury /
loss due to his fault

buyer may elect between withdrawing
from sale or demanding proportionate
reduction of price with damages in either
case
D. SPECIFIC IMPLIED WARRANTIES IN THE SALE OF GOODS
1. Warranty as to fitness & quality
Requisites:
a. buyer makes known to seller the particular
purpose for
which goods are acquired and it appears
that the buyer relied on the seller’s skill or judgment
b. goods are bought by description from seller
who deals
in goods of that description
2. Sale of Goods by sample

If seller is a dealer in goods of that kind,
there is an implied warranty that the
goods shall be free from defect rendering
them unmerchantable which would not
be apparent on reasonable examination
of the sample
E. EFFECTS OF WAIVER

Parties may increase or diminish implied warranty
against eviction

However:
1. seller in bad faith & there is waiver
against eviction – null & void
2. buyer without knowledge of a particular
risk made general renunciation of
warranty – not waiver but merely limits
liability of seller in case of eviction
3. buyer with knowledge of risk of eviction
assumed its consequences & made a
waiver – vendor not liable (applicable
only to waiver of warranty against
eviction)

when goods delivered to buyer he cannot rescind
sale

if he knew of the breach of warranty when he
accepted goods without protest

if he fails to return or offer to return goods to
seller in substantially as good condition as they
were at time ownership was transferred

when goods deteriorated, buyer can still return
them in that condition if such is due to breach or
warranty
F. BUYER’S OPTION IN CASE OF BREACH OF WARRANTY


8
1.

Accept goods & set up breach of
warranty by way of recoupment in
diminution or extinction or the price.
2. Accept goods & maintain action against
seller for damages
3. Refuse to Accept goods & maintain action
against seller for damages
4. Rescind contract of sale & refuse to
receive goods/return them when already
received.
EXTINGUISHMENT
GROUNDS:
1. Same grounds whereby obligations in general are
extinguished:
a. payment or performance
b. loss of the subject matter
c. condonation or remission
d. confusion or merger of rights or creditor and debtor
e. compensation
f. novation
g. annulment
h. rescission
i. fulfillment of a resolutory condition
j. prescription
2. Conventional redemption – only applies to contract of
sale
3. Legal redemption – only applies to contract of sale
CONVENTIONAL REDEMPTION

seller reserved the right to repurchase thing sold

coupled with obligation to return price of the sale,
expense of contract & other legitimate payments
and the necessary & useful expenses made on
the thing sold

right must be recognized in the deed of sale;
must be the same contract
OPTION TO PURCHASE

right to repurchase the thing sold granted to the
vendor in a separate instrument from the deed of
sale
Equitable Mortgage
One in which although lacking in some formality or for or
words, or other requisites demanded by a statute,
nevertheless reveals the intention of the parties to charge
real property as security for debt and contains nothing
impossible or contrary to law
When in doubt, the transaction purporting to be a sale
should be construed as an equitable mortgage which
involves lesser transmission of rights and interest over the
property subject of the controversy
EQUITABLE MORTGAGE

a contract with right to repurchase is equitable
mortgage if the following requisites concur:
1. price of sale with right to repurchase is
unusually
inadequate
2. seller remains in possession as a lessee or
otherwise
3. upon / after expiration of right to repurchase,
another instrument extending the period of redemption is
executed
4. buyer retains for himself a part of the purchase
price
5. seller binds himself to pay taxes on thing sold
6. real intention of parties is to secure the
payment of a
debt or performance of other obligation
On July 14, 2004, Pedro executed in favor of Juan a Deed
of Absolute Sale over a parcel of land covered by TCT No.
6245. It appears in the Deed of Sale that Pedro received X
sold a parcel of land to Y on 01 January 2002, payment
from Juan P120,000.00 as purchase price. However, Pedro
retained the owner's duplicate of said title. Thereafter,
Juan, as lessor, and Pedro, as lessee, executed a contract
of lease over the property for a period of one (1) year with
a monthly rental of Pl,000.00. Pedro, as lessee, was also
obligated to pay the realty taxes on the property during
the period of lease. Subsequently, Pedro filed a complaint
against Juan for the reformation of the Deed of Absolute
Sale, alleging that the transaction covered by the deed

was an equitable mortgage. In his verified answer to the
complaint, Juan alleged that the property was sold to him
under the Deed of Absolute Sale, and interposed
counterclaims to recover possession of the property and
to compel Pedro to turn over to him the owner's duplicate
of title. Resolve the case with reasons. (6%)
PERIOD OF REDEMPTION
1. No period agreed upon
– 4 years from date of contract
2. When there is agreement
– should no exceed 10 years; if it exceeded, valid
only for the first 10 years.
3. When period to redeem has expired & there has been a
previous suit on the nature of the contract
– seller shill has 30 days from final judgement on
the basis that contract was a sale with pacto de retro
4. When period has expired & seller allowed the period of
redemption to expire
– seller is at fault for not having exercised his
rights so should not be granted a new period
IN CASE OF MULTIPLE PARTIES
1. When an undivided thing is old because co-owners
cannot agree that it be allotted to on of them – vendee a
retro my compel the vendor to redeem the whole thing
2. When an undivided thing is sold by co-owners / coheirs, vendors a retro may only exercise his right over his
respective share; vendee a retro may demand that they
must come to an agreement first and may not be
compelled to consent to a partial redemption
3. When rights for co-owners over an undivided thins is
sold as regards to their own share – vendee retro cannot
compel one to redeem the whole property
4. Should one of the co-heirs/co-owners succeed in
redeeming the property – such vendor a retro shall be
considered as trustee with respect to the share of the
other co-owners/co-heirs.
LEGAL REDEMPTION

right to be subrogated upon the same terms and
conditions stipulated in the contract, in the place
of one who acquires the thing

by purchase or

by dation in payment or

by other transaction whereby ownership
is transmitted by onerous title.

Instances of Legal Redemption

Among co-heirs

Among co-owners

Among adjoining owners (urban land,
rural land, credit in litigation)
1. Among co-heirs

any of heirs sells hereditary right to stranger
before partition

co-heirs has 1 month from receipt of notice in
writing
2. Among co-owners

any or all of co-owners sells their share to 3rd
person

any co-owner may exercise right of redemption
by paying reasonable price of property to the
buyer

if 2 or more co-owners desire to exercise right of
redemption, they may only do so in proportion to
the share they may respectively have in the thing
owned in common
CO-HEIRS
COOWNERS
Heir may redeem for himself alone
Coowner may redeem property
the hereditary right sold by a co-heir - - but
even if uses his own funds,
inures to the benefit of
other co-owners
Sale of hereditary right (1088) over
--Sale of
interest in no particular object
particular property
3. Among adjoining owners

9
a. Rural land

where piece of rural land has an area not
exceeding 1 hectare, adjoining owner has right to
redeem unless grantee does not own a rural land

if 2 or more adjacent lot owners desire to exercise
right to redeem, owner of adjoining lot with
smaller area shall be preferred

if 2 or more adjacent lit owners desire to exercise
right to redeem & both have same lot area, one
who first requested shall be granted
b. Urban land


when piece of land is small & cannot be
used for any practical purpose & brought
merely for speculation, owner of
adjoining land can redeem

2 or more owners of adjoining lot desire
to exercise right to redeem, owner whose
intention towards use of land shall be
preferred.
c. Sale of credit litigation

when a credit or other incorporeal right in
litigation is sold, debtor shall have a right
to extinguish it by reimbursing the
assignee for the price the latter paid
therefor plus judicial costs, interest

debtor may exercise right within 30 days
from assignee demands payment from
him
WHEN PERIOD OF REDEMPTION BEGINS TO RUN
1. Right of legal pre-emption of redemption shall be
exercised within 30 days from notice by the vendor
2.Deed of sale not to be recorded in RD unless
accompanied by affidavit that vendor has given notice to
redemptioners
3. (Exceptions) When there is actual knowledge, no need
to give written notice; period of redemption begins to run
from actual knowledge.
Alonzo vs. IAC – co-heir only brought an action for
redemption of hereditary right sold by another heir only
after 13 years after having actual knowledge
Pilapil vs. CA – buyers took possession of the property
immediately after execution of the Deed of Sale in their
favor and none fohte co-owners questioned the same
Distrito vs. CA – co-owner acted as the middleman or
intermediary to effect the sale to a third-party
HOW IS REDEMPTION EFFECTED:
1. Seller a retro must return first pay the following:
a. the price of the thing sold
b. expensed of the contract and other legitimate
payments made by reason of the sale
c. necessary and useful expensed made on the thing sold
2. Valid tender of payment is sufficient
3. Mere sending of notice without valid tender is
insufficient
4. Failure to pay useful & unnecessary expenses entitled
vendee to retain land unless actual reimbursement is
made
OTHER INSTANCES WHEN RIGHT OF LEGAL REDEMPTION
IS GRANTED
1. Redemption of homesteads

Public Land Act

Land acquired under free patent
homestead

Subject to repurchase by wife, legal heirs
within 5 years from date of conveyance
2. Redemption in tax sales

in case of tax delinquency/failure to pay
tax assessments, property is foreclosed

delinquent payer has 1 year to redeem
by paying to the revenue District Officer
the amount of tax delinquencies, &
interest or purchase price.
3. Redemption by judgement debtor

1 year to redeem by paying purchaser at
public auction with interest
4. Redemption in extrajudicial foreclosure

1 year from date of sale and registration
5. Redemption in judicial foreclosure of mortgage

no right to redeem is granted to debtor
mortgagor

except when mortgagee is bank of a
banking institution

90 days after finality of judgement

Betty and Lydia were co-owners of a parcel of
land. Last January 31, 2001, when she paid her
real estate tax, Betty discovered that Lydia had
sold her share to Emma on November 10, 2000.
The following day, Betty offered to redeem her
share from Emma, but the latter replied that
Betty's right to redeem has already prescribed. Is
Emma correct or not? Why? (5%)
Adela and Beth are co-owners of a parcel of land. Beth
sold her undivided share of the property to Xandro, who
promptly notified Adela of the sale and furnished the
latter a copy of the deed of absolute sale. When Xandro
presented the deed for registration, the register of deeds
also notified Adela of the sale, enclosing a copy of the
deed with the notice. However, Adela ignored the notices.
A year later, Xandro filed a petition for the partition of the
property. Upon receipt of summons, Adela immediately
tendered the requisite amount for the redemption. Xandro
contends that Adela lost her right of redemption after the
expiration of 30 days from her receipt of the notice of the
sale given by him. (5%)
BULK SALES LAW
Coverage:
1. A sale, transfer, mortgage or assignment of
goods, wares, merchandise, provisions or material
other than in the ordinary course of
business;

Sale of goods other than in
ordinary course of business
2. The sale, transfer, mortgage or assignment of all, or
substantially all of the business or trade, theretofore
conducted by the vendor, mortgagor, transferor, or
assignor;

Sale of business
3. The sale, transfer, mortgage or assignment of all, or
substantially all of the fixtures and equipment used in
and about the business.

Sale of fixtures & equipments
REQUIREMENTS / OBLIGATIONS
Merchant must give the buyer a certified schedule of his
debts
Names of creditors
Amounts owing to each
Nature of the debt


Purchase price paid must be applied to these debts
Ten (10) days before the sale, the seller must take an
inventory of his stock and advise all his creditors of the
same
Effects of Non-Compliance
1. If purchase money or mortgage proceeds are not
applied pro-rata to the payment of the bona fide
claims of the creditors

Sale is fraudulent and void
2. Non giving of the list of creditors or intentional
omission of the names of some of the creditors
and placing of wrong date required by law

Seller or mortgagor subject to
penal sanctions
3. Transfer in bulk without consideration or for
nominal consideration

Seller subject to penal sanctions
4. Failure to comply with other provisions of the law
the non-application of the consideration
proportionately to the creditors, the preparation
of the inventory and the notification to creditors

10


Seller subject to
penal sanctions

Penalty
Imprisonment – Not less than 6 months
Fine – Not exceeding P5,000
Imprisonment and Fine
Seeking to streamline its operations and to bail out its
losing ventures, the stockholders of X corporation
unanimously adopted a proposal to sell substantially all of
the machineries and equipment used in and about its
manufacturing business and to sink the proceeds of the
sale for the expansion of its cargo transport services.
a) Would the transaction be covered by the
provisions of the Bulk Sales Law?
b) How would X corporation effect a valid sale?
PD 957
Subdivision and Condominium buyer's Protective Decree

full development of the subdivision
project or the condominium project and
the compliance by the owner or dealer
SECTION 7. Exempt Transactions. - A license to sell and
performance bond shall not be required in any of the
following transactions:


a) Sale of a subdivision lot resulting from the partition of
land among co-owners and co-heirs.
b) Sale or transfer of a subdivision lot by the original
purchaser thereof and any subsequent sale of the same
lot.
c) Sale of a subdivision lot or a condominium unit by or for
the account of a mortgagee in the ordinary course of
business when necessary to liquidate a bona fide debt.
SECTION 9. Revocation of Registration Certificate and
License to Sell. –

Underlying Reasons for enactment of the law:
a) Is insolvent; or
There are reports that:
1. Real estate subdivision developers have reneged on
obligations to provide and maintain properly subdivision
basic requirement such as roads, drainage, sewerage,
water systems, lighting systems;
2. There are cases of swindling and fraudulent
manipulations perpetrated by unscrupulous subdivision
and condominium sellers and operators (e.g. as failure to
deliver titles to the buyers and to pay real estate taxes)
Important terms:
Subdivision project. - "Subdivision project" shall mean a
tract or a parcel of land registered under Act No. 496
which is partitioned primarily for residential purposes into
individual lots with or without improvements thereon, and
offered to the public for sale, in cash or in installment
terms.
Subdivision lot. - "Subdivision lot" shall mean any of the
lots, whether residential, commercial, industrial, or
recreational, in a subdivision project.
Condominium project. - "Condominium project" shall
mean the entire parcel of real property divided or to be
divided primarily for residential purposes into
condominium units, including all structures thereon.
Condominium unit. - "Condominium unit" shall mean a
part of the condominium project intended for any type of
independent use or ownership, including one or more
rooms or spaces located in one or more floors (or part of
parts of floors) in a building or buildings and such
accessories as may be appended thereto.
Important Provisions:
SECTION 4. Registration of Projects

registered owner of a parcel of land shall submit
his subdivision plan to the Authority

same procedure shall be followed in the case of a
plan for a condominium project
SECTION 5. License to sell.

After issuance of registration certificate, owner
shall obtain a license to sell the project within two
weeks from the registration of such project.
SECTION 6. Performance Bond.

No license to sell subdivision lots or condominium
units shall be issued by the Authority unless the
owner or dealer shall have filed an adequate
performance bond

to guarantee

the construction and maintenance of the
roads, gutters, drainage, sewerage, water
system, lighting systems, and

b) has violated any of the provisions of this Decree or any
applicable rule or regulation of the Authority, or any
undertaking of his/its performance bond;
c) Has been or is engaged or is about to engage in
fraudulent transactions;
d) Has made any misrepresentation in any prospectus,
brochure, circular or other literature about the subdivision
project or condominium project that has been distributed
to prospective buyers;
e) Is of bad business repute;
f) Does not conduct his business in accordance with law or
sound business principles.
SECTION 11. Registration of Dealers, Brokers and
Salesmen.

real estate dealer, broker or salesman who
engage in the business of selling subdivision lots
or condominium units shall register himself with
the Authority
SECTION 12. Revocation of Registration as Dealers,
Brokers or Salesmen.
1. Has violated any provision of this Decree or any rule or
regulation made hereunder; or
2. Has made a material false statement in his application
for registration; or
3. Has been guilty of a fraudulent act in connection with
any sale of a subdivision lot or condominium unit; or
4. Has demonstrated his unworthiness to transact the
business of dealer, broker, or salesman, as the case may
be.
5. In case of charges against a salesman, notice thereof
shall also be given the broker or dealer employing such
salesman.
SECTION 17. Registration.

the seller shall register in the Office of the
Register of Deeds of the province or city where
the property is situated the ff”

contracts to sell,

deeds of sale and

other similar instruments relative to the
sale or conveyance of the subdivision lots
and condominium units

the above documents shall be registered
whether or not the purchase price is paid
in full
SECTION 18. Mortgages.

Owner or developer cannot mortgage any unit or
lot without prior written approval of the Authority.

proceeds of the mortgage loan shall be used for
the development of the condominium or

11
subdivision project and effective measures have
been provided to ensure such utilization.
SECTION 19. Advertisements.

Advertisements through newspaper, radio,
television, leaflets, circulars or any other form
about the subdivision or the condominium or its
operations or activities must reflect the real facts
and must be presented in such manner that will
not tend to mislead or deceive the public.

Advertisements shall form part of the sales
warranties enforceable against said owner or
developer, jointly and severally. x x x
SECTION 21. Sales Prior to Decree

owner or developer of the subdivision or
condominium project shallcomplete compliance
with his or its obligations within two years from
the date of this Decree unless otherwise extended
by the Authority or unless an adequate
performance bond is filed
SECTION 23. Non-Forfeiture of Payments

No installment payment shall be forfeited in favor
of the owner or developer when the buyer, after
due notice to the owner or developer, desists
from further payment due to the fault of the
owner or developer

Such buyer may, at his option, be
reimbursed the total amount paid
including amortization interests but
excluding delinquency interests, with
interest thereon at the legal rate.
SECTION 24. Failure to pay installments

The rights of the buyer shall be governed by
Republic Act No. 6552.
SECTION 33. Nullity of Waivers

Anyone who waives compliance with any
provision of this Decree shall be void.
SECTION 38. Administrative Fines

The Authority may prescribe and impose fines
not exceeding ten thousand pesos
SECTION 39. Penalties

fine of not more than twenty thousand
(P20,000.00) pesos and/or imprisonment of
not more than ten years
SECTION 40. Liability of Controlling Persons

Every person who directly or indirectly controls
any person liable under any provision of this
Decree or of any rule or regulation issued
thereunder shall be liable jointly and severally
with and to the same extent as such controlled
person
Luzon Dev’t Bank vs. Enriquez, G.R. No. 168646.
January 12, 2011
Mortgage contract void

DELTA violated Section 18 of PD 957 in
mortgaging the properties in Delta Homes I
(including Lot 4) to the BANK without prior
clearance from the HLURB.

This violation of Section 18 renders the mortgage
executed by DELTA void.

Considering that “PD 957 aims to protect
innocent subdivision lot and condominium unit
buyers against fraudulent real estate practices,”
we have construed Section 18 thereof as
“prohibitory and acts committed contrary to it are
void.”

Because of the nullity of the mortgage, neither
DELTA nor the BANK could assert any right arising
therefrom. The BANK’s loan of P8 million to DELTA
has effectively become unsecured due to the
nullity of the mortgage.
Registration (of the Contract to Sell)

the Contract to Sell, involving a subdivision lot, is
covered and protected by PD 957.

One of the protections afforded by PD 957 to
buyers such as Enriquez is the right to have her
contract to sell registered with the Register of
Deeds in order to make it binding on third parties.

The purpose of registration is to protect the
buyers from any future unscrupulous transactions
involving the object of the sale or contract to sell,
whether the purchase price therefor has been
fully paid or not.

While DELTA, in the instant case, failed to register
Enriquez’s Contract to Sell with the Register of
Deeds, this failure will not prejudice Enriquez or
relieve the BANK from its obligation to respect
Enriquez’s Contract to Sell.

Despite the non-registration, the BANK cannot be
considered, under the circumstances, an innocent
purchaser for value of Lot 4 when it accepted the
latter (together with other assigned properties) as
payment for DELTA’s obligation.

The BANK was well aware that the assigned
properties, including Lot 4, were subdivision lots
and therefore within the purview of PD 957.
Sps. Chien vs. STA. LUCIA REALTY , G.R. No. 162090.
January 31, 2007
Issue: Whether the absence of the Certificate of
Registration and License to Sell at the time of execution
rendered the Contract to Sell and its addendum null and
void.
Ruling:

while the law penalizes the selling of subdivision
lots and condominium units without prior
issuance of a Certificate of Registration and
License to Sell by the HLURB, it does not provide
that the absence thereof will automatically render
a contract, otherwise validly entered, void.

With regard to P.D. 957, nothing therein provides
for the nullification of a contract to sell in the
event that the seller, at the time the contract was
entered into, did not possess a certificate of
registration and license to sell.

Absent any specific sanction pertaining to the
violation of the questioned provisions (Secs. 4
and 5), the general penalties provided in the law
shall be applied. The general penalties for the
violation of any provisions in P.D. 957 are
provided for in Sections 38 and 39.

As can clearly be seen in the aforequoted
provisions, the same do not include the
nullification of contracts that are otherwise validly
entered.


"The Condominium Act" (RA NO. 4726)
What is a Condominium?
Sec. 2. A condominium is an interest in real property
consisting of separate interest in a unit in a residential,
industrial or commercial building and an undivided
interest in common, directly or indirectly, in the land on
which it is located and in other common areas of the
building. A condominium may include, in addition, a
separate interest in other portions of such real property.
Can juridical persons hold title in a condominium?
Title to the common areas, including the land, or the
appurtenant interests in such areas, may be held by a
corporation specially formed for the purpose (hereinafter
known as the "condominium corporation") in which the
holders of separate interest shall automatically be
members or shareholders, to the exclusion of others, in
proportion to the appurtenant interest of their respective
units in the common areas. (Sec. 2)
What is the effect or what is deemed included if you
transfer your unit or an apartment, office or store or other
space in the condominium?
Sec. 5. Any transfer or conveyance of a unit or an
apartment, office or store or other space therein, shall
include the transfer or conveyance of the undivided

12
interests in the common areas or, in a proper case, the
membership or shareholdings in the condominium
corporation:
Can you effect transfer to non-Filipino Citizens?
Where the common areas in the condominium project are
owned by the owners of separate units as co-owners
thereof, no condominium unit therein shall be conveyed or
transferred to persons other than Filipino citizens, or
corporations at least sixty percent of the capital stock of
which belong to Filipino citizens, except in cases of
hereditary succession. (Sec. 5)
How can a corporation effect a valid transfer of common
areas in a condominium project?
Where the common areas in a condominium project are
held by a corporation, no transfer or conveyance of a unit
shall be valid if the concomitant transfer of the
appurtenant membership or stockholding in the
corporation will cause the alien interest in such
corporation to exceed the limits imposed by existing laws.
(Sec. 5)
What are the incidents of a condominium grant in
connection to sale and other form of alienation?
(f) Each condominium owner shall have the exclusive
right to mortgage, pledge or encumber his condominium
and to have the same appraised independently of the
other condominiums but any obligation incurred by such
condominium owner is personal to him.
(Sec. 8)
(g) Each condominium owner has also the absolute right
to sell or dispose of his condominium unless the master
deed contains a requirement that the property be first
offered to the condominium owners within a reasonable
period of time before the same is offered to outside
parties (Sec. 8)
Can a unit owner demand partition by sale of the
condominium project?
Sec. 8. Where several persons own condominiums in a
condominium project, an action may be brought by one or
more such persons for partition thereof by sale of the
entire project, as if the owners of all of the condominiums
in such project were co-owners of the entire project in the
same proportion as their interests in the common areas.
What are the conditions before a unit owner demand
partition by sale of the condominium project?
(a) That three years after damage or destruction to the
project which renders material part thereof unit for its use
prior thereto, the project has not been rebuilt or repaired
substantially to its state prior to its damage or
destruction, or
(b) That damage or destruction to the project has
rendered one-half or more of the units therein
untenantable and that condominium owners holding in
aggregate more than thirty percent interest in the
common areas are opposed to repair or restoration of the
project; or
(c) That the project has been in existence in excess of fifty
years, that it is obsolete and uneconomic, and that
condominium owners holding in aggregate more than fifty
percent interest in the common areas are opposed to
repair or restoration or remodeling or modernizing of the
project; or
(d) That the project or a material part thereof has been
condemned or expropriated and that the project is no
longer viable, or that the condominium owners holding in
aggregate more than seventy percent interest in the
common areas are opposed to continuation of the
condominium regime after expropriation or condemnation
of a material portion thereof; or
(e) That the conditions for such partition by sale set forth
in the declaration of restrictions, duly registered in
accordance with the terms of this Act, have been met.
What is the duty of the project owner prior to the
conveyance of any condominium unit?
Sec. 9. The owner of a project shall, prior to the
conveyance of any condominium therein, register a
declaration of restrictions relating to such project, which

restrictions shall constitute a lien upon each condominium
in the project, and shall insure to and bind all
condominium owners in the project. Such liens, unless
otherwise provided, may be enforced by any
condominium owner in the project or by the management
body of such project.
What are the requirements for a condominium corporation
to alienate its common areas?
Sec. 16. A condominium corporation shall not, during its
existence, sell, exchange, lease or otherwise dispose of
the common areas owned or held by it in the
condominium project unless authorized by the affirmative
vote of all the stockholders or members.