Understanding Contracts of Sale and Related Real Estate Transactions in the Philippines, Study notes of Law

Download Understanding Contracts of Sale and Related Real Estate Transactions in the Philippines and more Study notes Law in PDF only on Docsity! ATTY. TERESITA L. CRUZ VLC “Civil Law And PROCEDURE (Paralegal Certification Training)” (10 December 2023) “Special Contracts” ART.1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. By the CONTRACT OF SALE one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. ART.1477. The ownership of the thing shall be transferred to the vendee upon the actual or constructive delivery thereof. ACE FOODS, INC. vs. MICROPACIFIC TECHNOLOGIES CO., LTD., GR 200602,12/22/13 MTCL Ace Foods Accepted MTCL’s offer; issued PO amounting to P646,464.00; failed to pay purchase price despite demand.Letter proposal for the delivery and sale of computer equipment Q: What contract was entered into by the parties? Being consensual in nature, a Contract of Sale had been perfected at the precise moment ACE Foods, as evinced by its act of sending MTCL the Purchase Order, accepted the latter’s proposal to sell the subject products in consideration of the purchase price of P646,464.00. From that point in time, the reciprocal obligations of the parties - , i.e. of MTCL to deliver the said products to ACE Foods, and of ACE Foods to pay the purchase price within thirty (30) days from delivery – already arose and consequently may be demanded. CONTRACT OF SALE CONTRACT OF AGENCY TO SELL (Art. 1466 NCC) Buyer receives the goods as owner; 1. Seller warrants the thing sold; 4. Agent receives the goods as goods of the principal; 1. Buyer, as a general rule, cannot return the object sold; 3. Buyer has to pay the price; 2. Agent simply has to account for the proceeds of sale to principal; 2. Agent, if unable to sell, can return the goods; 3. Agent does not make warranty for which he assumes personal liability, for as long as he acts within his authority and in the name of seller; 4. Buyer can deal with the thing as he pleases being the owner. 5. Agent, in dealing with the thing received, must act & is bound according to the instructions of the principal. 5. CONTRACT OF SALE CONTRACT for A PIECE OF WORK (Art. 1467 NCC) Thing subject of the contract would have existed and been the subject of sale to some other person even if the order had not been given; available to all in the general course of business; 1. Risk of loss before delivery is borne by buyer; 2. Primary object of a contract is a sale of manufactured item already existing, even though the item is installed by labor furnished by seller. 3. Thing transferred is not one in existence & which would never have existed but for the order of the person desiring it; manufactured especially according to the order of a specific person/entity; 1. Risk of loss before delivery is borne by the worker/contractor, not by the one who ordered; 2. Services dominate the contract even though there is a sale of goods involved. 3. A: NO. The SC HELD: What may be regarded as a consideration separate from the price is discussed in Vda. de Quirino v. Palarca, G.R. No. L-28269. August 15, 1969, a case which also involved a lease contract with option to buy where we had occasion to say that "the consideration for the lessor's obligation to sell the leased premises to the lessee, should he choose to exercise his option to purchase the same, is the obligation of the lessee to sell to the lessor the building and/or improvements constructed and/or made by the former, if he fails to exercise his option to buy the leased premises In this case, the consideration is even more onerous on the part of the lessee since it entails transferring ownership of the building and/or improvements on the property to the lessor, WITHOUT any compensation, should the bank fail to exercise its option to buy within the period stipulated. GUZMAN, BOCALING & CO. vs. BONNEVIE, G.R. No. 86150 March 2, 1992 A 600 sq. m. lot with 2 buildings constructed thereon, was leased to the Bonnevies by the administratrix Africa Reynoso, for a period of one year at a monthly rental of P4,000.00. The Contract of lease contained the following stipulation: “In case the LESSOR desires or decides to sell the leased property, the LESSEES shall be given a first priority to purchase the same, all things and considerations being equal.” Reynoso alleged that she notified the Bonnevies by registered mail that she was selling the leased premises for P600.000.00 less a mortgage loan of P100,000.00, and was giving them 30 days from receipt of the letter within which to exercise their right of first priority to buy the lot. The Bonnevies asserted they never received Reynoso’s letter. For failure of the lessees to buy the lot, the leased premises were sold to Guzman, Bocaling. The Contract of Sale provided for immediate payment of P137,500.00 on the purchase price with the balance of P262,500.00 to be paid when the premises were vacated. Q: Was there a violation of the Bonnevies’ right of first priority granted to them in the Contract of Lease? A: YES. The SC HELD: Even if the letter had indeed been sent to and received by the Bonnevies and they did not exercise their right of first priority, Reynoso would still be guilty of violating Par. 20 of the Contract of Lease which specifically stated that the Bonnevies could exercise the right of first priority, "all things and conditions being equal." The Court reads this mean that there should be identity of the terms and conditions to be offered to the Bonnevies and all other prospective buyers, with the Bonnevies to enjoy the right of first priority. The selling price quoted to the Bonnevies was P600,000.00, to be fully paid in cash less only the mortgage lien of P100,000.00 while the selling price offered to and accepted by Guzman Bocaling was only P400,000.00 and only P137,500.00 was paid in cash while the balance of P272,500.00 was to be paid "when the property (was) cleared of tenants. (SALE OF PERSONAL PROPERTY IN INSTALLMENTS) 1. Exact fulfillment of the obligation, should the vendee fail to pay; – Seller has the following alternative remedies: 2. Cancel the sale, should the vendee’s failure to pay cover two (2) or more installments; 3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover 2 or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. B. SPECIAL REMEDIES: 1. RECTO LAW (Art. 1484 NCC) Equitable Savings Bank vs. Palces, GR 214752, March 9, 2016 In this case, there was no vendor-vendee relationship between respondent and petitioner. Respondent never bought the subject vehicle from petitioner but from a third party, and merely sought financing from petitioner for its full purchase price. In order to document the loan transaction between petitioner and respondent, a Promissory Note with Chattel Mortgage was executed wherein, respondent acknowledged her indebtedness to petitioner in the amount of P1,196,100.00 and placed the subject vehicle as a security for the loan. Indubitably, a loan contract with the accessory chattel mortgage contract - and not a contract of sale of personal property in installments - was entered into by the parties with respondent standing as the debtor-mortgagor and petitioner as the creditor- mortgagee. Article 1484 NCC is not applicable. A. Right of SPECIFIC PERFORMANCE – seller must observe the grace period granted to the buyer to pay, WITHOUT ADDITIONAL INTEREST, the unpaid installments. 1. GRACE PERIOD IS ONE MONTH/YEAR OF INSTALLMENTS PAID; 2. In case of installment payments LESS THAN 2 YEARS, PERIOD SHALL NOT BE LESS THAN 60 DAYS from the date the installment became due; 3. Failure to pay within the grace period allows the seller to proceed to (B). 2. MACEDA LAW (R.A. 6552) - THE REALTY INSTALLMENT BUYER PROTECTION ACT - Applicable ONLY to: transactions or contracts of sale or financing of real estate on installment payments, including sale of residential and condominium units; A: NO. For a valid and effective cancellation or rescission under RA 6552 (Maceda Law), it must comply with the mandatory twin requirements of a notarized notice of cancellation AND a refund of the cash surrender value. The actual cancellation of the contract can only be deemed to take place upon the expiry of a 30-day period following the receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act AND the full payment of the cash surrender value. Q: Was there a valid rescission of the Contract To Sell under RA 6552, also known as the Maceda Law? RULES IN DOUBLE SALES (Art. 1544 NCC) a). To the first registrant in the RD, in GF; b). If no inscription, to the first possessor, in GF; c). If none of the above, to the person with the oldest title, in GF. 1. PERSONAL PROPERTY - To the first possessor in GF. 2. REAL PROPERTY MIRROR DOCTRINE - one CANNOT close his eyes to facts which should put a reasonable and prudent 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. SPS. PUDADERA vs. MAGALLANES, et. al., GR 170073 , October 18, 2010. The SC HELD: The 1st buyer is the owner. Mere registration is not enough to confer ownership. The law requires that the 2nd buyer must have acquired and registered the property. Every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of the property. This rule shall not apply when the party has actual knowledge of facts and 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 property in litigation. A conventional redemption is deemed to be an EQUITABLE MORTGAGE in any of the following: (Art. 1602 NCC) 1. Price of the sale is unusually inadequate; 2. Vendor remains in possession as lessee or otherwise; 3. Period of redemption is extended after expiration; 4. Purchaser retains part of purchase price; 5. Vendor binds himself to pay the taxes of the thing sold; 6. Any other case where the parties really intended that the transaction shall secure the payment of a debt or the performance of an obligation. Spouses SOLITARIOS vs. Spouses JAQUE, G.R. 199852, Nov. 12, 2014 Felipe & Julia Solitarios Contract of Mortgage NOT a Contract of Sale. * Deeds of Sale dated May 8, 1981 and April 26, 1983; allowed the Solitarios to remain on the lot subject to delivery of a portion of the properties’ produce to them. Gaston & Lilia Jaque 40,608 sq. m. agricultural lot originally w/ TCT # 1249 in Felipe’s name but later in Spouses Jaque’s names under TCT # 745. The SC HELD: The transaction between the parties is equitable mortgage. It was never denied by respondents that spouses Solitarios have remained in possession of the subject property and exercised acts of ownership over the said lot for almost 17 years even after the purported absolute sale until their filing of the complaint. To allow the transfer of the lot to the Jaques would amount to condoning the prohibited practice of pactum commissorium. Art. 2088 NCC provides that the creditor cannot appropriate or consolidate ownership over a mortgaged property upon failure of the mortgagor to pay a debt obligation. SUBLEASE: ALLOWED, unless expressly prohibited in the contract of lease of things (Art. 1650 NCC). SUBLESSEE is SUBSIDIARILY LIABLE to the lessor for: 1. all acts which refer to the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee (Art. 1651 NCC); 2. any rent due from the lessee BUT the sublessee shall NOT be responsible BEYOND the amount of rent due from him in accordance with the TERMS of the sublease, at the time of the extra-judicial demand by the lessor. (Art. 1652 NCC) 1. within the scope of his authority (Art. 1881 NCC); AGENT MUST ACT: a). Do acts conducive to the accomplishment of the purpose of the agency (Art. 1881 NCC); b). Authority is NOT considered EXCEEDED if performed in a manner MORE ADVANTAGEOUS to the principal than that specified by him (Art. 1882 NCC). 2. in behalf of his principal (Art. 1882 NCC); 3. in accordance with the instructions of his principal (Art. 1887 NCC). Art. 1874. Sale of land by an agent authority of the agent MUST be in writing; otherwise, the sale is VOID. BAUTISTA-SPILLE vs. NICORP MGT. & DEV. CORP., et.al., GR 214057, Oct. 19, 2015 Reg. owner of a 33,052 sq.m. lot in Imus, Cavite; executed a GPA in favor of her brother, Benjamin “to exercise adm., gen. control & supervision over my business & properties in the Phil. and to act as my general rep. & agent. xxx”. Florentina Executed a CTS of lot in favor of NICORP for P15M, with down payment of 20% of P15M, balance payable in 8 months. Benjamin Q: Is the Contract To Sell of the lot valid, voidable or void? Paid the down payment; the TCT to be held in escrow by IE Bank until full payment of P15M. NICORP International Exchange Bank (IEB) A. It is VOID. In Cosmic Lumber Corp. v. CA, the SC enunciated, When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Thus, the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. Loss of the thing suffered by bailor; Bailee suffers the loss even if caused by a fortuitous event and he is NOT absolved from obligation to pay; Purely personal in character (Art. 1939 NCC) a). Death of either party extinguishes the commodatum; b). Bailee can neither lend/ lease the object to a 3rd person. Exception: Members of the bailee’s household may use the thing loaned. Exception to the exception: 1. Stipulation to the contrary 2. Nature of the thing forbids such use. NOT purely personal in character. COMMODATUM MUTUUM In the absence of an express stipulation as to the rate of interest that would govern the parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in judgments shall no longer be twelve percent (12%) per annum - as reflected in the case of Eastern Shipping Lines XXX - but will now be six percent (6%) per annum effective July 1, 2013. It should be noted, nonetheless, that the new rate could only be applied prospectively and not retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable. Q: What is the prevailing rate of interest now? A: Monetary Board Circular No. 799, series of 2013 took effect on 1 July 2013. LOAN is constituted from the moment a person receives a thing belonging to another w/ the obl. of safely keeping it & returning the same (Art. 1962) • perfected only upon delivery of the thing; • may be constituted judicially or extra-judicially (Art. 1964 NCC); • gratuitous contract, except IF (Art. 1965 ); • only movable things may be the object; • may be entered into orally or in writing (Art. 1969 NCC) 1). there is agreement to the contrary; OR 2). depositary is engaged in the business of storing goods; DEPOSIT 1. Innkeepers are LIABLE as depositaries for effects brought by guests, provided: RESPONSIBILITY OF INNKEEPERS: a). notice was given to them/their employees. b). the guests/travellers took the precautions they were advised to take as to the care and vigilance of their effects. (Art. 1998) 2. Liability for loss/injury to personal property of guests applies whether caused by: a). servants or employees of the hotel b). strangers (Art. 2000 NCC) EXCEPTION: Force majeure (Art. 2001) (a). use of arms; (b). through an irresistible force. * by posting notices to the effect that he is NOT liable for the articles brought by the guests; stipulation between hotel-keeper and guest Art. 2003. Hotel-keeper CANNOT FREE himself from responsibility VOID. YHT REALTY CORPORATION, et. al., vs.CA, et.al., G.R. NO. 126780, 2/17/05 The SC HELD: Article 2003 NCC is an expression of public policy. The hotel business like the common carrier’s business is imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests AND security to their persons and belongings. The twin duty constitutes the essence of the business. The law does not allow such duty to the public to be negated or diluted by any contrary stipulation in so-called “undertakings” that ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature. an accessory contract whereby a person called the guarantor binds himself to the creditor to fulfill the obl. of the principal debtor in case the latter should fail to do so. (Art. 2047 (1) NCC) a contract whereby a person called the surety binds himself SOLIDARILY with the principal debtor. GUARANTY SURETY GUARANTy & SURETYship he shall SUFFER THE LOSS to the extent of said property for the insolvency of the debtor resulting from such negligence. (Art. 2061). 1. set it up against the CREDITOR upon the latter’s demand for payment from him; AND For the benefit of EXCUSSION, G MUST: (Art. 2060 NCC) 2. point out to the CREDITOR ALL available property of the DEBTOR in the Philippines sufficient to cover the amount of the debt. NEGLIGENT in exhausting the properties pointed out Subject matter is REAL property 3. Creditor has obl. to apply the fruits to the payment of interest, if owing and to the principal of the credit; 2. Creditor acquires only the right to receive the fruits of the real property does NOT produce a REAL RIGHT; 2. Creditor does NOT have the right to receive the fruits of the property but REM creates a REAL RIGHT over the property enforceable against the whole world; 1. Real property delivered to the creditor; ANTICHRESIS REAL ESTATE MORTGAGE 1. Debtor retains possession of real property; 3. NO such obligation on the part of mortgagee; 4. Creditor is obliged to pay the taxes and charges upon the estate. 4. Creditor has NO such obligation. 1. Object personal property; 1. Object real property; PLEDGEANTECHRESIS 2. Perfected by mere consent; 2. Perfected by delivery of the object pledged; 3. Consensual contract. 3. Real contract. 2nd auction sale with the same formalities as 1st sale; creditor/pledgee may appropriate the thing pledged and give debtor an acquittance for his ENTIRE DEBT. REQUISITES FOR THE SALE OF THING PLEDGED (Art. 2112 NCC): 1. Credit has not been satisfied in due time; 2. Creditor/pledgee proceeds before a notary public for the sale in a public auction; 3. Debtor is notified of the place, date and time of the public sale and the amount for which the sale is to be held; 4. 1st auction, NO Sale 5. 2nd auction, NO Sale debtor NOT entitled to the excess; creditor NOT entitled to RECOVER the deficiency. All bids at the public auction shall offer to pay the purchase price at ONCE. ART. 2114 NCC. extinguishes the principal obligation, whether or not the proceeds of the sale are EQUAL to the amount of the principal obligation. Sale of the thing pledgedART. 2115 NCC. (1). Proceeds of the sale than the amt. of obl. > (2). Proceeds of the sale than the amt. of obl. < Spouses Paray, et. al. vs. Rodriquez, et. al., G.R. 132287, January 24, 2006 Under the Civil Code, the foreclosure of a pledge occurs extra-judicially, without intervention by the courts. All the creditor needs to do, if the credit has not been satisfied in due time, is to proceed before a notary public for the sale of the thing pledged. Pledged property, necessarily personal in character, may NOT be redeemed by the debtor after being sold in public auction. No law or jurisprudence establishes such right. No such right exists.