Civil Law

Recent Rulings on SALES

Concept and elements –– Art. 1458 of the Civil Code describes a contract of sale as a transaction by which “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”; the elements of a perfected contract of sale are the following: (1) the meeting of the minds of the parties or their consent to a transfer of ownership in exchange for a price; (2) the determinate object or subject matter of the contract; and (3) the price certain in money or its equivalent as consideration for the sale; the absence of any of these elements renders a contract void. (Guison vs. Heirs of Loreño Terry, G.R. No. 191914, Aug. 09, 2017)

Contract of –– It is basic that the object of a valid sales contract must be owned by the seller; Nemo dat quod non habet, as an ancient Latin maxim says: one cannot give what one does not have. (Ko vs. Aramburo, G.R. No. 190995, Aug. 09, 2017)

—    Perfected at the moment there is a meeting of minds not only upon the thing that is the object of the contract but also upon the price; from that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts; the elements of a contract of sale are consent, object and price in money or its equivalent; the absence of any of these essential elements negates the existence of a perfected contract of sale. (Estrellado vs. Presiding Judge of the MTC in Cities, 11th Judicial Region, Br. 3, Davao City, G.R. No. 164482, Nov. 08, 2017)

—      The issue of good faith or bad faith of a buyer is relevant only where the subject of the sale is a registered land but not where the property is an unregistered land; one who purchases an unregistered land does so at his peril; his claim of having bought the land in good faith, i.e., without notice that some other person has a right to, or interest in, the property, would not protect him if it turns out that the seller does not actually own the property. (Mun. Rural Bank of Libmanan, Camarines Sur vs. Ordoñez, G.R. No. 204663, Sept. 27, 2017)

—    The sale of real property, to be enforceable, should be in a writing subscribed by the party charged for it; despite the document embodying the agreement on the sale not being acknowledged before a notary public, the non-observance of the form prescribed by Art. 1358(1) of the Civil Code did not render the sale invalid; the form required by Art. 1358 was only for convenience of the parties, and was not essential to the validity or enforceability of the sale. (Estrellado vs. Presiding Judge of the MTC in Cities, 11th Judicial Region, Br. 3, Davao City, G.R. No. 164482, Nov. 08, 2017)

Double sale — If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property; should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. (Calma vs. Atty. Lachica, Jr., G.R. No. 222031, Nov. 22, 2017)

Implied warranty against eviction — In order for the implied warranty against eviction to be enforceable, the following requisites must concur: (a) there must be a final judgment; (b) the purchaser has been deprived of the whole or part of the thing sold; (c) said deprivation was by virtue of a prior right to the sale made by the vendor; and (d) the vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee. (Pilipinas Makro, Inc. vs. Coco Charcoal Phils., Inc., G.R. No. 196419, Oct. 04, 2017)

Innocent purchasers for value — The acquisition of the property by respondents must be respected because they were innocent purchasers for value; general principle that persons dealing with registered land have the right to completely rely on the Torrens title issued over the property; buyers are not required to go beyond what the certificate of title indicates on its face, provided the acquisition of the land is made in good faith, that is, without notice that some other person has a right to, or interest in, the property. (Sps.Cano vs. Sps. Cano, G.R. No. 188666, Dec. 14, 2017)

Warranty — A warranty is a collateral undertaking in a sale of either real or personal property, express or implied; that if the property sold does not possess certain incidents or qualities, the purchaser may either consider the sale void or claim damages for breach of warranty. (Pilipinas Makro, Inc. vs. Coco Charcoal Phils., Inc., G.R. No. 196419, Oct. 04, 2017)

—      An express warranty pertains to any affirmation of fact or any promise by the seller relating to the thing, the natural tendency of which is to induce the buyer to purchase the same; on the other hand, an implied warranty is one which the law derives by application or inference from the nature of transaction or the relative situation or circumstances of the parties, irrespective of any intention of the seller to create it. (Pilipinas Makro, Inc. vs. Coco Charcoal Phils., Inc., G.R. No. 196419, Oct. 04, 2017)

Warranty against hidden defects — A buyer cannot be considered to have agreed to take possession of the things sold in the condition where they are found and from the place where they are located if the critical defect is one which he or she cannot even readily sense. (Poole-Blunden vs. Union Bank of the Phils., G.R. No. 205838, Nov. 29, 2017)

—      A seller is generally responsible for warranty against hidden defects of the thing sold; Art. 1566, paragraph 2 states the seller’s liability for hidden defects shall be inapplicable if there is a stipulation made to the contrary; however, a mere stipulation does not suffice; to be fully absolved of liability, Art. 1566, paragraph 2 also requires a seller to be unaware of the hidden defects in the thing sold. (Poole-Blunden vs. Union Bank of the Phils., G.R. No. 205838, Nov. 29, 2017)

Buyer in good faith — One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor; when a piece of land is in the actual possession of persons other than the seller, the buyer must be wary and should investigate the rights of those in possession; without making such inquiry, one cannot claim that he is a buyer in good faith. (Tiu vs. Sps. Jangas, G.R. No. 200285, Mar. 20, 2017)

Contract of — All things which are not outside the commerce of men, including future things may be the object of a contract; things having a potential existence and future goods, those that are yet to be manufactured, raised, or acquired, may be the objects of contracts of sale. (Sps. Villaluz, Jr. vs. Land Bank of the Phils., G.R. No. 192602, Jan. 18, 2017)

—      In a lump sum contract, a vendor is generally obligated to deliver all the land covered within the boundaries, regardless of whether the real area should be greater or smaller than that recited in the deed; however, in case there is conflict between the area actually covered by the boundaries and the estimated area stated in the contract of sale, he/she shall do so only when the excess or deficiency between the former and the latter is reasonable; vendee of a land when it is sold in gross or with the description ‘more or less’ does not thereby ipso facto take all risk of quantity in the land; the use of ‘more or less’ or similar words in designating quantity covers only a reasonable excess or deficiency. (Arcaina vs. Ingram, G.R. No. 196444, Feb. 15, 2017)

—      The declaration of nullity of a contract which is void ab initio operates to restore things to the state and condition in which they were found before the execution thereof. (Delos Santos vs. Abejon, G.R. No. 215820, Mar. 20, 2017)

—      Vendor shall be answerable for warranty against hidden defects on the thing sold; for the implied warranty against hidden defects to be applicable, the following conditions must be met: a. Defect is important or serious i. The thing sold is unfit for the use which it is intended ii. Diminishes its fitness for such use or to such an extent that the buyer would not have acquired it had he been aware thereof; b. Defect is hidden; c. Defect exists at the time of the sale; and d. Buyer gives Notice of the defect to the seller within a reasonable time. (Atty. Geromo vs. La Paz Housing and Dev’t. Corp., G.R. No. 211175, Jan. 18, 2017)

Contract to sell — The obligation of the seller to sell becomes demandable only upon the occurrence of the suspensive condition; payment of the full purchase price is a positive suspensive condition, failure of which is not considered a breach of the same but an occurrence that prevents the obligation of the seller to transfer title from becoming effective. (Felix Plazo Urban Poor Settlers Community Association, Inc. vs. Lipat, Sr., G.R. No. 182409, Mar. 20, 2017)

Double sales — Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s rights except only as provided by law, as in cases where the second buyer first registers in good faith the second sale ahead of the first; such knowledge of the first buyer does bar her from availing of her rights under the law, among them, first her purchase as against the second buyer. (Spring Homes Subdivision Co., Inc. vs. Sps. Tablada, Jr., G.R. No. 200009, Jan. 23, 2017)

Innocent purchaser for value —An innocent purchaser for value refers to the buyer of the property who pays for its full and fair price without or before notice of another person’s right or interest in it; however, if a property is registered, the buyer of a parcel of land is not obliged to look beyond the transfer certificate of title to be considered a purchaser in good faith for value; exception; application. (Sps. Aboitiz vs. Sps. Po, G.R. No. 208450, June 05, 2017)

Primus tempore, potior jure — The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of a double sale of immovable property; ownership of an immovable property which is the subject of a double sale shall be transferred: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. (Spring Homes Subdivision Co., Inc. vs. Sps. Tablada, Jr., G.R. No. 200009, Jan. 23, 2017)

Warranties — A warranty is a statement or representation made by the seller of goods – contemporaneously and as part of the contract of sale – that has reference to the character, quality or title of the goods; and is issued to promise or undertake to insure that certain facts are or shall be as the seller represents them. (Phil. Steel Coating Corp. vs. Quiñones, G.R. No. 194533, April 19, 2017)

—      An express warranty can be oral when it is a positive affirmation of a fact that the buyer relied on. (Phil. Steel Coating Corp. vs. Quiñones, G.R. No. 194533, April 19, 2017)

—      The buyer was not negligent in the instant case and should not be blamed for his losses. (Phil. Steel Coating Corp. vs. Quiñones, G.R. No. 194533, April 19, 2017)

—      The four-year prescriptive period of the express warranty applies in case at bar. (Phil. Steel Coating Corp. vs. Quiñones, G.R. No. 194533, April 19, 2017)

—      Where the breach of warranty was established, nonpayment of the unpaid purchase price was justified. (Phil. Steel Coating Corp. vs. Quiñones, G.R. No. 194533, April 19, 2017)

Contract of –– One who purchases a real property which is in possession of another should at least make some inquiry beyond the face of the title; a purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. (Solco vs. Megaworld Corp., G.R. No. 213669, March 05, 2018)

––      Opportunity cost is defined as the cost of the foregone alternative; in a potential sale, the seller reserves the property for a potential buyer and foregoes the alternative of searching for other offers. (Racelis vs. Sps. Javier, G.R. No. 189609, Jan. 29, 2018)

Contract to sell –– In a contract of sale, title to the property passes to the buyer upon delivery of the thing sold; in contrast, in a contract to sell, ownership does not pass to the prospective buyer until full payment of the purchase price; the title of the property remains with the prospective seller; in a contract of sale, the non-payment of the purchase price is a resolutory condition that entitles the seller to rescind the sale; in a contract to sell, the payment of the purchase price is a positive suspensive condition that gives rise to the prospective seller’s obligation to convey title; however, non-payment is not a breach of contract but an event that prevents the obligation of the vendor to convey title from becoming effective. (Racelis vs. Sps. Javier, G.R. No. 189609, Jan. 29, 2018)

––      Is a bilateral contract whereby the prospective seller, while expressly reserving the ownership over the thing sold despite the delivery thereof to the prospective buyer, binds himself to sell the property exclusively to the prospective buyer upon full payment of the purchase price. (Arbilon vs. Manlangit, G.R. No. 197920, Jan. 22, 2018)

––      The seller explicitly reserves the transfer of title to the buyer until the fulfillment of a condition, that is, the full payment of the purchase price; title to the property is retained by the seller until the buyer fully paid the price of the thing sold. (Arbilon vs. Manlangit, G.R. No. 197920, Jan. 22, 2018)

Deed of Absolute Sale (DAS) –– As correctly pointed out by petitioner, the DAS is itself the proof that the sale of the property is supported by sufficient consideration; this is anchored on the disputable presumption of consideration inherent in every contract; thus, Art. 1354 of the Civil Code provides: “Although the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary”; this disputable presumption is reiterated in the Rules of Court; Sec. 3, Rule 131 of the Rules; in Mangahas v. Brobio, the Court explained how the presumption of sufficient consideration can be overcome;  petitioners stand to benefit from the disputable presumption of consideration with the presentation of the DAS; it became incumbent upon respondents to present preponderant evidence to prove lack of consideration. (Mendoza vs. Sps. Palugod, G.R. No. 220517, June 20, 2018)

Earnest money –– An earnest money given in a contract to sell as consideration for seller’s promise to reserve the subject property for the buyer; the seller, in excluding all other prospective buyers from bidding for the subject property has given up what may have been more lucrative offers or better deals. (Racelis vs. Sps. Javier, G.R. No. 189609, Jan. 29, 2018)

––      Earnest money, under Art. 1482 of the Civil Code, is ordinarily given in a perfected contract of sale; however, earnest money may also be given in a contract to sell. (Racelis vs. Sps. Javier, G.R. No. 189609, Jan. 29, 2018)

––      It is paid for the seller’s benefit; it is part of the purchase price while at the same time proof of commitment by the potential buyer; absent proof of a clear agreement to the contrary, it is intended to be forfeited if the sale does not happen without the seller’s fault; the potential buyer bears the burden of proving that the earnest money was intended other than as part of the purchase price and to be forfeited if the sale does not occur without the fault of the seller. (Racelis vs. Sps. Javier, G.R. No. 189609, Jan. 29, 2018)

––      Whenever earnest money is given in a contract of sale, it shall be considered as proof of the perfection of the contract; however, this is a disputable presumption, which prevails in the absence of contrary evidence; the delivery of earnest money is not conclusive proof that a contract of sale exists. (Racelis vs. Sps. Javier, G.R. No. 189609, Jan. 29, 2018)Stages –– The stages of a contract of sale are: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale, which is the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof; expounded. (Desiderio Dalisay Investments, Inc. vs. SSS, G.R. No. 231053, April 04, 2018)

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