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ARTICLE NO. ANNOTATION NOTES
FORM & INTERPRETATION
1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may
have 1st taken possession thereof in GF, if it should be movable
prop. Should it be immovable prop, the ownership shall belong to
the person acquiring it who in GF 1st recorded it in the Registry
of Prop. Should there be no inscription, the ownership shall
pertain to the person, who in GF was 1st in the possession; &,
in the absence thereof, to the person who presents the oldest
title, provided there is GF.
*Rule on double/multiple sales. Applies only to purchasers in
GF, disqualifies anybody in BF. Movable 1st in possession in GF
Immovable 1st who registers in GF; if no registration, 1st in
possession in GF; if neither possession nor registration, older
title in GF - Taking of possession may be symbolic. - Registration
any entry made in the books of the Registry of Prop w/c records
solemnly & permanently the right of ownership & other real
rights. - Requirement of law is 2-fold: acquisition in GF &
registration in GF. - What is registered is NOT the land, what is
registered is the DEED OF SALE. - If the seller DOES NOT have the
capacity to transfer the prop, the buyer cannot be considered to be
in GF. - Sale of real estate becomes legally effective against 3rd
persons only from date of its registration - A title procured by
fraud or misrepresentation can still be source of a completely good
legal & valid title if the same is in the hands of an innocent
purchaser for value.
1544 CASE DOCTRINES CARBONELL v CA, GF must characterize the act
of anterior registration. If there is inscription, prior
registration in GF is a precondition to superior title. Example of
exception to mirror doctrine, when the buyer knows of facts &
circumstances that would compel one to make an inquiry. DTC v
MACAM, the court ruled that in double sales wherein the 1st sale
was made prior to land registration & the 2nd sale was made
after said registration, the 1st sale is favored (provided there is
GF of course). What happened was, the land was sold during the
pendency of land registration proceedings. 1st sale was executed
before land could be registered. 2nd sale was executed after the
land had been registered. 2nd buyer was first to register the sale
(execution sale). Court ruled that 1st buyer has superior title b/c
at the time of the 2nd sale, the seller had nothing to convey.
DAVID v BANDIN, The defense of having purchase the prop in GF may
be availed of only where registered land is involved & the
buyer had relied in GF on the clear title of the registered owner.
One who purchases an unregistered land does so at his peril. His
claim of having bought the land in GF, would not protect him it
turns out that the seller does not actually own the prop. OLIVARES
v GONZALES, example of 2nd buyer being first to register. CARAM v
LAURETA, The rule of caveat emptor requires the purchaser to be
aware of the supposed title of the vendor & one who buys w/o
checking the vendors title takes all the risks & losses
consequent to such failure. - A possessor in GF is one who is not
aware that there exists in his title or mode of acquisition any
flaw w/c invalidates it. - 1544 does not declare void a deed of
sale registered in BF. It does not mean however, than said contract
is not void. To give full effect to 1544, the status of the 2
contracts must be determined & clarified. One contract must be
declared valid so that one vendee may exercise all the rights of an
owner, while the other contract must be declared void to cut off
all rights w/c may arise from said contract. CRUZ v CABANA,
Knowledge gained by the 1st buyer of the 2nd sale cannot defeat the
1st buyers right except only as provided by the CC & that is
where the 2nd buyer 1st registers in GF the 2nd sale ahead of the
1st. Such knowledge of the 1st buyer does not bar her from availing
of her rights under the law, among them, to register 1st her
purchase as against the 2nd buyer. But in converse, knowledge
gained by the 2nd buyer of the 1st sale defeats his rights even if
he 1st to register the 2nd sale, since such knowledge taints his
prior registration w/ BF. Before the 2nd buyer can obtain priority
over the 1st, he must show that he acted in GF throughout from the
time of acquisition until the title is transferred to him by
registration or, failing registration, by delivery of possession.
The 2nd buyer must show continuing GF & innocence or lack of
knowledge of the 1st sale until his contract ripens into full
ownership thru prior registration as provided by law. VALDEZ v CA,
example of 2nd buyer in BF. RADIOWEALTH FINANCE v PALILEO, double
sale of unregistered land, 2nd buyer 1st to register. Under Act no.
3344, registration of instruments affecting unregistered lands is
w/o prejudice to a 3rd party w/ a better right. The mere
registration of sale in ones favor does not give him any right over
the land if the vendor was not anymore the owner of the land having
previously sold the same to somebody else even if the earlier sale
was unrecorded. Art 1544 has no application to land not registered.
TAREDO v CA, One who registered the sale in his favor has a
preferred right over the other who has not registered his title,
even if the latter is in actual possession of the immovable prop.
OCCEA v ESPONILLA, The defense of indefeasibility of a Torrens
title does not extend to a transferee who takes the certificate of
title in BF, w/ notice of a flaw. - A purchaser in GF & for
value is one who buys prop w/o notice that some other person has a
right or interest in such prop & pays its fair price before he
has notice of the adverse claims & interest of another person
in the same prop. The settled rule is that a buyer of real prop in
the possession of persons other than the seller must be wary &
should investigate the rights of those in possession. W/o such
inquiry, the buyer can hardly be regarded as a buyer in GF &
cannot have any right over the prop. A purchaser cannot simply
close his eyes to facts w/c should put a reasonable man on his
guard & then claim that he acted in GF under the belief that
there was no defect in the title of his vendor. His mere refusal to
believe that such defect exists or his willful closing of his eyes
to the possibility of the existence of a defect in his vendors
title will not make him an innocent purchaser for value if later
develops that the title was in fact defective, & it appears he
would have notice of the defect had he acted w/ that measure of
precaution w/c may reasonably be required of a prudent man in a
similar situation. - Indeed, the genl rule is that one who deals w/
prop registered under the Torrens system need not go beyond the
same, but only has to rely on the title. He is charged w/ notice
only of such burdens & claims as are annotated on the title.
However, this principle does not apply when the party has actual
knowledge of facts & circumstances that would impel a
reasonably cautious man to make such inquiry or when the purchaser
has knowledge of a defect or the lack of title in his vendor or of
sufficient facts to induce a reasonably prudent man to inquire into
the status of the title of the prop in litigation. 1545. Where the
obligation of either party to a contract of sale is subject
CONDITION: An uncertain event or contingency on the happening of
w/c the (CATUNGAL vs. RODRIGUEZ) The option to rescind the contract
is not
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to any condition w/c is not performed, such party may refuse to
proceed w/ the contract or he may waive performance of the
condition. If the other party has promised that the condition
should happen or be performed, such first mentioned party may also
treat the nonperformance of the condition as a breach of
warranty.
obligation (or right) of the contract depends. The obligation
does not attach until the condition is performed. (1) If the
obligation of either party is subject to any condition & such
condition is not fulfilled, such party may either: (a) REFUSE to
proceed w/ the contract; or (2) PROCEED w/ the contract, WAIVING
the performance of the condition. (2) If the condition is in the
nature of a promise that it should happen the non-performance of
such condition may be treated by the other party as a breach of
warranty. EFFECT OF NON-FULFILLMENT OF CONDITION 1. The other party
may: - Refuse or Proceed w/ the contract; OR - Proceed w/ the
contract, Waiving the performance of the condition. 2. If the
condition is in the nature of a promise that it should happen, the
non-performance of such condition may be treated by the other party
as Breach of Warranty.
purely potestative but rather also subject to the same mixed
condition as his obligation to pay the balance of the purchase
price i.e., the negotiation of a road right of way. In the event
the condition is fulfilled (or the negotiation is successful),
Rodriguez must pay the balance of the purchase price. In the event
the condition is not fulfilled (or the negotiation fails),
Rodriguez has the choice either (a) to not proceed w/ the sale
& demand return of his downpayment or (b) considering that the
condition was imposed for his benefit, to waive the condition &
still pay the purchase price despite the lack of road access. This
is the most just interpretation of the parties' contract that gives
effect to all its provisions. If the period when the condition
should be fulfilled (negotiation of right of way) is not
stipulated, the party imposing the condition cannot extrajudicially
rescind the contract. Such party must come to court to seek that a
period or date be fixed when the condition must be fulfilled. A
distinction must be made b/w a condition imposed on the perfection
of a contract & a condition imposed on the performance of an
obligation. The failure to comply w/ the first condition prevents
the judicial relation itself from coming into existence. Failure to
comply w/ the second merely gives the option either to refuse or
proceed w/ the sale or waive performance.
WARRANTY CONDITION
Obligation of the parties
Goes into the performance of such obligation. May constitute an
obligation itself.
Goes into the root of the existence of the obligation.
Existence of contract
May form part of the obligation by provision of law w/o the
parties having agreed thereto.
Must be stipulated by the parties in order to form part of an
obligation.
Subject matter of the Contract
Whether express or implied relates to the subject matter itself
or to the obligations of the seller w/ regard to the subject matter
of the sale.
May attach itself either to the obligation of the seller to
deliver possession & transfer ownership.
1546. Any affirmation of fact or any promise by the seller
relating to the thing is an EXPRESS WARRANTY if the natural
tendency of such affirmation or promise is to induce the buyer to
purchase the same, & if the buyer purchases the thing relying
thereon. No affirmation of the value of the thing, nor any
statement purporting to be a statement of the sellers opinion only,
shall be construed as a warranty, unless the seller made such
affirmation or statement as an expert & it was relied upon by
the buyer.
WARRANTY: is a statement or representation made by the seller of
goods contemporaneously & as a part of the contract of sale,
having reference to the character, quality, or title of the goods,
& by w/c he promises or undertakes to insure that certain facts
are or shall be as he then represents them. EXPRESS WARRANTY: is
any affirmation or promise by the seller relating to the thing, the
natural tendency of w/c is to induce the buyer to purchase the
thing & the buyer thus induced, does purchase the same. The
intent of the seller is not necessary to make him liable for the
warranty. The profession of the seller is important whether his
opinion would make constitute as a warrant. The term warrant or
warranty is not necessary to be used by the seller to constitute a
warranty.
NOTE: Although the definition pertains only to the seller, the
buyer may make warranties as well, as when he warrants that he will
pay or when he makes an affirmation or promise to induce the seller
to enter into the contract of sale.
Mere express of opinion does not import a warranty UNLESS the
seller is an expert & his opinion was relied upon by the buyer
(Art. 1341).
The usual exaggerations in trade, when the other party had an
opportunity to know the facts, are in themselves fraudulent (Art.
1340).
Misrepresentation made in good faith is not fraudulent but may
constitute error (Art. 1343).
(SONNY LO vs. KJS ECO-FRAMEWORK) In assignment of credit, w/c is
in the nature of a sale of personal property, produced the effects
of a dation in payment w/c may extinguish the obligation. A vendor
or assignor, is bound to warrant the existence & legality of
the credit at the time of the sale or assignment. (ENGINEERING
& MACHINERY Co. vs. CA) The remedy against violations of the
warranty against hidden defects is either to withdraw from the
contract (redhibitory action) or to demand a proportionate
reduction of the price
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(accion quanti minoris), w/ damages in either case.
1547. In a contract of a sale, unless a contrary intention
appears, there is: (1) An 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, & that the buyer shall from that time
have & enjoy the legal & peaceful possession of the thing;
(2) An 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. This article shall not, however, be held to
render liable a sheriff, auctioneer, mortgagee, pledge, or other
person professing to sell by virtue of authority in fact or law,
for the sale of a thing in w/c a third person has a legal or
equitable interest.
IMPLIED WARRANTY: that w/c the law derives from the nature of
the transaction or the relative situation or circumstances of the
parties, irrespective of any intention of the seller to create it.
An implied warranty may be waived or modified by express
stipulation & is deemed incorporated in the contract. KINDS OF
IMPLIED WARRANTIES: 1) Warranty that the seller has the right to
sell. 2) Warranty against eviction. 3) Warranty against
non-apparent servitude. 4) Warranty against hidden defects. 5)
Warranty against redhibitory defects on animals. 6) Warranties in
sale of goods / quality. 7) Warranties for consumer goods (Consumer
Act of the Philippines) INSTANCES WHEN IMPLIED WARRANTY IS NOT
APPLICABLE: 1) As is & where is sale 2) Sale of second-hand
articles 3) Sale by virtue of authority of fact or law (sale by the
sheriff, auctioneer, mortgagee, or pledge)
(MOLES vs. IAC) As a general rule there is no implied warranty
in the sale of secondhand articles. EXCEPT where the buyer
(expressly or by implication) makes known to the seller the
particular purpose for w/c the goods are acquired & that the
buyer relies on the sellers skill or judgment. There is an implied
warranty that the goods shall be reasonably fit for such
purpose.
1548. EVICTION shall take place whenever by final judgment based
on right prior to the sale or an act imputable to the vendor, the
vendee is deprived of the whole or a part of the thing purchased.
The vendor shall answer for the eviction even though nothing has
been said in the contract on the subject. The contracting parties,
however, may increase, diminish, or suppress this legal obligation
of the vendor.
EVICTION: the judicial process, whereby the vendee is deprived
of the whole or part of the thing purchased by virtue of a final
judgment based on a right prior to the sale or an act imputable to
the vendor. ELEMENTS OF WARRANTY AGAINST EVICTION: (N.O. F.A.D.S.)
1) The vendee is Deprived in whole or in part of the thing
purchased; 2) He is so deprived by virtue of a Final judgment; 3)
The judgment is based on A right prior to the sale or an act
imputable to the vendor; 4) The vendor was Summoned in the suit for
eviction & made a co-defendant at the instance of the vendee;
& 5) There is NO waiver on the part of the vendee. VENDORS
LIABILITY CONSISTS OF (TOTAL EVICTION): (Art. 1555) 1) Value of the
thing at the time of eviction; 2) Income or fruits if he has been
ordered to deliver them to the party who won the suit; 3) Cost of
suit; 4) Expenses of the contract; 5) Damages & interests if
the sale was done in bad faith. VENDORS LIABILITY CONSISTS OF
(PARTIAL EVICTION): (Art. 1556) 1) Enforce VICED; or 2) Demand
rescission.
Trespass contemplated in this article: the trespass must be that
w/c where the trespasser claims title over the property in
question. ART. 1553. Any stipulation exempting the vendor from the
obligation to answer for eviction shall be void if he acted in bad
faith.
1549. The vendee need not appeal from the decision in order that
the vendor may become liable for eviction.
Appeal is not needed & the buyer need not resist eviction
for the right against the vendor to accrue. It is enough that the
requisites (NO FADS) are complied w/.
1550. When the adverse possession had been commenced before the
sale but the prescriptive period is completed after the transfer,
the vendor shall not be liable for eviction.
PRESCRIPTION: One acquires ownership & other real rights
thru the lapse of time in the manner & under the conditions
prescribed by law. (1) When prescription has been commenced to run
against the vendor & was already complete before the sale, the
vendee can enforce the warranty against eviction. (2) Even if the
prescription has started before the sale but reached the limit
prescribed by law after the sale, the vendor is not liable for
eviction.
If the property sold is a registered land, Article 1550 does not
apply b/c it ownership of land is not subject to prescription.
1551. If the property is sold for nonpayment of taxes due &
not made known to the vendee before the sale, the vendor is liable
for eviction.
1552. The judgment debtor is also responsible for eviction in
judicial GENERAL RULE: If the judgment debtor has no right over the
property Keep in mind that the judgment debtor had no right over
the property. Since
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sales, unless it is o/w decreed in the judgment. subject to
attachment, he will be liable for the eviction of one who bought
the property in a judicial sale. EXCEPTION: unless the court
decreed o/w REMEDY OF PERSON EVICTED: Recover the price paid w/
interest. Inapplicability of Rescission: Rescission contemplates
that the one demanding it is able to return whatever he has
received under the contract. Since the vendee can no longer return
the subject-matter, rescission cannot be carried out.
the judgment creditor acquired no better right than the judgment
debtor. The purchaser for value & in good faith was evicted by
the REAL owner, the payments he made cannot be retained by the
creditor (kasi wala rin siyang right). Kailangan ibalik ni judgment
creditot yung pera na pinagbentahan. B/c there is no bad faith on
the part of the creditor, no interest will accrue nor damages in
favor of the purchaser. REMEDY OF PERSON EVICTED: Return of
payment. REMEDY OF JUDGMENT CREDITOR: File a case again?
1553. Any stipulation exempting the vendor from the obligation
to answer for eviction shall be void, if he acted in bad faith.
How to determine if the vendor acted in bad faith: - If the
vendor had knowledge before the sale that fact that would
give rise to eviction. How to determine if the vendee acted in
bad faith:
- If he knew of the defect of title before the sale or had
knowledge of the facts that he should inquire about the
property.
Vendee will NOT BE ENTITLED to the warranty against eviction nor
recover damages.
REMEDY AGAINST VENDOR IN BAD FAITH: Recovery of what was paid
plus damages.
1554. If the vendee has renounced the right to warranty in case
of eviction, & eviction should take place, the vendor shall
only pay the value w/c the thing sold had at the time of the
eviction. Should the vendee have made the waiver w/ knowledge of
the risks of eviction & assumed its consequences, the vendor
shall not be liable.
KINDS OF WAIVER OF EVICTION: PRESUMPTION: Consciente CONSCIENTE
the waiver is voluntarily made by the vendee w/o the knowledge
& assumption of its consequences. INTENCIONADA the waiver is
made by the vendee w/ knowledge of the risks of eviction &
assumption of its consequences. REMEDY for consciente vendor shall
pay only the value of the thing sold at the time of eviction
(Solutio Indebiti). Value when sold Depreciation value = Value at
the time of eviction REMEDY for intencionada vendor is not liable
to answer for the eviction.
NOTE: Every waiver is presumed to be consciente. To consider
Intnecionada, it must be accompanied by some circumstance w/c
reveals the vendors knowledge of the risks of eviction & his
intention to submit to such consequences.
1555. When the warranty has been agreed upon or nothing has been
stipulated on this point, in case eviction occurs, the vendee shall
have the right to demand from the vendor: (1) The RETURN OF THE
VALUE w/c the thing sold had at the time of the eviction, be it be
greater or less than the price of the sale; (2) The INCOME or
FRUITS, if he has been ordered to deliver them to the party who won
the suit against him; (3) The COST OF THE SUIT w/c caused the
eviction &, in a proper case, those of the suit brought against
the vendor for the warranty; (4) The EXPENSES OF THE CONTRACT, if
the vendee has paid them; (5) The DAMAGES & INTERESTS, &
ornamental expenses, if the sale was made in bad faith.
For (1), the law speaks nothing of interests. The rationale
behind this is that the vendee has received fruits from the thing
sold w/c would set off the interest possible earned. For (4),
traditionally, the cost to execute the contract is borne by the
buyer. If it was stipulated that the buyer bears the expenses to
execute the contract, he may recover what he has spent for such.
For (5), for obvious reasons & w/c we should know by now, kapag
may bad faith, may damages. RIGHTS OF SECOND PURCHASER: GENERAL
RULE: A contract is binding only b/w the parties, their assigns
& heirs. EXCEPTION: When during the first sale, the vendor
expressed in the contract a warranty against eviction. Then the
vendee sold the same property to another & likewise expressed a
warranty against eviction, the purchaser or second vendee acquires
the right of action against the original vendor for the breach of
warranty.
1556. PARTIAL EVICTION - Should the vendee lose, by reason of
the eviction, a part of the thing sold of such importance, in
relation to the whole, that he would not have bought it w/o said
part, he may demad the rescission of the contract; but w/ the
obligation to return the thing w/o other encumbrances than those
w/c it had when he acquired it. He may exercise this right of
action, instead of enforcing the vendors liability for eviction.
The same rule shall be observed when two or more thing have been
jointly sold for lump sum, or for a separate price for each of them
if it should clearly appear that the vendee would have not
purchased one w/o the other.
REMEDIES OF BUYER or VENDEE: (The alternative remedies
enunciated in Art. 1555 also applies) 1) Enforce vendors liability
for eviction; 2) Damages for Breach of Warranty; or 3) Demand
rescission This article applies to either, a sale of two or more
things or a divisible thing. Kapag indivisible, go to Art 1554 kasi
since indivisible, whole eviction ang mag-aaply na provision. There
are two instances to w/c the article pertains to: 1) Deprived of a
part of the thing sold, where that part if so important that the
buyer would have not bought it w/o said part. Ex. Binili mo yung
Boracay property ni erap (yung may pool na may imported Bora white
sand at may wave generator pa), kaso lang binenta ni vendor yung
part ng bahay nay un sa iba. Hassle diba? Kasi kaya mo binili yung
bahay dahil sa malupet na pool na yun. Gawin mo, demanda mo! Pwede
rin na tangina mo, iyo na yang bahay na yan, lamunin mo!
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2) When two or more things are jointly sold whether for a lump
sum or for a separate price for each, & the vendee would have
not purchased one w/o the other. Ex. Collector si John ng Power
Rangers. Bumili ka nung isang set ng Power Rangers action figure.
Pero si Pink Ranger sira. Eh naman, si pink ranger yun! Its either
i-demanda mo dahil na-deprive ka ng paglaro kay pink ranger. O
kaya, ibalik mo na lang yung apat.
1557. The warranty cannot be enforced until a final judgment has
been rendered, whereby the vendee loses the thing acquired or a
part thereof.
ELEMENTS FOR THE ENFORCEMENT OF WARRANTY IN CASE OF EVICTION: 1)
Deprivation of the whole or part of the thing sold; & 2)
Existence of a final judgment. Indispensible, it is, that the court
that eviction is declared by a court. Look at this 3 provisions as
a whole. The court has the authority to declare that there is
eviction. Obviously, to enforce your right for the breach of
warranty against eviction, you need to file a case in court (Art.
1557). Siyempre, youll be enforcing a right. Sino ba nagbigay ng
warranty? Diba yung vendor? So, you must implead the vendor in
order to enforce that right. Pag hindi, eh di wapakels siya kung
na-evict ka (Art. 1558). Sa Art. 1559 naman, yung nagpapa-evict
sayo ang nagdemanda. Tanga ka kung aakuin mo yung kaso mag-isa.
Maghanap ng kadamay. File ka ng motion to include the vendor as
co-defendant o kaya mag-file ka ng third party complaint. Articles
1557 & 1558, ikaw yung nag-eenforce ng right at ikaw yung
nag-file ng kaso. Sa Article 1559, ikaw yung nademanda. Pinapasa mo
lang yung hassle sa ungas na nagbenta sayo na sablay yung
warranty.
1558. The vendor shall not be obliged to make good the proper
warranty, UNLESS he is summoned in the suit for eviction at the
instance of the vendee.
1559. The defendant vendee shall ask, within the time fixed by
the Rules of Court answering the complaint that the vendor be made
a co-defendant.
1560. If the immovable sold should be encumbered w/ any
non-apparent burden or servitude, not mentioned in the agreement,
of such a nature that it must be presumed that the vendee would not
have acquired it had he been aware thereof, he may ask rescission
of the contract, UNLESS he should prefer the appropriate indemnity.
Neither right can be exercised if the non-apparent burden or
servitude is recorded in the Registry of Property, UNLESS there is
an express warranty that the thing is free from all burdens &
encumbrances. Within one year, to be computed from the execution of
the deed, the vendee may bring action for rescission, or sue for
damages. One year having elapsed he may only bring an action for
damages within an equal period, to be counted from the date on w/c
he discovered the burden or servitude.
REMEDIES: 1) Rescission 2) Damages The lack of knowledge on the
part of the vendor is not a valid defense. However, the contract
may still be invalidated on the ground of mistake (Art. 1331) In
the ff cases, the vendee cannot exercise such right: (A.R.K.) 1)
Apparent burden or servitude; 2) Registered non-apparent burden or
servitude; & 3) Vendee had Knowledge of the encumbrance.
PRESCRIPTION:
- ONE (1) YEAR from the execution of the deed of sale, ACTION
FOR RESCISSION.
Beyond that period, ACTION FOR DAMAGES, ONE (1) YEAR from the
date of discovery of the non-apparent burden or servitude.
When warranty is not applicable: 1) Apparent Servitude 2)
Non-apparent servitude is Recorded in the Registry of Property 3)
Agreement that there will exist a servitude 4) Knowledge of the
vendee of a servitude.
SUBSECTION 2. Warranty Against Hidden Defects of or Encumbrances
Upon the Thing Sold
Article 1561. The vendor shall be responsible for warranty
against the hidden defects w/c the thing sold may have, should they
render it unfit for the use for w/c it is intended, or should they
diminish 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; but said vendor shall not be
answerable for patent defects or those w/c may be visible, or for
those w/c are not visible if the vendee is an expert who, by reason
of his trade or profession, should have known them.
Redhibition the avoidance of a sale on account of some vice or
defect in the thing sold, w/c renders its use impossible, or so
inconvenient & imperfect that it must be supposed that the
buyer would not have purchased it had he known of the vice.
Redhibitory Action an action instituted to avoid a sale on account
of some vice or defect in the thing sold, w/c renders its use
impossible, or so inconvenient & imperfect that it must be
supposed that the buyer would not have purchased it had he known of
the vice. Redhibitory Vice or Defect is a defect in the article
sold against w/c defect the seller is bound to warrant.
Defect must constitute an imperfection, of certain importance A
minor defect does NOT give rise to redhibition Mere absence of a
certain quality in the thing sold w/c the vendee
thought it to contain is NOT necessarily a redhibitory defect
REQUISITES for WARRANTY AGAINST HIDDEN DEFECTS
a. Defect is important or Serious i. The thing sold is unfit for
the use w/c 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
Moles vs. IAC The SC defined redhibitory defect contemplated in
Article 1561 of the Civil Code w/c must be an imperfection or
defect of such nature as to engender a certain degree of
importance. An imperfection OR defect of little consequence does
not come w/in the category of being redhibitory. Note: Seller does
not warrant patent defect; Caveat emptor (buyer beware) Q: When is
a vendor responsible for hidden defects? A: If the hidden defects
w/c the thing sold may have:
1) Render it unfit for the use for w/c it is intended, or 2)
Diminish 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.
Q: When is the seller not answerable for the defects of the
thing sold? A:
1) For patent defects or those w/c are visible, or 2) Even for
those w/c are not visible if the buyer is an expert who, by
reason of his trade or profession, should have known them (Art.
1561), or
3) If the contrary has been stipulated, & the vendor was not
aware of the hidden faults or defects in the thing sold. (Art.
1566)
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b. Defect is Hidden - it was not known & could not have
known c. Defect Exists at the time of the sale d. Buyer gives
Notice of the defect to the seller within reasonable time e. Action
for rescission or reduction of the price is brought within the
proper period i. 6 months from delivery of the thing sold ii.
Within 40 days from the delivery in case of animals
f. There must be No waiver of warranty on the part of the buyer.
WHERE DEFECT PATENT or MADE KNOWN
1) A warranty does not cover defects w/c the buyer must have
observed 2) Same rule is applicable if the seller tells the buyer.
But if the seller
successfully uses art to conceal the defects, the seller is
liable. 3) GEN RULE: There is NO implied warranty against hidden
defects in
the sale of second hand goods. XPTN: If seller made
misrepresentation or is in BF
4) When the seller binds himself against patent or obvious
defects he cannot allege as a defense that inspection would have
disclosed the defect or that the buyer relied on his own
judgement.
Q: Is there a waiver of warranty against hidden defects when the
lessee inspected the premises & pushed thru w/ the contract? A:
Yes. Under Arts. 1561 & 1653 of the Civil Code, the lessor is
responsible for warranty against hidden defects, but he is not
answerable for patent
defects or those, w/c are visible. When plaintiff admitted on
crossexamination that he inspected the premises three or four times
before signing the lease contract. During his inspection, he
noticed the rotten plywood on the ceiling, w/c in his opinion was
caused by leaking water or termites. Yet, he decided to go thru w/
the lease agreement. Hence, respondents cannot be held liable for
the alleged warranty against hidden defects.
Article 1562. In a sale of goods, there is an implied warranty
or condition as to the quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to
the seller the particular purpose for w/c the goods are acquired,
& it appears that the buyer relies on the seller's skill or
judgment (whether he be the grower or manufacturer or not), there
is an implied warranty that the goods shall be reasonably fit for
such purpose; (2) Where the goods are brought by description from a
seller who deals in goods of that description (whether he be the
grower or manufacturer or not), there is an implied warranty that
the goods shall be of merchantable quality.
The specific implied warranties in sale of goods: 1) Warranty of
fitness
GR: No implied warranty XPTN: a. Buyer manifests to the seller
the particular purpose for w/c the
goods are required; & b. Buyer relies upon the sellers skill
or judgment
2) Warranty of merchantability That goods are reasonably fit for
the general purpose for w/c they are sold.
Moles v. IAC The SC discussed...as a general rule there is no
implied warranty in the sale of secondhand articles. Said general
rule, however, is not w/o exceptions. Article 1562 of our Civil
Code, w/c was taken from the Uniform Sales Act, provides: "Art.
1562.In a sale of goods, there is an implied warranty or condition
as to the quality or fitness of the goods, as follows:
(1)Where the buyer, expressly or by implication, makes known to
the seller the particular purpose for w/c the goods are acquired,
& it appears that the buyer relies on the seller's skill or
judgment (whether he be the grower or manufacturer or not), there
is an implied warranty that the goods shall be reasonably fit for
such purpose;"
Article 1563. In the case of contract of sale of a specified
article under its patent or other trade name, there is no warranty
as to its fitness for any particular purpose, unless there is a
stipulation to the contrary
There is still an implied warranty of fitness for particular
purpose when the buyer relied upon the sellers judgement rather
than the patent or trade name. Particular Purpose means usage
different from the ordinary uses the article was made to meet.
For example R went to Autohub Inc. to buy a car. After he was
shown cars of different models & makes he chose to get a BMW M3
GT. R intended to enter the car in a race but this fact was not
made known to the seller. If the car should not run as fast as R
had expected, Autohub Inc is not liabale b/c in buying the M3 GT he
relied upon his own judgement. BUT if the seller was inform of his
purpose & R was assured that the car would run a maximum of 240
kilometers per hour THERES AN EXPRESS WARRANTY FOR A PARTICULAR
PURPOSE & Autohub Inc. would be liable if the car should not
fit for such purpose..
Article 1564. An implied warranty or condition as to the quality
or fitness for a particular purpose may be annexed by the usage of
trade.
Article 1565. In the case of a contract of sale by sample, if
the seller is a dealer in goods of that kind, there is an implied
warranty that the goods shall be free from any defect rendering
them unmerchantable w/c would not be apparent on reasonable
examination of the sample.
Article 1566. The vendor is responsible to the vendee for any
hidden faults or defects in the thing sold, even though he was not
aware thereof. This provision shall not apply if the contrary has
been stipulated, & the vendor was not aware of the hidden
faults or defects in the thing sold. Article 1568. If the thing
sold should be lost in consequence of the hidden faults, & the
vendor was aware of them, he shall bear the loss, & shall be
obliged to return the price & refund the expenses of the
contract, w/ damages. If he was not aware of them, he shall only
return the price & interest thereon, & reimburse the
expenses of the contract w/c the vendee might have paid
OBLIGATION of the SELLER in case of breach of warranty against
hidden defects? A: If NO WAIVER of warranty & the thing was
lost due to hidden defects 1. If the thing should be lost in
consequence of the hidden faults, & seller was aware of them he
shall:
a. bear the loss, b. return the price & c. refund the
expenses of the contract d. pay damages
2. If the thing is lost & seller was not aware of the hidden
faults he shall: a. return the price & interest b. reimburse
the expenses of the contract w/c the buyer might have paid, but not
for damages.
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Article 1569. If the thing sold had any hidden fault at the time
of the sale, & should thereafter be lost by a fortuitous event
or thru the fault of the vendee, the latter may demand of the
vendor the price w/c he paid, less the value w/c the thing had when
it was lost. If the vendor acted in bad faith, he shall pay damages
to the vendee.
B: If there was waiver of warranty 1. when the seller is aware
of the hidden defects Waiver is in BAD FAITH: seller is still
liable 2. When the seller is not aware of the hidden defects:
seller is NOT liable C: If the defective thing is lost thru
fortuitous event or fault of buyer 1. Buyer may demand of the
seller the price paid less the value of the thing at the time of
the loss
The difference b/w the price paid & the value of the thing
at the time of loss represents the damage suffered by the buyer
& the amount w/c the seller enriched himself at the buyers
expense
The thing sold must be defective at the time of sale.
Article 1567. In the cases of articles 1561, 1562, 1564, 1565
& 1566, the vendee may elect b/w withdrawing from the contract
& demanding a proportionate reduction of the price, w/ damages
in either case.
REMEDY OF BUYER 1. Accion Redhibitoria (withdrawing from the
contract), OR 2. Accion Quanti Minoris (proportionate reduction of
price)
Q: What are the remedies of the buyer in case of sale of things
w/ hidden defects? A: The vendee may elect b/w:
1. Withdrawing from the contract, or 2. Demanding a
proportionate reduction of the price, w/ damages in either
case.
Article 1570. The preceding articles of this Subsection shall be
applicable to judicial sales, except that the judgment debtor shall
not be liable for damages.
The warranty is applicable to judicial sales. However, the
judgement debtor is not liable for damages for the reason that he
merely IS COMPELLED to sell his property
Article 1571. Actions arising from the provisions of the
preceding ten articles (1561-1570) shall be barred after six
months, from the delivery of the thing sold. Article 1577. The
redhibitory action, based on the faults or defects of animals, must
be brought within forty days from the date of their delivery to the
vendee.
Action for rescission or reduction of the price is brought
within the proper period 1) 6 months from delivery of the thing
sold 2) Within 40 days from the delivery in case of animals
MOLES v. IAC Article 1571 of the Civil Code provides for a
prescriptive period of six months for a redhibitory action, a
cursory reading of the ten preceding articles to w/c it refers will
reveal that said rule may be applied only in case of implied
warranties. The present case involves one w/ an express warranty.
Consequently, the general rule on rescission of contract, w/c is
four years shall apply. A certification to the effect that the
linotype machine bought by petitioner was in A-1 condition was
issued by private respondent in favor of the former. This
certification was a condition sine qua non for the release of
petitioner's loan w/c was to be used as payment for the purchase
price of the machine. The SC ruled that private respondent is
indeed bound by the express warranty he executed in favour of the
petitioner.
Article 1572. If two or more animals are sold together, whether
for a lump sum or for a separate price for each of them, the
redhibitory defect of one shall only give rise to its redhibition,
& not that of the others; unless it should appear that the
vendee would not have purchased the sound animal or animals w/o the
defective one. The latter case shall be presumed when a team, yoke
pair, or set is bought, even if a separate price has been fixed for
each one of the animals composing the same. Article 1573. The
provisions of the preceding article w/ respect to the sale of
animals shall in like manner be applicable to the sale of other
things.
Sale of animals on teams (2 or more)
Gen rule: when only one is defective, only one is redhibited
& not the others
exception: when it appears buyer would not have purchased the
team w/o the defective one
apply to sale of other things
Article 1574. There is no warranty against hidden defects of
animals sold at fairs or at public auctions, or of live stock sold
as condemned
sale of animals at fair or public auction ---- no warranty
against hidden defects
Article 1575. The sale of animals suffering from contagious
diseases shall be void. A contract of sale of animals shall also be
void if the use or service for w/c they are acquired has been
stated in the contract, & they are found to be unfit
therefor.
Q: When is the sale of animal void? A: The sale is void if
animal is: 1. Suffering from contagious diseases;
Unfit for the use or service for w/c they were purchased as
indicated in the contract
Article 1576. If the hidden defect of animals, even in case a
professional inspection has been made, should be of such a nature
that expert knowledge is not sufficient to discover it, the defect
shall be considered as redhibitory. But if the veterinarian, thru
ignorance or bad faith should fail to discover or disclose it, he
shall be liable for damages. Article 1578. If the animal should die
within three days after its purchase, the vendor shall be liable if
the disease w/c cause the death existed at the time of the contract
Article 1577. The redhibitory action, based on the faults or
defects of animals, must be brought within forty days from the date
of their delivery to the vendee. This action can only be exercised
w/ respect to faults & defects w/c are determined by law or by
local customs.
INSTANCES WHERE THERE IS REDHIBITORY DEFECTS ON ANIMALS 1) even
in the case of professional inspection, hidden defect is of such
nature that expert knowledge is not
sufficient to discover it 2) if vet failed to discover thru
ignorance or bad faith (he is liable for damages) 3) The animal
dies w/in 3 days after its purchase & the disease w/c caused
the death existed at the time of the
contract sale of unfit animals
prescription of action: 40 days from date of delivery to
buyer
if sale is rescinded, animals to be returned in same condition
when they were acquired; buyer shall answer for injury / loss due
to his fault
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Article 1579. If the sale be rescinded, the animal shall be
returned in the condition in w/c it was sold & delivered, the
vendee being answerable for any injury due to his negligence, &
not arising from the redhibitory fault or defect
buyer may elect b/w withdrawing from sale & demanding
proportionate reduction of price w/ damages in either case
Article 1580. In the sale of animals w/ redhibitory defects, the
vendee shall also enjoy the right mentioned in article 1567; but he
must make use thereof within the same period w/c has been fixed for
the exercise of the redhibitory action.
REMEDY OF BUYER 1. Accion Redhibitoria (withdrawing from the
contract), OR 2. Accion Quanti Minoris (proportionate reduction of
price)
Article 1581. The form of sale of large cattle shall be governed
by special laws.
OBLIGATIONS of the VENDEE
1582. The vendee is bound to accept delivery & to pay the
price of the thing sold at the time & place stipulated in the
contract. If the time & place should not have been stipulated,
the payment must be made at the time & place of the delivery of
the thing sold.
Principal Obligations of the vendee: 1. ACCEPT delivery of the
thing sold 2. PAY the price of the thing sold at the time &
place stipulated 3. bear the EXPENSES of the contract & putting
the goods in a DELIVERABLE state* *No.3 applies only if the parties
stipulated such. Absent such stipulation, such obli belongs to the
vendor -Vendor is not bound to deliver until full payment of the
purchase price & the vendee is not bound to pay until delivery.
Meaning, the default nature of a contract of sale is RECIPROCAL.
Kaliwaan dapat. Rules WHERE & WHEN to accept delivery &
make payment: - if both are stipulated, parties are bound to comply
w/ the stipulations (e.g. accept at location 1/date 1, pay at
location 2/date 2) -If there is no stipulation, vendee bound to
accept delivery & pay @ the time & place of delivery -No
stipulation as to WHERE, acceptance & payment made wherever the
thing might be @ the moment the contract was perfected -If only
time for DELIVERY was stipulated, vendee must pay before delivery
-If only time for PAYMENT was stipulated, vendee is entitled to
delivery before he pays
1583. Unless o/w agreed, the buyer of goods is not bound to
accept delivery thereof by installments. Where there is a contract
of sale of goods to be delivered by stated installments, w/c are to
be separately paid for, & the seller makes defective deliveries
in respect of one or more installments, or the buyer neglects or
refuses w/o just cause to take delivery of or pay for one or more
installments, it depends in each case on the terms of the contract
& the circumstances of the case, whether the breach of contract
is so material as to justify the injured party in refusing to
proceed further & suing for damages for breach of the entire
contract, or whether the breach is severable, giving rise to a
claim for compensation but not to a right to treat the whole
contract as broken.
Buyer neither bound to receive delivery nor privileged to pay in
installments EXCEPT if stipulated upon. - Breach in installment:
Material or severable? *Material if breach of installment prevents
further performance of the contract - If material, injured party
has choice: A) Refuse to proceed w/ contract; B) Damages for breach
of entire contract - If severable, injured party entitled to
compensation but contract is still effective.
1584. Where goods are delivered to the buyer, w/c he has not
previously examined, he is not deemed to have accepted them unless
& until he has had a reasonable opportunity of examining them
for the purpose of ascertaining whether they are in conformity w/
the contract if there is no stipulation to the contrary. Unless o/w
agreed, when the seller tenders delivery of goods to the buyer, he
is bound, on request, to afford the buyer a reasonable opportunity
of examining the goods for the purpose of ascertaining whether they
are in conformity w/ the contract.
Where goods are delivered to a carrier by the seller, in
accordance w/ an order from or agreement w/ the buyer, upon the
terms that the goods shall not be delivered by the carrier to the
buyer until he has paid the price, whether such terms are indicated
by marking the goods w/ the words "collect on delivery," or o/w,
the buyer is not entitled to examine the goods before the payment
of the price, in the absence of agreement or usage of trade
permitting such examination.
Acceptance assent to become owner of the specific goods when
delivery of them is offered Ownership is transferred only upon
actual delivery subject to a reasonable opportunity of examining
them. This right is thus a condition precedent to the transfer of
ownership. Limitations on right to examine: 1. Seller is bound to
afford buyer a reasonable opportunity of examining the goods only
ON REQUEST. 2. Must be availed of w/in a reasonable time 3. May be
waived
*If the goods are sent to a carrier, the buyer still has the
right to examine the goods before paying UNLESS C.O.D. (in such a
case, buyer will be allowed to examine the goods only if it has
been agreed upon or permitted by usage).
1585. The buyer is deemed to have accepted the goods when he
intimates to the seller that he has accepted them, or when the
goods have been delivered to him, & he does any act in relation
to them w/c is inconsistent w/ the ownership of the seller, or
when, after the lapse of a reasonable time, he retains the goods
w/o intimating to the seller that he has rejected them.
Modes of manifesting acceptance: 1. Express 2. Implied a. buyer
performs an act of ownership b. after lapse of reasonable time,
buyer retains the goods w/o intimating rejection
*Acceptance & delivery separate - Acceptance = obli of the
vendee, Delivery = obli of the vendor - Generally, there must be
delivery before acceptance can be made. Hence, delivery must be
made even if w/o acceptance. In certain instances though,
acceptance may be had even before delivery.
1586. In the absence of express or implied agreement of the
parties, acceptance of the goods by the buyer shall not discharge
the seller from liability in damages or other legal remedy for
breach of any promise or warranty in the contract of sale. But, if,
after acceptance of the goods, the buyer fails to give notice to
the seller of the breach in any promise of warranty within a
reasonable time after the buyer knows, or ought to know of such
breach, the seller shall not be liable therefor.
1587. Unless o/w agreed, where goods are delivered to the buyer,
& he refuses to accept them, having the right so to do, he is
not bound to return them to the seller, but it is sufficient if he
notifies the seller that he refuses to accept them. If he
voluntarily constitutes himself a depositary thereof, he shall
-If the buyer justly refuses the goods, he becomes a bailee
& has the obli to take care of the thing. He is not bound
though to return the goods. -After notice of refusal, it is the
seller who must take the goods from the buyer -Goods are still @
sellers risk even if buyer refuses to return unless buyer has
agreed to become a depositary. -Buyer may resell goods if after
notice of refusal seller fails to take them (read 1533, buyer
becomes unpaid seller)
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be liable as such.
1588. If there is no stipulation as specified in the first
paragraph of article 1523, when the buyer's refusal to accept the
goods is w/o just cause, the title thereto passes to him from the
moment they are placed at his disposal.
*Therefore, risks shall be borne by him.
1589. The vendee shall owe interest for the period b/w the
delivery of the thing & the payment of the price, in the ff
three cases: (1) Should it have been so stipulated; (2) Should the
thing sold & delivered produce fruits or income; (3) Should he
be in default, from the time of judicial or extrajudicial demand
for the payment of the price.
-Generally, interest rate will accrue from date of delivery
until payment. Exceptions: when date from w/c interest rate is to
run is stipulated & no. 3 -If it was stipulated that an
interest will accrue, but there is no rate stipulated, legal rate.
-For no. 2, there must be 2 conditions: a) thing has been
delivered; 2) it must produce fruits/income
1169. Those obliged to deliver or to do something incur in delay
from the time the obligee judicially or extrajudicially demands
from them the fulfillment of the obli. However, demand by the
creditor shall not be necessary in order that delay may exist: 1.
When the obli or the law expressly so declares; 2. When from the
nature & the circumstances of the obli it appears that the
designation of the time when the thing is to be delivered or the
service is to be rendered was a controlling motive for the
establishment of the contract; 3. When demand would be useless, as
when the obligor has rendered it beyond his power to perform. In
reciprocal oblis, neither party incurs in delay if the other does
not comply or is not ready to comply in a proper manner w/ what is
incumbent upon him. From the moment one of the parties fulfills his
obli, delay by the other begins.
1590. Should the vendee be disturbed in the possession or
ownership of the thing acquired, or should he have reasonable
grounds to fear such disturbance, by a vindicatory action or a
foreclosure of mortgage, he may suspend the payment of the price
until the vendor has caused the disturbance or danger to cease,
unless the latter gives security for the return of the price in a
proper case, or it has been stipulated that, notwithstanding any
such contingency, the vendee shall be bound to make the payment. A
mere act of trespass shall not authorize the suspension of the
payment of the price.
Vendee may suspend payment in the ff cases: 1. If he is
disturbed in the possession or ownership of the thing bought; or 2.
If he has a well-grounded fear that his possession or ownership
would be disturbed by vindicatory action/mortgage foreclosure. *If
there has been partial payment, vendee may only suspend that w/c is
yet to be paid. He cannot recover what has been already paid. *In
no.2, it is not necessary that an action be instituted against the
vendee. If an action is instituted, the remedy is not automatically
1548. In 1548, the vendee must be deprived of possession, in whole
or in part. Nag-institute pa lang naman ng action, relax. It
appears that his remedy is filing a 3rd party complaint against the
vendor. *If the disturbance is caused by a non-apparent servitude,
remedy is 1560. When vendee cannot exercise right: 1. Vendor gives
SECURITY for the return of the price 2. If it has been STIPULATED
that vendee must make payment notwithstanding any contingency 3.
Vendor has caused the disturbance or danger to CEASE 4. Disturbance
is a mere act of TRESPASS 5. Vendee has FULLY paid the price
1591. Should the vendor have reasonable grounds to fear the loss
of immovable property sold & its price, he may immediately sue
for the rescission of the sale. Should such ground not exist, the
provisions of Article 1191 shall be observed.
*Contemplates a situation wherein there has been delivery of the
immovable but the price is yet to be paid *If there is no ground to
fear the loss of the immovable or the price, 1191 applies, why? B/c
vendee is yet to comply w/ his obli giving the vendor the option to
choose b/w fulfillment (for vendee to pay) or rescission of the
contract + damages in either
1592. In the sale of immovable property, even though it may have
been stipulated that upon failure to pay the price at the time
agreed upon the rescission of the contract shall of right take
place, the vendee may pay, even after the expiration of the period,
as long as no demand for rescission of the contract has been made
upon him either judicially or by a notarial act. After the demand,
the court may not grant him a new term.
Mandates the necessity of demand before rescission. *Teka kala
ko ba 1191, pwede mamili b/w fulfillment or rescission? Failure to
comply w/ obligation is not the contracts resc ission. It merely
gives the right for the vendor to choose b/w the 2 remedies
aforestated. As a matter of fact, even if there is a stipulation
allowing for automatic rescission, demand is still necessary before
rescission could take place. The demand must be judicial or
notarized else, its useless. Also, 1191 tells us that when there is
just cause, instead of decreeing rescission, the court may extend
the period for payment. However, 1592 specifically provides that
the court may no longer grant a new term when a judicial/notarized
demand has been made. 1592 does not apply:
1. Sale on installment of real estate 6552 applies 2. Contracts
to sell/conditional sale of real estate since payment is the
suspensive condition that will give rise to vendors obli to convey
title, non-
payment will not justify rescission, it merely suspends vendors
obli 1593. W/ respect to movable property, the rescission of the
sale shall of right take place in the interest of the vendor, if
the vendee, upon the expiration of the period fixed for the
delivery of the thing, should not have appeared to receive it, or,
having appeared, he should not have tendered the price at the same
time, unless a longer period has been stipulated for its
payment.
When the object of the sale is MOVABLE, rescission of the vendor
takes place: 1. Vendee w/o valid cause does not accept delivery 2.
Vendee w/o valid cause does not pay the price UNLESS credit period
has been given to him
*Similar to the requirement of demand in 1592, the vendor should
take some affirmative action indicating intention to rescind.
ACTION for BREACH of CONTRACT of SALE of GOODS
1594. Actions for breach of the contract of sale of goods shall
be governed Actions available for breach of contract:
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particularly by the provisions of this Chapter, & as to
matters not specifically provided for herein, by other applicable
provisions of this Title.
Seller: 1. Payment of the price 2. Damages for non-acceptance 3.
Rescission for breach of contract
Buyer: 1. Specific performance 2. Rescission/damages for breach
of warranty
1595. Where, under a contract of sale, the ownership of the
goods has passed to the buyer & he wrongfully neglects or
refuses to pay for the goods according to the terms of the contract
of sale, the seller may maintain an action against him for the
price of the goods. Where, under a contract of sale, the price is
payable on a certain day, irrespective of delivery or of transfer
of title & the buyer wrongfully neglects or refuses to pay such
price, the seller may maintain an action for the price although the
ownership in the goods has not passed. But it shall be a defense to
such an action that the seller at any time before the judgment in
such action has manifested an inability to perform the contract of
sale on his part or an intention not to perform it. Although the
ownership in the goods has not passed, if they cannot readily be
resold for a reasonable price, & if the provisions of article
1596, fourth paragraph, are not applicable, the seller may offer to
deliver the goods to the buyer, &, if the buyer refuses to
receive them, may notify the buyer that the goods are thereafter
held by the seller as bailee for the buyer. Thereafter the seller
may treat the goods as the buyer's & may maintain an action for
the price.
When available: 1. Ownership of goods has passed to buyer +
buyer wrongfully refuses to
pay 2. Price is payable on certain day + buyer wrongfully
neglects/refuses to
pay 3. Goods cannot readily be resold for a reasonable price +
buyer
wrongfully refuses the accept + 1596, 4th par does not apply *In
2 & 3, it is immaterial w/n title is yet to pass *Defense
available to buyer in 2: Seller has manifested inability to perform
or intention not to perform at all
1596. Where the buyer wrongfully neglects or refuses to accept
& pay for the goods, the seller may maintain an action against
him for damages for nonacceptance. The measure of damages is the
estimated loss directly & naturally resulting in the ordinary
course of events from the buyer's breach of contract. Where there
is an available market for the goods in question, the measure of
damages is, in the absence of special circumstances showing
proximate damage of a different amount, the difference b/w the
contract price & the market or current price at the time or
times when the goods ought to have been accepted, or, if no time
was fixed for acceptance, then at the time of the refusal to
accept. If, while labor or expense of material amount is necessary
on the part of the seller to enable him to fulfill his obligations
under the contract of sale, the buyer repudiates the contract or
notifies the seller to proceed no further therewith, the buyer
shall be liable to the seller for labor performed or expenses made
before receiving notice of the buyer's repudiation or countermand.
The profit the seller would have made if the contract or the sale
had been fully performed shall be considered in awarding the
damages.
When the seller has a right of action for damages: 1. If the
buyer w/o lawful cause neglects or refuses to accept & pay for
the goods he agreed to buy 2. Executory contract, ownership in the
goods yet to pass, & seller cannot maintain an action to
recover price 3. Goods are not yet identified at the time of the
contract or subsequently
Measure of damages: General formula: Loss = X Y Where: X =
contract price or the remaining if partly paid; Y = market price at
time goods ought to have been accepted or time of refusal Formula 2
(buyer repudiates the contract or notifies seller to proceed no
further) Loss = (X-Y) + Z + A Where: Z = labor performed &
expenses incurred for materials before receipt of such notice; A =
profit seller would have realized If there are special
circumstances (such as BF), additional damages If no available
market, seller entitled to full amount of damage
1597. Where the goods have not been delivered to the buyer,
& the buyer has repudiated the contract of sale, or has
manifested his inability to perform his obligations thereunder, or
has committed a breach thereof, the seller may totally rescind the
contract of sale by giving notice of his election so to do to the
buyer.
Cases when seller may rescind a contract of sale of goods w/c
are yet to be delivered:
1. Buyer repudiates contract of sale; 2. Buyer has manifested
inability to perform oblis thereunder; 3. Buyer has committed a
breach of contract
*Seller required to give notice of rescission. Need not be
formal. Bringing of action can be considered as notice. *Read 1385,
CC for limitations on right of seller to rescind. *Breach must be
substantial to justify rescission *Seller cannot unilaterally &
extrajudicially rescind EXCEPT 1597 or express stipulation.
1598. Where the seller has broken a contract to deliver specific
or ascertained goods, a court may, on the application of the buyer,
direct that the contract shall be performed specifically, w/o
giving the seller the option of retaining the goods on payment of
damages. The judgment or decree may be unconditional, or upon such
terms & conditions as to damages, payment of the price &
o/w, as the court may deem just.
Applies only where the goods to be delivered are specific or
ascertained. Damages (that mentioned in this article) do not
substitute performance, therefore, seller cannot retain goods. They
are imposed to insure performance.
1599. Where there is a breach of warranty by the seller, the
buyer may, at his election: (1) Accept or keep the goods & set
up against the seller, the breach of warranty by way of recoupment
in diminution or extinction of the price; (2) Accept or keep the
goods & maintain an action against the seller for damages for
the breach of warranty; (3) Refuse to accept the goods, &
maintain an action against the seller for damages for the breach of
warranty; (4) Rescind the contract of sale & refuse to receive
the goods or if the goods have already been received, return them
or offer to return them to the seller & recover the price or
any part thereof w/c has been paid. When the buyer has claimed
& been granted a remedy in anyone of these ways, no other
remedy can thereafter be granted, w/o prejudice to the provisions
of the second paragraph of Article 1191. Where the goods have been
delivered to the buyer, he cannot rescind the sale if he knew of
the breach of warranty when he accepted the goods w/o protest, or
if he fails to notify the seller within a reasonable time of the
election to rescind, or if he fails to return or to offer to return
the goods to the seller in substantially as good condition as they
were in at the time the ownership was transferred to the buyer. But
if deterioration or injury of the goods is due to the breach or
warranty, such deterioration or injury shall not prevent the buyer
from returning or offering to return the goods to the seller &
rescinding the sale. Where the buyer is entitled to rescind the
sale & elects to do so, he shall cease to be liable for the
price upon returning or offering to return the goods. If the price
or any part thereof has already been paid, the seller shall be
liable to repay so much thereof as has been paid, concurrently w/
the return of the goods, or
Remedies of buyer when seller breaches promise/warranty: 1.
ACCEPT goods + REDUCE/EXTINGUISH PRICE 2. ACCEPT goods + DAMAGES 3.
REFUSE goods + DAMAGES 4. RESCIND contract (wherein he will be
allowed to recover whatever he
has paid as rescission brings the parties to where they were
before. Reset button kumbaga)
Remedies alternative. Once alternative is GRANTED (read: not
elected), no other remedy can be exercised. EXCEPT: 1191, buyer
chooses fulfillment, fulfillment not possible, he may then choose
to rescind. Rescission not allowed when:
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immediately after an offer to return the goods in exchange for
repayment of the price. Where the buyer is entitled to rescind the
sale & elects to do so, if the seller refuses to accept an
offer of the buyer to return the goods, the buyer shall thereafter
be deemed to hold the goods as bailee for the seller, but subject
to a lien to secure payment of any portion of the price w/c has
been paid, & w/ the remedies for the enforcement of such lien
allowed to an unpaid seller by Article 1526. (5) In the case of
breach of warranty of quality, such loss, in the absence of special
circumstances showing proximate damage of a greater amount, is the
difference b/w the value of the goods at the time of delivery to
the buyer & the value they would have had if they had answered
to the warranty.
1. Buyer accepts + knows breach + no protest 2. Buyer does not
notify seller w/in reasonable time of choice to rescind 3. Fails to
return or offer to return the goods in substantially as good
condition as they were HOWEVER if the deterioration of the goods
was caused by the very breach itself, then rescission is
allowed
*1586 = acceptance of the buyer will not discharge seller from
liability due to breach of warranties Rights & oblis of buyer
in case of rescission:
1. Buyer ceases to be liable for the price, his obli now is to
return the goods
2. Recover whatever he has paid 3. Right to hold the goods as
bailee if seller refuses the return 4. Right to have a lien n the
goods for any price he has paid, w/c lien he
may enforce as if he were an unpaid seller
EXTINGUISHMENT of SALE
1600. Sales are extinguished by the same causes as all other
obligations, by those stated in the preceding articles of this
Title, & by conventional or legal redemption.
Classification of mode of extinguishment of a contract of sale:
1. COMMON (1231) 2. SPECIAL (1484, 1532, 1539, 1540, 1542, 1556,
1560, 1567, 1591) 3. EXTRA SPECIAL (Conventional & Legal
Redemption)
1231. Obligations are extinguished: 1. By payment or
performance; 2. By loss of the thing due; 3. By condonation or
remission of the debt; 4. By confusion or merger of the rights of
creditor & debtor; 5. By compensation 6. By novation
Section 1 Conventional Redemption 1601. Conventional redemption
shall take place when the vendor reserves the right to repurchase
the thing sold, w/ the obligation to comply w/ the provisions of
Article 1616 & other stipulations w/c may have been agreed
upon.
Conventional redemption the right w/c the vendor reserves to
himself, to reacquire the prop sold provided he returns to the
vendee the price of the sale, the expenses of the contract, any
other legit payments he made therefor & the necessary & the
useful expenses made on the thing sold & fulfills other
stipulations w/c may have been agreed upon Nature of conventional
redemption: (CAR4P2O)
1. Contractual created by virtue of an express contract 2.
Accidental nullity does not annul contract 3. Real right binds 3rd
persons 4. Resolutory condition vendees right of ownership is
extinguished
when exercised 5. Reserved @ moment of perfection b/c if agreed
upon afterwards, it
is not conventional redemption but rather a promise to sell 6.
Reciprocal vendor returns price, vendee returns object of sale 7.
Potestative depends upon will of the vendor 8. Power or privilege
vendor may or may not exercise 9. Owner is necessarily the one who
is entitled to exercise
Right of Repurchase Option to Buy
Reserved as a stipulation in the contract
Given in another instrument
Granted at moment of perfection Granted after execution of
absolute sale
Evidences pacto de retro when extension is granted
Does not evidence pacto de retro when taken together w/ the
contract of sale. Extension would not fall under 1602 (3)
1602. The contract shall be presumed to be an equitable
mortgage, in any of the ff cases: (1) When the price of a sale w/
right to repurchase is unusually inadequate; (2) When the vendor
remains in possession as lessee or o/w; (3) When upon or after the
expiration of the right to repurchase another instrument extending
the period of redemption or granting a new period is executed; (4)
When the purchaser retains for himself a part of the purchase
price; (5) When the vendor binds himself to pay the taxes on the
thing sold; (6) In any other case where it may be fairly inferred
that the real intention of the parties is that the transaction
shall secure the payment of a debt or the performance of any other
obligation. In any of the foregoing cases, any money, fruits, or
other benefit to be received by the vendee as rent or o/w shall be
considered as interest w/c shall be subject to the usury laws.
Equitable mortgage one w/c lacks proper formalities, form or
words, or other requisites prescribed by law for a mortgage, but
shows the intention of the parties to make the prop subject of the
contract denominated as a contract of sale, as security for a debt,
& contains nothing impossible or contrary to law.
Pacto de Retro Mortgage
Ownership is immediately transferred
Ownership is not transferred but prop is merely made subject to
a charge or lien as security
Seller loses all interest if he does not repurchase
Mortgagor does not lose interest in prop if he fails to pay
debt, merely subjects it to foreclosure/execution
No obli on part of buyer to foreclose
Mortgagee must foreclose
Ramos v CA, example of #2, #5 and #6 (purchase price were
advanced by way of loans) -To create the presumption enunciated by
1602, the existence of one circumstance is enough. Existence of any
of the circumstances enumerated therein, not a concurrence nor an
overwhelming number of such circumstances, suffices to give rise to
the presumption that the contract w/ the right of repurchase is an
equitable mortgage. - Parol evidence admissible since contract does
not express the true intent & agreement of the parties. (Read
Rule 130, 9 (b), Rules of Court) -It must be admitted that there
are some cases where the parties really intend a sale w/ right of
repurchase Although such cases are rare, still the freedom of
contract must be maintained & respected. Therefore, the
contract under consideration is preserved. De Leon v Salvador,
While in ordinary sales for reasons of equity a transaction may be
invalidated on the ground of inadequacy of price, or when
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No right to redeem Right to redeem
*Inadequacy mere disproportion cannot alone justify the
conclusion that the transaction is a pure & simple loan. It
must be gross or purely shocking to the conscience or is such that
the mind revolts at it & such that a reasonable man would
neither directly or indirectly be likely to consent to it *Vendor
remains in possession mere tolerated possession of vendor by the
vendee not enough to prove equitable mortgage
such inadequacy shocks ones conscience as to justify the courts
to interfere, such does not follow when the law gives the owner the
right to redeem, as when a sale is made at public auction, upon the
theory that the lesser the price the easier it is for the owner to
effect the redemption, When there is right to redeem, inadequacy of
price should not be material, b/c the judgment debtor may reacquire
the prop or also sell his right to redeem & thus recover the
loss he claims to have suffered by reason of the price obtained at
the auction sale. Flores v So, In a sale w/ the right of
redemption, the ownership over the thing sold is transferred to the
vendee upon execution of the contract, subject only to the
resolutory condition that the vendor exercise his right of
repurchase w/in the period agreed upon. Lao v CA, example of #2,
#3, #6 (Lao was in dire need of money. Necessitous men are not,
truly speaking, free men, but to answer a present emergency, will
submit to any terms that the crafty may impose upon them.) Lanuza v
de Leon, example of #1, #2, #6 (delay in filing petition for
consolidation). Capulong v CA, example of #2, #6 (delay in taking
possession of the thing sold. The court said the vendees should
have taken possession after execution of the sale not upon
expiration of redemption period.)
1603. In case of doubt, a contract purporting to be a sale w/
right to repurchase shall be construed as an equitable mortgage.
1604. The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale.
Presumption not conclusive. Parol evidence admissible in proving
real intention of parties.
1605. In the cases referred to in Articles 1602 & 1604, the
apparent vendor may ask for the reformation of the instrument.
Reformation remedy granted by law by means of w/c a written
instrument is made or construed so as to express or conform to the
real intention of the parties when such intention is not expressed
in the instrument
1359. When, there having a been a meeting of the minds of the
parties to a contract, their true intention is not expressed in the
instrument purporting to embody the agreement, by reason of
mistake, fraud, inequitable conduct or accident, one of the parties
may ask for the reformation of the instrument to the end that such
true intention may be expressed. If mistake, fraud, inequitable
conduct, or accident has prevented a meeting of the minds of the
parties, the proper remedy is not reformation of the instrument but
annulment of the contract.
1606. The right referred to in Article 1601, in the absence of
an express agreement, shall last four years from the date of the
contract. Should there be an agreement, the period cannot exceed
ten years. However, the vendor may still exercise the right to
repurchase within thirty days from the time final judgment was
rendered in a civil action on the basis that the contract was a
true sale w/ right to repurchase.
Does not apply where the contract is not one of sale w/ right of
repurchase. (Therefore, learn to distinguish b/w sale w/ right of
repurchase vs option to buy)
1607. In case of real property, the consolidation of ownership
in the vendee by virtue of the failure of the vendor to comply w/
the provisions of article 1616 shall not be recorded in the
Registry of Property w/o a judicial order, after the vendor has
been duly heard.
Acquisition by the vendee a retro is automatic. Once vendor
fails to 1616, absolute title or ownership of the prop sold becomes
vested or consolidated by operation of law on the vendee. What 1607
prevents is the REGISTRATION of such consolidation. Actions to
consolidate ownership:
1. Ordinary civil action 2. Registration proceedings Where land
is sold under pacto de retro,
vendor a retro may file originally. IF during pendency of such
proceedings, the period of redemption expires & ownership is
consolidated in the vendee, he will be substituted in place of the
vendor a retro.
Ramos v CA, 1607 contemplates a contentious proceeding wherein
the vendor a retro must be named respondent in the caption &
title of the petition for consolidation of ownership & duly
summoned & heard. An order granting the vendees petition for
consolidation of ownership, w/o the vendor a retro being named as
respondent, summoned & heard, is a patent nullity want for want
of jurisdiction of the court over the person of the latter.
1608. The vendor may bring his action against every possessor
whose right is derived from the vendee, even if in the second
contract no mention should have been made of the right to
repurchase, w/o prejudice to the provisions of the Mortgage Law
& the Land Registration Law w/ respect to third persons.
Consignation not required to preserve right to redeem. But to
actually redeem, there must be consignation (in case vendee a retro
unjustly refuses payment from vendor a retro) An INNOCENT PURCHASER
FOR VALUE & IN GF may defeat the right of the vendor a retro IF
he does not properly register/annotate his right of redemption.
1609. The vendee is subrogated to the vendor's rights &
actions. Vendee may exercise acts of ownership over the prop (sell,
mortgage, enjoy fruits, fishfry) B/C he becomes the owner nga e
diba. Subject to a resolutory
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condition lang naman ang title niya. So he can do whatever the
fuck he wants to the property. In any case, 1608 gives the vendor
the right to redeem from a person the vendee has disposed the prop
to.
1610. The creditors of the vendor cannot make use of the right
of redemption against the vendee, until after they have exhausted
the property of the vendor.
Exception to this is where the prop was sold under an already
existing mortgage or antichresis (pledge). The mortgagee or pledgee
in such an instance need not exhaust the prop of the vendor.
1611. In a sale w/ a right to repurchase, the vendee of a part
of an undivided immovable who acquires the whole thereof in the
case of article 498, may compel the vendor to redeem the whole
property, if the latter wishes to make use of the right of
redemption.
A, B, C co-owns undivided parcel of land. A sold his share to X
w/ right of repurchase. During the interim (period b/w sale &
expiration of right of redemption), X was able to acquire the whole
prop after indemnifying B & C. If A wants to exercise his right
of repurchase, X may CHOOSE to either sell the original share or
compel A to buy the whole prop.
498. Whenever the thing is essentially indivisible & the
co-owners cannot agree that it be allotted to one of them who shall
indemnify the others, it shall be sold & its proceeds
distributed.
1612. If several persons, jointly & in the same contract,
should sell an undivided immovable w/ a right of repurchase, none
of them may exercise this right for more than his respective share.
The same rule shall apply if the person who sold an immovable alone
has left several heirs, in w/c case each of the latter may only
redeem the part w/c he may have acquired. 1613. In the case of the
preceding article, the vendee may demand of all the vendors or
co-heirs that they come to an agreement upon the purchase of the
whole thing sold; & should they fail to do so, the vendee
cannot be compelled to consent to a partial redemption. 1614. Each
one of the co-owners of an undivided immovable who may have sold
his share separately, may independently exercise the right of
repurchase as regards his own share, & the vendee cannot compel
him to redeem the whole property.
A, B, C co-owns undivided parcel of land. They JOINTLY sell such
land to X w/ right of repurchase in the SAME contract. Suppose they
had co-equal shares. A chooses to exercise his right of redemption,
A, B & C can only redeem 1/3 of the prop individually. BUT! X
can require all of them redeem the whole prop or that they agree to
its redemption by any one of them. (If one of them redeems whole
prop, redemptioner does not acquire whole prop, the co-ownership is
revived & he has the right to be reimbursed) The same rule
applies when the vendor a retro leaves several heirs. HOWEVER if
the sale was made INDIVIDUALLY and SEPARATELY, the vendee a retro
(X in the above example) cannot require the vendors a retro (A, B
& C). 1611 v 1614 Supposing, A, B & C were co-owners of a
piece of land. On the same day, but under different transactions,
they all, separately but coincidentally, sold their respective
shares to X, each w/ right of repurchase. After 2 years, B elects
to exercise his right of repurchase. Can X compel B to redeem the
whole property? X raises 1611 as basis for his contention, while B
raises 1614. The acquisition of the whole in 1611 is by way of 498,
a mode of terminating co-ownership. Meaning, the parties agree to
terminate the co-ownership by allotting the whole to one of them,
and did not merely intend individually to sell their respective
share, coincidentally, to the same person. Art 494, CC provides,
that a co-owner may demand at any time the partition of the thing
owned in common. HOWEVER, the co-owners may agree to keep the thing
UNDIVIDED FOR A CERTAIN PERIOD OF TIME, not exceeding 10 years.
Donor may prohibit partition for a max of 20 years. Now, if they
cannot agree on the partition, & the period to keep the thing
undivided expires, 498 comes into play. In 498, it is either: a)
The co-owners have come to an agreement to terminate the
co-ownership & who among them will own & indemnify the
others; or b) they are forced to sell the thing owned in common to
a stranger to the co-ownership. THEREFORE, 1611 applies only when
the acquisition of the whole by the vendee a retro was effected
because they (vendee & co-owners) could not agree on the
partition of the thing owned in common BUT they did agree on having
it allotted to one of them, in 1611s case, that co-owner is the
vendee a retro. It is only through this situation that the vendee a
retro can compel the vendor a retro to buy the whole prop b/c, he
was practically compelled to buy the whole property as well when
the co-ownership was subsisting.
1615. If the vendee should leave several heirs, the action for
redemption cannot be brought against each of them except for his
own share, whether the thing be undivided, or it has been
partitioned among them. But if the inheritance has been divided,
& the thing sold has been awarded to one of the heirs, the
action for redemption may be instituted against him for the
whole.
In this case, it is the vendee a retro who leaves several heirs.
In such a case, redemption for the WHOLE must be brought against
ALL of them else, the vendor a retro can only redeem that which
have been inherited by the heir he brings the action to. BUT! If
the whole prop was inherited by a single heir only, then redemption
of the whole may be brought against him. NATURAL. 1608 people,
1608.
1616. The vendor cannot avail himself of the right of repurchase
w/o returning to the vendee the price of the sale, & in
addition: (1) The expenses of the contract, & any other
legitimate payments made by reason of the sale; (2) The necessary
& useful expenses made on the thing sold.
To avail of right of repurchase, the vendor a retro must pay: 1.
Price of the sale (Read: not value of the thing) 2. Expenses by the
vendee a retro (such as registration) 3. Necessary & useful
expenses incurred by vendee a retro (such as
those made to prevent waste, deterioration or loss of the thing
or improvements)
*2 & 3 need not be paid at the time the right is exercised
for they may not be readily & conveniently liquidated at such
time. *Ordinary & simple expenses borne by the vendee (e.g.
sweldo ng pahinante) *Vendor a retro cannot compel vendee a retro
to remove improvements made on the land save for some exceptions
(e.g. Land is subject to homestead read de Leon, p. 452) Offer to
redeem must be simultaneous w/ tender of payment. IF vendee a retro
unjustly refuses vendors payment for redemption, vendor may consign
such payment to the courts (vendee is not required to consign
though, it would be the diligent thing to do lang)
SOLID HOMES v CA, this is a case wherein the court stressed that
the vendor a retros obli, in exercising the right of redemption, is
not 1616 only. 1601 adds that the vendor a retro should also comply
w/ other stipulations agreed upon, such as, in this case, the
payment of additional 30% interest for the expenses of the
contract.
1617. If at the time of the execution of the sale there should
be on the land, *Parties may arrange for a sharing arrangement
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visible or growing fruits, there shall be no reimbursement for
or prorating of those existing at the time of redemption, if no
indemnity was paid by the purchaser when the sale was executed.
Should there have been no fruits at the time of the sale & some
exist at the time of redemption, they shall be prorated b/w the
redemptioner & the vendee, giving the latter the part
corresponding to the time he possessed the land in the last year,
counted from the anniversary of the date of the sale.
*Fruits referred to are natural & industrial. Civil fruits
belong to vendee. If vendee paid for the fruits at the time of the
sale, vendor must reimburse such payment at time of redemption. If
there were no fruits at time of sale & at time of redemption,
malamang walang irereimburse. BUT! If there were no fruits at time
of sale, & some existed at time of redemption, then it will be
apportioned proportionately b/w redemptioner & vendee. The
vendees share is in proportion to the time he possessed the prop
during the last year counted from the anniversary of the date of
the sale.
1618. The vendor who recovers the thing sold shall receive it
free from all charges or mortgages constituted by the vendee, but
he shall respect the leases w/c the latter may have executed in
good faith, & in accordance w/ the custom of the place where
the land is situated.
1609 gives the vendee a retro the right to perform acts of
ownership over the prop, but as his ownership is revocable, such
acts are also revocable. However, 1618 provides an exception, i.e.,
leases the vendee executed in GF & in accordance w/ the custom
of the place where land is situated.
Section 2 Legal Redemption 1619. Legal redemption is the right
to be subrogated, upon the same terms & 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.
*Serves as definition for legal redemption *Nature of legal
redemption is same w/ conventional redemption EXCEPT it is not
contractual as the source of legal redemption is not created by
virtue of a contract, but rather by law. *Legal redemption may be
converted into conventional redemption.
Conventional Redemption Legal Redemption
Derived from contracts Derived from Law
Exercised necessarily by the owner Actual ownership is not a
condition precedent
Subrogation transfer of right of another to the person
subrogated Dacion en pago happens when debtor offers another thing
to creditor who accepts such substitute as payment for an
outstanding debt
1620. A co-owner of a thing may exercise the right of redemption
in case the shares of all the other co-owners or of any of them,
are s