review outline in sales by atty. aliakhbar jumrani (1)

8/16/2019 Review Outline in Sales by Atty. Aliakhbar Jumrani (1)

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JURISTS BAR REVIEW CENTER™

REVIEW OUTLINE IN SALES

Atty. Aliakhbar A. Jumrani

I. Definition

By a 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 in money or its

equivalent. (Art. 1458, CC)

1. Essential Requisites:

a. Consent or meeting of the minds;

b. Determinate subject matter; and

c. Price certain in money or its equivalent.

2. Absolute vs. Conditional Sale

A contract of sale is absolute when title to the property passes to the vendee upon delivery of

the thing sold. A deed of sale is absolute when there is no stipulation in the contract that title to the

property remains with the seller until full payment of the purchase price. The sale is also absolute if

there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the

vendee fails to pay within a fixed period. In a conditional sale, as in a contract to sell, ownership

remains with the vendor and does not pass to the vendee until full payment of the purchase price.

The full payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising. (Spouses Ramos vs. Spouses Heruela, G.R. No.

145330, October 14, 2005 )

A contract to sell may further be distinguished from a conditional contract of sale, in that, the

fulfillment of the suspensive condition, which is the full payment of the purchase price, will not

automatically transfer ownership to the buyer although the property may have been previously

delivered to him. The prospective vendor still has to convey title to the prospective buyer by entering

into a contract of absolute sale. While in a conditional contract of sale, the fulfillment of the suspensive

condition renders the sale absolute and affects the seller's title thereto such that if there was previous

delivery of the property, the seller's ownership or title to the property is automatically transferred to the

buyer. (Ursal vs. Court of Appeals, G.R. No. 142411, October 14, 2005 )

II. Notes on the Parties to a Contract of Sale

1. The Vendor/Seller

a) The vendor must be legally capacitated to enter into contract. (Art. 37, 1489, CC). If the

vendor is a corporation, the contract must be executed by the board of directors or by a

corporate agent duly authorized by the board. (Spouses Firme vs. Bukal Enterprises, G.R.

No. 146608, October 23, 2003)

b) The

vendor must have a

right to transfer the ownership at the time it is delivered. (Art. 1459, CC; Heirs of San Miguel vs. Court of Appeals, G.R. No. 136054, September 5, 2001)

2015 Review Outline in Sales by Atty. Aliakhbar A. Jumrani for Jurists Bar Review Center ™

All rights reserved 2015 by Jurists Review Center Inc. Unauthorized reproduction, use, or dissemination is

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2. The Vendee/Buyer

a) The vendee must be must also be legally capacitated to enter into contract. In case of

minors or other persons without capacity to act, only the purchase of necessaries is valid,

for which they shall pay a reasonable price therefor. (Art. 37, 1489, CC). Also, if the

vendor is a corporation, the contract must be executed by the board of directors or by a corporate agent duly authorized by the board. (Spouses Firme vs. Bukal Enterprises,

supra)

Note:

A person is not incapacitated to enter into a contract merely because of advanced years or by

reason of physical infirmities, unless such age and infirmities impair his mental faculties to the extent

that he is unable to properly, intelligently and fairly understand the provisions of said contract. (Yason

vs. Arciaga, G.R. No. 145017, January 28, 2005)

b) The husband and the wife cannot sell property to each other, except:

1. When a separation of property was agreed upon in the marriage settlements; or

2. When there has been a judicial separation of property.

c) The following persons cannot acquire by purchase, even at a public or judicial auction,

either in person or through the mediation of another:

1. The guardian, the property of the person or persons who may be under his

guardianship;

2. Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given;

3. Executors and administrators, the property of the estate under administration;

4. Public officers and employees, the property of the State or of any subdivision thereof,

or of any government owned or controlled corporation, or institution, the administration

of which has been entrusted to them; this provision shall apply to judges and

government experts who, in any manner whatsoever take part in the sale;

5. Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other

officers and

employees connected with the

administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction

or territory they exercise their respective functions; this prohibition includes the act of

acquiring by assignment and shall apply to lawyers, with respect to the property and

rights which may be the object of any litigation in which they may take part by virtue of

their profession;

6. Others specially disqualified by law.

III. Subject Matter

1. It must be licit (Art. 1459, CC)





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2. It must be a thing the seller of which has a right to transfer ownership of (Ibid)

3. It must be determinate, meaning it is particularly designated or physically segregated from all

others of the same class (Art. 1460, CC)

The requisite that a thing be determinate is satisfied if at the time the contract is entered

into, the thing is capable of being made determinate without the necessity of a new or

further agreement between the parties. (Ibid)

The failure of the parties to specify with absolute clarity the object of a contract by including

its technical description is of no moment. What is important is that there is, in fact, an

object that is determinate or at least determinable, as subject of the contract of sale.

(Naranja vs. Court of Appeals, G.R. No. 160132, April 17, 2009)

4. It may be things having a potential existence (Art. 1461, CC) or goods to be manufactured,

raised or acquired by the seller after the perfection of the contract. (Art. 1462, CC) In either

case, the failure of the condition or contingency to materialize will invalidate the contact.

5. It may be a segregated or an undivided share or interest. (Art. 1463-64, CC)

6. It may be subject to a resolutory condition. (Art. 1465, CC) Ex. the object of a pacto de retro

sale.

IV. Obligation of the Seller to Transfer Ownership

1. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing

which is the object of the sale. (Art. 1495, CC)

2. The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale of real property, the seller is not obligated to transfer in the name of the buyer a new certificate of

title, but rather to transfer ownership of the real property. x x x The buyer may become the

owner of the real property even if the certificate of title is still registered in the name of the

seller. (Zaide vs. Court of Appeals, L-46715-16, July 29, 1988 )

3. Registration of the sale with the Registry of Deeds, or the issuance of a new certificate of title,

does not confer ownership on the buyer. Such registration or issuance of a new certificate of

title is not one of the modes of acquiring ownership. (Chua vs. Court of Appeals, G.R. No.

119255, April 9, 2003)

V. Price

1. Price signifies the sum stipulated as the equivalent of the thing sold and also every incident

taken into consideration for the fixing of the price, put to the debit of the vendee and agreed to

by him. (Inchausti vs. Cromwell, 20 Phil. 345 [1911] )

2. Price is considered certain:

a) When it is agreed upon by the parties (Art. 1473, CC);

b) When it is in reference to another thing certain (Art. 1469, CC);





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c) When the determination thereof is left to the judgment or specified person or persons

(Ibid).

3. Failure to pay the consideration vs. lack of consideration

It is not the act of payment of price that determines the validity of a contract of sale. Payment

of the price has nothing to do with the perfection of the contract. Payment of the price goes into the

performance of the contract. Failure to pay the consideration is different from lack of consideration.

The former results in a right to demand the fulfillment or cancellation of the obligation under an

existing valid contract while the latter prevents the existence of a valid contract. (Spouses

Buenaventura vs. Court of Appeals, G.R. No. 126376, November 20, 2003)

4. A definite agreement on the manner of payment as a part of the price

A definite agreement on the manner of payment of the price is an essential element in the

formation of a binding and enforceable contract of sale. This is so because the agreement as to the

manner of payment goes into the price such that a

disagreement on the manner of payment is tantamount to a failure to agree on the price. (Toyota Shaw vs. Court of Appeals, G.R. No. 116650,

May 23, 1995 )

5. Gross inadequacy of the price vs. Simulation of Price

Inadequacy of price means the price is insufficient to satisfy the real or actual price of the

object of the sale. (Pineda) Gross inadequacy of the price does not affect a contract of sale, except

as it may indicate a defect in the consent, or that the parties really intended a donation or some other

act or contract (Art. 1470, CC), or if it is purely shocking to the conscience. (Cachola, Sr. vs. Court of

Appeals, G.R. No. 97822, May 7, 1992 )

6. Earnest money

Whenever earnest money is given in a contract of sale, it shall be considered as part of the

price and as proof of the perfection of the contract, unless the money initially paid was given to

guarantee that the buyer would not back out from the sale, considering that the parties to the sale

have yet to arrive at a definite agreement as to its terms. (Art. 1482, CC; Heirs of Pangan vs. Spouses

Perreras, G.R. No. 157374, August 27, 2009)

VI. Formation of Contract of Sale

1. Valid in any form

Contracts shall be obligatory, in whatever form they may have entered into, provided all the

essential requisites for their validity are present. However, when the law requires that a contract be in

some form in order that it may be valid or enforceable, or that a contract be proved in a certain way,

that requirement is absolute and indispensable. (Art. 1356, CC)

The contract of sale is perfected at the moment there is a meeting of minds upon the thing

which is the object of the contract and upon the price. From that moment, the parties may reciprocally

demand performance, subject to the provisions of the law governing the form of contracts. (Art. 1475,

CC)

The necessity of a public document for contracts which transmit or extinguish real rights over

immovable property, as mandated by Article 1358 of the Civil Code, is only for convenience; it is not





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essential for validity or enforceability. The only effect of non-compliance with the provisions of Article

1358 of the Civil Code is that a party to such a contract embodied in a private document may be

compelled to execute a public document. (Teoco vs. Metrobank, G.R. No. 162333, December 23,

2008 )

VII. Transfer of Ownership

a) Transferred upon delivery

Ownership and other real rights over property are acquired and transmitted by law, by

donation, by testate and intestate succession, and in consequence of certain contracts, by tradition.

(Art. 712, second par., CC)

The ownership of the thing sold shall be transferred to the vendee upon the actual or

constructive delivery thereof. (Art. 1477, CC)

The ownership of the thing sold is acquired by the vendee from the moment it is delivered to

him in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an

agreement that the possession is transferred from the vendor to the vendee. (Art. 1496, CC)

2. Modes of Delivery

a) Actual

b) Constructive or legal

c) Any other manner (Art. 1496, CC)

3. Constructive Delivery of Different Types of Property

a) Real property

1. Execution of public instrument

2. Traditio constitutum possessorium

b) Personal property


2. Symbolic delivery

3. Traditio longa manu

4. Traditio brevi manu

5. Traditio constitutum possessorium

c) Incorporeal property


2. Placing of titles of ownership in the possession of the vendee





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3. Exercise by the vendee of his rights with the vendor’s consent.

4. Constructive delivery is merely presumptive

The execution of a public instrument gives rise only to a prima facie presumption of

delivery. Such presumption is destroyed when the delivery is not effected because of a legal

impediment. Such constructive or symbolic delivery, being merely presumptive, is deemed negated

by the failure of the vendee to take actual possession of the land sold. (Ten Forty Realty vs. Cruz,

G.R. No. 151212, September 10, 2003)

5. By agreement, delivery may not result in the transfer of ownership

The parties may stipulate that ownership in the thing shall not pass to the purchaser until he

has fully paid the price. (Art. 1478, CC)

VIII. Risk of Loss

1. Loss at the time of perfection (Art. 1493, CC)

a) If, at the time of the perfection of the contract, the thing is lost, the contract is void.

b) If the loss is partial, the contract can exist as to the remainder.

2. Loss before transfer of ownership (Art. 1504, CC)

a) General rule: 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.

b) Exceptions:

1. Where delivery of the goods has been made to the buyer or to a bailee for the

buyer, in pursuance of the contract and the ownership in the goods has been

retained by the seller merely to secure performance by the buyer of his obligations

under the contract, the goods are at the buyer’s risk from the time of such delivery;

2. Where actual delivery has been delayed through the fault of either the buyer or

seller the goods are at the risk of the party in fault.

3. Loss after Perfection but before Delivery

If there was neither an actual nor constructive delivery of the thing sold, the risk of loss should

be borne by the seller, who was still the owner and possessor of the thing. This is in accordance with

the well-known doctrine of res perit domino. (Norkis Distributors vs. Court of Appeals, G.R. No. 91029,

February 7, 1991)

IX. Documents of Title

1. Definition

“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





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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[1], CC)

A negotiable document of title is 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. (Art. 1507, CC)

A non-negotiable document of title is a document of title, by the terms of which, the goods are

deliverable to a specified person. (Pineda; Art. 1511, CC)

2. Negotiation of a Negotiable Document of Title (Art. 1508, CC)

a) By mere delivery;

b) By indorsement coupled with delivery.

3. Rights of Persons to Whom a Document of Title has been Negotiated (Art. 1513, CC)

a) Such title to the goods which the person negotiating has in good faith for value;

b) Such title to the goods which the person to whose order the goods were to be delivered

had or which he can convey to a purchaser in good faith for value; and

c) The direct obligation of the bailee issuing the document to hold the possession of the

goods for him as fully as if the bailee had contracted directly with him.

4. Rights of Persons to Whom a Document of Titled has been Transferred (Art. 1514, CC)

a) The

title to the goods as against the transferor but subject to the terms of any

agreement;

b) The right to notify the bailee of the transfer and to order the bailee to hold possession

of the goods for him according to the terms of the agreement.

5. Warranties on Sale of Document of Title (Art. 1516, CC)

a) Genuineness of the document;

b) Possession of legal right to negotiate or transfer it;

c) He has no knowledge of any fact impairing the validity of the document;

d) He has a right to transfer title to the goods; and

e) The goods are merchantable or fit for a particular purpose for which they were

purchased.

X. Remedies of an Unpaid Seller

1. A seller is an unpaid seller:

a. When the whole of the price has not been paid or tendered;





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b. When a bill of exchange or other negotiable instrument has been received as

conditional payment, and the condition on which it was received has been broken by

reason of the dishonor of the instrument, the insolvency of the buyer or otherwise. (Art.

1525, CC)

2. A

buyer is deemed

insolvent if either he has

ceased to pay his debts in the ordinary course of business or he cannot pay his debts as they become due, whether insolvency proceedings

have been commenced or not. (Art. 1636[1], CC)

3. The Remedies of an Unpaid Seller (Art. 1526, CC)

a. A lien on the goods or right to retain them for the price while he is in possession of

them;

b. In case of the insolvency of the buyer, a right of stopping the goods in transit after he

has parted with the possession of them;

c. A right of resale;

d. A right to rescind the sale.

XI. Performance of the Contract

1. Obligations of the Vendor:

a) To transfer the ownership of the thing (Art. 1495, CC);

b) To deliver the thing sold with all its accessions and accessories in the condition in

which they were upon the perfection of the contract (Art. 1537, CC);

c) To warrant against eviction and against hidden defects (Art. 1547, CC);

d) To take care of the thing, pending delivery, with proper diligence (Art. 1163, CC); and

e) To pay for the expenses for the execution and registration of the sale, unless there is a

stipulation to the contrary (Art. 1487, CC).

2. Obligations of the Vendee (Art. 1582, CC):

a) To accept delivery; and

b) To pay the price.

3. Buyer’s Right of Examination before Acceptance (Art. 1584, CC)

a) The buyer has a right to a reasonable opportunity to examine the goods to ascertain

whether they are in conformity with the contract.

b) Unless a specific period is agreed upon, the buyer should examine the goods within a

reasonable time.

4. Signs of Acceptance by the Buyer (Art. 1585, CC)





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a) When he communicates with the seller expressly manifesting his acceptance thereof;

b) When he performs an act in relation to the goods inconsistent with the ownership of the

seller; and

c) When, after the lapse of a reasonable time following the delivery, he retains the goods

without complaining to the seller or without intimating that he has rejected them.

5. Buyer’s Right to Suspend Payment of the Price (Art. 1590, CC)

a) If he is disturbed in the possession or ownership of the thing bought;

b) If he has a well-grounded fear that his possession or ownership would be disturbed by

a vindicatory action or foreclosure of mortgage.

6. Rescission

a) In sale of real property

1. Absolute Sale – Apply Art. 1191 and 1592 of the Civil Code

2. Sale on Installment/ Contract to Sell – Apply Republic Act 6552

b) In sale of personal property (Art. 1593, CC)

a) The vendee, upon the expiration of the period fixed for the delivery of the thing

purchased, refused to receive it without justifiable cause; or

b) He failed to pay the price, unless granted a longer period within which to pay.

XII. Warranties

1. Express Warranty

Express warranty is any affirmation of fact or any promise by the seller relating to the thing 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. (Art. 1546, CC)

2. Implied Warranty

Implied warranty is inherent in a contract of sale. It is presumed to exist although nothing has

been mentioned about it. (Pineda)

Implied warranty may be modified or suppressed by agreement of the parties. (Art. 1548,

1566, CC)

3. Implied Warranties in Sale (Art. 1547, CC)

a) 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 (implied warranty against eviction);





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b) 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.

4. Elements of Warranty against Eviction

a) The vendee is deprived in whole or in part of the thing purchased (Art. 1557, CC);

b) He is so deprived by virtue of a final judgment (Art. 1557, CC);

c) The vendor was summoned in the suit for eviction at the instance of the vendee (Art.

1558, CC);

The vendor/s should be made parties to the suit at the instance of vendees,

either by way of asking that the former be made a co-defendant or by the filing

of a third-party complaint against said vendors. (Escaler vs. Court of Appeals,

L-42636, August 1, 1985 )

d) There is no waiver on the part of the vendee (Art. 1554, CC);

e) The vendee is in good faith (J.M. Tuason vs. Court of Appeals, L-41233, November 21,

1979)

5. Obligation of the Vendor in case of Eviction (Art. 1555, CC)

a) 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;

b) The income or fruits, if he has not been ordered to deliver them to the party who won

the suit against him;

c) The costs of suit which caused the eviction and, in proper case, those of the suit

brought against the vendor for the warranty;

d) The damages and interests and ornamental expenses, if the sale was made in bad

faith.

6. Elements of Warranty Against Hidden Defects

a) The defect must be such that it renders the thing unfit for the use for which it is

intended, or it diminishes its fitness 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 (Art. 1561, CC);

b) The defect must be hidden or cannot be discovered by ordinary inspection or

examination (Art. 1561, CC);

c) The defect must be present at the time of the execution of the sale;

d) The vendee has not waived the warranty (Art. 1566, CC).

7. Obligation of the Vendor in case the Thing is Lost due to Hidden Defects (Art. 1568, CC)

a) If the vendor was aware thereof:





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Return the price and refund the expenses of the contract, with damages

b) If the vendor was not aware thereof:

Return the price and interest thereon, and reimburse the expenses of the

contract which the vendee might have paid.

8. Prescriptive Period for Rescission or Reduction of the Price (Warranty Against Hidden

Defects)

a) 6 months from delivery

b) 40 days (in case of animals) from delivery

9. Warranty of Fitness for a Particular Purpose vs. Warranty of Merchantability

The first is a warranty that the goods are suitable for the particular or special purpose

disclosed by the buyer which will not be satisfied by the mere fitness of the goods for general purposes. The second is a warranty that the goods purchased are reasonably fit for the general

purposes for which they are sold. (Pineda)

XIII. Breach of Contract

1. If breach is on the part of the vendee

a) Action for payment of the price of the goods (Art. 1595, CC)

b) Action for damages due to wrongful neglect and refusal to accept and pay for the

goods (Art. 1596, CC)

c) Action for rescission if buyer has repudiated the contracts or has manifested his

inability to perform his obligation (Art. 1597, CC)

2. If breach is on the part of the vendor

a) Action for specific performance when the vendor has failed to deliver the goods (Art.

1598, CC)

b) Action for damages for breach of warranty but accepting the goods (Art. 1599, CC)

c) Action for

rescission for breach of warranty where the vendee may validly refuse acceptance of the goods, or even if the goods had already been received, he may

return them (Art. 1599, CC)

XIV. Extinguishment of Sale

1. Conventional Redemption – It takes 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, CC)

2. Characteristics of the Right to Repurchase:

a) It is purely contractual.





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b) It is an accidental stipulation.

c) It is a real right when it is registered.

d) It is potestative, as it depends upon the will of the vendor.

e) It is a resolutory condition.

f) It is not an obligation but a power or privilege of the vendor.

g) It is reserved at the moment of the perfection of the contract.

h) The person entitled to exercise the right is the owner of the property sold and not any

third party.

i) It gives rise to reciprocal obligations.

3. What the Vendor A Retro must return to the Vendee (Art. 1616, CC):

a) Price of the sale;

b) Expenses of the contract;

c) Any other legitimate payments made by reason of the sale; and

d) The necessary and useful expenses made on the thing sold.

4. Equitable mortgage – It is one which, although lacking in some formality, or form or words, or

other requisites demanded by a statute, nevertheless reveals the intention of the parties to

charge

real property as

security for a

debt, there being no impossibility nor anything contrary to law in this intent. (Rockville vs. Spouses Miranda, G.R. No. 155716, October 2, 2009)

5. When a Sale with Right of Repurchase presumed to be an Equitable Mortgage (Art. 1602,

CC):

a) When the price of a sale with right to repurchase is unusually inadequate;

b) When the vendor remains in possession as lessee or otherwise;

c) 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;

d) When the purchaser retains for himself a part of the purchase price;

e) When the vendor binds himself to pay the taxes on the thing sold;

f) 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.

6. The presence of even one of the circumstances in Article 1602 is sufficient basis to declare a

contract as one of equitable mortgage. The explicit provision of Article 1602 that any of those

circumstances would suffice to construe a contract of sale to be one of equitable mortgage is in consonance with the rule that the law favors the least transmission of property rights.





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(Banga vs. Bello, G.R. No. 156705, September 30, 2005, citing Aguirre vs. Court of Appeals,

323 SCRA 771, 775 [2000] )

7. Legal Redemption - 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. (Art. 1619, CC)

8. Legal Redemption by a Co-Owner:

a) There must be co-ownership of a thing;

b) There must be alienation of all or of any of the shares of the other co-owners;

c) The sale must be to a third person or stranger, i.e., not a co-owner; and

d) The sale must be before partition.

If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.

Should two or more co-owners desire to exercise the right of redemption,

they may only do so in proportion to the share they may respectively have in

the thing owned in common.

9. Legal Redemption by Adjacent Owners of Rural Lands:

a) Both the land of the one exercising the right of redemption and the land sought to be

redeemed must be rural;

b) The lands must be adjacent;

c) There must be an alienation;

d) The piece of rural land alienated must not exceed one (1) hectare;

e) The grantee or vendee must already own another rural land; and

f) The rural land sold must not be separated by brooks, drains, ravines, roads and other

apparent servitudes from the adjoining lands.

The right cannot be exercised against a vendee if he is also an adjacent owner.

In case two or more adjacent owners desire to exercise the right of

redemption, the law gives preference to the owner of the adjoining land of

smaller area but if both lands have the same area, to the one who first

requested the redemption.

The reason for the law in question is to foster the development of

agricultural areas by adjacent owners who may desire the increase for the

improvement of their own land." The intention of the law in giving this right

of redemption is to protect agriculture, by the union of small agricultural lands and those adjoining thereto under one single owner for their better





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exploitation. (Fabia vs. Intermediate Appellate Court, L-66101, November

21, 1984)

10. Pre-Emption and Legal Redemption by Adjacent Owners of Urban Lands:

a) The one exercising the right must be an adjacent owner;

b) The piece of land sold must be so small and so situated that a major portion thereof

cannot be used for any practical purpose within a reasonable time; and

c) Such urban land was bought merely for speculation.

11. Statute of Limitation

a) 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. (Art. 1623, CC)

12. Duty to Serve Written Notice to Possible Redemptioners

a) 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.

b) But!!! Co-owners with actual notice of the sale are not entitled to written notice. x x x A

written notice of a fact already known to them, would be superfluous. (Spouses Si vs.

Court of Appeals, G.R. No. 122047, October 12, 2000 )

13. Tender of a Check is Sufficient to Exercise Right of Redemption

a) A check may be used for the exercise of the right of redemption, the same being a right

and not an obligation. The tender of a check is sufficient to compel redemption but is

not in itself a payment that relieves the redemptioner from his liability to pay the

redemption price. (Fortunado vs. Court of Appeals, 196 SCRA 269, 279 [1991] )

XV. The Subdivision and Condominium Buyers’ Protective Decree (PD 957)

1. Important Definitions

a) Subdivision project – 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. It shall include all residential, commercial, industrial and recreational areas as

well as open spaces and other community and public areas in the project.

b) Subdivision lot – any of the lots, whether residential, commercial, industrial, or

recreational, in a subdivision project.

c) Condominium project – the entire parcel of real property divided or to be divided

primarily for residential purposes into condominium units, including all structures

thereon.





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d) Condominium unit - 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.

e) Owner – the registered owner of the land subject of a subdivision or a condominium project.

f) Developer – the person who develops or improves the subdivision project or

condominium project for and in behalf of the owner thereof.

g) Dealer – any person directly engaged as principal in the business of buying, selling or

exchanging real estate whether on a full-time or part-time basis.

h) Broker - any person who, for commission or other compensation, undertakes to sell or

negotiate the sale of a real estate belonging to another.

2. Requisites before an Owner/Real Estate Dealer can

Sell any Subdivision Lot or Condominium

Unit

a) Certificate of Registration (Sec. 4, PD 957)

b) License to Sell (Sec. 5, PD 957)

c) Performance Bond (Sec. 6, PD 957)

3. Failure to Obtain a License to Sell also carries Criminal Liability under Sec. 39, PD 957.

We emphasize that the owner or dealer of subdivision lots or condominium units must have already obtained a license to sell at the time it disposes or attempts to dispose of the property. The

subsequent issuance of a license to sell and the invocation of good faith "cannot reach back to erase

the offense and extinguish [an accused’s] criminal liability." This is because engaging in such

activities is regarded as a crime that is malum prohibitum, one to which criminal intent is immaterial.

The perpetrators are punished, because the law forbids the mere commission of an act regardless of

whether the conduct is inherently immoral or not. (Bernardo vs. Tan, G.R. No. 185491, July 11, 2012 )

4. Transactions exempt from the requirement of license to sell and performance bond (Sec. 7,

PD 957):

a) Sale of a subdivision lot

resulting from the partition of land among co-owners and co-hers;

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.

5. Grounds for Revocation of Certificate of Registration or License to Sell (Sec. 9, PD 957)

a) Owner or dealer is insolvent;





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b) Owner or dealer 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) Owner or dealer has been or is engaged or is about to engage in fraudulent

transactions;

d) Owner or dealer 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) Owner or dealer is of bad business repute;

f) Owner or dealer does not conduct his business in accordance with law or sound

business principles; or

g) Where the owner or dealer is a partnership or corporation or an unincorporated

association, it shall be sufficient cause for cancellation of its registration certificate and

its license to sell, if

any member of such partnership or

any officer or director of such

corporation or association has been guilty of any act or omission which would be cause

for refusing or revoking the registration of an individual dealer, broker or salesman.

6. Registration requirement

All contracts to sell, deeds of sale and other similar instruments relative to the sale or

conveyance of the subdivision lots and condominium units, whether or not the purchase price is paid

in full, shall be registered by the seller in the Office of the Register of Deeds of the province or city

where the property is situated. (Sec. 17, PD 957)

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. Registration of the sale or contract to sell makes it binding on third parties; it serves as a

notice to the whole world that the property is subject to the prior right of the buyer of the property

(under a contract to sell or an absolute sale), and anyone who wishes to deal with the said property

will be held bound by such prior right. (Luzon Development Bank vs. Enriquez, G.R. No. 168646,

January 12, 2011)

7. Mortgage by Owner/Dealer of Any Unit or Lot must be made with prior Written Approval by the

Housing and Land Use Regulatory Board. (Sec. 18, PD 957)

A mortgage contract executed in breach of Section 18 of [PD 957] is null and 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. (Luzon Development Bank vs. Enriquez, supra)

8. Time for Completion under HLURB Resolution No. 699, Series of 2001 –

Within one (1) year or within such other period of time as may be fixed by the Board from the

date of the issuance of license to sell. Request for extension of time to complete development of a

subdivision or condominium project may be granted only in cases where non-completion of project is

caused by

fortuitous events,

legal orders or such

other reasons that the board may

deem fit/proper





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with the written notice to lot or unit buyers without prejudice to the exercise of their rights pursuant to

Section 23 of the Decree. (Sec. 21)

9. Non-Forfeiture of Payments -

When the buyer, after due notice to the owner or developer, desists from further payment due

to the failure of the owner or developer to develop the subdivision or condominium project according

to the approved plans and within the time limit for complying with the same. (Sec. 23, PD 957)

10. Failure to Pay Installments (for reasons other than the failure of the owner or developer to

develop the project) – Apply RA 6552.

11. Issuance of Title

The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of

the lot or unit. No fee, except those required for the registration of the deed of sale in the Registry of

Deeds, shall be collected for the issuance of such title. In the event a mortgage over the lot or unit is

outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem

the mortgage or the corresponding portion thereof within six months from such issuance in order that

the title over any fully paid lot or unit may be secured and delivered to the buyer in accordance

herewith. (Sec. 25, PD 957)

The unreasonable and unjustifiable delay in the issuance or delivery of the certificate of title is

a substantial breach of contract which accords the buyer to rescind the contract under Art. 1191, CC.

(Gotesco Properties vs. Fajardo, G.R. No. 201167, February 27, 2013)

12. Payment of Real Estate Tax

Real estate tax and assessment on a lot or unit shall be

paid by the owner or developer

without recourse to the buyer for as long as the title has not passed the buyer; Provided, however,

that if the buyer has actually taken possession of and occupied the lot or unit, he shall be liable to the

owner or developer for such tax and assessment effective the year following such taking of

possession and occupancy. (Sec. 26, PD 957)

XVI. The Condominium Act (RA 4726)

1. Definition (Sec. 2)

A condominium is an interest in real property consisting of:

a) separate interest in a unit in a residential, industrial or commercial building; and

b) an undivided interest in common, directly or indirectly, in the land on which it is located

and in other common areas of the building.

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.





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2. Transfer or Conveyance of Unit and Undivided Interest in the Common Areas; Nationality

requirement

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 interests in the common areas or, in a proper

case, the membership or shareholdings in the condominium corporation: Provided , however , That 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. 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)

The law provides that no condominium unit can be sold without at the same time selling the

corresponding amount of rights, shares or other interests in the condominium management body, the

Condominium Corporation; and no one can buy shares in a Condominium Corporation without at the

same time buying a condominium unit. It expressly allows foreigners to acquire condominium units

and shares in condominium corporations up to not more than 40% of the total and outstanding capital

stock of a Filipino-owned or controlled corporation. Under this set up, the ownership of the land is

legally separated from the unit itself. The land is owned by a Condominium Corporation and the unit

owner is simply a member in this Condominium Corporation. As long as 60% of the members of this

Condominium Corporation are Filipino, the remaining members can be foreigners. (Hulst vs. P.R.

Builders, G.R. No. 156364, September 25, 2008 [Resolution on the Motion for Partial

Reconsideration] )

3. Incidents of Ownership

a) Ownership of a Unit

1. interior surfaces of the perimeter walls, floors, ceilings, windows and doors

thereof;

2. the exclusive right to paint, repaint, tile, wax, paper or otherwise refinish and

decorate the inner surfaces of the walls, ceilings, floors, windows and doors

bounding his own unit;

3. 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; and

4. 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.

b) Interest in the Common Areas

1. lobbies, stairways, hallways, and other areas of common use, elevator

equipment and shafts, central heating, central refrigeration and central

air-conditioning equipment, reservoirs, tanks, pumps and other central services





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and facilities, pipes, ducts, flues, chutes, conduits, wires and other utility

installations, wherever located, except the outlets thereof when located within

the unit;

2. an exclusive easement for the use of the air space encompassed by the

boundaries of the unit as it exists at any particular time and as the unit may lawfully be altered or reconstructed from time to time;

3. unless otherwise provided, the common areas are held in common by the

holders of units, in equal shares, one for each unit;

4. A non-exclusive easement for ingress, egress and support through the common

areas is appurtenant to each unit and the common areas are subject to such

easements.

4. Grounds for Partition of the Condominium Project (Sec. 8):

a) That

three years after

damage or destruction to the project which renders material part

thereof unfit 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.

5. The Condominium Corporation

a) The corporate purposes of such a corporation shall be limited to the holding of the

common areas, either in ownership or any other interest in real property recognized by

law, to the management of the project, and to such other purposes as may be

necessary, incidental or convenient to the accomplishment of said purposes. (Sec. 10)

b) Membership in a condominium corporation, regardless of whether it is a stock or

non-stock corporation, shall not be transferable separately from the condominium unit

of which it is an appurtenance. When a member or stockholder ceases to own a unit in the project in which the condominium corporation owns or holds the common areas, he





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shall automatically cease to be a member or stockholder of the condominium

corporation. (Ibid)

c) The term of a condominium corporation shall be co-terminus with the duration of the

condominium project, the provisions of the Corporation Law to the contrary

notwithstanding. (Sec. 11)

d) In case of involuntary dissolution of a condominium corporation for any of the causes

provided by law, the common areas owned or held by the corporation shall, by way of

liquidation, be transferred pro indiviso and in proportion to their interest in the

corporation to the members or stockholders thereof, subject to the superior rights of the

corporation creditors. Such transfer or conveyance shall be deemed to be a full

liquidation of the interest of such members or stockholders in the corporation. After

such transfer or conveyance, the provisions of this Act governing undivided

co-ownership of, or undivided interest in, the common areas in condominium projects

shall fully apply. (Sec. 12)

e) Until the enabling or the master deed of the project in which the condominium

corporation owns or holds the common area is revoked, the corporation shall not be

voluntarily dissolved through an action for dissolution under Rule 104 of the Rules of

Court, except for the following:

1. That three years after damage or destruction to the project in which the

corporation owns or holds the common areas, which damage or destruction

renders a material part thereof unfit for its use prior thereto, the project has not

been rebuilt or repaired substantially to its state prior to its damage or

destruction; or

2. That damage or destruction to the project has rendered one-half or more of the

units therein untenantable and that more than thirty percent of the members of

the corporation, if non-stock, or the shareholders representing more than thirty

percent of the capital stock entitled to vote, if a stock corporation, are opposed

to the repair or reconstruction of the project, or

3. That the project has been in existence in excess of fifty years, that it is obsolete

and uneconomical, and that more than fifty percent of the members of the

corporation, if non-stock, or the stockholders representing more than fifty

percent of the capital stock entitled to vote, if a stock corporation, are

opposed to the repair or restoration or remodeling or modernizing of the project; or

4. That the project or a material part thereof has been condemned or expropriated

and that the project is no longer viable, or that the members holding in

aggregate more than seventy percent interest in the corporation, if non-stock, or

the stockholders representing more than seventy percent of the capital stock

entitled to vote, if a stock corporation, are opposed to the continuation of the

condominium regime after expropriation or condemnation of a material portion

thereof; or





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5. That the conditions for such a dissolution set forth in the declaration of

restrictions of the project in which the corporation owns or holds the common

areas, have been met. (Sec. 13)

f) The condominium corporation may also be dissolved by the affirmative vote of all the

stockholders or members thereof at a general or special meeting duly called for the purpose: Provided , That all the requirements of Section sixty-two of the Corporation

Law are complied with. (Sec. 14)

6. The Condominium Certificate of Title (Sec. 18)

a) Issued upon registration of an instrument conveying a condominium, the payment of

the proper fees, and after entering and annotating the conveyance on the certificate of

title covering the land included within the project;

b) Contains a copy of the description of the land, a brief description of the condominium

conveyed, name and personal circumstances of the condominium owner;

c) No conveyance of condominiums or part thereof, subsequent to the original

conveyance thereof from the owner of the project, shall be registered unless

accompanied by a certificate of the management body of the project that such

conveyance is in accordance with the provisions of the declaration of restrictions of

such project.

7. Assessments and Condominium Dues (Sec. 20)

a) It is imposed in accordance with a duly registered declaration of restrictions.

b) It shall be an

obligation of the owner thereof (of the condominium) at the time the

assessment is made.

c) The amount of any such assessment plus any other charges thereon, such as interest,

costs (including attorney's fees) and penalties, as such may be provided for in the

declaration of restrictions, shall be and become a lien upon the condominium assessed

when the management body causes a notice of assessment to be registered with the

Register of Deeds of the city or province where such condominium project is located.

d) Upon payment of said assessment and charges or other satisfaction thereof, the

management body shall cause to be registered a release of the lien.

e) Such lien shall be superior to all other liens registered subsequent to the registration of

said notice of assessment except real property tax liens and except that the declaration

of restrictions may provide for the subordination thereof to any other liens and

encumbrances.

f) Such liens may be enforced in the same manner provided for by law for the judicial or

extra-judicial foreclosure of mortgages of real property.

-o0o-





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