A. Sales

IX. CONTRACT OF SALE

A. Nature and Form (Civil Code, arts. 1458-1488)

B. Capacity to Buy or Sell (Civil Code, arts. 1489-1492)

C. Obligations of the Vendor (Civil Code, arts. 1459-1505)

D. Double Sale (Civil Code, art. 1544)

E. Effects of Loss of Thing Sold (Civil Code, arts. 1493-1494)

F. Recto Law (Civil Code, art. 1484)

G. Maceda Law (R.A. No. 6552)

H. Rights of Unpaid Seller (Civil Code, arts. 1525-1535)

I. Conventional Redemption (Civil Code, arts. 1601 and 1606-1618); Legal Redemption (Civil Code, arts. 1619-1623)

J. Equitable Mortgage (Civil Code, arts. 1602-1605)

Sale

A sale is a contract where one party (seller or vendor) obligates himself to transfer the ownership of and to deliver a determinate thing, while the other party (buyer or vendee) obligates himself to pay for the said thing a price certain in money or its equivalent.

The primary consideration in determining the true nature of a contract is the intention of the parties. If the words of a contract appear to contravene the evident intention of the parties, the latter shall prevail. Such intention is determined not only from the express terms of their agreement, but also from the contemporaneous and subsequent acts of the parties. (Heirs of Dela Rosa v. Batongbacal, et al., G.R. No. 179205, July 30, 2014)

Application of caveat emptor in particular sale transactions

• For animals sold at fairs or public auctions, and livestock sold as condemned, there is no warranty against hidden defects (NCC, Art. 1574);
• Double sales (NCC, Art. 1544);
• In sheriff’s sales; and
• Tax sales.

NOTE: Article 1574 excludes only the warranty against hidden defects in the specified animal sales. In double sales, Article 1544 determines which buyer acquires ownership according to its good-faith priority rules; it does not exclude warranties of title or quality. The purchaser who buys without checking the title of the vendor is assuming all risks of eviction.

In sheriff’s sales, the sheriff does not guarantee the title to real property and it is not incumbent upon him to place the buyer in possession of such property.

Two Types of Delivery:

• Actual- physical delivery
• Constructive
• Execution of Public Instrument (Art. 1498) only produces the effect of delivery when:
• The thing sold is subject to control of seller at the time of execution of instrument. (Addison v. Felix, G.R. No. L-12342, 1918); and
• Such control should remain for a reasonable period after execution of the Instrument. (Power Commercial and Industrial Corp. v. CA, G.R. No. 119745, 1997)
• Constitutum Possessorium (Art. 1500) after the sale, the seller retains physical possession of the subject matter in a capacity other than owner, such as lessee
• Traditio Brevi Manu the would-be buyer was already in possession of the subject matter in another capacity (i.e., as lessee) and pursuant to the sale, he would now hold possession as owner
• Traditio Longa Manu delivery by mere consent or agreement.

SALE BY A PERSON NOT THE OWNER AT THE TIME OF DELIVERY (Arts. 1462, 1505, 1459)

1. Rules on Legal Effects of Sale by a Non- owner

General Rule: If sale is by a non-owner, buyer acquires no better title than seller had. (Art. 1505)

Exceptions:

• Owner by his conduct is precluded from denying seller’s authority (Estoppel) (Art. 1505)
• Contrary is provided for in recording laws (Art. 1505; P.D. 1529)
• Sale is made under statutory power of sale or under order of a court of competent jurisdiction (Art. 1505)
• Sale is made in a merchants store in accordance with code of commerce and special laws. (Art. 1505)

2. Title as to Movable Properties

General Rule: Possession is equivalent to title (Art. 559)

Requisites:(PG)

• Possession of movable
• Made in Good faith (Art. 559)

Exceptions:

• Owner who lost a movable may recover it from its possessor; if the possessor acquired it in good faith at a public sale, the owner must reimburse the price paid (Art. 559)
• An owner who was unlawfully deprived of a movable may recover it from its possessor; if the possessor acquired it in good faith at a public sale, the owner must reimburse the price paid (Art. 559)
• Bought in a merchant store – owner cannot recover even if unlawfully deprived (Art. 1505)

Exceptions to the Exceptions:

• Movable is bought at public sale owner can only recover after reimbursing price

SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE

• Perfection Stage
• Sale by owner VALID
• Sale by non-owner VALID (Arts. 1459, 1475)

Reason why both sales are valid: ownership is necessary only at time of delivery; at perfection stage, the seller is obligated to transfer ownership and deliver the thing, although ownership need not yet have passed (Villanueva, Law on Sales, 294, 2016)

Law on estoppel further bolsters it: title passes by operation of law to grantee when person who is not owner of the goods sold delivers it and later on acquires title thereto (Art. 1434)

Since valid, action to annul is improper; there is already a perfected contract.

• Consummation Stage

Contract of sale is valid because it has passed perfected stage, despite seller not being the owner or seller having no authority to sell

• Generally, delivery by a non-owner without authority does not transfer better title than the seller had, subject to the exceptions in Art. 1505 and the after-acquired-title rule in Art. 1434
• Effect: buyer acquired no better right than transferor (Art. 1505)
• Legal effect: CAVEAT EMPTOR BUYER BEWARE but Buyer always has cause of action against the Seller

Law on Sales Apply

Dacion en pago is governed by the law on sales because it has the nature of a sale: the creditor receives the debtor’s property as buyer, and its value is applied to the debtor’s obligation. The obligation is extinguished to the extent of the value of the property delivered. (Shuy v. Spouses Cariño-Maulawin, G.R. No. 190375, February 8, 2012)

As in a sale, the creditor as buyer and the debtor as seller must agree on the valuation. The usual warranties of sale also apply.

Requisites:

• The debtor performs a prestation in place of payment. This may consist of delivering a corporeal thing, a real right, or a credit against a third person.
• The prestation given in substitution differs from the prestation due.
• The creditor and debtor agree that performing the substitute prestation immediately extinguishes the obligation to the extent of their agreed valuation.